EXHIBIT 10.8

 

ASSIGNMENT AND FIRST AMENDMENT TO COMMERCIAL LEASE

 

This Assignment and First Amendment to Commercial Lease (this “Amendment”) is
entered into and effective as of June 13, 2019 (the “Effective Date”) by and
among GREEN ROAD, LLC, a California limited liability company (“Landlord”),
David Barakett, an individual (the “Guarantor”), SGSD, LLC, a Nevada limited
liability company (“SGSD”), and NMG SAN DIEGO, LLC, a California limited
liability company (“NMG”).

 

RECITALS

 

A. Landlord and SGSD are parties to that certain Commercial Lease dated December
1, 2018, (the “Lease”), whereby SGSD leases from Landlord that certain real
property in San Diego, California, commonly known as 7625 Carroll Road, San
Diego, California 92121 (APN: 343-100-35) and consisting of approximately 1.29
acres and all improvements thereon (including, without limitation, two small
buildings and a parking area), as more particularly described in the Lease (the
“Premises”). The Lease is guaranteed by Guarantor pursuant to that certain
Guaranty of Lease dated December 1, 2018, (the “Guaranty”).

 

B. SGSD desires to assign to NMG all of its right, title, and interest as Tenant
under the Lease, and NMG desires to assume from SGSD all of its right, title,
and interest as Tenant under the Lease, subject to the terms and condition of
this Amendment.

 

C. Pursuant to Paragraph 21 of the Lease, Landlord’s consent is required in
connection with any assignment of Tenant’s interests under the Lease.

 

D. SGSD and NMG have requested that Landlord consent to and approve the
Assignment, and Landlord has agreed to consent to and approve the assignment,
all on the terms and conditions set forth below.

 

NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of
which are hereby expressly acknowledged and agreed, in reliance on the above
recitals, the parties do hereby agree as follows:

 

AMENDMENT

 

1. Capitalized Terms. Capitalized terms not otherwise defined herein shall have
the meanings assigned to such terms in the Lease.

 

2. Assignment.

 

2.1 SGSD hereby grants, sells, transfers, conveys, assigns, and sets over unto
NMG all of SGSD’s right, title, and interest in and to the Lease and to the
extent assignable, any and all subordination, non-disturbance and attornment
agreements, estoppel letters, subleases, and any and all similar agreements, if
any, executed by SGSD in connection with the Lease and/or the Premises,
including but not limited to those set forth on Schedule 1 (collectively, the
“Property Agreements”).

 

 

  

 

2.2 SGSD Consideration. As consideration for the assignment set forth in Section
2.1 of this Amendment, NMG shall cause NMG’s parent entity, Body and Mind, Inc.,
a Canadian Corporation (hereinafter “BAM”), to pay SGSD up to three (3) payments
of shares in accordance with the Settlement and Release Agreement of even date
herewith among BaM and its related entities and the Guarantor and his related
entities.

 

2.3 NMG hereby assumes the Lease and agrees to perform all of the duties,
obligations, covenants, conditions, and restrictions included in the Lease and
the Property Agreements that are required to be performed by SGSD thereunder.
NMG hereby agrees to pay, when due, all rents, taxes, insurance, assessments,
utilities, costs, expenses, and any other sums due and payable under the Lease
and Property Agreements accruing after the Effective Date. NMG shall cause BAM
to assume the Guaranty and agree to perform all of the duties, obligations,
covenants, conditions, and restrictions included in the Lease and the Property
Agreements that are guaranteed by the Guarantor under the Guaranty.

 

2.4 Representations of SGSD. SGSD hereby represents and warrants to NMG that:

 

a. SGSD has full power and authority to enter into this Amendment and to assign
the Lease and each Property Agreement.

 

b. This Amendment is valid, binding, and enforceable against SGSD in accordance
with its terms.

 

c. SGSD has delivered to NMG a true, correct, and complete copy of the Lease and
each Property Agreement. The Lease and Property Agreements are true, complete,
and correct and constitute the entire agreement between the Landlord and SGSD
with respect to the Premises and have not been amended, modified, supplemented,
or assigned prior to the execution of this Amendment, except for such
instruments as are identified on Schedule 1.

 

d. There are no promises, agreements, understandings, or commitments between
Landlord and SGSD or SGSD and third parties relating to the Lease, the Property
Agreements, or the Premises, other than those set forth in Schedule 1, that are
not being terminated by SGSD on or prior to the Effective Date, without any
continuing obligation on either NMG or the Premises.

 

e. The Lease and Property Agreements are valid and in full force and effect. To
the best of its knowledge, neither Landlord nor SGSD or any third party is in
default under the Lease or under any Property Agreement, and no event has
occurred that, with the giving of notice, or passage of time, or both, would
constitute such a default by Landlord or by SGSD or any other party thereto, and
neither Landlord nor any other party has asserted any claim against SGSD.

 

f. To SGSD’s knowledge, the “Landlord” (as defined in the recital above) is the
owner of the Premises.

 

2.5 Representations of NMG. NMG hereby represents and warrants to SGSD that (i)
NMG has full power and authority to enter into this Assignment and to assume the
Lease and each Property Agreement, and (ii) this Amendment is valid, binding,
and enforceable against NMG in accordance with its terms. NMG shall cause BAM to
release Guarantor from the Guaranty to be assumed by BAM pursuant to Section 2.3
of this Amendment.

 

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2.6 Representations of Landlord. In addition to and in no way limiting the
representations and warranties of Landlord set forth in the Lease, Landlord
hereby represents and warrants to NMG that upon execution and assignment of the
Lease as set forth herein, NMG shall begin its term under the Lease in good
standing. There have been no known defaults or lease violations prior to NMG’s
assignment for which the Landlord will hold NMG liable. In no event shall
Landlord hold NMG liable for any past due taxes accrued in connection with the
Premises prior to execution of this Agreement. Landlord shall release Guarantor
from the Guaranty to be assumed by BAM pursuant to Section 2.3 of this
Amendment.

 

2.7 Indemnity.

 

a. NMG shall indemnify, defend, and hold SGSD harmless from and against any and
all claims, damages, liabilities, costs, and expenses caused by any breach or
alleged breach of (i) any obligation to be performed by NMG, as Tenant under the
Lease, or as a party to the Property Agreements, accruing after the Effective
Date, or (ii) any of the representations, warranties, or agreements of NMG set
forth herein.

 

b. SGSD shall indemnify, defend, and hold NMG harmless from and against any and
all claims, damages, liabilities, costs, and expenses caused by any breach or
alleged breach of (i) any obligation to be performed by SGSD and its
predecessors, as Tenant under the Lease, or as a party to the Property
Agreements, accruing on or prior to the Effective Date, or (ii) any of the
representations, warranties, or agreements of SGSD set forth herein.

 

2.8 Consent.

 

Landlord consents to this assignment to NMG and further agrees that NMG shall be
accepted as the “Original Tenant” as set forth in the Lease. Except as expressly
set forth in this Amendment, Landlord’s consent to assignment to NMG shall not
be construed in any manner to modify, waive, or affect any of the provisions of
the Lease restricting assignment or subletting, or to waive any breach or
default by SGSD under the Lease, and neither SGSD nor any guarantor, shall be
released from, and SGSD and all such guarantors shall be and remain liable for
the performance and observance of all of the provisions of the Lease, including,
without limitation, the payment of the Rent and all other sums now or hereafter
due under the Lease, all as amended by this Amendment.

 

3. Landlord Consideration.

 

3.1 NMG shall pay to Landlord three (3) payments as set forth herein, for a
total payment in the amount of Two Million Two Hundred Thirty-Three Thousand
Seven Hundred Sixty-Five Dollars and 26/100 ($2,233,765.26) (“Landlord
Consideration”) in cash and stock as follows:

 

a. Payment 1. The first payment shall be Seven Hundred Thousand Dollars
($700,000.00) worth of vested BAM shares calculated upon execution of this
Amendment at the maximum discount allowed by the Canadian Stock Exchange to be
paid to Landlord immediately following execution of this Amendment, subject to
the mandatory six (6) month exchange holding period (the “Landlord Shares”).

 

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b. Payment 2. The second payment shall be Seven Hundred Eighty-Three Thousand
Seven Hundred Sixty-Five Dollars and 26/100 ($783,765.26) in cash to be paid to
Landlord via bank draft within five (5) business days of execution of this
Amendment by all Parties; and

 

c. Payment 3. The third payment shall be Seven Hundred Fifty Thousand Dollars
($750,000.00) in cash plus interest at the rate of five percent (5%) simple per
annum accruing from the Effective Date to be paid to Landlord no later than five
(5) business days of Landlord’s receipt from the City of San Diego of a
Conditional Use Permit allowing adult-use commercial cannabis storefront retail
operations at the Premises.

 

Notwithstanding any provision in the Lease to the contrary, delivery of the
Landlord Consideration shall fully satisfy any and all monetary obligations of
SGSD related to Landlord’s consent to the assignment of the Lease to NMG,
including, without limitation, payment of any Sale Bonus due under Paragraph
21.1.2(b) of the Lease, any obligations with respect to the payment of the CUP
Obligation under Paragraph 6.4 of the Lease. For the avoidance of doubt, no
other payments shall be due or owing to Landlord by SGSD or NMG in connection
with the assignment of the Lease to NMG and/or the CUP Obligation (which shall
be deemed satisfied in full for all purposes under the Lease).

 

3.2 In the event NMG fails to timely pay the Landlord Consideration and such
non-payment continues for a period of ten (10) business days following written
notice to NMG, the Lease shall automatically terminate. The parties acknowledge
and agree a default by failing to pay timely in accordance with this Section 3.2
shall be incurable. Landlord shall have all remedies under the Lease, arising at
law or in equity, including, without limitation the right to recover the unpaid
Landlord Consideration.

 

4. Amendment to Lease.

 

4.1 The beginning of Paragraph 3.2 of the Lease is amended as follows:

 

“Provided that Tenant is not in default under this Lease after the lapse of any
applicable cure periods, and provided further that Tenant is in full occupancy
of the Premises, Tenant shall have three (3) successive options (each a “Renewal
Option”) to extend the Term of this Lease for the Premises for a period of five
(5) years from the Expiration Date (“Renewal Option Term”).”

 

4.2 Paragraph 21.1.1 of the Lease is amended to include the following:

 

“Landlord hereby acknowledges that NMG is a subsidiary of BAM and BAM is a
publicly traded company. For the purpose of clarity only and without limitation,
the following transactions standing alone shall not trigger the Sale Bonus or be
deemed an assignment requiring consent of the Landlord (collectively, the
“Excluded Transactions”):

 

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a. Affiliates. NMG may assign or sublet the Premises, or any portion thereof,
with 30-day’s notice to Landlord, to any entity which controls, is controlled
by, or is under common control with NMG, provided that said affiliate assignee
assumes, in full, the obligations of NMG under this Lease. Any such assignment
shall not, in any way, affect or limit the liability of NMG under the terms of
this Lease even if after such assignment or subletting the terms of this Lease
are materially changed or altered without the consent of NMG, the consent of
which shall not be necessary;

 

b. Personnel. Changes to NMG personnel, including but not limited to,
management, directors and officers, and other employees, as applicable; or

 

c. Entity Name Change. Changes to NMG’s legal entity name, the registration of
one or more “doing business as” names, or any other change to the identity of
the store; or

 

d. Sale of Membership. Any change in members representing less than fifty
percent (50%) of the existing membership interest of NMG.”

 

4.2. For a period commencing on the Effective Date and expiring on the earlier
to occur of (a) eighteen (18) months following the Effective Date, or (b) the
date that Tenant breaches or is in default under any provision of the Lease, as
amended, Paragraph 21.1.2(b) shall be restated in its entirety as follows:

 

“(b) Sale Bonus. Subject to Paragraph 21.1.1 of the Lease, if Tenant seeks
consent to assignment from Landlord in the context of a sale of Tenant’s
business, whether by sale of equity or sale of all or substantially all of
Tenant’s assets, Landlord shall consent to such assignee (subject to the
reasonable conditions of 21.1.2(a) above) provided Landlord receives from
assignee and Tenant an additional bonus amount (“Sale Bonus”) at closing of the
transaction equal to $1,000,000. Such Sale Bonus shall be due in connection with
the first two assignments triggering this obligation, and thereafter,
assignments will not require payment of a Sale Bonus.”

 

4.3 Paragraph 32.1 of the Lease is amended as follows to reflect the notice
address of NMG:

 

Tenant:

 

NMG San Diego, LLC

 

 

c/o Body and Mind, Inc.

2730 S. Harbor Blvd., Suite A

Santa Ana, CA 92704

Attention: Stephen “Trip” Hoffman 

 

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With a copy to:

 

Luke K. Stanton

a Professional Law Corporation 15260 Ventura Blvd., Suite 1700

Sherman Oaks, California 91403

Attention: Patrick D. Devine, Esq.

 

5. No Default. Landlord and SGSD affirm that as of the Effective Date, no breach
or default by either party has occurred and is continuing under the Lease, all
Rent is paid current, and SGSD has paid the Security Deposit to Landlord. If
requested by another party hereto, the other parties shall execute an estoppel
certificate confirming the same.

 

6. Further Assurances. Each of the undersigned is authorized to sign this
Amendment and each of the parties hereto shall, and shall cause their respective
affiliates to, execute and deliver such additional documents, instruments,
conveyances, and assurances and take such further actions as may be reasonably
required to carry out the provisions hereof and give effect to the transactions
contemplated hereby.

 

7. Ratification. The parties hereby ratify the Lease, and except as expressly
modified by this Amendment, all terms, provisions, and conditions of the Lease
shall remain unchanged and in full force and effect. To the extent of any
inconsistency between the terms and provisions of this Amendment and the Lease,
the terms and provisions of this Amendment shall control.

 

8. Entire Agreement. This Amendment and the Lease contain the entire
understanding and agreement between the parties with respect to the matters
amended herein.

 

9. Amendment and Modification. This Amendment may not be changed or modified
orally, but only by an agreement in writing signed by the party against whom
enforcement of any waiver, change, or modification is sought.

 

10. Governing Law. This Amendment shall be governed by, construed and enforced
in accordance with the laws of the State of California.

 

11. Counterparts. For the convenience of the parties, this Amendment may be
executed in one or more counterparts and by facsimile or electronic signatures,
and each executed counterpart shall for all purposes be deemed an original and
shall have the same force and effect as an original, but all of such
counterparts together shall constitute in the aggregate but one and the same
instrument.

 

12. Construction. This Amendment shall be construed as a whole and in accordance
with its fair meaning and without regard to any presumption or rule requiring
construction against the other party preparing this Amendment or any part
hereof.

 

13. Attorneys’ Fees. If any legal action or other proceeding is brought in
connection with this Amendment, the successful or prevailing party, whether or
not such party has instituted the action, shall be entitled to recover from the
non-prevailing party reasonable attorneys’ fees and other costs incurred in such
action or proceeding, in addition to any other relief to which it may be
entitled.

 

[Signature blocks on following page]

 

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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound hereby,
have caused this Amendment to be signed by their duly authorized officers as of
the Effective Date.

 

 LANDLORD:

 

 

 

 

GREEN ROAD, LLC,

a California limited liability company

 

 

 

 

    By:/s/ Rick Engebretsen

 

Print Name:

Rick Engebretsen  Its:President     

 

 

 

 

 

SGSD:

 

 

 

 

 

SGSD, LLC,

a Nevada limited liability company 

 

 

 

 

 

 

By:

/s/ David Barakett

 

 

Print Name:

David Barakett

 

 

Its:

Manager

 

 

 

 

 

 

 

 

 

 

NMG:

 

 

 

 

 

NMG SAN DIEGO, LLC,

a California limited liability company 

 

 

 

 

 

 

By:

/s/ Stephen ‘Trip’ Hoffman

 

 

Print Name:

Stephen ‘Trip’ Hoffman

 

 

Its:

Manager

 

 

 

 

 

 

 

 

 

 

David Barakett

(“Guarantor”):

 

 

 

 

 

 

By:

/s/ David Barakett

 

 

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SCHEDULE 1

 

PROPERTY AGREEMENTS

 

[Lease to be inserted prior to execution]

 

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COMMERCIAL LEASE

 

THIS COMMERCIAL LEASE (“Lease”) is made effective as of December 1, 2018 by and
between Green Road, LLC, a California limited liability company (“Landlord”),
and SGSD, LLC, a Nevada limited liability company (“Tenant”).

 

1. PREMISES

 

Landlord leases to Tenant and Tenant leases from Landlord, upon the terms and
conditions set forth in this Lease, that certain real property situated in the
County of San Diego, State of California, commonly known as 7625 Carroll Road,
San Diego, California 92121, assessor’s parcel number 343-100-35, including all
land and all improvements therein, and as detailed on Exhibit “A” (“the
Premises”). The Premises consist of approximately 1.29 acres and include two
small buildings (collectively the “Building”) and a parking area.

 

2. POSSESSION AND LEASE COMMENCEMENT

 

2.1 Possession Date. At execution of this Lease, Landlord shall grant Tenant
access to the Premises and Tenant agrees to accept possession of the Premises
effective as of December 1, 2018, to immediately construct Alterations (as
defined in Paragraph 12) reasonably required to comply with the Regulations (as
defined in Paragraph 4.3) and Tenant’s Permitted Use (as defined in Paragraph
4.1) pursuant to Paragraph 4.3, which date shall be referred to as the
“Possession Date.” Tenant has inspected and accepts the Premises in its present
condition, broom cleaned, and “as is.” Tenant represents that the Premises and
improvements existing on the Premises are in good order, condition and repair as
of the Possession Date. Tenant further acknowledges that no representations as
to the condition or repair of the Premises nor promises to alter, remodel or
improve the Premises have been made by Landlord or any agents of Landlord unless
such are expressly set forth in this Lease.

 

2.2 Commencement Date. The “Commencement Date” shall be the date that is the
earlier to occur of (a) the date on which Tenant’s Alterations pursuant to
Paragraph 2.1 have been completed to such an extent that Tenant can lawfully
commence its occupancy of the Premises, or (b) one-hundred twenty (120) days
after the Possession Date.

 

3. TERM

 

3.1 Initial Term. The term of this Lease (“Term”) shall commence on the
Commencement Date and continue in full force and effect through and until the
Expiration Date, as defined below, or until this Lease is terminated as
otherwise provided herein. To the extent that the actual Commencement Date is
the first day of a calendar month, then the Expiration Date shall be the date
immediately preceding the date which is sixty (60) months after the Commencement
Date. Otherwise, the Expiration Date shall be the last day of the sixtieth
(60th) month after the Commencement Date (“Expiration Date”).

 

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3.2 Option To Renew. Provided that Tenant is not in default under this Lease
after the lapse of any applicable cure periods, and provided further that Tenant
is in full occupancy of the Premises, Tenant shall have two (2) successive
options (each a “Renewal Option”) to extend the Term of this Lease for the
Premises for a period of five (5) years from the Expiration Date (“Renewal
Option Term”). The Renewal Options shall be on all of the same terms and
conditions of this Lease, except as otherwise expressly provided below. Tenant
may exercise the Renewal Option by delivering written notice to Landlord of its
intention to so extend the Term of this Lease no earlier than six (6) months
prior to the end of the Term and no later than three (3) months prior to the end
of the Term (“Renewal Option Exercise Period”). The monthly Base Rent payable
during the Renewal Option Term shall be equal to an amount agreed upon by
Landlord and Tenant during the Renewal Option Exercise Period prior to Tenant’s
exercise of the Renewal Option. If Landlord and Tenant cannot agree to the
monthly Base Rent payable during the Renewal Option Term, the monthly Base Rent
payable shall be equal to one hundred three percent (103%) of the last month’s
monthly Base Rent for the Term. For each lease year after the first lease year
of each Renewal Option, Base Rent will increase based on increases in the CPI
for San Diego County for the prior calendar year with the first lease year of
the applicable Renewal Option being the base year; provided, however, in no
event shall the increase be less than one percent (1%) or more than six percent
(6%) each year. Landlord shall update Paragraph 6.1 accordingly. The rights
contained in this Paragraph 3.2 are personal to the original Tenant (“Original
Tenant”) and may only be exercised by Original Tenant, and may not be exercised
by any assignee, sublessee or other transferee of Original Tenant’s interest in
this Lease, except as expressly consented to in writing by Landlord.

 

3.3 Early Termination. Landlord and Tenant shall each have the option to
terminate this Lease (“Early Termination Option”) upon thirty (30) days prior
written notice to the other in the event of the threat of civil or criminal
action being brought with just cause and reasonable likelihood of success
against Landlord and/or Tenant by the United States Department of Justice in
connection with Tenant’s operating activities. In the event the Lease is
terminated pursuant to the exercise of the Early Termination Option, Landlord
shall be entitled to retain any Rent payments made by Tenant up to the date of
termination of this Lease.

 

4. USE

 

4.1 General. Tenant shall use the Premises for a lawful Medical Marijuana
Consumer Cooperative or Marijuana Outlet pursuant to San Diego Municipal Code
sections 42.1501 et seq. (as enacted on May 27, 2011 and thereafter amended) and
uses incidental thereto (“Permitted Use”) and for no other purpose. Tenant
agrees to use and occupy the Premises continuously during the Term for this
purpose and for no other purpose without exception so that customer traffic and
volume of business shall be maximized and so that overall tenant performance and
Landlord’s potential for receiving Percentage Rent shall not be diminished.

 

4.2 Limitations. Tenant shall not permit any odors, smoke, dust, gas,
substances, noise or vibrations to emanate from the Premises as a result of
Tenant’s or Tenant’s employees, agents, customers, visitors, invitees,
licensees, contractors, assignees and subtenants (each, a “Tenant Party” and
collectively, “Tenant Parties”) use thereof, nor take any action which would
constitute a nuisance or would disturb, obstruct or endanger the Premises or any
neighboring properties. Tenant shall not permit the smoking, ingestion, or other
use of any Schedule I drugs as defined by the United States Controlled
Substances Act on or about the Premises by Tenant Parties. Tenant shall not use
or allow the Premises to be used for any immoral, improper or unlawful purpose,
nor shall Tenant cause, maintain or permit any nuisance in, on or about the
Premises. Tenant shall not commit or suffer the commission of any waste in, on
or about the Premises. Tenant shall not allow any sale by auction upon the
Premises, or place any loads upon the floors, walls or ceilings which could
endanger the structure, or place any hazardous or harmful substances in the
drainage system of the Premises.

 

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4.3 Compliance With Regulations. Tenant shall at Tenant’s sole cost and expense,
promptly comply with all existing or future applicable municipal, state, federal
(to the extent not inconsistent with municipal and state laws allowing Tenant to
use the Premises for the Permitted Use), and other governmental statutes, rules,
requirements, regulations, laws and ordinances, including zoning ordinances,
regulations, and covenants, easements and restrictions of record governing and
relating to the use, occupancy or possession of the Premises, or to the use,
storage, generation or disposal of Hazardous Materials, as defined in Paragraph
37 of this lease, or to the collection, sorting, separation, and recycling of
waste products, garbage, refuse, and trash (collectively “Regulations”). Tenant
shall, at its sole cost and expense, subject to Paragraph 12, perform those
Alterations reasonably required to comply with the Regulations and Tenant’s
Permitted Use, including, without limitation, laws and regulations pertaining to
(i) the Americans with Disabilities Act of 1990, 42 U.S.C. § 12101 et seq., as
amended (“ADA”); (ii) Hazardous Materials, as defined in Paragraph 37 of this
Lease; (iii) applicable building codes and regulations, in effect as of the
Commencement Date; and (iv) any requirements and tenant improvements mandated in
connection with the City of San Diego Conditional Use Permit (“CUP”) for
operating the Permitted Use. If any governmental license or permit shall be
required for the proper and lawful conduct of Tenant’s use of the Premises and
if the failure to secure such license or permit would, in any way, affect
Landlord or the Premises, then Tenant, at Tenant’s sole cost and expense unless
otherwise stated, shall promptly procure and thereafter maintain, submit for
inspection by Landlord, and at all times comply with the terms and conditions
of, each such license or permit. Tenant shall, at its sole cost and expense,
promptly comply with the requirements of any board of fire underwriters or other
similar body now or hereafter constituted. Tenant shall not do or permit
anything to be done in, on, under or about the Premises or bring or keep
anything which will in any way increase the rate of any insurance upon the
Premises or upon any contents therein or cause a cancellation of said insurance
or otherwise affect said insurance in any manner. To the maximum extent allowed
by law, Tenant shall indemnify, defend (by counsel reasonably acceptable to
Landlord), protect and hold Landlord harmless from and against any loss, cost,
expense, damage, attorneys’ fees or liability arising out of the failure of
Tenant to comply with any Regulations notwithstanding any conflicts of laws
among such Regulations. Tenant’s obligations pursuant to the foregoing indemnity
shall survive the expiration or earlier termination of this Lease.

 

4.4 Contest Of Regulations. Tenant, at Tenant’s sole cost and expense and after
notice to Landlord, may contest, by appropriate proceedings prosecuted
diligently and in good faith, the legality or applicability of any Regulations
affecting the Premises provided that: (a) neither Landlord nor any Landlord
Indemnitees (as defined in Paragraph 8.3) shall be subject to civil or criminal
penalties, nor shall the Premises or any part thereof be subject to being
condemned or vacated, nor shall the certificate of occupancy for the Premises or
the Building be suspended or threatened to be suspended, by reason of
non-compliance or by reason of such contest; (b) if Landlord or any Landlord
Indemnitees may be subject to any civil fines or penalties or if Landlord may be
liable to any independent third party as a result of such non-compliance, then
before the commencement of such contest Tenant shall furnish to Landlord either
(i) a bond of a surety company satisfactory to Landlord, in form and substance
reasonably satisfactory to Landlord, and in an amount at least equal to one
hundred twenty (120%) percent of Landlord’s estimate of the sum of (A) the cost
of such compliance, (B) the penalties or fines that may accrue by reason of such
non-compliance (as reasonably estimated by Landlord), and (C) the amount of such
liability to independent third parties, and shall indemnify Landlord (and any
Landlord Indemnitees) against the cost of such compliance and liability
resulting from or incurred in connection with such contest or non-compliance; or
(ii) other security satisfactory in all respects to Landlord; (c) such
non-compliance or contest shall not constitute or result in a violation (either
with the giving of notice or the passage of time or both) of the terms of any
mortgage, or if such mortgage conditions such non-compliance or contest upon the
taking of action or furnishing of security by Landlord, such action shall be
taken or such security shall be furnished at the expense of Tenant; and (d)
Tenant shall keep Landlord regularly advised as to the status of such
proceedings.

 

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5. OPERATIONS

 

During the entire Term, Tenant shall continuously conduct Tenant’s business in
the Premises in the manner provided in Paragraph 4.1, and shall keep the
Premises open for business every day during the entire Term for regular business
hours; provided, however, that this provision shall not apply if the Premises
are closed or Tenant’s business is temporarily shut down for reasons as Landlord
may approve in advance in writing.

 

6. RENT

 

6.1 Rent. All monetary obligations of Tenant under this Lease (except for any
security deposit) shall be deemed to be “Rent.” All Rent shall be due in advance
on the first day of each calendar month and paid to Landlord in lawful money of
the United States, without deduction or offset whatsoever (except as
specifically set forth in this Lease), at 568 North Tulip Street, Escondido,
California 92025, or to such other place as Landlord may from time to time
designate in writing. If the obligation for payment of any portion of Rent
commences on a day other than the first day of a month, then the amount shall be
prorated and shall be paid on that same day on which the obligation commences.

 

6.2 Pre-Commencement Rent. Beginning on the Possession Date and continuing until
the Commencement Date, Tenant shall pay to Landlord and Landlord shall receive,
without notice or demand, “Pre-Commencement Rent” in the amount of $12,000 per
month. Pre-Commencement Rent shall be payable in monthly installments in advance
on or before the first (1st) day of each calendar month, in lawful money of the
United States, without deduction or offset whatsoever (except as specifically
set forth in this Lease

 

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6.3 Base Rent. Beginning on the Commencement Date, Tenant shall pay to Landlord
and Landlord shall receive, without notice or demand throughout the Term, Base
Rent as set forth in the table below (“Base Rent”). Notwithstanding anything to
the contrary contained herein and provided that Tenant faithfully performs all
of the terms and conditions of this Lease, Landlord hereby agrees to abate
Tenant’s obligation to pay Base Rent such that Base Rent shall be reduced to the
amount of $12,000 per month for the period from the Commencement Date until the
first day of the calendar month immediately following the month in which the
issuance of the CUP and commencement of business operations under the CUP occur.
Upon expiration of this abatement period, Base Rent shall resume being paid in
accordance with the table below per the applicable lease month. During this
abatement period, Tenant shall still be responsible for the payment of all its
other monetary obligations under this Lease including, without limitation,
Tenant’s obligation to pay Additional Rent. In the event of a default by Tenant
under the terms of this Lease that results in early termination pursuant to the
provisions of Paragraph 26.2 of this Lease, then as a part of the recovery set
forth in Paragraph 26 of this Lease, Landlord shall be entitled to the recovery
of the Base Rent that was abated under the provisions of this Paragraph 6. The
amount of Base Rent abated pursuant to this paragraph may be referred herein as
“Abated Rent Amount.”

 

Lease Months

Monthly Base Rent

1-12

$15,000.00

13-24

$15,450.00

25-36

$15,913.50

37-48

$16,390.91

49-Expiration Date

$16,882.63

 

6.4 Additional Rent. Commencing on the Possession Date, Tenant shall pay
Landlord as additional Rent all amounts attributable to Real Property Taxes, as
defined below. All monies other than Base Rent required to be paid by Tenant in
this Lease, including, but not limited to, Pre-Commencement Rent, Real Property
Taxes, as defined below, charges to be paid by Tenant under Paragraph 15, the
interest and late charge described in Paragraphs 26.4 and 26.5, and any monies
spent by Landlord pursuant to Paragraph 30, shall be considered additional rent
(“Additional Rent”). Tenant shall also pay to Landlord as Additional Rent the
aggregate amount of $150,000.00 in consideration for Landlord’s expenses
incurred in pursuit of the CUP (“CUP Obligation”) within one (1) year of the
first day of the month following issuance of the CUP and commencement of
business operations under the CUP. The amount of Additional Rent attributable to
Real Property Taxes, as defined below, shall be paid monthly in an amount equal
to 1/12th of the amount due in the applicable year (the amount due for any
partial month or Lease year shall be prorated). Such amount shall be based on
Landlord’s written statement estimating such Real Property Taxes for the
applicable year. If at the end of any Lease year, the amount paid by Tenant for
Real Property Taxes is less than the amount of Real Property Taxes otherwise
required to be paid by Tenant for such year (based on the actual amount of such
Real Property Taxes for such year) the balance shall be paid by Tenant along
with the next monthly installment of Rent under this Lease, and if the amount
paid by Tenant for Real Property Taxes for such year is more than the amount of
Real Property Taxes otherwise required to be paid by Tenant for such year, such
amount shall be credited against the next installments of Rent payable under
this Lease (if any such amounts remain owing by Landlord to Tenant after the
termination of this Lease, such amounts shall be paid by Landlord to Tenant
within twenty (20) days of the termination of this Lease).

 

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6.5 Real Property Taxes. “Real Property Taxes” means and refers to all federal,
state, county, or local government or municipal taxes, fees, charges, or other
impositions of every kind or nature, whether general, special, ordinary, or
extraordinary imposed in connection with the Premises. Real Property Taxes
include taxes, fees, and charges such as real property taxes, general and
special assessments, transit taxes, leasehold taxes, and taxes based on the
receipt of rent (including gross receipts or sales taxes applicable to the
receipt of rent, unless required to be paid by Tenant), and personal property
taxes imposed on fixtures, machinery, equipment, apparatus, systems,
appurtenances, and other personal property used in connection with the Premises
or the Building, as the case may be along with reasonable legal and other
professional fees, costs and disbursements incurred in connection with
proceedings to contest, determine or reduce real property taxes. Notwithstanding
the foregoing, the following shall be excluded from Real Property Taxes: all
excess profits taxes, franchise taxes, gift taxes, capital stock taxes,
inheritance and succession taxes, estate taxes, federal, state, and local income
taxes, and other taxes applied or measured by Landlord’s general or net income
(as opposed to rents, receipts, or income attributable to operations at the
Building).

 

6.6 Net Rent. This is a so-called “pure net” or “triple net” lease, and the Base
Rent provided for herein is intended to be received in its entirety by Landlord
without deduction, set-off, charge or other diminution in any way.

 

6.7 Percentage Rent. In addition to Base Rent and Additional Rent, commencing
with the Commencement Date, Tenant also agrees to pay to Landlord, at the times
and in the manner specified in this Lease, percentage rent (“Percentage Rent”)
in the amount of three percent (3%) of Gross Sales. This computation shall be
made with respect to each Lease Year; provided, however, that the Gross Sales
made during the fractional month, if any, preceding the first Lease Year shall
be included in the Gross Sales of that Lease Year. For any partial Lease Year
(that includes any period shorter than a calendar year that precedes the
termination of this Lease and any full Lease Year during which Tenant’s
obligation to pay Base Rent has been abated, in whole or in part for any reason)
the amount of annual Gross Sales in this Section shall be reduced by multiplying
that amount by a fraction, the numerator of which is the total actual amount of
Base Rent Tenant was obligated to pay during the partial Lease Year and the
denominator of which is the total Base Rent Tenant would have been obligated to
pay, on an average basis, had the partial Lease Year at issue been a full Lease
Year or if the Base Rent for such Lease Year had not been abated, as applicable.

 

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6.7.1 Lease Year. “Lease Year” means with respect to the first Lease Year, the
period commencing on the first day of the first full calendar month after the
Commencement Date (“Lease Year Commencement Date”) and ending on the day
immediately preceding the anniversary of the Lease Year Commencement Date; and
with respect to each succeeding Lease Year, the twelve (12) month period
commencing on each anniversary of the Lease Year Commencement Date, provided
that the last Lease Year shall end on the last day of the Term or on such an
earlier date as this Lease is terminated in accordance with its terms.

 

6.7.2 Gross Sales. “Gross Sales” shall include (less the exceptions and
authorized deductions in this Lease) all sales made and all cash and credit
revenue of Tenant, including finance charges to customers, and in case of sales
on credit whether or not payment is actually made, at, in, on, or from the
Premises; the gross amount received by Tenant for merchandise sold pursuant to
orders received in or from the Premises, though filled elsewhere; and the gross
amount received by Tenant from all other sources of income derived from the
business conducted on the Premises.

 

6.7.3 Sales Tax Excepted. There is excepted from Tenant’s Gross Sales the amount
of all sales tax receipts required to be accounted for by Tenant to any
government or governmental agency, but not the amount of any excise tax (except
a consumer excise tax) or other governmental obligation in the nature of a tax
on the privilege of doing business. There shall also be deducted from Tenant’s
Gross Sales the amount of any actual refunds or credits made by Tenant for
returned merchandise, provided the sale of such merchandise was previously
included by Tenant in Tenant’s Gross Sales.

 

6.7.4 Records Requirements. Tenant shall record at the time of sale, in the
presence of the customer, all receipts from sales or other transactions, whether
cash or credit, in a cash register or registers having tape that accumulates and
consecutively numbers all purchases. Tenant shall keep:

 

(a) full and accurate books of account and records in accordance with generally
accepted accounting principles consistently applied, including, without
limitation, a sales journal, general ledger, and all bank account statements
showing deposits of Gross Sales revenue;

 

(b) all cash register receipts with regard to the Gross Sales, credits, refunds,
and other pertinent transactions made from or on the Premises (including the
Gross Sales of any subtenant, licensee, or concessionaire); and

 

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(c) detailed original records of any exclusions or deductions from Gross Sales
(including any exclusions or deductions from Gross Sales of any subtenant,
licensee, or concessionaire).

 

These books, receipts, and records shall be kept for a period of two (2) years
after the close of each Lease Year, and shall be available for inspection and
audit by Landlord and Landlord’s representatives at the Premises at all times
during regular business hours. In addition, on request of Landlord or Landlord’s
representatives, Tenant agrees to furnish copies of Tenant’s state and local
sales and use tax returns.

 

6.7.5 Monthly Sales Statement. Within ten (10) days after the end of each
calendar month, commencing with the tenth (10th) day of the month following the
calendar month in which Tenant’s obligation to pay Percentage Rent commences and
ending with the tenth (10th) day of the month following the last month of the
Term, Tenant shall furnish Landlord with a statement, to be certified as correct
by Tenant or an employee of Tenant authorized so to certify, that sets forth
Tenant’s Gross Sales per Paragraph 6.7.2 for the month just concluded (“Monthly
Sales Statement”), including any authorized exclusions and deductions. With each
Monthly Sales Statement, Tenant shall pay to Landlord as Percentage Rent an
amount equal to three percent (3%) multiplied by the amount of Tenant’s Gross
Sales for the month reported, adjusted as provided in Paragraphs 6.7 and 6.7.1
if appropriate.

 

6.7.6 Annual Sales Statement. Prior to the last day of the first (1st) month
following the end of each Lease Year, Tenant shall furnish Landlord a statement
of Tenant’s annual Gross Sales made during the previous Lease Year, or any
partial Lease Year, including any authorized deductions (“Annual Sales
Statement”). Such Annual Sales Statement shall be certified as correct by
Tenant, or if Tenant is a corporation or limited liability company, by an
authorized officer or manager of Tenant. With each Annual Sales Statement Tenant
shall pay to Landlord the amount of any additional Percentage Rent that is
payable to Landlord, considering any installments of Percentage Rent paid by
Tenant to Landlord during the previous Lease Year or partial Lease Year, as
appropriate. If the Annual Sales Statement shows that during the previous Lease
Year Tenant paid more Percentage Rent than it was obligated to pay under the
terms of this Lease, the amount of this overpayment shall be applied to the next
installment or installments of Percentage Rent due or, if the overpayment was in
the last year of the Term, Landlord shall refund to Tenant the full amount of
this overpayment within thirty (30) days of Landlord’s receipt of the statement.

 

6.7.7 Audit. Once with respect to each Lease Year and within two (2) years after
its end, whether during or after the Term, Landlord may cause an audit of
Tenant’s business by an independent accountant of Landlord’s own selection, and
if any monthly or annual statement of Gross Sales for the Lease Year made by
Tenant to Landlord is found to be more than three percent (3%) less than the
amount of Tenant’s actual Gross Sales for the period covered by this statement,
Tenant shall immediately pay to Landlord the cost of the audit and any
additional Percentage Rent shown to be payable by Tenant, together with interest
from the original due date at the rate of ten percent (10%) per annum;
otherwise, the cost of this audit shall be paid by Landlord.

 

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6.7.8 Default. If Tenant fails to provide to Landlord any Monthly Sales
Statement or Annual Sales Statement at the time and in the manner specified in
this Lease, this failure shall constitute a default under this Lease and
Landlord shall have the right, in addition to any other rights or remedies it
may have under this Lease, to conduct an audit to determine these sales, and
Tenant shall immediately reimburse Landlord for the cost of the audit on written
demand by Landlord. If any Monthly Sales Statement or Annual Sales Statement is
found to be more than five percent (5%) less than the amount of Tenant’s Gross
Sales shown by this audit, the understatement shall be deemed willful and
Landlord may terminate this Lease upon written notice given at any time within
thirty (30) days after receipt of the audit by Landlord. If at any time Tenant
causes an audit of Tenant’s business at the Premises to be made by an
independent accountant, Tenant shall furnish Landlord a copy of the report of
this audit at no cost to Landlord, within ten (10) days after Tenant’s receipt
of the audit report.

 

6.7.9 Additional Rights. The acceptance by Landlord of any monies paid to
Landlord by Tenant as Percentage Rent for the Premises as shown by any Annual
Sales Statement furnished by Tenant shall not be an admission of the accuracy of
the statement or of any of the monthly statements furnished by Tenant during the
subject year, or of the sufficiency of the amount of Percentage Rent payments,
but Landlord shall be entitled at any time within two (2) years from the end of
the Lease Year for which any of the Percentage Rent payments have been paid to
question the sufficiency of the amount paid and the accuracy of the statements
furnished by Tenant to justify the amount Tenant shall, for each period of two
(2) years, including the two (2) years following the end of the Term, keep safe
and intact all of the records, books, and accounts required under Paragraph
6.7.4, and shall upon request make these records available to Landlord,
Landlord’s auditor, representative, or agent for examination at any reasonable
time during this period.

 

6.7.10 Assignee/Subtenant Gross Sales. Wherever Tenant’s business or operations,
or Tenant’s Gross Sales, or Tenant’s records, books, accounts, and other data
are referred to in this Lease, they shall be deemed to include those of any
assignee, subtenant, concessionaire, licensee, vending machine operator, or
other person, firm, or corporation selling merchandise or services on or from
the Premises; provided that this subparagraph shall not be deemed to imply
consent to the operations of any other person, firm, or corporation except in
accordance with the provisions of Paragraph 21.

 

6.7.11 Business Operations. Tenant shall operate Tenant’s business in the
Premises with due diligence and efficiency so as to produce the maximum amount
of Gross Sales that may be produced by this manner of operation. Tenant shall at
all times carry a full and complete stock of seasonable merchandise offered for
sale at competitive prices and shall maintain adequate personnel for the
efficient service of its customers, provided that during a reasonable period of
time prior to the normal termination of this Lease, Tenant may commence winding
up its business in an orderly fashion.

 

6.7.12 Calculation After Default/Termination. If this Lease is terminated by
Landlord because of Tenant’s default, and if Tenant becomes liable for any
deficiency in Percentage Rent by way of damages or otherwise, or if at any time
during the Term, Tenant ceases to conduct in the Premises the business referred
to in Paragraph 4.1, then from and after the time of the breach causing this
termination, or from and after the time of the cessation of business, the
Percentage Rent shall be deemed to be an amount based upon the average of the
payments that have accrued to Landlord as Percentage Rent under this Paragraph
6.7 during the twenty-four (24) months preceding the termination or cessation of
business, unless the termination or cessation occurs within three (3) years of
the beginning of the Term, in which event the previous twelve (12) (or fewer, if
applicable) months shall be used as the basis of this average.

 

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6.7.13 In any case where Landlord has a cause of action for damages, Landlord
shall have the privilege of splitting the cause to permit the institution of a
separate suit for the Base Rent provided in Paragraph 6.3, and neither
institution of any suit, nor the subsequent entry of judgment, shall bar
Landlord from bringing another suit for the Percentage Rent provided in
Paragraph 6.7; it being the purpose of this subparagraph to provide that the
forbearance on the part of Landlord in any suit or entry of judgment for any
part of the Rent reserved under this Lease, to sue for, or to include in any
suit and judgment the Percentage Rent then due, shall not serve as defense
against, nor prejudice a subsequent action for, the Percentage Rent. The claims
for Base Rent and those for the Percentage Rent may be regarded by Landlord, if
it so elects, as separate claims capable of being assigned separately.

 

6.7.14 Neither the provisions in Paragraph 6.7 for the computation of Percentage
Rent, nor any one or more agreements contained in this Lease, is intended,
deemed, or construed to create a partnership between Landlord and Tenant, to
make them joint venturers, or to make Landlord in any way responsible for the
debts or losses of Tenant.

 

7. RENT AND OTHER MONIES DUE UPON EXECUTION

 

 

(1)Pre-Commencement Rent: $12,000.00.

 

 

 

 

(2)Security Deposit: $33,765.26 (“Security Deposit”).

 

 

 

 

(3)Total Due upon Execution of this Lease: $45,765.26.

 

8. INSURANCE AND INDEMNIFICATION

 

8.1 Landlord’s Insurance. All insurance maintained by Landlord shall be for the
sole benefit of Landlord and under Landlord’s sole control. Landlord, at
Landlord’s option, may (but shall have no obligation to) carry (i) insurance
against loss of rent, in an amount equal to the amount of Base Rent and
Additional Rent that Landlord could be required to abate to rent in the event of
condemnation or casualty damage for a period of twelve (12) months; and (ii)
liability insurance and such other insurance as Landlord may deem prudent or
advisable, including, without limitation, liability insurance in such amounts
and on such terms as Landlord shall determine. Landlord shall not be obligated
to insure, and shall have no responsibility whatsoever for any damage to, any
furniture, machinery, goods, inventory or supplies, or other personal property
or fixtures which Tenant may keep or maintain in the Premises, or any leasehold
improvements, additions or alterations within the Premises.

 

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8.2 Tenant’s Insurance. Tenant shall procure at Tenant’s sole cost and expense
and keep in effect from the date of this Lease and at all times until the end of
the Term the following:

 

8.2.1 Fire, Vandalism, And Malicious Mischief Insurance. Property insurance
insuring the Premises against damage or destruction due to risks including fire,
vandalism, and malicious mischief, in an amount not less than the replacement
cost thereof, in the form and with deductibles and endorsements, including
extended coverage, as selected by Landlord.

 

8.2.2 Business Interruption And Property Insurance. Insurance covering personal
property, fixtures, furnishings, equipment, and inventory of merchandise of
Tenant located in the Premises and all improvements, additions or alterations
made by or for Tenant to the Premises on an “all risk” basis, insuring such
property for the full replacement value of such property, including “use and
occupancy” and/or “business interruption” coverage.

 

8.2.3 Liability Insurance. Commercial General Liability insurance covering
bodily injury and property damage liability occurring in or about the Premises
or arising out of the use and occupancy of the Premises, and any areas adjacent
thereto, and the business operated by Tenant or by any other occupant of the
Premises. Such insurance shall include contractual liability coverage insuring
all of Tenant’s indemnity obligations under this Lease. Such coverage shall have
a minimum combined single limit of liability of at least Two Million Dollars
($2,000,000.00), and a minimum general aggregate limit of Three Million Dollars
($3,000,000.00), with an “Additional Insured – Managers or Lessors of Premises
Endorsement” and the “Amendment of the Pollution Exclusion Endorsement.” All
such policies shall be written to apply to all bodily injury (including death),
property damage or loss, personal and advertising injury and other covered loss,
however occasioned, occurring during the policy term, shall be endorsed to add
Landlord and any party holding an interest to which this Lease may be
subordinated as an additional insured, and shall provide that such coverage
shall be “primary” and non-contributing with any insurance maintained by
Landlord, which shall be excess insurance only. Such coverage shall also contain
endorsements including employees as additional insureds if not covered by
Tenant’s Commercial General Liability Insurance. All such insurance shall
provide for the severability of interests of insureds; and shall be written on
an “occurrence” basis, which shall afford coverage for all claims based on acts,
omissions, injury and damage, which occurred or arose (or the onset of which
occurred or arose) in whole or in part during the policy period.

 

8.2.4 Workers’ Compensation And Employers’ Liability Insurance. Workers’
Compensation Insurance as required by any Regulations, and Employers’ Liability
Insurance in amounts not less than One Million Dollars ($1,000,000) each
accident for bodily injury by accident; One Million Dollars ($1,000,000) policy
limit for bodily injury by disease; and One Million Dollars ($1,000,000) each
employee for bodily injury by disease.

 

8.2.5 Commercial Auto Liability Insurance. Commercial auto liability insurance
with a combined limit of not less than One Million Dollars ($1,000,000) for
bodily injury and property damage for each accident. Such insurance shall cover
liability relating to any auto (including owned, hired and non-owned autos).

 

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8.2.6 Alterations Requirements. In the event Tenant desires to perform any
Alterations (as defined in Paragraph 12 below) costing in excess of $100,000.00,
Tenant shall deliver to Landlord, prior to commencing such Alterations (i)
evidence satisfactory to Landlord that Tenant carries “builder’s risk” insurance
covering construction of such Alterations in an amount and form approved by
Landlord, and (ii) such other insurance as Landlord shall nondiscriminatorily
require.

 

8.2.7 General Insurance Requirements. All coverages described in this Paragraph
8.2 shall be endorsed to (i) provide Landlord with thirty (30) days’ notice of
cancellation or change in terms; and (ii) waive all rights of subrogation by the
insurance carrier against Landlord. If at any time during the Term the amount or
coverage of insurance which Tenant is required to carry under this Paragraph 8.2
is, in Landlord’s reasonable judgment, materially less than the amount or type
of insurance coverage typically carried by owners or tenants of properties
located in the general area in which the Premises is located which are similar
to and operated for similar purposes as the Premises or if Tenant’s use of the
Premises should change with or without Landlord’s consent, Landlord shall have
the right to require Tenant to increase the amount or change the types of
insurance coverage required under this Paragraph 8.2. All insurance policies
required to be carried by Tenant under this Lease shall be written by companies
rated A X or better in Best’s Insurance Guide and authorized to do business in
the State of California. In any event, the total deductible amounts under all
insurance policies required to be carried by Tenant under this Lease shall not
exceed Five Thousand Dollars ($5,000) per occurrence. Tenant shall deliver to
Landlord on or before the Commencement Date, and thereafter at least thirty (30)
days before the expiration dates of the expired policies, certified copies of
Tenant’s insurance policies, or a certificate evidencing the same issued by the
insurer thereunder; and, if Tenant shall fail to procure such insurance, or to
deliver such policies or certificates, Landlord may, at Landlord’s option and in
addition to Landlord’s other remedies in the event of a default by Tenant under
this Lease, procure the same for the account of Tenant, and the cost thereof
shall be paid to Landlord as Additional Rent.

 

8.3 Indemnification. To the maximum extent allowed by law, Tenant shall
indemnify, defend by counsel reasonably acceptable to Landlord, protect and hold
Landlord (or any successor) and each of their respective directors,
shareholders, partners, lenders, members, managers, contractors, affiliates, and
employees (collectively, “Landlord Indemnitees”) harmless from and against any
and all claims, liabilities, losses, costs, loss of rents, liens, damages,
injuries or expenses, including reasonable attorneys’ and consultants’ fees and
court costs, demands, causes of action, or judgments, directly or indirectly
arising out of or related to, regardless of fault: (1) claims of injury to or
death of persons or damage to property or business loss occurring or resulting
directly or indirectly from the use or occupancy of the Premises by Tenant or
Tenant’s Parties, or from activities or failures to act of Tenant or Tenant’s
Parties; (2) claims arising from work or labor performed, or for materials or
supplies furnished to or at the request of Tenant in connection with performance
of any work done for the account of Tenant within the Premises; (3) claims
arising from any breach or default on the part of Tenant in the performance of
any covenant contained in this Lease; (4) claims arising from the negligence or
intentional acts or omissions of Tenant or Tenant’s Parties; and (5) claims
arising from the broker fees in connection with this Lease. The foregoing
indemnity by Tenant shall not be applicable to claims to the extent arising from
the sole negligence or willful misconduct of Landlord. Landlord shall not be
liable to Tenant and Tenant hereby waives all claims against Landlord for any
injury to or death of or damage to any person or property or business loss in or
about the Premises by or from any cause whatsoever (other than Landlord’s sole
negligence or willful misconduct) and, without limiting the generality of the
foregoing, whether caused by water leakage of any character from the roof,
walls, basement or other portion of the Premises, or caused by gas, fire, oil or
electricity in, on or about the Premises, acts of God or of third parties, or
any matter outside of the reasonable control of Landlord. The provisions of this
Paragraph 8.3 shall survive the expiration or earlier termination of this Lease.

 

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9. WAIVER OF SUBROGATION

 

Landlord and Tenant each waives any claim, loss or cost it might have against
the other for any injury to or death of any person or persons, or damage to or
theft, destruction, loss, or loss of use of any property (“Loss”), to the extent
the same is insured against (or is required to be insured against under the
terms hereof) under any property damage insurance policy covering the Premises,
Landlord’s or Tenant’s fixtures, personal property, leasehold improvements, or
business, regardless of whether the negligence of the other party caused such
Loss. This release shall apply between the parties and shall apply to any claims
under or through either of the parties as a result of any asserted right of
subrogation. The policies of property insurance required by this Lease shall
include a clause or endorsement waiving the insurer’s right of subrogation
against the other party.

 

10. LANDLORD’S REPAIRS AND MAINTENANCE

 

Landlord shall have no obligation to construct, install, maintain, repair, or
replace any part of the Premises, any improvements in the Premises, nor shall
Landlord be obligated to contribute to the cost of any improvements to the
Premises constructed by Tenant. Notwithstanding the foregoing sentence, Landlord
shall maintain the foundation of the Building and all structural and
load-bearing walls of the Building (collectively, “Structural Components”).
Tenant shall immediately give Landlord written notice of any defect or need of
repairs in such components of the Premises for which Landlord is responsible,
after which Landlord shall have a reasonable opportunity (i.e., no less than ten
(10) business days) and the right to enter the Premises at all reasonable times
to repair same. Landlord’s liability with respect to any defects, repairs, or
maintenance for which Landlord is responsible under any of the provisions of
this Lease shall be limited to the cost of such repairs or maintenance, and
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
repairs, alterations or improvements in or to any portion of the Premises,
except as expressly provided in Paragraph 24 below.

 

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11. TENANT’S REPAIRS AND MAINTENANCE

 

Tenant shall at all times during the Term, at Tenant’s sole expense, maintain
all non-Structural Components of the Premises, including the electrical,
plumbing, sprinkler, or fire/life-safety systems serving the Premises, the
heating, ventilating and air conditioning (“HVAC”) systems serving the Premises,
and all other portions of the Premises in a good, clean and secure condition and
promptly make all necessary repairs and replacements, as determined by Landlord,
including but not limited to, all workmanship of the same character, kind and
quality as the original. If any maintenance performed by Tenant affects the
Building’s electrical, plumbing, sprinkler, or fire/life-safety systems, Tenant
shall use only those contractors previously approved by Landlord for work on
such systems, unless such use is impracticable as in the case of a life
threatening situation. Any work performed by or on behalf of Tenant shall be
performed in accordance with the provisions of this Lease governing repairs and
alterations by Tenant. Tenant shall at Tenant’s expense also perform regular
removal of trash and debris. Tenant shall, at Tenant’s expense, enter into a
regularly scheduled preventative maintenance/service contract for the HVAC
system servicing the Premises and shall provide a copy to Landlord promptly
following the Commencement Date. In the event that Tenant does not comply with
the foregoing obligation, Landlord shall have the right to enter into a
scheduled preventative maintenance/service contract for the HVAC system
following five (5) days notice to Tenant in which event the cost of such
contract, together with an administrative fee not to exceed five percent (5%) of
such contract amount, shall be billed to Tenant and shall be payable as
Additional Rent under this Lease. Nothing herein shall expressly or by
implication render Tenant Landlord’s agent or contractor to effect any repairs
or maintenance required of Tenant under this Paragraph 11, as to all of which
Tenant shall be solely responsible.

  

12. ALTERATIONS

 

12.1 Tenant shall not make, or allow to be made, any alterations, physical
additions, improvements or partitions, including without limitation the
attachment of any fixtures or equipment, in, about or to the Premises
(“Alterations”) without obtaining the prior written consent of Landlord, which
consent shall not be unreasonably withheld with respect to proposed Alterations
which: (a) comply with all applicable Regulations; and (b) are, in Landlord’s
opinion, compatible with the Building and its building systems (e.g.,
mechanical, electrical, fire/life-safety, plumbing, and HVAC system or systems)
or its Structural Components, and will not cause the Building or such systems to
be required to be modified to comply with any Regulations (including, without
limitation, the ADA). Specifically, but without limiting the generality of the
foregoing, Landlord shall have the right of written consent for all plans and
specifications for the proposed Alterations, construction means and methods, all
appropriate permits and licenses, any contractor or subcontractor to be employed
on the work of Alterations, and the time for performance of such work, and may
impose rules and regulations for contractors and subcontractors performing such
work. Notwithstanding the foregoing provisions of this Paragraph 12.1, Tenant
may make any Alterations that (i) do not adversely affect the building systems
(e.g., mechanical, electrical, fire/life-safety, plumbing, and HVAC system or
systems) or the Structural Components of the Building, and (ii) cost less than
Twenty-Five Thousand Dollars ($25,000) in each instance, without Landlord’s
prior consent, provided that Tenant delivers notice to Landlord not less than
thirty (30) days prior to the commencement of construction of any such
Alterations. Tenant shall also supply to Landlord any documents and information
reasonably requested by Landlord in connection with Landlord’s consideration of
a request for approval under this Lease. Tenant shall cause all Alterations to
be accomplished in a good and workmanlike manner, and to comply with all
applicable Regulations and Paragraph 27 hereof. Tenant shall at Tenant’s sole
expense, perform any additional work required under applicable Regulations due
to the Alterations under this Lease. No review or consent by Landlord of or to
any proposed Alteration or additional work shall constitute a waiver of Tenant’s
obligations under this Paragraph 12. Tenant shall reimburse Landlord for all
costs which Landlord may incur in connection with granting approval to Tenant
for, or reviewing a notice in connection with, any such Alterations, including
any costs or expenses which Landlord may incur in electing to have outside
architects and engineers review said plans and specifications. All such
Alterations shall remain the property of Tenant until the expiration or earlier
termination of this Lease, at which time they shall be and become the property
of Landlord; provided, however, that Landlord may, at Landlord’s option, require
that Tenant, at Tenant’s expense, remove any or all Alterations made by Tenant
and restore the Premises by the expiration or earlier termination of this Lease,
to their condition existing prior to the construction of any such Alterations.
All such removals and restoration shall be accomplished in a good and
workmanlike manner so as not to cause any damage to the Premises whatsoever. If
Tenant fails to remove such Alterations or Tenant’s trade fixtures or furniture
or other personal property, Landlord may keep and use them or remove any of them
and cause them to be stored or sold in accordance with applicable law, at
Tenant’s sole expense. Tenant shall be responsible for and shall pay prior to
delinquency any taxes or governmental service fees, possessory interest taxes,
fees or charges in lieu of any such taxes, capital levies, or other charges
imposed upon, levied with respect to or assessed against its fixtures or
personal property, on the value of Alterations within the Premises, and on
Tenant’s interest pursuant to this Lease, or any increase in any of the
foregoing based on such Alterations. To the extent that any such taxes are not
separately assessed or billed to Tenant, Tenant shall pay the amount thereof as
invoiced to Tenant by Landlord.

 

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12.2 In compliance with Paragraph 27 hereof, at least ten (10) business days
prior to beginning construction of any Alteration, Tenant shall give Landlord
written notice of the expected commencement date of that construction to permit
Landlord to post and record a notice of non-responsibility. Upon substantial
completion of construction, if the law so provides, Tenant shall cause a timely
notice of completion to be recorded in the office of the recorder of the county
in which the Premises are located.

 

13. SIGNS

 

Tenant may install and maintain such signage on the Premises as is consistent
with the operation of a retail store and in compliance with applicable law, all
Regulations and this Lease. Tenant’s signs shall be constructed, installed,
maintained and removed at Tenant’s sole cost and expense. Any illuminated
signage shall be controlled by the Tenant’s time clock so as to be illuminated
only during the normal operational hours of the Tenant’s business. Tenant shall
(i) maintain full replacement value property insurance for any and all sign
structures constructed by Tenant and (ii) reimburse Landlord for any and all
costs or expenses related to Tenant’s signs to the extent paid by Landlord,
which costs, expenses and/or fees shall constitute Additional Rent under this
Lease. Tenant shall remove all such signs or graphics, and repair any resulting
damage to the Premises on or prior to the expiration or any earlier termination
of this Lease. Such installations and removals shall be made at Tenant’s sole
cost and expense and in such manner as to avoid injury to or defacement of the
Premises and any other improvements contained therein, and Tenant shall repair
any injury or defacement including without limitation discoloration caused by
such installation or removal. Notwithstanding the foregoing sentence, Landlord
may elect to retain any or all of Tenant’s signage upon the termination or
expiration of this Lease by delivering written notice to Tenant not less than
ten (10) days prior to expiration of the Term.

 

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14. INSPECTION/POSTING NOTICES

 

After reasonable notice, except in emergencies where no such notice shall be
required, Landlord and Landlord’s agents and representatives, shall have the
right to enter the Premises to inspect the same, to clean, to perform such work
as may be permitted or required under this Lease, including to complete and
perform maintenance on the wells on the Premises, to make repairs, improvements
or alterations to the Premises, to deal with emergencies, to post such notices
as may be permitted or required by law to prevent the perfection of liens
against Landlord’s interest in the Premises or to exhibit the Premises to
prospective tenants, purchasers, encumbrances or to others, or for any other
purpose as Landlord may deem necessary or desirable; provided, however, that
Landlord shall use reasonable efforts not to unreasonably interfere with
Tenant’s business operations. Tenant shall not be entitled to any abatement of
Rent by reason of the exercise of any such right of entry. Tenant waives any
claim for damages 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. Landlord shall at all times have and retain a
key with which to unlock all of the doors in, upon and about the Premises,
excluding Tenant’s vaults and safes or special security areas (designated in
advance), and Landlord shall have the right to use any and all means which
Landlord may deem necessary or proper to open said doors in an emergency, in
order to obtain entry to any portion of the Premises, and any entry to the
Premises or portions thereof obtained by Landlord by any of said means, or
otherwise, shall not be construed to be a forcible or unlawful entry into, or a
detainer of, the Premises, or an eviction, actual or constructive, of Tenant
from the Premises or any portions thereof. At any time within six (6) months
prior to the expiration of the Term or following any earlier termination of this
Lease or agreement to terminate this Lease, Landlord shall have the right to
erect on the Premises a suitable sign indicating that the Premises are available
for lease.

 

15. SERVICES AND UTILITIES

 

15.1 Tenant shall contract for and pay directly when due, for all water, gas,
heat, light, power, telephone, sewer, sprinkler charges, cleaning, waste
disposal and other utilities and services used on or from the Premises, together
with any taxes, penalties, surcharges or the like pertaining thereto, and
maintenance charges for utilities and shall furnish all electric light bulbs,
ballasts and tubes. If any such services are not separately billed or metered to
Tenant, Tenant shall pay an equitable proportion, as determined in good faith by
Landlord, of all charges. All sums payable under this Paragraph 15 shall
constitute Additional Rent under this Lease.

 

15.2 Tenant acknowledges that Tenant has inspected and accepts the water,
electricity, and other utilities and services being supplied or furnished to the
Premises as of the date Tenant takes possession of the Premises, if any, as
being sufficient in their present condition, “as is,” for the Permitted Use, and
for Tenant’s intended operations in the Premises. Landlord shall have no
obligation to provide electricity or any other services or utilities to the
Premises. Tenant agrees to cooperate fully with Landlord and to abide by all of
the regulations and requirements which Landlord may reasonably prescribe for the
proper functioning and protection of the Premise’s electrical systems.

 

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15.3 Tenant shall not without written consent of Landlord use any apparatus,
equipment or device in the Premises that will require additions or alterations
to or interfere with the Premises existing power distribution systems; nor
connect with electric current, except through existing electrical outlets in the
Premises. Tenant shall pay directly to Landlord upon demand the cost of all such
additional resources, energy, utility service and meters (and of installation,
maintenance and repair thereof and of any additional circuits or other equipment
necessary to furnish any additional resources, energy, utility or service).
Landlord may add to the separate or metered charge a recovery of additional
expense incurred in keeping account of the excess water, electric current or
other resource so consumed. Except as specifically set forth below, Landlord
shall in no case be liable for any damages directly or indirectly resulting from
nor shall the Rent or any monies owed Landlord under this Lease herein reserved
be abated by reason of: (a) the installation, use or interruption of use of any
equipment used in connection with the furnishing of any such utilities or
services, or any change in the character or means of supplying or providing any
such utilities or services or any supplier thereof; (b) the failure to furnish
or delay in furnishing any such utilities or services when such failure or delay
is caused by acts of God or the elements, labor disturbances of any character,
or otherwise, or because of any interruption of service due to Tenant’s use of
water, electric current or other resource in excess of that being supplied or
furnished for the use of the Premises as of the date Tenant takes possession of
the Premises; or (c) the inadequacy, limitation, curtailment, rationing or
restriction on use of water, electricity, gas or any other form of energy or any
other service or utility whatsoever serving the Premises otherwise; or (d) the
partial or total unavailability of any such utilities or services to the
Premises or the diminution in the quality or quantity thereof, whether by
Regulations or otherwise; or (e) any interruption in Tenant’s business
operations as a result of any such occurrence; nor shall any such occurrence
constitute an actual or constructive eviction of Tenant or a breach of an
implied warranty by Landlord. Landlord shall further have no obligation to
protect or preserve any apparatus, equipment or device installed by Tenant in
the Premises, including without limitation by providing additional or
after-hours heating or air conditioning. Landlord shall be entitled to cooperate
voluntarily and in a reasonable manner with the efforts of national, state or
local governmental agencies or utility suppliers in reducing energy or other
resource consumption. The obligation to make services available under this Lease
shall be subject to the limitations of any such voluntary, reasonable program.
In addition, Landlord reserves the right to change the supplier or provider of
any such utility or service from time to time. Landlord may, but shall not be
obligated to, upon notice to Tenant, contract with or otherwise obtain any
electrical or other such service for or with respect to the Premises or Tenant’s
operations therein from any supplier or provider of any such service. Tenant
shall cooperate with Landlord and any supplier or provider of such services
designated by Landlord from time to time to facilitate the delivery of such
services to Tenant at the Premises, including without limitation allowing
Landlord and Landlord’s suppliers or providers, and their respective agents and
contractors, reasonable access to the Premises for the purpose of installing,
maintaining, repairing, replacing or upgrading such service or any equipment or
machinery associated therewith.

 

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16. SUBORDINATION

 

Without the necessity of any additional document being executed by Tenant for
the purpose of effecting a subordination, this Lease shall be and is hereby
declared to be subject and subordinate at all times to: (a) all ground leases or
underlying leases which may now exist or hereafter be executed affecting the
Premises and/or the land upon which the Premises are situated, or both; and (b)
any mortgage or deed of trust which may now exist or be placed upon the Premises
or the land upon which the Premises are situated, or said ground leases or
underlying leases, or Landlord’s interest or estate in any of said items which
is specified as security. Notwithstanding the foregoing, Landlord shall have the
right to subordinate or cause to be subordinated any such ground leases or
underlying leases or any such liens to this Lease. If any ground lease or
underlying lease terminates for any reason or any mortgage or deed of trust is
foreclosed or a conveyance in lieu of foreclosure is made for any reason, Tenant
shall, notwithstanding any subordination, attorn to and become the Tenant of the
successor in interest to Landlord provided that Tenant shall not be disturbed in
its possession under this Lease by such successor in interest so long as Tenant
is not in default under this Lease. Within ten (10) days after request by
Landlord, Tenant shall execute and deliver any additional documents evidencing
Tenant’s attornment or the subordination of this Lease with respect to any such
ground leases or underlying leases or any such mortgage or deed of trust, in the
form requested by Landlord or by any ground landlord, mortgagee, or beneficiary
under a deed of trust, subject to such nondisturbance requirement. If requested
in writing by Tenant, Landlord shall use commercially reasonable efforts to
obtain a subordination, nondisturbance and attornment agreement for the benefit
of Tenant reflecting the foregoing from any ground landlord, mortgagee or
beneficiary, at Tenant’s expense, subject to such other terms and conditions as
the ground landlord, mortgagee or beneficiary may require. With respect to any
mortgage or deed of trust encumbering the Premises, or any part of the Premises,
as of the Commencement Date, Landlord shall use its reasonable best efforts to
cause the holder of such encumbrance to agree (in a form required by the holder
of such encumbrance) that so long as Tenant is not in default of its obligations
under this Lease, this Lease will not be terminated and Tenant’s possession of
the Premises will not be disturbed by the termination or foreclosure, or
proceedings for enforcement, of such encumbrance.

 

17. FINANCIAL STATEMENTS

 

At the request of Landlord in connection with the financing or disposition of
the Premises, or any portion of the Premises, Tenant shall provide Landlord with
Tenant’s and any guarantor’s current financial statements or other information
discussing financial worth of Tenant and any guarantor, which Landlord shall use
solely for purposes of this Lease and in connection with the ownership,
management, financing and disposition of the Premises. Notwithstanding the
foregoing, however, Tenant shall not be obligated to provide its financial
statements or other financial information more than four (4) times within a
period of twelve (12) months.

 

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18. ESTOPPEL CERTIFICATE

 

Tenant agrees from time to time, within ten (10) days after request of Landlord,
to deliver to Landlord, or Landlord’s designee, an estoppel certificate stating
that this Lease is in full force and effect, that this Lease has not been
modified (or stating all modifications, written or oral, to this Lease), the
date to which Rent has been paid, the unexpired portion of this Lease, that
there are no current defaults by Landlord or Tenant under this Lease (or
specifying any such defaults), that the leasehold estate granted by this Lease
is the sole interest of Tenant in the Premises and/or the land at which the
Premises are situated, and such other matters pertaining to this Lease as may be
reasonably requested by Landlord or any mortgagee, beneficiary, purchaser or
prospective purchaser of the Premises or any interest therein. Failure by Tenant
to execute and deliver such certificate shall constitute an acceptance of the
Premises and acknowledgment by Tenant that the statements included are true and
correct without exception. Landlord and Tenant intend that any statement
delivered pursuant to this Paragraph may be relied upon by any mortgagee,
beneficiary, purchaser or prospective purchaser of the Premises or any interest
therein. The parties agree that Tenant’s obligation to furnish such estoppel
certificates in a timely fashion is a material inducement for Landlord’s
execution of this Lease, and shall be an event of default (without any cure
period that might be provided under Paragraph 26.1.3 of this Lease) if Tenant
fails to fully comply or makes any material misstatement in any such
certificate.

 

19. SECURITY DEPOSIT

 

Tenant shall deposit with Landlord upon execution hereof the nonrefundable
Security Deposit as security for Tenant’s faithful performance of its
obligations under this Lease. If Tenant fails to pay Rent, or otherwise defaults
under this Lease, Landlord may use, apply or retain all or any portion of said
Security Deposit for the payment of any amount due Landlord or to reimburse or
compensate Landlord for any liability, expense, loss or damage which Landlord
may suffer or incur by reason thereof. If Landlord uses or applies all or any
portion of the Security Deposit, Tenant shall within ten (10) days after written
request therefor deposit monies with Landlord sufficient to restore said
Security Deposit to the full amount required by this Lease. Should the Permitted
Use be amended to accommodate a material change in the business of Tenant or to
accommodate a sublessee or assignee, Landlord shall have the right to increase
the Security Deposit to the extent necessary, in Landlord’s reasonable judgment,
to account for any increased wear and tear that the Premises may suffer as a
result thereof. If a change in control of Tenant occurs during this Lease and
following such change the financial condition of Tenant is, in Landlord’s
reasonable judgment, significantly reduced, Tenant shall deposit such additional
monies with Landlord as shall be sufficient to cause the Security Deposit to be
at a commercially reasonable level based on such change in financial condition.
Landlord shall not be required to keep the Security Deposit separate from its
general accounts. No part of the Security Deposit shall be considered to be held
in trust, to bear interest or to be prepayment for any monies to be paid by
Tenant under this Lease.

 

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20. LIMITATION OF TENANT’S REMEDIES

 

The obligations and liability of Landlord to Tenant for any default by Landlord
under the terms of this Lease are not personal obligations of Landlord or of the
individual or other partners of Landlord or its or their partners, directors,
officers, or shareholders, and Tenant agrees to look solely to Landlord’s
interest in the Premises (including rents, issues, profits, proceeds, and other
income arising from the Premises) for the recovery of any amount from Landlord,
and shall not look to other assets of Landlord nor seek recourse against the
assets of the individual or other partners of Landlord or its or their partners,
directors, officers or shareholders. Any lien obtained to enforce any such
judgment and any levy of execution thereon shall be subject and subordinate to
any lien, mortgage or deed of trust on the Premises. Under no circumstances
shall Tenant have the right to offset against or recoup Rent or other payments
due and to become due to Landlord under this Lease except as expressly provided
in this Lease, which Rent and other payments shall be absolutely due and payable
under this Lease in accordance with the terms of this Lease. In no case shall
Landlord be liable to Tenant for any lost profits, damage to business, or any
form of special, indirect or consequential damage on account of any breach of
this Lease or otherwise, notwithstanding anything to the contrary contained in
this Lease.

 

21. ASSIGNMENT AND SUBLETTING

 

21.1 Assignment And Subletting

 

21.1.1 General. This Lease has been negotiated to be and is granted as an
accommodation to the Original Tenant. Accordingly, this Lease is personal to the
Original Tenant, and Tenant’s rights granted under this Lease do not include the
right to assign this Lease or sublease the Premises, or to receive any excess,
either in installments or lump sum, over the Rent which is expressly reserved by
Landlord as hereinafter provided, except as otherwise expressly hereinafter
provided. Tenant shall not assign or pledge this Lease or sublet the Premises or
any part thereof, whether voluntarily or by operation of law, or permit the use
or occupancy of the Premises or any part thereof by anyone other than Tenant, or
suffer or permit any such assignment, pledge, subleasing or occupancy, without
Landlord’s prior written consent except as provided herein. If Tenant desires to
assign this Lease or sublet any or all of the Premises, Tenant shall give
Landlord written notice (“Transfer Notice”) at least sixty (60) days prior to
the anticipated effective date of the proposed assignment or sublease, which
shall contain all of the information reasonably requested by Landlord to address
Landlord’s decision criteria specified hereinafter. Landlord shall then have a
period of thirty (30) days following receipt of the Transfer Notice to notify
Tenant in writing that Landlord either (i) refuses to consent or (ii) consents
to the proposed assignment or sublease, subject, however, to Landlord’s prior
written consent of the proposed assignee or subtenant and of any related
documents or agreements associated with the assignment or sublease. If Landlord
should fail to notify Tenant in writing of such election within said period,
Landlord shall be deemed to have waived option (i) above, but written consent by
Landlord of the proposed assignee or subtenant shall still be required. If
Landlord does not exercise option (i) above, Landlord’s consent to a proposed
assignment or sublease shall not be unreasonably withheld, conditioned, or
delayed. Consent to any assignment or subletting shall not constitute consent to
any subsequent transaction to which this Paragraph 21 applies.

 

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21.1.2 Conditions Of Landlord’s Consent.

 

(a) Without limiting the other instances in which it may be reasonable for
Landlord to withhold Landlord’s consent to an assignment or subletting, Landlord
and Tenant acknowledge that it shall be reasonable for Landlord to withhold
Landlord’s consent in the following instances: if the proposed assignee does not
agree to be bound by and assume the obligations of Tenant under this Lease in
form and substance satisfactory to Landlord; the use of the Premises by such
proposed assignee or subtenant would not be a Permitted Use or would violate the
CUP and/or Regulations; the proposed assignee or subtenant is not of sound
financial condition as determined by Landlord in Landlord’s sole discretion; the
proposed assignee or subtenant is a governmental agency; the proposed assignee
or subtenant does not have a good reputation as a tenant of property or a good
business reputation; the proposed assignee or subtenant is a person with whom
Landlord is negotiating to lease the Premises; the assignment or subletting
would entail any Alterations which would lessen the value of the leasehold
improvements in the Premises; or Tenant is in default of any obligation of
Tenant under this Lease, or Tenant has defaulted under this Lease on three (3)
or more occasions during any twelve (12) months preceding the date that Tenant
shall request consent. Failure by or refusal of Landlord to consent to a
proposed assignee or subtenant shall not cause a termination of this Lease. At
the option of Landlord, a surrender and termination of this Lease shall operate
as an assignment to Landlord of any subleases or subtenancies. Landlord shall
exercise this option by giving notice of that assignment to such subtenants on
or before the effective date of the surrender and termination. In connection
with each request for assignment or subletting, Tenant shall pay to Landlord all
actual, out-of-pocket costs and expenses incurred by Landlord in reviewing such
proposed transfer or any mortgagee or ground lessor in approving each such
request and effecting any such transfer, including, without limitation,
reasonable attorneys’ fees.

 

(b) Sale Bonus. If Tenant seeks consent to assignment from Landlord in the
context of a sale of Tenant’s business, whether by sale of equity or sale of all
or substantially all of Tenant’s assets, Landlord shall consent to such assignee
(subject to the reasonable conditions of 21.1.2(a) above) provided Landlord has
been paid the CUP Obligation in full, and provided Landlord receives from
assignee and Tenant an additional bonus amount (“Sale Bonus”) at closing of the
transaction equal in the aggregate to the amount (rounded up to the nearest
dollar) that is the greater of (1) $2,000,000.00; (2) the product of the total
purchase price of the transaction multiplied by ten percent (10%); or (3) in the
event the transaction involves an assignment, sale, or other transfer of less
than one hundred percent (100%) of the issued and outstanding shares/units of
Tenant, the product of multiplying the per share/unit price for such transaction
(determined by dividing the purchase price by the number of shares/units being
assigned, sold, or transferred in the transaction) by the total number of issued
and outstanding shares/units of the Tenant, and then multiplying by ten percent
(10%).

 

21.2 Bonus Rent. Any Rent or other consideration realized by Tenant under any
such sublease or assignment in excess of the Rent payable under this Lease,
after amortization of a reasonable brokerage commission incurred by Tenant,
shall be divided and paid, fifty percent (50%) to Tenant, fifty percent (50%) to
Landlord.

 

21.3 Corporation. If Tenant is a corporation, a transfer of corporate shares by
sale, assignment, bequest, inheritance, operation of law or other disposition
(including such a transfer to or by a receiver or trustee in federal or state
bankruptcy, insolvency or other proceedings, but excluding a transfer to a
shareholder’s spouse or child provided that such transfer is not a subterfuge to
avoid the obligations of this Lease) resulting in a change in the present
control of such corporation or any of its parent corporations by the person or
persons owning a majority of said corporate shares, shall constitute an
assignment for purposes of this Lease.

 

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21.4 Partnership, LLC, Other Unincorporated Entity. If Tenant is a partnership,
joint venture, limited liability company or other unincorporated business form,
a transfer of the interest of persons, firms or entities responsible for
managerial control of Tenant by sale, assignment, bequest, inheritance,
operation of law or other disposition, so as to result in a change in the
present control of said entity and/or of the underlying beneficial interests of
said entity and/or a change in the identity of the persons responsible for the
general credit obligations of said entity shall constitute an assignment for all
purposes of this Lease.

 

21.5 Liability. No assignment or subletting by Tenant, permitted or otherwise,
shall relieve Tenant of any obligation under this Lease or any guarantor of this
Lease of any liability under its guaranty or alter the primary liability of the
Tenant named herein for the payment of Rent or for the performance of any other
obligations to be performed by Tenant, including obligations contained in
Paragraph 25 with respect to any assignee or subtenant. Landlord may collect
rent or other amounts or any portion thereof from any assignee, subtenant, or
other occupant of the Premises, permitted or otherwise, and apply the net rent
collected to the Rent payable under this Lease, but no such collection shall be
deemed to be a waiver of this Paragraph 21, or the acceptance of the assignee,
subtenant or occupant as tenant, or a release of Tenant from the further
performance by Tenant of the obligations of Tenant under this Lease or any
guarantor of this Lease of any liability under its guaranty. Any assignment or
subletting which conflicts with the provisions hereof shall be void.

 

22. AUTHORITY

 

Landlord represents and warrants that it has full right and authority to enter
into this Lease and to perform all of Landlord’s obligations under this Lease
and that all persons signing this Lease on its behalf are authorized to do.
Tenant and the person or persons, if any, signing on behalf of Tenant, jointly
and severally represent and warrant that Tenant has full right and authority to
enter into this Lease, and to perform all of Tenant’s obligations under this
Lease, and that all persons signing this Lease on its behalf are authorized to
do so.

 

23. CONDEMNATION

 

23.1 Condemnation Resulting In Termination. If the whole or any substantial part
of the Premises, or so much of the Premises as to render the balance of the
Premises unusable, should be taken or condemned for any public use under any
Regulation, or by right of eminent domain, or by private purchase in lieu
thereof, and the taking would prevent or materially interfere with the Permitted
Use of the Premises, either party shall have the right to terminate this Lease
at its option. In such event the Rent shall be abated during the unexpired
portion of this Lease, effective when the physical taking of said Premises shall
have occurred.

 

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23.2 Condemnation Not Resulting In Termination. If the temporary use or
occupancy of any part of the Premises shall be taken or appropriated under power
of eminent domain during the Term, this Lease shall be and remain unaffected by
such taking or appropriation and Tenant shall continue to pay in full all Rent
payable under this Lease by Tenant during the Term; in the event of any such
temporary appropriation or taking, Tenant shall be entitled to receive that
portion of any award which represents compensation for the use of or occupancy
of the Premises during the Term.

 

23.3 Award. Landlord shall be entitled to (and Tenant shall assign to Landlord)
any and all payment, income, rent, award or any interest therein whatsoever
which may be paid or made in connection with such taking or conveyance and
Tenant shall have no claim against Landlord or otherwise for any sums paid by
virtue of such proceedings, whether or not attributable to the value of any
unexpired portion of this Lease, except as expressly provided in this Lease.
Notwithstanding the foregoing, any compensation specifically and separately
awarded Tenant for Tenant’s personal property, moving costs, or interruption of
or damage to Tenant’s business, shall be and remain the property of Tenant.

 

23.4 Waiver Of C.C.P. §1265.130. Each party waives the provisions of California
Code of Civil Procedure Section 1265.130 allowing either party to petition the
superior court to terminate this Lease as a result of a partial taking.

 

24. CASUALTY DAMAGE

 

24.1 General. If the Premises should be damaged or destroyed by fire, tornado,
or other casualty (collectively, “Casualty”), Tenant shall give immediate
written notice thereof to Landlord. Within forty-five (45) days after Landlord’s
receipt of such notice, Landlord shall notify Tenant whether in Landlord’s
estimation material restoration of the Premises can reasonably be made within
one hundred eighty (180) days from the date of such notice and receipt of
required permits for such restoration. Landlord’s determination shall be binding
on Tenant.

 

24.2 Within 180 Days. If the Premises should be damaged by Casualty to such
extent that material restoration can in Landlord’s estimation be reasonably
completed within one hundred eighty (180) days after the date of such notice and
receipt of required permits for such restoration, this Lease shall not
terminate. Provided that insurance proceeds are received by Landlord to fully
repair the damage, Landlord shall proceed to rebuild and repair the Premises
diligently and in the manner determined by Landlord, except that Landlord shall
not be required to rebuild, repair or replace any part of any Alterations which
may have been placed on or about the Premises or paid for by Tenant. If the
Premises are untenantable in whole or in part following such damage, the Rent
payable under this Lease during the period in which they are untenantable shall
be abated proportionately, but only to the extent the Premises are unfit for
occupancy. If, however, (i) any such repair is not commenced by Landlord within
ninety (90) days after the casualty, or (ii) such repair work is not
substantially completed within nine (9) months after such casualty, then Tenant
may, at its option, upon notice to Landlord, elect to terminate this Lease
effective as of the date of the casualty.

 

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24.3 Greater Than 180 Days. If the Premises should be damaged by Casualty to
such extent that rebuilding or repairs cannot in Landlord’s estimation be
reasonably completed within one hundred eighty (180) days after the date of such
notice and receipt of required permits for such rebuilding or repair, then
Landlord shall have the option of either: (1) terminating this Lease effective
upon the date of the occurrence of such damage, in which event the Rent shall be
abated during the unexpired portion of this Lease; or (2) electing to rebuild or
repair the Premises diligently and in the manner determined by Landlord.
Landlord shall notify Tenant in writing (“Landlord’s Election Notice”) of its
election within thirty (30) days after Landlord’s receipt of notice of the
damage or destruction. Notwithstanding the foregoing, however, in the event that
rebuilding or repairs cannot in Landlord’s estimation be reasonably completed
within one hundred eighty (180) days after the date of Landlord’s receipt of
required permits for such rebuilding or repair, then Tenant shall also have the
option to terminate this Lease effective upon the date of the occurrence of such
damage by notifying Landlord of its election to terminate within ten (10)
business days following Tenant’s receipt of Landlord’s Election Notice. If
Landlord has elected to make such repairs, and if (i) any such repair is not
commenced by Landlord within ninety (90) days after the casualty, or (ii) such
repair work is not substantially completed within nine (9) months after such
casualty, then Tenant may, at its option, upon notice to Landlord, elect to
terminate this Lease effective as of the date of the casualty. If Landlord does
not elect to make such repairs, then within five (5) business days after
Landlord notifies Tenant that it will not make such repairs, either Landlord or
Tenant may terminate this Lease effective as of the date of the casualty.
Notwithstanding the above, Landlord shall not be required to rebuild, repair or
replace any part of any Alterations which may have been placed, on or about the
Premises or paid for by Tenant. If the Premises are untenantable in whole or in
part following such damage, the Rent payable under this Lease during the period
in which they are untenantable shall be abated proportionately, but only to the
extent the Premises are unfit for occupancy.

 

24.4 Insurance Proceeds. Notwithstanding anything herein to the contrary, if the
Premises are damaged or destroyed and are not fully covered by the insurance
proceeds received by Landlord or if the holder of any indebtedness secured by a
mortgage or deed of trust covering the Premises requires that the insurance
proceeds be applied to such indebtedness, then in either case Landlord shall
have the right to terminate this Lease by delivering written notice of
termination to Tenant within thirty (30) days after the date of notice to
Landlord that said damage or destruction is not fully covered by insurance or
such requirement is made by any such holder, as the case may be, whereupon this
Lease shall terminate.

 

24.5 Waiver. This Paragraph 24 shall be Tenant’s sole and exclusive remedy in
the event of damage or destruction to the Premises. As a material inducement to
Landlord entering into this Lease, Tenant hereby waives any rights it may have
under Sections 1932, 1933(4), 1941 or 1942 of the California Civil Code with
respect to any destruction of the Premises, Landlord’s obligation for
tenantability of the Premises and Tenant’s right to make repairs and deduct the
expenses of such repairs, or under any similar law, statute or ordinance now or
hereafter in effect.

 

24.6 Tenant’s Personal Property. In the event of any damage or destruction of
the Premises, under no circumstances shall Landlord be required to repair any
injury or damage to, or make any repairs to or replacements of, Tenant’s
personal property.

 

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25. HOLDING OVER

 

Unless Landlord expressly consents in writing to Tenant’s holding over, Tenant
shall be unlawfully and illegally in possession of the Premises, whether or not
Landlord accepts any rent from Tenant or any other person while Tenant remains
in possession of the Premises without Landlord’s written consent. If Tenant
shall retain possession of the Premises or any portion thereof without
Landlord’s consent following the expiration of this Lease or sooner termination
for any reason, then Tenant shall pay to Landlord for each day of such retention
one hundred fifty percent (150%) of the amount of daily rental as of the last
month prior to the date of expiration or earlier termination; provided, however,
that during the first (1st) month following the expiration or earlier
termination of the Lease, Tenant shall only be obligated to pay to Landlord one
hundred twenty-five percent (125%) of the amount of the daily rental as of the
last month prior to the expiration or earlier termination. Tenant shall also
indemnify, defend, protect and hold Landlord harmless from any loss, liability
or cost, including consequential and incidental damages and reasonable
attorneys’ fees, incurred by Landlord resulting from delay by Tenant in
surrendering the Premises, including, without limitation, any claims made by the
succeeding tenant founded on such delay. Acceptance of Rent by Landlord
following expiration or earlier termination of this Lease, or following demand
by Landlord for possession of the Premises, shall not constitute a renewal of
this Lease, and nothing contained in this Paragraph 25 shall waive Landlord’s
right of reentry or any other right. Additionally, if upon expiration or earlier
termination of this Lease, or following demand by Landlord for possession of the
Premises, Tenant has not fulfilled its obligation with respect to repairs and
cleanup of the Premises or any other Tenant obligations as set forth in this
Lease, then Landlord shall have the right to perform any such obligations as it
deems necessary at Tenant’s sole cost and expense, and any time required by
Landlord to complete such obligations shall be considered a period of holding
over and the terms of this Paragraph 25 shall apply. The provisions of this
Paragraph 25 shall survive any expiration or earlier termination of this Lease.

 

26. DEFAULT

 

26.1 Events Of Default. The occurrence of any of the following shall constitute
an event of default on the part of Tenant:

 

26.1.1 Abandonment. Abandonment or vacation of the Premises for a continuous
period in excess of five (5) days. Tenant waives any right to notice Tenant may
have under Section 1951.3 of the California Civil Code, the terms of this
Paragraph 26.1 being deemed such notice to Tenant as required by said Section
1951.3.

 

26.1.2 Nonpayment Of Rent. Failure to pay any installment of Rent or any other
amount due and payable under this Lease within three (3) days after Landlord
delivers notice to Tenant that the Rent or any other amount due and payable
under this Lease was not received by Landlord on the date due.

 

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26.1.3 Other Obligations. Failure to perform any obligation, agreement or
covenant under this Lease other than those matters specified in subparagraphs
26.1.1 and 26.1.2 of this Paragraph 26.1, and in Paragraphs 8, 16, 18 and 25,
such failure continuing for fifteen (15) days after written notice of such
failure, as to which time is of the essence.

 

26.1.4 General Assignment. A general assignment by Tenant for the benefit of
creditors.

 

26.1.5 Bankruptcy. The filing of any voluntary petition in bankruptcy by Tenant,
or the filing of an involuntary petition by Tenant’s creditors, which
involuntary petition remains undischarged for a period of thirty (30) days. If
under applicable law, the trustee in bankruptcy or Tenant has the right to
affirm this Lease and continue to perform the obligations of Tenant under this
Lease, such trustee or Tenant shall, in such time period as may be permitted by
the bankruptcy court having jurisdiction, cure all defaults of Tenant under this
Lease outstanding as of the date of the affirmance of this Lease and provide to
Landlord such adequate assurances as may be necessary to ensure Landlord of the
continued performance of Tenant’s obligations under this Lease.

 

26.1.6 Receivership. The employment of a receiver to take possession of
substantially all of Tenant’s assets or the Premises, if such appointment
remains undismissed or undischarged for a period of fifteen (15) days after the
order therefore.

 

26.1.7 Attachment. The attachment, execution or other judicial seizure of all or
substantially all of Tenant’s assets or Tenant’s leasehold of the Premises, if
such attachment or other seizure remains undismissed or undischarged for a
period of fifteen (15) days after the levy thereof.

 

26.1.8 Insolvency. The admission by Tenant in writing of its inability to pay
its debts as they become due.

 

26.1.9 Nuisance Judgment. The rendering of a judgment by a civil court finding
the Tenant’s occupancy or use of the Premises to be a public or private
nuisance.

 

26.2 Remedies Upon Default.

 

26.2.1 Termination. In the event of the occurrence of any event of default,
Landlord shall have the right to give a written termination notice to Tenant,
and on the date specified in such notice, Tenant’s right to possession shall
terminate, and this Lease shall terminate unless on or before such date all Rent
in arrears and all costs and expenses incurred by or on behalf of Landlord under
this Lease shall have been paid by Tenant and all other events of default of
this Lease by Tenant at the time existing shall have been fully remedied to the
satisfaction of Landlord. At any time after such termination, Landlord may
recover possession of the Premises or any part thereof and expel and remove
therefrom Tenant and any other person occupying the same, including any
subtenant or subtenants notwithstanding Landlord’s consent to any sublease, by
any lawful means, and again repossess and enjoy the Premises without prejudice
to any of the remedies that Landlord may have under this Lease, or at law or
equity by any reason of Tenant’s default or of such termination. Landlord hereby
reserves the right, but shall not have the obligation, to recognize the
continued possession of any subtenant. The delivery or surrender to Landlord by
or on behalf of Tenant of keys, entry codes, or other means to bypass security
at the Premises shall not terminate this Lease.

 

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26.2.2 Continuation After Default. Even though an event of default may have
occurred, this Lease shall continue in effect for so long as Landlord does not
terminate Tenant’s right to possession under Paragraph 26.2.1 hereof. Landlord
shall have the remedy described in California Civil Code Section 1951.4
(Landlord may continue this Lease in effect after Tenant’s breach and
abandonment and recover Rent as it becomes due, if Tenant has the right to
sublet or assign, subject only to reasonable limitations), or any successor code
section. Accordingly, if Landlord does not elect to terminate this Lease on
account of any event of default by Tenant, Landlord may enforce all of
Landlord’s rights and remedies under this Lease, including the right to recover
Rent as it becomes due. Acts of maintenance, preservation or efforts to lease
the Premises or the appointment of a receiver under application of Landlord to
protect Landlord’s interest under this Lease or other entry by Landlord upon the
Premises shall not constitute an election to terminate Tenant’s right to
possession.

 

26.2.3 Increased Security Deposit. If Tenant is in default under Paragraph
26.1.2 hereof and such default remains uncured for ten (10) days after such
occurrence or such default occurs more than three (3) times in any twelve (12)
month period, Landlord may require that Tenant increase the Security Deposit to
the amount of three (3) times the current month’s Rent at the time of the most
recent default.

 

26.3 Damages After Default. Should Landlord terminate this Lease pursuant to the
provisions of Paragraph 26.2.1 hereof, Landlord shall have the rights and
remedies of a Landlord provided by Section 1951.2 of the Civil Code of the State
of California, or any successor code sections. Upon such termination, in
addition to any other rights and remedies to which Landlord may be entitled
under applicable law or at equity, Landlord shall be entitled to recover from
Tenant: (1) the worth at the time of award of the unpaid Rent and other amounts
which had been earned at the time of termination; (2) the worth at the time of
award of the amount by which the unpaid Rent and other amounts that would have
been earned after the date of termination until the time of award exceeds the
amount of such Rent loss that Tenant proves could have been reasonably avoided;
(3) the worth at the time of award of the amount by which the unpaid Rent and
other amounts for the balance of the Term after the time of award exceeds the
amount of such Rent loss that the Tenant proves could be reasonably avoided; and
(4) any other amount and court costs necessary to compensate Landlord for all
detriment proximately caused by Tenant’s failure to perform Tenant’s obligations
under this Lease or which, in the ordinary course of things, would be likely to
result therefrom. The “worth at the time of award” as used in (1) and (2) above
shall be computed at the Applicable Interest Rate (defined below). The “worth at
the time of award” as used in (3) above shall be computed by discounting such
amount at the Federal Discount Rate of the Federal Reserve Bank of San Francisco
at the time of award plus one percent (1%). If this Lease provides for any
periods during the Term during which Tenant is not required to pay Base Rent or
if Tenant otherwise receives a Rent concession, then upon the occurrence of an
event of default, Tenant shall owe to Landlord the full amount of such Base Rent
or value of such Rent concession, plus interest at the Applicable Interest Rate,
calculated from the date that such Base Rent or Rent concession would have been
payable.

 

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26.4 Late Charge. In addition to its other remedies, Landlord shall have the
right without notice or demand to add to the amount of any payment required to
be made by Tenant under this Lease, and which is not paid and received by
Landlord within five (5) business days following delivery of notice from
Landlord that such payment is delinquent pursuant to the terms and conditions of
this Lease, an amount equal to five percent (5%) of the delinquent amount, or
One Hundred Fifty Dollars ($150), whichever amount is greater, for each month or
portion thereof that the delinquency remains outstanding to compensate Landlord
for the loss of the use of the amount not paid and the administrative costs
caused by the delinquency, the parties agreeing that Landlord’s damage by virtue
of such delinquencies would be extremely difficult and impracticable to compute
and the amount stated herein represents a reasonable estimate thereof. Landlord
shall provide Tenant with a written notice of delinquent Rent or any other
amount payable by Tenant under this Lease twice. Upon the third delinquency, the
late charge specified above in this Paragraph 26.4 shall be automatic and
applied without further notice. Any waiver by Landlord of any late charges or
failure to claim the same shall not constitute a waiver of other late charges or
any other remedies available to Landlord.

 

26.5 Interest. Interest shall accrue on all sums not paid when due under this
Lease at the lesser of ten percent (10%) per annum or the maximum interest rate
allowed by law (“Applicable Interest Rate”) from the due date until paid.

 

26.6 Remedies Cumulative. All of Landlord’s rights, privileges and elections or
remedies are cumulative and not alternative, to the extent permitted by law and
except as otherwise provided herein.

 

26.7 Replacement Of Statutory Notice Requirements. When this Lease requires
service of a notice, that notice shall replace rather than supplement any
equivalent or similar statutory notice, including any notice required by
California Code of Civil Procedure Section 1161 or any similar or successor
statute. When a statute requires service of a notice in a particular manner,
service of that notice (or a similar notice required by this Lease) in the
manner required by this Paragraph 26 shall replace and satisfy the statutory
service-of-notice procedures, including those required by California Code of
Civil Procedure Section 1162 or any similar or successor statute.

 

27. LIENS

 

Tenant shall at all times keep the Premises free from liens arising out of or
related to work or services performed, materials or supplies furnished or
obligations incurred by or on behalf of Tenant or in connection with work made,
suffered or done by or on behalf of Tenant in or on the Premises. If Tenant does
not, within ten (10) days following the imposition of any such lien, cause the
same to be released of record by payment or posting of a proper bond, Landlord
shall have, in addition to all other remedies provided herein and by law, the
right, but not the obligation, to cause the same to be released by such means as
Landlord shall deem proper, including payment of the claim giving rise to such
lien. All sums paid by Landlord on behalf of Tenant and all expenses incurred by
Landlord in connection therefore shall be payable to Landlord by Tenant on
demand with interest at the Applicable Interest Rate as Additional Rent.
Landlord shall have the right at all times to post and keep posted on the
Premises any notices permitted or required by law, or which Landlord shall deem
proper, for the protection of Landlord, the Premises and any other party having
an interest therein, from mechanics’ and materialmen’s liens, and Tenant shall
give Landlord not less than ten (10) business days prior written notice of the
commencement of any work on the Premises which could lawfully give rise to a
claim for mechanics’ or materialmen’s liens to permit Landlord to post and
record a timely notice of non-responsibility, as Landlord may elect to proceed
or as the law may from time to time provide, for which purpose, if Landlord
shall so determine, Landlord may enter the Premises. Tenant shall not remove any
such notice posted by Landlord without Landlord’s consent, and in any event not
before completion of the work which could lawfully give rise to a claim for
mechanics’ or materialmen’s liens.

 

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28. RIGHT OF FIRST REFUSAL

 

28.1 If at any time during the Term, Landlord decides to sell the Premises to a
third person, Landlord shall deliver to Tenant the terms on which Landlord
intends to sell (“Proposed Offer”), and Tenant may, within twelve (12) calendar
days after receipt by Tenant of the Proposed Offer, elect to purchase the
Premises on the same terms as those set forth in such Proposed Offer by giving
written notice to Landlord. If Tenant shall not accept such Proposed Offer and
give written notice within the specified time, subject to the limitations
described below, the right of first refusal shall cease to exist, but the Lease,
as amended, shall continue otherwise on all of the other terms, covenants, and
conditions set forth in the Lease.

 

28.2 If Tenant declines to exercise its right of first refusal after receipt of
the Proposed Offer, and, thereafter Landlord should desire to sell the Premises
for a purchase price that is at least five percent (5%) less than the purchase
price set forth in the Proposed Offer, or on other terms and conditions that are
materially more favorable to the buyer than those set forth in the Proposed
Offer, Landlord shall provide Tenant with a right of first refusal on the
revised terms; and Tenant may within twelve (12) days thereafter, elect to
purchase the Premises on the same terms as those set forth in that revised
offer.

 

28.3 If Tenant declines to exercise its right of first refusal after receipt of
the Proposed Offer, and, thereafter, the proposed transfer or sale is not
consummated, Tenant’s right of first refusal shall apply to any subsequent
transaction. If, however, said transfer or sale is, in fact, completed, then
said right shall be extinguished and shall not apply to any subsequent
transactions.

 

28.4 This right of first refusal shall apply to a sale of the Premises or any
portion thereof, including but not limited to any sale, deed, conveyance, or
grant of easement.

 

28.5 Landlord shall have no obligation to give Tenant a right of first refusal:
(i) during the period commencing with the giving of any notice of default under
this Lease and continuing until said default is cured; (ii) during the period of
time any Rent is unpaid (without regard to whether notice thereof is given to
Tenant); (iii) during the time Tenant is in breach of this Lease; or (iv) in the
event that Tenant has been given three (3) or more notices of default under this
Lease, whether or not the defaults are cured, during the twelve (12) month
period immediately preceding the exercise of the right of first refusal.

 

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28.6 This right of first refusal shall not apply to a transfer, by way of sale,
gift, or devise, to or for a party related to Landlord, including a trust
created by Landlord, or to any transfer, in whole or in part, from one such
related party to another, but shall apply to any subsequent transfer to a third
person. For this purpose, if the then owner of the Premises shall be an
individual, a “related party” shall include a spouse, lineal descendant or
spouse of such descendant, ancestor, or sibling (whether by whole or half
blood), a trust for the benefit of the then owner, a partnership or limited
liability company of which such owner is a member, a joint ownership, or
ownership in common, which includes the then owner of the Premises, or a
corporation, the majority of whose securities is owned by the owner of the
Premises, or any one or more of the foregoing parties. If the then owner of the
Premises shall be a corporation, a related party shall include an affiliate,
subsidiary or parent corporation, a successor by merger or consolidation, or the
holder or holders of the majority of the securities of such corporation.

 

28.7 If the Premises shall be conveyed to the Tenant under this right of first
refusal, Rent and other charges shall be apportioned and adjusted as provided in
the Proposed Offer.

 

29. TRANSFERS BY LANDLORD

 

In the event of a sale or conveyance by Landlord of the Premises or a
foreclosure by any creditor of Landlord, the same shall operate to release
Landlord from any liability upon any of the covenants or conditions, express or
implied, herein contained in favor of Tenant, to the extent required to be
performed after the passing of title to Landlord’s successor-in-interest;
provided that such transferee shall have fully assumed and be liable for all
obligations of this Lease to be performed by Landlord, including the payment of
any tenant improvement allowance. In such event, Tenant agrees to look solely to
the responsibility of the successor-in-interest of Landlord under this Lease
with respect to the performance of the covenants and duties of “Landlord” to be
performed after the passing of title to Landlord’s successor-in-interest. This
Lease shall not be affected by any such sale and Tenant agrees to attorn to the
purchaser or assignee. Subject to the provisions of this Paragraph 29,
Landlord’s successor(s)-in-interest shall not have liability to Tenant with
respect to the failure to perform any of the obligations of “Landlord,” to the
extent required to be performed prior to the date such successor(s)-in-interest
became the owner of the Premises.

 

30. RIGHT OF LANDLORD TO PERFORM TENANT’S COVENANTS

 

All covenants and agreements to be performed by Tenant under any of the terms of
this Lease shall be performed by Tenant at Tenant’s sole cost and expense and
without any abatement of Rent (except as expressly set forth in this Lease). If
Tenant shall fail to pay any sum of money, other than Base Rent, required to be
paid by Tenant under this Lease or shall fail to perform any other act on
Tenant’s part to be performed under this Lease, including Tenant’s obligations
under Paragraph 11 hereof, and such failure shall continue for fifteen (15) days
after notice thereof by Landlord, in addition to the other rights and remedies
of Landlord, Landlord may make any such payment and perform any such act on
Tenant’s part. In the case of an emergency, no prior notification by Landlord
shall be required. Landlord may take such actions without any obligation and
without releasing Tenant from any of Tenant’s obligations. All sums so paid by
Landlord and all incidental costs incurred by Landlord and interest thereon at
the Applicable Interest Rate, from the date of payment by Landlord, shall be
paid to Landlord on demand as Additional Rent.

 

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31. WAIVER

 

If either Landlord or Tenant waives the performance of any term, covenant or
condition contained in this Lease, such waiver shall not be deemed to be a
waiver of any subsequent breach of the same or any other term, covenant or
condition contained herein, or constitute a course of dealing contrary to the
expressed terms of this Lease. The acceptance of Rent by Landlord shall not
constitute a waiver of any preceding breach by Tenant of any term, covenant or
condition of this Lease, regardless of Landlord’s knowledge of such preceding
breach at the time Landlord accepted such Rent. Failure by Landlord to enforce
any of the terms, covenants or conditions of this Lease for any length of time
shall not be deemed to waive or decrease the right of Landlord to insist
thereafter upon strict performance by Tenant. Waiver by Landlord of any term,
covenant or condition contained in this Lease may only be made by a written
document signed by Landlord, based upon full knowledge of the circumstances.

 

32. NOTICES

 

32.1 Each provision of this Lease or of any applicable governmental laws,
ordinances, regulations and other requirements with reference to sending,
mailing, or delivery of any notice or the making of any payment by Landlord or
Tenant to the other shall be deemed to be complied with when given in writing
and either personally delivered, sent by commercial overnight courier, mailed,
certified or registered, postage prepaid or sent by facsimile with confirmed
receipt (and with an original sent by commercial overnight courier), and in each
case addressed to the party to be notified at the notice address set forth
below, or to such other place as the party to be notified may from time to time
designate by at least fifteen (15) days notice to the notifying party. Notices
shall be deemed served upon receipt or refusal to accept delivery.

 

Landlord:

Green Road, LLC

 

Attn: Rick Engebretsen

568 North Tulip St

Escondido, CA 92025 

 

 

Tenant:

Tenant appoints as its agent to receive the service of all default notices and
notice of commencement of unlawful detainer proceedings the person in charge of
or apparently in charge of occupying the Premises at the time, and, if there is
no such person, then such service may be made by attaching the same on the main
entrance of the Premises or by sending the same to Tenant, 7625 Carroll Road,
San Diego, California 92121.

 

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32.2 Required Notices. Tenant shall immediately notify Landlord in writing of
any notice of a violation or a potential or alleged violation of any Regulations
that relates to the Premises, or of any inquiry, investigation, enforcement or
other action that is instituted or threatened by any governmental or regulatory
agency against Tenant or any other occupant of the Premises, or any claim that
is instituted or threatened by any third party that relates to the Premises.

 

33. ATTORNEYS’ FEES

 

If Landlord places the enforcement of this Lease, or any part thereof, or the
collection of any Rent due, or to become due under this Lease, or recovery of
possession of the Premises in the hands of an attorney, Tenant shall pay to
Landlord, upon demand, Landlord’s reasonable attorneys’ fees and court costs,
whether incurred at trial, appeal or review. In any action which Landlord or
Tenant brings to enforce its respective rights under this Lease, the
unsuccessful party shall pay all costs incurred by the prevailing party
including reasonable attorneys’ fees, to be fixed by the court, and said costs
and attorneys’ fees shall be a part of the judgment in said action.

 

34. SUCCESSORS AND ASSIGNS

 

This Lease shall be binding upon and inure to the benefit of Landlord, its
successors and assigns, and shall be binding upon and inure to the benefit of
Tenant, its successors, and to the extent assignment is approved by Landlord as
provided under this Lease, Tenant’s assigns.

 

35. FORCE MAJEURE

 

If performance by a party of any portion of this Lease is made impossible by any
prevention, delay, or stoppage caused by strikes, lockouts, labor disputes, acts
of God, inability to obtain services, labor, or materials or reasonable
substitutes for those items, government actions, civil commotions, fire or other
casualty, or other causes beyond the reasonable control of the party obligated
to perform, performance by that party for a period equal to the period of that
prevention, delay, or stoppage is excused. Tenant’s obligation to pay Rent,
however, is not excused by this Paragraph 35.

 

36. SURRENDER OF PREMISES

 

Tenant shall, upon expiration or sooner termination of this Lease, surrender the
Premises to Landlord in the same condition as existed on the date Tenant
originally took possession thereof, including, but not limited to, all interior
walls cleaned, all interior painted surfaces repainted in the original color,
all holes in walls repaired, all carpets shampooed and cleaned, all HVAC
equipment in operating order and in good repair, and all floors cleaned, waxed,
and free of any Tenant-introduced marking or painting, all to the reasonable
satisfaction of Landlord. Tenant shall remove all of its debris from the
Premises. At or before the time of surrender, Tenant shall comply with the terms
of Paragraph 12.1 hereof with respect to Alterations to the Premises and all
other matters addressed in such Paragraph. If the Premises are not so
surrendered at the expiration or sooner termination of this Lease, the
provisions of Paragraph 25 hereof shall apply. All keys to the Premises or any
part thereof shall be surrendered to Landlord upon expiration or sooner
termination of the Term. Tenant shall give written notice to Landlord at least
thirty (30) days prior to vacating the Premises and shall meet with Landlord for
a joint inspection of the Premises at the time of vacating, but nothing
contained herein shall be construed as an extension of the Term or as a consent
by Landlord to any holding over by Tenant. In the event of Tenant’s failure to
give such notice or participate in such joint inspection, Landlord’s inspection
at or after Tenant’s vacating the Premises shall conclusively be deemed correct
for purposes of determining Tenant’s responsibility for repairs and restoration.
Any delay caused by Tenant’s failure to carry out its obligations under this
Paragraph 36 beyond the term hereof, shall constitute unlawful and illegal
possession of Premises under Paragraph 25 hereof.

 

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37. HAZARDOUS MATERIALS

 

37.1 Prohibition On Hazardous Materials. Tenant shall conduct its business and
shall cause all Tenant Parties to act in such a manner as to (a) not release or
permit the release of any Hazardous Material in, under, on or about the
Premises, or (b) not use, store, generate, treat, discharge, disperse, handle,
manufacture, transport or dispose of (collectively, “Handle”) any Hazardous
Materials (other than incidental amounts of customary cleaning and office
supplies) in or about the Premises in violation of any Regulations, including
any applicable laws relating to Hazardous Materials, or Tenant’s Permitted Use
of the Premises, without the prior written consent of Landlord, which consent
Landlord may withhold in its sole and absolute discretion (“Hazardous Materials
Consent Requirements”). “Hazardous Materials” means any hazardous, explosive,
radioactive or toxic substance, material or waste which is or becomes regulated
by any local, state or federal governmental authority or agency, including,
without limitation, any material or substance which is (i) defined or listed as
a “hazardous waste,” “extremely hazardous waste,” “restricted hazardous waste,”
“hazardous substance,” “hazardous material,” “pollutant” or “contaminant” under
any Regulations, (ii) petroleum or petroleum derivative, (iii) a flammable
explosive, (iv) a radioactive material or waste, (v) a polychlorinated biphenyl,
(vi) asbestos or asbestos containing material, (vii) infectious waste, or (viii)
a carcinogen.

 

37.2 Indemnity. Tenant shall indemnify, protect, defend and hold Landlord, its
shareholders, officers, agents, employees, assigns, representatives, and
lenders, harmless from and against any and all damages, liabilities, judgments,
costs, claims, liens, expenses, penalties, loss of permits and attorneys’ and
consultants’ fees arising out of or involving any Hazardous Substance brought
onto the Premises by or for Tenant or by anyone under Tenant’s control. Tenant’s
obligations under this Section 37.2 shall include, but not be limited to, the
effects of any contamination or injury to person, property or the environment
created or suffered by Tenant, and the cost of investigation (including
consultants’ and attorneys’ fees and testing), removal, remediation, restoration
and/or abatement thereof, or of any contamination therein involved, and shall
survive the expiration or earlier termination of this Lease. No termination,
cancellation or release agreement entered into by Landlord and Tenant shall
release Tenant from its obligations under this Lease with respect to Hazardous
Substances, unless specifically so agreed by Landlord in writing at the time of
such agreement.

 

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38. MISCELLANEOUS

 

38.1 General. The term “Tenant” or any pronoun used in place thereof shall
indicate and include the masculine or feminine, the singular or plural number,
individuals, firms or corporations, and their respective successors, executors,
administrators and permitted assigns, according to the context hereof.

 

38.2 Time. Time is of the essence regarding this Lease and all of its
provisions.

 

38.3 Choice Of Law. This Lease shall in all respects be governed by the laws of
the State of California.

 

38.4 Entire Agreement. This Lease and the following exhibits and attachments
constitute the entire agreement between the parties and supersede all prior
agreements and understandings related to the Premises, including all lease
proposals, letters of intent and other documents: Exhibit “A” (Premises) and
Exhibit “B” (Guaranty of Lease).

 

38.5 Modification. This Lease may not be modified except by a written instrument
signed by the parties hereto. Tenant accepts the area of the Premises as
specified in this Lease as the approximate area of the Premises for all purposes
under this Lease, and acknowledges and agrees that no other definition of the
area (rentable, usable or otherwise) of the Premises shall apply. Tenant shall
in no event be entitled to a recalculation of the square footage of the
Premises, rentable, usable or otherwise, and no recalculation, if made,
irrespective of its purpose, shall reduce Tenant’s obligations under this Lease
in any manner, including without limitation the amount of Base Rent payable by
Tenant.

 

38.6 Severability. If, for any reason whatsoever, any of the provisions hereof
shall be unenforceable or ineffective, all of the other provisions shall be and
remain in full force and effect.

 

38.7 Recordation. Tenant shall not record this Lease or a short form memorandum
hereof.

 

38.8 Examination Of Lease. Submission of this Lease to Tenant does not
constitute an option or offer to lease and this Lease is not effective otherwise
until execution and delivery by both Landlord and Tenant.

 

38.9 Accord And Satisfaction. No payment by Tenant of a lesser amount than the
total Rent due nor any endorsement on any check or letter accompanying any check
or payment of Rent shall be deemed an accord and satisfaction of full payment of
Rent, and Landlord may accept such payment without prejudice to Landlord’s right
to recover the balance of such Rent or to pursue other remedies. All offers by
or on behalf of Tenant of accord and satisfaction are hereby rejected in
advance.

 

38.10 Easements. Landlord may grant easements on the Premises and dedicate for
public use portions of the Premises without Tenant’s consent; provided that no
such grant or dedication shall materially interfere with Tenant’s Permitted Use
of the Premises. Upon Landlord’s request, Tenant shall execute, acknowledge and
deliver to Landlord documents, instruments, maps and plats necessary to
effectuate Tenant’s covenants under this Lease.

 

 42

  

  

38.11 Drafting And Determination Presumption. The parties acknowledge that this
Lease has been agreed to by both the parties, that both Landlord and Tenant have
consulted with attorneys with respect to the terms of this Lease and that no
presumption shall be created against Landlord because Landlord drafted this
Lease. Except as otherwise specifically set forth in this Lease, with respect to
any consent, determination or estimation of Landlord required or allowed in this
Lease or requested of Landlord, Landlord’s consent, determination or estimation
shall be given or made solely by Landlord in Landlord’s good faith opinion,
whether or not objectively reasonable. If Landlord fails to respond to any
request for its consent within the time period, if any, specified in this Lease,
Landlord shall be deemed to have disapproved such request.

 

38.12 Exhibits. The Exhibits, addenda and attachments attached hereto are hereby
incorporated herein by this reference and made a part of this Lease as though
fully set forth herein.

 

38.13 No Light, Air Or View Easement. Any diminution or shutting off of light,
air or view by any structure which may be erected on lands adjacent to or in the
vicinity of the Premises shall in no way affect this Lease or impose any
liability on Landlord.

 

38.14 No Third Party Benefit. This Lease is a contract between Landlord and
Tenant and nothing herein is intended to create any third party benefit.

 

38.15 Quiet Enjoyment. Upon payment by Tenant of the Rent, and upon the
observance and performance of all of the other covenants, terms and conditions
on Tenant’s part to be observed and performed, Tenant shall peaceably and
quietly hold and enjoy the Premises for the term hereby demised without
hindrance or interruption by Landlord or any other person or persons lawfully or
equitably claiming by, through or under Landlord, subject, nevertheless, to all
of the other terms and conditions of this Lease. Landlord shall not be liable
for any hindrance, interruption, interference or disturbance by other tenants or
third persons, nor shall Tenant be released from any obligations under this
Lease because of such hindrance, interruption, interference or disturbance.

 

38.16 Counterparts. This Lease may be executed in any number of counterparts,
each of which shall be deemed an original.

 

38.17 Multiple Parties. If more than one person or entity is named herein as
Tenant, such multiple parties shall have joint and several responsibility to
comply with the terms of this Lease.

 

38.18 Prorations. Any Rent or other amounts payable to Landlord by Tenant under
this Lease for any fractional month shall be prorated based on a month of 30
days. As used herein, the term “fiscal year” shall mean the calendar year or
such other fiscal year as Landlord may deem appropriate.

 

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38.19 INTENTIONALLY OMITTED

 

38.20 Confidentiality. Notwithstanding anything to the contrary set forth in
this Lease, except to the extent required by any applicable Securities and
Exchange Commission requirements, or any applicable Federal or State securities
laws (collectively, “Securities Laws”), Tenant agrees that neither Tenant nor
its agents or any other parties acting on behalf of Tenant shall disclose any
matters set forth in this Lease, or disseminate or distribute any information
concerning the terms, details or conditions hereof to any person, firm or entity
without obtaining the express written consent of Landlord and, if Tenant is
required by the Securities Laws, or in connection with any judicial or
quasi-judicial proceeding, or pursuant to court order or discovery request, to
disclose any information contained in this Lease, Tenant will give Landlord
written notice of such requirement promptly upon Tenant becoming aware of same
and in any event prior to making any disclosure pursuant thereto, and Tenant
will provide such assistance in seeking a protective order or other appropriate
relief as Landlord may reasonably request. If Landlord is unable to obtain a
protective order or other remedy with respect to such disclosure, Tenant (or
such other persons to whom such disclosure request or requirement applies) will
disclose or otherwise furnish only the information legally required to be
disclosed, as advised by legal counsel, and such disclosure shall be made only
to the necessary and appropriate governmental entities. Landlord hereby agrees
that the foregoing restriction shall not preclude Tenant from disclosing any
matters set forth in this Lease to any agent, representative or employee of
Tenant or to any current or prospective assignee, subtenant or lender of Tenant.

 

38.21 INTENTIONALLY OMITTED

 

38.22 Waiver Of Redemption. Tenant hereby waives any and all rights conferred by
California Civil Code Section 3275 and by California Code of Civil Procedure
Sections 1174(c) and 1179 and any and all other laws and rules of law from time
to time in effect during the term of this Lease providing that Tenant shall have
any right to redeem, reinstate or restore this Lease following its termination
by reason of Tenant’s breach.

 

38.23 Brokerage Commission. Landlord and Tenant each represents and warrants to
the other that each had no representation, conversations, or negotiations with
any broker or finder concerning the Premises or the consummation of this Lease.

 

39. MEDIATION; ARBITRATION

 

39.1 Mediation. Except with regard to any claim, counterclaim, dispute, and
other matter relating to the payment of Rent or any other sum owing from Tenant
to Landlord under this Lease, Landlord and Tenant agree that, if and to the
extent that any claim, counterclaim, dispute, and other matter in question
between them arising out of or relating to this Lease or the breach thereof
(collectively, “Nonmonetary Disputes”) cannot be resolved through direct
discussions, such Nonmonetary Dispute shall be sent to mediation prior to either
of them initiating against the other a demand for arbitration pursuant to this
section, unless delay in initiating arbitration would irrevocably prejudice one
of the parties. The mediator of any dispute submitted to mediation under this
Lease shall not serve as arbitrator of such dispute unless otherwise agreed. All
expenses of the mediation shall be borne by the parties equally; however, each
party shall bear the expense of its own counsel, experts, witnesses, and
preparation and presentation of proofs.

 

 44

  

  

39.2 Arbitration. Except with regard to any claim, counterclaim, dispute, and
other matter relating to the payment of Rent or any other sum owing from Tenant
to Landlord under this Lease, Landlord and Tenant agree that, if and to the
extent that any Nonmonetary Dispute cannot be resolved through direct
discussions or through mediation in accordance with Section 39.1 above, such
Nonmonetary Dispute shall at the election of either party be submitted to the
American Arbitration Association (“AAA”) for binding arbitration conducted by a
single arbitrator (“Arbitrator”) in San Diego, California, in accordance with
the Commercial Arbitration Rules (“CAR”) of the AAA, except as modified by the
terms of this section (“Arbitration”). The Arbitrator shall have the power to
grant such legal and equitable remedies and award such damages as may be granted
or awarded by a Judge of the Superior Court of the County of San Diego,
California. The Arbitrator shall prepare and provide to the parties a written
decision (“Decision”) on all matters which are the subject of the Arbitration,
including factual findings and the reasons which form the basis of the Decision
of the Arbitrator. The Decision shall be non-appealable, conclusive, and final
and shall have the effect and be enforceable in the manner provided by the
California Code of Civil Procedure. Costs of the Arbitration shall be borne as
directed by the Arbitrator, subject to Section 33 above. The parties hereby
agree that the CAR are modified as follows:

 

(a) If the parties have not agreed to an Arbitrator within thirty (30) days
after submission of the Nonmonetary Dispute to Arbitration, then the AAA shall
appoint a single neutral Arbitrator as soon thereafter as practical.

 

(b) The parties shall be permitted discovery, including depositions, under the
supervision of and rules set by the Arbitrator; provided, however, that
discovery shall be completed within forty-five (45) days of selection or
appointment of the Arbitrator. The Arbitrator shall have the power to impose
such sanctions as the Arbitrator deems appropriate for failure of a party or
counsel for a party to comply with discovery rules established by the
Arbitrator.

 

(c) A hearing shall be held no later than ninety (90) days after submission to
Arbitration, unless a hearing is waived by all parties.

 

(d) No later than ten (10) days from the date of closing of the Arbitration
hearing, or, if an oral hearing has been waived, from the date of transmitting
final statements and proofs to the Arbitrator, the Arbitrator shall render a
written decision.

 

39.3 Unlawful Detainer. Notwithstanding the foregoing, nothing contained in this
Section 39 shall be deemed to limit or restict Landlord’s rights to file an
unlawful detainer action under California Code of Civil Procedure §§ 1161 et
seq. and obtain a judgment thereunder.

 

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40. JURY TRIAL WAIVER

 

EACH PARTY HERETO (WHICH INCLUDES ANY ASSIGNEE, SUCCESSOR HEIR OR PERSONAL
REPRESENTATIVE OF A PARTY) SHALL NOT SEEK A JURY TRIAL, HEREBY WAIVES TRIAL BY
JURY, AND HEREBY FURTHER WAIVES ANY OBJECTION TO VENUE IN THE COUNTY IN WHICH
THE PREMISES ARE LOCATED, AND AGREES AND CONSENTS TO PERSONAL JURISDICTION OF
THE COURTS OF THE STATE IN WHICH THE PROPERTY IS LOCATED, IN ANY ACTION OR
PROCEEDING OR COUNTERCLAIM BROUGHT BY ANY PARTY HERETO AGAINST THE OTHER ON ANY
MATTER WHATSOEVER ARISING OUT OF OR IN ANY WAY CONNECTED WITH THIS LEASE, THE
RELATIONSHIP OF LANDLORD AND TENANT, TENANT’S USE OR OCCUPANCY OF THE PREMISES,
OR ANY CLAIM OF INJURY OR DAMAGE, OR THE ENFORCEMENT OF ANY REMEDY UNDER ANY
STATUTE, EMERGENCY OR OTHERWISE, WHETHER ANY OF THE FOREGOING IS BASED ON THIS
LEASE OR ON TORT LAW. EACH PARTY REPRESENTS THAT IT HAS HAD THE OPPORTUNITY TO
CONSULT WITH LEGAL COUNSEL CONCERNING THE EFFECT OF THIS PARAGRAPH 40. THE
PROVISIONS OF THIS PARAGRAPH 40 SHALL SURVIVE THE EXPIRATION OR EARLIER
TERMINATION OF THIS LEASE.

 

IN WITNESS WHEREOF, the parties hereto have executed this Commercial Lease as of
the day and the year first above written.

 

 

LANDLORD:

 

Green Road, LLC,

a California limited liability company

    By:/s/ Rick Engebretsen

 

Name:  

Rick Engebretsen  Title: Manager  Dated:  November 28, 2018 

 

 46

  

  

 

TENANT:

 

SGSD, LLC,

a Nevada limited liability company

    By:/s/ David Barakett

 

Name:  

David Barakett  Title: CEO  Dated:  November 28, 2018 

 

 47

  

 

EXHIBIT A

 

PREMISES

 

Parcel D of Parcel Map No. 904, in the City of San Diego, County of San Diego,
State of California, according to Parcel Map thereof filed in the Office of the
County Recorder of San Diego County on July 18, 1972 as File No. 185254 of
Official Records, being a portion of Lot 1 of G-W Industrial Park Unit No. 1, in
the City of San Diego, County of San Diego, State of California, according to
Map thereof No. 7120, filed in the Office of the County Recorder of San Diego
County, November 18, 1971.

 

 

  

  

EXHIBIT B

 

GUARANTY OF LEASE

 

 

  

  

GUARANTY OF LEASE

 

THIS GUARANTY OF LEASE (“Guaranty”) dated as of December 1, 2018 is executed by
David Barakett (“Guarantor”) in favor of Green Road, LLC, a California limited
liability company (“Landlord”).

 

RECITALS

 

A. Landlord and SGSD, LLC, a Nevada limited liability company (“Tenant”), have
entered into a lease dated as of December 1, 2018 (“Lease”), whereby Landlord
agreed to lease to Tenant and Tenant agreed to lease from Landlord the premises
located at 7625 Carroll Road, San Diego, California 92121 (the “Premises”).

 

B. As a condition to entering into the Lease, Landlord has required that
Guarantor execute and deliver to Landlord this Guaranty.

 

NOW THEREFORE, in consideration of Landlord entering into the Lease of the
Premises to Tenant, Guarantor covenants and agrees as follows:

 

1. GUARANTY

 

Guarantor absolutely and unconditionally guarantees to Landlord the timely
payment of all amounts that Tenant may at any time owe under the Lease, or any
extensions, renewals, or modifications of the Lease. Guarantor further
guarantees to Landlord the full, faithful, and timely performance by Tenant of
the Lease, or any extensions, renewals, or modifications of the Lease. If Tenant
shall default at any time in the payment of any rent or any other sums, costs,
or charges, or in the performance of any covenant or obligation under the Lease,
then Guarantor, at Guarantor’s expense, shall on demand by Landlord fully and
promptly pay all rent, sums, costs, and charges to be paid and perform all other
covenants and obligations to be performed by Tenant pursuant to the Lease. In
addition, Guarantor shall on demand by Landlord pay to Landlord all sums due to
Landlord, including, without limitation, all interest on past due obligations of
Tenant, costs advanced by Landlord, damages, and all expenses (including,
without limitation, court costs and reasonable attorney’s fees) that may arise
in consequence of Tenant’s default.

 

2. WAIVERS

 

2.1 Guarantor authorizes Landlord, without notice or demand and without
affecting Guarantor’s liability under this Guaranty, to:

 

(a) consent to any extensions, accelerations, or other changes in the time for
any payment provided for in the Lease, or consent to any other alteration of any
covenant, term, or condition of the Lease in any respect, and to consent to any
assignment, subletting, or reassignment of the Lease;

 

 

  

  

(b) take and hold security for any payment provided for in the Lease or for the
performance of any covenant, term, or condition of the Lease, or exchange,
waive, or release any security; and

 

(c) apply this security and direct the order or manner of its sale as Landlord
may determine.

 

2.2 Notwithstanding any termination, renewal, extension, or holding over of the
Lease, this Guaranty shall continue until all of the covenants and obligations
on the part of Tenant to be performed have been fully and completely performed
by Tenant, and Guarantor shall not be released of any obligation or liability
under this Guaranty so long as there is any claim against Tenant arising out of
the Lease that has not been settled or discharged in full. To the extent any of
the provisions of this Guaranty are inconsistent with any applicable Law,
including §§2187-2855 of the California Civil Code, the provisions of this
Guaranty shall control. This Guaranty shall not be released, modified, or
affected by the failure or delay on the part of Landlord to enforce any of the
rights or remedies

of Landlord under the Lease.

 

3. INDEPENDENT OBLIGATIONS

 

3.1 The obligations of Guarantor under this Guaranty are independent of, and may
exceed, the obligations of Tenant. A separate action may, at Landlord’s option,
be brought and prosecuted against Guarantor, whether or not any action is first
or subsequently brought against Tenant, or whether or not Tenant is joined in
any action, and Guarantor may be joined in any action or proceeding commenced by
Landlord against Tenant arising out of, in connection with, or based upon the
Lease.

 

3.2 Guarantor waives any right to:

 

(a) require Landlord to proceed against Tenant or any other person or entity or
pursue any other remedy in Landlord’s power;

 

(b) complain of delay in the enforcement of Landlord’s rights under the Lease;
and

 

(c) require Landlord to proceed against or exhaust any security held from Tenant
or Guarantor.

 

3.3 Guarantor waives any defense arising by reason of any disability or other
defense of Tenant or by reason of the cessation from any cause of the liability
of Tenant. Guarantor waives any right to assert or plead any statute of
limitations relating to this Guaranty or the Lease. Guarantor waives all demands
upon and notices to Tenant and to Guarantor, including, without limitation,
demands for performance, notices of nonperformance, notices of nonpayment, and
notices of acceptance of this Guaranty.

 

 

  

  

3.4 Guarantor subordinates all existing or future indebtedness of Tenant to
Guarantor to the obligations owed to Landlord under the Lease and this Guaranty.
Guarantor waives any right of subrogation that Guarantor may have against
Tenant.

 

4. DEFINITION OF TENANT

 

For purposes of this Guaranty and the obligations and liabilities of Guarantor,
the term “Tenant” shall be deemed to include any and all concessionaires,
licensees, franchisees, department operators, assignees, subtenants, or others
directly or indirectly leasing or occupying the Premises leased under the Lease
or operating or conducting a business in or from these Premises.

 

5. NO REPORTING DUTY

 

Guarantor assumes full responsibility for keeping fully informed of the
financial condition of Tenant and all other circumstances affecting Tenant’s
ability to perform Tenant’s obligations under the Lease, and agrees that
Landlord will have no duty to report to Guarantor any information that Landlord
receives about Tenant’s financial condition or any circumstances bearing on
Tenant’s ability to perform such obligations.

 

6. CONTINUING GUARANTY

 

This Guaranty shall remain in full force notwithstanding the appointment of a
receiver to take possession of all or substantially all of the assets of Tenant,
or an assignment by Tenant for the benefit of creditors, or any action taken or
suffered by Tenant under any insolvency, bankruptcy, reorganization, moratorium,
or other debtor relief act or statute, whether now existing or later amended or
enacted, or the disaffirmance of the Lease in any action or otherwise.

 

7. JOINT AND SEVERAL OBLIGATIONS

 

If this Guaranty is signed, or if the obligations of Tenant are otherwise
guaranteed, by more than one party, their obligations shall be joint and
several, and the release or limitation of liability of any one or more of the
guarantors shall not release or limit the liability of any other guarantors.

 

8. SUCCESSORS AND ASSIGNS

 

This Guaranty shall be binding upon Guarantor and Guarantor’s heirs,
administrators, personal and legal representatives, successors, and assigns, and
shall inure to the benefit of Landlord and Landlord’s successors and assigns.
Landlord may, without notice, assign this Guaranty, the Lease, or the rents and
other sums payable under the Lease, in whole or in part.

 

 

  

  

9. GUARANTY OF COSTS AND FEES

 

In addition to the amounts guaranteed, Guarantor agrees to pay reasonable
attorney’s fees and all other costs and expenses incurred by Landlord in
enforcing this Guaranty or in any action or proceeding arising out of, or
relating to, this Guaranty.

 

10. NO WAIVER

 

No provision of this Guaranty or right of Landlord can be waived, nor can the
Guarantor be released from its obligations except in writing signed by Landlord.

 

11. GOVERNING LAW

 

This Guaranty shall be deemed to be made under and shall be governed by
California law in all respects, including matters of construction, validity, and
performance, and the terms and provisions of this Guaranty may not be waived,
altered, modified, or amended except in a writing signed by an authorized
officer of Landlord and by Guarantor. Any litigation concerning this Guaranty
shall be initiated in a state court of competent jurisdiction in the County of
San Diego and Guarantor consents to the jurisdiction of such court.

 

12. SEVERANCE

 

If any of the provisions of this Guaranty shall contravene or be held invalid
under the laws of any jurisdiction, this Guaranty shall be construed as if it
did not contain those provisions, and the rights and obligations of the parties
shall be construed and enforced accordingly.

 

13. COUNTERPARTS

 

This Guaranty may be executed in any number of counterparts, each of which shall
be a valid and binding original, but all of which together shall constitute one
and the same instrument.

 

IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the date first
written above.

 

 

GUARANTOR:

    By:/s/ David Barakett

 

Name:  

David Barakett  Dated:  November 28, 2018