Document:

EX 10.1

    EXHIBIT
      10.1

    

    

    

    

    

    

    

    

    STANDARD
      FORM OFFICE LEASE

    

    BETWEEN

    

    WESTCORE
      PENINSULA VINTAGE, LLC,

    

    a
      Delaware limited liability company,

    

    as
      Landlord,

    

    AND

    

    OXIS
      INTERNATIONAL, INC.,

    

    a
      Delaware corporation

    

    as
      Tenant

    

    Dated:
      February 2, 2006

    

    For
      Premises Located at:

    

    VINTAGE
      PARK

    Suite
      B

    323
      Vintage Park Drive

    Foster
      City, California 94404

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    LEASE

    

    This
      Standard Form Office Lease (this “Lease”) is made as of February 2, 2006 (the
“Lease Date”), by WESTCORE
      PENINSULA VINTAGE, LLC,
      a
      Delaware limited liability company (“Landlord”), and OXIS
      INTERNATIONAL, INC., a
      Delaware corporation (“Tenant”).

    

    Landlord
      and Tenant, intending to be legally bound, and in consideration of their mutual
      covenants and all conditions of this Lease, covenant and agree as
      follows.

    

    BASIC
      LEASE PROVISIONS

    

    1.    DEFINED
      TERMS

    

    In
      this
      Lease the following terms have the meanings set forth below.

    

    1.1.    Premises.
      Approximately 4,136 rentable square feet, known as Suite B of the Building,
      as
      outlined on Exhibit A attached to and made a part of this Lease.

    

    1.2.    Building.
      The
      building containing approximately 25,503 rentable square feet, and all future
      alterations, additions, improvements, restorations or replacements, commonly
      known as 323 Vintage Park Drive, Foster City, California.

    

    1.3.    Term.
      Three
      (3) years.

    

    1.4.    Commencement
      Date.
      April
      1, 2006, subject to adjustment as set forth in Article 3.

    

    1.5.    Expiration
      Date.
      March
      31, 2009, subject to adjustment as set forth in Article 3.

    

    1.6.    Base
      Rent.
      Commencing on the Commencement Date and continuing throughout the Term, Tenant
      shall pay Base Rent in accordance with the following schedule:

    

    
      	
               

              Lease
                Year

            	 	
              Monthly
                Base Rent

              Per
                Rentable Square Foot

            	 	
               

              Monthly
                Base Rent

            
	
              1

            	 	
              $1.25

            	 	
              $5,170.00

            
	
              2

            	 	
              $1.29
                (rounded)

            	 	
              $5,325.10

            
	
              3

            	 	
              $1.33
                (rounded)

            	 	
              $5,484.85

            

    

    

    1.7.    Security
      Deposit.
      $5,484.85.

    

    1.8.    Intentionally
      Omitted.

    

    1.9.    Tenant’s
      Proportionate Share of Operating Costs.
      Approximately 16.22% of the Operating Costs as defined in Article 5 allocable
      to
      the Building, based upon the rentable square feet of the Premises, compared
      to
      the total rentable square feet of the Building.

    

    1.10.    Permitted
      Use.
      Research and development and general office use and for no other use or purposes
      whatsoever.

    

    1.11.    Tenant’s
      Trade Name.
      Oxis
      International, Inc.

    

    1.12.    Broker.

    Landlord’s:
      Cornish & Carey Commercial

    Tenant’s:
      Cornish & Carey Commercial

    

    1.13.    Guarantor(s):
      None.

    

    1.14.    Intentionally
      Omitted.

    

    1.15.    Landlord’s
      Address.

    

    c/o
      Westcore Properties, LLC

    235
      Pine
      Street, Suite 1150

    San
      Francisco, California 94104

    Attention:
      Property Manager

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    With
      a
      copy to:

    

    Westcore
      Properties, LLC

    4445
      Eastgate Mall, Suite 210

    San
      Diego, California 92121

    Attention:
      Asset Manager

    

    1.16.    Tenant’s
      Address.

    

    Before
      occupancy:

    OXIS
      International

    6040
      North Cutter Circle

    Suite
      317

    Portland,
      Oregon 97217

    

    After
      Occupancy: The
      Premises

    

    1.17.    Parking.
      Twelve
      (12) unreserved spaces at the then prevailing rate in the Building, which rate
      is currently at no cost to Tenant.

    

    1.18.    Amount
      due on Execution of Lease.
      Upon
      Tenant’s execution of this Lease, Tenant shall pay the following amount to
      Landlord:

    
      
        	 	 	 	 	 
	
                Monthly
                  Rent:

              	 	
                $

              	
                5,170.00

              	 
	
                (For
                  the First Month of the Term)

              	 	 	 	 
	
                Security
                  Deposit:

              	 	
                $

              	
                5,484.85

              	 
	
                Construction
                  Contribution (Section 2):

              	 	
                $

              	
                1,666.67

              	 
	
                TOTAL
                  DUE ON EXECUTION OF LEASE:

              	 	
                $

              	
                12,321.52

              	 
	 	 	 	 	 

      

    

    2.    PREMISES
      DEMISED

    

    Landlord
      and Tenant acknowledge that a portion of the Premises are currently occupied
      by
      another tenant, Conformis, Inc. (the “Existing Tenant”), in accordance with that
      certain Lease Agreement dated July 9, 2004, by and between Landlord and the
      Existing Tenant (the “Existing Lease”). As consideration for the Existing
      Tenant’s agreement to surrender the portion of the Premises occupied by it,
      Tenant agrees to contribute $1,666.67 (the “Construction Contribution”) for use
      by Existing Tenant to build out a new room located within its premises. This
      Lease is expressly conditioned upon (a) the execution by Landlord and the
      Existing Tenant of an amendment to the Existing Lease which provides for the
      surrender of possession of such portion of the Premises to Landlord, (b)
      Existing Tenant’s vacation and surrender of the Premises to Landlord, and (c)
      Tenant’s payment of the Construction Contribution to Landlord concurrently with
      its execution and delivery of this Lease (collectively, the “Surrender
      Condition”). In the event that the Surrender Condition is not satisfied on or
      before March 1, 2006, Tenant may terminate this Lease by delivering five (5)
      business days written prior notice to Landlord; provided, however, that if
      such
      Surrender Condition is satisfied within such five (5) business day period,
      Tenant’s termination notice shall have no effect and this Lease shall be in full
      force and effect. Subject to the foregoing conditions precedent, Landlord hereby
      leases to Tenant and Tenant hereby leases from Landlord the premises described
      in Section 1.1 (“Premises”) on the terms and conditions set forth in this Lease
      (including all exhibits and attachments hereto, which are incorporated herein
      by
      reference). Tenant’s obligations under this Lease shall commence as of the Lease
      Date, except as otherwise expressly provided in this Lease. As used in this
      Lease, the term “Project” includes the Building, three (3) other buildings
      located adjacent to the Building, adjoining parking areas and garages, if any,
      and the surrounding land and air space which are the site and grounds for the
      Building and parking areas and garages.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    3.    TERM;
      OPTION
      TERM

    

    3.1.    Initial
      Term.
      The
      Term, Commencement Date and Expiration Date shall be as specified in Sections
      1.3, 1.4, and 1.5, respectively. However, the Commencement Date shall be
      adjusted if necessary, and documented in the form of Exhibit C attached hereto,
      to the earlier of: (a) the date of “Substantial Completion” of the “Tenant
      Improvements” as those terms are defined in the Tenant Work Letter, attached
      hereto as Exhibit B; or (b) the date Tenant takes possession of the Premises,
      and the Expiration Date shall be adjusted accordingly; provided that if the
      Commencement Date is not the first day of the month, then the Expiration Date
      shall be the last day of the month in which the third (3rd)
      anniversary of the Commencement Date occurs. In the event that the Commencement
      Date does not occur on or before July 1, 2006 (the “Outside Commencement Date”),
      subject to delays caused by Tenant or Force Majeure, then Tenant shall have
      the
      right to terminate this Lease by giving Landlord written notice within ten
      (10)
      days after the Outside Commencement Date. If Tenant timely gives such notice
      to
      Landlord, then (i) this Lease shall terminate ten (10) days after Landlord’s
      receipt of Tenant’s notice, (ii) Landlord shall reimburse to Tenant any prepaid
      rent, and (iii) Landlord and Tenant shall have no further rights or obligations
      to each other pursuant to this Lease. For purposes of this Lease, the term
      “Lease Year” shall mean each consecutive twelve (12) month period during the
      Term, commencing on the Commencement Date; provided, however, that the first
      Lease Year shall commence on the Commencement Date and end on the last day
      of
      the eleventh month thereafter and the second and each succeeding Lease Year
      shall commence on the first day of the next calendar month; and further provided
      that the last Lease Year shall end on the Lease Expiration Date. The terms
      and
      provisions of this Lease shall be effective as of the Lease Date. In addition,
      any references in this Lease to the “Term” or words of similar import shall mean
      the Term together with any Option Term (as defined below), unless the context
      clearly indicates otherwise.

    

    3.2.    Option
      Terms.
      Tenant
      shall have one (1) option to extend the Term for a period of three (3) years
      (the “Option Term”), which Option shall be exercisable by written notice
      delivered by Tenant to Landlord as provided in Section 3.2.1., below, provided
      that Tenant has not committed an Event of Default which has not been cured,
      as
      such term is defined in Article 24 below, as of the date of delivery of such
      notice. The Option to extend the Term shall be exercisable by Tenant only if
      the
      originally named Tenant or a Permitted Transferee (as hereinafter defined)
      is in
      possession of one hundred percent (100%) of the Premises.

    

    3.2.1.    Exercise
      of Option.
      The
      Option may be exercised by Tenant, if at all, only in the following manner:
      (i)
      Tenant shall deliver written notice (the “Option Notice”) to Landlord not more
      than twelve (12) months nor less than eight (8) months prior to the expiration
      of the Term, stating that Tenant is interested in exercising its option; (ii)
      Landlord, after receipt of Tenant’s notice, shall deliver notice (the “Option
      Rent Notice”) to Tenant within thirty (30) days of Landlord’s receipt of the
      Option Notice setting forth the “Option Rent,” as that term is defined in
      Section 3.2.2, below, which shall be applicable to the Lease during the Option
      Term; and (iii) if Tenant wishes to exercise such Option, Tenant shall, on
      or
      before the date occurring six (6) months prior to the expiration of the Term,
      exercise such Option by delivering written notice thereof to Landlord, and
      upon,
      and concurrent with, such exercise, if the Option Rent was determined in
      accordance with Section 3.2.2, below, Tenant may, at its option, object to
      the
      Option Rent contained in the Option Rent Notice, in which case the parties
      shall
      follow the procedure, and the Option Rent shall be determined, as set forth
      in
      Section 3.2.3, below.

    

    3.2.2.    Option
      Rent.
      The
      rent
      payable by Tenant during the Option Term (the “Option Rent”) shall be equal to
      the prevailing monthly market rental value for comparable space in the area
      in
      which the Building is located (including additional rent and considering any
      “base year” or “expense stop” applicable thereto), including all escalations, at
      which tenants, as of the commencement of the Option Term, are leasing
      non-sublease, non-renewal, non-encumbered, non-equity space in comparable
      buildings for a comparable term. In no event shall the Option Rent be less
      than
      the Base Rent then in effect.

    

    3.2.3.    Determination
      of Option Rent.
      In the
      event Tenant timely and appropriately objects to the Option Rent, Landlord
      and
      Tenant shall attempt to agree upon the Option Rent using their best good-faith
      efforts. If Landlord and Tenant fail to reach agreement within ten (10) days
      following Tenant’s objection to the Option Rent (the “Outside Agreement Date”),
      then Tenant may give written notice (“Appraisal Notice”) to Landlord that Tenant
      desires to have the Option Rent determined by appraisal pursuant to the
      procedures set forth in Sections 3.2.3.1 through 3.2.3.5, below.

    

    3.2.3.1.    Within
      ten (10) days after Landlord’s receipt of the Appraisal Notice in accordance
      with this Section, Landlord and Tenant shall agree upon a list of three (3)
      independent, unaffiliated real estate brokers with at least five (5) years’
full-time experience brokering commercial properties within ten (10) miles
      of
      the Project. Within five (5) days after agreement upon the list of brokers,
      Landlord and Tenant shall meet and each shall have the right to disqualify
      one
      (1) of the brokers until only one (1) broker (“Broker”) has not been
      disqualified by either Landlord or Tenant.

    

    3.2.3.2.    Within
      fifteen (15) days after the appointment of the Broker, the parties shall each
      submit their determination of the Option Rent to the Broker and the Broker
      shall
      independently determine the Option Rent. The Option Rent shall equal the Option
      Rent submitted by Landlord or Tenant that is closest to the Option Rent
      determined by the Broker. The Broker shall not divulge to Landlord or Tenant
      the
      Option Rent determined by the Broker until both parties instruct it to do so
      in
      writing. The determination of the Broker in accordance with this Section 3.2
      shall be final and binding on the parties and a judgment may be rendered thereon
      in a court of competent jurisdiction.

    

    3.2.3.3.    If
      the
      parties fail to select the three (3) qualified brokers or the Broker, a Broker
      shall be selected by the then-Presiding Judge of the Superior Court of the
      State
      of California of the County in which the Property is located, acting in his
      individual judicial capacity.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    3.2.3.4.    The
      cost
      of arbitration shall be paid by Landlord and Tenant equally.

    

    3.2.3.5.    During
      the period requiring the adjustment of monthly Rent (as hereinafter defined)
      to
      Option Rent, Tenant shall pay, as monthly Rent pending such determination,
      the
      monthly Rent in effect for the Premises immediately prior to such adjustment;
      provided, however, that upon the determination of the applicable Option Rent,
      Tenant shall pay Landlord the difference between the amount of monthly Rent
      Tenant actually paid and Option Rent immediately upon the determination of
      the
      Option Rent.

    

    4.    SECURITY
      DEPOSIT

    

    Concurrently
      with Tenant’s execution of this Lease, Tenant shall deposit with Landlord in the
      amount set forth in Section 1.7, a security deposit as security for the
      performance of all of Tenant’s obligations under this Lease. Within thirty (30)
      days after the expiration of the Term or any earlier termination of this Lease,
      Landlord shall (provided that Tenant is not in default under this Lease) return
      the security deposit to Tenant, less such portion as Landlord shall have
      appropriated to make good any default by Tenant. Landlord shall have the right,
      but not the obligation, to apply all or any portion of the security deposit
      to
      cure any Tenant default at any time, in which event Tenant shall be obligated
      to
      restore the security deposit to its original amount within ten (10) business
      days, and Tenant’s failure to do so shall be deemed to be a material default of
      this Lease. Tenant hereby waives (i) California Civil Code Section 1950.7,
      as
      amended or recodified from time to time, and any and all other laws, rules
      and
      regulations, now or hereafter in force, applicable to security deposits in
      the
      commercial context (“Security Deposit Laws”), and (ii) any and all rights,
      duties and obligations either party may now or, in the
      future, will have relating to or arising from the Security Deposit Laws.
      Notwithstanding anything to the contrary contained herein, the security deposit
      may be retained and applied by Landlord (a) to offset Rent (as defined in
      Section 5.3) which is unpaid either before or after the termination of this
      Lease, and (b) against other damages suffered by Landlord before or after the
      termination of this Lease, whether foreseeable or unforeseeable, caused by
      the
      act or omission of Tenant or any officer, employee, agent or invitee of Tenant.
      The security deposit shall be held by Landlord free of trust, and may be
      commingled with other funds and accounts of Landlord or its agents, and Tenant
      shall not be entitled to receive any interest earned with respect thereto.
      In
      the event of a sale of the Project or assignment of this Lease by Landlord
      to
      any person other than a mortgagee, Landlord shall have the right to transfer
      the
      security deposit to its vendee or assignee, subject to Tenant’s aforesaid rights
      upon termination, and thereupon Landlord shall be released and relieved from
      any
      liability with respect to the return of such security deposit to Tenant, such
      vendee or assignee to be solely responsible to Tenant therefor.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    5.    RENT

    

    5.1.    Tenant
      agrees to pay the Base Rent set forth in Section 1.6 for each month of the
      Term,
      payable in advance on the first day of each month commencing with the
      Commencement Date, without any deduction or setoff whatsoever. All payments
      of
      Rent (as defined in Section 5.3) shall be payable in lawful U.S. money. Payments
      shall not be deemed received until actual receipt thereof by Landlord. If the
      Commencement Date is not the first day of a month, or if the Expiration Date
      is
      not the last day of a month, a prorated monthly installment shall be paid at
      the
      then current rate for the fractional month during which this Lease commences
      or
      terminates. At the time of execution of this Lease by Tenant, Tenant shall
      pay
      all money due to Landlord as set forth in Section 1.18.

    

    5.2.    Intentionally
      Deleted.

    

    5.3.    In
      addition to Base Rent, Tenant shall pay to Landlord on the first day of each
      and
      every month of this Lease, one-twelfth (1/12th) of the Landlord’s reasonable
      estimate of Tenant’s Proportionate Share of the Operating Costs for that
      calendar year. The parties acknowledge that Landlord’s initial estimate of the
      monthly Operating Costs for the 2006 calendar year is equal to $.46 per rentable
      square foot. Such estimate is not a maximum or a cap, but only an estimate
      which
      is subject to adjustment. Landlord shall have the right, at any time and from
      time to time during the term of this Lease, by notice to Tenant, to change
      said
      estimate. Landlord and Tenant agree and stipulate that the rentable area in
      the
      Building, the rentable area in the Premises, and Tenant’s Proportionate Share of
      the Operating Costs are as set forth in Sections 1.1, 1.2 and 1.9 of this
      Lease. Tenant acknowledges that: (i) Landlord makes no representation as to
      the
      actual rentable square footage of the Premises or the Building, and (ii) there
      shall be no adjustment to the Base Rent based upon any other or additional
      measurement of rentable square footage. Any discrepancy discovered after the
      Lease Date in connection with the square footages stated in Sections 1.1 and
      1.2
      shall not be a basis for an adjustment in the Base Rent, unless otherwise agreed
      in writing by Landlord and Tenant. Base Rent, Tenant’s Proportionate Share of
      Operating Costs, and all other amounts payable by Tenant under this Lease
      whether to Landlord or to others are collectively defined as the
“Rent.”

    

    5.4.    “Operating
      Costs” shall be determined for each calendar year by taking into account on a
      consistent basis all costs of management, maintenance, and operation of the
      Project. Operating Costs shall include but not be limited to: (i) the cost
      of
      supplying all utilities, the cost of operating, maintaining, repairing,
      renovating and managing the utility systems, mechanical systems, sanitary and
      storm drainage systems, and escalator and elevator systems, and the cost of
      supplies and equipment and maintenance and service contracts in connection
      therewith; (ii) the cost of licenses, certificates, permits and inspections
      and
      the cost of contesting the validity or applicability of any governmental
      enactments which may affect Operating Costs, and the costs incurred in
      connection with the implementation and operation of a transportation system
      management program or similar program; (iii) the cost of insurance carried
      by
      Landlord, in such amounts as Landlord may reasonably determine, including,
      without limitation, insurance premiums and insurance deductibles paid or
      incurred by Landlord; (iv) fees, charges and other costs, including, without
      limitation, management fees, consulting fees, legal fees and accounting fees,
      of
      all persons engaged by Landlord or otherwise reasonably incurred by Landlord
      in
      connection with the management, operation, maintenance and repair of the
      Project; (v) wages, salaries and other compensation and benefits of all persons
      engaged in the operation, maintenance or security of the Building, and
      employer’s Social Security taxes, unemployment taxes or insurance, and any other
      taxes which may be levied on such wages, salaries, compensation and benefits;
      provided, that if any employees of Landlord provide services for more than
      one
      building of Landlord, then a prorated portion of such employees’ wages, benefits
      and taxes shall be included in Operating Costs based on the portion of their
      working time devoted to the Building; (vi) payments under any easement, license,
      operating agreement, declaration, restrictive covenant, or instrument pertaining
      to the sharing of costs by the Building; (vii) operation, repair, maintenance
      and replacement of all systems, equipment, components or facilities which serve
      the Building in the whole or in part; (viii) amortization (including, without
      limitation, interest on the unamortized cost at a rate equal to the floating
      commercial loan rate announced from time to time by Bank of America, a national
      banking association, as its prime rate, plus 2% per annum) of the cost of
      acquiring or the rental expense of personal property used in the maintenance,
      operation and repair of the Building and Project; and (ix) all federal,
      state, county, or local governmental or municipal taxes, fees, charges or other
      impositions of every kind and nature, whether general, special, ordinary or
      extraordinary because of or in connection with the ownership, leasing and
      operation of the Project, including, without limitation, any assessment, tax,
      fee, levy or charge in addition to, or in substitution, partially or totally,
      of
      any assessment, tax, fee, levy or charge previously included within the
      definition of real property tax, it being acknowledged by Tenant and Landlord
      that Proposition 13 was adopted by the voters of the State of California in
      the
      June 1978 election and that assessments, taxes, fees, levies and charges may
      be
      imposed by governmental agencies for such services as fire protection, street,
      sidewalk and road maintenance, conservation, refuse removal, transit and for
      other governmental services formerly provided without charge to property owners
      or occupants; (x) costs incurred in connection with the parking areas servicing
      the Project; and (xi) the cost of capital improvements or other costs incurred
      in connection with the Project (A) that are intended as a labor-saving device
      or
      to effect other economies in the operation or maintenance of the Project, or
      any
      portion thereof, (B) that are required under any governmental law or regulation
      but which were not so required in connection with the Project at the time that
      permits for the construction of the Building were obtained, or (C) that are
      in
Landlord’s
      reasonable opinion reasonably necessary to maintain the Project in good
      condition and repair; provided, however, that each such permitted capital
      expenditure shall be amortized (including, without limitation, interest on
      the
      unamortized cost) over its useful life as Landlord shall reasonably determine.
      If the Building is a part of a multi-building development, those Operating
      Costs
      attributable to such development as a whole (and not attributable solely to
      any
      individual building therein) shall be allocated by Landlord to the Building
      and
      to the other buildings within such development on an equitable basis. Landlord
      shall have the right, but not the obligation, from time to time, to equitably
      allocate some or all of the Operating Costs among different tenants of the
      building (the “Cost Pools”). Such Cost Pools may include, but shall not be
      limited to, the office space tenants of the Building and the retail space
      tenants of the Building. If the Building is less than ninety-five percent (95%)
      occupied during all or a portion of a calendar year, the variable components
      of
      the Operating Costs as determined by Landlord shall be calculated as if the
      Building had been 95% occupied for the full calendar year. “Operating Costs”
shall not include any of the following, for purposes of calculating the portion
      of Operating Costs payable by Tenant: (1) leasing commissions in connection
      with
      leases at the Building, (2) the cost of construction of tenant improvements
      for
      a specific tenant of the Building in connection with such tenant’s occupancy of
      premises in the Building, (3) additions to the Project, (4) advertising, (5)
      depreciation deductions taken by the Landlord for tax purposes, (6) payment
      of
      interest or principal on loans secured by the Project, (7) income taxes of
      Landlord, (8) rent paid by Landlord under a ground lease for the Project, (9)
      gift, franchise, inheritance or estate taxes imposed upon or assessed against
      the interest of any person in the Project, or taxes computed upon the basis
      of
      the net income of any owners of any interest in the Project, (10) capital
      expenditures, improvements or structural changes made to the Building other
      than
      those expressly permitted in subsection (xi) above, (11) costs, including
      permit, license and inspection costs, incurred with respect to the installation
      of tenant improvements to other tenant’s leased premises within the Project or
      incurred in renovating or otherwise improving, decorating, painting or
      redecorating vacant leasable space within the Project, (12) costs in order
      to
      market space to potential tenants, leasing commissions, and attorneys’ fees in
      connection with the negotiation and preparation of letters, deal memos, letters
      of intent, leases, subleases and/or assignments or other costs in connection
      with lease, sublease and/or assignment negotiations with presents or prospective
      tenants or other occupants of the Project, (13) reserves (except that nothing
      contained herein shall be deemed to prevent Lessor’s collection of anticipated
      Operating Costs for the current year), (14) ground lease rental on any
      underlying ground lease or interest, principal, points and/or fees on debts
      or
      amortization on any mortgage or mortgages or any other debt instrument
      encumbering the Project, (15) to the extent any employee of Landlord spends
      only
      a portion of his or her time working with respect to the Project (as opposed
      to
      full time work with respect to the Project), a prorated amount of such
      employee’s wages, salaries and compensation based upon the portion of time spent
      by such employee with respect to the projects other than the Project, (16)
      costs
      of correcting any presently existing non-compliance of the Project with
      applicable laws (as enforced upon the execution of this Lease) other than any
      such existing non-compliance where compliance work is not presently required
      to
      be performed (as opposed to existing non-compliance where compliance work is
      legally mandated even in the absence of subsequent improvements, alterations
      or
      change in use), (17) increased costs of performance resulting from the
      negligence or willful misconduct of Landlord or Landlord’s agents, employees or
      contractors, (18) costs incurred due to violation by Landlord or any other
      tenant in the Project of the terms and conditions of any lease for space within
      the Project, (19) charitable or political contributions, (20) interest,
      penalties or other costs arising out of Landlord’s failure to make timely
      payment of its obligations, (21) overhead and profit paid to Landlord or to
      subsidiaries or affiliates of Landlord for goods and/or services in the Project
      to the extent the same exceeds the costs of such goods and/or services rendered
      by qualified, unaffiliated third parties on a competitive basis, (22) costs
      to
      remediate Hazardous Materials located upon, within or beneath the Project (i)
      prior to the Commencement Date, or (ii) after the Commencement Date as a result
      of Landlord’s acts, (23) costs (other than ordinary maintenance) for sculpture,
      paintings and other objects of art, or (24) any excess utility expense payable
      by another tenant of the Project pursuant to such tenant’s lease.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    5.5.    Within
      one hundred twenty (120) days after December 31 of each calendar year, or as
      soon thereafter as practicable, the total of the Operating Costs for said
      calendar year just completed shall be determined by Landlord. Landlord shall
      give Tenant notice of such determination, and Tenant within thirty (30) days
      thereafter shall pay to Landlord Tenant’s Proportionate Share of the Operating
      Costs for such calendar year, less the payments made by Tenant to Landlord
      during such calendar year for Operating Costs, or, if Tenant has overpaid such
      amount, Landlord shall credit any excess paid toward Tenant’s next rental
      payment due. During the first and last years of the Term, Tenant’s Proportionate
      Share of the Operating Costs shall be adjusted in proportion to the number
      of
      days of that calendar year during which this Lease is in effect over the total
      days in that calendar year.

    

    5.6.    In
      addition to Tenant’s Proportionate Share of Operating Costs, Tenant shall
      reimburse Landlord upon demand for any and all taxes required to be paid by
      Landlord when such taxes are measured by or reasonably attributable to the
      cost
      or value of Tenant’s equipment, furniture, fixtures and other personal property
      located in the Premises.

    

    6.    INITIAL
      CONSTRUCTION;
      CONDITION OF THE PREMISES

    

    Construction,
      if any, to be completed by Landlord will be in accordance with the Tenant Work
      Letter attached to and made a part of this Lease as Exhibit B. Landlord will
      not
      be obligated to construct or install any improvements or facilities of any
      kind
      other than those called for in Exhibit B. All improvements shall be the property
      of Landlord, subject to Section 7.4, and upon termination of this Lease, Tenant
      shall deliver the Premises to Landlord in the condition required by Article
      36.
      The Premises shall be delivered to Tenant on or before the Commencement Date
      in
      broom clean condition with all major building systems, including the electrical,
      heating, ventilation and air conditioning systems, plumbing and utilities,
      dock
      doors and levelers, and the roof of the Premises in good working order as of
      the
      Commencement Date.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    7.    REPAIRS
      & ALTERATIONS

    

    7.1.    Subject
      to reimbursement pursuant to Section 5.3, and subject to the provisions of
      Section 7.2, and Articles 8 and 14, Landlord agrees to keep in good condition
      the foundations, exterior walls, structural portions of the Building, the roof
      and the HVAC, mechanical, electrical, life safety and plumbing systems of the
      Building not located in or exclusively serving the Premises (expressly
      excluding, however, any HVAC, mechanical, electrical, plumbing or lighting
      equipment in the Premises, which repair shall be Tenant’s sole responsibility).
      Landlord shall not be liable or responsible for breakdowns or temporary
      interruptions in service or for any repair or maintenance which is caused in
      whole or in part by the act or omission of Tenant or its agents, contractors,
      employees, or guests. In the event of any repair or maintenance caused by the
      act or omission of Tenant, Tenant shall pay for such repair or maintenance
      upon
      demand from Landlord and shall indemnify, defend, protect and hold harmless
      Landlord against any and all loss, cost or liability in connection therewith.
      Landlord shall have a reasonable time after written notice from Tenant to
      perform necessary repairs or maintenance. Tenant hereby waives and releases
      its
      right to make repairs at Landlord’s expense under Sections 1941 and 1942 of the
      California Civil Code or under any similar law, statute, or ordinance now or
      hereafter in effect.

    

    7.2.    Subject
      to the provisions of Section 7.1, and Articles 8 and 14, Tenant shall keep
      and
      maintain the Premises in first class condition and repair, and shall make all
      necessary repairs thereto at Tenant’s sole cost and expense. Tenant’s repair and
      maintenance obligations include, without limitation, repairs to: (a) floor
      coverings; (b) interior partitions; (c) doors; (d) the interior side of demising
      walls; (e) electronic, phone and data cabling and related equipment that is
      installed by or for the exclusive benefit of Tenant and located in the Premises
      or other portions of the Building or the Project; (f) supplemental air
      conditioning units, kitchens, including hot water heaters, plumbing, and similar
      facilities exclusively serving the Premises; (g) mechanical (including HVAC),
      plumbing fixtures, wiring, electrical, and lighting systems serving the
      Premises; (h) windows, glass and plate glass; (i) ceilings; (j) skylights,
      smoke
      hatches and roof vents; (k) fixtures and equipment; and (l) Alterations (as
      hereinafter defined). If Tenant fails to make any repairs to the Premises for
      more than thirty (30) days after written notice from Landlord (although notice
      shall not be required in an emergency), Landlord may make the repairs and Tenant
      shall pay the reasonable cost of the repairs, together with an administrative
      charge in an amount equal to ten percent (10%) of the cost of the repairs.
      In
      addition, Tenant shall, at its sole cost and expense, provide janitorial service
      to the Premises in a manner consistent with other similar projects in the Foster
      City, California area. The janitorial service to be provided by Tenant shall
      include, but not be limited to, the obligation to clean the exterior windows
      and
      to keep the interior of the Premises such as the windows, floors, walls, doors,
      showcases and fixtures clean and neat in appearance and to remove all trash
      and
      debris which may be found in or around the Premises. Tenant is responsible
      for
      all redecorating, remodeling, alteration and painting required by Tenant during
      the Term. Tenant covenants and agrees not to suffer or permit any lien of
      mechanics or materialmen or others to be placed against the Project, the
      Building or the Premises with respect to work or services claimed to have been
      performed for or materials claimed to have been furnished to Tenant or the
      Premises under this Article 7 or otherwise, and, in case of any such lien
      attaching or notice of any lien, Tenant covenants and agrees to cause it to
      be
      immediately released and removed of record or Landlord, at its sole option,
      may
      immediately take all action necessary to release and remove such lien, and
      Tenant shall, upon demand, immediately reimburse Landlord for all costs and
      expenses relating thereto incurred by Landlord.

    

    7.3.    Tenant
      may not make any improvements, alterations, additions or changes to the Premises
      (collectively, the “Alterations”) without first procuring the written consent of
      Landlord to such Alterations, which consent shall be requested by Tenant not
      less than thirty (30) days prior to the commencement thereof, and which consent
      shall not be unreasonably withheld by Landlord. Landlord may condition its
      consent on, among other things, its receipt, review and approval of complete
      plans and specifications for such Alterations, the installation of additional
      risers, feeders and other appropriate equipment as well as utility meters.
      The
      installation, maintenance, repair and replacement, as well as all charges in
      connection with all such meters and equipment shall be at Tenant’s sole cost and
      expense. Notwithstanding the foregoing, Tenant shall have the right without
      Landlord’s consent but upon five (5) business days’ prior notice to Landlord to
      make cosmetic, non-structural Alterations to the Premises in accordance with
      the
      terms of this Lease, provided that such Alterations do not (i) affect the
      exterior of the Premises or the Project (nor may such Alterations be visible
      from street level on the exterior of the Building), (ii) affect the Project’s
      electrical, ventilation, plumbing, elevator, mechanical, air conditioning or
      any
      other systems therein, or (iii) exceed $10,000 in the aggregate per year. The
      construction of the initial improvements to the Premises shall be governed
      by
      the terms of the Tenant Work Letter, attached hereto as Exhibit B, and not
      the
      terms of this Article 7.

    

    7.4.    Except
      to
      the extent Tenant requests and Landlord designates otherwise at the time
      Landlord approves such Alterations, all or any part of the Alterations, whether
      made with or without the consent of Landlord, shall, at the election of
      Landlord, either be removed by Tenant at its expense before the expiration
      or
      earlier termination of this Lease or shall remain upon the Premises and be
      surrendered therewith at the Expiration Date or earlier termination of this
      Lease as the property of Landlord without disturbance or injury. If Landlord
      requires the removal of all or part of any Alterations, Tenant, at its expense,
      shall immediately repair any damage to the Premises or the Building caused
      by
      such removal. If Tenant fails to remove the Alterations upon Landlord’s request,
      then Landlord may (but shall not be obligated to) remove them and the cost
      of
      removal and repair of any damage together with all other damages which Landlord
      may suffer by reason of the failure of Tenant to remove Alterations, shall
      be
      paid by Tenant to Landlord upon demand. Tenant shall not be entitled to any
      compensation from Landlord for any Alterations removed by Landlord or at
      Landlord’s direction.

    

    7.5.    Tenant
      shall construct such Alterations and perform such repairs in conformance with
      any and all applicable rules and regulations of any federal, state, county
      or
      municipal code or ordinance and pursuant to a valid building permit, issued
      by
      the applicable municipality, in conformance with Landlord’s construction rules
      and regulations. Landlord’s consent to such Alterations or Landlord’s approval
      of the plans, specifications, and working drawings for such Alterations will
      create no responsibility or liability on the part of Landlord for the
      completeness, design, sufficiency or compliance with all laws, rules and
      regulations of governmental agencies or authorities (including without
      limitation the Americans With Disabilities Act of 1990, as amended from title
      to
      time, and the provisions of that
      Act
      applicable to the Project or any part of it) with respect to such Alterations.
      All work with respect to any Alterations must be done in a good and workmanlike
      manner and diligently prosecuted to completion to the end that the Premises
      shall at all times be a complete unit except during the period of work. In
      performing the work of any such Alterations, Tenant shall have the work
      performed in such manner as not to obstruct access to the Building or the Common
      Areas for any other tenant of the Building, and as not to obstruct the business
      of Landlord or other tenants in the Building, or interfere with the labor force
      working in the Building. Not less than fifteen nor more than twenty days prior
      to commencement of any Alterations, Tenant shall notify Landlord in writing
      of
      the work commencement date so that Landlord may post notices of
      nonresponsibility about the Premises. Upon completion of any Alterations, Tenant
      agrees to cause a Notice of Completion to be recorded in the office of the
      Recorder of the County in which the Premises are located in accordance with
      Section 3093 of the Civil Code of the State of California or any successor
      statute, and Tenant shall deliver to the Building management office a
      reproducible copy of the “as built” drawings of the Alterations, if
      any.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    7.6.    The
      charges for work performed by a contractor selected by Landlord shall be deemed
      Rent under this Lease, payable upon billing therefor, either periodically during
      construction or upon the substantial completion of such work, at Landlord’s
      option. Upon completion of such work, Tenant shall deliver to Landlord evidence
      of payment, contractors’ affidavits and full and final waivers of all liens for
      labor, services or materials. Tenant shall pay to Landlord a percentage of
      the
      cost of such work sufficient to compensate Landlord for all overhead, general
      conditions, fees and other costs and expenses arising from Landlord’s
      involvement with such work.

    

    7.7.    In
      the
      event that Tenant makes any Alterations, Tenant agrees to carry “Builder’s All
      Risk” insurance in an amount approved by Landlord covering the construction of
      such Alterations, and such other insurance as Landlord may require, it being
      understood and agreed that all of such Alterations shall be insured by Tenant
      pursuant to Article 9 of this Lease immediately upon completion thereof. In
      addition, Landlord may, in its discretion, require Tenant to obtain a lien
      and
      completion bond or some alternate form of security satisfactory to Landlord
      in
      an amount sufficient to ensure the lien-free completion of such Alterations
      and
      naming Landlord a co-obligee.

    

    8.    FIRE
      OR CASUALTY DAMAGE

    

    8.1.    Repair
      of Damage to Premises by Landlord.
      If the
      Premises or any portion of the Project is damaged by fire or other cause (the
      “Occurrence”) without the negligence or willful act of Tenant or its partners,
      trustees, officers, directors, shareholders, members, beneficiaries, licensees,
      invitees, or any subtenants or subtenants’ agents, employees, contractors, or
      invitees, servants, guests, or independent contractors (collectively, “Tenant
      Persons”), Landlord shall diligently, and as soon as practicable, repair the
      damage; provided, however, that Landlord may elect not to rebuild or restore
      the
      Premises or any portion of the Project, and instead terminate this Lease, by
      notifying Tenant in writing of such termination within ninety (90) days after
      the date on which Landlord has actually discovered the full extent and nature
      of
      such damages, such notice to include a lease termination date and a date for
      Tenant to vacate the Premises. Landlord may so elect to terminate this Lease
      only if the Building shall be damaged by fire or other cause, whether or not
      the
      Premises are affected, and one or more of the following conditions is present:
      (i) repairs cannot reasonably be completed within two hundred (200) days after
      the Occurrence; (ii) the Occurrence occurs during the last Lease Year; (iii)
      the
      holder of any mortgage on the Building or ground lessor with respect to the
      Project shall require that the insurance proceeds or any portion thereof be
      used
      to retire all or a portion of the mortgage debt, or shall terminate the ground
      lease, as the case may be; (iv) Landlord’s insurer has not agreed that the
      damage is fully covered, except for deductible amounts, by Landlord’s insurance
      policies; or (v) in Landlord’s sole discretion, twenty percent (20%) or more of
      the rentable floor area of the Project is unusable, unmarketable, damaged or
      destroyed. If Landlord terminates this Lease, the Base Rent and Tenant’s
      Proportionate Share of increases in Operating Costs (collectively, “Periodic
      Rent”) shall be apportioned and paid to the date of termination (subject to
      abatement as provided below). Such repair or restoration by Landlord shall
      be to
      substantially the same condition of the base, shell, and core of the Premises
      and common areas prior to the casualty, except for modifications required by
      zoning and building codes and other laws or by the holder of a mortgage on
      the
      Building, or the lessor of a ground or underlying lease with respect to the
      Project or portion thereof, or any other modifications to the Common Areas
      reasonably deemed desirable by Landlord, which are consistent with the character
      of the Project, provided access to the Premises and any common restrooms serving
      the Premises shall not be materially impaired. Notwithstanding any other
      provision of this Lease, upon the occurrence of any damage to the Premises,
      Tenant shall assign to Landlord (or to any party designated by Landlord) all
      insurance proceeds payable to Tenant under Tenant’s insurance required under
      Section 9.1.2 of this Lease that are attributable to the tenant improvements
      and
      Alterations, and Landlord shall repair any injury or damage to the tenant
      improvements and Alterations installed in the Premises and shall return such
      tenant improvements to their condition prior to the Occurrence; provided that
      if
      the cost of such repair by Landlord exceeds the amount of insurance proceeds
      received by Landlord from Tenant’s insurance carrier, as assigned by Tenant, the
      cost of such repairs shall be paid by Tenant to Landlord prior to Landlord’s
      repair of the damage. In connection with such repairs and replacements, Tenant
      shall, prior to the commencement of construction, submit to Landlord, for
      Landlord’s review and approval, all plans, specifications and working drawings
      relating thereto, and Landlord shall select the contractors to perform such
      improvement work.

    

    8.2.    Termination
      By Either Party.

    

    8.2.1.    If
      Landlord does not elect to terminate this Lease under the terms of Section
      8.1,
      but the damage required to be repaired by Landlord is not repaired by the end
      of
      the 200 Day Period, then either Landlord or Tenant (subject to Section 8.2.2),
      within thirty (30) days after the end of the 200 Day Period, may terminate
      this
      Lease by written notice to the other party, in which event this Lease shall
      terminate as of the date of receipt of the notice, and the Periodic Rent shall
      be apportioned and paid to the date of termination (subject to abatement as
      provided below). The “200 Day Period” shall mean the period beginning on the
      date of the Occurrence and ending two hundred (200) days from the date of the
      Occurrence, provided that such 200 Day Period shall not be extended for
      any
      delays caused by Force Majeure. Notwithstanding the preceding provisions of
      this
      Section 8.2.1, if (a) Landlord has not elected to terminate this Lease pursuant
      to the terms of Section 8.1, and (b) Landlord is proceeding to complete the
      repairs, then neither party shall have the right to terminate this Lease if,
      before the end of the 200 Day Period, Landlord, at Landlord’s sole option, gives
      written notice to Tenant that the repairs will be completed within thirty (30)
      days after the end of the 200 Day Period, and the repairs are actually completed
      within such thirty day period. If the repairs are not completed within thirty
      days after the end of the 200 Day Period, then either party may terminate this
      Lease by written notice to the other party. Such notice of termination shall
      be
      given within sixty (60) days after the end of the 200 Day Period, and shall
      be
      effective upon receipt thereof by the other party to this Lease.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    8.2.2.    Notwithstanding
      the provisions of Section 8.2.1, Tenant shall have the right to terminate this
      Lease under Section 8.2.1 only if each of the following conditions is satisfied:
      (a) the damage to the Project by fire or other casualty was not caused by the
      gross negligence or intentional act of Tenant Persons; (b) there is then no
      uncured Event of Default by Tenant; and (c) as a result of the damage, Tenant
      cannot reasonably conduct business from the Premises.

    

    8.3.    Rent
      Abatement.
      Subject
      to the last sentence of this Section 8.3, during the period that the damaged
      portion of the Premises is rendered untenantable by the damage, Periodic Rent
      shall be reduced by the ratio that the rentable square footage of the Premises
      thereby rendered untenantable bears to the total rentable square footage of
      the
      Premises, provided that (i) Tenant does not occupy or use such untenantable
      portion of the Premises during such rent abatement period, and (ii) Tenant
      shall, as soon as reasonably practicable after the event purportedly giving
      rise
      to rent abatement, give written notice to Landlord of Tenant’s claim for rent
      abatement and the basis therefor, including the date when Tenant vacated the
      Premises or portion thereof as a result of the Occurrence. Notwithstanding
      the
      preceding sentence, if the damage was the consequence of the fault or negligence
      of any of the Tenant Persons, then the Periodic Rent shall be abated only to
      the
      extent Landlord actually receives rental or business interruption proceeds
      allocated to the Periodic Rent for the Premises. If the rent abatement period
      expressly provided in this Section 8.3 is for a period of less than five days,
      then Periodic Rent for the first such five days shall be abated only to the
      extent that Landlord actually receives rental or business interruption proceeds
      allocable to such Periodic Rent to be abated.

    

    8.4.    Tenant
      Liability for Damages.
      Subject
      to Section 8.5, all injury or damage to the Premises or the Building resulting
      from the gross negligence or intentional acts or misconduct of any Tenant
      Persons shall be repaired at the sole cost of Tenant, payable on demand by
      Landlord, or at Landlord’s option, Landlord may require Tenant to perform such
      repairs or portion thereof and Periodic Rent shall not abate. If Landlord shall
      so elect, Landlord shall have the right to make repairs to the standard tenant
      improvements, not including any tenant extras, Alterations, or personal
      property, and any expense incurred by Landlord, together with interest thereon
      at the rate of ten percent (10%) per year shall be paid by Tenant upon
      demand.

    

    8.5.    Release
      to Extent of Insurance Proceeds.
      Notwithstanding any other provisions of this Lease, and provided that any
      applicable insurance coverage is not thereby invalidated, limited, or made
      more
      expensive, Tenant shall be relieved from the obligation to repair or pay for
      physical injury or damage to the Project resulting from the negligence, gross
      negligence or intentional act or misconduct of any of Tenant Persons only to
      the
      extent that Landlord actually receives insurance proceeds for complete payment
      in full for such repairs from Tenant’s or Landlord’s insurance.

    

    8.6.    Insurance
      Deductible.
      Notwithstanding the preceding provisions in this Article 8 concerning abatement
      of Periodic Rent, Tenant shall not be relieved from its obligation to pay
      Tenant’s Proportionate Share of the insurance deductibles under insurance
      policies carried by Landlord.

    

    8.7.    Waiver
      of Statutes.
      The
      provisions of this Lease, including, without limitation, this Article 8,
      constitute an express agreement between Landlord and Tenant with respect to
      any
      and all damage to, or destruction of, all or any part of the Premises, the
      Building, or any other portion of the Project, and any statute or regulation
      of
      the State in which the Building is located, including, without limitation,
      Sections 1932(2) and 1933(4) of the California Civil Code, with respect to
      any
      rights or obligations concerning damage or destruction in the absence of an
      express agreement between the parties, and any other such statute or regulation
      which may hereafter be in effect, shall have no application to this Lease or
      any
      damage or destruction to all or any part of the Premises, the Building, or
      any
      other portion of the Project.

    

    9.    INSURANCE

    

    9.1.    Tenant
      shall during the entire Term maintain the following insurance
      coverage:

    

    9.1.1.    Commercial
      General Liability Insurance for personal injury and property damage claims
      arising out of Tenant’s occupation or use of the Premises and from its business
      operations, and including liability arising under any indemnity set forth in
      this Lease in amounts of not less than $2 million for each occurrence and $3
      million for all occurrences each year.

    

    9.1.2.    Property
      damage insurance covering all Tenant’s furniture, trade fixtures, office
      equipment, merchandise and other property in the Premises and all original
      and
      later-installed tenant improvements in the Premises (including, without
      limitation, the Tenant Improvements). This insurance shall be a “Causes of Loss
      - Special Form” (formerly known as “All Risk”) policy covering the full
      replacement cost of the items covered and including vandalism, malicious
      mischief, earthquake sprinkler leakage coverages.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    9.1.3.    All
      required workers’ compensation or other similar insurance pursuant to all
      applicable state and local statutes and regulations.

    

    9.1.4.    Adequate
      business interruption insurance to cover a period of not less than twelve (12)
      months.

    

    9.2.    All
      insurance provided by Tenant under this Lease shall be coordinated with any
      preceding, concurrent or subsequent, occurrence or claims made insurance, in
      such a manner as to avoid any gap in coverage against claims arising out of
      occurrences, conduct or events which take place during the period beginning
      on
      the Lease Date and ending on termination of this Lease.

    

    9.3.    Landlord
      makes no representation that the insurance coverage required of Tenant provides
      adequate coverage for Tenant’s needs or for its obligations under this Lease.
      Tenant shall not do or permit to be done anything which shall cause the
      cancellation of, invalidate, increase the rate of, or otherwise adversely
      affect, the insurance policies referred to in this Article 9.

    

    9.4.    Landlord
      shall not be deemed to have waived or reduced any of the insurance coverage
      requirements for Tenant except by an express written agreement to that effect.
      The receipt by Landlord or its contractors or agents of insurance policies,
      certificates, letters, or other correspondence, documents or information which
      do not conform to the insurance requirements of this Lease, or the failure
      of
      Landlord to receive policies, certificates, or other documentation required
      by
      this Article 9, shall not be deemed to be Landlord’s consent to a waiver or
      reduction of any such requirements, despite any failure by Landlord to object
      to
      same at the time of receipt (or lack of receipt), or thereafter. Any reduction,
      modification, or waiver of any of Tenant’s insurance requirements under this
      Lease may be made only by a written document signed by Landlord and Tenant
      which
      expressly amends the pertinent described portions of this Lease.

    

    9.5.    Where
      Landlord provides written notice to Tenant regarding Tenant’s failure to
      maintain the insurance required of Tenant in this Article 9 and Tenant fails
      to
      obtain such insurance within two (2) business days after receipt of such notice,
      Landlord shall have the right and option, but not the obligation, to maintain
      any or all of the insurance which is required in Section 9.1 to be provided
      by
      Tenant if Tenant fails to maintain the insurance required of Tenant in this
      Article 9. All costs of Tenant’s insurance provided by the Landlord shall be
      obtained at Tenant’s expense.

    

    9.6.    The
      minimum insurance requirements set forth in this Lease shall not limit the
      liability of Tenant under this Lease. The Landlord, and any parties specified
      by
      the Landlord, shall be named as additional insureds under the Tenant’s
      insurance. All insurance companies providing insurance pursuant to this Article
      shall be rated at least A-XII in Best’s Key Rating Guide and shall be otherwise
      reasonably acceptable to Landlord and licensed and qualified to do business
      in
      the State of California. Insurance provided by the Tenant shall be primary
      as to
      all covered claims and any insurance carried by Landlord is excess and is
      non-contributing. Each Tenant’s insurance policy must not be cancelable or
      modifiable except upon thirty (30) days prior written notice to Landlord and
      any
      specified mortgagee of Landlord. The insurance must also contain a severability
      of interest clause acceptable to Landlord. Copies of policies or original
      certificates of insurance with respect to each policy shall be delivered to
      the
      Landlord prior to the Commencement Date, and thereafter, at least thirty (30)
      days before the expiration of each existing policy. Any insurance required
      hereunder of Tenant may be provided with blanket insurance policy(ies) insuring
      Tenant at locations in addition to the Premises, so long as such blanket
      policy(ies) expressly affords the coverage required of Tenant under this Lease.
      Tenant shall take all necessary steps so as to prevent the actual effective
      aggregate coverage of such blanket policy(ies) from ever being eroded at any
      time by claims, or reserves therefor established by the insurer, so that the
      minimum coverage afforded to Landlord required by this Lease shall at all times
      remain in effect. Notwithstanding the foregoing, Landlord shall obtain and
      keep
      in force during the term of this Lease in customary amounts for buildings
      comparable to the Building a “Causes of Loss - Special Form” insurance policy
      covering loss or damage to the Building.

    

    9.7.    Landlord
      has the right at any time, but not the obligation, to reasonably change, cancel,
      decrease or increase any insurance required or specified under this Lease.
      Landlord at its option may obtain any of the required insurance directly or
      through umbrella policies covering the Building and other assets owned by
      Landlord.

    

    9.8.    Landlord
      and Tenant agree to request that their respective insurance companies issuing
      property damage insurance waive any rights of subrogation that such companies
      may have against Landlord or Tenant, as the case may be, so long as the
      insurance carried by Landlord or Tenant, respectively, is not invalidated
      thereby. As long as such waivers of subrogation are contained in their
      respective insurance policies, Landlord and Tenant hereby waive any right that
      either may have against the other on account of any loss or damage to their
      respective property to the extent such loss or damage is actually insured under
      policies of insurance for fire and all risk coverage, theft, public liability,
      or other similar insurance.

    

    9.9.    Tenant
      shall not conduct or permit to be conducted by its employees, agents, guests
      or
      invitees any activity, or place any equipment in or about the Premises or the
      Building that will in any way increase the cost of fire insurance or other
      Landlord insurance on the Building. If any increase in the cost of fire
      insurance or other insurance is stated by any insurance company or by the
      applicable Insurance Rating Bureau, if any, to be due to any activity or
      equipment of Tenant in or about the Premises or the Building, such statement
      shall be conclusive evidence that the increase in such cost is due to such
      activity or equipment and, as a result thereof, Tenant shall be liable for
      the
      amount of such increase. Tenant shall reimburse Landlord for such amount upon
      written demand from Landlord and any such sum shall be considered additional
      Rent payable hereunder. Tenant, at its sole expense, shall comply with any
      and
      all requirements of any insurance organization or company necessary for the
      maintenance of reasonable fire and public liability insurance covering the
      Premises and the Building.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    10.    WAIVER
      AND INDEMNIFICATION

    

    To
      the
      extent not prohibited by law, Landlord, its partners, trustees, ancillary
      trustees and their respective officers, directors, shareholders, members,
      beneficiaries, agents, servants, employees, and independent contractors
      (collectively, “Landlord Persons”) shall not be liable for any damage either to
      person or property or resulting from the loss of use thereof, which damage
      is
      sustained by Tenant or by other persons claiming through Tenant except for
      damage arising solely from the gross negligence or intentional misconduct of
      Landlord Persons. Tenant agrees to protect, indemnify, defend, and hold Landlord
      harmless from all claims and all costs, including reasonable attorneys’ fees,
      expenses and liabilities, except those caused solely by Landlord’s negligence,
      in any way arising or resulting from (a) any accident, injury, death, loss
      or
      damage to any person or to any property including, without limitation, the
      person and property of Tenant and its employees, agents, officers, guests,
      and
      all other persons at any time in the Building or the Premises or the Common
      Areas, (b) the occupancy or use of the Premises by the Tenant, or (c) any act
      or
      omission or negligence of Tenant or any agent, licensee, or invitee of Tenant,
      or its contractors, employees, or any subtenant or subtenant’s agents,
      employees, contractors, or invitees. The indemnification obligations of Tenant
      under this Lease shall survive the expiration or earlier termination of this
      Lease.

    

    11.    USE
      OF PREMISES

    

    11.1.    The
      Premises are leased to Tenant for the sole purpose set forth in Section 1.10
      and
      Tenant shall not use or permit the Premises to be used for any other purposes
      without the prior written consent of Landlord, which consent may be withheld
      in
      Landlord’s sole and absolute discretion. Tenant shall not allow occupancy
      density of use of the Premises which is greater than the average density of
      the
      other tenants of the Building. Tenant further covenants and agrees that it
      shall
      not use, or permit any person or persons to use, the Premises or any part
      thereof for any use or purpose contrary to the rules and regulations, attached
      hereto as Exhibit D, or in violation of the laws of the United States of
      America, the State of California, or the ordinances, regulations or requirements
      of the local municipal or county governing body or other lawful authorities
      having jurisdiction over the Building. Landlord shall not be responsible to
      Tenant for the nonperformance of any of such rules and regulations by or
      otherwise with respect to the acts or omissions of any other tenants, guests
      or
      occupants of the Building.

    

    11.2.    Tenant
      shall comply with all recorded covenants, conditions, and restrictions now
      or
      hereafter affecting the real property underlying the Project. Tenant shall,
      at
      its expense, obtain any governmental permits or approvals required for Tenant’s
      intended use of the Premises except as may be expressly provided in Exhibit
      B.
      The obtaining of any such permits or approvals is not a condition to any of
      Tenant’s obligations under this Lease. Tenant acknowledges that except as
      expressly stated in this Lease, neither Landlord nor Landlord’s agent has made
      any representation or warranty, whether express or implied, as to the Premises,
      including, without limitation, the suitability of the Premises for the conduct
      of Tenant’s business. Except as otherwise expressly provided in this Lease,
      including, without limitation, Section 6 of this Lease, Tenant accepts the
      Premises in their AS IS condition as of the Lease Date, with all faults and
      defects. Tenant has been advised by Landlord to conduct its own investigation
      of
      the suitability of the Premises for Tenant’s intended use, including, without
      limitation, a careful inspection of the Premises, a review of all applicable
      laws and ordinances, and inquiries of all applicable government agencies before
      executing this Lease.

    

    12.    SIGNS

    

    Landlord
      retains absolute control over the exterior appearance of the Building and
      Project and the exterior appearance of the Premises as viewed from the public
      halls and public areas. Tenant will not install, or permit to be installed,
      any
      drapes, furnishings, signs, lettering, designs, advertising or any items that
      will in any way alter the exterior appearance of the Building or the exterior
      appearance of the Premises as viewed from the public halls and public areas.
      Any
      sign, advertising, design, or lettering installed by Tenant shall be considered
      an Alteration (as defined in Section 7.3) and shall be subject to the provisions
      of Article 7. Notwithstanding the foregoing, at Tenant’s sole cost and expense,
      Landlord shall (a) maintain building standard listings on the Building directory
      for Tenant, and (b) install Building standard suite signage at the entrance
      to
      the Premises. 
      All
      signage rights granted to Tenant under this Lease are personal, and may not
      be
      assigned or transferred without Landlord’s prior written consent, which consent
      Landlord may withhold in its sole discretion.

    

    13.    ASSIGNMENT
      AND SUBLETTING

    

    13.1.    Tenant
      shall not assign, transfer, mortgage or otherwise encumber this Lease or sublet
      or rent (or permit a third party to occupy or use) (collectively, a “Transfer”)
      the Premises, or any part thereof, nor shall any Transfer of this Lease or
      the
      right of occupancy be effected by operation of law or otherwise, without the
      prior written consent of Landlord which shall not be unreasonably withheld
      or
      delayed; provided, however, that the parties hereby agree that it shall be
      deemed to be reasonable under this Lease and under any applicable law for
      Landlord to withhold consent to any proposed Transfer where, without limitation
      as to other reasonable grounds for withholding consent: (i) the transferee
      is of
      a character or reputation or engaged in a business which is not consistent
      with
      the quality of the Building; (ii) the transferee is either a governmental agency
      or instrumentality thereof; (iii) the transferee is not a party of reasonable
      financial worth and/or financial stability in light of the responsibilities
      involved under this Lease on the date consent is requested; (iv) the Transfer
      may result in a significant increase in the use of the utilities, services
      or
      Common Areas of the Project; (v) the proposed assignee or sublessee is an
      existing tenant of the Building or is currently negotiating with Landlord for
      space in the Building, (vi) the proposed Transfer would cause a violation of
      another lease for space in the Building, or would give an occupant of the
      Building a right to cancel its lease, or (vii) Tenant has committed an Event
      of
      Default which has not been cured. For purposes of the foregoing prohibitions,
      a
      transfer at any one time or from time to time of fifty percent (50%) or more
      of
      an interest in Tenant (whether stock, partnership interest or other form of
      ownership or control) by any person(s) or entity(ties) having an interest in
      ownership or control of Tenant at the Lease Date shall be
      deemed
      to be a Transfer of this Lease. Notwithstanding the foregoing, however, neither
      an assignment of the Premises to a transferee which is the resulting entity
      of a
      merger or consolidation of Tenant with another entity, nor an assignment or
      subletting of all or a portion of the Premises to an affiliate of Tenant (an
      entity which is controlled by, controls, or is under common control with,
      Tenant) (each, a “Permitted Transferee”), shall be deemed a Transfer, provided
      that Tenant notifies Landlord in writing at least thirty days in advance of
      any
      such assignment or sublease, and promptly supplies Landlord with any documents
      or information reasonably requested by Landlord regarding such Transfer or
      transferee, that the tangible net worth of such transferee is not less than
      Tenant’s net worth as of the date of this Lease, and that such assignment or
      sublease is not a subterfuge by Tenant to avoid its obligations under this
      Lease. In no event shall Tenant be deemed to have been released under this
      Lease
      in the event of such transfer and Tenant shall remain primarily liable
      hereunder. Notwithstanding any provision of this Lease, or any present or future
      law to the contrary, Landlord and Tenant hereby expressly agree that if a court
      of competent jurisdiction determines that Landlord unreasonably withheld consent
      to a proposed Transfer, then Tenant’s sole and exclusive remedy for such breach
      by Landlord shall be limited to termination of this Lease as of the date of
      such
      court determination, and Tenant hereby expressly waives the right to recover
      any
      monetary damages of whatever kind for such breach. If Landlord consents to
      the
      proposed Transfer, (a) the initial Tenant, subsequent transferees, and all
      guarantors shall remain liable under this Lease, and Tenant shall obtain the
      prior written consent of any guarantor to such Transfer in a form acceptable
      to
      Landlord; and (b) each of the transferees shall agree in a writing acceptable
      to
      Landlord to assume and be bound by all of the terms and conditions of this
      Lease. Any Transfer without Landlord’s written consent shall be voidable by
      Landlord and, at Landlord’s election, constitute an “Event of Default,” as that
      term is defined in Article 24 of this Lease. Neither the consent by Landlord
      to
      any Transfer nor the collection or acceptance by Landlord of Rent from any
      assignee, subtenant or occupant shall be construed as a waiver or release of
      the
      initial Tenant or any guarantor from the terms and conditions of this Lease
      or
      relieve Tenant or any subtenant, assignee or other party from obtaining the
      consent in writing of Landlord to any further Transfer. Tenant hereby assigns
      to
      Landlord the Rent and other sums due from any subtenant, assignee or other
      occupant of the Premises and hereby authorizes and directs each such subtenant,
      assignee or other occupant to pay such rent or other sums directly to Landlord;
      provided, however, that until the occurrence of an Event of Default, Tenant
      shall have the license to continue collecting such rent and other
      sums.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    If
      Landlord consents to a Transfer under this Section 13.1, Tenant will pay
      Landlord’s reasonable processing costs and attorneys’ fees incurred in giving
      such consent, provided that in no event shall such costs and fees exceed
      $2,000.00 with respect to any one Transfer. If, for any proposed Transfer,
      Tenant contracts to receive total Rent or other consideration exceeding the
      total Rent called for hereunder (prorated by the ratio that the assignment
      or
      sublease term and square footage bears to the term and square footage of this
      Lease) after deduction (amortized over the term of the assignment or sublease)
      of Tenant’s reasonable costs for tenant improvements, Tenant will pay the excess
      to Landlord as additional Rent promptly upon receipt.

    

    13.2.    In
      the
      event of a proposed assignment or subletting of more than fifty-percent (50%)
      of
      the Premises, Landlord shall also have the right, by notice to Tenant, to
      terminate this Lease in the event of an assignment as to all of the Premises
      and, in the event of a sublease, as to the subleased portion of the Premises
      and
      to require that all or part, as the case may be, of the Premises be surrendered
      to Landlord for the balance of the Term (collectively “Recapture the Lease”).
      Notwithstanding the previous sentence, if, before entering into a proposed
      assignment or sublease, Tenant gives written notice to Landlord of Tenant’s
      intention to sublease or assign, and Landlord does not, within fifteen (15)
      business days after Landlord’s actual receipt of such written notice and all
      information requested by Landlord relating to such proposed assignment or
      subletting, provide written notice to Tenant that Landlord intends to Recapture
      the Lease, then Landlord may not Recapture the Lease by reason of such proposed
      assignment or subletting, provided that: (i) if Landlord consents to the
      proposed assignment or subletting, Tenant shall complete such assignment or
      sublease within one hundred twenty (120) days after the end of such fifteen
      (15)
      day period, and (ii) nothing contained in this Section 13.2 shall be deemed
      to
      waive any of Landlord’s rights to approve or disapprove a Transfer as provided
      in Section 13.1 of this Lease. If, within fifteen (15) business days after
      Landlord’s actual receipt of written notice of Tenant’s intention to sublease or
      assign, Landlord informs Tenant that Landlord intends to Recapture the Lease,
      then Tenant shall have the option to rescind its intention to sublease or assign
      the Premises by providing Landlord with written notice within ten (10) business
      days after Tenant’s receipt of Landlord’s written notice regarding its intention
      to Recapture the Lease, and Landlord shall not have the right to Recapture
      the
      Lease. This Section 13.2 shall not apply to Permitted Transferees.

    

    14.    EMINENT
      DOMAIN

    

    In
      the
      event any portion of the Premises is taken from Tenant under eminent domain
      proceedings, Tenant shall have no right, title or interest in any award made
      for
      such taking, except for any separate award for fixtures and improvements
      installed by Tenant and which have not become the property of Landlord. If
      ten
      percent (10%) or more of the Premises or Building shall be taken by power of
      eminent domain or condemned by any competent authority for any public or
      quasi-public use or purpose, or if Landlord shall grant a deed or other
      instrument in lieu of such taking by eminent domain or condemnation, Landlord
      shall have the option to terminate this Lease upon ninety (90) days notice,
      provided such notice is given no later than one hundred eighty (180) days after
      the date of such taking, condemnation, reconfiguration, vacation, deed or other
      instrument. If ten percent (10%) or more of the Premises shall be taken or
      access to the Premises is substantially impaired, Tenant shall have the option
      to terminate this Lease upon ninety (90) days notice, provided such notice
      is
      given no later than sixty (60) days after the date of such taking, condemnation,
      reconfiguration, vacation, deed or other instrument. Tenant hereby waives any
      and all rights it might otherwise have pursuant to Section 1265.130 of the
      California Code of Civil Procedure.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    15.    WAIVER
      AND SEVERABILITY

    

    15.1.    The
      consent of Landlord in any instance to any variation of the terms of this Lease,
      or the receipt of Rent with knowledge of any breach, shall not be deemed to
      be a
      waiver as to any breach of any Lease covenant or condition, nor shall any waiver
      occur to any provision of this Lease except in writing, signed by Landlord
      or
      Landlord’s authorized agent. The waiver or relinquishment by Landlord of any
      right or power contained in this Lease at any one time or times shall not be
      considered a waiver or relinquishment of any right or power at any other time
      or
      times. If Tenant tenders payment to Landlord of an amount which is less than
      the
      Rent then due to Landlord, at Landlord’s option, Landlord may reject such
      tender, and such tender shall be void and of no effect, or Landlord may accept
      such tender, without prejudice to Landlord’s right to demand the balance due.
      This Lease constitutes the entire agreement of the parties and supersedes any
      and all prior or contemporaneous written or oral negotiations, correspondence,
      understandings and agreements between the parties respecting the subject matter
      hereof. No supplement, modification or amendment to this Lease shall be binding
      unless executed in writing by both parties.

    

    15.2.    If
      any
      term or provision of this Lease or any application shall be invalid or
      unenforceable, then the remaining terms and provisions of this Lease shall
      not
      be affected.

    

    16.    USE
      OF COMMON FACILITIES

    

    As
      used
      in this Lease, “Common Areas” shall mean all areas within the Project which are
      available for the common use of tenants of the Project and which are not leased
      or held for the exclusive use of Tenant or any other tenant. Common Areas
      include without limitation parking areas and driveways, sidewalks, loading
      areas, lobbies, stairways, elevators, access road, corridors, landscaped and
      planted areas. Use of the Common Areas may be restricted by Landlord from time
      to time for purposes of repairs or renovations.

    

    17.    SERVICES

    

    Tenant
      shall contract for and pay directly (at Tenant’s sole cost and expense) when
      due, all services and utilities to the Premises, including, but not limited
      to,
      heating, ventilation and air-conditioning, electricity, water, gas, light,
      power, trash pick-up, sewer, telephone, sprinkler charges, janitorial and
      interior security services and all other utility services supplied to the
      Premises, and all taxes and surcharges thereon, together with maintenance
      charges related thereto. If any such services are not separately billed or
      metered to Tenant, the cost of all services shall be included within Operating
      Costs, unless charged directly (and not as a part of Operating Costs) to Tenant.
      Landlord reserves the right to separately meter or monitor any utility services
      provided to the Premises. The cost of any meter shall be borne by Tenant.
      Landlord shall be under no responsibility or liability for failure or
      interruption in such services caused by breakage, accident, strikes, repairs
      or
      for any other causes, nor in any event for any indirect or consequential
      damages; and such failure or interruption shall not be construed as an eviction
      of Tenant, nor work an abatement of Rent, nor render Landlord liable in damages,
      nor release Tenant from prompt fulfillment of any of the covenants under this
      Lease.

    

    18.    ENTRY
      OF LANDLORD

    

    Landlord
      reserves the right to enter upon the Premises at all reasonable times and
      reserves the right, during the last eight (8) months of the Term where Tenant
      has not delivered an Option Notice pursuant to Section 3.2.1(i) or during the
      last six (6) months of the Term where Tenant has not delivered a written notice
      pursuant to Section 3.2.1(iii), to show the Premises at reasonable times to
      prospective tenants and to affix for lease/rent signs to the Building at the
      Landlord’s discretion. Landlord may, upon 24 hours prior notice (provided that
      no prior notice is required in the event of an emergency), enter the Premises
      at
      any time for purposes of repair or maintenance of the Premises or any portion
      of
      the Project, or for the health, safety or protection of any person or property.
      If deemed appropriate by Landlord for the health, safety or protection of person
      or property, Tenant shall, upon notice from Landlord, vacate the Premises as
      Landlord directs.

    

    19.    INTENTIONALLY
      DELETED

    

    20.    SUBORDINATION
      AND ATTORNMENT

    

    This
      Lease is subject and subordinate to all ground or underlying leases and to
      any
      first mortgage(s) which may now or hereafter affect those leases or the land
      and
      to all renewals, modifications, consolidations, replacements and extensions
      thereof. This subordination shall be self-operative; however, Tenant shall
      execute promptly any instrument that Landlord or any first mortgagee may request
      confirming subordination. Tenant hereby constitutes and appoints Landlord as
      Tenant’s attorney-in-fact to execute any such instrument on behalf of Tenant.
      Before any foreclosure sale under a mortgage, the mortgagee shall have the
      right
      to subordinate the mortgage to this Lease, and, in the event of a foreclosure,
      this Lease may continue in full force and effect and Tenant shall attorn to
      and
      recognize as its landlord the purchaser of Landlord’s interest under this Lease.
      Tenant shall, upon the request of a mortgagee or purchaser at foreclosure,
      execute, acknowledge and deliver any instrument that has for its purpose and
      effect the subordination of the lien of any mortgage to this Lease or Tenant’s
      attornment to the purchaser.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    21.    ESTOPPEL
      CERTIFICATES

    

    Tenant
      shall at any time upon not less than ten (10) business days prior written notice
      from Landlord execute, acknowledge and deliver to Landlord a statement in
      writing (i) certifying that this Lease is unmodified and in full force and
      effect (or, if modified, stating the nature of such modification and certifying
      that this Lease, as so modified, is in full force and effect) and the date
      to
      which the Periodic Rent is paid in advance, if any, (ii) acknowledging that
      there are not, to Tenant’s knowledge, any uncured Landlord defaults, or
      specifying such defaults if any are claimed, and (iii) including any
      information, certification or acknowledgement as may be reasonably requested
      by
      Landlord. Any such statement may be conclusively relied upon by a prospective
      purchaser or encumbrancer of the Premises. Tenant’s failure to deliver this
      statement within such time shall be conclusive upon Tenant (i) that this Lease
      is in full force, without modification except as may be represented by Landlord,
      (ii) that there are no uncured defaults in Landlord’s performance, and (iii)
      that not more than one month’s Base Rent has been paid in advance. If Landlord
      desires to finance or refinance the Project, or any part thereof, Tenant agrees
      to deliver to any lender designated by Landlord such financial statements or
      other information concerning Tenant as may be reasonably required by that
      lender, including, without limitation, the past three years’ financial
      statements. All such financial statements shall be received by Landlord in
      confidence and shall be used only for the specified purposes.

    

    22.    BUILDING
      RULES AND REGULATIONS

    

    Tenant
      agrees to abide by all reasonable rules and regulations of the Building imposed
      by Landlord. These rules and regulations, presented as Exhibit D attached
      hereto, are imposed for the cleanliness, good appearance, proper maintenance,
      good order and reasonable use of the Premises and the Building, and as may
      be
      reasonably necessary for the proper enjoyment of the Building by all tenants
      and
      their clients, customers and employees. The rules and regulations may be
      reasonably changed from time to time by the Landlord on reasonable notice to
      Tenant. Landlord shall not be responsible to Tenant for the nonperformance
      of
      any rules and regulations by or otherwise with respect to the acts or omissions
      of any other tenant or occupants of the Project.

    

    23.    NOTICES

    

    All
      notices or other communications between the parties shall be in writing and
      shall be deemed duly given, if delivered in person, or upon the earlier of
      receipt, if mailed by certified or registered mail, or three (3) days after
      certified or registered mailing, return receipt requested, postage prepaid,
      or
      upon confirmation of delivery by an overnight delivery service (such as Federal
      Express or Overnite Express), addressed and sent to the parties at their
      addresses set forth in Sections 1.15 and 1.16. Landlord and Tenant may from
      time
      to time by written notice to the other designate another address for receipt
      of
      future notices.

    

    24.    EVENTS
      OF DEFAULT

    

    Each
      of
      the following shall constitute an “Event of Default:” (i) Tenant fails to pay
      Rent within five (5) days after receipt of written notice from Landlord that
      such amount is due, (ii) Tenant fails to observe or perform any other Lease
      term, condition, obligation or covenant binding upon, or required of Tenant
      within thirty (30) days after receipt of written notice from Landlord; provided,
      however, if the nature of such default is such that the same cannot be
      reasonably cured within a thirty (30) day period (unless such failure to perform
      is materially and adversely affecting other tenants in the Building), Tenant
      shall not be deemed to be in default if Tenant diligently commences such cure
      within such period and thereafter diligently proceeds to rectify and cure said
      default, but in no event shall such period exceed ninety (90) days, (iii) Tenant
      abandons the Premises; (iv) Tenant or any guarantor of this Lease makes or
      consents to a general assignment for the benefit of creditors or a common law
      composition of creditors, or a receiver of the Premises or all or substantially
      all of Tenant’s or guarantor’s assets is appointed, (v) Tenant or any guarantor
      files a voluntary petition in any bankruptcy or insolvency proceeding, or an
      involuntary petition in any bankruptcy or insolvency proceeding is filed against
      Tenant or any guarantor, and is not discharged by Tenant or the guarantor within
      sixty (60) days, (vi) any guarantor repudiates or breaches its guaranty in
      any
      way, or (vii) there is a Transfer (as defined in Article 13) of the Premises
      or
      the Lease by Tenant, without the prior written consent of Landlord as required
      by Article 13.

    

    25.    LANDLORD’S
      REMEDIES

    

    25.1.    Upon
      the
      occurrence of an Event of Default, Landlord, at its option, without further
      notice or demand to Tenant, shall have in addition to all other rights and
      remedies provided in this Lease, at law or in equity, the option to pursue
      any
      one or more of the following remedies, each and all of which shall be cumulative
      and nonexclusive, without any notice or demand whatsoever.

    

    25.1.1.    Terminate
      this Lease, in which event Tenant shall immediately surrender the Premises
      to
      Landlord, and if Tenant fails to do so, Landlord may, without prejudice to
      any
      other remedy which it may have for possession or arrearages in Rent, enter
      upon
      and take possession of the Premises and expel or remove Tenant and any other
      person who may be occupying the Premises or any part thereof, without being
      liable for prosecution or any claim or damages therefor; and Landlord may
      recover from Tenant the following:

    

    25.1.1.1.    The
      worth
      at the time of award of any unpaid rent which has been earned at the time of
      such termination; plus

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    25.1.1.2.    The
      worth
      at the time of award of the amount by which the unpaid rent which would have
      been earned after termination until the time of award exceeds the amount of
      such
      rental loss that Tenant proves could have been reasonably avoided;
      plus

    

    25.1.1.3.    The
      worth
      at the time of award of the amount by which the unpaid rent for the balance
      of
      the Term after the time of award exceeds the amount of such rental loss that
      Tenant proves could have been reasonably avoided; plus

    

    25.1.1.4.    Any
      other
      amount necessary to compensate Landlord for all the detriment proximately caused
      by Tenant’s failure to perform its obligations under this Lease or which in the
      ordinary course of things would be likely to result therefrom, specifically
      including but not limited to, brokerage commissions and advertising expenses
      incurred, expenses of remodeling the Premises or any portion thereof for a
      new
      tenant, whether for the same or a different use, and any special concessions
      made to obtain a new tenant; and

    

    25.1.1.5.    At
      Landlord’s election, such other amounts in addition to or in lieu of the
      foregoing as may be permitted from time to time by applicable law.

    

    The
      term
“rent” as used in this Section 25.1 shall be deemed to be and to mean all sums
      of every nature required to be paid by Tenant pursuant to the terms of this
      Lease, whether to Landlord or to others, including, without limitation, late
      charges and interest. As used in Sections 25.1.1(i) and (ii), above, the “worth
      at the time of award” shall be computed by allowing interest at the rate set
      forth in Section 25.3, below, but in no case greater than the maximum amount
      of
      such interest permitted by law. As used in Section 25.1.1(iii) above, the “worth
      at the time of award” shall be computed by discounting such amount at the
      discount rate of the Federal Reserve Bank of San Francisco at the time of award
      plus one percent (1%).

    

    25.1.2.    Landlord
      shall have the remedy described in California Civil Code Section 1951.4 (lessor
      may continue lease in effect after lessee’s breach and abandonment and recover
      rent as it becomes due, if lessee has the right to sublet or assign, subject
      only to reasonable limitations). Accordingly, if Landlord does not elect to
      terminate this Lease on account of any default by Tenant, Landlord may, from
      time to time, without terminating this Lease, enforce all of its rights and
      remedies under this Lease, including the right to recover all rent as it becomes
      due.

    

    25.2.    Whether
      or not Landlord elects to terminate this Lease on account of any default by
      Tenant, as set forth in this Article 25, Landlord shall have the right to
      terminate any and all subleases, licenses, concessions or other consensual
      arrangements for possession entered into by Tenant and affecting the Premises
      or
      may, in Landlord’s sole discretion, succeed to Tenant’s interest in such
      subleases, licenses, concessions or arrangements. In the event of Landlord’s
      election to succeed to Tenant’s interest in any such subleases, licenses,
      concessions or arrangements, Tenant shall, as of the date of notice by Landlord
      of such election, have no further right to or interest in the rent or other
      consideration receivable thereunder.

    

    25.3.    If
      Tenant
      fails to pay any Rent within five (5) days after the Rent becomes due and
      payable, Tenant shall pay to Landlord a late charge of ten percent (10%) of
      the
      amount of overdue Rent. Notwithstanding the foregoing, Tenant shall not be
      obligated to pay such late charge for the first such late payment in any twelve
      (12) month period, provided that such payment is made within five (5) days
      after
      receipt of written notice from Landlord that such amount was not paid when
      due.
      In addition, any late Rent payment shall bear interest from the date that Rent
      became due and payable to the date of payment by Tenant at the interest rate
      of
      ten percent (10%) per annum, provided that in no case shall such rate be higher
      than the highest rate permitted by applicable law. Late charges and interest
      shall be due and payable within two (2) days after written demand from
      Landlord.

    

    26.    RIGHT
      OF LANDLORD TO CURE TENANT’S DEFAULT

    

    If
      an
      Event of Default occurs, then Landlord may (but shall not be obligated to)
      make
      such payment or do such act to cure the Event of Default, and charge the
      expense, together with interest, at the interest rate set forth in Section
      25.3,
      to Tenant. Payment for the cure shall be due and payable by the Tenant upon
      demand; however, the making of any payment or the taking of such action by
      Landlord shall not be deemed to cure the Event of Default or to stop Landlord
      from the pursuit of any remedy to which Landlord would otherwise be
      entitled.

    

    27.    COMPLIANCE
      WITH LAW

    

    Tenant
      shall not do anything or suffer anything to be done in or about the Premises
      which will in any way conflict with any law, statute, ordinance or other
      governmental rule, regulation or requirement now in force or which may hereafter
      be enacted or promulgated. At its sole cost and expense, Tenant shall promptly
      comply with all such governmental measures, other than the making of structural
      changes or changes to the Building’s life safety system. Should any standard or
      regulation now or hereafter be imposed on Landlord or Tenant by a state, federal
      or local governmental body charged with the establishment, regulation and
      enforcement of occupational, health or safety standards for employers,
      employees, landlords or tenants, then Tenant agrees, at its sole cost and
      expense, to comply promptly with such standards or regulations. The judgment
      of
      any court of competent jurisdiction or the admission of Tenant in any judicial
      action, regardless of whether Landlord is a party thereto, that Tenant has
      violated any of said governmental measures, shall be conclusive of that fact
      as
      between Landlord and Tenant.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    28.    BENEFIT

    

    Subject
      to the provisions of Article 13 hereof, the rights, duties and liabilities
      created hereunder shall inure to the benefit of and be binding upon the parties
      hereto, their heirs, personal representatives, successors and
      assigns.

    

    29.    PROHIBITION
      AGAINST RECORDING

    

    Except
      as
      provided in this Lease, neither this Lease, nor any memorandum, affidavit or
      other writing with respect thereto, shall be recorded by Tenant or by anyone
      acting through, under, or on behalf of Tenant, and the recording thereof in
      violation of this provision shall make this Lease null and void at Landlord’s
      election.

    

    30.    TRANSFER
      OF LANDLORD’S INTEREST

    

    Tenant
      acknowledges that Landlord has the right to transfer all or any portion of
      its
      interest in the Project and Building and in this Lease and Tenant agrees that
      in
      the event of any such transfer and a transfer of the security deposit and the
      express assumption by the assignee of all of Landlord’s obligations under this
      Lease, Landlord shall automatically be released from all liability under this
      Lease and Tenant agrees to look solely to such transferee for the performance
      of
      Landlord’s obligations hereunder after the date of transfer. Tenant further
      acknowledges that Landlord may assign its interest in this Lease to a mortgage
      lender as additional security and agrees that such an assignment shall not
      release Landlord from its obligations hereunder and that Tenant shall continue
      to look to Landlord for the performance of its obligations
      hereunder.

    

    31.    FORCE
      MAJEURE

    

    Any
      prevention, delay or stoppage due to strikes, lockouts, labor disputes, acts
      of
      God, inability to obtain services, labor or materials or reasonable substitutes
      therefore, governmental actions, civil commotions, fire or other casualty,
      and
      other causes beyond the reasonable control of the party obligated to perform
      (collectively, the “Force Majeure”), except with respect to the obligations
      imposed with regard to Rent and other charges to be paid by Tenant pursuant
      to
      this Lease, and Tenant’s obligations under Articles 10, 11 and 27 of this Lease
      notwithstanding anything to the contrary contained in this Lease, shall excuse
      the performance of such party for a period equal to any such prevention, delay,
      or stoppage and, therefore, if this Lease specifies a time period for
      performance of an obligation of either party, that time period shall be extended
      by the period of any delay in such party’s performance caused by a Force
      Majeure.

    

    32.    LANDLORD’S
      LIMITATION OF LIABILITY

    

    It
      is
      expressly understood and agreed that notwithstanding anything in this Lease
      to
      the contrary, and notwithstanding any applicable law to the contrary, the
      liability of Landlord hereunder (including any successor landlord) and any
      recourse by Tenant against Landlord shall be limited solely and exclusively
      to
      the interest of Landlord in and to the Premises, and neither Landlord, nor
      any
      of its constituent partners, shall have any personal liability therefor, and
      Tenant hereby expressly waives and releases such personal liability on behalf
      of
      itself and all persons claiming by, through or under Tenant. Under no
      circumstances shall Landlord be liable for special damages, indirect damages
      or
      other consequential damages, including without limitation, injury to Tenant’s
      business or for any loss of income or profit therefrom.

    

    33.    LANDLORD’S
      EXCULPATION

    

    No
      present or future officer, director, employee, trustee, partner, member,
      manager, retirant, beneficiary, internal investment contractor, investment
      manager or agent of Landlord shall have any personal liability, directly or
      indirectly, and recourse shall not be had against any such officer, director,
      employee, trustee, partner, member, manager, retirant, beneficiary, internal
      investment contractor, investment manager or agent under or in connection with
      this Lease or any other document or instrument heretofore or hereafter executed
      in connection with this Lease. Tenant hereby waives and releases any and all
      such personal liability and recourse. The limitations of liability provided
      in
      this Article 33 are in addition to, and not in limitation of, any limitation
      on
      liability applicable to Landlord provided by law or in any other contract,
      agreement or instrument.

    

    34.    BUILDING
      RENOVATIONS

    

    Tenant
      hereby acknowledges that Landlord is currently renovating or may during the
      Term
      renovate, improve, alter, or modify (collectively, the “Renovations”) the
      Building and/or the Premises, which Renovations may include, without limitation,
      (i) installing sprinklers in the Common Areas and tenant spaces, (ii) modifying
      the Common Areas and tenant spaces to comply with applicable laws and
      regulations, including regulations relating to the physically disabled, and
      (iii) installing new carpeting, lighting, and wall coverings in the Common
      Areas. Tenant hereby agrees that such Renovations shall in no way constitute
      a
      constructive eviction of Tenant nor entitle Tenant to any abatement of Rent,
      provided that Landlord uses commercially reasonable efforts to minimize
      interference with Tenant’s use, possession and enjoyment of the Premises.
      Subject to the foregoing, Landlord shall have no responsibility, or for any
      reason be liable, to Tenant for any injury to or interference with Tenant’s
      business arising from the Renovations, nor shall Tenant be entitled to any
      compensation or damages from Landlord for loss of the use of the whole or any
      part of the Premises or of tenant’s personal property or improvements resulting
      from the Renovations, or for any inconvenience or annoyance occasioned by such
      Renovations.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    35.    ATTORNEYS’
      FEES

    

    If
      either
      party commences litigation against the other for the specific performance of
      this Lease, for damages for breach hereof or otherwise for enforcement of any
      remedy hereunder, the parties hereto agree to, and hereby do waive any right
      to
      a trial by jury and, in the event of any such commencement of litigation, the
      prevailing party shall be entitled to recover from the other party such costs
      and reasonable attorney’s fees as may have been incurred, as well as reasonable
      attorneys’ fees and costs incurred in enforcing any judgment against the
      non-prevailing party.

    

    36.    SURRENDER
      OF THE PREMISES

    

    Tenant
      shall peaceably surrender the Premises to Landlord on the Expiration Date or
      earlier termination of this Lease, in broom-clean condition and in as good
      condition as when Tenant took possession, including, without limitation, the
      repair of any damage to the Premises caused by the removal of any of Tenant’s
      personal property or trade fixtures from the Premises, except for reasonable
      wear and tear and loss by fire or other casualty not caused by Tenant or its
      agents, and subject to Section 7.4. Notwithstanding anything to the contrary
      contained herein, on or before the Expiration Date or any earlier termination
      of
      this Lease, Tenant shall, at Tenant’s sole cost and expense and in compliance
      with the National Electric Code and other applicable laws, remove all
      electronic, fiber, phone and data cabling and related equipment that has been
      installed by or for the exclusive benefit of Tenant in or around the Premises
      (collectively, the “Cabling”); provided, however, Tenant shall not remove the
      Cabling if Tenant receives a written notice from Landlord at least fifteen
      (15)
      days prior to the expiration of the Lease authorizing all or any portion of
      the
      Cabling to remain in place, in which event the Cabling or portion thereof
      authorized by Landlord remain at the Premises shall be surrendered with the
      Premises upon expiration or earlier termination of this Lease. Subject to
      Section 7.4, any of Tenant’s personal property left on or in the Premises, the
      Building or the Common Areas after the Expiration Date or earlier termination
      of
      this Lease shall be deemed to be abandoned without any further notice whatsoever
      to Tenant by Landlord, and, at Landlord’s option, Landlord may dispose of said
      property in any manner it deems appropriate, without compensation to Tenant,
      and
      title shall pass to Landlord under this Lease. Landlord reserves the right
      to
      charge Tenant for the removal, storage and disposition of any of Tenant’s
      personal property left within any portion of the Project. Tenant hereby waives
      any rights it may have under Sections 1980 through 1991 of the California Civil
      Code, or any other statutes of similar import.

    

    37.    HOLDING
      OVER

    

    In
      the
      event that Tenant shall not immediately surrender the Premises to Landlord
      on
      the Expiration Date or earlier termination of this Lease, Tenant shall be deemed
      to be a month to month tenant upon all of the terms and provisions of this
      Lease, provided however, the monthly Base Rent shall be one hundred fifty
      percent (150%) of the monthly Base Rent in effect during the last month of
      the
      Term (except that if for such last month of the Term, there was a rent credit
      or
      abatement, then the month immediately prior thereto for which there was no
      such
      rent credit or abatement, shall be used instead). The provisions of this Article
      37 shall not be deemed to limit or constitute a waiver of any other rights
      or
      remedies of Landlord provided herein or at law. If Tenant shall hold over after
      the Expiration Date or earlier termination of this Lease, and Landlord shall
      desire to regain possession of the Premises, then Landlord may forthwith
      re-enter and take possession of the Premises without process, or by any legal
      process in force in the State of California, and Tenant shall protect, defend,
      indemnify and hold Landlord harmless from all loss, costs (including reasonable
      attorneys’ fees) and liability resulting from Tenant’s holding over, including,
      without limiting the generality of the foregoing, the cost of unlawful detainer
      proceedings instituted by Landlord against Tenant, increased construction costs
      to Landlord as a result of Landlord’s inability to timely commence construction
      of tenant improvements for a new tenant for the Premises, lost profits that
      results from Landlord’s inability to timely deliver the Premises to such new
      tenant, and any claims made by any succeeding tenant founded upon such failure
      to surrender and any lost profits to Landlord resulting therefrom.

    

    38.    JOINT
      AND SEVERAL

    

    If
      there
      is more than one Tenant, the obligations imposed upon Tenant under this Lease
      shall be joint and several.

    

    39.    TIME
      IS OF THE ESSENCE; GOVERNING LAW

    

    Time
      is
      of the essence as to Tenant’s obligations contained in this Lease. This Lease
      shall be construed and enforced in accordance with the laws of the State of
      California.

    

    40.    SUBMISSION
      OF LEASE

    

    Submission
      of this instrument for examination or signature by Tenant does not constitute
      a
      reservation of or an option for lease, and it is not effective as a lease or
      otherwise until execution and delivery by both Landlord and Tenant.

    

    41.    BROKERS

    

    Landlord
      and Tenant hereby warrant to each other that they have had no dealings with
      any
      real estate broker or agent in connection with the negotiation of this Lease,
      excepting only the real estate brokers or agents specified in Section 1.12
      (the
“Brokers”), and that they know of no other real estate broker or agent who is
      entitled to a commission in connection with this Lease. Each party agrees to
      indemnify and defend the other party against and hold the other party harmless
      from any and all claims, demands, losses, liabilities, lawsuits, judgments,
      and
      costs and expenses (including without limitation reasonable attorneys’ fees)
      with respect to any leasing commission
      or equivalent compensation alleged to be owing on account of the indemnifying
      party’s dealings with any real estate broker or agent other than the Brokers.
      The terms of this Article 41 shall survive the expiration or earlier termination
      of the Term.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    42.    HAZARDOUS
      MATERIALS

    

    42.1.    As
      used
      in this Lease, the term “Hazardous Material” means any flammable items,
      explosives, radioactive materials, hazardous or toxic substances, material
      or
      waste or related materials, including, without limitation, any substances
      defined as or included in the definition of “hazardous substances”, “hazardous
      wastes,” “infectious wastes,” “hazardous materials” or “toxic substances” now or
      subsequently regulated under any federal, state or local laws or regulations
      including, without limitation, petroleum-based products, printing inks, acids,
      pesticides, asbestos, PCBs and similar compounds, and including any different
      products and materials which are subsequently found to have adverse effects
      on
      the environment or the health and safety of persons.

    

    42.2.    Tenant
      shall not cause or permit any Hazardous Material to be generated, produced,
      brought upon, used, stored, treated or disposed of in or about the Premises
      or
      the Project by Tenant, its agents, employees, contractors, affiliates,
      sublessees or invitees. Tenant shall indemnify, defend and hold Landlord
      harmless from all actions (including, without limitation, remedial or
      enforcement actions of any kind, and administrative or judicial proceedings
      and
      orders or judgments), costs, claims, damages (including punitive damages),
      expenses (including, attorneys’, consultants’ and experts’ fees, court costs)
      amounts paid in settlement, fines, forfeitures or other civil, administrative
      or
      criminal penalties, injunctive or other relief, liabilities or losses arising
      from a breach of this prohibition by Tenant, its agents, employees, contractors,
      affiliates, sublessees or invitees. Upon expiration or earlier termination
      of
      this Lease, Tenant shall cause any Hazardous Materials arising out of or related
      to the use or occupancy of the Premises by Tenant or its agents, affiliates,
      customers, employees, business associates or assigns to be removed from the
      Premises and the Project and properly transported for use, storage or disposal
      in accordance with all applicable laws, regulations and ordinances.

    

    43.    LANDLORD’S
      RESERVATIONS

    

    In
      addition to the other rights of Landlord under this Lease, Landlord reserves
      the
      right to change the street address and/or name of the Building without being
      deemed to be guilty of an eviction, actual or constructive, or a disturbance
      or
      interruption of the business of Tenant or Tenant’s use or occupancy of the
      Premises.

    

    44.    PARKING

    

    Tenant
      shall receive the use of the number of parking spaces set forth in Section
      1.17
      upon Tenant’s compliance with all parking rules and regulations issued from time
      to time by Landlord and at no cost to Tenant. Tenant shall have the right (i)
      to
      lease from Landlord for the Tenant’s use, additional spaces at the prevailing
      market rates established from time to time by Landlord, as and when made
      available to Tenant by Landlord, and (ii) to assign or sublease any or all
      of
      the parking spaces to the extent such assignment or subletting is in accordance
      with Section 13.

    

    45.    INTENTIONALLY
      OMITTED

    

    46.    CONFIDENTIALITY

    

    Tenant
      acknowledges and agrees that the terms of this Lease and any future amendments
      or other agreements in connection with this Lease are confidential and
      constitute proprietary information of Landlord. Disclosure of the terms could
      adversely affect the ability of Landlord to negotiate other leases and impair
      Landlord’s relationship with other tenants. Accordingly, Tenant agrees that it,
      and its partners, agents, representatives, officers, directors, employees and
      attorneys, shall not disclose, either directly or indirectly, any of the terms
      or conditions of this Lease or any future amendments or other agreements in
      connection with this Lease, to any person or entity, except (a) to personnel
      employed by Tenant, as reasonably necessary for Tenant's performance of its
      obligations under this Lease, (b) for tax reporting purposes, (c) in any legal
      action or as required by law, (d) to prospective subtenants or assignees under
      this Lease, (e) as required in connection with any filing required with the
      Securities and Exchange Commission, or (f) as reasonably necessary in connection
      with any merger or acquisition or other business purpose of Tenant. The
      preceding provisions of this paragraph shall not apply to, or bar or limit
      any
      legal action between Tenant and the Landlord to enforce this Lease.

    

    47.    INTERPRETATION
      OF LEASE

    

    Landlord
      and Tenant have had the opportunity to review and revise this Lease. As such,
      this Lease shall be construed and interpreted as the joint work product of
      Landlord and Tenant and/or their attorneys. The rule of construction to the
      effect that any ambiguities are to be resolved against the drafting party shall
      not be employed in any interpretation of this Lease. This Lease and all of
      its
      terms shall be construed equally as to Landlord and Tenant.

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    48.    WAIVER
      OF REDEMPTION AND JURY TRIAL

    

    TENANT
      HEREBY EXPRESSLY WAIVES ANY AND ALL RIGHTS OF REDEMPTION CONFERRED BY STATUTE
      OR
      OTHERWISE, AND, WITH RESPECT TO ANY LITIGATION ARISING OUT OF THIS LEASE, AND
      TO
      THE EXTENT PERMITTED BY LAW, LANDLORD AND TENANT WAIVE THE RIGHT TO A TRIAL
      BY
      JURY AND THE RIGHT TO FILE IN SUCH ACTION ANY COUNTERCLAIMS OR CROSS-CLAIMS
      AGAINST THE OTHER (OTHER THAN COMPULSORY COUNTERCLAIMS OR
      CROSS-CLAIMS).

    

    49.    COUNTERPARTS

    

    This
      Lease may be executed in counterparts, each of which shall be deemed an
      original, but such counterparts, when taken together, shall constitute one
      agreement.

    

    [SIGNATURES
      ON NEXT PAGE]

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    IN
      WITNESS WHEREOF,
      the
      parties hereto have executed or caused this Lease to be executed by their
      authorized agents as of the Lease Date.

    

    “Landlord”:

    

    WESTCORE
      PENINSULA VINTAGE, LLC,

    a
      Delaware limited liability company

    

    
      	By:	
              Westcore
                Peninsula, LLC,

            

    

    a
      Delaware limited liability company,

    its
      Manager

    

    

    By: 
      /s/
      Donald Ankeny

    Donald
      Ankeny, Authorized Signatory

    

    

    “Tenant”:

    

    OXIS
      INTERNATIONAL, INC.,

    a
      Delaware corporation

    

    By:
      /s/
      Steven T. Guillen

    Authorized
      Signatory

    

    By:______________________________

    Authorized
      SignatoryEX 10.1

    EXHIBIT
      10.1

     

    THIS
      EMPLOYMENT AGREEMENT
      is made
      as of the 7th
      day of
January,
      2002
      between
PHANTOM
      FIBER INC.,
      a
      corporation organized and subsisting under the laws of the Province of Ontario
      (the "Company") and Jeffrey
      Halloran,
      an
      individual resident in the Province of Ontario (the "Jeffrey
      Halloran").

    

    WHEREAS
      the
      Company has offered Jeffrey
      Halloran
      employment and Jeffrey
      Halloran
      has
      accepted the Company's offer, subject to the following terms and conditions
      and
      in mutual consideration of the promises made between the parties in this
      Agreement.

    

    AND
      WHEREAS the
      Company and Jeffrey
      Halloran
      agree
      this Agreement will constitute the sole and exclusive agreement relating to
      the
      employment of Jeffrey
      Halloran
      by the
      Company.

    

    NOW
      THEREFORE in
      consideration of the foregoing and other good and valuable consideration, the
      receipt and sufficiency of which is hereby acknowledged, the parties hereto
      hereby acknowledge and agree as follows:

     

    
      
        	
                ARTICLE
                  1.

              	
                EMPLOYMENT
                  

              

      

      

      
        	
                1.1

              	
                Subject
                  to change by resolution of the Management of the Company from time
                  to time
                  (the "Mangement"), the Company hereby employs Jeffrey
                  Halloran
                  as
                  President
                  & CEO
                  on
                  a full time basis, and Jeffrey
                  Halloran
                  hereby accepts such employment upon the terms and conditions set
                  out
                  herein. 

              

      

       

      
        	
                ARTICLE
                  2.

              	
                TERMS

              

      

      

      
        	
                2.1

              	
                Jeffrey
                  Halloran
                  employment shall be on a full time basis commencing January
                  7, 2002,
                  and shall continue indefinitely subject to termination in accordance
                  with
                  Articles 3 and 12 hereof. The employer shall be the sole judge
                  during the
                  Probationary Period to evaluate whether the employee shall continue
                  to be
                  employed by the Employer. The Employee shall continue as long as
                  the
                  services rendered by Employee are satisfactory to the
                  Employer.

              

      

       

      
        	
                ARTICLE
                  3.

              	
                DUTIES
                  OF Jeffrey
                  Halloran

              

      

       

    

    
      	
              3.1

            	
              Jeffrey
                Halloran
                shall perform such duties and responsibilities as may be fixed and
                assigned to him from time to time by Management. At the time of this
                Agreement, as President
                & CEO, Jeffrey Halloran
                shall, without limitation, be responsible for establishing goals
                and
                direction and executing on same. Managing the creation of a single
                product
                or family of products from inception to release as well as marketing
                and
                distribution.

            

    

    

    
      	
              3.2

            	
              Jeffrey
                Halloran
                shall devote all his working time, ability and attention to the business
                of the Company during the term of his employment with the Company
                and
                shall faithfully serve the Company and use his best efforts to discharge
                his duties and responsibilities in good faith and to promote the
                best
                interests and welfare of the Company.

            

    

     

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    
      	
              3.3

            	
              Jeffrey
                Halloran
                shall not, without the prior written consent of Management, be directly
                or
                indirectly engaged in any other trade, business or occupation during
                the
                term of his employment, provided that nothing in this Agreement shall
                preclude Jeffrey
                Halloran
                from engaging in charitable and community activities, from managing
                his
                personal investments or from serving as a member of the Board of
                Directors
                of an unaffiliated company not in competition with the Company, subject
                however, to the prior approval of
                Management.

            

    

    

    
      	
              3.4

            	
              Jeffrey
                Halloran
                hereby represents and warrants to the Company that he has the necessary
                expertise to fulfill his obligations hereunder and verifies that
                he is not
                a party to any agreement or under any other obligation to a person
                or
                entity, including any former employer, nor does he have any other
                interest
                which is inconsistent with or in conflicts with this Agreement, or
                which
                would prevent, limit or impair his performance of any of the covenants
                herein or any duties of his employment with the Company. Jeffrey
                Halloran
                understands that the Company does not want him to disclose to it
                any
                Confidential Information which Jeffrey
                Halloran
                may have obtained from a former employer, although Jeffrey
                Halloran
                is
                free to use his general knowledge and past experience gained from
                any such
                former employer. Jeffrey
                Halloran
                represents and warrants to the Company that any Work Product, as
                hereinafter defined, used or developed by Jeffrey
                Halloran
                in
                the course of his employment with the Company will not infringe upon
                or
                violate any copyright, patent, trade mark or trade secret or other
                proprietary right of any person.

            

    

    

    
      	
              ARTICLE
                4.

            	
              COMPENSATION
                AND BENEFITS

            

    

    

    
      	
              4.1

            	
              Jeffrey
                Halloran
                agrees that he will receive Compensation and Benefits as described
                in
                Schedule "A". 

            

    

     

    
      	
              4.2

            	
              With
                effect, Jeffrey
                Halloran
                shall be compensated at an annual base salary of no less than one
                hundred
                and twenty thousand Canadian Dollars (Cdn $ 120,000)
                (hereinafter being referred to as the "Base Salary"), payable in
                semi-monthly installments. He will also be entitled to 2.5% of all
                gross
                sales, exclusive of applicable product related taxes (hereinafter
                being
                referred to as the “Commission”). Up to 50% of all due commissions can be
                converted into common shares at a price set at the previous round
                of
                financing or as set by the Board of Directors of the
                company.

            

    

    

    
      	
              4.3

            	
              Jeffrey
                Halloran
                shall, further, at the sole and absolute discretion of Management
                of the
                Company based upon Jeffrey
                Halloran
                performance, be entitled to participate in the Company's Employee
                Stock
                Option Plan from time to time, with the number and price of shares
                being
                determined by Management at its sole
                discretion.

            

    

    

    
      	
              4.4

            	
              Jeffrey
                Halloran
                shall, further, at the sole and absolute discretion of Management
                of the
                Company based upon Jeffrey
                Halloran’s
                performance, be entitled to participate in the Company's Bonus Plan.
                The
                Bonus Plan will consist of two components, the first component being
                a
                profit sharing plan in which 10% of the Net Profit of the company
                will be
                distributed among all of the employees in a pro-rated format based
                upon
                the base salary of the employee. The second component being a
                discretionary, subjective amount being determined by Management at
                its
                sole discretion.

            

    

     

     

    
      
         

      

      
        -2-

        
          

        

      

      
         

      

    

     

    
      	
              ARTICLE
                5.

            	
              EMPLOYEE
                BENEFITS

            

    

    

    
      	
              5.1

            	
              Except
                as otherwise provided in this Agreement with respect to the Employee
                Stock
                Option Plan and as may otherwise be provided for herein, Jeffrey
                Halloran
                shall be entitled to any employee benefits offered by the Company
                generally to all other employees of the Company from time to time,
                including without limitation health, dental and insurance
                benefits.

            

    

    

    
      	
              5.2

            	
              Jeffrey
                Halloran
                shall be entitled to vacation and sick leave in accordance with the
                vacation and sick leave policies adopted by the Company from time
                to time,
                provided that Jeffrey
                Halloran
                shall be entitled to no less than four (4) weeks of paid vacation
                each
                calendar year. Any vacation shall be at such time and for such periods
                as
                shall be mutually agreed upon between Jeffrey
                Halloran
                and the Company. Jeffrey
                Halloran shall
                further be entitled to all public holidays observed by the
                Company.

            

    

    

    
      	
              5.3

            	
              Jeffrey
                Halloran
                shall further be reimbursed by the Company for all business expenses,
                as
                approved by the Company, which are reasonably incurred by Jeffrey
                Halloran
                in
                the course of his carrying out his duties for the Company and accounted
                for in accordance with the Company's normal practices and procedures
                for
                the reimbursement of expenses.

            

    

    

    
      	
              5.4

            	
              For
                greater certainty, nothing in this Agreement shall prevent Jeffrey
                Halloran
                from being entitled to receive any additional compensation or benefits
                as
                approved by Management.

            

    

     

    
      	
              ARTICLE
                6.

            	
              CONFIDENTIAL
                INFORMATION AND PROPRIETARY DATA

            

    

    

    
      	
              6.1

            	
              Jeffrey
                Halloran
                acknowledges that, in the course of fulfilling his employment duties,
                Jeffrey
                Halloran
                has and will continue to have access to and will be entrusted with
                detailed Confidential Information, and covenants and agrees with
                the
                Company that he shall not disclose, during the currency of this Agreement
                or thereafter, any Confidential Information to any Person, firm or
                company. Nor shall Jeffrey
                Halloran
                disclose or use, directly or indirectly, the Confidential Information
                for
                any purpose other than in furtherance of the business of the Company.
                The
                term "Confidential Information" means information and data not known
                generally outside the Company concerning the Company's and its
                affiliates', business and technical information, including, without
                limitation, confidential, proprietary and non-public information,
                trade
                secrets, know-how and intellectual property relating to the present
                and
                contemplated services, designs, processes, techniques, programming
                code,
                source code, programs, prototypes, compilation of information, methods,
                techniques, research and development know-how and data, manufacturing
                designs and processes, engineering designs, formulae, existing, pending
                or
                abandoned patent and copyright applications, information relating
                to any
                product, device, equipment or machine, information about or relating
                to
                the Company's potential business ventures, modes of merchandising,
                marketing techniques, procedures, products, lines of merchandise,
                specifications, reports, manuals, purchases, sales information, customers,
                customer lists, price lists, customers' requirements and applications,
                suppliers, services, business and customers of the Company, information
                relating to Work Product or Inventions, as defined in Article 7,
                and the
                Company's and its customers' financial and marketing data, business
                plans
                and devices.

            

    

     

     

    
      
         

      

      
        -3-

        
          

        

      

      
         

      

    

     

    It
      is
      understood that Confidential Information does not include any of the
      following:

    

    
      	 	
              a.

            	
              information
                previously known to Jeffrey
                Halloran
                (except where such information was provided by the Company or its
                representatives); 

            

    

    

    
      	 	
              b.

            	
              information
                which is or becomes generally available to the public or within the
                industry through no act or omission on the part of Jeffrey
                Halloran;
                or

            

    

    

    
      	 	
              c.

            	
              information
                which is required to be disclosed pursuant to any statute, regulation,
                order, subpoena or document discovery request, provided that Jeffrey
                Halloran
                shall, as soon as practicable, give the Company prior written notice
                of
                such required disclosure in order to afford the Company an opportunity
                to
                seek a protective order (it being agreed that if a protective order
                is not
                sought or obtained in such circumstances, Jeffrey
                Halloran
                may disclose such information without
                liability).

            

    

    

    
      	
              6.2

            	
              Jeffrey
                Halloran
                agrees that all Confidential Information is the property of the Company
                or
                its affiliates and shall remain so and that the disclosure of any
                Confidential Information would be highly detrimental or prejudicial
                to the
                best interests of the Company or its affiliates and could severely
                damage
                the economic interests of the Company and/or its affiliates. Except
                as
                otherwise herein provided, Jeffrey
                Halloran
                agrees that during the period of his employment, and thereafter,
                Jeffrey
                Halloran
                will hold in strictest confidence, will take all necessary precautions
                against unauthorized disclosure of, and will not use or disclose
                to any
                person, firm or corporation, without the written authorization of
                an
                officer of the Company, any of the Confidential Information, except
                as
                such use or disclosure may be required in connection with the work
                of
                Jeffrey
                Halloran
                for the Company. Jeffrey
                Halloran
                understands that this Agreement applies to verbal and computerized
                as well
                as written information.

            

    

     

    
      	
              6.3

            	
              Upon
                or after the termination of his employment with the Company, Jeffrey
                Halloran
                agrees that he will not take with him any Confidential Information
                that is
                in written, computerized, machine-readable, model, sample, or other
                form
                capable of physical or telecommunication delivery, without the prior
                written consent of an officer of the Company. Jeffrey
                Halloran
                also agrees that upon the termination of his employment with the
                Company,
                Jeffrey Halloran shall deliver promptly and return to the Company
                all such
                materials, along with all other property of the Company, in his
                possession, custody or control and Jeffrey
                Halloran
                shall make no further use of same. Should any such items be discovered
                by
                Jeffrey
                Halloran
                after his termination, Jeffrey
                Halloran
                agrees to return them promptly to the Company without retaining copies
                of
                any kind.

            

    

     

     

    
      
         

      

      
        -4-

        
          

        

      

      
         

      

    

     

    
      	
              ARTICLE
                7.

            	
              WORK
                PRODUCT AND INVENTIONS

            

    

    

    
      	
              7.1

            	
              The
                term "Work Product" means any discoveries, ideas and suggestions,
                improvements and/or Inventions of any character pertaining to the
                industries or falling within the scope of the business of the Company,
                made and/or developed by and/or in or with which Jeffrey
                Halloran
                has participated or will participate in during the course of his
                employment with the Company.

            

    

    

    
      	
              7.2

            	
              The
                term "Inventions" means any intellectual property including without
                limitation technological innovations, discoveries, inventions, designs,
                formulae, source code, programs, know-how, tests, performance data,
                processes, production methods, improvements to all such property,
                and the
                like, regardless of whether or not patentable, copyrightable, or
                subject
                to trade-mark. The term "Inventions" also includes any recorded material,
                notes or records defining, describing or illustrating any such
                intellectual property.

            

    

    

    
      	
              7.3

            	
              With
                respect to any and all Work Product or Inventions which Jeffrey
                Halloran,
                either by himself alone or together with others, makes, conceives,
                originates, devises, discovers, develops or produces during, in whole
                or
                in part, the course or period of his employment with the Company
                or
                during, in whole or in part, the one (1) year period after his employment
                ceases:

            

    

    

    
      	 	
              a.

            	
              Jeffrey
                Halloran
                will keep notes and written records of any such work, which record
                shall
                be kept on the premises of the Company and available at all times
                for the
                purpose of evaluation and use in obtaining patents or as a protective
                procedure. Jeffrey
                Halloran
                agrees to disclose fully and promptly to the Company any and all
                such
                Inventions, regardless of whether or not made, conceived, originated,
                devised, discovered, developed or produced either during his working
                hours
                or directly in connection with the work assigned to him by the Company.
                Jeffrey
                Halloran
                agrees that all code, product ideas, financing ideas, business plans,
                models, instructions, drawings, blueprints, manuals, letters, notes,
                notebooks, books, memoranda, reports, software code listings, or
                other
                writings made by him or which may come into his possession during
                his
                employment with the Company and which relate in any way to or embody
                any
                Confidential Information or relate to his employment or any activity
                or
                business of the Company, shall be the exclusive property of the Company
                and shall be kept on the Company's premises, except when required
                elsewhere in connection with any activity of the Company and shall
                be
                available to his supervisors at all times for the purpose of evaluation
                and use in obtaining patents or other protective
                procedures;

            

    

     

    
      
         

      

      
        -5-

        
          

        

      

      
         

      

    

     

    
      	 	
              b.

            	
              Jeffrey
                Halloran
                also agrees that the Company is and shall be the sole owner of all
                property rights in any and all such Work Product and Inventions;
                that
                Jeffrey
                Halloran
                hereby assigns and agrees to assign all right, title and interest
                in such
                Work Product and Inventions to the Company or its nominee; without
                any
                additional compensation to him, that Jeffrey
                Halloran
                will sign all applications for, and assignments of, patents, copyright
                or
                other interests therein required or desired by the Company to obtain
                and
                promote the right to the exclusive enjoyment of the Work Product
                and
                Inventions by the Company and sign all other writings and perform
                all
                other acts necessary or convenient to carry out the terms of this
                Agreement. These obligations shall continue beyond the termination
                of his
                employment with respect to Work Products or Inventions conceived
                or made
                by Jeffrey
                Halloran
                during the period of his employment, and shall be binding upon his
                assigns, executors, administrators and other legal representatives.
                Jeffrey
                Halloran
                hereby waives his moral rights in any such Work Product and Inventions,
                and agrees that the Company or its assignee shall have the right
                to make
                any modifications, corrections, alterations, upgrades and/or adaptations
                as it may require. Jeffrey
                Halloran
                further acknowledges and agrees that the Company, its assignees and
                licensees will not be required to designate Jeffrey
                Halloran
                as
                the creator of the Work Product or Inventions when distributed publicly
                or
                otherwise, nor to make any distribution or publication of the Work
                Product
                or Inventions.

            

    

    

    
      	
              ARTICLE
                8.

            	
              INTELLECTUAL
                PROPERTY PROTECTION

            

    

    

    
      	
              8.1

            	
              Jeffrey
                Halloran
                agrees to execute all documents and perform all other lawful acts,
                which
                the Company deems necessary for the preparation, filing, and prosecution
                of applications for patents, trade-marks, copyright or other forms
                of
                intellectual property protection in Canada and in foreign countries,
                for
                Work Product or Inventions. Jeffrey
                Halloran
                will execute all documents for the transfer of all of his interest
                therein
                to the Company or its nominee, including the execution of original,
                divisional, continuing, or reissue applications, preliminary statements,
                affidavits, or concessions and the giving of factual testimony regarding
                said Work Product or Inventions. All expenses for the copyrighting
                of such
                subject matter and the prosecution and patenting said Work Product
                and
                Inventions and improvements shall be borne by the Company; Jeffrey
                Halloran
                will be compensated for services rendered at the Company's request,
                in
                addition to traveling and personal expenses incurred in complying
                with
                said request.

            

    

    

    
      	
              ARTICLE
                9.

            	
              NON-COMPETITION

            

    

    

    
      	
              9.1

            	
              Jeffrey
                Halloran
                agrees that during the term of his employment with the Company and
                for a
                period of one (1) year after the termination of his employment with
                the
                Company, Jeffrey
                Halloran
                will not, without the express written consent of the Company, directly
                or
                indirectly, either individually or in a partnership, or jointly or
                in
                conjunction with or for any Person:

            

    

    

    
      	 	
              a.

            	
              be
                employed or otherwise engaged by (in the same capacity in which the
                Jeffrey
                Halloran
                was engaged by the Company);

            

    

     

     

    
      
         

      

      
        -6-

        
          

        

      

      
         

      

    

     

    
      	 	
              b.

            	
              consult
                with or advise;

            

    

    

    
      	 	
              c.

            	
              manage;

            

    

     

    
      	 	
              d.

            	
              own
                a significant minority or majority shares in the capital
                of;

            

    

    

    
      	 	
              e.

            	
              lend
                money to or guarantee the debts or obligations of;
                or

            

    

    

    
      	 	
              f.

            	
              permit
                his name or any part thereof to be used or employed
                by;

            

    

    

    another
      business entity or person in North America in the development, manufacture,
      promotion, marketing, distribution or sale of products or services competitive
      with the products or services or in the same line of commerce as the products
      or
      services that Jeffrey
      Halloran
      dealt
      with while engaged by the Company.

     

    
      	
              ARTICLE
                10.

            	
              NON-SOLICITATION
                OF STAFF AND CUSTOMERS

            

    

    

    
      	
              10.1

            	
              Jeffrey
                Halloran
                acknowledges that it is critical to the Company that it retain the
                staff
                of itself and its affiliates, including its executive staff, programmers,
                systems analysts, maintenance staff, training staff, other personnel
                and
                hired consultants. Accordingly, Jeffrey
                Halloran
                covenants and agrees that he will not, at any time while he has any
                contractual obligation to the Company and for a period of one (1)
                year
                thereafter, directly or indirectly, hire or enter into any contractual
                arrangement with or use the services of, or attempt to obtain the
                withdrawal from the Company of, any of its staff, including by having
                such
                staff employed by a consultant or independent contractor for Jeffrey
                Halloran
                or
                for any other Person.

            

    

    

    
      	
              10.2

            	
              Jeffrey
                Halloran
                shall not, without the prior written consent of the Company, at any
                time
                while Jeffrey
                Halloran
                has a contractual obligation to the Company and for a period of one
                (1)
                year thereafter, either individually or in a partnership or jointly
                or in
                conjunction with or for the benefit of any person, solicit, endeavor
                to
                solicit, canvass or deal with in relation to the business of the
                Company
                any Person who:

            

    

    

    
      	 	
              a.

            	
              was
                a client/customer of the Company for which the Company performed
                any
                services within the period of two (2) years prior to the date on
                which
                Jeffrey
                Halloran ceased
                to have a contractual obligation to the Company;
                or

            

    

    

    
      	 	
              b.

            	
              has
                been pursued as a prospective client/customer by the Company at any
                time
                within two (2) years prior to the date on which Jeffrey
                Halloran
                ceased to have a contractual obligation to the Company and in respect
                of
                which the Company has not decided to cease all such pursuit; or
                

            

    

    
      	 	
              c.

            	
              use
                his personal knowledge or influence over any such client/customer
                or
                prospective client/customer to or for his benefit or the benefit
                of any
                other person competing with or endeavouring to compete with the
                Company.

            

    

     

     

    
      
         

      

      
        -7-

        
          

        

      

      
         

      

    

     

     

    
      	
              10.3

            	
              For
                purposes of this Agreement, the term "Person" means any individual,
                partnership, limited partnership, joint venture, syndicate, sole
                proprietorship, company or corporation with or without share capital,
                unincorporated associations, trusts, trustees, executors, administrators
                or other legal person representatives, regulatory bodies or agencies,
                government or governmental agencies, authorities or entities howsoever
                designated or constituted.

            

    

     

    
      	
              ARTICLE
                11.

            	
              STATEMENT
                AS TO REASONABLENESS

            

    

    

    
      	
              11.1

            	
              Jeffrey
                Halloran
                hereby acknowledges, agrees and consents as
                follows:

            

    

    

    
      	 	
              a.

            	
              all
                restrictions contained herein are reasonable and valid as to scope,
                area,
                duration and content and are essential to the protection and furtherance
                of the legitimate interests of the Company and its affiliates and
                the
                survival of their activities;

            

    

    

    
      	 	
              b.

            	
              any
                breach by Jeffrey
                Halloran
                of
                this Agreement would shall constitute sufficient grounds for immediate
                termination of all obligations of the Company to him with no additional
                payment other than amounts owing up to the effective date of
                termination;

            

    

    

    
      	 	
              c.

            	
              in
                the event of a breach or anticipated breach of any of the covenants
                contained in this Agreement by Jeffrey
                Halloran
                would cause irreparable harm to the Company, damages will be difficult
                to
                ascertain and may not be sufficient to remedy such breach and,
                accordingly, the Company may petition a court of law or equity for
                preliminary and permanent injunctive relief in order to put an end
                to any
                such breach, without the necessity of proof of actual damages, and
                if
                desired by the Company for an account of all profits and benefits
                arising
                out of such violation, which rights and remedies shall be in addition
                to
                any other relief which the Company may have under the law or equity,
                including but not limited to reasonable lawyer's
                fees;

            

    

    

    
      	 	
              d.

            	
              Jeffrey
                Halloran
                hereby waives all defences to the strict enforcement of this Agreement
                by
                the Company; and

            

    

    

    
      	 	
              e.

            	
              nothing
                herein shall be construed so as to limit or restrict any remedy at
                law
                which the Company may have against Jeffrey
                Halloran
                for any breach by him of this
                Agreement.

            

    

     

    
      	
              ARTICLE
                12.

            	
              TERMINATION

            

    

    

    
      	
              12.1

            	
              The
                Company may terminate this Agreement and terminate the employment
                of
                Jeffrey
                Halloran
                for cause, at any time, without notice or compensation in lieu of
                notice.
                It is understood and agreed that cause, includes, without limitation,
                any
                material breach of the provisions of this Agreement by Jeffrey
                Halloran,
                theft, fraud or dishonesty, documented incompetence or gross
                insubordination on the part of Jeffrey
                Halloran,
                a
                breach by Jeffrey
                Halloran
                of
                his fiduciary duties to the Company, conviction of Jeffrey
                Halloran
                of
                an indictable offence or any other matter that would constitute cause
                at
                law.

            

    

     

     

    
      
         

      

      
        -8-

        
          

        

      

      
         

      

    

     

    
      	
              12.2

            	
              Jeffrey
                Halloran
                employment shall automatically terminate upon his death or physical
                or
                mental disability, without any compensation therefore outside of
                benefits
                paid by the Company's insurers under the Company's employment benefit
                plan
                at the time of death or disability.

            

    

    

    
      	
              12.3

            	
              The
                Company may, upon six (6) months prior written notice, terminate
                this
                employment agreement with Jeffrey
                Halloran,
                in which event all unvested shares, rights thereto, stock options,
                stock
                awards and allocations shall immediately and fully vest. Jeffrey
                Halloran
                shall have the right to exercise the vested unexercised portion of
                all
                outstanding stock option and stock awards, whether granted by the
                Company
                or another shareholder of the Company, in accordance with the terms
                of
                such options. Any restricted stock shall remain subject to the terms
                of
                each grant. Furthermore, Jeffrey
                Halloran will
                receive in one payment two times his annual base salary and two times
                the
                commission amount earned for the trailing twelve months. All extended
                health care premiums will remain in full effect for a one year
                period.

            

    

    

    
      	
              12.4

            	
              Jeffrey
                Halloran
                may, upon three (3) months prior written notice, terminate his employment
                with the Company at any time, in which event all unvested shares,
                rights
                thereto, stock options, stock awards and allocations shall be forfeited
                as
                at the date of termination. Jeffrey
                Halloran
                shall have the right to exercise the vested unexercised portion of
                all
                outstanding stock option and stock awards, whether granted by the
                Company
                or another shareholder of the Company, prior to the date of termination,
                in accordance with the terms of such options, and the unexercised
                portion
                of any such options or awards shall be forfeited, irrespective of
                its
                terms. Any restricted stock shall remain subject to the terms of
                each
                grant.

            

    

    

    
      	
              12.5

            	
              If
                Jeffrey
                Halloran
                employment with the Company is terminated for cause the Company shall
                pay
                Jeffrey
                Halloran,
                as soon as practicable after the date of termination, any Base Salary
                and
                reimbursable expenses accrued or owing to Jeffrey
                Halloran for
                services rendered as at the date of termination, and Jeffrey
                Halloran
                shall forfeit any unvested shares or rights thereto that he may hold
                as at
                the date of termination. Jeffrey
                Halloran
                shall have the right, to exercise the vested unexercised portion
                of all
                outstanding stock option and stock awards prior to the date of
                termination, in accordance with the terms of such options and awards,
                and
                the unexercised portion of any such options or awards shall be forfeited,
                irrespective of its terms. Any restricted stock shall remain subject
                to
                the terms of each grant.

            

    

     

    
      	
              ARTICLE
                13.

            	
              ARBITRATION

            

    

    

    
      	
              13.1

            	
              In
                the event of any material difference of opinion or dispute between
                Jeffrey
                Halloran
                and the Company with respect to the construction or interpretation
                of this
                Agreement or the alleged breach thereof, which cannot be settled
                amicably
                by agreement of the parties, then such dispute shall be submitted
                to and
                determined by arbitration by a single arbiter in the City of Toronto,
                Ontario in accordance with the provision of the Arbitrations
                Act,
                Ontario, and judgment upon the award rendered shall be final, binding
                and
                conclusive upon the parties and may be entered in the highest court,
                provincial or federal, having jurisdiction. The costs of the arbitration
                shall be borne as determined by the
                arbitrator.

            

    

     

     

    
      
         

      

      
        -9-

        
          

        

      

      
         

      

    

     

    
      	
              ARTICLE
                14.

            	
              NOTIFICATION

            

    

    

    
      	
              14.1

            	
              Any
                demand, notice, direction or other communication to be made or given
                hereunder (in each case, "Communication") shall be in writing and
                may be
                made or given by personal delivery, by courier, by facsimile transmittal
                or other similar means of electronic communication, or by registered
                mail,
                charges prepaid, addressed to the respective parties as
                follows:

            

    

    

    
      	 	
              (a)

            	
              to

            

    

    Jeffrey
      Halloran

    6
      Bunhill
      Court

    Ajax,
      Ontario

    L1S
      4S7

    

    
      	
            	(b)	
              to
                the Company:

            

    

    

    PHANTOM
      FIBER INC.

    71
      King
      Street East, Suite 300

    Toronto,
      ON M5C 1G3

    

    Telefax:
      (416) 703-0900

    

    or
      to
      such other address or telefax number as any party may from time to time notify
      the other in accordance with this section.

    

    Any
      Communication made by personal delivery or by courier shall be conclusively
      deemed to have been given and received on the day of actual delivery thereof,
      or, if made or given by telefax or other electronic means of communication,
      on
      the first business day following the transmittal thereof. Any Communication
      that
      is mailed shall be conclusively deemed to have been given and received on the
      third business day following the date of mailing but if, at the time of mailing
      or within three business days thereafter, there is or occurs a labour dispute
      or
      other event that might reasonably be expected to disrupt delivery of documents
      by mail, any Communication shall be delivered or transmitted by means of
      recorded electronic communication as provided for in this Article.

     

    
      	
              ARTICLE
                15.

            	
              SURVIVAL

            

    

    

    
      	
              15.1

            	
              Jeffrey
                Halloran
                acknowledges and agrees that the obligations under Articles 6, 7,
                8, 9, 10
                and 11 are to remain in effect in perpetuity and survive the termination
                of this Agreement; that same will continue to apply notwithstanding
                the
                manner or reasons for the termination of Jeffrey
                Halloran
                and regardless of whether Jeffrey
                Halloran
                is
                terminated with or without notice or
                cause.

            

    

     

    
      
         

      

      
        -10-

        
          

        

      

      
         

      

    

     

    
      	
              ARTICLE
                16.

            	
              WAIVER
                OF BREACH

            

    

    

    
      	
              16.1

            	
              The
                failure of either party to require the performance of any term or
                condition of this Agreement, or the waiver by either party of any
                breach
                of this Agreement, shall not prevent a subsequent enforcement of
                any such
                term or any other term nor shall it be deemed a waiver of any subsequent
                breach.

            

    

     

    
      	
              ARTICLE
                17.

            	
              GOVERNING
                LAW

            

    

    

    
      	
              17.1

            	
              It
                is the intention of the parties hereto that this Agreement and the
                performance hereunder be construed in accordance with, and under
                and
                pursuant to the laws of the Province of Ontario. The parties hereto
                hereby
                attorn to the exclusive jurisdiction of the courts of the Province
                of
                Ontario. 

            

    

     

    
      	
              ARTICLE
                18.

            	
              SEVERABILITY
                AND MODIFICATION

            

    

    

    
      	
              18.1

            	
              If
                any covenant or provision of this Agreement is determined by a court
                of
                competent jurisdiction to be void or unenforceable or against public
                policy in whole or in part for any reason whatsoever, such provision
                shall
                be deemed severable and severed from this Agreement and the balance
                of
                this Agreement shall remain in full force and
                effect.

            

    

    

    
      	
              18.2

            	
              If
                any restriction of this Agreement is held over-broad or unreasonable,
                such
                restriction shall be modified or revised to include the maximum reasonable
                restriction allowed by law.

            

    

     

    
      	
              ARTICLE
                19.

            	
              AMENDMENT/WAIVER

            

    

    

    
      	
              19.1

            	
              No
                provision of this Agreement may be amended, waived, modified, extended
                or
                discharged unless such amendment, waiver, extension or discharge
                is agreed
                to in writing signed by both the Company and Jeffrey
                Halloran.

            

    

     

    
      	
              ARTICLE
                20.

            	
              ASSIGNMENT
                AND SUCCESSORS OF INTEREST

            

    

    

    
      	
              20.1

            	
              This
                Agreement shall not be assignable by Jeffrey
                Halloran,
                but shall be assignable by the Company in the event the Company merges
                or
                consolidates with or into any other corporation or corporations,
                or sells
                or otherwise transfers substantially all of its assets to another
                corporation or Person. In such event, the provisions of this Agreement
                shall be binding upon and inure to the benefit of the corporation
                or
                Person surviving or resulting from the merger or consolidation or
                to which
                the assets are sold or transferred and all references herein to the
                Company refer with equal force and effect to any corporate or other
                successor of the corporation or Person that acquires directly or
                indirectly by merger, consolidation, purchase or otherwise, all or
                substantially all of the assets of the
                Company.

            

    

     

     

    
      
         

      

      
        -11-

        
          

        

      

      
         

      

    

    

    
      	
              ARTICLE
                21.

            	
              COMPLETE
                AGREEMENT

            

    

     

    
      	
              21.1

            	
              This
                Agreement is the complete agreement between Jeffrey
                Halloran
                and the Company with respect to the subject matter hereof and supersedes
                any and all previous agreements, negotiations, discussions or
                understandings previously existing with respect to the subject matters
                addressed herein or the employment of Jeffrey
                Halloran
                with the Company.

            

    

     

    
      	
              ARTICLE
                22.

            	
              INDEPENDENT
                LEGAL ADVICE

            

    

    

    
      	
              22.1

            	
              Jeffrey
                Halloran
                warrants and represents that he is entering into this Agreement with
                the
                Company willingly and that he has had the opportunity of receiving
                independent legal advice respecting this
                Agreement.

            

    

     

    
      	
              ARTICLE
                23.

            	
              RECEIPT
                OF COPY OF AGREEMENT

            

    

    

    
      	
              23.1

            	
              Jeffrey
                Halloran
                hereby acknowledges receipt of a duplicate copy of this
                Agreement.

            

    

    

    IN
      WITNESS WHEREOF
      the
      parties hereto have caused this Agreement to be executed.

    

    
      	 	
              )

              )

              )

              )

              )

              )

              )

            	
              PHANTOM
                FIBER INC.

               

               

               

              Per:

              
                

              

              Name:
                Bernadette Halloran

              Title:
                VP, Finance & Admin.

            
	
              SIGNED,
                SEALED AND DELIVERED
                in
                the presence of

               

               

               

               

              
                

              

              Witness

            	
              )

              )

              )

              )

              )

              )

              )

            	
               

               

               

               

               

              
                

              

              Jeffrey
                Halloran

            

    

     

    
      
         

      

      
        -12-

        
          

        

      

      
         

      

    

    Schedule
      "A"

    
PERFORMANCE
      TARGETS

     

    The
      following document contains the terms and conditions of the performance targets
      that will be implemented for the defined period. This agreement will supersede
      any previous agreements or terms. Phantom Fiber Inc. reserves the right to
      amend
      this agreement throughout the course of its above stated duration. Should a
      new
      agreement not be implemented at the completion of the above stated timeframe,
      this agreement will remain in effect with all accumulated amounts being reset
      with the anniversary date of this agreement.

    

    Compensation

     

    Base
      Salary

     

    The
      base
      salary for the effective period will be $120,000
      a
      year
      payable on a semi-monthly basis, along with 2.5% of all revenue. 

     

    Expenses/Benefits

     

    
      	 	
              ·

            	
              All
                extended health care premiums are included.

            

    

    
      	 	
              ·

            	
              A
                $700 per month car allowance plus applicable vehicle expenses will
                be
                included.

            

    

    
      	 	
              ·

            	
              Any
                other expenses incurred will be approved or must be in accordance
                with
                current standards and policies.

            

    

    
      	 	
              ·

            	
              4
                weeks vacation

            

    

     

    Options

     

    Options
      -
      600,000
      options
      (@$.10
      strike
      price) to be vested equally over three years 

    

    Severance
      Compensation

     

    Should
      the company choose to terminate Jeffrey Halloran’s employment agreement, Jeffrey
      Halloran will receive two times his base salary and two times the commission
      amount earned for the trailing twelve months. All outstanding options, whether
      vested or not, will immediately vest. All extended health care premiums will
      remain in full effect for a one year period.

     

    
      
         

      

        -13-

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