Document:

lmi10k031509ex6.htm

    Exhibit 10.6

    FIFTH
AMENDMENT TO LEASE

     

    This
Fifth Amendment to Lease (“Fifth Amendment”) dated for reference purposes only
September 15, 2008 is made at San Diego, California, between H. G. FENTON
PROPERTY COMPANY, a California corporation [formerly known as H.G. FENTON
COMPANY, a California corporation] (“Landlord”), and D3 TECHNOLOGIES, INC., a
California corporation (“Tenant”) with reference to the following facts and
circumstances:

     

    RECITALS:

     

    A.           Tenant
and Landlord entered into that certain Lease dated March 24, 1997, which was
subsequently amended by that certain First Amendment dated April 17, 2000, that
certain Second Amendment dated October 16, 2000, that certain Third Amendment
dated January 15, 2003, and that certain Fourth Amendment dated February 6,
2006, (hereinafter referred to as the “Lease”). Initially capitalized terms not
otherwise defined in this Fifth Amendment shall have the same meanings as in the
Lease.

     

    B.           Tenant
is currently in occupancy of the area known as 4838 Ronson Court, Suites A - L,
San Diego, California 92111, for a total of 16,359 rentable square feet (the
“Existing Premises”).

     

    C.           The
parties wish to (i) provide for an increase in the area of the Existing
Premises, by adding thereto the area known as 4848 Ronson Court, Suite K, San
Diego, California 92111, consisting of approximately 1,407 rsf (the “Expansion
Premises”) as depicted on the attached Exhibit A [the entire area of Premises
occupied by Tenant shall now contain 17,776 rsf] and (ii) specify the amount of
monthly Base Rent to be paid by Tenant for the Existing & Expansion
Premises. The parties also wish to make certain other modifications to the
Lease.

     

    D.           The
Lease for the Existing Premises is scheduled to expire on March 31,
2009.

     

    E.           The
Lease for the Expansion Premises shall be for a period of forty-one (41) full
calendar months, and shall expire on March 31, 2012 (the “Expansion Premises
Expiration Date”).

     

    NOW,
THEREFORE, the parties agree that the Lease shall be amended as set forth
herein.

     

    1.           COMMENCEMENT DATE OF
EXPANSION PREMISES. The Commencement Date for the Expansion Premises
shall be November 1, 2008 (the “Expansion Premises Commencement Date”) upon
which Landlord delivers the Expansion Premises in accordance with the applicable
provisions of the Lease. Accordingly, the term “Delivery of the Premises” as
used herein shall refer to the Premises known as 4848 Ronson Court, Suite K, San
Diego, California 92111. The estimated date for Delivery of the Expansion
Premises shall be October 1, 2008.

     

    2.           EARLY POSSESSION OF
EXPANSION PREMISES. Landlord acknowledges that Tenant may occupy the
Expansion Premises prior to the Expansion Premises Commencement Date, to begin
the Premises Refurbishment Work described in Section 5 below, and that such
occupancy (“Early Possession”) shall be subject to all provisions of the Lease.
Tenant shall not be required to pay monthly Base Rent for the Expansion Premises
during the Early Possession period however Early Possession will be subject to
the following:

     

    
      	
               
      

            	
              a)

            	
              Tenant’s
      full execution and delivery of this Fifth
  Amendment;

            

    

    
      	
               
      

            	
              b)

            	
              Landlord’s
      receipt of additional Security Deposit as detailed in Section 8 below;
      and

            

    

    
      	
               
      

            	
              c)

            	
              Landlord’s
      receipt of Tenant’s updated certificate of insurance for the Expansion
      Premises evidencing coverage for all insurance required in accordance with
      Section 11 of the Lease.

            

    

     

    3.           EXPANSION PREMISES
TERM. Landlord leases to Tenant and Tenant hires from Landlord for a term
beginning on the Expansion Premises Commencement Date and ending on the
Expansion Premises Expiration Date the Expansion Premises on all of the terms
and conditions of the Lease; provided, however, that monthly Base Rent for the
entire Premises shall be as set forth in Section 3 below.

     

    The
following table confirms the areas of the Premises:

    
      
            

          	
                  Area
      of Premises

                	
                  RSF

                
	
                  Existing
      Premises (4838 Ronson Court, Suites A - L)

                	
                  16,359

                
	
                  Expansion
      Premises (4848 Ronson Court, Suite K)

                	
                  1,407

                
	
                  Total
      Rentable Square Feet

                	
                  17,776

                

        

      

    

     

    4.           MONTHLY BASE
RENT.  The following table sets forth the revised schedule of
the monthly Base Rent (net of utilities and Operating Expenses) payable for both
the Existing Premises and the Expansion Premises:

    

    
      
        
          
            
              	
                      Month
      of Term

                    	
                      No.
      of

                      Months

                      Payable

                    	
                      Expansion

                      Premises

                      Base
      Rent

                    	
                      Existing

                      Premises

                      Base
      Rent

                    	
                      Total

                      Monthly

                      Base
      Rent

                    
	
                      November
      1, 2008 – March 31, 2009

                    	
                      5

                    	
                      $1,660.26

                    	
                      $18,574.32

                    	
                      $20,234.58

                    
	
                      April
      1, 2009 – March 31, 2010

                    	
                      12

                    	
                      $1,660.26

                    	 
      	
                      $1,660.26

                    
	
                      April
      1, 2010 – March 31, 2011

                    	
                      12

                    	
                      $1,726.67

                    	 
      	
                      $1,726.67

                    
	
                      April
      1, 2011 – March 31, 2012

                    	
                      12

                    	
                      $1,795.74

                    	 
      	
                      $1,795.74

                    

            

          

        

      

    

     

    5.           CONDITION OF THE
PREMISES. Both the Existing Premises and the Expansion Premises have been
previously improved in accordance with the applicable provisions of Section 3.3
and Exhibit B of the Lease. Tenant accepts the entire Premises in its current
“as is” condition, and acknowledges that Landlord shall not be required to make
any additional improvements in or to the Premises. Notwithstanding the
foregoing, after the Expansion Premises Commencement Date, and subject to the
provisions of this Section, Landlord shall make available to Tenant a credit up
to a maximum amount of twenty thousand and 00/100 dollars ($20,000.00) [the
Premises Refurbishment Credit”] which may be used by Tenant to refurbish or
recondition existing improvements within the Premises [the “Premises
Refurbishment Work”]. Any Premises Refurbishment Work shall be made in
accordance with the applicable provisions of Section 8.6 of the Lease
(Alterations and Additions). Upon completion of the Premises Refurbishment Work,
Tenant shall submit to Landlord bona fide invoices evidencing the payment by
Tenant for the Premises Refurbishment Work (material, labor, etc.). Within
thirty (30) days after receipt of such invoices and any necessary waivers,
releases or other documentation required by Landlord, Landlord shall reimburse
Tenant, up to the maximum of the Premises Refurbishment Credit, for such cost
and expenses incurred by Tenant.  All Premises Refurbishment Work
shall be performed by Tenant in a workmanlike manner.  Tenant shall
obtain any and all necessary permits (if any) required for the Premises
Refurbishment Work.  All Premises Refurbishment Work, including
reimbursement of the Premises Refurbishment Credit shall be completed prior to
December 31, 2008.

     

    6.           OTHER AREA DEPENDANT
TERMS. On the Expansion Premises Commencement Date, pursuant to Section
1.12 of the Lease, Tenant’s Share of Excess Operating Expenses shall be 35.99%
for Real Property Taxes and Other Operating Expenses.

     

    7.           PARKING. As a result
of the addition of the Expansion Premises, on the Expansion Premises
Commencement Date, Tenant's parking spaces shall be increased to a total of
fifty-three (53) parking spaces. All parking shall be on a non-reserved
basis.

     

    8.           SECURITY DEPOSIT. As
a result of the addition of the Expansion Premises, upon Tenant’s execution of
this Fifth Amendment, Tenant shall deliver to Landlord the additional amount of
$1,660.26 as an increase in the Security Deposit to be held by Landlord in
accordance with the provisions of Section 6 of the Lease. The total Security
Deposit to be held by Landlord shall be $9,654.21.

     

    9.           ADDITION OF
GUARANTOR. The parties acknowledge that LMI AEROSPACE, INC., a Missouri
corporation shall be added as Guarantor in accordance with the terms and
conditions of the Guaranty Agreement attached as Exhibit B to this Fifth
Amendment.

     

    EXCEPT AS
SPECIFICALLY AMENDED HEREIN, all other terms and conditions of the Lease shall
remain in full force and effect between the parties hereto.

    

    
      	
              Landlord:

            	 
      
	 
      	 
      
	
              Date:

            	
              9/24/08

            	 
      	
              H.G.
      FENTON PROPERTY COMPANY, a California corporation

            
	 
      	 
      
	 
      	
              By:           H.G.
      FENTON COMPANY

            
	 
      	
              Authorized
  Agent

            
	 
      	 
      
	 
      	
              By:

            	
              /s/
      Kevin D. Hill

            
	 
      	 
      	
              Kevin
      D. Hill, Vice President, Leasing

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              By:

            	
              /s/
      Michael Neal

            
	 
      	 
      	
              Michael
      P. Neal, President/CEO

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	
              Tenant:

            	 
      	 
      
	 
      	 
      	 
      
	
              Date:

            	
              22
      Sep 08

            	 
      	
              D3
      TECHNOLOGIES, INC., a California corporation

            
	 
      	 
      
	 
      	 
      
	 
      	
              By:

            	
              /s/
      Edward Knowles

            
	 
      	 
      	
              Edward
      Knowles, CFO

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              By:

            	
              /s/
      Ryan Bogan

            
	 
      	 
      	
              Ryan
      Bogan

            
	 
      	 
      
	 
      	
              [TWO
      (2) AUTHORIZED SIGNATURES REQUIRED]

            

    

     

    

      
        
           

        

        
           

          
            

          

        

        
           

        

      

    
      EXHIBIT
B

       

      GUARANTY
AGREEMENT

       

      FOR VALUE
RECEIVED, and in consideration for H. G. FENTON PROPERTY COMPANY, a California
corporation (“Landlord”), entering into that
certain STANDARD INDUSTRIAL LEASE dated September 15, 2008 (“Lease”) between Landlord and
D3 TECHNOLOGIES, INC., a California corporation (“Tenant”), relating to the
leased premises as more particularly described in the Lease (“Premises”), the undersigned
LMI AEROSPACE, INC., a Missouri corporation (“Guarantor”) hereby guarantees
to Landlord (i) the prompt payment in accordance with its terms of all rent due
to Landlord under the Lease, and (ii) strict compliance by Tenant with the
terms, covenants and conditions of the Lease. If more than one person or entity
guaranties the obligations of Tenant under the Lease (whether by signing this
Guaranty or otherwise), the liability of each guarantor (including Guarantor)
shall be joint and several with that of each and every other person or persons
guarantying the obligations of Tenant under the Lease.

       

      Guarantor
hereby waives the benefits and protection of the provisions of California CIVIL
CODE §2819, and Guarantor hereby grants to Landlord full power and authority to:
(i) change, alter, cancel, renew or extend the time for payment of rent due
under the Lease or performance by Tenant of any other terms or conditions of the
Lease as Landlord and Tenant may expressly or impliedly agree upon; or (ii)
change, modify, extend or otherwise amend the Lease, including increasing the
rental payable thereunder by Tenant; or (iii) otherwise deal with Tenant as
Landlord may elect, without in any way diminishing, releasing or discharging the
liability hereunder of Guarantor. Such liability shall be continuing and shall
only be terminated by full compliance by Tenant with all the terms of the
Lease.

       

      Notice of
acceptance of this Guaranty as well as all demands, presentations, notices of
protest and notices of every kind or nature, including those of any action or
non-action on the part of Tenant, Landlord or other party, are hereby fully
waived by Guarantor. Upon any default of Tenant under the Lease, Landlord may,
at its option, proceed directly and at once, without notice of such default,
against Guarantor to collect and recover the full amount of the liability
hereunder or any portion thereof without proceeding against Tenant or any other
party or foreclosing upon, selling, or otherwise disposing of or collecting or
applying any property, real or personal, Landlord may then have as security for
the performance by Tenant under the Lease. Guarantor hereby waives the right to
require Landlord to proceed against Tenant or to pursue any other remedy
Landlord may have, waive the right to plead or assert any election of remedies
Landlord may have, waives the pleading of any statute of limitations as a
defense to the obligation hereunder, and waives any other defense arising by
reason of any disability or other defenses of Tenant or by reason of the
cessation from any cause whatsoever of the liability of Tenant.

       

      If legal
action is commenced by Landlord to enforce this Guaranty or any term or
condition hereof, Guarantor agrees to pay to Landlord costs of collection and,
as part of the costs incurred therein, such additional sums as the Court may
adjudge reasonable as attorneys’ fees in said suit. No indulgence, forbearance
or extensions of time of payment or performance permitted or granted to Tenant
by Landlord shall in any way release Guarantor from liability or diminish
Guarantor’s obligations hereunder.

       

      In
addition to all liens upon, and rights of set-off against the moneys, securities
or other property of Guarantor given to Landlord by law, Landlord shall have a
lien upon and a right of set-off against all moneys, securities and other
property of Guarantor now or hereafter in the possession of Landlord, whether
held in a general or special account, or for safekeeping or otherwise; and every
such lien and right of set-off may be exercised without demand upon or notice to
Guarantor. No lien or right of set-off shall be deemed to have been waived by
any act or conduct on the part of Landlord, or by any neglect to exercise such
right of set-off or to enforce such lien, or by any delay in so doing; and every
right of set-off and lien shall continue in full force and effect until such
right of set-off or lien is specifically waived or released by an instrument in
writing signed by Landlord.

       

      Any
indebtedness of Tenant now or hereafter held by Guarantor is hereby subordinated
to any indebtedness of Tenant to Landlord, and such indebtedness of Tenant to
Guarantor if Tenant so requests shall be collected, enforced and received by
Guarantor as trustee for Tenant and held as security for performance of the
obligation of Tenant to Landlord, but without reducing or affecting in any
manner the liability of Guarantor under the other provisions of this
Guaranty.

       

      Landlord
may without notice assign this Guaranty in whole or in part. No assignment of
the Lease shall diminish, release, discharge or otherwise modify Guarantor’s
liability under this Guaranty. Guarantor hereby waives any right it might
otherwise have to require Landlord to apply any security deposit or other
security that it may hold under the Lease to any default. So long as Landlord’s
interest in the Lease is subject to a mortgage or deed of trust, no acquisition
by Guarantor of Landlord’s interest under the Lease shall affect Guarantor’s
obligations under this Guaranty, which shall remain in effect for the benefit of
Landlord’s lender.

       

      

      
        
          	
                  Date:  09/23/08

                	
                  /s/
      Ryan P. Bogan

                
	 
      	
                  LMI
      AEROSPACE, INC., a Missouri corporation

                
	 
      	
                  GUARANTOR

                

        

      

       

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

    FOURTH
AMENDMENT TO LEASE

     

     

    This
Fourth Amendment to Lease (“Fourth Amendment”) dated for reference purposes only
February 6, 2006 is made at San Diego, California, between H.G. FENTON COMPANY,
a California corporation (“Landlord”) and D3 TECHNOLOGIES, INC., a California
corporation (“Tenant”) with reference to the following facts and
circumstances.

     

    RECITALS:

     

    A.           Tenant
and Landlord entered into that certain Lease dated March 24, 1997, which was
subsequently amended by that certain First Amendment dated April 17 2000, that
certain Second Amendment dated October 16, 2000 and that certain Third Amendment
dated January 15, 2003 (hereinafter referred to as the
“Lease”).  Initially capitalized terms not otherwise defined in this
Fourth Amendment shall have the same meanings as in the Lease.

     

    B.           Tenant
is in occupancy of the area known as 4838 Ronson Court, Suite A, San Diego,
California 92111, for a total of 12,537 rentable square feet (the “Existing
Premises”).

     

    C.           The
parties wish to (i) provide for an increase in the area of the Existing
Premises, by adding thereto the area known as 4838 Ronson Court, Suite L, San
Diego, California 92111, consisting of approximately 3,822 rsf (“Expansion
Premises”) as depicted on the attached Exhibit A [the entire area of Premises
occupied by Tenant shall now contain 16,359 rsf]; (ii) specify the amount of
monthly Base Rent to be paid by Tenant for the Existing & Expansion Premises
and; (iii) extend the Term by an additional thirty-six (36) months (the
“Extended Term’).  The parties also wish to make certain other
modifications to the Lease.

     

    D.           The
Lease for the Existing Premises is scheduled to expire on March 31, 2006 (as
extended by the parties). Tenant wishes to extend the Term of the Lease for an
additional period of thirty-six (36) full calendar months, to now expire on
March 31, 2009 (the “Extended Term”).

     

    E.           The Lease for the
Expansion Premises shall commence as set forth below and shall also expire on
March 31, 2009.  

     

    NOW
THEREFORE, the parties agree that the Lease shall be amended as set forth
herein.

     

    1.           COMMENCEMENT DATE OF
EXPANSION PREMISES.  The Commencement Date for the Expansion
Premises shall be the date upon which Landlord delivers the Expansion Premises
in accordance with the applicable provisions of the Lease and the attached
Exhibit B.  Accordingly, the term “Delivery of the Premises” as used
herein shall refer to the Premises known as 4838 Ronson Court, Suite L, San
Diego, California  92111.  The estimated date for Delivery
of the Expansion Premises shall be on or about April 1, 2006 (the “Expansion
Premises Commencement Date”).

     

    2.           EXPANSION
PREMISES.  Landlord leases to Tenant and Tenant hires from
Landlord for a term beginning on the Expansion Premises Commencement Date and
ending on March 31, 2009, the Expansion Premises on all of the terms and
conditions of the Lease; provided, however, that monthly Base Rent for the
entire Premises shall be as set forth in Paragraph 3 below.

    

        The following
table confirms the areas of the Premises:

    

    
      
        
          	
                  Area
      of Premises

                	
                  RSF

                
	
                  Existing
      Premises (4838 Ronson Court, Suite A)

                	
                  12,537

                
	
                  Expansion
      Premises (4848 Ronson Court, Suite L)

                	
                  3,822

                
	
                  Total
      Rentable Square Feet

                	
                  16,359

                

        

      

    

     

    3.           MONTHLY BASE
RENT.  The following table sets forth the revised schedule of
the monthly Base Rent payable for both the Existing Premises and the Expansion
Premises:

    

    
      
        
          
            
              	
                      Month
      of Term

                    	
                      No.
      of

                      Months

                      Payable

                    	
                      Expansion

                      Premises

                      Base
      Rent

                    	
                      Existing

                      Premises

                      Base
      Rent

                    	
                      Total

                      Monthly

                      Base
      Rent

                    
	
                      April
      1, 2006 – March 31, 2007

                    	
                      12

                    	
                      $4,395.30

                    	
                      $12,777.71

                    	
                      $17,173.01

                    
	
                      April
      1, 2007 – March 31, 2008

                    	
                      12

                    	
                      $4,571.11

                    	
                      $13,288.82

                    	
                      $17,859.93

                    
	
                      April
      1, 2009 – March 31, 2009

                    	
                      12

                    	
                      $4,753.95

                    	
                      $13,820.37

                    	
                      $18,574.32

                    

            

          

        

      

    

     

    4.           IMPROVEMENTS TO THE EXISTING
AND EXPANSION PREMISES.  The Premises have been previously
improved in accordance with the applicable provisions of Section 3.3 and Exhibit
B of the Lease.  Tenant accepts the Premises in its “as is” condition,
and acknowledges that Landlord shall not be required to make any additional
improvements. Notwithstanding the foregoing, Tenant has requested that
Landlord’s contractor, Design Build Tenant Improvements (“Contractor”), install
certain improvements within the Premises (“Additional Improvements”) at
Landlord’s sole cost and expense as set forth in Exhibit B attached to this
Fourth Amendment.  (All improvements shall be performed using
Landlord’s Building standard materials, colors and finishes.  Tenant
shall be responsible for moving of all trade fixtures, furniture and
equipment.)

     

    5.           OTHER AREA DEPENDANT
TERMS.  On the Expansion Premises Commencement Date, the
Expense Stop in Section 1.14 of the Lease shall be changed to Base Year 2006 for
the Extended Term, for purposes of calculating Excess Operating
Expenses.  Pursuant to Section 1.12 of the Lease, Tenant’s Share of
Excess Operating Expenses shall be 33.13% for Real Property Taxes and Other
Operating Expenses.

     

    6.           PARKING.  As
a result of the addition of the Expansion Premises, on the Expansion Premises
Commencement Date, Tenant’s parking spaces shall be increased to a total of
forty-nine (49) parking spaces.  All parking shall be on a
non-reserved basis.

     

    7.           SECURITY
DEPOSIT.  As a result of the addi6ton of the Expansion
Premises, upon Tenant’s execution of this Fourth Amendment, Tenant shall deliver
to Landlord the additional amount of $4,753.95 as an increase in the Security
Deposit to be held by Landlord in accordance with the provisions of Section 6 of
the Lease. The total Security Deposit to be held by Landlord shall be
$7,993.95.

     

    8.           CONDITIONS
PRECEDENT.  The effectiveness of this Fourth Amendment and all
rights to Tenant under this Agreement, are contingent upon Landlord executing a
Lease with THE SOCIETY FOR COMPUTER SIMULATION, a California corporation for the
property located at 4848 Ronson Court, Suite B, San Diego, California
92111.

     

    EXCEPT AS SPECIFICALLY AMENDED HEREIN, all other terms and
conditions of the Lease shall remain in full force and effect between the
parties hereto.

     

    
      	
              Landlord:

            	 
      
	 
      	 
      
	
              Date:

            	
              2/22/06

            	 
      	
              H.G.
      FENTON COMPANY, a California corporation

            
	 
      	 
      
	 
      	 
      
	 
      	
              By:

            	
              /s/
      Kevin D. Hill

            
	 
      	 
      	
              Kevin
      D. Hill, Vice President, Leasing

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              By:

            	
              /s/
      Michael Neal

            
	 
      	 
      	
              Michael
      P. Neal, President/CEO

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	
              Tenant:

            	 
      	 
      
	 
      	 
      	 
      
	
              Date:

            	
              2/17/06

            	 
      	
              D3
      TECHNOLOGIES, INC., a California corporation

            
	 
      	 
      
	 
      	 
      
	 
      	
              By:

            	
              /s/
      Edward Knowles

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              By:

            	
              /s/
      Ryan Bogan

            
	 
      	 
      	 
      
	 
      	 
      
	 
      	
              [TWO
      (2) AUTHORIZED SIGNATURES REQUIRED]

            

    

     

    
 

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    THIRD
AMENDMENT TO LEASE

    

    This
Third Amendment to Lease (“Third Amendment”) dated for reference purposes only
January 15, 2003 is made at San Diego, California, between H.G. FENTON COMPANY,
a California corporation, formerly known as WESTERN SALT COMPANY, (“Landlord”),
and D3 Technologies, Inc., a California corporation (“Tenant”) with reference to
the following facts and circumstances.

    

    RECITALS:

    

    A.           Landlord
and Tenant entered into that certain Lease dated March 24, 1997, which was
subsequently amended by that certain First Amendment to Lease dated April 17,
2000, and that certain Second Amendment to Lease dated October 16, 2000
(collectively, the “Lease”) wherein Landlord leased to Tenant, and Tenant leased
from Landlord, approximately 12,537 rentable square feet of space located in
Landlord’s Building addressed at 4838 Ronson Court, Suite A, as more
particularly described on Exhibit A attached to the Lease
(“Premises”).  Initially capitalized terms not otherwise defined in
this Third Amendment shall have the same meanings as in the Lease.

    

    B.           This
Lease expires on March 31, 2003.

    

    C.           The
parties wish to (i) extend the Term of the Lease for the Premises: (ii) specify
the amount of monthly Base Rent to be paid by Tenant for the
Premises.  The parties also wish to make certain other modifications
to the Lease.

    

    NOW, THEREFORE, the parties agree that
the Lease shall be amended as set forth herein.

    

    1.           EFFECTIVE
DATE.  The effective date shall be April 1, 2003 (the
“Effective Date”).

    

    2.           EXTENSION OF
TERM.  The Term of the Lease shall be extended twenty four (24)
full calendar months to now expire on March 31, 2005 (the “Extended
Term”).

    

    3.           MONTHLY BASE
RATE.  The following table sets forth the revised schedule of
the monthly Base Rent payable for the Premises during the remaining
Term:

    

    
      
        
          	
                  Month
      of Term

                	
                  No.
      of

                  Months

                	
                  Total
      Monthly Base

                  Rent

                
	
                  April
      1, 2003 – March 31, 2004

                	
                  12
      months

                	
                  $11,659.41

                
	
                  April
      1, 2004 – March 31, 2005

                	
                  12
      months

                	
                  $11,910.15

                
	
                  April
      1, 2005 – March 31, 2006 (Pursuant to Option to Extend)

                	
                  12
      months

                	
                  $12,286.26

                

        

      

    

    

    4.           OPTION TO
EXTEND.  At the expiration of the Extension of Term, Tenant
shall have the right to extend the Term for one (1) additional period of one (1)
year with Sixty (60) days advanced written notice to Landlord.  The
total monthly base rent for this Option to Extend will be
$12,286.25.

     

    5.           OPERATING
EXPENSES.  Operating Expenses shall continue to be treated as
set forth in Section 26 of the Lease.

    

    6.           CONDITION OF THE
PREMISES.  Tenant accepts the Premises in its current “as is”
condition.  Landlord shall not be required to make any additional
improvements or modifications in or to the Premises, except as set forth
below.

    

    (a)           The
completion of the Additional Improvements by Landlord shall be deemed Landlord’s
Work for all purposes of the Lease.

    

    (b)           Landlord
shall complete Additional Improvements, within thirty (30) days after Lease
Commencement Date.  (All improvements shall be performed using
Landlord’s Building standard materials, colors and finishes; Tenant shall be
responsible for moving of all trade fixtures, furniture and
equipment):

    

    7.           ADDITIONAL IMPROVEMENTS TO
BE COMPLETED BY LANDLORD.

    

    
      	
               
      

            	
              (a)

            	
              New
      carpet installed in the areas marked by an X and shaded areas per the
      attached Exhibit B.

            

    

     

    [SIGNATURE
BLOCK ON FOLLOWING PAGE]

    8.           SECURITY
DEPOSIT.  There shall be no increase in the amount of Tenant’s
Security Deposit.

    

    9.           NO OTHER
CHANGES.  Except as specifically amended herein, all other
terms and conditions of the Lease shall remain in full force and effect between
the parties hereto.

    

    
      	
              Landlord:

            	 
      
	 
      	 
      
	
              Date:

            	
              2/5/03

            	 
      	
              H.G.
      FENTON PROPERTY COMPANY, a California corporation

            
	 
      	 
      
	 
      	 
      
	 
      	
              By:

            	
              /s/
      Kevin D. Hill

            
	 
      	 
      	
              Kevin
      D. Hill, Leasing Director

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              By:

            	
              /s/
      Michael Neal

            
	 
      	 
      	
              Michael
      P. Neal, President/COO

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	
              Tenant:

            	 
      	 
      
	 
      	 
      	 
      
	
              Date:

            	
              1/31/03

            	 
      	
              D3
      TECHNOLOGIES, INC., a California corporation

            
	 
      	 
      
	 
      	 
      
	 
      	
              By:

            	
              /s/
      John J. Bogan

            
	 
      	 
      	
              John
      J. Bogan, President, CEO

            
	 
      	 
      	 
      
	 
      	
              By:

            	
              /s/
      Edward Knowles

            
	 
      	 
      	
              Edward
      Knowles, CFO

            
	 
      	 
      
	
            

    

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

    SECOND
AMENDMENT TO LEASE

    

    This
Second Amendment to Lease (“Second Amendment”) dated for reference purposes only
October 16, 2000 is made at San Diego, California, between H.G. FENTON COMPANY,
a California corporation, formerly known as WESTERN SALT COMPANY, (“Landlord”),
and D3 Technologies, Inc., a California corporation (“Tenant”) with reference to
the following facts and circumstances.

    

    RECITALS:

    

    A.           Landlord
and Tenant entered into that certain Lease dated March 24, 1997, which was
subsequently amended by that certain First Amendment to Lease dated April 17,
2000 (collectively, the “Lease”) wherein Landlord leased to Tenant, and Tenant
leased from Landlord, approximately 12,537 rentable square feet of space located
in Landlord’s Building addressed at 4838 Ronson Court, Suite A, and
approximately 4,293 rentable square feet of space located in Landlord’s Building
addressed 4858 Ronson Court, Suite D, for a total of approximately 16,830
rentable square feet of space, as more particularly described on Exhibit A
attached to the Lease (“Premises”).  Initially capitalized terms not
otherwise defined in this Second Amendment shall have the same meanings as in
the Lease.

    

    B.           In
accordance with the provisions of Section 9 contained within the First
Amendment, Tenant has exercised the Early Termination Option with regard to that
portion of the Premises identified as 4858 Ronson Court, Suite D, thereby
reducing the area of Premises by 4,293 rentable square feet.

    

    C.           The
parties wish to (i) restate the rentable square footage of the Premises as
approximately 12,537; and (ii) specify the new amount of monthly Base Rent to be
paid by Tenant for the reduced area of Premises.

    

    D.           The
Lease expires on March 31, 2002.

    

    NOW, THEREFORE, the parties agree that
the Lease shall be amended as set forth herein.

    

    1.           EFFECTIVE
DATE.  The effective date shall be December 1, 2000 (the
“Effective Date”).

    

    2.           MONTHLY BASE
RATE.  The following table sets forth the revised schedule of
the monthly Base Rent payable for the Premises during the remaining
Term:

    

    
      
        
          	
                  Month
      of Term

                	
                  No.
      of

                  Months

                	
                  Total
      Monthly Base

                  Rent

                
	
                  December
      1, 2000 – March 31, 2001

                	
                  4
      months

                	
                  $10,620.51

                
	
                  April
      1, 2001 – March 31, 2002

                	
                  12
      months

                	
                  $10,992.22

                
	
                  April
      1, 2002 – March 31, 2003 (Pursuant to Option to Extend)

                	
                  12
      months

                	
                  $11,486.87

                

        

      

    

     

    3.           OPERATING
EXPENSES.  Operating Expenses shall continue to be treated as
set forth in Section 26 of the Lease.

     

    4.           CONDITION OF THE
PREMISES.  Tenant accepts the Premises in its current “as is”
condition.  Landlord shall not be required to make any additional
improvements or modifications in or to the Premises.

    

    5.           SECURITY
DEPOSIT.  There shall be no change in the amount of Tenant’s
Security Deposit.

    

    6.           NO OTHER
CHANGES.  Except as specifically amended herein, all other
terms and conditions of the Lease shall remain in full force and effect between
the parties hereto.

     

    [SIGNATURE
BLOCK ON FOLLOWING PAGE]

    
      	
              Landlord:

            	 
      
	 
      	 
      
	
              Date:

            	
              10/24/00

            	 
      	
              H.G.
      FENTON PROPERTY COMPANY, a California corporation

            
	 
      	 
      
	 
      	 
      
	 
      	
              By:

            	
              /s/
      Kevin D. Hill

            
	 
      	 
      	
              Kevin
      D. Hill, Leasing Manager

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              By:

            	
              /s/
      Michael Neal

            
	 
      	 
      	
              Michael
      P. Neal, President

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	
              Tenant:

            	 
      	 
      
	 
      	 
      	 
      
	
              Date:

            	
              10/19/00

            	 
      	
              D3
      TECHNOLOGIES, INC., a California corporation

            
	 
      	 
      
	 
      	 
      
	 
      	
              By:

            	
              /s/
      William A. Huston

            
	 
      	 
      	
              William
      A. Huston, President

            
	 
      	 
      	 
      
	 
      	
              By:

            	
              /s/
      Edward Knowles

            
	 
      	 
      	
              Edward
      Knowles, CFO

            
	 
      	 
      
	
            

    

    

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    

    FIRST
AMENDMENT TO LEASE

    

    This
First Amendment to Lease (“First Amendment”) dated for reference purposes only
April 17, 2000 is made at San Diego, California, between WESTERN SALT COMPANY, a
California corporation, (“Landlord”), and D3 Technologies, Inc., a California
corporation (“Tenant”) with reference to the following facts and
circumstances.

    

    RECITALS:

    

    A.           Landlord
and Tenant entered into that certain Lease dated March 24, 1997 (the “Lease”)
wherein Landlord leased to Tenant, and Tenant leased from Landlord,
approximately 16,480 rentable square feet of space located in Landlord’s
Building addressed at 4838 Ronson Court, Suite A, and 4858 Ronson Court, Suite
D, as more particularly described on Exhibit A attached to the Lease
(“Premises”).  Initially capitalized terms not otherwise defined in
this First Amendment shall have the same meanings as in the Lease.

    

    B.           The
Lease expires on March 31, 2000.

    

    C.           The
parties wish to (i) extend the Term of the Lease for the Premises; (ii) specify
the amount of monthly Base Rent to be paid by tenant for the Premises, (iii)
restate the rentable square footage of the Premises as approximately
16,830.  The parties also wish to make certain other modifications to
the Lease.

    

    NOW, THEREFORE, the parties agree that
the Lease shall be amended as set forth herein.

    

    1.           EFFECTIVE
DATE.  The effective date shall be April 1, 2000 (the
“Effective Date”).

    

    2.           EXTENSION OF
TERM.  The Term of the Lease shall be extended twenty four (24)
full calendar months to now expire on March 31, 2002 (the “Extended
Term”).

    

    3.           MONTHLY BASE
RATE.  The following table sets forth the revised schedule of
the monthly Base Rent payable for the Premises during the Extended
Term:

    

    
      
        
          	
                  Month
      of Term

                	
                  Total
      Monthly Base

                  Rent

                
	
                  April
      1, 2000 – March 31, 2001

                	
                  $14,257.25

                
	
                  April
      1, 2001 – March 31, 2002

                	
                  $14,756.25

                
	
                  April
      1, 2002 – March 31, 2003 (Option to Extend)

                	
                  $15,420.28

                

        

      

    

     

    4.           OPTION TO
EXTEND.  At the expiration of the Extension of Term, Tenant
shall have the right to extend the Term for one (1) additional period of one (1)
year in accordance with the Basic Lease Provisions.  The total monthly
base rent for this Option to Extend will be $15,420.28.

    

    5.           OPERATING
EXPENSES.  Operating Expenses shall continue to be treated as
set forth in Section 26.

    

    6.           CONDITION OF THE
PREMISES.  Tenant accepts the Premises in its current “as is”
condition.  Landlord shall not be required to make any additional
improvements or modifications in or to the Premises, except as set forth
below.

    

    (a)           The
completion of the Additional Improvements by Landlord shall be deemed Landlord’s
Work for all purposes of the Lease.

    

    (b)           Landlord
shall use its best efforts to complete the Additional Improvements by June 15,
2000 for 4838 Ronson Court, Suite A.  The Additional Improvements for
4858 Ronson Court, Suite D will only be made after the expiration of the Early
Termination Option (as such term is defined in Section 9 below) or upon written
notification that the Early termination Option would not be
exercised.

    

    7.           ADDITIONAL IMPROVEMENTS TO
BE COMPLETED BY LANDLORD.  Which is defined as
follows:

    

    
      	
               
      

            	
              (a)

            	
              Spot
      painting of drywall surfaces which are marked, scuffed or
      damaged.  Spot painting may require painting of an entire an
      entire wall or office (as mutually agreed upon by Landlord and Tenant),
      however, for purposes of this provision, the parties acknowledge that
      “Cosmetic painting” does not contemplate painting of the entire
      Premises.  Tenant shall be responsible for moving all furniture,
      fixtures and equipment.  All work shall be done during normal
      working hours.

            

    

    

    
      	
               
      

            	
              (b)

            	
              Replacement
      of stained, damaged, or broken ceiling tiles in
  premises;

            

    

    

    
      	
               
      

            	
              (c)

            	
              Replacement
      of rusted or damaged HVAC
registers.

            

    

    

    8.           ALTERATIONS AND
ADDITIONS.  Pursuant to the provisions of Section 8.6 of Lease,
Tenant is authorized and shall be required to make improvements (as it’s sole
costs and expense) to 4838 Ronson Court pursuant to the G.L. Foster
Construction, Inc. proposal attached hereto as Exhibit A.  Said
improvements shall be made for the purpose of restoring the Premises to its
original and intended configuration.

     

    9.           EARLY TERMINATION
OPTION.  Tenant shall have a one-time right and option to
terminate this Lease for the portion of the Premises identified as 4858 Ronson
Court, Suite D (“Early Termination Option”), within the first six (6) months of
the Extended term (the “Termination Period”), subject to the following terms and
conditions:

    

    
      	
               
      

            	
              (i)

            	
              Tenant
      shall provide Landlord with written notice (“Termination Notice”) at least
      sixty (60) days prior to the date upon which Tenant desires to terminate
      the Lease (the “Termination Date”);
and

            

    

    

    
      	
               
      

            	
              (ii)

            	
              Concurrently
      with delivery of the Termination Notice, Tenant shall pay Landlord a fee
      (“Termination Fee”), in the amount of $3,636.60;
  and

            

    

    

    
      	
               
      

            	
              (iii)

            	
              Tenant
      shall not be in default of any material provisions of this Lease, both at
      the time the Termination Notice is delivered and at the Termination
      Date.

            

    

    

    10.           SECURITY
DEPOSIT.  There shall be no increase in the amount of Tenant’s
Security Deposit.

    

    11.           NO OTHER
CHANGES.  Except as specifically amended herein, all other
terms and conditions of the Lease shall remain in full force and effect between
the parties hereto.

    

    
      	
              Landlord:

            	 
      
	 
      	 
      
	
              Date:

            	
              5/8/00

            	 
      	
              WESTERN
      SALT COMPANY, a California corporation

            
	 
      	 
      
	 
      	 
      
	 
      	
              By:

            	
              /s/
      Linda B. Kaufman

            
	 
      	 
      	
              Linda
      B. Kaufman, Leasing Manager

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	 
      	
              By:

            	
              /s/
      Michael Neal

            
	 
      	 
      	
              Michael
      P. Neal, Vice President

            
	 
      	 
      	 
      
	 
      	 
      	 
      
	
              Tenant:

            	 
      	 
      
	 
      	 
      	 
      
	
              Date:

            	
              4/28/00

            	 
      	
              D3
      TECHNOLOGIES, INC., a California corporation

            
	 
      	 
      
	 
      	 
      
	 
      	
              By:

            	
              /s/
      W. A. Huston

            
	 
      	 
      	
              William
      A. Huston, President

            
	 
      	 
      	 
      
	 
      	
              By:

            	
              /s/
      Edward Knowles

            
	 
      	 
      	
              Edward
      Knowles, CFO

            
	 
      	 
      

    

     

    
      
        
           

        

        
           

          
            

          

        

        
           

        

      

    

    

    

     

    STANDARD
INDUSTRIAL LEASE

    (MODIFIED
GROSS)

     

    Sycamore
Grove Business Park

     

    WESTERN
SALT COMPANY,

     

    a
California corporation

     

    "Landlord"

     

    And

     

    D3
TECHNOLOGIES, INC.,

     

    a
California corporation

     

    "Tenant"

    

    TABLE OF CONTENTS
SECTION

     

    
      
        	
                SECTION

              	
                PAGE

              
	
                1.

              	
                BASIC
      LEASE PROVISIONS

              	
                1

              
	
                2.

              	
                DEFINITIONS

              	
                2

              
	
                3.

              	
                PREMISES

              	
                4

              
	
                4.

              	
                TERM;
      DELIVERY OF PREMISES

              	
                5

              
	
                5.

              	
                RENT

              	
                6

              
	
                6.

              	
                SECURITY
      DEPOSIT

              	
                7

              
	
                7.

              	
                USE

              	
                7

              
	
                8.

              	
                MAINTENANCE,
      REPAIRS AND ALTERATIONS

              	
                8

              
	
                9.

              	
                TAXES

              	
                9

              
	
                10.

              	
                UTILITIES

              	
                9

              
	
                11.

              	
                INSURANCE

              	
                10

              
	
                12.

              	
                WAIVER
      AND INDEMNITY

              	
                11

              
	
                13.

              	
                DAMAGE
      AND DESTRUCTION

              	
                12

              
	
                14.

              	
                CONDEMNATION

              	
                13

              
	
                15.

              	
                ASSIGNMENT
      AND SUBLETTING

              	
                13

              
	
                16.

              	
                DEFAULT
      BY TENANT; REMEDIES

              	
                15

              
	
                17.

              	
                TENANT’S
      INSOLVENCY

              	
                16

              
	
                18.

              	
                DEFAULT
      BY LANDLORD

              	
                17

              
	
                19.

              	
                SUBORDINATION
      AND ESTOPPEL

              	
                18

              
	
                20.

              	
                HAZARDOUS
      MATERIALS

              	
                18

              
	
                21.

              	
                NOTICE

              	
                19

              
	
                22.

              	
                OTHER
      TERMS AND CONDITIONS

              	
                19

              
	
                23.

              	
                GENERAL
      PROVISIONS

              	
                21

              
	
                24.

              	
                ADDENDUM

              	
                25

              

      

    

     

    EXHIBITS

     

    
      
        	
                A

              	
                Site
      Plan

              
	
                B

              	
                Premises
      and Improvements to Premises

              
	
                C

              	
                Rules
      and Regulations

              
	
                D

              	
                Intentionally
      Omitted

              
	
                E

              	
                Environmental
      Questionnaire

              
	
                F

              	
                Intentionally
      Omitted

              

      

    

    

    STANDARD
INDUSTRIAL LEASE-MODIFIED GROSS

    

     

    THIS STANDARD INDUSTRIAL
LEASE–MODIFIED GROSS ("Lease"), dated for reference purposes only, March
24, 1997, Is made at San Diego, California, between WESTERN SALT COMPANY, a
California corporation ("Landlord"), and D3
TECHNOLOGIES, INC., a California corporation ("Tenant").

     

    1.           BASIC
LEASE PROVISIONS. The words and figures set forth in this Section 1 are
used as defined terms in this Lease.

     

    1.1           Premises: The real property
and improvements which are the subject of this Lease.  The Premises
shall consist of 16,480
rentable square feet (rsf) comprised of the following areas:

     

    12,187 rsf as depicted on
Exhibit B, which has an address of 4838 Ronson Court

     

    4,293 rsf as depicted on
Exhibit B, which has an address of 4858 Ronson Court, Suite A (1/2 of
Building).

     

    1.2           Building: The Industrial
buildings addressed at 4838 and 4858 Ronson Court, San Diego,
California.

     

    1.3           Project: Those portions of the
Business Park addressed at 4828-4858 Ronson Court San Diego, California. The
Project, which is depicted on Exhibit A, contains a total rentable area of
approximately 49,380 square feet.

     

    
      
        	
                1.4            Term:

                 

              	
                Thirty-six
      (36) months.

              
	
                1.5            Commencement and Expiration
      Dates:

                 

              	 
      
	
                (a)           Commencement
      Date:

                 

              	
                April
      1, 1997

              
	
                (b)           Expiration
      Date:

                 

              	
                March
      31, 2000

              
	
                (c)           Delivery
      of the Premises:

                 

              	
                April
      1, 1997

              
	
                1.6            Extension Option
      Period:

                 

              	
                Two
      (2); each for a period of one (1) year.

              
	
                1.7            Initial Monthly Base
      Rent:

                 

              	
                $12,560.00

              
	
                1.8            Prepaid Base
      Rent:

                 

              	
                None.

              
	
                1.9            Periodic Increase In Base
      Rent:

                 

              	 
      
	
                Lease
      Year:

                2

                3

              	
                Base Rent

                $13,045.40

                $13,548.80

                 

              
	
                1.10           Security Deposit
      Amount:

                 

              	
                3,240.00
      (Already Held by Landlord)

              
	
                1.11           Tenant Improvement
      Allowance:

                 

              	
                None;
      however, subject to the provisions of Exhibit B.

              
	
                1.12           Tenant’s Share of Excess
      Operating Expenses:

                 

              	 
      
	
                (a)           Real
      Property Taxes:

                 

              	
                33.37%

              
	
                (b)           Other
      Operating Expenses:

                 

              	
                33.37%

              
	
                1.13           Permitted
      Use:

                 

              	
                General
      office use and storage of supplies and equipment.

              
	
                1.14           Expense
      Stop:

                 

              	
                Not
      Applicable (see Section 26 of Addendum to Lease)

              
	
                1.15           Broker(s):

                 

              	
                Not
      Applicable

              
	
                1.16           Parking:

              	
                45
      vehicles.

              

         

        	
                1.17           Landlord’s Address for
      Notice:

              	
                H.
      G. Fenton Material Company

                %
      Fenton-Western Properties

                7220
      Trade Street, Suite 300 (92121)

                Post
      Office Box 64

                San
      Diego, California 92112

                Tel:
      (619) 566-2000

                Fax:
      (619) 549-3587

                Attention:
      Property Manager

                 

              
	
                1.18           Tenant’s Address for
      Notice:

              	
                D3
      Technologies

                4838
      Ronson Court

                San
      Diego, CA 92111

                Tel:
      (619) 571-1685

                Fax:
      (619) 571-8563

                Attention:
      Manning D. Calhoun

                 

              
	
                1.19           Tenant’s
      Guarantor(s):

              	
                None.

                 

              
	
                1.20           Addendum:

              	
                Section
      24 – 27.

              

      

    

    

    2.           DEFINITIONS.
The captions appearing in this Section 2 are used as defined terms in this
Lease.

     

    2.1           Additional Rent. All sums
payable by Tenant hereunder other than Base Rent, including without limitation
Tenant's Share of Excess Operating Expenses, late charges, interest on past due
amounts, attorneys' fees, and reimbursements to Landlord of sums advanced by
Landlord to cure any default or discharge any obligation of Tenant
hereunder.

     

    2.2           Base Rent. The basic monthly
rent payable to Tenant for the use and occupancy of the Premises, in accordance
with Section 5 of this Lease.

     

    2.3           Intentionally
Omitted

     

    2.4           Commencement Date. The first
day of the Term, as determined in accordance with Section 4.1
below.

     

    2.5           Common Areas. All areas and
facilities outside the Premises and within the Building and Project that Tenant
is permitted to use, as provided and designated by the Landlord from time to
time for the general non-exclusive use of Landlord, Tenant and other tenants of
the Building and Project and their respective employees, suppliers, shippers,
customers, invitees, licensees or other visitors, including without limitation
hallways, entryways, common rest rooms on multi-tenant floors, elevators,
stairways, common pipes, conduits, wires and appurtenant equipment serving the
Premises, parking areas, loading and unloading areas, trash areas, roadways,
sidewalks, walkways, parkways, driveways and landscaped areas.

     

    2.6           Declaration. The recorded
Declaration of Covenants, Conditions and Restrictions for the Business Park, as
the same may be amended from time to time.

     

    2.7           Delivery of the Premises. The
date of the inspection and acceptance (or deemed acceptance) of the Premises by
Tenant, following Landlord's notice that Landlord's Delivery Work has been
substantially completed in accordance with Exhibit B attached
hereto.

     

    2.8           Hazardous Materials. Any and
all materials or substances which have been determined to be nuisance or
dangerous, toxic or hazardous or a pollutant or contaminant, including but not
limited to any hydrocarbon material, flammable explosives, asbestos, urea
formaldehyde, radioactive materials or waste, or other hazardous, toxic,
contaminating or polluting materials, substances or wastes, including, without
limitation, any `hazardous substances", "hazardous wastes", "hazardous
materials" or "toxic substances" under any Hazardous Materials
Laws.

     

    2.9           Hazardous Materials Laws. All
federal, state and local laws, ordinances and regulations, including, but not
limited to, the Federal Water Pollution Control Act (33 U.S.C. §1251, at seq.),
Resource Conservation & Recovery Act (42 U.S.C. §6901, et seq.), Safe
Drinking Water Act (42 U.S.C. §3000f, et seq.), Toxic Substances Control Act (15
U.S.C. §2601, at seq.), the Clean Air Act (42 U.S.C. §7401, at seq.),
Comprehensive Environmental Response, Compensation and Liability Act (42 U.S.C.
§9601, at seq.), California HEALTH & SAFETY CODE (§25100, at seq., §39000,
at seq.), California Safe Drinking Water & Toxic Enforcement Act of 1986
(California HEALTH & SAFETY CODE §25249.5, at seq.), California WATER CODE
(§13000, et seq.), and other comparable federal, state or local law, regulation
or interpretation thereof, whether currently in force or enacted in the future,
together with any licenses, permits, plans or approvals generated pursuant to or
as a result of any such law, which regulates or proscribes the use, storage,
disposal, cleanup, transportation, release or threatened release into the
environment or presence of Hazardous Materials.

     

    2.10           Lease Year. A period of twelve
consecutive full calendar months. The first Lease Year shall begin on the
Commencement Date if the Commencement Date is the first day of a calendar month;
otherwise, the first Lease Year shall begin on the first day of the first full
calendar month after the month in which the Commencement Date occurs. Each
succeeding Lease Year shall begin on the anniversary of the beginning of the
first Lease Year. If Tenant should extend the Term pursuant to any extension
option granted herein, the first day of the Extension Term shall also be deemed
to be the first day of a Lease Year for all purposes of this Lease.

     

    2.11           Tenant's Work. The
Improvements and other work, if any, to be accomplished by Tenant in accordance
with Exhibit B.

     

    2.12           Landlord's Delivery Work. All
items of Landlord's Work except those which Landlord reasonably cannot complete
prior to the Commencement Date, e.g., Landlord's Work that
cannot be performed by Landlord until Tenant (i) provides Landlord with plans
and specifications therefor, or (ii) obtains a building permit, or (iii)
completes those items of Tenant's Work that are necessarily completed prior to a
particular item of Landlord's Work.

     

    2.13           Landlord's Work. The
improvements and other work, if any, to be accomplished by Landlord in
accordance with Exhibit B.

     

    2.14           Mortgage. Any mortgage, trust
deed or other encumbrance, and all renewals, extensions or replace­ments
thereof, now or hereafter imposed by Landlord upon the real property which
includes the Premises.

     

    2.15           Mortgagee. The holder of a
Mortgage.

     

    2.16           Operating Expenses. All costs
incurred by Landlord, if any, for any of the following:

     

    (a)           The
operation, repair and maintenance, in neat, clean and good order and condition
of (i) the Common Areas of the Project, Including without limitation all parking
areas, loading and unloading areas, trash areas, roadways, sidewalks, walkways,
parkways, driveways, landscaped areas, striping, bumpers, and irrigation
systems, common area lighting facilities, and fences and gates; (ii) fire
detection in the Project, including sprinkler system maintenance and repair; and
(iii) unless allocated directly to Tenant pursuant to Section 8.1(b), the
Building's heating, ventilation and air conditioning ("HVAC") systems.

     

    (b)           Trash
disposal for the Project, and to the extent any such services are provided,
janitorial service, security services, gardening, painting, plumbing,
electrical, carpentry, window washing, signage and equipment rental expenses,
and any other service to be provided by Landlord that is elsewhere in the Lease
stated to be an item of Operating Expenses.

     

    (c)           Any
deductible portion of an insured loss concerning any of the items or matters
described in this Section.

     

    (d)           Premiums
for any insurance policies maintained by Landlord pursuant to Section 11
below.

     

    (e)           Real
Property Taxes to be paid by Landlord.

     

    (f)           Utilities
not separately metered to Tenant or other tenants of the Project.

     

    (g)           Independent
contractors for services (excluding capital improvements), and compensation
(including employment taxes and fringe benefits) of all persons who perform
regular and recurring duties connected with day-to-day operation, maintenance
and repair of the Project, provided such compensation is commercially
reasonable.

     

    (h)           Maintenance
and repair of roofs, building walls, foundations, and all sewer and water
facilities.

     

    (i)           A
property management fee in the amount of fifteen percent (15%) of the preceding
items of Operating Expenses.

     

    (j)           Dues
and assessments payable to the Business Park's property owners association (if
any).

     

    (k)           Intentionally
Omitted.

     

    The
inclusion of the improvements, facilities and services set forth in the
foregoing definition shall not be deemed Landlord's representation that such
improvements or facilities exist, nor shall It impose on Landlord any obligation
either to have those improvements or facilities or to provide those services,
unless the improvements or facilities already exist in the Project or Landlord
already provides the services as of the Commencement Date, or unless Landlord
has agreed to do so elsewhere in the Lease.

     

    2.17           Real Property Taxes. All
general property and improvement taxes and all forms of assessment, special
assessment or reassessment, license fee, license tax, business license tax,
commercial rental tax, in lieu tax, levy, charge, penalty (to the extent not
imposed as a result of Landlord's negligence) or similar imposition, Imposed by
any authority having the direct power to tax, including any city, county, state
or federal government, or any school, agricultural, lighting, drainage or other
improvement or special assessment district thereof, or any agency or public
body, as against any legal or equitable interest of Landlord in the Premises and
all improvements thereon and thereto as they presently exist or as they may be
expanded, developed, constructed or altered from time to time, including but not
limited to: (a) any tax on Landlord's rent, right to rent or other income from
the Premises or all or any portion of the Project or as against Landlord's
business of leasing the Premises, but specifically excluding Landlord's federal,
state or city income, franchise, corporate, personal property, stock transfer,
revenues, inheritance or estate taxes; (b) any assessments, taxes, fees, levies
or charges in addition to, or in substitution, partially or totally, for any
assessment, tax, fee, levy or charge previously included within the definition
of real property tax before adoption of Proposition 13 by the voters of the
State of California in the June 1978 election, it being acknowledged by Tenant
and Landlord that assessments, taxes, fees, levies and charges may be imposed by
governmental agencies for such services as fire protection, street, sidewalk and
road mainte­nance, refuse removal and for other governmental services that
were before Proposition 13 provided without charge to property owners or
occupants; and (c) any assessment, tax, fee, levy or charge upon this
transaction or any document to which Tenant is a party which is imposed on the
creation or transfer of an interest or an estate in the Premises. It is the
intention of Tenant and Landlord that all new and increased assessments, taxes,
fees, levies and charges, and all similar assessments, taxes, fees, levies and
charges be included within the definition of Real Property Taxes for the
purposes of this Lease. Real Property Taxes for the first year of the Term shall
be calculated as if the Premises and related improvements were fully assessed.
If at any time during the Term the laws concerning the methods of real property
taxation prevailing at the commencement of the Lease Term are changed so that a
tax or excise on rents or any other tax, however described, is levied or
assessed against Landlord as a substitution in whole or in part for any real
property taxes, then Real Property Taxes shall include, but not be limited to,
any such assessment, tax, fee, levy or charge allocable to or measured by the
area of the Premises or the rent payable hereunder, including, without
limitation, any gross income tax with respect to the receipt of such rent, or
upon or with respect to the possession, leasing, operating, management,
maintenance, alteration, repair, use or occupancy by Tenant of the Premises, or
any portion thereof. With respect to any assessments that may be levied against
or upon the Premises, the Building or all or any portion of the Project and that
under the laws then in force may be evidenced by improvement or other bonds, or
may be paid in annual installments, there shall be included within the
definition of Real Property Taxes with respect to any tax fiscal year only the
amount currently payable on such tax, bond or assessment, including interest,
for such tax fiscal year or the current annual installment for such tax fiscal
year.

     

    3.           PREMISES.

     

    3.1           Lease of Premises. In
consideration of the rent and covenants set forth below, Landlord hereby leases
the Premises to Tenant, and Tenant hires the Premises from Landlord, for the
term, at the rental, and upon all of the conditions set forth herein. Except as
otherwise provided herein, this Lease is subject to: (ii) all covenants,
conditions, restrictions, easements, mortgages, deeds of trust, leases, ground
or underlying leases, rights of way, reciprocal easement agreements to which
Landlord is a party which affect the Project and all other matters now or
hereafter affecting the Project or the Premises; and (ii) all zoning laws,
ordinances and building codes now or hereafter affecting the Project or the
Premises. In the event Landlord has a leasehold Interest in the Project or the
Premises, this Lease shall terminate upon the termination of such leasehold
interest whether such termination is voluntary, involuntary, or by operation of
law, without liability of Landlord (unless otherwise specifically set forth
herein).

     

    3.2           Landlord's Reserved Rights.
Landlord reserves to itself the absolute rights: (i) to use the roof, exterior
walls and area beneath the Premises, and (ii) to install, use, maintain and
replace equipment, machinery, pipes, conduits and wiring located within the
Premises which serve other parts of the Project, in a manner and in locations
that do not unreasonably interfere with Tenant's use of the
Premises.

     

    3.3           Condition of Premises. Tenant
acknowledges that except to the extent expressly set forth in this Lease or in a
written addendum or amendment hereto, neither Landlord nor its agents have made
(i) any promise to alter, remodel or otherwise improve, or (ii) any
representation or warranty with respect to the condition of, the Premises, the
Building or any part of the Project or improvements thereon or therein. Tenant's
taking possession of the Premises shall be deemed acceptance of the Premises by
Tenant, and shall be deemed conclusively to establish that the Premises are in
good and satisfactory condition as of the date Tenant takes possession. Subject
to the completion of any Landlord's Work, Tenant accepts possession of the
Premises in their current, "as is", condition, and acknowledges that it has
inspected the Premises before signing this Lease and is fully aware of the
condition of the Premises.

     

    3.4           Rights in Common Areas.
Landlord grants to Tenant and to Tenant's employees, invitees and licensees a
non-exclusive license during the Term to use the Common Areas, subject to the
terms and conditions of this Lease. Tenant acknowledges that others, including
without limitation Landlord and other tenants of the Building and Project, and
their respective employees, invitees and visitors, and other persons authorized
by Landlord, will also be entitled to use the Common Areas. Without advance
notice to Tenant and without any liability to Tenant in any respect, Landlord
shall have the right to:

     

    (a)           Establish
and enforce reasonable rules and regulations concerning the maintenance,
management, use and operation of the Common Areas.

     

    (b)           Close
off any of the Common Areas to whatever extent required in the opinion of
Landlord and its counsel to prevent a dedication of any of the Common Areas or
the accrual of any rights by any person or the public to the Common Areas,
provided such closure does not deprive Tenant of the substantial benefit and
enjoyment of the Premises.

     

    (c)           Temporarily
close any of the Common Areas for maintenance, alteration or improvement
purposes.

     

    (d)           Select,
appoint or contract with any person for the purpose of operating and maintaining
the Common Areas, subject to such terms and at such rates as Landlord deems
reasonable and proper.

     

    (e)           Change
the size, use, shape or nature of any portions of the Common Areas, provided
such change does not deprive Tenant of the reasonable benefit and enjoyment of
the Premises. So long as Tenant is not thus deprived of the reasonable use and
benefit of the Premises, Landlord will also have the right at any time to change
the arrangement or location of, or both, or to regulate or eliminate the use of,
any concourse, parking spaces, garage, or any elevators, stairs, toilets or
other public conveniences in the Project, without incurring any liability to
Tenant or entitling Tenant to any abatement of rent, and such action will not
constitute an actual or constructive eviction of Tenant.

     

    (f)           Erect
one or more additional buildings on the Common Areas, expand the existing
buildings or other buildings to cover a portion of the Common Areas, convert
Common Areas to a portion of the Building or other buildings, or convert any
portion of such other buildings to Common Areas. Upon erection of any additional
buildings or change in the Common Areas, the portion of the Project upon which
buildings or structures have been erected will no longer be deemed to be a part
of the Common Areas. In the event of any such changes in the size or use of the
Common Areas of the Project, Landlord may make an appropriate adjustment In the
Building's or any other buildings' pro rata share of exterior Common Areas of
the Project as appropriate, and a corresponding adjustment to Tenant's Share of
Excess Operating Expenses.

     

    4.           TERM:
DELIVERY OF PREMISES.

     

    4.1           Term. The Term shall be for
the number of months set forth at Section 1.4 above, beginning on the
Commencement Date and ending on the Expiration Date.

     

    4.2           Intentionally
Omitted.

     

    4.3           Intentionally
Omitted.

     

    4.4           Memorandum of Commencement
Date. Following the Delivery of the Premises, Landlord shall prepare and
forward to Tenant two copies of a written Memorandum of Commencement Date,
signed by Landlord, confirming the Commencement Date and the date on which the
Term will expire. Within ten (10) days after receipt thereof, Tenant shall sign
and return one copy of the Memorandum of Commencement Date, indicating either
Tenant's agreement with the matters set forth therein or any areas of
disagreement. Tenant's failure to return a copy of the Memorandum of
Commencement Date within such ten-day period shall be conclusively deemed
Tenant's agreement with all matters set forth therein. Any dispute or
disagreement on Tenant's part as to the Commencement Date set forth in such
memorandum shall, at the election of either party, be submitted to final,
binding arbitration in San Diego, California under the Commercial Arbitration
Rules of the American Arbitration Association.

     

    4.5           Intentionally
Omitted.

     

    5.           RENT.

     

    5.1           General. From and after the
Commencement Date, Tenant agrees to pay Landlord, in advance, on the first day
of each and every calendar month during the Term, Base Rent and Additional Rent
as specified in this Section. Payment of all such rent shall be without offset
or demand, shall be in lawful money of the United States of America and shall be
made at the address set forth for Landlord herein or at such other place as
Landlord may direct.

     

    5.2           Base Rent. Base Rent shall
initially be in the amount per month set forth in Section 1.7.

     

    5.3           Annual Adjustment to Base
Rent. Base Rent shall be increased during the Term in accordance with the
schedule set forth in Section 1.9.

     

    5.4           Excess Operating Expenses. See
Section 26 of Addendum to Lease.

     

    5.5           Late Charges. Tenant
acknowledges that late payment by Tenant to Landlord of Base Rent or Additional
Rent due hereunder will cause Landlord to incur costs not contemplated by this
Lease, the exact amount of which is extremely difficult to ascertain. Such costs
include, but are not limited to, processing and accounting charges, and late
charges which may be imposed upon Landlord by the terms of any mortgage or deed
of trust covering the Premises. Therefore, if any payment of Base Rent or
Additional Rent is not paid within five (5) days after the date due, Tenant
shall pay to Landlord ten percent (10%) of the amount due or Two Hundred Fifty
Dollars ($250.00), whichever is greater. The parties agree that such late charge
represents a fair and reasonable estimate of the costs that Landlord will incur
by reason of the late payment by Tenant. The late charge shall be deemed
Additional Rent and the right to require it shall be in addition to all of
Landlord's other rights and remedies hereunder or at law and shall not be
construed as limiting Landlord's remedies in any manner.

     

    6.           SECURITY
DEPOSIT. Tenant has paid to Landlord, a security deposit in the amount
set forth at Section 1.10 ("Security Deposit"). The
Security Deposit shall be held by Landlord as security for the faithful
performance by Tenant of all of the terms, covenants and conditions of this
Lease to be kept and performed by Tenant. If Tenant defaults with respect to any
provision of this Lease, including, but not limited to, the provisions relating
to the payment of rent, Landlord may (but shall not be required to) use, apply
or retain all or any part of the Security Deposit for the payment of any rent or
any other sum in default, or for the payment of any other amount which Landlord
may spend or become obligated to spend by reason of Tenant's default or to
compensate Landlord for any other loss or damage which Landlord may suffer by
reason of Tenant's default. If any portion of the Security Deposit is so used or
applied, Tenant shall, upon demand therefor, deliver cash to Landlord in an
amount sufficient to restore the Security Deposit to its original amount, and
Tenant's failure to do so shall be a material breach of this Lease. Landlord
shall not be required to keep the Security Deposit separate from its general
funds, and Tenant shall not be entitled to interest thereon. If Tenant shall
fully and faithfully perform every provision of this Lease to be performed by
it, the Security Deposit or any balance thereof shall be returned to Tenant (or
at Landlord's option, to the last assignee of Tenant's interests hereunder) at
the expiration of the Term, provided that Landlord may retain the Security
Deposit until such time as any amount due from Tenant under this Lease has been
determined and paid in full.

     

    7.           USE.

     

    7.1           Permitted Use. The
Premises shall be used and occupied only for the purposes and activities set
forth in Section 1.13 above, and for no other uses or purposes whatsoever. If
any governmental license or permit shall be required for the proper and lawful
conduct of Tenant's business or other activity carried on in the Premises, or if
a failure to procure such a license or permit might or would in any way affect
Landlord or the Business Park, then Tenant, at Tenant's expense, shall (i) duly
procure and thereafter maintain such license or permit and submit the same for
inspection by Landlord, (ii) install and pay for any improvements, changes or
alterations in the Premises, required by any governmental authority, as a result
of its proposed use of the Premises or its manner of operation, and (iii) at all
times, comply with the requirements of each such license or permit. Tenant
warrants that it has investigated whether its proposed use of the Premises and
its proposed manner of operation will comply with, and Tenant assumes the risk
that its proposed use of the Premises and its proposed manner of operation are
and will continue to be in compliance with, all applicable land use approvals,
laws and regulations, including without limitation all zoning laws regulating
the use of and enjoyment of the Premises. Tenant agrees that under no
circumstances shall Tenant be released in whole or in part from any of its
obligations under this Lease as a result of any governmental authority's
disallowing or limiting Tenant's proposed use of the Premises or its manner of
operation.

     

    7.2           Condition of Premises.
Landlord warrants to Tenant, but without regard either to any Tenant's Work or
to the use for which Tenant will use the Premises, that as of the date of
Delivery of the Premises, the Premises do not violate the Declaration or any
other covenants or restrictions of record or any applicable building code,
regulation or ordinance in effect on the date of this Lease. In the event it
should be determined that this warranty has been violated, then after written
notice from Tenant, Landlord shall promptly, at its sole cost and expense,
rectify any such violation. In the event Tenant does not give Landlord any such
written notice of violation within three (3) months after the Commencement Date,
the correction of such violation shall thereafter be Tenant's obligation, to be
performed at Tenant's sole cost and expense. The foregoing warranty shall be of
no force or effect if, prior to the date of this Lease, Tenant was the owner or
occupant of the Premises, in which event Tenant shall correct any such
violation, whenever determined to exist, at Tenant's sole cost and
expense.

     

    7.3           Compliance
With Requirements. Subject to Section 7.2 above, Tenant shall, at
Tenant's expense, promptly comply with all applicable statutes, ordinances,
rules, regulations, applicable covenants and restrictions of record, and
requirements of any fire insurance underwriters or rating bureaus, now in effect
or which may hereafter come into effect during the Term, whether or not they
reflect a change in policy from that now existing, relating in any manner to the
Premises and the occupation and use by Tenant of the Premises. Tenant shall not
use or permit the use of the Premises in any manner that will tend to create
waste or a nuisance or shall tend to disturb other occupants of the Business
Park. Without limiting the generality of the foregoing, Tenant shall, at its
sole cost and expense, comply promptly with all Hazardous Materials Laws and
with all environmental laws and ordinances applicable to the conduct of Tenant's
business, including all air quality and air pollution regulations of the
regional air pollution control district. If at any time it reasonably appears to
Landlord that Tenant is not fulfilling its obligations under this Section,
Landlord may cause to be performed, at Tenant's sole cost, an audit or
inspection of the Premises to evaluate Tenant's compliance
herewith.

     

    7.4           Compliance With Americans With
Disabilities Act. Landlord shall ensure that as of the date of this
lease, the design and construction of the Building, the Premises and any Common
Areas are in compliance with Title III of the Americans With Disabilities
Act ("ADA") and other
applicable laws and regulations that relate to access by the disabled or
handicapped. Tenant shall be responsible for compliance with the ADA and related
statutes with respect to any alterations or improvements to the Premises and the
operation of any businesses conducted from the Premises; Landlord shall have no
responsibility or liability with respect thereto. In the event of any changes to
the ADA or other applicable statutes, or any rules or regulations promulgated
pursuant thereto, that become effective after the date of this Lease, Tenant
shall be responsible, at its sole expense, for any necessary alterations or
improvements to the Premises, and Landlord shall be responsible for any
necessary alterations or improvements to the Building or any Common Areas;
provided, however, that Landlord's costs and expenses incurred in connection
with any such alterations or improvements shall be conclusively deemed to be
Operating Expenses, notwithstanding the classification of such costs and
expenses as capital items in accordance with generally accepted accounting
practice.

     

    7.5           Rules and Regulations. Tenant
shall at all times comply with the Declaration and with the rules and
regulations for the Business Park. A copy of the rules and regulations in
existence on the date of this Lease is attached hereto as Exhibit C, but
Landlord reserves the right to amend the rules and regulations at any time by
giving notice of amendment to Tenant, if Landlord determines such amendments to
be to the best interests of the Building and its tenants. Tenant shall not be
bound by any such amended rules and regulations until Tenant has received a
written copy thereof. Landlord agrees that the rules and regulations shall be
enforced in a uniform and non-discriminatory manner; provided, however, that
Landlord shall not be liable to Tenant for Landlord's failure to enforce the
rules and regulations against any other tenants of the Project.

     

    8.           MAINTENANCE.
REPAIRS AND ALTERATIONS.

     

    8.1           Tenant's
Obligations.

     

    (a)           Tenant
shall keep and maintain in good, sanitary order, condition, and repair
(including replacement of parts and equipment if necessary) the following areas
of the Premises and every part thereof and any and all appurtenances thereto
wherever located, including, without limitation, the interior surfaces of the
exterior walls, the interior portion of all doors, door frames, door
checks, windows (including window sashes, casements and frames), Tenant's signs,
walls, floor and ceilings, and all other repairs, replacements, renewals and
restorations, interior ordinary and extraordinary, foreseen and unforeseen, and
all other work performed, and additions, alterations, and improvements installed
by or on behalf of Tenant. Any interior glass broken shall promptly be replaced
by Tenant with glass of the same quality, size and kind. If Tenant shall fail to
replace same within seventy-two (72) hours after such glass is broken, Landlord
shall have the right, but shall not be obligated, to replace such glass, in
which event Tenant shall, promptly upon demand therefor by Landlord, reimburse
Landlord for expenses incurred by Landlord in connection therewith. In addition,
Tenant shall be responsible for the purchase, stocking, replacement, and
installation of all interior light bulbs which serve only the
Premises.  Notwithstanding the foregoing, Tenant may, at Tenant's
discretion, elect to have Landlord be responsible for the maintenance, repair,
and replacement of the preceding items contained in this Section 8.1(a),
provided however, that Landlord shall have the right to bill Tenant Additional
Rent for such maintenance, repair, and replacement, and such Additional Rent
shall be payable together with Tenant’s next Base Rent installment after such
work has been performed by Landlord.

     

    (b)           Intentionally
Omitted

     

    (c)           Tenant
shall, at Tenant's sole cost and expense, comply with all laws, rules, orders,
ordinances, directions, regulations and legal requirements of federal, state,
county or municipal governmental authorities now or hereafter affecting or
applying to the Premises, including, without limitation, the Americans With
Disabilities Act.

     

    (d)           Tenant
shall, at Tenant's sole cost and expense, be responsible for all services
related to cleaning (janitorial and portering, if any) the interior portions of
the Premises, excluding the common area restrooms.

     

    8.2           Condition on Termination. On
the last day of the Term, or on any sooner termination, Tenant shall surrender
the Premises to Landlord in the same condition as received, ordinary wear and
tear excepted, clean and free of debris. Any damage or deterioration of the
Premises shall not be deemed ordinary wear and tear if the same could have been
prevented by good maintenance practices. Tenant shall reimburse Landlord for
repair of any damage to the Premises occasioned by the installation or removal
of Tenant's trade fixtures, alterations, furnishings and equipment, and shall
leave all air lines, power panels, electrical distribution systems, lighting
fixtures, HVAC systems, plumbing and fencing in good operating
condition.

     

    8.3           Landlord's Rights. If Tenant
fails to perform Tenant's obligations under Section 8.1 or 8.2 or under any
other provision of this Lease, Landlord may enter the Premises after three (3)
days' prior written notice to Tenant (except in the case of emergency, in which
case no notice shall be required) and perform such obligations on Tenant's
behalf and put the Premises in good order, condition and repair, and the cost
thereof together with interest thereon from the date incurred at the maximum
rate then allowed by law shall be due and payable as Additional Rent to Landlord
together with Tenant's next Base Rent installment.

     

    8.4           Landlord's
Obligations.

     

    (a)           Except
for Sections 13 and 14 relating to damage and condemnation, and the provisions
in this Section 8.4 below which relate solely to multi-tenant buildings, the
parties intend that Landlord shall have no obligation whatsoever to repair and
maintain the interior, non-structural portions of Premises or the equipment
therein, all of which the parties intend to be obligations of Tenant pursuant to
this Section 8. Notwithstanding the foregoing, the Building is a multi-tenant
facility, and Landlord shall keep in good condition and repair the foundations,
exterior walls, structural condition of interior bearing walls, and roof of the
Building, as well as the Common Areas, and all costs and expenses incurred by
Landlord in connection therewith shall be included within Operating Expenses
which included in Tenant’s payment of Base Rent. Landlord shall have no
obligation to make repairs under this Section until a reasonable time after
receipt of written notice from Tenant of the need for such repairs.

     

    (b)           Landlord
shall procure and maintain at Tenant's expense, which expense is included in
Base Rent, an HVAC system maintenance contract on any HVAC systems which serve
only the Premises, and Landlord shall be responsible for any repairs thereto
throughout the Term.

     

    (c)           Except
for damage caused by any negligence or intentional act or omission of Tenant,
Tenant's employees suppliers shippers, customers, or invitees (which damage
Tenant shall repair at its expense), Landlord shall maintain at Tenant’s
expense, which expense is included in Base Rent, all plumbing and sewage
facilities within the Premises (including free flow up to the main sewer line),
plumbing fixtures, and electrical systems (whether or not located in the
Premises), sprinkler system and exterior plate glass.

     

    (d)           Landlord
shall, at Tenant’s expense, which expense is included in Base Rent, maintain and
be responsible for all services related to cleaning (janitorial and portering,
if any) the Common area restrooms and kitchen, which serve only the
Premises.

     

    8.5           Waiver. Tenant expressly
waives all rights to make repairs at the expense of Landlord or deduct any
amounts from rent as provided in any statute or law in effect during the Term of
this Lease, including its rights under the provisions of § 1941 and § 1942 of
the Civil Code of the State of California.

     

    8.6           Alterations and
Additions.

     

    (a)           Tenant
shall not, without Landlord's prior written consent which shall not be
unreasonably withheld, make any alterations, improvements, additions, or Utility
Installations in, to or about the Premises. Tenant shall make no change or
alteration to the exterior of the Building without Landlord's prior written
consent, which consent may be withheld for any reason in Landlord's sole
discretion and which may at Landlord's discretion be conditioned upon Tenant's
providing Landlord, at Tenant's sole cost and expense, a lien and completion
bond in an amount equal to one and one-half (1 1/2) times the cost of the work.
As used in this Section, the term "Utility Installations" shall mean
carpeting, window coverings, air lines, power panels, electrical distribution
systems, lighting fixtures, space heaters, air conditioning, plumbing and
fencing. Landlord may require that Tenant remove at the expiration of the Term
any or all alterations, improvements, additions or Utility Installations which
were not part of the original Tenant Improvements, and restore the Premises and
the Common Areas to their prior condition. Should Tenant make any alterations,
improvements, additions or Utility Installations without the prior approval of
Landlord, Landlord may, at any time during the Term of this lease, require that
Tenant remove any or all of the same.

     

    (b)           Except
for improvements to be accomplished by Landlord at its expense, if any, Tenant
shall pay, when due, all claims for labor or materials furnished or alleged to
have been furnished to or for Tenant at or for use in the Premises, which claims
are or may be secured by any mechanic's or materialmen's lien against the
Building or any interest therein. Tenant shall give Landlord not less than ten
days' notice prior to the commencement of any work in the Premises, and Landlord
shall have the right to post notices of non-responsibility in or on the Premises
or the Building as provided by law. If Tenant shall, in good faith, contest the
validity of any such lien, claim or demand, then Tenant shall, at its sole
expense, defend itself and Landlord against the same and shall pay and satisfy
any adverse Judgment that may be rendered thereon before the enforcement thereof
against the Landlord or the Building, upon the condition that if Landlord shall
require, Tenant shall furnish to Landlord a surety bond satisfactory to Landlord
in an amount equal to one and one-half (1/2) times the amount of such contested
lien claim or demand, indemnifying Landlord against liability for such claim or
lien and for all costs of defense thereof, of obtaining the release of any lien,
and of making the Building free from the effect of such lien or claim. In
addition, Landlord may require Tenant to pay Landlord's attorneys' fees and
costs in participating in such action if Landlord shall decide it is in
Landlord's best interest to do so. In any event, Landlord may pay the lien claim
prior to the enforcement thereof, in which event Tenant shall reimburse Landlord
in full, including attorneys' fees for any such expense, as Additional Rent,
with the next due rents.

     

    (c)           All
alterations, Improvements, additions and Utility Installations (exclusive of all
trade fixtures of Tenant) which may be made on the Premises, shall be the
property of Landlord and shall remain upon and be surrendered with the Premises
at the expiration of the Lease term, unless Landlord requires their removal.
Notwithstanding the provisions of this Section 8.6, Tenant's machinery and
equipment (other than Utility Installations), other than that which is affixed
to the Premises so that it cannot be removed without material damage to the
Premises or the Building, shall remain the property of Tenant and may be removed
by Tenant subject to the provisions of Section 8.2.

     

    9.           TAXES.

     

    9.1           Real Property Taxes. Landlord
shall pay all Real Property Taxes with respect to the Building and the Project,
which shall be included in Operating Expenses. If the Premises are separately
assessed, or included within an assessor's parcel that does not encompass the
entire Project, Landlord shall adjust Tenant's Share of Excess Operating
Expenses as it relates to Real Property Taxes, to reflect the proportion between
the area of the Premises and the total area of the assessor's parcel
encompassing the Premises.

     

    9.2           Personal Property Taxes.
Tenant shall pay prior to delinquency all taxes assessed against and levied upon
trade fixtures, furnishings, equipment and all other personal property of Tenant
contained in the Premises or elsewhere. When possible, Tenant shall cause said
trade fixtures, furnishings, equipment and all other personal property to be
assessed and billed separately from the real property of Landlord. If any of
Tenant's said personal property shall be assessed with Landlord's real property,
Tenant shall pay to Landlord the taxes attributable to Tenant within ten days
after a receipt of a written statement setting forth the taxes applicable to
Tenant's property.

     

    10.           UTILITIES.
Tenant shall be solely responsible for, shall arrange for, and shall promptly
pay all charges, including meter and connection fees, for gas, electricity, and
any other utility used upon or furnished to the Premises. In the event any such
utility is not separately metered, Tenant shall pay its share of the cost
thereof, as equitably determined by Landlord, as Additional Rent, as part of
Operating Expenses. In this regard, Tenant acknowledges and agrees that if
Tenant's use of the Premises results In a disproportionately heavy use of water
or other commonly metered utilities, then Landlord, at Landlord's discretion,
and in a reasonable and equitable manner, may adjust Tenant's Share of Excess
Operating Expenses to reflect such disproportionately heavy use. Landlord does
not warrant that any services Landlord supplies will not be interrupted, e.g., because of accidents,
repairs, alterations, improvements or any reason beyond the reasonable control
of Landlord. No such interruption shall: (i) be considered an eviction or
disturbance of Tenant's use and possession of the Premises; (ii) entitle Tenant
to terminate this Lease; (iii) make Landlord liable to Tenant for damages; (iv)
abate Base Rent, Additional Rent or any other sums due hereunder; or (v) relieve
Tenant from performing its obligations hereunder.

     

    11.           INSURANCE.

     

    11.1           Liability Insurance–Tenant.
Prior to the earlier of the Commencement Date or Tenant's occupancy of the
Premises, Tenant, at its own expense, shall obtain from and shall thereafter
keep in force with companies reasonably acceptable to Landlord, commercial
general liability insurance applying to the use and occupancy of the Premises,
or any areas adjacent thereto, and the business operated by Tenant or any other
occupant on the Premises. Such insurance shall: include broad form contractual
liability insurance coverage specifically insuring all of Tenant's indemnity
obligations under this Lease; have a minimum combined single limit liability of
at least $2,000,000; be written to apply to all bodily injury, property damage,
personal injury and other covered loss, however occasioned, occurring during the
policy term; contain endorsements deleting any employee exclusion on personal
injury coverage; include products and completed operations coverage; provide for
severability of interests or a cross-liability provision or endorsement; be
endorsed to delete any liquor liability exclusion, and afford coverage for all
claims based on acts, omissions, injury and damage, which claims occurred or
arose (or the onset of which occurred or arose) in whole or in part during the
policy period. The foregoing policy of insurance shall name Landlord and any
parties designated by Landlord as additional insureds, and shall include a
per-location endorsement, Form C62504 or equivalent. In addition, Tenant shall
maintain non-owned automobile liability insurance. The policy limits herein
specified shall be increased from time to time upon written demand from
Landlord, if circumstances reasonably justify such increases. Tenant shall
furnish Landlord with a certificate of such insurance within thirty days after
the Commencement Date and whenever requested shall satisfy Landlord that such
policy is in full force and effect. The policy shall be endorsed to provide that
its coverage shall be primary and noncontributing with any insurance carried by
Landlord, and shall be further endorsed to provide that it shall not be canceled
or altered without thirty days' prior written notice to Landlord.

     

    11.2           Liability Insurance–Landlord.
Landlord shall obtain and keep in force during the Term commercial general
liability insurance, insuring against liability for injury to or death of
persons and loss of or damage to property occurring in or on the Common Areas.
Landlord's liability insurance shall be in amount of not less than $2,000,000
combined single limit per occurrence for bodily and personal injury and property
damage.

     

    11.3           Property
Insurance—Landlord.

     

    (a)           Landlord
shall maintain in full force and effect at all times a standard policy or
policies insuring against "all risk" perils (also known as "special perils")
covering the Building and other improvements owned by Landlord in the Business
Park in an amount at least sufficient to avoid the effects of coinsurance
provisions of the policy or policies (i.e., not less than ninety
percent [90%] of the actual replacement cost of the Building and other
improvements, without deduction for depreciation and excluding foundations,
excavation costs and the cost of underground flues, pipes and drains, if such
costs are properly excludable under coinsurance requirements). Such insurance
shall include (i) a standard form of lender's loss payable endorsement, issued
to the holder or holders of a mortgage or deed of trust secured in whole or in
part by the Building and the other property on which the insured improvements
are located; (ii) at Landlord's sole option, coverage for flood or earthquake or
both; and (iii) rental income insurance equal to Base Rent and Operating
Expenses for up to one year. In addition, Landlord shall obtain and keep in
force during the Term such other insurance as Landlord deems
advisable.

     

    (b)           Tenant
shall pay for any increase in the property insurance of the Building or such
other building or buildings if the increase is caused by Tenant's acts,
omissions, use or occupancy of the Premises. Tenant shall not do or permit to be
done anything which shall invalidate the insurance policies referred to in this
Section 11.3. If Tenant does or permits to be done anything which shall increase
the cost of the insurance policies referred to in this Section 11.3, then Tenant
shall within thirty (30) days after demand therefor by Landlord reimburse
Landlord for any additional premiums attributable to any act or omission or
operation of Tenant causing such increase in the cost of insurance. Landlord
shall deliver to Tenant a written statement setting forth the amount of any such
insurance cost increase and showing in reasonable detail the manner in which it
has been computed.

     

    11.4           Property Insurance–Tenant.
Tenant shall pay for and shall maintain in full force and effect at all times, a
standard policy insuring against "all risk" perils (also known as "special
perils"), covering all exterior glass, whether plate or otherwise, and all
interior glass, stock in trade, merchandise, trade fixtures, equipment and other
personal property located In the Premises and used by Tenant in connection with
its business. Tenant shall furnish Landlord with a duly executed certificate
evidencing such coverage at the commencement of the Term and not less than
thirty (30) days before the expiration of the term of such
coverage.

     

    11.5           Insurance Policies. Each
policy of insurance required to be maintained by Tenant hereunder shall name
Landlord, and any other parties in interest designated by Landlord, as
additional insureds and shall contain a clause that the insurer will not cancel
or change such insurance without first giving Landlord thirty (30) days' prior
written notice. Such Insurance may be furnished by Tenant under any blanket
policy carried by it or under a separate policy therefor; provided that such
blanket policy shall contain an endorsement that names Landlord (and any other
parties in interest designated by Landlord) as an additional insured, references
the Premises and guarantees that a minimum limit equal to the insurance amounts
required in this Lease will be available specifically for the Premises. All
insurance shall be with a good and solvent insurance company authorized to do
business in the State in which the Business Park is located, having a minimum
rating of A and X in Best's Insurance Guide. A copy of the paid-up policy or
other evidence reasonably satisfactory to Landlord shall be delivered to
Landlord prior to the Term Commencement Date and not less than thirty (30) days
prior to each renewal or extension of such policy of insurance. In the event
that Tenant shall deliver a certificate of insurance in lieu of a copy of the
paid-off insurance policy at any time during the Term of this Lease, a copy of
such insurance policy shall be provided to Landlord as soon thereafter as
practicable. No policy of insurance under this Section shall provide for a
deductible in excess of Ten Thousand Dollars ($10,000), provided that Tenant
shall remain obligated for the insurance deductible. All public liability,
property damage or casualty policies and the coverage evidenced thereby shall be
primary with respect to any policies carried by Landlord and any coverage
carried by Landlord shall pay only amounts in excess of the limits in said
policies of Tenant. In addition to the foregoing, in the event Tenant fails to
provide or keep in force any of the insurance required pursuant to this Section
11, then Landlord, in its discretion and without waiving any of its rights under
this Lease, may provide such insurance, in which event the cost thereof shall be
payable by Tenant to Landlord as Additional Rent on the first day of the
calendar month immediately following demand therefor from Landlord.

     

    11.6           Waiver of Subrogation. Each
party hereby waives any and all rights of recovery against the other party
hereto and its officers, agents, employees, or representatives, and Tenant
hereby waives any rights it may have against any trust deed holder, for the
loss, damage, or injury to property arising from any event which is covered by
insurance against fire, vandalism, malicious mischief, and extended coverage,
and such other perils as are from time to time included in the "all risk"
insurance policy(ies) carried by Landlord and Tenant pursuant to this Section
11, provided that such waiver shall apply only to the extent of any recovery by
the injured party under such insurance. In the event the other party is a
self-insurer (as may be permitted herein), such waiver shall be to the limit of
that insurance required to be carried hereunder. Each party hereto, on behalf of
its respective insurance companies hereby waives, to the extent of any recovery
under any such insurance policies, any right of subrogation that one may have
against the other, and Tenant, on behalf of its insurance companies, hereby
waives any right of subrogation which such insurer may have against any trust
deed holder. Each party hereto shall cause its respective insurance policies to
contain endorsements evidencing such waivers of subrogation. The foregoing
releases and waivers of subrogation shall be operative only so long as same
shall neither preclude the obtaining of insurance nor diminish, reduce or impair
the liability of any insurer. In the event that a waiver of subrogation cannot
be obtained, the other party is relieved of the obligation to obtain a waiver of
subrogation rights with respect to the particular insurance
involved.

     

    12.           WAIVER
AND INDEMNITY.

     

    12.1           Waiver
and Exemption of Landlord From Liability. Tenant hereby agrees that
except for damage or injury resulting from Landlord's sole active negligence or
willful misconduct, Landlord shall not be liable for injury to Tenant's business
or any loss of income, including damage to the goods, wares, merchandise or
other property of Tenant or of Tenant's employees, invitees, customers, or any
other person in or about the Premises, or the Common Areas. Landlord shall not
be liable, except when the damage or injury is a result of Landlord's sole
active negligence or willful misconduct, for injury to the person of Tenant,
Tenant's employees, agents or contractors, whether such damage or injury is
caused by or results from fire, steam, electricity, gas, water or rain, or from
the breakage, leakage, obstruction or other defects of pipes, sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures or from any other
cause, whether said damage or injury results from conditions arising upon the
Premises, or the Common Areas or from other sources or places and regardless of
whether the cause of such damage or injury or the means of repairing the same is
inaccessible to Tenant. Landlord shall not be liable for any damages arising
from any act or neglect of any other tenant, occupant or use of the Business
Park or from the failure of Landlord to enforce the provisions of any, other
lease in the Business Park. Tenant, as a material part of the consideration to
Landlord, hereby assumes all risk of damage to property of Tenant or injury to
persons, in, upon or about the Premises and elsewhere arising from the above or
any other causes, and Tenant hereby waives all claims in respect thereof against
Landlord.

     

    12.2           Tenant's Indemnity. Tenant
shall indemnify, protect, defend, and hold Landlord and Landlord's officers,
directors, employees and agents (collectively, "representatives") harmless
from and against any and all claims, actions, demands, proceedings, losses,
damages, costs of any kind or character (including reasonable attorneys' fees
and court costs), expenses, liabilities, judgments, fines, penalties, or
interest (collectively, "Losses"), arising from or out
of Tenant's use of the Premises, or from the conduct of Tenant's business or
from any activity, work or things done, permitted or suffered by Tenant in or
about the Premises or elsewhere. Tenant shall also indemnify, protect, defend,
and hold Landlord and Landlord's representatives harmless from and against any
and all Losses arising from any breach or default in the performance of any
obligation on Tenant's part to be performed under the terms of this Lease, or
arising from any act or omission of Tenant, or any of Tenant's agents,
contractors, or employees, and from and against all costs, attorneys' fees,
expenses and liabilities reasonably incurred in the defense of any such claim or
any action or proceeding brought thereon; and in case any action or proceeding
be brought against Landlord or any of Landlord's representatives by reason of
any such claim, Tenant upon notice from Landlord shall defend the same at
Tenant's expense by counsel reasonably satisfactory to Landlord and Landlord
shall cooperate with Tenant in such defense. Neither termination of this Lease
nor completion of the acts to be performed under this Lease shall release Tenant
from its obligations to defend or indemnify Landlord as required hereunder so
long as the event upon which any such Loss is predicated shall have occurred
prior to the effective date of any such termination or completion.

     

    12.3           Landlord's Indemnity. Landlord
shall defend, indemnify and hold Tenant and Tenant's representatives harmless
from and against any and all Losses arising in any way from (i) the sole active
negligence or willful misconduct of Landlord; or (ii) any breach or default in
the performance of any obligation on Landlord's part to be performed under this
Lease. Landlord shall defend any such action or proceeding brought against
Tenant or its representatives at Landlord's expense with counsel reasonably
satisfactory to Tenant. Neither termination of this Lease nor completion of the
acts to be performed under this Lease shall release Landlord from its
obligations to defend or indemnify Tenant as required hereunder so long as the
event upon which any such Loss is predicated shall have occurred prior to the
effective date of any such termination or completion.

     

    13.           DAMAGE
AND DESTRUCTION.

     

    13.1           Definitions.

     

    (a)           "Partial Damage" shall mean if
the Premises are damaged or destroyed to the extent that the cost of repair is
less than fifty percent (50%) of the then replacement cost of the
Premises.

     

    (b)           "Total Destruction" shall mean
if the Premises are damaged or destroyed to the extent that the cost of repair
is fifty percent (50%) or more of the then replacement cost of the
Premises.

     

    (c)           "Insured Loss" shall mean
damage or destruction which was covered by an event required to be covered by
the insurance described in Section 11.3. The fact that an Insured Loss has a
deductible amount shall not make the loss an uninsured loss.

     

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

     

    13.2           Partial Damage.

     

    (a)           Insured
Loss: Subject to the provisions of Sections 13.4 and 13.5, if at any time during
the Term there is damage which is an Insured Loss and which falls into the
classification of Partial Damage, then Landlord shall, at Landlord's expense,
repair such damage to the Premises, but not Tenant's fixtures or equipment, as
soon as reasonably possible and this Lease shall continue in full force and
effect. In no event, however, shall Landlord be obligated to spend for such
repairs more than the amount of available insurance proceeds, plus the amount of
any deductible elected by Landlord.

     

    (b)           Uninsured
Loss: Subject to the provisions of Sections 13.4 and 13.5, if at any time during
the Term there is damage which is not an Insured Loss and which falls within the
classification of Partial Damage, unless caused by a negligent or willful act of
Tenant (in which event Tenant shall make the repairs at Tenant's expense), which
damage causes substantial interference with the normal conduct of Tenant's
business, Landlord may at Landlord's option either (i) repair such damage as
soon as reasonably possible at Landlord's expense, in which event this Lease
shall continue in full force and effect, or (ii) give written notice to Tenant
within thirty days after the date of the occurrence of such damage of Landlord's
intention to cancel and terminate this Lease as of the date of the occurrence of
such damage. In the event Landlord elects to give such notice of Landlord's
intention to cancel and terminate this Lease, Tenant shall have the right within
ten days after the receipt of such notice to give written notice to Landlord of
Tenant's intention to repair such damage at Tenant's expense, without
reimbursement from Landlord, in which event this Lease shall continue in full
force and effect, and Tenant shall proceed to make such repairs as soon as
reasonably possible. If Tenant does not give such notice within such ten-day
period this Lease shall be canceled and terminated as of the date of the
occurrence of such damage.

     

    13.3           Total Destruction. Subject to
the provisions of Sections 13.4 and 13.5, if at any time during the Term there
is damage, whether or not it is an Insured Loss, which falls into the
classification of Total Destruction, then Landlord may at Landlord's option
either (i) repair such damage or destruction, but not Tenant's fixtures,
equipment or tenant improvements (except for tenant improvements initially
constructed at the commencement of the Term), as soon as reasonably possible at
Landlord's expense, and this Lease shall continue in full force and effect, or
(ii) give written notice to Tenant within thirty days after the date of
occurrence of such damage of Landlord's intention to cancel and terminate this
Lease, in which case this Lease shell be canceled and terminated as of the date
of the occurrence of such damage.

     

    13.4           Damage Near End of Term.
Subject to the following sentence, if at any time during the last year of the
Term of this Lease as extended from time to time there is substantial damage,
whether or not an Insured Loss, which falls within the classification of Partial
Damage, Landlord may at its option cancel and terminate this Lease as of the
date of occurrence of such damage by giving written notice to Tenant, within
thirty days after the date of occurrence of such damage, of Landlord's election
to terminate. Notwithstanding the foregoing, in the event that Tenant has an
option to extend or renew this Lease, and the time within which said option may
be exercised has not yet expired, Tenant shall exercise such option, if it is to
be exercised at all, no later than thirty days after the occurrence of an
Insured Loss falling within the classification of Partial Damage during the last
year of the Term. If Tenant duly exercises such option during the thirty day
period, Landlord shall, at Landlord's expense, repair such damage, but not
Tenant's fixtures, equipment or tenant improvements, as soon as reasonably
possible and this Lease shall continue in full force and effect; provided,
however, that In no event shall Landlord be obligated to spend for such repairs
more than the amount of available insurance proceeds, plus the amount of any
deductible elected by Landlord. If Tenant fails to exercise such option during
the thirty day period, then Landlord may at Landlord's option terminate and
cancel this Lease as of the date of the occurrence of such damage.

     

    13.5           Abatement of Rent. In the
event Landlord repairs or restores the Premises pursuant to the provisions of
this Section 13, the rent payable hereunder for the period during which such
damage, repair or restoration continues shall be abated in proportion to the
degree to which Tenant's normal and customary use of the Premises is impaired.
Except for abatement of rent, if any, Tenant shall have no claim against
Landlord for any damage suffered by reason of any such damage, destruction,
repair or restoration.

     

    13.6           Waiver. Landlord and Tenant
waive the provisions of any statutes which relate to termination of leases when
leased property is destroyed and agree that such event shall be governed by the
terms of this Lease.

     

    14.           CONDEMNATION.

     

    14.1           Total Condemnation of
Premises. If the whole of the Premises shall be taken by any public
authority under condemnation, the power of eminent domain, or by a sale in lieu
thereof under threat of condemnation (collectively "taking" or "taken" as the
case may be), then the Term shall cease as of the day of possession pursuant to
such taking, and the Rent shall be paid up to that day. Landlord shall refund
such rent as may have been paid in advance for the period subsequent to the date
of such possession.

     

    14.2           Partial
Condemnation.

     

    (a)           If
less than the whole but more than twenty percent (20%) of the Premises shall be
taken, Tenant shall have the right to terminate this Lease or, subject to
Landlord's right of termination as set forth in Section 14.2(b), to continue in
possession of the remainder of the Premises and shall notify Landlord in writing
within ten (10) days after notice of such taking of Tenant's intention. If
twenty percent (20%) or less of the Premises shall be so taken, the Term shall
cease with respect to the part so taken as of the day possession shall be taken,
and Tenant shall pay rent up to that day for the part so taken.

     

    (b)           If
more than twenty percent (20%) of the Building or more than twenty percent (20%)
of the Premises shall be taken, Landlord may, by notice to Tenant delivered on
or before the date surrendering possession, terminate this Lease.

     

    (c)           In
the event this Lease is not so terminated, Tenant shall remain in the portion of
the Premises not so taken, and all of the terms, provisions, covenants,
conditions, and agreements contained herein shall continue in effect with
respect to the portion not so taken, except that Base Rent shall be reduced in
proportion to the amount of the Premises taken, and Landlord shall, to the
extent of severance damages received by Landlord in connection with such
condemnation, repair any damage to the Premises caused by such condemnation
except to the extent that Tenant has been reimbursed therefor by the condemning
authority. Tenant shall pay any amount in excess of such severance damages
required to complete such repair.

     

    14.3           Landlord's and Tenant's
Damages. Any award for the taking of all or any part of the Premises
under the power of eminent domain or any payment made under threat of the
exercise of such power shall be the property of Landlord, whether such award
shall be made as compensation for diminution in value of the leasehold or for
the taking of the fee, or as severance damages; provided, however, that Tenant
shall be entitled to any award for loss of or damage to Tenant's trade fixtures,
moving costs and removable personal property to the extent separately awarded.
Tenant shall have the right to negotiate its award separately with the
condemning authority; provided, however, that Tenant's right to pursue its claim
shall be subordinate to the right of Landlord's first lien mortgagee to the
extent required to discharge the first lien mortgage after application of
Landlord's award.

     

    14.4           Waiver. This Article 14 is in
lieu of, and Tenant hereby expressly waives any rights it may have under, any
statute governing the condemnation of the Premises, including § 1932 and § 1933
of the California Civil Code and § 1265.130 of the California Code
of Civil Procedure.

     

    15.           ASSIGNMENT AND
SUBLETTING.

     

    15.1           Landlord's Consent Required.
Tenant shall not voluntarily or by operation of law assign, transfer, mortgage,
sublet, or otherwise transfer or encumber all or any part of Tenant's interest
in the Lease or in the Premises, without Landlord's prior written consent, which
shall not be unreasonably withheld. Any attempted assignment, transfer,
mortgage, encumbrance or sublease without such consent shall be void, and shall
constitute a breach of this Lease without the need for notice to
Tenant.

     

    15.2           Procedure. In the event Tenant
wishes to sublet or assign the Premises, or any portion thereof, Tenant shall
submit in writing to Landlord (i) the name of the proposed sublessee or
assignee, (ii) a statement describing the nature of the business to be carried
on in the Premises, (iii) a copy of the proposed sublease or assignment,
including all terms and conditions thereof, (iv) Landlord's lease application
form, completed by the proposed assignee or sublessee, (v) financial statements
for the proposed assignee or sublessee, which shall include, at a minimum, prior
year and year to date (current to within six months) balance sheets, income and
expense statements and sources and uses of cash statements, and (vi) such other
financial information regarding such sublessee or assignee as Landlord shall
reasonably request.

     

    15.3           Provisions Applicable to Both
Assignment and Subletting.

     

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

     

    (b)           The
consent by Landlord to any assignment or sublease shall not constitute a consent
to any subsequent assignment or sublease by Tenant or to any assignment or
sublease by the sublessee. However, Landlord may consent to subsequent subleases
and assignments of the sublease or any amendments or modifications thereto,
provided Landlord notifies Tenant or anyone else liable on the Lease or sublease
and Landlord shall obtain their consent thereto.

     

    (c)           If
Tenant subleases the Premises or any part of it or assigns any of its rights
under this Lease in and to the Premises, all rents paid by the sublessee or
assignee which are in excess of the amount of Base Rent and Additional Rent then
payable by Tenant under this Lease shall be the property of and shall be paid to
Landlord. Any attempt on the part of Tenant to enter into a sublease or
assignment which does not provide for the payment of such excess rent to
Landlord shall be deemed to be a material breach of this Lease. The parties
acknowledge that the provisions of this Section are a material inducement for
Landlord's execution of this Lease and that Tenant has represented and warranted
that its sole purpose for entering into this Lease is to obtain possession of
the Premises and not to generate revenues from the leasing or subleasing of any
portion of the Premises.

     

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

     

    15.4           Provisions Applicable to
Subletting. Regardless of Landlord's consent, the following terms and
conditions shall apply to any subletting by Tenant of all or any part of the
Premises and shall be included in subleases.

     

    (a)           Tenant
hereby assigns and transfers to Landlord all of Tenant's interest in all rentals
and income arising from any sublease made by Tenant, and Landlord may collect
such rent and income and apply the same toward Tenant's obligations under this
Lease; provided, however, that until a default shall occur in the performance of
Tenant's obligations under this Lease, Tenant may receive, collect and enjoy the
rents accruing under such sublease. Landlord shall not, by reason of any
assignment of such sublease to Landlord or by reason of the collection of the
rents from a sublessee, be deemed liable to the sublessee for any failure of
Tenant to perform and comply with any of Tenant's obligations to such sublessee
under such sublease. Tenant hereby irrevocably authorizes and directs any such
sublessee, upon receipt of a written notice from Landlord stating that a default
exists in the performance of Tenant's obligations under this Lease, to pay to
Landlord the rents due and to become due under the sublease. Tenant agrees that
such sublessee shall have the right to rely upon any such statement and request
from Landlord, and that such sublessee shall pay such rents to Landlord without
any obligation or right to inquire as to whether such default exists and
notwithstanding any notice from or claim from Tenant to the contrary. Tenant
shall have no right or claim against such sublessee or Landlord for any such
rents so paid by said sublessee to Landlord.

     

    (b)           No
sublease entered into by Tenant shall be effective unless and until it has been
approved in writing by Landlord. By entering into a sublease, any sublessee
shall be deemed, for the benefit of Landlord, to have assumed and agreed to
comply with all of Tenant's obligation hereunder, except to the extent such
obligations are contrary to or inconsistent with provisions contained in a
sublease to which Landlord has expressly consented in writing.

     

    (c)           Landlord's
written consent to any sublease of the Premises by Tenant shall not constitute
an acknowledgment that no default then exists under this Lease of the
obligations to be performed by Tenant nor shall such consent be deemed a waiver
of any then existing default, except as may be otherwise stated by Landlord at
the time in writing.

     

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

     

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

     

    (f)           The
consent by Landlord to any sublease shall not release Tenant from its
obligations or alter the primary liability of Tenant to pay the rent and perform
and comply with all of the obligations of Tenant to be performed under this
Lease.

     

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

     

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

     

    15.5           Attorneys' Fees. In the event
Tenant shall assign or sublet the Premises or request the consent of Landlord to
any assignment or sublease or if Tenant shall request the consent of Landlord
for any act Tenant proposes to do, then Tenant shall pay Landlord's reasonable
attorneys' fees incurred in connection therewith, such attorneys' fees not to
exceed $500.00 for each such request.

     

    15.6           Continuing Liability of
Tenant. No transfer permitted by this Section shall release Tenant or
change Tenant's primary liability to pay the rent and to perform all other
obligations of Tenant under this Lease. Landlord's acceptance of rent from any
other person is not a waiver of any provision of this Section. Consent to one
transfer is not a consent to any subsequent transfer. If Tenant's transferee
defaults under this Lease, Landlord may proceed directly against Tenant without
pursuing remedies against the transferee. Landlord may consent to subsequent
assignments or modifications of this Lease by Tenant's transferee, without
notifying Tenant or obtaining its consent. Such action shall not relieve Tenant
of its liability under this Lease.

     

    15.7           Effect of Termination. In the
event of Tenant's surrender of this Lease or the termination of this Lease in
any other manner, Landlord may, at its option, either terminate any or all
subtenancies or succeed to the interest of Tenant as sublessor thereunder. No
merger shall result from Tenant's sublease of the Premises under this Section,
Tenant's surrender of this Lease or the termination of this Lease in any other
manner.

     

    16.           DEFAULT
BY TENANT: REMEDIES.

     

    16.1           Events of Default. The
occurrence of any of the following (each, a "Default") shall constitute a
material breach or default by Tenant of its obligations hereunder:

     

    (a)           Failure
by Tenant to pay rent when due if the failure continues for three (3) days after
notice has been given to Tenant that the rent is delinquent.

     

    (b)           Failure
by Tenant to perform any provision of this Lease required of it other than
clause (a) above if the failure is not cured within ten (10) days after notice
has been given to Tenant. If, however, the failure cannot reasonably be cured
within the cure period, Tenant shall not be in default of this Lease if Tenant
com­mences to cure the failure within the cure period and diligently and in
good faith continues to cure the failure.

     

    (c)           To
the extent permitted by law, a general assignment by Tenant or any Guarantor of
the Lease for the benefit of creditors, or the filing by or against Tenant or
any Guarantor of any proceeding under any insolvency or bankruptcy law, unless
in the case of a proceeding filed against Tenant or any Guarantor the same is
dismissed within sixty (60) days, or the appointment of a trustee or receiver to
take possession of all or substantially all of the assets of Tenant or any
Guarantor, unless possession is restored to Tenant or such Guarantor within
thirty (30) days, or any execution or other judicially authorized seizure of all
or substantially all of Tenant's assets located upon the Premises or of Tenant's
interest in this Lease, unless such seizure is discharged within thirty days
(each, an "Insolvency
Event").

     

    16.2           Default Notices. Notices given
under this Section will specify the alleged failure or breach and the applicable
Lease provisions; and shall demand that Tenant perform the provisions of this
Lease or pay the rent that is delinquent, as the case may be, within the
applicable period of time or quit the Premises. No such notice shall be deemed a
forfeiture or a termination of this Lease unless Landlord so elects in the
notice. The purpose of the notice requirements in this Section is to extend the
notice requirements of the unlawful detainer statutes. Such notice shall,
however, be In lieu of and not in addition to any notice required under the
unlawful detainer statutes.

     

    16.3           Landlord's Remedies. Landlord
shall have the below listed remedies if Tenant commits a default. These remedies
are not exclusive; they are cumulative to any remedies now or later allowed by
law.

     

    (a)           Landlord
may terminate Tenant's right to possession of the Premises at any time. No act
by Landlord other than giving notice of termination to Tenant shall terminate
this Lease. Acts of maintenance, efforts to relet the Premises or the
appointment of a receiver on Landlord's initiative to protect Landlord's
interest under this Lease shall not constitute a termination of Tenant's right
to possession. On termination, Landlord shall have the right to recover from
Tenant:

     

    (i)           The
worth at the time of the award of the unpaid rent that had been earned at the
time of termination of this Lease;

     

    (ii)           The
worth at the time of the award of the amount by which the unpaid rent that would
have been earned after the date of termination of this Lease until the time of
award exceeds the amount of the loss of rent that Tenant proves could have been
reasonably avoided;

     

    (iii)           The
worth at the time of the award of the amount by which unpaid rent for the
balance of the Term after the time of award exceeds the amount of the loss of
rent that Tenant proves could have been reasonably avoided; and

     

    (iv)           Any
other amount, including reasonable attorneys' fees and court costs, necessary to
compensate Landlord for all detriment proximately caused by Tenant's default or
which in the ordinary course of things would be likely to result
therefrom.

     

    The
phrase "worth at the time of the award" as used in clauses (i) and (ii) above is
to be computed by allowing interest at the rate of twelve percent (12%) per
annum, but not to exceed the then legal rate of interest. The same phrase as
used in clause (iii) above is to be computed by discounting the amount at the
discount rate of the Federal Reserve Bank of San Francisco at the time of the
award, plus one percent (1%).

     

    (b)           Landlord
may exercise the remedy provided in California Civil
Code §1951.4, that is, Landlord may continue this Lease In full force and
effect, and collect Base Rent and Excess Operating Expenses as they become due,
so long as Landlord does not terminate Tenant's right to possession pursuant to
Section 16.3(a) above. During the period that Tenant is in default, Landlord may
enter the Premises and relet them or any part of them, to third parties for
Tenant's account, for a shorter or longer term than the Term of this Lease, and
for such rental and on such other terms as Landlord, in its sole discretion,
shall deem advisable and Tenant shall be immediately liable to Landlord for all
costs which Landlord incurs in reletting the Premises, including, without
limitation, broker's commissions, advertising expenses, the cost of remodeling
the Premises which may be required for reletting, and all such similar costs. No
act by Landlord pursuant to this Section shall terminate this Lease unless
Landlord shall notify Tenant that it elects to terminate this Lease. After
Tenant's default and for as long as Landlord does not terminate Tenant's right
to possession of the Premises, Tenant shall have the right to assign its
interest in the Lease upon the reasonable prior consent of Landlord; provided,
however, that Tenant shall not be released from any liability under this Lease
as a result of such assignment.

     

    (c)           Landlord
may, after expiration of any applicable cure period, unless there is an
emergency (in which case Landlord need not wait), correct or remedy any failure
of Tenant not timely cured. The reasonable cost paid by Landlord to correct or
remedy any such default will immediately become due and payable to Landlord as
additional rent.

     

    (d)           Nothing
contained in this Lease shall limit Landlord to the remedies specifically set
forth in this Section 16.3. Upon Tenant's default or breach, Landlord shall be
entitled to exercise any right or remedy then provided by law, including without
limitation the right to obtain injunctive relief and the right to recover all
damages caused by Tenant's default or breach in the performance of any of its
obligations under this Lease.

     

    16.4           Interest. Any amount owed to
Landlord under the terms and provisions of this Lease which is not paid when due
shall bear interest at the highest rate allowed by applicable law from the date
the same becomes due and payable by the terms and provisions of this Lease until
paid, unless otherwise specifically provided in this Lease.

     

    16.5           Mitigation. Efforts by
Landlord to mitigate damages caused by Tenant's breach shall not be construed as
a waiver of Landlord's right to recover damages.

     

    16.6           Right of Landlord to Re-Enter.
In the event of any termination of this Lease, Landlord shall have the immediate
right to enter upon and repossess the Premises, and any personal property of
Tenant may be removed from the Premises and stored in any public warehouse at
the risk and expense of Tenant.

     

    16.7           Recapturable Expenses. Tenant
acknowledges that Landlord has undertaken or may undertake certain expenses in
connection with the Lease, including payment of some or all of the following:
brokerage commissions, the costs of any Landlord's Work, moving expenses or
other categories of cost or expense ("Recapturable Expenses").
Notwithstanding any provision or implication to the contrary in this Lease, in
the event of premature termination of the Term of this Lease pursuant to Section
16.3(a) following Tenant's default, there shall be immediately due and payable
from Tenant, as Additional Rent which has been fully earned at the time of
termination, the unamortized portion of the Recapturable Expenses actually
incurred by Landlord. For purposes of this Section, the unamortized portion of
the Recapturable Expenses shall be determined by multiplying the total
Recapturable Expenses actually incurred by Landlord by a fraction, the numerator
of which is the number of months remaining in the Term following premature
termination in which unabated Base Rent would have been payable to Landlord
pursuant to the Lease, and the denominator of which is the total number of
months in the Term, both before and after the premature termination, in which
unabated Base Rent was paid or would have been payable to Landlord had the Lease
not been terminated. Any Recapturable Expenses due to Landlord in accordance
with this Section shall be in addition to any sums otherwise recoverable
pursuant to Section 16.3(a) of this Lease.

     

    17.           TENANT'S
INSOLVENCY.

     

    17.1           Applicability of Section. In
addition to any rights or remedies of Landlord under the terms of this Lease,
the following provisions shall specifically apply upon the occurrence of an
Insolvency Event (as defined in Section 16.1(c) above).

     

    17.2           Assumption Or Rejection Of
Lease.

     

    (a)           Notwithstanding
anything to the contrary contained herein, Tenant as debtor in possession and
any receiver or trustee in bankruptcy for Tenant (collectively, "Tenant's Trustee") shall either assume
or reject this Lease within sixty (60) days following the entry of an order for
relief or within such earlier time as may be provided by applicable
law.

     

    (b)           Notwithstanding
anything to the contrary contained herein, in the event that this Lease is
attempted to be assumed under the Bankruptcy Code by Tenant's Trustee during the
existence of any Default by Tenant, no such attempted assumption shall be
effective unless and until Tenant's Trustee: (i) cures, or provides adequate
assurance that it will promptly cure, such Default; and (ii) compensates, or
provides adequate assurance that it will promptly compensate, Landlord for any
actual pecuniary loss to Landlord resulting from such Default; and (iii)
provides adequate assurance of future performance of Tenant's obligations and
covenants under this Lease. Landlord shall be entitled to reimbursement from the
estate of Tenant for all actual costs incurred by Landlord in considering any
proposed assignee of the Lease pursuant to this Section 17.

     

    (c)           Tenant's
Trustee may assign this Lease pursuant to the provisions of the Bankruptcy Code
only if: (A) Tenant's Trustee assumes the Lease in accordance with the above
provisions of this Section 17.2; and (B) the assignee of Tenant's Trustee
assumes all of the obligations arising under this Lease and provides adequate
assurance of its future performance of Tenant's obligations and covenants under
this Lease (whether or not a Default has occurred under the Lease). Any such
assignee shall, upon demand, execute and deliver to Landlord, an instrument
confirming such assumption.

     

    (d)           For
purposes of Section 17.2(b) and (c), the term "adequate assurance of future
performance" shall include, without limitation, at least the
following:

     

    (i)           Any
proposed assignee must have, as demonstrated to Landlord's satisfaction, a net
worth (as defined in accordance with generally accepted accounting principles
consistently applied) in an amount sufficient to assure that the proposed
assignee will have the resources to meet the financial responsibilities under
this Lease, including the payment of all rent. The financial condition and
resources of Tenant and any Guarantor(s) are material inducements to Landlord
entering into this Lease.

     

    (ii)           Any
proposed assignee must have engaged in the permitted use described in Section
1.13 for at least five (5) years prior to any such proposed
assignment.

     

    (iii)           In
entering into this Lease, Landlord considered extensively Tenant's permitted use
and determined that such permitted business would add substantially to the
tenant balance in the Business Park, and were it not for Tenant's agreement to
operate only Tenant's permitted business on the Premises, Landlord would not
have entered into this Lease. Landlord's anticipated benefits from the lease of
the Premises will be materially impaired if a trustee in bankruptcy or any
assignee of this Lease operates any business other than Tenant's permitted
business.

     

    (iv)           Any
assumption of this Lease by a proposed assignee shall not adversely affect
Landlord's relationship with any of the remaining tenants in the Premises,
taking into consideration any and all other "use" clauses and/or "exclusivity"
clauses which may then exist under their leases with Landlord.

     

    (v)           Any
proposed assignee must not be engaged in any business or activity which it will
conduct on the Premises and which will subject the Premises to contamination by
any Hazardous Materials.

     

    (vi)           The
percentage rent, if any, due under this Lease shall not decline
substantially.

     

    (vii)           Any
assumption or assignment of this Lease shall not breach substantially any
provision in any other lease, financing agreement, or master agreement relating
to the Business Park;

     

    (viii)           Any
assumption or assignment of this Lease shall not alter or affect materially any
other obligation or duty of Tenant nor be used to circumvent the remainder of
the provisions of this Lease.

     

    18.           DEFAULT
BY LANDLORD.

     

    18.1           Landlord's Default. Landlord
shall be in default if Landlord fails to perform any provision of this Lease
required of it and the failure is not cured within thirty (30) days after notice
has been given to Landlord. If, however, the failure cannot reasonably be cured
within the cure period, Landlord shall not be in default of this Lease if
Landlord commences to cure the failure within the cure period and diligently and
in good faith continues to cure the failure. Notices given under this Section
shall specify the alleged breach and the applicable Lease provisions. If
Landlord shall at any time default beyond the applicable notice and cure period,
Tenant shall have the right to cure such default on Landlord's behalf. Any sums
expended by Tenant in doing so, and all reasonably necessary incidental costs
and expenses incurred in connection therewith, shall be payable by Landlord to
Tenant within thirty days following demand therefor by Tenant; provided,
however, that Tenant shall not be entitled to any deduction or setoff against
any rent otherwise payable to Landlord under this Lease.

     

    18.2           Notice to Mortgagee(s).
Whenever Tenant serves notice on Landlord of Landlord's default, written notice
shall also be served at the same time upon the Mortgagee under any first- or
second-priority Mortgage; provided, however, that Tenant shall have no
obligation to provide such notice unless and until Tenant has received written
notice of the Mortgagee's existence and address. Such Mortgagee shall have the
periods of time within which to cure Landlord's defaults as are provided in
Section 18.1, which periods shall commence to run thirty (30) days after the
commencement of the periods within which Landlord must cure its defaults under
Section 18.1. In this connection, any representative of the Mortgagee shall have
the right to enter upon the Premises for the purpose of curing Landlord's
default. Such Mortgagee shall notify Landlord and Tenant of the address of such
Mortgagee to which such notice shall be sent, and the agreements of Tenant under
this Section are subject to prior receipt of such notice. If the nature of the
default is such that the Mortgagee's possession is required to cure the default,
then Tenant will not terminate the Lease so long as such Mortgagee commences
proceedings to obtain possession of the Premises within the period of time
afforded to the Mortgagee to cure such default, and once the Mortgagee has
obtained possession, diligently proceeds to cure the default. Nothing contained
in this Lease shall be construed to impose any obligation on any Mortgagee to
cure any default by Landlord under the Lease.

     

    19.           SUBORDINATION
AND ESTOPPEL.

     

    19.1           Subordination. Subject to the
provisions of this Section 19, at the option and upon written declaration of
Landlord, this Lease and the leasehold estate created hereby shall be subject,
subordinate and inferior to the lien and charge of any Mortgage; provided,
however, that this Lease shall not be subordinate to any Mortgage arising after
the date of this Lease, or any renewal, extension or replacement thereof, unless
and until Landlord provides Tenant with an agreement from the Mortgagee of the
type normally provided by commercial lenders in southern California ("Non-Disturbance Agreement"),
setting forth that so long as Tenant is not in default hereunder, Landlord's and
Tenant's rights and obligations hereunder shall remain in force and Tenant's
right to possession shall be upheld. Subject to the foregoing condition, (i)
Landlord hereby expressly reserves the right, at its option and declaration, to
place Mortgages upon and against the Premises and/or any part thereof, superior
in lien and effect to this Lease and the estate created hereby, and (ii)
Landlord shall be entitled to sign, acknowledge and record in the Office of the
County Recorder of the County in which the Premises are situated, a declaration
that this Lease and leasehold estate are subject, subordinate and Inferior to
any Mortgage placed or to be placed by Landlord upon or against the Premises
and/or any part thereof (in favor of any Mortgagee, trustee or title insurance
company insuring the interest of any such Mortgagee), recordation of which
shall, of and by itself and without further notice to or act or agreement of
Tenant, make this Lease and the estate created hereby subject, subordinate and
inferior thereto. Notwithstanding the foregoing, Tenant shall, promptly
following a request by Landlord and after receipt of the Non-Disturbance
Agreement, execute and acknowledge any subor­dination agreement or other
documents required to establish of record the priority of any such Mortgage over
this Lease, so long as such agreement does not otherwise increase Tenant's
obligations or diminish Tenant's rights hereunder.

     

    19.2           Attornment. In the event of
foreclosure of any Mortgage, whether superior or subordinate to this Lease, then
(a) this Lease shall continue in force; (b) Tenant's quiet possession shall not
be disturbed if Tenant is not in default hereunder; (c) Tenant shall attorn to
and recognize the Mortgagee or purchaser at foreclosure sale ("New Owner") as Tenant's
landlord for the remaining term of this Lease; and (d) the New Owner shall not
be bound by (i) any payment of rent for more than one month in advance, (ii) any
amendment, modification or ending of this Lease without the New Owner's consent
after the New Owner's name is given to Tenant, unless the amendment,
modification or ending is specifically authorized by the original Lease and does
not require landlord's prior agreement or consent, or (iii) any liability for
any act or omission of a prior Landlord. At the request of the New Owner, Tenant
shall execute a new lease for the Premises, setting forth all of the provisions
of this Lease except that the term of the new lease shall be for the balance of
the Term.

     

    19.3           Estoppel Certificate. Tenant
shall execute and deliver to Landlord, within ten days after receipt of
Landlord's request, any estoppel certificate or other statement to be furnished
to any prospective purchaser of or any lender against the Premises. Such
estoppel certificate shall acknowledge and certify each of the following
matters, to the extent each may be true: that the Lease is in effect and not
subject to any rental offsets, claims or defenses to its enforcement; the
commencement and termination dates of the Term; that Tenant is paying rent on a
current basis; that any Landlord's Work required to be furnished under the Lease
has been completed in all respects; that the Lease constitutes the entire
agreement between Tenant and Landlord relating to the Premises; that Tenant has
accepted the Premises and is in possession thereof; that the Lease has not been
modified, altered or amended except in specified respects by specified
instruments; and that Tenant has no notice of any prior assignment,
hypothecation or pledge of rents or the Lease. Tenant shall also, upon request
of Landlord, certify and agree for the benefit of any Mortgagee against the
Premises or the Building that Tenant will not look to such Mortgagee: as being
liable for any act or omission of Landlord; as being obligated to cure any
defaults of Landlord under the Lease which occurred prior to the time Mortgagee,
its successors or assigns, acquired Landlord's interest in the Premises by
foreclosure or otherwise; as being bound by any payment of Base Rent or
Additional Rent by Tenant to Landlord for more than one month in advance; or as
being bound by Landlord to any amendment or modification of the Lease without
Mortgagee's written consent.

     

    19.4           Remedies. Failure of the
Tenant to sign any statement or instrument delivered by Landlord or Mortgagee to
effectuate the provisions of this Section 19 within ten (10) days after request
to do so by Landlord shall constitute a material breach of this Lease, and
Landlord shall have the right, by not less than ten (10) days' notice to Tenant,
to declare this Lease terminated and the Term ended; in which event, this Lease
shall cease and terminate on the date specified in such notice with the same
force and effect as though the date set forth in such notice were the date
originally set forth herein and fixed as the Expiration Date, and Tenant shall
vacate and surrender the Premises but shall remain liable as hereinafter
provided. The foregoing shall be in addition to, rather than in lieu of, any
remedies or rights Landlord may now or hereafter have hereunder or at law or in
equity.

     

    20.           HAZARDOUS
MATERIALS.

     

    20.1           Tenant's Environmental
Questionnaire. Tenant warrants and represents, and acknowledges that this
Lease was entered into by Landlord in material reliance upon, the information
set forth in the environmental questionnaire, in the form attached as
Exhibit E, that was previously delivered by Tenant to
Landlord.

     

    20.2           Tenant's
Obligations.

     

    (a)           Tenant
shall at all times and in all respects comply with all Hazardous Materials Laws,
and shall, at its own expense, procure, maintain in effect and comply with all
conditions of any and all permits, licenses, and other governmental and
regulatory approvals required for Tenant's use of the Premises, including,
without limitation, discharge of (appropriately treated) materials or wastes
into or through any sanitary sewer serving the Premises. Except as discharged
into the sanitary sewer in strict accordance and conformity with all applicable
Hazardous Materials Laws, Tenant shall cause any and all Hazardous Materials
removed from the Premises to be removed and transported solely by duly licensed
haulers to duly licensed facilities for final disposal of such materials and
wastes. Tenant shall in all respects handle, treat, deal with and manage any and
all Hazardous Materials in, on, under or about the Premises in total conformity
with all applicable Hazardous Materials Laws and prudent industry practices
regarding management of such Hazardous Materials.

     

    (b)           Upon
expiration or earlier termination of the Term, Tenant shall cause all Hazardous
Materials to be removed from the Premises and transported for use, storage or
disposal in accordance with and compliance with all applicable Hazardous
Materials Laws.

     

    (c)           Except
in the event of an emergency, Tenant shall not take any remedial action in
response to the presence of any Hazardous Materials in or about the Premises,
nor enter into any settlement agreement, consent decree or other compromise in
respect to any claims relating to any Hazardous Materials in any way connected
with the Premises, without first notifying Landlord of Tenant's intention to do
so and affording Landlord ample opportunity to appear, intervene or otherwise
appropriately assert and protect Landlord's interest with respect
thereto.

     

    (d)           Tenant
shall immediately notify Landlord in writing of: (i) any enforcement, cleanup,
removal or other governmental or regulatory action instituted, completed or
threatened pursuant to any Hazardous Materials Laws; (ii) any claim made or
threatened by any person against Tenant or the Premises relating to damage,
contribution, cost recovery compensation, loss or injury resulting from or
claimed to result from any Hazardous Materials; and (iii) any reports made to
any environmental agency arising out of or in connection with any Hazardous
Materials in or removed from the Premises, including any complaints, notices,
warnings or asserted violations in connection therewith. Tenant shall also
supply to Landlord as promptly as possible, and in any event within five
business days after Tenant first receives or sends the same, copies of all
claims, reports, complaints, notices, warnings or asserted violations, relating
in any way to the Premises or Tenant's use thereof. Tenant shall promptly
deliver to Landlord copies of hazardous waste manifests reflecting the legal and
proper disposal of all Hazardous Materials removed from the
Premises.

     

    20.3           Indemnity. With respect to
Tenant's use and occupancy of the Premises and Common Areas, Tenant shall
indemnify, defend (by counsel reasonably acceptable to Landlord), protect, and
hold Landlord and each of Landlord's officers, directors, shareholders,
employees, agents, attorneys, successors and assigns, free and harmless from and
against any and all claims, liabilities, penalties, forfeitures, losses or
expenses (including attorneys' fees), or death of or injury to any person or
damage to any property whatsoever, arising from or caused in whole or in part,
directly or indirectly, by (a) the presence in, on, under or about the Premises,
or discharge in or from the Premises, of any Hazardous Materials that arose or
occurred during Tenant's occupancy thereof; (b) Tenant's use, analysis, storage,
transportation, disposal, release, threatened release, discharge or generation
of Hazardous Materials to, in, on, under, about or from the Premises; or (c)
Tenant's failure to comply with any Hazardous Materials Law. Tenant's
obligations hereunder shall include, without limitation, and whether foreseeable
or unforeseeable, all costs of any required or necessary repair, cleanup or
detoxification or decontamination of the Premises, or the preparation and
implementation of any closure, remedial action or other required plans in
connection therewith, and shall survive the expiration or earlier termination of
the Term. For purposes of the release and indemnity provisions hereof, any acts
or omissions of Tenant, or by employees, agents, assignees, subtenants,
contractors or subcontractors of Tenant or others acting for or on behalf of
Tenant (whether or not they are negligent, intentional, willful or unlawful)
shall be strictly attributable to Tenant.

     

    21.           NOTICE.
All notices, demands or requests from one party to the other shall be in
writing. Notices may be personally delivered, sent by Federal Express or other
reputable express delivery service, sent by telecopier with first-class mail
backup, or sent by certified mail, postage prepaid, to the addresses set forth
at Section 1.17 or 1.18, as applicable. Notices shall be deemed received upon
actual delivery to the addressee with respect to personal or express delivery
service or telecopier, and three (3) days after deposit in the mails with
respect to mailing. Each party shall have the right, from time to time, to
designate a different address by notice given in conformity with this Section to
the other party.

     

    22.           OTHER
TERMS AND CONDITIONS.

     

    22.1           Signage. Tenant shall not
place or permit to be placed, any sign, advertisement, notice or other similar
matter on the doors, windows, exterior walls, roof or other areas of the
Premises which are open to the view of persons outside the Premises, except in
accordance with Landlord's signage plan which is attached as Exhibit
D.

     

    22.2           Parking. In connection with
its use and occupancy of the Premises, Tenant shall have the right to park in
the parking area of the Project, at no additional charge and on a non-reserved
basis and on terms and conditions to be established by the Landlord from time to
time during the Term, no more than the number of vehicles set forth in Section
1.16. The parking authorized by this Section shall be for personal
transportation to and from the Premises, and not for long-term storage of
automobiles or for short- or long-term storage of boats, trailers or
recreational vehicles. Landlord reserves the right to designate certain parking
areas in the Project as being for the exclusive use of other tenants of the
Project.

     

    22.3           Site Plan. The purpose of the
site plan attached hereto as Exhibit A is to show the intended development of
the Project, the approximate locations of building areas, traffic lanes,
sidewalks, parking areas, curb cuts and abutting thoroughfares, and of the
Premises, and those intended to be leased to other tenants, whether named
thereon or not. All such information is subject to change at Landlord's option
without notice, and no rights are granted to Tenant by the inclusion of said
plot plan as a part of this Lease. No representations or warranties are made by
Landlord that the Project or the Business Park will be developed as shown. The
foregoing is in addition to, not in substitution of, all rights reserved to
Landlord pursuant to Section 3 above.

     

    22.4           Easements. Landlord reserves
to itself the right, from time to time, to grant such easements, rights and
dedications as Landlord deems necessary or desirable, and to cause the
recordation of parcel maps and restrictions, so long as such easements, rights,
dedications, maps and restrictions do not unreasonably interfere with Tenant's
normal conduct of its business on the Premises. Tenant shall sign any of the
aforementioned documents upon request of Landlord and failure to do so shall
constitute a material default of this Lease by Tenant without the need for
further notice to Tenant.

     

    22.5           No Light, Air or View
Easements. No diminution or shutting off of light, air or view by any
structure which may be erected on lands adjacent to the Building shall in any
way affect this Lease or impose any liability on Landlord.

     

    22.6           Security Measures. Tenant
acknowledges that Landlord does not intend to provide guard service or other
security measures for the benefit of the Premises. Tenant assumes all
responsibility for the protection of Tenant, its agents, and invitees and the
property of Tenant and of Tenant's agents and invitees from acts of third
parties, and assumes all risk in connection with any failure to provide or lack
of such security measures. Tenant hereby waives any and all claims for damages
to persons or property sustained by Tenant, or by any other person or entity,
arising from, out of or in connection with, or alleged to arise from, out of or
in connection with, Landlord's not providing any security measure for the
Premises or Project. Nothing herein contained shall prevent Landlord, at
Landlord's sole option, from providing security protection for the Premises, in
which event the costs thereof shall be included within Operating
Expenses.

     

    22.7           Holding Over By Tenant. Tenant
agrees upon the expiration or termination of this Lease, immediately and
peaceably to yield up and surrender the Premises; notice to quit or vacate is
hereby expressly waived. Tenant shall be liable to Landlord for any and all
damages incurred by Landlord as the result of any failure by Tenant to timely
surrender possession of the Premises as required herein. If Tenant shall hold
over after the expiration of this Lease for any cause, such holding over shall
be deemed a tenancy at sufferance or, at the sole discretion of Landlord, a
tenancy from month-to-month, in which event such month-to-month tenancy shall be
upon the same terms, conditions and provisions set forth In this Lease, at one
and one-half (1 1/2) times the Base Rent that was in effect immediately prior to
the termination.

     

    22.8           Landlord's Right of Entry.
Landlord and Landlord's agents may enter upon the Premises at any reasonable
time and upon reasonable notice (except no notice shall be required in an
emergency) to make such repairs, additions or improvements as Landlord shall
deem necessary; to post such notices as Landlord may deem necessary to exempt
Landlord and Landlord's interest in the Building and Premises from
responsibility on account of any work or repairs done by Tenant upon or in
connection with the Premises; to inspect and examine the Premises and see that
the covenants hereof are being kept and performed; or to exhibit the Premises to
prospective tenants or purchasers.

     

    22.9           Relocation. Tenant
acknowledges that, upon not less than thirty (30) days' prior written notice
from Landlord, Landlord shall have the right to relocate Tenant to another
premises within the Business Park. Tenant acknowledges that such relocation
right reserved to Landlord shall be exercisable in Landlord's sole discretion,
for purposes of accomplishing Landlord's plan for the delicate Tenant mix and
harmony within the Business Park; provided, however, that any such relocation
shall be at Landlord's expense, but only to the extent necessary to insure that
upon such relocation Tenant shall occupy a Premises of substantially the same
square footage, utility capacity, and basic amenities as were provided to Tenant
as part of the Premises leased hereunder.

     

    22.10           Furnishing of Financial
Statements. Tenant acknowledges that Landlord entered into this Lease in
reliance upon receiving current and periodic financial reports documenting the
progress of Tenant's business operations. Accordingly, Tenant shall deliver to
Landlord, within ten (10) days after request therefor from time to time and in
any event no later than June 30 of each year of the Term, financial statements
reflecting Tenant's current financial condition and financial statements for
each of the two (2) years prior to the then-current fiscal statement year. Such
statements shall be prepared in accordance with generally accepted accounting
principles and, if such is the normal practice of Tenant, shall be audited by an
independent certified public accountant.

     

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

     

    22.12           Keys. Two (2) keys to the
Premises will be furnished by Landlord. Additional keys will be furnished upon
Tenant paying Landlord the cost thereof. No additional lock or locks shall be
placed by Tenant on any door in the Building unless written consent of Landlord
shall have been first obtained; and, should such consent be so obtained,
Landlord shall be supplied with keys to each such lock and no other than the
employees of Landlord or those it has authorized in writing shall work on or
modify any lock which is part of the Premises. Tenant shall not cause or allow
the duplication of any keys to be made, and Tenant shall not cause or allow any
keys to be possessed by any person other than an authorized agent of Tenant.
Tenant agrees, at the termination of the tenancy, to return all keys of all
doors.

     

    22.13           Other Tenancies. Landlord
reserves the absolute right to effect such other tenancies in the Business
Center as Landlord, in the exercise of its sole business judgment, shall
determine to promote the best interest thereof. Tenant does not rely on the
fact, nor does Landlord represent, that any specific tenants shall, during the
Term of this Lease, occupy any space in the Business Park, notwithstanding the
appearance of any names of tenants on the site plan attached hereto as Exhibit
A, or any replacements or substitutions thereof.

     

    22.14           Brokers' Fees. Landlord has
agreed to pay a fee for brokerage services rendered in this transaction to the
broker(s) identified in Section 1.15. Such brokerage commission shall be payable
in accordance with the separate written agreement between Landlord and such
broker(s), which alone shall govern such brokers' entitlement to any commission.
Landlord and Tenant each represent and warrant to the other that no broker,
agent or finder, licensed or otherwise has been engaged by it, respectively, in
connection with the transaction contemplated by this Agreement, other than the
broker(s) named above. In the event of any other claim for broker's, agent's or
finder's fee or commission in connection with this transaction, the party upon
whose alleged statement, representation or agreement such claim or liability
arises shall indemnify, save, hold harmless and defend the other party from and
against such claim and liability.

     

    23.           GENERAL
PROVISIONS.

     

    23.1           Exculpation. The obligations
of Landlord under this Lease do not constitute personal obligations of Landlord
or its directors, officers or shareholders, and Tenant shall look solely to the
Project and to no other assets of Landlord for satisfaction of any liability
with respect to this Lease, and agrees not to seek recourse against the
directors, officers or shareholders of Landlord, nor against any of their
personal assets, for such satisfaction.

     

    23.2           Conveyance By Landlord.
Landlord shall be free at all times, without need of consent or approval by
Tenant, to assign its interest in this Lease and/or to convey fee title to the
Premises. Each conveyance by Landlord of Landlord's interest in the Lease or the
Premises prior to expiration or termination hereof shall be subject to this
Lease and shall relieve the grantor of any further obligations or liability as
Landlord, and Tenant shall look solely to Landlord's successor in interest for
all future obligations of Landlord. Tenant hereby agrees to attorn to Landlord's
successors in interest, whether such interest is acquired by sale, transfer,
foreclosure, deed in lieu of foreclosure or otherwise. The term "Landlord` as
used in this Lease, so far as covenants and obligations on the part of Landlord
are concerned, shall be limited to mean and include only the owner at the time
in question of the fee title of the Premises. Without further agreement, the
transferee of such title shall be deemed to have assumed and agreed to observe
and perform any and all obligations of Landlord hereunder during its ownership
of the Premises.

     

    23.3           Quiet Enjoyment. Landlord
agrees that so long as Tenant is not in default hereunder Tenant shall have the
quiet enjoyment of the Premises without hindrance on the part of Landlord.
Landlord further agrees that Landlord will warrant and defend Tenant in the
peaceful and quiet enjoyment of the Premises against the lawful claims of all
persons claiming by, through or under Landlord.

     

    23.4           No Accord and Satisfaction. No
payment by Tenant or receipt by Landlord of a lesser amount than the rent herein
stipulated shall be deemed to be other than on account of the earliest
stipulated rent, nor shall any endorsement or statement on any check or any
letter accompanying any check or payment as rent be deemed an accord and
satisfaction, and Landlord shall accept such check or payment without prejudice
to Landlord's right to recover the balance of such rent or pursue any other
remedy in this Lease provided.

     

    23.5           Waiver. No delay or omission
in the exercise of any right or remedy of Landlord for any Default by Tenant
hereunder shall impair such right or remedy or be construed as a waiver thereof.
One or more waivers of any covenant or condition by Landlord shall not be
construed as a waiver of a subsequent breach of the same covenant or condition,
and the consent or approval by Landlord to or of any act by Tenant requiring
Landlord's consent or approval shall not be deemed to render unnecessary
Landlord's consent or approval to or of any subsequent similar act by Tenant. No
breach of a covenant or condition of this Lease shall be deemed to have been
waived by Landlord unless such waiver is in writing signed by Landlord. The
acceptance of any rent or other charges hereunder shall not be deemed a waiver
of any breach or Default hereunder other than the payment of the amount accepted
by Landlord.

     

    23.6           Cumulative Rights. The various
rights, options, elections, powers and remedies contained in this Lease shall be
construed as cumulative and no one of them shall be exclusive of any of the
others, or of any other legal or equitable remedy which either party might
otherwise have in the event of breach or default in the terms hereof, and the
exercise of one right or remedy by such party shall not impair its right to any
other right or remedy until all obligations imposed upon the other party have
been fully performed.

     

    23.7           Independent Covenants. This
Lease shall be construed as though the covenants herein between Landlord and
Tenant are independent and not dependent, and Tenant hereby expressly waives the
benefit of any statute to the contrary and agrees that if Landlord fails to
perform its obligations set forth herein, Tenant shall not be entitled to make
any repairs or perform any acts hereunder at Landlord's expense or to any setoff
of the rent or other amounts owing hereunder against Landlord; provided,
however, the foregoing shall in no way impair the right of Tenant to commence a
separate action against Landlord for any violation by Landlord of the provisions
hereof so long as notice is first given to Landlord and any Mortgagee (of whose
address Tenant has theretofore been notified) and an opportunity is granted to
Landlord and such holder to correct such violation as provided
above.

     

    23.8           Relationship of the Parties.
Nothing contained herein shall be deemed or construed by the parties hereto, nor
by any third party, as creating the relationship of principal and agent or of
partnership or of joint venture between the parties hereto, it being understood
and agreed that neither the method of computation of rent, nor any other
provision contained herein, nor any acts of the parties hereto, shall be deemed
to create any relationship between the parties hereto other than the
relationship of landlord and tenant.

     

    23.9           Force Majeure. If either party
is delayed in the performance of any covenant of this Lease because of any of
the following causes, then such performance shall be excused for the period of
the delay and the period for such performance shall be extended for a period
equivalent to the period of such delay: acts of the other party; action of the
elements; war, riot or civil insurrection; building moratoria, trip generation
restrictions or other similar action by the City of San Diego or other
governmental agency or entity; labor disputes; inability to procure or a general
shortage of labor or materials in the normal channels of trade; delay in
transportation; delay in inspections; or any other cause beyond the reasonable
control of the party so obligated, whether similar or dissimilar to the
foregoing, financial inability excepted; provided, however, that except as
specifically set forth elsewhere in this Lease, no such events shall affect
Tenant's obligation to pay Base Rent, Additional Rent or any other amount
payable under this Lease, nor shall such events affect the length of the Term
(except to the extent expressly provided herein).

     

    23.10           Consents. With respect to any
provision of this Lease which either provides or is held to provide that
Landlord shall not unreasonably withhold or unreasonably delay any consent or
approval, Tenant shall not be entitled to make any claim for, and Tenant hereby
expressly waives, any claim for damages, it being understood and agreed that
Tenant's sole remedy therefor shall be an action for specific
performance.

     

    23.11           Counterparts. This Lease may
be executed in two or more counterparts, each of which shall be an original, but
all of which shall constitute one and the same instrument.

     

    23.12           Authority. Each individual
executing this Lease on behalf of such entity represents and warrants that he or
she is duly authorized to execute and deliver this Lease on behalf of said
entity. Upon the request of the other party, any such party shall, at the time
of the execution of this Lease, deliver to the other party evidence of such
authority satisfactory to the other party.

     

    23.13           Recording. Tenant shall not
record this Lease or any short form or memorandum version hereof without the
prior written consent of Landlord, which may be withheld at Landlord's sole
discretion.

     

    23.14           Interpretation and Use of
Pronouns. Wherever herein the singular number is used, the same shall
include the plural, and the masculine gender shall include the feminine and the
neuter genders. All conditions contained herein shall be deemed covenants. The
words "breach" or "default" are used interchangeably herein and each shall be
deemed to include the other.

     

    23.15           Captions and Interpretations.
Section titles or captions contained in this Lease are inserted as a matter of
convenience and for reference and in no way define, limit, extend or describe
the scope of this Lease or any provision hereof. No provision in this Lease is
to be interpreted for or against either party because that party or its legal
representative drafted such provision.

     

    23.16           Severability. If any term,
covenant, condition or provision of this Lease is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remainder of the
provisions shall remain in full force and effect and shall in no way be
affected, impaired or invalidated.

     

    23.17           Applicable Law. This Lease
shall be governed by, and construed in accordance with, the laws of the State of
California, notwithstanding the fact that Landlord or Tenant may be located in
another State or that this Lease may be executed in another State. If any
provision of this Lease or the application thereof to any person or
circumstances shall, to any extent, be invalid or unenforceable, the remainder
of this Lease shall not be affected thereby, and each provision of this Lease
shall be valid and enforceable to the fullest extent permitted by law. Any
action brought to enforce or nullify this Lease or the provisions hereof shall
be brought in San Diego County, California, and in no other forum.

     

    23.18           Waiver of Right of Redemption.
Tenant hereby waives for Tenant and for all those claiming under Tenant all
right now or hereafter existing to redeem, by statute or by order or judgment of
any court or by any legal process or writ, Tenant's right of occupancy of the
Premises after any termination of this Lease. Tenant hereby waives its rights
under California Code
Of Civil Procedure §1179.

     

    23.19           Attorneys' Fees. In case suit
shall be brought for any unlawful detainer of the Premises, for the recovery of
any rent due under the provisions of this Lease, or because of the breach or
alleged breach of any other covenant herein contained, the prevailing party
shall recover from the non-prevailing party all costs and expenses incurred
therein, including reasonable attorneys' fees and expenses incurred in enforcing
any judgment. If Landlord, through no fault of its own, is made a party to any
litigation relating to the subject matter covered by this Lease instituted by or
against Tenant, then Tenant shall defend, indemnify and hold Landlord harmless
from and against all costs and expenses, including reasonable attorneys' fees,
incurred by Landlord in connection therewith. In addition thereto, Tenant agrees
to pay Landlord's costs, expenses and reasonable attorneys' fees with respect
to: (i) each request to Landlord for permission or consent to assign or sublet
the Premises, as provided in Section 15.5 above; (ii) each request made by
Tenant to modify, amend or supplement this Lease; and (iii) any breach or
default by Tenant which is cured prior to litigation. Landlord shall notify
Tenant of the amount of such attorneys' fees, and Tenant shall pay the same (as
Additional Rent) within fifteen (15) days after such notice.

     

    23.20           Joint and Several Obligations.
If there shall be more than one Tenant, they shall all be bound jointly and
severally by the terms, provisions, covenants, conditions, and agreements
herein. No rights, however, shall inure to the benefit of any assignee of Tenant
unless the assignment to such assignee has been approved by Landlord in writing
as required hereunder.

     

    23.21           Successors and Assigns. The
covenants and conditions herein contained shall, subject to the provisions as to
assignments, apply to and bind the heirs, successors, executors, administrators
and assigns of the respective parties hereof. If this Lease is signed by more
than one person as Tenant, their obligation shall be joint and
several.

     

    23.22           Time of the Essence. Time is
expressly declared to be of the essence of this Lease, and of all covenants and
conditions herein contained.

     

    23.23           No Third-Party Beneficiaries.
The provisions of this Lease are solely for the benefit of the parties hereto,
and no broker or other third party shall be entitled to any benefits hereof or
hereunder.

     

    23.24           Entire Agreement. This Lease
and the exhibits, and the Addendum, if any, attached hereto and forming a part
hereof, set forth all the terms, provisions, covenants, conditions, promises,
agreements and understandings between Landlord and Tenant concerning the
Premises. There are no warranties, representations, covenants, promises,
agreements, conditions or understandings, either oral or written, between them
other than set forth herein. No alteration, amendment, change or addition to
this Lease shall be binding upon Landlord or Tenant unless reduced to writing
and signed by each party.

     

    23.25           No Option By Landlord.
Preparation of this Lease by Landlord or Landlord's agent and submission of same
to Tenant shall not be deemed an option or offer to lease the Premises on the
terms and conditions contained herein or a reservation of the Premises in favor
of Tenant. This Lease shall become binding upon Landlord only upon Landlord's
execution and delivery of this Lease to Tenant. The receipt (which shall include
the cashing, deposit or other negotiation of checks, money orders and the like)
of any moneys by Landlord which are tendered by Tenant along with a
Tenant-executed copy of this Lease, or at any time prior to Landlord's delivery
of a fully executed copy of this Lease to Tenant, shall not constitute an
acceptance of Tenant's offer to lease as contained herein. Tenant acknowledges
that Landlord will not deliver a fully executed copy of this Lease until
Landlord has received both any Guaranties required hereunder, and such corporate
resolutions or other information as reasonably satisfies Landlord as to the
incumbency and authority to sign of each individual signing this Lease or any
Guaranty. Tenant also acknowledges that the fully executed Lease will not be
delivered by Landlord to Tenant unless and until approved by Landlord's lender,
and that in determining whether to approve, Landlord's lender will consider
Tenant's lease application, credit information, biographical data on Tenant's
key officers or principals, and financial statements relating to Tenant's
business. Notwithstanding the foregoing, delivery of this Lease by Tenant to
Landlord after signature by Tenant shall constitute an option which can be
accepted by Landlord at any time until two (2) weeks after delivery of the
signed Lease by Tenant.

     

    23.26           Exhibits. All exhibits
described herein, if any, are part of this Lease and by this reference are
expressly incorporated herein. This Lease contains the following
Exhibits:

     

    Exhibit
A                    Project
Site Plan

    Exhibit
B                     Premises
and Improvements to Premises

    Exhibit
C                     Rules
and Regulations

    Exhibit
D                     Intentional
Omitted

    Exhibit
E                      Environmental
Questionnaire

    Exhibit
F                      Intentional
Omitted

    Exhibit
G                      Intentional
Omitted

    

    23.27           Addendum. The attached
Addendum, if any is specified in Section 1.20 above, is part of this Lease and
by this reference is expressly incorporated herein.

     

    IN
WITNESS WHEREOF, the parties hereto have executed this Lease on the date(s) set
forth by their respective signatures.

     

    
      
        
          
            	
                    Landlord:

                  	 
      
	
                    Date:  3/25/97                        
      

                  	
                    WESTERN
      SALT COMPANY, a California corporation

                    By     /s/ Kevin D.
      Hill               
                                                                    

                    Kevin D. Hill, Leasing
      Manager

                     

                     

                    By   /s/ Michael P. Neal                                            
        

                    Michael P. Neal, Development
      Manager

                  
	
                    Tenant:

                  	 
      
	
                    Date:  3-21-97                      
      

                  	
                    D3
      TECHNOLOGIES, a California corporation

                    By __________________________________________                                                               

                     

                     

                    By  /s/ W.A.
      Hustonlmi10k031509ex7.htm

    Exhibit 10.7

      FIRST
AMENDMENT TO

      QUADRANT
BUSINESS PARK

      STANDARD
FORM MULTI-TENANT LEASE

      

      THIS
FIRST AMENDMENT TO QUADRANT BUSINESS PARK STANDARD FORM MULTI-TENANT LEASE (this
"Amendment") is dated for reference purposes the 27th day of
June, 2006, by and between STERLING REALTY ORGANIZATION
CO., a Washington
corporation, successor in interest to F. H. Braillard, doing business as
The Quadrant Business Park ("Landlord"), and D3 TECHNOLOGIES, INC., a California
corporation ("Tenant").

       

      RECITALS

      

      A.           Landlord
and Tenant entered into that certain Quadrant Business Park Standard Form
Multi-Tenant Lease dated June 23, 2005 (the "Lease"), for the lease of certain
premises consisting of approximately 9,230 square feet located at Building F,
8217 44th Avenue West, Suite D, Mukilteo, Washington 98275 (the "Initial
Premises").

       

      B.           Landlord
and Tenant desire to amend the Lease on the terms and conditions set forth in
this Amendment.

       

      NOW,
THEREFORE, for valuable consideration, the receipt and sufficiency cit which is
hereby acknowledged, the parties agree as follows:

       

      1.           Defined Terms. Unless
otherwise defined in this Amendment, capitalized terms used herein shall have
the same meaning as they are given in the Lease.

      

      2.           Expansion of Premises.
Commencing on September 1, 2006 (the "Expansion Space Commencement Date"), the
Initial Premises shall be expanded by 8,824 square feet of space located in
Suite A of Building F, 8217 44th Avenue West, Mukilteo, Washington 98275 (the
"Expansion Space"). The floor plan showing the exact location of the Expansion
Space is attached hereto as Exhibit A. All terms and
conditions of the Lease, as amended by this Amendment, shall apply to Tenant's
lease of the Expansion Space.

      

      3.           Expansion Space Term. Tenant's
lease of the Expansion Space shall commence on the Expansion Space Commencement
Date and shall continue through December 31, 2011 (the "Expansion Space Term").
Tenant shall have the right to extend the Expansion Space Term on the same terms
and conditions as those set forth in the last two sentences of Section 3 of the
Lease.

       

      4.           Expansion Space Base Rent. Monthly Base Rent for
the Expansion Space for the Expansion Space Term shall be as
follows:

      

      
        	
                          Term:

                 

              	
                Base
      Rent:

              	
                Total
      Per Month:

              
	
                9/1/06
      – 12/31/06

              	
                $5,000.00

              	
                $5,000.00
      + CAM

                 

              
	
                1/1/07
      – 12/31/07

              	
                $9,706.00

              	
                $9,706.00
      + CAM

                 

              
	
                1/1/08
      – 12/31/08

              	
                $9,998.00

              	
                $9,998.00
      + CAM

                 

              
	
                1/1/09
      – 12/31/09

              	
                $10,298.00

              	
                $10,298.00
      + CAM

                 

              
	
                1/1/10
      – 12/31/10

              	
                $10,606.00

              	
                $10,606.00
      + CAM

                 

              
	
                1/11/11
      – 12/31/11

              	
                $10,925.00

              	
                $10,925.00
      + CAM

              

      

       

      5.           Improvements. Landlord shall,
at Landlord's expense and on a turnkey basis, complete the tenant improvements
to the Premises as depicted on the Floor Plan using the same finishes that were
used in the Initial Premises provided, however, Tenant shall be responsible for
paying for any specific Tenant upgrades (such as, without limitation, upgrades
to finishes. structure and building systems). Tenant shall reimburse Landlord
for the cost of any such upgrades within ten (10) days
after receipt of an invoice from Landlord for such cost. Except for the
improvements to be completed by Landlord, Tenant is leasing the Expansion Space
in its “as is” condition.

      

      6.           
Ratification. Except as
expressly set forth in this Amendment, the terms and conditions of the Lease
shall remain in full force and effect and are hereby ratified by Landlord and
Tenant.

      

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

      

      TENANT:

      

      D3
TECHNOLOGIES, INC.

      

      

      By:___________________________

      Ed
Knowles, CFO

       

      LANDLORD:

      

      STERLING
REALTY ORGANIZATION CO.

      

      

      By:
___________________________

      David
Schooler, President

       

      
        
           

        

        
           

          
            

          

        

        
           

        

      

       

      QUADRANT
BUSINESS PARK

      

      STANDARD
FORM-MULTI-TENANT LEASE

      

      1.           PARTIES  This lease
is made this 23rd day of
June, 2005 between F. H. Braillard, owner, d.b.a. THE QUADRANT BUSINESS PARK,
“Landlord”, and D3 TECHNOLOGIES, “Tenant”

      

      2.           PREMISES   Landlord
agrees to lease to Tenant, “The Premises” described in Exhibit “A” and
consisting of approximately 9,230 S. F. (exact square feet to be determined
within 30 days of execution and adjustments to this lease as required), of
office space.  The Premises are a part of “The Building”, which
Building is located on the “Real Property” described in Exhibit
“B”.

      

      3.           TERM  The term of
this lease shall be 65 months commencing on the 1st day of
August, 2005, and terminating on the 31st day of
December, 2010, unless sooner terminated as provided herein; or extended
pursuant to Paragraph twenty-two (22) herein.  Tenant may extend this
lease for four (4), one (1) one year periods, at terms to be agreed
to.  Tenant must notify Landlord, in writing, on hundred and eighty
(180) days prior to each Lease Extension.

      

      4.           POSSESSION

      
        	
                 
      

              	
                a.

              	
                If
      the Landlord, for any reason whatsoever, cannot deliver possession of the
      Premises to the Tenant on the commencement date of the term hereof, this
      Lease shall not be void or voidable, nor shall Landlord be liable to
      tenant for any loss or damage resulting therefrom, but in that event all
      rent shall be abated during the period between the commencement of said
      term and the time when the Landlord delivers
  possession.

              

      

      

      
        	
                 
      

              	
                b.

              	
                The
      Landlord shall permit the Tenant to occupy the Premises on or before July
      25th,
      2005, such occupancy shall be subject to all the provisions of the Lease
      and shall not advance the termination date of this
  Lease.

              

      

      

      
        	
                 
      

              	
                c.

              	
                If
      Tenant should cause any delay in Landlord’s completion of the Premises,
      thereby delaying tenant’s occupancy of the Premises beyond the
      commencement date of this Lease, then the Landlord, may at it option
      require the Tenant to commence payment of rent on the stated commencement
      date as specified herein.

              

      

      

      5.           RENT   Without prior notice or demand, Tenant agrees to pay Landlord as monthly rent for the
Premises the sum of: (SEE SCHEDULE
BELOW) on or before the fifth (5th) day of
the first full calendar month of the term hereof and a like sum on or before the
fifth (5th)
day of each and every successive calendar month thereafter during the term
hereof.  Rent for any period during the term hereof which is for less
than one (1) month shall be a prorated portion of the monthly installment
herein, based upon a thirty (30) day month.  Rent shall be paid
to Landlord at the address to which notices to Landlord are to be given without
deduction or offset in lawful money of the United States of America, or to such
other person or at such other place as Landlord may from time to time designate
in writing.  In addition to base rent stated here, Tenant shall
pay additional rent as their share of the Common Area Costs and Expenses,
pursuant to Paragraph 8.

      

      
        	
                Term

              	
                Base
      Rent

              	
                CAM

              	
                Total
      Per Month

                 

              
	
                July
      25-December 31, 2005

              	
                $5,000.00

              	
                $1,938.00

              	
                $6,938.00

                 

              
	
                January
      1-December 31, 2006

              	
                $9,230.00

              	
                Current
      CAM Charges

              	
                $9,350.00
      + CAM

                 

              
	
                January
      1-December 31, 2007

              	
                $9,500.00

              	
                Current
      CAM Charges

              	
                $9,630.00
      + CAM

                 

              
	
                January
      1-December 31, 2008

              	
                $9,790.00

              	
                Current
      CAM Charges

              	
                $9,920.00
      + CAM

                 

              
	
                January
      1-December 31, 2009

              	
                $10,085.00

              	
                Current
      CAM Charges

              	
                $10,215.00
      + CAM

                 

              
	
                January
      1-December 31, 20010

              	
                $10,388.00

              	
                Current
      CAM Charges

              	
                $10,524.00
      + CAM

              

      

      

      6.           PREPAID RENT  Upon
execution of this Lease, Tenant shall deposit with Landlord $6,964.00 (the
“deposit”) as prepaid rent and shall be allocated as follows:

      

      a.           Prepaid
Rent

      $     0      
of the Deposit shall be applied to monthly rent due for the first month of the
Lease term.

      b.            $   6,938.00  
of the Deposit shall e applied to monthly rent due for the last month of the
Lease term.

      

      7.           USE   Tenant
shall use the Premises for engineering and general business offices, and other
lawful purposes as may be incidental thereto and hereby agrees that it has
determined to its satisfaction that the Premises can be used for those
purposes.  The Premises may not be used for any other purposes without
Landlord’s written consent. Outside storage, including without limitation,
trucks and other vehicles, is prohibited Landlord’s written
consent.  Tenant shall at his own expense and cost obtain any and all
licenses and permits necessary for its use of the Premises, and shall promptly
comply with all governmental orders and directives including but not limited to
those regarding the correction, prevention and abatement of nuisances in or
upon, or connected with, the Premises, all at Tenant’s sole
expense.  Tenant shall not permit any objectionable odors smoke, dust,
gas, noise or vibrations to emanate from the premises, nor take any other action
which would constitute a nuisance or would disturb or endanger any other tenants
of the building or buildings on the Property, or unreasonably interfere with
their use of their respective Premises.  In additional to any other
remedies Landlord may have for a breach by Tenant of the terms of this Section
7, Landlord shall have the right ot have Tenant evicted from the Premises. 
Without Landlord’s prior written consent, Tenant shall not receive, store or
otherwise handle any product, material or merchandise which is explosive or
highly inflammable.

      

      With
respect to any release of toxic or hazardous substances or wastes or other
condition of the Premises occurring on or after the date of the Lease and caused
by or resulting from the negligent acts or omissions or willful misconduct of
Tenant, its employee’s, authorized agents or contractors, and which release or
other condition violates the provisions of, or necessitates any removal,
treatment, or other remedial action under, any past, present, or future federal,
state or local statute or ordinance or any regulation, directive, or requirement
of any governmental authority with jurisdiction relating to protection of the
environment, Tenant agrees to defend, indemnify, and hold harmless
Landlord, its partners, employees, agents, and contractors, from and against any
and all losses, claims, liabilities, damages, fines, costs, and expenses
(including reasonable attorney’s fees and legal expenses) arising out of or
resulting there from.  The provisions of this paragraph shall survive
the termination or expiration of this Lease and the surrender of the Premises by
tenant, with respect to releases, or conditions occurring prior to such
termination, expiration, or surrender.  With respect to any release of
toxic or hazardous substances, or wastes or other condition of the Premises
occurring prior to the date of this Lease and caused by or resulting from the
negligent acts or omissions or willful misconduct of Landlord, it's agents, or
contractors, and which release or condition violates the provisions of, or
necessitates any removal, treatment, or other remedial action under, any past,
present, or future federal, state, or local statute or ordinance or any
regulation requirement or directive of any governmental authority with
jurisdiction relating to protection of the environment, Landlord agrees to
defend, indemnify, and hold harmless Tenant from and against any and all losses,
liabilities, damages, demands, fines, costs and expenses (including reasonable
attorney’s fees and legal expenses) arising out of or resulting there
from.

       

      Tenant
shall remove any sumps and clarifiers and any related Hazardous Materials
(“Hazardous Material” shall mean any petroleum and petroleum products, asbestos,
and PCB’s and any “hazardous substances”, “hazardous materials” or “hazardous
substances” in the Comprehensive Environmental Response, Compensation and
Liability Act of 1908, as amended, the Hazardous Materials Transportation Act,
as amended, or the Resource Conservation and Recovery Act, as amended, those
substances, materials and wastes which are defined as “hazardous wastes” or as
“hazardous substances” in the Washington health and safety codes or labor codes,
and “hazardous” or “toxic” in the regulations adopted or publication promulgated
pursuant to any of said laws in or about the Premises and associated with
Tenant’s use and occupancy thereof upon the expiration or earlier termination of
the lease.

      Notwithstanding
anything to the contrary contained herein, Landlord agrees that the Tenant shall
not be responsible for, and Landlord shall hold Tenant harmless against any
costs of cleanup or removal arising from or associated with any hazardous
material existing in, on or throughout Premises, as of the date Tenant occupies
the premises pursuant to the terms of this Lease.

      

      Tenant
shall not do or permit anything to be done in or about the Premises or bring or
keep anything therein which will in any way increase the existing rate or affect
any fire or other insurance upon the Building of any of its contents, or cause
cancellation of Insurance Policy covering the Building or any part thereof of
any of its contents.

      

      Tenant
shall not do or permit anything to be done in or about the Premises to be used
for any improper, immoral, unlawful, or objectionable purpose.  Tenant
shall not commit or suffer to be committed any waste in or upon the
Premises.  Tenant shall not place upon or install in windows or other
openings or exterior sides of doors or walls of the Premises any signs, symbols,
drapes or other materials without written consent of the Landlord.

      

      Landlord
gives Tenant and its employees, authorized representatives, and business invites
a nonexclusive right to reasonable use and enjoyment of the Common Areas,
subject to Landlord’s rights set forth herein.

      

      8.           TENANT’S SHARE OF COMMON COSTS AND
EXPENSES   Tenant shall pay as additional rent their share of
the common costs and expense of the operation and maintenance of the
Property.  Tenant’s Share is estimated to be equal to $0.21 for each
square foot of the Premises for the first accounting period of the Lease term,
which is currently $1,938.00 per month.

      

      An
accounting period is a calendar year.  The first accounting period
shall commence on the date the Lease term commences, and the last accounting
period shall and on the date the Lease term expires.  The first
accounting period of the Lease term shall be the first full calendar year of the
Lease term.  Landlord may adjust the Estimated Common Costs and
Expenses at the commencement of each new accounting period throughout the Lease
term, whereupon Tenant’s share shall be adjusted accordingly.  If at
any time during any accounting period, Landlord determines that he actual Common
Costs and Expenses for the remainder of such accounting period will vary by more
than five percent (5%) from the Landlord’s original estimate, Landlord may, by
written notice to Tenant, adjust the Common Cots and Expenses for the remainder
of such accounting period, and, accordingly, Tenant’s Share to be paid
hereunder.  If the actual Tenant’s Share of the Common Area Costs and
Expenses exceeds Tenant’s payments made, Tenant shall pay to Landlord the
deficiency within thirty (30) days of Tenant’s receipt of such statement of
deficiency.  If Tenant’s payments made during the accounting period
exceed the actual Tenant’s Share, Landlord may, at Landlord’s sole discretion,
pay excess to Tenant at the time Landlord furnishes said statement to credit the
excess toward Tenant’s payments of the Tenant’s share of the next succeeding
accounting period.

      

      Common
Costs and Expenses shall include the “Property Taxes” and “Operating
Expenses”.  Property Taxes shall include, without limitation, all real
and personal taxes, charges and assessments imposed on the Premises, Building,
Property or Common Areas, and any other taxes, charges or assessments assessed
against the Landlord, Premises, Building, or Common Area in connection with the
use or occupancy of the Premises at any time during the term of this
Lease.  “Operating Expenses” shall mean the annual Operating Expenses
which include, without limitation, all operating costs incurred by Landlord or
on behalf of the Premises in maintaining, operating, and providing services to
and for the Building, Property, and Common Areas, including, without
limitations, the costs of maintenance, utilities, supplies, insurance, service
contracts, advertising, independent contractors, property management, a reserve
account for the replacement of capital items, compensation of all persons who
perform regular and recurring duties connected with the Building, Property, and
Common Areas, its equipment, utilities, sprinkler systems, and operation
thereof, and an allowance to Landlord or Landlord’s agent for supervision of
such maintenance, operation, services and repairs of the Building, Property, and
Common Areas and any and all assessments charges to Landlord or the property, in
connection with the operation, repair and maintenance of the Common
Areas.

      

      9.           REPAIR
RESPONSIBILITY

      a.           By
taking possession of the Premises, Tenant shall be deemed to have accepted the
Premises as being in good, sanitary order, condition, and
repair.  Tenant shall supply a punch list, within five (5) days of
possession that will describe any exception items for Landlord to repair at
Landlord’s expenses.  Tenant shall, when and if needed, at Tenant’s
sole expense, make repairs to the Premises and every part thereof including
electrical, plumbing, lighting, heating, and air conditioning.  Tenant
shall surrender the Premises to Landlord in good condition upon the expiration
or sooner termination of this Lease; provided however, that Tenant shall not be
held responsible for damage to the Premises from causes beyond the reasonable
control of Tenant, to the extent covered by Landlord’s fire and extended
coverage insurance policy, or for ordinary wear and tear.  Except as
specifically provided in an addendum, if any, to this Lease, Landlord shall have
no obligation whatsoever, to alter, remodel, improve, repair, redecorate or
paint the Premises or any part thereof and the parties hereto affirm that
Landlord has made no representations to Tenant respecting the condition of the
Premises or the Building except as specifically herein set forth.

      

      b.           Landlord,
at its option for the benefit of the Tenant and to assure proper maintenance of
the heating and air conditioning, may engage a maintenance firm to maintain the
heating, ventilation and air conditioning system (if any) servicing the
Premises.  Tenant shall pay to Landlord, or, at Landlord’s election,
directly to the maintenance firm, Tenant’s share of the cost of such
maintenance.

      

      c.           Except
as provided herein, Tenant shall, at its expense clean, maintain and keep in
good repair throughout the term of this Lease the entire Premises and
appurtenances, including without limitation, signs, windows, doors, skylights,
and trade fixtures including the cleaning of glass and woodwork on both sides of
the interior wall separating their Premises from the Interior Common area do the
Building.

      

      d.           Notwithstanding
the provisions of Article 9a. above, but subject to the provisions of Paragraph
15, Landlord shall repair and maintain the structural portions of the Building,
including the basic plumbing, air conditioning, heating, and electrical systems,
installed or furnished by Landlord only in so for as such heating, air
conditioning and electrical system provide service to the entire Building,
unless such maintenance and repairs are caused in part or in whole by the act,
neglect, fault or omission of any duty by the Tenant, its agents, servants,
employees or invitees, in which case Tenant shall pay to Landlord the reasonable
costs of such maintenance and repairs.  Landlord shall not be liable
for any failure to make any such repairs or to perform any maintenance unless
such failure shall persist for an unreasonable time after written of the need of
such repairs or maintenance is given to Landlord by Tenant.  Except as
provided in Articles 15 and 16 hereof, there shall be no abatement of rent and
no liability by Landlord by reason of any injury to or interference with
Tenant’s business arising from the making of any repairs or improvements in or
to any portion of the Building or the Premises or to fixtures, appurtenances and
equipment therein.  Tenant waives the right to make repairs at
Landlord’s expense under any law, statute, or ordinance now or hereafter in
effect.

       

      
        10.           MAINTENANCE AND
MANAGEMENT

      

      a.           Landlord
shall maintain the Common Areas in good condition at all times and shall have
the right to:

      
        	
                 
      

              	
                1.

              	
                Establish
      and enforce reasonable rules and regulations applicable to all tenants
      concerning the maintenance management, use and operation of the
      Building.

              

      

      
        	
                 
      

              	
                2.

              	
                Make
      changes, to the Common Areas including, without limitation, structural and
      decorating changes in interior common area, the location of entrances,
      exits and parking areas.

              

      

      

      b.           Common
Areas, as defined in this Lease, mean all parts of the interior and exterior of
the Building, and related land areas and facilities outside the individual
Premises but constituting a part of the Building.  Common Areas
include, without limitation:

      
        	
                 
      

              	
                1.

              	
                The
      property upon which the Premises are located, pedestrian walkways,
      landscaped areas, sidewalks, loading areas and roads located on the
      Property.

              

      

      
        	
                 
      

              	
                2.

              	
                The
      structural parts of the Building and other improvements in which the
      Premises are located, which structural parts include only the foundation,
      bearing and exterior walls (excluding glass and doors),

                subflooring,
      and roof (excluding skylights).

              

      

      
        	
                 
      

              	
                3.

              	
                The
      unexposed electrical, plumbing, and sewage systems lying outside the
      Premises.

              

      

      
        	
                 
      

              	
                4.

              	
                External
      window frames, gutters, and downspouts on the Building in which the
      Premises are located.

              

      

      
        	
                 
      

              	
                5.

              	
                Those
      cretin open areas, landscaped areas, and roadways, utility systems and
      facilities located outside the Premises and Building but constituting a
      party of the Property.

              

      

      

      c.           Landlord
shall not be liable, nor shall the rent be abated because of services caused by
accident, strike, necessity for repairs, or for any other reason beyond its
control.

      

      11.           UTILITIES.    Tenant
shall pay, prior to delinquency, for heat, light, water and other utility
services supplied to the Premises and will pay any required
deposits.  Water sewer and other utility charges for which separate
billings are not available shall be prorated by Landlord based on the ratio of
the number of square feet in the Building, provided, however, that Landlord may
increase Tenant’s prorata portion of any such charges to reflect unusual or
excessive utility system demands.  Separate charges may be made to
reflect unusual or excessive utility system demands where not separately
metered.

      

      12.           ALTERATIONS AND ADDITIONS BY
TENANT.    Tenant may make, at its sole expense, such
additional improvements or alterations to the Premises, which it may deem
necessary or desirable including altering and/or adding, relocating or removing
restrooms.  However, any repairs or new construction by Tenant shall
be done in conformity with plans and specifications approved in writing by
Landlord.  All work performed shall be done in a workmanlike manner
and with materials (where not specifically described in the specifications) of
the quality and appearance standard in the Building and shall become the
property of the Landlord.  Landlord may require Tenant to remove any
improvements or alterations at the expiration of the term, such removal to occur
at Tenant’s sole cost and expense.  At the end of the lease period,
all improvements made by Tenant shall become the property of the Landlord and
shall remain on the Premises.

      

      13.           LIENS.    Tenant
shall keep the Premises and the property in which the Premises are situated free
from all liens arising out of any work performed, materials furnished or
obligations incurred by Tenant.  Landlord may require, at Landlord’s
sole option, that Tenant shall provide to Landlord, at Tenant’s sole cost and
expense, a lien and completion bond in an amount equal to one and on-half (1
1/2) times any and all estimated cost of any improvements, additions, or
alterations to the Premises, to insure Landlord against any liability for
mechanics’ and materialmen’s liens and to insure completion of the
work.

      

      14.           INSURANCE.    Landlord
shall procure throughout the term of the lease fire and extended coverage
insurance in the amount of the full insurable value of the Building containing
the Premises.  Tenant assumes the risk of loss of its furnishings,
trade fixtures, equipment and supplies which shall not be insured under the
above policy.  Tenant agrees to procure and maintain throughout the
term of the Lease at Tenant’s sole cost and expense, liability insurance
underwritten by a form satisfactory to Landlord covering all persons and
property on Premises in connection with Tenant’s business in the following
amounts:

       

      
        	
                 
      

              	
                a.

              	
                $1,000,000
      combined Single Limit for Bodily Injury and Property Damage
    or

              

      

      
        	
                 
      

              	
                b.

              	
                $500,000/$1,000,000
      for Bodily Injury and $250,000 each occurrence for Property
      Damage.

              

      

      Landlord
shall be named as an additional insured and shall be furnished with a
certificate of insurance.  Such coverage shall be primary and
noncontributing with any insurance carried by the Landlord.  The
liability insurance policy shall contain endorsements requiring 90 days notice
to Landlord prior to and cancellation or any reduction in amount of the
coverage.  Tenant as a material part of the consideration to be
rendered to Landlord, hereby agrees to defend, indemnify and hold harmless
Landlord against any and all claims, costs and liabilities, including reasonable
attorney’s fees, arising from Tenant’s use of the Premises, or from the conduct
of Tenant’s business, or from any activity, work or things done, permitted of
suffered by Tenant’s agents, contractors or employees.

      

      15.           DESTRUCTION.    If
the Premises or the Building is destroyed or damaged by fire, earthquake or
other casualty to the extent that they are untentatable in whole or in part,
then at Landlord’s option, Landlord may proceed with reasonable diligence to
rebuild and restore the Premises or such part thereof, provide that within
thirty (30) days after such destruction or injury landlord shall notify Tenant
in writing of Landlord’s intention to do so.  During the period from
destruction or damage until restoration, the rent shall be abated in proportion
to the share of the Premises, which Landlord determines is unfit for
occupancy.  If damage is due to the fault or neglect of Tenant or its
agents, employees, invitees or licensees, there shall be not abatement of
rent.  If Landlord shall fail to notify Tenant, then this Lease shall,
at the expiration of the time for giving of notice as herein provided, be deemed
terminated and at an end.  Landlord shall not be required to repair
any injury or damage by fire or other cause, or to make any repairs or
replacements of any panels, decoration, office fixtures, paintings, floor
covering, partitions, or any other property installed in the Premises by
Tenant, Tenant’s personal property or any inconvenience or annoyance
occasioned by such damage, repair, reconstruction or restoration.

      

      16.           CONDEMNATION.     If
all or part of the Premises are taken under power of eminent domain, or sold
under the threat of the exercise of said power, this Lease shall terminate as to
the part so taken as of the date of the condemning authority takes
possession.  If more than 25% of the floor area of Premises is taken
by condemnation, Tenant may by written notice within ten (10) days after notice
of such taking, or absent of such notice, within ten (10) days after the
condemning authority takes possession terminate this Lease as of the date the
condemning authority takes possession.  If Tenant does not so
terminate, this lease shall remain in effect as to the portion of the Premises
remaining except that the rent shall be reduced in the proportion that the floor
area taken bears to the original total floor area, provided that circumstances
makes abatement based on the floor area unreasonable, the rent shall abate by a
reasonable amount to be determined by Landlord.  In the event Tenant
elects not to terminate the Lease with respect to any part of the Premises
remaining after condemnation, Landlord shall have no responsibility to restore
such part of the Premises to its condition prior to condemnation.  Any
award for the taken of all or a part of the Premises under the power of eminent
domain, including payment made under threat of the exercise of such power, shall
be the property of the Landlord, whether made as compensation for diminution in
value or the leasehold or for the taking of the fee or as severance damages,
provided that Tenant shall be entitled to such compenstion as may be separately
awarded or recoverable by Tenant in Tenant’s own right for the loss of or damage
to Tenant’s trade fixtures and removable personal property.  Landlord
shall not be liable to Tenant for the Loss of all or any part of the Premises
taken by condemnation.

       

      17.           ASSIGNMENT AND
SUBLETTING.     Tenant shall not assign, let or
sublet this Lease or any part thereof, either by operation of law or otherwise,
or permit any other party to occupy all or any part of the Premises without
first obtaining written consent of Landlord.  This Lease shall not be
assignable by operation of law.  Landlord shall not unreasonably
withhold approval of the proposed assignee whose credit worthiness is comparable
to that of Tenant.  Landlord shall not unreasonably withhold approval
of the proposed assignee whose credit worthiness is comparable to that of
Tenant.  Landlord reserves the right to recapture the Premises, or
applicable portion thereof, in lieu of giving its consent by notice given to
Tenant within twenty (20) days after receipt of Tenant’s written request for
assignment or subletting.  Such recapture shall terminate this Lease
as to the applicable space effective on the prospective date of assignment or
subletting, which shall be the last day of a calendar month and not earlier than
sixty (60) days after receipt of the Tenant’s request. If Landlord elects not to
recapture and thereafter gives its consent, Landlord and Tenant agree that
Landlord may charge Tenant a reasonable sum, not to exceed $500.00, to reimburse
Landlord for legal and administrative costs incurred in accommodating this
Assignment and/or Subletting.  Tenant and Landlord to share equally in
any rental and other proceeds paid to Tenant in excess of the rent to be paid to
Landlord under the terms of this Lease.  If Tenant is a corporation,
and transfer of this Lease from Tenant by merger, consolidation or liquidation
or any change in the ownership, or power to vote the majority of the outstanding
voting stock of Tenant, said transfer shall constitute an assignment for the
purposes of this section.  If Tenant is a partnership, any other
change in the individuals or entities of which the partnership is composed shall
constitute an assignment for purposes of this section.  Subject to the
provisions above, this Lease shall be binding upon and inure to the benefit of
the parties, and successors and assigns.

      

      18.           DEFAULT.     The
occurrence of any one or more of the following events shall constitute a
material default and breach of the Lease by the Tenant.

      

      1.           Vacation
or abandonment of any portion of the Premises.

      2.           Failure
by Tenant to make any payment required as and when due, where such failure shall
continue after five (5) business days written notice form
Landlord.

      3.           Failure
by Tenant to observe or perform any of the covenants, conditions or provisions
of this Lease, other than the making of any payment, where such failure shall
continue for a period of thirty (30) days after written notice form
Landlord.

      4.           a.
(I) the making of any general assignment or general arrangement for the benefit
of creditors, (II) the filing by or against Tenant of a petition in bankruptcy,
including reorganization or arrangement, unless, in the case of a petition filed
against Tenant, the same is dismissed within thirty (30) days; (III) the
appointment of a trustee or receiver to take this Lease; (IV) the seizure by any
department of any government or any officer thereof of the business or property
of Tenant; (V) adjudication that Tenant is bankrupt.

      
        	
                 
      

              	
                b.
      Notice by Tenant of Default.  Tenant shall notify Landlord
      promptly of any default not by its nature necessarily known to
      Landlord.

              

      

      
        	
                 
      

              	
                c.
      Default by Landlord.  Landlord shall not be
      in default unless Landlord fails to perform its obligations within thirty
      (30) days after notice by Tenant in writing specifying wherein Landlord
      has failed to perform; provided that if the nature of Landlord’s
      obligation is such that more than thirty (30) days are required for
      performance, Landlord shall not be in default if Landlord commences
      performance within thirty (30) days of Tenant’s notice and thereafter
      completes Landlord’s performance within a reasonable
  time.

              

      

       

      19.           REMEDIES IN
DEFAULT.     In event of any default or breach,
Landlord may, at any time without waiving or limiting any other right or remedy,
reenter and take possession of the premises or terminated this Lease, or pursue
any remedy allowed by law or equity.  Tenant agrees to pay Landlord
the cost of recovering possession of the Premises, the expenses or reletting,
and any other costs or damages arising out of Tenant’s default including,
without limitation, the costs of removing persons and property from the
Premises, the costs of preparing or altering the Premises for reletting,
broker’s commissions and legal fees not withstanding any reentry or termination,
the liability of Tenant for the rent provided for therein shall not be
extinguished for the balance of the term of this Lease, and Tenant covenants and
agrees to make good to the Landlord any deficiency arising form reletting the
Premises at a lesser rent than herein agreed to.  Tenant shall pay
such deficiency each month as the amount thereof as ascertained by the
Landlord.

      
20.           ACCESS.     Tenant
shall permit Landlord to enter the premises at reasonable times for any
reasonable purpose including but not limited to inspecting, altering and
repairing the Premises and ascertaining compliance with provisions thereof by
Tenant, but nothing herein shall be construed as imposing any obligation on
Landlord to perform any such work or duties.  Landlord may also show
the premises to prospective purchasers or tenants at reasonable times, provided
that Landlord shall not interfere with Tenant’s business operation.

       

      21.           WAIVER OF
SUBROGATION.     Tenant and Landlord each
releases and relieves the other and waives its entire right of recovery against
the other for loss or damage arising out of incident ot the perils covered by
fire and extended coverage, and liability insurance endorsements approved for
use in Washington which occur in, or about the Premises, weather caused by the
negligence of either party, their agents employees, or otherwise.

       

      Each party shall obtain from its insurer(s) provisions
permitting waiver of any claim against the other party for loss or damage within
the scope of the above insurance.  The release and waiver of recovery
contained herein shall be limited by, and shall be coextensive with; the waiver
provisions of the Insurance policies procured by and maintained by the parties
pursuant to this Lease, if either Landlord or Tenant is unable to obtain its
insurer’s permission to waiver of any claim against the other party, Landlord or
Tenant shall promptly notify the other party of such inability.

       

      22.           HOLDOVER
TENANCY.     If (without execution of a new
Lease or written extension) Tenant shall hold over after the expiration of the
term of this Lease with Landlord’s written consent, Tenant shall be deemed to be
occupying the premises as a Tenant form month to month which tenancy may be
terminated as provided by law.  If tenant shall hold over after
expiration of the term of the Lease without Landlord’s written consent, Tenant’s
rent payable hereunder shall be increased by fifty (50) percent over Tenant’s
rent required in the last month of the term of this Lease.  During any
such tenancy, Tenant agrees to be bound by all of the terms, covenants and
conditions as specified, in so far as applicable.

       

      23.           COMPLIANCE WITH
LAW.     Tenant shall not use Premises or permit
anything to be done in or about the Premises which will in any way conflict with
any law, statute, ordinance or governmental rule or regulation currently in
force or which may hereafter be enacted or promulgated.  Tenant shall,
at its sole cost and expense, promptly comply with all laws, statutes,
ordinances and governmental rules, regulations or requirements now in force or
which may hereafter be in force and with the requirements of any board of fire
insurance underwriters or other similar bodies now or hereafter constituted,
relating to, or affecting the conditions, use or occupancy of the Premises,
excluding structural changes not related to or affected by Tenant’s improvements
or acts.  The Judgment of any court of competent jurisdiction of the
admission of Tenant in any action against Tenant, whether Landlord be a party
thereto or not that Tenant has violated any law, statute, ordinance or
governmental rule, regulation or requirement, shall be conclusive of the fact as
between the Landlord and Tenant.

       

      24.           RULES AND
REGULATIONS.     Tenant shall faithfully observe
and comply with the rules and regulations that Landlord shall from time to time
promulgate.  Landlord reserves the right from time to time to make
reasonable modifications to said rules.  The additions to those rules
shall be binding upon delivery of a copy of them to Tenant.  Landlord
shall not be responsible to Tenant for the nonperformance of any said rules by
any other Tenants or occupants.  At this date June 23, 2005, there are
no written rules or regulations in effect.  The only rule in place is
that no Tenant may park any vehicle in front of any roll-up door that is not
part of there demised space.

       

      25.           PARKING.     Tenants
shall have the right to use, in common with other tenants and occupants of the
Building, the parking facilities of Building subject to the rules and
regulations and any charges of Landlord for such parking facilities which may be
established or altered by Landlord at any time or from time to time during the
term hereof.

       

      26.           MORTGAGES, DEEDS OF
TRUST, PURCHASERS (ESTOPPEL
STATEMENT).      It is understood and
agreed that Landlord may sell, mortgage or grant deeds of trust with respect to
the Premises, the Building or Property.  Tenant agrees to execute,
within twenty (20) days following Landlord’s request, such reasonable
certificates as may required by a mortgage or trust deed beneficiary stating
that the Lease is in full force and effect and the dates to which the rent and
charges have been paid.  Upon a foreclosure or conveyance in lieu or
foreclosure, and a demand by Landlord’s successor, Tenant shall attorn to and
recognize such successor as Landlord under this Lease.

       

      27.           SUBORDINATION.     Tenant
agrees that this Lease and all renewals and modifications, supplements,
consolidations and extensions therefore shall be subordinate to the Lien of any
mortgages or deeds of trust now or hereafter placed against the Property or
Building to which the Premises comprise a part, provided, however in the event
that any mortgagee or beneficiary shall so elect, Landlord reserves the right to
subordinate this Lease to said mortgage or deeds of trust upon the terms
required by such mortgagee or beneficiary.  Not withstanding the
above, so long as Tenant is not in default herein, this Lease shall remain in
full force and effect for the full term hereof.

       

      28.           TENANTS
PROPERTY.     Furnishings, trade fixtures and
equipment installed by Tenant shall be the property of the Tenant.  On
termination of the Lease, Tenant shall remove any such
property.  Tenant shall repair or reimburse Landlord for the cost of
repairing any damage to the Premises resulting from the installment or removal
of such property.

       

      29.           REMOVAL OF
PROPERTY.     All personal property of Tenant
remaining in the Premises after reentry or termination of this Lease shall
conclusively be deemed abandoned and may be removed by
Landlord.  Landlord may store such property in any place selected by
Landlord including but not limited to a public warehouse, at the expense and
risk of the owner thereof, with the right to sell stored property without notice
to Tenant.  The proceeds of such sale shall be applied first to the
costs of such sale, second to the payment of the cost of removal and storage, if
any and third to the payment of any other sums of money which may then be due
from Tenant to Landlord under any of the terms hereof, and balance if any to be
paid to Tenant.

       

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

      
         

        31.           NOTICES.     All
notices under this Lease shall be in writing and shall be effective when mailed
or delivered to Landlord, c/o:

        

        F. H.
Braillard QUADRANT

        BUSINESS
PARK

        P.O. Box
1000 Muldteo, WA

        98276
Phone 425-366-8048

        

        Or to
Tenant at the following address, or to such other address as either party may
designate to the other in writing from time to time.

        

        D-3
Technologies

        4838
Ronson Court

        San
Diego, CA

        92111
Phone 868-

        671-1686

        

        32.           GENERAL
PROVISIONS.

        a.           Plats
and Riders.  Clauses, plats and riders, if any signed by Landlord and
Tenant and endorsed on or affixed to this lease are part Thereof.

        

        b.           Waiver.  The
waiver by either party to any term covenant or condition herein contained shall
not be deemed to be a waiver of such term covenant or condition on any
subsequent breach of the same or any other term covenant or condition herein
contained.  The subsequent acceptance of rent hereunder by Landlord
shall not be deemed to be a waiver of any breach by Tenant to any term, covenant
or condition of this Lease, other than the failure of the Tenant to pay the
particular rental so accepted, regardless of Landlord’s knowledge of such
preceding breach at the time of acceptance of rent.  No covenant, term
or condition of this Lease shall be deemed to have been waived by Landlord
unless such waiver shall be in writing and signed by Landlord’s duly authorized
representative.

        

        c.           Joint
Obligation.  If there be more than on Tenant the obligation hereunder
imposed upon Tenants shall be Joint and several.

        

        d.           Marginal
Headings.  The marginal headings and section titles in the Sections of
this Lease are not part of this Lease and shall have no effect upon the
construction or interpretation of any part hereof.

        

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

        

        f.           Recordation.  Tenant
shall not record this Lease or a short form memorandum hereof without the prior
written consent of the Landlord.

        

        g.           Late
Charges.  Tenant acknowledges that late payment by Tenant to Landlord
of rent or other sums due hereunder will cause Landlord to incur costs not
contemplated by this Lease, the exact amount of which would be extremely
difficult and impractical to ascertain.  Such costs include, but are
not limited to, processing and accounting charges, and late charges which may be
imposed on Landlord by the terms of any mortgage or trust deed covering the
Premises; therefore, in the event Tenant should fail to pay any Installment of
rent or any other sum due hereunder within five (5) days after such amount is
due, Tenant shall pay to Landlord as additional rent a late charge equal to 5%
of each installment or the sum of $50.00 per month, whichever is
greater.  Tenant will pay a $25.00 charge to Landlord for each
returned check.  In addition, any sums due to Landlord under terms of
this Lease which is not paid when due shall bear interest at the rate of 18%
from the date the same becomes due and payable until paid.

        

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

        

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

        

        j.           Attorney’s
Fees.  If either party requires the services of an attorney in
connection with enforcing the terms of this Lease or in the event suit is
brought for the recovery of any rent due under this Lease or for the breach of
any covenant or condition of this Lease, or for the restitution of said Premises
to Landlord and/or eviction of Tenant during said term or after the expiration
thereof, the prevailing party will be entitled to reasonable sum for attorney’s
fees, witness fees and court costs, including costs of appeal.

         

        k.           Sale
of Property.  In the event of any sale of the Building or Property, or
any assignment of this Lease by Landlord, Landlord shall be and hereby entirely
freed and retieved of all liability under any and aU of Its covenants and
obligations contained in or derived from this Lease arising out of an act,
occurrence, or omission accruing after the consummation of such sale or
assignment; and the purchaser or assignee of such sale or assignment or any
subsequent sale or assignment; and the purchaser or assignee of such sale or
assignment or any subsequent sale or assignment of Lease, the Property or
Building, shall be deemed, without any further agreement between the parties or
their successors in Interest or between the parties and any such purchaser or
assignee have assumed and agreed to carry out any and all of the covenants and
obligations of the Landlord under this Lease.

        

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

        

        m.           Severability.  Any
provision of this Lease which shall prove invalid, void or Illegal shall in no
way affect, Impair or invalidate any other provision here of and such other
provisions shall remain in full force and effect.

        

        n.           Cumulative
Remedies.  No remedy or election hereunder shall be deemed exclusive
but shall, wherever possible, be cumulative with all other remedies at Jaw or en
equity.

        

        o.           Choice
of Law.  The laws of the State of Washington shall govern this
Lease.

        

        p.           Light,
Air and VieW.  Landlord does not guarantee the continued present
status of light, air, or view over any improvements adjoining or in the vicinity
of the Building.

        

        q.           Interpretation.  This
Lease has been submitted to the scrutiny of all parties hereto and their
counsel, if desired, and shall be given a fair and reasonable interpretation in
accordance with the words hereof, without consideration or weight being given to
its having been drafted by any party hereto or its counsef.

        

        r.           Keys.  Upon
termination of this Lease, Tenant shall surrender all keys to the Premises to
Landlord at the place then fixed for payment of rent.  Tenant shall
inform Landlord of all combination locks, safes and vaults, if any in the
Premises.

      

       

      33.           SIGNS.     Signage
is allowed per individual suites and must be approved in writing by Landlord
prior to installation.

       

      34.           NORMAL BUSINESS
HOURS.     If use defined under section 7 is a
retail activity, Tenant agrees to maintain normal business hours consisted with
similar retail business in the area.  Failure to maintain normal
business hours shall be deemed a default under the terms of this
Lease.

      

      35.           AUTHORITY OF
PARTIES.

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

      

      b.           Limited
Partnerships.  If the Landlord herein is a Limited partnership, it is
understood and agreed that any claims by tenant ion Landlord shall be limited to
the assets of the limited partnership, and furthermore, Tenant expressly waives
any and all rights to proceed against the individual partners or the officers,
directors or shareholders of any corporate partner, except to the extent of
their interest in said limited partnership.

      

      36.           RELOCATION.      To
accommodate the changing needs of the tenants in the park, Tenant agrees, if
requested, to cooperate with Landlord in relocating to different premises within
the park to help Landlord meet those changing space needs.  Any
relocation will be done so as to minimize the impact on the Tenant, and the
costs of said relocation would be the responsibility of the
Landlord.  Tenant agrees if requested to cooperate with landlord in
evaluating proposals to relocate to different premises within the park to help
Landlord meet those changing space needs. Tenant agrees not to unreasonably
decline any such requests to relocate.  However, Tenant reserves the
right to decline any such request when the proposed relocation will, in the
opinion of Tenant, have a negative impact upon the conduct of its
business.

      

      37.           COMMISSIONS.     No
commissions are payable in connection with this transaction.

      

      38.           PERSONAL
GUARENTEE.     This lease is entered into by the
Landlord conditioned upon an in reliance upon the personal guarantee of the
terms and conditions contained herein by the persons identified as Personal
grantors on the signature page attached hereto.

      

      39.           EXHIBITS.    A-The
Premises, B-Legal Description, C-Landlord Provided Tenant
Improvements.

      

      THIS
LEASE IS SUBJECT TO ACCEPTANCE BY THE LANDLORD.

      

      IN
WHITNESS HEREOF, the parties hereto have executed this Lease the date and year
above written.

      

      
        	
                Landlord

                 

              	
                Tenant

              
	
                F.
      H. Braillard

              	
                D-3
      Technologies

              
	
                QUADRANT
      BUSINESS PARK

              	
                4838
      Ronson Court

              
	
                PO
      Box 1000

              	
                San
      Diego, CA

              
	
                Mukilteo,
      WA  98275

              	
                92111

              
	
                Phone
      425-355-9048

                 

              	 
      
	
                __________________________________

              	
                ________________________________

              
	
                LANDLORD

              	
                TENANT

              
	
                Date:
      6/24/05

              	
                Date:
      27, June 2005

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