Exhibit 10.3

STANDARD INDUSTRIAL/COMMERCIAL

MULTI-TENANT LEASE - GROSS

AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION

 

1.                 Basic Provisions (“Basic Provisions”).

                    1.1               Parties: This Lease (“Lease”), dated for
reference purposes only June 20, 2004
, is made by and between MAGNUM PROPERTIES, INC.

(“Lessor”)

 

                                                                                                                                                                                  

                                                                                                                                                                                  

 

and SUB-URBAN INDUSTRIES, INC.

 

                                                                                                                                                                                  

                                                                                                                                                                                  

 

                                                                                                                                      (“Lessee”),
(collectively the “Parties”, or individually a “Party”).

 

                    1.2(a)           Premises: That certain portion of the
Project (as defined below), including all improvements therein or to be provided
by Lessor under the terms of this Lease, commonly known by the street address of
2222 EAST WASHINGTON BOULEVARD UNIT B    , located in the City of Los
Angeles                 , County of Los Angeles                   , State of
California            , with zip code 90021    , as outlined on Exhibit  A 
attached hereto (“Premises”) and generally described as (describe briefly the
nature of the Premises): approximately 4,000 square feet of
industrial                   office space situated within a multi-tenant
building

 

                                                                                                                                                                                  

 

In addition to Lessee’s rights to use and occupy the Premises as hereinafter
specified, Lessee shall have non-exclusive rights to the Common Areas (as

defined in Paragraph 2.7 below) as hereinafter specified, but shall not have any
rights to the roof, exterior walls or utility raceways of the building
containing the Premises (“Building”) or to any other buildings in the Project.
The Premises, the Building, the Common Areas, the land upon which they are
located, along with all other buildings and improvements thereon, are herein
collectively referred to as the “Project.” (See also Paragraph 2.)

                    1.2(b)          Parking: ******************* unreserved
vehicle parking spaces (“Unreserved Parking Spaces”); and four
(4)                    reserved vehicle parking spaces (“Reserved Parking
Spaces”). (See also Paragraph 2.6.) See Addendum Paragraph 1.12a

                    1.3               Term: Two      years and ************
months (“Original Term”) commencing July 15, 2004         (“Commencement Date”)
and ending July 15, 2006    (“Expiration Date”). (See also Paragraph 3.)

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

                    1.5               Base Rent: $2,500.00   per month (“Base
Rent”), payable on the FIRST     day of each month commencing July 15,
2004            . (See also Paragraph 4.)

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

                    1.6               Lessee’s Share of Common Area Operating
Expenses: see paragraph 1.12g    percent (33%) (“Lessee’s Share”).

                    1.7               Base Rent and Other Monies Paid Upon
Execution:

                                        (a)                Base Rent:
$2,500.00     for the period July 15, 2004 up to August 15, 2004.

                                        (b)               Common Area Operating
Expenses: $                       for the period.

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

                                        (d)               Other:
$                                  for        .

                                        (e)                Total Due Upon
Execution of this Lease: $7,500.00                                   .

 

                    1.8               Agreed Use: Sales office and related
activities.

                                                                                                                                                                                  

                                                                                                                                                                                  

                                                                                                                                                                                  

                  (See also Paragraph 6.)

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

                    1.10             Real Estate Brokers: (See also Paragraph
15.)

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

applicable boxes):

 

o

 

 

 

represents Lessor exclusively (“Lessor’s Broker”);

 

 

 

 

 

o

 

 

 

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

 

 

 

 

 

.x

 

Magnum Properties

 

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

 

                                        (b) Payment to Brokers: Upon execution
and delivery of this Lease by both Parties, Lessor shall pay to the Brokers the
brokerage fee agreed to in a separate written agreement (or if there is no such
agreement, the sum of              or       % of the total Base Rent for the
brokerage services rendered by the Brokers)

 

                    1.11             Guarantor. The obligations of the Lessee
under this Lease are to be guaranteed by               Joe
Shortal                    

(“Guarantor”). (See also Paragraph 37.)

                    1.12             Addenda and Exhibits. Attached hereto is an
Addendum or Addenda consisting of Paragraphs 1.12a          through
1.121            and Exhibits A            through B          , all of which
constitute a part of this Lease.

 

2.                 Premises.

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

not the actual size is more or less.

                    2.2               Condition. See Paragraph 2.5. Lessor shall
deliver that portion of the Premises contained within the Building (“Unit”) to
Lessee broom clean and free of debris on the Commencement Date or the Early
Possession Date, whichever first occurs (“Start Date”), and, so long as the
required service contracts described in Paragraph 7.1(b) below are obtained by
Lessee and in effect within thirty days following the Start Date, warrants that
the existing electrical, plumbing, fire sprinkler, lighting, heating,
ventilating and air conditioning systems (“HVAC”), loading doors, if any, and
all other such elements in the Unit, other than those constructed by Lessee,
shall be in good operating condition on said date and that the structural
elements of the roof, bearing walls and foundation of the Unit shall be free of
material defects. If a non-compliance with such warranty exists as of the Start
Date, or if one of such systems or elements should malfunction or fail within
the appropriate warranty period, Lessor shall, as Lessor’s sole obligation with
respect to such matter, except as otherwise provided in this Lease, promptly
after receipt of written notice from Lessee setting forth with specificity the
nature and extent of such non-compliance, malfunction or failure, rectify same
at Lessor’s expense. The warranty periods shall be as follows: (i) 6 months as
to the HVAC systems, and (ii) 30 days as to the remaining systems and other
elements of the Unit. If Lessee does not give Lessor the required notice within
the appropriate warranty period, correction of any such non-compliance,
malfunction or failure shall be the obligation of Lessee at Lessee’s sole cost
and expense (except for the repairs to the fire sprinkler systems, roof,
foundations, and/or bearing walls — see Paragraph 7).

                    2.3               Compliance. See Paragraph 2.5. Lessor
warrants that the improvements on the Premises and the Common Areas comply with
the building codes that were in effect at the time that each such improvement,
or portion thereof, was constructed, and also with all applicable laws,
covenants or restrictions of record, regulations, and ordinances in effect on
the Start Date (“Applicable Requirements”). Said warranty does not apply to the
use to which Lessee will put the Premises or to any Alterations or Utility
Installations (as defined in Paragraph 7.3(a).) made or to be made by Lessee.
NOTE: Lessee is responsible for determining whether or not the zoning is
appropriate for Lessee’s intended use, and acknowledges that past uses of the
Premises may no longer be allowed.

 

                  

                  

                  

                  

Initials

Initials

 

 

 

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

 

If the Premises do not comply with said warranty, Lessor shall, except as
otherwise provided, promptly after receipt of written notice from Lessee setting
forth with specificity the nature and extent of such non-compliance, rectify the
same at Lessor’s expense. If Lessee does not give Lessor written notice of a
non-compliance with this warranty within 6 months following the Start Date,
correction of that non-compliance shall be the obligation of Lessee at Lessee’s
sole cost and expense. If the Applicable Requirements are hereafter changed so
as to require during the term of this Lease the construction of an addition to
or an alteration of the Unit, Premises and/or Building, the remediation of any
Hazardous Substance, or the reinforcement or other physical modification of the
Unit, Premises and/or Building (“Capital Expenditure”), Lessor and Lessee shall
allocate the cost of such work as follows:

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

                                        (b) If such Capital Expenditure is not
the result of the specific and unique use of the Premises by Lessee (such as,
governmentally mandated seismic modifications), then Lessor and Lessee shall
allocate the obligation to pay for the portion of such costs reasonably
attributable to the Premises pursuant to the formula set out in Paragraph
7.1(d); provided, however, that if such Capital Expenditure is required during
the last 2 years of this Lease or if Lessor reasonably determines that it is not
economically feasible to pay its share thereof, Lessor shall have the option to
terminate this Lease upon 90 days

prior written notice to Lessee unless Lessee notifies Lessor, in writing, within
10 days after receipt of Lessor’s termination notice that Lessee will pay for
such Capital Expenditure. If Lessor does not elect to terminate, and fails to
tender its share of any such Capital Expenditure, Lessee may advance such funds
and deduct same, with interest, from Rent until Lessor’s share of such costs
have been fully paid. If Lessee is unable to finance Lessor’s share, or if the
balance of the Rent due and payable for the remainder of this Lease is not
sufficient to fully reimburse Lessee on an offset basis, Lessee shall have the
right to terminate this Lease upon 30 days written notice to Lessor.

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

                    2.4               Acknowledgements. Lessee acknowledges
that: (a) it has been advised by Lessor and/or Brokers to satisfy itself with
respect to the condition of the Premises (including but not limited to the
electrical, HVAC and fire sprinkler systems, security, environmental aspects,
and compliance with Applicable Requirements and the Americans with Disabilities
Act), and their suitability for Lessee’s intended use, (b) Lessee has made such
investigation as it deems necessary with reference to such matters and assumes
all responsibility therefore as the same relate to its occupancy of the
Premises, and (c) neither Lessor, Lessor’s agents, nor Brokers have made any
oral or written representations or warranties with respect to said matters other
than as set forth in this Lease.

                    2.5               Lessee as Prior Owner/Occupant. The
warranties made by Lessor in Paragraph 2 shall be of no force or effect if
immediately prior to the Start Date Lessee was the owner or occupant of the
Premises. In such event, Lessee shall be responsible for any necessary
corrective work. The Lessee is the Lessee and occupant of the Premises on the
Start Date and this Paragraph 2.5 is operable. See also Addendum Paragraphs 52,
53, 54, 55 and 56.

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

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

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

                    (c) If Lessee permits or allows any of the prohibited
activities described in this Paragraph 2.6, then Lessor shall have the right,
without notice, in

addition to such other rights and remedies that it may have, to remove or tow
away the vehicle involved and charge the cost to Lessee, which cost shall be

immediately payable upon demand by Lessor.

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

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

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

responsible to Lessee for the non-compliance with said Rules and Regulations by
other tenants of the Project.

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

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

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

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

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

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

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

 

3.                 Term.

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

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

                    3.3               Delay in Possession. Lessor agrees to use
its best commercially reasonable efforts to deliver possession of the Premises
to Lessee by the Commencement Date. If, despite said efforts, Lessor is unable
to delivery possession as agreed, Lessor shall not be subject to any liability
therefor, nor shall such failure affect the validity of this Lease. Lessee shall
not, however, be obligated to pay Rent or perform its other obligations until it
receives possession of the Premises. If possession is not delivered within 60
days after the Commencement Date, Lessee may, at its option, by notice in
writing within 10 days after the end of such 60 day period, cancel this Lease,
in which event the Parties shall be discharged from all obligations hereunder.
If such written notice is not received by Lessor within said 10 day period,
Lessee’s right to cancel shall terminate. Except as otherwise provided, if
possession is not tendered to lessee by the Start Date and Lessee does not
terminate this Lease, as aforesaid, any period of rent abatement that Lessee
would otherwise have enjoyed shall run from the date of delivery of possession
and continue for a period equal to what Lessee would otherwise have enjoyed
under the terms hereof, but minus any days of delay caused by acts or omissions
of Lessee. If possession of the premises is not delivered within 4 months after
the Commencement Date, this Lease shall terminate unless other agreements are
reached between Lessor and Lessee, in writing.

 

                  

                  

                  

                  

Initials

Initials

 

 

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

 

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

 

4.                 Rent.

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

                    4.2       Common Area Operating Expenses. Lessee shall pay
to Lessor during the term hereof, in addition to the Base Rent, Lessee’s Share

(as specified in Paragraph 1.6.) of all Common Area Operating Expenses, as
hereinafter defined, during each calendar year of the term of this Lease, in
accordance with the following provisions:

                    (a)       “Common Area Operating Expenses” are defined, for
purposes of this Lease, as all costs incurred by Lessor relating to the
ownership

and operation of the Project, including, but not limited to, the following:

(i)            The operation, repair and maintenance, in neat, clean, good order
and condition, but not the replacement (see subparagraph

(e)), of the following:

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

 (bb)        Exterior signs and any tenant directories.

 (cc)        Any fire sprinkler systems.

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

metered.

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

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

(v)           Any increase above the Base Real Property Taxes (as defined in
Paragraph 10).

(vi)          Any “Insurance Cost Increase” (as defined in Paragraph 8).

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

(viii)        The cost of any Capital Expenditure to the Building or the Project
not covered under the provisions of Paragraph 2.3

provided; however, that Lessor shall allocate the cost of any such Capital
Expenditure over a 12 year period and Lessee shall not be required to pay more
than Lessee’s Share of 1/144th of the cost of such Capital Expenditure in any
given month.

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

Expense.

                    (b)       Any Common Area Operating Expenses and Real
Property Taxes that are specifically attributable to the Unit, the Building or
to any other

building in the Project or to the operation, repair and maintenance thereof,
shall be allocated entirely to such Unit, Building, or other building. However,
any

Common Area Operating Expenses and Real Property Taxes that are not specifically
attributable to the Building or to any other building or to the operation,

repair and maintenance thereof, shall be equitably allocated by Lessor to all
buildings in the Project.

                    (c)       The inclusion of the improvements, facilities and
services set forth in Subparagraph 4.2(a) shall not be deemed to impose an
obligation

upon Lessor to either have said improvements or facilities or to provide those
services unless the Project already has the same, Lessor already provides the

services, or Lessor has agreed elsewhere in this Lease to provide the same or
some of them.

                    (d)       Lessee’s Share of Common Area Operating Expenses
shall be payable by Lessee within 10 days after a reasonably detailed statement
of

actual expenses is presented to Lessee. At Lessor’s option, however, an amount
may be estimated by Lessor from time to time of Lessee’s Share of annual

Common Area Operating Expenses and the same shall be payable monthly or
quarterly, as Lessor shall designate, during each 12 month period of the Lease

term, on the same day as the Base Rent is due hereunder. Lessor shall deliver to
Lessee within 60 days after the expiration of each calendar year a

reasonably detailed statement showing Lessee’s Share of the actual Common Area
Operating Expenses incurred during the preceding year. If Lessee’s

payments under this Paragraph 4.2 (d) during the preceding year exceed Lessee’s
Share as indicated on such statement, Lessor shall be credited the amount

of such over-payment against Lessee’s Share of Common Area Operating Expenses
next becoming due. If Lessee’s payments under this Paragraph 4.2(d)

during the preceding year were less than Lessee’s Share as indicated on such
statement, Lessee shall pay to Lessor the amount of the deficiency within 10

days after delivery by Lessor to Lessee of the statement.

                    (e)       When a capital component such as the roof,
foundations, exterior walls or a Common Area capital improvement, such as the
parking lot

paving, elevators, fences, etc. requires replacement, rather than repair or
maintenance, Lessor shall, at Lessor’s expense, be responsible for such

replacement. Such expenses and/or costs are not Common Area Operating Expenses.

                4.3           Payment. Lessee shall cause payment of Rent to be
received by Lessor in lawful money of the United States, without offset or
deduction

(except as specifically permitted in this Lease), on or before the day on which
it is due. Rent for any period during the term hereof which is for less than one

full calendar month shall be prorated based upon the actual number of days of
said month. Payment of Rent shall be made to Lessor at its address stated

herein or to such other persons or place as Lessor may from time to time
designate in writing. Acceptance of a payment which is less than the amount then

due shall not be a waiver of Lessor’s rights to the balance of such Rent,
regardless of Lessor’s endorsement of any check so stating. In the event that
any

check, draft, or other instrument of payment given by Lessee to Lessor is
dishonored for any reason, Lessee agrees to pay to Lessor the sum of $25.

 

 5.                Security Deposit. Lessee shall deposit with Lessor upon
execution hereof the Security Deposit as security for Lessee’s faithful
performance of its obligations under this Lease. If Lessee fails to pay Rent, or
otherwise Defaults under this Lease, Lessor may use, apply or retain all or any
portion of said Security Deposit for the payment of any amount due Lessor or to
reimburse or compensate Lessor for any liability, expense, loss or damage which
Lessor may suffer or incur by reason thereof. If Lessor uses or applies all or
any portion of the Security Deposit, Lessee shall within 10 days after written
request therefor deposit monies with Lessor sufficient to restore said Security
Deposit to the full amount required by this Lease. If the Base Rent increases
during the term of this Lease, Lessee shall, upon written request from Lessor,
deposit additional monies with Lessor so that the total amount of the Security
Deposit shall at all times bear the same proportion to the increased Base Rent
as the initial Security Deposit bore to the initial Base Rent. Should the Agreed
Use be amended to accommodate a material change in the business of Lessee or to
accommodate a sublessee or assignee, Lessor shall have the right to increase the
Security Deposit to the extent necessary, in Lessor’s reasonable judgment, to
account for any increased wear and tear that the Premises may suffer as a result
thereof. If a change in control of Lessee occurs during this Lease and following
such change the financial condition of Lessee is, in Lessor’s reasonable
judgment, significantly reduced, Lessee shall deposit such additional monies
with Lessor as shall be sufficient to cause the Security Deposit to be at a
commercially reasonable level based on such change in financial condition.
Lessor shall not be required to keep the Security Deposit separate from its
general accounts. Within 14 days after the expiration or termination of this
Lease, if Lessor elects to apply the Security Deposit only to unpaid Rent, and
otherwise within 30 days after the Premises have been vacated pursuant to
Paragraph 7.4(c) below, Lessor shall return that portion of the Security Deposit
not used or applied by Lessor. No part of the Security Deposit shall be
considered to be held in trust, to bear interest or to be prepayment for any
monies to be paid by Lessee under this Lease.

6.                 Use.

                    6.1               Use. Lessee shall use and occupy the
Premises only for the Agreed Use, or any other legal use which is reasonably
comparable thereto, and for no other purpose. Lessee shall not use or permit the
use of the Premises in a manner that is unlawful, creates damage, waste or a
nuisance, or that disturbs occupants of or causes damage to neighboring premises
or properties. Lessor shall not unreasonably withhold or delay its consent to
any written request for a modification of the Agreed Use, so long as the same
will not impair the structural integrity of the improvements on the Premises or
the mechanical or electrical systems therein, and/or is not significantly more
burdensome to the Premises. If Lessor elects to withhold consent, Lessor shall
within 7 days after

such request give written notification of same, which notice shall include an
explanation of Lessor’s objections to the change in the Agreed Use.

                    6.2               Hazardous Substances. .

                                        (a)                Reportable Uses
Require Consent. The term “Hazardous Substance” as used in this Lease shall mean
any product, substance, or waste whose presence, use, manufacture, disposal,
transportation, or release, either by itself or in combination with other
materials expected to be on the Premises, is either: (i) potentially injurious
to the public health, safety or welfare, the environment or the Premises, (ii)
regulated or monitored by any governmental authority, or (iii) a basis for
potential liability of Lessor to any governmental agency or third party under
any applicable statute or common law theory. Hazardous Substances shall include,
but not be limited to, hydrocarbons, petroleum, gasoline, and/or crude oil or
any products, by-products or fractions thereof. Lessee shall not engage in any
activity in or on the Premises which constitutes a Reportable Use of Hazardous
Substances without the express prior written consent of Lessor and timely
compliance (at Lessee’s expense) with all Applicable Requirements. “Reportable
Use” shall mean (i) the installation or use of any above or below ground storage
tank, (ii) the generation, possession, storage, use, transportation, or disposal
of a Hazardous Substance that requires a permit from, or with respect to which a
report, notice, registration or business plan is required to be filed with, any
governmental authority, and/or (iii) the presence at the Premises of a Hazardous
Substance with respect to which any Applicable Requirements requires that a
notice be given to persons

 

                  

                  

                  

                  

Initials

Initials

 

 

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

 

entering or occupying the Premises or neighboring properties. Notwithstanding
the foregoing, Lessee may use any ordinary and customary materials reasonably
required to be used in the normal course of the Agreed Use, so long as such use
is in compliance with all Applicable Requirements, is not a Reportable Use, and
does not expose the Premises or neighboring property to any meaningful risk of
contamination or damage or expose Lessor to any liability therefor. In addition,

Lessor may condition its consent to any Reportable Use upon receiving such
additional assurances as Lessor reasonably deems necessary to protect itself,
the public, the Premises and/or the environment against damage, contamination,
injury and/or liability, including, but not limited to, the installation (and
removal on or before Lease expiration or termination) of protective
modifications (such as concrete encasements) and/or increasing the Security
Deposit.

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

                                        (c)                Lessee Remediation.
Lessee shall not cause or permit any Hazardous Substance to be spilled or
released in, on, under, or about the Premises (including through the plumbing or
sanitary sewer system) and shall promptly, at Lessee’s expense, take all
investigatory and/or remedial action reasonably recommended, whether or not
formally ordered or required, for the cleanup of any contamination of, and for
the maintenance, security and/or

monitoring of the Premises or neighboring properties, that was caused or
materially contributed to by Lessee, or pertaining to or involving any Hazardous
Substance brought onto the Premises during the term of this Lease, by or for
Lessee, or any third party.

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

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

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

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

                    6.3               Lessee’s Compliance with Applicable
Requirements. Except as otherwise provided in this Lease, Lessee shall, at
Lessee’s sole expense, full, diligently and in a timely manner, materially
comply with all Applicable Requirements, the requirements of any applicable fire
insurance underwriter or rating bureau, and the recommendations of Lessor’s
engineers and/or consultants which relate in any manner to the Premises, without
regard to whether said requirements are now in effect or become effective after
the Start Date. Lessee shall, within 10 days after receipt of Lessor’s written
request, provide Lessor with copies of all permits and other documents, and
other information evidencing Lessee’s compliance with any Applicable
Requirements specified by Lessor, and shall immediately upon receipt, notify
Lessor in writing (with copies of any documents involved) of any threatened or
actual claim, notice, citation, warning, complaint or report pertaining to or
involving the failure of Lessee or the Premises to comply with any Applicable
Requirements.

                    6.4               Inspection; Compliance. Lessor and
Lessor’s “Lender” (as defined in Paragraph 30) and consultants shall have the
right to enter into Premises at any time, in the case of an emergency, and
otherwise at reasonable times, for the purpose of inspecting the condition of
the Premises and for verifying compliance by Lessee with this Lease. The cost of
any such inspections shall be paid by Lessor, unless a violation of Applicable
Requirements, or a contamination is found to exist or be imminent, or the
inspection is requested or ordered by a governmental authority. In such case,
Lessee shall upon request reimburse Lessor for the cost of such inspection, so
long as such inspection is reasonably related to the violation or contamination.

 

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

                    7.1               Lessee’s Obligations.

                                        (a) In General. Subject to the
provisions of Paragraph 2.2 (Condition), 2.3 (Compliance), 6.3 (Lessee’s
Compliance with Applicable

Requirements), 7.2 (Lessor’s Obligations), 9 (Damage or Destruction), and 14
(Condemnation), Lessee shall, at Lessee’s sole expense, keep the Premises,

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

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

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

                                        (d) Replacement. Subject to Lessee’s
indemnification of Lessor as set forth in Paragraph 8.7 below, and without
relieving Lessee of liability resulting from Lessee’s failure to exercise and
perform good maintenance practices, if an item described in Paragraph 7.1(b)
cannot be repaired other

than at a cost which is in excess of 50% of the cost of replacing such item,
then such item shall be replaced by Lessor, and the cost thereof shall be
prorated between the Parties and Lessee shall only be obligated to pay, each
month during the remainder of the term of this Lease, on the date on which Base
Rent is due, an amount equal to the product of multiplying the cost of such
replacement by a fraction, the numerator of which is one, and the denominator of
which is 144 (ie. 1/144th of the cost per month). Lessee shall pay interest on
the unamortized balance at a rate that is commercially reasonable in the
judgment of Lessor’s accountants. Lessee may, however, prepay its obligation at
any time.

                    7.2               Lessor’s Obligations. Subject to the
provisions of Paragraphs 2.2 (Condition), 2.3 (Compliance), 4.2 (Common Area
Operating Expenses), 6 (Use), 7.1 (Lessee’s Obligations), 9 (Damage or
Destruction) and 14 (Condemnation), Lessor, subject to reimbursement pursuant to
Paragraph 4.2, shall keep in good order, condition and repair the foundations,
exterior walls, structural condition of interior bearing walls, exterior roof,
fire sprinkler system,

Common Area fire alarm and/or smoke detection systems, fire hydrants, parking
lots, walkways, parkways, driveways, landscaping, fences, signs and utility
systems serving the Common Areas and all parts thereof, as well as providing the
services for which there is a Common Area Operating Expense pursuant to

 

                  

                  

                  

                  

Initials

Initials

 

 

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

 

Paragraph 4.2. Lessor shall not be obligated to paint the exterior or interior
surfaces of exterior walls, nor shall Lessor be obligated to maintain, repair or
replace windows, doors or plate glass of the Premises. Lessee expressly waives
the benefit of any statute now or hereafter in effect to the extent it is
inconsistent with the terms of this Lease.

                    7.3               Utility Installations; Trade Fixtures;
Alterations.

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

security and fire protection systems, communication systems, lighting fixtures,
HVAC equipment, plumbing, and fencing in or on the Premises. The term “Trade

Fixtures” shall mean Lessee’s machinery and equipment that can be removed
without doing material damage to the Premises. The term “Alterations” shall mean

any modification of the improvements, other than Utility Installations or Trade
Fixtures, whether by addition or deletion. “Lessee Owned Alterations and/or

Utility Installations” are defined as Alterations and/or Utility Installations
made by Lessee that are not yet owned by Lessor pursuant to Paragraph 7.4(a).

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

                                        (c) Indemnification. Lessee shall pay,
when due, all claims for labor or materials furnished or alleged to have been
furnished to or for Lessee at or for use on the Premises, which claims are or
may be secured by any mechanic’s or materialmen’s lien against the Premises or
any interest therein.

Lessee shall give Lessor not less than 10 days notice prior to the commencement
of any work in, on or about the Premises, and Lessor shall have the right to
post notices of non-responsibility. If Lessee shall contest the validity of any
such lien, claim or demand, then Lessee shall, at its sole expense defend and
protect itself, Lessor and the Premises against the same and shall pay and
satisfy any such adverse judgment that may be rendered thereon before the
enforcement thereof. If Lessor shall require, Lessee shall furnish a surety bond
in an amount equal to 150% of the amount of such contested lien, claim or
demand, indemnifying Lessor against liability for the same. If Lessor elects to
participate in any such action, Lessee shall pay Lessor’s attorneys’ fees and
costs.

                    7.4               Ownership; Removal; Surrender; and
Restoration

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

Alterations and Utility Installations shall, at the expiration or termination of
this Lease, become the property of Lessor and be surrendered by Lessee with the
Premises.

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

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

 

8.                 Insurance; Indemnity.

                    8.1               Payment of Premium Increases.

                                        (a)                As used herein, the
term “Insurance Cost Increase” is defined as any increase in the actual cost of
the insurance applicable to the Building and/or the Project and required to be
carried by Lessor, pursuant to Paragraphs 8.2(b), 8.3(a) and 8.3(b), (“Required
Insurance”), over and above the Base Premium, as hereinafter defined, calculated
on an annual basis. Insurance Cost Increase shall include, but not be limited
to, requirements of the holder of a mortgage or deed of trust covering the
Premises, Building and/or Project, increased valuation of the Premises, Building
and/or Project, and/or a general premium rate increase. The term Insurance Cost
Increase shall not, however, include any premium increases resulting from the
nature of the occupancy of any other tenant of the Building. If the parties
insert a dollar amount in Paragraph 1.9, such amount shall be considered the
“Base Premium.” The Base Premium shall be the annual premium applicable to the
12 month period immediately preceding the Start Date. If, however, the Project
was not insured for the entirety of such 12 month period, then the Base Premium
shall be the lowest annual premium reasonably obtainable for the Required
Insurance as of the Start Date, assuming the most nominal use possible of the
Building. In no event, however, shall Lessee be responsible for any portion of
the premium cost attributable to liability insurance coverage in excess of
$2,000,000 procured under Paragraph 8.2(b).

                                        (b)               Lessee shall pay any
Insurance Cost Increase to Lessor pursuant to Paragraph 4.2. Premiums for policy
periods commencing prior to, or extending beyond, the term of this Lease shall
be prorated to coincide with the corresponding Start Date or Expiration Date.

                    8.2               Liability Insurance.

                                        (a) Carried by Lessee. Lessee shall
obtain and keep in force a Commercial General Liability policy of insurance
protecting Lessee and Lessor as an additional insured against claims for bodily
injury, personal injury and property damage based upon or arising out of the
ownership, use, occupancy or maintenance of the Premises and all areas
appurtenant thereto. Such insurance shall be on an occurrence basis providing
single limit coverage in an amount not less than $1,000,000 per occurrence with
an annual aggregate of not less than $2,000,000, an “Additional Insured-Managers
or Lessors of Premises Endorsement” and contain the “Amendment of the Pollution
Exclusion Endorsement” for damage caused by heat, smoke or fumes from a hostile
fire. The policy shall not contain any intra-insured exclusions as between
insured persons or organizations, but shall include coverage for liability
assumed under this Lease as an “insured contract” for the performance of
Lessee’s indemnity obligations under this Lease. The limits of said insurance
shall not, however, limit the liability of Lessee nor relieve Lessee of any
obligation hereunder. All insurance carried by Lessee shall be primary to and
not contributory with any similar insurance carried by Lessor, whose insurance
shall be considered excess insurance only.

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

                    8.3               Property Insurance - Building,
Improvements and Rental Value.

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

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

 

                  

                  

                  

                  

Initials

Initials

 

 

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

 

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

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

                    8.4               Lessee’s Property; Business Interruption
Insurance.

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

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

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

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

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

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

                    8.8               Exemption of Lessor from Liability. Lessor
shall not be liable for injury or damage to the person or goods, wares,
merchandise or other property of Lessee, Lessee’s employees, contractors,
invitees, customers, or any other person in or about the Premises, whether such
damage or injury is caused by or results from fire, steam, electricity, gas,
water or rain, or from the breakage, leakage, obstruction or other defects of
pipes, fire sprinklers, wires,

appliances, plumbing, HVAC or lighting fixtures, or from any other cause,
whether the said injury or damage results from conditions arising upon the
Premises or upon other portions of the Building, or from other sources or
places. Lessor shall not be liable for any damages arising from any act or
neglect of any other tenant of Lessor nor from the failure of Lessor to enforce
the provisions of any other lease in the Project. Notwithstanding Lessor’s
negligence or breach of this Lease, Lessor shall under no circumstances be
liable for injury to Lessee’s business or for any loss of income or profit
therefrom.

 

9.                 Damage or Destruction.

                    9.1               Definitions.

                                        (a) “Premises Partial Damage” shall mean
damage or destruction to the improvements on the Premises, other than Lessee
Owned Alterations and Utility Installations, which can reasonably be repaired in
3 months or less from the date of the damage or destruction, and the cost
thereof does not exceed a sum equal to 6 month’s Base Rent. Lessor shall notify
Lessee in writing within 30 days from the date of the damage or destruction as
to whether or not the damage is Partial or Total.

                                        (b) “Premises Total Destruction” shall
mean damage or destruction to the improvements on the Premises, other than
Lessee Owned Alterations and

Utility Installations and Trade Fixtures, which cannot reasonably be repaired in
3 months or less from the date of the damage or destruction and/or the cost
thereof exceeds a sum equal to 6 month’s Base Rent. Lessor shall notify Lessee
in writing within 30 days from the date of the damage or destruction as to
whether or not the damage is Partial or Total.

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

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

                                        (e) “Hazardous Substance Condition”
shall mean the occurrence or discovery of a condition involving the presence of,
or a contamination by, a

Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises.

                    9.2               Partial Damage - Insured Loss. If a
Premises Partial Damage that is an Insured Loss occurs, then Lessor shall, at
Lessor’s expense, repair such damage (but not Lessee’s Trade Fixtures or Lessee
Owned Alterations and Utility Installations) as soon as reasonably possible and
this Lease shall continue in full force and effect; provided, however, that
Lessee shall, at Lessor’s election, make the repair of any damage or destruction
the total cost to repair of which is $5,000 or less, and, in such event, Lessor
shall make any applicable insurance proceeds available to Lessee on a reasonable
basis for that purpose.

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

                    9.3               Partial Damage - Uninsured Loss. If a
Premises Partial Damage that is not an Insured Loss occurs, unless caused by a
negligent or willful act of Lessee (in which event Lessee shall make the repairs
at Lessee’s expense), Lessor may either: (i) repair such damage as soon as
reasonably possible at Lessor’s expense, in which event this Lease shall
continue in full force and effect, or (ii) terminate this Lease by giving
written notice to Lessee within

30 days after receipt by Lessor of knowledge of the occurrence of such damage.
Such termination shall be effective 60 days following the date of such notice.

In the event Lessor elects to terminate this Lease, Lessee shall have the right
within 10 days after receipt of the termination notice to give written notice to

Lessor of Lessee’s commitment to pay for the repair of such damage without
reimbursement from Lessor. Lessee shall provide Lessor with said funds or
satisfactory assurance thereof within 30 days after making such commitment. In
such event this Lease shall continue in full force and effect, and Lessor shall
proceed to make such repairs as soon as reasonably possible after the required
funds are available. If Lessee does not make the required commitment, this Lease
shall terminate as of the date specified in the termination notice.

                    9.4               Total Destruction. Notwithstanding any
other provision hereof, if a Premises Total Destruction occurs, this Lease shall
terminate 60 days following such Destruction. If the damage or destruction was
caused by the gross negligence or willful misconduct of Lessee, Lessor shall
have the right to

recover Lessor’s damages from Lessee, except as provided in Paragraph 8.6.

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

 

                  

                  

                  

                  

Initials

Initials

 

 

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

 

expires. If Lessee duly exercises such option during such period and provides
Lessor with funds (or adequate assurance thereof) to cover any shortage in
insurance proceeds, Lessor shall, at Lessor’s commercially reasonable expense,
repair such damage as soon as reasonably possible and this Lease shall continue
in full force and effect. If Lessee fails to exercise such option and provide
such funds or assurance during such period, then this Lease shall terminate on
the date specified in the termination notice and Lessee’s option shall be
extinguished.

                    9.6               Abatement of Rent; Lessee’s Remedies.

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

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

Premises, whichever first occurs.

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

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

 

10.               Real Property Taxes.

                    10.1             Definitions.

                                         (a) “Real Property Taxes.” As used
herein, the term “Real Property Taxes” shall include any form of assessment;
real estate, general, special, ordinary or extraordinary, or rental levy or tax
(other than inheritance, personal income or estate taxes); improvement bond;
and/or license fee imposed

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

                                         (b) “Base Real Property Taxes.” As used
herein, the term “Base Real Property Taxes” shall be the amount of Real Property
Taxes, which are assessed against the Premises, Building, Project or Common
Areas in the calendar year during which the Lease is executed. In calculating
Real Property Taxes for any calendar year, the Real Property Taxes for any real
estate tax year shall be included in the calculation of Real Property Taxes for
such calendar year based upon the number of days which such calendar year and
tax year have in common.

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

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

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

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

attributable to Lessee’s property within 10 days after receipt of a written
statement setting forth the taxes applicable to Lessee’s property.

 

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

 

12.               Assignment and Subletting.

                    12.1             Lessor’s Consent Required.

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

                                         (b) A change in the control of Lessee
shall constitute an assignment requiring consent. The transfer, on a cumulative
basis, of 25% or more of the voting control of Lessee shall constitute a change
in control for this purpose.

                                         (c) The involvement of Lessee or its
assets in any transaction, or series of transactions (by way of merger, sale,
acquisition, financing, transfer, leveraged buy-out or otherwise), whether or
not a formal assignment or hypothecation of this Lease or Lessee’s assets
occurs, which results or will result in a reduction of the Net Worth of Lessee
by an amount greater than 25% of such Net Worth as it was represented at the
time of the execution of this

Lease or at the time of the most recent assignment to which Lessor has
consented, or as it exists immediately prior to said transaction or transactions
constituting such reduction, whichever was or is greater, shall be considered an
assignment of this Lease to which Lessor may withhold its consent. “Net Worth of
Lessee” shall mean the net worth of Lessee (excluding any guarantors)
established under generally accepted accounting principles.

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

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

                    12.2             Terms and Conditions Applicable to
Assignment and Subletting.

                                         (a) Regardless of Lessor’s consent, any
assignment or subletting shall not: (i) be effective without the express written
assumption by such assignee or sublessee of the obligations of Lessee under this
Lease, (ii) release Lessee of any obligations hereunder, or (iii) alter the
primary liability of Lessee for the payment of Rent or for the performance of
any other obligations to be performed by Lessee.

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

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

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

                                         (e) Each request for consent to an
assignment or subletting shall be in writing, accompanied by information
relevant to Lessor’s determination as to the financial and operational
responsibility and appropriateness of the proposed assignee or sublessee,
including but not limited to the intended use and/or required modification of
the Premises, if any, together with a fee of $1,000 or 10% of the current
monthly Base Rent applicable to the portion

 

 

                  

                  

                  

                  

Initials

Initials

 

 

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

 

of the Premises which is the subject of the proposed assignment or sublease,
whichever is greater, as consideration for Lessor’s considering and processing
said request. Lessee agrees to provide Lessor with such other or additional
information and/or documentation as may be reasonably requested.

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

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

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

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

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

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

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

 

13. Default; Breach; Remedies.

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

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

                                         (b) The failure of Lessee to make any
payment of Rent or any Security Deposit required to be made by Lessee hereunder,
whether to Lessor or to a third party, when due, to provide reasonable evidence
of insurance or surety bond, or to fulfill any obligation under this Lease which
endangers or

threatens life or property, where such failure continues for a period of 3
business days following written notice to Lessee.

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

                                         (d) A Default by Lessee as to the
terms, covenants, conditions or provisions of this Lease, or of the rules
adopted under paragraph 2.9

hereof, other than those described in subparagraphs 13.1(a), (b) or (c), above,
where such Default continues for a period of 30 days after written notice;
provided, however, that if the nature of Lessee’s Default is such that more than
30 days are reasonably required for its cure, then it shall not be deemed to be

a Breach if Lessee commences such cure within said 30 day period and thereafter
diligently prosecutes such cure to completion.

                                         (e) The occurrence of any of the
following events: (i) the making of any general arrangement or assignment for
the benefit of creditors; (ii) becoming a “debtor” as defined in 11 U.S.C. § 101
or any successor statute thereto (unless, in the case of a petition filed
against Lessee, the same is dismissed within 60 days); (iii) the appointment of
a trustee or receiver to take possession of substantially all of Lessee’s assets
located at the Premises or of Lessee’s interest in this Lease, where possession
is not restored to Lessee within 30 days; or (iv) the attachment, execution or
other judicial seizure of substantially all of Lessee’s assets located at the
Premises or of Lessee’s interest in this Lease, where such seizure is not
discharged within 30 days; provided, however, in the event that any provision of
this subparagraph

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

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

                                         (g) If the performance of Lessee’s
obligations under this Lease is guaranteed: (i) the death of a Guarantor, (ii)
the termination of a Guarantor’s liability with respect to this Lease other than
in accordance with the terms of such guaranty, (iii) a Guarantor’s becoming
insolvent or the subject of a

bankruptcy filing, (iv) a Guarantor’s refusal to honor the guaranty, or (v) a
Guarantor’s breach of its guaranty obligation on an anticipatory basis, and
Lessee’s failure, within 60 days following written notice of any such event, to
provide written alternative assurance or security, which, when coupled with the
then existing resources of Lessee, equals or exceeds the combined financial
resources of Lessee and the Guarantors that existed at the time of execution of
this Lease.

                    13.2             Remedies. If Lessee fails to perform any of
its affirmative duties or obligations, within 10 days after written notice (or
in case of an emergency, without notice), Lessor may, at its option, perform
such duty or obligation on Lessee’s behalf, including but not limited to the
obtaining of reasonably

required bonds, insurance policies, or governmental licenses, permits or
approvals. The costs and expenses of any such performance by Lessor shall be due

and payable by Lessee upon receipt of invoice therefor. If any check given to
Lessor by Lessee shall not be honored by the bank upon which it is drawn,
Lessor, at its option, may require all future payments to be made by Lessee to
be by cashier’s check. In the event of a Breach, Lessor may, with or without
further notice or demand, and without limiting Lessor in the exercise of any
right or remedy which Lessor may have by reason of such Breach:

                                         (a) Terminate Lessee’s right to
possession of the Premises by any lawful means, in which case this Lease shall
terminate and Lessee shall immediately surrender possession to Lessor. In such
event Lessor shall be entitled to recover from Lessee: (i) the unpaid Rent which
had been earned at

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

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

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

                    13.3             Inducement Recapture. Any agreement for
free or abated rent or other charges, or for the giving or paying by Lessor to
or for Lessee of any cash or other bonus, inducement or consideration for
Lessee’s entering into this Lease, all of which concessions are hereinafter
referred to as Inducement Provisions”, shall be deemed conditioned upon Lessee’s
full and faithful performance of all of the terms, covenants and conditions of
this Lease. Upon Breach of this Lease by Lessee, any such Inducement Provision
shall automatically be deemed deleted from this Lease and of no further force or
effect, and any rent, other charge, bonus, inducement or consideration
theretofore abated, given or paid by Lessor under such an Inducement Provision
shall be immediately due and payable by Lessee to Lessor, notwithstanding any
subsequent cure of said Breach by Lessee. The acceptance by Lessor of rent or
the cure of the Breach which

 

 

                  

                  

                  

                  

Initials

Initials

 

 

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

 

initiated the operation of this paragraph shall not be deemed a waiver by Lessor
of the provisions of this paragraph unless specifically so stated in writing by
Lessor at the time of such acceptance.

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

                    13.5             Interest. Any monetary payment due Lessor
hereunder, other than late charges, not received by Lessor, when due as to
scheduled payments (such as Base Rent) or within 30 days following the date on
which it was due for non-scheduled payment, shall bear interest from the date
when due, as to scheduled payments, or the 31st day after it was due as to
non-scheduled payments. The interest (“Interest”) charged shall be equal to the
prime rate reported in the Wall Street Journal as published closest prior to the
date when due plus 4%, but shall not exceed the maximum rate allowed by law.
Interest is payable in addition to the potential late charge provided for in
Paragraph 13.4.

                    13.6             Breach by Lessor.

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

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

 

14.               Condemnation. If the Premises or any portion thereof are taken
under the power of eminent domain or sold under the threat of the exercise of
said power (collectively “Condemnation”), this Lease shall terminate as to the
part taken as of the date the condemning authority takes title or possession,
whichever

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

 

15.               Brokerage Fees.

                    15.1             Additional Commission:  In addition to the
payments owed pursuant to Paragraph 1.10 above, and unless Lessor and the
Brokers otherwise agree in writing, Lessor agrees that: (a) if Lessee exercises
any Option, (b) if Lessee acquires from Lessor any rights to the Premises or
other premises owned by Lessor and located within the Project, (c) if Lessee
remains in possession of the Premises with the consent of Lessor, after the
expiration of this Lease, or (d) if Base Rent is increased, whether by agreement
or operation of an escalation clause herein, then, Lessor shall pay Brokers a
fee in accordance with the schedule of the Brokers in effect at the time of the
execution of this Lease.

                    15.2             Assumption of Obligations.  Any buyer or
transferee of Lessor’s interest in this Lease shall be deemed to hae assumed
Lessor’s obligation hereunder.  Brokers shall be third party beneficiaries of
the provisions of Paragraphs 1.10, 15, 22 and 31.  If Lessor fails to pay to
Brokers any amounts due as and for brokerage fees pertaining to this Lease when
due, then such amounts shall accrue interest.  In addition, if Lessor fails to
pay any amounts to Lessee’s Broker when du, Lessee’s Broker may send written
notice to Lessor and Lessee of such failure and if Lessor fails to pay such
amounts deemed to be a third party beneficiary of any commission agreement
entered into by and/or between Lessor and Lessor’s Broker for the limited
purpose of collecting any brokerage fee owed.

                    15.3             Representations and Indemnities of Broker
Relationships. Lessee and Lessor each represent and warrant to the other that it
has had no dealings with any person, firm, broker or finder (other than the
Brokers, if any) in connection with this Lease, and that no one other than said
named Brokers is entitled to any commission or finder’s fee in connection
herewith. Lessee and Lessor do each hereby agree to indemnify, protect, defend
and hold the other

harmless from and against liability for compensation or charges which may be
claimed by any such unnamed broker, finder or other similar party by reason of
any dealings or actions of the indemnifying Party, including any costs,
expenses, attorneys’ fees reasonably incurred with respect thereto.

 

16.               Estoppel Certificates.

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

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

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

 

17.               Definition of Lessor. The term “Lessor” as used herein shall
mean the owner or owners at the time in question of the fee title to the
Premises, or, if this is a sublease, of the Lessee’s interest in the prior
lease. In the event of a transfer of Lessor’s title or interest in the Premises
or this Lease, Lessor shall deliver to the transferee or assignee (in cash or by
credit) any unused Security Deposit held by Lessor. Except as provided in
Paragraph 15, upon such transfer or assignment and delivery of the Security
Deposit, as aforesaid, the prior Lessor shall be relieved of all liability with
respect to the obligations and/or covenants under this Lease thereafter to be
performed by the Lessor. Subject to the foregoing, the obligations and/or
covenants in this Lease to be performed by the Lessor shall be binding only upon
the Lessor as hereinabove defined. Notwithstanding the above, and subject to the
provisions of Paragraph 20 below, the original Lessor under this Lease, and all
subsequent holders of the Lessor’s interest in this Lease shall remain liable
and responsible with regard to the potential duties and liabilities of Lessor
pertaining to Hazardous Substances as outlined in Paragraph 6.2 above.

 

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

 

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

 

20.               Limitation on Liability. Subject to the provisions of
Paragraph 17 above, the obligations of Lessor under this Lease shall not
constitute personal

obligations of Lessor, the individual partners of Lessor or its or their
individual partners, directors, officers or shareholders, and Lessee shall look
to the Premises, and to no other assets of Lessor, for the satisfaction of any
liability of Lessor with respect to this Lease, and shall not seek recourse
against the individual partners of Lessor, or its or their individual partners,
directors, officers or shareholders, or any of their personal assets for such
satisfaction.

 

 

                  

                  

                  

                  

Initials

Initials

 

 

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

 

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

 

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

hereof by either Party. The liability (including court costs and attorneys’
fees), of any Broker with respect to negotiation, execution, delivery or
performance by either Lessor or Lessee under this Lease or any amendment or
modification hereto shall be limited to an amount up to the fee received by such
Broker pursuant to this Lease; provided, however, that the foregoing limitation
on each Broker’s liability shall not be applicable to any gross negligence or
willful misconduct of such Broker.

 

23.               Notices.

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

concurrently transmitted to such party or parties at such addresses as Lessor
may from time to time hereafter designate in writing.

                    23.2             Date of Notice. Any notice sent by
registered or certified mail, return receipt requested, shall be deemed given on
the date of delivery shown on the receipt card, or if no delivery date is shown,
the postmark thereon. If sent by regular mail the notice shall be deemed given
48 hours after the same is addressed as required herein and mailed with postage
prepaid. Notices delivered by United States Express Mail or overnight courier
that guarantee next day

delivery shall be deemed given 24 hours after delivery of the same to the Postal
Service or courier. Notices transmitted by facsimile transmission or similar
means shall be deemed delivered upon telephone confirmation of receipt
(confirmation report from fax machine is sufficient), provided a copy is also
delivered via delivery or mail. If notice is received on a Saturday, Sunday or
legal holiday, it shall be deemed received on the next business day.

 

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

by Lessee, or be construed as the basis of an estoppel to enforce the provision
or provisions of this Lease requiring such consent. The acceptance of Rent by

Lessor shall not be a waiver of any Default or Breach by Lessee. Any payment by
Lessee may be accepted by Lessor on account of monies or damages due Lessor,
notwithstanding any qualifying statements or conditions made by Lessee in
connection therewith, which such statements and/or conditions shall be of no

force or effect whatsoever unless specifically agreed to in writing by Lessor at
or before the time of deposit of such payment.

 

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

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

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

                                         (ii)                Lessee’s Agent. An
agent can agree to act as agent for the Lessee only. In these situations, the
agent is not the Lessor’s agent, even if by agreement the agent may receive
compensation for services rendered, either in full or in part from the Lessor.
An agent acting only for a Lessee has the following affirmative obligations. To
the Lessee: A fiduciary duty of utmost care, integrity, honesty, and loyalty in
dealings with the Lessee. To the Lessee and the Lessor: a. Diligent exercise of
reasonable skills and care in performance of the agent’s duties. b. A duty of
honest and fair dealing and good

faith. c. A duty to disclose all facts known to the agent materially affecting
the value or desirability of the property that are not known to, or within the
diligent attention and observation of, the Parties. An agent is not obligated to
reveal to either Party any confidential information obtained from any other
Party which does not involve the affirmative duties set forth above.

                                         (iii)               Agent Representing
Both Lessor and Lessee. A real estate agent, either acting directly or through
one or more associate licenses, can legally be the agent of both the Lessor and
the Lessee in a transaction, but only with the knowledge and consent of both the
Lessor and the Lessee. In a dual agency situation, the agent has the following
affirmative obligations to both the Lessor and the Lessee: a. A fiduciary duty
of utmost care, integrity, honesty and loyalty in the dealings with either
Lessor or the Lessee. b. Other duties to the Lessor and the Lessee as stated
above in subparagraphs (i) or (ii). In representing both Lessor and Lessee, the
agent may not without the express permission of the respective Party, disclose
to the other Party that the

Lessor will accept rent in an amount less than that indicated in the listing or
that the Lessee is willing to pay a higher rent than that offered. The above
duties of the agent in a real estate transaction do not relieve a Lessor or
Lessee from the responsibility to protect their own interests. Lessor and Lessee
should carefully read all agreements to assure that they adequately express
their understanding of the transaction. A real estate agent is a person
qualified to advise about real estate. If legal or tax advice is desired,
consult a competent professional.

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

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

 

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

 

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

 

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

 

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

 

30.               Subordination; Attornment; Non-Disturbance.

                    30.1             Subordination. This Lease and any Option
granted hereby shall be subject and subordinate to any ground lease, mortgage,
deed of trust, or other hypothecation or security device (collectively,
“Security Device”), now or hereafter placed upon the Premises, to any and all
advances made on the security thereof, and to all renewals, modifications, and
extensions thereof. Lessee agrees that the holders of any such Security Devices
(in this Lease together

referred to as “Lender”) shall have no liability or obligation to perform any of
the obligations of Lessor under this Lease. Any Lender may elect to have this
Lease and/or any Option granted hereby superior to the lien of its Security
Device by giving written notice thereof to Lessee, whereupon this Lease and such
Options shall be deemed prior to such Security Device, notwithstanding the
relative dates of the documentation or recordation thereof.

 

 

                  

                  

                  

                  

Initials

Initials

 

 

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

 

30.2             Attornment. Subject to the non-disturbance provisions of
Paragraph 30.3; Lessee agrees to attorn to a Lender or any other party who
acquires ownership of the Premises by reason of a foreclosure of a Security
Device, and that in the event of such foreclosure, such new owner shall not: (a)
be liable for any act or omission of any prior lessor or with respect to events
occurring prior to acquisition of ownership; (b) be subject to any offsets or
defenses which Lessee might have against any prior lessor, (c) be bound by
prepayment of more than one month’s rent, or (d) be liable for the return of any
security deposit paid to any prior lessor.

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

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

 

31.               Attorneys’ Fees. If any Party brings an action or proceeding
involving the Premises whether founded in tort, contract or equity, or to
declare rights hereunder, the Prevailing Party (as hereafter defined) in any
such proceeding, action, or appeal thereon, shall be entitled to reasonable
attorneys’ fees. Such fees may be awarded in the same suit or recovered in a
separate suit, whether or not such action or proceeding is pursued to decision
or judgment. The term,

“Prevailing Party” shall include, without limitation, a Party who substantially
obtains or defeats the relief sought, as the case may be, whether by compromise,

settlement, judgment, or the abandonment by the other Party of its claim or
defense. The attorneys’ fees award shall not be computed in accordance with any

court fee schedule, but shall be such as to fully reimburse all attorneys’ fees
reasonably incurred. In addition, Lessor shall be entitled to attorneys’ fees,
costs and expenses incurred in the preparation and service of notices of Default
and consultations in connection therewith, whether or not a legal action is
subsequently commenced in connection with such Default or resulting Breach ($200
is a reasonable minimum per occurrence for such services and consultation).

 

32.               Lessor’s Access; Showing Premises; Repairs. Lessor and
Lessor’s agents shall have the right to enter the Premises at any time, in the
case of an emergency, and otherwise at reasonable times for the purpose of
showing the same to prospective purchasers, lenders, or tenants, and making such
alterations,

repairs, improvements or additions to the Premises as Lessor may deem necessary.
All such activities shall be without abatement of rent or liability to Lessee.

Lessor may at any time place on the Premises any ordinary “For Sale” signs and
Lessor may during the last 6 months of the term hereof place on the Premises any
ordinary “For Lease” signs. Lessee may at any time place on the Premises any
ordinary “For Sublease” sign.

 

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

 

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

 

35.               Termination; Merger. Unless specifically stated otherwise in
writing by Lessor, the voluntary or other surrender of this Lease by Lessee, the
mutual termination or cancellation hereof, or a termination hereof by Lessor for
Breach by Lessee, shall automatically terminate any sublease or lesser estate in
the

Premises; provided, however, that Lessor may elect to continue any one or all
existing subtenancies. Lessor’s failure within 10 days following any such event

to elect to the contrary by written notice to the holder of any such lesser
interest, shall constitute Lessor’s election to have such event constitute the
termination of such interest.

 

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

 

37.               Guarantor.

                    37.1             Execution. The Guarantors, if any, shall
each execute a guaranty in the form most recently published by the American
Industrial Real Estate Association, and each such Guarantor shall have the same
obligations as Lessee under this Lease.

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

written confirmation that the guaranty is still in effect.

 

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

 

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

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

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

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

                    39.4             Effect of Default on Options.

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

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

                                         (c) An Option shall terminate and be of
no further force or effect, notwithstanding Lessee’s due and timely exercise of
the Option, if, after such exercise and prior to the commencement of the
extended term, (i) Lessee fails to pay Rent for a period of 30 days after such
Rent becomes due (without any necessity of Lessor to give notice thereof), (ii)
Lessor gives to Lessee 3 or more notices of separate Default during any 12 month
period, whether or not the Defaults are cured, or (iii) if Lessee commits a
Breach of this Lease.

 

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

 

 

                  

                  

                  

                  

Initials

Initials

 

 

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

 

41.               Reservations. Lessor reserves the right: (i) to grant, without
the consent or joinder of Lessee, such easements, rights and dedications that
Lessor deems necessary, (ii) to cause the recordation of parcel maps and
restrictions, and (iii) to create and/or install new utility raceways, so long
as such easements,

rights, dedications, maps, restrictions, and utility raceways do not
unreasonably interfere with the use of the Premises by Lessee. Lessee agrees to
sign any documents reasonably requested by Lessor to effectuate such rights.

 

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

 

43.               Authority. If either Party hereto is a corporation, trust,
limited liability company, partnership, or similar entity, each individual
executing this Lease on

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

 

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

 

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

 

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

 

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

 

48.               Waiver of Jury Trial. The Parties hereby waive their
respective rights to trial by jury in any action or proceeding involving the
Property or arising out of this Agreement.

 

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

 

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

 

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

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

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

 

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

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

 

Executed at: Los Angeles, California

 

Executed at: Los Angeles, California

On: June 29, 2004

 

Executed at: June 29, 2004

 

 

 

By LESSOR:

 

By LESSEE:

MAGNUM PROPERTIES, INC.

 

SUB-URBAN INDUSTRIES, INC.

 

 

.

 

 

 

By:

 

By:

Name Printed: Mike Meraz

 

Name Printed: Aaron Apodaca

Title: Broker

 

Title: Chief Operating Officer

 

 

 

By:

 

By:

Name Printed:

 

Name Printed: Joe Shortal

Title:

 

Title: Chief Executive Officer

Address: 2222 E. Washington Boulevard, Unit A

 

Address: 2222 E. Washington Boulevard, Unit B

Los Angeles, CA 90021

 

Los Angeles, CA 90021

 

 

.

Telephone: (323) 585-3000

 

Telephone: (213)229-2885

Facsimile: (323) 585-3335

 

Facsimile: (213)229-8885

Federal ID No.:

 

Federal ID No.:

 

These forms are often modified to meet changing requirements of law and needs of
the industry. Always write or call to make sure you are utilizing the most

current form: American Industrial Real Estate Association, 700 South Flower
Street, Suite 600, Los Angeles, CA 90017. (213) 687-8777.

 

(c)Copyright 1998 By American Industrial Real Estate Association.

All rights reserved.

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

 

 

 

                  

                  

                  

                  

Initials

Initials

 

 

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

 

ADDENDUM TO LEASE DATED JUNE 20,

2004

2222 EAST WASHINGTON BOULEVARD,

UNIT B

LOS ANGELES, CALIFORNIA

BY AND BETWEEN

MAGNUM PROPERTIES, INC. (LESSOR)

AND

SUB-URBAN INDUSTRIES, INC., (LESSEE)

 

This addendum is the Addendum referred to in that certain Standard
Industrial/Commercial Multi-Tenant Gross Lease dated as of June 20, 2004 by and
between, Magnum Properties Inc. (Lessor), and sub-Urban Industries, Inc. as
Lessee (the “Form Lease”). In the event of any inconsistency between the
provisions of this Addendum and the Form Lease, the provisions of this Addendum
shall govern and
control.                                                                                                                                               
.

 

1.12a PARKING: Lessee will be granted certain portions of the rear area of the
Premises for parking and loading as set forth on Exhibit A. Lessee will not
allow its invitees or employees to park, load or wait in any parking or common
area other than set forth in this lease: Lessees’ trash container if any will be
stored within its designated parking area. If needed, Lessee shall be granted
(2) additional parking spaces in the rear parking lot area behind 2221 E.
Washington Boulevard during 8 AM to 5:30 PM Monday thru Friday.

 

1.12b LESSEE’S ACCESS: Lessee will have nonexclusive common area access for
ingress only through the driveway gate at the west side of Premises (see Exhibit
A).

 

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

 

Lessee will have nonexclusive common area access for ingress and egress only
through driveway gate at the east side of Premises (see Exhibit A). Lessee will
cooperate with the neighboring tenants to the east of the Premises regarding
gate operation and security and pay its portion of electric. charges for the
operation of the gate.   .

 

1.12c LESSEE COOPERATION: Lessee will cooperate with any reasonable requests by
Lessor concerning building security, access, upkeep, repairs and normal
day-to-day operations. Lessee will keep the exterior of its portion of the
Premises clean from debris and graffiti.

 

1.12d UTILITY & CHARGES: Lessee will place its trash and security-alarm system
and other required services to the Premises in its name and pay said charges. In
addition to the Base Rent Lessee will its portion of the electricity and water
consumption charges and maintenance of the shared gate at the east side of the
property and any applicable Common Area Costs. Lessee’s portion of the monthly
CAM charge shall not exceed $300.00 per month.

 

1.12e LIABILITY INSURANCE: Lessee will obtain and provide to Lessor, evidence of
Premises liability naming Lessor as “co-insured”, prior to Lessee’s occupancy.

 

1.12f CONDITION AT COMMENCEMENT: Lessor is leasing the premises to Lessee in its
existing as is condition as of the commencement date of this lease. Lessor is
not required to make further improvements within the space except: and
janitorize where needed, repair all office walls and doorways, reinstall missing
shelving & cabinets, paint all walls white and install carpeting, repair toilets
& sink and HVAC units. All other services will be in working order. Lessor will
maintain roof and structural elements.

 

1.12g CONDITION AT TERMINATION: At the time Lessee surrenders the property,
Lessee warrants that the premises will be in as good as condition as when
received, excepting ordinary wear and tear or unavoidable acts of God. Lessee
acknowledges the existence of certain “personal property” (fluorescent strip
lighting, & electrical distribution, desks, tables and other furniture) within
the space belonging to the Lessor. All “personal property” (fluorescent strip
lighting & electrical distribution) is the property of Lessor and will remain
after this lease terminates.

 

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

 

Addendum to Lease June 20, 2004

2222 East Washington Boulevard, Unit B Page 2

1.12h OPTION TO EXTEND: See attached form

1.12i LESSEE’S DUE DILIGENCE. Lessee acknowledges that Lessee has done its own
due diligence and has verified to its satisfaction all aspects of the Premises
that may affect its decision to lease the Premises, including but not limited
to, the age of the building on the Premises, the size and dimensions of the
Premises, the size of loading doors, the condition or usability of any existing
trade fixtures or equipment, traffic flow for trucks, loading and unloading,
HVAC, electrical service and distribution, parking, number of toilets, security,
zoning, compatibility of neighboring tenants, and Lessee’s ability to operate
its business with the necessary permits and according to the laws, rules and
regulations of the appropriate governmental jurisdictions in which the Premises
is located. Lessee also acknowledges that Lessee is not relying on any
representations by Lessor/ Broker of any kind, verbal or written, respecting the
Premises. Lessor holds a California Real Brokers License.

 

.12j COMPLIANCE WITH LEGAL REQUIR MENTS. Lessee agrees that, throughout the term
of the Lease, Lessee shall be responsible for obtaining, paying for and
complying with the requirements of any and all permits, licenses, and other
approvals relating to such Applicable Requirements which may be necessary or
appropriate to operate its business in the Premises (“Permits”), including but
not limited to those relating to zoning and health and occupational safety
requirements. Lessee acknowledges and agrees that Lessor shall not be liable for
any failure by Lessee to obtain, pay for or comply with any requirements of such
Permits.

 

1.12k PERSONAL GUARANTEE: See attached form

 

1.121 RENT INCREASE: See attached form

 

Read and Agreed:

Lessee:

[g119531le05i001.jpg]

 [g119531le05i002.jpg]

 

[g119531le05i003.jpg]

/ f / / End of Addendum / / j /

 

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

 

[g119531le05i004.jpg]

AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION GUARANTY OF LEASE

WHEREAS,MAGNUM PROPERTIES, INC.

 

“Lessor’, and SUB-URBAN INDUSTRIES,INC.

wherein Lessor will lease the promises to Lessee, and

WHEREAS,                                                 Joe Shortal hereinafter
“Guarantors” have a financial Interest in Lessee, and WHEREAS, Lessor would not
execute the Lease if Guarantors did not execute and deliver to Lessor this
Guarantee of Lease.

NOW THEREFORE, In consideration of the execution of the foregoing Lease by
Lessor and a: a material inducement to Lessor to execute said Lease, Guarantors
hereby jointly, severally, unconditionally and irrevocably guarantee the prompt
payment by Lessee of all rents and all other sums payable by Lessee under said
Lea” and the faithful and prompt performance by Losses of each and every one of
the terms, conditions and covenants of said Lease to be kept and performed by
Lessee.

It is specifically agreed that the term: of the foregoing Lease may be modified
by agreement between Lessor and Less”, or by a course of conduct, and said Lea”
may be assigned by Lessor or any assignee of Lessor without consent or notice to
Guarantors and that this Guaranty shall guarantee the performance of said Los”
as so modified.

This Guaranty shall not be released, modified or affected by the failure or
delay on the part of Lessor to enforce any of the rights or remedies of the
Lessor under said Lease, whether pursuant to the terms thereof or at law or in
equity.

No notice of default need be given to Guarantors, it being specifically agreed
that the guarantee of the undersigned is a continuing guarantee under which
Lessor may proceed Immediately against Losses and/or against Guarantors
following any breach or default by Lessee or for the enforcement of any rights
which Lessor may have as against Loss** under the terms of the Lease or at law
or in equity.

Lessor shall have the right to proceed against Guarantors hereunder following
any breach or default by Lessee without first proceeding against Lessee and
without previous notice to or demand upon either Lessee or Guarantors.

Guarantors hereby waive (a) notice of acceptance of this Guaranty. (b) demand of
payment, presentation and protest, (c) all right to assert Or plead any statute
of limitations relating to this Guaranty or the Lease, (d) any right to require
the Lessor to proceed against the Less” or any other Guarantor or any other
person or entity liable to Lessor, (e) any right to require Lessor to apply to
any default any security deposit or other security it rnay hold under the Lease,
(f) any right to require Lessor to proceed under any other remedy Lessor may
have before proceeding against Guarantors, (g) any right of subrogation.

Guarantors do hereby subrogate all existing or future indebtedness of Lessee to
Guarantors to the obligations owed to Lessor under the Lease and this Guaranty.

If a Guarantor is married, such Guarantor expressly agrees that recourse may be
had against his or her separate property for all of the obligations hereunder.

The obligations of Lessee under the Lease to execute and deliver estoppel
statements and financial statements, as therein provided, shall be deemed to
also require the Guarantors hereunder to do and provide the same.

The term “Lessor” refers to and means the Lessor named in the Lease and also
Lessor’s successors and assigns. So long as Lessor’s interest in the Lease, the
leased premises or the rents, issues and profits therefrom, are subject to any
mortgage or deed of trust or assignment for security, no acquisition by
Guarantors of the Lessor’s Interest shall affect the continuing obligation of
Guarantors under this Guaranty which shall nevertheless continue in full force
and effect for the benefit of the mortgagee, beneficiary, trustee or assignee
under such mortgage, deed of trust or assignment and their successors and
assigns.

The term “Lessee” refers to and means the Lessee named in the Lease and also
Lessee’s successors and assigns.

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

 

In the event any action be brought by said Lessor against Guarantors hereunder
to enforce the obligation of Guarantors hereunder, the unsuccessful party in
such action shall pay to the prevailing party therein a reasonable attorney’s
fee which shall be fixed by the court.

If this Form has been filled in, it has been prepared for submission to your
attorney for his approval. No representation or recommendation is made by the
American Industrial Real Estate Association, the real estate broker or its
agents or employees as to the legal sufficiency, legal effect, or tax
consequences of this Form or the transaction relating thereto.

Executed at Los Angeles, California

 

 

 

 

on June 29, 2004

 

 

 

Joe Shortal

 

 

 

 

 

 

 

Address 2222 E. Washington Boulevard Unit B

 

 

 

“GUARANTORS”

 

 

 

 

 

 

 

Los Anqeles,CA 90021

 

 

 

 

 

 

 

©1996 -American Industrial Real Estate Association

 

 

FORM GR•1-12I96E

 

 

 

 

 

REVISED

 

OPTION(S) TO EXTEND

STANDARD LEASE ADDENDUM

Dated June 20, 2004

By and Between (Lessor): Magnum Properties, Inc.

(Lessee): Sub-Urban Industries, Inc.

Address of Premises: 2222 E, Washington Blvd., Unit B

Los Angeles. CA 90021

Paragraph 1.12h

 

A.     OPTION(S) TO EXTEND:

Lessor hereby grants to Lessee the option to extend the term of this Lease for
One    (1)      additional Twenty Four                                      
(24)                   month period(s) commencing when the prior term expires
upon each and all of the following terms and conditions:

(i)  In order to exercise an option to extend, Lessee must give written notice
of such election to Lessor and Lessor must receive the same at least 3     but
not more than 5       months prior to the date that the option period would
commence, time being of the essence. If proper notification of the exercise of
an option is not given and/or received, such option shall automatically expire.
Options (if there are more than one) may only be exercised consecutively.

Option.

(ii)  The provisions of paragraph 39, including those relating to Lessee’s
Default set forth in paragraph 39.4 of this Lease, are conditions of this

(iii)  Except for the provisions of this Lease granting an option or options to
extend the term, all of the terms and conditions of this Lease except where
specifically modified by this option shall apply.

 

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

 

(iv)  This Option is personal to the original Lessee, and cannot be assigned or
exercised by anyone other than said original Lessee and only while the original
Lessee is in full possession of the Premises and without the intention of
thereafter assigning or subletting.

(v)  The monthly rent for each month of the option period shall be calculated as
follows, using the method(s) indicated below: (Check Method(s) to be Used and
Fill in Appropriately)

Cost of Living Adjustment(s) (COLA)

 

On (Fill in COLA Dates): July 15, 2005 and each July 5th throughout the Option
Term

the Base Rent shall be adjusted by the change, if any, from the Base Month
specified below, in the Consumer Price Index of the Bureau of Labor Statistics
of the U.S. Department of Labor for (select one): o   CPI W (Urban Wage Earners
and Clerical Workers) or o   CPI U (All Urban Consumers), for (Fill in Urban
Area):

Los Angeles -

Riverside - Orange

counties All Items (1982-1984 =

100), herein referred to as “CPI”.

b.      The monthly rent payable in accordance with paragraph A.l.a. of this
Addendum shall be calculated as follows: the Base Rent set forth in paragraph
1.5 of the attached Lease, shall be multiplied by a fraction the numerator of
which shall be the CPI of the calendar month 2 months prior to the month(s)
specified in paragraph A.l.a. above during which the adjustment is to take
effect, and the denominator of which shall be the CPI of the calendar month
which is 2 months prior to (select one): 13   the first month of the term of
this Lease as set forth in paragraph 1.3 (“Base Month”) or o   (Fill in Other
“Base Month”):

July 15,                                                   2005   . The sum so
calculated shall constitute the new monthly rent hereunder, but in no event,
shall any such new monthly rent be less than the rent payable for the month
immediately preceding the rent adjustment.

c.       In the event the compilation and/or publication of the CPI shall be
transferred to any other governmental department or bureau or agency or shall be
discontinued, then the index most nearly the same as the CPI shall be used to
make such calculation. In the event that the Parties cannot agree on such
alternative index, then the matter shall be submitted for decision to the
American Arbitration Association in accordance with the then rules of said
Association and the decision of the arbitrators shall be binding upon the
parties. The cost of said Arbitration shall be paid equally by the Parties.

 

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

 

RENT ADJUSTMENT(S)

STANDARD LEASE ADDENDUM

 

Dated June 20, 2004.

 

 

 

 

 

By and Between (Lessor)

 

. Magnum Properties, Inc.

 

 

 

 

 

(Lessee)

 

. Sub-Urban Industries, Inc.

 

 

Address of Premises:.

 

2222 E, Washington Blvd. . Unit B

 

 

 

Los Angeles, CA 90021

 

Paragraph 1. 121

A.     RENT ADJUSTMENTS:

The monthly rent for each month of the adjustment period(s) specified below
shall be increased using the method(s) indicated below: (Check Method(s) to be
Used and Fill in Appropriately)

xx  1.  Cost of Living Adjustment(s) (COLA)

 

a.        On (Fill in COLA Dates): July 15,   2005

the Base Rent shall be adjusted by the change, if any, from the Base Month
specified below, in the Consumer Price Index of the Bureau of Labor Statistics
of the U.S. Department of Labor for (select one): 13   CPI W (Urban Wage Earners
and Clerical Workers) or xx CPI U (All Urban Consumers), for (Fill in Urban
Area):Los Angeles - Orange - Riverside, All Items (1982-1984 =100), herein
referred to as “CPI”.

 

b.      The monthly rent payable in accordance with paragraph A.La. of this
Addendum shall be calculated as follows: the Bass Rent set forth in paragraph
1.5 of the attached Lease, shall be multiplied by a fraction the numerator of
which shall be the CPI of the calendar month 2 months prior to the month(s)
specified 1n paragraph A.La. above during which the adjustment (s to take
effect, and the denominator of which shall be the CPI of the calendar month
which is 2 months prior to (select one); xx the first month of the term of this
Lease as set forth in paragraph 1.3 (“Base Month”) or o   (Fill (n Other “Base
Month”):

. The sum so calculated shall constitute the new monthly rent hereunder, but In
no event, shall any such new monthly rent be less than the rent payable for the
month immediately preceding the rent adjustment.

c.       In the event the compilation and/or publication of the CPI shall be
transferred to any other governmental department or bureau or agency or shall be
discontinued, then the index most nearly the same as the CPI shall be used to
make such calculation. In the event that the Parties cannot agree on such
alternative index, then the matter shall be submitted for decision to the
American Arbitration Association in accordance with the then rules of said
Association and the decision of the arbitrators shall be binding upon the
parties. The cost of said Arbitration shall be paid equally by the Parties.

 

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