LEASE AGREEMENT

1.0

This Lease Agreement is entered into this 12 ^th day of April, 2004, by and between BC Investments & Leasing, Inc., 1700 42nd St. SW Suite 2000, Fargo, North Dakota 58103, a North Dakota corporation, hereinafter referred to as “Landlord”; and Alien Technology Corporation, 18220 Butterfield Blvd., Morgan Hill, California 95037, a California corporation, hereinafter referred to as “Tenant”.

I.

LEASED PREMISES

1.1

In consideration of the rents, covenants, and agreements herein contained, the Landlord hereby leases to Tenant, and the Tenant hereby leases from Landlord, the premises outlined in red and further described in Exhibit A attached hereto and made a part hereof, consisting of 4,976 square feet of “Usable Space” for Tenant’s exclusive use and 590 square feet of “Common Area” space to be shared in common with other tenants of the Building, totaling 5,566 square feet of the entire business office building owned by Landlord. At an additional charge of $6.00 per square foot, Tenant will have the use of approximately 350 square feet of “Mechanicals Space” in the basement of the office building for Tenant’s own boiler, vacuum pump, air compressor, and other mechanicals. The Usable Space, the Common Area and the Mechanicals Space are hereinafter referred to as the “Leased Premises”. Tenant shall have the right of egress to and ingress from the Leased Premises and common areas including the basement area for the Tenant’s use and servicing of its property in the basement.

1.2

Landlord hereby represents and warrants that it owns the building located at 1700 42nd St. SW Suite 2000, Fargo, North Dakota 58103 (the “Building”) and has the right and authority to lease the Leased Premises as set forth in this Agreement. Landlord covenants and agrees that Tenant, upon the payment of the rent herein stipulated, shall have the peaceful quiet possession, use and enjoyment of the Leased Premises, without hindrance on the part of Landlord or any party claiming by, through or under it, for the term of this Lease Agreement, and Landlord further warrants that it shall defend Tenant in such peaceful and quiet possession, use and enjoyment of the Lease Premises against any such claims.

1.3

The parties are satisfied that the area to be leased by the Tenant is as stated in section 1.1 irregardless of whether the space is in excess of or is actually less than that stated in section 1.1. Rent will not be adjusted upwards or downwards in the event that the leased facility exceeds or is less than what is actually stated in section 1.1 of this agreement.

1.4

Term . The original term of this Lease shall commence on April 15, 2004, and end on December 31, 2005. Upon the execution of this Lease Agreement, Tenant shall have immediate access/possession to the Leased Premises in order to allow the Tenant a period of time to install fixtures, facilities or equipment or to perform finishing work. Tenant shall repair premises for Tenant’s occupation at its sole cost and expense. Regardless of whether Tenant has completed the Tenant’s installation of fixtures, facilities, or equipment or regardless of whether Tenant has completed all work necessary for the Tenant’s occupation of the premises, rent will commence on April 15, 2004.

1.5

Landlord No Liability . From the date of the Tenant’s occupancy of the premises, Landlord shall have no responsibility or liability to Tenant for loss or damage to Tenant’s fixtures, facilities, equipment or merchandise, installed or left on the Leased Premises by the Tenant.

1.6

Rent . Tenant agrees to tender to Landlord, at Landlord’s office located at 1700 42 ^nd St. SW Suite 2000, Fargo, North Dakota 58103, or such other place as Landlord from time to time may designate in writing on or before the 1 ^st day of each and every month during the term of this Lease the total monthly sum of $5,121.62 as rent for the Leased Premises calculated as follows:

a.

Base Rent . Tenant agrees to pay Landlord a fixed base rent, hereinafter referred to as “Base Rent”, payable except as hereinafter provided, in advance and successive equal installments of $4,077.99 by the first day of each and every calendar month during the term of this Lease. This Base Rent includes 4,976 square feet of “Usable Space”, 590 square feet of “Common Area” space totaling 5,566 square feet at a rate of $8.41 per square foot and the approximate 350 square feet of space located in the basement of the building (the 350 square feet in the basement will be calculated at a rate of $6.00 per

square foot or $2,100.00 per year or $175.00 per month). All rent Tenant fails to timely tender to Landlord by the fifth (5 ^th ) day of each and every month as referred to herewithin, shall bear interest from the date due to the date paid at the rate of 8% per annum. Said interest shall be due from Tenant to Landlord as additional rent on or before the next due date. A default in the payment of rents shall not be considered cured unless interest as referred to herewithin is paid by Tenant to Landlord. Upon default and payment of said interest, Landlord shall have the same remedies as upon any other default. Said interest shall be in addition to any other rights and remedies provided to Landlord pursuant to the terms of this Lease and as allowed by law.

b.

CAM Charges . Tenant shall pay as additional rent to Landlord a proportionate share of the costs and expenses of maintaining and operating said space (excluding the 350 square feet in the basement level) as described in attached Exhibit B . Commencing the first day of first calendar month within the term of this Lease, Tenant shall pay calendar monthly operating charges in the amount of $1,043.63 which is calculated to be the Tenant’s proportionate share of the costs and expenses in maintaining and operating the said space including Tenant’s proportionate share of taxes, special assessments, snow removal, lawn care, and common area maintenance expense until the termination of the original term of this Lease. The space located in the basement will not be charged any CAM Fees.

1.7

Option to Extend Lease . Tenant shall have three (3) options to extend the Lease for three (3) consecutive terms of six months each subject to the following terms and conditions:

a.

Landlord hereby grants Tenant the sole and exclusive option to extend the Lease for a period of time commencing January 1, 2006, until the earlier of:

1.

Tenant’s default under this Lease Agreement and failure to timely cure the same;

2.

Termination of this Lease Agreement; or

3.

June 30, 2007

•

Option 1/1/06 – 6/30/06

b.

Tenant must timely exercise its option to extend the Lease for an additional term of 6 months of January 1, 2006 through June 30, 2006, by giving the Landlord notice. Notice of the Tenant’s election to exercise its option to extend the Lease must be given or served and shall be deemed duly served and said option deemed duly exercised if the written notification and exercise of the option is delivered personally or mailed by registered or certified mail and actually received by the Landlord any time from July 1, 2005 and before October 1, 2005. The Tenant’s extension of the Lease shall be premised upon the same terms and conditions of the original Lease except the fixed rent for the period of time January 1, 2006 through June 30, 2006, shall be $4,813.33 per month plus any additional increase in the common area maintenance (CAM Expense). The rent is calculated at $10.00 per square foot times 5,566 square feet of Usable Space and the $175/mo for the 350 square feet for the basement space divided by 12 months plus the previous Cam Expense of $2.25 per square foot times 5,566 square feet divided by 12 plus any increase in the Cam Expense. On or before December 31, 2005, and only if Tenant at that time exercise its option to extend the term and lease, Landlord shall provide Tenant with new CAM Area Expense. CAM Area Expense will not exceed the sum of $2.63 per square foot during the calendar year 2006 in the event that Tenant extends its Lease hereunder.

•

Option 7/1/06 – 12/31/06

c.

Tenant to timely exercise its option to extend the Lease for an additional term of 6 months, July 1, 2006 through December 31, 2006, Tenant must give Landlord notice. Notice of the Tenant’s election to exercise its option to extend the Lease must be given or served and shall be deemed duly served and said option deemed duly exercised if the written notification and exercise of the option is delivered personally or mailed by registered or certified mail and actually received by the Landlord any time from January 1, 2006 and before April 1, 2006.

•

Option 1/1/07 – 6/30/07

d.

For Tenant to timely exercise its option to extend the Lease for an additional term of 6 months, January 1, 2007 through June 30, 2007, Tenant must give Landlord notice. Notice of the Tenant’s election to exercise its option to extend the Lease must be given or served and shall be deemed duly served and said option deemed duly exercised if the written notification and exercise of the option is delivered personally or mailed by registered or certified mail and actually received by the Landlord any time from July 1, 2006 and before October 1, 2006.

1.8

Security Deposit . Upon the execution of this Lease, Tenant shall provide Landlord with a security deposit in the amount of $5,000.00. Said security deposit shall be tendered to the Landlord and shall be utilized by the Landlord to offset any damages caused by Tenant to the premises and/or failure of the Tenant to pay rent and shall be applied upon termination of the Lease in question. Tenant is not authorized to utilize security deposit for the last month’s rent due under this Lease or any extension thereof.

1.9

The security deposit tendered to Landlord shall not accrue interest. Upon termination of the Lease by Tenant and in the event that Tenant has not caused Landlord any damages and has not failed to tender rent when due, Landlord shall return to Tenant within 30 days of the termination of the Lease the security deposit without interest. Otherwise, Landlord will deduct from the security deposit all damages caused by Tenant including past due rent and returned to Tenant within 30 days after termination of the Lease the remaining balance of the deposit.

1.10

Business Use . The Leased Premises shall be used and occupy by Tenant for any lawful purpose, such use and the occupancy shall be in compliance with all applicable laws, ordinances, and governmental regulations, provided however that Tenant and/or its assigns shall in no event use the Leased Premises for adult entertainment, the sale of alcohol or other similar disreputable uses.

1.11

Conduct of Business . Tenant agrees that during the term of this Lease, Tenant shall not use sidewalks or the parking lot for Tenant conducting of business except for ingress, egress. Landlord shall not obstruct any of the roadways extending through the common areas surrounding the Building.

1.12

Care of Premises . Tenant shall, at its expense, keep the leased premises, including windows, and loading platforms in a reasonably clean, safe and sanitary condition, conform to applicable laws, ordinances, regulations, and code with respect to Tenant’s operation at the Leased Premises, and remove regularly all trash and garbage, replace broken glass and exterior and interior windows and doors with glass of the same quality and upon Landlord’s request, remove any encroachments maintained or authorized by it on any public place without Landlord’s written consent.

1.13

Repairs .

a.

Landlord’s Duties . Landlord shall keep only the foundations and subflooring, the four outer walls, and the roof and roof drains (including roof coverings, flashings, awnings, and drainpipes), the structural elements of the Building, the sprinkler system and pumps, soils and drainage, and downspouts and gutters of the Leased Premises, and the integrity of the paved areas, including but not limited to, concrete

truck ramps, employee parking areas, and roadways, in good repair, ordinary wear and tear excepted (“Landlord Items”). Landlord will be responsible for keeping the common area reasonably clean consistent with the first class business operation and will be responsible for all snow removal, lawn care and common area repairs. Landlord will be responsible for timely payment of all taxes and special assessments relating to the Building. Landlord, at its sole cost and expense, shall repair and maintain the Landlord Items at all times in good order, condition and repair of equal quality and class with the original work as of the commencement hereof, and be responsible for compliance with all laws, directions, rules and regulations of regulatory bodies or officials have jurisdiction in that regard. During the initial term of this Lease, Landlord, at its sole cost and expense, shall be responsible for all repairs and replacements of all waterlines, electricity, heat, HVAC, plumbing, and all other utilities and services inside the Leased Premises as those items exist as of the Effective Date (excluding any improvements, modifications or additions made by Tenant), except as caused by the negligence of Tenant.

b.

Except as otherwise as provided in this Lease, Tenant shall keep the Leased Premises at all times in good order, condition, and repair of equal quality and class with the original work as performed by Landlord, ordinary wear and tear excepted, and maintain the Leased Premises at Tenant’s own expense and accordance with all laws, directions, rules and regulations of regulatory bodies or officials have jurisdiction in that regard. If Tenant refuses or neglects to commence repairs within 10 days after written demand or adequately to complete said repairs within a reasonable time thereafter, Landlord shall make the repairs without liability to Tenant for any loss or damages it may accrue to the Tenant’s stock or business by reason thereof and if Landlord makes such repair, Tenant shall pay to Landlord, on demand, as additional rent, and the costs thereof. Except as provided herein, Tenant shall be responsible for all repairs and replacements of all waterlines, electricity, heat, HVAC, plumbing, and all other utilities and services associated with Tenant’s use and occupancy of the Leased Premises located inside the Leased Premises. Landlord, at its sole cost and expense, will be responsible for maintenance and any repairs to water, electrical, and other utilities service connections and lines running from the exterior of the office building up to the time of entry of the Tenant’s Leased Premises. Landlord shall be responsible for delivery of reasonable quantities of water, electrical and other utilities to the Leased Premises. Provided that the Leased Premises are separately metered, Landlord shall not be responsible or bear any cost for any increase in the electrical service provided to Tenant because of the Tenant’s operations.

1.14

Signs and Display Windows . Landlord, at its sole cost and expense, shall be responsible for design, installation and maintenance of a multi-tenant sign that is visible from 42 ^nd Street SW and 17 ^th Avenue. Tenant shall be displayed equally prominent with other tenants of the Building. Landlord shall submit to Tenant for approval, drawing showing all proposed sign work to be erected in connection with the Building including lettering and other advertising media upon the doors and windows showing Tenant and other tenants of the Building. Landlord’s approval shall not be unreasonably withheld, conditioned or delayed. No advertising medium should be used so as to be a nuisance or menace to Landlord or other tenants. The cost of installing, maintaining, changing and removing all signs shall be borne by the Tenant. Tenant’s rights and respective signs shall not be transferable separate from this Lease.

1.15

Alterations and Fixtures . Except as herein provided, Tenant shall not make any structural alterations or additions to the Leased Premises without Tenant first obtaining Landlord’s written approval of plans and specifications and only upon furnishing such indemnification against liens, costs, damages and expenses as Landlord may reasonably require. Landlord acknowledges its consent to the improvements made by Tenant concurrent with the execution of this Lease (“Initial Improvements”). Tenant shall make said structural repairs at its own cost and expense. Before termination of the Lease, Tenant must remove all of its trade fixtures, equipment, and personal property from the premises and restore the premises to the original condition therein at the time of leasing the premises except reasonable wear and tear excepted. Any work stations installed by Tenant, walls, or other alterations made to the premises with the Landlord’s consent must either be removed and restored to the original condition as to the commencement of the lease or, with the Landlord’s permission, may remain on the premises. Landlord acknowledges that Tenant has no obligation to remove the Initial Improvements or to restore that portion of the Leased Premises to its

original condition, provided however that Tenant must remove its trade fixtures, equipment and personal property from the premises. The parties acknowledge that Tenant will be installing various equipment, machinery, and other property used solely in Tenant’s business and Tenant may remove the same prior to the expiration of the lease.

1.16

In the event that the lease is terminated and Tenant has refused or has failed to remove its personal property from the premises, the Landlord may remove said property of the Tenant to the Landlord’s basement area or to a offsite storage facility and will retain the same for one (1) month. The Tenant may retrieve the same from the Landlord upon paying the Landlord’s costs of removal and cost of storage and administrative expenses involved in the same. After one (1) month of the equipment being in storage, the Landlord shall have the right to sell the same without an accounting to the Tenant, and shall refund to Tenant the excess of any proceeds after deducting for Landlord’s costs of removal and cost of storage and administrative expenses involved in the same.

1.17

Public Liability . During the occupancy of the Leased Premises by the Tenant, Tenant shall keep in full force and effect at its expense a policy or policies of public liability insurance with respect to the Leased Premises and the business of Tenant and any sub-tenant, licensee or concessionaire, with companies reasonably acceptable to Landlord, in which both Tenant and Landlord shall be adequately covered under reasonable limits liability not less than $500,000.00 for injury or death to any one person and $1,500,000.00 with respect to damage to property. Landlord shall be named on said policy as an additional insured.

1.18

Fire Insurance Provisions.

a.

Landlord represents and warrants that Tenant’s operations do not in any way impair or invalidate the obligation of any policy of insurance and that no increases in premium’s for insurance are caused resulting from the business carried on in the Leased Premises by Tenant. In the event Tenant changes the nature and scope of its operations that causes an increase in hazard exposure, such change will not impair or invalidate the obligation of any policy of insurance on or in reference to the Leased Premises or the building in which the Leased Premises are situated. Tenant agrees to pay upon demand as additional rent, any increase in premiums for insurance that may be charged during the term of this Lease on the amount of insurance to be carried by Landlord on the Leased Premises or entire building premises, resulting from Tenant’s change in the nature and scope of its operations that causes an increase in hazard exposure in the Leased Premises by Tenant.

1.19

Deliveries, Parking Lot . All loading and unloading and all removal of garbage and refuse shall be made in accordance with regulations reasonably adopted by Landlord. Tenant and its employees and agents shall park cars only in areas designed from time to time by Landlord as employees’ parking areas. Landlord shall designate fifteen (15) contiguous parking spots close to the Leased Premises for Tenant’s employees and/or visitors in a location to be agreed by the parties. Trucks or delivery vehicles shall not be parked so as to inconvenience other tenants or impede access to the parking lot by customers or invitees.

1.20

Covenants to Hold Harmless . Unless the liability for damage or loss is caused by the negligence of Landlord, its agents, or employees, Landlord shall be held harmless by Tenant from any liability for damages to any person or property in or upon Leased Premises caused by the negligence of Tenant. All property kept, stored or maintained in the Leased Premises shall be so kept, stored, or maintained at the sole risk of Tenant. Tenant agrees to pay all sums of money in respect of any labor, services, materials, supplies or equipment furnished or alleged to have been furnished to Tenant in or about the Leased Premises which may be secured by any Mechanic’s, Materialsmen’s or other lien against the Leased Premises or the Landlord’s interest therein and will cause each such lien to be discharged at the time performance of any obligation secured thereby matures, provided that Tenant may contest such lien, but if such lien is reduced to final judgment and if such judgment or process thereon is not stayed, or if stayed and said stay expires, then and in such event Tenant shall forthwith pay and discharge said judgment. Landlord shall have the right to post and maintain on the Leased Premises, notice of non-responsibility under the laws of North Dakota.

1.21

Assignment or Subletting . Except as provided in this Section 1.21, Tenant agrees not to sell, assign, mortgage, pledge, or in any manner transfer this Lease or any estate or interest thereunder and not to sublet the Leased Premises or any part or parts thereof and not to permit any license or concessionaire therein without the previous written consent of Landlord in each instance, which shall not be unreasonably withheld, conditioned or delayed. Tenant shall have the right, upon written notice to Landlord, assign or otherwise transfer its rights or obligations under this Lease Agreement in the event of a merger, acquisition, reorganization or sale of all or substantially all of the assets of Tenant. Consent by Landlord to one assignment of this Lease or to one subletting of the Leased Premises which assignment shall not be unreasonably withheld, shall not be a waiver of Landlord’s rights under this Section as to any subsequent assignment or subletting.

1.22

Access To Premises . Landlord reserves the right to enter upon the Leased Premises at reasonable business hours, with not less than twenty-four hours advance notice (except in the event of emergency), to inspect the same, or to make repairs, additions or alterations to the Leased Premises or other property, or to exhibit the premises to prospective tenants or purchasers or others related to a lease or purchase, to enter at any time in the event of an emergency, and to display during the last ninety (90) days of the term, without hindrance or molestation by Tenant, “For Rent” or similar signs on windows or doors in the Leased Premises.

1.23

Utility Services .

a.

Gas and Electricity . Landlord agrees to cause mains, conduits, and other facilities to be provided and maintained to supply gas and electricity to the Leased Premises by a separate meter or to nearby places, and Tenant shall maintain the same within the Leased Premises. Tenant shall pay, when billed, for all gas and electricity used in the Leased premises. If Tenant shall use gas or electricity for any purpose in the Leased Premises and if Landlord shall elect to supply the service or services used, Tenant shall accept and use the same as tendered by Landlord and pay therefore, when billed, as additional rent, at the applicable rates filed with the proper regulating authority, and in effect, of if not required to be so filed, or if not in effect, then at rates prevailing in the nearby vicinity for similar service.

b.

Interruption of Service . Landlord shall not be liable in damages or otherwise if the furnishing by Landlord or by any other supplier or any utility service or other service to the Leased Premises shall be interrupted or impaired by fire, accident, riot, strike, act of Godor by any causes beyond Landlord’s control.

1.24

Landlord Covenants . Landlord covenants and agrees that as of the commencement date the Leased Premise is in full compliance with all applicable laws, rules, regulations, codes, and ordinances of all local, state, federal and other governmental and quasi-governmental authorities having jurisdiction over the Leased Premises. In the event that the use or occupancy of the Leased Premises by Tenant for the aforesaid purposes is hereafter impeded, limited or prohibited by any restriction, condition or covenant in the chain of title or by any zoning ordinance or other municipal or governmental statute law, order, rule or regulation, or in the event that either Landlord or Tenant is unable to secure and retain the necessary licenses and permits to use the Leased Premises as aforesaid, then and in any of such events, Tenant, in addition to all other rights and remedies provided by law, may, at its election, terminate this Lease by giving Landlord five (5) days written notice of such termination, in which case, upon such termination, Tenant shall surrender possession of the Leased Premises to Landlord and the rent and other sums payable hereunder by either party shall be prorated on a per diem basis to the date of termination and adjusted between Landlord and Tenant and, upon receipt of payment by the party due to be paid under such adjustment, this Lease shall be null and void with no further obligations, rights or duties surviving between the parties hereto.

1.25

Landlord Taxes . Tenant shall not be required to pay any municipal, county, state, or federal income or franchise taxes of Landlord, or any municipal, county, state, or federal estate, succession, inheritance, or transfer taxes of Landlord. Tenant shall not be liable for increases in real property taxes that result from changes in ownership of the Leased Premises.

1.26

Waiver of Subrogation . Landlord and Tenant each waive any right to recover against the other on account of any and all claims Landlord or Tenant may have against the other with respect to property insurance actually carried, or required to be carried hereunder.

II.

HAZARDOUS WASTE

2.0

Tenant’s Obligations . Tenant covenants and agrees that Tenant shall at all times from and after delivery of possession of the property to Tenant, be responsible and liable for, and be in complete and strict compliance with, all “Governmental” laws, ordinances rules and regulations relating to the use by Tenant of hazardous materials at the Leased Premises. The term “