Document:

Exhibit
10.7

 

ORIGINAL

 

STANDARD
INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE – MODIFIED NET

AMERICAN
INDUSTRIAL REAL ESTATE ASSOCIATION

 

[LOGO]

 

1.                                      Basic
Provisions (“Basic Provisions”)

 

1.1                               Parties: This Lease (“Lease”),
dated for reference purposes only, August 6, 1997, is made and between Ben
and Ariela Lawee (“Lessor”) and HWE, INC., a California Corporation,
d.b.a.   Interactive Health (“Lessee”)
(collectively the “Parties,” 
or individually a “Party”).

 

1.2(a)                   Premises: That certain portion of
the Building, including all improvements therein or to be provided by Lessor
under the terms of this Lease, commonly known by the street address of 3030
Walnut Avenue, located in the City of Long Beach County of Los Angeles, State
of California, with zip code 90807, as outlined on Exhibit A attach hereto (“Premises”).
The “Building” is that certain building containing the Premises and
generally described as (describe briefly the nature of the Building): The
approximate 54,352 square foot front portion of that certain 98,515 square foot
concrete tilt-up distribution building - See Exhibit A

In addition to Lessee’s rights to
use and occupy the Premises as hereinafter specified, Lessee shall have
non-exclusive rights to the Common Areas (as defined Paragraph 2.7 below) as
hereinafter specified, but shall not have any rights to the roof, exterior
walls or utility raceways of the Building or to any other buildings the
Industrial Center. The Premises, the Building, the Common Areas, the land upon
which they are located, along with all other buildings and improvement thereon,
are herein collectively referred to as the “Industrial Center.” (Also
see Paragraph 2.)

 

1.2 (b)               Parking: n/a unreserved vehicle parking
spaces (“Unreserved Parking Spaces”): and Fifty (50) reserved vehicle
parking spaces (“Reserved Parking Spaces”). (Also see  Paragraph 2.6.)

 

1.3                                 Term: Five years and 0
months (“Original Term”) commencing October 1, 1997 (“Commencement
Date”) and ending September 30, 2002 (“Expiration Date”). (Also
see Paragraph 3.)

 

1.4                                 Early
Possession: September 15, 1997 (“Early Possession Date”). (Also
see Paragraphs 3.2 and 3.3.)

 

1.5                                 Base Rent: $20,653.76 per
month (“Base Rent”), payable on the first day of each month commencing

October 1, 1997 (Also see
Paragraph 4.)

 

ý                                    If
this box is checked, this Lease provides for the Base Rent to be adjusted per
Addendum 11, attached hereto.

 

1.6(a)                   Base Rent Paid Upon Execution: $20,
653.76  as Base Rent for the period
October 1, 1997 - October 31, 1997

 

1.6 (b)               Lessee’s Share of Common Area Operating
Expenses: 55.171 percent (   % ) (“Lessee’s
Share”) as determined by

 

ý                                    prorata
square footage of the Premises as compared to the total square footage of the
Building or [   ] other criteria as
described in Addendum        .

 

1.7                                 Security Deposit: $22,827.84
(“Security Deposit”). (Also see Paragraph 5.)

 

1.8                                 Permitted Use:
Warehousing / distribution / related subassembly operations,  service & repair of electronic health
equipment, furniture and related products; related office (“Permitted Use”)
(Also see Paragraph 6.) uses.

 

1.9                                 Insuring Party. Lessor
is the “Insuring Party.” (Also see Paragraph 8.)

 

1.10(a)             Real Estate Brokers. The following real
estate broker(s) (collectively, the “Brokers”) and brokerage
relationships exist in this transaction and are consented to by the Parties
(check applicable boxes):

 

ý                                    Matlow-Kennedy
Commercial represents Lessor exclusively (“Lessor’s Broker”);

 

ý                                    Corporate
Planners & Coordinators represents Lessee exclusively (“Lessee’s
Broker”); or

 

o                                                                                           represents
both Lessor and Lessee (“Dual Agency”). (Also see Paragraph 15.)

 

1.10(b)            Payment to Brokers. Upon the execution of
this Lease by both Parties, Lessor shall pay to said Broker(s) jointly, or in
such separate shares as they may mutually designate in writing, a fee as set
forth in a separate written agreement between Lessor and said Broker(s) (or in
the event there is no separate written agreement between Lessor and said
Broker(s), the sum of $      ) for brokerage services
rendered by said Broker(s) in connection with this transaction.

 

1.11                           Guarantor. The obligations
of the Lessee under this Lease are to be guaranteed by n/a  (“Guarantor”). (Also see Paragraph
37.)

 

1.12                           Addenda and Exhibits.
Attached hereto is an Addendum or Addenda consisting of Paragraphs 1 through
25, and Exhibits A
through             ,
all of which constitute a part of this Lease.

 

2.                                       Premises,
Parking and Common Areas.

 

2.1                                 Letting. Lessor hereby
leases to Lessee, and Lessee hereby leases from Lessor, the Premises, for the
term, at the rental, and upon all of the terms, convenants and conditions set
forth in this Lease. Unless otherwise provided herein, any statement of square
footage set forth in this Lease, or that may have been used in calculating
rental and/or Common Area Operating Expenses, is an approximation which Lessor
and Lessee agree is reasonable and the rental and Lessee’s Share (as defined in
Paragraph 1.6(b)) based thereon is not subject to revision whether or not the
actual square footage is more or less.

 

2.2                                 Condition.  Lessor shall deliver the Premises to Lessee
clean and free of debris on the Commencement Date and warrants to Lessee that
the existing plumbing, electrical systems, fire sprinkler system, lighting, air
conditioning and heating systems and loading doors, if any, in the Premises,
other than those constructed by Lessee, shall be in good operating condition on
the Commencement Date. If a non-compliance with said warranty exists as of the
Commencement Date, Lessor shall, except as otherwise provided in this Lease,
promptly after receipt of written notice from Lessee setting forth with
specificity the nature and extent of such non-compliance, rectify same at
Lessor’s expenses. If Lessee does not give Lessor written notice of a
non-compliance with this warranty within ** after the Commencement Date,
correction of that non-compliance shall be the obligation of  Lessee at Lessee’s sole cost and expense. 

 

** Addendum Paragraph
2

 

2.3                                 Compliance with Covenants,
Restrictions and Building Code. Lessor warrants that any improvements
(other than those constructed by Lessee or at Lessee’s direction) on or in the
Premises which have been constructed or installed by Lessor or with Lessor’s
consent or at Lessor’s direction shall comply with all applicable covenants or
restrictions of record and applicable building codes, regulations and
ordinances in effect on the Commencement Date. Lessor further warrants to
Lessee that Lessor has no knowledge of any claim having been made by any governmental
agency that a violation or violations of applicable building codes,
regulations, or ordinances exist with regard to the Premises as of the
Commencement Date. Said warranties shall not apply to any Alterations or
Utility Installations (defined in Paragraph 7.3(a)) made or to be made by
Lessee. If the Premises do not comply with said warranties, Lessor shall,
except as otherwise provided in this Lease, promptly after receipt of written
notice from Lessee given within ** following the Commencement Date and setting
forth with specificity the nature and extent of such non-compliance, take such
action, at Lessor’s expense, as may be reasonable or appropriate to rectify the
non-compliance.

 

** Addendum 2

 

Addendum Paragraph 3

 

2.4                                 Acceptance of Premises.  Lessee hereby acknowledges: (a) that it has
been advised by the Broker(s) to satisfy itself with respect to the condition
of the Premises (including but not limited to the electrical and fire sprinkler
systems, security, environmental aspects, seismic and earthquake requirements,
and compliance with the Americans with Disabilities Act and applicable zoning,
municipal, county, state and federal laws, ordinances and regulations and any
convenants or restrictions of record (collectively, “Applicable Laws”) and the
present and future suitability of the Premises for Lessee’s intended use; (b)
that Lessee has made such investigation as it deems necessary with reference to
such matters, is satisfied with reference thereto, and assumes all
responsibility therefore as the same relate to Lessee’s occupancy of the
Premises and/or the terms of this Lease; and (c) that neither Lessor, nor any
of Lessor’s agents, has made any oral or written representations or warranties
with respect to said matters other than as set forth in this Lease.

 

2.5                                 Lessee as Prior Owner /
Occupant.  The warranties made by
Lessor in this Paragraph 2 shall be of no force or effect if immediately prior
to the date set forth in Paragraph 1.1 Lessee was the owner or occupant of the
Premises. In such event, Lessee shall, at Lessee’s sole cost and expense,
correct any non-compliance of the Premises with said warranties.

 

	
   

  	
   

  	
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2.6                                 Vehicle Parking.
Lessee shall be entitled to use the number of Unreserved Parking Spaces and
Reserved Parking Spaces specified in Paragraph 1.2(b) on those portions of the
Common Areas designated from time to time by Lessor for parking. Lessee shall
not use more parking spaces than said number. Said parking spaces shall be used
for parking by vehicles no larger than full-size passenger automobiles or
pick-up trucks, herein called “Permitted Size Vehicles.” Vehicles other
than Permitted Size Vehicles shall be parked and loaded or unloaded as directed
by Lessor in the Rules and Regulations (as defined in Paragraph 40) issued by
Lessor. (Also see Paragraph 2.9.)

 

Addendum
Paragraph 4

 

(a)                                  Lessee shall not permit or
allow any vehicles that belong to or are controlled by Lessee or Lessee’s
employees, suppliers, shippers, customers, contractors or invitees to be
loaded, unloaded, or parked in areas other than those designated by Lessor for
such activities.

 

(b)                                 If Lessee permits or allows
any of the prohibited activities described in this Paragraph 2.6, then Lessor
shall have the right, without notice, in addition to such other rights and
remedies that it may have, to remove or low away the vehicle involved and
charge the cost to Lessee, which cost shall be immediately payable upon demand
by Lessor.

 

(c)                                  Lessor shall at the
Commencement Date of this Lease, provide the parking facilities required by
Applicable Law.

 

2.7                                 Common Areas - Definition. The
term “Common Areas” is defined as all areas and facilities outside the
Premises and within the exterior boundary line of the Industrial Center and
interior utility raceways within the Premises that are provided and designated
by the Lessor from time to time for the general non-exclusive use of Lessor,
Lessee and other lessees of the Industrial Center and their respective
employees, suppliers, shippers, customers, contractors and invitees, including
parking areas, loading and unloading areas, trash areas, roadways, sidewalks,
walkways, parkways, driveways and landscaped areas.

 

2.8                                 Common Areas - Lessee’s
Rights. Lessor hereby grants to Lessee, for the benefit of Lessee and its
employees, suppliers, shippers, contractors, customers and invitees, during the
term of this Lease, the non-exclusive right to use, in common with others
entitled to such use, the Common Areas as they exist from time to time, subject
to any rights, powers, and privileges reserved by Lessor under the terms hereof
or under the terms of any rules and regulations or restrictions governing the
use of the Industrial Center. Under no circumstances shall the right herein
granted to use the Common Areas be deemed to include the right to store any
property, temporarily or permanently, in the Common Areas. Any such storage
shall be permitted only by the prior written consent of Lessor or Lessor’s
designated agent, which consent may be revoked at any time. In the event that
any unauthorized storage shall occur then Lessor shall have the right, without
notice, in addition to such other rights and remedies that it may have, to
remove the property and charge the cost to Lessee, which cost shall be
immediately payable upon demand by Lessor.

 

2.9                                 Common Areas - Rules and
Regulations. Lessor or such other person(s) as Lessor may appoint shall
have the exclusive control and management of the Common Areas and shall have
the right, from time to time, to establish, modify, amend and enforce
reasonable Rules and Regulations with respect thereto in accordance with
Paragraph 40. Lessee agrees to abide by and conform to all such Rules and
Regulations, and to cause its employees, suppliers, shippers, customers,
contractors and invitees to so abide and conform. Lessor shall not be
responsible to Lessee for the non-compliance with said rules and regulations by
other lessees of the Industrial Center.

 

2.10                           Common Areas - Changes. Lessor
shall have the right, in Lessor’s sole discretion, from time to time:

 

(a)                                  To make changes to the
Common Areas, including, without limitation, changes in the location, size,
shape and number of driveways, entrances, parking spaces, parking areas,
loading and unloading areas, ingress, egress, direction of traffic, landscaped
areas, walkways and utility raceways;

 

(b)                                 To close temporarily any of
the Common Areas for maintenance purposes so long as reasonable access to the
Premises remains available;

 

(c)                                  To designate other land
outside the boundaries of the Industrial Center to be a part of the Common
Areas;

 

(d)                                 To add additional buildings
and improvements to the Common Areas;

 

(e)                                  To use the Common Areas
while engaged in making additional improvements, repairs or alterations to the
Industrial Center, or any portion thereof; and

 

(f)                                    To do and perform such
other acts and make such other changes in, to or with respect to the Common
Areas and Industrial Center as Lessor may, in the exercise of sound business
judgment, deem to be appropriate.

 

3.                                       Term.

 

3.1                                 Term. The Commencement
Date, Expiration Date and Original Term of this Lease are as specified in
Paragraph 1.3.

 

3.2                                 Early Possession. If an
Early Possession Date is specified in Paragraph 1.4 and if Lessee totally or
partially occupies the Premises after the Early Possession Date but prior to
the Commencement Date, the obligation to pay Base Rent ** shall be abated for
the period of such early occupancy. All other terms of this Lease, however,
(including but not limited to the obligations to carry the insurance required
by Paragraph 8) shall be in effect during such period. Any such early
possession shall not affect nor advance the Expiration Date of the Original
Term.

 

**Addendum Paragraph
5

 

3.3                                 Delay in Possession. If
for any reason Lessor cannot deliver possession of the Premises to Lessee by
the Early Possession Date, if one is specified in Paragraph 1.4, or if no Early
Possession Date is specified, by the Commencement Date, Lessor shall not be
subject to any liability therefor, nor shall such failure affect the validity
of this Lease, or the obligations of Lessee hereunder, or extend the term
hereof, but in such case, Lessee shall not, except as otherwise provided
herein, be obligated to pay rent or perform any other obligation of Lessee
under the terms of this Lease until Lessor delivers possession of the Premises
to Lessee. If possession of the Premises is not delivered to Lessee within
sixty (60) days after the Commencement Date, Lessee may, at its option, by
notice in writing to Lessor within ten (10) days after the end of said sixty
(60) day period, cancel this Lease, in which event the parties shall be
discharged from all obligations hereunder; provided further, however, that if
such written notice of Lessee is not received by Lessor within said ten (10)
day period, Lessee’s right to cancel this Lease hereunder shall terminate and
be of no further force or effect. Except as may be otherwise provided, and
regardless of when the Original Term actually commences, if possession is not
tendered to Lessee when required by this Lease and Lessee does not terminate
this Lease, as aforesaid, the period free of the obligation to pay Base Rent,
if any, that Lessee would otherwise have enjoyed shall run from the date of
delivery of possession and continue for a period equal to the period during
which the Lessee would have otherwise enjoyed under the terms hereof, but minus
any days of delay caused by the acts, changes or omissions of Lessee.

 

Addendum
Paragraph 6

 

4.                                       Rent.

 

4.1                                 Base Rent. Lessee shall
pay Base Rent and other rent or charges, as the same may be adjusted from time
to time, to Lessor in lawful money of the United States, without offset or
deduction, on or before the day on which it is due under the terms of this
Lease. Base Rent and all other rent and charges for any period during the term
hereof which is for less than one full month shall be prorated based upon the
actual number of days of the month involved. Payment of Base Rent and other
charges shall be made to Lessor at its address stated herein or to such other
persons or at such other addresses as Lessor may from time to time designate in
writing to Lessee.

 

4.2                                 Common Area Operating
Expenses. Lessee shall pay to Lessor during the term hereof, in addition to
the Base Rent, Lessee’s Share (as specified in Paragraph 1.6(b)) of all Common
Area Operating Expenses, as hereinafter defined, during each calendar year of
the term of this Lease, in accordance with the following provisions:

 

(a)                                  “Common Area Operating
Expenses” are defined, for purposes of this Lease, as all costs incurred by
Lessor relating to the ownership and operation of the Industrial Center,
including, but not limited to, the following:

 

(i)                                     The operation, repair and
maintenance, in neat, clean, good order and condition, of the following:

 

(aa)                            The Common Areas, including
parking areas, loading and unloading areas, trash areas, roadways, sidewalks,
walkways, parkways, driveways, landscaped areas, striping, bumpers, irrigation
systems, Common Area lighting facilities, fences and gates, elevators and roof.

 

(bb)                          Exterior signs and any tenant
directories.

 

(cc)                            Fire detection and sprinkler
systems.

 

(ii)                                  The cost of water, gas,
electricity and telephone to service the Common Areas.

 

(iii)                               Trash, disposal and security
services and the costs of any environmental inspections

 

Addendum Paragraph 7

 

(iv)                              Reserves set aside for
maintenance and repair of Common Areas.

 

(v)                                 Real Property Taxes (as
defined in Paragraph 10.2) to be paid by Lessor for the Building and the Common
Areas under Paragraph 10 hereof.

 

(vi)                              The cost of the premiums for the
insurance policies maintained by Lessor under Paragraph 8 hereof.

 

(vii)                           Any deductible portion of an
insured loss concerning the Building or the Common Areas.

 

(viii)                        Any other services to be provided by
Lessor that are stated elsewhere in this Lease to be a Common Area Operating
Expense.

 

Addendum
Paragraph 8

 

(b)                                 Any Common Area Operating
Expenses and Real Property Taxes that are specifically attributable to the
Building or to any other building in the Industrial Center or to the operation,
repair and maintenance thereof, shall be allocated entirely to the Building or
to such other building. However, any Common Area Operating Expenses and Real
Property Taxes that are not specifically attributable to the Building or to any
other building or to the operation, repair and maintenance thereof, shall be
equitably allocated by Lessor to all buildings in the Industrial Center.

 

(c)                                  The inclusion of the
improvements, facilities and services set forth in Subparagraph 4.2(a) shall
not be deemed to impose an obligation upon Lessor to either have said
improvements or facilities or to provide those services unless the Industrial
Center already has the same, Lessor already provides the services, or Lessor
has agreed elsewhere in this Lease to provide the same or some of them.

 

(d)                                 Lessee’s Share of Common Area
Operating Expenses shall be payable by Lessee within ten (10) days after a
reasonably detailed statement of actual expenses is presented to Lessee by
Lessor. At Lessor’s option, however, an amount may be estimated by Lessor from
time to time of Lessee’s Share of annual Common Area Operating Expenses and the
same shall be payable monthly or quarterly, as Lessor shall designate, during
each 12-month period of the Lease term, on the same day as the Base Rent is due
hereunder. Lessor shall deliver to Lessee within sixty (60) days after the
expiration of each calendar year a reasonably detailed statement showing
Lessee’s Share of the actual Common Area Operating Expenses incurred during the
preceding year. If Lessee’s payments under this Paragraph 4.2(d) during said
preceding year exceed Lessee’s Share as indicated on said statement, Lessee
shall be credited the amount of such over-

 

	
   

  	
   

  	
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payment against Lessee’s Share of
Common Area Operating Expenses next becoming due. If Lessee’s payments under
this Paragraph 4.2(d) during said preceding year were less than Lessee’s Share
as indicated on said statement, Lessee shall pay to Lessor the amount of the deficiency
within ten (10) days after delivery by Lessor to Lessee of said statement.

 

5.                                       Security
Deposit.  Lessee shall deposit with
Lessor upon Lessee’s execution hereof the Security Deposit set forth in
paragraph 1.7 as security for Lessee's faithful performance of Lessee’s
obligations under this Lease.  If Lessee
fails to pay Base Rent or other rent or charges due hereunder, or otherwise
Defaults under this Lease (as defined in Paragraph 13.1), Lessor may use, apply
or retain all or any portion of said Security Deposit for the payment of any
amount due Lessor to reimburse or compensate Lessor for any liability, cost,
expense, loss or damage (including attorneys’ fees) which Lessor may suffer or
incur by reason thereof Lessor uses or applies all or any portion of said
Security Deposit, Lessee shall within ten (10) days after written request
therefore deposit monies with Lessor sufficient to restore said Security
Deposit to the full amount required by this Lease.  Any time the Base Rent increases during the term of this Lease,
Lessee shall, upon written request from Lessor, deposit additional monies with
Lessor as an addition to the Security Deposit so that the total amount of the
Security Deposit shall, at all times bear the same proportion to the then current
Base Rent as the initial Security Deposit bears to the initial Base Rent set
forth in paragraph 1.5. Lessor shall not be required to keep all or any part of
the Security Deposit separate from its general accounts.  Lessor shall, at the expiration or earlier
termination of the term hereof and after Lessee has vacated the Premises,
return to Lessee (or, at Lessor’s option, to the last assignee, if any, of
Lessee’s interest herein), that portion the Security Deposit not used or
applied by Lessor.  Unless otherwise
expressly agreed in writing by Lessor, no part of the Security Deposit shall be
considered be held in trust, to bear interest or other increment for its use,
or to be prepayment for any monies to be paid by Lessee under this Lease.

 

6.                                       Use.

 

6.1                                 Permitted Use.

 

(a)                                  Lessee shall use and occupy
the Premises only for the Permitted Use set forth in paragraph 1.8, or any
other legal use which is reasonably comparable thereto, and for no other
purpose.  Lessee shall not use or permit
the use of the Premises in a manner that is unlawful, creates waste or a
nuisance that disturbs owners and/or occupants of, or causes damage to the
Premises or neighboring premises or properties.

 

(b)                                 Lessor hereby agrees to not
unreasonably withhold or delay its consent to any written request by Lessee,
Lessee’s assignees or subtenants and by prospective assignees and subtenants of
Lessee, its assignees and subtenants, for a modification of said Permitted Use,
so long as the same will impair the structural integrity of the improvements on
the Premises or in the Building or the mechanical or electrical systems
therein, does not conflict with uses other lessees, is not significantly more
burdensome to the Premises or the Building and the improvements thereon, and is
otherwise permissible pursuant to this Paragraph 6.  If Lessor elects to withhold such consent, Lessor shall within
five (5) business days after such request give a written notification of same,
which notice shall include an explanation of Lessor’s reasonable objections to
the change in use.

 

6.2                                 Hazardous Substances.

 

(a)                                  Reportable Uses Require
Consent.  The term “Hazardous
Substance” as used in this Lease shall mean any product, substance,
chemical, material or waste whose presence, nature, quantity and/or intensity of
existence; use, manufacture, disposal, transportation, spill, release or
effect, either itself or in combination with other materials expected to be on
the Premises, is either: (i) potentially injurious to the pubic health, safety
or welfare, the  environment, or the
Premises; (ii) regulated or monitored by any governmental authority; or (iii) a
basis for potential liability of Lessor to any governmental agency or third
party under any applicable statute or common law theory.  Hazardous Substance shall include, but not
be limited to, hydrocarbons, petroleum, gasoline, crude oil, any products or
by-products thereof.  lessee shall not
engage in any activity in or about the Premises which constitutes a Reportable
Use (as hereinafter define of Hazardous Substances without the express prior
written consent of Lessor and compliance in a timely manner (at Lessee’s sole
cost and expense) with Applicable Requirements (as defined in Paragraph
6.3).  “Reportable Use” shall
mean (i) the installation or use of any above or below ground storage tank,
(ii) the generation, possession, storage, use, transportation, or disposal of a
Hazardous Substance that requires a permit from, or with respect to which a
report, notice registration or business plan is required to be filed with, any
governmental authority, and (iii) the presence in, on or about the Premises of
a Hazardous Substance with respect to which any Applicable Laws require that a
notice be given to persons entering or occupying the Premises or neighboring
properties.  Notwithstanding the
foregoing, Lessee may, without Lessor’s prior consent, but upon notice to
Lessor and in compliance with all Applicable Requirements, use any ordinary and
customary materials reasonably required to be used by Lessee in the normal course
of the Permitted Use, so long as such use is not a Reportable Use and do not
expose the Premises or neighboring properties to any meaningful risk of
contamination or damage or expose Lessor to any liability therefore.  In addition, Less may (but without any
obligation to do so) condition its consent to any Reportable Use of any
Hazardous Substance by Lessee upon Lessee’s giving Lessor such additional
assurances as Lessor, in its reasonable discretion, deems necessary to protect
itself, the public, the Premises and the environment against damage
contamination or injury and/or liability therefor, including but not limited to
the installation (and, at Lessor’s option, removal on or before Lease
expiration or earlier termination) of reasonably necessary  protective modifications to the Premises
(such as concrete encasements) and/or the deposit of an additional Security
Deposit under Paragraph 5 hereof.  

 

Addendum Paragraph 9

 

(b)                                 Duty to inform Lessor.  If Lessee knows, or has reasonable cause to
believe, that a Hazardous Substance has come to be located in, on under or
about the Premises or the Building, other than as previously consented to by
Lessor, Lessee shall immediately give Lessor written notice thereof, together
with a copy of any statement, report, notice, registration, application,
permit, business plan, license, claim, action, or proceeding given to, or
received from, any governmental authority or private party concerning the
presence, spill, release, discharge of, or exposure to, such Hazardous Substance
including but not limited to all such documents as may be involved in any
Reportable Use involving the Premises. 
Lessee shall not cause or permit any Hazardous Substance to be spilled
or released in, on, under or about the Premises (including, without limitation,
through the plumbing or sanitary sewer system).

 

(c)                                  Indemnification.  Lessee shall indemnify, protect, defend and
hold Lessor, its agents, employees, lenders and ground lessor, if any, and the
Premises, harmless from and against any and all damages, liabilities,
judgments, costs, claims, liens, expenses, penalties, loss of permits and
attorneys’ and consultants’ fees arising out of or involving any Hazardous
Substance brought onto the Premises by or for Lessee or by anyone under
Lessee’s control.  Lessee obligations
under this Paragraph 6.2(c) shall include, but not be limited to, the effects
of any contamination or injury to person, property or the environment created
or suffered by Lessee, and the cost of investigation (including consultants’
and attorneys’ fees and testing), removal, remediation, restoration and/or
abatement thereof, or of any contamination therein involved, and shall survive
the expiration or earlier termination of this Lease.  No termination, cancellation or release agreement entered into by
Lessor and Lessee shall release Lessee from its obligations under this Lease
with respect to Hazardous Substances, unless specifically so agreed by Lessor
in writing at the time of such agreement.

 

6.3                                 Lessee’s Compliance with
Requirements.  Lessee shall, at
Lessee’s sole cost and expense, fully, diligently and in a timely manner,
comply with all “Applicable Requirements,” which term is used in this
Lease to mean all laws, rules, regulations, ordinances, directives, covenants,
easements and restrictions of record, permits, the requirements of any
applicable fire insurance underwriter or rating bureau, and the recommendations
of Lessor’s engineers and/or consultants, relating in any manner to the
Premises (including but not limited to matters pertaining to (i) industrial
hygiene, (ii) environmental conditions on, in, under or about the Premises,
including soil and groundwater conditions, and (iii) the use, generation,
manufacture, production, installation, maintenance, removal, transportation,
storage, spill, or release of any Hazardous Substance), now in effect or which
may hereafter come into effect. Lessee shall, within five (5) days after
receipt of Lessor’s written request, provide Lessor with copies of all
documents and information, including but not limited to permits, registrations,
manifests, applications, reports and certificates, evidencing Lessee’s
compliance with any Applicable Requirements specified by Lessor, and shall
immediately upon receipt, notify Lessor in writing (with copies of any
documents involved) of any threatened or actual claim, notice, citation,
warning, complaint or report pertaining to or involving failure by Lessee or
the Premises to comply with any Applicable Requirements.

 

6.4                                 Inspection; Compliance
with Law.  Lessor, Lessor’s agents,
employees, contractors and designated representatives, and the holders of any
mortgages, deeds of trust or ground leases on the Premises (“Lenders”)
shall have the right to enter the Premises at any time in the case of an emergency,
and otherwise at reasonable times, for the purpose of inspecting the condition
of the Premises and for verifying compliance by Lessee with this Lease and all
Applicable Requirements( as defined in Paragraph 6.3), and Lessor shall be
entitled to employ experts and/or consultants in connection therewith to advise
Lessor with respect to Lessee’s activities, including but not limited to
Lessee’s installation, operation, use, monitoring, maintenance, or removal of
any Hazardous Substance on or from the Premises.  The costs and expenses of any such inspections shall be paid by
the party requesting same, unless a Default or Breach of this Lease by Lessee
or a violation of Applicable Requirements or a contamination, caused or
materially contributed to by Lessee, is found to exist or to be imminent, or
unless the inspection is requested or ordered by a governmental authority as
the result of any such existing or imminent violation or contamination.  In such case, Lessee shall upon request
reimburse Lessor or Lessor’s Lender, as the case may be, for the costs and
expenses of such inspections.

 

7.                                       Maintenance,
Repairs, Utility Installations, Trade Fixtures and Alterations.

 

7.1                                 Lessee’s Obligations.

 

(a)                                  Subject to the provisions of
Paragraphs 2.2 (Condition), 2.3 (Compliance with Covenants, Restrictions and
Building Code), 7.2 (Lessor’s Obligations), 9 (Damage or Destruction), and 14
(Condemnation), Lessee shall, at Lessee’s sole cost and expense and at all
times, keep the Premises and every part thereof in good order, condition and
repair (whether or not such portion of the Premises requiring repair, or the
means of repairing the same, are reasonable or readily accessible to Lessee,
and whether or not the need for such repairs occurs as a result of Lessee’s
use, any prior use, the elements or the age of such portion of the Premises),
including, without limiting the generality of the foregoing, all equipment or
facilities specifically serving the Premises, such as plumbing, heating, air
conditioning, ventilating, electrical, lighting facilities, boilers, fired or
unfired pressure vessels, fire hose connections if within the Premises,
fixtures, interior walls, interior surfaces of exterior walls, ceilings,
floors, windows, doors, plate glass, and skylights, but excluding any items
which are the responsibility of Lessor pursuant to Paragraph 7.2 below.  Lessee, in keeping the Premises in good
order, condition and repair, shall exercise and perform good maintenance
practices.  Lessee’s obligations shall
include restorations, replacements or renewals when necessary to keep the
Premises and all improvements thereon or a part thereof in good order,
condition and state of repair.

 

(b)                                 Lessee shall, at Lessee’s
sole cost and expense, procure and maintain a contract, with copies to Lessor,
in customary form and substance for and with a contractor specializing and
experienced in the inspection, maintenance and service of the heating, air
conditioning and ventilation system for the Premises.  However, Lessor reserves the right, upon notice to Lessee, to
procure and maintain the contract for the heating, air conditioning and
ventilation systems, and if Lessor so elects, Lessee shall reimburse Lessor,
upon demand, for the cost thereof.

 

(c)                                  If Lessee fails to perform
Lessee’s obligations under this paragraph 7.1, Lessor may enter upon the
Premises after ten (10) days’ prior written notice to Lessee (except in the
case of an emergency, in which case no notice shall be required), perform such
obligations on Lessee’s behalf, and put the Premises in good order, condition
and repair; in accordance with Paragraph 13.2 below.

 

7.2                                 Lessor’s Obligations.
Subject to the provisions of Paragraph 2.2 (Condition), 2.3 (Compliance with
Covenants; Restrictions and Building Code), 4.2 (Common Area Operating
Expenses), 6 (Use), 7.1 (Lessee’s Obligations), 9 (Damage or Destruction) and
14 (Condemnation), Lessor, subject to reimbursement pursuant to Paragraph 4.2
shall keep in good order, condition and repair the foundations, exterior walls,
structural condition of interior bearing walls, exterior roof, fire sprinkler
and/or standpipe and hose (if located in the Common Areas) or other automatic
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detection systems and equipment,
fire hydrants, parking lots, walkways, parkways, driveways, landscaping,
fences, signs and utility systems serving the Common Areas and all parts
thereof, as well as providing the services for which there is a Common Area
Operating Expense pursuant to Paragraph 4.2. Lessor shall not be obligated to
paint the exterior or interior surfaces of exterior walls nor shall Lessor be
obligated to maintain, repair or replace windows, doors or plate glass of the
Premises.  Lessee expressly waives the
benefit of any statute now or hereafter in effect which would otherwise afford
Lessee the right to make repairs at Lessor’s expense or to terminate this Lease
because of Lessor’s failure to keep the Building, Industrial Center or Common
Areas in good order, condition and repair.

 

7.3                                 Utility Installations,
Trade Fixtures, Alterations.

 

(a)                                  Definitions; Consent
Required. The term “Utility Installations” is used in this Lease to
refer to all air lines, power panels, electrical distribution, security, fire
protection systems, communications systems, lighting fixtures, heating,
ventilating and air conditioning equipment, plumbing, and fencing in, on or
about the Premises.  The term “Trade
Fixtures” shall mean Lessee’s machinery and equipment which can be removed
without doing material damage to the Premises. 
The term “Alterations” shall mean any modification of the
improvements on the Premises which are provided by Lessor under the terms of
this Lease, other than Utility Installations or Trade Fixtures.  “Lessee-Owned Alterations and/or Utility
Installations” are defined as Alterations and/or Utility Installations made
by Lessee that are not yet owned by Lessor pursuant to Paragraph 7.4(a).  Lessee shall not make nor cause to be made
any Alterations or Utility Installations in, on, under or about the Premises
without Lessor’s prior written consent. 
Lessee may, however make non-structural Utility Installations to the
interior of the Premises (excluding the roof) without Lessor’s consent but upon
notice to Lessor, so long as they are not visible from the outside of the
Premises, do not involve puncturing, relocating or removing the roof or any
existing walls, or changing or interfering with the fire sprinkler or fire
detection systems and the cumulative cost thereof during the term of this Lease
as extended does not exceed $2,500.00.

 

(b)                                 Consent. Any Alterations
or Utility Installations that Lessee shall desire to make and which require the
consent of the Lessor shall be presented to Lessor in written form with
detailed plans.  All consents given by
Lessor, whether by virtue of Paragraph 7.3(a) or by subsequent specific
consent, shall be deemed conditioned upon: (i) Lessee’s acquiring all
applicable permits required by governmental authorities; (ii) the furnishing of
copies of such permits together with a copy of the plans and specifications for
the Alteration or Utility Installation to Lessor prior to commencement of the
work thereon; and (iii) the compliance by Lessee with all conditions of said
permits in a prompt and expeditious manner. 
Any Alterations or Utility Installations by Lessee during the term of
this Lease shall be done in a good and workmanlike manner, with good and
sufficient materials, and be in compliance with all Applicable
Requirements.  Lessee shall ? upon
completion thereof furnish Lessor with as-built plans and specifications
therefor. Lessor may, (but without obligation to do so) condition its consent
to any requested Alteration or Utility Installation that costs $2,500.00 or
more upon Lessee’s providing Lessor with a lien and completion bond in an
amount equal to one and one-half times the estimated cost of such Alteration or
Utility Installation.

 

(c)                                  Lien Protection.  Lessee shall pay when due all claims for
labor or materials furnished or alleged to have been furnished to or for Lessee
at or for use on the Premises, which claims are or may be secured by any
mechanic’s or materialmen’s lien against the Premises or any interest
therein.  Lessee shall give Lessor not
less than ten (10) days’ notice prior to the commencement of any work in, on,
or about the Premises, and Lessor shall have the right to post notices of
non-responsibility in or on the Premises as provided by law.  If Lessee shall, in good faith, contest the
validity of any such lien, claim or demand, then Lessee shall, at its sole
expense, defend and protect itself, Lessor and the Premises against the same
and shall pay and satisfy any such adverse judgment that may be rendered
thereon before the enforcement thereof against the Lessor or the Premises.  If Lessor shall require, Lessee shall
furnish to Lessor a surety bond satisfactory to Lessor in an amount equal to
one and one-half times the amount of such contested lien claim or demand,
indemnifying Lessor against liability for the same, as required by law for the
holding of the Premises free from the effect of such lien or claim.  In addition, Lessor may require Lessee to
pay Lessor’s attorneys’ fees and costs in participating in such action if Lessor
shall decide it is to its best interest to do so.

 

7.4                               Ownership, Removal, Surrender,
and Restoration.

 

(a)                                  Ownership. Subject to Lessor’s
right to require their removal and to cause Lessee to become the owner thereof
as hereinafter provided in this Paragraph 7.4, all Alterations and Utility Installations
made to the Premises by Lessee shall be the property of and owned by Lessee,
but considered a part of the Premises. 
Lessor may, at any time and at its option, elect in writing to Lessee to
be the owner of all or any specified part of the Lessee-Owned Alterations and
Utility Installations.  Unless otherwise
instructed per Subparagraph 7.4(b) hereof, all Lessee-Owned Alterations and
Utility Installations shall, at the expiration or earlier termination of this
Lease, become the property of Lessor and remain upon the Premises and be
surrendered with the Premises by Lessee.

 

(b)                                 Removal. Unless otherwise
agreed in writing, Lessor may require that any or all Lessee-Owned Alterations
or Utility Installations be removed by the expiration or earlier termination of
this Lease, notwithstanding that their installation may have been consented to
by Lessor.  Lessor may require the
removal at any time of all or any part of any Alterations or Utility
Installations made without the required consent of Lessor.

 

(c)                                  Surrender/Restoration.  Lessee shall surrender the Premises by
the end of the last day of the Lease term or any earlier termination date,
clean and free of debris and in good operating order, condition and state of
repair, ordinary wear and tear excepted. 
Ordinary wear and tear shall not include any damage or deterioration
that would have been prevented by good maintenance practice or by Lessee
performing all of its obligations under this Lease.  Except as otherwise agreed or specified herein, the Premises, as
surrendered, shall include the Alterations and Utility Installations. The
obligation of Lessee shall include the repair of any damage occasioned by the
installation, maintenance or removal of Lessee’s Trade Fixtures, furnishings,
equipment, and Lessee-Owned Alterations and Utility Installations, as well as
the removal of any storage tank installed by or for Lessee, and the removal,
replacement, or remediation of any soil, material or ground water contaminated
by Lessee, all as may then be required by Applicable Requirements and/or good
practice.  Lessee’s Trade Fixtures shall
remain the property or Lessee and shall be removed by Lessee subject to its
obligation to repair and restore the Premises per this Lease.

 

8.                                       Insurance;
Indemnity.

 

8.1                                 Payment of Premiums.  The cost of the premiums for the
insurance policies maintained by Lessor under this Paragraph 8 shall be a
Common Area Operating Expense pursuant to paragraph 4.2 hereof.  Premiums for policy periods commencing prior
to, or extending beyond, the term of this Lease shall be prorated to coincide
with the corresponding Commencement Date or Expiration Date.

 

8.2                                 Liability Insurance.

 

(a)                                  Carried by Lessee.
Lessee shall obtain and keep in force during the term of this Lease a
Commercial General Liability policy of insurance protecting Lessee, Lessor and
any Lender(s) whose names have been provided to Lessee in writing (as
additional insureds) against claims for bodily injury personal injury and
property damage based upon, involving or arising out of the ownership, use,
occupancy or maintenance of the Premises and all areas appurtenant
thereto.  Such insurance shall be on an
occurrence basis providing single limit coverage in an amount not less than
$1,000,000 per occurrence with an “Additional Insured-Managers or Lessors of
Premises” endorsement and contain the “Amendment of the Pollution Exclusion”
endorsement for damage caused by heat, smoke or fumes from a hostile fire.  The policy shall not contain any intra-insured
exclusions as between insured persons or organizations, but shall include
coverage for liability assumed under this Lease as an “Insured contract”
for the performance of Lessee’s indemnity obligations under this Lease.  The limits of said insurance required by
this Lease or as carried by Leasee shall not, however, limit the liability of
Lessee nor relieve Lessee of any obligation hereunder.  All insurance to be carried by Lessee shall
be primary to and not contributory with any similar insurance carried by
Lessor, whose Insurance shall be considered excess insurance only.

 

(b)                                 Carried by Lessor.  Lessor shall also maintain liability
insurance described in Paragraph 8.2(a) above, in addition to and not in lieu
of, the insurance required to be maintained by Lessee.  Lessee shall not be names as an additional
insured therein.

 

8.3                                 Property
Insurance-Building, Improvements and Rental Value.

 

(a)                                  Building and
Improvements.  Lessor shall obtain
and keep in force during the term of this Lease a policy or policies in the
name of Lessor, with loss payable to Lessor and to any lender(s), insuring
against loss or damage to the Premises. 
Such insurance shall be for full replacement cost, as the same shall
exist from time to time, or the amount required by any Lender(s), but in no
event more than the commercially reasonable and available insurable value
thereof if, by reason of the unique nature or age of the improvements involved,
such latter amount is less than full replacement cost.  Lessee-Owned Alterations and Utility
Installations, Trade Fixtures and Lessee’s personal property shall be insured
by Lessee pursuant to Paragraph 8.4. If the coverage is available and
commercially appropriate, Lessor’s policy or policies shall insure against all
risks of direct physical loss or damage (except the perils of flood and/or
earthquake unless required by a Lender), including coverage for any additional
costs resulting from debris removal and reasonable amounts of coverage for the
enforcement of any ordinance or law regulating the reconstruction or
replacement of any undamaged sections of the Building required to be demolished
or removed by reason of the enforcement of any building, zoning, safety or land
use laws as the result of a covered loss, but not including plate glass
insurance.  Said policy or policies shall
also contain an agreed valuation provision in lieu of any co-insurance clause,
waiver of subrogation, and inflation guard protection causing an increase in
the annual property insurance coverage amount by a factor of not less than the
adjusted U.S. Department of Labor Consumer Price Index for All Urban Consumers
for the city nearest to where the Premises are located.

 

(b)                                 Rental Value.  Lessor shall also obtain and keep in
force during the term of this Lease a policy or policies in the name of Lessor,
with loss payable to Lessor and any Lender(s), insuring the loss of the full
rental and other charges payable by all lessees of the Building to Lessor for
one year (including all Real Property Taxes, insurance costs, all Common Area
Operating Expenses and any scheduled rental increases). Said insurance may
provide that in the event the Lease is terminated by reason of an insured loss,
the period of indemnity for such coverage shall be extended beyond the date of
the completion of repairs or replacement of the Premises, to provide for one
full year’s loss of rental revenues from the date of any such loss.  Said insurance shall contain an agreed
valuation provision in lieu of any co-insurance clause, and the amount of coverage
shall be adjusted annually to reflect the projected rental income, Real
Property Taxes, insurance premium costs and other expenses, if any, otherwise
payable, for the next 12-month period. 
Common Area Operating Expenses shall include any deductible amount in
the event of such loss.

 

(c)                                  Adjacent Premises. Lessee
shall pay for any increase in the premiums for the property insurance of the
Building and for the Common Areas or other buildings in the Industrial Center
if said increase is caused by Lessee’s acts, omissions, use or occupancy of the
Premises.

 

(d)                                 Lessee’s Improvements. Since
Lessor is the Insuring Party, Lessor shall not be required to insure
Lessee-Owned Alterations and Utility installations unless the item in question
has become the property of Lessor under the terms of this Lease.

 

8.4                             Lessee’s Property
Insurance.  Subject to the
requirements of Paragraph 8.5, Lessee at its cost shall either by separate
policy or, at Lessor’s option, by endorsement to a policy already carried,
maintain insurance coverage on all of Lessee’s personal property.  Trade Fixtures and Lessee-Owned Alterations
and Utility Installations in, on, or about the Premises similar in coverage to
that carried by Lessor as the Insuring Party under Paragraph 8.3(a).  Such insurance shall be full replacement
cost coverage with a deductible not to exceed $1,000 per occurrence.  The proceeds from any such insurance shall
be used by Lessee for the replacement of personal property and the restoration
of Trade Fixtures and Lessee-Owned Alterations and Utility Installations.  Upon request from Lessor, Lessee shall
provide Lessor with written evidence that such insurance is in force.

 

8.5                             Insurance Policies. Insurance
required hereunder shall be in companies duly licensed to transact business in
the state where the Premises are located, and maintaining during the policy
term a “General Policyholders Rating” of at least B+, V, or such other rating
as may be required by a Lender, as set forth in the most current issue of
“Best’s Insurance Guide.” Lessee shall not do or permit to be done anything
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to Lessor’s rights under
Paragraph 6.2(c) and Paragraph 13), Lessor may at Lessor’s option either (i)
investigate and remediate such Hazardous Substance Condition, if required, as
soon as reasonably possible at Lessor’s expense, in which event this Lease
shall continue in full force and effect, or (ii) if the estimate cost to
investigate and remediate such condition exceeds twelve (12) times the then
monthly Base Rent or $100,000 whichever is greater, give written notice Lessee
within thirty (30) days after receipt by Lessor of knowledge of the occurrence
of such Hazardous Substance Condition of Lessor’s desire to terminate to Lease
as of the date sixty (60) days following the date of such notice.  In the event Lessor elects to give such
notice of Lessor’s intention to terminate this Lease.  Lessee shall have the right within ten (10) days after the
receipt of such notice to give written notice to Lessor of Lessee’s commitment
to pay for the excess cost of (a) investigation and remediation of such
Hazardous Substance Condition to the extent required by Applicable
Requirements, over (b) an amount equal assurance thereof within thirty (30)
days following said commitment by Lessee. 
In such event this Lease shall continue in full force and effect, and
Lessor shall proceed to make such investigation and remediation as soon as
reasonably possible after the required funds are available.  If Lessee does not give such notice and
provide the required funds or assurance thereof within the time period
specified above, this Lease shall terminate as of the date specified in
Lessor’s notice of termination.

 

Addendum
Paragraph 10

 

9.8                                 Termination - Advance
Payments.  Upon termination of this
Lease pursuant to this Paragraph 9, Lessor shall return to Lessee any advance
payment made by Lessee to Lessor and so much of Lessee’s Security Deposit as
has not been, or is not then required to be, used by Lessor under the terms of
this Lease.

 

9.9                                 Waiver of Statutes.  Lessor and Lessee agree that the terms of
this Lease shall govern the effect of any damage to or destruction of the
Premises and the Building with respect to the termination of this Lease and
hereby waive the provisions of any present or future statute to the extent it
is inconsistent herewith.

 

10.          Real
Property Taxes.

 

10.1                           Payment of Taxes.  Lessor shall pay the Real Property Taxes, as
defined in Paragraph 10.2, applicable to the Industrial Center, and except as
otherwise provided in Paragraph 10.3, any such amounts shall be included in the
calculation of Common Area Operating Expenses in accordance with the provisions
of Paragraph 4.2.

 

10.2                           Real Property Tax Definition.  As used herein, the term “Real Property
Taxes” shall include any form of real estate tax or assessment, general,
special, ordinary, or extraordinary and any license fee, commercial rental tax,
improvement bond or bonds, levy or tax (other than inheritance, personal income
or estate taxes) imposed upon the Industrial Center by any authority having the
direct or indirect power to tax, including any city, state or federal
government, or any school, agricultural, sanitary, fire, street, drainage, or
other improvement district thereof, levied against any legal or equitable
interest of Lessor in the Industrial Center or any portion thereof.  The term “Real Property Taxes” shall
also include any tax, fee, levy, assessment or charge, or any increase therein,
imposed by reason of events occurring, or changes in Applicable Law taking
effect, during the term of this Lease, including but not limited to a change in
the ownership of the Industrial Center or in the improvements thereon, the
execution of this Lease, or any modification, amendment or transfer thereof,
and whether or not contemplated by the Parties.  In calculating Real Property Taxes for any calendar year, the
Real Property Taxes for any real estate tax year shall be included in the
calculation or Real Property Taxes for such calendar year based upon the number
of days which such calendar year and tax year have in common.

 

Addendum Paragraph 11

 

10.3                           Additional Improvements.  Common Area Operating Expenses shall not
include Real Property Taxes specified in the tax assessor’s records and work
sheets as being caused by additional improvements placed upon the Industrial
Center by other lessees or by Lessor for the exclusive enjoyment of such other
lessees.  Notwithstanding Paragraph 10.1
hereof, Lessee shall, however, pay to Lessor at the time Common Area Operating
Expenses are payable under Paragraph 4.2, the entirety of any increase in Real
Property Taxes if assessed solely by reason of Alterations, Trade Fixtures or
Utility Installations placed upon the Premises by Lessee or at Lessee’s
request.

 

10.4                           Joint Assessment.  If the Building is not separately assessed,
Real Property Taxes allocated to the Building shall be an equitable proportion
of the Real Property Taxes for all of the land and improvements included within
the tax parcel assessed, such proportion to be determined by Lessor from the
respective valuations assigned in the assessor’s work sheets or such other
information as may be reasonably available. 
Lessor’s reasonable determination thereof, in good faith, shall be
conclusive.

 

10.5                           Lessee’s Property Taxes.  Lessee shall pay prior to delinquency all
taxes assessed against and levied upon Lessee-Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises or stored within the Industrial
Center.  When possible, Lessee shall
cause its Lessee-Owned Alterations and Utility Installations, Trade Fixtures,
furnishings, equipment and all other personal property to be assessed and
billed separately from the real property of Lessor.  If any of Lessee’s said property shall be assessed with Lessor’s
real property, Lessee shall pay Lessor the taxes attributable to Lessee’s
property within ten (10) days after receipt of a written statement setting
forth the taxes applicable to Lessee’s property.

 

11.                                 Utilities.  Lessee shall pay directly for all utilities
and services supplied to the Premises, including but not limited to
electricity, telephone, security, gas and cleaning of the Premises, together
with any taxes thereon.  If any such
utilities or services are not separately metered to the Premises or separately
billed to the Premises, Lessee shall pay to Lessor a reasonable proportion to
be determined by Lessor of all such charges jointly metered or billed with
other premises in the Building, in the manner and within the time periods set
forth in Paragraph 4.2(d).

 

12.                                 Assignment
and Subletting.

 

12.1                           Lessor’s Consent Required.

 

(a)                                  Lessee shall not voluntarily
or by operation of law assign, transfer, mortgage or otherwise transfer or
encumber (collectively, “assign”) or sublet all or any part of Lessee’s
interest in this Lease or in the Premises without Lessor’s prior written
consent given under the subject to the terms of Paragraph 36.

 

(b)                                 A change in the control of
Lessee shall constitute an assignment requiring Lessor’s consent.  The transfer, on a cumulative basis, of or
more of the voting control of Lessee shall constitute a change in control for
this purpose.

 

Addendum Paragraph 12

 

(c)                                  The involvement of Lessee or
its assets in any transaction, or series of transactions (by way of merger,
sale, acquisition, financing, refinancing, transfer, leveraged buy-out or
otherwise), whether or not a formal assignment or hypothecation of this Lease
or Lessee’s assets occurs, which results or will result in a reduction of the
Net Worth of Lessee, as hereinafter defined, by an amount equal to or greater
than of such Net Worth of Lessee as it was represented to Lessor at the time of
full execution and delivery of this Lease or at the time of the most recent
assignment to which Lessor has consented, or as it exists immediately prior to
said transaction or transactions constituting such reduction, at whichever time
said Net Worth of Lessee was or is greater, shall be considered an assignment
of this Lease by Lessee to which Lessor may reasonably withhold its
consent.  “Net Worth of Lessee”
for purposes of this Lease shall be the net worth of Lessee (excluding any
Guarantors) established under generally accepted accounting principles consistently
applied.

 

Addendum Paragraph 12

 

(d)                                 An assignment or subletting
of Lessee’s interest in this Lease without Lessor’s specific prior written
consent shall, at Lessor’s option, be a Default curable after notice per
Paragraph 13.1, or a non-curable Breach without the necessity of any notice and
grace period.  If Lessor elects to treat
such unconsented to assignment or subletting as a non-curable Breach, Lessor
shall have the right to terminate this Lease.

 

(e)                                  Lessee’s remedy for any
breach of this Paragraph 12.1 by Lessor shall be limited to compensatory
damages and/or injunctive relief.

 

12.2                           Terms and Conditions Applicable
to Assignment and Subletting.

 

(a)                                  Regardless or Lessor’s
consent, any assignment or subletting shall not (i) be effective without the
express written assumption by such assignee or sublessee of the obligations of
Lessee under this Lease, (ii) release Lessee of any obligations hereunder, nor
(iii) alter the primary liability of Lessee for the payment of Base Rent and
other sums due Lessor hereunder or for the performance of any other obligations
to be performed by Lessee under this Lease.

 

(b)                                 Lessor may accept any rent or
performance of Lessee’s obligations from any person other than Lessee pending
approval or disapproval of an assignment. 
Neither a delay in the approval or disapproval of such assignment nor
the acceptance of any rent for performance shall constitute a waiver or
estoppel of Lessor’s rights to exercise its remedies for the Default or Breach
by Lessee of any of the terms, covenants or conditions of this Lease.

 

(c)                                  The consent of Lessor to any
assignment or subletting shall not constitute a consent to any subsequent
assignment or subletting by Lessee or to any subsequent or successive
assignment or subletting by the assignee or sublessee.  However, Lessor may consent to subsequent
sublettings and assignments of the sublease or any amendments or modifications
thereto without notifying Lessee or anyone else liable under this Lease or the
sublease and without obtaining their consent, and such action shall not relieve
such persons from liability under this Lease or the sublease.

 

(d)                                 In the event of any Default
or Breach of Lessee’s obligation under this Lease, Lessor may proceed directly
against Lessee, any Guarantors or anyone else responsible of the performance of
the Lessee’s obligations under this Lease, including any sublessee, without
first exhausting Lessor’s remedies against any other person or entity
responsible therefor to Lessor, or any security held by Lessor.

 

(e)                                  Each request for consent to
an assignment or subletting shall be in writing, accompanied by information
relevant to Lessor’s determination as to the financial and operational
responsibility and appropriateness of the proposed assignee or sublessee, including
but not limited to the intended use and/or required modification of the
Premises, if any, together with a non-refundable deposit of as reasonable
consideration for Lessor’s considering and processing the request for consent.  Lessee agrees to provide Lessor with such
other or additional information and/or documentation as may be reasonably
requested by Lessor.

 

Addendum Paragraph 13

 

(f)                                    Any assignee of, or
sublessee under, this Lease shall, by reason of accepting such assignment or
entering into such sublease, be deemed, for the benefit of Lessor, to have
assumed and agreed to conform and comply with each and every term, covenant,
condition and obligation herein to be observed or performed by Lessee during
the term of said assignment or sublease, other than such obligations as are
contrary to or inconsistent with provisions of an assignment or sublease to
which Lessor has specifically consented in writing.

 

	
   

  	
   

  	
  Initials:

  	
  /s/ BL  AL 
  CP

  

 

 

this Paragraph 8. Lessee shall
cause to be delivered to Lessor, within seven (7) days after the earlier of the
Early Possession Date or the Commencement certified copies of, or certificates
evidencing the existence and amounts of, the insurance required under Paragraph
8.2(a) and 8.4. No such policy shall [ILLEGIBLE] lable or subject to
modification except after thirty (30) days’ prior written notice to
Lessor.  Lessee shall at least thirty
(30) days prior to the expiration of such policies, furnish Lessor with
evidence of renewals or “Insurance binders” evidencing renewal thereof, or
Lessor may order such insurance and charge the cost there to Lessee, which
amount shall be payable by Lessee to Lessor upon demand.

 

8.6                                 Waiver of Subrogation.  Without affecting any other rights or
remedies, Lessee and Lessor each hereby release and relieve the other, and
waive their entire right to recover damages (whether in contract or in tort)
against the other, for loss or damage to their property arising out of or
incident to the perils required to be insured against under Paragraph 8.  The effect of such releases and waivers of
the right to recover damages shall not be limited by the amount of insurance
carried or required, or by any deductibles applicable thereto.  Lessor and Lessee agree to have their
respective insurance companies issuing property damage insurance waive any
right to subrogation that such companies may have against Lessor or Lessee, as
the case may be, so long as the insurance is not invalidated thereby.

 

8.7                                 Indemnity. Except for
Lessor’s negligence and/or breach of express warranties, Lessee shall
indemnify, protect, defend and hold harmless the Premises, Lessor and its
agents, Lessor’s master or ground lessor, partners and Lenders, from and
against any and all claims, loss of rents and/or damages, costs, liens, judgments,
penalties, loss of permits, attorneys’ and consultants’ fees, expenses and/or
liabilities arising out of, involving, or in connection with, the occupancy of
the Premises by Lessee, the conduct of Lessee’s business, any act, omission or
neglect of Lessee, its agents, contractors, employees or invitees, and out of
any Default or Breach by Lessee in the performance in a timely manner of any
obligation on Lessee’s part to be performed under this Lease.  The foregoing shall include, but not be
limited to, the defense or pursuit of any claim or any action or proceeding
involved therein, and whether or not (in the case of claims made against
Lessor) litigated and/or reduced to judgment. 
In case any action or proceeding be brought against Lessor by reason of
any of the foregoing matters, Lessee upon notice from Lessor shall defend the
same at Lessee’s expense by counsel reasonably satisfactory to Lessor and
Lessor shall cooperate with Lessee in such defense.  Lessor need not have first paid any such claim in order to be so
indemnified.

 

8.8                                 Exemption of Lessor from
Liability.  Lessor shall not be
liable for injury or damage to the person or goods, wares, merchandise or other
property of Lessee, Lessee’s employees, contractors, invitees, customers, or
any other person in or about the Premises, whether such damage or injury is
caused by or results from fire, steam, electricity, gas, water or rain, or from
the breakage, leakage, obstruction or other defects of pipes, fire sprinklers,
wires, appliances, plumbing, air conditioning or lighting fixtures, or from any
other cause, whether said injury or damage results from conditions arising upon
the Premises or upon other portions of the Building of which the Premises are a
part, from other sources or places, and regardless of whether the cause of such
damage or injury or the means of repairing the same is accessible or not.  Lessor shall not be liable for any damages
arising from any act or neglect of any other lessee of Lessor nor from the
failure by Lessor to enforce the provisions of any other lease in the
Industrial Center. Notwithstanding Lessor’s negligence or breach of this Lease,
Lessor shall under no circumstances be liable for injury to Lessee’s business
or for any loss of income or profit therefrom.

 

9.                                       Damage
or Destruction.

 

9.1                                 Definitions.

 

(a)                                  “Premises Partial Damage”
shall mean damage or destruction to the Premises, other than Lessee-Owned
Alterations and Utility Installations, the repair cost of which damage or
destruction is less than fifty percent (50%) of the then Replacement Cost (as
defined in Paragraph 9.1(d)) of the Premises (excluding Lessee-Owned
Alterations and Utility Installations and Trade Fixtures) immediately prior to
such damage or destruction.

 

(b)                                 “Premises Total
Destruction” shall mean damage or destruction to the Premises, other than
Lessee-Owned Alterations and Utility Installations, the repair cost of which
damage or destruction is fifty percent (50%) or more of the then Replacement
Cost of the Premises (excluding Lessee-Owned Alterations and Utility
Installations and Trade Fixtures) immediately prior to such damage or
destruction. In addition, damage or destruction to the Premises other than
Lessee-Owned Alterations and Utility Installations and Trade Fixtures of any
lessees of the Building, the cost of which damage or destruction fifty percent
(50%) or more of the then Replacement Cost (excluding Lessee-Owned Alterations
and Utility Installations and Trade Fixtures of any lessees of the Building) of
the Building shall, at the option of Lessor, be deemed to be Premises Total
Destruction.

 

(c)                                  “Insured Loss” shall
mean damage or destruction to the Premises, other than Lessee-Owned Alterations
and Utility Installations and Trade Fixtures, which was caused by an event
required to be covered by the insurance described in Paragraph 8.3(a)
irrespective of any deductible amounts or coverage limits involved.

 

(d)                                 “Replacement Cost”
shall mean the cost to repair or rebuild the improvements owned by Lessor at
the time of the occurrence to their condition existing immediately prior
thereto, including demolition, debris removal and upgrading required by the
operation of applicable building codes, ordinances or laws, and without
deduction for depreciation.

 

(e)                                  “Hazardous Substance
Condition” shall mean the occurrence or discovery of a condition involving
the presence of, or a contamination by, a Hazardous Substance as defined in
Paragraph 6.2(a), in, on, or under the Premises.

 

9.2                                 Premises Partial Damage
- Insured Loss. If Premises Partial Damage that is an Insured Loss
occurs, then Lessor shall, at Lessor’s expense, repair such damage (but not
Lessee’s Trade Fixtures or Lessee-Owned Alterations and Utility Installations)
as soon as reasonably possible and this Lease shall continue in full force and
effect.  In the event, however, that
there is a shortage of insurance proceeds and such shortage is due to the fact
that, by reason of the unique nature of the improvements in the Premises, full
replacement cost insurance coverage was not commercially reasonable and
available, Lessor shall have no obligation to pay for the shortage in insurance
proceeds or to fully restore the unique aspects of the Premises unless Lessee
provides Lessor with the funds to cover same, or adequate assurance thereof,
within ten (10) days following receipt of written notice of such shortage and
request therefor.  If Lessor receives
said funds or adequate assurance thereof within said ten (10) day period,
Lessor shall complete them as soon as reasonably possible and this Lease shall
remain in full force and effect.  If
Lessor does not receive such funds or assurance within said period, Lessor may
nevertheless elect by written notice to Lessee within ten (10) days thereafter
to make such restoration and repair as is commercially reasonable with Lessor
paying any shortage in proceeds, in which case this Lease shall remain in full
force and effect.  If Lessor does not
receive such funds or assurance within such ten (10) day period, and if Lessor
does not so elect to restore and repair, then this Lease shall terminate sixty
(60) days following the occurrence of the damage or destruction.  Unless otherwise agreed, Lessee shall in no
event have any right to reimbursement from Lessor for any funds contributed by
Lessee to repair any such damage or destruction.  Premises Partial Damage due to flood or earthquake shall be
subject to Paragraph 9.3 rather than Paragraph 9.2, notwithstanding that there
may be some insurance coverage, but the net proceeds of any such insurance
shall be made available for the repairs if made by either Party.

 

9.3                                 Partial Damage - Uninsured
Loss.  If Premises Partial Damage
that is not an Insured Loss occurs, unless caused by a negligent or willful act
of Lessee (in which event Lessee shall make the repairs at Lessee’s expense and
this Lease shall continue in full force and effect), Lessor may at Lessor’s
option, either (i) repair such damage as soon as reasonably possible at
Lessor’s expense, in which event this Lease shall continue is full force and
effect, or (ii) give written notice to Lessee within thirty (30) days after
receipt by Lessor of knowledge of the occurrence of such damage of Lessor’s
desire to terminate this Lease as of the date sixty (60) days following the
date of such notice.  In the event
Lessor elects to give such notice of Lessor’s intention to terminate this
Lease, Lessee shall have the right within ten (10) days after the receipt of
such notice to give written notice to Lessor of Lessee’s commitment to pay for
the repair of such damage totally at Lessee’s expenses and without
reimbursement from Lessor.  Lessee shall
provide Lessor with the required funds or satisfactory assurance thereof within
thirty (30) days following such commitment from Lessee. In such event this
Lease shall continue in full force and effect, and Lessor shall proceed to make
such repairs as soon as reasonably possible after the required funds are
available.  If Lessee does not give such
notice and provide the funds or assurance thereof within the times specified
above, this Lease shall terminate as of the date specified in Lessor’s notice
of termination.

 

9.4                                 Total Destruction.  Notwithstanding any other provision hereof,
if Premises Total Destruction occurs (including any destruction required any
authorized public authority), this Lease shall terminate sixty (60) days
following the date of such Premises Total Destruction, whether or not the
damage or destruction is an Insured Loss or was caused by a negligent or
willful act of Lessee. In the event, however, that the damage or destruction
was caused by Lessee, Lessor shall have right to recover Lessor’s damages from
Lessee except as released and waived in Paragraph 9.7.

 

9.5                                 Damage Near End of Term.
If at any time during the last six (6) months of the term of this Lease there is
damage for which the cost to repair exceeds one month’s Base Rent, whether or
not an Insured Loss, Lessor may, at Lessor’s option, terminate this Lease
effective sixty (60) days following the date of occurrence of such damage by
giving written notice to Lessee of Lessor’s election to do so within thirty
(30) days after the date of occurrence of such damage.  Provided, however, if Lessee at that time
has an exercisable option to extend this Lease or to purchase the Premises,
then Lessee may preserve this Lease by (a) exercising such option, and (b)
providing Lessor with any shortage in insurance proceeds (or adequate assurance
thereof) needed to make the repairs on or before the earlier of (i) the date
which is ten (10) days after Lessee’s receipt of Lessor’s written notice
purporting to terminate this Lease, or (ii) the day prior to the date upon
which such option expires.  If Lessee
duly exercises such option during such period and provides Lessor with funds
(or adequate assurance thereof) to cover any shortage in insurance proceeds,
Lessor shall, at Lessor’s expense repair such damage as soon as reasonably
possible and this Lease shall continue in full force and effect.  If Lessee fails to exercise such option and provide
such funds or assurance during such period, then this Lease shall terminate as
of the date set forth in the first sentence of this Paragraph 9.5.

 

9.6                                 Abatement of Rent;
Lessee’s Remedies.

 

(a)                                  In the event of (i) Premises
Partial Damage or (ii) Hazardous Substance Condition for which Lessee is not
legally responsible, the Base Rent, Common Area Operating Expenses and other
charges, if any, payable by Lessee hereunder for the period during which such
damage or condition, its repair, remediation or restoration continues, shall be
abated in proportion to the degree to which Lessee’s use of the Premises is
impaired, but not in excess of proceeds from insurance required to be carried
under Paragraph 8.3(b). Except for abatement of Base Rent, Common Area
Operating Expenses and other charges, if any, as aforesaid, all other
obligations of Lessee hereunder shall be performed by Lessee, and Lessee shall
have no claim against Lessor for any damage suffered by reason of any such
damage, destruction, repair, remediation or restoration.

 

(b)                                 If Lessor shall be obligated
to repair or restore the Premises under the provisions of this Paragraph 9 and
shall not commence, in a substantial and meaningful way, the repair or
restoration of the Premises within ninety (90) days after such obligation shall
accrue, Lessee may, at any time prior to the commencement of such repair or
restoration, give written notice to Lessor and to any Lenders of which Lessee
has actual notice of Lessee’s election to terminate this Lease on a date not
less than sixty (60) days following the giving of such notice.  If Lessee gives such notice to Lessor and
such Lenders and such repair or restoration is not commenced within thirty (30)
days after receipt of such notice, this Lease shall terminate as of the date
specified in said notice.  If Lessor or
a Lender commences the repair or restoration of the Premises within thirty (30)
days after the receipt of such notice, this Lease shall continue in full force
and effect.  “Commence” as used
in this Paragraph 9.6 shall mean either the unconditional authorization of the
preparation of the required plans, or the beginning of the actual work on the
Premises, whichever occurs first.

 

9.7                                 Hazardous Substance
Conditions.  If a Hazardous
Substance Condition occurs, unless Lessee is legally responsible therefor (in
which case Lessee shall make the investigation and remediation thereof required
by Applicable Requirements and this Lease shall continue in full force and
effect, but subject

 

	
   

  	
   

  	
  Initials:

  	
  /s/ BL  AL 
  CP

  

 

 

ADDENDUM
TO LEASE

 

THIS ADDENDUM TO LEASE shall
constitute part of that Lease dated August 6, 1997, (the “Lease”) by and
between Ben and Ariela Lawee (“Lessor”) and H.W.E., Inc., a California
Corporation, d.b.a. Interactive Health (“Lessee”) for the Premises commonly
known as 3030 Walnut Avenue, Long Beach, California 90807, and the terms hereof
shall for all purposes be deemed incorporated in the Lease.

 

1.                                       Base
Rent shall be adjusted as follows:

 

Base Rent for
the period 10/01/97 through 09/30/98 shall be $20,653.76 per month.

Base Rent for
the period 10/01/98 through 09/30/99 shall be $21,197.28 per month.

Base Rent for
the period 10/01/99 through 09/30/00 shall be $21,740.80 per month.

Base Rent for
the period 10/01/00 through 09/30/01 shall be $22,284.32 per month.

Base Rent for
the period 10/01/01 through 09/30/02 shall be $22,827.84 per month.

 

2.                                       .
.. . one (1) year . . .

 

3.                                       Lessor
makes no warranty that the Permitted Use in Paragraph 1.8 is permitted for the
Premises under Applicable Laws (as defined in Paragraph 2.4).

 

4.                                       Lessee
shall have exclusive use of the fifty (50) parking spaces as designated on
Exhibit A (“Site Plan”). Notwithstanding the provisions of Paragraph 2.6,
Lessee shall be permitted to park over-size trucks and other vehicles in its
designated parking spaces provided said vehicles do not disturb the ingress or
egress of other tenants of the Industrial Center.

 

5.                                       .
.. . and Common Area Operating Expenses . . .

 

6.                                       Lessor
hereby acknowledges that failure by Lessor to deliver possession of the
Premises to Lessee by the Early Possession Date will result in Lessee having to
hold-over for an additional month at its existing premises. In such event,
Lessee shall not be required to pay Base Rent and Lessee’s Share of Common Area
Operating Expenses for the month of November, 1997. Lessor acknowledges that
Lessee intends to complete its move into the Premises so that Lessee will be
able to commence business operations by October 1, 1997. This includes not
only the transfer of stock and merchandise, but also the installation of
Lessee’s communication systems. Lessee acknowledges that Lessor will continue
to occupy the Premises during normal business hours (8:00 a.m. to 6:00 p.m.)
during the Early Possession period in order to wind down its business. Lessee
agrees to permit Lessor to maintain or install a communication system during
the Early Possession period so long as this does not interfere with Lessee’s
move into the Premises and installation of its own

 

1

 

communication
systems. Both Lessor and Lessee shall reasonably cooperate with each other
during this transaction period.

 

7.                                       .
.. . accounting, . . .

 

8.                                       Notwithstanding
the above, it is agreed that the Common Area Operating Expenses shall not be
incurred unless reasonably necessary and, in all events, shall be reasonable in
amount. Further, Lessee shall only be obligated to pay, each month during the
remainder of the term of this Lease, on the date on which Base Rent is due, an
amount equal to the product of multiplying the cost of the expenses listed in
this paragraph, (i) resurfacing of the packing areas, loading and unloading
areas or walkways, (ii) repairs or replacements required to the structural
portions of the Building and the roof, and (iii) the painting of the outside of
the Building, by a fraction, the numerator of which is one (1), and the
denominator of which is the number of months of the useful life of such
replacement as such useful life is specified pursuant to federal income tax
regulations or guidelines for depreciation thereof including interest on the
unamortized balance as is then commercially reasonable in the judgment of
Lessor’s accountant with Lessee reserving the right to prepay its obligation at
any time.

 

9.                                       Lessor
shall indemnify, protect, defend and hold Lessee, its agents, employees and
contractors, harmless from and against any and all damages, liabilities,
judgments, costs, claims, liens, expenses, penalties, permits, attorneys’ fees
and consultant’s fees arising out of or involving any Hazardous Substance
located in, on, under or about the Premises, building or industrial center, as
of the Commencement Date or brought onto the Premises, building or industrial
center by Lessor, or by anyone under Lessor’s control during the term of this
Lease. No termination, cancellation or release agreement entered into by Lessor
and Lessee shall release Lessor from its obligations under this Lease with
respect to Hazardous Substances unless specifically so agreed by Lessee in
writing at the time of such agreement.

 

10.                                 If a
Hazardous Substance Condition occurs and either existed as of the Commencement
Date or was brought on to the Premises, building or industrial center by Lessor
or by anyone under Lessor’s control, Lessee shall have the option to terminate
this Lease by giving written notice to Lessor of its election to terminate
within thirty (30) days following receipt by Lessee of knowledge of such
Hazardous Substance Condition.

 

11.                                 Notwithstanding
the above, Lessee shall not be responsible for any increases in Real Property
Taxes resulting from a change in ownership of the Building during the Lease
Term.

 

12.                                 . . .
fifty percent (50%) . . .

 

2

 

13.                                 . . .
$750.00 . . .

 

 

14.                                 . . .
(except under Paragraph 13.2 of this Lease) . . .

 

15.                                 . . .
five (5) days after notice of failure to pay such amount when due, then . . .

 

16.                                 In the
event that a Late Charge is payable hereunder, whether or not collected, for
any three (3) installments of Base Rent during any twelve (12) month period,
then notwithstanding Paragraph 4.1 or any other provision of this Lease to the
contrary, Base Rent shall, at Lessor’s option, become due and payable quarterly
in advance.

 

17.                                 . . .
and shall be kept confidential.  In no
event shall Lessee be required to furnish any documentation under this
paragraph in the event the potential lender or purchaser is a competitor of
Lessee or affiliated with a competitor of Lessee.

 

18.                                 . . .
provided such transfer or assignment shall not alter the primary liability of
the prior lessor for the obligations of Lessor arising in connection with
Paragraph 6.2 of this Lease.

 

19.                                 . . .
upon reasonable advance notice . . .

 

20.                                 . . .
and show the Premises to prospective lessees . . .

 

21.                                 Subject
to Lessor’s approval and with a city permit, Lessee shall have the right, at
Lessee’s expense, to install a sign on the building above the offices or to
install a monument sign in front of the building.  Lessee shall not have any rights to the freeway sign.

 

22.                                 Lessor to
perform, at its expense, the following work prior to the Commencement Date: i)
demise the Premises with a wall of aluminum frame and drywall; ii) repaint the
offices; and iii) clean all carpets.

 

23.                                 Lessor
agrees to provide the property set forth in this paragraph for the use of
Lessee during the term of this Lease or any extension.  Lessee agrees to return the property to
Lessor at the end of its tenancy, in the same condition as received, reasonable
wear and tear excepted:

 

1.                                                               Roller-belt
assy, metal (6 ea.)

2.                                                               Cabinet,
4’, wood, wht/gm

3.                                                               Work
benches, wood & putty (2 ea.)

4.                                                               Parts
rack assy (small parts), 7 shelf, dbl-sided, dbl-width (7 ea.)

5.                                                               Parts
rack assy (medium parts), single tier (11 ea.)

6.                                                               Parts
rack assy (large parts), dbl-width (9 ea.)

7.                                                               Wall
racks, 5 tier (4 ea.)

 

3

 

8.                                                               Wall
racks, 2 tier (11 ea.)

9.                                                               Podium,
shipping

10.                                                         Ladder,
rolling, blue

11.                                                         Forklift,
electric (Big Joe)

12.                                                         Pallet
jacks, BT Lifters (5 ea.)

13.                                                         Desk,
walnut w/o return

14.                                                         Cabinet,
6’, blk metal, 2 door, locking

15.                                                         Desk:
blk with oak trim and return (3 ea.)

16.                                                         Microwave
oven, GE Spacemaker (2 ea.)

17.                                                         Paper
towel dispenser, wall-mounted

18.                                                         Refrigerator,
GE

19.                                                         Refrigerator,
Combo 65 miniature

20.                                                         Stove,
Dacor 4 burner electric

21.                                                         Stove,
2 burner electric

22.                                                         White
board, 7’x4’

 

24.                                 Option
to Extend dated August 6, 1997, attached hereto, is hereby incorporated by
this reference.

 

25.                                 The
Lease, this Addendum and any related documents may be signed in counterpart.

 

 

	
  LESSOR:

  	
   

  	
  LESSEE:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  BEN AND ARIELA LAWEE

  	
   

  	
  HWE, INC., A CALIFORNIA

  	
   

  
	
   

  	
   

  	
  CORPORATION, D.B.A.

  	
   

  
	
   

  	
   

  	
  INTERACTIVE HEALTH

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  BY:

  	
  /s/ Ben Lawee

  	
   

  	
   

  	
  BY:

  	
  /s/ Carolyn Perrier

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  BY:

  	
  /s/ Ariela Lawee

  	
   

  	
   

  	
  BY:

  	
   

  	
   

  	
   

  
											

 

4Exhibit
10.8

 

[LOGO]

 

OPTION(S)
TO EXTEND

 

ADDENDUM
TO

STANDARD LEASE

 

	
   

  	
  Dated

  	
  August 6, 1997

  
	
   

  	
   

  
	
   

  	
  By and Between (Lessor)

  	
   

  	
  Ben & Ariela Lawee

  
	
   

  	
   

  
	
   

  	
  (Lessee)

  	
   

  	
  HWE, Inc., a California corporation

  
	
   

  	
   

  	
   

  	
  dba Interactive Health

  
	
   

  	
   

  
	
   

  	
  Property Address:

  	
   3030 Walnut Avenue, Long Beach, CA

  
						

 

See Addendum 124

 

A.                                    OPTION(S)
TO EXTEND:

 

Lessor hereby grants to Lessee the option to
extend the term of this Lease for 1 additional 36 month period commencing when
the prior term expires upon each and all of the following terms and conditions:

 

(i)                  Lessee gives to Lessor, and Lessor
actually receives on a date which is prior to the date that the option period
we commence (if exercised) by at least 6 and not more than 9 months, a written
notice of the exercise of the option(s) extend this Lease for said additional
term(s), time being of essence.  If said
notification of the exercise of said option(s) is (are) so given and received,
the option(s) shall automatically expire; said option(s) may (if more than one)
only be exercised consecutively;

 

(ii)               The provisions of paragraph 39,
including the provision relating to default of Lessee set forth in paragraph
39.4 of Lease are conditions of this Option;

 

(iii)            All of the terms and conditions of this
Lease except where specifically modified by this option shall apply;

 

(iv)           The monthly rent for each month of the
option period shall be calculated as follows, using the method(s) indicates
below:

 

(Check Method(s) to be Used and Fill in Appropriately)

 

ý                                    II.                                     Market Rental
Value Adjustment(s) (MRV)

 

(a)                                  On (Fill in MRV
Adjustment Date(s): October 1, 2002, the monthly rent payable under
paragraph 1.5 (“Base Rent”) of the attached Lease shall be adjusted to the
“Market Rental Value of the Property as follows:

 

1)                                      Four months prior
to the Market Rental Value (MRV) Adjustments Date(s) described above, Lessor
Lessee shall meet to establish an agreed upon new MRV for the specified
term.  If agreement cannot be reached,
then:

 

	
  Initials:

  	
  /s/ BL

  	
   

  	
   

  	
  Initials:

  	
  /s/ CP

  
	
   

  	
  AL

  	
   

  	
   

  	
   

  	
   

  

 

OPTION(S)
TO EXTEND

NOTICE:              These forms are often modified to meet
changing requirements of law and industry needs.  Always write or call to make sure you are utilizing the most
current form:  American Industrial Real
Estate Association, 345 South Figueroa Street, Suite M-1, Los Angeles, CA
90071. (213) 687-8777. Fax No. (213) 687-8616.

 

1991 American Industrial Real Estate Association.

 

1

 

i)                                         Lessor and
Lessee shall immediately appoint a mutually acceptable appraiser or broker to
establish the new MRV within the next 30 days. 
Any associated costs will be split equally between the parties. or

 

ii)                                      Both Lessor and
Lessee shall each immediately select and pay the appraiser or broker of their
choice establish a MRV within the next 30 days.  If, for any reason, either one of the appraisals is not completed
within the next 30 days, as stipulated, then the appraisal that is completed at
that time shall automatically become the new MRV.  If both appraisals are completed and the two appraisers/brokers
cannot agree on a reasonable average MRV then they shall immediately select a
third  mutually acceptable
appraiser/broker to establish a third MRV within the next 30 days.  The average of the two appraisals closest in
value shall then become the new MRV. 
The costs of the third appraisal will be split equally between the
parties.

 

(b)                                 Upon
the establishment of each New Market Rental Value as described in paragraph
All:

 

1) the monthly rental sum so calculated for
each term as specified in paragraph All(a) will become the new “Base Rent” for
the purpose of calculating any further Cost of Living Adjustments as specified
in paragraph Al(a) above and

 

2) the first month of each Market Rental
Value term as specified in paragraph All(a) shall become the new “Base Month”
for the purpose of calculating any further Cost of Living Adjustments as
specified in paragraph Al(b).

 

B.                                    NOTICE:
Unless specified otherwise herein, notice of any escalations other than Fixed
Rental Adjustments shall be made as specified in paragraph 23 of the attached
Lease.

 

C.                                    BROKER’S
FEE:

 

The Real Estate Brokers specified in
paragraph 1.10 of the attached Lease shall be paid a Brokerage Fee for each
adjustment specified above in accordance with paragraph 15 of the attached
Lease.

 

 

	
  Initials:

  	
  /s/ BL

  	
   

  	
   

  	
  Initials:

  	
  /s/ CP

  
	
   

  	
  AL

  	
   

  	
   

  	
   

  	
   

  

 

OPTION(S)
TO EXTEND

NOTICE:              These forms are often modified to meet
changing requirements of law and industry needs.  Always write or call to make sure you are utilizing the most
current form:  American Industrial Real
Estate Association, 345 South Figueroa Street, Suite M-1, Los Angeles, CA
90071. (213) 687-8777. Fax No. (213) 687-8616.

 

1991 American Industrial Real Estate Association.

 

2

 

EXHIBIT A

TO

BILL OF SALE AND ASSIGNMENT

 

 

INVENTORY
(Office Space)

3030 Walnut Ave., Long Beach, CA

 

	
  Item

  	
   

  	
  Description

  
	
   

  	
   

  	
   

  
	
  1.

  	
   

  	
  Bookcase, 2 shelf, blk, metal (5 ea.)

  
	
  2.

  	
   

  	
  Bookcase, wood w/glass doors

  
	
  3.

  	
   

  	
  Bookcase, blue/wht

  
	
  4.

  	
   

  	
  Coffee station, wood

  
	
  5.

  	
   

  	
  Computer workstation, putty with return
  & side shelf (2 ea.)

  
	
  6.

  	
   

  	
  Computer stand, putty

  
	
  7.

  	
   

  	
  Conference table w/9 maroon rolling chairs

  
	
  8.

  	
   

  	
  Desk, blk with oak trim and return (3 ea.)

  
	
  9.

  	
   

  	
  Desk, walnut w/return (7ea.)

  
	
  10.

  	
   

  	
  Desk, walnut w/o return

  
	
  11.

  	
   

  	
  Desk, dark oak w/o return

  
	
  12.

  	
   

  	
  Desk, steel case grey with blk top (2 ea.)

  
	
  13.

  	
   

  	
  Drafting table 

  
	
  14.

  	
   

  	
  Easel

  
	
  15.

  	
   

  	
  Filing cabinet, lateral, 2-drawer, blk

  
	
  16.

  	
   

  	
  Filing cabinet, Century 62 2-drawer
  legal-size blk metal (3 ea.)

  
	
  17.

  	
   

  	
  Filing cabinet, York 2-drawer legal-size
  blk metal (3 ea.)

  
	
  18.

  	
   

  	
  Filing cabinet, 2 drawer w/locks (2 ea.)

  
	
  19.

  	
   

  	
  Filing cabinet, 2 drawer putty (2 ea.)

  
	
  20.

  	
   

  	
  Filing cabinet, 2 drawer, blk (8 ea.)

  
	
  21.

  	
   

  	
  Filing cabinet, 2 drawer, under-desk (3
  ea.)

  
	
  22.

  	
   

  	
  Hanging tree, brushed aluminum

  
	
  23.

  	
   

  	
  Kitchen table, round

  
	
  24.

  	
   

  	
  Kitchen chairs, plastic (4 ea.: 2 blue/1
  maroon/1 grey)

  
	
  25.

  	
   

  	
  Office chair: blk/maroon (3 ea.)

  
	
  26.

  	
   

  	
  Office chairs: all maroon (3 ea.)

  
	
  27.

  	
   

  	
  Office chair: blue w/wood arms

  
	
  28.

  	
   

  	
  Office chair: blk w/wood arms

  
	
  29.

  	
   

  	
  Office chairs, rolling (2 ea.: grey/blk,
  blue/blk)

  
	
  30.

  	
   

  	
  Office chair, stationary, blue w/wood arms

  
	
  31.

  	
   

  	
  Office chair, stationary, maroon/wood

  
	
  32.

  	
   

  	
  Office chairs, rolling, armless, blue (2
  ea.)

  
	
  33.

  	
   

  	
  Office chairs: stationary, blk/chrome (4
  ea.)

  

 

1

 

	
  34.

  	
   

  	
  Office chairs: stationary, grey/chrome (2
  ea.)

  
	
  35.

  	
   

  	
  Office chair, blk/brn padded “judges”

  
	
  36.

  	
   

  	
  Office chairs, stationary, blk/leather (2
  ea.)

  
	
  37.

  	
   

  	
  Sofa, six section, maroon

  
	
  38.

  	
   

  	
  Trash cans, assorted plastic & metal (5
  ea.)

  
	
  39.

  	
   

  	
  TV stand, dark grey

  
	
  40.

  	
   

  	
  Typewriter stands (2 ea.: blk/brn)

  
	
  41.

  	
   

  	
  Wall unit, 3 shelf, 3 drawer

  
	
  41.

  	
   

  	
  Wall unit, 3 shelf, blue/wht, locking

  

 

2

 

BILL OF SALE
AND ASSIGNMENT

 

FOR VALUABLE CONSIDERATION, the receipt and
sufficiency of which is hereby acknowledged, the undersigned, BEN AND ARIELA
LAWEE (collectively, “Seller”), hereby sells, transfers and assigns to HWE,
INC., a California corporation doing business as Interactive Health (“Buyer”),
all of the improvements and personal property listed on Exhibit A (the
“Assets”) currently located at 3030 Walnut Avenue, Long Beach, California.  Buyer has good and marketable title to all
of the Assets, all free and clear of all liens, pledges, charges, security
interests, encumbrances or any other adverse interest of any kind.

 

Seller will, from time to time, upon written
request therefor, execute and deliver to Buyer any new or confirmatory
instruments and do and perform any other acts which Buyer may reasonably request
in order to fully assign and transfer to, and vest in, Buyer, Seller’s right,
title and interest in all of the Assets or to enable Buyer to protect, realize
upon or otherwise enjoy any of the Assets.

 

This Bill of Sale is being provided in
consideration of, and as partial consideration for, Buyer’s execution and
delivery of the Standard Industrial/Commercial Multi-Tenant Lease-Modified Net
dated August 6, 1997, between Seller, as lessor, and Buyer, as lessee.

 

All references to “Seller” and “Buyer” shall
include their respective nominees, successors and assigns.

 

DATED:  August 14, 1997

 

	
   

  	
   

  	
  /s/ Ben Lawee

  	
   

  
	
   

  	
   

  	
  BEN LAWEE

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ Ariela Lawee

  	
   

  
	
   

  	
   

  	
  ARIELA LAWEE

  

 

 

ADDENDUM TO
LEASE

 

THIS ADDENDUM TO LEASE shall constitute part of that Lease dated August 6,
1997, (the “Lease”) by and between Ben and Ariela Lawee (“Lessor”) and H.W.E.,
Inc., a California Corporation, d.b.a. Interactive Health (“Lessee”) for the
Premises commonly known as 3030 Walnut Avenue, Long Beach, California 90807,
and the terms hereof shall for all purposes be deemed incorporated in the
Lease.

 

1.                                       Base
Rent shall be adjusted as follows:

 

Base Rent for the period 10/01/97 through
09/30/98 shall be $20,653.76 per month.

Base Rent for the period 10/01/98 through
09/30/99 shall be $21,197.28 per month.

Base Rent for the period 10/01/99 through
09/30/00 shall be $21,740.80 per month.

Base Rent for the period 10/01/00 through
09/30/01 shall be $22,284.32 per month.

Base Rent for the period 10/01/01 through
09/30/02 shall be $22,827.84 per month.

 

2.                                       .
.. . one (1) year . . .

 

3.                                       Lessor
makes no warranty that the Permitted Use in Paragraph 1.8 is permitted for the
Premises under Applicable Laws (as defined in Paragraph 2.4).

 

4.                                       Lessee
shall have exclusive use of the fifty (50) parking spaces as designated on
Exhibit A (“Site Plan”). 
Notwithstanding the provisions of Paragraph 2.6, Lessee shall be
permitted to park over-size trucks and other vehicles in its designated parking
spaces provided said vehicles do not disturb the ingress or egress of other
tenants of the Industrial Center.

 

5.                                       .
.. . and Common Area Operating Expenses . . .

 

6.                                       Lessor
hereby acknowledges that failure by Lessor to deliver possession of the
Premises to Lessee by the Early Possession Date will result in Lessee having to
holdover for an additional month at its existing premises.  In such event, Lessee shall not be required
to pay Base Rent and Lessee’s Share of Common Area Operating Expenses for the
month of November, 1997.  Lessor
acknowledges that Lessee intends to complete its move into the Premises so that
Lessee will be able to commence business operations by October 1,
1997.  This includes not only the
transfer of stock and merchandise, but also the installation of Lessee’s
communication systems.  Lessee
acknowledges that Lessor will continue to occupy the Premises during normal
business hours (8:00 a.m. to 6:00 p.m.) during the Early Possession period in
order to wind down its business.  Lessee
agrees to permit Lessor to maintain or install a communication system during
the Early Possession period so long as this does not interfere with Lessee’s
move into the Premises and installation of its own

 

1

 

communication systems. Both Lessor and Lessee
shall reasonably cooperate with each other during this transition period.

 

7.                                       .
.. . accounting, . . .

 

8.                                       Notwithstanding
the above, it is agreed that the Common Area Operating Expenses shall not be
incurred unless reasonably necessary and, in all events, shall be reasonable in
amount. Further, Lessee shall only be obligated to pay, each month during the
remainder of the term of this Lease, on the date on which Base Rent is due, an
amount equal to the product of multiplying the cost of the expenses listed in
this paragraph, (i) resurfacing of the packing areas, loading and unloading
areas or walkways, (ii) repairs or replacements required to the structural
portions of the Building and the roof, and (iii) the painting of the outside of
the Building, by a fraction, the numerator of which is one (1), and the
denominator of which is the number of months of the useful life of such
replacement as such useful life is specified pursuant to federal income tax
regulations or guidelines for depreciation thereof including interest on the unamortized
balance as is then commercially reasonable in the judgment of Lessor’s
accountant with Lessee reserving the right to prepay its obligation at any time
..

 

9.                                       Lessor
shall indemnify, protect, defend and hold Lessee, its agents, employees and
contractors, harmless from and against any and all damages, liabilities,
judgments, costs, claims, liens, expenses, penalties, permits, attorneys’ fees
and consultant’s fees arising out of or involving any Hazardous Substance
located in, on, under or about the Premises, building or industrial center, as
of the Commencement Date or brought onto the Premises, building or industrial
center by Lessor, or by anyone under Lessor’s control during the term of this
Lease.  No termination, cancellation or
release agreement entered into by Lessor and Lessee shall release Lessor from
its obligations under this Lease with respect to Hazardous Substances unless
specifically so agreed by Lessee in writing at the time of such agreement.

 

10.                                 If
a Hazardous Substance Condition occurs and either existed as of the
Commencement Date or was brought on to the Premises, building or industrial
center by Lessor or by anyone under Lessor’s control, Lessee shall have the
option to terminate this Lease by giving written notice to Lessor of its election
to terminate within thirty (30) days following receipt by Lessee of knowledge
of such Hazardous Substance Condition.

 

11.                                 Notwithstanding
the above, Lessee shall not be responsible for any increases in Real Property
Taxes resulting from a change in ownership of the Building during the Lease
Term.

 

12.                                 .
.. . fifty percent (50%) . . .

 

2

 

13.                                 .
.. . $750.00 . . .

 

14.                                 .
.. . (except under Paragraph 13.2 of this Lease) . . .

 

15.                                 .
.. . five (5) days after notice of failure to pay such amount when due, then . .
..

 

16.                                 In
the event that a Late Charge is payable hereunder, whether or not collected,
for any three (3) installments of Base Rent during any twelve (12) month
period, then notwithstanding Paragraph 4.1 or any other provision of this Lease
to the contrary, Base Rent shall, at Lessor’s option, become due and payable
quarterly in advance.

 

17.                                 .
.. . and shall be kept confidential.  In
no event shall Lessee be required to furnish any documentation under this
paragraph in the event the potential lender or purchaser is a competitor of
Lessee or affiliated with a competitor of Lessee.

 

18.                                 ...
provided such transfer or assignment shall not alter the primary liability of
the prior lessor for the obligations of Lessor arising in connection with
Paragraph 6.2 of this Lease.

 

19.                                 .
.. . upon reasonable advance notice...

 

20.                                 .
.. . and show the Premises to prospective lessees ...

 

21.                                 Subject
to Lessor’s approval and with a city permit, Lessee shall have the right, at Lessee’s
expense, to install a sign on the building above the offices or to install a
monument sign in front of the building. 
Lessee shall not have any rights to the freeway sign.

 

22.                                 Lessor
to perform, at its expense, the following work prior to the Commencement Date:
i) demise the Premises with a wall of aluminum frame and drywall; ii) repaint
the offices; and iii) clean all carpets.

 

23.                                 Lessor agrees to
provide the property set forth in this paragraph for the use of Lessee during
the term of this Lease or any extension. 
Lessee agrees to return the property to Lessor at the end of its
tenancy, in the same condition as received, reasonable wear and tear excepted:

 

1.                                                               Roller-belt
assy, metal (6 ea.)

2.                                                               Cabinet,
4', wood, wht/gm

3.                                                               Work
benches, wood & putty (2 ea.)

4.                                                               Parts
rack assy (small parts), 7 shelf, dbl-sided, dbl-width (7 ea.)

5.                                                               Parts
rack assy (medium parts), single tier (11 ea.)

6.                                                               Parts
rack assy (large parts), dbl-width (9 ea.)

7.                                                               Wall
racks, 5 tier (4 ea.)

 

3

 

8.                                                               Wall
racks, 2 tier (11 ea.)

9.                                                               Podium,
shipping

10.                                                         Ladder,
rolling, blue

11.                                                         Forklift,
electric (Big Joe)

12.                                                         Pallet
jacks, BT Lifters (5 ea.)

13.                                                         Desk,
walnut w/o return

14.                                                         Cabinet,
6', blk metal, 2 door, locking

15.                                                         Desk:
blk with oak trim and return (3 ea.)

16.                                                         Microwave
oven, GE Spacemaker (2 ea.)

17.                                                         Paper
towel dispenser, wall-mounted

18.                                                         Refrigerator,
GE

19.                                                         Refrigerator,
Combo 65 miniature

20.                                                         Stove,
Dacor 4 burner electric

21.                                                         Stove,
2 burner electric

22.                                                         White
board, 7'x4'

 

24.                                 Option
to Extend dated August 6, 1997, attached hereto, is hereby incorporated by
this reference.

 

25.                                 The
Lease, this Addendum and any related documents may be signed in counterpart.

 

 

	
  LESSOR:

  	
  LESSEE:

  
	
   

  	
   

  
	
  BEN AND ARIELA LAWEE

  	
  HWE, INC., A CALIFORNIA

  
	
   

  	
  CORPORATION, D.B.A.

  
	
   

  	
  INTERACTIVE HEALTH

  
	
   

  	
   

  
	
   

  	
   

  
	
  BY:

  	
  /s/ Ben Lawee

  	
   

  	
  BY:

  	
  /s/ Carolyn Perrier

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  BY:

  	
  /s/ Ariela Lawee

  	
   

  	
  BY:

  	
   

  	
   

  
							

 

4

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