Exhibit 10.3

 

STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE - NET
AIR COMMERCIAL REAL ESTATE ASSOCIATION

 

1.Basic Provisions (“Basic Provisions”).

 

1.1              Parties: This Lease (“Lease”), dated for reference purposes
only March 15, 2004, is made by and between JONDA HAWTHORNE, LLC (“Lessor”) and
DISTRIBUTION BY AIR, a DBA DISTRIBUTIONS SERVICES, INC. COMPANY (“Lessee”),
(collectively the “Parties”, or individually a “Party”).

 

1.2              (a) Premises: That certain portion of the Project (as defined
below), including all improvements therein or to be provided by Lessor under the
terms of this Lease, commonly known by the street address of 2701 W. El Sequndo
Blvd., located in the City of Hawthorne, County of Los Angeles, State of
California, with zip code 90250, as outlined on Exhibit A attached hereto
(“Premises”) and generally described as (describe briefly the nature of the
Premises): an approximately 70,100 square foot portion of a larger industrial
type building. In addition to Lessee’s rights to use and occupy the Premises as
hereinafter specified, Lessee shall have non-exclusive rights to the Common
Areas (as defined in Paragraph 2.7 below) as hereinafter specified, but shall
not have any rights to the roof, exterior walls or utility raceways of the
building containing the Premises (“Building”) or to any other buildings in the
Project. The Premises, the Building, the Common Areas, the land upon which they
are located, along with all other buildings and improvements thereon, are herein
collectively referred to as the “Project.” (See also Paragraph 2)

 

(b)               Parking: N/A unreserved vehicle parking spaces (“Unreserved
Parking Spaces”); and N/A reserved vehicle parking spaces (“Reserved Parking
Spaces”). (See also Paragraph 2.6)

 

1.3              Term: Five (5) years and three (3) months (“Original Term”)
commencing May 1, 2004 (“Commencement Date”) and ending July 31, 2009
(“Expiration Date”). (See also Paragraph 3)

 

1.4              Early Possession: N/A (“Early Possession Date”). (See also
Paragraphs 3.2 and 3.3)

 

1.5              Base Rent: $27,339.00 per month (“Base Rent”), payable on the
first day of each month commencing August 01, 2004. (See also Paragraph 4)

 

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

 

1.6              Lessee’s Share of Common Area Operating Expenses: 477.00/mo,
initially percent (28.71%) (“Lessee’s Share”). (see Addendum 54.)

 

1.7              Base Rent and Other Monies Paid Upon Execution:

 

(a)                Base Rent: $27,339.00 for the period August 01, 2004, through
August 31, 2004.

 

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(b)               Common Area Operating Expenses: $477.00 for the period August
01-31, 2004.

 

(c)                Security Deposit: $27,339.00 (“Security Deposit”). (See also
Paragraph 5)

 

(d)               Other: $N/A for N/A.

 

(e)                Total Due Upon Execution of this Lease: $55,155.00.

 

1.8              Agreed Use: general office, warehousing, trucking, freight
forwarding, and related lawful uses.

 

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

 

1.10          Real Estate Brokers: (See also Paragraph 15)

 

(a)                Representation: The following real estate brokers (the
“Brokers”) and brokerage relationships exist in this transaction (check
applicable boxes):

 

¨N/A represents Lessor exclusively (“Lessor’s Broker”);

 

¨N/A represents Lessee exclusively (“Lessee’s Broker”); or

 

ýColliers Seeley International, Inc. 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 Brokers the brokerage fee agreed to in
a separate written agreement (or if there is no such agreement, the sum of per
agmt or agmt % of the total Base Rent for the brokerage services rendered by the
Brokers).

 

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

 

1.12          Addenda and Exhibits. Attached hereto is an Addendum or Addenda
consisting of Paragraphs 50 through 62 and Exhibits A-1 through A-3, all of
which constitute a part of this Lease.

 

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.

 

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2.2              Condition. Lessor shall deliver that portion of the Premises
contained within the Building (“Unit”) to Lessee broom clean and free of debris
on the Commencement Date or the Early Possession Date, whichever first occurs
(“Start Date”), and, so long as the required service contracts described in
Paragraph 7.1(b) below are obtained by Lessee and in effect within thirty days
following the Start Date, warrants that the existing electrical, plumbing, fire
sprinkler, lighting, heating, ventilating and air conditioning systems (“HVAC”),
loading doors, if any, and all other such elements in the Unit, other than those
constructed by Lessee, shall be in good operating condition on said date and
that the structural elements of the roof, bearing walls and foundation of the
Unit shall be free of material defects. If a non-compliance with such warranty
exists as of the Start Date, or if one of such systems or elements should
malfunction or fail within the appropriate warranty period, Lessor shall, as
Lessor’s sole obligation with respect to such matter, except as otherwise
provided in this Lease, promptly after receipt of written notice from Lessee
setting forth with specificity the nature and extent of such non-compliance,
malfunction or failure, rectify same at Lessor’s expense. The warranty periods
shall be as follows: (i) 6 months as to the HVAC systems, and (ii) 30 days as to
the remaining systems and other elements of the Unit. If Lessee does not give
Lessor the required notice within the appropriate warranty period, correction of
any such non-compliance, malfunction or failure shall be the obligation of
Lessee at Lessee’s sole cost and expense (except for the repairs to the fire
sprinkler systems, roof, foundations, and/or bearing walls - see Paragraph 7).

 

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

 

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

 

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(b)               If such Capital Expenditure is not the result of the specific
and unique use of the Premises by Lessee (such as, governmentally mandated
seismic modifications), then Lessor and Lessee shall allocate the obligation to
pay for the portion of such costs reasonably attributable to the Premises
pursuant to the formula set out in Paragraph 7.1(d); provided, however, that if
such Capital Expenditure is required during the last 2 years of this Lease or if
Lessor reasonably determines that it is not economically feasible to pay its
share thereof, Lessor shall have the option to terminate this Lease upon 90 days
prior written notice to Lessee unless Lessee notifies Lessor, in writing, within
10 days after receipt of Lessor’s termination notice that Lessee will pay for
such Capital Expenditure. If Lessor does not elect to terminate, and fails to
tender its share of any such Capital Expenditure, Lessee may advance such funds
and deduct same, with Interest, from Rent until Lessor’s share of such costs
have been fully paid. If Lessee is unable to finance Lessor’s share, or if the
balance of the Rent due and payable for the remainder of this Lease is not
sufficient to fully reimburse Lessee on an offset basis, Lessee shall have the
right to terminate this Lease upon 30 days written notice to Lessor.

 

(c)                Notwithstanding the above, the provisions concerning Capital
Expenditures are intended to apply only to non-voluntary, unexpected, and new
Applicable Requirements. If the Capital Expenditures are instead triggered by
Lessee as a result of an actual or proposed change in use, change in intensity
of use, or modification to the Premises then, and in that event, Lessee shall be
fully responsible for the cost thereof, and Lessee shall not have any right to
terminate this Lease.

 

2.4              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, environmental aspects, and compliance with
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.

 

2.5              Intentionally Omitted.

 

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

 

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(a)                Lessee shall not permit or allow any vehicles that belong to
or are controlled by Lessee or Lessee’s employees, suppliers, shippers,
customers, contractors or invitees to be loaded, unloaded, or parked in areas
other than those designated by Lessor for such activities.

 

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

 

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

 

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

 

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

 

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

 

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

 

(a)                To make changes to the Common Areas, including, without
limitation, changes in the location, size, shape and number of driveways,
entrances, parking spaces, parking areas, loading and unloading areas, ingress,
egress, direction of traffic, landscaped areas, walkways and utility raceways;

 

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

 

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

 

(d)               To add additional buildings and improvements to the Common
Areas;

 

(e)                To use the Common Areas while engaged in making additional
improvements, repairs or alterations to the Project, or any portion thereof; and

 

(f)                To do and perform such other acts and make such other changes
in, to or with respect to the Common Areas and Project as Lessor may, in the
exercise of sound business judgment, deem to be appropriate.

 

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. If Lessee totally or partially occupies the
Premises prior to the Commencement Date, the obligation to pay Base Rent shall
be abated for the period of such early possession. All other terms of this Lease
(including but not limited to the obligations to pay Lessee’s Share of Common
Area Operating Expenses, Real Property Taxes and insurance premiums and to
maintain the Premises) shall, however, be in effect during such period. Any such
early possession shall not affect the Expiration Date.

 

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 as agreed, Lessor shall not be subject to any liability therefor, 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 it receives
possession of the Premises. 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. Except as otherwise provided, if possession is not
tendered to Lessee by the Start Date and Lessee does not terminate this Lease,
as aforesaid, 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 of the Premises is not delivered within 4 months after the
Commencement Date, this Lease shall terminate unless other agreements are
reached between Lessor and Lessee, in writing.

 

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

 

4.Rent.

 

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

 

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

 

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

 

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

 

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

 

(bb)Exterior signs and any tenant directories.

 

(cc)Any fire detection and/or sprinkler systems.

 

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

 

(iii)Trash disposal, pest control services, property management, security
services, and the costs of any environmental inspections.

 

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(iv)Reserves set aside for maintenance and repair of Common Areas.

 

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

 

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

 

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

 

(viii)The cost of any Capital Expenditure to the Building or the Project not
covered under the provisions of Paragraph 2.3 provided; however, that Lessor
shall allocate the cost of any such Capital Expenditure over a 12 year period
and Lessee shall not be required to pay more than Lessee’s Share of 1/144th of
the cost of such Capital Expenditure in any given month.

 

(ix)Any other services to be provided by Lessor that are stated elsewhere in
this Lease to be a Common Area Operating Expense.

 

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

 

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

 

(d)               Lessee’s Share of Common Area Operating Expenses shall be
payable by Lessee within 10 days after a reasonably detailed statement of actual
expenses is presented to Lessee. At Lessor’s option, however, an amount may be
estimated by Lessor from time to time of Lessee’s Share of annual Common Area
Operating Expenses and the same shall be payable monthly or quarterly, as Lessor
shall designate, during each 12 month period of the Lease term, on the same day
as the Base Rent is due hereunder. Lessor shall deliver to Lessee within 60 days
after the expiration of each calendar year a reasonably detailed statement
showing Lessee’s Share of the actual Common Area Operating Expenses incurred
during the preceding year. If Lessee’s payments under this Paragraph 4.2(d)
during the preceding year exceed Lessee’s Share as indicated on such statement,
Lessor shall credit the amount of such over-payment against Lessee’s Share of
Common Area Operating Expenses next becoming due. If Lessee’s payments under
this Paragraph 4.2(d) during the preceding year were less than Lessee’s Share as
indicated on such statement, Lessee shall pay to Lessor the amount of the
deficiency within 10 days after delivery by Lessor to Lessee of the statement.

 

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4.3              Payment. Lessee shall cause payment of Rent to be received by
Lessor in lawful money of the United States, without offset or deduction (except
as specifically permitted in this Lease), on or before the day on which it is
due. 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 charges which may be due.

 

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 therefor deposit monies with Lessor sufficient to restore said Security
Deposit to the full amount required by this Lease. If the Base Rent increases
during the term of this Lease, Lessee shall, upon written request from Lessor,
deposit additional monies with Lessor so that the total amount of the Security
Deposit shall at all times bear the same proportion to the increased Base Rent
as the initial Security Deposit bore to the initial Base Rent. Should the Agreed
Use be amended to accommodate a material change in the business of Lessee or to
accommodate a sublessee or assignee, Lessor shall have the right to increase the
Security Deposit to the extent necessary, in Lessor’s reasonable judgment, to
account for any increased wear and tear that the Premises may suffer as a result
thereof. If a change in control of Lessee occurs during this Lease and following
such change the financial condition of Lessee is, in Lessor’s reasonable
judgment, significantly reduced, Lessee shall deposit such additional monies
with Lessor as shall be sufficient to cause the Security Deposit to be at a
commercially reasonable level based on such change in financial condition.
Lessor shall not be required to keep the Security Deposit separate from its
general accounts. Within 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.

 

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6.2Hazardous Substances.

 

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

 

(b)               Duty to Inform Lessor. If Lessee knows, or has reasonable
cause to believe, that a Hazardous Substance has come to be located in, on,
under or about the Premises, other than as previously consented to by Lessor,
Lessee shall 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.

 

(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, 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.

 

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(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 areas outside of the Project).
Lessee’s obligations shall include, but not be limited to, the effects of any
contamination or injury to person, property or the environment created or
suffered by Lessee, and the cost of investigation, removal, remediation,
restoration and/or abatement, and shall survive the expiration or termination of
this Lease. No termination, cancellation or release agreement entered into by
Lessor and Lessee shall release Lessee from its obligations under this Lease
with respect to Hazardous Substances, unless specifically so agreed by Lessor in
writing at the time of such agreement.

 

(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 existed as a result of Hazardous Substances on the
Premises prior to the Start Date or which are caused by the gross negligence or
willful misconduct of Lessor, its agents or employees. Lessor’s obligations, as
and when required by the Applicable Requirements, shall include, but not be
limited to, the cost of investigation, removal, remediation, restoration and/or
abatement, and shall survive the expiration or termination of this Lease.

 

(f)                Investigations and Remediations. Lessor shall retain the
responsibility and pay for any investigations or remediation measures required
by governmental entities having jurisdiction with respect to the existence of
Hazardous Substances on the Premises prior to the Start Date, 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 therefor (in which case Lessee shall make the investigation
and remediation thereof required by the Applicable Requirements and this Lease
shall continue in full force and effect, but subject to Lessor’s rights under
Paragraph 6.2(d) and Paragraph 13), Lessor may, at Lessor’s option, either (i)
investigate and remediate such Hazardous Substance Condition, if required, as
soon as reasonably possible at Lessor’s expense, in which event this Lease shall
continue in full force and effect, or (ii) if the estimated cost to remediate
such condition exceeds 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.

 

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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 Premises, without regard to whether said
requirements are now in effect or become effective after the Start Date. Lessee
shall, within 10 days after receipt of Lessor’s written request, provide Lessor
with copies of all permits and other documents, and other information evidencing
Lessee’s compliance with any Applicable Requirements specified by Lessor, and
shall immediately upon receipt, notify Lessor in writing (with copies of any
documents involved) of any threatened or actual claim, notice, citation,
warning, complaint or report pertaining to or involving the failure of Lessee or
the Premises to comply with any Applicable Requirements.

 

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, 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
contamination 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.

 

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

 

7.1Lessee’s Obligations.

 

(a)                In General. Subject to the provisions of Paragraph 2.2
(Condition), 2.3 (Compliance), 6.3 (Lessee’s Compliance with Applicable
Requirements), 7.2 (Lessor’s Obligations), 9 (Damage or Destruction), and 14
(Condemnation), Lessee shall, at Lessee’s sole expense, keep the Premises,
Utility Installations (intended for Lessee’s exclusive use, no matter where
located), and Alterations in good order, condition and repair (whether or not
the portion of the Premises requiring repairs, or the means of repairing the
same, are reasonably or readily accessible to Lessee, and whether or not the
need for such repairs occurs as a result of Lessee’s use, any prior use, the
elements or the age of such portion of the Premises), including, but not limited
to, all equipment or facilities, such as plumbing (see Addendum 55), HVAC
equipment, electrical, lighting facilities, boilers, pressure vessels, fixtures,
interior walls, interior surfaces of exterior walls, ceilings, floors, windows,
doors, plate glass, roofs, and skylights but excluding any items which are the
responsibility of Lessor pursuant to Paragraph 7.2. Lessee, in keeping the
Premises in good order, condition and repair, shall exercise and perform good
maintenance practices, specifically including the procurement and maintenance of
the service contracts required by Paragraph 7.1(b) below. Lessee’s obligations
shall include restorations, replacements or renewals when necessary to keep the
Premises and all improvements thereon or a part thereof in good order, condition
and state of repair.

 

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(b)               Service Contracts. Lessee shall, at Lessee’s sole expense,
procure and maintain contracts, and obtain proposals for equipment repair for
Lessor’s routine budgetary and monitoring of its fixed assets with copies to
Lessor, in customary form and substance for, and with contractors specializing
and experienced in the maintenance of the following equipment and improvements,
if any, if and when installed on the Premises: (i) HVAC equipment, (ii) boiler
and pressure vessels, (iii) clarifiers, and (iv) any other equipment, if
reasonably required by Lessor. However, Lessor reserves the right, upon notice
to Lessee, to procure and maintain any or all of such service contracts, and if
Lessor so elects, Lessee shall reimburse Lessor, upon demand, for the cost
thereof.

 

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

 

(d)               Replacement. Subject to Lessee’s indemnification of Lessor as
set forth in Paragraph 8.7 below, and without relieving Lessee of liability
resulting from Lessee’s failure to exercise and perform good maintenance
practices, if an item described in Paragraph 7.1(b) cannot be repaired other
than at a cost which is in excess of 50% of the cost of replacing such item,
then such item shall be replaced by Lessor, and the cost thereof shall be
prorated between the Parties and Lessee shall only be obligated to pay, each
month during the remainder of the term of this Lease, on the date on which Base
Rent is due, an amount equal to the product of multiplying the cost of such
replacement by a fraction, the numerator of which is one, and the denominator of
which is 144 (ie. 1/144th of the cost per month). Lessee shall pay Interest on
the unamortized balance at a rate that is commercially reasonable in the
judgment of Lessor’s accountants. Lessee may, however, prepay its obligation at
any time.

 

7.2              Lessor’s Obligations. Subject to the provisions of Paragraphs
2.2 (Condition), 2.3 (Compliance), 4.2 (Common Area Operating Expenses), 6
(Use), 7.1 (Lessee’s Obligations), 9 (Damage or Destruction) and 14
(Condemnation), Lessor, subject to reimbursement pursuant to Paragraph 4.2,
shall keep in good order, condition and repair the foundations, exterior walls,
structural condition of interior bearing walls, exterior roof, fire sprinkler
system, Common Area fire alarm and/or smoke detection systems, fire hydrants,
parking lots, walkways, parkways, driveways, landscaping, fences, signs and
utility systems serving the Common Areas and all parts thereof, as well as
providing the services for which there is a Common Area Operating Expense
pursuant to Paragraph 4.2. Lessor shall not be obligated to paint the exterior
or interior surfaces of exterior walls nor shall Lessor be obligated to
maintain, repair or replace windows, doors or plate glass of the Premises. (see
Addendum 55) Lessee expressly waives the benefit of any statute now or hereafter
in effect to the extent it is inconsistent with the terms of this Lease.

 

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7.3Utility Installations; Trade Fixtures; Alterations.

 

(a)                Definitions. The term “Utility Installations” refers to all
floor and window coverings, air lines, power panels, electrical distribution,
security and fire protection systems, communication systems, 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 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, 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.

 

(c)                Indemnification. 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 materialman’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.

 

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7.4Ownership; Removal; Surrender; and Restoration.

 

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

 

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

 

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8.2Liability Insurance.

 

(a)                Carried by Lessee. Lessee shall obtain and keep in force a
Commercial General Liability policy of insurance protecting Lessee and Lessor as
an additional insured against claims for bodily injury, personal injury and
property damage based upon or arising out of the ownership, use, occupancy or
maintenance of the Premises and all areas appurtenant thereto. Such insurance
shall be on an occurrence basis providing single limit coverage in an amount not
less than $1,000,000 per occurrence with an annual aggregate of not less than
$2,000,000, 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.

 

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

 

8.3Property Insurance—Building, Improvements and Rental Value.

 

(a)                Building and Improvements. Lessor shall obtain and keep in
force a policy or policies of insurance in the name of Lessor, with loss payable
to Lessor, any ground-lessor, and to any Lender insuring loss or damage to the
Premises. The amount of such insurance shall be equal to the full replacement
cost of the Premises, as the same shall exist from time to time, or the amount
required by any Lender, but in no event more than the commercially reasonable
and available insurable value thereof. Lessee Owned Alterations and Utility
Installations, Trade Fixtures, and Lessee’s personal property shall be insured
by Lessee under Paragraph 8.4. If the coverage is available and commercially
appropriate, such policy or policies shall insure against all risks of direct
physical loss or damage (flood and/or earthquake), including coverage for debris
removal and the enforcement of any Applicable Requirements requiring the
upgrading, demolition, reconstruction or replacement of any portion of the
Premises as the result of a covered loss. Said policy or policies shall also
contain an agreed valuation provision in lieu of any coinsurance clause, waiver
of subrogation, and inflation guard protection causing an increase in the annual
property insurance coverage amount by a factor of not less than the adjusted
U.S. Department of Labor Consumer Price Index for All Urban Consumers for the
city nearest to where the Premises are located. If such insurance coverage has a
deductible clause, the deductible amount shall not exceed $1,000 per occurrence.

 

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

 

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

 

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

 

8.4Lessee’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 of not to exceed $1,000 per occurrence. The
proceeds from any such insurance shall be used by Lessee for the replacement of
personal property, Trade Fixtures and Lessee Owned Alterations and Utility
Installations. Lessee shall provide Lessor with written evidence that such
insurance is in force.

 

(b)               Business Interruption. Lessee shall obtain and maintain loss
of income and extra expense insurance 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.

 

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8.7              Indemnity. Except for Lessor’s gross negligence or willful
misconduct, Lessee shall indemnify, protect, defend and hold and hold harmless
the Premises, Lessor and is 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,
unless caused by Lessor’s gross negligence or willful misconduct, 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, or from other sources or places. Lessor shall not be
liable for nay damages arising from any act or neglect of any other tenant of
Lessor nor from the failure of Lessor to enforce the provisions of any other
lease in the Project. 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.

 

9.Damage or Destruction.

 

9.1Definitions.

 

(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 3 months or less from
the date of the damage or destruction, and the cost thereof does not exceed a
sum equal to 6 month’s Base Rent. 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 improvements on the Premises, other than Lessee Owned Alterations and
Utility Installations and Trade Fixtures, which cannot reasonably be repaired in
3 months or less from the date of the damage or destruction and/or the cost
thereof exceeds a sum equal to 6 month’s Base Rent. 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.

 

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(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.

 

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 $5,000 or less, and, in such event, Lessor shall make any applicable
insurance proceeds available to Lessee on a reasonable basis for that purpose.
Notwithstanding the foregoing, if the required insurance was not in force or the
insurance proceeds are not sufficient to effect such repair, the Insuring Party
shall promptly contribute the shortage in proceeds as and when required to
complete said repairs. In the event, however, such shortage was due to the fact
that, by reason of the unique nature of the improvements, full replacement cost
insurance coverage was not commercially reasonable and available, Lessor shall
have no obligation to pay for the shortage in insurance proceeds or to fully
restore the unique aspects of the Premises unless Lessee provides Lessor with
the funds to cover same, or adequate assurance thereof, within 10 days following
receipt of written notice of such shortage and request therefor. If Lessor
receives said funds or adequate assurance thereof within said 10 day period, the
party responsible for making the repairs shall complete them as soon as
reasonably possible and this Lease shall remain in full force and effect. If
such funds or assurance are not received, Lessor may nevertheless elect by
written notice to Lessee within 10 days thereafter to: (i) make such restoration
and repair as is commercially reasonable with Lessor paying any shortage in
proceeds, in which case this Lease shall remain in full force and effect, or
(ii) have this Lease terminate 30 days thereafter. Lessee shall not be entitled
to reimbursement of any funds contributed by Lessee to repair any such damage or
destruction. Premises Partial Damage due to flood or earthquake shall be subject
to Paragraph 9.3, notwithstanding that there may be some insurance coverage, but
the net proceeds of any such insurance shall be made available for the repairs
if made by either Party.

 

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.

 

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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.

 

9.6Abatement 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.

 

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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 Project, Lessor’s right
to other income therefrom, and/or Lessor’s business of leasing, by any authority
having the direct or indirect power to tax and where the funds are generated
with reference to the Project address and where the proceeds so generated are to
be applied by the city, county or other local taxing authority of a jurisdiction
within which the Project is located. The term “Real Property Taxes” shall also
include any tax, fee, levy, assessment or charge, or any increase therein,
imposed by reason of events occurring during the term of this Lease, including
but not limited to, a change in the ownership of the Project or any portion
thereof or a change in the improvements thereon. In calculating Real Property
Taxes for any calendar year, the Real Property Taxes for any real estate tax
year shall be included in the calculation of Real Property Taxes for such
calendar year based upon the number of days which such calendar year and tax
year have in common.

 

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

 

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

 

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

 

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

 

11.              Utilities. Lessee shall pay for all water, gas, heat, light,
power, telephone, trash disposal and other utilities and services supplied to
the Premises, together with any taxes thereon. Notwithstanding the provisions of
Paragraph 4.2, if at any time in Lessor’s sole judgment, Lessor determines that
Lessee is using a disproportionate amount of water, electricity or other
commonly metered utilities, or that Lessee is generating such a large volume of
trash as to require an increase in the size of the dumpster and/or an increase
in the number of times per month that the dumpster is emptied, then Lessor may
increase Lessee’s Base Rent by an amount equal to such increased costs.

 

12.Assignment and Subletting.

 

12.1Lessor’s Consent Required.

 

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

 

(b)               A change in the control of Lessee shall constitute an
assignment requiring consent. The transfer, on a cumulative basis, of 45% 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.

 

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(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.

 

12.2Terms and Conditions Applicable to Assignment and Subletting.

 

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

 

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

 

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

 

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

 

(e)                Each request for consent to an assignment or subletting shall
be in writing, accompanied by information relevant to Lessor’s determination as
to the financial and operational responsibility and appropriateness of the
proposed assignee or sublessee, including but not limited to the intended use
and/or required modification of the Premises, if any, together with a fee of
$1,000, 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.

 

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(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. 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.

 

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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.

 

(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 5
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 service contracts,
(iii) the rescission of an unauthorized assignment or subletting, (iv) an
Estoppel Certificate, (v) a requested subordination, (vi) evidence concerning
any guaranty and/or Guarantor, (vii) any document requested under Paragraph 41
(easements), or (viii) 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 2.9 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.

 

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

 

13.2          Remedies. If Lessee fails to perform any of its affirmative duties
or obligations, within 10 days after written notice (or in case of an emergency,
without notice), Lessor may, at its option, perform such duty or obligation on
Lessee’s behalf, including but not limited to the obtaining of reasonably
required bonds, insurance policies, or governmental licenses, permits or
approvals. The costs and expenses of any such performance by Lessor shall be due
and payable by Lessee upon receipt of invoice therefor. If any check given to
Lessor by Lessee shall not be honored by the bank upon which it is drawn,
Lessor, at its option, may require all future payments to be made by Lessee to
be by cashier’s check. 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.

 

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(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 10 days after such amount shall be due,
then, without any requirement for notice to Lessee, Lessee shall 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, 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 equal to the prime rate reported in the Wall
Street Journal as published closest prior to the date when due plus 4%, 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.

 

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13.6Breach by Lessor.

 

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

 

(b)               Performance by Lessee on Behalf of Lessor. In the event that
neither Lessor nor Lender cures said breach within 30 days after receipt of said
notice, or if having commenced said cure they do not diligently pursue it to
completion, then Lessee may elect to cure said breach at Lessee’s expense and
offset from Rent an amount equal to the greater of one month’s Base Rent or the
Security Deposit, and to pay an excess of such expense under protest, reserving
Lessee’s right to 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 floor area of the Unit, or more
than 25% of Lessee’s Reserved Parking Spaces, is taken by Condemnation, Lessee
may, at Lessee’s option, to be exercised in writing within 10 days after Lessor
shall have given Lessee written notice of such taking (or in the absence of such
notice, within 10 days after the condemning authority shall have taken
possession) terminate this Lease as of the date the condemning authority takes
such possession. If Lessee does not terminate this Lease in accordance with the
foregoing, this Lease shall remain in full force and effect as to the portion of
the Premises remaining, except that the Base Rent shall be reduced in proportion
to the reduction in utility of the Premises caused by such Condemnation.
Condemnation awards and/or payments shall be the property of Lessor, whether
such award shall be made as compensation for diminution in value of the
leasehold, the value of the part taken, or for severance damages; provided,
however, that Lessee shall be entitled to any compensation for Lessee’s
relocation expenses, loss of business goodwill and/or Trade Fixtures, without
regard to whether or not this Lease is terminated pursuant to the provisions of
this Paragraph. All Alterations and Utility Installations made to the Premises
by Lessee, for purposes of Condemnation only, shall be considered the property
of the Lessee and Lessee shall be entitled to any and all compensation which is
payable therefor. In the event that this Lease is not terminated by reason of
the Condemnation, Lessor shall repair any damage to the Premises caused by such
Condemnation.

 

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15.Brokerage Fees.

 

15.1Intentionally Omitted.

 

15.2Intentionally Omitted.

 

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

 

16.Estoppel Certificates.

 

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

 

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

 

(c)                If Lessor desires to finance, refinance, or sell the
Premises, or any part thereof, Lessee 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. Notwithstanding the above, and subject to the
provisions of Paragraph 20 below, the original Lessor under this Lease, and all
subsequent holders of the Lessor’s interest in this Lease shall remain liable
and responsible with regard to the potential duties and liabilities of Lessor
pertaining to Hazardous Substances as outlined in Paragraph 6.2 above.

 

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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. Subject to the provisions of Paragraph
17 above, the obligations of Lessor under this Lease shall not constitute
personal obligations of Lessor, the individual partners of Lessor or its or
their individual partners, 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 the individual partners of Lessor, or its or their individual partners,
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. 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.

 

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 certified or registered mail or U.S.
Postal Service Express Mail, with postage prepaid, 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. 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. If notice is received on a Saturday, Sunday or legal
holiday, it shall be deemed received on the next business day.

 

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24.              Waivers. No waiver by Lessor of the Default or Breach of any
term, covenant or condition hereof by the other party, shall be deemed a waiver
of any other term, covenant or condition hereof, or of any subsequent Default or
Breach by such party of the same or of any other term, covenant or condition
hereof. A party’s consent to, or approval of, any act shall not be deemed to
render unnecessary the obtaining of consent to, or approval of, any subsequent
or similar act by the other party 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.

 

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(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)                Buyer and Seller 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 125% of the Base Rent applicable immediately preceding the
expiration or termination. Nothing contained herein shall be construed as
consent by Lessor to any holding over by Lessee.

 

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

 

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

 

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

 

30.Subordination; Attornment; Non-Disturbance.

 

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

 

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30.2          Attornment. In the event that Lessor transfers title to the
Premises, or the Premises are acquired by another upon the foreclosure or
termination of a Security Device to which this Lease is subordinated (i) Lessee
shall, subject to the non-disturbance provisions of Paragraph 30.3, attorn to
such new owner, and upon request, enter into a new lease, containing all of the
terms and provisions of this Lease, with such new owner for the remainder of the
term hereof, or, at the election of 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, 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).

 

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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 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.
All such activities shall be without abatement of rent or liability to Lessee.
Lessor may at any time place on the Premises any ordinary “For Sale” signs and
Lessor may during the last 8 months of the term hereof place on the Premise any
ordinary “For Lease” signs. Lessee may at any time place on the Premises any
ordinary “For Sublease” sign.

 

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. Except for ordinary “For Sublease” signs which may be
placed only on the Premises, Lessee shall not place any sign upon the Project
without Lessor’s prior written consent. All signs must comply with all
Applicable Requirements.

 

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

 

36.              Consents. Except as otherwise provided herein, wherever in this
Lease the consent of a Party is required to an act by or for the other Party,
such consent shall not be unreasonably withheld or delayed. Lessor’s actual
reasonable costs and expenses (including but not limited to architects’,
attorneys’, engineers’ and other consultants’ fees) incurred in the
consideration of, or response to, a request by Lessee for any Lessor consent,
including but not limited to consents to an assignment, a subletting or the
presence or use of a Hazardous Substance, shall be paid by Lessee upon receipt
of an invoice and supporting documentation therefore, provided, however, that
Lessor’s recoverable attorney’s fees shall not exceed $500.00 in response to
consent for a sublease or assignment not involving a change in use or
substantial tenant improvements. 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.

 

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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 Permitted Transferee 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          Options Personal To Original Lessee. Any Option granted to Lessee
in this Lease is personal to the original Lessee, and cannot be assigned or
exercised by anyone other than said original Lessee and only while the original
Lessee is in full possession of the Premises and, if requested by Lessor, with
Lessee certifying that Lessee has no intention of thereafter assigning or
subletting.

 

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

 

39.4          Effect of Default on Options.

 

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

 

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

 

(c)                An Option shall terminate and be of no further force or
effect, notwithstanding Lessee’s due and timely exercise of the Option, if,
after such exercise and prior to the commencement of the extended term, (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), (ii) Lessor gives to
Lessee 3 or more notices of separate Default during any 12 month period, whether
or not the Defaults are cured, or (iii) if Lessee commits a Breach of this
Lease.

 

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

 

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

 

42.              Performance Under Protest. If at any time a dispute shall arise
as to any amount or sum of money to be paid by one Party to the other under the
provisions hereof, the Party against whom the obligation to pay the money is
asserted shall have the right to make payment “under protest” and such payment
shall not be regarded as a voluntary payment and there shall survive the right
on the part of said Party to institute suit for recovery of such sum. If it
shall be adjudged that there was no legal obligation on the part of said Party
to pay such sum or any part thereof, said Party shall be entitled to recover
such sum or so much thereof as it was not legally required to pay provisions of
this Lease, plus interest at the rate specified in paragraph 13.5.

 

43.              Authority. 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.

 

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

 

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

 

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

 

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

 

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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.

 

49.              Mediation and Arbitration of Disputes. An Addendum requiring
the Mediation and/or the Arbitration of all disputes between the Parties arising
out of this Lease [_] is [_] is not attached to this Lease.

 

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

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

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

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

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

 

Page 37 of 38

 

  

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

 

Executed at: Los Angeles, California   Executed at: Newbury Park, California on:
    on:             By LESSOR     By LESSEE:   JONDA HAWTHORNE, LLC  
DISTRIBUTION BY AIR, A DBA       DISTRIBUTION SERVICES, INC. COMPANY          
By:  /s/ Susanna K. Flaster   By:  /s/ Paul Pollara Name Printed: Susanna K.
Flaster, Trustee   Name Printed: Paul Pollara   of the David V. Karney Trust    
    u/d dated 8/19/83, as amended                 Title:  Member    Title: 
Principal            By:      By:    Name Printed:     Name Printed:   Title:  
  Title:   Address: 12011 San Vincente Blvd, Ste. 606   Address:     Los
Angeles, CA 90049                                     Telephone: (310) 826-5637
  Telephone:   Facsimile: (310) 476-4712   Facsimile:   Federal ID No.:
95-4682651   Federal ID No.:  

  

  

Page 38 of 38

 

 

arbitration agreement
Standard Lease Addendum

 

Dated: March 15, 2004     By and Between (Lessor) JONDA HAWTHORNE, LLC        
(Lessee) DISTRIBUTION BY AIR,   A DBA DISTRIBUTION SERVICES, INC. COMPANY    
Address of Premises 2701 W. El Segundo Blvd.   Hawthorne, CA 90250          

Paragraph 50

 

A.ARBITRATION OF DISPUTES:

 

Except as provided In Paragraph B below, the Parties agree to resolve any and
all claims, disputes or disagreements arising under this Lease, including, but
not limited to any matter relating to Lessor’s failure to approve an assignment,
sublease or other transfer of Lessee’s interest In the Lease under Paragraph 12
of this Lease, any other defaults by Lessor, or any defaults by Lessee by and
through arbitration as provided below and Irrevocably waive any and all rights
to the contrary. The Parties agree to at all times conduct themselves in strict,
full, complete and timely accordance with the terms hereof and that any attempt
to circumvent the terms of this Arbitration Agreement shall be absolutely null
and void and of no force or effect whatsoever.

 

B.DISPUTES EXCLUDED FROM ARBITRATION:

 

The following claims, disputes or disagreements under this Lease are expressly
excluded from the arbitration procedures set forth herein: 1. Disputes for which
a different resolution determination is specifically set forth in this Lease, 2.
All claims by either party which (a) seek anything other than enforcement or
determination of rights under this Lease, or (b) are primarily founded upon
matters of fraud, willful misconduct, bad faith or any other allegations of
tortious action, and seek the award of punitive or exemplary damages, 3. Claims
relating to (a) Lessor’s exercise of any unlawful detainer rights pursuant to
applicable law or (b) rights or remedies used by Lessor to gain possession of
the Premises or terminate Lessee’s right of possession to the Premises, all of
which disputes shall be resolved by suit filed In the applicable court of
jurisdiction, the decision of which court shall be subject to appeal pursuant to
applicable law and 4. All claims arising under Paragraph 39 of this Lease, which
disputes shall be resolved by the specific dispute resolution procedure provided
in Paragraph 39 to the extent that such disputes concern solely the
determination of rent.

 

C.APPOINTMENT OF AN ARBITRATOR;

 

All disputes subject to this Arbitration Agreement, shall be determined by
binding arbitration before: 0 a retired judge of the applicable court of
jurisdiction (e.g., the Superior Court of the State of California) affiliated
with Judicial Arbitration 8 Mediation Services, Inc. (“JAMS”), [X]the American
Arbitration Association (“AAA”) under its commercial arbitration rules, by
members who have 10 or more years experience with real estate valuation in the
industrial real estate market In the greater Los Angeles area, [_] n/a as may be
otherwise mutually agreed by Lessor and Lessee (the “Arbitrator”). Such
arbitration shall be initiated by the Parties, or either of them, within ten
(10) days after either party sends written notice (the “Arbitration Notice’) of
a demand to arbitrate by registered or certified mall to the other party and to
the Arbitrator. The Arbitration Notice shall contain a description of the
subject matter of the arbitration, the dispute with respect thereto, the amount
involved, if any, and the remedy or determination sought. If the Parties have
agreed to use JAMS they may agree on a retired judge from the JAMS panel. If
they are unable to agree within ten days. JAMS will provide a ilst of three
available judges and each party may strike one. The remaining judge (or If there
are two, the one selected by JAMS) will serve as the Arbitrator. If the Parties
have elected to utilize AAA or some other organization, the Arbitrator shall be
selected in accordance with said organization’s rules. In the event the
Arbitrator is not selected as provided for above for any reason, the party
initiating arbitration shall apply to the appropriate Court for the appointment
of a qualified retired judge to act as the Arbitrator.

 

Page 1 of 3

 

 

 

D.ARBITRATION PROCEDURE:

 

1.                  PRE-HEARING ACTIONS. The Arbitrator shall schedule a
pre-hearing conference to resolve procedural matters, arrange for the exchange
of information, obtain stipulations, and narrow the Issues. The Parties will
submit proposed discovery schedules to the Arbitrator at the pre-hearing
conference. The scope and duration of discovery will be within the sole
discretion of the Arbitrator. The Arbitrator shall have the discretion to order
a pre-hearing exchange of information by the Parties, Including, without
limitation, production of requested documents, exchange of summaries of
testimony of proposed witnesses, and examination by deposition of parties and
third party witnesses. This discretion shall be exercised in favor of discovery
reasonable under the circumstances. The Arbitrator shall issue subpoenas and
subpoenas duces tecum as provided for in the applicable statutory or case law
(e.g., In California Code of Civil Procedure Section 1282.8).

 

2.                  THE DECISION. The arbitration shall be conducted In the city
or county within which the Premises are located at a reasonably convenient site.
Any Party may be represented by counsel or other authorized representative. In
rendering a decision(s), the Arbitrator shall determine the rights and
obligations of the Parties according to the substantive laws and the terms and
provisions of this Lease. The Arbitrator’s decision shall be based on the
evidence Introduced al the hearing, including all logical and reasonable
inferences therefrom. The Arbitrator may make any determination and/or grant any
remedy or relief that Is Just and equitable. The decision must be based on, and
accompanied by, a written statement of decision explaining the factual and legal
basis for the decision as to each of the principal controverted issues. The
decision shall be conclusive and binding, and it may thereafter be confirmed as
a judgment by the court of applicable jurisdiction, subject only to challenge on
the grounds set forth In the applicable statutory or case law (e.g., in
California Code of Civil Procedure Section 1286.2). The validity and
enforceability of the Arbitrator’s decision Is to be determined exclusively by
the court of appropriate jurisdiction pursuant to the provisions of this Lease.
The Arbitrator may award costs, including without limitation, Arbitrator’s fees
and costs, attorneys’ fees, and expert and witness costs, to the prevailing
party, If any, as determined by the Arbitrator In his discretion.

 

Page 2 of 3

 

  

Whenever a matter which has been submitted to arbitration involves a dispute as
to whether or not a particular act or omission (other than a failure to pay
money) constitutes a Default, the time to commence or cease such action shall be
tolled from the date that the Notice of Arbitration is served through and until
the date the Arbitrator renders his or her decision. Provided, however, that
this provision shall NOT apply In the event that the Arbitrator determines that
the Arbitration Notice was prepared in bad faith.

 

Whenever a dispute arises between the Parties concerning whether or not the
failure to make a payment of money constitutes a default, the service of an
Arbitration Notice shall NOT toll the time period in which to pay the money. The
Party allegedly obligated to pay the money may, however, elect to pay the money
“under protest* by accompanying said payment with a written statement setting
forth the reasons for such protest. If thereafter, the Arbitrator determines
that the Party who received said money was not entitled to such payment, said
money shall be promptly returned to the Party who paid such money under protest
together with Interest thereon as defined In Paragraph 13.5. If a Party makes a
payment “under protest” but no Notice of Arbitration Is filed within thirty
days, then such protest shall be deemed waived. (See also Paragraph 43)

 

NOTICE: These forms are often modified to meet changing requirements of law and
industry needs. Always write or call us to make sure you are utilizing the most
current form; AIR Commercial Real Estate Association, 700 South Flower Street,
Suite 600, Los Angeles, CA 90017, Telephone No.: (213) 687-8177. Fax No.: (213)
687-8616.

 

Page 3 of 3

 

  

ADDENDUM to Standard Industrial/Commercial Multi-Tenant Lease--Net dated for
reference purposes only, March 15. 2004 for the property located at 2701 West
Hawthorne Blvd.. Hawthorne. California 90250 by and between JONDA HAWTHORNE. LLC
(Lessor) and DISTRIBUTION BY AIR. a DBA DISTRIBUTION SERVICES. INC. COMPANY
(Lessee),

 

Addendum 51. Payment of Rent

All rentals payments, including but not limited to Base Rent, Rent Escalations,
Common Area Charges, Real Estate Tax and Insurance Reimbursements (as
applicable) shall be made payable and sent to:

 

JONDA HAWTHORNE, LLC
c/o Kamey Management Company
P. O. Box 51769
Los Angeles, CA 90051-6069

 

Addendum 52. Rent-Free Occupancy

Lessee shall be granted occupancy of the Premises effective May 01, 2004. Lessee
shall not be obligated for the payment of Base Rent, Common Area Maintenance,
Real Property Taxes nor reimbursing Lessor for Insurance for the Premises from
May 01, 2004, through July 31, 2004. However, Lessee shall have Lessee's
insurance in place per the terms of this Lease prior to occupancy and Lessee
shall be responsible for all utilities effective May 0l, 2004.

 

Addendum 53. Base Rent Escalation(s).

After the initial Rent-Free Occupancy period per Addendum 52 herein, the Base
Rent shall be as follows:

 

EFFECTIVE DATE NEW BASE RENT August 01, 2004 $27,339.00 November 01, 2004
$30,844.00 May 01, 2006 $32,947.00 May 01, 2008 $35,050.00    

Addendum 54. Common Area Maintenance

During the initial term, Lessee's share of Common Area Maintenance Expenses
shall not exceed $600.00 per month.

 

Addendum 55. Real Property Taxes — Proposition 13 Protection

If the Real Property Taxes are increased as a result of a sale or other transfer
of the Premises not controllable by the Lessee, then the payment of the increase
in taxes attributable to such transfer shall not be passed through to the
Lessee, but shall become the obligation of the Lessor.

 

Addendum 56. Tenant Improvements

On or before May 01, 2004, Lessor shall complete the following improvements, at
Lessor's sole cost and expense:

1)install carpets in the offices where previously removed,

2)all HVAC units to be inspected and in good working order prior to Lease
Commencement.

 

Page 1 of 4

 

 

Addendum 57. Plumbing

Lessee shall be responsible for 1) maintenance of all embedded plumbing
servicing the premises, 2) maintaining and repairing all restroom fixtures, and
3) all minor repairs, such as plugged drains and toilets. Lessor shall be
responsible for repairs of all embedded plumbing, except where replacement or
repair is necessary due to damage caused by Lessee's negligence.

 

Addendum 58. Outdoor Storage

Lessee shall not store containers, equipment nor packing materials in any
outdoor area of the property, except as approved by prior written consent of
Lessor.

 

Addendum 59. Additional Sub-Lease Provisions

If, per the terms and conditions set forth in Paragraph 12 of the Lease
Agreement and all sub-paragraphs of same, Lessor approves a Sub-Lease AND if
said Sub-lease terms provide net profit to the Lessee (lessor to Sub- Tenant),
Lessor shall be entitled to 50% of the Oct profit of such Sub-Lease. A separate
Agreement shall be drawn, by Lessor, evidencing the specific details of such
Agreement, at such time as the Sub-Lease Consent is executed. "Net profit" means
net of all Lease costs and all reasonable costs in connection with such
sublease.

 

Addendum 60, Option

Lessor hereby grants to Lessee one (1) option to extend the term of this Lease
for five (5) additional years commencing when the prior term expires upon each
and all of the following terms and conditions:

(i)In order to exercise an option to extend, Lessee must give written notice of
such election to Lessor and Lessor must receive the same at least four (4)
months, but not more than six (6) months, prior to the date that the option
period would commence, time being of the essence. If proper notification of the
exercise of an option is not given and/or received, such option shall
automatically expire.

(ii)The provisions of paragraph 39, including those relating to Lessee's Default
set forth in paragraph 39.4 of this Lease, are conditions of this Option. Except
for the provisions of this Lease granting an option to extend the term and
Lessor's Improvements, all of the terms and conditions of this Lease except
where specifically modified by this option shall apply.

(iii)This Option is personal to the original Lessee, and cannot be assigned nor
exercised by anyone other than said original Lessee and only while the original
Lessee is in full possession of the Premises, and without the intention of
thereafter assigning or subletting.

(iv)The monthly rent for each month of the first thirty (30) months of the
option period shall be the "Market Rental Value" (MRV) of the property, based on
comparable properties in the immediate area, as follows:

1)Four (4) months prior to each Market Rental Value Adjustment Date described
above, the Parties shall attempt to agree upon what the new MRV will be on the
adjustment date. If agreement cannot be reached, within thirty (30) days, then:

a)Lessor and Lessee shall immediately appoint a mutually acceptable broker to
establish the new MRV within the next thirty (30) days. Any associated costs
will be split equally between the Parties, or

 

Page 2 of 4

 

  

b)Both Lessor and Lessee shall each immediately make a reasonable determination
of the MRV and submit such determination, in writing, to arbitration in
accordance with the following provisions:

i)Within fifteen (15) days thereafter, Lessor and Lessee shall each select a
broker ("Consultant") of their choice to act as an arbitrator. The two
arbitrators so appointed shall immediately select a third mutually acceptable
Consultant to act as a third arbitrator.

ii)The three arbitrators shall, within thirty (30) days of the appointment of
the third arbitrator, reach a decision as to what the actual MRV for the
Premises is and whether Lessor's or Lessee's submitted MRV is the closest
thereto. The decision of a majority of the arbitrators shall be binding on the
Parties. The submitted MRV which is determined to be the closest to the actual
MRV shall thereafter be used by the Panics.

iii)If either of the Parties fails to appoint an arbitrator within the specified
fifteen (15) days, the arbitrator timely appointed by one of them shall reach a
decision on his or her own, and said decision shall be binding on the Parties.

iv)The entire cost of such arbitration shall be paid by the party whose
submitted MRV is not selected, i.e. the one that is NOT the closest to the
actual MRV.

2)Notwithstanding the foregoing, the new MRV shall not be less than the rent
payable for the month immediately preceding the rent adjustment. Upon the
establishment of the New Market Rental Value:

a)the new MRV will become the new "Base Rent" for the purpose of calculating any
further Adjustments, and

b)the first month of the Market Rental Value term shall become the new "Base
Month" for the purpose of calculating any further Adjustments.

(v)The Base Rent shall be adjusted every thirty (30) months after the
commencement of the Option Term in an amount equal to the increase in the
Consumer Price Index (CPI) with increases effective on the following date(s):

 

INCREASE DATE BASE COMPARISON MONTH February 1, 2012 May, 2009    

   

The increase in the Consumer Price Index shall be computed based on the
"Consumer Price Index for All Urban Consumers, Los Angeles-Anaheim-Riverside,
All Items, 1982-84=100", issued by the United States Department of Labor, Bureau
of Labor Statistics. If the Index for the month which is three (3) months prior
to the increase date is greater than the Index for the corresponding Base
Comparison Month referenced above, then the monthly Base Rent will be increased
in the same proportion as the increase. However, such increase shall not be less
than 7.5% nor more than 15%. In no event shall the monthly Base Rent be
decreased as a result of any declines in said Consumer Price Index.

 

Page 3 of 4

 

  

Should the United States Department of Labor re-adjust the above-described
Consumer Price Index to a different base period than the base period in effect
when this Lease is executed, then such change in the base shall be taken into
account and reflected in all adjustments. Should the official reports of the
United States Department of Labor be unavailable for the relevant period at the
time that any adjustment hereunder is to become effective, Lessee shall pay the
rental on the unadjusted basis until the statistical information for the
adjustment is available, and within fifteen (15) days from written notice by
Lessor to Lessee of the adjustment including figures upon which the adjustment
is based, Lessee shall pay to Lessor such sum as represents the difference
between the rent paid and the adjusted amount of the rent due and payable. In
addition, at such time, Lessee shall pay to Lessor an amount sufficient to cause
the security deposit hereunder to be increased in an amount equal to the new
monthly base rental. If the described Index shall no longer be published,
another index generally recognized as authoritative shall be substituted by
agreement of the parties. If they are unable to agree within thirty (30) days
after demand by either party, the substitute index shall, on application of
either party, be selected by the chief officer of the San Francisco Regional
Office of the Bureau of Labor Statistics or its successor. If selection by such
officer cannot be obtained, the adjustment shall be made by mutual agreement or
by arbitration.

 

Addendum 61, Holding Over

Lessee shall not hold over on the Premises after the expiration or sooner
termination of the lease term without the express prior written consent of the
Lessor. Lessee shall indemnify Lessor for, and hold Lessor harmless from and
against, any and all losses or liabilities arising out of or in connection with
any delay by Lessee in surrendering and vacating the premises, including,
without limitation, any claims made by any succeeding lessee based on any delay
and any liabilities arising out of or in connection with theses claims, and
Lessor's damages should any such succeeding lessee cancel its lease based upon
such holding over by Lessee. If possession of the premises is not surrendered to
Lessor on the expiration or sooner termination of the lease term, in addition to
any other rights and remedies of Lessor hereunder or at law or in equity, Lessee
shall pay to Lessor for each month or portion thereof during which Lessee holds
over in the Premises a sum equal to one hundred fifty percent (150%) of the Base
Rent in effect for the last month of the Lease term. If any tenancy is created
by Lessee's holding over in the Premises, the tenancy shall be on all of the
terms and conditions of the Lease, except that rent shall be increased as set
forth above and the tenancy shall be a month-to-month tenancy. Nothing in this
Paragraph shall be deemed to permit Lessee to retain possession of the premises
after the expiration or sooner termination of the Lease term.

 

Addendum 62. Conflicts

In the event of any conflict between this Addendum and the Lease, the terms and
conditions of this Addendum shall control.

 

Page 4 of 4

 

 

[ex10-3.jpg] 

 

 

 

 

[ex10-3b.jpg] 

 

 

 

 

FIRST AMENDMENT TO LEASE

 

This FIRST AMENDMENT TO LEASE (the “Amendment”) is made and entered into as of
February 25, 2008, by and between Jonda Hawthorne, LLC, a California Limited
Liability Company (“Lessor”) and DBA Distribution Services, Inc., a New Jersey
corporation (“Lessee”). Lessor and Lessee entered into that certain Standard
Industrial/Commercial Mutli-Tenant Lease – Net dated as of March 16, 2004,
hereinafter referred to as the “Lease”, for those certain premises described as
2701 W. El Segundo Boulevard, Hawthorne, California (the “Premises”). Lessor and
Lessee desire to amend the terms of the Lease as hereinafter provided. Unless
otherwise defined herein, all capitalized terms used in this Amendment shall
have the same meaning as are ascribed to such terms in the Lease.

 

NOW THEREFORE, Lessor and Lessee hereby agree as follows:

 

1.OPTION TO EXTEND: The option to extend the Lease as provided in Paragraph 60
of the Lease shall provide for one (1) option to extend the Lease for a period
to commence on August 1, 2009 and expire on February 28, 2013. All other terms
and conditions of Paragraph 60 shall remain unchanged.

 

2.REPRESENTATIONS: Each party represents to the other that it has full power and
authority to execute this Amendment. Each party represents to the other that is
has not made any assignment, sublease, transfer, conveyance or other disposition
of the Lease or any interest in the Lease or the demand, obligation, liability,
action or cause of action arising from or in any manner connected with the Lease
or the Premises by any other party. This Amendment shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns.

 

3.NO OFFER: This Amendment shall not be binding until executed and delivered by
both parties. This Amendment shall not be relied upon by any other party,
individual, corporation, partnership or other entity as a basis for terminating
its Lease with Leassor.

 

4.BROKERS: Other than the Klabin Company (“Dual Agency”) Lessee and Lessor each
represent and warrant tot eh other that it has had no dealings with any person,
firm, broker or finder in connection with this Amendment, and that no one is
entitled to any commission or finder’s fee in connection herewith except as
provided for in a separate agreement between Lessor and Lessor’s Broker
(“Listing Agreement”). 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. In accordance with the foregoing, Lessee acknowledges and agree
that Lessee shall be solely responsible for any change or Lessee’s Broker,
except as provided for the Listing Agreement.

 

 

 

 

5.WHOLE AGREEMENT: The mutual obligations of the parties as provided herein are
the sole consideration for the Amendment and no representations, promises or
inducements have been made by the parties other than as appear in this
Amendment. This Amendment may not be amended except in writing signed by all
parties.

 

6.ATTORNEY’S FEES: In the event either party hereto commences an action or
arbitration against the other party arising out of or in connection with this
Amendment, the prevailing party shall be entitled to recover from the losing
party reasonable attorney’s fees and costs.

 

7.INCORPORATION: Except as otherwise expressly set forth herein, and to the
extend necessary to give effect to the provisions hereof, all terms and
conditions of the Lease shall remain unmodified and in full force and effect,
provided, however, Lessee shall not be entitled to any free rent, additional
improvements by lessor, tenant improvement allowances, or additional options to
extend the Term and any such terms contained in the Lease prior to this
Amendment are hereby deleted and are of no further force and effect.

 

8.SEPARATE COUNTERPARTS: This document may be executed in one or more separate
counterparts, each of which, when so executed, shall be deemed to be an
original. Such counterparts shall together constitute and be one and the same
instrument.

 

IN WITNESS WHEREOF, the parties hereto have entered into this Amendment as of
the date first set forth above.

  

Lessor:     Lessee:             Jonda Hawthorne, LLC, a California Limited
Liability Company   DBA Distribution Services, Inc. a New Jersey Corporation 

   

By:  KAR3 Properties Limited Partnership         A Delaware Limited Partnership,
Member       By:  AKG3 Properties, LLC, a California Limited         Liability
Company, General Partner                                     By:  /s/ Aliza
Karney Guren   By:  /s/ Paul Pollara   Aliza Karney Guren, Member     Paul
Pollara

  

2

 

 

This SECOND AMENDMENT TO LEASE (the “Amendment”) is made and entered into as of
March 26, 2009, by and between Jonda Hawthorne, LLC, a California Limited
Liability Company (“Lessor”) and DBA Distribution Services, Inc., a New Jersey
corporation (“Lessee”). Lessor and Lessee entered into that certain Standard
Industrial/Commercial Multi Tenant Lease - Net dated as of March 15, 2004,
hereinafter referred to as the “Original Lease”, which was amended by the First
Amendment to Lease dated February 25, 2008, hereinafter referred to as the
“First Amendment”, collectively hereinafter referred to as the “Lease”, for
those certain premises described as 2701 W. El Segundo Boulevard, Hawthorne,
California (the “Premises”). Lessor and Lessee desire to amend the terms of the
Lease as hereinafter provided. Unless otherwise defined herein, all capitalized
terms used in this Amendment shall have the same meaning as are ascribed to such
terms in the Lease.

 

NOW THEREFORE, Lessor and Lessee hereby agree as follows:

 

1.OPTION TO EXTEND: Lessor and Lessee acknowledge and agree that in accordance
with the terms of the Lease, the Expiration Date of the Term of the Lease was
July 31, 2009 and that Lessee had one (1) option to extend as set forth in
Paragraph 60 of the Original Lease as amended by the First Amendment. Lessor and
Lessee further acknowledge and agree that Lessee is now exercising the option to
extend the Term and has no remaining options to extend.

 

2.LEASE TERM: The Term of the Lease is hereby extended for forty-three (43)
months commencing August 1, 2009 (the “New Commencement Date”) accordingly, the
Expiration Date of the Lease is hereby amended to be February 28, 2013.

 

3.BASE RENT AND ESCALATION:

 

In accordance with Paragraph 60 of the Original Lease (Option),

 

a.During the period commencing August 1, 2009 and continuing through January 31,
2012, the monthly Base Rent is increased to $42,060.00 per month.

 

b.During the remaining thirteen (13) months of this option period, commencing
February 1, 2012, the Base Rent shall be increased to compensate for any rise in
the Consumer Price Index between May 2009 and November 2011, however, such
increase shall not be more than a total of fifteen percent (15%) nor less than
seven and one-half percent (7.5%). In no event shall the Base Rent be decreased
as a result of any decline in the Consumer Price Index.

 

4.REPRESENTATIONS: Each party represents to the other that it has full power and
authority to execute this Amendment. Each party represents to the other that it
has not made any assignment, sublease, transfer, conveyance or other disposition
of the Lease or any interest in the Lease or the Premises and, except as
provided herein, has no knowledge of any existing or threatened claim, demand,
obligation, liability, action or cause of action arising from or in any warmer
connected with the Lease or the Premises by any other party. This Amendment
shall be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and assigns.

 

 

 

 

5.NO OFFER: This Amendment shall not be binding until executed and delivered by
both parties. This Amendment shall not be relied upon by any other party,
individual, corporation, partnership or other entity as a basis for terminating
its Lease with Lessor.

 

6.BROKERS: Other than Gateway Business Properties (“Dual Agency”) Lessee and
Lessor each represent and warrant to the other that it has had no dealings with
any person, firm, broker or finder in connection with this Amendment, and that
no one is entitled to any commission or finder’s fee in connection herewith
except as provided for in a separate agreement between Lessor and Lessor’s
Broker (“Listing Agreement”). 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. In accordance with the foregoing,
Lessee acknowledges and agrees that Lessee shall be solely responsible for any
charge of Lessee’s Broker, except as provided for the Listing Agreement .

 

7.WHOLE AGREEMENT: The mutual obligations of the parties as provided herein are
the sole consideration for this Amendment and no representations, promises or
inducements have been made by the parties other than as appear in this Amendment
This Amendment may not be amended except in writing signed by all parties, by
Lessor, tenant improve rent allowances, or additional options to extend the Term
and any such terms contained in the Lease p to this Amendment are hereby deleted
are of no further force and effect.

 

8.SEPARATE COUNTERPARTS. This document may be executed in one or more separate
counterparts, each of which, when so executed, shall be deemed to be an
original. Such counterparts shall together constitute and be one and the same
instrument.

 

2

 

 

IN WITNESS WHEREOF, the pates hereto have entered in this Amendment as of the
date first set forth above.

  

Lessor:     Lessee:             Jonda Hawthorne, LLC, a California Limited
Liability Company   DBA Distribution Services, Inc. a New Jersey Corporation   
        By:  KAR3 Properties Limited Partnership         A Delaware Limited
Partnership, Member       By:  AKG3 Properties, LLC, a California Limited      
  Liability Company, General Partner      

  

By:  /s/ Aliza K. Guren   By:  /s/ Paul Pollara   Aliza K. Guren, Manager    
Paul Pollara       Its:  Vice President 

 

Date: 4-17-09             By:                    Name Printed:                 
  Its:  Sec./Asst. Sec./CFO/Asst. CFO (circle one)                 Date: 
4-16-09

 

 

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THIRD AMENDMENT
TO
STANDARD INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE – NET
(2701 W. El Segundo Blvd.)

 

THIS THIRD AMENDMENT TO STANDARD INDUSTRIAL/ COMMERCIAL MULTI-TENANT LEASE NET
(“Amendment”) is made as of January 28, 2010, between JONDA HAWTHORNE, LLC, a
California limited liability company (“Lessor”), and DBA DISTRIBUTION SERVICES,
INC., a New Jersey corporation (“Lessee”), with reference to the following
facts:

 

A.                Lessor and Lessee are parties to that certain Standard
Industrial/Commercial Multi-Tenant Lease - Net dated as of March 15, 2004 and
Addendum and Arbitration Agreement attached thereto (the “Original Lease”), as
amended by the First Amendment to Lease dated February 25, 2008 (the “First
Amendment”) and Second Amendment to Lease dated March 26, 2009 (the “Second
Amendment”), for those certain premises located at the street address of 2701 W.
El Segundo Blvd., Hawthorne, CA 90250 (the “Premises”), for a term that is
presently scheduled to expire on February 28, 2013. The Original Lease, First
Amendment and Second Amendment are collectively referred to as the “Lease
Agreement”.

 

B.                 Lessor and Lessee are also parties to that certain Standard
Industrial/Commercial Multi-Tenant Lease - Net dated as of February 25, 2008 and
Addendum and Arbitration Agreement attached thereto (collectively the “Original
2705 Lease”), as amended by the First Amendment dated as of the date hereof, for
those certain premises located at the street address of 2705 W. El Segundo
Blvd., Hawthorne, CA 90250 (the “2705 Premises”), for a term that is presently
scheduled to expire on February 28, 2013.

 

C.                 The City of Hawthorne has required that the sprinkler system
in the Premises and the 2705 Premises be upgraded, Golden State Fire Protection,
Inc. (“Golden State”) has submitted a bid dated January 4, 2010 to perform the
sprinkler upgrade work (the “Sprinkler Work”), which bid is acceptable to Lessor
and Lessee. The cost of the Sprinkler Work as set forth in the bid is $167,200,
allocable $83,600 to the Premises and $83,600 to the 2705 Premises.

 

D.                Lessee has requested that Lessor engage Golden State to
perform the Sprinkler Work, and that Lessor bear a portion of the cost of, and
also finance for Lessee’s benefit a portion of the cost of, the Sprinkler Work.
Lessor is agreeable to the foregoing, in consideration for Lessee’s agreement to
an extension of the present term of the Lease Agreement and the other terms and
conditions set forth in this Amendment.

 

E.                 Defined terms used in this Amendment shall have the meanings
set forth in the Lease Agreement, unless otherwise expressly provided herein.

 

 

 

  

NOW, THEREFORE, for valuable consideration, the receipt and adequacy of which
are hereby acknowledged by the parties, the parties hereto agree as follows:

 

1.                  Lease Term Extension. The present term of the Lease
Agreement is hereby extended for an additional three (3) years, said three (3)
year period to commence on March 1, 2013 and end on February 29, 2016. The
monthly Base Rent payable by Lessee during the three (3) year period shall be
equal to the scheduled monthly Base Rent payable during February 2013 plus a CPI
increase to take effect on March 1, 2013, and another CPI increase to take
effect on September 1, 2014, both increases to be in accordance with the
methodology set forth in Addendum Paragraph 60(v) of the Original Lease, except
that: (i) the Increase Dates for the three (3) year period shall be March 1,
2013 and September 1, 2014, respectively; (ii) the Base Comparison Months for
the three (3) year period shall be December 2011 and December 2012,
respectively; (iii) the Base Rent increase to take effect on March 1, 2013 shall
not be less than three percent (3%) nor more than six percent (6%) greater than
the scheduled Base Rent in effect during February 2013; and (iv) the Base Rent
increase to take effect on September 1, 2014 shall not be less than four and
one-half percent (4%%) nor more than nine percent (9%) greater than the
scheduled Base Rent in effect during August 2014. Lessee shall continue to pay
through February 29, 2016, in addition to monthly Base Rent, all categories of
expenses that Lessee was responsible for payment of during the present term of
the Lease Agreement. Lessee shall have no right or option to extend or renew its
rental of the Premises beyond February 29, 2016.

 

2.                  Sprinkler Work Cost. Lessor shall contract with Golden State
to perform the Sprinkler Work in the Premises. Concurrently with Lessee’s
execution of this Amendment, Lessee shall deliver to Lessor a check payable to
Golden State in the amount of $20,000, representing a portion of the $83,600
cost of the Sprinkler Work to be performed in the Premises. Lessor shall be
responsible for payment to Golden State of the remaining $63,600 cost of the
Sprinkler Work to be performed in the Premises, except that Lessee shall
reimburse Lessor for $38,600 of said remaining cost, plus interest on the unpaid
balance at the rate of seven percent (7%) per annum, by making seventy-two (72)
equal monthly payments to Lessor of $658.09, with the first monthly installment
due March 1, 2010 and the final monthly installment due February 1, 2016. Each
such installment shall be due and payable on the first day of the calendar month
along with Lessee’s regular monthly Base Rent payment, shall be deemed “Rent”
for all purposes of the Lease Agreement, and shall be subject to a late charge
if not received by Lessor on or before the tenth (10th) day of each calendar
month. Should the term of Lessee’s rental of the Premises from Lessor terminate
prior to February 1, 2016 for any reason, then the unpaid balance of said
$38,600 obligation (plus interest on the unpaid balance at the rate of seven
percent (7%) per annum) shall become immediately due and payable by Lessee to
Lessor in a lump sum. The monthly payments due from Lessee under this Paragraph
2 are in addition to the monthly payments due from Lessee under Paragraph 2 of
the First Amendment to the Original 2705 Lease.

 

3.                  Cross-Default. A Default by Lessee under this Amendment or
the Lease Agreement shall, at the option of Lessor, constitute a Default by
Lessee under the Original 2705 Lease and the First Amendment thereto; a Default
by Lessee under the Original 2705 Lease or the First Amendment thereto shall, at
the option of Lessor, constitute a Default by Lessee under this Amendment and
the Lease Agreement.

 

4.                  No Brokers. Lessee represents and warrants to Lessor that no
broker or finder has been engaged by Lessee in connection with the transaction
contemplated by this Amendment. Lessee agrees to pay any and all claims made by
any other broker or finder who asserts that it was engaged by Lessee in
connection with the negotiation, execution or consummation of this Amendment.

 

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5.                  No Arbitration. The Arbitration Agreement, appearing as part
of the Original Lease at Paragraph 50, shall be of no further force or effect
and no longer deemed a part of the Lease Agreement, effective immediately.

 

6.                  No Offer. This Amendment shall not be binding until executed
and delivered by both parties. This Amendment shall not be relied upon by any
other party, individual, corporation, partnership or other entity as a basis for
terminating its Lease with Lessor.

 

7.                  Entire Agreement. The Lease Agreement, as amended by this
Amendment, represents the entire agreement between the parties, superseding all
prior oral, written and electronic understandings and agreements. This Amendment
may not be amended except in writing signed by all parties. In the event of any
conflict between the Lease Agreement and this Amendment, this Amendment shall
control.

 

8.                  Ratification. Except as otherwise specifically provided in
this Amendment, all of the terms, definitions, covenants and conditions of the
Lease Agreement are hereby ratified, confirmed and remain in full force and
effect, and are incorporated into this Amendment, and shall be applicable to
Lessee’s rental of the Premises through February 29, 2016.

 

9.                  Separate Counterparts: Signature Deliveries. This Amendment
may be executed in one or more separate counterparts, each of which, when so
executed, shall be deemed to be an original. Such counterparts shall together
constitute and be one and the same Instrument. Further, either party may deliver
its signature hereon via facsimile or electronic (PDF) transmission, and any
such signature so delivered shall be binding on that party.

 

[SEE SIGNATURE PAGE ATTACHED HERETO]

 

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IN WITNESS WHEREOF, this Amendment is made as of the date first written above.

 

LESSOR: JONDA HAWTHORNE, LLC   a California limited liability company          
By its Manager:               Karney Management Company,     a California
corporation             By:  /s/ Aliza K. Guren       Aliza K. Guren       Chief
Executive Officer         LESSEE: DBA DISTRIBUTION SERVICES, INC.   a New Jersey
corporation           By:  /s/ James C. Eagen   Name;  James C. Eagen   Title: 
President                    By:  /s/ Michael Capezza   Name:  Michael Capezza  
Title:  Secretary 

 

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