Exhibit 10.36

 

 

 

________________________________

 

 

LEASE

 

________________________________

 

 

 

 

Between

 

SPINEBARREL, LLC

 

and

 

AEROGROW INTERNATIONAL, INC.

 

 

 

 

May 29, 2019

 

 

 

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SUMMARY OF BASIC LEASE TERMS

 

1.     Tenant: Aerogrow International, Inc.

 

(a)     Tenant’s entity form and jurisdiction: Nevada corporation

 

(b)     Tenant’s federal taxpayer identification number: 46-0510685

 

2.     Building/Premises: 5405 Spine Road, Boulder, Colorado 80301

 

(a)     Type: Single Tenant

 

(b)     Total Rentable Square Footage: approximately 14,630 sf

 

3.     Initial Lease Term:

 

(a)     Period: Seven (7) years

 

(b)     Delivery Date: June 1, 2019

 

(c)     Commencement Date:      October 1, 2019

 

(d)     Expiration Date: September 30, 2026

 

4.     Extension Options: Tenant shall have two (2) options to renew or extend
the term of the lease for a period of five (5) years each as provided in Section
3.2.

 

5.     Termination Options: One-Time right to terminate after the fifth (5th)
year of the Lease with payment of termination fee as provided in Section 15.1.

 

6.     Base Rent Schedule:

 

Lease Year

$PSF NNN

Annual

Monthly

6/1/2019-9/30/2019 *

$0.00

$0.00

$0.00

10/1/2019-9/30/2020

$17.25

$252,367.50

$21,030.63

10/1/2020-9/30/2021

$17.85

$261,145.50

$21,762.13

10/1/2021-9/30/2022

$18.48

$270,362.40

$22,530.20

10/1/2022-9/30/2023

$19.13

$279,871.90

$23,322.66

10/1/2023-9/30/2024

$19.79

$289,527.70

$24,127.31

10/1/2024-9/30/2025

$20.49

$299,768.70

$24,980.73

10/1/2025-9/30/2026

$21.20

$310,156.00

$25,846.33

*Gross Rent (Base Rent and Additional Rent) shall be abated during the first
four (4) months.

 

7.     Additional Rent:

 

(a)     Tenant shall pay 100% of Additional Rent $8,461.02 per month, based on
an estimate of $6.94 per square foot of the Premises

 

(b)     Monthly Deposits commence on the Commencement Date

 

(c)     Initial Monthly Deposits: $29,491.65 (Base Rent plus Additional Rent)

 

 

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8.     Security Deposit Amount:                       $700,000.00

 

9.     Place for Payments:                                 SpineBarrel, LLC

c/o The Colorado Group

3434 47th Street, Suite 220

Boulder, CO 80301

 

10.     Place for Notices:

Landlord:

 

with a copy to:

SpineBarrel, LLC

c/o The Colorado Group

3434 47th Street, Suite 220

Boulder, CO 80301

Attn: Neil Littman

 

Packard and Dierking, LLC

2595 Canyon Blvd., Suite 200

Boulder, CO 80302

Attn: Kimberly Lord

     

Tenant:

 

with copies to:

Prior to Commencement Date:

 

AeroGrow International, Inc.

6075 Longbow Dr., Suite 200

Boulder, CO 80301

Attn: Grey Gibbs

 

 

 

The Scotts Miracle-Gro Company

14111 Scottslawn Rd

Marysville, OH 43041

Attention Real Estate Department

After Commencement Date:

 

Aerogrow International, Inc.

5404 Spine Road

Boulder, CO 80301

Attn: Grey Gibbs

 

The Scotts Miracle-Gro Company

14111 Scottslawn Road

Marysville, OH 43041

Attn: Legal Department

 

11.     Permitted Uses: General office and lab related uses.

 

12.     Brokers:                    Tenant’s Broker: Brian McClenahan and Jeremy
Kroner, CBRE, Inc.

Landlord’s Broker: Neil Littmann, W. Scott Reichenberg, Jessica Cashmore and
Aaron Baney, The Colorado Group, Inc. Furthermore, the Parties acknowledge
timely disclosure that Neil Littmann and W. Scott Reichenberg are members of the
Landlord.

 

13.     Utilities: Direct to Tenant

 

14.     Tenant Finish Contribution: Up to a maximum amount of $40.00 psf
($585,200.00) payable on receipt of documented invoices from Tenant and in
accordance with the Work Letter.

 

 

 

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LEASE

 

This Lease is made and entered into by and between SpineBarrel, LLC, a Colorado
limited liability company (“Landlord”), and Aerogrow International, Inc., a
Nevada corporation (“Tenant”), and shall be effective on the date of its
execution by the last party to sign (the “Effective Date”).

 

ARTICLE 1

GENERAL

 

1.1   Consideration. Landlord enters into this Lease in consideration of the
payment by Tenant of the Rents herein reserved and the keeping, observance and
performance by Tenant of the covenants and agreements of Tenant herein
contained.

 

1.2     Exhibits and Addenda to Lease. The Exhibits and Addenda listed below
shall be attached to this Lease and deemed incorporated in this Lease by this
reference. In the event of any inconsistency or conflict between such Exhibits
and Addenda and the terms and provisions of this Lease, the terms and provisions
of the Exhibits and Addenda shall control. The Exhibits and Addenda to this
Lease are:

 

Summary of Basic Lease Terms

 

Exhibit A     Notice of Non-Liability for Mechanics’ Liens

 

Exhibit B     Work Letter

 

Exhibit C     Rules and Regulations

 

Exhibit D     Bill of Sale with Furniture Fixtures & Equipment List

 

ARTICLE 2

DEFINITIONS; DEMISE OF PREMISES

 

2.1     Building. “Building” shall mean the building or buildings constructed on
the Land, as the same may be expanded, remodeled, reconstructed or otherwise
modified from time to time by Tenant, with Landlord’s consent as provided in
Section 8.12, currently containing approximately the number of square feet of
interior floor area set forth on the Summary of Basic Lease Terms.

 

2.2     Improvements. “Improvements” shall mean the Building, the Parking Area
and all other fixtures and improvements on the Land, including landscaping
thereon.

 

2.3      Land. “Land” shall mean the parcel or parcels of real property upon
which the Building is located, as the same may be replatted, resubdivided or
adjusted from time to time by Landlord in its sole discretion.

 

2.4     Lease Year. “Lease Year” shall mean a period of twelve (12) consecutive
calendar months commencing, if the Commencement Date is the first day of a
month, on the Commencement Date. If the Commencement Date is not the first day
of a month, “Lease Year” shall mean a period of twelve (12) consecutive calendar
months commencing on the first day of the month immediately following the
Commencement Date, and the first Lease Year shall include such partial month.

 

 

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2.5     Parking Area. “Parking Area” shall mean that portion of the Land that is
or is to be paved and otherwise improved or designated unimproved land for the
parking of motor vehicles containing approximately thirty-eight (38) parking
stalls.

 

2.6     Premises. The “Premises” shall mean the Building that is located on the
Land.

 

2.7     Property. “Property” shall mean the Land, the Building and the
Improvements and any fixtures and personal property used in operation and
maintenance of the Land, Building and Improvements other than fixtures and
personal property of Tenant.

 

2.8    Demise. Subject to the provisions, covenants and agreements herein
contained, Landlord hereby leases and demises to Tenant, and Tenant hereby
leases from Landlord, the Premises as hereinafter defined, for the Lease Term as
hereinafter defined, subject to existing covenants, conditions, restrictions,
easements and encumbrances affecting the same.

 

2.9     Square Footage and Address. The Premises contains approximately the
rentable floor area set forth in the Summary of Basic Lease Terms. The address
of the Premises is the address set forth in the Summary of Basic Lease Terms.

 

2.10    Use of Parking Area/Bike Storage. Tenant is hereby granted a right and
license to use the Parking Area. Landlord shall not be responsible for any
injuries to any person nor any damage to any automobile, vehicle or other
property that occurs in or about the Parking Area. Tenant shall be permitted to
store bicycles within the Building in designated storage areas.

 

2.11     Building Access. Tenant will have 7 days per week, 24 hours per day,
access.

 

2.12    Covenant of Quiet Enjoyment. Landlord covenants and agrees that,
provided Tenant is not in default and keeps, observes and performs the covenants
and agreements of Tenant contained in this Lease, Tenant shall have quiet and
peaceable possession of the Premises, and such possession shall not be disturbed
or interfered with by Landlord or by any person claiming by, through or under
Landlord.

 

2.13    Condition of Premises. Landlord agrees that to the best of Landlord’s
current knowledge, the Property and the Premises and the systems serving the
Premises (i.e., HVAC, fire suppression, electrical), including the Building and
restrooms, are in compliance with all applicable governmental regulations,
codes, rules and laws, including the Americans with Disabilities Act. Window
coverings as currently exist in the Premises will be retained for Tenant’s use.
Electrical distribution is present at the Premises but Tenant is responsible for
any upgrades that it may desire and these will be covered as part of Tenant’s
Work under the Work Letter. No submetering is present as it is a single tenant
Building; however, there a three (3) services that support the Building as it
was a multi-tenant building in the past. Tenant covenants and agrees that Tenant
accepts the Premises “as is” and Tenant hereby waives any warranty of condition
or habitability, suitability for occupancy, use or habitation, fitness for a
particular purpose or merchantability, express or implied, relating to the
Premises.

 

 

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ARTICLE 3

TERM OF LEASE

 

3.1     Lease Term. “Lease Term” or “Term” shall mean the period of time
specified in the Summary of Basic Lease Terms commencing at midnight on the
Commencement Date as set forth in the Summary of Basic Lease Terms and expiring
at midnight on the Expiration Date, as specified in the Summary of Basic Lease
Terms. The term “Lease Term” or “Term” shall include the Option Terms provided
in this Lease if Tenant’s Extension Options are exercised in accordance with the
terms and conditions hereof.

 

3.2     Options to Extend Lease. Provided that the Lease is then in full force
and effect and there exists no uncured default by Tenant, Tenant shall have the
right and option (each, an “Extension Option”) to extend this Lease for two (2)
additional terms of five (5) years each (each, an “Option Term”), as provided
herein. Tenant must exercise the Extension Options, if at all, by providing
Landlord with written notice thereof at least nine (9) months prior to the
expiration date of the initial 5-year Term, or the first Option Term, as the
case may be (“Extension Notice”). If Tenant does not provide Landlord with the
Extension Notice as and when herein specified, all Extension Options shall
terminate and be of no further force or effect. If Tenant exercises an Extension
Option, the Term shall be extended upon the same terms and conditions as set
forth in the Lease, except that the Base Rent shall be adjusted as provided
herein and the Extension Option applicable to such Option Term shall be of no
further force and effect. The Base Rent for the first year of an Option Term
shall be the then current Market Rate (as defined below), and will be increased
annually thereafter by the greater of three and one half percent (3.5%) or the
CPI Escalator as set forth in Section 3.2.3 below. Landlord shall not be
obligated to pay any commission or fee to any Tenant broker or agent with
respect to Tenant’s exercise of the Extension Options. Each Extension Option
shall apply to the entire Premises and may not be exercised as to only a portion
of the Premises. If Tenant is in material default of its obligations under the
Lease beyond all applicable grace periods at either the time it exercises an
Extension Option or the date upon which an Option Term is to commence, then
Landlord at its option may elect to treat the exercise of such Extension Option
as ineffective in which case this Lease shall terminate upon expiration of the
initial 5-year Term, or first Option Term, as the case may be.

 

3.2.1     Market Rate. Upon exercise by Tenant of an Extension Option and for a
period of thirty (30) days thereafter, Landlord and Tenant shall make a good
faith effort to agree upon the Market Rate. The “Market Rate” means the rate at
which Landlord under no compulsion to lease the Premises and a tenant under no
compulsion to lease the Premises would determine as the rental as of the
commencement date of such Option Term, taking into consideration all relevant
factors, including, without limitation, the uses permitted under the Lease, the
quality, size, design and location of the Premises, and the rental for
comparable space located in the City of Boulder. The Base Rent for the first
year of an Option Term shall not be less than 95% of the Base Rent provided
during the last year of the preceding Term.

 

3.2.2     Market Rate Dispute Resolution. In the event that Landlord and Tenant
fail to agree on the Market Rate within such thirty (30) day period, then Tenant
shall within ten (10) business days after the expiration of such 30-day period
give written notice to Landlord of either (a) the withdrawal by Tenant of its
Extension Notice, whereupon all existing Extension

 

 

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Options shall terminate and the Lease shall expire on the expiration date of the
then-current Term, or (b) that Tenant is requiring the Market Rate to be
determined by arbitration. If Tenant does not provide such notice within said
10-day period, then Tenant shall be deemed to have withdrawn its Extension
Notice, the Extension Option(s) shall terminate and the Lease shall expire on
the expiration date of the then-current Term. If Tenant timely provides notice
and requires arbitration, then the parties shall within ten (10) days after
Tenant’s notice of arbitration select an arbitrator to render a final
determination of the Market Rate. The arbitrator shall be a licensed commercial
real estate broker who has at least (10) years continuous experience in the
business of commercial real estate brokerage in Boulder, Colorado, and shall be
a member in good standing of the Denver Metropolitan Commercial Association of
Realtors (“DMCAR”) and Commercial Brokers of Boulder (“CBB”), or if either of
such organizations is not then in existence, such other trade group(s) or
professional organization(s) as leading commercial real estate brokers in
Boulder, Colorado, customarily participate in at such time. The arbitrator shall
conduct such hearings and investigations as the arbitrator shall deem
appropriate and shall, within thirty (30) days after having been appointed,
establish the Market Rate. The fees of the arbitrator shall be divided equally
between Landlord and Tenant. The determination rendered in accordance with the
provisions of this Section shall be final and binding in fixing the Market Rate.
The arbitrator shall not have the power to add to, modify, or change any of the
provisions of this Lease. In the event Landlord and Tenant are unable to agree
upon an arbitrator, Landlord and Tenant shall each, at its own expense, select
an arbitrator and those two arbitrators shall then choose an arbitrator meeting
the qualifications set forth above to make the determination. If any party fails
to select an arbitrator as described above, the arbitrator selected by the other
party shall be deemed to be the arbitrator selected by the parties under this
paragraph. If for any reason the Market Rate shall not have been determined
prior to the commencement of the Option Term, then, until the Market Rate has
been finally determined in accordance with this Section, the amount of Base Rent
shall remain the same as payable during the prior year of the Lease. Upon final
determination of the Market Rate, an appropriate adjustment to the Base Rent
shall be made reflecting such final determination, and an adjustment shall be
made between Landlord and Tenant with respect to any overpayment or underpayment
of Base Rent from the commencement of the Option Term to the date of such final
determination, together with interest accruing at the rate of eight percent (8%)
per annum.

 

3.2.3     CPI Escalator. During any Option Term the amount of Base Rent shall be
increased annually by the greater of 3.5% or the CPI Escalator (defined below)
on October 1 of each year during the Option Term. As used herein, the term “CPI
Escalator” shall refer to the following formula:

 

The increase in the United States Department of Labor, Bureau of Labor
Statistics, Consumer Price Index for All Urban Consumers (Denver-Boulder,
Colorado area, 1982-1984 = 100) (“CPI”) between (i) the most recently published
CPI prior to the date which is three months prior to the relevant anniversary
date of the Lease (the “Comparison Date”) and (ii) the most recently published
CPI prior to the date which is one year prior to the Comparison Date.

 

In no event shall the Base Rent be reduced. Landlord shall notify Tenant of the
amount of each increase in Base Rent by a written statement. If the Base Rent is
increased by the CPI

 

 

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Escalator, such notice shall include the CPI for the Comparison Date and for the
date that is one year prior to the Comparison Date. If the format or components
of the CPI are materially changed, Landlord shall substitute an index which is
published by the Bureau of Labor Statistics or a similar agency and which is
most nearly equivalent to the CPI on the Comparison Date.

 

In the event Landlord has not given Tenant a written statement setting forth the
amount of the increase in Base Rent for a given year by October 1, Tenant shall
continue to pay Base Rent in the same amount applicable during the prior year
until such time as Landlord has provided Tenant with such written statement.
Within 10 days after Landlord provides such written statement, Tenant shall pay
to Landlord the aggregate amount of additional Base Rent owed from the
anniversary date based upon the increase in Base Rent applicable for such year.

 

ARTICLE 4

RENT AND OTHER AMOUNTS PAYABLE

 

4.1     Base Rent. Tenant covenants and agrees to pay to Landlord, without prior
notice, demand, offset, deduction or abatement, Base Rent specified in the
Summary of Basic Lease Terms for the full Lease Term beginning on the
Commencement Date.

 

4.2     Monthly Rent. Base Rent shall be payable monthly in advance, without
notice, in equal installments, together with the Monthly Deposits in the amounts
specified in the Summary of Basic Lease Terms (“Monthly Rent”). The first
monthly installment shall be due and payable on the Commencement Date and a like
monthly installment shall be due and payable on or before the first day of each
calendar month succeeding the Commencement Date during the Lease Term, except
that the rental payment for any fractional calendar month, if applicable, at the
commencement or end of the Lease Term shall be prorated based on a 30-day month.

 

4.3     Place of Payments. Base Rent and all other sums payable by Tenant to
Landlord under this Lease shall be paid to Landlord at the place for payments
specified in the Summary of Basic Lease Terms, or such other place as Landlord
may from time to time designate in writing.

 

4.4     Lease a Net Lease and Rent Absolute. It is the intent of the parties
that: (i) the Base Rent provided in this Lease shall be a net payment to
Landlord; (ii) except as otherwise expressly provided herein, the Lease shall
continue for the full Lease Term notwithstanding any occurrence preventing or
restricting use and occupancy of the Premises, including any damage or
destruction affecting the Premises, and any action by governmental authority
relating to or affecting the Premises; (iii) the Base Rent shall be absolutely
payable without offset, reduction or abatement for any cause except as otherwise
specifically provided in this Lease; (iv) Landlord shall not bear any costs or
expenses relating to the Premises or provide any services or do any act in
connection with the Premises except as otherwise specifically provided in this
Lease; and (v) Tenant shall pay, in addition to Base Rent, Additional Rent to
cover costs and expenses relating to the Premises and the Property, all as
hereinafter provided.

 

4.5     Additional Rent. Commencing on the Commencement Date, Tenant covenants
and agrees to pay all costs and expenses relating to the operation, maintenance
and repair of Premises and Property, including utilities; Taxes and
proportionate Assessments and costs and expenses of Landlord’s Insurance; the
Management Fee; and all other costs and expenses that

 

 

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Tenant is obligated to pay under this Lease (all such costs and expenses other
than Base Rent are referred to herein collectively, “Additional Rent”). Landlord
covenants and agrees that Landlord shall pay the costs and expenses for which
Landlord has collected Additional Rent as and when due. Tenant shall not be
responsible or otherwise obligated to pay Landlord for any late fees, interest,
penalties or other charges resulting from Landlord’s failure to make such
payments when due.

 

4.6     Monthly Deposits for Taxes, Insurance and Management Fee. Tenant will
pay to Landlord monthly in advance, without notice, commencing on the
Commencement Date and on the first day of each month thereafter, amounts as
hereinafter specified, for payment of Taxes and Assessments (defined in
Section 5.1), Landlord’s Insurance (defined in Section 6.2), the Management Fee
(defined in Section 7.2), and any other charges payable with respect to the
Premises hereunder as Additional Rent (collectively “Monthly Deposits”). The
Monthly Deposits shall each be equal to 1/12 of the amounts, as reasonably
estimated and re-estimated from time to time by Landlord, of the annual Taxes
and Assessments, annual Landlord’s Insurance premiums, and annual Management Fee
payable with respect to the Property. Landlord shall submit to Tenant before the
beginning of each calendar year during the Term, or as soon thereafter as
reasonably practicable, a statement of Landlord’s estimate of Monthly Deposits
due from Tenant during such calendar year. If Landlord fails to give Tenant
notice of its estimated Monthly Deposits due for any calendar year, then Tenant
shall continue making estimated Monthly Deposits in accordance with the estimate
for the previous calendar year until a new estimate is provided. If Landlord
determines that, because of unexpected increases in Taxes and Assessments or
Landlord’s Insurance, Landlord’s estimate of the Monthly Deposits was too low,
then Landlord shall have the right to give a new statement thereof due from
Tenant for the balance of the applicable calendar year and bill Tenant for any
deficiency, which amount Tenant shall pay within thirty (30) days. Tenant shall
thereafter pay estimated Monthly Deposits based on such new statement. If Tenant
so requests in writing within thirty (30) days after receipt of a new statement,
Landlord shall furnish Tenant with a copy of invoices or receipts for the
expenses giving rise to Landlord’s re-estimation of Monthly Deposits.

 

4.7     Reconciliation Statement. Within ninety (90) days after the expiration
of each calendar year during the Term, or as soon thereafter as is reasonably
practicable, Landlord shall submit a statement (the “Reconciliation Statement”)
to Tenant showing the actual Taxes and Assessments and Landlord’s Insurance
premiums due from Tenant for such calendar year. If for any calendar year,
Tenant’s estimated payments therefor exceed the actual amount due from Tenant,
then Landlord shall give Tenant a credit in the amount of the overpayment toward
Tenant’s next monthly payments of Monthly Rent (until exhausted), or, in the
event the Lease has expired or terminated and no Default by Tenant exists,
Landlord shall pay Tenant the total amount of such excess upon delivery of the
Reconciliation Statement to Tenant. If for any calendar year, Tenant’s estimated
payments are less than the actual amount due from Tenant, then Tenant shall pay
the total amount of such deficiency to Landlord within thirty (30) days after
receipt of the Reconciliation Statement from Landlord. If Tenant so requests in
writing within thirty (30) days after receipt of the Reconciliation Statement
for a calendar year, Landlord shall furnish Tenant with a copy of invoices or
receipts for Taxes and Assessments and Landlord’s Insurance for such calendar
year. Landlord’s and Tenant’s obligations with respect to any overpayment or
underpayment of Taxes and Assessments and Landlord’s Insurance shall survive the
expiration or termination of this Lease.

 

 

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4.8     Security Deposit. Upon execution of this Lease by Tenant, Tenant shall
deposit with Landlord the amount specified as a security deposit in the Summary
of Basic Lease Terms (the “Security Deposit”). The amount of the Security
Deposit shall be decreased by $100,000 every twelve (12) months following the
Commencement Date (i.e., date of first $100,000 reduction would be October 1,
2020), so long as Tenant has not had any uncured event of default during the
prior twelve (12) month period. The Security Deposit shall be retained by
Landlord and may be applied by Landlord, to the extent necessary, to pay and
cover any loss, cost, damage or expense, including attorneys’ fees, sustained by
Landlord by reason of the failure of Tenant to comply with any provisions,
covenant or agreement of Tenant contained in this Lease. To the extent not
necessary to cover such loss, cost, damage or expense, the Security Deposit,
without any interest thereon, shall be returned to Tenant within 60 days after
expiration of the Lease Term or the date Tenant surrenders the Premises to
Landlord in the condition required hereunder, whichever is later; provided,
however, that Landlord may also deduct any amount from the Security Deposit
Landlord estimates may be required to cover any shortfall in Monthly Deposits
made by Tenant in the final year of the Lease until such time as Landlord has
completed its annual Additional Rent reconciliation for such year. The Security
Deposit shall not be considered as an advance payment of rent or as a measure of
the loss, cost, damage or expense which is or may be sustained by Landlord. In
the event all or any portion of the Security Deposit is applied by Landlord to
pay any such loss, cost, damage or expense, Tenant shall, from time to time,
within five (5) business day of receipt of Landlord’s written demand, deposit
with Landlord such amounts as may be necessary to replenish the Security Deposit
to its original amount.

 

4.9     General Provisions as to Monthly Deposits and Security Deposit. Landlord
shall not be required to hold the Security Deposit in an escrow or trust deposit
account, and Landlord shall not commingle the Monthly Deposits with Landlord’s
own funds. Landlord shall not be obligated to pay interest to Tenant on account
of the Monthly Deposits and Security Deposit. In the event of a transfer by
Landlord of Landlord’s interest in the Premises to a third party, Landlord shall
deliver the Monthly Deposits and Security Deposit to the transferee of
Landlord’s interest, and Landlord shall thereupon be discharged from any further
liability to Tenant with respect to such Monthly Deposits and Security Deposit.
In the event of a transfer by Tenant of Tenant’s interest in the Premises,
Landlord shall be entitled to return the Monthly Deposits and Security Deposit
to Tenant’s successor in interest, and Landlord shall thereupon be discharged
from any further liability with respect to the Monthly Deposits and Security
Deposit.

 

ARTICLE 5

TAXES AND ASSESSMENTS

 

5.1     Covenant to Pay Taxes and Assessments. Tenant covenants and agrees to
pay as Additional Rent all Taxes and proportionate Assessments that accrue
during or are attributable to the Lease Term. “Taxes and Assessments” means all
taxes, assessments or other impositions, general or special, ordinary or
extraordinary, of every kind or nature, which may be levied, assessed or imposed
upon or with respect to the Property or any part thereof, or upon any building,
improvements or personal property at any time situated thereon, but excluding
Landlord’s state or federal income, franchise, estate or inheritance taxes.

 

5.2     Proration at Commencement and Expiration of Term. Taxes and Assessments
shall be prorated between Landlord and Tenant for the year in which the Lease
Term commences

 

 

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and for the year in which the Lease Term expires as of, respectively, the
Commencement Date and Expiration Date (as extended, if applicable), except as
herein provided. Additionally, for the year in which the Lease Term expires,
Tenant shall be liable without proration for the full amount of Taxes and
Assessments relating to any improvements, fixtures, equipment or personal
property that Tenant is required to remove or in fact removes as of the
expiration of the Lease Term. Proration of Taxes and Assessments shall be made
on the basis of actual Taxes and Assessments. Taxes and Assessments for the
years in which the Lease Term commences and expires shall be paid and deposited
with the Landlord through Monthly Deposits as hereinabove provided. In the event
actual Taxes and Assessments for either year are greater or less than as
estimated for purposes of Monthly Deposits, appropriate adjustment and payment
shall be made between the parties at the time the actual Taxes and Assessments
are known, as may be necessary to accomplish proration, as hereinafter provided,
and such obligation shall survive the termination or expiration of this Lease.

 

5.3     Special Assessments. If any Taxes and Assessments are payable in
installments over a period of years, Tenant shall be responsible only for
installments for periods during the Lease Term with proration, as above
provided, of any installment payable prior to or after expiration of the Lease
Term.

 

5.4     New or Additional Taxes. Tenant’s obligation to pay Taxes and
Assessments shall include any Taxes and Assessments of a nature not presently in
effect but which may hereafter be levied, assessed or imposed upon Landlord or
upon the Property if such tax shall be based upon or arise out of the ownership,
use or operation of or the rents received from the Property, other than income
taxes or estate taxes of Landlord. For the purposes of computing Tenant’s
liability for such new type of tax or assessment, the Property shall be deemed
the only property owned by Landlord. Notwithstanding anything to the contrary in
the foregoing, Tenant’s obligation to pay any such Taxes and Assessments shall
only be attributable to those levied, assessed or imposed for periods during the
Lease Term or when Tenant was in possession of the Property.

 

5.5    Right to Contest Taxes. Landlord shall have the right to contest any
Taxes and Assessments. If Landlord does not contest any Taxes and Assessments,
then Tenant shall have the right to do so at Tenant’s cost and expense.
Landlord, at Tenant’s expense, agrees to execute and deliver to Tenant any
commercially reasonable documents that may be necessary or proper to permit
Tenant to contest any such Taxes and Assessments. Landlord shall pay to or
credit Tenant with any abatement, reduction or recovery of any Taxes and
Assessments attributable to the Lease Term less all costs and expenses incurred
by Landlord, including attorneys’ fees, in connection with pursuing such
abatement, reduction or recovery.

 

ARTICLE 6

INSURANCE 

 

6.1    Casualty Insurance. Landlord covenants and agrees to obtain and keep in
full force and effect during the Lease Term property insurance including
“special form” coverage with respect to the Property, in an amount equal to the
full replacement cost thereof, with coinsurance clauses of no less than ninety
percent (90%), and with coverage, at Landlord’s

 

 

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option, by endorsement or otherwise, for all risks, flood, vandalism and
malicious mischief, sprinkler leakage, boilers, and loss of rents and with a
deductible in the amount for each occurrence as Landlord, in its reasonable
discretion, may determine from time to time (“Casualty Insurance”). Casualty
Insurance obtained by Landlord will not name Tenant as an insured party, but
will, at Landlord’s option, name any mortgagee or holder of a deed of trust as
an insured party as its interest may appear. Any Casualty Insurance coverage
Landlord obtains pursuant to this Section 6.1 shall contain a waiver of rights
of subrogation as among Tenant, Landlord and the holder of any such mortgage or
deed of trust. Tenant covenants and agrees to pay, as Additional Rent, the cost
of Casualty Insurance obtained by Landlord, and to pay, as Additional Rent, the
cost of any deductible paid under such Casualty Insurance for any processed
claim. Tenant shall be responsible for obtaining, at Tenant’s cost and expense,
insurance coverage for personal property and Changes or other leasehold
improvements made by Tenant, and for business interruption of Tenant.

 

6.2     Liability Insurance. Tenant covenants and agrees to obtain and keep in
full force and effect during the Lease Term, and to pay the premiums and costs
of, commercial general liability insurance (“Liability Insurance”) covering
public liability for claims for bodily injury, personal injury, and property
damage with respect to the use and operation of the Premises and the Property by
Tenant, with minimum limits of $2,000,000 each occurrence and $5,000,000 general
aggregate, a portion of which may be provided through an excess policy. Landlord
may also obtain and keep in full force and effect during the Lease Term
liability insurance covering public liability with respect to the ownership, use
and operation of the Property (any such liability insurance and the Casualty
Insurance, collectively, the “Landlord’s Insurance”). Tenant covenants and
agrees to pay the premiums and costs of Landlord’s Insurance as Additional Rent
hereunder.

 

6.3     Other Insurance. Tenant covenants and agrees to obtain and keep in full
force and effect during the Lease Term, and to pay the premiums and costs of,
reasonable other types of insurance relating to the Property or Tenant’s
occupancy, use and operation of the Premises that Landlord or any mortgagee or
holder of a deed of trust on the Property may hereafter reasonably require.
Tenant shall cause such other insurance to be in effect within 30 days after
receipt of written notice from Landlord.

 

6.4     General Provisions Respecting Insurance. Except as otherwise approved in
writing by Landlord, all insurance obtained by Tenant shall (a) be on forms and
with insurers approved by Landlord, which approval shall not be unreasonably
withheld; (b) name Landlord, Landlord’s managers and agents, and the holder of
any mortgage or deed of trust encumbering the Property as additional insured
with respect to liability insurance, as their interests may appear; (c) contain
a waiver of rights of subrogation as among Tenant, Landlord and the holder of
any such mortgage or deed of trust; (d) provide coverage on an occurrence basis;
and (e) provide, by certificate of insurance or otherwise, proof of coverage.
Tenant shall promptly notify Landlord in writing if it receives any notice that
insurance coverage will be canceled or reduced. Certificates of insurance
obtained by Tenant shall be delivered to Landlord who may deposit the same with
the holder of any such first mortgage or deed of trust.

 

6.5     Cooperation in the Event of Loss. Landlord and Tenant shall cooperate
with each other in the collection of any insurance proceeds which may be payable
in the event of any loss,

 

 

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including the execution and delivery of any proof of loss or other actions
required to effect recovery.

 

ARTICLE 7

UTILITY, OPERATING, MAINTENANCE AND REPAIR EXPENSES; MANAGEMENT FEE 

 

7.1     Utility Charges. Tenant covenants and agrees to contract in Tenant’s own
name and to pay directly to the providers thereof, all charges for water,
sewage, disposal, storm drainage fees, gas, electricity, light, heat, power,
telephone or other utility services used, rendered or supplied to or for the
Premises.

 

7.2     Operating Expenses; Management Fee. Tenant covenants and agrees to
perform or contract for those services required to operate, repair and maintain
the Property as defined in Section 7.3 herein, and to pay for all costs and
expenses related thereto. Tenant shall pay to Landlord, as Additional Rent, a
commercially reasonable and market rate management fee that is no more than five
percent (5%) of the gross rents collected (“Management Fee”) for Lease
administration obligations of Landlord as required herein. Landlord agrees that
annual increases to controllable Operating Expenses shall not exceed four
percent (4%) per year. For purposes of this Lease, “Controllable Operating
Expenses” means all Operating Expenses other than Real Estate Taxes and
Insurance, including deductibles, weather-related maintenance and repair
expenses (including snow removal), utilities costs and expenses, maintenance and
repair expenses, expenses incurred to comply with governmental requirements
becoming effective or applicable after the Effective Date, and any other
expenses not reasonably within the control of Landlord.

 

7.3     Tenant’s Maintenance Obligation. Except as set forth in Section 7.4
below, Tenant, at its sole cost and expense, will maintain, repair, replace and
keep the Property and Premises and all improvements, fixtures and personal
property thereon in good, safe and sanitary condition, order and repair and in
accordance with all applicable laws, ordinances, orders, rules and regulations
of governmental authorities having jurisdiction. Without limiting the generality
of the foregoing, Tenant will perform or contract for and promptly pay for all
necessary or appropriate maintenance and repairs of the HVAC systems, signage,
doors, and glass, within the premises, and for trash and garbage disposal,
janitorial and cleaning services, security services, interior painting, window
washing, replacement of light bulbs and light fixtures. All maintenance and
repairs (as set forth above) are to be performed by Tenant and shall be done
promptly, in a good and workmanlike fashion. Landlord is responsible for the
delivery, appropriate maintenance and repairs of the plumbing, electrical and
other systems to the Premises from a public source; provided, however, that
Tenant will promptly pay for such services once delivered to the Premises.

 

7.4     Landlord’s Maintenance Obligation. Landlord will maintain and repair the
Parking Area (including, without limitation, seal coats, striping and
resurfacing/repaving), Building roof, landscaping, irrigation system, exterior
painting, and snow removal; however, such costs shall be passed through to the
Tenant as a part of the Operating Expenses as defined in Section 4.4 and 4.5
herein. This Lease is a NNN lease, and the Landlord is responsible only for
costs associated with the actual replacement of HVAC units, foundations and
load-bearing walls

 

 

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of the Building, roof replacement, and parking lot replacement; provided,
however, that, Tenant’s obligations to pay for the following repairs in any
given year will be split over two years except in the final year of the Lease as
follows: HVAC unit repairs in excess of $2,500, roof repairs in excess of
$5,000, and parking lot repaving and repairs in excess of $5,000. In the event
Landlord incurs any other costs or expenses relating to maintenance or repairs
to the Premises or the Property, Tenant shall pay or reimburse Landlord for any
such costs or expenses within 30 days of receiving notice thereof.

 

ARTICLE 8

OTHER COVENANTS OF TENANT 

 

8.1     Limitation on Use by Tenant. Tenant covenants and agrees to use the
Premises only for the use or uses set forth as Permitted Uses by Tenant in the
Summary of Basic Lease Terms and for no other purposes, except with the prior
written consent of Landlord. Landlord has made no investigation of and makes no
representations or warranties whatsoever regarding the permissibility of
Tenant’s Permitted Uses under applicable zoning or land use laws, rules,
regulations or approvals.

 

8.2     Compliance with Laws. Tenant covenants and agrees that at all times
during the Lease Term, Tenant’s use of the Premises shall be in compliance with
all zoning, land use and other applicable laws, rules and regulations with
respect thereto, and that nothing shall be done or kept on the Property in
violation of any law, ordinance, order, rule or regulation of any governmental
authority having jurisdiction, and that the Property shall be used, kept and
maintained in compliance with any such law, ordinance, order, rule or regulation
and with the certificate of occupancy issued for the Building.

 

8.3     Compliance with Insurance Requirements. Tenant covenants and agrees that
nothing shall be done or kept on the Property which might impair or increase the
cost of insurance maintained with respect to the Premises, which might increase
the insured risks or which might result in cancellation of any such insurance.

 

8.4     No Waste or Impairment of Value. Tenant covenants and agrees that
nothing shall be done or kept on the Property that might impair the value of the
Property, or which would constitute excessive wear and tear or waste.

 

8.5     No Overloading. Tenant covenants and agrees that nothing shall be done
or kept on the Property and that no improvements, changes, alterations,
additions, maintenance or repairs shall be made to the Property which might (a)
impair the structural soundness of the Building, Improvements or Parking Area,
(b) result in an overload of electrical lines serving the Building or cause
excessive tripping of circuit breakers, (c) interfere with any telephone lines
or equipment or any other electric or electronic equipment in the Building or on
any adjacent or nearby property, (d) place excessive demands on or exceed the
capacity of the water lines or sewer lines servicing the Building, or (e) in any
other way overload any portion of the Premises or any equipment or facilities
servicing the same. In the event of violations hereof, Tenant covenants and
agrees to immediately remedy the violation at Tenant’s expense and in compliance
with all requirements of governmental authorities and insurance underwriters.

 

 

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8.6     No Nuisance, Noxious or Offensive Activity. Tenant covenants and agrees
that nothing shall be done or kept on the Property that may be or become a
public or private nuisance or which may cause unreasonable disturbance or
annoyance to others on adjacent or nearby property. Tenant covenants and agrees
that it will not use or permit to be used any part of the Premises for: (a) any
adult book store or a store or any other establishment primarily selling or
exhibiting pornographic materials or a store or club permitting the partial or
complete exposure of any human genitalia, or topless or bottomless
entertainment; (b) the sale of paraphernalia for use with illicit drugs or
marijuana; or (c) growing, storing, selling or otherwise supplying, using or
consuming illicit drugs or marijuana.

 

8.7     No Annoying Lights, Sounds or Odors. Tenant covenants and agrees that no
light shall be emitted from the Premises which is unreasonably bright or causes
unreasonable glare; no sound shall be emitted from the Premises which is
unreasonably loud or annoying; and no odor shall be emitted from the Premises
which is or might be noxious or offensive to others on adjacent or nearby
property.

 

8.8     No Unsightliness. Tenant covenants and agrees that no unsightliness
shall be permitted on the Property that is visible from any adjacent or nearby
property. Without limiting the generality of the foregoing, all unsightly
conditions, equipment, objects and conditions shall be kept enclosed within the
Premises; no refuse, scrap, debris, garbage, trash, bulk materials or waste
shall be kept, stored or allowed to accumulate on the Premises or the Property
in an unsightly manner; and all pipes, wires, poles, antennas and other
facilities for utilities or the transmission or reception of audio or visual
signals or electricity shall be kept and maintained underground or enclosed
within the Premises or appropriately screened from view.

 

8.9     No Animals. With the exception of certain pets pre-approved by Tenant
for permission on the Property during working hours only, Tenant covenants and
agrees that no animals shall be permitted or kept on the Property; provided,
however, that nothing herein shall be construed as prohibiting qualified service
animals which may not be legally excluded from the Premises pursuant to the
Americans with Disabilities Act or any similar law, rule or regulation
applicable to the Premises.

 

8.10   Restriction on Signs and Exterior Lighting. No directory or suite
signature exists; however, Tenant shall be permitted (at its sole cost and
expense) to use the monuments signs on the South and East sides of the Property.
Tenant covenants and agrees that no other signs or advertising devices of any
nature shall be erected or maintained by Tenant on the Property and no exterior
lighting shall be permitted on the Property except as approved in writing by
Landlord, which approval shall not be unreasonably withheld. All signage and
lighting shall comply with applicable laws and covenants. Tenant shall remove
all of its signage at the end of the Term and repair any damage caused by such
removal.

 

8.11     No Violation of Covenants. Tenant covenants and agrees not to commit,
suffer or permit any violation of any covenant, condition or restriction
affecting the Property, including those Rules and Regulations for the Building
which are attached hereto as Exhibit C and which may be revised by Landlord from
time to time.

 

 

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8.12  Restriction on Changes and Alterations. Tenant covenants and agrees not to
improve, change, alter, add to, remove or demolish any Improvements
(collectively, “Changes”) having a cost or value in excess of $5,000.00, or that
affect the structural elements, building systems or foundations of the Premises,
without the prior written consent of Landlord, which consent shall not be
unreasonably withheld, and unless Tenant complies with all conditions which may
be imposed by Landlord, in its reasonable discretion, in connection with such
consent. Tenant shall pay to Landlord the reasonable costs and expenses of
Landlord for architectural, engineering, legal or other consultants that may be
reasonably incurred by Landlord in determining whether to approve any such
Changes. Landlord’s consent to any Changes and the conditions imposed in
connection therewith shall be subject to all requirements and restrictions of
any holder of a mortgage or deed of trust encumbering the Property. If such
consent is given, no such Changes shall be permitted unless: (a) Tenant shall
have procured and paid for all necessary permits and authorizations from any
governmental authorities having jurisdiction; (b) such Changes will not reduce
the value of the Property, and will not affect or impair existing insurance on
the Property; and (c) Tenant, at Tenant’s sole cost and expense, shall maintain
or cause to be maintained workmen’s compensation insurance covering all persons
employed in connection with the work and obtain liability insurance covering any
loss or damage to persons or property arising in connection with any such
Changes and such other insurance or bonds as Landlord may reasonably require.
Tenant covenants and agrees that any such Changes approved by Landlord shall be
completed with due diligence and in a good and workmanlike fashion and in
compliance with all conditions imposed by Landlord and all applicable permits,
authorizations, laws, ordinances, orders, rules and regulations of governmental
authorities having jurisdiction, and that the costs and expenses with respect to
such Changes shall be paid promptly when due and that the Changes shall be
accomplished free of liens of mechanics and materialmen. Tenant covenants and
agrees that all such Changes shall become the property of the Landlord at the
expiration of the Lease Term or, if Landlord so requests, Tenant shall, at or
prior to expiration of the Lease Term and at its sole cost and expense, remove
such Changes and restore the Property to its condition prior to such Changes.

 

8.13   No Mechanics’ Liens. Tenant covenants and agrees not to permit or suffer,
and to cause to be removed and released, any mechanic’s, materialmen’s or other
lien on account of supplies, machinery, tools, equipment, labor or material
furnished or used in connection with the construction, alteration, improvement,
addition to or repair of the Premises by, through or under Tenant. If a lien is
filed, Tenant shall within fifteen (15) days after receipt of notice thereof, at
Landlord’s option, remove the lien by paying it in full, furnish Landlord a bond
sufficient to discharge the lien or deposit in an escrow approved by Landlord
150% of the amount of such lien. At least fifteen (15) days prior to any
Changes, Tenant shall provide written notice to Landlord of the date of
commencement of any Changes. Prior to the commencement of any Changes, Tenant
shall post in conspicuous locations and maintain on the Premises Notices of
Owner’s Non-Liability in the form attached hereto as Exhibit A or in such other
form as Landlord may from time to time require in writing.

 

8.14   No Other Encumbrances. Tenant covenants and agrees not to obtain any
financing secured by Tenant’s interest in the Premises and not to encumber the
Property or Landlord’s or Tenant’s interest therein, without the prior written
consent of Landlord, and to keep the Property free from all liens and
encumbrances by, through or under Tenant.

 

 

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8.15   Subordination to Landlord Mortgages. Tenant covenants and agrees that
this Lease and Tenant’s interest in the Premises shall be junior and subordinate
to any mortgage or deed of trust now or hereafter encumbering the Property,
provided that such subordination shall be conditioned on any mortgagee under a
mortgage, beneficiary under a deed of trust and their successors-in-interest
agreeing that this Lease and the rights of Tenant hereunder shall not be
disturbed and shall continue in full force and effect so long as an uncured
Default by Tenant has not occurred. In the event of a foreclosure of any such
mortgage or deed of trust, Tenant shall attorn to the party acquiring title to
the Property as the result of such foreclosure. Tenant covenants and agrees,
within 10 business days after receipt of written request from Landlord, to
execute a commercially reasonable Subordination, Nondisturbance and Attornment
Agreement as may be necessary or appropriate to confirm and establish this Lease
as subordinate to any such mortgage or deed of trust in accordance with the
foregoing provisions. Alternatively, Tenant covenants and agrees that, at the
option of any mortgagee or beneficiary under a deed of trust, Tenant shall
within 10 business days after receipt of written request therefor execute and
deliver such commercially reasonable documents as may be necessary to establish
this Lease and Tenant’s interest in the Premises as superior to any such
mortgage or deed of trust. If Tenant fails to execute any documents as required
under the provisions hereof, Tenant hereby makes, constitutes and irrevocably
appoints Landlord as Tenant’s attorney in fact and in Tenant’s name, place and
stead to execute any such document.

 

8.16    Assignment or Subletting. Tenant shall have the right to sublease or
assign this Lease to a parent, subsidiary, affiliate, or other entity
controlling or in common control with Tenant (collectively, an “Affiliate”) upon
prior written notice to Landlord but without the requirement of prior written
consent so long as the entity is of equal or better financial strength and
provides a security deposit equal to the current security deposit being held by
Landlord or $400,000, whichever is greater (unless otherwise agreed by the
Landlord, at Landlord’s sole discretion) acceptable to Landlord and Landlord has
been provided with a copy of such Affiliate’s financials prior to execution of
the sublease or assignment. Except for a Transfer by Tenant to an Affiliate as
set forth above, Tenant covenants and agrees not to make or permit a Transfer by
Tenant, as hereinafter defined, without Landlord’s prior written consent, which
consent shall not be unreasonably withheld. A “Transfer by Tenant” shall include
an assignment of this Lease, a sublease of all or any part of the Premises, any
transfer of 30% or more of the voting stock or interests of Tenant, or any
assignment, sublease, license, franchise, transfer, mortgage, pledge or
encumbrance of all or any part of Tenant’s interest under this Lease or in the
Premises, by operation of law or otherwise, or the use or occupancy of all or
any part of the Premises by anyone other than Tenant. Except as otherwise
provided herein, any such Transfer by Tenant without Landlord’s written consent
shall be void and shall constitute a default under this Lease. In the event
Landlord consents to any Transfer by Tenant, Tenant shall not be relieved of its
obligations under this Lease and Tenant shall remain liable, jointly and
severally and as a principal, and not as a guarantor or surety, under this Lease
to the same extent as though no Transfer by Tenant had been made. The acceptance
of rent by Landlord from any person other than Tenant shall not be deemed to be
a waiver by Landlord of the provisions of this Section or of any other provision
of this Lease and any consent by Landlord to Transfer by Tenant shall not be
deemed a consent to any subsequent Transfer by Tenant. Landlord shall be
entitled to consider any reasonable factor in giving or withholding its consent
to a proposed Transfer by Tenant.

 

 

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Tenant covenants and agrees that in the event Landlord consents to a sublease by
Tenant, Tenant and Tenant’s subtenant shall enter into the form of agreement
then being used by Landlord for subleases, and in the event Landlord consents to
an assignment, Tenant and Tenant’s assignee shall enter into the form of
agreement then being used by Landlord for assignments. In the event Tenant or
Tenant’s transferee requests any changes or revisions to any such agreement,
Tenant shall pay to Landlord, within 10 days after demand by Landlord, the
reasonable costs and expenses of Landlord in connection with any request by
Tenant for consent to a Transfer, including attorneys’ fees.

 

8.17    Annual Financial Statements. Tenant covenants and agrees to furnish to
Landlord, within fifteen (15) days after Landlord’s written request, copies of
Tenant’s most recent year-end financial statements and year-to-date financial
statements through the end of the preceding calendar month. Other than as
required by a potential lender, mortgagee, investor or purchaser, Landlord
covenants and agrees that it will not deliver or otherwise share such financial
statements with any third party. The financial statements shall include a
balance sheet as of the end of, and a statement of profit and loss for, the
periods described herein and, if regularly prepared by Tenant, a statement of
sources and use of funds for the preceding fiscal year of Tenant.

 

8.18    Payment of Income and Other Taxes. Tenant covenants and agrees to pay
promptly when due all personal property taxes on personal property of Tenant on
the Premises and all federal, state and local income taxes, sales taxes, use
taxes, Social Security taxes, unemployment taxes and taxes withheld from wages
or salaries paid to Tenant’s employees, the nonpayment of which might give rise
to a lien on the Premises or Tenant’s interest therein, and to furnish, if
requested by Landlord, evidence of such payments.

 

8.19    Estoppel Certificates. Tenant covenants and agrees to execute,
acknowledge and deliver to Landlord, upon Landlord’s written request, a written
estoppel certificate certifying that this Lease is unmodified (or, if modified,
stating the modifications) and in full force and effect; stating the dates to
which Base Rent has been paid, stating the amount of the Security Deposit held
by Landlord; stating the amount of the Monthly Deposits held by Landlord for the
then calendar year; stating whether or not Landlord is in default under this
Lease (and, if so, specifying the nature of the default); and stating such other
matters concerning this Lease as Landlord may reasonably request. Tenant agrees
that such statement may be delivered to and relied upon by any existing or
prospective mortgagee or purchaser of the Property; provided, however, that any
such reliance will be subject to Tenant’s knowledge and statements made in the
estoppel certificate as of the date of that estoppel certificate. Further, such
estoppel certificate shall not be deemed to alter or modify any terms of this
Lease with the exception of any attornment to the party acquiring the Property.
Tenant agrees that a failure to deliver such a statement within 10 business days
after written request from Landlord shall be conclusive upon Tenant that this
Lease is in full force and effect without modification except as may be
represented by Landlord; that there are no uncured defaults by Landlord under
this Lease; and that any representations by Landlord with respect to Base Rent,
the Security Deposit and Monthly Deposits are true. In the event Tenant requests
any changes or revisions to any estoppel certificate, Tenant shall pay to
Landlord, within 10 days after demand by Landlord, the reasonable costs and
expense Landlord incurred in excess of $1,000 (if any) in connection with the
negotiation, drafting and revision of such estoppel certificate, including
attorneys’ fees.

 

 

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8.20    Landlord Right to Inspect and Show Premises and to Install “For Sale”
Signs. Tenant covenants and agrees that Landlord and its authorized
representatives shall have the right to enter the Premises at any reasonable
time upon reasonable prior telephonic or email notice to Tenant for the purposes
of inspecting the same or performing any other obligations of Tenant that Tenant
has failed to perform hereunder within the applicable cure period set forth in
Article 12 below, or for the purposes of showing the Premises to any existing or
prospective mortgagee, purchaser or (if during the last nine (9) months of the
Lease Term or any extension thereof) lessee of the Premises. Tenant covenants
and agrees that Landlord may at any time and from time to time place on the
Property a sign advertising the Property for sale or (if during the last nine
(9) months of the Lease Term or any extension thereof) for lease. Landlord shall
make commercially reasonable efforts to give Tenant advance notice of entry and
to avoid any unreasonable disturbance of Tenant’s use and enjoyment of the
Premises.

 

8.21    Landlord Title to Fixtures, Improvements and Equipment/Tenant Purchase
of Certain FF&E. Tenant covenants and agrees that all fixtures and improvements
on the Premises (excluding Tenant’s Equipment, defined below and the FF&E sold
to Tenant) including all plumbing, heating, lighting, electrical and air
conditioning fixtures and equipment, whether or not attached or affixed to the
Premises, and whether now or hereafter located upon the Premises, shall be and
remain the property of the Landlord upon expiration of the Lease Term.
Concurrently with the Effective Date and subject to Landlord’s acquisition of
the FF&E from the prior Tenant, Tenant agrees to purchase for $26,882 certain
FF&E as identified in Exhibit D and to be conveyed by through Bill of Sale in
the form also included as part of Exhibit D. The purchased FF&E is and shall
become part of Tenant’s Equipment as defined in Section 8.22 below.

 

8.22    Removal of Tenant’s Equipment. Unless otherwise agreed by the parties,
in writing, Tenant covenants and agrees to remove, at or prior to the expiration
or earlier termination of the Term, all movable trade fixtures, equipment,
apparatus, machinery, signs, furniture, furnishings and personal property used
in the operation of the business of Tenant or purchased and used by Tenant in
connection with the use and operation of the Premises (collectively, “Tenant’s
Equipment”). If such removal shall injure or damage the Premises, Tenant
covenants and agrees, at its sole cost and expense, at or prior to the
expiration or earlier termination of the Term, to repair such injury and damage
in good and workmanlike fashion and to place the Premises in the same condition
as the Premises would have been if such Tenant’s Equipment had not been
installed. If Tenant fails to remove any Tenant’s Equipment as required
hereunder, Landlord may, at its option, keep and retain any such Tenant’s
Equipment or dispose of the same and retain any proceeds therefrom, and Tenant
shall reimburse Landlord for any costs or expenses of Landlord in removing the
same and in restoring the Premises in excess of the actual proceeds, if any,
received by Landlord from disposition thereof. Tenant releases and discharges
Landlord from any and all claims and liabilities of any kind arising out of
Landlord’s disposition of Tenant’s Equipment. Tenant shall not be required to
remove any approved alterations in the Premises at the end of the term including
data and phone cabling.

 

8.23    Tenant Indemnification of Landlord. Tenant covenants and agrees to
protect, indemnify, defend and hold harmless Landlord from and against all
liability, obligations, claims, damages, penalties, causes of action, costs and
expenses, including reasonable attorneys’ fees, imposed upon, incurred by or
asserted against Landlord by reason of: (a) any accident, injury to

 

 

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or death of any person or loss of or damage to any property occurring on or
about the Premises or Property; (b) any act or omission of Tenant or Tenant’s
officers, employees, agents, guests or invitees or of anyone claiming by,
through or under Tenant; (c) any use which may be made of, or condition existing
upon, the Premises or Property; (d) any improvements, fixtures or equipment upon
the Premises or Property; (e) any violation of any law, ordinance, order, rule
or regulation of governmental authorities having jurisdiction by Tenant or
Tenant’s officers, employees, agents, guests or invitees or by anyone claiming
by, through or under Tenant; and (f) any repairs or maintenance of Changes to
the Property made or caused to be made by, through or under Tenant. Tenant
further covenants and agrees that, in case any action, suit or proceeding is
brought against Landlord by reason of any of the foregoing, Tenant will, at
Tenant’s sole cost and expense, pay all costs and expenses to defend Landlord in
any such action, suit or proceeding with counsel of Landlord’s choosing.

 

8.24   Liability of Landlord. Landlord covenants and agrees to protect,
indemnify, defend and hold harmless Tenant from and against all liability,
obligations, claims, damages, penalties, causes of action, costs and expenses,
including reasonable attorneys’ fees, imposed upon, incurred by or asserted
against Tenant by reason of Landlord’s negligence or willful misconduct.
Notwithstanding anything to the contrary contained in this Lease, Landlord, its
beneficiaries, successors and assigns, shall not be personally liable with
respect to any of the terms, covenants and conditions of this Lease, and Tenant
shall look solely to the equity of Landlord in the Property in the event of any
default or liability of Landlord under this Lease, such exculpation of liability
to be absolute and without any exception whatsoever.

 

8.25    Release upon Transfer.

 

8.25.1     Release upon Transfer by Landlord. In the event of a Transfer by
Landlord of the Property or of Landlord’s interest as Landlord under this Lease,
Landlord’s successor or assignee shall take subject to and be bound by this
Lease and, in such event, Tenant covenants and agrees that Landlord shall be
released from all obligations of Landlord under this Lease, except obligations
which arose and matured prior to such Transfer by Landlord; that Tenant shall
thereafter look solely to Landlord’s successor or assign for satisfaction of the
obligations of Landlord under this Lease; and that, upon demand by Landlord or
Landlord’s successor or assign, Tenant shall attorn to such successor or assign.

 

8.25.2     Release upon Transfer by Tenant. In the event of a Transfer by Tenant
of Tenant’s interest as Tenant under this Lease, Tenant’s successor or assignee
shall take subject to and be bound by this Lease and, in such event, Landlord
covenants and agrees that Tenant shall be released from all obligations of
Tenant under this Lease, except obligations which arose and matured prior to
such Transfer by Tenant; that Landlord shall thereafter look solely to Tenant’s
successor or assign for satisfaction of the obligations of Tenant under this
Lease.

 

8.26    Monitoring Equipment. Should equipment for monitoring fire systems
and/or security systems be deemed necessary by Tenant or Landlord or be required
for the Premises by federal, state or local governing agencies because of
Tenant’s equipment, the nature of Tenant’s business or Tenant’s modification of
the Premises, Tenant shall be responsible for installation of such monitoring
system, for any required building permits, monthly monitoring fees, and any
fines, penalties or other charges for false alarms.

 

 

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ARTICLE 9

ENVIRONMENTAL MATTERS 

 

9.1     Definitions.

 

9.1.1     Hazardous Material. “Hazardous Material” means any substance:

 

9.1.1.1     which is or becomes defined as a “hazardous material,” “hazardous
waste,” “hazardous substance,” “regulated substance,” “pollutant” or
“contaminant” under any federal, state or local statute, regulation, rule or
ordinance or amendments thereto including, without limitation, the Comprehensive
Environmental Response, Compensation and Liability Act (42 U.S.C. § 9601 et
seq.) and the Resource Conservation and Recovery Act (42 U.S.C. § 6901 et seq.);
or

 

9.1.1.2     which is toxic, explosive, corrosive, flammable, infectious,
radioactive, carcinogenic, mutagenic or otherwise hazardous and is or becomes
regulated by any governmental authority, agency, department, commission, board,
agency or instrumentality of the United States, the State of Colorado or any
political subdivision thereof; or

 

9.1.1.3     the presence of which on the Premises causes or threatens to cause a
nuisance upon the Premises or to adjacent properties or poses or threatens to
pose a hazard to the health or safety of persons on or about the Premises,
including radon gas; or

 

9.1.1.4     which contains gasoline, diesel fuel or other petroleum
hydrocarbons; or

 

9.1.1.5     which contains polychlorinated bipheynls (PCBs), asbestos or urea
formaldehyde foam insulation.

 

9.1.2     Environmental Requirements. “Environmental Requirements” means all
applicable present and future statutes, regulations, rules, ordinances, codes,
licenses, permits, orders, approvals, plans, authorizations, concessions,
franchises and similar items, of all governmental agencies, departments,
commissions, boards, bureaus or instrumentalities of the United States, states
and political subdivisions thereof and all applicable judicial, administrative
and regulatory decrees, judgments and orders relating to the protection of human
health or the environment.

 

9.1.3     Environmental Damages. “Environmental Damages” means all claims,
judgments, damages, losses, penalties, fines, liabilities (including strict
liability), encumbrances, liens, costs and expenses of investigation and defense
of any claim, whether or not such claim is ultimately defeated, and of any good
faith settlement or judgment, of whatever kind or nature, contingent or
otherwise, matured or unmatured, foreseeable or unforeseeable, including without
limitation reasonable attorneys’ fees and disbursements and consultants’ and
witnesses’ fees, any of which are incurred at any time as a result of the
existence of Hazardous Material upon, about, beneath the Premises or migrating
or threatening to migrate to or from the Premises, or the existence of a
violation of Environmental Requirements pertaining to the Premises.

 

 

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9.2     Tenant’s Obligation to Indemnify, Defend and Hold Harmless. Tenant, its
successors and assigns, agrees to indemnify, defend, reimburse and hold harmless
the following persons from and against any and all Environmental Damages arising
from activities of Tenant or its employees, agents, contractors, subcontractors,
guests, licensees or invitees which (1) result in the presence of Hazardous
Materials upon, about or beneath the Property or migrating to or from the
Property, or (2) result in the violation of any Environmental Requirements
pertaining to the Property and the activities thereon:

 

9.2.1     Landlord;

 

9.2.2     any other person who acquires an interest in the Premises through
Landlord in any manner, including but not limited to purchase at a foreclosure
sale or otherwise; and

 

9.2.3     the directors, officers, shareholders, employees, partners, agents,
contractors, subcontractors, experts, licensees, affiliates, lessees,
mortgagees, trustees, heirs, devisees, successors, assigns, guests and invitees
of such persons.

 

This obligation shall include, but not be limited to, the burden and expense of
investigating and defending all claims, suits and administrative proceedings
(with counsel reasonably approved by the indemnified parties), including
attorneys’ fees and expert witness and consulting fees, even if such claims,
suits or proceedings are groundless, false or fraudulent, and conducting all
negotiations of any description, and paying and discharging, when and as the
same become due, any and all judgments, penalties or other sums due against such
indemnified persons, and all such expenses incurred in enforcing the obligation
to indemnify. Tenant, at its sole expense, may employ additional counsel of its
choice to associate with counsel representing the indemnified parties.

 

9.3     Tenant’s Obligation to Remediate. Notwithstanding the obligation of
Tenant to indemnify Landlord pursuant to this agreement, Tenant shall, upon
demand of Landlord, and at its sole cost and expense, promptly take all actions
to remediate the Property that are reasonably necessary to mitigate
Environmental Damages or to allow full economic use of the Property, or are
required by Environmental Requirements, which remediation is necessitated by the
(1) introduction of a Hazardous Material upon, about or beneath the Property or
(2) a violation of Environmental Requirements, either of which is caused by the
actions of Tenant, its employees, agents, contractors, subcontractors, guests,
invitees or licensees. Tenant shall promptly provide to Landlord copies of
testing results and reports that are generated in connection with the above
activities, and copies of any correspondence with any governmental entity
related to such activities.

 

9.4     Notification. If Tenant shall become aware of or receive notice or other
communication concerning any actual, alleged, suspected or threatened violation
of Environmental Requirements, or liability of Tenant for Environmental Damages
in connection with the Premises or past or present activities of any person
thereon, or that any representation set forth in this agreement is not or is no
longer accurate, then Tenant shall deliver to Landlord, within 10 days of the
receipt of such notice or communication by Tenant, a written description of said
violation, liability, correcting information or actual or threatened event or
condition,

 

 

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together with copies of any such notice or communication. Receipt of such notice
shall not be deemed to create any obligation on the part of Landlord to defend
or otherwise respond to any such notification or communication.

 

9.5     Negative Covenants.

 

9.5.1     No Hazardous Material on Premises. Except in strict compliance with
all Environmental Requirements, Tenant shall not cause, permit or suffer any
Hazardous Material to be brought upon, treated, kept, stored, disposed of,
discharged, released, produced, manufactured, generated, refined or used upon,
about or beneath the Premises by Tenant, its agents, employees, contractors,
subcontractors, guests, licensees or invitees or any other person. Tenant shall
deliver to Landlord copies of all documents that Tenant provides to any
governmental body in connection with compliance with Environmental Requirements
with respect to the Premises, such delivery to be contemporaneous with provision
of the documents to the governmental agency.

 

9.5.2     No Violations of Environmental Requirements. Tenant shall not cause,
permit or suffer the existence or the commission by Tenant, its agents,
employees, contractors, subcontractors or guests, licensees or invitees or by
any other person of a violation of any Environmental Requirements upon, about or
beneath the Premises or any portion of the Building or Land.

 

9.6     Landlord’s Right to Inspect and to Audit Tenant’s Records. Upon
reasonable prior written notice to Tenant, Landlord shall have the right, but
not the duty, to enter and conduct an inspection of the Premises and to inspect
and audit Tenant’s records concerning Hazardous Materials at a reasonable time
to be mutually scheduled by the parties to determine whether Tenant is complying
with the terms of the Lease, including but not limited to the compliance of the
Premises and the activities thereon with Environmental Requirements and the
existence of Environmental Damages. On the dates and times to be mutually
scheduled by the parties, Tenant hereby grants to Landlord the right to enter
the Premises and to perform such tests on the Premises as are reasonably
necessary in the opinion of Landlord to assist in such audits and
investigations. Landlord shall use reasonable efforts to minimize interference
with the business of Tenant by such tests inspections and audits, but Landlord
shall not be liable for any interference caused thereby.

 

9.7     Landlord’s Right to Remediate. Should Tenant fail to perform or observe
any of its obligations or agreements pertaining to Hazardous Materials or
Environmental Requirements, then Landlord shall have the right, but not the
duty, without limitation upon any of the rights of Landlord pursuant to this
Lease, to enter the Premises personally or through its agents, consultants or
contractors and perform the same. Tenant agrees to indemnify Landlord for the
costs thereof and liabilities therefrom as set forth in Section 9.2.

 

9.8     Tenant shall not be responsible for costs and expenses related to
Hazardous Material present, discharged, leaked, released, disposed, or emitted
in, under, about, from or on the Property prior to the Effective Date in
violation of Environmental Requirements and/or any Hazardous Materials present,
discharged, leaked, released, disposed, or emitted in, under, about,

 

 

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from, or otherwise made present on the Property by Landlord or its officers,
directors, employees and agents during the Term.

 

9.9     Survival of Environmental Obligations. The rights and obligations of
Landlord and Tenant as set forth in this Article 9 and all of its sections shall
survive expiration or termination of this Lease.

 

ARTICLE 10

DAMAGE OR DESTRUCTION 

 

10.1    Notice of Damage to Premises. If any portion of the Property shall be
damaged or destroyed by fire or other casualty, Tenant shall give prompt written
notice thereof to Landlord (“Tenant’s Notice of Damage”).

 

10.2    Options to Terminate if Damage is Substantial. Upon receipt of Tenant’s
Notice of Damage, Landlord shall promptly proceed to determine the nature and
extent of the damage or destruction and to estimate the time necessary to repair
or restore the Property. As soon as reasonably possible, Landlord shall give
written notice to Tenant stating Landlord’s estimate of the time necessary to
repair or restore the Property (“Landlord’s Notice of Repair Time”). If Landlord
reasonably estimates that the repair or restoration cannot be completed within
one (1) year from the time of Landlord’s Notice of Repair Time, Landlord and
Tenant shall each have the option to terminate this Lease. If, however, the
damage or destruction was caused by the act or omission of Tenant or Tenant’s
officers, employees, agents, guests or invitees or of anyone claiming by,
through or under Tenant, Landlord shall have the option to terminate this Lease
if Landlord reasonably estimates that the repair or restoration cannot
reasonably be completed within one (1) year from the time of Landlord’s Notice
of Repair Time, but Tenant shall not have the option to terminate this Lease.
Any option granted hereunder shall be exercised by written notice to the other
party given within 10 days after Landlord’s Notice of Repair Time. If either
Landlord or Tenant exercises its option to terminate this Lease, the Lease Term
shall expire 30 days after the notice by either Landlord or Tenant exercising
such party’s option to terminate this Lease. Following termination of this Lease
under the provisions hereof, Landlord shall refund to Tenant such amounts of
Base Rent and Additional Rent theretofore paid by Tenant as may be applicable to
the period subsequent to the time of Tenant’s Notice of Damage less the
reasonable value of any use or occupation of the Property by Tenant subsequent
to the time of Tenant’s Notice of Damage.

 

10.3    Damage to Building. If the Building shall be damaged or destroyed by
fire or other casualty (whether or not the rest of the Property is affected) to
the extent of fifty percent (50%) or more of the replacement value thereof and
within 30 days after the happening of such damage Landlord shall decide not to
reconstruct or rebuild the Building, then upon written notice to Tenant within
such 30 days, this Lease shall terminate and Landlord shall refund to Tenant
such amounts of Base Rent and Additional Rent paid by Tenant for the period
after such damage less the reasonable value of any use or occupation of the
Premises by Tenant during such period.

 

10.4    Obligations to Repair and Restore. If repair and restoration of the
Premises can be completed within the period specified in Section 10.2, in
Landlord’s reasonable estimation, or if neither Landlord nor Tenant terminate
this Lease as provided in Sections 10.2 or 10.3, this

 

 

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Lease shall continue in full force and effect and Landlord shall proceed
forthwith to cause the Premises to be repaired and restored to the condition
existing on the date Tenant originally occupied the Premises with reasonable
diligence and there shall be abatement of Base Rent and Additional Rent
proportionate to the extent of the space and period of time that Tenant is
unable to use and enjoy the Premises. Landlord may, at its option, require
Tenant to arrange for and supervise the repair and restoration of the Premises,
in which case Landlord shall furnish Tenant with the insurance proceeds for such
repair and restoration at the time or times such funds are needed, provided such
proceeds are sufficient to cover the costs of repair or restoration. Landlord
shall have no responsibility or obligation to restore any Changes or other
leasehold improvements installed by Tenant. If Tenant elects to restore any such
items, Tenant shall be responsible for doing so and may pay for the same with
the proceeds of any casualty insurance maintained by Tenant. Landlord and Tenant
shall cooperate reasonably and in good faith to coordinate repair and
restoration of the Premises and any Tenant improvements at the same time and
using the same contractor, if applicable and if reasonably practicable.

 

10.5   Application of Insurance Proceeds. The proceeds of any Casualty Insurance
maintained on the Property by Landlord shall be paid to and become the property
of Landlord, subject to any obligation of Landlord to cause the Premises to be
repaired and restored and further subject to any rights of a holder of a
mortgage or deed of trust encumbering the Property to such proceeds. Landlord’s
obligation to repair and restore the Premises provided in this Article 10 is
limited to the repair and restoration that can be accomplished with the proceeds
of any Casualty Insurance maintained by Landlord on the Property. The amount of
any such insurance proceeds is subject to any right of a holder of a mortgage or
deed of trust encumbering the Property to apply such proceeds to its secured
debt.

 

ARTICLE 11

CONDEMNATION 

 

11.1    Taking. A “Taking” shall mean the taking of all or any portion of the
Premises as a result of the exercise of the power of eminent domain or
condemnation for public or quasi-public use or the sale of all or part of the
Premises under the threat of condemnation. A “Substantial Taking” shall mean a
Taking of twenty-five percent (25%) or more of the area (in square feet) of the
Premises. An “Insubstantial Taking” shall mean a Taking that does not constitute
a Substantial Taking.

 

11.2    Termination upon Substantial Taking. If there is a Substantial Taking
with respect to the Premises, the Lease Term shall expire on the date of vesting
of title pursuant to such Taking. In the event of termination of this Lease
under the provisions hereof, Landlord shall refund to Tenant such amounts of
Base Rent and Additional Rent theretofore paid by Tenant as may be applicable to
the period subsequent to the time of termination of this Lease.

 

11.3    Restoration upon Insubstantial Taking. In the event of an Insubstantial
Taking, this Lease shall continue in full force and effect, Landlord shall
proceed forthwith to cause the Premises, less such Taking, to be restored as
near as may be to the condition existing on the date Tenant originally occupied
the Premises, and there shall be abatement of Base Rent and Additional Rent
proportionate to the extent of the space so taken. Landlord may, at its option,
require Tenant to arrange for and handle the restoration of the Premises, in
which case Landlord

 

 

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shall furnish Tenant with sufficient funds for such restoration at the time or
times such funds are needed.

 

11.4    Right to Award. The total award, compensation, damages or consideration
received or receivable as a result of a Taking (“Award”) shall be paid to and be
the property of Landlord, including, without limitation, any part of the Award
made as compensation for diminution of the value of the leasehold or the fee of
the Premises. Tenant hereby assigns to Landlord all of Tenant’s right, title and
interest in and to any such Award. Tenant covenants and agrees to execute,
immediately upon demand by Landlord, such documents as may be necessary to
facilitate collection by Landlord of any such Award. Notwithstanding Landlord’s
right to the entire Award, Tenant shall be entitled to any separate award, if
any, for the loss of Tenant’s personal property or the loss of Tenant’s business
and profits and/or Tenant’s relocation costs.

 

ARTICLE 12

DEFAULTS BY TENANT 

 

12.1    Defaults Generally. Each of the following shall constitute a “Default by
Tenant” under this Lease.

 

12.2    Failure to Pay Rent or Other Amounts. A Default by Tenant shall exist if
Tenant fails to pay Base Rent, Additional Rent, Monthly Deposits or any other
amounts payable by Tenant under the terms of this Lease, within three days after
such amount is due.

 

12.3   Violation of Lease Terms. A Default by Tenant shall exist if Tenant
breaches or fails to comply with any agreement, term, covenant or condition in
this Lease applicable to Tenant, and Tenant does not cure such breach or failure
within 15 business days after written notice thereof by Landlord to Tenant, or,
if such breach or failure to comply cannot be reasonably cured within such
15-day period, if Tenant shall not in good faith commence to cure such breach or
failure to comply within such 15-day period or shall not diligently proceed
therewith to completion within 60 days following the occurrence of the breach or
failure.

 

12.4    Nonoccupancy of Premises. A Default by Tenant shall exist if Tenant
shall leave the Premises continuously unoccupied without the payment of rent or
shall vacate and abandon the Premises.

 

12.5    Transfer of Interest Without Consent. A Default by Tenant shall exist if
Tenant’s interest under this Lease or in the Premises shall be transferred to or
pass to or devolve upon any other party without Landlord’s prior written
consent.

 

12.6    Execution and Attachment Against. A Default by Tenant shall exist if
Tenant’s interest under this Lease or in the Premises shall be taken upon
execution or by other process of law directed against Tenant, or shall be
subject to any attachment at the instance of any creditor or claimant against
Tenant and said attachment shall not be discharged or disposed of within 30 days
after the levy thereof.

 

12.7  Bankruptcy or Related Proceedings. A Default by Tenant shall exist if
Tenant shall file a petition in bankruptcy or insolvency or for reorganization
or arrangement under the bankruptcy laws of the United States (and Tenant does
not assume this Lease in a reorganization

 

 

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proceeding) or under any similar act of any state, or shall voluntarily take
advantage of any such law or act by answer or otherwise, or shall be dissolved
or shall make an assignment for the benefit of creditors or if involuntary
proceedings under any such bankruptcy or insolvency law or for the dissolution
of Tenant shall be instituted against Tenant or a receiver or trustee shall be
appointed for the Premises or for all or substantially all of the property of
Tenant, and such proceedings shall not be dismissed or such receivership or
trustee-ship vacated within 90 days after such institution or appointment.

 

ARTICLE 13

LANDLORD’S REMEDIES

 

13.1    Remedies Generally. Upon the occurrence of any Default by Tenant,
Landlord shall have the right, at Landlord’s election, then or at any time
thereafter, to exercise any one or more of the following remedies.

 

13.2   Cure by Landlord. In the event of a Default by Tenant, Landlord may, at
Landlord’s option, but without obligation to do so, and without releasing Tenant
from any obligations under this Lease, make any payment or take any action as
Landlord may deem necessary or desirable to cure any such Default by Tenant in
such manner and to such extent as Landlord may deem necessary or desirable.
Landlord may do so without demand on, or written notice to, Tenant and without
giving Tenant any opportunity to cure such Default by Tenant. Tenant covenants
and agrees to pay to Landlord, within 10 business days after demand, all
advances, costs and expenses of Landlord in connection with the making of any
such payment or the taking of any such action, including reasonable attorneys’
fees, together with interest as hereinafter provided from the day of payment of
any such advances, costs and expenses by Landlord. Action taken by Landlord may
include commencing, appearing in, defending or otherwise participating in any
action or proceedings and paying, purchasing, contesting or compromising any
claim, right, encumbrance, charge or lien with respect to the Premises which
Landlord, in its discretion, may deem necessary or desirable to protect its
interest in the Premises and under this Lease.

 

13.3    Termination of Lease and Damages. In the event of a Default by Tenant,
Landlord may, at Landlord’s option, terminate this Lease, effective at such time
as may be specified by written notice to Tenant, and demand (and, if such demand
is refused, recover) possession of the Premises from Tenant. Tenant shall remain
liable to Landlord for damages in an amount equal to the Base Rent, Additional
Rent and other sums which would have been owing by Tenant hereunder for the
balance of the Lease Term, had this Lease not been terminated, less the net
proceeds, if any, of reletting of the Premises by Landlord subsequent to such
termination, after deducting all of Landlord’s expenses in connection with such
recovery of possession or reletting. Landlord shall be entitled to collect and
receive such damages from Tenant on the days on which the Base Rent, Additional
Rent and other amounts would have been payable if this Lease had not been
terminated. Alternatively, at the option of Landlord, Landlord shall be entitled
to recover forthwith from Tenant, as damages for loss of the bargain and not as
a penalty, an aggregate sum which, at the time of such termination of this
Lease, represents the excess, if any, of (a) the aggregate of the Base Rent,
Additional Rent and all other sums payable by Tenant hereunder that would have
accrued for the balance of the Lease Term, over (b) the

 

 

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aggregate rental value of the Premises for the balance of the Lease Term, both
discounted to present worth at the then applicable federal rate.

 

13.4    Repossession and Reletting. In the event of Default by Tenant, Landlord
may reenter and take possession of the Premises or any part thereof, without
demand or notice, and repossess the same and expel Tenant and any party claiming
by, under or through Tenant, and remove the effects of both, without breach of
the peace, without being liable for prosecution on account thereof or being
deemed guilty of any manner of trespass, and without prejudice to any remedies
for arrears of rent or right to bring any proceeding for breach of covenants or
conditions. No such reentry or taking possession of the Premises by Landlord
shall be construed as an election by Landlord to terminate this Lease unless a
written notice of such intention is given to Tenant. No notice from Landlord
hereunder or under a forcible entry and detainer statute or similar law shall
constitute an election by Landlord to terminate this Lease unless such notice
specifically so states. Landlord reserves the right, following any reentry or
reletting, to exercise its right to terminate this Lease by giving Tenant such
written notice, in which event the Lease will terminate as specified in said
notice. After recovering possession of the Premises, Landlord may, from time to
time, but shall not be obligated to, relet the Premises, or any part thereof,
for the account of Tenant, for such term or terms and on such conditions and
upon such other terms as Landlord, in its absolute discretion, may determine.
Landlord may make such repairs, alterations or improvements as Landlord may
consider appropriate to accomplish such reletting, and Tenant shall reimburse
Landlord upon demand for all costs and expenses, including brokers’ commissions
and attorneys’ fees, which Landlord may incur in connection with such reletting.
Landlord may collect and receive the rents for such reletting but Landlord shall
in no way be responsible or liable for any failure to relet the Premises, or any
part thereof, or for any failure to collect any rent due upon such reletting.
Notwithstanding Landlord’s recovery of possession of the Premises, Tenant shall
continue to pay on the dates herein specified, the Base Rent, Additional Rent
and other amounts which would be payable hereunder if such repossession had not
occurred. Upon the expiration or earlier termination of this Lease, Landlord
shall refund to Tenant any amount, without interest, by which the amounts paid
by Tenant, when added to the net amount, if any, recovered by Landlord through
any reletting of the Premises, exceeds the amounts payable by Tenant under this
Lease. If, in connection with any reletting, the new lease term extends beyond
the existing term, or the premises covered thereby include other premises not
part of the Premises, a fair apportionment of the rent received from such
reletting and the expenses incurred in connection therewith will be made in
determining the net amount recovered from such reletting.

 

13.5    Suits by Landlord. Actions or suits for the recovery of amounts and
damages payable under this Lease may be brought by Landlord from time to time,
at Landlord’s election, and Landlord shall not be required to await the date
upon which the Lease Term would have expired to bring any such action or suit.

 

13.6   Recovery of Landlord Enforcement Costs. All costs and expenses incurred
by Landlord in connection with collecting any amounts and damages owing by
Tenant pursuant to the provisions of this Lease or to enforce any provision of
this Lease, including reasonable attorneys’ fees, whether or not any action is
commenced by Landlord, shall be paid by Tenant to Landlord upon demand.

 

 

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13.7     Administrative Late Charge. Other remedies for nonpayment of rent
notwithstanding, if the Monthly Rent payment is not received by Landlord on or
before the third day of the month for which the rent is due, or if any other
payment due Landlord by Tenant is not received by Landlord on or before the last
day of the month next following the month in which Tenant was invoiced, an
Administrative Late Charge of five percent (5%) of such past due amount shall be
come due and payable in addition to such amounts owed under this Lease to help
defray the additional cost to Landlord for processing such late payments.

 

13.8     Interest on Past-Due Payments and Advances. Tenant covenants and agrees
to pay to Landlord interest on demand at the rate of fifteen percent (15%) per
annum, compounded on a monthly basis, on the amount of any Monthly Rent or other
charges not paid when due, from the date due and payable, and on the amount of
any payment made by Landlord required to have been made by Tenant under this
Lease and on the amount of any costs and expenses, including reasonable
attorneys’ fees, paid by Landlord in connection with the taking of any action to
cure any Default by Tenant, from the date of making any such payment or the
advancement of such costs and expenses by Landlord.

 

13.9   Landlord’s Bankruptcy Remedies. Nothing contained in this Lease shall
limit or prejudice the right of Landlord to prove and obtain as liquidated
damages in any bankruptcy, insolvency, receivership, reorganization or
dissolution proceeding, an amount equal to the maximum allowable by any statute
or rule of law governing such proceeding in effect at the time when such damages
are to be proved, whether or not such amount be greater, equal or less than the
amounts recoverable, either as damages or rent, under this Lease.

 

13.10   Remedies Cumulative. Exercise of any of the remedies of Landlord under
this Lease shall not prevent the concurrent or subsequent exercise of any other
remedy provided for in this Lease or otherwise available to Landlord at law or
in equity.

 

ARTICLE 14

SURRENDER AND HOLDING OVER 

 

14.1   Surrender upon Lease. Upon the expiration or earlier termination of this
Lease, or on the date specified in any demand for possession by Landlord after
any Default by Tenant, Tenant covenants and agrees to surrender possession of
the Premises to Landlord broom clean, with all lighting, doors and electrical
and mechanical systems (including, without limitation, all HVAC facilities) in
good working order and condition, all walls in clean condition and holes or
punctures in the walls repaired and otherwise in the same condition as when
Tenant first occupied the Premises, ordinary wear and tear excepted.

 

14.2    Holding Over. If Tenant shall hold over after the expiration of the
Lease Term, without written agreement providing otherwise, Tenant shall be
deemed to be a Tenant at sufferance, at a monthly rental, payable in advance,
equal to one hundred fifty percent (150%) of the Monthly Rent due during the
last month of the Lease Term, and Tenant shall be bound by all of the other
terms, covenants and agreements of this Lease. Nothing contained herein shall be
construed to give Tenant the right to hold over at any time, and Landlord may
exercise any and all remedies at law or in equity to recover possession of the
Premises, as well as any damages

 

 

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incurred by Landlord, due to Tenant’s failure to vacate the Premises and deliver
possession to Landlord as herein provided.

 

ARTICLE 15

TENANT RIGHT TO TERMINATE

 

15.1    Tenant Right to Terminate15.2     . Tenant shall have a one-time right
to terminate this Lease at the end of the fifth (5th) year of the Initial Lease
Term upon at least nine (9) months’ prior written notice to Landlord before the
end of the fifth (5th) year, and payment to Landlord of a termination fee equal
to three (3) months gross rent plus all unamortized transaction costs.
Transaction costs shall include, but may not be limited to Tenant Finish
Allowance, Real Estate Commissions, legal fees and 2/7th of the gross rental
abatement provided during the first four (4) months of the Lease Term. Within 30
days following lease execution, Landlord agrees to provides a letter agreement
to set forth the termination fee.

 

ARTICLE 16

MISCELLANEOUS

 

16.1      No Implied Waiver. No failure by Landlord to insist upon the strict
performance of any term, covenant or agreement contained in this Lease, no
failure by Landlord to exercise any right or remedy under this Lease, and no
acceptance of full or partial payment during the continuance of any Default by
Tenant, shall constitute a waiver of any such term, covenant or agreement, or a
waiver of any such right or remedy or a waiver of any such Default by Tenant.

 

16.2      Survival of Provisions. Notwithstanding any termination of this Lease,
the same shall continue in force and effect as to any provisions hereof which
require observance or performance by Landlord or Tenant subsequent to
termination.

 

16.3     Covenants Independent. This Lease shall be construed as if the
covenants herein between Landlord and Tenant are independent, and not dependent,
and Tenant shall not be entitled to any offset against Landlord if Landlord
fails to perform its obligations under this Lease.

 

16.4       Covenants as Conditions. Each provision of this Lease performable by
Tenant shall be deemed both a covenant and a condition.

 

16.5     Tenant’s Remedies. Tenant may bring a separate action against Landlord
for any claim Tenant may have against Landlord under this Lease, provided Tenant
shall first give written notice thereof to Landlord and shall afford Landlord a
reasonable opportunity to cure any such default. In no event will Landlord be
responsible for any incidental, consequential or special damages incurred by
Tenant, including, but not limited to, loss of profits or interruption of
business as a result of any default by Landlord hereunder.

 

16.6     Prevailing Parties’ Fees and Expenses. In the event of any lawsuit
between Landlord and Tenant arising under or relating to this Lease, the
prevailing party in such lawsuit shall be awarded from the other its costs and
expenses incurred in connection therewith, including reasonable attorney fees.

 

 

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16.7     Binding Effect. This Lease shall extend to and be binding upon the
heirs, executors, legal representatives, successors and assigns of the
respective parties hereto. The terms, covenants, agreements and conditions in
this Lease shall be construed as covenants running with the Land.

 

16.8      Short Form Lease. This Lease shall not be recorded, but Tenant agrees,
at the request of Landlord, to execute a short form lease for recording,
containing the names of the parties, a description of the Premises and the Lease
Term.

 

16.9      Notices and Demands. All notices, demands or billings that Landlord or
Tenant may be required or may desire to serve on the other shall, except as
otherwise expressly set forth in this Lease, be in writing and shall be served
by mailing the same by certified mail, postage prepaid and return receipt
requested, or by recognized overnight courier, addressed as set forth in the
Summary of Basic Lease Terms or addressed to such other address or addresses as
either Landlord or Tenant may from time to time designate to the other in
writing in accordance with this Section. Any notice so given shall be deemed
effectively given upon the date received (or refused). The customary receipt
shall be conclusive evidence of service of any notice given by overnight courier
or certified mail.

 

16.10     Force Majeure. In the event that either party shall be delayed or
hindered in, or prevented from, the performance of any act required hereunder
(with the exception of monetary obligations) by reason of strikes, lock-outs,
labor troubles, inability to procure materials, the inability to obtain building
inspections, approvals or permits, stop work orders, the inability to obtain a
certificate of occupancy, failure of power or unavailability of utilities,
riots, insurrection, war or other reason of like nature not the fault of such
party, or not within its reasonable control, the performance of such acts shall
be excused for the period of delay, and the period for the performance of any
such act shall be extended for a period equivalent to the period of such delay
(including extension of both the commencement and expiration dates of this
Lease); provided, however, that if Tenant is not in any way responsible for the
delay and does not have use or occupancy of the Premises during the period of
delay, the rent and other charges payable hereunder shall be abated for such
period of delay.

 

16.11      Time of the Essence. Time is of the essence under this Lease, and all
provisions herein relating thereto shall be strictly construed.

 

16.12     Captions for Convenience. The headings and captions hereof are for
convenience only and shall not be considered in interpreting the provisions
hereof.

 

16.13      Severability. If any provision of this Lease shall be held invalid or
unenforceable, the remainder of this Lease shall not be affected thereby, and
there shall be deemed substituted for the affected provision a valid and
enforceable provision as similar as possible to the affected provision.

 

16.14     Governing Law and Venue. This Lease shall be interpreted and enforced
according to the laws of the State of Colorado. Any action or proceeding arising
out of this Lease, its modification or termination, or the performance or breach
of either party hereto, shall be brought exclusively in courts of the state and
county in which the Property is located. The

 

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parties agree that such courts are a convenient forum and waive any right to
alter or change venue, including removal. THE PARTIES IRREVOCABLY WAIVE ANY
RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING ARISING OUT OF OR
PERTAINING IN ANY WAY TO THIS LEASE.

 

16.15    Entire Agreement/Further Assurances. This Lease and any exhibits and
addenda referred to herein, constitute the final and complete expression of the
parties’ agreement with respect to the Premises and Tenant’s occupancy thereof.
Each party agrees that it has not relied upon or regarded as binding any prior
agreements, negotiations, representations or understandings, whether oral or
written, except as expressly set forth herein. The parties agree that if there
should be any clerical or typographical errors in this Lease, the Summary of
Basic Lease Terms, any exhibit or addendum hereto, the party requested to do so
will use its reasonable, good faith efforts to execute such corrective
instruments or do all things necessary or appropriate to correct such errors.
Further, the parties agree that if it becomes necessary or desirable to execute
further instruments or to make other assurances, the party requested to do so
will use its reasonable, good faith efforts to provide such executed instruments
or do all things reasonably necessary or appropriate to carry out this Lease.

 

16.16     No Oral Amendment or Modifications. No amendment or modification of
this Lease, and no approvals, consents or waivers by Landlord under this Lease,
shall be valid and binding unless in writing and executed by the party to be
bound.

 

16.17      Real Estate Brokers. Tenant represents and warrants that it has dealt
only with the Brokers listed in the Summary of Basic Lease Terms in the
negotiation of this Lease. Landlord shall make payment of the brokerage fee due
to the Brokers pursuant to and in accordance with the Landlord’s separate
written agreement with The Colorado Group, Inc.. Tenant hereby agrees to
indemnify and hold the Landlord harmless of and from any and all loss, costs,
damages or expenses (including, without limitation, all attorneys’ fees and
disbursements) by reason of any claim or of liability to any other broker, agent
or person claiming through or under Tenant. Additionally, Tenant acknowledges
and agrees that Landlord shall have no obligation for payment of any brokerage
fee or similar compensation to any person with whom Tenant has dealt or may in
the future deal with respect to renewals or extensions of the Lease Term. In the
event any claim is made against Landlord by any other broker who shall claim to
have negotiated this Lease on behalf of Tenant or to have introduced Tenant to
the Building or to Landlord, Tenant shall be liable for payment of all
reasonable attorneys’ fees, costs, expenses and other charges of any kind
incurred by Landlord in defending against the same. W. Scott Reichenberg and
Neil Littman with The Colorado Group, Inc. also have an ownership interest in
Landlord.

 

16.18     Relationship of Landlord and Tenant. Nothing contained herein shall be
deemed or construed as creating the relationship of principal and agent or of
partnership or of joint venture by the parties hereto, it being understood and
agreed that no provision contained in this Lease nor any acts of the parties
hereto shall be deemed to create any relationship other than the relationship of
landlord and tenant.

 

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16.19     Authority of Tenant. Tenant represents and warrants that each
individual executing this Lease on behalf of Tenant is duly authorized to
deliver this Lease on behalf of Tenant and that this Lease is binding upon
Tenant in accordance with its terms.

 

16.20     Counterparts. This Lease may be executed in multiple counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument. An executed facsimile copy or electronic
PDF of this Lease shall be binding for all purposes.

 

 

 

 

 

 

 

[Signature page follows.]

 

 

 

 

 

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IN WITNESS WHEREOF, each party has caused this Lease to be executed the day and
year set forth next to its signature below.

 

 

 

TENANT:

 

AeroGrow International, Inc.,

a Nevada corporation

 

 

By:                                                 

 

Name:                                       

 

Title:                                         

Date: __________________

 

 

 

LANDLORD:

 

SpineBarrel, LLC, 

a Colorado limited liability company

 

 

By:                                                 

 

Name:                                       

 

Title:                                         

Date: __________________

 

 

 

 

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EXHIBIT A

 

NOTICE OF NON-LIABILITY FOR MECHANICS’ LIENS

 

 

Pursuant to C.R.S. § 38-22-105, SpineBarrel, LLC, a Colorado limited liability
company, the owner of these premises located at 5405 Spine Road, Boulder,
Colorado 80301, hereby gives notice to all persons performing labor or
furnishing skill, materials, machinery or other fixtures in connection with any
construction, alteration, removal, addition, repair or other improvement on or
to these premises, that the owner shall not be liable therefor and the interests
of said owner shall not be subject to any lien for the same.

 

 

 

 

 

 

 

 

 

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EXHIBIT B

 

WORK LETTER

 

 

Landlord: SpineBarrel, LLC

 

Tenant: AeroGrow International, Inc.

 

Premises: 54052 Spine Road, Boulder, Colorado

 

 

Concurrently herewith, Tenant and Landlord have executed a Lease (the “Lease”)
covering the Premises. This Work Letter is hereby attached to and made part of
that Lease as Exhibit B and terms used herein shall have the same meaning as set
forth in the Lease. In consideration of the execution of the Lease, Landlord and
Tenant mutually agree as follows:

 

Landlord’s Work:

 

1.     Landlord shall deliver, at Landlord’s cost and expense, the following
Base Building Improvements, which shall be known as “Landlord’s Work”: Above
ceiling components including HVAC, ducting and controls and sprinkler/life
safety system, which shall be in good working order upon delivery; however, any
modifications of said systems required based on the tenant improvement
modifications will be under the Tenant’s scope of work and shall be paid for as
part of the Tenant Improvement Allowance.

 

2.     Landlord shall provide all utilities during the initial construction of
the Premises at no cost to Tenant, not to exceed the four (4) period of rent
abatement provided for in the Lease during buildout (6/1/2019-9/30/2019).

 

Tenant’s Work:

 

1.     All work that is necessary to permit Tenant to commence its business in
the Premises, including installation of trade fixtures and furnishings, shall be
completed by Tenant at Tenant’s sole cost and expense (“Tenant’s Work”). All
permanent fixtures installed in the Premises by Tenant shall be deemed part of
the Premises upon installation and the property of the Landlord.

 

2.     Preliminary Plans/Working Drawings.

 

 

(a)

Landlord shall pay for preliminary space planning expense up to $0.15/sf. Tenant
shall submit an invoice for this space planning to Landlord for payment.

 

 

(b)

Tenant shall have the right to contract directly with its contractor and
architect. Tenant will have the right to competitively bid the Tenant’s Work
with several mutually acceptable qualified contractors (at least three) and to
select the

 

 

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acceptable bidder to construct Tenant’s Work. Tenant agrees that it will
interview and include Landlord’s preferred contractor, Commercial Building
Service, Inc. (“CBS”) as one of the qualified contractors. Tenant must contract
with an architect/engineer of its choice to obtain plans and specifications of
Tenant’s Work at Tenant’s sole cost and expense, subject to reimbursement from
Tenant Improvement Allowance. Tenant’s architect/engineer shall prepare plans
and specifications (stamped by the architect/engineer) for Tenant’s Work to be
completed in the Premises (the “Plans and Specifications”). All plans and
Specifications are subject to review and approval by Landlord and Tenant is
required to submit the Plans and Specifications for such review and approval
prior to commencement of Tenant’s Work. Landlord shall, within seven (7)
business days after receipt of the Plans and Specifications by Landlord for its
review and approval, submit to Tenant the Plans and Specifications with the
required approvals noted thereon, or submit comments to Tenant setting forth
changes to be made in the Plans and Specifications. If changes are required by
Landlord, Tenant shall have the Plans and Specifications modified and
resubmitted to Landlord for approval and such process shall be repeated until
Landlord has approved the Plans and Specifications for the Premises (hereinafter
referred to as “Approved Plans and Specifications”). Changes to the Approved
Plans and Specifications shall be made only upon prior written approval of
Landlord and shall be at Tenant’s sole cost and expense. Tenant will not be
required to remove any alterations in the Premises at the end of the Term if
approved by Landlord as part of the Plans and Specifications, including data and
phone cabling

 

3.     Contracts.

 

 

(a)

Tenant shall contract directly for the Tenant’s Work to be completed in
accordance with the approved Plans and Specifications. Tenant’s contractor shall
bill Tenant and Tenant shall be solely responsible for paying all costs for
Tenant’s Work as set forth on the approved Plans and Specifications. All
Tenant’s Work shall: (i) be performed pursuant to written contracts with workmen
and mechanics, which shall be acceptable to Landlord; (ii) comply with all
reasonable restrictions and requirements as Landlord may impose with respect to
Tenant’s Work; (iii) be performed in a workmanlike manner, in line with standard
market finish level and conform to the standards of the Building; and (iii) be
done in a safe and lawful manner in compliance with applicable laws,
governmental regulations and requirements. Tenant shall cause such contractor to
take all steps necessary to cooperate in the coordination of the performance of
Tenant’s Work with the work of Landlord or Landlord’s contractors in the
Premises or in the Building, including, without limitation, exchanging
information about and coordination their respective schedules, attending
coordination meetings, and cooperating in allowing and obtaining access to and
availability of portions of the site for performance of Tenant’s Work and the
work of such other contractors.

 

 

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(b)

There shall be no specified subcontractors unless Landlord is willing to pay for
any increased cost. Landlord asks that tenant’s contractor consider using
Control Service Center for the HVAC as they are familiar with the Building
systems.

 

 

(c)

Tenant and Tenant’s contractor shall indemnify Landlord from any mechanic’s or
materialmen’s lien against Landlord’s interest in the Building or Premises. If a
lien is filed, Tenant or Tenant’s contractor shall, at Landlord’s option, remove
the lien by paying it in full, furnish Landlord a bond sufficient to discharge
the lien or deposit in an escrow approved by Landlord 150% of the amount of such
lien. In the event Tenant or Tenant’s contractor shall fail to remove the lien,
provide a bond or cash escrow, Landlord shall be entitled to take such action at
law, in equity or under the Lease as Landlord deems appropriate and Tenant shall
be responsible for all monies Landlord may pay in discharging any lien including
all costs and reasonable attorneys’ fees incurred by Landlord in settling,
defending against, appealing or in any manner dealing with lien.

 

 

(d)

The Commencement Date, Tenant’s rental obligations, and other obligations under
the Lease will not be delayed or extended by any delays in construction.

 

4.     Tenant Improvement Allowance.

 

 

(a)

Landlord shall pay up to $40 per square foot of Premises (for a total of up to
$585,200) (“Tenant Improvement Allowance”) for the costs of the Tenant
Improvements. The Tenant Improvement Allowance may be used for any and all hard
and soft costs, including, but not limited to, the cost to construct improvement
to the Premises, design and any fees associated with Tenant’s third-party
management or supervisions of the project. Tenant shall be responsible for and
shall pay all costs of the Tenant Improvements in excess of the Tenant
Improvement Allowance. In the event that the costs of the Tenant Improvements
are less than the Tenant Improvement Allowance, Tenant shall be entitled to a
reduction in Base Rent as follows: for any unused Tenant Improvement Allowance
up to $5.00 per square foot Tenant shall get a $1.00 reduction for each $1.00
not spent and, in the event, that the unused Tenant Improvement Allowance
exceeds $5.00 per square foot then any additional reduction in Base Rent is
limited to $.0677 per square foot for each full dollar of the $40 per square
foot allowance that is not utilized. Any reduction shall be applied to the first
year of the lease term and the same annual escalations outlined herein shall be
used to create a new rent schedule. In such event, Landlord and Tenant shall
enter into an amendment to the Lease memorializing the decrease in the Tenant
Improvement Allowance and the Base Rent. Tenant shall also be allowed to utilize
excess Tenant Improvement Allowance (allowance remaining after the approved
Plans and Specifications are completed) towards the purchase and installation of
furniture, fixtures, equipment, moving costs and telecommunications cabling, so
long as those items or expenses do not exceed $7.50 per square foot.

 

 

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(b)

If the costs of the Tenant Improvements exceed the Tenant Improvement Allowance,
Tenant shall have the right to require Landlord to pay up to an additional $5.00
per square foot of Premises (for a total of up to $73,150) for the cost of the
Tenant Improvements. Such additional contribution shall be a part of the Tenant
Improvement Allowance and subject to all the terms and conditions of the Lease
and this Work Letter affecting same. Such additional contribution by Landlord to
the cost of the Tenant Improvements shall be reimbursed by Tenant by increasing
the Base Rent by a monthly amount determined by amortizing such additional
amount at an interest rate of eight percent (8%) per annum over the Initial
Lease Term. In such event, Landlord and Tenant shall enter into an amendment to
the Lease memorializing the increase in the Tenant Improvement Allowance and the
Base Rent. Notwithstanding anything to the contrary contained in the Lease, no
rental abatement provided for in the Lease shall apply to Tenant’s obligation to
repay the additional Tenant Improvement Allowance.

 

(c)

Landlord shall pay the Tenant Improvement Allowance to Tenant in one lump sum as
requested upon the occurrence of the following: (a) the City of Boulder issues a
Certificate of Completion regarding the entirety of the Tenant work; and (b)
Tenant submits to Landlord a request for the Tenant Improvement Allowance (the
“Allowance Request”), which Allowance Request shall include the following: (i)
invoices establishing the basis of the cost of work for which Tenant is seeking
payment of the Allowance; (iii) affidavits from Tenant’s contractor and
architect affirming that all payrolls, bills for materials and any equipment and
other indebtedness related to that portion of the Tenant Work performed by or on
behalf of contractor or architect, as appropriate, and any of its
subcontractors, suppliers, consultants or sub-consultants have been paid in
full; (iv) full, final and unconditional lien releases from parties designated
by Landlord and in a form reasonably acceptable to Landlord; and (v) any other
data, to the extent and in such form as may be reasonably designated by
Landlord, that establishes: (1) the amount of the cost of work for which
reimbursement is sought; and (2) that the Property will be free from liens
related to the Tenant Work. Notwithstanding anything herein to the contrary: (a)
Tenant must submit its Allowance Request no later than 180 days after the City
of Boulder’s issuance of the Certificate of Occupancy (the “Request Submittal
Deadline”); and (b) in the event that Tenant fails to submit a complete
Allowance Request containing all of the information required above on or before
the Request Submittal Deadline, Tenant shall forfeit its right to the Allowance.

 

5.     Commencement of Construction. Tenant shall construct the tenant
improvements for the Premises in accordance with the Plans and Specifications
(the “Tenant Improvements”). Tenant shall commence construction of the Tenant
Improvements upon approval of the Plans and Specifications, approval of
contracts, issuance of the building permit and all other government approvals
required for the construction of the Tenant Improvements. Tenant shall be
responsible for management of the Tenant Improvements including their timely
completion.

 

6.     Delays. The Commencement Date of the Lease Term and the commencement of
Tenant’s obligation to pay rentals due under the Lease shall be on the date
specified as the Commencement Date in the Summary of Basic Lease Terms. In no
event shall Landlord be responsible or liable for any delays caused in whole or
in part by the Contractor, Architect,

 

 

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governmental or quasi-governmental delays, force majeure or other causes unless
the direct result of Landlord’s actions.

 

7.     Change Orders. Subject to Landlord’s prior written approval, Tenant may
request changes in the Tenant Improvements.

 

8.    Governmental Requirements. If any changes to the Tenant Improvements are
required by any applicable governmental authority and/or quasi-governmental
authority including, without limitation, any county or municipal planning
department, building department, fire department or utility provider, then
Landlord and Tenant agree to either (a) modify the Plans and Specification to
either eliminate or comply with the government requirement, or (b) Tenant agrees
to pay any additional expenditure that cannot be paid out of the Tenant
Improvement Allowance.

 

9.     Management and Planning. Landlord shall be permitted to provide a
reasonable level of oversight (at its sole cost). In the event Landlord is
requested to undertake construction management functions, Landlord shall charge
a construction management fee to compensate Landlord for administering the
design and construction of the Tenant Improvements. The construction management
fee shall be in the amount of five percent (5%) of the total cost of the Tenant
Improvements, which fee may be disbursed by Landlord from the Tenant Improvement
Allowance.

 

 

 

 

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EXHIBIT C

 

RULES AND REGULATIONS

 

1.     The sidewalk, entries, and driveways of the Property shall not be
obstructed by Tenant, or its agents, or used by them, or any invitees, for any
purpose other than ingress and egress to and from the Demised Premises.

 

2.     Tenant shall not place any objects including, without limitation, any
antennas, satellite dishes, aerials, outdoor furniture, other similar devices or
property on the roof or exterior walls of the Building or any other part of the
Property.

 

3.     If Tenant desires telegraphic, telephonic or other electric connections
in the Premises, Landlord or its agent will direct the electrician as to where
and how the wires may be introduced; and, without such direction, no boring or
cutting of wires will be permitted. Any such installation or connection shall be
made at Tenant's expense.

 

4.     Tenant shall not install or operate any steam or gas engine or boiler, or
other mechanical apparatus in the Premises, except as specifically approved in
the Lease. The use of oil, gas, or flammable liquids for heating, lighting or
any other purpose is expressly prohibited. Explosives or other articles deemed
extra hazardous shall not be brought into the Property.

 

5.     Tenant shall not engage in or permit: (a) the sale, distribution,
dispensing, storage, processing, cultivation or use of marijuana or products
containing marijuana or THC, whether or not designated or used for medicinal
purposes, or any other Controlled Substances (as herein defined) upon the
Premises or the Property; and (b) any doctor’s office or appointments,
prescription or recommendation services, or services related to medical
marijuana or products containing marijuana or THC upon the Premises or the
Property. “Controlled Substances” shall mean any controlled substances as
defined in Section 802(6) of the Controlled Substances Act, as amended,
21 U.S.C. § 801 et seq.

 

6.     Parking any type of recreational vehicles is specifically prohibited on
or about the Property. No vehicle of any type shall be stored in the parking
areas at any time other than trucks which are operable and owned by the Tenant
or its employees and then only overnight and in front of the Premises. In the
event that a vehicle is disabled, it shall be removed within 48 hours. There
shall not be "For Sale" or other advertising signs on or about any parked
vehicle. All vehicles shall be parked in the designated parking areas in
conformity with all signs and other markings. All parking will be open parking,
and no reserved parking, numbering or lettering of individual spaces will be
permitted except as specified by Landlord.

 

7.     Tenant shall maintain the Premises free from rodents, insects and other
pests. Tenant, at its sole cost, shall be responsible for any pests or other
extermination services, which Landlord shall be entitled to request of Tenant
from time to time. Tenant shall not burn any trash or garbage of any kind in or
about the Premises or the Property.

 

 

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8.     Landlord reserves the right to exclude or expel from the Property any
person who, in the judgment of Landlord, is intoxicated or under the influence
of liquor or drugs or who shall in any manner do any act in violation of these
Rules and Regulations or the Lease.

 

9.     Tenant shall give Landlord prompt notice of any defects in the water,
lawn sprinkler, sewage, gas pipes, electrical lights and fixtures, heating
apparatus, or any other service equipment affecting the Premises.

 

10.     Tenant shall not permit storage outside the Premises, including without
limitation, outside storage of trucks and other vehicles (except as provided for
in Paragraph 6 above), or dumping of waste or refuse or permit any harmful
materials to be placed in any drainage system or sanitary system in or about the
Premises.

 

11.     All moveable trash receptacles provided by the trash disposal firm for
the Premises must be kept in the trash enclosure areas, if any, provided for
that purpose.

 

12.     No auction, public or private, will be permitted on the Premises or the
Property.

 

13.     No awnings shall be placed over the windows in the Premises except with
the prior written consent of Landlord.

 

14.     The Premises shall not be used for lodging, sleeping or cooking or for
any immoral or illegal purposes or for any purpose other than that specified in
the Lease. No gaming devices shall be operated in the Premises.

 

15.     Tenant assumes full responsibility for reasonable protection of the
Premises from theft, robbery, pilferage, arson, vandalism or other destruction
of property.

 

16.     Tenant shall not install or operate on the Premises any machinery or
mechanical devices of a nature not directly related to Tenant's ordinary use of
the Premises and shall keep all such machinery free of vibration, noise and air
waves which may be transmitted beyond the Premises.

 

17.     All loading and unloading of goods, inventory and other property from
the Premises shall be made only through loading dock areas or areas designated
by the Landlord for such purpose.

 

18.     Tenant shall keep the Premises at a sufficient temperature to prevent
freezing of water in pipes and fixtures. The plumbing facilities shall not be
used for any purpose other than the Permitted Uses and only in a manner
consistent with the construction thereof. Tenant shall not deposit or permit to
be deposited any foreign substance in the plumbing facilities. Tenant shall bear
the expense of any breakage, stoppage or damage resulting therefrom.

 

19.     Pets are not allowed in the Premises without the written consent of
Landlord; provided, however, that nothing herein shall be construed as
prohibiting qualified service animals which may not be legally excluded from the
Premises pursuant to the Americans with Disabilities Act or any similar law.

 

 

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

 

 

 

EXHIBIT D

 

FF&E

 

BILL OF SALE

 

 

SpineBarrel, LLC, a Colorado limited liability company (“Assignor”), in
consideration of Ten Dollars ($10.00) and other good and valuable consideration
received from AeroGrow International, Inc., a Nevada corporation (“Assignee”),
has bargained and sold, and by these presents does grant and convey unto
Assignee all of Assignor’s right, title and interest in and to all of the
furniture, fixtures and equipment listed on Exhibit A attached hereto
(collectively referred to as the “FF&E”), AS IS, WHERE IS” without warranty to
have and to hold, all and singular, the FF&E to Assignee and its successors and
assigns forever.

 

Assignor further covenants and agrees with Assignee that it will, from time to
time, at the request of Assignee, execute and deliver or cause to be executed
and delivered all such further bills of sale, certificates, assignments,
instruments of transfer and agreements as may reasonably be required by Assignee
in order to more effectively vest title in Assignee to the FF&E.

 

 

 

IN WITNESS WHEREOF, the Assignor has executed this instrument effective as of
the ____ day of _____________, 2019.

 

 

ASSIGNOR:

SpineBarrel, LLC, a

Colorado limited liability company

 

By: __________________________

Name: ________________________

Title: _________________________

 

 

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

 

 

EXHIBIT A

to General Assignment and Bill of Sale

 

List of FF&E

 

 

FURNISHINGS AND EQUIPMENT TO REMAIN

AT 5405 SPINE RD FOR AEROGROW

 

Quantity

 

 

 

 

Desks

 

 

 

 

 

    Executive

3

 

 

 

 

    Private office

33

 

 

 

 

    Meeting table

10

 

 

 

 

    Task chairs

38

 

 

 

 

    Side chairs

Leather

Wood frame

Standard Black

 

12

20

 

41

 

    Veridesk

13

 

 

 

 

 

 

 

 

 

 

Cubicles

 

 

 

 

 

    Note: All hydraulic Desks

14

 

 

 

 

    Task chairs

12

 

 

 

 

     All Cubical Walls

UNK

 

 

 

 

 

 

 

 

 

 

Bookcases

 

 

 

 

 

 

16

 

 

 

 

 

 

 

 

 

 

File cabinets

 

 

 

 

 

     2-drawer lateral

16

 

 

 

 

    4-drawer lateral

4

 

 

 

 

    3- drawer lateral

26

 

 

 

 

    standing

4 drawer

2 drawer

 

3 drawer

 

 

4

2

 

1

 

     Sliding Door Cabinets

6

 

 

 

 

     Black Cabinets with drawers

5

 

 

 

 

     Black Cabinets w/out drawers

2

 

 

 

 

 

 

 

 

 

 

White boards

 

 

 

 

 

    Conf. rms

1

 

 

 

 

    private offices

29

 

 

 

 

    Cubicles

2

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

Conference rooms

 

 

 

 

 

    Tables

3

 

 

 

 

    Chairs

27

 

 

 

 

    TV

3

 

 

 

 

 

 

 

 

 

 

Kitchen

 

 

 

 

 

    Tables

6

 

 

 

 

    Chairs

23

 

 

 

 

    Microwave

2

 

 

 

 

    Fridge

1

 

 

 

 

 

 

 

 

 

 

Reception

 

 

 

 

 

    Table

1

 

 

 

 

    Chairs

2

 

 

 

 

    Armoire

Large - 2

Small - 2

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

     Picnic Tables

2

 

 

 

 

     Dedicated A/C in Server room

1

 

 

 

 

     All the installed network cabling and wall jacks

UNK

 

 

 

 

     Network patch panels in data room

UNK

 

 

 

 

     All the exiting network/server racks and ladder racking

UNK

 

 

 

 

     FM-200 Fire Suppression System in the data room and IT Closet

2

 

 

 

 

     Building Alarm, Security and Entry systems (control panels to be handled
separately outside this transaction)

UNK