Exhibit 10.1
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AIR COMMERCIAL REAL ESTATE ASSOCIATION
STANDARD INDUSTRIAL/COMMERCIAL
MULTI-TENANT LEASE — GROSS
1. Basic Provisions (“Basic Provisions”).
1.1 Parties: This Lease (“Lease”), dated for reference purposes only August 12,
2008, is made by and between Orange County Department of Education Facilities
Corporation, a California corporation (“Lessor”) and Irvine Sensors Corporation,
a Delaware corporation (“Lessee”), (collectively the “Parties”, or individually
a “Party”).
1.2(a) Premises: That certain portion of the Project (as defined below),
including all improvements therein or to be provided by Lessor under the terms
of this Lease, commonly known by the street address of 3001 Red Hill Avenue
Suite 3-102, located in the City of Costa Mesa, County of Orange, State of
California, with zip code 92626, as outlined on Exhibit B attached hereto
(“Premises”) and generally described as (describe briefly the nature of the
Premises): The premises consisting of approximately 20,534 of rentable square
feet of space. In addition to Lessee’s rights to use and occupy the Premises as
hereinafter specified, Lessee shall have non-exclusive rights to any utility
raceways of the building containing the Premises (“Building”) and to the Common
Areas (as defined in Paragraph 2.7 below), but shall not have any rights to the
roof, or exterior walls of the Building or to any other buildings in the
Project. The Premises, the Building, the Common Areas, the land upon which they
are located, along with all other buildings and improvements thereon, are herein
collectively referred to as the “Project.” (See also Paragraph 2)
1.2(b) Parking: in common unreserved vehicle parking spaces. (See also
Paragraph 2.6)
1.3 Term: 5 years and 0 months (“Original Term”) commencing October 1, 2008
(“Commencement Date”) and ending September 30, 2013 (“Expiration Date”). (See
also Paragraph 3)
1.4 Early Possession: N/A (“Early Possession Date”). (See also Paragraphs 3.2
and 3.3)
1.5 Base Rent: $26,993.88 per month (“Base Rent”), payable on the First day of
each month commencing October 1, 2008. (See also Paragraph 4)
þ If this box is checked, there are provisions in this Lease for the Base Rent
to be adjusted.
1.6 Lessee’s Share of Common Area Operating Expenses Common Area Charge (“CAM”):
$1,437.38 percent (     %) (“Lessee’s Share”).
Lessee’s Share CAM Charge has been calculated by dividing the approximate square
footage of the Premises by the approximate square footage of the Project. In the
event that that size of the Premises and/or the Project are modified during the
term of this Lease, Lessor shall recalculate Lessee’s Share CAM Charge to
reflect such modification.
1.7 Base Rent and Other Monies Paid Upon Execution:
(a) Base Rent: $26,993.88 for the period October 1-31, 2008.
(b) Common Area Operating Expenses: $1,437.38 for the period October 1-31, 2008.
(c) Security Deposit: $ (see ¶ 52) (“Security Deposit”). (See also Paragraph 5)
(d) Other: $                     for                     .
(e) Total Due Upon Execution of this Lease: $28,431.26.
1.8 Agreed Use: General administrative offices and testing of prototype
electronics. (See also Paragraph 6)
1.9 Insuring Party. Lessor is the “Insuring Party”. (See also Paragraph 8)
1.10 Real Estate Brokers: (See also Paragraph 15)
(a) Representation: The following real estate brokers (the “Brokers”) and
brokerage relationships exist in this transaction (check applicable boxes):
þ CIP Real Estate Property Services represents Lessor exclusively (“Lessor’s
Broker”);
o                      represents Lessee exclusively (“Lessee’s Broker”); or
o                      represents both Lessor and Lessee (“Dual Agency”).
(b) Payment to Brokers: Upon execution and delivery of this Lease by both
Parties, Lessor shall pay to the Brokers the brokerage fee agreed to in a
separate written agreement (or if there is no such agreement, the sum of
                    or                     % of the total Base Rent for the
brokerage services rendered by the Brokers).
1.11 Guarantor. The obligations of the Lessee under this Lease are to be
guaranteed by                     (“Guarantor”). (See also Paragraph 37)
1.12 Attachments. Attached hereto are the following, all of which constitute a
part of this Lease:
þ an Addendum consisting of Paragraphs 50 through 65;
þ a site plan depicting the Premises; (Exhibit B)
þ a site plan depicting the Project; (Exhibit C)
þ a current set of the Rules and Regulations for the Project (Exhibit E);
o a current set of the Rules and Regulations adopted by the owners’ association;
þ a Work Letter (Exhibit D);
þ other (specify): Tenant Information (Exhibit A), Lessee’s Hazardous Materials
Disclosure
Certificate (Exhibit F)

      ©1998 — AIR COMMERCIAL REAL ESTATE ASSOCIATION   FORM MTG-4-5/05E

 

 

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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 that portion of the Premises contained
within the Building (“Unit”) to Lessee broom clean and free of debris on the
Commencement Date or the Early Possession Date, whichever first occurs (“Start
Date”), and, so long as the required service contracts described in
Paragraph 7.1(b) below are obtained by Lessee and in effect within thirty days
following the Start Date, warrants that the existing electrical, plumbing, fire
sprinkler, lighting, heating, ventilating and air conditioning systems (“HVAC”),
loading doors, sump pumps, if any, and all other such elements in the Unit,
other than those constructed by Lessee, shall be in good operating condition on
said date, that the structural elements of the roof, bearing walls and
foundation of the Unit shall be free of material defects, and that the Unit does
not contain hazardous levels of any mold or fungi defined as toxic under
applicable state or federal law. If a non-compliance with such warranty exists
as of the Start Date, or if one of such systems or elements should malfunction
or fail within the appropriate warranty period, Lessor shall, as Lessor’s sole
obligation with respect to such matter, except as otherwise provided in this
Lease, promptly after receipt of written notice from Lessee setting forth with
specificity the nature and extent of such non-compliance, malfunction or
failure, rectify same at Lessor’s expense. The warranty periods shall be as
follows: (i) 6 months as to the HVAC systems, and (ii) 30 days as to the
remaining systems and other elements of the Unit. 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 (except for the repairs to the fire sprinkler
systems, roof, foundations, and/or bearing walls — see Paragraph 7).
2.3 Compliance. Lessor warrants that to the best of its knowledge the
improvements on the Premises and the Common Areas comply with the building codes
that were in effect at the time that each such improvement, or portion thereof,
was constructed, and also with all applicable laws, covenants or restrictions of
record, regulations, and ordinances in effect on the Start Date (“Applicable
Requirements”). Said warranty does not apply to the use to which Lessee will put
the Premises, modifications which may be required by the Americans with
Disabilities Act or any similar laws as a result of Lessee’s use (see
Paragraph 49), or to any Alterations or Utility Installations (as defined in
Paragraph 7.3(a)) made or to be made by Lessee. NOTE: Lessee is responsible for
determining whether or not the Applicable Requirements, and especially the
zoning are appropriate for Lessee’s intended use, and acknowledges that past
uses of the Premises may no longer be allowed. If the Premises do not comply
with said warranty, Lessor shall, except as otherwise provided, promptly after
receipt of written notice from Lessee setting forth with specificity the nature
and extent of such non-compliance, rectify the same at Lessor’s expense. If
Lessee does not give Lessor written notice of a non-compliance with this
warranty within 6 months following the Start Date, correction of that
non-compliance shall be the obligation of Lessee at Lessee’s sole cost and
expense. If the Applicable Requirements are hereafter changed so as to require
during the term of this Lease the construction of an addition to or an
alteration of the Unit, Premises and/or Building, the remediation of any
Hazardous Substance, or the reinforcement or other physical modification of the
Unit, Premises and/or Building (“Capital Expenditure”), Lessor and Lessee shall
allocate the cost of such work as follows:
(a) Subject to Paragraph 2.3(c) below, if such Capital Expenditures are required
as a result of the specific and unique use of the Premises by Lessee as compared
with uses by tenants in general, Lessee shall be fully responsible for the cost
thereof, provided, however, that if such Capital Expenditure is required during
the last 2 years of this Lease and the cost thereof exceeds 6 months’ Base Rent,
Lessee may instead terminate this Lease unless Lessor notifies Lessee, in
writing, within 10 days after receipt of Lessee’s termination notice that Lessor
has elected to pay the difference between the actual cost thereof and the amount
equal to 6 months’ Base Rent. If Lessee elects termination, Lessee shall
immediately cease the use of the Premises which requires such Capital
Expenditure and deliver to Lessor written notice specifying a termination date
at least 90 days thereafter. Such termination date shall, however, in no event
be earlier than the last day that Lessee could legally utilize the Premises
without commencing such Capital Expenditure.
(b) If such Capital Expenditure is not the result of the specific and unique use
of the Premises by Lessee (such as, governmentally mandated seismic
modifications), then Lessor and Lessee shall allocate the obligation to pay for
the portion of such costs reasonably attributable to the Premises pursuant to
the formula set out in Paragraph 7.1(d); provided, however, that if such Capital
Expenditure is required during the last 2 years of this Lease or if Lessor
reasonably determines that it is not economically feasible to pay its share
thereof, Lessor shall have the option to terminate this Lease upon 90 days prior
written notice to Lessee unless Lessee notifies Lessor, in writing, within
10 days after receipt of Lessor’s termination notice that Lessee will pay for
such Capital Expenditure. If Lessor does not elect to terminate, and fails to
tender its share of any such Capital Expenditure, Lessee may advance such funds
and deduct same, with Interest, from Rent until Lessor’s share of such costs
have been fully paid. If Lessee is unable to finance Lessor’s share, or if the
balance of the Rent due and payable for the remainder of this Lease is not
sufficient to fully reimburse Lessee on an offset basis, Lessee shall have the
right to terminate this Lease upon 30 days written notice to Lessor.
(c) Notwithstanding the above, the provisions concerning Capital Expenditures
are intended to apply only to non-voluntary, unexpected, and new Applicable
Requirements. If the Capital Expenditures are instead triggered by Lessee as a
result of an actual or proposed change in use, change in intensity of use, or
modification to the Premises then, and in that event, Lessee shall either:
(i) immediately cease such changed use or intensity of use and/or take such
other steps as may be necessary to eliminate the requirement for such Capital
Expenditure, or (ii) complete such Capital Expenditure at its own expense.
Lessee shall not have any right to terminate this Lease.
2.4 Acknowledgements. Lessee acknowledges that: (a) it has been advised by
Lessor and/or Brokers to satisfy itself with respect to the condition of the
Premises (including but not limited to the electrical, HVAC and fire sprinkler
systems, security, environmental aspects, and compliance with Applicable
Requirements and the Americans with Disabilities Act), and their suitability for
Lessee’s intended use, (b) Lessee has made such investigation as it deems
necessary with reference to such matters and assumes all responsibility therefor
as the same relate to its occupancy of the Premises, and (c) neither Lessor,
Lessor’s agents, nor Brokers have made any oral or written representations or
warranties with respect to said matters other than as set forth in this Lease.
In addition, Lessor acknowledges that: (i) Brokers have made no representations,
premises or warranties concerning Lessee’s ability to honor the Lease or
suitability to occupy the Premises, and (ii) it is Lessor’s sole responsibility
to investigate the financial capability and/or suitability of all proposed
tenants.
2.5 Lessee as Prior Owner/Occupant. The warranties made by Lessor in Paragraph 2
shall be of no force or effect if immediately prior to the Start Date Lessee was
the owner or occupant of the Premises. In such event, Lessee shall be
responsible for any necessary corrective work.

      ©1998 — AIR COMMERCIAL REAL ESTATE ASSOCIATION   FORM MTG-4-5/05E

 

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2.6 Vehicle Parking. Lessee shall be entitled to use the number of Parking
Spaces specified in Paragraph 1.2(b) on those portions of the Common Areas
designated from time to time by Lessor for parking. Lessee shall not use more
parking spaces than said number. Said parking spaces shall be used for parking
by vehicles no larger than full-size passenger automobiles or pick-up trucks,
herein called “Permitted Size Vehicles.” Lessor may regulate the loading and
unloading of vehicles by adopting Rules and Regulations as provided in
Paragraph 2.9. No vehicles other than Permitted Size Vehicles may be parked in
the Common Area without the prior written permission of Lessor. In addition:
(a) Lessee shall not permit or allow any vehicles that belong to or are
controlled by Lessee or Lessee’s employees, suppliers, shippers, customers,
contractors or invitees to be loaded, unloaded, or parked in areas other than
those designated by Lessor for such activities.
(b) Lessee shall not service or store any vehicles in the Common Areas.
(c) If Lessee permits or allows any of the prohibited activities described in
this Paragraph 2.6, then Lessor shall have the right, without notice, in
addition to such other rights and remedies that it may have, to remove or tow
away the vehicle involved and charge the cost to Lessee, which cost shall be
immediately payable upon demand by Lessor.
2.7 Common Areas — Definition. The term “Common Areas” is defined as all areas
and facilities outside the Premises and within the exterior boundary line of the
Project and interior utility raceways and installations within the Unit that are
provided and designated by the Lessor from time to time for the general
non-exclusive use of Lessor, Lessee and other tenants of the Project and their
respective employees, suppliers, shippers, customers, contractors and invitees,
including parking areas, loading and unloading areas, trash areas, roadways,
walkways, driveways and landscaped areas.
2.8 Common Areas — Lessee’s Rights. Lessor grants to Lessee, for the benefit of
Lessee and its employees, suppliers, shippers, contractors, customers and
invitees, during the term of this Lease, the non-exclusive right to use, in
common with others entitled to such use, the Common Areas as they exist from
time to time, subject to any rights, powers, and privileges reserved by Lessor
under the terms hereof or under the terms of any rules and regulations or
restrictions governing the use of the Project. Under no circumstances shall the
right herein granted to use the Common Areas be deemed to include the right to
store any property, temporarily or permanently, in the Common Areas. Any such
storage shall be permitted only by the prior written consent of Lessor or
Lessor’s designated agent, which consent may be revoked at any time. In the
event that any unauthorized storage shall occur, then Lessor shall have the
right, without notice, in addition to such other rights and remedies that it may
have, to remove the property and charge the cost to Lessee, which cost shall be
immediately payable upon demand by Lessor.
2.9 Common Areas — Rules and Regulations. Lessor or such other person(s) as
Lessor may appoint shall have the exclusive control and management of the Common
Areas and shall have the right, from time to time, to establish, modify, amend
and enforce reasonable rules and regulations (“Rules and Regulations”) for the
management, safety, care, and cleanliness of the grounds, the parking and
unloading of vehicles and the preservation of good order, as well as for the
convenience of other occupants or tenants of the Building and the Project and
their invitees. Lessee agrees to abide by and conform to all such Rules and
Regulations, and shall use its best efforts to cause its employees, suppliers,
shippers, customers, contractors and invitees to so abide and conform. Lessor
shall not be responsible to Lessee for the non-compliance with said Rules and
Regulations by other tenants of the Project.
2.10 Common Areas — Changes. Lessor shall have the right, in Lessor’s sole
discretion, from time to time:
(a) To make changes to the Common Areas, including, without limitation, changes
in the location, size, shape and number of driveways, entrances, parking spaces,
parking areas, loading and unloading areas, ingress, egress, direction of
traffic, landscaped areas, walkways and utility raceways;
(b) To close temporarily any of the Common Areas for maintenance purposes so
long as reasonable access to the Premises remains available;
(c) To designate other land outside the boundaries of the Project to be a part
of the Common Areas;
(d) To add additional buildings and improvements to the Common Areas;
(e) To use the Common Areas while engaged in making additional improvements,
repairs or alterations to the Project, or any portion thereof; and
(f) To do and perform such other acts and make such other changes in, to or with
respect to the Common Areas and Project as Lessor may, in the exercise of sound
business judgment, deem to be appropriate.
3. Term.
3.1 Term. The Commencement Date, Expiration Date and Original Term of this Lease
are as specified in Paragraph 1.3.
3.2 Early Possession. If Lessee totally or partially occupies the Premises prior
to the Commencement Date, the obligation to pay Base Rent shall be abated for
the period of such early possession. All other terms of this Lease (including
but not limited to the obligations to pay Lessee’s Share of Common Area
Operating Expenses, Real Property Taxes and insurance premiums and to maintain
the Premises) shall be in effect during such period. Any such early possession
shall not affect the Expiration Date.
3.3 Delay In Possession. Lessor agrees to use its best commercially reasonable
efforts to deliver possession of the Premises to Lessee by the Commencement
Date. If, despite said efforts, Lessor is unable to deliver possession as
agreed, Lessor shall not be subject to any liability therefor, nor shall such
failure affect the validity of this Lease or change the Expiration Date. 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
the delivery of possession and continue for a period equal to what Lessee would
otherwise have enjoyed, but minus any days of delay caused by the acts or
omissions of Lessee. If possession is not delivered within 60 days after the
Commencement Date, Lessee may, at its option, by notice in writing within
10 days after the end of such 60 day period, cancel this Lease, in which event
the Parties shall be discharged from all obligations hereunder. If such written
notice is not received by Lessor within said 10 day period, Lessee’s right to
cancel shall terminate. Except as otherwise provided, if possession is not
tendered to Lessee by the Start Date and Lessee does not terminate this Lease,
as aforesaid, 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 of the Premises is not delivered within 4 months 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 tender 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”).

      ©1998 — AIR COMMERCIAL REAL ESTATE ASSOCIATION   FORM MTG-4-5/05E

 

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4.2 Common Area Operating Expenses. CAM Charges. Lessee shall pay to Lessor
during the term hereof, in addition to the Base Rent, Lessee’s Share (as
specified in Paragraph 1.6) 51) of all Common Area Operating Expenses, as
hereinafter defined, during each calendar year of the term of this Lease, in
accordance with the following provisions:
(a) “Common Area Operating Expenses” are defined, for purposes of this Lease, as
all costs incurred by Lessor relating to the ownership and operation of the
Project, including, but not limited to, the following:
(i) The operation repair and maintenance, in neat, clean, good order and
condition, but not the replacement (see subparagraph (e)), of the following:
(aa) The Common Areas and Common Area improvements, including parking areas,
loading and unloading areas, trash areas, roadways, parkways, walkways,
driveways, landscaped areas, bumpers, irrigation systems, Common Area lighting
facilities, fences and gates, elevators, roofs, and roof drainage systems.
(bb) Exterior signs and any tenant directories.
(cc) Any fire sprinkler systems.
(ii) The cost of water, gas, electricity and telephone to service the Common
Areas and any utilities not separately metered.
(iii) Trash disposal, post control services, property management, security
services, owner’s association dues and fees, the cost to repaint the exterior of
any structures and the cost of any environmental inspections.
(iv) Reserves set aside for maintenance and repair of Common Areas and Common
Area equipment.
(v) Any increase above the Base Real Property Taxes (as defined in
Paragraph 10).
(vi) Any “Insurance Cost Increase” (as defined in Paragraph 8).
(vii)  Any deductible portion of an insured less concerning the Building or the
Common Areas.
(viii) Auditors’, accountants’ and attorneys’ fees and costs related to the
operation, maintenance, repair and replacement of the Project.
(ix) The cost of any capital improvement to the Building or the Project not
covered under the provisions of Paragraph 2.3 provided: however, that Lessor
shall allocate the cost of any such capital improvement over a 12 year period
and Lessee shall not be required to pay more than Lessee’s Share of 1/144th of
the cost of such capital improvement in any given month.
(x) Any other services to be provided by Lessor that are stated elsewhere in
this Lease to be a Common Area Operating Expense.
(b) Any Common Area Operating Expenses and Real Property Taxes that are
specifically attributable to the Unit, the Building or to any other building in
the Project or to the operation, repair and maintenance thereof, shall be
allocated entirely to such Unit, Building, or other building. However, any
Common Area Operating Expenses and Real Property Taxes that are not specifically
attributable to the Building or to any other building or to the operation,
repair and maintenance thereof, shall be equitably allocated by Lessor to all
buildings in the Project.
(c) The inclusion of the improvements, facilities and services set forth in
Subparagraph 4.2(a) shall not be deemed to impose an obligation upon Lessor to
either have said improvements or facilities or to provide those services unless
the Project already has the same, Lessor already provides the services, or
Lessor has agreed elsewhere in this Lease to provide the same or some of them.
(d) Lessee’s Share of Common Area Operating Expenses is payable monthly on the
same day as the Base Rentis due hereunder. The amount of such payments shall be
based on Lessor’s estimate of the annual Common Area Operating Expenses. Within
60 days after written request (but not more than once each year) Lessor shall
deliver to Lessee a reasonably detailed statement showing Lessee’s Share of the
actual Common Area Operating Expenses incurred during the preceding year. If
Lessee’s payments during such year exceed Lessee’s Share, Lesser shall credit
the amount of such over payment against Lessee’s future payments. If Lessee’s
payments during such year were less than Lessee’s Share, Lessee shall pay to
Lessor the amount of the deficiency within 10 days after delivery by Lessor to
Lessee of the statement.
(e) Except as provided in paragraph 4.2(a)(viii), Common Area Operating Expenses
shall not include the cost of replacing equipment or capital components such as
the roof, foundations, exterior walls or Common Area capital improvements, such
as the parking lot paving, elevators, fences that have a useful life for
accounting purposes of 5 years or more.
(f) Common Area Operating Expenses shall not include any expenses paid by any
tenant directly to third parties, or as to which Lessor is otherwise reimbursed
by any third party, other tenant, or insurance proceeds.
4.3 Payment. Lessee shall cause payment of Rent to be received by Lessor in
lawful money of the United States, without offset or deduction (except as
specifically permitted in this Lease), on or before the day on which it is due.
All monetary amounts shall be rounded to the nearest whole dollar. In the event
that any statement or invoice prepared by Lessor is inaccurate such inaccuracy
shall not constitute a waiver and Lessee shall be obligated to pay the amount
set forth in this Lease. Rent for any period during the term hereof which is for
less than one full calendar month shall be prorated based upon the actual number
of days of said month. Payment of Rent shall be made to Lessor at its address
stated herein or to such other persons or place as Lessor may from time to time
designate in writing. Acceptance of a payment which is less than the amount then
due shall not be a waiver of Lessor’s rights to the balance of such Rent,
regardless of Lessor’s endorsement of any check so stating. In the event that
any check, draft, or other instrument of payment given by Lessee to Lessor is
dishonored for any reason, Lessee agrees to pay to Lessor the sum of $25 in
addition to any Late Charge and Lessor, at its option, may require all future
Rent be paid by cashier’s check. Payments will be applied first to accrued late
charges and attorney’s fees, second to accrued interest, then to Base Rent and
Common Area Operating Expenses, and any remaining amount to any other
outstanding charges or costs.
5. Security Deposit. Lessee shall deposit with Lessor upon execution hereof the
Security Deposit as security for Lessee’s faithful performance of its
obligations under this Lease. If Lessee fails to pay Rent, or otherwise Defaults
under this Lease, Lessor may use, apply or retain all or any portion of said
Security Deposit for the payment of any amount due 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 the Security Deposit, Lessee shall within 10 days after written request
therefor deposit monies with Lessor sufficient to restore said Security Deposit
to the full amount required by this Lease. If the Base Rent increases during the
term of this Lease, Lessee shall, upon written request from Lessor, deposit
additional monies with Lessor so that the total amount of the Security Deposit
shall at all times bear the same proportion to the increased Base Rent as the
initial Security Deposit bore to the initial Base Rent. Should the Agreed Use be
amended to accommodate a material change in the business of Lessee or to
accommodate a sublessee or assignee, Lessor shall have the right to increase the
Security Deposit to the extent necessary, in Lessor’s reasonable judgment, to
account for any increased wear and tear that the Premises may suffer as a result
thereof. If a change in control of Lessee occurs during this Lease and following
such change the financial condition of Lessee is, in Lessor’s reasonable
judgment, significantly reduced, Lessee shall deposit such additional monies
with Lessor as shall be sufficient to cause the Security Deposit to be at a
commercially reasonable level based on such change in financial condition.
Lessor shall not be required to keep the Security Deposit separate from its
general accounts. Within 14 days after the expiration or termination of this
Lease, if Lessor elects to apply the Security Deposit only to unpaid Rent, and
otherwise within 30 days after the Premises have been vacated pursuant to
Paragraph 7.4(c) below, 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 this Lease.
6. Use.
6.1 Use. Lessee shall use and occupy the Premises only for the Agreed Use, or
any other legal use which is reasonably comparable thereto, and for no other
purpose. Lessee shall not use or permit the use of the Premises in a manner that
is unlawful, creates damage, waste or a nuisance, or that disturbs occupants of
or causes damage to neighboring premises or properties. Other than guide, signal
and seeing eye dogs, Lessee shall not keep or allow in the Premises any pets,
animals, birds, fish, or reptiles. Lessor shall not unreasonably withhold or
delay its consent to any written request for a modification of the Agreed Use,
so long as the same will not impair the structural integrity of the Building or
the mechanical or electrical systems therein, and/or is not significantly more
burdensome to the Project. 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.

      ©1998 — AIR COMMERCIAL REAL ESTATE ASSOCIATION   FORM MTG-4-5/05E

 

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6.2 Hazardous Substances.
(a) Reportable Uses Require Consent. The term “Hazardous Substance” as used in
this Lease shall mean any product, substance, or waste whose presence, use,
manufacture, disposal, transportation, or release, either by itself or in
combination with other materials expected to be on the Premises, is either:
(i) potentially injurious to the public health, safety or welfare, the
environment or the Premises, (ii) regulated or monitored by any governmental
authority, or (iii) a basis for potential liability of Lessor to any
governmental agency or third party under any applicable statute or common law
theory. Hazardous Substances shall include, but not be limited to, hydrocarbons,
petroleum, gasoline, and/or crude oil or any products, by-products or fractions
thereof. Lessee shall not engage in any activity in or on the Premises which
constitutes a Reportable Use of Hazardous Substances without the express prior
written consent of Lessor and timely compliance (at Lessee’s expense) with all
Applicable Requirements. “Reportable Use” shall mean (i) the installation or use
of any above or below ground storage tank, (ii) the generation, possession,
storage, use, transportation, or disposal of a Hazardous Substance that requires
a permit from, or with respect to which a report, notice, registration or
business plan is required to be filed with, any governmental authority, and/or
(iii) the presence at the Premises of a Hazardous Substance with respect to
which any Applicable Requirements requires that a notice be given to persons
entering or occupying the Premises or neighboring properties. Notwithstanding
the foregoing. Lessee may use any ordinary and customary materials reasonably
required to be used in the normal course of the Agreed Use, ordinary office
supplies (copier toner, liquid paper, glue, etc.) and common household cleaning
materials, so long as such use is in compliance with all Applicable
Requirements, is not a Reportable Use, and does not expose the Premises or
neighboring property to any meaningful risk of contamination or damage or expose
Lessor to any liability therefor. In addition, Lessor may condition its consent
to any Reportable Use upon receiving such additional assurances as Lessor
reasonably deems necessary to project 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
immediately give written notice of such fact to Lessor, and provide Lessor with
a copy of any report, notice, claim or other documentation which it has
concerning the presence of such Hazardous Substance.
(c) Lessee Remediation. Lessee shall not cause or permit any Hazardous Substance
to be spilled or released in, on, under, or about the Premises (including
through the plumbing or sanitary sewer system) and shall promptly, at Lessee’s
expense, comply with all Applicable Requirements and take all investigatory
and/or remedial action reasonably recommended, whether or not formally ordered
or required, for the cleanup of any contamination of, and for the maintenance,
security and/or monitoring of the Premises or neighboring properties, that was
caused or materially contributed to by Lessee, or pertaining to or involving any
Hazardous Substance brought onto the Premises during the term of this Lease, by
or for Lessee, or any third party.
(d) Lessee Indemnification. Lessee shall indemnify, defend and hold Lessor, its
agents, employees, lenders and ground lessor, if any, harmless from and against
any and all loss of rents and/or damages, liabilities, judgments, claims,
expenses, penalties, and attorneys’ and consultants’ fees arising out of or
involving any Hazardous Substance brought onto the Premises by or for Lessee, or
any third party (provided, however, that Lessee shall have no liability under
this Lease with respect to underground migration of any Hazardous Substance
under the Premises from areas outside of the Project not caused or contributed
to by Lessee). Lessee’s obligations shall include, but not be limited to, the
effects of any contamination or injury to person, property or the environment
created or suffered by Lessee, and the cost of investigation, removal,
remediation, restoration and/or abatement, and shall survive the expiration or
termination of this Lease. No termination, cancellation or release agreement
entered into by Lessor and Lessee shall release Lessee from its obligations
under this Lease with respect to Hazardous Substances, unless specifically so
agreed by Lessor in writing at the time of such agreement.
(e) Lessor Indemnification. Lessor and its successors and assigns shall
indemnify, defend, reimburse and hold Lessee, its employees and lenders,
harmless from and against any and all environmental damages, including the cost
of remediation, which suffered as a direct result of Hazardous Substances on the
Premises prior to Lessee taking possession or which are caused by the gross
negligence or willful misconduct of Lessor, its agents or employees. Lessor’s
obligations, as and when required by the Applicable Requirements, shall include,
but not be limited to, the cost of investigation, removal, remediation,
restoration and/or abatement, and shall survive the expiration or termination of
this Lease.
(f) Investigations and Remediations. Lessor shall retain the responsibility and
pay for any investigations or remediation measures required by governmental
entities having jurisdiction with respect to the existence of Hazardous
Substances on the Premises prior to Lessee taking possession, unless such
remediation measure is required as a result of Lessee’s use (including
“Alterations”, as defined in paragraph 7.3(a) below) of the Premises, in which
event Lessee shall be responsible for such payment. Lessee shall cooperate fully
in any such activities at the request of Lessor, including allowing Lessor and
Lessor’s agents to have reasonable access to the Premises at reasonable times in
order to carry out Lessor’s investigative and remedial responsibilities.
(g) Lessor Termination Option. If a Hazardous Substance Condition (see
Paragraph 9.1(e)) occurs during the term of this Lease, unless Lessee is legally
responsible therefor (in which case Lessee shall make the investigation and
remediation thereof required by the Applicable Requirements and this Lease shall
continue in full force and effect, but subject to Lessor’s rights under
Paragraph 6.2(d) and Paragraph 13), Lessor may, at Lessor’s option, either
(i) investigate and remediate such Hazardous Substance Condition, if required,
as soon as reasonably possible at Lessor’s expense, in which event this Lease
shall continue in full force and effect, or (ii) if the estimated cost to
remediate such condition exceeds 12 times the then monthly Base Rent or
$100,000, whichever is greater, give written notice to Lessee, within 30 days
after receipt by Lessor of knowledge of the occurrence of such Hazardous
Substance Condition, of Lessor’s desire to terminate this Lease as of the date
60 days following the date of such notice. In the event Lessor elects to give a
termination notice, Lessee may, within 10 days thereafter, give written notice
to Lessor of Lessee’s commitment to pay the amount by which the cost of the
remediation of such Hazardous Substance Condition exceeds an amount equal to 12
times the then monthly Base Rent or $100,000, whichever is greater. Lessee shall
provide Lessor with said funds or satisfactory assurance thereof within 30 days
following such commitment. In such event, this Lease shall continue in full
force and effect, and Lessor shall proceed to make such remediation as soon as
reasonably possible after the required funds are available. If Lessee does not
give such notice and provide the required funds or assurance thereof within the
time provided, this Lease shall terminate as of the date specified in Lessor’s
notice of termination.
6.3 Lessee’s Compliance with Applicable Requirements. Except as otherwise
provided in this Lease, Lessee shall, at Lessee’s sole expense, fully,
diligently and in a timely manner, materially comply with all Applicable
Requirements, the requirements of any applicable fire insurance underwriter or
rating bureau, and the recommendations of Lessor’s engineers and/or consultants
which relate in any manner to such Requirements, without regard to whether said
Requirements are now in effect or become effective after the Start Date. Lessee
shall, within 10 days after receipt of Lessor’s written request, provide Lessor
with copies of all permits and other documents, and other information evidencing
Lessee’s compliance with any Applicable Requirements specified by Lessor, and
shall immediately upon receipt, notify Lessor in writing (with copies of any
documents involved) of any threatened or actual claim, notice, citation,
warning, complaint or report pertaining to or involving the failure of Lessee or
the Premises to comply with any Applicable Requirements. Likewise, Lessee shall
immediately give written notice to Lessor of: (i) any water damage to the
Premises and any suspected seepage, pooling, dampness or other condition
conducive to the production of mold; or (ii) any mustiness or other odors that
might indicate the presence of mold in the Premises.

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6.4 Inspection; Compliance. Lessor and Lessor’s “Lender” (as defined in
Paragraph 30) and consultants shall have the right to enter into Premises at any
time, in the case of an emergency, and otherwise at reasonable times after
reasonable notice, for the purpose of inspecting the condition of the Premises
and for verifying compliance by Lessee with this Lease. The cost of any such
inspections shall be paid by Lessor, unless a violation of Applicable
Requirements, or a Hazardous Substance condition (see Paragraph 9.1) is found to
exist or be imminent, or the inspection is requested or ordered by a
governmental authority. In such case, Lessee shall upon request reimburse Lessor
for the cost of such inspection, so long as such inspection is reasonably
related to the violation or contamination. In addition, Lessee shall provide
copies of all relevant material safety data sheets (MSDS) to Lessor within
10 days of the receipt of written request therefor.
7. Maintenance; Repairs; Utility Installations; Trade Fixtures and Alterations.
7.1 Lessee’s Obligations.
(a) In General. Subject to the provisions of Paragraph 2.2 (Condition), 2.3
(Compliance), 6.3 (Lessee’s Compliance with Applicable Requirements), 7.2
(Lessor’s Obligations), 9 (Damage or Destruction), and 14 (Condemnation), Lessee
shall, at Lessee’s sole expense, keep the Premises, Utility Installations
(intended for Lessee’s exclusive use, no matter where located), and Alterations
in good order, condition and repair (whether or not the portion of the Premises
requiring repairs, or the means of repairing the same, are reasonably or readily
accessible to Lessee, and whether or not the need for such repairs occurs as a
result of Lessee’s use, any prior use, the elements or the age of such portion
of the Premises), including, but not limited to, all equipment or facilities,
such as plumbing, HVAC equipment, electrical, lighting facilities, boilers,
pressure vessels, fixtures, interior walls, interior surfaces of exterior walls,
ceilings, floors, windows, doors, plate glass, and skylights but excluding any
items which are the responsibility of Lessor pursuant to Paragraph 7.2. 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.
(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) clarifiers, and (iv) 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 Lessee shall reimburse
Lessor, upon demand, for the cost thereof.
(c) Failure to Perform. If Lessee fails to perform Lessee’s obligations under
this Paragraph 7.1, Lessor may enter upon the Premises after 10 days’ prior
written notice to Lessee (except in the case of an emergency, in which case no
notice shall be required), perform such obligations on Lessee’s behalf, and put
the Premises in good order, condition and repair, and Lessee shall promptly pay
to Lessor a sum equal to 115% of the cost thereof.
(d) Replacement. Subject to Lessee’s indemnification of Lessor as set forth in
Paragraph 8.7 below, and without relieving Lessee of liability resulting from
Lessee’s failure to exercise and perform good maintenance practices, if an item
described in Paragraph 7.1(b) cannot be repaired other than at a cost which is
in excess of 50% of the cost of replacing such item, then such item shall be
replaced by Lessor, and the cost thereof shall be prorated between the Parties
and Lessee shall only be obligated to pay, each month during the remainder of
the term of this Lease, on the date on which Base Rent is due, an amount equal
to the product of multiplying the cost of such replacement by a fraction, the
numerator of which is one, and the denominator of which is 144 (ie. 1/144th of
the cost per month). Lessee shall pay interest on the unamortized balance but
may prepay its obligation at any time.
7.2 Lessor’s Obligations. Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance), 4.2 (Common Area Operating Expenses), 6 (Use),
7.1 (Lessee’s Obligations), 9 (Damage or Destruction) and 14 (Condemnation),
Lessor, subject to reimbursement pursuant to Paragraph 4.2, shall keep in good
order, condition and repair the foundations, exterior walls, structural
condition of interior bearing walls, exterior roof, fire sprinkler system,
Common Area fire alarm and/or smoke detection systems, fire hydrants, parking
lots, walkways, parkways, driveways, landscaping, fences, signs and utility
systems serving the Common Areas and all parts thereof, as well as providing the
services for which there is a Common Area Operating Expense pursuant to
Paragraph 4.2. Lessor shall not be obligated to paint the exterior or interior
surfaces of exterior walls nor shall Lessor be obligated to maintain, repair or
replace windows, doors or plate glass of the Premises. Lessee expressly waives
the benefit of any statute now or hereafter in effect to the extent it is
inconsistent with the terms of this Lease.
7.3 Utility Installations; Trade Fixtures; Alterations.
(a) Definitions. The term “Utility Installations” refers to all floor and window
coverings, air and/or vacuum lines, power panels, electrical distribution,
security and fire protection systems, communication cabling, lighting fixtures,
HVAC equipment, plumbing, and fencing in or on the Premises. The term “Trade
Fixtures” shall mean Lessee’s machinery and equipment that can be removed
without doing material damage to the Premises. The term “Alterations” shall mean
any modification of the improvements, other than Utility Installations or Trade
Fixtures, whether by addition or deletion. “Lessee Owned Alterations and/or
Utility Installations” are defined as Alterations and/or Utility Installations
made by Lessee that are not yet owned by Lessor pursuant to Paragraph 7.4(a).
(b) Consent. Lessee shall not make any Alterations or Utility Installations to
the Premises without Lessor’s prior written consent. Lessee may, however, make
non-structural Utility Installations to the interior of the Premises (excluding
the roof) without such consent but upon notice to Lessor, as long as they are
not visible from the outside, do not involve puncturing, relocating or removing
the roof or any existing walls, will not affect the electrical, plumbing, HVAC,
and/or life safety systems, and the cumulative cost thereof during this Lease as
extended does not exceed a sum equal to 3 month’s Base Rent in the aggregate or
a sum equal to one month’s Base Rent in any one 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. Lessor may,
as a precondition to granting such approval, require Lessee to utilize a
contractor chosen and/or approved by Lessor. Any Alterations or Utility
Installations that Lessee shall desire to make and which require the consent of
the Lessor shall be presented to Lessor in written form with detailed plans.
Consent shall be deemed conditioned upon Lessee’s: (i) acquiring 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 performed in a workmanlike manner with good and
sufficient materials. Lessee shall promptly upon completion furnish Lessor with
as-built plans and specifications. For work which costs an amount in excess of
one month’s Base Rent, Lessor may condition its consent upon Lessee providing a
lien and completion bond in an amount equal to 150% of the estimated cost of
such Alteration or Utility Installation and/or upon Lessee’s posting an
additional Security Deposit with Lessor.
(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 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 or elect ownership
as hereinafter provided, all Alterations and Utility Installations made by
Lessee shall be the property of Lessee, but considered a part of the Premises.
Lessor may, at any time, elect in writing to be the owner of all or any
specified part of the Lessee Owned Alterations and Utility Installations. Unless
otherwise instructed per paragraph 7.4(b) hereof, all Lessee Owned Alterations
and Utility Installations shall, at the expiration or termination of this Lease,
become the property of Lessor and be surrendered by Lessee with the Premises.
(b)  Removal. By delivery to Lessee of written notice from Lessor not earlier
than 90 and not later than 30 days prior to the end of the term of this Lease,
Lessor may require that any or all Lessee Owned Alterations or Utility
Installations be removed by the expiration or termination of this Lease. Lessor
may require the removal at any time of all or any part of any Lessee Owned
Alterations or Utility Installations made without the required consent.
(c)  Surrender; Restoration. Lessee shall surrender the Premises by the
Expiration Date or any earlier termination date, with all of the improvements,
parts and surfaces thereof broom clean and free of debris, and in good operating
order, condition and state of repair, ordinary wear and tear excepted. “Ordinary
wear and tear” shall not include any damage or deterioration that would have
been prevented by good maintenance practice. Notwithstanding the foregoing, if
this Lease is for 12 months or less, then Lessee shall surrender the Premises in
the same condition as delivered to Lessee on the Start Date with NO allowance
for ordinary wear and tear. Lessee shall repair any damage occasioned by the
installation, maintenance or removal of Trade Fixtures, Lessee owned Alterations
and/or Utility Installations, furnishings, and equipment as well as the removal
of any storage tank installed by or for Lessee. Lessee shall also completely
remove from the Premises any and all Hazardous Substances brought onto the
Premises by or for Lessee, or any third party (except Hazardous Substances which
were deposited via underground migration from areas outside of the Premises)
even if such removal would require Lessee to perform or pay for work that
exceeds statutory requirements- Trade Fixtures shall remain the property of
Lessee and shall be removed by Lessee. Any personal property of Lessee not
removed on or before the Expiration Date or any earlier termination date shall
be deemed to have been abandoned by Lessee and may be disposed of or retained by
Lessor as Lessor may desire. The failure by Lessee to timely vacate the Premises
pursuant to this Paragraph 7.4(c) without the express written consent of Lessor
shall constitute a holdover under the provisions of Paragraph 26 below.
8. Insurance; Indemnity.
8.1 Payment of Premium Increases.
(a) As used herein, the term “Insurance Cost Increase” is defined as any
increase in the actual cost of the insurance applicable to the Building and/or
the Project and required to be carried by Lessor, pursuant to Paragraphs 8.2(b),
8.3(a) and 8.3(b), ( “Required Insurance”), over and above the Base Premium, as
hereinafter defined, calculated on an annual basis. Insurance Cost Increase
shall include, but not be limited to, requirements of the holder of a mortgage
or deed of trust covering the Premises, Building and/or Project, increased
valuation of the Premises, Building and/or Project, and/or a general premium
rate increase. The term Insurance Cost Increase shall not, however, include any
premium increases resulting from the nature of the occupancy of any other tenant
of the Building. If the parties insert a dollar amount in Paragraph 1.9, such
amount shall be considered the “Base Premium.” The Base Premium shall be the
annual premium applicable to the 12 month period immediately preceding the Start
Date. If, however, the Project was not insured for the entirety of such 12 month
period, then the Base Premium shall be the lowest annual premium reasonably
obtainable for the Required Insurance as of the Start Date, assuming the most
nominal use possible of the Building. In no event, however, shall Lessee be
responsible for any portion of the premium cost attributable to liability
insurance coverage in excess of $2,000,000 procured under Paragraph 8.2(b).
(b) Lessee shall pay any Insurance Cost Increase to Lessor pursuant to
Paragraph 4.2. Premiums for policy periods commencing prior to, or extending
beyond, the term of this Lease shall be prorated to coincide with the
corresponding Start Date or Expiration Date.
8.2 Liability Insurance.
(a) Carried by Lessee. Lessee shall obtain and keep in force a Commercial
General Liability policy of insurance protecting Lessee and Lessor as an
additional insured against claims for bodily injury, personal injury and
property damage based upon or arising out of the ownership, use, occupancy or
maintenance of the Premises and all areas appurtenant thereto. Such insurance
shall be on an occurrence basis providing single limit coverage in an amount not
less than $1,000,000 per occurrence with an annual aggregate of not less than
$2,000,000. Lessee shall add Lessor as an additional insured by means of an
endorsement at least as broad as the Insurance Service Organization’s
“Additional Insured-Managers or Lessors of Premises” Endorsement and coverage
shall also be extended to include damage caused by heat, smoke or fumes from a
hostile fire. The policy shall not contain any intra-insured exclusions as
between insured persons or organizations, but shall include coverage for
liability assumed under this Lease as an “insured contract” for the performance
of Lessee’s indemnity obligations under this Lease. The limits of said insurance
shall not, however, limit the liability of Lessee nor relieve Lessee of any
obligation hereunder. Lessee shall provide an endorsement on its liability
policy(ies) which provides that its insurance shall be primary to and not
contributory with any similar insurance carried by Lessor, whose insurance shall
be considered excess insurance only.
(b)  Carried by Lessor. Lessor shall maintain liability insurance as described
in Paragraph 8.2(a), in addition to, and not in lieu of, the insurance required
to be maintained by Lessee. Lessee shall not be named as an additional insured
therein.
8.3 Property Insurance — Building, Improvements and Rental Value.
(a) Building and Improvements. Lessor shall obtain and keep in force a policy or
policies of insurance in the name of Lessor, with loss payable to Lessor, any
ground-lessor, and to any Lender insuring loss or damage to the Premises. The
amount of such insurance shall be equal to the full insurable replacement cost
of the Premises, as the same shall exist from time to time, or the amount
required by any Lender, but in no event more than the commercially reasonable
and available insurable value thereof. Lessee Owned Alterations and Utility
Installations, Trade Fixtures, and Lessee’s personal property shall be insured
by Lessee under Paragraph 8.4. 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, and
inflation guard protection causing an increase in the annual property insurance
coverage amount by a factor of not less than the adjusted U.S. Department of
Labor Consumer Price Index for All Urban Consumers for the city nearest to where
the Premises are located. If such insurance coverage has a deductible clause,
the deductible amount shall not exceed $1,000 per occurrence.
(b) Rental Value. Lessor shall also 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.
(c) Adjacent Premises. Lessee shall pay for any increase in the premiums for the
property insurance of the Building and for the Common Areas or other buildings
in the Project if said increase is caused by Lessee’s acts, omissions, use or
occupancy of the Premises.
(d) Lessee’s Improvements. Since Lessor is the Insuring Party, Lessor shall not
be required to insure Lessee Owned Alterations and Utility Installations unless
the item in question has become the property of Lessor under the terms of this
Lease.

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8.4 Lessee’s Property; Business Interruption Insurance.
(a) Property Damage. Lessee shall obtain and maintain insurance coverage on all
of Lessee’s personal property, Trade Fixtures, and Lessee Owned Alterations and
Utility Installations. Such insurance shall be full replacement cost coverage
with a deductible of not to exceed $1,000 per occurrence. The proceeds from any
such insurance shall be used by Lessee for the replacement of personal property,
Trade Fixtures and Lessee Owned Alterations and Utility Installations. Lessee
shall provide Lessor with written evidence that such insurance is in force.
(b) Business Interruption. Lessee shall obtain and maintain loss of income and
extra expense insurance in amounts as will reimburse Lessee for direct or
indirect loss of earnings attributable to all perils commonly insured against by
prudent lessees in the business of Lessee or attributable to prevention of
access to the Premises as a result of such perils.
(c) No Representation of Adequate Coverage. Lessor makes no representation that
the limits or forms of coverage of insurance specified herein are adequate to
cover Lessee’s property, business operations or obligations under this Lease.
8.5 Insurance Policies. Insurance required herein shall be by companies duly
licensed or admitted to transact business in the state where the Premises are
located, and maintaining during the policy term a “General Policyholders Rating”
of at least A-, VI, as set forth in the most current issue of “Best’s Insurance
Guide”, or such other rating as may be required by a Lender. Lessee shall not do
or permit to be done anything which invalidates the required insurance policies.
Lessee shall, prior to the Start Date, deliver to Lessor certified copies of
policies of such insurance or certificates evidencing the existence and amounts
of the required insurance. No such policy shall be cancelable or subject to
modification except after 30 days prior written notice to Lessor. Lessee shall,
at least 10 days prior to the expiration of such policies, furnish Lessor with
evidence of renewals or “insurance binders” evidencing renewal thereof, or
Lessor may order such insurance and charge the cost thereof to Lessee, which
amount shall be payable by Lessee to Lessor upon demand. Such policies shall be
for a term of at least one year, or the length of the remaining term of this
Lease, whichever is less. If either Party shall fail to procure and maintain the
insurance required to be carried by it, the other Party may, but shall not be
required to, procure and maintain the same.
8.6 Waiver of Subrogation. Without affecting any other rights or remedies,
Lessee and Lessor each hereby release and relieve the other, and waive their
entire right to recover damages against the other, for loss of or damage to its
property arising out of or incident to the perils required to be insured against
herein. The effect of such releases and waivers is not limited by the amount of
insurance carried or required, or by any deductibles applicable hereto. The
Parties agree to have their respective property damage insurance carriers waive
any right to subrogation that such companies may have against Lessor or Lessee,
as the case may be, so long as the insurance is not invalidated thereby.
8.7 Indemnity. Except for Lessor’s gross negligence or willful misconduct,
Lessee shall indemnify, protect, defend and hold harmless the Premises, Lessor
and its agents, Lessor’s master or ground lessor, partners and Lenders, from and
against any and all claims, loss of rents and/or damages, liens, judgments,
penalties, attorneys’ and consultants’ fees, expenses and/or liabilities arising
out of, involving, or in connection with, the use and/or occupancy of the
Premises by Lessee. If any action or proceeding is brought against Lessor by
reason of any of the foregoing matters, Lessee shall upon notice defend the same
at Lessee’s expense by counsel reasonably satisfactory to Lessor and Lessor
shall cooperate with Lessee in such defense. Lessor need not have first paid any
such claim in order to be defended or indemnified.
8.8 Exemption of Lessor and its Agents from Liability. Notwithstanding the
negligence or breach of this Lease by Lessor or its agents, neither Lessor nor
its agents shall be liable under any circumstances for: (i) injury or damage to
the person or goods, wares, merchandise or other property of Lessee, Lessee’s
employees, contractors, invitees, customers, or any other person in or about the
Premises, whether such damage or injury is caused by or results from fire,
steam, electricity, gas, water or rain, indoor air quality, the presence of mold
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, or from other sources
or places, (ii) any damages arising from any act or neglect of any other tenant
of Lessor or from the failure of Lessor or its agents to enforce the provisions
of any other lease in the Project, or (iii) injury to Lessee’s business or for
any loss of income or profit therefrom. Instead, it is intended that Lessee’s
sole recourse in the event of such damages or injury be to file a claim on the
insurance policy(ies) that Lessee is required to maintain pursuant to the
provisions of paragraph 8.
8.9 Failure to Provide Insurance. Lessee acknowledges that any failure on its
part to obtain or maintain the insurance required herein will expose Lessor to
risks and potentially cause Lessor to incur costs not contemplated by this
Lease, the extent of which will be extremely difficult to ascertain.
Accordingly, for any month or portion thereof that Lessee does not maintain the
required insurance and/or does not provide Lessor with the required binders or
certificates evidencing the existence of the required insurance, the Base Rent
shall be automatically increased, without any requirement for notice to Lessee,
by an amount equal to 10% of the then existing Base Rent or S100, whichever is
greater. The parties agree that such increase in Base Rent represents fair and
reasonable compensation for the additional risk/costs that Lessor will incur by
reason of Lessee’s failure to maintain the required insurance. Such increase in
Base Rent shall in no event constitute a waiver of Lessee’s Default or Breach
with respect to the failure to maintain such insurance, prevent the exercise of
any of the other rights and remedies granted hereunder, nor relieve Lessee of
its obligation to maintain the insurance specified in this Lease.
9. Damage or Destruction.
9.1 Definitions.
(a) “Premises Partial Damage” shall mean damage or destruction to the
improvements on the Premises, other than Lessee Owned Alterations and Utility
Installations, which can reasonably be repaired in 3 months or less from the
date of the damage or destruction, and the cost thereof does not exceed a sum
equal to 6 month’s Base Rent. Lessor shall notify Lessee in writing within 30
days from the date of the damage or destruction as to whether or not the damage
is Partial or Total. Notwithstanding the foregoing, Premises Partial Damage
shall not include damage to windows, doors, and/or other similar items which
Lessee has the responsibility to repair or replace pursuant to the provisions of
Paragraph 7.1.
(b) “Premises Total Destruction” shall mean damage or destruction to the
improvements on the Premises, other than Lessee Owned Alterations and Utility
Installations and Trade Fixtures, which cannot reasonably be repaired in
3 months or less from the date of the damage or destruction and/or the cost
thereof exceeds a sum equal to 6 month’s Base Rent. Lessor shall notify Lessee
in writing within 30 days from the date of the damage or destruction as to
whether or not the damage is Partial or Total.
(c) “Insured Loss” shall mean damage or destruction to improvements on the
Premises, other than Lessee Owned Alterations and Utility Installations and
Trade Fixtures, which was caused by an event required to be covered by the
insurance described in Paragraph 8.3(a), irrespective of any deductible amounts
or coverage limits involved.
(d) “Replacement Cost” shall mean the cost to repair or rebuild the improvements
owned by Lessor at the time of the occurrence to their condition existing
immediately prior thereto, including demolition, debris removal and upgrading
required by the operation of Applicable Requirements, and without deduction for
depreciation.
(e) “Hazardous Substance Condition” shall mean the occurrence or discovery of a
condition involving the presence of, or a contamination by, a Hazardous
Substance as defined in Paragraph 6.2(a), in, on, or under the Premises which
requires repair, remediation, or restoration.

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9.2 Partial Damage — Insured Loss. If a Premises Partial Damage that is an
Insured Loss occurs, then Lessor shall, at Lessor’s expense, repair such damage
(but not Lessee’s Trade Fixtures or Lessee Owned Alterations and Utility
Installations) as soon as reasonably possible and this Lease shall continue in
full force and effect, provided, however, that Lessee shall, at Lessor’s
election, make the repair of any damage or destruction the total cost to repair
of which is $10,000 or less, and, in such event, Lessor shall make any
applicable insurance proceeds available to Lessee on a reasonable basis for that
purpose. Notwithstanding the foregoing, if the required insurance was not in
force or the insurance proceeds are not sufficient to effect such repair, the
Insuring Party shall promptly contribute the shortage in proceeds as and when
required to complete said repairs. In the event, however, such shortage was due
to the fact that, by reason of the unique nature of the improvements, full
replacement cost insurance coverage was not commercially reasonable and
available, Lessor shall have no obligation to pay for the shortage in insurance
proceeds or to fully restore the unique aspects of the Premises unless Lessee
provides Lessor with the funds to cover same, or adequate assurance thereof,
within 10 days following receipt of written notice of such shortage and request
therefor. If Lessor receives said funds or adequate assurance thereof within
said 10 day period, the party responsible for making the repairs shall complete
them as soon as reasonably possible and this Lease shall remain in full force
and effect. If such funds or assurance are not received, Lessor may nevertheless
elect by written notice to Lessee within 10 days thereafter to: (i) make such
restoration and repair as is commercially reasonable with Lessor paying any
shortage in proceeds, in which case this Lease shall remain in full force and
effect, or (ii) have this Lease terminate 30 days thereafter. Lessee shall not
be entitled to reimbursement of any funds contributed by Lessee to repair any
such damage or destruction. Premises Partial Damage due to flood or earthquake
shall be subject to Paragraph 9.3, notwithstanding that there may be some
insurance coverage, but the net proceeds of any such insurance shall be made
available for the repairs if made by either Party.
9.3 Partial Damage — Uninsured Loss. If a Premises Partial Damage that is not an
Insured Loss occurs, unless caused by a negligent or willful act of Lessee (in
which event Lessee shall make the repairs at Lessee’s expense). Lessor may
either: (i) repair such damage as soon as reasonably possible at Lessor’s
expense, in which event this Lease shall continue in full force and effect, or
(ii) terminate this Lease by giving written notice to Lessee within 30 days
after receipt by Lessor of knowledge of the occurrence of such damage. Such
termination shall be effective 60 days following the date of such notice. In the
event Lessor elects to terminate this Lease, Lessee shall have the right within
10 days after receipt of the termination notice to give written notice to Lessor
of Lessee’s commitment to pay for the repair of such damage without
reimbursement from Lessor. Lessee shall provide Lessor with said funds or
satisfactory assurance thereof within 30 days after making such commitment. In
such event this Lease shall continue in full force and effect, and Lessor shall
proceed to make such repairs as soon as reasonably possible after the required
funds are available. If Lessee does not make the required commitment, this Lease
shall terminate as of the date specified in the termination notice.
9.4 Total Destruction. Notwithstanding any other provision hereof, if a Premises
Total Destruction occurs, this Lease shall terminate 60 days following such
Destruction. If the damage or destruction was caused by the gross negligence or
willful misconduct of Lessee, Lessor shall have the right to recover Lessor’s
damages from Lessee, except as provided in Paragraph 8.6.
9.5 Damage Near End of Term. If at any time during the last 6 months of this
Lease there is damage for which the cost to repair exceeds one month’s Base
Rent, whether or not an Insured Loss, Lessor may terminate this Lease effective
60 days following the date of occurrence of such damage by giving a written
termination notice to Lessee within 30 days after the date of occurrence of such
damage. Notwithstanding the foregoing, if Lessee at that time has an exercisable
option to extend this Lease or to purchase the Premises, then Lessee may
preserve this Lease by, (a) exercising such option and (b) providing Lessor with
any shortage in insurance proceeds (or adequate assurance thereof) needed to
make the repairs on or before the earlier of (i) the date which is 10 days after
Lessee’s receipt of Lessor’s written notice purporting to terminate this Lease,
or (ii) the day prior to the date upon which such option expires. If Lessee duly
exercises such option during such period and provides Lessor with funds (or
adequate assurance thereof) to cover any shortage in insurance proceeds, Lessor
shall, at Lessor’s commercially reasonable expense, repair such damage as soon
as reasonably possible and this Lease shall continue in full force and effect.
If Lessee fails to exercise such option and provide such funds or assurance
during such period, then this Lease shall terminate on the date specified in the
termination notice and Lessee’s option shall be extinguished.
9.6 Abatement of Rent; Lessee’s Remedies.
(a) Abatement. In the event of Premises Partial Damage or Premises Total
Destruction or a Hazardous Substance Condition for which Lessee is not
responsible under this Lease, the Rent payable by Lessee for the period required
for the repair, remediation or restoration of such damage shall be abated in
proportion to the degree to which Lessee’s use of the Premises is impaired, but
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. If Lessor shall be obligated to repair or restore the Premises and
does not commence, in a substantial and meaningful way, such repair or
restoration within 90 days after such obligation shall accrue, Lessee may, at
any time prior to the commencement of such repair or restoration, give written
notice to Lessor and to any Lenders of which Lessee has actual notice, of
Lessee’s election to terminate this Lease on a date not less than 60 days
following the giving of such notice. If Lessee gives such notice and such repair
or restoration is not commenced within 30 days thereafter, this Lease shall
terminate as of the date specified in said notice. If the repair or restoration
is commenced within such 30 days, this Lease shall continue in full force and
effect. “Commence” shall mean either the unconditional authorization of the
preparation of the required plans, or the beginning of the actual work on the
Premises, whichever first occurs.
9.7 Termination; Advance Payments. Upon termination of this Lease pursuant to
Paragraph 6.2(g) or Paragraph 9, an equitable adjustment shall be made
concerning advance Base Rent and any other advance payments made by Lessee to
Lessor. Lessor shall, in addition, return to Lessee 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.
10. Real Property Taxes.
10.1 Definitions.
(a) “Real Property Taxes.” 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 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 Project address and where the proceeds so generated are to
be applied by the city, county or other local taxing authority of a jurisdiction
within which the Project is located. The term “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 Project, (ii) a change in
the improvements thereon, and/or (iii) levied or assessed on machinery or
equipment provided by Lessor to Lessee pursuant to this Lease.
(b) “Base Real Property Taxes.” As used herein, the term “Base Real Property
Taxes” shall be the amount of Real Property Taxes, which are assessed against
the Premises, Building, Project or Common Areas in the calendar year during
which the Lease is executed. In calculating Real Property Taxes for any calendar
year, the Real Property Taxes for any real estate tax year shall be included in
the calculation of Real Property Taxes for such calendar year based upon the
number of days which such calendar year and tax year have in common.
10.2 Payment of Taxes. Except as otherwise provided in Paragraph 10.3, Lessor
shall pay the Real Property Taxes applicable to the Project, and said payments
shall be included in the calculation of Common Area Operating Expenses in
accordance with the provisions of Paragraph 4.2.

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10.3 Additional Improvements. Common Area Operating Expenses shall not include
Real Property Taxes specified in the tax assessor’s records and work sheets as
being caused by additional improvements placed upon the Project by other lessees
or by Lessor for the exclusive enjoyment of such other lessees. Notwithstanding
Paragraph 10.2 hereof, Lessee shall, however, pay to Lessor at the time Common
Area Operating Expenses are payable under Paragraph 4.2, the entirety of any
increase in Real Property Taxes if assessed solely by reason of Alterations,
Trade Fixtures or Utility Installations placed upon the Premises by Lessee or at
Lessee’s request or by reason of any alterations or improvements to the Premises
made by Lessor subsequent to the execution of this Lease by the Parties.
10.4 Joint Assessment. If the Building is not separately assessed, Real Property
Taxes allocated to the Building shall be an equitable proportion of the Real
Property Taxes for all of the land and improvements included within the tax
parcel assessed, such proportion to be determined by Lessor from the respective
valuations assigned in the assessor’s work sheets or such other information as
may be reasonably available. Lessor’s reasonable determination thereof, in good
faith, shall be conclusive.
10.5 Personal Property Taxes. Lessee shall pay prior to delinquency all taxes
assessed against and levied upon Lessee Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises. When possible, Lessee shall cause its
Lessee Owned Alterations and Utility Installations, Trade Fixtures, furnishings,
equipment and all other personal property to be assessed and billed separately
from the real property of Lessor. If any of Lessee’s said property shall be
assessed with Lessor’s real property, Lessee shall pay Lessor the taxes
attributable to Lessee’s property within 10 days after receipt of a written
statement setting forth the taxes applicable to Lessee’s property.
11. Utilities and Services. Lessee shall pay for all water, gas, heat, light,
power, telephone, trash disposal and other utilities and services supplied to
the Premises, together with any taxes thereon. Notwithstanding the provisions of
Paragraph 4.2, if at any time in Lessor’s sole judgment, Lessor determines that
Lessee is using a disproportionate amount of water, electricity or other
commonly metered utilities, or that Lessee is generating such a large volume of
trash as to require an increase in the size of the trash receptacle and/or an
increase in the number of times per month that it is emptied, then Lessor may
increase Lessee’s Base Rent by an amount equal to such increased costs. There
shall be no abatement of Rent and Lessor shall not be liable in any respect
whatsoever for the inadequacy, stoppage, interruption or discontinuance of any
utility or service due to riot, strike, labor dispute, breakdown, accident,
repair or other cause beyond Lessor’s reasonable control or in cooperation with
governmental request or directions.
12. Assignment and Subletting.
12.1 Lessor’s Consent Required.
(a) Lessee shall not voluntarily or by operation of law assign, transfer,
mortgage or encumber (collectively, “assign or assignment”) or sublet all or any
part of Lessee’s interest in this Lease or in the Premises without Lessor’s
prior written consent.
(b) Unless Lessee is a corporation and its stock is publicly traded on a
national stock exchange, a change in the control of Lessee shall constitute an
assignment requiring consent. The transfer, on a cumulative basis, of 25% or
more of the voting control of Lessee shall constitute a change in control for
this purpose.
(c) The involvement of Lessee or its assets in any transaction, or series of
transactions (by way of merger, sale, acquisition, financing, transfer,
leveraged buy-out or otherwise), whether or not a formal assignment or
hypothecation of this Lease or Lessee’s assets occurs, which results or will
result in a reduction of the Net Worth of Lessee by an amount greater than 25%
of such Net Worth as it was represented at the time of the execution of this
Lease or at the time of the most recent assignment to which Lessor has
consented, or as it exists immediately prior to said transaction or transactions
constituting such reduction, whichever was or is greater, shall be considered an
assignment of this Lease to which Lessor may withhold its consent. “Net Worth of
Lessee” shall mean the net worth of Lessee (excluding any guarantors)
established under generally accepted accounting principles.
(d) An assignment or subletting without consent shall, at Lessor’s option, be a
Default curable after notice per Paragraph 13.1(c), or a noncurable Breach
without the necessity of any notice and grace period. If Lessor elects to treat
such unapproved assignment or subletting as a noncurable Breach, Lessor may
either: (i) terminate this Lease, or (ii) upon 30 days written notice, increase
the 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.
(f) Lessor may reasonably withhold consent to a proposed assignment or
subletting if Lessee is in Default at the time consent is requested.
(g) Notwithstanding the foregoing, allowing a diminimus portion of the Premises,
ie.20 square feet or less, to be used by a third party vendor in connection with
the installation of a vending machine or payphone shall not constitute a
subletting.
12.2 Terms and Conditions Applicable to Assignment and Subletting.
(a) Regardless of Lessor’s consent, no assignment or subletting shall: (i) be
effective without the express written assumption by such assignee or sublessee
of the obligations of Lessee under this Lease, (ii) release Lessee of any
obligations hereunder, or (iii) alter the primary liability of Lessee for the
payment of Rent or for the performance of any other obligations to be performed
by Lessee.
(b) Lessor may accept Rent or performance of Lessee’s obligations from any
person other than Lessee pending approval or disapproval of an assignment,
Neither a delay in the approval or disapproval of such assignment nor the
acceptance of Rent or performance shall constitute a waiver or estoppel of
Lessor’s right to exercise its remedies for Lessee’s Default or Breach.
(c) Lessor’s consent to any assignment or subletting shall not constitute a
consent to any subsequent assignment or subletting.
(d) In the event of any Default or Breach by Lessee, Lessor may proceed directly
against Lessee, any Guarantors or anyone else responsible for the performance of
Lessee’s obligations under this Lease, including any assignee or sublessee,
without first exhausting Lessor’s remedies against any other person or entity
responsible therefore to Lessor, or any security held by Lessor.
(e) Each request for consent to an assignment or subletting shall be in writing,
accompanied by information relevant to Lessor’s determination as to the
financial and operational responsibility and appropriateness of the proposed
assignee or sublessee, including but not limited to the intended use and/or
required modification of the Premises, if any, together with a fee of $500 as
consideration for Lessor’s considering and processing said request. Lessee
agrees to provide Lessor with such other or additional information and/or
documentation as may be reasonably requested. (See also Paragraph 36)
(f) Any assignee of, or sublessee under, this Lease shall, by reason of
accepting such assignment, entering into such sublease, or entering into
possession of the Premises or any portion thereof, be deemed to have assumed and
agreed to conform and comply with each and every term, covenant, condition and
obligation herein to be observed or performed by Lessee during the term of said
assignment or sublease, other than such obligations as are contrary to or
inconsistent with provisions of an assignment or sublease to which Lessor has
specifically consented to in writing.
(g) Lessor’s consent to any assignment or subletting shall not transfer to the
assignee or sublessee any Option granted to the original Lessee by this Lease
unless such transfer is specifically consented to by Lessor in writing. (See
Paragraph 39.2)

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12.3 Additional Terms and Conditions Applicable to Subletting. The following
terms and conditions shall apply to any subletting by Lessee of all or any part
of the Premises and shall be deemed included in all subleases under this Lease
whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee’s interest in
all Rent payable on any sublease, and Lessor may collect such Rent and apply
same toward Lessee’s obligations under this Lease; provided, however, that until
a Breach shall occur in the performance of Lessee’s obligations. Lessee may
collect said Rent. In the event that the amount collected by Lessor exceeds
Lessee’s then outstanding obligations any such excess shall be refunded to
Lessee. Lessor shall not, by reason of the foregoing or any assignment of such
sublease, nor by reason of the collection of Rent, be deemed liable to the
sublessee for any failure of Lessee to perform and comply with any of Lessee’s
obligations to such sublessee. Lessee hereby irrevocably authorizes and directs
any such sublessee, upon receipt of a written notice from Lessor stating that a
Breach exists in the performance of Lessee’s obligations under this Lease, to
pay to Lessor all Rent due and to become due under the sublease. Sublessee shall
rely upon any such notice from Lessor and shall pay all Rents to Lessor without
any obligation or right to inquire as to whether such Breach exists,
notwithstanding any claim from Lessee to the contrary.
(b) In the event of a Breach by Lessee, Lessor may, at its option, require
sublessee to attorn to Lessor, in which event Lessor shall undertake the
obligations of the sublessor under such sublease from the time of the exercise
of said option to the expiration of such sublease; provided, however, Lessor
shall not be liable for any prepaid rents or security deposit paid by such
sublessee to such sublessor or for any prior Defaults or Breaches of such
sublessor.
(c) Any matter requiring the consent of the sublessor under a sublease shall
also require the consent of Lessor.
(d) No sublessee shall further assign or sublet all or any part of the Premises
without Lessor’s prior written consent.
(e) Lessor shall deliver a copy of any notice of Default or Breach by Lessee to
the sublessee, who shall have the right to cure the Default of Lessee within the
grace period, if any, specified in such notice. The sublessee shall have a right
of reimbursement and offset from and against Lessee for any such Defaults cured
by the sublessee.
13. Default; Breach; Remedies.
13.1 Default; Breach. A “Default” is defined as a failure by the Lessee to
comply with or perform any of the terms, covenants, conditions or Rules and
Regulations under this Lease. A “Breach” is defined as the occurrence of one or
more of the following Defaults, and the failure of Lessee to cure such Default
within any applicable grace period:
(a) The abandonment of the Premises; or the vacating of the Premises without
providing a commercially reasonable level of security, or where the coverage of
the property insurance described in Paragraph 8.3 is jeopardized as a result
thereof, or without providing reasonable assurances to minimize potential
vandalism.
(b) The failure of Lessee to make any payment of Rent or any Security Deposit
required to be made by Lessee hereunder, whether to Lessor or to a third party,
when due, to provide reasonable evidence of insurance or surety bond, or to
fulfill any obligation under this Lease which endangers or threatens life or
property, where such failure continues for a period of 3 business days following
written notice to Lessee.
(c) The commission of waste, act or acts constituting public or private
nuisance, and/or an illegal activity on the Premises by Lessee, where such
actions continue for a period of 3 business days following written notice to
Lessee.
(d) The failure by Lessee to provide (i) reasonable written evidence of
compliance with Applicable Requirements, (ii) the service contracts, (iii) the
rescission of an unauthorized assignment or subletting, (iv) an Estoppel
Certificate, (v) a requested subordination, (vi) evidence concerning any
guaranty and/or Guarantor, (vii) any document requested under Paragraph 41,
(viii) material data safety sheets (MSDS), or (ix) any other documentation or
information which Lessor may reasonably require of Lessee under the terms of
this Lease, where any such failure continues for a period of 10 days following
written notice to Lessee.
(e) A Default by Lessee as to the terms, covenants, conditions or provisions of
this Lease, or of the rules adopted under Paragraph 2.9 hereof, other than those
described in subparagraphs 13.1(a), (b), (c) or (d), above, where such Default
continues for a period of 30 days after written notice; provided, however, that
if the nature of Lessee’s Default is such that more than 30 days are reasonably
required for its cure, then it shall not be deemed to be a Breach if Lessee
commences such cure within said 30 day period and thereafter diligently
prosecutes such cure to completion.
(f) The occurrence of any of the following events: (i) the making of any general
arrangement or assignment for the benefit of creditors; (ii) becoming a “debtor”
as defined in 11 U.S.C. § 101 or any successor statute thereto (unless, in the
case of a petition filed against Lessee, the same is dismissed within 60 days);
(iii) the appointment of a trustee or receiver to take possession of
substantially all of Lessee’s assets located at the Premises or of Lessee’s
interest in this Lease, where possession is not restored to Lessee within
30 days; or (iv) the attachment, execution or other judicial seizure of
substantially all of Lessee’s assets located at the Premises or of Lessee’s
interest in this Lease, where such seizure is not discharged within 30 days;
provided, however, in the event that any provision of this subparagraph is
contrary to any applicable law, such provision shall be of no force or effect,
and not affect the validity of the remaining provisions.
(g) The discovery that any financial statement of Lessee or of any Guarantor
given to Lessor was materially false.
(h) If the performance of Lessee’s obligations under this Lease is guaranteed:
(i) the death of a Guarantor, (ii) the termination of a Guarantor’s liability
with respect to this Lease other than in accordance with the terms of such
guaranty, (iii) a Guarantor’s becoming insolvent or the subject of a bankruptcy
filing, (iv) a Guarantor’s refusal to honor the guaranty, or (v) a Guarantor’s
breach of its guaranty obligation on an anticipatory basis, and Lessee’s
failure, within 60 days following written notice of any such event, to provide
written alternative assurance or security, which, when coupled with the then
existing resources of Lessee, equals or exceeds the combined financial resources
of Lessee and the Guarantors that existed at the time of execution of this
Lease.
13.2 Remedies. If Lessee fails to perform any of its affirmative duties or
obligations, within 10 days after written notice (or in case of an emergency,
without notice), Lessor may, at its option, perform such duty or obligation on
Lessee’s behalf, including but not limited to the obtaining of reasonably
required bonds, insurance policies, or governmental licenses, permits or
approvals. Lessee shall pay to Lessor an amount equal to 115% of the costs and
expenses incurred by Lessor in such performance upon receipt of an invoice
therefor. In the event of a Breach, Lessor may, with or without further notice
or demand, and without limiting Lessor in the exercise of any right or remedy
which Lessor may have by reason of such Breach:
(a) Terminate Lessee’s right to possession of the Premises by any lawful means,
in which case this Lease shall terminate and Lessee shall immediately surrender
possession to Lessor. In such event Lessor shall be entitled to recover from
Lessee: (i) the unpaid Rent which had been earned at the time of termination;
(ii) the worth at the time of award of the amount by which the unpaid rent which
would have been earned after termination until the time of award exceeds the
amount of such rental loss that the Lessee proves could have been reasonably
avoided; (iii) the worth at the time of award of the amount by which the unpaid
rent for the balance of the term after the time of award exceeds the amount of
such rental loss that the Lessee proves could be reasonably avoided; and
(iv) any other amount necessary to compensate Lessor for all the detriment
proximately caused by the Lessee’s failure to perform its obligations under this
Lease or which in the ordinary course of things would be likely to result
therefrom, including but not limited to the cost of recovering possession of the
Premises, expenses of relating, including necessary renovation and alteration of
the Premises, reasonable attorneys’ fees, and that portion of any leasing
commission paid by Lessor in connection with this Lease applicable to the
unexpired term of this Lease. The worth at the time of award of the amount
referred to in provision (iii) of the immediately preceding sentence shall be
computed by discounting such amount at the discount rate of the Federal Reserve
Bank of the District within which the Premises are located at the time of award
plus one percent. Efforts by Lessor to mitigate damages caused by Lessee’s
Breach of this Lease shall not waive Lessor’s right to recover damages under
Paragraph 12. If termination of this Lease is obtained through the provisional
remedy of unlawful detainer, Lessor shall have the right to recover in such
proceeding any unpaid Rent and damages as are recoverable therein, or Lessor may
reserve the right to recover all or any part thereof in a separate suit. If a
notice and grace period required under Paragraph 13.1 was not previously given,
a notice to pay rent or quit, or to perform or quit given to Lessee under the
unlawful detainer statute shall also constitute the notice required by
Paragraph 13.1. In such case, the applicable grace period required by
Paragraph 13.1 and the unlawful detainer statute shall run concurrently, and the
failure of Lessee to cure the Default within the greater of (he 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.

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(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 relent, and/or the
appointment of a receiver to protect the Lessor’s interests, shall not
constitute a termination of the Lessee’s right to possession.
(c) Pursue any other remedy now or hereafter available under the laws or
judicial decisions of the state wherein the Premises are located. The expiration
or termination of this Lease and/or the termination of Lessee’s right to
possession shall not relieve Lessee from liability under any indemnity
provisions of this Lease as to matters occurring or accruing during the term
hereof or by reason of Lessee’s occupancy of the Premises.
13.3 Inducement Recapture. Any agreement for free or abated rent or other
charges, or for the giving or paying by Lessor to or for Lessee of any cash or
other bonus, inducement or consideration for Lessee’s entering into this Lease,
all of which concessions are hereinafter referred to as “Inducement Provisions”,
shall be deemed conditioned upon Lessee’s full and faithful performance of all
of the terms, covenants and conditions of this Lease. Upon Breach of this Lease
by Lessee, any such Inducement Provision shall automatically be deemed deleted
from this Lease and of no further force or effect, and any rent, other charge,
bonus, inducement or consideration theretofore abated, given or paid by Lessor
under such an Inducement Provision shall be immediately due and payable by
Lessee to Lessor, notwithstanding any subsequent cure of said Breach by Lessee.
The acceptance by Lessor of rent or the cure of the Breach which initiated the
operation of this paragraph shall not be deemed a waiver by Lessor of the
provisions of this paragraph unless specifically so stated in writing by Lessor
at the time of such acceptance.
13.4 Late Charges. Lessee hereby acknowledges that late payment by Lessee of
Rent will cause Lessor to incur costs not contemplated by this Lease, the exact
amount of which will be extremely difficult to ascertain. Such costs include,
but are not limited to, processing and accounting charges, and late charges
which may be imposed upon Lessor by any Lender. Accordingly, if any Rent shall
not be received by Lessor within 5 days after such amount shall be due, then,
without any requirement for notice to Lessee, Lessee shall immediately pay to
Lessor a one-time late charge equal to 10% of each such overdue amount or $100,
whichever is greater. The parties hereby agree that such late charge represents
a fair and reasonable estimate of the costs Lessor will incur by reason of such
late payment. Acceptance of such late charge by Lessor shall in no event
constitute a waiver of Lessee’s Default or Breach with respect to such overdue
amount, nor prevent the exercise of any of the other rights and remedies granted
hereunder. In the event that a late charge is payable hereunder, whether or not
collected, for 3 consecutive installments of Base Rent, then notwithstanding any
provision of this Lease to the contrary, Base Rent shall, at Lessor’s option,
become due and payable quarterly in advance.
13.5 Interest. Any monetary payment due Lessor hereunder, other than late
charges, not received by Lessor, when due as to scheduled payments (such as Base
Rent) or within 30 days following the date on which it was due for non-scheduled
payment, shall bear interest from the date when due, as to scheduled payments,
or the 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. Lessor shall not be deemed in breach of this Lease unless
Lessor fails within a reasonable time to perform an obligation required to be
performed by Lessor. For purposes of this Paragraph, a reasonable time shall in
no event be less than 30 days after receipt by Lessor, and any Lender whose name
and address shall have been furnished Lessee in writing for such purpose, of
written notice specifying wherein such obligation of Lessor has not been
performed; provided, however, that if the nature of Lessor’s obligation is such
that more than 30 days are reasonably required for its performance, then Lessor
shall not be in breach if performance is commenced within such 30 day period and
thereafter diligently pursued to completion.
(b) Performance by Lessee on Behalf of Lessor. In the event that neither Lessor
nor Lender cures said breach within 30 days after receipt of said notice, or if
having commenced said cure they do not diligently pursue it to completion, then
Lessee may elect to cure said breach at Lessee’s expense and offset from Rent
the actual and reasonable cost to perform such cure, provided however, that such
offset shall not exceed an amount equal to the greater of one month’s Base Rent
or the Security Deposit, reserving Lessee’s right to reimbursement from Lessor
for any such expense in excess of such offset. Lessee shall document the cost of
said cure and supply said documentation to Lessor.
14. Condemnation. If the Premises or any portion thereof are taken under the
power of eminent domain or sold under the threat of the exercise of said power
(collectively “Condemnation”), this Lease shall terminate as to the part taken
as of the date the condemning authority takes title or possession, whichever
first occurs. If more than 10% of the floor area of the Unit, or more than 25%
of Lessee’s Reserved Parking Spaces, is taken by Condemnation, Lessee may, at
Lessee’s option, to be exercised in writing within 10 days after Lessor shall
have given Lessee written notice of such taking (or in the absence of such
notice, within 10 days after the condemning authority shall have taken
possession) terminate this Lease as of the date the condemning authority takes
such possession. If Lessee does not terminate this Lease in accordance with the
foregoing, this Lease shall remain in full force and effect as to the portion of
the Premises remaining, except that the Base Rent shall be reduced in proportion
to the reduction in utility of the Premises caused by such Condemnation.
Condemnation awards and/or payments shall be the property of Lessor, whether
such award shall be made as compensation for diminution in value of the
leasehold, the value of the part taken, or for severance damages; provided,
however, that Lessee shall be entitled to any compensation for Lessee’s
relocation expenses, loss of business goodwill and/or Trade Fixtures, without
regard to whether or not this Lease is terminated pursuant to the provisions of
this Paragraph. All Alterations and Utility Installations made to the Premises
by Lessee, for purposes of Condemnation only, shall be considered the property
of the Lessee and Lessee shall be entitled to any and all compensation which is
payable therefore. In the event that this Lease is not terminated by reason of
the Condemnation, Lessor shall repair any damage to the Premises caused by such
Condemnation.
15. Brokerage Fees.
15.1 Additional Commission. In addition to the payments owed pursuant to
Paragraph 1.10 above, and unless Lessor and the Brokers otherwise agree in
writing, Lessor agrees that: (a) if Lessee exercises any Option, (b) if Lessee
acquires from Lessor any rights to the Premises or other premises owned by
Lessor and located within the Project, (c) if Lessee remains in possession of
the Premises, with the consent of Lessor, after the expiration of this Lease, or
(d) if Base Rent is increased, whether by agreement or operation of an
escalation clause herein, then, Lessor shall pay Brokers a fee in accordance
with the schedule of the Brokers in effect at the time of the execution of this
Lease.
15.2 Assumption of Obligations. Any buyer or transferee of Lessor’s interest in
this Lease shall be deemed to have assumed Lessor’s obligation hereunder.
Brokers shall be third party beneficiaries of the provisions of Paragraphs 1.10,
15, 22 and 31. If Lessor fails to pay to Brokers any amounts due as and for
brokerage fees pertaining to this Lease when due, then such amounts shall accrue
Interest. In addition, if Lessor fails to pay any amounts to Lessee’s Broker
when due, Lessee’s Broker may send written notice to Lessor and Lessee of such
failure and if Lessor fails to pay such amount within 10 days after said notice,
Lessee shall pay said monies to its Broker and offset such amounts against Rent.
In addition, Lessee’s Broker shall be deemed to be a third party beneficiary of
any commission agreement entered into by and/or between Lessor and Lessor’s
Broker for the limited purpose of collecting any brokerage fee owed.

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15.3 Representations and Indemnities of Broker Relationships. Lessee and Lessor
each represent and warrant to the other that it has had no dealings with any
person, firm, broker or finder (other than the Brokers, if any) in connection
with this Lease, and that no one other than said named Brokers is entitled to
any commission or finder’s fee in connection herewith. Lessee and Lessor do each
hereby agree to indemnify, protect, defend and hold the other harmless from and
against liability for compensation or charges which may be claimed by any such
unnamed broker, finder or other similar party by reason of any dealings or
actions of the indemnifying Party, including any costs, expenses, attorneys’
fees reasonably incurred with respect thereto.
16. Estoppel Certificates.
(a) Each Party (as “Responding Party”) shall within 10 days after written notice
from the other Party (the “Requesting Party”) execute, acknowledge and deliver
to the Requesting Party a statement in writing in form similar to the then most
current “Estoppel Certificate” form published by the AIR Commercial Real Estate
Association, plus such additional information, 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 stating that: (i) the Lease is in full force and effect
without modification except as may be represented by the Requesting Party, (ii)
there are no uncured defaults in the Requesting Party’s performance, and
(iii) if Lessor is the Requesting Party, not more than one month’s rent has been
paid in advance. Prospective purchasers and encumbrancers may rely upon the
Requesting Party’s Estoppel Certificate, and the Responding Party shall be
estopped from denying the truth of the facts contained in said Certificate.
(c) If Lessor desires to finance, refinance, or sell the Premises, or any part
thereof, Lessee and all Guarantors shall deliver to any potential lender or
purchaser designated by Lessor such financial statements as may be reasonably
required by such lender or purchaser, including but not limited to Lessee’s
financial statements for the past 3 years. All such financial statements shall
be received by Lessor and such lender or purchaser in confidence and shall be
used only for the purposes herein set forth.
17. Definition of Lessor. The term “Lessor” as used herein shall mean the owner
or owners at the time in question of the fee title to the Premises, or, if this
is a sublease, of the Lessee’s interest in the prior lease. In the event of a
transfer of Lessor’s title or interest in the Premises or this Lease, Lessor
shall deliver to the transferee or assignee (in cash or by credit) any unused
Security Deposit held by Lessor. 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 herein above
defined.
18. Severability. The invalidity of any provision of this Lease, as determined
by a court of competent jurisdiction, shall in no way affect the validity of any
other provision hereof.
19. Days. Unless otherwise specifically indicated to the contrary, the word
“days” as used in this Lease shall mean and refer to calendar days.
20. Limitation on Liability. The obligations of Lessor under this Lease shall
not constitute personal obligations of Lessor, or its partners, members,
directors, officers or shareholders, and Lessee shall look to the Premises, and
to no other assets of Lessor, for the satisfaction of any liability of Lessor
with respect to this Lease, and shall not seek recourse against Lessor’s
partners, members, directors, officers or shareholders, or any of their personal
assets for such satisfaction.
21. Time of Essence. Time is of the essence with respect to the performance of
all obligations to be performed or observed by the Parties under this Lease.
22. No Prior or Other Agreements; Broker Disclaimer. This Lease contains all
agreements between the Parties with respect to any matter mentioned herein, and
no other prior or contemporaneous agreement or understanding shall be effective.
Lessor and Lessee each represents and warrants to the Brokers that it has made,
and is relying solely upon, its own investigation as to the nature, quality,
character and financial responsibility of the other Party to this Lease and as
to the use, nature, quality and character of the Premises. Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party. The liability (including court costs and attorneys’
fees), of any Broker with respect to negotiation, execution, delivery or
performance by either Lessor or Lessee under this Lease or any amendment or
modification hereto shall be limited to an amount up to the fee received by such
Broker pursuant to this Lease; provided, however, that the foregoing limitation
on each Broker’s liability shall not be applicable to any gross negligence or
willful misconduct of such Broker.
23. Notices.
23.1 Notice Requirements. All notices required or permitted by this Lease or
applicable law shall be in writing and may be delivered in person (by hand or by
courier) or may be sent by regular, certified or registered mail or U.S. Postal
Service Express Mail, with postage prepaid, or by facsimile transmission, and
shall be deemed sufficiently given if served in a manner specified in this
Paragraph 23. The addresses noted adjacent to a Party’s signature on this Lease
shall be that Party’s address for delivery or mailing of notices. Either Party
may by written notice to the other specify a different address for notice,
except that upon Lessee’s taking possession of the Premises, the Premises shall
constitute Lessee’s address for notice. A copy of all notices to Lessor shall be
concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate in writing.
23.2 Date of Notice. Any notice sent by registered or certified mail, return
receipt requested, shall be deemed given on the date of delivery shown on the
receipt card, or if no delivery date is shown, the postmark thereon. If sent by
regular mail the notice shall be deemed given 72 hours after the same is
addressed as required herein and mailed with postage prepaid. Notices delivered
by United States Express Mail or overnight courier that guarantee next day
delivery shall be deemed given 24 hours after delivery of the same to the Postal
Service or courier. Notices transmitted by facsimile transmission or similar
means shall be deemed delivered upon telephone confirmation of receipt
(confirmation report from fax machine is sufficient), provided a copy is also
delivered via delivery or mail. If notice is received on a Saturday, Sunday or
legal holiday, it shall be deemed received on the next business day.
24. Waivers. 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 monies 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.
(a) When entering into a discussion with a real estate agent regarding a real
estate transaction, a Lessor or Lessee should from the outset understand what
type of agency relationship or representation it has with the agent or agents in
the transaction. Lessor and Lessee acknowledge being advised by the Brokers in
this transaction, as follows:
(i)  Lessor’s Agent. A Lessor’s agent under a listing agreement with the Lessor
acts as the agent for the Lessor only. A Lessor’s agent or subagent has the
following affirmative obligations: To the Lessor: A fiduciary duty of utmost
care, integrity, honesty, and loyalty in dealings with the Lessor. To the Lessee
and the Lessor: a, Diligent exercise of reasonable skills and care in
performance of the agent’s duties, b. A duty of honest and fair dealing and good
faith, c. A duty to disclose all facts known to the agent materially affecting
the value or desirability of the property that are not known to, or within the
diligent attention and observation of, the Parties. An agent is not obligated to
reveal to either Party any confidential information obtained from the other
Party which does not involve the affirmative duties set forth above.

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(ii) Lessee’s Agent. An agent can agree to act as agent for the Lessee only. In
these situations, the agent is not the Lessor’s agent, even if by agreement the
agent may receive compensation for services rendered, either in full or in part
from the Lessor. An agent acting only for a Lessee has the following affirmative
obligations. To the Lessee: A fiduciary duty of utmost care, integrity, honesty,
and loyalty in dealings with the Lessee. To the Lessee and the Lessor: a.
Diligent exercise of reasonable skills and care in performance of the agent’s
duties. b. A duty of honest and fair dealing and good faith, c. A duty to
disclose all facts known to the agent materially affecting the value or
desirability of the property that are not known to, or within the diligent
attention and observation of, the Parties. An agent is not obligated to reveal
to either Party any confidential information obtained from the other Party which
does not involve the affirmative duties set forth above.
(iii) Agent Representing Both Lessor and Lessee. A real estate agent, either
acting directly or through one or more associate licenses, can legally be the
agent of both the Lessor and the Lessee in a transaction, but only with the
knowledge and consent of both the Lessor and the Lessee. In a dual agency
situation, the agent has the following affirmative obligations to both the
Lessor and the Lessee: a. A fiduciary duty of utmost care, integrity, honesty
and loyalty in the dealings with either Lessor or the Lessee, b. Other duties to
the Lessor and the Lessee as stated above in subparagraphs (i) or (ii). In
representing both Lessor and Lessee, the agent may not without the express
permission of the respective Party, disclose to the other Party that the Lessor
will accept rent in an amount less than that indicated in the listing or that
the Lessee is willing to pay a higher rent than that offered. The above duties
of the agent in a real estate transaction do not relieve a Lessor or Lessee from
the responsibility to protect their own interests. Lessor and Lessee should
carefully read all agreements to assure that they adequately express their
understanding of the transaction. A real estate agent is a person qualified to
advise about real estate. If legal or tax advice is desired, consult a competent
professional.
(b) Brokers have no responsibility with respect to any default or breach hereof
by either Party. The Parties agree that no lawsuit or other legal proceeding
involving any breach of duty, error or omission relating to this Lease may be
brought against Broker more than one year after the Start Date and that the
liability {including court costs and attorneys’ fees), of any Broker with
respect to any such lawsuit and/or legal proceeding shall not exceed the fee
received by such Broker pursuant to this Lease; provided, however, that the
foregoing limitation on each Broker’s liability shall not be applicable to any
gross negligence or willful misconduct of such Broker.
(c) Buyer and Seller agree to identify to Brokers as “Confidential” any
communication or information given Brokers that is considered by such Party to
be confidential.
26. No Right To Holdover. Lessee has no right to retain possession of the
Premises or any part thereof beyond the expiration or termination of this Lease.
In the event that Lessee holds over, then the Base Rent shall be increased to
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.
27. Cumulative Remedies. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other remedies at
law or in equity.
28. Covenants and Conditions; Construction of Agreement. All provisions of this
Lease to be observed or performed by Lessee are both covenants and conditions.
In construing this Lease, all headings and titles are for the convenience of the
Parties only and shall not be considered a part of this Lease. Whenever required
by the context, the singular shall include the plural and vice versa. This Lease
shall not be construed as if prepared by one of the Parties, but rather
according to its fair meaning as a whole, as if both Parties had prepared it.
29. Binding Effect; Choice of Law. This Lease shall be binding upon the parties,
their personal representatives, successors and assigns and be governed by the
laws of the State in which the Premises are located. Any litigation between the
Parties hereto concerning this Lease shall be initiated in the county in which
the Premises are located.
30. Subordination; Attornment; Non-Disturbance.
30.1 Subordination. This Lease and any Option granted hereby shall be subject
and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, “Security Device”), now or
hereafter placed upon the Premises, to any and all advances made on the security
thereof, and to all renewals, modifications, and extensions thereof. Lessee
agrees that the holders of any such Security Devices (in this Lease together
referred to as “Lender”) shall have no liability or obligation to perform any of
the obligations of Lessor under this Lease. Any Lender may elect to have this
Lease and/or any Option granted hereby superior to the lien of its Security
Device by giving written notice thereof to Lessee, whereupon this Lease and such
Options shall be deemed prior to such Security Device, notwithstanding the
relative dates of the documentation or recordation thereof.
30.2 Attornment. In the event that Lessor transfers title to the Premises, or
the Premises are acquired by another upon the foreclosure or termination of a
Security Devise to which this Lease is subordinated (i) Lessee shall, subject to
the non-disturbance provisions of Paragraph 30.3, attorn to such new owner, and
upon request, enter into a new lease, containing all of the terms and provisions
of this Lease, with such new owner for the remainder of the term hereof, or, at
the election of the new owner, this Lease will automatically become a new lease
between Lessee and such new owner, and (ii) Lessor shall thereafter be relieved
of any further obligations hereunder and such new owner shall assume all of
Lessor’s obligations, except that such new owner shall not: (a) be liable for
any act or omission of any prior lessor or with respect to events occurring
prior to 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 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 or Broker brings an action or proceeding
involving the Premises whether founded in tort, contract or equity, or to
declare rights hereunder, the Prevailing Party (as hereafter defined) in any
such proceeding, action, or appeal thereon, shall be entitled to reasonable
attorneys’ fees. Such fees may be awarded in the same suit or recovered in a
separate suit, whether or not such action or proceeding is pursued to decision
or judgment. The term, “Prevailing Party” shall include, without limitation, a
Party or Broker who substantially obtains or defeats the relief sought, as the
case may be, whether by compromise, settlement, judgment, or the abandonment by
the other Party or Broker of its claim or defense. The attorneys’ fees award
shall not be computed in accordance with any court fee schedule, but shall be
such as to fully reimburse all attorneys’ fees reasonably incurred. In addition,
Lessor shall be entitled to attorneys’ fees, costs and expenses incurred in the
preparation and service of notices of Default and consultations in connection
therewith, whether or not a legal action is subsequently commenced in connection
with such Default or resulting Breach ($200 is a reasonable minimum per
occurrence for such services and consultation).

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32. Lessor’s Access; Showing Premises; Repairs. Showing Premises; Repairs.
Lessor and Lessor’s agents shall have the right to enter the Premises at any
time, in the case of an emergency, and otherwise at reasonable times after
reasonable prior notice for the purpose of showing the same to prospective
purchasers, lenders, or tenants, and making such alterations, repairs,
improvements or additions to the Premises as Lessor may deem necessary or
desirable and the erecting, using and maintaining of utilities, services, pipes
and conduits through the Premises and/or other premises as long as there is no
material adverse effect on Lessee’s use of the Premises. All such activities
shall be without abatement of rent or liability to Lessee.
33. Auctions. Lessee shall not conduct, nor permit to be conducted, any auction
upon the Premises without Lessor’s prior written consent. Lessor shall not be
obligated to exercise any standard of reasonableness in determining whether to
permit an auction.
34. Signs. Lessor may place on the Premises ordinary “For Sale” signs at any
time and ordinary “For Lease” signs during the last 6 months of the term hereof.
Except for ordinary “For Sublease” signs which may be placed only on the
Premises, Lessee shall not place any sign upon the Project without Lessor’s
prior written consent. All signs must comply with all Applicable Requirements.
35. Termination; Merger. Unless specifically stated otherwise in writing by
Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, that Lessor may elect to continue any one or all
existing subtenancies. Lessor’s failure within 10 days following any such event
to elect to the contrary by written notice to the holder of any such lesser
interest, shall constitute Lessor’s election to have such event constitute the
termination of such interest.
36. Consents. Except as otherwise provided herein, wherever in this Lease the
consent of a Party is required to an act by or for the other Party, such consent
shall not be unreasonably withheld or delayed. Lessor’s actual reasonable costs
and expenses (including but not limited to architects’, attorneys’, engineers’
and other consultants’ fees) incurred in the consideration of, or response to, a
request by Lessee for any Lessor consent, including but not limited to consents
to an assignment, a subletting or the presence or use of a Hazardous Substance,
shall be paid by Lessee upon receipt of an invoice and supporting documentation
therefor. Lessor’s consent to any act, assignment or subletting shall not
constitute an acknowledgment that no Default or Breach by Lessee of this Lease
exists, nor shall such consent be deemed a waiver of any then existing Default
or Breach, except as may be otherwise specifically stated in writing by Lessor
at the time of such consent. The failure to specify herein any particular
condition to Lessor’s consent shall not preclude the imposition by Lessor at the
time of consent of such further or other conditions as are then reasonable with
reference to the particular matter for which consent is being given. In the
event that either Party disagrees with any determination made by the other
hereunder and reasonably requests the reasons for such determination, the
determining party shall furnish its reasons in writing and in reasonable detail
within 10 business days following such request.
37. Guarantor.
37.1 Execution. The Guarantors, if any, shall each execute a guaranty in the
form most recently published by the AIR Commercial Real Estate Association.
37.2 Default. It shall constitute a Default of the Lessee if any Guarantor fails
or refuses, upon request to provide: (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 financial statements, (c) an Estoppel Certificate, or (d)
written confirmation that the guaranty is still in effect.
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: (a) the right to extend the term of or
renew this Lease or to extend or renew any lease that Lessee has on other
property of Lessor; (b) the right of first refusal or first offer to lease
either the Premises or other property of Lessor; (c) the right to purchase or
the right of first refusal to purchase the Premises or other property of Lessor.
39.2 Options Personal To Original Lessee. Any Option granted to Lessee in this
Lease is personal to the original Lessee, and cannot be assigned or exercised by
anyone other than said original Lessee and only while the original Lessee is in
full possession of the Premises and, if requested by Lessor, with Lessee
certifying that Lessee has no intention of thereafter assigning or subletting.
39.3 Multiple Options. In the event that Lessee has any multiple Options to
extend or renew this Lease, a later Option cannot be exercised unless the prior
Options have been validly exercised.
39.4 Effect of Default on Options.
(a) Lessee shall have no right to exercise an Option: (i) during the period
commencing with the giving of any notice of Default and continuing until said
Default is cured, (ii) during the period of time any Rent is unpaid (without
regard to whether notice thereof is given Lessee), (iii) during the time Lessee
is in Breach of this Lease, or (iv) in the event that Lessee has been given 3 or
more notices of separate Default, whether or not the Defaults are cured, during
the 12 month period immediately preceding the exercise of the Option.
(b) The period of time within which an Option may be exercised shall not be
extended or enlarged by reason of Lessee’s inability to exercise an Option
because of the provisions of Paragraph 39.4(a).
(c) An Option shall terminate and be of no further force or effect,
notwithstanding Lessee’s due and timely exercise of the Option, if, after such
exercise and prior to the commencement of the extended term or completion of the
purchase, (i) Lessee fails to pay Rent for a period of 30 days after such Rent
becomes due (without any necessity of Lessor to give notice thereof), or (ii) if
Lessee commits a Breach of this Lease.
40. Security Measures. Lessee hereby acknowledges that the Rent payable to
Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.
41. Reservations. Lessor reserves the right: (i) to grant, without the consent
or joinder of Lessee, such easements, rights and dedications that Lessor deems
necessary, (ii) to cause the recordation of parcel maps and restrictions, and
(iii) to create and/or install new utility raceways, so long as such easements,
rights, dedications, maps, restrictions, and utility raceways do not
unreasonably interfere with the use of the Premises by Lessee. Lessee agrees to
sign any documents reasonably requested by Lessor to effectuate such rights.
42. Performance Under Protest. If at any time a dispute shall arise as to any
amount or sum of money to be paid by one Party to the other under the provisions
hereof, the Party against whom the obligation to pay the money is asserted shall
have the right to make payment “under protest” and such payment shall not be
regarded as a voluntary payment and there shall survive the right on the part of
said Party to institute suit for recovery of such sum. If it shall be adjudged
that there was no legal obligation on the part of said Party to pay such sum or
any part thereof, said Party shall be entitled to recover such sum or so much
thereof as it was not legally required to pay. A Party who does not initiate
suit for the recovery of sums paid “under protest” within 6 months shall be
deemed to have waived its right to protest such payment.

      ©1998 — AIR COMMERCIAL REAL ESTATE ASSOCIATION   FORM MTG-4-5/05E

 

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43. 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) If this Lease is executed by more than one person or entity as “Lessee”,
each such person or entity shall be jointly and severally liable hereunder. It
is agreed that any one of the named Lessees shall be empowered to execute any
amendment to this Lease, or other document ancillary thereto and bind all of the
named Lessees, and Lessor may rely on the same as if all of the named Lessees
had executed such document.
(c) This Lease may be executed by the Parties in counterparts, each of which
shall be deemed an original and all of which together shall constitute one and
the same instrument.
44. Conflict. Any conflict between the printed provisions of this Lease and the
typewritten or handwritten provisions shall be controlled by the typewritten or
handwritten provisions.
45. 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.
46. Amendments. This Lease may be modified only in writing, signed by the
Parties in interest at the time of the modification. As long as they do not
materially change Lessee’s obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by a Lender in connection with the obtaining of normal financing or
refinancing of the Premises.
47. 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.
48. Mediation and Arbitration of Disputes. An Addendum requiring the Mediation
and/or the Arbitration of all disputes between the Parties and/or Brokers
arising out of this Lease o is o is not attached to this Lease.
49. Americans with Disabilities Act. Since compliance with the Americans with
Disabilities Act (ADA) is dependent upon Lessee’s specific use of the Premises,
Lessor makes no warranty or representation as to whether or not the Premises
comply with ADA or any similar legislation. In the event that Lessee’s use of
the Premises requires modifications or additions to the Premises in order to be
in ADA compliance, Lessee agrees to make any such necessary modifications and/or
additions at Lessee’s expense.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.
ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AIR COMMERCIAL
REAL ESTATE ASSOCIATION OR BY ANY BROKER AS TO THE LEGAL SUFFICIENCY, LEGAL
EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT
RELATES. THE PARTIES ARE URGED TO:
1. SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.
2. RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF THE
PREMISES. SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE POSSIBLE
PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PREMISES, THE STRUCTURAL
INTEGRITY, THE CONDITION OF THE ROOF AND OPERATING SYSTEMS, COMPLIANCE WITH THE
AMERICANS WITH DISABILITIES ACT AND THE SUITABILITY OF THE PREMISES FOR LESSEE’S
INTENDED USE.
WARNING: IF THE PREMISES ARE LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN
PROVISIONS OF THE LEASE MAY NEED TO BE REVISED TO COMPLY WITH THE LAWS OF THE
STATE IN WHICH THE PREMISES ARE LOCATED.

      ©1998 — AIR COMMERCIAL REAL ESTATE ASSOCIATION   FORM MTG-4-5/05E

 

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

                          Executed at: Costa Mesa, CA   Executed:    
On: 9.26.08
  On:  
 
     
 
             
 
   
 
                        By LESSOR:   By LESSEE:    
 
                        Orange County Department of Education   Irvine Sensors
Corporation,     Facilities Corporation,   a Delaware corporation     a
California Corporation                
 
                       
By:
/s/ Andrea Sullivan   By: /s/ John J. Stuart, Jr.    
 
 
   
 
    Name Printed: Andrea Sullivan   Name Printed: John J. Stuart, Jr.    
Title:
Director, Facilities Planning M&O   Title: Sr. VP & Chief Financial Officer    
 
                       
By:
          By:            
 
 
   
 
    Name Printed:       Name Printed:        
 
 
 
     
 
   
Title:
          Title:            
 
 
 
     
 
             
Address:
          Address:            
 
 
 
     
 
             
 
                                 
 
                                  Telephone: (____)       Telephone: (____)    
   
 
     
 
         
 
    Facsimile: (____)       Facsimile: (____)        
 
     
 
         
 
    Federal ID No.       Federal ID No.        
 
     
 
         
 
   

                          BROKER:   BROKER:          
 
                        CIP Real Estate                          
 
                       
Att:
      Wyatt Prichard   Att:            
Title:
      Ass. Vice Pres. Leasing & Marketing   Title:    
 
   
Address:
      19762 MacArthur Blvd., Suite 300   Address:      
 
            Irvine, CA 92612          
 
    Telephone:   (949) 474-7030   Telephone: (____)  
 
   
 
                 
 
    Facsimile:   (949) 474-2101   Facsimile: (____)        
 
                 
 
    Federal ID No.   33-0692627   Federal ID No.        
 
                 
 
   

NOTICE: These forms are often modified to meet changing requirements of law and
industry needs. Always write or call to make sure you are utilizing the most
current form: AIR Commercial Real Estate Association, 800 W 6th Street,
Suite 800, Los Angeles, CA 90017. Telephone No. (213) 687-8777. Fax No.:
(213) 687-8616.
(c)Copyright 1998 By AIR Commercial Real Estate Association.
All rights reserved.
No part of these works may be reproduced in any form without permission in
writing.

      ©1998 — AIR COMMERCIAL REAL ESTATE ASSOCIATION   FORM MTG-4-5/05E

 

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ADDENDUM TO STANDARD INDUSTRIAL/COMMERCIAL
MULTI-TENANT LEASE — GROSS
Dated for Reference Purposes
August 6, 2008
By and Between
ORANGE COUNTY DEPARTMENT OF EDUCATION FACILITIES CORPORATION,
a California Corporation
(“Lessor”)
and
IRVINE SENSORS CORPORATION,
a Delaware corporation
(“Lessee”)

50.  
Base Rent. The Base Rent defined in Paragraph 1.5 of the lease shall be
increased annually by three and one-half percent (3.5%) cumulatively in
accordance with the following schedule:

                  Months   Base Rate     Monthly Rent  
10/01/08-03/31/09
  $ 1.3146     $ 26,993.88  
04/01/08-09/30/09
  $ 1.4500     $ 29,774.30  
10/01/09-09/30/10
  $ 1.5007     $ 30,816.40  
10/01/10-09/30/11
  $ 1.5533     $ 31,894.97  
10/01/11-09/30/12
  $ 1.6076     $ 33,011.30  
10/01/12-09/30/13
  $ 1.6639     $ 34,166.69  

51.  
CAM Charges. In lieu of Lessee paying Lessee’s Share of Common Area Operating
Expenses as defined in Section 1.6 of the Lease, Lessee shall pay, as Rent, the
Common Area Maintenance Charge (“CAM Charge”) specified in Section 1.7(b) of the
Lease. The CAM charge will be increased annually by three and one-half percent
(3.5%) cumulatively as follows.

                  Months   CAM Rate     CAM  
10/01/08-03/31/09
  $ 0.0700     $ 1,437.38  
04/01/08-09/30/09
  $ 0.0725     $ 1,487.69  
10/01/09-09/30/10
  $ 0.0750     $ 1,539.76  
10/01/10-09/30/11
  $ 0.0776     $ 1,593.65  
10/01/11-09/30/12
  $ 0.0803     $ 1,649.43  
10/01/12-09/30/13
  $ 0.0831     $ 1,707.16  

   
References in Paragraph 7 and elsewhere in the Lease to Paragraph 4.2 (“Common
Area Operating Expenses”) shall be deemed to reference this Addendum
Paragraph 51 (“CAM Charges”).

52.  
Security Deposit. Lessor currently holds Security Deposit of $32,193.00 pursuant
to Section 5 of Lessee’s existing lease. Lessor shall return Security Deposit to
Lessee within thirty (30) days from the full execution and delivery of this
Lease.

 

 

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53.  
Hazardous Substances/Disclosure Certificate. “Hazardous Substances” as defined
in Section 6.2 of this Lease shall also have the same meaning as any toxic,
hazardous substances, material, waste, pollutant, contaminant or infectious or
radioactive material, including but not limited to those substances, materials
or wastes regulated now or in the future under any of the following statutes or
regulations promulgated thereto: (1) any “hazardous substance” within the
meaning of the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended (“CERCLA”) 42 U.S.C. § 9601, et seq. or the California
Hazardous Substance Account Act, Cal. Health and Safety Code § 25300 et seq. or
the Porter-Cologne Water Quality Act, Cal. Water code § 13000 et seq. or the
Hazardous Materials Transportation Act, 49 U.S.C. § 1801, et seq.; (2) any
“hazardous waste” within the meaning of the Resource Conservation and Recovery
Act, 42 U.S.C. § 6901 et seq.; or (3) any other substance, chemical, waste,
toxicant, pollutant or contaminate regulated by any federal, state or local law,
statute, rule, regulation or ordinance for the protection of health or the
environment “Environmental Laws”, including without limitation, any petroleum
products or fractions thereof. Lessee acknowledges its obligations under
Paragraph 6.2 of the Lease and affirms that Lessee’s Reportable Use of Hazardous
Substances under the Lease has and will at all times be done with timely
compliance (at Lessee’s expense) with all Applicable Requirements as more fully
contemplated by Paragraph 6.2 of the Lease. In accordance with and as
contemplated by Paragraph 6.2(b) of this Lease and not by way of limitation,
Lessee shall promptly notify Lessor in writing and provide Lessor copies of any
comments, notices or reports concerning Lessee’s use of Hazardous Substances
received by Lessee from or by any governmental agency. Prior to executing this
Lease, Lessee has completed, executed and delivered to Lessor Lessee’s initial
Hazardous Substances Disclosure Certificate (“Initial HazMat Certificate”) a
copy of which is attached hereto as Exhibit F and incorporated herein by this
reference. Lessee covenants, represents and warrants to Lessor that the
information on the Initial HazMat Certificate is true and correct and accurately
describes the use(s) of Hazardous Substances which are and/or will be made
and/or used on the Premises by Lessee. Lessee shall commencing with the date
which is one year from the Commencement Date and continuing every year
thereafter or at any other time upon reasonable request of Lessor, complete,
execute, and deliver to Lessor, a Hazardous Substances Disclosure Certificate
(the “HazMat Certificate”) substantially in the form of Exhibit F describing
Lessee’s then present use of Hazardous Substances on the Premises, and any other
reasonably necessary documents as required by Lessor.
  54.  
Repairs and Maintenance. Lessor shall undertake all of the repair and
maintenance Items outlined in Exhibit D of this proposal; some of which have
already been completed.
  55.  
Broker. Lessee acknowledges that it has not dealt with a broker in negotiation
of this Lease and Lessor is not responsible for the payment of any commissions
or brokerage fees. Lessee does hereby agree to indemnify, protect, defend and
hold Lessor harmless from and against liability for compensation or charges
which may be claimed by any broker, finder or other similar party by reason of
any dealings or actions of Lessee, including any costs, expenses, attorneys’
fees reasonably incurred with respect thereto.
  56.  
Exterior Storage. Lessee shall neither store nor permit to be stored any
vehicles, boats, RV’s, goods, machinery, merchandise, equipment or any other
items whatsoever on the Premises other than wholly within a closed building
without the prior written approval of the Lessor. Any item left unattended for
96 hours is subject to removal at owner’s expense.
  57.  
Dumping/Trash. Lessee acknowledges that there shall be no dumping of carpet,
cement, concrete, rock, wood products, or any other such heavy materials into
the trash bins or anywhere else on the Premises. Lessee shall not dispose of
rubbish from off-site operations in the trash areas or elsewhere in the Project,
nor shall Lessee permit or allow Lessee’s employees, suppliers, shippers,
customers, contractors and invitees to do so.
  58.  
Parking. Any vehicle left unattended for 96 hours is subject to tow at vehicle
owner’s expense. In addition, no Lessee shall use, or cause to be used, more
parking that the parking ratio established by the City of Costa Mesa for their
given space.
  59.  
Window Coverings. All window coverings must be approved in writing by Lessor.
Failure to obtain written approval for window coverings shall be considered a
violation of this Lease.
  60.  
Lessee Information. is attached as Exhibit “A”.

 

 

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61.  
Rekeying. In the event that Lessee wants to rekey the access doors to the
Premises, Lessee must retain the approved contractor for the Project (see below)
and any rekeying must conform to the Project’s “Master Key System”. Any rekeying
will be Lessee’s sole cost and responsibility.
     
Approved Contractor:

Airport Lock & Safe Co.
4251 Martingale Way, Suite D
Newport Beach, CA 92660
Telephone: (949) 833-2034
  62.  
Pets. No pets are allowed on the Premises or at the Project without Lessor’s
prior written consent except for seeing eye dogs/service pets per ADA.
  63.  
Miscellaneous. Lessee shall not cook or prepare meals on the Premises. Lessee
shall not use Premises for a “residence” for itself or any employee of Lessee.
  64.  
Confidentiality. The terms of this Lease have been negotiated between Lessor and
Lessee and are not for publication to other parties. Lessee agrees to keep the
terms of this Lease confidential.
  65.  
General Rules and Regulations. Lessor may from time to time establish and/or
modify reasonable rules and regulations in addition to those contained herein
governing the use and occupancy of the Premises, the Building and the Project.

AGREED & ACCEPTED:

                  LESSOR:   LESSEE:       ORANGE COUNTY DEPARTMENT OF   IRVINE
SENSORS CORPORATION,     EDUCATION FACILITIES CORPORATION,   a Delaware
corporation     a California corporation            
 
               
By:
  /s/ Andrea Sullivan   By:   /s/ John J. Stuart, Jr.    
 
 
 
Andrea Sullivan      
 
   
Title:
  Director, Facilities Planning and M&O   Title:   Sr. VP & Chief Financial
Officer      
Date:
  09/26/08   Date:   9/22/08    

                     
 
   By:                                
 
   Title:                                
 
   Date:     /    /                             

If Lessee is a CORPORATION, the authorized officers must sign on behalf of the
corporation and indicate the capacity in which they are signing. The Lease must
be executed by the president or vice-president and the secretary or assistant
secretary, unless the bylaws or a resolution of the board of directors shall
otherwise provide, in which event, the bylaws or a certified copy of the
resolution, as the case may be, must be attached to this Lease.

 

 

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EXHIBIT A
LESSEE INFORMATION

1.  
Your new mailing address will be:
   
3001 Red Hill Avenue, Building 3, Suite 3-102
Costa Mesa, CA 92626
  2.  
If you are new in Costa Mesa, you must go to the City Hall to apply for a
business license. The address is:
     
City of Costa Mesa
Business License Division
77 Fair Drive
Costa Mesa, CA 92626
(714) 754-5234
  3.  
Utilities providing serve to The Esplanade:
     
SBC
(800) 310-2355
     
Southern California Edison
P.O. Box 600
Rosemead, CA 91771-001
(800) 950-2356
  4.  
The nearest Post Office is:
   
1590 Adams Avenue
Costa Mesa, CA 92626
(800) 275-8777
  5.  
Please make checks payable to:
     
OCDE/ THE ESPLANADE
  6.  
Mail check to:
     
CIP Real Estate Property Services
19762 MacArthur Blvd., Suite 300
Irvine, CA 92612
Attention: Accounting
  7.  
As per the lease, the Lessor is required to be listed as an additional insured
on the “Certificate of Insurance”. Please list as follows:
     
Orange County Department of Education Facilities Corporation,
Orange County Board of Education,
Orange County Superintendent of Schools
and CIP Real Estate Property Services
  8.  
Property Management Company: CIP Real Estate Property Services

     
Telephone:
  (949) 474-7030

Facsimile:
  (949) 474-2101

Contact Person:
  Devon Stanke — Property Manager (ext. 314)

 

 

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EXHIBIT B

SPACE PLAN – BUILDING 3 – FIRST FLOOR
(FLOOR PLAN) [c78736c7873602.gif]

 

 

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EXHIBIT B

SPACE PLAN – BUILDING 3 – SECOND FLOOR
(FLOOR PLAN) [c78736c7873603.gif]

 

 

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EXHIBIT C

THE ESPLANADE ON REDHILL LLC

SITE PLAN
(SITE PLAN) [c78736c7873604.gif]

 

 

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EXHIBIT D

WORK LETTER
IRVINE SENSORS CORPORATION
Items to be Complete:

  1.  
Paint 210” of hallways
    2.  
Remove 800 sq. ft. of asbestos floor tile
    3.  
Install 800” of new tile and base
    4.  
Install four new toilets, gaskets and angle stops
    5.  
Install coating and deck of 2nd floor (25’ x 6’)
    6.  
Install high volume vent fan in Building 4 restrooms
    7.  
Remove carpet in hallway on 2nd floor. Replace with 60’ x 6’ in matching color
    8.  
Install carpet in three stair wells in Building 4
    9.  
Repair, clean and replace springs and bearings on 11 doors

Completed Items:

  10.  
Repair water damage as needed
    11.  
Move furniture as needed
    12.  
Remove 100’ 4” rubber base and drill holes below base line
    13.  
Fog all walls with Anti Microbial
    14.  
Shampoo and steam rinse carpet fibers, approximately 1000’
    15.  
Fog all carpet fibers with Anti Microbial
    16.  
Furnish and install 3 dehumidifiers and 5 blowers and run for 48 hours
    17.  
Remove equipment, furnish and install 100’ 4” rubber base
    18.  
Replace existing 30 gallon electric water heater with American Heater (240
volt), including new smitty pan and earthquake strap.

 

 

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EXHIBIT E
RULES AND REGULATIONS
It is the Lessor’s intention and purpose to operate an outstanding
office/warehouse building. The Lessor will strive at all times to render prompt
and efficient service and to maintain the property in the best possible
condition. In an effort to maintain the property, the Lessor asks your
cooperation in observing the following rules. Any expense incurred by the
management as a result of violation of these rules will be assessed against the
Lessee and shall constitute default by Lessee. Lessee shall promptly notify the
management of any needed repairs to any of the equipment or fixtures.
(A) The Lessee shall comply with all the rules and regulations of the Board of
Fire Underwriters, officers or boards of the city, county or state having
jurisdiction over the Premises, and with all ordinances and regulations of
governmental authorities wherein the leased premises are located, at Lessee’s
sole cost and expense, but only insofar as any of such rules, ordinances and
regulations relate to the Lessee’s use of the Premises.
(B) The exterior of all drapes installed by Lessee shall be lined with white
material. All blinds are to be approved by Lessor. Blinds must be left in the
fully extended position at all times.
(C) No additional locks shall be placed upon any doors of the premises without
prior approval from the Lessor. Lessor shall furnish to Lessee keys (3) to the
Premises, and any additional keys shall be furnished at the cost and expense of
Lessee. Upon the expiration or earlier termination of this Lease, Lessee shall
surrender to Lessor all keys to the Premises. All duplicate key and lockset
repairs/reset requests shall be made to the Lessor, at the sole expense of the
Lessee.
(D) Lessee and their employees are encouraged to park as far away from the
entrances as possible. This will enable customers and clients to enter and
conduct business without undue inconvenience. Certain spaces have been set aside
as Handicapped Parking. These spaces will not be utilized for personal vehicles
of Lessee or employees of Lessee.
(E) Parking — Lessee shall not permit or allow vehicles that belong to or are
controlled by, Lessee’s employees, suppliers, shippers, customers, contractors
or invitees to be parked overnight in the parking spaces. Any vehicle left
unattended for 72 hours is subject to being towed at vehicle owner’s expense.
Delivery and/or trade vehicles should be parked in front driveway and front
parking areas only when loading or unloading for a period of no more than thirty
minutes at a time, unless otherwise approved by Lessor. At all other times,
these vehicles should be parked in the rear of the Building. Any driveway areas
located in front of the Building should not be considered parking spaces by
Lessee. Any residue deposited on any parking or loading area by a vehicle will
be the responsibility of the Lessee, and the Lessee will immediately clean the
area. No vehicle may extend onto the sidewalk surfaces that cross a driveway at
any time, except for loading or unloading purposes. Lessee may not place signs
of any type on the Building and/or parking and loading areas without prior
permission from the Lessor.
In addition, no Lessee shall use, or cause to be used, more parking than the
parking ration established by the City for their given space. Lessee will obtain
written approval from CIP Real Estate Property Services should Lessee have a
truck, can or other type for work vehicle, which requires over night Parking.
(F) No antennas will be installed on the exterior of the Building by the Lessee,
or their agents, without the written approval of the Lessor. If such antennas
are installed, they shall be removed by Lessor at the Lessee’s expense.
(G) The sidewalks, entrances, passages, or Common Areas shall not be obstructed
or used for any other purpose than ingress and egress.
(H) Lessee shall not enter any normally locked space. High voltages and delicate
machinery are present in the spaces. The roof of the Building is considered a
locked space and entrance is not permitted.
(I) Lessor shall have the right to prescribe the weight, position and manner of
support of all safes, freight, furniture and other bulky matter shall be moved
only at such times, by such persons, and in such manner, as shall be determined
by Lessor’s management agent. Lessee shall not place any object upon any floor
of the Building which will cause the floor load of such floor to exceed that
which was designed of such floor or which is allowed by law.
(J) The Buildings exterior grounds and paved areas shall not be utilized for the
storage or assembly of any type of materials or equipment owned by the Lessee.
Lessee shall neither store nor permit to be stored any vehicles, boats, RV’s,
goods, machinery, merchandise, equipment or any other items what soever on the
Premises other than wholly within a closed building without the prior written
approval Lessor. Any item left unattended for 96 hours is subject to removal at
owner’s sole cost and expense.
(K) Prior to Lessee’s movement of fixtures and equipment into or out of the
leased premises, the Lessee shall coordinate the time, date and location of
moving vehicles with the Lessor’s Property Management.
(L) The Property Management Department’s office hours are 8:00 a.m. until 5:00
p.m. Monday through Friday. Please conduct your business with this department
during these hours.
(M) The eating of food or the consumption of alcoholic beverages, in the
hallways or Common Areas, is expressly prohibited.
NOTE: The Lessor reserves the right to make changes to these rules from time to
time.

 

 

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EXHIBIT F
LESSEE’S HAZARDOUS MATERIALS DISCLOSURE CERTIFICATE
Your cooperation in this matter is appreciated. Initially, the information
provided by you in this Hazardous Materials Disclosure Certificate is necessary
for the Lessor (identified below) to evaluate and finalize a lease agreement
with you as Lessee. Upon execution of Lease signed by you and the Lessor
(“Lease”), based on an annual basis in accordance with the provisions of
Paragraph 52 of the signed Lease, you are to provide an update to the
information initially provided by you in this certificate. The information
contained in initial Hazardous Materials Disclosure Certificate and each annual
certificate provided by you thereafter will be maintained in confidentiality by
Lessee subject to release and disclosure as required by (i) any lenders and
owners and their respective environmental consultants, (ii) any prospective
purchaser(s) of all or any portion of the property on which the Premises are
located, (iii) Lessor to defend itself or its lenders, partners or
representatives against any claim or demand, and (iv) any laws, rules,
regulations, orders, decrees, or ordinances, including, without limitation,
court orders or subpoenas. Any and all capitalized terms used herein, which are
not otherwise defined herein, shall have the same meaning ascribed to such term
in the signed Lease. Any questions regarding this certificate should be directed
to, and when completed, the certificate should be delivered to:
Notice to Lessor:
CIP Real Estate Property Services
19762 MacArthur Blvd., Suite 300
Irvine, CA 92612
Attn: Accounting
Phone: (949) 474-7030
Fax: (949) 474-2101
Name of Lessee: Irvine Sensors Corporation, a Delaware corporation
Mailing Address: 3001 Red Hill Ave., Building 3, Suite 3-102, Costa Mesa, CA
92626
Contact Person, Title and Telephone Number(s): ERIC BOYD
Contact Person for Hazardous Waste Materials Management and Manifests and
Telephone Number(s): Jim Yamaguchi
Address of Premises: 3001 Red Hill Ave., Building 3, Suite 3-102, Costa Mesa, CA
92626
Length of initial Term: 60 months commencing on Oct. 1, 2008 and ending Sept.
30, 2013
GENERAL INFORMATION:
Describe below, the initial proposed operations to take place in, on, or about
the Premises, including, without limitation, principal products processed,
manufactured or assembled services and activities to be provided or otherwise
conducted. Existing Lessees should describe any proposed changes to on-going
operations.
Research & Development operations on semiconductors involving the use of silicon
& ceramic chips & wafers, related components & necessary processes.

 

 

--------------------------------------------------------------------------------

 

USES, STORAGE AND DISPOSAL OF HAZARDOUS MATERIALS:
Will any Hazardous Materials be used, generated, stored or disposed of in, on or
about the Premises? Existing Lessees should describe any Hazardous Materials,
which continue to be used, generated, stored or disposed of in, on or about the
Premises.

                 
Wastes
  Yes? þ   No? o  
Chemical Products
  Yes? þ   No? o  
Other
  Yes? o   No? þ  

If Yes is marked, please explain: Small quantities of solvents, [ILLEGIBLE]
If yes is marked in Section above, attach a list of any Hazardous Materials to
be used, generated, stored or disposed of in, on or about the Premises,
including the applicable hazard class and an estimate of the quantities of such
Hazardous Materials at any given time; estimated annual throughput; the proposed
location(s) and method of storage (excluding nominal amounts of ordinary
household cleaners and janitorial supplies which are not regulated by any
Environmental Laws); and the proposed location(s) and method of disposal for
each Hazardous Material, including, the estimated frequency, and the proposed
contractors and subcontractors. Existing Lessees should attach a list setting
forth the information requested above and such list should include actual data
from on-going operations and the identification of any variations in such
information from the prior year’s certificate.
STORAGE TANKS AND SUMPS
Is any above or below ground storage of gasoline, diesel, petroleum, or other
Hazardous Materials in tanks or sumps proposed in, on or about the Premises?
Existing Lessees should describe any such actual or proposed activities.
Yes: þ       No: o
If yes, please explain: [ILLEGIBLE], high pressure gases
WASTE MANAGEMENT
Has your company been issued an EPA Hazardous Waste Generator I.D. Number
(Existing Lessees should describe any additional identification numbers issued
since the previous certificate)?
Yes: þ       No: o
If yes, please explain: [ILLEGIBLE]
Has your company filed a biennial or quarterly reports as a hazardous waste
generator (Existing Lessees should describe any new reports filed)?
Yes: o       No: þ

     
If yes, please explain:
   
 
   
 
     

 

 

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WASTEWATER TREATMENT AND DISCHARGE
Will your company discharge wastewater or other wastes to:

                         
 
  Storm drain?   No       Sewer?   Yes    
 
                            Surface water?   No       No wastewater or other
wastes discharged.                    
 
   

Existing Lessees should indicate any actual discharges. If so, describe the
nature of any proposed or actual discharge(s) below:
Treated Wastewater
Will any such wastewater or waste be treated before discharge?
Yes: þ     No: o
If yes, describe the type of treatment proposed to be conducted. Existing
Lessees should describe the actual treatment conducted.
Neutralisation system, automated. Uses either acid or base to neutralize the
waste water in a holding tank before discharge.
AIR DISCHARGES
Do you plan for any air filtration systems or stacks to be used in your
company’s Operations in, on or about the Premises that will discharge into the
air; and will such air emissions be monitored? Existing Lessees should indicate
whether or not there are any such air filtration systems or stacks in use in, on
or about the Premises which discharge into the air and whether such air
emissions are being monitored.
Yes: o     No: þ
If yes, please explain:
 
 
Do you propose to operate any of the following types of equipment, or any other
equipment requiring an air emissions permit (Existing Lessees should specify any
such equipment being operated in, on or about the Premise)?

              Spray booth (s)   No   Incinerator No   Dip tank (s)   No   Other
(describe) No   Dry oven (s)   No   No Equipment requiring permit þ  

If yes, please explain:
 
 
HAZARDOUS MATERIALS DISCLOSURES
Has your company prepared or will it be required to prepare a Hazardous
Materials management plan (“Management Plan”) pursuant to Fire Department or
other governmental or regulatory agencies’ requirements? Existing Lessees should
indicate whether or not a Management Plan is required and has been prepared.
Yes: þ     No: o

      *  
If yes, attach a copy of the Management Plan (Existing Lessees should attach a
copy of any required updates to the Management Plan).

 

 

--------------------------------------------------------------------------------

 

Are any of the Hazardous Materials, and in particular chemicals, proposed to be
used in your operations in, on or about the Premises regulated under Proposition
65 (Existing Lessees should indicate whether or not there are ay new Hazardous
Materials being so used which are regulated under Proposition 65)?
Yes: o No: þ
If yes, please explain:
 
 
ENFORCEMENT ACTIONS AND COMPLAINTS
With respect to Hazardous Materials or Environmental Laws, has your company ever
been subject to any agency enforcement actions, administrative orders, or
consent decrees or has your company received requests for information, notice or
demand letters, or any other inquiries regarding its operations’? Existing
Lessees should indicate whether or not any such actions, orders or decrees have
been, or are in the process of being, undertaken or if any such requests have
been received.
Yes: o No: þ
If yes, describe the actions, orders or decrees and any continuing compliance
obligations imposed as a result of these actions, orders or decrees and also
describe any requests, notices or demands, and attach a copy of all such
documents. Existing Lessees should describe and attach a copy of any new
actions, orders, decrees, requests, notices or demands not already delivered to
Lessor pursuant to the provisions of Section 29 of the signed Lease Agreement.
If yes, please explain:
 
 
Have there ever been, or are there now pending, any lawsuits against your
company regarding any environmental or health concerns?
Yes: o No: þ
If yes, describe any such lawsuits and attach copies of the complaint(s),
cross-complaint(s), pleadings and all other documents related thereto as
requested by Lessor complaint(s), pleadings and other related documents not
already delivered to Lessor pursuant to the provisions of Section 29 of the
signed Lease Agreement.
Have there been any problems or complaints from adjacent Lessees, owners or
other neighbors at your company’s current facility with regard to environmental
or health and safety concerns? Existing Lessees should indicate whether or not
there have been any such problems or complaints from adjacent Lessees, owners or
other neighbors at, about or near the Premises.
Yes: o No: þ
If yes, please describe. (Existing Lessees should describe any such problems or
Complaints not already disclosed to Lessor under the provisions of the signed
Lease Agreement).
Please explain:
 
 

 

 

--------------------------------------------------------------------------------

 

PERMITS AND LICENSES
Attach copies of all Hazardous Materials permits and licenses including a
Transporter Permit number issued to your company with respect to its proposed
operations in, on or about the Premises, including, without limitation, any
wastewater discharge permits, air emissions permits, and use permits or
approvals. Existing Lessees should attach copies of any new permits and licenses
as well as any renewals of permits or licenses previously issued.
The undersigned hereby acknowledges and agrees that (A) this Hazardous Materials
Disclosure Certificate is being delivered in connection with, and as required
by, Lessor in connection with the evaluation and finalization of a Lease
Agreement and will be attached thereto as an exhibit; (B) that this Hazardous
Materials Disclosure Certificate is being delivered in accordance with, and as
required by, the provisions of Paragraph 52 of the Lease Agreement; and (C) that
Lessee shall have and retain full and complete responsibility and liability with
respect to any of the
Hazardous Materials disclosed in the HazMat Certificate notwithstanding
Lessor’s/Lessee’s receipt and/or approval of such certificate. Lessee further
agrees that none of the following described acts or events shall be construed or
otherwise interpreted as either (a) excusing, diminishing or otherwise limiting
Lessee from the requirement to fully and faithfully perform its obligations
under the Lease with respect to Hazardous Materials, including, without
limitation, Lessee’s indemnification of the Indemnitees and compliance with all
Environmental Laws, or (b) imposing upon Lessor, directly or indirectly, any
duty or liability with respect to any such Hazardous Materials, including,
without limitation, any duty on Lessor to investigate or otherwise verify the
accuracy of the representations and statements made therein or to ensure that
Lessee is in compliance with all Environmental Laws; (i) the delivery of such
certificate to Lessor and/or Lessor’s acceptance of such certificate,
(ii) Lessor’s review and approval of such certificate, (iii) Lessor’s failure to
obtain such certificate from Lessee at any time, or (iv) Lessor’s actual or
constructive knowledge of the types and quantities of Hazardous Materials being
used, stored, generated, disposed of or transported on or about the Premises by
Lessee or Lessee’s Representatives, Notwithstanding the foregoing or anything to
the contrary contained herein, the undersigned acknowledges and agrees that
Lessor and its partners, lenders and representatives may, and will, rely upon
the statements, representations, warranties, and certifications made herein and
the truthfulness thereof in entering into the Lease Agreement and the
continuance thereof throughout the term, and any renewals thereof, of the Lease
Agreement.
I John J. Stuart Jr., CFO acting with full authority to bind the
(proposed) Lessee and on behalf of the (proposed) Lessee, certify, represent and
warrant that the information contained in this certificate is true and correct.
AGREED AND ACCEPTED:
NAME IRVINE SENSORS CORPORATION

          By:   /s/ John J. Stuart Jr.       Its: Sr. VP & Chief Financial
Officer      Date: Sept. 22, 2008       

 

 

--------------------------------------------------------------------------------

 

(COSTA MESA LETTERHEAD) [c78736c7873605.gif]

      IRVINE SENSORS CORP.   Issue Date 10/03/2007 3001 RED HILL AV 3-100    
Costa Mesa CA. 92626   Expiration Date 10/02/2008

Business Address: 3001 RED HILL AV 3-100
Permit Description:
TO OPERATE A PERMANENT RESEARCH AND DEVELOPMENT PRODUCTION LINE IN ACCORDANCE
WITH ARTICLE 80 OF THE CALIFORNIA FIRE CODE, 2001 EDITION.
REFER TO HAZARDOUS MATERIALS DISCLOSURE IN FIRE PREVENTION FOR COMPLETE
INVENTORY LIST AND SITE PLAN.

     
Issued by:
   
Station: 2
   
Shift: B
  This permit must be posted conspicuously on the designated premises or
equipment. It is not transferable. For renewal, contact the Fire Prevention
Bureau at (714) 327-7400.

      Signature:  /s/ [ILLEGIBLE]  Date: 10/11/07

 

 

--------------------------------------------------------------------------------

 

HMIS Data Entry Form
Enter appropriate quantities in storage and in use (open & closed) for each
chemical. If chemicals are not listed, add additional rows as necessary. Use a
seaparate sheet for each location.
Name: Irvine Sensors Corporation
Location:                 

                                              Stored in Fire           Largest  
      Quantity       Rated Cab.?   Quantity Use   Quantity Use   Container
Chemical / Trade Name   Conc.   Stored   Units   Yes(Y) No(N)   Closed   Open  
Size
Janatorial
                           
STAT GARD DISSIPATIVE FLORR FINISH
      2   5GAL   N   1       5GAL
WAXIE BAR-TOP FURNATURE POLISH
      4   13OZ   Y   3       13OZ
3M DESK & OFFICE CLEANER
      7   15OZ   Y   4       15OZ
ZEP STAINLESS STEEL CLEANER
      2   18OZ   Y   1       18OZ
ZEP CARPET SPOT REMOVER CLEANER
      2   240Z   Y   1       24OZ
CLEAR VIEW WINDOW CLEANER
      1   5GAL   N   1       5GAL
MULTI GREEN
      1   5GAL   N   1       5GAL
PREMIER / degreaser
      1   5GAL   N   1       5GAL  
Lab
                           
NO CLEAN FLUX 264-5
      2   1GAL   Y   2       1GAL
MIOCRONOX mx2103DT
      5   1GAL   Y   0       1GAL
Allied Expoxy Mount
  160OZ   2   120OZ   Y           120OZ
Allied Colloidal Salica
      1   32OZ   Y           32OZ
Vericlean Defluxer
      6   10OZ   Y           10OZ
HYDOGEN PEROXIDE
      1   16OZ   Y   1       16OZ
WD-40
      2   11OZ   Y   1       11OZ
ROSIN SOLDER FLUX TYPE RMA
      1   1QT   Y           1QT
NOVEL FLUX REMOVER
      1   12OZ   Y   1       12OZ
SUPER CLEAN DEFLUXER
      1   12OZ   Y           12OX
NOVEL ELECTRONIC DEGREASER
      1   12OZ   Y   1       12OZ
NOVEL CONTACT CLEANER
      1   12OZ   Y   1       12OZ
SUPER CLEAN DEFLUXER
      6   12OZ   Y   1       12OZ
ISO PRO PYL ALCHOHL
      1   6OZ       1       6OZ
ENSO
      1   6OZ   N       1   6OZ
TECH OLSTER
      1   10 OZ   N       1   10 OZ
3M NOVEC FLUX REMOVER
      4   12 OZ   N           10 OZ
ANTI STAT MICRO FREEZE
      4   120Z   N           12 OZ
KESTER 1429 FLUX
      5   1QT   Y            

      Page 1 of 4
9/11/2008   Irvine Sensors Corporation
3001 Red Hill Ave
Costa Mesa, CA 62626

 

--------------------------------------------------------------------------------

 

HMIS Data Entry Form

Enter appropriate quantities in storage and in use (open & closed) for each
chemical. If chemicals are not listed, add additional rows as necessary. Use a
seaparate sheet for each location.

       
Name:
  Irvine Sensors Corporation  
Location: 
     

                                              Stored in Fire           Largest  
      Quantity       Rated Cab.?   Quantity Use   Quantity Use   Container
Chemical / Trade Name   Conc.   Stored   Units   Yes(Y) No(N)   Closed   Open  
Size
POXY
      2 OZ   10   Y   1       2 OZ
SILICON THERMAL JOINT COMPOUND
      4 OZ   1   Y   1       4 OZ
RTU
      8 OZ   1   Y   1       8 OZ
NEXTBL COATING 811-21
      1 LTR/60 ML   1   Y   1       1 LTR
NEXTBL THINNER
      1 LTR   1   Y   1       1 LTR
CONFORMAL COATING STRIPPER
      500 ML   2   Y   1       500 ML
VARNISH
      1 PT   1   Y   1       1 PT
RUBBER CEMENT
      4 OZ   1   Y   1       4 OZ
LIQUID WRENTCH
      4 OZ   1   Y   1       4 OZ
PAINT AROSAL
      14.7 ML   5   Y   1       14.7
LIQUID QUITEX BLACK ACRYLIC PAINT
      20 OZ   1   Y   1       20 OZ
TAP OIL
      4 OZ   1   Y   1       4 OZ
FLUX PRN
          1   Y   1        
SOLDER FLUX
      1 GAL   1   Y   1       1 GAL
RTU
      3 OZ   5   Y   1       3 OZ
CONTACT CLEANER
      11.7 OZ   1   Y   1       11.7
ABS CEMENT
      8 OZ   1   Y   1       8 OZ
CONFORMAL COATING
      12 OZ   3   Y   1       12 OZ
DCI VERI CLEAN
      10 OZ   5   Y   1       10 OZ
BIO ACT EC-7M
      10 OZ   2   Y   1       10 OZ
RAID ANT AND ROACH KILLER
      17.5   1   Y   1       17.5
3M SUPER 77 ADHESIVE
      16.5 OZ   1   Y   1       16.5

          Irvine Sensors Corporation Page 2 of 4   3001 Red Hill Ave 9/11/2008  
Costa Mesa, CA 62626

 

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Irvine Sensors Corporation
Hazardous Materials Management Plan

 

 

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Irvine Sensors Corporation

              NUMBER   REV LTR   DOC. CONTROL NO.
XXX-000-0000   PAGE 3 of 13

12.0  
SAFETY PRECAUTIONS AND PROTOCOL IN WORK AREAS

  12.1  
CLEAN ROOMS

Absolutely no drinks or foods inside clean rooms.
When entering a clean room wear, at least, the following garments and put them
on in the order given:

  1.  
Put on shoe-covers (regular or conductive) while sitting on a bench facing the
exit door. Swing around toward the inside.
    2.  
Put on headgear.
    3.  
Put on Clean Room conductive coat or bonnie suit.
    4.  
Make sure all clothing snaps are closed.
    5.  
Put on gloves (optional).
    6.  
Retrieve your assigned wrist strap, test it, and sign off on the wall chart.
    7.  
Once inside room, wear safety glasses and/or gloves and/or finger cots and/or
face shield, where appropriate, as dictated by the specifications of the work to
be performed.

If alone in the lab make sure that there is at least another person on the
premises that knows where you are before performing any work.
Do not use any equipment for which you are not trained to operate.
Never hesitate to admit that you have made a mistake. This can not only prevent
injuries, but costly equipment damage as well.
If there are injuries, always report them promptly and properly.
In case of uncontrollable fire, or exposure to hazardous chemicals, including
gases, or injuries that require immediate medical attention, or major spills.
CONTACT THE SAFETY OFFICE IMMEDIATELY AT EXTENSION 8712
and inform your supervisor as well, by any possible means.
REMEMBER: BE ALERT AT ALL TIMES AND ALWAYS USE COMMON SENSE.

  12.2  
EQUIPMENT USE

The use of any equipment is allowed only to personnel whose names appear on the
approved list to operate the specific equipment.
All work must be approved and directed by a Supervisor.
Record all work performed on appropriate Process Traveler, Personal Lab
Notebook, Logbook, or pertinent Work Order. Always sign off and date appropriate
documentation.

  12.3  
WHEN TO EVACUATE

The following are some of the reasons to evacuate the work place:

  1.  
Power failure.
    2.  
A fire alarm or exhaust failure alarm sounds.
    3.  
A hazardous gas leak.
    4.  
Any other instance when the situations is deemed to be life threatening.

Many of the units in use are equipped with alarms that do not warrant
evacuation. Learn to distinguish the difference between these and others, and
always investigate equipment alarms.
PROPRIETARY INFORMATION TO IRVINE SENSORS CORPORATION
Not to be duplicated, used, or disclosed in whole or in part for any purpose
other than evaluation. This restriction
does not limit the right to use information contained herein if it is obtained
from another source without restriction.

 

 

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Irvine Sensors Corporation

              NUMBER   REV LTR   DOC. CONTROL NO.             XXX-000-0000  
PAGE 4 of 13

  12.3.1  
EVACUATION PROCEDURES

Follow the steps described below, if there is a need to evacuate:

  1.  
Leave the work place as quickly as possible through the nearest exit. Emergency
exits are clearly marked, and also described on posted facility maps. Do not
wait for an emergency to become familiar with emergency exit locations.
    2.  
If working at a chemical exhaust hood pull down its shield, if at all possible,
before evacuating.
    3.  
Leave your clean room attire on. Do not take time to undress.
    4.  
Visually check to make sure that nobody is left behind in the work area.
    5.  
As soon as possible, move to a safe area and first inform the SAFETY OFFICE of
the situation and then your supervisor.
    6.  
Contact other staff to make sure everybody in the vicinity is aware of the
situation.
    7.  
Do not re-enter the work place for any reason until is cleared by a Supervisor
or personnel from the Safety Team. In some cases, in order to correct the
hazard, authorized personnel may have to enter the work place wearing SCBA
equipment.

  12.3.2  
EMERGENCY PROCEDURES

In case of controllable fires do the following:

  1.  
Use the nearest fire extinguishers; first pull the ring pin, then unclip the
horn, aim at the base of the flames and squeeze the lever.
    2.  
If clothing is on fire, use fire blankets to smother the flames. ‘
    3.  
In case of electric fires, turn OFF the source of power.
    4.  
Immediately after, report fire to a Supervisor.

In case of uncontrollable fires:

  1.  
Sound fire alarm or asked somebody nearest it to do it. Fire alarm is a portable
loud horn.
    2.  
Immediately evacuate the area.
    3.  
Call the SAFETY OFFICE to have them originate the evacuation of the entire
building, if necessary.
    4.  
Immediately after, inform a Supervisor.

  12.4  
SERIOUS ACCIDENTS THAT REQUIRE MEDICAL ATTENTION

Do the following:

  1.  
Call the SAFETY OFFICE.
    2.  
Whenever possible administer first aid procedures.
    3.  
Never move or lift an accident victim unless there is danger of further injury.
If the victim must be moved away from a hazardous area, pull from the victim’s
feet and drag away while protecting from possible head injury.
    4.  
Calm and comfort, but do not alarm, the victim.
    5.  
If it is judged that the victim’s injury will permit it, call and wait for a
trained person to give first aid.
    6.  
If it is judged that immediate action is required, one or more of the following
may be done while waiting for first aid assistance.

  a.  
In case of chemical contact with skin:
       
Remove contaminated clothing
       
Flush with plenty of water for at least 15 minutes
       
Request medical assistance
    b.  
In case of chemical contact with eyes:
       
Rinse with eyewash for at least 15 minutes, lifting upper and lower eyelids
occasionally.

PROPRIETARY INFORMATION TO IRVINE SENSORS CORPORATION
Not to be duplicated, used, or disclosed in whole or in part for any purpose
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does not limit the right to use information contained herein if it is obtained
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              NUMBER   REV LTR   DOC. CONTROL NO.
XXX-000-0000   PAGE 5 of 13

     
Get medical attention as quickly as possible regardless of how eyes feel.
    c.  
In case of HF or HF mixtures contact with skin:
       
Remove contaminated clothing.
       
Rinse with plenty of water for at least 15 minutes.
       
Apply Calcium Gluconate or equivalent cream specific for HF burns.
       
Get immediate medical attention.
    d.  
In case of electrical shock:
       
Remove the source of the shock as soon as possible. Use a dry towel when moving
“live” wires or equipment.
       
If the victim is not breathing give artificial respiration.
       
Request medical attention.
    e.  
In case of swallowed poisons:
       
Follow instructions on label.
       
If there are no instructions then dilute cases of strong acids or strong alkalis
by administering large amounts of water.
       
Request medical attention.
    f.  
In case of bleeding:
       
Hold a clean cloth pad directly on the wound and apply hand pressure. Do not
apply a tourniquet.
       
Request medical attention.
    g.  
In case of bone fractures:
       
Do not move the victim, unless it is absolutely necessary.
       
Request medical attention.
    h.  
In case of thermal burns:
       
Do not attempt to remove clothing.
       
Request immediate medical attention.

In all emergency situations act promptly but never hastily. Thoughtless actions
may only complicate the situation.
Report all accidents or injuries to a Lab Supervisor.
When calling the Safety Office:

  1.  
Identify yourself.
    2.  
State the exact location where the emergency exists.
    3.  
Give the telephone number from where you are calling.
    4.  
Describe the situation as clearly and as quickly as possible.
    5.  
Do not hung up until the person on the other side has done so.

PROPRIETARY INFORMATION TO IRVINE SENSORS CORPORATION
Not to be duplicated, used, or disclosed in whole or in part for any purpose
other than evaluation. This restriction
does not limit the right to use information contained herein if it is obtained
from another source without restriction.

 

 

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              NUMBER   REV LTR   DOC. CONTROL NO.
XXX-000-0000   PAGE 6 of 13

  12.5  
CHEMICAL SAFETY

  12.5.1  
SOLVENTS

   
In general, solvents are liquids used to dissolve other substances. In
microelectronics, solvents are used in many processes, including degreasing
(i.e. to dissolve grease), stripping of coatings, wafer cleaning,
photolithography, etc.
     
Operators are exposed to solvents mainly by breathing and by contact with skin.
Each solvent has its own unique properties and present different health hazards;
however, some generalizations can be made:

  1.  
Solvents can cause acute damage to skin and breathing passages.
    2.  
Most solvents can enter the blood stream after inhalation.
    3.  
Most solvents are “highly flammable”; some are “explosive”.
    4.  
Long term exposure to even low levels of some solvents can cause of variety of
organ damages. Liver, lung, kidney and reproductive organs can be damaged from
low-dose exposure. In addition, infertility in women and men, damage to the
unborn, and cancer (as could be the case when there is exposure to benzene and
chlorinated hydrocarbons) can result.
    5.  
The health effects of long-term exposure and the interactions of solvents with
other chemicals may not be known in detail. Some solvents once thought to be
safe (i.e. benzene) are now known to be powerful carcinogens. Therefore,
solvents should be treated as potentially harmful. Adequate ventilation, safe
storage and protective clothing are among the safety measure that must be taken.
    6.  
It is always important to know what one is working with and to be aware of
potential problems. In all cases read the Material Safety Data Sheet
(MSDS) before using any solvent.
    7.  
Solvents that are stored in the different work places are listed in Appendix A
along with their basic hazards. Appendix B lists the approved chemicals for use
in the different locations, including exhaust hoods. Under each of the hoods use
only the listed, approved, chemicals.
    8.  
Always wear protective attire when handling solvents of any kind, including
chemicals that are not solvents. Such protective attire should include, as a
minimum, safety glasses and/or face shield, appropriate gloves, and any other
garment, such as aprons, etc.

ALWAYS HANDLE SOLVENTS IN VENTILATED HOODS!
NEVER INHALE SOLVENT VAPORS!

  12.5.2  
ACIDS AND BASES

   
Acid and bases (alkalis) are mostly aqueous solutions. These chemicals are used
in the microelectronics industry in a variety of processes as cleaning
solutions, etching solutions, photolithograpy development solutions, etc.
     
These compounds also have unique properties but have some common
characteristics:

  1.  
All acids and bases can cause burns when in contact with skin or eyes.
Additionally, vapors or mists from solutions can damage the lining of the nose,
mouth, throat, and lungs. The extent of the damage depends on the strength and
type of the acids and bases used, and on the length of exposure.

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              NUMBER   REV LTR   DOC. CONTROL NO.
XXX-000-0000   PAGE 7 of 13

  2.  
Effects on the skin range from mild rashes to severe blisters and ulcers
(breaking of the skin). These compounds affect breathing in different ways,
ranging from minor irritation of the breathing passages, to chronic bronchitis,
to pulmonary edema (fluids in the lungs). Long term effects of exposure and
interaction with other chemicals are largely unknown. For example, at least one
cancer-causing agent is formed when chromic acid comes in contact with metals.
    3.  
In the event of a splash or spill, the exposed skin or eyes should be flooded
with water from emergency showers or eyewashes. If acids or bases are splashed
on clothing, remove the clothing while under an emergency shower.
    4.  
Acids and bases located in the different work places are listed in Appendix A.
    5.  
Only the approved chemicals listed in Appendix B should be used in specific
hoods.
    6.  
As always, protective attire should be worn when processing materials that
require the use of acids and/or bases. At a minimum wear chemical protective
gloves and safety glasses or face shield. It is often advisable to wear in
addition to the above a protective apron and protective sleeves.
    7.  
Beware of any objects or controls on the interior or exterior of hoods as they
are likely to have been handle by somebody with acid or base contaminated
gloves.
       
Wear the same protective attire as mentioned above when working under hoods.

  12.5.3  
OXIDATION-REDUCTION (REDOX) REACTIONS

   
As the name implies these reactions take place when oxidizing and reducing
substances come in contact with each other.
     
These reactions can occur in any of three physical states: gas, liquid or solid.
When a reaction of this type occurs, generally there is generation of heat and
some times an explosion may take place.
     
The precautions that should be taken include, but are not limited to:

  1.  
Isolate these substances from other potentially reactive compounds.
    2.  
When working with such agents, wear adequate protective gear.
    3.  
If the substances involved are note water-sensitive, work in an area where
safety showers and flushing hoses are available.

   
NOTE: Appendix A contains a list of oxidizing and reducing substances.

  12.6  
CHEMICALS STORAGE-HANDLING-WASTE DISPOSAL-SPILLS

  12.6.1  
STORAGE

  1.  
Never store acids with solvents in the same cabinet or hood. There may be a
potential for an explosion. See Appendix A for incompatibilities.
    2.  
Only store chemicals in properly designated cabinets or hoods. If in doubt about
their proper storage locations, ask a Lab supervisor.
    3.  
All containers must be labeled as to their contents. Not following this practice
may be cause for dismissal.
    4.  
Only approved chemicals may be stored in the Lab. See Appendix B for list of
approved chemicals.
    5.  
Certain chemicals may be subject to exceptions. Examples are those used in
photolithography, special adhesives, etc. Appendix E describes special storage
instructions.

PROPRIETARY INFORMATION TO IRVINE SENSORS CORPORATION
Not to be duplicated, used, or disclosed in whole or in part for any purpose
other than evaluation. This restriction does not limit the right to use
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              NUMBER   REV LTR   DOC. CONTROL NO.
XXX-000-0000   PAGE 8 of 13

  12.6.2  
HANDLING

  1.  
Before handling any chemical that you are not familiar with, always read the
label, consult the pertinent MSDS, refer to Appendix A of this manual and, if
necessary, ask your supervisor regarding handling procedures.
    2.  
Always wear appropriate protective attire even if just carrying a bottle.
    3.  
Never carry acids and solvents together.
    4.  
Prior to transferring chemicals from one location to another, make sure that the
place of destination is properly prepared to receive such chemicals.
    5.  
Bottles should be opened under exhaust hoods.
    6.  
After pouring a chemical from a bottle, wipe the bottle exterior with wet
lint-free towels and finish wiping with dry towels. Rinse the towels with DI
water before disposing into a plastic bag-lined safety container. Contaminated
rags that have not been rinsed may present a fire hazard.
    7.  
When working with chemicals for extended periods of time, periodically rinse
gloves and sleeves, and dry with lint-free towels.
    8.  
Strictly avoid touching anything with contaminated gloves, especially outside of
hoods (and also knobs and controls inside hoods).
    9.  
Always after handling chemicals, rinse gloves with DI water and dry with
lint-free towels. Then, after removing gloves, rinse hands as well.

  12.6.3  
WASTE DISPOSAL

  1.  
Disposal of empty bottles

  a.  
Acids — Completely fill bottle to the point of overflow with water, at least
once, to eliminate any potential residual fumes. Then, triple rinse the interior
and exterior before discarding.
    b.  
Solvents — Vent empty solvent bottles under a hood for at least 48 hours before
discarding. On the bottle, mark the date and time that it is to be discarded and
initial it. At the proper time recap aerated bottles and discard.

  2.  
After working with acids and bases

  a.  
Rinse glassware by overflowing with DI water, as done with bottles.
    b.  
After completing an operation, clean in and around the working area with wet
lint-free towels; then dry using dry lint-free towels.
    c.  
Rinse all towels very thoroughly with water before discarding into a plastic
bag-lined safety disposal container.

  3.  
After working with solvents.

  a.  
Never return used (spent) solvents to original container.
    b.  
Solvents should be disposed into solvent waste containers.
    c.  
Solvent waste containers must be properly labeled indicating not only contents,
but beginning date of storage.
       
Never store a solvent in a container with a label that does not list such
solvent.
    d.  
Photolithography chemicals should be disposed by following the procedure
described in Appendix E.
    e.  
Arrangements for solvent waste pick-up are the responsibility of the Process
Facilities Manager.

PROPRIETARY INFORMATION TO IRVINE SENSORS CORPORATION
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other than evaluation. This restriction does not limit the right to use
information contained herein if it is obtained from another source without
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              NUMBER   REV LTR   DOC. CONTROL NO.
XXX-000-0000   PAGE 9 of 13

  12.6.4  
CHEMICAL SPILLS

     
CAUTION: ALL CHEMICAL SPILLS PRESENT AN IMMEDIATE SAFETY HAZARD. CLEAN UP SHOULD
BE IMMEDIATE.

Inside exhaust hoods

  a.  
Solvents

  1.  
Eliminate any source of ignition (sparks, etc.).
    2.  
Use an adequate number of lint-free towels to wipe up spilled solvents.
    3.  
Discard towels inside tied plastic bags into a plastic bag-lined safety waste
container.

  b.  
Acids and Bases

  1.  
Dilute by spraying with a generous amount of DI water.
    2.  
Wipe dry with lint-free towels.
    3.  
Rinse towel with DI water and dispose into a plastic bag-lined safety waste
container.

Outside of exhaust hoods

  a.  
Solvents

  1.  
Eliminate sources of ignition (sparks, etc.).
    2.  
Take the nearest spill kit.
    3.  
Apply spill absorbent from the perimeter inward, covering the total spill area.
    4.  
Mix thoroughly with scoop until material is dry and free flowing again, and no
evidence of solvent remains.
    5.  
Transfer sorbed solvent into bag provided and call the Safety Office at
extension 8712.

  b.  
Acids and Bases (except HF)

  1.  
Take the nearest appropriate spill kit (either for acids or bases)
    2.  
Apply the neutralizer from the spill perimeter inward. Use sufficient material
to secure a uniform color change. When foaming stops, if there is any, proceed
with mixing.
    3.  
Carefully mix and, if necessary, add more neutralizer.
    4.  
Add absorbent as needed to complete the neutralization.
    5.  
Scoop up the neutralized spill into the bag provided.
    6.  
Wash floor with soap and water.
    7.  
Inform Process Facilities Manager to arrange for disposal.

  c.  
Hydrofluoric Acid (HF)

  1.  
Use an HF spill kit.
    2.  
Apply proper neutralizer from the perimeter of the spill inward.
    3.  
The liquid neutralizer will turn into a powder when neutralization of the acid
is complete.
    4.  
Scoop up powder into plastic bag provided.
    5.  
Wash floor with soap and water.
    6.  
Call Process Facilities Manager for waste disposal.

CAUTION: IF THE SPILL CAUSES CONTACT OF HF WITH ANY PART OF YOUR BODY OR
CLOTHING RINSE FOR AT LEAST 15 MINUTES OR USE EMERGENCY SHOWER, ALSO FOR 15
MINUTES. REMOVE CLOTHING IF NECESSARY. AFTER RINSING, APPLY THE AVAILABLE
CALCIUM GLUCONATE OINTMENT ON THE AFFECTED PARTS AND OBTAIN MEDICAL ATTENTION
IMMEDIATELY THEREAFTER.
PROPRIETARY INFORMATION TO IRVINE SENSORS CORPORATION
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              NUMBER   REV LTR   DOC. CONTROL NO.
XXX-000-0000   PAGE 10 of 13

  12.7  
COMPRESSED GASES

   
Non-hazardous gas cylinders should be handled using the proper transportation
means. Only authorized personnel should handle hazardous gas cylinders.
     
Compressed gases represent a special hazard. Each compressed gas cylinder
contains a very large amount of energy. This energy, improperly released, can
result in serious injury. In addition, gases can be hazardous from their
flammability, toxicity or corrosive characteristics. See Appendix A. In order to
minimize hazards associated with the handling of compressed gases, observe the
precautions listed below.

  1.  
Handle all gas cylinders in the same manner, whether full or empty.
    2.  
Do no transport gas cylinders without removing pressure regulators and placing
valve protection caps back on, unless properly mounted on service carts ready
for use.
    3.  
Do not use cylinders as rollers or as support.
    4.  
All cylinders must secured firmly in position by straps, chains or any other
appropriate means to prevent against tipping or falling.
    5.  
To install a pressure regulator on a cylinder:

  a.  
Select a regulator appropriate for the particular gas cylinder.
    b.  
Remove cylinder cap. Make sure cylinder valve is tightly closed.
    c.  
Position regulator on cylinder and tighten nut to secure it in place. Most
regulators have a high-pressure and a low-pressure side with corresponding
valves and gauges.
    d.  
Make sure that both regulator valves are closed by turning counterclockwise as
far out as possible.
    e.  
Slowly open the cylinder valve.
    f.  
Slowly open the high-pressure valve of the regulator. The gauge will read the
total pressure in the cylinder.
    g.  
When ready to use slowly open the low-pressure valve to the pressure required.

  6.  
To remove a pressure regulator from a cylinder:

  a.  
First, close the cylinder valve.
    b.  
Then open (by turning clockwise) the regulator’s high-pressure valve if not
already open.
    c.  
Finally open the low-pressure valve, in the same manner, if not already open, to
allow the gas remaining in the line to escape. Take special precautions with
hazardous gases.
    d.  
Once the reading on both gauges goes to zero, close both valves and while
holding the regulator with one hand use the other to unscrew it from the side of
the cylinder.
    e.  
Make sure that cylinder valve is tightly closed. Finally replace cylinder cap.

  7.  
Do not place cylinders near furnaces, radiators, or any source of heat. The
cylinder temperature should not be allowed to exceed 125°F (52°C).
    8.  
Do not drop or roughly handle cylinders.
    9.  
Do not expose gas cylinders to continuous dampness, salt, corrosive chemicals,
or fumes.
    10.  
Do not attempt to repair or alter cylinders or valves. If a cylinder is damaged
or leaking, inform your supervisor.
    11.  
Do not allow cylinders to completely empty out. Leave at least 15 psi of
pressure in the cylinder.
    12.  
Preserve and comply with all markings and signs applying to compressed gas
equipment and systems.

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              NUMBER   REV LTR   DOC. CONTROL NO.
XXX-000-0000   PAGE 11 of 13

  13.  
No smoking while handling cylinders of compressed gasses. In fact, no smoking,
period.
    14.  
Never allow oil to get in contact with compressed Oxygen.
    15.  
Always use non-sparking tools on compressed gas cylinders.
    16.  
Use appropriate labels to mark cylinders as FULL, IN USE, EMPTY.
    17.  
Do not store cylinders in locations where heavy objects may fall on them.
    18.  
Store EMPTY cylinders separately from charged cylinders.

NOTE:  
PLASMA ENHANCED CHEMICAL VAPOR DEPOSITION (PECVD) AND REACTIVE ION ETCHING
(RIE) GASES ARE LISTED IN RIE AND PECVD SECTION BELOW. BECOME FAMILIAR WITH
THESE GASSES HAZARDS: SOME MAY BE TOXIC AND/OR FLAMMABLE. MOST OF THESE GASES
MAY PRESENT A LIFE-THREATENING HAZARD.

  12.8  
CRYOGENIC FLUIDS

  1.  
Cryogens, such as liquid nitrogen and liquid helium, are used in dewars and in
vacuum systems cold traps.
    2.  
Some of the dangers are explosion, spillage and frostbite, release of
asphyxiating gasses.
    3.  
Only authorized personnel will service equipment requiring cryogenic fluids.
However, for any exposure or short period of contact with cryogenic fluids,
flush area of exposure with large quantities of warm water. Seek medical
attention.

  12.9  
PHYSICAL HAZARDS

  1.  
Radio Frequency (RF)

     
RIE etching systems and plasma assisted deposition systems generate frequencies
in the MHz range. These tools are properly shielded. Follow the precautions
described below.

  a.  
Keep face and limbs away from any exposed induction coils.
    b.  
People with pacemakers should not enter the area where this type of equipment is
located.
    c.  
HIGH VOLTAGE is present. Do not touch any part of the equipment unless
completely qualified to do so.

  2.  
Thermal

     
Take the precautions mentioned below.

  a.  
Never expose face or limbs to the hot surfaces of ovens and hot plates, or to
any other hot surface.
    b.  
HOT quartzware looks like COLD quartzware. Never touch without CAUTION.

  3.  
Ultraviolet Light (UV)

     
UV light sources are found mostly in photolithography equipment, ozone etchers,
etc. The source is generally a mercury arc lamp which emits UV radiation.
       
When working in an area where UV radiation is present:

  a.  
Wear UV goggles if you have to look into the light or have to repair or replace
the source.
    b.  
Never allow direct UV radiation to strike your eyes directly.

PROPRIETARY INFORMATION TO IRVINE SENSORS CORPORATION
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              NUMBER   REV LTR   DOC. CONTROL NO.
XXX-000-0000   PAGE 12 of 13

  c.  
Never place a reflective surface of any kind near a UV radiation where it could
be reflected directly into your eyes.
    d.  
Never place a flammable material in the optical path of a UV radiation.
    e.  
If UV lamp should ever explode, evacuate area immediately, as mercury vapors
will disperse into the area. Immediately after leaving the area notify your
Supervisor.

  CAUTION:  
If a mercury lamp has to be removed, allow it to cool down for at least 30 to 45
minutes before removing the lamp house cover. Mercury lamps will explode if not
cooled.

  12.10  
RIE AND PECVD SYSTEMS

  12.10.1  
SAFETY PRECAUTIONS

This type of equipment is used to dry etch a variety of materials and to
deposit, among others, dielectric materials such as Silicon Nitride, Silicon
Dioxide and Silicon Oxynitride.

  12.10.2  
GASES USED

Oxygen (O2), dilute Silane (5% SiH4 95% He), Nitrogen (N2), Ammonia (NH3), Freon
(CF4), Sulfur Hexafluoride (SF6). Helium (He), etc.

  12.10.3  
HAZARDS

These gases may be flammable, explosive, toxic; which, along with high
temperatures, chambers under vacuum, high voltages, radio frequencies, etc. can
create very hazardous situations.
Refer to the appropriate Process Specifications for operating conditions.
Remember, only authorized personnel can operate this equipment.

  12.10.4  
SAFETY

1.  
All safety rules and procedures must be followed.
  2.  
Operating temperatures range from 200°C to 500°C. Therefore, do not touch with
hands even if wearing gloves.
  3.  
Nitrogen is used to purge systems of other gases to prevent explosive
concentrations to form. Maintain it at not less than 20 psi.
  4.  
Silane (SiH4) is a very dangerous gas. Although the heavily diluted mixtures are
not pyrophoric (self-igniting in contact with air), mixtures above 10% ignite
shortly after exposure to air, producing water vapor and Silicon Dioxide (SiO2)
powder (white) in an explosive reaction, that generates an extremely high
temperature.
     
If a line rupture occurs, DO NOT TURN OFF THE GAS. Vacate the area. Call safety
personnel who will reenter the area wearing an SCBA and slowly turn off the
silane line.

  12.11  
PHOTOLITHOGRAPHY OPERATIONS

  12.11.1  
PROCESSING PRECAUTIONS

1.  
Wear full safety apparel during all photolithography operations.
  2.  
Perform process under hoods or using equipment with appropriate ventilation.
  3.  
Mix chemicals under a hood wearing specified safety apparel.

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              NUMBER   REV LTR   DOC. CONTROL NO.
XXX-000-0000   PAGE 13 of 13

4.  
Label any bottle with contents, date, and mixer’s initials.
  5.  
Rinse any measuring container very thoroughly with DI water.
  6.  
Avoid contact of skin and eyes with chemicals. If contact with chemicals is
made, rinse with water for 15 minutes and then seek medical attention.
  7.  
While dispensing chemicals, or just after, do not rub eyes or touch skin. The
gloves you are wearing may be contaminated.
  8.  
Avoid breathing of vapors. If vapors are inhaled, move immediately into a fresh
air environment. High concentrations of photoresist vapors may be irritating to
eyes and to the respiratory track. In extreme cases it can cause narcosis.
  9.  
Keep FLAMMABLE liquids away from oxidants, heat, sparks, or flame.
  10.  
Do not mix HMDS with water. HMDS can react with water to form ammonia and
hexamethyldisiloxane.
  11.  
Keep HMDS away from oxidants, heat, sparks and open flame.
  12.  
Many developers are corrosive alkaline solutions. For safety purposes, all
developers must be considered as such. Read the specific label on each developer
bottle.

PROPRIETARY INFORMATION TO IRVINE SENSORS CORPORATION
Not to be duplicated, used, or disclosed in whole or in part for any purpose
other than evaluation. This restriction does not limit the right to use
information contained herein if it is obtained from another source without
restriction.