Exhibit 10.3

 

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AIR COMMERCIAL REAL ESTATE ASSOCIATION STANDARD INDUSTRIAL/COMMERCIAL
SINGLE-TENANT LEASE - NET (DO NOT USE THIS FORM FOR MULTI-TENANT BUILDINGS) 1.
Basic Provisions (“Basic Provisions”). 1.1 Parties: This Lease (“Lease”), dated
for reference purposes only DECEMBER 12, 2013 , is made by and between HILLSIDE
ASSOCIATES II, LLC (“Lessor”) and AEROVIRONMENT, INC., A DELAWARE CORPORATION .
(“Lessee”), (collectively the “Parties,” or individually a “Party”). 1.2
Premises: That certain real property, including all improvements therein or to
be provided by Lessor under the terms of this Lease, and commonly known as 996
FLOWER GLEN STREET, SIMI VALLEY , located in the County of VENTURA , State of
CALIFORNIA , and generally described as (describe briefly the nature of the
property and, if applicable, the “Project”, if the property is located within a
Project) FREE STANDING SINGLE STORY 43,008 SQUARE FOOT BUILDING LOCATED WITHIN
THE HILLSIDE INDUSTRIAL CENTER PROJECT *SEE PARAGRAPH #2 OF ADDENDUM
(“Premises”). (See also Paragraph 2) 1.3 Term: EIGHT (8) years and ZERO (0)
months (“Original Term”) commencing DECEMBER 1, 2013 (“Commencement Date”) and
ending NOVEMBER 30, 2021 (“Expiration Date”). (See also Paragraph 3) 1.4 Early
Possession: N/A (“Early Possession Date”). (See also Paragraphs 3.2 and 3.3) 1.5
Base Rent: $27,525.00 per month (“Base Rent”), payable on the FIRST day of each
month commencing DECEMBER 1, 2013 . (See also Paragraph 4) If this box is
checked, there are provisions in this Lease for the Base Rent to be adjusted.
1.6 Base Rent and Other Monies Paid Upon Execution: (a) Base Rent: $13,762.50
for the period DEC. 1, 2013 THROUGH DEC. 31, 2013 (b) Security Deposit: $0.00
(“Security Deposit”). (See also Paragraph 5) (c) Association Fees: $N/A for the
period N/A (d) Other: $N/A for N/A (e) Total Due Upon Execution of this Lease:
$13,762.50 . 1.7 Agreed Use: OFFICE & WAREHOUSE FOR LIGHT MANUFACTURING . (See
also Paragraph 6) 1.8 Insuring Party: Lessor is the “Insuring Party” unless
otherwise stated herein. (See also Paragraph 8) 1.9 Real Estate Brokers: (See
also Paragraph 15) (a) Representation: The following real estate brokers (the
“Brokers”) and brokerage relationships exist in this transaction (check
applicable boxes): represents Lessor exclusively (“Lessor’s Broker”); JOSEF
FARRAR/NEWMARK GRUBB KNIGHT FRANK (NGKF) represents Lessee exclusively
(“Lessee’s Broker”); or represents both Lessor and Lessee (“Dual Agency”). (b)
Payment to Brokers: Upon execution and delivery of this Lease by both Parties,
Lessor shall pay to the Broker the fee agreed to in their separate written
agreement (or if there is no such agreement, the sum of PER AGREEMENT or % of
the total Base Rent) for the brokerage services rendered by the Brokers. 1.10
Guarantor. The obligations of the Lessee under this Lease are to be guaranteed
by N/A (“Guarantor”). (See also Paragraph 37) 1.11 Attachments. Attached hereto
are the following, all of which constitute a part of this Lease: an Addendum
consisting of Paragraphs 1 through 2 ; a plot plan depicting the Premises; a
current set of the Rules and Regulations; a Work Letter; other (specify): RENT
ADJUSTMENT, RENT CONCESSION AGREEMENT, ADDENDUM, ATTACHMENT, OPTION TO RENEW .
2. Premises. 2.1 Letting. Lessor hereby leases to Lessee, and Lessee hereby
leases from Lessor, the Premises, for the term, at the rental, and upon all of
the terms, covenants and conditions set forth in this Lease. Unless otherwise
provided herein, any statement of size set forth in this Lease, PAGE 1 OF 18
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or that may have been used in calculating Rent, is an approximation which the
Parties agree is reasonable and any payments based thereon are not subject to
revision whether or not the actual size is more or less. Note: Lessee is advised
to verify the actual size prior to executing this Lease. 2.2 Condition. Lessor
shall deliver the Premises to Lessee broom clean and free of debris on the
Commencement Date or the Early Possession Date, whichever first occurs (“Start
Date”), and, so long as the required service contracts described in Paragraph
7.1(b) below are obtained by Lessee and in effect within thirty days following
the Start Date, warrants that the existing electrical, plumbing, fire sprinkler,
lighting, heating, ventilating and air conditioning systems (“HVAC”), loading
doors, sump pumps, if any, and all other such elements in the Premises, other
than those constructed by Lessee, shall be in good operating condition on said
date, that the structural elements of the roof, bearing walls and foundation of
any buildings on the Premises (the “Building”) shall be free of material
defects, and that the Premises do not contain hazardous levels of any mold or
fungi defined as toxic under applicable state or federal law. If a
non-compliance with said warranty exists as of the Start Date, or if one of such
systems or elements should malfunction or fail within the appropriate warranty
period, Lessor shall, as Lessor’s sole obligation with respect to such matter,
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, malfunction or failure, rectify same at Lessor’s expense. The
warranty periods shall be as follows: (i) 6 months as to the HVAC systems, and
(ii) 30 days as to the remaining systems and other elements of the Building. If
Lessee does not give Lessor the required notice within the appropriate warranty
period, correction of any such non-compliance, malfunction or failure shall be
the obligation of Lessee at Lessee’s sole cost and expense. 2.3 Compliance.
Lessor warrants that to the best of its knowledge the improvements on the
Premises comply with the building codes, applicable laws, covenants or
restrictions of record, regulations, and ordinances (“Applicable Requirements”)
that were in effect at the time that each improvement, or portion thereof, was
constructed. Said warranty does not apply to the use to which Lessee will put
the Premises, modifications which may be required by the Americans with
Disabilities Act or any similar laws as a result of Lessee’s use (see Paragraph
50), or to any Alterations or Utility Installations (as defined in Paragraph
7.3(a)) made or to be made by Lessee. NOTE: Lessee is responsible for
determining whether or not the Applicable Requirements, and especially the
zoning, are appropriate for Lessee’s intended use, and acknowledges that past
uses of the Premises may no longer be allowed. If the Premises do not comply
with said warranty, Lessor shall, except as otherwise provided, promptly after
receipt of written notice from Lessee setting forth with specificity the nature
and extent of such non-compliance, rectify the same at Lessor’s expense. If
Lessee does not give Lessor written notice of a non-compliance with this
warranty within 6 months following the Start Date, correction of that
non-compliance shall be the obligation of Lessee at Lessee’s sole cost and
expense. If the Applicable Requirements are hereafter changed so as to require
during the term of this Lease the construction of an addition to or an
alteration of the Premises and/or Building, the remediation of any Hazardous
Substance, or the reinforcement or other physical modification of the Unit,
Premises and/or Building (“Capital Expenditure”), Lessor and Lessee shall
allocate the cost of such work as follows: (a) Subject to Paragraph 2.3(c)
below, if such Capital Expenditures are required as a result of the specific and
unique use of the Premises by Lessee as compared with uses by tenants in
general, Lessee shall be fully responsible for the cost thereof, provided,
however that if such Capital Expenditure is required during the last 2 years of
this Lease and the cost thereof exceeds 6 months’ Base Rent, Lessee may instead
terminate this Lease unless Lessor notifies Lessee, in writing, within 10 days
after receipt of Lessee’s termination notice that Lessor has elected to pay the
difference between the actual cost thereof and an amount equal to 6 months’ Base
Rent. If Lessee elects termination, Lessee shall immediately cease the use of
the Premises which requires such Capital Expenditure and deliver to Lessor
written notice specifying a termination date at least 90 days thereafter. Such
termination date shall, however, in no event be earlier than the last day that
Lessee could legally utilize the Premises without commencing such Capital
Expenditure. (b) If such Capital Expenditure is not the result of the specific
and unique use of the Premises by Lessee (such as, governmentally mandated
seismic modifications), then Lessor shall pay for such Capital Expenditure and
Lessee shall only be obligated to pay, each month during the remainder of the
term of this Lease, on the date that on which the Base Rent is due, an amount
equal to 144th of the portion of such costs reasonably attributable to the
Premises. Lessee shall pay Interest on the balance but may prepay its obligation
at any time. If, however, such Capital Expenditure is required during the last 2
years of this Lease or if Lessor reasonably determines that it is not
economically feasible to pay its share thereof, Lessor shall have the option to
terminate this Lease upon 90 days prior written notice to Lessee unless Lessee
notifies Lessor, in writing, within 10 days after receipt of Lessor’s
termination notice that Lessee will pay for such Capital Expenditure. If Lessor
does not elect to terminate, and fails to tender its share of any such Capital
Expenditure, Lessee may advance such funds and deduct same, with Interest, from
Rent until Lessor’s share of such costs have been fully paid. If Lessee is
unable to finance Lessor’s share, or if the balance of the Rent due and payable
for the remainder of this Lease is not sufficient to fully reimburse Lessee on
an offset basis, Lessee shall have the right to terminate this Lease upon 30
days written notice to Lessor. (c) Notwithstanding the above, the provisions
concerning Capital Expenditures are intended to apply only to non-voluntary,
unexpected, and new Applicable Requirements. If the Capital Expenditures are
instead triggered by Lessee as a result of an actual or proposed change in use,
change in intensity of use, or modification to the Premises then, and in that
event, Lessee shall either: (i) immediately cease such changed use or intensity
of use and/or take such other steps as may be necessary to eliminate the
requirement for such Capital Expenditure, or (ii) complete such Capital
Expenditure at its own expense. Lessee shall not, however, have any right to
terminate this Lease. 2.4 Acknowledgements. Lessee acknowledges that: (a) it has
been advised by Lessor and/or Brokers to satisfy itself with respect to the
condition of the Premises (including but not limited to the electrical, HVAC and
fire sprinkler systems, security, environmental aspects, and compliance with
Applicable Requirements and the Americans with Disabilities Act), and their
suitability for Lessee’s intended use, (b) Lessee has made such investigation as
it deems necessary with reference to such matters and assumes all responsibility
therefor as the same relate to its occupancy of the Premises, and (c) neither
Lessor, Lessor’s agents, nor Brokers have made any oral or written
representations or warranties with respect to said matters other than as set
forth in this Lease. In addition, Lessor acknowledges that: (i) Brokers have
made no representations, promises or warranties concerning Lessee’s ability to
honor the Lease or suitability to occupy the Premises, and (ii) it is Lessor’s
sole responsibility to investigate the financial capability and/or suitability
of all proposed tenants. 2.5 Lessee as Prior Owner/Occupant. The warranties made
by Lessor in Paragraph 2 shall be of no force or effect if immediately prior to
the Start Date Lessee was the owner or occupant of the Premises. In such event,
Lessee shall be responsible for any necessary corrective work. 3. Term. 3.1
Term. The Commencement Date, Expiration Date and Original Term of this Lease are
as specified in Paragraph 1.3. 3.2 Early Possession. If Lessee totally or
partially occupies the Premises prior to the Commencement Date, the obligation
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Base Rent shall be abated for the period of such early possession. All other
terms of this Lease (including but not limited to the obligations to pay Real
Property Taxes and insurance premiums and to maintain the Premises) shall be in
effect during such period. Any such early possession shall not affect the
Expiration Date. 3.3 Delay In Possession. Lessor agrees to use its best
commercially reasonable efforts to deliver possession of the Premises to Lessee
by the Commencement Date. If, despite said efforts, Lessor is unable to deliver
possession by such date, Lessor shall not be subject to any liability therefor,
nor shall such failure affect the validity of this Lease. Lessee shall not,
however, be obligated to pay Rent or perform its other obligations until Lessor
delivers possession of the Premises and any period of rent abatement that Lessee
would otherwise have enjoyed shall run from the date of delivery of possession
and continue for a period equal to what Lessee would otherwise have enjoyed
under the terms hereof, but minus any days of delay caused by the acts or
omissions of Lessee. If possession is not delivered within 60 days after the
Commencement Date, Lessee may, at its option, by notice in writing within 10
days after the end of such 60 day period, cancel this Lease, in which event the
Parties shall be discharged from all obligations hereunder. If such written
notice is not received by Lessor within said 10 day period, Lessee’s right to
cancel shall terminate. If possession of the Premises is not delivered within
120 days after the Commencement Date, this Lease shall terminate unless other
agreements are reached between Lessor and Lessee, in writing. 3.4 Lessee
Compliance. Lessor shall not be required to deliver possession of the Premises
to Lessee until Lessee complies with its obligation to provide evidence of
insurance (Paragraph 8.5). Pending delivery of such evidence, Lessee shall be
required to perform all of its obligations under this Lease from and after the
Start Date, including the payment of Rent, notwithstanding Lessor’s election to
withhold possession pending receipt of such evidence of insurance. Further, if
Lessee is required to perform any other conditions prior to or concurrent with
the Start Date, the Start Date shall occur but Lessor may elect to withhold
possession until such conditions are satisfied. 4. Rent. 4.1. Rent Defined. All
monetary obligations of Lessee to Lessor under the terms of this Lease (except
for the Security Deposit) are deemed to be rent (“Rent”). 4.2 Payment. Lessee
shall cause payment of Rent to be received by Lessor in lawful money of the
United States, without offset or deduction (except as specifically permitted in
this Lease), on or before the day on which it is due. All monetary amounts shall
be rounded to the nearest whole dollar. In the event that any invoice prepared
by Lessor is inaccurate such inaccuracy shall not constitute a waiver and Lessee
shall be obligated to pay the amount set forth in this Lease. Rent for any
period during the term hereof which is for less than one full calendar month
shall be prorated based upon the actual number of days of said month. Payment of
Rent shall be made to Lessor at its address stated herein or to such other
persons or place as Lessor may from time to time designate in writing.
Acceptance of a payment which is less than the amount then due shall not be a
waiver of Lessor’s rights to the balance of such Rent, regardless of Lessor’s
endorsement of any check so stating. In the event that any check, draft, or
other instrument of payment given by Lessee to Lessor is dishonored for any
reason, Lessee agrees to pay to Lessor the sum of $25 in addition to any Late
Charge and Lessor, at its option, may require all future Rent be paid by
cashier’s check. Payments will be applied first to accrued late charges and
attorney’s fees, second to accrued interest, then to Base Rent and Common Area
Operating Expenses, and any remaining amount to any other outstanding charges or
costs. 4.3 Initials 5. Security Deposit. Lessee shall deposit with Lessor upon
execution hereof the Security Deposit as security for Lessee’s faithful
performance of its obligations under this Lease. If Lessee fails to pay Rent, or
otherwise Defaults under this Lease, Lessor may use, apply or retain all or any
portion of said Security Deposit for the payment of any amount due already due
Lessor, for Rents which will be due in the future, and/ or to reimburse or
compensate Lessor for any liability, expense, loss or damage which Lessor may
suffer or incur by reason thereof. If Lessor uses or applies all or any portion
of the Security Deposit, Lessee shall within 10 days after written request
therefor deposit monies with Lessor sufficient to restore said Security Deposit
to the full amount required by this Lease. If the Base Rent increases during the
term of this Lease, Lessee shall, upon written request from Lessor, deposit
additional monies with Lessor so that the total amount of the Security Deposit
shall at all times bear the same proportion to the increased Base Rent as the
initial Security Deposit bore to the initial Base Rent. Should the Agreed Use be
amended to accommodate a material change in the business of Lessee or to
accommodate a sublessee or assignee, Lessor shall have the right to increase the
Security Deposit to the extent necessary, in Lessor’s reasonable judgment, to
account for any increased wear and tear that the Premises may suffer as a result
thereof. If a change in control of Lessee occurs during this Lease and following
such change the financial condition of Lessee is, in Lessor’s reasonable
judgment, significantly reduced, Lessee shall deposit such additional monies
with Lessor as shall be sufficient to cause the Security Deposit to be at a
commercially reasonable level based on such change in financial condition.
Lessor shall not be required to keep the Security Deposit separate from its
general accounts. 6. Use. 6.1 Use. Lessee shall use and occupy the Premises only
for the Agreed Use, or any other legal use which is reasonably comparable
thereto, and for no other purpose. Lessee shall not use or permit the use of the
Premises in a manner that is unlawful, creates damage, waste or a nuisance, or
that disturbs occupants of or causes damage to neighboring premises or
properties. Other than guide, signal and seeing eye dogs, Lessee shall not keep
or allow in the Premises any pets, animals, birds, fish, or reptiles. Lessor
shall not unreasonably withhold or delay its consent to any written request for
a modification of the Agreed Use, so long as the same will not impair the
structural integrity of the improvements on the Premises or the mechanical or
electrical systems therein, and/or is not significantly more burdensome to the
Premises. If Lessor elects to withhold consent, Lessor shall within 7 days after
such request give written notification of same, which notice shall include an
explanation of Lessor’s objections to the change in the Agreed Use. PAGE 3 OF 18
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6.2 Hazardous Substances. (a) Reportable Uses Require Consent. The term
“Hazardous Substance” as used in this Lease shall mean any product, substance,
or waste whose presence, use, manufacture, disposal, transportation, or release,
either by its if or in combination with other materials expected to be on the
Premises, is either: (i) potentially injurious to the public health, safety or
welfare, the environment or the Premises, (ii) regulated or monitored by any
governmental authority, or (iii) a basis for potential liability of Lessor to
any governmental agency or third party under any applicable statute or common
law theory. Hazardous Substances shall include, but not be limited to,
hydrocarbons, petroleum, gasoline, and/or crude oil or any products, by-products
or fractions thereof. Lessee shall not engage in any activity in or on the
Premises which constitutes a Reportable Use of Hazardous Substances without the
express prior written consent of Lessor and timely compliance (at Lessee’s
expense) with all Applicable Requirements. “Reportable Use” shall mean (i) the
installation or use of any above or below ground storage tank, (ii) the
generation, possession, storage, use, transportation, or disposal of a Hazardous
Substance that requires a permit from, or with respect to which a report,
notice, registration or business plan is required to be filed with, any
governmental authority, and/or (iii) the presence at the Premises of a Hazardous
Substance with respect to which any Applicable Requirements requires that a
notice be given to persons entering or occupying the Premises or neighboring
properties. Notwithstanding the foregoing, Lessee may use any ordinary and
customary materials reasonably required to be used in the normal course of the
Agreed Use, ordinary office supplies (copier toner, liquid paper, glue, etc.)
and common household cleaning materials, so long as such use is in compliance
with all Applicable Requirements, is not a Reportable Use, and does not expose
the Premises or neighboring property to any meaningful risk of contamination or
damage or expose Lessor to any liability therefor. In addition, Lessor may
condition its consent to any Reportable Use upon receiving such additional
assurances as Lessor reasonably deems necessary to protect itself, the public,
the Premises and/or the environment against damage, contamination, injury and/or
liability, including, but not limited to, the installation (and removal on or
before Lease expiration or termination) of protective modifications (such as
concrete encasements) and/or increasing the Security Deposit. (b) Duty to Inform
Lessor. If Lessee knows, or has reasonabie cause to believe, that a Hazardous
Substance has come to be located in, on, under or about the Premises, other than
as previously consented to by Lessor, Lessee shall immediately give written
notice of such fact to Lessor, and provide Lessor with a copy of any report,
notice, claim or other documentation which it has concerning the presence of
such Hazardous Substance. (c) Lessee Remediation. Lessee shall not cause or
permit any Hazardous Substance to be spilled or released in, on, under, or about
the Premises (including through the plumbing or sanitary sewer system) and shall
promptly, at Lessee’s expense, comply with all Applicable Requirements and take
all investigatory and/or remedial action reasonably recommended, whether or not
formally ordered or required, for the cleanup of any contamination of, and for
the maintenance, security and/or monitoring of the Premises or neighboring
properties, that was caused or materially contributed to by Lessee, or
pertaining to or involving any Hazardous Substance brought onto the Premises
during the term of this Lease, by or for Lessee, or any third party. (d) Lessee
Indemnification. Lessee shall indemnify, defend and hold Lessor, its agents,
employees, lenders and ground lessor, if any, harmless from and against any and
all loss of rents and/or damages, liabilities, judgments, claims, expenses,
penalties, and attorneys’ and consultants’ fees arising out of or involving any
Hazardous Substance brought onto the Premises by or for Lessee, or any third
party (provided, however, that Lessee shall have no liability under this Lease
with respect to underground migration of any Hazardous Substance under the
Premises from adjacent properties not caused or contributed to by Lessee).
Lessee’s obligations shall include, but not be limited to, the effects of any
contamination or injury to person, property or the environment created or
suffered by Lessee, and the cost of investigation, removal, remediation,
restoration and/or abatement, and shall survive the expiration or termination of
this Lease. No termination, cancellation or release agreement entered into by
Lessor and Lessee shall release Lessee from its obligations under this Lease
with respect to Hazardous Substances, unless specifically so agreed by Lessor in
writing at the time of such agreement. (e) Lessor Indemnification. Lessor and
its successors and assigns shall indemnify, defend, reimburse and hold Lessee,
its employees and lenders, harmless from and against any and all environmental
damages, including the cost of remediation, which result from Hazardous
Substances which existed on the Premises prior to Lessee’s occupancy or which
are caused by the gross negligence or willful misconduct of Lessor, its agents
or employees. Lessor’s obligations, as and when required by the Applicable
Requirements, shall include, but not be limited to, the cost of investigation,
removal, remediation, restoration and/or abatement, and shall survive the
expiration or termination of this Lease. (f) Investigations and Remediations.
Lessor shall retain the responsibility and pay for any investigations or
remediation measures required by governmental entities having jurisdiction with
respect to the existence of Hazardous Substances on the Premises prior to
Lessee’s occupancy, unless such remediation measure is required as a result of
Lessee’s use (including “Alterations”, as defined in paragraph 7.3(a) below) of
the Premises, in which event Lessee shall be responsible for such payment.
Lessee shall cooperate fully in any such activities at the request of Lessor,
including allowing Lessor and Lessor’s agents to have reasonable access to the
Premises at reasonable times in order to carry out Lessor’s investigative and
remedial responsibilities. (g) Lessor Termination Option. If a Hazardous
Substance Condition (see Paragraph 9.1(e)) occurs during the term of this Lease,
unless Lessee is legally responsible therefor (in which case Lessee shall make
the investigation and remediation thereof required by the Applicable
Requirements and this Lease shall continue in full force and effect, but subject
to Lessor’s rights under Paragraph 6.2(d) and Paragraph 13), Lessor may, at
Lessor’s option, either (i) investigate and remediate such Hazardous Substance
Condition, if required, as soon as reasonably possible at Lessor’s expense, in
which event this Lease shall continue in full force and effect, or (ii) if the
estimated cost to remediate such condition exceeds 12 times the then monthly
Base Rent or $100,000, whichever is greater, give written notice to Lessee,
within 30 days after receipt by Lessor of knowledge of the occurrence of such
Hazardous Substance Condition, of Lessor’s desire to terminate this Lease as of
the date 60 days following the date of such notice. In the event Lessor elects
to give a termination notice, Lessee may, within 10 days thereafter, give
written notice to Lessor of Lessee’s commitment to pay the amount by which the
cost of the remediation of such Hazardous Substance Condition exceeds an amount
equal to 12 times the then monthly Base Rent or $100,000, whichever is greater.
Lessee shall provide Lessor with said funds or satisfactory assurance thereof
within 30 days following such commitment. In such event, this Lease shall
continue in full force and effect, and Lessor shall proceed to make such
remediation as soon as reasonably possible after the required funds are
available. If Lessee does not give such notice and provide the required funds or
assurance thereof within the time provided, this Lease shall terminate as of the
date specified in Lessor’s notice of termination. 6.3 Lessee’s Compliance with
Applicable Requirements. Except as otherwise provided in this Lease, Lessee
shall, at Lessee’s sole expense, fully, diligently and in a timely manner,
materially comply with all Applicable Requirements, the requirements of any
applicable fire insurance underwriter or rating bureau, and the recommendations
of Lessor’s engineers and/or consultants which relate in any manner to the such
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Requirements, without regard to whether such Requirements are now in effect or
become effective after the Start Date. Lessee shall, within 10 days after
receipt of Lessor’s written request, provide Lessor with copies of all permits
and other documents, and other information evidencing Lessee’s compliance with
any Applicable Requirements specified by Lessor, and shall immediately upon
receipt, notify Lessor in writing (with copies of any documents involved) of any
threatened or actual claim, notice, citation, warning, complaint or report
pertaining to or involving the failure of Lessee or the Premises to comply with
any Applicable Requirements. Likewise, Lessee shall immediately give written
notice to Lessor of: (i) any water damage to the Premises and any suspected
seepage, pooling, dampness or other condition conducive to the production of
mold; or (ii) any mustiness or other odors that might indicate the presence of
mold in the Premises. 6.4 Inspection; Compliance. Lessor and Lessor’s “Lender”
(as defined in Paragraph 30) and consultants shall have the right to enter into
Premises at any time, in the case of an emergency, and otherwise at reasonable
times after reasonable notice, for the purpose of inspecting the condition of
the Premises and for verifying compliance by Lessee with this Lease. The cost of
any such inspections shall be paid by Lessor, unless a violation of Applicable
Requirements, or a Hazardous Substance Condition (see paragraph 9.1) is found to
exist or be imminent, or the inspection is requested or ordered by a
governmental authority. In such case, Lessee shall upon request reimburse Lessor
for the cost of such inspection, so long as such inspection is reasonably
related to the violation or contamination. In addition, Lessee shall provide
copies of all relevant material safety data sheets (MSDS) to Lessor within 10
days of the receipt of a written request therefor. 7. Maintenance; Repairs,
Utility Installations; Trade Fixtures and Alterations. 7.1 Lessee’s Obligations.
(a) In General. Subject to the provisions of Paragraph 2.2 (Condition), 2.3
(Compliance), 6.3 (Lessee’s Compliance with Applicable Requirements), 7.2
(Lessor’s Obligations), 9 (Damage or Destruction), and 14 (Condemnation), Lessee
shall, at Lessee’s sole expense, keep the Premises, Utility Installations
(intended for Lessee’s exclusive use, no matter where located), and Alterations
in good order, condition and repair (whether or not the portion of the Premises
requiring repairs, 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, but not limited to, all equipment or facilities,
such as plumbing, HVAC equipment, electrical, lighting facilities, boilers,
pressure vessels, fire protection system, fixtures, walls (interior and
exterior), foundations, ceilings, roofs, roof drainage systems, floors, windows,
doors, plate glass, skylights, landscaping, driveways, parking lots, fences,
retaining walls, signs, sidewalks and parkways located in, on, or adjacent to
the Premises. Lessee, in keeping the Premises in good order, condition and
repair, shall exercise and perform good maintenance practices, specifically
including the procurement and maintenance of the service contracts required by
Paragraph 7.1(b) below. 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. Lessee shall, during the term of this Lease, keep the exterior
appearance of the Building in a first-class condition (including, e.g. graffiti
removal) consistent with the exterior appearance of other similar facilities of
comparable age and size in the vicinity, including, when necessary, the exterior
repainting of the Building. (b) Service Contracts. Lessee shall, at Lessee’s
sole expense, procure and maintain contracts, with copies to Lessor, in
customary form and substance for, and with contractors specializing and
experienced in the maintenance of the following equipment and improvements, if
any, if and when installed on the Premises: (i) HVAC equipment, (ii) boiler, and
pressure vessels, (iii) fire extinguishing systems, including fire alarm and/or
smoke detection, (iv) landscaping and irrigation systems, (v) roof covering and
drains, and (vi) clarifiers. *(See attachment) initials (c) Failure to Perform.
If Lessee fails to perform Lessee’s obligations under this Paragraph 7.1, Lessor
may enter upon the Premises after 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, and Lessee shall promptly pay to Lessor a sum equal to
115% of the cost thereof. (d) Replacement. Subject to Lessee’s indemnification
of Lessor as set forth in Paragraph 8.7 below, and without relieving Lessee of
liability resulting from Lessee’s failure to exercise and perform good
maintenance practices, if an item described in Paragraph 7.1(b) cannot be
repaired other than at a cost which is in excess of 50% of the cost of replacing
such item, then such item shall be replaced by Lessor, and the cost thereof
shall be prorated between the Parties and Lessee shall only be obligated to pay,
each month during the remainder of the term of this Lease, on the date on which
Base Rent is due, an amount equal to the product of multiplying the cost of such
replacement by a fraction, the numerator of which is one, and the denominator of
which is 144 (ie. 1/144th of the cost per month). Lessee shall pay interest on
the unamortized balance but may prepay its obligation at any time. 7.2 Lessor’s
Obligations. Subject to the provisions of Paragraphs 2.2 (Condition), 2.3
(Compliance), 9 (Damage or Destruction) and 14 (Condemnation), it is intended by
the Parties hereto that Lessor have no obligation, in any manner whatsoever, to
repair and maintain the Premises, or the equipment therein, all of which
obligations are intended to be that of the Lessee. It is the intention of the
Parties that the terms of this Lease govern the respective obligations of the
Parties as to maintenance and repair of the Premises, and they expressly waive
the benefit of any statute now or hereafter in effect to the extent it is
inconsistent with the terms of this Lease. 7.3 Utility Installations; Trade
Fixtures; Alterations. (a) Definitions. The term “Utility Installations” refers
to all floor and window coverings, air and/or vacuum lines, power panels,
electrical distribution, security and fire protection systems, communication
cabling, lighting fixtures, HVAC equipment, plumbing, and fencing in or on the
Premises. The term “Trade Fixtures” shall mean Lessee’s machinery and equipment
that can be removed without doing material damage to the Premises. The term
“Alterations” shall mean any modification of the improvements, other than
Utility Installations or Trade Fixtures, whether by addition or deletion.
“Lessee Owned Alterations and/or Utility Installations” are defined as
Alterations and/or Utility Installations made by Lessee that are not yet owned
by Lessor pursuant to Paragraph 7.4(a). (b) Consent. Lessee shall not make any
Alterations or Utility Installations to the Premises without Lessor’s prior
written consent. Lessee may, however, make non-structural Utility Installations
to the interior of the Premises (excluding the roof) without such consent but
upon notice to Lessor, as long as they are not visible from the outside, do not
involve puncturing, relocating or removing the roof or any existing walls, will
not affect the electrical, plumbing, HVAC, and/or life safety systems, and the
cumulative cost thereof during this Lease as extended does not exceed a sum
equal to 3 month’s Base Rent in the Notwithstanding the foregoing, Lessee shall
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make or permit any roof penetrations and/or install anything on the roof without
the prior written approval of Lessor. Lessor may, as a precondition to granting
such approval, require Lessee to utilize a contractor chosen and/or approved by
Lessor. Any Alterations or Utility Installations that Lessee shall desire to
make and which require the consent of the Lessor shall be presented to Lessor in
written form with detailed plans. Consent shall be deemed conditioned upon
Lessee’s: (i) acquiring ail applicable governmental permits, (ii) furnishing
Lessor with copies of both the permits and the plans and specifications prior to
commencement of the work, and (iii) compliance with all conditions of said
permits and other Applicable Requirements in a prompt and expeditious manner.
Any Alterations or Utility Installations shall be performed in a workmanlike
manner with good and sufficient materials. Lessee shall promptly upon completion
furnish Lessor with as-built plans and specifications. For work which costs an
amount in excess of one month’s Base Rent, Lessor may condition its consent upon
Lessee providing a lien and completion bond in an amount equal to 150% of the
estimated cost of such Alteration or Utility installation and/or upon Lessee’s
posting an additional Security Deposit with Lessor. Initials (c) Liens; Bonds.
Lessee shall pay, when due, all claims for labor or materials furnished or
alleged to have been furnished to or for Lessee at or for use on the Premises,
which claims are or may be secured by any mechanic’s or materialmen’s lien
against the Premises or any interest therein. Lessee shall give Lessor not less
than 10 days notice prior to the commencement of any work in, on or about the
Premises, and Lessor shall have the right to post notices of non-responsibility.
If Lessee shall contest the validity of any such lien, claim or demand, then
Lessee shall, at its sole expense defend and protect itself. Lessor and the
Premises against the same and shall pay and satisfy any such adverse judgment
that may be rendered thereon before the enforcement thereof. If Lessor shall
require, Lessee shall furnish a surety bond in an amount equal to 150% of the
amount of such contested lien, claim or demand, indemnifying Lessor against
liability for the same. If Lessor elects to participate in any such action,
Lessee shall pay Lessor’s reasonable attorneys’ fees and costs. Initials 7.4
Ownership; Removal; Surrender; and Restoration. (a) Ownership. Subject to
Lessor’s right to require removal or elect ownership as hereinafter provided,
all Alterations and Utility Installations made by Lessee shall be the property
of Lessee, but considered a part of the Premises. Lessor may, at any time, elect
in writing to be the owner of all or any specified part of the Lessee Owned
Alterations and Utility Installations. Unless otherwise instructed per paragraph
7.4(b) hereof, all Lessee Owned Alterations and Utility Installations shall, at
the expiration or termination of this Lease, become the property of Lessor and
be surrendered by Lessee with the Premises. (b) Removal. By delivery to Lessee
of written notice from Lessor not earlier than 90 and not later than 30 days
prior to the end of the term of this Lease, Lessor may require that any or all
Lessee Owned Alterations or Utility Installations be removed by the expiration
or termination of this Lease. Lessor may require the removal at any time of all
or any part of any Lessee Owned Alterations or Utility Installations made
without the required consent. (c) Surrender; Restoration. Lessee shall surrender
the Premises by the Expiration Date or any earlier termination date, with all of
the improvements, parts and surfaces thereof broom clean and free of debris, and
in good operating order, condition and state of repair, ordinary wear and tear
excepted. “Ordinary wear and tear” shall not include any damage or deterioration
that would have been prevented by good maintenance practice. Notwithstanding the
foregoing, if this Lease is for 12 months or less, then Lessee shall surrender
the Premises in the same condition as delivered to Lessee on the Start Date with
NO allowance for ordinary wear and tear. Lessee shall repair any damage
occasioned by the installation, maintenance or removal of Trade Fixtures, Lessee
owned Alterations and/or Utility Installations, furnishings, and equipment as
well as the removal of any storage tank installed by or for Lessee. Lessee shall
completely remove from the Premises any and all Hazardous Substances brought
onto the Premises by or for Lessee, or any third party (except Hazardous
Substances which were deposited via underground migration from areas outside of
the Premises, or if applicable, the Premises) even if such removal would require
Lessee to perform or pay for work that exceeds statutory requirements. Trade
Fixtures shall remain the property of Lessee and shall be removed by Lessee. Any
personal property of Lessee not removed on or before the Expiration Date or any
earlier termination date shall be deemed to have been abandoned by Lessee and
may be disposed of or retained by Lessor as Lessor may desire. The failure by
Lessee to timely vacate the Premises pursuant to this Paragraph 7.4(c) without
the express written consent of Lessor shall constitute a holdover under the
provisions of Paragraph 26 below. 8. Insurance; Indemnity. 8.1 Payment For
Insurance. Lessee shall pay for all insurance required under Paragraph 8 except
to the extent of the cost attributable to liability insurance carried by Lessor
under Paragraph 8.2(b) in excess of $2,000,000 per occurrence. Premiums for
policy periods commencing prior to or extending beyond the Lease term shall be
prorated to correspond to the Lease term. Payment shall be made by Lessee to
Lessor within 10 days following receipt of an invoice. 8.2 Liability Insurance.
(a) Carried by Lessee. Lessee shall obtain and keep in force a Commercial
General Liability policy of insurance protecting Lessee and Lessor as an
additional insured against claims for bodily injury, personal injury and
property damage based upon or arising out of the ownership, use, occupancy or
maintenance of the Premises and all areas appurtenant thereto. Such insurance
shall be on an occurrence basis providing single limit coverage in an amount not
less than $1,000,000 per occurrence with an annual aggregate of not less than
$2,000,000. Lessee shall add Lessor as an additional insured by means of an
endorsement at least as broad as the Insurance Service Organization’s
“Additional Insured-Managers or Lessors of Premises” Endorsement. The policy
shall not contain any intra-insured exclusions as between insured persons or
organizations, but shall include coverage for liability assumed under this Lease
as an “insured contract” for the performance of Lessee’s indemnity obligations
under this Lease. The limits of said insurance shall not, however, limit the
liability of Lessee nor relieve Lessee of any obligation hereunder. Lessee shall
provide an endorsement on its liability policy(ies) which provides that its
insurance shall be primary to and not contributory with any similar insurance
carried by Lessor, whose insurance shall be considered excess insurance only.
Initials (b) Carried by Lessor. Lessor shall maintain liability insurance as
described in Paragraph 8.2(a), in addition to, and not in lieu of, the insurance
required to be maintained by Lessee. Lessee shall not be named as an additional
insured therein. 8.3 Property Insurance - Building, Improvements and Rental
Value. (a) Building and Improvements. The Insuring Party shall obtain and keep
in force a policy or policies in the name of Lessor, with loss payable to
Lessor, any ground-lessor, and to any Lender insuring loss or damage to the
Premises. The amount of such insurance shall be equal to the full insurable
replacement cost of the Premises, as the same shall exist from time to time, or
the amount required by any Lender, but in no event more than the commercially
reasonable and available insurable value thereof. If Lessor is the Insuring
Party, however, Lessee Owned Alterations and Utility Installations, Trade
Fixtures, and Lessee’s personal property shall be insured by Lessee under
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coverage is available and commercially appropriate, such policy or policies
shall insure against all risks of direct physical loss or damage (except the
perils of flood and/or earthquake unless required by a Lender), including
coverage for debris removal and the enforcement of any Applicable Requirements
requiring the upgrading, demolition, reconstruction or replacement of any
portion of the Premises as the result of a covered loss. Said policy or policies
shall also contain an agreed valuation provision in lieu of any coinsurance
clause, waiver of subrogation, and inflation guard protection causing an
increase in the annual property insurance coverage amount by a factor of not
less than the adjusted U.S. Department of Labor Consumer Price Index for All
Urban Consumers for the city nearest to where the Premises are located. If such
insurance coverage has a deductible clause, the deductible amount shall not
exceed $1,000 per occurrence, and Lessee shall be liable for such deductible
amount in the event of an Insured Loss. (b) Rental Value. The Insuring Party
shall obtain and keep in force a policy or policies in the name of Lessor with
loss payable to Lessor and any Lender, insuring the loss of the full Rent for
one year with an extended period of indemnity for an additional 180 days
(“Rental Value insurance”). Said insurance shall contain an agreed valuation
provision in lieu of any coinsurance clause, and the amount of coverage shall be
adjusted annually to reflect the projected Rent otherwise payable by Lessee, for
the next 12 month period. Lessee shall be liable for any deductible amount in
the event of such loss. (c) Adjacent Premises. If the Premises are part of a
larger building, or of a group of buildings owned by Lessor which are adjacent
to the Premises, the Lessee shall pay for any increase in the premiums for the
property insurance of such building or buildings if said increase is caused by
Lessee’s acts, omissions, use or occupancy of the Premises. 8.4 Lessee’s
Property; Business Interruption Insurance. (a) Property Damage. Lessee shall
obtain and maintain insurance coverage on all of Lessee’s personal property,
Trade Fixtures, and Lessee Owned Alterations and Utility Installations. Such
insurance shall be full replacement cost coverage with a deductible of not to
exceed $1,000 per occurrence. Lessee shall provide Lessor with written evidence
that such insurance is in force. Initials (b) Business Interruption. Lessee
shall obtain and maintain loss of income and extra expense insurance in amounts
as will reimburse Lessee for direct or indirect loss of earnings attributable to
all perils commonly insured against by prudent lessees in the business of Lessee
or attributable to prevention of access to the Premises as a result of such
perils. (c) No Representation of Adequate Coverage. Lessor makes no
representation that the limits or forms of coverage of insurance specified
herein are adequate to cover Lessee’s property, business operations or
obligations under this Lease. 8.5 Insurance Policies. Insurance required herein
shall be by companies duly licensed or admitted to transact business in the
state where the Premises are located, and maintaining during the policy term a
“General Policyholders Rating” of at least A-, VI, as set forth in the most
current issue of “Best’s Insurance Guide”, or such other rating as may be
required by a Lender. Lessee shall not do or permit to be done anything which
invalidates the required insurance policies. Lessee shall, prior to the Start
Date, deliver to Lessor certified copies of policies of such insurance or
certificates evidencing the existence and amounts of the required insurance. No
such policy shall be cancelable or subject to modification except after 30 days
prior written notice to Lessor. Lessee shall, at least 10 days prior to the
expiration of such policies, furnish Lessor with evidence of renewals or
“insurance binders” evidencing renewal thereof, or Lessor may order such
insurance and charge the cost thereof to Lessee, which amount shall be payable
by Lessee to Lessor upon demand. Such policies shall be for a term of at least
one year, or the length of the remaining term of this Lease, whichever is less.
If either Party shall fail to procure and maintain the insurance required to be
carried by it, the other Party may, but shall not be required to, procure and
maintain the same. 8.6 Waiver of Subrogation. Without affecting any other rights
or remedies, Lessee and Lessor each hereby release and relieve the other, and
waive their entire right to recover damages against the other, for loss of or
damage to its property arising out of or incident to the perils required to be
insured against herein. The effect of such releases and waivers is not limited
by the amount of insurance carried or required, or by any deductibles applicable
hereto. The Parties agree to have their respective property damage insurance
carriers waive any right to subrogation that such companies may have against
Lessor or Lessee, as the case may be, so long as the insurance is not
invalidated thereby. 8.7 Indemnity. Except for Lessor’s gross negligence or
willful misconduct, Lessee shall indemnify, protect, defend and hold harmless
the Premises, Lessor and its agents, Lessor’s master or ground lessor, partners
and Lenders, from and against any and all claims, loss of rents and/or damages,
liens, judgments, penalties, attorneys’ and consultants’ fees, expenses and/or
liabilities arising out of, involving, or in connection with, the use and/or
occupancy of the Premises by Lessee. If any action or proceeding is brought
against Lessor by reason of any of the foregoing matters, Lessee shall upon
notice defend the same at Lessee’s expense by counsel reasonably satisfactory to
Lessor and Lessor shall cooperate with Lessee in such defense. Lessor need not
have first paid any such claim in order to be defended or indemnified. 8.8
Exemption of Lessor and its Agents from Liability. Notwithstanding the
negligence or breach of this Lease by Lessor or its agents, neither Lessor nor
its agents shall be liable under any circumstances for: (i) 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, indoor air quality, or from the
breakage, leakage, obstruction or other defects of pipes, fire sprinklers,
wires, appliances, plumbing, HVAC or lighting fixtures, or from any other cause,
whether the said injury or damage results from conditions arising upon the
Premises or upon other portions of the building of which the Premises are a
part, or from other sources or places, (ii) any damages arising from any act or
neglect of any other tenant of Lessor or from the failure of Lessor or its
agents to enforce the provisions of any other lease in the Project, or (iii)
injury to Lessee’s business or for any loss of income or profit therefrom.
Instead, it is intended that Lessee’s sole recourse in the event of such damages
or injury be to file a claim on the insurance policy(ies) that Lessee is
requited to maintain pursuant to the provisions of paragraph 8. Initials 8.9
Failure to Provide Insurance. Lessee acknowledges that any failure on its part
to obtain or maintain the insurance required herein will expose Lessor to risks
and potentially cause Lessor to incur costs not contemplated by this Lease, the
extent of which will be extremely difficult to ascertain. Accordingly, for any
month or portion thereof that Lessee does not maintain the required insurance
and/or does not provide Lessor with the required binders or certificates
evidencing the existence of the required insurance, the Base Rent shall be
automatically increased, without any requirement for notice to Lessee, by an
amount equal to 10% of the then existing Base Rent or $100, whichever is
greater. The parties agree that such increase in Base Rent represents fair and
reasonable compensation for the additional risk/costs that Lessor will incur by
reason of Lessee’s failure to maintain the required insurance. Such increase in
Base Rent shall in no event constitute a waiver of Lessee’s Default or Breach
with respect to the failure to maintain such insurance, prevent the exercise of
any of the other rights and remedies granted hereunder, nor relieve Lessee of
its obligation to maintain the insurance specified in this Lease. PAGE 7 OF 18
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9. Damage or Destruction. 9.1 Definitions. (a) “Premises Partial Damage” shall
mean damage or destruction to the improvements on the Premises, other than
Lessee Owned Alterations and Utility Installations, which can reasonably be
repaired in 6 months or less from the date of the damage or destruction. Lessor
shall notify Lessee in writing within 30 days from the date of the damage or
destruction as to whether or not the damage is Partial or Total. Notwithstanding
the foregoing, Premises Partial Damage shall not include damage to windows,
doors, and/or other similar items which Lessee has the responsibility to repair
or replace pursuant to the provisions of Paragraph 7.1., except as provided in
Section 7,1 (d) Initials (b) “Premises Total Destruction” shall mean damage or
destruction to the Premises, other than Lessee Owned Alterations and Utility
Installations and Trade Fixtures, which cannot reasonably be repaired in 6
months or less from the date of the damage or destruction. Lessor shall notify
Lessee in writing within 30 days from the date of the damage or destruction as
to whether or not the damage is Partial or Total. (c) “Insured Loss” shall mean
damage or destruction to improvements on the Premises, other than Lessee Owned
Alterations and Utility Installations and Trade Fixtures, which was caused by an
event required to be covered by the insurance described in Paragraph 8.3(a),
irrespective of any deductible amounts or coverage limits involved. (d)
“Replacement Cost” shall mean the cost to repair or rebuild the improvements
owned by Lessor at the time of the occurrence to their condition existing
immediately prior thereto, including demolition, debris removal and upgrading
required by the operation of Applicable Requirements, and without deduction for
depreciation. (e) “Hazardous Substance Condition” shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises which requires repair, remediation, or restoration. 9.2 Partial Damage
- Insured Loss. If a Premises Partial Damage that is an Insured Loss occurs,
then Lessor shall, at Lessor’s expense, repair such damage (but not Lessee’s
Trade Fixtures or Lessee Owned Alterations and Utility Installations) as soon as
reasonably possible and this Lease shall continue in full force and effect;
provided, however, that Lessee shall, at Lessor’s election, make the repair of
any damage or destruction the total cost to repair of which is $10,000 or less,
and, in such event, Lessor shall make any applicable insurance proceeds
available to Lessee on a reasonable basis for that purpose. Notwithstanding the
foregoing, if the required insurance was not in force or the insurance proceeds
are not sufficient to effect such repair, the Insuring Party shall promptly
contribute the shortage in proceeds (except as to the deductible which is
Lessee’s responsibility) as and when required to complete said repairs. In the
event, however, such shortage was due to the fact that, by reason of the unique
nature of the improvements, full replacement cost insurance coverage was not
commercially reasonable and available, Lessor shall have no obligation to pay
for the shortage in insurance proceeds or to fully restore the unique aspects of
the Premises unless Lessee provides Lessor with the funds to cover same, or
adequate assurance thereof, within 10 days following receipt of written notice
of such shortage and request therefor. If Lessor receives said funds or adequate
assurance thereof within said 10 day period, the party responsible for making
the repairs shall complete them as soon as reasonably possible and this Lease
shall remain in full force and effect. If such funds or assurance are not
received, Lessor may nevertheless elect by written notice to Lessee within 10
days thereafter to: (i) make such restoration and repair as is commercially
reasonable with Lessor paying any shortage in proceeds, in which case this Lease
shall remain in full force and effect, or (ii) have this Lease terminate 30 days
thereafter. Lessee shall not be entitled to reimbursement of any funds
contributed by Lessee to repair any such damage or destruction. Premises Partial
Damage due to flood or earthquake shall be subject to Paragraph 9.3,
notwithstanding that there may be some insurance coverage, but the net proceeds
of any such insurance shall be made available for the repairs if made by either
Party. * (See attachment) Initials 9.3 Partial Damage - Uninsured Loss. If a
Premises Partial Damage that is not an Insured Loss occurs, unless caused by a
negligent or willful act of Lessee (in which event Lessee shall make the repairs
at Lessee’s expense), Lessor may either: (i) repair such damage as soon as
reasonably possible at Lessor’s expense, in which event this Lease shall
continue in full force and effect, or (ii) terminate this Lease by giving
written notice to Lessee within 30 days after receipt by Lessor of knowledge of
the occurrence of such damage. Such termination shall be effective 60 days
following the date of such notice. In the event Lessor elects to terminate this
Lease, Lessee shall have the right within 10 days after receipt of the
termination notice to give written notice to Lessor of Lessee’s commitment to
pay for the repair of such damage without reimbursement from Lessor. Lessee
shall provide Lessor with said funds or satisfactory assurance thereof within 30
days after making such commitment. In such event this Lease shall continue in
full force and effect, and Lessor shall proceed to make such repairs as soon as
reasonably possible after the required funds are available. If Lessee does not
make the required commitment, this Lease shall terminate as of the date
specified in the termination notice. 9.4 Total Destruction. Notwithstanding any
other provision hereof, if a Premises Total Destruction occurs, this Lease shall
terminate “60 days following such Destruction. If the damage or destruction was
caused by the gross negligence or willful misconduct of Lessee Lessor shall have
the right to recover Lessor’s damages from Lessee, except as provided in
Paragraph 8.6. *(See attachment) Initials 9.5 Damage Near End of Term. If at any
time during the last 6 months of this Lease there is damage for which the cost
to repair exceeds one month’s Base Rent, whether or not an Insured Loss, Lessor
may terminate this Lease effective 60 days following the date of occurrence of
such damage by giving a written termination notice to Lessee within 30 days
after the date of occurrence of such damage. Notwithstanding the foregoing, if
Lessee at that time has an exercisable option to extend this Lease or to
purchase the Premises, then Lessee may preserve this Lease by, (a) exercising
such option and (b) providing Lessor with any shortage in insurance proceeds (or
adequate assurance thereof) needed to make the repairs on or before the earlier
of (i) the date which is 10 days after Lessee’s receipt of Lessor’s written
notice purporting to terminate this Lease, or (ii) the day prior to the date
upon which such option expires. If Lessee duly exercises such option during such
period and provides Lessor with funds (or adequate assurance thereof) to cover
any shortage in insurance proceeds, Lessor shall, at Lessor’s commercially
reasonable expense, repair such damage as soon as reasonably possible and this
Lease shall continue in full force and effect. If Lessee fails to exercise such
option and provide such funds or assurance during such period, then this Lease
shall terminate on the date specified in the termination notice and Lessee’s
option shall be extinguished. 9.6 Abatement of Rent; Lessee’s Remedies. (a)
Abatement. In the event of Premises Partial Damage or Premises Total Destruction
or a Hazardous Substance Condition for which Lessee is not responsible under
this Lease, the Rent payable by Lessee for the period required for the repair,
remediation or restoration of such damage shall be abated in proportion to the
degree to which Lessee’s use of the Premises is impaired, but All other
obligations of Lessee hereunder shall be performed by Lessee, and Lessor shall
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damage, destruction, remediation, repair or restoration except as provided
herein. (b) Remedies. If Lessor is obligated to repair or restore the Premises
and does not commence, in a substantial and meaningful way, such repair or
restoration within 60 days after such obligation shall accrue, Lessee may, at
any time prior to the commencement of such repair or restoration, give written
notice to Lessor and to any Lenders of which Lessee has actual notice, of
Lessee’s election to terminate this Lease on a date not less than 60 days
following the giving of such notice. If Lessee gives such notice and such repair
or restoration is not commenced within 30 days thereafter, this Lease shall
terminate as of the date specified in said notice. If the repair or restoration
is commenced within such 30 days, this Lease shall continue in full force and
effect. “Commence” shall mean either the unconditional authorization of the
preparation of the required plans, or the beginning of the actual work on the
Premises, whichever first occurs. 9.7 Termination; Advance Payments. Upon
termination of this Lease pursuant to Paragraph 6.2(g) or Paragraph 9, an
equitable adjustment shall be made concerning advance Base Rent and any other
advance payments made by Lessee to Lessor. Lessor shall, in addition, return to
Lessee any remaining portion of Lessee’s Security Deposit as is not then
required to be, used by Lessor. 10. Real Property Taxes. 10.1 Definition. As
used herein, the term “Real Property Taxes” shall include any form of
assessment; real estate, general, special, ordinary or extraordinary, or rental
levy or tax (other than inheritance, personal income or estate taxes);
improvement bond; and/or license fee imposed upon or levied against any legal or
equitable interest of Lessor in the Premises or the Project, Lessor’s right to
other income therefrom, and/or Lessor’s business of leasing, by any authority
having the direct or indirect power to tax and where the funds are generated
with reference to the Building address and where the proceeds so generated are
to be applied by the city, county or other local taxing authority of a
jurisdiction within which the Premises are located. Real Property Taxes shall
also include any tax, fee, levy, assessment or charge, or any increase therein:
(i) imposed by reason of events occurring during the term of this Lease, and
(ii) levied of assessed on machinery or equipment provided by Lessor to Lessee
pursuant to this Lease. 10.2 Payment of Taxes. In addition to Base Rent, Lessee
shall pay to Lessor an amount equal to the Real Property Tax installment due at
least 20 days prior to the applicable delinquency date. If any such installment
shall cover any period of time prior to or after the expiration or termination
of this Lease, Lessee’s share of such installment shall be prorated. In the
event Lessee incurs a late charge on any Rent payment, Lessor may estimate the
current Real Property Taxes, and require that such taxes be paid in advance to
Lessor by Lessee monthly in advance with the payment of the Base Rent. Such
monthly payments shall be an amount equal to the amount of the estimated
installment of taxes divided by the number of months remaining before the month
in which said installment becomes delinquent. When the actual amount of the
applicable tax bill is known, the amount of such equal monthly advance payments
shall be adjusted as required to provide the funds needed to pay the applicable
taxes. If the amount collected by Lessor is insufficient to pay such Real
Property Taxes when due, Lessee shall pay Lessor, upon demand, such additional
sum as is necessary. Advance payments may be intermingled with other moneys of
Lessor and shall not bear interest. In the event of a Breach by Lessee in the
performance of its obligations under this Lease, then any such advance payments
may be treated by Lessor as an additional Security Deposit. 10.3 Joint
Assessment. If the Premises are not separately assessed, Lessee’s liability
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
conclusively determined by Lessor from the respective valuations assigned in the
assessor’s work sheets or such other information as may be reasonably available.
10.4 Personal Property Taxes. Lessee shall pay, prior to delinquency, all taxes
assessed against and levied upon Lessee Owned Alterations, Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee. When possible. Lessee shall cause its Lessee Owned Alterations and
Utility Installations, Trade Fixtures, furnishings, equipment and all other
personal property to be assessed and billed separately from the real property of
Lessor. If any of Lessee’s said property shall be assessed with Lessor’s real
property, Lessee shall pay Lessor the taxes attributable to Lessee’s property
within 10 days after receipt of a written statement setting forth the taxes
applicable to Lessee’s property. 11. Utilities and Services. Lessee shall pay
for all water, gas, heat, light, power, telephone, trash disposal and other
utilities and services supplied to the Premises, together with any taxes
thereon. If any such services are not separately metered or billed to Lessee,
Lessee shall pay a reasonable proportion, to be determined by Lessor, of all
charges jointly metered or billed. There shall be no abatement of rent and
Lessor shall not be liable in any respect whatsoever for the inadequacy,
stoppage, interruption or discontinuance of any utility or service due to riot,
strike, labor dispute, breakdown, accident, repair or other cause beyond
Lessor’s reasonable control or in cooperation with governmental request or
directions. 12. Assignment and Subletting. 12.1 Lessor’s Consent Required. (a)
Lessee shall not voluntarily or by operation of law assign, transfer, mortgage
or encumber (collectively, “assign or assignment”) or sublet all or any part of
Lessee’s interest in this Lease or in the Premises without Lessor’s prior
written consent. (b) Unless Lessee is a corporation and its stock is publicly
traded on a national stock exchange, a change in the control of Lessee shall
constitute an assignment requiring consent. The transfer, on a cumulative basis,
of 25% or more of the voting control of Lessee shall constitute a change in
control for this purpose. (c) The involvement of Lessee or its assets in any
transaction, or series of transactions (by way of merger, sale, acquisition,
financing, transfer, leveraged 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 by an amount
greater than 25% of such Net Worth as it was represented at the time of the
execution of this Lease or at the time of the most recent assignment to which
Lessor has consented, or as it exists immediately prior to said transaction or
transactions constituting such reduction, whichever was or is greater, shall be
considered an assignment of this Lease to which Lessor may withhold its consent.
“Net Worth of Lessee” shall mean the net worth of Lessee (excluding any
guarantors) established under generally accepted accounting principles. (d) An
assignment or subletting without consent shall, at Lessor’s option, be a Default
curable after notice per Paragraph 13.1(c), or a noncurable Breach without the
necessity of any notice and grace period. If Lessor elects to treat such
unapproved assignment or subletting as a noncurable Breach, Lessor may either:
(i) terminate this Lease, or (ii) upon 30 days written notice, increase the
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 Rent then in effect. Further, in the event of such Breach and rental
adjustment, (i) the purchase price of any option to purchase the Premises held
by Lessee shall be subject to similar adjustment to 110% of the price previously
in effect, and (ii) all fixed and non-fixed rental adjustments scheduled during
the remainder of the Lease term shall be increased to 110% of the scheduled
adjusted rent. (e) Lessee’s remedy for any breach of Paragraph 12.1 by Lessor
shall be limited to compensatory damages and/or injunctive relief. (f) Lessor
may reasonably withhold consent to a proposed assignment or subletting if Lessee
is in Default at the time consent is requested. (g) Notwithstanding the
foregoing, allowing a de minimis portion of the Premises, ie. 20 square feet or
less, to be used by a third party vendor in connection with the installation of
a vending machine or payphone shall not constitute a subletting. 12.2 Terms and
Conditions Applicable to Assignment and Subletting. (a) Regardless of Lessor’s
consent, no assignment or subletting shall: (i) be effective without the express
written assumption by such assignee or sublessee of the obligations of Lessee
under this Lease, (ii) release Lessee of any obligations hereunder, or (iii)
alter the primary liability of Lessee for the payment of Rent or for the
performance of any other obligations to be performed by Lessee. (b) Lessor may
accept Rent or performance of Lessee’s obligations from any person other than
Lessee pending approval or disapproval of an assignment. Neither a delay in the
approval or disapproval of such assignment nor the acceptance of Rent or
performance shall constitute a waiver or estoppel of Lessor’s right to exercise
its remedies for Lessee’s Default or Breach. (c) Lessor’s consent to any
assignment or subletting shall not constitute a consent to any subsequent
assignment or subletting. (d) In the event of any Default or Breach by Lessee,
Lessor may proceed directly against Lessee, any Guarantors or anyone else
responsible for the performance of Lessee’s obligations under this Lease,
including any assignee or sublessee, without first exhausting Lessor’s remedies
against any other person or entity responsible 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, if any,
together with a fee of $500 as consideration for Lessor’s considering and
processing said request. Lessee agrees to provide Lessor with such other or
additional information and/or documentation as may be reasonably requested. (See
also Paragraph 36) (f) Any assignee of, or sublessee under, this Lease shall, by
reason of accepting such assignment, entering into such sublease, or entering
into possession of the Premises or any portion thereof, be deemed to have
assumed and agreed to conform and comply with each and every term, covenant,
condition and obligation herein to be observed or performed by Lessee during the
term of said assignment or sublease, other than such obligations as are contrary
to or inconsistent with provisions of an assignment or sublease to which Lessor
has specifically consented to in writing. (g) Lessor’s consent to any assignment
or subletting shall not transfer to the assignee or sublessee any Option granted
to the original Lessee by this Lease unless such transfer is specifically
consented to by Lessor in writing. (See Paragraph 39.2) 12.3 Additional Terms
and Conditions Applicable to Subletting. The following terms and conditions
shall apply to any subletting by Lessee of all or any part of the Premises and
shall be deemed included in all subleases under this Lease whether or not
expressly incorporated therein: (a) Lessee hereby assigns and transfers to
Lessor all of Lessee’s interest in all Rent payable on any sublease, and Lessor
may collect such Rent and apply same toward Lessee’s obligations under this
Lease; provided, however, that until a Breach shall occur in the performance of
Lessee’s obligations, Lessee may collect said Rent. In the event that the amount
collected by Lessor exceeds Lessee’s then outstanding obligations any such
excess shall be refunded to Lessee. Lessor shall not, by reason of the foregoing
or any assignment of such sublease, nor by reason of the collection of Rent, be
deemed liable to the sublessee for any failure of Lessee to perform and comply
with any of Lessee’s obligations to such sublessee. Lessee hereby irrevocably
authorizes and directs any such sublessee, upon receipt of a written notice from
Lessor stating that a Breach exists in the performance of Lessee’s obligations
under this Lease, to pay to Lessor all Rent due and to become due under the
sublease. Sublessee shall rely upon any such notice from Lessor and shall pay
all Rents to Lessor without any obligation or right to inquire as to whether
such Breach exists, notwithstanding any claim from Lessee to the contrary. (b)
In the event of a Breach by Lessee, Lessor may, at its option, require sublessee
to attorn to Lessor, in which event Lessor shall undertake the obligations of
the sublessor under such sublease from the time of the exercise of said option
to the expiration of such sublease; provided, however, Lessor shall not be
liable for any prepaid rents or security deposit paid by such sublessee to such
sublessor or for any prior Defaults or Breaches of such sublessor. (c) Any
matter requiring the consent of the sublessor under a sublease shall also
require the consent of Lessor. (d) No sublessee shall further assign or sublet
all or any part of the Premises without Lessor’s prior written consent. (e)
Lessor shall deliver a copy of any notice of Default or Breach by Lessee to the
sublessee, who shall have the right to cure the Default of Lessee within the
grace period, if any, specified in such notice. The sublessee shall have a right
of reimbursement and offset from and against Lessee for any such Defaults cured
by the sublessee. 13. Default; Breach; Remedies. 13.1 Default; Breach. A
“Default” is defined as a failure by the Lessee to comply with or perform any of
the terms, covenants, conditions or Rules and Regulations under this Lease. A
“Breach” is defined as the occurrence of one or more of the following Defaults,
and the failure of Lessee to cure such Default within any applicable grace
period: (a) The abandonment of the Premises; or the vacating of the Premises
without providing a commercially reasonable level of security, or where the
coverage of the property insurance described in Paragraph 8.3 is jeopardized as
a result thereof, or without providing reasonable assurances to minimize
potential vandalism. (b) The failure of Lessee to make any payment of Rent or
any Security Deposit required to be made by Lessee hereunder, whether to Lessor
or to a third party, when due, to provide reasonable evidence of insurance or
surety bond, or to fulfill any obligation under this Lease which endangers or
threatens life or property, where such failure continues for a period of 3
business days following written notice to Lessee. THE ACCEPTANCE BY LESSOR OF A
PARTIAL PAYMENT OF RENT OR SECURITY DEPOSIT SHALL NOT CONSTITUTE A WAIVER OF ANY
OF LESSOR’S RIGHTS, INCLUDING LESSOR’S RIGHT TO RECOVER POSSESSION OF THE
PREMISES. (c) The failure of Lessee to allow Lessor and/or its agents access to
the Premises or the commission of waste, act or acts constituting public or
private nuisance, and/or an illegal activity on the Premises by Lessee, where
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 following written notice to Lessee. “(See Attachment) (d) The failure by Lessee
to provide (i) reasonable written evidence of compliance with Applicable
Requirements, (ii) the service contracts, (iii) the rescission of an
unauthorized assignment or subletting, (iv) an Estoppel Certificate or financial
statements, (v) a requested subordination, (vi) evidence concerning any guaranty
and/or Guarantor, (vii) any document requested under Paragraph 42, (viii)
material safety data sheets (MSDS), or (ix) any other documentation or
information which Lessor may reasonably require of Lessee under the terms of
this Lease, where any such failure continues for a period of 10 days following
written notice to Lessee. (e) A Default by Lessee as to the terms, covenants,
conditions or provisions of this Lease, or of the rules adopted under Paragraph
40 hereof, other than those described in subparagraphs 13.1(a), (b), (c) or (d),
above, where such Default continues for a period of 30 days after written
notice; provided, however, that if the nature of Lessee’s Default is such that
more than 30 days are reasonably required for its cure, then it shall not be
deemed to be a Breach if Lessee commences such cure within said 30 day period
and thereafter diligently prosecutes such cure to completion. (f) The occurrence
of any of the following events: (i) the making of any general arrangement or
assignment for the benefit of creditors; (ii) becoming a “debtor” as defined in
11 U.S.C. §101 or any successor statute thereto (unless, in the case of a
petition filed against Lessee, the same is dismissed within 60 days); (iii) the
appointment of a trustee or receiver to take possession of substantially all of
Lessee’s assets located at the Premises or of Lessee’s interest in this Lease,
where possession is not restored to Lessee within 30 days; or (iv) the
attachment, execution or other judicial seizure of substantially all of Lessee’s
assets located at the Premises or of Lessee’s interest in this Lease, where such
seizure is not discharged within 30 days; provided, however, in the event that
any provision of this subparagraph is contrary to any applicable law, such
provision shall be of no force or effect, and not affect the validity of the
remaining provisions. (g) The discovery that any financial statement of Lessee
or of any Guarantor given to Lessor was materially false. (h) If the performance
of Lessee’s obligations under this Lease is guaranteed: (i) the death of a
Guarantor, (ii) the termination of a Guarantor’s liability with respect to this
Lease other than in accordance with the terms of such guaranty, (iii) a
Guarantor’s becoming insolvent or the subject of a bankruptcy filing, (iv) a
Guarantor’s refusal to honor the guaranty, or (v) a Guarantor’s breach of its
guaranty obligation on an anticipatory basis, and Lessee’s failure, within 60
days following written notice of any such event, to provide written alternative
assurance or security, which, when coupled with the then existing resources of
Lessee, equals or exceeds the combined financial resources of Lessee and the
Guarantors that existed at the time of execution of this Lease. 13.2 Remedies.
If Lessee fails to perform any of its affirmative duties or obligations, within
10 days after written notice (or in case of an emergency, without notice),
Lessor may, at its option, perform such duty or obligation on Lessee’s behalf,
including but not limited to the obtaining of reasonably required bonds,
insurance policies, or governmental licenses, permits or approvals. Lessee shall
pay to Lessor an amount equal to 115% of the costs and expenses incurred by
Lessor in such performance upon receipt of an invoice therefor. In the event of
a Breach, Lessor may, with or without further notice or demand, and without
limiting Lessor in the exercise of any right or remedy which Lessor may have by
reason of such Breach: (a) Terminate Lessee’s right to possession of the
Premises by any lawful means, in which case this Lease shall terminate and
Lessee shall immediately surrender possession to Lessor. In such event Lessor
shall be entitled to recover from Lessee: (i) the unpaid Rent which had been
earned at the time of termination; (ii) the worth at the time of award of the
amount by which the unpaid rent which would have been earned after termination
until the time of award exceeds the amount of such rental loss that the Lessee
proves could have been reasonably avoided; (iii) the worth at the time of award
of the amount by which the unpaid rent for the balance of the term after the
time of award exceeds the amount of such rental loss that the Lessee proves
could be reasonably avoided; and (iv) any other amount necessary to compensate
Lessor for all the detriment proximately caused by the Lessee’s failure to
perform its obligations under this Lease or which in the ordinary course of
things would be likely to result therefrom, including but not limited to the
cost of recovering possession of the Premises, expenses of reletting, including
necessary renovation and alteration of the Premises, reasonable attorneys’ fees,
and that portion of any leasing commission paid by Lessor in connection with
this Lease applicable to the unexpired term of this Lease. The worth at the time
of award of the amount referred to in provision (iii) of the immediately
preceding sentence shall be computed by discounting such amount at the discount
rate of the Federal Reserve Bank of the District within which the Premises are
located at the time of award plus one percent. Efforts by Lessor to mitigate
damages caused by Lessee’s Breach of this Lease shall not waive Lessor’s right
to recover damages under Paragraph 12. If termination of this Lease is obtained
through the provisional remedy of unlawful detainer, Lessor shall have the right
to recover in such proceeding any unpaid Rent and damages as are recoverable
therein, or Lessor may reserve the right to recover all or any part thereof in a
separate suit. If a notice and grace period required under Paragraph 13.1 was
not previously given, a notice to pay rent or quit, or to perform or quit given
to Lessee under the unlawful detainer statute shall also constitute the notice
required by Paragraph 13.1. In such case, the applicable grace period required
by Paragraph 13.1 and the unlawful detainer statute shall run concurrently, and
the failure of Lessee to cure the Default within the greater of the two such
grace periods shall constitute both an unlawful detainer and a Breach of this
Lease entitling Lessor to the remedies provided for in this Lease and/or by said
statute. (b) Continue the Lease and Lessee’s right to possession and recover the
Rent as it becomes due, in which event Lessee may sublet or assign, subject only
to reasonable limitations. Acts of maintenance, efforts to relet, and/or the
appointment of a receiver to protect the Lessor’s interests, shall not
constitute a termination of the Lessee’s right to possession. (c) Pursue any
other remedy now or hereafter available under the laws or judicial decisions of
the state wherein the Premises are located. The expiration or termination of
this Lease and/or the termination of Lessee’s right to possession shall not
relieve Lessee from liability under any indemnity provisions of this Lease as to
matters occurring or accruing during the term hereof or by reason of Lessee’s
occupancy of the Premises. 13.3 Inducement Recapture. Any agreement for free or
abated rent or other charges, or for the giving or paying by Lessor to or for
Lessee of any cash or other bonus, inducement or consideration for Lessee’s
entering into this Lease, all of which concessions are hereinafter referred to
as “Inducement Provisions,” shall be deemed conditioned upon Lessee’s full and
faithful performance of all of the terms, covenants and conditions of this
Lease. Upon Breach of this Lease by Lessee, any such Inducement Provision shall
automatically be deemed deleted from this Lease and of no further force or
effect, and any rent, other charge, bonus, inducement or consideration
theretofore abated, given or paid by Lessor under such an inducement Provision
shall be immediately due and payable by Lessee to Lessor, notwithstanding any
subsequent cure of said Breach by Lessee. The acceptance by Lessor of rent or
the cure of the Breach which initiated the operation of this paragraph shall not
be deemed a waiver by Lessor of the provisions of this paragraph unless
specifically so stated in writing by Lessor at the time of such acceptance. 13.4
Late Charges. Lessee hereby acknowledges that late payment by Lessee of Rent
will cause Lessor to incur costs not contemplated by this Lease, the exact
amount of which will be extremely difficult to ascertain. Such costs include,
but are not limited to, processing and accounting charges, and late charges
which may be imposed upon Lessor by any Lender. Accordingly, if any Rent shall
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 within 5 days after such amount shall be due, then, without any requirement for
notice to Lessee, Lessee shall immediately pay to Lessor a one-time late charge
equal to 10% of each such overdue amount or $100, whichever is greater. The
Parties hereby agree that such late charge represents a fair and reasonable
estimate of the costs Lessor will incur by reason of such late payment.
Acceptance of such late charge by Lessor shall in no event constitute a waiver
of Lessee’s Default or Breach with respect to such overdue amount, nor prevent
the exercise of any of the other rights and remedies granted hereunder. In the
event that a late charge is payable hereunder, whether or not collected, for 3
consecutive installments of Base Rent, then notwithstanding any provision of
this Lease to the contrary, Base Rent shall, at Lessor’s option, become due and
payable quarterly in advance. 13.5 Interest. Any monetary payment due Lessor
hereunder, other than late charges, not received by Lessor, when due as to
scheduled payments (such as Base Rent) or within 30 days following the date on
which it was due for non-scheduled payment, shall bear interest from the date
when due, as to scheduled payments, or the 31 st day after it was due as to
non-scheduled payments. The interest (“Interest”) charged shall be computed at
the rate of 10% per annum but shall not exceed the maximum rate allowed by law.
Interest is payable in addition to the potential late charge provided for in
Paragraph 13.4. 13.6 Breach by Lessor. (a) Notice of Breach. Lessor shall not be
deemed in breach of this Lease unless Lessor fails within a reasonable time to
perform an obligation required to be performed by Lessor. For purposes of this
Paragraph, a reasonable time shall in no event be less than 30 days after
receipt by Lessor, and any Lender whose name and address shall have been
furnished Lessee in writing for such purpose, of written notice specifying
wherein such obligation of Lessor has not been performed; provided, however,
that if the nature of Lessor’s obligation is such that more than 30 days are
reasonably required for its performance, then Lessor shall not be in breach if
performance is commenced within such 30 day period and thereafter diligently
pursued to completion. (b) Performance by Lessee on Behalf of Lessor. In the
event that neither Lessor nor Lender cures said breach within 30 days after
receipt of said notice, or if having commenced said cure they do not diligently
pursue it to completion, then Lessee may elect to cure said breach at Lessee’s
expense and offset from Rent the actual and reasonable cost to perform such
cure, provided, however, that such offset shall not exceed an amount equal to
the greater of one month’s Base Rent or the Security Deposit, reserving Lessee’s
right to seek reimbursement from Lessor for any such expense in excess of such
offset. Lessee shall document the cost of said cure and supply said
documentation to Lessor. 14. Condemnation. If the Premises or any portion
thereof are taken under the power of eminent domain or sold under the threat of
the exercise of said power (collectively “Condemnation”), this Lease shall
terminate as to the part taken as of the date the condemning authority takes
title or possession, whichever first occurs. If more than 10% of the Building,
or more than 25% of that portion of the Premises not occupied by any building,
is taken by Condemnation, Lessee may, at Lessee’s option, to be exercised in
writing within 10 days after Lessor shall have given Lessee written notice of
such taking (or in the absence of such notice, within 10 days after the
condemning authority shall have taken possession) terminate this Lease as of the
date the condemning authority takes such possession. If Lessee does not
terminate this Lease in accordance with the foregoing, this Lease shall remain
in full force and effect as to the portion of the Premises remaining, except
that the Base Rent shall be reduced in proportion to the reduction in utility of
the Premises caused by such Condemnation. Condemnation awards and/or payments
shall be the property of Lessor, whether such award shall be made as
compensation for diminution in value of the leasehold, the value of the part
taken, or for severance damages, provided, however, that Lessee shall be
entitled to any compensation paid by the condemnor for Lessee’s relocation
expenses, loss of business goodwill and/or Trade Fixtures, without regard to
whether or not this Lease is terminated pursuant to the provisions of this
Paragraph. All Alterations and Utility Installations made to the Premises by
Lessee, for purposes of Condemnation only, shall be considered the property of
the Lessee and Lessee shall be entitled to any and all compensation which is
payable therefor. In the event that this Lease is not terminated by reason of
the Condemnation, Lessor shall repair any damage to the Premises caused by such
Condemnation. 15. Brokerage Fees. 15.3 Representations and Indemnities of Broker
Relationships. Lessee and Lessor each represent and warrant to the other that it
has had no dealings with any person, firm, broker or finder (other than the
Brokers, if any) in connection with this Lease, and that no one other than said
named Brokers is entitled to any commission or finder’s fee in connection
herewith. Lessee and Lessor do each hereby agree to indemnify, protect, defend
and hold the other harmless from and against liability for compensation or
charges which may be claimed by any such unnamed broker, finder or other similar
party by reason of any dealings or actions of the indemnifying Party, including
any costs, expenses, attorneys’ fees reasonably incurred with respect thereto.
16. Estoppel Certificates. (a) Each Party (as “Responding Party”) shall within
10 days after written notice from the other Party (the “Requesting Party”)
execute, acknowledge and deliver to the Requesting Party a statement in writing
in form similar to the then most current “Estoppel Certificate” form published
by the AIR Commercial Real Estate Association, plus such additional information,
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 requested by the Requesting Party. (b) If the Responding Party shall fail to
execute or deliver the Estoppel Certificate within such 10 day period, the
Requesting Party may execute an Estoppel Certificate stating that: (i) the Lease
is in full force and effect without modification except as may be represented by
the Requesting Party, (ii) there are no uncured defaults in the Requesting
Party’s performance, and (iii) if Lessor is the Requesting Party, not more than
one month’s rent has been paid in advance. Prospective purchasers and
encumbrancers may rely upon the Requesting Party’s Estoppel Certificate, and the
Responding Party shall be estopped from denying the truth of the facts contained
in said Certificate. (c) If Lessor desires to finance, refinance, or sell the
Premises, or any part thereof, Lessee and all Guarantors shall within 10 days
after written notice from Lessor deliver to any potential lender or purchaser
designated by Lessor such financial statements as may be reasonably required by
such lender or purchaser, including but not limited to Lessee’s financial
statements for the past 3 years. All such financial statements shall be received
by Lessor and such lender or purchaser in confidence and shall be used only for
the purposes herein set forth. 17. Definition of Lessor. The term “Lessor” as
used herein shall mean the owner or owners at the time in question of the fee
title to the Premises, or, if this is a sublease, of the Lessee’s interest in
the prior lease. In the event of a transfer of Lessor’s title or interest in the
Premises or this Lease, Lessor shall deliver to the transferee or assignee (in
cash or by credit) any unused Security Deposit held by Lessor. Upon such
transfer or assignment and delivery of the Security Deposit, as aforesaid, the
prior Lessor shall be relieved of all liability with respect to the obligations
and/or covenants under this Lease thereafter to be performed by the Lessor.
Subject to the foregoing, the obligations and/or covenants in this Lease to be
performed by the Lessor shall be binding only upon the Lessor as hereinabove
defined. 18. Severability. The invalidity of any provision of this Lease, as
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof. 19. Days. Unless otherwise specifically
indicated to the contrary, the word “days” as used in this Lease shall mean and
refer to calendar days. 20. Limitation on Liability. The obligations of Lessor
under this Lease shall not constitute personal obligations of Lessor or its
partners, members, directors, officers or shareholders, and Lessee shall look to
the Premises, and to no other assets of Lessor, for the satisfaction of any
liability of Lessor with respect to this Lease, and shall not seek recourse
against Lessor’s partners, members, directors, officers or shareholders, or any
of their personal assets for such satisfaction. 21. Time of Essence. Time is of
the essence with respect to the performance of all obligations to be performed
or observed by the Parties under this Lease. 22. No Prior or Other Agreements;
Broker Disclaimer. This Lease contains all agreements between the Parties with
respect to any matter mentioned herein, and no other prior or contemporaneous
agreement or understanding shall be effective. Lessor and Lessee each represents
and warrants to the Brokers that it has made, and is relying solely upon, its
own investigation as to the nature, quality, character and financial
responsibility of the other Party to this Lease and as to the use, nature,
quality and character of the Premises. Brokers have no responsibility with
respect thereto or with respect to any default or breach hereof by either Party.
23. Notices. 23.1 Notice Requirements. All notices required or permitted by this
Lease or applicable law shall be in writing and may be delivered in person (by
hand or by courier) or may be sent by regular, certified or registered mail or
U.S. Postal Service Express Mail, with postage prepaid, or by facsimile
transmission, and shall be deemed sufficiently given if served in a manner
specified in this Paragraph 23. The addresses noted adjacent to a Party’s
signature on this Lease shall be that Party’s address for delivery or mailing of
notices. Either Party may by written notice to the other specify a different
address for notice, except that upon Lessee’s taking possession of the Premises,
the Premises shall constitute Lessee’s address for notice. A copy of all notices
to Lessor shall be concurrently transmitted to such party or parties at such
addresses as Lessor may from time to time hereafter designate in writing. 23.2
Date of Notice. Any notice sent by registered or certified mail, return receipt
requested, shall be deemed given on the date of delivery shown on the receipt
card, or if no delivery date is shown, the postmark thereon. If sent by regular
mail the notice shall be deemed given 72 hours after the same is addressed as
required herein and mailed with postage prepaid. Notices delivered by United
States Express Mail or overnight courier that guarantee next day delivery shall
be deemed given 24 hours after delivery of the same to the Postal Service or
courier. Notices transmitted by facsimile transmission or similar means shall be
deemed delivered upon telephone confirmation of receipt (confirmation report
from fax machine is sufficient), provided a copy is also delivered via delivery
or mail. If notice is received on a Saturday, Sunday or legal holiday, it shall
be deemed received on the next business day. 24. Waivers. (a) No waiver by
Lessor of the Default or Breach of any term, covenant or condition hereof by
Lessee, shall be deemed a waiver of any other term, covenant or condition
hereof, or of any subsequent Default or Breach by Lessee of the same or of any
other term, covenant or condition hereof. Lessor’s consent to, or approval of,
any act shall not be deemed to render unnecessary the obtaining of Lessor’s
consent to, or approval of, any subsequent or similar act by Lessee, or be
construed as the basis of an estoppel to enforce the provision or provisions of
this Lease requiring such consent. (b) The acceptance of Rent by Lessor shall
not be a waiver of any Default or Breach by Lessee. Any payment by Lessee may be
accepted by Lessor on account of moneys or damages due Lessor, notwithstanding
any qualifying statements or conditions made by Lessee in connection therewith,
which such statements and/or conditions shall be of no force or effect
whatsoever unless specifically agreed to in writing by Lessor at or before the
time of deposit of such payment. (C) THE PARTIES AGREE THAT THE TERMS OF THIS
LEASE SHALL GOVERN WITH REGARD TO ALL MATTERS RELATED THERETO AND HEREBY WAIVE
THE PROVISIONS OF ANY PRESENT OR FUTURE STATUTE TO THE EXTENT THAT SUCH PAGE 13
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 STATUTE IS INCONSISTENT WITH THIS LEASE. 25. Disclosures Regarding The Nature
of a Real Estate Agency Relationship. (a) When entering into a discussion with a
real estate agent regarding a real estate transaction, a Lessor or Lessee should
from the outset understand what type of agency relationship or representation it
has with the agent or agents in the transaction. Lessor and Lessee acknowledge
being advised by the Brokers in this transaction, as follows: (i) Lessor’s
Agent. A Lessor’s agent under a listing agreement with the Lessor acts as the
agent for the Lessor only. A Lessor’s agent or subagent has the following
affirmative obligations: To the Lessor: A fiduciary duty of utmost care,
integrity, honesty, and loyalty in dealings with the Lessor. To the Lessee and
the Lessor: a. Diligent exercise of reasonable skills and care in performance of
the agent’s duties, b. A duty of honest and fair dealing and good faith. c. A
duty to disclose all facts known to the agent materially affecting the value or
desirability of the property that are not known to, or within the diligent
attention and observation of, the Parties. An agent is not obligated to reveal
to either Party any confidential information obtained from the other Party which
does not involve the affirmative duties set forth above. (ii) Lessee’s Agent. An
agent can agree to act as agent for the Lessee only. In these situations, the
agent is not the Lessor’s agent, even if by agreement the agent may receive
compensation for services rendered, either in full or in part from the Lessor.
An agent acting only for a Lessee has the following affirmative obligations. To
the Lessee: A fiduciary duty of utmost care, integrity, honesty, and loyalty in
dealings with the Lessee. To the Lessee and the Lessor: a. Diligent exercise of
reasonable skills and care in performance of the agent’s duties, b. A duty of
honest and fair dealing and good faith, c. A duty to disclose all facts known to
the agent materially affecting the value or desirability of the property that
are not known to, or within the diligent attention and observation of, the
Parties. An agent is not obligated to reveal to either Party any confidential
information obtained from the other Party which does not involve the affirmative
duties set forth above. (iii) Agent Representing Both Lessor and Lessee. A real
estate agent, either acting directly or through one or more associate licenses,
can legally be the agent of both the Lessor and the Lessee in a transaction, but
only with the knowledge and consent of both the Lessor and the Lessee. In a dual
agency situation, the agent has the following affirmative obligations to both
the Lessor and the Lessee: a. A fiduciary duty of utmost care, integrity,
honesty and loyalty in the dealings with either Lessor or the Lessee, b. Other
duties to the Lessor and the Lessee as stated above in subparagraphs (i) or
(ii). In representing both Lessor and Lessee, the agent may not without the
express permission of the respective Party, disclose to the other Party that the
Lessor will accept rent in an amount less than that indicated in the listing or
that the Lessee is willing to pay a higher rent than that offered. The above
duties of the agent in a real estate transaction do not relieve a Lessor or
Lessee from the responsibility to protect their own interests. Lessor and Lessee
should carefully read all agreements to assure that they adequately express
their understanding of the transaction. A real estate agent is a person
qualified to advise about real estate. If legal or tax advice is desired,
consult a competent professional. (b) Brokers have no responsibility with
respect to any default or breach hereof by either Party. The Parties agree that
no lawsuit or other legal proceeding involving any breach of duty, error or
omission relating to this Lease may be brought against Broker more than one year
after the Start Date and that the liability (including court costs and
attorneys’ fees), of any Broker with respect to any such lawsuit and/or legal
proceeding shall not exceed the fee received by such Broker pursuant to this
Lease; provided, however, that the foregoing limitation on each Broker’s
liability shall not be applicable to any gross negligence or willful misconduct
of such Broker. (c) Lessor and Lessee agree to identify to Brokers as
“Confidential” any communication or information given Brokers that is considered
by such Party to be confidential. 26. No Right To Holdover. Lessee has no right
to retain possession of the Premises or any part thereof beyond the expiration
or termination of this Lease. In the event that Lessee holds over, then the Base
Rent shall be increased to 125% of the Base Rent applicable immediately
preceding the expiration or termination. Nothing contained herein shall be
construed as consent by Lessor to any holding over by Lessee 27. Cumulative
Remedies. No remedy or election hereunder shall be deemed exclusive but shall,
wherever possible, be cumulative with all other remedies at law or in equity.
28. Covenants and Conditions; Construction of Agreement. All provisions of this
Lease to be observed or performed by Lessee are both covenants and conditions.
In construing this Lease, all headings and titles are for the convenience of the
Parties only and shall not be considered a part of this Lease. Whenever required
by the context, the singular shall include the plural and vice versa. This Lease
shall not be construed as if prepared by one of the Parties, but rather
according to its fair meaning as a whole, as if both Parties had prepared it.
29. Binding Effect; Choice of Law. This Lease shall be binding upon the Parties,
their personal representatives, successors and assigns and be governed by the
laws of the State in which the Premises are located. Any litigation between the
Parties hereto concerning this Lease shall be initiated in the county in which
the Premises are located. 30. Subordination; Attornment; Non-Disturbance. 30.1
Subordination. This Lease and any Option granted hereby shall be subject and
subordinate to any ground lease, mortgage, deed of trust, or other hypothecation
or security device (collectively, “Security Device”), now or hereafter placed
upon the Premises, to any and all advances made on the security thereof, and to
all renewals, modifications, and extensions thereof. Lessee agrees that the
holders of any such Security Devices (in this Lease together referred to as
“Lender”) shall have no liability or obligation to perform any of the
obligations of Lessor under this Lease. Any Lender may elect to have this Lease
and/or any Option granted hereby superior to the lien of its Security Device by
giving written notice thereof to Lessee whereupon this Lease and such Options
shall be deemed prior to such Security Device, notwithstanding the relative
dates of the documentation or recordation thereof. 30.2 Attornment. In the event
that Lessor transfers title to the Premises, or the Premises are acquired by
another upon the foreclosure or termination of a Security Devise to which this
Lease is subordinated (i) Lessee shall, subject to the non-disturbance
provisions of Paragraph 30.3, attorn to such new owner, and upon request, enter
into a new lease, containing all of the terms and provisions of this Lease, with
such new owner for the remainder of the term hereof, or, at the election of the
new owner, this Lease will automatically become a new lease between Lessee and
such new owner, and (ii) Lessor shall thereafter be relieved of any further
obligations hereunder and such new owner shall assume all of Lessor’s
obligations, except that such new owner shall not: (a) be liable for any act or
omission of any prior lessor or with respect to events occurring prior to
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 ownership; (b) be subject to any offsets or defenses which Lessee might have
against any prior lessor, (c) be bound by prepayment of more than one month’s
rent, or (d) be liable for the return of any security deposit paid to any prior
lessor which was not paid or credited to such new owner. 30.3 Non-Disturbance.
With respect to Security Devices entered into by Lessor after the execution of
this Lease, Lessee’s subordination of this Lease shall be subject to receiving a
commercially reasonable non-disturbance agreement (a “Non-Disturbance
Agreement”) from the Lender which Non-Disturbance Agreement provides that
Lessee’s possession of the Premises, and this Lease, including any options to
extend the term hereof, will not be disturbed so long as Lessee is not in Breach
hereof and attorns to the record owner of the Premises. Further, within 60 days
after the execution of this Lease, Lessor shall, if requested by Lessee, use its
commercially reasonable efforts to obtain a Non-Disturbance Agreement from the
holder of any pre-existing Security Device which is secured by the Premises. In
the event that Lessor is unable to provide the Non-Disturbance Agreement within
said 60 days, then Lessee may, at Lessee’s option, directly contact Lender and
attempt to negotiate for the execution and delivery of a Non-Disturbance
Agreement. 30.4 Self-Executing. The agreements contained in this Paragraph 30
shall be effective without the execution of any further documents; provided,
however, that, upon written request from Lessor or a Lender in connection with a
sale, financing or refinancing of the Premises, Lessee and Lessor shall execute
such further writings as may be reasonably required to separately document any
subordination, attornment and/or Non-Disturbance Agreement provided for herein.
31. Attorneys’ Fees. If any Party or Broker brings an action or proceeding
involving the Premises whether founded in tort, contract or equity, or to
declare rights hereunder, the Prevailing Party (as hereafter defined) in any
such proceeding, action, or appeal thereon, shall be entitled to reasonable
attorneys’ fees. Such fees may be awarded in the same suit or recovered in a
separate suit, whether or not such action or proceeding is pursued to decision
or judgment. The term, “Prevailing Party” shall include, without limitation, a
Party or Broker who substantially obtains or defeats the relief sought, as the
case may be, whether by compromise, settlement, judgment, or the abandonment by
the other Party or Broker of its claim or defense. The attorneys’ fees award
shall not be computed in accordance with any court fee schedule, but shall be
such as to fully reimburse all attorneys’ fees reasonably incurred. In addition,
Lessor shall be entitled to attorneys’ fees, costs and expenses incurred in the
preparation and service of notices of Default and consultations in connection
therewith, whether or not a legal action is subsequently commenced in connection
with such Default or resulting Breach ($200 is a reasonable minimum per
occurrence for such services and consultation). 32. Lessor’s Access; Showing
Premises; Repairs. Lessor and Lessor’s agents shall have the right to enter the
Premises at any time, in the case of an emergency, and otherwise at reasonable
times after reasonable prior notice for the purpose of showing the same to
prospective purchasers, lenders, or tenants, and making such alterations,
repairs, improvements or additions to the Premises as Lessor may deem necessary
or desirable and the erecting, using and maintaining of utilities, services,
pipes and conduits through the Premises and/or other premises as long as there
is no material adverse effect to Lessee’s use of the Premises. All such
activities shall be without abatement of rent or liability to Lessee. * (See
attachment) 33. Auctions. Lessee shall not conduct, nor permit to be conducted,
any auction upon the Premises without Lessor’s prior written consent. Lessor
shall not be obligated to exercise any standard of reasonableness in determining
whether to permit an auction. 34. Signs. Lessor may place on the Premises
ordinary “For Sale” signs at any time and ordinary “For Lease” signs during the
last 6 months of the term hereof. Except for ordinary “for sublease” signs,
Lessee shall not place any sign upon the Premises without Lessor’s prior written
consent. All signs must comply with all Applicable Requirements. 35.
Termination; Merger. Unless specifically stated otherwise in writing by Lessor,
the voluntary or other surrender of this Lease by Lessee, the mutual termination
or cancellation hereof, or a termination hereof by Lessor for Breach by Lessee,
shall automatically terminate any sublease or lesser estate in the Premises;
provided, however, that Lessor may elect to continue any one or all existing
subtenancies. Lessor’s failure within 10 days following any such event to elect
to the contrary by written notice to the holder of any such lesser interest,
shall constitute Lessor’s election to have such event constitute the termination
of such interest. 36. Consents. Except as otherwise provided herein, wherever in
this Lease the consent of a Party is required to an act by or for the other
Party, such consent shall not be unreasonably withheld or delayed. Lessor’s
actual reasonable costs and expenses (including but not limited to architects’,
attorneys’, engineers’ and other consultants’ fees) incurred in the
consideration of, or response to, a request by Lessee for any Lessor consent,
including but not limited to consents to an assignment, a subletting or the
presence or use of a Hazardous Substance, shall be paid by Lessee upon receipt
of an invoice and supporting documentation therefor. Lessor’s consent to any
act, assignment or subletting shall not constitute an acknowledgment that no
Default or Breach by Lessee of this Lease exists, nor shall such consent be
deemed a waiver of any then existing Default or Breach, except as may be
otherwise specifically stated in writing by Lessor at the time of such consent.
The failure to specify herein any particular condition to Lessor’s consent shall
not preclude the imposition by Lessor at the time of consent of such further or
other conditions as are then reasonable with reference to the particular matter
for which consent is being given. In the event that either Party disagrees with
any determination made by the other hereunder and reasonably requests the
reasons for such determination, the determining party shall furnish its reasons
in writing and in reasonable detail within 10 business days following such
request. 37. Guarantor. (RESERVED) 38. Quiet Possession. Subject to payment by
Lessee of the Rent and performance of all of the covenants, conditions and
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 Lessee’s part to be observed and performed under this Lease, Lessee shall have
quiet possession and quiet enjoyment of the Premises during the term hereof. 39.
Options. If Lessee is granted an Option, as defined below, then the following
provisions shall apply: 39.1 Definition. “Option” shall mean: (a) the right to
extend or reduce the term of or renew this Lease or to extend or reduce the term
of or renew any lease that Lessee has on other property of Lessor; (b) the right
of first refusal or first offer to lease either the Premises or other property
of Lessor; (c) the right to purchase, the right of first offer to purchase or
the right of first refusal to purchase the Premises or other property of Lessor.
39.2 Options Personal To Original Lessee. Any Option granted to Lessee in this
Lease is personal to the original Lessee, and cannot be assigned or exercised by
anyone other than said original Lessee and only while the original Lessee is in
full possession of the Premises and, if requested by Lessor, with Lessee
certifying that Lessee has no intention of thereafter assigning or subletting.
39.3 Multiple Options. In the event that Lessee has any multiple Options to
extend or renew this Lease, a later Option cannot be exercised unless the prior
Options have been validly exercised. 39.4 Effect of Default on Options. (a)
Lessee shall have no right to exercise an Option: (i) during the period
commencing with the giving of any notice of Default and continuing until said
Default is cured, (ii) during the period of time any Rent is unpaid (without
regard to whether notice thereof is given Lessee), (iii) during the time Lessee
is in Breach of this Lease, or (iv) in the event that Lessee has been given 3 or
more notices of separate Default, whether or not the Defaults are cured, during
the 12 month period immediately preceding the exercise of the Option. (b) The
period of time within which an Option may be exercised shall not be extended or
enlarged by reason of Lessee’s inability to exercise an Option because of the
provisions of Paragraph 39.4(a). (c) An Option shall terminate and be of no
further force or effect, notwithstanding Lessee’s due and timely exercise of the
Option, if, after such exercise and prior to the commencement of the extended
term or completion of the purchase, (i) Lessee fails to pay Rent for a period of
30 days after such Rent becomes due (without any necessity of Lessor to give
notice thereof), or (ii) if Lessee commits a Breach of this Lease. 40. Multiple
Buildings. If the Premises are a part of a group of buildings controlled by
Lessor, Lessee agrees that it will abide by and conform to all reasonable rules
and regulations which Lessor may make from time to time for the management,
safety, and care of said properties, including the care and cleanliness of the
grounds and including the parking, loading and unloading of vehicles, and to
cause its employees, suppliers, shippers, customers, contractors and invitees to
so abide and conform. Lessee also agrees to pay its fair share of common
expenses incurred in connection with such rules and regulations. 41. Security
Measures. Lessee hereby acknowledges that the Rent payable to Lessor hereunder
does not include the cost of guard service or other security measures, and that
Lessor shall have no obligation whatsoever to provide same. Lessee assumes all
responsibility for the protection of the Premises, Lessee, its agents and
invitees and their property from the acts of third parties. 42. Reservations.
Lessor reserves to itself the right, from time to time, to grant, without the
consent or joinder of Lessee, such easements, rights and dedications that Lessor
deems necessary, and to cause the recordation of parcel maps and restrictions,
so long as such easements, rights, dedications, maps and restrictions do not
unreasonably interfere with 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 to pay the money is asserted shall have the right to make payment
“under protest” and such payment shall not be regarded as a voluntary payment
and there shall survive the right on the part of said Party to institute suit
for recovery of such sum. If it shall be adjudged that there was no legal
obligation on the part of said Party to pay such sum or any part thereof, said
Party shall be entitled to recover such sum or so much thereof as it was not
legally required to pay. A Party who does not initiate suit for the recovery of
sums paid “under protest” with 6 months shall be deemed to have waived its right
to protest such payment. 44. Authority; Multiple Parties; Execution. (a) If
either Party hereto is a corporation, trust, limited liability company,
partnership, or similar entity, each individual executing this Lease on behalf
of such entity represents and warrants that he or she is duly authorized to
execute and deliver this Lease on its behalf (b) If this Lease is executed by
more than one person or entity as “Lessee”, each such person or entity shall be
jointly and severally liable hereunder. It is agreed that any one of the named
Lessees shall be empowered to execute any amendment to this Lease, or other
document ancillary thereto and bind all of the named Lessees, and Lessor may
rely on the same as if all of the named Lessees had executed such document. (c)
This Lease may be executed by the Parties in counterparts, each of which shall
be deemed an original and ail of which together shall constitute one and the
same instrument. 45. Conflict. 46. Offer. Preparation of this Lease by either
Party or their agent and submission of same to the other Party shall not be
deemed an offer to lease to the other Party. This Lease is not intended to be
binding until executed and delivered by all Parties hereto. 47. Amendments. This
Lease may be modified only in writing, signed by the Parties in interest at the
time of the modification. As long as they do not materially change Lessee’s
obligations hereunder, Lessee agrees to make such reasonable non-monetary
modifications to this Lease as may be reasonably required by a Lender in
connection with the obtaining of normal financing or refinancing of the
Premises. PAGE 16 OF 18 INITIALS INITIALS ©2001 - AIR COMMERCIAL REAL ESTATE
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 48. Waiver of Jury Trial. THE PARTIES HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO
TRIAL BY JURY IN ANY ACTION OR PROCEEDING INVOLVING THE PROPERTY OR ARISING OUT
OF THIS AGREEMENT. 49. Mediation and Arbitration of Disputes. An Addendum
requiring the Mediation and/or the Arbitration of all disputes between the
Parties and/or Brokers arising out of this Lease is is not attached to this
Lease. *(See attachment) 50. Americans with Disabilities Act. Since compliance
with the Americans with Disabilities Act (ADA) is dependent upon Lessee’s
specific use of the Premises, Lessor makes no warranty or representation as to
whether or not the Premises comply with ADA or any similar legislation. In the
event that Lessee’s use of the Premises requires modifications or additions to
the Premises in order to be in ADA compliance, Lessee agrees to make any such
necessary modifications and/or additions at Lessee’s expense. LESSOR AND LESSEE
HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND PROVISION
CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR INFORMED AND
VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE TIME THIS LEASE
IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND EFFECTUATE
THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE PREMISES.
ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AIR COMMERCIAL
REAL ESTATE ASSOCIATION OR BY ANY BROKER AS TO THE LEGAL SUFFICIENCY, LEGAL
EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT
RELATES. THE PARTIES ARE URGED TO: 1. SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND
TAX CONSEQUENCES OF THIS LEASE. 2. RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND
INVESTIGATE THE CONDITION OF THE PREMISES. SAID INVESTIGATION SHOULD INCLUDE BUT
NOT BE LIMITED TO: THE POSSIBLE PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF
THE PREMISES, THE STRUCTURAL INTEGRITY, THE CONDITION OF THE ROOF AND OPERATING
SYSTEMS, AND THE SUITABILITY OF THE PREMISES FOR LESSEE’S INTENDED USE. WARNING:
IF THE PREMISES IS LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN PROVISIONS
OF THE LEASE MAY NEED TO BE REVISED TO COMPLY WITH THE LAWS OF THE STATE IN
WHICH THE PREMISES IS LOCATED. The parties hereto have executed this Lease at
the place and on the dates specified above their respective signatures. Executed
at: Executed at: On: On: By LESSOR: By LESSEE: HILLSIDE ASSOCIATES II, LLC
AEROVIRONMENT, INC . / A DELAWARE CORPORATION By: By: Name Printed: MARGARET M.
KESTLEY Name Printed: CATHLEEN S. CLINE, Title: AUTHORIZED AGENT Title: VP ADMIN
By: By: Name Printed: Name Printed: Title: Title: Address: Address: Telephone: (
) Telephone: ( ) Facsimile: ( ) Facsimile: ( ) Federal ID No. Federal ID No.
BROKER: BROKER: Attn: Attn: Title: Title: Address: Address: Telephone: ( )
Telephone: ( ) Facsimile: ( ) Facsimile: ( _) Federal ID No. Federal ID No. PAGE
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 NOTICE: These forms are often modified to meet changing requirements of law and
industry needs. Always write or call to make sure you are utilizing the most
current form: AIR Commercial Real Estate Association, 800 W 6th Street, Suite
800, Los Angeles, CA 90017. Telephone No. (213) 687-8777. Fax No.: (213)
687-8616. © Copyright 2001 - By AIR Commercial Real Estate Association. All
rights reserved. No part of these works may be reproduced in any form without
permission in writing. PAGE 18 OF 18 INITIALS ©2001 - AIR COMMERCIAL REAL ESTATE
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 Date: DECEMBER 12, 2013 By and Between (Lessor) HILLSIDE ASSOCIATES IT, LLC
(Lessee)AEROVIRONMENT, INC., A DELAWARE CORPORATION Address of Premises: 996
FLOWER GLEN STREET SIMI VALLEY, CA 93065 1. Base Rent Partial Abatement.
Provided Lessee shall not be in material default of the Lease, after any
applicable notice and cure periods, immediately prior to or during any Base Rent
partial abatement period, as provided in that certain Rental Concession
Agreement attached hereto, the Base Rent payable by Lessee to Lessor for the
Premises shall be partially abated to the extent provided and during the periods
provided in that certain Rental Concession Agreeement attached hereto. 2.
Maintenance and Repairs, Paragraph 7 of this Lease is hereby amended to provide
that Lessee shall be obligated to manage and contract directly for services
related to Lessee’s obligations to maintain the Premises, including, but not
limited to, all utilities and janitorial service, Lessor shall be responsible,
at Lessor’s sole cost and expense, for that portion of roof replacement and
future roof repair cost which exceeds $1,000 per occurrence, per building.
Lessee shall be responsible, at Lessee’s sole cost and expense, for the first
$1,000 of roof replacement and future roof repair cost not payable by Lessor
above. A roof assessment of the Premises shall be performed by a licensed
roofing contractor. All roofing replacement and/or repair work shall be
performed to applicable governmental code requirements, within one hundred and
twenty (120) days of lease execution weather permitting. 3. Tax Protest. During
the term of Lease, Lessee shall be entitled, at its election, to file a protest
with the Ventura County Tax Assessor’s Office to reduce the real property taxes
to reflect the current valuation of the Property. 4. Exterior Windows and Doors.
Prior to January 31st, 2014, subject to such extension of additional time as may
be required due to weather, Lessor, at Lessors sole cost and expense, shall
repair and re-seal all exterior windows and doors of the Premises, In a
workman-like and professional manner, as may be required. Lessee shall maintain
all exterior windows and doors of the Premises throughout Term of the Lease. 5.
HVAC. Lessor and Lessee agree that, within a commercially reasonable time, upon
mutual agreement of Lessor and Lessee, the HVAC units of the Premises that have
exceeded their useful life and any other HVAC major components (such as
compressors, fans, etc.) that fail, for reasons other than failure of Lessee to
maintain such HVAC major components, during the extended Term of the Lease
(collectively, the “HVAC Work”) shall be repaired or replaced, as may be
required, subject to the cost allocation provided below. Lessee shall not
perform any of the HVAC Work without Lessor’s prior approval of the work to be
done and the estimated cost of such work The cost of such HVAC Work shall be
borne 50% by Lessor and 50% by Lessee and Lessee’s share of such cost shall be
payable by Lessee upon demand by Lessor, Lessee shall be entitled to apply its
Base Rent partial abatement or any portion thereof during the twelfth (12th)
through the sixteenth (16th) months of the Term of this Lease, as provided In
the attached Rental Concession Agreement, to satisfy its obligation for its
share of such HVAC Work and. In the event of such election by Lessee, the amount
of such Base Rent partial abatement shall be reduced by the amount of Lessee’s
share of the HVAC Work so applied (Base rent is not increased and remains the
same. Lessee is just not entitled to offset cost of HVAC work as rent concession
since Lessee did not pay). Notwithstanding the foregoing, Lessee shall maintain
all HVAC units and HVAC major components during the Term through a service
contract with Lessor’s approved HVAC vendor. 6. Parking Area, Lessor shall,
within twelve (12) months of lease execution weather permitting (such work to be
done during daylight savings time) slurry coat and restripe the parking areas of
the Property, at Lessor’s sole cost and expense, on non-work days (Saturdays and
Sundays). 7. Rental Refund Payment. Promptly after mutual execution of this
Amendment, Lessor agrees to refund to Lessee Base Rent paid by Lessee for the
Premises during 2013 in the amount of $107,520. &. Option to Extend Term. Lessee
shall have one (1) option to extend the Term for sixty (60) months on the terms
and subject to the conditions provided in the attached Option to Renew. 9.
Street Privatization. Lessor agrees to cooperate with the City of Simi Valley
with respect to the privatization of Enchanted Way/Flower Glen Street. Lessee
shall be responsible for obtaining all approvals and permits necessary for such
privatization, at Lessee’s sole cost and expense. If Enchanted Way/Flower Glen
Street are successfully privatized, Lessee shall be responsible for all
maintenance of such privatized street(s), at Lessee’s sole cost and expense
during the Lease term. 10. Non-Disturbance Agreement. Lessor and Lessee
acknowledge their respective rights and obligations under Paragraph 30.3
regarding Non-Disturbance Agreements. 

 

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 AIR COMMERCIAL REAL ESTATE ASSOCIATION STANDARD INDUSTRIAL/COMMERCIAL
SINGLE-TENANT LEASE - NET ATTACHMENT 7.1(b) However, if in Lessor’s sole opinion
one or more service providers contracted for by Lessee is performing in a
substandard fashion, Lessor may give Lessee 30 days’ written notice to cure the
problem. Should Lessee fail to cure the substandard performance within that 30
day period, then Lessor may, at its option, procure and maintain a substitute
service provider(s), the cost for which Lessee shall reimburse Lessor, upon
demand. 9.2 ..., except emergency repairs required in the judgment of Lessee to
prevent additional loss to real or personal property of the parties hereto. 9.4.
...7 days after Lessor determines that damage is Total Destruction. 13.1 (c) No
default or breach shall occur when access is denied by Lessee when Lessor or its
employees or agents do not comply with the citizenship and status requirements
of the International Traffic in Arms Regulations of the United States
Government. Such regulations require that anyone allowed access to the building
must be a U.S. citizen, legal permanent resident or a member of a protected
class since items produced in the premises are listed on the U.S. Munitions list
of the ITAR. 32. No default or breach shall occur when access is denied by
Lessee when Lessor or its employees or agents do not comply with the citizenship
and status requirements of the International Traffic in Arms Regulations of the
United States Government. Such regulations require that anyone allowed access to
the building must be a U.S. citizen, legal permanent resident or a member of a
protected class since items produced in the premises are listed on the U.S.
Munitions list of the ITAR. 45, Agreement constitutes the entire agreement
between the parties, regardless of any prior negotiations. This Agreement shall
only be amended or otherwise changed through a writing, signed by both Lessor
and Lessee. 49, The parties shall agree to first attempt mediation of any
disputes, with an agreed to mediator and his/her cost shared equally by the
parties. If said mediation does not occur within 30 days of the dispute arising,
then either party may proceed to Court. Notwithstanding the foregoing, lessor
shall not be obligated to engage in mediation for any cause of action seeking
possession and/or rents owed by Lessee. In such cases, the Civil code and the
Code of Civil Procedure shall govern the dispute resolution.

 

[g44021kli021.gif]

 RENT ADJUSTMENT(S) STANDARD LEASE ADDENDUM Dated DECEMBER 12, 2013 By and
Between (Lessor) HILLSIDE ASSOCIATES II, LLC (Lessee)AEROVIRONMENT, INC., A
DELAWARE CORPORATION Address of Premises: 996 FLOWER GLEN STREET SIMI VALLEY, CA
93065 Paragraph A. RENT ADJUSTMENTS: The monthly rent for each month of the
adjustment period(s) specified below shall be increased using the method(s)
indicated below: (Check Method(s) to be Used and Fill in Appropriately) 1. Cost
of Living Adjustment(s) (COLA) a. On (Fill in COLA Dates): N/A the Base Rent
shall be adjusted by the change, if any, from the Base Month specified below, in
the Consumer Price Index of the Bureau of Labor Statistics of the U.S.
Department of Labor for (select one): CPI W (Urban Wage Earners and Clerical
Workers) or CPI U (All Urban Consumers), for (Fill in Urban Area): N/A , All
Items (1982-1984 = 100), herein referred to as “CPI”. b. The monthly rent
payable in accordance with paragraph A.l.a. of this Addendum shall be calculated
as follows: the Base Rent set forth in paragraph 1.5 of the attached Lease,
shall be multiplied by a fraction the numerator of which shall be the CPI of the
calendar month 2 months prior to the month(s) specified in paragraph A.l.a.
above during which the adjustment is to take effect, and the denominator of
which shall be the CPI of the calendar month which is 2 months prior to (select
one): the first month of the term of this Lease as set forth in paragraph 1.3
(“Base Month”) or (Fill in Other “Base Month”): N/A. The sum so calculated shall
constitute the new monthly rent hereunder, but in no event, shall any such new
monthly rent be less than the rent payable for the month immediately preceding
the rent adjustment. c. In the event the compilation and/or publication of the
CPI shall be transferred to any other governmental department or bureau or
agency or shall be discontinued, then the index most nearly the same as the CPI
shall be used to make such calculation. In the event that the Parties cannot
agree on such alternative index, then the matter shall be submitted for decision
to the American Arbitration Association in accordance with the then rules of
said Association and the decision of the arbitrators shall be binding upon the
parties. The cost of said Arbitration shall be paid equally by the Parties. II.
Market Rental Value Adjustment(s) (MRV) a. On (Fill in MRV Adjustment Date(s):
N/A the Base Rent shall be adjusted to the “Market Rental Value” of the property
as follows: 1) Four months prior to each Market Rental Value Adjustment Date
described above, the Parties shall attempt to agree upon what the new MRV will
be on the adjustment date. If agreement cannot be reached within thirty days,
then: (a) Lessor and Lessee shall immediately appoint a mutually acceptable
appraiser or broker to establish the new MRV within the next 30 days. Any
associated costs will be split equally between the Parties, or (b) Both Lessor
and Lessee shall each immediately make a reasonable determination of the MRV and
submit such determination, in writing, to arbitration in accordance with the
following provisions: (i) Within 15 days thereafter, Lessor and Lessee shall
each select an appraiser or broker (“Consultant” -check one) of their choice to
act as an arbitrator. The two arbitrators so appointed shall immediately select
a third mutually acceptable Consultant to act as a third arbitrator. (ii) The 3
arbitrators shall within 30 days of the appointment of the third arbitrator
reach a decision as to what the actual MRV for the Premises is, and whether
Lessor’s or Lessee’s submitted MRV is the closest thereto. The decision of a
majority of the arbitrators shall be binding on the Parties. The submitted MRV
which is determined to be the closest to the actual MRV shall thereafter be used
by the Parties. PAGE 1 OF 2 INITIALS INlTIALS ©2000 - AIR COMMERCIAL REAL ESTATE
ASSOCIATION FORM RA-3-8/00E

 

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 (iii) If either of the Parties fails to appoint an arbitrator within the
specified 15 days, the arbitrator timely appointed by one of them shall reach a
decision on his or her own, and said decision shall be binding on the Parties.
(iv) The entire cost of such arbitration shall be paid by the party whose
submitted MRV is not selected, i.e , the one that is NOT the closest to the
actual MRV. 2) Notwithstanding the foregoing, the new MRV shall not be less than
the rent payable for the month immediately preceding the rent adjustment. b.
Upon the establishment of each New Market Rental Value: 1) the new MRV will
become the new “Base Rent” for the purpose of calculating any further
Adjustments, and 2) the first month of each Market Rental Value term shall
become the new ‘Base Month’ for the purpose of calculating any further
Adjustments. III. Fixed Rental Adjustment(s) (FRA) The Base Rent shall be
increased to the following amounts on the dates set forth below: On (Fill in FRA
Adjustment Date(s)): The New Base Rent shall be: DECEMBER 1, 2013 $27,525.00
DECEMBER 1, 2015 $28,764.00 DECEMBER 1, 2017 $30,058.00 DECEMBER 1, 2019
$31,411.00 B. NOTICE: Unless specified otherwise herein, notice of any such
adjustments, other than Fixed Rental Adjustments, shall be made as specified in
paragraph 23 of the Lease. NOTICE: These forms are often modified to meet
changing requirements of law and industry needs. Always write or call to make
sure you are utilizing the most current form: AIR Commercial Real Estate
Association, 800 W 6th Street, Suite 800, Los Angeles, CA 90017. Telephone No.
(213) 687-8777. Fax No.: (213) 687-8616. PAGE 2 OF 2 INITIALS INlTIALS ©2000 -
AIR COMMERCIAL REAL ESTATE ASSOCIATION FORM RA-3-8/00E

 

 

RENT CONCESSION AGREEMENT

 

This document shall set-forth the agreement of HILLSIDE ASSOCIATES II, LLC, a
California Liability Company Lessor, and AEROVIRONMENT, INC., a Delaware
Corporation, Lessee concerning the Rent Concessions offered to Lessee in
connection with that certain Lease dated DECEMBER 12, 2013 by and between Lessor
and Lessee for the premises located at: 996 FLOWER GLEN STREET City of SIMI
VALLEY, State of California (the “Lease”).

 

AS MATERIAL CONSIDERATION for the Rent Concession set-forth herein is Lessee’s
agreement to lease the Premises on the terms and provisions of the Lease for the
entire Lease term.  Lessee acknowledges that the Free Rent as set-forth below
(herein called “Rent Concession”) is a concession given to Lessee for leasing
the Premises for the term stated in the Lease Agreement.  In the event Lessee
becomes in default of any material Lease provision at any time during the Lease
term and has not cured such default within the applicable Notice and Cure
periods in the lease, Lessor and Lessee agree that:  (a) in addition to any
other remedy available to Lessor, Lessor shall be entitled to recover from
Lessee the unamortized rental amount of any received Rental Concessions taken by
Lessee prior to such default date, (b) Lessee agrees to pay such amount to
Lessor with the next rental payment.  Lessee shall be entitled to the Free Rent
and/or Rent Concession(s) provided below for the applicable period of time
referenced below:

 

DECEMBER 1, 2013 THROUGH DECEMBER 31, 2013

 

$

13,762.50

 

JANUARY 1, 2014 THROUGH JANUARY 31, 2014

 

$

27,525.00

 

FEBRUARY 1, 2014 THROUGH FEBRUARY 28, 2014

 

$

27,525.00

 

MARCH 1, 2014 THROUGH MARCH 31, 2014

 

$

27,525.00

 

APRIL 1, 2014 THROUGH APRIL 30, 2014

 

$

13,762.50

 

MAY 1, 2014 THROUGH MAY 31, 2014

 

$

13,762.50

 

JUNE 1, 2014 THROUGH JUNE 30, 2014

 

$

3,030.50

 

NOVEMBER 1, 2014 THROUGH NOVEMBER 30, 2014

 

$

13,762.50

 

DECEMBER 1, 2014 THROUGH DECEMBER 31, 2014

 

$

13,762.50

 

JANUARY 1, 2015 THROUGH JANUARY 31, 2015

 

$

13,762.50

 

FEBRUARY 1, 2015 THROUGH FEBRUARY 28, 2015

 

$

13,762.50

 

MARCH 1, 2015 THROUGH MARCH 31, 2015

 

$

13,762.50

 

 

No NNN as defined in the lease shall be abated by the Rent Concession.

 

Rent Concession(s) referenced above equal a fair rental value in a sum as
determined at the time the Rent Concession commences.

 

THIS DOCUMENT shall not be deemed binding upon Lessor unless and until it is
executed by Lessor and a copy delivered to Lessee.

 

Dated this 18 day of December, 2013.

 

 

LESSOR:

LESSEE:

HILLSIDE ASSOCIATES II, LLC

AEROVIRONMENT, INC.

A California Limited Liability Company

A Delaware Corporation

By MID VALLEY PROPERTIES,

 

Managing Agent

 

 

 

 

 

BY:

/s/ Margaret M. Kestly

 

BY:

/s/ Cathleen S. Cline

 

Margaret M. Kestly, Authorized Agent

 

CATHLEEN S. CLINE

 

 

VP, ADMIN

 

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OPTION TO RENEW

 

Tenant is granted one option to extend the lease for a period of Five (5) years
commencing immediately after the expiration of the basic lease term.  It shall
be the obligation of the tenant to notify the Landlord of its intention to
exercise its option to renew within the period between 270 days and 360 days
prior to the day that the current lease expires.  The notification of the intent
to exercise its option shall be sent by tenant in writing by U.S. mail
certified, overnight courier delivery or registered with return receipt
requested.

 

The commencement rent for the first month of the option period shall be equal to
comparable market rent for a similar building located within a ten-mile radius
of the lease property giving consideration to all concessions, tenant
improvement allowance and rental abatement for a non-renewal and non-sublease
space.  In analyzing the comparable building properties, the parties may take
into account all factors including ceiling height, parking ratio, loading docks,
loading doors and height/size of those doors, HVAC, office build out, electrical
power and distribution, skylights, yard space, the general location and the view
from inside the building.

 

Upon receipt within the time period spelled out above and the tenant’s exercise
of its option to extend said lease both parties will meet and confer in an
attempt to arrive at the beginning rent during the option period.  If the
parties are not able to agree on the option period rent, each party shall
designate a licensed real estate broker who has dealt with industrial property
in the Simi Valley for not less than 5 years from the date of his appointment,
and is at that time employed by an established real estate brokerage firm.  If
both brokers are unable to agree on the reasonable commencement rent for the
option period, then both brokers will attempt to designate a third broker with
qualifications at least as stringent as those required of the original brokers.
Said third broker shall be given all of the material used by the original
brokers to base their reasonable market value, and said broker shall make his
own investigation. The third broker then shall select the opinion of one broker
as the most correct value, and the value selected by said third broker shall be
binding upon the parties.

 

If two original brokers cannot agree on a third broker, or if the third broker
is unacceptable to the parties as defined herein, then either party may request
that the presiding judge of the Superior Court of the County of Ventura select a
commercial real estate broker from the list usually kept by said presiding
judge, and said appointed brokers opinion shall be absolutely binding on all
parties.

 

Any outside broker representing the tenant will receive a 2.5% commission for
the option term, payable by Landlord.

 

If Lessee is in monetary default on the date of giving the option notice or at
any time prior to the commencement of the renewal term, the option notice shall
be totally ineffective and this Lease shall expire at the end of the initial
term.

 

Notwithstanding the foregoing, the new Market Rent Value shall not be less than
the rent payable for the month immediately preceding the rent adjustment.

 

 

Dated this 18 day of December, 2013.

 

LESSOR:

LESSEE:

HILLSIDE ASSOCIATES II, LLC

AEROVIRONMENT, INC.

A California Limited Liability Company

A Delaware Corporation

 

 

By MID VALLEY PROPERTIES,

 

Managing Agent

 

 

 

 

 

BY:

/s/ Margaret M. Kestly

 

BY:

/s/ Cathleen S. Cline

 

Margaret M. Kestly, Authorized Agent

 

CATHLEEN S. CLINE

 

 

VP, ADMIN

 

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