Blueprint





 






Exhibit
10.24

 


STANDARD
INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE – GROSS

 




1.

 Basic Provisions (“Basic
Provisions”).








1.1

Parties. This Lease (“Lease”), dated for reference
purposes only December 14, 2018, is made by and between Pensco
Truat Company Custodian F.B.O.Raymond W. Matteson, IRA #MA529
(“Lessor”) and
GrowLife, Inc, a Delaware Corporation. (“Lessee”), (collectively the
“Parties”), or
individually a “Party”).








1.2

(a) Premises: That certain real property,
including all improvements therein or to be provided by Lessor
under the terms of this Lease, commonly known as (street address,
unit/suite, city, state): 10170 Croydon Way, Units B, F and G,
Sacramento, CA 95827 (“Premises”). The Premises are
located in the County of Sacramento, and generally described as
(describe briefly the nature of the Premises and
“Project”): containing 28,100 square feet of Industrial
Space, including 2,024 square feet of office space, contained in an
industrial park.. In addition to Lessee’s rights to use and
occupy the Premises as hereinafter specified, Lessee shall have
non-exclusive rights to any utility raceways of the building
containing the Premises (“Building”) and to the Common Areas
(as defined in Paragraph 2.7 below), but shall not have any rights
to the roof, or exterior walls of the 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: Prorata share of
unreserved vehicle parking spaces. (See also Paragraph
2.6).




1.3

 Term: Five years and 0 months
(“Original
Term”) commencing on January 1, 2019
(“Commencement
Date”) and ending December 31, 2023
(“Expiration
Date”). (See also Paragraph 3).








1.4

Early Possession: Lessee currently
occupies the premise (“Early
Possession Date”). (See also Paragraph 3.2 and
3.3).








1.5

Base Rent $17,500 per month
(“Base Rent”),
payable on the _first (1st) day of each month
commencing January 1, 2019. (See also Paragraph 4).






X☐If this box is
checked, there are provisions in this Lease for the Base Rent to be
adjusted. See Paragraph 49.




1.6

Lessee’s Share of Common Area Operating
Expenses: N/A percent (N/A%) (“Lessee’s Share”). In the
event that the size of the Premises and/or the Project are modified
during the term of this Lease, Lessor shall recalculate
Lessee’s Share to reflect such modification.








1.7

Base
Rent and Other Monies Paid Upon Execution:








(a)

Base Rent: $17,500 for the period
January 1-31, 2019.








(b)

Common Area Operating Expenses: N/A for
the period N/A.








(c)

Security Deposit: $19,000
(“Security
Deposit”). (See also Paragraph 5)








(d)

Other N/A for N/A








(e)

Total Due Upon Execution of this Lease:
$36,500..








1.8

Agreed
Use: Assembly and sale of plastic parts for use by the agricultural
industry.






(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 and 25)








(a)

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







☐               

N/A represents
Lessor exclusively (“Lessor’s
Broker”);





 



☐       

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





 



☐       

N/A 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 N/A or N/A % 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 N/A
(“Guarantor”).
(See also Paragraph 37)








1.12

  Attachments.
Attached hereto are the following, all of which constitute a part
of this Lease:






X☐an Addendum
consisting of Paragraphs 49 through 61;


☐a site plan depicting
the Premises;


☐a site plan depicting
the Project;


☐a current set of the
Rules and Regulations for the Project;


☐ a current set of the
Rules and Regulations adopted by the owners’
association;


☐a Work
Letter;


☐other (specify):
_______.




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. While the approximate square footage of
the Premises may have been used in the marketing of the Premises
for purposes of comparison, the Base Rent started herein is NOT
tied to the square footage and






Is not
subject to adjustment should the actual size be determined to be
different. NOTE: Lessee is advised to verify the actual size prior
to executing this Lease.




2.2

Condition. Lessee currently occupies the
Premises and therefore is aware of the condition of the Premises
and accepts the Premises in its current “AS IS, WHERE
IS” condition. The structural elements of the roof, bearing
walls and foundation of the Unit shall be free of material defects,
and the Unit does not contain any known hazardous levels of any mold
or fungi defined as toxic under applicable state or federal law.
Lessor also warrants, that unless otherwise specified in writing,
Lessor is unaware of (i) any recorded Notices of Default affecting
the Premise; (ii) any delinquent amounts due under any loan secured
by the Premises; and (iii) any bankruptcy proceeding affecting the
Premises.








2.3

Compliance. Lessee shall comply with the
building codes, applicable laws, covenants or restrictions of
record, regulation and ordinances (“Applicable Requirements”)
applicable to the Premises including any modifications which may be
required by the Americans with Disabilities Act or any similar laws
as a result of Lessee’s use (see Paragraph 49), 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 Applicable Requirements, and especially the
zoning are appropriate for Lessee’s intended use, and
acknowledges that past uses of the Premises may no longer be
allowed. 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), the Lessor shall pay for such Capital Expenditure
and Lessee shall only be obligated to pay, each month during the
remainder of the term of this Lease or any extension thereof, on
the date that on which the Base Rent is due, an amount equal to
1/144th of
the portion of such costs reasonably attributable to the Premises.
Lessee shall pay Interest on the balance but may prepay its
obligation at any time. If, however, 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 either: (i) immediately cease such changed
use or intensity of use and/or take such other steps as may be
necessary to eliminate the requirement for such Capital
Expenditure, or (ii) complete such Capital Expenditure at its own
expense. Lessee shall not have any right to terminate this
Lease.







 







 











 








2.4

Acknowledgements. Lessee acknowledges
that: (a) it has been given an opportunity to inspect and measure
the Premises; (b) it has been advised by Lessor to satisfy itself
with respect to the size and 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; (c) Lessee has made
such investigation as it deems necessary with reference to such
matters and assumes all responsibility therefor as the same relate
to its occupancy of the Premises; (d) it is not relying on any
representation as to the size of the Premises made by Lessor; (e)
the square footage of the Premises was not material to
Lessee’s decision to lease the Premises and pay the Rent
stated herein, and (f) neither Lessor, Lessor’s agents 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.








2.6

Vehicle Parking. Lessee shall be
entitled to use the number of 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 consent of Lessor. In
addition:

 




(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 and 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 as
additional Rent.








2.7

Common Areas – Definition. The
term “Common
Areas” is defined as all areas or 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 the Lessor, Lessee and other
tenants of the Project and their respective employees, suppliers,
shippers, customers, contactors and invitees, including parking
areas, loading and unloading areas, trash areas, roofs, 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,
the 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 by
immediately payable upon demand by Lessor as additional
Rent.








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 shall use its best efforts 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 and 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 judgement, 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. Any provision herein
granting Lessee Early Possession of the Premises is subject to and
conditioned upon the Premises being available for such possession
prior to the Commencement Date. Any grant of Early Possession only
conveys a non-exclusive right to occupy the Premises.








3.3

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 payment of
Rent, notwithstanding Lessor’s election to withhold
possession pending receipt of such evidence of insurance. Further,
if Lessee is required to perform and 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

Payment. Lessee shall cause payment of
Rent to be received by Lessor in lawful money of the United States
without notice, withholding, abatement, offset or deduction (except
as specifically permitted in this Lease), on or before the day on
which it is due. In the event that any statement or invoice
prepared by Lessor is inaccurate such inaccuracy shall not
constitute a waiver and Lessee shall be obligated to pay the amount
set forth in this Lease. 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. Acceptanceor 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 in
addition to any Late Charge and Lessor, at its option, may require
all future Rent be paid by cashier’s check. Payments will be
applied first to accrued late charges and attorney’s fees,
second to accrued interest, then to Base Rent, and any remaining
amount to any other outstanding charges or costs.








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
already due Lessor, for Rents which will be due in the future,
and/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
extant necessary, in Lessor’s reasonable judgement, 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 such change the financial
condition of Lessee is, in Lessor’s reasonable judgement,
significantly reduced, Lessee shall deposit such additional monies
with Lessor as shall be sufficient to cause the Security Deposit to
be 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 90 days
after the expiration or termination of this Lease, Lessor shall
return that portion of the Security Deposit not used or applied to
Lessor. Lessor shall upon written request provide Lessee with an
accounting showing how that portion of the Security Deposit that
was not returned was applied. 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.
THE SECURITY DEPOSIT SHALL NOT BE USED BY LESSEE IN LIEU OF PAYMENT
OF THE LAST MONTH’S RENT.








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
without Lessor’s prior written
consent. 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. Other than guide, signal and
seeing eye dogs, Lessee shall not keep or allow in the Premises any
pets, animals, birds, fish or reptiles. 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 Building or the mechanical
or electrical systems therein, is not
illegal under any law, and/or is not significantly more
burdensome to the Project. If Lessor elects to withhold consent,
Lessor shall within 7 days after such request give written
notification of the 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 no be limited to, hydrocarbons,
petroleum, gasoline, and/or crude oil or any products, by-products
or fractions thereof. Lessee shall not engage in any activity in or
on the Premises which constitutes a Reportable Use of Hazardous
Substances without the express prior written consent of Lessor and
timely compliance (at Lessee’s expense) with all Applicable
Requirements. “Reportable
Use” shall mean (i) the installation or use of any
above or below ground storage tank; (ii) the generation,
possession, storage, use, transportation, or disposal of a
Hazardous Substance that requires a permit from, or with respect to
which a report, notice, registration or business plan is required
to be filed with, any governmental authority, and/or (iii) the
presence at the Premises of a Hazardous Substance with respect to
which any Applicable Requirements requires that a notice be given
to persons 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, ordinary office supplies
(copier toner, liquid paper, glue, etc.) and common household
cleaning materials, 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 by the 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 the 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, comply with
all


Applicable
Requirements and 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, judgements, 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 not caused or
contributed to by Lessee). Lessee’s obligations shall
include, but not be limited to, the effects of any contamination or
injury to person, property or the environment created of 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. Except as
otherwise provided in paragraph 8.7, 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 are
suffered as a direct result of Hazardous Substances on the Premises
prior to Lessee taking possession or which cased 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 the Lessee taking possession, unless such
remediation measure is required as a result of Lessee’s use
(including “Alterations” as defined by paragraph 7.3(a)
below) of the Premises, 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 or 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 the 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 a of
he 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, fully, 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 insurance
carrier, engineers and/or consultants which relate in any
manner to the Premises, without regard to whether said Applicable
Requirements are no 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. Likewise, Lessee shall immediately
give written notice to Lessor of: (i) any water damage to the
Premises and an suspected seepage, pooling, dampness or other
condition conducive to the production of mold; or (ii) any
mustiness or other odors that might indicate the presence of mold
in the Premises.








6.4

Inspection; Compliance. Lessor and Lessor’s
“Lender” (as
defined in Paragraph 30), property
manager, and consultants authorized by Lessor shall have the
right to enter the Premises at any time in the case of an
emergency, and otherwise at reasonable times after reasonable
notice, for the purpose of inspecting and/or testing the condition
of the Premises and/or 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 Hazardous
Substance Condition (see Paragraph 9.1) 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.
In addition, Lessee shall provide copies of all relevant material
safety data sheets (MSDS) to
Lessor within 10 days of the receipt of written request thereof.
Lessee acknowledges that any failure on its part to allow such
inspections or testing will expose Lessor to risks and potentially
cause Lessor to incur costs not contemplated by this Lease,
theextent of which will be extremely difficult to ascertain.
Accordingly, should the Lessee fail to allow such inspections
and/or testing in a timely fashion the Base Rent shall be
automatically increased, without any requirement for notice to
Lessee, by an amount equal to 10% of the then existing Base Rent
for the remainder of the Lease. The Parties agree that such
increase in Base Rent represents fair and reasonable compensation
for the additional risk/costs that Lessor will incur by reason of
Lessee’s failure to allow such inspection and/or testing.
Such increase in Base Rent shall in no event constitute a waiver of
Lessee’s Default or Breach with respect to such failure nor
prevent the exercise of any of the other rights or remedies granted
hereunder.








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 age of such portion of the Premises), including,
but not limited to, all equipment or facilities, such as plumbing,
HVAC equipment, electrical, lighting facilities, light bulbs, ballasts, electrical switches,
lines, connections and subpanels, boilers, pressure vessels,
fixtures, interior walls, interior surfaces of exterior walls,
ceilings, floors, windows, doors, plate glass, phone and data lines, 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 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, and (iii) clarifiers. However, Lessor reserves the right,
upon notice to Lessee, to procure and maintain any or all of such
service contracts, and 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 pay to Lessor a sum equal to 115% of 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 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 but
may prepay its obligation at any time.








7.2

Lessor’s Obligations. Subject to
provisions of Paragraph 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. 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.







 







 








7.3

Utility
Installations; Trade Fixtures; Alterations.








(a)

Definitions. The term
“Utility
Installations” refers to all floor and window
coverings, air and/or vacuum lines, power panels, electrical
distribution, security and fire protection systems, communication
cabling, 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 Alterations or Utility Installations to the interior
or 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, will not affect the electrical, plumbing, HVAC,
and/or life safety systems, do not trigger the requirement for
additional modifications and/or improvements to the Premises
resulting from Applicable Requirements, such as compliance with
Title 24, and the cumulative cost thereof during this Lease as
extended does not exceed a sum equal to 3 month’s Base Rent
in the aggregate or 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)

 Liens; Bonds. 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 judgement 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 or
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 expected.
“Ordinary wear and tear” shall not include any damage
or deterioration that would have been prevented by good maintenance
practice. Notwithstanding the foregoing, if the Lessee occupies the
Premises 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
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 Premises) to the level specified in
Applicable Requirements. Trade Fixtures shall remain the property
of Lessee and shall be removed by Lessee. Any personal property of
Lessee not removed on or before the Expiration Date or any earlier
termination date shall be deemed to have been abandoned by Lessee
and may be disposed of or retained by Lessor as Lessor may desire.
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 Paragraph 8.2(b),
8.3(b), over and above the Base Premium, as hereinafter defined,
calculated on an annual basis and
resulting from Lessee’s use of the Premises. 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. 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 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. Lessee shall
add Lessor as an additional insured by means of an endorsement at
least as broad as theInsurance Service Organization’s
“Additional Insured-Managers or Lessors of Premises”
Endorsement and shall deliver the
endorsement within ten (10) days of request. 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 if said insurance shall not, however, limit the
liability of Lessee nor relieve Lessee of any obligation hereunder.
Lessee shall provide an endorsement on its liability policy (ies)
which provides that its insurance 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 insurable 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 not
by Lessor. 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 or any portion of the Premises as the result of a
covered loss. Said policy or policies shall also contain a waiver
or 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 $5,000 per
occurrence.








(b)

Rental Value. Lessor shall 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”). The
amount of coverage shall be adjusted annually to reflect the
projected Rent otherwise payable by Lessee, for the next 12 month
period.








(c)

Adjacent Premises. Lessee shall pay for
any increase in the premiums for the property insurance of the
Building and for the Common Areas or other buildings in the Project
if said increase is cause 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; Worker’s
Compensation 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 no 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.








(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)

Worker’s Compensation Insurance.
Lessee shall obtain and maintain Worker’s Compensation
Insurance in such amount as may be required by Applicable
Requirements. Such policy shall include a ‘Waiver of
Subrogation’ endorsement. Lessee shall provide Lessor with a
copy of such endorsement along with the certificate of insurance or
copy of the policy required by paragraph 8.5








(d)

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 maintaining during the policy term a
“General Policyholders Rating” of at least A-, VII, 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 with copies of the required
endorsements 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 10 days prior to the expiration of such
policies, furnish Lessor with evidence of renewals or
“insurance binders” evidencing renewal thereof, or
Lessor may increase his liability insurance coverage 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, nut 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 of 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, judgements, penalties, attorney’s and
consultants’ fees, expenses and/or liabilities arising out
of, involving, or in connection with, a Breach of the Lease by
Lessee and/or the use, maintenance,
repair, and/or
occupancy of the Premises and/or Project by Lessee and/or by
Lessee’s employees, contractors or invitees. 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 and its Agents from
Liability. Not withstanding the negligence or breach of this
Lease by Lessor or its agents, neither Lessor nor its agents shall
be liable under any circumstances for: (i) 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, indoor air quality, the presence of mold or from the
breakage, leakage, obstruction or other defects of pipers, 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; (ii) any damages
arising from any act or neglect of any other tenant of Lessor or
from the failure of Lessor or its agents to enforce the provisions
of any other lease in the Project; or (iii) injury to
Lessee’s business or for any loss of income or profit
therefrom. Instead, it is intended that Lessee’s sole
recourse in the event of such damages or injury be to file a claim
on the insurance policy(ies) that Lessee is required to maintain
pursuant to the provisions of paragraph 8.








8.9

Failure to Provide Insurance. Lessee
acknowledges that any failure on its part to obtain or maintain the
insurance required herein will expose Lessor to risks and
potentially cause Lessor to incur costs not contemplated by this
Lease, the extent of which will be extremely difficult to
ascertain. Accordingly, for any month or portion thereof that
Lessee does not maintain the required insurance and/or does not
provide Lessor with the required binders or certificates evidencing
the existence of the required insurance, the Base Rent shall be
automatically increased, without any requirement for notice to
Lessee, by an amount equal to 10% of the then existing Base Rent of
$100, whichever is greater. The parties agree that such increase in
Base Rent represents fair and reasonable compensation for the
additional risk/costs that Lessor will incur by reason of
Lessee’s failure to maintain the required insurance. Such
increase in Base Rent shall in no event constitute a waiver of
Lessee’s Default or Breach with respect to the failure to
maintain such insurance, prevent the exercise of any of the other
rights and remedies granted hereunder, nor relieve Lessee of its
obligation to maintain the insurance specified in this
Lease.








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 6 months or less from the date of the
damage or destruction. 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 6 months or less from the date of the
damage or destruction. 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 or 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, in, on,
or under the Premises which requires restoration.








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
$10,000 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 what 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 (subject to reimbursement pursuant to Paragraph 4.2), in
which event this Lease shall continue in full force and effect, or
(iii) 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 or such damage. Notwithstanding the foregoing, if
Lessee at that time has an exercisable option to extend this Lease
or to purchase the Premises, then Lessee may preserve this Lease by
(a) exercising such option and (b) providing Lessor with any
shortage in insurance proceeds (or adequate assurance thereof)
needed to make the repairs on or before the earlier of (i) the date
which is 10 days after Lessee’s receipt of Lessor’s
written notice purporting to terminate this Lease, or (ii) the day
prior to the date upon which such option 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 is 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.








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. The term “Real
Property Taxes” shall also include any tax, fee, levy,
assessment or charge, or any increase therein: (i) 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; (ii)
a change in the improvement thereon; and/or (iii) levied or
assessed on machinery or equipment provided by Lessor to Lessee
pursuant to this Lease.








(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 Project, during the entire
calendar year in which the Lease is executed.








10.2

Payment of Taxes. Except as otherwise
provided in Paragraph 10.3, Lessor shall pay the Real Property
Taxes applicable to the Project.








10.3

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 and Services.
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. If at any time in
Lessor’s sole judgement, Lessor determines that Lessee is
generating such a large volume of trash as to require an increase
in the size of the trash receptacle and/or an increase in the
number of timers per month that it is emptied, then Lessor may
increase Lessee’s Base Rent by an amount equal to such
increased costs. There shall be no abatement of Rent and Lessor
shall not be liable in any respect whatsoever for the inadequacy,
stoppage, interruption or discontinuance of any utility or service
due to riot, strike, labor dispute, breakdown accident, repair or
other cause beyond Lessor’s reasonable control or in
cooperation with governmental request or directions.








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, which
consent may be withheld in Lessor’s sole
discretion.








(b)

Unless Lessee is a
corporation and its stock is publicly traded on a national stock
exchange, 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 Lessor’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 and 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(d), or a
non-curable Breach without the necessity of any notice and grace
period. If Lessor elects to treat such unapproved assignment or
subletting as a non-curable Breach, Lessor may either: (i)
terminate this Lease, or (ii) upon 30 days written notice, increase
the monthly 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 by limited
to compensatory damages and/or injunctive relief.








(f)

Lessor may
reasonably withhold consent to a proposed assignment or subletting
if Lessee is in Default at the time consent is
requested.








(g)

Notwithstanding the
foregoing, allowing a de minimis portion of the Premises, ie. 20
square feet or less, to be used by a third party vendor in
connection with the installation of a vending machine or pay phone
shall not constitute a subletting.








12.2

Terms
and conditions Applicable to Assignment and
Subletting.








(a)

Regardless of
Lessor’s consent, no assignment or subletting shall: (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 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 therefor 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 $500 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. (See also
Paragraph 36) Lessee shall also
reimburse Lessor all attorney’s fees incurred by Lessor to
evaluate and document the assignment, sublease and/or
Lessor’s consent.








(f)

Any assignee of, or
sublessee under, this Lease shall, by reason of accepting such
assignment, entering into such sublease, or entering into
possession of the Premises or any portion thereof, 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.








(g)

Lessor’s
consent to any assignment or subletting shall not transfer to the
assignee or sublessee any Option granted to the original Lessee by
this Lease unless such transfer is specifically consented to by
Lessor in writing. (See Paragraph 39.2)







 







 








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. In the
event that the amount collected by Lessor exceeds Lessee’s
then outstanding obligations any such excess shall be refunded to
Lessee. 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 sublease. Lessee hereby irrevocably authorizes and directs any
such sublease, 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 sublease 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 Premises
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. THE ACCEPTANCE BY LESSOR OF A PARTIAL PAYMENT OF RENT OR
SECURITY DEPOSIT SHALL NOT CONSTITUTE A WAIVER OF ANY OF
LESSOR’S RIGHTS, INCLUDING LESSOR’S RIGHT TO RECOVER
POSSESSION OF THE PREMISES.








(c)

The failure of
Lessee to allow Lessor and/or its agent access to the Premises or
the commission of waste, act or acts constituting public or private
nuisance, and/or an illegal activity on the Premises by Lessee,
where such actions continue for a period of 3 business days
following written notice to Lessee. In the event that Lessee
commits waste, a nuisance or an illegal activity a second time
then, the Lessor may elect to treat such conduct as a non-curable
Breach rather than a Default.








(d)

The failure to
Lessee to provide (i) reasonable written evidence of compliance
with Applicable Requirements, (ii) the service contracts, (iii) the
rescission of a unauthorized assignment or subletting, (iv) an
Estoppel Certificate of financial statements, (v) a requested
subordination, (vi) evidence concerning any guaranty and/or
Guarantor, (vii) any document requested under Paragraph 41, (viii)
material safety data sheets (MSDS), or (ix) and 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.








(e)

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), (c) or (d), 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.








(f)

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








(g)

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








(h)

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 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 the 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. Lessee shall pay to
Lessor the amount equal to 115% of the costs and expenses incurred
by Lessor in such performance upon receipt of an invoice therefor.
In the event of a Breach, Lessor may, with or without notice or
demand, and without limiting Lessor in the exercise of any right or
remedy which Lessor may have reason of such Breach:








(a)

Terminate
Lessee’s right to possession of the Premises by any lawful
means, in which case this Lease terminate and Lessee shall
immediately surrender possession to Lessor. In such even Lessor
shall by 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 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 reletting, including necessary renovation and
alteration of the Premises, reasonable attorney’s 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 cause by Lessee’s Breach of this Lease shall not
waive Lessor’s right to recover any damages to which Lessor
is otherwise entitled. If termination of this Lease is obtained
though 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
relet, 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, the cost of tenant
improvements for Lessee paid for or performed by Lessor, or for the
giving or paying by Lessor to or for Lessee for 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 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 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 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 immediately 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 shall bear interest from the 31st day after it was
due. The interest (“Interest”) charged shall be
computed at the rate of 10% per annum 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 to 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 the actual and
reasonable cost to perform such cure, provided however, that such
offset shall not exceed an amount equal to the greater of one
month’s Base Rent or the Security Deposit, reserving
Lessee’s right to reimbursement from Lessor for any such
expense in excess of such offset. 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 the 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 entitled to any
compensation paid by the condemnor 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.

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 AIR CRE, 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. In addition, Lessee
acknowledges that any failure on its part to provide such an
Estoppel Certificate will expose Lessor to risks and potentially
cause Lessor to incur costs not contemplated by this Lease, the
extent of which will be extremely difficult to ascertain.
Accordingly, should the Lessee fail to execute and/or deliver a
requested Estoppel Certificate in a timely fashion the monthly Base
Rent shall be automatically increased, without any requirement for
notice to Lessee, by an amount equal to 10% of the then existing
Base Rent or $100, whichever is greater for remainder of the Lease.
The Parties agree that such increase in Base Rent represents fair
and reasonable compensation for the additional risk/costs that
Lessor will incur by reason of Lessee’s failure to provide
the Estoppel Certificate. Such increase in Base Rent shall in no
event constitute a waiver of Lessee’s Default or Breach with
respect to the failure to provide the Estoppel Certificate nor
prevent the exercise of any of the other rights and remedies
granted hereunder.








(c)

If Lessor desires
to finance, refinance, or sell the Premises, or any part thereof,
Lessee and all Guarantors shall within 10 days after written notice
from Lessor 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 part 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.








16.

 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. 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.








17.

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.








18.

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








19.

Limitation on Liability. The obligations
of Lessor under this Lease shall not constitute personal
obligations of Lessor, or its partners, members, 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 Lessor’s partners, members, directors or
shareholders, or any of their personal assets for such
satisfaction.








20.

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







 







 








21.

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.




22.

Notices.








22.1

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 certified or registered mail or U.S. Postal Service
Express Mail, with postage prepaid, 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 be 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 addressed as Lessor may from time to time
hereafter designate in writing.








22.2

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. Notices
delivered by United States Express Mail or overnight courier that
guarantees next day delivery shall be deemed given 24 hours after
delivery of the same to the Postal Service or courier. Notices
delivered by hand shall be deemed delivered upon actual receipt. If
notice is received on a Saturday, Sunday or legal holiday, it shall
be deemed received on the next business day.








23.

 Waivers.








(a)

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.








(b)

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 or no force or
effect whatsoever unless specifically agreed to in writing by
Lessor at or before the time of deposit of such
payment.








(c)

THE PARTIES AGREE
THAT THE TERMS OF THIS LEASE SHALL GOVERN WITH REGARD TO ALL
MATTERS RELATED THERETO AND HEREBY WAIVE THE PROVISIONS OF ANY
PRESENT OR FUTURE STATUTE TO THE EXTENT THAT SUCH STATUTE IS
INCONSISTENT WITH THIS LEASE.








24.

 Disclosures Regarding The Nature of a Real
Estate Agency Relationship. NOT
APPLICABLE








(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 the 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 paragraphs
(i) or (ii). In representing both Lessor and Lessee, the agent may
not withhold 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
parties agree that no lawsuit or other legal proceeding involving
and breach of duty, error or omission relating to this Lease may be
brought against Broker more than one year after the Start Date and
that the liability (including court costs and attorneys’
fees), of any Broker with respect to any such lawsuit and/or legal
proceeding 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)

Lessor and Lessee
agree to identify to Broker’s as “Confidential”
any communication or information given Brokers that is considered
by such Party to be confidential.








25.

 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. Holdover Base Rent shall be calculated
on monthly basis. Nothing contained herein shall be construed as
consent by Lessor to any holding over by Lessee.








26.

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.








27.

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.








28.

Binding Effect; Choice of Law. This
lease shall be binding
upon the parties, their personal representative, 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.








29.

Subordination;
Attornment; Non-Disturbance








29.1

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”), nor 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.








29.2

Attornment. In the event that Lessor
transfers title to the Premises, or the Premises are acquired by
another upon the foreclosure or termination of a Security Device to
which this Lease is subordinated (i) Lessee, shall, subject to the
non-disturbance provisions of Paragraph 29.3, attorn to such new
owner, and upon request, enter into a new lease, containing all of
the terms and provisions of this Lease, with such new owner for the
remainder of the term hereof, or, at the election of the new owner,
this Lease will automatically become a new lease between Lessee and
such new owner, and (ii) Lessor shall thereafter be relieved of any
further obligations hereunder and such new owner shall assume all
of Lessor’s obligations, except that 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 which was not paid or
credited to such new owner.








29.3

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 thereof,
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, if requested
by Lessee, 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.








29.4

Self-Executing. The agreements contained
in this Paragraph 29 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.








30.

Attorneys’ Fees. If any Party or
Broker 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 judgement. The term,
“Prevailing
Party” shall include, without limitation, a Party or
Broker who substantially obtains or defeats the relief sough, as
the case may be, whether by compromise, settlement, judgement, or
the abandonment by the other Party or Broker of its claim or
defense. The attorneys’ fees award shall no 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 ($400 is a reasonable minimum per occurrence
for such services and consultations).








31.

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 after reasonable prior notice 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 or desirable and the erecting, using and
maintaining of utilities, services, pipes and conduits through the
Premises and/or other








32.

Auctions. Lessee shall no 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.







 







 








33.

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








34.

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.








35.

Consents. All requests for consent shall
be in writing. 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
acknowledgement 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.








36.

Guarantor. NOT APPLICABLE








36.1

Execution. The Guarantors, if any, shall
each execute a guaranty in the form most recently published BY AIR
CRE.








36.2

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.








37.

 Quiet Possession. Subject to payment by
Lessee of the Rent and performance of all 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.








38.

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








38.1

Definition. “Option” shall mean: (a) the right
to extend or reduce the term of or renew this Lease or to extend or
reduce the term of 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, the right of first offer to purchase or the
right of first refusal to purchase the Premises or other property
of Lessor.








39.

 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 employees, agents and invitees and their
property from the acts of third parties.








40.

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.








41.

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. A Party who does not initiate suit for the recovery of sums
paid “under protest” within 6 months shall be deemed to
have waived its right to protest such payment.








42.

Authority;
Multiple Parties; Execution.








(a)

 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.








(b)

If this Lease is
executed by more than one person or entity as “Lessee”,
each such person or entity shall be jointly and severally liable
hereunder. It is agreed that any one of the named Lessees shall be
empowered to execute any amendment to this Lease, or other document
ancillary thereto and bind all of the named Lessees, and Lessor may
rely on the same as if all of the named Lessees had executed such
document.








(c)

This Lease may be
executed by the Parties in counterparts, each of which shall be
deemed an original and all of which together shall constitute one
and the same instrument.







 







 








43.

 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.








44.

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.








45.

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.








46.

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.








47.

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








48.

Accessibility; Americans with Disabilities
Act.








(a)

The
Premises:






X☐ have not undergone
an inspection by a Certified Access Specialist (CASp). Note: A
Certified Access Specialist (CASp) can inspect the subject premises
and determine whether the subject premises comply with all of the
applicable construction- related accessibility standards under
state law. Although state law does not require a CASp inspection of
the subject premises, the commercial property owner or lessor may
not prohibit the lessee or tenant from obtaining a CASp inspection
of the subject premises for the occupancy or potential occupancy of
the lessee or tenant, if requested by the lessee or tenant. The
parties shall mutually agree on the arrangements for the time and
manner of the CASp inspection, the payment of the fee for the CASp
inspection, and the cost of making any repairs necessary to correct
violations of construction-related accessibility standards within
the premises.

 


☐ have undergone an
inspection by a Certified Access Specialist (CASp) and it was
determined that the Premises met all applicable construction
related accessibility standards pursuant to California Civil Code
§55.51 et seq. Lessee acknowledges that it received a copy of
the inspection report at least 48 hours prior to executing this
Lease and agrees to keep such report confidential.

 


☐ have undergone an
inspection by a Certified Access Specialist (CASp) and it was
determined that the Premises did not meet all applicable
construction related accessibility standards pursuant to California
Civil Code §55.51 et seq. Lessee acknowledges that it received
a copy of the inspection report at least 48 hours prior to
executing this Lease and agrees to keep such report confidential
except as necessary to complete repairs and corrections of
violations of construction related accessibility
standards.

 


In the
event that the Premises have been issued an inspection report by a
CASp the Lessor shall provide a copy of the disability access
inspection certificate to Lessee within 7 days of execution of this
Lease.

 




(b)

 Since
compliance with the Americans with Disabilities Act (ADA) and other
state and local accessibility statues are dependent upon
Lessee’s specific use of the Premises, Lessor makes no
warranty or representation as to whether or not the Premises comply
with ADA or any similar legislation. In the event that
Lessee’s use of the Premises requires modifications or
additions to the Premises in order to be in compliance with ADA or
other accessibility statutes, Lessee agrees to make any such
necessary modifications and/or additions at Lessee’s
expense.






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 AIR CRE 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 ACOT 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 Denver,
CO__________                                                                                      

Executed at
__________





 



On:
1/22/19                                                                            

On:
_________





 


By
LESSOR:                                                                                     By
LESSEE:

 


PENSCO
TRUST COMPANY, Custodian F.B.O. Raymond GrowLife, Inc., a Delaware
corporation

 


W.
Matteson IRA #MA529

 



_____________________________________                                                                                                 

_____________________________________





 



_____________________________________                                                                                                 

_____________________________________





 



By: By:/s/ Michelle
Fausett,
1/21/19                                                                            

By: /s/ Mark Scott,
______________________





 



Name Printed:
Michelle
Fausett                                                                                      

Name Printed: Mark
Scott





 



Title: Designated
Signator                                                                                      

Title:
CFO________________





 



Phone:
_______________                                                                                      

Phone:
_______________





 



Fax:
_________________                                                                                      

Fax:
_________________





 



Email:
_______________                                                                                      

Email:
_______________





 



 







 





 


APPROVED
BY:

 



By: /s/ Raymond W.
Matteson                                                                 

By:
__________________________________





 



Name Printed:
Raymond W.
Matteson                                                                                      

Name Printed:
____________________





 



Title:
________________                                                                                      

Title:
________________





 



Phone:
_______________                                                                                      

Phone:
_______________





 



Fax:
_________________                                                                                      

Fax:
_________________





 



Email:
_______________                                                                                      

Email:
_______________





 



Address:
_____________________________                                                                            

Address:
_____________________________





 



Federal ID No:
______________                                                                                      

Federal ID No:
______________





 



Broker                                                                            

Broker





 



________                                                                                      

________





 



Attn:
____________________                                                                                      

Attn:
____________________





 



Title:
________________                                                                                      

Title:
________________





 



Address:
_______________                                                                                      

Address:
_______________





 



Phone:
_________________                                                                                      

Phone:
_________________





 



Fax:
_______________                                                                                      

Fax:
_______________





 



Email:
_____________________________                                                                            

Email:
_____________________________





 



Federal ID No:
______________                                                                                      

Federal ID No:
______________





 



Broker/Agents BRE
License #:
_________                                                                                      

Broker/Agents BRE
License #: _________





 


 



AIR CRE. 500 North Brand Blvd, Suite 900, Glendale, CA 91203, Tel
213-687-8777, Email contracts@aircre.com



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


 


 



 







 











 



ADDENDUM NO. 1 TO STANDARD INDUSTRIAL/COMMERCIAL


 



MULTI- TENANT LEASE – GROSS


 


This
Addendum No. 1 to Standard Industrial/Commercial Multi-Tenant Lease
– Gross (“Addendum”) dated for reference
purposes only December 14, 2018, is entered into by and between
PENSCO TRUST COMPANY, Custodian F.B.O. Raymond W. Matteson IRA
#MA529 (“Lessor”) and GROWLIFE, INC. a
Delaware corporation (“Lessee”) concerning the property
commonly known by the street address of 10170 Croydon Way, Units B,
F, G, Sacramento, California 95827 (the “Premises”).


 



Recitals


 




A.

 Lessor and
Lessee entered into a Standard Industrial/Commercial Multi- Tenant
Lease – Gross dated December 14, 2018 (hereinafter referred
to as the “Lease”) concerning certain
Premises described therein containing approximately 28,100 square
feet.






 




B.

Lessor and Lessee
now desire to supplement and amend the Lease and agree to certain
other matters as hereinafter set forth.






 


NOW,
THEREFORE, in consideration of the foregoing and the mutual
agreement of the parties hereto to the terms and conditions set
forth below, the parties agree as follows:


 



Agreement


 




49.

 Base Rent. The Lease is hereby
amended to provide for annual increases in the payment of Base Rent
according to the following schedule:






 


	

MONTHS
OF TERM

	

MONTHLY
BASE RENT


	

1/01/19
– 12/31/19

	

$17,500.00


	

1/01/20
– 12/31/20

	

$18,025.00


	

1/01/21
– 12/31/21

	

$18,566.00


	

1/01/22
– 12/31/22

	

$19,123.00


	

1/01/23
– 12/31/23

	

$19,696.00







 




50.

 Cannabis Restrictions. Lessee
shall not use the Premises for growing any cannabis products
without first obtaining Lessor’s written consent, which
consent may be withheld in Lessor’s sole discretion. Prior to
considering any type of business that in any way includes cannabis
products, Lessee shall request Lessor’s consent by fully
describing the nature of the intended business as it relates to
cannabis products. As a condition of Lessor’s consent, Lessee
must also obtain all governmental permits and approvals, including
all federal governmental approvals. Lessor must also obtain the
consent of Lessor’s insurance carrier. Lessor may consider
approving Lessee’s involvement in growing cannabis products
that are strictly used in a laboratory environment and are not sold
to the public or intended for public consumption. However, in all
instances, Lessee must first obtain the written consent of Lessor
and must further satisfy all conditions set forth in this Paragraph
50.






 




51.

Expansion of Premises. In the
event Lessee desires to expand the size of the Premises and Lessor
is able to accommodate Lessee’s expansion, the Base Rent for
any expanded portion of the Premises shall be the fair market rent
at the time of the expansion.






 




52.

Tenant Improvements. In the
event Lessee desires to make any improvements or Alterations in or
to the Premises, Lessee shall first obtain Lessor’s written
consent. At the time of such request, Lessee shall submit
professionally prepared plans detailing the work to be performed
and Lessor shall have a






minimum
of (10) business days to review and either approve or disapprove
the plans. Once the plans are


approved by Lessor
and Lessee, Lessee shall submit the plans to the County of
Sacramento and obtain all required permits. If as a result of or a
condition of obtaining permits for such Alterations or improvements
Lessor is required to construct improvements to the exterior of the
Premises or the common areas to comply with the ADA or any other
accessibility laws, Lessee shall be obligated to reimburse Lessor
for all costs related to such improvements.


 



 







 






 




53.

Waiver of Relief from
Forfeiture. Lessee hereby waives any right of redemption or
relief from forfeiture under the law of the governing jurisdiction,
or any other present or future law, in the event Lessee is evicted
or Lessor takes possession of the premises by reason of any default
by Lessee hereunder.






 




54.

Lessee’s Remedies for
Lessor’s Default. Lessee waives any right to terminate
this Lease and to vacate the premises due to any default by Lessor
under this Lease. Lessee’s sole remedy for Lessor’s
default is an action for damages, injunctive or declaratory
relief.






 




55.

Accord and Satisfaction. No
payment by Lessee or receipt by Lessor of a lesser amount than the
Rent herein stipulated shall be deemed to be other than on account
of the Rent, nor shall any endorsement or statement on any check or
any letter accompanying any check or payment as Rent be deemed an
accord and satisfaction; and Lessor may accept such check or
payment without prejudice to Lessor’s right to recover the
balance of such Rent or pursue any other remedy in this Lease. No
endorsement on any check nor any letter accompanying any check or
payment of Rent, or partial payment thereof, shall prevent Lessor
from treating such payment as on account of the earliest delinquent
sum owed Lessor, as Lessor’s sole election, and Lessee waives
the benefit of any contrary court decision or statute, including,
without limitation, Civil Code Section 1479 and Commercial Code
Section 3311. In connection with the foregoing, Lessor shall have
the absolute right in Lessor’s sole discretion to apply any
payment received from Lessee to any account due or
delinquent.






 




56.

Form of Payment After Default.
If Lessee fails to timely pay any amount due under this Lease and
Lessor serves a Notice of Default, Lessor shall have the right to
require that any subsequent amounts paid by Lessee to Lessor under
this Lease (to cure a default or otherwise) be paid in the form of
a money order, cashier’s or certified check drawn on an
institution acceptable to Lessor, or other form approved by Lessor,
despite any prior practice of accepting payments in a different
form. Lessor may accept Lessee’s payments without waiving any
rights under this Lease, including rights under a previously served
Notice of Default. If Lessor accepts payment after serving a Notice
of Default, Lessor may nevertheless commence and pursue an action
to enforce Lessor’s rights and remedies under the previously
served Notice of Default without giving Lessee any further notice
or demand






 




57.

No Co-Tenancy Requirement.
Lessor reserves the right to select the mix of tenancies in the
Project as Lessor, in the exercise of its sole business judgement,
shall determine to best promote the interests of the Project.
Lessee is not relying on the fact, nor does Lessor represent that
any specific tenant or number of tenants shall during the term of
this Lease occupy any space in the Project.






 




58.

Lessor’s Rights of Entry.
Notwithstanding any other position of the Lease to the contrary,
including paragraph 31, Lessor shall have the absolute right to
show the Premises to prospective tenants at any time following
service of a Notice of Default through and including the date that
such default has been fully cured, or at any time during the last
six (6) months of the Lease Term. Lessor’s entry into the
Premises and the showing of the Premises by Lessor to prospective
tenants shall be without abatement of rent or liability to Lessee.
Lessor will give Lessee notice of its intent to enter the Premises
at lease the prior Business Day to the date Lessor intends to enter
in or show the Premises.






 




59.

Security Deposit. If Lessee
defaults with respect to any provision of this Lease, Lessor may
apply all any part of the Security Deposit for the payment of any
Rent or other sum in default, the repair of damage to






 



4685021.1723091.1                                                       

-2-                                            

12/17/18.
V1






 


the
Premises , or the payment of any other amounts which Lessor may
spend or become obligated to spend by reason of Lessee’s
default or to compensate Lessor for any other loss or damage which
Lessor may suffer by reason of Lessee’s default to the full
extent permitted by law, including all losses and damages that
Lessor has suffered or may reasonably suffer as the result of any
default by Lessee under this Lease, including any damages arising
under section 1951.2 of the California Civil Code for Rent due
following termination of this Lease, against any costs incurred by
Lessor in connection with this Lease for the removal of
Lessee’s property, fixtures, equipment and/or signs. It is
the intent of the parties that the provisions of this paragraph ,
in addition to the provisions of Paragraph 5 of the Lease, shall
control the rights and obligations of the parties with respect to
the disposition of Security Deposit and Lessee hereby waives any
inconsistent provisions of California Civil Code section 1950.7, or
other provisions of law governing disposition of security deposits,
and acknowledges that Lessor may apply the Security Deposit to Rent
in default and any other loss or damage arising out of
Lessee’s default under this Lease, including, but not limited
to, post-termination damages, damages under Bankruptcy Code section
502(B)(6), or any other amounts Lessor may spend or become
obligated to spend, including attorneys’ fees and
costs.


 



 







 






 




60.

Condition of Premises.
Notwithstanding any contrary provision in the Lease, on or before
the expiration or earlier termination of the Lease, Lessee shall
remove all access doors constructed by the former tenant between
any of the Units leased to Lessee and Lessee shall return the
demising walls for each Unit to the original condition. Further,
Lessee shall be liable for all costs, penalties or improvement
obligations related to any unpermitted improvements existing in the
Premises.






 




61.

Real Property Taxes.
Notwithstanding anything to the contrary set forth in the Lease,
including but not limited to Paragraph 10.1, in the event
Proposition 13 property tax protection is no longer applicable to
commercial properties in California, or in the event of any
statutory, governmental or other change in the manner in which
commercial properties are taxed in California, Lessee shall pay its
equitable share (based on the square footage of the Premises) of
any increase in Real Property Taxes resulting from any change in
the manner in which Real Property Taxes are presently assessed.
Lessor shall continue to pay that portion of the Real Property
Taxes that would have been due under the current method of
calculating Real Property Taxes in California, which presently
includes the Proposition 13 protection, and Lessee shall pay its
equitable share of any increase in Real Property Taxes in excess of
that amount.






 


IN
WITNESS WHEREOF, the undersigned have executed this Addendum as of
the day and year set forth below.


 


 


 


	
LESSOR: 
 

	

 

	

 

	
LESSEE
 

	

 


	
 
 

	

 

	

 

	
 
 

	

 


	

PENSCO TRUST COMPANY,   
 

	

 

	

 

	

GROWLIFE, INC.,    

	

 


	

CUSTODIAN F.B.O. RAYMOND
W.      
 

	

 

	

 

	

a Delaware corporation    

	

 


	

MATTESON
IRA #MA529       
   

	

 

	

 

	
 
 

	

 


	

 
        
 

	

 

	

 

	
 
 

	

 


	
By: /s/
Michelle
Fausett,

	

 

	

 

	
/s/

	

 


	
1/21/19

	

 

	

 

	
Name 

	

 


	
 


	

 

	

 

	
Title

	

 


	
Approved
by: 


	

 

	

 

	
 

	

 


	
/s/ Raymond W.
Matteson     

	

 

	

 

	
By:/s/ Mark
Scott  

	

 


	
Raymond W.
Matteson      

	

 

	

 

	
Mark Scott
 

	

 


	
Dated:
12/19/18      
 

	

 

	

 

	
Its: Chief
Financial Officer  

	

 


	
 
       

	

 

	

 

	
Dated:
12/19.18