AIR COMMERCIAL REAL ESTATE ASSOCIATION

STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE – NET

 

1.     Basic Provisions ("Basic Provisions").

 

1.1            Parties: This Lease ("Lease"), dated for reference purposes only
May 1, 2012, is made by and between COP-Western Avenue, LLC, a California
limited liability company ("Lessor") and Fujitsu Ten Corp. of America, a
California corporation ("Lessee"), (collectively the "Parties", or individually
a "Party").

1.2(a)       Premises: That certain portion of the Project (as defined below),
including all improvements therein or to be provided by Lessor under the terms
of this Lease, commonly known by the street address of 20100 and 20200 Western
Avenue located in the City of Los Angeles , County of Los Angeles , State of
California , with zip code 90501 , as outlined on Exhibit A attached hereto
("Premises") and generally described as (describe briefly the nature of the
Premises): Two (2) separate warehouse and office spaces totaling approximately
56,520 square feet. In addition to Lessee's rights to use and occupy the
Premises as hereinafter specified, Lessee shall have non-exclusive rights to any
utility raceways of the building containing the Premises ("Building") and to the
common Areas (as defined in Paragraph 2.7 below), but shall not have any rights
to the roof or exterior walls of the Building or to any other buildings in the
Project. The Premises, the Building, the Common Areas, the land upon which they
are located, along with all other buildings and improvements thereon, are herein
collectively referred to as the "Project." (See also Paragraph 2 and Addendum
Paragraph 64)

1.2(b)       Parking: 105 unallocated and unreserved vehicle parking spaces.
(See also Paragraph 2.6 and Addendum Paragraph 54))

1.3           Term: Seven (7) years and No (0) months ("Original Term")
commencing June 1, 2012 ("Commencement Date") and ending May 31, 2019
("Expiration Date"). (See also Paragraph 3)

1.4            Early Possession: If the Premises are available Lessee may have
non-exclusive possession of the Premises commencing upon lease execution and
delivery of funds set forth in Section 1.7 below ("Early Possession Date").

(See also Paragraphs 3.2 and 3.3)

1.5           Base Rent: $ 43,269.30 per month ("Base Rent"), payable on the
first day of each month commencing June 1, 2012 (See also Paragraph 4 and
Addendum Paragraph 51).

þ If this box is checked, there are provisions in this Lease for the Base Rent
to be adjusted. See Paragraph 50 of Addendum

1.6           Lessee's Share of Common Area Operating Expenses: forty-eight and
54/100ths percent (48.54%) ("Lessee's Share"). Lessee's Share has been
calculated by dividing the approximate rentable square footage of the Premises
by the approximate square footage of the Project and shall not be subject to
revision except in connection with an actual change in the size of the Premises
or a change in the space available for lease in the Project.

1.7           Base Rent and Other Monies Paid Upon Execution:

(a) Base Rent: $21,634.60 for the period 2/01/2013-2/28/2013 (See Par. 51 of
Addendum)

(b) Common Area Operating Expenses: $11,969.20 for the period 6/1/2012 -
6/30/2012 (see Paragraph 51 of Addendum)

(c) Security Deposit: $170,500.00 ("Security Deposit"). (See also Paragraph 5)

(d) Other: $ N/A for

(e) Total Due Upon Execution of this Lease: $ 196,656.60.

1.8          Agreed Use: Warehouse, repair center, distribution and
administrative offices for automotive technology and components. (See also
Paragraph 6)

1.9          Insuring Party. Lessor is the "Insuring Party". (See also Paragraph
8)

1.10        Real Estate Brokers: (See also Paragraph 15)

(a) Representation: The following real estate brokers (the "Brokers") and
brokerage relationships exist in this transaction

(Check applicable boxes):

þ CBRE, Inc. represents Lessor exclusively ("Lessor's Broker");

þ Collier's International represents Lessee exclusively ("Lessee's Broker"); or

¨ ____________________________________________________________________represents
both Lessor and Lessee ("Dual Agency").

(b) Payment to Brokers: Pursuant to a separate written agreement between Lessor
and Lessor’s Broker.

 

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1.11          Guarantor. The obligations of the Lessee under this Lease are to
be guaranteed by N/A ("Guarantor"). (See also Paragraph 37)

1.12          Attachments. Attached hereto are the following, all of which
constitute a part of this Lease:

þ an Addendum consisting of Paragraphs 50 through 57;

þ a site plan depicting the Premises; (Exhibit A)

£ a site plan depicting the Project;

£ a current set of the Rules and Regulations for the Project;

£ a current set of the Rules and Regulations adopted by the owners' association;

£ a Work Letter;

þ other (specify); Exhibit B - Tenant Improvements/Allowance

                Exhibit C - Designated Reserved Parking.

2. Premises.

2.1          Letting. Lessor hereby leases to Lessee, and Lessee hereby leases
from Lessor, the Premises, for the term, at the rental, and upon all of the
terms, covenants and conditions set forth in this Lease. While the approximate
square footage of the Premises may have been used in the marketing of the
Premises for purposes of comparison, the Base Rent stated herein is NOT tied to
square footage and is not subject to adjustment should the actual size be
determined to be different. NOTE: Lessee is advised to verify the actual size
prior to executing this Lease.

2.2          Condition. Lessor shall deliver that portion of the Premises
contained within the Building ('Unit") to Lessee broom clean and free of debris
on the Commencement Date or the Early Possession Date, whichever first occurs
("Start Date"), and, so long as the required service contracts described in
Paragraph 7.1(b) below are obtained by Lessee and in effect within thirty days
following the Start Date, warrants that the existing electrical, plumbing, fire
sprinkler, lighting, heating, ventilating and air conditioning systems ("HVAC"),
loading doors, sump pumps, if any, and all other such elements in the Unit,
other than those constructed by Lessee, shall be in good operating condition on
said date, that the structural elements of the roof, bearing walls and
foundation of the Unit shall be free of material defects, and that the Unit does
not contain hazardous levels of any mold or fungi defined as toxic under
applicable state or federal law. If a non-compliance with such warranty exists
as of the Start Date, or if one of such systems or elements should malfunction
or fail within the appropriate warranty period, Lessor shall, as Lessor's sole
obligation with respect to such matter, except as otherwise provided in this
Lease, promptly after receipt of written notice from Lessee setting forth with
specificity the nature and extent of such non-compliance, malfunction or
failure, rectify same at Lessor's expense. The warranty periods shall be as
follows: (i) 6 months as to the HVAC systems, and (ii) 120 days as to the
remaining systems and other elements of the Unit. If Lessee does not give Lessor
the required notice within the appropriate warranty period, correction of any
such non-compliance, malfunction or failure shall be the obligation of Lessee at
Lessee's sole cost and expense (except for the repairs to the fire sprinkler
systems, roof, foundations, and/or bearing walls - see Paragraph 7).         

2.3          Compliance. Lessor warrants that to the best of its knowledge the
improvements on the Premises and the Common Areas comply with the building codes
that were in effect at the time that each such improvement, or portion thereof,
was constructed, and also with all applicable laws, covenants or restrictions of
record, regulations, and ordinances in effect on the Start Date ("Applicable
Requirements"). Said warranty does not apply to the specific and unique use to
which Lessee will put the Premises, modifications which may be required by the
Americans with Disabilities Act or any similar laws as a result of Lessee's
specific and unique use (see Paragraph 49), or to any Alterations or Utility
Installations (as defined in Paragraph 7.3(a)) made or to be made by Lessee.
NOTE: Lessee is responsible for determining whether or not the Applicable
Requirements and especially the zoning are appropriate for Lessee's intended
use, and acknowledges that past uses of the Premises may no longer be allowed.
If the Premises do not comply with said warranty, Lessor shall, except as
otherwise provided, promptly after receipt of written notice from Lessee setting
forth with specificity the nature and extent of such non-compliance rectify the
same at Lessor's expense. If Lessee does not give Lessor written notice of a
non-compliance with this warranty within 6 months following the Start Date,
correction of that non-compliance shall be the obligation of Lessee at Lessee's
sole cost and expense, provided, however, if such noncompliance was not readily
apparent, then such warranty shall extend for a period of 24 months from the
Commencement Date. If the Applicable Requirements are hereafter changed so as to
require during the term of this Lease the construction of an addition to or an
alteration of the Unit, Premises and/or Building, the remediation of any
Hazardous Substance, or the reinforcement or other physical modification of the
Unit, Premises and/or Building ("Capital Expenditure"), Lessor and Lessee shall
allocate the cost of such work as follows:

(a)           Subject to Paragraph 2.3(c) below, if such Capital Expenditures
are required as a result of the specific and unique use of the Premises by
Lessee as compared with uses by tenants in general, Lessee shall be fully
responsible for the cost thereof, provided, however that if such Capital
Expenditure is required during the last 2 years of this Lease and the cost
thereof exceeds 6 months' Base Rent, Lessee may instead terminate this Lease
unless Lessor notifies Lessee, in writing, within 10 days after receipt of
Lessee's termination notice that Lessor has elected to pay the difference
between the actual cost thereof and the amount equal to 6 months' Base Rent. If
Lessee elects termination, Lessee shall immediately cease the use of the
Premises which requires such Capital Expenditure and deliver to Lessor written
notice specifying a termination date at least 90 days thereafter. Such
termination date shall, however, in no event be earlier than the last day that
Lessee could legally utilize the Premises without commencing such Capital
Expenditure.

(b)           If such Capital Expenditure is not the result of the specific and
unique use of the Premises by Lessee (such as, governmentally mandated seismic
modifications), then Lessor shall pay for such Capital Expenditure and Lessee
shall only be obligated to pay, each month during the remainder of the term of
this Lease or any extension thereof, on the date that on which the Base Rent is
due, an amount equal to the amortized portion of such costs reasonably
attributable to the Premises amortized over the useful life of such Capital
Expenditure as reasonably determined by Lessor. Lessee shall pay Interest on the
balance but may prepay its obligation at any time. If, however, Lessor
reasonably determines that it is not economically feasible to pay its share
thereof, Lessor shall have the option to terminate this Lease upon 90 days prior
written notice to Lessee unless Lessee notifies Lessor, in writing, within 10
days after receipt of Lessor's termination notice that Lessee will pay for such
Capital Expenditure. If Lessor does not elect to terminate, and fails to tender
its share of any such Capital Expenditure, Lessee may advance such funds and
deduct same, with Interest, from Rent until Lessor's share of such costs have
been fully paid. If Lessee is unable to finance Lessor's share, or if the
balance of the Rent due and payable for the remainder of this Lease is not
sufficient to fully reimburse Lessee on an offset basis, Lessee shall have the
right to terminate this Lease upon 30 days written notice to Lessor.

(c)          Notwithstanding the above, the provisions concerning Capital
Expenditures are intended to apply only to non-voluntary, unexpected, and new
Applicable Requirements. If the Capital Expenditures are instead triggered by
Lessee as a result of an actual or proposed change in use, change in intensity
of use, or modification to the Premises then, and in that event, Lessee shall
either: (i) immediately cease such changed use or intensity of use and/or take
such other steps as may be necessary to eliminate the requirement for such
Capital Expenditure, or (ii) complete such Capital Expenditure at its own
expense. Lessee shall not have any right to terminate this Lease.

 

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2.4          Acknowledgements. Lessee acknowledges that: (a) it has been given
an opportunity to inspect and measure the Premises, (b) it has been advised by
Lessor and/or Brokers to satisfy itself with respect to the size and condition
of the Premises (including but not limited to the electrical, HVAC and fire
sprinkler systems, security, environmental aspects, and compliance with
Applicable Requirements and the Americans with Disabilities Act), and their
suitability for Lessee's intended use, (c) Lessee has made such investigation as
it deems necessary with reference to such matters and assumes all responsibility
therefor as the same relate to its occupancy of the Premises, (d) it is not
relying on any representation as to the size of the Premises made by Brokers or
Lessor, (e) the square footage of the Premises was not material to Lessee's
decision to lease the Premises and pay the Rent stated herein, and (f) neither
Lessor, Lessor's agents, nor Brokers have made any oral or written
representations or warranties with respect to said matters other than as set
forth in this Lease. In addition, Lessor acknowledges that: (i) Brokers have
made no representations, promises or warranties concerning Lessee's ability to
honor the Lease or suitability to occupy the Premises and (ii) it is Lessor's
sole responsibility to investigate the financial capability and/or suitability
of all proposed tenants.

2.5            Lessee as Prior Owner/Occupant. The warranties made by Lessor in
Paragraph 2 shall be of no force or effect if immediately prior to the Start
Date Lessee was the owner or occupant of the Premises. In such event, Lessee
shall be responsible for any necessary corrective work.

2.6            Vehicle Parking. Lessee shall be entitled to use the number of
parking spaces specified in Paragraph 1.2(b) on those portions of the Common
Areas designated from time to time by Lessor for parking without additional
charge. Lessee shall not use more parking spaces than said number. Said parking
spaces shall be used for parking by vehicles no larger than full-size passenger
automobiles or pick-up trucks, herein called "Permitted Size Vehicles." Lessor
may regulate the loading and unloading of vehicles by adopting Rules and
Regulations as provided in Paragraph 2.9. No vehicles other than Permitted Size
Vehicles may be parked in the Common Area without the prior written permission
of Lessor. In addition:

(a) Lessee shall not permit or allow any vehicles that belong to or are
controlled by Lessee or Lessee's employees, suppliers, shippers, customers,
contractors or invitees to be loaded, unloaded, or parked in areas other than
those designated by Lessor for such activities. Lessor acknowledges that Lessee
will be driving vehicles into the electronics repair portion of the Premises and
consents to such use by Lessee.

(b) Lessee shall not service or store any vehicles in the Common Areas.

(c) If Lessee permits or allows any of the prohibited activities described in
this Paragraph 2.6, then Lessor shall have the right, without notice, in
addition to such other rights and remedies that it may have, to remove or tow
away the vehicle involved and charge the cost to Lessee, which cost shall be
immediately payable upon demand by Lessor.

2.7            Common Areas - Definition. The term "Common Areas" is defined as
all areas and facilities outside the Premises and within the exterior boundary
line of the Project and interior utility raceways and installations within the
Unit that are provided and designated by the Lessor from time to time for the
general non-exclusive use of Lessor, Lessee and other tenants of the Project and
their respective employees, suppliers, shippers, customers, contractors and
invitees, including parking areas, loading and unloading areas, trash areas,
roadways, walkways, driveways and landscaped areas.

2.8            Common Areas - Lessee's Rights. Lessor grants to Lessee, for the
benefit of Lessee and its employees, suppliers, shippers, contractors, customers
and invitees, during the term of this Lease, the non-exclusive right to use, in
common with others entitled to such use, the Common Areas as they exist from
time to time, subject to any rights, powers, and privileges reserved by Lessor
under the terms hereof or under the terms of any rules and regulations or
restrictions governing the use of the Project. Under no circumstances shall the
right herein granted to use the Common Areas be deemed to include the right to
store any property, temporarily or permanently, in the Common Areas. Any such
storage shall be permitted only by the prior written consent of Lessor or
Lessor's designated agent, which consent may be revoked at any time. In the
event that any unauthorized storage shall occur then Lessor shall have the
right, without notice, in addition to such other rights and remedies that it may
have, to remove the property and charge the cost to Lessee, which cost shall be
immediately payable upon demand by Lessor.

2.9            Common Areas - Rules and Regulations. Lessor or such other
person(s) as Lessor may appoint shall have the exclusive control and management
of the Common Areas and shall have the right, from time to time, to establish,
modify, amend and enforce reasonable rules and regulations ("Rules and
Regulations") for the management, safety, care, and cleanliness of the grounds,
the parking and unloading of vehicles and the preservation of good order, as
well as for the convenience of other occupants or tenants of the Building and
the Project and their invitees. Such Rules and Regulations shall be enforced by
Lessor in a non-discriminatory manner. Lessee agrees to abide by and conform to
all such Rules and Regulations, and shall use its best efforts to cause its
employees, suppliers, shippers, customers, contractors and invitees to so abide
and conform. Lessor shall not be responsible to Lessee for the non-compliance
with said Rules and Regulations by other tenants of the Project.

2.10          Common Areas - Changes. Lessor shall have the right, in Lessor's
sole discretion, from time to time:

(a) To make changes to the Common Areas, including, without limitation, changes
in the location, size, shape and number of driveways, entrances, parking spaces,
parking areas, loading and unloading areas, ingress, egress, direction of
traffic, landscaped areas, walkways and utility raceways; provided, however,
such actions do not materially and adversely affect Lessee's access to or use of
the Premises.

(b) To close temporarily any of the Common Areas for maintenance purposes so
long as reasonable access to the Premises remains available;

(c) To designate other land outside the boundaries of the Project to be a part
of the Common Areas;

(d) To add additional buildings and improvements to the Common Areas; provided,
however, such actions do not materially and adversely affect Lessee's access to
or use of the Premises.

(e) To use the Common Areas while engaged in making additional improvements,
repairs or alterations to the Project, or any portion thereof provided Lessor
shall use good faith efforts to minimize disruption to Lessee; and

(f) To do and perform such other acts and make such other changes in, to or with
respect to the Common Areas and Project as Lessor may, in the exercise of sound
business judgment, deem to be appropriate provided Lessor shall use good faith
efforts to minimize disruption to Lessee.

3.             Term.

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

3.2 Early Possession. Any provision herein granting Lessee Early Possession of
the Premises is subject to and conditioned upon the Premises being available for
such possession prior to the Commencement Date. Any grant of Early Possession
only conveys a non-exclusive right to occupy the Premises. If Lessee totally or
partially occupies the Premises prior to the Commencement Date, the obligation
to pay Base Rent shall be abated for the period of such Early Possession. All
other terms of this Lease (including but not limited to the obligations to pay
Lessee's Share of Common Area Operating Expenses, Real Property Taxes and
insurance premiums and to maintain the Premises) shall be in effect during such
period .Any such Early Possession shall not affect the Expiration Date. 

 

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3.3 Delay In Possession. Lessor agrees to use its best commercially reasonable
efforts to deliver possession of the Premises to Lessee by the Commencement
Date. If, despite said efforts, Lessor is unable to deliver possession by such
date, Lessor shall not be subject to any liability therefore, nor shall such
failure affect the validity of this Lease or change the Expiration Date. Lessee
shall not, however, be obligated to pay Rent or perform its other obligations
until Lessor delivers possession of the Premises and any period of rent
abatement that Lessee would otherwise have enjoyed shall run from the date of
delivery of possession and continue for a period equal to what Lessee would
otherwise have enjoyed under the terms hereof, but minus any days of delay
caused by the acts or omissions of Lessee. If possession is not delivered within
60 days after the Commencement Date, as the same may be extended under the terms
of any Work Letter executed be Parties, Lessee may, at its option, by notice in
writing within 10 days after the end of such 60 day period, cancel this Lease,
in which event the Parties shall be discharged from all obligations hereunder.
If such written notice is not received by Lessor within said 10 day period,
Lessee's right to cancel shall terminate. If possession of the Premises is not
delivered within 120 days after the Commencement Date, this Lease shall
terminate unless other agreements are reached between Lessor and Lessee,

in writing.

3.4    Lessee Compliance. Lessor shall not be required to tender possession of
the Premises to Lessee until Lessee complies with its obligation to provide
evidence of insurance (Paragraph 8.5). Pending delivery of such evidence, Lessee
shall be required to perform all of its obligations under this Lease from and
after the Start Date, including the payment of Rent, notwithstanding Lessor's
election to withhold possession pending receipt of such evidence of insurance.
Further, if Lessee is required to perform any other conditions prior to or
concurrent with the Start Date, the Start Date shall occur but Lessor may elect
to withhold possession until such conditions are satisfied.

4.             Rent.

4.1            Rent Defined. All monetary obligations of Lessee to Lessor under
the terms of this Lease (except for the Security Deposit) are deemed to be rent
("Rent").

4.2            Common Area Operating Expenses. Lessee shall pay to Lessor during
the term hereof, in addition to the Base Rent, Lessee's Share (as specified in
Paragraph 1.6) of all Common Area Operating Expenses, as hereinafter defined,
during each calendar year of the term of this Lease, in accordance with the
following provisions:

(a)           "Common Area Operating Expenses" are defined, for purposes of this
Lease, as all commercially reasonable costs incurred by Lessor relating to the
ownership and operation of the Project, including, but not limited to, the
following:

(i) The operation, repair and maintenance, in neat, clean, good order and
condition , and if necessary the replacement, of the following:

(aa)          The Common Areas and Common Area improvements, including parking
areas, loading and unloading areas, trash areas, roadways, parkways, walkways,
driveways, landscaped areas, bumpers, irrigation systems, Common Area lighting
facilities, fences and gates, elevators, roofs, exterior walls of the buildings,
building systems and roof drainage systems.

(bb)          Exterior signs and any tenant directories.

(cc)           Any fire sprinkler systems.

(dd)          All other areas and improvements that are within the exterior
boundaries of the Project but outside of the Premises and/or any other space
occupied by a tenant.

(ii)          The cost of water, gas, electricity and telephone to service the
Common Areas and any utilities not separately metered.

(iii)         The cost of trash disposal, pest control services, property
management, security services, owners' association dues and fees, the cost to
repaint the exterior of any structures and the cost of any environmental
inspections.

(iv)          Reasonable reserves set aside for maintenance, repair and/or
replacement of Common Area improvements and equipment.

(v)           Real Property Taxes (as defined in Paragraph 10).

(vi)          The cost of the premiums for the insurance maintained by Lessor
pursuant to Paragraph 8.

(vii)         Any deductible portion of an insured loss concerning the Building
or the Common Areas.

(viii)        Auditors', accountants' and attorneys' fees and costs related to
the operation, maintenance, repair and replacement of the Project.

(ix)          The cost of any capital improvement to the Building or the Project
not covered under the provisions of Paragraph 2.3 provided; however, that Lessor
shall allocate the cost of any such capital improvement over the useful life of
such capital improvement as reasonably determined by Lessor and Lessee shall not
be required to pay more than Lessee's Share of the amortized cost of such
capital improvement in any given month.

(x)           The cost of any other services to be provided by Lessor that are
stated elsewhere in this Lease to be a Common Area Operating Expense.

(b)           Any Common Area Operating Expenses and Real Property Taxes that
are specifically attributable to the Unit, the Building or to any other building
in the Project or to the operation, repair and maintenance thereof, shall be
allocated entirely to such Unit, Building, or other building. However, any
Common Area Operating Expenses and Real Property Taxes that are not specifically
attributable to the Building or to any other building or to the operation,
repair and maintenance thereof, shall be equitably allocated by Lessor to all
buildings in the Project.

(c)           The inclusion of the improvements, facilities and services set
forth in Subparagraph 4.2(a) shall not be deemed to impose an obligation upon
Lessor to either have said improvements or facilities or to provide those
services unless the Project already has the same, Lessor already provides the
services, or Lessor has agreed elsewhere in this Lease to provide the same or
some of them.

(d)          Lessee's Share of Common Area Operating Expenses is payable monthly
on the same day as the Base Rent is due hereunder. The amount of such payments
shall be based on Lessor's estimate of the annual Common Area Operating
Expenses. Within 120 days after the end of each calendar year Lessor shall
deliver to Lessee a reasonably detailed statement showing Lessee's Share of the
actual Common Area Operating Expenses for the preceding year. If Lessee's
payments during such year exceed Lessee's Share, Lessor shall credit the amount
of such over-payment against Lessee's future payments. If Lessee's payments
during such year were less than Lessee's Share, Lessee shall pay to Lessor the
amount of the deficiency within 30 days after delivery by Lessor to Lessee of
the statement.

(e)            Common Area Operating Expenses shall not include any expenses
paid by any tenant directly to third parties, or as to which Lessor is otherwise
reimbursed by any third party, other tenant, or insurance proceeds.

4.3            Payment. Lessee shall cause payment of Rent to be received by
Lessor in lawful money of the United States, without offset or deduction (except
as specifically permitted in this Lease), on or before the day on which it is
due. All monetary amounts shall be rounded to the nearest whole dollar. In the
event that any invoice prepared by Lessor is inaccurate such inaccuracy shall
not constitute a waiver and Lessee shall be obligated to pay the amount set
forth in this Lease. Rent for any period during the term hereof which is for
less than one full calendar month shall be prorated based upon the actual number
of days of said month. Payment of Rent shall be made to Lessor at its address
stated herein or to such other persons or place as Lessor may from time to time
designate in writing. Acceptance of a payment which is less than the amount then
due shall not be a waiver of Lessor's rights to the balance of such Rent,
regardless of Lessor's endorsement of any check so stating. In the event that
any check, draft, or other instrument of payment given by Lessee to Lessor is
dishonored for any reason, Lessee agrees to pay to Lessor the sum of $25 in
addition to any Late Charge and Lessor, at its option, may require all future
Rent be paid by cashier's check. Payments will be applied first to accrued late
charges and attorney's fees, second to accrued interest, then to Base Rent and
Common Area Operating Expenses, and any remaining amount to any other
outstanding charges or costs.

 

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5. Security Deposit. Lessee shall deposit with Lessor upon execution hereof the
Security Deposit as security for Lessee's faithful performance of its
obligations under this Lease. If Lessee fails to pay Rent, or otherwise Defaults
under this Lease, Lessor may use, apply or retain all or any portion of said
Security Deposit for the payment of any amount already due Lessor, for Rents
which will be due in the future, and/ or to reimburse or compensate Lessor for
any liability, expense, loss or damage which Lessor may suffer or incur by
reason thereof. If Lessor uses or applies all or any portion of the Security
Deposit, Lessee shall within 10 days after written request therefor deposit
monies with Lessor sufficient to restore said Security Deposit to the full
amount required by this Lease. Should the Agreed Use be amended to accommodate a
material change in the business of Lessee or to accommodate a sublessee or
assignee, Lessor shall have the right to increase the Security Deposit to the
extent necessary, in Lessor's reasonable judgment, to account for any increased
wear and tear that the Premises may suffer as a result thereof. If a change in
control of Lessee occurs during this Lease and following such change the
financial condition of Lessee is, in Lessor's reasonable judgment, significantly
reduced, Lessee shall deposit such additional monies with Lessor as shall be
sufficient to cause the Security Deposit to be at a commercially reasonable
level based on such change in financial condition. Lessor shall not be required
to keep the Security Deposit separate from its general accounts. Within 90 days
after the expiration or termination of this Lease, Lessor shall return that
portion of the Security Deposit not used or applied by Lessor. No part of the
Security Deposit shall be considered to be held in trust, to bear interest or to
be prepayment for any monies to be paid by Lessee under this Lease.

6. Use.

6.1            Use. Lessee shall use and occupy the Premises only for the Agreed
Use, and for no other purpose. Lessee shall not use or permit the use of the
Premises in a manner that is unlawful, creates damage, waste or a nuisance, or
that disturbs occupants of or causes damage to neighboring premises or
properties. Other than guide, signal and seeing eye dogs, Lessee shall not keep
or allow in the Premises any pets, animals, birds, fish, or reptiles. Lessor
shall not unreasonably withhold or delay its consent to any written request for
a modification of the Agreed Use, so long as the same will not impair the
structural integrity of the Building or the mechanical or electrical systems
therein, and/or is not significantly more burdensome to the Project. If Lessor
elects to withhold consent, Lessor shall within 7 days after such request give
written notification of same, which notice shall include an explanation of
Lessor's objections to the change in the Agreed Use.

6.2            Hazardous Substances.

(a)           Reportable Uses Require Consent. The term "Hazardous Substance" as
used in this Lease shall mean any product, substance, or waste whose presence,
use, manufacture, disposal, transportation, or release, either by itself or in
combination with other materials expected to be on the Premises, is either: (i)
potentially injurious to the public health, safety or welfare, the environment
or the Premises, (ii) regulated or monitored by any governmental authority, or
(iii) a basis for potential liability of Lessor to any governmental agency or
third party under any applicable statute or common law theory. Hazardous
Substances shall include, but not be limited to, hydrocarbons, petroleum,
gasoline, and/or crude oil or any products, by-products or fractions thereof.
Lessee shall not engage in any activity in or on the Premises which constitutes
a Reportable Use of Hazardous Substances without the express prior written
consent of Lessor and timely compliance (at Lessee's expense) with all
Applicable Requirements. "Reportable Use" shall mean (i) the installation or use
of any above or below ground storage tank, (ii) the generation, possession,
storage, use, transportation, or disposal of a Hazardous Substance that requires
a permit from, or with respect to which a report, notice, registration or
business plan is required to be filed with, any governmental authority, and/or
(iii) the presence at the Premises of a Hazardous Substance with respect to
which any Applicable Requirements requires that a notice be given to persons
entering or occupying the Premises or neighboring properties. Notwithstanding
the foregoing, Lessee may use any ordinary and customary materials reasonably
required to be used in the normal course of the Agreed Use, ordinary office
supplies (copier toner, liquid paper, glue, etc.) and common household cleaning
materials, so long as such use is in compliance with all Applicable
Requirements, is not a Reportable Use, and does not expose the Premises or
neighboring property to any meaningful risk of contamination or damage or expose
Lessor to any liability therefor. In addition, Lessor may condition its consent
to any Reportable Use upon receiving such additional assurances as Lessor
reasonably deems necessary to protect itself, the public, the Premises and/or
the environment against damage, contamination, injury and/or liability,
including, but not limited to, the installation (and removal on or before Lease
expiration or termination) of protective modifications (such as concrete
encasements) and/or increasing the Security Deposit.

(b)           Duty to Inform Lessor. If Lessee knows, or has reasonable cause to
believe, that a Hazardous Substance has come to be located in, on, under or
about the Premises, other than as previously consented to by Lessor, Lessee
shall promptly give written notice of such fact to Lessor, and provide Lessor
with a copy of any report, notice, claim or other documentation which it has
concerning the presence of such Hazardous Substance.

(c)           Lessee Remediation. Lessee shall not cause or permit any Hazardous
Substance to be spilled or released in, on, under, or about the Premises
(including through the plumbing or sanitary sewer system) and shall promptly, at
Lessee's expense, comply with all Applicable Requirements and take all
investigatory and/or remedial action reasonably recommended, whether or not
formally ordered or required, for the cleanup of any contamination of, and for
the maintenance, security and/or monitoring of the Premises or neighboring
properties, that was caused or materially contributed to by Lessee, or
pertaining to or involving any Hazardous Substance brought onto the Premises
during the term of this Lease, by or for Lessee, or any third party under
Lessee's direction or control.

(d)           Lessee Indemnification. Lessee shall indemnify, defend and hold
Lessor, its agents, employees, lenders and ground lessor, if any, harmless from
and against any and all loss of rents and/or damages, liabilities, judgments,
claims, expenses, penalties, and attorneys' and consultants' fees arising out of
or involving any Hazardous Substance brought onto the Premises by or for Lessee,
or any third party under Lessee's direction or control (provided, however, that
Lessee shall have no liability under this Lease with respect to underground
migration of any Hazardous Substance under the Premises from areas outside of
the Project not caused or contributed to by Lessee). Lessee's obligations shall
include, but not be limited to, the effects of any contamination or injury to
person, property or the environment created or suffered by Lessee, and the cost
of investigation, removal, remediation, restoration and/or abatement, and shall
survive the expiration or termination of this Lease. No termination,
cancellation or release agreement entered into by Lessor and Lessee shall
release Lessee from its obligations under this Lease with respect to Hazardous
Substances, unless specifically so agreed by Lessor in writing at the time of
such agreement.

 

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(e)           Lessor Indemnification. Lessor and its successors and assigns
shall indemnify, defend, reimburse and hold Lessee, its employees and lenders,
harmless from and against any and all damages, liabilities, judgment claims,
expenses, penalties and attorneys' and consultant's fees including the cost of
remediation, which are suffered as a direct result of Hazardous Substances on
the Premises prior to Lessee taking possession or which are caused by the gross
negligence or willful misconduct of Lessor, its agents or employees. Lessor's
obligations, as and when required by the Applicable Requirements, shall include,
but not be limited to, the cost of investigation, removal, remediation,
restoration and/or abatement, and shall survive the expiration or termination of
this Lease.

(f)           Investigations and Remediations. Lessor shall retain the
responsibility and pay for any investigations or remediation measures required
by governmental entities having jurisdiction with respect to the existence of
Hazardous Substances on the Premises prior to the Lessee taking possession,
unless such remediation measure is required as a result of Lessee's use
(including "Alterations", as defined in paragraph 7.3(a) below) of the Premises,
in which event Lessee shall be responsible for such payment. Lessee shall
cooperate fully in any such activities at the request of Lessor, including
allowing Lessor and Lessor's agents to have reasonable access to the Premises at
reasonable times in order to carry out Lessor's investigative and remedial
responsibilities. Lessee shall only be responsible to conduct or reimburse
Lessor for any investigations with respect to any existing Hazardous Substances
on the Premises caused by Lessee or third parties under Lessee's direction or
control.

(g)           Lessor Termination Option. If a Hazardous Substance Condition (see
Paragraph 9.1(e)) occurs during the term of this Lease, unless Lessee is legally
responsible therefor (in which case Lessee shall make the investigation and
remediation thereof required by the Applicable Requirements and this Lease shall
continue in full force and effect, but subject to Lessor's rights under
Paragraph 6.2(d) and Paragraph 13), Lessor may, at Lessor's option, either (i)
investigate and remediate such Hazardous Substance Condition, if required, as
soon as reasonably possible at Lessor's expense, in which event this Lease shall
continue in full force and effect, or (ii) if the estimated cost to remediate
such condition exceeds, $500,000.00 give written notice to Lessee, within 30
days after receipt by Lessor of knowledge of the occurrence of such Hazardous
Substance Condition, of Lessor's desire to terminate this Lease as of the date
60 days following the date of such notice. In the event Lessor elects to give a
termination notice, Lessee may, within 10 days thereafter, give written notice
to Lessor of Lessee's commitment to pay the amount by which the cost of the
remediation of such Hazardous Substance Condition exceeds an amount equal to
$500,000.00. Lessee shall provide Lessor with said funds or satisfactory
assurance thereof within 30 days following such commitment. In such event, this
Lease shall continue in full force and effect, and Lessor shall proceed to make
such remediation as soon as reasonably possible after the required funds are
available. If Lessee does not give such notice and provide the required funds or
assurance thereof within the time provided, this Lease shall terminate as of the
date specified in Lessor's notice of termination.

6.3            Lessee's Compliance with Applicable Requirements. Except as
otherwise provided in this Lease, Lessee shall, at Lessee's sole expense, fully,
diligently and in a timely manner, materially comply with all Applicable
Requirements, the reasonable requirements of any applicable fire insurance
underwriter or rating bureau, without regard to whether said Requirements are
now in effect or become effective after the Start Date. Lessee shall, within 10
days after receipt of Lessor's written request, provide Lessor with copies of
all permits and other documents, and other information evidencing Lessee's
compliance with any Applicable Requirements specified by Lessor, and shall
immediately upon receipt, notify Lessor in writing (with copies of any documents
involved) of any threatened or actual claim, notice, citation, warning,
complaint or report pertaining to or involving the failure of Lessee or the
Premises to comply with any Applicable Requirements. Likewise, Lessee shall
promptly give written notice to Lessor of: (i) any water damage to the Premises
and any suspected seepage, pooling, dampness or other condition conducive to the
production of mold; or (ii) any mustiness or other odors that might indicate the
presence of mold in the Premises.

6.4            Inspection; Compliance. Lessor and Lessor's "Lender" (as defined
in Paragraph 30) and consultants shall have the right to enter into Premises at
any time, in the case of an emergency, and otherwise during normal business
hours after reasonable notice, for the purpose of inspecting the condition of
the Premises and for verifying compliance by Lessee with this Lease. The cost of
any such inspections shall be paid by Lessor, unless a violation of Applicable
Requirements by Lessee or any third party under Lessee's direction or control,
or a Hazardous Substance Condition (see Paragraph 9.1) is found to exist or be
imminent due to any acts or omissions of Lessee or any third party under
Lessee's direction or control, or the inspection is requested or ordered by a
governmental authority due to any acts or omissions of Lessee or any third party
under Lessee's direction or control. In such case, Lessee shall upon request
reimburse Lessor for the cost of such inspection, so long as such inspection is
reasonably related to the violation or contamination. In addition, Lessee shall
provide copies of all relevant material safety data sheets (MSDS) to Lessor
within 10 days of the receipt of written request therefor.

7.           Maintenance; Repairs, Utility Installations; Trade Fixtures and
Alterations.

7.1          Lessee's Obligations.

(a)          In General. Subject to the provisions of Paragraph 2.2 (Condition),
2.3 (Compliance), 6.3 (Lessee's Compliance with Applicable Requirements), 7.2
(Lessor's Obligations), 9 (Damage or Destruction), and 14 (Condemnation), Lessee
shall, at Lessee's sole expense, keep the Premises, Utility Installations
(intended for Lessee's exclusive use, no matter where located), and Alterations
in good order, condition and repair (whether or not the portion of the Premises
requiring repairs, or the means of repairing the same, are reasonably or readily
accessible to Lessee, and whether or not the need for such repairs occurs as a
result of Lessee's use, any prior use, the elements or the age of such portion
of the Premises), including, but not limited to, all equipment or facilities,
such as plumbing, HVAC equipment, electrical, lighting facilities, boilers,
pressure vessels, fixtures, interior walls, interior surfaces of exterior walls,
ceilings, floors, windows, doors, plate glass, and skylights but excluding any
items which are the responsibility of Lessor pursuant to Paragraph 7.2. Lessee,
in keeping the Premises in good order, condition and repair, shall exercise and
perform good maintenance practices, specifically including the procurement and
maintenance of the service contracts required by Paragraph 7.1(b) below.
Lessee's obligations shall include restorations, replacements or renewals when
necessary to keep the Premises and all improvements thereon or a part thereof in
good order, condition and state of repair.

(b)          Service Contracts. Lessee shall, at Lessee's sole expense, procure
and maintain contracts, with copies to Lessor, in customary form and substance
for, and with contractors specializing and experienced in the maintenance of the
following equipment and improvements, if any, if and when installed on the
Premises: (i) HVAC equipment, However, Lessor reserves the right, upon notice to
Lessee, to procure and maintain any or all of such service contracts, and Lessee
shall reimburse Lessor, upon demand, for the cost thereof.

 

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(c)          Failure to Perform. If Lessee fails to perform Lessee's obligations
under this Paragraph 7.1, Lessor may enter upon the Premises after 10 days'
prior written notice to Lessee (except in the case of an emergency, in which
case no notice shall be required), perform such obligations on Lessee's behalf,
and put the Premises in good order, condition and repair, and Lessee shall
promptly pay to Lessor a sum equal to 115% of the cost thereof.

(d)           Replacement. Subject to Lessee's indemnification of Lessor as set
forth in Paragraph 8.7 below, and without relieving Lessee of liability
resulting from Lessee's failure to exercise and perform good maintenance
practices, if an item described in Paragraph 7.1(a) cannot be repaired other
than at a cost which is in excess of 50% of the cost of replacing such item,
then such item shall be replaced by Lessor, and the cost thereof shall be
prorated between the Parties and Lessee shall only be obligated to pay, each
month during the remainder of the term of this Lease, on the date on which Base
Rent is due, an amount equal to the product of multiplying the cost of such
replacement by a fraction, the numerator of which is one, and the denominator of
which is the number of months in the useful life of such item as reasonably
determined by Lessor. Lessee shall pay Interest on the unamortized balance but
may prepay its obligation at any time.

7.2           Lessor's Obligations. Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance), 4.2 (Common Area Operating Expenses), 6 (Use),
7.1 (Lessee's Obligations), 9 (Damage or Destruction) and 14 (Condemnation),
Lessor, subject to reimbursement pursuant to Paragraph 4.2, shall keep in good
order, condition and repair the foundations, exterior walls, structural
condition of interior bearing walls, exterior roof (including roof membrane),
fire sprinkler system, Common Area fire alarm and/or smoke detection systems,
fire hydrants, parking lots, walkways, parkways, driveways, landscaping, fences,
signs and utility systems serving the Common Areas and all parts thereof, as
well as providing the services for which there is a Common Area Operating
Expense pursuant to Paragraph 4.2. Lessor shall not be obligated to paint the
exterior or interior surfaces of exterior walls nor shall Lessor be obligated to
maintain, repair or replace windows, doors or plate glass of the Premises.
Lessee expressly waives the benefit of any statute now or hereafter in effect to
the extent it is inconsistent with the terms of this Lease.

7.3          Utility Installations; Trade Fixtures; Alterations.

(a)           Definitions. The term "Utility Installations" refers to all floor
and window coverings, air and/or vacuum lines, power panels, electrical
distribution, security and fire protection systems, communication cabling,
lighting fixtures, HVAC equipment, plumbing, and fencing in or on the Premises.
The term "Trade Fixtures" shall mean Lessee's machinery and equipment that can
be removed without doing material damage to the Premises. The term "Alterations"
shall mean any modification of the improvements, other than Utility
Installations or Trade Fixtures, whether by addition or deletion. "Lessee Owned
Alterations and/or Utility Installations" are defined as Alterations and/or
Utility Installations made by Lessee that are not yet owned by Lessor pursuant
to Paragraph 7.4(a).

(b)           Consent. Lessee shall not make any Alterations or Utility
Installations to the Premises without Lessor's prior written consent. Lessee
may, however, make non-structural Alterations or Utility Installations to the
interior of the Premises (excluding the roof) without such consent but upon
notice to Lessor, as long as they are not visible from the outside, do not
involve puncturing, relocating or removing the roof or any existing walls, will
not affect the electrical, plumbing, HVAC, and/or life safety systems, and the
cumulative cost thereof during this Lease as extended does not exceed a sum
equal to 3 month's Base Rent in the aggregate or a sum equal to one month's Base
Rent in any one year. Notwithstanding the foregoing, Lessee shall not make or
permit any roof penetrations and/or install anything on the roof without the
prior written approval of Lessor. Lessor may, as a precondition to granting such
approval, require Lessee to utilize a contractor chosen and/or approved by
Lessor. Any Alterations or Utility Installations that Lessee shall desire to
make and which require the consent of the Lessor shall be presented to Lessor in
written form with detailed plans. Consent shall be deemed conditioned upon
Lessee's: (i) acquiring all applicable governmental permits, (ii) furnishing
Lessor with copies of both the permits and the plans and specifications prior to
commencement of the work, and (iii) compliance with all conditions of said
permits and other Applicable Requirements in a prompt and expeditious manner.
Any Alterations or Utility Installations shall be performed in a workmanlike
manner with good and sufficient materials. Lessee shall promptly upon completion
furnish Lessor with as-built plans and specifications.

(c)           Liens; Bonds. Lessee shall pay, when due, all claims for labor or
materials furnished or alleged to have been furnished to or for Lessee at or for
use on the Premises, which claims are or may be secured by any mechanic's or
material man’s lien against the Premises or any interest therein. Lessee shall
give Lessor not less than 10 days notice prior to the commencement of any work
in, on or about the Premises, and Lessor shall have the right to post notices of
non-responsibility. If Lessee shall contest the validity of any such lien, claim
or demand, then Lessee shall, at its sole expense defend and protect itself,
Lessor and the Premises against the same and shall pay and satisfy any such
adverse judgment that may be rendered thereon before the enforcement thereof. If
Lessor shall require, Lessee shall furnish a surety bond in an amount equal to
150% of the amount of such contested lien, claim or demand, indemnifying Lessor
against liability for the same. If Lessor elects to participate in any such
action, Lessee shall pay Lessor's attorneys' fees and costs.

7.4          Ownership; Removal; Surrender; and Restoration.

(a)           Ownership. Subject to Lessor's right to require removal or elect
ownership as hereinafter provided, all Alterations and Utility Installations
made by Lessee shall be the property of Lessee, but considered a part of the
Premises. Lessor may, at any time, elect in writing to be the owner of all or
any specified part of the Lessee Owned Alterations and Utility Installations.
Unless otherwise instructed per paragraph 7.4(b) hereof, all Lessee Owned
Alterations and Utility Installations shall, at the expiration or termination of
this Lease, become the property of Lessor and be surrendered by Lessee with the
Premises.

(b)          Removal. By delivery to Lessee of written notice from Lessor at the
time Lessor consents to the installation of such Lessee Owned Alterations and
Utility Installations pursuant to Paragraph 7.3(b) above. Lessor may require
that any or all Lessee Owned Alterations or Utility Installations be removed by
the expiration or termination of this Lease. Lessor may require the removal at
any time of all or any part of any Lessee Owned Alterations or Utility
Installations made without the required consent.

(c)           Surrender; Restoration. Lessee shall surrender the Premises by the
Expiration Date or any earlier termination date, with all of the improvements,
parts and surfaces thereof broom clean and free of debris, and in good operating
order, condition and state of repair, ordinary wear and tear excepted. "Ordinary
wear and tear" shall not include any damage or deterioration that would have
been prevented by good maintenance practice. Notwithstanding the foregoing, if
this Lease is for 12 months or less, then Lessee shall surrender the Premises in
the same condition as delivered to Lessee on the Start Date with NO allowance
for ordinary wear and tear. Lessee shall repair any damage occasioned by the
installation, maintenance or removal of Trade Fixtures, Lessee owned Alterations
and/or Utility Installations, furnishings, and equipment as well as the removal
of any storage tank installed by or for Lessee. Lessee shall also completely
remove from the Premises any and all Hazardous Substances brought onto the
Premises by or for Lessee, or any third party under Lessee's direction or
control (except Hazardous Substances which were deposited via underground
migration from areas outside of the Project) even if such removal would require
Lessee to perform or pay for work that exceeds statutory requirements. Trade
Fixtures shall remain the property of Lessee and shall be removed by Lessee. Any
personal property of Lessee not removed on or before the Expiration Date or any
earlier termination date shall be deemed to have been abandoned by Lessee and
may be disposed of or retained by Lessor as Lessor may desire. The failure by
Lessee to timely vacate the Premises pursuant to this Paragraph 7.4(c) without
the express written consent of Lessor shall constitute a holdover under the
provisions of Paragraph 26 below. 

 

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8.          Insurance; Indemnity.

8.1          Payment of Premiums. The cost of the premiums for the insurance
policies required to be carried by Lessor, pursuant to Paragraphs 8.2(b), 8.3(a)
and 8.3(b), shall be a Common Area Operating Expense. Premiums for policy
periods commencing prior to, or extending beyond, the term of this Lease shall
be prorated to coincide with the corresponding Start Date or Expiration Date.

8.2          Liability Insurance.

(a)           Carried by Lessee. Lessee shall obtain and keep in force a
Commercial General Liability policy of insurance protecting Lessee and Lessor as
an additional insured against claims for bodily injury, personal injury and
property damage based upon or arising out of the ownership, use, occupancy or
maintenance of the Premises and all areas appurtenant thereto. Such insurance
shall be on an occurrence basis providing single limit coverage in an amount not
less than $1,000,000 per occurrence with an annual aggregate of not less than
$5,000,000 or an umbrella policy of not less than $5,000,000. Lessee shall add
Lessor as an additional insured by means of an endorsement at least as broad as
the Insurance Service Organization's "Additional Insured-Managers or Lessors of
Premises" Endorsement. The policy shall not contain any intra-insured exclusions
as between insured persons or organizations, but shall include coverage for
liability assumed under this Lease as an "insured contract" for the performance
of Lessee's indemnity obligations under this Lease. The limits of said insurance
shall not, however, limit the liability of Lessee nor relieve Lessee of any
obligation hereunder. Lessee shall provide an endorsement on its liability
policy(ies) which provides that its insurance shall be primary to and not
contributory with any similar insurance carried by Lessor, whose insurance shall
be considered excess insurance only.

(b)            Carried by Lessor. Lessor shall maintain liability insurance as
described in Paragraph 8.2(a), in addition to, and not in lieu of, the insurance
required to be maintained by Lessee. Lessee shall not be named as an additional
insured therein.

8.3           Property Insurance - Building, Improvements and Rental Value.

(a)            Building and Improvements. Lessor shall obtain and keep in force
a policy or policies of insurance in the name of Lessor, with loss payable to
Lessor, any ground-lessor, and to any Lender insuring loss or damage to the
Premises. The amount of such insurance shall be equal to the full insurable
replacement cost of the Premises, as the same shall exist from time to time, or
the amount required by any Lender, but in no event more than the commercially
reasonable and available insurable value thereof. Lessee Owned Alterations and
Utility Installations, Trade Fixtures, and Lessee's personal property shall be
insured by Lessee not by Lessor. If the coverage is available and commercially
appropriate, such policy or policies shall insure against all risks of direct
physical loss or damage (except the perils of flood and/or earthquake unless
required by a Lender), including coverage for debris removal and the enforcement
of any Applicable Requirements requiring the upgrading, demolition,
reconstruction or replacement of any portion of the Premises as the result of a
covered loss. Said policy or policies shall also contain an agreed valuation
provision in lieu of any coinsurance clause, waiver of subrogation, and
inflation guard protection causing an increase in the annual property insurance
coverage amount by a factor of not less than the adjusted U.S. Department of
Labor Consumer Price Index for All Urban Consumers for the city nearest to where
the Premises are located. If such insurance coverage has a deductible clause,
the deductible amount shall not exceed $5,000 per occurrence.

(b)          Rental Value. Lessor shall also obtain and keep in force a policy
or policies in the name of Lessor with loss payable to Lessor and any Lender,
insuring the loss of the full Rent for one year with an extended period of
indemnity for an additional 180 days ("Rental Value insurance"). Said insurance
shall contain an agreed valuation provision in lieu of any coinsurance clause,
and the amount of coverage shall be adjusted annually to reflect the projected
Rent otherwise payable by Lessee, for the next 12 month period.

(c)           Adjacent Premises. Lessee shall pay for any increase in the
premiums for the property insurance of the Building and for the Common Areas or
other buildings in the Project if said increase is caused by Lessee's acts,
omissions, use or occupancy of the Premises.

(d)           Lessee's Improvements. Since Lessor is the Insuring Party, Lessor
shall not be required to insure Lessee Owned Alterations and Utility
Installations unless the item in question has become the property of Lessor
under the terms of this Lease.

8.4           Lessee's Property; Business Interruption Insurance; Worker's
Compensation Insurance.

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

(b)            Business Interruption. Lessee shall obtain and maintain loss of
income and extra expense insurance as would be offered in a standard commercial
property policy. The coverage would activate and claim be pursued when loss is
caused by a covered peril.

(c)            Worker's Compensation Insurance. Lessee shall obtain and maintain
Worker’s Compensation Insurance in such amount as may be required by Applicable
Requirements.

(d)           No Representation of Adequate Coverage. Lessor makes no
representation that the limits or forms of coverage of insurance specified
herein are adequate to cover Lessee's property, business operations or
obligations under this Lease.

8.5          Insurance Policies. Insurance required herein shall be by companies
maintaining during the policy term a "General Policyholders Rating" of at least
A-, VII, as set forth in the most current issue of "Best's Insurance Guide", or
such other rating as may be required by a Lender. Lessee shall not do or permit
to be done anything which invalidates the required insurance policies. Lessee
shall, prior to the Start Date, deliver to Lessor certificates with copies of
the required endorsements evidencing the existence and amounts of the required
insurance. Lessee shall, at least 10 days prior to the expiration of such
policies, furnish Lessor with evidence of renewals or "insurance binders"
evidencing renewal thereof, or Lessor may order such insurance and charge the
cost thereof to Lessee, which amount shall be payable by Lessee to Lessor upon
demand. Such policies shall be for a term of at least one year, or the length of
the remaining term of this Lease, whichever is less. If either Party shall fail
to procure and maintain the insurance required to be carried by it, the other
Party may, but shall not be required to, procure and maintain the same.

 

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8.6          Waiver of Subrogation. Without affecting any other rights or
remedies, Lessee and Lessor each hereby release and relieve the other, and waive
their entire right to recover damages against the other, for loss of or damage
to its property arising out of or incident to the perils required to be insured
against herein. The effect of such releases and waivers is not limited by the
amount of insurance carried or required or by any deductibles applicable hereto.
The Parties agree to have their respective property damage insurance carriers
waive any right to subrogation that such companies may have against Lessor or
Lessee, as the case may be, so long as the insurance is not invalidated thereby.

8.7          Indemnity. Except for Lessor's gross negligence or willful
misconduct, or that of Lessor's agents or employees, Lessee shall indemnify,
protect, defend and hold harmless the Premises, Lessor and its agents, Lessor's
master or ground lessor, partners and Lenders, from and against any and all
claims, loss of rents and/or damages, liens, judgments, penalties, attorneys'
and consultants' fees, expenses and/or liabilities arising out of, involving, or
in connection with, the use and/or occupancy of the Premises by Lessee. If any
action or proceeding is brought against Lessor by reason of any of the foregoing
matters, Lessee shall upon notice defend the same at Lessee's expense by counsel
reasonably satisfactory to Lessor and Lessor shall cooperate with Lessee in such
defense. Lessor need not have first paid any such claim in order to be defended
or indemnified.

8.8          Exemption of Lessor and its Agents from Liability. Except to the
extent caused by the gross negligence or willful misconduct of Lessor, its
agents or employees, neither Lessor nor its agents shall be liable under any
circumstances for: (i) injury or damage to the person or goods, wares,
merchandise or other property of Lessee, Lessee's employees, contractors,
invitees, customers, or any other person in or about the Premises, whether such
damage or injury is caused by or results from fire, steam, electricity, gas,
water or rain, indoor air quality, the presence of mold or from the breakage,
leakage, obstruction or other defects of pipes, fire sprinklers, wires,
appliances, plumbing, HVAC or lighting fixtures, or from any other cause,
whether the said injury or damage results from conditions arising upon the
Premises or upon other portions of the Building, or from other sources or
places, (ii) any damages arising from any act or neglect of any other tenant of
Lessor or from the failure of Lessor or its agents to enforce the provisions of
any other lease in the Project, or (iii) injury to Lessee's business or for any
loss of income or profit therefrom. Instead, it is intended that Lessee's sole
recourse in the event of such damages or injury be to file a claim on the
insurance policy(ies) that Lessee is required to maintain pursuant to the
provisions of paragraph 8.

8.9          Failure to Provide Insurance. Lessee acknowledges that any failure
on its part to obtain or maintain the insurance required herein will expose
Lessor to risks and potentially cause Lessor to incur costs not contemplated by
this Lease, the extent of which will be extremely difficult to ascertain.
Accordingly, for any month or portion thereof that Lessee does not maintain the
required insurance and/or does not provide Lessor with the required binders or
certificates evidencing the existence of the required insurance, the Base Rent
shall be automatically increased, without any requirement for notice to Lessee,
by an amount equal to 10% of the then existing Base Rent or $100, whichever is
greater. The parties agree that such increase in Base Rent represents fair and
reasonable compensation for the additional risk/costs that Lessor will incur by
reason of Lessee's failure to maintain the required insurance. Such increase in
Base Rent shall in no event constitute a waiver of Lessee's Default or Breach
with respect to the failure to maintain such insurance, prevent the exercise of
any of the other rights and remedies granted hereunder, nor relieve Lessee of
its obligation to maintain the insurance specified in this Lease.

9.           Damage or Destruction.

9.1          Definitions.

(a)            "Premises Partial Damage" shall mean damage or destruction to the
improvements on the Premises, other than Lessee Owned Alterations and Utility
Installations, which can reasonably be repaired in 9 months or less from the
date of the damage or destruction. Lessor shall notify Lessee in writing within
30 days from the date of the damage or destruction as to whether or not the
damage is Partial or Total. Notwithstanding the foregoing, Premises Partial
Damage shall not include damage to windows, doors, and/or other similar items
which Lessee has the responsibility to repair or replace pursuant to the
provisions of Paragraph 7.1.

(b)           "Premises Total Destruction" shall mean damage or destruction to
the improvements on the Premises, other than Lessee Owned Alterations and
Utility Installations and Trade Fixtures, which cannot reasonably be repaired in
9 months or less from the date of the damage or destruction. Lessor shall notify
Lessee in writing within 30 days from the date of the damage or destruction as
to whether or not the damage is Partial or Total.

(c)            "Insured Loss" shall mean damage or destruction to improvements
on the Premises, other than Lessee Owned Alterations and Utility Installations
and Trade Fixtures, which was caused by an event required to be covered by the
insurance described in Paragraph 8.3(a), irrespective of any deductible amounts
or coverage limits involved.

(d)            "Replacement Cost" shall mean the cost to repair or rebuild the
improvements owned by Lessor at the time of the occurrence to their condition
existing immediately prior thereto, including demolition, debris removal and
upgrading required by the operation of Applicable Requirements, and without
deduction for depreciation.

(e)            "Hazardous Substance Condition" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance, in, on, or under the Premises which requires restoration.

9.2          Partial Damage - Insured Loss. If a Premises Partial Damage that is
an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair such
damage (but not Lessee's Trade Fixtures or Lessee Owned Alterations and Utility
Installations) as soon as reasonably possible and this Lease shall continue in
full force and effect; provided, however, that Lessee shall, at Lessor's
election, make the repair of any damage or destruction the total cost to repair
of which is $10,000 or less, and, in such event, Lessor shall make any
applicable insurance proceeds available to Lessee on a reasonable basis for that
purpose. Notwithstanding the foregoing, if the required insurance was not in
force or the insurance proceeds are not sufficient to effect such repair, the
Insuring Party shall promptly contribute the shortage in proceeds as and when
required to complete said repairs. In the event, however, such shortage was due
to the fact that, by reason of the unique nature of the improvements, full
replacement cost insurance coverage was not commercially reasonable and
available, Lessor shall have no obligation to pay for the shortage in insurance
proceeds or to fully restore the unique aspects of the Premises unless Lessee
provides Lessor with the funds to cover same, or adequate assurance thereof,
within 10 days following receipt of written notice of such shortage and request
therefor. If Lessor receives said funds or adequate assurance thereof within
said 10 day period, the party responsible for making the repairs shall complete
them as soon as reasonably possible and this Lease shall remain in full force
and effect. If such funds or assurance are not received, Lessor may nevertheless
elect by written notice to Lessee within 10 days thereafter to: (i) make such
restoration and repair as is commercially reasonable with Lessor paying any
shortage in proceeds, in which case this Lease shall remain in full force and
effect, or (ii) have this Lease terminate 30 days thereafter. Lessee shall not
be entitled to reimbursement of any funds contributed by Lessee to repair any
such damage or destruction. Premises Partial Damage due to flood or earthquake
shall be subject to Paragraph 9.3, notwithstanding that there may be some
insurance coverage, but the net proceeds of any such insurance shall be made
available for the repairs if made by either Party.

 

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9.3           Partial Damage - Uninsured Loss. If a Premises Partial Damage that
is not an Insured Loss occurs, unless caused by a negligent or willful act of
Lessee (in which event Lessee shall make the repairs at Lessee's expense),
Lessor may either: (i) repair such damage as soon as reasonably possible at
Lessor's expense, in which event this Lease shall continue in full force and
effect, or (ii) terminate this Lease by giving written notice to Lessee within
30 days after receipt by Lessor of knowledge of the occurrence of such damage.
Such termination shall be effective 60 days following the date of such notice.
In the event Lessor elects to terminate this Lease, Lessee shall have the right
within 30 days after receipt of the termination notice to give written notice to
Lessor of Lessee's commitment to pay for the repair of such damage without
reimbursement from Lessor. Lessee shall provide Lessor with said funds or
satisfactory assurance thereof within 30 days after making such commitment. In
such event this Lease shall continue in full force and effect, and Lessor shall
proceed to make such repairs as soon as reasonably possible after the required
funds are available. If Lessee does not make the required commitment, this Lease
shall terminate as of the date specified in the termination notice.

9.4          Total Destruction. Notwithstanding any other provision hereof, if a
Premises Total Destruction occurs, this Lease shall terminate 60 days following
such Destruction. If the damage or destruction was caused by the gross
negligence or willful misconduct of Lessee, Lessor shall have the right to
recover Lessor's damages from Lessee, except as provided in Paragraph 8.6.

9.5          Damage Near End of Term. If at any time during the last 9 months of
this Lease there is damage for which the cost to repair exceeds three one
month's Base Rent, whether or not an Insured Loss, either party may terminate
this Lease effective 60 days following the date of occurrence of such damage by
giving a written termination notice to the other party within 30 days after the
date of occurrence of such damage. Notwithstanding the foregoing, if Lessee at
that time has an exercisable option to extend this Lease or to purchase the
Premises, then Lessee may preserve this Lease by, (a) exercising such option and
(b) providing Lessor with any shortage in insurance proceeds (or adequate
assurance thereof) needed to make the repairs on or before the earlier of (i)
the date which is 10 days after Lessee's receipt of Lessor's written notice
purporting to terminate this Lease, or (ii) the day prior to the date upon which
such option expires. If Lessee duly exercises such option during such period and
provides Lessor with funds (or adequate assurance thereof) to cover any shortage
in insurance proceeds, Lessor shall, at Lessor's commercially reasonable
expense, repair such damage as soon as reasonably possible and this Lease shall
continue in full force and effect. If Lessee fails to exercise such option and
provide such funds or assurance during such period, then this Lease shall
terminate on the date specified in the termination notice and Lessee's option
shall be extinguished.

9.6           Abatement of Rent; Lessee's Remedies.

(a)            Abatement. In the event of Premises Partial Damage or Premises
Total Destruction or a Hazardous Substance Condition for which Lessee is not
responsible under this Lease, the Rent payable by Lessee for the period required
for the repair, remediation or restoration of such damage shall be abated in
proportion to the degree to which Lessee's use of the Premises is impaired, All
other obligations of Lessee hereunder shall be performed by Lessee, and Lessor
shall have no liability for any such damage, destruction, remediation, repair or
restoration except as provided herein.

(b)            Remedies. If Lessor is obligated to repair or restore the
Premises and does not commence, in a substantial and meaningful way, such repair
or restoration within 90 days after such obligation shall accrue, or complete
the same within 240 days after obtaining permits, Lessee may, at any time prior
to the commencement of such repair or restoration, give written notice to Lessor
and to any Lenders of which Lessee has actual notice, of Lessee's election to
terminate this Lease on a date not less than 60 days following the giving of
such notice. If Lessee gives such notice and such repair or restoration is not
commenced within 30 days thereafter, this Lease shall terminate as of the date
specified in said notice. If the repair or restoration is commenced within such
30 days, this Lease shall continue in full force and effect. "Commence" shall
mean either the unconditional authorization of the preparation of the required
plans, or the beginning of the actual work on the Premises, whichever first
occurs.

9.7          Termination; Advance Payments. Upon termination of this Lease
pursuant to Paragraph 6.2(g) or Paragraph 9, an equitable adjustment shall be
made concerning advance Base Rent and any other advance payments made by Lessee
to Lessor. Lessor shall, in addition, return to Lessee so much of Lessee's
Security Deposit as has not been, or is not then required to be, used by Lessor.

10.          Real Property Taxes.

10.1        Definition. As used herein, the term "Real Property Taxes" shall
include any form of assessment; real estate, general, special, ordinary or
extraordinary, or rental levy or tax (other than inheritance, personal income or
estate taxes); improvement bond; and/or license fee imposed upon or levied
against any legal or equitable interest of Lessor in the Project, Lessor's right
to other income therefrom, and/or Lessor's business of leasing, by any authority
having the direct or indirect power to tax and where the funds are generated
with reference to the Project address and where the proceeds so generated are to
be applied by the city, county or other local taxing authority of a jurisdiction
within which the Project is located. The term "Real Property Taxes" shall also
include any tax, fee, levy, assessment or charge, or any increase therein: (i)
imposed by reason of events occurring during the term of this Lease, including
but not limited to, a change in the ownership of the Project, (ii) a change in
the improvements thereon, and/or (iii) levied or assessed on machinery or
equipment provided by Lessor to Lessee pursuant to this Lease. In calculating
Real Property Taxes for any calendar year, the Real Property Taxes for any real
estate tax year shall be included in the calculation of Real Property Taxes for
such calendar year based upon the number of days which such calendar year and
tax year have in common.

10.2        Payment of Taxes. Except as otherwise provided in Paragraph 10.3,
Lessor shall pay the Real Property Taxes applicable to the Project and said
payments shall be included in the calculation of Common Area Operating Expenses
in accordance with the provisions of Paragraph 4.2.

10.3        Additional Improvements. Common Area Operating Expenses shall not
include Real Property Taxes specified in the tax assessor's records and work
sheets as being caused by additional improvements placed upon the Project by
other lessees or by Lessor for the exclusive enjoyment of such other lessees.
Notwithstanding Paragraph 10.2 hereof, Lessee shall, however, pay to Lessor at
the time Common Area Operating Expenses are payable under Paragraph 4.2, the
entirety of any increase in Real Property Taxes if assessed solely by reason of
Alterations, Trade Fixtures or Utility Installations placed upon the Premises by
Lessee or at Lessee's request or by reason of any alterations or improvements to
the Premises made by Lessor subsequent to the execution of this Lease by the
Parties.

10.4        Joint Assessment. If the Building is not separately assessed, Real
Property Taxes allocated to the Building shall be an equitable proportion of the
Real Property Taxes for all of the land and improvements included within the tax
parcel assessed, such proportion to be determined by Lessor from the respective
valuations assigned in the assessor's work sheets or such other information as
may be reasonably available. Lessor's reasonable determination thereof, in good
faith, shall be conclusive.

10.5        Personal Property Taxes. Lessee shall pay prior to delinquency all
taxes assessed against and levied upon Lessee Owned Alterations and Utility
Installations, Trade Fixtures, furnishings, equipment and all personal property
of Lessee contained in the Premises. When possible, Lessee shall cause its
Lessee Owned Alterations and Utility Installations, Trade Fixtures, furnishings,
equipment and all other personal property to be assessed and billed separately
from the real property of Lessor. If any of Lessee's said property shall be
assessed with Lessor's real property, Lessee shall pay Lessor the taxes
attributable to Lessee's property within 10 days after receipt of a written
statement setting forth the taxes applicable to Lessee's property. 

 

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11.          Utilities and Services. Lessee shall pay for all water, gas, heat,
light, power, telephone, trash disposal and other utilities and services
supplied to the Premises, together with any taxes thereon. Notwithstanding the
provisions of Paragraph 4.2, if at any time in Lessor's reasonable judgment,
Lessor determines that Lessee is using a disproportionate amount of water,
electricity or other commonly metered utilities, or that Lessee is generating
such a large volume of trash as to require an increase in the size of the trash
receptacle and/or an increase in the number of times per month that it is
emptied, then Lessor may increase Lessee's Base Rent by an amount equal to such
increased costs. There shall be no abatement of Rent and Lessor shall not be
liable in any respect whatsoever for the inadequacy, stoppage, interruption or
discontinuance of any utility or service due to riot, strike, labor dispute,
breakdown, accident, repair or other cause beyond Lessor's reasonable control or
in cooperation with governmental request or directions.

12.          Assignment and Subletting.

12.1        Lessor's Consent Required.

(a)           Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or encumber (collectively, "assign or assignment") or sublet
all or any part of Lessee's interest in this Lease or in the Premises without
Lessor's prior written consent.

(b)           Unless Lessee is a corporation and its stock is publicly traded on
a national stock exchange, a change in the control of Lessee shall constitute an
assignment requiring consent. The transfer, on a cumulative basis, of 50% or
more of the voting control of Lessee shall constitute a change in control for
this purpose.

(c)           The involvement of Lessee or its assets in any transaction, or
series of transactions (by way of merger, sale, acquisition, financing,
transfer, leveraged buy-out or otherwise), whether or not a formal assignment or
hypothecation of this Lease or Lessee's assets occurs, which results or will
result in a reduction of the Net Worth of Lessee by an amount greater than 25%
of such Net Worth as it was represented at the time of the execution of this
Lease or at the time of the most recent assignment to which Lessor has
consented, or as it exists immediately prior to said transaction or transactions
constituting such reduction, whichever was or is greater, shall be considered an
assignment of this Lease to which Lessor may withhold its consent. "Net Worth of
Lessee" shall mean the net worth of Lessee (excluding any guarantors)
established under generally accepted accounting principles.

(d)           Other than a Permitted Transfer as set forth in the Addendum, an
assignment or subletting without consent shall, at Lessor's option, be a Default
curable after notice per Paragraph 13.1(c), or a noncurable Breach without the
necessity of any notice and grace period. If Lessor elects to treat such
unapproved assignment or subletting as a noncurable Breach, Lessor may either:
(i) terminate this Lease, or (ii) upon 30 days written notice, increase the
monthly Base Rent to 110% of the Base Rent then in effect. Further, in the event
of such Breach and rental adjustment, (i) the purchase price of any option to
purchase the Premises held by Lessee shall be subject to similar adjustment to
110% of the price previously in effect, and (ii) all fixed and non-fixed rental
adjustments scheduled during the remainder of the Lease term shall be increased
to 110% of the scheduled adjusted rent.

(e)           Lessee's remedy for any breach of Paragraph 12.1 by Lessor shall
be limited to compensatory damages and/or injunctive relief.

(f)            Lessor may reasonably withhold consent to a proposed assignment
or subletting if Lessee is in Default at the time consent is requested.

(g)          Notwithstanding the foregoing, allowing a de minimis portion of the
Premises, ie. 20 square feet or less, to be used by a third party vendor in
connection with the installation of a vending machine or payphone shall not
constitute a subletting.

12.2        Terms and Conditions Applicable to Assignment and Subletting.

(a)           Regardless of Lessor's consent, no assignment or subletting shall:
(i) be effective without the express written assumption by such assignee or
sublessee of the obligations of Lessee under this Lease, (ii) release Lessee of
any obligations hereunder, or (iii) alter the primary liability of Lessee for
the payment of Rent or for the performance of any other obligations to be
performed by Lessee.

(b)           Lessor may accept Rent or performance of Lessee's obligations from
any person other than Lessee pending approval or disapproval of an assignment.
Neither a delay in the approval or disapproval of such assignment nor the
acceptance of Rent or performance shall constitute a waiver or estoppel of
Lessor's right to exercise its remedies for Lessee's Default or Breach.

(c)           Lessor's consent to any assignment or subletting shall not
constitute consent to any subsequent assignment or subletting.

(d)          In the event of any Default or Breach by Lessee, Lessor may proceed
directly against Lessee, any Guarantors or anyone else responsible for the
performance of Lessee's obligations under this Lease, including any assignee or
sublessee, without first exhausting Lessor's remedies against any other person
or entity responsible therefore to Lessor, or any security held by Lessor.

(e)           Each request for consent to an assignment or subletting shall be
in writing, accompanied by information relevant to Lessor's determination as to
the financial and operational responsibility and appropriateness of the proposed
assignee or sublessee, including but not limited to the intended use and/or
required modification of the Premises, if any, together with a fee of $500 as
consideration for Lessor's considering and processing said request. Lessee
agrees to provide Lessor with such other or additional information and/or
documentation as may be reasonably requested. (See also Paragraph 36)

(f)           Any assignee of, or sublessee under, this Lease shall, by reason
of accepting such assignment, entering into such sublease, or entering into
possession of the Premises or any portion thereof, be deemed to have assumed and
agreed to conform and comply with each and every term, covenant, condition and
obligation herein to be observed or performed by Lessee during the term of said
assignment or sublease, other than such obligations as are contrary to or
inconsistent with provisions of an assignment or sublease to which Lessor has
specifically consented to in writing.

(g)           Lessor's consent to any assignment or subletting shall not
transfer to the assignee or sublessee any Option granted to the original Lessee
by this Lease unless such transfer is specifically consented to by Lessor in
writing. (See Paragraph 39.2)

12.3      Additional Terms and Conditions Applicable to Subletting. The
following terms and conditions shall apply to any subletting by Lessee of all or
any part of the Premises and shall be deemed included in all subleases under
this Lease whether or not expressly incorporated therein:

(a)           Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all Rent payable on any sublease, and Lessor may collect such Rent
and apply same toward Lessee's obligations under this Lease; provided, however,
that until a Breach shall occur in the performance of Lessee's obligations,
Lessee may collect said Rent. In the event that the amount collected by Lessor
exceeds Lessee's then outstanding obligations any such excess shall be refunded
to Lessee. Lessor shall not, by reason of the foregoing or any assignment of
such sublease, nor by reason of the collection of Rent, be deemed liable to the
sublessee for any failure of Lessee to perform and comply with any of Lessee's
obligations to such sublessee. Lessee hereby irrevocably authorizes and directs
any such sublessee, upon receipt of a written notice from Lessor stating that a
Breach exists in the performance of Lessee's obligations under this Lease, to
pay to Lessor all Rent due and to become due under the sublease. Sublessee shall
rely upon any such notice from Lessor and shall pay all Rents to Lessor without
any obligation or right to inquire as to whether such Breach exists,
notwithstanding any claim from Lessee to the contrary.

 

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(b)           In the event of a Breach by Lessee, Lessor may, at its option,
require sublessee to attorn to Lessor, in which event Lessor shall undertake the
obligations of the sublessor under such sublease from the time of the exercise
of said option to the expiration of such sublease; provided, however, Lessor
shall not be liable for any prepaid rents or security deposit paid by such
sublessee to such sublessor or for any prior Defaults or Breaches of such
sublessor.

(c)           Any matter requiring the consent of the sublessor under a sublease
shall also require the consent of Lessor.

(d)           No sublessee shall further assign or sublet all or any part of the
Premises without Lessor's prior written consent.

(e)           Lessor shall deliver a copy of any notice of Default or Breach by
Lessee to the sublessee, who shall have the right to cure the Default of Lessee
within the grace period, if any, specified in such notice. The sublessee shall
have a right of reimbursement and offset from and against Lessee for any such
Defaults cured by the sublessee.

13.          Default; Breach; Remedies.

13.1        Default; Breach. A "Default" is defined as a failure by the Lessee
to comply with or perform any of the terms, covenants, conditions or Rules and
Regulations under this Lease. A "Breach" is defined as the occurrence of one or
more of the following Defaults, and the failure of Lessee to cure such Default
within any applicable grace period:

(a)           

(b)           The failure of Lessee to make any payment of Rent or any Security
Deposit required to be made by Lessee hereunder, whether to Lessor or to a third
party, when due, to provide reasonable evidence of insurance or surety bond, or
to fulfill any obligation under this Lease which endangers or threatens life or
property, where such failure continues for a period of 3 business days following
written notice to Lessee. THE ACCEPTANCE BY LESSOR OF A PARTIAL PAYMENT OF RENT
OR SECURITY DEPOSIT SHALL NOT CONSTITUTE A WAIVER OF ANY OF LESSOR'S RIGHTS,
INCLUDING LESSOR'S RIGHT TO RECOVER POSSESSION OF THE PREMISES.

(c)           The failure of Lessee to allow Lessor and/or its agents access to
the Premises or the commission of waste, act or acts constituting public or
private nuisance, and/or an illegal activity on the Premises by Lessee, where
such actions continue for a period of 5 days following written notice to Lessee.

(d)           The failure by Lessee to provide (i) reasonable written evidence
of compliance with Applicable Requirements, (ii) the service contracts, (iii)
the rescission of an unauthorized assignment or subletting, (iv) an Estoppel
Certificate or financial statements, (v) a requested subordination, (vi)
evidence concerning any guaranty and/or Guarantor, (vii) any document requested
under Paragraph 41, (viii) material data safety sheets (MSDS), or (ix) any other
documentation or information which Lessor may reasonably require of Lessee under
the terms of this Lease, where any such failure continues for a period of 10
days following written notice to Lessee.

(e)           A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 2.9 hereof,
other than those described in subparagraphs 13.1(a), (b), (c) or (d), above,
where such Default continues for a period of 30 days after written notice;
provided, however, that if the nature of Lessee's Default is such that more than
30 days are reasonably required for its cure, then it shall not be deemed to be
a Breach if Lessee commences such cure within said 30 day period and thereafter
diligently prosecutes such cure to completion.

(f)           The occurrence of any of the following events: (i) the making of
any general arrangement or assignment for the benefit of creditors; (ii)
becoming a "debtor" as defined in 11 U.S.C. § 101 or any successor statute
thereto (unless, in the case of a petition filed against Lessee, the same is
dismissed within 60 days); (iii) the appointment of a trustee or receiver to
take possession of substantially all of Lessee's assets located at the Premises
or of Lessee's interest in this Lease, where possession is not restored to
Lessee within 30 days; or (iv) the attachment, execution or other judicial
seizure of substantially all of Lessee's assets located at the Premises or of
Lessee's interest in this Lease, where such seizure is not discharged within 30
days; provided, however, in the event that any provision of this subparagraph is
contrary to any applicable law, such provision shall be of no force or effect,
and not affect the validity of the remaining provisions.

(g)           The discovery that any financial statement of Lessee or of any
Guarantor given to Lessor was knowingly and materially false.

(h)           If the performance of Lessee's obligations under this Lease is
guaranteed: (i) the death of a Guarantor, (ii) the termination of a Guarantor's
liability with respect to this Lease other than in accordance with the terms of
such guaranty, (iii) a Guarantor's becoming insolvent or the subject of a
bankruptcy filing, (iv) a Guarantor's refusal to honor the guaranty, or (v) a
Guarantor's breach of its guaranty obligation on an anticipatory basis, and
Lessee's failure, within 60 days following written notice of any such event, to
provide written alternative assurance or security, which, when coupled with the
then existing resources of Lessee, equals or exceeds the combined financial
resources of Lessee and the Guarantors that existed at the time of execution of
this Lease.

13.2         Remedies. If Lessee fails to perform any of its affirmative duties
or obligations, within 10 days after written notice (or in case of an emergency,
without notice), Lessor may, at its option, perform such duty or obligation on
Lessee's behalf, including but not limited to the obtaining of reasonably
required bonds, insurance policies, or governmental licenses, permits or
approvals. Lessee shall pay to Lessor an amount equal to 115% of the costs and
expenses incurred by Lessor in such performance upon receipt of an invoice
therefor. In the event of a Breach, Lessor may, with or without further notice
or demand, and without limiting Lessor in the exercise of any right or remedy
which Lessor may have by reason of such Breach:

 

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(a)           Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease shall terminate and Lessee shall
immediately surrender possession to Lessor. In such event Lessor shall be
entitled to recover from Lessee: (i) the unpaid Rent which had been earned at
the time of termination; (ii) the worth at the time of award of the amount by
which the unpaid rent which would have been earned after termination until the
time of award exceeds the amount of such rental loss that the Lessee proves
could have been reasonably avoided; (iii) the worth at the time of award of the
amount by which the unpaid rent for the balance of the term after the time of
award exceeds the amount of such rental loss that the Lessee proves could be
reasonably avoided; and (iv) any other amount necessary to compensate Lessor for
all the detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things would be
likely to result therefrom, including but not limited to the cost of recovering
possession of the Premises, expenses of reletting, including necessary
renovation and alteration of the Premises, reasonable attorneys' fees, and that
portion of any leasing commission paid by Lessor in connection with this Lease
applicable to the unexpired term of this Lease. The worth at the time of award
of the amount referred to in provision (iii) of the immediately preceding
sentence shall be computed by discounting such amount at the discount rate of
the Federal Reserve Bank of the District within which the Premises are located
at the time of award plus one percent. Efforts by Lessor to mitigate damages
caused by Lessee's Breach of this Lease shall not waive Lessor's right to
recover damages under Paragraph 12. If termination of this Lease is obtained
through the provisional remedy of unlawful detainer, Lessor shall have the right
to recover in such proceeding any unpaid Rent and damages as are recoverable
therein, or Lessor may reserve the right to recover all or any part thereof in a
separate suit. If a notice and grace period required under Paragraph 13.1 was
not previously given, a notice to pay rent or quit, or to perform or quit given
to Lessee under the unlawful detainer statute shall also constitute the notice
required by Paragraph 13.1. In such case, the applicable grace period required
by Paragraph 13.1 and the unlawful detainer statute shall run concurrently, and
the failure of Lessee to cure the Default within the greater of the two such
grace periods shall constitute both an unlawful detainer and a Breach of this
Lease entitling Lessor to the remedies provided for in this Lease and/or by said
statute.

(b)          Continue the Lease and Lessee's right to possession and recover the
Rent as it becomes due, in which event Lessee may sublet or assign, subject only
to reasonable limitations. Acts of maintenance, efforts to relet, and/or the
appointment of a receiver to protect the Lessor's interests, shall not
constitute a termination of the Lessee's right to possession.

(c)           Pursue any other remedy now or hereafter available under the laws
or judicial decisions of the state wherein the Premises are located. The
expiration or termination of this Lease and/or the termination of Lessee's right
to possession shall not relieve Lessee from liability under any indemnity
provisions of this Lease as to matters occurring or accruing during the term
hereof or by reason of Lessee's occupancy of the Premises.

13.3        Inducement Recapture. Any agreement for free or abated rent or other
charges, tenant improvement allowance, or for the giving or paying by Lessor to
or for Lessee of any cash or other bonus, inducement or consideration for
Lessee's entering into this Lease, all of which concessions are hereinafter
referred to as "Inducement Provisions", shall be deemed conditioned upon
Lessee's full and faithful performance of all of the terms, covenants and
conditions of this Lease. Upon Breach of this Lease by Lessee, any unused or
unpaid Inducement Provision shall automatically be deemed deleted from this
Lease and of no further force or effect, and the unamortized portion as
amortized over the term of the Lease of any rent, other charge, bonus,
inducement or consideration theretofore abated, given or paid by Lessor under
such an Inducement Provision shall be immediately due and payable by Lessee to
Lessor, notwithstanding any subsequent cure of said Breach by Lessee. The
acceptance by Lessor of rent or the cure of the Breach which initiated the
operation of this paragraph shall not be deemed a waiver by Lessor of the
provisions of this paragraph unless specifically so stated in writing by Lessor
at the time of such acceptance.

13.4        Late Charges. Lessee hereby acknowledges that late payment by Lessee
of Rent will cause Lessor to incur costs not contemplated by this Lease, the
exact amount of which will be extremely difficult to ascertain. Such costs
include, but are not limited to, processing and accounting charges, and late
charges which may be imposed upon Lessor by any Lender. Accordingly, if any Rent
shall not be received by Lessor within 5 days after such amount shall be due,
then, without any requirement for notice to Lessee, Lessee shall immediately pay
to Lessor a one-time late charge equal to 5% of each such overdue amount or
$100, whichever is greater. The parties hereby agree that such late charge
represents a fair and reasonable estimate of the costs Lessor will incur by
reason of such late payment. Acceptance of such late charge by Lessor shall in
no event constitute a waiver of Lessee's Default or Breach with respect to such
overdue amount, nor prevent the exercise of any of the other rights and remedies
granted hereunder. In the event that a late charge is payable hereunder, whether
or not collected, for 3 consecutive installments of Base Rent, then
notwithstanding any provision of this Lease to the contrary, Base Rent shall, at
Lessor's option, become due and payable quarterly in advance.

13.5        Interest. Any monetary payment due Lessor hereunder, other than late
charges, not received by Lessor, when due as to scheduled payments (such as Base
Rent) or within 30 days following the date on which it was due for non-scheduled
payment, shall bear interest from the date 5 days after the date due, as to
scheduled payments, or the 31st day after it was due as to non-scheduled
payments. The interest ("Interest") charged shall be computed at the rate of 10%
per annum but shall not exceed the maximum rate allowed by law. Interest is
payable in addition to the potential late charge provided for in Paragraph 13.4.

13.6        Breach by Lessor.

(a)          Notice of Breach. Lessor shall not be deemed in breach of this
Lease unless Lessor fails within a reasonable time to perform an obligation
required to be performed by Lessor. For purposes of this Paragraph, a reasonable
time shall in no event be less than 30 days after receipt by Lessor, and any
Lender whose name and address shall have been furnished Lessee in writing for
such purpose, of written notice specifying wherein such obligation of Lessor has
not been performed; provided, however, that if the nature of Lessor's obligation
is such that more than 30 days are reasonably required for its performance, then
Lessor shall not be in breach if performance is commenced within such 30 day
period and thereafter diligently pursued to completion.

(b)          Performance by Lessee on Behalf of Lessor. In the event that
neither Lessor nor Lender cures said breach within 30 days after receipt of said
notice, or if having commenced said cure they do not diligently pursue it to
completion, then Lessee may elect to cure said breach at Lessee's expense and
offset from Rent the actual and reasonable cost to perform such cure, provided
however, that such offset shall not exceed an amount equal to two month's Base
Rent, reserving Lessee's right to reimbursement from Lessor for any such expense
in excess of such offset. Lessee shall document the cost of said cure and supply
said documentation to Lessor prior to any offset.

14.        Condemnation. If the Premises or any portion thereof are taken under
the power of eminent domain or sold under the threat of the exercise of said
power (collectively "Condemnation"), this Lease shall terminate as to the part
taken as of the date the condemning authority takes title or possession,
whichever first occurs. If more than 10% of the floor area of the Unit, or more
than 25% of the parking spaces is taken by Condemnation, Lessee may, at Lessee's
option, to be exercised in writing within 10 days after Lessor shall have given
Lessee written notice of such taking (or in the absence of such notice, within
10 days after the condemning authority shall have taken possession) terminate
this Lease as of the date the condemning authority takes such possession. If
Lessee does not terminate this Lease in accordance with the foregoing, this
Lease shall remain in full force and effect as to the portion of the Premises
remaining, except that the Base Rent shall be reduced in proportion to the
reduction in utility of the Premises caused by such Condemnation. Condemnation
awards and/or payments shall be the property of Lessor, whether such award shall
be made as compensation for diminution in value of the leasehold, the value of
the part taken, or for severance damages; provided, however, that Lessee shall
be entitled to any compensation paid by the condemnor for Lessee's relocation
expenses, loss of business goodwill and/or Trade Fixtures, without regard to
whether or not this Lease is terminated pursuant to the provisions of this
Paragraph. All Alterations and Utility Installations made to the Premises by
Lessee, for purposes of Condemnation only, shall be considered the property of
the Lessee and Lessee shall be entitled to any and all compensation which is
payable therefor. In the event that this Lease is not terminated by reason of
the Condemnation, Lessor shall repair any damage to the Premises caused by such
Condemnation.

 

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15.          Brokerage Fees.

15.1

15.2

15.3          Representations and Indemnities of Broker Relationships. Lessee
and Lessor each represent and warrant to the other that it has had no dealings
with any person, firm, broker or finder (other than the Brokers, if any) in
connection with this Lease, and that no one other than said named Brokers is
entitled to any commission or finder's fee in connection herewith. Lessee and
Lessor do each hereby agree to indemnify, protect, defend and hold the other
harmless from and against liability for compensation or charges which may be
claimed by any such unnamed broker, finder or other similar party by reason of
any dealings or actions of the indemnifying Party, including any costs,
expenses, attorneys' fees reasonably incurred with respect thereto.

16.         Estoppel Certificates.

(a)          Each Party (as "Responding Party") shall within 10 days after
written notice from the other Party (the "Requesting Party") execute,
acknowledge and deliver to the Requesting Party a statement in writing in form
similar to the then most current "Estoppel Certificate" form published by the
AIR Commercial Real Estate Association, plus such additional information,
confirmation and/or statements as may be reasonably requested by the Requesting
Party.

(b)          If the Responding Party shall fail to execute or deliver the
Estoppel Certificate within such 10 day period, the Requesting Party may execute
an Estoppel Certificate stating that: (i) the Lease is in full force and effect
without modification except as may be represented by the Requesting Party, (ii)
there are no uncured defaults in the Requesting Party's performance, and (iii)
if Lessor is the Requesting Party, not more than one month's rent has been paid
in advance. Prospective purchasers and encumbrancers may rely upon the
Requesting Party's Estoppel Certificate, and the Responding Party shall be
estopped from denying the truth of the facts contained in said Certificate.

(c)          If Lessor desires to finance, refinance, or sell the Premises, or
any part thereof, Lessee shall within 15 days after written notice from Lessor
deliver to any potential lender or purchaser designated by Lessor such recent
financial statements as may be reasonably required by such lender or purchaser,
including but not limited to Lessee's most recently prepared financial
statements. All such financial statements shall be received by Lessor and such
lender or purchaser in confidence, shall be used only for the purposes herein
set forth and upon the request of Lessee such parties shall sign a commercially
reasonable non-disclosure agreement regarding such financials.

17.         Definition of Lessor. The term "Lessor" as used herein shall mean
the owner or owners at the time in question of the fee title to the Premises,
or, if this is a sublease, of the Lessee's interest in the prior lease. In the
event of a transfer of Lessor's title or interest in the Premises or this Lease,
Lessor shall deliver to the transferee or assignee (in cash or by credit) any
unused Security Deposit held by Lessor. Upon such transfer or assignment and
delivery of the Security Deposit, as aforesaid, the prior Lessor shall be
relieved of all liability with respect to the obligations and/or covenants under
this Lease thereafter to be performed by the Lessor. Subject to the foregoing,
the obligations and/or covenants in this Lease to be performed by the Lessor
shall be binding only upon the Lessor as hereinabove defined.

18.         Severability. The invalidity of any provision of this Lease, as
determined by a court of competent jurisdiction, shall in no way affect the
validity of any other provision hereof.

19.         Days. Unless otherwise specifically indicated to the contrary, the
word "days" as used in this Lease shall mean and refer to calendar days.

20.         Limitation on Liability. The obligations of Lessor under this Lease
shall not constitute personal obligations of Lessor, or its partners, members,
directors, officers or shareholders, and Lessee shall look to the Premises, and
to no other assets of Lessor, for the satisfaction of any liability of Lessor
with respect to this Lease, and shall not seek recourse against Lessor's
partners, members, directors, officers or shareholders, or any of their personal
assets for such satisfaction.

21.         Time of Essence. Time is of the essence with respect to the
performance of all obligations to be performed or observed by the Parties under
this Lease.

22.         No Prior or Other Agreements; Broker Disclaimer. This Lease contains
all agreements between the Parties with respect to any matter mentioned herein,
and no other prior or contemporaneous agreement or understanding shall be
effective. Lessor and Lessee each represents and warrants to the Brokers that it
has made, and is relying solely upon, its own investigation as to the nature,
quality, character and financial responsibility of the other Party to this Lease
and as to the use, nature, quality and character of the Premises. Brokers have
no responsibility with respect thereto or with respect to any default or breach
hereof by either Party.

23.         Notices.

23.1          Notice Requirements. All notices required or permitted by this
Lease or applicable law shall be in writing and may be delivered in person (by
hand or by courier) or may be sent by regular, certified or registered mail or
U.S. Postal Service Express Mail, with postage prepaid, or by facsimile
transmission, and shall be deemed sufficiently given if served in a manner
specified in this Paragraph 23. The addresses noted adjacent to a Party's
signature on this Lease shall be that Party's address for delivery or mailing of
notices. Either Party may by written notice to the other specify a different
address for notice, except that upon Lessee's taking possession of the Premises,
the Premises shall constitute Lessee's address for notice. A copy of all notices
to Lessor shall be concurrently transmitted to such party or parties at such
addresses as Lessor may from time to time hereafter designate in writing.

23.2          Date of Notice. Any notice sent by registered or certified mail,
return receipt requested, shall be deemed given on the date of delivery shown on
the receipt card, or if no delivery date is shown, the postmark thereon. If sent
by regular mail the notice shall be deemed given 72 hours after the same is
addressed as required herein and mailed with postage prepaid. Notices delivered
by United States Express Mail or overnight courier that guarantees next day
delivery shall be deemed given 24 hours after delivery of the same to the Postal
Service or courier. Notices transmitted by facsimile transmission or similar
means shall be deemed delivered upon telephone confirmation of receipt
(confirmation report from fax machine is sufficient), provided a copy is also
delivered via delivery or mail. If notice is received on a Saturday, Sunday or
legal holiday, it shall be deemed received on the next business day.

 

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24.          Waivers.

(a)          No waiver by either party of the Default or Breach of any term,
covenant or condition hereof by the other party, shall be deemed a waiver of any
other term, covenant or condition hereof, or of any subsequent Default or Breach
by the other party of the same or of any other term, covenant or condition
hereof. Lessor's consent to, or approval of, any act shall not be deemed to
render unnecessary the obtaining of Lessor's consent to, or approval of, any
subsequent or similar act by Lessee, or be construed as the basis of an estoppel
to enforce the provision or provisions of this Lease requiring such consent.

(b)          The acceptance of Rent by Lessor shall not be a waiver of any
Default or Breach by Lessee. Any payment by Lessee may be accepted by Lessor on
account of moneys or damages due Lessor, notwithstanding any qualifying
statements or conditions made by Lessee in connection therewith, which such
statements and/or conditions shall be of no force or effect whatsoever unless
specifically agreed to in writing by Lessor at or before the time of deposit of
such payment.

(c)          THE PARTIES AGREE THAT THE TERMS OF THIS LEASE SHALL GOVERN WITH
REGARD TO ALL MATTERS RELATED THERETO AND HEREBY WAIVE THE PROVISIONS OF ANY
PRESENT OR FUTURE STATUTE TO THE EXTENT THAT SUCH STATUTE IS INCONSISTENT WITH
THIS LEASE.

25.          Disclosures Regarding The Nature of a Real Estate Agency
Relationship.

(a)          

26.          No Right To Holdover. Lessee has no right to retain possession of
the Premises or any part thereof beyond the expiration or termination of this
Lease. In the event that Lessee holds over, then the Base Rent shall be
increased to 150% of the Base Rent applicable immediately preceding the
expiration or termination. Nothing contained herein shall be construed as
consent by Lessor to any holding over by Lessee.

27.          Cumulative Remedies. No remedy or election hereunder shall be
deemed exclusive but shall, wherever possible, be cumulative with all other
remedies at law or in equity.

28.          Covenants and Conditions; Construction of Agreement. All provisions
of this Lease to be observed or performed by Lessee are both covenants and
conditions. In construing this Lease, all headings and titles are for the
convenience of the Parties only and shall not be considered a part of this
Lease. Whenever required by the context, the singular shall include the plural
and vice versa. This Lease shall not be construed as if prepared by one of the
Parties, but rather according to its fair meaning as a whole, as if both Parties
had prepared it.

29.         Binding Effect; Choice of Law. This Lease shall be binding upon the
parties, their personal representatives, successors and assigns and be governed
by the laws of the State in which the Premises are located. Any litigation
between the Parties hereto concerning this Lease shall be initiated in the
county in which the Premises are located.

30.         Subordination; Attornment; Non-Disturbance.

30.1        Subordination. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or other
hypothecation or security device (collectively, "Security Device"), now or
hereafter placed upon the Premises, to any and all advances made on the security
thereof, and to all renewals, modifications, and extensions thereof. Lessee
agrees that the holders of any such Security Devices (in this Lease together
referred to as "Lender") shall have no liability or obligation to perform any of
the obligations of Lessor under this Lease. Any Lender may elect to have this
Lease and/or any Option granted hereby superior to the lien of its Security
Device by giving written notice thereof to Lessee, whereupon this Lease and such
Options shall be deemed prior to such Security Device, notwithstanding the
relative dates of the documentation or recordation thereof.

 

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30.2          Attornment. In the event that Lessor transfers title to the
Premises, or the Premises are acquired by another upon the foreclosure or
termination of a Security Devise to which this Lease is subordinated (i) Lessee
shall, subject to the non-disturbance provisions of Paragraph 30.3, attorn to
such new owner, and upon request, enter into a new lease, containing all of the
terms and provisions of this Lease, with such new owner for the remainder of the
term hereof, or, at the election of the new owner, this Lease will automatically
become a new lease between Lessee and such new owner, and (ii) Lessor shall
thereafter be relieved of any further obligations hereunder and such new owner
shall assume all of Lessor's obligations, except that such new owner shall not:
(a) be liable for any act or omission of any prior lessor or with respect to
events occurring prior to acquisition of ownership; (b) be subject to any
offsets or defenses which Lessee might have against any prior lessor, (c) be
bound by prepayment of more than one month's rent, or (d) be liable for the
return of any security deposit paid to any prior lessor which was not paid or
credited to such new owner.

30.3          Non-Disturbance. With respect to Security Devices entered into by
Lessor after the execution of this Lease, Lessee's subordination of this Lease
shall be subject to receiving a commercially reasonable non-disturbance
agreement (a "Non-Disturbance Agreement") from the Lender which Non-Disturbance
Agreement provides that Lessee's possession of the Premises, and this Lease,
including any options to extend the term hereof, will not be disturbed so long
as Lessee is not in Breach hereof and attorns to the record owner of the
Premises. Further, within 60 days after the execution of this Lease, Lessor
shall, if requested by Lessee, use its commercially reasonable efforts to obtain
a Non-Disturbance Agreement from the holder of any pre-existing Security Device
which is secured by the Premises. In the event that Lessor is unable to provide
the Non-Disturbance Agreement within said 60 days, then Lessee may, at Lessee's
option, directly contact Lender and attempt to negotiate for the execution and
delivery of a Non-Disturbance Agreement.

30.4          Self-Executing. The agreements contained in this Paragraph 30
shall be effective without the execution of any further documents; provided,
however, that, upon written request from Lessor or a Lender in connection with a
sale, financing or refinancing of the Premises, Lessee and Lessor shall execute
such further writings as may be reasonably required to separately document any
subordination, attornment and/or Non-Disturbance Agreement provided for herein.

31.         Attorneys' Fees. If any Party brings an action or proceeding
involving the Premises whether founded in tort, contract or equity, or to
declare rights hereunder, the Prevailing Party (as hereafter defined) in any
such proceeding, action, or appeal thereon, shall be entitled to reasonable
attorneys' fees. Such fees may be awarded in the same suit or recovered in a
separate suit, whether or not such action or proceeding is pursued to decision
or judgment. The term, "Prevailing Party" shall include, without limitation, a
Party or Broker who substantially obtains or defeats the relief sought, as the
case may be, whether by compromise, settlement, judgment, or the abandonment by
the other Party of its claim or defense. The attorneys' fees award shall not be
computed in accordance with any court fee schedule, but shall be such as to
fully reimburse all attorneys' fees reasonably incurred. In addition, Lessor
shall be entitled to attorneys' fees, costs and expenses incurred in the
preparation and service of notices of Default and consultations in connection
therewith, whether or not a legal action is subsequently commenced in connection
with such Default or resulting Breach ($200 is a reasonable minimum per
occurrence for such services and consultation).

32.         Lessor's Access; Showing Premises; Repairs. Lessor and Lessor's
agents shall have the right to enter the Premises at any time, in the case of an
emergency, and otherwise during normal business hours after reasonable prior
notice for the purpose of showing the same to prospective purchasers, lenders,
or during the last 12 months of the term, to tenants, and making such
alterations, repairs, improvements or additions to the Premises as Lessor may
deem necessary or desirable and the erecting, using and maintaining of
utilities, services, pipes and conduits through the Premises and/or other
premises as long as there is no material adverse effect on Lessee's use of the
Premises. All such activities shall be without abatement of rent or liability to
Lessee.

33.         Auctions. Lessee shall not conduct, nor permit to be conducted, any
auction upon the Premises without Lessor's prior written consent. Lessor shall
not be obligated to exercise any standard of reasonableness in determining
whether to permit an auction.

34.         Signs. Lessor may place on the Premises ordinary "For Sale" signs at
any time and ordinary "For Lease" signs during the last 6 months of the term
hereof. Except for ordinary "For Sublease" signs which may be placed only on the
Premises, Lessee shall not place any sign upon the Project without Lessor's
prior written consent. All signs must comply with all Applicable Requirements.

35.         Termination; Merger. Unless specifically stated otherwise in writing
by Lessor, the voluntary or other surrender of this Lease by Lessee, the mutual
termination or cancellation hereof, or a termination hereof by Lessor for Breach
by Lessee, shall automatically terminate any sublease or lesser estate in the
Premises; provided, however, that Lessor may elect to continue any one or all
existing subtenancies. Lessor's failure within 10 days following any such event
to elect to the contrary by written notice to the holder of any such lesser
interest, shall constitute Lessor's election to have such event constitute the
termination of such interest.

36.         Consents. Except as otherwise provided herein, wherever in this
Lease the consent of a Party is required to an act by or for the other Party,
such consent shall not be unreasonably withheld or delayed. Lessor's actual
reasonable costs and expenses (including but not limited to architects',
attorneys', engineers' and other consultants' fees) incurred in the
consideration of, or response to, a request by Lessee for any Lessor consent,
including but not limited to consents to an assignment, a subletting or the
presence or use of a Hazardous Substance, shall be paid by Lessee upon receipt
of an invoice and supporting documentation therefor. Lessor's consent to any
act, assignment or subletting shall not constitute an acknowledgment that no
Default or Breach by Lessee of this Lease exists, nor shall such consent be
deemed a waiver of any than existing Default or Breach, except as may be
otherwise specifically stated in writing by Lessor at the time of such consent.
The failure to specify herein any particular condition to Lessor's consent shall
not preclude the imposition by Lessor at the time of consent of such further or
other conditions as are then reasonable with reference to the particular matter
for which consent is being given. In the event that either Party disagrees with
any determination made by the other hereunder and reasonably requests the
reasons for such determination, the determining party shall furnish its reasons
in writing and in reasonable detail within 10 business days following such
request.

37.         Guarantor.

37.1          Execution. The Guarantors, if any, shall each execute a guaranty
in the form most recently published by the AIR Commercial Real Estate
Association.

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

38.          Quiet Possession. Subject to payment by Lessee of the Rent and
performance of all of the covenants, conditions and provisions on Lessee's part
to be observed and performed under this Lease, Lessee shall have quiet
possession and quiet enjoyment of the Premises during the term hereof.

39.         Options. If Lessee is granted an option, as defined below, then the
following provisions shall apply.

39.1          Definition. "Option" shall mean: (a) the right to extend or reduce
the term of or renew this Lease or to extend or reduce the term of or renew any
lease that Lessee has on other property of Lessor; (b) the right of first
refusal or first offer to lease either the Premises or other property of Lessor;
(c) the right to purchase, the right of first offer to purchase or the right of
first refusal to purchase the Premises or other property of Lessor.

 

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39.2        Options Personal To Original Lessee. Any Option granted to Lessee in
this Lease is personal to the original Lessee and any Permitted Transferee (as
defined in the Addendum), and cannot be assigned or exercised by anyone other
than said original Lessee or a Permitted Transferee and only while the original
Lessee or a Permitted Transferee is in full possession of the Premises

39.3        Multiple Options. In the event that Lessee has any multiple Options
to extend or renew this Lease, a later Option cannot be exercised unless the
prior Options have been validly exercised.

39.4        Effect of Default on Options.

(a)          Lessee shall have no right to exercise an Option: (i) during the
period commencing with the giving of any notice of Default and continuing until
said Default is cured, (ii) during the period of time any Rent is unpaid
(without regard to whether notice thereof is given Lessee), (iii) during the
time Lessee is in Breach of this Lease, or (iv) in the event that Lessee has
been given 3 or more notices of separate Default, whether or not the Defaults
are cured, during the 12 month period immediately preceding the exercise of the
Option.

(b)          The period of time within which an Option may be exercised shall
not be extended or enlarged by reason of Lessee's inability to exercise an
Option because of the provisions of Paragraph 39.4(a).

(c)           An Option shall terminate and be of no further force or effect,
notwithstanding Lessee's due and timely exercise of the Option, if, after such
exercise and prior to the commencement of the extended term or completion of the
purchase, (i) Lessee fails to pay Rent for a period of 30 days after such Rent
becomes due (without any necessity of Lessor to give notice thereof),or (ii) if
Lessee commits a Breach of this Lease.

40.        Security Measures. Lessee hereby acknowledges that the Rent payable
to Lessor hereunder does not include the cost of guard service or other security
measures, and that Lessor shall have no obligation whatsoever to provide same.
Lessee assumes all responsibility for the protection of the Premises, Lessee,
its agents and invitees and their property from the acts of third parties.

41.        Reservations. Lessor reserves the right: (i) to grant, without the
consent or joinder of Lessee, such easements, rights and dedications that Lessor
deems necessary, (ii) to cause the recordation of parcel maps and restrictions,
and (iii) to create and/or install new utility raceways, so long as such
easements, rights, dedications, maps, restrictions, and utility raceways do not
unreasonably interfere with the access to and use of the Premises by Lessee.
Lessee agrees to sign any documents reasonably requested by Lessor to effectuate
such rights.

42.        Performance Under Protest. . If at any time a dispute shall arise as
to any amount or sum of money to be paid by one Party to the other under the
provisions hereof, the Party against whom the obligation to pay the money is
asserted shall have the right to make payment "under protest" and such payment
shall not be regarded as a voluntary payment and there shall survive the right
on the part of said Party to institute suit for recovery of such sum. If it
shall be adjudged that there was no legal obligation on the part of said Party
to pay such sum or any part thereof, said Party shall be entitled to recover
such sum or so much thereof as it was not legally required to pay. A Party who
does not initiate suit for the recovery of sums paid "under protest" within 6
months shall be deemed to have waived its right to protest such payment.

43.         Authority; Multiple Parties; Execution.

(a)          If either Party hereto is a corporation, trust, limited liability
company, partnership, or similar entity, each

individual executing this Lease on behalf of such entity represents and warrants
that he or she is duly authorized to execute and deliver this Lease on its
behalf. Each Party shall, within 30 days after request, deliver to the other
Party satisfactory evidence of such authority.

(b)           If this Lease is executed by more than one person or entity as
"Lessee", each such person or entity shall be

jointly and severally liable hereunder. It is agreed that any one of the named
Lessees shall be empowered to execute any amendment to this Lease, or other
document ancillary thereto and bind all of the named Lessees, and Lessor may
rely on the same as if all of the named Lessees had executed such document.

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

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

45.         Offer. Preparation of this Lease by either party or their agent and
submission of same to the other Party shall not be deemed an offer to lease to
the other Party. This Lease is not intended to be binding until executed and
delivered by all Parties hereto.

46.         Amendments. This Lease may be modified only in writing, signed by
the Parties in interest at the time of the modification. As long as they do not
materially change Lessee's obligations hereunder, Lessee agrees to make such
reasonable non-monetary modifications to this Lease as may be reasonably
required by a Lender in connection with the obtaining of normal financing or
refinancing of the Premises.

47.          Waiver of Jury Trial. THE PARTIES HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING INVOLVING THE PROPERTY OR
ARISING OUT OF THIS AGREEMENT.

48.          Arbitration of Disputes. An Addendum requiring the Arbitration of
all disputes between the Parties and/or Brokers arising out of this Lease £ is þ
is not attached to this Lease.

49. Americans with Disabilities Act. Since compliance with the Americans with
Disabilities Act (ADA) is dependent upon Lessee's specific use of the Premises,
Lessor makes no warranty or representation as to whether or not the Premises
comply with ADA or any similar legislation. In the event that Lessee's use of
the Premises requires modifications or additions to the Premises in order to be
in ADA compliance, Lessee agrees to make any such necessary modifications and/or
additions at Lessee's expense. Lessor has not received any written notice from
any governmental agency stating that the Premises are not in compliance with
ADA.

LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND
PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR
INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT, AT THE
TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE
AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE
PREMISES.

ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AIR COMMERCIAL
REAL ESTATE ASSOCIATION OR BY ANY BROKER AS TO THE LEGAL SUFFICIENCY, LEGAL
EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT
RELATES. THE PARTIES ARE URGED TO:

1. SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.

2. RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF THE
PREMISES. SAID

INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE POSSIBLE PRESENCE OF
HAZARDOUS SUBSTANCES, THE ZONING OF THE PREMISES, THE STRUCTURAL INTEGRITY, THE
CONDITION OF THE ROOF AND OPERATING SYSTEMS, COMPLIANCE WITH THE AMERICANS WITH
DISABILITIES ACT AND THE SUITABILITY OF THE PREMISES FOR LESSEE'S INTENDED USE.

WARNING: IF THE PREMISES ARE LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN
PROVISIONS OF THE LEASE MAY NEED TO BE REVISED TO COMPLY WITH THE LAWS OF THE
STATE IN WHICH THE PREMISES ARE LOCATED.

 

PAGE 17 OF 18_________       INITIALS INITIALS ©1999 - AIR COMMERCIAL REAL
ESTATE ASSOCIATION FORM MTN-11-3/10E

 

 

 

   

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

Executed at:     Executed at:  

 

On:     Executed at:  

 

By Lessor:   By Lessee:       COP –Western, LLC   Fujitsu Ten Corp of America a
California limited liability company   a California corporation By: /s/ Jonathon
Carley   By: /s/ Lawrence S. Kutsch Named Printed:   Jonathon Carley   Name
Printed    Lawrence S. Kutsch Title: Director Asset Management of Manager  
Title: EVP Administration       By: /s/ Terry Roussel   By: Name Printed: Terry
Roussel   Name Printed: Title:   Chief Executive Officer of Manager   Title:
Address: c/o Cornerstone Real Estate Funds   Address: 20100 Western Avenue 1920
Main Street, Suite 400   Los Angeles, CA 90501 Irvine, CA 92614     Telephone:
(949) 852-1007   Telephone: (   ) Facsimile:   (949) 852-2729   Facsimile:   ( 
) Email:   Email: Email:   Email: Federal ID No.   Federal ID No.

 

BROKER:   BROKER:       CBRE Inc.   Colliers International       Attn: John
Schumacher   Attn: David Drummond Title: Exec. Vice President   Title: Exec.
Vice President Address: 2221 Rosecrans Ave., Ste.100   Address: 2050 W. 190th
Street, Ste. 101 El Segundo, CA 90245   Torrance, CA  90504 Telephone: (949)
852-1007   Telephone: (   ) Facsimile:   (949) 852-2729   Facsimile:   (  )
Email:   Email: Email:   Email: Federal ID No.   Federal ID No. Broker/Agent DRE
License #:   Broker/Agent DRE License #        

 

NOTICE: These forms are often modified to meet changing requirements of law and
industry needs. Always write or call to make sure you are utilizing the most
current form: AIR Commercial Real Estate Association, 800 W 6th Street, Suite
800, Los Angeles, CA 90017. Telephone No. (213) 687-8777. Fax No.: (213)
687-8616.

 

©Copyright 1999 By AIR Commercial Real Estate Association.

All rights reserved. No part of these works may be reproduced in any form
without permission in writing.

 

PAGE 18 OF 18_________       INITIALS INITIALS ©1999 - AIR COMMERCIAL REAL
ESTATE ASSOCIATION FORM MTN-11-3/10E

 

 

 

 

 

 

 

ADDENDUM TO STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT

LEASE – NET

 

DATED MAY 1, 2012 BY AND BETWEEN COP – WESTERN AVENUE, LLC, A

CALIFORNIA LIMITED LIABILITY COMPANY (“LESSOR”), AND FUJITSU

TEN CORP. OF AMERICA, A CALIFORNIA CORPORATION (“LESSEE”)

all of which constitute a part of the Lease attached hereto.

 

50.        Base Rent Adjustments. The Base Rent, set forth in Paragraph 1.5,
shall be increased during the Term as follows:

 

June 1, 2014 through May 31, 2016:          $45,865.46 per month, which consists
of $27,034.51 for 20100 Western Avenue and $18,830.95 for 20200 Western Avenue.

 

June 1, 2016 through May 31, 2018:          $48,617.39 per month, which consists
of $28,656.58 for 20100 Western Avenue and $19,960.81 for 20200 Western Avenue.

 

June 1, 2018 through May 31, 2019:          $51,534.43 per month, which consists
of $30,375.97 for 20100 Western Avenue and $21,158.46 for 20200 Western Avenue.

 

51.          Abated Rent.     Notwithstanding anything to the contrary in the
Lease, Lessee shall not be responsible for any Base Rent or Lessee’s Share of
Real Property Taxes under the Lease during the first eight months (June 2012
through January 2013) of the Term (the “Full Abated Rent”). Additionally, Lessee
shall not be responsible for one-half (1/2) of the Base Rent under the Lease
during the months of February 2013 through May 2013 (the “Partial Abated Rent”
and together with the Full Abated Rent, the “Abated Rent”). In the event of a
Breach by Lessee of this Lease, Lessee’s right to any future Abated Rent shall
be immediately terminated and Lessee shall owe and shall

immediately repay to Lessor the unamortized portion of Abated Rent as described
in Paragraph 13.3. The remedies in this Paragraph 51 are in addition to and
shall not limit Lessor’s other remedies under the Lease or at law or equity for
a Breach or Default by Lessee. The estimated Common Area Operating Expenses
shown in Paragraph 1.7(b) of

the Lease includes Lessee’s Share of Real Property Taxes, so Lessee shall only
pay $4,522.00 for the estimated Common Area Operating Expenses for the months of
June 2012 through December 2012, subject to the annual reconciliation of the
Common Area Operating Expenses as set forth in Paragraph 4.2 of the Lease.
Additionally,

notwithstanding anything to the contrary in this Lease, Lessee shall not be
responsible for Lessee’s Share of Common Area Operating Expenses or Real
Property Taxes during Early Possession.

 

52.          Early Lease Termination.           Lessee shall have the one-time
option to terminate all or portion of the Lease as expressly set forth below:

 

a.            Entire Lease.    Notwithstanding anything to the contrary set
forth herein and provided that Lessee shall have not previously executed its
option to terminate the Lease as to a portion of the Premises as set forth in
Paragraph 52(b) below, Lessee shall have the onetime right to terminate this
Lease during the Original Term (the “Full Termination Option”) effective any
time between July 1, 2017 and November 30, 2017 (the Termination Period”),
provided that Lessee shall (i) deliver a written notice to Lessor at least one
hundred eighty (180) days prior to the selected effective date of such entire
termination of the Lease within the Termination Period (the “Early Full
Termination Date”), (ii) on or before the Early Full Termination Date, deliver
funds to Lessor in an amount equal to all “Full Unamortized Leasing Costs” (as
defined below) which shall be reasonably calculated by Lessor, and (iii) have
paid to Lessor all Rent due under the Lease for the period prior to the Early
Full Termination Date. “Full Unamortized Leasing Costs” shall mean the
unamortized amount of all Abated Rent, any Allowance provided to Lessee by
Lessor for tenant improvements, and all leasing commissions paid by Lessor as of
the Early Full Termination Date amortized over eighty-four (84) months. Lessee’s
failure to pay the Full Unamortized Leasing Costs and Rents due for the period
prior to the Early Full Termination Date on or before the Early Full Termination
Date will terminate the Full Termination Option and the Partial Termination
Option (as defined below) and make each of them null and void.

 

1

 

 

b.            Partial Premises.    Notwithstanding anything to the contrary set
forth herein and subject to the Rent adjustment and any other revisions to the
terms of the Lease set forth below, Lessee shall have the one-time right to
terminate its obligations and rights to lease the Warehouse Portion (as defined
below) of the Premises (the “Partial Termination Option”) effective any time
during the Termination Period, provided that Lessee shall (i) deliver a written
notice to Lessor at least one hundred eighty (180) days prior to the selected
effective date of such partial termination of the Lease within the Termination
Period (the “Early Partial Termination Date”), (ii) on or before the Early
Partial Termination Date, deliver funds to Lessor in an amount equal to all
“Partial Unamortized Leasing Costs” (as defined below) which shall be reasonably
calculated by Lessor, (iii) have paid to Lessor all Rent due under the Lease for
the period prior to the Early Partial Termination Date, and (iv) have fully
vacated and removed all its property from the Warehouse Portion (as defined
below) prior to the Early Partial Termination Date as set forth in Paragraph 7.4
of the Lease. “Warehouse Portion” shall mean that portion of the Premises
commonly known as 20200 Western Avenue being approximately 26,515 square feet.
“Partial Unamortized Leasing Costs” shall mean one-half (1/2) of the unamortized
amount of all Abated Rent, any Allowance provided to Lessee by Lessor for tenant
improvements, and all leasing commissions paid by Lessor as of the Early Partial
Termination Date amortized over eighty-four (84) months. Lessee’s failure to pay
the Partial Unamortized Leasing Costs and Rents due for the period prior to the
Early Partial Termination Date on or before the Early Partial Termination Date
will terminate the Partial Termination Option and the Full Termination Option
and make each of them null and void. Notwithstanding Section 50 above and
provided that Lessee has effectively exercised and performed under its Partial
Termination Option (being the “Partial Termination”), upon and after the Early
Partial Termination Date: (a) the Warehouse Portion shall be deemed excluded
from the Premises for all future purposes under the Lease; (b) Lessee shall have
no rights in or to the Warehouse Portion; (c) the monthly Base Rent for the
revised Premises shall be $28,656.58 through May 31, 2018 and then increased to
$30,375.97 on June 1, 2018 through the rest of the Original Term; and (d)
Lessee’s Share shall be reduced to twenty-five and 77/100ths percent (25.77%).
Upon and after the Partial Termination, Lessee shall certify to any third party
that may be acquiring an interest or right in or to the Warehouse Portion that
Lessee no longer has any rights or claims to use the Warehouse Portion.

 

53.          Option to Renew.           Lessee shall, provided the Lease is in
full force and effect and Lessee is not in Breach under any of the other terms
and conditions of the Lease at the time of notification or commencement, have
one (1) option to renew this Lease for a term of sixty (60) months, for the
portion of the Premises being leased by Lessee as of the date the renewal term
is to commence, on the same terms and conditions set forth in the Lease, except
as modified by the terms, covenants and conditions as set forth below:

 

               a.           If Lessee elects to exercise said option, then
Lessee shall provide Lessor with written notice not later than the date which is
nine (9) months prior to the Expiration Date and not earlier then the date which
is twelve (12) months prior to the Expiration Date. If Lessee fails to provide
such notice in a timely manner, Lessee’s option shall automatically terminate
and Lessee shall have no further or additional right to extend or renew the Term
of the Lease.

 

               b.           The monthly Base Rent in effect at the expiration of
the Original Term of the Lease shall be adjusted to reflect the current fair
market rental and escalations for comparable space in the Building or Project
and in other similar office/industrial buildings within the Torrance area as of
the date the renewal term is to commence (the “Fair Market Rate”), taking into
account the specific provisions of the Lease which will remain constant.

Lessor shall advise Lessee of the new Base Rent for the Premises no later than
fifteen (15) days after receipt of Lessee's written request therefore. Said
notification of the new Base Rent may include a provision for its escalation to
provide for a change in Fair Market Rate between the time of notification and
the commencement of the renewal term. If Lessee and Lessor are unable to agree
on a mutually acceptable rental rate no later than ninety (90) days prior to the
Expiration Date, then Lessor and Lessee shall each appoint a qualified MAI
appraiser with at least five (5) years’ of experience appraising comparable
properties within the Torrance area on or before the date which is no later than
seventy-five (75) days prior to the Expiration Date. Those two appraisers
designated by the parties shall appoint a third MAI appraiser doing business in
the area on or before the date which is no later than sixty (60) days prior to
the Expiration Date. The three appraisers shall decide upon the Fair Market Rate
for the Premises as of the Expiration Date by a majority vote (2 of the 3
appraisers). The Fair Market Rate decided by majority vote of the appraisers
shall become the Base Rent and escalations for the renewal term. Lessor and
Lessee shall equally share in the expense of the appraisers except that in the
event the Fair Market Rate determined by the appraisers is found to be within
three percent (3%) of the original Fair Market Rate quoted by Lessor, then
Lessee shall bear the full cost of all the appraisal process.

                c.           This option is not transferable except to a
Permitted Transferee (defined below). The parties hereto acknowledge and agree
that they intend that the aforesaid option to renew this Lease shall be
"personal" to Lessee as set forth above and that in no event will any assignee
or sublessee have any rights to exercise the aforesaid option to renew.

 

d.            Lessee shall have no Termination Option during any renewal period.

 

2

 

 

54.          Reserved Parking; Revised Parking for Termination. Notwithstanding
Section 1.2(b) of this Lease, Lessor shall designate or mark those sixty (60)
parking spaces set forth of Exhibit “C” attached hereto as “reserved” for the
benefit of Lessee (the “Reserved Parking Spaces”). Notwithstanding anything in
Paragraph 1.2(b) or elsewhere in the Lease, should Lessee complete the Partial
Termination as described above, Lessee shall only be entitled to fifty-five (55)
total parking spaces of which thirty (30) of those shall be marked Reserved
Parking Spaces.

 

55.          Conflict/Defined Terms. If the terms of this Addendum conflict with
the terms of the Lease, the terms of this Addendum shall prevail. Any terms not
defined herein shall have the meanings ascribed to them under the Lease.

 

56.          Exclusions from Common Area Operating Expenses; Right to Audit;
Gross-Up.

 

a.            Exclusions.          Notwithstanding anything to the contrary
contained in the Lease or this Addendum, including Paragraph 4.2 of the Lease,
the following are excluded from the definition of Common Area Operating
Expenses: (i) the costs of repair, replacement, or restoration work occasioned
by any damage or destruction pursuant to Article 9 or Condemnation pursuant to
Article 13; (ii) finance and debt service fees, principal and/or interest on
debt or amortization payments on any mortgages executed by Lessor covering
Lessor’s property, any other indebtedness of Lessor, and rental under any ground
lease or leases for the Building, Common Areas and/or the Project; (iii) any
depreciation allowance or expense, amortization (except as expressly permitted
by the Lease), and expense reserves and other non-cash items; (iv) management
fees in excess of five percent (5%) of gross revenue and rents; (v) any costs or
expenses representing any amount paid for services and materials to a (personal
or business) related person, firm, or entity of Lessor, the property manager, or
any of their principals to the extent such amount exceeds the amount that would
have been paid for such service or materials at the then existing market rates
in the absence of such relationship; (vi) insurance costs for coverage not
customarily paid by tenants of similar projects in the vicinity of the Building,
and increases in insurance costs caused by special nature or activities of
another occupant of the Project; (vii) costs incurred in connection with the
presence of any Hazardous Substances, except to the extent caused by the release
or emission of the Hazardous Substance in question by Lessee or any third party
under its direction or control; (viii) the costs and expenses attributable to
the construction of the Building, including correcting defects in the
construction of the Building or in the Building equipment; (ix) the costs of
repairs or maintenance which are covered by warranties or service contracts in
existence on the Commencement Date and to the extent such maintenance and
repairs are made at no cost to Lessor; (x) the costs of repairs, alterations,
and general maintenance necessitated by the negligence or willful misconduct of
Lessor or its agents, employees, or contractors or repairs, alterations, and
general maintenance necessitated by the negligence or willful misconduct of any
other occupant of the Project or any of their respective agents, employees,
contractors, invitees, or licensees; (xi) interest or penalties due to the late
payment of taxes, utility bills or other such costs, except to the extent caused
by Lessee; (xii) any amount payable by Lessor by way of indemnity or for damages
or which constitute a fine or penalty, including interest or penalties for late
payment; (xiii) any cost for overtime or other expenses to Lessor in curing
defaults; (xiv) the costs including fines, penalties, and legal fees incurred
due to violations by Lessor, its employees, agents, or contractors or assigns,
or any other occupant of the Project of building codes, any governmental rule or
requirement or any other contract pertaining to the Premises; (xv) any of the
following tax or assessment expenses: (a) penalties and interest, other than
those attributable to Lessee’s failure to comply timely with its obligations
pursuant to the Lease, (b) increases in Real Property Taxes (whether increases
result from increased rate, valuation, or both) attributable to additional
improvements to the Project unless constructed for Lessee’s primary benefit or
for the common benefit of Lessee and other tenants in the Project, and (c) any
Real Property Taxes in excess of the amount which would be payable if such tax
or assessment expense were paid in installments over the longest possible term;
(xvi) Lessor’s general overhead; and (xvii) bad debt expenses and charitable
contributions and donations of Lessor.

 

3

 

 

b.            Right to Audit.          In the event Lessee disputes the amount
of Common Area Operating Expenses payable by Lessee, provided Lessee is not then
in Default of the Lease (other than a default for failure to pay Lessee’s Share
of Common Area Operating Expenses) and no event shall have occurred which with
the passage of time would constitute an event of Default under the Lease (other
than a default for failure to pay Lessee’s Share of Common Area Operating
Expenses), Lessee shall be entitled to retain an independent, certified public
accountancy firm (the "CPA") engaged on a noncontingency fee basis, or an
employee of Lessee, to audit and/or review Lessor’s general ledger of expenses
with respect to the calculation of Common Area Operating Expenses. Lessee shall
give notice ("Inspection Notice") to Lessor of Lessee's intent to audit within
ninety (90) days after Lessee's receipt of Lessor's expense statement which sets
forth Lessor's actual Common Area Operating Expenses for the previous calendar
year, identifying the expense in question and setting out in reasonable detail
the reason why such expense should not be binding on Lessee. Such audit shall be
conducted at a mutually agreeable time during normal business hours at the
office of Lessor or its management agent where such accounts are maintained or
at such other location as the parties shall mutually agree. If Lessee does not
cause such audit to be accomplished within ninety (90) days after Lessor’s
receipt of the Inspection Notice, Lessee’s right to object to any such expense
shall terminate. In no event shall Lessee be entitled to so inspect such records
more than once per fiscal year. Lessee shall pay all costs of such audit
including, without limitation, any and all copying costs, unless the actual
Common Area Operating Expenses submitted to Lessee by Lessor for any fiscal year
are determined by the CPA to be overstated by five percent (5%) or greater in
which event Lessor shall pay for the reasonable out-of-pocket costs incurred by
Lessee in connection with the audit. The amount of Additional Rent payable by
Lessee to Lessor shall be appropriately adjusted on the basis of such audit and,
if the audit shows (a) that Lessor has overcharged Lessee, then Lessor shall
credit such overcharge against the next installment of Rent coming due hereunder
or (b) that Lessor has undercharged Lessee, then Lessee shall pay to Lessor such
amount due as Additional Rent within thirty (30) days following the completion
of such audit. All of the information obtained by Lessee and/or its auditor in
connection with such audit, as well as any compromise, settlement, or adjustment
reached between Lessor and Lessee as a result thereof, shall be held in strict
confidence and, except as may be required pursuant to litigation, shall not be
disclosed to any third party, directly or indirectly, by Lessee or its auditor
or any of their officers, agents or employees. Lessor may require Lessee's
auditor to execute a separate confidentiality agreement affirming the foregoing
as a condition precedent to any audit. In the event of a violation of this
confidentiality covenant in connection with any audit, then in addition to any
other legal or equitable remedy available to Lessor, Lessee shall forfeit its
right to any reconciliation or cost reimbursement payment from Lessor due to
said audit (and any such payment theretofore made by Lessor shall be promptly
returned by Lessee), and Lessee shall have no further audit rights under this
Lease.

 

57.         Assignment and Subletting; Permitted
Transfers.         Notwithstanding anything to the contrary in the Lease or this
Addendum, including Paragraph 12 of the Lease, and provided that Lessee shall
not be in Default under the terms of the Lease, Lessee may, without Lessor’s
prior written consent and without the right of recapture, sublet the Premises or
assign the Lease to: (i) a subsidiary, affiliate, or other entity controlling,
controlled by or under common control with Lessee with common ownership,
directly or indirectly with Lessee, (ii) a successor corporation or entity
related to Lessee by merger, consolidation, acquisition, non-bankruptcy
reorganization, or government action; or (iii) a purchaser of substantially all
of Lessee’s assets; provided that such transferee or subtenant assumes the
Lessee’s obligations of the Lease in writing of which a copy shall be delivered
to Lessor. Any of the above are referenced hereafter as a "Permitted Transfer",
and the transferee is referenced as "Permitted Transferee". Notwithstanding the
above, Lessee shall only be permitted to assign, sublet or transfer to a
Permitted Transferee without the consent of Lessor, if, and only if, such
Permitted Transferee at the time of such proposed assignment or sublease has a
net worth equal to or greater than the net worth of Lessee at the time of such
proposed assignment or sublease as determined using generally accepted
accounting principles. Prior to any Permitted Transfer, Lessee shall deliver
financial statements of the proposed transferee, assignee or sublessee prepared
in conformity with generally accepted accounting principles.

 

58.          Hazardous Substances.          Lessor acknowledges that Lessee’s
use of the Premises results in the generation of a small amount of lead waste
which requires that a notice be given to persons entering or occupying the
Premises. Lessor hereby consents to such Reportable Use by Lessee within the
Premises. Pursuant to the provisions of Paragraph 6.2(a) of the Lease, Lessee
shall comply (at Lessee’s expense) with all Applicable Requirements in
connection with such Reportable Use and shall indemnify, defend and hold Lessor,
its owners, members, managers and agents harmless from such use by Lessee or any
third party under Lessee’s direction or control.

 

[SIGNATURES APPEAR ON FOLLOWING PAGE(S)]

 

4

 

 

IN WITNESS WHEREOF, the parties have executed this Addendum as of the reference
date first set forth in the Lease.

 

COP – WESTERN AVENUE, LLC, a California

FUJITSU TEN CORP. OF AMERICA, a 

limited liability company   California corporation         By: Cornerstone
Operating Partnership,       LP, a Delaware limited partnership,       its Sole
Member    

 

By: Cornerstone Core Properties,   By: /s/ Lawrence S. Kutsch   REIT, Inc., a
Maryland corporation,   Lawrence S. Kutsch   its General Partner  

Executive Vice President, Administration 

 

By: /s/ Jonathan Carley   Jonathan Carley    Director, Asset Management     By:
/s/ Terry Roussel   Terry Roussel   Chief Executive Officer

 

5

 

 

[exa-a2pg1.jpg]

 

 

 

 

[exa-a2pg2.jpg]

 

 

 

 

[exa-a2pg3.jpg]

 

 

 

 

[exa-a2pg4.jpg]

 

 

 

 

 

EXHIBIT B

 

LESSOR’S TENANT IMPROVEMENT ALLOWANCE

AND LESSEE’S IMPROVEMENT OBLIGATIONS

 

Lessee hereby acknowledges and agrees that (a) subject to Paragraph 2.2 of the
Lease, Lessee accepts the Premises in its “AS IS” condition as of the
Commencement Date, and (b) Lessor is not and shall not be obligated to construct
or pay for any improvements, additions or refurbishment in, to or of the
Premises, except for the “Allowance” as defined below. Lessee desires to make
certain improvements to the Premises (all such improvements being hereinafter
referred to as the “Lessee Improvements”) which shall be subject to Lessee’s
compliance with each and every provision set forth in this Exhibit B and in the
Lease, including, without limitation, Paragraphs 7.3 and 7.4 of the Lease.
Lessee hereby agrees to indemnify, defend and hold Lessor harmless from and
against any and all claims, costs, liens, expenses or liability, arising from
Lessee’s design, construction, maintenance and use of any improvements in, on or
about the Premises (including, without limitation, Lessee’s disturbance of other
tenants or

occupants in or around the Project, Lessee’s failure to obtain any necessary
permits, approvals or certificates from the applicable governmental authorities,
and/or attorneys’ costs and fees, and court costs). In addition to the
requirements of Paragraph 7.3(b), Lessor’s approval of any Lessee Improvements
for which Lessee desires to apply the Allowance is subject to the following
additional provisions:

 

1.          Prior to hiring any contractors or subcontractors, or entering into
agreements with any of them, Lessee shall deliver to Lessee for Lessor’s
reasonable approval the name of the general contractor Lessee proposes to hire
to perform the Lessee Improvements. It shall be reasonable for Lessor to
withhold approval based on the proposed contractor’s inadequate financial
status, reputation for poor quality work, lack of experience, insurance, or
union/nonunion status. As a condition to its approval, Lessor may require
insurance coverage, regular written progress reports and consultations, and the
employment of only union or non-union personnel and subcontractors.

 

2.          The Lessee Improvements may be commenced any time after the
satisfaction of the items listed in this subsection and shall be completed
within twelve (12) months following the Commencement Date. The work contemplated
by the this section shall not commence until:

 

(a)          receipt and written approval by Lessor of the floor plan, proposed
scope of work, and thereafter the detailed working drawings and specifications
depicting the proposed Lessee Improvements (collectively the “Plans and
Specifications”) (it is understood and agreed that Lessee may not make any
alterations to the electrical distribution system to the Premises, Building or
Project if, in Lessor’s sole judgment, such alterations would in any way
interfere with other tenants in the Project). Lessor shall notify Lessee of its
approval or disapproval of the Plans and Specifications within ten (10) business
days after receipt thereof from Lessee. If Lessor reasonably disapproves of any
portion of the Plans and Specifications, the parties shall meet, within three
(3) days after Lessee’s receipt of Lessor’s disapproval, to agree upon revisions
to be made to the Plans and Specifications to meet the reasonable satisfaction
of the parties. Lessee shall then cause the Plans and Specifications to be
revised to the form agreed upon in such meeting and Lessor shall then approve or
reasonably disapprove the revised Plans and Specifications no later than five
(5) days after Lessor’s receipt of such revised Plans and Specifications. If
Lessor shall again reasonably disapprove the revised Plans and Specifications,
the parties will revise and review the Plans and Specifications again in
accordance with the procedure set forth above until the parties' reasonable
approval is obtained, provided, however, if such Plans and Specifications are
not approved by Lessor within forty-five (45) days after Lessee’s original
submittal to Lessor, then the twelve (12) month construction deadline described
above and in Section 4 below shall be extended on a day-for-day basis for each
day thereafter until the Plans and Specifications have been approved.

 

(b)          a copy of a fully executed construction contract or contracts
(collectively, the “Construction Contract”) has been delivered to Lessor
including the name of the general contractors and all subcontractors and their
California state contractor’s license numbers;

 

(c)          an insurance certificate has been received by Lessor from the
general contractor naming Lessor as an additional insured on the general
contractor’s commercial liability insurance policy which complies with Section 4
below;

 

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(d)          all other requirements regarding insurance imposed on Lessee by
this Lease have been satisfied; and

 

(e)          Lessee has given Lessor at least ten (10) days' prior written
notice of Lessee's intention to commence construction.

 

3.          Lessee shall bear the entire cost of the Lessee Improvements and all
the costs of architectural and engineering consultants in connection therewith,
except that Lessor shall reimburse Lessee in an amount not to exceed Six Hundred
Thousand Dollars $600,000.00 (the “Allowance”) for the design and construction
of the Lessee Improvements by properly licensed third parties.

 

The Allowance shall only be disbursed and shall be used only to reimburse Lessee
for the following items directly related to the Lessor approved Lessee
Improvements:

 

(a)          Payment of the cost of unrelated, third parties preparing the
working drawings, including mechanical, electrical, plumbing and structural
drawings.

 

(b)          The payment of plan check, permit and license fees relating to
construction of the Lessee Improvements.

 

(c)          Construction of the Lessee Improvements, including, without
limitation, the following:

 

(i)           Installation within the Premises of all partitioning, doors, floor
coverings, ceilings, wall coverings and painting, millwork and similar items;

 

(ii)         All electrical wiring, lighting fixtures, outlets and switches, and
other electrical work necessary for the Premises;

 

(iii)        The furnishing and installation of all duct work, terminal boxes,
diffusers and accessories necessary for the heating, ventilation and air
conditioning cooling systems within the Premises, including the cost of meter
and key control for after-hour air conditioning.

 

(iv)        All fire and life safety control systems such as fire walls,
sprinklers, halon, fire alarms, including piping, wiring and accessories,
necessary for the Premises;

 

(v)         All plumbing, fixtures, pipes and accessories necessary for the
Premises;

 

(vi)        Testing and inspection costs; and

 

(vii)        Fees for the general contractor(s) as expressly set forth in the
Construction Contract.

 

4.          Provided that Lessee submits a written request or requests, not more
frequently than once every thirty (30) day period, for payment of all or a
portion of the Allowance prior to the date that is twelve (12) months following
the Commencement Date (the “Payment Request Date”), Lessor agrees to reimburse
Lessee in multiple disbursements, not more often than every thirty (30) days, an
amount not to exceed the lesser of (i) ninety (90%) of any acceptable and paid
invoices for the Lessee Improvements delivered by Lessee to Lessor, or (ii) the
entire Allowance (on an aggregate basis of all progress payments previously and
currently requested by Lessee) upon satisfaction of each of the following:

 

(a)          all required governmental approvals and permits have been obtained
and originals thereof delivered to Lessor, including the building permit
application and plan check number;

 

(b)          the Lessee Improvements as of the request date have been completed
or are being completed in accordance with the working drawings;

 

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(c)          no Breach (as defined in the Lease) then exists under the Lease;
and

 

(d)          the submission to Lessor of paid invoices evidencing the completion
of certain Lessee Improvements together with partial and/or conditional lien
releases for the work covered by such invoices by each and every applicable
contractor performing such work.

 

Notwithstanding the above, Lessor shall have the right to retain a portion of
the Allowance up to ten percent (10%) of the greater of: (y) the entire
Allowance; or (z) the entire amount to be paid by Lessee under the Construction
Contract (the “Retention”). Lessor agrees to release the Retention, up to the
aggregate amount of unpaid portions of invoices requested by Lessee for payment
under this Section 4 prior to the Payment Request Date, to Lessee upon
satisfaction of each of the following:

 

i.             the Lessee Improvements shall have been substantially completed
in accordance with the working drawings, and the original inspection card, with
all appropriate signatures and/or initials thereon, has been delivered to
Lessor;

 

ii.         a notice of completion has been recorded in accordance with
applicable California law and a recorded copy thereof has been provided to
Lessor;

 

iii.         delivery to Lessor of all original blue prints, drawings and
as-built plans and specifications for the Lessee Improvements;

 

iv.         a final, unconditional certificate of occupancy for the Premises has
been issued by the appropriate governmental agency (or such equivalent
governmental issuance, approval or sign-off that permits the occupancy of the
Premises); and

 

v.           the submission to Lessor of all paid invoices evidencing the
completion of certain Lessee Improvements together with unconditional lien
releases for the work and materials covered by such invoices by each and every
applicable contractor performing work on or providing materials to the Premises.

 

5.          Except for the Allowance, Lessor shall have no liability or
responsibility for the Lessee Improvements or any maintenance, repairs to,
changes to, or code upgrades required in connection with the Lessee
Improvements. During the period of construction, Lessee and its contractors and
subcontractors shall procure and maintain property damage and public liability
insurance during the period of their performance of labor or the furnishing of
materials to the Premises from an insurance company reasonably satisfactory to
Lessor. Said insurance shall have a coverage limit of at least Two Million
Dollars ($2,000,000) and be in form reasonably satisfactory to Lessor and shall
name Lessor and, at Lessor’s request, any mortgagee or property manager of
Lessor, as additional insureds, as their respective interests may appear. Lessee
shall also require each contractor and subcontractor employed to perform labor
or furnish materials to the Premises to procure and maintain, during the
performance of the labor or the furnishing of the materials, a policy of
workers’ compensation or employer’s liability insurance issued by an insurance
company reasonably acceptable to Lessor and Lessor’s mortgagees for the
protection of the employees of the contractors and subcontractors, including
executive, managerial, and supervisorial employees engaged in any work to be
performed in the Premises. Copies of the policies or certificates evidencing the
existence and amounts of such insurance, and renewals or binders, shall be
delivered to Lessor by Lessee prior to the commencement of the Lessee
Improvements.

 

6.          No unused portion of the Allowance upon completion of the Lessee
Improvements shall be provided to Lessee or be available to Lessee as a credit
against any obligations of Lessee under the Lease. Lessor shall have no
obligation to deliver any unused portion of the Allowance to Lessee for any
reimbursement request made by Lessee after the Payment Request Date.

 

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7.          Except to the extent arising from the gross negligence or willful
misconduct of Lessor, Lessee shall be responsible for and shall indemnify,
defend and hold Lessor harmless from and against any liability, cost, claim,
lawsuit, damage or expense (including court costs and attorneys’ fees) arising
out of any activity or omission of Lessee’s contractors, subcontractors, or
their agents and employees. Such indemnity and defense obligations by Lessee
shall also apply with respect to any and all costs, losses, damages, injuries
and liabilities related in any way to Lessor’s performance of any ministerial
acts reasonably necessary to (i) permit Lessee to complete the Lessee
Improvements, and/or (ii) enable Lessee to obtain any building permit or
certificate of occupancy for the Premises.

 

8.          Time is of the essence of this Exhibit B.

 

9.          The Lessee Improvements constructed by Lessee pursuant to this
Exhibit B and shall be deemed “Alterations” in accordance with, and subject to
the provisions of Paragraphs 7.3 and 7.4 of the Lease.

 

10.         Any failure of Lessee to comply with any of the provisions contained
in this Exhibit B shall be deemed a Default under the Lease. In addition to the
remedies provided to Lessor in this Exhibit B upon the occurrence of such a
Default by Lessee, Lessor shall have all remedies available at law or equity to
a landlord against a defaulting tenant pursuant to a written lease, including
but not limited to those set forth in the Lease.

 

THIS EXHIBIT IS APPROVED BY LESSOR AND LESSEE:

 

      LESSOR’S INITIALS   LESSEE’S INITIALS

 

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