Document:

Exhibit 10.5

FIFTH

EXTENSION AND MODIFICATION

OF

EMPLOYMENT AGREEMENT

THIS FIFTH EXTENSION AND MODIFICATION OF EMPLOYMENT AGREEMENT (the “Extension”)
is entered into as of April 30, 2007 by and between Hearthside Homes, Inc., a
California corporation (“Employer”), which is an indirect wholly-owned
subsidiary of California Coastal Communities, Inc., a Delaware corporation (“Parent”),
and ED MOUNTFORD (“Executive”).

W I T N E S S E T
H:

WHEREAS, Executive and Employer have entered into an Employment
Agreement dated as of May 1, 1998, an Extension and Modification of
Employment Agreement dated December 7, 1999, a Second Extension and
Modification of Employment Agreement dated April 30, 2001, a Third
Extension and Modification of Employment Agreement dated March 18, 2003, a
Modification of Employment Agreement dated November 12, 2003 and a Fourth
Extension and Modification of Employment Agreement dated July 20, 2005
(collectively, the “Employment Agreement”), through which Executive has
provided various executive capacities to Employer and Employer has obtained
various executive services by Executive; and

WHEREAS, Employer desires to obtain the benefit of continued service
from Executive by extending the Employment Agreement, and Executive desires to
render continued services to Employer by extending the Employment Agreement
pursuant to the terms and conditions of this Extension;

NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises and covenants herein contained, the parties agree as follows:

SECTION 1.           CONTINUING EFFECTIVENESS OF
EMPLOYMENT AGREEMENT.  Except to the
extent of any modification made pursuant to the terms of this Extension, the
Employment Agreement shall continue to remain in full force and effect
following the date hereof.

SECTION 2.           EXTENSION OF TERM.  Employer and Executive hereby agree to extend
the term of the Employment Agreement until April 30, 2009.

SECTION 3.           BASE SALARY.  Effective January 1, 2007 and until the
expiration of the term set forth in Section 2 above, Employer agrees to
pay Executive a base salary of at least One Hundred and Ninety Thousand Five
Hundred Dollars ($190,500) per year in semi-monthly installments on the
same dates the other senior officers of Employer are paid.

(i)               Paid
Time Off.  Executive shall be
entitled to five (5) weeks of paid time off (“PTO”) each twelve-month period,
in accordance with the terms and provisions set forth in

 1
 

that certain Hearthside Homes/California Coastal Communities Employee
Handbook Addendum dated December 4, 2006 (the “Addendum”) a copy of which has
been delivered to Executive; and Executive hereby represents and warrants that
(i) the Addendum has been fully read and understood, and (ii) Executive agrees
to be bound by the Addendum with respect to all matters of PTO.

SECTION 4.           BONUS.  From the date hereof and until the expiration
of the term set forth above, Employer agrees to provide Executive with the
opportunity to earn the following incentive bonuses: (i) a discretionary bonus,
to be determined on an annual basis in the sole and absolute discretion of
Parent’s Compensation Committee, related to such Committee’s assessment of
Executive’s relative contribution towards the success of Signal Landmark’s
Brightwater project; (ii) an incentive bonus in the amount of Fifty Thousand
Dollars ($50,000) upon the recording by the County of Orange of all Final Maps
necessary for development of 349 homes at Brightwater; and (iii) the “Oxnard Project Bonus” that
may be earned by Executive in connection with Hearthside Homes Oxnard LLC’s
development project in Oxnard, California (the “Oxnard Project”) under the
terms set forth in the Modification of Employment Agreement dated November 12,
2003.

IN
WITNESS WHEREOF, the parties have executed this Extension as of the date first
above written.

	
   

  	
  “EMPLOYER”

  
	
   

  	
   

  
	
   

  	
  HEARTHSIDE
  HOMES, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ RAYMOND J. PACINI

  	
   

  
	
   

  	
   

  	
  Raymond J.
  Pacini

  	
   

  
	
   

  	
   

  	
  Chief Executive
  Officer

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  “EXECUTIVE”

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  /s/ ED MOUNTFORD

  	
   

  
	
   

  	
   

  	
  Ed Mountford

  	
   

  

 

 2Exhibit 10.0

STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE - NET 
 AIR
COMMERCIAL REAL ESTATE ASSOCIATION

1.             Basic
Provisions (“Basic Provisions”).

1.1           Parties:
This Lease (“Lease”), dated for
reference purposes only October 19,
2006                  ,
is made by and between The Auerbach Family Trust of 1987                                                                                                                          
                                   
                                                                                                             
(“Lessor”) and
Aldila, Inc., a Delaware Corporation                                                                                                                                              
               
                                                                                                                                                                                                                                                                 (“Lessee”), (collectively the “Parties”, or individually a “Party”).

1.2(a)      Premises:
That certain portion of the Project (as defined below), including all
improvements therein or to be provided by Lessor under the terms of this Lease, commonly known
by the street address of 14145 Danielson
Street                     ,
located in the City of Poway                     ,
County of San
Diego                            ,
State of California                          ,
with zip code 92064      , as outlined on
Exhibit A       attached hereto (“Premises”) and generally described as
(describe briefly the nature of the Premises): An approximately 52,156
rentable square foot office and industrial space.                                                                                                                                                                                        
                                                                                                                                                     
..

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

1.2(b)      Parking:
141 reserved (location shown on site plan) vehicle parking spaces. (See
also Paragraph 2.6)

1.3           Term:
5                                        
years and 3                                            
months (“Original Term”)  

commencing see Paragraph
50                           
(“Commencement Date”) and ending see
Paragraph 50  (“Expiration Date”).
(See also Paragraph 3)

1.4           Early
Possession:  see Paragraph
50                                                                                                               

(“Early Possession Date”).

(See also Paragraphs 3.2 and 3.3)

1.5           Base
Rent:  $  39,117.00   
per month (“Base Rent”), payable
on the first                      
day of each month commencing see Paragraph
50                                                                                                                        .
(See also Paragraph 4)

x If this box is checked, there are provisions
in this Lease for the Base Rent to be adjusted.

1.6           Lessee’s
Share of Common Area Operating Expenses:  Forty-five   
percent (45%)     (“Lessee’s
Share”). Lessee’s Share has been calculated by dividing the approximate
square footage of the Premises by the approximate square footage of the
Project. In the event that the size of the Premises and/or the Project are
modified during the term of this Lease, Lessor shall recalculate Lessee’s Share
to reflect such modification.

1.7           Base
Rent and Other Monies Paid Upon Execution:

(a)                                  Base Rent: $39,117.00
for the period see Paragraph
50                                                                
.

(b)                                 Common Area Operating Expenses:  $13,039.00             
for the period see Paragraph
50         .

(c)                                  Security Deposit:  $44,888.00        
(“Security Deposit”). (See also
Paragraph 5)

(d)                                 Other:  $_______________________
for _____________________________________________
_______________________________________________________________________________

(e)                                  Total Due Upon Execution of this Lease: $           97,044.00       .

1.8           Agreed
Use:  General office, light industrial, production and warehouse,
and any other legal uses permitted by existing zoning and approved in writing by
Lessor, such approval not to be unreasonably withheld, conditioned, or
delayed.                                                               .
(See also Paragraph 6)

1.9           Insuring
Party. Lessor is the “Insuring
Party”. (See also Paragraph 8)

1.10         Real
Estate Brokers: (See also Paragraph 15)

(a)           Representation: The following real estate
brokers (the “Brokers”) and
brokerage relationships exist in this transaction 

(check applicable boxes):

x  John Burnham Real Estate Services, Inc., a
Delaware Corp (aka Burnham Real Estate) (Mickey Morera and Matt Kelly)
represents Lessor exclusively (“Lessor’s
Broker”);

x  John Burnham Real Estate Services, Inc., a
Delaware Corp (aka Burnham Real Estate) (Jed Stirnkorb and James Duncan)
represents Lessee exclusively (“Lessee’s
Broker”); or

o________________________________________________ represents both Lessor and Lessee (“Dual Agency”).

(b)           Payment
to Brokers: Upon execution and delivery of this Lease by both
Parties, Lessor shall pay to the Brokers the brokerage fee agreed to in a
separate written agreement (or if there is no such agreement, 5% of the
total Base Rent for the brokerage services rendered by the Brokers).

1.12 Attachments.
Attached hereto are the following, all of which constitute a part of this
Lease:

	
  /s/ RJC

  	
   

  	
   

  	
  /s/ EA

  
	
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x
an Addendum consisting of Paragraphs 50               
through 56                     ;

x
a site plan depicting the Premises;

o
a site plan depicting the Project;

o
a current set of the Rules and Regulations for the Project;

o
a current set of the Rules and Regulations adopted by the owners’ association;

o
a Work Letter;

o
other (specify);                                                                                                                                                                            
                                                                                                                                                                                                       
.

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 Rent, is an approximation
which the Parties agree is reasonable and any payments based thereon are not
subject to revision whether or not the actual size is more or less. NOTE: Lessee is advised to verify the actual size
prior to executing this Lease.

2.2           Condition. Lessor shall deliver that
portion of the Premises contained within the Building (“Unit”) to Lessee broom clean and free or
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 and in effect within thirty days following the Start Date,
warrants that the existing electrical, plumbing, fire sprinkler, lighting,
heating, ventilating and air conditioning systems (“HVAC”), all rooftop  equipment,
loading doors, sump pumps, if any, and all other such elements in the Unit,
other than those constructed by Lessee, shall be in good operating condition on
said date, that the structural elements of the roof, bearing walls and
foundation of the Unit shall be free of material defects, and that the Unit
does not contain any hazardous substance (as defined below) or hazardous levels
of any mold or fungi defined as toxic under applicable state or federal law.
Lessor further warrants that the
existing bathrooms in the Premises and the parking areas reserved for Lessee’s
use are in compliance with current provisions of the Americans with
Disabilities Act, however, no warranties are made with respect to such
compliance resulting from Lessee’s specific use of the Premises or the tenant
improvements that Lessee makes to the Premises. If a non-compliance with such
warranty exists as of the Start Date, or if one of such systems or elements
should malfunction or fail within the appropriate warranty period. 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, malfunction or failure, rectify same at Lessor’s expense. The
warranty periods shall be as follows: (i) 6-9 months as to the HVAC systems,
and (ii) 30-60 days as to the remaining systems and other elements of the Unit.
If Lessee does not give Lessor the required notice within the appropriate
warranty period, correction of any such non-compliance, malfunction or failure
shall be the obligation of Lessee at Lessee’s sole cost and expense (except for
the repairs to the fire sprinkler systems, roof, foundations, and/or bearing
walls - see Paragraph 7).

2.3           Compliance. Lessor warrants that to the
best of its knowledge the improvements on the Premises and the Common Areas
comply with the building codes that were in effect at the time that each such
improvement, or portion thereof, was constructed, and also with all applicable
laws, covenants or restrictions of record, regulations, and ordinances in
effect on the Start Date (“Applicable
Requirements”). Said warranty does not apply to the specific use to
which Lessee will put the Premises, modifications which may be required by the
Americans with Disabilities Act or any similar laws as a result of Lessee’s use
(see Paragraph 49), 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 Applicable
Requirements and especially the zoning are 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 with 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 6 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 so as to require during the term of this Lease the construction of an
addition to or an alteration of the Unit, Premises and/or Building, the
remediation of any Hazardous Substance, or the reinforcement or other physical
modification of the Unit, Premises and/or Building (“Capital Expenditure”). Lessor and Lessee shall allocate the
cost of such work as follows:

(a)           Subject to Paragraph
2.3(c) below, if such Capital Expenditures are required as a result of the
specific and unique use of the Premises by Lessee as compared with uses by
tenants in general, Lessee shall be fully responsible for the cost thereof,
provided, however that if such Capital Expenditure is required during the last
2 years of this Lease and the cost thereof exceeds 6 months’ Base Rent, Lessee
may instead terminate this Lease unless Lessor notifies Lessee, in writing,
within 10 days after receipt of Lessee’s termination notice that Lessor has
elected to pay the difference between the actual cost thereof and the amount
equal to 6 months’ Base Rent. If Lessee elects termination, Lessee shall
immediately cease the use of the Premises which requires such Capital
Expenditure and deliver to Lessor written notice specifying a termination date
at least 90 days thereafter. Such termination date shall, however, in no event
be earlier than the last day that Lessee could legally utilize the Premises
without commencing such Capital Expenditure.

(b)           If such Capital
Expenditure is not the result of the specific and unique use of the Premises by
Lessee (such as, governmentally mandated seismic modifications), then Lessor
and Lessee shall allocate the obligation to pay for the portion of such costs
reasonably attributable to the Premises pursuant to the formula set out in
Paragraph 7.1(d); provided, however, that if such Capital Expenditure is
required during the last 2 years of this Lease, Lessor shall have the option to
terminate this Lease upon 90 days prior written notice to Lessee unless Lessee
notifies Lessor, in writing, within 10 days after receipt of Lessor’s
termination notice that Lessee will pay for such Capital Expenditure. If Lessor
does not elect to terminate, and fails to tender its share of any such Capital
Expenditure, Lessee may advance such funds and deduct same, with Interest, from
Rent until Lessor’s share of such costs have been fully paid. If Lessee is
unable to finance Lessor’s share, or if the balance of the Rent due and payable
for the remainder of this Lease is not sufficient to fully reimburse Lessee on
an offset basis, Lessee shall have the right to terminate this Lease upon 30
days written notice to Lessor.

(c)           Notwithstanding the
above, the provisions concerning Capital Expenditures are intended to apply
only to non-voluntary, unexpected, and new Applicable Requirements. If the
Capital Expenditures are instead triggered by Lessee as a result of an actual
or proposed change in use, change in intensity of use, or modification to the
Premises then, end in that event, Lessee shall either: (i) immediately cease
such changed use or intensity of use and/or take such other steps as may be
necessary to eliminate the requirement for such Capital Expenditure, or (ii)
complete such Capital Expenditure at its own expense. Lessee shall not have any
right to terminate this Lease.

2.4           Acknowledgements. Lessee acknowledges that,
subject to Lessor’s representations, warranties, and  covenants  contained herein,: (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 the Americans with Disabilities Act), 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 Brokers have made any
oral or written representations or warranties with respect to said matters
other than as set forth in this Lease.

	
  /s/ RJC

  	
   

  	
   

  	
  /s/ EA

  
	
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In
addition, Lessor acknowledges that: (i) Brokers have made no representations,
promises or warranties concerning Lessee’s ability to honor the Lease or
suitability to occupy the Premises, and (ii) it is Lessor’s sole responsibility
to investigate the financial capability and/or suitability of all proposed tenants.

2.6           Vehicle Parking. Lessee shall be entitled
to use the number of parking spaces specified in Paragraph 1.2(b) on those
portions of the Common Areas shown on the attached site plan of the Premises.
Lessee shall not use more parking spaces than said number. Said parking spaces
shall be used for parking by vehicles no larger than full-size passenger
automobiles or pick-up trucks, herein called “Permitted
Size Vehicles.” Lessor may regulate the loading and unloading of
vehicles by adopting Rules and Regulations as provided in Paragraph 2.9. No
vehicles other than Permitted Size Vehicles may be parked in the Common Area
without the prior written permission of Lessor. In addition:

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

(b)           Lessee shall not service or store any vehicles
in the Common Areas.

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

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

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

2.9           Common Areas - Rules and
Regulation. 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 in a nondiscriminatory manner,
commercially reasonable rules and regulations (“Rules
and Regulations”) for the management, safety, care, and cleanliness
of the grounds, the parking and unloading of vehicles and the preservation of good
order, as well as for the convenience of other occupants or tenants of the
Building and the Project and their invitees. Lessee agrees to abide by and
conform to all such Rules and Regulations, and shall use its best efforts to
cause its employees, suppliers, shippers, customers, contractors and invitees
to so abide and conform. Lessor shall not be responsible to Lessee for the
non-compliance with said Rules and Regulations by other tenants of the Project.

2.10         Common Areas - Changes. Lessor shall have the right, in Lessor’s sole
discretion, from time to time, so long as such changes do not materially and
adversely affect Lessee’s use of, or access to, the Premises and do not result
in a material increase in Common
Area Operating Expenses:

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

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

(c)           To designate other land outside the boundaries
of the Project 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 Project, or any
portion thereof; and

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

3.             Term.

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

3.2           Early Possession. If 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 Lessee’s Share of Common
Area Operating Expenses, Real Property Taxes and insurance premiums and to
maintain the Premises) shall 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 or change the
Expiration Date. Lessee shall not, however, be obligated to pay Rent or perform
its other obligations until Lessor delivers possession of the Premises and any
period of rent abatement that Lessee would otherwise have enjoyed shall run
from the date of the delivery of possession and continue for a period equal to
what Lessee would otherwise have enjoyed, but minus any days of delay caused by
the acts or omissions of Lessee. If possession is not delivered within 60 days
after the Commencement Date, Lessee may, at its option, by notice in writing
within 10 days after the end of such 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 10 day period, Lessee’s
right to cancel shall terminate. Except as otherwise provided, if possession is
not tendered to Lessee by the Start Date 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 4 months after the Commencement Date, this Lease shall
terminate unless other agreements are reached between Lessor and Lessee, in
writing.

	
  /s/ RJC

  	
   

  	
   

  	
  /s/ EA

  
	
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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 or this Lease (except for the Security
Deposit) are deemed to be rent (“Rent”).

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

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

(i)            The operation, repair
and maintenance, in neat, clean, good order and condition , and if necessary
the replacement, of the fallowing:

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

(bb)         Exterior signs and any tenant directories.

(cc)         Any fire sprinkler systems.

(ii)           The cost of water, gas, electricity and telephone to service the Common Areas and any utilities not
separately metered.

(iii)          Trash disposal, pest
control services, property management, security services, owners’ association
dues and fees, the cost to repaint the exterior of any structures and the cost
of any environmental inspections.

(iv)          Real Property Taxes (as defined in Paragraph 10).

(v)           The cost of the premiums for the insurance maintained by Lessor pursuant
to Paragraph 8.

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

(vii)         Auditors’, accountants’
and attorneys’ fees and costs related to the operation, maintenance, repair and
replacement of the Project.

(viii)        The cost of any capital
improvement to the Building or the Project not covered under the provisions of
Paragraph 2.3 provided, however, that Lessor shall allocate the cost of any
such capital improvement over a 12 year
period and Lessee shall not be required to pay more than Lessee’s Share of
1/144th of the cost of such capital improvement in any given month.

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

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

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

(d)           Lessee’s Share of Common Area Operating Expenses
is payable monthly on the same day as the Base Rent is due hereunder. The
amount of such payments shall be based on Lessor’s estimate of the annual
Common Area Operating Expenses. Within 60 days after written request (but not more than once each
year) Lessor shall deliver to Lessee a reasonably detailed statement showing
Lessee’s Share of the actual Common Area Operating Expenses incurred during the
preceding year. If Lessee’s payments during such year exceed Lessee’s Share.
Lessor shall credit the amount of such over-payment against Lessee’s future
payments. If Lessee’s payments during such year were less than Lessee’s Share,
Lessee shall pay to Lessor the amount of the deficiency within 10 days after
delivery by Lessor to Lessee of the statement.

(e)           Common Area Operating Expenses shall not
include any expenses paid by any tenant directly to third parties, or as to
which Lessor is otherwise reimbursed by any third party, other tenant, or
insurance proceeds. Common Area Operating Expenses shall not include any: (i)
advertising, brokerage commissions, or costs incurred in connection with the
marketing of Premises at the Building; (ii) salary of any employee of Lessor,
to the extent such employee’s time is not devoted to the day-to-day operations
or maintenance of the Building; provided, however, to the extent such employee
provides services for more than the Project, then a prorated portion of such
employees’ wages, benefits, and taxes shall be included in Common Area
Operating Expenses based on the portion of their working time devoted to the
Project; (iii) bonuses, incentives, or commissions (other than salary, taxes,
and benefits) paid with respect to any employee of lessor, (iv) capital
replacements, repairs, or improvements except as specifically allowed above:
(v) purchase, replacement, or repair of artwork; (vi) repairs, renovations, or
improvements to the Project, Building, or Premises required to comply with
applicable laws in effect as of the date Landlord obtains a building permit for the Building; (vii)
costs or expenses directly reimbursed by other lessees of the Building; (viii)
a property management fee (or, in the event employees of Lessor or its
affiliate manage the day-to-day operations of the Building, the imputed
property management fee) which shall not exceed three percent (3%) of the gross
revenues of the Building; (ix) gifts purchased by Lessor for tenants of the
Building; and (x) utilities separately metered to the Premises or to the
Premises of other tenants in the Building.

	
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Lessor shall keep proper books of account, receipts,
and other appropriate records with respect to Common Area Operating Expenses.
Within ninety (90) days following Lessee’s receipt of the actual Common Area
Operating Expenses statement for any expense year. Lessee shall be entitled,
upon thirty (30) days’ advance written notice, to inspect such books, receipts,
and records for such expense year at Lessor’s or Lessor’s property manager’s
principal offices, and/or to have an Independent certified public accountant
hired by Lessee and reasonably approved by Lessor to audit such books,
receipts, and records. In the event that any such audit reveals an underpayment
or overpayment of Lessee’s share of Common Area Operating Expenses, the
applicable party shall pay to the other, upon demand, the amount necessary to
effect all appropriate adjustments.

Lessor shall reimburse Lessee upon demand for all
costs reasonably incurred by Lessee in connection with any such audit in the
event that such audit determines that Lessee’s share of Common Area Operating
Expenses stated to be payable in the applicable actual Common Area Operating
Expenses statement was more than one hundred ten percent (110%) of Lessee’s
share of Common Area
Operating Expenses properly payable for such expense year.

4.3           Payment. Lessee shall cause payment of Rent
to be received by Lessor in lawful money of the United States, without offset
or deduction (except as specifically permitted in this Lease), on or before the
day on which it is due. All monetary amounts shall be rounded to the nearest
whole dollar. In the event that any invoice prepared by Lessor is inaccurate
such inaccuracy shall not constitute a waiver and Lessee shall be obligated to
pay the amount set forth in this Lease. Rent for any period during the term
hereof which is for less than one 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. In the event that any check, draft, or other instrument of payment
given by Lessee to Lessor is dishonored for any reason, Lessee agrees to pay to
Lessor the sum of $25 in addition to any Late Charge and Lessor, at its option,
may require all future Rent be paid by cashier’s check. Payments will be
applied first to accrued late charges and attorney’s fees, second to accrued
interest, then to Base Rent and Common Area Operating Expenses, and any
remaining amount to any other outstanding charges or costs.

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 of
incur by reason thereof. If Lessor uses or applies all or any portion of the
Security Deposit, Lessee shall within 10 days after written request therefor
deposit monies with Lessor sufficient to restore said Security Deposit to the
full amount required by this Lease. Lessor shall not be required to keep the
Security Deposit separate from its general accounts. Within 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 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 occupants of or causes damage to neighboring premises or
properties. Other than guide, signal and seeing eye dogs. Lessee shall not keep
or allow in the Premises any pets, animals, birds, fish, or reptiles. Lessor
shall not unreasonably withhold 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 Building or the mechanical or electrical systems
therein, and/or is not significantly more burdensome to the Project. If Lessor
elects to withhold consent, Lessor shall within 7 days after such request give
written notification of same, which notice shall include an explanation of
Lessor’s objections to the change in the Agreed 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, ordinary office supplies (copier toner, liquid paper, glue, etc.)
and common household cleaning materials, 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.
Notwithstanding anything to the contrary contained
herein, Lessor hereby approves of Lessee using, storing, and manufacturing in
and about the Premises, such paints, solvents and similar materials used in the
ordinary course of Lessee’s business, provided same are used and stored in
compliance with all applicable laws. Further Lessor agrees to allow Lessee to
locate outside of the Premises (i) an enclosure within which certain paints,
solvents, and similar products may be stored, and (ii) compressors serving the
Premises, the size and location of such areas to be subject to Lessor’s prior
written approval, not to be unreasonably withheld, conditioned or delayed.

	
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(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 its agents or contractors to cause) 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,
comply with all Applicable Requirements and 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 areas
outside of the Project not caused or contributed to by Lessee). 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 hereby
represents and warrants to Lessee that: (i) to the best of Lessor’s knowledge
the Premises does not contain any Hazardous Substances, and (ii) to the best of
Lessor’s knowledge, no prior tenant of the Premises stored, used, manufactured,
disposed of, or released any Hazardous Substances in the Premises. 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, including the cost of remediation, which are suffered as a direct result
of Hazardous Substances on the Premises, Building, or Project prior to Lessee
taking possession or which are caused by the gross negligence or willful
misconduct 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 Lessee
taking possession, unless such remediation measure is required as a result of
Lessee’s use (including “Alterations”, as defined in paragraph 7.3(a) below) of
the Premises, in which event Lessee shall be responsible for such payment.
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)           Lessor Termination Option. If a Hazardous
Substance Condition (see Paragraph 9.1 (e)) 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 12 times the
then monthly Base Rent or $500,000, whichever is greater, give written notice
to Lessee, within 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 60 days following the date of such notice.
In the event Lessor elects to give a termination notice, Lessee may, within 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 12 times the then monthly Base Rent or
$500,000, whichever is greater. Lessee shall provide Lessor with said funds or
satisfactory assurance thereof within 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, with respect to the Premises, 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 such
Requirements, without regard to whether said Requirements are now in effect or
become effective after the Start Date. Lessee shall, within 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. Likewise, Lessee shall immediately give written
notice to Lessor of: (i) any water damage to the Premises and any suspected
seepage, pooling, dampness or other condition conducive to the production of
mold; or (ii) any mustiness or other odors that might indicate the presence of
mold in the Premises.

6.4           Inspection; Compliance. Lessor and Lessor’s
“Lender” (as defined in Paragraph
30) and consultants shall have the right to enter into Premises at any time, in
the case of an emergency, and otherwise at reasonable times after reasonable
notice, 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 Hazardous Substance condition (see Paragraph 9.1) is found
to exist or be imminent, or the inspection is requested of ordered by a
governmental authority. In such case, Lessee shall upon request reimburse
Lessor for the cost of such inspection, so long as such inspection is
reasonably related to the violation or contamination. In addition, Lessee shall
provide copies of all relevant material safety data sheets (MSDS) to Lessor within 10 days of the
receipt of written request therefor.

	
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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 the Premises,
Utility Installations (intended for Lessee’s exclusive use, no matter where
located), 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 of facilities, such as interior plumbing, HVAC
equipment, electrical, lighting facilities, boilers, pressure vessels,
fixtures, interior walls, interior surfaces of exterior walls, ceilings,
floors, windows, doors, plate glass, and skylights but excluding any items
which are the responsibility of Lessor pursuant to Paragraph 7.2. 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 of renewals when necessary
to keep the Premises and all improvements thereon or a part thereof in good
order, condition and state of repair.

(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, if any, if and when installed on the
Premises: (i) HVAC equipment, (ii) boiler and pressure vessels, (iii)
clarifiers, and (iv) any other equipment, if reasonably required by Lessor.
However, in the event Lessee fails to maintain such contracts.  Lessor reserves the right, upon notice to
Lessee, to procure and maintain any or all of such service contracts, and
Lessee shall reimburse Lessor, upon demand, for the reasonable cost thereof.

(c)           Failure to Perform. If Lessee fails to perform Lessee’s
obligations under this Paragraph 7.1, Lessor may enter upon the Premises after 10 days’ prior written notice to Lessee
(except in the case of an emergency, in which case no notice shall be
required), perform such obligations on Lessee’s behalf, and put the Premises in
good order, condition and repair, and Lessee shall promptly pay to Lessor a sum
equal to 115% of the cost thereof.

7.2           Lessor’s Obligations. Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance), 4.2 (Common Area Operating Expenses), 6 (Use),
7.1 (Lessee’s Obligations), 9 (Damage or Destruction) and 14 (Condemnation),
Lessor, subject to reimbursement pursuant to Paragraph 4.2, shall keep in good
order, condition and repair the foundations, exterior walls, plumbing other
than within the interior  of the
Premises, structural condition of interior bearing walls, exterior roof, fire
sprinkler system, Common Area fire alarm and/or smoke detection systems, fire
hydrants, parking lots, walkways, parkways, driveways, landscaping, fences,
signs and utility systems serving the Common Areas and all parts thereof, as
well as providing the services for which there is a Common Area Operating
Expense pursuant to Paragraph 4.2. Lessor shall not be obligated to paint the
exterior or interior surfaces of exterior walls nor shall Lessor be obligated
to maintain, repair or replace windows, doors or plate glass of the Premises.
Lessee expressly waives the benefit of any statute now or hereafter in effect
to the extent it is inconsistent with the terms of this Lease.

7.3           Utility Installations; Trade
Fixtures; Alterations.

(a)           Definitions. The term “Utility
Instillations” refers to all floor and window coverings, air and/or
vacuum lines, power panels, electrical distribution, security and fire
protection systems, communication cabling, 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).

(b)           Consent. 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, will not
affect the electrical, plumbing, HVAC, and/or life safety systems, and the cumulative cost thereof during this
Lease as extended does not exceed a sum equal to 3 month’s Base Rent in the
aggregate or a sum equal to one month’s Base Rent in any one year.
Notwithstanding the foregoing, Lessee shall not make or permit any roof
penetrations and/or install anything on the roof without the prior written
approval of Lessor. Lessor may, as a precondition to granting such approval,
require Lessee to utilize a contractor chosen and/or approved by Lessor. Any
Alterations or Utility Installations that Lessee shall desire to make and which
require the consent or 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.

(c)           Lions; Bonds. 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 materialman’s lien against the Premises or any interest therein. Lessee
shall give Lessor not less than 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 150% of 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.

	
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(b)           Removal. By delivery to Lessee of written
notice from Lessor not earlier than 90 and not later than 30 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 excepted. “Ordinary wear and tear” shall not include any damage
or deterioration that would have been prevented by good maintenance practice.
Notwithstanding the foregoing, if this Lease is for 12 months or less, then
Lessee shall surrender the Premises in the same condition as delivered to
Lessee on the Start Date with NO allowance for ordinary wear and tear. Lessee
shall repair any damage occasioned by the installation, maintenance or removal
of Trade Fixtures, Lessee owned Alterations and/or Utility Installations,
furnishings, and equipment as well as the removal of any storage tank installed
by or for Lessee.

Lessee shall also
completely remove from the Premises any and all Hazardous Substances brought
onto the Premises by or for Lessee, or any third party (except Hazardous
Substances which were deposited via underground migration from areas outside of
the Project) even if such removal would require Lessee to perform or pay for
work that exceeds statutory requirements. Trade Fixtures shall remain the
property of Lessee and shall be removed by Lessee. Any personal property of
Lessee not removed on or before the Expiration Date or any earlier termination
date shall be deemed to have been abandoned by Lessee and may be disposed of or
retained by Lessor as Lessor may desire. 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 of Premiums. The cost of the
premiums for the insurance policies required to be carried by Lessor, pursuant
to Paragraphs 8.2(b), 8.3(a) and 8.3(b), shall be a Common Area Operating
Expense. Premiums for policy periods commencing prior to, or extending beyond,
the term of this Lease shall be prorated to coincide with the corresponding
Start Date or Expiration Date.

8.2           Liability Insurance.

(a)           Carried by Lessee. Lessee shall obtain and
keep in force a Commercial General Liability policy of insurance protecting
Lessee and Lessor as an additional insured 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 $1,000,000 per occurrence with an annual
aggregate of not less than $2,000,000. Lessee shall add Lessor as an additional
insured by means of an endorsement at least as broad as the Insurance Service
Organization’s “Additional Insured-Managers or Lessors of Premises” Endorsement
and coverage shall also be extended to include 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. Lessee
shall provide an endorsement on its liability policy(ies) which provides that
its insurance 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. Lessor shall
obtain and keep in force a policy or policies of insurance in the name or
Lessor, with loss payable to Lessor, any ground-lessor, and to any Lender
insuring loss or damage to the Premises. The amount of such insurance shall be
equal to the full insurable replacement cost of the Premises, as the same shall
exist from time to time, or the amount required by any Lender, but in no event
more than the commercially reasonable and available insurable value thereof.
Lessee Owned Alterations and Utility Installations. Trade Fixtures, and Lessee’s
personal property shall be insured by Lessee under Paragraph 8.4. 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 $10,000 per occurrence.

(b)           Rental Value. Lessor shall also 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 year with an extended period
of indemnity for an additional 180 days (“Rental Value insurance”). 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 12 month
period.

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

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

8.4           Lessee’s Property; 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. 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 A-, VI, 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 30 days
prior written notice to Lessor.

	
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Lessee shall, at least 10 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 gross negligence or
willful misconduct, 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. Unless caused by the
negligence of Lessor or its agents. 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, indoor air quality, the presence
of mold 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, 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 nor from the failure of Lessor to
enforce the provisions of any other lease in the Project. 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 3
months or less from the date of the damage or destruction, Lessor shall notify Lessee
in writing within 30 days from the date of the damage or destruction as to
whether or not the damage is Partial or Total. Notwithstanding the foregoing,
Premises Partial Damage shall not include damage to windows, doors, and/or
other similar items which Lessee has the responsibility to repair or replace
pursuant to the provisions of Paragraph 7.1.

(b)           “Premises Total Destruction” shall mean
damage or destruction to the improvements on the Premises, other than Lessee Owned Alterations and Utility Installations
and Trade Fixtures, which cannot reasonably be repaired in 3 months or less
from the date of the damage or destruction. Lessor shall notify Lessee in
writing within 30 days from the date of the damage or destruction as to whether
or not the damage is Partial or Total.

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

(d)           “Replacement Cost” shall mean the cost to
repair or rebuild the improvements owned by Lessor at the time of the
occurrence to their condition existing immediately prior thereto, including
demolition, debris removal and upgrading required by the operation of
Applicable 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 which requires repair, remediation, or restoration.

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 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. Lessor shall have no obligation to pay for the shortage in insurance
proceeds or to fully restore the unique aspects of the Premises unless Lessee
provides Lessor with the funds to cover same, or adequate assurance thereof,
within 10 days following receipt of written notice of such shortage and request
therefor. If Lessor receives said funds or adequate assurance thereof within
said 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 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 (ii) have this Lease terminate 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.

	
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9.3           Partial Damage - Uninsured Loss. If a
Premises Partial Damage that is not an Insured Loss occur, 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 30 days after receipt
by Lessor of knowledge of the occurrence of such damage. Such termination shall
be effective 60 days following the date of such notice. In the event Lessor
elects to terminate this Lease, Lessee shall have the right within 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 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 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 6 months of
this Lease there is damage for which the cost to repair exceeds one month’s
Base Rent, whether or not an Insured Loss, Lessor may terminate this Lease
effective 60 days following the date of occurrence of such damage by giving a
written termination notice to Lessee within 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 10 days after Lessee’s receipt of Lessor’s written notice
purporting to terminate this Lease, or (ii) the day prior to the date upon
which such option expires. If Lessee duly exercises such option during such
period and provides Lessor with funds (or adequate assurance thereof) to cover
any shortage in insurance proceeds. Lessor shall, at Lessor’s 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. 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 90 days after such obligation shall
accrue, Lessee may, at any time prior to the commencement of such repair of
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 60 days following the giving of such notice. If Lessee gives such
notice and such repair or restoration is not commenced within 30 days
thereafter, this Lease shall terminate as of the date specified in said notice.
If the repair or restoration is commenced within such 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 or 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. 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 of Lessor in the Project, 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 Project 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 Project is located. The term “Real Property Taxes” shall also
include any tax, fee, levy, assessment or charge, or any increase therein: (i)
imposed by reason of events occurring during the term of this Lease, including
but not limited to, a change in the ownership of the Project, (ii) a change in
the improvements thereon, and/or (iii) levied or assessed on machinery or
equipment provided by Lessor to Lessee pursuant to this Lease. In calculating
Real Property Taxes for any calendar year, the Real Property Taxes for any real
estate tax year shall be included in the calculation or Real Property Taxes for
such calendar year based upon the number of days which such calendar year and
tax year have in common.

10.2         Payment of Taxes. Except as otherwise provided in Paragraph
10.3, Lessor shall pay the Real Property Taxes applicable to the Project, and
said payments shall be included in the calculation of Common Area Operating
Expenses in accordance with the provisions of Paragraph 4.2.

10.3         Additional Improvements. Common Area Operating Expenses shall not
include Real Property Taxes specified in the tax assessor’s records and work
sheets as being caused by additional improvements placed upon the Project by
other lessees or by Lessor for the exclusive enjoyment of such other lessees.
Notwithstanding Paragraph 10.2 hereof, Lessee shall, however, pay to Lessor at
the time Common Area Operating Expenses are payable under Paragraph 4.2, the
entirety of any increase in Real Property Taxes if assessed solely by reason of
Alterations, Trade Fixtures or Utility Installations placed upon the Premises
by Lessee or at Lessee’s request or by reason of any alterations or
improvements to the Premises made by Lessor subsequent to the execution of this
Lease by the Parties.

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

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

	
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11.           Utilities and Services. 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. Notwithstanding the
provisions of Paragraph 4.2, if at any time in Lessor’s sole judgment, Lessor
determines that Lessee is using a disproportionate amount of water, electricity
or other commonly metered utilities, or that Lessee is generating such a large
volume of trash as to require an increase in the size of the trash receptacle
and/or an increase in the number of times per month that it is emptied, then
Lessor may increase Lessee’s Base Rent by an amount equal to such increased
costs. There shall be no abatement of Rent and Lessor shall not be liable in
any respect whatsoever for the inadequacy, stoppage, interruption or discontinuance
of any utility or service due to riot, strike, labor dispute, breakdown,
accident, repair or other cause beyond Lessor’s reasonable control or in
cooperation with governmental request or directions.

Notwithstanding any other
provisions of this Lease, in the event there is an interruption of essential
services (e.g., utilities or access) not caused by reason of Lessee or any of
Lessee’s officers, agents, servants, employees, and independent contractors’
negligence or willful misconduct, which Interruption of essential services
prevents Lessee from using the Premises for the conduct of its business, then
provided such Interruption continues for 5 consecutive days and provided
restoration of the services in question is a matter under the control of Lessor,
its agents and/or contractors. Lessee shall be entitled to abate the payment of
Rent due pursuant to the terms of this Lease for a period commencing as of the
date Lessee ceased operating its business in the Premises as a result of such
interruption event and ending on the earlier of (i) the date Lessee reoccupies
the Premises for the conduct of its business therein or (ii) the date Lessor
shall have restored the provision of the essential services so interrupted.

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, which consent shall not be unreasonably withheld,
conditioned, or delayed.

(b)           Unless Lessee is a corporation and its stock
is publicly traded on a national stock exchange, a change in the control of
Lessee shall constitute an assignment requiring consent. The transfer, on a
cumulative basis, of 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 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 30
days written notice, increase the monthly Base Rent to 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 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 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.

(f)            Lessor may reasonably
withhold consent to a proposed assignment or subletting if Lessee is in Default
at the time consent is requested.

12.2         Terms and Conditions
Applicable to Assignment and Subletting.

(a)           Regardless of Lessor’s consent, no assignment
or subletting shall: (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 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 $500 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.
(See also Paragraph 36).

(f)            Any assignee of, or sublessee under, this
Lease shall, by reason of accepting such assignment, entering into such sublease, or entering into possession of the Premises or any
portion thereof, 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. In the event that the amount collected by Lessor exceeds
Lessee’s then outstanding obligations any such excess shall be refunded to
Lessee.

	
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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.

(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 and Regulations 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 of Rent or any Security Deposit 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 3 business days following written notice to
Lessee.

(c)           The commission of
waste, act or acts constituting public or private nuisance, and/or an illegal
activity on the Premises by Lessee, where such actions continue for a period of
3 business days following written notice to Lessee.

(d)           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) an Estoppel Certificate, (v) a
requested subordination, (vi) evidence concerning any guaranty and/or
Guarantor, (vii) any document requested under Paragraph 41, (viii) material
data safety sheets (MSDS), or (ix) 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 10 days following written notice to
Lessee.

(e)           A Default by Lessee as
to the terms, covenants, conditions or provisions of this Lease, or of the
rules adopted under Paragraph 2.9 hereof, other than those described in
subparagraphs 13.1(a), (b), (c) or (d), above, where such Default continues for
a period of 30 days after written notice; provided, however, that if the nature
of Lessee’s Default is such that more than 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 30 day period and thereafter diligently prosecutes such curs
to completion

(f)            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. § 101 or
any successor statute thereto (unless, in the case of a petition filed against
Lessee, the same is dismissed within 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 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 30 days; provided, however, in the event that any provision
of this subparagraph is contrary to any applicable law, such provision shall be
of no force or effect, and not affect the validity of the remaining provisions.

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

(h)           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 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 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. Lessee shall pay to Lessor an amount equal to
115% of the costs and expenses incurred by Lessor in such performance upon
receipt of an invoice therefor. 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.
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
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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.

13.4         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 5 days after notice to Lessee
that such amount is due, then, without any requirement for notice to Lessee,
Lessee shall immediately pay to Lessor a one-time late charge equal to 10% of
each such overdue amount or $100, whichever is greater. 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 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 5 days after notice to
Lessee that such amount is due as to scheduled payments (such as Base Rent) or
within 30 days following the date on which it was due for non-scheduled
payment, shall bear interest from the date when due, as to scheduled payments,
or the 31st day after it was due as to non-scheduled payments. The interest (“Interest”) charged shall be computed at
the rate of 10% per annum 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 falls 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 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 in such that more than 30 days are reasonably required for
its performance, then Lessor shall not be in breach if performance is commenced
within such 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 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 the actual and
reasonable cost to perform such cure, provided however, that such offset shall
not exceed an amount equal to three (3) month’s Base Rent, reserving Lessee’s
right to reimbursement from Lessor for any such expense in excess or such
offset. 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 or 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 10%
of the floor area of the Unit, or more than 25% of Lessee’s Reserved Parking
Spaces, is taken by Condemnation, or if Lessee reasonably determines that
Lessee’s business operations are materially or adversely affected by any such
Condemnation. Lessee may, at Lessee’s option, to be exercised in writing within
10 days after Lessor shall have given Lessee written notice of such taking (or
in the absence of such notice, within 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 be 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.           Brokerage Fees

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.
Brokers shall be third party beneficiaries of the provisions of Paragraphs
1,10, 15, 22 and 31.

	
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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 Broken 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.           Estoppel Certificates.

(a)           Each Party (as “Responding Party”) shall within 10 days
after written notice from the other Party (the “Requesting Party”) execute, acknowledge and deliver to the
Requesting Party a statement in writing in form similar to the then most
current “Estoppel Certificate”
form published by the AIR Commercial Real Estate Association, plus such
additional information, confirmation and/or statements as may be reasonably
requested by the Requesting Party.

(b)           If the Responding Party shall fail to execute
or deliver the Estoppel Certificate within such 10 day period, the Requesting
Party may execute an Estoppel Certificate stating that: (i) the 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. Prospective purchasers and encumbrancers may rely upon the
Requesting Party’s Estoppel Certificate, and the Responding Party shall be
estopped from denying the truth of the facts contained in said Certificate.

(c)           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 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.

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.           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. The obligations of Lessor under this Lease shall
not constitute personal obligations of Lessor, or its partners, members,
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 Lessor’s
partners, members, 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 use, 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 or applicable law 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 72 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 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 (confirmation report from fax machine is sufficient),
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 of 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.           Disclosures Regarding The
Nature of a Real Estate Agency Relationship.

(a)           When entering into a
discussion with a real estate agent regarding a real estate transaction, a
Lessor or Lessee should from the outset understand what type of agency relationship
or representation it has with the agent or agents in the transaction. Lessor
and Lessee acknowledge being advised by the Brokers in this transaction, as
follows:

	
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(i)            Lessor’s Agent. A Lessor’s agent under a
listing agreement with the Lessor acts as the agent for the Lessor only. A
Lessor’s agent or subagent has the following affirmative obligations: To the
Lessor: A fiduciary duty of utmost care, integrity, honesty, and loyalty in
dealings with the Lessor. To the Lessee and the Lessor: (a) Diligent
exercise of reasonable skills and care in performance of the agent’s duties.
(b) A duty of honest and fair dealing and good faith. (c) A duty to disclose
all facts known to the agent materially affecting the value or desirability of
the property that are not known to, or within the diligent attention and
observation of, the Parties. An agent is not obligated to reveal to either
Party any confidential information obtained from the other Party which does not
involve the affirmative duties sat forth above.

(ii)           Lessee’s Agent. An agent can agree to act
as agent for the Lessee only. In these situations, the agent is not the Lessor’s
agent, even if by agreement the agent may receive compensation for services
rendered, either in full or in part from the Lessor. An agent acting only for a
Lessee has the Following affirmative obligations. To the Lessee: A
fiduciary duty of utmost care, integrity, honesty, and loyalty in dealings with
the Lessee. To the Lessee and the Lessor: (a) Diligent exercise of
reasonable skills and care in performance of the agent’s duties. (b) A duty of
honest and fair dealing and good faith. (c) A duty to disclose all facts known
to the agent materially affecting the value or desirability of the property
that are not known to, or within the diligent attention and observation of, the
Parties. An agent is not obligated to reveal to either Party any confidential
information obtained from the other Party which does not involve the
affirmative duties set forth above.

(iii)          Agent Representing Both Lessor and Lessee. A real estate agent, either
acting directly or through one or more associate licenses, can legally be the
agent of both the Lessor and the Lessee in a transaction, but only with the
knowledge and consent of both the Lessor and the Lessee. In a dual agency
situation, the agent has the following affirmative obligations to both the
Lessor and the Lessee: (a) A fiduciary duty of utmost care, integrity, honesty
and loyalty in the dealings with either Lessor or the Lessee. (b) Other duties
to the Lessor and the Lessee as stated above in subparagraphs (i) or (ii). In
representing both Lessor and Lessee, the agent may not without the express
permission of the respective Party, disclose to the other Party that the Lessor
will accept rent in an amount less than that indicated in the listing or that
the Lessee is willing to pay a higher rent than that offered. The above duties
of the agent in a real estate transaction do not relieve a Lessor or Lessee
from the responsibility to protect their own interests. Lessor and Lessee
should carefully read all agreements to assure that they adequately express their
understanding of the transaction. A real estate agent is a person qualified to
advise about real estate. If legal or tax advice is desired, consult a
competent professional.

(b)           Brokers have no responsibility with respect to
any Default or Breach hereof by either Party. The Parties agree that no lawsuit
or other legal proceeding involving any breach of duty, error or omission
relating to this Lease may be brought against Broker more than one year after
the Start Date and that the liability (including court costs and attorneys’
fees), of any Broker with respect to any such lawsuit and/or legal proceeding
shall not exceed 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.

(c)           Buyer and Seller agree to identify to Brokers
as “Confidential” any communication or information given Brokers that is
considered by such Party to be confidential.

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 150% of the Base Rent applicable 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 or
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 (in this Lease together referred to as “Lender”) 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,
whereupon 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. In the event that Lessor transfers title to
the Premises, or the Premises are acquired by another upon the foreclosure or
termination of a Security Device to which this Lease is subordinated (i) Lessee
shall, subject to the non-disturbance provisions of Paragraph 30.3, attorn to
such new owner, and upon request, enter into a new lease, containing all of the
terms and provisions of this Lease, with such new owner for the remainder of
the term hereof, or, at the election of the new owner, this Lease will
automatically become a new lease between Lessee and such new owner, and (ii)
Lessor shall thereafter be relieved of any further obligations hereunder and
such new owner shall assume all of Lessor’s obligations, except that such new
owner shall not: (a) be liable for any act or omission of any prior lessor or
with respect to events occurring prior to acquisition of ownership; (b) be
subject to any offsets or defenses which Lessee might have against any prior
lessor, (c) be bound by prepayment of more than one month’s rent, or (d) be
liable for the return of any security deposit paid to any prior lessor.

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 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 60
days, then Lessee may, at Lessee’s option, directly contact Lender and attempt
to negotiate 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.

	
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31.           Attorneys’ Fees. If any Party or Broker
brings an action or proceeding involving the Premises whether founded in tort,
contract or equity, or to 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
is pursued to decision or 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 ($200 is a reasonable minimum per occurrence for
such services and consultation).

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 after reasonable
prior notice for the purpose of showing the same to prospective purchasers,
lenders, or during the last 6 months of the term, tenants, and making such
alterations, repairs, improvements or additions to the Premises as Lessor may
deem necessary or desirable and the erecting, using and maintaining of
utilities, services, pipes and conduits through the Premises and/or other
premises as long as there is no material adverse effect on Lessee’s use of the
Premises. All such activities shall be without abatement of rent or liability
to Lessee.

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

34.           Signs. Lessor may place on the Premises
ordinary “For Sale” signs at any time and ordinary “For Lease” signs during the
last 6 months of the term hereof. Except for ordinary “For Sublease” signs
which may be placed only on the Premises. Lessee shall not place any sign upon
the Project 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 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 10 business days following such request.

37.           Guarantor

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. If Lessee is granted an option, as
defined below, then the following provisions shall apply.

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.

39.3         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 3 or more notices of
separate Default, whether or not the Defaults are cured, during the 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 or completion of the purchase, (i) Lessee falls to pay
Rent for a period of 30 days after such Rent becomes due (without any necessity
of Lessor to give notice thereof), or (ii) if Lessee commits a Breach of this
Lease.

40.           Security Measures. Lessee hereby
acknowledges that the Rent 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.

41.           Reservations. Lessor reserves the right:
(i) to grant, without the consent or joinder of Lessee, such easements, rights
and dedications that Lessor deems necessary, (ii) to cause the recordation of
parcel maps and restrictions, and (iii) to create and/or install new utility
raceways, so long as such easements, rights, dedications, maps, restrictions,
and utility raceways do not unreasonably interfere with the use of the Premises
by Lessee. Lessee agrees to sign any documents reasonably requested by Lessor
to effectuate such rights.

	
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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. A Party who does not initiate suit for the recovery of sums paid “under
protest” within 6 months shall be deemed to have waived its right to protest
such payment.

43.           Authority; Multiple Parties; Execution.

(a)           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, within 30 days after
request, deliver to the other Party satisfactory evidence of such authority.

(b)           If this Lease is
executed by more than one person or entity as “Lessee”, each such person or
entity shall be jointly and severally liable hereunder. It is agreed that any
one of the named Lessees shall be empowered to execute any amendment to this
Lease, or other document ancillary thereto and bind all of the named Lessees,
and Lessor may rely on the same as if all of the named Lessees had executed
such document.

(c)           This Lease may be
executed by the Parties in counterparts, each of which shall be deemed an
original and all of which together shall constitute one and the same
instrument.

44.           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.

45.           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.

46.           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.

47.           Waiver of Jury Trial. THE PARTIES HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING INVOLVING THE
PROPERTY OR ARISING OUT OF THIS AGREEMENT.

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

49.           Americans with Disabilities Act. Since
compliance with the Americans with Disabilities Act (ADA) is dependent upon
Lessee’s specific use  of the
Premises. Lessor makes no warranty or representation as to whether or not the
Premises comply with ADA or any similar legislation. In the event that Lessee’s
use of the Premises requires modifications or additions to the Premises in
order to be in ADA compliance. Lessee agrees to make any such necessary
modifications and/or additions at Lessee’s expense.

LESSOR AND LESSEE HAVE
CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND PROVISION CONTAINED
HEREIN, AND BY THE 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 AIR COMMERCIAL 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. COMPLIANCE WITH THE AMERICANS WITH
DISABILITIES ACT AND THE SUITABILITY OF THE PREMISES FOR LESSEE’S INTENDED USE.

WARNING: IF THE PREMISES
ARE 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 ARE LOCATED.

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

	
  Executed at:

  	
  Santa Monica, CA

  	
   

  	
  Executed at:

  	
   

  
	
  On:

  	
  12-20-06

  	
   

  	
  On:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  By
  LESSOR:

  	
   

  	
  By LESSEE:

  	
   

  
	
  The Auerbach
  Family Trust of 1987

  	
   

  	
  Aldila, Inc., a Delaware Corporation

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Emest Auerbach

  	
   

  	
  By:

  	
  /s/ Robert J. Cierzan

  
	
  Name Printed:

  	
  Emest Auerbach

  	
   

  	
  Name Printed:

  	
  Robert J. Cierzan

  
	
  Title:

  	
  Co-Trustee

  	
   

  	
  Title:

  	
  Vice President of Finance

  
	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Name Printed:

  	
   

  	
   

  	
  Name Printed:

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  
	
  Address:

  	
  2416 Wilsture Blud.

  	
   

  	
  Address:

  	
  13450 Stowe Drive

  
	
   

  	
  Santa Monica, CA

  	
   

  	
   

  	
  Poway, CA 92064

  
	
   

  	
  90403

  	
   

  	
   

  	
   

  
	
  Telephone:

  	
  (310) 315-9770

  	
   

  	
  Telephone:

  	
  (858) 513-1801

  
	
  Facsimile:

  	
  (310) 453-3261

  	
   

  	
  Facsimile:

  	
  (858) 513-1870

  
	
  Federal ID No.

  	
   

  	
   

  	
  Federal ID No.

  	
  13-3645590

  
																								

 

	
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 PAGE 17 OF 18
 

 

	
  BROKER:

  	
   

  	
   

  	
  BROKER:

  	
   

  
	
  John Burnham Real Estate Services, Inc. a

  	
   

  	
  John Burnham Real Estate Services, Inc. a

  
	
   

  	
   

  	
  Delaware Corp. (aka Burnham Real Estate)

  
	
  Delaware Corp. (aka Burnham Real Estate)

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Attn:

  	
  Jed Stirnkorb

  
	
  Attn:

  	
  Mickey Morera

  	
   

  	
  Title:

  	
  Senior Vice President

  
	
  Title:

  	
  Senior Vice President

  	
   

  	
  Address:

  	
  4435 Eastgate Mall, Suite 200

  
	
  Address:

  	
  4435 Eastgate Mall, Suite 200

  	
   

  	
  San Diego, CA 92121

  
	
  San Diego, CA 92121

  	
   

  	
  Telephone:

  	
  (858) 558-5655

  
	
   

  	
   

  	
   

  	
  Facsimile:

  	
  (858) 334-6790

  
	
  Telephone:

  	
  (858) 558-5639

  	
   

  	
  Email:

  	
  stirnkorb@burnhamrealestate.com

  
	
  Facsimile:

  	
  (858) 334-6755

  	
   

  	
  Federal ID No.

  	
   

  
	
  Email:

  	
  morera@burnhamrealestate.com

  	
   

  	
   

  	
   

  
	
  Federal
  ID No.

  	
   

  	
   

  	
  Attn: James Duncan

  	
   

  
	
   

  	
   

  	
   

  	
  Title: Associate Vice President

  	
   

  
	
  ATTN: Matt Kelly

  	
   

  	
   

  	
  Telephone: 858-558-5664

  	
   

  
	
  Title: Vice President

  	
   

  	
   

  	
  Facsimile: 858-452-3206

  	
   

  
	
  Telephone:
  858-558-5647

  	
   

  	
   

  	
  Email: duncan@burnhamrealestate.com

  
	
  Faxsimile: 858-452-3206

  	
   

  	
   

  	
   

  	
   

  
	
  Email:
  kelly@burnhamrealestate.com

  	
   

  	
   

  	
   

  	
   

  
																			

 

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: AIR COMMERCIAL REAL
ESTATE ASSOCIATION, 700 South Flower Street, Suite 600, Los Angeles, CA 90017.
(213) 687-8777.

©Copyright
1999 By AIR Commercial Real Estate Association.

All rights reserved.

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

	
  /s/ RJC

  	
   

  	
   

  	
  /s/ EA

  
	
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  FORM
  MTN-4-8/04E

  

 

 PAGE 18 OF 18

 

 

Addendum to Lease dated
October 19, 2006 

between 

Auerbach Family Trust of 1987 (“Lessor”) and 

Aldila, Inc., a Delaware Corporation (“Lessee”) 

For Premises Located at 14145 Danielson Street, Poway, CA

50.  Possession/Term:

A.    Lessor will deliver possession
of the office area within the Premises to Lessee upon mutual execution of this
Lease. The warehouse area within the Premises is presently occupied by a
month-to-month tenant. Within three (3) calendar days of mutual execution of
this Lease, Lessor shall furnish said tenant of the warehouse area with a
30-day lease termination notice, and shall deliver the warehouse area to Lessee
within three (3) calendar days after said current tenant vacates the area. If
the current tenant fails to vacate the warehouse area by the expiration of the
aforementioned notice, Lessor, at its cost, shall immediately institute the
necessary legal procedures to secure the eviction of such tenant, and shall not
be liable to Lessee for any delays in delivery of the warehouse area that may
result from any conduct on the part of the existing month-to-month tenant.

B.     The Commencement Date of the
Lease shall be the date on which Lessor delivers possession of the warehouse
area of the Premises to Lessee. For a period of three (3) months following the
Commencement Date, Lessee shall have the right to occupy the Premises free of
Base Rent and Common Area Operating Expenses. If such three (3) month period
ends on a day other than the final day of a calendar month, Lessee shall pay
Base Rent and Common Area Operating Expenses to Lessor for the balance of such
calendar month on a pro-rated basis, and the sums paid by Lessee on Lease
execution and described in Paragraphs 1.7(a) and 1.7(b) hereof shall be applied
to the first full calendar month following the expiration of Lessee’s free rent
period. Lessor and Lessee agree to execute a letter agreement within ten (10)
business days after Lessor’s delivery of the warehouse area to Lessee, setting
forth the Commencement Date and Expiration Date of the Original Term.

51.  Option
to Extend: Subject to all of the provisions of Paragraph 39
of this Lease, Lessor hereby grants Lessee a total of one (1) option to extend
the term of this Lease for a period of five (5) years (the “Option Term”). If
the option to extend the term of this Lease is validly exercised by Lessee, the
Option Term shall commence immediately following the Expiration Date of the
Original Term of this Lease. In order to exercise such option to extend the
Lease term, Lessee must give Lessor written notice of Lessee’s election to so
exercise the option no earlier than twelve (12) months, and no later than nine
(9) months prior to the Commencement Date of the Option Period, time being of
the essence. If Lessee fails for any reason to give Lessor such written notice
on a timely basis, Lessee shall be conclusively deemed to have elected not to
exercise the option to extend the Lease term, and the Lease shall terminate on
the Expiration Date. All of the terms and conditions of the Lease shall be
applicable during the Option Term, except that the monthly Base Rent payable by
Lessee during the first year of the Option Term shall equal the prevailing
market rental rate for the Premises as of the scheduled commencement date of
the Option Term (the “Option Rental”). If the Parties cannot agree on the
Option Rental within 45-days of the date of Lessee’s notice exercising the
option, then the Option Rental shall be determined by two (2) real estate
brokers, one to be appointed by each Party within 15 days of the expiration of
the aforementioned 45-day period. Each such broker shall have at least 7 years
experience in the leasing of commercial property in the area in which the
Premises are located, and shall have no prior personal or business relationship
with the Party who appoints him or her. If one Party fails to appoint a broker
within such 15-day period, then the broker appointed by the other Party shall
determine the Option Rental alone. If the two (2) brokers cannot agree on the
Option Rental, then the average of their determinations shall equal the Option
Rental for the Premises. In making their determination, the brokers shall
assume that the Premises are in good condition and are being subjected to their
then current use. The brokers’ fees shall be shared by the Parties. In no
event, however, regardless of the determination of the broker(s), shall the
Option Rental for the Premises during the first twelve months of the first
Option Term be less than the monthly Base Rent payable during the final twelve
months of the Original Term (i.e. $44,888.00). As of the first anniversary of
the commencement date of the Option Term, and continuing annually thereafter
during the Option Term, monthly Base Rent shall be increased by three and
one-half percent (3.5%) over the monthly Base Rent payable during the preceding
twelve month period.

52.  Base
Rent During Original Term: During the Original Term of this
Lease, the monthly Base Rent payable by Lessee shall be subject to adjustment
as follows:

	
  4/1/07 – 4/30/2012

  
	
  Months 4 through
  15:

  	
   

  	
  $

  	
  39,117.00 NNN

  
	
  Months 16
  through 27:

  	
   

  	
  $

  	
  40,486.00 NNN

  
	
  Months 28
  through 39:

  	
   

  	
  $

  	
  41,903.00 NNN

  
	
  Months 40
  through 51:

  	
   

  	
  $

  	
  43,370.00 NNN

  
	
  Months 52
  through 63:

  	
   

  	
  $

  	
  44,888.00 NNN

  

 

53.  Rent
Abatement: Notwithstanding the provisions of Paragraph 3.2 of
the printed portion of the Lease, both Base Rent and Lessee’s obligation to pay
its share of Common Area Operating Expenses shall be abated for all periods
prior to the Commencement Date and for three (3) months thereafter, however if
Lessee takes possession of all or any portion of the Premises prior to the Commencement
Date, all other provisions of this Lease shall be in effect during such period
of early occupancy, including, without limitation, Lessee’s insurance
obligations under Paragraphs 8.2 (a) and 8.4 and Lessee’s obligation for
payment of utilities and services under Paragraph 11 of the printed portion of
this Lease.

 

54.  Tenant
Improvement Allowance: Lessor shall provide Lessee with a
tenant improvement allowance not to exceed the amount of $50,000.00 for the
purposes of painting the interior of the Premises, installing new carpeting in
the office area of the Premises, Lessee’s signage and other work to be
performed by Lessee. Lessee shall initially pay for the cost of such painting,
carpeting, and other work. Lessor shall promptly reimburse Lessee such $50,000
upon Lessee’s substantial completion of such work. Except for such allowance,
it shall be the obligation of Lessee, at Lessee’s expense to make all
alterations and improvements to the Premises, which Lessee deems necessary for
the operation of its business, with all such alterations and improvements to be
carried out in accordance with the provisions of Paragraph 7 of the printed
portion of this Lease.

55.  Signage:
Lessee shall be allowed to install corporate signage on a
non-exclusive basis on the Project and the Premises, as follows: (a) on the top
of the Building facing south above Lessee’s premises; (b) on the shared
monument sign on Danielson Street; and (c) at access points on the Project. All
signage shall be installed at Lessee’s expense and shall be subject to City of
Poway approval and prior written approval of Lessor, not to be unreasonably
withheld, conditioned, or delayed.

56.  Interpretation:
If  a conflict
arises between the terms of the printed portion of this Lease and the terms of
this Addendum, the terms of this Addendum shall control. All capitalized terms
used in this Addendum without definition shall have the meanings attributed to
them in the printed portion of this Lease. Unless otherwise provided herein,
the term “Lease” means the Lease to which this Addendum is attached, this
Addendum and all exhibits and schedules hereto, if any.

	
  Lessor’s Initials:

  	
   

  	
  Lessee’s
  Initials:

  
	
  /s/ EA

  	
   

  	
  /s/ RJC

  

 

 

Exhibit “A”

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00123-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00123-of-00352.parquet"}]]