Document:

EX-10.1

 

Exhibit 10.1

EXECUTION COPY

     THIS LEASE AGREEMENT (the “Lease”) made as of the 19th day of October, 2006, by and between
BPVISALIA LLC, a Delaware limited liability company, having an office at c/o GE Commercial Finance
Business Property Corporation, Suite 500, 10900 NE 4th Street, Bellevue, Washington
98004, Attn: Structured Real Estate (the “Landlord”), and JO-ANN STORES SUPPLY CHAIN MANAGEMENT,
INC. an Ohio corporation, having its principal office at 5555 Darrow Road, Hudson, Ohio 44236
(“Tenant”).

     In consideration of the rents and provisions herein stipulated to be paid and performed,
Landlord and Tenant, intending to be legally bound, hereby covenant and agree as follows:

     1. Demise of Premises. Landlord hereby demises and lets to Tenant and Tenant hereby
takes and leases from Landlord for the term and upon the provisions hereinafter specified the
following described property (the “Leased Premises”): (i) the lot or parcel of land owned in fee
by Landlord and described in Exhibit “A” attached hereto and made a part hereof, together with the
easements, rights and appurtenances thereunto belonging or appertaining (the “Land”); (ii) the
buildings, structures and other improvements on the Land (collectively, the “Improvements”); and
(iii) the machinery and equipment owned by Landlord which is attached to the Improvements in such a
manner as to become fixtures under applicable law, together with all additions and accessions
thereto, substitutions therefor and replacements thereof permitted by this Lease (collectively, the
“Equipment”), excepting therefrom the Trade Fixtures.

     2. Certain Definitions.

          “Additional Rent” shall mean Additional Rent as defined in Paragraph 32.

          “Adjoining Property” shall mean all sidewalks, curbs, gores and vault spaces
adjoining the Leased Premises.

          “Alteration” or “Alterations” shall mean any or all changes, additions (whether
or not adjacent to or abutting any then existing buildings), expansions (whether or
not adjacent to or abutting any then existing buildings), improvements,
reconstructions, removals or replacements of any of the Improvements or Equipment,
both interior or exterior, and ordinary and extraordinary.

          “Appraisal Election Notice” shall mean Appraisal Election Notice as defined in
Exhibit B.

          “Basic Rent” shall mean Basic Rent as defined in Paragraph 6.

          “Basic Rent Payment Dates” shall mean the Basic Rent Payment Dates as defined
in Paragraph 6.

 

 

          “Commencement Date” shall mean October 19, 2006.

          “Condemnation” shall mean a Taking and/or a Requisition.

          “Default Rate” shall mean the Default Rate as defined in Paragraph 19(b) (iv).

          “Electing Party” shall mean Electing Party as defined in Exhibit B.

          “Equipment” shall mean the Equipment as defined in Paragraph 1.

          “Event of Default” shall mean an Event of Default as defined in Paragraph
19(a).

          “Fair Market Rent” shall mean Fair Market Rent as defined in Exhibit B.

          “Guarantor” shall mean Jo-Ann Stores, Inc. or such replacement, substitute or
other guarantor acceptable to Landlord in its sole discretion.

          “Guaranty” shall mean that certain corporate guaranty of this Lease given by
Guarantor of even date herewith.

          “Impositions” shall mean the Impositions as defined in Paragraph 8.

          “Improvements” shall mean the Improvements as defined in Paragraph 1.

          “Insurance Requirement” or “Insurance Requirements” shall mean, as the case may
be, any one or more of the terms of each insurance policy required to be carried by
Tenant under this Lease and the requirements of the issuer of such policy, and
whenever Tenant shall be engaged in making any Alteration or Alterations, repairs or
construction work of any kind (collectively, “Work”), the term “Insurance
Requirement” or “Insurance Requirements” shall be deemed to include a requirement
that Tenant obtain or cause its contractor to obtain completed value builder’s risk
insurance when the estimated cost of the Work in any one instance exceeds the sum of
One Million ($1,000,000.00) Dollars and that Tenant or its contractor shall obtain
worker’s compensation insurance or other adequate insurance coverage covering all
persons employed in connection with the Work, whether by Tenant, its contractors or
subcontractors and with respect to whom death or bodily injury claims could be
asserted against Landlord.

          “Land” shall mean the Land as defined in Paragraph 1.

          “Law” shall mean any constitution, statute or rule of law.

          “Lease Year” shall mean the twelve calendar month period beginning on the
Commencement Date and on each anniversary thereof throughout the Term.

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          “Lease Year Commencement Date” shall mean the Commencement Date, if such date
shall be on the first day of a calendar month, or, if the Commencement Date does not
fall on the first day of a calendar month, then, “Lease Year Commencement Date”
shall mean the first day of the first calendar month following that month in which
the Commencement Date falls.

          “Leased Premises” shall mean the Leased Premises as defined in Paragraph 1.

          “Legal Requirement” or “Legal Requirements” shall mean, as the case may be, any
one or more of all present and future Laws, codes, ordinances, orders, judgments,
decrees, injunctions, rules, regulations and requirements, even if unforeseen or
extraordinary, of every duly constituted governmental authority or agency (but
excluding those which by their terms are not applicable to and do not impose any
obligation on Tenant, Landlord or the Leased Premises) and all covenants,
restrictions and conditions now of record, or of record in the future if
created or filed by or with the consent of Tenant, which may be applicable
to Tenant, Landlord (with respect to the Leased Premises) or to all or any part of
or interest in Leased Premises, or to the use, manner of use, occupancy, possession,
operation, maintenance, alteration, repair or reconstruction of the Leased Premises,
even if compliance therewith (i) necessitates structural changes or improvements
(including changes required to comply with the “Americans with Disabilities Act”) or
results in interference with the use or enjoyment of the Leased Premises or (ii)
requires Tenant to carry insurance other than as required by the provisions of this
Lease.

          “Lender” shall mean an entity identified as such in writing to Tenant which
makes a Loan to Landlord, secured by a Mortgage and evidenced by a Note or which is
the holder of the Mortgage and Note as a result of an assignment thereof.

          “Loan” shall mean a loan made by a Lender to Landlord secured by a Mortgage and
evidenced by a Note.

          “Mortgage” shall mean a first priority mortgage, deed of trust or similar
security instrument hereafter executed covering the Leased Premises, or any part
thereof, from Landlord to Lender.

          “Net Award” shall mean the entire award payable to Landlord by reason of a
Condemnation, less any reasonable expenses incurred by Landlord in collecting such
award.

          “Net Proceeds” shall mean the entire proceeds of any insurance required under
clauses (i), (iv) or (vii) of Paragraph 14 (a) plus any deductible or self-insured
retentions of Tenant, less any actual and reasonable expenses incurred by Landlord
in collecting such proceeds.

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          “Non-electing Party” shall mean Non-electing Party as defined in Exhibit B.

          “Note” or “Notes” shall mean a Promissory Note or Notes hereafter executed from
Landlord to Lender, which Note or Notes will be secured by a Mortgage and an
assignment of leases and rents and such other documents as Lender may require.

          “Permitted Encumbrances” shall mean those covenants, restrictions,
reservations, liens, conditions, agreements (including, without limitation, the
Performance Agreement dated February 7, 2000, between Tenant and the City of
Visalia, the “Performance Agreement”), encroachments, easements and other matters of
title that affect the Leased Premises as of the date of Landlord’s acquisition
thereof, excepting, however, any such matters arising from the acts of Landlord
(such as liens arising as a result of judgments against Landlord).

          “Person” means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust (including a
business trust), non-incorporated organization or government or any agency or
political subdivision thereof or any other entity.

          “Requisition” shall mean any temporary condemnation or confiscation of the use
or occupancy of the Leased Premises by any governmental authority, civil or
military, whether pursuant to an agreement with such governmental authority in
settlement of or under threat of any such requisition or confiscation, or otherwise.

          “Restoration” shall mean the Restoration as defined in Paragraph 13(c) (i).

          “State” shall mean the State or Commonwealth in which the Leased Premises is
situated.

          “Taking” shall mean any permanent taking of the Leased Premises in or by
condemnation or other eminent domain proceedings pursuant to any law, general or
special, or by reason of any agreement with any condemnor in settlement of or under
threat of any such condemnation or other eminent domain proceedings or by any other
means, or any de facto condemnation.

          “Term” shall mean the Term as defined in Paragraph 5.

          “Termination Date” shall mean the Termination Date as defined in Paragraph
13(b).

          “Terrorism Laws” means Executive Order 13224 issued by the President of the
United States of America, the Terrorism Sanctions Regulations (Title 31 Part 595 of
the U.S. Code of Federal Regulations), the Terrorism List Governments Sanctions
Regulations (Title 31 Part 596 of the U.S. Code of Federal Regulations), the Foreign
Terrorist Organizations Sanctions Regulations

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(Title 31 Part 597 of the U.S. Code of Federal Regulations), and the Cuban
Assets Control Regulations (Title 31 Part 515 of the U.S. Code of Federal
Regulations), and all other present and future federal, state and local laws,
ordinances, regulations, policies, lists (including, without limitation, the
Specially Designated Nationals and Blocked Persons List) and any other requirements
of any governmental authority (including, without limitation, the United States
Department of the Treasury Office of Foreign Assets Control) addressing, relating
to, or attempting to eliminate, terrorist acts and acts of war, each as hereafter
supplemented, amended or modified from time to time, and the present and future
rules, regulations and guidance documents promulgated under any of the foregoing, or
under similar laws, ordinances, regulations, policies or requirements of other
states or localities.

          “Trade Fixtures” shall mean all fixtures, equipment (including, without
limitation, the conveyor belt system) and other items of personal property (whether
or not attached to the Improvements) which are owned by Tenant and used in the
operation of the business conducted on the Leased Premises.

     3. Title and Condition.

          (a) The Leased Premises are demised and let subject to (i) the Permitted Encumbrances, (ii)
all Legal Requirements and Insurance Requirements, including any existing violation of any thereof,
and (iii) the condition of the Leased Premises as of the commencement of the Term; without
representation or warranty by Landlord; it being understood and agreed, however, that the recital
of the Permitted Encumbrances herein shall not be construed as a revival of any thereof which for
any reason may have expired.

          (b) LANDLORD HAS NOT MADE AND WILL NOT MAKE ANY INSPECTION OF ANY OF THE LEASED PREMISES, AND
LANDLORD LEASES AND WILL LEASE AND TENANT TAKES AND WILL TAKE THE LEASED PREMISES “AS IS”, AND
TENANT ACKNOWLEDGES THAT LANDLORD (WHETHER ACTING AS LANDLORD HEREUNDER OR IN ANY OTHER CAPACITY)
HAS NOT MADE AND WILL NOT MAKE, NOR SHALL LANDLORD BE DEEMED TO HAVE MADE, ANY WARRANTY OR
REPRESENTATION, EXPRESS OR IMPLIED, WITH RESPECT TO ANY OF THE LEASED PREMISES, INCLUDING ANY
WARRANTY OR REPRESENTATION AS TO ITS FITNESS FOR USE OR PURPOSE, DESIGN OR CONDITION FOR ANY
PARTICULAR USE OR PURPOSE, AS TO THE QUALITY OF THE MATERIAL OR WORKMANSHIP THEREIN, LATENT OR
PATENT, AS TO LANDLORD’S TITLE THERETO, OR AS TO VALUE, COMPLIANCE WITH SPECIFICATIONS, LOCATION,
USE, CONDITION, MERCHANTABILITY, QUALITY, DESCRIPTION, DURABILITY OR OPERATION, IT BEING AGREED
THAT ALL RISKS INCIDENT THERETO ARE TO BE BORNE BY TENANT. Tenant acknowledges that the Leased
Premises are of its selection and to its specifications and that the Leased Premises have been
inspected by Tenant and are satisfactory to it. In the event of any defect or deficiency in any of
the Leased Premises of any nature, whether patent or latent, Landlord shall not have any
responsibility or liability with respect thereto or for any incidental or consequential damages
(including strict liability in tort). The provisions of this Paragraph 3 (b) have been negotiated,
and the foregoing provisions are

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intended to be a complete exclusion and negation of any warranties by Landlord, express or
implied, with respect to any of the Leased Premises, arising pursuant to the uniform commercial
code or any other Law now or hereafter in effect or otherwise.

          (c) Tenant acknowledges and agrees that Tenant has examined the title to the Leased Premises
prior to the execution and delivery of this Lease and has found such title to be satisfactory for
the purposes contemplated by this Lease.

          (d) Landlord hereby assigns, without recourse or warranty whatsoever, to Tenant, all
warranties, guaranties and indemnities, express or implied, and similar rights which Landlord may
have against any manufacturer, seller, engineer, contractor or builder in respect of any of the
Leased Premises, including, but not limited to, any rights and remedies existing under contract or
pursuant to the uniform commercial code (collectively, the “guaranties”). Such assignment shall
remain in effect until the termination of this Lease. Landlord shall also retain the right to
enforce any guaranties assigned in the name of Tenant upon the occurrence of an Event of Default.
Landlord hereby agrees to execute and deliver at Tenant’s expense such further documents as Tenant
may reasonably request in order that Tenant may have the full benefit of the assignment effected or
intended to be effected by this Paragraph 3 (d). Upon the termination of this Lease, the
guaranties shall automatically revert to Landlord. The foregoing provision of reversion shall be
self-operative and no further instrument of reassignment shall be required. In confirmation of
such reassignment Tenant shall execute and deliver promptly any certificate or other instrument
which Landlord may request. Any monies collected by Tenant under any of the guaranties after the
occurrence of and during the continuation of an Event of Default shall be held in trust by Tenant
and promptly paid over to Landlord.

          (e) Landlord agrees to enter into, at Tenant’s expense, such easements, covenants, waivers,
approvals or restrictions for utilities, parking or other matters as desirable for operation of the
Leased Premises or properties adjacent thereto (collectively, “Easements”) as reasonably requested
by Tenant, subject to Lender’s and Landlord’s approval, not to be unreasonably withheld,
conditioned or delayed; provided, however, that no such Easement shall result in any diminution in
the value or utility of the Leased Premises for use as a central dsitribution facility and further
provided that no such Easement shall render the use of the Leased Premises dependent upon any other
property or condition the use of the Leased Premises upon the use of any other property, each of
which Tenant shall certify to Landlord and Lender in writing delivered with Tenant’s request with
respect to such Easement. Tenant’s request shall also include Tenant’s written undertaking
acknowledging that Tenant shall remain liable hereunder as principal and not merely as a surety or
guarantor notwithstanding the establishment of any Easement.

          (f) Tenant agrees that Tenant is obligated to and shall perform all obligations of the owner
of the Leased Premises under and pay all expenses which the owner of the Leased Premises may be
required to pay in accordance with the Performance Agreement, any reciprocal easement agreement or
any other agreement or document of record now, or of record in the future if created or filed by or
with the consent of Tenant, affecting the Leased Premises, herein referred to collectively as the
“REA”, and that Tenant shall comply with all of the terms and conditions of the REA during the Term
of this Lease. Tenant further covenants and agrees to indemnify, defend and hold harmless Landlord
and Lender against any claim, loss or damage

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suffered by Landlord or Lender by reason of Tenant’s failure to perform any obligations or pay
any expenses as required under any REA or comply with the terms and conditions of any REA as herein
above provided during the Term of this Lease.

     4. Use of Leased Premises; Quiet Enjoyment.

          (a) Tenant may (subject to Paragraph 4(b)) use the Leased Premises as a distribution center or
for any other lawful purpose so long as such other lawful purpose would not (i) have a material
adverse effect on the value of the Leased Premises, (ii) materially increase (when compared to use
as a distribution center) the likelihood that Tenant, Landlord or Lender would incur liability
under any provisions of the Act referred to in Paragraph 26 of this Lease, or (iii) result in or
give rise to any material environmental deterioration or degradation of the Leased Premises. In no
event shall the Leased Premises be used for any purpose which shall violate any of the provisions
of any Permitted Encumbrance or any covenants, restrictions or agreements now in existence or
hereafter created by or consented to by Tenant applicable to the Leased Premises. Tenant agrees
that with respect to the Permitted Encumbrances and any covenants, restrictions or agreements now
existing or hereafter created by or consented to by Tenant, Tenant shall observe, perform and
comply with and carry out the provisions thereof required therein to be observed and performed by
Landlord.

          (b) Subject
to Tenant’s rights under Paragraph 18 hereof, Tenant shall not permit any unlawful
occupation, business or trade to be conducted on the Leased Premises or any use to be made thereof
contrary to applicable Legal Requirements or Insurance Requirements. Subject to Tenant’s rights
under Paragraph 18, Tenant shall not use, occupy or permit any of the Leased Premises to be used or
occupied, nor do or permit anything to be done in or on any of the Leased Premises, in a manner
which would (i) make void or voidable any insurance which Tenant is required hereunder to maintain
then in force with respect to any of the Leased Premises, (ii) affect the ability of Tenant to
obtain any insurance which Tenant is required to furnish hereunder, or (iii) cause any injury or
damage to any of the Improvements unless pursuant to Alterations permitted under Paragraph 12
hereof.

          (c) Subject to all of the provisions of this Lease, so long as no Event of Default exists
hereunder, Landlord covenants to do no act to disturb the peaceful and quiet occupation and
enjoyment of the Leased Premises by Tenant.

     5. Term.

          (a) Subject to the provisions hereof Tenant shall have and hold the Leased Premises for an
initial term commencing on the Lease Year Commencement Date and ending at midnight on the date
immediately prior to the twentieth (20th) anniversary of the Lease Year Commencement Date (the
“Expiration Date”) (such initial term, together with any Renewal Term, hereinafter defined, which
comes into effect as hereinafter provided, is herein called the “Term”).

          (b) Provided this Lease shall not have been terminated pursuant to the provisions of
Paragraphs 13(b) or 19 and no Event of Default (beyond any applicable cure period) has occurred and
is continuing, this Lease and the Term shall be automatically extended

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for that number of renewal terms set forth on Exhibit “B”, each for that period set forth on
Exhibit “B” (each, “Renewal Term”), upon the condition that Tenant may cancel any Renewal Term by
giving notice (“Renewal Term Cancellation Notice”) to Landlord in writing at least twelve (12)
months prior to the expiration of the then current Term. Upon the giving of a Renewal Term
Cancellation Notice this Lease and the Term shall terminate and come to an end on the last day of
the then current Term. Any Renewal Term shall be subject to all of the provisions of this Lease,
and all such provisions shall continue in full force and effect, except that the Basic Rent for
each Renewal Term shall be the amounts determined in accordance with the schedule set forth in
Exhibit “B” attached hereto and made a part hereof. If Tenant shall timely give a Renewal Term
Cancellation Notice, then all options with regard to subsequent Renewal Terms shall expire and be
null and void.

     6. Rent.

          (a) Tenant shall pay to Landlord (or to Lender, if directed by Landlord), as minimum annual
rent for the Leased Premises during the Term, the amounts set forth in Exhibit “B” attached hereto
(“Basic Rent”), payable in advance commencing on the first day of the first month following the
month in which the Commencement Date occurs (unless the Commencement Date is the first day of a
month, in which case commencing on the Commencement Date) continuing on the first day of each
calendar month thereafter during the Term (the said days being called the “Basic Rent Payment
Dates”), and shall pay the same at Landlord’s address set forth below, or at such other place as
Landlord from time to time may designate to Tenant in writing, in funds which at the time of such
payment shall be legal tender for the payment of public or private debts in the United States of
America and if required by Lender or Landlord by wire transfer in immediately available federal
funds to such account in such bank as Lender or Landlord shall designate, from time to time. Upon
request by Landlord, Tenant shall establish arrangements whereby payments of the Basic Rent and
Additional Rent are transferred by Automated Clearing House Debit from an account established by
Tenant at a United States bank or other financial institution to such account as Landlord may
designate. Basic Rent shall be adjusted on certain anniversaries of the Lease Year Commencement
Date, as set forth on Exhibit “B”. If the Commencement Date shall occur on a date other than the
first day of a calendar month, then, Basic Rent for the period from and including the Commencement
Date through and including the last day of the month in which the Commencement Date occurs shall be
paid, in advance, on the date hereof, in an amount prorated by (i) dividing the monthly installment
of Basic Rent due for the month in which the Commencement Date occurs by the number of days in such
month, and (ii) multiplying such sum by the numbers of days remaining in such month from and after
the Commencement Date.

          (b) Tenant shall pay and discharge before the imposition of any fine, lien, interest or
penalty may be added thereto for late payment thereof, the following (“Additional Rent”), all other
amounts and obligations which Tenant assumes or agrees to pay or discharge pursuant to this Lease,
together with every fine, penalty, interest and cost which may be added by the party to whom such
payment is due for nonpayment or late payment thereof. In the event of any failure by Tenant to pay
or discharge any of the foregoing, Landlord shall have the same rights, powers and remedies
provided herein, by Law or otherwise as are available to Landlord in the event of nonpayment of
Basic Rent.

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          (c) If any installment of Basic Rent is not paid within ten days after written notice is given
by Landlord or Lender (or Lender’s servicer or other designee of Lender) to Tenant that the same is
overdue, Tenant shall pay to Landlord or Lender, as the case may be, on demand, as Additional Rent,
a late charge equal to five percent (5%) (the “Late Charge”) on such overdue installment of Basic
Rent. Tenant acknowledges and agrees that late payment of Basic Rent or Additional Rent by Tenant
will cause Landlord to incur increased costs not contemplated by this Lease. The exact amount of
such costs is extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges. The assessment of the forgoing late charge represents a fair
and reasonable estimate of certain costs which Landlord will incur by reason of a late payment by
Tenant.

     7. Net Lease; Non-Terminability.

          (a) This is a net Lease and Basic Rent, Additional Rent and all other sums payable hereunder
by Tenant shall be paid, except as otherwise expressly set forth in this Lease, without notice,
demand, setoff, counterclaim, recoupment, abatement, suspension, deferment, diminution, deduction,
reduction or defense.

          (b) Except as otherwise expressly provided in this Lease, this Lease shall not terminate and
Tenant shall not have any right to terminate this Lease, during the Term. Except as otherwise
expressly provided in this Lease, Tenant shall not be entitled to any setoff, counterclaim,
recoupment, abatement, suspension, deferment, diminution, deduction, reduction or defense of or to
Basic Rent, Additional Rent or any other sums payable under this Lease; and except as otherwise
expressly provided in this Lease, the obligations of Tenant under this Lease shall not be affected
by any interference with Tenant’s use of any of the Leased Premises for any reason, including but
not limited to the following: (i) any damage to or destruction of any of the Leased Premises by
any cause whatsoever, (ii) any Condemnation, (iii) the prohibition, limitation or restriction of
Tenant’s use of any of the Leased Premises, (iv) any eviction by paramount title or otherwise, (v)
Tenant’s acquisition of ownership of any of the Leased Premises other than pursuant to an express
provision of this Lease, (vi) any default on the part of Landlord under this Lease or under any
other agreement, (vii) any latent or other defect in, or any theft or loss of any of the Leased
Premises, (viii) the breach of any warranty of any seller or manufacturer of any of the Equipment,
(ix) any violation of Paragraph 4 (c) by Landlord, or (x) any other cause, whether similar or
dissimilar to the foregoing, any present or future Law to the contrary notwithstanding. It is the
intention of the parties hereto that the obligations of Tenant under this Lease shall be separate
and independent covenants and agreements, and that Basic Rent, Additional Rent and all other sums
payable by Tenant hereunder shall continue to be payable in all events (or, in lieu thereof, Tenant
shall pay amounts equal thereto), and that the obligations of Tenant under this Lease shall
continue unaffected, unless this Lease shall have been terminated pursuant to an express provision
of this Lease. Notwithstanding anything contained in Paragraph 7(b)(ix) to the contrary, Tenant
does not waive its right to sue Landlord for damages as a result of such violation.

          (c) Tenant agrees that it shall remain obligated under this Lease in accordance with its
provisions and that, except as otherwise expressly provided herein, it shall not take any action to
terminate, rescind or avoid this Lease, notwithstanding (i) the bankruptcy, insolvency,
reorganization, composition, readjustment, liquidation, dissolution, winding-up or other

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proceeding affecting Landlord, (ii) the exercise of any remedy, including foreclosure, under
the Mortgage, or (iii) any action with respect to this Lease (including the disaffirmance hereof)
which may be taken by Landlord under the Federal Bankruptcy Code or by any trustee, receiver or
liquidator of Landlord or by any court under the Federal Bankruptcy Code or otherwise.

          (d) This Lease is the absolute and unconditional obligation of Tenant. Tenant waives all
rights which are not expressly stated in this Lease but which may now or hereafter otherwise be
conferred by Law (i) to quit, terminate or surrender this Lease or any of the Leased Premises, (ii)
to any setoff, counterclaim, recoupment, abatement, suspension, deferment, diminution, deduction,
reduction or defense of or to Basic Rent, Additional Rent or any other sums payable under this
Lease, except as otherwise expressly provided in this Lease, and (iii) for any statutory lien or
offset right against Landlord or its property.

     8. Payment of Impositions; Compliance with Legal Requirements and Insurance
Requirements.

          (a) (i) Subject to the provisions of Paragraph 18 hereof relating to contests, Tenant shall,
before interest or penalties are due thereon, pay and discharge (all of the following being herein
collectively called the “Impositions”): all taxes of every kind and nature (including real, ad
valorem, personal property, gross income, franchise, withholding, profits and gross receipts taxes)
on or with respect to the Leased Premises, including but not limited to those arising out of or in
connection with a re-assessment of the Premises as a result of a change of ownership of any portion
of the Leased Premises (but excluding conveyance tax and fees as set forth below except in the
event the change in ownership is the result of the exercise by Tenant of its Right of First
Refusal) or in connection with ‘newly constructed’ improvements located on the Leased Premises; all
charges and/or taxes for any easement or agreement maintained for the benefit of the Leased
Premises; all general and special assessments, levies, permits, inspection and license fees on or
with respect to the Leased Premises; all water and sewer rents and other utility charges on or with
respect to the Leased Premises; all ground rents on or with respect to the Leased Premises; and all
other public charges and/or taxes whether of a like or different nature, even if unforeseen or
extraordinary, imposed or assessed upon or with respect to the Leased Premises, prior to or during
the Term, against Landlord, Tenant or any of the Leased Premises as a result of or arising in
respect of the occupancy, leasing, use, maintenance, operation, management, repair or possession
thereof, or any activity conducted on the Leased Premises, or the Basic Rent or Additional Rent,
including without limitation, any gross income tax, sales tax, occupancy tax or excise tax levied
by any governmental body on or with respect to such Basic Rent or Additional Rent. If received by
Landlord, Landlord shall promptly deliver to Tenant any bill or invoice with respect to any
Imposition.

               (ii) Nothing herein shall obligate Tenant to pay, and the term “Impositions” shall exclude,
federal, state or local (A) transfer taxes as the result of a conveyance by (or suffered by)
Landlord (except in the event that Tenant purchases the Leased Premises from Landlord), (B)
franchise, capital stock or similar taxes if any, of Landlord, (C) income, gross income, excess
profits or other taxes, if any, of Landlord, determined on the basis of or measured by its net or
gross income, or (D) any estate, inheritance, succession, gift, capital levy or similar taxes,
unless the taxes referred to in clauses (B) and (C) above are in lieu of or a substitute for any
other tax or assessment upon or with respect to any of the Leased Premises

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which, if such other tax or assessment were in effect at the commencement of the Term, would
be payable by Tenant and then only to the extent of such substitution. In the event that any
assessment against any of the Leased Premises may be paid in installments, Tenant shall have the
option to pay such assessment in installments; and in such event, Tenant shall be liable only for
those installments which accrue during the Term and which relate to the time period within the
Term. Tenant shall prepare and file all tax reports required by governmental authorities which
relate to the Impositions. Tenant shall deliver to Landlord and to Lender, within twenty (20) days
after Landlord’s written request therefor, copies of all settlements and notices pertaining to the
Impositions which may be issued by any governmental authority and receipts for payments of all
Impositions made during each calendar year of the Term.

          (b) Subject to the provisions of Paragraph 18 hereof, Tenant shall promptly comply with and
conform to all of the Legal Requirements and Insurance Requirements.

          (c) Any assessment, tax, fee, levy or charge in addition to, or in substitution, partially or
totally, of any assessment, tax, fee, levy or charge previously included within the definition of
real property tax shall be deemed an Imposition, it being acknowledged by Tenant and Landlord that
Proposition 13 was adopted by the voters of the State of California in the June 1978 election
(“Proposition 13”) and that assessments, taxes, fees, levies and charges may be imposed by
governmental agencies for such services as fire protection, street, sidewalk and road maintenance,
refuse removal and for other governmental services formerly provided without charge to property
owners or occupants, and, in further recognition of the decrease in the level and quality of
governmental services and amenities as a result of Proposition 13, Impositions shall also include
any governmental or private assessments or the Leased Premises’ contribution towards a governmental
or private cost-sharing agreement for the purpose of augmenting or improving the quality of
services and amenities normally provided by governmental agencies. It is the intention of Tenant
and Landlord that all such new and increased assessments, taxes, fees, levies, and charges and all
similar assessments, taxes, fees, levies and charges be included within the definition of
Impositions for the purposes of this Lease.

     9. Liens; Recording and Title.

          (a) Subject to the provisions of Paragraph 18 hereof, Tenant shall not, directly or
indirectly, create or permit to be created or to remain, and shall promptly discharge, any lien on
the Leased Premises, on the Basic Rent, Additional Rent or on any other sums payable by Tenant
under this Lease, other than the Mortgage, the Permitted Encumbrances and any mortgage, lien,
encumbrance or other charge created by or resulting from any act or omission by Landlord or those
claiming by, through or under Landlord (except Tenant). Notice is hereby given that Landlord shall
not be liable for any labor, services or materials furnished or to be furnished to Tenant, or to
anyone holding any of the Leased Premises through or under Tenant, and that no mechanics’ or other
liens for any such labor, services or materials shall attach to or affect the interest of Landlord
in and to any of the Leased Premises.

          (b) Each of Landlord and Tenant shall execute, acknowledge and deliver to the other a written
Memorandum of this Lease to be recorded in the appropriate land records of the jurisdiction in
which the Leased Premises is located, in order to give public notice and protect the validity of
this Lease. In the event of any discrepancy between the provisions of said
recorded Memorandum of this Lease and the provisions of this Lease, the provisions of this
Lease shall prevail.

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          (c) Nothing in this Lease and no action or inaction by Landlord shall be deemed or construed
to mean that Landlord has granted to Tenant any right, power or permission to do any act or to make
any agreement which may create, give rise to, or be the foundation for, any right, title, interest
or lien in or upon the estate of Landlord in any of the Leased Premises.

          (d) Nothing in this Lease shall prohibit or limit Landlord’s right to sell (subject to
Paragraph 33) or to mortgage the Leased Premises and to assign its rights under this Lease to a
buyer or Lender.

     10. Indemnification.

          (a) Tenant agrees to defend, pay, protect, indemnify, save and hold harmless Landlord and
Lender, and their officers, directors, shareholders, partners, beneficial owners, trustees,
members, managers and employees, from and against any and all liabilities, losses, damages,
penalties, costs, expenses (including reasonable attorneys’ fees and expenses), causes of action,
suits, claims, demands or judgments of any nature whatsoever, howsoever caused, arising from the
Leased Premises or the use, non-use, occupancy, condition, design, construction, maintenance,
repair or rebuilding of the Leased Premises, and any injury to or death of any person or persons or
any loss of or damage to any property, real or personal, in any manner arising therefrom connected
therewith or occurring thereon, whether or not such indemnified party has or should have knowledge
or notice of the defect or conditions, if any, causing or contributing to said injury, death, loss,
damage or other claim; except to the extent that any such liability, loss, damage, penalty, cost,
expense, cause of action, suit, claim, demand or judgment is the result of the gross negligence of
such indemnified party or the intentional wrongful act of such indemnified party (it being
understood that Landlord shall not be deemed to be grossly negligent for failing to perform any act
which, as between Landlord and Tenant, Tenant has covenanted to perform pursuant to this Lease).
In case any action or proceeding is brought against any indemnified party by reason of any such
claim against which Tenant has agreed to defend, pay, protect, indemnify, save and hold harmless
pursuant to the preceding sentence, Tenant covenants upon notice from such indemnified party to
resist or defend such indemnified party in such action, with the expenses of such defense paid by
Tenant, and such indemnified party will cooperate and assist in the defense of such action or
proceeding if reasonably requested so to do by Tenant.

          (b) The obligations of Tenant under this Paragraph 10 shall survive any expiration or
termination of this Lease.

     11. Maintenance and Repair.

          (a) Except for any Alterations that Tenant is permitted to make pursuant to this Lease, Tenant
shall at all times, including any Requisition period, put, keep and maintain the Leased Premises
(including, without limitation, the roof, landscaping, walls, footings, foundations and structural
components of the Leased Premises) and the Equipment in the same condition and order of repair as
exists as of the date of this Lease, except for ordinary wear and

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tear and damage by insured casualty (if the Leased Premises are not restored), and shall
promptly make all repairs and replacements of every kind and nature, whether foreseen or
unforeseen, which may be required to be made upon or in connection with the Leased Premises in
order to keep and maintain the Leased Premises in the order and condition required by this
Paragraph 11(a). Tenant shall do or cause others to do all shoring of the Leased Premises or of
foundations and walls of the Improvements and every other act necessary or appropriate for
preservation and safety thereof, by reason of or in connection with any excavation or other
building operation upon any of the Leased Premises, whether or not Landlord shall, by reason of any
Legal Requirements or Insurance Requirements, be required to take such action or be liable for
failure to do so. Landlord shall not be required to make any repair, whether foreseen or
unforeseen, or to maintain any of the Leased Premises or Adjoining Property in any way, and Tenant
hereby expressly waives the right to make repairs at the expense of the Landlord, which right may
be provided for in any Law now or hereafter in effect. Nothing in the preceding sentence shall be
deemed to preclude Tenant from being entitled to insurance proceeds or condemnation awards for
Restoration pursuant to Paragraphs 13 (c) and 14 (g) of this Lease. Tenant shall, in all events,
make all repairs for which it is responsible hereunder promptly, and all repairs shall be in a
good, proper and workmanlike manner.

          (b) In the event that any Improvement shall violate any Legal Requirements or Insurance
Requirements and as a result of such violation enforcement action is commenced against Tenant or
with respect to the Leased Premises, then Tenant, shall either (i) obtain valid and effective
waivers or settlements of all claims, liabilities and damages resulting from each such violation,
whether the same shall affect Landlord, Tenant or both, or (ii) take such action as shall be
necessary to remove such violation, including, if necessary, any Alteration. Any such repair or
Alteration shall be made in conformity with the provisions of Paragraph 12.

          (c) If Tenant shall be in default under any of the provisions of this Paragraph 11 or
Paragraph 26, Landlord may after thirty (30) days written notice given to Tenant and failure of
Tenant to commence to cure during said period, but without notice in the event of an emergency, do
whatever is necessary to cure such default as may be appropriate under the circumstances for the
account of and at the expense of Tenant. In the event of an emergency Landlord shall notify Tenant
of the situation by phone or other available communication. All reasonable sums so paid by
Landlord and all reasonable costs and expenses (including, without limitation, attorneys’ fees and
expenses) so incurred, together with interest thereon at the Default Rate from the date of payment
or incurring the expense, shall constitute Additional Rent payable by Tenant under this Lease and
shall be paid by Tenant to Landlord on demand.

          (d) Tenant waives the right to make repairs at the Landlord’s expense under any Legal
Requirement now or hereafter in effect, including, without limitation, under Sections 1941 and 1942
of the California Civil Code.

     12. Alterations.

          (a) Tenant shall not make any Alterations which would (after the completion thereof) impair
the structural integrity of the Leased Premises or include the expansion or addition of any
above-ground storage tanks in addition to those which presently exist on the Leased Premises,
without Landlord’s prior written consent, which consent Landlord agrees not to

 - 13 - 

 

unreasonably withhold, condition or delay. Tenant may make any other Alterations without the
prior written consent of the Landlord provided such Alterations comply with all of the provisions
of the following sentence.

          (b) In the event that Landlord gives its prior written consent to any Alterations, or if such
consent is not required, Tenant agrees that in connection with any Alteration: (i) the fair
market value of the Leased Premises shall not be lessened in any material respect after the
completion of any such Alteration, or its structural integrity impaired; (ii) the Alteration and
any Alteration theretofore made or thereafter to be made shall not in the aggregate reduce the
gross floor area of the Improvements by more than ten percent (10%); (iii) all such Alterations
shall be performed in a good and workmanlike manner, and shall be expeditiously completed in
compliance with all Legal Requirements; (iv) all work done in connection with any such Alteration
shall comply with all Insurance Requirements; (v) Tenant shall promptly pay all costs and expenses
of any such Alteration, and shall (subject to the provisions of Paragraph 18 hereof) discharge all
liens filed against any of the Leased Premises arising out of the same; (vi) Tenant shall procure
and pay for all permits and licenses required in connection with any such Alteration; (vii) all
such Alterations shall be the property of Landlord and shall be subject to this Lease; and (viii)
all Alterations shall be made in the case of any Alteration the estimated cost of which in any one
instance exceeds One Million ($1,000,000) Dollars under the supervision of an architect or engineer
and, in accordance with plans and specifications which shall be submitted to Landlord prior to the
commencement of the Alterations.

     13. Condemnation.

          (a) Tenant, promptly after obtaining knowledge of the institution of any proceeding for
Condemnation, shall notify Landlord thereof and Landlord shall be entitled to participate in any
Condemnation proceeding. Landlord, promptly after obtaining knowledge of the institution of any
proceeding for Condemnation, shall notify Tenant thereof and Tenant shall have the right to
participate in such proceedings. Subject to the provisions of this Paragraph 13 and Paragraph 15,
Tenant hereby irrevocably assigns to Lender or to Landlord, in that order, any award or payment in
respect of any Condemnation of Landlord’s interest in the Leased Premises, except that (except as
hereinafter provided) nothing in this Lease shall be deemed to assign to Landlord or Lender any
award relating to the value of the leasehold interest created by this Lease or any award or payment
on account of the Trade Fixtures, moving expenses and out-of-pocket expenses incidental to the
move, if available, to the extent Tenant shall have a right to make a separate claim therefor
against the condemnor, it being agreed, however, that Tenant shall in no event be entitled to any
payment that reduces the award to which Landlord is or would be entitled for the condemnation of
Landlord’s interest in the Leased Premises. Notwithstanding the foregoing, Tenant shall not be
entitled to any award or payment on account of Tenant’s leasehold interest under this Lease except
in the event of a Condemnation described in Paragraph 13(b) and then only if and to the extent that
Landlord receives an amount equal to or greater than the amount set forth on Exhibit “C”
attached hereto and made a part hereof.

          (b) If (i) the entire Leased Premises or (ii) at least twenty percent (20%) of the applicable
Land (for purposes of such calculation, applicable Land shall not include any portion of the
approximately 24 acres of unimproved land lying East of the fenceline located East of the building;
provided that if such unimproved land is later improved by Tenant in accordance with

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the terms hereof, then the portion thereof so improved will be included in “Land” for purposes
of such calculation), or twenty percent (20%) of the building constructed on the Land, or the means
of access for freight delivery located on the East side of the building, or any other means of
ingress, egress or access to the Leased Premises to the extent that no other method of ingress,
egress or access to and from the Leased Premises remains is taken, the loss of which even after
Restoration would, in Tenant’s reasonable business judgment, be substantially and materially
adverse to the business operations of Tenant at the Leased Premises, shall be subject of a Taking
by a duly constituted authority or agency having jurisdiction, then Tenant shall, not later than
ninety (90) days after a Taking has occurred, serve notice (“Tenant’s Termination Notice”) upon
Landlord of Tenant’s intention to terminate this Lease on any Basic Rent Payment Date specified in
such Tenant’s Termination Notice, which date (the “Termination Date”) shall be no sooner than the
first Basic Rent Payment Date occurring at least thirty (30) days after the date of such Tenant’s
Termination Notice. Provided the Tenant pays all Basic Rent and Additional Rent accruing through
the proposed Termination Date (and Tenant remains obligated, following termination, to pay all
items of Additional Rent for which billings are first received after the date of termination), that
Impositions are pro-rated between Landlord and Tenant as of the proposed Termination Date, the
Lease shall terminate on the Termination Date.

          (c) (i) In the event of a Condemnation of any part of the Leased Premises which does not
result in a Termination of this Lease, subject to the requirements of Paragraph 15, the Net Award
of such Condemnation shall belong to the Tenant but shall be held initially by Landlord for the
benefit of Tenant to fund the Restoration of the Premises; and promptly after such Condemnation,
Tenant shall commence and diligently continue to restore the Leased Premises as nearly as possible
to its value, condition and character immediately prior to such Condemnation, in accordance with
the provisions of this Lease, including but not limited to the provisions of Paragraphs 11(a), 12
and 15 (such restoration following a Condemnation and restoration following a casualty is, as the
context shall require, herein called a “Restoration”).

               (ii) Upon the payment to Landlord of the Net Award of a Taking which falls within the
provisions of this Paragraph 13(c), Landlord and Lender shall, to the extent received, make that
portion of the Net Award equal to the cost of Restoration (the “Restoration Award”)
available to Tenant for Restoration, in accordance with the provisions of Paragraph 15, and
promptly after completion of the Restoration, the balance of the Net Award shall be paid to Tenant.
Tenant shall restore the Leased Premises in good and workmanlike manner using materials of equal
or better quality as those being replaced. All Basic Rent, Additional Rent and other sums payable
hereunder shall continue unabated and unreduced.

               (iii) In the event of a Requisition of the Leased Premises, Landlord shall apply the Net Award
of such Requisition, to the extent available, to the installments of Basic Rent, Additional Rent or
other sums payable by Tenant hereunder thereafter payable and Tenant shall pay any balance
remaining thereafter. Upon the expiration of the Term, any portion of such Net Award which shall
not have been previously credited to Tenant on account of the Basic Rent and Additional Rent shall
be retained by Landlord.

          (d) Except with respect to an award or payment to which Tenant is entitled pursuant to the
provisions of Paragraph 13 (a), 13 (b) and 13 (c), no agreement with any condemnor in settlement of
or under threat of any Condemnation shall be made by either

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Landlord or Tenant without the written consent of the other, and of Lender, if the Leased
Premises is then subject to a Mortgage, which consent of Landlord and Tenant shall not be
unreasonably withheld, conditioned or delayed.

          (e) The terms and provisions of this Paragraph 13 are intended to provide for all rights and
obligations of the parties to this Lease in the event of the acquisition of all or a portion of the
Leased Premises for public use as contemplated by Section 1265.160 of the California Code of Civil
Procedure.

     14. Insurance.

          (a) Tenant shall maintain at its sole cost and expense the following insurance on the Leased
Premises:

          (i) “All-risk” of physical damage coverage insurance, including earthquake
damage coverage, covering the building, Improvements and betterments and Equipment
on a replacement cost basis. Such coverage as provided will not be subject to
coinsurance and will include a full “replacement cost” endorsement together with
appropriate “demolition and increased costs of construction” endorsements and a
waiver of subrogation endorsement. Tenant shall be responsible for determining the
applicability of “demolition and increased costs of construction” endorsements. If
Tenant elects to provide blanket “all-risk” coverage over locations in addition to
the Premises, Landlord reserves the right to require a specific endorsement or
endorsements from the insurance companies affording such coverage evidencing
coverage over the Premises in a sufficient amount to provide recovery on a
replacement cost basis. Tenant’s coverage may provide for reasonable self-insured
retentions or deductibles not to exceed $1,000,000.00 so long as no Event of Default
under Section 19(a)(i) hereof shall have occurred and be continuing hereunder;
provided, however, in the event that Guarantor’s tangible net worth is less than
$100,000,000 and Tenant desires to maintain a deductible or self-insured retention
of not more than $500,000, Landlord may require Tenant to maintain a deductible or
self-insured retention not greater than $250,000 in which event Landlord will
reimburse Tenant for the difference in Tenant’s insurance premium resulting from
such requirement but in no event shall such reimbursable amount exceed $12,000
annually. Further, in the event that Guarantor’s tangible net worth is less than
$100,000,000 and Tenant desires to maintain a deductible or self-insured retention
of more than $500,000 but less than $1,000,000, Landlord may require Tenant to
maintain a deductible or self-insured retention of not more than $250,000 in which
event Landlord will reimburse Tenant for the difference in Tenant’s insurance
premium resulting from such requirement but in no event shall such reimbursable
amount exceed $15,000 annually.

          (ii) Commercial general liability insurance for the benefit of Landlord, Tenant
and the Lender, fully protecting Landlord, Tenant and the Lender in respect of
personal injuries and death to persons and property damage, with a combined single
limit of not less than $5,000,000 per occurrence for personal injuries and death to
persons and property damage. In the event Tenant maintains

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blanket liability coverage, the total limits of liability required hereunder
must be available to the Premises. Tenant’s coverage may provide for reasonable
self-insured retentions or deductibles not to exceed $1,000,000.00 so long as (i) no
Event of Default under Section 19(a)(i) hereof shall have occurred and be continuing
hereunder.

          (iii) Business interruption/loss of rents insurance covering all risks for the
benefit of Landlord, Tenant and, if Landlord so directs, for the benefit of the
Lender, as their interests may appear, covering risk of loss during the lesser of
the first 12 months of reconstruction or the actual reconstruction period
necessitated by the occurrence of any of the covered hazards, in such amounts as may
be customary for comparable properties in the area and in an amount sufficient to
prevent Landlord or Tenant from becoming a co-insurer. Tenant’s obligation for
payment of rent shall be reduced dollar for dollar by the amount of rent insurance
received by Landlord or Lender.

          (iv) Boiler and machinery coverage covering loss or damage, on a replacement
cost basis, from explosion of any steam and pressure boilers, hot water heaters, and
similar apparatus located in, on or about the Premises with limits of not less than
the replacement cost of the Improvements.

          (v) Flood (if the Premises is located in whole or in part within any flood
plain area as designated by any department or agency of the United States Government
having jurisdiction) and in such amounts as may be customary for comparable
properties in the area, provided the same is available at rates which are
economically practical in relation to the risks covered, as determined by Tenant and
reasonably approved by Landlord.

          (vi) Workers’ compensation insurance coverage for all persons employed by
Tenant on the Premises with statutory limits and otherwise with limits of and
provisions in accordance with the requirements of applicable local, state and
federal law, which shall include insurance against Occupational Disease and
Voluntary Compensation Insurance, together with Employer’s Liability Insurance with
a limit of not less than $1,000,000 per occurrence.

          (vii) If necessary, during the course of any construction or reconstruction in
connection with any addition, renovation or any Casualty or Condemnation, “builder’s
risk” coverage for the Premises written on an “all risk” basis with privilege
granted to occupy in an amount not less than the full amount of the construction or
reconstruction cost, during the period of any Major Alteration, which shall include
the value of building materials on the Premises, covering loss or damage by fire,
lightning, windstorm, hail, explosion, riot, riot attending a strike, civil
commotion, aircraft vehicles, smoke, earthquakes, vandalism and malicious mischief,
and flood insurance (if the Premises is in a flood hazard area), and such other
hazards as may be included in broad form of extended coverage from time to time
available.

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          (viii) Without limiting the generality of the foregoing, during the Lease Term,
Tenant shall, at Tenant’s sole cost and expense, secure and keep the insurance
coverages as required in Exhibit D hereto in full force and effect; subject to
Tenant’s right to self-insure in subsection (b) below..

          (b) In addition to the self-insured retention, exclusions and deductibles permitted under
Paragraphs 14(a)(i) and (ii), during such time as (i) no Event of Default is outstanding hereunder,
and (ii) the tangible net worth of Tenant or Guarantor shall be not less than One Hundred Million
Dollars ($100,000,000.00) as determined in accordance with generally accepted accounting principles
consistently applied, Tenant may self-insure all or any portion of the coverage referred to in
Paragraph 14 (a) (i), (ii), (iii) and (iv) , provided that the self insurance program of this
section (b) does not violate any Legal Requirements.

          (c) Tenant shall not violate or permit to be violated any of the conditions or provisions of
any of the insurance policies, and Tenant shall so perform and satisfy the requirements of the
companies writing such policies. Tenant further agrees to reasonably cooperate with Landlord as
and when requested to comply with loss prevention programs.

          (d) Tenant shall also provide such other forms of insurance and/or the foregoing insurance in
such additional amounts as are customarily furnished by tenants under comparable leases in the case
of property similar in use to the Premises and located in an area in which the Premises is situated
provided the same is available at rates which are commercially practical in relation to the risk
covered.

          (e) All insurance policies maintained by Tenant pursuant to this Lease shall name Tenant as
insured, and Landlord and the Lender as additional insureds and shall provide (a) that losses shall
be payable notwithstanding any act or negligence of Tenant and (b) that no cancellation or material
alteration in the terms and conditions of coverage thereof shall be effective until at least 30
days after written notice thereof, is given to Landlord and to the Lender.

          (f) All policies of insurance procured by Tenant shall be issued by insurance companies
licensed to do business in the State in which the Leased Premises are located. Notwithstanding the
foregoing, such insurance companies may instead only be eligible under a Surplus Lines license.
All policies shall be in a form and with companies reasonably acceptable to Landlord and may be
part of blanket coverage relating to various properties operated by Tenant.

     Insurance proceeds which are payable to Tenant alone in accordance with the provisions of this
Lease shall be held by Tenant and used solely by Tenant to pay for the cost of making repairs,
alterations and improvements to the Leased Premises and doing such work as may be necessary to
protect the Leased Premises against further damage and for no other purpose. If the proceeds of
insurance payable to Tenant alone under this Lease shall exceed such costs after completion of the
Restoration, the balance shall be paid to Tenant.

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          (g) In the event of any casualty loss relating to the Leased Premises exceeding One Million
Dollars ($1,000,000), Tenant shall give Landlord immediate notice thereof. Tenant
shall adjust, collect and compromise any and all claims, with the consent of Lender and
Landlord, not to be unreasonably withheld, conditioned or delayed, and Landlord and Lender shall
have the right to join with Tenant therein. If the estimated cost of Restoration or repair shall
be One Million Dollars ( $1,000,000.00) or less, all proceeds of any insurance required under
clauses (i), (iv) and (vii)of Paragraph 14(a) shall be payable to Tenant, provided that Tenant or
Guarantor at such time shall have a tangible net worth of not less than One Hundred Million Dollars
($100,000,000.00) as determined in accordance with generally accepted accounting principles,
consistently applied, and in all other events to a Trustee which shall be a federally insured bank
or other financial institution, selected by Landlord and Tenant and reasonably satisfactory to
Lender (the “Trustee”). If the Leased Premises shall be covered by a Mortgage, Lender, if it so
desires, shall be the Trustee. Each insurer is hereby authorized and directed to make payment
under said policies directly to such Trustee instead of to Landlord and Tenant jointly; and Tenant
and Landlord each hereby appoints such Trustee as its attorney-in-fact to endorse any draft
therefor for the purposes set forth in this Lease after approval by Tenant of such Trustee, if
Trustee is other than Lender. In the event of any casualty (whether or not insured against)
resulting in damage to the Leased Premises or any part thereof, Basic Rent and Additional Rent
shall not abate. The Net Proceeds of such insurance payment shall be retained by the Trustee and,
promptly after such casualty, Tenant, as required in Paragraphs 11 (a) and 12, shall commence and
diligently continue to perform the Restoration to the Leased Premises. Upon payment to the Trustee
of such Net Proceeds, the Trustee shall, to the extent available, make the Net Proceeds available
to Tenant for Restoration, in accordance with the provisions of Paragraph 15. Tenant shall,
whether or not the Net Proceeds are sufficient for the purpose, promptly repair or replace the
Improvements and Equipment in accordance with the provisions of Paragraph 11(a) and the Net
Proceeds of such loss shall thereupon be payable to Tenant, subject to the provisions of Paragraph
15 hereof. In the event that any damage or destruction shall occur at such time as Tenant shall
not have maintained third-party insurance in accordance with Paragraph 14(a)(i), (iv) and (vii),
Tenant shall pay to the Trustee the amount of the proceeds that would have been payable had such
insurance program been in effect (the “Tenant Insurance Payment”). In all cases in which the Net
Proceeds and/or the Tenant Insurance Payment are required to be paid to a Trustee hereunder, if the
estimated cost of the Restoration, as reasonably determined by Landlord, exceeds the amount paid to
the Trustee (whether as a result of deductibles, self insurance or for any other reason
whatsoever), then in accordance with Paragraph 15(h), Tenant shall pay to the Trustee the amount of
such excess.

          (h) Upon the execution of this Lease, Tenant shall deliver to Landlord and to the Lender
evidence of insurance coverage as to the policies required by this Lease evidencing compliance with
the terms of this Lease and bearing evidence of payment of all premiums therefor. Thereafter, as
to policy renewals, Tenant will provide Landlord and the Lender with certificates or assurances of
continued coverage within two (2) days after the expiration of such policies. Tenant shall
immediately certify to Landlord in writing that no lapse in insurance coverage has occurred.

          (i) If the memoranda of policies or certificates or evidence of payment of the premiums
thereon shall not be so delivered to Landlord as required herein, or if Landlord learns of any
cancellation of any policy required hereunder, Landlord may procure and/or pay for any such
insurance for Landlord’s benefit only and not for the benefit of Tenant, with or without notice to
Tenant. The amount so paid by Landlord with interest thereon from the date of

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payment shall become due and payable by Tenant as Additional Rent with the next or any
subsequent installment of Basic Rent which shall become due after such payment by Landlord; it
being expressly covenanted that payment by Landlord of any such premium shall not be deemed to
waive or release the default in the payment thereof by Tenant, or the right of Landlord to take
such action as may be permissible hereunder as in the case of default in the payment of Basic Rent.

          (j) Except as provided in subsection (k) below, the provisions of Section 1932 and Section
1933 of the Civil Code of the State of California, including amendments thereto and any other law
which may hereafter be in force during the term of this Lease, which authorizes the termination of
the Lease upon partial or complete destruction of the Leased Premises, are hereby waived by Tenant.

          (k) If in the last two (2) years of any Term of this Lease the Leased Premises are damaged
such that the cost of Restoration is in excess of twenty-five percent (25%) of its then fair market
value or even after Restoration, in Tenant’s reasonable business judgment, be substantially and
materially adverse to the business operations of Tenant at the Leased Premises, then Tenant may
terminate this Lease.

     15. Restoration. Net Proceeds, Restoration Award and Tenant Insurance Payment (the
aggregate of which being herein defined as the “Restoration Fund”) shall be disbursed by
the Trustee in accordance with the following conditions: (a) If the cost of Restoration will exceed
$1,000,000, prior to commencement of the Restoration the architects, general contractor(s), and
plans and specifications for the Restoration shall be approved by Landlord, which approval shall
not be unreasonably withheld, conditioned or delayed; and which approval shall be granted to the
extent that the plans and specifications depict a Restoration which complies with all Laws and is
substantially similar to the Improvements and Equipment which existed prior to the occurrence of
the casualty or Taking, whichever is applicable and which approval will be conclusively deemed
granted if Landlord fails, within fifteen (15) business days following Landlord’s receipt of
Tenant’s request (accompanied by copies of the plans and specifications for such Restoration) to
grant or to reasonably withhold (with reasons stated) such approval.

          (b) At the time of any disbursement, no Event of Default shall exist and no mechanics’ or
materialmen’s liens shall have been filed and remain undischarged or unbonded.

          (c) Disbursements shall be made from time to time in an amount not exceeding the hard and soft
cost of the work and costs incurred since the last disbursement upon receipt of (1) satisfactory
evidence, including architects’ certificates of the stage of completion, of the estimated cost of
completion and of performance of the work to date in a good and workmanlike manner in accordance
with the contracts, plans and specifications, (2) partial releases of liens and/or partial waiver
of lien as local law and custom may dictate, and (3) other reasonable evidence of cost and payment
so that Landlord can verify that the amounts disbursed from time to time are represented by work
that is completed in place or delivered to the site and free and clear of mechanics’ lien claims.

          (d) Each request for disbursement shall be accompanied by a certificate of Tenant describing
the work, materials or other costs or expenses, for which payment is requested, stating the cost
incurred in connection therewith and stating that Tenant has not

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previously received payment for
such work or expense and the certificate to be delivered by Tenant upon completion of the work
shall, in addition, state that the work has been substantially completed and complies with the
applicable requirements of this Lease.

          (e) The Trustee may retain ten percent (10%) of the Restoration Fund until the Restoration is
at least fifty percent (50%) complete, and thereafter five percent (5%) until the Restoration is
substantially complete.

          (f) The Restoration Fund shall be kept in a separate interest-bearing federally insured
account by the Trustee or by Lender.

          (g) At all times the undisbursed balance of the Restoration Fund held by Trustee plus any
funds contributed thereto by Tenant, shall be not less than the cost of completing the Restoration,
free and clear of all liens.

          (h) In addition, prior to commencement of Restoration and at any time during Restoration, if
the estimated cost of Restoration, as reasonably determined by Landlord, exceeds the amount of the
Net Proceeds, the Restoration Award and Tenant Insurance Payment available for such Restoration,
the amount of such excess shall be paid by Tenant to the Trustee to be added to the Restoration
Fund. Any sum in the Restoration Fund which remains in the Restoration Fund upon the completion of
Restoration shall be paid to Tenant. For purposes of determining the source of funds with respect
to the disposition of funds remaining after the completion of Restoration, the Net Proceeds or the
Restoration Award shall be deemed to be disbursed prior to any amount added by Tenant.

     All work performed and improvements made by or on behalf of Tenant hereunder shall be of equal
or better quality as the improvements that existed prior to any such casualty, condemnation or
Alteration.

     16. Subordination to Financing.

     (a) (i) Subject to the provisions of Paragraph 16 (a)(ii), Tenant agrees that this
Lease shall at all times be subject and subordinate to the lien of any Mortgage, and Tenant
agrees, upon demand, without cost, to execute instruments as may be reasonably required to
further effectuate or confirm such subordination, provided that the holder of such Mortgage,
Landlord and Tenant shall have entered into a subordination, non-disturbance and attornment
agreement which shall provide to Tenant the benefits described in Paragraph 16(a)(ii).

     (ii) Except as expressly provided in this Lease by reason of the occurrence of an Event
of Default, Tenant’s tenancy and Tenant’s rights under this Lease shall not be disturbed,
terminated or otherwise adversely affected, nor shall this Lease be affected, by any default
under any Mortgage, and in the event of a foreclosure or other enforcement of any Mortgage,
or sale in lieu thereof, the purchaser at such foreclosure sale shall be bound to Tenant for
the Term of this Lease (from and after the date such
purchaser takes fee ownership of the Leased Premises) and any Renewal Term, the rights
of Tenant under this Lease shall expressly survive, and this Lease shall in all respects
continue in full force and effect so long as no Event of Default has occurred and is

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continuing. Tenant shall not be named as a party defendant in any such foreclosure suit,
except as may be required by Law. Notwithstanding the provisions of any Mortgage, during
the time this Lease is in force insurance proceeds and Restoration Award shall be permitted
to be used for Restoration in accordance with the provisions of this Lease. Notwithstanding
an Event of Default, but provided no event of default has occurred under the Qualified
Sublease, the provisions of this Paragraph 16 (a) shall continue to apply for the benefit of
any Qualified Subtenant referred to in Paragraph 17 herein.

          (b) Notwithstanding the provisions of Paragraph 16(a), the holder of any Mortgage to which
this Lease is subject and subordinate shall have the right, at its sole option, at any time, to
subordinate and subject the Mortgage, in whole or in part, to this Lease by recording a unilateral
declaration to such effect, provided that such holder shall have agreed that during the time this
Lease is in force insurance proceeds and Restoration Award shall be permitted to be used for
restoration in accordance with the provisions of this Lease.

          (c) At any time prior to the expiration of the Term, Tenant agrees, at the election and upon
demand of any owner of the Leased Premises, or of a Lender who has granted non-disturbance to
Tenant pursuant to Paragraph 16 (a) above, to attorn, from time to time, to any such owner or
Lender, upon the terms and conditions of this Lease, for the remainder of the Term. The provisions
of this Paragraph 16(c) shall inure to the benefit of any such owner or Lender, shall apply
notwithstanding that, as a matter of law, this Lease may terminate upon the foreclosure of the
Mortgage, shall be self-operative upon any such demand, and no further instrument shall be required
to give effect to said provisions.

          (d) Each of Tenant and Lender, however, upon demand of the other, hereby agrees to execute,
from time to time, instruments in confirmation of the foregoing provisions of Paragraphs 16(a) and
16(c), reasonably satisfactory to the requesting party acknowledging such subordination,
non-disturbance and attornment as are provided in such subsections and setting forth the terms and
conditions of its tenancy.

          (e) Each of Tenant and Landlord agrees that, if requested by the other, each shall, without
charge, enter into a Subordination, Non-Disturbance and Attornment Agreement in form and substance
substantially as provided in Exhibit E hereto.

     17. Assignment, Subleasing.

          (a) Except as set forth herein, Tenant may assign its interest in this Lease and may sublet
the Leased Premises in whole or in part, from time to time, with prior written notice to Landlord
but without the consent of Landlord; provided, however, in no event may Tenant assign this Lease or
sublease any portion of the Leased Premises to any Person whose property or interests are subject
to being blocked under any Terrorism Laws and/or who is in violation of any Terrorism Laws, and any
such assignment or subletting shall not be effective until the assignee or sublessee has provided
written certification to Landlord that (A) neither such assignee or sublessee nor any Person who
owns directly or indirectly any interest in such
assignee or sublessee is a Person whose property or interests are subject to being blocked
under any of the Terrorism Laws or is otherwise in violation of any Terrorism Laws, and (B) such
assignee or sublessee has taken reasonable measures to assure that no Person who owns directly

 - 22 - 

 

or
indirectly any interest in such assignee or sublessee is a Person whose property or interests are
subject to being blocked under any of the Terrorism Laws or is otherwise in violation of the
Terrorism Laws; provided, however, the covenant contained in this sentence shall not apply to any
Person to the extent that such Person’s interest is in or through a U.S. publicly traded entity.

          (b) Each sublease of the Leased Premises or any part thereof shall be subject and subordinate
to the provisions of this Lease. No assignment or sublease shall affect or reduce any of the
obligations of the assigning Tenant hereunder or of any guarantor of the assigning Tenant’s
obligations hereunder, and all such obligations shall continue in full force and effect as
obligations of a principal and not as obligations of a guarantor, as if no assignment or sublease
had been made and the assigning Tenant and any assignee shall be jointly and severally liable for
all obligations of Tenant pursuant to this Lease. Notwithstanding any assignment or subletting
Tenant shall continue to remain liable and responsible for the payment of the Basic Rent and
Additional Rent and the payment and performance of all its other obligations under this Lease;
provided, however, if the assignee of Tenant’s interest has an investment grade rating by Standard
& Poor’s of not less than BBB- or an investment grade rating by Moody’s of not less than Baa3 (but
in no event less than the related Standard & Poor’s or Moody’s rating of Tenant or of Guarantor at
the time), or equivalent rating of any other nationally recognized statistical rating organization
and is not on credit watch for downgrade, then, Tenant and any guarantor of Tenant’s hereunder
shall be released from all liability and obligation under this Lease arising from and after the
date of assignment upon delivery to Landlord of a validly authorized and executed, enforceable
Instrument of Assumption described below in this Paragraph. No assignment or sublease shall impose
any obligations on Landlord under this Lease except as otherwise provided in this Lease. Tenant
agrees that in the case of an assignment of the Lease, Tenant shall, within thirty (30) days prior
the scheduled commencement date of any such assignment, deliver to Landlord (i) a copy of such
assignment in recordable form and (ii) an agreement executed and acknowledged by the assignee in
recordable form wherein the assignee shall agree to assume and agree to observe and perform all of
the terms and provisions of this Lease on the part of the Tenant to be observed and performed from
and after the date of such assignment. In the case of a sublease, Tenant shall, within thirty
(30) days prior to the scheduled commencement date of such sublease, deliver to Landlord a copy of
such sublease. The failure by Tenant to provide such prior written notice to Landlord shall not
have the effect of voiding such sublease or assignment.

          (c) Upon the occurrence of an Event of Default under this Lease, Landlord shall have the right
to collect and enjoy all rents and other sums of money payable under any sublease of any of the
Leased Premises, and Tenant hereby irrevocably and unconditionally assigns such rents and money to
Landlord, which assignment may be exercised upon and after (but not before) the occurrence of an
Event of Default.

          (d) (i) Landlord agrees for itself, its successors and assigns, promptly upon Tenant’s
request, to enter into a nondisturbance and attornment agreement with any Qualified Subtenant, as
defined below, upon the terms described below, pursuant to which Landlord shall agree, for so long
as such Qualified Subtenant is not in default beyond all
applicable periods of notice and cure under its Qualified Sublease, as defined below, that the
Qualified Sublease shall not be terminated as a result of any termination of this Lease and such
Qualified Subtenant’s use and occupancy of the Leased Premises shall not be disturbed by

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Landlord,
and pursuant to which such Qualified Subtenant shall agree to attorn to Landlord or its successor
as landlord under the Qualified Sublease upon any termination of this Lease. Said agreement shall
further provide that nothing therein contained shall impose any obligation on the Landlord or the
Lender to (A) return or apply any security deposit under such Qualified Sublease, unless such
security deposit shall be transferred and turned over to the Landlord or Lender or their or either
of their successors, (B) expend any sums to make any installations or alterations provided to be
made by the landlord under said Qualified Sublease or reimburse the tenant under said Qualified
Sublease for any installations or alterations made by it, (C) be liable for any act or omission of
Tenant as sublandlord (or any successor to Tenant as sublandlord) or be subject to any offsets or
defense which such Qualified Subtenant might have against Tenant as sublandlord (or any successor
to Tenant as sublandlord), (D) be bound by any rent or additional rent which such Qualified
Subtenant might have paid for more than the current month to any prior landlord, or (E) be bound by
any amendment or modification of the Qualified Sublease made without the prior written consent of
Landlord.

               (ii) Any subtenant under a Qualified Sublease, as defined below, is a “Qualified Subtenant.” A
“Qualified Sublease” shall be any sublease of no less than 300,000 square feet of the Leased
Premises, pursuant to which the subtenant thereunder had, (A) at the time such sublease was entered
into, a Standard & Poor’s investment grade rating of BBB-, or higher or a Moody’s investment grade
rating of Baa3, or higher (or equivalent rating of any other nationally recognized statistical
rating organization) and was not on credit watch and such entity is of no lesser financial quality
than the Tenant at the time of such sublease or (B) in the event such subtenant does not have a
public rating, then such subtenant shall be required to have a “Shadow Rating”, if publicly
available, or in the alternative an equivalent “NAIC Rating” equal to a Standard & Poor’s
investment grade rating of BBB-, or higher or a Moody’s investment grade rating of Baa3, or higher
(or equivalent rating of any other nationally recognized statistical rating organization) or have a
financial condition equal to or better than any publicly traded company with an equivalent
investment grade rating in the same industry or sector; such sublease to be on the identical terms
and conditions of this Lease (except the Basic Rent or Additional Rent (or both) may be higher and
the Qualified Subtenant shall not have a right of first refusal under Section 33 hereof), and for a
term not to exceed the Term of this Lease, and with the Qualified Subtenant not to have any rights
or options in addition to those provided to Tenant under this Lease (and if any such Qualified
Sublease shall include all or part of any Renewal Term or Renewal Terms, then Tenant shall be
conclusively deemed to have irrevocably waived the right to issue a Renewal Term Cancellation
Notice as to such Renewal Term or Renewal Terms, which waiver Tenant will confirm in writing to
Landlord if requested to do so, except that if thereafter such Qualified Sublease shall terminate
prior to its original term and on or before the last day as of which Tenant would otherwise be
entitled to issue a Renewal Term Cancellation Notice as to any Renewal Term originally included
within the term of such Qualified Sublease, then Tenant’s right to issue a Renewal Term
Cancellation Notice as to such Renewal Term and all subsequent Renewal Terms originally falling
within the term of such Qualified Sublease shall be reinstated in accordance with the terms of this
Lease).

          (e) (i) Landlord agrees for itself, its successors and assigns, promptly upon Tenant’s
request, to enter into an agreement with any Qualified Assignee, as defined below, pursuant to
which Landlord shall agree, for so long as such Qualified Assignee is not in default of its
obligations under this Lease, that no defaults or Event of Default shall be deemed to have

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occurred
under this Lease by reason of the occurrence of one or more of the events designated in Paragraphs
19(a)(iii), (iv), (v) or (vi) with respect to any party who was a Tenant under this Lease prior to
the date of the assignment of this Lease to the Qualified Assignee.

               (ii) A “Qualified Assignee” shall be any assignee of the Tenant’s rights, title and interest
under this Lease which, at the time of the assignment to it, had a Standard & Poor’s investment
grade rating of BBB-, or higher, or a Moody’s investment grade rating of Baa3, or higher, (or
equivalent rating of any other nationally recognized statistical rating organization) and is not on
credit watch.

     18. Permitted Contests.

          (a) After prior written notice to Landlord, Tenant shall not be required to (i) pay any
Imposition, (ii) comply with any Legal Requirement, (iii) discharge or remove any lien referred to
in Paragraphs 9 or 12, or (iv) take any action with respect to any violation referred to in
Paragraph 11(b) so long as Tenant shall contest, in good faith and at its expense, the existence,
the amount or the validity thereof, the amount of the damages caused thereby, or the extent of its
or Landlord’s liability therefor, by appropriate proceedings which shall operate during the
pendency thereof to prevent (A) the collection of, or other realization upon, the Imposition or
lien so contested, (B) the sale, forfeiture or loss of any of the Leased Premises, any Basic Rent
or any Additional Rent to satisfy the same or to pay any damages caused by the violation of any
such Legal Requirement or by any such violation, (C) any interference with the use or occupancy of
any of the Leased Premises, (D) any interference with the payment of any Basic Rent or any
Additional Rent, and (E) the cancellation of any fire or other insurance policy. Nothing herein
shall permit Tenant to operate in non-compliance with any Law.

          (b) In no event shall Tenant pursue any contest with respect to any Imposition, Legal
Requirement, lien, or violation, referred to above in such manner that exposes Landlord or Lender
to (i) criminal liability, penalty or sanction, (ii) any civil liability, penalty or sanction for
which Tenant has not made provisions reasonably acceptable to Landlord and Lender or (iii)
defeasance of its interest in the Leased Premises.

          (c) Tenant agrees that each such contest shall be promptly and diligently prosecuted to a
final conclusion, except that Tenant shall have the right to attempt to settle or compromise such
contest through negotiations. Tenant shall pay and save Lender and Landlord harmless against any
and all losses, judgments, decrees and costs (including all attorneys’ fees and expenses) in
connection with any such contest and shall, promptly after the final determination of such contest,
fully pay and discharge the amounts which shall be levied, assessed, charged or imposed or be
determined to be payable therein or in connection therewith, together with all penalties, fines,
interest, costs and expenses thereof or in connection therewith, and perform all acts the
performance of which shall be ordered or decreed as a result thereof.

     19. Conditional Limitations; Default Provisions.

          (a) Events of Default. Tenant shall be in default under this Lease if any one or more
of the following events (referred to herein as “Events of Default” or “Event of Default”) shall
occur:

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               (i) if default shall be made in the procurement or maintenance of any insurance required under
this Lease; or

               (ii) if default shall be made in the payment when due of any Basic Rent or Additional Rent and
such default shall continue for ten days after Landlord gives Tenant written notice of such
nonpayment; or

               (iii) if default shall be made in the payment of any other sum payable under this Lease and
such default shall continue for 15 days after Landlord gives Tenant written notice of nonpayment;
or

               (iv) if default shall be made by Tenant in the performance of or compliance with any of the
terms of this Lease other than those referred to in any of the other subparagraphs in this
Paragraph, and such default shall continue for a period of 60 days after Landlord gives Tenant
written notice thereof (but Tenant will not be deemed to be in default if Tenant commences to
remedy the default within the 60-day period and proceeds to cure with due diligence; provided,
however, in no event shall such cure period be extended to more than 120 days after Landlord gives
Tenant written notice of the default); or

               (v) if Tenant or any guarantor of Tenant’s obligations under this Lease (each, if any, a
“Guarantor”) shall file a voluntary petition in bankruptcy or shall be adjudicated a bankrupt or
insolvent, or shall file any petition or answer seeking any reorganization, arrangement,
composition or readjustment, or similar relief for itself under any present or future federal,
state or other statute, law or regulation, or shall seek or consent to or acquiesce in the
appointment of any trustee, receiver or liquidator of itself or of all or any substantial part of
its or of the property, or shall take any general assignment for the benefit of creditors or shall
admit in writing its inability to pay debts generally as they become due; or

               (vi) if a petition shall be filed against Tenant or any Guarantor seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar relief under any
present or future federal, state or other statute, law or regulation, and shall remain undismissed
or unstayed for a period of 60 days, or if in connection with any such event any trustee, receiver
or liquidator of Tenant or such Guarantor, or of all or any substantial part of any of its
property, shall be appointed without its consent or acquiescence and such appointment shall remain
unvacated or unstayed for a period of 30 days; or

               (vii) any Guarantor shall fail to perform such Guarantor’s obligations under such Guaranty; or

               (viii) if this Lease or the estate of Tenant hereunder shall be transferred to or shall pass
to or devolve upon any other person except in a manner expressly permitted herein.

     All of the time periods set forth in this Paragraph 19(a) shall be in lieu of and not in
addition to the notice required by California Code of Civil Procedure Section 1161.

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          (b) If any Event of Default shall have occurred, Landlord shall have the right at its option,
then or at any time thereafter, to do any one or more of the following without demand upon or
notice to Tenant:

               (i) Landlord may give Tenant notice (following the occurrence of an Event of Default) of
Landlord’s intention to terminate this Lease on a date specified in such notice (which date shall
be no sooner than thirty (30) days after the date of the notice). Upon the date therein specified,
unless the Event of Default for which the termination is effected has been cured by Tenant, the
Term and the estate hereby granted and all rights of Tenant hereunder shall expire and terminate as
if such date were the date herein above fixed for the expiration of the Term, but Tenant shall
remain liable for all its obligations hereunder through the date herein above fixed for the
expiration of the Term, including its liability for Basic Rent and Additional Rent as hereinafter
provided.

               (ii) Landlord may, whether or not the Term of this Lease shall have been terminated pursuant
to clause (i) above give Tenant notice (following the occurrence of an Event of Default) to
surrender the Leased Premises to Landlord on a date specified in such notice (which date shall be
no sooner than thirty (30) days after the date of the notice), at which time Tenant shall surrender
and deliver possession of the Leased Premises to Landlord unless the Event of Default for which the
termination is effected has been cured by Tenant. Upon or at any time after taking possession of
the Leased Premises, Landlord may remove any persons or property therefrom. Landlord shall be
under no liability for or by reason of any such entry, repossession or removal. No such entry or
repossession shall be construed as an election by Landlord to terminate this Lease unless Landlord
gives a written notice of such intention to Tenant pursuant to clause (i) above.

               (iii) After repossession of any of the Leased Premises pursuant to clause (ii) above, whether
or not this Lease shall have been terminated pursuant to clause (i) above, Landlord may relet the
Leased Premises or any part thereof to such tenant or tenants for such term or terms (which may be
greater or less than the period which would otherwise have constituted the balance of the Term) for
such rent, on such conditions (which may include concessions or free rent) and for such uses as
Landlord, in its reasonable discretion, may determine; and Landlord shall collect and receive any
rents payable by reason of such reletting. The rents received on such reletting shall be applied
(A) first to the reasonable and actual expenses of such reletting and collection, including without
limitation necessary renovation and alterations of the Leased Premises, reasonable and actual
attorneys’ fees and any reasonable and actual real estate commissions paid, and (B) thereafter
toward payment of all sums due or to become due Landlord hereunder. If a sufficient amount to pay
such expenses and sums shall not be realized or secured, then Tenant shall pay Landlord any such
deficiency monthly, and Landlord may bring an action therefor as such monthly deficiency shall
arise. Landlord shall not, in any event, be required to pay Tenant any sums received by Landlord
on a reletting of the Leased Premises in excess of the rent provided in this Lease, but such excess
shall reduce any accrued present or future obligations of Tenant hereunder. Landlord’s re-entry
and reletting of the Leased Premises without termination of this Lease shall not preclude Landlord
from
subsequently terminating this Lease as set forth above. Landlord may make such Alterations as
Landlord in
its reasonable discretion may deem advisable. Tenant agrees to pay Landlord, as
Additional Rent, immediately upon demand, all reasonable expenses incurred by Landlord in
obtaining
possession, in performing Alterations and in reletting any of the Leased Premises, including fees
and commissions of attorneys, architects, agents and brokers.

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               (iv) If Tenant shall fail to make payment of any installment of Basic Rent or any Additional
Rent within the time frames provided after written notice is given by Landlord or Lender (or
Lender’s servicer or other designee of Lender) to Tenant that the same is overdue, Tenant shall pay
to Landlord, a sum equal to the lesser of 12% or the highest rate allowed by law, of the amount
unpaid (the “Default Rate”) computed from the date such payment of Basic Rent or Additional Rent
was due to and including the date of payment.

               (v) Landlord may exercise any other right or remedy now or hereafter existing by law or in
equity, including, without limitation, the remedies provided for in California Civil Code Section
1951.4, which provides, in effect, that a lessor may continue a lease in effect after the lessee’s
breach and abandonment and may recover rent as it becomes due, if the lessee has the right to
sublet or assign, subject only to reasonable limitations.

               (vi) In the event of any expiration or termination of this Lease or repossession of any of the
Leased Premises by reason of the occurrence of an Event of Default, Tenant shall pay to Landlord
Basic Rent, Additional Rent and all other sums required to be paid by Tenant to and including the
date of such expiration, termination or repossession and, thereafter, Tenant shall, until the end
of what would have been the Term (without giving effect to any future Renewal Term) in the absence
of such expiration, termination or repossession, and whether or not any of the Leased Premises
shall have been relet, be liable to Landlord for and shall pay to Landlord as liquidated and agreed
current damages: (i) Basic Rent, Additional Rent and all other sums which would be payable under
this Lease by Tenant in the absence of such expiration, termination or repossession, less (ii) the
net proceeds, if any, of any reletting pursuant to Paragraph 19(b) (iii), after deducting from such
proceeds all of Landlord’s reasonable expenses in connection with such reletting (including,
without limitation, all reasonable repossession costs, brokerage commissions, legal expenses,
attorneys’ fees, employees’ expenses, costs of Alteration and expenses of preparation for
reletting); together with interest thereon at the Default Rate until paid. Tenant hereby agrees to
be and remain liable for all sums aforesaid and Landlord may recover such damages from Tenant and
institute and maintain successive actions or legal proceedings against Tenant for the recovery of
such damages. Nothing herein contained shall be deemed to require Landlord to wait to begin such
action or other legal proceedings until the date when the Term would have expired by limitation had
there been no such Event of Default.

               (vii) Upon occurrence of an Event of Default, Landlord may give Tenant notice of Landlord’s
intention to terminate this Lease on a date specified in such notice (which date shall be no sooner
than thirty (30) days after the date of the notice). Upon the date therein specified, unless the
Event of Default for which the termination is effected has been cured by Tenant, Landlord may
terminate this Lease, in which event Tenant shall immediately surrender the Leased Premises to
Landlord, and if Tenant fails to do so, Landlord may, without prejudice to any other remedy which
it may have for possession or arrearages in rent, enter upon
and take possession of the Leased Premises by process of law and expel or remove Tenant and
any other person who may be occupying the Leased Premises or any part thereof, without being liable
for prosecution or any claim or damages therefor; and in the event of such termination of this
Lease, Landlord may recover from Tenant the following:

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          (A) the worth at the time of award of any unpaid Basic Rent, Additional Rent and all other
sums required to be paid by Tenant to and including the date of such termination; plus

          (B) the worth at the time of award of the amount by which the unpaid Basic Rent, Additional
Rent and all other sums required to be paid by Tenant which would have been earned after
termination until the time of award exceeds the amount of such rental loss that could have been
reasonably avoided; plus

          (C) the worth at the time of award of the amount by which the unpaid Basic Rent, Additional
Rent and all other sums required to be paid by Tenant for the balance of the Term after the time of
award exceeds the amount of such rental loss that could have been reasonably avoided; plus

          (D) any other amount necessary to compensate Landlord for all the detriment proximately caused
by Tenant’s failure to perform its obligations under this Lease or which in the ordinary course of
things would be likely to result therefrom, specifically including but not limited to, brokerage
commissions and advertising expenses incurred, expenses of remodeling the Leased Premises or any
portion thereof for a new tenant, whether for the same or a different use, and any special
concessions made to obtain a new tenant; and

          (E) all reasonable costs and expenses of collection, including reasonable attorneys’ fees.

As used in subparagraphs (A), (B) and (C) above, the “worth at the time of award” shall be computed
by allowing interest at the Default Rate on all overdue amounts due Landlord, but in no case
greater than the maximum amount of such interest permitted by law. As used in subparagraph (C)
above, the “worth at the time of award” shall be computed by discounting the amounts described in
subparagraph (C) at an annual discount rate of 7%.

          (c) At any time after such expiration or sooner termination of this Lease pursuant to
Paragraph 19 or pursuant to Law or if Landlord shall have reentered the Leased Premises, as the
case may be, whether or not Landlord shall have recovered any amounts under Paragraph 19(b)(iii) or
19(b)(vi), Landlord shall be entitled to recover from Tenant and Tenant shall pay to Landlord, on
demand, as the entire damages for Tenant’s default, the amount by which the Basic Rent, and all
Additional Rent reserved hereunder for the unexpired portion of the Term demised herein (without
giving effect to any future Renewal Term) as if the Lease had not expired or been terminated
exceeds the then fair and reasonable rental value of the Leased Premises for the same period,
discounted to present worth at the annual rate of seven percent (7%), minus any such monthly
deficiencies previously recovered from Tenant under Paragraph 19(b)(iii) if applicable to such
period, plus interest on the amount owing from time to time at the Default Rate until paid.

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          (d) If any Law governing a proceeding in which the damages provided for in Paragraph 19(c) are
to be proved shall validly limit the amount thereof to an amount less than the
amount above agreed
upon, Landlord shall be entitled to the maximum amount allowable under such Law.

     20. Additional Rights of Landlord and Tenant.

          (a) No right or remedy conferred upon or reserved to Landlord in this Lease is intended to be
exclusive of any other right or remedy; and each and every right and remedy shall be cumulative and
in addition to any other right or remedy contained in this Lease. No delay or failure by Landlord
or Tenant to enforce its rights under this Lease shall be construed as a waiver, modification or
relinquishment thereof. In addition to the other remedies provided in this Lease, Landlord and
Tenant shall be entitled, to the extent permitted by applicable law, to injunctive relief in case
of the violation or attempted or threatened violation of any of the provisions of this Lease, or to
specific performance of any of the provisions of this Lease.

          (b) Tenant hereby waives and surrenders for itself and all those claiming under it, including
creditors of all kinds, any right and privilege which it or any of them may have under any present
or future Law to redeem any of the Leased Premises or to have a continuance of this Lease after
termination of this Lease or of Tenant’s right of occupancy or possession pursuant to any court
order or any provision hereof.

          (c) Landlord hereby waives any right to distrain or levy upon Trade Fixtures or any property
of Tenant and any Landlord’s lien or similar lien upon Trade Fixtures and any other property of
Tenant regardless of whether such lien is created or otherwise. Landlord agrees at the request of
Tenant, to execute a waiver of any Landlord’s or similar lien for the benefit of any present or
future holder of a security interest in or lessor of any of Trade Fixtures or any other personal
property of Tenant.

          (d) Landlord acknowledges and agrees in the future to acknowledge (in a written form
reasonably satisfactory to Tenant) to such persons and entities at such times and for such purposes
as Tenant may reasonably request that the Trade Fixtures are Tenant’s property and not part of the
Improvements (regardless of whether or to what extent such Trade Fixtures are affixed to the
Improvements) or otherwise subject to the terms of this Lease.

          (e) Each of Tenant and Landlord (herein called “Paying Party”) agrees to pay to the other
party (herein called “Demanding Party”) any and all reasonable costs and expenses incurred by the
Demanding Party in connection with any litigation or other action instituted by the Demanding Party
to enforce the obligations of the Paying Party under this Lease, to the extent that the Demanding
Party has prevailed in any such litigation or other action. Any amount payable by Tenant to
Landlord pursuant to this Paragraph 20(e) shall be due and payable by Tenant to Landlord as
Additional Rent. No sum payable by Landlord to Tenant under this subparagraph will be payable or
recoverable from any sums pledged or assigned (or intended to have been pledged or assigned) by
Landlord to Lender, Tenant’s right to recover such sums from Landlord being subordinate to the
rights of Lender, such sums only being recoverable after payment to Lender in full of the Loan as
constituted on the date hereof. As used in this Paragraph, “costs and expenses” shall include,
without limitation, reasonable attorneys’ fees at
trial, on appeal and on any petition for review, and in any proceeding in bankruptcy, in
addition to all other sums provided by Law.

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     21. Notices. All notices, demands, requests, consents, approvals, offers, statements and
other instruments or communications required or permitted to be given pursuant to the provisions of
this Lease (collectively “Notice” or “Notices”) shall be in writing and shall be deemed to have
been given for all purposes (i) three (3) days after having
been sent by United States mail, by
registered or certified mail, return receipt requested, postage prepaid, addressed to the other
party at its address as stated below, or (ii) one (1) day after having been sent by Federal
Express, United Parcel or other nationally recognized air courier service.

     To the Addresses stated below:

	 	 	 
	 

	 	If to Landlord:
	 
	 	 
	 

	 	BPVisalia LLC
	 

	 	c/o GE Commercial Finance Business Property
	 

	 	Corporation
	 

	 	Suite 500, 10900 NE 4th Street
	 

	 	Bellevue, WA 98004
	 

	 	Attn: Structured Real Estate
	 
	 	 
	 

	 	With a copy to:
	 
	 	 
	 

	 	GE Commercial Finance Business Property Corporation
	 

	 	Suite 500, 10900 NE 4th Street
	 

	 	Bellevue, WA 98004
	 

	 	Attn: Bill Moore, Esq., General Counsel
	 
	 	 
	 

	 	If to Tenant:
	 
	 	 
	 

	 	c/o Jo-Ann Stores, Inc.
	 

	 	5555 Darrow Road
	 

	 	Hudson, OH 44236
	 

	 	Attn: General Counsel
	 
	 	 
	 

	 	With a copy to:
	 
	 	 
	 

	 	Vice President, Transportation and Logistics and

	 

	 	Treasurer

If any Lender shall have advised Tenant by Notice in the manner aforesaid that it is the holder of
a Mortgage and states in said Notice its address for the receipt of Notices, then simultaneously
with the giving of any Notice by Tenant to Landlord, Tenant shall send a copy of such Notice to
Lender in the manner aforesaid. For the purposes of this Paragraph 21, any party may substitute
its address by giving fifteen days’ notice to the other party in the manner provided above. Any
Notice may be given on behalf of any party by its counsel.

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     22. Estoppel Certificates. Landlord and Tenant shall at any time and from time to
time, upon not less than twenty days’ prior written request by the other, execute, acknowledge and
deliver to the other a statement in writing, certifying (i) that this Lease is unmodified and in
full effect (or, if there have been modifications, that this Lease is in full effect as modified,
setting forth such modifications), (ii) the dates to which Basic Rent, payable hereunder has been
paid, (iii) that to the knowledge of the signer of such certificate no default by either Landlord
or Tenant exists hereunder or specifying each such default of which the signer may have knowledge,
(iv) the remaining Term hereof, (v) with respect to a certificate signed on behalf of Tenant, that
to the knowledge of the signer of such certificate, there are no proceedings pending or threatened
against Tenant before or by any court or administrative agency which if adversely decided would
materially and adversely affect the financial condition and operations of Tenant or if any such
proceedings are pending or threatened to said signer’s knowledge, specifying and describing the
same , and (vi) such other matters as may reasonably be requested by the party requesting the
certificate. It is intended that any such statements may be relied upon by Lender, the recipient
of such statements or their assignees or by any prospective purchaser, assignee or subtenant of the
Leased Premises.

     23. Surrender and Holding Over.

          (a) Upon the expiration or earlier termination of this Lease, Tenant shall peaceably leave and
surrender the Leased Premises (except as to any portion thereof with respect to which this Lease
has previously terminated) to Landlord. Tenant may remove from the Leased Premises on or prior to
such expiration or earlier termination the Trade Fixtures and personal property which is owned by
Tenant, and Tenant at its expense shall, on or prior to such expiration or earlier Termination,
repair any damage caused by such removal. Trade Fixtures and personal property not so removed at
the end of the Term or within thirty days after the earlier termination of the Term for any reason
whatsoever shall become the property of Landlord, and Landlord may thereafter cause such property
to be removed from the Leased Premises. The cost of removing and disposing of such property and
repairing any damage to any of the Leased Premises caused by such removal shall be borne by Tenant.
Landlord shall not in any manner or to any extent be obligated to reimburse Tenant for any
property which becomes the property of Landlord as a result of such expiration or earlier
termination.

          (b) Any holding over by Tenant of the Leased Premises after the expiration or earlier
termination of the Term of this Lease or any extensions thereof, with the consent of Landlord,
shall operate and be construed as tenancy from month to month only, at one hundred twenty-five
percent (125%) of the Basic Rent reserved herein, and upon the same terms and conditions as
contained in this Lease. Notwithstanding the foregoing, any holding over without Landlord’s
consent shall entitle Landlord, in addition to collecting Basic Rent at a rate of one hundred
twenty-five percent (125%) thereof, to exercise all rights and remedies provided by law or in
equity, including the remedies of Paragraph 19 (b). Nothing contained in this Paragraph 23(b) shall
be construed as consent by Landlord to any holding over by Tenant, and Landlord expressly reserves
the right to require Tenant to surrender possession of the Leased Premises to Landlord as provided
in this Lease upon the expiration or other termination of this
Lease. The provisions of this Paragraph 23(b) shall not be deemed to limit or constitute a
waiver of any other rights or remedies of Landlord provided herein or at law.

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     24. No Merger of Title. There shall be no merger of this Lease nor of the leasehold
estate created by this Lease with the fee estate in or ownership of any of the Leased Premises by
reason of the fact that the same person, corporation, firm or other entity may acquire or hold or
own, directly or indirectly, (a) this Lease or the leasehold estate created by this Lease or any
interest in this Lease or in such leasehold estate and (b) the fee estate or ownership of any of
the Leased Premises or any other leasehold interest therein or any interest in such fee estate or
ownership or leasehold estate. No such merger shall occur unless and until all persons,
corporations, firms and other entities having any interest in (i) this Lease or the leasehold
estate created by this Lease and (ii) the fee estate in or ownership of the Leased Premises or
other leasehold interest thereunder or any part thereof sought to be merged shall join in a written
instrument effecting such merger and shall duly record the same.

     25. Definition of Landlord.

          (a) Anything contained herein to the contrary notwithstanding, any claim based on or in
respect of any liability of Landlord under this Lease shall be enforced only against the Landlord’s
interest in the Leased Premises and shall not be enforced against the Landlord individually or
personally or against any officer, director, member, shareholder or partner of Landlord.

          (b) The term “Landlord” as used in this Lease so far as covenants or obligations on the part
of Landlord are concerned, shall be limited to mean and include only the owner or owners of the
Leased Premises or holder of the Mortgage in possession at the time in question of the Leased
Premises and in the event of any transfer or transfers of the title of the Leased Premises, the
Landlord herein named (and in case of any subsequent transfers or conveyances, the then grantor)
shall be automatically freed and relieved from and after the date of such transfer and conveyance
of all personal liability as respects the performance of any covenants or obligations on the part
of Landlord contained in this Lease thereafter to be performed.

     26. Hazardous Substances.

          (a) Tenant agrees that it will not on, about, or under the Leased Premises, make, release,
treat or dispose of any “hazardous substances” as that term is defined in the Comprehensive
Environmental Response, Compensation and Liability Act, and the rules and regulations promulgated
pursuant thereto, as from time to time amended, 42 U.S.C. § 9601 et seq. (the “Act”); but the
foregoing shall not prevent the use of any hazardous substances in accordance with applicable Laws
and regulations. Tenant represents and warrants that it will at all times comply with the Act and
any other federal, state or local Laws, rules or regulations governing “Hazardous Materials”.
“Hazardous Materials” as used herein shall mean all chemicals, petroleum, crude oil or any fraction
thereof, hydrocarbons, polychlorinated biphenyls (PCBs), asbestos, asbestos-containing materials
and/or products, urea formaldehyde, or any substances which are classified as “hazardous” or
“toxic” under the Act; hazardous waste as defined under the Solid Waste Disposal Act, as amended 42
U.S.C. § 6901 et seq.; air pollutants
regulated under the Clean Air Act, as amended, 42 U.S.C. § 7401, et seq.; pollutants as
defined under the Clean Water Act, as amended, 33 U.S.C. § 1251, et seq., any pesticide as defined
by Federal Insecticide, Fungicide, and Rodenticide Act, as amended, 7 U.S.C. § 136, et seq., any

 - 33 - 

 

hazardous chemical substance or mixture or imminently hazardous substance or mixture regulated by
the Toxic Substances Control Act, as amended, 15 U.S.C. § 2601, et Seq., any substance listed in
the United States Department of Transportation Table at 45 CFR 172.101; any chemicals included in
regulations promulgated under the above listed statutes; any explosives, radioactive material, and
any chemical or other substance regulated by federal, state or local statutes similar to the
federal statutes listed above and regulations promulgated under such federal, state or local
statutes. As defined in Paragraph 26(a), Hazardous Materials shall also include all substances
identified as hazardous or toxic under the California Health & Safety Code (“H&S Code”) Section
25100, et seq. (Hazardous Waste Control); H&S Code Section 25300, et seq. (the Hazardous Substance
Account Act); H&S Code Section 25404 et seq. (Unified Hazardous Waste and Hazardous Materials
Management Regulatory Program); H&S Code Section 25531 et seq. (Hazardous Materials Management);
H&S Code Section 18901 et seq. (California Building Standards); California Water Code Section
13000, et seq. (the Porter-Cologne Water Quality Control Act); California H&S Code Section 26100,
et seq.(Toxic Mode Protection Act of 2001); and H&S Code Section 25915 et seq. (Asbestos
Notification).

          (b) To the extent required by the Act and/or any federal, state or local Laws, rules or
regulations governing Hazardous Materials, Tenant shall remove any hazardous substances (as defined
in the Act) and Hazardous Materials (as defined above) whether now or hereafter existing on the
Leased Premises and whether or not arising out of or in any manner connected with Tenant’s
occupancy of the Leased Premises during the Term. In addition to, and without limiting Paragraph
10 of this Lease Tenant shall and hereby does agree to defend, indemnify and hold Lender and
Landlord, their officers, directors, shareholders, partners, beneficial owners, trustees, members,
managers and employees, harmless from and against any and all causes of actions, suits, demands or
judgments of any nature whatsoever, losses, damages, penalties, expenses, fees, claims, costs
(including response and remedial costs), and liabilities, including, but not limited to, reasonable
attorneys’ fees and costs of litigation, arising out of or in any manner connected with (i) the
violation of any applicable federal, state or local environmental Law with respect to the Leased
Premises or Tenant’s or any other person’s or entity’s prior ownership of the Leased Premises; (ii)
the “release” or “threatened release” of or failure to remove, as required by this Paragraph 26,
“hazardous substances” (as defined in the Act) and Hazardous Materials (as defined above) at or
from the Leased Premises or any portion or portions thereof, including any past or current release
and any release or threatened release during the initial term and any extension or Renewal Term
whether or not arising out of or in any manner connected with Tenant’s occupancy of the Leased
Premises during the initial term or any extension or Renewal Term. Claims may be asserted under
this indemnification after the expiration or termination of this Lease, so long as the claim arose
due to an act or omission occurring prior to the expiration or termination of this Lease.

          (c) The Tenant agrees that it will not install any underground storage tank at the Leased
Premises without specific, prior written approval from the Landlord and Lender. The Tenant agrees
that it will not store combustible or flammable materials on the Leased Premises in violation of
the Act or any other federal, state or local Laws, rules or regulations governing Hazardous
Materials.

     27. Entry by Landlord. Landlord and its authorized representatives shall have the
right upon reasonable notice (which shall be not less than five (5) days except in the case of

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emergency) to enter the Leased Premises at all reasonable business hours (and at all other times in
the event of an emergency): (a) for the purpose of inspecting the same or for the purpose of doing
any work under Paragraph 11(c), and may take all such action thereon as may be necessary or
appropriate for any such purpose (but nothing contained in this Lease or otherwise shall create or
imply any duty upon the part of Landlord to make any such inspection or do any such work), and (b)
for the purpose of showing the Leased Premises to prospective purchasers and mortgagees and, at any
time within six (6) months prior to the expiration of the Term of this Lease for the purpose of
showing the same to prospective tenants. No such entry shall constitute an eviction of Tenant but
any such entry shall be done by Landlord in such reasonable manner as to minimize any disruption of
Tenant’s business operation.

     28. Statements. Tenant shall submit to Landlord and Lender, when filed with the
Securities and Exchange Commission, copies of the Forms 10Q and 10K of Guarantor. If at any time
Guarantor is no longer a public company, Tenant shall submit to Landlord and Lender or their
designee (a) any financial statements of Guarantor which are provided by Guarantor to its lenders,
and (b) the annual audited financial report and quarterly unaudited financial reports within one
hundred twenty (120) days following the close of each fiscal year (in the case of annual reports)
or fiscal quarter (in the case of quarterly reports) of Guarantor. If Guarantor shall have been
released from liability hereunder, then the then Tenant hereunder (or the guarantor of its
obligations hereunder, if any) shall provide to Landlord an annual audited financial report and
quarterly unaudited financial reports (including, income and expense statement and balance sheet)
within one hundred twenty (120) days following the close of the quarterly or annual (as the case
may be) fiscal period in question. Notwithstanding the foregoing, neither Tenant nor Guarantor nor
any successor Tenant or guarantor, if any shall be required to submit such statements if on the
applicable delivery date thereof such statements shall be available on EDGAR, or any successor to
EDGAR.

     29. No Usury. The intention of the parties being to conform strictly to the
applicable usury laws, whenever any provision herein provides for payment by Tenant to Landlord of
interest at a rate in excess of the legal rate permitted to be charged, such rate herein provided
to be paid shall be deemed reduced to such legal rate.

     30. Separability. Each and every covenant and agreement contained in this Lease is,
and shall be construed to be, a separate and independent covenant and agreement, and the breach of
any such covenant or agreement by Landlord shall not discharge or relieve Tenant from its
obligation to perform the same. If any term or provision of this Lease or the application thereof
to any provision of this Lease or the application thereof to any person or circumstances shall to
any extent be invalid and unenforceable, the remainder of this Lease, or the application of such
term or provision to person or circumstances other than those as to which it is invalid or
unenforceable, shall not be affected thereby, and each term and provision of this Lease shall
be valid and shall be enforced to the extent permitted by law.

     31. Miscellaneous.

          (a) The paragraph headings in this Lease are used only for convenience in finding the subject
matters and are not part of this Lease or to be used in determining the intent of the parties or
otherwise interpreting this Lease.

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          (b) As used in this Lease the singular shall include the plural as the context requires and
the following words and phrases shall have the following meanings: (i) “including” shall mean
“including but not limited to”; (ii) “provisions” shall mean “provisions, terms, agreements,
covenants and/or conditions”; (iii) “lien” shall mean “lien, charge, encumbrance, title retention
agreement, pledge, security interest, mortgage and/or deed of trust”; and (iv) “obligation” shall
mean “obligation, duty, agreement, liability, covenant or condition”.

          (c) Any act which Landlord is permitted to perform under this Lease may be performed at any
time and from time to time by Landlord or any person or entity designated by Landlord. Any act
which Tenant is required to perform under this Lease shall be performed at Tenant’s sole cost and
expense.

          (d) This Lease may be modified, amended, discharged or waived only by an agreement in writing
signed by the party against whom enforcement of any such modification, amendment, discharge or
waiver is sought.

          (e) The covenants of this Lease shall run with the Land and bind Tenant, the successors and
assigns of Tenant and all present and subsequent subtenants of and holders of encumbrances upon any
of the Leased Premises, and shall inure to the benefit of and bind Landlord, its successors and
assigns.

          (f) This Lease will be simultaneously executed in several counterparts, each of which when so
executed and delivered shall constitute an original, fully enforceable counterpart for all
purposes.

          (g) This Lease shall be governed by and construed according to the laws of the State in which
the Leased Premises is located.

          (h) Wherever the consent or approval of Landlord is required hereunder, Landlord agrees that
it will not unreasonably withhold or delay such consent or approval.

     32. Additional Rent. The term “Additional Rent” as used herein includes all amounts,
costs, expenses, liabilities and obligations (including but not limited to Tenant’s obligation to
pay any Net Awards or Purchase Price hereunder) which Tenant is required to pay pursuant to the
terms of this Lease other than Basic Rent.

     33. Right of First Refusal. Except in transactions memorialized by an executed agreement of purchase and sale prior to
the end of the eighteenth month following the Commencement Date, Landlord shall not sell or convey
or agree to sell or convey the Leased Premises or any part thereof without first having complied
with the requirements of this Paragraph 33. If after the end of the eighteenth month following the
Commencement Date, Landlord shall desire to sell or convey all or any portion or portions of the
Leased Premises, Landlord shall obtain from a third party a bona fide arms’ length written offer
(the “Offer”), acceptable to Landlord, to purchase all or such portion of the Leased Premises; and
Landlord shall submit a written copy of the Offer to Tenant and shall give Tenant fifteen (15)
calendar days within which to elect to purchase the portion of the Leased Premises which is the
subject of the Offer (herein called the “Subject Premises”) on the precise terms and conditions of
the Offer (except that if the Offer shall be in whole or in part for consideration other than cash,
Tenant

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shall have the right to pay in cash the fair market value of such non-cash consideration).
If Tenant elects to so purchase the Subject Premises, Tenant shall give to Landlord written notice
thereof (“Acceptance Notice”) and closing shall be held within thirty (30) days after the date of
the Acceptance Notice, whereupon Landlord shall convey the Subject Premises to Tenant. At closing
Landlord shall deliver to Tenant a special warranty deed (or local equivalent) as to the Subject
Premises, sufficient to convey to Tenant fee simple title to the Subject Premises free and clear of
all liens, restrictions and encumbrances, except for the Permitted Encumbrances, liens or
encumbrances created, suffered or consented to in writing by Tenant or arising by reason of the
failure of Tenant to have observed or performed any term, covenant or agreement herein to be
observed or performed by Tenant, the lien of any Impositions then affecting the Leased Premises,
this Lease and, if the Subject Premises are to be conveyed subject to the outstanding balance of
the Loan, the Mortgage and all other Loan documents. This right of first refusal shall continue as
to all portions of the Leased Premises until such time as such portions shall have been sold by
Landlord to the party making the Offer or its assignee(s); provided, however, this right of first
refusal shall not be transferable by Tenant other than to an affiliate of Tenant that becomes the
tenant hereunder. In the event Tenant shall elect not to so purchase the Subject Premises,
Landlord may thereafter sell the Subject Premises which are the subject of the Offer only to the
party making the Offer or its assignee(s) and only in accordance with the terms thereof, unless a
further Offer is submitted to Tenant in accordance with this Paragraph 33 (except that Landlord may
negotiate a five percent (5%) price reduction from that set forth in the Offer and an extension of
the closing date by six (6) months from that set forth in the Offer without having to re-offer the
Leased Premises to Tenant). To prevent Landlord from defeating the rights of Tenant under this
Paragraph 33, Landlord agrees that Landlord will at no time following the eighteenth month
following the Commencement Date accept an offer to purchase all or any portion of the Leased
Premises together with any other property (except other property which is leased to Tenant or an
affiliate of Tenant) unless a separate purchase price is specified for the Leased Premises which
bears the same relationship to the total purchase price in such offer as the fair market value of
the Leased Premises bears to the fair market value of all property included in such offer and such
offer is otherwise structured so that Tenant may accept as to the Leased Premises only. In no
event shall the provisions of this Paragraph 33 or the rights and privileges of Tenant under this
Paragraph 33 be construed as limiting in any manner any other rights granted elsewhere in this
Lease Agreement to Tenant. Notwithstanding anything to the contrary herein, the provisions of this
Paragraph 33 shall not apply to (i) any sale or conveyance of the Leased Premises in foreclosure,
trustee’s sale, (or similar proceeding) of a bona-fide mortgage or deed of trust or to any
conveyance in lieu of foreclosure or in lieu of
trustee’s sale of such a mortgage or deed of trust or to any other succession of Lender or its
designee to ownership or transfer after foreclosure or deed-in-lieu to any affiliate of Lender,
(ii) any sale, conveyance, alienation, mortgage, encumbrance, pledge or transfer of the beneficial
ownership interest, membership interest or other equity interest in Landlord, or the change of the
trustee, manager or other controlling person of the Landlord or (iii) any mortgage, pledge or
encumbrance of Landlord’s fee interest in the Leased Premises.

     If Landlord shall obtain an Offer with respect to a sale or conveyance of all or any portion
of the Leased Premises, and sells the Leased Premises (to Tenant or anyone else) Tenant hereby
acknowledges and consents as follows: (i) any such sale or conveyance during any period in which
the Loan may not be prepaid or defeased, as the case may be, shall be subject to the outstanding
balance of the Loan, and, if Tenant shall be entitled to, and shall, exercise its

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rights under this
Paragraph 33, the Loan, Note, Mortgage and other Loan documents will be assumed by Tenant, and the
lien of the Mortgage may not be released during such period; (ii) such sale shall be in accordance
with and subject to the terms and provisions of the Note and Mortgage, whether such purchase
contemplates the purchase of the Leased Premises subject to the lien of the Mortgage or for a
release of the lien of the Mortgage; and (iii) if the lien of the Mortgage is not released in
connection with such sale of the Leased Premises, and if Tenant acquires the Leased Premises, no
merger of title shall occur and this Lease and the Guaranty of this Lease will remain in full force
and effect in accordance with their terms.

     If Tenant shall have agreed to purchase the Subject Premises pursuant to an Offer under which
the third party offeror was to acquire the Subject Premises under and subject to the lien of the
Mortgage, and if such purchase by Tenant of the Subject Premises shall occur at a time when the
Loan may be prepaid or defeased, as the case may be, Tenant may purchase the Subject Premises for
cash free and clear of the Mortgage but only if (i) the cash portion of the Offer is increased by
an amount equal to the principal and interest secured by the Mortgage, and (ii) Tenant pays (in
addition to the purchase price) all prepayment premiums or defeasance deposits, yield maintenance
amounts, satisfaction fees and other sums which become owing as a result of such prepayment or
defeasance, as the case may be; all to the end and effect that Landlord will net the same amount as
Landlord would have netted had the Subject Premises been sold under and subject to the lien of the
Mortgage, pursuant to the Offer.

     The rights and obligations of this Section 33 apply only to the original Tenant under this
Lease and any affiliate of Tenant that becomes tenant hereunder and any attempted assignment or
transfer by the original Tenant shall be void and of no force or effect.

     34. Disclaimer. For avoidance of doubt, the parties hereby confirm that Tenant
has no duty to occupy the Leased Premises or to operate any business in the Leased Premises, and
that there is no restriction under this Lease on the location of places of business by Tenant, its
sublessors, assigns or subtenants, even if such a place or places of business compete with a
business operated in the Leased Premises. Notwithstanding the foregoing, Tenant agrees to comply
with all of its Obligations hereunder during the entire Lease Term.

     35. Lease Characterization.

          (a) Landlord and Tenant intend that:

              (i) this Lease constitutes a lease of all, of the Leased Premises and the Landlord and
Tenant have executed and delivered this Lease with the understanding that this Lease
constitutes a unitary, unseverable instrument pertaining to all of the Leased Premises, and
that neither this Lease nor the duties, obligations or rights of Tenant may be allocated or
otherwise divided among the Leased Premises by Tenant;

              (ii) this Lease is a “true lease” and not a financing lease, capital lease, mortgage,
equitable mortgage, deed of trust, trust agreement, security instrument or other financing
or trust arrangement, and the economic realities of this Lease are those of a true lease;
and

 - 38 - 

 

              (iii) the business relationship created by this Lease and any related documents is
solely that of a long-term commercial lease between Landlord and Tenant and has been entered
into by both parties in reliance upon the economic and legal bargains contained herein.

          (b) Landlord and Tenant acknowledge and agree that the Term is less than the remaining
economic life of the Leased Premises.

          (c) Tenant waives any claim or defense based upon the characterization of this Lease as
anything other than a true lease and irrevocably waives any claim or defense which asserts
that this Lease is anything other than a true lease. Tenant covenants and agrees that it
will not assert that this Lease is anything but a true lease. Tenant stipulates and agrees
not to challenge the validity, enforceability or characterization of the lease of the Leased
Premises as a true lease. Tenant shall support the intent of the parties that the lease of
the Leased Premises pursuant to this Lease is a true lease, if, and to the extent that, any
challenge occurs.

          (d) Tenant represents and warrants to Landlord that (i) the Basic Rent reflects the
rent determined by Landlord and Tenant in bona fide arms’ length negotiations for the use of
the Leased Premises and was agreed to by Landlord and Tenant on that basis, and (ii) the
execution, delivery and performance by Tenant of this Lease does not constitute a transfer
of all or any part of the Premises (other than the leasehold created hereunder).

          (e) The expressions of intent, the waivers, the representations and warranties, the
covenants, the agreements and stipulations set forth in this Paragraph are a material
inducement to Landlord entering into this Lease.

[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK;

EXECUTION PAGE FOLLOWS]

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     IN WITNESS WHEREOF, Landlord and Tenant have caused this instrument to be executed under seal
as of the day and year first above written.

	 	 	 	 	 	 	 
	 	 	TENANT:	 	 
	 
	 	 	 	 	 	 
	 	 	JO-ANN STORES SUPPLY CHAIN	 	 
	 	 	MANAGEMENT, INC.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ James C. Kerr
 

	 	 
	 

	 	 	 	Name: James C. Kerr	 	 
	 

	 	 	 	Title: Vice President	 	 
	 
	 	 	 	 	 	 
	(Corporate Seal)

	 	Attest:
	 	/s/ Scott E. Roubic
 

Name: Scott E. Roubic
	 	 
	 

	 	 	 	Title:	 	 
	 
	 	 	 	 	 	 
	 	 	LANDLORD:	 	 
	 
	 	 	 	 	 	 
	 	 	BPVISALIA LLC	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ John Thornley
 

	 	 
	 

	 	 	 	Name: John Thornley	 	 
	 

	 	 	 	Title: President	 	 
	 
	 	 	 	 	 	 
	(Corporate Seal)

	 	Attest:
	 	 /s/ Jorge Florez
 

	 	 
	 

	 	 	 	Name: Jorge Florez	 	 
	 

	 	 	 	Title: Vice President	 	 

[EXECUTION PAGE OF LEASE AGREEMENT]

 - 40 - 

 

EXHIBIT A

Premises

PARCEL NO. 1 OF PARCEL MAP NO. 4443, IN THE CITY OF VISALIA, COUNTY OF TULARE, STATE OF CALIFORNIA,
AS PER MAP RECORDED IN BOOK 45, PAGE 48 OF PARCEL MAPS, TULARE COUNTY RECORDS.

EXCEPTING THEREFROM THAT PORTION THEREOF CONVEYED TO CITY OF VISALIA, A MUNICIPAL CORPORATION, BY
DEED RECORDED FEBRUARY 23, 2001, AS INSTRUMENT NO. 01-5809, OFFICIAL RECORDS.

APN: 077-360-006

 

 

EXHIBIT B

Basic Rent Schedule

Number of Consecutive Renewal Terms: Eight (8)

Duration of each Renewal Term: Five (5) Years

1. During Lease Years 1 through 5, the Basic Rent per Lease Year shall be $1,775,000.00. On the
first day of each of the
6th,
11th,
16th,
21st,
26th,
31st, 36th, 41st, 46th, 51st and 56th
anniversary of the first Lease Year Commencement Date, Basic Rent shall increase to one hundred six
percent (106%) of the Basic Rent in the preceding period.

2. (a) In the 41st Lease Year (which is the first year of the fifth Renewal Term), Basic Rent shall
be adjusted to fair market rent (“Fair Market Rent”) as of the commencement of such Renewal
Term and determined in accordance with this Paragraph 2. The Fair Market Rent shall be deemed to
be equal to 106% of the Basic Rent applicable to the previous period unless Landlord or Tenant
gives notice (“Appraisal Election Notice”) to the other of its election to have Fair Market
Rent determined by appraisal under this Paragraph 2, which notice must be given at least 180 days
(but not more than 365 days) before commencement of the Renewal Term in question and must be
accompanied by a written appraisal setting forth fair market rent for the Leased Premises prepared
by an appraiser who is both a member of the American Institute of Appraisers and actively engaged
in the appraisal of real property in the area where the Leased Premises is located.

     (b) If one of the parties (the “Electing Party”) gives a timely Appraisal Election
Notice in compliance with Paragraph 2(a) of this Exhibit B, then Fair Market Rent for such Renewal
Term shall be deemed to be as set forth in the accompanying appraisal unless the other party (the
“Non-electing Party”) gives the Electing Party written notice of its disapproval of
Electing Party’s appraisal within sixty days after receipt of Electing Party’s appraisal, which
notice must also be accompanied by a written appraisal complying with Paragraph 2(a) of this
Exhibit B. If the Non-electing Party gives timely notice of its disapproval of Electing Party’s
appraisal, Landlord’s appraiser and Tenant’s appraiser shall jointly, within fifteen days after
delivery of Non-electing Party’s appraisal, choose a third appraiser who is a member of the
American Institute of Appraisers who shall, within twenty days after appointment, choose one of the
two appraised values as the Fair Market Rent, which determination shall be binding upon both Tenant
and Landlord. Except as provided in Paragraph 2(c) of this Exhibit B, each party shall bear the
fees and expenses of its own appraiser, and the fees and expenses of the third appraiser shall be
borne by the party whose appraisal was not chosen by the third appraiser.

     (c) Notwithstanding anything to the contrary herein, Tenant may cancel any of the last four
Renewal Terms by giving a Renewal Term Cancellation Notice on or before the date which is ten
business days after determination of Fair Market Rent for such Renewal Term under this Paragraph 2.
If Tenant cancels one of the last four Renewal Terms, Tenant shall bear the fees and expenses of
all appraisers rendering appraisals under this Paragraph 2 in connection with the Renewal Term so
cancelled. Upon the giving of a Renewal Term Cancellation Notice this Lease and the Term shall
terminate and come to an end as of the later of (i) the one hundred eightieth (180th) day following
the giving of the Renewal Term Cancellation Notice, or (ii) the

 

 

last day of the then current Term (and if the effect of this sentence is to extend the Term it
shall be so extended on the terms and conditions and for the Rent specified herein for the Renewal
Term so cancelled).

 - 2 - 

 

EXHIBIT C

13(a) MINIMUM TO LANDLORD

$27,500,000

 

 

EXHIBIT D

INSURANCE REQUIREMENTS

NAME OF INSURED: (Tenant)

INSURED MAILING ADDRESS:

PROPERTY ADDRESS(s):

ADDITIONAL INSURED: BPVisalia LLC, c/o GE Commercial Finance Business Property Corporation,
its Successors and Assigns 10900 N.E. 4th Street, Suite 500 Bellevue, WA 98004

LEASE NO.:

INSURANCE REQUIREMENTS:

HAZARD INSURANCE:

Evidenced on Form Acord 28 — Evidence of Insurance, naming BPVISALIA LLC, its Successors
and/or Assigns, as Additional Insured as respects the subject property.

Perils: All Risk/ Special Form, Wind Damage, Business Interruption, Boiler and
Machinery, and if applicable, Flood and Earthquake Insurance.

Values:
100% Replacement cost value of property/Limit of $1,000,000 deductible

Endorsements Required:

	 	§ 	 	Replacement Cost endorsements
	 
	 	§ 	 	List of Locations and Schedule of Values, if Blanket Policy
	 
	 	§ 	 	30 Days Notice of Cancellation
	 
	 	§ 	 	Statement of “No Co-Insurance”

Co-insurance will not be accepted as a condition of any insurance provided.

Loss of Rents/Business Interruption for 12 months (or in an amount equivalent to at least 12 mos.
rent) is required.

Boiler and Machinery Coverage will be required.

Sinkhole coverage will be required for all properties located in Florida.

LIABILITY:

Coverage to be On Occurrence basis only.

Certificate of Insurance, showing commercial general liability on an Occurrence Basis, in an
amount not less than $5,000,000 (per occurrence) to include

Bodily injury and property damage liability (primary and excess umbrella acceptable to
satisfy limits).

 

 

BPVisalia LLC, its Successors and/or Assigns is to be named Additional Insured as respects
this property with issuance of an additional insured endorsement.

SPECIAL INSTRUCTIONS

BPVisalia LLC is to be provided with an Evidence of Insurance and a Certificate of Insurance from
an insurance company having a Best’s Rating of A-/IX or better and be licensed in the state in
which the property is located for, respectively, hazard and liability coverage and must be executed
by the insurance company or its authorized agent. The evidence and certificate must itemize the
above coverage and endorsements.

 - 2 - 

 

EXHIBIT E

SUBORDINATION, NON-DISTURBANCE

AND ATTORNMENT AGREEMENT

               This Subordination, Non-Disturbance and Attornment Agreement (this “Agreement”) is as of the
                     day of                     , 20___, between CWCapital LLC (“Lender”)
and Jo-Ann Stores Supply Chain Management, Inc. (“Tenant”).

RECITALS

     A. Tenant is the tenant under a certain lease (the “Lease”), dated as of October 19, 2006,
with BPVisalia LLC, a Delaware limited liability company (“Landlord”), of premises described in the
Lease (the “Premises”) as more particularly described in Exhibit A hereto.

     B. This Agreement is being entered into in connection with a certain loan (the “Loan”) which
Lender has made to Landlord, and secured, in part, by a Deed of Trust, Assignment of Leases and
Rents and Security Agreement on the Premises (the “Deed of
Trust “) dated as of                                         , 20___ and an Assignment of Leases and Rents dated as of
                                        ,
20___ (the “Assignment”; the Deed of
Trust, the Assignment and the other documents executed and delivered in connection with the Loan
are hereinafter collectively referred to as the “Loan Documents”).

AGREEMENT

          For mutual consideration, including the mutual covenants and agreements set forth below, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

          1. Tenant agrees that the Lease and all terms and conditions contained therein and all rights,
options, liens and charges created thereby is and shall be subject and subordinate in all respects
to the Loan Documents and to all present or future advances under the obligations secured thereby
and all renewals, amendments, modifications, consolidations, replacements and extensions of secured
obligations and the Loan Documents, to the full extent of all amounts secured by the Loan Documents
from time to time. Lender consents to the Lease and the provisions thereof.

          2. Lender agrees that, if Lender exercises any of its rights under the Loan Documents such
that it becomes the owner of the Premises, including but not limited to an entry by Lender pursuant
to the Deed of Trust, a foreclosure of the Deed of Trust, a power of sale under the Deed of Trust
or otherwise: (a) the Lease shall continue in full force and effect as a direct lease between
Lender and Tenant, and subject to all the terms, covenants and conditions of the Lease, and (b)
Lender shall not disturb Tenant’s right of quiet possession of the Premises under the terms of the
Lease so long as Tenant is not in default beyond any applicable grace period of any term, covenant
or condition of the Lease.

 - 3 - 

 

          3. Tenant agrees that, in the event of a exercise of the power of sale or foreclosure of the
Deed of Trust by Lender or the acceptance of a deed in lieu of foreclosure by Lender or any other
succession of Lender to ownership of the Premises, Tenant will attorn to and recognize Lender as
its landlord under the Lease for the remainder of the term of the Lease (including all extension
periods which have been or are hereafter exercised) upon the same terms and conditions as are set
forth in the Lease, and Tenant hereby agrees to pay and perform all of the obligations of Tenant
pursuant to the Lease.

          4. Tenant agrees that, in the event Lender succeeds to the interest of Landlord under the
Lease, Lender shall not be:

          (a) liable in any way for any act, omission, neglect or default of any prior Landlord
(including, without limitation, the then defaulting Landlord), or

          (b) subject to any claim, defense, counterclaim or offsets which Tenant may have against any
prior Landlord (including, without limitation, the then defaulting Landlord), or

          (c) bound by any payment of rent or additional rent which Tenant might have paid for more than
one month in advance of the due date under the Lease to any prior Landlord (including, without
limitation, the then defaulting Landlord), or

          (d) bound by any obligation to make any payment to Tenant which was required to be made prior
to the time Lender succeeded to any prior Landlord’s interest, or

          (e) accountable for any monies deposited with any prior Landlord (including security
deposits), except to the extent such monies are actually received by Lender, or

          (f) bound by any amendment or modification of the Lease made without the written consent of
Lender which consent will not be unreasonably withheld or delayed, and which consent will be deemed
given if Lender fails to respond to a request for consent within 30 days after notice to Lender and
receipt by Lender of all information reasonably necessary and/or reasonably requested by Lender to
evaluate the request which must be sent in accordance with Section 8 below.

          Nothing contained herein shall prevent Lender from naming Tenant in any foreclosure or other
action or proceeding initiated in order for Lender to avail itself of and complete any such
foreclosure or other remedy, subject, however, in all cases to the provisions of Section 2 above.

          Notwithstanding anything to the contrary, in the event of any casualty or condemnation
(eminent domain), Lender must permit the insurance proceeds or the condemnation award, as the case
may be, to be used for any restoration and repair as required by the Lease.

          5. Tenant hereby agrees to give to Lender copies of all notices of Landlord default(s) under
the Lease in the same manner as, and whenever, Tenant shall give any such notice of default to
Landlord and no such notice of default shall be deemed given to Landlord unless and until a copy of
such notice shall have been so delivered to Lender. Lender shall have the right but no obligation
to remedy any landlord default under the Lease, or to cause any default of Landlord under the Lease
to be remedied, and for such purpose Tenant hereby grants Lender, in addition the period given to
Landlord for remedying defaults, an additional 30 days to remedy, or cause to be

 - 4 - 

 

remedied, any such default. Tenant shall accept performance by Lender of any term, covenant,
condition or agreement to be performed by Landlord under the Lease with the same force and effect
as though performed by Landlord. No Landlord default under the Lease shall exist or shall be
deemed to exist (i) as long as Lender, in good faith, shall have commenced to cure such default
within the above reference time period and shall be prosecuting the same to completion with
reasonable diligence, subject to force majeure, or (ii) if possession of the Premises is required
in order to cure such default, or if such default is not susceptible of being cured by Lender, as
long as Lender, in good faith, shall have notified Tenant that Lender intends to institute
proceedings under the Loan Documents, and, thereafter, as long as such proceedings shall have been
instituted and shall be prosecuted with reasonable diligence; provided, however, that in no event
will the time to cure such default exceed 90 days. In the event of the termination of the Lease by
reason of any default thereunder by Landlord, upon Lender’s written request, given within thirty
(30) days after any such termination, Tenant, within thirty (30) days after receipt of such
request, shall execute and deliver to Lender or its designee or nominee a new lease of the Premises
for the remainder of the term of the Lease upon all of the terms, covenants and conditions of the
Lease. Neither Lender nor its designee or nominee shall become liable under the Lease unless and
until Lender or its designee or nominee becomes, and then only with respect to periods in which
Lender or its designee or nominee remains, the owner of the Premises. In no event shall Lender have
any personal liability as successor to Landlord and Tenant shall look only to the estate and
property of Lender in the Premises for the satisfaction of Tenant’s remedies for the collection of
a judgment (or other judicial process) requiring the payment of money in the event of any default
by Lender as Landlord under the Lease, and no other property or assets of Lender shall be subject
to levy, execution or other enforcement procedure for the satisfaction of Tenant’s remedies under
or with respect to the Lease. Lender shall have the right, without Tenant’s consent, to foreclose
the Deed of Trust or to accept a deed in lieu of foreclosure of the Deed of Trust or to exercise
any other remedies under the Loan Documents.

          6. Tenant has no knowledge of any prior assignment or pledge of the rents accruing under the
Lease by Landlord. Tenant hereby acknowledges the making of the Assignment from Landlord to Lender
in connection with the Loan. Tenant acknowledges that the interest of the Landlord under the Lease
is to be assigned to Lender solely as security for the purposes specified in the Assignment, and
Lender shall have no duty, liability or obligation whatsoever under the Lease or any extension or
renewal thereof, either by virtue of the Assignment or by any subsequent receipt or collection of
rents thereunder, unless Lender shall specifically undertake such liability in writing and is
obligated to take on such duty, liability or obligation pursuant to the terms of this Agreement
and/or Lease.

          In the event Tenant receives written notice from Lender that rents and/or other monies due
under the Lease are to be paid to Lender, Tenant shall pay to Lender, or as otherwise directed by
Lender, by check made payable solely to Lender or as directed by Lender, all rents and other monies
due or to become due under the Lease, and Landlord hereby expressly authorizes Tenant to make such
payments to Lender, or as otherwise directed by Lender, and Landlord hereby releases and discharges
Tenant of and from any liability to Landlord on account of any such payments. If such notice is
received by Tenant at least seven (7) days before a regularly scheduled payment from Tenant to
Landlord, then should Tenant fail to make payment as directed by Lender after receipt of any such
notice from Lender, Tenant shall remain liable to Lender for all amounts so paid after receipt of
such notice and such payments shall not be applied as payments by Tenant under the Lease.

 - 5 - 

 

          7. If Tenant is a corporation, each individual executing this Agreement on behalf of said
corporation represents and warrants that s/he is duly authorized to execute and deliver this
Agreement on behalf of said corporation, in accordance with a duly adopted resolution of the Board
of Directors of said corporation or in accordance with the by-laws of said corporation, and that
this Agreement is binding upon said corporation in accordance with its terms. If Landlord is a
partnership or limited liability company, each individual executing this Agreement on behalf of
said partnership or limited liability company represents and warrants the s/he is duly authorized
to execute and deliver this Agreement on behalf of said partnership or limited liability company in
accordance with the partnership agreement for the partnership or operating agreement for the
limited liability company.

          8. Any notice, election, communication, request or other document or demand required or
permitted under this Agreement shall be in writing and shall be deemed delivered on the earlier to
occur of (a) receipt or (b) the date of delivery, refusal or nondelivery indicated on the return
receipt, if deposited in a United States Postal Service Depository, postage prepaid, sent certified
or registered mail, return receipt requested, or if sent via recognized commercial courier service
providing for a receipt, addressed to Tenant or Lender, as the case may be at the following
addresses:

	 	 	 	 	 
	 

	 	If to Tenant:
	 	Jo-Ann Stores Supply Chain Management, Inc.
	 

	 	 	 	Attn: General Counsel
	 

	 	 	 	5555 Darrow Road
	 

	 	 	 	Hudson, OH 44236
	 
	 	 	 	 
	 

	 	with a copy to:
	 	Jo-Ann Stores Supply Chain Management, Inc.
	 

	 	 	 	Attn: Treasurer
	 

	 	 	 	5555 Darrow Road
	 

	 	 	 	Hudson, OH 44236
	 
	 	 	 	 
	 

	 	If to Lender:
	 	CWCapital LLC
	 

	 	 	 	One Charles River Place
	 

	 	 	 	63 Kendrick Street
	 

	 	 	 	Needham, Massachusetts 02494
	 

	 	 	 	Attention: Gardner Hall
	 

	 	 	 	Re: [Name of Deal]
	 

	 	 	 	Telecopier: (781) 707-9397
	 
	 	 	 	 
	 

	 	with copies to:
	 	CWCapital LLC
	 

	 	 	 	One Charles River Place
	 

	 	 	 	63 Kendrick Street
	 

	 	 	 	Needham, Massachusetts 02494
	 

	 	 	 	Attn: Servicing Department
	 

	 	 	 	Telecopier: (781) 707-9397
	 

	 	 	 	or any successor servicer appointed by Lender

          9. The term “Lender” as used herein includes any successor or assign of the named Lender
herein, including without limitation, any co-lender at the time of making the Loan, any purchaser
at a foreclosure sale and any transferee pursuant to a deed in lieu of foreclosure, and
their successors and assigns, and the term “Tenant” as used herein includes any successor and
assign of the named Tenant herein.

 - 6 - 

 

          10. If any provision of this Agreement is held to be invalid or unenforceable by a court of
competent jurisdiction, such provision shall be deemed modified to the extent necessary to be
enforceable, or if such modification is not practicable such provision shall be deemed deleted from
this Agreement, and the other provisions of this Agreement shall remain in full force and effect.

          11. Neither this Agreement nor any of the terms hereof may be terminated, amended,
supplemented, waived or modified orally, but only by an instrument in writing executed by the party
against which enforcement of the termination, amendment, supplement, waiver or modification is
sought.

          12. This Agreement shall be construed in accordance with the laws of the State where the
Premises is located.

          13. This Subordination Agreement shall not be effective against Tenant unless and until Tenant
has received a fully executed copy of this Subordination Agreement signed by all parties.

[REMAINDER OF PAGE LEFT INTENTIONALLY BLANK;

EXECUTION PAGE FOLLOWS]

 - 7 - 

 

     Witness the execution hereof as of the date first above written.

	 	 	 	 	 	 	 	 	 
	 	 	CWCAPITAL LLC	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 

	 	 
	 

	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

	 	 
	 	 	JO-ANN STORES SUPPLY CHAIN

          MANAGEMENT, INC.	 	 
	 
	 	 	 	 	 	 	 	 
	 

	 	By:	 	 	 	 	 	 
	 	 	 	 	 	 	 
	 

	 	 	 	Name:	 	 	 	 
	 

	 	 	 	 	 	 

	 	 
	 

	 	 	 	Title:	 	 	 	 
	 

	 	 	 	 	 	 

	 	 

	 	 	 	 	 	 	 
	Acknowledged by:	 	 	 	 
	 
	 	 	 	 	 	 
	BPVISALIA LLC	 	 	 	 
	 
	 	 	 	 	 	 
	By:
	 	 	 	 	 	 
	 

	 	 

	 	 	 	 
	Print:
	 	 	 	 	 	 
	 

	 	 

	 	 	 	 
	Its:
	 	 	 	 	 	 
	 

	 	 

	 	 	 	 

[Insert appropriate notary acknowledgments]

 - 8 - 

 

EXHIBIT A

Premises

PARCEL NO. 1 OF PARCEL MAP NO. 4443, IN THE CITY OF VISALIA, COUNTY OF TULARE, STATE OF CALIFORNIA,
AS PER MAP RECORDED IN BOOK 45, PAGE 48 OF PARCEL MAPS, TULARE COUNTY RECORDS.

EXCEPTING THEREFROM THAT PORTION THEREOF CONVEYED TO CITY OF VISALIA, A MUNICIPAL CORPORATION, BY
DEED RECORDED FEBRUARY 23, 2001, AS INSTRUMENT NO. 01-5809, OFFICIAL RECORDS.

APN: 077-360-006Exhibit 4(b)

    DEFERRED
      COMPENSATION PLAN

    FOR
      DIRECTORS OF

    DNB
      FINANCIAL CORPORATION

    

    (Effective
      October 1, 2006)

    

    1. Purpose.

     

    The
      purpose of this DCP is to provide each Eligible Director with the opportunity
      to
      select the timing of receipt of his or her Compensation. This DCP has been
      adopted by the Board pursuant to the DNB Financial Corporation Incentive Equity
      and Deferred Compensation Plan to partially implement Article IX thereof, and
      shall be considered a part of such Plan and subject to the pertinent terms
      and
      provisions thereof. 

     

    2. Eligibility.

     

    Each
      Eligible Director shall be eligible to participate in this DCP.

     

    3. Definitions.

     

    The
      words
      and phrases set forth below shall have the meanings indicated, unless the
      context requires a different meaning. Each capitalized term or phrase used
      in
      this DCP but not defined in this Section 3 shall have the same meaning as the
      definition of such term or phrase set forth in the DNB Financial Corporation
      Incentive Equity and Deferred Compensation Plan.

     

    (a)  “Beneficiary”
      shall mean the person(s) designated to receive the balance of an Eligible
      Director’s Deferred Account upon the death of the Eligible Director. A
      Beneficiary may only be a natural person, a trust, or an entity that is
      tax-exempt under Section 501(c)(3) of the Code. 

     

    (b) “Company”
      shall mean DNB Financial Corporation.

     

    (c) “Compensation”
      shall mean the compensation payable by the Company, either in cash or pursuant
      to an Award of Shares, to an Eligible Director for his or her services as a
      member of the Board and committees thereof.

     

    (d) “DCP”
      shall mean the Deferred Compensation Plan for Directors of DNB Financial
      Corporation, as set forth herein and as may be amended from time to
      time.

     

    (e) “Effective
      Date” shall mean October 1, 2006, the effective date of this DCP.

     

    (f) “Election”
      shall mean the written election by an Eligible Director, pursuant to Section
      4,
      below, to defer the receipt of all or a portion of his Compensation pursuant
      to
      this DCP.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    (g) “Eligible
      Director” shall mean any member of the Board, or of the board of directors of a
      direct or indirect subsidiary of the Company, who is entitled to Compensation
      for his services as a member of the Board or such other board.

     

    (h) “Share”
      or “Shares” shall mean one or more shares of Stock, including fractional
      shares.

     

    4. Election.

     

    (a) Prior
      to
      the commencement of a calendar year, but not later than the preceding December
      15, an Eligible Director may make an Election, pursuant to which payment of
      a
      specified percentage or flat dollar amount of his Compensation earned and
      otherwise payable in cash during such year and thereafter, or a specified
      percentage or number of Shares subject to an Award granted in such year, shall
      be deferred until a future date established pursuant to Section 6(b), below.
      Notwithstanding the preceding sentence, however, in the case of any individual
      who will be an Eligible Director as of the Effective Date, or in the case of
      an
      individual who first becomes an Eligible Director after the Effective Date,
      the
      Eligible Director may make an Election at any time prior to the Effective Date
      or during the period ending on the 30th
      day
      following the Effective Date, or at any time prior to the date on which he
      or
      she becomes an Eligible Director or during the period ending on the
      30th
      day
      following the date he or she first becomes an Eligible Director, as the case
      may
      be, provided that in no event shall such Election apply with respect to any
      Compensation earned by the Eligible Director prior to the date of the Election.
      

     

    (b) An
      Eligible Director’s Election must be in writing, and in such form as the
      Committee shall prescribe. No Election with respect to Compensation otherwise
      payable in cash shall be effective with respect to any calendar year unless
      the
      amount projected to be deferred for such year is at least five thousand dollars
      ($5,000). 

     

    (c) An
      Eligible Director may modify or revoke his or her Election effective as of
      the
      commencement of any calendar year, provided such modification or revocation
      is
      in writing in such form as the Committee shall prescribe, and is delivered
      to
      the Company in advance of such year. 

     

    (d) An
      Eligible Director’s Election with respect to Compensation otherwise payable in
      cash, or subsequent modification or revocation thereof, shall remain in effect
      through subsequent calendar years, unless and until modified or revoked, or
      a
      new Election is made, in accordance with the foregoing provisions of this
      Section 4. An Eligible Director’s Election with respect to Awards of Shares
      shall apply solely with respect to Awards granted in the calendar year to which
      the Election relates, and no Shares payable pursuant to another Award shall
      be
      deferred pursuant to this DCP or otherwise unless a new Election is made with
      respect to such Award pursuant to the foregoing provisions of this Section
      4.

     

    5. Allocations
      to Deferred Compensation Account.

     

    (a) That
      number of Shares having a Fair Market Value equal to one hundred and ten percent
      (110%) of the amount of Compensation otherwise payable in cash which an

     

    
      
         

      

      
        2

        
          

        

      

      
         

      

    

    Eligible
      Director has deferred pursuant to an Election shall be allocated to the Eligible
      Director’s Deferred Compensation Account. The determination of the number of
      Shares to be allocated shall be based on the Fair Market Value of the Stock
      on
      the last day of the month in which such Compensation would have been paid to
      the
      Eligible Director but for his or her Election. 

     

    (b) That
      number of Shares equal to the number of Shares subject to an Award which an
      Eligible Director has deferred pursuant to an Election shall be allocated to
      the
      Eligible Director’s Deferred Compensation Account as of the last day of the
      month in which such Shares would otherwise have been paid to the Eligible
      Director or become vested, whichever is later. 

     

    (c) The
      amount of a cash dividend paid with respect to the Stock shall be deemed to
      be
      paid with respect to the Shares allocated to an Eligible Director’s Deferred
      Compensation Account and immediately reinvested in additional Shares in
      accordance with the same procedures and valuation provisions as are applicable
      under the Company’s Dividend Reinvestment Plan from time to time.

     

    (d) All
      Shares allocated to an Eligible Director’s Deferred Compensation Account shall
      thereafter be fully vested and shall not be forfeitable for any reason.

     

    6. Distributions
      from Deferred Compensation Account.

     

    (a) All
      distributions from an Eligible Director’s Deferred Account shall be in Shares,
      except that the Fair Market Value of any fraction of a Share as of the date
      of
      distribution shall be paid in cash. All Shares distributed to an Eligible
      Director or Beneficiary shall be subject to a restriction whereby they may
      not
      be sold, hypothecated or otherwise transferred for a period of one (1) year
      from
      the date of distribution without the express, written consent of the Committee.
      Certificates representing distributed Shares shall bear a legend reflecting
      such
      restriction. 

     

    (b)  Distribution
      of an Eligible Director’s Deferred Compensation Account shall commence upon the
      earlier of the following:

     

    (i) the
      date
      as of which he or she separates from service with the Company, within the
      meaning of Section 409A of the Code; 

     

    (ii) the
      Eligible Director’s attainment of age 75; or

     

    (iii) the
      Eligible Director’s attainment of an attained age or a specified date designated
      by his or her Election, or as revised pursuant to Section 6(d), below.

     

    If
      the
      Eligible Director does not designate an age in his or her Election pursuant
      to
      clause (iii), distribution of the Eligible Director’s Deferred Compensation
      Account shall commence upon the occurrence of the earlier of the events
      specified in clause (i) and (ii). A single designation shall apply to the entire
      balance of the Eligible Director’s Deferred Compensation Account. 

     

    
      
         

      

      
        3

        
          

        

      

      
         

      

    

    (c) Upon
      the
      occurrence of the distribution event set forth in Section 6(b), above, the
      balance of the Eligible Director’s Deferred Compensation Account shall be
      distributed in one of the following optional forms of distribution, as he or
      she
      may designate in his or her Election:

     

    (i) A
      single
      lump sum distribution on or about January 15 of the calendar year following
      the
      calendar year in which such distribution event occurs; or 

     

    (ii) Annual
      installments payable for a number of whole years designated by the Eligible
      Director in his or her Election, which number shall not exceed ten (10),
      commencing on or about January 15 of the calendar year following the calendar
      year in which such distribution event occurs, and each January 15 thereafter
      during the installment period.

     

    In
      the
      absence of a designation by the Eligible Director pursuant to this Section
      6(c),
      the Eligible Director shall be deemed to have designated the distribution method
      set forth in clause (i). A single designation shall apply to the entire balance
      of the Eligible Director’s Deferred Compensation Account. 

     

    If
      distributions are to be made in installments, the amount of each installment
      shall be equal to the balance of the Deferred Compensation Account as of the
      close of the calendar year preceding the date of distribution of the
      installment, divided by the number of installment payments remaining (including
      that installment). 

     

    (d) An
      Eligible Director may elect to change the timing or method of distribution
      (or
      both) previously designated (or deemed designated) pursuant to Section 6(b)
      or
      (c), above, by submission of a new designation to the Company, subject to the
      following limitations and any further limitations prescribed by Section 409A
      of
      the Code:

     

    (i) no
      such
      new designation shall take effect until at least 12 months after the date on
      which it is made;

     

    (ii) the
      first
      payment as a result of such new designation shall be made no earlier than five
      (5) years after the date such payment would have been made absent such new
      Election; and 

     

    (iii) in
      the
      case of a payment scheduled to be made or payments scheduled to commence upon
      the attainment of a specified age, the new designation must be made at least
      12
      months prior to the attainment of such age. 

     

    (e) Notwithstanding
      an Eligible Director’s Election or any provision of this DCP to the contrary,
      upon an Eligible Director’s separation from service with the Company, within the
      meaning of Section 409A of the Code, the Eligible Director’s entire Deferred
      Compensation Account shall be distributed in a single lump sum on or about
      January 15 of the calendar year following his or her separation from service
      if
      the Fair Market Value of the Deferred Compensation Account as of the close
      of
      such calendar year is not in excess of ten thousand dollars ($10,000).

     

    
      
         

      

      
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    (f) Distribution
      of all or a portion of an Eligible Director’s Deferred Compensation Account
      shall be accelerated upon request of the Eligible Director if the Committee
      determines that the Eligible Director has experienced an unforeseeable
      emergency, within the meaning of Section 409A of the Code. The amount to be
      distributed shall not exceed the amount necessary to satisfy such unforeseeable
      emergency plus amounts necessary to pay taxes reasonably anticipated as a result
      of such distribution, after taking into account the extent to which such
      emergency may be relieved through reimbursement or compensation by insurance
      or
      otherwise or by liquidation of the Eligible Director’s assets (to the extent the
      liquidation of such assets would not itself cause severe financial hardship).
      In
      the event the requesting Eligible Director is a member of the Committee, the
      Eligible Director shall not participate in the decision by the Committee.

     

    (g) In
      the
      event of an Eligible Director’s death prior to the distribution in full of his
      or her Deferred Compensation Account, the Beneficiary shall receive the balance
      of the Eligible Director’s Deferred Compensation Account in a single lump sum as
      soon as practicable following the Eligible Director’s death. 

     

    (h) Any
      amount distributed to an Eligible Director or Beneficiary under this DCP shall
      be subject to all applicable tax withholdings mandated by law. To the extent
      necessary, the number of Shares otherwise distributable at any time shall be
      reduced by that number of Shares having a Fair Market Value equal to the amount
      of tax required to be withheld in connection with such distribution.

     

    7. Designation
      of Beneficiary.

     

    (a) Each
      Eligible Director shall file with the Company a written designation, in the
      form
      prescribed by the Company, of one or more persons as Beneficiary to receive
      the
      balance of the Eligible Director’s Deferred Compensation Account upon his or her
      death. The Eligible Director may, from time to time, revoke or change his or
      her
      Beneficiary designation by filing a new designation with the Company. The last
      such designation received by the Company shall be controlling; provided,
      however, that no designation, change or revocation thereof, shall be effective
      unless received by the Company prior to the Eligible Director’s
      death.

     

    (b) If
      no
      such Beneficiary designation is in effect at the time of the Eligible Director’s
      death, or if no designated Beneficiary survives the Eligible Director, the
      payment of the amount, if any, payable under this DCP upon his or her death
      shall be made to the Eligible Director’s estate.

     

    8. Claims
      Procedures.

     

    (a) An
      Eligible Director or, in the event of the Eligible Director’s death, his or her
      Beneficiary, may file a written claim for payment hereunder with the Committee.
      In the event of a denial of any payment due to or requested by the Eligible
      Employee or Beneficiary (the “claimant”), the Committee will give the claimant
      written notification containing specific reasons for the denial. The written
      notification will contain specific reference to the pertinent provisions of
      this
      DCP on which the denial of the claim is based. In addition, it will contain
      a
      description of any other material or information necessary for the claimant
      to
      perfect a claim, and 

     

    
      
         

      

      
        5

        
          

        

      

      
         

      

    

    an
      explanation of why such material or information is necessary. The notification
      will provide further appropriate information as to the steps to be taken if
      the
      claimant wishes to submit the claim for review and the time limits applicable
      thereto. This written notification will be given to a claimant within ninety
      (90) days after receipt of the claim by the Committee unless special
      circumstances require an extension of time for processing the claim, in which
      case the Committee shall provide written notice of the extension to the claimant
      and the reasons therefore, and the date by which the Company expects to make
      its
      determination with respect to the claim. In no event shall such extension exceed
      90 days.

     

    (b) In
      the
      event of a denial of a claim for benefits, the claimant or a duly authorized
      representative will be permitted to submit issues and comments in writing to
      the
      Committee and to submit documents, records and other information relating to
      the
      claim for benefits. The claimant or a duly authorized representative shall
      also
      be provided, upon request and free of charge, reasonable access to, and copies
      of, all documents, records, and other information relevant to the claimant’s
      claim for benefits. In addition, the claimant or a duly authorized
      representative may make a written request for a full and fair review of the
      claim and its denial by the Committee that takes into account all comments,
      documents, records and other information submitted by the claimant, without
      regard to whether such information was submitted or considered in the initial
      benefits determination; provided, however, that such written request is received
      by the Commitee (or its delegate) within sixty (60) days after receipt by the
      claimant of written notification of the denial. The sixty (60) day requirement
      may be waived by the Committee in appropriate cases.

     

    (c) A
      decision on review of a claim for benefits will be rendered by the Commitee
      within sixty (60) days after the receipt of the request. Under special
      circumstances, an extension (up to an additional 60 days) can be granted for
      processing the decision. Notice of this extension must be provided in writing
      to
      the claimant prior to the expiration of the initial sixty-day period. In no
      event will the decision be rendered more than one hundred twenty (120) days
      after the initial request for review. Any decision by the Commitee will be
      furnished to the claimant in writing and will set forth the specific reasons
      for
      the decision and the specific provisions on which the decision is based. The
      claimant or a duly authorized representative shall also be provided, upon
      request and free of charge, reasonable access to, and copies of, all documents,
      records, and other information relevant to the claimant’s claim for benefits.

     

    9. Amendment
      or Termination.

     

    The
      Board
      reserves the right at any time to amend this DCP in whole or in part,
      retroactively or prospectively, for any reason and without the consent of any
      Eligible Director or Beneficiary, provided that no amendment may adversely
      affect the rights of an Eligible Director or a Beneficiary with respect to
      amounts credited to the Eligible Director’s Deferred Compensation Account prior
      to such amendment or alter the timing of distribution of any Eligible Director’s
      Deferred Compensation Account. The Board reserves the right at any time to
      terminate this DCP. Upon termination of this DCP, (a) all Elections with respect
      to the deferral of future Compensation shall terminate as of the date specified
      by the Board, but not before the earliest time permitted under Section 409A
      of
      the Code; and (b) the Deferred Compensation Account of each Eligible Director
      shall be distributed at such time or times as it would have been distributed
      in
      the absence of termination, unless the Board, in its discretion, elects to
      distribute the Deferred Compensation Accounts of all Eligible Directors in
      some
      other manner but in no event prior to the earliest time permitted under Section
      409A of the Code.   

     

    
      
         

      

      
        6

        
          

        

      

      
         

      

    

    10. Miscellaneous.

     

    (a) Nothing
      contained in this DCP shall give the Eligible Director the right to be retained
      in the service of the Company. 

     

    (b) If
      the
      Company shall find that any person to whom any amount is payable under this
      DCP
      is unable to care for his affairs because of illness or accident, or is a minor,
      the Company may direct that any amount to which such person is entitled be
      paid
      to his or her spouse, a child, a relative, an institution maintaining or having
      custody of such person, or any other person deemed by the Company to be a proper
      recipient on behalf of such person otherwise entitled to payment. Any such
      payment shall be a complete discharge of the liability of the DCP and the
      Company therefor.

     

    (c) Except
      insofar as may otherwise be required by law, no amount payable at any time
      under
      this DCP shall be subject in any manner to alienation by anticipation, sale,
      transfer, assignment, bankruptcy, pledge, attachment, charge, encumbrance or
      garnishment by creditors of the Eligible Director or his or her Beneficiary,
      nor
      be subject in any manner to the debts or liabilities of any person, and any
      attempt to so alienate or subject any such amount, whether presently or
      thereafter payable, shall be void.

     

    (d) It
      is the
      intention of the Company that this DCP shall be unfunded for Federal income
      tax
      purposes. Accordingly, this DCP constitutes a mere promise by the Company to
      make payments hereunder in the future, and each Eligible Director or, if
      applicable, his or her Beneficiary, shall have the status of a general unsecured
      creditor of the Company with respect to this DCP. Except as provided by the
      terms of any trust established pursuant to Section 9.4 of the DNB Financial
      Corporation Incentive Equity and Deferred Compensation Plan, neither an Eligible
      Director nor his or her Beneficiary shall have any right, title, or interest
      in
      or to any assets which the Company may hold to aid it in meeting its obligations
      hereunder. Such assets, whether held in trust or otherwise, shall be
      unrestricted corporate assets. 

     

     

     

    7

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