Document:

EX-10.1

   

  Exhibit 10.1

  STANDARD MULTI-TENANT OFFICE LEASE - GROSS

  1. Basic Provisions ("Basic Provisions").

  	1.1	Parties: This Lease ("Lease"), dated for reference purposes only April 25, 2022, is made by and between Charlotta Partners, Inc., a CA corporation and 9310 Towne Centre Drive Harrison-1, LLC, a CA limited liability company (collectively "Lessor") and Ventyx Biosciences, Inc., a Delaware corporation (collectively, "Lessee"), (collectively the "Parties", or individually a "Party").

  	1.2(a) Premises: That certain portion of the Project (as defined below), known as Suite Numbers(s) 240 & 248, one (1) floor(s), consisting of approximately 2,986 rentable square feet and approximately 2,604 useable square feet as outlined in Exhibit A attached hereto ("Premises"). The Premises are located at 662 Encinitas Blvd., in the City of Encinitas, County of San Diego, State of California, with zip code 92024. In addition to Lessee's rights to use and occupy the Premises as hereinafter specified, Lessee shall have non-exclusive rights to the Common Areas (as defined in Paragraph 2.7 below) as hereinafter specified, but shall not have any rights to the roof, the exterior walls, the area above the dropped ceilings (except for the purpose of installing communication and data lines for office use), or the utility raceways of the building containing the Premises ("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." The Project consists of approximately 33,917 rentable square feet. (See also Paragraph 2)

  	1.2(b) Parking: Ten (10) unreserved and zero (0) reserved vehicle parking spaces at a monthly cost of $00.00 (zero) per unreserved space and $00.00 (zero) per reserved space. (See Paragraph 2.6 and Addendum)

  	1.3	Term: Subject to Paragraph 54, Four (4) year(s) and two (2) months and zero (0) days ("Original Term") commencing May 1, 2022 ("Commencement Date") and ending June 30, 2026 ("Expiration Date"). (See also Paragraph 3)

  	1.4	Early Possession: None ("Early Possession Date"). (See also Paragraphs 3.2 and 3.3)

  	1.5	Base Rent: Eleven thousand four hundred and ninety-six dollars and 10/100 ($11,496.10) per month ("Base Rent)", payable on the First (1) day of each month commencing on the Commencement Date.  (See also Paragraph 4)

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

  	1.6	Lessee's Share of Operating Expense Increase: Eight and 80/100 percent (8.80%) ("Lessee's Share"). Lessee's Share has been calculated by dividing the approximate rentable square footage of the Premises by the total approximate square footage of the rentable space contained in the Project and shall not be subject to revision except in connection with an actual change in the size of the Premises or a change in the space available for lease in the Project.

  	1.7	Base Rent and Other Monies Paid Upon Execution:

  		(a) 	Base Rent: $11,496.10 for first month.

  		(b) 	Security Deposit: $11,496.10* ("Security Deposit"). (See also Paragraph 5)

  		(c) 	Parking: $00.00 (zero) for the period.

  		(d) 	Other: $50 (first month Estimated Utility Cost Payments – see Paragraph 52)___________

  		(e) 	Total Due Upon Execution of this Lease: $23.042.20

  	1.8	Agreed Use: Professional office. (See also Paragraph 6)

  	1.9	Base Year; Insuring Party. The Base Year is 2021.  Lessor is the "Insuring Party". (See also Paragraphs 4.2 and 8)

  	1.10	Real Estate Brokers: (See also Paragraph 15)

  		(a) Representation: Neither Lessor nor Lessee have been represented by any third party with respect to this Lease and no fees to third parties, including but not limited to real estate brokers, are owed.

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  	1.11	Guarantor. The obligations of the Lessee under this Lease shall be guaranteed by N/A ("Guarantor"). (See also Paragraph 37)

  	1.12	Business Hours for the Building:: 8:00 a.m. to 8:00 p.m., Mondays through Fridays (except Building Holidays)

  and 8:00 a.m. to 10:00 p.m. on Saturdays (except Building Holidays). "Building Holidays" shall mean the dates of observation of New Year's Day, President's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day, and N/A.  Notwithstanding the Business Hours for the Building, Lessee shall have the right to access the Premises 24 hours a day and seven days a week.

  	1.13	Lessor Supplied Services. See Paragraph 11

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

  ☒     an Addendum consisting of Paragraphs 51 through 54;

  ☒     a plot plan depicting the Premises (see Exhibit A);

  ☐     a current set of the Rules and Regulations;

  ☒     Demo Plan (see Exhibit B);

  ☒     Improvement Plan (see Exhibit C);

  ☐     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 the Premises to Lessee in a clean condition on the Commencement Date or the Early Possession Date, whichever first occurs ("Start Date"), and warrants that the existing electrical, plumbing, fire sprinkler, lighting, heating, ventilating and air conditioning systems ("HVAC"), and all other items which the Lessor is obligated to construct pursuant to the Work Letter attached hereto, if any, other than those constructed by Lessee, shall be in good operating condition on said date.

  	2.3	Compliance. Lessor warrants that the improvements comprising 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 ("Applicable Requirements") in effect on the Start Date. Said warranty does not apply to the 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 50), or to any Alterations or Utility Installations (as defined in Paragraph 7.3(a)) made or to be made by Lessee. NOTE: Lessee is responsible for determining whether or not the zoning and other Applicable Requirements 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. 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 Premises, the remediation of any Hazardous Substance, or the reinforcement or other physical modification of the Premises ("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 cost of such Capital Expenditure as follows: Lessor shall advance the funds necessary for such Capital Expenditure but Lessee shall be obligated to pay, each month 

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  during the remainder of the term of this Lease, on the date on which Base Rent is due, an amount equal to the product of multiplying Lessee's share of the cost of such Capital Expenditure (the percentage specified in Paragraph 1.6 by a fraction, the numerator of which is one, and the denominator of which is 144 (i.e. 1/144th of the cost per month). Lessee shall pay interest on the unamortized balance of Lessee's share at a rate that is commercially reasonable in the judgment of Lessor's accountants. Lessee may, however, prepay its obligation at any time. Provided, however, that if such Capital Expenditure is required during the last 2 years of this Lease or if Lessor reasonably determines that it is not economically feasible to pay its share thereof, 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.  Notwithstanding the above, if such Capital Expenditure is required during the last two (2) years of this Lease or if Lessee reasonably determines that it is not economically feasible to pay its share thereof, Lessee shall have the option to terminate this Lease upon 90 days prior written notice to Lessor unless Lessor notifies Lessee, in writing, within ten (10) days after receipt of Lessee’s termination notice that Lessor will pay for such Capital Expenditure.

  		(c) Notwithstanding the above, the provisions concerning Capital Expenditures are intended to apply only to nonvoluntary, 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, and in that event, Lessee shall be fully responsible for the cost thereof, and Lessee shall not have any right to terminate this Lease.

  	2.4 	Acknowledgements. Lessee acknowledges that: (a) Lessee has been advised by Lessor and/or Brokers to satisfy itself with respect to the condition of the Premises (including but not limited to the electrical, HVAC and fire sprinkler systems, security, environmental aspects, and compliance with Applicable Requirements), and their suitability for Lessee's intended use, (b) Lessee has made such investigation as it deems necessary with reference to such matters and assumes all responsibility therefore 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. 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.

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

  	2.6 	Vehicle Parking. So long as Lessee is not in default, and subject to the Rules and Regulations attached hereto, and as established by Lessor from time to time, Lessee shall be entitled to rent and use the number of parking spaces specified in Paragraph 1.2(b) at the rental rate applicable from time to time for monthly parking as set by Lessor and/or its licensee.

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

  		(b) The monthly rent per parking space specified in Paragraph 1.2(b) is subject to change upon 30 days prior written notice to Lessee.  The rent for the parking is payable one month in advance prior to the first day of each calendar month.

  	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 Premises that are provided and designated by the Lessor from time to time for the general nonexclusive use of Lessor, Lessee and other tenants of the Project and their respective employees, suppliers, shippers, customers, contractors and invitees, including, but not limited to, common entrances, lobbies, corridors, stairwells, public restrooms, elevators, 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 nonexclusive 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 

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  Lessor shall have the right, without notice, in addition to such other rights and remedies that it may have, to remove the property and charge the cost to Lessee, which cost shall be immediately payable upon demand by Lessor.

  	2.9	Common Areas - Rules and Regulations. Lessor or such other person(s) as Lessor may appoint shall have the exclusive control and management of the Common Areas and shall have the right, from time to time, to adopt, modify, amend and enforce 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. The Lessee agrees to abide by and conform to all such Rules and Regulations, and to cause its employees, suppliers, shippers, customers, contractors and invitees to so abide and conform. Lessor shall not be responsible to Lessee for the noncompliance 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:

  		(a) To make changes to the Common Areas, including, without limitation, changes in the location, size, shape and number of the lobbies, windows, stairways, air shafts, elevators, escalators, restrooms, 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 the Operating Expense Increase) shall, however, be in effect during such period. Any such early possession shall not affect the Expiration Date.

  	3.3	Delays 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 by such date, Lessor shall not be subject to any liability therefore, nor shall such failure affect the validity of this Lease. Lessee shall not, however, be obligated to pay Rent or perform its other obligations until Lessor delivers possession of the Premises and 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 is not delivered within 60 days after the Commencement Date, as the same may be extended under the terms of any Work Letter executed by Parties, 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. If possession of the Premises is not delivered within 120 days after the Commencement Date, this Lease shall terminate unless other agreements are reached between Lessor and Lessee, in writing.

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

  4.	Rent.

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

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  	4.2 	Operating Expense Increase. Lessee shall pay to Lessor during the term hereof, in addition to the Base Rent, Lessee's Share of the amount by which all Operating Expenses for each Comparison Year exceeds the amount of all Operating Expenses for the Base Year, such excess being hereinafter referred to as the "Operating Expense Increase", in accordance with the following provisions:

  		(a)	"Base Year" is as specified in Paragraph 1.9.

  		(b)	"Comparison Year" is defined as each calendar year during the term of this Lease subsequent to the Base Year; provided, however, Lessee shall have no obligation to pay a share of the Operating Expense Increase applicable to the first 12 months of the Lease Term (other than such as are mandated by a governmental authority, as to which government mandated expenses Lessee shall pay Lessee's Share, notwithstanding they occur during the first twelve (12) months). Lessee's Share of the Operating Expense Increase for the first and last Comparison Years of the Lease Term shall be prorated according to that portion of such Comparison Year as to which Lessee is responsible for a share of such increase.

  		(c)	"Operating Expenses" include all costs incurred by Lessor relating to the ownership and operation of the Project, calculated as if the Project was at least 95% occupied, including, but not limited to, the following:

  			(i) The operation, repair, and maintenance in neat, clean, safe, good order and condition, but not the replacement (see subparagraph (g)), of the following:

  				(aa) The Common Areas, including their surfaces, coverings, decorative items, carpets, drapes and window coverings, and including parking areas, loading and unloading areas, trash areas, roadways, sidewalks, walkways, stairways, parkways, driveways, landscaped areas, striping, bumpers, irrigation systems, Common Area lighting facilities, building exteriors and roofs, fences and gates;

  				(bb) All heating, air conditioning, plumbing, electrical systems, life safety equipment, communication systems and other equipment used in common by, or for the benefit of, lessees or occupants of the Project, including elevators and escalators, tenant directories, fire detection systems including sprinkler system maintenance and repair.

  			(ii) Trash disposal, janitorial and security services, pest control services, and the costs of any environmental inspections;

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

  			(iv) The cost of the premiums for the insurance policies maintained by Lessor pursuant to paragraph 8 and any deductible portion of an insured loss concerning the Building or the Common Areas;

  			(v) The amount of the Real Property Taxes payable by Lessor pursuant to paragraph 10;

  			(vi) The cost of water, sewer, gas, electricity, and other publicly mandated services not separately metered;

  			(vii) Labor, salaries, and applicable fringe benefits and costs, materials, supplies and tools, used in maintaining and/or cleaning the Project and accounting and management fees attributable to the operation of the Project;

  			(viii) The cost of any Capital Expenditure 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 Expenditure 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 Expenditure in any given month;

  			(ix) Replacement of equipment or improvements that have a useful life for accounting purposes of 5 years or less.

  		(d) Any item of Operating Expense that is specifically attributable to the Premises, the Building or to any other building in the Project or to the operation, repair and maintenance thereof, shall be allocated entirely to such Premises, Building, or other building. However, any such item that is 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.

  		(e) The inclusion of the improvements, facilities and services set forth in Subparagraph 4.2(c) 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.

  		(f) Lessee's Share of Operating Expense Increase shall be payable by Lessee within 10 days after a reasonably detailed statement of actual expenses is presented to Lessee by Lessor. At Lessor's option, however, an amount may be estimated by Lessor from time to time in advance of Lessee's Share of the Operating Expense Increase for any Comparison Year, and the same shall be payable monthly during each Comparison Year of the Lease term, on the same day as the Base Rent is due hereunder. In the event that Lessee pays Lessor's estimate of Lessee's Share of Operating Expense Increase as aforesaid, Lessor shall deliver to Lessee within 60 days after the expiration of each Comparison Year a reasonably detailed statement showing Lessee's Share of the actual Operating Expense Increase incurred during such year. If Lessee's payments under this paragraph (f) during said Comparison Year exceed Lessee's Share as indicated on said statement, Lessee shall be entitled to credit the amount of such overpayment against Lessee's Share of Operating Expense Increase next falling due. If Lessee's payments under this paragraph during said Comparison Year were less 

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  than Lessee's Share as indicated on said statement, Lessee shall pay to Lessor the amount of the deficiency within 10 days after delivery by Lessor to Lessee of said statement. Lessor and Lessee shall forthwith adjust between them by cash payment any balance determined to exist with respect to that portion of the last Comparison Year for which Lessee is responsible as to Operating Expense Increases, notwithstanding that the Lease term may have terminated before the end of such Comparison Year.

  		(g) Operating Expenses shall not include the costs of replacement for equipment or capital components such as the roof, foundations, exterior walls or a Common Area capital improvement, such as the parking lot paving, elevators, fences that have a useful life for accounting purposes of 5 years or more unless it is of the type described in paragraph 4.2(c) (viii), in which case their cost shall be included as above provided.

  		(h) 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 by insurance proceeds.

  4.3	Payment. Lessee shall cause payment of Rent to be received by Lessor in lawful money of the United States on or before the day on which it is due, without offset or deduction (except as specifically permitted 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. Payments will be applied first to accrued late charges and attorney's fees, second to accrued interest, then to Base Rent and Operating Expense Increase, 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 or 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 therefore, deposit monies with Lessor sufficient to restore said Security Deposit to the full amount required by this Lease. If the Base Rent increases during the term of this Lease, Lessee shall, upon written request from Lessor, deposit additional moneys with Lessor so that the total amount of the Security Deposit shall at all times bear the same proportion to the increased Base Rent as the initial Security Deposit bore to the initial Base Rent. Should the Agreed Use be amended to accommodate a material change in the business of Lessee or to accommodate a sublessee or assignee, Lessor shall have the right to increase the Security Deposit to the extent necessary, in Lessor's reasonable judgment, to account for any increased wear and tear that the Premises may suffer as a result thereof. If a change in control of Lessee occurs during this Lease and following such change the financial condition of Lessee is, in Lessor's reasonable judgment, significantly reduced, Lessee shall deposit such additional monies with Lessor as shall be sufficient to cause the Security Deposit to be at a commercially reasonable level based on such change in financial condition. 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. 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 improvements of the Building, will not adversely affect the mechanical, electrical, HVAC, and other systems of the Building, and/or will not affect the exterior appearance of the Building. 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, byproducts or fractions thereof. Lessee shall not 

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  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 such as 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 therefore. In addition, Lessor may condition its consent to any Reportable Use upon receiving such additional assurances as Lessor reasonably deems necessary to protect itself, the public, the Premises and/or the environment against damage, contamination, injury and/or liability, including, but not limited to, the installation (and removal on or before Lease expiration or termination) of protective modifications (such as concrete encasements) and/or increasing the Security Deposit.

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

  		(c) Lessee Remediation. Lessee shall not cause or permit any Hazardous Substance to be spilled or released in, on, under, or about the Premises (including through the plumbing or sanitary sewer system) and shall promptly, at Lessee's expense, 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 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 result from Hazardous Substances which existed on the Premises prior to Lessee's occupancy 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 Lessee's occupancy, 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 therefore (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 $100,000, 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 

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  the then monthly Base Rent or $100,000, 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, the requirements of any applicable fire insurance underwriter or rating bureau, and the recommendations of Lessor's engineers and/or consultants which relate in any manner to the Premises, without regard to whether said requirements are now in effect or become effective after the Start Date. Lessee shall, within 10 days after receipt of Lessor's written request, provide Lessor with copies of all permits and other documents, and other information evidencing Lessee's compliance with any Applicable Requirements specified by Lessor, and shall immediately upon receipt, notify Lessor in writing (with copies of any documents involved) of any threatened or actual claim, notice, citation, warning, complaint or report pertaining to or involving the failure of Lessee or the Premises to comply with any Applicable Requirements.

  	6.4	Inspection; Compliance. Lessor and Lessor's "Lender" (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, 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 9.1e) is found to exist or be imminent, or the inspection is requested or ordered by a governmental authority. In such case, Lessee shall upon request reimburse Lessor for the cost of such inspection, so long as such inspection is reasonably related to the violation or contamination.

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

  	7.1	Lessee's Obligations. 

  		(a) Notwithstanding Lessor's obligation to keep the Premises in good condition and repair, Lessee shall be responsible for payment of the cost thereof to Lessor as additional rent for that portion of the cost of any maintenance and repair of the Premises, or any equipment (wherever located) that serves only Lessee or the Premises, to the extent such cost is attributable to causes beyond normal wear and tear. Lessee shall be responsible for the cost of painting, repairing or replacing wall coverings, and to maintain, repair or replace any improvements within the Premises (including, but not limited to, light bulbs, light ballasts, unclogging sewer drain lines, etc.). Lessee shall be responsible for repair, replacement and maintenance of any plumbing and electrical outside of walls, ceilings and floors including, but not limited to, fixture replacement.  Lessor may, at its option, upon reasonable notice, elect to have Lessee perform any particular such maintenance or repairs the cost of which is otherwise Lessee's responsibility hereunder.

  	7.2	Lessor's Obligations. Subject to the provisions of Paragraphs 2.2 (Condition), 2.3 (Compliance), 4.2 (Operating Expenses), 6 (Use),	 7.1 (Lessee's Obligations), 9 (Damage or Destruction) and 14 (Condemnation), Lessor, subject to reimbursement pursuant to Paragraph 4.2, shall keep in good order, condition and repair the foundations, exterior walls, structural condition of interior bearing walls, exterior roof, fire sprinkler system, fire alarm and/or smoke detection systems, fire hydrants, and the Common Areas. Lessor shall also be responsible for repair or replacement of any electrical and plumbing within walls, ceilings and floors.  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 Installations" refers to all floor and window coverings, air lines, vacuum lines, power panels, electrical distribution, security and fire protection systems, communication cabling, lighting fixtures, HVAC equipment, and plumbing 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, ceilings, floors 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 $2000. 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 of the Lessor shall be presented to Lessor in written 

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  form with detailed plans. Consent shall be deemed conditioned upon Lessee's: (i) acquiring all applicable governmental permits, (ii) furnishing Lessor with copies of both the permits and the plans and specifications prior to commencement of the work, and (iii) compliance with all conditions of said permits and other Applicable Requirements in a prompt and expeditious manner. Any Alterations or Utility Installations shall be performed in a workmanlike manner with good and sufficient materials. Lessee shall promptly upon completion furnish Lessor with as-built plans and specifications. For work which costs an amount in excess of one month's Base Rent, Lessor may condition its consent upon Lessee providing a lien and completion bond in an amount equal to 150% of the estimated cost of such Alteration or Utility Installation and/or upon Lessee's posting an additional Security Deposit with Lessor.

  		(c) Liens; 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 materialmen'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.

  		(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 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. 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	Insurance Premiums. The cost of the premiums for the insurance policies maintained by Lessor pursuant to paragraph 8 are included as Operating Expenses (see paragraph 4.2 (c)(iv)). Said costs shall include increases in the premiums resulting from additional coverage related to requirements of the holder of a mortgage or deed of trust covering the Premises, Building and/or Project, increased valuation of the Premises, Building and/or Project, and/or a general premium rate increase. Said costs shall not, however, include any premium increases resulting from the nature of the occupancy of any other tenant of the Building. If the Project was not insured for the entirety of the Base Year, then the base premium shall be the lowest annual premium reasonably obtainable for the required insurance as of the Start Date, assuming the most nominal use possible of the Building and/or Project. In no event, however, shall Lessee be responsible for any portion of the premium cost attributable to liability insurance coverage in excess of $2,000,000 procured under Paragraph 8.2(b).

  	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 

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  aggregate of not less than $2,000,000, an "Additional Insured-Managers or Lessors of Premises Endorsement" and contain the "Amendment of the Pollution Exclusion Endorsement" for damage caused by heat, smoke or fumes from a hostile fire. The policy shall not contain any intra-insured exclusions as between insured persons or organizations, but shall include coverage for liability assumed under this Lease as an "insured contract" for the performance of Lessee's indemnity obligations under this Lease. The limits of said insurance shall not, however, limit the liability of Lessee nor relieve Lessee of any obligation hereunder. All insurance carried by Lessee shall be primary to and not contributory with any similar insurance carried by Lessor, whose insurance shall be considered excess insurance only.

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

  	8.3	Property Insurance - Building, Improvements and Rental Value.

  		(a) Building and Improvements. Lessor shall obtain and keep in force a policy or policies of insurance in the name of Lessor, with loss payable to Lessor, any ground-lessor, and to any Lender insuring loss or damage to the Building and/or Project. The amount of such insurance shall be equal to the full replacement cost of the Building and/or Project, 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 $1,000 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 B+, V, as set forth in the most current issue of "Best's Insurance Guide", or such other rating as may be required by a Lender. Lessee shall not do or permit to be done anything which invalidates the required insurance policies. Lessee shall, prior to the Start Date, deliver to Lessor certified copies of policies of such insurance or certificates evidencing the existence and amounts of the required insurance. No such policy shall be cancelable or subject to modification except after 30 days prior written notice to Lessor. Lessee shall, at least 30 days prior to the expiration of such policies, furnish Lessor with evidence of renewals or "insurance binders" evidencing renewal thereof, or Lessor may order such insurance and charge the cost thereof to Lessee, which amount shall be payable by Lessee to Lessor upon demand. Such policies shall be for a term of at least one year, or the length of the remaining term of this Lease, whichever is less. If 

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  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. Lessor shall not be liable for injury or damage to the person or goods, wares, merchandise or other property of Lessee, Lessee's employees, contractors, invitees, customers, or any other person in or about the Premises, whether such damage or injury is caused by or results from fire, steam, electricity, gas, water or rain, or from the breakage, leakage, obstruction or other defects of pipes, fire sprinklers, wires, appliances, plumbing, HVAC or lighting fixtures, or from any other cause, whether the said injury or damage results from conditions arising upon the Premises or upon other portions of the Building, 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, and the cost thereof does not exceed a sum equal to 6 month's Base Rent. 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.

  		(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 and/or the cost thereof exceeds a sum equal to 6 month's Base Rent. 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 $5,000 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 

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  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 therefore. 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.

  	9.3	Partial Damage - Uninsured Loss. If a Premises Partial Damage that is not an Insured Loss occurs, unless caused by a negligent or willful act of Lessee (in which event Lessee shall make the repairs at Lessee's expense), Lessor may either: (i) repair such damage as soon as reasonably possible at Lessor's expense, in which event this Lease shall continue in full force and effect, or (ii) terminate this Lease by giving written notice to Lessee within 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, but not to exceed the proceeds received from the Rental Value insurance. All other obligations of Lessee hereunder shall be performed by Lessee, and Lessor shall have no liability for any such damage, destruction, remediation, repair or restoration except as provided herein. 

  		(b)	Remedies. If Lessor shall be obligated to repair or restore the Premises and does not commence, in a substantial and meaningful way, such repair or restoration within 90 days after such obligation shall accrue, Lessee may, at any time prior to the commencement of such repair or restoration, give written notice to Lessor and to any Lenders of which Lessee has actual notice, of Lessee's election to terminate this Lease on a date not less than 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.

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

  10.	Real Property Taxes.

  	10.1	Definitions. 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. "Real Property Taxes" shall also include any tax, fee, levy, assessment or charge, or any increase therein, imposed by reason of events occurring during the term of this Lease, including but not limited to, a change in the ownership of the Project or any portion thereof or a change in the improvements thereon.

  	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 Operating Expenses in accordance with the provisions of Paragraph 4.2.

  	10.3	Additional Improvements. 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 Operating Expenses are payable under Paragraph 4.2, the entirety of any increase in Real Property Taxes if assessed solely by reason of Alterations, Trade Fixtures or Utility Installations placed upon the Premises by Lessee or at Lessee's request.

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

  	10.5	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.

  11.	Utilities and Services.

  	11.1	Services Provided by Lessor. Lessor shall provide heating, ventilation, air conditioning, reasonable amounts of electricity for normal lighting and office machines, and water for reasonable and normal drinking and lavatory use in connection with an office.  Lessor shall also provide janitorial services to the common Areas.  Lessor shall not, however, be required to provide janitorial services to any portion of the Premises.

  	11.2	Services Exclusive to Lessee. Lessee shall pay for all water, gas, heat, light, power, telephone, trash and other utilities and services specially or exclusively supplied and/or metered exclusively to the Premises or to Lessee, together with any taxes thereon. If a service/utility is not separately metered to the Premises, Lessee shall pay at Lessor's option, either Lessee's Share or a reasonable proportion to be determined by Lessor of all charges for such jointly metered service.

  	11.3	Hours of Service. Said services and utilities shall be provided during times set forth in Paragraph 1.12. Utilities and services required at other times shall be subject to advance request and reimbursement by Lessee to Lessor of the cost thereof.

  	11.4	Excess Usage by Lessee. Lessee shall not make connection to the utilities except by or through existing outlets and shall not install or use machinery or equipment in or about the Premises that uses excess water, lighting or power, or suffer or permit any act that causes extra burden upon the utilities or services, including but not limited to security and trash services, over standard office usage for the Project. Lessor shall require Lessee to reimburse Lessor for any excess expenses or costs that may arise out of a breach of this subparagraph by Lessee. Lessor may, in its sole discretion, install at Lessee's expense supplemental equipment and/or separate metering applicable to Lessee's excess usage or loading.

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  	11.5	Interruptions. 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.

  12.	Assignment and Subletting.

  	12.1	Lessor's Consent Required.

  		(a) Lessee shall not voluntarily or by operation of law assign, transfer, mortgage or encumber (collectively, "assign or assignment") or sublet all or any part of Lessee's interest in this Lease or in the Premises without Lessor's prior written consent.

  		(b) 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 buyout 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.

  	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 a consent to any subsequent assignment or subletting.

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

  		(e) Each request for consent to an assignment or subletting shall be in writing, accompanied by information relevant to Lessor's determination as to the financial and operational responsibility and appropriateness of the proposed assignee or sublessee, including but not limited to the intended use and/or required modification of the Premises, if any. 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 or entering into such sublease, be deemed to have assumed and agreed to conform and comply with each and every term, covenant, condition and obligation herein to be observed or performed by Lessee during the term of said assignment or sublease, other than such obligations as are contrary to or inconsistent with provisions of an assignment or sublease to which Lessor has specifically consented to in writing.

  		(g) Lessor's consent to any assignment or subletting shall not transfer to the assignee or sublessee any Option granted to the original Lessee by this Lease unless such transfer is specifically consented to by Lessor in writing. (See Paragraph 39.2)

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

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

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

  		(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 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 (easements), or (viii) any other documentation or information which Lessor may reasonably require of Lessee under the terms of this Lease, where any such failure continues for a period of 10 days following written notice to Lessee.

  		(d) A Default by Lessee as to the terms, covenants, conditions or provisions of this Lease, or of the rules adopted under Paragraph 2.9 hereof, other than those described in subparagraphs 13.1(a), (b) or (c), 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 cure to completion.

  		(e) The occurrence of any of the following events: (i) the making of any general arrangement or assignment for the benefit of creditors; (ii) becoming a "debtor" as defined in 11 U.S.C. § 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 (e) is contrary to any applicable law, such provision shall be of no force or effect, and not affect the validity of the remaining provisions.

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

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  		(g) If the performance of Lessee's obligations under this Lease is guaranteed: (i) the death of a Guarantor, (ii) the termination of a Guarantor's liability with respect to this Lease other than in accordance with the terms of such guaranty, (iii) a Guarantor's becoming insolvent or the subject of a bankruptcy filing, (iv) a Guarantor's refusal to honor the guaranty, or (v) a Guarantor's breach of its guaranty obligation on an anticipatory basis, and Lessee's failure, within 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. The costs and expenses of any such performance by Lessor shall be due and payable by Lessee upon receipt of invoice therefor. If any check given to Lessor by Lessee shall not be honored by the bank upon which it is drawn, Lessor, at its option, may require all future payments to be made by Lessee to be by cashier's check. In the event of a Breach, Lessor may, with or without further notice or demand, and without limiting Lessor in the exercise of any right or remedy which Lessor may have by reason of such Breach:

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

  		(b) Continue the Lease and Lessee's right to possession and recover the Rent as it becomes due, in which event Lessee may sublet or assign, subject only to reasonable limitations, pursuant to California Civil Code Section 1951.4 (lessor may continue lease in effect after lessee’s breach and abandonment and recover rent as it becomes due, if lessee has right to sublet or assign, subject only to reasonable limitations). Acts of maintenance, efforts to relet, and/or the appointment of a receiver to protect the Lessor's interests, shall not constitute a termination of the Lessee's right to possession.

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

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

  	13.4	Late Charges. Lessee hereby acknowledges that late payment by Lessee of Rent will cause Lessor to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. Such costs include, but are not limited to, processing and accounting charges, and late charges which may be imposed upon Lessor by any Lender. Accordingly, if any Rent 

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  shall not be received by Lessor within 5 days after such amount shall be due, then, without any requirement for notice to Lessee, Lessee shall pay to Lessor a one-time late charge equal to 7.5% 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, when due as to scheduled payments (such as Base Rent) or within 30 days following the date on which it was due for nonscheduled payment, shall bear interest from the date when due, as to scheduled payments, or the 31st day after it was due as to nonscheduled 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 fails within a reasonable time to perform an obligation required to be performed by Lessor. For purposes of this Paragraph, a reasonable time shall in no event be less than 30 days after receipt by Lessor, and any Lender whose name and address shall have been furnished Lessee in writing for such purpose, of written notice specifying wherein such obligation of Lessor has not been performed; provided, however, that if the nature of Lessor's obligation is such that more than 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 the greater of one month's Base Rent or the Security Deposit, reserving Lessee's right to seek reimbursement from Lessor. Lessee shall document the cost of said cure and supply said documentation to Lessor.

  14.	Condemnation. If the Premises or any portion thereof are taken under the power of eminent domain or sold under the threat of the exercise of said power (collectively "Condemnation"), this Lease shall terminate as to the part taken as of the date the condemning authority takes title or possession, whichever first occurs. If more than 10% of the rentable floor area of the Premises, or more than 25% of Lessee's Reserved Parking Spaces, if any, are taken by 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 therefore. 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.

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

  	15.2	Assumption of Obligations. Any buyer or transferee of Lessor's interest in this Lease shall be deemed to have assumed Lessor's obligation hereunder. Brokers shall be third party beneficiaries of the provisions of Paragraphs 1.10, 15, 22 and 31. If Lessor fails to pay to Brokers any amounts due as and for brokerage fees pertaining to this Lease when due, then such amounts shall accrue Interest. In addition, if Lessor fails to pay any amounts to Lessee's Broker when due, Lessee's Broker may send written notice to Lessor and Lessee of such failure and if Lessor fails to pay such amounts within 10 days after said notice, Lessee shall pay said 

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  monies to its Broker and offset such amounts against Rent. In addition, Lessee's Broker shall be deemed to be a third party beneficiary of any commission agreement entered into by and/or between Lessor and Lessor's Broker for the limited purpose of collecting any brokerage fee owed.

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

  16.	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 American Industrial 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 Project, 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.

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  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 48 hours after the same is addressed as required herein and mailed with postage prepaid. Notices delivered by United States Express Mail or overnight courier that guarantee next day delivery shall be deemed given 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:

  		(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 set 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 Lesser 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 advise is desired, consult a competent professional.

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  	(b) Brokers have no responsibility 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 any breach of duty, error or omission relating to this Lease 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 of Law. This Lease shall be binding upon the Parties, their personal representatives, successors and assigns and be governed by the laws of the State in which the Premises are located. Any litigation between the Parties hereto concerning this Lease shall be initiated in the county in which the Premises are located.

  30.	Subordination; Attornment; Non-Disturbance.

  	30.1	Subordination. This Lease and any Option granted hereby shall be subject and subordinate to any ground lease, mortgage, deed of trust, or other hypothecation or security device (collectively, "Security Device"), now or hereafter placed upon the Premises, to any and all advances made on the security thereof, and to all renewals, modifications, and extensions thereof. Lessee agrees that the holders of any such Security Devices (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 nondisturbance 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 such new owner, this Lease shall automatically become a new Lease between Lessee and such new owner, upon all of the terms and conditions hereof, for the remainder of the term hereof, and (ii) Lessor shall thereafter be relieved of any further obligations hereunder and such new owner shall assume all of Lessor's obligations hereunder, 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 for the purpose of showing the same to prospective purchasers, lenders, or 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 to Lessee's use of the Premises. All such activities shall be without abatement of rent or liability to Lessee. Lessor may at any time place on the Premises any ordinary "For Sale" signs and Lessor may during the last 6 months of the term hereof place on the Premises any ordinary "For Lease" signs. In addition, Lessor shall have the right to retain keys to the Premises and to unlock all doors in or upon the Premises other than to files, vaults and safes, and in the case of emergency to enter the Premises by any reasonably appropriate means, and any such entry shall not be deemed a forcible or unlawful entry or detainer of the Premises or an eviction. Lessee waives any charges for damages or injuries or interference with Lessee's property or business in connection therewith.

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

  34.	Signs. Lessee shall not place any sign upon the Project without Lessor's prior written consent.

  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.

  	37.1	Execution. The Guarantors, if any, shall each execute a guaranty in the form most recently published by the American Industrial Real Estate Association.

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

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

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  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.

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

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

  	39.4 Effect of Default on Options.

  		(a) Lessee shall have no right to exercise an Option: (i) during the period commencing with the giving of any notice of Default and continuing until said Default is cured, (ii) during the period of time any Rent is unpaid (without regard to whether notice thereof is given Lessee), (iii) during the time Lessee is in Breach of this Lease, or (iv) in the event that Lessee has been given 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 fails 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. In the event, however, that Lessor should elect to provide security services, then the cost thereof shall be an Operating Expense.

  41.	Reservations.

  	(a) 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, (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. Lessor may also: change the name, address or title of the Building or Project upon at least 90 days prior written notice; provide and install, at Lessee's expense, Building standard graphics on the door of the Premises and such portions of the Common Areas as Lessor shall reasonably deem appropriate; grant to any lessee the exclusive right to conduct any business as long as such exclusive right does not conflict with any rights expressly given herein; and to place such signs, notices or displays as Lessor reasonably deems necessary or advisable upon the roof, exterior of the Building or the Project or on pole signs in the Common Areas. Lessee agrees to sign any documents reasonably requested by Lessor to effectuate such rights. The obstruction of Lessee's view, air, or light by any structure erected in the vicinity of the Building, whether by Lessor or third parties, shall in no way affect this Lease or impose any liability upon Lessor. 

  	(b) Lessor also reserves the right to move Lessee to other space of comparable size in the Building or Project. Lessor must provide at least 45 prior written notice of such move, and the new space must contain improvements of comparable quality to those contained within the Premises. Lessor shall pay the reasonable out of pocket costs that Lessee incurs with regard to such relocation, including the expenses of moving and necessary stationary revision costs. In no event, however, shall Lessor be required to pay an amount in excess of two months Base Rent. Lessee may not be relocated more than once during the term of this Lease.  

  	(c) Lessee shall not: (i) use a representation (photographic or otherwise) of the Building or Project or their name(s) in connection with Lessee's business; or (ii) suffer or permit anyone, except in emergency, to go upon the roof of the Building.

  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.

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  43.	Authority.

  	(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.

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

  48.	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.

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

  50.	Americans with Disabilities Act. In the event that as a result of Lessee's use, or intended use, of the Premises the Americans with Disabilities Act or any similar law requires modifications or the construction or installation of improvements in or to the Premises, Building, Project and/or Common Areas, the Parties agree that such modifications, construction or improvements shall be made at Lessee's expense.  Lessee does hereby agree to indemnify, protect, defend and hold Lessor harmless from and against any and all liability and claims resulting from non-compliance with the Americans with Disabilities Act or any other local, state or federal law pertaining to access for disabled persons.

  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 AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY ANY BROKER AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT RELATES. THE PARTIES ARE URGED TO:

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

  2.	RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF THE PREMISES. SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE POSSIBLE PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING AND SIZE 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.

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	Executed at:
	Encinitas, California
	 
	Executed at:
	Encinitas, California

	 
	 
	 
	 
	 

	on:
	May 6, 2022
	 
	on:
	May 3, 2022

	 
	 
	 
	 
	 

	By LESSOR:
Charlotta Partners, Inc.
9310 Towne Centre Drive Harrison-1, LLC
	 
	By LESSEE:
Ventyx Biosciences, Inc.

	 
	 
	 
	 
	 

	By:
	/s/ Keith Harrison
	 
	By:
	/s/ Christopher W. Krueger

	 
	 
	 
	 
	 

	Name
	 
	 
	 
	 

	Printed:
	Keith Harrison
	 
	 
	Christopher W. Krueger

	 
	 
	 
	By:
	 

	Title:
	President, President
	 
	 
	Chief Business Officer

	 
	 
	 
	 
	 

	Address:
	P.O. Box 231594
	 
	Address:
	662 Encinitas Blvd., Suite 250

	 
	 
	 
	 
	 

	 
	Encinitas, CA 92023
	 
	 
	Encinitas, CA 92024

	 
	 
	 
	 
	 

	 
	 
	 
	 
	 

	 
	 
	 
	 
	 

	Telephone
	 
	 
	Telephone
	 

	/Fax
	(760) 436-7171/(760) 436-9571
	 
	/Fax
	 

   

   

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  ADDENDUM TO LEASE DATED April 25, 2022, BY AND BETWEEN CHARLOTTA PARTNERS, INC AND 9310 TOWNE CENTRE DRIVE HARRISON-1, LLC, HEREINAFTER COLLECTIVELY “LESSOR”, AND VENTYX BIOSCIENCES, INC, HEREINAFTER COLLECTIVELY “LESSEE”, FOR THE OFFICE/RETAIL SPACE LOCATED AT 662 ENCINITAS BLVD., SUITES 240 & 248, ENCINITAS, CALIFORNIA 92024 HEREINAFTER THE “PREMISES” (THE “LEASE”).  LESSOR AND LESSEE HAVE AGREED THAT THE LEASE IS AMENDED AND SUPPLEMENTED AS FOLLOWS:

  51.	BASE RENT ADJUSTMENTS:  Beginning July 1, 2022, and annually thereafter, Base Rent shall increase by three percent (3.0%).  The schedule of monthly Base Rent for the Term is as follows:

   

  			
	Date From
	Date To
	Monthly Installment of Base Rent

	Commencement Date
	6/30/22
	$11,496.10

	7/1/22
	6/30/23
	$11,840.98

	7/1/23
	6/30/24
	$12,196.21

	7/1/24
	6/30/25
	$12,562.10

	7/1/25
	6/30/26
	$12,938.96

  52.	UTILITY REIMBURSEMENTS:  In accordance with paragraph 11.2 of the Lease, Lessee shall make regular monthly payments in an amount to be reasonably determined by Lessor, from time to time, to represent the estimated monthly allocation of the costs of utilities and services not separately metered but provided to the Premises (the “Estimated Utility Cost Payments”).  Utilities not separately metered but provided to the Premises include water, sewer, power/electricity and trash disposal.  As of the commencement date of this Lease, such amount has been determined to be $50.00 and the Estimated Utility Cost Payments are due at the same time as Base Rental payment.  Lessor shall periodically, but no later than ninety (90) days after the Expiration Date, calculate Lessee’s fair share of utility costs based on the actual bills for that period and shall notify tenant in writing of the difference between that figure and the total Estimated Utility Cost Payments made by Lessee over the same period.  If the total Estimated Utility Cost Payments exceed the Lessee’s fair share of the actual costs, Lessor shall credit the difference to Lessee’s Base Rent due for the month immediately following such determination.  If the total Estimate Utility Cost Payments are less than Lessee’s fair share of the actual costs, Lessee shall pay the difference with the Base Rent due for the month immediately following such determination.

  53.	JANITORIAL:  Lessee shall be responsible for janitorial to the Premises.  Lessor shall be responsible for Common Area janitorial pursuant to paragraph 11.1 of the Lease.

  54.	LEASE COMMENCEMENT:  The Premises are currently occupied by Justin White PC under a lease agreement with Lessor which expires April 30, 2022.  Lessor expects Justin White PC to vacate the premises by April 30, 2022 but Justin White PC could holdover without Lessor’s consent.  In the event there is a holdover, Lessor make a reasonable effort to get Justin White PC to vacate the Premises no later than June 30, 2022.  If Justin White PC remains in occupancy beyond June 30, 2022, Lessee shall have the right to cancel this Lease upon written notice to Lessor.  Otherwise, this Lease shall commence on the day after the current occupant of the Premises vacates the Premises.  If the Commencement Date is after May 1, 2022, the Original Term will be reduced by the number of days (and/or months) between May 1, 2022 and the Commencement Date, and the Expiration Date will remain unchanged. 

  AGREED AND ACCEPTED:

   

  Lessor /s/ KH    Lessee /s/ CK   

  Page 25 of  26

  

   

  							
	Executed at:
	Encinitas, California
	 
	Executed at:
	Encinitas, California

	 
	 
	 
	 
	 

	on:
	May 6, 2022
	 
	On:
	May 3, 2022

	 
	 
	 
	 
	 

	By LESSOR:
Charlotta Partners, Inc. & 9310 Towne Centre Drive Harrison-1, LLC
	 
	By LESSEE:
Ventyx Biosciences, Inc.

	 
 
	 
	 
	 
	 

	By:
	/s/ Keith Harrison
	 
	By:
	/s/ Christopher W. Krueger

	 
	 
	 
	 
	 

	Name
	 
	 
	Name
	 

	Printed:
	Keith Harrison
	 
	Printed:
	Christopher W. Krueger

	 
	 
	 
	 
	 

	Title:
	President, President
	 
	Title:
	Chief Business Officer

	 
	 
	 
	 
	 

	Address:
	P.O. Box 231594
	 
	Address:
	662 Encinitas Blvd., Suite 250

	 
	Encinitas, CA 92023-1594
	 
	 
	Encinitas, CA 92024

	 
	 
	 
	 
	 

	 
	 
	 
	 
	 

	 
	 
	 
	 
	 

	Telephone
	(760) 436-7171
	 
	Telephone
	 

	/Fax
	(760) 436-9571
	 
	/Fax
	 

   

   

  Lessor /s/ KH    Lessee /s/ CK   

  Page 26 of  26EXHIBIT
10.2

 

CERTAIN
IDENTIFIED INFORMATION [***] HAS BEEN EXCLUDED FROM THE EXHIBIT BECAUSE IT IS BOTH (I) NOT MATERIAL AND (II) WOULD BE COMPETITIVELY HARM
IF PUBLICLY DISCLOSED.

 

Purchase
Agreement

 

No.:
0122

 

Between

 

CQENS
Technologies Inc.

 

And

 

Montrade
S.p.A.

 

For
the purchase of: 

 

The
development, manufacture, delivery, and installation of an automated 100 stick per minute ‘vapour/heat stick’ manufacturing
line.

 

    	 

     

    

 

CONTENTS

 

	CLAUSE	 	PAGE
	 	 	 
	1.	definitions
    and interpretation	2
	2.	sale
    and purchase	5
	3.	pricing
    and payment	5
	4.	Terms
    of DElivery and deadlines	7
	5.	insurance	7
	6.	liquidated
    damages	7
	7.	warranties	8
	8.	pre-delivery
    inspection	8
	9.	installation
    and Commissioning	9
	10.	Acceptance
    Testing	9
	11.	defective
    equipment	10
	12.	training	10
	13.	documentation	10
	14.	limitation
    of liability	11
	15.	intellectual
    property	11
	16.	force
    majeure	12
	17.	termination	12
	18.	confidential
    information	13
	19.	dispute
    resolution and governing law	14
	20.	NOTICES	14
	21.	ASSIGNMENT
    AND SUB-CONTRACTING	15
	22.	invalidity	15
	23.	waiver	15
	24.	NO
    PARTNERSHIP	15
	25.	ENTIRE
    AGREEMENT	15

 

	Schedule
    1
	Technical
    Specification of Equipment
	Schedule
    2
	Performance
    Standards
	Schedule
    3
	Documentation
	Schedule
    4
	Timetable
	Schedule
    5
	Spare
    Parts
	Schedule
    6
	Related
    Equipment

  

    	1

    	 

    

 

THIS
AGREEMENT is made on 14thJUNE 2022BETWEEN:

 

	(1)	CQENS
    Technologies Inc, of 5550 Nicollet Avenue, Minneapolis, MN 55419, USA or its assigns (the “Buyer”); 
	 	 
	 	and
	 	 
	(2)	Montrade
    S.p.A., Via Armando Sarti 6, 40132 Bologna, Italy (the “Seller”).

 

RECITALS

 

	(A)	The
    Seller carries on the business of manufacturing and selling the Equipment, as defined below. 
	 	 
	(B)	The
    Buyer carries on the business of manufacturing and selling the Finished Products, as defined below. 
	 	 
	(C)	The
    Buyer is willing to purchase from the Seller the Equipment for use in connection with its business on the terms set out in this agreement.
    

 

THE
PARTIES AGREE AS FOLLOWS:

 

	1.	definitions
    and interpretation
	 	 
	1.1	In
    this agreement, the following words and expressions shall have the following meanings, unless the context otherwise requires:

 

“Acceptance”
means the successful completion of the Acceptance Tests and any relevant Repeat Tests (and “Accepted” shall be
construed accordingly);

 

“Acceptance
Certificate” means the letter to be issued by the Buyer on Acceptance confirming the successful completion of the Acceptance
Tests;

 

“Acceptance
Date” means the date of issue of the Acceptance Certificate;

 

“Acceptance
Tests” means the tests to be carried out by the Buyer and Seller pursuant to clause 10 (and “Acceptance Testing”
shall be construed accordingly);

 

“Computer
Software” means any and all computer programs as back up files including the Human machine Interface back up file and all documentation,
including user manuals, relating to the foregoing.

 

 “Delivery
Premises” means the Buyers facility at ___________________________ or such other place as Buyer shall designate.

 

“Delivery”
means the Equipment having been brought on to the Delivery Premises and being in all respects ready and available for installation;

 

“Delivery
Date” has the meaning given to it in the Timetable at schedule 4;

 

“Documentation”
means the documentation listed at schedule 3, together with any further documentation in respect of the operation, maintenance, or
repair of the Equipment supplemental to it issued by the Seller from time to time;

 

    	2

    	 

    

 

“Encumbrance”
means any mortgage, charge (whether fixed or floating), pledge, lien, hypothecation, trust, right of set-off or other third party
right or interest (whether legal or equitable and including, without limitation, a third party right or interest arising out of or referable
to a conditional sale, credit sale, hire-purchase agreement or agreement for lease or use), assignment by way of security, reservation
of title or any other security interest of any kind however created or arising or any other agreement or arrangement (including, without
limitation, a sale and repurchase arrangement) having similar effect;

 

“Equipment”
means the equipment to be designed and built by Seller and purchased by the Buyer as summarised at the head of this agreement and
described more particularly in the Technical Specification;

 

“Finished
Product” means “vapor/heat” stick as described in Schedule [***] as per drawing MI002CQE022002
_;

 

“Force
Majeure” has the meaning given to it in clause 16;

 

“Installation”
means the process of setting up the Equipment (including its unpacking, assembly, installation, and commissioning) at the Buyer’s
premises in order to render the Equipment ready for commercial operation and Acceptance Testing;

 

“Intellectual
Property Right” means any (i) Patent, Trademark, Trae Secrets, design right (whether registered or unregistered), copyright,
database right, semiconductor topography right, right of confidence or other similar intellectual or industrial property rights, (ii)
any similar right which could be patented, trademarked or copyrighted anywhere in the world including any application in respect of the
registration of any of the foregoing if not already protected, and (iii) all other intellectual property or proprietary rights and claims
or causes of action arising out of or related to any infringement, misappropriation, or other violation of any of the foregoing, including
rights to recover for past, present, and future violations thereof;

 

Intellectual
Property shall not include drawings and software of the Equipment so long as such drawings and software are related solely to the Equipment
and are not related to the production of the Finished Product in any way whatsoever;

 

“Patents”
means all inventions and discoveries, and all patents and patent applications therefor, including divisions, continuations, continuations-in-part,
and reissues

 

“Performance
Standards” has the meaning given to it in schedule 2;

 

“Purchase
Price” has the meaning given to it in clause 3;

 

“Related
Equipment” means the Buyer’s existing equipment with which the Equipment is required to operate, or to which the Equipment
is required to interface, as set out in schedule 6;

 

“Site”
means the area within the Buyer’s premises where the Equipment is to be installed, together with all fixtures and fittings
appurtenant to it;

 

“Spare
Parts” means any replacement parts or components as set out in schedule 5 which may be required from time to time for the maintenance
or repair of the Equipment;

 

“Start
Date” means the date by which the Equipment shall be ready for commercial operation, as specified in the Timetable;

 

“Technical
Specification” means the technical specification of the Equipment as set out in schedule 1;

 

“Timetable”
means the timetable in accordance with which the Seller shall carry out its obligations as set out in schedule 4;

 

    	3

    	 

    

 

“Trade
Secrets” means confidential and proprietary information, trade secrets and know-how, including confidential processes, schematics,
databases, formulae, drawings, prototypes, models, designs, know-how and customer lists, in each case, to the extent protectable under
applicable law as a trade secret.

  

“Trademarks”
means all trademarks, service marks, internet domain names, logos, symbols, trade dress, assumed names, fictitious names, trade names,
social media account handles, and other indicia of origin, all applications, and registrations for all the foregoing, and all goodwill
associated therewith and symbolized thereby, including all renewals of same;

 

“Training”
means the training to be provided by the Seller pursuant to clause 12;

 

“Value
Added Tax” means value added tax or any other tax of a similar nature that may be substituted for or levied in addition to
it in each case at the rate current from time to time;

 

“Warranties”
means the warranties given by the Seller pursuant to clause 9;

 

“Warranty
Period” means the period commencing on the date of this agreement and expiring on the date 12 months from the Acceptance Date;

 

“Working
Days” means Monday to Friday inclusive in every week of a calendar year excluding only public holidays in North Carolina (USA);

 

“Working
Hours” means 8 a.m. to 6 p.m. on Working Days; and

 

“Works”
means all duties and obligations of the Seller set out in this agreement (including as the same may be amended from time to time)
relating to the manufacture, Installation, , and Acceptance Testing of the Equipment and the provision of the Training.

 

		
	1.2	In
    this agreement unless otherwise specified, reference to:
	 	 	 
	 	(a)	clauses,
    paragraphs, and schedules are to clauses and paragraphs of and schedules to this agreement. The schedules form part of the operative
    provisions of this agreement and reference to this agreement shall, unless the context otherwise requires, include references to
    the schedules;
	 	 	 
	 	(b)	a
    person includes any individual, firm, corporation or undertaking (whether or not having separate legal personality and irrespective
    of the jurisdiction in or under the law of which it was incorporated or exists);
	 	 	 
	 	(c)	a
    statute or statutory instrument or any of their provisions is to be construed as a reference to that statute or statutory instrument
    or such provision as the same may have been or may from time-to-time hereafter be amended or re-enacted; and
	 	 	 
	 	(d)	references
    to the Seller or Buyer shall be deemed to include their respective permitted assignees and the successors in title to substantially
    the whole of their respective undertakings.
	 	 	 
	 	(e)	The
    index and the headings in this agreement are for information only and are to be ignored in construing the same.
	 	 	 
	 	(f)	The
    terms “including” or “includes” are to be construed as being without limitation. 

 

    	4

    	 

    

  

	2.	sale
    and purchase
	 	 	 	 
	2.1	Subject
    to the terms and conditions of this agreement:
	 	 	 	 
	 	(a)	the
    Seller shall:
	 	 	 	 
	 	 	(i)	perform
    the Works according to Schedule [***], the product; and
	 	 	 	 
	 	 	(ii)	sell
    and Deliver the Equipment free from any Encumbrance; and 

 

 

	 	(b)	the
    Buyer shall pay for the Project/machinery development cost part (A):
	 	 	 	 
	 	 	(i)	Payment
    1 – 1st instalment on signing of contract – 50%
	 	 	 	 
	 	 	(ii)	Payment
    2 – 2nd instalment on completion of design phase within 4 months from signing of contract – 50%

 

	 	(c)	the
    Buyer shall purchase the Equipment part (B):
	 	 	 	 
	 	 	(i)	Payment
    1 – Deposit on signing of contract - 35%
	 	 	 	 
	 	 	(ii)	Payment
    2 – Successful completion of FAT - 55%
	 	 	 	 
	 	 	(iii)	Payment
    3 – Final Payment on install and SAT – 10% part (B) plus installation part (C) and (D) and training options as taken
    

 

The
transportation as delivery to the Buyer site is an additional service provided by the Seller, but it is purely a transportation service
not including any import fee or taxation . The insurance fee is to be covered by the Buyer.

 

	3.	pricing
    and payment
	 	 
	3.1	The
    total price payable by the Buyer for the Equipment and the performance by the Seller of the Works (the “Purchase Price”)
    shall be that sum set out in, or calculated in accordance with, the table below:

 

	Item	 	Description	 	Price (EUR)	 
	(A)	 	Project/machinery development cost part a	 	€	257,500	 
	(B)	 	[***]	 	€	1287,500	 
	(C)	 	Installation of product detailed in B as per Montrade proposal in a location to be finalised as determined by Buyer in its sole discretion	 	€	81,575	 
	(D)	 	Travelling time and costs for engineering install team to install equipment in the USA	 	€	21,030	 
	 	 	Total	 	€	1,647,605	 
	OPTIONS TO BE EXERCISED BY THE BUYER	 	 	 	 
	(E)	 	Training services cost if not chosen to be taken at the time of install visit	 	€	65,835	 
	(F)	 	Item E if delivered in the same period as the machine installation takes place	 	€	0.00	 
	(G)	 	Production support post start up- 1 engineer per week	 	€	9,000	 
	(H)	 	Part b of the machinery development cost	 	€	257,000	 

 

    	5

    	 

    

 

	3.2	This
    agreement and payment schedule calls for the payment of € 257,500 to cover the project/machinery development costs for the machine
    contemplated herein. Once made, the payment is made it also provides the buyer a five-year option entitling the buyer to pay another
    € 257,500 for similar development costs should the buyer commission another machine from the seller. In the event that the buyer
    declines to order another machine, the payment will provide the buyer all rights to the proprietary intellectual property arising
    from the development of the machine purchased under this agreement, if, in the opinion of both the buyer and seller, there is such
    property. Should the buyer decline the option by neither purchasing another machine nor paying for the intellectual property, the
    intellectual property shall remain with the seller
	 	 
	3.3	The
    Purchase Price DO NOT include all other taxes and import duties whatsoever to the Seller of effecting Delivery of the Equipment according
    to Incoterms 2000. The Purchase Price DO NOT include any insurance to deliver the Equipment to Buyer’s site.
	 	 
	3.4	The
    Buyer shall pay the Purchase Price as per clause 2.1 at the date as shown by an appropriate invoice from the Seller. The Seller shall
    issue an invoice for the relevant percentage of the Purchase Price on or by the dates, or within three Working Days after the events.
	 	 
	3.5	Bank
    Warranty

 

A
bank warranty/guaranty equal to the amount of the payment 1 of part (B) as per clause 2.1 must be supplied to the Buyer and be granted
by a European bank of recognised reputation approved by the Buyer and is binding until successful FAT and it expires before the Equipment
is despatched to its destination. It does not create any additional costs toward the Buyer and must be paid on the first Buyer’s
call.

 

    	6

    	 

    

 

The
outstanding amount of the part B of the contract value will be paid to the Seller by the Buyer after signing the final protocol of acceptance
by both parties, latest however 120 days after receiving the equipment on site, in case, that the test of acceptance for reasons which
do not have to be represented by the Seller cannot be carried out.

 

Unless
the Buyer instructs otherwise, the Seller shall address each invoice to:

 

CQENS
Technologies Inc., 5550 Nicollet Avenue, Minneapolis, MN 55419 USA

 

	4.	Terms
    of DElivery and deadlines
	 	 
	4.1	The
    Seller shall effect Delivery of the Equipment according to Schedule1.1, the product , and carry out the Works in accordance with
    the Timetable in Schedule 4.
	 	 
	4.2	The
    Seller shall effect Delivery of the Equipment according to delivery terms Incoterm 2010; Ex-Works Bologna (Italy).
	 	 
	4.3	Unless
    agreed otherwise in writing, the Seller shall notify the Project Manager at the Buyer by facsimile or email, at least two weeks prior
    to Delivery, full details of the Equipment, including the dimensions, weight, and contents of any case to be used to deliver the
    Equipment to the Buyer.

 

	5.	insurance
	 	 
	 	The
    Buyer shall insure the Equipment at his own expense. 

 

	6.	liquidated
    damages
	 	 
	6.1	The
    parties agree that there are no liquidated damages to be compensated by the Seller to the Buyer. 

 

	 	(a)	Attached
    hereto and made a part hereof as Schedule 6.1(a), is a list of sole source suppliers of Seller for parts or materials critical to
    the Equipment, the parts or materials supplied by such sole source supplier, and the delivery dates agreed to by the Seller and the
    sole source supplier. If any sole source supplier, notifies Seller of a delay in the delivery date of such soul source part or material
    which delivery shall be outside the delivery date set forth on Schedule 6.1(a), then in such event, Seller shall immediately notify
    Buyer of such delay and an estimated time of delivery of such sole source product. Buyer shall have ten (10) days form such notice
    to agree that (i) the Delivery Date and Acceptance Date shall be extended day for day of the soul source supplier delay, If any sole
    source supplier fails to provide a delay notice, and also fails to deliver such sole source product or material, then in such event,
    Seller shall immediately notify Buyer of such sole source supplier’s failure to deliver. Buyer shall have ten (10) days form
    such notice to agree that (i) the Delivery Date and Acceptance Date shall be extended day for day of the soul source supplier delay,
    or 

 

	6.2	 If
    the Equipment is not, for any reason solely attributable to the Seller, Accepted by the “Acceptance Date” , the Seller
    shall pay, by way of liquidated damages, to the Buyer, for each full week by which the Acceptance is delayed more than 6 weeks beyond
    that date a sum per delayed week equal to 0,1 per cent (or whatever is agreed) of the part B of the Purchase Price,
    which sum the Seller acknowledges is a genuine and reasonable assessment of the damages incurred by Buyer for such delayed Acceptance
    .
	 	 
	6.3	The
    total sum payable by the Seller to the Buyer pursuant to clause 6.2 shall not exceed two per cent of the Purchase Price.
	     	 
	6.4	No
    further claims for compensation will be allowed on the basis of a delay for which the Seller is responsible
	

 

    	7

    	 

    

  

	7.	WARRANTIES
	 	 
	7.1	The Seller warrants to the Buyer that:
	 	 	 
		(a)	it
    will use and will procure that its employees, agents, sub-contractors use all reasonable skill and care in the performance of the
    Works;
	 	 	 
		(b)	the
    Equipment shall meet the Technical Specification, be of satisfactory quality and shall operate in accordance with the Performance
    Standards throughout the Warranty Period;
	 	 	 
		(c)	it
    will comply with all applicable legislation or standards, including all health and safety regulations, product safety regulations
    and noise emission regulations in the performance of the Works and the Equipment shall as at the Acceptance Date comply with the
    same; and
	 	 	 
		(d)	the
    Equipment is, and shall continue to be, until title in it transfers to the Buyer in accordance with clause 4, its absolute property
    free from any Encumbrance except the rights provided to CQENS under this Agreement.
	 	 	 
	7.2	The Warranties shall continue to apply in full notwithstanding the issue of an Acceptance Certificate by the Buyer.

 

	8.	pre-delivery
    inspection (FAT)
	 	 
	8.1	The
    Buyer shall be entitled at any time prior to Delivery to inspect the Equipment at the Seller’s premises to ensure its compliance
    with the Technical Specification schedule [***], and the Buyer and the Seller shall together conduct such preliminary checks
    of the performance of the Equipment at the Seller’s premises (not amounting to the full performance of the Acceptance Tests)
    as the Buyer shall reasonably require. Buyer’s right to or actual inspection of the Equipment or any preliminary checks will
    not act to void Seller’s Warranty.
	 	 
	8.2	Following
    completion of the inspection and the checks referred to in clause 8.1 to the Buyer’s reasonable satisfaction, once the Seller
    declare the Equipment readiness, the Buyer shall fulfil the payment 2 of part (B) as per clause 2.1 and effect the Delivery of the
    Equipment in accordance with clause 4.
	 	 
	8.3	Completion
    of the inspection and checks referred to in this clause shall not operate to limit the rights of the Buyer in relation to Acceptance
    or otherwise void or alter the Warranty.

 

    	8

    	 

    

  

	9.	installation
    and Commissioning
	 	 
	9.1	Following
    Delivery of the Equipment, the Buyer shall notify the Seller that the Equipment is ready to be Installed. The Seller shall Install
    the Equipment in accordance with the Timetable. Seller shall be liable for any and all of its, its employees, contractors, or agents’
    actions related to the installation of the Equipment.
	 	 
	9.2	When
    installing the Equipment, the Seller shall comply with and shall procure that its employees, agents and sub-contractors comply with
    all reasonable instructions issued by the Buyer to ensure that Installation and operation of the Equipment does not present any risk
    to the health and safety of individuals at the Buyer’s premises and that the Equipment complies with CE mark . Buyer’s
    instructions will not act to void the Warranty, and Seller shall remain liable for the proper installation and operation of the Equipment
    until the Equipment maintains the original status of parts and the correct handling in operations is executed according to the Seller’s
    training instructions.
	 	 
	9.3	 

 

	10.	Acceptance
    Testing
	 	 
	10.1	The
    Buyer and the Seller shall together conduct the Acceptance Tests in accordance with the Timetable to determine whether the Equipment:

 

	 	(a)	complies
    in all material respects with the Technical Specification, schedule [***]; and
	 	 	 
	 	(b)	operates
    in accordance with the Performance Standards (together the “Acceptance Criteria”).

 

	10.2	If
    during the course of the Acceptance Tests the Equipment does not comply with any of the Acceptance Criteria to the satisfaction of
    the Buyer, for reasons only attributable to the Seller, the Equipment shall fail the Acceptance Tests and the Seller shall forthwith
    and at its own expense: 

 

	 	(a)	rectify
    any defects to the Equipment; and 
	 	 	 
	 	(b)	conduct
    a repeat of the Acceptance Tests (“Repeat Tests”) and
	 	 	 
	 	(c)	.
    pay the liquidated damages, per week , if such failure continues past the 6 weeks from Acceptance Date

 

	 	 
	10.3	Subject
    to clause 10.5, the Seller shall repeat the process set out in clause 10.2 until the relevant Repeat Test demonstrates to the satisfaction
    of the Buyer that the Equipment complies with the Acceptance Criteria. If the Equipment fails the Acceptance Tests three or more
    times, Buyer may, in its sole discretion require Seller to pick up the Equipment, at Seller’s sole cost and receive a refund
    for the full Purchase Price.
	 	 
	10.4	Where
    the Acceptance Tests or Repeat Tests have been completed successfully the Equipment shall be deemed to be Accepted and the Buyer
    shall forthwith issue an Acceptance Certificate. 
	 	 
	10.5	If
    the Equipment is delayed beyond 6 weeks by the Acceptance Date for reasons only attributable to the Seller , then the Seller shall
    be liable to pay liquidated damages to the Buyer in accordance with clause 6.2.

 

    	9

    	 

    

  

	11.	DEFECTIVE EQUIPMENT
	 	 
	11.1	During the Warranty Period:
	 	 	 
		(a)	if
    the Equipment ceases to operate properly or absolutely, or if it fails to continue to comply with the Performance Standards (in each
    case a “Defect Event”) for any reason not attributable to the actions of Buyer, then the Seller shall, at the
    Buyer’s request, make available in a reasonable period of time at the Buyer’s premises trained staff to inspect and commence
    repair of the Equipment in order to remedy the Defect Event within a reasonable time of such request;
	 	 	 
		(b)	on
    request by the Buyer during Working Hours the Seller shall provide advice to the Buyer over the telephone or by way email or facsimile
    (whichever is requested by the Buyer) in relation to the maintenance or repair of the Equipment; and
	 	 	 
		(c)	the
    Seller shall retain sufficient, trained staff to fulfil its obligations in this clause. 
	 	 	 
	11.2	 	All
    services provided by the Seller pursuant to clause 11.1 shall be undertaken or provided at no cost to the Buyer, save that where
    the Seller can show that the Defect Event is attributable to the Buyer’s failure to operate or maintain the Equipment in accordance
    with the Service Manual, in case of natural wear and tear or by the use of non-specified materials or replacement materials, the
    Seller may charge for that work undertaken or those services provided in accordance with its then current price list.
	 	 	 
	11.3	 	The
    Seller undertakes that it shall at all times during the Warranty Period maintain a sufficient stock of the Spare Parts and shall
    deliver any Spare Parts reasonably required by the Buyer for the purposes of any maintenance of the Equipment by it as soon as possible
    after Buyer’s request.
	 	 	 
	11.4	 	All
    Spare Parts provided by the Seller pursuant to clause 11.3 shall be provided at no cost to the Buyer save where the Seller can show
    that the Buyer’s requirement for the Spare Parts in question is attributable to its failure to operate or maintain the Equipment
    in accordance with the Service Manual, in cases of natural wear and tear or by the use of non-specified materials or replacement
    materials, in which case the Spare Parts shall be supplied at the Seller’s then current price list.

  

	12.	training
	 	 
	12.1	The
    Seller shall, in accordance with Schedule 7, provide Buyer’s skilled employees with all necessary training in order to enable
    those employees to properly use and maintain the Equipment.
	 	 
	13.	documentation
	 	 
	13.1	The
    Seller shall on or prior to the Acceptance Date supply the Buyer with the Documentation.
	 	 
	13.2	Seller
    shall maintain an insurance policy acceptable to Buyer in its reasonable discretion for Seller’s liability for any actions
    or inactions taken on Buyer’s property or otherwise related to the installation and operation of the Equipment a. 

 

    	10

    	 

    

 

	14.	limitation
    of liability
	 	 
	14.1	Subject
    to binding statutory requirements, the Seller shall be liable for personal injury and damage to property. The Seller shall supply
    the Buyer with evidence of the extent of its liability insurance on request. Seller shall be liable for any and all damages caused
    by it, its agents, employees, or contractor, while on the property of Buyer or otherwise engaged in the installation of the Equipment
	 	 
	14.2	The
    Buyer will not be entitled to make claims other than those mentioned, except in cases of wilful intent or gross negligence on the
    part of the Seller in particular, neither party shall have any claims for indirect or consequential damages and shall not be liable
    to the other by reason of any negligence or any other tortuous action or any representation (unless fraudulent), or any implied warranty,
    condition or other term, or under the express terms of this agreement, for any loss of anticipated revenues, loss of profits, loss
    of business opportunities, indirect loss or damage, costs, expenses or other such claims for compensation whatsoever (whether caused
    by its negligence or that of its employees, agents or otherwise) which arises out of or in connection with the agreement, except
    as expressly provided in this clause.
	 	 
	14.3	Subject
    to clause 14.1 and 14.4 below, the aggregate liability of each party to the other under or in connection with the agreement shall
    not exceed the amount of the Purchase Price.
	 	 
	14.4	Nothing
    in this agreement shall operate to limit or exclude the liability of either party to the other for death or personal injury caused
    by its negligence or that of its employees, agents, or subcontractors; or for fraud (including, but not limited to, fraudulent misrepresentation),
    provided that nothing in this clause confers any right or remedy upon any party to which it would not otherwise be entitled.
	 	 
	14.5	The
    Seller will not be liable for the suitability of the premises, building or facilities for the installation and operation of the Equipment
    supplied.

 

	15.	intellectual property
	 	 
	 	If
    use of the delivered Equipment within the Warranty Period leads to the infringement of Intellectual Property rights or Copyright
    , for any reason solely attributable to the Equipment mechanism, the Seller will obtain the right of continued use for the Buyer
    or the Seller will modify the delivered Equipment to prevent continued infringement of the intellectual property right, at its discretion.
    The Seller will also indemnify the Buyer against any claims by the owners of the intellectual property rights concerned, including
    but in no way limited to, attorneys’ fees. 
	 	 
	 	The
    Buyer will indemnify the Seller against any claims related to the infringement of intellectual property rights or copyrights concerned
    the product and the methods to produce. 
	 	 
	15.1	Save
    as provided in this agreement the above undertakings will be final in the event of intellectual property right or copyright infringement.
	 	 	 
	 	They
    will apply only if
	 	 	 
	 	a.	the
    Buyer informs the Seller of the intellectual property right or copyright infringement claims within 20 working days,
	 	 	 
	 	b.	the
    Buyer provides the Seller with reasonable assistance to counter these claims and enable the Seller, where appropriate, to make the
    modifications referred to in clause 15.1 at no cost to Buyer
	 	 	 

    	11

    	 

    

 

	 	c.	the
    Seller reserves the right to take any action to counter these claims, including the right to settle out of court,
	 	 	 
	 	d.	,
    and
	 	 	 
	 	e.	the
    infringement did not occur because the Buyer altered the delivered Equipment independently or used it in violation of the agreement.
	 	 
	15.2	For
    purposes of this Agreement, “Innovations” shall mean any invention, improvement, discovery or idea, whether or not shown
    or described in writing or reduced to practice, and works of authorship, whether or not patentable or copyrightable, including “works
    for hire” as that term is defined in the United States Copyright Act (17 U.S.C. § 101), which (i) relate directly to the
    business of the Buyer, (ii) relate to the Buyer’s actual or demonstrably anticipated research and development, (iii) result
    from any work performed by the Seller’s employees agents, independent contractors, shareholders or officers pursuant to this
    Agreement, or (iv) are developed or conceived through the use of Confidential Information or equipment, supplies or facilities provided
    by Buyer.
	 	 
	 	Seller
    acknowledges that all Innovations have been created or are being created at the instance of Buyer and are “works made for hire,”
    as that term is defined in the United States Copyright Act (17 U.S.C. § 101) and otherwise by common law. If such laws are inapplicable
    or in the event that such works, or any part thereof, are determined by a governmental authority or a court of competent jurisdiction
    not to be works made for hire, then Seller hereby grants an irrevocable, exclusive, and unconditional assignment by Seller to Buyer
    of all of Seller’s right, title and interest (including, without limitation, all rights in and to the patents, copyrights,
    or comparable protections throughout the world, including the right to prepare derivative works and the right to all renewals and
    extensions).
	 	 
	 	The
    above Is valid starting from the payment remittance by the Buyer to Seller of part (H) of the Contract Price as in clause 3.1 within
    6 months from Ex-works delivery of the Equipment.

 

	16.	force majeure
	 	 
	16.1	For
    the purpose of this clause 16 the term ““Force Majeure Even”“ means, in relation to either party,
    an event or circumstance beyond the reasonable control of that party (the ““Claiming Part”“).
	 	 
	16.2	The
    Claiming Party shall not be deemed to be in breach of this agreement (the “Non-claiming Part”“) for any
    delay in performance or any non-performance of any obligations under this agreement (and the time for performance shall be extended
    accordingly) if and to the extent that the delay or non-performance is due to a Force Majeure Event, always provided that:
	 	 	 
	 	(a)	the
    Claiming Party could not have avoided the effect of the Force Majeure Event by taking precautions which, having regard to all matters
    known to it before the occurrence of the Event of Force Majeure and all relevant factors, it ought to have taken but did not take;
    and
	 	 	 
	 	(b)	the
    Claiming Party has used its best endeavours to mitigate the effect of the Force Majeure Event and continues to carry out its obligations
    under this agreement in any other way that is practicable.
	16.3	As
    a condition precedent of relief under this clause, the Claiming Party shall promptly notify the Non-claiming Party of the nature
    and extent of the circumstances giving rise to the Force Majeure Event within seven days of becoming aware of the Force Majeure Event.
	 	 

    	12

    	 

    

 

	16.4	If
    the Force Majeure Event in question prevails for a continuous period of more than six months after the date on which it began,
    the Non-claiming Party may give notice to the Claiming Party terminating this agreement. The notice to terminate must specify the
    termination date, which must be not less than 20 Working Days after the date on which the notice to terminate is given. Once
    a notice to terminate has been validly given, this agreement will terminate on the termination date set out in the notice. 

 

	17.	confidential information
	 	 	 
	17.1	For
    the purposes of this clause, “Business Information” means all business, commercial, economic, financial, operational,
    technical, administrative, marketing, planning and staff information and data relating to either party or any of its group companies
    and “Equipment Information” means all technical information and data relating to the nature or specification of
    the Equipment provided by either party to the other.
	 	 	 
	17.2	Each
    party undertakes to the other in respect of all Business Information and in respect of all Equipment Information that:
	 	 	 
	 	(a)	it
    shall not use any such Business Information or Equipment Information for any purpose other than the proper performance by it of the
    obligations to which it is subject pursuant to this agreement; and
	 	 	 
	 	(b)	it
    shall not, without the express written consent of the other, disclose any such Business Information or Equipment Information to any
    person other than to such of its directors, employees and advisers who are necessarily required in the course of their duties to
    receive and act on the same for the purpose of the proper performance by it of the obligations to which it is subject pursuant to
    this agreement.
	 	 	 
	17.3	The
    obligations of confidentiality provided for by clause 17.2 shall not apply in respect of Business Information or Equipment Information
    to the extent that such information:
	 	 	 
	 	(a)	is
    in the public domain as at the date of this agreement or comes into the public domain hereafter otherwise than by reason of the disclosure
    of such information in breach of the terms of this agreement; or
	 	 	 
	 	(b)	is
    required to be disclosed as a matter of law or by any court or governmental, administrative, or regulatory authority (including pursuant
    to the rules of any stock exchange) competent to require such disclosure.
	 	 	 
	17.4	Each
    party shall, forthwith upon receipt by it of written demand from the other, return all written Business Information and Equipment
    Information provided to it, its directors, employees and advisers and all copies of the same, and shall either return or destroy
    all notes, memoranda and other stored information (including information stored in any computer system or other device capable of
    containing information whether in readable form or otherwise) prepared by it, its directors, employees and advisers which relate
    to any Business Information or Equipment Information, whether or not any of the same are then in its possession and it will, upon
    receipt of written demand, confirm in writing that all such Business Information and Equipment Information has been returned or destroyed.
	 	 	 
	17.5	Neither
    party shall disclose the making of this agreement nor its terms without the prior written consent of the other.
	 	 
	17.6	Each
    party undertakes to the other that it shall procure that each of its employees and all those persons to whom Business Information
    or Equipment Information is disclosed pursuant to clause 17.2(b) shall observe the terms of this agreement relating to such Business
    Information and Equipment Information in all respects as if they were party to it.
	 	 
	17.7	The
    obligations and restrictions provided for by this clause shall apply without limit of time and whether or not this agreement has
    expired or been terminated.

 

    	13

    	 

    

  

	18.	governing
law AND JURISDICTION

 

The
parties hereby irrevocably and unconditionally: (1) agree that any action or Proceeding related to this Agreement shall be brought in,
and hereby submits itself and its property to the jurisdiction of, the courts of the State of minnesota located in the City of minneapolis.
the courts of the United States of America for the ____________ District of minnesota, and the appellate courts from any thereof; (2)
consent to the venue of any such action or Proceeding in any of said courts and waives any objection that it may have, now or hereafter,
that such action or Proceeding was brought in an inconvenient court and agrees not to plead or claim the same; and (3) agree that service
of process in any such action or Proceeding may be effected by mailing a copy thereof by registered or certified mail (or any substantially
similar form of mail), postage prepaid, to the party against whom the action or Proceeding is brought at its address set forth herein,
provided the same is permitted by the appropriate rules of the governing court.

 

The
interpretation and construction of this Agreement, the obligations of the Parties, and any claims or disputes relating to this Agreement,
shall be governed by, and construed in accordance with, the domestic Laws of the State of minnesota excluding the choice or conflicts
of law rules .

 

	19.	NOTICES

 

Any
notice, demand or other communication given or made under or in connection with this agreement (other than requests made pursuant to
clause 11.1) shall be in writing and shall be delivered personally or sent by fax or prepaid first-class post or overnight delivery service
(air mail or overnight delivery service if posted to or from a place outside the country of delivery):

 

	 	In
    the case of the Buyer to: CQENS Technologies Inc.
	 	Address:5550 Nicollet Avenue, Minneapolis

                                                                           MN
    55419

	 	Attention:
    W Bartkowski
	 	Email:
    wbartkowski@cqens.com
	 	 
	 	In
    the case of the Seller to: Montrade S.p.A.
	 	Address:
    Via Armando Sarti 6, 40132 
	 	Bologna,
    Italy
	 	Attention:
    Antonella Giannini
	 	Email:
    antonella@montrade.it

 

and
shall be deemed to have been duly given or made as follows:

 

	 	(a)	if
    personally delivered, upon delivery at the address of the relevant party;
	 	 	 
	 	(b)	if
    sent by first class post, two Working Days after the date of posting;

 

	 	(c)	if
    sent by air mail, five Working Days after the date of posting; 
	 	 	 
	 	(d)	if
    sent by fax, when despatched; and
	 	 	 
	 	(a)	if
    sent by overnight delivery service, three working days after date of delivery to such service;

 

provided
that, if in accordance with the above provision, any such notice, demand or other communication would otherwise be deemed to be given
or other communication would otherwise be deemed to be given or made outside Working Hours, such notice, demand, or other communication
shall be deemed to be given or made at the start of Working Hours on the next Working Day.

 

    	14

    	 

    

 

	20.	ASSIGNMENT
    AND SUB-CONTRACTING
	 	 
	20.1	Seller party may, without the prior written consent of the Buyer, assign the benefit of all or any of the Seller’s obligations under this agreement, nor any benefit arising under or out of this agreement, nor sub-contract or delegate the performance of any obligation to which it is subject pursuant to this agreement.

                                                                               

                                                                              Buyer may assign its rights and obligations under this agreement in in its sole discretion.

 

	21.	invalidity
	 	 
	21.1	If
    any provision of this agreement is or becomes (whether or not pursuant to any judgment or otherwise) invalid, illegal, or unenforceable
    in any respect under the law of any jurisdiction:
	 	 	 
	 	(a)	the
    validity, legality, and enforceability under the law of that jurisdiction of any other provision; and
	 	 	 
	 	(b)	the
    validity, legality, and enforceability under the law of any other jurisdiction of that or any other provision,

 

shall
not be affected or impaired in any way thereby.

 

	21.2	If
    any provision of this agreement shall be held to be void or declared illegal, invalid, or unenforceable for any reason whatsoever,
    such provision shall be divisible from this agreement and shall be deemed to be deleted from this agreement and the validity of the
    remaining provisions shall not be affected. In the event that any such deletion materially affects the interpretation of this agreement
    then the parties shall negotiate in good faith with a view to agreeing a substitute provision which as closely as possible reflects
    the commercial intention of the parties.

  

	22.	waiver
	 	 
	22.1	A
    waiver of any term, provision, or condition of, or consent granted under, this agreement shall be effective only if given in writing
    and signed by the waiving or consenting party and then only in the instance and for the purpose for which it is given.
	 	 
	22.2	No
    failure or delay on the part of any party in exercising any right, power or privilege under this agreement shall operate as a waiver
    of such right, power or privilege, nor shall any single or partial exercise of any right, power or privilege preclude any other or
    further exercise of such (or any other) right, power, or privilege.
	 	 
	22.3	The
    rights and remedies set out in this agreement are cumulative with, and not exclusive of, any rights or remedies to which either party
    may be entitled by law. The termination of this agreement for any reason whatsoever shall not affect or prejudice each party’s
    rights or remedies that may have accumulated as of the date of such termination.

  

	23.	NO
    PARTNERSHIP
	 	 
	 	Nothing
    in this agreement and no action taken by the parties pursuant to this agreement shall constitute, or be deemed to constitute, between
    the parties a partnership, association, joint venture, or other co-operative entity.

 

	24.	ENTIRE
    AGREEMENT
	 	 
	 	Save
    for fraud or fraudulent concealment by either party, this agreement embodies the entire agreement of the parties, and the parties
    agree that any standard terms and conditions of business of either of them shall not apply to the sale and purchase to which this
    agreement relates. This agreement shall not be modified, amended, or varied except in writing, signed by duly authorised representatives
    of the parties.

 

    	15

    	 

    

 

	Signed
    for and on behalf of	 	Signed
    for and on behalf of  
	 	 	 
	SELLER
    	 	BUYER

    

	 	 	 
	/s/
    Antonella Giannini	 	/s/
    Alexander Chong
	(Signature)	 	(Signature)
	Antonella
    Giannini

    
	 	Alexander
    Chong
	 	 	 
	/s/
    Alberto Monzoni	 	/s/
    Ged Shudall
	 (Signature)	 	(Signature)
	Alberto
    Monzoni	 	Ged
    Shudall
	 	 	 
	July
    4, 2022	 	Bologna,
    Italy / July 4, 2022
	Place/date	 	Place/date

 

    	16

    	 

    

 

Schedule
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Schedule
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Schedule
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Schedule
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