Document:

EXHIBIT 10.27

 

Kellis
Commercial Inc.

 

2115 S. 56th St., Suite 205 / Tacoma, Washington 98409 / (206) 475-4363

 

BROADWAY
PLACE

OFFICE BUILDING LEASE

 

1. PARTIES

 

This Lease, dated, for reference purposes only,
March 7, 2000, is made by and between Shaub Properties Inc. (herein called “Landlord”)
and Advance TelCom Group, Inc., a California Corporation (herein called “Tenant”).

 

2. PREMISES

 

Landlord does
hereby lease to Tenant and Tenant hereby leases from Landlord that certain
office space (herein called “Premises”) indicated on Exhibit “A-1” (less
the generator area) attached hereto and made a part hereof located in that
certain building on the real property legally described on Exhibit “A3’’
at the address known as 1124 Broadway, Tacoma, WA 98402 (“Building”), said
Premises being agreed, for the purpose of this Lease, to have (a) an area of
approximately 3110 square feet on the second floor of the Building for offices
use.  The parties hereto understand and
agree that the square footage references set forth above are for reference
purposes only and the accuracy thereof is not warranted by the Landlord and any
inaccuracy therein shall not effect the rent or Tenant’s share of operating
expenses payable under this Lease.

Said Lease is subject to the terms, covenants
and conditions herein set forth and the Tenant covenants as a material part of
the consideration for this Lease to keep and perform each and all of said terms,
covenants and conditions by it to be kept and performed and that this Lease is
made upon the condition of said performance.

 

3. TERM

 

The term of this Lease shall be for 9 years
and 10 months, commencing on the 1st day of April 2000 and ending on
the 31st day of January 2009.

 

4. POSSESSION

 

The Lease shall commence on April 1, 2000.  If the Commencement Date has not occurred for
any reason whatsoever on or before April 1,2000, then, as Tenant’s sole remedy,
Tenant may terminate the Lease by written notice to Landlord, whereupon any
monies previously paid by Tenant to Landlord shall be reimbursed to Tenant.

 

5. RENT

 

Tenant agrees
to pay to Landlord as rental, without prior notice or demand, for the Premises
the sum of $2,332.50, beginning on April 1, 2000 and a like sum on or before
the first day of each and every successive calendar month thereafter during the
term hereof; provided, no rent shall be payable on April 1, 2000 or May
1, 2000 (free rent period).  Thereafter
the monthly rent rate beginning February 1,2001 shall be $2402.48, the monthly
rent beginning February 1, 2002 shall be $2,475.04, monthly rent beginning
February 1, 2003 shall be $2,550.20.  Said

 

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rental shall be paid to Landlord, without deduction or offset in lawful
money of the United States of America, which shall be legal tender at the time
of payment in Tacoma, Washington, or to such other person or at such other
place as Landlord may from time to time designate in writing.  On the first day of the fifth lease year, and
annually thereafter, the then current fixed monthly rental shall be increased but
in no event decreased by the percentage by which the U.S.  All Urban Consumer Price Index (1982-1984
equals 100) (“Index”), as published by the U.S. Department of Labor, Bureau of
Labor Statistics, for the previous calendar month, shall have increased from
the said price index for 12 months prior. 
In the event the said Index shall hereafter he converted to a different
standard reference base or otherwise revised, the determination of the
percentage increase shall be made with the use of such conversion factor,
formula or table for converting the Index as may be published by the Bureau of
Labor Statistics.  In the event the Index
shall cease to be published, then, for the purposes of this paragraph, there
shall be substituted for the Index such other Index as Landlord and Tenant
shall agree upon, and, if they are unable to agree within ninety (90) days
after the Index ceases to he published, such matters shall be determined by
arbitration in accordance with the Commercial Arbitration Rules of the American
Arbitration Association.  Rent for any
period during the term hereof which is for less than one (1) month shall be a
prorated portion of the monthly installment herein, based upon a thirty- (30)
day month.  Rental shall be paid to Landlord,
c/o Kellis Commercial Inc., 2115 S. 56th St. Suite 205, Tacoma, WA, 98409,
without deduction or offset.  In addition
to the base rental described herein, Tenant agrees to pay Landlord the
following additional rental:

 

(a)           Whenever, for any calendar year, Landlord’s estimated
operating expenses of the Building, as defined herein, are greater than the
actual operating expenses for the base year which is 2000, then in addition to
the monthly rental described above, Tenant shall pay such increased expenses as
additional rent.  Payments shall be
increased effective January 1, and on the same date of each month thereafter,
by an amount equal to one-twelfth (1/12th) of the estimated increase in
operating expenses.

 

(b)           The term “operating expenses,” as used herein, shall mean
any and all expenses, costs and amounts incurred by the Landlord in connection
with the ownership, servicing, operation, maintenance, repair and/or management
of the Building, and related exterior appurtenances, and the cost of any services
or capital expenditures incurred in order to achieve a reduction of any
operating expenses (such capital expenditures shall be amortized over the
useful life of the relevant improvements) and shall include real estate taxes.  Operating expenses shall include the
following costs by way of illustration, but no limitation; real estate taxes
and assessments levied on the Building and the real property upon which the
Premises is located; utilities and services; insurance premiums (provided, in
the event that at any time during the term hereof Landlord obtains insurance
not carried during the base year, only the increase over what such policy would
have cost during such base year, as reasonably determined by Landlord, shall be
included as an operating expense); licenses, permits and inspection fees;
accounting, legal, inspection, consulting and other services; wages, salaries
and other compensation and benefits for all persons engaged in the operation,
maintenance or security of the Premises; operation, repair and maintenance of
all systems and equipment and components thereof, including replacement of
components, janitorial service, alarm and security service, window cleaning,
trash removal, elevator maintenance, if any, cleaning of walks, parking
facilities and building walls, removal of ice and snow, replacement of wall and
floor coverings, ceiling tiles and fixtures in lobbies, corridors, bathrooms
and other common or public areas or facilities, maintenance and replacement of shrubs,
trees, grass, sod and other landscaped items, irrigation

 

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systems, drainage facilities, fences, curbs,
and walkways, re-paving and re-striping parking facilities, and roof repairs;
and all other costs of maintenance and management of the Building.  Operating expenses shall not include capital
improvements (other than those specified in the third line of this subparagraph
above); expenses of painting, decorating and alteration of other than public
areas; interest and amortization of mortgages; depreciation of the Building;
income or franchise taxes or other such taxes imposed or measured by the net
income of the Landlord from operation of the Building and related exterior
appurtenances.  “Operating Expenses”
shall also not include and Tenant shall in no event have any obligation to
perform or to pay directly, or to reimburse Landlord for, all or any portion of
the following:  (a) costs occasioned by
the act, omission or violation of current and existing law by Landlord, or
their respective agents, employees or contractors; (b) costs to correct any
construction defect in the Premises or the Building or to comply with any
CC&Rs requirement or law applicable to the Premises or the Building in
effect on the Commencement Date; (c) insurance deductibles or other costs
occasioned by casualty in excess of $50,000 with respect to any single claim; and
(d) costs incurred in connection with the presence of any Hazardous Material,
except to the extent caused by the use, release or emission of the Hazardous
Material in question by Tenant.  If the
operating expenses in the base year are not based on a fully leased Building,
then such amounts shall be increased to reflect a fully leased Building.

 

(c)           The parties agree that Tenant’s pro rata share of operating
expenses shall be         %, representing
the ratio that the approximate rentable area of the space contained in the
Building.

 

(d)           Within forty-five (45) days following the end of each
calendar year, Landlord shall furnish to Tenant a statement certified as
correct by an officer of Landlord, showing the operating expenses incurred by
Landlord during such period.  If Tenant’s
pro rata share of operating expenses incurred shall exceed the payments made,
Tenant shall pay Landlord the deficiency within ten (10) days after receipt of
such statement.  If Tenant’s payments
exceed the operating expenses.  Tenant
may offset the excess against estimated operating expense rental payments next
coming due.  Tenant may audit the books,
records and supporting documents of Landlord to the extent necessary to
determine the accuracy of the foregoing statement during normal business hours.  Such audit, if          
will occur within one hundred eighty (180) days after Tenant receives such
notice.  Tenant shall bear the cost of
such audit, unless such audit discloses            
Landlord has overstated Tenant’s pro rata share of operating expenses by more
than ten percent (10%) of the actual amount of such costs, in which event
Landlord shall pay the cost of Tenant’s audit. 
Landlord shall promptly refund any overcharges to Tenant.

 

(e)           If the Commencement Date is other than January 1, or if the
termination date is other than December 31, Tenant’s proportionate share of any
increased operating expense for such year shall be pro rated based upon a 365
day year.

 

(f)            Even though the term has expired
and Tenant has vacated the Premises, when the final determination is made of
Tenant’s proportionate share of operating expenses for the year in which this
Lease terminates, Tenant shall pay any increase due over the estimated expenses
paid and conversely any       payment, less any
amounts due Landlord hereunder, shall be rebated by Landlord to Tenant.

 

6. SECURITY DEPOSIT

 

As partial consideration for the execution of
this Lease, the Tenant has this day paid the Landlord the sum of $2,550.20, the
receipt of which is hereby acknowledged. 
If Tenant defaults with respect to any provision of this Lease beyond
applicable notice and cure periods, including,

 

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but not limited to the provisions relating to
the payment of rent, Landlord may (but shall not be required to) use, apply or
retain all or any part of said deposit for the payment of any rent or any other
sum in default, or for the payment of any amount which Landlord may spend or
become obligated to spend by reason of Tenant’s default, or to compensate
Landlord for any other loss or damage which Landlord may suffer by reason of
Tenant’s default.  If any portion of said
deposit is so used or applied, Tenant shall within five (5) days after written
demand therefore, deposit cash with Landlord in an amount sufficient to restore
said deposit to its original amount and Tenant’s failure to do so shall be a
material breach of this Lease.  Landlord
shall not be required to keep said deposit separate from its general funds, and
Tenant shall not be entitled to interest on said deposit.  Tenant agrees that Landlord is not a trustee
of said deposit and may commingle it, use it in ordinary business, transfer or
assign it, or use it in any combination of those ways.  If Tenant is not in default beyond applicable
notice and cure periods, said deposit shall be credited on the payment of the last
month’s minimum rental of the term of this Lease or to any outstanding sum owed
to Landlord by Tenant at the expiration of this Lease.

 

7. USE

 

Tenant shall
use the Premises for telephone switching equipment and general office purposes
including marketing, sales and customer services and shall not use or permit
the Premises to be used for any other purpose without the prior written consent
of Landlord.

 

Tenant shall not do or permit anything to be
done in or about the Premises nor bring or keep anything therein which will in
any way (a) increase the existing rate of or affect any fire or other insurance
upon the Building or any of its contents, unless Tenant obtains the prior
written consent of Landlord and Tenant pays such increase or (b) cause
cancellation of any insurance policy covering said Building or any part thereof
or any of its contents.  Tenant shall not
do or permit anything to be done in or about the Premises which will in any way
obstruct or interfere with the rights of other tenants or occupants of the
Building or injure or annoy them or use or allow the Premises to be used for
any improper, immoral, unlawful or objectionable purpose, nor shall Tenant
cause, maintain or permit any nuisance in, on or about the Premises.  Tenant shall not commit or suffer to be
committed any waste in or upon the Premises.

 

8. COMPLIANCE WITH LAW

 

Tenant shall not use the Premises or permit
anything to be done in or about the Premises which will in any way conflict
with any law, statute, ordinance or governmental rule or regulation now in
force or which may hereafter be enacted or promulgated.  Tenant shall, at its sole cost and expense,
promptly comply with all laws, statutes, ordinances and governmental rules,
regulations or requirements now in force or which may hereafter be in force,
and with the requirements of any board of fire insurance underwriters or other
similar bodies now or hereafter constituted, relating to, or affecting the
condition, use or occupancy of the Premises, excluding the making of structural
changes not related to or affected by Tenant’s improvements or acts (which
shall be the responsibility of Landlord). 
The judgment of any court of competent jurisdiction or the admission of
Tenant in any action against Tenant,       her
Landlord be a party thereto or not, that Tenant has violated any law, statute,
ordinance or governmental rule, regulation or requirement, shall be conclusive
of that fact as between the Landlord and Tenant.  Landlord warrants and represents that, as of
the date hereof, to the best of Landlord’s knowledge, the Premises and the
Building comply with all applicable laws, rules, regulations, codes, and
ordinances.

 

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9. ALTERATIONS AND ADDITIONS

 

Tenant shall not make or suffer to be made
any alterations, additions or improvements to or of the Premises or any part
thereof without the written consent of Landlord first had and obtained and any
alterations, additions or improvements to or of said Premises, including, but
not limited to, wall covering, paneling and built-in cabinet work, but
excepting movable furniture and trade fixtures, shall on the expiration of the
term become a part of the realty and belong to the Landlord and shall be
surrendered with the Premises.  In the
event Landlord consents to the making of any alterations, additions or
improvements to the Premises by Tenant, the same shall be made by Tenant at
Tenant’s sole cost and expense, and any contractor or person selected by Tenant
to make the same must first be approved of writing by the Landlord.  Upon the expiration or sooner termination of
the term hereof, Tenant shall, upon written demand by Landlord, given at least
thirty (30) days prior to the end of the term, at Tenant’s sole cost and
expense, forthwith and with all due diligence remove any alterations,
additions, or improvements made by Tenant, designated by Landlord to be
removed, and Tenant shall, forthwith and with all due diligence at its sole
cost and expense, repair any damage to the Premises caused by such removal.  Landlord hereby consents to the Tenant Improvements
set forth on the space plan on Attachment 1 attached hereto, which shall
be at Tenant’s sole cost and expense.  In
addition, Tenant may construct nonstructural alterations in the Premises
without Landlord’s prior approval; provided that (a) the cost of any project
does not exceed $5,000.00; and (b) Tenant shall give Landlord prior notice of
such improvements as required by Article 11 hereof.  Trade fixtures, furniture, equipment and
other personal property installed by the Tenant in the Premises (“Tenants
Property”) shall at all times be and remain Tenant’s property.  Tenant may at any time remove Tenant’s
Property from the Premises, provided that Tenant repairs all damage caused by
such removal and Tenant is not then in default under this Lease.

 

10. REPAIRS

 

a.             By taking possession of the
Premises, Tenant shall be deemed to have accepted the Premises in its present
condition.  Tenant shall, at Tenant’s
sole cost and expense, keep the Premises and every part thereof in good
condition and repair, damage thereto from causes beyond the reasonable control
of Tenant and ordinary wear and tear excepted. 
Tenant shall upon the expiration or sooner termination of this Lease
hereof surrender the Premises to the Landlord in good condition, ordinary wear
and tear and damage from causes beyond the reasonable control of Tenant
excepted.  Landlord shall have no obligation
whatsoever to alter, remodel, improve, decorate or paint the Premises or any
part thereof and the parties hereto affirm that Landlord has made no
representations or warranties to Tenant respecting the condition of the
Premises or the Building except as specifically herein set forth.

 

b.             Notwithstanding the provisions
of Article 10.a. hereinabove, Landlord shall repair and maintain the structural
portions of the Building, including, without limitation, the roof, foundation,
floor slab, exterior walls and interior structural supports and the basic
plumbing, air-conditioning, heating, and electrical systems, installed or
furnished by Landlord, unless such maintenance and repairs are caused in part
or in whole by the act, neglect, fault or omission of any duty by the Tenant,
its agents, servants, employees or invitees, in which case Tenant shall pay to
Landlord the all costs of such maintenance and repairs.  Tenant shall maintain any air conditioning,
heating or electrical systems installed by Tenant or necessary for Tenant
beyond the basic systems currently on the Premises.  Landlord shall not be liable for any failure
to make any such repairs or to perform any maintenance unless such failure
shall persist for an unreasonable time after written notice of the need of such
repairs or maintenance is given to

 

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Landlord by Tenant.  Except as provided in Article 21 hereof,
there shall be no abatement of rent and no liability of Landlord by reason of
any injury to or interference with Tenant’s business arising from the making of
any repairs, alterations or improvements in or to any portion of the Building
or the Premises or in or to fixtures, appurtenances and equipment therein,
Tenant waives the right to make repairs at Landlord’s expense under any law,
statute or ordinance now or hereafter in effect.

 

c.             In the event Landlord fails to
perform any of its obligations herein or under the Lease and (except in case of
emergency posing an immediate threat to persons or property, in which case no
prior notice shall be required) fails to cure such default within thirty (30)
days after written notice from Tenant specifying the nature of such default
where such default could reasonably be cured within said thirty (30) day
period, or fails to commence such cure within said thirty (30) day period and
thereafter continuously with due diligence prosecute such cure to complete
where such default could not reasonably be cured within said thirty (30) day
period, then Tenant shall have the right, but not the obligation, to cure such
default and to demand reimbursement by landlord of the cost of such cure, with
interest thereon at the rate of ten percent (10%) per annum from the date of
the expenditure until repaid.

 

11. LIENS

 

Tenant shall keep the Premises and the real
property on which the Premises are situated free from any liens arising out of
any work performed, materials furnished or obligations incurred by Tenant.  Tenant shall provide Landlord with at least
ten (10) days notice of any alterations that Tenant will make to the Premises
in order that Landlord may post notices of nonresponsibility with respect to
such alterations.  Tenant shall
immediately cause any lien on the Building in connection with alterations made
by Tenant to be discharged or removed of record by either paying the amount
thereof or obtaining a lien release bond in an amount equal to one hundred
fifty percent (150%) of the amount of said lien.

 

12. ASSIGNMENT AND SUBLETTING

 

Tenant shall not either voluntarily or by
operation of law, assign, transfer, mortgage, pledge, hypothecate or encumber
this Lease or any interest therein, and shall not sublet the Premises or any
part thereof, or any right or privilege appurtenant thereto, or suffer any other
person (the employees, agents, servants and invitees of Tenant excepted) to
occupy or use the Premises, or any portion thereof, without the written consent
of Landlord first had and obtained, which consent shall not be unreasonably
withheld, and a consent to one assignment, subletting, occupation or use by any
other person shall not be deemed to be a consent to any subsequent assignment,
subletting, occupation or use by another person.  Any such assignment or subletting without
such consent shall be void, and shall, at the option of the Landlord,
constitute a default under this Lease, except however, Tenant may, with prior
notice, but without Landlord’s prior written consent, sublet the Premises or
assign the Lease to (a) a subsidiary, affiliate division or corporation
controlling, controlled by or under common control with Tenant, (b) a successor
corporation related to Tenant by merger, consolidation, or non bankruptcy
reorganization, or (c) the purchaser of substantially all of Tenant’s assets.  A sale or transfer of Tenant’s capital stock
shall not be deemed an assignment, subletting or any other transfer of the
Lease.

 

13. HOLD HARMLESS

 

Except to the
extent of the negligence or willful misconduct of Landlord or its’ agents,
contractors or invitees, Tenant shall indemnify and hold harmless Landlord
against and from any

 

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and all claims arising out of or in connection with Tenant’s use or
occupancy of the Premises or from any activity, work, or other thing done,
permitted or suffered by the Tenant in or about the Building, and shall further
indemnify and hold harmless Landlord against and from any and all claims arising
from any breach or default in the performance of any obligation on Tenant’s
part to be performed under the terms of this Lease, or arising from any act or
negligence of the Tenant, or any officer, agent, employee, guest, or invitee of
Tenant, and from all and against all costs, attorney’s fees, expenses and
liabilities incurred in or about any such claim or any action or proceeding
brought thereon, and, in any case, action or proceeding be brought against
Landlord by reason of any such claim, Tenant upon notice from Landlord shall
defend the same at Tenant’s expense by counsel reasonably satisfactory to
Landlord.

 

Landlord or
its agents shall not be liable for any damage to property entrusted by Tenant
to agents or employees of Landlord (i.e., janitorial help), nor for loss or
damage to any property by theft or otherwise, nor for any injury to or damage
to persons or property resulting from  fire,
explosion, falling plaster, steam, gas, electricity, water or rain which may
leak from any part of the Building or from the pipes, appliances or plumbing
works therein or from the roof, street or subsurface or from any other place
resulting from dampness or any other cause whatsoever, except to the extent of
the negligence or willful misconduct of Landlord or its’ agents, contractors or
invitees.  Landlord or its agents shall
not be liable for interference with the light or other incorporeal
hereditaments, loss of business by Tenant, nor shall Landlord be liable for any
latent defect in the Premises or in the Building.  Tenant shall give prompt notice to Landlord
in case of fire or accidents in the Premises or in the Building or of defects
therein or in the fixtures or equipment.

 

Tenant agrees to defend and hold harmless
Landlord from any and all claims for damages suffered or alleged to be suffered
in or about the Premises, by any employee or other person, or any firm or
corporation, except to the extent of the negligence or willful misconduct of
Landlord or it’s agents, contractors or invitees.

 

14. INSURANCE/SUBROGATION

 

Landlord shall maintain “all risk” property
insurance insuring against risk of loss or damage to the Premises for the full
replacement cost thereof.  Notwithstanding
anything to the contrary herein or in the Lease, the parties hereto release
each other and their respective agents, employees, successors and assigns from
all liability for damage to any property that is actually covered by property
insurance in force or which would normally be covered by full replacement value
“all risk” property insurance, without regard to the negligence or willful
misconduct of the entity so released.  Each
party shall cause each insurance policy it obtains to include a waiver of
subrogation regarding the liabilities released hereby.  All of Landlord’s and Tenant’s repair and
indemnity obligations under the Lease shall be subject to the waiver contained
in this paragraph.

 

15. LIABILITY INSURANCE

 

Tenant shall, at Tenant’s expense, obtain and
keep in force during the term of this Lease a policy of comprehensive public
liability insurance with minimum amounts of $1,000,000.00 per Occurrence and an
aggregate limit of $2,000,000.00 for property damage, and combined limits of
$1,000,000.00 per Occurrence and an aggregate limit of $2,000,000.00 per
individual and per incident for personal and bodily injury, insuring Landlord
and Tenant against liability arising out of the ownership, use, occupancy or
maintenance of the Premises and all areas appurtenant thereto.  The limit of said insurance shall not,
however, limit the liability of the Tenant hereunder.  Tenant may carry said insurance under a
blanket policy, providing, however, said 

 

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insurance by Tenant shall list Landlord as
Primary Additional Insured.  If Tenant
shall fail to procure and maintain said insurance, Landlord may, but shall not
be required to, procure and maintain same, but at the expense of Tenant.  Insurance required hereunder, shall be in
companies rated A-VII or better in “Best’s Insurance Guide”.  Tenant shall deliver to Landlord prior to
occupancy of the Premises copies of policies of liability insurance required
herein or certificates evidencing the existence and amounts of such insurance
with loss payable clauses satisfactory to Landlord naming Landlord as Primary
Additional Insured.  No policy shall be
cancelable or subject to reduction of coverage except after thirty (30) days
prior written notice to Landlord.  Tenant
shall also at its own expense maintain, during the Lease Term, and at any time
prior to the Lease Term commencing with the date on which the Tenant is given
possession of the Premises for any reason, insurance covering its furniture,
fixtures, equipment, all leasehold improvements and inventory in an amount
equal to not less than 100% of the full replacement value thereof.

 

16. SERVICES AND UTILITIES

 

Landlord agrees to furnish to the Premises
during reasonable hours of generally recognized business days, to be determined
by Landlord at its reasonable discretion, and subject to the rules and
regulations of the Building of which the Premises are a part, water, refuse
services and sanitary sewer.  Landlord
shall also maintain and keep lighted the common stairs, common entries and wash
exterior windows of the Building of which the Premises are a part.  Landlord shall not be liable for, and Tenant
shall not be entitled to, any reduction of rental by reason of Landlord’s
failure to furnish any of the foregoing when such failure is caused by accident,
breakage, repairs, strikes, lockouts or other labor disturbances or labor
disputes of any character, or by any other cause, similar or dissimilar, beyond
the reasonable control of Landlord.  Landlord
shall not be liable under any circumstances for a loss of or injury to
property, however occurring, through or in connection with or incidental to
failure to furnish any of the foregoing. 
Wherever heat generating machines or equipment are used in the Premises
which affect the temperature otherwise maintained by the air conditioning
system, Landlord reserves the right to install supplementary air conditioning
units in the Premises and the cost thereof, including the cost of installation,
and the cost of operation and maintenance thereof shall be paid by Tenant to
Landlord upon demand by Landlord.  Tenant
shall provide and pay for janitorial service to the Premises arrange for and
separately meter and pay for electrical service and shall replace lamps in all
light fixtures within the Premises.

 

17. PROPERTY TAXES

 

Tenant shall pay, or cause to be paid, before
delinquency, any and all taxes levied or assessed and which become payable
during the term hereof upon             
Tenant’s leasehold improvements, equipment, furniture, fixtures and personal
property located in the Premises.  In the
event any or all of the Tenant’s leasehold improvements, equipment, furniture,
fixtures and personal property shall be assessed and taxed with the Building.  Tenant shall pay to Landlord its share of
such taxes within ten (10) days after delivery to Tenant by Landlord of a statement
in writing setting forth the amount of such taxes applicable to Tenant’s
property.

 

18. RULES AND REGULATIONS

 

Tenant shall faithfully observe and comply
with the rules and regulations that Landlord shall from time to time promulgate.  Landlord reserves the right from time to time
to make all reasonable modifications to said rules.  The additions and modifications to those
rules shall be

 

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binding upon Tenant upon delivery of a copy
of them to Tenant.  Landlord shall not be
responsible to Tenant for the nonperformance of any said rules by any other
tenants or occupants.

 

19. HOLDING OVER

 

If Tenant remains in possession of the
Premises or any part thereof after the expiration of the term hereof, such occupancy
shall be a tenancy from month to month, terminable on thirty (30) days written
notice from either party to the other, at a rental in the amount of 125% of the
last monthly rental, plus all other charges payable hereunder, and upon all the
terms hereof applicable to a month to month tenancy unless so modified and/or
extended by Landlord in writing and attached to said Lease.

 

20. ENTRY BY LANDLORD

 

Landlord reserves and shall at any and all
time, upon twenty-four hour advanced notice to the Tenant, have the right to
enter the Premises, inspect the same, supply any service to be provided by
Landlord to Tenant hereunder, to submit said Premises to prospective purchasers
or tenants to post notices of non-responsibility, and to alter, improve or
repair the Premises and any portion of the Building of which the Premises are a
part that Landlord may deem necessary or desirable, without abatement of rent
and may for that purpose erect scaffolding and other necessary structures where
reasonably required by the character of the work to be performed, always
providing that the entrance to the Premises shall not be blocked thereby, and
further providing that the business of the Tenant shall not be interfered with
unreasonably.  Tenant hereby waives any
claim for damages or for any injury or inconvenience to or interference with
Tenant’s business, any loss of occupancy or quiet enjoyment of the Premises,
and any other loss occasioned thereby.  Any
entry by Landlord and Landlord’s agents shall not impair Tenant’s operations
more than reasonable necessary.  Notwithstanding
any of the above, Landlord shall have the right of immediate entry and the
right to use any and all means which Landlord may deem proper to open doors in
the Premises in an emergency, without liability to Tenant except for any
failure to exercise due care for Tenant’s property.  Any entry to the Premises obtained by
Landlord by any of said means, or otherwise shall not under any circumstances
be construed or deemed to be a forcible or unlawful entry into, or a detainer
of, the Premises, or an eviction of Tenant from the Premises or any portion
thereof.  Landlord shall not show the
Premises to prospective tenants prior to the last ninety (90) days of the
expiration of the term including extensions thereto.  Notwithstanding anything to the contrary in
the Lease, Landlord shall not have access to the switch area, except in the
event of an emergency, and in the event of such emergency, must be accompanied
by an authorized agent of Tenant.

 

21. RECONSTRUCTION

 

In the event
the Premises or the Building are damaged by fire or other perils covered by
Landlord’s insurance, Landlord agrees to forthwith repair the same; and this
Lease shall remain in full force and effect, except that Tenant shall be
entitled to a proportionate reduction of the rent while such repairs are being
made, such proportionate reduction to be based upon the extent to which the
making of such repairs shall materially interfere with the business carried on
by the Tenant in the Premises.  Except to
the extent covered by rental insurance held by Landlord, if the damage is due
to the fault or neglect of Tenant or its employees, there shall be no abatement
of rent.

 

8

 

In the event
the Premises or the Building are damaged as a result of any cause other than
the perils covered by Landlord’s insurance, then Landlord shall forthwith
repair the same, provided the extent of the destruction is less than ten (10%)
per cent of the then full replacement cost of the Building of which the
Premises are a part.  In the event the
destruction of the Premises or the Building are damaged as a result of any
cause other than the perils covered by Landlord’s insurance to an extent equal
to or greater than ten (10%) per cent of the full replacement cost of the
Building, then Landlord shall have the option: 
(1) to repair or restore such damage, this Lease continuing in full
force and effect, but the rent to be proportionately reduced as hereinabove in
this Article provided; or (2) give notice to Tenant at any time within sixty
(60) days after such damage terminating this Lease as of the date specified in
such notice, which date shall be no less than thirty (30) and no more than
sixty (60) days after the giving of such notice.  In the event of giving such notice, this Lease
shall expire and all interest of the Tenant in the Premises shall terminate on
the date so specified in such notice and the Rent, reduced by a proportionate
amount based upon the extent, if any, to which such damage materially
interfered with the business carried on by the Tenant in the Premises, shall be
paid up to date of said such termination.

 

Notwithstanding
anything to the contrary contained in this Article, Landlord shall not have any
obligation whatsoever to repair, reconstruct or restore the Premises when the
damage resulting from any casualty covered under this Article occurs during the
last six (6) months of the term of this Lease including any extension thereof,
and the cost to repair such damage which exceeds $20,000.

 

Landlord shall
not be required to repair any injury or damage by fire or other cause, or to
make any repairs or replacements of any panels, decoration, office fixtures,
railings, floor covering, partitions, or any other property installed in the
Premises by Tenant.

 

The Tenant shall not be entitled to any
compensation or damages from Landlord for loss of the use of the whole or any
part of the Premises, Tenant’s personal property or any inconvenience or
annoyance occasioned by such damage, repair, reconstruction or restoration.  If the Premises are damaged by any         
and Landlord does not elect to terminate the Lease or is not entitled to
terminate the Lease pursuant to its terms, then Tenant shall have the option to
terminate the Lease if the Premises cannot be, or are not in fact, fully
restored by Landlord to their prior condition within one hundred eighty (180)
days after the damage.

 

22. DEFAULT

 

The occurrence
of any one or more of the following events shall constitute a default and
breach of this Lease by Tenant:

 

a.             The vacating or abandonment of
the Premises by Tenant.

 

b.             The failure by Tenant to make
any payment of rent or any other payment required to be made by Tenant
hereunder, as and when due, where such failure shall continue for a period of
five (5) days after written notice thereof by Landlord to Tenant.

 

c.             The failure by Tenant to observe
or perform any of the covenants, conditions or provisions of this Lease to be
observed or performed by the Tenant, other than described in Article 22.a., b.
and d. above, where such failure shall continue for a period of thirty (30)
days after written notice thereof by Landlord to Tenant; provided, however,
that if the nature of Tenant’s default is such that more than thirty (30) days
are reasonably required for its cure, then Tenant shall not be deemed to be in
default if Tenant commences such cure within said thirty (30) day period and
thereafter diligently prosecutes such cure to completion.

 

9

 

d.             The making by Tenant of any
general assignment or general arrangement for the benefit of creditors; or the
filing by or against Tenant of a petition to have Tenant adjudged a bankrupt,
or a petition or reorganization or arrangement under any law relating to
bankruptcy (unless, in the case of a petition filed against Tenant, the same is
dismissed within sixty (60) days); or the appointment of a trustee or a
receiver to take possession of substantially all of Tenant’s assets located at
the Premises or of Tenant’s interest in this Lease, where possession is not
restored to Tenant within thirty (30) days; or the attachment, execution or
other judicial seizure of substantially all of Tenant’s assets located at the
Premises or of Tenant’s interest in this Lease, where such seizure is not
discharged in thirty (30) days.

 

23. REMEDIES IN DEFAULT

 

In the event
of any such material default or breach by Tenant, Landlord may at any time
thereafter, with or without notice or demand and without limiting Landlord in
the exercise of a right or remedy which Landlord may have by reason of such
default or breach:

 

a.             Terminate Tenant’s right to
possession of the Premises by any lawful means, in which case this Lease shall
terminate and Tenant shall immediately surrender possession of the Premises to Landlord.  In such event Landlord shall be entitled to
recover from Tenant all damages incurred by Landlord by reason of Tenant’s
default including, but not limited to, the cost of recovering possession of the
Premises; expenses of reletting, including necessary renovation and alteration
of the Premises, reasonable attorney’s fees, any real estate commission
actually paid; the worth at the time of award by the court having jurisdiction
thereof of the amount by which the unpaid rent for the balance of the term
after the time of such award exceeds the amount of such rental loss for the
same period that Tenant proves could be reasonably avoided; that portion of the
leasing commission paid by Landlord and applicable to the unexpired term of
this Lease.  Unpaid installments of rent
or other sums shall bear interest from the date due at the rate of eighteen
(18%) per cent per annum.  In the event
Tenant shall have abandoned the Premises, Landlord shall have the option of (a)
taking possession of the Premises and recovering from Tenant the amount
specified in this paragraph, or (b) proceeding under the provisions of the
following Article 23.b. or c.

 

b.             Maintain Tenant’s right to
possession, in which case this Lease shall continue in effect whether or not
Tenant shall have abandoned the Premises. 
In such event Landlord shall be entitled to enforce all of Landlord’s
rights and remedies under this Lease, including the right to recover the rent
as it becomes due hereunder.

 

c.             Pursue any other remedy now or
hereafter available to Landlord under the laws or judicial decision of the
State in which the Premises are located.

 

Landlord shall have no security interest or
lien on any item of Tenant’s property.  Landlord
waives any right of Landlord’s lien that may arise at law.

 

24. EMINENT DOMAIN

 

If more than twenty-five (25%) per cent of
the Premises shall be taken or appropriated by any public or quasi-public
authority under the power of eminent domain, either party hereto shall have the
right, at its option, to terminate this Lease, and Landlord shall be entitled
to any and all income, rent, award, or any interest therein whatsoever which
may be paid or made in connection with such public or quasi-public use or
purpose, and Tenant shall have no claim against Landlord for the value of any
unexpired term of this Lease.  If either
less than or more than twenty-five (25%) per cent of the Premises is taken and
neither party elects to terminate as herein provided, the rental thereafter to
be paid shall be equitably reduced.  If
any part of the Building other than

 

10

 

the Premises may be so taken or appropriated,
Landlord shall have the right at its option to terminate this Lease and shall
be entitled to the entire award as above provided.  In the event the Premises or the Building are
condemned, Tenant shall receive a portion of the condemnation proceeds (whether
by award or payment under threat of condemnation) based on:  (i) the unamortized value, allocable to the
remainder of the Lease term, of any improvements installed at Tenant’s expense,
(ii) Tenant’s moving cost; and (iii) Tenant’s trade fixtures.

 

25. OFFSET STATEMENT

 

Tenant shall at any time and from time to time
upon not less than twenty (20) days prior written notice from Landlord execute,
acknowledge and deliver to Landlord a statement in writing, (a) certifying that
this Lease is unmodified and in full force and effect (or, if modified, stating
the nature of such modification and certifying that this Lease is so modified,
is in full force and effect), and the date to which the rental and other
charges are paid in advance, if any, and (b) acknowledging that there are not,
to Tenant’s knowledge, any uncured defaults on the part of the Landlord
hereunder, or specifying such defaults if any are claimed.  Any such statement may be relied upon by any
prospective purchaser or encumbrancer of all or any portion of the real
property of which the Premises are a part.

 

26. AUTHORITY OF PARTIES

 

If Tenant is a corporation, Tenant represents
and warrants that each individual executing this Lease on behalf of said
corporation is duly authorized to execute and deliver this Lease on behalf of
said corporation, in accordance with a duly adopted resolution of the board of
directors of said corporation or in accordance with the by-laws of said
corporation, and that this Lease is binding upon said corporation in accordance
with its terms.

 

27. GENERAL PROVISIONS

 

(i)            Plats
and Riders.  Clauses, plats
and riders, if any, signed by the Landlord and the Tenant and endorsed on or
affixed to this Lease are a part hereof.

 

(ii)           Waiver. The waiver by Landlord or Tenant of any
term, covenant or condition herein contained shall not be deemed to be a waiver
of such term, covenant or condition on any subsequent breach of the same or any
other term, covenant or condition herein contained.  The subsequent acceptance of rent hereunder
by Landlord shall not be deemed to be a waiver of any preceding breach by
Tenant of any term, covenant or condition of this Lease, other than the failure
of the Tenant to pay the particular rental so accepted, regardless of Landlord’s
knowledge of such preceding breach at the time of the acceptance of such rent.

 

(iii)         Notices. All notices and demands which may or are
to be required or permitted to be given by either party to the other hereunder
shall be in writing.  All notices and
demands to Landlord or Tenant shall be delivered personally, or sent via
nationally recognized overnight courier, or deposited in the United States Mail,
postage prepaid, registered or certified, return receipt requested, addressed
as set forth below, or to such other place as Tenant or Landlord may from time
to time designate in writing.  Any notice
required under the Lease that is sent by mail shall be deemed received, if
properly addressed three (3) business days after any such notice is deposited
in the United States mail certified, postage-prepaid, return-receipt requested
or one (1) business day following deposit with any overnight courier, cost
prepaid or upon actual deliver, whichever is earlier.

 

11

 

	
  LANDLORD

  	
   

  	
  TENANT

  
	
   

  	
   

  	
   

  
	
  Shaub Properties lnc.

  	
   

  	
  Advance TelCom Group, Inc.

  
	
  c/o Kellis Commercial Inc.

  	
   

  	
  885 San Antonio Road, Suite R

  
	
  2115 S. 56th St. Suite 205

  	
   

  	
  Los Altos, CA 94022

  
	
  Tacoma, WA
  98409

  	
   

  	
   

  

 

(iv)          Joint
Obligation.  If there be more
than one Tenant the obligations hereunder imposed upon Tenants shall be joint
and several.

 

(v)            Marginal
Headings.  The marginal
headings and Article titles to the Articles of this Lease are not a part of
this Lease and shall have no effect upon the construction or interpretation of
any part hereof.

 

(vi)          Time. Time is of the essence of this Lease and
each and all of its provisions in which performance is a factor.

 

(vii)         Successors
and Assigns.  The covenants
and conditions herein contained, subject to the provisions as to assignment,
apply to and bind the heirs, successors, executors, administrators and assigns
of the parties hereto.

 

(viii)        Recordation. Neither Landlord nor Tenant shall record
this Lease or a short form memorandum hereof without the prior written consent
of the other party.

 

(ix)          Quiet
Possession.  Upon Tenant
paying the rent reserved hereunder and observing and performing all of the
covenants, conditions and provisions on Tenant’s part to be observed and
performed hereunder, Tenant shall have quiet possession of the Premises for the
entire term hereof, subject to all the provisions of this Lease.

 

(x)           Additional
Rent.  Tenant hereby
acknowledges that late payment by Tenant to Landlord of rent or other sums due
hereunder will cause Landlord to incur costs not contemplated by this Lease,
the exact amount of which will be extremely difficult to ascertain.  Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed upon
Landlord by terms of any mortgage or trust deed covering the Premises.  Accordingly, if any installment of rent or if
a sum due from Tenant shall not be received by Landlord or Landlord’s designee
within three (3) days after said amount is past due, then Tenant shall pay to
Landlord additional rent equal to five (5%) per cent of such overdue amount or
Fifty and no/100ths dollars ($50.00), which ever is greater.  The parties hereby agree that such additional
rent represents a fair and reasonable estimate of the cost that Landlord will
incur by reason of the late payment by Tenant.  Acceptance of such additional rent by the
Landlord shall in no event constitute a waiver of Tenant’s default with respect
to such overdue amount, nor prevent Landlord from exercising any of the other
rights and remedies granted hereunder.

 

(xi)          Prior
Agreements.  This Lease
contains all of the agreements of the parties hereto with respect to any matter
covered or mentioned in this Lease, and no prior agreements or understanding
pertaining to any such matters shall be effective for any purpose.  No provision of this Lease may be amended or
added to except by an agreement in writing signed by the parties hereto or
their respective successors in interest.  This Lease shall not be effective or binding
on any party until fully executed by both parties hereto.

 

(xii)         Inability
to Perform.  This Lease and
the obligations of the Tenant hereunder shall not be affected or impaired
because the Landlord is unable to fulfill any of its obligations hereunder or
is delayed in doing so, if such inability or delay is caused by reason of
strike, labor troubles, acts of God, or any other cause beyond the reasonable
control of the Landlord.

 

12

 

(xiii)       Attorneys’
Fees.  In the event of any
action or proceeding brought by either party against the other under this Lease
the prevailing party shall be entitled to recover all costs and expenses
including the fees of its attorneys in such action or proceeding in such amount
as the court may adjudge reasonable as attorneys’ fees or in any appeal
therefrom.  Landlord shall also be
entitled to any and all fees and costs incurred in connection with a bankruptcy
by Tenant.

 

(xiv)        Sale
of Premises by Landlord.  In
the event of any sale of the Building, Landlord shall be and is hereby entirely
freed and relieved of all liability under any and all of its covenants and
obligations contained in or derived from this Lease arising out of any act,
occurrence or omission occurring after the consummation of such sale; provided
the purchaser, at such sale or any subsequent sale of the Premises shall be
deemed, shall have assumed in writing and agreed to carry out any and all of
the covenants and obligations of the Landlord under this Lease.

 

(xv)          Subordination,
Attornment.  Upon request of
the Landlord, Tenant will in writing, within twenty (20) days following such
request, subordinate its rights hereunder to the lien of any first mortgage, or
first deed of trust to any bank, insurance company or other lending
institution, now or hereafter in force against the land and Building of which
the Premises are a part, and upon any buildings hereafter placed upon the land
of which the Premises are a part and to all advances made or hereafter to be
made upon the security thereof; provided, that the ground lessor, lender or
other holder of the interest to which this Lease shall be subordinated
contemporaneously executes a recognition and nondisturbance agreement which (i)
provides that this Lease shall not be terminated so long as Tenant is not in
default under this Lease and (ii) recognizes all of Tenant’s rights hereunder.

 

In the event
any proceedings are brought for foreclosure, or in the event of the exercise of
the power of sale under any mortgage or deed of trust made by the Landlord
covering the Premises, the Tenant shall attorn to the purchaser upon any such
foreclosure or sale and recognize such purchaser as the Landlord under this
Lease.

 

The provisions
of this Article to the contrary notwithstanding, and so long as Tenant is not
in default hereunder, this Lease shall remain in full force and effect for the
full term hereof.

 

Landlord shall
use its best efforts to cause all mortgagees, lenders, ground lessors and other
parties currently holding a security interest affecting the Premises to execute,
within ninety (90) days of the Commencement Date, a recognition and nondisturbance
agreements which (i) provides that this Lease shall not be terminated so long
as Tenant is not in default under this Lease beyond applicable notice and cure
periods and (ii) recognizes all of Tenant’s rights hereunder and under the
Lease.

 

(xvi)        Name. Tenant shall not use the name of the
Building or of the development in which the Building is situated for any
purpose other than as an address of the business to be conducted by the Tenant
in the Premises.

 

(xvii)       Separability. Any provision of this Lease which shall
prove to be invalid, void or illegal shall in no way affect, impair or
invalidate any other provision hereof and such other provision shall remain in
full force and effect.

 

(xviii)      Cumulative
Remedies.  No remedy or
election hereunder shall be deemed exclusive but shall, wherever possible, be
cumulative with all other remedies at law or in equity.

 

(xix)        Choice
of Law/Venue.  This Lease
shall be governed by the laws of the State in which the Premises are located.  Venue shall be in Pierce County.

 

13

 

(xx)         Signs
and Auctions.  Tenant shall
not place any sign upon the Premises or Building or conduct any auction thereon
without Landlord’s prior written consent.  All signage shall be consistent with the sign
criteria set forth on Exhibit “B”.

 

(xxi)        Hazardous
Substances and Infectious Waste.  Tenant hereby agrees that Tenant shall not use,
store, manufacture, or dispose of any substance or material which may be deemed
to be hazardous, toxic or infectious or subject to any regulation for storage,
use or disposal by any governmental authority including the Environmental Protection
Agency, and the Washington Department of Health (“Hazardous Materials”), except
with respect to the use of storage of petroleum products in connection with its
generator, and then, only if such Hazardous Materials are used, stored,
manufactured and disposed of at Tenant’s sole cost and expense in accordance
with all applicable laws, rules, regulations, recommendations and ordinances of
any governmental authority.  As used
herein, “Hazardous Materials” shall include, but are not limited to, any
material or substance which is infectious; flammable; explosive; corrosive; radioactive;
toxic; petroleum; or any volatile derivative of petroleum; asbestos and any
substance defined as a hazardous substance, hazardous material, toxic substance,
or hazardous waste in the Comprehensive Environmental Response, Compensation
and Liability Act of 1980 (“CERCLA”) (42 U.S.C. SS 9601 et. seq.),
the Resource Conservation and Recovery Act of 1976 (42 U.S.C. 6901, et. seq.),
the Federal Water Pollution Control Act (33 U.S.C. S 1317), the Superfund
Amendments and Reauthorization Act of 1986 (“SARA”), Section 70.105.010 of
Chapter 70.105 of the Revised Code of Washington (“Hazardous Waste Management
Law”), Section 2 (6) of Chapter 2 of the 1987 Laws of Washington, and all
amendments to these laws and regulations adopted or publications promulgated
pursuant to these laws.  Hazardous
Materials shall also include any other applicable government regulations
defining or describing such material.  Tenant
further agrees that it shall upon written request, give a written certification
to Landlord regarding the substances then used by Tenant, the amounts and the
methods of storage, treatment, use and disposal.  To the best knowledge of Landlord, (a) no
Hazardous Material is present in the Building or the soil, surface water or
groundwater thereof, (b) no underground storage tanks are present at or in the
immediate vicinity of the Building, and (c) no action, proceeding or claim is
pending or threatened regarding the Building concerning any Hazardous Material
or pursuant to any environmental law.  Notwithstanding anything to the contrary in
the Lease, under no circumstance shall Tenant be liable for, and Landlord shall
indemnify, defend, protect and hold harmless Tenant, its agents, contractors,
stockholders, directors, successors, representatives, and assigns from and
against, all losses, costs, claims, liabilities and damages (including
attorneys’ and consultants’ fees) of every type and nature, directly or
indirectly arising out of or in connection with any Hazardous Material present
at any time on or about the Building, or the soil, air, improvements,
groundwater or surface water thereof, or the violation of any laws, orders or
regulations, relating to any such Hazardous Material, except to the extent that
any of the foregoing actually results from the release or emission of Hazardous
Material by Tenant or its agents or employees in violation of applicable
environmental laws or this Article.  Tenant
shall indemnify, defend, protect and hold harmless Landlord, its agents,
contractors, stockholders, directors, successors, representatives, and assigns
from and against all losses, costs, claims, liabilities and damages (including
attorneys’ and consulting fees) of every type and nature, directly or
indirectly arising out of or in connection with any Hazardous Materials stored,
manufactured, used or disposed of on the Premises by Tenant or its agents or
employees in violation of this Article or applicable environmental laws.

 

14

 

28. WAIVER OF JURY TRIAL

 

The parties hereto hereby waive their
respective right to a jury trial.

 

29. BROKERS

 

Tenant
warrants that it has had no dealings with any real estate broker or agents in
connection with the negotiation of this Lease excepting only Kellis Commercial
Inc., 2115 S. 56th St., Suite 205, Tacoma, Washington, 98409, and Kidder Mathews
& Segner, 1201 Pacific Avenue, Suite 801, Tacoma, Washington, 98402 (“Broker),
and it knows of no other real estate broker or agent who is entitled to a
commission in connection with this Lease.

 

Upon execution of this Lease by both parties,
Landlord shall pay to Kellis Commercial Inc., a licensed real estate broker, a
fee per schedule of fees and commissions of Broker attached hereto as Exhibit
“C” (“Fee Schedule”).  Landlord
further agrees that if Tenant exercises any option granted herein or any option
substantially similar thereto, either to extend the term of this Lease, to
renew this lease, to purchase said Premises or any part thereof and/or any
adjacent property which Landlord may own or in which Landlord has an interest,
or any other option granted herein, if said Broker is the procuring cause of
any other lease or sale entered into between the parties pertaining to the
Premises and/or any adjacent property in which Landlord has an interest, then
as to any of said transactions, Landlord shall pay Broker a fee in accordance
with the Fee Schedule.  Landlord agrees
to pay said fee not only on behalf of Landlord but also on behalf of any
person, corporation, association, or other entity having an ownership interest
in said real property or any part thereof, when such fee is due hereunder.  Any transferee of Landlord’s interests in this
Lease, by accepting an assignment of such interest, shall be deemed to have
assumed Landlord’s obligation under this Article 29.  Said Broker shall be a third party beneficiary
of the provisions of this Article.

 

30. OPTION

 

Lessee may at
Lessee’s option extend the original terms of this Lease for two additional
periods of 5 years each (“Option Period”), subject to all of the provisions of
this Lease, including but not limited to provisions for adjustments to and
variations in rent and additional rent.  Failure to exercise the option for any period
shall nullify the option for all subsequent periods.  In the event any permitted assignee exercised
any of the options to renew, the original Lessee shall continue to be liable
during the period of this renewal.  After
the exercise of any option to extend, all references in this Lease to the term
shall be considered to mean the term as extended, and all references to
termination or to the end of the term as extended.  Lessee’s right to the option is subject to:

 

a.             The
following conditions precedent:

 

1)            The
Lease shall be in effect at the time notice of exercise is given and on the
last day of the term.

 

2)            The
Lessee shall not be in default under any provision of this Lease beyond applicable
notice and cure periods.

 

b.             Compliance
with the following procedure before exercise of the option:

 

1)            At
least one hundred and twenty (120) days before the last day of the term, Lessee
shall give Lessor written notice irrevocably exercising the option.

 

2)            In
lieu of executing a new lease, each party shall, at the request of the other,
endorse on the original lease or on a true copy of the original lease that
party’s signature or signatures, the date the option was exercised and the
words “option exercised”.  Alternatively,
each party shall, at the request of the other, execute a Memorandum, in
recordable

 

15

 

form,
acknowledging the fact that the option has been exercised and otherwise
complying with the requirements of Law for an effective memorandum or abstract
of lease.

 

Monthly Rent shall be adjusted at the
beginning of each five-year Option Period to an amount equal the Fair Market
Rent for the Premises.  The term “Fair
Market Rent” shall mean the greater of (a) the Monthly Rent at the time of
determination, or (b) rent obtained for comparable space of similar size and
location in comparable centers in the greater Tacoma area on the date such determination
is made at the best use for the Premises. 
Landlord and Tenant shall use good faith efforts to agree on Fair Market
Rent within thirty (30) days after exercise by Tenant of its option to extend.  If the parties cannot agree on the Fair
Market Rent for the Premises within such time, then the Fair Market Rent shall
he determined as follows:  Both Landlord
and Tenant shall each designate an appraiser familiar with the rent of Tacoma
commercial real properly.  The two
appraisers shall have thirty (30) days within which to determine the Fair
Market Rent for the Premises.  If the two
appraisers agree upon the such rent, they shall jointly render a single written
report stating that Rent.  If the two
appraisers cannot agree upon the Fair Market Rent of the Premises, they shall
each render separate written reports and shall, within fifteen (15) days,
appoint a third appraiser who shall determine the Fair Market Rent thereof and
shall render a written report of his opinion thereon.  The Fair Market Rent contained in the aforesaid
joint written report, or the written report of the third appraiser, as the case
may be, shall be the appraised Fair Market Rent;  provided that if the Rent determined in the
report of the third appraiser is more than the higher of the first two
appraisals, the higher of the first two appraisals shall govern; and provided
further, that if the Rent contained in the appraisal report of the third
appraiser is less than the lower of the first two appraisals, the lower of the
first two appraisals shall govern.  Each
party shall pay the fees and other costs of the appraiser appointed by that
party and the fees and other costs of the third appraiser shall he shared
equally by both parties.  Such Fair
Market Rent for the purposes of this Lease shall be final and binding upon the
parties.

 

Notwithstanding the foregoing, if the Fair
Market Rent for any renewal term is determined by appraisal as set forth above
and if Tenant does not, in Tenant’s sole discretion, approve the rental amount
established thereby, then Tenant may rescind its exercise of the renewal option
by giving Landlord written notice of such election to rescind within ten (10)
days after such monthly rent amount has been established.  If Tenant rescinds its exercise of the renewal
option, then (i) the Lease shall terminate on the one hundred twentieth (120)
day after Tenant’s notice of rescission or on the date the Lease term would
otherwise, have expired absent Tenant’s exercise of the renewal option,
whichever is later, (ii) Tenant shall pay all costs and expenses of the
appraisal or arbitration and (iii) rent for any period after the original lease
term shall be set at the determined Fair Market Rent.

 

31. AGENCY DISCLOSURE

 

At the signing of this agreement the leasing
licensee D. William Frame, III and Kidder Mate & Segner, Inc. (company name
as licensed) represented Tenant. The listing licensee William R. Kellis and
Kellis Commercial, Inc. (company name as licensed) represented Owner. Each
party signing this document confirms that prior oral and/or written disclosure
of agency was provided to him her in this transaction. (WAC 308-124D-040)

 

16

 

32. INTENTIONALLY OMITTED

 

33. PARKING

 

Landlord shall provide Tenant the use of (5)
parking spaces in the Commerce Street Parking Garage at prevailing market
rates.

 

34. SIGNAGE

 

Landlord hereby approves of Tenant’s signage
as set forth on Attachment 2.

 

35. USE OF SPECIALIZED EQUIPMENT

 

Landlord acknowledges that Tenant will keep
on the Premises (a) batteries specialized for computers, (b) a power generator,
and (c) a fuel storage tank containing approximately 1,000 gallons of fuel, and
Landlord hereby consents to all of the foregoing;  provided that (i) at all times Tenant
complies with all rules, laws, and codes with respect to such items, including
all laws concerning Hazardous Materials, (ii) the presence of such items shall
not violate any terms of this Lease and (iii) Tenant shall pay all costs and
fees in connection with such items.

 

36. APPROVALS

 

Whenever the Lease requires an approval,
consent, designation, determination, selection or judgment by either Landlord
or Tenant, such approval, consent, designation, determination, selection or
judgment and any conditions imposed thereby shall be reasonable and shall not
be unreasonably withheld or delayed.

 

The parties hereto have executed this Lease
at the place and on the dates specified immediately adjacent to their
respective signatures.

 

This lease contains all covenants and
agreements between Landlord and Tenant relating in any manner to the rental,
use and occupancy of the Premises and the other matters set forth in this Lease.  No prior agreement or understanding
pertaining to the same shall be valid or of any force or effect.  No representation, inducement, understanding
or anything of any nature whatsoever made, stated or represented on Landlord’s
behalf, either orally or in writing (except in this Lease) has induced Tenant
to enter into this Lease.  Any amendment
of this agreement must be in writing and signed by both Landlord and Tenant.  This Lease shall not be effective or binding
on any party until fully executed by both parties hereto.

 

	
  LANDLORD:

  	
   

  	
  TENANT:

  
	
   

  	
   

  	
   

  
	
  Shaub
  Properties, Inc.

  	
   

  	
  Advance
  TelCom Group, Inc.

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Steve
  Shaub

  	
   

  	
   

  	
  By:

  	
  /s/ Bruce
  Green

  	
   

  
	
  Its:

  	
  President

  	
   

  	
   

  	
  Its:

  	
  General
  Manager

  	
   

  

 

This Lease has been prepared for submission to
your attorney for his/her approval.  No
representation or recommendation is made by Kellis Commercial Inc. or its
agents or employees as to the legal sufficiency, legal effect, or tax
consequences of this Lease or the transactions relating thereto.

 

17

 

CORPORATE

 

	
  STATE OF
  WASHINGTON

  	
  )

  
	
   

  	
  ) ss.

  
	
  COUNTY
  OF PIERCE

  	
  )

  

 

On this 9 day of March A.D. 2000, before me
personally appeared Steve Shaub to me known to be the President of Shaub
Properties Inc., the corporation that executed the within and foregoing
instrument, and acknowledged the same instrument to be the free and voluntary act
and deed of said corporation, for the uses and purposes therein mentioned, and
on oath stated that he was authorized to execute said instrument.

 

IN WITNESS WHEREOF, I have hereunto set my hand and
affixed my official seal, the day and year first above written.

 

	
   

  	
   

  	
  /s/ William
  Kellis

  	
   

  
	
   

  	
   

  	
  Name:

  	
  William R.
  Kellis

  	
   

  
	
  [Notary Seal]

  	
   

  	
  Notary
  Public in and for the State of

  
	
   

  	
   

  	
  Washington,
  residing at:

  	
  2605 N.
  Starr Tacoma, WA

  	
   

  
	
   

  	
   

  	
  My
  Appointment Expires:

  	
  8-10-02

  	
   

  
										

 

CORPORATE

 

	
  STATE OF
  WASHINGTON

  	
  )

  
	
   

  	
  ) ss.

  
	
  COUNTY
  OF PIERCE

  	
  )

  

 

On this 9 day of March A.D. 2000, before me
personally appeared Bruce Green G.M. of Advanced TelCom Group, Inc. to me known
to be the General Manager that executed the within and foregoing instrument,
and acknowledged the same instrument to be the free and voluntary act and deed
of said corporation, for the uses and purposes therein mentioned, and on oath stated
that he was authorized to execute said instrument.

 

IN WITNESS WHEREOF, I have hereunto set my hand and
affixed my official seal, the day and year first above written.

 

	
   

  	
   

  	
  /s/ William
  Kellis

  	
   

  
	
   

  	
   

  	
  Name:

  	
  William R.
  Kellis

  	
   

  
	
  [Notary Seal]

  	
   

  	
  Notary
  Public in and for the State of

  
	
   

  	
   

  	
  Washington,
  residing at:

  	
  2605 N.
  Starr Tacoma, WA

  	
   

  
	
   

  	
   

  	
  My
  Appointment Expires:

  	
  8-10-02

  	
   

  
										

 

18

 

RULES AND REGULATIONS

 

1.             No
sign, placard, picture, advertisement, name or notice shall be inscribed,
displayed or printed or affixed on or to any part of the outside or inside of
the Building without the written consent of Landlord first had and obtained and
Landlord shall have the right to remove any such sign, placard, picture,
advertisement, name or notice without notice to and at the expense of Tenant.

 

All approved
signs or lettering on doors shall be printed, painted, affixed or inscribed at
the expense of Tenant by a person approved of by Landlord.

 

Tenant shall not place anything or allow
anything to be placed near the glass of any window, door, partition or wall which
may appear unsightly from outside the Premises; provided, however, that
Landlord may furnish and install a Building standard window covering at all
exterior windows.  Tenant shall not
without prior written consent of Landlord cause or otherwise sunscreen any
window.

 

2.             The
sidewalks, decks, entrances and stairways shall not be obstructed by any of the
Tenants or used by them for any purpose other than for ingress and egress from
their respective Premises.

 

3.             The
toilet rooms, urinals, wash bowls and other apparatus shall not be used for any
purpose other than that for which they were constructed and no foreign
substance of any kind whatsoever shall be thrown therein and the expense of any
breakage, stoppage or damage resulting from the violation of this rule shall be
borne by the Tenant who, or whose employees or invitees shall have caused it.

 

4.             Tenant
shall not overload the floor of the Premises or in any way deface the Premises
or any part thereof.

 

5.             No
furniture, freight or equipment of any kind shall be brought into the Building
without the prior notice to Landlord and all moving of the same into or out of
the Building shall be done at such time and in such manner as Landlord shall
designate.  Landlord shall have the right
to prescribe the weight, size and position of all safes and other heavy equipment
brought into the Building and also the times and manner of moving the same in
and out of the Building.  Safes or other
heavy objects shall, if considered necessary by landlord, stand on supports of
such thickness as is necessary to properly distribute the weight.  Landlord will not be responsible the loss of
or damage to any such safe or property from any cause and all damage done to
the Building by moving or maintaining any such safe or other property shall be
repaired at the expense of Tenant.

 

6.             Tenant
shall not use, keep or permit to be used or kept any foul or noxious gas or
substance in the Premises, or permit or suffer the Premises to be occupied or
used in a manner offensive or objectionable to the Landlord or other occupants
of the Building by reason of noise, odors and/or vibrations, or interfere in
any way with other tenants or those having business therein, nor shall any
animals or birds he brought in or kept in or about the Premises or the Building.

 

19

 

7.             No
cooking, except microwave cooking for lunch purposes, shall be done or permitted
by any Tenant on the Premises, nor shall the Premises be used for the storage
of merchandise, for washing clothes, for lodging, or for any improper,
objectionable or immoral purposes.

 

8.             Tenant
shall not use, except otherwise provided in the Lease, or keep in the Premises
or the Building any kerosene, gasoline or inflammable or combustible fluid or
material, or use any method of heating or air conditioning other than that supplied
by Landlord.

 

9.             Landlord
will direct electricians as to where and how telephone wires are to be
introduced.  No boring or cutting for
wires will be allowed without the consent of the Landlord.  The location of telephones, call boxes and
other office equipment affixed to the Premises shall be subject to the approval
of Landlord.

 

10.           The
Landlord shall in no case be liable for damages for any error with regard to
the admission to or exclusion from the Building of any person.  In case of invasion, mob, riot, public
excitement or other commotion, the Landlord reserves the right to prevent
access to the Building during the continuance of the same by closing of the
doors or otherwise, for the safety of the tenants and protection of property in
the Building and the Building.

 

11.           Landlord
reserves the right to exclude or expel from the Building any person who, in the
judgment of Landlord, is intoxicated or under the influence of liquor or drugs,
or who shall in any manner do any act in violation of any of the rules and
regulations of the Building.

 

12.           No
vending machine or machines of any description shall be installed, maintained
or operated upon the Premises without the written consent of the Landlord.

 

13.           Landlord
shall have the right, exercisable without notice and without liability to
Tenant, to change the name and street address of the Building of which the
Premises are a part.

 

14.           Tenant
shall not disturb, solicit, or canvass any occupant of the Building and shall
cooperate to prevent same.

 

15.           Without
the written consent of Landlord, Tenant shall not use the name of the Building
in connection with or in promoting or advertising the business of Tenant except
as Tenant’s address.

 

16.           Landlord
shall have the right to control and operate the public portions of the
Building, and the public facilities as well as facilities furnished for the
common use of the tenants, in such manner as it deems best for the benefit of
the tenants generally.

 

17.           All
entrance doors in the Premises shall be left locked when the Premises are not in
use.

 

18.           Water
usage is restricted to those activities normally associated with the use the
Premises are leased for and the personal use by Tenant, Tenant’s employees,
clients, suppliers or others is strictly forbidden.

 

20

 

19.           Any
regulations or restrictions, either temporary or permanent, which shall be
imposed by public agencies and which Landlord has no control, shall
automatically supersede any provisions of this lease or its rules and
regulations and therefore be abided by Tenant.

 

20.           This
complex has been designated as a non-smoking building.  Notification of such must be given to all
employees and visitors.

 

21

 

EXHIBIT “A3”

 

LEGAL DESCRIPTION

 

Lots 9 through 15, inclusive, in Block 1106 of
MAP OF NEW TACOMA, WASHINGTON TERRITORY, filed for record February 3, 1875 in
the office of the Pierce County Auditor, in Pierce County, Washington.

 

TOGETHER with the Easterly 0.42 feet of “Court
C”, and the westerly 0.42 feet of “Broadway Plaza” adjacent to and abutting
said premises, as vacated by City of Tacoma Ordinance No. 23104, recorded under
Auditor’s file No. 8402220183.

 

EXCEPT from said vacation the Subsurface
Rights thereof.

 

EXCEPT that portion of Lots 9 and 10 lying to
the North of the following described lines:

 

Commencing at the southwesterly corner of said
Lot 9 thence South 08 degrees 47’ 13” East along the Westerly line of said
Block 1106, 0.08 feet to the point of beginning; thence North 81 degrees 08’ 46”
East 0.04 feet to the Northwesterly corner of an existing building as located
at the sidewalk level in April 1983; thence continuing North 81 degrees 08’ 46”
East along the Northerly face of said building 119.99 feet to a point of
intersection with the Easterly line of said Lot 9 (the Northeasterly corner of
said building bears North 81 degrees 08’ 46” East 0.03 feet distant) and the
terminus of this description.  The above
point of terminus bears North 08 degrees 46’ 37” West 0.06 feet distant from
the Southeasterly corner of said Lot 9.

 

ALSO EXCEPT for that portion of Lots 14 and 15
lying to the South of the following described lines:

 

Commencing at the Northwesterly corner of said
Lot 15; thence South 08 degrees 47’ 13” East 0.06 feet to the point of
beginning (the southwesterly corner of the above described building bears South
81 degrees 09’ 29” West 0.03 feet distant); thence along the Southerly fact of
said building, North 81 degrees 09’ 29’ East 120.01 feet to a point of intersection
with the Easterly line of said Lot 14 (the Southeasterly corner of said
building bears North 81 degrees 09’ 29” East 0.04 feet distant) and the
terminus of this description.  The above
point of terminus bears North 08 degrees 46’ 37” West 0.06 feet from the
Northeasterly corner of said Lot 15.

 

i

 

EXHIBIT “B”

 

TENANT SIGN CRITERIA

 

A. PURPOSE

 

The intent of these sign criteria is to
provide standards necessary to achieve visually coordinated, balance, and
appealing signage for Broadway Place.

 

All Tenant signs in the building shall be
governed by these criteria.  Landlord at
all times has full rights of approval of sign design, size, color, spacing of
lines and letters, location on the building, and all other aspects of signage.

 

Upon request of the Tenant, exceptions to
these standards will be seriously considered by Landlord.  However, experience has shown that exceptions
create inequities and resulting disputes between tenants.  Generally, approval of exceptions will
require showing that the tenant has made a considerable investment over a
period of time advertising in such a way that public recognition of the
business depends on the use of the name, color, shape, or logo for which the
exception is requested.

 

B. GENERAL PROCEDURE

 

All tenants are required to have signage as
provided herein.  Prior to any
installation, Tenant shall provide to Landlord a design drawing to scale which
accurately shows the sign as it would look when installed, with colors
designated in words, construction details and electrical specifications.  Preliminary sketches may be submitted to
obtain a response to basic ideas of shape, color, and wording, but a scale
drawing will be required from the sign contractor before approval is granted.  Approval will be shown in writing on the face
of the scale drawing, signed by the Landlord’s representative.  This signed drawing will be returned to the
sign contractor for use in applying to the City for an installation permit.

 

Modifications to the initial design which are
required will be clearly shown on the signed drawing and approval will be
conditional on the required changes being made.

 

C. GENERAL SPECIFICATIONS

 

1)
Each Tenant
space shall be provided with an area for a sign on the main building face or on
a canopy face.  The sign will be located
at the front of the leased space.  In
some cases, Landlord may elect to offer tenant the option of an illuminated
awning sign.  Tenant may then choose
between a building face sign and an awning sign, but may not have both.

 

2)
If any
Tenant is to have one under-canopy sign, Tenant’s business name only (no logo)
will be affixed to a background using white letters.  Letter style, background material and
background color shall be determined solely by the Landlord based on a unified,
coordinated, center-wide plan.

 

3)
Signs shall
conform to all applicable City of Tacoma ordinances.

 

i

 

4)
Sign wording
is limited to the establishment’s name with option to show product or service
offered.  (i.e.; Jacques’ Hair Styling).

 

D. CONSTRUCTION REQUIREMENTS

 

1)
“Can Signs”
are expressly prohibited, without Landlord’s prior written consent.

 

2)
All signs
may be individual channel letters or channel words of metal construction.  Each large letter, numeral or unit shall be
attached, structurally and electrically, individually tot he fascia.  Any secondary line of small letter is allowed
to be non-illuminated.

 

3)
Each large
letter, numeral or unit shall be internally illuminated and faced with
Plexiglass or similar material.  Colors
shall be limited to the following:  dark
red, green, pink, dark blue, light blue, white, and black.  Additional colors may be approved and added
to this list at Landlord’s discretion.

 

4)
To assure
the architectural integrity of the building facade, the use of all sign colors,
details and materials shall be subject to the Landlord’s approval.  Complete shop drawings, indicating
dimensions, position on fascia, materials and colors must be submitted to the
Landlord for written approval prior to submission to the City.

 

E. MISCELLANEOUS REQUIREMENTS

 

1)
Flashing,
moving or audible signs will not be permitted.

 

2)
No exposed
conduit, electro-metallic tubing, ballast boxes, transformers or raceways shall
be permitted.

 

due to the increasing tasteful use of exposed
neon, exposed neon tubing will be considered on a case-by-case basis.  In general, exposed neon as part of a channel
letter sign should not dominate the design. 
Outline tubing and full border tubing are not acceptable.

 

3)
Location of
all openings for conduits and sleeves in fascia panels and/or building walls
shall be indicated by the sign contractor on drawings submitted to the Landlord.  All penetrations of the building structure
required for sign installations shall be neatly sealed in a water-tight
condition,

 

4)
The sign
contractor shall repair any damage caused by installation and Tenant shall be
fully responsible for the operation of Tenant’s sign

 

5)
No signmaker’s
labels or other identification shall be permitted on the exposed surface of
signs.  Testing laboratory labels shall be
as inconspicuous as possible within code compliance.

 

6)
If the
fascia sign is ever removed for replacement, modification, or because of the termination
of lease, Tenant shall leave the fascia panel in good conditions, normal wear
and tear excepted.  Without limitation,
Tenant shall specifically be required to fill in a

 

ii

 

workmanlike
manner any holes left in the fascia by removal of the sign and conduit and to
repaint to match existing paint.

 

F. INFORMATION AND TEMPORARY SIGNING

 

1)
Store front
Information Signing:  Each Tenant may
place on the storefront, within the glass area next to the front door, white
vinyl lettering not to exceed 1” in height nor more than 144 square inches,
indicating hours of business, emergency telephone number, etc.  The 144 square inches shall be measured by a
rectangle around the outside of all lines of lettering.

 

2)
Second floor
office information signing:  Each Tenant
may place a sign not to exceed 28” in width, on the office front, within the
glass area next to the front door, vinyl lettering, vivid blue helvetica
medium, 1 1/2” in height, to identify the company name.  The letters shall be justified to the left
side 2 1/2” from the side of the window and the top edge of the top line of
letters shall measure 38” from the floor. 
Suite #, hours of business and all other information shall be 1” high,
vivid blue helvetica medium vinyl lettering. 
See example below.  All office
signing to be manufactured and installed by a professional, with the Landlord’s
prior written approval.

 

3)
Temporary
and Portable Signs:  No Tenant shall
affix or maintain upon the glass panes and supports of the show windows or upon
the exterior walls of the premises or the building or in the parking lot and
landscape areas any signs other than as permitted herein except with the
Landlord’s approval and then in compliance with city codes.

 

4)
The Tenant
may affix or maintain signs as Tenant chooses within Tenant’s demised premises
except for all areas within the first thirty-six (36) inches from any glass
windows, glass doors and supports of windows and doors.

 

5)
The Landlord
may issue written approval to the Tenant permitting deviation from the sign
prohibition within the thirty-six (36) inches of all glass windows and doors.

 

6)
Homemade
cardboard, butcher-paper, shoe-polish, spray paint, and stencil signs are
prohibited.

 

iiiEXHIBIT 10.28

 

OFFICE LEASE

 

This lease is made and entered into at Salem, Oregon, this 19 day of
January 1999, by and between Retro, LLC,
Landlord, and Advanced TelCom Group, Inc., a California
corporation, Tenant.

 

Landlord hereby leases to Tenant a portion of the building located at
198 Commercial St. SE, Salem, Oregon (the “Building”), as follows:  approximately 6,873 net useable square feet on
the first floor as shown on the attached floor plan marked as Exhibit “A”, (the
“Premises”).  Said Premises shall include
twenty (20) parking spaces.  Said parking
spaces shall be either non-exclusive permit parking spaces located on the third
through fifth floors of the adjacent city-owned parking structure, and/or
parking spaces for exclusive use in either one of the surface parking lots
located diagonally across Commercial Street, and/or behind the parking garage
on Ferry Street detailed on Exhibits “B” & “C”, or a combination thereof.  The exact location of said parking spaces and
Tenant suite number shall be determined prior to occupancy.

 

Tenant’s proportionate share of total building square footage for
purposes of Sections 32 and 34 shall be twenty and three tenths (20.3%) percent.  Tenant’s total rentable square feet,
including their proportionate share of common areas, as further detailed in
paragraph 2, is approximately 7,815.

 

Landlord and Tenant covenant and agree as follows:

 

1.                                      Term
and Monthly Base Rent.

This lease is for a term of ten (10) years commencing on the later of
the following (the “Commencement Date”):  (A) the date by which all of the following
have occurred:  (i) Landlord has
substantially completed the Tenant Improvements set forth in Section 39 in
accordance with the Lease, (ii) there remains no incomplete or defective item
of the Tenant Improvements that would adversely effect Tenant’s intended use of
the Premises; (iii) Landlord has delivered possession of the Premises to
Tenant; and (iv) Landlord has obtained all approvals and permits from the
appropriate governmental authorities required for the legal occupancy of the
Premises for Tenant’s intended use; or (B) one hundred twenty (120) days from
execution hereof (the “Commencement Date”), and continuing through the last day
of the one hundred twentieth (120th) month thereafter, at a Monthly
Full Service Gross (FSG) Base Rent for the usable area as follows:

 

	
  Year 1 $9,627.50

  	
  per mo. FSG

  	
  Year 6

  	
  $10,734.00 per mo. FSG

  
	
  Year 2 $9,820.00

  	
  per mo. FSG

  	
  Year 7

  	
  $11,056.00 per mo. FSG

  

 

	
   

  	
   

  	
  Please initial

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Landlord

  	
  Tenant

  

 

1

 

	
  Year 3 $10,016.00

  	
  per mo. FSG

  	
  Year 8

  	
  $11,387.00 per mo. FSG

  
	
  Year 4 $10,217.00

  	
  per mo. FSG

  	
  Year 9

  	
  $11,729.00 per mo. FSG

  
	
  Year 5 $10,421.00

  	
  per mo. FSG

  	
  Year 10

  	
  $12,081.00 per mo. FSG

  

 

Rent is payable in advance on the first day of each month commencing on
the Commencement Date.  The rent for the
first month of the lease term shall be paid by Tenant upon the execution of the
lease agreement.

 

2.                                      Common
Areas.

Landlord shall grant to Tenant and Tenant’s employees, agents, customers
and invitees the non-exclusive right during the Lease Term and any renewal Term
to use in common with others granted the use thereof the Common Areas which
shall be those areas, indoors and outdoors, provided by Landlord for the
general use of the tenants of the Building and shall include, without
limitation, the restrooms, if any, for the use of more than one tenant or the
public, lobbies, common, hallways, parking areas, roadways, pedestrian
sidewalks, delivery areas, landscaped areas and all other areas or improvements
which may be provided by Landlord for the general use of tenants of the
Building and their agents, employees and customers.  The manner in which the Common Areas shall be
maintained and the expenditures therefor shall be at the reasonable discretion
of the Landlord.  Landlord shall be
responsible for the operation, management and maintenance of the Common Areas.  The manner in which the Common Areas shall be
maintained shall be at the reasonable discretion of the Landlord; provided however,
that Landlord shall use reasonable efforts not to unduly interfere with or
disrupt Tenant’s occupancy of the Building. 
Tenant shall pay monthly as additional rent Tenant’s proportionate share
of interior space devoted to the Common Areas (Common Area Rent).  Said Common Areas of the Building are
stipulated to be 5,400 square feet, which equates to 13.7% of the overall
building square footage excluding basement. 
Tenant’s proportionate share of the Common Areas equals 1,096 square
feet.  Tenant’s monthly base rental for
it’s proportionate share of the Common Area is Sixteen Hundred forty-four and
no/100 Dollars ($1,644.00).  The total
usable and common area base monthly rental for year one is $11,271.50
($9,627.50 + $1,644.00 = $11,271.50).  The
monthly rent on the common area shall be increased on an annual basis at the
same rate as the usable area which is 2% annually for the first five years and
3% annually for the second five years of the lease term which shall be the
following amounts:

 

	
  Year 1

  	
  $1,644.00 per mo.

  	
  Year 6

  	
  $1,833.00 per mo.

  
	
  Year 2

  	
  $1,677.00 per mo.

  	
  Year 7

  	
  $1,888.00 per mo.

  
	
  Year 3

  	
  $1,710.00 per mo.

  	
  Year 8

  	
  $1,945.00 per mo.

  
	
  Year 4

  	
  $1,745.00 per mo.

  	
  Year 9

  	
  $2,003.00 per mo.

  
	
  Year 5

  	
  $1,780.00 per mo.

  	
  Year 10

  	
  $2,063.00 per mo.

  

 

2

 

3.                                      Delivery
of Possession.

Should Landlord be unable to deliver possession of the Premises on the
date fixed for the commencement of the term, commencement will be deferred and
Tenant shall owe no rent until notice from Landlord tendering possession to
Tenant.  Landlord shall have no liability
to Tenant for delay in delivering possession, nor shall such delay extend the
term of this lease in any manner unless the parties execute a written extension
agreement.  In the event the Commencement
Date shall not have occurred for any reason which is within Landlords control,
on or before May 31, 1999 then the date Tenant is otherwise obliged to commence
payment of rent shall be delayed by one additional day for each day that the
Commencement Date is delayed beyond May 31, 1999.  In the event the Commencement Date shall not
have occurred for any reason which is within Landlords control, on or before
June 30, 1999, then Tenant may terminate this Lease by written notice to Landlord,
whereupon any monies previously paid by Tenant to Landlord shall be reimbursed
to Tenant.

 

4.                                      Rent
Payment.

Tenant shall pay the Base Rent for the Premises and any additional rent
provided herein without deduction or offset. 
Rent for any partial month during the lease term shall be prorated to
reflect the number of days during the month that Tenant occupies the Premises.  Additional rent means amounts determined
under Sections 32 through 34 of this Lease and any other sums payable by Tenant
to Landlord under this Lease.  Rent not
paid within five (5) days of when due shall bear interest at the rate of
one-and-one-half percent per month until paid. 
Landlord may at its option impose a late charge of $.05 for each $1 of
rent for rent payments made more than 5 days late in lieu of interest for the
first month of delinquency, without waiving any other remedies available for
default.  Failure to impose a late charge
shall not be a waiver of Landlord’s rights hereunder.

 

5.                                      Security
Deposit.

Tenant shall pay upon the execution hereof a security deposit equal to
one months base rental totaling $11,271.50. 
Said security deposit shall be held by Landlord for the term of the
lease, including the option to extend, if exercised by Tenant, for Tenant’s
faithful performance of all lease terms. 
Landlord shall return all or a portion of Tenant’s security deposit upon
termination of the lease and the Premises being returned by Tenant to Landlord
free from any defaults and in satisfactory condition reasonable wear and tear
excepted.

 

6.                                      Use.

Tenant shall use the Premises for general office, storage and
maintenance of telecommunications equipment, marketing, sales and customer
service and other related office uses and for no other purpose without Landlord’s
written consent.  In connection with its
use, Tenant shall at its expense promptly comply and cause the Premises to
comply with all applicable laws, ordinances, rules and regulations of any
public authority and shall not annoy, obstruct, or interfere with the rights of
other

 

3

 

tenants of the Building.  Tenant
shall create no nuisance nor allow any objectionable fumes, noise, or
vibrations to be emitted from the Premises. 
Tenant shall not conduct any activities that will in any manner degrade
or damage the reputation of the Building. 
In the event Landlord’s insurance rates on the building increase due to
Tenant’s particular use, Tenant agrees to pay 100% of the additional cost.  Notwithstanding anything to the contrary in
the Lease, Tenant shall not be required to comply with or cause the Premises to
comply with any laws, rules, regulations, codes, ordinances, underwriters’
requirements, covenants, conditions and restrictions (collectively, “Laws”)
unless such compliance is necessitated solely due to Tenant’s particular use of
the Premises.

 

7.                                      Equipment.

Tenant shall install in the Premises office equipment as is customary
for their use and shall not overload the floors or existing electrical circuits
of the Premises or Building or alter the plumbing or wiring of the Premises or
Building.  Landlord must approve in
advance the location of and manner of installing any additional wiring or
electrical, HVAC, heat generating or communication equipment or exceptionally
heavy articles.  All telecommunications
and computer related equipment, electrical, conduit, cables and wiring,
additional dedicated circuits and any additional air conditioning required
because of heat generating equipment or special lighting installed by Tenant, at
it’s expense, shall also be operated on a monthly basis at Tenant’s expense.  Landlord acknowledges that Tenant, at it’s
sole cost, shall install additional electrical service, an approximate 15’ x 20’
transformer room and HVAC in order to operate the equipment that Tenant plans
to install into the building.  Landlord
must approve of the location of Tenant’s equipment and the additional
electrical and HVAC prior to installation. 
Tenant agrees to remove, at it’s sole cost, all of its equipment,
electrical, conduit, generator and all other personal property or trade
fixtures at the end of the lease term, including option, if exercised, and
restore the building to it’s condition prior to the installation of Tenant’s
improvements and equipment.  The
restoration of the building shall also include the removal of the transformer
required by PGE to be located in the building, the 3 hour fire rated walls,
overhead and personnel doors and replace exterior block wall with two (2)
windows the same size and material as the ones removed.

 

8.                                      Signs.

No signs, awnings, antennas, or other apparatus shall be painted on or
attached to the Building or anything placed on any glass or woodwork of the
Premises or positioned so as to be visible from outside the Premises without Landlord’s
written approval, which shall not be unreasonably withheld, delayed or
conditioned as to design, materials, size, location, and color.  All signs installed by Tenant shall comply
with Landlord’s standards for signs and all applicable codes and all signs and
sign hardware shall be removed upon termination of this lease with the sign
location restored to its former state unless Landlord elects to retain all or
any portion thereof.  Said installation,
removal and restoration shall be at Tenant’s sole cost and expense.

 

4

 

Notwithstanding the foregoing, Landlord shall provide, at Tenant’s sole
cost, a lobby tenant directory and suite entry sign as well as two (2) exterior
signs mounted on the entry of the building. 
The cost of the two (2) exterior building signs shall be approximately
$1,100.00 installed.  The exterior
building signs are totally at Tenant’s option. 
The total cost of all signage shall not exceed $1,500.00 installed.  Tenant’s execution hereof shall be deemed to
be Tenant’s approval of the terms of this section.

 

9.                                      Utilities
and Services.

Landlord will furnish water and electricity to the Building at all
times and will furnish heat and air conditioning during the normal Building
hours as established by Landlord which, at a minimum, shall be 7 am - 7 pm
Monday through Friday and Saturday 8 am - 12 pm.  Janitorial service will be provided Monday
through Friday in accordance with the regular schedule of the Building, which
schedule and service may change from time to time.  Tenant shall comply with all government laws
or regulations regarding the use or reduction of use of utilities on the
Premises.  Interruption of services or
utilities shall not be deemed an eviction or disturbance of Tenant’s use and
possession of the Premises, render Landlord liable to Tenant for damages, or
relieve Tenant from performance of Tenant’s obligations under this lease.  Landlord shall take all reasonable steps to
correct any interruptions in service.  Electrical
service furnished will be 110 volts unless different service already exists in
the Premises.  Tenant shall provide its
own surge protection for power furnished to the Premises.  The utility service provided by Landlord will
be for normal administrative office use and does not include the utility
service for Tenant’s special equipment needs. 
Tenant shall pay separately for their special utility and service and
repair needs for their equipment and the additional HVAC.  If there is any interruption, failure, stoppage
or interference of the utilities, services or access to the Premises or due to
the presence of any Hazardous Materials on or about the Building or the project
of which the Building is a part (the “Project”) (except to the extent released
or emitted by Tenant), and such interruption continues for seven (7)
consecutive calendar days, then Tenant shall be entitled to an equitable
abatement of rent to the extent of the interference with Tenant’s use of the
Premises occasioned thereby.  If the
interference, which is in control of the Landlord, persists for more than
thirty (30) consecutive calendar days, then Tenant shall have the right to
terminate the Lease.

 

10.                               Extra
Usage.

If Tenant uses excessive amounts of utilities or services of any kind
because of operation outside of normal Building hours, high demands from office
machinery and equipment, nonstandard lighting, or any other cause, Landlord may
impose a reasonable charge for supplying such extra utilities or services,
which charge shall be payable monthly by Tenant in conjunction with rent
payments.  In case of dispute over any
extra charge under this section, Landlord shall designate a qualified
independent engineer whose decision shall be conclusive on both parties.  Landlord and Tenant shall each pay one-half
of the cost of such determination.

 

5

 

11.                               Security.

Landlord may but shall have no obligation to provide security service
or to adopt security measures regarding the Premises, and Tenant shall
cooperate with all reasonable security measures adopted by Landlord.  Tenant may install a security system within
the leased Premises with Landlord’s written consent which will not be
unreasonably withheld.  Landlord will be
provided with an access code to any security system.  Landlord may modify the type or amount of
security measures or services provided to the Building or the Premises at any
time.  Notwithstanding anything to the
contrary in the Lease, Landlord shall not have access to the switch area except
in the event of an emergency, and in the event of such emergency, must be
accompanied by an authorized agent of Tenant.

 

12.                               Maintenance
and Repair.

Landlord shall have no liability for failure to perform required
maintenance and repair unless written notice of such maintenance or repair is
given by Tenant, and Landlord fails to commence efforts to remedy the problem
in a reasonable time and manner.  Landlord
shall have the right to erect scaffolding and other apparatus necessary for the
purpose of making repairs, and Landlord shall have no liability for
interference with Tenant’s use because of repairs and installations provided
Landlord shall use reasonable efforts to minimize disruption to Tenant’s
business.  Tenant shall have no claim
against Landlord for any interruption or reduction of services or interference
with Tenant’s occupancy, and no such interruption or reduction shall be
construed as a constructive or other eviction of Tenant provided Landlord shall
use reasonable efforts to minimize disruption to Tenant’s business.  Repair of damage caused by negligent or
intentional acts or breach of this lease by Tenant, its employees or invitees
shall be at Tenant’s expense after first applying the proceeds of insurance to
cover such loss, if any.  Notwithstanding
the foregoing, Landlord shall have no obligation whatsoever for the maintenance
and repair of the additional electrical and HVAC installed in the Premises by
Tenant due to Tenant’s special equipment needs.

 

Notwithstanding the foregoing, Landlord shall perform and construct,
and Tenant shall have no responsibility to perform or construct, any repair,
maintenance or improvements (a) necessitated by the acts or omissions of
Landlord or any other occupant of the Building, or their respective agents,
employees or contractors, (b) occasioned by fire or other casualty or
condemnation, (c) which could be treated as a “capital expenditure” under
generally accepted accounting principles, (d) to the heating, ventilating, air
conditioning, electrical, water, sewer, and plumbing systems serving the
Premises or the Building other than any additional systems installed by Tenant,
and (e) to any portion of the Building outside of the demising walls of the
Premises.  Notwithstanding the foregoing,
Tenant shall pay for its share of the repairs described in subsections (c)-(e)
to the extent such costs are properly included in operating expenses.

 

6

 

Landlord warrants and represents that, as of the Commencement Date, (i)
the Premises, and the Building will comply with all applicable laws, rules,
regulations, codes, ordinances, underwriters’ requirements, covenants,
conditions and restrictions, (ii) the Premises will be in good and clean
operating condition and repair, (iii) the electrical, mechanical, HVAC,
plumbing, sewer, elevator and other systems serving the Premises and the
Building will be in good operating condition and repair, and (iv) the roof of
the Building will be in good condition and water tight.  Landlord shall, promptly after receipt of
notice from Tenant, remedy any non-compliance with such warranty at Landlord’s
sole cost and expense.

 

13.                               Alterations.

Tenant shall not make any alterations, additions, or improvements to
the Premises, change the color of the interior, or install any wall or floor
covering without Landlord’s prior written consent which may be withheld in
Landlord’s reasonable discretion, excepting the alterations and additions
acknowledged and approved by Landlord herein. 
Any such improvements, alterations, wiring, cables or conduit installed
by Tenant shall at once become part of the Premises and belong to Landlord
except for removable machinery and unattached movable trade fixtures.  Landlord may at its option require that
Tenant remove any improvements, alterations, wiring, cables or conduit
installed by or for Tenant and restore the Premises to the original condition
upon termination of this lease.  Landlord
shall have the right to approve the contractor used by Tenant for any work in the
Premises, which approval shall not be unreasonably withheld delayed or
conditioned and to post notices of nonresponsibility in connection with work
being performed by Tenant in the Premises. 
Work by Tenant shall comply with all laws then applicable to the
Premises.

 

14.                               Indemnity.

Tenant shall not allow any liens to attach to the Building or Tenant’s
interest in the Premises as a result of its activities.  Except to the extent of the negligence or
willful misconduct of Landlord or its agents, contractors, or invitees Tenant
shall indemnify and defend Landlord and its managing agents from any claim,
liability, damage, or loss occurring on the Premises, arising out of any
activity by Tenant, its agents, or invitees or resulting from Tenant’s failure
to comply with any term of this lease.  Except
to the extent of the negligence or willful misconduct of Landlord or its
agents, contractors, or invitees neither Landlord nor its managing agent shall
have any liability to Tenant because of loss or damage to Tenant’s property or
for death or bodily injury caused by the acts or omissions of other Tenants of
the Building, or by third parties (including criminal acts).  Notwithstanding anything to the contrary in
this Lease, Landlord shall not be released or indemnified from, and shall
indemnify, defend, protect and hold harmless Tenant from, all losses, damages,
liabilities, judgments, actions, claims, attorneys’ fees, consultants’ fees,
payments, costs and expenses arising from the negligence or willful misconduct
of Landlord or its agents, contractors, licensees or invitees, Landlord’s
violation of any law, order or regulation, or a breach of Landlord’s
obligations or representations under the Lease.

 

7

 

15.                               Insurance.

Tenant shall carry liability insurance with limits of not less Two
Million Dollars ($2,000,000), combined single limit bodily injury and property
damage which insurance shall have an endorsement naming Landlord and Landlord’s
managing agent, if any, as an additional insured, covering the liability
insured under Section 14 of this lease and be in form and with companies
reasonably acceptable to Landlord.

 

Prior to occupancy, Tenant shall furnish a certificate evidencing such
insurance which shall state that the coverage shall not be canceled or
materially changed without 10 days advance notice to Landlord and Landlord’s
managing agent, if any.  A renewal
certificate shall be furnished at least 10 days prior to expiration of any
policy.  Landlord shall maintain “all
risk” property insurance insuring against risk of loss or damage to the
Building for the full replacement cost thereof.

 

16.                               Fire
or Casualty.

“Major Damage” means damage by fire or other casualty to the Building
or the Premises which causes the Premises or any substantial portion of the
Building to be unusable, or which will cost more than 25% of the pre-damage
value of the Building to repair, or which is not covered by insurance.  In case of Major Damage, Landlord may elect
to terminate this lease by notice in writing to the Tenant within 30 days after
such date.  If this lease is not
terminated following Major Damage, or if damage occurs which is not Major
Damage, Landlord shall promptly restore the Premises to the condition existing
just prior to the damage.  Landlord shall
not be required to restore damage to tenant improvements or alterations
installed by Tenant.  Rent shall be
reduced from the date of damage until the date restoration work being performed
by Landlord is substantially complete, with the reduction to be in proportion
to the area of the Premises not useable by Tenant.  Notwithstanding the foregoing, in the event
such damage cannot reasonably be or is not infact repaired, within 180 days of
the date thereof, Tenant may terminate this lease.  Notwithstanding anything to the contrary in
the Lease, Landlord shall not have the right to terminate the Lease if (i) the
Building is damaged by a peril required to be insured against by Landlord under
the Lease, or (ii) the damage is relatively minor (e.g., the cost of
repair or restoration does not exceed five percent (5%) of the then replacement
cost of the Building).

 

17.                               Waiver
of Subrogation.

Tenant shall be responsible for insuring its personal property and
trade fixtures located on the Premises and any alterations or tenant
improvements it has made to the Premises. 
Notwithstanding anything to the contrary herein neither Landlord, its
managing agent nor Tenant or their respective agents shall be liable to the
other for any loss or damage caused by water damage, sprinkler leakage, fire,
or any of the risks that are or could be covered by a special all risk property
insurance policy, or for any business interruption without regard to the
negligence of either party, and there shall be no subrogated claim by one party’s
insurance carrier against the other party arising out of any such loss.  Each party shall cause each insurance policy
it obtains to

 

8

 

include a waiver of subrogation regarding the liabilities released
hereby.  All of Landlord’s and Tenant’s
repair and indemnity obligations under the Lease shall be subject to the waiver
contained in this paragraph.

 

18.                               Eminent
Domain.

If a condemning authority takes title by eminent domain or by agreement
in lieu thereof to the entire Building or a portion sufficient to render the
Premises unsuitable for Tenant’s use, then either party may elect to terminate
this lease effective on the date that possession is taken by the condemning
authority.  Rent shall be reduced for the
remainder of the term in an amount proportionate to the reduction in area of
the Premises caused by the taking.  All
condemnation proceeds shall belong to Landlord, and Tenant shall have no claim
against Landlord or the condemnation award because of the taking provided,
however, Tenant shall receive a portion of the condemnation proceeds (whether
by award or payment under threat of condemnation) based on:  (i) the unamortized value, allocable to the
remainder of the Lease term, of any improvements installed at Tenant’s expense,
which are not removable; (ii) Tenant’s moving cost; (iii) loss to Tenant’s
goodwill as a consequence of the condemnation; and (iv) Tenant’s trade
fixtures.

 

19.                               Assignment
and Subletting.

This lease shall bind and inure to the benefit of the parties, their
respective heirs, successors, and assigns, provided that Tenant shall not
assign its interest under this lease or sublet all or any portion of the
Premises without first obtaining Landlord’s consent in writing.  No assignment shall relieve Tenant of its
obligation to pay rent or perform other obligations required by this lease, and
no consent to one assignment or subletting shall be a consent to any further
assignment or subletting.  Landlord shall
not unreasonably withhold, delay or condition its consent to any assignment or
subletting provided the proposed Tenant is compatible with Landlord’s normal
standards for the Building.  Compatibility
may or may not be based on a competitive use within the building.  Landlord, in its reasonable discretion, shall
make this determination.  If an
assignment or subletting is permitted, any cash profit, or the net value of any
other consideration received by Tenant as a result of such transaction shall be
paid to Landlord promptly following its receipt by Tenant after subtracting
Tenant’s reasonable costs in connection therewith, including, without
limitation, reasonable broker commissions and attorneys’ fees, the cost of
improvements made by Tenant to the Premises for the benefit of any such
subtenant or assignee, and the unamortized cost of improvements paid for by
Tenant.  Tenant shall pay any costs
incurred by Landlord in connection with a request for assignment or subletting
(not to exceed $1,000), including reasonable attorneys’ fees.

 

Notwithstanding anything to the contrary in the Lease, Tenant may,
without Landlord’s prior written consent and without being subject to any
recapture rights or bonus rent provisions, sublet the Premises or assign the
Lease to (a) a subsidiary, affiliate, division or corporation controlling,
controlled by or under common control

 

9

 

with Tenant, (b) a successor corporation related to Tenant by merger,
consolidation, nonbankruptcy reorganization, or government action, or (c) a
purchaser of substantially all of Tenant’s assets located in the Premises (each
a “Permitted Assignee”).  A sale or
transfer of Tenant’s capital stock shall not be deemed an assignment,
subletting or any other transfer of the Lease or the Premises.

 

20.                               Default.

Any of the following shall constitute a default by Tenant under this
lease:

 

(a)          Tenant’s failure to pay rent or any other
charge under this lease within 10 days after written notice of nonpayment, or
failure to comply with any other term or condition within 20 days following
written notice from Landlord specifying the noncompliance.  If such noncompliance cannot be cured within
the 20-day period, this provision shall be satisfied if Tenant commences
correction within such period and thereafter proceeds in good, faith and with
reasonable diligence to effect compliance as soon as possible.  Time is of the essence of this lease.

 

(b)         Tenant’s insolvency, business failure or
assignment for the benefit of its creditors. 
Tenants commencement of proceedings under any provision of any
bankruptcy or insolvency law or failure to obtain dismissal of any petition
filed against it under such laws within the time required to answer; or the
appointment of a receiver for all or any portion of Tenant’s properties or
financial records.

 

21.                               Remedies
for Default.

In case of default as described in Section 20, Landlord shall have the
right to the following remedies which are intended to be cumulative and in
addition to any other remedies provided under applicable law:

 

(a)          Landlord may at its option terminate the
lease by notice to Tenant.  Upon
termination, Landlord may retake possession of the Premises and may use or
relet the Premises without waiving the right to damages.  Following such retaking of possession,
efforts by Landlord to relet the Premises shall be sufficient if Landlord
follows its usual procedures for finding tenants for the space at rates not
less than the current rates for other comparable space in the Building.  If Landlord has other vacant space in the
Building, prospective tenants may be placed in such other space without
prejudice to Landlord’s claim to damages or loss of rentals from Tenant.

 

(b)         Landlord may recover all damages caused by
Tenant’s default which shall include an amount equal to rentals lost because of
the default, lease commissions paid for this lease, and the unamortized cost of
any tenant improvements installed by Landlord to meet Tenant’s special
requirements.  Landlord may sue
periodically to recover damages as they occur throughout the lease term, and no
action for accrued damages shall bar a later action for damages subsequently
accruing.  Landlord may elect in any one
action to recover accrued damages plus damages

 

10

 

attributable to the remaining term of the lease.  Such damages shall be measured by the
difference between the rent under this lease and the reasonable rental value of
the Premises for the remainder of the term, both discounted to the time of
judgment at the prevailing interest rate on judgments.

 

(c)          Landlord may make any payment or perform any
obligation which Tenant has failed to perform, in which case Landlord shall be
entitled to recover from Tenant upon demand all amounts so expended, plus
interest from the date of the expenditure at the rate of one-and-one-half
percent per month.  Any such payment or
performance by Landlord shall not waive Tenant’s default.

 

(d)         In the event Landlord fails to perform any of
its obligations herein or under the Lease and (except in case of emergency
posing an immediate threat to persons or property, in which case no prior
notice shall be required) fails to cure such default within thirty (30) days
after written notice from Tenant specifying the nature of such default where
such default could reasonably be cured within said thirty (30) day period, or
fails to commence such cure within said thirty (30) day period and thereafter
continuously with due diligence prosecute such cure to completion where such
default could not reasonably be cured within said thirty (30) day period, then
Tenant shall have the right, but not the obligation, to cure such default and
to demand reimbursement by Landlord of the cost of such cure, with interest
thereon at the rate of ten percent (10%) per annum or the highest rate allowed
by law, whichever is less, from the date of the expenditure until repaid.

 

22.                               Surrender.

On expiration or early termination of this lease, Tenant shall deliver
all keys to Landlord and surrender the Premises vacuumed, swept, and free of
debris and in the same condition as at the commencement of the term subject
only to reasonable wear and tear from ordinary use and damage by casualty
and/or act of God excepted.  Tenant shall
remove all of its furnishings and trade fixtures that remain its property and
repair all damage resulting from such removal. 
Failure to remove shall be an abandonment of the property, and Landlord
may dispose of it in any manner without liability.  If Tenant fails to vacate the Premises when
required, including failure to remove all its personal property, Landlord may
elect either:  (i) to treat Tenant as a
tenant from month to month, subject to the provisions of this lease except that
rent shall be one-and-one-half times the total rent being charged when the
lease term expired, and any option or other rights regarding extension of the
term or expansion of the Premises shall no longer apply; or (ii) to eject
Tenant from the Premises and recover damages caused by wrongful holdover.

 

23.                               Regulations.

Landlord shall have the right but shall not be obligated to make,
revise and enforce regulations or policies consistent with this lease for the
purpose of promoting safety, health (including moving, use of common areas and
prohibition of smoking), order,

 

11

 

economy, cleanliness, and good service to all tenants of the Building.  All such regulations and policies shall be
complied with as if part of this lease.  Tenant
shall not be required to comply with any new rule or regulation unless the same
applies non-discriminatorily to all occupants of the Building, does not
unreasonably interfere with Tenant’s use of the Premises or Tenant’s parking
rights and does not materially increase the obligations or decrease the rights
of Tenant under the Lease.

 

24.                               Access.

During times other than normal Building hours Tenant’s officers and
employees or those having business with Tenant may be required to identify
themselves or show passes in order to gain access to the Building.  Landlord shall have no liability for
permitting or refusing to permit access by anyone.  Landlord may regulate access to any Building
elevators outside of normal Building hours. 
Landlord shall have the right to enter upon the Premises at any time by
passkey or otherwise to determine Tenant’s compliance with this lease, to
perform necessary services, maintenance and repairs or alterations to the
Building or the Premises, or to show the Premises to any prospective tenant or
purchasers.  Except in case of emergency
such entry shall be at such times and in such manner as to minimize
interference with the reasonable business use of the Premises by Tenant and
shall be after at least twenty-four (24) hours’ notice to Tenant.  Any such entry by Landlord shall not impair
Tenant’s operations more than reasonably necessary and shall be subject to
Tenant’s reasonable security measures.  Landlord
shall not show the Premises to tenants or brokers except during the last one
hundred eighty (180) days of the term of the Lease (including any extensions
thereof).

 

25.                               Furniture
and Bulky Articles.

Tenant shall move furniture and bulky articles in and out of the
Building or make independent use of the elevators only at times approved by
Landlord following at least 24 hours written notice to Landlord of the intended
move.  Landlord will not unreasonably
withhold its consent under this section.

 

26.                               Notices.

Notices between the parties relating to this lease shall be in writing,
effective when delivered, or if mailed, effective on the second day following
mailing, postage prepaid, to the address for the party stated in this lease or
to such other address as either party may specify by notice to the other.  Rent shall be payable to Landlord at the same
address and in the same manner, but shall be considered paid only when
received.

 

27.                               Subordination
and Attornment.

This lease shall be subject to and subordinate to any mortgages, deeds
of trust, or land sale contracts (hereafter collectively referred to as encumbrances)
now existing against the Building.  At
Landlord’s option this lease shall be subject and subordinate to any future
encumbrance hereafter placed against the Building (including the

 

12

 

underlying land) or any modifications of existing encumbrances, and
Tenant shall execute such documents as may reasonably be requested by Landlord
or the holder of the encumbrance to evidence this subordination.  If any encumbrance is foreclosed, then if the
purchaser at foreclosure sale gives to Tenant a written agreement to recognize
Tenant’s lease, Tenant shall attorn to such purchaser and this Lease shall
continue.

 

Notwithstanding anything to the contrary in the Lease, the
subordination of Tenant’s rights and interest under the Lease to any mortgage
or deed of trust shall be contingent upon Tenant’s having received from any
such mortgagee or beneficiary of any deed of trust a written recognition
agreement in form reasonably satisfactory to Tenant providing that Tenant’s
rights and interest shall not be disturbed in the event of any foreclosure of
any such mortgage or deed of trust and confirming that Tenant shall receive all
of the rights and services provided for under the Lease.  Notwithstanding anything to the contrary in
the Lease, Landlord shall, prior to the Commencement Date, use its best efforts
to obtain from all ground lessors or mortgagees holding a security interest in
the Premises, the Building or the Project, a written recognition agreement in
form reasonably satisfactory to Tenant providing that Tenant’s rights and
interest shall not be disturbed in the event of any foreclosure of any such
mortgage or other security instrument and confirming that Tenant shall receive
all of the rights and services provided for under the Lease.

 

28.                               Transfer
of Building.

If the Building is sold or otherwise transferred by Landlord or any
successor, Tenant shall attorn to the purchaser or transferee and recognize it
as the landlord under this lease, and, provided the purchaser or transferee
assumes all obligations hereunder, the transferor shall have no further
liability hereunder accruing after the transfer.

 

29.                               Estoppels.

Either party will within 20 days after notice from the other execute,
acknowledge and deliver to the other party a certificate certifying whether or
not this lease has been modified and is in full force and effect; whether there
are any modifications or alleged breaches by the other party; the dates to
which rent has been paid in advance, and the amount of any security deposit or
prepaid rent; and any other facts that may reasonably be requested.  Failure to deliver the certificate within the
specified time shall be conclusive upon the party of whom the certificate was
requested that the lease is in full force and effect and has not been modified
except as may be represented by the party requesting the certificate.  If requested by the holder of any
encumbrance, or any ground lessor, Tenant will agree to give such holder or
lessor notice of and the same opportunity as Landlord to cure any default by
Landlord under this lease.

 

13

 

30.                               Attorneys’
Fees.

In any litigation arising out of this lease, the prevailing party shall
be entitled to recover attorneys’ fees at trial and on any appeal.  If Landlord incurs attorneys’ fees because of
a default by Tenant, Tenant shall pay all such fees whether or not litigation
is filed.

 

31.                               Quiet
Enjoyment.

Landlord warrants that so long as Tenant complies with all terms of this
lease it shall be entitled to peaceable and undisturbed possession of the
Premises free from any eviction or disturbance by Landlord.  Neither Landlord nor its managing agent shall
have any liability to Tenant for loss or damages arising out of the acts,
including criminal acts, of other tenants of the Building or third parties, nor
any liability for any reason which exceeds the value of its interest in the
Building.

 

32.                               Additional
Rent - Tax Adjustment.

After the property has been fully assessed, which is presumed to be the
tax year 1999-2000, for any July 1 - June 30 tax year, the real property taxes
levied against the Building and its underlying land and the land for the
surface parking lot across the street, so long as this is available for use by
Tenant, it’s customers and invitees, exceed those levied for the first year the
property is fully assessed (or the 1999-2000 tax year, whichever is later),
then the monthly rental for the next succeeding calendar year shall be
increased by one-twelfth of such tax increase times Tenant’s Proportionate
Share.  “Real Property Taxes” as used
herein means all taxes and assessments of any public authority against the
Building and the land on which it is located, the cost of contesting any tax
and any form of fee or charge imposed on Landlord as a direct consequence of
owning or leasing the Premises, including but not limited to rental taxes,
gross receipt taxes, leasing taxes, or any fee or charge wholly or partially in
lieu of or in substitution for ad valorem real property taxes or assessments,
whether now existing or hereafter enacted. 
If any portion of the Building is occupied by a tax-exempt tenant so
that the Building has a partial exemption under ORS 307.112 or a similar
statute, then real property taxes shall mean taxes computed as if such partial
exemption did not exist.  If a separate
assessment or identifiable tax increase arises solely because of improvements
added to the Premises by Tenant, then Tenant shall pay 100% of such increase.  Notwithstanding anything to the contrary in
the Lease, “Real Estate Taxes” shall not include and Tenant shall not be
required to pay any portion of any tax or assessment expense or any increase
therein (a) levied on Landlord’s rental income, unless such tax or assessment
expense is imposed in lieu of real property taxes; (b) in excess of the amount
which would be payable if such tax or assessment expense were paid in
installments over the longest possible term; (c) imposed on land and
improvements other than the Project; or (d) attributable to Landlord’s net
income, inheritance, gift, transfer, estate or state taxes.

 

14

 

33.                               Additional
Rent - Option to Extend.

In the event Tenant exercises the option to extend the lease, as detailed
in section 43 hereof, the Landlord shall adjust the monthly rental for the
first year of the option period.  Said
rental adjustment for the first year shall be the fair market full service
gross (FSG) rent for downtown Salem Class “A” office space with a minimum of
3/1000 sq. ft. of parking and nightly janitorial included in the monthly rental.  Said fair market FSG rental shall be
determined, by a letter opinion of value, within sixty (60) days after Tenant’s
notice exercising said Option to Extend, by a qualified MAI appraiser chosen by
Landlord and Tenant who is active in the area and knowledgeable of commercial
office rents in the area at that time.  The
cost of said letter opinion of value shall be split 50/50.  Said fair market rent as determined by
appraiser for the first year of the option period shall be not less than
$1.88/sq. ft./mo. FSG.  The second
through the fifth year of the option period, the monthly rental shall be
increased each year on the anniversary date by the same percentage as the
increase, if any, in the Consumer Price Index as published by the U.S.
Department of Labor, Bureau of Labor Statistics.  The change shall be computed by comparing the
schedule entitled “U.S. City Average, All Items, All Urban Consumers, 1982-84 =
100” for Portland-Vancouver-Salem for the latest available month preceding the
month in which the option term commenced with the same figure for the same
month in the years for which the adjustment is computed.  All comparisons shall be made using index
figures derived from the same base period and in no event shall this provision
operate to decrease the monthly rental for the Premises below the initial
stated monthly rental, plus property tax adjustments and operating expense
adjustments as provided in this lease.  If
the index cited above is revised or discontinued during the term of this lease
then the index that is designated by the Portland Metropolitan Association of
Building Owners and Managers to replace it shall be used.  If the monthly rent for the renewal term is
determined by appraisal and if Tenant does not, in Tenant’s sole discretion,
approve the rental amount established thereby, then Tenant may rescind its
exercise of the renewal option by giving Landlord written notice of such
election to rescind within ten (10) days after such monthly rent amount has
been established.  If Tenant rescinds its
exercise of the renewal option, then Tenant shall pay all costs and expenses of
the appraisal.

 

34.                               Additional
Rent - Operating Expense Adjustment.

Tenant shall pay as additional rent Tenant’s Proportionate Share of the
amount by which operating expenses for the Building increase over those
experienced by Landlord during the first full year of the lease term (Base
Year).  Effective January 1, 2000, the
Landlord shall estimate the amount by which operating expenses are expected to
increase, if any, over those proposed or incurred in the base year.  Monthly rental for that year shall be
increased by one-twelfth of Tenant’s share of the estimated increase.  Following the end of each calendar year,
Landlord shall compute the actual increase in operating expenses and bill
Tenant for any deficiency or credit Tenant with any excess collected.  As used herein “operating expenses” shall
mean all costs of operating and maintaining the Building as determined by
standard real estate

 

15

 

accounting practice, including, but not limited to:  all water and sewer charges; parking;
landscaping; trash removal; the cost of natural gas and electricity provided to
the Building; janitorial and cleaning supplies and services; administration
costs and management fees; security services, if any; insurance premiums;
licenses, permits for the operation and maintenance of the Building and all of its
component elements and mechanical systems; the annual amortized capital
improvement cost (amortized over such a period as Landlord may select but not
shorter than the period allowed under the Internal Revenue Code and at a
current market interest rate) for any capital improvements to the Building
required by any governmental authority.  Operating
expenses shall not include any item not charged to all other Tenants of the
building, excepting excessive electrical useage, if any, by Tenant.  Notwithstanding anything to the contrary in
the Lease:  (A) If the operating expenses
for the Base Year are not based on a fully leased Building, then such amounts
shall be increased to reflect a fully leased Building; and (B) operating
expenses shall not include and Tenant shall in no event have any obligation to
perform or to pay for the following (collectively, “Costs”):  (a) Costs occasioned by the act, omission or
violation of any Law by Landlord or any other occupant of the Building, or
their respective agents, employees or contractors; (b) Costs occasioned by
casualty or condemnation; (c) Costs to correct any construction defect in the
Premises or the Building or to comply with any CC&Rs or Law applicable to
the Premises or the Building on the Commencement Date; (d) Costs of any
renovation, improvement, painting or redecorating of any portion of the
Building not made available for Tenant’s use; (e) Costs incurred in connection
with marketing or advertising the Building, or the violation by Landlord or any
occupant of the Building (other than Tenant) of the terms and conditions of any
lease or other agreement; (f) insurance Costs for coverage not customarily paid
by tenants of similar projects in the vicinity of the Premises, increases in
insurance Costs caused by the activities of another occupant of the Project,
insurance deductibles in excess of $10,000, and co-insurance payments; (g)
Costs incurred in connection with the presence of any Hazardous Material,
except to the extent caused by the release or emission of the Hazardous
Material in question by Tenant; (h) Costs in the nature of depreciation or
other expense reserves; (i) Costs to repair, replace, restore or maintain the
structural portions of the Building (including the structural portion of roofs)
or the parking facilities serving the Building; (j) executives’ salaries; (k)
Costs which could properly be capitalized under generally accepted accounting
principles, except capital improvements to the Building required by Law not in
effect as of the Commencement Date, capital improvements to the extent they
reduce operating expenses, or capital improvements to restore or replace
existing systems and components of the Building (except as otherwise excluded
from operating expenses in this paragraph), and all such permitted capital
improvements shall be amortized over the useful life of the capital item in
question.

 

35.                               Tenant
Audit.

Tenant may audit the books, records and supporting documents of
Landlord to the extent necessary to determine the accuracy of Landlord’s
computation of additional

 

16

 

rent or rent adjustment under Sections 32 and 34 of this Lease during
normal business hours.  Such audit, if
any, will occur within one hundred twenty (120) days after Tenant receives such
notice.  Tenant shall bear the cost of
such audit, unless such audit discloses that Landlord has overstated the total
costs by more than five percent (5%) of the actual amount of such costs, in
which event Landlord shall pay the cost of Tenant’s audit not to exceed $500.00
or the overstated amount, whichever is lesser. 
Landlord shall promptly refund any overcharges to Tenant.

 

36.                               Complete
Agreement; No Implied Covenants.

This lease and the attached Exhibits and Schedules if any, constitute
the entire agreement of the parties and supersede all prior written and oral
agreements and representations, and there are no implied covenants or other
agreements between the parties except as expressly set forth in this Lease.  Neither Landlord nor Tenant is relying on any
representations other than those expressly set forth herein.

 

37.                               Captions.

The titles to the sections of this lease are descriptive only and are
not intended to change or influence the meaning of any section or to be part of
this lease.

 

38.                               Non-waiver.

Failure by either party to promptly enforce any regulation, remedy or
right of any kind under this Lease shall not constitute a waiver of the same
and such right or remedy may be asserted at any time after such party becomes
entitled to the benefit thereof notwithstanding delay in enforcement.

 

39.                               Tenant
Improvements.

Landlord at it’s sole cost and expense, shall provide tenant
improvements (the “Tenant Improvements”) to suit as detailed in Exhibit “A”
attached hereto, excepting the transformer room marked room 112.  Said tenant improvements shall be delivered
by Landlord on the commencement of the lease in a finished condition including
taped, sanded and painted drywall partitions, HVAC, drop ceiling and
fluorescent lighting fixtures, carpeting, Armstrong Excelon SDT Static
Dissipative tile (does not include installation of additional copper grounding
strips) flooring in computer rooms, and 110-volt electrical outlets every 10
feet.  Landlord shall provide the
generator room with concrete floor, 2 hour rated walls and ceiling, 110-volt
electrical outlets on walls and fluorescent lighting fixtures.  Landlord shall also provide fully improved
common areas including ground floor lobby, elevator, corridors and restrooms.  Landlord shall be responsible for all costs
associated with fire code compliance and ADA compliance.  The final cost estimate shall be determined
within ten (10) days of Landlord’s receipt of Tenant’s final space plan.

 

Tenant’s final space plan is attached hereto as Exhibit A and has been
approved by the parties hereto.  Landlord
shall cause to be prepared, as quickly as possible, final plans, specifications
and working drawings of the Tenant Improvements (“Final

 

17

 

Plans”), all of which conform to or represent logical evolutions of or
developments from Tenant’s final space plan. 
Within ten (10) days after receipt thereof, at its election (a) Tenant
may approve the Final Plans, or (b) Tenant may deliver to Landlord the specific
written changes to such plans that are necessary, in Tenant’s opinion, to
conform such plans to Tenant’s final space plan.  If Tenant desires changes, Landlord shall not
unreasonably withhold its approval of such changes and the parties shall confer
and negotiate in good faith to reach agreement on modifications to the Final
Plans.  As soon as approved by Landlord
and Tenant, Landlord shall submit the Final Plans to all appropriate
governmental agencies and thereafter the Landlord shall use its best efforts to
obtain required governmental approvals as soon as practicable.  After the Final Plans have been approved,
neither party shall have the right to require extra work or change orders with
respect to the construction of the Tenant Improvements without the prior
written consent of the other, which consent shall not be unreasonably withheld
or delayed.  All change orders shall
specify any change in the final cost estimate as a consequence of the change
order.

 

Upon Landlord obtaining the required governmental approvals for the
Tenant Improvements, Landlord shall provide Tenant early occupancy of the
Premises for Tenant’s construction of Tenant’s additional improvements set
forth below and for the installation of Tenant’s trade fixtures and equipment.  Such early occupancy shall be on the same
terms and conditions of this Lease except that Tenant shall have no obligation
to pay rent during such early occupancy.

 

Tenant shall reimburse Landlord, in cash, prior to lease commencement
for any costs that exceed $135,000.00 due to changes or additions caused by
Tenant or it’s special utility and HVAC needs, but only if such excess cost is
reflected in the final cost estimate.

 

Tenant has advised Landlord and Landlord has approved of Tenant’s
requirement for additional improvements to be located at the Premises.  Said additional improvements that are
exclusively for Tenant’s use may include, but are not necessarily limited to, a
1,200-amp, 120/208-volt, 3 phase power service with distribution, an on-site
transformer room #112 required by PGE, and ten (10) tons of roof mounted HVAC
with distribution to service Tenant’s equipment.  All costs associated with the additional
electrical and HVAC equipment installation and the transformer room shall
solely be the obligation and responsibility of Tenant.  Tenant shall contract separately with a
licensed and bonded contractor, that is pre-approved by Landlord, for said
additional tenant improvements.  Landlord
shall be held harmless and have no responsibility whatsoever for any delays
that may occur in Landlord’s completion of the standard tenant improvements to
be built by Landlord and delivery of the Premises to Tenant that are caused by
the installation of the additional tenant improvements to be installed by
Tenant.  No delay in the commencement
date of the lease term and the payment of rent when due shall be specifically
caused by the

 

18

 

Tenant installation of such additional tenant improvements.  The selection of a contractor, the location
and cost of said additional tenant improvements, including Landlord’s approval
thereof, shall be determined prior to the commencement of construction.

 

Notwithstanding anything to the contrary, Landlord shall pay, and
Tenant shall have no responsibility for, the following costs associated with
Tenant’s additional improvements:  (i)
costs to bring the Building into compliance with applicable Laws, including,
without limitation, the Americans with Disabilities Act and Hazardous Materials
Laws and (ii) costs incurred to remove Hazardous Materials from the Premises or
the Building.

 

Effective upon delivery of the Premises to Tenant, Landlord warrants
that (i) construction of the Tenant Improvements was performed in accordance
with all Laws and the Final Plans and in a good and workmanlike manner, and
(ii) all material and equipment installed in the Premises conformed to the
Final Plans and was new and otherwise of good quality.

 

40.                               Designer
Time.

Landlord, at its sole cost and expense, shall provide Tenant three (3)
hours of the Landlord’s building designer time to coordinate the carpet and
paint colors and other materials in Tenant’s leased space so they will
coordinate with the building exterior and interior colors and materials.  Tenant, at its sole cost and expense, may, at
its option, contract separately with said designer for professional services
and furniture in excess of the three hours of time provided by Landlord.

 

41.                               Financial
Information.

Landlord shall keep all financial information provided by Tenant
confidential.

 

42.                               Broker
License Disclosure.

Tenant acknowledges that it has been informed that Larry Tokarski and
Dennis Young are licensed real estate brokers in the state of Oregon, and both
have an ownership interest in the referenced property.  Dennis Young of Coldwell Banker Commercial is
representing Landlord and Tim Campbell of Campbell Commercial Real Estate is
representing Tenant.

 

43.                               Option
to Extend.

If Tenant is not then in default under any of the terms, covenants and
conditions of this Lease, and providing it shall deliver written notice to
Landlord within one hundred eighty (180) days prior to the termination of the
lease term of its election to extend the term hereof, then Tenant shall have
the option to extend the term of this Lease for one (1) additional period of
five (5) years.  It is the intent of the
parties hereto that the option herein granted to Tenant shall not be
exercisable by Tenant unless Tenant shall be in possession of the Premises as
of the date of its exercise hereof.  This
option shall terminate and be of no further force and effect in the event

 

19

 

Tenant shall either sublease or agree to sublease over fifty percent
(50%) of the Premises for all of the then current term of this lease, or assign
this Lease for the then current term hereof, or agree to enter into such
sublease or assignment, at any time up to and including the end of the lease
term, except where such sublease or assignment shall be to a Permitted
Assignee, provided that said assignee shall have assumed in full the
obligations of Tenant under this Lease.

 

44.                               Future
Development.

Landlord may in the future develop the surface parking lot located
diagonally across Commercial Street with a commercial building(s) and/or a
parking structure.  Tenant agrees to
cooperate with Landlord in the relocation of its parking spaces that are situated
on this lot to another area within a reasonable distance and/or within the
attached city owned parking structure (Liberty Square) provided there is no
additional expense to Tenant.

 

45.                               Force
Majeure.

In the event that either party hereto shall be delayed, hindered in or
prevented from performing any act required hereunder by reason of strikes,
lockouts, inability to procure material, failure of power, restrictive
governmental laws or regulations, riots, insurrection, adverse weather
conditions or fire or any other casualty any other reason of a like nature not
the fault of or beyond control of the party delayed in performing such act,
then performance of such act shall be excused for the period of the delay and
the period allowed for the performance of such act shall be extended for a
period equivalent to the period of such delay. 
This paragraph, however, shall not be deemed to extend the time at which
Tenant is entitled to an abatement of rent or to terminate the Lease
(including, without limitation, any right to abate rent or terminate the Lease
set forth in Section 3, 9, 16 and 18).

 

46.                               Repainting
and Carpet Cleaning.

At the end of the fifth (5th) year of the lease term and
provided Tenant is not and has not theretofore been in default of any terms of
the lease, Landlord shall, at it’s sole cost, repaint the interior walls of
Tenant’s suite and have the carpet cleaned. 
The paint shall be a similar color and grade as the paint originally
used.  Tenant shall be responsible, at it’s
sole cost, to relocate any of it’s furniture, fixtures and equipment so that
said painting and carpet cleaning can be done in the most timely and cost
effective manner.

 

47.                               Additional
Parking and Fire System.

(a)          Landlord has been advised by Tenant that they
will require additional surface parking lot spaces for storage of their service
vehicles that can be fenced and secured. 
Said additional parking spaces should be within reasonable proximity to
the Premises.  The number, location and
the sole cost thereof shall be the responsibility of Tenant and shall not be a
condition of this lease.  Landlord shall,
however, use it’s best efforts to help Tenant secure said additional parking
spaces.

 

20

 

(b)         Landlord has been advised by Tenant that it
must cap the existing water fire sprinkler system in the area(s) that Tenant’s
computer equipment will be located and replace with a Halon or equivalent fire
system.  This is acceptable to Landlord
provided said system is installed at Tenant’s sole cost, it meets all
governmental codes that have jurisdiction over the Premises and that Tenant
removes said fire system and replaces the existing water fire sprinkler system
upon the termination of the lease and Tenant vacating the Premises.

 

48.                               Hazardous
Materials.

To the best knowledge of Landlord, (a) no Hazardous Material is present
in the Premises or in the Building or the soil, surface water or groundwater
thereof, (b) no underground storage tanks are present on or about the Building,
and (c) no action, proceeding or claim is pending or threatened regarding the
Building concerning any Hazardous Material or pursuant to any environmental Law
except for asbestos containing floor tiles which are presently non-friable and
are or will be encapsulated by carpeting and other vinyl and ceramic floor
coverings.  Further, Landlord has been
advised that there are two (2) abandoned underground storage tanks in the alley
adjacent to the easterly property line of the Premises.  The alley is not a part of the Premises and
is publicly owned.  Under no circumstance
shall Tenant be liable for, and Landlord shall indemnify, defend, protect and
hold harmless Tenant, its agents, contractors, stockholders, directors,
successors, representatives, and assigns from and against, all losses, costs,
claims, liabilities and damages (including attorneys’ and consultants’ fees) of
every type and nature, directly or indirectly arising out of or in connection
with any Hazardous Material present at any time in, on or about the Premises or
the Building, or the soil, air, improvements, groundwater or surface water
thereof, or the violation of any environmental Law, except to the extent that
any of the foregoing actually results from the release or emission of Hazardous
Material by Tenant or its agents in violation of applicable environmental Laws.  As used in this Lease, “Hazardous Material”
shall mean any material which is now or hereafter regulated by any governmental
authority or which poses a hazard to the environment or human life.

 

49.                               No
Liens.

Landlord shall have no security interest or lien on any item of Tenant’s
trade fixtures, furniture, equipment and other personal property.  Landlord waives any right of distraint,
distress for rent or Landlord’s lien that may arise at law.

 

50.                               Title
to Premises.

Landlord represents and warrants that it has good and marketable title
to the Project, free and clear of any liens and encumbrances (except for
Continental Mortgage Company in the amount of $2,300,000.00).

 

21

 

51.                               Approvals.

Whenever the Lease requires an approval, consent, designation,
determination, selection or judgment by either Landlord or Tenant, such
approval, consent, designation, determination, selection or judgment and any
conditions imposed thereby shall be reasonable and shall not be unreasonably
withheld or delayed and, in exercising any right or remedy hereunder, each
party shall at all times act reasonably and in good faith.

 

52.                               Specialized
Equipment.

Landlord acknowledges that Tenant will keep on the Premises certain
specialized equipment in connection with the operation of Tenant’s business,
including, without limitation, the following:  (a) batteries specialized for computers, (b) a
power generator, and (c) a diesel fuel storage tank containing approximately
1,000 gallons of diesel fuel.  Landlord
hereby consents to Tenant’s storage and use of such items on the Premises.  Said diesel fuel shall be completely
contained at all times by Tenant within the generator room.

 

53.                               Reasonable
Expenditures.

Any expenditure by a party permitted or required under the Lease, for
which such party is entitled to demand and does demand reimbursement from the
other party, shall be limited to the fair market value of the goods and
services involved, shall be reasonably incurred, and shall be substantiated by
documentary evidence available for inspection and review by the other party or
its representative during normal business hours.

 

54.                               Tenant’s
Property.

Alterations and other interior improvements paid for by Tenant and
trade fixtures, furniture, equipment and other personal property installed in
the Premises (“Tenant’s Property”) shall at all times be and remain Tenant’s
Property.  Tenant may at any time remove
Tenant’s Property from the Premises, provided that Tenant repairs all damage
caused by such removal.

 

(The remainder of this page has been intentionally
left blank)

 

22

 

55.                               Exhibits

The following Exhibits are attached hereto and incorporated as a part
of this lease: Exhibit “A” - Floor and Space Plan, Exhibits “B” & “C”-
Surface Parking Lots.

 

IN WITNESS WHEREOF, the duly authorized representatives of the parties
have executed this lease as of the day and year first written below.

 

	
  LANDLORD:

  	
  TENANT:

  
	
   

  	
   

  
	
  RETRO, LLC,

  	
  ADVANCED TELCOM GROUP INC.,

  
	
  an Oregon Limited Liability Company

  	
  a California corporation

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  /s/ Lawrence Tokarski

  	
   

  	
  By:

  	
   

  	
  /s/ Charlene S. Curry

  
	
   

  	
  Lawrence Tokarski

  	
   

  	
  Charlene Curry

  
	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
  Managing Member

  	
   

  	
  Title:

  	
   

  	
  Controller

  
	
   

  	
   

  	
   

  	
   

  
	
  Date:

  	
   

  	
  1-20-99

  	
   

  	
  Date:

  	
   

  	
  1-19-99

  
	
   

  	
   

  
	
  Address for Notices:

  	
   

  
	
   

  	
   

  
	
  Landlord:

  	
  Tenant:

  
	
   

  	
   

  
	
  698 12th Street SE, Suite 210

  	
  885 N. San Antonio Rd, Suite R

  
	
  Salem, OR 97301

  	
  Los Altos, CA 94022

  
	
  Telephone: (503) 361-7168

  	
  Telephone: (650) 559-8900

  
										

 

23

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