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EXHIBIT 10.25

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STANDARD INDUSTRIAL LEASE — MULTI-TENANT

AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION

 

[GRAPHIC]

 

1.      Parties.  This Lease, dated, for reference purposes
only, November 30, 1993, is made by and between William D
& Edna J. Wright dba South Coast Business Park (herein called “Lessor”)
and q.a.d., Inc., a California Corporation (herein called “Lessee”).

 

2.      Premises, Parking and Common Areas.

 

2.1        Premises.  Lessor hereby leases to Lessee
and Lessee leases from Lessor for the term, at the rental, and upon all of the
conditions set forth herein, real property situated in the County of Santa
Barbara, State of California commonly known as South Coast
Business Park, Phases I & II (46,198 s.f. + 14,000 s.f. = 60,198 s.f)
and described as 6430 Via Real, Suite’s 3 thru 8 (building C), Carpinteria,
CA consisting of approximately 9,500 square feet (see exhibit “A” attached
hereto) herein referred to as the “Premises”, as may be outlined on an
Exhibit attached hereto. Including rights to the Common Areas as hereinafter
specified but not including any rights to the roof of the Premises or to any
Building in the Industrial Center. The Premises are a portion of a building,
herein referred to as the “Building.” The Premises, the Building, the Common Areas,
the land upon which the same are located, along with all other buildings and
improvements thereon, are herein collectively referred to as the “Industrial
Center.”

 

2.2        Vehicle
Parking. Lessee shall be entitled to 29 vehicle parking
spaces, unreserved and unassigned, on those portions of the Common Areas
designated by Lessor for parking. Lessee shall not use more parking spaces than
said number. Said parking spaces shall be used only for parking by vehicles no
larger than full size passenger automobiles or pick-up trucks, herein called
“Permitted Size Vehicles.” Vehicles other than Permitted Size Vehicles are
herein referred to as “Oversized Vehicles.” Lessee shall have the non-exclusive
right to use the lot located at 6410 Via Real for parking until such time that
construction commences

 

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

 

2.2.2  If Lessee permits or allows any of the
prohibited activities described in paragraph 2.2 of this Lease, then Lessor
shall have the right, without notice. In addition to such other rights and
remedies that it may have, to remove or tow away the vehicle involved and
charge the cost to Lessee, which cost shall be immediately payable upon demand
by Lessor.

 

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

 

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

 

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

 

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

 

(a)  To make changes to the Common Areas,
including, without limitation, changes in the location, size, shape and number
of driveways, entrances, parking spaces, parking areas, loading and unloading
areas, ingress, egress, direction of traffic, landscaped areas and walkways;
(b) To close temporarily any of the Common Areas for maintenance purposes so
long as reasonable access to the Premises remains available; (c) To designate
other land outside the boundaries of the Industrial Center to be a part of the
Common Areas; (d) To add additional buildings and improvements to the Common
Areas; (e) To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Industrial Center, or any portion
thereof; (f) To do and perform such other acts and make such other changes in,
to or with respect to the Common Areas and Industrial Center as Lessor may, in
the exercise of sound business judgment, deem to be appropriate.

 

2.6.1        Lessor shall at all
times provide the parking facilities required by applicable law and in no event
shall the number of parking spaces that Lessee is entitled to under paragraph
2.2 be reduced.

 

3.      Term.

 

3.1       Term.  The term of this Lease shall be for fifty-six
(56) months commencing on 5/1/94 or upon receipt of final approval from
city of Carp and ending on in any event + December 31, 1998 unless
sooner terminated pursuant to any provision hereof. See Addendum.

 

3.2       Delay
in Possession. 
Notwithstanding said commencement date, if for any reason Lessor cannot deliver
possession of the Premises to Lessee on said date, Lessor shall not be subject
to any liability therefor, nor shall such failure affect the validity of this
Lease or the obligations of Lessee hereunder or extend the term hereof, but in
such case, Lessee shall not be obligated to pay rent or perform any other
obligation of Lessee under the terms of this Lease, except as may be otherwise
provided in this Lease, until possession of the Premises is tendered to Lessee.

 

3.3       Early
Possession.  If
Lessee occupies the Premises prior to said commencement date, such occupancy
shall be subject to all provisions of this Lease, such occupancy shall not
advance the termination date, and Lessee shall pay rent for such period at the
initial monthly rates set forth below.

 

4.      Rent.

 

4.1       Base
Rent.  Lessee
shall pay to Lessor, as Base Rent for the Premises, without any offset or
deduction, except as may be otherwise expressly provided in this Lease, on the 1st
day of each month of the term hereof, monthly payments in advance of $ 11,875.00.
See Addendum for cost of living adjustments to Base Rent, and determination of
rent during Extension Periods. Lessee shall pay Lessor upon execution
hereof $ 11,875.00 as Base Rent for first month’s rent Rent for
any period during the term hereof which is for less than one month shall be a
pro rata portion of the Base Rent. Rent shall be payable in lawful money of the
United States to Lessor at the address stated herein or to such other persons
or at such other places as Lessor may designate in writing.

 

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

(a)  “Lessee’s Share” is defined, for purposes of
this Lease, as 15.78 percent, guaranteed not to exceed $.22

(b)  “Operating Expenses” is declined, for
purposes of this Lease, as all costs incurred by Lessor, if any, for: per s.f.
for the first 12 months of occupancy

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

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

        (bb)  Trash disposal services;

        (cc)  Tenant directories;

        (dd)  Fire detection systems including sprinkler
system maintenance and repair;

 

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        (ee)  Security services;

        (ff)  Any other service to be provided by Lessor
that is elsewhere in this Lease stated to be an “Operating Expense”;

(ii)  Any deductible portion of
an insured loss concerning any of the items or matters described in this
paragraph 4.2;

(iii)  The cost of the premiums
for the liability and property insurance policies to be maintained by Lessor
under paragraph 8 hereof;

(iv)  The amount of the real
property tax to be paid by Lesor under paragraph 10.1 hereof;

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

 

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

 

(d)  Lessee’s Share of Operating Expenses shall
be payable by Lessee within ten (10) days after a reasonably detailed statement
of actual expenses is presented to Lessee by Lessor. At Lessor’s option,
however, an amount may be estimated by Lessor from time to time of Lessee’s
Share of annual Operating Expenses and the same shall be payable monthly or
quarterly, as Lessor shall designate during each twelve-month period of the
Lease term, on the same day as the Base Rent is due hereunder. In the event
that Lessee pays Lessor’s estimate of Lessee’s Share of Operating Expenses as
aforesaid, Lessor shall deliver to Lessee within sixty (60) days after the
expiration of each calendar year a reasonably detailed statement showing
Lessee’s Share of the actual Operating Expenses incurred during the preceding
year. If Lessee’s payments under this paragraph 4.2(d) during said preceding
year exceed Lessee’s Share as indicated on said statement, Lessee shall be
entitled to credit the amount of such overpayment against Lessee’s Share of
Operating Expenses next falling due. If Lessee’s payments under this paragraph
during said preceding year were less than Lessee’s Share as indicated on said
statement. Lessee shall pay to Lessor the amount of the deficiency within ten
(10) days after delivery by Lessor to Lessee of said statement.

 

5.        Security
Deposit. 
Lessee shall deposit with Lessor upon execution hereof $11,875.00
as security for Lessee’s faithful performance of Lessee’s obligation hereunder.
If Lessee fails to pay rent or other charges due hereunder, or otherwise
defaults with respect to any provision of this Lease, Lessor may use, apply or
retain all or any portion of said deposit for the payment of any rent or other
charge in default or for the payment of any other sum to which Lessor may
become obligated by reason of Lessee’s default, or to compensate Lessor for any
loss or damage which Lessor may suffer thereby. If Lessor so uses or applies
all or any portion of said deposit, Lessee shall within ten (10) days after
written demand therefor deposit cash with Lessor in an amount sufficient to
restore said deposit to the full amount then required of Lessee. If the monthly
rent shall, from time to time, increase during the term of this Lease, Lessee
shall at the time of such increase, deposit with Lessor additional money as a
security deposit so that the total amount of the security deposit held by
Lessor shall at all times bear the same proportion to the than current Base
Rent as the initial security deposit bears to the Initial Base Rent set forth
in paragraph 4. Lessor shall not be required to keep said security deposit
separate from its general accounts. If Lessee performs all of Lessee’s
obligations hereunder, said deposit, or so much thereof as has not theretofore
been applied by Lessor, shall be returned, without payment of interest or other
increment for its use, to Lessee (or, at Lessor’s option, to the last assignee,
if any, of Lessee’s interest hereunder) all the expiration of the term hereof,
and after Lessee has vacated the Premises. No trust relationship is created
herein between Lessor and Lessee with respect to said Security Deposit.

 

6.     Use.

 

6.1. 
Use.  The Premises shall be used and occupied only for the purpose of
manufacturing, developing and marketing computer software, & training class
and for no other use without Lessor’s prior written consent. See Addendum
for additional terms.

 

6.2. 
Compliance with Law.

 

                  (a) 
Lessor warrants to Lessee that the Premises, in the state existing on
the date that the Lease term commences, but without regard to the use for which
Lessee will occupy the Premises, does not violate any covenants or restrictions
of record, or any applicable building code, regulation or ordinance in effect
on such Lease term commencement date. In the event it is determined that this
warranty has been violated, then it shall be the obligation of the Lessor,
after written notice from Lessee, to promptly, at Lessor’s sole cost and
expense, rectify any such violation. In the event Lessee does not give to
Lessor written notice of the violation of this warranty within six months from
the date that the Lease term commences, the correction of same shall be the
obligation of the Lessee of Lessee’s sole cost. The warranty contained in this
paragraph 6.2(a) shall be of no force of effect if, prior to the date of this
Lease, Lessee was an owner or occupant of the Premises and, in such event,
Lessee shall correct any such violation at Lessee’s sole cost.

 

                  (b) 
Except as provided in paragraph 6.2(a) Lessee shall, at Lessee’s
expense, promptly comply with all applicable statutes, ordinances, rules,
regulations, orders, covenants and restrictions of record, and requirements of
any life insurance underwriters or rating bureaus, now in effect or which may
hereafter come into effect, whether or not they reflect a change in policy from
that now existing, during the term or any part or the term hereof, relating in any
manner to the Premises and the occupation and use by Lessee of the Premises and
of the Common Areas. Lessee shall not use nor permit the use of the Premises or
the Common Areas in any manner that will tend to create waste or a nuisance or
shall lend to disturb other occupants of the Industrial Center.

 

6.3.       Condition of Premises.

 

                  (a) 
Lessor shall deliver the Premises to Lessee clean and free of debris on
the Lease commencement date (unless Lessee is already in possession) and Lessor
warrants to Lessee that the plumbing, lighting, air conditioning, heating, and
loading doors in the Premises shall be in good operating condition on the Lease
commencement date. In the event that it is determined that this warranty has
been violated, then it shall be the obligation of Lessor, after receipt of
written notice from Lessee setting forth with specificity the nature of the
violation, to promptly, at Lessor’s sole cost, rectify such violation. Lessee’s
failure to give such written notice to Lessor within thirty (30) days after the
Lease commencement date shall cause the conclusive presumption that Lessor has
complied with all of Lessor’s obligations hereunder. The warranty contained in
this paragraph 6.3(a) shall be of no force or effect if prior to the date of this
Lease, Lessee was an owner or occupant of the Premises. See Addendum.

 

                  (b) 
Except as otherwise provided in this Lease, Lessee hereby accepts the
Premises in their condition existing as of the Lease commencement date or the
date that Lessee takes possession of the Premises, whichever is earlier,
subject to all applicable zoning, municipal, county and state laws, ordinances
and regulations governing and regulating the use of the Premises, and any
covenants or restrictions of record, and accepts this Lease subject thereto and
to all matters disclosed thereby and by any exhibits attached hereto. Lessee
acknowledges that neither Lessor nor Lessor’s agent has made any representation
or warranty as to the present of future suitability of the Premises for the conduct
of Lessee’s business.

 

7.      Maintenance, Repairs, Alterations and
Common Area Services.

 

          7.1. 
Lessor’s Obligations.  Subject to the provisions of paragraphs 4.2 (Operating Expenses),
6 (Use), 7.2 (Lessee’s Obligations) and 9 (Damage or Destruction) and except
for damage caused by any negligent or intentional act or omission of Lessee,
Lessee’s employees, suppliers, shippers, customers, or invitees, in which event
Lessee shall repair the damage, Lessor, at Lessor’s expense, subject to
reimbursement pursuant to paragraph 4.2, shall keep in good condition and
repair the foundations, exterior walls, structural condition of interior
bearing walls, and roof of the Premises, as well as the parking lots, walkways,
driveways, landscaping, fences, signs and utility installations of the Common
Areas and all parts thereof, as well as providing the services for which there
is an Operating Expense pursuant to paragraph 4.2. Lessor shall not, however,
be obligated to paint the exterior or interior surface of exterior walls, nor
shall Lessor be required to maintain, repair or replace windows, doors or plate
glass of the Premises. Lessor shall have no obligation to make repairs under
this paragraph 7.1 until a reasonable time after receipt of written notice from
Lessee of the need for such repairs. Lessee expressly waives the benefits of
any statute now or hereafter in effect which would otherwise afford Lessee the
right to make repairs at Lessor’s expense or to terminate this Lease because
Lessor’s failure to keep the Premises in good order, condition and repair.
Lessor shall not be liable for damages or loss of any kind of nature by reason
of Lessor’s failure to furnish any Common Area Services when such failure is
caused by accident, breakage, repairs, strikes, lockout, or other labor
disturbances of disputes of any character, or by any other cause beyond the
reasonable control of Lessor.

 

          7.2. 
Lessee’s Obligations.

 

(a)  Subject to the provisions
of paragraphs 6 (Use), 7.1 (Lessor’s Obligations), and 9 (Damage or Destruction),
Lessee, at Lessee’s expense, shall keep in good order, condition and repair the
Premises and every part thereof (whether or not the damaged portion of the
Premises or the means of repairing the same are reasonably or readily
accessable to Lessee) including, without limiting the generality of the
foregoing, all plumbing, heating, ventilating and air conditioning systems
(Lessee shall procure and maintain, at Lessee’s expense, a ventilating and air
conditioning system maintenance contract), electrical and lighting facilities
and equipment within the Premises, fixtures, interior walls and interior
surfaces of exterior walls, ceilings, windows, doors, plate glass, and
skylights located within the Premises. Lessor reserves the right to procure and
maintain the ventilating and air conditioning system maintenance contract and
if Lessor so elects, Lessee shall reimburse Lessor, upon demand, for the cost
thereof. Lessee shall be responsible for clean-up of all hazardous waste
occurring in or about the premises.

 

(b)  If Lessee fails to perform
Lessee’s obligations under this paragraph 7.2 or under any other paragraph of
this Lease, Lessor may enter upon the Premises after ten (10) days prior
written notice to Lessee (except in the case of emergency, in which no notice
shall be required), perform such obligations on Lessee’s behalf and put the
Premises in good order, condition and repair, and the cost thereof together
with interest thereon at the maximum rate then allowable by law shall be due
and payable as additional rent to Lessor together with Lessee’s next Base Rent
installment.

 

(c)  On the last day of the term
hereof, or on any sooner termination, Lessee shall surrender the Premises to
Lessor in the same condition as received, ordinary wear and tear excepted,
clean and free of debris. Any damage or deterioration of the Premises shall not
be deemed ordinary wear and tear if the same could have been prevented by good
maintenance practices. Lessee shall repair any damage to the Premises
occasioned by the installation or removal of Lessee’s trade fixtures,
alterations, furnishings and equipment. Notwithstanding anything to the
contrary otherwise stated in this Lease, Lessee shall leave the air lines,
power panels, electrical distribution systems, lighting fixtures, space
heaters, air conditioning, plumbing and fencing on the Premises in good
operating condition.

 

          7.3. 
Alterations and Additions.

 

(a)  Lessee shall not without
Lessor’s prior written consent make any alterations, improvements, additions,
or Utility installations in, on or about the Premises, or the Industrial
Center, except for nonstructural alterations to the Premises not exceeding
$2,500 in cumulative costs, during the term of this Lease. In any event,
whether or not in excess of $2,500 in cumulative cost, Lessee shall make no
change or alteration to the 

 

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exterior of the Premises nor
the exterior of the Building nor the Industrial Center without Lessor’s prior
written consent. As used in this paragraph 7.3 the term “Utility Installation”
shall mean carpeting, window coverings, air lines, power panels, electrical
distribution systems, lighting fixtures, space heaters, air conditioning,
plumbing, and fencing. Lessor may require that Lessee remove any or all of said
alterations, improvements, additions or Utility Installations at the expiration
of the term, and restore the Premises and the Industrial Center to their prior
condition. Lessor may require Lessee to provide Lessor, at Lessee’s sole cost
and expense, a lien and completion bond in an amount equal to one and one-half
times the estimated cost of such improvements, to insure Lessor against any
liability for mechanic’s and materialmen’s liens and to insure completion of the
work. Should Lessee make any alterations, improvements, additions or Utility
Installations without the prior approval of Lessor, Lessor may at any time
during the term of this lease, require that Lessee remove any or all of the
same.

 

(b)  Any alterations,
improvements, additions or Utility Installations in or about the Premises or
the Industrial Center that Lessee shall desire to make and which requires the
consent of the Lessor shall be presented to Lessor in written form, with
proposed detailed plans. If Lessor shall give its consent, the consent shall be
deemed conditioned upon Lessee acquiring a permit to do so from appropriate
governmental agencies, the furnishing of a copy thereof to Lessor prior to the
commencement of the work and the compliance by Lessee of all conditions of said
permit in a prompt and expeditious manner.

 

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

 

(d)  All alterations,
improvements, additions and Utility Installations (whether or not such Utility
Installations constitute trade fixtures of Lessee), which may be made on the
Premises, shall be the property of Lessor and shall remain upon and be
surrendered with the Premises at the expiration of the Lease term, unless Lessor
requires their removal pursuant to paragraph 7.3(a). Notwithstanding the
provisions of this paragraph 7.3(d), Lessee’s machinery and equipment, other
than that which is affixed to the Premises so that it cannot be remove without
material damage to the Premises, and other than Utility Installations, shall
remain the Property of Lessee and may be removed by Lessee subject to the
provisions of paragraph 7.2.

 

7.4 
Utility Additions.  Lessor reserves the right to install new or additional utility
facilities throughout the Building and the Common Areas for the benefit of
Lessor or Lessee, or any other lessee, or any other lessee of the Industrial
Center, including, but not by way of limitation, such utilities as plumbing,
electrical systems, security systems, communication systems, and fire
protection and detection systems, so long as such installations do not
unreasonably interfere with Lessee’s use of the Premises.

 

8.      Insurance; Indemnity.

 

8.1 Liability Insurance — Lessee.

See page 8 after article number
49

 

8.2. 
Liability Insurance — Lessor.  Lessor shall obtain and keep in force during
the term of this Lease a policy of Combined Single Limit Bodily Injury and
Property Damage Insurance, insuring Lessor, but not Lessee, against any
liability arising out of the ownership, use, occupancy or maintenance of the
Industrial Center in an amount not less than $1,000,000 per occurrence.

 

8.3. 
Property Insurance.  Lessor shall obtain and keep in force during the term of this
Lease a policy or policies of insurance covering loss or damage to the
Industrial Center improvements, but not Lessee’s personal property, fixtures,
equipment or tenant improvements, in an amount not to exceed the full
replacement value thereof, as the same may exist from time to time, providing
protection against all perils included within the classification of fire,
extended coverage, vandalism, malicious mischief, flood (in the event same is
required by a lender having a lien on the Premises) special extended perils
(“all risk” as such term is used in the insurance industry), plate glass
insurance and such other insurance as Lessor deems advisable. In addition,
Lessor shall obtain and keep in force, during the term of this Lease, a policy
of rental value insurance covering a period of one year, with loss payable to
Lessor, which insurance shall also cover all Operating Expanses for said
period. In the event that the Premises shall suffer an insured loss as defined
in paragraph 9.1(g) hereof, the deductible amounts under the casualty insurance
policies relating to the Premises shall be paid by Lessee.

 

8.4 
Payment of Premium Increase.

 

(a)  After the term of this
Lease has commenced, Lessee shall not be responsible for paying Lessee’s Share
of any increase in the property insurance premium for the Industrial Center
specified by Lessor’s insurance carrier as being caused by the use, acts or
omissions of any other lessee of the Industrial Center, or by the nature of
such other lessee’s occupancy which create an extraordinary or unusual risk.

 

(b)  Lessee, however, shall pay
the entirety of any increase in the property insurance premium for the
Industrial Center over what it was immediately prior to the commencement of the
term of this Lease if the increase is specified by Lessor’s insurance carrier as
being caused by the nature of Lessee’s occupancy or any act or omission of
Lessee.

 

8.5 
Insurance Policies.  Insurance required hereunder shall be in companies holding a
“General Policyholders Rating” of at least B plus or such other ratings as may
be required by a lender having a lien on the Premises, as set forth in the most
current issues of “Best’s Insurance Guide.” Lessee shall not do or permit to be
done anything which shall invalidate the insurance policies carried by Lessor.
Lessee shall deliver to Lessor copies of liability insurance policies required
under paragraph 8.1 or certificates evidencing the existence and amounts of
such insurance within seven (7) days after the commencement date of this Lease.
No such policy shall be cancelable or subject to reduction of coverage or other
modification except after thirty (30) days prior written notice to Lessor.
Lessee shall, at least thirty (30) days prior to the expiration of such
policies, furnish Lessor with renewals or “binders” thereof.

 

8.6 
Walver of Subrogation.  Lessee and Lessor each herby release and
relieve the other, and waive their entire right of recovery against the other
for loss or damage arising out of or incident to the perils insured against
which perils occur in, on or about the Premises, whether due to the negligence
of Lessor or Lessee or their agents, employees, contractors and/or invitees.
Lessee and Lessor shall, upon obtaining the policies of insurance required give
notice to the insurance carrier or carriers that the foregoing mutual waiver of
subrogation is contained in this Lease.

 

8.7 
Indemnity. 
Lessee shall indemnify and hold harmless Lessor from and against any and
all claims arising from Lessee’s use of the Industrial Center, or from the
conduct of Lessee’s business or from any activity, work or things done,
permitted or suffered by Lessee in or about the Premises or elsewhere and shall
further indemnify and hold harmless Lessor from and against any and all claims
arising from any breach or default in the performance of any obligation on
Lessee’s part to be performed under the terms of this Lease, or arising from
any act or omission of Lessee, or any of Lessee’s agents, contactors, or
employees, and from and against all costs, attorney’s fees, expenses and
liabilities incurred in the defense of any such claim or any action or
proceeding brought thereon; and in case any action or proceeding be brought
against Lessor by reason of any such claim, Lessee upon notice from Lessor
shall defend the same at Lessee’s expense by counsel reasonably satisfactory to
Lessor and Lessor shall cooperate with Lessee in such defense. Lessee, as a
material part of the consideration to Lessor, hereby assumes all risk of damage
to property of Lessee or injury to person, in, upon or about the Industrial
Center arising from any cause and Lessee hereby waives all claims in respect
thereof against Lessor. See Addendum.

 

8.8 
Exemption of Lessor from Liability.  Lessee hereby agrees that Lessor shall not
be liable for injury to Lessee’s business or any loss of income therefrom or
for damage to the goods, wares, merchandise or other property of Lessee,
Lessee’s employees, invitees, customers, or any other person in or about the
Premises or the Industrial Center, nor shall Lessor be liable for injury to the
person of Lessee. Lessee’s employees, agents of contractors, whether such
damage or injury is caused by or results from fire, steam, electricity, gas,
water or rain, or from the breakage, leakage, obstruction or other defects or
pipes, sprinklers, wires, appliances, plumbing, air conditioning or lighting
fixtures, or from any other cause, whether said damage or injury results from
conditions arising upon the Premises or upon other portions of the Industrial
Center, or from other sources or places and regardless of whether the cause of
such damage or injury or the means of repairing the same is inaccessible to
Lessee. Lessor shall not be liable for any damages arising from any act or
neglect of any other lessee, occupant or user of the Industrial Center, nor
from the failure of Lessor to enforce the provisions of any other lease of the
Industrial Center.

 

9.      Damage or Destruction.

 

9.1 
Definitions.

 

(a)  “Premises Partial Damage”
shall mean if the Premises are damaged or destroyed to the extent that the cost
of repair is less than fifty percent of the then replacement cost of the
Premises.

 

(b)  “Premises Total
Destruction” shall mean if the Premises are damaged or destroyed to the extent
that the cost of repair is fifty percent or more of the then replacement cost
of the Premises.

 

(c)  “Premises Building Partial
Damage” shall mean if the Building of which the Premises are a part is damaged
or destroyed to the extent that the cost to repair is less than fifty percent
of the then replacement cost of the Building.

 

(d)  “Premises Building Total
Destruction” shall mean if the Building of which the Premises are a part is
damaged or destroyed to the extent that the cost to repair is fifty percent or
more of the then replacement cost of the Building.

 

(e)  “Industrial Center
Buildings” shall mean all of the buildings on the Industrial Center site.

 

(f)  “Industrial Center
Buildings Total Destruction” shall mean if the Industrial Center Buildings are
damaged or destroyed to the extent that the cost of repair is fifty percent or
more of the then replacement cost of the Industrial Center Buildings.

 

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(g)  “Insured Loss” shall mean
damage or destruction which was covered by an event required to be covered by
the Insurance described “paragraph 8. The fact that an Insured Loss has a
deductible amount shall not make the loss an uninsured loss.

 

(h)  “Replacement Cost” shall
mean the amount of money necessary to be spent in order to repair or rebuild
the damaged area to the condition that existed immediately prior to the damage
occurring excluding all improvements made by lessees.

 

9.2 
Premises Partial Damage; Premises Building Partial Damage.

 

(a)  Insured Loss:  Subject to the provisions of paragraphs 9.4 and 9.5, if at any
time during the term of this Lease there is damage which is an Insured Loss and
which falls into the classification of either Premises Partial Damage or
Premises Building Partial Damage, then Lessor shall, at Lessor’s expenses, repair
such damage to the Premises, but not Lessee’s fixtures, equipment or tenant
improvements, as soon as reasonably possible and this Lease shall continue in
full force and effect.

 

(b)  Uninsured Loss:  Subject to the provisions of paragraphs 9.4 and 9.5, if at any
time during the term of this Lease there is damage which is not an Insured Loss
and which falls within the classification of Premises Partial Damage or
Premises Building Partial Damage, unless caused by a negligent or willful act
of Lessee (in which event Lessee shall make the repairs at Lessee’s expense),
which damage prevents Lessee from using the Premises, Lessor or may at Lessor’s
option either (i) repair such damage as soon as reasonably possible at Lessor’s
expense, in which event this Lease shall continue in full force and effect, or
(ii) give written notice to Lessee within thirty (30) days after the date of
the occurrence of such damage of Lessor’s intention to cancel and terminate
this Lease as of the date of the occurrence of such damage. In the event Lessor
elects to give such notice of Lessor’s intention to cancel and terminate this
Lease, Lessee shall have the right within ten (10) days after the receipt of
such notice to give written notice to Lessor of Lessee’s intention to repair such
damage at Lessee’s expense, without reimbursement from Lessor, in which event
this Lease shall continue in full force and effect, and Lessee shall proceed to
make such repairs as soon as reasonably possible. If Lessee does not give such
notice within such 10-day period this Lease shall be cancelled and terminated
as of the date of the occurrence of such damage.

 

9.3 
Premises Total Destruction; Premises Building Total Destruction;
Industrial Center Buildings Total Destruction.

 

(a)  Subject to the provisions of paragraphs 9.4
and 9.5, if at any time during the term of this Lease there is damage, whether
or not it is an Insured Loss, and which falls into the classifications of
either (i) Premises Total Destruction, or (ii) Premises Building Total
Destruction, or (iii) Industrial Center Buildings Total Destruction, then
Lessor may at Lessor’s option either (i) repair such damage or destruction, but
not Lessee’s fixtures, equipment or tenant improvements, as soon as reasonably
possible at Lessor’s expense, and this Lease shall continue in full force and
effect, or (ii) give written notice to Lessee within thirty (30) days after the
date of occurrence of such damage of Lessor’s intention to cancel and terminate
this Lease, in which case this Lease shall be cancelled and terminated as of
the date of the occurrence of such damage.

 

9.4 
Damage Near End of Term.

 

(a)  Subject to paragraph 9.4(b), if at any time
during the last six months of the term of this Lease there is substantial
damage, whether or not an Insured loss, which falls within the classification
of Premises Partial Damage, Lessor may at Lessor’s option cancel and terminate
this Lease as of the date of occurrence of such damage by giving written notice
to Lessee of Lessor’s election to do so within 30 days after the date of
occurrence of such damage.

 

(b)  Notwithstanding paragraph 9.4(a), in the
event that Lessee has an option to extend or renew this Lease, and the time
within which said option may be exercised has not yet expired, Lessee shall
exercise such option, if it is to be exercised at all, no later than twenty
(20) days after the occurrence of an insured Loss falling within the
classification of Premises Partial Damage during the last six months of the
term of this Lease. If Lessee duly exercises such option during said twenty
(20) day period, Lessor shall, at Lessor’s expense, repair such damage, but not
Lessee’s fixtures, equipment or tenant improvements, as soon as reasonably
possible and this Lease shall continue in full force and effect. If Lessee
fails to exercise such option during said twenty (20) day period by giving
written notice to Lessee of Lessor’s election to do so within ten (10) days
after the expiration of said twenty (20) day period, notwithstanding any term
or provision in the grant of option to the contrary.

 

9.5 
Abatement of Rent; Lessee’s Remedies.

 

(a)  In the event Lessor repairs or restores the
Premises pursuant to the provisions of this paragraph 9, the rent payable
hereunder for the period during which such damage, repair or restoration
continues shall be abated in proportion to the degree to which Lessee’s use of
the Premises is impaired. Except for abatement of rent, if any, Lessee shall
have no claim against Lessor for any damage suffered by reason of any such
damage, destruction repair or restoration.

 

(b)  If Lessor shall be obligated to repair or
restore the Premises under the provisions of this paragraph 9 and shall not
commence such repair or restoration within ninety (90) days after such
obligation shall accrue, Lessee may at Lessee’s option cancel and terminate
this Lease by giving Lessor written notice of Lessee’s election to do so at any
time prior to the commencement of such repair or restoration. In such event
this Lease shall terminate as of the date of such notice.

 

9.6 
Termination – Advance Payments.  Upon termination of this Lease pursuant to
this Paragraph 9, an equitable adjustment shall be made concerning advance rent
and any advance payments made by Lessee to Lessor. Lessor shall, in addition,
return to Lessee so much of Lessee’s security deposit as has not theretofore
been applied by Lessor.

 

9.7 
Waiver. 
Lessor and Lessee waive the provisions of any statute which relate to
termination of leases when leased property is destroyed and agree that such event
shall be governed by the terms of this Lease.

 

10.    Real Property Taxes.

 

10.1 Payment of Taxes.  Lessor shall pay the real property tax, as
defined in paragraph 10.3. applicable to the Industrial Center subject to
reimbursement by Lessee of Lessee’s Share of such taxes in accordance with the
provisions of paragraph 4.2, except as otherwise provided in paragraph 10.2.

 

10.2 
Additional Improvements.  Lessee shall not be responsible for paying
Lessee’s Share of any increase in real property tax specified in the tax
assessor’s records and work sheets as being caused by additional improvements
placed upon the Industrial Center by other lessees or by Lessor for the
exclusive enjoyment of such other lessees. Lessee shall, however, pay to Lessor
at the time that Operating Expenses are payable under paragraph 4.2(c) the
entirety of any increase in real property tax if assessed solely by reason of
additional improvements place upon the Premises by Lessee or at Lessee’s
request.

 

10.3 
Definition of “Real Property Tax.”  As used herein, the term “real property tax”
shall include any form of real estate tax or assessment, general, special,
ordinary or extraordinary, and any license fee, commercial rental tax,
improvement bond or bonds, levy or tax (other than inheritance, personal income
or estate taxes) imposed on the Industrial Center or any portion thereof by any
authority having the direct or indirect power to tax, including any city,
county, state or federal government, or any school, agricultural, sanitary, fire,
street, drainage or other improvement district thereof, as against any legal or
equitable interest of Lessor in the Industrial Center or in any portion
thereof, as against Lessor’s right to rent or other income therefrom, and as
against Lessor’s business of leasing the Industrial Center. Ther term “real
property tax” shall also include any tax, fee, levy, assessment or charge (i)
in substitution of, partially or totally, any tax, fee, levy, assessment or
charge hereinabove included within the definition of “real property tax,” or
(ii) the nature of which was hereinbefore included within the definition of
“real property tax.” or (iii) which is imposed for a service or right not
charged prior to June 1, 1978, or, if previously charged, has been increased since
June 1, 1978, or (iv) which is imposed as a result of a transfer, either
partial or total, of Lessor’s interest in the Industrial Center or which is
added to a tax or charge hereinbefore included within the definition of real
property tax by reason of such transfer, or (v) which is imposed by reason of
this transaction, any modifications or changes hereto, or any transfers hereof.

 

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

 

10.5 
Personal Property Taxes.

 

(a)  Lessee shall pay prior to delinquency all
taxes assessed against and levied upon trade fixtures, furnishings, equipment
and all other personal property of Lessee contained in the Premises or
elsewhere. When possible, Lessee shall cause said trade fixtures, furnishings,
equipment all other personnel property to be assessed and billed separately
from the real property of Lessor.

 

(b)  If any of Lessee’s said personal property
shall be assessed with Lessor’s real property, Lessee shall pay to Lessor the
taxes attributable to Lessee within ten (10) days after receipt of a written
statement setting forth the taxes applicable to Lessee’s property.

 

11     Utilities.  Lessee shall pay for all water, gas, heat,
light, power, telephone and other utilities and services supplied to the
Premises, together any taxes thereon. If any such services are not separately
metered to the Premises, Lessee shall pay at Lessor’s option, either Lessee’s
Share or reasonable proportion to be determined by Lessor of all charges
jointly metered with other premises in the Building.

 

12     Assignment and Subletting.

 

12.1  Lessor’s Consent Required.  Lessee shall not voluntarily or by operation
of law assign, transfer, mortgage, sublet, or otherwise transfer or encumber
all or any part of Lessee’s interest in the Lease or in the Premises, without
Lessor’s prior written consent, which Lessor shall not reasonably withhold.
Lessor shall respond to Lessee’s request for consent hereunder in a timely
manner and any attempted assignment, transfer, mortgage, encumbrance or
subletting without such consent shall be void, and shall constitute a breach of
this Lease without the need for notice to Lessee under paragraph 13.1. See
Addendum for additional terms.

 

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12.3 
Terms and Conditions of Assignment.  Regardless of Lessor’s consent, no
assignment shall release Lessee of Lessee’s obligations hereunder or alter the
primary liability of Lessee to pay the Base Rent and Lessee’s Share of
Operating Expenses, and to perform all other obligations to be performed by
Lessee hereunder Lessor may accept rent from any person other than Lessee
pending approval of disapproval of such assignment. Neither a delay in the
approval or disapproval of such assignment nor the acceptance of rent shall
constitute a waiver or estoppel of Lessor’s right to exercise its remedies for
the breach of any of the terms or conditions of this paragraph 12 or this
Lease. Consent to one assignment shall not be a deemed consent to any
subsequent assignment. In the event of default by any assignee of Lessee or any
successor of Lessee, in the performance of any of the terms hereof, Lessor may
proceed directly against Lessee without the necessity of exhausting remedies
against said assignee. Lessor may consent to subsequent assignments of this
Lease or amendments or modifications to this Lease with assignees of Lessee,
without notifying Lessee, or any successor of Lessee, and without obtaining its
or their consent thereto and such action shall not relieve Lessee of liability
under this Lease.

 

12.4 
Terms and Conditions Applicable to Subletting.  Regardless of Lessor’s consent, the
following terms and conditions shall apply to any subletting by Lessee
subletting by Lessee of all or any part of the Premises and shall be included
in subleases:

 

(a)  Lessee hereby assigns and transfer to Lessor
all of Lessee’s interest in all rentals and income arising from any sublease
heretofore or hereafter made by Lessee, and Lessor may collect such rent and
income and apply same toward Lessee’s obligations under this Lease; provided, however,
that until a default shall occur in the performance of Lessee’s obligations
under this Lease, Lessee may receive, collect and enjoy the rents accruing
under such sublease. Lessor shall not, by reason of this or any other
assignment of such sublease to Lessor nor by reason of the collection of the
rents from a sublessee, be deemed liable to the sublessee for any failure of
Lessee to perform and comply with any of Lessee’s obligations to such sublessee
under such sublease. Lessee hereby irrevocably authorizes and directs any such
sublessee, upon receipt of a written notice from Lessor stating that a default
exists in the performance of Lessee’s obligations under this Lease, to pay to
Lessor the rents due and to become due under the sublease. Lessee agrees that
such sublessee shall have the right to rely upon any such statement and request
from Lessor, and that such sublessee shall pay such rents to Lessor without any
obligation or right to inquire as to whether such default exists and
notwithstanding any notice from or claim from Lessee to the contrary. Lessee
shall have no right or claim against such sublessee or Lessor for any such
rents so paid by said sublessee to Lessor.

 

(b)  No sublease entered into by Lessee shall be
effective unless and until it has been approved in writing by Lessor. In
entering into any sublease, Lessee shall use only such form of sublease as is
satisfactory to Lessor, and once approved by Lessor, such sublease shall not be
changed or modified without Lessor’s prior written consent. Any sublessee
shall, by reason of entering into a sublease under this Lease, be deemed, for
the benefit of Lessor, to have assumed and agreed to conform and comply with
each and every obligation herein to be performed by Lessee other than such obligations
as are contrary to or inconsistent with provisions contained in a sublease to
which Lessor has expressly consented in writing.

 

(c)  If Lessee’s obligations under this Lease
have been guaranteed by third parties, then a sublease, and Lessor’s consent
thereto, shall not be effective unless said guarantors give their written
consent to such sublease and the terms thereof.

 

(d)  The consent by Lessor to any subletting
shall not release Lessee from its obligations or after the primary liability of
Lessee to pay the rent and perform and comply with all of the obligations of
Lessee to be performed under this Lease.

 

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

 

(f)  In the event of any default under this
Lease, Lessor may proceed directly against Lessee, any guarantors or any one
else responsible for the performance of this Lease, including the sublessee,
without first exhausting Lessor’s remedies against any other person or entity
responsible therefor to Lessor, or any security held by Lessor or Lessee.

 

(g)  In the event Lessee shall default in the
performance of its obligations under this Lease, Lessor, at its option and
without any obligation to do so, may require any sublessee to attorn to Lessor,
in which event Lessor shall undertake the obligations of Lessee under such
sublease from the time of the exercise of said option to the termination of
such sublease: provided, however, Lessor shall not be liable for any prepaid
rents or security deposit paid by such sublessee to Lessee or for any other
prior defaults of Lessee under such sublease.

 

(h)  Each and every consent required of Lessee
under a sublease shall also require the consent of Lessor.

 

(i)  No sublessee shall further assign or sublet
all or any part of the Premises without Lessor’s prior written consent.

 

(j)  Lessor’s written consent to any subletting
of the Premises by Lessee shall not constitute an acknowledgement that no
default then exists under this Lease of the obligations to be performed by
Lessee nor shall such consent be deemed a waiver of any then existing default,
except as may be otherwise stated by Lessor at the time.

 

(k)  With respect to any subletting to which
Lessor has consented, Lessor agrees to deliver a copy of any notice of default
by Lessee to the sublessee. Such sublessee shall have the right to cure a
default of Lessee within ten (10) days after service of said notice of default
upon such sublessee, and the sublessee shall have a right of reimbursement and
offset from and against Lessee for any such defaults cured by the sublessee.

 

12.5 
Attorney’s Fees.  In the event Lessee shall assign or sublet the Premises or
request the consent of Lessor to any assignment or subletting or if Lessee
shall request the consent of Lessor for any act Lessee proposes to do then
Lessee shall pay Lessor’s reasonable attorneys fees incurred in connection
therewith, such attorneys fees not to exceed $350.00 for each such request.

 

13.    Default;
Remedies.

 

13.1 
Default. 
The occurrence of any one or more the following events shall constitute
a material default of this Lease by Lessee:

(a)  The vacating or abandonment of the Premises by
Lessee.

 

(b)  The failure by Lessee to make any payment of
rent or any other payment required to be made by Lessee hereunder, as and when
due, where such failure shall continue for a period of three (3) days after
written notice thereof from Lessor to Lessee. In the event that Lessor serves
Lessee with a Notice to Pay Rent or Quit pursuant to applicable Unlawfual
Detainer statutes such Notice to Pay Rent or Quit shall also constitute the
notice required by this subparagraph.

 

(c)  Except as otherwise provided in this Lease,
the failure by Lessee to observe or perform any of the covenants, conditions or
provisions of this Lease to be observed or performed by Lessee, other than
described in paragraph (b) above, where such failure shall continue for a period
of thirty (30) days after written notice thereof from Lessor to Lessee:
provided, however, that if the nature of Lessee’s noncompliance is such that
more than thirty (30) days are reasonably required for its cure, then Lessee
shall not be deemed to be in default if Lessee commenced such cure within said
thirty (30) day period and thereafter diligently prosecutes such cure to
completion. To the extent permitted by law, such thirty (30) day notice shall
constitute the sole and exclusive notice required to be given to Lessee under
applicable Unlawful Detainer statues.

 

(d)  (i) 
The making by Lessee of any general arrangement or general assignment
for the benefit of creditors;  (ii)  Lessee becomes a “debtor” as defined in 11
U.S.C. §101 or any successor statute thereto (unless, in the case of a petition
filed against Lessee, the same is dismissed within sixty (60) days); (iii) the
appointment of a trustee or receiver to take possession of substantially all of
Lessee’s assets located at the Premises or of Lessee’s interest in this Lease,
where possession is not restored to Lessee within thirty (30) days; or (iv)
that attachment, execution or other judicial seizure of substantially all of
Lessee’s assets located at the Premises or of Lessee’s interest in this Lease,
where such seizure is not discharged within thirty (30) days. In the event that
any provision of this paragraph 13.1(d) is contrary to any applicable law, such
provisions shall be of no force or effect.

 

(e)  The discovery by Lessor that any financial statement
given to Lessor by Lessee, any assignee of Lessee, any subtenant of Lessee, any
successor in interest of Lessee or any guarantor of Lessee’s obligation
hereunder, was materially false. See Addendum.

 

13.4. 
Remedies. 
In the event of any such material default by Lessee, Lessor may at any
time thereafter, with or without notice or demand and without limiting Lessor
in the exercise of any right or remedy which Lessor may have by reason of such
default:

 

(a)  Terminate Lessee’s right to possession of
Premises by any lawful means, in which case this Lease and the term hereof
shall terminate and Lessee shall immediately surrender possession of the
Premises to Lessor.  In such event
Lessor shall be entitled to recover from Lessee all damages incurred by Lessor
by reason of Lessee’s default including, but not limited to, the cost of
recovering possession of the Premises; expenses of reletting, including
necessary renovation and alteration of Premises, reasonable attorney’s fees,
and 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 Lessee proves could be reasonably
avoided; that portion of the leasing commission paid by Lessor pursuant to
paragraph 15 applicable to the unexpired term of this Lease.

 

(b)  Maintain Lessee’s right to possession in
which case this Lease shall continue in effect whether or not Lessee shall have
vacated or abandoned the Premises. In such event Lessor shall be entitled to
enforce all of Lessor’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 Lessor under the laws or judicial decisions of the state wherein
the Premises are located. Unpaid installments of rent and other unpaid monetary
obligations of Lessee under the terms of this Lease shall bear interest from
the date due at the maximum rate then allowable by law. Lessor’s remedies shall
include the relief set forth in section 1951.2 of the California Civil Code.

 

13.3. 
Default by Lessor.  Lessor shall not be in default unless Lessor fails to perform
obligations required of Lessor within a reasonable time, but in no event later
than thirty (30) days after written notice by Lessee to Lessor and to the
holder of any first mortgage or deed of trust covering the Premises whose name
and address shall have theretofore been furnished to Lesses in writing,
specifying wherein Lessor has failed to perform such obligation; provided,
however, that if the nature of Lessor’s obligation is such that more than
thirty (30) days are required for performance then Lessor shall not be in
default if Lessor commences performance within such thirty (30) day period and
thereafter diligently prosecutes the same to completion.

 

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13.4 
Late Charges. 
Lessee here by acknowledges that late payment by Lessee to Lessor or
Base Rent, Lessee’s Share of Operating Expenses or other sums due hereunder
will cause Lessor 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 on Lessor by the terms of any mortgage or trust deed
covering the Property. Accordingly, if any installment of Base Rent, Operating
Expenses, or any other sum due from Lessee shall not be received by Lessor or
Lessor’s designee within ten (10) days after such amount shall be due, then
without any requirement for notice to Lessee, Lessee shall pay to Lessor a late
charge equal to 6% of such overdue amount. The parties hereby agree that such
late charge represents a fair and reasonable estimate of the costs lessor will
incur by reason of late payment by Lessee. Acceptance of such late charge by
Lessor shall in no event constitute a walver of Lessee’s default with respect
to such overdue amount, nor prevent Lessor from exercising any of the other
rights and remedies granted hereunder. In the event that a late charge is
payable hereunder, whether or not collected, for three (3) consecutive
installments of any of the aforesaid monetary obligations of Lessee, then Base
Rent shall automatically become due and payable quarterly in advance, rather
than monthly, not withstanding paragraph 4.1 or any other provision of this
Lease to the contrary.

 

14.    Condemnation  If the Premises or any portion thereof or
the Industrial Center are taken under the power of eminent domain, or sold
under the threat of the exercise of said power (all of which are herein called
“condemnation”), this Lease shall terminate as to the part so taken as of the
date the condemning authority takes title or possession, whichever first
occurs. If more than ten percent of the floor area of the Premises, or more
than twenty-five percent of that portion of the Common Areas designated as
parking for the Industrial Center is taken by condemnation, Lessee may, at
Lessee’s option to be exercised in writing only within ten (10) days after
Lessor shall have given Lessee written notice of such taking (or in the absence
of such notice within ten (10) days after the condemning authority shall have
taken possession) terminate this Lease as of the date the condemning authority
takes such possession. If Lessee does not terminate this Lease in accordance
with the foregoing, this Lease shall remain in full force and effect as to the
portion of the premises remaining, except that the rent shall be reduced in the
proportion that the floor area of the Premises taken bears to the total floor
area of the Premises. No reduction of rent shall occur if the only area taken
is that which does not have the Premises located thereon. Any award for the
taking of all or any part of the Premises under the power of eminent domain or
any payment made under threat of the exercise of such power shall be the property
of Lessor, whether such award shall be made as compensation for diminution in
value of the leasehold or for the taking of the fee, or as severance damages,
provided, however, that lessee shall be entitled to any award for loss of or
damage to Lessee’s trade fixtures and removable personal property. In the event
that this Lease is not terminated by reason of such condemnation, Lessor shall
to the extent of severance damages received by Lessor in connection with such
condemnation, repair any damage to the Premises caused by such condemnation
except to the extent that Lessee has been reimbursed there for by the
condemning authority. Lessee shall pay any amount in excess of such severance
damages to complain such repair.

 

15.    Broker’s
Fee

 

(a)   Upon execution of this Lease
by both parties, Lessor shall pay to     
Licensed real estate broker(s), a fee as set forth in a separate
agreement between Lessor and said broker(s), or in the event there is no
separate agreement between Lessor and said borker(s), the sum of $      for brokerage services rendered by said
broker(s) to Lessor in this transaction.

 

(b)   Lessor agrees to pay said
fee not only 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 Lessor’s interests in this Lease,
whether such transfer is by agreement or by operation of law, shall be deemed
to have assumed Lessor’s obligation under this paragraph 15. Said broker shall
be a third party beneficiary of the provisions of this paragraph 15.

 

16.    Estoppel
Certificate.

 

(a)   Each party (as “responding
party”) shall at any time upon not less than ten (10) days’ prior written
notice from the other party (“requesting party”) execute, acknowledge and
deliver to the requesting party a statement in writing (i) certifying that this
Lease is unmodified and in full force and effect (or, if modified, stating the
nature of such modification and certifying that this Lease, as so modified, is
in full force and effect) and the date to which the rent and other charges are
paid in advance, if any, and (ii) acknowledging that there are not, to the
responding party’s knowledge, any uncured defaults on the part of the
requesting party, or specifying such defaults if any are claimed. Any such
statement may be conclusively relied upon by any prospective purchaser or
encumbrancer of the Premises or of the business of the requesting party.

 

(b)   At the requesting party’s
option, the failure to deliver such statement within such time shall be a
material default of this Lease by the party who is to respond, without any
further notice to such party, or it shall be conclusive upon such party that
(i) this Lease is in full force and effect, without modification except as may
be represented by the requesting party, (ii) there are no uncured defaults in
the requesting party’s performance, and (iii) If Lessor is the requesting
party, not more than one month’s rent has been paid in advance.

 

(c)   If Lessor desires to
finance, refinance, or sell the Property, or any part thereof, Lessee hereby
agrees to deliver to any lender or purchaser designated by Lessor such
financial statements of Lessee as may be reasonably required by such lender or
purchaser. Such statements shall include the past three (3) years’ financial
statements of Lessee. All such financial statements shall be received by Lessor
and such lender or purchaser in confidence and shall be used only for the
purposes herein set forth.

 

17.    Lessor’s Liability.  The term “Lessor” as used herein shall mean
only the owner or owners, at the time in question, of the fee title or a
lessee’s interest in a ground lease of the Industrial Center, and except as
expressly provided in paragraph 15. In the event of any transfer of such title
or interest, Lessor herein named (and in case of any subsequent transfers than
the grantor) shall be relieved from and after the date of such transfer of all
liability as respects Lessor’s obligations thereafter to be performed, provided
that any funds in the hands of Lessor or the then grantor at the time of such
transfer, in which Lessee has an interest, shall be delivered to the grantee.
The obligations contained in this Lease to be performed by Lessor shall,
subject as aforesaid, be binding on Lessor’s successors and assigns, only
during there respective periods of ownership.

 

18.    Severability.  The invalidity of any provision of this
Lease as determined by a court of competent jurisdiction, shall in no way
affect the validity of any other provision hereof.

 

19.    Interest on Past-due Obligations.  Except as expressly
herein provided, any amount due to Lessor not paid when due shall bear interest
at the maximum rate than allowable by law from the date due. Payment of such
interest shall not excuse or cure any default by Lessee under this Lease;
provided, however, that interest shall not be payable on late charges incurred
by Lessee nor on any amounts upon which late charges are paid by Lessee.

 

20.    Time of Essence.  Time is of the essence with respect to
the obligations to be performed under this Lease.

 

21.    Additional Rent.  All monetary obligations of Lessee to
Lessor under the terms of this Lease, including but not limited to Lessee’s
Share of Operating Expenses and insurance and tax expenses payable shall be
deemed to be rent.

 

22.    Incorporation of Prior Agreement;
Amendements.  This
Lease contains all agreements of the parties with respect to any matter
mentioned herein. No prior or contemporaneous agreement or understanding
pertaining to any such matter shall be effective. This lease may be modified in
writing only, signed by the parties in interest at the time of the
modification. Except as otherwise stated in this Lease, Lessee hereby
acknowledges that neither the real estate broker listed in paragraph 15 hereof
nor any cooperating broker on this transaction nor the lessor or any employee
or agents of any of said persons has made any oral or written warranties or
representations to Lessee relative to the condition or use by Lessee of the
Premises or the Property and Lessee acknowledges that Lessee assumes all
responsibility regarding the Occupational Safety Health Act, the legal use and
adaptability of the Premises and the compliance thereof with all applicable
laws and regulations in effect during the term of this Lease except as
otherwise specifically stated in this Lease.

 

23.    Notices. Any notice required or permitted to be given
hereunder shall be in writing and may be given by personal delivery or by
certified mail, and if given personally or by mail, shall be deemed
sufficiently given if addressed to Lessee or to Lessor at the address noted
below the signature of the respective parties, as the case may be. Either party
may be notice to the other specify a different address for notice purposes
except that upon Lessee’s taking possession of the Premises, the Premises shall
constitute Lessee’s address for notice purposes. A copy of all notices required
or permitted to be given to Lessor hereunder shall be concurrently transmitted to such party or parties at such
addresses as Lessor may from time to time hereafter designate by notice to
Lessee.

 

24.    Waivers. 
No waiver by Lessor or any provision hereof
shall be deemed a waiver of any other provision hereof or of any subsequent
breach by Lessee of the same or any other provision, Lessor’s consent to, or
approval of, any not shall not be deemed to render unnecessary the obtaining of
Lessor’s consent to or approval of any subsequent act by Lessee. The acceptance
of rent hereunder by Lessor shall not be a waiver of any preceding breach by
Lessee of any provision hereof, other than the failure of Lessee to pay the
particular rent so accepted, regardless of Lessor’s knowledge of such preceding
breach at the time of acceptance of such rent.

 

25.    Recording. 
Either Lessor or Lessee shall, upon request of
the other, execute, acknowledge and deliver to the other a “short form”
memorandum of this Lease for recording purposes.

 

26.    Holding Over.  If Lessee, with Lessor’s consent,
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 upon
all the provisions of this Lease pertaining to the obligations of Lessee but
all Options, if any, granted under the terms of this Lease shall be deemed
terminated and be of no further affect during said month to month tenancy.

 

Initials: KL PML

 

6

 

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

 

28.    Covenants
and Conditions.  Each
provision of this Lease performable by Lessee shall be deemed both a covenant
and a condition.

 

29.    Binding
Effect; Choice of Law. 
Subject to any provisions hereof restricting assignment or subletting by
Lessee and subject to the provisions of paragraph 17, this Lease shall bind the
parties, their personal representatives, successors and assigne. This Lease
shall be governed by the laws of the State where the Industrial Center is
located and any litigation concerning this Lease between the parties hereto
shall be initiated in the county in which the Industrial Center is located.

 

30.    Subordination.

 

(a)      This Lease, and any
Option granted hereby, at Lessor’s option, shall be subordinate to any ground
lease, mortgage, deed of trust, or any other hypothecation or security now or
hereafter placed upon the Industrial Center and to any and all advances made on
the security thereof and to all renewals, modifications, consolidations,
replacements and extensions thereof. Notwithstanding such subordination,
Lessee’s right to quiet possession of the Premises shall not be disturbed if
Lessee is not in default and so long as Lessee shall pay the rent and observe
and perform all of the provisions of this Lease, unless this Lease is otherwise
terminated pursuant to its terms. If any mortgage, trustee or ground lessor
shall elect to have this Lease and any Options granted hereby prior to the lien
of its mortgage, deed of trust of ground lease, and shall give written notice
thereof to Lessee, this Lease and such Options shall be deemed prior to such
mortgage, deed of trust or ground lease, whether this Lease or such Options are
dated prior or subsequent to the date of said mortgage, deed of trust or ground
lease or the date of recording thereof.

 

(b)     Lessee agrees to execute
any documents required to effectuate an attornment, a subordination or to make
this Lease or any Option granted herein prior to the lien of any mortgage, deed
of trust or ground lease, as the case may be Lessee’s failure to execute such
documents within ten (10) days after written demand shall constitute a material
default by Lessee hereunder without further notice to Lessee or, at Lessor’s
option, Lessor shall execute such documents on behalf of Lessee as Lessee’s
attorney-in-fact. Lessee does hereby make, constitute and irrevocably appoint
Lessor as Lessee’s attorney-in-fact and in Lessee’s name, place and stead, to
execute such documents in accordance with this paragraph 30(b).

 

31.    Attorney’s
Fees.  If either party or the
broker(s) named herein bring an action to enforce the terms hereof or declare
rights hereunder, the prevailing party in any such action, on trial or appeal,
shall be entitled to his reasonable attorney’s fees to be paid by the losing
party as fixed by the court. The provisions of this paragraph shall inure to
the benefit of the broker named herein who seeks to enforce a right hereunder.

 

32.    Lessor’s
Access.  Lessor and Lessor’s
agents shall have the right to enter the Premises at reasonable times for the
purpose of inspecting the same, showing the same to prospective purchasers,
lenders, or lessees, and making such alterations, repairs, improvements of
additions to the Premises or to the building of which they are part as Lessor
may deem necessary or desirable. Lessor may at any time place on or about the
Premises or the Building any ordinary “For Sale” signs and Lessor may at any
time during the last 120 days of the term hereof place on or about the Premises
any ordinary “For Lease” signs. All activities of Lessor pursuant to this
paragraph shall be without abatement of rent, nor shall Lessor have any
liability to Lessee for the same.

 

33.    Auctions.  Lessee shall not conduct, nor permit to be
conducted, either voluntarily or involuntarily, any auction upon the Premises
or the Common Areas without first having obtained Lessor’s prior written
consent. Notwithstanding anything to the contrary in this Lease, Lessor shall
not be obligated to exercise any standard of reasonableness in determining
whether to grant such consent.

 

34.    Signs.  Lessee shall not place any sign upon the
Premises or the Industrial Center without Lessor’s prior written consent. Under
no circumstances shall Lessee place a sign on any roof of the Industrial
Center.

 

35.    Merger.  The voluntary or other surrender of this
Lease by Lessee, or a mutual cancellation thereof, or a termination by Lessor,
shall not work a merger, and shall, at the option of Lessor, terminate all or
any existing subtenancies or may, at the option of Lessor, operate as an
assignment to Lessor of any or all of such subtenancies.

 

36.    Consents.  Except for paragraph 33 hereof, wherever in
this Lease the consent of one party is required to an act of the other party
such consent shall not be unreasonably withheld or delayed.

 

37.    Guarantor.  In the event that there is a guarantor of
this Lease, said guarantor shall have the same obligations as Lessee under this
Lease.

 

38.    Quiet Possession.  Upon Lessee paying the rent for the Premises
and observing and performing all of the covenants, conditions and provisions on
Lessee’s paid to be observed and performed hereunder, Lessee shall have quiet
possession of the Premises for the entire term hereof subject to all of the
provisions of this Lease. The individuals executing this Lease on behalf of
Lessor represent and warrant to Lessee that they are fully authorized and
legally capable of executing this Lease on behalf of Lessor and that such execution
is binding upon all parties holding an ownership interest in the Property.

 

39.    Options.

 

39.1  Definition.  As used in this paragraph the word “Option”
has the following meaning: (1) the right or option to extend the term of this
Lease or to renew this Lease or to extend or renew any lease that Lessee has on
other property of Lessor; (2) the option or right of first refusal to lease the
Premises or the right of first offer to lease the Premises or the right of
first refusal to lease other space within the Industrial Center or other
property of Lessor or the right of first offer to lease other space within the
Industrial Center or other property of Lessor; (3) the right or option to
purchase the Premises or the Industrial Center, or the right of first refusal
to purchase the Premises or the Industrial Center, or the right of first offer
to purchase the Premises or the Industrial Center, or the right or option to
purchase other property of Lessor, or the right of first refusal to purchase
other property of Lessor or the right of first offer to purchase other property
of Lessor.

 

39.2  Options
Personal.  Each Option
granted to Lessee in this Lease is personal to the original Lessee and may be
exercised only by the original Lessee while occupying the Premises who does so
without the intent of thereafter assigning this Lease or subletting the
Premises or any portion thereof, and may not be exercised or be assigned,
voluntarily or involuntarily, by or to any person or entity other than Lessee,
provided, however, that an Option may be exercised by or assigned to any Lessee
Affiliate as defined in paragraph 12.2 of this Lease. The Options, if any,
herein granted to Lessee are not assignable separate and apart from this Lease,
nor may any Option be separated from this Lease in any manner, either by
reservation or otherwise.

 

39.3  Multiple
Options.  In the event that
Lessee has any multiple options to extend or renew this Lease a later option
cannot be exercised unless the prior option to extend or renew this Lease has
been so exercised.

 

39.4  Effect of
Default on Options.

 

(a)     Lessee shall have no right to exercise an
Option, notwithstanding any provision in the grant of Option to the contrary,
(i) during the time commencing from the date Lessor gives to Lessee a notice of
default pursuant to paragraph 13.1(b) or 13.1(c) and continuing until the
noncompliance alleged in said notice of default is cured, or (ii) during the
period of time commencing on the date after a monetary obligation to Lessor is
due from Lessee and unpaid (without any necessity for notice thereof to Lessee)
and continuing until the obligation is paid, or (iii) at any time after an
event of default described in paragraphs 13.1(a), 13.1(d), or 13.1(e) (without
any necessity of Lessor to give notice of such default to Lessee), nor (iv) in
the event that Lessor has given to Lessee three or more notices of default
under paragraph 13.1(b), or paragraph 13.1(c), whether or not the defaults are
cured, during the 12 month period of time immediately prior to the time that
Lessee attempts to exercise the subject Option.

 

(b)     The period of time within which an Option
may be exercised shall not be extended or enlarged by reason of Lessee’s
inability to exercise an Option because of the provisions of paragraph 39.4(a).

 

(c)     All rights of Lessee under the provisions
of an Option shall terminate and be of no further force or effect,
notwithstanding Lessee’s due and timely exercise of the Option. If, after such
exercise and during the term of this Lease, (i) Lessee falls to pay to Lessor a
monetary obligation of Lessee for a period of thirty (30) days after such
obligation becomes due (without any necessity of Lessor to give notice thereof
to Lessee), or (ii) Lessee fails to commence to cure a default specified in paragraph
13.1(c) within thirty (30) days after the date that Lessor gives notice to
Lessee of such default and/or Lessee fails thereafter to diligently prosecute
said cure to completion, or (iii) Lessee commits a default described in
paragraph 3.1(a), 13.1(d) or 13.1(e) (without any necessity of Lessor to give
notice of such default to Lessee), or (iv) Lessor gives to Lessee three or more
offices of default under paragraph 13.1(b), or paragraph 13.1(c), whether or
not the defaults are cured.

 

40.    Security
Measures.  Lessee hereby
acknowledges that Lessor shall have no obligation whatsoever to provide guard
service or other security measures for the benefit of the Premises or the
Industrial Center. Lessee assumes all responsibility for the protection of
Lessee, its agents, and invitees and the property of Lessee and of Lessee’s
agents and invitees from acts of third parties. Nothing herein contained shall
prevent Lessor, at Lessor’s sole option, from providing security protection for
the Industrial Center or any part thereof, in which event the cost thereof
shall be included within the definition of Operating Expenses, as set forth in
paragraph 4.2(b).

 

41.    Easements.  Lessor reserves to itself the right, from
time to time, to grant such easements, rights and dedications that Lessor deems
necessary or desirable, and to cause the recordation of Parcel Maps and
restrictions, so long as such easements, rights, dedications, Maps and
restrictions do not unreasonably interfere with the use of the premises by
Lessee.  Lessee shall sign any of the
aforementioned documents upon request of Lessor and failure to do so shall
constitute a material default of this Lease by Lessee without the need for
further notice to Lessee.

 

42.    Performance
Under Protest.  If at any
time a dispute shall arise as to any amount or sum of money to be paid by one
party to the other under the provisions hereof, the party against whom the
obligation to pay the money is asserted shall have the right to make payment
“under protest” and such payment shall not be regarded as a voluntary payment,
and there shall survive the right on the part of said party to institute suit
for recovery of such sum. If it shall be adjudged that there was no legal
obligation on the part of said party to pay such sum or any part thereof, said
party shall be entitled to recover such sum or so much thereof as it was not
legally required to pay under the provisions of this Lease.

 

Initials: KL PML

 

7

 

43.    Authority. If
Lessee is a corporation, trust, or general or limited partnership, each
individual executing this Lease on behalf of such entity represents and
warrants that he or she is duly authorized to execute and deliver this Lease on
behalf of said entity. If Lessee is a corporation, trust or partnership.  Lessee shall, within thirty (30) days after
execution of this Lease, deliver to Lessor evidence of such authority
satisfactory to Lessor.

 

44.    Conflict.  Any conflict between the printed provisions
of this Lease and the typewritten or handwritten provisions, if any, shall be
controlled by the typewritten or handwritten provisions.

 

45.    Offer.  Preparation of this Lease by Lessor or
Lessor’s agent and submission of same to Lessee shall not be deemed an offer to
lease.  This Lease shall become binding
upon Lessor and Lessee only when fully executed by Lessor and Lessee.

 

46.    Addendum.  Attached hereto is an addendum or addenda
containing paragraphs             A       through              11       which
constitute a part of this Lease.

 

47.    Modification For Lender.  If in connection with obtaining financing
for the building, the Lender shall request reasonable modifications in this
Lease as a condition to such financing, Leasee will not unreasonably withhold,
delay, or defer its consent thereto, provided that such modifications do not
increase the obligations of Lessee hereunder or materially adverse affect the
leasehold interest hereby created.

 

48.

 

49.    Mortgage Protection.  Lessee agrees to give any mortgages and/or
trust deed holders, as to all or a portion of the Premises, by registered mail,
a copy of any notice of default served upon Lessor, provided that prior to such
notice Lessee has been notified in writing (by way of notice or assignment of
rents and leases, or otherwise) of the addresses of such mortgages and/or trust
deed holders. Lessee agrees not to exercise any remedies available by virtue of
a default unless Lessor shall have failed to cure such default within thirty
(30) days after receipt of notice of default or such additional time as may be
reasonably necessary to cure the default in the case of a default incapable of
being cured within thirty (30) days. Lessee further agrees that the mortgages
and/or trust deed holder shall have an additional thirty (30) days within which
to cure such default, or if such default cannot be cured within that time, then
such additional time as may be necessary if within such thirty (30) days any
mortgagee and/or trust deed holder has commenced and is diligently pursuing the
remedies necessary to cure such default (including but not limited to
commencement of foreclosure proceedings if necessary to effect such cure), in
which event such right, if any, as Lessee might otherwise have to terminate the
Lease shall not be exercised while such remedies are being so diligently
pursued.

 

0.1    Liability
Insurance—Lessee.  Lessee
shall, at Lessee’s expense, obtain and keep in force during the term of this
Lease a policy of Comprehensive General Liability Insurance utilizing an
Insurance Services Office standard form with Broad Form General Liability
Endorsement (GL0404), or equivalent, in an amount of not less than 1)
$1,000,000 per occurrence of Bodily Injury and Property Damage combined single
limit with a $1,000,000 excess liability policy, or 2) $1,000,000 per
occurrence of Bodily Injury and Property Damage with a $2,000,000 General
Aggregate Bodily Injury and Property Damage, and shall insure Lessee with
Lessor as an additional insured against liability arising out of the use,
occupancy or maintenance of the Premises. The policy shall insure performance
by Lessee of the Indemnity provisions of this paragraph 8. The limits of said
insurance shall not, however, limit the liability of Lessee hereunder.

 

LESSOR AND LESSEE HAVE
CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND PROVISION CONTAINED
HEREIN AND BY EXECUTION OF THIS LEASE, SHOW THEIR INFORMED AND VOLUNTARY
CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS LEASE IS
EXECUTED. THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE NO EFFECTUATE THE
INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE PREMISES.

 

THIS LEASE HAS
BEEN PREPARED FOR SUBMISSION TO YOUR ATTORNEY FOR APPROVAL. NO REPRESENTATION
OR RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR
BY THE REAL ESTATE BROKER OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL
SUFFICIENCY, LEGAL EFFECT. OR TAX CONSEQUENCES OF THIS LEASE

 

 

	
  LESSOR

  	
  LESSEE

  
	
   

  	
   

  
	
  William D
  & Edna J. Wright dba

  	
  q.a.d., Inc.
  a California Corporation

  
	
  South,Coast
  Business Park

  	
  By

  	
  /s/ Pam
  Lopker

  
	
  /s/ 

  	
  William D
  & Edna J. Wright

  	
   

  	
  Pam Lopker
  Its President, 

  
	
   

  	
  By: 

  	
  /s/ Karl
  Lopker

  
	
  Date on 

  	
  Jan. 20 1994
  

  	
   

  	
  Karl Lopker,
  its Vice President

  
	
   

  	
  Executed on

  	
  1/13/94

  
	
   

  	
  [Corporation Seal]

  
	
   

  	
   

  
	
  ADDRESS FOR NOTICES AND RENT

  	
  ADDRESS

  
	
  130 Garden
  Street

  	
   

  
	
  Santa
  Barbara, California 93101

  	
   

  
										

 

8

 

EXHIBIT “A”

 

[GRAPHIC]

 

9

 

ADDENDUM TO LEASE

 

This ADDENDUM is attached to and forms a part
of that certain Standard Industrial Lease dated for reference purposes November
30, 1993, by and between William D & Edna J. Wright dba South Coast
Business Park (“Lessor”) and q.a.d., Inc., a California Corporation
(“Lessee”). The said Standard Industrial Lease is hereby
modified/supplemented (and as modified/supplemented is hereinafter referred to
as “this Lease”) in the followinq particulars only:

 

A. 
Option to Extend Term of Lease. Lessee is hereby granted the option to
extend the term of this Lease for two (2) additional successive periods of three
(3) years each. The options shall be exercised by the delivery of written
notice to Lessor no earlier than two hundred seventy (270) days and no later
than one hundred eighty (180) days prior to the expiration of the lease term
then in effect. Any extensions granted hereunder shall be on the same terms and
conditions applicable to the initial term except as to rent, which shall be
increased in accordance with Paragraph B(2) below. Lessee.’s right to exercise
the options granted herein is subject to the terms and conditions set forth in
Paragraph 39 of this Lease.

 

B. 
Adjustments to Base Rent.

(1) Cost of Living Adjustments to Base Rent. The Base Rent payable
pursuant to Paragraph 4.1 shall be subject to further adjustment as of lease
anniversary date, and as of the same date each year thereafter during the
initial lease term and any extension period. Said date is herein after referred
to as the “Adjustment Date.” The adjustment shall be made as follows:

 

The Base Rent for the Premises shall be adjusted by the same percentage
as the change, if any, in the Consumer Price Index (All Items for All Urban
Consumers 1982–84=100 Base), of the United States Department of Labor,
Bureau of Labor Statistics for Los Angeles–Anaheim–Riverside, CA
(the “Index”). The adjustment shall be calculated according to the following
formula:

 

X 
=  A x B / C

 

X 
=  Adjusted rent

 

A  = Base Rent as of the first month of the term then in effect.

 

B  = The monthly index for the third month immediately preceding the Adjustment Date.

 

C  =  The monthly index for
the third month immediately
preceding the first month of the term then in effect.

 

The monthly rent as so adjusted
shall be payable for each month commencing with the Adjustment Date and
continuing until the next Adjustment Date.

 

1

 

If the Index is discontinued or revised during the term of this Lease,
such other government Index or computation with which it is replaced shall be
used in order to obtain substantially the same result as would be obtained if
the Index had not been discontinued or revised.

 

(2) Determination of Base Rent During
Extension Periods. In the event Lessee exercises the option to
extend granted in Paragraph (a) above, the Base Rent payable at the commencement
of the applicable Extension Period shall be the then prevailing market rate for
a triple net lease of comparable lease Premises in the surrounding geographical
area. Prevailing market rate shall be determined by mutual agreement of Lessor
and Lessee on the basis of the value which will be obtained in an arms-length
transaction between an informed and willing tenant (other than a tenant
currently in possession of the demised Premises) and an informed and willing
landlord (other than the then existing landlord of demised Premises) under no
compulsion to lease. If Lessor and Lessee have not agreed upon the prevailing
market rental rate by the date which is thirty (30) days prior to the
expiration of the lease term then in effect, then the option to extend will
automatically cease and be deemed extinguished. The base monthly rent as
determined pursuant to this Paragraph B(2) shall thereafter be subject to
further cost of living adjustments pursuant to the terms of Paragraph B(l)
above.

 

C.  Construction of Tenant Improvements.  Lessee understands and agrees that Lessor is
currently in the process constructing the improvements which shall comprise the
Premises. In the course of such construction, Lessor hereby agrees to construct
the tenant improvements set forth in the plans and specifications attached
hereto as Exhibit “B”. Such plans and specifications are hereby clarified as
follows: SEE EXHIBIT “B”. Lessee has reviewed and approved all such
plans and specifications. Any changes or additions made by Lessee to such plans
and specifications shall be at Lessee’s sole cost and expense, including a ten
percent (10%) administrative payment to Lessor. Such additional payments shall
be paid by Lessee to Lessor as follows: (i) fifty percent (50%) upon approval
of such change by Lessor; and (ii) fifty percent (50%) prior to occupancy of
the Premises by Lessee. All tenant improvements sha11 be deemed substantially
completed when the City of Carpinteria issues a certificate of Occupancy for
the Premises. Notwithstanding the issuance of such Certificate, Lessee shall be
provided with a punch list of such tenant improvements prior to the
commencement of the lease term, and shall inspect the Premises after their
substantial completion. Lessee shall set forth any manner in which Lessee
claims that the Premises to do not conform to the plans and specifications
attached hereto as Exhibit “B”, as reasonably measured by the standards of
finished, comparably priced industrial space in the Santa Barbara area
(hereinafter the “discrepancy”). Lessor shall cure such discrepancies to the
extent Lessor deems such discrepancies to be reasonably claimed, within thirty
(30)-days following commencement of the lease term. Provided however, if any
such discrepancy is incapable of cure within such thirty (30) day period, and
Lessor has commenced the cure of such discrepancy within such thirty (30)-day
period, this provision shall be satisfied.

 

 

2

 

D. Use. Paragraph 6
of this Lease is hereby supplemented as follows:

(1) Prohibited Uses. Lessee
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 increase the existing rate of or
affect any fire or other insurance upon the Premises or any of its contents, or
cause a cancellation of any insurance policy covering the Premises or any part
thereof or any of its contents. Lessee shall not commit or suffer to be
committed any nuisance or waste in or upon the Premises. Lessee shaIl 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.
Lessee shall not keep any animals or pets on the Premises. Lessee shall not use
or store “hazardous materials or wastes” on the Premises, as such terms are
defined by applicable federal and state law, without Lessor’s prior written
consent. If such consent is given, Lessee shall comply with governmental laws,
rules and regulations pertaining to hazardous materials and wastes. Lessor
shall have a right of re–entry upon the Premises on reasonable notice and
at reasonable times for purposes of inspection, contamination testing and remediation.

 

(2) Installation of Specialized Equipment and Use of Lessee’s
Possessions on the Premises. Lessor shall not be liable to Lessee for damage to
Lessee or Lessee’s possessions, including but not limited to furniture,
fixtures, equipment (specialized or otherwise), and inventory, from any cause.
Lessee waives all claims against Lessor for damage to Lessee’s possessions
arising for any reason. Lessee shall comply with all laws, regulations and
ordinances relating to the condition and use of any and all of Lessee’s
possessions on the Premises, including laws requiring the alteration,
maintenance and restoration of the Premises as a result of Lessee’s particular
use. Provided, however, any required alterations to the Premises shall be
conditioned upon Lessor’s prior written consent. The Premises shall not be
electrically overloaded, No equipment, machinery, apparatus or other appliance
shall be used or operated on the Premises in such a manner that such equipment
will in any way injure, vibrate or shake the Premises, or place an excessive
burden on power sources installed on the Premises.

 

E.    Assignment
and Subletting. Lessee hereby understands and agrees that Lessor
may withhold its consent to any requested assignment, or subletting, and such
withholding of consent shall be deemed reasonable, in the event that the
proposed assignee or sublessee intends to use or store hazardous wastes or
materials on the Premises. The term of the sublease shall not exceed the term
of the master lease.

 

F. Indemnity. The indemnification of Lessor by Lessee pursuant to
Paragraph 8.7 of this Lease shall also include and extend to any violation by
Lessee of applicable state, federal and local laws pertaining to the use,
storage and discharge of hazardous materials and wastes.

 

G. Default. Paragraph 13.1 of this Lease is supplemented to provide
that the release or discharge by Lessee of any hazardous material or wastes in
or about the Premises, or violation of any law or deviation from prescribed

 

 

3

 

procedures in the use or storage of hazardous materials or wastes,
shall constitute a material default of this Lease by Lessee. Wherever used in
this Lease, the terms hazardous wastes and/or hazardous materials shall include
all definitions of hazardous wastes and materials provided by both federal and
California law.

 

 

4

 

IN WITNESS WHEREOF, Lessor and
Lessee have each caused this Addendum to be executed concurrently with the Lease
of which this Addendum forms a part.

 

	
  LESSOR:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  WILLIAM D.
  WRIGHT dba

  	
   

  	
   

  	
   

  
	
  SOUTH COAST
  BUSINESS PARK

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  BY:

  	
  /s/ William
  D & Edna J. Wright

  	
   

  	
  Dated:

  	
  Jun 20-94

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  LESSEE:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  q.a.d.,
  Inc., a California Corporation

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  BY: 

  	
  /s/ Pam
  Lopker

  	
   

  	
  Dated:

  	
  1/13/94

  	
   

  
	
   

  	
  Pam Lopker,
  its President

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  BY: 

  	
  /s/ Karl
  Lopker

  	
   

  	
  Dated: 

  	
  1/13/94

  	
   

  
	
   

  	
  Karl Lopker,
  its Vice President

  	
   

  	
   

  	
   

  

 

5

 

Addendum to Lease

Number Two

 

Building “C”

 

Lessor shall spend up to $25.00
per square foot of leased space being remodeled (suites 6, 7, & 8).

 

Lessee shall pay in cash for
any tenant improvements requested by Lessee in excess of $25.00 per square foot

 

	
  LESSOR:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  William D
  Wright dba

  	
   

  	
   

  
	
  South Coast
  Business Park

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  BY: 

  	
  /s/ William
  D. Wright

  	
   

  	
  Jun 20-94

  
	
   

  	
   

  	
  Dated

  
	
   

  	
   

  	
   

  
	
  LESSEE:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  q.a.d.,
  Inc., a California Corporation

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  BY: 

  	
  /s/ Pam
  Lopker

  	
   

  	
  1/13/94

  
	
   

  	
  Pam Lopker,
  President

  	
   

  	
  Dated

  
	
   

  	
   

  	
   

  
	
  BY: 

  	
  /s/ Karl
  Lopker

  	
   

  	
  1/13/94

  
	
   

  	
  Karl Lopker,
  Vice President

  	
   

  	
  Dated[LOGO] AMERICAN INDUSTRIAL REAL
ESTATE ASSOCIATION

EXHIBIT 10.26

STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT
LEASE – NET

(DO NOT USE THIS FORM FOR MULTI-TENANT
BUILDINGS)

 

1.
            Basic Provisions ("Basic
Provisions")

 

1.1       Parties: This Lease ("Lease"),
dated for reference purposes only, August 21, 1997, is made by and between
Eleanor H. Simpson, Trustee for the Eleanor H. Simpson Trust dated June 28,
1977 ("Lessor") and
BioEnterics Corporation ("Lessee"),
(collectively the "Parties",
or individually a "Party").

 

1.2       Premises: That certain real property,
including all improvements therein or to be provided by Lessor under the terms
of this Lease, and commonly known as 1125 Mark Avenue, Carpinteria (APN
001-420-11, 12, 13, 14) located in the County of Santa Barbara, State of
California, and generally described as (describe briefly the nature of the
property and, if applicable, the "Project",
if the property is located within a Project) an industrial building of
approximately 22,700 square feet and part of the condominium association
known as Lafayette Business Park. ("Premises").
(See also Paragraph 2) 

 

1.3       Term: ten (10) years and 04 months ("Original Term") commencing November 1,
1997 ("Commencement Date")
and ending February 28, 2008 ("Expiration
Date"). (See also Paragraph 3)

 

1.4       Early Possession: N/A ("Early Possession Date"). (See also
Paragraphs 3.2 and 3.3)

 

1.5       Base Rent: $ 14,300.00 per month ("Base Rent"), payable on the first
(1st) day of each month commencing March 1, 1998 (See also Paragraph 4) If
this box is checked, there are provisions in this Lease for the Base Rent to be
adjusted.

 

1.6       Base Rent: Paid Upon Execution: $ 14,300.00
as Base Rent for the period March 1, 1998 through March 31, 1998.

 

1.7       Security Deposit: $ 14,300.00 ("Security Deposit") (See also Paragraph
5)

 

1.8       Agreed Use: Office and the production of
medical products. (See also paragraph 6)

 

1.9       Insuring Party: Lessor is the "Insuring Party" unless otherwise
stated herein. (See also Paragraph 8)

 

1.10     Real Estate Brokers: (See also Paragraph
15)

 

(a)   Representation: The following real estate brokers
(collectively, the "Brokers")
and brokerage relationships exist in this transaction (check applicable boxes):

o                                                                  
represents Lessor exclusively ("Lessor's
Broker");

o                                                              
represents Lessee exclusively ("Lessee's
Broker"); or

ý CB Commercial Real Estate Group, Inc
represents both Lessor and Lessee ("Dual
Agency").

 

(b)  Payments to Brokers: Upon execution and delivery of this Lease
by both Parties, Lessor shall pay to the Broker the fee agreed to in their
separate written agreement (or if there is no such agreement, the sum of    % of the total Base Rent for the brokerage
services rendered by said Broker).

 

1.11     Guarantor.  The
obligations of the Lessee under this Lease are to be guaranteed by Donald K.
McGhan ("Guarantor").
(See also Paragraph 37)

 

1.12     Addenda and Exhibits. 
Attached hereto is an Addendum or Addenda consisting of
Paragraphs 50 through 57 and Exhibits                                                   , all of which
constitute a part of this Lease.

 

2.             Premises.

 

2.1       Letting.  Lessor
hereby leases to Lessee, and Lessee hereby leases from Lessor, the Premises,
for the term, at the rental, and upon all of the terms, covenants and
conditions set forth in this Lease. Unless otherwise provided herein, any
statement of size set forth in this Lease, or that may have been used in
calculating rental, is an approximation which the Parties agree is reasonable
and the rental based thereon is not subject to revision whether or not the
actual size is more or less.

 

2.2       Condition.  Lessor
shall deliver the Premises to Lessee broom clean and free of debris on the
Commencement Date or the Early Possession Date, whichever first occurs ("Start Date"), and, so long as the
required service contracts described in Paragraph 7.1(b) below are obtained by
Lessee within thirty (30) days following the Start Date, warrants that the existing
electrical, plumbing, fire sprinkler, lighting, heating, ventilating and air
conditioning systems ("HVAC"),
loading doors, if any, and all other such elements in the Premises, other than
those constructed by Lessee, shall be in good operating condition on said date
and that the structural elements of the roof, bearing walls and foundation of
any buildings on the Premises (the "Building")
shall be free of material defects. If a non-compliance with said warranty
exists as of the Start Date, Lessor shall, as Lessor’s sole obligation with
respect to such matter, except as otherwise provided in this Lease, promptly
after receipt of written notice from Lessee setting forth with specificity the
nature and extent of such non-compliance, rectify same at Lessor's expense. If,
after the Start Date, Lessee does not give Lessor written notice of any
non-compliance with this warranty within: (i) one year as to the surface of the
roof and the structural portions of the roof, foundations and bearing walls,
(ii) six (6) months as to the HVAC systems, (iii) thirty (30) days as to the
remaining systems and other elements of the Building, correction of such
non-compliance shall be the obligation of lessee at Lessee's sole cost and
expense.

 

2.3       Compliance.  Lessor
warrants that the improvements on the Premises comply with all applicable laws,
covenants or restrictions of record, building codes, regulations and ordinances
("Applicable Requirements")
in effect on the Start Date. Said warranty does not apply to the use to which Lessee
will put the Premises or to any Alterations or Utility Installations (as
defined in Paragraph 7.3(a)) made or to be made by Lessee. NOTE Lessee is
responsible for determining whether or not the zoning is appropriate for
Lessee's intended use, and acknowledges that past uses of the Premises may no
longer be allowed. If the Premises do not comply which said warranty, Lessor
shall, except as otherwise provided, promptly after receipt of written notice
from Lessee setting forth with specificity the nature and extent of such
non-compliance, rectify the same at Lessor's expense. If Lessee does not give
Lessor written notice of a non-compliance with this warranty within twelve (12)
months following the Start Date, correction of that non-compliance shall be the
obligation of Lessee at Lessee's sole cost and expense. If the Applicable
Requirements are hereafter changed (as opposed to being in existence at the
Start Date, which is addressed in Paragraph 6.2(e) below) so as to require
during the term of this Lease the construction of an addition to or an
alteration of the Building, the remediation of any Hazardous Substance, or the
reinforcement or other physical modification of the Building ("Capital Expenditure"), Lessor and
Lessee shall allocate the cost of such work as follows: Lessee (see Addendum)

 

	
  Initials 

  	
   

  	
  JM

  	
   

  	
  EHS

  

 

 

 

2.4       Acknowledgements. 
Lessee acknowledges that: (a) it has been advised by Lessor
and/or Brokers to satisfy itself with respect to the condition of the Premises
(including but not limited to the electrical, HVAC and fire sprinkler systems,
security, environmental aspects and compliance with Applicable Requirements),
and their suitability for Lessee's intended use, (b) Lessee has made such
investigation as it deems necessary with reference to such matters and assumes
all responsibility therefor as the same relate to its occupancy of the
Premises, and (c) neither Lessor, Lessor's agents, nor any Broker has made any
oral or written representations or warranties with respect to said matters other
than as set forth in this Lease. In addition, Lessor acknowledges that: (a)
Broker has made no representations, promises or warranties concerning Lessee's
ability to honor the Lease or suitability to occupy the Premises, and (b) it is
Lessor's sole responsibility to investigate the financial capability and/or
suitability of all proposed tenants.

 

2.5       Lessee as Prior Owner/Occupant.  The warranties made by Lessor in
Paragraph 2 shall be of no force or effect if immediately prior to the Start
Date Lessee was the owner or occupant of the Premises. In such event, Lessee
shall be responsible for any necessary corrective work.

 

3.             Term.

 

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

 

3.2       Early Possession. 
If Lessee totally or partially occupies the Premises prior to
the Commencement Date, the obligation to pay Base Rent shall be abated for the
period of such early possession. All other terms of this Lease (including but
not limited to the obligations to pay Real Property Taxes and insurance
premiums and to maintain the Premises) shall, however, be in effect during such
period. Any such early possession shall not affect the Expiration Date.

 

3.3       Delay in Possession. 
Lessor agrees to use its best commercially reasonable efforts
to deliver possession of the Premises to Lessee by the Commencement Date. If,
despite said efforts, Lessor is unable to deliver possession as agreed, Lessor
shall not be subject to any liability therefor, nor shall such failure affect
the validity of this Lease. Lessee shall not, however, be obligated to pay Rent
or perform its other obligations until it receives possession of the Premises.
If possession is not delivered with sixty (60) days after the commencement
Date, Lessee may at its option by notice in writing within ten (10) days after
the end of such sixty (60) day period, cancel this Lease, in which event the
Parties shall be discharged from all obligations hereunder. If such written
notice is not received by Lessor within said ten (10) day period, Lessee's
right to cancel shall terminate. Except as otherwise provided, if possession is
not tendered to Lessee when required and Lessee does not terminate this Lease,
as aforesaid, any period of rent abatement that Lessee would otherwise have
enjoyed shall run from the date of delivery of possession and continue for a
period equal to what Lessee would otherwise have enjoyed under the terms
hereof, but minus any days of delay caused by the acts or omissions of Lessee.
If possession of the Premises is not delivered within four (4) months after the
Commencement Date, this Lease shall terminate unless other agreements are
reached between Lessor and Lessee, in writing.

 

3.4       Lessee Compliance. 
Lessor shall not be required to tender possession of the
Premises to Lessee until Lessee complies with its obligation to provide
evidence of Insurance (Paragraph 8.5). Pending delivery of such evidence,
Lessee shall be required to perform all of its obligations under this Lease
from and after the Start Date, including the payment of Rent, notwithstanding
Lessor's election to withhold possession pending receipt of such evidence of
insurance. Further, if Lessee is required to perform any other conditions prior
to or concurrent with the Start Date the Start Date shall occur but Lessor may
elect to withhold possession until such conditions are satisfied.

 

4             Rent.

 

4.1       Rent Defined.  All
monetary obligations of Lessee to Lessor under the terms of this Lease (except
for the Security Deposit) are deemed to be rent ("Rent").

 

4.2       Payment. 
Lessee shall cause payment of Rent to be received by Lessor in lawful
money of the United States, without offset or deduction, on or before the day
on which it is due. Rent for any period during the term hereof which is for
less that one (1) full calendar month shall be prorated based upon the actual
number of days of said month. Payment of Rent shall be made to Lessor at its
address stated herein or to such other persons or place as Lessor may from time
to time designate in writing. Acceptance of a payment which is less than the
amount then due shall not be a waiver of Lessor's rights to the balance of such
Rent, regardless of Lessor's endorsement of any check so stating.

 

5.             Security Deposit.  Lessee shall deposit with Lessor upon
execution hereof the Security Deposit as security for Lessee's faithful
performance of its obligations under this Lease.  If Lessee fails to pay Rent, or otherwise Defaults under this
Lease, Lessor may use, apply or retain all or any portion of said Security
Deposit for the payment of any amount due Lessor or to reimburse or compensate
Lessor for any liability, expense, loss or damage which Lessor may suffer or
incur by reason thereof.  If Lessor uses
or applies all or any portion of said Security Deposit, Lessee shall within ten
(10) days after written request therefor deposit monies with Lessor sufficient
to restore said Security Deposit to the full amount required by this
Lease.  If the Base Rent increases
during the term of this Lease, Lessee shall, upon written request from Lessor,
deposit additional moneys with Lessor so that the total amount of the Security
Deposit shall at all times bear the same proportion to the increased Base Rent
as the initial Security Deposit bore to the initial Base Rent.  Should the Agreed Use be amended to
accommodate a material change in the business of Lessee or to accommodate a
sublessee or assignee, Lessor shall have the right to increase the Security
Deposit to the extent necessary, in Lessor's reasonable judgment, to account
for any increased wear and tear that the Premises may suffer as a result
thereof.  If a change in control of
Lessee occurs during this Lease and following such change the financial
condition of Lessee is, in Lessor's reasonable judgment, significantly reduced,
Lessee shall deposit such additional monies with Lessor as shall be sufficient
to cause the Security Deposit to be at a commercially reasonable level based on
said change in financial condition. 
Lessor shall not be required to keep the Security Deposit separate from
its general accounts.  Within fourteen
(14) days after the expiration or termination of this Lease, if Lessor elects
to apply the Security Deposit only to unpaid Rent, and otherwise within thirty
(30) days after the Premises have been vacated pursuant to Paragraph 7.4(c)
below, Lessor shall return that portion of the Security Deposit not used or
applied by Lessor.  No part of the
Security Deposit shall be considered to be held in trust, to bear interest or
to be prepayment for any monies to be paid by Lessee under this Lease.

 

6.             Use.

 

6.1       Use.  Lessee shall use and occupy the Premises only for the Agreed Use,
or any other legal use which is reasonably comparable thereto, and for no other
purpose.  Lessee shall not use or permit
the use of the Premises in a manner that is unlawful, creates damage, waste or
a nuisance, or that disturbs owners and/or occupants of, or causes damage to
neighboring properties.  Lessor shall
not unreasonably withhold

 

1

 

or delay its consent to any
written request for a modification of the Agreed Use, so long as the same will
not impair the structural Integrity of the improvements on the Premises or the
mechanical or electrical systems therein, is not significantly more burdensome
to the Premises.  If Lessor elects to
withhold consent, Lessor shall within five (5) business days after such request
give written notification of same, which notice shall include an explanation of
Lessor's objections to the change in use.

 

6.2       Hazardous Substances.

 

(a)   Reportable Uses Require Consent.  The term "Hazardous
Substance" as used in this Lease shall mean any product,
substance, or waste whose presence, use, manufacture, disposal, transportation,
or release, either by itself or in combination with other materials expected to
be on the Premises, Is either: (i) potentially injurious to the public health,
safety or welfare, the environment or the Premises, (ii) regulated or monitored
by any governmental authority, or (iii) a basis for potential liability of
Lessor to any governmental agency or third party under any applicable statute
or common law theory.  Hazardous
Substances shall include, but not be limited to, hydrocarbons, petroleum,
gasoline, and/or crude oil or any products, by-products or fractions
thereof.  Lessee shall not engage in any
activity in or on the Premises which constitutes a Reportable Use of Hazardous
Substances without the express prior written consent of Lessor and timely
compliance (at Lessee's expense) with all Applicable Requirements.  "Reportable
Use" shall mean (i) the installation or use of any above or
below ground storage tank, (ii) the generation, possession, storage, use,
transportation, or disposal of a Hazardous Substance that requires a permit
from, or with respect to which a report, notice, registration or business plan
is required to be filed with, any governmental authority, and/or (iii) the
presence at the Premises of a Hazardous Substance with respect to which any
Applicable Requirements requires that a notice be given  to persons entering or occupying the
Premises or neighboring properties. 
Notwithstanding the foregoing, Lessee may use any ordinary and customary
materials reasonably required to be used in the normal course of the Agreed
Use, so long as such use is in compliance with all Applicable Requirements, is
not a Reportable Use, and does not expose the Premises or neighboring property
to any meaningful risk of contamination or damage or expose Lessor to any
liability therefor.  In addition, Lessor
may condition its consent to any Reportable Use upon receiving such additional
assurances as Lessor reasonably deems necessary to protect itself, the public,
the Premises and/or the environment against damage, contamination, injury
and/or liability, including, but not limited to, the installation (and removal
on or before Lease expiration or termination) of protective modifications (such
as concrete encasements) and/or increasing the Security Deposit.

 

(b)  Duty to Inform Lessor. 
If Lessee knows, or has reasonable cause to believe, that a Hazardous
Substance has come to be located in, on, under or about the Premises, other
than as previously consented to by Lessor, Lessee shall immediately give
written notice of such fact to Lessor, and provide Lessor with a copy of any
report, notice, claim or other documentation which it has concerning the
presence of such Hazardous Substance.

 

(c)   Lessee Remediation. 
Lessee shall not cause or permit any Hazardous Substance to be spilled
or released in, on, under, or about the Premises (including through the
plumbing or sanitary sewer system) and shall promptly, at Lessee's expense,
take all investigatory and/or remedial action reasonably recommended, whether
or not formally ordered or required, for the cleanup of any contamination of,
and for the maintenance, security and/or monitoring of the Premises or
neighboring properties, that was caused or materially contributed to by Lessee,
or pertaining to or involving any Hazardous Substance brought onto the Premises
during the term of this Lease, by or for Lessee, or any third party.

 

(d)  Lessee Indemnification.  Lessee shall indemnify, defend and hold Lessor, its agents,
employees, lenders and ground lessor, if any, harmless from and against any and
all loss of rents and/or damages, liabilities, judgments, claims, expenses,
penalties, and attorneys' and consultants' fees arising out of or involving any
Hazardous Substance brought onto the Premises by or for Lessee, or any third
party (provided, however, that Lessee shall have no liability under this Lease
with respect to underground migration of any Hazardous Substance under the
Premises from adjacent properties). 
Lessee's obligations shall include, but not be limited to, the effects
of any contamination or injury to person, property or the environment created
or suffered by Lessee, and the cost of investigation, removal, remediation,
restoration and/or abatement, and shall survive the expiration or termination
of this Lease.  No termination, cancellation or release agreement
entered into by Lessor and Lessee shall release Lessee from its obligations
under this Lease with respect to Hazardous Substances, unless specifically so
agreed by Lessor in writing at the time of such agreement.

 

(e)   Lessor Indemnification. 
Lessor and its successors and assigns shall indemnify, defend, reimburse
and hold Lessee, its employees and lenders, harmless from and against any and
all environmental damages which existed as a result of Hazardous Substances on
the Premises prior to the Start Date or which are caused by the gross
negligence, or intentional acts of Lessor, its agents or employees.  Lessor's obligations, as and when required
by the Applicable Requirements, shall include, but not be limited to, the cost
of investigation, removal, remediation, restoration and/or abatement, and shall
survive the expiration or termination of this Lease.

 

(f)   Investigations and Remediations.  Lessor shall retain the responsibility and pay for any
investigations or remediation measures required by governmental entities having
jurisdiction with respect to the existence of Hazardous Substances on the
Premises prior to the Start Date. 
Lessee shall cooperate fully in any such activities at the request of
Lessor, including allowing Lessor and Lessor's agents to have reasonable access
to the Premises at reasonable times in order to carry out Lessor's
investigative and remedial responsibilities.

 

(g)  Landlord Termination Option. 
If a Hazardous Substance Condition occurs during the term of this Lease,
unless Lessee is legally responsible therefor (in which case Lessee shall make
the investigation and remediation thereof required by the Applicable
Requirements and this Lease shall continue in full force and effect, but
subject to Lessor's rights under Paragraph 6.2(d) and Paragraph 13), Lessor
may, at Lessor's option, either (i) investigate and remediate such Hazardous
Substance Condition, if required, as soon as reasonably possible at Lessor's
expense, in which event this Lease shall continue in full force and effect, or
(ii) if the estimated cost to remediate such condition exceeds twelve (12)
times the then monthly Base Rent or $100,000, whichever is greater, give
written notice to Lessee, within  thirty
(30) days after receipt by Lessor of knowledge of the occurrence of such
Hazardous Substance Condition, of Lessor's desire to terminate this Lease as of
the date sixty (60) days following the date of such notice.  In the event Lessor elects to give a termination
notice, Lessee may, within ten (10) days thereafter, give written notice to
Lessor of Lessee's commitment to pay the amount by which the cost of the
remediation of such Hazardous Substance Condition exceeds an amount equal to
twelve (12) times the then monthly Base Rent or $100,000, whichever is
greater.  Lessee shall provide Lessor
with said funds or satisfactory assurance thereof within thirty (30) days
following such commitment.  In such
event, this Lease shall continue in full force and effect, and Lessor shall
proceed to make such remediation as soon as reasonably possible after the
required funds are available.  If Lessee
does not give such notice and provide the required funds or assurance thereof
within the time provided, this Lease shall terminate as of the date specified
in Lessor's notice of termination.

 

6.3       Lessee's Compliance with Applicable Requirements.  Except as otherwise provided in this Lease,
Lessee, shall, at Lessee's sole expense, fully, diligently and in a timely
manner, materially comply with all Applicable Requirements, the requirements of
any applicable fire insurance underwriter or rating bureau, and the
recommendations of Lessor's engineers and/or consultants which relate in any
manner to the Premises, without regard to whether said requirements are now in
effect or become effective after the Start Date.  Lessee shall, within ten (10) days after receipt of Lessor's
written request, provide Lessor with copies of all permits and other documents,
and other information evidencing Lessee's compliance with any Applicable
Requirements specified by Lessor, and shall immediately upon receipt, notify
Lessor in writing (with copies of any documents involved) of any threatened or
actual claim, notice, citation, warning, complaint or report pertaining to or
involving the failure of Lessee or the Premises to comply with any Applicable
Requirements.

 

6.4       Inspection; Compliance.  Lessor and Lessor's Lender and consultants
shall have the right to enter into Premises at any time, in the case of an
emergency, and otherwise at reasonable times, for the purpose of inspecting the
condition of the Premises and for verifying compliance by Lessee with this
Lease.  The cost of any such inspections
shall be paid by Lessor, unless a violation of Applicable Requirements, or a
contamination is found to exist or be imminent, or the inspection is requested
or ordered by a governmental authority. 
In such case, Lessee shall upon request reimburse Lessor for the cost of
such inspections, so long as such inspection is reasonably related to the
violation or contamination.

 

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

 

7.1       Lessee's Obligations.

 

(a)   In General.  Subject to
the provisions of Paragraph 2.2 (Condition), 2.3 (Compliance), 6.3 (Lessee's
Compliance with Applicable Requirements), 7.2 (Lessor's Obligations), 9 (Damage
or Destruction), and 14 (Condemnation), Lessee shall, at Lessee's sole expense,
keep 

 

2

 

the Premises, Utility
Installations, and Alterations in good order, condition and repair (whether or
not the portion of the Premises requiring repairs, or the means of repairing
the same, are reasonably or readily accessible to Lessee, and whether or not
the need for such repairs occurs as a result of Lessee's use, any prior use,
the elements or the age of such portion of the Premises), including, but not
limited to, all equipment or facilities, such as plumbing, HVAC, electrical,
lighting facilities, boilers, pressure vessels, fire protection system,
fixtures, walls (interior and exterior), foundations, ceilings, roofs, floors,
windows, doors, plate glass, skylights, landscaping, driveways, parking lots,
fences, retaining walls, signs, sidewalks and parkways located in, on, or
adjacent to the Premises.  Lessee, in
keeping the Premises in good order, condition and repair, shall exercise and
perform good maintenance practices, specifically including the procurement and
maintenance of the service contracts required by Paragraph 7.1(b) below.  Lessee's obligations shall include
restorations, replacements or renewals when necessary to keep the Premises and
all improvements thereon or a part thereof in good order, condition and state
of repair.  Lessee shall, during the
term of this Lease, keep the exterior appearance of the Building in a
first-class condition consistent with the exterior appearance of other similar
facilities of comparable age and size in the vicinity, including, when
necessary, the exterior repainting of the Building.

 

(b)  Service Contracts. 
Lessee shall, at Lessee's sole expense, procure and maintain contracts,
with copies to Lessor, in customary form and substance for, and with
contractors specializing and experienced in the maintenance of the following
equipment and improvements, ("Basic
Elements"), if any, as and when installed on the Premises: (i)
HVAC equipment, (ii) boiler, and pressure vessels, (iii) fire protection
systems, (iv) landscaping and irrigation systems, (v) roof covering and drains,
and (vi) asphalt and parking lots, (vii) clarifiers and (viii) any other
equipment, if reasonably required by Lessor.

 

(c)   Replacement.  Subject
to Lessee's indemnification of Lessor as set forth in Paragraph 8.7 below, and
without relieving Lessee of liability resulting from Lessee's failure to
exercise and perform good maintenance practices, if the Basic Elements
described in Paragraph 7.1(b) cannot be repaired other than at a cost which is
in excess of 50% of the cost of replacing such Basic Elements, then such Basic
Elements shall be replaced by Lessor, and the cost thereof shall be prorated
between the Parties and Lessee shall only be obligated to pay, each month
during the remainder of the term of this Lease, on the date on which Base Rent
is due, an amount equal  to the product
of multiplying the cost of such replacement by a fraction, the numerator of
which is one, and the denominator of which is the number of months of the
useful life of such replacement as such useful life is specified pursuant to
Federal income tax regulations or guidelines for depreciation thereof
(including interest on the unamortized balance as is then commercially
reasonable in the judgment of Lessor's accountants), with Lessee reserving the
right to prepay its obligation at any time.

 

7.2       Lessor's Obligations.  Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance), 9 (Damage or Destruction) and 14 (Condemnation),
it is intended by the Parties hereto that Lessor have no obligation, in any
manner whatsoever, to repair and maintain the Premises, or the equipment therein,
all of which obligations are intended to be that of the Lessee.  It is the intention of the Parties that the
terms of this Lease govern the respective obligations of the Parties as to
maintenance and repair of the Premises, and they expressly waive the benefit of
any statute now or hereafter in effect to the extent it is inconsistent with
the terms of this Lease.

 

7.3       Utility installations; Trade Fixtures; Alterations.

 

(a)   Definitions; Consent Required.  The term "Utility
Installations" refers to all floor and window coverings, air
lines, power panels, electrical distribution, security and fire protection
systems, communication systems, lighting fixtures, HVAC equipment, plumbing,
and fencing in or on the Premises.  The
term "Trade Fixtures"
shall mean Lessee's machinery and equipment that can be removed without doing
material damage to the Premises.  The
term "Alterations" shall
mean any modification of the improvements, other than Utility Installations or
Trade Fixtures, whether by addition or deletion.  "Lessee Owned Alterations
and/or Utility Installations" are defined as Alterations and/or
Utility Installations made by Lessee that are not yet owned by Lessor pursuant
to Paragraph 7.4(a).  Lessee shall not
make any Alterations or Utility Installations to the Premises without Lessor's
prior written consent.  Lessee may,
however, make non-structural Utility Installations to the interior of the
Premises (excluding the roof) without such consent but upon notice to Lessor,
as long as they are not visible from the outside, do not involve puncturing,
relocating or removing the roof or any existing walls, and the cumulative cost
thereof during this Lease as extended does not exceed $50,000 in the aggregate
or $10,000 in any one year.

 

(b)  Consent.  Any Alterations
or Utility Installations that Lessee shall desire to make and which require the
consent of the Lessor shall be presented to Lessor in written form with
detailed plans.  Consent shall be deemed
conditioned upon Lessee's: (i) acquiring all applicable governmental permits,
(ii) furnishing Lessor with copies of both the permits and the plans and
specifications prior to commencement of the work, and (iii) compliance with all
conditions of said permits and other Applicable Requirements in a prompt and expeditious
manner.  Any Alterations or Utility
Installations shall be performed in a workmanlike manner with good and
sufficient materials.  Lessee shall
promptly upon completion furnish Lessor with as-built plans and
specifications.  For work which costs an
amount equal to the greater of one month's Base Rent, or $10,000, Lessor may
condition its consent upon Lessee providing a lien and completion bond in an
amount equal to one and one-half times the estimated cost of such Alteration or
Utility Installation and/or upon Lessee's posting an additional Security
Deposit with Lessor.

 

(c)   Indemnification. 
Lessee shall pay, when due, all claims for labor or materials furnished
or alleged to have been furnished to or for Lessee at or for use on the
Premises, which claims are or may be secured by any mechanic's or materialmen's
lien against the Premises or any interest therein.  Lessee shall give Lessor not less than ten (10) days' notice
prior to the commencement of any work in, on or about the Premises, and Lessor shall
have the right to post notices of non-responsibility.  If Lessee shall contest the validity of any such lien, claim or
demand, then Lessee shall, at its sole expense defend and protect itself,
Lessor and the Premises against the same and shall pay and satisfy any such
adverse judgment that may be rendered thereon before the enforcement
thereof.  If Lessor shall require,
Lessee shall furnish a surety bond in an amount equal to one and one-half times
the amount of such contested lien, claim or demand, indemnifying Lessor against
liability for the same.  If Lessor
elects to participate in any such action, Lessee shall pay Lessor's attorneys'
fees and costs.

 

7.4       Ownership; Removal; Surrender; and Restoration.

 

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

 

(b)  Removal.  By delivery
to Lessee of written notice from Lessor not later than ninety (90) days prior
to the end of the term of this Lease, Lessor may require that any or all Lessee
Owned Alterations or Utility Installations be removed by the expiration or
termination of this Lease.  Lessor may
require the removal at any time of all or any part of any Lessee Owned
Alterations or Utility Installations made without the required consent.

 

(c)   Surrender/Restoration. 
Lessee shall surrender the Premises by the Expiration Date or any
earlier termination date, with all of the improvements, parts and surfaces
thereof broom clean and free of debris, and in good operating order, condition
and state of repair, ordinary wear and tear expected.  "Ordinary wear and tear" shall not include any damage
or deterioration that would have been prevented by good maintenance practice.  Lessee shall repair any damage occasioned by
the installation, maintenance or removal of Trade Fixtures, furnishings, and
equipment as well as the removal of any storage tank installed by or for
Lessee, and the removal, replacement, or remediation of any soil, material or
groundwater contaminated by Lessee. 
Trade Fixtures shall remain the property of Lessee and shall be removed
by Lessee.  The failure by Lessee to
timely vacate the Premises pursuant to this Paragraph 7.4(c) without the
express written consent of Lessor shall constitute a holdover under the
provisions of Paragraph 26 below.

 

8.             Insurance; Indemnity.

 

8.1       Payment For Insurance.  Lessee shall pay for all insurance required
under Paragraph 8 except to the extent of the cost attributable to liability
insurance carried by Lessor under Paragraph 8.2(b) in excess of $2,000,000 per
occurrence.  Premiums for policy periods
commencing prior to or extending beyond the Lease term shall be prorated to
correspond to the Lease term.  Payment
shall be made by Lessee to Lessor within ten (10) days following receipt of an
invoice.

 

8.2       Liability Insurance.

 

(a)   Carried by Lessee. 
Lessee shall obtain and keep in force a Commercial General Liability
Policy of Insurance protecting Lessee

 

3

 

and Lessor against claims for
bodily injury, personal injury and property damage based upon or arising out of
the ownership, use, occupancy or maintenance of the Premises and all areas
appurtenant thereto.  Such insurance
shall be on an occurrence basis providing single limit coverage in an amount
not less than $2,000,000 per occurrence with an "Additional Insured-Managers or Lessors of Premises
Endorsement" and contain the "Amendment of the Pollution Exclusion Endorsement" for
damage caused by heat, smoke or fumes from a hostile fire.  The Policy shall not contain any
intra-insured exclusions as between insured persons or organizations, but shall
include coverage for liability assumed under this Lease as an "insured
contract" for the performance of Lessee's indemnity obligations under this
Lease.  The limits of said insurance
shall not, however, limit the liability of Lessee nor relieve Lessee of any
obligation hereunder.  All insurance
carried by Lessee shall be primary to and not contributory with any similar insurance
carried by Lessor, whose insurance shall be considered excess insurance only.

 

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

 

8.3       Property Insurance – Building, Improvements and Rental
Value.

 

(a)   Building and Improvements. 
The Insuring Party shall obtain and keep in force a policy or policies
in the name of Lessor, with loss payable to Lessor and to any Lender insuring
loss or damage to the Premises.  The
amount of such insurance shall be equal to the full replacement cost of the
Premises, as the same shall exist from time to time, or the amount required by
any Lenders, but in no event more than the commercially reasonable and
available insurable value thereof.  If
Lessor is the Insuring Party, however, Lessee Owned Alterations and Utility
Installations, Trade Fixtures, and Lessee's personal property shall be insured
by Lessee under Paragraph 8.4 rather than by Lessor.  If the coverage is available and commercially appropriate, such
policy or policies shall insure against all risks of direct physical loss or
damage (except the perils of flood and/or earthquake unless required by a
Lender), including coverage for debris removal and the enforcement of any
Applicable Requirements requiring the upgrading, demolition, reconstruction or
replacement of any portion of the Premises as the result of a covered
loss.  Said policy or policies shall
also contain an agreed valuation provision in lieu of any coinsurance clause,
waiver of subrogation, and inflation guard protection causing an increase in
the annual property insurance coverage amount by a factor of not less than the
adjusted U.S. Department of Labor Consumer Price Index for All Urban Consumers
for the city nearest to where the Premises are located.  If such insurance coverage has a deductible
clause, the deductible amount shall not exceed $1,000 per occurrence, and
Lessee shall be liable for such deductible amount in the event of an Insured
Loss.

 

(b)  Rental Value.  The
Insuring Party shall obtain and keep in force a policy or policies in the name
of Lessor with loss payable to Lessor and any Lender, insuring the loss of the
full Rent for one (1) year.  Said
insurance shall provide that in the event the Lease is terminated by reason of
an insured loss, the period of Indemnity for such coverage shall be extended
beyond the date of the completion of repairs or replacement of the Premises, to
provide for one full year's loss of Rent from the date of any such loss.  Said insurance shall contain an agreed
valuation provision in lieu of any coinsurance clause, and the amount of
coverage shall be adjusted annually to reflect the projected Rent otherwise payable
by Lessee, for the next twelve (12) month period.  Lessee should be liable for any deductible amount in the event of
such loss.

 

(c)   Adjacent Premises.  If
the Premises are part of a larger building, or of a group of buildings owned by
Lessor which are adjacent to the Premises, the Lessee shall pay for any
increase in the premiums for the property insurance of such building or
buildings if said increase is caused by Lessee's acts, omissions, use or
occupancy of the Premises.

 

8.4       Lessee's Property/Business Interruption Insurance.

 

(a)   Property Damage. 
Lessee shall obtain and maintain insurance coverage on all of Lessee's
personal property, Trade Fixtures, and Lessee Owned Alterations and Utility
Installations.  Such insurance shall be
full replacement cost coverage with a deductible of not to exceed $1,000 per
occurrence.  The proceeds from any such
insurance shall be used by Lessee for the replacement of personal property,
Trade Fixtures and Lessee Owned Alterations and Utility Installations.  Lessee shall provide Lessor with written
evidence that such insurance is in force.

 

(b)  Business Interruption. 
If reasonably available, and if Lessor requests Lessee to do so in
writing, Lessee shall obtain and maintain loss of income and extra expense
insurance in amounts as will reimburse Lessee for direct or indirect loss of
earnings attributable to all perils commonly insured against by prudent lessees
in the business of Lessee or attributable to prevention of access to the
Premises as a result of such perils.

 

(c)   No Representation of Adequate Coverage.  Lessor makes no representation that the
limits or forms of coverage of insurance specified herein are adequate to cover
Lessee's property, business operations or obligations under this Lease.

 

8.5       Insurance Policies.  Insurance required herein shall be by
companies duly licensed or admitted to transact business in the state where the
Premises are located, and maintaining during the policy term a "General
Policyholders Rating" of at least B+, V, as set forth in the most current
issue of "Best's Insurance Guide", or such other rating as may be
required by a Lender.  Lessee shall not
do or permit to be done anything which invalidates the required insurance
policies.  Lessee shall, prior to the
Start Date, deliver to Lessor certified copies of policies of such insurance or
certificates evidencing the existence and amounts of the required
insurance.  No such policy shall be
cancelable or subject to modification except after thirty (30) days prior
written notice to Lessor.  Lessee shall,
at least thirty (30) days prior to the expiration of such policies, furnish
Lessor with evidence of renewals or "insurance binders" evidencing
renewal thereof, or Lessor may order such insurance and charge the cost thereof
to Lessee, which amount shall be payable by Lessee to Lessor upon demand.  Such policies shall be for a term of at
least one year, or the length of the remaining term of this Lease, whichever is
less.  If either Party shall fail to
procure and maintain the insurance required to be carried by it, the other
Party may, but shall not be required to, procure and maintain the same.

 

8.6       Waiver of Subrogation.  Without affecting any other rights or
remedies, Lessee and Lessor each hereby release and relieve the other, and waive
their entire right to recover damages against the other, for loss of or damage
to its property arising out of or incident to the perils required to be insured
against herein.  The effect of such
releases and waivers is not limited by the amount of insurance carried or
required, or by any deductibles applicable hereto.  The Parties agree to have their respective property damage
insurance carriers waive any right to subrogation that such companies may have
against Lessor or Lessee, as the case may be, so long as the insurance is not
invalidated thereby.

 

8.7       Indemnity. 
Except for Lessor's sole negligence, Lessee shall Indemnify, protect,
defend and hold harmless the Premises, Lessor and its agents, Lessor's master
or ground lessor, partners and Lenders, from and against any and all claims,
loss of rents and/or damages, liens, judgments, penalties, attorneys' and
consultants' fees, expenses and/or liabilities arising out of, involving, or in
connection with, the use and/or occupancy of the Premises by Lessee.  If any action or proceeding is brought
against Lessor by reason of any of the foregoing matters, Lessee shall upon
notice defend the same at Lessee's expense by counsel reasonably satisfactory
to Lessor and Lessor shall cooperate with Lessee in such defense.  Lessor need not have first paid any such
claim in order to be defended or indemnified.

 

8.8       Exemption of Lessor from Liability.  Lessor shall not be liable for injury or
damage to the person or goods, wares, merchandise or other property of Lessee,
Lessee's employees, contractors, invitees, customers, or any other person in or
about the Premises, whether such damage or injury is caused by or results from
fire, steam, electricity, gas, water or rain, or from the breakage, leakage,
obstruction or other defects of pipes, fire sprinklers, wires, appliances,
plumbing, HVAC or lighting fixtures, or from any other cause, whether the said
injury or damage results from conditions arising upon the Premises or upon
other portions of the Building of which the Premises are a part, or from other
sources or places.  Lessor shall not be
liable for any damages arising from any act or neglect of any other tenant of
Lessor.  Notwithstanding Lessor's
negligence or breach of this Lease, Lessor shall under no circumstances be
liable for injury to Lessee's business or for any loss of income or profit
therefrom.

 

9.             Damage or Destruction.

 

9.1       Definitions.

 

(a)   "Premises Partial Damage" shall mean damage or
destruction to the improvements on the Premises, other than Lessee Owned
Alterations and Utility Installations, which can reasonably be repaired in six
(6) months or less from the date of the damage or destruction.  Lessor shall notify Lessee in writing within
thirty (30) days from the date of the damage or destruction as to whether or
not the damage is partial or Total.

 

(b)  "Premises Total Destruction" shall mean damage or
destruction to the Premises, other than Lessee Owned Alterations and Utility
Installations, which cannot reasonably be repaired in six (6) months or less from
the date of the damage or destruction. 
Lessor shall notify Lessee in writing within thirty (30) days from the
date of the damage or destruction as to whether or not the damage is Partial or
Total.

 

4

 

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

 

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

 

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

 

9.2       Partial Damage - Insured Loss.  If a Premises Partial Damage that is an
Insured Loss occurs, then Lessor shall, at Lessor's expense, repair such damage
(but not Lessee's Trade Fixtures or Lessee Owned Alterations and Utility
Installations) as soon as reasonably possible and this Lease shall continue in
full force and effect; provided, however, that Lessee shall, at Lessor's
election, make the repair of any damage or destruction the total cost to repair
of which is $10,000 or less, and, in such event, Lessor shall make any
applicable insurance proceeds available to Lessee on a reasonable basis for
that purpose.  Notwithstanding the foregoing,
if the required insurance was not in force or the insurance proceeds are not
sufficient to effect such repair, the Insuring Party shall promptly contribute
the shortage in proceeds (except as to the deductible which is Lessee's
responsibility) as and when required to complete said repairs.  In the event, however, such shortage was due
to the fact that, by reason of the unique nature of the improvements, full
replacement cost insurance coverage was not commercially reasonable and
available.  Lesser shall have no
obligation to pay for the shortage in insurance proceeds or to fully restore
the unique aspects of the Premises unless Lessee provides Lessor with the funds
to cover same, or adequate assurance thereof, within ten (10) days following
receipt of written notice of such shortage and request therefor.  If Lessor receives said funds or adequate
assurance thereof within said ten (10) day period, the party responsible for
making the repairs shall complete them as soon as reasonably possible and this
Lease shall remain in full force and effect. 
If such funds or assurance are not received, Lessor may nevertheless
elect by written notice to Lessee within ten (10) days thereafter to: (i) make
such restoration and repair as is commercially reasonable with Lessor paying
any shortage in proceeds, in which case this Lease shall remain in full force
and effect, or have this Lease terminate thirty (30) days thereafter.  Lessee shall not be entitled to
reimbursement of any funds contributed by Lessee to repair any such damage or
destruction.  Premises Partial Damage
due to flood or earthquake shall be subject to Paragraph 9.3, notwithstanding
that there may be some insurance coverage, but the net proceeds of any such
insurance shall be made available for the repairs if made by either Party.

 

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

 

9.4       Total Destruction.  Notwithstanding any other provision hereof,
if a Premises Total Destruction occurs, this Lease shall terminate sixty (60)
days following such Destruction.  If the
damage or destruction was caused by the gross negligence or willful misconduct
of Lessee, Lessor shall have the right to recover Lessor's damages from Lessee
except as provided in Paragraph 8.6.

 

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

 

9.6       Abatement of Rent; Lessee's Remedies.

 

(a)   Abatement.  In the
event of Premises Partial Damage or Premises Total Destruction or a Hazardous
Substance Condition for which Lessee is not responsible under this Lease, the
Rent payable by Lessee for the period required for the repair, remediation or
restoration of such damage shall be abated in proportion to the degree to which
Lessee's use of the Premises is impaired, but not to exceed the proceeds
received from the Rental Value insurance. 
All other obligations of Lessee hereunder shall be performed by Lessee,
and Lessor shall have no liability for any such damage, destruction,
remediation, repair or restoration except as provided herein.

 

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

 

9.7       Termination-Advance Payments.  Upon termination of this Lease pursuant to
Paragraph 6.2(g) or Paragraph 9, an equitable adjustment shall be made concerning
advance Base Rent and any other advance payments made by Lessee to Lessor.  Lessor shall, in addition, return to Lessee
so much of Lessee's Security Deposit as has not been, or is not then required
to be, used by Lessor.

 

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

 

10.          Real Property Taxes.

 

10.1     Definition of "Real Property Taxes."  As used herein, the term "Real Property Taxes" shall
include any form of assessment; real estate, general, special, ordinary or
extraordinary, or rental levy or tax (other than inheritance, personal income
or estate taxes); improvement bond; and/or license fee imposed upon or levied
against any legal or equitable interest or Lessor in the Premises, Lessor's
right to other income therefrom, and/or Lessor's business of leasing, by any
authority having the direct or indirect power to tax and where the funds are
generated with reference to the Building address and where the proceeds so
generated  are to be applied by the
city, county or other local taxing authority of a jurisdiction within which the
Premises are located.  The term "Real Property Taxes" shall also
include any tax, fee, levy, assessment or charge, or any increase therein,
imposed by reason of events occurring during the term of this Lease, including
but not limited to, a change in the ownership of the Premises.

 

10.2 

 

(a)   Payment of Taxes. 
Lessee shall pay the Real Property Taxes applicable to the Premises
during the term of this Lease.  Subject
to Paragraph 10.2(b), all such payments shall be made at least ten (10) days
prior to any delinquency date.  Lessee
shall promptly furnish Lessor with satisfactory evidence that such taxes have
been paid.  If any such taxes shall
cover any period of time prior to or after the expiration or

 

5

 

termination of this Lease,
Lessee's share of such taxes shall be prorated to cover only that portion of
the tax bill applicable to the period that this Lease is in effect, and Lessor
shall reimburse Lessee for any overpayment. 
If Lessee shall fail to pay any required Real Property Taxes, Lessor
shall have the right to pay the same, and Lessee shall reimburse Lessor
therefor upon demand.

 

(b)  Advance Payment.  In
the event Lessee incurs a late charge on any Rent payment, Lessor may, at Lessor's
option, estimate the current Real Property Taxes, and require that such taxes
be paid in advance to Lessor by Lessee, either: (i) in a lump sum amount equal
to the installment due, at least twenty (20) days prior to the applicable
delinquency date, or (ii) monthly in advance with the payment of the Base
Rent.  If Lessor elects to require
payment monthly in advance, the monthly payment shall be an amount equal to the
amount of the estimated installment of taxes divided by the number of months
remaining before the month in which said installment becomes delinquent.  When the actual amount of the applicable tax
bill is known, the amount of such equal monthly advance payments shall be
adjusted as required to provide the funds needed to pay the applicable taxes.  If the amount collected by Lessor is
insufficient to pay such Real Property Taxes when due, Lessee shall pay Lessor,
upon demand, such additional sums as are necessary to pay such obligations.  All moneys paid to Lessor under this
Paragraph may be intermingled with other moneys of Lessor and shall not bear
interest.  In the event of a Breach by
Lessee in the performance of its obligations under this Lease, then any balance
of funds paid to Lessor under the provisions of this Paragraph may at the option
of Lessor, be treated as an additional Security Deposit.

 

10.3     Joint Assessment.  If the Premises are not separately assessed, Lessee's liability
shall be an equitable proportion of the Real Property Taxes for all of the land
and improvements included within the tax parcel assessed, such proportion to be
conclusively determined by Lessor from the respective valuations assigned in
the assessor's work sheets or such other information as may be reasonably
available.

 

10.4     Personal Property Taxes.  Lessee shall pay, prior to delinquency, all
taxes assessed against and levied upon Lessee Owned Alterations, Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee.  When possible, Lessee shall
cause such property to be assessed and billed separately from the real property
of Lessor.  If any of Lessee's said
personal property shall be assessed with Lessor's real property, Lessee shall
pay Lessor the taxes attributable to Lessee's property within ten (10) days
after receipt of a written statement.

 

11.          Utilities.  Lessee shall pay for all water, gas, heat,
light, power, telephone, trash disposal and other utilities and services
supplied to the Premises, together with any taxes thereon.  If any such services are not separately
metered to Lessee, Lessee shall pay a reasonable proportion, to be determined
by Lessor, of all charges jointly metered.

 

12.          Assignment and Subletting.

 

12.1     Lessor's Consent Required.

 

(a)   Lessee shall not voluntarily
or by operation of law assign, transfer, mortgage or encumber (collectively, 

"assign or assignment") or sublet all
or any part of Lessee's interest in this Lease or in the Premises without
Lessor's prior written consent.

 

(b)  A change in the control of
Lessee shall constitute an assignment requiring consent.  The transfer, on a cumulative basis, of
twenty-five percent (25%) or more of the voting control of Lessee shall
constitute a change in control for this purpose.

 

(c)   The involvement of Lessee or
its assets in any transaction, or series of transactions (by way of merger,
sale, acquisition, financing, transfer, leveraged buy-out or otherwise),
whether or not a formal assignment or hypothecation of this Lease or Lessee's
assets occurs, which results or will result in a reduction of the Net Worth of
Lessee by an amount greater than twenty-five percent (25%) of such Net Worth as
it was represented at the time of the execution of this Lease or at the time of
the most recent assignment to which Lessor has consented or as it exists
immediately prior to said transaction or transactions constituting such
reduction, whichever was or is greater, shall be considered an assignment of
this Lease to which Lessor may withhold its consent.  "Net Worth of Lessee"
shall mean the net worth of Lessee (excluding any guarantors) established under
generally accepted accounting principles.

 

(d)  An assignment or subletting
without consent shall, at Lessor's option, be a Default curable after notice
per Paragraph 13.1(c), or a noncurable Breach without the necessity of any
notice and grace period.  If Lessor
elects to treat such unapproved assignment or subletting as a noncurable
Breach, Lessor may either: (i) terminate this Lease, or (ii) upon thirty (30)
days written notice, increase the monthly Base Rent to one hundred ten percent
(110%) of the Base Rent then in effect. 
Further, in the event of such Breach and rental adjustment, (i) the
purchase price of any option to purchase the Premises held by Lessee shall be
subject to similar adjustment to one hundred ten percent (110%) of the price
previously in effect, and (ii) all fixed and non-fixed rental adjustments
scheduled during the remainder of the Lease term shall be increased to One
Hundred Ten Percent (110%) of the scheduled adjusted rent.

 

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

 

12.2     Terms and Conditions Applicable to Assignment and
Subletting.

 

(a)   Regardless of Lessor's
consent, any assignment or subletting shall not: (i) be effective without the
express written assumption by such assignee or sublessee of the obligations of
Lessee under this Lease, (ii) release Lessee of any obligations hereunder, or
(iii) alter the primary liability of Lessee for the payment of Rent or for the
performance of any other obligations to be performed by Lessee.

 

(b)  Lessor may accept Rent or
performance of Lessee's obligations from any person other than Lessee pending
approval or disapproval of an assignment. 
Neither a delay in the approval or disapproval of such assignment nor
the acceptance of Rent or performance shall constitute a waiver or estoppel of
Lessor's right to exercise its remedies for Lessee's Default or Breach.

 

(c)   Lessor's consent to any
assignment or subletting shall not constitute a consent to any subsequent
assignment or subletting.

 

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

 

(e)   Each request for consent to
an assignment or subletting shall be in writing, accompanied by information
relevant to Lessor's determination as to the financial and operational
responsibility and appropriateness of the proposed assignee or sublessee,
including but not limited to the intended use and/or required modification of
the Premises, if any, together with a fee of $1,000 or ten percent (10%) of the
current monthly Base Rent applicable to the portion of the Premises which is
the subject of the proposed assignment or sublease, whichever is greater, as
consideration for Lessor's considering and processing said request.  Lessee agrees to provide Lessor with such
other or additional information and/or documentation as may be reasonably
requested.

 

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

 

12.3     Additional Terms and Conditions Applicable to
Subletting.  The following
terms and conditions shall apply to any subletting by Lessee of all or any part
of the Premises and shall be deemed included in all subleases under this Lease
whether or not expressly incorporated therein:

 

(a)   Lessee hereby assigns and
transfers to Lessor all of Lessee's interest in all Rent payable on any
sublease, and Lessor may collect such Rent and apply same toward Lessee's
obligations under this Lease; provided, however, that until a Breach shall
occur in the performance of Lessee's obligations, Lessee may collect said
Rent.  Lessor shall not, by reason of
the foregoing or any assignment of such sublease, nor by reason of the
collection of Rent, be deemed liable to the sublessee for any failure of Lessee
to perform and comply with any of Lessee's obligations to such sublessee.  Lessee hereby irrevocably authorizes and
directs any such sublessee, upon receipt of a written notice from Lessor
stating that a Breach exists in the performance of Lessee's obligations under
this Lease, to pay to Lessor all Rent due and to become due under the
sublease.  Sublessee shall rely upon any
such notice from Lessor and shall pay all Rents to Lessor without any
obligation or right to inquire as to whether such Breach exists, notwithstanding
any claim from Lessee to the contrary.

 

(b)  In the event of a Breach by
Lessee, Lessor may, at its option, require sublessee to attorn to Lessor, in
which event Lessor shall undertake the obligations of the sublessor under such
sublease from the time of the exercise of said option to the expiration of such
sublease; provided, however, Lessor shall not be liable for any prepaid rents
or security deposit paid by such sublessee to such sublessor or for any prior
Defaults or Breaches of such sublessor.

 

6

 

(c)   Any matter requiring the
consent of the sublessor under a sublease shall also require the consent of
Lessor.

 

(d)  No sublessee shall further
assign or sublet all or any part of the Premises without Lessor's prior written
consent.

 

(e)   Lessor shall deliver a copy
of any notice of Default or Breach by Lessee to the sublessee, who shall have
the right to cure the Default of Lessee within the grace period, if any,
specified in such notice.   The sublessee
shall have a right of reimbursement and offset from and against Lessee for any
such Defaults cured by the sublessee.

 

13.          Default; Breach; Remedies.

 

13.1     Default; Breach.  A "Default"
is defined as a failure by the Lessee to comply with or perform any of the
terms, covenants, conditions or rules under this Lease.  A "Breach"
is defined as the occurrence of one or more of the following Defaults, and the
failure of Lessee to cure such Default within any applicable grace period:

 

(a)   The abandonment of the
Premises; or the vacating of the Premises without providing a commercially
reasonable level of security, or where the coverage of the property insurance
described in Paragraph 8.3 is jeopardized as a result thereof, or without
providing reasonable assurances to minimize potential vandalism.

 

(b)  The failure of Lessee to make
any payment or Rent or any other monetary payment required to be made by Lessee
hereunder, whether to Lessor or to a third party, when due, to provide
reasonable evidence of insurance or surety bond, or to fulfill any obligation
under this Lease which endangers or threatens life or property, where such
failure continues for a period of three (3) business days following written
notice to Lessee.

 

(c)   The failure by Lessee to
provide (i) reasonable written evidence of compliance with Applicable
Requirements,  (ii) the service
contracts, (iii) the rescission of an unauthorized assignment or subletting,
(iv) a Tenancy Statement, (v) a requested subordination, (vi) evidence
concerning any guaranty and/or Guarantor, (vii) any document requested under
Paragraph 42 (easements), or (viii) any other documentation or information
which Lessor may reasonably require of Lessee under the terms of this Lease,
where any such failure continues for a period of ten (10) days following
written notice to Lessee.

 

(d)  A Default by Lessee as to the
terms, covenants, conditions or provisions of this Lease, or of the rules
adopted under Paragraph 40 hereof, other then those described in subparagraphs
13.1(a), (b) or (c), above, where such Default continues for a period of thirty
(30) days after written notice; provided, however, that if the nature of
Lessee's Default is such that more than thirty (30) days are reasonably
required for its cure, then it shall not be deemed to be a Breach if Lessee
commences such cure within said thirty (30) day period and thereafter
diligently prosecutes such cure to completion.

 

(e)   The occurrence of any of the
following events: (i) the making of any general arrangement or assignment for
the benefit of creditors; (ii) becoming a "debtor" as defined in 11 U.S.C. Section 101 or any
successor statute thereto (unless, in the case of a petition filed against
Lessee, the same is dismissed within sixty (60) days); (iii) the appointment of
a trustee or receiver to take possession of substantially all of Lessee's
assets located at the Premises or of Lessee's interest in this Lease, where
possession is not restored to Lessee within thirty (30) days; or (iv) the
attachment, execution or other judicial seizure of substantially all of Lessee's
assets located at the Premises or of Lessee's interest in this Lease, where
such seizure is not discharged within thirty (30) days; provided, however, in
the event that any provision of this subparagraph (e) is contrary to any
applicable law, such provision shall be of no fore or effect, and not affect
the validity of the remaining provisions.

 

(f)   The discovery that any
financial statement of Lessee or of any Guarantor given to Lessor was
materially false.

 

(g)  If the performance of
Lessee's obligations under this Lease is guaranteed: (i) the death of a
Guarantor, (ii) the termination of a Guarantor's liability with respect to this
Lease other than in accordance with the terms of such guaranty, (iii) a
Guarantor's becoming insolvent or the subject of a bankruptcy filing, (iv) a
Guarantor's refusal to honor the guaranty, or (v) a Guarantor's breach of its
guaranty obligation on an anticipatory basis, and Lessee's failure, within
sixty (60) days following written notice of any such event, to provide written
alternative assurance or security, which, when coupled with the then existing
resources of Lessee, equals or exceeds the combined financial resources of
Lessee and the Guarantors that existed at the time of execution of this Lease.

 

13.2     Remedies. 
If Lessee fails to perform any of its affirmative duties or obligations,
within ten (10) days after written notice (or in case of an emergency, without
notice),  Lessor may, at its option,
perform such duty or obligation on Lessee's behalf, including but not limited
to the obtaining of reasonably required bonds, insurance policies, or
governmental licenses, permits or approvals. 
The costs and expenses of any such performance by Lessor shall be due
and payable by Lessee upon receipt of invoice therefor.  If any check given to Lessor by Lessee shall
not be honored by the bank upon which it is drawn, Lessor, at its option, may
require all future payments to be made by Lessee to be by cashier's check.  In the event of a Breach, Lessor may, with
or without further notice or demand, and without limiting Lessor in the
exercise of any right or remedy which Lessor may have by reason of such Breach:

 

(a)   Terminate Lessee's right to
possession of the Premises by any lawful means, in which case this Lease shall
terminate and Lessee shall immediately surrender possession to Lessor.  In such event Lessor shall be entitled to
recover from Lessee: (i) the unpaid Rent which had been earned at the time of
termination; (ii) the worth at the time of award of the amount by which the
unpaid rent which would have been earned after termination until the time of
award exceeds the amount of such rental loss that the Lessee proves could have
been reasonably avoided: (iii) the worth at the time of award of the amount by
which the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided: and (iv) any other amount necessary to compensate Lessor
for all the detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, 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 attorneys' fees, and that
portion of any leasing commission paid by Lessor in connection with this Lease
applicable to the unexpired term of this Lease.  The worth at the time of award of the amount referred to in
provision (iii) of the immediately preceding sentence shall be computed by
discounting such amount at the discount rate of the Federal Reserve Bank of the
District within which the Premises are located at the time of award plus one
percent (1%).  Efforts by Lessor to
mitigate damages caused by Lessee's Breach of this Lease shall not waive
Lessor's right to recover damages under Paragraph 12 if termination of this
Lease is obtained through the provisional remedy of unlawful detainer, Lessor
shall have the right to recover in such proceeding any unpaid Rent and damages
as are recoverable therein, or Lessor may reserve the right to recover all or
any part thereof in a separate suit.  If
a notice and grace period required under Paragraph 13.1 was not previously
given, a notice to pay rent or quit, or to perform or quit given to Lessee
under the unlawful detainer statute shall also constitute the notice required
by Paragraph 13.1.  In such case, the
applicable grace period required by Paragraph 13.1 and the unlawful detainer
statute shall run concurrently, and the failure of Lessee to cure the Default
within the greater of the two such grace periods shall constitute both an
unlawful detainer and a Breach of this Lease entitling Lessor to the remedies provided
for in this Lease and/or by said statute.

 

(b)  Continue the Lease and
Lessee's right to possession and recover the Rent as it becomes due, in which
event Lessee may sublet or assign, subject only to reasonable limitations.  Acts of maintenance, efforts to relet,
and/or the appointment of a receiver to protect the Lessor's interests, shall
not constitute a termination of the Lessee's right to possession.

 

(c)   Pursue any other remedy now
or hereafter available under the laws or judicial decisions of the state
wherein the Premises are located.  The
expiration or termination of this Lease and/or the termination of Lessee's
right to possession shall not relieve Lessee from liability under any indemnity
provisions of this Lease as to matters occurring or accruing during the term
hereof or by reason of Lessee's occupancy of the Premises.

 

13.3     Inducement Recapture.  Any agreement for free or abated rent or
other charges, or for the giving or paying by Lessor to or for Lessee of any
cash or other bonus, inducement or consideration for Lessee's entering into
this Lease, all of which concessions are hereinafter referred to as "Inducement Provisions," shall be
deemed conditioned upon Lessee's full and faithful performance of all of the
terms, covenants and conditions of this Lease. 
Upon Breach of this Lease by Lessee, any such Inducement Provision shall
automatically be deemed deleted from this Lease and of no further force or
effect, and any rent, other charge, bonus, inducement or consideration
theretofore abated, given or paid by Lessor under such an Inducement Provision
shall be immediately due and payable by Lessee to Lessor, notwithstanding any
subsequent cure of said Breach by Lessee. 
The acceptance by Lessor of rent or the cure of the Breach which initiated
the operation of this paragraph shall not 

 

7

 

be deemed a waiver by Lessor of
the provisions of this paragraph unless specifically so stated in writing by
Lessor at the time of such acceptance.

 

13.4     Late Charges.  Lessee hereby acknowledges that late payment by Lessee of Rent
will cause Lessor 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
Lessor by any Lender.  Accordingly, if
any Rent shall not be received by Lessor within five (5) days after such amount
shall be due, then, without any requirement for notice to Lessee, Lessee shall
pay to Lessor a one-time late charge equal to ten percent (10%) of each such
overdue amount.  The parties hereby
agree that such late charge represents a fair and reasonable estimate of the
costs Lessor will incur by reason of such late payment.  Acceptance of such late charge by Lessor
shall in no event constitute a waiver of Lessee's Default or Breach with
respect to such overdue amount, nor prevent the exercise of any of the other
rights and remedies granted hereunder. 
In the event that a late charge is payable hereunder, whether or not
collected, for three (3) consecutive installments of Base Rent, then
notwithstanding any provision of this Lease to the contrary, Base Rent shall,
at Lessor's option, become due and payable quarterly in advance.

 

13.5     Interest. 
Any monetary payment due Lessor hereunder, other than late charges, not
received by Lessor within thirty (30) days following the date on which it was
due, shall bear interest from the thirty-first (31st) day after it was
due.  The interest ("Interest") charged shall be equal to
the prime rate charged by the largest state chartered bank in the state in
which the Premises are located plus 4%, but shall not exceed the maximum rate
allowed by law.  Interest is payable in
addition to the potential late charge provided for in Paragraph 13.4.

 

13.6     Breach by Lessor.

 

(a)   Notice of Breach. 
Lessor shall not be deemed in breach of this Lease unless Lessor fails
within a reasonable time to perform an obligation required to be performed by
Lessor. For purposes of this Paragraph, a reasonable time shall in no event be
less than thirty (30) days after receipt by Lessor, and any Lender whose name
and address shall have been furnished Lessee in writing for such purpose, of
written notice specifying wherein such obligation of Lessor has not been
performed; provided, however, that if the nature of Lessor's obligation is such
that more than thirty (30) days are reasonably required for its performance,
then Lessor shall not be in breach if performance is commenced within such
thirty (30) day period and thereafter diligently pursued to completion.

 

(b)  Performance by Lessee on Behalf of Lessor.  In the event that neither Lessor nor Lender
cures said breach within thirty (30) days after receipt of said notice, or if
having commenced said cure they do not diligently pursue it to completion, then
Lessee may elect to cure said breach at Lessee's expense and offset from Rent
an amount equal to the greater of one month's Base Rent or the Security
Deposit, and to pay an excess of such expense under protest, reserving Lessee's
right to reimbursement from Lessor. 
Lessee shall document the cost of said cure and supply said
documentation to Lessor.

 

14.          Condemnation.  If the Premises or any portion thereof are
taken under the power of eminent domain or sold under the threat of the
exercise of said power (collectively "Condemnation"),
this Lease shall terminate as to the part taken as of the date the condemning
authority takes title or possession, whichever first occurs.  If more than ten percent (10%) of any
building, or more than twenty-five percent (25%) of the land area not occupied
by any building, is taken by Condemnation, Lessee may, at Lessee's option, to
be exercised in writing within ten (10) days after Lessor shall have given
Lessee written notice of such taking (or in the absence of such  notice, within ten (10) days after the
condemning authority shall have taken possession) terminate this Lease as of
the date the condemning authority takes such possession.  If Lessee does not terminate this Lease in
accordance with the foregoing, this Lease shall remain in full force and effect
as to the portion of the Premises remaining, except that the Base Rent shall be
reduced in proportion to the reduction in utility of the Premises caused by
such Condemnation.  Condemnation awards
and/or payments shall be the property of Lessor, whether such award shall be
made as compensation for diminution in value of the leasehold, the value of the
part taken, or for severance damages; provided, however, that Lessee shall be
entitled to any compensation for Lessee's relocation expenses, loss of business
goodwill and/or Trade Fixtures, without regard to whether or not this Lease is
terminated pursuant to the provisions of this Paragraph.  All Alterations and Utility Installations
made to the Premises by Lessee, for purposes of Condemnation only, shall by
considered the property of the Lessee and Lessee shall be entitled to any and
all compensation which is payable therefor. 
In the event that this Lease is not terminated by reason of the
Condemnation, Lessor shall repair any damage to the Premises caused by such
Condemnation.

 

15.          Brokers' Fee.

 

15.1     Additional Commission.  In addition to the payments owed pursuant to
Paragraph 1.10 above, and unless Lessor and the Brokers otherwise agree in
writing, Lessor agrees that: (a) if Lessee exercises any Option, (b) if Lessee
acquires any rights to the Premises or other premises owned by Lessor and
located within the same Project, if any, within which the Premises is located,
(c) if Lessee remains in possession of the Premises, with the consent of
Lessor, after the expiration of this Lease, or (d) if Base Rent is increased,
whether by agreement or operation of an escalation clause herein, then, Lessor
shall pay Brokers a fee in accordance with the schedule of said Brokers in
effect at the time of the execution of this Lease.

 

15.2     Assumption of Obligations.  Any buyer or transferee of Lessor's interest
in this Lease shall be deemed to have assumed Lessor's obligation
hereunder.  Each Broker shall be a third
party beneficiary of the provisions of Paragraphs 1.10, 15, 22 and 31.  If Lessor fails to pay to a Broker any amounts
due as and for commissions pertaining to this Lease when due, then such amounts
shall accrue Interest.  In addition, if
Lessor fails to pay any amounts to Lessee's Broker when due, Lessee's Broker
may send written notice to Lessor and Lessee of such failure and if Lessor
fails to pay such amounts within ten (10) days after said notice, Lessee shall
pay said monies to its Broker and offset such amounts against Rent.  In addition, Lessee's Broker shall be deemed
to be a third party beneficiary of any commission agreement entered into by
and/or between Lessor and Lessor's Broker.

 

15.3     Representations and Indemnities of Broker
Relationships.  Lessee and
Lessor each represent and warrant to the other that it has had no dealings with
any person, firm, broker or finder (other than the Brokers, if any) in
connection with this Lease, and that no one other than said named Brokers is
entitled to any commission or finder's fee in connection herewith.  Lessee and Lessor do each hereby agree to
indemnify, protect, defend and hold the other harmless from and against
liability for compensation or charges which may be claimed by any such unnamed
broker, finder or other similar party by reason of any dealings or actions of
the indemnifying Party, including any costs, expenses, attorneys' fees
reasonably incurred with respect thereto.

 

16.          Tenancy Statement/Estoppel
Certificate.

 

16.1     Each Party (as "Responding Party") shall within ten
(10) days after written notice from the other Party (the "Requesting Party") execute,
acknowledge and deliver to the Requesting Party an estoppel certificate in
writing, in form similar to the then most current "Tenancy Statement" form published by
the American Industrial Real Estate Association, plus such additional
information, confirmation and/or statements as may be reasonably requested by
the Requesting Party.

 

16.2     If Lessor desires to
finance, refinance, or sell the Premises, or any part thereof, Lessee and all
Guarantors shall deliver to any potential lender or purchaser designated by
Lessor such financial statements as may be reasonably required by such lender or
purchaser, including but not limited to Lessee's financial statements for the
past three (3) years.  All such
financial statements shall be received by Lessor and such lender or purchaser
in confidence and shall be used only for the purposes herein set forth.

 

17.          Definition of Lessor.  The term "Lessor" as used herein shall mean the owner or owners at
the time in question of the fee title to the Premises, or, if this is a
sublease, of the Lessee's interest in the prior lease. In the event of a
transfer of Lessor's title or interest in the Premises or this Lease.  Lessor shall deliver to the transferee or
assignee (in cash or by credit) any unused Security Deposit held by
Lessor.  Except as provided in Paragraph
15, upon such transfer or assignment and delivery of the Security Deposit, as
aforesaid, the prior Lessor shall be relieved of all liability with respect to
the obligations and/or covenants under this Lease thereafter to be performed by
the Lessor.  Subject to the foregoing,
the obligations and/or covenants in this Lease to be performed by the Lessor
shall be binding only upon the Lessor as hereinabove defined.  Notwithstanding the above, the original
Lessor under this Lease, and all subsequent holders of the Lessor's interest in
this Lease shall remain liable and responsible with regard to the potential
duties and liabilities of Lessor pertaining to Hazardous Substances as outlined
in Paragraph 6 above.

 

18.          Severability.
The invalidity of any provision of this Lease, as determined by a court of
competent jurisdiction, shall in no way affect the validity of any other
provision hereof.

 

8

 

19.          Days. 
Unless otherwise specifically indicated to the
contrary, the word "days" as used in this Lease shall mean and refer
to calendar days.

 

20.          Limitation on Liability.  Except with respect to Lessor's fraud, gross
negligence or willful misconduct, the obligations of Lessor under this Lease
shall not constitute personal obligations of Lessor, the individual partners of
Lessor or its or their individual partners, directors, officers or
shareholders, and Lessee shall look to the Premises, and to no other assets of
Lessor, for the satisfaction of any liability of Lessor with respect to this
Lease, and shall not seek recourse against the individual partners of Lessor,
or its or their individual partners, directors officers or shareholders, or any
of their personal assets for such satisfaction.

 

21.          Time of Essence.  Time is of the essence with respect to the
performance of all obligations to be performed or observed by the Parties under
this Lease.

 

22.          No Prior or Other Agreements; Broker
Disclaimer. 
This Lease contains all agreements between the Parties with respect to
any matter mentioned herein, and no other prior or contemporaneous agreement or
understanding shall be effective. 
Lessor and Lessee each represents and warrants to the Brokers that it
has made, and is relying solely upon, its own investigation as to the nature,
quality, character and financial responsibility of the other Party to this
Lease and as to the nature, quality and character of the Premises.  Brokers have no responsibility with respect
thereto or with respect to any default or breach hereof by either Party.  The liability (including court costs and
Attorneys' fees), of any Broker with respect to negotiation, execution,
delivery or performance by either Lessor or Lessee under this Lease or any
amendment or modification hereto shall be limited to an amount up to the fee
received by such Broker pursuant to this Lease; provided, however, that the
foregoing limitation on each Broker's liability shall not be applicable to any
gross negligence or willful misconduct of such Broker.

 

23.          Notices.

 

23.1     Notice Requirements.  All notices required or permitted by this
Lease shall be in writing and may be delivered in person (by hand or by
courier) or may be sent by regular, certified or registered mail or U.S. Postal
Service Express Mail, with postage prepaid, or by facsimile transmission, and
shall be deemed sufficiently given if served in a manner specified in this
Paragraph 23.  The addresses noted
adjacent to a Party's signature on this Lease shall be that Party's address for
delivery or mailing of notices.  Either
Party may by written notice to the other specify a different address for
notice, except that upon Lessee's taking possession of the Premises, the
Premises shall constitute Lessee's address for notice.  A copy of all notices to Lessor shall be
concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate in writing.

 

23.2     Date of Notice.  Any notice sent by registered or certified mail, return receipt
requested, shall be deemed given on the date of delivery shown on the receipt
card, or if no delivery date is shown, the postmark thereon.  If sent by regular mail the notice shall be
deemed given forty-eight (48) hours after the same is addressed as required
herein and mailed with postage prepaid. 
Notices delivered by United States Express Mail or overnight courier
that guarantee next day delivery shall be deemed given twenty-four (24) hours
after delivery of the same to the Postal Service or courier.  Notices transmitted by facsimile
transmission or similar means shall be deemed delivered upon telephone
confirmation of receipt, provided a copy is also delivered via delivery or
mail.  If notice is received on a
Saturday, Sunday or legal holiday, it shall be deemed received on the next
business day.

 

24.          Waivers.  No waiver by Lessor of the Default or Breach
of any term, covenant or condition hereof by Lessee, shall be deemed a waiver
of any other term, covenant or condition hereof, or any subsequent Default or
Breach by Lessee of the same or of any other term, covenant or condition
hereof.  Lessor's consent to, or
approval of, any act shall not be deemed to render unnecessary the obtaining of
Lessor's consent to, or approval of, any subsequent or similar act by Lessee,
or be construed as the basis of an estoppel to enforce the provision or
provisions of this Lease requiring such consent.  The acceptance of Rent by Lessor shall not be a waiver of any
Default or Breach by Lessee. Any payment by Lessee may be accepted by Lessor on
account of moneys or damages due Lessor, notwithstanding any qualifying statements
or conditions made by Lessee in connection therewith, which such statements
and/or conditions shall be of no force or effect whatsoever unless specifically
agreed to in writing by Lessor at or before the time of deposit of such
payment.

 

25.          Recording.  Either Lessor or Lessee shall, upon request
of the other, execute, acknowledge and deliver to the other a short form
memorandum of this Lease for recording purposes.  The Party requesting recordation shall be responsible for payment
of any fees applicable thereto.

 

26.          No Right To Holdover.  Lessee has no right to retain possession of
the Premises or any part thereof beyond the expiration or termination of this
Lease.  In the event that Lessee holds
over, then the Base Rent shall be increased to one hundred fifty percent (150%)
of the Base Rent applicable during the month immediately preceding the
expiration or termination.  Nothing
contained herein shall be construed as consent by Lessor to any holding over by
Lessee.

 

27.          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.

 

28.          Covenants and Conditions; Construction
of Agreement. 
All provisions of this Lease to be observed or performed by Lessee are
both covenants and conditions.  In
construing this Lease, all headings and titles are for the convenience of the
parties only and shall not be considered a part of this Lease.  Whenever required by the context, the
singular shall include the plural and vice versa.  This Lease shall not be construed as if prepared by one of the
parties, but rather according to its fair meaning as a whole, as if both
parties had prepared it.

 

29.          Binding Effect; Choice of Law.  This Lease shall be binding upon the
parties, their personal representatives, successors and assigns and be governed
by the laws of the State in which the Premises are located.  Any litigation between the Parties hereto
concerning this Lease shall be initiated in the county in which the Premises
are located.

 

30.          Subordination; Attornment;
Non-Disturbance.

 

30.1     Subordination.  This Lease and any Option granted hereby shall be subject and
subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "Security Device"), now or hereafter
placed upon the Premises, to any and all advances made on the security thereof,
and to all renewals, modifications, and extensions thereof.  Lessee agrees that the holders of any such
Security Devices shall have no liability or obligation to perform any of the
obligations of Lessor under this Lease. 
Any Lender may elect to have this Lease and/or any Option granted hereby
superior to the lien of its Security Device by giving written notice thereof to
Lessee, this Lease and such Options shall be deemed prior to such Security
Device, notwithstanding the relative dates of the documentation or recordation
thereof.

 

30.2     Attornment.  Subject to the non-disturbance provisions of Paragraph 30.3,
Lessee agrees to attorn to a Lender or any other party who acquires ownership
of the Premises by reason of a foreclosure of a Security Device, and that in
the event of such foreclosure, such new owner shall not; (i) be liable for any
act or omission of any prior lessor or with respect to events occurring prior
to acquisition of ownership; (ii) be subject to any offsets or defenses which
Lessee might have against any prior lessor, or (iii) be bound by prepayment of
more than one (1) month's rent.

 

30.3     Non-Disturbance.  With respect to Security Devices entered into by Lessor after the
execution of this Lease, Lessee's subordination of this Lease shall be subject
to receiving a commercially reasonable non-disturbance agreement (a "Non-Disturbance Agreement") from the
Lender which Non-Disturbance Agreement provides that Lessee's possession of the
Premises, and this Lease, including any options to extend the term hereof, will
not be disturbed so long as Lessee is not in Breach hereof and attorns to the
record owner of the Premises.  Further,
within sixty (60) days after the execution of this Lease, Lessor shall use its
commercially reasonable efforts to obtain a Non-Disturbance Agreement from the
holder of any pre-existing Security Device which is secured by the Premises. In
the event that Lessor is unable to provide the Non-Disturbance Agreement within
said sixty (60) days, then Lessee may, at Lessee's option, directly contact
Lessor's lender and attempt to negotiable for the execution and delivery of a
Non-Disturbance Agreement.

 

30.4     Self-Executing.  The agreements contained in this Paragraph 30 shall be effective
without the execution of any further documents; provided, however, that, upon
written request from Lessor or a Lender in connection with a sale, financing or
refinancing of the Premises, Lessee and Lessor shall execute such further
writings as may be reasonably required to separately document any
subordination, attornment and/or Non-Disturbance Agreement provided for herein.

 

31.          Attorneys' Fees.  If any Party or Broker brings an action or
proceeding to enforce the terms hereof or declare rights hereunder, the
Prevailing Party (as hereafter defined) in any such proceeding, action, or
appeal thereon, shall be entitled to reasonable attorneys' fees.  Such fees may be awarded in the same suit or
recovered in a separate suit, whether or not such action or proceeding in
pursued to decision or

 

9

 

judgment.  The term, "Prevailing Party" shall include, without limitation, a
Party or Broker who substantially obtains or defeats the relief sought, as the
case may be, whether by compromise, settlement, judgment, or the abandonment by
the other Party or Broker of its claim or defense.  The attorneys' fees award shall not be computed in accordance
with any court fee schedule, but shall be such as to fully reimburse all
attorneys' fees reasonably incurred.  In
addition, Lessor shall be entitled to attorneys' fees, costs and expenses
incurred in the preparation and service of notices of Default and consultations
in connection therewith, whether or not a legal action is subsequently
commenced in connection with such Default or resulting Breach.

 

32.          Lessor's Access; Showing Premises;
Repairs. 
Lessor and Lessor's agents shall have the right to enter the Premises at
any time, in the case of an emergency, and otherwise at reasonable times for
the purpose of showing the same to prospective purchasers, lenders, or lessees,
and making such alterations, repairs, improvements or additions to the Premises
as Lessor may deem necessary. All such activities shall be without abatement of
rent or liability to Lessee.  Lessor may
at any time place on the Premises any ordinary "For Sale" signs and Lessor may during the last six (6)
months of the term hereof place on the Premises any ordinary "For Lease" signs.  Lessee may at any time place on or about the
Premises any ordinary "For Sublease"
sign.

 

33.          Auctions.  Lessee shall not conduct, nor permit to be
conducted, any auction upon the Premises without Lessor's prior written
consent.  Lessor shall not be obligated
to exercise any standard of reasonableness in determining whether to permit an
auction.

 

34.          Signs.  Except for ordinary "For Sublease"
signs, Lessee shall not place any sign upon the Premises without Lessor's prior
written consent.  All signs must comply
with all Applicable Requirements.

 

35.          Termination; Merger.  Unless specifically stated otherwise in
writing by Lessor, the voluntary or other surrender of this Lease by Lessee,
the mutual termination or cancellation hereof, or a termination hereof by
Lessor for Breach by Lessee, shall automatically terminate any sublease or
lesser estate in the Premises; provided, however, that Lessor may elect to
continue any one or all existing subtenancies. 
Lessor's failure within ten (10) days following any such event to elect
to the contrary by written notice to the holder of any such lesser interest,
shall constitute Lessor's election to have such event constitute the
termination of such interest.

 

36.          Consents.  Except as otherwise provided herein,
wherever in this Lease the consent of a Party is required to an act by or for
the other Party, such consent shall not be unreasonably withheld or
delayed.  Lessor's actual reasonable
costs and expenses (including but not limited to architects', attorneys',
engineers' and other consultants' fees) incurred in the consideration of, or
response to, a request by Lessee for any Lessor consent, including but not
limited to consents to an assignment, a subletting or the presence or use of a
Hazardous Substance, shall be paid by Lessee upon receipt of an invoice and
supporting documentation therefor. 
Lessor's consent to any act, assignment or subletting shall not
constitute an acknowledgment that no Default or Breach by Lessee of this Lease
exists, nor shall such consent be deemed a waiver of any then existing Default
or Breach, except as may be otherwise specifically stated in writing by Lessor
at the time of such consent.  The
failure to specify herein any particular condition to Lessor's consent shall
not preclude the imposition by Lessor at the time of consent of such further or
other conditions as are then reasonable with reference to the particular matter
for which consent is being given.  In
the event that either Party disagrees with any determination made by the other
hereunder and reasonably requests the reasons for such determination, the
determining party shall furnish its reasons in writing and in reasonable detail
within ten (10) business days following such request.

 

37.          Guarantor.

 

37.1     Execution. 
The Guarantors, if any, shall each execute a guaranty in the form most
recently published by the American Industrial Real Estate Association, and each
such Guarantor shall have the same obligations as Lessee under this Lease.

 

37.2     Default. 
It shall constitute a Default of the Lessee if any Guarantor fails or
refuses, upon request to provide: (a) evidence of the execution of the
guaranty, including the authority of the party signing on Guarantor's behalf to
obligate Guarantor, and in the case of a corporate Guarantor, a certified copy
of a resolution of its board of directors authorizing the making of such
guaranty, (b) current financial statements, (c) a Tenancy Statement, or (d)
written confirmation that the guaranty is still in effect.

 

38.          Quiet Possession.  Subject to payment by Lessee of the Rent and
performance of all of the covenants, conditions and provisions on Lessee's part
to be observed and performed under this Lease, Lessee shall have quiet
possession and quiet enjoyment of the Premises during the term hereof.

 

39.          Options.

 

39.1     Definition. "Option" shall mean: (a) the right to
extend the term of or renew this Lease or to extend or renew any lease that
Lessee has on other property of Lessor; (b) the right of first refusal or first
offer to lease either the Premises or other property of Lessor; (c) the right
to purchase or the right of first refusal to purchase the Premises or other
property of Lessor.

 

39.2     Options Personal To Original Lessee.  Each Option granted to Lessee in this Lease
is personal to the original Lessee, and cannot be assigned or exercised by
anyone other than said original Lessee and only while the original Lessee is in
full possession of the Premises and, if requested by Lessor, with Lessee certifying
that Lessee has no intention of thereafter assigning or subletting.

 

39.3     Multiple Options.  In the event that Lessee has any multiple Options to extend or
renew this Lease, a later Option cannot be exercised unless the prior Options
have been validly exercised.

 

39.4     Effect of Default on Options.

 

(a)   Lessee shall have no right
to exercise an Option: (i) during the period commencing with the giving of any
notice of Default and continuing until said Default is cured, (ii) during the
period of time any Rent is unpaid (without regard to whether notice thereof is
given Lessee), (iii) during the time Lessee is in Breach of this Lease, or (iv)
in the event that Lessee has been given three (3) or more notices of Default,
whether or not the Defaults are cured, during the twelve (12) month period
immediately preceding the exercise of the Option.

 

(b)  The period of time within
which an Option may be exercised shall not be extended or enlarged by reason of
Lessee's inability to exercise an Option because of the provisions of Paragraph
39.4(a).

 

(c)   An Option shall terminate
and be of no further force or effect, notwithstanding Lessee's due and timely
exercise of the Option, if, after such exercise and prior to the commencement
of the extended term, (i) Lessee fails to pay Rent for a period of thirty (30)
days after such Rent becomes due (without any necessity of Lessor to give
notice thereof), (ii) Lessor gives to Lessee three (3) or more notices of
separate Default during any twelve (12) month period, whether or not the
Defaults are cured, or (iii) if Lessee commits a Breach of this Lease.

 

40.          Multiple Buildings.  If the Premises are a part of a group of
buildings controlled by Lessor, Lessee agrees that it will observe all
reasonable rules and regulations which Lessor may make from time to time for
the management, safety, and care of said properties, including the care and
cleanliness of the grounds and including the parking, loading and unloading of
vehicles, and that Lessee will pay its fair share of common expenses incurred
in connection therewith.

 

41.          Security Measures.  Lessee hereby acknowledges that the rental
payable to Lessor hereunder does not include the cost of guard service or other
security measures, and that Lessor shall have no obligation whatsoever to
provide same.  Lessee assumes all
responsibility for the protection of the Premises, Lessee, its agents and
invitees and their property from the acts of third parties.

 

42.          Reservations.  Lessor reserves to itself the right, from
time to time, to grant, without the consent or joinder of Lessee, such
easements, rights and dedications that Lessor deems necessary, and to cause the
recordation of parcel maps and restrictions, so long as such easements, rights,
dedications, maps and restrictions do not unreasonably interfere with the use
of the Premises by Lessee.  Lessee
agrees to sign any documents reasonably requested by Lessor to effectuate any
such easement rights, dedication, map or restrictions.

 

43.          Peformance Under Protest.  If at any time a dispute shall arise as to
any amount or sum of money to be paid by one Party to the other under the
provisions hereof, the Party against whom the obligation to pay the money is
asserted shall have the right to make payment "under protest" and
such payment shall not be regarded as a voluntary payment and there shall
survive the right on the part of said Party to institute suit for recovery of
such sum.  If it shall be adjudged that
there was no legal obligation on the part of said Party to pay such sum or any
part thereof, said Party shall be entitled to recover such sum or so much
thereof as it was not legally required to pay.

 

44.          Authority.  If either Party hereto is a corporation,
trust, limited liability company, partnership, or similar entity, each
individual executing this Lease on behalf of such entity represents and
warrants that he or she is duly authorized to execute and deliver this Lease on
its behalf.  Each party shall, with
thirty (30) days after request, deliver to the other party satisfactory evidence
of such authority.

 

10

 

45.          Conflict.  Any conflict between the printed provisions
of this Lease and the typewritten or handwritten provisions shall be controlled
by the typewritten or handwritten provisions.

 

46.          Offer.  Preparation of this Lease by either Party or
their agent and submission of same to the other Party shall not be deemed an
offer to lease to the other Party.  This
Lease is not intended to be binding until executed and delivered by all Parties
hereto.

 

47.          Amendments.  This Lease may be modified only in writing,
signed by the Parties in interest at the time of the modification.  As long as they do not materially change
Lessee's obligations hereunder, Lessee agrees to make such reasonable non-monetary
modifications to this Lease as may be reasonably required by a Lender in
connection with the obtaining of normal financing or refinancing of the
Premises.

 

48.          Multiple Parties.  If more than one person or entity is named
herein as either Lessor or Lessee, such multiple Parties shall have joint and
several responsibility to comply with the terms of this Lease.

 

49.          Mediation and Arbitration of Disputes.  An Addendum requiring the Mediation and/or
the Arbitration of all disputes between the Parties and/or Brokers arising out
of this Lease o is o
is not attached to this Lease.

 

LESSOR AND LESSEE HAVE
CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND PROVISION CONTAINED
HEREIN, AND BY EXECUTION OF THIS LEASE SHOW THEIR INFORMED AND VOLUNTARY CONSENT
THERETO.  THE PARTIES HEREBY AGREE THAT,
AT THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY
REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH
RESPECT TO THE PREMISES.

 

ATTENTION:  NO REPRESENTATION OR RECOMMENDATION IS MADE
BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY ANY BROKER AS TO THE
LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE
TRANSACTION TO WHICH IT RELATES.  THE
PARTIES ARE URGED TO:

 

1.  SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF
THIS LEASE.

2.  RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE
CONDITION OF THE PREMISES.  SAID
INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE POSSIBLE PRESENCE OF HAZARDOUS
SUBSTANCES, THE ZONING OF THE PREMISES, THE STRUCTURAL INTEGRITY, THE CONDITION
OF THE ROOF AND OPERATING SYSTEMS, AND THE SUITABILITY OF THE PREMISES FOR
LESSEE'S INTENDED USE.

 

WARNING:  IF THE PREMISES IS LOCATED IN A STATE OTHER
THAN CALIFORNIA, CERTAIN PROVISIONS OF THE LEASE MAY NEED TO BE REVISED TO
COMPLY WITH THE LAWS OF THE STATE IN WHICH THE PREMISES IS LOCATED.

 

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

 

	
  Executed at:

  	
   

  	
   

  	
  Executed at:

  	
   

  
	
  on

  	
  9/11/97

  	
   

  	
  on:

  	
  9/12/97

  
	
  By LESSOR:

  	
   

  	
  By LESSEE:

  
	
   

  	
  Eleanor H.
  Simpson, Trustee for the Eleanor

  	
   

  	
   

  	
  BioEnterics
  Corporation, a wholly owned

  
	
   

  	
  H. Simpson
  Trust dated June 28, 1977

  	
   

  	
   

  	
  subsidary of
  Inamed Corporation

  
	
   

  	
   

  	
   

  
	
  By: 

  	
  /s/ Eleanor
  H. Simpson

  	
   

  	
  By: 

  	
  /s/ Jimmy J.
  McGhan

  
	
  Name
  Printed:

  	
  Eleanor H.
  Simpson

  	
   

  	
  Name
  Printed:

  	
  Jimmy J.
  McGhan

  
	
  Title:

  	
  Owner

  	
   

  	
  Title:

  	
  President

  
	
   

  	
   

  	
   

  
	
  By: 

  	
   

  	
   

  	
  By: 

  	
   

  
	
  Name
  Printed: 

  	
   

  	
   

  	
  Name

  	
  Printed:

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  
	
  Address:

  	
   

  	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Telephone:
  (805)

  	
  963-7825

  	
   

  	
  Telephone:
  (805)

  	
  683-6761

  
	
  Facsimile:(   )

  	
   

  	
   

  	
  Facsimile:
  (   )

  	
   

  
	
  Federal ID
  No.

  	
   

  	
   

  	
  Federal ID
  No: 

  	
   

  
	
  BROKER:

  	
   

  	
  BROKER:

  
	
   

  	
  CB
  Commercial Real Estate Group, Inc.

  	
   

  	
   

  	
  CB
  Commercial Real Estate Group, Inc.

  
	
  Executed at:

  	
   

  	
   

  	
  Executed at:

  	
   

  
	
  on:

  	
   

  	
   

  	
  on:

  	
   

  
	
   

  	
   

  	
   

  
	
  By: 

  	
   

  	
   

  	
  By: 

  	
   

  
	
  Name
  Printed:

  	
  Edward C. De
  Lacy

  	
   

  	
  Name
  Printed:

  	
  Edward C. De
  Lacy

  
	
  Title: 

  	
  First Vice
  President

  	
   

  	
  Title:

  	
  First Vice
  President

  
	
  Address:

  	
  1332 Anacapa
  Street, Suite 110

  	
   

  	
  Address:

  	
  1332 Anacapa
  Street, Suite 110

  
	
   

  	
  Santa
  Barbara, CA 93101

  	
   

  	
   

  	
  Santa
  Barbara, CA 93101

  
	
  Telephone: (805)
  

  	
  963-6100

  	
   

  	
  Telephone:
  (805) 

  	
  963-6100

  
	
  Facsimile:
  (805) 

  	
  963-6120

  	
   

  	
  Facsimile:
  (805) 

  	
  963-6120

  
	
  Federal ID
  No.

  	
   

  	
   

  	
  Federal ID
  No.

  	
   

  
																															

 

NOTE:  These forms are often
modified to meet changing requirements of law and industry needs.  Always write or call to make sure you are
utilizing the most current form: 
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 700 So, Flower Street,
Suite 600, Los Angeles, California 90017. (213) 687-8777. Fax No. (213)
687-8616

 

©Copyright 1996 – By American
industrial Real Estate Association. All rights reserved.

No part of
these works may be reproduced in any form without permission in writing.

 

11

 

ADDENDUM

 

ADDENDUM
TO THAT A.I.R. STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE-NET DATED
AUGUST 21, 1997, BY AND BETWEEN BIOENTERICS CORPORATION AS "LESSEE",
AND E.H. SIMPSON PROPERTIES, GARY SIMPSON AGENT AS "LESSOR" FOR THAT
CERTAIN PROPERTY COMMONLY KNOWN 1125 MARK AVENUE, CARPINTERIA, STATE OF
CALIFORNIA.

 

50.          Tenant Improvements - Free Rent:

The Lessee
desires to make tenant improvements to the building.  The Lessee shall submit said building plans to the Lessor for
Approval, which shall not be unreasonably withheld.  In Lieu of a tenant improvement allowance, the Lessor will grant
the Lessee four (4) months of free rent to subsidize a portion of the tenant
improvements.

 

51.          Hazardous Materials:

The Lessor
warrants that to the best of their knowledge the building does not contain
asbestos or hazardous waste and that the property does not have, and has never
had, an underground storage container on the property.  A copy of the McLaren/Hart Environmental
Assessment dated August 30, 1994, initiated by the exiting tenant, Ortho
Dianogstics was included with the Lease Proposal.

 

52.          Condominium Project:

The Lessee
understands that this building is part of a condominium association called the
Lafayette Business Park, a copy of the by laws were included with the lease
proposal.

 

53.          Building Operation:

Upon the
completion of a lease, the Lessor is to turn over keys to the Lessee and any
materials pertinent to the operation of the facility.

 

Continuation
of section 2.3 of the Lease

 

The cost of
Capital Expenditure work is being allocated to Lessee for the following
reasons:

a)                                      The
term of the Lease is 10 years, with two (2) options to renew for additional
periods totaling another 10 years, so it is anticipated that Lessee will enjoy
most of the benefits of any such work.

b)                                     Lessee
intends to make susbstantial improvements to the premises to make the same
suitable for its intended purposes, and such improvements may affect the cost
of any such work.

c)                                      Lessee
has been granted an opinion to purchase the premises for a purchase price with
fixed annual increases.  It is
anticipated that Lessee will ultimately exercise such purchase option and
thereby obtain the reversionary value of any such work.

 

AGREED
AND ACCEPTED:

 

	
  LESSEE:

  	
   

  	
   

  	
  LESSOR:

  	
   

  
	
  BioEnterics Corporation

  	
   

  	
  Eleanor H. Simpson, Trustee of the

  
	
   

  	
   

  	
  Eleanor H. Simpson Trust dated

  
	
   

  	
   

  	
  June 28, 1977

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Jimmy J.
  McGhan

  	
   

  	
  By:

  	
  /s/ Eleanor
  H. Simpson

  
	
   

  	
  Jimmy J. McGhan

  	
   

  	
   

  	
  Eleanor H. Simpson

  
	
  Title:

  	
  President

  	
   

  	
  Title:

  	
  Owner

  
	
  Date:

  	
  9/12/97

  	
   

  	
  Date:

  	
  9/11/97

  
									

 

 

b.     Upon the establishment of
each New Market Rental Value:

 

1)   the new MRV will become the new
"Base Rent" for the purpose of calculating any further Adjustments,
and

2)   the first month of each
Market Value term shall become the new "Base Month" for the purpose
of calculating any further Adjustments.

 

o            III.           Fixed
Rental Adjustment(s) (FRA)

 

The Base Rent shall be
increased to the following amounts on the dates set forth below:

 

On (Fill in FRA Adjustments Date(s):                     The
New Base Rent Shall be:

___________________________________     $_______________________

___________________________________     $_______________________

___________________________________     $_______________________

___________________________________     $_______________________

 

B.            NOTICE:

 

Unless
specified otherwise herein, notice of any such adjustments, other than Fixed
Rental Adjustments, shall be made as specified in paragraph 23 of the Lease.

 

C.            BROKER'S FEE:

 

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

 

RENT ADJUSTMENT(S)

 

For this form, write: American
Industrial Real Estate Association, 700 S. Flower Street, Suite 600, Los
Angeles, Calif.90017

©1997 – American Industrial
Real Estate Association                                                  FORM

 

2

 

[LOGO]

 

RENT ADJUSTMENT(S)

 

STANDARD LEASE ADDENDUM

 

	
  Dated 
  

  	
  August 21,
  1997

  
	
   

  
	
  By and Between (Lessor)

  	
   

  	
  Eleanor H. Simpson, Trustee for the

  
	
   

  	
   

  	
  Eleanor H. Simpson Trust dated June 28,
  1977

  
	
   

  	
   

  	
   

  
	
  (Lessee)

  	
   

  	
  BioEnterics
  Corporation

  
	
   

  
	
  Address of Premises:

  	
   

  	
  1125 Mark
  Avenue, Carpinteria, CA 93013

  
				

 

Paragraph 54

 

A.            RENT ADJUSTMENTS

 

The monthly
rent for each month of the adjustment period(s) specified shall be increased
using the method(s) indicated below:

 

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

 

ý            I.              Cost
of Living Adjustment(s) (COLA)

 

a.             On (Fill in COLA Dates): Each
annual anniversary of November 1, through the term of the lease and  options
to extend the Base Rent shall be adjusted by the change, if any, from the Base
Month specified below, in the Consumer Price Index of the Bureau of Labor
Statistics of the U.S. Department of Labor for (select one): ý
CPI W (Urban Wage Earners and Clerical Workers) or o
CPI U (All Urban Consumers), for (Fill in Urban Area):

 

Los Angeles, Anaheim,
Riverside, All Items (1982-1984=100), herein referred to as "CPI" The
annual C.P.I. increase shall not exceed five percent (5%), compounded from the
previous year's rent.

b.             The monthly rent payable in
accordance with paragraph A.I.a. of this Addendum shall be calculated as
follows: the Base Rent set forth in paragraph 1.5 of the attached Lease (as
adjusted), shall be multiplied by a fraction the numerator of which shall be
the CPI of the calendar month two months prior to the month(s) specified in
paragraph A.I.a. above during which the adjustment is to take effect, and the
denominator of which shall be the CPI of the calendar month which is two months
prior to (select one): o
the first month of the term of this Lease as set forth in paragraph 1.3
("Base Month") or ý (Fill in Other
"Base Month"): tenth month of the previous year. The sum so
calculated shall constitute the new monthly rent hereunder, but in no event,
shall any such new monthly rent be less than the rent payable for the month
immediately preceding the rent adjustment.

 

c.             In the event the compilation and/or
publication of the CPI shall be transferred to any other governmental
department or bureau or agency or shall be discontinued, then the index most
nearly the same as the CPI shall be used to make such calculation.  In the event that the Parties cannot agree
on such alternative index, then the matter shall be submitted for decision to
the American Arbitration Association in accordance with the then rules of said
Association and the decision of the arbitrators shall be binding upon the
parties.  The cost of said Arbitration
shall be paid equally by the Parties.

 

o            II             Market
Rental Value Adjustment(s) (MRV)

 

a.     On (Fill in MRV Adjustment
Date(s):

 

the Base Rent shall be adjusted
to the "Market Rental Value" of the property as follows:

 

1)     Four months prior to each
Market Rental Value Adjustment Date described above, the Parties shall attempt
to agree upon what the new MRV will be on the adjustment date.  If agreement cannot be reached within thirty
days, then:

 

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

 

(b)   Both Lessor and Lessee shall
each immediately make a reasonable determination of the MRV and submit such
determination, in writing, to arbitration in accordance with the following
provisions:

 

(i)    Within fifteen days
thereafter, Lessor and Lessee shall each select an o
appraiser or o broker ("Consultant"–check one) of their choice
to act as an arbitrator.  The two
arbitrators so appointed shall immediately select a third mutually acceptable
Consultant to act as a third arbitrator.

 

(ii)   The three arbitrators shall
within thirty days of the appointment of the third arbitrator reach a decision
as to what the actual MRV for the Premises is, and whether Lesson’s or Lessee's
submitted MRV is the closest thereto. 
The decision of a majority of the arbitrators shall be binding on the
Parties.  The submitted MRV which is determined
to be the closest to the actual MRV shall thereafter be used by the Parties.

 

(iii)  If either of the Parties
fails to appoint an arbitrator within the specified fifteen days, the
arbitrator timely appointed by one of them shall reach a decision on his or her
own, and said decision shall be binding on the Parties.

 

(iv)  The entire cost of such
arbitration shall be paid by the party whose submitted MRV is not selected, ie.
the one that is NOT the closest to the actual MRV.

 

2)     Notwithstanding the foregoing,
the new MRV shall not be less than the rent payable for the month immediately
preceding the rent adjustment.

 

	
  Initials: 

  	
  JM

  
	
   

  	
  EHS

  

 

RENT ADJUSTMENT(S)

 

For this form, write: American
Industrial Real Estate Association, 700 S. Flower Street, Suite 600, Los
Angeles, Calif.90017

©1997 – American Industrial
Real Estate Association                                                  FORM

 

1

 

[LOGO]

 

OPTION(S) TO EXTEND

 

ADDENDUM TO

STANDARD LEASE

 

	
  Dated 
  

  	
  August 21,
  1997

  
	
   

  
	
  By and Between (Lessor)

  	
   

  	
  Eleanor H. Simpson, Trustee for the

  
	
   

  	
   

  	
  Eleanor H. Simpson Trust dated June 28,
  1977

  
	
   

  	
   

  	
   

  
	
  (Lessee)

  	
   

  	
  BioEnterics
  Corporation

  
	
   

  
	
  Property Address:

  	
   

  	
  1125 Mark
  Avenue, Carpinteria, CA 93013

  
				

 

Paragraph 55

 

A.            OPTION(S) TO EXTEND:

 

Lessor hereby
grants to Lessee the option to extend the term of this Lease for    2    
additional    60    month period(s) commencing when the prior
term expires upon each and all of the following terms and conditions:

 

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

 

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

 

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

 

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

 

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

 

ý            I.              Cost
of Living Adjustment(s) (COL)

(a)                                  On
(Fill in COL Adjustment Date (s):Each annual anniversary of November 1 through
the option periods as set forth in Paragraph 54

 

 

1

 

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

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

 

2)             In any event, the new MRV shall not
be less than the payable for the month immediately preceding the date for rent
adjustment.

 

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

 

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

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

 

o            III.           Fixed
Adjustments(s) (FRA)

 

The monthly rent payable under
paragraph 1.5 ("Base Rent") of the attached Lease shall be increased
to the following amounts on the dates set forth below:

 

On (Fill in FRA Adjustment Date(s)):                               The
New Base Rental shall be:

 

                                                                                           $

                                                                                           $

                                                                                           $

                                                                                           $

 

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

 

C.            BROKER'S FEE:

 

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

 

NOTICE:  These forms are often modified to meet
changing requirements of law and industry needs.  Always write or call to make sure you are utilizing the most
current form American Industrial Real Estate Association, 345 South Figueroa
Street, Suite M.1 Los Angeles, CA 90071.

 

 

2

 

[LOGO] AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION

 

OPTION TO PURCHASE

 

STANDARD LEASE ADDENDUM

 

	
  Dated 

  	
  August 21,
  1997

  
	
   

  
	
  By and Between (Lessor)

  	
   

  	
  Eleanor H. Simpson, Trustee for the

  
	
   

  	
   

  	
  Eleanor H. Simpson Trust dated June 28,
  1977

  
	
   

  	
   

  	
   

  
	
  (Lessee)

  	
   

  	
  BioEnterics
  Corporation

  
	
   

  
	
  Address of Premises:

  	
   

  	
  1125 Mark
  Avenue, Carpinteria, CA 93013

  
				

 

Paragraph   56 

 

(a)           Lessor hereby grants to Lessee an
option to purchase the Premises upon the terms and conditions herein set forth.

 

(b)           In order to exercise this option to
purchase, Lessee must give written notice of the exercise of the option to
Lessor during the period from see (g) below to      (the "Option Period"),time
being of the essence.  If such notice is
not so given, this option shall automatically expire.  At the same time the option is exercised, Lessee must deliver to
Lessor a cashier's check in the amount of $50,000.00 payable to Lawyers Title
Company to be part of the Purchase price.

 

(c)           The provisions of paragraph 39,
including those relating to Lessee's Default set forth in paragraph 39.4 of
this Lease are conditions of this Option.

 

(d)           If Lessee elects to exercise this
option this option to purchase as provided above, the transfer of title to
Lessee shall occur on the close of escrow on see (g) below , and until that
time the terms of this Lease shall remain in full force and effect.

 

(e)           If Lessee elects to exercise this
option to purchase, the purchase price to be paid by Lessee shall be
$1,700,000.00 and with an annual compounded price increase of two and one-half
percent (2 1/2%) until the close of escrow (with a proration of such two and
one-half percent (2 1/2%) for any partial year from the commencement date until
the close of escrow).

 

(f)            Within ten days after this option to
purchase is exercised, Lessor and Lessee shall give instructions to consummate
the sale to Lawyers Title Company, located at 200 E. Carrillo, Santa Barbara,
CA 93101, who shall act as escrow holder, on the normal and usual escrow forms
then used by such escrow holder, as follows:

 

(i)            Escrow shall close on the date set
forth in paragraph (d) above;

 

(ii)           Lessor shall deposit the check
referred to in paragraph (b) into escrow upon opening thereof, with the balance
of the purchase price to be deposited into escrow no later than 11:00 a.m. on
the business day prior to the expected closing date;

 

(iii)          The parties agree to execute any
additional instructions as are normal and usual;

 

(iv)          The balance of the terms and
conditions of sale shall be as set forth in the American Industrial Real Estate
Association "STANDARD OFFER, AGREEMENT AND ESCROW INSTRUCTIONS FOR THE
PURCHASE OF REAL ESTATE", a copy of which is attached hereto, except for
the following: see below and paragraphs 4.2; 5; 6; 9.1 a, b, c, d, e, f, g, h,
i, j and k; and 20, which do not apply.

 

(g)           The Tenant shall have an option to
purchase the property within 180 days of a step up in income tax basis of the
property.  The option shall be binding
on Lessor's successors.  The option
period shall be valid during the Lease term and Lease extension options.  The purchase price will be paid in cash and
the property will be conveyed free and clear of liens and encumberments except
for exceptions approved in a Preliminary Title Report from Lawyers Title
Company to be reviewed prior to Lease execution.

 

(h)           Notwithstanding any provision of the
Lease which this option is a part, Lessee shall have the right to assign its
right, title and interest under this option to its designated nominee and
nominees after its exercise thereof and prior to the close of escrow, whereupon
such nominee or nominees shall succeed to all right of Lessee hereunder,
provided, however, that Lessee and Guarantor shall remain liable for all
obligations hereunder and under the Lease.

 

NOTE: These forms are often
modified to meet changing requirements of law and needs of the industry.  Always write or call to make sure you are
utilizing the most current form: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION,
700 So. Flower St., Suite 600, Los Angeles, CA 90017.

 

OPTION TO PURCHASE

 

 

[LOGO] AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION]

 

GUARANTY OF LEASE

 

WHEREAS,
Eleanor H. Simpson, Trustee of the Eleanor H. Simpson Trust dated June 28,
1977, hereinafter "Lessor", and BioEnterics Corporation , hereinafter
"Lessee", are about to execute a document entitled "Lease"
dated August 21, 1997 concerning the premises commonly known as     wherein Lessor will lease the premises to
Lessee, and 

WHEREAS,
Donald K. McGhan hereinafter "Guarantors" have a financial in Lessee,
and

WHEREAS,
Lessor would not execute the Lease if Guarantors did not execute and deliver
this Guarantee of Lease.

 

NOW THEREFORE,
in consideration of the execution of the foregoing Lease by Lessor and as a
material inducement to Lessor to execute said Lease, Guarantors hereby jointly,
severally, unconditionally and irrevocably guarantee the prompt payment by
Lessee of all rents and all other sums payable by Lessee under said Lease and
the faithful and prompt performance by Lessee of each and every one of the
terms, conditions and covenants of said Lease to be kept and performed by
Lessee.

 

It is
specifically agreed that the terms of the foregoing Lease may be modified by
agreement between Lessor and Lessee, or by a course of conduct, and said Lease
may be assigned by Lessor or any assignee of Lessor without consent or notice
to Guarantors and that this Guaranty shall guarantee the performance of said
Lease as so modified.

 

This Guaranty
shall not be released, modified or affected by the failure or delay on the part
of Lessor to enforce any of the rights or remedies of the Lessor under said
Lease, whether pursuant to the terms thereof or at law or in equity.

 

No notice of
default need be given to Guarantors, it being specifically agreed that the
guarantee of the undersigned is a continuing guarantee under which Lessor may
proceed immediately against Lessee and/or against Guarantors following any
breach or default by Lessee or for the enforcement of any rights which Lessor
may have as against Lessee or at law or in equity.

 

Lessor shall
have the right to proceed against Guarantors hereunder following any breach or
default by Lessee without first proceeding against Lessee and without previous
notice to or demand upon either Lessee or Guarantors.

 

Guarantors
hereby waive (a) notice of acceptance of this Guaranty, (b) demand of payment,
presentation and protest, (c) all right to assert or plead any statue of
limitations relating to this Guaranty or the Lease, (d) any right to require
the Lessor to proceed against the Lessee or any other Guarantor or any other
person or entity liable to Lessor, (e) any right to require Lessor to apply to
any default, any security deposit or other security it may hold under the
Lease, (f) any right to require Lessor to proceed under any other remedy Lessor
may have before proceeding against Guarantors, (g) any right of subrogation.

 

Guarantors do
hereby subrogate all existing or future indebtedness of Lessee to Guarantors to
the obligations owed to Lessor under the Lease and this Guaranty.

 

If a Guarantor
is married, such Guarantor expressly agrees that recourse may be had against
his or her separate property for all of the obligations hereunder.

 

The
obligations of Lessee under the Lease to execute and deliver estoppel
statements and financial statements, as therein provided, shall be deemed to
also require the Guarantors hereunder to do and provide the same.

 

The term
"Lessor" refers to and means the Lessor named in the Lease and also
Lessor's successors and assigns.  So
long as Lessor's interest in the Lease, the leased premises or the rents,
issues and profits therefrom, are subject to any mortgage or deed of trust or
assignment for security, no acquistion by Guarantors of the Lessor's interest
shall affect the continuing obligation of Guarantors under this Guarranty which
shall nevertheless continue in full force and effect for the mortgagee,
beneficiary, trustee or assignee under such mortgage, deed of trust or
assignment and their successors and assigns.

 

The term
"Lessee" refers to and means the Lessee named in the Lease and also
Lessee's successors and assigns.

 

In the event
any action be brought by said Lessor against Guarantors hereunder to enforce
the obligation of Guarantors hereunder, the unsuccessful party in such action
shall pay to the prevailing party therein a reasonable attorney's fee which
shall be fixed by the court.

 

If this form has been filled in, it has been
prepared for submission to your attorney for his approval.  No representation or recommendation is made
by the American Industrial Real Estate Association, the real estate broker or
its agents or employees as to the legal sufficiency, legal effect, or tax
consequences of this Form or the transaction relating thereto.

 

	
  Executed at

  	
   

  	
   

  	
  /s/ Donald
  K. McGhan

  
	
   

  	
   

  	
  Donald K. McGhan

  
	
  on

  	
  SEPT. 12,
  1997

  	
   

  	
   

  
	
  Address

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  "GUARANTORS"

  
						

 

For this form, write: American
Industrial Real Estate Association, 700 S. Flower Street, Suite 600, Los
Angeles, Calif.90017

©1997 – American Industrial
Real Estate Association

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