EXHIBIT 10.19

 

STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE — GROSS
(DO NOT USE THIS FORM FOR MULTI-TENANT BUILDINGS)

 

1.                                      Basic Provisions (“Basic Provisions”).

1.1                                 Parties: This Lease (“Lease”), dated for
reference purposes only, February 23, 2004, is made by and between William Cash
Forman, a married man ( “Lessor”) and Hoefer, Inc., a Delaware corporation
(“Lessee”), (collectively the “Parties,” or individually a “Party”).

1.2                                 Premises: That certain real property,
including all improvements therein or to be provided by Lessor under the terms
of this Lease, and commonly known as 953 Indiana Street , located in the County
of San Francisco , State of California , and generally described as (describe
briefly the nature of the property and, if applicable, the “Project”, if the
property is located within a Project) a concrete industrial building
(“Premises”). (See also Paragraph 2)

1.3                                 Term: 10 years and 0 months (“Original
Term”) commencing March 1, 2004 (“Commencement Date”) and ending February 28,
2014 (“Expiration Date”). (See also Paragraph 3)

1.4                                 Early Possession: February 24, 2004 (“Early
Possession Date”). (See also Paragraphs 3.2 and 3.3 and Addendum Paragraph #52
Prior Occupancy)

1.5                                 Base Rent: $ 16,995.00 per month (“Base
Rent”) commencing May 23, 2004, and thereafter payable on the first (1st) day of
each month. (See also Paragraph 4)

ý      If this box is checked, there are provisions in this Lease for the Base
Rent to be adjusted.

1.6                                 Base Rent and Other Monies Paid Upon
Execution:

(a) Base Rent: $ 16,995.00 monthly for the period May 23, 2004 through
February 28, 2005. (See also Paragraph 51)

(b) Security Deposit: $ 20,000.00 (“Security Deposit”). (See also Paragraph 5)

(c) Association Fees: $ n/a for the period n/a

(d) Other: $ n/a for n/a.

(e) Total Due Upon Execution of this Lease: $ 36,995.00.

1.7                                 Agreed Use: Development, light manufacturing
and distribution of electrophoresis equipment and supplies (See also Paragraph
6)

1.8                                 Insuring Party: Lessor is the “Insuring
Party”. The annual “Base Premium” is $ 6,612.00  (See also Paragraph 8)

1.9                                 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):

ý      HC&M Commercial Properties, Inc. represents Lessor exclusively (“Lessor’s
Broker”);

ý      Whitney Cressman represents Lessee exclusively (“Lessee’s Broker”); or

o      represents both Lessor and Lessee (“Dual Agency”).

(b) Payment to Brokers: Upon execution and delivery of this Lease by both
Parties, Lessor shall pay to the Broker the fee agreed to in their separate
written agreement for the brokerage services rendered by the Brokers. See
addendum Paragraphs #54 and #55.

1.10                           Intentionally Omitted.

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

ý      an Addendum consisting of Paragraphs 51 through 56

ý      a plot plan depicting the Premises;

o      a current set of the Rules and Regulations;

o      a Work Letter;

ý      other (specify): Addenda Paragraphs 57 and 58.

 

2.                                       Premises.

2.1                                 Letting. Lessor hereby leases to Lessee, and
Lessee hereby leases from Lessor, the Premises, for the term, at the rental, and
upon all of the terms, covenants and conditions set forth in this Lease. Unless
otherwise provided herein, any statement of size set forth in this Lease, or
that may have been used in calculating Rent, is an approximation which the
Parties agree is reasonable and any payments based thereon are not subject to
revision whether or not the actual size is more or less. Note: Lessee is advised
to verify the actual size prior to executing this Lease.

2.2                                 Condition. Lessor shall deliver the Premises
to Lessee broom clean and free of debris on the Commencement Date or the Early
Possession Date, whichever first occurs (“Start Date”), and warrants that the
surface and structural elements of the roof, bearing walls and foundation of any
buildings on the Premises (the “Building”) shall be free of material defects as
of the Start Date. If a non-compliance with said warranty exists as of the Start
Date, 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. 
Notwithstanding anything contained herein to the contrary , Seller has not
received any written notice and has no current actual knowledge that any
government agency or any employee or official considers the construction of the
Premises or its operation or use to have failed to comply with any Applicable
Requirement, as defined in Paragraph 2.3 below, or that any investigation has
been commenced or is contemplated respecting any such possible failure of
compliance.

2.3                                 Acknowledgements. Lessee acknowledges that:
(a) it has been advised by Lessor and/or Brokers to satisfy itself with respect
to the condition of the Premises (including but not limited to the electrical,
HVAC and fire sprinkler systems, security, and compliance with  the building
codes, applicable laws, covenants or restrictions of record, regulations, and
ordinances (“Applicable Requirements”) and the Americans with Disabilities Act),
and their suitability for Lessee’s intended use, (b) Lessee has made such
investigation as it deems necessary with reference to such matters and assumes
all responsibility therefor as the same relate to its occupancy of the Premises,
and (c) neither Lessor, Lessor’s agents, nor Brokers have made any oral or
written representations or warranties with respect to said matters other than as
set forth in this Lease. In addition, Lessor acknowledges that: (i) Brokers have
made no representations, 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.

 

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. Lessee shall be permitted
to occupy the Premises prior to the Commencement Date, and 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
insurance premiums and to maintain the Premises) shall, however, be in effect
during such period. Any such early possession shall not affect the Expiration
Date.

 

Initials

 

 

 

Initials

 

 

 

 

 

©2001 - American Industrial Real Estate Association

 

REVISED

 

FORM STG-8-7/01E.

 

1

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

 

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. 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, 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 deliver 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                                 Payment. Lessee shall cause payment of Rent
to be received by Lessor in lawful money of the United States on or before the
day on which it is due, without offset or deduction (except as specifically
permitted 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
payments to be made by Lessee to be 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 Operating Expense Increase, and any remaining amount to
any other outstanding charges or costs.

 

5.                                       Security Deposit. Lessee shall deposit
with Lessor upon execution hereof the Security Deposit as security for Lessee’s
faithful performance of its obligations under this Lease. If Lessee fails to pay
Rent, or otherwise Defaults under this Lease, Lessor may use, apply or retain
all or any portion of said Security Deposit for the payment of any amount due
Lessor or to reimburse or compensate Lessor for any liability, expense, loss or
damage which Lessor may suffer or incur by reason thereof. If Lessor uses or
applies all or any portion of the Security Deposit, Lessee shall within 10 days
after written request therefore deposit monies with Lessor sufficient to restore
said Security Deposit to the full amount required by this Lease.  Lessor shall
not be required to keep the Security Deposit separate from its general accounts.
Within 14 days after the expiration or termination of this Lease, if Lessor
elects to apply the Security Deposit only to unpaid Rent, and otherwise within
30 days after the Premises have been vacated pursuant to Paragraph 7.4(c) below,
Lessor shall return that portion of the Security Deposit not used or applied by
Lessor. No part of the Security Deposit shall be considered to be held in trust,
to bear interest or to be prepayment for any monies to be paid by Lessee under
this Lease.

 

6.                                       Use.

6.1                                 Use. Lessee shall use and occupy the
Premises only for the Agreed Use, or any other legal use which is reasonably
comparable thereto, and for no other purpose. Lessee shall not use or permit the
use of the Premises in a manner that is unlawful, creates damage, waste or a
nuisance, or that disturbs occupants of or causes damage to neighboring premises
or properties. 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 improvements on the Premises or
the mechanical or electrical systems therein, and/or is not significantly more
burdensome to the Premises. 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/Compliance. 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 fully complying 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
therefore. 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 in compliance with all Applicable Requirements, Lessee
shall immediately give written notice of such fact to Lessor, and provide Lessor
with a copy of any report, notice, claim or other documentation which it has
concerning the presence of such Hazardous Substance in violation of Applicable
Requirements.

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

(d) Lessee Indemnification. Lessee shall indemnify, defend and hold Lessor, its
agents, employees, lenders and ground lessor, if any, harmless from and against
any and all loss of rents and/or damages, liabilities, judgments, claims,
expenses, penalties, and attorneys’ and consultants’ fees arising out of or
involving any Hazardous Substance brought onto the Premises by or for Lessee, or
any third party (provided, however, that Lessee shall have no liability under
this Lease with respect to underground migration of any Hazardous Substance
under the Premises from adjacent properties 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

 

2

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

 

agreement entered into by Lessor and Lessee shall release Lessee from its
obligations under this Lease with respect to Hazardous Substances, unless
specifically so agreed by Lessor in writing at the time of such agreement.

(e) Lessor Indemnification. Lessor and its successors and assigns shall
indemnify, defend, reimburse and hold Lessee, its employees and lenders,
harmless from and against any and all environmental damages, including the cost
of remediation, which result from Hazardous Substances which existed on the
Premises prior to Lessee’s occupancy or which are caused by the gross negligence
or willful misconduct of Lessor, its agents or employees. Lessor’s obligations,
as and when required by the Applicable Requirements, shall include, but not be
limited to, the cost of investigation, removal, remediation, restoration and/or
abatement, and shall survive the expiration or termination of this Lease.

(f) Investigations and Remediations. Lessor shall retain the responsibility and
pay for any investigations or remediation measures required by governmental
entities having jurisdiction with respect to the existence of Hazardous
Substances on the Premises prior to Lessee’s occupancy, unless such remediation
measure is required as a result of Lessee’s use (including “Alterations”, as
defined in Paragraph 7.3(a) below) of the Premises, in which event Lessee shall
be responsible for such payment. Lessee shall cooperate fully in any such
activities at the request of Lessor, including allowing Lessor and Lessor’s
agents to have reasonable access to the Premises at reasonable times in order to
carry out Lessor’s investigative and remedial responsibilities.

(g) Lessor Termination Option. If a Hazardous Substance Condition (see Paragraph
9.1(e)) occurs during the term of this Lease, unless Lessee is legally
responsible therefore (in which case Lessee shall make the investigation and
remediation thereof required by the Applicable Requirements and this Lease shall
continue in full force and effect, but subject to Lessor’s rights under
Paragraph 6.2(d) and Paragraph 13), Lessor may, at Lessor’s option, either (i)
investigate and remediate such Hazardous Substance Condition, if required, as
soon as reasonably possible at Lessor’s expense, in which event this Lease shall
continue in full force and effect, or (ii) if the estimated cost to remediate
such condition exceeds 12 times the then monthly Base Rent or $100,000,
whichever is greater, give written notice to Lessee, within 30 days after
receipt by Lessor of knowledge of the occurrence of such Hazardous Substance
Condition, of Lessor’s desire to terminate this Lease as of the date 60 days
following the date of such notice. In the event Lessor elects to give a
termination notice, Lessee may, within 10 days thereafter, give written notice
to Lessor of Lessee’s commitment to pay the amount by which the cost of the
remediation of such Hazardous Substance Condition exceeds an amount equal to 12
times the then monthly Base Rent or $100,000, whichever is greater. Lessee shall
provide Lessor with said funds or satisfactory assurance thereof within 30 days
following such commitment. In such event, this Lease shall continue in full
force and effect, and Lessor shall proceed to make such remediation as soon as
reasonably possible after the required funds are available. If Lessee does not
give such notice and provide the required funds or assurance thereof within the
time provided, this Lease shall terminate as of the date specified in Lessor’s
notice of termination.

6.3                                 Lessee’s Compliance with Applicable
Requirements. Except as otherwise provided in this Lease, Lessee shall, at
Lessee’s sole expense, fully, diligently and in a timely manner, materially
comply with all Applicable Requirements, the requirements of any applicable fire
insurance underwriter or rating bureau, and the recommendations of Lessor’s
engineers and/or consultants which relate in any manner to the such
Requirements, without regard to whether such 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.

6.4                                 Inspection; Compliance. Lessor and Lessor’s
“Lender” (as defined in Paragraph 30) and consultants shall have the right to
enter into Premises at any time, in the case of an emergency, and otherwise at
reasonable times after reasonable notice, for the purpose of inspecting the
condition of the Premises and for verifying compliance by Lessee with this
Lease. The cost of any such inspections shall be paid by Lessor, unless a
violation of Applicable Requirements, or a Hazardous Substance Condition (see
Paragraph 9.1) is found to exist or be imminent, or the inspection is requested
or ordered by a governmental authority. In such case, Lessee shall upon request
reimburse Lessor for the cost of such inspection, so long as such inspection is
reasonably related to the violation or contamination. In addition, Lessee shall
provide copies of all relevant material safety data sheets (“MSDS”) to Lessor
within 10 days of the receipt of a 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” (as
defined in Paragraph 7.3(a)) (intended for Lessee’s exclusive use, no matter
where located), and “Alterations” (as defined in Paragraph 7.3(a)) 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, fire protection system, fixtures, walls (non-bearing),
ceilings, floors, windows, doors, plate glass, skylights, landscaping,
driveways, parking lots, fences, retaining walls, signs, Premises. Lessee is
also responsible for keeping the roof and roof drainage clean and free of
debris. Lessor shall keep the surface and structural elements of the roof,
foundations, and bearing walls in good repair (see Paragraph 7.2). Lessee, in
keeping the Premises in good order, condition and repair, shall exercise and
perform good maintenance practices. 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. Lessee shall, during the term of this Lease, keep the exterior
appearance of the Building in a first-class condition (including, e.g. graffiti
removal) consistent with the exterior appearance of other similar facilities of
comparable age and size in the vicinity, including, when necessary, the exterior
repainting of the Building.  Notwithstanding anything contained herein to the
contrary, Lessee shall not be required to replace the HVAC system or any other
building system during the last two (2) years of the term hereof and same shall
be Lessor’s responsibility (except that Lessor shall not have any obligation to
replace the HVAC system), provided however that in the event Lessee exercises
its right to terminate pursuant to Paragraph 55 below, the “last two (2) years
of the term” shall not include the sixth and seventh years of the term.

(b) Failure to Perform. If Lessee fails to perform Lessee’s obligations under
this Paragraph 7.1, Lessor may enter upon the Premises after 20 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.

7.2                                 Lessor’s Obligations. Subject to the
provisions of Paragraphs 2.2 (Condition), 2.3 (Compliance), 9 (Damage or
Destruction) and 14 (Condemnation), it is intended by the Parties hereto that
Lessor have no obligation, in any manner whatsoever, to repair and maintain the
Premises, or the equipment therein, all of which obligations are intended to be
that of the Lessee, except for the surface and structural elements of the roof,
foundations and bearing walls, the repair of which shall be the responsibility
of Lessor upon receipt of written notice that such a repair is necessary. It is
the intention of the Parties that the terms of this Lease govern the respective
obligations of the Parties as to maintenance and repair of the Premises, and
they expressly waive the benefit of any statute now or hereafter in effect to
the extent it is inconsistent with the terms of this Lease.

7.3                                 Utility Installations; Trade Fixtures;
Alterations.

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

(b) Consent. Lessee shall not make any Alterations or Utility Installations to
the Premises without Lessor’s prior written consent. Lessee may, however, make
non-structural Utility Installations to the interior of the Premises (excluding
the roof) without such consent

 

3

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

 

but upon notice to Lessor, as long as they are not visible from the outside, do
not involve puncturing, relocating or removing the roof or any existing walls,
will not affect the electrical, plumbing, HVAC, and/or life safety systems, and
the cumulative cost thereof during this Lease as extended does not exceed a sum
equal to 3 month’s Base Rent in the aggregate or a sum equal to one month’s Base
Rent in any one year. Notwithstanding the foregoing, Lessee shall not make or
permit any roof penetrations and/or install anything on the roof without the
prior written approval of Lessor. Lessor may, as a precondition to granting such
approval, require Lessee to utilize a contractor chosen and/or approved by
Lessor. Any Alterations or Utility Installations that Lessee shall desire to
make and which require the consent of the Lessor shall be presented to Lessor in
written form with detailed plans. Consent shall be deemed conditioned upon
Lessee’s: (i) acquiring all applicable governmental permits, (ii) furnishing
Lessor with copies of both the permits and the plans and specifications prior to
commencement of the work, and (iii) compliance with all conditions of said
permits and other Applicable Requirements in a prompt and expeditious manner.
Any Alterations or Utility Installations shall be performed in a workmanlike
manner with good and sufficient materials. Lessee shall promptly upon completion
furnish Lessor with as-built plans and specifications. For work which costs an
amount in excess of one month’s Base Rent, Lessor may condition its consent upon
Lessee providing a lien and completion bond in an amount equal to 150% of the
estimated cost of such Alteration or Utility Installation and/or upon Lessee’s
posting an additional Security Deposit with Lessor. Notwithstanding anything
contained herein to the contrary, Lessor has consented to the initial
Alterations to the Premises being undertaken by Lessee as described in Paragraph
53 of the Addendum.

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

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.
Unless otherwise instructed per Paragraph 7.4(b) hereof, and except for the
items described in Exhibit A which items must be removed prior to the expiration
of this Lease by Lessee, all Lessee Owned Alterations and Utility Installations
shall, at the expiration or termination of this Lease, become the property of
Lessor and be surrendered by Lessee with the Premises.

(b) Removal. By delivery to Lessee of written notice from Lessor not earlier
than 90 and not later than 30 days prior to the end of the term of this Lease,
Lessor may require that any or all Lessee Owned Alterations or Utility
Installations be removed by the expiration or termination of this Lease. Lessor
may require the removal at any time of all or any part of any Lessee Owned
Alterations or Utility Installations made without the required consent.

(c) Surrender; Restoration. Lessee shall surrender the Premises by the
Expiration Date or any earlier termination date, with all of the improvements,
parts and surfaces thereof broom clean and free of debris, and in good operating
order, condition and state of repair, ordinary wear and tear excepted. “Ordinary
wear and tear” shall not include any damage or deterioration that would have
been prevented by good maintenance practice. Notwithstanding the foregoing, if
this Lease is for 12 months or less, then Lessee shall surrender the Premises in
the same condition as delivered to Lessee on the Start Date with NO allowance
for ordinary wear and tear. Lessee shall repair any damage occasioned by the
installation, maintenance or removal of Trade Fixtures, Lessee owned Alterations
and/or Utility Installations, furnishings, and equipment as well as the removal
of any storage tank installed by or for Lessee. Lessee shall completely remove
from the Premises any and all Hazardous Substances brought onto the Premises by
or for Lessee, or any third party (except Hazardous Substances which were
deposited via underground migration from areas outside of the Premises, or if
applicable, 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.

 

8.                                       Insurance; Indemnity.

8.1                                 Payment of Premium Increases.

(a) Commencing on the first (1st) day of the second (2nd) year of the Term of
the Lease, Lessee shall pay to Lessor any insurance cost increase (“Insurance
Cost Increase”) occurring during the term of this Lease. Insurance Cost Increase
is defined as any increase in the actual cost of the insurance required under
Paragraph 8.3(a) and 8.3(b) (“Required Insurance”), over and above the Base
Premium as hereinafter defined calculated on an annual basis. Insurance Cost
Increase shall include but not be limited to increases resulting from the nature
of Lessee’s occupancy, any act or omission of Lessee, requirements of the holder
of mortgage or deed of trust covering the Premises, increased valuation of the
Premises and/or a premium rate increase. The Parties are encouraged to fill in
the Base Premium in Paragraph 1.8 with a reasonable premium for the Required
Insurance based on the Agreed Use of the Premises. If the Parties fail to insert
a dollar amount in Paragraph 1.8, then the Base Premium shall be the lowest
annual premium reasonably obtainable for the Required Insurance as of the
commencement of the Original Term for the Agreed Use of the Premises

(b) Lessee shall pay any such Insurance Cost Increase to Lessor within 30 days
after receipt by Lessee of a copy of the premium statement or other reasonable
evidence of the amount due. If the insurance policies maintained hereunder cover
other property besides the Premises, Lessor shall also deliver to Lessee a
statement of the amount of such Insurance Cost Increase attributable only to the
Premises showing in reasonable detail the manner in which such amount was
computed. Premiums for policy periods commencing prior to, or extending beyond
the term of this Lease, shall be prorated to correspond to the term of this
Lease.

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 $2,000,000 per occurrence with an annual aggregate of not less than
$5,000,000, an “Additional Insured-Managers or Lessors of Premises Endorsement”
and contain the “Amendment of the Pollution Exclusion Endorsement” for damage
caused by heat, smoke or fumes from a hostile fire. The policy shall not contain
any intra-insured exclusions as between insured persons or organizations, but
shall include coverage for liability assumed under this Lease as an “insured
contract” for the performance of Lessee’s indemnity obligations under this
Lease. The limits of said insurance shall not, however, limit the liability of
Lessee nor relieve Lessee of any obligation hereunder. All insurance carried by
Lessee shall be primary to and not contributory with any similar insurance
carried by Lessor, whose insurance shall be considered excess insurance only.

8.3                                 Property Insurance - Building, Improvements
and Rental Value.

(a) Building and Improvements. The Insuring Party shall obtain and keep in force
a policy or policies 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 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. If Lessor is the Insuring Party, however, Lessee Owned
Alterations and Utility Installations, Trade Fixtures, and Lessee’s personal
property shall be insured by Lessee under Paragraph 8.4 rather than 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 or
included in the Base Premium), 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

 

4

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

 

are located. If such insurance coverage has a deductible clause, the deductible
amount shall not exceed $1,000 per occurrence, and Lessee shall be liable for
such deductible amount in the event of an Insured Loss.

(b) Rental Value. The Insuring Party shall 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 Rental
Value 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. Lessee shall be liable for any deductible amount in the event of such
loss.

8.4                                 Lessee’s Property; Business Interruption
Insurance.

(a) Property Damage. Lessee shall obtain and maintain insurance coverage on all
of Lessee’s personal property, Trade Fixtures, and Lessee Owned Alterations and
Utility Installations. Such insurance shall be full replacement cost coverage
with a deductible to be at reasonable market level. The proceeds from any such
insurance shall be used by Lessee for the replacement of personal property,
Trade Fixtures and Lessee Owned Alterations and Utility Installations. Lessee
shall provide Lessor with written evidence that such insurance is in force.

(b) Business Interruption. Lessee shall obtain and maintain loss of income and
extra expense insurance in amounts as will reimburse Lessee for direct or
indirect loss of earnings attributable to all perils commonly insured against by
prudent lessees in the business of Lessee or attributable to prevention of
access to the Premises as a result of such perils.

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

8.5                                 Insurance Policies. Insurance required
herein shall be by companies duly licensed or admitted to transact business in
the state where the Premises are located, and maintaining during the policy term
a “General Policyholders Rating” of at least B+, V, as set forth in the most
current issue of “Best’s Insurance Guide”, or such other rating as may be
required by a Lender. Lessee shall not do or permit to be done anything which
invalidates the required insurance policies. Lessee shall, prior to the Start
Date, deliver to Lessor certified copies of policies of such insurance or
certificates evidencing the existence and amounts of the required insurance. No
such policy shall be cancelable or subject to modification except after 30 days
prior written notice to Lessor. Lessee shall, at least 30 days prior to the
expiration of such policies, furnish Lessor with evidence of renewals or
“insurance binders” evidencing renewal thereof, or Lessor may order such
insurance and charge the cost thereof to Lessee, which amount shall be payable
by Lessee to Lessor upon demand. Such policies shall be for a term of at least
one year, or the length of the remaining term of this Lease, whichever is less.
If either Party shall fail to procure and maintain the insurance required to be
carried by it, the other Party may, but shall not be required to, procure and
maintain the same.

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

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

8.8                                 Exemption of Lessor from Liability. Lessor
shall not be liable for 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, 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 of
which the Premises are a part, or from other sources or places, unless same was
caused by Landlord’s gross negligence or willful misconduct.  Notwithstanding
Lessor’s negligence or breach of this Lease, Lessor shall under no circumstances
be liable for injury to Lessee’s business or for any loss of income or profit
therefrom.

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, and the failure to cure such default after ten (10) days’
notice, the Base Rent shall be automatically increased, without any requirement
for further 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 6 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.

(b) “Premises Total Destruction” shall mean damage or destruction to the
Premises, other than Lessee Owned Alterations and Utility Installations and
Trade Fixtures, which cannot reasonably be repaired in 6 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 as defined in Paragraph 6.2(a), in, on, or under the Premises which
requires repair, remediation, or 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
(except as to the deductible which is Lessee’s responsibility) 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

 

5

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

 

for making the repairs shall complete them as soon as reasonably possible and
this Lease shall remain in full force and effect. If such funds or assurance are
not received, Lessor may nevertheless elect by written notice to Lessee within
10 days thereafter to: (i) make such restoration and repair as is commercially
reasonable with Lessor paying any shortage in proceeds, in which case this Lease
shall remain in full force and effect, or (ii) have this Lease terminate 30 days
thereafter. Lessee shall not be entitled to reimbursement of any funds
contributed by Lessee to repair any such damage or destruction. Premises Partial
Damage due to flood or earthquake shall be subject to Paragraph 9.3,
notwithstanding that there may be some insurance coverage, but the net proceeds
of any such insurance shall be made available for the repairs if made by either
Party.

9.3                                 Partial Damage - Uninsured Loss. If a
Premises Partial Damage that is not an Insured Loss occurs, unless caused by a
negligent or willful act of Lessee (in which event Lessee shall make the repairs
at Lessee’s expense), Lessor may either: (i) repair such damage as soon as
reasonably possible at Lessor’s expense, in which event this Lease shall
continue in full force and effect, or (ii) terminate this Lease by giving
written notice to Lessee within 30 days after receipt by Lessor of knowledge of
the occurrence of such damage. Such termination shall be effective 60 days
following the date of such notice. In the event Lessor elects to terminate this
Lease, Lessee shall have the right within 10 days after receipt of the
termination notice to give written notice to Lessor of Lessee’s commitment to
pay for the repair of such damage without reimbursement from Lessor. Lessee
shall provide Lessor with said funds or satisfactory assurance thereof within 30
days after making such commitment. In such event this Lease shall continue in
full force and effect, and Lessor shall proceed to make such repairs as soon as
reasonably possible after the required funds are available. If Lessee does not
make the required commitment, this Lease shall terminate as of the date
specified in the termination notice.

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

9.5                                 Damage Near End of Term. If at any time
during the last 6 months of this Lease there is damage for which the cost to
repair exceeds one month’s Base Rent, whether or not an Insured Loss, Lessor may
terminate this Lease effective 60 days following the date of occurrence of such
damage by giving a written termination notice to Lessee within 30 days after the
date of occurrence of such damage. Notwithstanding the foregoing, if Lessee at
that time has an exercisable option to extend this Lease or to purchase the
Premises, then Lessee may preserve this Lease by (a) exercising such option and
(b) providing Lessor with any shortage in insurance proceeds (or adequate
assurance thereof) needed to make the repairs on or before the earlier of (i)
the date which is 10 days after Lessee’s receipt of Lessor’s written notice
purporting to terminate this Lease, or (ii) the day prior to the date upon which
such option expires. If Lessee duly exercises such option during such period and
provides Lessor with funds (or adequate assurance thereof) to cover any shortage
in insurance proceeds, Lessor shall, at Lessor’s commercially reasonable
expense, repair such damage as soon as reasonably possible and this Lease shall
continue in full force and effect. If Lessee fails to exercise such option and
provide such funds or assurance during such period, then this Lease shall
terminate on the date specified in the termination notice and Lessee’s option
shall be extinguished.

9.6                                 Abatement of Rent; Lessee’s Remedies.

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

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

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

9.8                                 Waive Statutes. Lessor and Lessee agree that
the terms of this Lease shall govern the effect of any damage to or destruction
of the Premises with respect to the termination of this Lease and hereby waive
the provisions of any present or future statute to the extent inconsistent
herewith.

 

10.                                 Real Property Taxes.

10.1                           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 Premises or 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 Building
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
Premises are located. 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 Premises, and (ii) levied or assessed on machinery or
equipment provided by Lessor to Lessee pursuant to this Lease.

10.2

(a) Payment of Taxes. Lessor shall pay the Real Property Taxes applicable to the
Premises provided, however, that commencing on the first (1st) day of the second
(2nd) year of the Term of this Lease, Lessee shall pay to Lessor the amount, if
any, by which Real Property Taxes applicable to the Premises have increased over
the fiscal tax year during which the Commencement Date occurs (“Tax Increase”).
Payment of any such Tax Increase shall be made by Lessee to Lessor within 30
days after receipt of Lessor’s written statement setting forth the amount due
and computation thereof. If any such taxes shall cover any period of time prior
to or after the expiration or termination of this Lease, Lessee’s share of such
taxes shall be prorated to cover only that portion of the tax bill applicable to
the period that this Lease is in effect. In the event lessee incurs a late
charge on any Rent payment, Lessor may estimate the current Real Property Taxes,
and require that the Tax Increase be paid in advance to Lessor by Lessee monthly
in advance with the payment of the Base Rent. Such monthly payment shall be an
amount equal to the amount of the estimated installment of the Tax Increase
divided by the number of months remaining before the month in which said
installment becomes delinquent. When the actual amount of the applicable Tax
Increase is known, the amount of such equal monthly advance payments shall be
adjusted as required to provide the funds needed to pay the applicable Tax
Increase. If the amount collected by Lessor is insufficient to pay the Tax
Increase when due, Lessee shall pay Lessor, upon demand, such additional sums as
are necessary to pay such obligations. Advance payments may be intermingled with
other moneys of Lessor and shall not bear interest. In the event of a Breach by
Lessee in the performance of its obligations under this Lease, then any such
advance payments may be treated by Lessor as an additional Security Deposit.

(b) Additional Improvements. Notwithstanding anything to the contrary in this
Paragraph 10.2, Lessee shall pay to Lessor upon demand therefor the entirety of
any increase in Real Property Taxes assessed by reason of Alterations or Utility
Installations placed upon the Premises by Lessee or at Lessee’s request.

10.3                           Personal Property Taxes. Lessee shall pay, prior
to delinquency, all taxes assessed against and levied upon Lessee Owned
Alterations, Utility Installations, Trade Fixtures, furnishings, equipment and
all personal property of Lessee. 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.

 

6

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

 

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. If any such services are not separately metered or billed to Lessee,
Lessee shall pay a reasonable proportion, to be determined by Lessor, of all
charges jointly metered or billed. 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, which shall not be unreasonably withheld or delayed.  It
shall be reasonable to withhold consent if the proposed assignee or sublessee
has a net worth at the time of the proposed assignment that is less than the
“Net Worth of Lessee” as defined in Paragraph 12.1(c) at the time of execution
of the Lease.  In addition, assignment of the Lease to an affiliate, parent, or
subsidiary shall be permitted without Landlord’s consent, provided Lessee
remains liable hereunder.

(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 30% or
more of the voting control of Lessee shall constitute a change in control for
this purpose.

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

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

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

12.2                           Terms and Conditions Applicable to Assignment and
Subletting.

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

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

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

(d) In the event of any Default or Breach by Lessee, Lessor may proceed directly
against Lessee, any Guarantors or anyone else responsible for the performance of
Lessee’s obligations under this Lease, including any assignee or sublessee,
without first exhausting Lessor’s remedies against any other person or entity
responsible therefor 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 or entering into such sublease, 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 obligations any such excess shall be refunded to Lessee. Lessor shall
not, by reason of the foregoing or any assignment of such sublease, nor by
reason of the collection of Rent, be deemed liable to the sublessee for any
failure of Lessee to perform and comply with any of Lessee’s obligations to such
sublessee. Lessee hereby irrevocably authorizes and directs any such sublessee,
upon receipt of a written notice from Lessor stating that a Breach exists in the
performance of Lessee’s obligations under this Lease, to pay to Lessor all Rent
due and to become due under the sublease. Sublessee shall rely upon any such
notice from Lessor and shall pay all Rents to Lessor without any obligation or
right to inquire as to whether such Breach exists, notwithstanding any claim
from Lessee to the contrary.

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

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

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

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

 

13.                                 Default; Breach; Remedies.

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

(a) The abandonment of the Premises; or the vacating of the Premises without
providing a commercially reasonable level of security, or where the coverage of
the property insurance described in Paragraph 8.3 is jeopardized as a result
thereof, or without providing reasonable assurances to minimize potential
vandalism.

 

7

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

 

(b) The failure of Lessee to make any payment of Rent or any Security Deposit
required to be made by Lessee hereunder, whether to Lessor or to a third party,
when due, to provide reasonable evidence of insurance or surety bond, or to
fulfill any obligation under this Lease which endangers or threatens life or
property, where such failure continues for a period of 3 business days following
written notice to Lessee.

(c) The failure by Lessee to provide (i) reasonable written evidence of
compliance with Applicable Requirements, (ii) the rescission of an unauthorized
assignment or subletting, (iii) an Estoppel Certificate, (iv) a requested
subordination, (v) evidence concerning any guaranty and/or Guarantor, (vi) any
document requested under Paragraph 42, or (vii)  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.

(d) A Default by Lessee as to the terms, covenants, conditions or provisions of
this Lease, or of the rules adopted under Paragraph 40 hereof, other than those
described in subparagraphs 13.1(a), (b) or (c), 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.

(e) 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 (e) is
contrary to any applicable law, such provision shall be of no force or effect,
and not affect the validity of the remaining provisions.

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

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

(a) Terminate Lessee’s right to possession of the Premises by any lawful means,
in which case this Lease shall terminate and Lessee shall immediately surrender
possession to Lessor. In such event Lessor shall be entitled to recover from
Lessee: (i) the unpaid Rent which had been earned at the time of termination;
(ii) the worth at the time of award of the amount by which the unpaid rent which
would have been earned after termination until the time of award exceeds the
amount of such rental loss that the Lessee proves could have been reasonably
avoided; (iii) the worth at the time of award of the amount by which the unpaid
rent for the balance of the term after the time of award exceeds the amount of
such rental loss that the Lessee proves could be reasonably avoided; and (iv)
any other amount necessary to compensate Lessor for all the detriment
proximately caused by the Lessee’s failure to perform its obligations under this
Lease or which in the ordinary course of things would be likely to result
therefrom, including but not limited to the cost of recovering possession of the
Premises, expenses of 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, or for the giving or paying by Lessor to or for
Lessee of any cash or other bonus, inducement or consideration for Lessee’s
entering into this Lease, all of which concessions are hereinafter referred to
as “Inducement Provisions,” shall be deemed conditioned upon Lessee’s full and
faithful performance of all of the terms, covenants and conditions of this
Lease. Upon Breach of this Lease by Lessee, any such Inducement Provision shall
automatically be deemed deleted from this Lease and of no further force or
effect, and any rent, other charge, bonus, inducement or consideration
theretofore abated, given or paid by Lessor under such an inducement Provision
shall be immediately due and payable by Lessee to Lessor, notwithstanding any
subsequent cure of said Breach by Lessee. The acceptance by Lessor of rent or
the cure of the Breach which initiated the operation of this Paragraph shall not
be deemed a waiver by Lessor of the provisions of this Paragraph unless
specifically so stated in writing by Lessor at the time of such acceptance.

13.4                           Late Charges. Lessee hereby acknowledges that
late payment by Lessee of Rent will cause Lessor to incur costs not contemplated
by this Lease, the exact amount of which will be extremely difficult to
ascertain. Such costs include, but are not limited to, processing and accounting
charges, and late charges which may be imposed upon Lessor by any Lender.
Accordingly, if any Rent shall not be received by Lessor within 5 days after
such amount shall be due more than twice in any calendar year during the term
hereof, then, without any requirement for notice to Lessee, Lessee shall
immediately pay to Lessor a one-time late charge equal to 10% of each such
overdue amount or $100, whichever is greater. The Parties hereby agree that such
late charge represents a fair and reasonable estimate of the costs Lessor will
incur by reason of such late payment. Acceptance of such late charge by Lessor
shall in no event constitute a waiver of Lessee’s Default or Breach with respect
to such overdue amount, nor prevent the exercise of any of the other rights and
remedies granted hereunder. In the event that a late charge is payable
hereunder, whether or not collected, for 3 consecutive installments of Base
Rent, then notwithstanding any provision of this Lease to the contrary, Base
Rent shall, at Lessor’s option, become due and payable quarterly in advance.

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

13.6                           Breach by Lessor.

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

 

8

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

 

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

 

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

 

15.                                 Brokerage Fees.

15.1                           Intentionally Deleted.

15.2                           Assumption of Obligations. Any buyer or
transferee of Lessor’s interest in this Lease shall be deemed to have assumed
Lessor’s obligation hereunder. Brokers shall be third party beneficiaries of the
provisions of Paragraphs 1.9, 15, 22 and 31. If Lessor fails to pay to Brokers
any amounts due as and for brokerage fees pertaining to this Lease when due,
then such amounts shall accrue Interest. In addition, if Lessor fails to pay any
amounts to Lessee’s Broker when due, Lessee’s Broker may send written notice to
Lessor and Lessee of such failure and if Lessor fails to pay such amounts within
10 days after said notice, Lessee shall pay said monies to its Broker and offset
such amounts against Rent. In addition, Lessee’s Broker shall be deemed to be a
third party beneficiary of any commission agreement entered into by and/or
between Lessor and Lessor’s Broker for the limited purpose of collecting any
brokerage fee owed.

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 American Industrial Real
Estate Association, plus such additional information, confirmation and/or
statements as may be reasonably requested by the Requesting Party.

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

(c) If Lessor desires to finance, refinance, or sell the Premises, or any part
thereof, Lessee and all Guarantors shall deliver to any potential lender or
purchaser designated by Lessor such financial statements as may be reasonably
required by such lender or purchaser, including but not limited to Lessee’s
financial statements for the past 3 years. All such financial statements shall
be received by Lessor and such lender or purchaser in confidence and shall be
used only for the purposes herein set forth.

 

17.                                 Definition of Lessor. The term “Lessor” as
used herein shall mean the owner or owners at the time in question of the fee
title to the Premises, or, if this is a sublease, of the Lessee’s interest in
the prior lease. In the event of a transfer of Lessor’s title or interest in the
Premises or this Lease, Lessor shall deliver to the transferee or assignee (in
cash or by credit) any unused Security Deposit held by Lessor. Except as
provided in Paragraph 15, upon such transfer or assignment and delivery of the
Security Deposit, as aforesaid, the prior Lessor shall be relieved of all
liability with respect to the obligations and/or covenants under this Lease
thereafter to be performed by the Lessor. Subject to the foregoing, the
obligations and/or covenants in this Lease to be performed by the Lessor shall
be binding only upon the Lessor as 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. The liability
(including court costs and attorneys’ fees), of any Broker with respect to
negotiation, execution, delivery or performance by either Lessor or Lessee under
this Lease or any amendment or modification hereto shall be limited to an amount
up to the fee received by such Broker pursuant to this Lease; provided, however,
that the foregoing limitation on each Broker’s liability shall not be applicable
to any gross negligence or willful misconduct of such Broker.

 

23.                                 Notices.

23.1                           Notice Requirements. All notices required or
permitted by this Lease or applicable law shall be in writing and may be
delivered in person (by hand or by courier) or may be sent by regular, certified
or registered mail or U.S. Postal Service Express Mail, with postage

 

9

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

 

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 48
hours after the same is addressed as required herein and mailed with postage
prepaid. Notices delivered by United States Express Mail or overnight courier
that guarantee next day delivery shall be deemed given 24 hours after delivery
of the same to the Postal Service or courier. Notices transmitted by facsimile
transmission or similar means shall be deemed delivered upon telephone
confirmation of receipt (confirmation report from fax machine is sufficient),
provided a copy is also delivered via delivery or mail. If notice is received on
a Saturday, Sunday or legal holiday, it shall be deemed received on the next
business day.

 

24.                                 Waivers. No waiver by Lessor of the Default
or Breach of any term, covenant or condition hereof by Lessee, shall be deemed a
waiver of any other term, covenant or condition hereof, or of any subsequent
Default or Breach by Lessee of the same or of any other term, covenant or
condition hereof. Lessor’s consent to, or approval of, any act shall not be
deemed to render unnecessary the obtaining of Lessor’s consent to, or approval
of, any subsequent or similar act by Lessee, or be construed as the basis of an
estoppel to enforce the provision or provisions of this Lease requiring such
consent. The acceptance of Rent by Lessor shall not be a waiver of any Default
or Breach by Lessee. Any payment by Lessee may be accepted by Lessor on account
of 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.

 

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

(a) When entering into a discussion with a real estate agent regarding a real
estate transaction, a Lessor or Lessee should from the outset understand what
type of agency relationship or representation it has with the agent or agents in
the transaction. Lessor and Lessee acknowledge being advised by the Brokers in
this transaction, as follows:

(i) Lessor’s Agent. A Lessor’s agent under a listing agreement with the Lessor
acts as the agent for the Lessor only. A Lessor’s agent or subagent has the
following affirmative obligations: To the Lessor: A fiduciary duty of utmost
care, integrity, honesty, and loyalty in dealings with the Lessor. To the Lessee
and the Lessor: a. Diligent exercise of reasonable skills and care in
performance of the agent’s duties. b. A duty of honest and fair dealing and good
faith. c. A duty to disclose all facts known to the agent materially affecting
the value or desirability of the property that are not known to, or within the
diligent attention and observation of, the Parties. An agent is not obligated to
reveal to either Party any confidential information obtained from the other
Party which does not involve the affirmative duties set forth above.

(ii) Lessee’s Agent. An agent can agree to act as agent for the Lessee only. In
these situations, the agent is not the Lessor’s agent, even if by agreement the
agent may receive compensation for services rendered, either in full or in part
from the Lessor. An agent acting only for a Lessee has the following affirmative
obligations. To the Lessee: A fiduciary duty of utmost care, integrity, honesty,
and loyalty in dealings with the Lessee. To the Lessee and the Lessor: a.
Diligent exercise of reasonable skills and care in performance of the agent’s
duties. b. A duty of honest and fair dealing and good faith. c. A duty to
disclose all facts known to the agent materially affecting the value or
desirability of the property that are not known to, or within the diligent
attention and observation of, the Parties. An agent is not obligated to reveal
to either Party any confidential information obtained from the other Party which
does not involve the affirmative duties set forth above.

(iii) Agent Representing Both Lessor and Lessee. A real estate agent, either
acting directly or through one or more associate licenses, can legally be the
agent of both the Lessor and the Lessee in a transaction, but only with the
knowledge and consent of both the Lessor and the Lessee. In a dual agency
situation, the agent has the following affirmative obligations to both the
Lessor and the Lessee: a. A fiduciary duty of utmost care, integrity, honesty
and loyalty in the dealings with either Lessor or the Lessee. b. Other duties to
the Lessor and the Lessee as stated above in subparagraphs (i) or (ii). In
representing both Lessor and Lessee, the agent may not without the express
permission of the respective Party, disclose to the other Party that the Lessor
will accept rent in an amount less than that indicated in the listing or that
the Lessee is willing to pay a higher rent than that offered. The above duties
of the agent in a real estate transaction do not relieve a Lessor or Lessee from
the responsibility to protect their own interests.

Lessor and Lessee should carefully read all agreements to assure that they
adequately express their understanding of the transaction. A real estate agent
is

a person qualified to advise about real estate. If legal or tax advice is
desired, consult a competent professional.

(b) Brokers have no responsibility with respect to any default or breach hereof
by either Party. The liability (including court costs and attorneys’ fees), of
any Broker with respect to any breach of duty, error or omission relating to
this Lease shall not exceed the fee received by such Broker pursuant to this
Lease; provided, however, that the foregoing limitation on each Broker’s
liability shall not be applicable to any gross negligence or willful misconduct
of such Broker.

(c) Lessor and Lessee agree to identify to Brokers as “Confidential” any
communication or information given Brokers that is considered by such Party to
be confidential.

 

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

 

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

 

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

 

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

 

30.                                 Subordination; Attornment; Non-Disturbance.

 

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

30.2                           Attornment. In the event that Lessor transfers
title to the Premises, or the Premises are acquired by another upon the
foreclosure or termination of a Security Device to which this Lease is
subordinated (i) Lessee shall, subject to the non-disturbance provisions of

 

10

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

 

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 such new
owner, this Lease shall automatically become a new Lease between Lessee and such
new owner, upon all of the terms and conditions hereof, for the remainder of the
term hereof, and (ii) Lessor shall thereafter be relieved of any further
obligations hereunder and such new owner shall assume all of Lessor’s
obligations hereunder, except that such new owner shall not: (a) be liable for
any act or omission of any prior lessor or with respect to events occurring
prior to acquisition of ownership; (b) be subject to any offsets or defenses
which Lessee might have against any prior lessor, (c) be bound by prepayment of
more than one month’s rent, or (d) be liable for the return of any security
deposit paid to any prior lessor.

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

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

 

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

 

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 at reasonable times after
reasonable prior notice for the purpose of showing the same to prospective
purchasers, lenders, or tenants, and making such alterations, repairs,
improvements or additions to the Premises as Lessor may deem necessary or
desirable and the erecting, using and maintaining of utilities, services, pipes
and conduits through the Premises and/or other premises as long as there is no
material adverse effect to 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. Lessee shall have the right to place signs
upon the Premises without Lessor’s prior written consent, provided such signs
comply with all Applicable Requirements.

 

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

 

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

 

37.                                 INTENTIONALLY OMITTED.

 

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

 

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

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

39.2                           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.

39.3                           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.

 

11

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

 

40.                                 Multiple Buildings. If the Premises are a
part of a group of buildings controlled by Lessor, Lessee agrees that it will
abide by and conform to all reasonable rules and regulations which Lessor may
make from time to time for the management, safety, and care of said properties,
including the care and cleanliness of the grounds and including the parking,
loading and unloading of vehicles, and to cause its employees, suppliers,
shippers, customers, contractors and invitees to so abide and conform. Lessee
also agrees to pay its fair share of common expenses incurred in connection with
such rules and regulations.

 

41.                                 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.

 

42.                                 Reservations. Lessor reserves to itself the
right, from time to time, to grant, without the consent or joinder of Lessee,
such easements, rights and dedications that Lessor deems necessary, and to cause
the recordation of parcel maps and restrictions, so long as such easements,
rights, dedications, maps and restrictions do not unreasonably interfere with
the use of the Premises by Lessee. Lessee agrees to sign any documents
reasonably requested by Lessor to effectuate any such easement rights,
dedication, map or restrictions.

 

43.                                 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.

 

44.                                 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.

 

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

 

46.                                 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.

 

47.                                 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.

 

48.                                 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. Each Party executing
this Agreement has been advised and understands that this provision is not
required by law to be a part of the Agreement but is subject to negotiation
between the Parties.

48.1                           Each Party to this Agreement hereby waives
his/its right to a jury trial of any controversy, dispute or claim or whatever
nature arising out of, in connection with or in relation to the interpretation,
performance or breach of this Agreement, including any claim based on contract,
tort, or statute.

48.2                           Notice:  By initialing in the space below, you
are stating that you have read all of the terms of the “Waiver of Jury Trial”
provision of this agreement and that you are agreeing that any dispute arising
out of or related to the matters included in the “Waiver of Jury Trial”
provision shall be decided by a judge, as provided by California law, and you
are giving up any rights you might possess to have the controversy, claim, or
dispute litigated in a jury trial; by initialing in the space below, you are
giving up your right to a jury trial. Your agreement to this provision is
voluntary.

48.3                           We have read and understand the foregoing and
agree to submit all controversies, disputes or claims of, in connection with or
in relation to the interpretation, performance, or breach of this Agreement,
including any claim based on contract, tort, or statute included in the “Waiver
of Jury Trial” provision to a judge.

 

Lessee’s Initials:                                Lessor’s Initials:
                          

 

49.                                 Mediation and Arbitration of Disputes. An
Addendum requiring the Mediation and/or the Arbitration of all disputes between
the Parties and/or Brokers arising out of this Lease ý is o is not attached to
this Lease. Prior to filing any action or lawsuit, any controversy, dispute or
claim of whatever nature arising out of, in connection with or in relation to
the interpretation, performance or breach of this Agreement, including any claim
based on contract, tort, or statute, a Party to this Agreement must first
attempt a good faith mediation before a retired judge or justice from the JAMS
panel in accordance with the then existing Rules of Practice and Procedure of
JAMS, or as may otherwise be mutually agreed by the Parties.  Failure of any
Party to participate in the mediation process shall result in a forfeiture of
the nonparticipating Party of the right to prosecute or defend the claim which
is the subject of the action or lawsuit.

 

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

 

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

 

ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN
INDUSTRIAL 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.

 

12

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

 

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, AND THE SUITABILITY
OF THE PREMISES FOR LESSEE’S INTENDED USE.

 

WARNING: IF THE PREMISES IS 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 IS LOCATED.

 

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

 

Executed at:

San Francisco

 

Executed at:

San Francisco

 

on:

February 23, 2004

 

on:

February 23, 2004

 

By LESSOR:

William Cash Forman

 

By LESSEE:

Hoefer, Inc.

 

 

By:

/s/ William Cash Forman

 

By:

/s/ Hugh Douglas Jr.

 

Name Printed:

William Cash Forman

 

Name Printed:

Hugh Douglas Jr.

 

Title:

Owner

 

Title:

Managing Director

 

By:

 

 

By:

 

 

Name Printed:

 

 

Name Printed:

 

 

Title:

 

 

Title:

 

 

Address:

 

 

Address:

 

 

Telephone/Facsimile:

415 648-2400

 

Telephone/Facsimile:

415 550-3431

 

 

 

 

 

 

 

Federal ID No.

 

 

Federal ID No.

200277014

 

 

 

BROKER:

HC&M Commercial Properties, Inc.

 

BROKER:

GVA Whitney Cressman

 

Attn:

David Becker

 

Attn:

James Bennett

 

Title:

Title:

Senior Advisor

 

Address:

1234 Mariposa Street

 

Address:

505 Sansome Street, Suite 300

 

San Francisco, CA 94107

 

San Francisco, CA 94111

 

Telephone/Facsimile:

415-865-3740/415-865-3753

 

Telephone/Facsimile:

415-229-8948/415-229-8987

 

Federal ID No.

 

 

Federal ID No.

 

 

 

 

NOTE: These forms are often modified to meet the changing requirements of law
and industry needs. Always write or call to make sure you are utilizing the most
current form: AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION, 700 So. Flower
Street, Suite 600, Los Angeles, California 90017. (213) 687-8777. Fax No. (213)
687-8616

 

13

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

 

Addendum to Standard Industrial/Commercial Single-Tenant Lease-Gross Dated
October 23, 2003, between William Cash Forman (Lessor) and Hoefer, Inc.
(Lessee), For the Premises Known as 953 Indiana Street, San Francisco

 

In the event of any conflict or inconsistency between the printed provisions of
the Lease Agreement and the provisions of this Addendum, the provisions of this
Addendum shall control.

 

51.                               Lease Term Rent Table.

A base rent of $16,995.00 paid monthly with three and a half percent (3.5%)
annual increases over the ten (10) year term.

 

Year

 

Monthly Rent

 

5/23/2004 – 2/28/2005:

 

$

16,995.00

 

3/1/2005 – 2/28/2006:

 

$

17,590.00

 

3/1/2006 – 2/28/2007:

 

$

18,205.00

 

3/1/2007 – 2/29/2008:

 

$

18,843.00

 

3/1/2008 – 2/28/2009:

 

$

19,502.00

 

3/1/2009 – 2/28/2010:

 

$

20,185.00

 

3/1/2010 – 2/28/2011:

 

$

20,891.00

 

3/1/2011 – 2/29/2012:

 

$

21,622.00

 

3/1/2012 – 2/28/2013:

 

$

22,379.00

 

3/1/2013 – 2/28/2014:

 

$

23,162.00

 

 

 

52.                               Prior Occupancy.

Lessee shall have the right to occupy said Premises as of the date of execution
of this Lease by Lessor.  Lessee shall pay no base rent prior to May 23, 2004. 
During this time, all provisions of the Lease (including but not limited to the
obligation to pay insurance premiums and to maintain the Premises), except the
provisions relating to rent, shall be in full force and effect.

 

53.                               Tenant Improvement Allowance.

Lessor shall provide Lessee with a base building improvement allowance of
Seventy-Five Thousand Dollars ($75,000.00).  Lessee shall undertake and complete
the following work (“Lessee’s Work”):

 

A.           Construct a loading dock with new access door

B.             Provide an ADA accessible entrance to building

C.             Provide ADA compliant restrooms

D.            Repair and re-stripe parking area as per their requirements and
City code

E.              Provide additional floor load capability

F.              Ensure the operation of all plumbing fixtures as are currently
in the premises

G.             Ensure the operation of existing electrical system

H.            Ensure the operation of the HVAC equipment to their satisfaction

I.                 Any other improvements which Lessee deems necessary to make
the Premises ready for Tenant’s occupancy, all as shown on the plans previously
submitted to Lessor; provided, however, that such improvements shall be limited
in scope so that the improvements shall not trigger any seismic upgrade
requirements to the Building pursuant to all Applicable Requirements.

 

Upon receipt by Lessor of Lessee’s demand for reimbursement after substantial
completion of all of the above work, Lessor shall have 30 days to make
reimbursement payment to Lessee.  In the event Lessor fails to make such
payment, in addition to any and all other remedies Lessee may have for
non-payment thereof, Lessee may deduct and setoff such Tenant Improvement
Allowance amount against future Rent and other charges due and owing hereunder.

 

Notwithstanding anything contained herein to the contrary, any and all seismic
improvements to the Premises required by the City of San Francisco prior to
Lessee’s occupancy or as a result of Lessee’s Work or occupancy shall be
undertaken by Lessor and completed by Lessor at Lessor’s sole cost and expense. 
In the event Lessee changes its use of the Premises or performs any work after
the execution of the Lease that is not a part of Lessee’s Work, which change or
work triggers any seismic upgrade requirements to the

 

14

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

 

Building pursuant to all Applicable Requirements, said upgrade requirements
shall be performed by Lessee at its sole cost and expense.

 

54.                               Broker Commission.

Upon mutual execution of a formal Lease, Lessor shall compensate brokers with a
commission based on the below listed schedule.  The commission shall be split
equally (50/50) between Whitney Cressman and HC&M Commercial Properties, Inc.:

 

Rent

 

X  Months

 

Total

 

X%=

 

Commission

 

$16,995.00

 

12

 

$

203,940

 

6

%

$

12,236.40

 

$17,590.00

 

12

 

$

211,077

 

6

%

$

12,664.67

 

$18,205.00

 

12

 

$

218,465

 

5

%

$

10,923.28

 

$18,843.00

 

12

 

$

226,111

 

5

%

$

11,305.60

 

$19,502.00

 

12

 

$

234,025

 

4

%

$

9,361.03

 

$20,185.00

 

12

 

$

242,216

 

3

%

$

7,266.50

 

$20,891.00

 

12

 

$

250,694

 

3

%

$

7,520.83

 

$21,622.00

 

12

 

$

259,468

 

3

%

$

7,784.06

 

$22,379.00

 

12

 

$

268,550

 

3

%

$

8,056.50

 

$23,162.00

 

12

 

$

277,949

 

3

%

$

8,338.48

 

Total lease consideration:

 

 

 

$

2,392,500

 

 

 

 

 

Total commission due:

 

 

 

 

 

 

 

$

95,457.35

 

 

Commission fee to be due as follows:

 

a)                                      50% due upon lease signing,

b)                                     50% (final) due at the first month of the
term (3/1/2004)

 

Should the option to extend be exercised, Lessor shall compensate above listed
brokers with a commission based on the following schedule upon written notice of
Lessee exercising said option:

 

2.5% of the rent for the five-year term.

 

55.                               Termination Right.

Notwithstanding anything contained in the Lease to the contrary, Lessee shall
have the right to terminate this Lease at any time after the seventh (7th)
anniversary of the Commencement Date by delivery of written notice to Lessor at
least one hundred eighty (180) days prior to the effective date of such
termination and the payment of a termination fee equal to the sum of (i) the
unamortized portion of the Tenant Improvement Allowance as of the effective date
of such termination, plus (ii) the amount of any leasing commission to be paid
by Lessor after the date of the lease termination applicable to the then
remaining lease term.

 

56.                               Lessor’s Work.

Lessor has notified Lessee that Lessor will perform certain seismic repair work
to the Building (“Lessor’s Work”), in Lessor’s sole discretion, commencing on or
near the date of the full execution of this Lease, and to be completed within
the first year of the term, more or less.  Lessor’s Work shall generally consist
of installing lateral tie-ins along the roof perimeter and shear bolting of
ledgers to concrete walls of the Building. As a result, Lessor’s Work may be
performed simultaneously with the work to be performed by Lessee pursuant to
Paragraph 53, above, at the Premises (“Lessee’s Work”).  To the extent
commercially reasonable, Lessor’s and Lessee’s contractors shall perform their
respective work in a manner and at times which do not impede or delay the
other’s contractor in the completion of the Premises as provided in this Lease.
Any such delays in the completion of the Premises shall not delay the
Commencement Date (Paragraph 1.3) nor the date upon which Base Rent shall
commence (Paragraph 1.5), nor any other time for performance by Lessee of any of
the provisions of this Lease. Any damage to any of Lessor’s Work caused by
Lessee’s contractor shall be repaired to Lessor’s reasonable satisfaction at the
sole cost and expense of Lessee.

 

15

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