Document:

exv10w18

 

EXHIBIT 10.18

UNITED STATES DISTRICT COURT

DISTRICT OF ARIZONA

	 	 	 
	IN RE TASER INTERNATIONAL
	 	Lead Case No. 05-0123-PHX-SRB
	SHAREHOLDER DERIVATIVE	 	 
	LITIGATION	 	 
	 	 	 
	 

	 	 
	 	 	 
	This Document Relates To:
	 	NOTICE OF SETTLEMENT OF
	 
	 	SHAREHOLDER DERIVATIVE
	ALL ACTIONS.
	 	ACTION

	 	 	 
	 

	 	 

NOTICE OF SETTLEMENT HEARING

	TO:	 	ALL RECORD AND/OR BENEFICIAL OWNERS OF TASER INTERNATIONAL, INC. COMMON STOCK AS OF DECEMBER
4, 2006 (“CURRENT TASER STOCKHOLDERS”):
	 
	 	 	PLEASE READ THIS NOTICE CAREFULLY AND IN ITS ENTIRETY. IF YOU ARE A CURRENT TASER
STOCKHOLDER, THE SETTLEMENT OF THE ACTIONS DESCRIBED HEREIN COULD AFFECT YOUR RIGHTS. THESE
ACTIONS ARE NOT “SECURITIES CLASS ACTIONS” AND THERE IS NO SETTLEMENT FUND ON WHICH TO MAKE
A CLAIM.

          THIS NOTICE IS PROVIDED pursuant to an Order of the United States District Court for the
District of Arizona (the “Court”) in the above-captioned shareholder derivative action.
Representative Plaintiffs brought the above-captioned action and two related state court actions
 

 

 

(collectively, the “Actions”) derivatively on behalf of TASER International, Inc. (“TASER” or
the “Company”).

          The Settling Parties to the Actions have entered into a Stipulation of Settlement dated
December 4, 2006 (the “Stipulation”) which provides for, among other things, the settlement and
dismissal of the Actions (the “Settlement”). Thus, you are hereby notified, pursuant to Federal
Rule of Civil Procedure 23.1 and an Order of the Court, that a final settlement hearing (the
“Settlement Hearing”) will be held in the Actions on
March 12, 2007 at 4:00 p.m. at the United
States District Court for District of Arizona, Sandra Day O’Connor United States Courthouse, which
is located at 401 West Washington Street, Phoenix, Arizona 85003-2118, in the Courtroom of the
Honorable Susan R. Bolton to, among other things: (i) determine the fairness, reasonableness, and
adequacy of the terms and conditions of the Settlement and whether the Court should finally approve
the Settlement and enter an Order and Final Judgment thereon; and (ii) rule upon the agreed-to fee
award for Federal Plaintiffs’ Lead Counsel in the Actions. Even though you are receiving this
Notice, the Court has not expressed any opinion as to the merits of any claim or defense that has
been or may be asserted in the Actions.

THE FOLLOWING RECITATION DOES NOT CONSTITUTE FINDINGS OF THE COURT. IT IS BASED ON
THE STATEMENTS OF THE SETTLING PARTIES AND SHOULD NOT BE UNDERSTOOD AS AN EXPRESSION
OF ANY OPINION OF THE COURT AS TO THE MERITS OF ANY OF THE CLAIMS OR DEFENSES RAISED
BY ANY OF THE SETTLING PARTIES.

	I.	 	BACKGROUND

          On January 11, 2005, Representative Plaintiffs in the Federal Action instituted litigation
on behalf of TASER against the Individual Defendants in the United States District Court for the
District of Arizona.

          On February 9, 2005, the Court in this “Federal Action” consolidated several derivative
actions as In re TASER International Shareholder Derivative Litigation, Case No. 05-123-PHX-SRB
and appointed the Federal Plaintiffs’ Lead Counsel.

 

 

          On May 13, 2005, after their investigation, plaintiffs in the Federal Action filed their
Federal Complaint alleging on behalf of TASER claims against the Individual Defendants for breach
of fiduciary duty, abuse of control, gross mismanagement, waste of corporate assets and unjust
enrichment based on allegations that the Individual Defendants, among other things, with knowing
or extreme recklessness issued, or caused TASER to issue, a series of improper and misleading
statements regarding: (a) the Company’s then-current operating condition and its future
prospects; and (b) the safety record of the Company’s weapons; that the Individual Defendants’
acts and failures to act had the effect of creating unwarranted market optimism, which in turn
caused the price of the Company’s common stock to be artificially inflated throughout the
Relevant Period; that certain of TASER’s officers and directors took advantage of the Company’s
artificially inflated stock price by selling over 1.7 million shares of their personally-held
stock for proceeds exceeding $88 million; and that the foregoing conduct caused TASER to suffer
damages.

          On August 19, 2005, TASER and the Individual Defendants moved to dismiss the Federal
Complaint, which was then fully briefed by all parties in the Federal Action, and on March 17,
2006, the Court denied the motions of both TASER and the Individual Defendants.

          The following events occurred in the Arizona State Court Action: (i) on January 12, 2005,
plaintiffs initiated litigation in the Arizona Superior Court for Maricopa County on behalf of
TASER against certain of the Individual Defendants; (ii) on May 3, 2005, the Court entered an
order consolidating related actions as In re TASER International, Inc. Shareholder Derivative
Litigation, Case No. CV 2005-684; (iii) on April 5, 2005, plaintiffs filed a Verified
Consolidated Derivative Complaint on behalf of TASER against certain of the Individual Defendants
claiming breach of fiduciary duty and unjust enrichment based on allegations substantially
similar to the allegations of the Federal Complaint; and (iv) on July 25, 2005, the Court issued
an order in part staying further litigation of the Arizona State Court Action pending resolution
of the Federal Action.

 

 

          The following events occurred in the Delaware State Court Action: (i) on January 13, 2005,
plaintiffs initiated litigation in the Court of Chancery of the State of Delaware for New Castle
County, by filing a Derivative Complaint captioned Rosenberg v. Smith, et al., Case No. 1000-N,
on behalf of TASER against certain of the Individual Defendants claiming breach of fiduciary duty
based on substantially similar allegations as alleged in the Federal Complaint, and (ii) on
September 13, 2005, the Court issued an order staying further litigation of the Delaware State
Court Action.

          The Individual Defendants have denied and continued to deny all the claims and allegations
against them in the Actions, TASER has asserted and continues to assert that the Representative
Plaintiffs in the Actions do not have standing to bring such claims against the Individual
Defendants on behalf of TASER and that Representative Plaintiffs’ failure to make a
pre-litigation demand on TASER’s Board of Directors is not excused.

          In and around April 2006, the parties in the Federal Action began private settlement
discussions, resulting in a mediation session on July 25, 2006 before the Hon. Layn R. Phillips
(ret.), with whose assistance the parties were able to reach the terms of settlement set forth in
the Stipulation.

          In August 2006, Representative Plaintiffs in the State Court Actions, through their counsel,
confirmed to Federal Plaintiffs’ Lead Counsel and counsel for Defendants that the Representative
Plaintiffs in the State Court Actions intend to dismiss their respective actions as part of and
in conjunction with the settlement and dismissal of the Federal Action.

	II.	 	THE SETTLING PARTIES’ POSITIONS REGARDING THE DESIRABILITY OF THE SETTLEMENT

          The Individual Defendants expressly have denied and continue to deny each and all of the
allegations and claims alleged in the Actions. The Individual Defendants expressly have denied and
continue to deny all charges of wrongdoing or liability against them, arising out of any of the
conduct, statements, acts or omissions alleged, or that could have been alleged in the

 

 

Actions. The Individual Defendants also have denied and continue to deny, inter alia, the
allegations that Representative Plaintiffs or TASER or its stockholders were harmed by the conduct
alleged in the Actions. The Individual Defendants further have denied and continue to deny that
they are liable to TASER for any claims, causes of action, costs, expenses, attorneys’ fees or
damages of any kind. The Individual Defendants have further asserted that, at all relevant times,
they acted in good faith and in a manner they reasonably believed to be in the best interests of
TASER and TASER’s stockholders.

          TASER has denied and continues to deny that Representative Plaintiffs have standing to assert
the claims in their respective Actions against the Individual Defendants. TASER has asserted and
continues to assert that Representative Plaintiffs’ failure to make a pre-litigation demand on
TASER’s Board is not excused.

          Nonetheless, TASER and Individual Defendants have concluded that further litigation of the
Actions would be protracted and expensive, and that it is desirable that the Actions be fully and
finally settled in the manner and upon the terms and conditions set forth in this Stipulation.
TASER and Individual Defendants also have taken into account the uncertainty and risks inherent in
any litigation and, therefore, determined that it is desirable and beneficial that the Actions be
settled in the manner and upon the terms and conditions set forth in the Stipulation.

          Federal Plaintiffs’ Lead Counsel asserts that they have conducted extensive discovery and
investigation during the development and prosecution of the Federal Action. This discovery and
investigation has included, inter alia; (i) inspecting, reviewing and analyzing thousands of pages
of documents produced by, or otherwise relating to, TASER; (ii) consulting with corporate
governance experts; (iii) participating in numerous face-to-face and telephonic meetings with
TASER’S counsel, and some of the Individual Defendants identified herein; (vi) participating in
formal mediation with a highly experienced mediator retained to assist resolving the Federal
Action; and (v) researching the applicable law with respect to the claims asserted in the Federal
Action and the potential defenses thereto.
 

 

 

          Representative Plaintiffs and All Plaintiffs’ Counsel believe that the claims asserted in the
Actions have merit. They recognize and acknowledge, however, the extraordinary expense and length
of continued proceedings necessary to prosecute the Actions against the Individual Defendants on
TASER’S behalf through trial and, potentially, through appeals. They also recognize the inherent
risks of an uncertain outcome, especially in complex litigation such as the Actions, as well as
the difficulties and delays of such litigation. Taking these risks, uncertainties and expenses
into consideration, Representative Plaintiffs and All Plaintiffs’ Counsel believe that the
Settlement set forth in the Stipulation confers substantial benefits upon TASER. Based on their
evaluation, Representative Plaintiffs and All Plaintiffs’ Counsel have determined that the
Settlement set forth in the Stipulation is in the best interests of Representative Plaintiffs,
TASER and TASER’s stockholders.

	III.	 	THE TERMS OF THE PROPOSED SETTLEMENT

          As a result of the filing, prosecution and settlement negotiations leading to the
Stipulation, Defendants and their insurance carrier have resolved claims under the effective
insurance policy so that the insurance carrier has agreed to make available to TASER $4.8 million
of its $5.0 million insurance policy for defense and/or settlement of pending securities claims,
to release any right to seek repayment of the $4.8 million, and to remit to TASER $4.8 million
less certain defense costs paid to date.

          As a result of the filing, prosecution and settlement negotiations leading to the
Stipulation, the Company will adopt the following corporate changes or provisions: (1)
appointment of a lead outside director to be chosen from among the recently appointed independent
directors whose duties will include among other responsibilities chairing executive sessions of
the Board, serving as the principal liaison between the non-employee directors and members of
senior management, representing the Board in meetings with investors, and working with the
Chairperson to finalize information flow to the Board, meeting agendas and meeting schedules; (2)
review and as appropriate revise the Company’s formal

 

 

insider trading policy; and (3) has contracted its internal audit function to an independent
third party until the first to occur of (i) such time that TASER no longer is required to comply
with the provisions of Section 404 of the Sarbanes-Oxley Act of 2002, (ii) TASER employs an
internal audit manager, or (iii) there is a “change of control” of TASER defined as the closing
of a merger, reorganization, consolidation or other transaction or related series of transactions
as a result of which the stockholders of TASER prior to such transaction do not hold at least a
majority of the voting stock of the acquiring or successor corporation or its parent company.

          As a result, in part, of the filing, prosecution and settlement negotiations leading to this
Stipulation, the Company has added two (2) new independent directors to the Board.

          The Settling Parties believe that the foregoing corporate changes or provisions have
benefited and will continue to materially benefit TASER and Current TASER Stockholders.

	IV.	 	SETTLEMENT HEARING AND APPROVAL

          On
March 12, 2007 at 4:00 p.m. the Court will hold a Settlement Hearing at the United States
District Court for District of Arizona, Sandra Day O’Connor United States Courthouse, before the
Hon. Susan Bolton to consider the approval of the Settlement on the terms set forth above.

PLEASE TAKE NOTE: YOUR RIGHTS MAY BE AFFECTED 

          If the Court approves the Settlement and enters the Final Judgment and Order of Dismissal with
Prejudice, upon the Effective Date, Representative Plaintiffs, and All Plaintiffs’ Counsel on their
own behalf and derivative on behalf of TASER, and Current TASER Stockholders (in their capacity as
stockholders only) shall fully, finally and forever relinquish and discharge all Released Claims
(including “Unknown Claims”) against each an all of the Released Persons. Each of the
Representative Plaintiffs, All Plaintiffs’ Counsel, and the Current TASER Stockholders may
hereafter discover facts in addition to or different from those which he or she now knows or
believes to be true with respect to the subject matter of the Released Claims, but they stipulate
and agree that the Representative Plaintiffs, All Plaintiffs’ Counsel,

 

 

and each Current TASER Stockholder shall be deemed to, upon the Effective Date, fully,
finally, and forever settle and release any and all Released Claims, which now exist, or heretofore
have existed upon any theory of law or equity, including, but not limited to, conduct which is
negligent, intentional, with or without malice, or a breach of any duty, law or rule, without
regard to the subsequent discovery or existence of such different or additional facts.

	V.	 	ATTORNEYS’ FEES AND REIMBURSEMENT OF EXPENSES

          TASER, on behalf of all Defendants, has agreed, upon approval by the Court, that for Federal
Plaintiffs’ Lead Counsel’s efforts in filing, prosecuting and settling the Action, TASER shall pay
to Federal Plaintiffs’ Lead Counsel attorneys’ fees and reimbursement of expenses in the amount of
$1,750,000.00 (the “Fee Award”).

          The Fee Award shall be paid to Federal Plaintiffs’ Lead Counsel in the form of TASER common
stock no later than ten (10) business days after the Effective Date (the “Payment Date”). Payment
shall be made in a certain number of TASER common shares equal to the Fee Award (“the Base
Number”). The Base Number shall be calculated based on the average of the closing prices of TASER
common stock during the period of thirty (30) calendar days after the date the Court in the Federal
Action enters Judgment (the “Base Number Price”). The Fee Award shall be calculated as the number
of TASER common shares equal to $1,750,000.00 divided by the Base Number Price.

          The Fee Award will also be subject to a collar provision for the benefit of Federal
Plaintiffs’ Lead Counsel or TASER. The “Collar Price” shall be the average of the closing prices
of TASER common stock during the period of thirty (30) calendar days preceding the five (5)
business days before the Payment Date. The collar provision provided in this paragraph becomes
effective only if either 1) the Base Number Price is greater than one hundred ten percent (110%) of
the Collar Price, or 2) the Base Number Price is less than ninety percent (90%) of the Collar
Price. If the collar provision does not become effective, then the Fee Award is determined
pursuant to the preceding paragraph. If the collar provision becomes effective,

 

 

then the Fee Award shall be the number of TASER common shares equal to $1,750,000.00 divided
by the Collar Price.

          The Fee Award is also subject to other modifications in the event that there is a change of
control of TASER, as set forth in Paragraph 9.6 of the Stipulation.

          The Fee Award includes fees and expenses incurred by All Plaintiffs’ Counsel in connection
with the prosecution and settlement of the Actions. To date, All Plaintiffs’ Counsel have not
received any fees, nor have they been reimbursed for their out of pocket expenses. The Fee Award
would compensate All Plaintiffs’ Counsel for the results achieved in the Actions, and risks of
undertaking the prosecution of the Actions on a contingent basis.

          Any stock distributed as part of the Settlement shall be issued pursuant to Section 3(a)(10)
of the Securities Act of 1933, and shall not be constituted “restricted securities.” In the event
that the stock cannot be issued pursuant to Section 3(a)(10), TASER shall take such steps as are
necessary to permit such issuance or, in lieu thereof, shall file a registration statement covering
the issuance of such stock or seek a “no action” letter from the Securities and Exchange Commission
covering such issuance. Furthermore, in the event that such stock cannot be issued pursuant to
Section 3(a)(10) and TASER files a registration statement with respect to the shares as
contemplated by the preceding sentence, TASER agrees that during the initial period that any such
stock is not otherwise freely tradable and transferable under Rule 144(k) or otherwise, TASER will,
at its sole cost, keep a registration statement relating to such TASER common stock effective under
the Securities Act of 1933.

          Defendants and their respective Related Parties shall have no responsibility for, and no
liability whatsoever with respect to, the fee allocation among All Plaintiffs’ Counsel, and any
other Person who may assert some claim thereto, of any portion of the Fees and Expenses.

	VI.	 	YOUR RIGHT TO BE HEARD AT THE HEARING

          Any Current TASER Stockholder may (but is not required to) appear and show cause, if he, she
or it has any reason why the Settlement of the Actions embodied in the Stipulation should

 

 

not be approved as fair, reasonable and adequate, or why a judgment should or should not be entered
thereon, or why fees inclusive of expenses should not be awarded as agreed upon by the Settling
Parties; provided however, that no Current TASER Stockholder or any other Person, shall be heard or
entitled to contest the approval of the Settlement, or, if approved, the Judgment to be entered
thereon, unless on or before ten business (10) days prior to the Settlement Hearing that Person has
caused to be filed written objections, stating all supporting bases and reasons, with:

CLERK OF THE COURT

United States District Court for the District of Arizona

Phoenix Division

Sandra Day O’Connor U.S. Courthouse,

401 West Washington Street, Suite 130, SPC1

Phoenix, Arizona 85003-2118

and has served copies of all such papers at the same time upon the following by first-class mail:

	 	 	 
	Robert B. Weiser, Esq.

	 	Keith E. Eggleton, Esq.
	The Weiser Law Firm, P.C.

	 	Wilson Sonsini Goodrich & Rosati, LLP
	121 N. Wayne Ave., Suite 100

	 	650 Page Mill Road
	Wayne, PA 19087

	 	Palo Alto, CA 94304-1050
	Federal Plaintiffs’ Lead Counsel

	 	Individual Defendants’ Counsel
	 
	 	 
	 

	 	Holly L. Gibeaut
	 

	 	TASER International, Inc.
	 

	 	17800 N. 85th St.
	 

	 	Scottsdale, AZ 85255-9603
	 

	 	TASER’s Counsel

          Attendance at the Settlement Hearing is not necessary in order for the objection to be
considered by the Court; however, Persons wishing to be heard orally in opposition to the approval
of the Settlement are required to indicate in their written objection their intention to appear at
the hearing. Thus, every written objection filed with the Court and mailed to the attorneys listed
above must contain: (1) the name, address and telephone number of the Person objecting to the
Settlement; (2) the number of shares of TASER common stock said Person owns; (3) the date(s) of
purchase of such shares, and a statement as to whether the Person will own such shares as of the
date of the Settlement Hearing; (4) a detailed statement of the basis for the Person’s objections
to or comments upon the Settlement, All Plaintiffs’ Counsel’s request

 

 

for approval of the Fee Award, or any other matter before the Court; (5) any supporting
papers, including all documents and writings that the Person desires the Court to consider; (6) a
representation as to whether the Person intends to appear at the Settlement Hearing; (7) a
representation as to whether the Person plans on calling any witness[es] at the Settlement Hearing;
and (8) the identities of any witnesses the Person plans to call at the Settlement Hearing.

          Any Current TASER Stockholder who does not make his, her or its objection in the manner
provided in the preceding paragraph of this Order shall be deemed to have waived such objection and
shall forever be foreclosed from making any objections to the fairness, adequacy, or reasonableness
of the Settlement, or the Fee Award.

	VII.	 	SCOPE OF THIS NOTICE

          The foregoing descriptions of the Actions, the Settlement Hearing, the proceedings to be held,
the activities leading to the Settlement, the terms of the Settlement, the conditions of
Settlement, and other matters described herein do not purport to be all inclusive. Accordingly,
you are referred to the Stipulation and other pleadings filed with the Clerk of the Court, which
may be examined during regular business hours at the offices of the Clerk of the Court at United
States District Court for the District of Arizona, Phoenix Division, Sandra Day O’Connor U.S.
Courthouse, 401 West Washington Street, Suite 130, SPC1, Phoenix, Arizona 85003-2118.

	VIII.	 	QUESTIONS REGARDING THE PROPOSED SETTLEMENT

          If you have questions regarding the Settlement, this Notice, or the history of the Actions,
please do not call or write the Court or the Company. Questions may be directed to:

Robert B. Weiser, Esq.

The Weiser Law Firm, P.C.

121 N. Wayne Ave., Suite 100

Wayne, PA 19087

(866) 934-7372

Federal Plaintiffs’ Lead CounselExhibit 10.3

Exhibit 10.3

LEASE OF BUSINESS PREMISES:  Comprehensive lease of premises for business use

LEASE AGREEMENT

This lease agreement was entered into as of August 1, 2005, between ESE, Inc., a corporation organized under the laws of the State of Nevada, having its principal place of business at P.O. Box 38025, Steel Creek Office, Mecklenburg County, Charlotte, NC 28278, referred to as "
Lessee," and Christine Root, an individual having her principal place of business at 5950 Hampton Leas Lane, Columbia, SC, referred to as "Lessor."  This lease agreement is intended to supersede and replace all previous lease agreements between the parties.

SECTION ONE

DESCRIPTION OF PREMISES

Lessor leases to Lessee the premises located at 413C Alissum Lane, Charlotte, Mecklenburg County, NC, and described more particularly as follows: 

A Steel frame building, 800 square feet of a light industrial/commercial center located approximately 160 feet west of Roundtree Rd. and approximately 1 mile NE of interstate 77.  413C is between two larger businesses, (approximately 6000 square feet each) and across from additional center of approximately 15000 square feet with four businesses

Property currently has steel siding on front, but can be replaced at Lessee's cost and must match, as closely as possible, the color of other units beside 413C.

SECTION TWO

TERM

The term of this lease agreement is seven years, beginning on Aug. 1st, 2005, terminating on Aug. 1st, 2012, at 12:00AM.

SECTION THREE

RENT

A. The total rent under this lease agreement is $16,200.

B. Lessee shall pay Lessor the above-specified amount in installments of $50 per month for the first two years and $250 per month for the remaining five years, beginning on Aug. 1st, 2005, with payments due on the 1st day of each month during the term of the lease agreement.

SECTION FOUR

USE OF PREMISES

The demised premises are to be used for the purposes of retail coffee sales. Lessee shall restrict its use to such purposes, and shall not use or permit the use of the demised premises for any other purpose without the prior, express, and written consent of Lessor, or Lessor's authorized agent.

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SECTION FIVE

RESTRICTIONS ON USE

A. Lessee shall not use the demised premises in any manner that will increase risks covered by insurance on the demised premises and result in an increase in the rate of insurance or a cancellation of any insurance policy, even if such use may be in furtherance of Lessee's business purposes.

B. Lessee shall not keep, use, or sell anything prohibited by any policy of fire insurance covering the demised premises, and shall comply with all requirements of the insurers applicable to the demised premises necessary to keep in force the fire and liability insurance.

SECTION SIX

WASTE, NUISANCE, OR UNLAWFUL ACTIVITY

Lessee shall not allow any waste or nuisance on the demised premises, or use or allow the demised premises to be used for any unlawful purpose.

SECTION SEVEN

DELAY IN DELIVERING POSSESSION

This lease agreement shall not be rendered void or voidable by the inability of Lessor to deliver possession to Lessee on the date set forth in Section Two. Lessor shall not be liable to Lessee for any loss or damage suffered by reason of such a delay; provided, however, that Lessor does deliver possession no later than Aug. 2nd, 2005. In the event of a delay in delivering possession, the rent for the period of such delay will be deducted from the total rent due under this lease agreement. No extension of this lease agreement shall result from a delay in delivering possession.

SECTION EIGHT

UTILITIES

Lessee shall arrange and pay for all utilities furnished to the demised premises for the term of this lease agreement, including, but not limited to, electricity, gas, water, sewer, and telephone service.

SECTION NINE

REPAIRS AND MAINTENANCE

Lessee shall maintain the demised premises and keep them in good repair at its expense, except that side and rear exterior walls and the roof will be maintained in good condition by Lessor. Lessee shall maintain and repair windows, doors, skylights, adjacent sidewalks, the building front, and interior walls. 

SECTION TEN

DELIVERY, ACCEPTANCE, AND SURRENDER OF PREMISES

 

A. Lessor represents that the demised premises are in fit condition for use by Lessee. Acceptance of the demised premises by Lessee shall be construed as recognition that the demised premises are in a good state of repair and in sanitary condition.

 

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B. Lessee shall surrender the demised premises at the end of the lease term, or any renewal of such term, in the same condition as when Lessee took possession, allowing for reasonable use and wear, and damage by acts of God, including fires and storms. Before delivery, Lessee shall remove all business signs placed on the demised premises by Lessee and restore the portion of the demised premises on which they were placed in the same condition as when received.

SECTION ELEVEN

PARTIAL DESTRUCTION OF PREMISES

 

A. Partial destruction of the demised premises shall not render this lease agreement void or voidable, nor terminate it except as specifically provided in this lease agreement. If the demised premises are partially destroyed during the term of this lease agreement, Lessor shall repair them when such repairs can be made in conformity with governmental laws and regulations, within 30 days of the partial destruction. Written notice of the intention of Lessor to repair shall be given to Lessee within 10 days after any partial destruction. Rent will be reduced proportionately to the extent to which the repair operations interfere with the business conducted on the demised premises by Lessee. If the repairs cannot be made within the time specified above, Lessor shall have the option to make them within a reasonable time and continue this lease agreement in effect with proportional rent rebate to Lessee as provided for in this lease agreement. If the repairs cannot be made in 60 days, and if Lessor does not elect to make them within a reasonable time, either party shall have the option to terminate this lease agreement.

B. Disputes between Lessor and Lessee relating to provisions of this section shall be arbitrated. The parties shall each select an arbitrator, and the two arbitrators selected shall together select a third arbitrator. The three arbitrators shall determine the dispute, and their decisions shall be binding on the parties. The parties shall divide the costs of arbitration equally between them.

SECTION TWELVE

ENTRY ON PREMISES BY LESSOR

 

A. Lessor reserves the right to enter on the demised premises at reasonable times to inspect them, perform required maintenance and repairs, or to make additions, alterations, or modifications to any part of the building in which the demised premises are located, and Lessee shall permit Lessor to do so.

B. Lessor may erect scaffolding, fences, and similar structures, post relevant notices, and place moveable equipment in connection with making alterations, additions, or repairs, all without incurring liability to Lessee for disturbance of quiet enjoyment of the demised premises, or loss of occupation of the demised premises.

SECTION THIRTEEN

SIGNS, AWNINGS, AND MARQUEES INSTALLED BY LESSEE

A. Lessee shall not construct or place signs, awnings, marquees, or other structures projecting from the exterior of the demised premises without the prior, express, and written consent of Lessor.

 

 

 

 

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B. Lessee shall remove signs, displays, advertisements, or decorations it has placed on the premises that, in the opinion of Lessor, are offensive or otherwise objectionable. If Lessee fails to remove such signs, displays, advertisements, or decorations within 30 days after receiving written notice from Lessor to remove them, Lessor reserves the right to enter the demised premises and remove them at the expense of Lessee.

SECTION FOURTEEN

BUSINESS SALE SIGNS

Lessee shall not conduct "Going out of Business," "Lost Our Lease," "Bankruptcy," or other sales of that nature on the demised premises without the written consent of Lessor.

SECTION FIFTEEN

NONLIABILITY OF LESSOR FOR DAMAGES

Lessor shall not be liable for liability or damage claims for injury to persons or property from any cause relating to the occupancy of the demised premises by Lessee, including those arising out of damages or losses occurring on sidewalks and other areas adjacent to the demised premises during the term of this lease agreement or any extension of such term. Lessee shall indemnify Lessor from any and all liability, loss, or other damage claims or obligations resulting from any injuries or losses of this nature.

SECTION SIXTEEN

LIABILITY INSURANCE

A. Prior to opening for business to the public, the Lessee shall procure and maintain in force at its expense during the term of this lease agreement and any extension of such term, public liability insurance with insurers and through brokers approved by Lessor. Such coverage shall be adequate to protect against liability for damage claims through public use of or arising out of accidents occurring in or around the demised premises, in a minimum amount of $25,000 for each person injured, $100,000 for any one accident, and $50,000 for property damage. The insurance policies shall provide coverage for contingent liability of Lessor on any claims or losses. The insurance policies shall be delivered to Lessor for safekeeping. Lessee shall obtain a written obligation from the insurers to notify Lessor in writing at least10 days prior to cancellation or refusal to renew any policy.

B. If the insurance policies required by this section are not kept in force, Lessor may procure the necessary insurance and pay the premium for it, and the premium shall be repaid to Lessor as an additional rent installment for the month following the date on which the premiums were paid by Lessor.

 

 

 

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SECTION SEVENTEEN

ASSIGNMENT, SUBLEASE, OR LICENSE

A. Lessee shall not assign or sublease the demised premises, or any right or privilege connected with the demised premises, or allow any other person except agents and employees of Lessee to occupy the demised premises or any part of the demised premises without first obtaining the written consent of Lessor. A consent by Lessor shall not be a consent to a subsequent assignment, sublease, or occupation by other persons.

B. An unauthorized assignment, sublease, or license to occupy by Lessee shall be void and shall terminate this lease agreement at the option of Lessor.

C. The interest of Lessee in this lease agreement is not assignable by operation of law without the written consent of Lessor.

SECTION EIGHTEEN

BREACH

The appointment of a receiver to take possession of the assets of Lessee, a general assignment for the benefit of the creditors of Lessee, any action taken or allowed to be taken by Lessee under any bankruptcy act, or the failure of Lessee to comply with each term and condition of this lease agreement shall constitute a breach of this lease agreement. Lessee shall have 30 days after receipt of written notice from Lessor of any breach to correct the conditions specified in the notice.

SECTION NINETEEN

REMEDIES OF LESSOR FOR BREACH BY LESSEE

Lessor shall have the following remedies in addition to its other rights and remedies in the event Lessee breaches this lease agreement and fails to make corrections as set forth in Section Eighteen:

A. Lessor may reenter the demised premises immediately and remove the property and personnel of Lessee, store the property in a public warehouse or at a place selected by Lessor, at the expense of Lessee.

B. After reentry, Lessor may terminate this lease agreement on giving 30 days' written notice of termination to Lessee. Without such notice, reentry will not terminate this lease agreement. On termination, Lessor may recover from Lessee all damages proximately resulting from the breach, including, but not limited to, the cost of recovering the demised premises and the balance of the rent payments remaining due and unpaid under this lease agreement.

C. After reentering, Lessor may relet the demised premises or any part of the demised premises for any term without terminating this lease agreement, at such rent and on such terms as it may choose. Lessor may make alterations and repairs to the demised premises. The duties and liabilities of the parties if the demised premises are relet shall be as follows:

 

 

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(1) In addition to Lessee'
s liability to Lessor for breach of this lease agreement, Lessee shall be liable for all expenses of the reletting, for the alterations and repairs made, and for the difference between the rent received by Lessor under the new lease agreement and the rent installments that were due for the same period under this lease agreement.

(2) Lessor, at its option, shall have the right to apply the rent received from reletting the premises (a) to reduce Lessee'
s indebtedness to Lessor under this lease agreement, not including indebtedness for rent, (b) to expenses of the reletting and alterations and repairs made, (c) to rent due under this lease agreement, or (d) to payment of future rent under this lease agreement as it becomes due.

If the new Lessee does not pay a rent installment promptly to Lessor, and the rent installment has been credited in advance of payment to the indebtedness of Lessee other than rent, or if rentals from the new Lessee have been otherwise applied by Lessor as provided for in this section, and during any rent installment period, are less than the rent payable for the corresponding installment period under this lease agreement, Lessee shall pay Lessor the deficiency, separately for each rent installment deficiency period, and before the end of that period. Lessor may, at any time after such reletting, terminate this lease agreement for the breach on which Lessor based the reentry and relet the demised premises.

After reentry, Lessor may procure the appointment of a receiver to take possession and collect rents and profits of the business of Lessee. If necessary to collect the rents and profits, the receiver may carry on the business of Lessee and take possession of the personal property used in the business of Lessee, including inventory, trade fixtures, and furnishings and use them in the business without compensating Lessee. Proceedings for appointment of a receiver by Lessor, or the appointment of a receiver and the conduct of the business of Lessee by the receiver, shall not terminate this lease agreement unless Lessor has given written notice of termination to Lessee as provided in this lease agreement.

SECTION TWENTY

ATTORNEY FEES

If Lessor files an action to enforce any agreement contained in this lease agreement, or for breach of any covenant or condition, Lessee shall pay Lessor reasonable attorney fees for the services of Lessor'
s attorney in the action, all fees to be fixed by the court.

SECTION TWENTY-ONE

CONDEMNATION

Eminent domain proceedings resulting in the condemnation of a part of the demised premises, but leaving the remaining premises usable by Lessee for the purposes of its business, will not terminate this lease agreement unless Lessor, at its option, terminates this lease agreement by giving written notice of termination to Lessee. The effect of any condemnation, where the option to terminate is not exercised, will be to terminate this lease agreement as to the portion of the demised premises condemned, and the lease of the remainder of the demised premises shall remain intact. The rental for the remainder of the lease term shall be reduced by the amount that the usefulness of the demised premises has been reduced for the business purposes of Lessee. Lessee assigns and transfers to Lessor any claim it may have to compensation for damages as a result of any condemnation.

 

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SECTION TWENTY-TWO

OPTION TO RENEW

Lessor grants to Lessee an option to renew this lease agreement for 5 years at a rental of $250.00 per month, with all other terms and conditions of the renewal lease to be the same as those in this lease agreement. To exercise this option to renew, Lessee must give Lessor written notice of intention to do so at least 30 days before this lease agreement expires.

SECTION TWENTY-THREE

WAIVERS

Waiver by Lessor of any breach of any covenant or duty of Lessee under this lease is not a waiver of a breach of any other covenant or duty of Lessee, or of any subsequent breach of the same covenant or duty.

SECTION TWENTY-FOUR

GOVERNING LAW

It is agreed that this lease agreement shall be governed by, construed, and enforced in accordance with the laws of the State of North Carolina.

SECTION TWENTY-FIVE

ENTIRE AGREEMENT

This lease agreement shall constitute the entire agreement between the parties. Any prior understanding or representation of any kind preceding the date of this lease agreement shall not be binding upon either party except to the extent incorporated in this lease agreement.

SECTION TWENTY-SIX

MODIFICATION OF AGREEMENT

Any modification of this lease agreement or additional obligation assumed by either party in connection with this agreement shall be binding only if evidenced in a writing signed by each party or an authorized representative of each party.

SECTION TWENTY-SEVEN

NOTICES

A. All notices, demands, or other writings that this lease agreement requires to be given, or which may be given, by either party to the other, shall be deemed to have been fully given when made in writing and deposited in the United States mail, registered and postage prepaid, and addressed as follows:

To Lessor: Christine Root, 5950 Hampton Leas Lane, Columbia, SC

 

 

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To Lessee: ESE, P.O. Box 38025, Steel Creek Office, Mecklenburg County, and Charlotte, NC 28278

B. The address to which any notice, demand, or other writing may be given or made or sent to any party as above provided may be changed by written notice given by such party as above provided.

SECTION TWENTY-EIGHT

BINDING EFFECT

This lease agreement shall bind and inure to the benefit of the respective heirs, personal representatives, successors, and assigns of the parties.

SECTION TWENTY-NINE

TIME OF THE ESSENCE

It is specifically declared and agreed that time is of the essence of this lease agreement.

SECTION THIRTY

PARAGRAPH HEADINGS

The titles to the paragraphs of this lease agreement are solely for the convenience of the parties and shall not be used to explain, modify, simplify, or aid in the interpretation of the provisions of this lease agreement.

In witness, each party to this lease agreement has caused it to be executed at 413C Alissum Lane, Charlotte, NC on the date indicated below.

	 	
Lessee: ESE Corporation

	
  
	 
	 	
ROBIN LONG

Robin Long, Secretary, 
	
8/29/06

	 	 
	
 

 
	
CHRISTINE ROOT

Lessor, Christine Root
	
8/29/06

 

 

 

 

 

 

 

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