Exhibit No. 10.29

 

EXECUTION COPY

 

AIR COMMERCIAL REAL ESTATE ASSOCIATION

 

STANDARD INDUSTRIAL/COMMERCIAL

 

SINGLE-TENANT LEASE – NET

 

1. Basic Provisions (“Basic Provisions”).

 

1.1 Parties. This Lease (“Lease”), dated for reference purposes only
December 31, 2004, is made by and between H & M PROPERTIES, a business name for
VHEM, LLC, a California limited liability company (“Lessor”) and Skurka
Aerospace Inc., a Delaware corporation (“Lessee”), (collectively the “Parties,”
or individually a “Party”).

 

1.2 Premises. Lessor does hereby rent and lease to Lessee and Lessee does hereby
rent and lease from Lessor (i) that certain vacant lot consisting of
approximately 109,000 square feet (the “Vacant Lot”), and (ii) that certain real
property, including all improvements located thereon, commonly known as 4600
Calle Bolero, Camarillo, California (the “Business Premises” and together with
the Vacant Lot, the “Premises”), as more particularly described on Exhibit A
attached hereto (See also Paragraph 2).

 

1.3 Term:

 

a. Unless sooner terminated or extended as provided herein, the term of the
Lease with respect to the Business Premises shall be for five (5) years
commencing on the 1st day of January, 2005 (the “Commencement Date”), and ending
on the 31st day of December, 2009 (“Expiration Date”). Lessee shall have the
right to terminate its tenancy with respect to all, but not less than all, of
the Premises at any time after Howard Skurka (“Skurka”) (i) voluntarily
terminates his employment with Skurka Engineering Co., a California corporation
(“Skurka Engineering”) without Good Reason (as such term is defined in that
certain Severance Agreement, dated as of December 31, 2004 (the “Severance
Agreement”), by and between Skurka and Skurka Engineering), or (ii) is
terminated from his employment for Cause (as defined in the Severance Agreement)
by Skurka Engineering; provided, however, that Lessee shall terminate its
tenancy for the Premises on not less than thirty (30) days prior written notice
to Lessor; provided further, that Lessee may not terminate its tenancy for the
Business Premises without also terminating its tenancy for the Vacant Lot.

 

b. Subject to the provisions of Paragraph 39, Lessee is hereby granted and shall
have an option to renew its tenancy for the Business Premises for an additional
five (5) years (the “Option”), but otherwise on the same terms, covenants and
conditions set forth in the Lease; provided however, the Base Rent (as defined
below) for such additional five-year period shall be as provided in Exhibit B.
Lessee shall exercise the Option, if at all, by written notice delivered to
Lessor not later than six (6) months prior to the Expiration Date.

 

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c. The term of the Lease with respect to the Vacant Lot shall be for one
(1) year, commencing on the 1st day of January 2005 and, subject to the
provisions of Paragraph 1.3(a), shall be automatically renewed for successive,
additional one (1) year periods (as may be extended, the “Vacant Lot Lease
Term”); provided however, that Lessee or Lessor may terminate Lessee’s tenancy
for the Vacant Lot, if at all, by written notice delivered to the other party
not later than thirty (30) days prior to the expiration of the Vacant Lot Lease
Term.

 

1.4 Early Possession: None. (“Early Possession Date”).

 

1.5 Base Rent: See Paragraph 1.6.

 

x 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: Lessee shall pay Lessor at the following address: H & M
Properties, a business name for VHEM, LLC, a California limited liability
company, P.O. Box 8420, Northridge, CA 91327-8420, or at such other place as
Lessor shall designate from time to time in writing, as rent for the Premises
(the “Base Rent”) the amounts set forth in Exhibit B attached hereto. Lessee
shall pay all Base Rents without demand and without setoff or deduction (except
as otherwise expressly set forth in the Lease), in advance on the 1st day of the
month during the term of the Lease. The Base 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. (See also Paragraph 4).

 

(b) Security Deposit: $50,500 (“Security Deposit”). (See also Paragraph 5).

 

1.7 Agreed Use: Lessor and Lessee hereby agree and acknowledge the following:

 

a. Lessee shall only use the Business Premises for manufacturing, assembling,
warehouse, office and/or distribution of industrial products (the “Agreed Use
for the Business Premises”).

 

b. A certain surface parking lot (the “Parking Lot”) is located on a portion of
the Vacant Lot, as more particularly described in the diagram attached hereto as
Exhibit C, and the portion of the Vacant Lot that is not the Parking Lot has
been landscaped with shrubbery, trees, flowers, lawns and similar landscaping
(the “Lawn Area”). Lessee shall only use (i) the Parking Lot, and no other
portion of the Vacant Lot, for parking by Lessee’s customers, employees, guests
and invitees (collectively, “Lessee’s Invitees”) and for the storage of trailers
containing only materials, supplies and/or equipment used by Lessee in
connection with its on-going operation at the Premises (to the extent that such
storage complies with Applicable Requirements (as defined below)), and (ii) the
Lawn Area for pedestrian access to and from the Business Premises, maintenance
of the Lawn Area, and recreational use by Lessee’s Invitees (as defined below)
(collectively, the “Agreed Use for the Vacant Lot” and together with the Agreed
Use for the Business Premises, the “Agreed Use”).

 

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c. Lessee shall use the Premises for the Agreed Use set forth in this Paragraph
1.7, and for no other purposes, without the prior written consent of Lessor,
which consent shall not be unreasonably withheld so long as such use is
consistent with, or reasonably comparable to, the Agreed Use. 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 causes damage to or unreasonably disturbs
occupants of neighboring premises or properties. (See also Paragraph 6).

 

1.8 Insuring Party. Lessor is the “Insuring Party”. (See also Paragraph 8).

 

1.9 Real Estate Brokers: N/A.

 

1.10 Guarantor. The obligations of the Lessee to pay all Rents and all other
sums payable by Lessee under this Lease are to be guaranteed by TRANSDIGM, INC.,
a Delaware corporation (“Guarantor”). (See also Paragraph 37).

 

1.11 Attachments. Attached hereto are the following, all of which constitute a
part of this Lease: Exhibits A through C.

 

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, 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 (“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 and 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. 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) ninety (90) 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.

 

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2.3 Compliance. Lessor hereby warrants to Lessee as follows:

 

a. Applicable Requirements. For the last five (5) years, the improvements on the
Premises have complied, in all material respects, with and are currently in
compliance, in all material respects, with all applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings, and
charges thereunder) of federal, state and local governments (and all agencies
thereof), including Environmental Health & Safety Requirements as hereinafter
defined (collectively, “Applicable Requirements”), and no claim, demand,
litigation, action, suit investigation, proceeding, hearing, complaint,
assessment, interference, opposition, reexamination, inquiry or judgment and
injunctions, judgments, orders, decrees and rulings of any nature has been filed
or, to Lessor’s knowledge, commenced or threatened, against it alleging any
failure to so comply. The warranty under this Paragraph 2.3(a) does not cover
matters relating to Environmental, Health and Safety Requirements, which matters
are covered exclusively by Paragraph 2.3(b).

 

b. Environmental, Health and Safety Matters.

 

(i) Lessor is in compliance in all material respects with all Environmental,
Health, and Safety Requirements. As used herein, “Environmental, Health, and
Safety Requirements” means all federal, state, and local statutes, regulations,
ordinances and other provisions having the force or effect of law, all judicial
and administrative orders and determinations, and all common law concerning
public heath and safety, worker health and safety, and pollution or protection
of the environment, including all those relating to the presence, use,
production, generation, handling, transportation, treatment, storage, disposal,
distribution, labeling, testing, processing, discharge, release, threatened
release, control, or cleanup of any hazardous materials, substances or wastes,
chemical substances or mixtures, pesticides, pollutants, contaminants, toxic
chemicals, petroleum products or byproducts, asbestos, polychlorinated
biphenyls, noise or radiation, each as amended.

 

(ii) Without limiting the generality of the foregoing, to Lessor’s knowledge,
Skurka Engineering has obtained and is in compliance with, all Permits (as such
term is defined in that certain Asset Purchase Agreement dated as of
December 11, 2004 (the “APA”), by and among Skurka Engineering, Guarantor and
certain shareholders listed on the signature pages thereof) that are required
pursuant to Environmental, Health, and Safety Requirements for the occupation of
its facilities and the operation of its business, except where such
non-compliance is not reasonably expected to have a Material Adverse Effect (as
defined in the APA).

 

(iii) Lessor has not received any written notice, report or other information
regarding any actual or alleged violation of Environmental, Health, and Safety
Requirements, or of any liabilities or potential liabilities, including any
investigatory, remedial, or corrective obligations, relating to it or its
facilities arising under Environmental, Health, and Safety Requirements, in each
instance, other than violations, alleged violations or liabilities that have
previously been resolved.

 

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(iv) To Lessor’s knowledge, Lessor has not had at any time in service any
underground storage tanks and there has been no release, use or storage of
polychlorinated biphenyls on, at, in, under or from any premises used by Lessor.

 

(v) To Lessor’s knowledge, Lessor has not treated, stored, disposed of, arranged
for or permitted the disposal of, transported, handled, or released any
substance that (a) requires removal or remediation under any Environmental,
Health and Safety Requirement including petroleum and petroleum by-products, and
is defined, listed or identified as “hazardous waste,” “hazardous material,”
“toxic substance,” “contaminant,” “pollutant,” “oil,” or “hazardous substance”
under such Environmental, Health and Safety Requirement, or (b) is toxic,
explosive, corrosive, flammable, infectious, radioactive, carcinogenic,
mutagenic or otherwise hazardous and is regulated as such under any
Environmental, Health and Safety Requirement; except in material compliance with
Environmental Health and Safety Requirements and does not own or operate any
property or facility in a manner that has given or would be reasonably expected
to give rise to liabilities, including any Liability (as defined in the APA) for
response costs, corrective action costs, personal injury, property damage,
natural resources damages or attorneys’ fees, pursuant to the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended
(CERCLA), the Solid Waste Disposal Act, or any other Environmental, Health, and
Safety Requirements.

 

(vi) Neither Lessor nor any predecessor of Lessor has expressly assumed or
undertaken any Liability, including any obligation for corrective or remedial
action, of any other Person (as defined in the APA) relating to Environmental,
Health and Safety Requirements.

 

c. As used in this Paragraph 2.3, “Lessor’s knowledge” means the knowledge of
Skurka and those officers, directors, and key employees listed on Schedule 1 of
the APA, after reasonable investigation. For purposes of this definition,
“reasonable investigation” will be satisfied by due inquiry regarding the fact
or other matter in question as a prudent businessperson would be reasonably
expected to make in the management of his or her business affairs, including due
inquiry of those officers, directors, key employees who would be reasonably
expected to have actual knowledge and professional advisors (including
attorneys, accountants and consultants who had a professional role with respect
to the fact or other matter in question) of Lessor who would reasonably be
expected to have knowledge.

 

d. The warranties in Paragraph 2.3 do not apply to the use to which Lessee will
put the Premises, modifications which may be required by the American with
Disabilities Act with respect to a change in Lessee’s use of the Premises 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. If the Premises do not comply with the warranties in
Paragraph 2.3, 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 the
warranties within one (1) year 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 the Lease, the

 

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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 Premises (“Capital Expenditure”), Lessor and Lessee
shall allocate the cost of such work in accordance with Paragraph 2.3(d) through
(g).

 

e. Subject to Paragraph 2.3(g) 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.

 

f. 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 and Lessee shall allocate the obligation to pay for
such costs pursuant to the provisions of Paragraph 7.1(d); provided, however,
that if such Capital Expenditure is required during the last year of this Lease,
Lessor shall have the option to terminate this Lease upon ninety (90) days prior
written notice to Lessee. If Lessor does not elect to terminate, Lessor shall
pay for 100% of the costs of such Capital Expenditure. Lessee shall not,
however, have any right to terminate this Lease if a Capital Expenditure is
required during the last year of this Lease unless such Capital Expenditure
unreasonably interferes with Lessee’s on-going operation at the Premises.

 

g. 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 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 hereby acknowledges that, other than as set forth
in the Lease, none of Lessor, Lessor’s representatives, agents, employees, or
any party acting on behalf of Lessor or under contract with Lessor have made any
oral or written representations or warranties with respect to the condition of
the Premises (including, but not limited to, the electrical, HVAC and fire
sprinkler systems, security, environmental aspects, compliance with Applicable
Requirements and American with Disabilities Act), and their suitability for
Lessee’s intended use. By execution of the Lease, Lessee acknowledges that no
representations or warranties have been made by Lessor or Lessor’s Agents (as
defined below) upon which Lessee

 

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has relied in executing the Lease, other than such representations or warranties
that are expressly set forth in the Lease.

 

2.5 Lessee as Prior Owner/Occupant. N/A

 

3. Term.

 

3.1 Term. The Commencement Date and Term of this Lease are as specified in
Paragraph 1.3.

 

3.2 Early Possession. N/A

 

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 thirty (30) 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 thirty (30) 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 on or before the day on which it is due,
without offset or deduction (except as specifically permitted 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

 

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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 payments to be made by Lessee to be by cashier’s check.
Payments will be applied first to accrued late charges and reasonable attorney’s
fees, second to accrued interest, then to Base Rent and operating expenses, and
any remaining amount to any other outstanding charges or costs.

 

4.3 Association Fees. N/A

 

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 the Lease. If Lessee fails to pay Rent after the expiration of
any applicable notice and/or cure period, or otherwise Breaches under the Lease,
Lessor may use, apply or retain all or any portion of said Security Deposit for
the payment of any amount due Lessor or to reimburse or compensate Lessor for
any liability, expense, loss or damage which Lessor may suffer or incur by
reason thereof. If Lessor uses or applies all or any portion of said Security
Deposit, Lessee shall within thirty (30) days after written request therefor to
deposit moneys with Lessor sufficient to restore said Security Deposit to the
full amount required by the Lease. Lessee’s failure to deposit the monies in
accordance with this Paragraph 5 shall constitute a Breach under the Lease.
Lessor shall not be required to keep the Security Deposit separate from its
general accounts, but shall be required to keep it in an interest bearing
account. Within fourteen (14) days after the expiration or termination of the
Lease, if Lessor elects to apply the Security Deposit only to unpaid Rent, and
otherwise within thirty (30) days after the Premises have been vacated pursuant
to Paragraph 7.4, Lessor shall return that portion of the Security Deposit not
used or applied by Lessor. No part of the Security Deposit shall be considered
to be held in trust, to bear interest or to be prepayment for any monies to be
paid by Lessee under the Lease. Nothing in this paragraph shall be deemed to
limit the amount of any claim, demand or cause of action of Lessor against
Lessee under the provisions of the Lease or require Lessor to apply the Security
Deposit in any way.

 

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 unreasonably disturbs
occupants of or causes damage to neighboring premises or properties. 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.

 

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6.2 Hazardous Substances.

 

a. Reportable Uses Require Consent. The term “Hazardous Substance” as used in
the Lease shall mean any product, substance, or waste whose presence, use,
manufacture, disposal, transportation, or release, either by itself or in
combination with other materials expected to be on the Premises, is either:
(i) potentially injurious to the public health, safety or welfare, the
environment or the Premises, (ii) regulated or monitored by any governmental
authority, or (iii) a basis for potential liability of Lessor to any
governmental agency or third party under any Applicable Requirements. 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 (but only to the extent such Reportable
Use was not conducted on the Premises prior to the Start Date) without the
express or written consent of Lessor (which consent shall not be unreasonably
withheld so long as such Reportable Use (i) is consistent with, or reasonably
comparable to, the Agreed Use, and (ii) complies 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
Requirement 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. In addition, Lessor may
condition its consent to any Reportable Use by Lessee (to the extent such
Reportable Use was not conducted on the Premises prior to the Start Date) 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 reasonable 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 promptly
give written notice of such fact to Lessor, and provide Lessor with a copy of
any report, notice, claim or other documentation which Lessee 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) in violation of any Applicable
Requirement, and shall promptly, at Lessee’s expense, comply with all Applicable
Requirements for the cleanup of any contamination of, and for the maintenance,
security and/or monitoring of the Premises or neighboring properties, that was
caused by Lessee, its agents, representatives, employees, or any party acting on
behalf of Lessee or under contract with Lessee (collectively, “Lessee’s
Agents”), or pertaining to or involving any Hazardous Substance brought onto the
Premises during the term of the Lease by Lessee or Lessee’s Agents.

 

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d. Lessor Investigations and Remediation. Lessor shall retain the responsibility
and pay for any investigations or remediation measures with respect to (i) the
existence of Hazardous Substances on the Premises prior to Lessee’s occupancy,
and (ii) any Hazardous Substance brought onto the Premises during the term of
the Lease by or for Lessor, its agents, representatives, employees, or any party
acting on behalf of Lessor or under contract with Lessor (collectively,
“Lessor’s Agents”) or any third party (other than Lessee and Lessee’s Agents).
Lessor shall comply with all Applicable Requirements for the cleanup of any
contamination of, and for the maintenance, security and/or monitoring of the
Premises or neighboring properties, that was caused by Lessor, Lessor’s Agents
or any third party (other than Lessee and Lessee’s Agents), or pertaining to or
involving any Hazardous Substance brought onto the Premises (i) prior to Lessee’
occupancy, or (ii) during the term of the Lease by Lessor, Lessor’s Agents or
any third party (other than Lessee and Lessee’s Agents). Lessor shall conduct
all such investigatory and/or remedial action in a manner that will minimize
disruption to Lessee’s on-going operation at the Premises.

 

e. Indemnification.

 

(i) Lessee shall indemnify, defend and hold harmless Lessor and Lessor’s Agents
from and against any and all loss of rents and/or damages, liabilities,
judgments, claims, expenses, penalties, and reasonable attorneys’ and
consultants’ fees arising out of any Hazardous Substance brought onto the
Premises by Lessee or Lessee’s Agents (provided, however, that Lessee shall have
no liability under the Lease with respect to (i) underground migration of any
Hazardous Substance under the Premises from adjacent properties not caused or
contributed to by Lessee or Lessee’s Agents, and (ii) any Hazardous Substance
brought onto the Premises by Lessor, Lessor’s Agents or any third party (other
than Lessee and Lessee’s Agents) during the term of the Lease). Lessee’s
obligation 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 or Lessee’s Agents, and the cost of investigation, removal,
remediation, restoration and/or abatement, and shall survive the expiration or
termination of the Lease for a period of five (5) years.

 

(ii) Lessor shall indemnify, defend and hold harmless Lessee and Lessee’s Agents
from and against any and all loss of rents and/or damages, liabilities,
judgments, claims, expenses, penalties, and reasonable attorneys’ and
consultants’ fees arising out of (i) the existence of Hazardous Substances on
the Premises prior to Lessee’s occupancy, and (ii) any Hazardous Substance
brought onto the Premises during the term of the Lease by or for Lessor,
Lessor’s Agents or any third party (other than by or for Lessee or Lessee’s
Agents); provided, however, that Lessor shall have no liability under the Lease
with respect to (i) underground migration of any Hazardous Substance under the
Premises from adjacent properties caused or contributed to by Lessee or Lessee’s
Agents, and (ii) any Hazardous Substance brought onto the Premises by Lessee or
Lessee’s Agents during the term of the Lease). Lessor’s obligation shall
include, but not be limited to, the effects of any contamination or injury to
person, property or the environment created or suffered by Lessor or Lessor’s
Agents, and the cost of

 

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investigation, removal, remediation, restoration and/or abatement, and shall
survive the expiration or termination of the Lease for a period of five
(5) years.

 

f. 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(e) 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
90 days following the date of such notice. In the event Lessor elects to give a
termination notice, Lessee may, within twenty (20) 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 reasonable recommendations of Lessor’s engineers and/or
consultants which relate in any manner to the such Applicable Requirements,
without regard to whether such Applicable Requirements are now in effect or
become effective after the Start Date. Lessee shall, within 10 business 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.

 

6.4 Inspection; Compliance. Lessor and Lessor’s “Lender” (as defined in
Paragraph 30) and consultants shall have the right to enter the Premises at any
time, in the case of an emergency, and otherwise at reasonable times after
reasonable notice, accompanied by Lessee’s Agent, for the purpose of inspecting
the condition of the Premises and for verifying compliance by Lessee with this
Lease and all Applicable Requirements; provided, however, such inspection shall
not unreasonably disrupt or disturb Lessee’s on-going operation of the Premises.
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 the

 

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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 fifteen (15) days of receipt of a written
request therefore.

 

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) or
Lessor’s or Lessor’s Agents’ gross negligence or willful misconduct, 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 (including, e.g., graffiti removal) consistent with
the exterior appearance of other similar facilities of comparable age and size
in the vicinity.

 

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,
(vi) clarifiers, (vii) basic utility feed to the perimeter of the Building, and
(viii) any other equipment, if reasonably required by Lessor. However, Lessor
reserves the right, upon notice to Lessee, to procure and maintain any or all of
such service contracts, and if Lessor so elects, Lessee shall reimburse Lessor
for the cost thereof within thirty (30) days after receipt from Lessor.

 

c. Failure to Perform. If Lessee fails to perform Lessee’s obligations under
this Paragraph 7.1, Lessor may enter upon the Premises (i) after thirty
(30) days’ prior written notice to Lessee, and (ii) Lessee has not commenced
performance within such thirty (30) day period (except in the case of any
emergency, in which case no notice shall be required), perform

 

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such obligations on Lessee’s behalf, and put the Premises in good order,
condition and repair, and Lessee shall pay to Lessor an amount equal to one
hundred percent (100%) of the actual costs and expenses reasonably incurred by
Lessor in such performance upon receipt by Lessee of an invoice thereafter from
Lessor.

 

d. Replacement. Subject to the indemnification as set forth in Paragraph 8.7,
and without relieving Lessee or Lessor of its liability resulting from such
Party’s negligence in performing its respective repair and maintenance
obligations under the Lease, if an item described in Paragraph 7.1(b) cannot be
repaired other than at a cost which is in excess of fifty percent (50%) of the
cost of replacing such item, then such item shall be replaced by Lessor. The
cost of such replacement shall be prorated between the Parties, and Lessee shall
only be obligated to pay, each month during the remainder of the term of the
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, the denominator of which is the number of months representing the
reasonable life of such item, with such reasonable life being determined in
accordance with generally accepted accounting principles. By way of illustration
only, in the event that the cost of replacing the HVAC equipment is $100,000,
and the useful life of such HVAC equipment is 100 months, Lessee shall pay
Lessor, for the remainder of the term of the Lease, a monthly amount equal to
$1,000 ($100,000 x 1/100) for the cost of such replacement. Lessee shall pay
interest on the unamortized balance at a rate that is commercially reasonable.
Lessee may, however, prepay its obligation at any time. Notwithstanding the
foregoing, if such Capital Expenditure is required during the last year of this
Lease, Lessor shall have the option to terminate this Lease upon ninety
(90) days prior written notice to Lessee. If Lessor does not elect to terminate,
Lessor shall pay for 100% of the costs of such Capital Expenditure. Lessee shall
not, however, have any right to terminate this Lease if a Capital Expenditure is
required during the last year of this Lease unless such Capital Expenditure
unreasonably interferes with Lessee’s on-going operation at the Premises.

 

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 (other than as provided
under this Lease), 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” shall refer 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, on or about 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) at
Lessee’s request, or otherwise required pursuant to Applicable Requirements, by
governmental authority or by reason of Lessee’s use of the Premises.

 

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b. Consent. Lessee shall not make any Alterations or Utility Installations to
the Premises without Lessor’s prior written consent (which consent shall not be
unreasonably withheld, so long as such Alteration or Utility Installation is
consistent with, or reasonably comparable to, the Agreed Use). Lessee may,
however, make non-structural Utility Installations or Alterations 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 the Lease as extended does not exceed a sum equal
to three (3) months’ Base Rent in any one (1) year. Notwithstanding the
foregoing, Lessee shall not make or permit any roof penetrations and/or install
anything on the roof without the prior written approval of Lessor, which
approval shall not be unreasonably withheld so long as such Alterations are
consistent with, or reasonably comparable to, the Agreed Use. Lessor may, as a
precondition to granting such approval, require Lessee to utilize a contractor
chosen and/or reasonably approved by Lessor. Any Alterations or Utility
Installations that Lessee shall desire to make and which require the consent of
Lessor shall be presented to Lessor in written form with proposed detailed
plans. Consent shall be deemed conditioned upon Lessee’s (i) acquiring all
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 done in a good and 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
six (6) months’ Base Rent, Lessor may condition its consent upon Lessee
providing a lien and completion bond in an amount equal to one hundred fifty
percent (150%) of the estimated cost of such Alteration or Utility Installation
and/or upon Lessee’s posting an additional Security Deposit with Lessor.

 

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.

 

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7.4 Ownership; Removal; Surrender; and Restoration.

 

a. Ownership. Subject to Lessor’s right to require removal, all Alterations and
Utility Installations made by Lessee shall be the property of Lessor, and
considered a part of the Premises.

 

b. Removal. N/A.

 

c. Surrender; Restoration. Lessee shall surrender the Business Premises or the
Vacant Lot, as applicable, by the end of the last day of the applicable lease
term or any earlier termination date (as applicable, the “Surrendered
Premises”), 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,
except for (i) ordinary wear and tear, or (ii) such other improvements, parts
and surfaces that are Lessor’s obligations to repair under the Lease, including
Lessor’s obligations to repair, if any, as a result of the Premises Partial
Damage or Condemnation. “Ordinary wear and tear” shall not include any damage or
deterioration that would have been prevented by good maintenance practice.
Lessee shall surrender to Lessor all keys and other such items pertaining to the
Surrendered Premises, and shall repair any damage occasioned by the
installation, maintenance or removal of Trade Fixtures, 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
Surrendered Premises any and all Hazardous Substances brought onto the
Surrendered Premises by or for Lessee and Lessee’s Agents during the term of the
Lease (except Hazardous Substances which were deposited via underground
migration from adjacent properties not caused or contributed to by Lessee or
Lessee’s Agents), and take all investigatory and/or remedial action as required
under the Applicable Requirements for the cleanup of any contamination of the
Surrendered Premises that was caused by Lessee or Lessee’s Agents. Trade
Fixtures shall remain the property of Lessee and shall be removed by Lessee on
or before the Expiration Date or any earlier termination date. 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 Surrendered 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.

 

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 commercial general
liability insurance carried by Lessor under Paragraph 8.2(b) in excess of
$1,000,000 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 within seven (7) business days following
receipt of an invoice; provided, however, that upon a Breach of the Lease by
Lessee, Lessor may require Lessee to pay for all insurance required under the
Lease in monthly installments (to be estimated by Lessor) in advance with the
payment of Base Rent. Premiums for policy periods commencing prior to or
extending beyond the Lease term shall be prorated to correspond to the Lease
term.

 

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8.2 Liability Insurance.

 

a. Carried by Lessee.

 

(i) Lessee shall obtain and keep in force a Commercial 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 a
single limit coverage in an amount not less than One Million Dollars
($1,000,000) per occurrence with an annual aggregate of not less than Two
Million Dollars ($2,000,000), an “Additional Insured-Managers or Lessors of
Premises Endorsement” and contain the “Amendment of the Pollution Exclusion
Endorsement” for damage caused by heat, smoke, fumes from a hostile fire. The
policy shall not contain any intra-insured exclusions as between insured persons
or organizations, but shall include coverage for liability assumed under the
Lease as an “insured contract” for the performance of Lessee’s indemnity
obligations under the Lease.

 

(ii) Lessee and Lessor shall be included as an additional insured under
Guarantor’s Commercial Umbrella Policy of insurance, which shall apply to bodily
injury/property damage, personal injury/advertising injury, at a minimum.

 

(iii) The limits of the insurance set forth in this subsection (a)(i) and
(a)(ii) shall not, however, limit the liability of Lessee nor relieve Lessee of
any obligation under the Lease. All insurance carried by Lessee shall be primary
to and not contributory with any similar insurance carried by Lessor, whose
insurance shall be excess insurance policy.

 

b. Carried by Lessor. Lessor shall maintain commercial general liability
insurance as described in Paragraph 8.2(a)(i), 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 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, Trade
Fixtures, and Lessee’s personal property shall be insured by Lessee under
Paragraph 8.4 rather than by Lessor. If the 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,

 

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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 $1,000,000 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. N/A

 

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 and Trade Fixtures. Such insurance shall be full
replacement cost coverage with a deductible of not to exceed $1,000,000 per
occurrence. The proceeds from any such insurance shall be used by Lessee for the
replacement of personal property, Trade Fixtures and Alterations and Utility
Installations. Lessee shall provide Lessor with written evidence that such
insurance is in force.

 

b. Business Interruption. N/A

 

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 California, and maintaining during
the policy term a “General Policyholders Rating” of at least B+, V, as set forth
in the most current issue of “Best’s Insurance Guide”, or such other rating as
may be reasonably required by Lender. Lessee shall not do or permit to be done
anything which invalidates the required insurance policies. Lessee and Lessor
shall, prior to the Start Date, deliver to each other certified copies of
policies of such insurance or certificates evidencing the existence and amounts
of the insurance required by each respective party during the term of the Lease.
No policy carried by Lessee shall be cancelable or subject to modification
except after ten (10) business days prior written notice to Lessor. Lessee
shall, at least ten (10) business days prior to the expiration of such policies,
furnish Lessor with evidence of renewals or “insurance binders” evidencing
renewal thereof, or if Lessee fails to timely provide such evidence after being
notified by Lessor of its failure to provide such evidence, Lessor may order
such insurance and charge the cost thereof to Lessee, which amount shall be
payable by Lessee to Lessor within seven (7) business days following Lessee’s
receipt of an invoice. Such policies shall be for a term of one (1) year, or the
length of the remaining term

 

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of the Lease, which 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 right or remedies, each
of Lessee and Lessor hereby releases and relieves the other, and waives its
entire right to recover damages against the other, for loss of damage to its
property arising out of or incident to the perils required to be insured against
under the Lease. The effect of such releases or waivers is not limited by the
amount of insurance carried or required, or by an deductibles applicable in the
Lease. The Parties agree to have their respective property damage insurance
carriers waive any right to subrogation or consent to a waiver of right of
recovery that such companies may have against Lessor or Lessee, as the case may
be, so long as the affected insurance polic(ies) are not invalidated thereby.
Should one Party’s insurance company increase its premiums for its wavier of
right of subrogation or consent to a waiver of right of recovery, the amount of
such increase shall be paid by the other Party upon demand.

 

8.7 Indemnity.

 

a. Indemnity by Lessee. Except for Lessor’s gross negligence or willful
misconduct, Lessee shall indemnify, protect, defend and hold harmless Lessor,
Lenders, and Lessor’s Agents, from and against any and all claims, damages,
liens, judgments, penalties, reasonable attorneys’ fees 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.

 

b. Indemnity by Lessor. Except for Lessee’s gross negligence or willful
misconduct, Lessor shall indemnify, protect, defend and hold harmless Lessee,
Lenders, and Lessee’s Agents, from and against any and all claims, damages,
liens, judgments, penalties, reasonable attorneys’ fees and consultants’ fees,
expenses and/or liabilities arising out of, involving, or in connection with,
performance of its obligations under the Lease to repair and maintain the
Premises. If any action or proceeding is brought against Lessee by reason of any
of the foregoing matters, Lessor shall upon notice defend the same at Lessor’s
expenses by counsel reasonably satisfactory to Lessee and Lessee shall cooperate
with Lessor in such defense. Lessee need not have first paid any such claim in
order to be defended or indemnified.

 

8.8 Exemption of Lessor from Liability. Except for Lessor’s gross negligence or
willful misconduct, Lessor shall not be liable for injury or damage to the
person or goods, wares, merchandise or other property of Lessee, Lessee’s
Invites, Lessee’s Agents or any other person in or about the Premises, whether
such damage or injury is caused by or results from fire, steam, electricity,
gas, water or rain, or from the breakage, leakage, obstruction or other 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

 

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places. Lessor shall not be liable for any damages arising from any act or
neglect of any other tenant of Lessor. Notwithstanding Lessor’s negligence or
Breach of the Lease, Lessor shall under no circumstances be liable for injury to
Lessee’s business or for any loss of income or profit therefrom.

 

8.9 Failure to Provide Insurance. N/A

 

9. Damage or Destruction.

 

9.1 Definitions.

 

a. “Premises Partial Damage” shall mean damage or destruction to the
improvements on the Premises 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. As used in this Paragraph 9,
“destruction” shall include a declaration by an applicable governmental
authority that all or a portion of the Premises is untenantable.

 

b. “Premises Total Destruction” shall mean damage or destruction to the
Premises, other than 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 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 expenses, commence repair of
such damage (but not Lessee’s Trade Fixtures) within forty-five (45) days after
Lessor receives written notice of the occurrence of such damage and the 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, Lessee may terminate the Lease
upon ninety (90) day written notice to Lessor if Lessor (i) within forty-five
(45) days after Lessor receives written notice of the occurrence of such damage,
does not commence repairs and has not requested Lessee to

 

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make such repairs as provided in this Paragraph 9.2, or (ii) commences but does
not complete such repairs within six (6) months thereafter.

 

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,
within forty-five (45) days after Lessor receives written notice of the
occurrence of such damage, either (i) commence repair of such damage at Lessor’s
expense, and the Lease shall continue in full force and effect, or
(ii) terminate the Lease by giving written notice to Lessee. Such termination
shall be effective ninety (90) days following the date of such notice. In the
event Lessor elects to terminate the Lease, Lessee shall have the right within
ten (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 thirty (30) days after making such
commitment. In such event, the Lease shall continue in full force and effect,
and Lessor shall proceed to commence repairs within forty-five (45) days after
the required funds are available to Lessor. If Lessee does not make the required
commitment, the Lease shall terminate as of the date specified in the
termination notice. Notwithstanding the foregoing, Lessee may terminate the
Lease upon ninety (90) day notice to Lessor if Lessor (i) elects to repair the
damage but does not commence repairs within the applicable forty-five (45) day
period, or (ii) Lessor does not complete such repairs within six (6) months
thereafter.

 

9.4 Total Destruction. Notwithstanding any other provision hereof, if a Premises
Total Destruction occurs, the Lease shall automatically terminate ninety
(90) 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 damage from Lessee, except as provided in Paragraph
8.6.

 

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 or Lessee may terminate this Lease
effective ninety (90) days following the date of occurrence of such damage by
giving a written termination notice to the other party 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, 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 thirty
(30) 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.

 

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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
not to exceed the proceeds received from the Rental Value insurance. All other
obligations of Lessee hereunder shall be performed by Lessee, and Lessor shall
have no liability for any such damage, destruction, remediation, repair or
restoration except as provided herein.

 

b. Remedies. Except as otherwise provided herein, if Lessor shall be obligated
to repair or restore the Premises and does not commence such repair or
restoration within 45 days after Lessor receives notice of such obligation,
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. Notwithstanding the foregoing, Lessee may
terminate the Lease upon ninety (90) days notice to Lessor if Lessor does not
complete such repair or restoration within six (6) months thereafter.

 

9.7 Termination; Advance Payments. Upon termination of this Lease pursuant to
Paragraph 6.2(f) 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 so much of Lessee’s Security
Deposit as has not been, or is not then required to be, used by Lessor.

 

9.8 Waive Statutes. Lessor and Lessee agree that the terms of this Lease shall
govern the effect of any damage to or destruction of the Premises with respect
to the termination of this Lease and hereby waive the provisions of any present
or future statute to the extent inconsistent herewith including, but not limited
to, Section 1932, subdivision (2) and Section 1933, subdivision (4) of the
California Civil Code.

 

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
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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, including but not limited to, a change in the
ownership of the Premises or a change in law, and (ii) levied or assessed on any
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 twenty (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 the Lease,
Lessee’s share of such installment shall be prorated. In the event Lessee
Breaches under the Lease, 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 funds 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 twenty (20) days prior to the applicable delinquency date, such additional
sum as is necessary. If the amount collected by Lessor is in excess of the Real
Property Taxes, Lessor shall promptly return such excess to Lessee within twenty
(20) days after such Real Property Taxes are due. Advanced payments may be
intermingled with other moneys of Lessor and shall not bear interest.

 

10.3 Joint Assessment. N/A

 

10.4 Personal Property Taxes. Lessee shall pay, prior to delinquency, all taxes
assessed against and levied upon Trade Fixtures, furnishings, equipment and all
personal property of Lessee. When possible, Lessee shall cause its 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 twenty (20) 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. There shall be no abatement of
Rent and, except to the extent caused by Lessor’s gross negligence or willful
misconduct, 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.

 

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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 the Lease or in the Premises without Lessor’s prior
written consent; provided, however, that Lessee may assign or sublease its
interest in the Lease, without obtaining Lessor’s consent, to an Affiliate of
Lessee by delivering written notice to Lessor at least thirty (30) days prior to
such assignment. As used herein, “Affiliate” means any entity directly or
indirectly controlling or controlled by Lessee. For the purposes of the
definition of “Affiliate,” “control” (including, with correlative meanings, the
terms “controlling,” “controlled by,” or “under common control with”), as
applied to any entity, means the possession, directly or indirectly, of the
power (i) to vote 10% or more of the securities having ordinary voting power for
the election of directors of such entity or (ii) to direct or cause the
direction of the management and policies of that entity, whether through the
ownership of voting securities or by contract or otherwise.

 

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 50% 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 monthly Base Rent to 110% of the Base 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.

 

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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 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 Breach by Lessee, Lessor may proceed directly against
Lessee, the Guarantor (but only with respect to the obligations guaranteed by
the Guarantor under the Guaranty) 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 or entering into such sublease, 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

 

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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 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 for more than 30 consecutive days; 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 where such failure continues for a period of 5 days following written
notice to Lessee; or 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 5 days following
written notice to Lessee.

 

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c. 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, (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 30 days following
written notice to Lessee.

 

d. A Default by Lessee as to the terms, covenants, conditions or provisions of
this Lease, or of the rules adopted under Paragraph 40 hereof, other than those
described in subparagraphs 13.1(a), (b) or (c), 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.

 

e. 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; (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;
(v) assignment of the Lease by operation of law; and (vi) Lessee’s becoming
insolvent; provided, however, in the event that any provision of this
subparagraph (e) is contrary to any applicable law, such provision shall be of
no force or effect; and not affect the validity of the remaining provisions.

 

f. The discovery that any financial statement of Lessee or of any Guarantor
given to Lessor was materially false.

 

g. If the performance of Lessee’s obligations under this Lease is guaranteed:
(i) the death of a Guarantor, (ii) the termination of a Guarantor’s liability
with respect to this Lease other than in accordance with the terms of such
guaranty, (iii) a Guarantor’s becoming insolvent or the subject of a bankruptcy
filing, (iv) Guarantor’s refusal to honor the guaranty, or (v) 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 Guarantor that existed at the time of execution of this Lease.

 

13.2 Remedies. Except as otherwise provided in the Lease, if Lessee (i) fails to
perform any of its affirmative duties or obligations after the receipt of notice
from Lessor (to the extent such notice is required under the Lease) and the
expiration of the applicable cure period, or (ii) has commenced to perform its
affirmative duties or obligations but cannot complete such

 

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performance within a commercially reasonable time thereafter, Lessor may, within
thirty (30) days after written notice and Lessee’s failure to cure during such
30 day period (or in case of an emergency, without notice or passage of any
applicable cure period), elect to 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 one hundred percent (100%) of the actual costs
and expenses reasonably incurred by Lessor in such performance upon receipt of
an invoice thereafter. 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 reasonable 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 or Paragraph 13. 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.

 

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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. N/A

 

13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee of
Rent will cause Lessor incur costs no contemplated by the 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 by Lessor and Lender. Accordingly, if any Rent shall not be
received by Lessor within ten (10) days after such amount shall be due, then,
without any requirement for notice to Lessee, Lessee shall pay to Lessor, on the
next installment of Rent coming due, a one-time late charge equal to five
percent (5%) of each such overdue amount. All such charges shall be secured as
additional rents under the Lease. 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 three (3) consecutive installments of
Base Rent, then notwithstanding any provision of the Lease to the contrary, Base
Rent shall, at Lessor’s option, become due and payable quarterly in advance.

 

13.5 Interest. Except as otherwise provided in this Lease, any monetary payment
due Lessor or Lessee hereunder, other than late charges, not received by such
party, 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 31st 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. Except as otherwise provided herein, 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. Except as otherwise provided in
this Lease, 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

 

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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, reserving Lessee’s right to seek reimbursement from Lessor. Lessee shall
document the cost of said cure and supply said documentation to Lessor.

 

14. Condemnation.

 

a. If the Premises are taken under the power of eminent domain or sold under the
threat of the exercise of said power (collectively, “Condemnation”), the Lease
shall terminate as to the part taken as of the date the condemning authority
takes title or possession, whichever first occurs. The Lease shall otherwise
remain in full force and effect as to the portion of the Premises remaining (the
“Remaining Premises”); provided, however, that the Remaining Premises is, in
Lessee’s sole and absolute judgment, fit and suitable for the Agree Use by
Lessee; provided, further, that the Rent shall be adjusted based on the square
footage of the Remaining Premises, such adjustment to be effective as of the
date the condemning authority takes title or possession to the Condemned portion
of the Premises, whichever first occurs. 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.

 

b. Lessee may file a separate claim with the condemning authority for moving
expenses and damage or loss of Lessee’s business, if any, as a result of the
Condemnation; provided, however, such claim shall not, in Lessor’s reasonable
judgment, in any way diminish or lessen the value of the condemnation awards
and/or payments payable to Lessor under Paragraph 14(a). Notwithstanding
anything to the contrary stated or implied herein, in no event shall Lessor be
liable for, or be held on account of, any damage or loss of Lessee’s business as
a result of the Condemnation.

 

c. In the event that the Lease is not terminated by reason of the Condemnation,
Lessor shall promptly repair any damage to the Remaining Premises caused by such
Condemnation. Lessee may terminate the Lease upon ninety (90) day written notice
to Lessor if (i) Lessor does not commence repairs within forty-five (45) days
after Lessor receives written notice of the occurrence of such damage or
(ii) Lessor commences but does not complete such repairs within six (6) months
thereafter.

 

15. Brokerage Fees. N/A

 

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, confirmation and/or statements as
may be reasonably 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

 

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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 the Guarantor shall deliver to any potential lender or
purchaser designated by Lessor such public financial statements and other public
information, if any, as may be reasonably required by such lender or purchaser,
including but not limited to the public financial statements of Lessee and the
Guarantor, if any, 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. Except as provided in Paragraph 15, 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. 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 each other that it has made, and is relying
solely upon, its own investigation as to the nature, quality, character and
financial responsibility of the other Party to this Lease and as to the nature,
quality and character of the Premises.

 

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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, or other nationally recognized overnight courier, 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 48 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. 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. 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.

 

25. Disclosures Regarding the Nature of a Real Estate Agency Relationship. N/A

 

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
150% 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.

 

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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 Device 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 such new owner, this Lease shall automatically become a new
Lease between Lessee and such new owner, upon all of the terms and conditions
hereof, for the remainder of the term hereof, and (ii) Lessor shall thereafter
be relieved of any further obligations hereunder and such new owner shall assume
all of Lessor’s obligations hereunder, 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 acquisition of 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.

 

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

 

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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 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 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 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 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.

 

32. Lessor’s Access; Showing Premises; Repairs. Lessor and Lessor’s Agents shall
have the right to enter the Premises (i) at any time, in the case of an
emergency (giving notice as reasonably practicable), and (ii) otherwise at
reasonable times after reasonable prior notice (such entry to be conducted in a
manner that does not unreasonably disrupt or disturb Lessee’s on-going operation
of the Premises), for the purpose of showing the same to prospective purchasers,
lenders, or tenants (in the case of tenants, during the last six (6) months of
the Lease only), and making such alterations, repairs, improvements or additions
to the Premises as Lessor may deem necessary under the Lease and the erecting,
using and maintaining of utilities, services, pipes, 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 so long as Lessor conducts such activities in
compliance with the provisions of this Paragraph.

 

33. Auctions. Lessee shall not conduct, nor permit to be conducted, any auction
upon the Premises without Lessor’s prior written consent.

 

34. Signs. Lessor may place on the Premises (i) at any time, ordinary “For Sale”
signs and signs equivalent in size to that which are located on the Premises as
of the Start Date, and (ii) during the last six (6) months of the term hereof,
“For Lease” signs; provided however, that all such signs must comply with
Applicable Requirements. Except for ordinary “sublease” signs

 

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and signs listed in the foregoing sentence, Lessee shall not place any other
sign, advertisement, marquee, awning, or notice (collectively, the “Signs”) upon
the Premises without Lessor’s prior written consent, which consent shall not be
unreasonably withheld so long as such placement of Signs is consistent with, or
reasonably comparable to, the Agreed Use and complies with 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. Up to $500 of 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 the presence or use of a Hazardous Substance (but
expressly excluding sublease or assignment), 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.

 

37.1 Execution. The Guarantor shall execute a guaranty in the form most recently
published by the AIR Commercial Real Estate Association or such other form as
agreed to by the Parties (the “Guaranty”), and such Guarantor shall have the
same obligations (subject to the provisions of Paragraph 1.10 and the Guaranty),
as Lessee under this Lease.

 

37.2 Default. It shall constitute a Breach of the Lessee if Guarantor fails or
refuses, within 30 days after receipt of written request from Lessor for:
(a) evidence of the execution of the guaranty, including the authority of the
party signing on Guarantor’s behalf to obligate Guarantor, and in the case of a
corporate Guarantor, a certified copy of a resolution of its board of directors
authorizing the making of such guaranty, (b) current, public financial
statements, (c) an Estoppel Certificate, or (d) written confirmation that the
guaranty is still in effect.

 

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38. Quiet Possession. Subject to payment by Lessee of the Rent and performance
of all of the covenants, conditions and provisions on Lessee’s part to be
observed and performed under this Lease, Lessee shall have quiet possession 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: the right to extend the term of or renew
this Lease as provided in Paragraph 1.3.

 

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. N/A

 

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 which is then due and
payable 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, (i) Lessee fails to
pay Rent for a period of 30 days after such Rent becomes due (and Lessee’s
failure to cure after any applicable cure periods), or (ii) if Lessee commits a
Breach of this Lease.

 

40. Multiple Buildings. N/A.

 

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.
Except as otherwise provided in this Lease, Lessee assumes all responsibility
for the protection of the Premises, Lessee, Lessee’s Agents and Lessee’s
Invitees and their property from the acts of third parties.

 

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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 or occupancy 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. Except as otherwise
provided in this Lease, 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, with Interest, such sum or so much thereof
as it was not legally required to pay.

 

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. Each party shall, within 30 days
after request, deliver to the other party satisfactory evidence of such
authority.

 

b. This Lease may be executed by the Parties in counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same instrument.

 

45. Conflict. Any conflict between the printed provisions of this Lease and
typewritten or handwritten provisions shall be controlled by the typewritten or
handwritten provisions.

 

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.

 

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 arising out of this
Lease is not attached to this Lease.

 

50. American 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

 

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or representation as to whether or not the Premises comply with ADA or any
similar legislation. In the event that Lessees’ 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.

 

51. Change in Law. Whenever reference is made in the Lease to any provision of
law, such reference applies to all amendments and changes now or hereafter made
to such laws.

 

52. Titles and Headings. The titles and headings of sections of the Lease are
intended for convenience only and shall not in any way affect the meaning or
construction of any provision of the Lease.

 

[signatures on next page]

 

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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.

 

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The parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.

 

Executed as of: December 31, 2004       Executed as of: December 31, 2004

By LESSOR:

     

By LESSEE:

H & M PROPERTIES, A BUSINESS NAME FOR VHEM, LLC, a California limited liability
company       SKURKA AEROSPACE INC., a Delaware corporation By:  

/s/ Howard Skurka

      By:  

/s/ Gregory Rufus

Name Printed:  

Howard Skurka

      Name Printed:  

Gregory Rufus

Title:

 

Member & Vice President

     

Title:

 

Treasurer

Address:           Address: H & M Properties, a business name for      

4600 Calle Bolero

VHEM, LLC, a California limited company

     

Camarillo, CA 93011

P.O. Box 8420

           

Northridge, California 91327-8420

           

with a copy to:

O’Melveny & Myers, LLP

400 South Hope Street

Los Angeles, CA 90071

Attention: Greg Thorpe, Esq.

     

with a copy to:

Baker & Hostetler LLP

3200 National City Center

1900 East Ninth St.

Cleveland, OH 44114

Attn: Elizabeth Dellinger Esq.

 

Signature Page to Lease

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EXECUTION COPY

 

EXHIBIT A

 

LEGAL DESCRIPTION OF THE PREMISES

 

ALL OF PARCELS 1 AND 2 OF PARCEL MAP L. D. 218 IN THE CITY OF CAMARILLO, COUNTY
OF VENTURE, STATE OF CALIFORNIA, AS PER MAP RECORDED IN BOOK 39 PAGE 35 OF
PARCEL MAPS, IN THE OFFICE OF THE COUNTY RECORDER OF SAID COUNTY.

 

SUBJECT TO THE EXCEPTIONS AND RESERVATIONS LISTED IN SCHEDULE 1 ATTACHED HERETO
AND BY THIS REFERENCE INCORPORATED HEREIN.

 

    A-1   Lease

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EXECUTION COPY

 

EXHIBIT B

 

BASE RENT

 

    

Monthly

Base Rent

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Vacant Lot

   $ 100

Business Premises

      

01/01/05 through 12/31/09

   $ 50,500

01/01/09 through 12/31/14

   $ 54,000

 

    B-1   Lease

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EXECUTION COPY

 

EXHIBIT C

 

DIAGRAM OF THE VACANT LOT

 

[attached]

 

    C-1   Lease