rental shall be paid to Landlord, without deduction or offset in lawful money of the United States of America, which shall be legal tender at the time of payment in Tacoma, Washington, or to such other person or at such other place as Landlord may from time to time designate in writing.  On the first day of the fifth lease year, and annually thereafter, the then current fixed monthly rental shall be increased but in no event decreased by the percentage by which the U.S.  All Urban Consumer Price Index (1982-1984 equals 100) (“Index”), as published by the U.S. Department of Labor, Bureau of Labor Statistics, for the previous calendar month, shall have increased from the said price index for 12 months prior.  In the event the said Index shall hereafter he converted to a different standard reference base or otherwise revised, the determination of the percentage increase shall be made with the use of such conversion factor, formula or table for converting the Index as may be published by the Bureau of Labor Statistics.  In the event the Index shall cease to be published, then, for the purposes of this paragraph, there shall be substituted for the Index such other Index as Landlord and Tenant shall agree upon, and, if they are unable to agree within ninety (90) days after the Index ceases to he published, such matters shall be determined by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association.  Rent for any period during the term hereof which is for less than one (1) month shall be a prorated portion of the monthly installment herein, based upon a thirty- (30) day month.  Rental shall be paid to Landlord, c/o Kellis Commercial Inc., 2115 S. 56th St. Suite 205, Tacoma, WA, 98409, without deduction or offset.  In addition to the base rental described herein, Tenant agrees to pay Landlord the following additional rental:

(a)           Whenever, for any calendar year, Landlord’s estimated operating expenses of the Building, as defined herein, are greater than the actual operating expenses for the base year which is 2000, then in addition to the monthly rental described above, Tenant shall pay such increased expenses as additional rent.  Payments shall be increased effective January 1, and on the same date of each month thereafter, by an amount equal to one-twelfth (1/12th) of the estimated increase in operating expenses.

(b)           The term “operating expenses,” as used herein, shall mean any and all expenses, costs and amounts incurred by the Landlord in connection with the ownership, servicing, operation, maintenance, repair and/or management of the Building, and related exterior appurtenances, and the cost of any services or capital expenditures incurred in order to achieve a reduction of any operating expenses (such capital expenditures shall be amortized over the useful life of the relevant improvements) and shall include real estate taxes.  Operating expenses shall include the following costs by way of illustration, but no limitation; real estate taxes and assessments levied on the Building and the real property upon which the Premises is located; utilities and services; insurance premiums (provided, in the event that at any time during the term hereof Landlord obtains insurance not carried during the base year, only the increase over what such policy would have cost during such base year, as reasonably determined by Landlord, shall be included as an operating expense); licenses, permits and inspection fees; accounting, legal, inspection, consulting and other services; wages, salaries and other compensation and benefits for all persons engaged in the operation, maintenance or security of the Premises; operation, repair and maintenance of all systems and equipment and components thereof, including replacement of components, janitorial service, alarm and security service, window cleaning, trash removal, elevator maintenance, if any, cleaning of walks, parking facilities and building walls, removal of ice and snow, replacement of wall and floor coverings, ceiling tiles and fixtures in lobbies, corridors, bathrooms and other common or public areas or facilities, maintenance and replacement of shrubs, trees, grass, sod and other landscaped items, irrigation

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systems, drainage facilities, fences, curbs, and walkways, re-paving and re-striping parking facilities, and roof repairs; and all other costs of maintenance and management of the Building.  Operating expenses shall not include capital improvements (other than those specified in the third line of this subparagraph above); expenses of painting, decorating and alteration of other than public areas; interest and amortization of mortgages; depreciation of the Building; income or franchise taxes or other such taxes imposed or measured by the net income of the Landlord from operation of the Building and related exterior appurtenances.  “Operating Expenses” shall also not include and Tenant shall in no event have any obligation to perform or to pay directly, or to reimburse Landlord for, all or any portion of the following:  (a) costs occasioned by the act, omission or violation of current and existing law by Landlord, or their respective agents, employees or contractors; (b) costs to correct any construction defect in the Premises or the Building or to comply with any CC&Rs requirement or law applicable to the Premises or the Building in effect on the Commencement Date; (c) insurance deductibles or other costs occasioned by casualty in excess of $50,000 with respect to any single claim; and (d) costs incurred in connection with the presence of any Hazardous Material, except to the extent caused by the use, release or emission of the Hazardous Material in question by Tenant.  If the operating expenses in the base year are not based on a fully leased Building, then such amounts shall be increased to reflect a fully leased Building.

(c)           The parties agree that Tenant’s pro rata share of operating expenses shall be         %, representing the ratio that the approximate rentable area of the space contained in the Building.

(d)           Within forty-five (45) days following the end of each calendar year, Landlord shall furnish to Tenant a statement certified as correct by an officer of Landlord, showing the operating expenses incurred by Landlord during such period.  If Tenant’s pro rata share of operating expenses incurred shall exceed the payments made, Tenant shall pay Landlord the deficiency within ten (10) days after receipt of such statement.  If Tenant’s payments exceed the operating expenses.  Tenant may offset the excess against estimated operating expense rental payments next coming due.  Tenant may audit the books, records and supporting documents of Landlord to the extent necessary to determine the accuracy of the foregoing statement during normal business hours.  Such audit, if           will occur within one hundred eighty (180) days after Tenant receives such notice.  Tenant shall bear the cost of such audit, unless such audit discloses             Landlord has overstated Tenant’s pro rata share of operating expenses by more than ten percent (10%) of the actual amount of such costs, in which event Landlord shall pay the cost of Tenant’s audit.  Landlord shall promptly refund any overcharges to Tenant.

(e)           If the Commencement Date is other than January 1, or if the termination date is other than December 31, Tenant’s proportionate share of any increased operating expense for such year shall be pro rated based upon a 365 day year.

(f)            Even though the term has expired and Tenant has vacated the Premises, when the final determination is made of Tenant’s proportionate share of operating expenses for the year in which this Lease terminates, Tenant shall pay any increase due over the estimated expenses paid and conversely any       payment, less any amounts due Landlord hereunder, shall be rebated by Landlord to Tenant.

6. SECURITY DEPOSIT

As partial consideration for the execution of this Lease, the Tenant has this day paid the Landlord the sum of $2,550.20, the receipt of which is hereby acknowledged.  If Tenant defaults with respect to any provision of this Lease beyond applicable notice and cure periods, including,

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but not limited to the provisions relating to the payment of rent, Landlord may (but shall not be required to) use, apply or retain all or any part of said deposit for the payment of any rent or any other sum in default, or for the payment of any amount which Landlord may spend or become obligated to spend by reason of Tenant’s default, or to compensate Landlord for any other loss or damage which Landlord may suffer by reason of Tenant’s default.  If any portion of said deposit is so used or applied, Tenant shall within five (5) days after written demand therefore, deposit cash with Landlord in an amount sufficient to restore said deposit to its original amount and Tenant’s failure to do so shall be a material breach of this Lease.  Landlord shall not be required to keep said deposit separate from its general funds, and Tenant shall not be entitled to interest on said deposit.  Tenant agrees that Landlord is not a trustee of said deposit and may commingle it, use it in ordinary business, transfer or assign it, or use it in any combination of those ways.  If Tenant is not in default beyond applicable notice and cure periods, said deposit shall be credited on the payment of the last month’s minimum rental of the term of this Lease or to any outstanding sum owed to Landlord by Tenant at the expiration of this Lease.

7. USE

Tenant shall use the Premises for telephone switching equipment and general office purposes including marketing, sales and customer services and shall not use or permit the Premises to be used for any other purpose without the prior written consent of Landlord.

Tenant shall not do or permit anything to be done in or about the Premises nor bring or keep anything therein which will in any way (a) increase the existing rate of or affect any fire or other insurance upon the Building or any of its contents, unless Tenant obtains the prior written consent of Landlord and Tenant pays such increase or (b) cause cancellation of any insurance policy covering said Building or any part thereof or any of its contents.  Tenant shall not do or permit anything to be done in or about the Premises which will in any way obstruct or interfere with the rights of other tenants or occupants of the Building or injure or annoy them or use or allow the Premises to be used for any improper, immoral, unlawful or objectionable purpose, nor shall Tenant cause, maintain or permit any nuisance in, on or about the Premises.  Tenant shall not commit or suffer to be committed any waste in or upon the Premises.

8. COMPLIANCE WITH LAW

Tenant shall not use the Premises or permit anything to be done in or about the Premises which will in any way conflict with any law, statute, ordinance or governmental rule or regulation now in force or which may hereafter be enacted or promulgated.  Tenant shall, at its sole cost and expense, promptly comply with all laws, statutes, ordinances and governmental rules, regulations or requirements now in force or which may hereafter be in force, and with the requirements of any board of fire insurance underwriters or other similar bodies now or hereafter constituted, relating to, or affecting the condition, use or occupancy of the Premises, excluding the making of structural changes not related to or affected by Tenant’s improvements or acts (which shall be the responsibility of Landlord).  The judgment of any court of competent jurisdiction or the admission of Tenant in any action against Tenant,       her Landlord be a party thereto or not, that Tenant has violated any law, statute, ordinance or governmental rule, regulation or requirement, shall be conclusive of that fact as between the Landlord and Tenant.  Landlord warrants and represents that, as of the date hereof, to the best of Landlord’s knowledge, the Premises and the Building comply with all applicable laws, rules, regulations, codes, and ordinances.

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9. ALTERATIONS AND ADDITIONS

Tenant shall not make or suffer to be made any alterations, additions or improvements to or of the Premises or any part thereof without the written consent of Landlord first had and obtained and any alterations, additions or improvements to or of said Premises, including, but not limited to, wall covering, paneling and built-in cabinet work, but excepting movable furniture and trade fixtures, shall on the expiration of the term become a part of the realty and belong to the Landlord and shall be surrendered with the Premises.  In the event Landlord consents to the making of any alterations, additions or improvements to the Premises by Tenant, the same shall be made by Tenant at Tenant’s sole cost and expense, and any contractor or person selected by Tenant to make the same must first be approved of writing by the Landlord.  Upon the expiration or sooner termination of the term hereof, Tenant shall, upon written demand by Landlord, given at least thirty (30) days prior to the end of the term, at Tenant’s sole cost and expense, forthwith and with all due diligence remove any alterations, additions, or improvements made by Tenant, designated by Landlord to be removed, and Tenant shall, forthwith and with all due diligence at its sole cost and expense, repair any damage to the Premises caused by such removal.  Landlord hereby consents to the Tenant Improvements set forth on the space plan on Attachment 1 attached hereto, which shall be at Tenant’s sole cost and expense.  In addition, Tenant may construct nonstructural alterations in the Premises without Landlord’s prior approval; provided that (a) the cost of any project does not exceed $5,000.00; and (b) Tenant shall give Landlord prior notice of such improvements as required by Article 11 hereof.  Trade fixtures, furniture, equipment and other personal property installed by the Tenant in the Premises (“Tenants Property”) shall at all times be and remain Tenant’s property.  Tenant may at any time remove Tenant’s Property from the Premises, provided that Tenant repairs all damage caused by such removal and Tenant is not then in default under this Lease.

10. REPAIRS

a.             By taking possession of the Premises, Tenant shall be deemed to have accepted the Premises in its present condition.  Tenant shall, at Tenant’s sole cost and expense, keep the Premises and every part thereof in good condition and repair, damage thereto from causes beyond the reasonable control of Tenant and ordinary wear and tear excepted.  Tenant shall upon the expiration or sooner termination of this Lease hereof surrender the Premises to the Landlord in good condition, ordinary wear and tear and damage from causes beyond the reasonable control of Tenant excepted.  Landlord shall have no obligation whatsoever to alter, remodel, improve, decorate or paint the Premises or any part thereof and the parties hereto affirm that Landlord has made no representations or warranties to Tenant respecting the condition of the Premises or the Building except as specifically herein set forth.

b.             Notwithstanding the provisions of Article 10.a. hereinabove, Landlord shall repair and maintain the structural portions of the Building, including, without limitation, the roof, foundation, floor slab, exterior walls and interior structural supports and the basic plumbing, air-conditioning, heating, and electrical systems, installed or furnished by Landlord, unless such maintenance and repairs are caused in part or in whole by the act, neglect, fault or omission of any duty by the Tenant, its agents, servants, employees or invitees, in which case Tenant shall pay to Landlord the all costs of such maintenance and repairs.  Tenant shall maintain any air conditioning, heating or electrical systems installed by Tenant or necessary for Tenant beyond the basic systems currently on the Premises.  Landlord shall not be liable for any failure to make any such repairs or to perform any maintenance unless such failure shall persist for an unreasonable time after written notice of the need of such repairs or maintenance is given to

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Landlord by Tenant.  Except as provided in Article 21 hereof, there shall be no abatement of rent and no liability of Landlord by reason of any injury to or interference with Tenant’s business arising from the making of any repairs, alterations or improvements in or to any portion of the Building or the Premises or in or to fixtures, appurtenances and equipment therein, Tenant waives the right to make repairs at Landlord’s expense under any law, statute or ordinance now or hereafter in effect.

c.             In the event Landlord fails to perform any of its obligations herein or under the Lease and (except in case of emergency posing an immediate threat to persons or property, in which case no prior notice shall be required) fails to cure such default within thirty (30) days after written notice from Tenant specifying the nature of such default where such default could reasonably be cured within said thirty (30) day period, or fails to commence such cure within said thirty (30) day period and thereafter continuously with due diligence prosecute such cure to complete where such default could not reasonably be cured within said thirty (30) day period, then Tenant shall have the right, but not the obligation, to cure such default and to demand reimbursement by landlord of the cost of such cure, with interest thereon at the rate of ten percent (10%) per annum from the date of the expenditure until repaid.

11. LIENS

Tenant shall keep the Premises and the real property on which the Premises are situated free from any liens arising out of any work performed, materials furnished or obligations incurred by Tenant.  Tenant shall provide Landlord with at least ten (10) days notice of any alterations that Tenant will make to the Premises in order that Landlord may post notices of nonresponsibility with respect to such alterations.  Tenant shall immediately cause any lien on the Building in connection with alterations made by Tenant to be discharged or removed of record by either paying the amount thereof or obtaining a lien release bond in an amount equal to one hundred fifty percent (150%) of the amount of said lien.

12. ASSIGNMENT AND SUBLETTING

Tenant shall not either voluntarily or by operation of law, assign, transfer, mortgage, pledge, hypothecate or encumber this Lease or any interest therein, and shall not sublet the Premises or any part thereof, or any right or privilege appurtenant thereto, or suffer any other person (the employees, agents, servants and invitees of Tenant excepted) to occupy or use the Premises, or any portion thereof, without the written consent of Landlord first had and obtained, which consent shall not be unreasonably withheld, and a consent to one assignment, subletting, occupation or use by any other person shall not be deemed to be a consent to any subsequent assignment, subletting, occupation or use by another person.  Any such assignment or subletting without such consent shall be void, and shall, at the option of the Landlord, constitute a default under this Lease, except however, Tenant may, with prior notice, but without Landlord’s prior written consent, sublet the Premises or assign the Lease to (a) a subsidiary, affiliate division or corporation controlling, controlled by or under common control with Tenant, (b) a successor corporation related to Tenant by merger, consolidation, or non bankruptcy reorganization, or (c) the purchaser of substantially all of Tenant’s assets.  A sale or transfer of Tenant’s capital stock shall not be deemed an assignment, subletting or any other transfer of the Lease.

13. HOLD HARMLESS

Except to the extent of the negligence or willful misconduct of Landlord or its’ agents, contractors or invitees, Tenant shall indemnify and hold harmless Landlord against and from any

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and all claims arising out of or in connection with Tenant’s use or occupancy of the Premises or from any activity, work, or other thing done, permitted or suffered by the Tenant in or about the Building, and shall further indemnify and hold harmless Landlord against and from any and all claims arising from any breach or default in the performance of any obligation on Tenant’s part to be performed under the terms of this Lease, or arising from any act or negligence of the Tenant, or any officer, agent, employee, guest, or invitee of Tenant, and from all and against all costs, attorney’s fees, expenses and liabilities incurred in or about any such claim or any action or proceeding brought thereon, and, in any case, action or proceeding be brought against Landlord by reason of any such claim, Tenant upon notice from Landlord shall defend the same at Tenant’s expense by counsel reasonably satisfactory to Landlord.

Landlord or its agents shall not be liable for any damage to property entrusted by Tenant to agents or employees of Landlord (i.e., janitorial help), nor for loss or damage to any property by theft or otherwise, nor for any injury to or damage to persons or property resulting from  fire, explosion, falling plaster, steam, gas, electricity, water or rain which may leak from any part of the Building or from the pipes, appliances or plumbing works therein or from the roof, street or subsurface or from any other place resulting from dampness or any other cause whatsoever, except to the extent of the negligence or willful misconduct of Landlord or its’ agents, contractors or invitees.  Landlord or its agents shall not be liable for interference with the light or other incorporeal hereditaments, loss of business by Tenant, nor shall Landlord be liable for any latent defect in the Premises or in the Building.  Tenant shall give prompt notice to Landlord in case of fire or accidents in the Premises or in the Building or of defects therein or in the fixtures or equipment.

Tenant agrees to defend and hold harmless Landlord from any and all claims for damages suffered or alleged to be suffered in or about the Premises, by any employee or other person, or any firm or corporation, except to the extent of the negligence or willful misconduct of Landlord or it’s agents, contractors or invitees.

14. INSURANCE/SUBROGATION

Landlord shall maintain “all risk” property insurance insuring against risk of loss or damage to the Premises for the full replacement cost thereof.  Notwithstanding anything to the contrary herein or in the Lease, the parties hereto release each other and their respective agents, employees, successors and assigns from all liability for damage to any property that is actually covered by property insurance in force or which would normally be covered by full replacement value “all risk” property insurance, without regard to the negligence or willful misconduct of the entity so released.  Each party shall cause each insurance policy it obtains to include a waiver of subrogation regarding the liabilities released hereby.  All of Landlord’s and Tenant’s repair and indemnity obligations under the Lease shall be subject to the waiver contained in this paragraph.

15. LIABILITY INSURANCE

Tenant shall, at Tenant’s expense, obtain and keep in force during the term of this Lease a policy of comprehensive public liability insurance with minimum amounts of $1,000,000.00 per Occurrence and an aggregate limit of $2,000,000.00 for property damage, and combined limits of $1,000,000.00 per Occurrence and an aggregate limit of $2,000,000.00 per individual and per incident for personal and bodily injury, insuring Landlord and Tenant against liability arising out of the ownership, use, occupancy or maintenance of the Premises and all areas appurtenant thereto.  The limit of said insurance shall not, however, limit the liability of the Tenant hereunder.  Tenant may carry said insurance under a blanket policy, providing, however, said

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insurance by Tenant shall list Landlord as Primary Additional Insured.  If Tenant shall fail to procure and maintain said insurance, Landlord may, but shall not be required to, procure and maintain same, but at the expense of Tenant.  Insurance required hereunder, shall be in companies rated A-VII or better in “Best’s Insurance Guide”.  Tenant shall deliver to Landlord prior to occupancy of the Premises copies of policies of liability insurance required herein or certificates evidencing the existence and amounts of such insurance with loss payable clauses satisfactory to Landlord naming Landlord as Primary Additional Insured.  No policy shall be cancelable or subject to reduction of coverage except after thirty (30) days prior written notice to Landlord.  Tenant shall also at its own expense maintain, during the Lease Term, and at any time prior to the Lease Term commencing with the date on which the Tenant is given possession of the Premises for any reason, insurance covering its furniture, fixtures, equipment, all leasehold improvements and inventory in an amount equal to not less than 100% of the full replacement value thereof.

16. SERVICES AND UTILITIES

Landlord agrees to furnish to the Premises during reasonable hours of generally recognized business days, to be determined by Landlord at its reasonable discretion, and subject to the rules and regulations of the Building of which the Premises are a part, water, refuse services and sanitary sewer.  Landlord shall also maintain and keep lighted the common stairs, common entries and wash exterior windows of the Building of which the Premises are a part.  Landlord shall not be liable for, and Tenant shall not be entitled to, any reduction of rental by reason of Landlord’s failure to furnish any of the foregoing when such failure is caused by accident, breakage, repairs, strikes, lockouts or other labor disturbances or labor disputes of any character, or by any other cause, similar or dissimilar, beyond the reasonable control of Landlord.  Landlord shall not be liable under any circumstances for a loss of or injury to property, however occurring, through or in connection with or incidental to failure to furnish any of the foregoing.  Wherever heat generating machines or equipment are used in the Premises which affect the temperature otherwise maintained by the air conditioning system, Landlord reserves the right to install supplementary air conditioning units in the Premises and the cost thereof, including the cost of installation, and the cost of operation and maintenance thereof shall be paid by Tenant to Landlord upon demand by Landlord.  Tenant shall provide and pay for janitorial service to the Premises arrange for and separately meter and pay for electrical service and shall replace lamps in all light fixtures within the Premises.

17. PROPERTY TAXES

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

18. RULES AND REGULATIONS

Tenant shall faithfully observe and comply with the rules and regulations that Landlord shall from time to time promulgate.  Landlord reserves the right from time to time to make all reasonable modifications to said rules.  The additions and modifications to those rules shall be

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binding upon Tenant upon delivery of a copy of them to Tenant.  Landlord shall not be responsible to Tenant for the nonperformance of any said rules by any other tenants or occupants.

19. HOLDING OVER

If Tenant remains in possession of the Premises or any part thereof after the expiration of the term hereof, such occupancy shall be a tenancy from month to month, terminable on thirty (30) days written notice from either party to the other, at a rental in the amount of 125% of the last monthly rental, plus all other charges payable hereunder, and upon all the terms hereof applicable to a month to month tenancy unless so modified and/or extended by Landlord in writing and attached to said Lease.

20. ENTRY BY LANDLORD

Landlord reserves and shall at any and all time, upon twenty-four hour advanced notice to the Tenant, have the right to enter the Premises, inspect the same, supply any service to be provided by Landlord to Tenant hereunder, to submit said Premises to prospective purchasers or tenants to post notices of non-responsibility, and to alter, improve or repair the Premises and any portion of the Building of which the Premises are a part that Landlord may deem necessary or desirable, without abatement of rent and may for that purpose erect scaffolding and other necessary structures where reasonably required by the character of the work to be performed, always providing that the entrance to the Premises shall not be blocked thereby, and further providing that the business of the Tenant shall not be interfered with unreasonably.  Tenant hereby waives any claim for damages or for any injury or inconvenience to or interference with Tenant’s business, any loss of occupancy or quiet enjoyment of the Premises, and any other loss occasioned thereby.  Any entry by Landlord and Landlord’s agents shall not impair Tenant’s operations more than reasonable necessary.  Notwithstanding any of the above, Landlord shall have the right of immediate entry and the right to use any and all means which Landlord may deem proper to open doors in the Premises in an emergency, without liability to Tenant except for any failure to exercise due care for Tenant’s property.  Any entry to the Premises obtained by Landlord by any of said means, or otherwise shall not under any circumstances be construed or deemed to be a forcible or unlawful entry into, or a detainer of, the Premises, or an eviction of Tenant from the Premises or any portion thereof.  Landlord shall not show the Premises to prospective tenants prior to the last ninety (90) days of the expiration of the term including extensions thereto.  Notwithstanding anything to the contrary in the Lease, Landlord shall not have access to the switch area, except in the event of an emergency, and in the event of such emergency, must be accompanied by an authorized agent of Tenant.

21. RECONSTRUCTION

In the event the Premises or the Building are damaged by fire or other perils covered by Landlord’s insurance, Landlord agrees to forthwith repair the same; and this Lease shall re