-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, VCzoGSCfz8rFLDthN/c+HSg++F60+Xk3L/6X8eQJc0fKtWa9qgKJIwOGCOeCbBZg PyOmaifYiAh64Id2XhLyOQ== 0001096906-09-000930.txt : 20090814 0001096906-09-000930.hdr.sgml : 20090814 20090813181353 ACCESSION NUMBER: 0001096906-09-000930 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 20090630 FILED AS OF DATE: 20090814 DATE AS OF CHANGE: 20090813 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMEXDRUG CORP CENTRAL INDEX KEY: 0000045621 STANDARD INDUSTRIAL CLASSIFICATION: WHOLESALE-DRUGS PROPRIETARIES & DRUGGISTS' SUNDRIES [5122] IRS NUMBER: 952251025 STATE OF INCORPORATION: CA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10304 FILM NUMBER: 091011718 BUSINESS ADDRESS: STREET 1: 369 SOUTH DOHENY DR SUITE 326 CITY: BEVERLY HILLS STATE: CA ZIP: 90211 BUSINESS PHONE: 3108550475 MAIL ADDRESS: STREET 1: 369 SOUTH DOHENY DR SUITE 326 CITY: BEVERLY HILLS STATE: CA ZIP: 90211 10-Q 1 amexdrug10q.txt ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2009 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to____________ Commission file number 0-7473 Amexdrug Corporation (Exact name of registrant as specified in its charter) NEVADA 95-2251025 --------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) identification No.) 8909 West Olympic Boulevard, Suite 208 Beverly Hills, California 90211 ------------------------------- (Address of principal executive offices) Registrant's telephone number: (310) 855-0475 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (ss.232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes [ ] No [ ] Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Large accelerated filer [ ] Accelerated filer [ ] Non-accelerated filer [ ] Smaller reporting company [ X ] (Do not check if a smaller reporting company) Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [ X ] APPLICABLE ONLY TO CORPORATE ISSUERS State the number of shares outstanding of each of the issuer's classes of common equity, as of the latest practicable date: As of August 6, 2009, there were 8,470,481 shares of the issuer's common stock issued and outstanding. 1 AMEXDRUG CORPORATION FORM 10-Q TABLE OF CONTENTS PART I - FINANCIAL INFORMATION Page ---- Item 1. Financial Statements (Unaudited)...................................3 Consolidated Balance Sheets -- As of June 30, 2009 (Unaudited) and December 31, 2008 (Audited)...................................5 Consolidated Statements of Operations for the Three and Six Months Ended June 30, 2009 and 2008 (Unaudited)...................6 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2009 and 2008 (Unaudited)..........................7 Notes to Consolidated Financial Statements (Unaudited)..............8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations........................................10 Item 3. Quantitative and Qualitative Disclosures About Market Risk........15 Item 4. Controls and Procedures...........................................15 PART II - OTHER INFORMATION Item 1. Legal Proceedings.................................................15 Item 1A. Risk Factors.......................................................15 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.......15 Item 3. Defaults Upon Senior Securities...................................15 Item 4. Submission of Matters to a Vote of Security Holders...............15 Item 5. Other Information.................................................16 Item 6. Exhibits..........................................................16 2 PART I - FINANCIAL INFORMATION Item 1. Financial Statements. The consolidated balance sheets of Amexdrug Corporation, a Nevada corporation, and subsidiaries as of June 30, 2009 (unaudited) and December 31, 2008 (unaudited), the related unaudited consolidated statements of operations for the three and six month periods ended June 30, 2009 and June 30, 2008, the related unaudited consolidated statements of cash flows for the six month periods ended June 30, 2009 and June 30, 2008 and the notes to the unaudited consolidated financial statements follow. The consolidated financial statements have been prepared by Amexdrug's management, and are condensed; therefore they do not include all information and notes to the financial statements necessary for a complete presentation of the financial position, results of operations and cash flows, in conformity with accounting principles generally accepted in the United States of America, and should be read in conjunction with the annual consolidated financial statements included in Amexdrug's annual report on Form 10-K for the year ended December 31, 2008. The accompanying consolidated financial statements reflect all adjustments which are, in the opinion of management, necessary to present fairly the results of operations and financial position of Amexdrug Corporation consolidated with Allied Med, Inc., Dermagen, Inc., and BioRx Pharmaceuticals, Inc., its wholly owned subsidiaries, and all such adjustments are of a normal recurring nature. The names "Amexdrug", "we", "our" and "us" used in this report refer to Amexdrug Corporation. Operating results for the quarter ended June 30, 2009, are not necessarily indicative of the results that can be expected for the year ending December 31, 2009. 3 AMEXDRUG CORPORATION AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS Page ---- Consolidated Balance Sheets - June 30, 2009 (Unaudited) and December 31, 2008 (Audited)...........................................5 Consolidated Statements of Operations (Unaudited) for the Three and Six Months Ended June 30, 2009 and 2008..............................6 Consolidated Statements of Cash Flows (Unaudited) for the Six Months Ended June 30, 2009 and 2008......................................7 Notes to Consolidated Financial Statements..................................8 4 AMEXDRUG CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Unaudited) June 30, December 31, 2009 2008 ------------ ------------ Assets Current Assets Cash and cash equivalents $ 123,144 $ 96,390 Investment 275 2,681 Accounts receivable, net of allowance of $22,100 501,330 314,397 Inventory 215,543 211,538 Deferred tax asset 12,000 16,345 Other receivable 7,038 8,288 Advances officer 1,504 5,360 Prepaid insurance - 7,900 ------------ ------------ Total Current Assets 860,834 662,899 ------------ ------------ Property and Equipment, at cost Office and computer equipment 191,763 182,880 Leasehold improvements 15,700 15,700 ------------ ------------ 207,463 198,580 Less accumulated depreciation (187,421) (183,350) ------------ ------------ Net Property and Equipment 20,042 15,230 ------------ ------------ Other Assets Other deposits 12,158 12,158 Intangibles Customer base, net of accumulated amortization of $18,259 - - Trademark, net of accumulated amortization of $340 1,268 1,351 Goodwill 17,765 17,765 ------------ ------------ Total Other Assets 31,191 31,274 ------------ ------------ Total Assets $ 912,067 $ 709,403 ============ ============ Liabilities and Shareholders' Equity Current Liabilities: Accounts payable $ 415,180 $ 430,818 Accrued liabilities 17,635 14,286 Corporate tax payable 34,097 9,270 Notes payable related parties 109,202 109,202 Business lines of credit 178,282 91,287 ------------ ------------ Total Current Liabilities 754,396 654,863 ------------ ------------ Shareholders' Equity Common stock, $0.0001 par value; 50,000,000 authorized common shares 8,470,481 shares issued and outstanding 8,471 8,471 Additional paid in capital 83,345 83,345 Treasury stock at cost (6,551) - Accumulated deficit 72,406 (37,276) ------------ ------------ Total Shareholders' Equity 157,671 54,540 ------------ ------------ Total Liabilities and Shareholders' Equity $ 912,067 $ 709,403 ============ ============ The accompanying notes are an integral part of these consolidated financial statements. 5
AMEXDRUG CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) The Three Months Ended The Six Months Ended June 30, June 30, June 30, June 30, 2009 2008 2009 2008 --------------------------- --------------------------- Sales $ 2,435,174 $ 1,469,772 $ 4,377,709 $ 2,772,986 Cost of Goods Sold 2,178,246 1,386,701 3,922,204 2,570,287 ------------ ------------ ------------ ------------ Gross Profit 256,928 83,071 455,505 202,699 ------------ ------------ ------------ ------------ Operating Expenses Selling, general and administrative expense 115,493 94,657 207,603 177,832 Research and development 28,147 1,050 89,795 2,063 ------------ ------------ ------------ ------------ Total Operating Expenses 143,640 95,707 297,398 179,895 ------------ ------------ ------------ ------------ Income/(Loss) before depreciation expense 113,288 (12,636) 158,107 22,804 Depreciation and amortization expense 2,097 5,882 4,154 9,484 ------------ ------------ ------------ ------------ Income/(Loss) before Other Income/(Expenses) 111,191 (18,518) 153,953 13,320 ------------ ------------ ------------ ------------ Other Income/(Expenses) Penalty - - (268) (344) Unrealized gain/(loss) (2,306) (327) (2,406) (327) Interest expense (5,519) (3,333) (10,825) (6,233) ------------ ------------ ------------ ------------ Total Other Income/(Expenses) (7,825) (3,660) (13,499) (6,904) ------------ ------------ ------------ ------------ Income/(Loss) before Provision for Income Taxes 103,366 (22,178) 140,454 6,416 Income tax benefit/(expense) (24,207) 12,832 (30,772) 6,412 ------------ ------------ ------------ ------------ Net Income/(Loss) $ 79,159 $ (9,346) $ 109,682 $ 12,828 ============ ============ ============ ============ BASIC AND DILUTED INCOME/(LOSS) PER SHARE $ 0.01 $ (0.00) $ 0.01 $ 0.00 ============ ============ ============ ============ WEIGHTED-AVERAGE COMMON SHARES OUTSTANDING BASIC AND DILUTED 8,470,481 8,470,481 8,470,481 8,470,481 ============ ============ ============ ============ The accompanying notes are an integral part of these consolidated financial statements. 6
AMEXDRUG CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) The Six Months Ended June 30, June 30, 2009 2008 ------------ ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income/(loss) $ 109,682 $ 12,828 Adjustment to reconcile net loss to net cash used in operating activities Depreciation and amortization 4,154 9,484 Unrealized gain/(loss) on investment 2,406 - (Increase) Decrease in: Accounts receivable (186,933) (70,499) Allowance for doubtful accounts - - Inventory (4,005) 58,781 Prepaid expenses 7,900 (1,397) Account settlement receivable 1,250 - Deferred tax asset 4,345 (3,200) Increase (Decrease) in: Accounts payable and accrued liabilities (12,289) (223,084) Corporate income tax payable 24,827 173 ------------ ------------ NET CASH USED IN OPERATING ACTIVITIES (48,663) (216,914) ------------ ------------ Net CASH FLOWS USED IN INVESTING ACTIVITIES: Purchase of fixed assets (8,883) (50,064) ------------ ------------ NET CASH USED IN INVESTING ACTIVITIES (8,883) (50,064) ------------ ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Advance, officer 3,856 - Loan payable, Dell - 1,005 Loan payable, AFS/IBEX - 437 Purchase of treasury stock (6,551) - Proceeds from credit line 86,995 12,044 Proceeds from related parties - 60,000 ------------ ------------ NET CASH PROVIDED BY FINANCING ACTIVITIES 84,300 73,486 ------------ ------------ NET INCREASE (DECREASE) IN CASH 26,754 (193,492) CASH, BEGINNING OF PERIOD 96,390 217,549 ------------ ------------ CASH, END OF PERIOD $ 123,144 $ 24,057 ============ ============ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Interest paid $ 6,457 $ 3,848 ============ ============ Income taxes $ 800 $ 800 ============ ============ The accompanying notes are an integral part of these consolidated financial statements. 7 AMEXDRUG CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED JUNE 30, 2009 1. Basis of Presentation The accompanying unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-Q and Rule 10-01 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included. Operating results for the six months ended June 30, 2009 are not necessarily indicative of the results that may be expected for the year ending December 31, 2009. For further information refer to the financial statements and footnotes thereto included in the Company's Form 10-K for the year ended December 31, 2008. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES This summary of significant accounting policies of AmexDrug Corporation is presented to assist in understanding the Company's financial statements. The financial statements and notes are representations of the Company's management, which is responsible for their integrity and objectivity. These accounting policies conform to accounting principles generally accepted in the United States of America and have been consistently applied in the preparation of the financial statements. Income per Share Calculations ----------------------------- The Company adopted Statement of Financial Standards ("SFAS") No. 128 for the calculation of "Income per Share". SFAS No. 128 dictates the calculation of basic earnings per share and diluted earnings per share. Basic earnings per share are computed by dividing income available to common shareholders by the weighted-average number of common shares available. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. The Company's diluted income per share is the same as the basic income per share for the six months ended June 30, 2009, because there are no outstanding dilutive instruments. Recently Issued Accounting Pronouncements ----------------------------------------- In May 2009, the FASB issued SFAS No. 165, "Subsequent Events" ("SFAS 165"), which establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. SFAS 165 is for interim or annual periods ending after June 15, 2009. The adoption of SFAS 165 did not have a material effect on the Company's financial statements. 8 AMEXDRUG CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS-UNAUDITED JUNE 30, 2009 3. CAPITAL STOCK During the six months ended June 30, 2009, the Company issued no shares of common stock. 4. INCOME TAXES The Company files income tax returns in the U.S. Federal jurisdiction, and the state of California. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S. income tax examinations by tax authorities for years before 2000. The Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, on January 1, 2007. FIN 48 clarifies the accounting for uncertainty in tax positions by prescribing a minimum recognition threshold required for recognition in the financial statements. FIN 48 also provides guidance on de-recognition, measurement classification, interest and penalties, accounting in interim periods, disclosure and transition. The Company's policy is to recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. 5. SUBSEQUENT EVENTS Management has evaluated subsequent events as of August 7, 2009, and has determined there are no subsequent events to be reported. 9 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations. Overview -------- Amexdrug Corporation is located at 8909 West Olympic Boulevard, Suite 208, Beverly Hills, California 90211. Its phone number is (310) 855-0475. Its fax number is (310) 855-0477. Its website is www.amexdrug.com. Shares of Amexdrug common stock are traded on the OTC Bulletin Board under the symbol AXRX.OB. The President of Amexdrug has had experience working in the pharmaceutical industry for the past 26 years. Amexdrug Corporation, through its wholly-owned subsidiaries, Dermagen, Inc., Allied Med, Inc., Royal Health Care, Inc. and BioRx Pharmaceuticals, Inc. is a rapidly growing pharmaceutical and cosmeceutical company specializing in the research and development, manufacturing and distribution of pharmaceutical drugs, cosmetics and distribution of prescription and over-the-counter drugs, private manufacturing and labeling and a quality control laboratory. At Amexdrug Corporation, it is our anticipation to give our clientele the opportunity to purchase cost effective products while maximizing the return of investments to our shareholders. Amexdrug Corporation distributes its products through its subsidiaries, Dermagen, Inc., Allied Med, Inc., Royal Health Care, Inc. and BioRx Pharmaceuticals, Inc. primarily to independent pharmacies and secondarily to small and medium-sized pharmacy chains, alternative care facilities and other wholesalers and retailers in the state of California. We have introduced five pharmaceutical over the counter (OTC) and natural products in 2008 and plan to add three more products, in various stages of development, in 2009. We presently market twelve products under the Sponix name. Our team of professionals fully pledges the effectiveness of our distinct products. At this time, we have certain distribution channels with suppliers and customers whom we know and trust, such as CVS, Target, Amazon, and hundreds of independent pharmacies. Of the estimated 100,000 retailers (drug stores and food mass), we expect to have 25,000 stores carry our products in 2009. Our mission is to expand the sales of our products to more than 40,000 stores in 2010. Amexdrug Corporation was initially incorporated under the laws of the State of California on April 30, 1963 under the name of Harlyn Products, Inc. Harlyn Products, Inc. was engaged in the business of selling jewelry to department stores and retail jewelry stores until the mid-1990s. The name of the Company was changed to Amexdrug Corporation in April 2000 to reflect the change in the Company's business to the sale of pharmaceutical products. The officers and directors of the Company also changed in April 2000. The domicile of the Company was changed from California to Nevada in December 2001. At that time the Company changed its fiscal year end from June 30 to December 31. References in this report to "we," "our," "us," the "company" and "Amexdrug" refer to Amexdrug Corporation and also to our subsidiaries, Dermagen, Inc., Allied Med, Inc., Royal Health Care, Inc. and BioRx Pharmaceuticals, Inc. Amexdrug currently has 50,000,000 shares of authorized common stock $.001 par value, of which 8,470,481 are issued and outstanding as of June 30, 2009. Allied Med, Inc. ---------------- On December 31, 2001, Amexdrug acquired all of the issued and outstanding common shares of Allied Med, Inc., an Oregon corporation, ("Allied Med") in a related party transaction. 10 Allied Med was formed as an Oregon corporation in October 1997, to operate in the pharmaceutical wholesale business of selling a full line of brand name and generic pharmaceutical products, over the counter (OTC) drug and non-drug products and health and beauty products to independent and chain pharmacies, alternative care facilities and other wholesalers. Amexdrug has assumed the operations of Allied Med, and Amexdrug intends to build on the pharmaceutical wholesale operations of Allied Med. The accompanying financial information includes the operations of Allied Med for all periods presented and the operations of Amexdrug Corporation from April 25, 2000. Dermagen, Inc. -------------- Amexdrug completed its purchase of Dermagen, Inc. on October 7, 2005. Dermagen, Inc. is now an operating subsidiary of Amexdrug. The acquisition of Dermagen, Inc. is not considered to be an acquisition of a significant amount of assets which would require audited financial statements of Dermagen, Inc. Dermagen, Inc. is a growing manufacturing company specializing in the manufacturing and distribution of certain pharmaceuticals, medical devices, health and beauty products. Dermagen, Inc. has a U.S.-FDA registered and state FDA approved manufacturing facility licensed to develop high margin skin and novel health and beauty products for niche markets. Dermagen's competitive advantage is in its superior product research and development for large leading domestic and international companies. Royal Health Care Company ------------------------- In October 2003, Allied Med acquired 100% of the assets of Royal Health Care Company. Royal Health Care Company is a health and beauty company which has sold specially manufactured facial and body creams, arthritic pain relief medications and an exclusive patented hair care product to pharmacies, beauty salons, beauty supply stores and other fine shops. Royal Health Care Company uses the highest quality ingredients for the finest quality products. Each product has been formulated with the essential ingredients and plant extracts to achieve optimum potential and quality. Royal Health Care Company products are manufactured by Dermagen, Inc., in an FDA approved manufacturing facility. The Royal Health Care Company assets acquired include the "Royal Health Care Company" name, logo, and related trademarks, all formulas to products manufactured for sale under the Royal Health Care Company name, and the Royal Health Care Company list of customers. These intellectual property rights were acquired without cost from a company in which Jack Amin's wife is a principal shareholder. Mr. Amin is the CEO and Chairman of Amexdrug Corporation and Allied Med, Inc. Management believes this acquisition will provide the Company with an opportunity to increase the number of products sold by the Company, and expand the Company's customer base. On October 28, 2004, Amexdrug formed a new subsidiary, Royal Health Care, Inc. as a Nevada corporation. Royal Health Care, Inc. was formed to manufacture and sell health and beauty products. BioRx Pharmaceuticals --------------------- On November 8, 2004, Amexdrug formed a new subsidiary, BioRx Pharmaceuticals, Inc. as a Nevada corporation. BioRx Pharmaceuticals, Inc. is committed to offer over the counter (OTC) products that are recommended with trust and faith by physicians, primarily podiatrists and dermatologists. The focus and mission of BioRx Pharmaceuticals, Inc. is to create, develop and manufacture products to help ease pain and restore and maintain the overall well-being of our customers. We strive for high performance and quality. Our commitment is to offer natural and OTC products that are recommended with confidence by doctors and pharmacists and that the customer can use with pleasure. Our compliance program is diligently followed through the Company. BioRx Pharmaceuticals, Inc. maintains high ethics for animal welfare and our products are never tested on animals. All products are made in the USA. 11 A total of twelve products have been manufactured for sale by BioRx Pharmacenticals, Inc., and a total of ten products are currently under different stages of development, three of which should be available in 2009. These over-the-counter and natural products are effective for treatment of fungus, arthritis, sunburn protection and for healthy feet and nails. BioRx Pharmaceuticals is planning to sell these products to national chain drugstores, sport chain stores, natural food markets and other mass markets. These products will be marketed under the names of Sponix and Bactivex, and will be sold under the name of BioRx Pharmaceuticals. Lease Agreements and Certain Other Contracts -------------------------------------------- The Company has a written lease agreement covering the property in Fullerton, California leased by the Company which is filed as an exhibit. The Beverly Hills property leased by the Company is under a month to month verbal lease since the original lease on the property has expired. The Company's Manila, Philippines location is also leased under a verbal lease agreement. The Company's loan agreement with Nora Amin is verbal. The Company does not have written contracts with its major suppliers or buyers. The Company has a written line of credit agreement with National Bank of California which is filed as an exhibit. Results of Operations --------------------- For the Three Months Ended June 30, 2009. ---------------------------------------- Revenues. For the three months ended June 30, 2009, Amexdrug reported sales of $2,435,174, comprised of $2,369,486 of sales from the Company's pharmaceutical wholesale business of selling brand name and generic pharmaceutical products and over the counter (OTC) health and beauty products, and $65,688 of sales of health and beauty products manufactured by the Company. This is $965,402 more than the $1,469,772 of sales reported for the three months ended June 30, 2008, which was comprised primarily of $1,344,436 sales from the Company's pharmaceutical wholesale distribution business of selling brand name and generic pharmaceutical products and over the counter (OTC) health and beauty products, and $125,336 of sales of health and beauty products manufactured by the Company. During the three month period ended June 30, 2009, Amexdrug experienced an increase in total sales due, in part, to the increased marketing efforts of the Company. Costs of Goods Sold. Cost of goods sold for the three months ended June 30, 2009 was $2,178,246, an increase of $791,545 from the $1,386,701 cost of goods sold for the three months ended June 30, 2008. Gross Profit. During the three months ended June 30, 2009 gross profit increased by $173,857 to $256,928, or 10.6% of sales, from the $83,071, or 5.7% of sales recorded for the three months ended June 30, 2008. The change in gross profit margin is attributable to an increase in sales as well as an increased percentage of sales made from higher gross margin products manufactured and sold in the three month period ended June 30, 2009. Expenses. Selling, general and administrative expense was $115,493 for the three months ended June 30, 2009, an increase of $20,836 from the $94,657 of selling, general and administrative expense recorded for the three months ended June 30, 2008. This increase in selling, general and administrative expense is attributable to increases in certain administrative expenses. 12 Net Income. During the three months ended June 30, 2009, Amexdrug earned net income of $79,159, as compared to the net loss of $9,346 experienced in the three months ended June 30, 2008. Amexdrug's improvement during the three month period ended June 30, 2009 is attributable largely to the significant increase in sales and resulting increase in gross profits in the later period. For the Six Months Ended June 30, 2009. -------------------------------------- Revenues. For the six months ended June 30, 2009, Amexdrug reported sales of $4,377,709, comprised of $4,256,428 of sales from the Company's pharmaceutical wholesale business of selling brand name and generic pharmaceutical products and over the counter (OTC) health and beauty products, and $121,281 of sales of health and beauty products manufactured by the Company. This is $1,604,723 more than the $2,772,986 of sales reported for the six months ended June 30, 2008 which was comprised primarily of $2,620,406 of sales from the Company's pharmaceutical wholesale distribution business of selling brand name and generic pharmaceutical products and over the counter (OTC) health and beauty products, and $152,580 of sales of health and beauty products manufactured by the Company. During the six month period ended June 30, 2009, Amexdrug experienced an increase in total sales due, in part, to increased marketing efforts of the Company. Costs of Goods Sold. Cost of goods sold for the six months ended June 30, 2009 was $3,922,204, an increase of $1,351,917 from the $2,570,287 cost of goods sold for the six months ended June 30, 2008. Gross Profit. During the six months ended June 30, 2009 gross profit increased by $252,806 to $455,505, or 10.4% of sales, from the $202,699, or 7.3% of sales recorded for the six months ended June 30, 2008. The change in gross profit margin is attributable to an increase in sales as well as an increased percentage of sales of higher gross margin products manufactured and sold in the first six months of 2009. Expenses. Selling, general and administrative expense was $207,603 for the six months ended June 30, 2009, an increase of $29,771 from the $177,832 of selling, general and administrative expense recorded for the six months ended June 30, 2008. This increase in selling, general and administrative expense is attributable to increases in certain administrative expenses. Net Income. During the six months ended June 30, 2009, Amexdrug earned net income of $109,682, an increase of $96,854 from the net income of $12,828 experienced in the six months ended June 30, 2008. Amexdrug's increase in net income during the six month period ended June 30, 2009 is attributable largely to the increase of sales and the resulting increase in gross profits earned in the later period. Liquidity and Capital Resources - June 30, 2009 ----------------------------------------------- As of June 30, 2009, Amexdrug reported total current assets of $860,834, comprised primarily of cash and cash equivalents of $123,144, accounts receivable of $501,330, inventory of $215,543, a deferred tax asset of $12,000 and other receivable of $7,038. Total assets as of June 30, 2009 were $912,067, which included total current assets, plus net property and equipment of $20,042, other deposits of $12,158, customer base of $1,268, and goodwill of $17,765. 13 Amexdrug's liabilities as of June 30, 2009 consisted primarily of accounts payable of $415,180, notes payables to related parties of $109,202, business line of credit of $178,282, corporate tax payable of $34,097 and accrued liabilities of $17,635. During the six months ended June 30, 2009, Amexdrug used $48,663 cash in operating activities compared to $216,914 cash used in operating activities in the six months ended June 30, 2008. The primary adjustments to reconcile net income to net cash used in operating activities during the six months ended June 30, 2009 were as follows: an increase in accounts receivable of $186,933, a decrease in accounts payable and accrued liabilities of $12,289, and an increase in corporate income tax payable of $24,827. Amexdrug had $123,144 in cash and cash equivalents at June 30, 2009. Operations have primarily been funded through cash generated from operations, and from loans made from the wife of our President. Management does not anticipate that Amexdrug will need to seek additional financing during the next twelve months. Inflation In the opinion of management, inflation has not and will not have a material effect on our operations in the immediate future. Management will continue to monitor inflation and evaluate the possible future effects of inflation on our business and operations. Capital Expenditures The Company expended $8,883 and $50,064 on capital expenditures during the three month periods ended June 30, 2009 and 2008, respectively. The Company has no current plans for any significant capital expenditures. Critical Accounting Policies In the notes to the audited consolidated financial statements for the year ended December 31, 2008, included in the Company's Annual Report on Form 10-K, the Company discusses those accounting policies that are considered to be significant in determining the results of operations and its financial position. The Company believes that the accounting principles utilized by it conform to accounting principles generally accepted in the United States of America. The preparation of financial statements requires Company management to make significant estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. By their nature, these judgments are subject to an inherent degree of uncertainty. On an on-going basis, the Company evaluates estimates. The Company bases its estimates on historical experience and other facts and circumstances that are believed to be reasonable, and the results form the basis for making judgments about the carrying value of assets and liabilities. The actual results may differ from these estimates under different assumptions or conditions. Forward-looking statements -------------------------- This document includes various forward-looking statements with respect to future operations of Amexdrug that are subject to risks and uncertainties. Forward-looking statements include information concerning expectations of future results of operations and such statements preceded by, followed by or that otherwise include the words "believes," "expects," "anticipates," "intends," "estimates" or similar expressions. For those statements, Amexdrug claims the protection of the safe harbor for forward-looking statements contained in the Private Litigation Reform Act of 1995. Actual results may vary materially. 14 Item 3. Quantitative and Qualitative Disclosures About Market Risk. A "smaller reporting company" (as defined by Item 10 of the Regulation S-K) is not required to provide the information required by this Item. Item 4. Controls and Procedures. Under the supervision and with the participation of management, our principal executive officer and principal financial officer evaluated the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 ("Exchange Act"), as of June 30, 2009. Based on this evaluation, our principal executive officer and our principal financial officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective and adequately designed to ensure that the information required to be disclosed by us in the reports we submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms and that such information was accumulated and communicated to our chief executive officer and chief financial officer, in a manner that allowed for timely decisions regarding required disclosure. During the last fiscal quarter ended June 30, 2009, there has been no change in internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. ANY FORWARD-LOOKING STATEMENTS INCLUDED IN THIS FORM 10-Q REPORT REFLECT MANAGEMENT'S BEST JUDGMENT BASED ON FACTORS CURRENTLY KNOWN AND INVOLVE RISKS AND UNCERTAINTIES. ACTUAL RESULTS MAY VARY MATERIALLY. PART II - OTHER INFORMATION Item 1. Legal Proceedings. Amexdrug is not presently a party to any material pending legal proceedings. To the best of Amexdrug's knowledge, no governmental authority or other party has threatened or is contemplating the filing of any material legal proceeding against Amexdrug. Item 1A. Risk Factors. A "smaller reporting company" (as defined by Item 10 of the Regulation S-K) is not required to provide the information required by this Item. Item 2. Unregistered Sales of Equity Securities and Use of Proceeds. During the three month period ended June 30, 2009, the Company did not issue any shares of its unregistered common stock. For a description of any sales of shares of the Company's unregistered stock made in the past three years, please refer to the Company's Annual Reports on Form 10-KSB or Form 10-K, and the Company's Quarterly Reports on Form 10-QSB or Form 10-Q filed since December 31, 2005 Item 3. Defaults Upon Senior Securities. None; not applicable. Item 4. Submission of Matters to a Vote of Security Holders. None; not applicable. 15 Item 5. Other Information. None; not applicable. Item 6. Exhibits. (a) Exhibits. EXHIBIT INDEX Exhibit Exhibit Number Description Location - ------- ----------- -------- 2.1 Agreement and Plan of Merger * (to change domicile from California 2.2 Agreement and Plan of Reorganization ** 3.1 Articles of Incorporation *** 3.2 By-Laws *** 10.1 Lease Agreement between Fullerton Business This Filing Center, Lessor, and Allied Med, Inc., Lessee, dated September 23, 2005 10.2 Lease Agreement between Fullerton Business This Filing Center, Lessor, and Allied Med, Inc., Lessee, dated September 23, 2005 10.3 Third Amendment to Lease Agreement between This Filing Fullerton Business Center, Lessor, and Allied Med, Inc., Lessee, dated November 5, 2008 10.4 Promissory Note with National Bank of This Filing California dated June 23, 2008 10.5 Change in Terms Agreement with National This Filing Bank of California dated June 9, 2009 14.1 Code of Ethics **** 21.1 List of Subsidiaries of Amexdrug This Filing Corporation 31.1 Certification of Chief Executive Officer This Filing pursuant to Section 302 of the Sarbanes- Oxley Act of 2002 31.2 Certification of Chief Financial Officer This Filing pursuant to Section 302 of the Sarbanes- Oxley Act of 2002 32.1 Certification of Chief Executive Officer This Filing pursuant to Section 906 of the Sarbanes- Oxley Act of 2002 32.2 Certification of Chief Financial Officer This Filing pursuant to Section 906 of the Sarbanes- Oxley Act of 2002 Summaries of all exhibits contained within this report are modified in their entirety by reference to these Exhibits. 16 * Exhibit 2.1 is incorporated by reference from Amexdrug's Form 8-K Current Report filed December 21, 2001 as Exhibit No. 10.01. ** Exhibit 2.2 is incorporated by reference from Amexdrug's Form 8-K Current Report filed January 15, 2002 as Exhibit No. 10.01. *** Exhibit 3.1 and 3.2 are incorporated by reference from Amexdrug's Form 10-KSB for the years ended December 31, 2001 filed on April 1, 2002. **** Exhibit 14.1 is incorporated by retference from Amexdrug's Form 10-K for the year ended December 31, 2008 filed April 13, 2009 17 SIGNATURES In accordance with the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. AMEXDRUG CORPORATION Date: August 10, 2009 By: /s/ Jack Amin ---------------------------- Jack Amin Director, President, Chief Executive Officer, Chief Financial Officer and Chief Accounting Officer 18 - -------------------------------------------------------------------------------- EX-10.1 2 amexdrug10qexh101.txt ================================================================================ EXHIBIT 10.1 STANDARD INDUSTRIAL/COMMERCIAL MULTI TENANT LEASE GROSS AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION RECORDING OF THIS LEASE PROHIBITED 1. Basic Provisions ("Basic Provisions"). 1.1 Parties: This Lease ("Lease"), dated for reference purposes only, SEPTEMBER 23, 2005 is made by and between FULLERTON BUSINESS CENTER ("Lessor") and ALLIED MED, INC., AN OREGON CORPORATION (collectively the "Parties," or individually a "Party"). 1.2(a) Premises: That certain portion of the Building, including all Improvements therein or to be provided by Lessor under the terms of this Lease, commonly known by the street address of 2500 E. FENDER AVENUE, UNIT "K" located In the City of FULLERTON County of ORANGE, State of CALIFORNIA, with zip code 92831, as outlined on Exhibit B attached hereto ("Premises"). The "Building" is that certain building containing the Premises and generally described as (describe briefly the nature of the Building): APPROXIMATELY 3,520 SQUARE FEET OF RENTABLE SPACE INCLUDING OVERHANG AS OUTLINED IN EXHIBITS "A" AND "B" ATTACHED HERETO AND INCORPORATED HEREIN. In addition to Lessee's rights to use and occupy the Premises as hereinafter specified, Lessee shall have non-exclusive rights to the Common Areas (as defined In Paragraph 2.7 below) as hereinafter specified, but shall not have any rights to the roof, exterior walls or utility raceways of the Building or to any other buildings In the Industrial Center. The Premises, the Building, the Common Areas, the land upon which they are located, along with all other buildings and Improvements thereon, are herein collectively referred to as the "Industrial Center." (Also see Paragraph 2.) 1.2(b) Parking: FIVE (5) unreserved vehicle parking spaces ("Unreserved Parking Spaces"); and N/A reserved vehicle parking spaces ("Reserved Parking Spaces"). (Also see Paragraph 2.6.) 1.3 Term: ONE (1) years and 0months ("Original Term") commencing OCTOBER 1, 2005 ("Commencement Date") and ending SEPTEMBER 30, 2006 ("Expiration Date"). (Also see Paragraph 3.) 1.4 Early Possession: N/A ("Early Possession Date"). (Also see Paragraphs 3.2 and 3.3.) 1.5 Base Rent: $2,534.00 per month ("Base Rent"), payable on the FIRST day of each month commencing OCTOBER 1, 2005. (Also see Paragraph 4.) [ ] If this box is checked, this Lease provides for the Base Rent to be adjusted per Addendum , attached hereto. 1.6(a) Base Rent Paid Upon Execution: $2,534.00 (as Base Rent for the period OCTOBER 1, 2005 - OCTOBER 31, 2005. 1.6(b) Lessee's Share of Common Area Operating Expenses: 0.015303 percent (_____%) ("Lessee's Share") as determined by [X] prorate square footage of the Premises as compared to the total square footage of the Building or [ ] other criteria as described in Addendum __. 1.7 Security Deposit: $7,602.00 ("Security Deposit"). (Also see Paragraph 5.) 1.8 Permitted Use: OFFICE/WAREHOUSE USED FOR PHARMACEUTICAL MANUFACTURING & DISTRIBUTION ("Permitted Use") (Also see Paragraph 6.) 1.9 Insuring Party. Lessor Is the "Insuring Party." (Also see Paragraph 8.) 1.10(a) Real Estate Brokers. The following real estate broker(s) (collectively, the "Brokers") and brokerage relationships exist in this transaction and are consented to by the Parties (check applicable boxes): [ ] N/A represents Lessor exclusively ("Lessor's Broker"); [ ] N/A represents Lessee exclusively ("Lessee's Broker"); or [ ] N/A represents both Lessor and Lessee ("Dual Agency"). (Also see Paragraph 15.) 1.10(b) Payment to Brokers. Upon the execution of this Lease by both Parties, Lessor shall pay to said Broker(s) jointly, or In such separate shares as they may mutually designate In writing, a fee as set forth In a separate written agreement between Lessor and said Broker(s) (or In the event there is no separate written agreement between Lessor and said Broker(s), the sum of ($-0) for brokerage services rendered by said Broker(s) in connection with this transaction. 1.11 Guarantor. The obligations of the Lessee under this Lease are to be guaranteed by N/A ("Guarantor"). (Also see Paragraph 37.) 1.12 Addenda and Exhibits. Attached hereto is an Addendum or Addenda consisting of Paragraphs 1 through 37, and Exhibits A through C, all of which constitute a part of this Lease. 2. Premises, Parking and Common Areas. 2.1 Letting. Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the Premises, for the term, at the rental, and upon all of the terms, covenants and conditions set forth in this Lease. Unless otherwise provided herein, any statement of square footage set forth In this Lease, or that may have been used in calculating rental and/or Common Area Operating Expenses, Is an approximation which Lessor and Lessee agree Is reasonable and the rental and Lessee's Share (as defined in Paragraph 1.6(b)) based thereon is not subject to revision whether or not the actual square footage Is more or less. 2.2 Condition. Lessor shall deliver the Premises to Lessee clean and free of debris on the Commencement Date and warrants to Lessee that the existing plumbing, electrical systems, fire sprinkler system, lighting, air conditioning and heating systems and loading doors, If any, In the Premises, other than those constructed by Lessee, shall be In good operating condition on the Commencement Date. If a non-compliance with said warranty exists as of the Commencement Data, Lessor shall, except as otherwise provided In this Lease, promptly after receipt of written notice from Lessee setting forth with specificity the nature and extent of such non-compliance, rectify same at Lessor's expense. If Lessee does not give Lessor written notice of a non-compliance with this warranty within thirty (30) days after the Commencement Date, correction of that non-compliance shall be the obligation of Lessee at Lessee's sole cost and expense. 1 2.3 Compliance with Covenants, Restrictions and Building Code. Lessor warrants that any Improvements (other than those constructed by Lessee or at Lessee's direction) on or in the Premises which have been constructed or Installed by Lessor or with Lessor's consent or at Lessor's direction shall comply with all applicable covenants or restrictions of record and applicable building codes, regulations and ordinances In effect on the Commencement Date. Lessor further warrants to Lessee that Lessor has no knowledge of any claim having been made by any governmental agency that a violation or violations of applicable building codes, regulations, or ordinances exist with regard to the Premises as of the Commencement Dale. Said warranties shall not apply to any Alterations or Utility Installations (defined Initials: (C) American Industrial Real Estate Association 1993 MULTI-TENANT-- GROSS in Paragraph 7.3(a)) made or to be made by Lessee. If the Premises do not comply with bald warranties, Lessor shall, except as otherwise provided in this Lease, promptly after receipt of written notice from Lessee given within six (6) months following the Commencement Dale and setting forth with specificity the nature and extent of such non-compliance, take such action, at Lessor's expense, as may be reasonable or appropriate to rectify the non-compliance. Lessor makes no warranty that the Permitted Use in Paragraph 1.8 is permitted for the Premises under Applicable Laws (as defined in Paragraph 2.4). 2.4 Acceptance of Premises. Lessee hereby acknowledges: (a) that It has been advised by the Broker(s) to satisfy Itself with respect to the condition of the Premises (including but not limited to the electrical and fire sprinkler systems, security, environmental aspects, seismic and earthquake requirements, and compliance with the Americans with Disabilities Act and applicable zoning, municipal, county, state and federal laws, ordinances and regulations and any covenants or restrictions of record (collectively, "Applicable Laws") and the present and future suitability of the Premises for Lessee's Intended use; (b) that Lessee has. made such investigation as it deems necessary with reference to such matters, is satisfied with reference thereto, and assumes all responsibility therefore as the same relate to Lessee's occupancy of the Premises and/or the terms of this Lease; and (c) that neither Lessor, nor any of Lessor's agents, has made any oral or written representations or warranties with respect to said matters other than as set forth In this Lease. 2.5 Lessee as Prior Owner/Occupant. The warranties made by Lessor In this Paragraph 2 shall be of no force or effect if immediately prior to the date set forth In Paragraph 1.1 Lessee was the owner or occupant of the Premises. In such event, Lessee shall, at Lessee's sole cost and expense, correct any non-compliance of the Premises with said warranties. 2.6 Vehicle Parking. Lessee shall be entitled to use the number of Unreserved Parking Spaces and Reserved Parking Spaces specified in Paragraph 1.2(b) on those portions of the Common Areas designated from time to time by Lessor for parking. Lessee shall not use more parking spaces than said number. Said parking spaces shall be used for parking by vehicles no larger than lull-size passenger automobiles or pick-up trucks, herein called "Permitted Size Vehicles." Vehicles other than Permitted Size Vehicles shall be parked and loaded or unloaded as directed by Lessor in the Rules and Regulations (as defined In Paragraph 40) issued by Lessor. (Also see Paragraph 2.9.) (a) Lessee shall not permit or allow any vehicles that belong to or are controlled by Lessee or Lessee's employees, suppliers, shippers, customers, contractors or Invitees to be loaded, unloaded, or parked In areas other than those designated by Lessor for such activities. (b) If Lessee permits or allows any of the prohibited activities described in this Paragraph 2.6, then Lessor shall have the right, without notice, In addition to such other rights and remedies that timey have, to remove or low away the vehicle Involved and charge the cost to Lessee, which cost shall be immediately payable upon demand by Lessor. (c) Lessor shall at the Commencement Dale of this Lease, provide the parking facilities required by Applicable Law. 2.7 Common Areas--Definition. The term "Common Areas" is defined as all areas and facilities outside the Premises and within the exterior boundary line of the Industrial Center and Interior utility raceways within the Premises that are provided and designated by the Lessor from time to time for the general nonexclusive use of Lessor, Lessee and other lessees of the Industrial Center and their respective employees, suppliers, shippers, customers, contractors and Invitees, including parking areas, loading and unloading areas, trash areas, roadways, sidewalks, walways, parkways, driveways and landscaped areas. 2.8 Common Areas--Lessee's Rights. Lessor hereby grants to Lessee, for the benefit of Lessee and Its employees, suppliers, shippers, contractors, customers and Invitees, during the term of this Lease, the non-exclusive right to use, In common with others entitled to such use, the Common Areas as they exist from time to time, subject to any rights, powers, and privileges reserved by Lessor under the terms hereof or under the terms of any rules and regulations or restrictions governing the use of the Industrial Center. Under no circumstances shall the right herein granted to use the Common Areas be deemed to include the right to store any properly, temporarily or permanently, In the Common Areas. Any such storage shall be permitted only by the prior written consent of Lessor or Lessor's designated agent, which consent may be revoked at any time. In the even) that any unauthorized storage shall occur than Lessor shall have the right, without notice, In addition to such other rights and remedies that It may have, to remove the properly and charge the cost to Lessee, which cost shall be Immediately payable upon demand by Lessor. 2.9 Common Areas--Rules and Regulations. Lessor or such other person(s) as Lessor may appoint shall have the exclusive control and management of the Common Areas and shall have the right, from time to time, to establish, modify, amend and enforce reasonable Rules and Regulations with respect thereto In accordance with Paragraph 40. Lessee agrees to abide by and conform to all such Rules and Regulations, and to cause its employees, suppliers, shippers, customers, contractors and Invitees to so abide and conform. Lessor shall not be responsible to Lessee for the non-compliance with said rules and regulations by other lessees of the Industrial Center. 2.10 Common Areas--Changes. Lessor shall have the right, In Lessor's sole discretion, from time to time: (a) To make changes to the Common Areas, Including, without limitation, changes in the location, size, shape and number of driveways, entrances, parking spaces, parking areas, loading and unloading areas, Ingress, egress, direction of traffic, landscaped areas, walkways and utility raceways; (b) To close temporarily any of the Common Areas for maintenance purposes so long as reasonable access to the Premises remains available; (c) To designate other land outside the boundaries of the Industrial Center to be a part of the Common Areas; (d) To add additional buildings and improvements to the Common Areas; (e) To use the Common Areas while engaged In making additional Improvements, repairs or alterations to the industrial Center, or any portion thereof; (f) To do and perform such other acts and make such other changes in, to or with respect to the Common Areas and Industrial Center as Lessor may, in the exercise of sound business judgment, deem to be appropriate. 3. Term. 3.1 Term. The Commencement Date, Expiration Data and Original Term of this Lease are as specified in Paragraph 1.3. 3.2 Early Possession. If an Early Possession Date Is specified In Paragraph 1.4 and If Lessee totally or partially occupies the Premises after the Early Possession Date but prior to the Commencement Date, the obligation to pay Base Rent shall be abated for the period of such early occupancy. All other terms of this Lease, however, (including but not limited to the obligations to pay Lessee's Share ol Common Area Operating Expenses and to carry the Insurance required by Paragraph 8) shall be In effect during such period. Any such early possession shall not affect nor advance the Expiration Date of the Original Term. 2 3.3 Delay in Possession. If for any reason Lessor cannot deliver possession of the Premises to Lessee by the Early Possession Dale, If one Is specified in Paragraph 1.4, or if no Early Possession Dale Is specified, by the Commencement Data, Lessor shall not be subject to any liability therefor, nor shall such failure affect the validity of this Lease, or the obligations of Lessee hereunder, or extend the term hereof, but In such case, Lessee shall not, except as otherwise provided herein, be obligated to pay rent or perform any other obligation of Lessee under the terms of this Lease until Lessor delivers possession of the Premises to Lessee. II possession of the Premises Is not delivered to Lessee within sixty (60) days after the Commencement Dale, Lessee may, at its option, by notice in writing to Lessor within ten (10) days after the and of said sixty (60) day period, cancel this Lease, In which event the parties shall be discharged from all obligations hereunder; provided further, however, that If such written notice of Lessee Is not received by Lessor within said ten (10) day period, Lessee's right to cancel this Lease hereunder shall terminate and be of no further force or effect. except as may be otherwise provided, and regardless of when the Original Term actually commences, If possession is not tendered to Lessee when required by this Lease and Lessee does not terminate this Lease, as aforesaid, the period free of the obligation to pay Base Rent, II any, that Lessee would otherwise have enjoyed shall run from the date of delivery of possession and continue for a period equal to the period during which the Lessee would have otherwise enjoyed under the terms hereof, but minus any days of delay caused by the acts, changes or omissions of Lessee. 4. Rent. 4.1. Base Rent. Lessee shall pay Base Rent and other rent or charges, as the same may be adjusted from time to time, to Lessor in lawful money of the United States, without offset or deduction, on or before the day on which It Is due under the terms of this Lease. Base Rent and all other rent and charges for any period during the term hereof which is for less than one full month shall be prorated based upon the actual number of days of the month involved. Payment of Base Rent and other charges shall be made to Lessor at its address staled herein or to such other persons or at such other addresses as Lessor may from time to time designate in writing to Lessee. 4.2 Common Area Operating Expenses. Lessee shall pay to Lessor during the term hereof, In addition to the Base Rent, Lessee's Share (as specified in Paragraph 1.6(b)) of all Common Area Operating Expenses, as hereinafter defined, during each calendar year of the term of this Lease, In accordance with the following provisions: (a) "Common Area Operating Expenses" are defined, for purposes of this Lease, as all costs Incurred by Lessor relating to the ownership and operation of the industrial Center, Including, but not limited lo, the following: (i) The operation, repair and maintenance, In neat, clean, good order and condition, of the following: (aa) The Common Areas, Including parking areas, loading and unloading areas, trash areas, roadways, sidewalks, walkways, parkways, driveways, landscaped areas, striping, bumpers, Irrigation systems, Common Area lighting facilities, fences and gales, elevators and roof. (bb) Exterior signs and any tenant directories. (cc) Fire detection and sprinkler systems. (ii) The cost of water, gas, electricity and telephone to service the Common Areas. (iii) Trash disposal, property management and security services and the costs of any environmental inspections. (iv) Reserves set aside for maintenance and repair of Common Areas. (v) Any Increase above the Base Real Property Taxes (as defined In Paragraph 10.2(b)) for the Building and the Common Areas. (vi) Any "Insurance Cost Increase" (as defined In Paragraph 8.1). (vii) The cost of Insurance carried by Lessor with respect to the Common Areas. (viii) Any deductible portion of an Insured loss concerning the Building or the Common Areas. (ix) Any other services to be provided by Lessor that are slated elsewhere In this Lease to be a Common Area Operating Expense. (b) Any Common Area Operating Expenses and Real Properly Taxes that are specifically attributable to the Building or to any other building in the Industrial Center or to the operation, repair and maintenance thereof, shall be allocated entirely to the Building or to such other building. However, any Common Area Operating Expenses and Real Property Taxes that are not specifically attributable to the Building or to any other building or to the operation repair and maintenance thereof, shall be equitably allocated by Lessor to all buildings in the industrial Center. (c) The Inclusion of the Improvements, facilities and services set forth In Subparagraph 4.2(e) shall not be deemed to impose an obligation upon Lessor to either have said Improvements or facilities or to provide those services unless the Industrial Center already has the same, Lessor already provides the services, or Lessor has agreed elsewhere In this Lease to provide the same or some of them. (d) Lessee's Share of Common Area Operating Expenses shall be payable by Lessee within ten (10) days after a reasonably detailed statement of actual expenses Is presented to Lessee by Lessor. At Lessor's option, however, an amount may be estimated by Lessor from time to time of Lessee's Share of annual Common Area Operating Expenses and the same shall be payable monthly or quarterly, as Lessor shall designate, during each 12-month period of the Lease term, on the same day as the Base Rent is due hereunder. Lessor shall deliver to Lessee within sixty (60) days after the expiration of each calendar year a reasonably detailed statement showing Lessee's Share of the actual Common Area Operating Expenses Incurred during the preceding year. If Lessee's payments under this Paragraph 4.2(d) during said preceding year exceed Lessee's Share as indicated on said statement. Lessor shall be credited the amount of such over payment against Lessee's Share of Common Area Operating Expenses next becoming due. If Lessee's payments under this Paragraph 4.2(d) during said preceding year were less than Lessee's Share as Indicated on said statement, Lessee shall pay to Lessor the amount of the deficiency within ten (10) days after delivery by Lessor to Lessee of said statement. 5. Security Deposit. Lessee shall deposit with Lessor upon Lessee's execution hereof the Security Deposit set forth In Paragraph 1.7 as security for Lessee's faithful performance of Lessee's obligations under This Lease. II Lessee falls to pay Base Rent or other rent or charges due hereunder, or otherwise Defaults under this Lease (as defined in Paragraph 13.1), Lessor may use, apply or retain all or any portion of said Security Deposit for the payment of any amount due Lessor or to reimburse or compensate Lessor for any liability, cost, expense, loss or damage (Including attorneys' fees) which Lessor may suffer or Incur by reason thereof. If Lessor uses or applies all or any portion of said Security Deposit, Lessee shall within ten (10) days after written request therefore deposit monies with Lessor sufficient to restore said Security Deposit to the lull amount required by this Lease. Any time the Base Rent Increases during the term of this Lease, Lessee shall, upon written request from Lessor, deposit additional monies with Lessor as an addition to the Security Deposit so that the total amount of the Security Deposit shall at all times bear the same proportion to the then current Base Rent as the Initial Security Deposit bears to the Initial Base Rent set forth In Paragraph 1.5. Lessor shall not be required to keep all or any part of the Security Deposit separate from Its general accounts. Lessor shall, at the expiration or earlier termination of the term hereof and alter Lessee has vacated the Premises, return to Lessee (or, at Lessor's option, to the last assignee, if any, of Lessee's Interest herein), that portion of the Security Deposit not used or applied by Lessor. Unless otherwise expressly agreed in writing by Lessor, no part of the Security Deposit shall be considered to be held in trust, to bear Interest or other Increment for Its use, or to be prepayment for any monies to be paid by Lessee under this Lease. 3 6. Use. 6.1 Permitted Use. (a) Lessee shall use and occupy the Premises only for the Permitted Use set forth In Paragraph 1.8, or any other legal use which Is reasonably comparable thereto, and for no other purpose. Lessee shall not use or permit the use of the Premises In a manner that is unlawful, creates waste or a nuisance, or that disturbs owners and/or occupants of, or causes damage to the Premises or neighboring premises or properties. (b) Lessor hereby agrees to not unreasonably withhold or delay Its consent to any written request by Lessee, Lessee's assignees or subtenants, and by prospective assignees and subtenants of Lessee, Its assignees and subtenants, for a modification of said Permitted Use, so long as the same will not Impair the structural integrity of the Improvements on the Premises or In the Building or the mechanical or electrical systems therein, does not conflict with uses by other lessees, is not significantly more burdensome to the Premises or the Building and the Improvements thereon, and is otherwise permissible pursuant to this Paragraph 6. If Lessor elects to withhold such consent, Lessor shall within five (5) business days after such request give a written notification of same, which notice shall include an explanation of Lessor's reasonable objections to the change in use. 6.2 Hazardous Substances. (a) Reportable Uses Require Consent. The term "Hazardous Substance" as used In this Lease shall mean any product, substance, chemical, material or waste whose presence, nature, quantity and/or intensity of existence, use, manufacture, disposal, transportation, spill, release or effect, either by Itself or in combination with other materials expected to be on the Premises, Is either: (i) potentially Injurious to the public health, safety or welfare, the environment, or the Premises; (ii) regulated or monitored by any governmental authority; or (iii) a basis for potential liability of Lessor to any governmental agency or third party under any applicable statute or common law theory. Hazardous Substance shall Include, but not be limited to, hydrocarbons, petroleum, gasoline, crude oil or any products or by-products thereof. Lessee shall not engage In any activity in or about the Premises which constitutes a Reportable Use (as hereinafter defined) of Hazardous Substances without the express prior written consent of Lessor and compliance In a timely manner (at Lessee's sole cost and expense) with all Applicable Requirements (as defined In Paragraph 6.3). "Reportable Use" shell mean (i) the Installation or use of any above or below ground storage tank, (ii) the generation, possession, storage, use, transportation, or disposal of a Hazardous Substance that requires a permit from, or with respect to which a report, notice, registration or business plan Is required to be filed with, any governmental authority, and (iii) the presence In, on or about the Premises of a Hazardous Substance with respect to which any Applicable Laws require that a notice be given to persons entering or occupying the Premises or neighboring properties. Notwithstanding the foregoing, Lessee may, without Lessor's prior consent, but upon notice to Lessor and In compliance with all Applicable Requirements, use any ordinary and customary materials reasonably required to be used by Lessee in the normal course of the Permitted Use, so long as such use Is not a Reportable Use and does not expose the Premises or neighboring properties to any meaningful risk of contamination or damage or expose Lessor to any liability therefor. In addition, Lessor may (but without any obligation to do so) condition Its consent to any Reportable Use of any Hazardous Substance by Lessee upon Lessee's giving Lessor such additional assurances as Lessor, In Its reasonable discretion, deems necessary to protect Itself, the public, the Premises and the environment against damage, contamination or Injury and/or liability therefor, Including but not limited to the Installation (and, at Lessor's option, removal on or before Lease expiration or earlier termination) of reasonably necessary protective modifications to the Premises (such as concrete encasements) and/or the deposit of an additional Security Deposit under Paragraph 5 hereof. (b) Duty to Inform Lessor. If Lessee knows, or has reasonable cause to believe, that a Hazardous Substance has come to be located In, on, under or about the Premises or the Building, other than as previously consented to by Lessor, Lessee shall Immediately give Lessor written notice thereof, together with a copy of any statement, report, notice, registration, application, permit, business plan, license, claim, action, or proceeding given to, or received from, any governmental authority or private party concerning the presence, spill, release, discharge of, or exposure to, such Hazardous Substance including but not limited to all such documents as may be involved In any Reportable Use Involving the Premises. Lessee shall not cause or permit any Hazardous Substance to be spilled or released in, on, under or about the Premises (Including, without limitation, through the plumbing or sanitary sewer system). (c) Indemnification. Lessee shall Indemnity, protect, defend and hold Lessor, its agents, employees, lenders and ground lessor, if any, and the Premises, harmless from and against any and all damages, liabilities, judgments, costs, claims, liens, expenses, penalties, loss of permits and attorneys' and consultants' fees arising out of or Involving any Hazardous Substance brought onto the Premises by or for Lessee or by anyone under Lessee's control. Lessee's obligations under this Paragraph 6.2(c) shall Include, but not be limited to, the effects of any contamination or Injury to person, properly or the environment created or suffered by Lessee, and the cost of Investigation (including consultants' and attorneys' fees and testing), removal, remediation, restoration and/or abatement thereof, or of any contamination therein Involved, and shall survive the expiration or earlier termination of this Lease. No termination, cancellation or release agreement entered into by Lessor and Lessee shall release Lessee from Its obligations under this Lease with respect to Hazardous Substances, unless specifically so agreed by Lessor In writing at the time of such agreement. 6.3 Lessee's Compliance with Requirements. Lessee shall, at Lessee's sole cost and expense, fully, diligently and In a timely manner, comply with all "Applicable Requirements," which term Is used In this Lease to mean all laws, rules, regulations, ordinances, directives, covenants, easements and restrictions of record, permits, the requirements of any applicable fire Insurance underwriter or rating bureau, and the recommendations of Lessor's engineers and/or consultants, relating in any manner to the Premises (Including but not limited to matters pertaining to (i) Industrial hygiene, (ii) environmental conditions on, in, under or about the Premises, including soli and groundwater conditions, and (iii) the use, generation, manufacture, production, Installation, maintenance, removal, transportation, storage, spill, or release of any Hazardous Substance), now In effect or which may hereafter come Into elect. Lessee shall, within live (5) days after receipt of Lessor's written request, provide Lessor with copies of all documents and Information, Including but not limited to permits, registrations, manifests, applications, reports and certificates, evidencing Lessee's compliance with any Applicable Requirements specified by Lessor, and shall immediately upon receipt, notify Lessor in writing (with copies of any documents Involved) of any threatened or actual claim, notice, citation, warning, complaint or report pertaining to or involving failure by Lessee or the Premises to comply with any Applicable Requirements. 4 6.4 Inspection; Compliance with Law. Lessor, Lessor's agents, employees, contractors and designated representatives, and the holders of any mortgages, deeds of trust or ground teases on the Premises ("Lenders") shall have the right to enter the Premises at any time In the case of an emergency, and otherwise at reasonable times, for the purpose of inspecting the condition of the Premises and for verifying compliance by Lessee with this Lease and all Applicable Requirements (as defined In Paragraph 6.3), and Lessor shall be entitled to employ experts and/or consultants in connection therewith to advise Lessor with respect to Lessee's activities, Including but not limited to Lessee's Installation, operation, use, monitoring, maintenance, or removal of any Hazardous Substance on or tram the Premises. The costs and expenses of any such Inspections shall be paid by the party requesting same, unless a Default or Breach of this Lease by Lessee or a violation of Applicable Requirements or a contamination, caused or materially contributed to by Lessee, is found to exist or to be imminent, or unless the inspection Is requested or ordered by a governmental authority as the result of any such existing or Imminent violation or contamination. In such case, Lessee shall upon request reimburse Lessor or Lessor's Lender, as the case may be, for the costs and expenses of such Inspections. 7. Maintenance, Repairs, Utility Installations, Trade Fixtures and Alterations. 7.1 Lessee's Obligations. (a) Subject to the provisions of Paragraphs 2.2 (Condition), 2.3 (Compliance with Covenants, Restrictions and Building Code), 7.2 (Lessor's Obligations), 9 (Damage or Destruction), and 14 (Condemnation), Lessee shall, at Lessee's sole cost and expense and at all times, keep the Premises and every pan thereof in good order, condition and repair (whether or not such portion of the Premises requiring repair, or the means of repairing the same, are reasonably or readily accessible to Lessee, and whether or not the need for such repairs occurs as a result of Lessee's use, any prior use, the elements or the age of such portion of the Premises), Including, without limiting the generality of the foregoing, all equipment or facilities specifically serving the Premises, such as plumbing, heating, air conditioning, ventilating, electrical, lighting facilities, boilers, fired or unfired pressure vessels, fire hose connections if within the Premises, fixtures, Interior walls, interior surfaces of exterior walls, ceilings, floors, windows, doors, plate glass, and skylights, but excluding any Items which are the responsibility of Lessor pursuant to Paragraph 7.2 below. Lessee, in keeping the Premises in good order, condition and repair, shall exercise and perform good maintenance practices. Lessee's obligations shall include restorations, replacements or renewals when necessary to keep the Premises and all improvements thereon or a part thereof in good order, condition and state of repair. (b) Lessee shall, al Lessee's sole cost and expense, at Lessee's option, procure and maintain a contract, with copies to Lessor, In customary form and substance for and with a contractor specializing and experienced In the Inspection, maintenance and service of the healing, air conditioning and ventilation system for the Premises. However, Lessor reserves the right, upon notice to Lessee, to procure and maintain the contract for the heating, air conditioning and ventilating systems, and it Lessor so elects, Lessee shall reimburse Lessor, upon demand, for the cost (hereof. (c) If Lessee fails to perform Lessee's obligations under this Paragraph 7.1, Lessor may enter upon the Premises after ten (10) days' prior written notice to Lessee (except in the case of an emergency, in which case no notice shall be required), perform such obligations on Lessee's behalf, and put the Premises in good order, condition and repair, in accordance with Paragraph 13.2 below. 7.2 Lessor's Obligations. Subject to the provisions of Paragraphs 2.2 (Condition), 2.3 (Compliance with Covenants, Restrictions and Building Code), 4.2 (Common Area Operating Expenses), 6 (Use), 7.1 (Lessee's Obligations), 9 (Damage or Destruction) and 14 (Condemnation), Lessor, subject to reimbursement pursuant to Paragraph 4.2, shall keep in good order, condition and repair the foundations, exterior walls, structural condition of interior bearing walls, exterior roof, fire sprinkler and/or standpipe and hose In good order, condition and repair (if located in the Common Areas) the other automatic fire extinguishing system including fire alarm and/or smoke detection systems and equipment, tire hydrants, parking lots, walkways, parkways, driveways, landscaping, lances, signs and utility systems serving the Common Areas and all parts thereof, as well as providing the services for which there Is a Common Area Operating Expense pursuant to Paragraph 4.2, Lessor shall not be obligated to paint the exterior or Interior surfaces of exterior walls nor shall Lessor be obligated to maintain, repair or replace windows, doors or plate glass of the Premises. Lessee expressly waives the benefit of any statute now or hereafter in effect which would otherwise afford Lessee the right to make repairs at Lessor's expense or to terminate this Lease because of Lessor's failure to keep the Building, Industrial Center or Common Areas In good order, condition and repair. 7.3 Utility Installations, Trade Fixtures, Alterations. (a) Definitions; Consent Required. The term "Utility Installations" Is used in this Lease to refer to all air lines, power panels, electrical distribution, security, tire protection systems, communications systems, lighting fixtures, healing, ventilating and air conditioning equipment, plumbing, and fencing in, on or about the Premises. The term "Trade Fixtures" shall mean Lessee's machinery and equipment which can be removed without doing material damage to the Premises. The term "Alterations" shall mean any modification of the Improvements on the Premises which are provided by Lessor under the terms of this Lease, other than Utility Installations or Trade Fixtures. "Lessee-Owned Alterations and/or Utility Installations" are defined as Alterations and/or Utility Installations made by Lessee that are not yet owned by Lessor pursuant to Paragraph 7.4(a). Lessee shall not make nor cause to be made any Alterations or Utility Installations In, on, under or about the Premises without Lessor's prior written consent. Lessee May, however, make non-structural Utility Installations to the Interior of the Premises (excluding the roof) without Lessor's consent but upon notice to Lessor, so long as they are not visible from the outside of the Premises, do not Involve puncturing, relocating or removing the roof or any existing walls, or changing or Interfering with the fire sprinkler or fire detection systems and the cumulative cost thereof during the term of this Lease as extended does not exceed $2,500.00. (b) Consent. Any Alterations or Utility Installations that Lessee shall desire to make and which require the consent of the Lessor shall be presented to Lessor In written form with detailed plans. All consents given by Lessor, whether by virtue of Paragraph 7.3(a) or by subsequent specific consent, shall be deemed conditioned upon: (i) Lessee's acquiring all applicable permits required by governmental authorities; (ii) the furnishing of copies of such permits together with a copy of the plans and specifications for the Alteration or Utility Installation to Lessor prior to commencement of the work thereon; and (iii) the compliance by Lessee with all conditions of said permits in a prompt and expeditious manner. Any Alterations or Utility Installations by Lessee during the term of this Lease shall be done in a good and workmanlike manner, with good and sufficient materials, and be In compliance with all Applicable Requirements. Lessee shall promptly upon completion thereof furnish Lessor with as-built plans and specifications therefor. Lessor may, (but without obligation to do so) condition Its consent to any requested Alteration or Utility Installation that costs $2,500.00 or more upon Lessee's providing Lessor with a lien and completion bond in an amount equal to one and one-hall times the estimated cost of such Alteration or Utility Installation. (c) Lien Protection. Lessee shall pay when due all claims for labor or materials furnished or alleged to have been furnished to or for Lessee at or for use on the Premises, which claims are or may be secured by any mechanic's or materialmen's lien against the Premises or any Interest therein. Lessee shall give Lessor not less than ten (10) days' nonce prior to the commencement of any work In, on, or about the Premises, and Lessor shall have the right to post notices of non-responsibility In or on the Premises as provided by law. II Lessee shall, In good faith, contest the validity of any such lien, claim or demand, than Lessee shall, al its sole expense, defend and protect Itself, Lessor and the Premises against the same and shall pay and satiety any such adverse judgment that may be rendered thereon before the enforcement thereof against the Lessor or the Premises. If Lessor shall require, Lessee shall furnish to Lessor a surety bond satisfactory to Lessor In an amount equal to one and one-half times the amount of such contested lien claim or demand, Indemnifying Lessor against liability for the same, as required by law for the holding of the Premises free from the effect of such Ilea or claim. In addition, Lessor may require Lessee to pay Lessor's attorneys' fees and costs in participating in such action if Lessor shall decide It Is to Its best Interest to do so. 5 7.4 Ownership, Removal, Surrender, and Restoration. (a) Ownership. Subject to Lessor's right to require their removal and to cause Lessee to become the owner thereof as hereinafter provided in this Paragraph 7.4, all Alterations and Utility Installations made to the Premises by Lessee shall be the property of and owned by Lessee, but considered a part of the Premises. Lessor may, at any time and at Its option, elect In writing to Lessee to be the owner of all or any specified part of the Lessee-Owned Alterations and Utility Installations. Unless otherwise Instructed per Subparagraph 7.4(b) hereof, all Lessee-Owned Alterations and Utility Installations shall, at the expiration or earlier termination of this Lease, become the property of Lessor and remain upon the Premises and be surrendered with the Premises by Lessee. (b) Removal. Unless otherwise agreed In writing, Lessor may require that any or all Lessee-Owned Alterations or Utility Installations be removed by the expiration or earlier termination of this Lease, notwithstanding that their Installation may have been consented to by Lessor. Lessor may require the removal at any time of all or any part of any Alterations or Utility Installations made without the required consent of Lessor. (c) Surrender/Restoration. Lessee shall surrender the Premises by the end of the last day of the Lease term or any earlier termination dale, clean and free of debris and in good operating order, condition and stale of repair, ordinary wear and tear excepted. Ordinary wear and tear shall not include any damage or deterioration that would have been prevented by good maintenance practice or by Lessee performing all of its obligations under this Lease. Except as otherwise agreed or specified herein, the Premises, as surrendered, shall include the Alterations and Utility Installations. The obligation of Lessee shall Include the repair of any damage occasioned by the Installation, maintenance or removal of Lessee's Trade Fixtures, furnishings, equipment, and Lessee-Owned Alterations and Utility Installations, as well as the removal of any storage tank Installed by or for Lessee, and the removal, replacement, or remediation of any soil, material or ground water contaminated by Lessee, all as may than be required by Applicable Requirements and/or good practice. Lessee's Trade Fixtures shall remain the property el Lessee and shall be removed by Lessee subject to its obligation to repair and restore the Premises per this Lease. 8. Insurance; indemnity. 8.1 Payment of Premium Increases. (a) As used herein, the term "Insurance Cost Increase" Is defined as any Increase In the actual cost of the Insurance applicable to the Building and required to be carried by Lessor pursuant to Paragraphs 8.2(b), 8.3(a) and 8.3(b), ("Required Insurance"), over and above the Base Premium, as hereinafter defined, calculated on an annual basis. "Insurance Cost Increase" shall Include, but not be limited to, requirements of the holder of a mortgage or deed of trust covering the Premises, Increased valuation of the Premises, and/or a general premium rate Increase. The term "Insurance Cost Increase" shall not, however, include any premium Increases resulting from the nature of the occupancy of any other lessee of the Building. II the parties insert a dollar amount In Paragraph 1.9, such amount shall be considered the "Base Premium." If a dollar amount has not been Inserted In Paragraph 1.9 and If the Building has been previously occupied during the twelve (12) month period Immediately preceding the Commencement Date, the "Base Premium" shall be the annual premium applicable to such twelve (12) month period. If the Building was not fully occupied during such twelve (12) month period, the "Base Premium" shall be the lowest annual premium reasonably obtainable for the Required Insurance as of the Commencement Date, assuming the most nominal use possible of the Building. In no event, however, shall Lessee be responsible for any portion of the premium cost attributable to liability Insurance coverage In excess of $1,000,000 procured under Paragraph 8.2(b). (b) Lessee shall pay any Insurance Cost Increase to Lessor pursuant to Paragraph 4.2. Premiums for policy periods commencing prior to, or extending beyond, the term of this Lease shall be prorated to coincide with the corresponding Commencement Dale or Expiration Date. 8.2 Liability Insurance. (a) Carried by Lessee, Lessee shall obtain and keep in force during the term of this Lease a Commercial General Liability policy of Insurance protecting Lessee, Lessor and any Lender(s) whose names have been provided to Lessee In writing (as additional insureds) against claims for bodily Injury, personal injury and property damage based upon, Involving or arising out of the ownership, use, occupancy or maintenance of the Premises and all areas appurtenant thereto. Such Insurance shell be on an occurrence basis providing single limit coverage In an amount not less than $1,000,000 per occurrence with an "Additional Insured-Managers or Lessor's of Premises" endorsement and contain the "Amendment of the Pollution Exclusion" endorsement for damage caused by heat, smoke or fumes from a hostile fire. The policy shall not contain any Intra-Insured exclusions as between Insured persons or organizations, but shall include coverage for liability assumed under this Lease as an "Insured contract" for the performance of Lessee's Indemnity obligations under this Lease. The limits of said insurance required by this Lease or as carried by Lessee shall not, however, Iimit the liability of Lessee nor relieve Lessee of any obligation hereunder. All Insurance to be carried by Lessee shall be primary to and not contributory with any similar Insurance carried by Lessor, whose insurance shall be considered excess Insurance only. (b) Carried by Lessor. Lessor shall also maintain liability Insurance described In Paragraph 8.2(a) above, in addition to and not In lieu of, the insurance required to be maintained by Lessee. Lessee shall not be named as an additional Insured therein. 8.3 Property Insurance-Building, Improvements and Rental Value. (a) Building and Improvements. Lessor shall obtain and keep In force during the term of this Lease a policy or policies In the name of Lessor, with loss payable to Lessor and to any Lender(s), Insuring against loss or damage to the Premises. Such Insurance shall,be for full replacement cost, as the same shall exist from time to time, or the amount required by any Lender(s), but In no event more than the commercially reasonable and available Insurable value thereof If, by reason of the unique nature or age of the Improvements Involved, such latter amount Is less than full replacement cost. Lessee-Owned Alterations and Utility Installations, Trade Fixtures and Lessee's personal property shall be insured by Lessee pursuant to Paragraph 8.4. If the coverage Is available and commercially appropriate, Lessor's policy or policies shall Insure against all risks of direct physical loss or damage (except the perils of flood end/or earthquake unless required by a Lender or included In the Base Premium), Including coverage for any additional costs resulting from debris removal and reasonable amounts of coverage for the enforcement of any ordinance or law regulating the reconstruction or replacement of any undamaged sections of the Building required to be demolished or removed by reason of the enforcement of any building, zoning, safety or land use laws as the result of a covered loss, but not Including plate glass insurance. Said policy or policies shall also contain an agreed valuation provision In lieu of any co-Insurance clause, waiver of subrogation, and inflation guard protection causing an Increase in the annual property Insurance coverage amount by a factor of not less than the adjusted U.S. Department of Labor Consumer Price Index for All Urban Consumers for the city nearest to where the Premises are located. 6 (b) Rental Value. Lessor shall also obtain and keep in force during the term of this Lease a policy or policies In the name of Lessor, with loss payable to Lessor and any Lender(s), Insuring the loss of the full rental and other charges payable by all lessees of the Betiding to Lessor for one year (Including all Real Property Taxes, Insurance costs, all Common Area Operating Expenses and any scheduled rental Increases). Said Insurance may provide that in the event the Lease Is terminated by reason of an Insured loss, the period of Indemnity for such coverage shall be extended beyond the date of the completion of repairs or replacement of the Premises, to provide for one lull year's loss of rental revenues from the date of any such loss. Said Insurance shall contain an agreed valuation provision In lieu of any co-Insurance clause, and the amount of coverage shall be adjusted annually to reflect the projected rental Income, Real Property Taxes, Insurance premium costs and other expenses, If any, otherwise payable, for the next 12-month period. Common Area Operating Expenses shall include any deductible amount In the event of such loss. (c) Adjacent Premises. Lessee shall pay for any Increase In the premiums for the property Insurance of the Building and for the Common Areas or other buildings in the Industrial Center II said Increase Is caused by Lessee's acts, omissions, use or occupancy of the Premises. (d) Lessee's Improvements. Since Lessor Is the Insuring Party, Lessor shall not be required to Insure Lessee-Owned Alterations and Utility Installations unless the Item In question has become the property of Lessor under the terms of this Lease. 8.4 Lessee's Property Insurance. Subject to the requirements of Paragraph 8.5, Lessee at Its cost shall either by separate policy or, at Lessor's option, by endorsement to a policy already carried, maintain Insurance coverage on all of Lessee's personal property, Trade Fixtures and Lessee-Owned Alterations and Utility Installations in, on, or about the Premises similar In coverage to that carried by Lessor as the Insuring Party under Paragraph 8.3(a). Such Insurance shall be lull replacement cost coverage with a deductible not to exceed $1,000 per occurrence. The proceeds from any such Insurance shall be used by Lessee for the replacement of personal property and the restoration of Trade Fixtures and Lessee-Owned Alterations and Utility Installations. Upon request tram Lessor, Lessee shall provide Lessor with written evidence that such Insurance is in force. 8.5 Insurance Policies. Insurance required hereunder shall be in companies duly licensed to transact business in the state where the Premises are located, and maintaining during the policy term a "General Policyholders Rating" 01 at least Be, V, or such other rating as may be required by a Lender, as set forth In the most current Issue of "Best's Insurance Guide." Lessee shall not do or permit to be done anything which shall invalidate the Insurance policies referred to in this Paragraph 8. Lessee shall cause to be delivered to Lessor, within seven (7) days after the earlier of the Early Possession Data or the Commencement Date, certified copies of, or certificates evidencing the existence and amounts of, the Insurance required under Paragraph 6.2(a) and 8.4. No such policy shall be cancelable or subject to modification except after thirty (30) days' prior written notice to Lessor. Lessee shall at least thirty (30) days prior to the expiration of such policies, furnish Lessor with evidence of renewals or "Insurance binders" evidencing renewal thereof, or Lessor may order such Insurance and charge the cost thereof to Lessee, which amount shall be payable by Lessee to Lessor upon demand. 8.6 Waiver of Subrogation. Without affecting any other rights or remedies, Lessee and Lessor each hereby release and relieve the other, and waive their entire right to recover damages (whether in contract or In tort) against the other, for loss or damage to their property arising out of or Incident to the perils required to be insured against under Paragraph 8. The effect of such releases and waivers of the right to recover damages shall not be limited by the amount of Insurance carried or required or by any deductibles applicable thereto. Lessor and Lessee agree to have their respective Insurance companies Issuing property damage Insurance waive any right to subrogation that such companies may have against Lessor or Lessee, as the case may be, so long as the Insurance is not invalidated thereby. 8.7 Indemnity. Except for Lessor's negligence and/or breach of express warranties, Lessee shall Indemnity, protect, defend and hold harmless the Premises, Lessor and Its agents, Lessor's master or ground Lessor, partners and Lenders, from and against any and all claims, loss of rents and/or damages, costs, liens, judgments, penalties, loss of permits, attorneys' and consultants' lees, expenses and/or liabilities arising out of, Involving, or In connection with, the occupancy of the Premises by Lessee, the conduct o1 Lessee's business, any act, omission or neglect of Lessee, Its agents, contractors, employees or Invitees, and out of any Default or Breach by Lessee In the performance in a timely manner of any obligation on Lessee's part to be performed under this Lease. The foregoing shall include, but not be limited to, the defense or pursuit of any claim or any action or proceeding Involved therein, and whether or not (In the case of claims made against Lessor) litigated and/or reduced to Judgment. In case any action or proceeding be brought against Lessor by reason of any of the foregoing matters, Lessee upon notice from Lessor shall defend the same at Lessee's expense by counsel reasonably satisfactory to Lessor and Lessor shall cooperate with Lessee in such defense. Lessor need not have first paid any such claim In order to be so indemnified. 8.8 Exemption of Lessor from Liability. Lessor shall not be liable for Injury or damage to the person or goods, wares, merchandise or other property of Lessee, Lessee's employees, contractors, Invitees, customers, or any other person in or about the Premises, whether such damage or Injury is caused by or results from fire, steam, electricity, gas, water or rain, or from the breakage, leakage, obstruction or other detects of pipes, fire sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures, or from any other cause, whether said Injury or damage results from conditions arising upon the Premises or upon other portions of the Building of which the Premises are a part, from other sources or places, and regardless of whether the cause of such damage or Injury or the means of repairing the same Is accessible or not. Lessor shall not be liable for any damages arising from any act or neglect of any other lessee of Lessor nor from the failure by Lessor to enforce the provisions of any other lease In the Industrial Center. Notwithstanding Lessor's negligence or breach of this Lease, Lessor shall under no circumstances be liable for injury to Lessee's business or for any loss of Income or profit therefrom. 9. Damage or Destruction. 9.1 Definitions. (a) "Premises Partial Damage" shall mean damage or destruction to the Premises, other than Lessee-Owned Alterations and Utility Installations, the repair cost of which damage or destruction Is less than fifty percent (50%) of the then Replacement Cost (as defined In Paragraph 9.1(d)) of the Premises (excluding Lessee-Owned Alterations and Utility Installations and Trade Fixtures) immediately prior to such damage or destruction. (b) "Premises Total Destruction" shall mean damage or destruction to the Premises, other than Lessee-Owned Alterations and Utility Installations, the repair cost of which damage or destruction Is fifty percent (50%) or more of the Then Replacement Cost of the Premises (excluding Lessee-Owned Alterations and Utility Installations and Trade Fixtures) Immediately prior to such damage or destruction. In addition, damage or destruction to the Building, other than Lessee Owned Alterations and Utility Installations and Trade Fixtures of any lessees of the Building, the cost of which damage or destruction Is fifty percent (50%) or more of the then Replacement Cost (excluding Lessee-Owned Alterations and Utility Installations and Trade Fixtures of any lessees of the Building) of the Building shall, at the option of Lessor, be deemed to be Premises Total Destruction. 7 (c) "Insured Loss" shall mean damage or destruction to the Premises, other than Lessee-Owned Alterations and Utility Installations and Trade Fixtures, which was caused by an event required to be covered by the Insurance described In Paragraph 8.3(a) irrespective of any deductible amounts or coverage limns involved. (d) "Replacement Cost" shall mean the cost to repair or rebuild the Improvements owned by Lessor at the time of the occurrence to their condition existing immediately prior thereto, including demolition, debris removal and upgrading required by the operation of applicable building codes, ordinances or laws, and without deduction for depreciation. (e) "Hazardous Substance Condition" shall mean the occurrence or discovery of a condition Involving the presence of, or a contamination by, a Hazardous Substance as defined In Paragraph 6.2(a), in, on, or under the Premises. 9.2 Premises Partial Damage--Insured Loss. If Premises Partial Damage that is an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair such damage (but not Lessee's Trade Fixtures or Lessee-Owned Alterations and Utility Installations) as soon as reasonably possible and this Lease shall continue in lull force and effect. In the event, however, that there Is a shortage of insurance proceeds and such shortage is due to the fact that, by reason of the unique nature of the Improvements In the Premises, lull replacement cost Insurance coverage was not commercially reasonable and available, Lessor shall have no obligation to pay for the shortage In Insurance proceeds or to fully restore the unique aspects of the Premises unless Lessee provides Lessor with the funds to cover same, or adequate assurance thereof, within ten (10) days following receipt of written notice of such shortage and request therefor. If Lessor receives said funds or adequate assurance thereof within said ten (10) day period, Lessor shall complete them as soon as reasonably possible and this Lease shall remain in full force and effect. If Lessor does not receive such funds or assurance within said period, Lessor may nevertheless elect by written notice to Lessee within ten (10) days thereafter to make such restoration and repair as is commercially reasonable with Lessor paying any shortage in proceeds, In which case this Lease shall remain in lull force and effect. If Lessor does not receive such funds or assurance within such ten (10) day period, and If Lessor does not so elect to restore and repair, then this Lease shall terminate sixty (60) days following the occurrence of the damage or destruction. Unless otherwise agreed, Lessee shall in no event have any right to reimbursement from Lessor for any funds contributed by Lessee to repair any such damage or destruction. Premises Partial Damage due to flood or earthquake shall be subject to Paragraph 9.3 rather than Paragraph 9.2, notwithstanding that there may be some Insurance coverage, but the net proceeds of any such insurance shall be made available for the repairs if made by either Party. 9.3 Partial Damage--Uninsured Loss. If Premises Partial Damage that Is not an Insured Loss occurs, unless caused by a negligent or willful act of Lessee (in which event Lessee shall make the repairs at Lessee's expense and this Lease shall continue In full force and effect), Lessor may at Lessor's option, either (i) repair such damage as soon as reasonably possible at Lessor's expense, In which event this Lease shall continue In lull force and effect, or (ii) give written notice to Lessee within thirty (30) days after receipt by Lessor of knowledge of the occurrence of such damage of Lessor's desire to terminate this Lease as of the date sixty (60) days following the date of such notice. In the event Lessor elects to give such notice of Lessor's Intention to terminate this Lease, Lessee shall have the right within ten (10) days after the receipt of such notice to give written notice to Lessor of Lessee's commitment to pay for the repair of such damage totally al Lessee's expense and without reimbursement from Lessor. Lessee shall provide Lessor with the required funds or satisfactory assurance thereof within thirty (30) days following such commitment from Lessee. In such event this Lease shall continue in full force and effect, and Lessor shall proceed to make such repairs as soon as reasonably possible alter the required funds are available. If Lessee does not give such notice and provide the funds or assurance thereof within the times specified above, This Lease shall terminate as of the dale specified In Lessor's notice of termination. 9.4 Total Destruction. Notwithstanding any other provision hereof, II Premises Total Destruction occurs (including any destruction required by any authorized public authority), this Lease shall terminate sixty (60) days following the dale of such Premises Total Destruction, whether or not the damage or destruction is an Insured Loss or was caused by a negligent or willful act of Lessee. In the event, however, that the damage or destruction was caused by Lessee. Lessor shall have the right to recover Lessor's damages from Lessee except as released and waived in Paragraph 9.7. 9.5 Damage Near End of Term. II at any time during the last six (6) months of the term of this Lease there is damage for which the cost to repair exceeds one month's Base Rent, whether or not an Insured Loss, Lessor may, at Lessor's option, terminate this Lease effective sixty (60) days following the date of occurrence o1 such damage by giving written notice to Lessee of Lessor's election to do so within thirty (30) days alter the dale of occurrence of such damage. Provided, however, If Lessee al that time has an exercisable option to extend this Lease or to purchase the Premises, then Lessee may preserve this Lease by (a) exercising such option, and (b) providing Lessor with any shortage in Insurance proceeds (or adequate assurance thereof) needed to make the repairs on or before the earlier of (i) the dale which Is Ian (10) days after Lessee's receipt of Lessor's written notice purporting to terminate this Lease, or (ii) the day prior to the dale upon which such option expires. If Lessee duly exercises such option during such period and provides Lessor with funds (or adequate assurance thereof) to cover any shortage in insurance proceeds, Lessor shall, at Lessor's expense repair such damage as soon as reasonably possible and this Lease shall continue in lull force and effect. II Lessee fails to exercise such option and provide such funds or assurance during such period, then this Lease shall terminate as of the date set forth in the first sentence of this Paragraph 9.5. 9.6 Abatement of Rent; Lessee's Remedies. (a) In the event of (i) Premises Partial Damage or (ii) Hazardous Substance Condition for which Lessee is not legally responsible, the Base Rent, Common Area Operating Expenses and other charges, if any, payable by Lessee hereunder for the period during which such damage or condition, its repair, remediation or restoration continues, shall be abated In proportion to the degree 10 which Lessee's use of the Premises is impaired, but not in excess of proceeds from insurance required to be carried under Paragraph 8.3(b). Except for abatement of Base Rent, Common Area Operating Expenses and other charges, II any, as aforesaid, all other obligations of Lessee hereunder shall be performed by Lessee, and Lessee shall have no claim against Lessor for any damage sued by reason of any such damage, destruction, repair, remediation or restoration. (b) If Lessor shall be obligated to repair or restore the Premises under the provisions of this Paragraph 9 and shall not commence, In a substantial and meaningful way, the repair or restoration of the Premises within ninety (90) days after such obligation shall accrue, Lessee may, at any time prior to the commencement of such repair or restoration, give written notice to Lessor and to any Lenders of which Lessee has actual notice of Lessee's election to terminate this Lease on a data not less than sixty (60) days following the giving of such notice. II Lessee gives such notice to Lessor and such Lenders and such repair or restoration is not commenced within thirty (30) days after receipt of such notice, this Lease shall terminate as of the date specified In said notice, If Lessor or a Lender commences the repair or restoration of the Premises within thirty (30) days after the receipt of such notice, this Lease shall continue In lull force and effect. "Commence" as used In this Paragraph 9.6 shall mean either the unconditional authorization of the preparation of the required plans, or the beginning of the actual work on the Premises, whichever occurs first. 8 9.7 Hazardous Substance Conditions. If a Hazardous Substance Condition occurs, unless Lessee Is legally responsible therefor (in which case Lessee shall make the investigation and remediation thereof required by Applicable Requirements and this Lease shall continue In lull force and effect, but subject to Lessor's rights under Paragraph 6.2(c) and Paragraph 13), Lessor may at Lessor's option either (i) Investigate and remediate such Hazardous Substance Condition, if required, as soon as reasonably possible at Lessor's expense, In which event this Lease shall continue In lull force and effect, or (ii) If the estimated cost to investigate and remediate such condition exceeds twelve (12) times the than monthly Base Rent or $100,000 whichever Is greater, give written notice to Lessee within thirty (30) days alter receipt by Lessor of knowledge of the occurrence of such Hazardous Substance Condition of Lessor's desire to terminate this Lease as of the date sixty (60) days following the dale of such notice. In the event Lessor elects to give such notice of Lessor's Intention to terminate this Lease, Lessee shall have the right within ten (10) days alter the receipt of such notice to give written notice to Lessor of Lessee's commitment to pay for the excess costs of (a) Investigation and remediation of such Hazardous Substance Condition to the extent required by Applicable Requirements, over (b) an amount equal to twelve (12) times the then monthly Base Rent or $100,000, whichever Is greater. Lessee shall provide Lessor with the funds required of Lessee or satisfactory assurance thereof within thirty (30) days following said commitment by Lessee. In such event this Lease shall continue In lull force and effect, and Lessor shall proceed to make such investigation and remediation as soon as reasonably possible alter the required funds are available. If Lessee does not give such notice and provide the required funds or assurance thereof within the time period specified above, this Lease shall terminate as of the dale specified in Lessor's notice of termination. 9.8 Termination--Advance Payments. Upon termination of this Lease pursuant to this Paragraph 9, Lessor shall return to Lessee any advance payment made by Lessee to Lessor and so much of Lessee's Security Deposit as has not been, or is not then required to be, used by Lessor under the terms of this Lease. 9.9 Waiver of Statutes. Lessor and Lessee agree that the terms of this Lease shall govern the effect of any damage to or destruction of the Premises and the Building with respect to the termination of this Lease and hereby waive the provisions of any present or future statute to the extent It Is Inconsistent herewith. 10. Real Property Taxes. 10.1 Payment of Taxes. Lessor shall pay the Real Property Taxes, as defined in Paragraph 10.2(a), applicable to the Industrial Center, and except as otherwise provided In Paragraph 10.3, any Increases In such amounts over the Base Real Property Taxes shall be Included In the calculation of Common Area Operating Expenses in accordance with the provisions of Paragraph 4.2. 10.2 Reel Property Tax Definitions. (a) As used herein, the term "Real Property Taxes" shall Include any form of real estate tax or assessment, general, special, ordinary or extraordinary, and any license fee, commercial rental tax, Improvement bond or bonds, levy or tax (other than Inheritance, personal Income or estate taxes) Imposed upon the Industrial Center by any authority having the direct or Indirect power to lax, Including any city, state or federal government, or any school, agricultural, sanitary, lire, street, drainage, or other Improvement district thereof, levied against any legal or equitable Interest of Lessor In the Industrial Center or any portion thereof, Lessor's right to rent or other Income therefrom, and/or Lessor's business of leasing the Premises. The term "Real Property Taxes" shall also Include any tax, lee, levy, assessment or charge, or any increase therein, Imposed by reason of events occurring, or changes In Applicable Law taking effect, during the term of this Lease, including but not limited to a change In the ownership of the Industrial Center or in the improvements thereon, the execution of this Lease, or any modification, amendment or transfer thereof, and whether or not contemplated by the Parties. (b) As used herein, the term "Base Real Property Taxes" shall be the amount of Real Property Taxes, which are assessed against the Premises, Building or Common Areas In the calendar year during which the Lease is executed. In calculating Real Property Taxes for any calendar year, the Real Property Taxes for any real estate tax year shall be Included in the calculation of Real Property Taxes for such calendar year based upon the number of days which such calendar year and tax year have In common. 10.3 Additional Improvements. Common Area Operating Expenses shall not Include Real Property Taxes specified in the tax assessor's records and work sheets as being caused by additional Improvements placed upon the Industrial Center by other lessees or by Lessor for the exclusive enjoyment of such other lessees. Notwithstanding Paragraph 10.1 hereof, Lessee shall, however, pay to Lessor at the time Common Area Operating Expenses are payable under Paragraph 4.2, the entirety of any Increase In Real Property Taxes II assessed solely by reason of Alterations, Trade Fixtures or Utility Installations placed upon the Premises by Lessee or at Lessee's request. 10.4 Joint Assessment. If the Building Is not separately assessed, Real Property Taxes allocated to the Building shall be an equitable proportion of the Real Property Taxes for all of the land and Improvements included within the tax parcel assessed, such proportion to be determined by Lessor from the respective valuations assigned in the assessor's work sheets or such other information as may be reasonably available. Lessor's reasonable determination thereof, in good faith, shall be conclusive. 10.5 Lessee's Property Taxes. Lessee shall pay prior to delinquency all taxes assessed against and levied upon Lessee-Owned Alterations and Utility Installations, Trade Fixtures, furnishings, equipment and all personal property of Lessee contained In the Premises or stored within the Industrial Center. When possible, Lessee shall cause Its Lessee-Owned Alterations and Utility Installations, Trade Fixtures, furnishings, equipment and all other personal property to be assessed and billed separately from the real property of Lessor. If any of Lessee's said property shall be assessed with Lessor's real property, Lessee shall pay Lessor the taxes attributable to Lessee's property within ten (10) days after receipt of a written statement setting forth the taxes applicable to Lessee's properly. 11. Utilities. Lessee shall pay directly for all utilities and services supplied to the Premises, Including but not limited to electricity, telephone, security, gas and cleaning of the Premises, together with any taxes thereon. If any such utilities or services are not separately metered to the Premises or separately billed to the Premises, Lessee shall pay to Lessor a reasonable proportion to be determined by Lessor of all such charges jointly metered or billed with other premises in the Building, In the manner and within the time periods set forth In Paragraph 4.2(d). 12. Assignment and Subletting. 12.1 Lessor's Consent Required. (a) Lessee shall not voluntarily or by operation of law assign, transfer, mortgage or otherwise transfer or encumber (collectively, "assign") or sublet all or any part of Lessee's Interest in this Lease or In the Premises without Lessor's prior written consent given under and subject to the terms of Paragraph 36. (b) A change in the control of Lessee shall constitute an assignment requiring Lessor's consent. The transfer, on a cumulative basis, of twenty-five per cent (25%) or more of the voting control of Lessee shall constitute a change in control for this purpose. 9 (c) The involvement of Lessee or Its assets In any transaction, or series of transactions (by way of merger, sale, acquisition, financing, refinancing, transfer, leveraged buy-out or otherwise), whether or not a formal assignment or hypothecation of this Lease or Lessee's assets occurs, which results or will result in a reduction of the Net Worth of Lessee, as hereinafter defined, by an amount equal to or greater than twenty-five percent (25%) of such Net Worth of Lessee as it was represented to Lessor al the time of full execution and delivery of this Lease or at the time of the most recent assignment to which Lessor has consented, or as It exists Immediately prior to said transaction or transactions constituting such reduction, at whichever time said Net Worth of Lessee was or is greater, shall be considered an assignment of this Lease by Lessee to which Lessor may reasonably withhold its consent. "Net Worth of Lessee" for purposes of this Lease shall be the net worth of Lessee (excluding any Guarantors) established under generally accepted accounting principles consistently applied. (d) An assignment or subletting of Lessee's Interest In this Lease without Lessor's specific prior written consent shall, al Lessor's option, be a Default curable after notice per Paragraph 13.1, or a non-curable Breach without the necessity of any notice and grace parted. If Lessor elects to treat such unconsented to assignment or subletting as a non-curable Breach, Lessor shall have the right to either: (i) terminate this Lease, or (ii) upon thirty (30) days' written notice ("Lessor's Notice"), Increase the monthly Base Rent for the Premises to the greater of the then fair market rental value of the Premises, as reasonably determined by Lessor, or one hundred ten percent (110%) of the Base Rent then In effect. Pending determination of the new fair market rental value, if disputed by Lessee, Lessee shall pay the amount set forth in Lessor's Notice, with any overpayment credited against the next Installment(s) of Base Rent coming due, and any underpayment for the period retroactively to the effective date of the adjustment being due and payable immediately upon the determination thereof. Further, in the event of such Breach and rental adjustment, (i) the purchase price of any option to purchase the Premises held by Lessee shall be subject to similar adjustment to the then lair market value as reasonably determined by Lessor (without the Lease being considered an encumbrance or any deduction for depreciation or obsolescence, and considering the Premises at its highest and best use and In good condition) or one hundred ten percent (110%) of the price previously in effect, (ii) any index-oriented rental or price adjustment formulas contained In this Lease shall be adjusted to require that the base Index be determined with reference to the index applicable to the time of such adjustment, and (iii) any used rental adjustments scheduled during the remainder of the Lease term shall be increased in the same ratio as the new rental bears to the Base Rent In effect Immediately prior to the adjustment specified In Lessor's Notice. (e) Lessee's remedy for any breach of this Paragraph 12.1 by Lessor shall be limited to compensatory damages and/or injunctive relief. 12.2 Terms and Conditions Applicable to Assignment and Subletting. (a) Regardless of Lessor's consent, any assignment or subletting shall not (i) be effective without the express written assumption by such assignee or sublessee of the obligations of Lessee under this Lease, (ii) release Lessee of any obligations hereunder, nor (iii) alter the primary liability of Lessee for the payment of Base Rent and other sums due Lessor hereunder or for the performance of any other obligations to be performed by Lessee under this Lease. (b) Lessor may accept any rent or performance of Lessee's obligations from any person other than Lessee pending approval or disapproval of an assignment. Neither a delay in the approval or disapproval of such assignment nor the acceptance of any rent for performance shall constitute a waiver or estoppel of Lessor's right to exercise its remedies for the Default or Breach by Lessee of any of the terms, covenants or conditions of this Lease. (c) The consent of Lessor to any assignment or subletting shall not constitute a consent to any subsequent assignment or subletting by Lessee or to any subsequent or successive assignment or subletting by the assignee or sublessee. However, Lessor may consent to subsequent sublettings and assignments of the sublease or any amendments or modifications thereto without notifying Lessee or anyone else liable under this Lease or the sublease and without obtaining their consent, and such action shall not relieve such persons from liability under this Lease or the sublease. (d) In the event of any Default or Breach of Lessee's obligation under this Lease, Lessor may proceed directly against Lessee, any Guarantors or anyone else responsible Tor the performance of the Lessee's obligations under this Lease, Including any sublessee, without first exhausting Lessor's remedies against any other person or entity responsible therefor to Lessor, or any security held by Lessor. (e) Each request for consent to an assignment or subletting shall be In writing, accompanied by Information relevant to Lessor's determination as to the financial and operational responsibility and appropriateness of the proposed assignee or sublessee, Including but not limited to the Intended use and/or required modification of the Premises, II any, together with a non-refundable deposit of $1,000 or ten percent (10%) of the monthly Base Rent applicable to the portion of the Premises which is the subject of the proposed assignment or sublease, whichever Is greater, as reasonable consideration for Lessor's considering and processing the request for consent. Lessee agrees to provide Lessor with such other or additional Information and/or documentation as may be reasonably requested by Lessor. (f) Any assignee of, or sublessee under, This Lease shall, by reason of accepting such assignment or entering Into such sublease, be deemed, for the benefit of Lessor, to have assumed and agreed to conform and comply with each and every term, covenant, condition and obligation herein to be observed or performed by Lessee during the term of said assignment or sublease, other than such obligations as are contrary to or Inconsistent with provisions of an assignment or sublease to which Lessor has specifically consented in writing. (g) The occurrence of a transaction described In Paragraph 12.2(c) shall give Lessor the right (but not the obligation) to require that the Security Deposit be Increased by an amount equal to six (6) times the then monthly Base Rent, and Lessor may make the actual receipt by Lessor of the Security Deposit Increase a condition to Lessor's consent to such transaction. (h) Lessor, as a condition to giving Its consent to any assignment or subletting, may require that the amount and adjustment schedule of the rent payable under this Lease be adjusted to what is .then the market value and/or adjustment schedule for property similar lo the Premises as then constituted, as determined by Lessor. 12.3 Additional Terms and Conditions Applicable to Subletting. The following terms and conditions shall apply to any subletting by Lessee of all or any pan of the Premises and shall be deemed Included In all subleases under this Lease whether or not expressly incorporated therein: 10 (a) Lessee hereby assigns and transfers to Lessor all of Lessee's Interest In all rentals and Income arising from any sublease of all or a portion of the Premises heretofore or hereafter made by Lessee, and Lessor may collect such rent and Income and apply same toward Lessee's obligations under this Lease; provided, however, that until a Breach (as defined In Paragraph 13.1) shall occur In the performance of Lessee's obligations under this Lease, Lessee may, except as otherwise provided In this Lease, receive, collect and enjoy the rents accruing under such sublease. Lessor shall not, by reason of the foregoing provision or any other assignment of such sublease to Lessor, nor by reason of the collection of the rents from a sublessee, be deemed liable to the sublessee for any failure of Lessee to perform and comply with any of Lessee's obligations to such sublessee under such Sublease. Lessee hereby irrevocably authorizes and directs any such sublessee, upon receipt of a written notice from Lessor stating that a Breach exists in the performance of Lessee's obligations under this Lease, to pay to Lessor the rents and other charges due and to become due under the sublease. Sublessee shall rely upon any such statement and request from Lessor and shall pay such rents and other charges to Lessor without any obligation or right to inquire as to whether such Breach exists and notwithstanding any notice from or claim from Lessee to the contrary. Lessee shall have no right or claim against such sublessee, or, until the Breach has been cured, against Lessor, for any such rents and other charges so paid by said sublessee to Lessor. (b) In the event of a Breech by Lessee In the performance of its obligations under this Lease, Lessor, at Its option and without any obligation to do so, may require any sublessee to attorn to Lessor, in which event Lessor shall undertake the obligations of the sublessor under such sublease from the time of the exercise of said option to the expiration of such sublease; provided, however, Lessor shall not be liable for any prepaid rents or security deposit paid by such sublessee to such sublessor or for any other prior defaults or breaches of such sublessor under such sublease. (c) Any matter or thing requiring the consent of the sublessor under a sublease shall also require the consent of Lessor herein. (d) No sublessee under a sublease approved by Lessor shall further assign or sublet all or any part of the Premises without Lessor's prior written consent. (e) Lessor shall deliver a copy of any notice of Default or Breach by Lessee to the sublessee, who shell have the right to cure the Default of Lessee within the grace period, 11 any, specified In such notice. The sublessee shall have a right of reimbursement and offset from and against Lessee for any such Defaults cured by the sublessee. 13. Default; Breech; Remedies. 13.1 Default; Breach. Lessor and Lessee agree that if an attorney Is consulted by Lessor in connection with a Lessee Default or Breach (as hereinafter defined), $350.00 is a reasonable minimum sum per such occurrence for legal services and costs In the preparation and service of a notice of Default, and that Lessor may include the cost of such services and costs In said notice as rent due and payable to cure said default. A "Default" by Lessee Is defined as a failure by Lessee to observe, comply with or perform any of the terms, covenants, conditions or rules applicable to Lessee under this Lease. A "Breach" by Lessee Is defined as the occurrence of any one or more of the following Defaults, and, where a grace period for cure after notice Is specified herein, the failure by Lessee to cure such Default prior to the expiration of the applicable grace period, and shall entitle Lessor to pursue the remedies set forth In Paragraphs 13.2 and/or 13.3: (a) The vacating of the Premises without the Intention to reoccupy same, or the abandonment of the Premises. (b) Except as expressly otherwise provided In this Lease, the failure by Lessee to make any payment of Base Rent, Lessee's Share of Common Area Operating Expenses, or any other monetary payment required to be made by Lessee hereunder as and when due, the (allure by Lessee to provide Lessor with reasonable evidence of insurance or surety bond required under this Lease, or the failure of Lessee to fulfill any obligation under this Lease which endangers or threatens life or property, where such failure continues for a period of three (3) days following written notice thereof by or on behalf of Lessor to Lessee. (c) Except as expressly otherwise provided In this Lease, the failure by Lessee to provide Lessor with reasonable written evidence (in duly executed original form, if applicable) of (i) compliance with Applicable Requirements per Paragraph 6.3, (ii) the inspection, maintenance and service contracts required under Paragraph 7.1(b), (iii) the rescission of an unauthorized assignment or subletting per Paragraph 12.1, (iv) a Tenancy Statement per Paragraphs 16 or 37, (v) the subordination or non-subordination of this Lease per Paragraph 30, (vi) the guaranty of the performance of Lessee's obligations under this Lease it required under Paragraphs 1.11 and 37, (vii) the execution of any document requested under Paragraph 42 (easements), or (All) any other documentation or information which Lessor may reasonably require of Lessee under the terms of this lease, where any such failure continues fore period of ten (10) days following written notice by or on behalf of Lessor to Lessee. (d) A Default by Lessee as to the terms, covenants, conditions or provisions of this Lease, or of the rules adopted under Paragraph 40 hereof that are to be observed, complied with or performed by Lessee, other than those described In Subparagraphs 13.1(a), (b) or (c), above, where such Default continues for a period of thirty (30) days after written notice thereof by or on behalf of Lessor to Lessee; provided, however, that If the nature of Lessee's Default is such that more than thirty (30) days are reasonably required (or its cure, then it shall not be deemed to be a Breach of this Lease by Lessee If Lessee commences such cure within said thirty (30) day period and thereafter diligently prosecutes such cure to completion. (e) The occurrence of any of the following events: (i) the making by Lessee of any general arrangement or assignment for the benefit of creditors; (ii) Lessee's becoming a "debtor" as defined in 11 U.S. Code Section 101 or any successor statute thereto (unless, in the case of a petition flied against Lessee, the same Is dismissed within sixty (60) days); (iii) the appointment of a trustee or receiver to take possession of substantially all of Lessee's assets located at the Premises or of Lessee's Interest In this Lease, where possession Is not restored to Lessee within thirty (30) days; or (iv) the attachment, execution or other judicial seizure o1 substantially all of Lessee's assets located at the Premises or of Lessee's Interest in this Lease, where such seizure is not discharged within thirty (30) days; provided, however, In the event that any provision of this Subparagraph 13.1(e) is contrary to any applicable law, such provision shall be of no force or effect, and shall not affect the validity of the remaining provisions. (f) The discovery by Lessor that any financial statement of Lessee or of any Guarantor, given to Lessor by Lessee or any Guarantor, was materially (g) If the performance of Lessee's obligations under this Lease is guaranteed: (i) the death of a Guarantor, (ii) the termination of a Guarantor's liability with respect to this Lease other Than In accordance with the terms of such guaranty, (iii) a Guarantor's becoming Insolvent or the subject of a bankruptcy filing, (iv) a Guarantor's refusal to honor the guaranty, or (v) a Guarantor's breach of its guaranty obligation on an anticipatory breach basis, and Lessee's failure, within sixty (60) days following written notice by or on behalf of Lessor to Lessee of any such event, to provide Lessor with written alternative assurances of security, which, when coupled with the then existing resources of Lessee, equals or exceeds the combined financial resources of Lessee and the Guarantors that existed at the time of execution of this Lease. 11 13.2 Remedies. If Lessee tells to perform any affirmative duty or obligation of Lessee under this Lease, within ten (10) days after written notice to Lessee (or in case of an emergency, without notice), Lessor may at Its option (but without obligation to do so), perform such duty or obligation on Lessee's behalf, including but not limited to the obtaining of reasonably required bonds, insurance policies, or governmental licenses, permits or approvals. The costs and expenses of any such performance by Lessor shall be due and payable by Lessee to Lessor upon invoice therefor. If any check given to Lessor by Lessee shall not be honored by the bank upon which it is drawn, Lessor, at its own option, may require all future payments to be made under this Lease by Lessee to be made only by cashier's check. In the event of a Breach of this Lease by Lessee (as defined in Paragraph 13.1), with or without further notice or demand, and without limiting Lessor in the exercise of any right or remedy which Lessor may have by reason of such Breach, Lessor may: (a) Terminate Lessee's right to possession of the Premises by any lawful means, In which case this Lease and the term hereof shall terminate and Lessee shall immediately surrender possession of the Premises to Lessor. In such event Lessor shall be entitled to recover from Lessee: (i) the worth at the time of the award of the unpaid rent which had been earned al the time of termination; (ii) the worth at the time of award of the amount by which the unpaid rent which would have bean earned after termination until the time of award exceeds the amount of such rental loss that the Lessee proves could have been reasonably avoided; (iii) the worth at the time of award of the amount by which the unpaid rent for the balance of the term after the time of award exceeds the amount of such rental loss that the Lessee proves could be reasonably avoided; and (iv) any other amount necessary to compensate Lessor for all the detriment proximately caused by the Lessee's failure to perform Its obligations under this Lease or which in the ordinary course of things would be likely to result therefrom, including but not limited to the cost of recovering possession of the Premises, expenses of reletting, including necessary renovation and alteration of the Premises, reasonable attorneys' fees, and that portion of any leasing commission paid by Lessor In connection with this Lease applicable to the unexpired term of this Lease. The worth at the time of award of the amount referred to in provision (iii) of the immediately preceding sentence shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco or the Federal Reserve Bank District in which the Premises are located at the time of award plus one percent (1%). Efforts by Lessor to mitigate damages caused by Lessee's Default or Breach of this Lease shall not waive Lessor's right to recover damages under this Paragraph 13.2. If termination of this Lease is obtained through the provisional remedy of unlawful detainer, Lessor shall have the right to recover in such proceeding the unpaid rent and damages as are recoverable therein, or Lessor may reserve the right to recover all or any part thereof in a separate suit for such rer and/or damages. If a notice and grace period required under Subparagraph 13.1(b), (c) or,(d) was not previously given, a notice to pay rent or quit, or to perform o quit, as the case may be, given to Lessee under any statute authorizing the forfeiture of lessee for unlawful detainer shall also constitute the applicable notice to grace period purposes required by Subparagraph 13.1(b),(c) or (d). In such case, the applicable grace period under the unlawful detainer statue shall run concur randy after the ode such statutory notice, and the failure of Lessee to cure the Default within the greater of the two (2) such grace periods shall constitute both at unlawful detainer and a Breach of this Lease entitling Lessor to the remedies provided for In this Lease and/or by said statute. (b) Continue the Lease and Lessee's right to possession In effect (In California under California Civil Code Section 1951.4 after Lessee's Breach and recover the rent as it becomes due, provided Lessee has the right to sublet or assign, subject only to reasonable limitations. Lessor and Lessee agree that the limitations on assignment and subletting in this Lease are reasonable. Acts of maintenance or preservation, efforts to relet the Premises, or the appointment of a receiver to protect the Lessor's Interest under this Lease, shall not constitute a termination of the Lessee's right to possession. (c) Pursue any other remedy now or hereafter available to Lessor under the laws or judicial decisions of the state wherein the Premises are located. (d) The expiration or termination of this Lease and/or the termination of Lessee's right to possession shall not relieve Lessee from Debility under any Indemnity provisions of this Lease as to matters occurring or accruing during the term hereof or by reason of Lessee's occupancy of the Premises. 13.3 Inducement Recapture in Event of Breech. Any agreement by Lessor for free or abated rent or other charges applicable to the Premises, or for the giving or paying by Lessor to or for Lessee of any cash or other bonus, Inducement or consideration for Lessee's entering Into this Lease, all of which concessions are hereinafter referred 10 as "Inducement Provisions" shall be deemed conditioned upon Lessee's full and faithful performance of all of the terms, covenants and conditions of this Lease to be performed or observed by Lessee during the term hereof as the same may be extended. Upon the occurrence of a Breach (as defined In Paragraph 13.1) of this Lease by Lessee, any such Inducement Provision shall automatically be deemed deleted from this Lease and of no further force or effect, and any rent, other charge, bonus, Inducement or consideration (heretofore abated, given or paid by Lessor under such an Inducement Provision shall be Immediately due and payable by Lessee to Lessor, and recoverable by Lessor, as additional rent due under this Lease, notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by Lessor of rent or the cure of the Breach which Initialed the operation of this Paragraph 13.3 shall not be deemed a waiver by Lessor of the provisions of this Paragraph 13.3 unless specifically so stated In writing by Lessor at the time of such acceptance. 13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee to Lessor of rent and other such due hereunder will cause Lessor to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. Such costs Include, but are not limited to, processing and accounting charges, end late charges which may be imposed upon Lessor by the terms of any ground lease, mortgage or deed of trust covering the Premises. Accordingly, If any Installment of rent or other sum due to Lessee shall not be received by Lessor or Lessor's designee within ten (10) days after such amount shall be due, then, without any requirement for notice to Lessee, Lessee shall pay to Lessor a late charge equal to six percent (6%) ten percent (10%) of such overdue amount. The parties hereby agree that such late charge represents a fair and reasonable estimate of the costs Lessor will incur by reason of late payment by Lessee. Acceptance of such late charge by Lessor shell In no event constitute a waiver of Lessee's Default or Breach with respect to such overdue amount, nor prevent Lessor from exercising any of the other rights and remedies granted hereunder: In the event that a late charge is payable hereunder, whether or not collected, for three (3) consecutive Installments of Base Rent, then notwithstanding Paragraph 4.1 or any other provision of this lease to the contrary, Base Rent shall, at Lessor's option, become due and payable quarterly In advance. 13.5 Breech by Lessor. Lessor shall not be deemed in breach of this Lease unless Lessor falls within a reasonable time to perform an obligation required to be performed by Lessor. For purposes of this Paragraph 13.5, a reasonable time shall In no event be less than thirty (30) days alter receipt by Lessor, and by any Lender(s) whose name and address shall have been furnished to Lessee In writing for such purpose, of written notice specifying wherein such obligation of Lessor has not been performed; provided, however, that II the nature of Lessor's obligation Is such that more than thirty (30) days after such notice are reasonably required for Its performance, then Lessor shall not be In breech of this Lease if performance Is commenced within such thirty (30) day period and thereafter diligently pursued to completion. 12 14. Condemnation. If the Premises or any portion thereof are taken under the power of eminent domain or sold under the threat of the exercise of said power (all of which are herein called "condemnation"), this Lease shall terminate as to the part so taken as of the dale the condemning authority lakes title or possession, whichever first occurs. If more than ten percent (10%) of the floor area of the Premises, or more than twenty-five percent (25%) of the portion of the Common Areas designated for Lessee's parking, Is taken by condemnation, Lessee may, at Lessee's option, to be exercised In writing within ten (10) days after Lessor shall have given Lessee written notice of such taking (or In the absence of such notice, within ten (10) days alter the condemning authority shall have taken possession) terminate this Lease as of the date the condemning authority lakes such possession. II Lessee does not terminate this Lease In accordance with the foregoing, this Lease shall remain In full force and effect as to the portion of the Premises remaining, except that the Base Rent shall be reduced in the same proportion as the rentable floor area of the Premises taken bears to the total rentable floor area of the Premises. No reduction of Base Rent shall occur If the condemnation does not apply to any portion of the Premises. Any award for the taking of all or any part of the Premises under the power of eminent domain or any payment made under threat of the exercise of such power shall be the property of Lessor, whether such award shall be made as compensation for diminution of value of the leasehold or for the taking of the lee, or as severance damages; provided, however, that Lessee shall be entitled to any compensation, separately awarded to Lessee for Lessee's relocation expenses and/or loss of Lessee's Trade Fixtures. In the event that this Lease is not terminated by reason of such condemnation, Lessor shall to the extent of its net severance damages received, over and above Lessee's Share of the legal and other expenses incurred by Lessor In the condemnation matter, repair any damage to the Premises caused by such condemnation authority. Lessee shall be responsible for the payment of any amount In excess of such net severance damages required to complete such repair. 15. Brokers' Fees. 15.1 Procuring Cause. The Broker(s) named in Paragraph 1.10 is/are the procuring cause of this Lease. 15.2 Additional Terms. This paragraph has been stricken from the document. 15.3 Assumption of Obligations. Any buyer or transferee of Lessor's Interest In this Lease, whether such transfer is by agreement or by operation of law, shall be deemed to have assumed Lessor's obligation under this Paragraph 15. Each Broker shall be an Intended third party beneficiary of the provisions of Paragraph 1.10 and of this Paragraph 15 to the extent of Its Interest In any commission arising from this Lease and may enforce that right directly against Lessor and Its successors. 15.4 Representations and Warranties. Lessee and Lessor each represent and warrant to the other that II has had no dealings with any person, firm, broker or tinder other than as named In Paragraph 1.10(a) In connection with the negotiation of this Lease and/or the consummation of the transaction contemplated hereby, and that no broker or other person, firm or entity other than said named Broker(s) Is entitled to any commission or finder's fee In connection with said transaction. Lessee and Lessor do each hereby agree to Indemnity, protect, defend and hold the other harmless from and against liability for compensation or charges which may be claimed by any such unnamed broker, finder or other similar party by reason of any dealings or actions of the Indemnifying Party, including any costs, expenses, and/or attorneys' lees reasonably incurred with respect thereto. 16. Tenancy and Financial Statements. 16.1 Tenancy Statement. Each Party (as "Responding Party") shall within ten (10) days after written notice from the other Party (the "Requesting Party") execute, acknowledge and deliver to the Requesting Party a statement In writing In a dorm similar to the Then most current "Tenancy Statement" dorm published by the American Industrial Real Estate Association, plus such additional Information, confirmation and/or statements as may be reasonably requested by the Requesting Party. 16.2 Financial Statement. If Lessor desires to finance, refinance, or sell the Premises or the Building, or any part thereof, Lessee and all Guarantors shall deliver to any potential lender or purchaser designated by Lessor such financial statements of Lessee and such Guarantors as may be reasonably required by such lender or purchaser, including but not limited to Lessee's financial statements for the past three (3) years. All such Mandel statements shall be received by Lessor and such lender or purchaser in confidence and shall be used only for the purposes herein set forth. 17. Lessor's Liability. The term "Lessor" as used herein shall mean the owner or owners at the time in question of the fee title to the Premises. In the event of a transfer of Lessor's title or interest In the Premises or in this Lease, Lessor shall deliver to the transferee or assignee (In cash or by credit) any unused Security Deposit held by Lessor at the time of such transfer or assignment. Except as provided In Paragraph 15.3, upon such transfer or assignment and delivery of the Security Deposit, as aforesaid, the prior Lessor shall be relieved of all liability with respect to the obligations and/or covenants under this Lease thereafter to be performed by the Lessor. Subject to the foregoing, the obligations and/or covenants in this Lease to be performed by the Lessor shall be binding only upon the Lessor as hereinabove defined. 18. Severability. The Invalidity of any provision of this Lease, as determined by a court of competent jurisdiction, shall In no way affect the validity of any other provision hereof. 19. Interest on Past-Due Obligations. Any monetary payment due Lessor hereunder, other than late charges, not received by Lessor within ten (10) days following the date on which II was due, shall bear interest from the date due at the prime rate charged by the largest slate chartered bank In the slate in which the Premises are located plus four percent (4%) per annum, but not exceeding the maximum rate allowed by law, In addition to the potential late charge provided for In Paragraph 13.4. 20. Time of Essence. Time is of the essence with respect to the performance of all obligations to be performed or observed by the Parties under this Lease. 21. Rent Defined. All monetary obligations of Lessee to Lessor under the terms of this Lease are deemed to be rent. 22. No Prior or other Agreements; Broker Disclaimer. This Lease contains all agreements between the Parties with respect to any matter mentioned herein, and no other prior or contemporaneous agreement or understanding shall be effective. Lessor and Lessee each represents and warrants to the Brokers that It has made, and is relying solely upon, its own investigation as to the nature, quality, character and financial responsibility of the other Party to this Lease and as to the' nature, quality and character of the Premises. Brokers have no responsibility with respect thereto or with respect to any default or breach hereof by either Party. Each Broker shall be an intended third party beneficiary of the provisions of this Paragraph 22. 23. Notices. 23.1 Notice Requirements. All notices required or permitted by this Lease shall be In writing and may be delivered In person (by hand or by messenger or courier service) or may be sent by regular, certified or registered mall or U.S. Postal Service Express Mall, with postage prepaid, or by facsimile transmission during normal business hours, and shall be deemed sufficiently given II served Ina manner specified In this Paragraph 23. The addresses noted adjacent to a Party's signature on this Lease shall be that Party's address for delivery or mailing of nonce purposes. Either Party may by written notice to the other specify a different address or notice purposes, except that upon Lessee's taking possession of the Premises, the Premises shall constitute Lessee's address for the purpose of mailing or delivering notices to Lessee. A copy of all notices required or permitted to be given to Lessor hereunder shall be concurrently transmitted to such party or parties at such addresses as Lessor may from time to time hereafter designate by written nonce to Lessee. 13 23.2 Date of Notice. Any notice sent by registered or certified mall, return receipt requested, shall be deemed given on the date of delivery shown on the receipt card, or If no delivery dale Is shown, the postmark thereon. If sent by regular mall, the nonce shall be deemed given forty-eight (48) hours after the same is addressed as required herein and mailed with postage prepaid. Notices delivered by United Stales Express Mail or overnight courier that guarantees next day delivery shall be deemed given twenty-four (24) hours alter delivery of the same to the United Slates Postal Service or courier. If any notice is transmitted by facsimile transmission or similar means, the same shall be deemed served or delivered upon telephone or facsimile confirmation of receipt of the transmission thereof, provided a copy Is also delivered via delivery or mail. If notice is received on a Saturday or a Sunday or a legal holiday, II shall be deemed received on the next business day. 24. Waivers. No waiver by Lessor of the Default or Breach of any term, covenant or condition hereof by Lessee, shall be deemed a waiver or any other term, covenant or condition hereof, or of any subsequent Default or Breach by Lessee of the same or any other term, covenant or condition hereof. Lessor's consent to, or approval of, any such act shall not be deemed to render unnecessary the obtaining of Lessor's consent to, or approval of, any subsequent or similar act by Lessee, or be construed as the basis of an estoppel to enforce the provision or provisions of this Lease requiring such consent. Regardless of Lessor's knowledge of a Default or Breach al the time of accepting rent, the acceptance of rent by Lessor shall not be a waiver of any Default or Breach by Lessee of any provision hereof. Any payment given Lessor by Lessee may be accepted by Lessor on account of moneys or damages due Lessor, notwithstanding any qualifying statements or conditions made by Lessee In connection herewith, which such statements and/or conditions shall be of no force or effect whatsoever unless specifically agreed to in writing by Lessor at or before the time of deposit of such payment. 25. Recording. This paragraph has been stricken from the document. 26. No Right to Holdover. Lessee has no right to retain possession of the Premises or any part thereof beyond the expiration or earlier termination of this Lease. In the event that Lessee holds over in violation of this Paragraph 26 then the Base Rent payable from and after the time of the expiration or earlier termination of this Lease shall be increased to two hundred percent (200%) of the Base Rent applicable during the month Immediately preceding such expiration or earlier termination. Nothing contained herein shall be construed as a consent by Lessor to any holding over by Lessee. 27. Cumulative Remedies. No remedy or election hereunder shall be deemed exclusive but shall, wherever possible, be cumulative with all other remedies al law or in equity. 28. Covenants and Conditions. All provisions of this Lease to be observed or performed by Lessee are both covenants and conditions. 29. Binding Effect; Choice at Law. This Lease shell be binding upon the Parties, their personal representatives, successors and assigns and be governed by the laws of the State In which the Premises are located. Any litigation between the Parties hereto concerning This Lease shall be Initialed In the county in which the Premises are located. 30. Subordination; Attornment; Non-Disturbance. 30.1 Subordination. This Lease and any Option granted hereby shall be subject and subordinate to any ground lease, mortgage, deed' of trust, or other hypothecation or security device (collectively, "Security Device"), now or hereafter placed by Lessor upon the real properly of which the Premises are a part, lo any and all advances made on the security thereof, and to all renewals, modifications, consolidations, replacements and extensions thereof. Lessee agrees that the Lenders holding any such Security Device shall have no duty, liability or obligation to perform any of the obligations of Lessor under this Lease, but that In the event of Lessor's default with respect to any such obligation, Lessee will give any Lender whose name and address have been furnished Lessee in writing for such purpose nonce of Lessor's default pursuant to Paragraph 13.5.1f any Lender shall elect to have this Lease and/or any Option granted hereby superior to the lien of Its Security Device and shall give written notice thereof to Lessee, this Lease and such Options shall be deemed prior to such Security Device, notwithstanding the relative dales dl the documentation or recordation thereof, 30.2 Attornment. Subject 10 the non-disturbance provisions of Paragraph 30.3, Lessee agrees to attorn to a Lender or any other party who acquires ownership of the Premises by reason of a foreclosure of a Security Device, and that in the event of such foreclosure, such new owner shall not: (i) be liable for any act or omission of any prior Lessor or with respect to events occurring prior to acquisition of ownership, (ii) be subject to any offsets or defenses which Lessee might have against any prior Lessor, or (iii) be bound by prepayment of more than one month's rent. 30.3 Non-Disturbance. With respect to Security Devices entered into by Lessor after the execution of this lease, Lessee's subordination of this Lease shall be subject to receiving assurance (a "non-disturbance agreement") from the Lender that Lessee's possession and this Lease, Including any options to extend the term hereof, will not be disturbed so long as Lessee Is not In Breech hereof and adorns to the record owner of the Premises. 30.4 Self-Executing. The agreements contained In this Paragraph 30 shall be effective without the execution of any further documents; provided, however, that upon written request from Lessor or a Lender In connection with a sale, financing or refinancing of Premises, Lessee and Lessor shall execute such further writings as may be reasonably required to separately document any such subordination or non-subordination, attornment and/or non-disturbance agreement as is provided for herein. 31. Attorneys' Fees. If any Party or Broker brings an action or proceeding to enforce the terms hereof or declare rights hereunder, the Prevailing Party (as hereafter defined) in any such proceeding, action, or appeal thereon, shall be entitled to reasonable attorneys' lees. Such lees may be awarded in the same suit or recovered in a separate suit, whether or not such action or proceeding Is pursued to decision or judgment. The term "Prevailing Party" shall Include, without limitation, a Party or Broker who substantially obtains or defeats the revel sought, as the case may be, whether by compromise, settlement, judgment, or the abandonment by the other Party or Broker of its claim or defense. The attorneys' fee award shall not be computed in accordance with any court lee schedule, but shall be such as to fully reimburse all attorneys' lees reasonably Incurred. Lessor shall be entitled to attorneys' lees, costs and expenses incurred in preparation and service of notices of Default and consultations in connection therewith, whether or not a legal action is subsequently commenced In connection with such Default or resulting Breach. Broker(s) shall be Intended third party beneficiaries of this Paragraph 31. 32. Lessor's Access; Showing Premises; Repairs. Lessor and Lessor's agents shall have the right to enter the Premises at any time, in the case of an emergency, and otherwise at reasonable times mar the purpose of showing the same to prospective purchasers, lenders, or lessees, and making such alterations, repairs, Improvements or additions to the Premises or to the Building, as Lessor may reasonably deem necessary. Lessor may al any time place on or about the Premises or Building any ordinary "For Sale" signs and Lessor may at any time during the last one hundred eighty (180) days of the term hereof place on or about the Premises any ordinary "For Lease" signs. All such activities of Lessor shall be without abatement of rent or liability to Lessee. 33. This paragraph has been stricken from the document. 14 34. Signs. Lessee shall not place any sign upon the exterior of the Premises of the building, without Lessor's prior written consent. (See Addendum) Part of this paragraph has been stricken from the document. 35. Termination; Merger. Unless specifically stated otherwise in writing by Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual termination or cancellation hereof, or a termination hereof by Lessor or Breach by Lessee, shall automatically terminate any sublease or lesser estate in the Premises; provided, however, Lessor shall, In the event of any such surrender, termination or cancellation, have the option to continue any one or all of any existing subtenancies. Lessor's failure within ten (10) days following any such event to make a written election to the contrary by written notice to the holder of any such lesser interest, shall constitute Lessor's election to have such event constitute the termination of such interest. 36. Consents. (a) Except for Paragraph 33 hereof (Auctions) or as otherwise provided herein, wherever In this Lease the consent of a Party is required to an act by or tor the other Party, such consent shall not be unreasonably withheld or delayed. Lessor's actual reasonable costs and expenses (including but not limited to architects', attorneys', engineers' and other consultants' lees) Incurred In the consideration of, or response lo, a request by Lessee for any Lessor consent pertaining to this Lease or the Premises, Including but not limned to consents to an assignment a subletting or the presence or use of a Hazardous Substance, shall be paid by Lessee to Lessor upon receipt of an Invoice and supporting documentation therefor. In addition to the deposit described in Paragraph 12.2(5), Lessor may, as a condition to considering any such request by Lessee, require that Lessee deposit with Lessor an amount of money (In addition to the Security Deposit held under Paragraph 5) reasonably calculated by Lessor is represent the cost Lessor will Incur in considering and responding to Lessee's request. Any unused portion of said deposit shall be refunded to Lessee without Interest. Lessor's consent to any act, assignment of this Lease or subletting of the Premises by Lessee shall not constitute an acknowledgment that no Default or Breach by Lessee of this Lease exists, nor shall such consent be deemed a waiver of any than existing Default or Breach, except as may be otherwise specifically sealed In writing by Lessor at the time of such consent. (b) All conditions to Lessor's consent authorized by this Lease are acknowledged by Lessee as being reasonable. The failure to specify herein any particular condition to Lessor's consent shall not preclude the Impositions by Lessor al the time of consent of such further or other conditions as are then reasonable with reference to the particular matter for which consent is being given. 37. Guarantor. 37.1 Form of Guaranty. If there are to be any Guarantors of this Lease per Paragraph 1.11, the form of the guaranty 10 be executed by each such Guarantor shall be in the form most recently published by the American Industrial Real Estate Association, and each such Guarantor shall have the same obligations as Lessee under this lease, Including but not limited to the obligation 10 provide the Tenancy Statement and Information required in Paragraph 16. 37.2 Additional Obligations of Guarantor. It shall constitute a Default of the Lessee under this Lease if any such Guarantor falls or refuses, upon reasonable request by Lessor to give: (a) evidence of the due execution of the guaranty called for by this Lease, Including the authority of the Guarantor (and of the party signing on Guarantor's behalf) to obligate such Guarantor on said guaranty, and resolution of its board of directors authorizing the making of such guaranty, together with a certificate of Incumbency showing the signatures of the persona authorized to sign on Its behalf, (b) current financial statements of Guarantor as may from time to time be requested by Lessor, (c) a Tenancy Statement, or (d) written confirmation that the guaranty is still in effect 38. Quiet Possession. Upon payment by Lessee of the rent for the Premises and the performance of all of the covenants, conditions and provisions on Lessee's part to be observed and performed under this Lease, Lessee shall have quiet possession of the premises for the entire term hereof subject to all of the provisions of this Lease. 39. Options. 39.1 Definition. As used in this Lease, the word "Option" has the following meaning: (a) the right to extend the term of this Lease or to renew this Lease on terms which may be mutually agreeable at prevailing market rates. Part of this paragraph has been stricken from the document. 39.2 Options Personal to Original Lessee. Each Option granted to Lessee in this Lease Is personal to the original Lessee named In Paragraph 1.1 hereof, and cannot be voluntarily or Involuntarily assigned or exercised by any person or entity other than said original Lessee while the original Lessee is in full and actual possession of the Premises and without the intention of thereafter assigning or subletting. The Options, if any, herein granted to Lessee are not assignable, either as a pan of an assignment of this Lease or separately or apart therefrom, and no Option may be separated from this Lease In any manner, by reservation or otherwise. 39.3 Multiple Options. In the event that Lessee has any multiple Options to extend or renew this Lease, a later option cannot be exercised unless the prior Options to extend or renew this Lease have been validly exercised. 39.4 Enact of Default on Options. (a) Lessee shall have no right to exercise an Option, notwithstanding any provision in the grant of Option to the contrary: (i) during the period commencing with the giving of any notice of Default under Paragraph 13.1 and continuing until the noticed Default Is cured, or (ii) during the period of time any monetary obligation due Lessor from Lessee Is unpaid (without regard to whether notice thereof Is given Lessee), or (iii) during the time Lessee is in Breach of this Lease, or (iv) In the event that Lessor has given to Lessee three (3) or more notices of separate Defaults under Paragraph 13.1 during the twelve (12) month period Immediately preceding the exercise of the Option, whether or not the Defaults are cured., (b) The period of time within which an Option may be exercised shall not be extended or enlarged by reason of Lessee's inability to exercise an Option because of the provisions of Paragraph 39.4(a). (c) All rights of Lessee under the provisions of an Option shall terminate and be of no further force or affect, notwithstanding Lessee's due and timely exercise of the Option, if, after such exercise and during the term of this Lease, (i) Lessee falls to pay to Lessor a monetary obligation of Lessee for a period of thirty (30) days after such obligation becomes due (without any necessity of Lessor to give notice thereof to Lessee), or (ii) Lessor gives to Lessee three (3) or more notices of separate Defaults under Paragraph 13.1 during any twelve (12) month period, whether or not the Defaults are cured, or (iii) If Lessee commits a Breach of this Lease. 15 40. Rules and Regulations. Lessee agrees that it will abide by, and keep and observe all reasonable rules and regulations ("Rules and Regulations") which Lessor may make from Ume to time for the management, safely, care, and cleanliness of the grounds, the parking and unloading of vehicles and the preservation of good order, as well as for the convenience of other occupants or tenants of the Building and the Industrial Center and their invitees. 41. Security Measures. Lessee hereby acknowledges that the rental payable to Lessor hereunder does not include the cost of guard service or other security measures, and that Lessor shall have no obligation whatsoever to provide same. Lessee assumes all responsibility for the protection of the Premises, Lessee, Its agents and Invitees and their property from the acts of third parties. 42. Reservations. Lessor reserves the right, from time to time, to grant, without the consent or joinder of Lessee, such easements, rights of way, utility raceways, and dedications that Lessor deems necessary, and to cause the recordation of parcel maps and restrictions, so long as such easements, rights of way, utility raceways, dedications, maps and restrictions do not reasonably Interfere with the use of the Premises by Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to effectuate any such easement rights, dedication, map or restrictions. 43. Performance Under Protest. If at any time a dispute shall arise as to any amount or sum of money to be paid by one Party to the other under the provisions hereof, the Party against whom the obligation la pay the money Is asserted shall have the right to make payment "under protest" and such payment shall not be regarded as a voluntary payment and there shall survive the right on the part of said Party to Institute suit for recovery o1 such sum. If It shall be adjudged that there was no legal obligation on the part of said Party to pay such sum or any part thereof, said Party shall be entitled to recover such sum or so much thereof as It was not legally required to pay under the provisions of this Lease. 44. Authority. If either Party hereto Is a corporation, trust, or general or limited partnership, each Individual executing this Lease on behalf of such entity represents and warrants that ha or she Is duly authorized to execute and deliver this Lease on Its behalf. If Lessee Is a corporation, trust or partnership, Lessee shall, within thirty (30) days after request by Lessor, deliver to Lessor evidence satisfactory to Lessor of such authority. 45. Conflict. Any conflict between the printed provisions of this Lease and the typewritten or handwritten provisions shall be controlled by the typewritten or handwritten provisions. 46. Otter. Preparation of this Lease by either Lessor or Lessee or Lessor's agent or Lessee's agent and submission of same to Lessee or Lessor shall not be deemed an oiler to lease. This Lease Is not intended to be binding until executed and delivered by all Parties hereto. 47. Amendments. This Lease may be modified only in writing, signed by the parties In Interest at the Urns of the modification. The Parties shall amend this Lease from time to time to reflect any adjustments that are made to the Base Rent or other rent payable under this Lease. As long as they do not materially change Lessee's obligations hereunder, Lessee agrees to make such reasonable non-monetary modifications to this Lease as may be reasonably required by an Institutional Insurance company or pension plan Lender In connection with the obtaining of normal financing or refinancing of the property of which the Premises are a part. 48. Multiple Parties. Except as otherwise expressly provided herein, If more than one person or entity Is named herein as either Lessor or Lessee, the obligations of such multiple parties shall be the joint and several responsibility of all persons or entitles named herein as such Lessor or Lessee. EXHIBIT "A" -- SITE PLAN EXHIBIT "B" -- FLOOR PLAN EXHIBIT "C" -- CREDIT LETTER 16 RECORDING OF THIS LEASE PROHIBITED LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE PREMISES. IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR YOUR ATTORNEY'S REVIEW AND APPROVAL FURTHER, EXPERTS SHOULD BE CONSULTED TO EVALUATE THE CONDITION OF THE PROPERTY FOR THE POSSIBLE PRESENCE OF ASBESTOS, UNDERGROUND STORAGE TANKS OR HAZARDOUS SUBSTANCES. NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL ESTATE BROKERS OR THEIR CONTRACTORS, AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEo QUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT RELATES; THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN COUNSEL AS TO THE LEGAL AND TM CONSEQUENCES OF THIS LEASE. IF THE SUBJECT PROPERTY IS IN A STATE OTHER THAN CALIFORNIA, AN ATTORNEY FROM THE STATE WHERE THE PROPERTY IS LOCATED SHOULD BE CONSULTED. The parties hereto have executed this Lease at the place and on the dales specified above their respective signatures. Executed at: FULLERTON BUSINESS CENTER Executed at: on: on: ----------------------------------- --------------------------- By LESSOR: FULLERTON BUSINESS CENTER By LESSEE: ALLIED MED, INC., By: ALEXICO, INC., a California Corporation AN OREGON CORPORATION --------------------------------------- --------------------- dba MID VALLEY MANAGEMENT, Managing Agent By: /s/ By: /s/ ---------------------------------------- ------------------------------ Name Printed:Jack Amin ------------------------------ Title: President ------------------------------ Name Printed: TERRI RHOADES Name Printed: JACK AMIN ---------------------------------------- ------------------------------ Title: AUTHORIZED AGENT Title: VICE PRESIDENT ---------------------------------------- ----------------------------- NOTE: These forms are often modified to meet changing requirements of law and needs of the industry. Always write or call to make sure you are utilizing the most current form: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 345 So. Figueroa St., M-1, Los Angeles, CA 90071 (213) 687-8777. 17 ADDENDUM I ---------- THIS ADDENDUM is attached to and integrated as a part of that certain Lease dated SEPTEMBER 23, 2005, by and between FULLERTON BUSINESS CENTER, Lessor, and ALLIED MED, INC., AN OREGON CORPORATION, Lessee, and constitutes additional Covenants, Conditions and Agreements contained herein, which Addendum shall prevail in the event of any conflict between the Covenants, Conditions and Agreements contained herein and those in said Lease. REFURBISHING FEE AND KEY DEPOSIT 1. Lessee agrees to pay to Lessor a non-refundable refurbishing fee of $ WAIVED and a key deposit of $ WAIVED. ACCEPTANCE OF LEASED PREMISES 2. Lessee accepts the Premises (as well as the improvements thereon and the facilities appurtenant thereto) in their present conditions, and acknowledges that the Premises (as well as the improvements thereon and the facilities appurtenant thereto) are in good, clean, safe and tenantable condition as of the date of this Lease. Lessee further represents to Lessor that the Premises have been inspected by Lessee, and that he/she has been assured by means independent of Lessor, or any Agent of Lessor, regarding truth of all facts material to the Lease, and that the Premises are being Leased by the Lessee as a result of his/her inspection and investigation and not as a result of any representations by Lessor or any Agent of Lessor. Lessee shall complete and return the "Unit Inspection Checklist" within 30 days of the lease commencement, and those items not corrected by Lessor will be excluded from Lessee's obligation to restore the Premises upon surrender. Lessee's failure to return the "Unit Inspection Check-List" constitutes a waiver of all rights thereto. RENT ESCALATIONS 3. Lessee agrees to pay to Lessor in advance, at such places as may be designated from time to time by Lessor, without deduction or offset, and Lessor agrees to accept as Rent for the Leased Premises, the following monthly Rental Payment Schedule for the term of the Lease: OCTOBER 1, 2005 THROUGH SEPTEMBER 30, 2006 $2,534.00 PER MONTH ADDRESS FOR RENT PAYMENTS 4 Lessee's payments of rent and other amounts due, shall be considered to have been received by Lessor only when received by mail at Mid Valley Management, P.O. Box 514779, Los Angeles, CA 90051-4779. Rental payments will not be accepted at any of Lessor's Leasing Offices. LATE CHARGES AND RETURNED CHECKS 5. Rent is due on the first of the month. If not received by the tenth of the month, a ten percent (10%) late charge on each delinquent payment will be added. A ten percent (10%) late charge will be added on all checks returned unpaid by the bank. If more than two (2) checks are returned, Lessee must thereafter pay by cashier's check and Lessor shall have as an additional remedy the right to terminate the Lease. Page 1 of 7 PARKING RULES AND REGULATIONS PERMITTED AND PROHIBITED PARKING 6. Parking is permitted in designated striped areas only. All other Vehicles not parked in such areas are subject to being towed away at Lessee's expense (22658 CVC). Parking is prohibited: (a) in areas not striped for parking; (b) in aisles; (c) where "No Parking" or "Fire Lane" signs are posted; (d) where "Handicap" signs are posted, unless Handicap I.D. is posted in or on vehicle; (e) on ramps; (f) in areas outside warehouse doors which are restricted to loading and unloading only; this is a fire lane and must not be blocked; (g) in specifically assigned and reserved spaces to others than Lessee; and (h) in such other areas as may be designated by Lessor, its Agents, Lessee or Licensee. OVERNIGHT STORAGE OF VEHICLES OR TRAILERS 7. There will be no overnight storage of Vehicles or Trailers in the parking lot. Vehicles used and moved on a daily basis are exempt. DAMAGED VEHICLES 8. There will be no storage of wrecked or damaged Vehicles at any time. DIRECTIONAL SIGNS AND ARROWS 9. All directional signs and arrows must be observed. SPEED LIMIT 10. The speed limit shall be five (5) miles per hour. RESPONSIBILITY FOR LOCKED VEHICLES AND DAMAGES 11. Every Lessee is requested to park and lock his/her own Vehicle. All responsibility for damage to Vehicles to be repaired is assumed by Authorized Users. Lessee shall repair or cause to be repaired at its sole cost and expense any and all damage to the Business Complex Parking Facility or any part thereof caused by Lessee, its Authorized Users, Invitees or Guests, or resulting from Vehicles of each of them. Lessee specifically waives any claims against Lessor arising out of damage to said Vehicles. COMMON AREA PARKING 12. Lessee shall be entitled to park in common with other Tenants of Lessor in the parking area for the specific use as described in the Leasehold. Lessee specifically waives any claims against Lessor arising out of damage to said Vehicles. Lessee agrees not to overburden the parking facilities and agrees to cooperate with Lessor and other Tenants in the use of parking facilities. Lessor reserves the right in its absolute discretion to determine whether parking facilities are becoming crowded, and in such an event, to allocate parking spaces among Lessee and other Tenants. In the event Lessor deems allocation necessary, Lessee shall be entitled to the use of no more than FIVE (5) parking spaces. Lessee hereby agrees not to occupy or permit its Employees, Customers or Invitees to occupy more than the number of spaces specified above; nor to park anywhere other than in parking stalls assigned and designated as such by painted signs, parking lines and parking bumpers. Page 2 of 7 MAINTENANCE 13. Pursuant to Paragraph 7.1 of the Lease Agreement, the cost to be charged hereunder shall include an additional administrative cost of twenty-five percent (25%) as additional rent to be paid by Lessee with the next rental payment. In addition to the Lease Agreement, upon termination of Lessee's tenancy, all keys shall be delivered to Lessor and any and all Personal Property left in the Premises at said termination shall become the Property of Lessor. Lessor shall have the right to dispose of the Property in any manner which at its sole election it claims appropriate. Lessee waives, releases and forever discharges Lessor from any and all claims, liability and expense with respect to such Personal Property, including the right to account for any proceeds of sale. TENANT ALTERATIONS 14. Lessor may withhold the approval of any alteration, addition, or improvement that requires work which does not comply with any applicable laws (including, without limitation, the Americans with Disabilities Act of 1990 and all regulations issued thereunder) or requires other alterations, additions, or improvements of the Premises or common areas of the Business Complex, in order to comply with applicable laws. 14.1 Lessee is not permitted to wallpaper or paint within Premises without Lessor's express written permission. If permission is granted by Lessor, Lessee is required to restore the wall surface areas, with like materials, to the same condition as they were prior to the execution of this Lease. 14.2 At the expiration of this lease term or at the time Lessee vacates the premises, if the entire floor surface area of the leased premises requires more than a damp mopping, Lessee agrees, as a condition of this Lease, to pay in full any and all costs incurred in returning the floor surface areas to the same condition as it was prior to the execution of this Lease. In the event Lessee uses any chemical substances, including, but not limited to the following: grease, paint, oil, ink, dye, solvents or other liquid base material, Lessee shall bear the responsibility to return the leased premises to the same condition as it was prior to the execution of this Lease. ROOF ACCESS 15. Neither Lessee, Lessee's Agent, Contractors, Employees or invitees shall enter upon the roof of the Premises (except in the case of an emergency) for any purpose whatsoever without first receiving Lessor's written consent which shall not be unreasonably withheld. 15.1 If the Lessee, Lessee's Agents, Contractors, Employees or invitees shall enter upon the roof of said Premises, whether with or without the consent of Lessor, then the Lessee specifically indemnifies and agrees to hold Lessor harmless from any and all claims, actions or causes of action resulting from injuries incurred to any of said individuals or any other Person or Property, caused by or as a result of their entering upon the roof of said Premises, 15.2 In the event that Lessor grants written permission to the Lessee or any of the persons set forth above to have roof access, said consent shall be expressly on the condition that each time said Lessee or those persons designated by Lessee to enter upon the roof that they first execute a written Letter of Agreement provided by Lessor (a) expressly indemnifying and holding Lessor free and harmless from any and all damages caused by said individuals to the Leasehold Premises, (b) indemnifying Lessors from any personal injury damages caused in connection therewith, (c) provide Lessor with a $200.00 deposit or such other sum as Lessor may hereinafter set for every penetration upon the roof with the express authorization to permit Lessor to seal around all roof cuts and to charge the deposit for the actual cost thereof and with the express understanding that at such time as the Lessee vacates the subject Premises, that all equipment installed thereon by Lessee shall be removed (unless there is an Agreement in writing by and between Lessor and Lessee to the contrary), Lessor's Roofer shall be responsible for making any and all roof repairs required by said removal and Lessee shall be responsible for all charges incurred in connection therewith. Lessor shall have the express authorization to charge Lessee's deposit for all costs in connection therewith and (d) at Lessor's election, secure a Performance and Material and Labor Bond from Contractor in the amount of one and one-half times the cost of said improvement; making the Lessor an additional insured and beneficiary. Page 3 of 7 15.3 Lessee shall be required to submit reasonably detailed final plans, specifications and working drawings of the proposed alteration or alterations and the name of its Contractor at least thirty (30) days before the date it intends to commence the alterations. Drawings shall include, but not be limited to, the disclosure of the size, weight and type of installation to be placed upon the roof. 15.4 Lessee's Contractor shall provide Lessor with Certificates of Insurance and at the election of Lessor, name the Lessee as an additional insured. WORK AREAS 16. Lessee shall not be permitted to work in the parking lot or loading door areas. All work must be confined within the Leased Premises. PROTECTION OF PREMISES 17. Lessee assumes any and all responsibility for protecting its Premises from theft, robbery, vandalism and pilferage. Lessor strongly suggests that Lessee re-key the unit upon taking possession, which cost is at Lessee's sole cost and expense. LESSEE'S ALARM SYSTEM 18. If Lessee desires to install an alarm system, all equipment must be installed inside Lessee's unit so as not to be visible and shall otherwise comply to the standards set by Lessor for all alarm systems contained in the Business Complex. All alarm systems must be approved by Lessor. When equipment is removed, the Premises must be restored to its original condition by Lessee. Only one alarm sticker per unit placed on Lessee's door is permitted, with the exception that corner units may also have a second sticker on the bottom of the side glass window. RUBBISH REMOVAL 19. No rubbish, containers or debris are to be left outside of Lessee's unit. All refuse is to be placed in designated trash bins. Any debris is subject to immediate removal by Lessor at Lessee's expense. This rule applies to pallets as well. Lessee shall not place in any trash box or receptacle any material which cannot be disposed of in the ordinary and customary manner of trash and garbage disposal. All garbage and refuse disposal shall be made in accordance with directions issued from time to time by Lessor. Lessee shall reimburse Lessor, upon demand, for trash removal service to the Business Complex allocated to the Premises by Lessor on a prorata basis. If Lessor shall determine that the trash generated by or at the Premises, in Lessor's reasonable estimation, shall be excessive, Lessee shall pay to Lessor, upon demand, such additional charges as Lessor shall equitably impose for such excess trash removal. Lessor shall have the option to contract for a single trash removal service for the entire Business Complex. EXTERIOR DAMAGE BY LESSEE During the Lease Term, and at expiration (or early termination) of this Lease, if Lessee dirties, soils or damages the exterior of Lessor's Business Complex, Lessee will be responsible for the repair of this damage. If Lessee fails to repair the damage which Lessee causes within five (5) days of such occurrence, then Lessor may make such repairs and bill Lessee for the cost of such repair plus an administrative cost of an additional twenty-five percent (25%). Page 4 of 7 SIGNAGE 21. Lessee shall not place or permit to be placed any projecting sign, marquee, decoration or awning on said Premises without the written consent of Lessor; which consent shall not be unreasonably withheld. All signs which are permitted shall be conforming to the signage criteria established from time to time by Lessor for the Premises, Building and the Business Complex, as applicable, and shall be maintained by Lessee at its sole expense, including, but not limited to sign fabrication, maintenance, operation (including any required utilities), repair and removal. Lessee, upon the request of Lessor, shall immediately remove any sign or decoration which Lessee has placed, or permitted to be placed in, on or about the Premises of which, in the sole option and discretion of Lessor, is objectionable or offensive; and if Lessee fails to do so, Lessor may enter upon said Premises and remove said item and charge the cost thereof to Lessee. Lessee shall not place or permit to be placed upon any side wall, rear wall, window or roof; any sign, advertisement or notice without the written consent of Lessor, which consent shall only be given where the proposed sign, advertisement or notice complies with the specifications of size, shape, design, color or material established by Lessor and which are applicable to all Tenants of Lessor's Business Complex. WINDOWS AND WINDOW COVERINGS 22. Lessee shall not place any window coverings upon the Leasehold Premises (e.g. curtains, draperies, blinds, etc.) without Lessor's written consent, which consent shall not be unreasonably withheld, and provided the proposed window covering complies with the specifications established by Lessor and which are applicable to all Tenants of Lessor in the Business Complex. Lessee shall keep the glass windows free of dirt and stains and shall clean windows on a frequent and regular basis. AUCTION ON PREMISES 23. Lessee shall not conduct or permit to be conducted any sale by auction or liquidation (going out of business sale) on said Premises. CANVASSING AND SOLICITATION 24. Canvassing, soliciting and distribution of handbills or other written material and peddling in the Business Complex is prohibited; each Tenant shall cooperate to prevent same. FOUL, NOXIOUS GAS OR SUBSTANCE AND ANIMALS 25. Lessee shall not use, or permit to be used in the Premises, any foul, noxious gas or substance; or permit or allow the Premises to be occupied or used in a manner offensive or objectionable to Lessor or other occupants of the Building by reason of noise, odors or vibrations; nor shall Lessee bring into or keep in or about the Premises any birds or animals (except seeing eye dogs when accompanied by their masters). UNDER THE INFLUENCE 26. Lessor reserves the right to exclude or expel from the Premises any person who, in Lessor's judgment, is intoxicated or under the influence of liquor, drugs or other abusive substances, or who is otherwise in violation of any Rules and Regulations of the Business Complex. NAME AND ADDRESS OF PREMISES Lessor reserves the right, exercisable with sixty (60) days notice and without liability to Lessee, to change the name and address of the Premises. Said sixty (60) days notice shall conclusively be deemed reasonable notice to Lessee. Page 5 of 7 RELOCATION RIGHT 28. Lessor may, upon not less than sixty (60) days prior written notice to Lessee, substitute for the Premises, reasonably similar space elsewhere in the Business Complex, and this Lease shall be deemed modified so as to eliminate the Premises hereby leased and to substitute therefor such other premises (and the rentable and usable areas thereof). In such event, in all other respects, this Lease shall remain in full force and effect according to its terms. In connection therewith, the costs of preparing such other premises for Tenant's use, together with Tenant's reasonable costs of moving, shall be borne by Lessor. NO PERSONAL OBLIGATION 29. Lessee agrees to look solely to any equity interest of Lessor in and to the Premises for satisfaction of any liability Lessor may have to Lessee under this Lease and not to any other assets of Lessor or the personal assets of any constituent general or limited partner, shareholder, director, officer, employee or member of Lessor or of any general or limited partnership, corporation, limited liability company or other entity of which Lessor is formed. NON-DISCRIMINATION AND NON-SEGREGATION COVENANT 30. Lessee herein covenants by and for himself or herself, his or her heirs, executors, administrators, assigns, and for all persons claiming under or through him or her. This Lease is made and accepted upon and subject to the following conditions: That there shall be no discrimination against or segregation of any person or group of persons on account of race, color, creed, religion, sex, marital status, national origin or ancestry, in the Leasing, Subleasing, transferring, use, occupancy, tenure and enjoyment of the Premises herein Leased; nor shall Lessee himself, or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination and/or segregation with reference to the selection, location number, use and occupancy of Lessees, Tenants, Sublessees, Subtenants, Assignees and/or Vendees in the Premises herein Leased. CHANGES IN RULES AND REGULATIONS 31. Lessor reserves the right by written notice to Lessee to rescind, alter or waive any Rule or Regulation prescribed for Lessor's Business Complex at any time when, in Lessor's judgment, it is necessary, desirable, proper and in the best interest of Lessor's Business Complex and its Tenants. Lessee agrees to be bound by any changes, revisions or modifications. Lessor further reserves the right to make such other Rules and Regulations as in its judgment may be necessary for the safety, care and cleanliness of the Premises and for the preservation of good order therein. Lessee agrees to abide by all such rules and Regulations hereinabove stated, and any additional Rules and Regulations which are adopted. WAIVER OF RULES AND REGULATIONS 32. Lessor may waive any one or more of these Rules and Regulations for the benefit of Lessee or any other Tenant, but no such waiver by Lessor to a particular Tenant shall be, (a) construed as a waiver of such Rules and Regulations in favor of Lessee or any other Tenant to prevent Lessor from thereafter enforcing any such Rules and Regulations against any or all of the Tenants of the Premises, and (b) any such waiver shall be deemed temporary in nature and cancelable at will by Lessor, and Lessee specifically acknowledges the right of Lessor to rescind said waiver at its sole election and discretion. HEADINGS The Titles and Headings of the various sections of this Addendum are intended solely for the convenience of reference only and are not intended to explain, modify or place any construction on any of the provisions of this Addendum. Page 6 of 7 CONFIDENTIALITY 34. Tenant acknowledges and agrees that the terms of this Lease are confidential and constitute propriety information of Landlord. Disclosure of the terms hereof could adversely affect the ability of Landlord to negotiate other leases with respect to the Project and may impair Landlord's relationship with other tenants of the Project. Tenant agrees that it and its partners, officers, directors, employees, brokers, and attorneys, if any, shall not disclose the terms and conditions of this Lease to any other person or entity without the prior written consent of Landlord which may be given or withheld by inadequate remedy for the breach of this provision by Tenant, and Landlord shall also have the right to seek specific performance of this provision and to seek injunctive relief to prevent its breach or continued breach. VIOLATION FEE 35. Anything to the contrary notwithstanding, on the second occurrence of Lessee's violation of paragraphs 6 through 12, and every occurrence thereafter, Lessor, at its sole option and in addition to all other rights and remedies available under this Lease, may charge a fee, as Additional Rent, of $100.00, which is a fair representation of unanticipated costs to Lessor as a result of this violation. STORAGE IN LOFT AREA 36. Lessor and Lessee agree that the area located above Lessee's office(s) is not intended to be used as storage. The storing of any material in this portion of your unit is a violation of your Lease Agreement, as well as a City of Fullerton building code violation, which could result in city fines or termination of your Lease Agreement. KEYS 37. Upon vacating the leased Premises, Lessee will provide Lessor with a set of working keys for the front and back doors, or will be charged to have the locks re-keyed. AGREED AND ACCEPTED: AGREED AND ACCEPTED: "LESSOR" "LESSEE" FULLERTON BUSINESS CENTER ALLIED MED INC., - ------------------------------------------ ------------------------------ By ALEXICO, INC., a California corporation AN OREGON CORPORATION DBA MID VALLEY MANAGEMENT, Managing Agent By /s/ Terri Rhoades By /s/ Jack Amin, President ----------------- ------------------------ Terri Rhoades Its: Authorized Agent By /s/ Jack Amin, Vice President Date: _____________ Page 7 of 7 - -------------------------------------------------------------------------------- EX-10.2 3 amexdrug10qexh102.txt ================================================================================ EXHIBIT 10.2 STANDARD INDUSTRIAL/COMMERCIAL MULTI TENANT LEASE GROSS AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION RECORDING OF THIS LEASE PROHIBITED 1. Basic Provisions ("Basic Provisions"). 1.1 Parties: This Lease ("Lease"), dated for reference purposes only, SEPTEMBER 23, 2005 is made by and between FULLERTON BUSINESS CENTER ("Lessor") and ALLIED MED, INC., AN OREGON CORPORATION (collectively the "Parties," or individually a "Party"). 1.2(a) Premises: That certain portion of the Building, including all Improvements therein or to be provided by Lessor under the terms of this Lease, commonly known by the street address of 2500 E. FENDER AVENUE, UNITS "I & J' located In the City of FULLERTON County of ORANGE, State of CALIFORNIA, with zip code 92831, as outlined on Exhibit B attached hereto ("Premises"). The "Building" is that certain building containing the Premises and generally described as (describe briefly the nature of the Building): APPROXIMATELY 1,600 SQUARE FEET OF RENTABLE SPACE INCLUDING OVERHANG AS OUTLINED IN EXHIBITS "A" AND "B" ATTACHED HERETO AND INCORPORATED HEREIN. In addition to Lessee's rights to use and occupy the Premises as hereinafter specified, Lessee shall have non-exclusive rights to the Common Areas (as defined In Paragraph 2.7 below) as hereinafter specified, but shall not have any rights to the roof, exterior walls or utility raceways of the Building or to any other buildings In the Industrial Center. The Premises, the Building, the Common Areas, the land upon which they are located, along with all other buildings and Improvements thereon, are herein collectively referred to as the "Industrial Center." (Also see Paragraph 2.) 1.2(b) Parking: TWO (2) unreserved vehicle parking spaces ("Unreserved Parking Spaces"); and N/A reserved vehicle parking spaces ("Reserved Parking Spaces"). (Also see Paragraph 2.6.) 1.3 Term: ONE (1) years and 0months ("Original Term") commencing OCTOBER 1, 2005 ("Commencement Date") and ending SEPTEMBER 30, 2006 ("Expiration Date"). (Also see Paragraph 3.) 1.4 Early Possession: N/A ("Early Possession Date"). (Also see Paragraphs 3.2 and 3.3.) 1.5 Base Rent: $1,152.00 per month ("Base Rent"), payable on the FIRST day of each month commencing OCTOBER 1, 2005. (Also see Paragraph 4.) [ ] If this box is checked, this Lease provides for the Base Rent to be adjusted per Addendum , attached hereto. 1.6(a) Base Rent Paid Upon Execution: $1,152.00 (as Base Rent for the period OCTOBER 1, 2005 - OCTOBER 31, 2005. 1.6(b) Lessee's Share of Common Area Operating Expenses: 0.0069559 percent (_____%) ("Lessee's Share") as determined by [X] prorate square footage of the Premises as compared to the total square footage of the Building or [ ] other criteria as described in Addendum __. 1.7 Security Deposit: $3,456.00 ("Security Deposit"). (Also see Paragraph 5.) 1.8 Permitted Use: OFFICE/WAREHOUSE USED FOR PHARMACEUTICAL MANUFACTURING & DISTRIBUTION ("Permitted Use") (Also see Paragraph 6.) 1.9 Insuring Party. Lessor Is the "Insuring Party." (Also see Paragraph 8.) 1.10(a) Real Estate Brokers. The following real estate broker(s) (collectively, the "Brokers") and brokerage relationships exist in this transaction and are consented to by the Parties (check applicable boxes): [ ] N/A represents Lessor exclusively ("Lessor's Broker"); [ ] N/A represents Lessee exclusively ("Lessee's Broker"); or [ ] N/A represents both Lessor and Lessee ("Dual Agency"). (Also see Paragraph 15.) 1.10(b) Payment to Brokers. Upon the execution of this Lease by both Parties, Lessor shall pay to said Broker(s) jointly, or In such separate shares as they may mutually designate In writing, a fee as set forth In a separate written agreement between Lessor and said Broker(s) (or In the event there is no separate written agreement between Lessor and said Broker(s), the sum of ($-0) for brokerage services rendered by said Broker(s) in connection with this transaction. 1.11 Guarantor. The obligations of the Lessee under this Lease are to be guaranteed by N/A ("Guarantor"). (Also see Paragraph 37.) 1.12 Addenda and Exhibits. Attached hereto is an Addendum or Addenda consisting of Paragraphs 1 through 37, and Exhibits A through C, all of which constitute a part of this Lease. 2. Premises, Parking and Common Areas. 2.1 Letting. Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the Premises, for the term, at the rental, and upon all of the terms, covenants and conditions set forth in this Lease. Unless otherwise provided herein, any statement of square footage set forth In this Lease, or that may have been used in calculating rental and/or Common Area Operating Expenses, Is an approximation which Lessor and Lessee agree Is reasonable and the rental and Lessee's Share (as defined in Paragraph 1.6(b)) based thereon is not subject to revision whether or not the actual square footage Is more or less. 2.2 Condition. Lessor shall deliver the Premises to Lessee clean and free of debris on the Commencement Date and warrants to Lessee that the existing plumbing, electrical systems, fire sprinkler system, lighting, air conditioning and heating systems and loading doors, If any, In the Premises, other than those constructed by Lessee, shall be In good operating condition on the Commencement Date. If a non-compliance with said warranty exists as of the Commencement Data, Lessor shall, except as otherwise provided In this Lease, promptly after receipt of written notice from Lessee setting forth with specificity the nature and extent of such non-compliance, rectify same at Lessor's expense. If Lessee does not give Lessor written notice of a non-compliance with this warranty within thirty (30) days after the Commencement Date, correction of that non-compliance shall be the obligation of Lessee at Lessee's sole cost and expense. 1 2.3 Compliance with Covenants, Restrictions and Building Code. Lessor warrants that any Improvements (other than those constructed by Lessee or at Lessee's direction) on or in the Premises which have been constructed or Installed by Lessor or with Lessor's consent or at Lessor's direction shall comply with all applicable covenants or restrictions of record and applicable building codes, regulations and ordinances In effect on the Commencement Date. Lessor further warrants to Lessee that Lessor has no knowledge of any claim having been made by any governmental agency that a violation or violations of applicable building codes, regulations, or ordinances exist with regard to the Premises as of the Commencement Dale. Said warranties shall not apply to any Alterations or Utility Installations (defined Initials: (C) American Industrial Real Estate Association 1993 MULTI-TENANT-- GROSS in Paragraph 7.3(a)) made or to be made by Lessee. If the Premises do not comply with bald warranties, Lessor shall, except as otherwise provided in this Lease, promptly after receipt of written notice from Lessee given within six (6) months following the Commencement Dale and setting forth with specificity the nature and extent of such non-compliance, take such action, at Lessor's expense, as may be reasonable or appropriate to rectify the non-compliance. Lessor makes no warranty that the Permitted Use in Paragraph 1.8 is permitted for the Premises under Applicable Laws (as defined in Paragraph 2.4). 2.4 Acceptance of Premises. Lessee hereby acknowledges: (a) that It has been advised by the Broker(s) to satisfy Itself with respect to the condition of the Premises (including but not limited to the electrical and fire sprinkler systems, security, environmental aspects, seismic and earthquake requirements, and compliance with the Americans with Disabilities Act and applicable zoning, municipal, county, state and federal laws, ordinances and regulations and any covenants or restrictions of record (collectively, "Applicable Laws") and the present and future suitability of the Premises for Lessee's Intended use; (b) that Lessee has. made such investigation as it deems necessary with reference to such matters, is satisfied with reference thereto, and assumes all responsibility therefore as the same relate to Lessee's occupancy of the Premises and/or the terms of this Lease; and (c) that neither Lessor, nor any of Lessor's agents, has made any oral or written representations or warranties with respect to said matters other than as set forth In this Lease. 2.5 Lessee as Prior Owner/Occupant. The warranties made by Lessor In this Paragraph 2 shall be of no force or effect if immediately prior to the date set forth In Paragraph 1.1 Lessee was the owner or occupant of the Premises. In such event, Lessee shall, at Lessee's sole cost and expense, correct any non-compliance of the Premises with said warranties. 2.6 Vehicle Parking. Lessee shall be entitled to use the number of Unreserved Parking Spaces and Reserved Parking Spaces specified in Paragraph 1.2(b) on those portions of the Common Areas designated from time to time by Lessor for parking. Lessee shall not use more parking spaces than said number. Said parking spaces shall be used for parking by vehicles no larger than lull-size passenger automobiles or pick-up trucks, herein called "Permitted Size Vehicles." Vehicles other than Permitted Size Vehicles shall be parked and loaded or unloaded as directed by Lessor in the Rules and Regulations (as defined In Paragraph 40) issued by Lessor. (Also see Paragraph 2.9.) (a) Lessee shall not permit or allow any vehicles that belong to or are controlled by Lessee or Lessee's employees, suppliers, shippers, customers, contractors or Invitees to be loaded, unloaded, or parked In areas other than those designated by Lessor for such activities. (b) If Lessee permits or allows any of the prohibited activities described in this Paragraph 2.6, then Lessor shall have the right, without notice, In addition to such other rights and remedies that timey have, to remove or low away the vehicle Involved and charge the cost to Lessee, which cost shall be immediately payable upon demand by Lessor. (c) Lessor shall at the Commencement Dale of this Lease, provide the parking facilities required by Applicable Law. 2.7 Common Areas--Definition. The term "Common Areas" is defined as all areas and facilities outside the Premises and within the exterior boundary line of the Industrial Center and Interior utility raceways within the Premises that are provided and designated by the Lessor from time to time for the general nonexclusive use of Lessor, Lessee and other lessees of the Industrial Center and their respective employees, suppliers, shippers, customers, contractors and Invitees, including parking areas, loading and unloading areas, trash areas, roadways, sidewalks, walways, parkways, driveways and landscaped areas. 2.8 Common Areas--Lessee's Rights. Lessor hereby grants to Lessee, for the benefit of Lessee and Its employees, suppliers, shippers, contractors, customers and Invitees, during the term of this Lease, the non-exclusive right to use, In common with others entitled to such use, the Common Areas as they exist from time to time, subject to any rights, powers, and privileges reserved by Lessor under the terms hereof or under the terms of any rules and regulations or restrictions governing the use of the Industrial Center. Under no circumstances shall the right herein granted to use the Common Areas be deemed to include the right to store any properly, temporarily or permanently, In the Common Areas. Any such storage shall be permitted only by the prior written consent of Lessor or Lessor's designated agent, which consent may be revoked at any time. In the even) that any unauthorized storage shall occur than Lessor shall have the right, without notice, In addition to such other rights and remedies that It may have, to remove the properly and charge the cost to Lessee, which cost shall be Immediately payable upon demand by Lessor. 2.9 Common Areas--Rules and Regulations. Lessor or such other person(s) as Lessor may appoint shall have the exclusive control and management of the Common Areas and shall have the right, from time to time, to establish, modify, amend and enforce reasonable Rules and Regulations with respect thereto In accordance with Paragraph 40. Lessee agrees to abide by and conform to all such Rules and Regulations, and to cause its employees, suppliers, shippers, customers, contractors and Invitees to so abide and conform. Lessor shall not be responsible to Lessee for the non-compliance with said rules and regulations by other lessees of the Industrial Center. 2.10 Common Areas--Changes. Lessor shall have the right, In Lessor's sole discretion, from time to time: (a) To make changes to the Common Areas, Including, without limitation, changes in the location, size, shape and number of driveways, entrances, parking spaces, parking areas, loading and unloading areas, Ingress, egress, direction of traffic, landscaped areas, walkways and utility raceways; (b) To close temporarily any of the Common Areas for maintenance purposes so long as reasonable access to the Premises remains available; (c) To designate other land outside the boundaries of the Industrial Center to be a part of the Common Areas; (d) To add additional buildings and improvements to the Common Areas; (e) To use the Common Areas while engaged In making additional Improvements, repairs or alterations to the industrial Center, or any portion thereof; (f) To do and perform such other acts and make such other changes in, to or with respect to the Common Areas and Industrial Center as Lessor may, in the exercise of sound business judgment, deem to be appropriate. 3. Term. 3.1 Term. The Commencement Date, Expiration Data and Original Term of this Lease are as specified in Paragraph 1.3. 3.2 Early Possession. If an Early Possession Date Is specified In Paragraph 1.4 and If Lessee totally or partially occupies the Premises after the Early Possession Date but prior to the Commencement Date, the obligation to pay Base Rent shall be abated for the period of such early occupancy. All other terms of this Lease, however, (including but not limited to the obligations to pay Lessee's Share ol Common Area Operating Expenses and to carry the Insurance required by Paragraph 8) shall be In effect during such period. Any such early possession shall not affect nor advance the Expiration Date of the Original Term. 2 3.3 Delay in Possession. If for any reason Lessor cannot deliver possession of the Premises to Lessee by the Early Possession Dale, If one Is specified in Paragraph 1.4, or if no Early Possession Dale Is specified, by the Commencement Data, Lessor shall not be subject to any liability therefor, nor shall such failure affect the validity of this Lease, or the obligations of Lessee hereunder, or extend the term hereof, but In such case, Lessee shall not, except as otherwise provided herein, be obligated to pay rent or perform any other obligation of Lessee under the terms of this Lease until Lessor delivers possession of the Premises to Lessee. II possession of the Premises Is not delivered to Lessee within sixty (60) days after the Commencement Dale, Lessee may, at its option, by notice in writing to Lessor within ten (10) days after the and of said sixty (60) day period, cancel this Lease, In which event the parties shall be discharged from all obligations hereunder; provided further, however, that If such written notice of Lessee Is not received by Lessor within said ten (10) day period, Lessee's right to cancel this Lease hereunder shall terminate and be of no further force or effect. except as may be otherwise provided, and regardless of when the Original Term actually commences, If possession is not tendered to Lessee when required by this Lease and Lessee does not terminate this Lease, as aforesaid, the period free of the obligation to pay Base Rent, II any, that Lessee would otherwise have enjoyed shall run from the date of delivery of possession and continue for a period equal to the period during which the Lessee would have otherwise enjoyed under the terms hereof, but minus any days of delay caused by the acts, changes or omissions of Lessee. 4. Rent. 4.1. Base Rent. Lessee shall pay Base Rent and other rent or charges, as the same may be adjusted from time to time, to Lessor in lawful money of the United States, without offset or deduction, on or before the day on which It Is due under the terms of this Lease. Base Rent and all other rent and charges for any period during the term hereof which is for less than one full month shall be prorated based upon the actual number of days of the month involved. Payment of Base Rent and other charges shall be made to Lessor at its address staled herein or to such other persons or at such other addresses as Lessor may from time to time designate in writing to Lessee. 4.2 Common Area Operating Expenses. Lessee shall pay to Lessor during the term hereof, In addition to the Base Rent, Lessee's Share (as specified in Paragraph 1.6(b)) of all Common Area Operating Expenses, as hereinafter defined, during each calendar year of the term of this Lease, In accordance with the following provisions: (a) "Common Area Operating Expenses" are defined, for purposes of this Lease, as all costs Incurred by Lessor relating to the ownership and operation of the industrial Center, Including, but not limited lo, the following: (i) The operation, repair and maintenance, In neat, clean, good order and condition, of the following: (aa) The Common Areas, Including parking areas, loading and unloading areas, trash areas, roadways, sidewalks, walkways, parkways, driveways, landscaped areas, striping, bumpers, Irrigation systems, Common Area lighting facilities, fences and gales, elevators and roof. (bb) Exterior signs and any tenant directories. (cc) Fire detection and sprinkler systems. (ii) The cost of water, gas, electricity and telephone to service the Common Areas. (iii) Trash disposal, property management and security services and the costs of any environmental inspections. (iv) Reserves set aside for maintenance and repair of Common Areas. (v) Any Increase above the Base Real Property Taxes (as defined In Paragraph 10.2(b)) for the Building and the Common Areas. (vi) Any "Insurance Cost Increase" (as defined In Paragraph 8.1). (vii) The cost of Insurance carried by Lessor with respect to the Common Areas. (viii) Any deductible portion of an Insured loss concerning the Building or the Common Areas. (ix) Any other services to be provided by Lessor that are slated elsewhere In this Lease to be a Common Area Operating Expense. (b) Any Common Area Operating Expenses and Real Properly Taxes that are specifically attributable to the Building or to any other building in the Industrial Center or to the operation, repair and maintenance thereof, shall be allocated entirely to the Building or to such other building. However, any Common Area Operating Expenses and Real Property Taxes that are not specifically attributable to the Building or to any other building or to the operation repair and maintenance thereof, shall be equitably allocated by Lessor to all buildings in the industrial Center. (c) The Inclusion of the Improvements, facilities and services set forth In Subparagraph 4.2(e) shall not be deemed to impose an obligation upon Lessor to either have said Improvements or facilities or to provide those services unless the Industrial Center already has the same, Lessor already provides the services, or Lessor has agreed elsewhere In this Lease to provide the same or some of them. (d) Lessee's Share of Common Area Operating Expenses shall be payable by Lessee within ten (10) days after a reasonably detailed statement of actual expenses Is presented to Lessee by Lessor. At Lessor's option, however, an amount may be estimated by Lessor from time to time of Lessee's Share of annual Common Area Operating Expenses and the same shall be payable monthly or quarterly, as Lessor shall designate, during each 12-month period of the Lease term, on the same day as the Base Rent is due hereunder. Lessor shall deliver to Lessee within sixty (60) days after the expiration of each calendar year a reasonably detailed statement showing Lessee's Share of the actual Common Area Operating Expenses Incurred during the preceding year. If Lessee's payments under this Paragraph 4.2(d) during said preceding year exceed Lessee's Share as indicated on said statement. Lessor shall be credited the amount of such over payment against Lessee's Share of Common Area Operating Expenses next becoming due. If Lessee's payments under this Paragraph 4.2(d) during said preceding year were less than Lessee's Share as Indicated on said statement, Lessee shall pay to Lessor the amount of the deficiency within ten (10) days after delivery by Lessor to Lessee of said statement. 5. Security Deposit. Lessee shall deposit with Lessor upon Lessee's execution hereof the Security Deposit set forth In Paragraph 1.7 as security for Lessee's faithful performance of Lessee's obligations under This Lease. II Lessee falls to pay Base Rent or other rent or charges due hereunder, or otherwise Defaults under this Lease (as defined in Paragraph 13.1), Lessor may use, apply or retain all or any portion of said Security Deposit for the payment of any amount due Lessor or to reimburse or compensate Lessor for any liability, cost, expense, loss or damage (Including attorneys' fees) which Lessor may suffer or Incur by reason thereof. If Lessor uses or applies all or any portion of said Security Deposit, Lessee shall within ten (10) days after written request therefore deposit monies with Lessor sufficient to restore said Security Deposit to the lull amount required by this Lease. Any time the Base Rent Increases during the term of this Lease, Lessee shall, upon written request from Lessor, deposit additional monies with Lessor as an addition to the Security Deposit so that the total amount of the Security Deposit shall at all times bear the same proportion to the then current Base Rent as the Initial Security Deposit bears to the Initial Base Rent set forth In Paragraph 1.5. Lessor shall not be required to keep all or any part of the Security Deposit separate from Its general accounts. Lessor shall, at the expiration or earlier termination of the term hereof and alter Lessee has vacated the Premises, return to Lessee (or, at Lessor's option, to the last assignee, if any, of Lessee's Interest herein), that portion of the Security Deposit not used or applied by Lessor. Unless otherwise expressly agreed in writing by Lessor, no part of the Security Deposit shall be considered to be held in trust, to bear Interest or other Increment for Its use, or to be prepayment for any monies to be paid by Lessee under this Lease. 3 6. Use. 6.1 Permitted Use. (a) Lessee shall use and occupy the Premises only for the Permitted Use set forth In Paragraph 1.8, or any other legal use which Is reasonably comparable thereto, and for no other purpose. Lessee shall not use or permit the use of the Premises In a manner that is unlawful, creates waste or a nuisance, or that disturbs owners and/or occupants of, or causes damage to the Premises or neighboring premises or properties. (b) Lessor hereby agrees to not unreasonably withhold or delay Its consent to any written request by Lessee, Lessee's assignees or subtenants, and by prospective assignees and subtenants of Lessee, Its assignees and subtenants, for a modification of said Permitted Use, so long as the same will not Impair the structural integrity of the Improvements on the Premises or In the Building or the mechanical or electrical systems therein, does not conflict with uses by other lessees, is not significantly more burdensome to the Premises or the Building and the Improvements thereon, and is otherwise permissible pursuant to this Paragraph 6. If Lessor elects to withhold such consent, Lessor shall within five (5) business days after such request give a written notification of same, which notice shall include an explanation of Lessor's reasonable objections to the change in use. 6.2 Hazardous Substances. (a) Reportable Uses Require Consent. The term "Hazardous Substance" as used In this Lease shall mean any product, substance, chemical, material or waste whose presence, nature, quantity and/or intensity of existence, use, manufacture, disposal, transportation, spill, release or effect, either by Itself or in combination with other materials expected to be on the Premises, Is either: (i) potentially Injurious to the public health, safety or welfare, the environment, or the Premises; (ii) regulated or monitored by any governmental authority; or (iii) a basis for potential liability of Lessor to any governmental agency or third party under any applicable statute or common law theory. Hazardous Substance shall Include, but not be limited to, hydrocarbons, petroleum, gasoline, crude oil or any products or by-products thereof. Lessee shall not engage In any activity in or about the Premises which constitutes a Reportable Use (as hereinafter defined) of Hazardous Substances without the express prior written consent of Lessor and compliance In a timely manner (at Lessee's sole cost and expense) with all Applicable Requirements (as defined In Paragraph 6.3). "Reportable Use" shell mean (i) the Installation or use of any above or below ground storage tank, (ii) the generation, possession, storage, use, transportation, or disposal of a Hazardous Substance that requires a permit from, or with respect to which a report, notice, registration or business plan Is required to be filed with, any governmental authority, and (iii) the presence In, on or about the Premises of a Hazardous Substance with respect to which any Applicable Laws require that a notice be given to persons entering or occupying the Premises or neighboring properties. Notwithstanding the foregoing, Lessee may, without Lessor's prior consent, but upon notice to Lessor and In compliance with all Applicable Requirements, use any ordinary and customary materials reasonably required to be used by Lessee in the normal course of the Permitted Use, so long as such use Is not a Reportable Use and does not expose the Premises or neighboring properties to any meaningful risk of contamination or damage or expose Lessor to any liability therefor. In addition, Lessor may (but without any obligation to do so) condition Its consent to any Reportable Use of any Hazardous Substance by Lessee upon Lessee's giving Lessor such additional assurances as Lessor, In Its reasonable discretion, deems necessary to protect Itself, the public, the Premises and the environment against damage, contamination or Injury and/or liability therefor, Including but not limited to the Installation (and, at Lessor's option, removal on or before Lease expiration or earlier termination) of reasonably necessary protective modifications to the Premises (such as concrete encasements) and/or the deposit of an additional Security Deposit under Paragraph 5 hereof. (b) Duty to Inform Lessor. If Lessee knows, or has reasonable cause to believe, that a Hazardous Substance has come to be located In, on, under or about the Premises or the Building, other than as previously consented to by Lessor, Lessee shall Immediately give Lessor written notice thereof, together with a copy of any statement, report, notice, registration, application, permit, business plan, license, claim, action, or proceeding given to, or received from, any governmental authority or private party concerning the presence, spill, release, discharge of, or exposure to, such Hazardous Substance including but not limited to all such documents as may be involved In any Reportable Use Involving the Premises. Lessee shall not cause or permit any Hazardous Substance to be spilled or released in, on, under or about the Premises (Including, without limitation, through the plumbing or sanitary sewer system). (c) Indemnification. Lessee shall Indemnity, protect, defend and hold Lessor, its agents, employees, lenders and ground lessor, if any, and the Premises, harmless from and against any and all damages, liabilities, judgments, costs, claims, liens, expenses, penalties, loss of permits and attorneys' and consultants' fees arising out of or Involving any Hazardous Substance brought onto the Premises by or for Lessee or by anyone under Lessee's control. Lessee's obligations under this Paragraph 6.2(c) shall Include, but not be limited to, the effects of any contamination or Injury to person, properly or the environment created or suffered by Lessee, and the cost of Investigation (including consultants' and attorneys' fees and testing), removal, remediation, restoration and/or abatement thereof, or of any contamination therein Involved, and shall survive the expiration or earlier termination of this Lease. No termination, cancellation or release agreement entered into by Lessor and Lessee shall release Lessee from Its obligations under this Lease with respect to Hazardous Substances, unless specifically so agreed by Lessor In writing at the time of such agreement. 6.3 Lessee's Compliance with Requirements. Lessee shall, at Lessee's sole cost and expense, fully, diligently and In a timely manner, comply with all "Applicable Requirements," which term Is used In this Lease to mean all laws, rules, regulations, ordinances, directives, covenants, easements and restrictions of record, permits, the requirements of any applicable fire Insurance underwriter or rating bureau, and the recommendations of Lessor's engineers and/or consultants, relating in any manner to the Premises (Including but not limited to matters pertaining to (i) Industrial hygiene, (ii) environmental conditions on, in, under or about the Premises, including soli and groundwater conditions, and (iii) the use, generation, manufacture, production, Installation, maintenance, removal, transportation, storage, spill, or release of any Hazardous Substance), now In effect or which may hereafter come Into elect. Lessee shall, within live (5) days after receipt of Lessor's written request, provide Lessor with copies of all documents and Information, Including but not limited to permits, registrations, manifests, applications, reports and certificates, evidencing Lessee's compliance with any Applicable Requirements specified by Lessor, and shall immediately upon receipt, notify Lessor in writing (with copies of any documents Involved) of any threatened or actual claim, notice, citation, warning, complaint or report pertaining to or involving failure by Lessee or the Premises to comply with any Applicable Requirements. 4 6.4 Inspection; Compliance with Law. Lessor, Lessor's agents, employees, contractors and designated representatives, and the holders of any mortgages, deeds of trust or ground teases on the Premises ("Lenders") shall have the right to enter the Premises at any time In the case of an emergency, and otherwise at reasonable times, for the purpose of inspecting the condition of the Premises and for verifying compliance by Lessee with this Lease and all Applicable Requirements (as defined In Paragraph 6.3), and Lessor shall be entitled to employ experts and/or consultants in connection therewith to advise Lessor with respect to Lessee's activities, Including but not limited to Lessee's Installation, operation, use, monitoring, maintenance, or removal of any Hazardous Substance on or tram the Premises. The costs and expenses of any such Inspections shall be paid by the party requesting same, unless a Default or Breach of this Lease by Lessee or a violation of Applicable Requirements or a contamination, caused or materially contributed to by Lessee, is found to exist or to be imminent, or unless the inspection Is requested or ordered by a governmental authority as the result of any such existing or Imminent violation or contamination. In such case, Lessee shall upon request reimburse Lessor or Lessor's Lender, as the case may be, for the costs and expenses of such Inspections. 7. Maintenance, Repairs, Utility Installations, Trade Fixtures and Alterations. 7.1 Lessee's Obligations. (a) Subject to the provisions of Paragraphs 2.2 (Condition), 2.3 (Compliance with Covenants, Restrictions and Building Code), 7.2 (Lessor's Obligations), 9 (Damage or Destruction), and 14 (Condemnation), Lessee shall, at Lessee's sole cost and expense and at all times, keep the Premises and every pan thereof in good order, condition and repair (whether or not such portion of the Premises requiring repair, or the means of repairing the same, are reasonably or readily accessible to Lessee, and whether or not the need for such repairs occurs as a result of Lessee's use, any prior use, the elements or the age of such portion of the Premises), Including, without limiting the generality of the foregoing, all equipment or facilities specifically serving the Premises, such as plumbing, heating, air conditioning, ventilating, electrical, lighting facilities, boilers, fired or unfired pressure vessels, fire hose connections if within the Premises, fixtures, Interior walls, interior surfaces of exterior walls, ceilings, floors, windows, doors, plate glass, and skylights, but excluding any Items which are the responsibility of Lessor pursuant to Paragraph 7.2 below. Lessee, in keeping the Premises in good order, condition and repair, shall exercise and perform good maintenance practices. Lessee's obligations shall include restorations, replacements or renewals when necessary to keep the Premises and all improvements thereon or a part thereof in good order, condition and state of repair. (b) Lessee shall, al Lessee's sole cost and expense, at Lessee's option, procure and maintain a contract, with copies to Lessor, In customary form and substance for and with a contractor specializing and experienced In the Inspection, maintenance and service of the healing, air conditioning and ventilation system for the Premises. However, Lessor reserves the right, upon notice to Lessee, to procure and maintain the contract for the heating, air conditioning and ventilating systems, and it Lessor so elects, Lessee shall reimburse Lessor, upon demand, for the cost (hereof. (c) If Lessee fails to perform Lessee's obligations under this Paragraph 7.1, Lessor may enter upon the Premises after ten (10) days' prior written notice to Lessee (except in the case of an emergency, in which case no notice shall be required), perform such obligations on Lessee's behalf, and put the Premises in good order, condition and repair, in accordance with Paragraph 13.2 below. 7.2 Lessor's Obligations. Subject to the provisions of Paragraphs 2.2 (Condition), 2.3 (Compliance with Covenants, Restrictions and Building Code), 4.2 (Common Area Operating Expenses), 6 (Use), 7.1 (Lessee's Obligations), 9 (Damage or Destruction) and 14 (Condemnation), Lessor, subject to reimbursement pursuant to Paragraph 4.2, shall keep in good order, condition and repair the foundations, exterior walls, structural condition of interior bearing walls, exterior roof, fire sprinkler and/or standpipe and hose In good order, condition and repair (if located in the Common Areas) the other automatic fire extinguishing system including fire alarm and/or smoke detection systems and equipment, tire hydrants, parking lots, walkways, parkways, driveways, landscaping, lances, signs and utility systems serving the Common Areas and all parts thereof, as well as providing the services for which there Is a Common Area Operating Expense pursuant to Paragraph 4.2, Lessor shall not be obligated to paint the exterior or Interior surfaces of exterior walls nor shall Lessor be obligated to maintain, repair or replace windows, doors or plate glass of the Premises. Lessee expressly waives the benefit of any statute now or hereafter in effect which would otherwise afford Lessee the right to make repairs at Lessor's expense or to terminate this Lease because of Lessor's failure to keep the Building, Industrial Center or Common Areas In good order, condition and repair. 7.3 Utility Installations, Trade Fixtures, Alterations. (a) Definitions; Consent Required. The term "Utility Installations" Is used in this Lease to refer to all air lines, power panels, electrical distribution, security, tire protection systems, communications systems, lighting fixtures, healing, ventilating and air conditioning equipment, plumbing, and fencing in, on or about the Premises. The term "Trade Fixtures" shall mean Lessee's machinery and equipment which can be removed without doing material damage to the Premises. The term "Alterations" shall mean any modification of the Improvements on the Premises which are provided by Lessor under the terms of this Lease, other than Utility Installations or Trade Fixtures. "Lessee-Owned Alterations and/or Utility Installations" are defined as Alterations and/or Utility Installations made by Lessee that are not yet owned by Lessor pursuant to Paragraph 7.4(a). Lessee shall not make nor cause to be made any Alterations or Utility Installations In, on, under or about the Premises without Lessor's prior written consent. Lessee May, however, make non-structural Utility Installations to the Interior of the Premises (excluding the roof) without Lessor's consent but upon notice to Lessor, so long as they are not visible from the outside of the Premises, do not Involve puncturing, relocating or removing the roof or any existing walls, or changing or Interfering with the fire sprinkler or fire detection systems and the cumulative cost thereof during the term of this Lease as extended does not exceed $2,500.00. (b) Consent. Any Alterations or Utility Installations that Lessee shall desire to make and which require the consent of the Lessor shall be presented to Lessor In written form with detailed plans. All consents given by Lessor, whether by virtue of Paragraph 7.3(a) or by subsequent specific consent, shall be deemed conditioned upon: (i) Lessee's acquiring all applicable permits required by governmental authorities; (ii) the furnishing of copies of such permits together with a copy of the plans and specifications for the Alteration or Utility Installation to Lessor prior to commencement of the work thereon; and (iii) the compliance by Lessee with all conditions of said permits in a prompt and expeditious manner. Any Alterations or Utility Installations by Lessee during the term of this Lease shall be done in a good and workmanlike manner, with good and sufficient materials, and be In compliance with all Applicable Requirements. Lessee shall promptly upon completion thereof furnish Lessor with as-built plans and specifications therefor. Lessor may, (but without obligation to do so) condition Its consent to any requested Alteration or Utility Installation that costs $2,500.00 or more upon Lessee's providing Lessor with a lien and completion bond in an amount equal to one and one-hall times the estimated cost of such Alteration or Utility Installation. (c) Lien Protection. Lessee shall pay when due all claims for labor or materials furnished or alleged to have been furnished to or for Lessee at or for use on the Premises, which claims are or may be secured by any mechanic's or materialmen's lien against the Premises or any Interest therein. Lessee shall give Lessor not less than ten (10) days' nonce prior to the commencement of any work In, on, or about the Premises, and Lessor shall have the right to post notices of non-responsibility In or on the Premises as provided by law. II Lessee shall, In good faith, contest the validity of any such lien, claim or demand, than Lessee shall, al its sole expense, defend and protect Itself, Lessor and the Premises against the same and shall pay and satiety any such adverse judgment that may be rendered thereon before the enforcement thereof against the Lessor or the Premises. If Lessor shall require, Lessee shall furnish to Lessor a surety bond satisfactory to Lessor In an amount equal to one and one-half times the amount of such contested lien claim or demand, Indemnifying Lessor against liability for the same, as required by law for the holding of the Premises free from the effect of such Ilea or claim. In addition, Lessor may require Lessee to pay Lessor's attorneys' fees and costs in participating in such action if Lessor shall decide It Is to Its best Interest to do so. 5 7.4 Ownership, Removal, Surrender, and Restoration. (a) Ownership. Subject to Lessor's right to require their removal and to cause Lessee to become the owner thereof as hereinafter provided in this Paragraph 7.4, all Alterations and Utility Installations made to the Premises by Lessee shall be the property of and owned by Lessee, but considered a part of the Premises. Lessor may, at any time and at Its option, elect In writing to Lessee to be the owner of all or any specified part of the Lessee-Owned Alterations and Utility Installations. Unless otherwise Instructed per Subparagraph 7.4(b) hereof, all Lessee-Owned Alterations and Utility Installations shall, at the expiration or earlier termination of this Lease, become the property of Lessor and remain upon the Premises and be surrendered with the Premises by Lessee. (b) Removal. Unless otherwise agreed In writing, Lessor may require that any or all Lessee-Owned Alterations or Utility Installations be removed by the expiration or earlier termination of this Lease, notwithstanding that their Installation may have been consented to by Lessor. Lessor may require the removal at any time of all or any part of any Alterations or Utility Installations made without the required consent of Lessor. (c) Surrender/Restoration. Lessee shall surrender the Premises by the end of the last day of the Lease term or any earlier termination dale, clean and free of debris and in good operating order, condition and stale of repair, ordinary wear and tear excepted. Ordinary wear and tear shall not include any damage or deterioration that would have been prevented by good maintenance practice or by Lessee performing all of its obligations under this Lease. Except as otherwise agreed or specified herein, the Premises, as surrendered, shall include the Alterations and Utility Installations. The obligation of Lessee shall Include the repair of any damage occasioned by the Installation, maintenance or removal of Lessee's Trade Fixtures, furnishings, equipment, and Lessee-Owned Alterations and Utility Installations, as well as the removal of any storage tank Installed by or for Lessee, and the removal, replacement, or remediation of any soil, material or ground water contaminated by Lessee, all as may than be required by Applicable Requirements and/or good practice. Lessee's Trade Fixtures shall remain the property el Lessee and shall be removed by Lessee subject to its obligation to repair and restore the Premises per this Lease. 8. Insurance; indemnity. 8.1 Payment of Premium Increases. (a) As used herein, the term "Insurance Cost Increase" Is defined as any Increase In the actual cost of the Insurance applicable to the Building and required to be carried by Lessor pursuant to Paragraphs 8.2(b), 8.3(a) and 8.3(b), ("Required Insurance"), over and above the Base Premium, as hereinafter defined, calculated on an annual basis. "Insurance Cost Increase" shall Include, but not be limited to, requirements of the holder of a mortgage or deed of trust covering the Premises, Increased valuation of the Premises, and/or a general premium rate Increase. The term "Insurance Cost Increase" shall not, however, include any premium Increases resulting from the nature of the occupancy of any other lessee of the Building. II the parties insert a dollar amount In Paragraph 1.9, such amount shall be considered the "Base Premium." If a dollar amount has not been Inserted In Paragraph 1.9 and If the Building has been previously occupied during the twelve (12) month period Immediately preceding the Commencement Date, the "Base Premium" shall be the annual premium applicable to such twelve (12) month period. If the Building was not fully occupied during such twelve (12) month period, the "Base Premium" shall be the lowest annual premium reasonably obtainable for the Required Insurance as of the Commencement Date, assuming the most nominal use possible of the Building. In no event, however, shall Lessee be responsible for any portion of the premium cost attributable to liability Insurance coverage In excess of $1,000,000 procured under Paragraph 8.2(b). (b) Lessee shall pay any Insurance Cost Increase to Lessor pursuant to Paragraph 4.2. Premiums for policy periods commencing prior to, or extending beyond, the term of this Lease shall be prorated to coincide with the corresponding Commencement Dale or Expiration Date. 8.2 Liability Insurance. (a) Carried by Lessee, Lessee shall obtain and keep in force during the term of this Lease a Commercial General Liability policy of Insurance protecting Lessee, Lessor and any Lender(s) whose names have been provided to Lessee In writing (as additional insureds) against claims for bodily Injury, personal injury and property damage based upon, Involving or arising out of the ownership, use, occupancy or maintenance of the Premises and all areas appurtenant thereto. Such Insurance shell be on an occurrence basis providing single limit coverage In an amount not less than $1,000,000 per occurrence with an "Additional Insured-Managers or Lessor's of Premises" endorsement and contain the "Amendment of the Pollution Exclusion" endorsement for damage caused by heat, smoke or fumes from a hostile fire. The policy shall not contain any Intra-Insured exclusions as between Insured persons or organizations, but shall include coverage for liability assumed under this Lease as an "Insured contract" for the performance of Lessee's Indemnity obligations under this Lease. The limits of said insurance required by this Lease or as carried by Lessee shall not, however, Iimit the liability of Lessee nor relieve Lessee of any obligation hereunder. All Insurance to be carried by Lessee shall be primary to and not contributory with any similar Insurance carried by Lessor, whose insurance shall be considered excess Insurance only. (b) Carried by Lessor. Lessor shall also maintain liability Insurance described In Paragraph 8.2(a) above, in addition to and not In lieu of, the insurance required to be maintained by Lessee. Lessee shall not be named as an additional Insured therein. 8.3 Property Insurance-Building, Improvements and Rental Value. (a) Building and Improvements. Lessor shall obtain and keep In force during the term of this Lease a policy or policies In the name of Lessor, with loss payable to Lessor and to any Lender(s), Insuring against loss or damage to the Premises. Such Insurance shall,be for full replacement cost, as the same shall exist from time to time, or the amount required by any Lender(s), but In no event more than the commercially reasonable and available Insurable value thereof If, by reason of the unique nature or age of the Improvements Involved, such latter amount Is less than full replacement cost. Lessee-Owned Alterations and Utility Installations, Trade Fixtures and Lessee's personal property shall be insured by Lessee pursuant to Paragraph 8.4. If the coverage Is available and commercially appropriate, Lessor's policy or policies shall Insure against all risks of direct physical loss or damage (except the perils of flood end/or earthquake unless required by a Lender or included In the Base Premium), Including coverage for any additional costs resulting from debris removal and reasonable amounts of coverage for the enforcement of any ordinance or law regulating the reconstruction or replacement of any undamaged sections of the Building required to be demolished or removed by reason of the enforcement of any building, zoning, safety or land use laws as the result of a covered loss, but not Including plate glass insurance. Said policy or policies shall also contain an agreed valuation provision In lieu of any co-Insurance clause, waiver of subrogation, and inflation guard protection causing an Increase in the annual property Insurance coverage amount by a factor of not less than the adjusted U.S. Department of Labor Consumer Price Index for All Urban Consumers for the city nearest to where the Premises are located. 6 (b) Rental Value. Lessor shall also obtain and keep in force during the term of this Lease a policy or policies In the name of Lessor, with loss payable to Lessor and any Lender(s), Insuring the loss of the full rental and other charges payable by all lessees of the Betiding to Lessor for one year (Including all Real Property Taxes, Insurance costs, all Common Area Operating Expenses and any scheduled rental Increases). Said Insurance may provide that in the event the Lease Is terminated by reason of an Insured loss, the period of Indemnity for such coverage shall be extended beyond the date of the completion of repairs or replacement of the Premises, to provide for one lull year's loss of rental revenues from the date of any such loss. Said Insurance shall contain an agreed valuation provision In lieu of any co-Insurance clause, and the amount of coverage shall be adjusted annually to reflect the projected rental Income, Real Property Taxes, Insurance premium costs and other expenses, If any, otherwise payable, for the next 12-month period. Common Area Operating Expenses shall include any deductible amount In the event of such loss. (c) Adjacent Premises. Lessee shall pay for any Increase In the premiums for the property Insurance of the Building and for the Common Areas or other buildings in the Industrial Center II said Increase Is caused by Lessee's acts, omissions, use or occupancy of the Premises. (d) Lessee's Improvements. Since Lessor Is the Insuring Party, Lessor shall not be required to Insure Lessee-Owned Alterations and Utility Installations unless the Item In question has become the property of Lessor under the terms of this Lease. 8.4 Lessee's Property Insurance. Subject to the requirements of Paragraph 8.5, Lessee at Its cost shall either by separate policy or, at Lessor's option, by endorsement to a policy already carried, maintain Insurance coverage on all of Lessee's personal property, Trade Fixtures and Lessee-Owned Alterations and Utility Installations in, on, or about the Premises similar In coverage to that carried by Lessor as the Insuring Party under Paragraph 8.3(a). Such Insurance shall be lull replacement cost coverage with a deductible not to exceed $1,000 per occurrence. The proceeds from any such Insurance shall be used by Lessee for the replacement of personal property and the restoration of Trade Fixtures and Lessee-Owned Alterations and Utility Installations. Upon request tram Lessor, Lessee shall provide Lessor with written evidence that such Insurance is in force. 8.5 Insurance Policies. Insurance required hereunder shall be in companies duly licensed to transact business in the state where the Premises are located, and maintaining during the policy term a "General Policyholders Rating" 01 at least Be, V, or such other rating as may be required by a Lender, as set forth In the most current Issue of "Best's Insurance Guide." Lessee shall not do or permit to be done anything which shall invalidate the Insurance policies referred to in this Paragraph 8. Lessee shall cause to be delivered to Lessor, within seven (7) days after the earlier of the Early Possession Data or the Commencement Date, certified copies of, or certificates evidencing the existence and amounts of, the Insurance required under Paragraph 6.2(a) and 8.4. No such policy shall be cancelable or subject to modification except after thirty (30) days' prior written notice to Lessor. Lessee shall at least thirty (30) days prior to the expiration of such policies, furnish Lessor with evidence of renewals or "Insurance binders" evidencing renewal thereof, or Lessor may order such Insurance and charge the cost thereof to Lessee, which amount shall be payable by Lessee to Lessor upon demand. 8.6 Waiver of Subrogation. Without affecting any other rights or remedies, Lessee and Lessor each hereby release and relieve the other, and waive their entire right to recover damages (whether in contract or In tort) against the other, for loss or damage to their property arising out of or Incident to the perils required to be insured against under Paragraph 8. The effect of such releases and waivers of the right to recover damages shall not be limited by the amount of Insurance carried or required or by any deductibles applicable thereto. Lessor and Lessee agree to have their respective Insurance companies Issuing property damage Insurance waive any right to subrogation that such companies may have against Lessor or Lessee, as the case may be, so long as the Insurance is not invalidated thereby. 8.7 Indemnity. Except for Lessor's negligence and/or breach of express warranties, Lessee shall Indemnity, protect, defend and hold harmless the Premises, Lessor and Its agents, Lessor's master or ground Lessor, partners and Lenders, from and against any and all claims, loss of rents and/or damages, costs, liens, judgments, penalties, loss of permits, attorneys' and consultants' lees, expenses and/or liabilities arising out of, Involving, or In connection with, the occupancy of the Premises by Lessee, the conduct o1 Lessee's business, any act, omission or neglect of Lessee, Its agents, contractors, employees or Invitees, and out of any Default or Breach by Lessee In the performance in a timely manner of any obligation on Lessee's part to be performed under this Lease. The foregoing shall include, but not be limited to, the defense or pursuit of any claim or any action or proceeding Involved therein, and whether or not (In the case of claims made against Lessor) litigated and/or reduced to Judgment. In case any action or proceeding be brought against Lessor by reason of any of the foregoing matters, Lessee upon notice from Lessor shall defend the same at Lessee's expense by counsel reasonably satisfactory to Lessor and Lessor shall cooperate with Lessee in such defense. Lessor need not have first paid any such claim In order to be so indemnified. 8.8 Exemption of Lessor from Liability. Lessor shall not be liable for Injury or damage to the person or goods, wares, merchandise or other property of Lessee, Lessee's employees, contractors, Invitees, customers, or any other person in or about the Premises, whether such damage or Injury is caused by or results from fire, steam, electricity, gas, water or rain, or from the breakage, leakage, obstruction or other detects of pipes, fire sprinklers, wires, appliances, plumbing, air conditioning or lighting fixtures, or from any other cause, whether said Injury or damage results from conditions arising upon the Premises or upon other portions of the Building of which the Premises are a part, from other sources or places, and regardless of whether the cause of such damage or Injury or the means of repairing the same Is accessible or not. Lessor shall not be liable for any damages arising from any act or neglect of any other lessee of Lessor nor from the failure by Lessor to enforce the provisions of any other lease In the Industrial Center. Notwithstanding Lessor's negligence or breach of this Lease, Lessor shall under no circumstances be liable for injury to Lessee's business or for any loss of Income or profit therefrom. 9. Damage or Destruction. 9.1 Definitions. (a) "Premises Partial Damage" shall mean damage or destruction to the Premises, other than Lessee-Owned Alterations and Utility Installations, the repair cost of which damage or destruction Is less than fifty percent (50%) of the then Replacement Cost (as defined In Paragraph 9.1(d)) of the Premises (excluding Lessee-Owned Alterations and Utility Installations and Trade Fixtures) immediately prior to such damage or destruction. (b) "Premises Total Destruction" shall mean damage or destruction to the Premises, other than Lessee-Owned Alterations and Utility Installations, the repair cost of which damage or destruction Is fifty percent (50%) or more of the Then Replacement Cost of the Premises (excluding Lessee-Owned Alterations and Utility Installations and Trade Fixtures) Immediately prior to such damage or destruction. In addition, damage or destruction to the Building, other than Lessee Owned Alterations and Utility Installations and Trade Fixtures of any lessees of the Building, the cost of which damage or destruction Is fifty percent (50%) or more of the then Replacement Cost (excluding Lessee-Owned Alterations and Utility Installations and Trade Fixtures of any lessees of the Building) of the Building shall, at the option of Lessor, be deemed to be Premises Total Destruction. 7 (c) "Insured Loss" shall mean damage or destruction to the Premises, other than Lessee-Owned Alterations and Utility Installations and Trade Fixtures, which was caused by an event required to be covered by the Insurance described In Paragraph 8.3(a) irrespective of any deductible amounts or coverage limns involved. (d) "Replacement Cost" shall mean the cost to repair or rebuild the Improvements owned by Lessor at the time of the occurrence to their condition existing immediately prior thereto, including demolition, debris removal and upgrading required by the operation of applicable building codes, ordinances or laws, and without deduction for depreciation. (e) "Hazardous Substance Condition" shall mean the occurrence or discovery of a condition Involving the presence of, or a contamination by, a Hazardous Substance as defined In Paragraph 6.2(a), in, on, or under the Premises. 9.2 Premises Partial Damage--Insured Loss. If Premises Partial Damage that is an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair such damage (but not Lessee's Trade Fixtures or Lessee-Owned Alterations and Utility Installations) as soon as reasonably possible and this Lease shall continue in lull force and effect. In the event, however, that there Is a shortage of insurance proceeds and such shortage is due to the fact that, by reason of the unique nature of the Improvements In the Premises, lull replacement cost Insurance coverage was not commercially reasonable and available, Lessor shall have no obligation to pay for the shortage In Insurance proceeds or to fully restore the unique aspects of the Premises unless Lessee provides Lessor with the funds to cover same, or adequate assurance thereof, within ten (10) days following receipt of written notice of such shortage and request therefor. If Lessor receives said funds or adequate assurance thereof within said ten (10) day period, Lessor shall complete them as soon as reasonably possible and this Lease shall remain in full force and effect. If Lessor does not receive such funds or assurance within said period, Lessor may nevertheless elect by written notice to Lessee within ten (10) days thereafter to make such restoration and repair as is commercially reasonable with Lessor paying any shortage in proceeds, In which case this Lease shall remain in lull force and effect. If Lessor does not receive such funds or assurance within such ten (10) day period, and If Lessor does not so elect to restore and repair, then this Lease shall terminate sixty (60) days following the occurrence of the damage or destruction. Unless otherwise agreed, Lessee shall in no event have any right to reimbursement from Lessor for any funds contributed by Lessee to repair any such damage or destruction. Premises Partial Damage due to flood or earthquake shall be subject to Paragraph 9.3 rather than Paragraph 9.2, notwithstanding that there may be some Insurance coverage, but the net proceeds of any such insurance shall be made available for the repairs if made by either Party. 9.3 Partial Damage--Uninsured Loss. If Premises Partial Damage that Is not an Insured Loss occurs, unless caused by a negligent or willful act of Lessee (in which event Lessee shall make the repairs at Lessee's expense and this Lease shall continue In full force and effect), Lessor may at Lessor's option, either (i) repair such damage as soon as reasonably possible at Lessor's expense, In which event this Lease shall continue In lull force and effect, or (ii) give written notice to Lessee within thirty (30) days after receipt by Lessor of knowledge of the occurrence of such damage of Lessor's desire to terminate this Lease as of the date sixty (60) days following the date of such notice. In the event Lessor elects to give such notice of Lessor's Intention to terminate this Lease, Lessee shall have the right within ten (10) days after the receipt of such notice to give written notice to Lessor of Lessee's commitment to pay for the repair of such damage totally al Lessee's expense and without reimbursement from Lessor. Lessee shall provide Lessor with the required funds or satisfactory assurance thereof within thirty (30) days following such commitment from Lessee. In such event this Lease shall continue in full force and effect, and Lessor shall proceed to make such repairs as soon as reasonably possible alter the required funds are available. If Lessee does not give such notice and provide the funds or assurance thereof within the times specified above, This Lease shall terminate as of the dale specified In Lessor's notice of termination. 9.4 Total Destruction. Notwithstanding any other provision hereof, II Premises Total Destruction occurs (including any destruction required by any authorized public authority), this Lease shall terminate sixty (60) days following the dale of such Premises Total Destruction, whether or not the damage or destruction is an Insured Loss or was caused by a negligent or willful act of Lessee. In the event, however, that the damage or destruction was caused by Lessee. Lessor shall have the right to recover Lessor's damages from Lessee except as released and waived in Paragraph 9.7. 9.5 Damage Near End of Term. II at any time during the last six (6) months of the term of this Lease there is damage for which the cost to repair exceeds one month's Base Rent, whether or not an Insured Loss, Lessor may, at Lessor's option, terminate this Lease effective sixty (60) days following the date of occurrence o1 such damage by giving written notice to Lessee of Lessor's election to do so within thirty (30) days alter the dale of occurrence of such damage. Provided, however, If Lessee al that time has an exercisable option to extend this Lease or to purchase the Premises, then Lessee may preserve this Lease by (a) exercising such option, and (b) providing Lessor with any shortage in Insurance proceeds (or adequate assurance thereof) needed to make the repairs on or before the earlier of (i) the dale which Is Ian (10) days after Lessee's receipt of Lessor's written notice purporting to terminate this Lease, or (ii) the day prior to the dale upon which such option expires. If Lessee duly exercises such option during such period and provides Lessor with funds (or adequate assurance thereof) to cover any shortage in insurance proceeds, Lessor shall, at Lessor's expense repair such damage as soon as reasonably possible and this Lease shall continue in lull force and effect. II Lessee fails to exercise such option and provide such funds or assurance during such period, then this Lease shall terminate as of the date set forth in the first sentence of this Paragraph 9.5. 9.6 Abatement of Rent; Lessee's Remedies. (a) In the event of (i) Premises Partial Damage or (ii) Hazardous Substance Condition for which Lessee is not legally responsible, the Base Rent, Common Area Operating Expenses and other charges, if any, payable by Lessee hereunder for the period during which such damage or condition, its repair, remediation or restoration continues, shall be abated In proportion to the degree 10 which Lessee's use of the Premises is impaired, but not in excess of proceeds from insurance required to be carried under Paragraph 8.3(b). Except for abatement of Base Rent, Common Area Operating Expenses and other charges, II any, as aforesaid, all other obligations of Lessee hereunder shall be performed by Lessee, and Lessee shall have no claim against Lessor for any damage sued by reason of any such damage, destruction, repair, remediation or restoration. (b) If Lessor shall be obligated to repair or restore the Premises under the provisions of this Paragraph 9 and shall not commence, In a substantial and meaningful way, the repair or restoration of the Premises within ninety (90) days after such obligation shall accrue, Lessee may, at any time prior to the commencement of such repair or restoration, give written notice to Lessor and to any Lenders of which Lessee has actual notice of Lessee's election to terminate this Lease on a data not less than sixty (60) days following the giving of such notice. II Lessee gives such notice to Lessor and such Lenders and such repair or restoration is not commenced within thirty (30) days after receipt of such notice, this Lease shall terminate as of the date specified In said notice, If Lessor or a Lender commences the repair or restoration of the Premises within thirty (30) days after the receipt of such notice, this Lease shall continue In lull force and effect. "Commence" as used In this Paragraph 9.6 shall mean either the unconditional authorization of the preparation of the required plans, or the beginning of the actual work on the Premises, whichever occurs first. 8 9.7 Hazardous Substance Conditions. If a Hazardous Substance Condition occurs, unless Lessee Is legally responsible therefor (in which case Lessee shall make the investigation and remediation thereof required by Applicable Requirements and this Lease shall continue In lull force and effect, but subject to Lessor's rights under Paragraph 6.2(c) and Paragraph 13), Lessor may at Lessor's option either (i) Investigate and remediate such Hazardous Substance Condition, if required, as soon as reasonably possible at Lessor's expense, In which event this Lease shall continue In lull force and effect, or (ii) If the estimated cost to investigate and remediate such condition exceeds twelve (12) times the than monthly Base Rent or $100,000 whichever Is greater, give written notice to Lessee within thirty (30) days alter receipt by Lessor of knowledge of the occurrence of such Hazardous Substance Condition of Lessor's desire to terminate this Lease as of the date sixty (60) days following the dale of such notice. In the event Lessor elects to give such notice of Lessor's Intention to terminate this Lease, Lessee shall have the right within ten (10) days alter the receipt of such notice to give written notice to Lessor of Lessee's commitment to pay for the excess costs of (a) Investigation and remediation of such Hazardous Substance Condition to the extent required by Applicable Requirements, over (b) an amount equal to twelve (12) times the then monthly Base Rent or $100,000, whichever Is greater. Lessee shall provide Lessor with the funds required of Lessee or satisfactory assurance thereof within thirty (30) days following said commitment by Lessee. In such event this Lease shall continue In lull force and effect, and Lessor shall proceed to make such investigation and remediation as soon as reasonably possible alter the required funds are available. If Lessee does not give such notice and provide the required funds or assurance thereof within the time period specified above, this Lease shall terminate as of the dale specified in Lessor's notice of termination. 9.8 Termination--Advance Payments. Upon termination of this Lease pursuant to this Paragraph 9, Lessor shall return to Lessee any advance payment made by Lessee to Lessor and so much of Lessee's Security Deposit as has not been, or is not then required to be, used by Lessor under the terms of this Lease. 9.9 Waiver of Statutes. Lessor and Lessee agree that the terms of this Lease shall govern the effect of any damage to or destruction of the Premises and the Building with respect to the termination of this Lease and hereby waive the provisions of any present or future statute to the extent It Is Inconsistent herewith. 10. Real Property Taxes. 10.1 Payment of Taxes. Lessor shall pay the Real Property Taxes, as defined in Paragraph 10.2(a), applicable to the Industrial Center, and except as otherwise provided In Paragraph 10.3, any Increases In such amounts over the Base Real Property Taxes shall be Included In the calculation of Common Area Operating Expenses in accordance with the provisions of Paragraph 4.2. 10.2 Reel Property Tax Definitions. (a) As used herein, the term "Real Property Taxes" shall Include any form of real estate tax or assessment, general, special, ordinary or extraordinary, and any license fee, commercial rental tax, Improvement bond or bonds, levy or tax (other than Inheritance, personal Income or estate taxes) Imposed upon the Industrial Center by any authority having the direct or Indirect power to lax, Including any city, state or federal government, or any school, agricultural, sanitary, lire, street, drainage, or other Improvement district thereof, levied against any legal or equitable Interest of Lessor In the Industrial Center or any portion thereof, Lessor's right to rent or other Income therefrom, and/or Lessor's business of leasing the Premises. The term "Real Property Taxes" shall also Include any tax, lee, levy, assessment or charge, or any increase therein, Imposed by reason of events occurring, or changes In Applicable Law taking effect, during the term of this Lease, including but not limited to a change In the ownership of the Industrial Center or in the improvements thereon, the execution of this Lease, or any modification, amendment or transfer thereof, and whether or not contemplated by the Parties. (b) As used herein, the term "Base Real Property Taxes" shall be the amount of Real Property Taxes, which are assessed against the Premises, Building or Common Areas In the calendar year during which the Lease is executed. In calculating Real Property Taxes for any calendar year, the Real Property Taxes for any real estate tax year shall be Included in the calculation of Real Property Taxes for such calendar year based upon the number of days which such calendar year and tax year have In common. 10.3 Additional Improvements. Common Area Operating Expenses shall not Include Real Property Taxes specified in the tax assessor's records and work sheets as being caused by additional Improvements placed upon the Industrial Center by other lessees or by Lessor for the exclusive enjoyment of such other lessees. Notwithstanding Paragraph 10.1 hereof, Lessee shall, however, pay to Lessor at the time Common Area Operating Expenses are payable under Paragraph 4.2, the entirety of any Increase In Real Property Taxes II assessed solely by reason of Alterations, Trade Fixtures or Utility Installations placed upon the Premises by Lessee or at Lessee's request. 10.4 Joint Assessment. If the Building Is not separately assessed, Real Property Taxes allocated to the Building shall be an equitable proportion of the Real Property Taxes for all of the land and Improvements included within the tax parcel assessed, such proportion to be determined by Lessor from the respective valuations assigned in the assessor's work sheets or such other information as may be reasonably available. Lessor's reasonable determination thereof, in good faith, shall be conclusive. 10.5 Lessee's Property Taxes. Lessee shall pay prior to delinquency all taxes assessed against and levied upon Lessee-Owned Alterations and Utility Installations, Trade Fixtures, furnishings, equipment and all personal property of Lessee contained In the Premises or stored within the Industrial Center. When possible, Lessee shall cause Its Lessee-Owned Alterations and Utility Installations, Trade Fixtures, furnishings, equipment and all other personal property to be assessed and billed separately from the real property of Lessor. If any of Lessee's said property shall be assessed with Lessor's real property, Lessee shall pay Lessor the taxes attributable to Lessee's property within ten (10) days after receipt of a written statement setting forth the taxes applicable to Lessee's properly. 11. Utilities. Lessee shall pay directly for all utilities and services supplied to the Premises, Including but not limited to electricity, telephone, security, gas and cleaning of the Premises, together with any taxes thereon. If any such utilities or services are not separately metered to the Premises or separately billed to the Premises, Lessee shall pay to Lessor a reasonable proportion to be determined by Lessor of all such charges jointly metered or billed with other premises in the Building, In the manner and within the time periods set forth In Paragraph 4.2(d). 12. Assignment and Subletting. 12.1 Lessor's Consent Required. (a) Lessee shall not voluntarily or by operation of law assign, transfer, mortgage or otherwise transfer or encumber (collectively, "assign") or sublet all or any part of Lessee's Interest in this Lease or In the Premises without Lessor's prior written consent given under and subject to the terms of Paragraph 36. (b) A change in the control of Lessee shall constitute an assignment requiring Lessor's consent. The transfer, on a cumulative basis, of twenty-five per cent (25%) or more of the voting control of Lessee shall constitute a change in control for this purpose. 9 (c) The involvement of Lessee or Its assets In any transaction, or series of transactions (by way of merger, sale, acquisition, financing, refinancing, transfer, leveraged buy-out or otherwise), whether or not a formal assignment or hypothecation of this Lease or Lessee's assets occurs, which results or will result in a reduction of the Net Worth of Lessee, as hereinafter defined, by an amount equal to or greater than twenty-five percent (25%) of such Net Worth of Lessee as it was represented to Lessor al the time of full execution and delivery of this Lease or at the time of the most recent assignment to which Lessor has consented, or as It exists Immediately prior to said transaction or transactions constituting such reduction, at whichever time said Net Worth of Lessee was or is greater, shall be considered an assignment of this Lease by Lessee to which Lessor may reasonably withhold its consent. "Net Worth of Lessee" for purposes of this Lease shall be the net worth of Lessee (excluding any Guarantors) established under generally accepted accounting principles consistently applied. (d) An assignment or subletting of Lessee's Interest In this Lease without Lessor's specific prior written consent shall, al Lessor's option, be a Default curable after notice per Paragraph 13.1, or a non-curable Breach without the necessity of any notice and grace parted. If Lessor elects to treat such unconsented to assignment or subletting as a non-curable Breach, Lessor shall have the right to either: (i) terminate this Lease, or (ii) upon thirty (30) days' written notice ("Lessor's Notice"), Increase the monthly Base Rent for the Premises to the greater of the then fair market rental value of the Premises, as reasonably determined by Lessor, or one hundred ten percent (110%) of the Base Rent then In effect. Pending determination of the new fair market rental value, if disputed by Lessee, Lessee shall pay the amount set forth in Lessor's Notice, with any overpayment credited against the next Installment(s) of Base Rent coming due, and any underpayment for the period retroactively to the effective date of the adjustment being due and payable immediately upon the determination thereof. Further, in the event of such Breach and rental adjustment, (i) the purchase price of any option to purchase the Premises held by Lessee shall be subject to similar adjustment to the then lair market value as reasonably determined by Lessor (without the Lease being considered an encumbrance or any deduction for depreciation or obsolescence, and considering the Premises at its highest and best use and In good condition) or one hundred ten percent (110%) of the price previously in effect, (ii) any index-oriented rental or price adjustment formulas contained In this Lease shall be adjusted to require that the base Index be determined with reference to the index applicable to the time of such adjustment, and (iii) any used rental adjustments scheduled during the remainder of the Lease term shall be increased in the same ratio as the new rental bears to the Base Rent In effect Immediately prior to the adjustment specified In Lessor's Notice. (e) Lessee's remedy for any breach of this Paragraph 12.1 by Lessor shall be limited to compensatory damages and/or injunctive relief. 12.2 Terms and Conditions Applicable to Assignment and Subletting. (a) Regardless of Lessor's consent, any assignment or subletting shall not (i) be effective without the express written assumption by such assignee or sublessee of the obligations of Lessee under this Lease, (ii) release Lessee of any obligations hereunder, nor (iii) alter the primary liability of Lessee for the payment of Base Rent and other sums due Lessor hereunder or for the performance of any other obligations to be performed by Lessee under this Lease. (b) Lessor may accept any rent or performance of Lessee's obligations from any person other than Lessee pending approval or disapproval of an assignment. Neither a delay in the approval or disapproval of such assignment nor the acceptance of any rent for performance shall constitute a waiver or estoppel of Lessor's right to exercise its remedies for the Default or Breach by Lessee of any of the terms, covenants or conditions of this Lease. (c) The consent of Lessor to any assignment or subletting shall not constitute a consent to any subsequent assignment or subletting by Lessee or to any subsequent or successive assignment or subletting by the assignee or sublessee. However, Lessor may consent to subsequent sublettings and assignments of the sublease or any amendments or modifications thereto without notifying Lessee or anyone else liable under this Lease or the sublease and without obtaining their consent, and such action shall not relieve such persons from liability under this Lease or the sublease. (d) In the event of any Default or Breach of Lessee's obligation under this Lease, Lessor may proceed directly against Lessee, any Guarantors or anyone else responsible Tor the performance of the Lessee's obligations under this Lease, Including any sublessee, without first exhausting Lessor's remedies against any other person or entity responsible therefor to Lessor, or any security held by Lessor. (e) Each request for consent to an assignment or subletting shall be In writing, accompanied by Information relevant to Lessor's determination as to the financial and operational responsibility and appropriateness of the proposed assignee or sublessee, Including but not limited to the Intended use and/or required modification of the Premises, II any, together with a non-refundable deposit of $1,000 or ten percent (10%) of the monthly Base Rent applicable to the portion of the Premises which is the subject of the proposed assignment or sublease, whichever Is greater, as reasonable consideration for Lessor's considering and processing the request for consent. Lessee agrees to provide Lessor with such other or additional Information and/or documentation as may be reasonably requested by Lessor. (f) Any assignee of, or sublessee under, This Lease shall, by reason of accepting such assignment or entering Into such sublease, be deemed, for the benefit of Lessor, to have assumed and agreed to conform and comply with each and every term, covenant, condition and obligation herein to be observed or performed by Lessee during the term of said assignment or sublease, other than such obligations as are contrary to or Inconsistent with provisions of an assignment or sublease to which Lessor has specifically consented in writing. (g) The occurrence of a transaction described In Paragraph 12.2(c) shall give Lessor the right (but not the obligation) to require that the Security Deposit be Increased by an amount equal to six (6) times the then monthly Base Rent, and Lessor may make the actual receipt by Lessor of the Security Deposit Increase a condition to Lessor's consent to such transaction. (h) Lessor, as a condition to giving Its consent to any assignment or subletting, may require that the amount and adjustment schedule of the rent payable under this Lease be adjusted to what is .then the market value and/or adjustment schedule for property similar lo the Premises as then constituted, as determined by Lessor. 12.3 Additional Terms and Conditions Applicable to Subletting. The following terms and conditions shall apply to any subletting by Lessee of all or any pan of the Premises and shall be deemed Included In all subleases under this Lease whether or not expressly incorporated therein: 10 (a) Lessee hereby assigns and transfers to Lessor all of Lessee's Interest In all rentals and Income arising from any sublease of all or a portion of the Premises heretofore or hereafter made by Lessee, and Lessor may collect such rent and Income and apply same toward Lessee's obligations under this Lease; provided, however, that until a Breach (as defined In Paragraph 13.1) shall occur In the performance of Lessee's obligations under this Lease, Lessee may, except as otherwise provided In this Lease, receive, collect and enjoy the rents accruing under such sublease. Lessor shall not, by reason of the foregoing provision or any other assignment of such sublease to Lessor, nor by reason of the collection of the rents from a sublessee, be deemed liable to the sublessee for any failure of Lessee to perform and comply with any of Lessee's obligations to such sublessee under such Sublease. Lessee hereby irrevocably authorizes and directs any such sublessee, upon receipt of a written notice from Lessor stating that a Breach exists in the performance of Lessee's obligations under this Lease, to pay to Lessor the rents and other charges due and to become due under the sublease. Sublessee shall rely upon any such statement and request from Lessor and shall pay such rents and other charges to Lessor without any obligation or right to inquire as to whether such Breach exists and notwithstanding any notice from or claim from Lessee to the contrary. Lessee shall have no right or claim against such sublessee, or, until the Breach has been cured, against Lessor, for any such rents and other charges so paid by said sublessee to Lessor. (b) In the event of a Breech by Lessee In the performance of its obligations under this Lease, Lessor, at Its option and without any obligation to do so, may require any sublessee to attorn to Lessor, in which event Lessor shall undertake the obligations of the sublessor under such sublease from the time of the exercise of said option to the expiration of such sublease; provided, however, Lessor shall not be liable for any prepaid rents or security deposit paid by such sublessee to such sublessor or for any other prior defaults or breaches of such sublessor under such sublease. (c) Any matter or thing requiring the consent of the sublessor under a sublease shall also require the consent of Lessor herein. (d) No sublessee under a sublease approved by Lessor shall further assign or sublet all or any part of the Premises without Lessor's prior written consent. (e) Lessor shall deliver a copy of any notice of Default or Breach by Lessee to the sublessee, who shell have the right to cure the Default of Lessee within the grace period, 11 any, specified In such notice. The sublessee shall have a right of reimbursement and offset from and against Lessee for any such Defaults cured by the sublessee. 13. Default; Breech; Remedies. 13.1 Default; Breach. Lessor and Lessee agree that if an attorney Is consulted by Lessor in connection with a Lessee Default or Breach (as hereinafter defined), $350.00 is a reasonable minimum sum per such occurrence for legal services and costs In the preparation and service of a notice of Default, and that Lessor may include the cost of such services and costs In said notice as rent due and payable to cure said default. A "Default" by Lessee Is defined as a failure by Lessee to observe, comply with or perform any of the terms, covenants, conditions or rules applicable to Lessee under this Lease. A "Breach" by Lessee Is defined as the occurrence of any one or more of the following Defaults, and, where a grace period for cure after notice Is specified herein, the failure by Lessee to cure such Default prior to the expiration of the applicable grace period, and shall entitle Lessor to pursue the remedies set forth In Paragraphs 13.2 and/or 13.3: (a) The vacating of the Premises without the Intention to reoccupy same, or the abandonment of the Premises. (b) Except as expressly otherwise provided In this Lease, the failure by Lessee to make any payment of Base Rent, Lessee's Share of Common Area Operating Expenses, or any other monetary payment required to be made by Lessee hereunder as and when due, the (allure by Lessee to provide Lessor with reasonable evidence of insurance or surety bond required under this Lease, or the failure of Lessee to fulfill any obligation under this Lease which endangers or threatens life or property, where such failure continues for a period of three (3) days following written notice thereof by or on behalf of Lessor to Lessee. (c) Except as expressly otherwise provided In this Lease, the failure by Lessee to provide Lessor with reasonable written evidence (in duly executed original form, if applicable) of (i) compliance with Applicable Requirements per Paragraph 6.3, (ii) the inspection, maintenance and service contracts required under Paragraph 7.1(b), (iii) the rescission of an unauthorized assignment or subletting per Paragraph 12.1, (iv) a Tenancy Statement per Paragraphs 16 or 37, (v) the subordination or non-subordination of this Lease per Paragraph 30, (vi) the guaranty of the performance of Lessee's obligations under this Lease it required under Paragraphs 1.11 and 37, (vii) the execution of any document requested under Paragraph 42 (easements), or (All) any other documentation or information which Lessor may reasonably require of Lessee under the terms of this lease, where any such failure continues fore period of ten (10) days following written notice by or on behalf of Lessor to Lessee. (d) A Default by Lessee as to the terms, covenants, conditions or provisions of this Lease, or of the rules adopted under Paragraph 40 hereof that are to be observed, complied with or performed by Lessee, other than those described In Subparagraphs 13.1(a), (b) or (c), above, where such Default continues for a period of thirty (30) days after written notice thereof by or on behalf of Lessor to Lessee; provided, however, that If the nature of Lessee's Default is such that more than thirty (30) days are reasonably required (or its cure, then it shall not be deemed to be a Breach of this Lease by Lessee If Lessee commences such cure within said thirty (30) day period and thereafter diligently prosecutes such cure to completion. (e) The occurrence of any of the following events: (i) the making by Lessee of any general arrangement or assignment for the benefit of creditors; (ii) Lessee's becoming a "debtor" as defined in 11 U.S. Code Section 101 or any successor statute thereto (unless, in the case of a petition flied against Lessee, the same Is dismissed within sixty (60) days); (iii) the appointment of a trustee or receiver to take possession of substantially all of Lessee's assets located at the Premises or of Lessee's Interest In this Lease, where possession Is not restored to Lessee within thirty (30) days; or (iv) the attachment, execution or other judicial seizure o1 substantially all of Lessee's assets located at the Premises or of Lessee's Interest in this Lease, where such seizure is not discharged within thirty (30) days; provided, however, In the event that any provision of this Subparagraph 13.1(e) is contrary to any applicable law, such provision shall be of no force or effect, and shall not affect the validity of the remaining provisions. (f) The discovery by Lessor that any financial statement of Lessee or of any Guarantor, given to Lessor by Lessee or any Guarantor, was materially (g) If the performance of Lessee's obligations under this Lease is guaranteed: (i) the death of a Guarantor, (ii) the termination of a Guarantor's liability with respect to this Lease other Than In accordance with the terms of such guaranty, (iii) a Guarantor's becoming Insolvent or the subject of a bankruptcy filing, (iv) a Guarantor's refusal to honor the guaranty, or (v) a Guarantor's breach of its guaranty obligation on an anticipatory breach basis, and Lessee's failure, within sixty (60) days following written notice by or on behalf of Lessor to Lessee of any such event, to provide Lessor with written alternative assurances of security, which, when coupled with the then existing resources of Lessee, equals or exceeds the combined financial resources of Lessee and the Guarantors that existed at the time of execution of this Lease. 11 13.2 Remedies. If Lessee tells to perform any affirmative duty or obligation of Lessee under this Lease, within ten (10) days after written notice to Lessee (or in case of an emergency, without notice), Lessor may at Its option (but without obligation to do so), perform such duty or obligation on Lessee's behalf, including but not limited to the obtaining of reasonably required bonds, insurance policies, or governmental licenses, permits or approvals. The costs and expenses of any such performance by Lessor shall be due and payable by Lessee to Lessor upon invoice therefor. If any check given to Lessor by Lessee shall not be honored by the bank upon which it is drawn, Lessor, at its own option, may require all future payments to be made under this Lease by Lessee to be made only by cashier's check. In the event of a Breach of this Lease by Lessee (as defined in Paragraph 13.1), with or without further notice or demand, and without limiting Lessor in the exercise of any right or remedy which Lessor may have by reason of such Breach, Lessor may: (a) Terminate Lessee's right to possession of the Premises by any lawful means, In which case this Lease and the term hereof shall terminate and Lessee shall immediately surrender possession of the Premises to Lessor. In such event Lessor shall be entitled to recover from Lessee: (i) the worth at the time of the award of the unpaid rent which had been earned al the time of termination; (ii) the worth at the time of award of the amount by which the unpaid rent which would have bean earned after termination until the time of award exceeds the amount of such rental loss that the Lessee proves could have been reasonably avoided; (iii) the worth at the time of award of the amount by which the unpaid rent for the balance of the term after the time of award exceeds the amount of such rental loss that the Lessee proves could be reasonably avoided; and (iv) any other amount necessary to compensate Lessor for all the detriment proximately caused by the Lessee's failure to perform Its obligations under this Lease or which in the ordinary course of things would be likely to result therefrom, including but not limited to the cost of recovering possession of the Premises, expenses of reletting, including necessary renovation and alteration of the Premises, reasonable attorneys' fees, and that portion of any leasing commission paid by Lessor In connection with this Lease applicable to the unexpired term of this Lease. The worth at the time of award of the amount referred to in provision (iii) of the immediately preceding sentence shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of San Francisco or the Federal Reserve Bank District in which the Premises are located at the time of award plus one percent (1%). Efforts by Lessor to mitigate damages caused by Lessee's Default or Breach of this Lease shall not waive Lessor's right to recover damages under this Paragraph 13.2. If termination of this Lease is obtained through the provisional remedy of unlawful detainer, Lessor shall have the right to recover in such proceeding the unpaid rent and damages as are recoverable therein, or Lessor may reserve the right to recover all or any part thereof in a separate suit for such rer and/or damages. If a notice and grace period required under Subparagraph 13.1(b), (c) or,(d) was not previously given, a notice to pay rent or quit, or to perform o quit, as the case may be, given to Lessee under any statute authorizing the forfeiture of lessee for unlawful detainer shall also constitute the applicable notice to grace period purposes required by Subparagraph 13.1(b),(c) or (d). In such case, the applicable grace period under the unlawful detainer statue shall run concur randy after the ode such statutory notice, and the failure of Lessee to cure the Default within the greater of the two (2) such grace periods shall constitute both at unlawful detainer and a Breach of this Lease entitling Lessor to the remedies provided for In this Lease and/or by said statute. (b) Continue the Lease and Lessee's right to possession In effect (In California under California Civil Code Section 1951.4 after Lessee's Breach and recover the rent as it becomes due, provided Lessee has the right to sublet or assign, subject only to reasonable limitations. Lessor and Lessee agree that the limitations on assignment and subletting in this Lease are reasonable. Acts of maintenance or preservation, efforts to relet the Premises, or the appointment of a receiver to protect the Lessor's Interest under this Lease, shall not constitute a termination of the Lessee's right to possession. (c) Pursue any other remedy now or hereafter available to Lessor under the laws or judicial decisions of the state wherein the Premises are located. (d) The expiration or termination of this Lease and/or the termination of Lessee's right to possession shall not relieve Lessee from Debility under any Indemnity provisions of this Lease as to matters occurring or accruing during the term hereof or by reason of Lessee's occupancy of the Premises. 13.3 Inducement Recapture in Event of Breech. Any agreement by Lessor for free or abated rent or other charges applicable to the Premises, or for the giving or paying by Lessor to or for Lessee of any cash or other bonus, Inducement or consideration for Lessee's entering Into this Lease, all of which concessions are hereinafter referred 10 as "Inducement Provisions" shall be deemed conditioned upon Lessee's full and faithful performance of all of the terms, covenants and conditions of this Lease to be performed or observed by Lessee during the term hereof as the same may be extended. Upon the occurrence of a Breach (as defined In Paragraph 13.1) of this Lease by Lessee, any such Inducement Provision shall automatically be deemed deleted from this Lease and of no further force or effect, and any rent, other charge, bonus, Inducement or consideration (heretofore abated, given or paid by Lessor under such an Inducement Provision shall be Immediately due and payable by Lessee to Lessor, and recoverable by Lessor, as additional rent due under this Lease, notwithstanding any subsequent cure of said Breach by Lessee. The acceptance by Lessor of rent or the cure of the Breach which Initialed the operation of this Paragraph 13.3 shall not be deemed a waiver by Lessor of the provisions of this Paragraph 13.3 unless specifically so stated In writing by Lessor at the time of such acceptance. 13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee to Lessor of rent and other such due hereunder will cause Lessor to incur costs not contemplated by this Lease, the exact amount of which will be extremely difficult to ascertain. Such costs Include, but are not limited to, processing and accounting charges, end late charges which may be imposed upon Lessor by the terms of any ground lease, mortgage or deed of trust covering the Premises. Accordingly, If any Installment of rent or other sum due to Lessee shall not be received by Lessor or Lessor's designee within ten (10) days after such amount shall be due, then, without any requirement for notice to Lessee, Lessee shall pay to Lessor a late charge equal to six percent (6%) ten percent (10%) of such overdue amount. The parties hereby agree that such late charge represents a fair and reasonable estimate of the costs Lessor will incur by reason of late payment by Lessee. Acceptance of such late charge by Lessor shell In no event constitute a waiver of Lessee's Default or Breach with respect to such overdue amount, nor prevent Lessor from exercising any of the other rights and remedies granted hereunder: In the event that a late charge is payable hereunder, whether or not collected, for three (3) consecutive Installments of Base Rent, then notwithstanding Paragraph 4.1 or any other provision of this lease to the contrary, Base Rent shall, at Lessor's option, become due and payable quarterly In advance. 13.5 Breech by Lessor. Lessor shall not be deemed in breach of this Lease unless Lessor falls within a reasonable time to perform an obligation required to be performed by Lessor. For purposes of this Paragraph 13.5, a reasonable time shall In no event be less than thirty (30) days alter receipt by Lessor, and by any Lender(s) whose name and address shall have been furnished to Lessee In writing for such purpose, of written notice specifying wherein such obligation of Lessor has not been performed; provided, however, that II the nature of Lessor's obligation Is such that more than thirty (30) days after such notice are reasonably required for Its performance, then Lessor shall not be In breech of this Lease if performance Is commenced within such thirty (30) day period and thereafter diligently pursued to completion. 12 14. Condemnation. If the Premises or any portion thereof are taken under the power of eminent domain or sold under the threat of the exercise of said power (all of which are herein called "condemnation"), this Lease shall terminate as to the part so taken as of the dale the condemning authority lakes title or possession, whichever first occurs. If more than ten percent (10%) of the floor area of the Premises, or more than twenty-five percent (25%) of the portion of the Common Areas designated for Lessee's parking, Is taken by condemnation, Lessee may, at Lessee's option, to be exercised In writing within ten (10) days after Lessor shall have given Lessee written notice of such taking (or In the absence of such notice, within ten (10) days alter the condemning authority shall have taken possession) terminate this Lease as of the date the condemning authority lakes such possession. II Lessee does not terminate this Lease In accordance with the foregoing, this Lease shall remain In full force and effect as to the portion of the Premises remaining, except that the Base Rent shall be reduced in the same proportion as the rentable floor area of the Premises taken bears to the total rentable floor area of the Premises. No reduction of Base Rent shall occur If the condemnation does not apply to any portion of the Premises. Any award for the taking of all or any part of the Premises under the power of eminent domain or any payment made under threat of the exercise of such power shall be the property of Lessor, whether such award shall be made as compensation for diminution of value of the leasehold or for the taking of the lee, or as severance damages; provided, however, that Lessee shall be entitled to any compensation, separately awarded to Lessee for Lessee's relocation expenses and/or loss of Lessee's Trade Fixtures. In the event that this Lease is not terminated by reason of such condemnation, Lessor shall to the extent of its net severance damages received, over and above Lessee's Share of the legal and other expenses incurred by Lessor In the condemnation matter, repair any damage to the Premises caused by such condemnation authority. Lessee shall be responsible for the payment of any amount In excess of such net severance damages required to complete such repair. 15. Brokers' Fees. 15.1 Procuring Cause. The Broker(s) named in Paragraph 1.10 is/are the procuring cause of this Lease. 15.2 Additional Terms. This paragraph has been stricken from the document. 15.3 Assumption of Obligations. Any buyer or transferee of Lessor's Interest In this Lease, whether such transfer is by agreement or by operation of law, shall be deemed to have assumed Lessor's obligation under this Paragraph 15. Each Broker shall be an Intended third party beneficiary of the provisions of Paragraph 1.10 and of this Paragraph 15 to the extent of Its Interest In any commission arising from this Lease and may enforce that right directly against Lessor and Its successors. 15.4 Representations and Warranties. Lessee and Lessor each represent and warrant to the other that II has had no dealings with any person, firm, broker or tinder other than as named In Paragraph 1.10(a) In connection with the negotiation of this Lease and/or the consummation of the transaction contemplated hereby, and that no broker or other person, firm or entity other than said named Broker(s) Is entitled to any commission or finder's fee In connection with said transaction. Lessee and Lessor do each hereby agree to Indemnity, protect, defend and hold the other harmless from and against liability for compensation or charges which may be claimed by any such unnamed broker, finder or other similar party by reason of any dealings or actions of the Indemnifying Party, including any costs, expenses, and/or attorneys' lees reasonably incurred with respect thereto. 16. Tenancy and Financial Statements. 16.1 Tenancy Statement. Each Party (as "Responding Party") shall within ten (10) days after written notice from the other Party (the "Requesting Party") execute, acknowledge and deliver to the Requesting Party a statement In writing In a dorm similar to the Then most current "Tenancy Statement" dorm published by the American Industrial Real Estate Association, plus such additional Information, confirmation and/or statements as may be reasonably requested by the Requesting Party. 16.2 Financial Statement. If Lessor desires to finance, refinance, or sell the Premises or the Building, or any part thereof, Lessee and all Guarantors shall deliver to any potential lender or purchaser designated by Lessor such financial statements of Lessee and such Guarantors as may be reasonably required by such lender or purchaser, including but not limited to Lessee's financial statements for the past three (3) years. All such Mandel statements shall be received by Lessor and such lender or purchaser in confidence and shall be used only for the purposes herein set forth. 17. Lessor's Liability. The term "Lessor" as used herein shall mean the owner or owners at the time in question of the fee title to the Premises. In the event of a transfer of Lessor's title or interest In the Premises or in this Lease, Lessor shall deliver to the transferee or assignee (In cash or by credit) any unused Security Deposit held by Lessor at the time of such transfer or assignment. Except as provided In Paragraph 15.3, upon such transfer or assignment and delivery of the Security Deposit, as aforesaid, the prior Lessor shall be relieved of all liability with respect to the obligations and/or covenants under this Lease thereafter to be performed by the Lessor. Subject to the foregoing, the obligations and/or covenants in this Lease to be performed by the Lessor shall be binding only upon the Lessor as hereinabove defined. 18. Severability. The Invalidity of any provision of this Lease, as determined by a court of competent jurisdiction, shall In no way affect the validity of any other provision hereof. 19. Interest on Past-Due Obligations. Any monetary payment due Lessor hereunder, other than late charges, not received by Lessor within ten (10) days following the date on which II was due, shall bear interest from the date due at the prime rate charged by the largest slate chartered bank In the slate in which the Premises are located plus four percent (4%) per annum, but not exceeding the maximum rate allowed by law, In addition to the potential late charge provided for In Paragraph 13.4. 20. Time of Essence. Time is of the essence with respect to the performance of all obligations to be performed or observed by the Parties under this Lease. 21. Rent Defined. All monetary obligations of Lessee to Lessor under the terms of this Lease are deemed to be rent. 22. No Prior or other Agreements; Broker Disclaimer. This Lease contains all agreements between the Parties with respect to any matter mentioned herein, and no other prior or contemporaneous agreement or understanding shall be effective. Lessor and Lessee each represents and warrants to the Brokers that It has made, and is relying solely upon, its own investigation as to the nature, quality, character and financial responsibility of the other Party to this Lease and as to the' nature, quality and character of the Premises. Brokers have no responsibility with respect thereto or with respect to any default or breach hereof by either Party. Each Broker shall be an intended third party beneficiary of the provisions of this Paragraph 22. 23. Notices. 23.1 Notice Requirements. All notices required or permitted by this Lease shall be In writing and may be delivered In person (by hand or by messenger or courier service) or may be sent by regular, certified or registered mall or U.S. Postal Service Express Mall, with postage prepaid, or by facsimile transmission during normal business hours, and shall be deemed sufficiently given II served Ina manner specified In this Paragraph 23. The addresses noted adjacent to a Party's signature on this Lease shall be that Party's address for delivery or mailing of nonce purposes. Either Party may by written notice to the other specify a different address or notice purposes, except that upon Lessee's taking possession of the Premises, the Premises shall constitute Lessee's address for the purpose of mailing or delivering notices to Lessee. A copy of all notices required or permitted to be given to Lessor hereunder shall be concurrently transmitted to such party or parties at such addresses as Lessor may from time to time hereafter designate by written nonce to Lessee. 13 23.2 Date of Notice. Any notice sent by registered or certified mall, return receipt requested, shall be deemed given on the date of delivery shown on the receipt card, or If no delivery dale Is shown, the postmark thereon. If sent by regular mall, the nonce shall be deemed given forty-eight (48) hours after the same is addressed as required herein and mailed with postage prepaid. Notices delivered by United Stales Express Mail or overnight courier that guarantees next day delivery shall be deemed given twenty-four (24) hours alter delivery of the same to the United Slates Postal Service or courier. If any notice is transmitted by facsimile transmission or similar means, the same shall be deemed served or delivered upon telephone or facsimile confirmation of receipt of the transmission thereof, provided a copy Is also delivered via delivery or mail. If notice is received on a Saturday or a Sunday or a legal holiday, II shall be deemed received on the next business day. 24. Waivers. No waiver by Lessor of the Default or Breach of any term, covenant or condition hereof by Lessee, shall be deemed a waiver or any other term, covenant or condition hereof, or of any subsequent Default or Breach by Lessee of the same or any other term, covenant or condition hereof. Lessor's consent to, or approval of, any such act shall not be deemed to render unnecessary the obtaining of Lessor's consent to, or approval of, any subsequent or similar act by Lessee, or be construed as the basis of an estoppel to enforce the provision or provisions of this Lease requiring such consent. Regardless of Lessor's knowledge of a Default or Breach al the time of accepting rent, the acceptance of rent by Lessor shall not be a waiver of any Default or Breach by Lessee of any provision hereof. Any payment given Lessor by Lessee may be accepted by Lessor on account of moneys or damages due Lessor, notwithstanding any qualifying statements or conditions made by Lessee In connection herewith, which such statements and/or conditions shall be of no force or effect whatsoever unless specifically agreed to in writing by Lessor at or before the time of deposit of such payment. 25. Recording. This paragraph has been stricken from the document. 26. No Right to Holdover. Lessee has no right to retain possession of the Premises or any part thereof beyond the expiration or earlier termination of this Lease. In the event that Lessee holds over in violation of this Paragraph 26 then the Base Rent payable from and after the time of the expiration or earlier termination of this Lease shall be increased to two hundred percent (200%) of the Base Rent applicable during the month Immediately preceding such expiration or earlier termination. Nothing contained herein shall be construed as a consent by Lessor to any holding over by Lessee. 27. Cumulative Remedies. No remedy or election hereunder shall be deemed exclusive but shall, wherever possible, be cumulative with all other remedies al law or in equity. 28. Covenants and Conditions. All provisions of this Lease to be observed or performed by Lessee are both covenants and conditions. 29. Binding Effect; Choice at Law. This Lease shell be binding upon the Parties, their personal representatives, successors and assigns and be governed by the laws of the State In which the Premises are located. Any litigation between the Parties hereto concerning This Lease shall be Initialed In the county in which the Premises are located. 30. Subordination; Attornment; Non-Disturbance. 30.1 Subordination. This Lease and any Option granted hereby shall be subject and subordinate to any ground lease, mortgage, deed' of trust, or other hypothecation or security device (collectively, "Security Device"), now or hereafter placed by Lessor upon the real properly of which the Premises are a part, lo any and all advances made on the security thereof, and to all renewals, modifications, consolidations, replacements and extensions thereof. Lessee agrees that the Lenders holding any such Security Device shall have no duty, liability or obligation to perform any of the obligations of Lessor under this Lease, but that In the event of Lessor's default with respect to any such obligation, Lessee will give any Lender whose name and address have been furnished Lessee in writing for such purpose nonce of Lessor's default pursuant to Paragraph 13.5.1f any Lender shall elect to have this Lease and/or any Option granted hereby superior to the lien of Its Security Device and shall give written notice thereof to Lessee, this Lease and such Options shall be deemed prior to such Security Device, notwithstanding the relative dales dl the documentation or recordation thereof, 30.2 Attornment. Subject 10 the non-disturbance provisions of Paragraph 30.3, Lessee agrees to attorn to a Lender or any other party who acquires ownership of the Premises by reason of a foreclosure of a Security Device, and that in the event of such foreclosure, such new owner shall not: (i) be liable for any act or omission of any prior Lessor or with respect to events occurring prior to acquisition of ownership, (ii) be subject to any offsets or defenses which Lessee might have against any prior Lessor, or (iii) be bound by prepayment of more than one month's rent. 30.3 Non-Disturbance. With respect to Security Devices entered into by Lessor after the execution of this lease, Lessee's subordination of this Lease shall be subject to receiving assurance (a "non-disturbance agreement") from the Lender that Lessee's possession and this Lease, Including any options to extend the term hereof, will not be disturbed so long as Lessee Is not In Breech hereof and adorns to the record owner of the Premises. 30.4 Self-Executing. The agreements contained In this Paragraph 30 shall be effective without the execution of any further documents; provided, however, that upon written request from Lessor or a Lender In connection with a sale, financing or refinancing of Premises, Lessee and Lessor shall execute such further writings as may be reasonably required to separately document any such subordination or non-subordination, attornment and/or non-disturbance agreement as is provided for herein. 31. Attorneys' Fees. If any Party or Broker brings an action or proceeding to enforce the terms hereof or declare rights hereunder, the Prevailing Party (as hereafter defined) in any such proceeding, action, or appeal thereon, shall be entitled to reasonable attorneys' lees. Such lees may be awarded in the same suit or recovered in a separate suit, whether or not such action or proceeding Is pursued to decision or judgment. The term "Prevailing Party" shall Include, without limitation, a Party or Broker who substantially obtains or defeats the revel sought, as the case may be, whether by compromise, settlement, judgment, or the abandonment by the other Party or Broker of its claim or defense. The attorneys' fee award shall not be computed in accordance with any court lee schedule, but shall be such as to fully reimburse all attorneys' lees reasonably Incurred. Lessor shall be entitled to attorneys' lees, costs and expenses incurred in preparation and service of notices of Default and consultations in connection therewith, whether or not a legal action is subsequently commenced In connection with such Default or resulting Breach. Broker(s) shall be Intended third party beneficiaries of this Paragraph 31. 32. Lessor's Access; Showing Premises; Repairs. Lessor and Lessor's agents shall have the right to enter the Premises at any time, in the case of an emergency, and otherwise at reasonable times mar the purpose of showing the same to prospective purchasers, lenders, or lessees, and making such alterations, repairs, Improvements or additions to the Premises or to the Building, as Lessor may reasonably deem necessary. Lessor may al any time place on or about the Premises or Building any ordinary "For Sale" signs and Lessor may at any time during the last one hundred eighty (180) days of the term hereof place on or about the Premises any ordinary "For Lease" signs. All such activities of Lessor shall be without abatement of rent or liability to Lessee. 33. This paragraph has been stricken from the document. 14 34. Signs. Lessee shall not place any sign upon the exterior of the Premises of the building, without Lessor's prior written consent. (See Addendum) Part of this paragraph has been stricken from the document. 35. Termination; Merger. Unless specifically stated otherwise in writing by Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual termination or cancellation hereof, or a termination hereof by Lessor or Breach by Lessee, shall automatically terminate any sublease or lesser estate in the Premises; provided, however, Lessor shall, In the event of any such surrender, termination or cancellation, have the option to continue any one or all of any existing subtenancies. Lessor's failure within ten (10) days following any such event to make a written election to the contrary by written notice to the holder of any such lesser interest, shall constitute Lessor's election to have such event constitute the termination of such interest. 36. Consents. (a) Except for Paragraph 33 hereof (Auctions) or as otherwise provided herein, wherever In this Lease the consent of a Party is required to an act by or tor the other Party, such consent shall not be unreasonably withheld or delayed. Lessor's actual reasonable costs and expenses (including but not limited to architects', attorneys', engineers' and other consultants' lees) Incurred In the consideration of, or response lo, a request by Lessee for any Lessor consent pertaining to this Lease or the Premises, Including but not limned to consents to an assignment a subletting or the presence or use of a Hazardous Substance, shall be paid by Lessee to Lessor upon receipt of an Invoice and supporting documentation therefor. In addition to the deposit described in Paragraph 12.2(5), Lessor may, as a condition to considering any such request by Lessee, require that Lessee deposit with Lessor an amount of money (In addition to the Security Deposit held under Paragraph 5) reasonably calculated by Lessor is represent the cost Lessor will Incur in considering and responding to Lessee's request. Any unused portion of said deposit shall be refunded to Lessee without Interest. Lessor's consent to any act, assignment of this Lease or subletting of the Premises by Lessee shall not constitute an acknowledgment that no Default or Breach by Lessee of this Lease exists, nor shall such consent be deemed a waiver of any than existing Default or Breach, except as may be otherwise specifically sealed In writing by Lessor at the time of such consent. (b) All conditions to Lessor's consent authorized by this Lease are acknowledged by Lessee as being reasonable. The failure to specify herein any particular condition to Lessor's consent shall not preclude the Impositions by Lessor al the time of consent of such further or other conditions as are then reasonable with reference to the particular matter for which consent is being given. 37. Guarantor. 37.1 Form of Guaranty. If there are to be any Guarantors of this Lease per Paragraph 1.11, the form of the guaranty 10 be executed by each such Guarantor shall be in the form most recently published by the American Industrial Real Estate Association, and each such Guarantor shall have the same obligations as Lessee under this lease, Including but not limited to the obligation 10 provide the Tenancy Statement and Information required in Paragraph 16. 37.2 Additional Obligations of Guarantor. It shall constitute a Default of the Lessee under this Lease if any such Guarantor falls or refuses, upon reasonable request by Lessor to give: (a) evidence of the due execution of the guaranty called for by this Lease, Including the authority of the Guarantor (and of the party signing on Guarantor's behalf) to obligate such Guarantor on said guaranty, and resolution of its board of directors authorizing the making of such guaranty, together with a certificate of Incumbency showing the signatures of the persona authorized to sign on Its behalf, (b) current financial statements of Guarantor as may from time to time be requested by Lessor, (c) a Tenancy Statement, or (d) written confirmation that the guaranty is still in effect 38. Quiet Possession. Upon payment by Lessee of the rent for the Premises and the performance of all of the covenants, conditions and provisions on Lessee's part to be observed and performed under this Lease, Lessee shall have quiet possession of the premises for the entire term hereof subject to all of the provisions of this Lease. 39. Options. 39.1 Definition. As used in this Lease, the word "Option" has the following meaning: (a) the right to extend the term of this Lease or to renew this Lease on terms which may be mutually agreeable at prevailing market rates. Part of this paragraph has been stricken from the document. 39.2 Options Personal to Original Lessee. Each Option granted to Lessee in this Lease Is personal to the original Lessee named In Paragraph 1.1 hereof, and cannot be voluntarily or Involuntarily assigned or exercised by any person or entity other than said original Lessee while the original Lessee is in full and actual possession of the Premises and without the intention of thereafter assigning or subletting. The Options, if any, herein granted to Lessee are not assignable, either as a pan of an assignment of this Lease or separately or apart therefrom, and no Option may be separated from this Lease In any manner, by reservation or otherwise. 39.3 Multiple Options. In the event that Lessee has any multiple Options to extend or renew this Lease, a later option cannot be exercised unless the prior Options to extend or renew this Lease have been validly exercised. 39.4 Enact of Default on Options. (a) Lessee shall have no right to exercise an Option, notwithstanding any provision in the grant of Option to the contrary: (i) during the period commencing with the giving of any notice of Default under Paragraph 13.1 and continuing until the noticed Default Is cured, or (ii) during the period of time any monetary obligation due Lessor from Lessee Is unpaid (without regard to whether notice thereof Is given Lessee), or (iii) during the time Lessee is in Breach of this Lease, or (iv) In the event that Lessor has given to Lessee three (3) or more notices of separate Defaults under Paragraph 13.1 during the twelve (12) month period Immediately preceding the exercise of the Option, whether or not the Defaults are cured., (b) The period of time within which an Option may be exercised shall not be extended or enlarged by reason of Lessee's inability to exercise an Option because of the provisions of Paragraph 39.4(a). (c) All rights of Lessee under the provisions of an Option shall terminate and be of no further force or affect, notwithstanding Lessee's due and timely exercise of the Option, if, after such exercise and during the term of this Lease, (i) Lessee falls to pay to Lessor a monetary obligation of Lessee for a period of thirty (30) days after such obligation becomes due (without any necessity of Lessor to give notice thereof to Lessee), or (ii) Lessor gives to Lessee three (3) or more notices of separate Defaults under Paragraph 13.1 during any twelve (12) month period, whether or not the Defaults are cured, or (iii) If Lessee commits a Breach of this Lease. 15 40. Rules and Regulations. Lessee agrees that it will abide by, and keep and observe all reasonable rules and regulations ("Rules and Regulations") which Lessor may make from Ume to time for the management, safely, care, and cleanliness of the grounds, the parking and unloading of vehicles and the preservation of good order, as well as for the convenience of other occupants or tenants of the Building and the Industrial Center and their invitees. 41. Security Measures. Lessee hereby acknowledges that the rental payable to Lessor hereunder does not include the cost of guard service or other security measures, and that Lessor shall have no obligation whatsoever to provide same. Lessee assumes all responsibility for the protection of the Premises, Lessee, Its agents and Invitees and their property from the acts of third parties. 42. Reservations. Lessor reserves the right, from time to time, to grant, without the consent or joinder of Lessee, such easements, rights of way, utility raceways, and dedications that Lessor deems necessary, and to cause the recordation of parcel maps and restrictions, so long as such easements, rights of way, utility raceways, dedications, maps and restrictions do not reasonably Interfere with the use of the Premises by Lessee. Lessee agrees to sign any documents reasonably requested by Lessor to effectuate any such easement rights, dedication, map or restrictions. 43. Performance Under Protest. If at any time a dispute shall arise as to any amount or sum of money to be paid by one Party to the other under the provisions hereof, the Party against whom the obligation la pay the money Is asserted shall have the right to make payment "under protest" and such payment shall not be regarded as a voluntary payment and there shall survive the right on the part of said Party to Institute suit for recovery o1 such sum. If It shall be adjudged that there was no legal obligation on the part of said Party to pay such sum or any part thereof, said Party shall be entitled to recover such sum or so much thereof as It was not legally required to pay under the provisions of this Lease. 44. Authority. If either Party hereto Is a corporation, trust, or general or limited partnership, each Individual executing this Lease on behalf of such entity represents and warrants that ha or she Is duly authorized to execute and deliver this Lease on Its behalf. If Lessee Is a corporation, trust or partnership, Lessee shall, within thirty (30) days after request by Lessor, deliver to Lessor evidence satisfactory to Lessor of such authority. 45. Conflict. Any conflict between the printed provisions of this Lease and the typewritten or handwritten provisions shall be controlled by the typewritten or handwritten provisions. 46. Otter. Preparation of this Lease by either Lessor or Lessee or Lessor's agent or Lessee's agent and submission of same to Lessee or Lessor shall not be deemed an oiler to lease. This Lease Is not intended to be binding until executed and delivered by all Parties hereto. 47. Amendments. This Lease may be modified only in writing, signed by the parties In Interest at the Urns of the modification. The Parties shall amend this Lease from time to time to reflect any adjustments that are made to the Base Rent or other rent payable under this Lease. As long as they do not materially change Lessee's obligations hereunder, Lessee agrees to make such reasonable non-monetary modifications to this Lease as may be reasonably required by an Institutional Insurance company or pension plan Lender In connection with the obtaining of normal financing or refinancing of the property of which the Premises are a part. 48. Multiple Parties. Except as otherwise expressly provided herein, If more than one person or entity Is named herein as either Lessor or Lessee, the obligations of such multiple parties shall be the joint and several responsibility of all persons or entitles named herein as such Lessor or Lessee. EXHIBIT "A" -- SITE PLAN EXHIBIT "B" -- FLOOR PLAN EXHIBIT "C" -- CREDIT LETTER 16 RECORDING OF THIS LEASE PROHIBITED LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE PREMISES. IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR YOUR ATTORNEY'S REVIEW AND APPROVAL FURTHER, EXPERTS SHOULD BE CONSULTED TO EVALUATE THE CONDITION OF THE PROPERTY FOR THE POSSIBLE PRESENCE OF ASBESTOS, UNDERGROUND STORAGE TANKS OR HAZARDOUS SUBSTANCES. NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL ESTATE BROKERS OR THEIR CONTRACTORS, AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEo QUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT RELATES; THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN COUNSEL AS TO THE LEGAL AND TM CONSEQUENCES OF THIS LEASE. IF THE SUBJECT PROPERTY IS IN A STATE OTHER THAN CALIFORNIA, AN ATTORNEY FROM THE STATE WHERE THE PROPERTY IS LOCATED SHOULD BE CONSULTED. The parties hereto have executed this Lease at the place and on the dales specified above their respective signatures. Executed at: FULLERTON BUSINESS CENTER Executed at: on: on: ----------------------------------- --------------------------- By LESSOR: FULLERTON BUSINESS CENTER By LESSEE: ALLIED MED, INC., By: ALEXICO, INC., a California Corporation AN OREGON CORPORATION --------------------------------------- --------------------- dba MID VALLEY MANAGEMENT, Managing Agent By: /s/ By: /s/ ---------------------------------------- ------------------------------ Name Printed:Jack Amin ------------------------------ Title: President ------------------------------ Name Printed: TERRI RHOADES Name Printed: JACK AMIN ---------------------------------------- ------------------------------ Title: AUTHORIZED AGENT Title: VICE PRESIDENT ---------------------------------------- ----------------------------- NOTE: These forms are often modified to meet changing requirements of law and needs of the industry. Always write or call to make sure you are utilizing the most current form: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 345 So. Figueroa St., M-1, Los Angeles, CA 90071 (213) 687-8777. 17 ADDENDUM I ---------- THIS ADDENDUM is attached to and integrated as a part of that certain Lease dated SEPTEMBER 23, 2005, by and between FULLERTON BUSINESS CENTER, Lessor, and ALLIED MED, INC., AN OREGON CORPORATION, Lessee, and constitutes additional Covenants, Conditions and Agreements contained herein, which Addendum shall prevail in the event of any conflict between the Covenants, Conditions and Agreements contained herein and those in said Lease. REFURBISHING FEE AND KEY DEPOSIT 1. Lessee agrees to pay to Lessor a non-refundable refurbishing fee of $ WAIVED and a key deposit of $ WAIVED. ACCEPTANCE OF LEASED PREMISES 2. Lessee accepts the Premises (as well as the improvements thereon and the facilities appurtenant thereto) in their present conditions, and acknowledges that the Premises (as well as the improvements thereon and the facilities appurtenant thereto) are in good, clean, safe and tenantable condition as of the date of this Lease. Lessee further represents to Lessor that the Premises have been inspected by Lessee, and that he/she has been assured by means independent of Lessor, or any Agent of Lessor, regarding truth of all facts material to the Lease, and that the Premises are being Leased by the Lessee as a result of his/her inspection and investigation and not as a result of any representations by Lessor or any Agent of Lessor. Lessee shall complete and return the "Unit Inspection Checklist" within 30 days of the lease commencement, and those items not corrected by Lessor will be excluded from Lessee's obligation to restore the Premises upon surrender. Lessee's failure to return the "Unit Inspection Check-List" constitutes a waiver of all rights thereto. RENT ESCALATIONS 3. Lessee agrees to pay to Lessor in advance, at such places as may be designated from time to time by Lessor, without deduction or offset, and Lessor agrees to accept as Rent for the Leased Premises, the following monthly Rental Payment Schedule for the term of the Lease: OCTOBER 1, 2005 THROUGH SEPTEMBER 30, 2006 $1,152.00 PER MONTH ADDRESS FOR RENT PAYMENTS 4 Lessee's payments of rent and other amounts due, shall be considered to have been received by Lessor only when received by mail at Mid Valley Management, P.O. Box 514779, Los Angeles, CA 90051-4779. Rental payments will not be accepted at any of Lessor's Leasing Offices. LATE CHARGES AND RETURNED CHECKS 5. Rent is due on the first of the month. If not received by the tenth of the month, a ten percent (10%) late charge on each delinquent payment will be added. A ten percent (10%) late charge will be added on all checks returned unpaid by the bank. If more than two (2) checks are returned, Lessee must thereafter pay by cashier's check and Lessor shall have as an additional remedy the right to terminate the Lease. Page 1 of 7 PARKING RULES AND REGULATIONS PERMITTED AND PROHIBITED PARKING 6. Parking is permitted in designated striped areas only. All other Vehicles not parked in such areas are subject to being towed away at Lessee's expense (22658 CVC). Parking is prohibited: (a) in areas not striped for parking; (b) in aisles; (c) where "No Parking" or "Fire Lane" signs are posted; (d) where "Handicap" signs are posted, unless Handicap I.D. is posted in or on vehicle; (e) on ramps; (f) in areas outside warehouse doors which are restricted to loading and unloading only; this is a fire lane and must not be blocked; (g) in specifically assigned and reserved spaces to others than Lessee; and (h) in such other areas as may be designated by Lessor, its Agents, Lessee or Licensee. OVERNIGHT STORAGE OF VEHICLES OR TRAILERS 7. There will be no overnight storage of Vehicles or Trailers in the parking lot. Vehicles used and moved on a daily basis are exempt. DAMAGED VEHICLES 8. There will be no storage of wrecked or damaged Vehicles at any time. DIRECTIONAL SIGNS AND ARROWS 9. All directional signs and arrows must be observed. SPEED LIMIT 10. The speed limit shall be five (5) miles per hour. RESPONSIBILITY FOR LOCKED VEHICLES AND DAMAGES 11. Every Lessee is requested to park and lock his/her own Vehicle. All responsibility for damage to Vehicles to be repaired is assumed by Authorized Users. Lessee shall repair or cause to be repaired at its sole cost and expense any and all damage to the Business Complex Parking Facility or any part thereof caused by Lessee, its Authorized Users, Invitees or Guests, or resulting from Vehicles of each of them. Lessee specifically waives any claims against Lessor arising out of damage to said Vehicles. COMMON AREA PARKING 12. Lessee shall be entitled to park in common with other Tenants of Lessor in the parking area for the specific use as described in the Leasehold. Lessee specifically waives any claims against Lessor arising out of damage to said Vehicles. Lessee agrees not to overburden the parking facilities and agrees to cooperate with Lessor and other Tenants in the use of parking facilities. Lessor reserves the right in its absolute discretion to determine whether parking facilities are becoming crowded, and in such an event, to allocate parking spaces among Lessee and other Tenants. In the event Lessor deems allocation necessary, Lessee shall be entitled to the use of no more than TWO (2) parking spaces. Lessee hereby agrees not to occupy or permit its Employees, Customers or Invitees to occupy more than the number of spaces specified above; nor to park anywhere other than in parking stalls assigned and designated as such by painted signs, parking lines and parking bumpers. Page 2 of 7 MAINTENANCE 13. Pursuant to Paragraph 7.1 of the Lease Agreement, the cost to be charged hereunder shall include an additional administrative cost of twenty-five percent (25%) as additional rent to be paid by Lessee with the next rental payment. In addition to the Lease Agreement, upon termination of Lessee's tenancy, all keys shall be delivered to Lessor and any and all Personal Property left in the Premises at said termination shall become the Property of Lessor. Lessor shall have the right to dispose of the Property in any manner which at its sole election it claims appropriate. Lessee waives, releases and forever discharges Lessor from any and all claims, liability and expense with respect to such Personal Property, including the right to account for any proceeds of sale. TENANT ALTERATIONS 14. Lessor may withhold the approval of any alteration, addition, or improvement that requires work which does not comply with any applicable laws (including, without limitation, the Americans with Disabilities Act of 1990 and all regulations issued thereunder) or requires other alterations, additions, or improvements of the Premises or common areas of the Business Complex, in order to comply with applicable laws. 14.1 Lessee is not permitted to wallpaper or paint within Premises without Lessor's express written permission. If permission is granted by Lessor, Lessee is required to restore the wall surface areas, with like materials, to the same condition as they were prior to the execution of this Lease. 14.2 At the expiration of this lease term or at the time Lessee vacates the premises, if the entire floor surface area of the leased premises requires more than a damp mopping, Lessee agrees, as a condition of this Lease, to pay in full any and all costs incurred in returning the floor surface areas to the same condition as it was prior to the execution of this Lease. In the event Lessee uses any chemical substances, including, but not limited to the following: grease, paint, oil, ink, dye, solvents or other liquid base material, Lessee shall bear the responsibility to return the leased premises to the same condition as it was prior to the execution of this Lease. ROOF ACCESS 15. Neither Lessee, Lessee's Agent, Contractors, Employees or invitees shall enter upon the roof of the Premises (except in the case of an emergency) for any purpose whatsoever without first receiving Lessor's written consent which shall not be unreasonably withheld. 15.1 If the Lessee, Lessee's Agents, Contractors, Employees or invitees shall enter upon the roof of said Premises, whether with or without the consent of Lessor, then the Lessee specifically indemnifies and agrees to hold Lessor harmless from any and all claims, actions or causes of action resulting from injuries incurred to any of said individuals or any other Person or Property, caused by or as a result of their entering upon the roof of said Premises, 15.2 In the event that Lessor grants written permission to the Lessee or any of the persons set forth above to have roof access, said consent shall be expressly on the condition that each time said Lessee or those persons designated by Lessee to enter upon the roof that they first execute a written Letter of Agreement provided by Lessor (a) expressly indemnifying and holding Lessor free and harmless from any and all damages caused by said individuals to the Leasehold Premises, (b) indemnifying Lessors from any personal injury damages caused in connection therewith, (c) provide Lessor with a $200.00 deposit or such other sum as Lessor may hereinafter set for every penetration upon the roof with the express authorization to permit Lessor to seal around all roof cuts and to charge the deposit for the actual cost thereof and with the express understanding that at such time as the Lessee vacates the subject Premises, that all equipment installed thereon by Lessee shall be removed (unless there is an Agreement in writing by and between Lessor and Lessee to the contrary), Lessor's Roofer shall be responsible for making any and all roof repairs required by said removal and Lessee shall be responsible for all charges incurred in connection therewith. Lessor shall have the express authorization to charge Lessee's deposit for all costs in connection therewith and (d) at Lessor's election, secure a Performance and Material and Labor Bond from Contractor in the amount of one and one-half times the cost of said improvement; making the Lessor an additional insured and beneficiary. Page 3 of 7 15.3 Lessee shall be required to submit reasonably detailed final plans, specifications and working drawings of the proposed alteration or alterations and the name of its Contractor at least thirty (30) days before the date it intends to commence the alterations. Drawings shall include, but not be limited to, the disclosure of the size, weight and type of installation to be placed upon the roof. 15.4 Lessee's Contractor shall provide Lessor with Certificates of Insurance and at the election of Lessor, name the Lessee as an additional insured. WORK AREAS 16. Lessee shall not be permitted to work in the parking lot or loading door areas. All work must be confined within the Leased Premises. PROTECTION OF PREMISES 17. Lessee assumes any and all responsibility for protecting its Premises from theft, robbery, vandalism and pilferage. Lessor strongly suggests that Lessee re-key the unit upon taking possession, which cost is at Lessee's sole cost and expense. LESSEE'S ALARM SYSTEM 18. If Lessee desires to install an alarm system, all equipment must be installed inside Lessee's unit so as not to be visible and shall otherwise comply to the standards set by Lessor for all alarm systems contained in the Business Complex. All alarm systems must be approved by Lessor. When equipment is removed, the Premises must be restored to its original condition by Lessee. Only one alarm sticker per unit placed on Lessee's door is permitted, with the exception that corner units may also have a second sticker on the bottom of the side glass window. RUBBISH REMOVAL 19. No rubbish, containers or debris are to be left outside of Lessee's unit. All refuse is to be placed in designated trash bins. Any debris is subject to immediate removal by Lessor at Lessee's expense. This rule applies to pallets as well. Lessee shall not place in any trash box or receptacle any material which cannot be disposed of in the ordinary and customary manner of trash and garbage disposal. All garbage and refuse disposal shall be made in accordance with directions issued from time to time by Lessor. Lessee shall reimburse Lessor, upon demand, for trash removal service to the Business Complex allocated to the Premises by Lessor on a prorata basis. If Lessor shall determine that the trash generated by or at the Premises, in Lessor's reasonable estimation, shall be excessive, Lessee shall pay to Lessor, upon demand, such additional charges as Lessor shall equitably impose for such excess trash removal. Lessor shall have the option to contract for a single trash removal service for the entire Business Complex. EXTERIOR DAMAGE BY LESSEE During the Lease Term, and at expiration (or early termination) of this Lease, if Lessee dirties, soils or damages the exterior of Lessor's Business Complex, Lessee will be responsible for the repair of this damage. If Lessee fails to repair the damage which Lessee causes within five (5) days of such occurrence, then Lessor may make such repairs and bill Lessee for the cost of such repair plus an administrative cost of an additional twenty-five percent (25%). Page 4 of 7 SIGNAGE 21. Lessee shall not place or permit to be placed any projecting sign, marquee, decoration or awning on said Premises without the written consent of Lessor; which consent shall not be unreasonably withheld. All signs which are permitted shall be conforming to the signage criteria established from time to time by Lessor for the Premises, Building and the Business Complex, as applicable, and shall be maintained by Lessee at its sole expense, including, but not limited to sign fabrication, maintenance, operation (including any required utilities), repair and removal. Lessee, upon the request of Lessor, shall immediately remove any sign or decoration which Lessee has placed, or permitted to be placed in, on or about the Premises of which, in the sole option and discretion of Lessor, is objectionable or offensive; and if Lessee fails to do so, Lessor may enter upon said Premises and remove said item and charge the cost thereof to Lessee. Lessee shall not place or permit to be placed upon any side wall, rear wall, window or roof; any sign, advertisement or notice without the written consent of Lessor, which consent shall only be given where the proposed sign, advertisement or notice complies with the specifications of size, shape, design, color or material established by Lessor and which are applicable to all Tenants of Lessor's Business Complex. WINDOWS AND WINDOW COVERINGS 22. Lessee shall not place any window coverings upon the Leasehold Premises (e.g. curtains, draperies, blinds, etc.) without Lessor's written consent, which consent shall not be unreasonably withheld, and provided the proposed window covering complies with the specifications established by Lessor and which are applicable to all Tenants of Lessor in the Business Complex. Lessee shall keep the glass windows free of dirt and stains and shall clean windows on a frequent and regular basis. AUCTION ON PREMISES 23. Lessee shall not conduct or permit to be conducted any sale by auction or liquidation (going out of business sale) on said Premises. CANVASSING AND SOLICITATION 24. Canvassing, soliciting and distribution of handbills or other written material and peddling in the Business Complex is prohibited; each Tenant shall cooperate to prevent same. FOUL, NOXIOUS GAS OR SUBSTANCE AND ANIMALS 25. Lessee shall not use, or permit to be used in the Premises, any foul, noxious gas or substance; or permit or allow the Premises to be occupied or used in a manner offensive or objectionable to Lessor or other occupants of the Building by reason of noise, odors or vibrations; nor shall Lessee bring into or keep in or about the Premises any birds or animals (except seeing eye dogs when accompanied by their masters). UNDER THE INFLUENCE 26. Lessor reserves the right to exclude or expel from the Premises any person who, in Lessor's judgment, is intoxicated or under the influence of liquor, drugs or other abusive substances, or who is otherwise in violation of any Rules and Regulations of the Business Complex. NAME AND ADDRESS OF PREMISES Lessor reserves the right, exercisable with sixty (60) days notice and without liability to Lessee, to change the name and address of the Premises. Said sixty (60) days notice shall conclusively be deemed reasonable notice to Lessee. Page 5 of 7 RELOCATION RIGHT 28. Lessor may, upon not less than sixty (60) days prior written notice to Lessee, substitute for the Premises, reasonably similar space elsewhere in the Business Complex, and this Lease shall be deemed modified so as to eliminate the Premises hereby leased and to substitute therefor such other premises (and the rentable and usable areas thereof). In such event, in all other respects, this Lease shall remain in full force and effect according to its terms. In connection therewith, the costs of preparing such other premises for Tenant's use, together with Tenant's reasonable costs of moving, shall be borne by Lessor. NO PERSONAL OBLIGATION 29. Lessee agrees to look solely to any equity interest of Lessor in and to the Premises for satisfaction of any liability Lessor may have to Lessee under this Lease and not to any other assets of Lessor or the personal assets of any constituent general or limited partner, shareholder, director, officer, employee or member of Lessor or of any general or limited partnership, corporation, limited liability company or other entity of which Lessor is formed. NON-DISCRIMINATION AND NON-SEGREGATION COVENANT 30. Lessee herein covenants by and for himself or herself, his or her heirs, executors, administrators, assigns, and for all persons claiming under or through him or her. This Lease is made and accepted upon and subject to the following conditions: That there shall be no discrimination against or segregation of any person or group of persons on account of race, color, creed, religion, sex, marital status, national origin or ancestry, in the Leasing, Subleasing, transferring, use, occupancy, tenure and enjoyment of the Premises herein Leased; nor shall Lessee himself, or any person claiming under or through him or her, establish or permit any such practice or practices of discrimination and/or segregation with reference to the selection, location number, use and occupancy of Lessees, Tenants, Sublessees, Subtenants, Assignees and/or Vendees in the Premises herein Leased. CHANGES IN RULES AND REGULATIONS 31. Lessor reserves the right by written notice to Lessee to rescind, alter or waive any Rule or Regulation prescribed for Lessor's Business Complex at any time when, in Lessor's judgment, it is necessary, desirable, proper and in the best interest of Lessor's Business Complex and its Tenants. Lessee agrees to be bound by any changes, revisions or modifications. Lessor further reserves the right to make such other Rules and Regulations as in its judgment may be necessary for the safety, care and cleanliness of the Premises and for the preservation of good order therein. Lessee agrees to abide by all such rules and Regulations hereinabove stated, and any additional Rules and Regulations which are adopted. WAIVER OF RULES AND REGULATIONS 32. Lessor may waive any one or more of these Rules and Regulations for the benefit of Lessee or any other Tenant, but no such waiver by Lessor to a particular Tenant shall be, (a) construed as a waiver of such Rules and Regulations in favor of Lessee or any other Tenant to prevent Lessor from thereafter enforcing any such Rules and Regulations against any or all of the Tenants of the Premises, and (b) any such waiver shall be deemed temporary in nature and cancelable at will by Lessor, and Lessee specifically acknowledges the right of Lessor to rescind said waiver at its sole election and discretion. HEADINGS The Titles and Headings of the various sections of this Addendum are intended solely for the convenience of reference only and are not intended to explain, modify or place any construction on any of the provisions of this Addendum. Page 6 of 7 CONFIDENTIALITY 34. Tenant acknowledges and agrees that the terms of this Lease are confidential and constitute propriety information of Landlord. Disclosure of the terms hereof could adversely affect the ability of Landlord to negotiate other leases with respect to the Project and may impair Landlord's relationship with other tenants of the Project. Tenant agrees that it and its partners, officers, directors, employees, brokers, and attorneys, if any, shall not disclose the terms and conditions of this Lease to any other person or entity without the prior written consent of Landlord which may be given or withheld by inadequate remedy for the breach of this provision by Tenant, and Landlord shall also have the right to seek specific performance of this provision and to seek injunctive relief to prevent its breach or continued breach. VIOLATION FEE 35. Anything to the contrary notwithstanding, on the second occurrence of Lessee's violation of paragraphs 6 through 12, and every occurrence thereafter, Lessor, at its sole option and in addition to all other rights and remedies available under this Lease, may charge a fee, as Additional Rent, of $100.00, which is a fair representation of unanticipated costs to Lessor as a result of this violation. STORAGE IN LOFT AREA 36. Lessor and Lessee agree that the area located above Lessee's office(s) is not intended to be used as storage. The storing of any material in this portion of your unit is a violation of your Lease Agreement, as well as a City of Fullerton building code violation, which could result in city fines or termination of your Lease Agreement. KEYS 37. Upon vacating the leased Premises, Lessee will provide Lessor with a set of working keys for the front and back doors, or will be charged to have the locks re-keyed. AGREED AND ACCEPTED: AGREED AND ACCEPTED: "LESSOR" "LESSEE" FULLERTON BUSINESS CENTER ALLIED MED INC., - ------------------------------------------ ------------------------------ By ALEXICO, INC., a California corporation AN OREGON CORPORATION DBA MID VALLEY MANAGEMENT, Managing Agent By /s/ Terri Rhoades By /s/ Jack Amin, President ----------------- ------------------------ Terri Rhoades Its: Authorized Agent By /s/ Jack Amin, Vice President Date: _____________ Page 7 of 7 - -------------------------------------------------------------------------------- EX-10.3 4 amexdrug10qexh103.txt ================================================================================ Exhibit 10.3 THIRD AMENDMENT TO LEASE AGREEMENT ---------------------------------- IT IS HEREBY AGREED BY THE UNDERSIGNED, that the Lease Agreement made and entered into the 23RD day of SEPTEMBER, 2005, by and between FULLERTON BUSINESS CENTER, Lessor, and ALLIED MED. INC., AN OREGON CORPORATION, Lessee, for the premises commonly known as: 2500 E. FENDER AVENUE, UNITS "I & J" FULLERTON, CA 92831, shall be extended for a period of TWO (2) YEARS AND TWO (2) MONTHS, commencing OCTOBER 1, 2008, and ending on NOVEMBER 30, 2010. All other terms and conditions of said Lease Agreement are incorporated herein by reference and shall remain in full force and effect during this extended term, except as follows: 1. Lessee agrees to pay to Lessor during this extended term, in advance, at such places as may be designated from time-to-time by Lessor, without deduction or offset, and Lessor agrees to accept as rent for the Leased premises monthly installments of TWO THOUSAND THREE HUNDRED FIFTY-EIGHT AND 00/100 ($2,358.00) Dollars, together with such other assessments, additions and pass-throughs as are described in the Lease Agreement. See paragraph 4.2 of your Lease Agreement. 2. Lessor and Lessee agree that the rent increase commencing OCTOBER 1, 2009, shall be determined pursuant to the terms set forth in the Addendum to the THIRD Amendment to Lease Agreement which is attached hereto and made a part hereof. 3. Lessee shall pay to Lessor the sum of N/A ($00.00) Dollars, concurrent with the execution of this Amendment representing an increase in Security Deposit. Lessor acknowledges the sum of *SEVEN THOUSAND SEVENTY-FOUR AND 00/100 ($7,074.00) Dollars, as security for the faithful performance of each and every term, covenant and condition of said Lease Agreement pursuant to Paragraph FIVE (5) of said Lease Agreement. This security includes the previous amounts received as security deposit. **Previously paid $7,758.00 3A. [Section 3A was lined through and deleted by the parties. It read as follows:] Lessee agrees to be bound by the "Rules and Regulations" and "Parking Rules and Regulations" now in effect as Exhibits "A and B" attached hereto, and any additional Rules and Regulations and Parking Rules and Regulations which may be promulgated by Lessor during the extended Lease term. 4. Lessee warrants and represents that there are no present and outstanding breaches of Lease by Lessor, and that Lessee has no claims or offset of any kind or nature against Lessor. 5. No rubbish, containers or debris are to be left outside of Lessee's unit. All refuse is to be placed in designated trash bins. Any debris is subject to immediate removal by Lessor at Lessee's expense. This rule applies to pallets as well. Lessee shall not place in any trash box or receptacle any material, which cannot be disposed of in the ordinary and customary manner of trash and garbage disposal. All garbage and refuse disposal shall be made in accordance with directions issued from time-to-time by Lessor. Lessee shall reimburse Lessor, upon demand, for trash removal service to the Property allocated to the Premises by Lessor on a prorata basis. If Lessor shall determine that the trash generated by or at the Premises, in Lessor's reasonable estimation, shall be excessive, Lessee shall pay to Lessor, upon demand, such additional charges, as Lessor shall equitably impose for such excess trash removal. Lessor shall have the option to contract for a single trash removal service for the entire Complex. 6. Notwithstanding the restrictions contained within California Civil Code ss.1950.7, Lessor may utilize the security deposit for any and all debt owed by Lessee to Lessor, including (but not limited to) future rental or worth at time of the award damages as codified in Civil Code ss.1951.2, or rent as it accrues pursuant to Civil Code ss.1951.4. To the extent that this is inconsistent with California Civil Code ss.1950.7, Lessee waives the protections of Civil Code 1950.7, Lessee waives any rights under California Civil Code ss.3275 and California Civil Code ss.1174(c) and ss.1179 and any and all current or future laws which give Lessee a right to redeem, reinstate, or restore this lease after it is terminated as a result of the Lessee's breach. EXCEPT AS HEREINABOVE AMENDED, the Lease Agreement shall remain unchanged and shall continue in full force and effect. Dated this 5th day of November, 2008. LESSOR: ADDENDUM TO THE THIRD AMENDMENT TO LEASE AGREEMENT LESSOR: LESSEE: FULLERTON BUSINESS CENTER ALLIED MED. INC., AN OREGON CORPORATION By: /s/ By: /s/ ------------------------------ ------------------------------------- TERRI RHOADES, AUTHORIZED AGENT JACK AMIN, PRESIDENT By: /s/ ------------------------------------- JACK AMIN, VICE PRESIDENT 1 ADDENDUM TO THE THIRD AMENDMENT TO LEASE AGREEMENT THIS ADDENDUM is attached to and integrated as a part of that certain THIRD Amendment to Lease Agreement dated SEPTEMBER 23, 2005, by and between FULLERTON BUSINESS CENTER, Lessor, and ALLIED MED, INC., AN OREGON CORPORATION, Lessee and constitutes additional Agreements and Conditions contained herein, which Addendum shall prevail in the event of any conflict between the Agreements and Conditions contained herein and those in said THIRD Amendment. RENT ESCALATIONS: - ----------------- On each anniversary date of the renewal term, the monthly rental payment shall be increased by $106.00. Lessor's failure and/or inadvertence to request a payment of an estimated or actual rent adjustment shall not constitute as a waiver or an estoppel of Lessor's right to demand any adjustment (including retroactive payments, if applicable) provided for in the Lease Agreement or this Addendum. 2 - -------------------------------------------------------------------------------- EX-10.4 5 amexdrug10qexh104.txt ================================================================================ Exhibit 10.4 PROMISSORY NOTE Borrower: Amexdrug Corporation; Dermegen, Inc.; Biorx Pharmaceuticals. Inc.; Royal Health Care, Inc.; and Allied Mod Inc. 8909 West Olympic Boulevard. Suite 208 Beverly Hilts. CA 90211 Principal Amount: $150,000.00 Lender, National Bank of California Corporate Banking Department 145 South Fairfax Avenue Los Angeles, CA 90036 Date of Note: June 23, 2008 PROMISE TO PAY. Amaxdrug Corporation; Dermagen, Inc.; Biorx Pharmaceuticals, Inc.; Royal Health Care, Inc.; and Allied Med Inc. ("Borrower,.) jointly and severally promise to pay to National Bank of California ("Lender"), or order, in lawful money of the United States of America, the principal amount of One Hundred Fifty Thousand & 00/100 Dollars ($I50.000.00) or so much as may be outstanding, together with interest on the unpaid outstanding principal balance of each advance. Interest shall be calculated from the data of each advance until repayment of each advance. PAYMENT. Borrower will pay this loan in full immediately upon Lender's demand. If no demand is made, Borrower will pay this loan in one payment of all outstanding principal plus all accrued unpaid interest on June 9, 2009. In addition, Borrower will pay regular monthly payments of all accrued unpaid interest due as of each payment date, beginning August 1, 2008, with all subsequent interest payments to be due on the same day of each month after that, Unless otherwise agreed or required by applicable law, payments will be applied first to any accrued unpaid interest; then to any late charges; then to any unpaid collection costs; and then to principal, Borrower will pay Lender at Lender's address shown above or at such other place as Lender may designate in writing. VARIABLE INTEREST RATE. The interest rate on this Note is subject to change from time to time based on changes in an independent index which is the Prime Rate as published from time to time in the Money Rates table of the West Coast Edition of The Wall Street Journal (the "Index"). The Index is not necessarily the lowest 'rate charged by Lender on its loans. If the index becomes unavailable during the term of this loan, Lender may designate a substitute index after notifying Borrower. Lender will tell Borrower the current Index rate upon Borrower's request. The interest rate change will not occur more often than each DAY. Borrower understands that Lender may make loans based on other rates as well. The Index currently is 5.000% per annum. The interest rate to be applied to the unpaid principal balance of this Note will be calculated as described in the "INTEREST CALCULATION METHOD" paragraph using a rate of 2.500 percentage points over the Index, adjusted if necessary for any minimum and maximum rata limitations described below, resulting in an initial rate of 7.500%. NOTICE: Under no circumstances will the interest rate on this Note be less than 7.500% per annum or more than the maximum rate allowed by applicable law. INTEREST CALCULATION METHOD. Interest on this Note is computed on a 365/360 basis; that is, by applying the ratio of the interest rate over a year of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding. All interest payable under this Note is computed using this method. PREPAYMENT; MINIMUM INTEREST CHARGE. Borrower agrees that all loan fees and other prepaid finance charges are earned fully as of the date of the loan and will not be subject to refund upon early payment (whether voluntary or as a result of default), except as otherwise required by law. In any event, even upon full prepayment of this Note, Borrower understands that Lender is entitled to a minimum interest charge of $100.00. Other than Borrower's obligation to pay any minimum interest charge, Borrower may pay without penalty all or a portion of the amount owed earlier than it is due. Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower's obligation to continue to make payments of accrued unpaid interest. Rather, early payments will reduce the principal balance due. Borrower agrees not to send Lender payments marked "paid in full", "without recourse", or similar language. If Borrower sends such a payment, Lender may accept it without losing any of Lender's rights under this Note, and Borrower will remain obligated to pay any further amount owed to Lender. All written communications concerning disputed amounts, including any check or other payment instrument that indicates that the payment constitutes "payment in full" of the amount owed or that is tendered with other conditions or limitations or as full satisfaction of a disputed amount must be mailed or delivered to: National Bank of California. Attn: Note Department, 14S South Fairfax Avenue Los Angeles, CA 90036. LATE CHARGE. If a payment is 10 days or more late, Borrower will be charged 6.000% of the unpaid portion of the regularly scheduled payment or $25.00, whichever is greater. INTEREST AFTER DEFAULT, Upon default, the interest rate on this Note shall, if permitted under applicable law, immediately increase by adding a 5.000 percentage point margin ("Default Rate Margin"). The Default Rate Margin shall also apply to each succeeding interest rate change that would have applied had there been no default. DEFAULT. Each of the following shall constitute an event of default (-Event of Default") under this Note: Payment Default. Borrower fails to make any payment when due under this Note. Other Defaults. Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Note or in any of the related documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between lender end Borrower, Default in Favor of Third Parties. Borrower or any Grantor defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower's property or Borrower's ability to repay this Note or perform Borrower's obligations under this Note or any of the related documents. Loan No: 930610000 Page 2 PROMISSORY NOTE (Continued) False Statements. Any warranty, representation or statement made or furnished to Lander by Borrower or on Borrower's behalf, or made by Guarantor, or any other guarantor, endorser, surety, or accommodation party, under this Note or the related documents in connection with the obtaining of the loan evidenced by this Note or any security document directly or indirectly securing repayment of this Note is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter. Insolvency. The dissolution or termination of Borrower's existence as a going business, the insolvency of Borrower, the appointment of a receiver for any part of Borrower's property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower. Creditor or Forfeiture Proceedings. Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing the loan. This includes a garnishment of any of Borrower's accounts, including deposit accounts, with Lender. However, this Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being en adequate reserve or bond for the dispute. Execution; Attachment. Any execution or attachment i$ levied against the Collateral, and such execution or attachment is not set aside, discharged or stayed within thirty (30) days after the same is levied. Change in Zoning or Public Restriction. Any change in any zoning ordinance or regulation or any other public restriction is enacted, adopted or implemented, that limits or defines the uses which may be made of the Collateral such that the present or intended use of the Collateral, as specified in the related documents, would be in violation of such zoning ordinance or regulation or public restriction, as changed. Default Under Other Lien Documents. A default occurs under any other mortgage, deed of trust or security agreement covering all or any portion of the Collateral. Judgment. Unless adequately covered by insurance in the opinion of Lender, the entry of a final judgment for the payment of money involving more then ten thousand dollars ($10,000.00) against Borrower and the failure by Borrower to discharge the same, or cause it to be discharged, or bonded off to Lender's satisfaction, within thirty (30) days from the date of the order, decree or process under which or pursuant to which such judgment was entered, Events Affecting Guarantor. Any of the preceding events occurs with respect to any Guarantor, or any other guarantor, endorser, surety, or accommodation party of any of the indebtedness or any Guarantor, or any other guarantor, endorser, surety, or accommodation party dies or becomes incompetent, or revokes or disputes the validity of, or liability under, any guaranty of the indebtedness evidenced by this Note, Change In 0wnurship. Any change in ownership of twenty-five percent (25%) or more of the common stock of Borrower. Adverse Change. A material adverse change occurs in Borrower's financial condition, or Lender believes the prospect of payment or performance of this Note is impaired. Insecurity. Lender in good faith believes itself insecure, Cure Provisions. If any default, other than a default in payment is curable and if Borrower has not been given a notice of a breach of the same provision of this Note within the preceding twelve (12) months, it may be cured if Borrower, after receiving written notice from Lender demanding cure of such default: (1) cures the default within fifteen (15) days; or (2) if the cure requires more than fifteen (15) days, immediately initiates steps which Lender deems in Lender's solo discretion to be sufficient to cure the default and thereafter continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical. LENDER'S RIGHTS. Upon default, Lender may declare the entire unpaid principal balance under this Note and all accrued unpaid interest immediately due, and then Borrower will pay that amount, ATTORNEYS' FEES; EXPENSES. Lender may hire or pay someone else to help collect this Note if Borrower does not pay. Borrower will pay Lender that amount. This includes, subject to any limits under applicable law, Lender's attorneys' fees and Lender's legal expenses, whether or not there is a lawsuit, Including attorneys' fees, expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), and appeals. Borrower also will pay any court costs, in addition to all other sums provided by law. JURY WAIVER. To the extent permitted by applicable law, Lender and Borrower hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by either Lender or Borrower against the other. GOVERNING LAW. This Note will be governed by federal law applicable to Lender and, to the extent not preempted by federal law, the laws of the State of California without regard to its conflicta of law provisions. This Note has been accepted by Lender in the State of California. CHOICE OF VENUE. If there is a lawsuit, Borrower agrees upon Lender's request to submit to the jurisdiction of the courts of Los Angeles County, State of California, RIGHT OF SETOFF. To the extent permitted by applicable law, Lender reserves a right of setoff in all Borrower's accounts with Lender (whether -checking, savings, or some other account). This includes all accounts Borrower holds jointly with someone else and all accounts Borrower may open in the future. However, this does riot include any IRA or Keogh accounts, or any trust accounts for which setoff would be prohibited by law, Borrower authorizes Lender, to the extent permitted by applicable law, to charge or setoff all sums owing on the indebtedness against any and all such accounts, COLLATERAL. Borrower acknowledges this Note is secured by Collateral as described per Commercial Security Agreement dated June 23, 2009, LINE OF CREDIT, This Note evidences a revolving line of credit. Advances under this Note may be requested either orally or in writing by Borrower or as provided in this paragraph. Lender may, but need not, require that all oral requests be confirmed in writing. All communications, instructions, or directions by telephone or otherwise to Lender are to be directed to Lender's office shown above, The following person or persons are authorized to request advances and authorize payments under the line of credit until Lender receives from Borrower, at Lender's address shown above, written notice of revocation. of such authority: Jack Amin, President/Secretary of Amexdrug Corporation; Jack Amin, Precident/Secretay of Dermagen, Inc.: Jack Amin, President/Secretary of BIORX Pharmaceuticals, Inc.; Jack Amin, President/Secretary of Royal Hearth Care, Inc.; and Jack Amin, President/Secretary of Allied Mod Inc. Borrower agrees to be liable for all sums either: (A) advanced in accordance with the instructions of an authorized person or (B) credited to any of Borrower's accounts with Lender, The unpaid principal balance owing on this Note at any time may be evidenced by endorsements on this Note or by Lender's internal records, including daily computer print-outs. Loan No: 930610000 Page 3 PROMISSORY NOTE (Continued) ARBITRATION. Borrower and Lender agree that all disputes, claims and controversies between them whether individual. joint, or class in nature, arising from this Note or otherwise, including without limitation contract and tart disputes, shall be arbitrated pursuant to the Rules of the American Arbitration Association in effect at the time the claim is filed, upon request of either party, No act to take or dispose of any collateral securing this Note shall constitute a waiver of this arbitration agreement or be prohibited by this arbitration agreement, This includes, without limitation. obtaining injunctive relief or a temporary restraining order; invoking a power of sale under any deed of trust or mortgage; obtaining a writ of attachment or imposition of a receiver; or exercising any rights relating to personal property, including taking or disposing of such property with or without judicial process pursuant to Article $ of the Uniform Commercial Code. Any disputes, claims, or controversies concerning the lawfulness or reasonableness of any act, or exercise of any right, concerning any collateral securing this Note, including any claim to rescind, reform, or otherwise modify any agreement relating to the collateral securing this Note, shall also be arbitrated, provided however that no arbitrator shall have the right or the power to enjoin or restrain any act of any party. Borrower and Lender agree that in the event of an action for judicial foreclosure pursuant to California Code of Civil Procedure Section 726, or any similar provision in any other state, the commencement of such an action will not constitute a waiver of the right to arbitrate and the court shall refer to arbitration as much of such action, including counterclaims, as lawfully may. be referred to arbitration. Judgment upon any award rendered by any arbitrator may be entered in any court having jurisdiction. Nothing in this Note shall preclude any party from seeking equitable relief from a court of competent jurisdiction. The statute of limitations, estoppel, waiver, latches, and similar doctrines which would otherwise be applicable in an action brought by a party shall be applicable in any arbitration proceeding, and the commencement of an arbitration proceeding shall be deemed the commencement of an action for these purposes. The Federal Arbitration Act shall apply to the construction, interpretation, and enforcement of this arbitration provision. FINANCIAL STATEMENTS, Borrower agrees to provide Lender with such financial statements and other related information at such frequencies and in such detail as Lender may reasonably request. CREDIT REPORT, We may report information about your account to credit bureaus. Late payments, missed payments, or other defaults on your account may be reflected in your credit report. SUCCESSOR INTERESTS. The terms of this Note shall be binding upon Borrower, and upon Borrower's heirs, personal representatives, successors and assigns, and shall inure to the benefit of Lender and its successors and assigns. GENERAL PROVISIONS, This Note is payable on demand. The inclusion of specific default provisions or rights of Lander shall not preclude Lender's right to declare payment of this Note on 'its demand. If any part of this Note cannot be enforced, this fact will not affect the rest of the Note. Lender may delay or forgo enforcing any of its rights or remedies under this Note without losing them. Each Borrower understands and agrees that, with or without notice to Borrower, Lender may with respect to any other Borrower (a) make one or more additional secured or unsecured loans or otherwise extend additional credit; (b) alter, compromise, renew, extend, accelerate, or otherwise change one or more times the time for payment or other terms of any indebtedness, including increases and decreases of the rate of interest on the indebtedness; (c) exchange, enforce, waive, subordinate, fail or decide not to perfect, and release any security, with or without the substitution of new collateral; (d) apply such security and direct the order or manner of sale thereof, including without limitation, any non-judicial sale permitted by this terms of the controlling security agreements, as Lender in its discretion may determine; (e) release, substitute, agree not to sue, or deal with any one or more of Borrower's sureties, endorsers, or other guarantors on any terms or in any manner Lender may choose; and (f) determine how, when and what application of payments and credits shall be mode on any other indebtedness owing by such other Borrower. Borrower and any other person who signs, guarantees or endorses this Note, to the extent allowed by law, waive any applicable statute of limitations, presentment, demand for payment, and notice of dishonor. Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Note, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability. All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan or release any party or guarantor or collateral; or impair, fail to realize upon or perfect Lender's security interest in the collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone. All such parties also agree that Lender may modify this loan without the consent of or notice to anyone other than the party with whom the modification is made. The obligations under this Note are joint and several. Loan No: 930610000 Page 4 PROMISSORY NOTE (Continued) PRIOR TO SIGNING THIS NOTE, EACH BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS. EACH BORROWER AGREES TO THE TERMS OF THE NOTE. BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE. BORROWER: By: /s/ Jack M. Amin ---------------------------------------------- Jack M. Amin, President/Secreatury of Amexdrug Corporation AMEXORUG CORPORATION DERMAGEN, INC. By: /s/ Jack M. Amin ---------------------------------------------- Jack M. Amin, President/Secreatury of Dermagen, Inc. BIORX PHARAMACEUTICALS, INC. By: /s/ Jack M. Amin ---------------------------------------------- Jack M. Amin, President/Secreatury of Biorx Pharamaceuticals, Inc. ROYAL HEALTH CARE, INC. By: /s/ Jack M. Amin ---------------------------------------------- Jack M. Amin, President/Secreatury of Royal Health Care, Inc. - -------------------------------------------------------------------------------- EX-10.5 6 amexdrug10qexh105.txt ================================================================================ Exhibit 10.5 CHANGE IN TERMS AGREEMENT Principal Loan Date Maturity Loan No. Officer $250,000.00 06-09-2009 06-09-2010 93061000 RK References in the boxes above are for Lender's use only and do not limit the applicability of this document to any particular loan or item. Any item above containing ''' has been omitted due to text length limitations. Borrower: Amexdrug Corporation; Dermagen, Inc.; Biorx Pharmaceuticals, Inc.; Royal Health Care, Inc.; and Allied Med Inc. 8909 West Olympic Boulevard, Suite 208 Beverly Hills, CA 90211 Lender: National Bank of California Corporate Banking Department 145 South Fairfax Avuenue Los Angeles, CA 90036 - -------------------------------------------------------------------------------- Principal Amount: $250,000.00 Date of Agreement: June 9, 2009 DESCRIPTION OF EXISTING INDEBTEDNESS: The Promissory Note and Business Loan Agreement dated June 23, 2008 and subsequent Change In Terms Agreement dated March 3, 2009 in the amount of $150,000.00. DESCRIPTION OF CHANGE IN TERMS: The Maturity of the Note is hereby extended from June 9, 2009 to June 9, 2010. The Principal Amount of the Note is hereby increased from $150,000.00 to $250,000.00. The interest rate floor on the Note is hereby increased from 6.000% to 7.000%. The "AFFIRMATIVE CONVENANTS" section of the Business Loan Agreement Is hereby amended as follows: Interim Statements. As soon as available, but in no event later than 45 days after the end of each fiscal quarter, Borrower's balance sheet and profit and loss statement for the period ended, prepared by Borrower. Tangible Net Worth Requirements: Borrower's Net Worth shall increase on a semi-annual basis, Concurrently herewith a Subordination Agreement shall be executed by Borrower and Nora Y. Amin as Creditor, as a condition of the Change in Terms. CONTINUING VALIDITY. Except as expressly changed by this Agreement, the terms ,of the original obligation or obligations, including all agreements evidenced or securing the obligation(s), remain unchanged and In full force and effect. Consent by Lender to this Agreement does not waive Lender's right to strict performance of the obligation(s) as changed, nor obligate Lender to make any future change in terms. Nothing in this Agreement will constitute a satisfaction of the obligation(s). it is the intention of Lender to retain as liable parties all makers or endorsers of the original obligation(s), including accommodation parties, unless a party is expressly released by Lender in writing. Any maker or endorser, including accommodation makers, will not be released by virtue of this Agreement. if any person who signed the original obligation does not sign this Agreement below, then all persons signing below acknowledge that this Agreement is given conditionally, based on the representation to Lender that the non-signing party consents to the changes and provisions of this Agreement or otherwise will not be released by it. This waiver applies not only to any Initial extension, modification or release, but also to all such subsequent actions. PRIOR TO SIGNING THIS AGREEMENT, BORROWERS READ AND UNDERSTOOD ALL PROVISIONS OF THIS AGREEMENT. BORROWERS AGREES TO THE TERMS OF THE AGREEMENT. BORROWER: By: /s/ Jack M. Amin ---------------------------------------------- Jack M. Amin, President/Secreatury of Amexdrug Corporation AMEXORUG CORPORATION DERMAGEN, INC. By: /s/ Jack M. Amin ---------------------------------------------- Jack M. Amin, President/Secreatury of Dermagen, Inc. BIORX PHARAMACEUTICALS, INC. By: /s/ Jack M. Amin ---------------------------------------------- Jack M. Amin, President/Secreatury of Biorx Pharamaceuticals, Inc. ROYAL HEALTH CARE, INC. By: /s/ Jack M. Amin ---------------------------------------------- Jack M. Amin, President/Secreatury of Royal Health Care, Inc. ALLIED MED INC. By: /s/ Jack M. Amin ---------------------------------------------- Jack M. Amin, President/Secreatury of Allied Med Inc. - -------------------------------------------------------------------------------- CHANGE IN TERMS AGREEMENT Loan No: 930610000 (Continued) Page 2 PRIOR TO SIGNING THIS AGREEMENT, GUARANTORS READ AND UNDERSTOOD ALL PROVISIONS OF THIS AGREEMENT. GUARANTORS AGREES TO THE TERMS OF THE AGREEMENT. GUARANTOR: By: /s/ Jack M. Amin ---------------------------------------------- Jack M. Amin, Individually By: /s/ Jack M. Amin ---------------------------------------------- Jack M. Amin - -------------------------------------------------------------------------------- EX-21.1 7 amexdrug10qexh211.txt ================================================================================ EXHIBIT 21.1 List of Subsidiaries of Amexdrug Corporation State of Names under Which Name of Subsidiary Incorporation/Organization They do Business - -------------------------------------------------------------------------------- Dermagen, Inc. California Dermagen, Inc. Allied Med, Inc. Oregon Allied Med, Inc. Royal Health Care, Inc. Nevada Royal Health Care, Inc. Royal Health Care Company BioRx Pharmaceutials, Inc. Nevada BioRx Pharmaceuticals, Inc. - -------------------------------------------------------------------------------- EX-31.1 8 amexdrug10qexh311.txt ================================================================================ EXHIBIT 31.1 SECTION 302 CERTIFICATION OF CHIEF EXECUTIVE OFFICER I, Jack Amin, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Amexdrug Corporation, 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, the results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and (d) disclosed in this quarterly report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 10, 2009 /s/ Jack Amin ---------------------------------- Jack Amin, Chief Executive Officer - -------------------------------------------------------------------------------- EX-31.2 9 amexdrug10qexh312.txt ================================================================================ EXHIBIT 31.2 SECTION 302 CERTIFICATION OF CHIEF FINANCIAL OFFICER I, Jack Amin, certify that: 1. I have reviewed this quarterly report on Form 10-Q of Amexdrug Corporation, 2. Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, the results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report; 4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have: (a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared; (b) designed such internal control over financial reporting or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; (c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this quarterly report based on such evaluation; and (d) disclosed in this quarterly report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): (a) all significant deficiencies in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and (b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: August 10, 2009 /s/ Jack Amin ---------------------------------- Jack Amin, Chief Financial Officer - -------------------------------------------------------------------------------- EX-32.1 10 amexdrug10qexh321.txt ================================================================================ EXHIBIT 32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Amexdrug Corporation (the "Company") on Form 10-Q for the period ending June 30, 2009, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jack Amin, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Jack Amin - ----------------------- Jack Amin Chief Executive Officer August 10, 2009 A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. The foregoing certifications are accompanying the Company's Form 10-Q solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and are not being filed as part of the Form 10-Q or as a separate disclosure document. - -------------------------------------------------------------------------------- EX-32.2 11 amexdrug10qexh322.txt ================================================================================ EXHIBIT 32.2 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002 In connection with the Quarterly Report of Amexdrug Corporation (the "Company") on Form 10-Q for the period ending June 30, 2009, as filed with the Securities and Exchange Commission on the date hereof (the "Report"), I, Jack Amin, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Sec. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief: (1) the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) the information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. /s/ Jack Amin - ------------------------ Jack Amin Chief Financial Officer August 10, 2009 A signed original of this written statement required by Section 906, or other document authenticating, acknowledging, or otherwise adopting the signature that appears in typed form within the electronic version of this written statement has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request. The foregoing certifications are accompanying the Company's Form 10-Q solely pursuant to section 906 of the Sarbanes-Oxley Act of 2002 (subsections (a) and (b) of section 1350, chapter 63 of title 18, United States Code) and are not being filed as part of the Form 10-Q or as a separate disclosure document. - -------------------------------------------------------------------------------- -----END PRIVACY-ENHANCED MESSAGE-----