Exhibit 10.7

 

FOURTH AMENDMENT TO LEASE

 

 

 

THIS FOURTH AMENDMENT TO LEASE AGREEMENT (the “Fourth Amendment”) is entered
into as of the 7th day of June, 2017 (the “Effective Date’), by and between
Prologis, L.P., a Delaware limited partnership (“Landlord”),  and Capstone
Turbine Corporation, a Delaware corporation (“Tenant”).

 

W I T N E S S E T H:

 

WHEREAS, Landlord and Tenant have entered into a Lease dated September 25, 2000
(the “Original Lease’), as amended by First Amendment to Lease dated October 7,
2008,  Second Amendment to Lease dated July 15, 2009 and a Third Amendment to
Lease dated March 28, 2013 (collectively “Lease”), pursuant to which Landlord
leased to Tenant certain premises consisting of approximately 78,711 square feet
located at 16640 Stagg Street, Van Nuys, California 91406 (the “Premises”), such
lease, as heretofore modified, being herein referred to as the “Lease”.

 

WHEREAS, Landlord and Tenant desire to modify the Lease on the terms and
conditions set forth below.

 

A G R E E M E N T:

 

NOW THEREFORE, in consideration of the Premises and the mutual covenants
hereinafter contained, the parties hereto agree as follows:

 

1.

The Lease Term is extended for sixty-two  (62) months, such that the Lease shall
terminate on February 28, 2023 (the “Third Extension Term”).  The Third
Extension Term shall commence on January 1, 2018 (“Third Extension Term
Commencement Date”), and shall expire, unless early terminated pursuant to the
terms of the Lease, on February 28, 2023 (the “Third Extension Term Expiration
Date”).  All of the terms and conditions of the Lease shall remain in full force
and effect during Third Extension Term except as set forth in this Fourth
Amendment including that the Monthly Base Rent shall be as follows:

        

 

Period

 

Monthly Base Rent

January 1, 2018

through

February 28, 2018

$0.00*

March 1, 2018

through

December 31, 2018

$66,846.17

January 1, 2019

through

December 31, 2019

$68,851.55

January 1, 2020

through

December 31, 2020

$70,917.10

January 1, 2021

through

December 31, 2021

$73,044.61

January 1, 2022

through

December 31, 2022

$75,235.95

January 1, 2023

through

February 28, 2023

$77,493.03

 

* During the two (2) months of free Base Rent period, Tenant shall be
responsible for Operating Expenses as set forth in the Lease.

 

2.

Effective on the Effective Date, the current Security Deposit of $44,078.00 as
set forth in the Original Lease shall be increased by $25,922.00, so that as of
such date and throughout the remainder of the Lease Term including the Third
Extension Term, the Security Deposit shall reflect a total amount of $70,000.00
which shall be held by pursuant to the terms of the Original Lease.

 

3.

Effective on the Effective Date, Tenant shall no longer be responsible for
future amortized repayments of the 2005 HVAC Compressor, 2005 HVAC Replacement,
2007 Replacement and 2015 Landscape Improvements.  Tenant shall continue to pay
all other Operating Expenses as provided in the Original Lease.  However,
promptly following the mutual execution of this Fourth Amendment, Landlord shall
replace the HVAC units tagged as A/C-1, A/C-5, and A/C-6 and, notwithstanding
anything contained in the Lease to the contrary, the cost and expense thereof
without an interest rate, shall be fully amortized over fifteen (15) years and
reimbursed to Landlord over the Lease Term including any extension or renewal
thereafter exercised.

 

4.

Notwithstanding anything contained herein to the contrary, Landlord shall
contribute a Tenant improvement allowance up to a maximum amount of $157,422.00
(the “TI Allowance”), toward Landlord approved Fourth Amendment Alterations to
the Premises, which may include, construction of mutually agreed upon Tenant
Improvements and other interior alterations desired by Tenant and reasonably
approved by Landlord (“Fourth Amendment Alterations”). Landlord’s approval of
the Fourth Amendment Alterations shall not be unreasonably withheld, delayed or
conditioned. Landlord acknowledges that the timing of Fourth Amendment
Alterations may be such that they are completed in various phases and Tenant may
request the TI Allowance in corresponding portions, subject to the terms of this
Section 4. Any particular request for payment of any portion of the TI Allowance
shall be made no more often than one time per month and shall be paid by
Landlord to Tenant within 30 days following Landlord’s receipt of (i) a written
request from Tenant setting forth the portion of the TI Allowance being
requested, (ii) completion of the portion of the Fourth Amendment Alterations  
 corresponding to the requested TI Allowance amounts as reasonably determined by
Landlord’s Construction Manager, (iii) Landlord’s receipt of Tenant’s invoice
from Tenant’s contractors and subcontractors (the “Tenant’s Contractors”)
substantiating the costs related thereto, and (iv) Landlord’s receipt of
conditional lien waivers from all Tenant’s Contractors who did work on the
portion of the Fourth Amendment Alterations for which Tenant is request a TI
Allowance payment.  Landlord shall be entitled to withhold $10,000 retention of
the TI Allowance, which shall be released upon receipt of (A) a final Tenant
invoice

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substantiating the final costs related to the Fourth Amendment Alterations, and
(B) Landlord’s receipt of a final and unconditional lien waivers from all
contractors and subcontractors who did work on the Fourth Amendment
Improvements.  Landlord shall be under no obligation to pay for any Fourth
Amendment Alterations to the Premises in excess of the TI Allowance.  Further,
such TI Allowance shall only be available for Tenant’s use through December 31,
2018, and Tenant hereby waives any and all rights to any portion of the TI
Allowance which has not been submitted for payment by Tenant as set forth
herein,  as of January 1, 2019. Landlord shall not charge Tenant any
construction management or supervision fee in connection with the Fourth
Amendment Alterations.

 

5.

Landlord shall provide Tenant with one (1) Renewal Option per the terms and
conditions outlined in Addendum 1 attached to this Fourth Amendment and by
reference incorporated herein. Any prior renewal, extension or termination
options (other than arising in connection with casualty or condemnation events,
as it might be set forth in the Lease)  shall be null and void with no further
force or effect.

 

6.

Landlord shall complete the Fourth Amendment Improvements as set forth in
Addendum 2 attached hereto and by reference incorporated herein. Except for the
Fourth Amendment Improvements, Tenant accepts the Premises in its “as is”
condition for the Third Extension Term, subject to any Landlord’s obligations to
maintain and repair the Premises set forth in the Lease, with no warranties or
representations except as otherwise set forth in the Original Lease.

 

7.

Except as otherwise expressly provided herein, all defined terms used in this
Fourth Amendment shall have the same respective meanings as are provided for
such defined terms in the Lease. 

 

8.

Notwithstanding anything provided in the Lease to the contrary but still subject
to the provisions set forth in Section 13 of the Original Lease, effective on
May 1, 2017, and on or before the first day of each month thereafter,
 Tenant shall make all payments required to be made by Tenant to Landlord under
the Lease (or to such other party as Landlord may from time to time specify in
writing) may only be made by Electronic Fund Transfer (“EFT”) of immediately
available federal funds before 11:00 a.m., Eastern Time of the due date at such
place, within the continental United States, as Landlord may from time to time
designate to Tenant in writing.

 

9.

The notice addresses for Landlord and Tenant during the Lease Term, as extended,
shall be as follows:

 

Landlord:

Prologis, L.P.

 

c/o Prologis

 

17777 Center Court Drive North, Suite 100

 

Cerritos, California 90703

 

 

With a copy to:

Prologis

 

4545 Airport Way

 

Denver, Colorado 80239

 

Attention: General Counsel

 

 

Tenant:

Capstone Turbine Corporation

 

21211 Nordhoff Street

 

Chatsworth, California 91311

 

Attention: Jayme Brooks

 

 

With a copy to:

Capstone Turbine Corporation

 

21211 Nordhoff Street

 

Chatsworth, California 91311

 

Attention: Legal Department

 

10.

Within fifteen (15) days of Landlord’s written request, Tenant agrees to deliver
to Landlord such reasonable information and/or documents as Landlord requires
for Landlord to comply with California Public Resources Code Section 25402.10,
or successor statute(s), and California Energy Commission adopted regulations
set forth in California Code of Regulations, Title 20, Division 2, Chapter 4,
Article 9, Sections 1680-1685, and successor and related California Code of
Regulations, relating to commercial building energy ratings.  Landlord makes the
following statement based on Landlord’s actual knowledge in order to comply with
California Civil Code Section 1938: The Building and Premises have not undergone
an inspection by a Certified Access Specialist (CASp).  A Certified Access
Specialist (CASp) can inspect the subject Premises and determine whether the
subject Premises comply with all of the applicable construction-related
accessibility standards under state law.  Although state law does not require a
CASp inspection of the subject Premises, the Landlord may not prohibit the
Tenant from obtaining a CASp inspection of the subject Premises for the
occupancy or potential occupancy of the Tenant, if requested by the Tenant.  The
parties shall mutually agree on the arrangements for the time and manner of the
CASp inspection, the payment of the fee for the CASp inspection, and the cost of
making any repairs necessary to correct violations of construction-related
accessibility standards within the Premises.  Landlord and Tenant hereby agree
that a Tenant-requested CASp inspection shall be at Tenant’s sole cost and
expense and a Landlord-requested CASp inspection shall be at Landlord’s sole
cost and expense, and that the cost of making any repairs necessary to correct
violations of construction-related accessibility standards within the Premises
stated in any such completed CASp inspection shall be governed by and paid
pursuant to Paragraph 4.2 (viii) and 6.3 of the Lease.

 

11.

Tenant and Landlord represent and warrant that the parties have dealt with no
broker, agent or other person in connection with this transaction and that no
broker, agent or other person brought about this

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transaction, other than Carlo Brignardello with Cresa Los Angeles (“Tenant’s
Broker”),  and Tenant and Landlord agree to indemnify and hold each
other harmless from and against any claims by any other broker, agent or other
person claiming a commission or other form of compensation by virtue of having
dealt with Tenant or Landlord with regard to this leasing transaction. Landlord
shall be responsible for paying any commissions in connection with this Fourth
Amendment.

 

12.

Insofar as the specific terms and provisions of this Fourth Amendment purport to
amend or modify or are in conflict with the specific terms, provisions and
exhibits of the Lease, the terms and provisions of this Fourth Amendment shall
govern and control; in all other respects, the terms, provisions and exhibits of
the Lease shall remain unmodified and in full force and effect.    

 

13.

Landlord and Tenant hereby agree that (i) this Fourth Amendment is incorporated
into and made a part of the Lease, (ii) any and all references to the Lease
hereinafter shall include this Fourth Amendment, and (iii) the Lease and all
terms, conditions and provisions of the Lease are in full force and effect as of
the date hereof, except as expressly modified and amended in this Fourth
Amendment.

 

14.

Any obligation or liability whatsoever of Prologis, a Maryland real estate
investment trust, which may arise at any time under this Lease or any obligation
or liability which may be incurred by it pursuant to any other instrument,
transaction, or undertaking contemplated hereby shall not be personally binding
upon, nor shall resort for the enforcement thereof be had to the property of,
its trustees, directors, shareholders, officers, employees or agents, regardless
of whether such obligation or liability is in the nature of contract, tort, or
otherwise.

 

 

 

signatures on following page

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IN WITNESS WHEREOF, the parties hereto have signed this Fourth Amendment as of
the day and year first above written.

 

 

 

 

 

 

 

 

 

____________________________

 

 

 

 

 

 

 

Prologis, Inc., a Maryland

 

 

 

____________________________

 

 

 

TENANT:

 

Capstone Turbine Corporation

a Delaware corporation

 

 

 

 

 

By:         /s/ Jayme Brooks

Name:    Jayme Brooks

Title:      CFO & CAO

LANDLORD:

 

PROLOGIS, L.P.

a Delaware limited partnership

 

By:         Prologis, Inc., a Maryland

corporation, its general partner

 

 

By:         /s/Robert B. Antrobius

Name:    Robert B. Antrobius

Title:      SVP

 

 

 

 

 

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ADDENDUM 1

 

ONE RENEWAL OPTION AT MARKET

(BASEBALL ARBITRATION)

 

ATTACHED TO AND A PART OF THE FOURTH AMENDMENT TO THE LEASE

DATED June 7, 2017, BETWEEN

 

PROLOGIS, L.P.,  a Delaware limited partnership

and

CAPSTONE TURBINE CORPORATION, a Delaware corporation

 

 

(a)Provided that as of the time of the giving of the Extension Notice by Tenant
and the Commencement Date of the Fourth Extension Term, (i) Tenant is the Tenant
originally named herein or a Tenant Affiliate, (ii) Tenant actually occupies all
of the Premises initially demised under this Lease and any space added to the
Premises, and (iii) no Tenant Default exists either at the time of Tenant’s
notice or as of the Commencement Date of the Fourth Extension Term; then Tenant
shall have the right to extend the Lease Term for an additional term of five (5)
years (such additional term is hereinafter called the "Fourth Extension Term")
commencing on the day following the Third Extension Term Expiration
Date (hereinafter referred to as the "Commencement Date of the Fourth Extension
Term").  Tenant shall give Landlord written notice (hereinafter called the
"Extension Notice") of its election to extend the term of the Lease Term at
least nine (9) months, but not more than twelve (12) months, prior to the
scheduled expiration date of the Lease Term. 

 

(b)The Base Rent payable by Tenant to Landlord during the Fourth Extension Term
shall be the Fair Market Rent, as defined and determined pursuant to Paragraphs
(c), (d), and (e) below.

 

(c)The term "Fair Market Rent" shall mean the Base Rent, expressed as an annual
rent per square foot of floor area, which Landlord would have received from
leasing the Premises for the Fourth Extension Term to an unaffiliated person
which is not then a tenant in the project of which the Premises are a part,
assuming that such space were to be delivered in "as-is" condition, and taking
into account the rental which such other tenant would most likely have paid for
such premises and taking into account other completed leases in comparable
buildings in the Van Nuys market (the “Comparable Leases”), including Base Rent
market escalations.    The Fair Market Rent shall not be reduced by reason of
any costs or expenses saved by Landlord by reason of Landlord's not having to
find a new tenant for the Premises (including without limitation brokerage
commissions, cost of improvements necessary to prepare the space for such
tenant's occupancy, rent concession, or lost rental income during any vacancy
period)  but, without modifying the “Fair Market Rent” rate, Landlord shall take
into account:  (i) any tenant improvement allowances provide or the cost of
improvements spent by landlords in the Comparable Leases, and (ii) any rent
concession such as rent abatement provided by landlords in Comparable Leases
(collectively the “Comparable Leases Concessions”).   Fair Market Rent means
only the rent component defined as Base Rent in the Lease and does not include
reimbursements and payments by Tenant to Landlord with respect to Operating
Expenses and other items payable or reimbursable by Tenant under the Lease.  In
addition to its obligation to pay Base Rent (as determined herein), Tenant shall
continue to pay and reimburse Landlord as set forth in the Lease with respect to
such Operating Expenses and other items with respect to the Premises during the
Fourth Extension Term.  The arbitration process described below shall be limited
to the determination of the Base Rent and Fair Market Rent and shall not affect
or otherwise reduce or modify the Tenant's obligation to pay or reimburse
Landlord for such Operating Expenses and other reimbursable items. 

 

(d)Landlord shall notify Tenant of its determination of the Fair Market Rent
(which shall be made in Landlord's sole discretion) for the Fourth Extension
Term, and Tenant shall advise Landlord of any objection within 10 business days
of receipt of Landlord's notice.  Failure to respond within the 10-business day
period shall constitute Tenant's rejection (“Deemed Rejection”) of such Fair
Market Rent. If Tenant objects, Landlord and Tenant shall commence negotiations
to attempt to agree upon the Fair Market Rent within 30 days of Landlord's
receipt of Tenant's notice.  If the parties cannot agree within said 30-day
period, each acting in good faith but without any obligation to agree, or if
there is a Deemed Rejection of Landlord’s Fair Market Rent, then the Lease Term
shall not be extended and shall terminate on its scheduled termination date and
Tenant shall have no further right hereunder or any remedy by reason of the
parties' failure to agree unless Tenant or Landlord invokes the arbitration
procedure provided below to determine the Fair Market Rent. 

 

(e)Arbitration to determine the Fair Market Rent shall be in accordance with the
Real Estate Valuation Arbitration Rules of the American Arbitration
Association.  Unless otherwise required by state law, arbitration shall be
conducted in the metropolitan area where the Project is located by a single
arbitrator unaffiliated with either party.  Either party may elect to arbitrate
by sending written notice to the other party and the Regional Office of the
American Arbitration Association within 10 business days after the 30-day
negotiating period provided in Paragraph (d), invoking the binding arbitration
provisions of this paragraph.  Landlord and Tenant shall each submit to the
arbitrator their respective proposal of Fair Market Rent.  The arbitrator must
choose between the Landlord's proposal and the Tenant's proposal and may not
compromise between the two or select some other amount.  The cost of the
arbitration shall be paid by Landlord if the Fair Market Rent is that proposed
by Landlord and by Tenant if the Fair Market Rent is that proposed by Tenant;
and shall be borne equally otherwise.  If the arbitrator has not determined the
Fair Market Rent as of the end of the Lease Term, Tenant shall pay 103 percent
of the Base Rent in effect under the Lease as of the end of the Lease Term until
the Fair Market Rent is determined as provided herein.  Upon such determination,
Landlord and Tenant shall make the appropriate adjustments to the payments
between them. 

 

(f)The parties consent to the jurisdiction of any appropriate court to enforce
the arbitration provisions of this Fourth Amendment and to enter judgment upon
the decision of the arbitrator.

 

(g)Except for the Base Rent and Fair Market Rent as determined above, Tenant's
occupancy of the Premises during the Fourth Extension Term shall be on the same
terms and conditions as are in effect immediately prior to the expiration of the
initial Lease Term; provided, however, Tenant shall have no further right to
extend the Lease

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Term pursuant to this Fourth Amendment or to any allowances, credits or
abatements (except for the allowances, credits or abatements expressly set forth
in this Fourth Amendment) or options to expand, contract, renew or extend the
Lease. 

 

(h)If Tenant does not send the Extension Notice within the period set forth in
Paragraph (a), Tenant's right to extend the Lease Term shall automatically
terminate.  Time is of the essence as to the giving of the Extension Notice and
the notice of Tenant's objection under Paragraph (d).

 

(i)Landlord shall have no obligation to refurbish or otherwise improve the
Premises for the Fourth Extension Term except for any on-going Landlord’s
obligations to repair and maintain the Premises as set forth in the Lease.  The
Premises shall be tendered on the Commencement Date of the Fourth Extension Term
in "as-is" condition subject to any on-going Landlord’s obligations to repair
and maintain the Premises as set forth in the Lease. 

 

(j)If the Lease is extended for the Fourth Extension Term, then Landlord shall
prepare and Tenant and Landlord shall execute an amendment to the Lease
confirming the extension of the Lease Term and the other provisions applicable
thereto. 

 

(k)If Tenant exercises its right to extend the term of the Lease for the Fourth
Extension Term pursuant to this Addendum, the term “Lease Term" as used in the
Lease, shall be construed to include, when practicable, the Fourth Extension
Term except as provided in (g) above.

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ADDENDUM 2

 

COMSTRUCTION

(TURNKEY)

 

ATTACHED TO AND A PART OF THE FOURTH AMENDMENT TO THE LEASE

DATED June 7, 2017, BETWEEN

 

PROLOGIS, L.P.,  a Delaware limited partnership

and

CAPSTONE TURBINE CORPORATION, a Delaware corporation

 

 

 

(a)Landlord agrees to furnish or perform at Landlord's sole cost and expense
those items of construction and those improvements (the "Fourth Amendment
Improvements") specified below:

 

·

Install one (1) solid state door detector in the existing elevator in the
Premises

·

Install one (1) solid state starter in the existing elevator in the Premises

 

(b)If Tenant shall desire any changes, Tenant shall so advise Landlord in
writing and Landlord shall determine whether such changes can be made in a
reasonable and feasible manner.  Any and all costs of reviewing any requested
changes, and any and all costs of making any changes to the Fourth Amendment
Improvements which Tenant may request and which Landlord may agree to shall be
at Tenant's sole cost and expense and shall be paid to Landlord upon demand and
before execution of the change order.

 

(c)Landlord shall proceed following the Effective Date with and complete in a
timely manner the construction of the Fourth Amendment Improvements.  As soon as
such improvements have been Substantially Completed, Landlord shall notify
Tenant in writing of the date that the Fourth Amendment Improvements were
Substantially Completed.  The Fourth Amendment Improvements shall be deemed
substantially completed ("Substantially Completed") when, in the opinion of the
construction manager (whether an employee or agent of Landlord or a third party
construction manager) ("Construction Manager"), the Fourth Amendment
Improvements are substantially completed except for punch list items which do
not prevent in any material way the use of the Fourth Amendment Improvements for
the purposes for which they were intended.  In the event Tenant, its employees,
agents, or contractors cause construction of such improvements to be delayed,
the date of Substantial Completion shall be deemed to be the date that, in the
reasonable opinion of the Construction Manager, Substantial Completion would
have occurred if such delays had not taken place.  Without limiting the
foregoing, Tenant shall be solely responsible for delays caused by Tenant's
request for any changes in the plans, Tenant's request for long lead items or
Tenant's interference with the construction of the Fourth Amendment
Improvements, and such delays shall not cause a deferral of the Third Extension
Term Commencement Date beyond what it otherwise would have been.  After the date
the Fourth Amendment Improvements are Substantially Complete Tenant shall, upon
demand, execute and deliver to Landlord a letter of acceptance of delivery of
the Fourth Amendment Improvements.  In the event of any dispute as to the
Substantial Completion of Fourth Amendment Improvements the certificate of the
Construction Manager shall be conclusive absent manifest error.

 

(d)Delay in completing the Fourth Amendment Improvements to the Premises shall
not serve to extend the term of the Third Extension Term or to make Landlord
liable for any damages arising therefrom.

 

 

 

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