**Exhibit10.11**

 

INDUSTRIAL GROSS LEASE

 

BETWEEN 78 MCCLAIN,L.L.C., AS LANDLORD, AND GO-VIDEO INC., AS TENANTNOVEMBER 15, 1994

 

INDUSTRIAL GROSS LEASEBETWEEN 78 MCCLAIN, L.L.C. AND GO-VIDEO, INC.TABLE OF CONTENTS

 
| 1.     | BASII-C-LEASE INFORMATION                            |   |
|--------|------------------------------------------------------|--------|
|   | 1.1 Parties                                          |   |
|   | 1.2- Premises                                        |   |
|   | 1.3 Site Plan                                        |   |
|   | 1.4 Lease Term                                       |   |
|   | 1.5 Renewal  Option Term                             |   |
|   | 1.6 Monthly  Rent                                    |   |
|   | 1.7 Base  Operating Costs                            |   |
|   | 1.8 Use                                              |   |
|   | 1.9  Security Deposit                                |   |
|   | 1.10 Guarantors                                      |   |
|   | 1.11 Broker                                          |   |
|   |                                                 |   |
| 2.     | PREMISES                                             |   |
|   | 2.1 Description                                      |   |
|   | 2.2  Revision of Site Plan                           |   |
|   |                                                 |   |
| 3.     | TERM                                                 |   |
|   | 3. 1 Term                                            |   |
|   | 3.2 Holding  Over                                    |   |
|   |                                                 |   |
| 4.     | MONTHLY RENT                                         |   |
|   | 4.1 Monthly  Rent                                    |   |
|   | 4.2 Time and Manner of  Payment                      |   |
|   | 4.3 Payment                                          |   |
|   | 4.4 ‘‘Lease Year’’ Defined       |   |
|   |                                                 |   |
| 5.     | EXCESS  OPERATING COSTS                              |   |
|   | 5.1  Tenant’s obligation                        |   |
|   | 5.2  ‘‘Operating Costs’’ Defined |   |
|   | 5.3  Tenant’s Share of Excess Operating Costs   |   |
|   |                                                 |   |
| 6.     | CONSTRUCTION OF PREMISES                             |   |
|   | 6.1 Obligations  of Landlord and Tenant              |   |
|   | 6.2 Condition of the  Premises                       |   |
|   |                                                 |   |
| 7.     | COMMON AREAS                                         |   |
|   | 7.1  “Common Areas” Defined                |   |
|   | 7.2  Use of Common Areas                             |   |
|   | 7.3 Parking                                          |   |
|   |                                                 |   |
| 8.     | USE OF  PREMISES                                     |   |
|   | 8.1  Permitted Uses                                  |   |
|   | 8.2 Insurance Requirements                           |   |
|   | 8.3 Prohibited operations                            |   |

 

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|   | 8.4 Antenna                                    |   |
|--------|------------------------------------------------|--------|
|   | 8.5 Compliance with Laws                       |   |
|   | 8.6 Use of Walls                               |   |
|   | 8.7  Indecent Materials                        |   |
|   | 8.8  Hazardous Substances                      |   |
|   | 8.9  Rules and Regulations                     |   |
|   |                                           |   |
| 9.     | VAIVER  AND INDEMNITY                          |   |
|   | 9.1  Assumption and Waiver                     |   |
|   | 9.2 Notice  of Claims                          |   |
|   | 9.3 Indemnity                                  |   |
|   |                                           |   |
| 10.    | INSURANCE                                      |   |
|   | 10.1  Required Insurance                       |   |
|   | 10.2  Notice of Insurance                      |   |
|   | 10.3 Waiver of Subrogation:  Release           |   |
|   | 10.4  Landlord’s Insurance                |   |
|   |                                           |   |
| 11.    | PERSONAL PROPERTY TAXES                        |   |
|   |                                           |   |
| 12.    | MAINTENANCE                                    |   |
|   | 12.1 Landlord’s Obligations               |   |
|   | 12.2  Tenant’s obligations                |   |
|   |                                           |   |
| 13.    | ALTERATIONS                                    |   |
|   | 13.1  Landlord’s Approval                 |   |
|   | 13.2 Alterations Become  Part of Premises      |   |
|   |                                           |   |
| 14.    | LIENS                                          |   |
|   |                                           |   |
| 15.    | DAMAGE AND DESTRUCTION                         |   |
|   | 15.1  Termination                              |   |
|   | 15.2 Repair                                    |   |
|   | 15.3  Abatement of Rent                        |   |
|   |                                           |   |
| 16.    | EMINENT  DOMAIN                                |   |
|   | 16.1  Total Condemnation                       |   |
|   | 16.2 Partial Condemnation of  the Premises     |   |
|   | 16.3 Partial Condemnation of  the Common Areas |   |
|   | 16.4  Condemnation Award                       |   |
|   | 16.5  Date of Condemnation                     |   |
|   |                                           |   |
| 17.    | ASSIGNMENT AND SUBLETTING                      |   |
|   | 17.1 Restriction on  Transfers                 |   |
|   | 17.2  Requested Transfers                      |   |
|   | 17.3  Tenant’s Liability                  |   |
|   | 17.4 Expenses                                  |   |
|   | 17.5 Void  Transfers                           |   |
|   | 17.6 No Merger                                 |   |
|   |                                           |   |
| 18.    | SECURITY  DEPOSIT                              |   |
|   |                                           |   |
| 19.    | SIGNS                                          |   |
|   |                                           |   |
| 20.    | UTILITIES                                      |   |
|   |                                           |   |
| 21.    | FIXTURES                                       |   |

 

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| 22.    | SURRENDER  OF PREMISES                                             |   |
|--------|--------------------------------------------------------------------|--------|
|   |                                                               |   |
| 23.    | ENTRY  AND INSPECTION                                              |   |
|   |                                                               |   |
| 24.    | ESTOPPEL  CERTIFICATE                                              |   |
|   |                                                               |   |
| 25.    | TITLE                                                              |   |
|   | 25.1 Subordination.                                                |   |
|   | 25.2  Quiet Enjoyment                                              |   |
|   |                                                               |   |
| 26.    | DEFAULT, REMEDIES                                                  |   |
|   | 26.1 Defaults                                                      |   |
|   | 26.2 Remedies                                                      |   |
|   | 26.3 Remedies Cumulative                                           |   |
|   | 26.4 Landlord’s Right to Act                                  |   |
|   | 26.5  “Additional Rent” Defined                          |   |
|   | 26.6 Late  Charges                                                 |   |
|   | 26.7  Interest on Past-Due Obligations                             |   |
|   | 26.8 Attorneys’ Fees, Waiver of Jury  Trial and Counterclaims |   |
|   | 26.9 Accord and  Satisfaction                                      |   |
|   |                                                               |   |
| 27.    | BANKRUPTCY  OF TENANT                                              |   |
|   |                                                               |   |
| 28:    | LANDLORD’S  LIABILITY                                         |   |
|   | 28.1 Default by  Landlord                                          |   |
|   | 28.2 Sale of  Landlord’s Interest                             |   |
|   | 28.3  Non-Recourse Liability                                       |   |
|   | 28.4 Mortgage Exculpation                                          |   |
|   |                                                               |   |
| 29.    | FORCE MAJEURE                                                      |   |
|   |                                                               |   |
| 30.    | BROKERS                                                            |   |
|   |                                                               |   |
| 31.    | NOTICES                                                            |   |
|   |                                                               |   |
| 32.    | FINANCIAL  STATEMENTS                                              |   |
|   |                                                               |   |
| 33.    | GENERAL                                                            |   |
|   | 33.1 Arizona  Law; Venue                                           |   |
|   | 33.2 No  Partnership                                               |   |
|   | 33.3 Amendments                                                    |   |
|   | 33.4 No Waiver                                                     |   |
|   | 33.5 Exhibits                                                      |   |
|   | 33.6 Partial Invalidity                                            |   |
|   | 33.7 Captions                                                      |   |
|   | 33.8 Time                                                          |   |
|   | 33.9  Recordation                                                  |   |
|   | 33.10 No Third Party Rights                                        |   |
|   | 33.11 Joint and Several Obligations                                |   |
|   | 33.12 Authority  to Execute                                        |   |
|   | 33.13 Binding on Successors and Assigns                            |   |
|   | 33.1-4-  Impartial Interpretation                                  |   |
|   | 33.15 Plurals                                                      |   |
|   | 33.1b  Survival of Obligations                                     |   |
|   | 33.17 Not Binding Until Signed                                     |   |

 

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| 34. | RIGHT OF FIRST REFUSAL |   |
|-----|------------------------|--------|

 

Legal Description FloorPlan Site PlanWork Letter Sign Criteria For Antenna And/Or Satellite Dish

 

INDEX OF DEFINED TERMS
| Term                         | Defined at:                           |
|------------------------------|---------------------------------------|
| Additional Rent              | Section 26.5                     |
| Affiliate,                   | Section 34                       |
| Broker                       | Section 1.11                     |
| Buyer                        | Section 34                       |
| Base Operating Costs  Broker | Section 1.7                      |
| Commencement Date            | Section 3.1                      |
| Common Areas                 | Section 7.1                      |
| Condemnation                 | Section 16.1                     |
| Controlling Percentage       | Section 17.1(e)                  |
| Default Interest             | Section 26.7                     |
| Environmental Laws           | Section 8.8                      |
| Excess Operating Costs       | Section 5.1                      |
| FIBA                         | Section 26.7                     |
| Guarantors                   | Section 1.10 and  26.1(e)        |
| Hazardous Substance          | Section 8.8                      |
| Insured Casualty             | Section 15.1                     |
| Landlord                     | Section 1.1                      |
| Landlord’s Improvements | Section 6.1                      |
| Lease Term                   | Section 3.1                      |
| Lease Year                   | Section 1.4 and  4.4             |
| Monthly Rent                 | Section 1.6                      |
| Operating Costs  Premises    | Section 5.2                      |
| Prime Rate                   | Section 1.2                      |
| Renewal Option Term          | Section 26.7                     |
| Security Deposit             | Section 1.5                      |
| Security Instruments         | Section 1.9 and  Article 18 |
| Site Plan                    | Section 25.1(a)                  |
| Tenant                       | Section 1.3                      |
| Tenant Improvements          | Section 7.3                      |
| Tenant’s Permitted      | Section 5.1                      |
| Tenant’s Share Transfer | Section 17.1                     |
| Use                          | Section 1.8                      |

 

STANDARD FORM INDUSTRIALGROSS LEASE

 

BY THIS LEASE (“Lease”)entered into as of this 15th day of November, 1994, Landlord and Tenant agreeas follows:

 

l.                                          BASICLEASE INFORMATION

THE FOLLOWING BASIC LEASEINFORMATION IS A PART OF THIS LEASE, BUT DOES NOT CONSTITUTE THE ENTIRE LEASE.TENANT ACKNOWLEDGES THAT IT HAS READ ALL OF THE PROVISIONS CONTAINED IN THEENTIRE LEASE AND ALL EXHIBITS WHICH ARE A PART THEREOF AND AGREES THAT THISLEASE, INCLUDING THE BASIC LEASE INFORMATION AND ALL EXHIBITS, REFLECTS THEENTIRE UNDERSTANDING AND REASONABLE EXPECTATIONS OF LANDLORD ANDTENANT-REGARDING THE PREMISES. TENANT ALSO ACKNOWLEDGES THAT IT HAS HAD THEOPPORTUNITY TO REVIEW THIS LEASE PRIOR TO EXECUTION WITH LEGAL COUNSEL AND SUCHOTHER ADVISORS AS TENANT DEEMS APPROPRIATE.

 

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1.1 Parties:

Landlord: 78 McClain,L.L.C., an Arizona limited liability company

Address: 7494 East DesertCove Scottsdale, Arizona 85260

Attention: Tom McClain,Manager

Tenant: Go-Video, Inc.

Entity:   aDelaware corporation

Address: 14455 NorthHayden Road Suite 219

Scottsdale, Arizona 85260

Contact: Douglas Klein,Vice President of Finance and Treasurer

Phone: {602} 998-3400

 

1.2 Premises:

Street Address:             7807 East McClainDrive Scottsdale, Arizona 85260

Legal Description: Allthat certain real property located in Scottsdale, Maricopa County, Arizona, andmore particularly described in Exhibit “A” attached hereto.

Approximate

Square Footage: 32,766square feet of Gross Leasable Area

 

1.3 Site Plan: The building, parking facilities andother improvements as depicted on Exhibit “B” attached hereto (the “SitePlan”).

 

1.4 Lease Term: Seven (7) years, commencing May1, 1995, or such other date as is specified in Section 3.1. The Lease Termshall also include the Renewal Option Term, if properly exercised by Tenant.

 

1.5 Renewal Option Term: One (1)optional renewal term of three (3)–years, exercised as specified inSection 3.1.

 

1.6 -Monthly Rent: For year ]., $22,936 per month;for years 2 and 3, $23,591.52 per month; for years 4 and 5, $24,574 per month;for years 6 and 7, $25,557; far years 8 through 10 (the Renewal Option Term)$26,868 per month. In addition to the foregoing amounts, monthly rent shallalso include any and all rental, occupancy, use, sales and transactionalprivilege tax imposed upon or payable by Landlord in connection with thisLease, the rentals due hereunder, or the use or occupancy of the Premises.

 

1.7 Base Operating Costs: The BaseOperating Costs shall equal actual Operating Costs (as defined inSection 5.2) incurred by Landlord during the first Lease Year.

 

1.8 Use: Consumer electronic products (including,without limitation, video equipment) manufacturing and warehousing and relatedoffice and administrative functions.

 

1.9 Security Deposit: $22,937.30,plus tax. The Security Deposit shall be deposited and subject to increase inaccordance with Article 18.

 

1.10 Guarantors: None.

 

1.11 Broker:     MichaelJohnson

Gore Range Equities, Inc.

2910 East Camelback Road,Suite 180 Phoenix, Arizona 85016

and

John Corritore                    . TheCorritore Company

6166 North ScottsdaleRoad, Suite 650 Scottsdale, Arizona 85253

 

2.             PREMISES

 

2.1 Description. Landlord leases to Tenant and Tenantleases from Landlord the Premises described in Section 1.2. Tenant’srights under this, Lease are subject to and restricted by the

 

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provisions of anycovenants, conditions, restrictions and easements, and all amendments thereto,recorded against the Premises.

 

2.2 Revision of Site Plan. Thedepiction of the Site Plan on Exhibit “B” represents Landlord’s current plansfor the Premises. Such depiction may be subsequently modified (subject toTenant’s written approval of any material modification) and does not constitutea representation, covenant or warranty of any kind by Landlord.

 

3.             TERM

 

3.1 Term. The term of this Lease shall be for thetime period set forth in Section 1.4 or until this Lease is soonerterminated (“Lease Term”). The Lease Term shall commence on the date thePremises are ready for occupancy by Tenant (the “Commencement Date”). If Landlordfails to obtain a building Mo4 permit from the City of Scottsdale forconstruction of the Premises by January 15, 1995, Tenant may cancel bygiving Landlord notice of ‘ cancellation within seven (7) days followingLandlord’s notice to Tenant of Landlord’s failure- to meet such date. If Tenantfails to give such notice, Tenant shall continue to be bound by the terms ofthis Lease. If Landlord fails to commence construction of the TenantImprovements set forth in Exhibit “C” to this Lease (the “Tenant Improvements”)by April 1, 1995, Tenant may cancel by giving Landlord notice ofcancellation within seven (7) days of such date and paying Landlord within five(5) business days of such notice the documented cost of rebuilding the exteriorwalls of the Building to conform with Landlord’s original drawings (i.e,windows inserted in the west wall to match the north and east walls, five (5)roll up doors inserted in the south wall, and a ten-foot panel window insertedin the north wall to match the west wall of the Building). If Tenant fails togive such notice, Tenant shall continue to be bound by the terms of this Lease.If the Building is not ready for occupancy by Tenant on or before May 1, 1995,Tenant shall receive ten (10) days free Monthly Rent in the month of June,1995. If the Building is not ready for occupancy by Tenant on or beforeJune 1, 1995, Tenant shall receive an additional ten (10) days freeMonthly Rent in the month of July, 1995. No free rent penalty shall be assessedagainst Landlord for any delay resulting from events described inArticle 29 of this Lease. Landlord shall provide thirty (30) days’ noticeto Tenant of the anticipated Commencement Date. If a delay in obtaining abuilding permit, commencing construction of Tenant Improvements, or delivery ofpossession is caused by Tenant’s failure to perform any obligation inaccordance with this Lease, the Lease Term shall commence on the date Landlordwould have delivered possession of the Premises to Tenant absent such delay.For purposes of calculating the expiration of the Lease Term, if theCommencement Date does not occur on the first day of a calendar month, theexpiration of the. Lease Term shall be calculated as though the Lease Termbegan on the first day of the next succeeding calendar month. Irrespective ofwhen the Commencement Date occurs, all of the provisions of this Lease shall beeffective as of the date that Landlord permits Tenant to enter the Premises,except that Tenant’s obligation to pay rent shall not commence until theCommencement Date. Provided Tenant is not in default upon either the noticedate or the expiration of the initial Lease Term, Tenant may renew this Lease,upon the terms hereof, for a Renewal Option Term of three {3} years by givingLandlord notice of Tenant’s election to renew no less than 180 days prior toexpiration of the initial term Lease Term.

 

3.2 -Holding Over. If Tenant remains on the Premisesafter the expiration of the Lease Term, Tenant shall become, at Landlord’selection, a tenant on a month-to-month basis at a Monthly Rent equal to onehundred fifty percent (1500) of the Monthly Rent payable for the last month ofthe Lease Term. Such rent shall be payable in advance on the first day of suchholdover period and on the first day of each month thereafter. Such tenancyshall be subject to all of the other provisions of this Lease.

 

4.                                       MONTHLYRENT

4.1 Monthly Rent. At the times and in the manner setforth herein, Tenant shall pay to Landlord as rent for the Premises during theLease Term, the Monthly Rent specified in Section 1.5 beginning on theCommencement Date and continuing thereafter throughout the Lease Term.

 

4.2 Time and Manner of Payment. TheMonthly Rent shall be paid in advance on the first day of each calendar monthbeginning with the Commencement Date. If the Commencement Date is other thanthe

 

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first day of a calendarmonth, the Monthly Rent payment for such fractional month shall be a pro rataamount {based upon a 30-day month} of the full Monthly Rent payment and shallbe paid on the Commencement Date (see Article 18 regarding application ofthe Security Deposit to the first month’s rent).

 

4.3 Payment. All sums payable pursuant to this Leaseshall be paid when due, in lawful money of the United States of America,without deduction, offset, prior notice or demand to Landlord at the addressset forth in Section 1.1, or at such other place or to such other personas Landlord may from time to time designate.

 

4.4 “Lease Year” Defined. “Lease Year” is each twelve(7.2) month period during the Lease Term. The first Lease Year shall begin at12:01 A.M. on the Commencement Date and end at midnight on the day before thefirst anniversary of the Commencement Date. (For example, if the CommencementDate were May 1, 1995, the first Lease Year would begin at 12:Oi A.M. on May l,1995, and end at midnight on April. 30, 1996.) Each succeeding Lease Year shallcommence on the anniversary of the Commencement Date and end on the anniversaryof the end of the First Lease Year.

 

5.                                       EXCESSOPERATING COSTS

5.1 Tenant’s Obligation. For eachLease Year, Tenant shall pay to Landlord, in the manner and at the intervalsprovided below, the amount by which the Operating Costs exceed the BaseOperating Costs (“Excess Operating Costs”). Tenant’s obligation for ExcessOperating Costs is referred to as “Tenant’s Share.”

 

5.2 “Operating Costs” Defined.“Operating Costs” shall mean the total-of all costs and expenses incurred inconnection with the ownership, operation, maintenance, replacement and repairof the Premises, including, without limitation, all sums expended for:

(a)                                  Supplies,materials, labor and equipment, used in or related to the operation andmaintenance of the Premises.

(b)                              Water,electricity, gas, sewer, waste disposal and other utilities, security, heating,air conditioning, ventilating, lighting, landscaping, painting, signage andtrash removal (not otherwise paid for directly by Tenant).

(c)                                  Maintenance,management, janitorial and service agreements related to the Premises(provided, however, that Tenant shall have the obligation to obtain and providejanitorial services for the Premises).

(d) Legal and accountingcosts (excluding legal costs of negotiating, terminating or -extending thisLease), incurred by Landlord in the operation of the Premises.

(e)                                  Insurancepremiums and costs, including but not limited to the premiums and costs offire, casualty and liability coverage, rental abatement, earthquake and floodinsurance related to the Premises.

(f) Maintenance, repairand replacement costs relating to the Premises, including without limitation,sidewalks, landscaping, service areas, driveways, parking areas (includingrepairing, resurfacing, repaving and restriping), walkways, building exteriors(including painting and repairing) roofs, signs and directories.

(g)                                 Clerical,supervisory and janitorial staff, and a reasonable management fee to Landlord.

(h) Real estate taxes andassessments, including all taxes, assessments (general and special) and otherimpositions or charges which may be taxed, charged, levied, assessed or imposedupon all or any portion of or in relation to the Premises or any portionthereof, any leasehold estate in the Premises or measured by rent from thePremises, including any increase caused by the transfer, sale or encumbrance ofthe Premises or any portion thereof, and specifically including all assessmentsand charges imposed against the Premises. Such taxes shall also include anyform of assessment, levy;—charge or tax (other than estate, inheritance, netincome or franchise taxes) imposed by any authority having a direct or indirectpower to tax or charge, including without limitation, any city, county, state,federal or any improvement or other district, whether such tax is (i)determined by the area of the Premises or the rent or other sums payable underthis Lease, (ii) upon or with respect to any legal or equitable interest ofLandlord in the Premises or any part thereof, (iii) upon this transaction orany document to which Tenant is a party creating a transfer in any interest inthe Premises, (iv) in lieu of or as a direct substitute in whole or in part orin addition to any real property taxes on the Premises, (v) based on anyparking spaces or parking facilities provided in the Premises, or (vi) inconsideration for services, such as police protection, fire

 

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protection, street,sidewalk and roadway maintenance, refuse removal of other services that may beprovided by any governmental or quasi-governmental agency from time-to-time.Notwithstanding the foregoing, Operating Costs shall not include any penalty orlate charge for Landlord’s failure to pay taxes or assessments when due andpayable. If the Premises- are taxed as unimproved land for some or all of theFirst Lease Year, then Base Operating Costs will be calculated using the taxesand assessment on the Premises for the first tax year in which the Premises areassessed with the improvements contemplated by this Lease.

Operating Costs shall notinclude depreciation of the Building, loan payments, real estate commissions,the initial cost of constructing the Building and other portions of Premises orTenant Improvement costs.

 

5.3 Tenant’s Share of Excess Operating Costs.Landlord, at its option, shall have the right to estimate the amount of ExcessOperating Costs next due and to collect and impound such amount from Tenant ona monthly, quarterly or such other basis as Landlord, in its discretion, maydetermine. Landlord shall provide Tenant with a reconciliation of Tenant’simpound account within 90 days after the end of each Lease Year, and if suchreconciliation reveals that Tenant’s impound account is insufficient to satisfyTenant’s Share of the Excess Operating Costs for such year, Tenant shall pay toLandlord such deficiency within ten (10) days after Tenant’s receipt of thereconciliation. Tenant, at Tenant’s cost and expense, may audit the OperatingCosts upon reasonable notice to Landlord. Landlord shall apply any excess inTenant’s impound account to Tenant’s rental obligations for the following month.After the final reconciliation after the expiration of the Lease Term, Landlordshall pay to Tenant any excess funds remaining in Tenant’s impound account. IfLandlord elects not to impound Tenant’s Share of Excess Operating Costs,Tenant’s-Share of Excess Operating Costs shall be computed not more than onceeach month and not less than once each year and shall be paid by Tenant withinten (10) days after receipt of a bill therefor from Landlord. Tenant’s Share ofExcess Operating Costs relating to items (c), (f), and (g) of Section 5.2above shall not increase more than five percent (50) per year.

 

6.                                       CONSTRUCTIONOF PREMISES

6.1 Obligations of Landlord and Tenant.Landlord shall, at Landlord’s expense, prepare the Premises for Tenant’soccupancy by performing that work described as “Landlord’s Improvements” onattached Exhibit “C” (“Landlord’s Improvements”). Landlord shall notify Tenantwhen Landlord substantially completes Landlord’s Improvements and, thereafter,Tenant shall, at its expense, perform all work and supply all materialsnecessary for Tenant’s use of the Premises that are not included withinLandlord’s Improvements.

 

6.2 Condition of the Premises.Tenant shall have 30 days after the Commencement Date of this Lease to giveLandlord notice of any contended defects in the Premises or in Landlord’sImprovements. Upon the expiration of such—30-day period, the Premises andLandlord’s Improvements shall be deemed to be in satisfactory condition and incompliance with this Lease, except as set forth to the contrary in Tenant’snotice to Landlord. If Tenant fails to give such notice within such 30-dayperiod or to specify a defect therein, Tenant shall be deemed to haveirrevocably waived all rights with respect to such defects, but only withrespect to these defects which Tenant could have reasonable detected. Uponreceipt of any such notice Landlord shall repair any actual defects orvariances in the exercise of reasonable diligence to the extent such work isLandlord’s obligation pursuant to this Lease. The existence of any defects orvariances shall not affect Tenant’s obligations set forth in Section 6.1.

 

6.3 ADA Standards.Landlord represents and warrants that during the Lease Term the Building willmeet all handicap standards per the 1988 Uniform building Code and allapplicable requirements of the Americans. with Disabilities Act of 1990 (the“ADA”). Landlord agrees, promptly and with due diligence, to make anyalterations and revisions necessary as a result of breach of the foregoingwarranty and representation, at Landlord’s sole cost, without charge to anyallowance provided to Tenant and without allocating such costs to ExcessOperating Costs, it being agreed that such costs are not includable asOperating Costs.

 

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7.                                       COMMONAREAS

7.1 “Common Areas” Defined. “CommonAreas” are those areas and facilities within the Premises that are used forlandscaping and open-space areas, parking areas, service -roads, loadingfacilities, sidewalks, driveways and similar uses.

 

7.2 Use of Common Areas. Tenantshall have the exclusive right to use the Common Areas subject to the terms ofthis Lease. The foregoing notwithstanding, Tenant shall have no claims againstLandlord arising out of the Condemnation or other taking by any publicauthority of any or all of the Common Areas.

 

7.3 Parking. The Common Areas shall include a minimumof eighty (80) parking spaces, including fifty (50) covered parking spaces. Theparking’ cover shall be of semi-cantilevered construction, and the coveredparking shall be located partially on 78th Street and partially at the rear ofthe Building. Tenant and its subtenants, invitees, licensees, agents,contractors, representatives, and employees (“Tenant’s Permittees”) shall parkonly in the areas designated for parking. If Landlord determines that Tenant orTenant’s Permittees are not parking in the designated areas, Landlord shallgive Tenant 3 business days’ notice of such fact and, thereafter, Tenant shall,within 3 business days of demand from Landlord, pay to Landlord the sum ofFifteen Dollars ($15.00) per day for each vehicle parked by Tenant or Tenant’sPermittees outside such designated areas; provided, however, that any demandsfor payment must be given to Tenant within 7 days after the occurrences withrespect to which payment is demanded.

 

8.                                       USEOF PREMISES

8.1 Permitted Uses. Tenant shalloccupy and use the Premises for the purposes specified in Section 1.7, andfor no other purposes whatsoever. No transfer pursuant to Article 17shall affect the foregoing restriction. Tenant warrants that Tenant hasinvestigated and is satisfied that the use of the Premises as permitted by thisLease and Tenant’s proposed manner of operation will comply with all applicablelaws, statutes, ordinances, codes, rules and regulations of governmental and/orprivate entities having jurisdiction over the Premises, including withoutlimitation all zoning laws regulating the use and enjoyment of the Premises.Tenant hereby waives any defense of its obligations hereunder based upon thelegal doctrines of frustration of purpose or impossibility or other defensesbased upon Tenant’s inability to use the Premises for the purposes for whichthe Premises were leased.

 

8.2 Insurance Requirements. Tenantshall not engage in or permit any activity that will cause the cancellation ofor increase the existing insurance premiums on or relating to the Premises.Tenant shall not allow or permit to remain in or about the Premises anyarticle that may be prohibited by the broadest form of “All Risk” or “SpecialForm” property damage insurance policies. Tenant shall comply with allrequirements pertaining to the use of the Premises -necessary for maintenanceof such insurance as Landlord may from time to time obtain for the Premises. IfTenant breaches this Section, Landlord shall have the right to demand andreceive from Tenant an amount equal to the increase in the existing premiumrate.

 

8.3 Prohibited Operations. No use,operation or conduct by Tenant or Tenant’s Permittees shall be conducted orpermitted within the Premises that is inconsistent with the operation of afirst-class industrial project, as reasonably determined by Landlord. Withoutlimiting the foregoing, Tenant shall not commit or permit any waste or anyunlawful, improper or offensive use of the Premises, or create or permit anypublic or private nuisance.

 

8.4 Antenna. Tenant shall not erect any aerial orantenna or any other item on the roof or exterior walls of the Premises, otherthan signs as permitted by Article 19, except as expressly approved byLandlord or as shown on Exhibit “E” attached hereto.

 

8.5 Compliance with Laws. Tenant, at its expense,shall comply with all existing and future rules, regulations, ordinances,orders, codes, laws and requirements of all municipal, county, state, federaland other applicable governmental authorities, the Board of Fire Underwriters,Landlord’s and Tenant’s insurance companies and other organizations thatestablish insurance rates pertaining to the Premises or the use of the CommonAreas, including without limitation the installation of fire extinguishers,alarm systems, sprinkler systems or automatic dry chemical extinguishingsystems. The judgment of any court of competent jurisdiction, or Tenant’sadmission in any action or proceeding against Tenant, whether or

 

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not Landlord is a partythereto, that Tenant has violated any such rule, regulation, ordinance, order,code, law or requirement, shall be conclusive of that fact as between Landlordand Tenant.

 

8.6 Use of Walls. Landlord reserves the use of theexterior walls, the roof and the floor of the Premises and the right to install,maintain, use, repair and replace pipes, conduits, wire and-other improvementsthrough the Premises in locations and in a manner that will not materiallyinterfere with Tenant’s use of the Premises.

 

8.7 Indecent Materials. Tenant orTenant’s Permittees shall not manufacture, produce, publish, sell, lease,display or disseminate on the Premises any media, materials, or devices(including, but not limited to newspapers, magazines, books, pamphlets,paintings, photographs, tapes, films, cassettes, cable television programs,movies, advertisements, and records) that Landlord, in its reasonablediscretion, deems to be unacceptable or inappropriate due to the indecent orotherwise offensive nature and content of such media, materials, or devices.Landlord specifically retains the right to enter and inspect the Premisesduring normal business hours to assure itself that Tenant is not in violationof this covenant. Tenant shall immediately cease the production of and removefrom the Premises, at Tenant’s cost, any such media, materials or devices uponreceipt of notice from Landlord requiring such ceasing and removal. If Tenantfails to permanently cease the production of and remove such media, materialsor devices within 2 business days after receipt of such notice, notwithstandingany grace periods afforded to Tenant elsewhere in this Lease, Tenant shall bedeemed in breach of this Lease and Landlord shall have the right to enter thePremises to remove the media, material or devices and to immediately terminatethis Lease as of the date of the breach.

 

8.8 Hazardous Substances. Tenantshall not manufacture, produce, use, store, release, dispose or handle in orabout the Premises or transfer to or from the Premises (or permit any otherparty to do such acts) any Hazardous Substance except in compliance with allapplicable Environmental Laws. Tenant shall not construct or use anyimprovements, fixtures or equipment or engage in any act on or about thePremises that would require the procurement of any license or permit pursuantto any Environmental Law. Tenant shall immediately notify Landlord of (i) theexistence of any Hazardous Substance on or about the Premises that may be inviolation of any Environmental Law (regardless of whether Tenant is responsiblefor the existence of such Hazardous Substance), (ii) any proceeding orinvestigation by any federal, state or local governmental authority regardingthe presence of any Hazardous Substance on the Premises or the migrationthereof to or from any other property, (iii) all claims made or threatened byany third party against Tenant relating to any loss or injury resulting fromany Hazardous Substance, or (iv) Tenant’s notification of the National ResponseCenter of any release of a reportable quantity of a Hazardous Substance in orabout the Premises. “Environmental Laws” shall mean any federal, state or localstatute, ordinance, rule, regulation or guideline pertaining to health, industrialhygiene, or the environment, including without limitation, the federal ComprehensiveEnvironmental Response, Compensation, and Liability Act,, as amended, and theArizona Environmental Quality Act. “Hazardous Substance” shall mean allsubstances, materials and wastes that are-or become regulated or classified ashazardous or toxic under any Environmental Law.

 

8.9 Rules and Regulations. Landlordshall have the right from time to time to adopt, amend, delete or modifyreasonable rules and regulations for the use, safety, cleanliness or care ofthe Premises. All rules and regulations and any modifications thereto shall beeffective immediately upon the delivery of notice to Tenant, along with acomplete copy of the rules and regulations. Tenant and Tenant’s Permitteesshall at all times faithfully observe and strictly comply with the rules andregulations. Any failure 1:iy-Tenant or Tenant’s Permittees to comply with anyrules or regulations shall be deemed to be a default under this Lease.Landlord-shall have no liability to Tenant for any violation of rules andregulations by any other tenant or person.

 

9.                                       WAIVERAND INDEMNITY

 

9.1 Assumption and Waiver. Tenantassumes all risk of, and waives all claims against Landlord arising from,damage, loss or theft of property or injury to persons in, upon, or about thePremises from any cause. The foregoing waiver includes, without limitation, thefollowing risks against which Tenant should maintain adequate insurance toprotect Tenant’s inventory, equipment and other personal property: 

 

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(i) any defect in orfailure of plumbing, heating or air conditioning equipment, electric wiring,water pipes, stairs, railings or walks; (ii) the disrepair of any equipment;(iii) the bursting, leaking or running of any tank, washstand, water closet,drain or any pipe or tank in, upon or about the Premises; (iv) the backup ofany sewer pipe or down spout; (v) the escape of steam or hot water; (vi) water,snow or ice; (vii) the falling of any fixture, plaster or stucco; (viii) brokenglass; (ix) any act or omission of occupants of adjoining property; and {x) anyunauthorized or criminal entry of third parties within the Premises or theBuilding, regardless of any breakdown, malfunction or insufficiency of anysecurity measures provided. Notwithstanding anything contained herein to thecontrary, Tenant shall not be liable to the extent that damage or injury isdetermined ultimately to be caused by the negligent or intentional tortuousacts of Landlord, or of Landlord’s employees, agents, invitees, licensees, orcontractors (“Landlord’s Agents”) or by breach of this Lease by Landlord.

 

9.2 Notice of Claims. Tenant shallgive notice to Landlord as soon as possible (i) in case of fire or accidents inthe Premises or any breakdown or malfunction of any security measures, and (ii)in the event any claim, action, proceeding or suit instituted or threatenedagainst Landlord.

 

9.3 Indemnity. Tenant shall indemnify Landlord andLandlord’s property manager, if any, against all claims, costs, attorneys’fees, damages, expenses, liabilities and losses arising out of or in connectionwith any of the following:

(a) Tenant’s and Tenant’sPermittees’ use of the Premises or the conduct of Tenant’s business thereon;

(b) Any activity, work oroccurrence performed, permitted or suffered by Tenant in, on or about thePremises;

(c) Tenant’s failure toperform fully and properly all of Tenant’s obligations under this Lease;

(d) The negligence orintentional misconduct of Tenant or Tenant’s Permittees;

(e) Any loss or damage toTenant’s property or the property of others or death of or injury to Tenant orTenant’s Permittees, unless caused by Landlord’s negligence or intentionalmisconduct;

(f) Tenant’s compliancewith or violation of any laws, statutes, codes, licensing requirements,ordinances, orders and rules and regulations of any public authority applicableto the Premises or any activity engaged thereon;

(g) Tenant’s failure tosurrender the Premises immediately upon the expiration or termination of the LeaseTerm;

(h) Any claims forbrokerage commissions or finder’s fees resulting from Tenant executing thisLease, excluding fees payable to the general leasing agent for the Projectdesignated by Landlord;     -

(i) The production orpresence of a Hazardous Substance in or about the Premises or any violation orclaim of violation of any Environmental Law relating to the Premises as aresult of the act or omission of Tenant or Tenant’s Permittees.

If any claim is made oraction is brought against Landlord as a result of any activities, or omissionslisted above, Tenant, upon notice from Landlord, shall diligently defend-thesame at Tenant’s expense through counsel satisfactory to Landlord.Notwithstanding anything contained herein to the contrary, Tenant shall not beliable to the extent that damage or injury is determined ultimately to becaused by the negligent or intentional tortuous act of landlord, or ofLandlord’s employees, agents, invitees, licensees, or contractors (“Landlord’sAgents”) or by breach of this Lease by Landlord.

 

10.                                 INSURANCE

10.1 Required Insurance. Tenant, atits expense, shall procure and maintain the following insurance:

(a) Comprehensive generalliability insurance policies against claims for bodily injury, death orproperty damage, occurring in, on or about the Premises or the Project, orresulting from Tenant’s use, occupancy or maintenance thereof, which policiesshall name Landlord, Landlord’s property manager and -any other entitiesdesignated by Landlord, as additional insureds. Such insurance shall be primarywith respect to Landlord and shall be in a total amount of at least FiveMillion Dollars ($5,000,000.00) combined single limit (or in such higheramounts as Landlord may reasonably designate from time to time). In the eventsuch amount is impaired or reduced for any reason, including but not limitedto, claims made by Tenant against such policies, Tenant shall immediatelypurchase additional insurance so that the total amount of insurance requiredhereunder shall be available in full at all times during the Lease Term. Noparties named as additional insureds shall incur any liability for the paymentof premiums for such policies. Such

 

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policies shall beendorsed to indicate that they will cover Tenant’s obligations underArticle 9 to the coverage limit of such policies (to the extent coverageis available under standard form policies or under a contractual liabilityendorsement) and shall provide that the insurance carrier shall have the dutyto defend and/or settle any legal proceeding filed against Landlord seekingdamages on account of bodily injury or property damage liability even if any ofthe allegations of such legal proceedings are groundless, false or fraudulent;

 

(b) Insurance againstdamage and destruction to Tenant’s personal property, inventory and allfixtures, equipment, machinery, improvements, additions and alterations to thePremises occurring as a result of acts or events typically covered by thebroadest form “All Risk” or “Special Form” property damage insurance policiesin the amount of full replacement value. In the event such items are damaged ordestroyed, Tenant shall diligently and fully repair and restore such items;

(c) Fire legal liabilityinsurance in an amount equal to the full replacement value of all improvements,additions and alterations within the Premises that Tenant is not entitled toremove from the Premises. Such insurance shall provide that all funds payableas a result of damage to the Premises or the Building shall be payable to Landlord.Such insurance policy shall also contain a severability of interest clausepertaining to the coverage afforded by such policy;

 

(d) Such other insuranceand in such amounts as may from time to time be reasonably required by Landlordagainst other insurable hazards. 

Landlord makes norepresentations that the above listed insurance is adequate to protect Tenantand Tenant may obtain such additional insurance=coverage as Tenant deemsappropriate.

 

10.2 Notice of Insurance. Allinsurance provided for in this Article shall be effected under valid andenforceable policies issued by insurance companies authorized to do business inArizona and approved by Landlord. The insurance policies shall be endorsed toindicate that Tenant’s coverage shall not be invalid due to any act or omissionon Landlord’s part. Tenant shall cause the insurance companies issuing suchinsurance to agree to notify Landlord in writing of any cancellation,alteration or non-renewal of said insurance at least 60 days prior thereto. Tenantshall deliver to Landlord at least 30 days prior to the date Tenant takespossession of the Premises, and thereafter on each anniversary of theCommencement Date, certificates evidencing the insurance coverage requiredherein. If Tenant fails to deliver such certificates to Landlord at least five(5) business days prior to the expiration or termination of any existinginsurance coverage or if Landlord receives notice that the existing insurancecoverage has been altered or reduced, Landlord, notwithstanding any graceperiods afforded Tenant in this Lease, shall be entitled to terminate thisLease immediately upon notice to Tenant. All public liability and propertydamage policies shall contain a provision that Landlord, although .named as anadditional insured, shall nonetheless be entitled to recovery under saidpolicies for any loss occasioned to Landlord, its servants, agents andemployees by reason of Tenant’s negligence. All insurance policies shallprovide “occurrence” coverage, rather than “claims-made” coverage.

 

10.3 Waiver of Subrogation:  Release. Notwithstanding any otherprovisions in this Lease, Tenant and Landlord each waive all rights of recoveryagainst the other, and against the directors, shareholders, partners, officers,employees, agents and representatives of the other, for loss of, or damage to,the waiving party, its property or the property of others under its control tothe extent that, with respect to Landlord, Landlord receives insurance proceedsfrom any insurance policy in force at the time of such loss or damage and, withrespect to Tenant, Tenant is required to maintain insurance pursuant to thisLease. Each party shall, upon obtaining the insurance policies requiredhereunder, give notice to the insurance carrier or carriers that the foregoingwaiver of subrogation is contained in this Lease and shall obtain, at their ownexpense, an appropriate waiver of subrogation endorsement from the insurer. Ifthe Premises, the Building or the Project or Tenant’s personal property are damagedor destroyed by fire or any other cause against which Tenant is required tomaintain insurance pursuant to this Lease, Landlord shall not be liable toTenant for any such damage or destruction. Tenant shall have no claim to orinterest in any portion of the proceeds of any insurance maintained byLandlord.

 

10.4 Landlord’s Insurance. Landlordshall maintain “All Risk” hazard insurance on the Building and otherimprovements to the Premises in an amount equal to the full replacement valueof the Building and other

 

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improvements.  Failure by Landlord to maintain suchinsurance shall not relieve Tenant of any obligation under this Lease,including without limitation, the obligation to pay rent.

 

11.                                 PERSONALPROPERTY TAXES

Tenant shall pay, priorto delinquency, all taxes assessed against or levied upon fixtures, leaseholdimprovements (including without limitation those improvements defined as“Leasehold Improvements” in the Maricopa County version of DPST Form 520,“Personal Property Statement”) and all personal property located in or upon thePremises (“Taxed Personal Property”). Tenant shall cause the Taxed PersonalProperty to be assessed and billed separately from the real property upon whichthe Premises are located. Tenant shall deliver copies of the DPST Form 520filed with the State of Arizona and Maricopa County within five (5) businessdays after mailing or delivering the form to the State and County,respectively. If any of Tenant’s Taxed Personal Property is assessed and taxedwith the Building or the Project, Tenant shall pay to Landlord its share ofsuch taxes, as determined by Landlord, within 10 days after delivery to Tenantby Landlord of a statement setting forth the amount thereof.

 

12.                                 MAINTENANCE

12.1 Landlord’s Obligations.Landlord shall promptly repair and maintain in good order and condition theCommon Areas and the roof, foundation, load-bearing walls, columns and beams,and heating, ventilation, and air conditioning equipment (provided Landlordshall only be obligated for replacement, not repair or maintenance, of HVACequipment) of the Building, and the outside Building plumbing, electrical andother facilities serving the Premises, except for (i) maintenance or repairsrequired because of any negligent or intentional act or omission of Tenant orTenant’s Permittees, including without limitation, damage to the interior orexterior of the Building or the parking stalls and covers, or (ii) maintenance,repairs, alterations or improvements required by a rule, regulation, ordinance,order, code, law or requirement of any governmental authority or insurer as aresult of Tenant’s use or possession of the Premises. Except as providedelsewhere in this Lease, Monthly Rent shall not abate and Landlord shall not beliable by reason of any injury or interference with Tenant’s business arisingfrom the making of any repairs, alterations, or improvements in or to thePremises; provided, however, Landlord shall perform such work in a manner so asto not unreasonably interfere with the conduct of Tenant’s business. Tenantshall not be entitled to undertake any such maintenance or repairs, whether atthe expense of Tenant or Landlord. Tenant shall pay to Landlord Tenant’s Shareof the costs incurred by Landlord in-performing such repair and maintenanceobligations in accordance with the provisions of Article 5 above; providedthat Tenant has no obligation to pay for repairs necessitated by faultyconstruction performed by Landlord except for those repairs necessitated bydefects waived by Tenant pursuant to Section 6.2. 3f Landlord elects toperform maintenance or repairs required due to the negligence or misconduct ofTenant or Tenant’s Permittees, Tenant shall reimburse Landlord for all costs soincurred by Landlord (including a reasonable charge for Landlord’s overhead)within 10 days after delivery of demand by Landlord.

 

12.2 Tenant’s Obligations. Tenantshall, unless specifically designated as Landlord’s obligations inSection 12.1, at Tenant’s expense, promptly repair and maintain thePremises in good order, condition and repair, including without limitation, allplate glass, windows, window coverings or treatment, doors, floors, floorcoverings, utility systems, wiring, alarm systems, interior wall surfaces andpainting, heating, ventilating and air conditioning systems (except forreplacements of HVAC equipment, which shall be Landlord’s obligation),switches, conduits, all appliances and equipment, all signage and allmaintenance, repairs, alterations or improvements required due to those mattersset forth in Sections 12.1(i) and 12.1(ii) above. Tenant shall change thefilters for the heating and air conditioning equipment during the first week ofeach month and shall contract with a service company acceptable to Landlord forthe annual maintenance of heating and air conditioning equipment. Tenant shallfurnish Landlord with a copy of the service contract within 10 days aftertaking possession of the Premises, and a copy of any subsequent contractswithin 10 days after execution. If Landlord determines that Tenant is notchanging the filters as required above, Landlord shall have the right torequire Tenant to contract with a service company to change such filters and toperform all other maintenance on the heating and air conditioning equipment forthe remainder of the Lease Term. Tenant shall, at Tenant’s expense, contractfor janitorial services, trash and waste removal and disposal, security servicesand protection and pest extermination with such persons and at such intervalsas Landlord shall approve in writing, such approval not to be unreasonably

 

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delayed or withheld.Tenant shall sweep and clean as needed and shall keep the sidewalk and areaimmediately adjacent to the Building free of refuse. All refuse shall becontained in trash containers at locations approved by Landlord.

 

13.                                 ALTERATIONS

13.1 Landlord’s Approval.  Tenantshall not make any alteration, addition or improvement to the Premises,including without limitation to the entrances and exits to the Premises, or toany fixture, wiring, plumbing, heating and air conditioning or other equipmenttherein without Landlord’s prior consent; provided, however, that Landlord’sconsent shall not be required for any alterations (i) of a purely cosmeticnature, and (ii) which do not in any way alter or affect any structuralelements of the Building, or any wiring, plumbing, heating, air conditioning,or other systems serving the Premises, and (iii) that are not visible outsideof the Premises, and (iv) that do not limit the uses to which the Premises maybe put or diminish the value of the Building and the rest of the Premises. IfLandlord’s consent is required hereunder, Landlord shall have the right toimpose any condition to such- consent as Landlord deems desirable (including,without limitation, the posting of bonds or use of a contractor designated orapproved by Landlord). Tenant must acquire, prior to the commencement ofconstruction, all necessary building permits and must provide Landlord withcertificates of property (course of construction), workmen’s compensation andliability insurance in form and amounts satisfactory to Landlord. Anyalteration, addition or improvement shall be completed in the exercise of duediligence in a good and workmanlike manner, in accordance with plans,specifications and drawings approved in writing by Landlord if Landlord’sconsent is required hereunder, and in compliance with this Lease and allapplicable laws, regulations and codes and all requirements of any insurerproviding coverage for the Premises. Tenant shall pay in a timely manner allcosts and fees incurred in connection therewith.

 

13.2 Alterations Become Part ofPremises. All alterations, additions or improvements to the Premises by Tenant(except movable furniture, equipment and trade fixtures) shall become part ofthe Premises and Landlord’s property immediately upon installation thereofunless Landlord requires the removal thereof prior to the termination of thisLease. Any alteration, addition or improvement that Tenant is required or permittedto remove, together with any movable furniture, equipment and trade fixtures,shall be removed at Tenant’s expense prior to the termination of this Lease andTenant shall promptly repair any damage to the Premises caused by such removal.                               IfTenant fails to remove any alteration, addition or improvement that Tenant isrequired to remove or fails to repair damage caused by such removal, Landlordshall have the right to undertake such action for Tenant and to collect withinthree (3) business days after demand from Tenant all costs (including areasonable charge for Landlord’s overhead) incurred in such removal or repair,together with Default Interest from the dates of Landlord’s payments until paidby Tenant.

 

14.                                 LIENS

Tenant shall keep thePremises free and clear of all liens incurred by or resulting from acts ofTenant. If any lien is filed, Tenant shall, within five (5) business daysthereafter, at its expense, cause the lien to be fully discharged by paying theobligation-secured thereby or by obtaining and recording a surety bond inaccordance with A.R.S. §33-1004. Tenant is not authorized to act for or onbehalf of Landlord for the purpose of constructing any improvements to thePremises, and neither Landlord nor Landlord’s interest in the Premises shall besubject to any obligations incurred by Tenant. Landlord shall be entitled, butnot obligated, to post on the Premises during the course of any construction byTenant such notices of non-responsibility as Landlord deems appropriate. Tenantshall, at least five (5) business days before the commencement of any workwhich might result in a lien, provide notice thereof to Landlord so thatLandlord may post such notices. If any lien is filed or any action affectingthe title to the Premises is commenced the party receiving such informationshall immediately notify the other party.

 

15.                                 DAMAGEAND DESTRUCTION

15.1 Termination.     If {i) the Premises or any portion thereof aredamaged or destroyed by any cause that is insured against by Landlord (an“Insured Casualty”) to an extent of at least 50% of the replacement cost of thePremises, (ii) the Premises or the Building are damaged or destroyed to anextent of at least 5% of the replacement costs of such structures by any causewhich is not insured against by Landlord, (iii) the Premises or any portionthereof are damaged or destroyed to an extent of at least 10% of thereplacement cost of the Premises by any cause whatsoever during the last three(3) years of the Lease

 

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Term, or (iv) theBuilding is damaged or destroyed to an extent of at least 50% of itsreplacement cost by any cause whatsoever (whether or not the Premises aredamaged or destroyed), either Landlord or Tenant shall be entitled to terminatethis Lease by notice to the other party given on or before 60 days after the,occurrence of such casualty. The effective date of termination shall be 10 daysafter receipt by the appropriate party of such notice. Tenant shall give promptnotice to Landlord of any damage occurring on the Premises.

 

15.2 Repair. If this Lease is not terminated as provided above, Landlord shall, inthe exercise of reasonable diligence and at’-its own expense, repair thePremises and the Building except as hereinafter provided. In such event, Tenantwaives the provisions of A.R.S. §33-343. If the damage or destruction is causedby an Insured Casualty, Landlord shall not be obligated to commence such repairuntil insurance proceeds therefor are made available to Landlord. Landlordshall not be obligated to repair or restore the Premises or the Building to acondition other than the condition of such improvement as existed on theCommencement Date. Upon completion of such repair or restoration by Landlord,Tenant shall diligently proceed to repair and restore the Premises to itscondition immediately prior to such damage or destruction, subject to theprovisions of Article 13.

 

15.3 Abatement of Rent.   During the period commencing with the dateof any damage or destruction that Landlord is required or elects to repair orrestore, and ending with the completion of such repairs or restoration, MonthlyRent and Tenant’s other rental obligations shall be proportionately abated inan amount equal to the proportion of which the portion of the Premises rendereduntenable bears to the total area of the Premises immediately prior to suchdamage and destruction. Notwithstanding the foregoing, Monthly Rent shall notabate if such damage or destruction was caused by the negligent or intentionalact or omission of Tenant, or Tenant’s Permittees. Except as expressly setforth in this Lease, Tenant shall not be entitled to terminate this Lease or toreduce or abate Monthly Rent or other sums payable hereunder in the event ofany damage or destruction from any cause whatsoever, including without limitationas a result of claims for inconvenience or loss of business.

 

16.                                 EMINENTDOMAIN

16.1 Total Condemnation.        If the entire Premises istaken under the power of eminent domain or conveyed by Landlord under thethreat thereof (a “Condemnation”), this Lease Term shall terminate as of thedate of Condemnation. A11 Monthly Rent and other obligations shall be paid andperformed up to such date, and Tenant shall have no claim against Landlord forthe value of any unexpired term of this Lease.

 

16.2 Partial Condemnation of thePremises. If a portion of the Premises is taken by a Condemnation and suchpartial taking renders the Premises unsuitable for Tenant’s business, asreasonably determined in good faith by Landlord and Tenant, this Lease shallterminate as of the date of Condemnation and Tenant shall have no claim againstLandlord for the value of any unexpired term of this Lease. If the partialtaking by Condemnation does not render the Premises unsuitable for Tenant’sbusiness, Landlord shall, in the exercise of reasonable diligence, restore the

 
| LANDLORD’S NOTARY |   |
|------------------------|--------|
|                   |   |
| STATE OF ARIZONA       | )      |
|                   | )      |
| County of Maricopa     | )      |

 

The foregoing documentwas acknowledged before me this I0th day of February 1995, by /s/ ThomasW. Maclain, the Manager for 78 MacClain LLC, an LLC, on behalf of said LLC

IN WITNESS WHEREOF, Ihereunto set my hand and official seal.

 

Notary Public

 

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My commission expires:

 

STATE OF ARIZONA

County of Maricopa

Theforegoing document was acknowledged before me this 23 day of December, 1994, byDouglas Klein, the Vice President of Go Video, Inc, an Corporation on behalf ofsaid Corporation.

IN WITNESS WHEREOF, Ihereunto set my hand and official seal.

 

Notary Public: /s/ MurielBurney

 

My commission expires:7/30/98

 

EXIIIBIT “A”

 

Legal Description of thePremises

 

North Scottsdale Airpart,Unit No. 2, Lots 13 and 14,commonly known as 7807 East McClain Drive, Scottsdale, Arizona.

 

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EXHIBIT “B” Site Plan

 

 

 

 

 

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EXHIBIT “C” WORK LETTER

 

BUILDING SPECIFICATIONSFOR

TOM McClain                   ,

Division #1 -SOFT COSTS,GENERAL C!2NDMONS, ALLOWANCE ITEMS:

 

ARCHITECTURAL ANDENGINEERING FOR ST RUCTURAL, MECHANICAL PLUMBING, ELECTRICAL, CIVIL DESIGN,LANDSCAPE AND GRADING AND DRAINAGE PLANS

Design ReviewARCHITECTURAL AND FEES

TOPO

CONSTRUCTION STAKING

SLUEPRINTING

SOILS REPORT

CONCRETE AND COMPACTIONTESTING

BUILDING PERMIT, LOG INFEES

GRACING AND DRAINAGEPERMIT AND REVIEW FEES

LANDSCAPING OFFSITE PERMITAND DRAWING

DRIVEWAY PERMIT AND PLANREVIEW

1’ WATER METER AND WATERRESOURCE ACQUISITION FEE

SEWER DEPLOYMENT FEE FORA 1’ WATER METMR

TELEPHONE HOOIC;JP TOONFE CENTRAL LOCATION

WRITTEN FIVE YEARGUARANTEE OF TERMITE PRE-TREATMENT

WATER USE FEE SCOTTSDALE

BUILDERS RISK INSURANCE

PENALTY FOR PAVEMENT CUTSITE TRAILER AND FACILITIES: PROGRESSIVE CLEAN-UP DURING CONSTRUCTION

FINAL DETAIL

TEMPORARY POWER AND WATER

TRASH DISPOSAL (JOBDUMPSTER)

PROJECT SUPERVISION

SCHEDULING ANDCOORDINATICN

TELEPHONE

ALLOWANCE ITEMS:

ELECTRIC HOOK-UPTRANSFORMER FEES LMLITY COMPANY

CABINET AND COUNTER TOP

FLOOR COVERING-CARPETALLOWANCE $16.00/sq.yd

 (COLOR AND STYLE AS APPROVED BY OWNER)

 

DIVISION #4 MASONRY:

8 X 8 x 18 CMU EXTERIORWALLS. MIX OF CENTER SCORED, SCORED CMU PER SCOTTSDALE D.R. SUBMITTALREQUIREMENT, FUTURE HANGAR DOOR AREA 2’ x 6’ METAL STUD SYNTHETIC STUCCO

(1) REFUSE PAD WITH (3)ENCLOSED 910E5, SCREEN WALLS 28’ EXTERIOR WALL HEIGHT

 

DIVISION #5 - METALS:

ROOF SUPPORT =LUMNS,LINTELS AND MISC. STRUCTURAL STEEL (1) ROOF LADDER AND SCUTTLE

STEEL PIPE NOLLARDS ASNECESSARY TO PROTECT MASONRY WALLS t8’ CLEAR HEIGHT IN WAREHOUSE TO BOTTOMOFTRUSSES COVERED PARIONG FOR 50 CARS

 

DIVISION #6 - WOOD ANDPLASTICS:

TRUSS ROOF SYSTEM.. 1/2-PLYWOOD, 2” X 4’ PERLINS, DOUBLE SLOPE ROOF SUPPORT PER SATELLITE DISH

 

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DIVISION #7 - THERMAL ANDMOISTURE PROTECTION

PROVIDE A DOUBLE SLOPEROOF WITH CRICKETS, OVERFLOWS, SCUPPERS, CONDUCTOR HEADS AND OPEN FACE DOWNSPOUTS

CAULK AND SEALANTS AT ALLEXTERIOR JOINTS INCLUDING WINDOWS 5.8.5. MODIFIED G-4 25 M., 10 YEAR LIMITEDROOF

R-30 CEILING A.C. AREAS

R-11 VINYL BACKINSULATION IN WAREHOUSE WHITE

R-11 INSULATION EXTERIORWALLS A.C. AREA AND AROUND REST ROOMS AND PRIVATE OFFICES

 

DIVISION #8 - DOORS ANDWINDOWS:

12’ BY 14’ OVERHEADSECTIONAL MANUALLY OPERATED OVERHEAD DOORS AS INDICATED ON DRAWINGS (1)EXTERIOR GLASS ENTRY STOREFRONT DOORS WITH OFFSET CLOSURE. WEATHER-STRIPPING,THRESHOLD AND LOCKSET HARDWARE, BUTT-GLAZED SOLAR GRAY GLASS IN 13/4’ x 4’OFFSET PAINT ALUMINUM FRAMES

DOORS TO RECEIVE SCHLAGEOR EQUAL HARDWARE

1 314’ SOLID CORE 3’-0’ x7-8’ OAK DOORS, PRE-FINISHED STEEL’KNOCK DOWN’ DOOR FRAMES (2) 3070 STEEL MANDOORS

DOOR EXITING A.C. AREASTO RECEIVE DOOR SEAL AND CLOSURE 4’ x 8’ SINGLE DOME SKYLIGHTS AS INDICATED ONPLANS

 

DIVISION #9 - FINISHES:

EXTERIOR PAINT, 2 COATSINCLUDING DOORS

INTERIOR PAINT, 2 COATSINCLUDING WAREHOUSE WALLS STUCCO, SOFFITS

MARLITE OR CERAMIC TILE(PER PLANS) ALL RESTROOM WALLS AS REQUIRED BY CITY CODE

5/8’ DRYWALL, KNOCK DOWNFINISH, ON 3 5/8’ METAL FRAMING AT INTERIOR WALLS, 24” O.C. 8’ CEILINGINCLUDING PRODUCTION AREA

ALL OFFICE AND PRODUCTION2’ x 2’ TEGULAR ACOUSTICAL 1’ILE IN SUSPENDED GRID

 

DIVISION #10 - SPECIALTIES:.

RESTROOM PARTITIONS

MIRRORS, SOAP DISPENSERS,PAPER TOWEL DISPENSERS AND HANDICAPPED GRAB BARS AS REQUIRED BY CITY

 

DIVISIONS #11 -EQUIPMENT, #12 - FURNISHINGS, #13 - SPECIAL CONSTRUCTION, AND #14 - CONVEYINGSYSTEMS

NOT INCLUDED IN THISPROPOSAL

 

DIVISION #15 -MECHANICAL:

PLUMBING

1” WATER METER WITH 1 1/2”COPPER SERVICE TO BUILDING AND TO FIXTURES A.B.S. SEWER SERVICE

ELECTRIC WATER HEATER

TANK TYPE WATER CLOSETS                  _ HANDICAPPEDWATER CLOSET, TANK TYPE

HOSE BI885 UTILITY SINKSINKS WITH VANITY TOP AT TOILET ROOMS LUNCH SINK AT LUNCH AREA

CONDENSATE LINES FROMA.C. UNITS TO CENTRAL DRAIN

(2) COFFEE BAR SINKS ATWORK AREA AND CONFERENCE WIRELATED CABINETRY AND WORK AREA (AS DETAILEDQNPLANS)

 

H V•A_C.•

EXHAUST TANS IN RESTROOMS

A.C. INCLUDING DUCT WORKAT OFFICE, LABIENGINEERING AND TECH. AREA (1 TONl250 SO. FT) EVAP COOLERS INWAREHOUSE INCLUDING RELIEF VENTS (4 MIN. AIR CHANGES)

 

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FIRE PROTECTION:

SPRINKLER SYSTEM TO BE TWET ORDINARY GROUP # (2). SEMI-RECESSED HEADS IN CHROME ESCUTCHEONS IN ACOUSTICCEILING AREAS, BACK FLOW PREVENTOR AND TAP PER CITY REQUIREMENTS

 

DIVISION  #16 - ELECTRICAL:

WALL MOUNTED BATHROOMLIGHT FIXTURES

ALL CONDUIT, J-BOXES,SWITCHES, ETC., AS NECESSARY 120”r, 3 PHASE SERVICE ENTRANCE SECTION

200 AMP BREAKER PANELS

EMERGENCY LIGHTING ANDEXIT LIGHTING PER CITY AND FIRE CODE

8’ TWO LAMP OPEN STRIPLIGHTING FIXTURES IN WAREHOUSE PROVIDING 20 F.C. TRENCHING AND CONDUIT FROMTRANSFORMER TO SERVICE ENTRANCE SECTION WIRING OF ROOFTOP H.V.A.C. UNITS,WATER HEATER, AND TOILET EXHAUST FANS (1) TRANSFORMER PAD

PHONE CONDUIT WITH PULLSTRING TO PROPERTY LINE PER U.S. WEST REQUIREMENTS TO ONE CENTRAL LOCATION

(1) 4 x 8’ x 3/4TELEPHONE MOUNTING BOARD WITH 11S GROUND SWITCHING AS REQUIRED (3) WAY                                        ‘

SITE LIGHTING, 150 W HPSWALL PACKS, PHOTO CELL SENSOR AND INCANDESCENT DOWN LIGHTS IN SOFFITS

2’ x 4 LAY-IN FIXTURES INOFFICE AND PRODUCTION, 30 F.C.

TELEPHONE LOCATIONS, 3.BOX EMPTY CONDUIT FUTURE COMPUTER CABELING

(1) 110 VOLT OUTLET PEROFFICE WALL OR EVERY 1Q’

RECESSED CAN FIXTURES ATSELECTED LOCATIONS

 

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EXHIBIT “D” SIGN CRITERIA

1.                                       Anysign must meet all applicable standards of the City of Scottsdale and any othergovernmental agency.

2.                                       Anysign must comply with all recorded covenants, conditions, and restrictionsaffecting the Premises.

3.                                       Allnecessary governmental approvals and permits must be obtained and maintainedfor any sign erected or maintained by Tenant on—the Premises.

4.                                       Anysign must be reasonably compatible architecturally and aesthetically and interms of quality with the other improvements on the Premises.

 

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EXHIBIT “E”

CRITERIA FOR ANTENNAAND/OR SATELLITE DISH

1. Any antenna or dishmust meet all applicable standards of the City of Scottsdale, the FederalAviation Administration, the Federal Communications Commission and any othergovernmental agency.

 

2. Any antenna or dishmust comply with all recorded covenants, conditions, and restrictions affectingthe Premises.

 

3. All necessarygovernmental approvals and permits must be obtained and maintained.

 

4. Any dish shall have amaximum height of no more than twelve feet (12’) above the adjacent groundlevel.

 

5. Any dish shall beenclosed with a screen wall matching the exterior finish of the principalbuilding on the Premises. Any gate shall be aesthetically harmonious with thearchitectural character of the Premises.

 

6. Any antenna shall beroof mounted at the rear of the building so as not to be visible from the frontof the building and adjacent streets.

 

7. Noantenna shall project more than three feet (3’) above the roof or any adjacentparapet wall.

 

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Premises to a conditioncomparable to its condition prior to the Condemnation less the portion lost inthe Condemnation and this Lease shall continue in full force and effect.Landlord shall not be obligated to commence such restoration until it receivesthe entire Condemnation award nor shall it be obligated to incur expenses inperforming such restoration in excess of the Condemnation award, less allcosts, expenses and fees (including attorneys’ fees) incurred by Landlord incollecting such award. In the event of such partial condemnation, the MonthlyRent shall be reduced in proportion to the Grass Leasable Area of the Premises sotaken.

 

16.3 Partial Condemnation of theCommon Areas.  If 25% of the land areaof the Common Areas are taken by a Condemnation (or such lesser amount thatresults in parking facilities inadequate to meet the local zoningrequirements), Landlord may elect to terminate this Lease by delivery of noticeto Tenant within 30 days after the date of Condemnation and Tenant shall haveno claim against Landlord for the value of any unexpired term of this Lease.The foregoing shall in no way restrict Landlord from providing alternativeparking facilities to serve the Project, although Landlord shall have noobligation to do so.

 

16.4 Condemnation Award.  In the event of a Condemnation, whetherwhole or partial, Tenant waives any right to any part of the award, as damagesor otherwise, and Landlord shall receive the full amount of such award,including any award for the leasehold estate. Notwithstanding the foregoing,Tenant shall have the right to recover from the condemning authority, but notfrom Landlord, such compensation as may be separately awarded to or recoverableby Tenant on account of any damage to Tenant’s business by reason of theCondemnation (except the loss of the leasehold estate) and for any cost or lossto which Tenant might be put in removing Tenant’s personal property, leaseholdimprovements and equipment.

 

16.5 Date of Condemnation. The dateof Condemnation shall mean the earlier of the date (i) possession-of thePremises is delivered to the condemning authority, or (ii) title to thePremises is vested in the condemning authority.

 

17.                                 ASSIGNMENTAND SUBLETTING

17.1 Restriction on Transfers.  Tenant shall not, without Landlord’s priorconsent, do any of the following (each and all of which shall hereinafter beindividually and collectively referred to as a “Transfer”):

(a) Assign, hypothecate,mortgage or otherwise encumber or convey Tenant’s interest in this Lease;

(b) Allow any transferthereof or any lien upon Tenant’s interest by operation of law;

(c) Sublet the Premisesor any part thereof;

(d) Permit the use oroccupancy of the Premises or any part thereof by anyone other than Tenant;

(e) If Tenant is acorporation, permit a dissolution, merger, consolidation or otherreorganization of Tenant, or the sale or transfer of a Controlling Percentageof Tenant’s capital stock or more than an aggregate of forty percent (40%) ofthe value of Tenant’s assets. “Controlling Percentage” means the ownership ofand the right to vote stack possessing more than an aggregate of forty percent(40%) of the total combined voting power of all classes of Tenant’s capitalstock issued, outstanding and entitled to vote for the election of directors;

(f) If Tenant is apartnership, permit the withdrawal or change, voluntary, involuntary or byoperation of law, of any general partner or the dissolution of the partnership.

Notwithstanding theprovisions above, Tenant may assign or sublet the Premises, or any portionthereof, without Landlord’s consent, to any corporation, partnership, limitedliability company or other legal entity which controls, is controlled by or isunder common control with Tenant, or to any such entity resulting from themerger, reorganization, or consolidation of or with Tenant, or to any suchentity which acquires all the assets of Tenant as a going concern of thebusiness that is being conducted on the Premises; provided that before suchassignment shall be effective (i) said assignee shall assume in full theobligations of Tenant under this Lease, and (ii) Landlord shall be givenwritten notice of such assignment and assumption..

 

17.2 Requested Transfers.  IfTenant desires Landlord’s consent to a transfer of the Premises, Tenant shallsubmit to Landlord:

 

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(a) The proposedsublease, assignment or other transfer agreement (executed by Tenant and theother party), which shall not commence or take effect prior to 30 days afterreceipt by Landlord of Tenant’s submission of all information required to besubmitted by Tenant to Landlord hereunder;

(b) A credit report onthe proposed transferee and $250 in cash to cover the legal review by Landlordand Landlord’s processing expenses; and

(c) Any other informationor item Landlord may reasonably request, including without limitation,sufficient information to enable Landlord to determine the acceptability of thefinancial responsibility (as measured by such factors as audited net worth andcredit rating), experience and character of the proposed transferee.

Landlord, within 30 daysafter receipt of all such information, by notice to Tenant shall either approveor deny the transfer as Landlord teems advisable in its reasonable discretion.

 

17.3 Tenant’s Liability. Despite anypermitted transfer, Tenant’s liability under this Lease shall remain in fullforce and effect for the remainder of the Lease Term. Prior to the transfer,the transferee shall agree in writing to comply with and be bound by this Leaseto the extent of the space transferred, and Tenant shall deliver to Landlordpromptly after execution, an executed copy of each such transfer document and anagreement of compliance by each such transferee.

 

17.4 Expenses. Tenant shall, promptly upon demandfrom Landlord, pay Landlord’s expenses (exceeding $250), including withoutlimitation legal fees, incurred in connection with its consideration of the proposedtransfer, irrespective of whether Landlord grants its consent.

 

17.5 Void Transfers. Any arrangementfor a transfer which is not in compliance with the provisions of thisArticle shall be void and shall constitute a default by Tenant under thisLease.

 

17.6 No Merger. The voluntary or other surrender ofthis Lease by Tenant, a mutual cancellation of -this Lease, or the terminationof this Lease by Landlord pursuant to any provision contained herein, shall notwork as a merger, but, at Landlord’s option, shall either terminate any or allexisting subleases hereunder, or operate as an assignment to Landlord of anysuch subleases.

 

18                                    SECURITYDEPOSIT

If Tenant Improvementshave been commenced on or prior to April 1, 1995, then on April 1,1995 (or on such earlier date as Tenant Improvements are commenced), Tenantshall deposit with Landlord that sum set forth in Section 1.8 as securityfor the full and faithful performance of every provision of this Lease (the“Security Deposit”). If Tenant Improvements have not commenced by April 1,1995, but Tenant elects not to cancel this Lease, then Tenant shall deposit theSecurity Deposit with Landlord upon the commencement of Tenant Improvements.The Security Deposit shall be applied to the first rent coming due under thisLease. If Tenant defaults under the terms of this Lease, beyond any applicablecure period, Landlord may condition continuation of the Lease or Tenant’sdeposit of a new Security Deposit equal to one month’s Monthly Rent. If Tenantdefaults, at any time that Landlord holds a Security Deposit Landlord shall beentitled, at its option, to apply or retain all or any part of the SecurityDeposit for the payment of any rent or any other sum in default, any amountthat Landlord may be obligated to spend by reason of Tenant’s default, or tocompensate Landlord for any other expenses which it may suffer due to Tenant’sdefault. The Security Deposit shall not be deemed liquidated damages. Ifany portion of the Security Deposit is so used Tenant shall, within five (5)days after demand therefor,- deposit sufficient cash with Landlord to restorethe Security Deposit to its full amount existing at such time. Landlord maykeep the Security Deposit with its general funds and Tenant shall not receiveinterest on the Security Deposit. if Tenant fully complies with the terms ofthis Lease, the Security Deposit shall be returned to Tenant or, at Landlord’soption, to the last assignee of Tenant’s interest in this Lease, as soon asLandlord determines the final amounts of Tenant’s obligations hereunder afterthe expiration of the Lease or any period of holding over. If Landlord conveysLandlord’s interest in the Premises, Landlord may transfer the Security Depositto any transferee and in that event, Tenant releases Landlord from allliability for the return of the Security Deposit. Tenant shall not assign,pledge, mortgage or otherwise hypothecate its interest in refund of theSecurity Deposit.

 

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19.                                 SIGNS

Tenant shall not erect orplace on or about the exterior of the Premises any signs, advertisingmaterials, awnings, canopies, exterior lighting or marquee, withoutLandlord-’-s prior approval of the design, type, kind and location thereof(which approval may be withheld in Landlord’s reasonable discretion). All signsand other items described above shall be installed and displayed in strictconformance with the requirements of all governmental agencies with authoritypertaining to the erection or placement thereof. Upon Landlord’s request,Tenant shall immediately remove any sign or advertising material which violatesthis Article. If Tenant fails to remove such material, Landlord shall have theright to remove such materials at Tenant’s expense. Landlord shall have theright to remove any sign on a temporary basis in order to perform Landlord’srepair and maintenance obligations.

 

20.                                 UTILITIES

Tenant shall pay prior todelinquency all charges for water, gas, heat, electricity, power, telephoneservice and all other services or utilities used within, or about the Premisesby Tenant or Tenant’s Permittees. If any such utility is not separatelymetered, Tenant shall reimburse Landlord within ten (10) days after writtendemand for the cost thereof as reasonably determined by Landlord. Any securitydeposit or connection charges required to furnish service to Tenant shall bepaid by Tenant. Landlord shall not be liable for loss or damage incurred inconnection with or incidental to the interruption or impairment of utilityservice to the Premises by any cause whatsoever.

 

21.                                 FIXTURES

Tenant shall install andmaintain at Tenant’s expense fixtures required for Tenant’s business. Allfixtures not permanently affixed to the Premises shall remain Tenant’s propertyand, provided Tenant is not in default hereunder, may be removed by Tenant fromtime to time for the purpose of replacing such fixtures with items of likecharacter, quality and value and may be permanently removed not later than thetermination of the Lease. If such fixtures or other property are not removedprior to the termination of the Lease, then such property shall, at Landlord’soption and sole discretion, become Landlord’s property or be disposed of byLandlord, as attorney-in-fact for and at the expense of Tenant. Tenant shallpromptly repair, at its expense, any damages occasioned by such removalincluding, without limitation, holes or openings made in the walls, roof orfloor of the Premises. All other fixtures, equipment and other property(including, without limitation, air conditioning units, heating equipment,plumbing fixtures, hot water heaters, carpeting or other floor coveringcemented or otherwise affixed to the floor, and draperies) that are placedupon, installed in or attached to the Premises by Tenant shall, at thetermination of this Lease for any reason, be the property of Landlord andremain upon and—be surrendered with the Premises.

 

22.                                 SURRENDEROF PREMISES

Tenant shall, upon thetermination of this Lease for any reason, quit and peaceably surrender thePremises to Landlord in good order, condition and repair (reasonable wear andtear excepted), free of refuse, in a broom-clean state and in accordance withArticle 21. Tenant shall provide Landlord with at least 30 days priornotice of the date on which Tenant will surrender the Premises. Tenant shalldeliver all keys for the Premises to Landlord at the address at which Tenantmakes rent payments and shall inform Landlord in writing of the combinations ofall safes, locks and vaults, if any, in the Premises. Landlord’s acceptance ofsurrender of the Premises by Tenant shall only arise from, and must: beevidenced by, written acknowledgement of acceptance of surrender signed byLandlord. No other act or conduct of Landlord, whether consisting of theacceptance of the keys to the Premises, or otherwise, shall be deemed to be an acceptanceby Landlord of the surrender of the Premises by Tenant prior to the expirationof the Lease Term.

 

23.                                 ENTRYAND INSPECTION

Landlord and its agentsshall be entitled to enter the Premises at any time for the purpose ofconducting inspections, to make repairs, additions, or alterations thereto orto the Building, to show the Premises to any prospective purchaser, tenant,lender or insurer; to stabilize or support the structural portions of thePremises, to post “For Rent” or “For Sale” signs (during the last twelve (12)months of the Lease Term or Renewal Option Term) and to take necessary actionin the event of an emergency. Landlord shall provide 24 hours’ prior telephonicnotice of any entry not made during regular business hours, except in the eventof emergency. In connection with such entry, Landlord shall be entitled toerect scaffolding and other

 

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structures or equipmentas reasonably required by the work to be performed, provided that Landlordshall not unreasonably interfere with Tenant’s business. No such entry shallentitle Tenant to terminate this Lease, to reduce or abate Monthly Rent orother amounts due hereunder or to any claims for damages. Landlord shall beentitled to use any reasonable means to enter the Premises in the event ofemergency and shall not be liable for any damages resulting therefrom.

 

24.                                 ESTOPPELCERTIFICATE

Upon receipt of a requestfrom Landlord, Tenant shall, within five (5) business days after receipt ofsuch request, execute, acknowledge and deliver to Landlord a written statement(i) certifying that this Lease is unmodified (or, if modified, stating thenature of such modification) and in full force and effect and the dates towhich rent and other charges are paid in advance, (ii) acknowledging that thereare no uncured defaults by Landlord, or specifying any claimed defaults, and(iii) certifying or acknowledging any other matters that Landlord mayreasonably request. Any such statements may be relied upon by any prospective purchaseror encumbrancer of all or any portion of the Building or the Project. Tenant’sfailure to deliver such statement within such five (5) business day periodshall be conclusive against Tenant that (1) this Lease is in full force andeffect, without modification, except as represented by Landlord, (2) there areno uncured defaults by Landlord, and (3) Monthly Rent has not been paid morethan one month in advance.

 

25.                                 TITLE

 

25.1 Subordination.

(a)                                  ThisLease shall be subject and subordinate at all times to any ground lease and thelien of any mortgages, deeds of trust or other security instruments (“SecurityInstruments”) in any amount presently existing or hereafter placed on oragainst Landlord’s interest in this Lease, the Building or the Premises, and toany and all previous or subsequent advances made there under, to the intereston the obligations secured thereby, and all renewals, replacements aridextensions, without the necessity of the execution and delivery of any furtherinstruments by Tenant. Tenant shall, at the written request and option of theground lessor, lien holder or the -purchaser of Landlord’s interest pursuant toa foreclosure or other proceeding, attorn to such ground lessor, lien holder orpurchaser or enter into a lease for the balance of the Lease Term upon the sameterms contained in this Lease.

(b)                                 Notwithstandingthe foregoing, Tenant shall execute and deliver such further instrumentsevidencing such subordination of this Lease if requested by Landlord withinfive (5) business days after Tenant’s receipt of such request. If Tenant failsor refuses to do so within such five (5) business day period, Tenantirrevocably appoints Landlord, its successors and assigns, as Tenant’sattorney-in-fact to execute and deliver all such instruments on Tenant’sbehalf; provided, however, that Tenant shall not be required to effectuate suchsubordination, nor shall Landlord be authorized to effect such subordination onTenant’s behalf, unless the mortgagee or beneficiary named in the Security Instrumentshall concurrently agree in writing, for Tenant’s benefit, that so long asTenant is not in default under this Lease, that neither this Lease nor any ofTenant’s rights shall be terminated or modified by any trustee’s sale orproceeding to foreclose the Security Instrument.

(c)                                  Landlordshall, at the written request of Tenant or Tenant’s lender, execute and deliverto Tenant’s lender such instruments reasonably required by Tenant’s lenderwherein Landlord agrees to subordinate Landlord’s claims to Tenant’s inventory,personal property and other assets to those of Tenant’s lender.

 

25.2 Quiet Enjoyment. ProvidedTenant is not in default hereunder, Landlord will do nothing to prevent Tenantfrom peaceably and quietly enjoying and occupying the Premises. This covenantshall not extend to, and Landlord shall not be liable for, any disturbance, actor condition brought about by anyone not claiming by or through Landlord, or toany action required or permitted to be taken by or on behalf of Landlord underthis Lease. This Lease conveys no interest to Tenant in light, air or view andLandlord shall not be liable to Tenant for interference with or diminution ofthe light, air or view, nor for any latent defect in the Premises.

 

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26.                                 DEFAULT,REMEDIES

 

26.1 Defaults. The occurrence of any one or more of the following events shallconstitute a material default and breach of this Lease by Tenant:

(a) Tenant’s abandoningor vacating the Premises;

(b) Tenant’ s failure tomake any payment of rent or other sum due under this Lease, as and when due,together with Default Interest thereon, where such failure continues for aperiod of five (5) business days after notice of delinquency;

(c) Tenant’s failure toobserve any provision of this Lease or to perform any of Tenant’s obligationsunder this Lease {except those described in Sections 26.1(a), (b) (d) and (e))where such failure continues for a period of 30 days after notice fromLandlord;

(d) Any transfer ofTenant’s interest in this Lease contrary to Article 17;

(e) To the extent notprohibited by law, (i) the making by Tenant or any guarantor of this Lease(“Guarantors”) of any general assignment or general arrangement for the benefitof creditors; (ii) the filing by or against Tenant or any of the Guarantors ofa proceeding under state or federal insolvency and/or bankruptcy laws (unless,in the case of a petition filed against Tenant or any of the Guarantors, thesame is dismissed within 30 days) ; (iii) the appointment of a trustee orreceiver to take possession of substantially all of Tenant’s assets at thePremises or of Tenant’s interest in this Lease, where possession is notrestored to Tenant within 30 days; or (iv) the attachment, execution or otherjudicial seizure of substantially all of Tenant’s assets at the Premises or ofTenant’s interest in this Lease.

 

26.2 Remedies. In the event of any default or breach described in Section 26.1 orany other material default by Tenant,

Landlord shall beentitled to exercise the following rights and remedies at any time thereafter,with or without notice or demand:

(a) To-terminate thisLease effective immediately upon delivery of notice to Tenant and Tenant shallimmediately surrender possession of the Premises upon receipt of such notice.Notwithstanding such termination, Tenant shall remain liable for damages in anamount equal to all Monthly Rent and other sums that would have become payableby Tenant during the balance of the Lease Term if this Lease had not beenterminated, less the net proceeds, if any, of any reletting of the Premisessubsequent to such termination, after deducting all of Landlord’s expensesincurred in connection with suclr--- reletting, including without limitationthose expenses set forth in Section 26.2(b) below. Landlord shall have theright to receive such damages from Tenant on the dates that such Monthly Rentand other sums would have become payable under the Lease had the Lease not beenterminated. Alternatively, Landlord shall have the right to recover from Tenant(i) the worth at the time of award (defined below) of the unpaid rent which hadaccrued at the time of termination; (ii) the worth at the time of award of theamount by which the unpaid rent which would have been earned after terminationuntil the time of award exceeds the amount of such rent loss that Tenant provescould reasonably have been avoided; (iii) the worth at the time of award of theamount by which the unpaid rent for the balance of the Lease Term, had theLease not been terminated, after the time of award exceeds the amount of suchrent loss that Tenant proves could reasonably be avoided; and (iv) any otheramount necessary to compensate Landlord for all the detriment proximatelycaused by Tenant’s failure to perform its obligations under this Lease or whichin the ordinary course of events would be likely to result from such failure.The “worth at the time of award!!. of the amounts referred to in subsections(i} and (ii) shall be computed by accruing Default Interest on the unpaidamounts and with respect to subsection (iii) shall be computed bydiscounting such amount at the discount rate of the Federal Reserve Bank of SanFrancisco at the time of award.

(b) To immediatelyre-enter and remove all persons and property from the Premises, withoutliability for damages sustained by reason of such re-entry and removal. Suchproperty may be stored in a public warehouse or elsewhere at Tenant’s expense.If Landlord elects to re-enter or take possession pursuant to legal proceedingsor any notice provided by law, Landlord shall have the right to terminate thisLease (as provided in subsection (a) above), or without terminating thisLease, to relet the Premises or any part thereof for such term (which may befor a term in excess of the Lease Term) and upon such conditions as Landlord,in its sole discretion, may deem advisable (which may include concessions offree rent, alterations or repairs and without obligation by the Landlord torelet the Premises prior to any other property of Landlord. If Landlord electsto relet the Premises, the rents received thereafter shall be applied first tothe payment of any indebtedness other than rent due hereunder from Tenant toLandlord; second, to the payment of any costs of such reletting, includingwithout limitation, all repossession costs, brokerage commissions, legalexpenses, employees’ -expenses, alteration, remodeling and repair costs

 

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and expenses of preparingfor such reletting; third, to the payment of rent due and unpaid hereunder; andthe residue, if any, shall be held by Landlord and applied to payment of futurerent as the same becomes due. If the rent to be received from such relettingwill be less than the total of all rental and other payments that Tenant wouldhave been obligated to make during the balance of the Lease Term, Tenant shallimmediately pay any such deficiency in full to Landlord. No such re-entry ortaking possession of the Premises by Landlord shall be construed as an electionto terminate this Lease unless a written notice of such intention is given toTenant or unless termination is decreed by a court. Notwithstanding any suchreletting without termination, Landlord may, at any time thereafter, elect toterminate this Lease for such previous breach, upon delivery of notice toTenant.

(c) To judicially obtainthe appointment of a receiver and the receiver may take possession of Tenant’spersonal property used in the conduct of Tenant’s business. Such entry ortaking of possession shall not constitute an eviction of Tenant and Tenantagrees to hold Landlord harmless from any claim by any person arising out of orin any way connected with such entry or taking of possession. Neither theapplication for or the appointment of a receiver, shall be construed as anelection by Landlord to terminate this Lease unless notice of such intention isgiven to Tenant.

 

26.3 Remedies Cumulative. No remedy or option ofLandlord shall be considered exclusive of any other remedy, but the same shallbe cumulative and in addition to every other remedy or option given hereunder,or now or hereafter existing at law, in equity or by statute, including,without limitation an action to recover amounts due hereunder. Landlord mayexercise its rights and remedies at any time, in any order, to any extent, andas often as Landlord deems advisable.

 

26.4 Landlord’s Right to Act. If Tenant fails toperform any of its obligations, Landlord shall have the right, without anypassage of time or declaring Tenant in default, to perform such obligation onTenant’s behalf and to charge to Tenant all costs and expenses (including anadministration fee equal to 20% of such costs and expenses) incurred inconnection therewith, together with Default Interest thereon from the dateincurred. Tenant shall pay such amount within 3 days after presentment of astatement to Tenant.

 

26.5 “Additional Rent” Defined. Allsums payable by Tenant hereunder=-in addition to Monthly Rent shall be deemedto be additional rent, including without limitation, for purposes ofSection 5_02(b) (7) of the Bankruptcy Code, whether such sums aredesignated as rent. Additionally, upon a default by Tenant hereunder, Tenantshall pay to Landlord immediately upon demand as additional rent the value, asreasonably determined by Landlord, of all concessions made to Tenant relating tothis tease or the Premises, including without limitation rental abatements andtenant improvement allowances.

 

26.6 Late Charges. The late paymentby Tenant of any sums due hereunder will cause Landlord to incur costs notcontemplated by this Lease, the exact amount of which will be difficult toascertain. Such costs include, but are not limited to, processing andaccounting charges, and late charges which may be imposed on Landlord by theterms of any encumbrance covering the Premises. Accordingly, if amounts payableby Tenant are not received by Landlord on or before the due date of suchpayment, Tenant shall immediately pay to Landlord a late charge equal to fivepercent (5-°s) of such payment. The parties agree that such late chargerepresents a fair and reasonable estimate of the costs Landlord will incur byreason of Tenant’s late payment, and shall be in addition to the payment of.Default Interest.

 

26.7 Interest an Past-DueObligations. Any amount owed Landlord that is not paid when due shall bear interestfrom the date due until paid at a rate equal to the lesser of (i) 18% perannum, or (ii) a variable rate per annum equal to 5 percentage points in excessof the Prime Rate designated by First Interstate Bank of Arizona, N.A. (“FTBA”)from time to time during the period such amount is owed to Landlord (“DefaultInterest”). The term Prime Rate shall mean the prime commercial lending rateannounced by FIBA, as the same may be changed from time to time. If FIBA shallat any time discontinue using a Prime Rate, Landlord shall, in its reasonablejudgment, substitute another means of determining the annual interest ratecharged by major commercial banks on 90-day unsecured commercial loans to theirmost creditworthy borrowers, and such interest rate as so determined shallthereafter be the Prime Rate. Payment of such interest shall not excuse or cureany default by tenant.

 

26.8 Attorneys’ Fees. Waiver of Jury Trial andCounterclaims. In any dispute between the parties, the prevailing party shallbe entitled to recover from the other party, immediately upon demand, all costsand

 

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attorneys’ fees, expertwitness fees, costs of tests and analyses, travel and accommodation expenses,deposition and trial transcript copies, court costs and other similar costs andfees incurred in enforcing its rights and remedies under this Lease, regardlessof whether legal proceedings are actually commenced. The parties waive trial byjury in any action, proceeding or counterclaim brought by either of the partieshereto against t-he other on any matters whatsoever arising out of or in anyway connected with this Lease, the relationship of Landlord and Tenant,Tenant’s use or occupancy of the Premises and/or any claim of injury or damage.If Landlord commences any proceedings for nonpayment of rent, Tenant shall notinterpose any counterclaim of whatever nature or description in any suchproceedings, other than compulsory counterclaims, it being the intent of thisLease that Tenant’s obligation to pay rent is separate from any obligation ofLandlord under this Lease other than the covenant of quiet enjoyment as setforth in Section 25. This shall not, however, be construed as a waiver ofTenant’s right to assert such claims in any separate action or action broughtby Tenant.

 

26.9 Accord and Satisfaction.Payment by Tenant or receipt by Landlord of a lesser amount than the rent orother charges due hereunder shall be deemed to be on account of the earliestdue stipulated rent or other charges, and no endorsement or statement on anycheck or any letter accompanying any check or payment shall be deemed an accordand satisfaction, and Landlord shall accept such check or payment withoutprejudice to Landlord’s right to recover the balance of such rent or othercharges or pursue any other remedy in this Lease.

 

27.                                 BANKRUPTCYOF TENANT

If, pursuant to theBankruptcy Code, 11 U.S.C. Section 101 et seq., Tenant assumes this Leaseand proposes to assign the same to any party who shall have made a bona fideoffer to accept an assignment of this Lease on terms acceptable to Tenant, thennotice of such proposed assignment, setting forth (i} the name and address ofsuch party, (ii) the terms of the offer, and (iii) evidence assuring suchparty’s future performance under the Lease shall be given to Landlord by Tenantno later than 20 days after receipt by Tenant of such offer, but in any eventno later than 10 days prior to the date that Tenant applies to a court ofcompetent jurisdiction for authority and approval to enter into such assignmentand assumption. Landlord shall thereupon have the prior right, to be exercisedby notice to Tenant given at any time prior to the effective date of suchproposed assignment, to accept an assignment of this Lease upon the same termsand conditions and for the same consideration, if any, as the bona fide offermade by such party, less any brokerage commissions which may be payable by suchperson for the assignment of this Lease.

 

28.                                 LANDLORD’SLIABILITY

 

28.1 Default by Landlord. Landlordshall not be considered in default or breach of this Lease for thenonperformance of any obligation imposed herein unless such nonperformanceshall continue for a period of at least thirty (30) days after notice fromTenant; provided, however, if the nature of the nonperformance is such that itcannot=-be reasonably cured within thirty (30) days, Landlord shall not bedeemed to be in default if Landlord commences to cure such nonperformancewithin such thirty (30) day period and thereafter pursues such cure tocompletion in the exercise of reasonable diligence. If Landlord grants asecurity interest in this Lease and notifies Tenant of the name and address ofsaid lien holder, notice shall not be effective unless Tenant simultaneouslyupon giving notice of nonperformance to Landlord delivers a copy of the same toeach such lien holder by personal delivery or certified or registered UnitedStates mail, postage prepaid. Each such lien holder shall be entitled toperform such obligation within thirty (30) days after the expiration of anyperiod of time within which Landlord is entitled to perform such obligationbefore Tenant shall have the right to take any action as a result of suchnonperformance.

 

28.2 Sale of Landlord’s Interest.Upon any sale or conveyance of Landlord’s interest in this Lease, Landlordshall be entirely relieved of a11 liability for Landlord’s obligations underthis Lease accruing thereafter, and the assignee or purchaser shall be deemedwithout any further agreement between the parties or their successors in interestto have assumed all of Landlord’s obligations accruing after such conveyance.-.

 

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28.3 Non-Recourse Liability. IfLandlord fails to perform any of its obligations under this Lease and, as aconsequence of such nonperformance, Tenant recovers a money judgment againstLandlord, such judgment shall be satisfied only out of Landlord’s interest inthe Premises. Landlord shall have no liability whatsoever for any deficiency,and no other assets of Landlord shall be subject to levy, execution or other enforcementprocedures as a result of such judgment. None of Landlord’s obligations underthis Lease shall be subject to specific performance or injunctive remedies, andTenant waives all rights with respect to such remedies.

 

28.4 Mortgage Exculpation. Notwithstandinganything contained herein to the contrary, Tenant waives and holds anymortgagee or beneficiary named in any mortgage, deed of trust or other securityinstrument harmless from any and all claims Tenant may have against Landlord,including all claims arising against Landlord prior to the mortgagee or beneficiarysucceeding to Landlord’s interest hereunder.

 

29.                                 FORCEMAJEURE

If either party isdelayed or prevented from the performance of any act by reason of acts of God,strikes, lockouts, labor troubles, failure or refusal of governmentalauthorities to timely issue permits or approvals or conduct reviews orinspections, civil disorder, inability to procure materials, restrictivegovernmental laws or regulations, or other causes beyond the control of theparty obligated (financial inability excepted), or,- in the case of Landlord’sapplication for building permits, design review approval or other land useapprovals, any unreasonable delays by the City of Scottsdale planning andzoning or building safety department, performance of such act shall be excusedfor the period of delay and the period for the performance of any such actshall be extended for a period equivalent to the period of such delay;provided, however, nothing herein shall excuse Tenant from the prompt paymentof Monthly Rent or any other sum.

 

30.                                 BROKERS

Tenant represents andwarrants that, except as listed in Section 1.10, Tenant has not dealt withany real estate broker(s) and there are no claims for brokerage commissions orfinder’s fees in connection with this Lease, other than from the Brokers.Landlord agrees to pay Brokers a commission equal to five percent (5%) of theMonthly Rent for the initial seven-year Lease Term, to be divided evenlybetween the two Brokers (and, without liability to Landlord, by Brokers withsuch other brokers or salesmen to which they may be obligated). The commissionshall be paid fifty percent (50%) upon Tenant’s, permanent occupying of thePremises and fifty percent (50%) on the second anniversary of Tenant’spermanent occupancy of the Premises, i.e., at the end of two continuous andconsecutive years of occupancy of the Premises by Tenant. If the Lease isterminated prior to such second anniversary for any reason other thanLandlord’s default under this Lease, Landlord shall have no obligation for thesecond half of the commission.

 

31.                                 NOTICES

No notice, consent,approval or other communication given in connection herewith shall be validlygiven, made, delivered or served unless in writing and delivered in person orsent by registered or certified United States mail, postage prepaid, toLandlord at the address set forth in Section 3.1 or to such otheraddresses as Landlord may from time to time designate in writing and deliver toTenant in accordance with this Article, and to Tenant at the Premises (or priorto Tenant’s occupancy of the Premises, at the address set forth inSection 1.1). Notices, consents, approval or communications shall bedeemed given or received upon delivery, if delivered in person, or upontwenty-four (24) hours after deposit in the mail, if delivered by mail. Unlessreceipt of transmission is acknowledged in writing by the recipient, facsimile,telex, electronic mail, or other telecommunication shall not constitute notice.

 

32.                                 FINANCIALSTATEMENTS

Tenant shall from time totime, within ten (10) days after Landlord’s request, provide Landlord withTenant’s most recent publicly available financial statements or annualstatements, certified to be accurate by a certified public accountant.

 

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33.                                 GENERAL

33.1 Arizona Law; Venue.         This Lease shall be construed in accordancewith the laws of the State of Arizona. The parties agree that Maricopa County,Arizona, shall be the venue for any litigation relating to this Lease.

 

33.2 No Partnership create anyrelationship other than that of landlord and tenant.

 

33.3 Amendments. No alteration, amendment, change oraddition to this Lease shall be binding upon Landlord or Tenant unless reducedto writing and signed by both parties.

 

33.4 No Waiver. No delay or omission of Landlord toexercise any right or power shall impair any such right or power, or shall beconstrued to be a waiver of any nonperformance by Tenant or an acquiescencetherein. No waiver of any nonperformance shall be effective unless it is inwriting. No written waiver by Landlord shall be deemed to be a waiver of anyother Lease provision, or of any subsequent breach by Tenant of the same or anyother provision. Landlord’s consent to or approval of any act by Tenant shallnot be deemed to render unnecessary the procurement of Landlord’s consent to orapproval of any subsequent act of Tenant, whether or not similar to the act soconsented to or approved.

 

33.5 Exhibits. Exhibits attached hereto shall by thisreference be deemed a part of this Lease as if set forth in full herein.

 

33.6 Partial Invalidity. If any provision of thisLease is held by a court of competent jurisdiction to be invalid, void orunenforceable, that provision may be modified to the minimum extent necessary andthe remainder of the provisions shall remain in full force and effect and shallin no way be affected, impaired or invalidated.

 

33.7 Captions. The various headings and numbersherein and the grouping of the provisions of this Lease into separate articlesand sections are for the purpose of convenience only and shall not control oraffect the meaning or construction of any of the provisions.

 

33.8Time. Time is of the essence. If any time period provided forherein expires on a Saturday, Sunday or legal holiday, such time period shallbe extended to the next succeeding day that is not a Saturday, Sunday or legalholiday.

 

33.9 Recordation. memorandum thereofin Arizona._

Tenant shall not recordthis Lease or any the public records of Maricopa County,

 

33.10 No Third Party Rights. Exceptas expressly provided herein, no term of this Lease is intended to or shall befor the benefit of any person not a party hereto, and no such other personshall have any right or cause or action hereunder.

 

33.11 Joint and Several Obligations. If Tenant isconstituted of two or more persons, corporations or other entities, allagreements, covenants, representations and warranties of Tenant herein are thejoint and several obligations of the entities constituting Tenant. If Tenant ishusband and wife, the obligations hereunder shall extend individually to thesole and separate property of each as well as to their community property.Notice given to any one of the entities constituting Tenant shall be deemed ashaving been given to a11 such entities.

 

33.12 Authority to Execute. Any individualexecuting this Lease on behalf of or as representative for a corporation orother person, partnership or entity represents and warrants that he or she isduly authorized to execute and deliver this Lease on behalf of such party, andthat this Lease is binding upon such party in accordance with its terms. IfTenant is a corporation or a partnership, Tenant shall deliver to Landlordwithin ten (10) days after the execution of this Lease a certified copy of aresolution of the board of directors or of all partners, as the case may be,authorizing or ratifying the actions of the individual (s) executing anddelivering this Lease.

 

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33.13 Binding on Successors and Assigns. Each ofthe provisions of this Lease shall bind, extend to, and inure to the benefit ofthe respective heirs, legal representatives, and successors and assigns of bothLandlord and Tenant; provided, however, that this clause shall not permit anytransfer contrary to the provisions of Article 17.

 

33.14 Impartial Interpretation. This Lease isthe result of. negotiations between Landlord and Tenant and therefore thelanguage contained in this Lease shall be construed as a whole according to itsfair meaning and not strictly for or against either Landlord or Tenant.

 

33.15 Plurals. The words “Landlord” and“Tenant,” as herein used, shall include the plural as well as the singular. Theneuter gender shall include the masculine and feminine genders.

 

33.16 Survival of Obligations. Tenant’sobligations pursuant to Sections 8.8 and 9.3 and Articles 5, 21, 22, 26 and 30of this Lease shall survive the expiration or other termination of the LeaseTerm.

 

33.17 NotBinding Until Signed. Submission of this instrument to Tenantfor examination shall not bind Landlord in any manner, until this instrument isexecuted and delivered by both Landlord and Tenant.

 

34.                                 RIGHTOF..FIRST REFUSAL

During the firstforty-eight (48) months of the Lease Term, provided Tenant is not then indefault beyond any applicable grace period, Tenant shall have the right offirst refusal an the sale by Landlord of some or all of the Premises to a thirdparty other than an Affiliate of Landlord. During such 48-month period, ifLandlord receives an offer to purchase some or all of the premises from a thirdparty other than an Affiliate of Landlord (“Buyer”), which Landlord wishes toaccept, Landlord shall first provide Tenant with written notice of the offer,together with a copy of any related purchase contract, agreement of sale,escrow instructions, or other written expression of the offer which shall setforth all material terms of the proposed sale. Tenant shall have fifteen (15)days after Landlord’s notice of the offer in which to elect to purchase thePremises (or portion thereof covered by the offer) on the same terms as theoffer by giving Landlord written notice of such election. If Tenant fails totimely elect to exercise its purchase option, then Landlord shall be free toaccept the offer and proceed with the sale to the third party. If the salefails to close, future offers made within the 48-month period shall be subjectto Tenant’s right of first refusal. If Tenant exercises its right of firstrefusal, escrow shall open within ten (10) days of Tenant’s notice exercisingits option to purchase and shall close on the same terms arid conditions as theoffer. Irrespective of whether the third party offer may impose suchrequirement upon Landlord, in any sale of all or part of the Premises byLandlord to Tenant pursuant to this right of first refusal, Landlord shall haveno obligation to provide Tenant with any environmental audit or report nor withany warranties and representations regarding environmental laws or issues. Thisright of first refusal shall not apply to or have any effect on any sale,transfer, or encumbrance of all or any part of the Premises by Landlord to anAffiliate. For purposes of this paragraph, an “Affiliate” of Landlord shallmean: any successor to Landlord by merger, consolidation, roll up, acquisition,or dissolution; any or all of Landlord’s, or, if Landlord is an entity, thenits partners’; members’, shareholders’, or beneficiaries’, spouse, children,grandchildren, brothers, sisters, parents, nieces, or nephews, or anycombination thereof, whether individually or as the partners, members,shareholders or beneficiaries in or of an entity; or, any entity in whichLandlord or its partners, members, shareholders, or beneficiaries hold acontrolling interest. If, escrow fails to close for any reason other thanLandlord’s default, then, in addition to any other remedies available toLender, Tenant’s right of first refusal shall terminate as to all futureoffers.

 

IN WITNESS WHEREOF, theparties have duly executed this Lease as of the date first above written.

78 MCCLAIN, L.L.C.,

an Arizona limitedliability company

 
| /s/ Thomas McClain     |            |
|------------------------|-----------------|
|                   |
| GO-VIDEO, INC.,        |
| a Delaware corporation |
| By:                    | /s/ David Klein |   |
| Its: Vice President    |
|                        |                 |  |

 

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When recorded return to:

SNELL & WILMER

One Arizona Center

Phoenix, Arizona 85004

Attn: Sam Cowley, Esq.

 

FIRST AMENDMENT TOINDUSTRIAL GROSS LEASE

 

THIS FTRST AMENDMENT TOINDUSTRIAL GROSS LEASE (the “Amendment”) is executed as of this 18 day of 2000by and between 78 McClain, L.L.C., an Arizona limited liability company {‘Landlord”)and Sensory Science Corporation, a Delaware corporation, successor in interestto Go Video Inc., a Delaware corporation (“Tenant”).

 

RECITALS

A.                                   Landlordand Tenant previously entered into that certain Industrial Gross Least ,datedNovember 15, 1994 (the “Lease”) with respect to the premises furtherdescribed in the Lease (the “Premises”).

 

B,                                     Landlorddesires to lease to Tenant and Tenant desires to lease from Landlord ten (10)additional parking spaces as shown on Exhibit A (the “Parking Area”).

 

C.                                     Landlordand Tenant now desire to amend the Lease in accordance with the terms

 

NOW, THEREFORE, for goodand valuable consideration, the receipt. and sufficiency of which is herebyacknowledged, the parties agree as follows:

‘I.                                     Section 1_3of the Lease is amended to provide that in addition to the facilities depictedon the Site Plan, the Premises shall include the Parking Area depicted anExhibit A.

2.                                       Thefirst sentence of Section 7.3 of the Lease i; amended to provide that theCommon Area shall include ninety (90) parking spaces.

3.                                       Exceptas provided in this Amendment, capitalized terms shall have the meaning setforth in the Lease.

4.                                       Exceptas amended hereby, the Lease shall remain in full force and effect.

5,                                       ThisAmendment may be executed in any number of counterparts, each of which shall bean original, but all of which shall constitute one instrument:

 

IN WITNESS WHEREOF, thisAmendment is executed as of the first day and year written above.

LANDLORD:

78 1ViCCLA1N, L.L.C., anArizona limited liability company

 

TENANT:

ACCEPTED AND APPROVED:SENSORY SCIFNCL CORPORATION,a Delaware corporation

 

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Sate, OF Arizona

County of Maricopa

The foregoing instrumentwas acknowledged before me this 18th day of April 2000, by Tom McClain, of78 McClain, LLC., an Arizona limited liability company, on behalf of the limitedliability company.

 

My Commission Expires:

 

STATE OF ARIZONA

SS, County Of Maricopa

The foregoing instrumentwas acknowledged before me this 18th day of April, 2000, Dewn Zad,the VP of HR of Sensory Science corporation, a Delaware corporation, on behalfof the corporation.

 

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Scottsdale NorthwestAirpark Property Owners Association

 

15821 N. 79 St., Suite 1 •Scottsdale, AZ 85260

Telephone 480.991.7117 •

FAX 480.991.6619

 

May 12, 2000

 

The undersigned havereviewed the proposed abandonment for the taxiway, referenced in letter datedApril 27, 2000 referring to Lot 14 in North Scottsdale Airpark No. 2 aka7835 West McClain Drive, (See Exhibit A & B attached) by Dawn M. Zadronzy,and hereby approved of its release.

NORTH SCOTTSDALE AIRPARKPROPERTY OWNER”S ASSOCIATION

 
| SCOTTSDALE AIRPORT                             |
|------------------------------------------------|
|                                           |
|                                           |
| /s/ Kevin Shirer                               |   |
| Airport  Specialist/Noise Abatement Specialist |

 

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