Exhibit 10.22

 

SUBLEASE

 

THIS LEASE, dated this 29th day of July, 2005, is between MODTECH HOLDINGS,
INC., a Delaware corporation (“Landlord”), and BOISE BUILDING SOLUTIONS
DISTRIBUTION, L.L.C., a Delaware limited liability company (“Tenant”).

 

W I T N E S S E T H:

 

WHEREAS, Landlord currently leases from BMG2 Enterprises (“Master Landlord”) the
Property (as hereinafter defined) pursuant to an Industrial Real Estate Lease
with Tenant’s predecessor, Modtech, Inc., a California corporation, date January
2, 1990, as amended pursuant to Amendment Number 1 between Landlord and Master
Landlord, dated the date hereof (collectively the “Master Lease”); and,

 

WHEREAS, Tenant desires to sublease the Property from Landlord so long as Master
Landlord will consent to this Lease.

 

NOW, THEREFORE, the parties agree as follows:

 

1. Sublease. Landlord hereby leases to Tenant, and Tenant hereby leases from
Landlord, the property commonly known as 12030 South Harlan Road, Lathrop, CA,
as shown on the site plan attached hereto as Exhibit A and made a part hereof,
together with all and singular the Land (as hereinafter defined), the Buildings
(as hereinafter defined), improvements, appurtenances, rights, privileges, and
easements pertaining thereto (“Property”). The Property contains a single-story
warehouse building of approximately 144,000 square feet (including adjacent
modular restrooms and two-story office area), two (2) metal-sided storage
buildings of 10,000 square feet

 

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each, and a single-story office building of approximately 4,800 square feet (the
“Buildings”) and that the parcel of land upon which the Buildings are located
(the “Land”) contains approximately thirty (30) acres. Tenant’s use of the
existing entrance to the Property from South Harlan Road shall not be exclusive,
but shall be a shared use pursuant to Section 15.01 of the Master Lease. The
Property is being leased to Tenant from Landlord pursuant to its interest as
tenant under the Master Lease, a copy of which is attached hereto as Exhibit B
and by this reference made a part hereof. All of the covenants, conditions and
obligations assumed by Landlord as tenant under the Master Lease, together with
any addenda, modifications or exhibits thereto, except the provisions dealing
with rent to be paid by Landlord thereunder, the addresses for notice and the
term of the Master Lease, are hereby incorporated as a part of this Sublease,
and Tenant assumes and agrees to be bound by all the provisions of the Master
Lease. All references to “Landlord” in the Master Lease shall be deemed to apply
to Landlord in this Sublease, and all references in the Master Lease to “Tenant”
shall be deemed to apply to Tenant in this Sublease. All references to “lease”
in the Master Lease shall be deemed to mean this Sublease. Landlord shall be
authorized to enforce any and all of the obligations of the Master Lease assumed
by Tenant hereunder.

 

In the event of a conflict between the terms and conditions of the Master Lease
and this Lease, the preprinted terms of the Master Lease and Amendment Number 1
thereto shall control, except solely as between Landlord and Tenant hereunder,
the terms of this Lease shall control to the extent the Master Lease and
Amendment Number 1 thereto has been specifically modified hereby such as in the
provisions relating to Term, Rent, Notice, Use, Renewal Option and the like, or
those provisions that are exclusively between Landlord and Tenant hereunder such
as Section 24 hereof.

 

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2. Term. The lease term shall commence on the date hereof and the term of
occupancy shall commence 60 days from the date hereof, so long as Tenant has not
exercised its right of termination as set forth in Section 24 of this Lease.
Tenant shall have the right to accelerate the term of occupancy commencement
date as provided in Section 24. The lease term shall end on August 31, 2015,
unless sooner terminated or extended as provided in this Lease.

 

3. Rent. For the period commencing on the first day of the term of occupancy and
ending August 31, 2007, Tenant shall pay monthly rent to Landlord in the amount
of $31,500.00, in advance, on the first day of each and every calendar month
during the Lease term except that if such term shall commence or terminate on a
day other than the first or last day of a month, the rent for such month shall
be apportioned. All rent due or to become due hereunder shall be paid to
Landlord at its address set forth in Section 18 hereof unless Landlord shall
designate some other payee or address for the payment thereof by giving written
notice thereof to Tenant.

 

Commencing September 1, 2007, the following rent schedule shall apply:

 

9/1/2007 – 8/31/2009

   $ 34,500.00 per month

9/1/2009 – 8/31/2011

   $ 36,225.00 per month

9/1/2011 – 8/31/2013

   $ 38,036.25 per month

9/1/2013 – 8/31/2015

   $ 39,938.06 per month

 

Upon full execution of this Lease, Tenant shall pay Landlord the sum of
$63,000.00 as prepaid rent for the months of September and October, 2005.

 

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4. Utilities and Services. Tenant shall pay the cost of any separately metered
utilities consumed by it at the Property during the term of this Lease.

 

5. Use of Property. The Property shall be used for the purposes of warehousing,
storage (including outside storage) and distribution of lumber and building
materials. Use of the Property shall include the right of ingress and egress by
semi-tractor vehicles over the “Access Road” as defined in Section 15.01 of the
Master Lease. Tenant shall maintain the Access Road in accordance with the
Master Lease. Tenant shall also have the right of Ingress and egress by rail
line to be installed and maintained at Tenant’s expense. Such rail line shall
enter the Property from the east as further described in Schedule 1 to Exhibit B
hereto and Tenant shall be responsible for obtaining, at its cost, all necessary
governmental permits and approvals for the installation of the rail line.

 

6. Maintenance and Repairs. Tenant shall take good care of the Property and
shall make and provide all repairs and maintenance necessitated by its use
thereof. The Property, including building floor slabs and all electrical,
plumbing, mechanical and HVAC systems are to be delivered to in good repair and
working order, reasonable wear and tear excepted. Landlord shall have all items
of personal property (including, but not limited to, all existing cranes and
hoists) removed from the Property in a good and workmanlike manner prior to the
commencement of the term of occupancy under Section 24 hereof. If the personal
property is not removed within this time period, Landlord agrees to reimburse
Tenant for the cost of removing any items of personal property, making repairs
and cleaning as necessary to achieve such condition of the Property.

 

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7. Alterations, Improvements, and Installations by Tenant. Except for the
improvements listed in Exhibit C, attached hereto and made a part hereof, which
Landlord hereby approves, Tenant shall first obtain the written approval of
Landlord and Master Landlord (which approval shall not be unreasonably withheld
or delayed) prior to making any structural alterations, improvements and
installations to the Property during the term of this Lease. Notwithstanding the
foregoing, Tenant shall have the right, at its own expense, to make such
non-structural alterations, improvements and installations to the Property as it
shall deem expedient or necessary for its purposes without Landlord or Master
Landlord’s prior written approval where such improvements do not exceed $75,000
in cost cumulatively over the term of this Lease. Any such alterations or
changes shall be done in a good and workmanlike manner and in accordance with
all applicable laws. Tenant shall be responsible for obtaining all necessary
building permits and other governmental approvals, shall furnish a copy thereof
to Landlord prior to the commencement of the work, shall comply with all
conditions of the permits in a prompt and expeditious manner, and shall
otherwise comply with the provisions of Section 6.05 of the Master Lease.

 

Tenant may remove any of its trade fixtures or personal property from the
Property at any time. Tenant may not remove, and neither Landlord nor Master
Landlord may require Tenant to remove, any alterations, improvements, and
installations made by Tenant pursuant to Exhibit C hereto.

 

8. Signs. Subject to Tenant obtaining all required governmental approvals,
Tenant shall have the right to place or paint one or more signs on the Property
including directional and safety signs to adequately direct visitors, guests and
the like on the

 

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Property so long as such signs are not readily readable from Harlan Road. Such
signage, at Boise’s option, shall include one free standing sign at the Harlan
Road entrance to the Property. The approximate size, shape and location of the
free standing sign are set forth in Exhibit D hereto. Tenant’s signage shall be
installed and maintained at Tenant’s expense and upon termination of this Lease,
at Landlord’s request, Tenant shall remove such signage at no cost or expense to
Landlord.

 

9. Assignment and Subletting. Tenant shall have the right to assign this Lease
and to sublease all or any part of the Premises at any time and from time to
time with the prior written consent of Landlord (which consent shall not be
unreasonably withheld), except that no such consent shall be required for
assignment to Tenant’s affiliates, subsidiaries and parent entities; provided,
however, that nothing in this paragraph shall be construed so as to relieve
Tenant of its obligations pursuant to this Lease.

 

10. Indemnification of Landlord. Tenant shall indemnify and hold Landlord and
Master Landlord harmless in accordance with Section 5.05 of the Master Lease.

 

11. Environmental. Landlord has previously used the Property for the
construction of modular buildings. In connection with such use, Landlord has
stored and used customary building materials on the Property, including wood,
steel, plastic, paint and industrial solvents. Except for such materials,
Landlord has no actual knowledge of the presence or removal of hazardous
substances in, on, under or about the Property or neighboring properties.
Landlord makes no other representation or warranty concerning the presence of
such materials or substances. Prior to the commencement of the occupancy term,
Tenant, at its cost and expense, shall be

 

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permitted to conduct a Phase I environmental assessment (to applicable AST
standards) of the Property and Tenant shall furnish Landlord a copy of the
report. Tenant acknowledges that if it does not exercise its right of
termination set forth in Section 24, it shall be deemed to have accepted the
Property “as is.”

 

Except for normal quantities used in the ordinary course of Tenant’s permitted
business use hereunder, Tenant shall not use, store, discharge or dispose of any
hazardous substances (including but not limited to hazardous waste, hazardous
chemicals, PCBs and asbestos) in, on, under or about the Property or neighboring
properties and shall be responsible for and hold harmless and indemnify Landlord
and Master Landlord from and against all demands, injuries to person or
property, death, costs (including reasonable attorney’s fees), lawsuits, claims
and state, local, or federal governmental actions, investigations, or fines as a
result thereof caused by Tenant, its agents, Tenants, employees or invitees.

 

12. Holding Over. If Tenant remains in possession of the Premises after the
expiration of the term of this Lease it shall be deemed to be a tenant from
month to month only at 125% of the monthly rental rate in effect during the last
month of the term expired and governed in all other things, except as to the
duration of the term, by the provisions of this Lease. Either party may
terminate such tenancy by giving to the other at least 30 days’ prior written
notice of its intent to terminate. Tenant shall indemnify Landlord and Master
Landlord from all damages it may incur as a result of Tenant’s delay in vacating
the Property.

 

13. Surrender. At the expiration of the term of this Lease, Tenant agrees to
quit and surrender possession of the Premises to Landlord in as good condition
as

 

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when delivered by Landlord, and in compliance with the terms of the Master Lease
as amended by Amendment Number 1 dated the date hereof. Tenant may not remove,
or be required by Landlord to remove, any improvements set forth on Exhibit C
hereto.

 

14. Master Lease Payments, Etc. Landlord represents and warrants to Tenant that
as of the date hereof it is not in breach of the Master Lease and that it shall
continue to pay on time all amounts owed by it as “Tenant” under the Master
Lease to the Master Landlord. All other obligations of Landlord as Tenant under
the Master Lease shall be the responsibility of Tenant. Tenant shall not commit
or permit to be committed any act or omission which would violate the terms of
the Master Lease and shall indemnify and defend Landlord from liability from any
breach or default under the Master Lease by Tenant. If Landlord fails to pay any
sums due by it under the Master Lease when due, Tenant may, after the
continuance of any such failure or default for 15 days after notice in writing
thereof is given by Tenant to Landlord (and in addition to any other rights or
remedies which may be available at law or in equity), either (i) make such
payments, or (ii) terminate this Lease. If Tenant elects to pay Landlord’s
obligations, Landlord agrees to pay to Tenant the amount of the expense
incurred, failing which Landlord agrees that Tenant may deduct the amount out of
the rental payments and other payments thereafter coming due to Landlord
pursuant to the provisions of this Sublease, without liability or forfeiture,
and may apply the same to payment of such indebtedness of Landlord to Tenant
until such indebtedness is fully paid as herein provided. Tenant represents that
the Master Lease provides that it is Master Landlord’s obligation under the
Master Lease to provide to Tenant and the Property all of the services and
utilities described in the Master Lease and this Sublease, including,

 

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without limitation, the Access Road, the waterline right of way, and the water
tank usage. Landlord shall have no liability or obligation for the failure of
Master Landlord to provide any such services or utilities.

 

15. Notices. Any notice or demand required or permitted to be given under the
terms of this Agreement shall be deemed to have been duly given or made if given
by any of the following methods:

 

a. Deposited in the United States mail, in a sealed envelope, postage prepaid,
by registered or certified mail, return receipt requested, respectively
addressed as follows:

 

To Tenant:    Boise Building Solutions Distribution, L.L.C.      Attention:
Corporate Real Estate Manager      1111 West Jefferson Street      P.O. Box 50  
   Boise, ID 83728-0001      Facsimile number 208-331-5738      With copy to:  
   Boise Building Solutions Distribution, L.L.C.      Attention: General Counsel
     1111 West Jefferson Street      P.O. Box 50      Boise, ID 83728-0001     
Facsimile number 208-384-4912 To Landlord:    Modtech Holdings, Inc.     
Attention: Dennis Shogren, CFO      2830 Barrett Avenue      Perris, CA 92571  
   Facsimile number 951/943-9814

 

b. Sent to the above address via an established national overnight delivery
service (such as Federal Express), charges prepaid, or

 

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c. Sent via any electronic communications method provided the sender obtains
written confirmation of receipt of the communication by the electronic
communication equipment at the office of the address listed above.

 

16. Insurance: Mutual Waiver of Subrogation. Tenant shall insure or self-insure
the Buildings and its property located on the Property, against fire and other
causes included in standard extended coverage by policies which shall include a
waiver by the insurer of all right of subrogation against Landlord and Tenant in
connection with any loss or damage thereby insured against. Neither Landlord nor
Tenant shall be liable to the other or to any insurance company (by way of
subrogation or otherwise) insuring the other party for any loss or damage to any
building, structure, or other tangible property, or any resulting loss of
income, or losses under workers’ compensation laws and benefits, even though
such loss or damage might have been occasioned by the negligence of such party,
its agents, or employees to the extent any such loss or damage is covered by
insurance benefiting the party suffering such loss or damage

 

17. Property Taxes. Tenant shall pay all taxes and assessments levied against
its personal property located on the Property, if any, and prior to the due
date. Tenant shall reimburse Landlord for Landlord’s share of all the taxes and
assessments levied against the real property and improvements covered by this
Lease as assessed by Master Landlord to Landlord pursuant to Section 4.02(c) of
the Master Lease; provided, however, that Tenant shall not be responsible for
any late payments or penalties. Tenant’s share of such taxes and assessments
shall be prorated for the first and last year of this Lease on a daily basis. If
any portion of the real property owned by Master Landlord of which the Property
is a part is sold, and the Property is thereafter

 

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separately assessed and the real property tax bill sent directly to Tenant,
Tenant shall pay the real property taxes on the Property in accordance with
Section 4.02(a) of the Master Lease.

 

18. Quiet Enjoyment. Landlord covenants that, so long as Tenant is not in breach
of the terms and conditions of this Lease, Tenant shall peaceably and quietly
have, hold, and enjoy the Property for the term hereof, subject to the
provisions of this Lease. Upon Tenant’s request, Landlord shall make reasonable
efforts to procure a nondisturbance clause from each current and future
mortgagee providing that Tenant’s possession will not be disturbed by a mortgage
foreclosure so long as Tenant is not in default of the Lease.

 

19. Renewal Option. Tenant shall have the right to renew the term of this Lease
for one (1) period of four (4) years. The rental rate during such renewal period
shall be as set forth below in this Section 19. Tenant shall provide Landlord
with at least one-hundred twenty (120) days’ advance written notice of its
intention to exercise said renewal option prior to the effective date of such
period.

 

Renewal Period Rent Schedule:

 

9/1/2015 – 8/31/2017

   $ 41,934.97 per month

9/1/2017 – 8/31/2019

   $ 44,031.71 per month.

 

(Sections 20-23 intentionally omitted)

 

24. Conditions Precedent. Tenant shall have sixty (60) days from the date of
full execution of this Lease to complete certain due diligence desired by Tenant
for the Property, including, but not limited to the following:

 

a. Tenant must be satisfied that it can obtain any required use, property
alteration or occupancy approvals from the appropriate governmental agencies;

 

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b. Rail service suitable for Tenant’s intended use of the Property must be
feasible;

 

c. The physical condition of the Property shall be determined to be consistent
with Tenant’s expectations and economically viable for its intended use,
including but not limited to, Tenant’s satisfaction with the fire protection
service for the Property and the fencing along the south side of the Property to
be installed installation by Landlord;

 

d. Tenant shall be satisfied with the environmental condition of the Property,
including the results of its Phase I environmental assessment; and,

 

To assist with such due diligence efforts by Tenant, at no cost or expense to
Master Landlord, Landlord and Master Landlord agree to provide Tenant with
access to or copies of all surveys, environmental reports, soils tests, tax
bills, engineering studies, utility drawings, building plans and specifications,
zoning approvals, repair and maintenance contracts and any other information
relative to the condition and economic viability of the Property that Landlord
and Master Landlord have in their possession.

 

In the event that such conditions are not satisfied, in the sole judgment of
Tenant, within such sixty (60) day period, Tenant may terminate this Lease upon
written notice to Landlord and obtain a full refund of the prepaid rent paid to
Landlord pursuant to Section 3 hereof. If Tenant so terminates this Lease,
neither party shall have any further rights or obligations hereunder. Tenant
reserves the right to waive its

 

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termination right in this Section 24 earlier than the prescribed sixty (60) day
period, in which case the term of occupancy shall be accelerated and commence on
the date of such written waiver by Tenant, and all terms and conditions of this
Lease shall be become effective, except that Tenant shall have no obligation to
pay rent until September 1, 2005.

 

25. Miscellaneous. Each and all of the terms and agreements herein contained
shall be binding upon and inure to the benefit of the parties hereto, their
heirs, personal, and legal representatives, successors, and assigns. This
instrument contains the entire agreement made between the parties and may not be
modified orally or in any manner other than by an agreement in writing signed by
all the parties hereto or their respective successors in interest. All
references herein to the Master Lease shall include Amendment Number 1 thereto
regardless of whether such amendment is specifically mentioned.

 

26. Acceptance. Execution of this Lease by Landlord constitutes an offer which
shall not be deemed accepted by Tenant until Tenant has executed this Lease and
Landlord has received a duplicate original copy thereof.

 

27. Counterparts. This Lease may be executed through the use of multiple
counterpart signature pages all of which signature pages when attached to one or
more counterparts of this Lease shall constitute a fully executed agreement,
notwithstanding the fact that all parties may not have signed the same signature
page. All such fully executed counterparts of this Lease shall constitute a
single agreement. This Lease shall be considered effective when a signature page
is signed by each party and delivered to the other parties; provided, that a
facsimile signature shall be considered

 

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due execution and shall be binding on the signatory thereto with the same force
and effect as if the signature were an original and not a facsimile signature.

 

IN WITNESS WHEREOF, the parties have duly executed this Lease on the date first
written above.

 

Landlord:

MODTECH HOLDINGS, INC.

By     Its    

Tenant:

BOISE BUILDING SOLUTIONS DISTRIBUTION, L.L.C.

By     Its    

 

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Master Landlord consents to the Sublease between Landlord and Tenant and
certifies that as of the date of Master Landlord’s execution hereof, and to the
best of Master Landlord’s actual knowledge, without any investigation of the
Property, Landlord is not in default or breach of any of the provisions of the
Master Lease and that the copy of the Master Lease attached hereto as Exhibit B
is a true, complete, and correct copy of the Master Lease effective as between
Master Landlord and Landlord as of commencement of the term of the sublease.
Master Landlord agrees not to renew, modify, amend, extend or terminate the
Master Lease without prior written notice to Tenant. After the date hereof,
Master Landlord agrees to provide Tenant with any notices of default provided to
Landlord. Master Landlord agrees that Tenant shall have the same grace period as
allowed to Landlord under the Master Lease and that Tenant may, but shall not be
obligated to, make payments or undertake such actions as necessary to cure such
default and Master Landlord agrees to accept such payments and/or undertakings
from Tenant. Master Landlord hereby approves of the improvements to the Property
proposed by Tenant in Exhibit C and agrees that any such improvements actually
made by Tenant can remain on the Property following termination of this Lease.

 

Master Landlord hereby consents to Landlord’s sublease of the Property to Tenant
subject to the terms and conditions set forth herein. Except as expressly set
forth herein, Master Landlord’s consent is not intended, and shall not be
construed (a) to modify or otherwise affect any provision of the Master Lease or
to release Landlord from any of its obligations and duties under the Master
Lease; or (b) as a waiver of any of Master Landlord’s rights under the Master
Lease; or (c) as binding or obligating Master Landlord in any manner whatsoever
with respect to covenants, representations, warranties, undertakings, or
agreement in the Sublease.

 

Notwithstanding the Sublease or Master Landlord’s consent thereto, Landlord
shall remain fully liable for the payment of rents and all other monetary
obligations and for the performance of all other obligations of the “Tenant”
under the Master Lease. Landlord shall continue to be liable as a principal and
not as a guarantor or surety to the same extent as though no sublease had been
made.

 

MASTER LANDLORD:

BMG2 ENTERPRISES

By     Its    

 

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Exhibit A to Sublease

 

Description of Property

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LOGO [g50265stp031.jpg]

 

*  SHADED PROPERTY IS LEASED PROPERTY.

     REMAINING PORTION IS LANDLORDS OTHER PROPERTY.

    

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Exhibit B to Sublease

 

Copy of Master Lease

Between BMG2 Enterprises and Modtech Holdings, Inc.

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Exhibit B to Sublease

 

[LOGO OF COLDWELL BANKER APPEARS HERE]

 

ARTICLE ONE: BASIC TERMS

 

This Article One contains the Basic Terms of this Lease between the Landlord and
Tenant named below. Other Articles, Sections and Paragraphs of the Lease
referred to in this Article One explain and define the Basic Terms and are to be
read in conjunction with the Basic Terms.

 

Section 1.01. Date of Lease: 1/2/90

 

Section 1.02. Landlord (include legal entity): BMG2, A CALIFORNIA GENERAL
PARTNER

 

Address of Landlord: c/o GRUGER - 2001 HARBOR BLVD #200

 

                                  COSTA MESA, LA 92627

 

Section 1.03. Tenant (include legal entity): Modtech, Inc., a California
corporation

 

Address of Tenant: 195 E. Morgan Street, Perris, California 92370.

 

Section 1.04. Property: (include street address, approximate square footage and
description) THAT 30 ACRES LOCATED WITHIN THE PARCEL DESCRIBED IN EXHIBIT A

 

Section 1.05. Lease Term: 25 years 0 months beginning on 1/1/90 As such other
date as is specified in this Lease, and ending on DECEMBER 31, 2014

 

Section 1.06. Permitted Uses: (See Article Five) Fabrication of modular
buildings and (illegible) offices and local uses.

 

Section 1.07. Tenant’s Guarantor: (if none, so state) Not applicable.

 

Section 1.08. Brokers: (See Article Fourteen) (if none, so state)

 

Landlord’s Broker: None

 

Tenant’s Broker: None

 

Section 1.09. Commission Payable to Landlord’s Broker: (See Article Fourteen) $
Not applicable.

 

Section 1.10. Initial Security Deposit: (See Section 3.03) $ 83,000

 

Section 1.11. Vehicle Parking Spaces Allocated to Tenant: Not applicable.

 

Section 1.12. Rent and Other Charges Payable by Tenant:

 

(a) BASE RENT: TWENTY FIVE THOUSAND DOLLARS (25,000) per month, for the first 12
months, as provided in Section 3.01, AND SHALL BE INCREASED ON THE FIRST DAY OF
EACH JANUARY AS PROVIDED IN 3.02. (if (ii) is completed, then (i) and Section
3.02 are inapplicable.)

 

(b) OTHER PERIODIC PAYMENTS: (i) Real Property Taxes (See Section 4.02); (ii)
(illegible) (See Section 4.03); (iii) Insurance Premiums (See Section 4.04);
(iv) Impounds for Insurance Premiums and Property (illegible) (See Section
4.07); (v) Maintenance, Repairs and Alterations (See Article Six).

 

Section 1.13. Landlord’s Share of Profit on Assignment or Sublease: (See Section
9.05)              percent (50%) of the Profit (the “Landlord’s Share”).

 

Section 1.14. Riders: The following Riders are attached to and made a part of
this Lease: (if none, so state) Exhibit A - Legal Description of Property.

 

            

1

 

(Single-Tenant Net Form)

  Initials   

 

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ARTICLE TWO: LEASE TERM

 

Section 2.01. Lease of Property For Lease Term. Landlord leases the Property to
Tenant and Tenant leases the Property [Illegible] Landlord for the Lease Term.
The Lease Term is for the period stated in Section 1.05 above and shall begin
and end on [Illegible] dates specified in Section 1.05 above, unless the
beginning or end of the Lease Term is changed under any provision of [Illegible]
Lease. The “Commencement Date” shall be the date specified in Section 1.05 above
for the beginning of the Lease Term, [Illegible] advanced or delayed under any
provision of this Lease.

 

Section 2.02. Delay in Commencement. Landlord shall not be liable to Tenant if
Landlord does not deliver possession of the Property to Tenant on the
Commencement Date. Landlord’s non-delivery of the Property to Tenant on that
date shall not affect this Lease or the obligations of Tenant under this Lease
except that the Commencement Date shall be delayed until Landlord delivers
possession of the Property to Tenant and the Lease Term shall be extended for a
period equal to the delay [Illegible] delivery of possession of the Property to
Tenant, plus the number of days necessary to end the Lease Term on the last day
of a month. If Landlord does not deliver possession of the Property to Tenant
within sixty (60) days after the Commencement Date. Tenant may elect to cancel
this Lease by giving written notice to Landlord within ten (10) days after the
sixty (60) -day period ends. If Tenant gives such notice, the Lease shall be
cancelled and neither Landlord nor Tenant shall have any further obligations to
the other. If Tenant does not give such notice, Tenant’s right to cancel the
Lease shall expire and the Lease Term shall commence upon the delivery of
possession of the Property to Tenant. If delivery of possession of the Property
to Tenant is delayed, Landlord and Tenant shall, upon such delivery, execute an
amendment to this Lease setting forth the actual Commencement Date and
expiration date of the Lease. Failure to execute such amendment shall not affect
the actual Commencement Date and expiration date of the Lease.

 

Section 2.03. Early Occupancy. If Tenant occupies the Property prior to the
Commencement Date, Tenant’s occupancy of the Property shall be subject to all of
the provisions of this Lease. Early occupancy of the Property shall not advance
the expiration date of this Lease. Tenant shall pay Base Rent and all other
charges specified in this Lease for the early occupancy period.

 

Section 2.04. Holding Over. Tenant shall vacate the Property upon the expiration
or earlier termination of this Lease. Tenant shall reimburse Landlord for and
indemnity Landlord against all damages which Landlord incurs from Tenant’s delay
in vacating the Property. If Tenant does not vacate the Property upon the
expiration or earlier termination of the Lease and Landlord thereafter accepts
rent from Tenant, Tenant’s occupancy of the Property shall be a “month-to-month”
tenancy, subject to all of the terms of this Lease applicable to a
month-to-month tenancy, except that the Base Rent then in effect shall be
increased by twenty-five percent (25%).

 

ARTICLE THREE: BASE RENT

 

Section 3.01. Time and Manner of Payment. Upon execution of this Lease. Tenant
shall pay Landlord the Base Rent in the amount stated in Paragraph 1.12(a) above
for the first month of the Lease Term. On the first day of the second month of
the Lease Term and each month thereafter, Tenant shall pay Landlord the Base
Rent, in advance, without offset, deduction or prior demand. The Base Rent shall
be payable at Landlord’s address or at such other place as Landlord may
designate in writing.

 

Section 3.02. Cost of Living increases. The Base Rent shall be increased on each
date (the “Rental Adjustment Date”) stated in Paragraph 1.12(a) above in
accordance with the increase in the United States Department of Labor, Bureau of
Labor Statistics, Consumer Price Index for All Urban Consumers (all items for
the geographical Statistical Area in which the Property is located on the basis
of 1982-1984 = 100) (the “Index”) as follows:

 

(a) The Base Rent (the “Comparison Base Rent”) in effect immediately before each
Rental Adjustment Date shall be increased by the percentage that the Index has
increased from the date (the “Comparison Date”) on which payment of the
Comparison Base Rent began through the month in which the applicable Rental
Adjustment Date occurs. The Base Rent shall not be reduced by reason of such
computation. Landlord shall notify Tenant of each increase by a written
statement which shall include the Index for the applicable Comparison Date, the
Index for the applicable Rental Adjustment Date, the percentage increase between
those two indices, and the new Base Rent. Any increase in the Base Rent provided
for in this Section 3.02 shall be subject to any minimum or maximum increase, if
provided for in Paragraph 1.12(a).

 

(b) Tenant shall pay the new Base Rent from the applicable Rental Adjustment
Date until the next Rental Adjustment Date. Landlord’s notice may be given after
the applicable Rental Adjustment Date of the increase, and Tenant shall pay
Landlord the accrued rental adjustment for the months elapsed between the
effective date of the increase and Landlord’s notice of such increase within ten
(10) days after Landlord’s notice. If the format or components of the Index are
materially changed after the Commencement Date, Landlord shall substitute an
index which is published by the Bureau of Labor Statistics or similar agency and
which is most nearly equivalent to the Index in effect on the Commencement Date.
The substitute Index shall be used to calculate the increase in the Base Rent
unless Tenant objects to such index in writing within fifteen (15) days after
receipt of Landlord’s notice. If Tenant objects, Landlord and Tenant shall
submit the selection of the substitute index for binding arbitration in
accordance with the rules and regulations of the American Arbitration
Association at its office closest to the Property. The costs of arbitration
shall be borne equally by Landlord and Tenant.

 

Section 3.03. Security Deposit; Increases.

 

(a) Upon the execution of this Lease, Tenant shall deposit with Landlord a cash
Security Deposit in the amount set forth in Section 1.10 above. Landlord may
apply all or part of the Security Deposit to any unpaid rent or other charges
due from Tenant or to cure any other defaults of Tenant. If Landlord uses any
part of the Security Deposit, Tenant shall restore the Security Deposit to its
full amount within ten (10) days after Landlord’s written request. Tenant’s
failure to do so shall be a material default under this Lease. No interest shall
be paid on the Security Deposit. Landlord shall not be required to keep the
Security Deposit separate from its other accounts and no trust relationship is
created with respect to the Security Deposit.

 

(b) Each Time the Base Rent is increased, Tenant shall deposit additional funds
with Landlord sufficient to increase the Security Deposit to an amount which
bears the same relationship to the adjusted Base Rent as the Initial Security
Deposit bore to the Initial Base Rent.

 

            

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Section 3.04. Termination; Advance Payments. Upon termination of this Lease
under Article Seven (Damage or Destruction), Article Eight (Condemnation) or any
other termination not resulting from Tenant’s default, and after Tenant has
vacated the Property in the manner required by this Lease, Landlord shall refund
or credit to Tenant (or Tenant’s successor) the unused portion of the Security
Deposit, any advance rent or other advance payments made by Tenant to Landlord,
and any amounts paid for real property taxes and other reserves which apply to
any time periods after termination of the Lease.

 

ARTICLE FOUR: OTHER CHARGES PAYABLE BY TENANT

 

Section 4.01. Additional Rent. All charges payable by Tenant other than Base
Rent are called “Additional Rent.” Unless this Lease provides otherwise, Tenant
shall pay all Additional Rent then due with the next monthly installment of Base
Rent. The term “rent” shall mean Base Rent and Additional Rent.

 

Section 4.02. Property Taxes.

 

(a) Real Property Taxes. Tenant shall pay all real property taxes on the
Property (including any fees, taxes or assessments against, or as a result of,
any tenant improvements installed on the Property by or for the benefit of
Tenant) during the Lease Term. Subject to Paragraph 4.02(c) and Section 4.07
below, such payment shall be made at least ten (10) days prior to the
delinquency date of the taxes. Within such ten (10)-day period, Tenant shall
furnish Landlord with satisfactory evidence that the real property taxes have
been paid. Landlord shall reimburse Tenant for any real property taxes paid by
Tenant covering any period of time prior to or after the Lease Term. If Tenant
fails to pay the real property taxes when due, Landlord may pay the taxes and
Tenant shall reimburse Landlord for the amount of such tax payment as Additional
Rent.

 

(b) Definition of “Real Property Tax.” “Real property tax” means: (i) any fee,
license fee, license tax, business license fee, commercial rental tax, levy,
charge, assessment, penalty or tax imposed by any taxing authority against the
Property; (ii) any tax on the Landlord’s right to receive, or the receipt of,
rent or income from the Property or against Landlord’s business of leasing the
Property; (iii) any tax or charge for fire protection, streets, sidewalks, road
maintenance, refuse or other services provided to the Property by any
governmental agency; (iv) any tax imposed upon this transaction or based upon a
reassessment of the Property due to a change of ownership, as defined by
applicable law, or other transfer of all or part of Landlord’s interest in the
Property; and (v) any charge or fee replacing any tax previously included within
the definition of real property tax. “Real property tax” does not, however,
include Landlord’s federal or state income, franchise, inheritance or estate
taxes.

 

(c) Joint Assessment. If the Property is not separately assessed, Landlord shall
reasonably determine Tenant’s share of the real property tax payable by Tenant
under Paragraph 4.02(a) from the assessor’s worksheets or other reasonably
available information. Tenant shall pay such share to Landlord within fifteen
(15) days after receipt of Landlord’s written statement.

 

(d) Personal Property Taxes.

 

(i) Tenant shall pay all taxes charged against trade fixtures, furnishings,
equipment or any other personal property belonging to Tenant. Tenant shall try
to have personal property taxed separately from the Property.

 

(ii) If any of Tenant’s personal property is taxed with the Property, Tenant
shall pay Landlord the taxes for the personal property within fifteen (15) days
after Tenant receives a written statement from Landlord for such personal
property taxes.

 

(e) Tenant’s Right to Contest Taxes. Tenant may attempt to have the assessed
valuation of the Property reduced or may initiate proceedings to contest the
real property taxes. If required by law, Landlord shall join in the proceedings
brought by Tenant. However, Tenant shall pay all costs of the proceedings,
including any costs or fees incurred by Landlord. Upon the final determination
of any proceeding or contest, Tenant shall immediately pay the real property
taxes due, together with all costs, charges, interest and penalties incidental
to the proceedings. If Tenant does not pay the real property taxes when due and
contests such taxes, Tenant shall not be in default under this Lease for
nonpayment of such taxes if Tenant deposits funds with Landlord or opens an
interest-bearing account reasonably acceptable to Landlord in the joint names of
Landlord and Tenant. The amount of such deposit shall be sufficient to pay the
real property taxes plus a reasonable estimate of the interest, costs, charges
and penalties which may accrue if Tenant’s action is unsuccessful, less any
applicable tax impounds previously paid by Tenant to Landlord. The deposit shall
be applied to the real property taxes due, as determined at such proceedings.
The real property taxes shall be paid under protest from such deposit if such
payment under protest is necessary to prevent the Property from being sold under
a “tax sale” or similar enforcement proceeding.

 

Section 4.03. Utilities. Tenant shall pay, directly to the appropriate supplier,
the cost of all natural gas, heat, light, power, sewer service, telephone,
water, refuse disposal and other utilities and services supplied to the
Property. However, if any services or utilities are jointly metered with other
property, Landlord shall make a reasonable determination of Tenant’s
proportionate share of the cost of such utilities and services and Tenant shall
pay such share to Landlord within fifteen (15) days after receipt of Landlord’s
written statement.

 

Section 4.04. Insurance Policies.

 

(a) Liability Insurance. During the Lease Term, Tenant shall maintain a policy
of commercial general liability insurance (sometimes known as broad form
comprehensive general liability insurance) insuring Tenant against liability for
bodily injury, property damage (including loss of use of property) and personal
injury arising out of the operation, use or occupancy of the Property. Tenant
shall name Landlord as an additional insured under such policy. The initial
amount of such insurance shall be One Million Dollars ($1,000,000) per
occurrence and shall be subject to periodic increase based upon inflation,
increased liability awards, recommendation of Landlord’s professional insurance
advisers and other relevant factors. The liability insurance obtained by Tenant
under this Paragraph 4.04(a) shall (i) be primary and non-contributing; (ii)
contain cross-liability endorsements; and (iii) insure Landlord against Tenant’s
performance under Section 5.05, if the matters giving rise to the indemnity
under Section 5.05 result from the negligence of Tenant. The amount and coverage
of such insurance shall not limit Tenant’s liability nor relieve Tenant of any
other obligation under this Lease. Landlord may also obtain comprehensive public
liability insurance in an amount and with coverage determined by Landlord
insuring Landlord against liability arising out of ownership, operation, use or
occupancy of the Property. The policy obtained by Landlord shall not be
contributory and shall not provide primary insurance.

 

            

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(b) Property and Rental Income Insurance. During the Lease Term, Landlord shall
maintain policies of insurance covering loss of or damage to the Property in the
full amount of its replacement value. Such policy shall contain an inflation
Guard Endorsement and shall provide protection against all perils included
within the classification of fire, extended coverage, vandalism, malicious
mischief, special extended perils (all risk), sprinkler leakage and any other
perils which Landlord deems reasonably necessary. Landlord shall have the right
to obtain flood and earthquake insurance if required by any lender holding a
security interest in the Property. Landlord shall not obtain insurance for
Tenant’s fixtures or equipment or building improvements installed by Tenant on
the Property. During the Lease Term, Landlord shall also maintain a rental
income insurance policy, with loss payable to Landlord, in an amount equal to
one year’s Base Rent, plus estimated real property taxes and insurance premiums.
Tenant shall be liable for the payment of any deductible amount under Landlord’s
or Tenant’s insurance policies maintained pursuant to this Section 4.04, in an
amount not to exceed Ten Thousand Dollars ($10,000). Tenant shall not do or
permit anything to be done which invalidates any such insurance policies.

 

(c) Payment of Premiums. Subject to Section 4.07, Tenant shall pay all premiums
for the insurance policies described in Paragraphs 4.04(a) and (b) (whether
obtained by Landlord or Tenant) within fifteen (15) days after Tenant’s receipt
of a copy of the premium statement or other evidence of the amount due, except
Landlord shall pay all premiums for non-primary comprehensive public liability
insurance which Landlord elects to obtain as provided in Paragraph 4.04(a). If
insurance policies maintained by Landlord cover improvements on real property
other than the Property, Landlord shall deliver to Tenant a statement of the
premium applicable to the Property showing in reasonable detail how Tenant’s
share of the premium was computed. If the Lease Term expires before the
expiration of an insurance policy maintained by Landlord, Tenant shall be liable
for Tenant’s prorated share of the insurance premiums. Before the Commencement
Date. Tenant shall deliver to Landlord a copy of any policy of insurance which
Tenant is required to maintain under this Section 4.04. At least thirty (30)
days prior to the expiration of any such policy, Tenant shall deliver to
Landlord a renewal of such policy. As an alternative to providing a policy of
insurance. Tenant shall have the right to provide Landlord a certificate of
insurance, executed by an authorized officer of the insurance company, showing
that the insurance which Tenant is required to maintain under this Section 4.04
is in full force and effect and containing such other information which Landlord
reasonably requires.

 

(d) General Insurance Provisions.

 

(i) Any insurance which Tenant is required to maintain under this Lease shall
include a provision which requires the insurance carrier to give Landlord not
less than thirty (30) days’ written notice prior to any cancellation or
modification of such coverage.

 

(ii) If Tenant fails to deliver any policy, certificate or renewal to Landlord
required under this Lease within the prescribed time period or if any such
policy is cancelled or modified during the Lease Term without Landlord’s
consent, Landlord may obtain such insurance, in which case Tenant shall
reimburse Landlord for the cost of such insurance within fifteen (15) days after
receipt of a statement that indicates the cost of such insurance.

 

(iii) Tenant shall maintain all insurance required under this Lease with
companies holding a “General Policy Rating” of A-12 or better, as set forth in
the most current issue of “Best Key Rating Guide”. Landlord and Tenant
acknowledge the insurance markets are rapidly changing and that insurance in the
form and amounts described in this Section 4.04 may not be available in the
future. Tenant acknowledges that the insurance described in this Section 4.04 is
for the primary benefit of Landlord. If at any time during the Lease Term,
Tenant is unable to maintain the insurance required under the Lease, Tenant
shall nevertheless maintain insurance coverage which is customary and
commercially reasonable in the insurance industry for Tenant’s type of business,
as that coverage may change from time to time. Landlord makes no representation
as to the adequacy of such insurance to protect Landlord’s or Tenant’s
interests. Therefore, Tenant shall obtain any such additional property or
liability insurance which Tenant deems necessary to protect Landlord and Tenant.

 

(iv) Unless prohibited under any applicable insurance policies maintained,
Landlord and Tenant each hereby waive any and all rights of recovery against the
other, or against the officers, employees, agents or representatives of the
other, for loss of or damage to its property or the property of others under its
control, if such loss or damage is covered by any insurance policy in force
(whether or not described in this Lease) at the time of such loss or damage.
Upon obtaining the required policies of insurance, Landlord and Tenant shall
give notice to the insurance carriers of this mutual waiver of subrogation.

 

Section 4.05. Late Charges. Tenant’s failure to pay rent promptly may cause
Landlord to incur unanticipated costs. The exact amount of such costs are
impractical or extremely difficult to ascertain. Such costs may include, but are
not limited to, processing and accounting charges and late charges which may be
imposed on Landlord by any ground lease, mortgage or trust deed encumbering the
Property. Therefore, if Landlord does not receive any rent payment within ten
(10) days after it becomes due, Tenant shall pay Landlord a late charge equal to
ten percent (10%) of the overdue amount. The parties agree that such late charge
represents a fair and reasonable estimate of the costs Landlord will incur by
reason of such late payment.

 

Section 4.06. Interest on Past Due Obligations. Any amount owed by Tenant to
Landlord which is not paid when due shall bear interest at the rate of fifteen
percent (15%) per annum from the due date of such amount. However, interest
shall not be payable on late charges to be paid by Tenant under this Lease. The
payment of interest on such amounts shall not excuse or cure any default by
Tenant under this Lease. If the interest rate specified in this Lease is higher
than the rate permitted by law, the interest rate is hereby decreased to the
maximum legal interest rate permitted by law.

 

Section 4.07. Impounds for Insurance Premiums and Real Property Taxes. If
requested by any ground lessor or lender to whom Landlord has granted a security
interest in the Property, or if Tenant is more than ten (10) days late in the
payment of rent more than once in any consecutive twelve (12) -month period,
Tenant shall pay Landlord a sum equal to one-twelfth (1/12) of the annual real
property taxes and insurance premiums payable by Tenant under this Lease,
together with each payment of Base Rent. Landlord shall hold such payments in a
non-interest bearing impound account. If unknown, Landlord shall reasonably
estimate the amount of real property taxes and insurance premiums when due.
Tenant shall pay any deficiency of funds in the impound account to Landlord upon
written request. If Tenant defaults under this Lease, Landlord may apply any
funds in the impound account to any obligation then due under this Lease.

 

            

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Section 5.01. Permitted Uses. Tenant may use the Property only for the Permitted
Uses set forth in Section 1.06 above.

 

Section 5.02. Manner of Use. Tenant shall not cause or permit the Property to be
used in any way which constitutes a violation of any law, ordinance, or
governmental regulation or order, which annoys or interferes with the rights of
other tenants of Landlord, or which constitutes a nuisance or waste. Tenant
shall obtain and pay for all permits, including a Certificate of Occupancy,
required for Tenant’s occupancy of the Property and shall promptly take all
actions necessary to comply with all applicable statutes, ordinances, rules,
regulations, orders and requirements regulating the use by Tenant of the
Property, including the Occupational Safety and Health Act.

 

Section 5.03. Hazardous Materials. As used in this Lease, the term “Hazardous
Material” means any flammable items, explosives, radioactive materials,
hazardous or toxic substances, material or waste or related materials, including
any substances defined as or included in the definition of “hazardous
substances”, “hazardous wastes”, “hazardous materials” or “toxic substances” now
or subsequently regulated under any applicable federal, state or local laws or
regulations, including without limitation petroleum-based products, paints,
solvents, lead, cyanide, DDT, printing inks, acids, pesticides, ammonia
compounds and other chemical products, asbestos, PCBs and similar compounds, and
including any different products and materials which are subsequently found to
have adverse effects on the environment or the health and safety of persons.
Tenant shall not cause or permit any Hazardous Material to be generated,
produced, brought upon, used, stored, treated or disposed of in or about the
Property by Tenant, its agents, employees, contractors, sublessees or invitees
without the prior written consent of Landlord. Landlord shall be entitled to
take into account such other factors or facts as Landlord may reasonably
determine to be relevant in determining whether to grant or withhold consent to
Tenant’s proposed activity with respect to Hazardous Material. In no event,
however, shall Landlord be required to consent to the installation or use of any
storage tanks on the Property.

 

Section 5.04. Signs and Auctions. Tenant shall not place any signs on the
Property without Landlord’s prior written consent. Tenant shall not conduct or
permit any auctions or sheriff’s sales at the Property.

 

Section 5.05. Indemnity. Tenant shall indemnify Landlord against and hold
Landlord harmless from any and all costs, claims or liability arising from: (a)
Tenant’s use of the Property; (b) the conduct of Tenant’s business or anything
else done or permitted by Tenant to be done in or about the Property, including
any contamination of the Property or any other property resulting from the
presence or use of Hazardous Material caused or permitted by Tenant: (c) any
breach or default in the performance of Tenant’s obligations under this Lease;
(d) any misrepresentation or breach of warranty by Tenant under this Lease; or
(e) other acts or omissions of Tenant. Tenant shall defend Landlord against any
such cost, claim or liability at Tenant’s expense with counsel reasonably
acceptable to Landlord or, at Landlord’s election. Tenant shall reimburse
Landlord for any legal fees or costs incurred by Landlord in connection with any
such claim. As a material part of the consideration to Landlord, Tenant assumes
all risk of damage to property or injury to persons in or about the Property
arising from any cause, and Tenant hereby waives all claims in respect thereof
against Landlord, except for any claim arising out of Landlord’s gross
negligence or willful misconduct. As used in this Section, the term “Tenant”
shall include Tenant’s employees, agents, contractors and invitees, if
applicable.

 

Section 5.06. Landlord’s Access. Landlord or its agents may enter the Property
at all reasonable times to show the Property to potential buyers, investors or
tenants or other parties; to do any other act or to inspect and conduct tests in
order to monitor Tenant’s compliance with all applicable environmental laws and
all laws governing the presence and use of Hazardous Material; or for any other
purpose Landlord deems necessary. Landlord shall give Tenant prior notice of
such entry except in the case of an emergency. Landlord may place customary “For
Sale” or “For Lease” signs on the Property.

 

Section 5.07. Quiet Possession. If Tenant pays the rent and complies with all
other terms of this Lease. Tenant may occupy and enjoy the Property for the full
Lease Term, subject to the provisions of this Lease.

 

ARTICLE SIX: CONDITION OF PROPERTY; MAINTENANCE; REPAIRS AND ALTERATIONS

 

Section 6.01. Existing Conditions. Tenant accepts the Property in its condition
as of the execution of the Lease, subject to all recorded matters, laws,
ordinances, and governmental regulations and orders. Except as provided herein,
Tenant acknowledges that neither Landlord nor any agent of Landlord has made any
representation as to the condition of the Property or the suitability of the
Property for Tenant’s intended use. Tenant represents and warrants that Tenant
has made its own inspection of and inquiry regarding the condition of the
Property and is not relying on any representations of Landlord or any Broker
with respect thereto. If Landlord or Landlord’s Broker has provided a Property
Information Sheet or other Disclosure Statement regarding the Property, a copy
is attached as an exhibit to the Lease.

 

Section 6.02. Exemption of Landlord from Liability. Landlord shall not be liable
for any damage or injury to the person, business (or any loss of income
therefrom), goods, wares, merchandise or other property of Tenant. Tenant’s
employees, invitees, customers or any other person in or about the Property,
whether such damage or injury is caused by or results from: (a) fire, steam,
electricity, water, gas or rain; (b) the breakage, leakage, obstruction or other
defects of pipes, sprinklers, wires, appliances, plumbing, air conditioning or
lighting fixtures or any other cause; (c) conditions arising in or about the
Property or upon other portions of the Project, or from other sources or places;
or (d) any act or omission of any other tenant of the Project. Landlord shall
not be liable for any such damage or injury even though the cause of or the
means of repairing such damage or injury are not accessible to Tenant. The
provisions of this Section 6.02 shall not, however, exempt Landlord from
liability for Landlord’s gross negligence or willful misconduct.

 

Section 6.03. Landlord’s Obligations. Subject to the provisions of Article Seven
(Damage or Destruction) and Article Eight (Condemnation), Landlord shall have
absolutely no responsibility to repair, maintain or replace any portion of the
Property at any time. Tenant waives the benefit of any present or future law
which might give Tenant the right to repair the Property at Landlord’s expense
or to terminate the Lease due to the condition of the Property.

 

Section 6.04. Tenant’s Obligations.

 

(a) Except as provided in Article Seven (Damage or Destruction) and Article
Eight (Condemnation), Tenant shall keep all portions of the Property (including
structural, nonstructural, interior, exterior, and landscaped areas, portions,
systems and equipment in good order, condition and repair (including interior
repainting and refinishing, as needed). If any portion of the

 

            

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Property or any system or equipment in the Property which Tenant is obligated to
repair cannot be fully repaired or restored, Tenant shall promptly replace such
portion of the Property or system or equipment in the Property, regardless of
whether the benefit of such replacement extends beyond the Lease Term; but if
the benefit or useful life of such replacement extends beyond the Lease Term (as
such term may be extended by exercise of any options), the useful life of such
replacement shall be prorated over the remaining portion of the Lease Term (as
extended), and Tenant shall be liable only for that portion of the cost which is
applicable to the Lease Term (as extended). Tenant shall maintain a preventive
maintenance contract providing for the regular inspection and maintenance of the
heating and air conditioning system by a licensed heating and air conditioning
contractor. If any part of the Property is damaged by any act or omission of
Tenant, Tenant shall pay Landlord the cost of repairing or replacing such
damaged property, whether or not Landlord would otherwise be obligated to pay
the cost of maintaining or repairing such property. It is the Intention of
Landlord and Tenant that at all times Tenant shall maintain the portions of the
Property which Tenant is obligated to maintain in an attractive, first-class and
fully operative condition.

 

(b) Tenant shall fulfill all of Tenant’s obligations under this Section 6.04 at
Tenant’s sole expense. If Tenant fails to maintain, repair or replace the
Property as required by this Section 6.04, Landlord may, upon ten (10) days’
prior notice to Tenant (except that no notice shall be required in the case of
an emergency), enter the Property and perform such maintenance or repair
(including replacement, as needed) on behalf of Tenant. In such case, Tenant
shall reimburse Landlord for all costs incurred in performing such maintenance
or repair immediately upon demand.

 

Section 6.05. Alterations, Additions, and Improvements.

 

(a) Tenant shall not make any alterations, additions, or improvements to the
Property without Landlord’s prior written consent, except for non-structural
alterations which do not exceed Ten Thousand Dollars ($10,000) in cost
cumulatively over the Lease Term and which are not visible from the outside of
any building of which the Property is part. Landlord may require Tenant to
provide demolition and/or lien and completion bonds in form and amount
satisfactory to Landlord. Tenant shall promptly remove any alterations,
additions, or improvements constructed in violation of this Paragraph 6.05(a)
upon Landlord’s written request. All alterations, additions, and improvements
shall be done in a good and workmanlike manner, in conformity with all
applicable laws and regulations, and by a contractor approved by Landlord. Upon
completion of any such work, Tenant shall provide Landlord with “as built”
plans, copies of all construction contracts, and proof of payment for all labor
and materials.

 

(b) Tenant shall pay when due all claims for labor and material furnished to the
Property. Tenant shall give Landlord at least twenty (20) days’ prior written
notice of the commencement of any work on the Property, regardless of whether
Landlord’s consent to such work is required. Landlord may elect to record and
post notices of non-responsibility on the Property.

 

Section 6.06. Condition upon Termination. Upon the termination of the Lease,
Tenant shall surrender the Property to Landlord, broom clean and in the same
condition as received except for ordinary wear and tear which Tenant was not
otherwise obligated to remedy under any provision of this Lease. However, Tenant
shall not be obligated to repair any damage which Landlord is required to repair
under Article Seven (Damage or Destruction). In addition, Landlord may require
Tenant to remove any alterations, additions or improvements (whether or not made
with Landlord’s consent) prior to the expiration of the Lease and to restore the
Property to its prior condition all at Tenant’s expense. All alterations,
additions and improvements which Landlord has not required. Tenant to remove
shall become Landlord’s property and shall be surrendered to Landlord upon the
expiration or earlier termination of the Lease except that Tenant may remove any
of Tenant’s machinery or equipment which can be removed without material damage
to the Property. Tenant shall repair, at Tenant’s expense, any damage to the
Property caused by the removal of any such machinery or equipment. In no event,
however, shall Tenant remove any of the following materials or equipment (which
shall be deemed Landlord’s property) without Landlord’s prior written consent;
any power wiring or power panels; lighting or lighting fixtures; wall coverings;
drapes, blinds or other window coverings; carpets or other floor coverings;
heaters, air conditioners or any other heating or air conditioning equipment;
fencing or security gates; or other similar building operating equipment and
decorations.

 

ARTICLE SEVEN: DAMAGE OR DESTRUCTION

 

Section 7.01. Partial Damage to Property.

 

(a) Tenant shall notify Landlord in writing immediately upon the occurrence of
any damage to the Property. If the Property is only partially damaged (i.e.,
less than fifty percent (50%) of the Property is untenantable as a result of
such damage or less than fifty percent (50%) of Tenant’s operations are
materially impaired) and if the proceeds received by Landlord from the insurance
policies described in Paragraph 4.04(b) are sufficient to pay for the necessary
repairs, this Lease shall remain in effect and Landlord shall repair the damage
as soon as reasonably possible. Landlord may elect (but is not required) to
repair any damage to Tenant’s fixtures, equipment, or improvements.

 

(b) If the insurance proceeds received by Landlord are not sufficient to pay the
entire cost of repair, or if the cause of the damage is not covered by the
insurance policies which Landlord maintains under Paragraph 4.04(b), Landlord
may elect either to (i) repair the damage as soon as reasonably possible, in
which case this Lease shall remain in full force and effect, or (ii) terminate
this Lease as of the date the damage occurred. Landlord shall notify Tenant
within thirty (30) days after receipt of notice of the occurrence of the damage
whether Landlord elects to repair the damage or terminate the Lease. If Landlord
elects to repair the damage, Tenant shall pay Landlord the “deductible amount”
(if any) under Landlord’s insurance policies and, if the damage was due to an
act or omission of Tenant, or Tenant’s employees, agents, contractors or
invitees, the difference between the actual cost of repair and any insurance
proceeds received by Landlord. If Landlord elects to terminate the Lease, Tenant
may elect to continue this Lease in full force and effect, in which case Tenant
shall repair any damage to the Property and any building in which the Property
is located. Tenant shall pay the cost of such repairs, except that upon
satisfactory completion of such repairs, Landlord shall deliver to Tenant any
insurance proceeds received by Landlord for the damage repaired by Tenant.
Tenant shall give Landlord written notice of such election within ten (10) days
after receiving Landlord’s termination notice.

 

(c) If the damage to the Property occurs during the last six (6) months of the
Lease Term and such damage will require more than thirty (30) days to repair,
either Landlord or Tenant may elect to terminate this Lease as of the date the
damage occurred, regardless of the sufficiency of any insurance proceeds. The
party electing to terminate this Lease shall give written notification to the
other party of such election within thirty (30) days after Tenant’s notice to
Landlord of the occurrence of the damage.

 

            

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Section 7.02. Substantial or Total Destruction. If the Property is substantially
or totally destroyed by any cause whatsoever (i.e., the damage to the Property
is greater than partial damage as described in Section 7.01), and regardless of
whether Landlord receives any insurance proceeds, this Lease shall terminate as
of the date the destruction occurred. Notwithstanding the preceding sentence, if
the Property can be rebuilt within six (6) months after the date of destruction,
Landlord may elect to rebuild the Property at Landlord’s own expense, in which
case this lease shall remain in full force and effect. Landlord shall notify
Tenant of such election within thirty (30) days after Tenant’s notice of the
occurrence of total or substantial destruction. If Landlord so elects, Landlord
shall rebuild the Property at Landlord’s sole expense, except that if the
destruction was caused by an act or omission of Tenant, Tenant shall pay
Landlord the difference between the actual cost of rebuilding and any insurance
proceeds received by Landlord.

 

Section 7.03. Temporary Reduction of Rent. If the Property is destroyed or
damaged and Landlord or Tenant repairs or restores the Property pursuant to the
provisions of this Article Seven, any rent payable during the period of such
damage, repair and/or restoration shall be reduced according to the degree, if
any, to which Tenant’s use of the Property is impaired. However, the reduction
shall not exceed the sum of one year’s payment of Base Rent, insurance premiums
and real property taxes. Except for such possible reduction in Base Rent,
insurance premiums and real property taxes, Tenant shall not be entitled to any
compensation, reduction, or reimbursement from Landlord as a result of any
damage, destruction, repair, or restoration of or to the Property.

 

Section 7.04. Waiver. Tenant waives the protection of any statute, code or
judicial decision which grants a tenant the right to terminate a lease in the
event of the substantial or total destruction of the leased property. Tenant
agrees that the provisions of Section 7.02 above shall govern the rights and
obligations of Landlord and Tenant in the event of any substantial or total
destruction to the Property.

 

ARTICLE EIGHT: CONDEMNATION

 

If all or any portion of the Property is taken under the power of eminent domain
or sold under the threat of that power (all of which are called “Condemnation”),
this Lease shall terminate as to the part taken or sold on the date the
condemning authority takes title or possession, whichever occurs first. If more
than twenty percent (20%) of the floor area of the building in which the
Property is located, or which is located on the Property, is taken, either
Landlord or Tenant may terminate this Lease as of the date the condemning
authority takes title or possession, by delivering written notice to the other
within ten (10) days after receipt of written notice of such taking (or in the
absence of such notice, within ten (10) days after the condemning authority
takes title or possession). If neither Landlord nor Tenant terminates this
Lease, this Lease shall remain in effect as to the portion of the Property not
taken, except that the Base Rent and Additional Rent shall be reduced in
proportion to the reduction in the floor area of the Property. Any Condemnation
award or payment shall be distributed in the following order: (a) first, to any
ground lessor, mortgagee or beneficiary under a deed of trust encumbering the
Property, the amount of its interest in the Property; (b) second, to Tenant,
only the amount of any award specifically designated for loss of or damage to
Tenant’s trade fixtures or removable personal property; and (c) third, to
Landlord, the remainder of such award, whether as compensation for reduction in
the value of the leasehold, the taking of the fee, or otherwise. If this Lease
is not terminated, Landlord shall repair any damage to the Property caused by
the Condemnation, except that Landlord shall not be obligated to repair any
damage for which Tenant has been reimbursed by the condemning authority. If the
severance damages received by Landlord are not sufficient to pay for such
repair. Landlord shall have the right to either terminate this Lease or make
such repair at Landlord’s expense.

 

ARTICLE NINE: ASSIGNMENT AND SUBLETTING

 

Section 9.01. Landlord’s Consent Required. No portion of the Property or of
Tenant’s interest in this Lease may be acquired by any other person or entity,
whether by sale, assignment, mortgage, sublease, transfer, operation of law, or
act of Tenant, without Landlord’s prior written consent, except as provided in
Section 9.02 below. Landlord has the right to grant or withhold its consent as
provided in Section 9.05 below. Any attempted transfer without consent shall be
void and shall constitute a non-curable breach of this Lease. If Tenant is a
partnership, any cumulative transfer of more than twenty percent (20%) of the
partnership interests shall require Landlord’s consent. If Tenant is a
corporation, any change in the ownership of a controlling interest of the voting
stock of the corporation shall require Landlord’s consent.

 

Section 9.02. Tenant Affiliate. Tenant may assign this Lease or sublease the
Property, without Landlord’s consent, to any corporation which controls, is
controlled by or is under common control with Tenant, or to any corporation
resulting from the merger of or consolidation with Tenant (“Tenant’s
Affiliate”). In such case, any Tenant’s Affiliate shall assume in writing all of
Tenant’s obligations under this Lease.

 

Section 9.03. No Release of Tenant. No transfer permitted by this Article Nine,
whether with or without Landlord’s consent, shall release Tenant or change
Tenant’s primary liability to pay the rent and to perform all other obligations
of Tenant under this Lease. Landlord’s acceptance of rent from any other person
is not a waiver of any provision of this Article Nine. Consent to one transfer
is not a consent to any subsequent transfer. If Tenant’s transferee defaults
under this Lease, Landlord may proceed directly against Tenant without pursuing
remedies against the transferee. Landlord may consent to subsequent assignments
or modifications of this Lease by Tenant’s transferee, without notifying Tenant
or obtaining its consent. Such action shall not relieve Tenant’s liability under
this Lease.

 

Section 9.04. Offer to Terminate. If Tenant desires to assign the Lease or
sublease the Property, Tenant shall have the right to offer, in writing, to
terminate the Lease as of a date specified in the offer. If Landlord elects in
writing to accept the offer to terminate within twenty (20) days after notice of
the offer, the Lease shall terminate as of the date specified and all the terms
and provisions of the Lease governing termination shall apply. If Landlord does
not so elect, the Lease shall continue in effect until otherwise terminated and
the provisions of Section 9.05 with respect to any proposed transfer shall
continue to apply.

 

Section 9.05. Landlord’s Consent.

 

(a) Tenant’s request for consent to any transfer described in Section 9.01 shall
set forth in writing the details of the proposed transfer, including the name,
business and financial condition of the prospective transferee, financial
details of the proposed transfer (e.g., the term of and the rent and security
deposit payable under any proposed assignment or sublease), and any other
information Landlord deems relevant. Landlord shall have the right to withhold
consent, if reasonable, or to grant consent, based on the following factors: (i)
the business of the proposed assignee or subtenant and the proposed use of the

 

            

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Property; (ii) the net worth and financial reputation of the proposed assignee
or subtenant; (iii) Tenant’s compliance with all of its obligations under the
Lease; and (iv) such other factors as Landlord may reasonably deem relevant. If
Landlord objects to a proposed assignment solely because of the net worth and/or
financial reputation of the proposed assignee, Tenant may nonetheless sublease
(but not assign), all or a portion of the Property to the proposed transferee,
but only on the other terms of the proposed transfer.

 

(b) If Tenant assigns or subleases, the following shall apply:

 

(i) Tenant shall pay to Landlord as Additional Rent under the Lease the
Landlord’s Share (stated in Section 1.13) of the Profit (defined below) on such
transaction as and when received by Tenant, unless Landlord gives written notice
to Tenant and the assignee or subtenant that Landlord’s Share shall be paid by
the assignee or subtenant to Landlord directly The “Profit” means (A) all
amounts paid to Tenant for such assignment or sublease, including “key” money,
monthly rent in excess of the monthly rent payable under the Lease, and all fees
and other consideration paid for the assignment or sublease, including fees
under any collateral agreements, less (B) costs and expenses directly incurred
by Tenant in connection with the execution and performance of such assignment or
sublease for real estate broker’s commissions and costs of renovation or
construction of tenant improvements required under such assignment or sublease.
Tenant is entitled to recover such costs and expenses before Tenant is obligated
to pay the Landlord’s Share to Landlord. The Profit in the case of a sublease of
less than all the Property is the rent allocable to the subleased space as a
percentage on a square footage basis.

 

(ii) Tenant shall provide Landlord a written statement certifying all amounts to
be paid from any assignment or sublease of the Property within thirty (30) days
after the transaction documentation is signed, and Landlord may inspect Tenant’s
books and records to verify the accuracy of such statement. On written request,
Tenant shall promptly furnish to Landlord copies of all the transaction
documentation, all of which shall be certified by Tenant to be complete, true
and correct. Landlord’s receipt of Landlord’s Share shall not be a consent to
any further assignment of subletting. The breach of Tenant’s obligation under
this Paragraph 9.05(b) shall be a material default of the Lease.

 

Section 9.06. No Merger. No merger shall result from Tenant’s sublease of the
Property under this Article Nine. Tenant’s surrender of this Lease or the
termination of this Lease in any other manner. In any such event, Landlord may
terminate any or all subtenancies or succeed to the interest of Tenant as
sublandlord under any or all subtenancies.

 

ARTICLE TEN: DEFAULTS; REMEDIES

 

Section 10.01. Covenants and Conditions. Tenant’s performance of each of
Tenant’s obligations under this Lease is a condition as well as a covenant.
Tenant’s right to continue in possession of the Property is conditioned upon
such performance. Time is of the essence in the performance of all covenants and
conditions.

 

Section 10.02. Defaults. Tenant shall be in material default under this Lease:

 

(a) If Tenant abandons the Property or if Tenant’s vacation of the Property
results in the cancellation of any insurance described in Section 4.04;

 

(b) If Tenant fails to pay rent or any other charge when due;

 

(c) If Tenant fails to perform any of Tenant’s non-monetary obligations under
this Lease for a period of thirty (30) days after written notice from Landlord;
provided that if more than thirty (30) days are required to complete such
performance. Tenant shall not be in default if Tenant commences such performance
within the thirty (30) -day period the thereafter diligently pursues its
completion. However, Landlord shall not be required to give such notice if
Tenant’s failure to perform constitutes a non-curable breach of this Lease. The
notice required by this Paragraph is intended to satisfy any and all notice
requirements imposed by law on Landlord and is not in addition to any such
requirement.

 

(d) (i) If Tenant makes a general assignment or general arrangement for the
benefit of creditors; (ii) if a petition for adjudication of bankruptcy or for
reorganization or rearrangement is filed by or against Tenant and is not
dismissed within thirty (30) days; (iii) if a trustee or receiver is appointed
to take possession of substantially all of Tenant’s assets located at the
Property or of Tenant’s interest in this Lease and possession is not restored to
Tenant within thirty (30) days; or (iv) if substantially all of Tenant’s assets
located at the Property or of Tenant’s interest in this Lease is subjected to
attachment, execution or other judicial seizure which is not discharged within
thirty (30) days. If a court of competent jurisdiction determines that any of
the acts described in this subparagraph (d) is not a default under this Lease,
and a trustee is appointed to take possession (or if Tenant remains a debtor in
possession) and such trustee or Tenant transfers Tenant’s interest hereunder,
then Landlord shall receive, as Additional Rent, the excess, if any, of the rent
(or any other consideration) paid in connection with such assignment or sublease
over the rent payable by Tenant under this Lease.

 

(e) If any guarantor of the Lease revokes or otherwise terminates, or purports
to revoke or otherwise terminate, any guaranty of all or any portion of Tenant’s
obligations under the Lease. Unless otherwise expressly provided, no guaranty of
the Lease is revocable.

 

Section 10.03. Remedies. On the occurrence of any material default by Tenant,
Landlord may, at any time thereafter, with or without notice or demand and
without limiting Landlord in the exercise of any right or remedy which Landlord
may have:

 

(a) Terminate Tenant’s right to possession of the Property by any lawful means,
in which case this Lease shall terminate and Tenant shall immediately surrender
possession of the Property to Landlord. In such event, Landlord shall be
entitled to recover from Tenant all damages incurred by Landlord by reason of
Tenant’s default, including (i) the worth at the time of the award of the unpaid
Base Rent, Additional Rent and other charges which Landlord had earned at the
time of the termination; (ii) the worth at the time of the award of the amount
by which the unpaid Base Rent, Additional Rent and other charges which Landlord
would have earned after termination until the time of the award exceeds the
amount of such rental loss that Tenant proves Landlord could have reasonably
avoided; (iii) the worth at the time of the award of the amount by which the
unpaid Base Rent, Additional Rent and other charges which Tenant would have paid
for the balance of the Lease Term after the time of award exceeds the amount of
such rental loss that Tenant proves Landlord could have reasonably avoided; and
(iv) any other amount necessary to compensate Landlord for all the detriment
proximately caused by Tenant’s failure to perform its obligations under the
Lease or which in the ordinary course of things would be likely to result
therefrom, including, but not limited to, any costs or expenses Landlord incurs
in maintaining or preserving the Property after such default, the cost of

 

            

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recovering possession of the Property, expenses of reletting, including
necessary renovation or alteration of the Property, Landlord’s reasonable
attorneys’ fees incurred in connection therewith, and any real estate commission
paid or payable. As used in subparts (i) and (ii) above, the “worth at the time
of the award” is computed by allowing interest on unpaid amounts at the rate of
fifteen percent (15%) per annum, or such lesser amount as may then be the
maximum lawful rate. As used in subpart (iii) above, the “worth at the time of
the award” is computed by discounting such amount at the discount rate of the
Federal Reserve Bank of San Francisco at the time of the award, plus one percent
(1%). If Tenant has abandoned the Property, Landlord shall have the option of
(i) retaking possession of the Property and recovering from Tenant the amount
specified in this Paragraph 10.03(a), or (ii) proceeding under Paragraph
10.03(b);

 

(b) Maintain Tenant’s right to possession, in which case this Lease shall
continue in effect whether or not Tenant has abandoned the Property. In such
event, Landlord shall be entitled to enforce all of Landlord’s rights and
remedies under this Lease, including the right to recover the rent as it becomes
due;

 

(c) Pursue any other remedy now or hereafter available to Landlord under the
laws or judicial decisions of the state in which the Property is located.

 

Section 10.04. Repayment of Free Rent. If this Lease provides for a postponement
of any monthly rental payments, a period of “free” rent or other rent
concession, such postponed rent or “free” rent is called the “Abated Rent”.
Tenant shall be credited with having paid all of the Abated Rent on the
expiration of the Lease Term only if Tenant has fully, faithfully, and
punctually performed all of Tenant’s obligations hereunder, including the
payment of all rent (other than the Abated Rent) and all other monetary
obligations and the surrender of the Property in the physical condition required
by this Lease. Tenant acknowledges that its right to receive credit for the
Abated Rent is absolutely conditioned upon Tenant’s full, faithful and punctual
performance of its obligations under this Lease. If Tenant defaults and does not
cure within any applicable grace period, the Abated Rent shall immediately
become due and payable in full and this Lease shall be enforced as if there were
no such rent abatement or other rent concession. In such case Abated Rent shall
be calculated based on the full initial rent payable under this Lease.

 

Section 10.05. Automatic Termination. Notwithstanding any other term or
provision hereof to the contrary, the Lease shall terminate on the occurrence of
any act which affirms the Landlord’s intention to terminate the Lease as
provided in Section 10.03 hereof, including the filing of an unlawful detainer
action against Tenant. On such termination, Landlord’s damages for default shall
include all costs and fees, including reasonable attorneys’ fees that Landlord
incurs in connection with the filing, commencement, pursuing and/or defending of
any action in any bankruptcy court or other court with respect to the Lease; the
obtaining of relief from any stay in bankruptcy restraining any action to evict
Tenant; or the pursuing of any action with respect to Landlord’s right to
possession of the Property. All such damages suffered (apart from Base Rent and
other rent payable hereunder) shall constitute pecuniary damages which must be
reimbursed to Landlord prior to assumption of the Lease by Tenant or any
successor to Tenant in any bankruptcy or other proceeding.

 

Section 10.06. Cumulative Remedies. Landlord’s exercise of any right or remedy
shall not prevent it from exercising any other right or remedy.

 

ARTICLE ELEVEN: PROTECTION OF LENDERS

 

Section 11.01. Subordination. Landlord shall have the right to subordinate this
Lease to any ground lease, deed of trust or mortgage encumbering the Property,
any advances made on the security thereof and any renewals, modifications,
consolidations, replacements or extensions thereof, whenever made or recorded.
Tenant shall cooperate with Landlord and any lender which is acquiring a
security interest in the Property or the Lease. Tenant shall execute such
further documents and assurances as such lender may require, provided that
Tenant’s obligations under this Lease shall not be increased in any material way
(the performance of ministerial acts shall not be deemed material), and Tenant
shall not be deprived of its rights under this Lease. Tenant’s right to quiet
possession of the Property during the Lease Term shall not be disturbed if
Tenant pays the rent and performs all of Tenant’s obligations under this Lease
and is not otherwise in default. If any ground lessor, beneficiary or mortgagee
elects to have this Lease prior to the lien of its ground lease, deed of trust
or mortgage and gives written notice thereof to Tenant, this Lease shall be
deemed prior to such ground lease, deed of trust or mortgage whether this Lease
is dated prior or subsequent to the date of said ground lease, deed of trust or
mortgage or the date of recording thereof.

 

Section 11.02. Attornment. If Landlord’s interest in the Property is acquired by
any ground lessor, beneficiary under a deed of trust, mortgagee, or purchaser at
a foreclosure sale. Tenant shall attorn to the transferee of or successor to
Landlord’s interest in the Property and recognize such transferee or successor
as Landlord under this Lease. Tenant waives the protection of any statute or
rule of law which gives or purports to give Tenant any right to terminate this
Lease or surrender possession of the Property upon the transfer of Landlord’s
interest.

 

Section 11.03. Signing of Documents. Tenant shall sign and deliver any
instrument or documents necessary or appropriate to evidence any such attornment
or subordination or agreement to do so. If Tenant fails to do so within ten (10)
days after written request. Tenant hereby makes, constitutes and irrevocably
appoints Landlord, or any transferee or successor of Landlord, the
attorney-in-fact of Tenant to execute and deliver any such instrument or
document.

 

Section 11.04. Estoppel Certificates.

 

(a) Upon Landlord’s written request, Tenant shall execute, acknowledge and
deliver to Landlord a written statement certifying: (i) that none of the terms
or provisions of this Lease have been changed (or if they have been changed,
stating how they have been changed); (ii) that this Lease has not been cancelled
or terminated; (iii) the last date of payment of the Base Rent and other charges
and the time period covered by such payment; (iv) that Landlord is not in
default under this Lease (or, if Landlord is claimed to be in default, stating
why); and (v) such other representations or information with respect to Tenant
or the Lease as Landlord may reasonably request or which any prospective
purchaser or encumbrancer of the Property may require. Tenant shall deliver such
statement to Landlord within ten (10) days after Landlord’s request. Landlord
may give any such statement by Tenant to any prospective purchaser or
encumbrancer of the Property. Such purchaser or encumbrancer may rely
conclusively upon such statement as true and correct.

 

            

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(b) If Tenant does not deliver such statement to Landlord within such ten
(10)-day period. Landlord, and any prospective purchaser or encumbrancer, may
conclusively presume and rely upon the following facts: (i) that the terms and
provisions of this Lease have not been changed except as otherwise represented
by Landlord; (ii) that this Lease has not been cancelled or terminated except as
otherwise represented by Landlord; (iii) that not more than one month’s Base
Rent or other charges have been paid in advance; and (iv) that Landlord is not
in default under the Lease. In such event, Tenant shall be estopped from denying
the truth of such facts.

 

Section 11.05. Tenant’s Financial Condition. Within ten (10) days after written
request from Landlord, Tenant shall deliver to Landlord such financial
statements as Landlord reasonably requires to verify the net worth of Tenant or
any assignee, subtenant, or guarantor of Tenant. In addition, Tenant shall
deliver to any lender designated by Landlord any financial statements required
by such lender to facilitate the financing or refinancing of the Property.
Tenant represents and warrants to Landlord that each such financial statement is
a true and accurate statement as of the date of such statement. All financial
statements shall be confidential and shall be used only for the purposes set
forth in this Lease.

 

ARTICLE TWELVE: LEGAL COSTS

 

Section 12.01. Legal Proceedings. If Tenant or Landlord shall be in breach or
default under this Lease, such party (the “Defaulting Party”) shall reimburse
the other party (the “Nondefaulting Party”) upon demand for any costs or
expenses that the Nondefaulting Party incurs in connection with any breach or
default of the Defaulting Party under this Lease, whether or not suit is
commenced or judgment entered. Such costs shall include legal fees and costs
incurred for the negotiation of a settlement, enforcement of rights or
otherwise. Furthermore, if any action for breach of or to enforce the provisions
of this Lease is commenced, the court in such action shall award to the party in
whose favor a judgment is entered, a reasonable sum as attorneys’ fees and
costs. The losing party in such action shall pay such attorneys’ fees and costs.
Tenant shall also indemnify Landlord against and hold Landlord harmless from all
costs, expenses, demands and liability Landlord may incur if Landlord becomes or
is made a party to any claim or action (a) instituted by Tenant against any
third party, or by any third party against Tenant, or by or against any person
holding any interest under or using the Property by license of or agreement with
Tenant; (b) for foreclosure of any lien for labor or material furnished to or
for Tenant or such other person; (c) otherwise arising out of or resulting from
any act or transaction of Tenant or such other person; or (d) necessary to
protect Landlord’s interest under this Lease in a bankruptcy proceeding, or
other proceeding under Title 11 of the United States Code, as amended. Tenant
shall defend Landlord against any such claim or action at Tenant’s expense with
counsel reasonably acceptable to Landlord or, at Landlord’s election. Tenant
shall reimburse Landlord for any legal fees or costs Landlord incurs in any such
claim or action.

 

Section 12.02. Landlord’s Consent. Tenant shall pay Landlord’s reasonable
attorneys’ fees incurred in connection with Tenant’s request for Landlord’s
consent under Article Nine (Assignment and Subletting), or in connection with
any other act which Tenant proposes to do and which requires Landlord’s consent.

 

ARTICLE THIRTEEN: MISCELLANEOUS PROVISIONS

 

Section 13.01. Non-Discrimination. Tenant promises, and it is a condition to the
continuance of this Lease, that there will be no discrimination against, or
segregation of, any person or group of persons on the basis of race, color, sex,
creed, national origin or ancestry in the leasing, subleasing, transferring,
occupancy, tenure or use of the Property or any portion thereof.

 

Section 13.02. Landlord’s Liability; Certain Duties.

 

(a) As used in this Lease, the term “Landlord” means only the current owner or
owners of the fee title to the Property or the leasehold estate under a ground
lease of the Property at the time in question. Each Landlord is obligated to
perform the obligations of Landlord under this Lease only during the time such
Landlord owns such interest or title. Any Landlord who transfers its title or
interest is relieved of all liability with respect to the obligations of
Landlord under this Lease to be performed on or after the date of transfer.
However, each Landlord shall deliver to its transferee all funds that Tenant
previously paid if such funds have not yet been applied, under the terms of this
Lease.

 

(b) Tenant shall give written notice of any failure by Landlord to perform any
of its obligations under this Lease to Landlord and to any ground lessor,
mortgagee or beneficiary under any deed of trust encumbering the Property whose
name and address have been furnished to Tenant in writing. Landlord shall not be
in default under this Lease unless Landlord (or such ground lessor, mortgagee or
beneficiary) fails to cure such non-performance within thirty (30) days after
receipt of Tenant’s notice. However, if such non-performance reasonably requires
more than thirty (30) days to cure, Landlord shall not be in default if such
cure is commenced within such thirty (30) -day period and thereafter diligently
pursued to completion.

 

(c) Notwithstanding any term or provision herein to the contrary, the liability
of Landlord for the performance of its duties and obligations under this Lease
is limited to Landlord’s interest in the Property, and neither the Landlord nor
its partners, shareholders, officers or other principals shall have any personal
liability under this Lease.

 

Section 13.03. Severability. A determination by a court of competent
jurisdiction that any provision of this Lease or any part thereof is illegal or
unenforceable shall not cancel or invalidate the remainder of such provision or
this Lease, which shall remain in full force and effect.

 

Section 13.04. Interpretation. The captions of the Articles or Sections of this
Lease are to assist the parties in reading this Lease and are not a part of the
terms or provisions of this Lease. Whenever required by the context of this
Lease, the singular shall include the plural and the plural shall include the
singular. The masculine, feminine and neuter genders shall each include the
other. In any provision relating to the conduct, acts or omissions of Tenant,
the term “Tenant” shall include Tenant’s agents, employees, contractors,
invitees, successors or others using the Property with Tenant’s expressed or
implied permission.

 

Section 13.05. Incorporation of Prior Agreements; Modifications. This Lease is
the only agreement between the parties pertaining to the lease of the Property
and no other agreements are effective. All amendments to this Lease shall be in
writing and signed by all parties. Any other attempted amendment shall be void.

 

Section 13.06. Notices. All notices required or permitted under this Lease shall
be in writing and shall be personally delivered or sent by certified mail,
return receipt requested, postage prepaid. Notices to Tenant shall be delivered
to the address specified in Section 1.03 above, except that upon Tenant’s taking
possession of the Property, the Property shall be Tenant’s address for notice
purposes. Notices to Landlord shall be delivered to the address specified in
Section 1.02 above. All notices shall be effective upon delivery. Either party
may change its notice address upon written notice to the other party.

 

            

10

 

(Single-Tenant Net Form)

  Initials   

 

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Section 13.07. Waivers. All waivers must be in writing and signed by the waiving
party. Landlord’s failure to enforce any provision of this Lease or its
acceptance of rent shall not be a waiver and shall not prevent Landlord from
enforcing that provision or any other provision of this Lease in the future. No
statement on a payment check from Tenant or in a letter accompanying a payment
check shall be binding on Landlord. Landlord may, with or without notice to
Tenant, negotiate such check without being bound to the conditions of such
statement.

 

Section 13.08. No Recordation. Tenant shall not record this Lease without prior
written consent from Landlord. However, either Landlord or Tenant may require
that a “Short Form” memorandum of this Lease executed by both parties be
recorded. The party requiring such recording shall pay all transfer taxes and
recording fees.

 

Section 13.09. Binding Effect; Choice of Law. This Lease binds any party who
legally acquires any rights or interest in this Lease from Landlord or Tenant.
However, Landlord shall have no obligation to Tenant’s successor unless the
rights or interests of Tenant’s successor are acquired in accordance with the
terms of this Lease. The laws of the state in which the Property is located
shall govern this Lease.

 

Section 13.10. Corporate Authority; Partnership Authority. If Tenant is a
corporation, each person signing this Lease on behalf of Tenant represents and
warrants that he has full authority to do so and that this Lease binds the
corporation. Within thirty (30) days after this Lease is signed. Tenant shall
deliver to Landlord a certified copy of a resolution of Tenant’s Board of
Directors authorizing the execution of this Lease or other evidence of such
authority reasonably acceptable to Landlord. If Tenant is a partnership, each
person or entity signing this Lease for Tenant represents and warrants that he
or it is a general partner of the partnership, that he or it has full authority
to sign for the partnership and that this Lease binds the partnership and all
general partners of the partnership. Tenant shall give written notice to
Landlord of any general partner’s withdrawal or addition. Within thirty (30)
days after this Lease is signed, Tenant shall deliver to Landlord a copy of
Tenant’s recorded statement of partnership or certificate of limited
partnership.

 

Section 13.11. Joint and Several Liability. All parties signing this Lease as
Tenant shall be jointly and severally liable for all obligations of Tenant.

 

Section 13.12. Force Majeure. If Landlord cannot perform any of its obligations
due to events beyond Landlord’s control, the time provided for performing such
obligations shall be extended by a period of time equal to the duration of such
events. Events beyond Landlord’s control include, but are not limited to, acts
of God, war, civil commotion, labor disputes, strikes, fire, flood or other
casualty, shortages of labor or material, government regulation or restriction
and weather conditions.

 

Section 13.13. Execution of Lease. This Lease may be executed in counterparts
and, when all counterpart documents are executed, the counterparts shall
constitute a single binding instrument. Landlord’s delivery of this Lease to
Tenant shall not be deemed to be an offer to lease and shall not be binding upon
either party until executed and delivered by both parties.

 

Section 13.14. Survival. All representations and warranties of Landlord and
Tenant shall survive the termination of this Lease.

 

ARTICLE FOURTEEN: BROKERS

 

Section 14.01. Broker’s Fee. When this Lease is signed by and delivered to both
Landlord and Tenant, Landlord shall pay a real estate commission to Landlord’s
Broker named in Section 1.08 above, if any, as provided in the written agreement
between Landlord and Landlord’s Broker, or the sum stated in Section 1.09 above
for services rendered to Landlord by Landlord’s Broker in this transaction.
Landlord shall pay Landlord’s Broker a commission if Tenant exercises any option
to extend the Lease Term or to buy the Property, or any similar option or right
which Landlord may grant to Tenant, or if Landlord’s Broker is the procuring
cause of any other lease or sale entered into between Landlord and Tenant
covering the Property. Such commission shall be the amount set forth in
Landlord’s Broker’s commission schedule in effect as of the execution of this
Lease. If a Tenant’s Broker is named in Section 1.08 above, Landlord’s Broker
shall pay an appropriate portion of its commission to Tenant’s Broker if so
provided in any agreement between Landlord’s Broker and Tenant’s Broker. Nothing
contained in this Lease shall impose any obligation on Landlord to pay a
commission or fee to any party other than Landlord’s Broker.

 

Section 14.02. Protection of Brokers. If Landlord sells the Property, or assigns
Landlord’s interest in this Lease, the buyer or assignee shall, by accepting
such conveyance of the Property or assignment of the Lease, be conclusively
deemed to have agreed to make all payments to Landlord’s Broker thereafter
required of Landlord under this Article Fourteen. Landlord’s Broker shall have
the right to bring a legal action to enforce or declare rights under this
provision. The prevailing party in such action shall be entitled to reasonable
attorneys’ fees to be paid by the losing party. Such attorneys’ fees shall be
fixed by the court in such action. This Paragraph is included in this Lease for
the benefit of Landlord’s Broker.

 

Section 14.03. Broker’s Disclosure of Agency. Landlord’s Broker hereby discloses
to Landlord and Tenant and Landlord and Tenant hereby consent to Landlord’s
Broker acting in this transaction as the agent of (check one):

 

¨    Landlord exclusively; or

 

¨    both Landlord and Tenant.

 

Section 14.04. No Other Brokers. Tenant represents and warrants to Landlord that
the brokers named in Section 1.08 above are the only agents, brokers, finders or
other parties with whom Tenant has dealt who are or may be entitled to any
commission or fee with respect to this Lease or the Property.

 

ADDITIONAL PROVISIONS MAY BE SET FORTH IN A RIDER OR RIDERS ATTACHED HERETO OR
IN THE BLANK SPACE BELOW. IF NO ADDITIONAL PROVISIONS ARE INSERTED, PLEASE DRAW
A LINE THROUGH THE SPACE BELOW.

 

            

11

 

(Single-Tenant Net Form)

  Initials   

 

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Landlord and Tenant have signed this Lease at the place and on the dates
specified adjacent to their signatures below and have initialled all Riders
which are attached to or incorporated by reference in this Lease.

 

   

“LANDLORD”

 

 

Signed on 1/2, 1990  

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

at PERRIS, C.A   BMG2     By:  

/s/ ILLEGIBLE

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

    Its:  

GENERAL PARTNER

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

    By:  

 

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

    Its:  

 

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

       

“TENANT”

 

Signed on 1/2, 1990

at PERRIS, C.A

 

Modtech, Inc., a California corporation

    By:  

 

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

    Its:  

 

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

    By:  

 

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

    Its:  

 

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IN ANY REAL ESTATE TRANSACTION, IT IS RECOMMENDED THAT YOU CONSULT WITH A
PROFESSIONAL, SUCH AS A CIVIL ENGINEER, INDUSTRIAL HYGIENIST OR OTHER PERSON
WITH EXPERIENCE IN EVALUATING THE CONDITION OF THE PROPERTY, INCLUDING THE
POSSIBLE PRESENCE OF ASBESTOS, HAZARDOUS MATERIALS AND UNDERGROUND STORAGE
TANKS.

 

THIS PRINTED FORM LEASE HAS BEEN DRAFTED BY LEGAL COUNSEL AT THE DIRECTION OF
THE SOUTHERN CALIFORNIA CHAPTER OF THE SOCIETY OF INDUSTRIAL AND OFFICE REALTORS
INC. NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE SOUTHERN CALIFORNIA
CHAPTER OF THE SOCIETY OF INDUSTRIAL AND OFFICE REALTORS INC., ITS LEGAL
COUNSEL, THE REAL ESTATE BROKERS NAMED HEREIN, OR THEIR EMPLOYEES OR AGENTS, AS
TO THE LEGAL SUFFICIENCY, LEGAL EFFECT OR TAX CONSEQUENCES OF THIS LEASE OR OF
THIS TRANSACTION, LANDLORD AND TENANT SHOULD RETAIN LEGAL COUNSEL TO ADVISE THEM
ON SUCH MATTERS AND SHOULD RELY UPON THE ADVICE OF SUCH LEGAL COUNSEL.

 

            

12

 

(Single-Tenant Net Form)

 

 

Initials

  

 

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Exhibit A

 

115550–JEC

 

LEGAL DESCRIPTION

 

All that certain real property situated in the County of San Joaquin, State of
California, and described with reference to the Public Land Surveys of the
United States as follows:

 

All that fractional portion of Section 14, Township 1 South, Range 6 East, Mount
Diablo Base and Meridian, more particularly described as follows:

 

Commencing at the corner common to Sections 11, 12, 13 and 14, Township 1 South,
Range 6 East, Mount Diablo Base and Meridian; thence South 87°32’55” West 463.68
feet; thence South 0°18’44” West, 3297.92 feet to the Northeast corner and the
True Point of Beginning of the Parcel herein described; thence 1st South
0°18’44” West 1366.39 feet; thence 2nd South 89°57’33” West 2209.47 feet; thence
3rd North 89°09’42” West 367.51 feet; 4th North 10°23’08” East 544.43 feet;
thence 5th North 10°18’29” East 136.97 feet; thence 6th South 89°56’31” East
419.87 feet; thence 7th North 10°15’13” East 212.04 feet; thence 8th North
89°55’42” West 419.64 feet; thence 9th North 10°18’29” East 489.79 feet; thence
10th North 89°57’33” East 2336.12 feet to the Point of Beginning.

 

Containing 75.029 acres more or less, and as shown on that certain record of
Survey recorded April 4, 1989, in Book 30 of Survey Maps, Page 108, San Joaquin
County Records.

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

June 5, 1989

 

LETTER OF INTENT

 

Modtech, Inc. hereby agrees to enter into a long-term lease with BMG2, a
California partnership, for that certain property located in Lathrop, California
(APN 195-030-25-26). The term of which will be for ten (10) years with a monthly
rental of $33,000. Further it is agreed, that if BMG2 arranges for the sale of
property not currently used by Modtech, Inc. (and agreed to by Modtech, Inc.)
that it will refund all rents paid on the property which has been sold, to the
extent such proceeds have/will be received, within ten days of BMG2 receipt.
Additionally, if such property is sold at a profit, BMG2 will also return to
Modtech, Inc. ten percent of such profit within ten days of BMG2 receipt.

 

agreed and accepted

 

/s/ James Goldenetz

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

     

/s/ Evan M. Gruber

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

James Goldenetz

President

Modtech, Inc.

     

Evan M. Gruber

Partner

BMG2

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Exhibit C to Sublease

 

List of Intended Improvements by Tenant

 

Tenant shall have the right, but not the obligation, to make certain
improvements to the Property as follows:

 

1. Installation of up to two rail spurs entering the Property from the east and
associated unloading areas, including a boxcar unloading platform and ramp
(collectively a “Rail Line”). The location, size and other material attributes
of the Rail Line shall be substantially the same as reflected on the attached
preliminary plans and drawings set forth in Schedule 1.

 

2. Installation of exterior siding and access doors on the existing main
warehouse building.

 

3. Installation of 10-12” water line as described in Section 15.02 of the Master
Lease, as amended.

 

4. Installation of new sanitary sewer line adjacent to the water line described
in Section 15.02 of the Master Lease, as amended.

 

5. Installation of additional exterior pavement and associated storm drainage
alterations, if any.

 

In addition to the above items, Tenant may also remodel the existing office
building to suit its purposes, make various repairs to the existing pavement,
and install yard lighting, bollard protection for existing fire hydrants, new
fencing/gates, security systems, and new landscaping.

 

All improvements made by Tenant shall be in accordance with applicable codes and
regulations and shall be substantially similar in quality to similar
improvements made by Tenant to its other leased facilities as represented by the
property located at 7145 Arlington Ave., Riverside, California 92503.

 

- 2 -

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LOGO [g50265stp048.jpg]    

CONCEPTUAL LAYOUT OF RAIL SPURS

NTS

      

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Exhibit D to Sublease

 

LOGO [g50265boise.jpg]  

 

 

Location HBC0102 - BUILDING SOLUTIONS, DISTRIBUTION

8301 CAPITOL DR.

GREENSBORO, NC

   LOGO [g50265health.jpg]         

08 07 02, JC/MG/JC

E2-000006-R9

 

LOGO [g50265stp141.jpg]   LOGO [g50265stp142.jpg] Existing  

Proposed Signage

 

P-1 Non-Illuminated freestanding sign panel

 

                             LOGO [g50265stp143.jpg]