EXHIBIT 10.27

Lease Agreement with Pawnee Properties, LLC.
 
 
 

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LEASE

PAWNEE PROPERTIES, LLC

(as Landlord)

and

AEROGROW INTERNATIONAL, INC.

(as Tenant)

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LEASE

THIS LEASE is made this 27th day of July, 2006, by and between PAWNEE
PROPERTIES, LLC, a Colorado limited liability company ("Landlord") and AEROGROW
INTERNATIONAL, INC. a Nevada corporation (“Tenant”).

WITNESSETH:

1. DEFINITIONS

In addition to other terms, which are defined elsewhere in this Lease, the terms
defined in the following subparagraphs of this Paragraph 1 shall have the
meanings set forth in such subparagraph whenever used in this Lease with the
first letter of each word capitalized.

a. “Additional Rent” shall mean Tenant’s Pro Rata Share of Operating Expenses
and such other charges as are required to be paid by Tenant to Landlord.

b.  "Base Rent" or “Basic Rental” shall mean annual rental for the first year of
the Primary Lease Term of ONE HUNDRED EIGHTY-NINE THOUSAND ONE HUNDRED EIGHT AND
NO/100’s Dollars ($189,108.00) payable in equal monthly installments of FIFTEEN
THOUSAND SEVEN HUNDRED FIFTY-NINE AND NO/100’s Dollars ($15,759.00).

c. “Brokers” shall mean The Colorado Group, Inc. and Chrisman Commercial, LLC
for Landlord and Irwin & Hendrick, Ltd. for Tenant.

d. "Building" shall mean that certain building and other improvements located at
6075 Longbow Drive, Boulder, Colorado 80301, and the real property upon which
such building and improvements is located.

e. “Commencement Date” shall mean the date the Lease commences pursuant to
paragraphs 3(b) or 3(l).

f. "Common Areas" shall mean those portions of the Building, which are made
available on a non-exclusive basis for general use in common, including
landscaping and lawn sprinkler systems, of tenants, their employees, agents and
invitees. Landlord shall have the right from time-to-time to change the location
or character of and to make alterations of or additions to the Common Areas, and
to repair and reconstruct the Common Areas.

g. Intentionally Deleted.
 

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h. The following exhibits, riders and/or addenda are attached to this Lease and
expressly incorporated herein by this reference:
 
Exhibit A Depiction of the Premises
Exhibit B Rules and Regulations
Exhibit C Form Tenant Estoppel Certificate
Exhibit D Form Subordination, Non-disturbance and Attornment Agreement
Exhibit E Work Letter
Exhibit F 2006 Estimated Operating Expenses

i. "Landlord's Notice Address" shall mean c/o Chrisman Commercial 5777 Central
Avenue, Suite 110, Boulder CO 80301, Attn: Steven Chrisman, or such other
address as Landlord may from time-to-time designate.

j. “Lease Year” shall mean each twelve month period during the Primary Lease
Term or extension thereof.

k. “Operating Expenses” shall mean all costs and expenses of every kind and
nature paid or incurred by Landlord in the operation, management, repair,
maintenance and administration of the Building as set forth in Paragraph 6
below.

l. “Parking Spaces” shall mean eighty-six (86) unassigned and uncovered parking
spaces in areas on the Property, which Landlord designates from time-to-time for
parking by tenants in the Building.

m. "Premises" shall mean those certain premises located on the first and second
floor of the Building known as Suite 200, which the parties agree is comprised
of approximately 21,012 rentable square feet as depicted on Exhibit A attached
hereto.

n. "Primary Lease Term." Subject to adjustment as set forth in Paragraph 3b
below, the term of the Lease shall commence at 12:01 a.m. on the 1st day of
December, 2006 and shall terminate at 12:00 midnight on the 31st day of January,
2012, unless modified pursuant to paragraph 3(b), a term of five (5) years and
two (2) months.

o. "Prime Rate" shall mean the rate quoted from time-to-time in the Money Rates
section of The Wall Street Journal that leading banks are charging to their most
credit-worthy customers.

p. "Property" shall mean that certain real property on which the Building is
situated, located in Boulder, Colorado more particularly described as Lot 3,
Longbow Park, County of Boulder, State of Colorado.

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q. "Rent" shall mean Basic Rent together with all other monetary obligations (or
other obligations which are capable of being reduced to a monetary sum) under
this Lease.

r. "Rentable Area" shall mean 39,626 square feet which is all rentable space
available for lease in the Building. If there is a significant change in the
aggregate Rentable Area as a result of an addition to the Building, partial
destruction thereof, modification to the design of the Building, or similar
cause which causes a reduction or increase thereto on a permanent basis,
Landlord shall make such adjustment in the computations as shall be necessary to
provide for any such change. Tenant agrees that the Rentable Area may be
recalculated in the event that the Building and/or the Premises is re-measured.
Notwithstanding such re-measurement, Tenant's Pro Rata Share and Base Rent shall
not be increased or decreased during the Primary Lease Term.

s.  “Reserve Amount” shall mean a reserve for replacement of heating,
ventilating and air-conditioning unit, replacement of the roof, and parking lot
in the amount of NINETEEN THOUSAND EIGHT HUNDRED THIRTEEN AND NO/100’s Dollars
($19,813.00)).

t. “Security Deposit" shall mean the sum of TWENTY-FOUR THOUSAND FOUR HUNDRED
TWENTY-SIX AND 45/100’s Dollars ($24,426.45).

u. "Tenant's Notice Address" shall mean 6075 Longbow Drive, Suite 200, Boulder,
Colorado 80301.

v. "Tenant's Permitted Use" shall mean administrative offices and assembly,
machine shop, and grow labs for Tenant’s in-home garden unit.

w. "Tenant's Pro Rata Share" shall mean 55.8166%. This percentage is calculated
by dividing the Premises square footage by 95% of the Rentable Area. In the
event Tenant at any time during the Primary Lease Term, or any extensions
thereof, leases additional space in the Building, Tenant's Pro Rata Share shall
be recomputed by dividing the total rentable square footage of the Premises then
being leased by Tenant (including any additional space) by 95% of the Rentable
Area and the resulting percentage shall become Tenant's Pro Rata Share.

2. PREMISES. In consideration of the payment of Rent and the keeping and
performance of the covenants and agreements by Tenant, as hereinafter set forth,
Landlord hereby leases and demises unto Tenant the Premises, together with a
non-exclusive right, subject to the provisions hereof, to use all appurtenances
thereto, including the Common Areas.

3. COMPLETION OF THE PREMISES AND POSSESSION.

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a. If the Premises have never been occupied and are not completed as of the date
this Lease is entered into and Landlord has agreed to complete the same to any
extent or the Premises have previously been occupied, but Landlord has agreed to
perform remodeling work thereon, provisions with respect to such completion or
remodeling will be set forth in a work letter to be executed between Landlord
and Tenant concurrently herewith (the "Work Letter"), the form of which is
attached hereto as Exhibit E. Other than as set forth in the Work Letter,
Landlord shall have no obligation for the completion or remodeling of the
Premises, and Tenant shall accept the Premises in their "as is" condition on the
date the Primary Lease Term commences. If Landlord is to complete or remodel the
Premises and if the Premises are not "Ready for Occupancy," as hereafter
defined, on the date the Primary Lease Term is to begin, Tenant's obligation to
pay the Base Rent, its Pro Rata Share of increases in Operating Expenses, and
other sums owing hereunder shall not commence until the Premises are Ready for
Occupancy, provided, however, from the effective date hereof, other than the
payment of Rent, this Lease, and all of the covenants, conditions, and
agreements herein contained shall be in full force and effect. The postponement
of Tenant's obligation to pay Rent and other sums herein provided to be paid by
Tenant for such period prior to the delivery of the Premises to Tenant, Ready
for Occupancy, as hereinafter defined, shall be in full settlement of all claims
which Tenant might otherwise have by reason of the Premises not being Ready for
Occupancy on the date the Primary Lease Term is scheduled to begin. However, if
Tenant takes possession of all or any part of the Premises prior to the date the
Premises are Ready for Occupancy for the purpose of conducting its usual
business therein, all terms and provisions of this Lease shall apply, including
the obligations for the payment of all Rent, and other amounts owing hereunder.
"Ready for Occupancy" as used herein shall mean the date that Landlord shall
have substantially completed the Premises or any remodeling work to be performed
by Landlord, to the extent agreed to in the Work Letter. The issuance of all
required certificate(s) of occupancy (temporary or permanent), final inspection
or other approval from the governmental authority having jurisdiction over the
Building allowing the Tenant to occupy the Premises shall control conclusively
the date upon which the Premises are Ready for Occupancy, and the obligation to
pay Rent begins as aforesaid. In addition to the above, if Landlord is delayed
in delivering the Premises to Tenant due to the failure of a prior occupant to
vacate the same, then the obligation for the payment of Rent and the
commencement of the term hereof shall also be postponed, as hereinabove set
forth, and such postponement shall be in full settlement of all claims which
Tenant may otherwise have by reason of such delay of delivery.

b. If the commencement of the Primary Lease Term is delayed pursuant to
Paragraph 3a above, and such commencement occurs on a day other than the first
day of the month, the Commencement Date of the Primary Lease Term shall be
further delayed until the first day of the following month and Tenant shall pay
proportionate Rent at the same monthly rate set forth herein (also in advance)
for such partial month. In the event said Commencement Date is so delayed, the
expiration of the term hereof shall be extended so that the Primary Lease Term
will continue for the full period set forth in Paragraph 1 hereof. As soon as
the Primary Lease Term commences, Landlord and Tenant shall execute an addendum
to this Lease, if requested by either party, setting forth the exact date on
which the Primary Lease Term commenced and the expiration date of the Primary
Lease Term.

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c.  Tenant may take possession of part of the Premises that are the subject of a
separate certificate of occupancy prior to the date the entire Premises are
Ready for Occupancy (“Partial Occupancy”). If a portion of the Premises of at
least one of the two floors to be occupied is approved for occupancy, all terms
and provisions of this Lease shall apply, however Tenant shall only be
responsible for a pro rata portion of the Rent and Additional Rent during the
period commencing with the date the Tenant occupies the partially completed
portion of the Premises and the date the entire Premises is Ready for Occupancy.
A Partial Occupancy shall not be deemed as the commencement of the Primary Lease
Term.

d. Landlord represents and warrants that, to the best of Landlord’s knowledge,
as of the commencement of the Primary Lease Term all Building systems are in
good working order and condition, including base Building HVAC, electrical, fire
and life safety systems, plumbing and other mechanical systems, and all other
elements constituting the base Building shell and if not Landlord will be
responsible for making and paying for the necessary repairs.

4. RENT. Tenant agrees to pay to Landlord as Base Rent, without prior notice or
demand, the following amounts:

Schedule of Base Rent
 
     

Month(s)
   
Monthly Base Rent
   
Annual Base Rent
                 
Dec 2006-Jan 2007
 
$
0.00
                       
Feb 2007-Jan 2008
 
$
15,759.00
 
$
189,108.00
                 
Feb 2008-Jan 2009
 
$
17,510.00
 
$
210,120.00
                 
Feb 2009-Jan 2010
 
$
18,385.50
 
$
220,626.00
                 
Feb 2010-Jan 2011
 
$
18,385.50
 
$
220,626.00
                 
Feb 2011-Jan 2012
 
$
19,261.00
 
$
231,132.00
                 
Total Base Rent:
       
$
1,071,612.00
 

 
Tenant shall begin to pay the Base Rent on the date the Primary Lease Term
commences and thereafter on the first day of each month during the term hereof.
All Rents shall be paid in advance, without notice, set off, abatement,
counterclaim, deduction or diminution, at the Colorado Group, 3434 47th Street,
Suite 220, Boulder, Colorado 80301, Attn: Susan Chrisman, or at such place as
Landlord from time-to-time designates in writing. Tenant shall pay its first
installment of Basic Rent to Landlord simultaneously with its execution of this
Lease. In addition, Tenant shall pay to Landlord Tenant's Pro Rata Share of
Operating Expenses as provided herein and such other charges as are required by
the terms of this Lease to be paid by Tenant which shall be referred to herein
as "Additional Rent." Landlord shall have the same rights as to the Additional
Rent as it has in the payment of Base Rent.
 
 
 

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5. SECURITY DEPOSIT. Simultaneously with its execution of this Lease, Tenant
shall deposit with Landlord the Security Deposit set forth in Paragraph 1t
above, which shall be held by Landlord as security for the faithful performance
by Tenant of all the terms, covenants, and conditions of this Lease to be kept
and performed by Tenant during the term hereof. If Tenant defaults with respect
to any provision of this Lease, including, but not limited to the provisions
relating to the payment of Rent, Landlord may (but shall not be required to)
use, apply or retain all or any part of the Security Deposit for the payment of
any Rent or for the payment of any amount which Landlord may spend or become
obligated to spend by reason of Tenant's default, or to compensate Landlord for
any other loss or damage which Landlord may suffer by reason of Tenant's
default. If any portion of said Security Deposit is so used or applied, Tenant
shall within five (5) days after written demand therefor, deposit cash with
Landlord in an amount sufficient to restore the Security Deposit to its original
amount and Tenant's failure to do so shall be an Event of Default under this
Lease. Landlord shall not be required to keep the Security Deposit separate from
its general funds, and Tenant shall not be entitled to interest on the Security
Deposit. If Tenant shall fully and faithfully perform every provision of this
Lease to be performed by it, the Security Deposit or any balance thereof shall
be returned to Tenant (or at Landlord's option, to the last assignee of Tenant's
interest hereunder) within sixty (60) days after the expiration of the Primary
Lease Term or any extension period thereof.

6. OPERATING EXPENSES.

a. Operating Expenses means all reasonable and necessary costs and expenses of
every kind and nature, other than those expressly excluded below, paid or
incurred by Landlord in operating, managing, repairing, maintaining and
administering the Building including, without limitation:

(1) The cost of all insurance required to be kept by Landlord pursuant to this
Lease or by any lender with respect to the Property, and any other insurance
customarily procured for other commercial buildings in the same geographical
area as the Building or which Landlord may reasonably elect to obtain with
respect to the operation or ownership of the Property and the part of any claim
required to be paid under the deductible portion of any insurance policies
carried by Landlord in connection with the Property.

(2) The cost of general repairs, maintenance and replacements, made from
time-to-time by Landlord to the Property, including costs under mechanical or
other maintenance contracts and repairs and replacements of equipment used in
connection with such maintenance and repair work. The foregoing excludes capital
expenditures as defined in Paragraph 6b(4) and costs for replacement of heating,
ventilating and air-conditioning units, replacement of the roof, and parking lot
which are provided for by the Reserve Amount ,
 
 
 

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(3) The cost of pest control, security services, window cleaning, janitorial and
snow and ice removal services.

(4) The cost of maintaining and repairing common areas, maintaining and
repairing landscaping, and of maintaining and operating fire detection, fire
prevention, lighting and communications systems.

(5) The cost of all utilities (including, without limitation, water, sewer, gas
and electricity) used or consumed.

(6) Remuneration (including wages, usual expense accounts and fringe benefits,
costs to Landlord of workmen's compensation and disability insurance and payroll
taxes) and fees of persons and companies to the extent directly engaged in
operating, repairing, maintaining, or administering the Property.

(7) The cost of professional property management fees (not to exceed 6% of Basic
Rental for the Property) and costs incurred by Landlord or its agents in
engaging accountants or other consultants to assist in making the computations
required hereunder.

(8) The cost of capital improvements and structural repairs and replacements
made in, on or to the Property that are [a] made in order to conform to changes
subsequent to the Commencement Date in any applicable laws, ordinances, rules,
regulations or orders of any governmental or quasi-governmental authority having
jurisdiction over the Property; [b] designed primarily or intended to reduce
Operating Expenses or the rate of increase in Operating Expense; or [c] incurred
for redecoration, renovation or replacement of floor coverings of Common Areas.
Landlord and Tenant agree that redecoration should not be required for the
Preliminary Lease Term. The items set forth above in [a] through [c] above shall
hereafter be collectively referred to as the “Capital Improvements.” The cost of
such Capital Improvements shall be charged by Landlord to Operating Expense in
equal annual installments over the useful life of such Capital Improvement (as
reasonably determined by Landlord) together with interest on the balance of the
unreimbursed cost at 4% above the Prime Rate.

(9) All real property taxes and assessments levied against the Building by any
governmental or quasi-governmental authority. The foregoing shall include any
taxes, assessments, surcharges, or service or other fees of a nature not
presently in effect which shall hereafter be levied on the Building as a result
of the use, ownership or operation of the Building or for any other reason,
whether in lieu of or in addition to, any current real estate taxes and
assessments; provided, however, any taxes which shall be levied on the rentals
of the Building shall be determined as if the Building were Landlord's only
property and, provided further, that in no event shall the term "taxes or
assessments," as used herein, include any net federal or state income taxes
levied or assessed on Landlord, unless such taxes are a specific substitute for
real property taxes. Such term shall, however, include gross taxes on rentals.
Expenses incurred by Landlord for tax consultants and in contesting the amount
or validity of any such taxes or assessments shall be included in such
computations. The term “assessment” shall include so-called special assessments,
license tax, business license fee, business license tax, commercial rental tax,
levy, charge, penalty or tax, imposed by any authority having the direct power
to tax, including any city, county, state or federal government, or any school,
agricultural, lighting, water, drainage or other improvement or special district
thereof, against the Premises, the Building, or the Property or any legal or
equitable interest of Landlord therein. For the purposes of this Lease, any
special assessments shall be deemed payable in such number of installments as is
permitted by law, whether or not actually so paid. Tenant shall not be
responsible to pay any fines, late charges or penalties assessed against
Landlord as a result of Landlord's failure to timely pay such taxes and
assessments.
 
 
 

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(10) Other costs and expenses, including supplies, not otherwise expressly
excluded hereunder attributable to the operation, management, repair,
maintenance and administration of the Property.

(11) The Reserve Amount.
 
b. Operating Expenses shall not, however, include the following:

(1) Any charge for depreciation of the Building and any principal, interest or
other finance charge.

(2) The cost of any work, including painting, decorating and work in the nature
of tenant finish, which Landlord performs for any tenant in the Building.

(3) The cost of repairs, replacements or other work occasioned by insured
casualty or defects in construction or equipment to the extent such cost is
reimbursed to Landlord (or not charged to Landlord) by reason of collected
insurance proceeds (using Landlord's good faith efforts to collect such
proceeds) or any contractors', manufacturers' or suppliers' warranties.

(4) Expenditures required to be capitalized for federal income tax purposes
before any reductions for accelerated depreciation or other alternative expense
method of such expenditures allowable under federal income tax regulations
(except as expressly authorized in Paragraph 6a(8) herein).
 
(5) Leasing commissions, advertising expenses and other costs incurred in
leasing space in the Building except as otherwise expressly provided in this
Lease.

 
 

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(6) The cost of repairing or rebuilding necessitated by condemnation.

(7) The cost of any damage to the Property or any settlement, payment or
judgment incurred by Landlord, resulting from Landlord's tortious act, neglect
or breach of this Lease that is not covered by insurance proceeds.

(8) Costs (including, without limitation, attorneys fees) incurred by Landlord
in attempting to collect Rent or evict tenants from the Building.

(9) Costs, including, without limitation, any penalties, fines and legal
expenses incurred by Landlord or any other tenant in the Building as a result of
a violation of any federal, state or local law, code or regulation.

c. Costs for maintenance of HVAC equipment for the Premises shall be charged to
Tenant by Landlord as costs are incurred and shall be paid by Tenant
concurrently with Tenant’s payment of Rent. Landlord shall use reasonable
efforts to allocate such HVAC maintenance charges equitably among the tenants
whose Premises are served by such equipment.

d. On the date the Primary Lease Term commences and continuing each month
thereafter during the Primary Lease Term (and any extension thereof) Tenant
shall pay to Landlord, at the same time as the Base Rent is paid, an amount
equal to one-twelfth (1/12) of Landlord's estimate of Tenant's Pro Rata Share of
Operating Expenses for the particular calendar year, with a final adjustment to
be made between the parties at a later date for said calendar year in accordance
with the procedures set forth herein.
 
(1) As soon as practicable following the end of each calendar year, but in no
event later than one hundred and fifty (150) days after the end of the calendar
year, during the Primary Lease Term, or any extension thereof, Landlord shall
submit to Tenant a statement prepared by a representative of Landlord setting
forth the exact amount of Tenant's Pro Rata Share of the Operating Expenses for
the calendar year just completed. Beginning with each subsequent calendar year,
it shall also set forth the estimated amount of Tenant's Pro Rata Share of
Operating Expenses for the new calendar year. In no event will the Rent to be
paid by Tenant hereunder ever be less than the Base Rent set forth in Paragraph
1 above.

(2) To the extent that Tenant's Pro Rata Share of Operating Expenses for the
period covered by such statement is different from the estimated amount upon
which Tenant paid during the calendar year just completed, Tenant shall pay to
Landlord the difference within twenty (20) days following receipt by Tenant of
such statement from Landlord or receive a credit on the next months' rental
owing hereunder, as the case may be. Upon request, Landlord shall make available
to Tenant for its review or audit, Landlord’s records of estimated or actual
Operating Expenses. Until Tenant receives such statement, Tenant's monthly Rent
for the new calendar year shall continue to be paid at the rate paid for the
calendar year just completed, but Tenant shall commence payment to Landlord of
the monthly installments of Rent on the basis of said statement beginning on the
first day of the month following the month in which Tenant receives such
statement. Moreover, Tenant shall pay to Landlord or deduct from the Rent, as
the case may be, on the date required for the first payment of Rent, as
adjusted, the difference, if any, between the monthly installments of Rent so
adjusted for the new calendar year and the monthly installments of Rent actually
paid during the new calendar year.

 
 

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(3)  If, during any particular calendar year, there is a change in the
information on which Landlord based the estimate upon which Tenant is then
making its estimated rental payments so that such estimate furnished to Tenant
is no longer accurate, Landlord shall be permitted to revise such estimate by
notifying Tenant and there shall be such adjustments made in the monthly rental
on the first day of the month following the serving of such statement on Tenant
as shall be necessary by either increasing or decreasing, as the case may be,
the amount of monthly Rent then being paid by Tenant for the balance of the
calendar year as well as an appropriate adjustment in cash based upon the amount
theretofore paid by Tenant during such particular calendar year pursuant to the
prior estimate (but in no event shall any such decrease result in a reduction of
the Base Rent).

e. Landlord's and Tenant's responsibilities with respect to the Operating
Expense adjustment described herein shall survive the expiration or early
termination of this Lease, and Landlord shall have the right to retain the
Security Deposit, or so much thereof as it deems necessary, to secure such
payment attributable to the year in which this Lease terminates.

f. If Tenant shall dispute the amount of an adjustment submitted by Landlord or
the proposed estimated increase or decrease on the basis of which Tenant's Rent
is to be adjusted as provided in Paragraphs 6d(2) or 6d(3) above, Tenant shall
give Landlord written notice of such dispute within thirty (30) days after
Landlord advises Tenant of such adjustment or proposed increase or decrease. If
Tenant does not give Landlord such notice within such time, then Tenant shall be
deemed to have waived its right to dispute the amounts so determined. If Tenant
timely objects, Tenant shall have the right to engage its own certified public
accountants ("Tenant's Accountants") for the purpose of verifying the accuracy
of the statement complained of or the reasonableness of the estimated increase
or decrease. If Tenant's Accountants determine that an error has been made,
Landlord and Tenant's Accountants shall use reasonable efforts to agree upon the
matter, failing which the parties shall settle the dispute by arbitration or in
such other manner as they agree. Notwithstanding the pendency of any dispute
over any particular statement, Tenant shall continue to pay Landlord the amount
of the adjusted monthly installments of Rent determined by Landlord until the
adjustment has been determined to be incorrect as aforesaid. A delay by Landlord
in submitting any statement contemplated herein for any calendar year shall not
affect the provisions of this Paragraph 6 or constitute a waiver of Landlord's
rights as set forth herein for said calendar year or any subsequent calendar
years during the Primary Lease Term and any extensions thereof.
 
 
 

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g. Notwithstanding anything contained herein to the contrary, if any lease
entered into by Landlord with any tenant in the Building provides for a separate
basis of computation for any Operating Expenses with respect to its premises,
then, to the extent that Landlord determines that an adjustment should be made
in making the computations herein provided for, Landlord shall be permitted to
modify the computation of Operating Expenses and Rentable Area for a particular
calendar year, in order to eliminate or otherwise modify any such expenses which
are paid for in whole or in part by such tenant. Furthermore, in making any
computations contemplated hereby, Landlord shall also be permitted to make such
adjustments and modifications to the provisions of this Paragraph 6 as shall be
reasonably necessary to achieve a fair and equitable allocation of the costs to
the Tenant based upon Tenant’s usage of such services and the intention of the
parties within this Paragraph 6.

h. The list of estimated operating expenses for the calendar year 2006 is
attached hereto as Exhibit F. The Operating Expenses for the calendar year 2006
are estimated to be $186,588.00 per year or $4.96 per rentable square foot per
year. Landlord makes no representations that the Operating Expenses will be any
more or less than the attached estimate. The pro rata portion of the $4.96 per
rentable square foot per year rate shall be paid by Tenant monthly with the
Basic Rent through the end of the first full calendar year of the Primary Lease
Term.

7. USE. Tenant shall use the Premises for Tenant’s Permitted Use and shall not
use or permit the Premises to be used for any other purpose without the prior
written consent of Landlord. Tenant shall not do or permit anything to be done
in or about the Premises nor bring or keep anything therein which will in any
way increase the existing rate or affect any fire or other insurance upon the
Building or any of its contents, or cause cancellation of any insurance policy
covering said Building or any part thereof or any of its contents. Tenant shall
not do or permit anything to be done in or about the Premises which will, in any
way, obstruct or interfere with the rights of other tenants or occupants of the
Building or injure or annoy them or use or allow the Premises to be used for any
improper, immoral, unlawful or objectionable purpose, nor shall Tenant cause,
maintain or permit any nuisance in, on or about the Premises. Tenant shall not
commit or suffer to be committed any waste in or upon the Premises. Tenant shall
comply with the Rules and Regulations for the Premises, as further described in
Paragraph 18.

8. COMPLIANCE WITH LAW. Tenant shall not use the Premises or permit anything to
be done in or about the Premises which will, in any way, conflict with any law,
statute, ordinance or governmental rule or regulation now in force or which may
hereafter be enacted or promulgated. Tenant shall, at its sole cost and expense,
promptly comply with all laws, statutes, ordinances and governmental rules,
regulations or requirements now in force or which may hereafter be in force, and
with the requirements of any board of fire insurance underwriters or other
similar bodies now or hereafter constituted, relating to, or affecting the
condition, use or occupancy of the Premises. The judgment against Tenant,
whether Landlord be a party thereto or not, that Tenant has violated any law,
statute, ordinance or governmental rule, regulation or requirement, shall be
conclusive of that fact as between Landlord and Tenant.

 
 

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9. ALTERATIONS AND ADDITIONS. Tenant shall not make or suffer to be made any
alterations, additions or improvements (collectively, “Alterations”) to or of
the Premises or any part thereof without the prior written consent of Landlord,
which shall not be unreasonably withheld. Any Alterations to or of said
Premises, including, but not limited to, wall covering, paneling and built-in
cabinet work, but excepting movable furniture and trade fixtures, shall, on the
expiration of the term, become a part of the realty and belong to Landlord and
shall be surrendered with the Premises. In the event Landlord consents to the
making of any Alterations to the Premises by Tenant, the same shall be made by
Tenant at its sole cost and expense, and any contractor or person selected by
Tenant to make the same, must first be reasonably approved of in writing by
Landlord. Upon the expiration or earlier termination of the term hereof, Tenant
shall, upon the written demand by Landlord, at Tenant's sole cost and expense,
forthwith and with all due diligence, remove any Alterations which have been
designated by Landlord to be removed, and repair any damage to the Premises
caused by such removal. Tenant may, at Tenant’s option, request that Landlord
make a determination as to whether Landlord will waive the preceding sentence at
the time Tenant obtains approval from Landlord for such Alterations.

10. REPAIRS. 

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

b. Landlord shall repair and maintain the structural portions of the Building,
including the roof, basic plumbing, air conditioning, heating, and electrical
and sprinkler systems installed or furnished by Landlord, unless such
maintenance and repairs are caused in part or in whole by the act, neglect,
fault or omission of any duty by Tenant, its agents, servants, employees or
invitees, in which case Tenant shall pay to Landlord the reasonable cost of such
maintenance and repairs. The cost of all such repairs (except repairs of
structural defects) shall be included in Operating Expenses. Landlord shall not
be liable for any failure to make any such repairs or to perform any maintenance
unless such failure shall persist for an unreasonable time after written notice
of the need of such repairs or maintenance is given to Landlord by Tenant.
Except as specifically provided in Paragraph 21 below regarding reconstruction
after a casualty, there shall be no abatement of Rent and no liability of
Landlord by reason of any injury to or interference with Tenant's business
arising from the making of any repairs, alterations or improvements in or to any
portion of the Building or the Premises or in or to fixtures, appurtenances and
equipment therein. Except as provided in Paragraph 10 c and Paragraph 10 d
below, Tenant waives the right to make repairs at Landlord's expense under any
law, statute or ordinance now or hereafter in effect.

 
 

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c. Notwithstanding the foregoing, if Landlord fails to make any repairs or to
perform any maintenance required of Landlord hereunder and within Landlord’s
reasonable control, and such failure shall persist for an unreasonable time (not
less than fifteen (15) days) after written notice of the need for such repairs
or maintenance is given to Landlord and unless Landlord has commenced such
repairs or maintenance during such period and is diligently pursuing the same,
Tenant may (but shall not be required to) following a second notice (which
notice shall have a heading in at least 12-point type, bold and all caps
“FAILURE TO RESPOND SHALL RESULT IN TENANT EXERCISING SELF-HELP RIGHTS”) and
Landlord’s failure to commence repairs within five (5) days after receipt of
such second notice, perform such repairs or maintenance in accordance with the
provisions of this Lease governing Tenant’s repairs and Alterations and Tenant
shall be entitled to offset all third party costs and expenses incurred by
Tenant therefor against the next monthly installment of Rent, provided Tenant
delivers to Landlord appropriate invoices and back-up documentation regarding
such costs and expenses.

d. Notwithstanding any of the foregoing, in the event of an emergency involving
imminent threat to life or substantial property damage, which shall include
potential damage to Tenant’s growing laboratories for plants and Tenant’s
computer systems, Tenant shall be permitted to proceed, at Tenant’s option, to
repair or otherwise rectify such imminent threat and Tenant shall be entitled to
offset all third party costs and expenses incurred by Tenant therefor against
the next monthly installment of Rent.

11. LIENS. Tenant shall keep the Premises and the Property free from any liens
arising out of any work performed, materials furnished or obligations incurred
by Tenant. Landlord may require, at Landlord's sole option, that Tenant shall
provide to Landlord, at Tenant's sole cost and expense, a lien and completion
bond or other security reasonably acceptable to Landlord in an amount equal to
one and one-half (1-1/2) times any and all estimated cost of improvements,
additions, or alterations in the Premises, to insure Landlord against any
liability for mechanics' and materialmen's liens and to insure completion of the
work.

12. ASSIGNMENT AND SUBLETTING. Except as expressly provided below, Tenant shall
not either voluntarily or by operation of law, assign or transfer this Lease or
any portion or interest therein, and shall not sublet the said Premises or any
part thereof, or any right or privilege appurtenant thereto, or suffer any other
person (the employees, agents, servants and invitees of Tenant excepted) to
occupy or use the said Premises, or any portion thereof, without the prior
written consent of Landlord, which will not be unreasonably withheld. Tenant may
not mortgage, pledge or encumber this Lease without Landlord’s prior written
consent which may be withheld in Landlord’s sole and absolute discretion. The
consent to one assignment, subletting, occupation or use by any other person
shall not be deemed to be a consent to any subsequent assignment, subletting,
occupation or use by another person. Any such assignment or subletting without
such consent shall be void, and shall, at the option of Landlord, constitute an
Event of Default under this Lease.

 
 

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Any Rent or other consideration realized by Tenant under any such assignment,
subletting or occupancy in excess of the Basic Rental and other sums payable
hereunder, after amortization of the reasonable and documented costs incurred by
Tenant for leasing commissions and leasehold improvements in connection with
such assignment, subletting or occupancy over the term of such assignment,
subletting or occupancy, shall be paid to Landlord by Tenant. Landlord may
charge a reasonable fee not to exceed $1,000 to pay for its expenses to review
any proposed assignment, sublease, or encumbrance.

13. HOLD HARMLESS.

a. Tenant shall indemnify and hold harmless Landlord against and from any and
all claims arising from Tenant's use of the Premises for the conduct of its
business or from any activity, work, or other thing done, permitted or suffered
by Tenant in or about the Property, and shall further indemnify and hold
harmless Landlord against and from any and all claims arising from any breach or
default in the performance of any obligation on Tenant's part to be performed
under the terms of this Lease, or arising from any act or negligence of Tenant,
or any officer, agent, employee, guest, or invitee of Tenant, and from all and
against all costs, reasonable attorneys' fees, expenses and liabilities incurred
in or about any such claim or any action or proceeding brought thereon, and, in
any case, action or proceeding be brought against Landlord by reason of any such
claim, Tenant, upon notice from Landlord shall defend the same at Tenant's
expense. Tenant, as a material part of the consideration to Landlord, hereby
assumes all risk of damage to property or injury to persons, in, upon or about
the Premises, from any cause other than Landlord's gross negligence or willful
and wanton acts. Landlord or its agents shall not be liable for any damage to
property entrusted to employees of the Building, nor for loss or damage to any
property by theft or otherwise, nor for any injury to or damage to persons or
property resulting from fire, explosion, falling plaster, steam, gas,
electricity, water or rain which may leak from any part of the Building or from
the pipes, appliances or plumbing works therein or from the roof, street or
subsurface or from any other place resulting from dampness or any other cause
whatsoever, unless caused by or due to the gross negligence or willful and
wanton acts of Landlord, its agents, servants or employees. Landlord or its
agents shall not be liable for interference with the light or other incorporeal
hereditament, loss of business by Tenant, nor shall Landlord be liable for any
latent defects in the Premises or in the Building. Tenant shall give prompt
notice to Landlord in case of fire or accidents in the Premises or in the
Building or of defects therein.

b. Landlord shall indemnify and hold harmless Tenant against and from any and
all claims arising from Landlord's activity, work, or other thing done,
permitted or suffered by Landlord in or about the Property, and shall further
indemnify and hold harmless Tenant against and from any and all claims arising
from any breach or default in the performance of any obligation on Landlord's
part to be performed under the terms of this Lease, or arising from any act or
negligence of Landlord, or any officer, agent, or employee of Landlord, and from
all and against all costs, reasonable attorneys' fees, expenses and liabilities
incurred in or about any such claim or any action or proceeding brought thereon,
and, in any case, action or proceeding be brought against Tenant by reason of
any such claim, Landlord, upon notice from Tenant shall defend the same at
Landlord's expense.

 
 

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14. SUBROGATION. Landlord and Tenant hereby mutually waive their respective
rights of recovery against each other for any loss, damage or claim under any
fire, extended coverage and other property insurance policies actually
maintained by such party or required to be maintained by such party under the
terms of this Lease. Each party shall obtain any special endorsements, if
required by their insurer to evidence compliance with the aforementioned waiver.

15. LIABILITY INSURANCE. Tenant shall, at Tenant's expense, obtain and keep in
force during the term of this Lease a policy of comprehensive public liability
insurance with limits not less than $2,000,000, combined single limit, insuring
Landlord and Tenant against any liability arising out of the ownership, use,
occupancy or maintenance of the Premises and all areas appurtenant thereto, as
their interests may appear. The limit of said insurance shall not, however,
limit the liability of Tenant hereunder. Tenant may carry said insurance under a
blanket policy, providing, however, said insurance by Tenant shall have a
Landlord's protective liability endorsement attached thereto. If Tenant shall
fail to procure and maintain said insurance, Landlord may, but shall not be
required to, procure and maintain same, but at the expense of Tenant. Tenant
shall deliver to Landlord prior to occupancy of the Premises certificates
evidencing the existence and amounts of such insurance. No policy shall be
cancelable or subject to reduction of coverage except after thirty (30) days'
prior written notice to Landlord.

16. SERVICES AND UTILITIES. Landlord agrees to furnish to the Premises during
reasonable hours of generally recognized business days, electricity for normal
lighting and fractional horsepower office machines and heat and air conditioning
to keep the Premises in a condition consistent with other similar buildings in
the Boulder area. If Tenant wishes to have air conditioning and heat to the
Premises between the hours of 6pm and 6:30am Monday through Friday and the 48
hours of Saturday and Sunday, Tenant agrees to pay for the cost of the system as
estimated by an independent HVAC maintenance company. Landlord shall also
maintain and keep lighted the common stairs, common entries and toilet rooms in
the Building of which the Premises are a part. Landlord shall not be liable for,
and Tenant shall not be entitled to, any reduction of rental by reason of
Landlord's failure to furnish any of the foregoing when such failure is caused
by accident, breakage, repairs, strikes, lockouts or other labor disturbances or
labor disputes of any character, or by any other cause, similar or dissimilar,
beyond the reasonable control of Landlord. Landlord shall not be liable under
any circumstances for a loss or injury to property, however occurring, through
or in connection with or incidental to failure to furnish any of the foregoing,
except as to Landlord's gross negligence or willful and wanton acts. Wherever
heat generating machines or equipment are used in the Premises which affect the
temperature otherwise maintained by the air conditioning system, Landlord
reserves the right to install supplementary air conditioning equipment in the
Premises and the cost thereof, including the cost of installation, and the cost
of operation and maintenance thereof shall be paid by Tenant to Landlord within
ten (10) days after demand by Landlord.
 
 
 

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Tenant will not, without written consent of Landlord, use any apparatus or
device in the Premises, including, but without limitation thereto, electronic
data processing machines, punch card machines, and machines using in excess of
120 volts, which will in any way increase the amount of electricity usually
furnished or supplied for the use of the Premises as general office space; nor
connect with electric current except through existing electrical outlets in the
Premises, any apparatus or device, for the purpose of using electric current. If
Tenant shall require water or electric current in excess of that usually
furnished or supplied for the use of the Premises as general office space,
Tenant shall first procure the reasonable prior written consent of Landlord.
Landlord may cause a water meter or electrical current meter to be installed in
the Premises, so as to measure the amount of water and electric current consumed
for any such use. The cost of any such meters and of installation, maintenance
and repair thereof shall be paid for by Tenant and Tenant agrees to pay to
Landlord promptly upon demand therefor by Landlord for all such water and
electric current consumed as shown by said meters at the rates charged for such
services by the local public utility furnishing the same, plus an additional
expense as reasonably determined by Landlord incurred in keeping account of the
water and electric current so consumed. If a separate meter is not installed,
such excess cost for such water and electric current will be established by an
estimate made by a utility company or electrical engineer.

Landlord acknowledges that Tenant will require electricity and air conditioning
for Tenant’s grow lab facilities twenty four hours per day, three hundred and
sixty five days per year and Landlord and Tenant agree that a check meter shall
be installed as part of the Tenant Improvements to measure Tenant‘s additional
electrical usage related to such requirement associated with Tenants grow lab
facilities.

17. PERSONAL PROPERTY TAXES. Tenant shall pay, or cause to be paid, before
delinquency, any and all taxes levied or assessed and which become payable
during the term hereof upon all Tenant's leasehold improvements, equipment,
furniture, fixtures and personal property located in the Premises; except that
which has been paid for by Landlord, and is the standard of the Building. In the
event any or all of Tenant's leasehold improvements, Alterations, equipment,
furniture, fixtures and personal property shall be assessed and taxed with the
Building, Tenant shall pay to Landlord its share of such taxes within thirty
(30) days after receipt by Tenant from Landlord of a statement in writing
setting forth the amount of such taxes applicable to Tenant's property which
statement shall include a copy of the tax bill.

18. RULES AND REGULATIONS. The current Rules and Regulations for the Premises
are attached hereto as Exhibit B and are incorporated herein by this reference.
Tenant shall faithfully observe and comply with the Rules and Regulations that
Landlord shall, from time-to-time, promulgate. Landlord reserves the right, from
time-to-time, to make all reasonable additions and modifications to said Rules
and Regulations, which shall be binding upon Tenant upon delivery of a copy of
them to Tenant. Landlord shall not be responsible to Tenant for the
nonperformance of any said Rules and Regulations by any other tenants or
occupants. Landlord will use commercially reasonable efforts to apply and
enforce the Rules and Regulations in a non-discriminatory manner.
 
 
 

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19. HOLDING OVER. Tenant shall have no right to hold over after the term without
the express prior written consent of Landlord which may be withheld in
Landlord’s sole and absolute discretion. If Tenant remains in possession of the
Premises or any part after the expiration of the term hereof, without the
express written consent of Landlord, such occupancy shall be on all terms of
this Lease except on a month-to-month basis and at a rental in the amount of one
and one-half times the last monthly Rent.

20. ENTRY BY LANDLORD. Landlord reserves, and shall during normal business hours
upon reasonable notice to Tenant (which may be verbal to Tenant’s on-site
manager) the right to enter the Premises, inspect the same, and to supply any
service to be provided by Landlord to Tenant hereunder, to submit said Premises
to prospective purchasers or during the last six months of the term to
prospective tenants, to post notices of non-responsibility, and to alter,
improve or repair the Premises and any portion of the Building of which the
Premises are a part that Landlord may deem necessary or desirable, without
abatement of Rent and may for that purpose in connection with any work to be
performed by Landlord under this Lease. Landlord shall not be required to give
any notice to Tenant in the event of any emergency, for recurring services
(e.g., janitorial) or if Tenant has vacated the Premises. Landlord may erect
scaffolding and other necessary structures where reasonably required by the
character of the work to be performed, always providing that the business of
Tenant shall not be interfered with unreasonably. Tenant hereby waives any claim
for damages or for any injury or inconvenience to or interference with Tenant's
business, any loss of occupancy or quiet enjoyment of the Premises, and any
other loss occasioned thereby unless caused by gross negligence or willful and
wanton acts of Landlord. For each of the aforesaid purposes, Landlord shall, at
all times, have and retain a key with which to unlock all of the doors in, upon
and about the Premises, and Landlord shall have the right to use any and all
means which Landlord may deem proper to open said doors in an emergency, in
order to obtain entry to the Premises without liability to Tenant except for the
gross negligence or willful and wanton conduct of Landlord. Any entry to the
Premises obtained by Landlord by any of said means, or otherwise shall not,
under any circumstances, be construed or deemed to be a forcible or unlawful
entry into, or a detainer of, the Premises, or an eviction of Tenant from the
Premises or any portion thereof. Tenant shall not change the locks to the
Premises without Landlord’s written consent.

21. RECONSTRUCTION. In the event the Premises, or the Building of which the
Premises are a part, are damaged by fire or other perils covered by extended
coverage insurance, Landlord agrees to forthwith repair the same to
substantially the same condition as existed immediately prior to such damage;
and this Lease shall remain in full force and effect, except that Tenant shall
be entitled to a proportionate reduction of the Rent while such repairs are
being made, such proportionate reduction to be based upon the extent to which
the damage and the making of such repairs shall materially and adversely
interfere with the business carried on by Tenant in the Premises. If the damage
is due to the fault or neglect of Tenant or its employees, there shall be no
abatement of Rent.
 
 
 

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In the event the Premises or the Building of which the Premises are a part are
damaged as a result of any cause other than the perils covered by fire and
extended coverage insurance, then Landlord shall forthwith repair the same
within one hundred and fifty (150) days of casualty, provided the extent of the
destruction be less than twenty percent (20%) of the then full replacement cost
of the Premises or the Building of which the Premises are a part. In the event
the destruction of the Premises or the Building is to an extent greater than
twenty percent (20%) of the full replacement cost, then Landlord shall have the
option: (1) to repair or restore such damage, this Lease continuing in full
force and effect, but the Rent to be proportionately reduced as hereinabove in
this Paragraph provided; or (2) give notice to Tenant at any time within thirty
(30) days after such damage terminating this Lease as of the date specified in
such notice, which date shall be no less than thirty (30) and no more than sixty
(60) days after the giving of such notice. In the event of giving such notice,
this Lease shall expire and all interest of Tenant in the Premises shall
terminate on the date so specified in such notice and the Rent, reduced by a
proportionate amount, based upon the extent, if any, to which such damage
materially interfered with the business carried on by Tenant in the Premises,
shall be paid up to date of said such termination. Notwithstanding anything to
the contrary contained in this paragraph, Landlord shall not have any obligation
whatsoever to repair, reconstruct or restore the Premises when the damage
resulting from any casualty covered under this paragraph occurs during the last
twelve (12) months of the term of this Lease or any extension thereof and in the
event of such casualty during the last twelve (12) months of the term of this
Lease, and Landlord shall have the right to terminate this Lease by giving
written notice to Tenant within thirty (30) days of such casualty.

Landlord shall not be required to repair any injury or damage by fire or other
cause, or to make any repairs or replacements of any panels, decoration, office
fixtures, railings, floor coverings, partitions, or any other property installed
in the Premises by Tenant unless covered by Landlord's insurance as part of the
Building.

Except as otherwise expressly authorized hereunder, Tenant shall not be entitled
to any compensation or damages from Landlord for loss of the use of the whole or
any part of the Premises or Tenant's personal property.

22. DEFAULT. The occurrence of any one or more of the following events shall
constitute an Event of Default:

a. The vacating or abandonment of the Premises by Tenant, without payment of
Rent.
 
 
 

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b. The failure by Tenant to make any payment of Rent or any other payment
required to be made by Tenant hereunder, as and when due.

c. The failure by Tenant to observe or perform any of the covenants, conditions
or provisions of this Lease to be observed or performed by Tenant, other than
described in Paragraph 22b above, where such failure shall continue for a period
of thirty (30) days after written notice thereof by Landlord to Tenant;
provided, however, that if the nature of Tenant's default is such that more than
thirty (30) days are reasonably required for its cure, then Tenant shall not be
deemed to be in default if Tenant commences such cure within said thirty (30)
day period and thereafter diligently prosecutes such cure to completion.

d. The making by Tenant of any general assignment or general arrangement for the
benefit of creditors; or the filing by or against Tenant of a petition to have
Tenant adjudged a bankrupt, or a petition of reorganization or arrangement under
any law relating to bankruptcy (unless, in the case of a petition filed against
Tenant, the same is dismissed within sixty [60] days); or the appointment of a
trustee or a receiver to take possession of substantially all of Tenant's assets
located at the Premises or of Tenant's interest in this Lease, where possession
is not restored to Tenant within thirty (30) days; or the attachment, execution
or other judicial seizure of substantially all of Tenant's assets located at the
Premises or of Tenant's interest in this Lease, where such seizure is not
discharged in thirty (30) days.

If Landlord is in default in the performance of any obligation under this Lease
on the part of Landlord to be performed and such default continues for a period
of thirty (30) days after Tenant's written notice to Landlord specifying the
nature of the default, then Tenant may exercise any right or remedy it may
possess at law or equity, which is not otherwise waived in this Lease. If the
default set forth in Tenant's notice cannot reasonably be cured within thirty
(30) days, then Landlord shall not be deemed to be in default if (i) Landlord
notifies Tenant in writing that it will cure the default, (ii) commences to cure
the default within such thirty (30)-day period, and (iii) proceeds diligently
and in good faith thereafter to cure such default and does cure such default
within a reasonable time.

23. REMEDIES IN DEFAULT. In the event of any Event of Default or other breach by
Tenant, Landlord may at any time thereafter, with or without notice or demand,
and without limiting Landlord in the exercise of a right or remedy which
Landlord may have by reason of such Event of Default or breach:

a. Reenter and take possession of the Premises or any part thereof and repossess
the same as of Landlord's former estate and expel Tenant and those claiming
through or under Tenant and remove the effects of both or either, without being
deemed guilty of any manner of trespass and without prejudice to any remedies
for arrears of Rent or preceding breach of covenants or conditions. Should
Landlord elect to reenter, as provided in this paragraph, or should Landlord
take possession pursuant to legal proceedings or pursuant to any notice provided
for by law, Landlord may, from time-to-time, without terminating this Lease,
relet the Premises or any part thereof, either alone or in conjunction with
other portions of the Building of which the Premises are a part, in Landlord's
or Tenant's name but for the account of Tenant, for such term or terms (which
may be greater or less than the period which would otherwise have constituted
the balance of the term of this Lease) and on such conditions and upon such
other terms (which may include concessions of free Rent and alteration and
repair of the Premises) as Landlord, in its absolute discretion, may determine
and Landlord may collect and receive the Rents therefor. Landlord shall in no
way be responsible or liable for any failure to relet the Premises, or any part
thereof, or for any failure to collect any Rent due upon such reletting, but
Landlord shall use commercially reasonable efforts to mitigate its damages. No
such reentry or taking possession of the Premises by Landlord shall be construed
as an election on Landlord's part to terminate this Lease unless a written
notice of such intention be given to Tenant. No notice from Landlord hereunder
or under a forcible entry and detainer statute or similar law shall constitute
an election by Landlord to terminate this Lease unless such notice specifically
so states. Landlord reserves the right following any such reentry and/or
reletting to exercise its right to terminate this Lease by giving Tenant such
written notice, in which event the Lease will terminate as specified in said
notice.
 
 
 

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   b. If Landlord elects to take possession of the Premises as provided in
Paragraph 23a above without terminating the Lease, Tenant shall pay to Landlord
(i) the Rent and other sums as herein provided, which would be payable hereunder
if such repossession had not occurred, less (ii) the net proceeds, if any, of
any reletting of the Premises after deducting all of Landlord's expenses
incurred in connection with such reletting, including, but without limitation,
all repossession costs, brokerage commissions, legal expenses, attorneys' fees,
expenses of employees, alteration, remodeling, and repair costs and expenses of
preparation for such reletting. Unpaid installments of rent or other sums shall
bear interest from the date due at the rate of twenty percent (20%) per annum.
If, in connection with any reletting, the new lease term extends beyond the
existing term or the premises covered thereby include other premises not part of
the Premises, a fair apportionment of the Rent received from such reletting and
the expenses incurred in connection therewith, as provided aforesaid, will be
made in determining the net proceeds received from such reletting. In addition,
in determining the net proceeds from such reletting, any Rent concessions will
be apportioned over the term of the new lease unless Tenant agrees otherwise.
Tenant shall pay such amounts to Landlord monthly on the days on which the Rent
and all other amounts owing hereunder would have been payable if possession had
not been retaken and Landlord shall be entitled to receive the same from Tenant
on each such day;

c. Give Tenant written notice of intention to terminate this Lease on the date
of such given notice or on any later date specified therein and, on the date
specified in such notice, Tenant's right to possession of the Premises shall
cease and the Lease shall thereupon be terminated, except as to Tenant's
liability hereunder as hereinafter provided, as if the expiration of the term
fixed in such notice were the end of the term herein originally demised. In the
event this Lease is terminated pursuant to the provisions of this Paragraph,
Tenant shall remain liable to Landlord for damages in an amount equal to the
Rent and other sums which would have been owing by Tenant hereunder for the
balance of the term had this Lease not been terminated less the net proceeds, if
any, of any reletting of the Premises by Landlord subsequent to such
termination, after deducting all Landlord's expenses in connection with such
reletting, including, but without limitation, the expenses enumerated above.
Landlord shall be entitled to collect such damages from Tenant monthly on the
days on which the Rent and other amounts would have been payable hereunder if
this Lease had not been terminated and Landlord shall be entitled to receive the
same from Tenant on each such day. Alternatively, at the option of Landlord, in
the event this Lease is terminated, Landlord shall be entitled to recover
forthwith against Tenant as damages for loss of the bargain and not as a penalty
an amount equal to the worth at the time of termination of the excess, if any,
of the amount of Rent reserved in this Lease for the balance of the term hereof
over the then Reasonable Rental Value of the Premises for the same period plus
all amounts incurred by Landlord in order to obtain possession of the Premises
and relet the same, including attorneys' fees, reletting expenses, alterations
and repair costs, brokerage commissions and all other like amounts. It is agreed
that the "Reasonable Rental Value" shall be the amount of rental which Landlord
can obtain as Rent for the remaining balance of the term. Landlord agrees to use
commercially reasonable efforts to mitigate its damages; or

 
 

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d. Pursue any other remedy now or hereafter available to Landlord under the laws
or judicial decision of the State of Colorado.

24. EMINENT DOMAIN. If more than twenty-five percent (25%) of the Premises shall
be taken or appropriated by any public or quasi-public authority under the power
of eminent domain, either party hereto shall have the right, at its option, to
terminate this Lease by giving written notice to the other party, and Landlord
shall be entitled to any and all income, Rent, award, or any interest therein
whatsoever which may be paid or made in connection with such public or
quasi-public use or purpose, and Tenant shall have no claim against Landlord or
the condemning authority for the value of any unexpired term of this Lease. If
either less than or more than twenty-five percent (25%) of the premises is
taken, or neither party elects to terminate as herein provided, the rental
thereafter to be paid shall be proportionately reduced. If more than ten percent
(10%) of the Building other than the Premises may be so taken or appropriated,
Landlord shall have the right at its option to terminate this Lease by giving
thirty (30) days written notice to Tenant and shall be entitled to the entire
award as above provided. Tenant shall, however, have the right to pursue a
separate claim directly against the condemning authority for any damage suffered
as a result of such taking.

25. ESTOPPEL STATEMENT. Landlord and Tenant shall at any time and from
time-to-time, upon not less than ten (10) business days' prior written notice
from the other party, execute, acknowledge, and deliver to the other party a
statement in writing, (a) certifying that this Lease is unmodified and in full
force and effect (or, if modified, stating the nature of such modification and
certifying that this Lease as so modified, is in full force and effect); (b) the
date to which the rental and other charges are paid in advance, if any; (c)
acknowledging that there are not, to Tenant's or Landlord's knowledge, as
appropriate, any uncured defaults on the part of the other party hereunder, or
specifying such defaults if any are claimed; and (d) such other items reasonably
requested by the other party. Any such statement may be relied upon by any
prospective purchaser or encumbrancer of all or any portion of the real property
of which the Premises are a part. Unless as otherwise reasonably requested,
Tenant Estoppel Statement shall be substantially in the form attached hereto as
Exhibit C.

 
 

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26. PARKING. Tenant shall have the right to use in common with other tenants or
occupants of the Building the parking facilities of the Building, subject to the
Rules and Regulations. Landlord shall have no liability for any damage to
property in or about the parking areas and Tenant hereby waives all claims
arising in connection therewith, and agrees to indemnify Landlord for any claims
arising out of or in connection with Tenant’s use of the Parking Spaces.

27. AUTHORITY OF PARTIES.

Each individual executing this Lease on behalf of Tenant represents and warrants
that he is duly authorized to execute and deliver this Lease on behalf of
Tenant, in accordance with a duly adopted resolution or in accordance with the
operating agreement, partnership agreement or other governing entity
documentation, and that this Lease is binding upon Tenant in accordance with its
terms.

28. GENERAL PROVISIONS.

a. Waiver. The waiver by Landlord of any term, covenant, or condition herein
contained shall not be deemed to be a waiver of such term, covenant or condition
or any subsequent breach of the same or any other term, covenant or condition
herein contained. The subsequent acceptance of Rent hereunder by Landlord shall
not be deemed to be a waiver of any preceding breach by Tenant of any term,
covenant or condition of this Lease, other than the failure of Tenant to pay the
particular rental so accepted, regardless of Landlord's knowledge of such
preceding breach at the time of the acceptance of such Rent.

b. Notices. All notices and demands which may or are to be required or permitted
to be given by either party to the other hereunder shall be in writing, except
the verbal notice by Landlord to Tenant as stated in Paragraph 20. All notices
and demands by Landlord to Tenant shall be sent by a) United States Mail,
postage prepaid, or b) nationally recognized overnight bonded courier, addressed
to Tenant at the address set forth in Paragraph 1u above, or to such other place
as Tenant may, from time-to-time, designate in a notice to Landlord. All notices
and demands by Tenant to Landlord shall be sent by a) United States Mail,
postage prepaid, or b) nationally recognized overnight bonded courier, addressed
to Landlord at the address set forth in Paragraph 1i above, or to such other
person or place as Landlord may, from time-to-time, designate in a notice to
Tenant.
 
 
 

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c. Joint Obligation. If there is more than one entity or individual which
compromises Tenant under this Lease, then the obligations hereunder imposed upon
Tenant shall be joint and several.

d. Headings and Paragraph Titles. The headings and paragraph titles of this
Lease are for reference purposes only and shall have no effect upon the
construction or interpretation of any part hereof.

e. Time. Time is of the essence of this Lease and each and all of its
provisions.

f. Successors and Assigns. The covenants and conditions herein contained,
subject to the provisions as to assignment, apply to and bind the heirs,
successors, executors, administrators and assigns of the parties hereto.

g. Recordation. Tenant shall not record this Lease or a short form memorandum
hereof or any other document which makes reference to this Lease without the
prior written consent of Landlord which may be withheld in Landlord’s sole and
absolute discretion. Any such recording without Landlord’s consent shall be
considered an Event of Default.

h. Quiet Possession. Upon Tenant paying the Rent reserved hereunder and
observing and performing all of the covenants, conditions and provisions on
Tenant's part to be observed and performed hereunder, Tenant shall have quiet
possession of the Premises for the entire term hereof against all parties
claiming by, through or under Landlord, subject to all the provisions of this
Lease.

i. Late Charges. Tenant hereby acknowledges that late payment by Tenant to
Landlord of Rent or other sums due hereunder will cause Landlord 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 Landlord by
terms of any mortgage or trust deed covering the Premises. Accordingly, if any
installment of Rent or of a sum due from Tenant shall not be received by
Landlord or Landlord's designee within five (5) days after said amount is due,
then Tenant shall pay to Landlord a one-time late charge equal to five percent
(5%) of such overdue amount. The parties hereby agree that such late charges
represent a fair and reasonable estimate of the cost that Landlord will incur by
reason of the late payment by Tenant. Acceptance of such late charges by
Landlord shall in no event constitute a waiver of Tenant's default with respect
to such overdue amount, nor prevent Landlord from exercising any of the other
rights and remedies granted hereunder.

j. Prior Agreements. This Lease contains all of the agreements of the parties
hereto with respect to any matter covered or mentioned in this Lease, and no
prior agreements or understanding pertaining to any such matters shall be
effective for any purpose. No provision of this Lease may be amended or added to
except by an agreement in writing signed by the parties hereto or their
respective successors in interest. This Lease shall not be effective or binding
on any party until fully executed by both parties hereto.
 
 
 

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k. Attorneys' Fees. In the event of any action or proceeding brought by either
party against the other under this Lease, the prevailing party shall be entitled
to recover all costs and expenses, including the fees of its attorneys in such
action or proceeding in such amount as the court may adjudge reasonable as
attorneys' fees.

l. Sale of Premises by Landlord. In the event of any sale of the Building, and
assignment of Tenant's Security Deposit to a purchaser, Landlord shall be and is
hereby entirely freed and relieved of all liability under any and all of its
covenants and obligations contained in or derived from this Lease arising out of
any act, occurrence or omission occurring after the consummation of such sale;
and the purchaser, at such sale or any subsequent sale of the Premises, shall be
deemed, without any further agreement between the parties or their successors in
interest or between the parties and any such purchaser, to have assumed and
agreed to carry out any and all of the covenants and obligations of Landlord
under this Lease.

m. Subordination, Non-Disturbance and Attornment. Within ten (10) days after
request of Landlord, Tenant will, in writing, subordinate its rights hereunder
to the lien of any first mortgage or first deed of trust to any bank, insurance
company or other lending institution, now or hereafter in force against the land
and Building of which the Premises are a part, and upon any buildings hereafter
placed upon the land of which the Premises are a part, and to all advances made
or hereafter to be made upon the security thereof.

In the event any proceedings are brought for foreclosure, or in the event of the
exercise of the power of sale under any mortgage or deed of trust made by
Landlord covering the Premises, Tenant shall attorn to the purchaser upon any
such foreclosure or sale and recognize such purchaser as Landlord under this
Lease.

Tenant will agree to confirm its subordination and attornment in the form
attached hereto as Exhibit D or pursuant to another subordination,
non-disturbance and attornment reasonably requested by Landlord’s lender.

Notwithstanding anything to the contrary contained herein, Tenant shall only be
obligated under this Paragraph 28m if such bank, insurance company or other
lending institution or purchaser upon any such foreclosure or sale (a)
recognizes Tenant's interest under this Lease, (b) agrees that, so long as
Tenant is not in default under this Lease beyond any applicable cure periods,
not to disturb Tenant's possession of the Premises, and (c) executes and
delivers a subordination, non-disturbance and attornment agreement substantially
in the form attached hereto as Exhibit D or pursuant to another subordination,
non-disturbance and attornment reasonably requested by Landlord’s lender.

 
 

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Within ten (10) days after request of Tenant, Landlord will, in writing, execute
a landlord waiver of liens in favor of a secured lender of Tenant, such waiver
to be in a form reasonably satisfactory to Landlord.

n. Name. Tenant shall not use the name of the Building or of the development in
which the Building is situated for any purpose other than as an address of the
business to be conducted by Tenant in the Premises.

o. Separability. Any provision of this Lease which shall prove to be invalid,
void or illegal shall in no way affect, impair or invalidate any other provision
hereof and such other provision shall remain in full force and effect.

p. 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.

q. Choice of Law. This Lease shall be governed by the laws of the State of
Colorado.

r. Signs and Auctions. Tenant shall not place any sign upon the Premises or
Building or conduct any auction thereon without Landlord's prior written consent
which shall not be unreasonably withheld, conditioned or delayed.
Notwithstanding the foregoing, Landlord agrees to provide to Tenant, at Tenant’s
sole cost and expense, Building standard signage on the monument sign for the
Building and Building standard directory signage during the term of this Lease.
In addition, Tenant shall have the right to secure signage on the exterior of
the Building upon satisfaction of the following requirements: (i) Tenant leases
a minimum of 75% of the Building and maintains the 75% minimum; (ii) Tenant
submits plans which detail the size, style and proposed location (on the
Building) to Landlord for its review and approval, which approval may be given,
withheld, or conditioned in its sole, absolute and subjective discretion; (iii)
Tenant’s Building sign complies with all applicable laws, ordinances, rules,
regulations or orders of any governmental or quasi-governmental authority having
jurisdiction over the Property and all restrictive covenants applicable to the
Property and Tenant provides Landlord evidence of same; and (iv) Tenant pays all
costs, fees and expenses (including permit fees) to have its sign affixed to the
Building. Upon the expiration, earlier termination of this Lease or Tenant
leases less than 75% of the Building, Tenant shall, at its sole cost and
expense, remove the Building signage and repair, paint, and/or replace any
portion of the Building damaged or altered as a result of its Building signage
(including, without limitation, any discoloration of the Building).

 
 

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s. Landlord's Liability. The liabilities of the partners or members of Landlord
pursuant to this Lease shall be limited to the assets of the partnership or
limited liability company, and Tenant, its successors and assigns hereby waive
all right to proceed against any of the partners, members, or the officers,
shareholders, or directors of any corporate partner of Landlord. The term
"Landlord," as used in this paragraph, shall mean only the owner or owners at
the time in question of the fee title or an interest in a ground lease of the
Property. Notwithstanding anything to the contrary contained herein, the extent
of Landlord's liability under this Lease shall be limited to the Property, and
Tenant shall not seek any personal liability against Landlord or any of
Landlord's partners or members.

t. Waiver of Jury Trial. Landlord and Tenant waive trial by jury in any action,
proceeding or counterclaim brought by either of the parties to this Lease
against the other on any matters whatsoever arising out of or in any way
connected with this Lease, the relationship of Landlord and Tenant, Tenant's use
of occupancy of the Premises, or any other claims (except claims for personal
injury or property damage), and any emergency statutory or any other statutory
remedy.

u. Lender/Mortgagees. This Lease, at Landlord’s option, shall be subordinate to
any mortgage or deed of trust (now or hereafter placed upon the land and the
Building of which the Premises are a part, and upon any buildings hereafter
placed upon the land of which the Premises are a part, and to all advances made
or hereafter to be made upon the security hereof), including any amendment,
modification or restatement of such documents. Tenant agrees that with respect
to any of the foregoing documents, no documentation, other than this Lease,
shall be required to evidence such subordination. Notice to Landlord of any such
alleged default shall be inef-fective unless notice is simultaneously delivered
to any holder of a mortgage and/or deed of trust affecting all or any portion of
the land and the Building of which the Premises are a part ("Mortgagees"), as
hereafter provided. Tenant agrees to give all Mortgagees, by certified mail,
return receipt requested, a copy of any notice of default served upon Landlord,
provided that prior to such notice Tenant has been notified, in writing (by way
of notice of Assign-ment of Rents and Leases, or otherwise), of the address of
such Mortgagees. Tenant further agrees that if Landlord shall have failed to
cure such default within the time provided for in this Lease, then the
Mort-gagees shall have an additional thirty (30) days within which to cure such
default or, if such default cannot be cured within that time, then such
additional time as may be necessary, if, within such thirty (30) days, any
Mortgagee has commenced and is diligently pursuing the remedies necessary to
cure such default (includ-ing, but not limited to, commencement of foreclosure
proceedings, if necessary to effect such cure), in which event this Lease shall
not be terminated while such remedies are being so diligently pursued. In no
event will Landlord or any Mortgagee be responsible for any consequential
damages incurred by Tenant as a result of any default, including, but not
limited to, lost profits or interruption of business as a result of any alleged
default by Landlord hereunder.

 
 

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v. Arbitration. Except for an action to gain possession of the Premises (and any
corresponding claim for damages resulting from Tenant’s alleged unlawful
detainer) and except as provided below, any and all disputes arising under or
related to this Lease which cannot be resolved through negotiations between the
parties shall be submitted to binding arbitration. If the parties fail to reach
a settlement of their dispute within fifteen (15) days after the earliest date
upon which one of the parties notified the other(s) of its desire to attempt to
resolve the dispute, then the dispute shall promptly be submitted to arbitration
by a single arbiter through the Judicial Arbiter Group ("JAG"), any successor of
the Judicial Arbiter Group, or any similar arbitration provider who can provide
a former judge to conduct such arbitration if JAG is no longer in existence, or
an arbiter appointed by the court. The arbiter shall be selected by JAG or the
court on the basis, if possible, of his or her expertise in the subject
matter(s) of the dispute. The decision of the arbiter shall be final,
nonappealable and binding upon the parties, and it may be entered in any court
of competent jurisdiction. The arbitration shall take place in Boulder,
Colorado. The arbitrator shall be bound by the laws of the State of Colorado
applicable to the issues involved in the arbitration and all Colorado rules
relating to the admissibility of evidence, including, without limitation, all
relevant privileges and the attorney work product doctrine. All such discovery
shall be completed in accordance with the time limitations prescribed in the
Colorado Rules of Civil Procedure, unless otherwise agreed by the parties or
ordered by the arbitrator on the basis of strict necessity adequately
demonstrated by the party requesting an extension or reduction of time. The
arbitrator shall have the power to grant equitable relief where applicable under
Colorado law. The arbitrator shall issue a written opinion setting forth her or
his decision and the reasons therefor within thirty (30) days after the
arbitration proceeding is concluded. The obligation of the parties to submit any
dispute arising under or related to this Agreement to arbitration as provided in
this Paragraph shall survive the expiration or earlier termination of this
Agreement. Notwithstanding the foregoing, either party may seek and obtain an
injunction or other appropriate relief from a court to preserve or protect the
status quo with respect to any matter pending conclusion of the arbitration
proceeding, but no such application to a court shall in any way be permitted to
stay or otherwise impede the progress of the arbitration proceeding.

w. Financial Statements. Tenant shall provide their most recent annual financial
statements, including statements of income and expense and statements of net
worth ("financial statements") within (fifteen) 15 business days following the
written request of Landlord. Landlord may request said annual financial
statements no more than twice during any twelve (12) month period. Said
financial statements shall be verified as being true and correct and Landlord
agrees to keep said financial statements confidential, but may use said annual
financial statements for purposes of obtaining financing upon or in connection
with the sale of the Property. At the time Landlord requests financial
statements from Tenant, Landlord shall advise Tenant if the financial statements
will be given to a third party and to whom the financial statements will be
submitted and Landlord shall, if requested to do so by Tenant, use commercially
reasonable efforts to obtain from such individual or entity a written agreement
which shall provide that said financial statements will be and shall remain
confidential. If Tenant has not previously submitted the required financial
statements to Landlord, within fifteen (15) days after the execution of this
Lease, Tenant shall submit to Landlord its most recent financial statements.

29. BROKERS. Tenant warrants that it has had no dealings with any real estate
brokers or agents in connection with the negotiation of this Lease excepting
only the Brokers listed in Paragraph 1c, and it knows of no other real estate
broker or agent who is entitled to a commission in connection with this Lease.
Tenant hereby agrees to indemnify Landlord for any loss or damage, including
defense costs, arising out of claims from brokers or other finders other than
the Brokers referenced above.
 
 
 

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30. HAZARDOUS MATERIALS AND ENVIRONMENTAL CONSIDERATIONS.

a. Tenant covenants and agrees that Tenant and its agents, employees,
contractors and invitees shall comply with all Hazardous Materials Laws (as
hereinafter defined). Without limiting the foregoing, Tenant covenants and
agrees that it will not use, generate, store or dispose of, nor permit the use,
generation, storage or disposal of Hazardous Materials (as hereinafter defined)
on, under or about the Premises, nor will it transport or permit the
transportation of Hazardous Materials to or from the Premises, except in strict
and full compliance with any applicable Hazardous Materials Laws. Any Hazardous
Materials located on the Premises shall be handled in an appropriately
controlled environment which shall include the use of such equipment (at
Tenant's expense) as is necessary to meet or exceed standards imposed by any
Hazardous Materials Laws and in such a way as not to interfere with any other
tenant's use of its premises. Upon breach of any covenant contained herein,
Tenant shall, at Tenant's sole expense, cure such breach by taking all action
prescribed by any applicable Hazardous Materials Laws or by any governmental
authority with jurisdiction over such matters.

b. Tenant shall inform Landlord at any time of (i) any Hazardous Materials it
intend to use, generate, handle, store or dispose of, on or about or transport
from, the Premises and (ii) of Tenant's discovery of any event or condition
which constitutes a violation of any applicable Hazardous Materials Laws. Tenant
shall provide to Landlord copies of all communications to or from any
governmental authority or any other party relating to Hazardous Materials
affecting the Premises.

c. Tenant shall indemnify and hold Landlord harmless from any and all claims,
judgments, damages, penalties, fines, costs, liabilities, expenses or losses
(including without limitation, diminution on value of the Premises, damages for
loss or restriction on use of all or part of the Premises, sums paid in
settlement of claims, investigation of site conditions, or any cleanup, removal
or restoration work required by any federal, state or local governmental agency,
attorney's fees, consultant fees and expert fees) which arise as a result of or
in connection with any breach of the foregoing covenants or any other violation
contained herein shall also accrue to the benefit of the employees, agents,
officers, directors and/or partners of Landlord.

d. Upon termination of the Lease and/or vacation of the Premises, Tenant shall
properly remove all Hazardous Materials and, provided that Landlord reasonably
believes that such a report is necessary, shall provide to Landlord an
environmental audit report, prepared by a professional consultant satisfactory
to Landlord and at Tenant's sole expense, certifying that the Premises have not
been subjected to environmental harm caused by Tenant's use and occupancy of the
Premises. Landlord shall grant to Tenant and its agents or contractors such
access to the Premises as is necessary to accomplish such removal and prepare
such report.
 
 
 

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e. "Hazardous Materials" shall mean (a) any chemical, material, substance or
pollutant which poses a hazard to the Premises or to persons on or about the
Premises or would cause a violation of or is regulated by any Hazardous
Materials Laws, and (b) any chemical, material or substance defined as or
included in the definitions of "hazardous substances", "hazardous wastes",
"hazardous materials", "extremely hazardous waste", "restricted hazardous
waste", "toxic substances", "regulated substances", or words of similar import
under any applicable federal, state or local law or under the regulations
adopted or publications promulgated pursuant thereto, including, but not limited
to, the Comprehensive Environmental Response. Compensation and Liability Act of
1980, as amended, 42 U.S.C. Sec. 9601, et seq.; the Hazardous Materials
Transportation Act, as amended, 49 U.S.C. Sec. 1801, et seq.; the Resource
Conservation and Recover Act, as amended, 42 U.S.C. Sec. 6901, et seq.; the
Solid Waste Disposal Act, 42 U.S.C. Sec. 6991 et seq.; the Federal Water
Pollution Control Act, as amended, 33 U.S.C. Sec. 1251, et seq., of the Colorado
Revised Statutes. "Hazardous Materials Laws" shall mean any federal, state or
local laws, ordinances, rules, regulations, or policies (including, but not
limited to, those laws specified above) relating to the environment, health and
safety or the use, handling, transportation, production, disposal, discharge or
storage of Hazardous Materials, or to industrial hygiene or the environmental
conditions on, under or about the Premises. Said term shall be deemed to include
all such laws as are now in effect or as hereafter amended and all other such
laws as may hereafter be enacted or adopted during the term of this Lease.
f. All obligations of Tenant hereunder shall survive and continue after the
expiration of this Lease or its earlier termination for any reason.

g. Tenant further covenants and agrees that it shall not install any storage
tank (whether above or below the ground) on the Premises without obtaining the
prior written consent of Landlord, which consent may be conditioned upon further
requirements imposed by Landlord with respect to, among other things, compliance
by Tenant with any applicable laws, rules, regulations or ordinances and safety
measures or financial responsibility requirements.

31. OPTION TO RENEW. If Tenant is not then in default of the terms, covenants
and conditions herein contained, Tenant shall have the option to renew this
Lease for one additional term of five (5) years. In the event Tenant desires to
exercise said option, Tenant shall give written notice of such fact to Landlord
not less than one hundred eighty (180) days prior to the expiration of the then
current term of this Lease. In the event of such exercise, this Lease shall be
deemed to be extended for the additional period on the same terms and
conditions; provided however, Landlord shall have the option of increasing basic
monthly rental to the then existing market rate for similar space in the Boulder
vicinity. Basic monthly rental shall increase three and a half percent (3.5%)
each year commencing the second year of the additional term. Landlord shall
notify Tenant of its determination of market rent no less than one hundred
twenty (180) days prior to commencement of the option term. In the event Tenant
objects to Landlord’s determination, Tenant must notify Landlord in writing on
or before the date that is sixty (150) days prior to the commencement of the
option term. Within the next thirty (30) days Landlord and Tenant shall each
select a Colorado qualified real estate appraiser with not fewer than five (5)
years’ of experience appraising property similar to the Premises in Boulder
County, Colorado, to determine the fair market rental value of the Premises. In
order to be included in this value determination process, such appraisers’
determinations must be delivered in writing to both Landlord and Tenant within
thirty (30) days after their appointment. If the valuations determined by such
appraisers are within ten percent (10%) of one another, the fair market rental
value of the Premises shall be the average of their figures. If the valuations
determined by such appraisers are outside ten percent (10%) of one another, the
two previously chosen appraisers shall jointly appoint a third appraiser with
similar qualifications who shall independently determine the fair market rental
value of the Premises within thirty (30) days after the appointment. The three
fair market rental values shall be averaged and the resulting amount shall be
the amount for that option term. The cost of all appraisals shall be paid
equally by Landlord and Tenant.
 
 
 

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32. FIRST RIGHT OF REFUSAL.  Tenant shall have the right-of-first refusal to
lease the remaining vacant space in the Building at such time as Landlord
receives an offer from a third party to lease the space. Tenant shall have three
(3) business days after receipt of written notice from Landlord of an offer to
lease the space from a third party to enter into a modification of this Lease to
include the additional space.
 

 
LANDLORD: 
PAWNEE PROPERTIES, LLC
     
TENANT:
AEROGROW INTERNATIONAL, INC. 
            By: /s/ Steven P. Chrisman     By: /s/ Mitchell B. Rubin  

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Steven P. Chrisman         

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Mitchell B. Rubin  
Manager
5777 Central Avenue, Suite 110
Boulder, Colorado 80301
Tax I.D. 84-1554609
     
Chief Financial Officer
900 28th Street, Suite 201
Boulder, Colorado 80303
Tax I.D. 46-051068

 
 
 

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