Exhibit 10.3
STANDARD INDUSTRIAL/COMMERCIAL
MULTI-TENANT LEASE - GROSS
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION


 


1.                 Basic
Provisions (“Basic Provisions”).


                    1.1               Parties: This Lease (“Lease”),
dated for reference purposes only June 20, 2004

, is made by and between MAGNUM PROPERTIES, INC.


(“Lessor”)


 


                                                                                                                                                                                  


                                                                                                                                                                                  


 


and SUB-URBAN INDUSTRIES, INC.


 


                                                                                                                                                                                  


                                                                                                                                                                                  


 


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


 


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


 


                                                                                                                                                                                  


 


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


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


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


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


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


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


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


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


                    1.7               Base Rent and Other Monies Paid
Upon Execution:


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


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


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


                                        (d)               Other: $                                 
for        .


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


 


                    1.8               Agreed Use: Sales office and
related activities.


                                                                                                                                                                                  


                                                                                                                                                                                  


                                                                                                                                                                                  


                 
(See also Paragraph 6.)


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


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


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


applicable boxes):


 


	
  o

  	
   

  	
   

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
   

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  .x

  	
   

  	
  Magnum Properties

  	
   

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

  



 


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


 


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


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


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


 


2.                 Premises.


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


not the actual size is more or less.


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


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


 


	                  
	                  

	                  
	                  

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


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


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


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


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


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


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


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


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


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


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


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


immediately payable upon demand by Lessor.


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


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


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


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


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


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


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


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


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


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


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


 


3.                 Term.


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


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


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


 


	                  
	                  

	                  
	                  

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


 


4.                 Rent.


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


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


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


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


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


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


(e)), of the following:


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


 (bb)        Exterior
signs and any tenant directories.


 (cc)        Any
fire sprinkler systems.


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


metered.


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


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


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


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


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


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


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


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


Expense.


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


days after delivery by
Lessor to Lessee of the statement.


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


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


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


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


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


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


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


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


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


 


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


6.                 Use.


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


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


                    6.2               Hazardous Substances. .


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


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


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


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


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


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


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


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


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


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


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


 


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


                    7.1               Lessee’s Obligations.


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


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


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


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


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


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


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


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


Common Area fire alarm and/or smoke detection systems, fire
hydrants, parking lots, walkways, parkways, driveways, landscaping, fences,
signs and utility systems serving the Common Areas and all parts thereof, as
well as providing the services for which there is a Common Area Operating
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Paragraph 4.2. Lessor shall not be obligated to paint the
exterior or interior surfaces of exterior walls, nor shall Lessor be obligated
to maintain, repair or replace windows, doors or plate glass of the Premises.
Lessee expressly waives the benefit of any statute now or hereafter in effect
to the extent it is inconsistent with the terms of this Lease.


                    7.3               Utility Installations; Trade
Fixtures; Alterations.


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


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


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


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


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


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


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


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


                    7.4               Ownership; Removal; Surrender;
and Restoration


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


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


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


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


 


8.                 Insurance;
Indemnity.


                    8.1               Payment of Premium Increases.


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


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


                    8.2               Liability Insurance.


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


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


                    8.3               Property Insurance - Building,
Improvements and Rental Value.


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


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


 


	                  
	                  

	                  
	                  

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


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


                    8.4               Lessee’s Property; Business
Interruption Insurance.


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


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


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


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


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


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


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


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


 


9.                 Damage
or Destruction.


                    9.1               Definitions.


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


                    9.5               Damage Near End of Term. If at
any time during the last 6 months of this Lease there is damage for which the
cost to repair exceeds one month’s Base Rent, whether or not an Insured Loss,
Lessor may terminate this Lease effective 60 days following the date of occurrence
of such damage by giving a written termination notice to Lessee within 30 days
after the date of occurrence of such damage. Notwithstanding the foregoing, if
Lessee at that time has an exercisable option to extend this Lease or to
purchase the Premises, then Lessee may preserve this Lease by, (a) exercising
such option and (b) providing Lessor with any shortage in insurance proceeds
(or adequate assurance thereof) needed to make the repairs on or before the
earlier of (i) the date which is 10 days after Lessee’s receipt of Lessor’s
written notice purporting to terminate this Lease, or (ii) the day prior to the
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expires. If Lessee duly exercises such option during such period
and provides Lessor with funds (or adequate assurance thereof) to cover any
shortage in insurance proceeds, Lessor shall, at Lessor’s commercially
reasonable expense, repair such damage as soon as reasonably possible and this
Lease shall continue in full force and effect. If Lessee fails to exercise such
option and provide such funds or assurance during such period, then this Lease
shall terminate on the date specified in the termination notice and Lessee’s
option shall be extinguished.


                    9.6               Abatement of Rent; Lessee’s
Remedies.


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


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


Premises, whichever first occurs.


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


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


 


10.                Real
Property Taxes.


                    10.1             Definitions.


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


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


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


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


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


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


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


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


 


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


 


12.              
Assignment and Subletting.


                    12.1              Lessor’s Consent Required.


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


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


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


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


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


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


                    12.2              Terms and Conditions Applicable to
Assignment and Subletting.


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


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


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


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


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


 
 


	                  
	                  

	                  
	                  

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


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


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


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


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


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


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


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


 


13. Default; Breach; Remedies.


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


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


 
 


	                  
	                  

	                  
	                  

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


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


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


                    13.6             Breach by Lessor.


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


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


 


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


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


 


15.               Brokerage
Fees.


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


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


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


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


 


16.               Estoppel
Certificates.


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


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


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


 


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


 


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


 


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


 


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


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


 
 


	                  
	                  

	                  
	                  

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


 


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


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


 


23.                Notices.


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


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


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


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


 


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


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


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


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


 


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


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


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


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


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


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


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


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


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


 


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


 


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


 


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


 


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


 


30.               Subordination;
Attornment; Non-Disturbance.


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


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


 
 


	                  
	                  

	                  
	                  

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


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


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


 


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


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


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


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


 


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


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


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


 


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


 


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


 


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


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


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


 


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


 


37.              
Guarantor.


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


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


written confirmation that the guaranty is still in effect.


 


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


 


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


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


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


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


                    39.4             Effect of Default on Options.


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


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


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


 


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


 
 


	                  
	                  

	                  
	                  

	Initials
	Initials




 
 















 


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


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


 


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


 


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


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


 


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


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


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


 


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


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


 


	
  Executed at: Los Angeles, California

  	
   

  	
  Executed at: Los Angeles, California

  
	
  On: June 29, 2004

  	
   

  	
  Executed at: June 29, 2004 

  
	
   

  	
   

  	
   

  
	
  By LESSOR:

  	
   

  	
  By LESSEE:

  
	
  MAGNUM PROPERTIES, INC.

  	
   

  	
  SUB-URBAN INDUSTRIES, INC.

  
	
   

  	
   

  	
  .

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  By:

  
	
  Name Printed: Mike Meraz

  	
   

  	
  Name Printed: Aaron Apodaca

  
	
  Title: Broker

  	
   

  	
  Title: Chief Operating Officer

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
  By:

  
	
  Name Printed:

  	
   

  	
  Name Printed: Joe Shortal

  
	
  Title:

  	
   

  	
  Title: Chief Executive Officer

  
	
  Address: 2222 E. Washington Boulevard, Unit A

  	
   

  	
  Address: 2222 E. Washington Boulevard, Unit B

  
	
  Los Angeles, CA 90021

  	
   

  	
  Los Angeles, CA 90021

  
	
   

  	
   

  	
  .

  
	
  Telephone: (323) 585-3000

  	
   

  	
  Telephone: (213)229-2885

  
	
  Facsimile: (323) 585-3335

  	
   

  	
  Facsimile: (213)229-8885

  
	
  Federal ID No.:

  	
   

  	
  Federal ID No.:

  



 


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


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


 


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


All rights reserved.


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


 


 
 


	                  
	                  

	                  
	                  

	Initials
	Initials




 
 

















 


ADDENDUM TO LEASE DATED JUNE 20,


2004


2222 EAST WASHINGTON BOULEVARD,


UNIT B


LOS ANGELES, CALIFORNIA


BY AND BETWEEN


MAGNUM PROPERTIES, INC. (LESSOR)


AND


SUB-URBAN INDUSTRIES, INC., (LESSEE)


 


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


 


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


 


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


 

















 


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


 


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


 


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


 


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


 


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


 


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


 

















 


Addendum to Lease June 20, 2004


2222 East Washington Boulevard, Unit B Page 2


1.12h OPTION TO EXTEND: See attached form


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


 


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


 


1.12k
PERSONAL GUARANTEE: See attached form


 


1.121 RENT
INCREASE: See attached form


 


Read and
Agreed:


Lessee:





 


 





/ f / / End of Addendum / / j /


 

















 





AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION GUARANTY OF LEASE


	
  WHEREAS,MAGNUM PROPERTIES, INC.

  
	
   

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

  
	
  wherein Lessor will lease the promises to Lessee,
  and

  



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


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


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


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


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


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


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


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


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


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


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


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

















 


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


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


	
  Executed at Los Angeles,
  California

  
	
   

  	
   

  	
   

  	
   

  
	
  on June 29, 2004

  	
   

  	
   

  	
   

  
	
  Joe
  Shortal

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Address 2222 E. Washington
  Boulevard Unit B

  	
   

  	
   

  	
   

  
	
  “GUARANTORS”

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Los Anqeles,CA 90021

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  ©1996 -American Industrial Real Estate
  Association

  	
   

  	
   

  
	
  FORM
  GR•1-12I96E

  	
   

  	
   

  	
   

  



 


 


REVISED


 


OPTION(S)
TO EXTEND


STANDARD
LEASE ADDENDUM


Dated June 20, 2004


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


(Lessee): Sub-Urban
Industries, Inc.


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


Los Angeles. CA 90021


Paragraph 1.12h


 


A.     OPTION(S) TO EXTEND:


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


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


Option.


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


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


 

















 


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


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


Cost of Living
Adjustment(s) (COLA)


 


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


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


Los
Angeles -


Riverside - Orange


counties All Items (1982-1984 =


100), herein referred to
as “CPI”.


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


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


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


 

















 


RENT
ADJUSTMENT(S)


STANDARD LEASE ADDENDUM


	
   

  	
  Dated June 20, 2004.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  By and
  Between (Lessor)

  	
   

  	
  . Magnum Properties, Inc.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  (Lessee)

  	
   

  	
  . Sub-Urban Industries, Inc.

  
	
   

  	
   

  
	
  Address of Premises:.

  	
   

  	
  2222 E, Washington Blvd. . Unit B

  
	
   

  	
   

  	
   

  	
  Los Angeles, CA 90021

  
						



 


Paragraph 1. 121


A.     RENT ADJUSTMENTS:


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


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


 


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


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


 


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


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


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