Unassociated Document


    


     

    


     

    Master
      Equipment Lease Agreement

     

    This
      Master Equipment Lease Agreement (this “Master Lease”) dated as of March
      6,
      2007
      is made
      by and between THE
      FIFTH
      THIRD LEASING COMPANY,
      having
      an office at 38
      Fountain Square Plaza, Cincinnati, Ohio 45263,
      and
Advanced
      Photonix, Inc.,
      a
corporation
      organized under the laws of the State of Delaware
      and
      having a principal place of business at 2925
      Boardwalk, Ann Arbor, Michigan 48104
      (“Lessee”). 

     

    TERMS
      AND CONDITIONS OF LEASE

    


    1.  Lease.
      Subject
      to the terms and conditions set forth herein, Lessor and Lessee shall execute
      and deliver Equipment Schedules (in form and substance as identified on
      Attachment 1 herein) pursuant to this Master Lease (each, an “Equipment
      Schedule”) and pursuant to each Equipment Schedule Lessor shall lease to Lessee
      the equipment and other property described on such Equipment Schedule (together
      with all parts, additions and accessories incorporated therein, and software
      incorporated therein, the “Equipment”). Each Equipment Schedule will incorporate
      by reference this Master Lease and will specify certain terms relating to the
      leasing of the Equipment (this Master Lease as incorporated into each Equipment
      Schedule, a “Lease”). Each Equipment Schedule, together with this Master Lease,
      shall constitute a separate and enforceable Lease. In the event that any term
      of
      any Equipment Schedule conflicts with or is inconsistent with any term of this
      Master Lease, the terms of the Equipment Schedule shall govern. As used herein,
      the term “Item of Equipment”, as it relates to any Equipment, shall have the
      meaning specified in the Equipment Schedule relating to such Equipment and
      if no
      such meaning is specified therein, “Item of Equipment” shall mean the Equipment
      as a whole.

     

    2.  Term.
      With
      respect to any Item of Equipment, unless otherwise specified on an Equipment
      Schedule, the initial term of lease shall commence on the earlier of (a) the
      date an Acceptance Certificate (as defined in Section 5)
      is
      executed with respect to such Item of Equipment, and (b) unless the Lessee
      rejects such Item of Equipment in a written notice to Lessor, ten (10) days
      after delivery of such Item of Equipment (the “Delivery and Acceptance Date”)
      and, unless earlier terminated as provided herein, shall expire on the
      Expiration Date (as defined in the Equipment Schedule relating to such Item
      of
      Equipment); provided,
      however, that
      the
      Base Lease Term or the then applicable Renewal Term shall be automatically
      extended for successive one month periods until either (a) the end of the Notice
      Period (as defined below) or (b) Lessor demanding return of the Equipment.
      As
      used herein, “Notice Period” shall mean the period ending on the latest of (i)
      the Expiration Date, (ii) one hundred eighty (180) days after the delivery
      by
      Lessee of its final written notice of its election to purchase or return the
      Equipment or to determine the Fair Market Value or Fair Market Rental Value,
      as
      applicable, in accordance with the options set forth in the Equipment Schedule
      and (iii) one hundred eighty (180) days after the delivery by Lessee of its
      election to return the Equipment. Lessee shall pay Basic Rent at the then
      current rate for each month during the automatic renewal term. As used herein,
      “Term” shall mean, collectively, the period from the Delivery and Acceptance
      Date to the Expiration Date and all Renewal Terms (as defined in the Equipment
      Schedule relating to such Equipment); provided,
      however,
      that
      this Master Lease shall be effective from and after the date of execution
      hereof. All tax and general indemnification obligations of Lessee hereunder
      shall survive the expiration, cancellation or other termination of the Term,
      and
      all payment obligations shall survive until indefeasible receipt by Lessor
      of
      such payment obligations. Provided that no Default or Event of Default (each
      as
      defined in Section 16)
      has
      occurred and is continuing, Lessor shall not interfere with Lessee’s quiet use
      and possession of the Equipment.

     

    3.  Rent.
      Lessee
      shall pay Lessor for the leasing of the Equipment hereunder the periodic rental
      payments (“Basic Rent”) on the dates (each a “Rent Payment Date”) and in the
      amounts set forth in the Equipment Schedule. Basic Rent together with all other
      additional amounts as may from time to time be payable under this Lease and
      the
      other Lease Documents (as defined in Section 4)
      is
      referred to herein as “Rent”). Rent shall be due whether or not Lessee has
      received any notice that such payments are due. All Rent shall be paid to Lessor
      at its address set forth in the Equipment Schedule, or as otherwise directed
      by
      Lessor in writing. If any Rent is not paid when due (or within 10 days
      thereafter) Lessee shall pay to Lessor a late payment fee equal to five percent
      (5%) of the amount of such Rent.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    4.  Net
      Lease.
      Each
      Lease shall constitute a non-cancelable net lease, it being the intention of
      the
      parties that all costs, expenses and liability associated with the Equipment
      or
      its lease shall be borne by Lessee. Lessee’s obligation to pay Rent and
      otherwise to perform its obligations under this Lease and each other document
      and agreement executed in connection with this Lease (together with the Lease,
      collectively, the “Lease Documents”) shall be irrevocable, absolute and
      unconditional and shall not be subject to defense, counterclaim, set-off,
      diminution, abatement or recoupment for any reason whatsoever, and Lessee waives
      all rights to terminate or surrender this Lease for any reason except as
      expressly set forth in this Lease, including, without limitation, defect in
      the
      Equipment or non-performance by Lessor. All Rent shall be paid without reduction
      or deduction whatsoever, including any reduction or deduction for any Tax (as
      defined in Section 18).

     

    5.  Acceptance.
      Upon
      delivery of the Equipment, Lessee shall promptly inspect and test such Equipment
      and, if acceptable to Lessee, accept such Equipment and deliver to Lessor a
      certificate of acceptance, in form and substance reasonably satisfactory to
      Lessor (“Acceptance Certificate”). Lessee represents that it has selected both
      (a) the Equipment, and (b) the manufacturer, vendor or other supplier of the
      Equipment (the “Supplier”) without assistance from Lessor and either is a party
      to, or has received a copy of, each agreement and document by which Lessor
      acquired the Equipment or the right to possession and use of the Equipment
      (including any documents or agreements with the Supplier (collectively, the
      “Supply Contract”)) prior to the Delivery and Acceptance Date. Lessee hereby
      assumes the risks, burdens, and obligations to any manufacturer or vendor of
      any
      Item of Equipment on account of nondelivery, nonacceptance or nonperformance
      of
      the Equipment. 

     

    6.  Disclaimer
      of Warranties.
      THE
      EQUIPMENT IS BEING LEASED TO THE LESSEE BY THE LESSOR “AS IS, WHERE IS”. LESSOR
      DOES NOT MAKE, HAS NOT MADE, SHALL NOT BE DEEMED TO MAKE OR HAVE MADE, AND
      EXPRESSLY DISCLAIMS TO LESSEE ANY WARRANTY OR REPRESENTATION, EITHER EXPRESS
      OR
      IMPLIED, WRITTEN OR ORAL, WITH RESPECT TO THE EQUIPMENT LEASED HEREUNDER OR
      ANY
      COMPONENT THEREOF, INCLUDING, WITHOUT LIMITATION, ANY WARRANTY AS TO DESIGN,
      COMPLIANCE WITH ANY LAW, RULE, SPECIFICATION, OR CONTRACT PERTAINING THERETO,
      QUALITY OF MATERIALS OR WORKMANSHIP, MERCHANTABILITY,
      FITNESS FOR ANY PURPOSE,
      USE OR
      OPERATION, SAFETY, PATENT, TRADEMARK OR COPYRIGHT INFRINGEMENT, OR TITLE, IT
      BEING AGREED THAT ALL SUCH RISKS, AS BETWEEN LESSOR AND LESSEE, ARE TO BE BORNE
      BY LESSEE. Lessee’s execution and delivery of an Acceptance Certificate shall be
      conclusive evidence as between Lessor and Lessee that the Items of Equipment
      referred to therein are acceptable for all purposes hereof. 

     

    7.  Conditions
      Precedent.
      The
      obligation of Lessor to purchase the Equipment and to lease the same to Lessee
      shall be subject to satisfaction (or waiver by Lessor) of each of the following
      conditions, prior to the Delivery and Acceptance Date with respect to such
      Equipment: (a) Lessor shall have received each of the following documents,
      in
      form and substance satisfactory to Lessor: (i) the Equipment Schedule relating
      to such Equipment duly executed by Lessee; (ii) an Acceptance Certificate for
      each Item of Equipment duly executed by Lessee; (iii) if requested by Lessor,
      an
      assignment of Lessee’s rights under the Supply Contract in form and substance
      acceptable to Lessor and consent executed by Lessee and the Supplier; (iv)
      the
      original bills of sale evidencing chain of title from the manufacturer or
      supplier to the Lessor relating to the Equipment to be leased hereunder;
(v)
      a
      certificate of the secretary or assistant secretary of Lessee dated the date
      of
      such Equipment Schedule certifying (A) the incumbency of each of the officers
      executing the applicable Lease Documents, (B) a copy of the articles or
      certificate of incorporation, by-laws or code of regulations, and other
      applicable organizational documents of Lessee and (C) copies of any other
      documents evidencing the authorization of the corporate officers on behalf
      of
      the Lessee to execute, deliver and perform this Lease and each other Lease
      Document; (vi)
      a
      certificate dated the date of such Equipment Schedule of the president or chief
      financial officer of Lessee certifying that, to the best of Lessee’s knowledge,
      no Default or Event of Default has occurred and is continuing and no Event
      of
      Loss (as defined in Section 11)
      has
      occurred with respect to any Equipment identified in such Equipment Schedule;
      and (vii) such other documents or agreements as may be required by the terms
      of
      the Equipment Schedule or as Lessor may reasonably request; (b) Lessor shall
      have the right (by assignment or otherwise) to purchase the Equipment identified
      in the applicable Equipment Schedule for a price not to exceed the Lessor’s
      Capitalized Cost (as identified in such Equipment Schedule) and on terms and
      conditions otherwise reasonably satisfactory to the Lessor; (c) Lessorby its
      execution of the Acceptance Certificate shall be deemed to have authorized
      Lessor to file Uniform Commercial Code financing statements or other records
      relating to such Equipment in the jurisdiction in which Lessee is a registered
      organization and such other jurisdiction as Lessor may reasonably require;
      (d)
      Lessor shall have received evidence of insurance policies covering the Equipment
      which comply with the requirements of Section 10,
      hereof;
      (e) the representations and warranties of the Lessee contained herein and in
      each of the Lease Documents shall be true and correct on and as of the Delivery
      and Acceptance Date both with and without giving effect to the transactions
      contemplated by the applicable Lease; (f) no Default or Event of Default shall
      have occurred and be continuing or result from the transactions contemplated
      by
      the Lease; (g) Lessee shall have paid the fees and reasonable out-of-pocket
      expenses of Lessor (including the fees and expenses of counsel to the Lessor
      and
      any filing or recordation fees) incurred in connection with the negotiation,
      execution and delivery of the Equipment Schedule and other Lease Documents
      relating thereto; and (h) no material adverse change in the existing or
      prospective financial condition or results of operations of Lessee or any
      guarantor of Lessee’s obligations hereunder (a “Guarantor”) which may affect the
      ability of Lessee to perform its obligations under the Lease Documents, or
      the
      ability of any Guarantor to perform its obligations under any Guaranty, shall
      have occurred since the date of the most recent audited financial statements
      of
      Lessee delivered to Lessor.

     

    
      
         

      

      
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    8.  Use
      and Maintenance; Alterations.

     

    (a)  Lessee
      covenants and agrees that it: (i) shall use the Equipment solely in the conduct
      of its business, for the purpose, and in the manner, for which the Equipment
      was
      designed, (and shall not permanently discontinue use of the Equipment without
      Lessor’s prior express written consent); (ii) shall operate, maintain, service
      and repair the Equipment, and maintain all records and other materials relating
      thereto, (A) in accordance and consistent with (1) the Supplier’s
      recommendations all maintenance and operating manuals or service agreements,
      whenever furnished or entered into, including any subsequent amendments or
      replacements thereof, issued by the Supplier or other service provider
      (including requiring all components, fuels and fluids installed in or used
      on
      the Equipment to meet the standards specified by the Supplier from time to
      time), (2) the requirements of all applicable insurance policies, (3) the Supply
      Contract, so as to preserve all of Lessee’s and Lessor’s rights thereunder,
      including all rights to any warranties, indemnities or other rights or remedies,
      (4) all applicable laws, and (5) the prudent practice of other similar companies
      in the same business as Lessee, but in any event, to no lesser standard than
      that employed by Lessee for comparable equipment owned or leased by it; and
      (B)
      without limiting the foregoing, so as to cause the Equipment to be in good
      repair and operating condition, except for ordinary wear and tear resulting
      despite Lessee’s full compliance with the terms hereof; (iii) shall not
      discriminate against the Equipment with respect to scheduling of maintenance,
      parts or service; (iv) shall not change the location of any Equipment as
      specified in the Equipment Schedule without the prior written consent of Lessor;
      and (v) to the extent requested by Lessor, shall cause each Item of the
      Equipment to be continually marked, in a plain and distinct manner, with the
      name of Lessor followed by the words “Owner and Lessor,” or other appropriate
      words designated by Lessor on labels furnished by Lessor. If the location for
      any Equipment specified in the Equipment Schedule is a facility leased by Lessee
      or owned by Lessee subject to one or more mortgage liens, upon the request
      of
      Lessor, Lessee will obtain an Access and Waiver Agreement in form and substance
      satisfactory to Lessor (as identified as Attachment 2 herein) from the landlord
      or lessors or mortgagees of such facility.

     

    (b)  Lessee,
      at its own cost and expense, will promptly replace all parts, appliances,
      systems, components, instruments and other equipment (“Parts”) incorporated in,
      or installed on, the Equipment which may from time to time become worn out,
      lost, stolen, destroyed, seized, confiscated, damaged beyond repair or
      permanently rendered unfit for use for any reason whatsoever. In addition,
      in
      the ordinary course of maintenance, service repair, overhaul or testing, Lessee
      may remove any Parts, whether or not worn out, lost, stolen, destroyed, seized,
      confiscated, damaged beyond repair or permanently rendered unfit for use,
provided
      that
      Lessee shall replace such Parts as promptly as practicable. All replacement
      Parts shall be free and clear of all Liens (as defined in Section 8(c))
      and
      shall be in as good an operating condition as, and shall have a value and
      utility at least equal to, the Parts replaced, assuming such replaced Parts
      were
      in the condition and repair required to be maintained by the terms hereof.
      Any
      replacement Part installed, or incorporated on, the Equipment shall be
      considered an accession to such Equipment and title to such replacement Part
      shall immediately vest in Lessor without cost or expense to Lessor.

     

    
      
         

      

      
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    (c)  Lessee
      will keep the Equipment and its interest therein free and clear of all liens,
      claims, mortgages, charges and encumbrances of any type regardless of how
      arising (“Liens”) other than any Lien arising out of claims against Lessor not
      relating to the lease of the Equipment to Lessee (“Permitted Liens”). Lessee
      will defend, at its own expense, Lessor’s title to the Equipment from all such
      Liens. If any Lien shall attach to any item of Equipment, Lessee will provide
      written notification to Lessor within five (5) business days after Lessee
      receives notice of any such attachment stating the full particulars thereof
      and
      the location of such Equipment on the date of such notification. 

     

    (d)  At
      its
      sole option, Lessee may make any alteration, modification or attachment to
      the
      Equipment deemed appropriate by Lessee, provided
      that
      such alteration, modification, attachment is of a type which is readily
      removable without damage to the Equipment does not decrease the value,
      condition, utility or useful life of the Equipment or cause such Equipment
      to
      become “limited use property” (as defined in Revenue Procedure 2001-28, 2001-19
      I.R.B. 1156 or any successor publication or Treasury Regulation issued pursuant
      to the Internal Revenue Code of 1986 (as amended, supplemented or modified
      from
      time to time, the “Code”)), a fixture (as defined in the Uniform Commercial Code
      as in effect in any applicable jurisdiction), or real property or affect the
      insurability or impair any manufacturer’s warranty with respect to the
      Equipment. All alterations, modifications and attachments of whatsoever kind
      or
      nature made to any item of Equipment that cannot be removed without damaging
      or
      reducing the functional capability, economic value or insurability of the item
      of Equipment or impairing any manufacturer’s warranty shall only be made with
      the prior written consent of the Lessor and shall be deemed to be part of the
      Equipment. Under no circumstance shall any alteration, modification or
      attachment be subjected by Lessee to any encumbrance other than this
      Lease.

     

    9.  Assignment
      and Sublease.
      Lessee
      shall not sublease or otherwise relinquish possession of any Item of Equipment,
      or assign, transfer or encumber its rights, interests or obligations hereunder
      or under any Equipment Schedule executed pursuant hereto unless expressly
      permitted pursuant to the terms of the Equipment Schedule relating to such
      Equipment. No assignment, transfer or sublease, in any event, shall relieve
      Lessee of, and Lessee shall remain primarily liable for, its obligations under
      each Lease Document.

     

    10.  Insurance. 

     

    (a)  Lessee
      shall provide, maintain and pay for insurance coverage with respect to the
      Equipment, insuring against, among other things, the
      loss,
      theft, damage, or destruction of the Equipment, in an amount not less than
      the
      Stipulated Loss Value (as defined in the applicable Equipment Schedule) of
      such
      Equipment at any time; and public liability and property damage with respect
      to
      the use or operation of the Equipment, in the amounts set forth in the
      applicable Equipment Schedule. All insurance against loss shall name Lessor
      as
      the sole loss payee and all liability insurance shall name Lessor and its
      Assignees (as defined in Section 20)
      and
      their subsidiaries and affiliated companies, and their successors and assigns
      as
      additional insureds. All of such insurance shall be in form (including all
      endorsements required by Lessor), and with companies, reasonably satisfactory
      to
      Lessor.

     

    (b)  All
      policies of insurance required hereunder shall (i) provide that any
      cancellation, expiration, lapse, or material modification shall not be effective
      as to the Lessor for a period of thirty (30) days after receipt by Lessor of
      written notice thereof; (ii) provide that premiums may be paid by the Lessor,
      but without liability on the part of the Lessor for such premiums; (iii) be
      primary without any right of set-off or right of contribution from any other
      insurance carried by the Lessor; (iv) contain breach of warranty provisions
      providing that, in respect of the interests of the Lessor, the insurance shall
      not be invalidated by any action, inaction or breach of warranty, declaration,
      or condition by the Lessee or any other person or by any fact or information
      known to Lessor; and (v) waive any right of subrogation against Lessor. Prior
      to
      the Delivery and Acceptance Date for any Item of Equipment, and thereafter,
      not
      less than 15 days prior to each renewal or replacement of such insurance, Lessee
      will deliver to Lessor certificates issued by the insurance carriers thereunder
      evidencing the insurance required to be maintained pursuant to this
      Lease.

     

    
      
         

      

      
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    (c)  The
      proceeds (if any) of the insurance maintained by Lessee that are received with
      respect to the loss or damage of any Equipment, shall be applied and paid
first,
      to
      Lessor for any amount then due and payable by Lessee under this Lease,
second,
      if an
      Event of Loss (as defined in Section 11)
      has
      occurred, to Lessor for the payment of Stipulated Loss Value or otherwise,
      to
      Lessee for its reasonable, documented, out-of-pocket costs to repair or replace
      such item of Equipment pursuant to Section 11(b)(i),
      to
      the extent that such repairs or replacements were necessitated by the occurrence
      of the loss for which such proceeds were paid, third,
      to
      Lessee to reimburse Lessee for any Stipulated Loss Value actually paid to,
      and
      retained by Lessor and fourth,
      any
      excess to Lessor. Proceeds of any liability insurance shall promptly be paid
      to
      the party entitled thereto.

     

    11.  Risk
      of Loss; Damage to Equipment.

     

    (a)  Lessee
      shall bear the entire risk of loss and damage to any and all Items of Equipment
      from any cause whatsoever, whether or not insured against, during the Term
      until
      the Equipment is returned to Lessor in accordance with Section 14
      hereof.
      No loss or damage shall relieve Lessee of the obligation to pay Rent or of
      any
      other obligation under this Lease. An “Event of Loss” shall be deemed to have
      occurred with respect to any Item of Equipment if such Item of Equipment or
      any
      material part thereof has been lost, stolen, requisitioned or condemned by
      any
      governmental authority, damaged beyond repair or damaged in such a manner that
      results in an insurance settlement on the basis of an actual or arranged total
      loss.

     

    (b)  Upon
      any
      loss or damage to any Item of Equipment not constituting an Event of Loss,
      Lessee will promptly, and in any event within thirty (30) days of such loss
      or
      damage (or such longer period as Lessor shall determine in its sole discretion),
      place such Item of Equipment in good condition and repair as required by the
      terms of this Lease. If an Event of Loss to any Item of Equipment has occurred,
      Lessee shall immediately notify Lessor of same, and at the option of Lessor,
      Lessee shall: (i) not more than thirty (30) days following such Event of Loss
      (or such longer period as Lessor shall determine in its sole discretion) replace
      such Item of Equipment with replacement equipment (acceptable to Lessor) in
      as
      good condition and repair, and with the same value remaining useful economic
      life and utility, as such replaced Item of Equipment immediately preceding
      the
      Event of Loss (assuming that such replaced Item of Equipment was in the
      condition required by this Lease), which replacement equipment shall
      immediately, and without further act, be deemed to constitute Items of Equipment
      and be fully subject to this Lease as if originally leased hereunder and shall
      be free and clear of all Liens; or (ii) pay to Lessor on the next succeeding
      Rent Payment Date the sum of (A) all Rent due and owing hereunder with respect
      to such Item of Equipment (at the time of such payment) including all Basic
      Rent
      payable on such Rent Payment Date plus (B) the Stipulated Loss Value as of
      such
      Rent Payment Date with respect to such Item of Equipment. Upon Lessor’s receipt
      of the payment required under subsection (ii) above, Lessee shall be entitled
      to
      Lessor’s interest in such Item of Equipment, in its then condition and location,
“as is” and “where is”, without any representations or warranties, express or
      implied.

     

    12.  Financial,
      Other Information and Notices.
      

     

    (a)  Lessee
      shall maintain a standard and modern system for accounting and shall furnish
      to
      Lessor:

     

    
      
         

      

      
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    (i)  Within
      forty-five (45) days after the end of each quarter, a copy of Lessee’s
      internally prepared consolidated financial statements for that quarter and
      for
      the year to date in a form reasonably acceptable to Lessor, prepared and
      certified as complete and correct, subject to changes resulting from year-end
      adjustments, by the chief financial officer of Lessee. 

     

    (ii)  Within
      one
      hundred twenty (120)
      days
      after the end of each fiscal year, a copy of Lessee’s consolidated year end
      financial statements audited by a firm of independent certified public
      accountants acceptable to Lessor (which acceptance shall not be unreasonably
      withheld) and accompanied by an audit opinion of such accountants without
      qualification. 

     

    All
      such
      financial statements shall be prepared in accordance with generally accepted
      accounting principles, consistently applied. In the event Lessee is a publicly
      held stock company domiciled in the United States, and Lessee files its
      financial statements on public record in accordance with the requirements set
      forth by the Securities and Exchange Commission, then Lessor shall deem Lessee
      to be in compliance with the financial reporting timing requirements set forth
      above.

     

    (b)  Lessee
      shall provide prompt written notice to Lessor (i) of any Event of Default (ii)
      of any loss or damage to any Item of Equipment or any Event of Loss with respect
      to any Item of Equipment, and (iii) any existing or threatened investigation,
      claim or action by any governmental authority which could adversely affect
      the
      Equipment or this Lease.

     

    (c)  Lessee
      shall furnish such other information as Lessor may reasonably request from
      time
      to time relating to the Equipment, this Lease or the operation or condition
      of
      Lessee including, without limitation, such additional financial statements
      of
      the Lessee for such periods as Lessor may request. 

     

    13.  Inspections.
      Lessor
      may from time to time during Lessee’s normal business hours, inspect the
      Equipment and Lessee’s records with respect thereto in a reasonable manner.
      Lessee shall cooperate with Lessor in scheduling such inspection and in making
      the Equipment available for inspection by Lessor or its designee at a single
      location as reasonably specified by Lessee. Lessee will, upon reasonable
      request, provide a report on the condition of the Equipment, a record of its
      maintenance and repair, a summary of all items suffering an Event of Loss,
      a
      certificate of no Event of Default, or such other information or evidence of
      compliance with Lessee’s obligations under the Lease as Lessor may reasonably
      request.

     

    14.  Condition
      Upon Return.
      At the
      expiration of the Term, unless Lessee has elected to purchase the Equipment
      in
      accordance with the terms of the Equipment Schedule, Lessee shall promptly,
      at
      its own cost and expense: (a) perform any testing and repairs required to place
      each Item of Equipment in the same condition and appearance as when received
      by
      Lessee (reasonable wear and tear excepted) and in good working order for its
      originally intended purpose and eligible for manufacturer’s maintenance (if
      available), free of all Lessee’s markings and free of all Liens other than
      Permitted Liens; (b) if de-installation, disassembly or crating is required,
      cause such Items of Equipment to be de-installed, disassembled and crated by
      an
      authorized manufacturer’s representative or such other service person as is
      reasonably satisfactory to Lessor; and (c) return such Items of Equipment in
      the
      condition and in the manner specified in the Equipment Schedule (collectively,
      the “Return Condition”). The Equipment, as returned, will include related
      maintenance logs, operating manuals, and other related materials. All operating
      manuals for the Equipment must be returned to Lessor undamaged and containing
      all pages. If lost or destroyed, Lessee shall, at its own expense, provide
      replacement operating manuals. Lessor may, but is not required to, inspect
      the
      Equipment prior to its return. If Lessor determines that the Equipment does
      not
      conform to the Return Condition, Lessor will promptly notify Lessee of such
      determination specifying the repairs or refurbishments needed to place the
      Equipment in the Return Condition. Lessor may, at its option, either require
      Lessee to effect such repairs or itself effect such repairs. In either case,
      all
      costs associated with any repairs and inspections will be paid by Lessee. Until
      Lessee has returned the Equipment in compliance with the requirements of this
      Lease, the Lease shall continue in full force and effect and Lessee shall
      continue to pay Rent notwithstanding any expiration or termination of the Term
      through and including the date on which the Equipment is accepted for return
      by
      Lessor as conforming with the Return Condition.

     

    
      
         

      

      
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    15.  Lessee’s
      Representations and Warranties.
      Lessee
      represents and warrants as of the date of execution and delivery of this Master
      Lease and each Equipment Schedule as follows: (a) Lessee is a corporation
      organized under the laws of the State of Delaware,
      having
      a principal place of business at 2925
      Boardwalk, Ann Arbor, Michigan 48104,
      duly
      organized, validly existing under the laws of the jurisdiction of its
      organization with full power to enter into and to pay and perform its
      obligations under the Equipment Schedule and this Lease as incorporated therein
      by reference, and is duly qualified or licensed in all other jurisdictions
      where
      its failure to so qualify would adversely affect the conduct of its business
      or
      its ability to perform any of its obligations under or the enforceability of
      this Lease; (b) each Equipment Schedule, this Master Lease and all other Lease
      Documents have been duly authorized, executed and delivered by Lessee, are
      valid, legal and binding obligations of Lessee, are enforceable against Lessee
      in accordance with their terms and do not and will not contravene any provisions
      of or constitute a default under Lessee’s organization documents, any agreement
      to which it is a party or by which it or any of its property is bound, or any
      applicable law, regulation or order of any governmental authority; (c) Lessor’s
      right, title and interest in and to the Equipment and the Rent therefrom will
      vest in Lessor upon Lessee’s acceptance of the Equipment for lease hereunder and
      will not be affected or impaired by the terms of any agreement or instrument
      by
      which Lessee or any of its property is bound; (d) no approval of, or filing
      with, any governmental authority or other person is required in connection
      with
      Lessee’s entering into, or the payment or performance of its obligations under,
      this Lease and the other Lease Documents; (e) there are no suits or proceedings
      pending or, to the knowledge of Lessee, threatened, before any court or
      governmental agency against or affecting Lessee which, if decided adversely
      to
      Lessee, would adversely affect the conduct of its business or its ability to
      perform any of its obligations under or the enforceability of this Lease; (f)
      the financial statements of Lessee which have been delivered to Lessor have
      been
      prepared in accordance with generally accepted accounting principles
      consistently applied, and fairly present Lessee’s financial condition and the
      results of its operations as of the date of and for the period covered by such
      statements (subject to customary year-end adjustments), and since the date
      of
      such statements there has been no adverse change in such financial condition
      or
      operations; (g) Lessee’s full and correct legal name is set forth on the
      signature page hereof and Lessee will not change its legal name or the location
      of its jurisdiction of organization without giving to Lessor at least thirty
      (30) days prior written notice thereof; (h) the Equipment will always be used
      for business or commercial, and not personal, purposes; (i) Lessee is not in
      default under any obligation for borrowed money, for the deferred purchase
      price
      of property or any lease agreement which, either individually or in the
      aggregate, would have an adverse effect on the condition of its business or
      its
      ability to perform any of its obligations under or the enforceability of this
      Lease; (j) under the laws of the jurisdiction(s) in which the Equipment is
      to be
      located, the Equipment consists solely of personal property and not fixtures;
      and (k) Lessee is, and will remain, in full compliance with all laws and
      regulations applicable to it including without limitation, (i) ensuring that
      no
      person who owns a controlling interest in or otherwise controls Lessee is or
      shall be (A) listed on the Specially Designated National and Blocked Person
      List
      maintained by the Office of Foreign Assets Control (“OFAC”), Department of the
      Treasury and/or any other similar lists maintained by OFAC pursuant to any
      authorizing statute, executive order or regulations or (C) a person designated
      under Section 1(b), (c) or (d) of Executive Order No. 13224 (September 23,
      2001), any related enabling legislation or any other similar executive order
      and
      (ii) compliance with all applicable Bank Secrecy Act (“BSA”) laws, regulations
      and government guidance on BSA compliance and on the prevention and detection
      of
      money laundering violations.

     

    Lessee’s
      representations and warranties shall survive termination or expiration of the
      Lease.

     

    
      
         

      

      
        7

        
          

        

      

      
         

      

    

    16.  Events
      of Default and Remedies. 

     

    (a)
      Each
      of the following events constitutes an “Event of Default” hereunder and any
      event that, with the passage of time or the giving of notice, or both, would
      constitute an Event of Default shall constitute a “Default” hereunder: (i)
      Lessee fails to pay any Rent when due under this Lease and such failure
      continues for a period of ten (10) days; (ii) any representation or warranty
      made by Lessee in the Lease or in any other Lease Document shall at any time
      prove to have been incorrect in any material respect as and when made; (iii)
      Lessee fails (A) to obtain and maintain the insurance coverage required
      herein; or (B) fails to observe or perform any other covenant, condition or
      agreement under this Lease and, in the case of clause (B), such failure
      continues unremedied for a period of fifteen (15) days unless Lessor waives
      such
      failure in Lesor’s sole discretion; (iv) Lessee or any Guarantor shall have
      consolidated with, merged with or into, or conveyed, sold or otherwise
      transferred all or substantially all of its assets or shall have failed to
      maintain its corporate existence; (v) Lessee or any Guarantor (A) ceases doing
      business as a going concern; (B) makes an assignment for the benefit of
      creditors or admits in writing its inability to pay its debts as they mature
      or
      generally fails to pay its debts as they become due; (C) initiates any voluntary
      bankruptcy, reorganization, insolvency or similar proceeding; (D) fails to
      obtain the discharge of any bankruptcy, reorganization, insolvency or similar
      proceeding initiated against it by others within sixty (60) days of the date
      such proceedings were initiated; (E) requests or consents to the appointment
      of
      a trustee, custodian or receiver or other officer with similar powers for itself
      or a substantial part of its property; or (F) a trustee, custodian or receiver
      or other officer with similar powers is appointed for itself or for a
      substantial part of its property; (vi) Lessee fails to return the Equipment
      or
      fails to return the Equipment in the required condition at the expiration of
      the
      Term; (vii) a default shall have occurred and be continuing under any contract,
      agreement or document between Lessee and any of its other creditors, (viii)
      a
      default shall have occurred and be continuing under any contract, agreement
      or
      document between Lessee or any Guarantor and Lessor or any affiliate of Lessor;
      (ix) if Lessee’s obligations are guaranteed by any other party, an “Event of
      Default” (under and as defined in the Guaranty executed by such Guarantor) shall
      occur; (x) a material adverse change in Lessee’s existing or prospective
      financial condition or results of operations since the date hereof which may
      affect the ability of Lessee to perform its obligations under the Lease
      Documents shall occur and be continuing; or (xi) the
      individuals who as of the date of this Agreement are members of the Board of
      Directors of the Lessee (the “Incumbent Board”) cease for any reason to
      constitute at least a majority of the Board of Directors; provided, however,
      that if the election, or nomination for election by the Lessee’s shareholders,
      of any new director was approved by a vote of at least a majority of the
      Incumbent Board, such new director shall, for purposes of this Agreement, be
      considered as a member of the Incumbent Board.

     

    (b)  Upon
      the
      occurrence of an Event of Default, Lessor may exercise any one or more of the
      following remedies and any additional rights and remedies permitted by law
      (none
      of which shall be exclusive) and shall be entitled to recover all its reasonable
      costs and expenses including incidental and consequential damages (as described
      in Section 2A-530 of the Uniform Commercial Code) and attorneys’ fees in
      enforcing its rights and remedies:

     

    (i)  Lessee
      shall upon demand assemble or cause to be assembled any or all of the Equipment
      at a location designated by Lessor; and/or to return promptly, at Lessee’s
      expense, any or all of the Equipment to Lessor at such location, in the
      condition and otherwise in accordance with all of the terms of Section 14
      hereof; and/or 

     

    (ii)  Lessor
      may itself or by its agents without breach of the peace or with court order
      or
      other process of law, enter upon the premises of Lessee or any other location
      where the Equipment is located and take possession of and render unusable by
      Lessee any or all of the Equipment, wherever it may be located, without any
      court order or other process of law and without liability for any damages
      occasioned by such taking of possession; and/or

     

    (iii)  Sell,
      re-lease or otherwise dispose of any or all of the Equipment, whether or not
      in
      Lessor’s possession, at public or private sale with or without notice to Lessee,
      with the right of Lessor to purchase and apply the net proceeds of such
      disposition, after deducting all costs of such disposition (including but not
      limited to costs of transportation, possession, storage, refurbishing,
      advertising and brokers’ fees), to the obligations of Lessee under this Lease,
      with Lessee remaining liable for any deficiency and with any excess being
      retained by Lessor, or retain any and all of the Equipment; and/or

     

    
      
         

      

      
        8

        
          

        

      

      
         

      

    

    (iv)  Cancel
      such Equipment Schedule as to any or all of the Equipment; and/or

     

    (v)  Proceed
      by appropriate court action, either at law or in equity (including an action
      for
      specific performance), to enforce performance by Lessee or to recover damages
      associated with such Event of Default; or exercise any other right or remedy
      available to Lessor at law or in equity; and/or

     

    (vi)  By
      offset, recoupment or other manner of application, apply any security deposit,
      monies held in deposit or other sums then held by Lessor or any affiliate of
      Lessor, and with respect to which Lessee has an interest, against any
      obligations of Lessee arising under this Lease or any other Lease Document,
      whether or not Lessee has pledged, assigned or granted a security interest
      to
      Lessor in any or all such sums as collateral for said obligations.

     

    (c)  In
      addition to the foregoing, Lessee shall pay to Lessor on demand the sum of
      (i)
      any and all Rent which is then due or which has accrued to the date of demand
      and (ii) at Lessor’s option (A) an amount equal to the Stipulated Loss Value (as
      set forth in the related Equipment Schedule) as of the Rent Payment Date on
      or
      immediately preceding the date of demand for the Items of Equipment as Lessor
      shall specify or (B) all Basic Rent and all other sums, including any tax
      indemnities becoming due as a result of such Event of Default, for the Term
      (including any mandatory Renewal Term) and all amounts due upon the expiration
      of the Term including any return fees and/or any amounts due with respect to
      the
      mandatory purchase of the Equipment becoming due under this Lease from the
      date
      of demand to the Expiration Date for such Items of Equipment plus the assumed
      residual value of such Equipment (as determined by Lessor). The Lessor and
      Lessee agree that Lessor shall be entitled to such amount as damages for loss
      of
      bargain and not as a penalty and that such amount is reasonable in light of
      the
      anticipated harm to Lessor caused by an Event of Default. 

     

    (d)  If
      Lessee
      pays the full amount referred to in Section 16(c) to Lessor prior to the
      termination of this Lease as it relates to such Items of Equipment, title to
      the
      relevant Equipment shall immediately vest in Lessee without representation
      or
      warranty by Lessor. If Lessee fails to pay such amount and Lessor subsequently
      sells, releases or otherwise disposes of such Items of Equipment, the amount
      due
      from Lessee under Section 16(c) shall be reduced by an amount equal to (i)
      the
      actual cash proceeds received and retained by Lessor upon any sale or
      disposition or (ii) if Lessor leases such Equipment by a lease agreement
      substantially similar to this Lease, the present value of the rents (discounted
      at the Prime Rate as announced by Fifth Third Bank and in effect at the time
      of
      demand plus 2.00%) payable under such subsequent Lease for the remaining Term
      of
      this Lease (without regard to any Renewal Terms other than the then current
      Renewal Term (if applicable)), in each case, net of all costs and expenses
      incurred in connection with such sale, disposition or lease including any
      incidental damages.

     

    (e)  A
      cancellation or termination hereunder shall occur only upon written notice
      by
      Lessor to Lessee, and only with respect to such Items of Equipment as Lessor
      specifically elects to cancel or terminate by such notice. Except as to any
      such
      Items of Equipment with respect to which there is a cancellation or termination,
      this Lease shall remain in full force and effect and Lessee shall be and remain
      liable for the full performance of all its obligations under this
      Lease.

     

    (f)  Lessee
      shall indemnify, defend and hold Lessor harmless for any loss, personal injury
      (including death), or damage to property, suffered by Lessor, its employees
      or
      any of its agents in connection with its entry onto the premises of Lessee
      or
      any third party hereunder. Each of the rights and remedies of Lessor hereunder
      and under the other Lease Documents is in addition to all of its other rights
      and remedies hereunder, under the other Lease Documents and under applicable
      law
      and nothing in this Lease or any other Lease Document shall be construed as
      limiting any such right or remedy. Lessor’s failure to exercise or delay in
      exercising any right, power or remedy available to Lessor shall not constitute
      a
      waiver or otherwise affect or impair its rights to the future exercise of any
      such right, power or remedy. Waiver by Lessor of any Event of Default shall
      not
      be a waiver by Lessor of any other or subsequent Events of Default.

     

    
      
         

      

      
        9

        
          

        

      

      
         

      

    

    17.  General
      Indemnification.
      Lessee
      shall pay, and shall indemnify and hold Lessor, its directors, officers, agents,
      employees, successors and assigns (each an “Indemnitee”) harmless on an
      after-tax basis from and against, any and all liabilities, causes of action,
      claims, suits, penalties, damages, losses, costs or expenses (including
      attorneys’ fees), obligations, liabilities, demands and judgments, and Liens, of
      any nature whatsoever (collectively, a “Liability”) arising out of or in any way
      related to: (a) the Lease Documents, (b) the manufacture, purchase,
      ownership, title, selection, acceptance, rejection, possession, lease, sublease,
      operation, use, maintenance, documenting, inspection, control, loss, damage,
      destruction, removal, storage, surrender, sale, use, condition, delivery,
      nondelivery, return or other disposition of or any other matter relating to
      any
      Item of Equipment or any part or portion thereof (including, in each case and
      without limitation, latent or other defects, whether or not discoverable, any
      claim for patent, trademark or copyright infringement) and any and all
      Liabilities in any way relating to or arising out of injury to persons,
      properties or the environment or any and all Liabilities based on strict
      liability in tort, negligence, breach of warranties or violations of any
      regulatory law or requirement, (c) a failure to comply fully with applicable
      law
      and (d) Lessee’s failure to perform any covenant, or Lessee’s breach of any
      representation or warranty, hereunder; provided,
      that the
      foregoing indemnity shall not extend to the Liabilities to the extent resulting
      solely from the gross negligence or willful misconduct of an
      Indemnitee.

     

    18.  General
      Tax Indemnification.
      Lessee
      shall pay when due and shall indemnify and hold each Indemnitee harmless from
      and against (on an after-tax basis) any and all taxes, fees, withholdings,
      levies, imposts, duties, assessments and charges of any kind and nature
      (“Taxes”) arising out of or related to this Lease or any other Lease Document
      (together with interest and penalties thereon and including, without limitation,
      sales, use, gross receipts, personal property, real property, real estate
      excise, ad
      valorem,
      business and occupational, value added, leasing, leasing use, documentary,
      stamp
      or other taxes imposed upon or against any Indemnitee, Lessee or any Equipment
      by any governmental authority with respect to any Equipment or the
      manufacturing, ordering, sale, purchase, shipment, delivery, acceptance or
      rejection, ownership, titling, registration, leasing, subleasing, possession,
      use, operation, removal, return or other dispossession thereof or upon the
      rents, receipts or earnings arising therefrom or upon or with respect to this
      Lease, whether payable at the inception of a Lease, during the Term thereof
      or
      at the expiration thereof, excepting only all United States federal, state
      and
      local taxes based on or measured by Lessor’s net income. Whenever this Lease or
      any other Lease Document terminates as to any Item of Equipment, Lessee shall,
      upon written request by Lessor, advance to Lessor the amount estimated by Lessor
      to be the personal property or other taxes on such Item of Equipment which
      are
      not yet payable, but for which Lessee is responsible. Lessor shall, at Lessee’s
      request, provide Lessee with Lessor’s method of computation of any estimated
      taxes.
      Except
      as otherwise provided in the Equipment Schedule relating to any Equipment,
      upon
      receipt of any tax bill relating to such Equipment from a relevant taxing
      authority, Lessor will pay the Tax identified on such tax bill. Lessee will,
      on
      demand, (a) reimburse Lessor for the amount of such Tax paid to such taxing
      authority and (b) pay to Lessor a fee (as identified by Lessor from time to
      time) relating to the administration of such payment.

     

    
      
         

      

      
        10

        
          

        

      

      
         

      

    

    19.  Ownership.
      Title
      to the Equipment shall at all times remain in Lessor, and Lessee shall acquire
      no ownership, title, property, right, equity or interest in the Equipment other
      than its leasehold interest solely as Lessee subject to all the terms and
      conditions hereof. This Lease, is intended to be a “finance lease” solely for
      the purposes of Article 2A of the Uniform Commercial Code as that term is
      defined in Article 2A of the Uniform Commercial Code. To the extent permitted
      by
      applicable law, Lessee (a) waives any and all rights and remedies of Lessee
      under Sections 2A-508 through 2A-522 of the Uniform Commercial Code and (b)
      any
      rights now or hereafter conferred by statute or otherwise to recover incidental
      or consequential damages from Lessor for any breach or any other reason
      whatsoever. If, notwithstanding the express intent of the parties, a court
      of
      competent jurisdiction determines that any Equipment Schedule is not a “finance
      lease”, the parties agree that in such event (i) (A) in order to secure the
      prompt payment of Rent under and with respect to this Lease, and the performance
      and observance by Lessee of all the agreements, covenants and provisions hereof
      (collectively, the “Obligations”), Lessee hereby grants to Lessor a first
      priority security interest in all of Lessee’s right, title and interest in the
      following (whether now existing or hereafter created and whether now owned
      or
      hereafter acquired): (1) the Equipment (including, without limitation, all
      inventory, equipment, fixtures or other property comprising the same), and
      general intangibles relating thereto, (2) additions, attachments, accessories
      and accessions thereto whether or not furnished by the Supplier of such
      Equipment, (3) all subleases (including the right to receive any payment
      thereunder and the right to make any election or determination or give any
      consent or waiver thereunder), chattel paper, accounts, security deposits and
      bills of sale relating thereto, (4) any and all substitutions, replacements
      or
      exchanges for any such Equipment or other collateral, and (5) any and all
      products and proceeds of any collateral hereunder (including all insurance
      and
      requisition proceeds and all other payments of any kind with respect to the
      Equipment and other collateral in and against which a security interest is
      granted hereunder and (B) Lessee agrees that with respect to the Equipment,
      in
      addition to all of the other rights and remedies available to Lessor hereunder
      upon the occurrence of an Event of Default, Lessor shall have all of the rights
      and remedies of a secured party under the Uniform Commercial Code; and (ii)
      the
      original principal amount of the obligations hereunder shall be an amount equal
      to the Lessor’s Capitalized Cost, and that such principal amount shall accrue
      interest at the lesser of (x) the maximum lawful rate permitted by applicable
      law or (y) the implicit interest rate reflecting Lessor’s financial assumptions
      at the time of the execution of the Lease (including any assumed residual value
      at the end of the Term as determined by Lessor. Lessee hereby authorizes Lessor
      to file, solely at the expense of Lessee, any Uniform Commercial Code financing
      statements or other similar documents that Lessor reasonably deems necessary
      or
      advisable to protect its interest. Lessee agrees promptly to execute and deliver
      to Lessor such further documents or other assurances, and to take such further
      action, including obtaining landlord and mortgagee waivers, as Lessor may from
      time to time reasonably request.

     

    20.  Assignment
      by Lessor.
      Lessor
      may at any time assign, grant a security interest in, or otherwise dispose
      of
      (individually or collectively, a “transfer”), all or any portion of its rights,
      title or interests in, to and under this Lease, any Equipment Schedule or any
      Item of Equipment, together or separately, to one or more persons or entities
      (each, an “Assignee”). Upon any such transfer, this Lease shall remain in full
      force and effect. If Lessee is given notice of any such transfer, it shall
      acknowledge receipt thereof in writing and execute, or otherwise authenticate,
      such further instruments as may be reasonably requested by Assignee with respect
      to such transfer, including without limitation, a consent certifying certain
      material facts and circumstances related to this Lease and the Equipment. Unless
      otherwise expressly agreed by Assignee, Assignee shall not assume any of the
      obligations of Lessor under this Lease. Upon written notice to Lessee of an
      assignment, Lessee agrees to pay the Rent with respect to the Items of Equipment
      covered by such assignment to such Assignee in accordance with the instructions
      specified in such notice and Lessee shall not assert against Assignee any
      defense, counterclaim or offset that Lessee may have against Lessor. All
      obligations and liabilities of Lessee to Lessor under this Lease (including,
      without limitation, any schedules, exhibits, riders or other attachments
      attached hereto or otherwise incorporated herein) are also hereby made for
      the
      express benefit of Assignee.

     

    21.  Miscellaneous.

     

    (a)  Lessee
      shall pay all reasonable costs and expenses of Lessor, including, without
      limitation, reasonable attorneys’ and other professional fees, the fees of any
      collection agencies and appraisers and all other costs and expenses related
      to
      any sale or re-lease of the Equipment (including storage costs), incurred by
      Lessor in the preparation, negotiation and execution of this Lease or any
      amendment or supplement hereto, enforcing any of the terms, conditions or
      provisions hereof and in protecting Lessor’s rights hereunder.

     

    (b)  This
      Lease shall be governed by and construed in accordance with the laws of the
      State of Michigan. Any judicial proceeding arising out of or relating to this
      Lease may be brought in any court of competent jurisdiction in Michigan and
      each
      of the parties hereto (i) accepts the nonexclusive jurisdiction of such courts
      and any related appellate court and agrees to be bound by any judgment rendered
      by any such court in connection with any such proceeding and (ii) waives any
      objection it may now or hereafter have as to the venue of any such proceeding
      brought in such court or that such court is an inconvenient forum. EACH OF
      THE
      LESSEE AND LESSOR HEREBY WAIVES THE RIGHT TO TRIAL BY JURY IN ANY LAWSUIT OR
      PROCEEDING ARISING OUT OF OR IN ANY WAY RELATING TO THIS LEASE, ANY EQUIPMENT
      SCHEDULE, OR ANY OTHER LEASE DOCUMENT AND ANY ASSIGNMENT, SUBLEASE OR OTHER
      DOCUMENT EXECUTED IN CONNECTION THEREWITH.

     

    
      
         

      

      
        11

        
          

        

      

      
         

      

    

    (c)  All
      notices delivered hereunder shall be in writing (including facsimile) and shall
      be delivered to the following addresses:

     

    if
      to
      Lessee:

    


    Advanced
      Photonix, Inc..

    2925
      Boardwalk

    Ann
      Arbor, Michigan 48104

    Attn:
      Richard
      Kurtz

    Robin
      Risser

    Facsimile:
      (734)
      998-3474

    


    if
      to
      Lessor:

    


    Fifth
      Third Commercial Leasing Company

    38
      Fountain Square Plaza

    MD10904A

    Cincinnati,
      Ohio 45263

    Facsimile:
      (513) 534-6706

    


    (d)  Lessee
      acknowledges and agrees that time is of the essence with respect to its
      performance under the Lease Documents. Any failure of Lessor to require strict
      performance by Lessee or any waiver by Lessor of any provision herein shall
      not
      be construed as a consent or waiver of any provision of this Lease. This Lease
      shall be binding upon, and inure to the benefit of, the parties hereto, their
      permitted successors and assigns. 

     

    (e)  This
      Lease, together with all other Lease Documents, constitutes the entire
      understanding or agreement between Lessor and Lessee with respect to the leasing
      of the Equipment, and supercedes all prior agreements, representations and
      understandings relating to the subject matter hereof. Neither this Lease nor
      any
      other Lease Document may be amended except by a written instrument signed by
      Lessor and Lessee.

     

    (f)  This
      Lease may be executed in any number of counterparts, each of which shall be
      an
      original and all of which shall constitute but one and the same
      instrument.

     

    (g)  Any
      provision of this Lease which is prohibited or unenforceable in any jurisdiction
      shall, as to such jurisdiction, be ineffective to the extent of such prohibition
      or unenforceability without invalidating the remaining provisions hereof, and
      any such prohibition or unenforceability shall not invalidate or render
      unenforceable such provision in any other jurisdiction. Captions are intended
      for convenience or reference only, and shall not be construed to define, limit
      or describe the scope or intent of any provisions hereof.

     

    
      
         

      

      
        12

        
          

        

      

      
         

      

    

    IN
      WITNESS WHEREOF, Lessor and Lessee have executed this Master Lease as of the
      day
      and year first above written.

     

    LESSOR:

     

    THE
      FIFTH
      THIRD LEASING COMPANY

     

    By:
      /s/
      Derek Burke

     

    Name:
      Derek
      Burke 

     

    Title: 
      Vice
      President

     

    


     

    LESSEE:

     

    ADVANCED
      PHOTONIX, INC.

     

    By:
      /s/
      Robin F. Risser

     

    Name: 
      Robin F.
      Risser

     

    Title: 
      CFO

     

    
      
         

      

      
        13

        
          

        

      

      
         

      

    


    ATTACHMENT
      1 TO MASTER LEASE

    


    Equipment
      Schedule - No. 001

    Dated
      March
      6,
      2007

    To
      Master
      Equipment Lease Agreement

    Dated
      as
      of March
      6,
      2007

     

    Lessor: THE
      FIFTH THIRD LEASING COMPANY,

    an
      Ohio corporation

     

    Lessee: Advanced
      Photonix, Inc.

     

    All
      of
      the terms of the Master Equipment Lease Agreement dated as of March
      6,
      2007
      (as
      amended, supplemented or modified from time to time, the “Master Lease”) between
      Lessee and Lessor are incorporated by reference herein. Capitalized terms used,
      and not otherwise defined, herein shall have the meanings ascribed thereto
      in
      the Master Lease. This Equipment Schedule as it incorporates the terms of the
      Master Lease and each schedule, exhibit and rider attached hereto is referred
      to
      as this “Lease”. This Equipment Schedule, and the Master Lease, as incorporated
      herein shall constitute a separate and enforceable lease. If any term of any
      schedule, exhibit or rider hereto conflicts with or is inconsistent with any
      term of this Equipment Schedule or the Master Lease, the terms of such schedule,
      exhibit or rider shall govern.

     

    Equipment.

     

    This
      Equipment Schedule relates to the Equipment described on Schedule 1 hereto
      (collectively, the “Equipment”).

     

    Financial
      Terms.

     

    Base
      Lease Term Commencement Date: ____________
      __, 2007 

     

    Base
      Lease Term: 60
      months


     

    Rent
      Payment Dates: _____________
      __, 2007
      and on
      the same day of each month thereafter during the Term. 

     

    Expiration
      Date: ____________
      __, _____ 

     

    Lessor’s
      Capitalized Cost: $___________________

     

    Rent:
      The
      Base Term Rental Factor is 0.________________
      (or
      $_______________
      per
      month as of the Base Lease Term Commencement Date). The Base Term Rental Factor
      has been determined based on an interest rate swap rate for a term corresponding
      to the maturity of this Lease as quoted in the Federal Reserve Statistical
      H15
      Release and such Base Term Rental Factor may be adjusted up or down (as
      appropriate) by Lessor (based upon Lessee’s choice of either (x) a corresponding
      interest rate swap rate quoted in such Release plus 300 basis points, or (y)
      a
      floating rate of Prime Rate plus 1/8%) as in effect on the Delivery and
      Acceptance Date. Lessor will provide Lessee with notice of any such adjustment.
      

     

    Equipment
      Location(s): As specified on Schedule 1. 

     

    Pursuant
      to Section 18 of the Master Lease, on or prior to the Delivery and Acceptance
      Date, Lessee will execute and deliver a Tax Payment Certification in the form
      of
      Exhibit A hereto. 

     

    
      
         

      

      
        14

        
          

        

      

      
         

      

    

    Lessee’s
      federal taxpayer identification number is and
      Lessee’s state charter or organizational identification number is.
      

     

    Rent
      and Tax Payments.

     

    On
      each
      Rent Payment Date during the Base Lease Term, Lessee shall pay (i) as Basic
      Rent
      for the Equipment, the product of the Base Term Rental Factor and Lessor’s
      Capitalized Cost for the Equipment and (ii) in respect of Taxes scheduled to
      become due, such amounts monthly (or at such other interval as Lessor may deem
      appropriate) as Lessor determines will be due and payable. In addition to the
      foregoing, on the Base Lease Term Commencement Date, Lessee shall pay to Lessor
      as interim rent for each day from the Delivery and Acceptance Date to the Base
      Lease Term Commencement Date, the sum of (A) $500.00,
      as
      daily rent and (B) such amounts daily in respect of Taxes as Lessor determines
      will be due and payable. 

     

    Rental
      payments shall be initiated by Lessor in accordance with the terms of this
      Lease
      from Lessee’s account through BillPayer 2000®.
      Lessee
      hereby authorizes Lessor to initiate such payments from Lessee’s account located
      at Fifth
      Third Bank,
      ABA
      routing number ***ABA
      Routing Number***,
      account
      number ***Bank
      Account Number***.
      Lessee
      acknowledges and agrees that use of BillPayer 2000®
      shall be
      governed by the BillPayer 2000®
      Terms
      and Conditions, and Lessee hereby acknowledges receipt of a copy of such Terms
      and Conditions. Lessee further acknowledges and agrees to maintain payments
      hereunder through BillPayer 2000®
      throughout the term of this Lease.

     

    Tax,
      Interest and Security.

     

    For
      federal and state income tax purposes, Lessor and Lessee agree that Lessee
      will
      be considered the owner of the Equipment. Accordingly, Lessor agrees (i) not
      to
      take actions or positions inconsistent with Lessee as owner of the Equipment
      on
      or with respect to its federal income tax return, and (ii) not to claim any
      tax
      benefits available to an owner of the Equipment on or with respect to its
      federal or state income tax return. The foregoing undertakings by Lessor shall
      not be violated by Lessor’s taking a tax position inconsistent with the
      foregoing to the extent such position is required by law or to the extent such
      position is taken without gross negligence on the part of Lessor. Lessor shall
      in no event be liable to Lessee if Lessee fails to secure any of the tax
      benefits available to the owner of the Equipment. 

     

    Nothing
      contained in the Lease Documents shall require Lessee at any time to pay
      interest at a rate exceeding the maximum permissible rate under applicable
      law.
      To the extent that any Rent is characterized as interest and if such interest
      payable by Lessee on any date would exceed the maximum amount permitted by
      applicable law, such interest payment shall automatically be reduced to such
      maximum amount permitted. Any interest actually received for any period in
      excess of such maximum amount permitted for such period shall be held by Lessor
      as security for the obligations of Lessee under this Lease.

     

    To
      the
      extent permitted by applicable law, Lessee waives any rights now or hereafter
      conferred by statute or otherwise to recover incidental or consequential damages
      from Lessor for any breach or any other reason whatsoever. In order to secure
      the prompt payment of Rent under and with respect to this Lease, and the
      performance and observance by Lessee of all the agreements, covenants and
      provisions hereof (collectively, the “Obligations”), Lessee hereby grants to
      Lessor a first priority security interest in all of Lessee’s right, title and
      interest in the following (whether now existing or hereafter created and whether
      now owned or hereafter acquired): (i) the Equipment (including, without
      limitation, all inventory, equipment, fixtures or other property comprising
      the
      same), and general intangibles relating thereto, (ii) additions, attachments,
      accessories and accessions thereto whether or not furnished by the Supplier
      of
      such Equipment, (iii) all subleases (including the right to receive any payment
      thereunder and the right to make any election or determination or give any
      consent or waiver thereunder), chattel paper, accounts, security deposits and
      bills of sale relating thereto, (iv) any and all substitutions, replacements
      or
      exchanges for any such Equipment or other collateral, and (v) any and all
      products and proceeds of any collateral hereunder (including all insurance
      and
      requisition proceeds and all other payments of any kind with respect to the
      Equipment and other collateral in and against which a security interest is
      granted hereunder). Lessee agrees that with respect to the Equipment, in
      addition to all of the other rights and remedies available to Lessor hereunder
      upon the occurrence of an Event of Default, Lessor shall have all of the rights
      and remedies of a secured party under the Uniform Commercial Code. Lessee
      further agrees that the original principal amount of the obligations hereunder
      shall be an amount equal to Lessor’s Capitalized Cost, and that such principal
      amount shall accrue interest at the implicit interest rate reflecting Lessor’s
      financial assumptions at the time of the execution of the Lease (including
      any
      outstanding balance at the end of the Base Lease Term as reflected by the
      purchase price for the Equipment at the end of the Base Lease Term set forth
      in
      Section 0).
      Lessee
      hereby authorizes Lessor to file, solely at the expense of Lessee, any Uniform
      Commercial Code financing statements or other similar documents that Lessor
      reasonably deems necessary or advisable to protect its interest. Lessee agrees
      promptly to execute and deliver to Lessor such further documents or other
      assurances, and to take such further action, including obtaining landlord and
      mortgagee waivers, as Lessor may from time to time reasonably
      request.

     

    
      
         

      

      
        15

        
          

        

      

      
         

      

    

    Insurance.
      

     

    The
      amount of public liability insurance including personal injury and property
      damage required to be maintained by Lessee pursuant to Section 10(a) of the
      Master Lease is $1,000,000.00
      per
      occurrence.

     

    End
      of Term.

    


    (h)  Upon
      the
      expiration of the Base Lease Term, so long as (i) no Default or Event of Default
      has occurred and is continuing and (ii) this Lease shall not have been earlier
      terminated, Lessee shall, upon the terms and conditions set forth below,
      purchase all but not less than all of the Equipment for a price equal to One
      Dollar ($1.00) plus all Rent then due and payable pursuant to this Lease and
      Taxes (including all sales and use Taxes) payable in connection with such
      purchase. Upon the purchase of the Equipment in accordance with the terms
      hereof, and payment of all other amounts then due and payable under this Lease,
      Lessor will deliver to Lessee a bill of sale transferring title to the Equipment
      to Lessee on an “as-is”, “where-is” basis without representation or warranty of
      any kind except that Lessor shall warrant that the Equipment is free, clear
      and
      unencumbered of all Liens arising by, through or under Lessor except for such
      Liens that Lessee is required to remove pursuant to the terms of the
      Lease.

     

    (i)  Except
      to
      the extent otherwise expressly set forth herein in case of a permitted
      prepayment in full of all Basic Rent and other obligations due under this Lease,
      the amount of Basic Rent or any other obligation required to be paid under
      this
      Lease shall not be discounted by virtue of the fact that such amount may be
      paid
      by the Lessee prior to the due date thereof.

     

    Amendments
      to Master Lease and Additional Lease Provisions.

     

    (j)  Section
      10(a) of the Master Lease is hereby amended by deleting the words “Stipulated
      Loss Value (as defined in the applicable Equipment Schedule) of such Equipment
      at any time” appearing therein and inserting in lieu thereof, the words,
“Lessor’s Capitalized Cost or such lesser amount to which Lessor shall
      reasonably consent.” 

     

    (k)  Section
      10(c) of the Master Lease is hereby amended by replacing the two references
      to
“Stipulated Loss Value” with the words “amounts due to Lessor pursuant to
      Section 11(b)(ii) following an Event of Loss.”

     

    (l)  Section
      11(b)(ii) of the Master Lease is hereby deleted in its entirety and the
      following is hereby inserted in lieu thereof: “(ii) pay to Lessor on the next
      succeeding Rent Payment Date (the “Loss Payment Date”) the sum of (A) all Rent
      due and owing hereunder with respect to such Item of Equipment (at the time
      of
      such payment) including all Basic Rent payable on such Rent Payment Date plus
      (B) an amount equal to each installment of Basic Rent payable under the Lease
      on
      each Rent Payment Date during the Term after the Loss Payment Date, in each
      case, discounted from the Rent Payment Date on which such payment would have
      been due to the Loss Payment Date at a rate per annum equal to the then current
      yield, as reasonably determined by Lessor, on United States Treasury securities
      with a remaining life to maturity equal to, or approximately equal to, the
      period from the Loss Payment Date to the final Rent Payment Date during the
      Term."

     

    
      
         

      

      
        16

        
          

        

      

      
         

      

    

    (m)  Section
      15 of the Master Lease is hereby amended by inserting the following immediately
      following clause (j) thereof: “(k) Upon the filing with the Secretary of State
      of Delaware
      of a
      Uniform Commercial Code financing statement describing Lessor, as secured party,
      Lessee, as debtor, and the Equipment as the collateral, Lessor shall have a
      first priority perfected security interest in the Equipment leased under this
      Lease.” 

     

    (n)  Section
      16(c) of the Master Lease is hereby deleted in its entirety and the following
      is
      hereby inserted in lieu thereof: “In addition to the foregoing, Lessee shall pay
      to Lessor on demand the sum of (i) any and all Rent which is then due or which
      has accrued to the date of demand and (ii) an amount equal to each installment
      of Basic Rent payable under the Lease on each Rent Payment Date during the
      Term
      after the date of demand, in each case, discounted from the Rent Payment Date
      on
      which such payment would have been due to the date of demand at a rate per
      annum
      equal to the then current yield, as reasonably determined by Lessor, on United
      States Treasury securities with a remaining life to maturity equal to, or
      approximately equal to, the period from the date of demand to the final Rent
      Payment Date during the Term. Lessor and Lessee agree that Lessor shall be
      entitled to such amount as damages for loss of bargain and not as a penalty
      and
      that such amount is reasonable in light of the anticipated harm to Lessor caused
      by an Event of Default.”

     

    (o)  Section
      19 of the Master Lease is hereby deleted in its entirety and the following
      is
      inserted, in lieu thereof: “19. [INTENTIONALLY OMITTED].”

     

    (p)  For
      purposes of this Equipment Schedule and to the extent required by law, Lessee
      for purposes of tangible personal property taxes will prepare and file
      applicable tax returns. Lessee hereby agrees to remit any tax due and owing
      (unless properly contested) directly to the taxing authority in which the
      Equipment is located. In the event the Lessee relocates the Equipment, Lessee
      shall notify Lessor. Upon request from Lessor, Lessee shall provide copies
      of
      any requested tax return and proof of payment. Both Lessor and Lessee agree
      to
      cooperate with each other to resolve any disputed assessment or governmental
      audit. Lessee shall have the right to contest any assessment provided such
      contest: (i) is properly initiated and challenged in accordance with such taxing
      jurisdiction’s procedures or is premised upon the advice of tax counsel; (ii)
      does not jeopardize the Equipment to confiscation or forfeiture; and (iii)
      does
      not subject Lessor to penalty or criminal sanction. Should any contest fail,
      or
      upon the advise of Lessor’s tax counsel be deemed to lack merit or be unlikely
      to succeed, Lessee shall upon demand from Lessor withdraw its challenge and
      promptly remit payment to the taxing authority.

     

    Except
      as
      expressly modified hereby, all terms and provisions of the Master Lease shall
      remain in full force and effect. This Equipment Schedule is not binding or
      effective with respect to the Master Lease or Equipment until executed on behalf
      of Lessor and Lessee by authorized representatives of Lessor and Lessee,
      respectively.

     

    Remainder
      of page intentionally left blank. Signature page follows.

    
      
         

      

      
        17

        
          

        

      

      
         

      

    



    


    IN
      WITNESS WHEREOF, Lessee and Lessor have caused this Equipment Schedule to be
      executed by their duly authorized representatives as of the date first above
      written.

    

      
        	
                LESSOR:  

              	
                 

              	
                LESSEE: 

              
	
                THE
                  FIFTH THIRD LEASING COMPANY 

              	
                 

              	
                ADVANCED
                  PHOTONIX, INC. 

              
	
                 

              	
                 

              	
                 

              
	
                 

              	
                 

              	 
	
                By: 

              	
                 

              	
                By: 

              
	
                Name:
                  

              	
                 

              	
                Name: 

              
	
                Title:
                  

              	
                 

              	
                Title:
                  

              


      

    

    


     

    THIS
      LEASE MAY BE EXECUTED IN SEVERAL COUNTERPARTS AND TO THE EXTENT, IF ANY, THAT
      THIS LEASE CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE UNIFORM
      COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO SECURITY
      INTEREST IN THIS LEASE MAY BE PERFECTED THROUGH THE TRANSFER OF POSSESSION
      OF
      ANY COUNTERPART OTHER THAT THE ORIGINAL COUNTERPART, WHICH SHALL BE IDENTIFIED
      AS THE CHATTEL PAPER ORIGINAL ON THE SIGNATURE PAGE THEREOF. THIS IS
      THE
      CHATTEL PAPER ORIGINAL.

     

    


     

    CHATTEL
      PAPER ORIGINAL

    
      
         

      

      
        18

        
          

        

      

      
         

      

    


    


    IN
      WITNESS WHEREOF, Lessee and Lessor have caused this Equipment Schedule to be
      executed by their duly authorized representatives as of the date first above
      written.

     

    
      	
              LESSOR:  

            	
               

            	
              LESSEE: 

            
	
              THE
                FIFTH THIRD LEASING COMPANY 

            	
               

            	
              ADVANCED
                PHOTONIX, INC. 

            
	
               

            	
               

            	
               

            
	
               

            	
               

            	 
	
              By: 

            	
               

            	
              By: 

            
	
              Name:
                

            	
               

            	
              Name: 

            
	
              Title:
                

            	
               

            	
              Title:
                

            


    

     

     

    THIS
      LEASE MAY BE EXECUTED IN SEVERAL COUNTERPARTS AND TO THE EXTENT, IF ANY, THAT
      THIS LEASE CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE UNIFORM
      COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO SECURITY
      INTEREST IN THIS LEASE MAY BE PERFECTED THROUGH THE TRANSFER OF POSSESSION
      OF
      ANY COUNTERPART OTHER THAT THE ORIGINAL COUNTERPART, WHICH SHALL BE IDENTIFIED
      AS THE CHATTEL PAPER ORIGINAL ON THE SIGNATURE PAGE THEREOF. THIS IS
      NOT
      THE
      CHATTEL PAPER ORIGINAL.

     

    


    
      
         

      

        19