Document:

exhibit10-1.htm

    

    
      
        
           

        

        
           

          
            

          

        

        
          Exhibit
10.1  

        

      

    

    

    AIR
COMMERCIAL REAL ESTATE ASSOCIATION STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT
LEASE -- GROSS

    (DO
NOT USE THIS FORM FOR MULTI-TENANT BUILDINGS)

    

    1. Basic
Provisions (“Basic Provisions”).

     

    1.1 Parties: This Lease (“Lease”), dated for reference
purposes only February 25, 2008, is made by and between Domenigoni-Barton
Properties, a California general partnership (“Lessor”) and Advance Display
Technologies, Inc. (“Lessee”), (collectively the
“Parties,” or
individually a “Party”).

     

    1.2 Premises: That certain real
property, including all improvements therein or to be provided by Lessor under
the terms of this Lease, and commonly known as 42230 Zevo Drive, Temecula,
located in the County of Riverside, State of California, and generally described
as (describe briefly the nature of the property and, if applicable, the “Project”, if the property is
located within a Project) +/-19,360 SF industrial building, concrete tilt-up
construction on +/-52,707 SF of land, zoned light industrial (LI), APN
909-360-033 (“Premises”). (See also
Paragraph 2)

     

    1.3 Term: 5 years and 0 months
(“Original Term”)
commencing April 1, 2008 (“Commencement Date “) and
ending March 31, 2013 (“Expiration Date”). (See also
Paragraph 3)

     

    1.4 Early Possession: Upon
execution of lease by the parties (“Early Possession Date”). (See
also Paragraphs 3.2 and 3.3)

     

    1.5 Base Rent: $ 13,552.00 per
month (“Base Rent”),
payable on the 1st day of each month commencing April 1, 2008 . (See also
Paragraph 4)

     

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

    

    1.6 Base
Rent and Other Monies Paid Upon Execution:

     

    (a) Base Rent: $ 13,552.00 for the
period 4/1/08 - 4/30/08.

     

    (b) Security Deposit: $ 15,252.90
(“Security Deposit”).
(See also Paragraph 5)

     

    (c) Association Fees: $ N/A for
the period _______________________

     

    (d) Other: $_________________ for
See
Addendum

     

    (e) Total Due Upon Execution of this
Lease: $ 28,804.90.

     

    1.7 Agreed Use: Assembly,
construction, and distribution of electronics and large consumer goods. (See
also Paragraph 6)

     

    1.8 Insuring Party: Lessor is the
“Insuring Party.” The
annual “Base Premium” is
$3,338.00. (See also Paragraph 8)

     

    1.9 Real Estate Brokers: (See also
Paragraph 15)

     

    

    
      
        
          
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            ©2001
– AIR COMMERCIAL REAL ESTATE ASSOCIATION FORM STG-11-6/07E

            #835420.1

          

           

        

        
           

          
            

          

        

        
           

        

      

    

    

    

     

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

     

    ý           D.
L. Phares & Associates represents Lessor exclusively (“Lessor’s
Broker”);

    ý           Rancon
Real Estate represents Lessee exclusively (“Lessee’s Broker”);
or

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

    

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

     

    1.10 Guarantor. The obligations of
the Lessee under this Lease are to be guaranteed by
____________________________________________ (“Guarantor”). (See also
Paragraph 37)

     

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

     

    ý           an
Addendum consisting of Paragraphs 1 through 10;

     ̈           a
plot plan depicting the Premises;

     ̈           a
current set of the Rules and Regulations;

     ̈           a
Work Letter;

    ý           other
(specify): Guaranty of Lease.

    

    2. Premises.

     

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

     

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

     

    

    
      
        
          
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– AIR COMMERCIAL REAL ESTATE ASSOCIATION FORM
STG-11-6/07E

          

           

        

        
           

          
            

          

        

        
           

        

      

    

    

     other
elements of the Building. If Lessee does not give Lessor the required notice
within the appropriate warranty period, correction of any such non-compliance,
malfunction or failure shall be the obligation of Lessee at Lessee’s sole cost
and expense, except for the roof, foundations, and bearing walls which are
handled as provided in paragraph 7.

     

    2.3 Compliance. Lessor warrants
that to the best of its knowledge the improvements on the Premises comply with
the building codes, applicable laws, covenants or restrictions of record,
regulations, and ordinances (“Applicable Requirements”) that
were in effect at the time that each improvement, or portion thereof, was
constructed. Said warranty does not apply to the use to which Lessee will put
the Premises, modifications which may be required by the Americans with
Disabilities Act or any similar laws as a result of Lessee’s use (see Paragraph
50), or to any Alterations or Utility Installations (as defined in Paragraph
7.3(a)) made or to be made by Lessee. NOTE: Lessee is responsible for
determining whether or not the Applicable Requirements, and especially the
zoning, are appropriate for Lessee’s intended use, and acknowledges that past
uses of the Premises may no longer be allowed. If the Premises do not
comply with said warranty, Lessor shall, except as otherwise provided, promptly
after receipt of written notice from Lessee setting forth with specificity the
nature and extent of such non-compliance, rectify the same at Lessor’s expense.
If Lessee does not give Lessor written notice of a non-compliance with this
warranty within 6 months following the Start Date, correction of that
non-compliance shall be the obligation of Lessee at Lessee’s sole cost and
expense. If the Applicable Requirements are hereafter changed so as to require
during the term of this Lease the construction of an addition to or an
alteration of the Premises and/or Building, the remediation of any Hazardous
Substance, or the reinforcement or other physical modification of the Unit,
Premises and/or Building (“Capital Expenditure”), Lessor
and Lessee shall allocate the cost of such work as follows:

     

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

     

    (b) If such
Capital Expenditure is not the result of the specific and unique use of the
Premises by Lessee (such as, governmentally mandated seismic modifications),
then Lessor shall pay for such Capital Expenditure and Lessee shall only be
obligated to pay, each month during the remainder of the term of this Lease, on
the date that on which the Base Rent is due, an amount equal to 144th of the
portion of such costs reasonably attributable to the Premises. Lessee shall pay
Interest on the balance but may prepay its obligation at any time. If, however,
such Capital Expenditure is required during the last 2 years of this Lease or if
Lessor reasonably determines that it is not economically feasible to pay its
share thereof, Lessor shall have the option to terminate this Lease upon 90 days
prior written notice to Lessee unless Lessee notifies Lessor, in writing, within
10 days after receipt of Lessor’s termination notice that Lessee will pay for
such Capital Expenditure. If Lessor does not elect to terminate, and fails to
tender its share of any such Capital Expenditure, Lessee may advance such funds
and deduct same, with Interest, from Rent until Lessor’s share of such costs
have been fully paid. If Lessee is unable to finance Lessor’s share, or if the
balance of the Rent due and payable for the remainder of this Lease
is

     

    

    
      
        
          
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    not
sufficient to fully reimburse Lessee on an offset basis, Lessee shall have the
right to terminate this Lease upon 30 days written notice to
Lessor.

     

    (c) Notwithstanding
the above, the provisions concerning Capital Expenditures are intended to apply
only to non-voluntary, unexpected, and new Applicable Requirements. If the
Capital Expenditures are instead triggered by Lessee as a result of an actual or
proposed change in use, change in intensity of use, or modification to the
Premises then, and in that event, Lessee shall either: (i) immediately cease
such changed use or intensity of use and/or take such other steps as may be
necessary to eliminate the requirement for such Capital Expenditure, or (ii)
complete such Capital Expenditure at its own expense. Lessee shall not, however,
have any right to terminate this Lease.

     

    2.4 Acknowledgements. Lessee
acknowledges that: (a) it has been advised by Lessor and/or Brokers to satisfy
itself with respect to the condition of the Premises (including but not limited
to the electrical, HVAC and fire sprinkler systems, security, environmental
aspects, and compliance with Applicable Requirements and the Americans with
Disabilities Act), and their suitability for Lessee’s intended use, (b) Lessee
has made such investigation as it deems necessary with reference to such matters
and assumes all responsibility therefor as the same relate to its occupancy of
the Premises, and (c) neither Lessor, Lessor’s agents, nor Brokers have made any
oral or written representations or warranties with respect to said matters other
than as set forth in this Lease. In addition, Lessor acknowledges that: (i)
Brokers have made no representations, promises or warranties concerning Lessee’s
ability to honor the Lease or suitability to occupy the Premises, and (ii) it is
Lessor’s sole responsibility to investigate the financial capability and/or
suitability of all proposed tenants.

     

    2.5 Lessee as Prior
Owner/Occupant. The warranties made by Lessor in Paragraph 2 shall be of
no force or effect if immediately prior to the Start Date Lessee was the owner
or occupant of the Premises. In such event, Lessee shall be responsible for any
necessary corrective work.

     

    3. Term.

     

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

     

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

     

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

     

    

    
      
        
          
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            INITIALS                                                             INITIALS

            

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– AIR COMMERCIAL REAL ESTATE ASSOCIATION FORM
STG-11-6/07E

          

           

        

        
           

          
            

          

        

        
           

        

      

    

    

    120 days
after the Commencement Date, this Lease shall terminate unless other agreements
are reached between Lessor and Lessee, in writing.

     

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

     

    4. Rent.

     

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

     

    4.2 Payment.  Lessee
shall cause payment of Rent to be received by Lessor in lawful money of the
United States, without offset or deduction (except as specifically permitted in
this Lease), on or before the day on which it is due. All monetary amounts shall
be rounded to the nearest whole dollar. In the event that any invoice prepared
by Lessor is inaccurate such inaccuracy shall not constitute a waiver and Lessee
shall be obligated to pay the amount set forth in this Lease. Rent for any
period during the term hereof which is for less than one full calendar month
shall be prorated based upon the actual number of days of said month. Payment of
Rent shall be made to Lessor at its address stated herein or to such other
persons or place as Lessor may from time to time designate in writing.
Acceptance of a payment which is less than the amount then due shall not be a
waiver of Lessor’s rights to the balance of such Rent, regardless of Lessor’s
endorsement of any check so stating. In the event that any check, draft, or
other instrument of payment given by Lessee to Lessor is dishonored for any
reason, Lessee agrees to pay to Lessor the sum of $25 in addition to any Late
Charge and Lessor, at its option, may require all future payments to be made by
Lessee to be by cashier’s check. Payments will be applied first to accrued late
charges and attorney’s fees, second to accrued interest, then to Base Rent and
Operating Expense Increase, and any remaining amount to any other outstanding
charges or costs.

     

    4.3 Association Fees. In addition
to the Base Rent, Lessee shall pay to Lessor each month an amount equal to any
owner’s association or condominium fees levied or assessed against the Premises.
Said monies shall be paid at the same time and in the same manner as the Base
Rent.

     

    5. Security Deposit. Lessee shall
deposit with Lessor upon execution hereof the Security Deposit as security for
Lessee’s faithful performance of its obligations under this Lease. If Lessee
fails to pay Rent, or otherwise Defaults under this Lease, Lessor may use, apply
or retain all or any portion of said Security Deposit for the payment of any
amount due already due Lessor, for Rents which will be due in the future, and/
or to reimburse or compensate Lessor for any liability, expense, loss or damage
which Lessor may suffer or incur by reason thereof. If Lessor uses or applies
all or any portion of the Security Deposit, Lessee shall within 10 days after
written request therefor deposit monies with Lessor sufficient to restore said
Security Deposit to the full amount required by this Lease. If the Base Rent
increases during the term of this Lease, Lessee shall, upon written request from
Lessor, deposit additional monies with Lessor so that the total amount of the
Security Deposit shall at all times bear the same proportion to the increased
Base Rent as the initial Security Deposit bore to the initial Base Rent. Should
the Agreed Use be amended to accommodate a material change in the business of
Lessee or to accommodate a sublessee or assignee, Lessor shall have the right to
increase the Security Deposit to the extent necessary, in Lessor’s reasonable
judgment, to account for any increased wear and tear that the Premises may
suffer

     

    

    
      
        
          
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– AIR COMMERCIAL REAL ESTATE ASSOCIATION FORM
STG-11-6/07E

          

           

        

        
           

          
            

          

        

        
           

        

      

    

    

    as a
result thereof. If a change in control of Lessee occurs during this Lease and
following such change the financial condition of Lessee is, in Lessor’s
reasonable judgment, significantly reduced, Lessee shall deposit such additional
monies with Lessor as shall be sufficient to cause the Security Deposit to be at
a commercially reasonable level based on such change in financial condition.
Lessor shall not be required to keep the Security Deposit separate from its
general accounts. Within 90 days after the expiration or termination of this
Lease, Lessor shall return that portion of the Security Deposit not used or
applied by Lessor. No part of the Security Deposit shall be considered to be
held in trust, to bear interest or to be prepayment for any monies to be paid by
Lessee under this Lease.

     

    6. Use.

     

    6.1 Use. Lessee shall use and
occupy the Premises only for the Agreed Use, or any other legal use which is
reasonably comparable thereto, and for no other purpose. Lessee shall not use or
permit the use of the Premises in a manner that is unlawful, creates damage,
waste or a nuisance, or that disturbs occupants of or causes damage to
neighboring premises or properties. Other than guide, signal and seeing eye
dogs, Lessee shall not keep or allow in the Premises any pets, animals, birds,
fish, or reptiles. Lessor shall not unreasonably withhold or delay its consent
to any written request for a modification of the Agreed Use, so long as the same
will not impair the structural integrity of the improvements on the Premises or
the mechanical or electrical systems therein, and/or is not significantly more
burdensome to the Premises. If Lessor elects to withhold consent, Lessor shall
within 7 days after such request give written notification of same, which notice
shall include an explanation of Lessor’s objections to the change in the Agreed
Use.

     

    6.2 Hazardous
Substances.

     

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

     

    

    
      
        
          
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    before
Lease expiration or termination) of protective modifications (such as concrete
encasements) and/or increasing the Security Deposit.

     

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

     

    (c) Lessee Remediation. Lessee
shall not cause or permit any Hazardous Substance to be spilled or released in,
on, under, or about the Premises (including through the plumbing or sanitary
sewer system) and shall promptly, at Lessee’s expense, comply with all
Applicable Requirements and take all investigatory and/or remedial action
reasonably recommended, whether or not formally ordered or required, for the
cleanup of any contamination of, and for the maintenance, security and/or
monitoring of the Premises or neighboring properties, that was caused or
materially contributed to by Lessee, or pertaining to or involving any Hazardous
Substance brought onto the Premises during the term of this Lease, by or for
Lessee, or any third party.

     

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

     

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

     

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

     

    

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

     

    6.3 Lessee’s Compliance with Applicable
Requirements. Except as otherwise provided in this Lease, Lessee shall,
at Lessee’s sole expense, fully, diligently and in a timely manner, materially
comply with all Applicable Requirements, the requirements of any applicable fire
insurance underwriter or rating bureau, and the recommendations of Lessor’s
engineers and/or consultants which relate in any manner to the such
Requirements, without regard to whether such Requirements are now in effect or
become effective after the Start Date. Lessee shall, within 10 days after
receipt of Lessor’s written request, provide Lessor with copies of all permits
and other documents, and other information evidencing Lessee’s compliance with
any Applicable Requirements specified by Lessor, and shall immediately upon
receipt, notify Lessor in writing (with copies of any documents involved) of any
threatened or actual claim, notice, citation, warning, complaint or report
pertaining to or involving the failure of Lessee or the Premises to comply with
any Applicable Requirements. Likewise, Lessee shall immediately give written
notice to Lessor of: (i) any water damage to the Premises and any suspected
seepage, pooling, dampness or other condition conducive to the production of
mold; or (ii) any mustiness or other odors that might indicate the presence of
mold in the Premises.

     

    6.4 Inspection; Compliance. Lessor
and Lessor’s “Lender”
(as defined in Paragraph 30) and consultants shall have the right to enter into
Premises at any time, in the case of an emergency, and otherwise at reasonable
times after reasonable notice, for the purpose of inspecting the condition of
the Premises and for verifying compliance by Lessee with this Lease. The cost of
any such inspections shall be paid by Lessor, unless a violation of Applicable
Requirements, or a Hazardous Substance Condition (see paragraph 9.1) is found to
exist or be imminent, or the inspection is requested or ordered by a
governmental authority. In such case, Lessee shall upon request reimburse Lessor
for the cost of such inspection, so long as such inspection is reasonably
related to the violation or contamination. In addition, Lessee shall provide
copies of all relevant material safety data sheets (MSDS) to Lessor within 10 days
of the receipt of a written request therefor.

     

    

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

     

    7.1 Lessee’s
Obligations.

     

    (a) In General. Subject to the
provisions of Paragraph 2.2 (Condition), 2.3 (Compliance), 6.3 (Lessee’s
Compliance with Applicable Requirements), 7.2 (Lessor’s Obligations), 9 (Damage
or Destruction), and 14 (Condemnation), Lessee shall, at Lessee’s sole expense,
keep the Premises, Utility Installations (intended for Lessee’s exclusive use,
no matter where located), and Alterations in good order, condition and repair
(whether or not the portion of the Premises requiring repairs, or the means of
repairing the same, are reasonably or readily accessible to Lessee, and whether
or not the need for such repairs occurs as a result of Lessee’s use, any prior
use, the elements or the age of such portion of the Premises), including, but
not limited to, all equipment or facilities, such as plumbing, HVAC equipment,
electrical, lighting facilities, boilers, pressure vessels, fire protection
system, fixtures, walls (interior and exterior), ceilings, floors, windows,
doors, plate glass, skylights, landscaping, driveways, parking lots, fences,
retaining walls, signs, sidewalks and parkways located in, on, or adjacent to
the Premises. Lessee is also responsible for keeping the roof and roof drainage
clean and free of debris. Lessor shall keep the surface and structural elements
of the roof, foundations, and bearing walls in good repair (see paragraph 7.2).
Lessee, in keeping the Premises in good order, condition and repair, shall
exercise and perform good maintenance practices, specifically including the
procurement and maintenance of the service contracts required by Paragraph
7.1(b) below. Lessee’s obligations shall include restorations, replacements or
renewals when necessary to keep the Premises and all improvements thereon or a
part thereof in good order, condition and state of repair. Lessee shall, during
the term of this Lease, keep the exterior appearance of the Building in a
first-class condition (including, e.g. graffiti removal) consistent with the
exterior appearance of other similar facilities of comparable age and size in
the vicinity, including, when necessary, the exterior repainting of the
Building.

     

    (b) Service Contracts. Lessee
shall, at Lessee’s sole expense, procure and maintain contracts, with copies to
Lessor, in customary form and substance for, and with contractors specializing
and experienced in the maintenance of the following equipment and improvements,
if any, if and when installed on the Premises: (i) HVAC equipment, (ii) boiler,
and pressure vessels, (iii) fire extinguishing systems, including fire alarm
and/or smoke detection, (iv) landscaping and irrigation systems, and (v)
clarifiers. However, Lessor reserves the right, upon notice to Lessee, to
procure and maintain any or all of such service contracts, and Lessee shall
reimburse Lessor, upon demand, for the cost thereof.

     

    (c) Failure to Perform. If Lessee
fails to perform Lessee’s obligations under this Paragraph 7.1, Lessor may enter
upon the Premises after 10 days’ prior written notice to Lessee (except in the
case of an emergency, in which case no notice shall be required), perform such
obligations on Lessee’s behalf, and put the Premises in good order, condition
and repair, and Lessee shall promptly pay to Lessor a sum equal to 115% of the
cost thereof.

     

    (d) Replacement. Subject to
Lessee’s indemnification of Lessor as set forth in Paragraph 8.7 below, and
without relieving Lessee of liability resulting from Lessee’s failure to
exercise and perform good maintenance practices, if an item described in
Paragraph 7.1(b) cannot be repaired other than at a cost which is in excess of
50% of the cost of replacing such item, then such item shall be replaced by
Lessor, and the cost thereof shall be prorated between the Parties and Lessee
shall only be obligated to pay, each month during the remainder of the term of
this Lease, on the date on which Base Rent is due, an amount equal to the
product of multiplying the cost of such replacement by a fraction, the numerator
of which is one, and the denominator of which is 144 (ie. 1/144th of the cost
per month). Lessee shall pay Interest on the unamortized balance but may prepay
its obligation at any time.

     

    

    
      
        
          
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    7.2 Lessor’s Obligations. Subject
to the provisions of Paragraphs 2.2 (Condition), 2.3 (Compliance), 9 (Damage or
Destruction) and 14 (Condemnation), it is intended by the Parties hereto that
Lessor have no obligation, in any manner whatsoever, to repair and maintain the
Premises, or the equipment therein, all of which obligations are intended to be
that of the Lessee, except for the surface and structural elements of the roof,
foundations and bearing walls, the repair of which shall be the responsibility
of Lessor upon receipt of written notice that such a repair is necessary. It is
the intention of the Parties that the terms of this Lease govern the respective
obligations of the Parties as to maintenance and repair of the Premises, and
they expressly waive the benefit of any statute now or hereafter in effect to
the extent it is inconsistent with the terms of this Lease.

     

    7.3 Utility
Installations; Trade Fixtures; Alterations.

     

    (a) Definitions. The term “Utility Installations” refers
to all floor and window coverings, air and/or vacuum lines, power panels,
electrical distribution, security and fire protection systems, communication
cabling, lighting fixtures, HVAC equipment, plumbing, and fencing in or on the
Premises. The term “Trade
Fixtures” shall mean Lessee’s machinery and equipment that can be removed
without doing material damage to the Premises. The term “Alterations” shall mean any
modification of the improvements, other than Utility Installations or Trade
Fixtures, whether by addition or deletion. “Lessee Owned Alterations and/or
Utility Installations” are defined as Alterations and/or Utility
Installations made by Lessee that are not yet owned by Lessor pursuant to
Paragraph 7.4(a).

     

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

     

    (c) Liens; Bonds. Lessee shall
pay, when due, all claims for labor or materials furnished or alleged to have
been furnished to or for Lessee at or for use on the Premises, which claims are
or may be secured by any mechanic’s or materialmen’s lien against the Premises
or any interest therein. Lessee shall give Lessor not less than 10 days notice
prior to the commencement of any work in, on or about the Premises, and Lessor
shall have the right to post notices of non-responsibility. If

     

    

    
      
        
          
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    Lessee
shall contest the validity of any such lien, claim or demand, then Lessee shall,
at its sole expense defend and protect itself, Lessor and the Premises against
the same and shall pay and satisfy any such adverse judgment that may be
rendered thereon before the enforcement thereof. If Lessor shall require, Lessee
shall furnish a surety bond in an amount equal to 150% of the amount of such
contested lien, claim or demand, indemnifying Lessor against liability for the
same. If Lessor elects to participate in any such action, Lessee shall pay
Lessor’s attorneys’ fees and costs.

     

    7.4 Ownership;
Removal; Surrender; and Restoration.

     

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

     

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

     

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

     

    8. Insurance;
Indemnity.

     

    8.1 Payment
of Premium Increases.

     

    (a) Lessee
shall pay to Lessor any insurance cost increase (“Insurance Cost Increase”)
occurring during the term of this Lease. Insurance Cost Increase is defined as
any increase in the actual cost of the insurance required under Paragraph
8.2(b), 8.3(a) and 8.3(b) (“Required

     

    

    
      
        
          
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    Insurance”), over and above
the Base Premium as hereinafter defined calculated on an annual basis. Insurance
Cost Increase shall include but not be limited to increases resulting from the
nature of Lessee’s occupancy, any act or omission of Lessee, requirements of the
holder of mortgage or deed of trust covering the Premises, increased valuation
of the Premises and/or a premium rate increase. The parties are encouraged to
fill in the Base Premium in paragraph 1.8 with a reasonable premium for the
Required Insurance based on the Agreed Use of the Premises. If the parties fail
to insert a dollar amount in Paragraph 1.8, then the Base Premium shall be the
lowest annual premium reasonably obtainable for the Required Insurance as of the
commencement of the Original Term for the Agreed Use of the Premises. In no
event, however, shall Lessee be responsible for any portion of the increase in
the premium cost attributable to liability insurance carried by Lessor under
Paragraph 8.2(b) in excess of $2,000,000 per occurrence.

     

    (b) Lessee
shall pay any such Insurance Cost Increase to Lessor within 30 days after
receipt by Lessee of a copy of the premium statement or other reasonable
evidence of the amount due. If the insurance policies maintained hereunder cover
other property besides the Premises, Lessor shall also deliver to Lessee a
statement of the amount of such Insurance Cost Increase attributable only to the
Premises showing in reasonable detail the manner in which such amount was
computed. Premiums for policy periods commencing prior to, or extending beyond
the term of this Lease, shall be prorated to correspond to the term of this
Lease.

     

    8.2 Liability
Insurance.

     

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

     

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

     

    8.3 Property
Insurance - Building, Improvements and Rental Value.

     

    (a) Building and Improvements. The
Insuring Party shall obtain and keep in force a policy or policies in the name
of Lessor, with loss payable to Lessor, any ground-lessor, and to any Lender
insuring loss or damage to the Premises. The amount of such insurance shall be
equal to the full insurable replacement cost of the Premises, as the same shall
exist from time to time, or the amount required by any Lender, but in no event
more than the commercially reasonable and available insurable value thereof. If
Lessor is the Insuring Party, however, Lessee Owned Alterations and Utility
Installations, Trade Fixtures, and Lessee’s personal property shall be insured
by Lessee under Paragraph

     

    

    
      
        
          
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     8.4
rather than by Lessor. If the coverage is available and commercially
appropriate, such policy or policies shall insure against all risks of direct
physical loss or damage (except the perils of flood and/or earthquake unless
required by a Lender or included in the Base Premium), including coverage for
debris removal and the enforcement of any Applicable Requirements requiring the
upgrading, demolition, reconstruction or replacement of any portion of the
Premises as the result of a covered loss. Said policy or policies shall also
contain an agreed valuation provision in lieu of any coinsurance clause, waiver
of subrogation, and inflation guard protection causing an increase in the annual
property insurance coverage amount by a factor of not less than the adjusted
U.S. Department of Labor Consumer Price Index for All Urban Consumers for the
city nearest to where the Premises are located. If such insurance coverage has a
deductible clause, the deductible amount shall not exceed $1,000 per occurrence,
and Lessee shall be liable for such deductible amount in the event of an Insured
Loss.

     

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

     

    (c) Adjacent Premises. If the
Premises are part of a larger building, or of a group of buildings owned by
Lessor which are adjacent to the Premises, the Lessee shall pay for any increase
in the premiums for the property insurance of such building or buildings if said
increase is caused by Lessee’s acts, omissions, use or occupancy of the
Premises.

     

    8.4 Lessee’s
Property; Business Interruption Insurance.

     

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

     

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

     

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

     

    8.5 Insurance Policies. Insurance
required herein shall be by companies duly licensed or admitted to transact
business in the state where the Premises are located, and maintaining during the
policy term a “General Policyholders Rating” of at least A-, VI, as set forth in
the most current issue of “Best’s Insurance Guide”, or such other rating as may
be required by a Lender. Lessee shall not do or permit to be done anything which
invalidates the required insurance policies. Lessee shall, prior to the Start
Date, deliver to Lessor certified copies of policies of such insurance or
certificates evidencing the existence and amounts of the required insurance. No
such policy shall be cancelable or subject to

     

    

    
      
        
          
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     modification
except after 30 days prior written notice to Lessor. (The issuing insurer will
endeavor to give such notice within 30 days.) Lessee shall, at least 10 days
prior to the expiration of such policies, furnish Lessor with evidence of
renewals or “insurance binders” evidencing renewal thereof, or Lessor may order
such insurance and charge the cost thereof to Lessee, which amount shall be
payable by Lessee to Lessor upon demand. Such policies shall be for a term of at
least one year, or the length of the remaining term of this Lease, whichever is
less. If either Party shall fail to procure and maintain the insurance required
to be carried by it, the other Party may, but shall not be required to, procure
and maintain the same.

     

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

     

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

     

    8.8 Exemption of Lessor and its Agents
from Liability. Notwithstanding the negligence or breach of this Lease by
Lessor or its agents, neither Lessor nor its agents shall be liable under any
circumstances for: (i) injury or damage to the person or goods, wares,
merchandise or other property of Lessee, Lessee’s employees, contractors,
invitees, customers, or any other person in or about the Premises, whether such
damage or injury is caused by or results from fire, steam, electricity, gas,
water or rain, indoor air quality, the presence of mold or from the breakage,
leakage, obstruction or other defects of pipes, fire sprinklers, wires,
appliances, plumbing, HVAC or lighting fixtures, or from any other cause,
whether the said injury or damage results from conditions arising upon the
Premises or upon other portions of the building of which the Premises are a
part, or from other sources or places, (ii) any damages arising from any act or
neglect of any other tenant of Lessor or from the failure of Lessor or its
agents to enforce the provisions of any other lease in the Project, or (iii)
injury to Lessee’s business or for any loss of income or profit therefrom.
Instead, it is intended that Lessee’s sole recourse in the event of such damages
or injury be to file a claim on the insurance policy(ies) that Lessee is
required to maintain pursuant to the provisions of paragraph 8.

     

    8.9 Failure to Provide Insurance.
Lessee acknowledges that any failure on its part to obtain or maintain the
insurance required herein will expose Lessor to risks and potentially cause
Lessor to incur costs not contemplated by this Lease, the extent of which will
be extremely difficult to ascertain. Accordingly, for any month or portion
thereof that Lessee does not maintain the required insurance and/or does not
provide Lessor with the required binders or certificates evidencing the
existance of the required insurance, the Base Rent shall be automatically
increased, without any requirement for notice to Lessee, by an amount equal to
10% of the then existing Base Rent or $100, whichever is greater. The parties
agree that such increase in Base Rent represents fair and reasonable
compensation for the

     

    

    
      
        
          
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     additional
risk/ costs that Lessor will incur by reason of Lessee’s failure to maintain the
required insurance. Such increase in Base Rent shall in no event constitute a
waiver of Lessee’s Default or Breach with respect to the failure to maintain
such insurance, prevent the exercise of any of the other rights and remedies
granted hereunder, nor relieve Lessee of its obligation to maintain the
insurance specified in this Lease.

     

    9. Damage
or Destruction.

     

    9.1 Definitions.

     

    (a) “Premises Partial Damage” shall
mean damage or destruction to the improvements on the Premises, other than
Lessee Owned Alterations and Utility Installations, which can reasonably be
repaired in 6 months or less from the date of the damage or destruction. Lessor
shall notify Lessee in writing within 30 days from the date of the damage or
destruction as to whether or not the damage is Partial or Total. Notwithstanding
the foregoing, Premises Partial Damage shall not include damage to windows,
doors, and/or other similar items which Lessee has the responsibility to repair
or replace pursuant to the provisions of Paragraph 7.1.

     

    (b) “Premises Total Destruction”
shall mean damage or destruction to the Premises, other than Lessee Owned
Alterations and Utility Installations and Trade Fixtures, which cannot
reasonably be repaired in 6 months or less from the date of the damage or
destruction. Lessor shall notify Lessee in writing within 30 days from the date
of the damage or destruction as to whether or not the damage is Partial or
Total.

     

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

     

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

     

    (e) “Hazardous Substance Condition”
shall mean the occurrence or discovery of a condition involving the presence of,
or a contamination by, a Hazardous Substance as defined in Paragraph 6.2(a), in,
on, or under the Premises which requires repair, remediation, or
restoration.

     

    9.2 Partial Damage - Insured Loss.
If a Premises Partial Damage that is an Insured Loss occurs, then Lessor shall,
at Lessor’s expense, repair such damage (but not Lessee’s Trade Fixtures or
Lessee Owned Alterations and Utility Installations) as soon as reasonably
possible and this Lease shall continue in full force and effect; provided,
however, that Lessee shall, at Lessor’s election, make the repair of any damage
or destruction the total cost to repair of which is $10,000 or less, and, in
such event, Lessor shall make any applicable insurance proceeds available to
Lessee on a reasonable basis for that purpose. Notwithstanding the foregoing, if
the required insurance was not in force or the insurance proceeds are not
sufficient to effect such repair, the Insuring Party shall promptly contribute
the shortage in proceeds (except as to the deductible which is Lessee’s
responsibility) as and when required to complete said repairs. In the event,
however, such shortage was due to the fact that, by reason of the unique nature
of the improvements, full replacement cost insurance coverage was not
commercially

     

    

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

     

    9.3 Partial Damage - Uninsured
Loss. If a Premises Partial Damage that is not an Insured Loss occurs,
unless caused by a negligent or willful act of Lessee (in which event Lessee
shall make the repairs at Lessee’s expense), Lessor may either: (i) repair such
damage as soon as reasonably possible at Lessor’s expense, in which event this
Lease shall continue in full force and effect, or (ii) terminate this Lease by
giving written notice to Lessee within 30 days after receipt by Lessor of
knowledge of the occurrence of such damage. Such termination shall be effective
60 days following the date of such notice. In the event Lessor elects to
terminate this Lease, Lessee shall have the right within 10 days after receipt
of the termination notice to give written notice to Lessor of Lessee’s
commitment to pay for the repair of such damage without reimbursement from
Lessor. Lessee shall provide Lessor with said funds or satisfactory assurance
thereof within 30 days after making such commitment. In such event this Lease
shall continue in full force and effect, and Lessor shall proceed to make such
repairs as soon as reasonably possible after the required funds are available.
If Lessee does not make the required commitment, this Lease shall terminate as
of the date specified in the termination notice.

     

    9.4 Total Destruction.
Notwithstanding any other provision hereof, if a Premises Total Destruction
occurs, this Lease shall terminate 60 days following such Destruction. If the
damage or destruction was caused by the gross negligence or willful misconduct
of Lessee, Lessor shall have the right to recover Lessor’s damages from Lessee,
except as provided in Paragraph 8.6.

     

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

     

    

    
      
        
          
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    9.6 Abatement
of Rent; Lessee’s Remedies.

     

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

     

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

     

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

     

    10. Real
Property Taxes.

     

    10.1 Definition. As used herein,
the term “Real Property
Taxes” shall include any form of assessment; real estate, general,
special, ordinary or extraordinary, or rental levy or tax (other than
inheritance, personal income or estate taxes); improvement bond; and/or license
fee imposed upon or levied against any legal or equitable interest of Lessor in
the Premises or the Project, Lessor’s right to other income therefrom, and/or
Lessor’s business of leasing, by any authority having the direct or indirect
power to tax and where the funds are generated with reference to the Building
address and where the proceeds so generated are to be applied by the city,
county or other local taxing authority of a jurisdiction within which the
Premises are located. Real Property Taxes shall also include any tax, fee, levy,
assessment or charge, or any increase therein: (i) imposed by reason of events
occurring during the term of this Lease, including but not limited to, a change
in the ownership of the Premises, and (ii) levied or assessed on machinery or
equipment provided by Lessor to Lessee pursuant to this Lease.

     

    10.2 (a)           Payment of Taxes. Lessor shall
pay the Real Property Taxes applicable to the Premises provided, however, that
Lessee shall pay to Lessor the amount, if any, by which Real Property Taxes
applicable to the Premises increase over the fiscal tax year during which the
Commencement Date Occurs (“Tax Increase”). Payment of any such Tax Increase
shall be made by Lessee to Lessor within 30 days after receipt of Lessor’s
written statement setting forth the amount due and computation thereof. If any
such taxes shall cover any period of time prior to or after the expiration or
termination of this Lease, Lessee’s share of such taxes shall be prorated to
cover only that portion of the tax bill applicable to the period that this Lease
is in effect. In the event lessee incurs a late charge on any Rent payment,
Lessor may estimate the current Real Property Taxes, and require that the Tax
Increase be paid in advance to Lessor by Lessee monthly in advance with the
payment of the Base Rent. Such

     

    

    
      
        
          
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     monthly
payment shall be an amount equal to the amount of the estimated installment of
the Tax Increase divided by the number of months remaining before the month in
which said installment becomes delinquent. When the actual amount of the
applicable Tax Increase is known, the amount of such equal monthly advance
payments shall be adjusted as required to provide the funds needed to pay the
applicable Tax Increase. If the amount collected by Lessor is insufficient to
pay the Tax Increase when due, Lessee shall pay Lessor, upon demand, such
additional sums as are necessary to pay such obligations. Advance payments may
be intermingled with other moneys of Lessor and shall not bear interest. In the
event of a Breach by Lessee in the performance of its obligations under this
Lease, then any such advance payments may be treated by Lessor as an additional
Security Deposit.

     

    (b) Additional Improvements.
Notwithstanding anything to the contrary in this Paragraph 10.2, Lessee shall
pay to Lessor upon demand therefor the entirety of any increase in Real Property
Taxes assessed by reason of Alterations or Utility Installations placed upon the
Premises by Lessee or at Lessee’s request or by reason of any alterations or
improvements to the Premises made by Lessor subsequent to the execution of this
Lease by the Parties.

     

    10.3 Joint Assessment. If the
Premises are not separately assessed, Lessee’s liability shall be an equitable
proportion of the Tax Increase for all of the land and improvements included
within the tax parcel assessed, such proportion to be conclusively determined by
Lessor from the respective valuations assigned in the assessor’s work sheets or
such other information as may be reasonably available.

     

    10.4 Personal Property Taxes.
Lessee shall pay, prior to delinquency, all taxes assessed against and levied
upon Lessee Owned Alterations, Utility Installations, Trade Fixtures,
furnishings, equipment and all personal property of Lessee. When possible,
Lessee shall cause its Lessee Owned Alterations and Utility Installations, Trade
Fixtures, furnishings, equipment and all other personal property to be assessed
and billed separately from the real property of Lessor. If any of Lessee’s said
property shall be assessed with Lessor’s real property, Lessee shall pay Lessor
the taxes attributable to Lessee’s property within 10 days after receipt of a
written statement setting forth the taxes applicable to Lessee’s
property.

     

    11. Utilities and Services. Lessee
shall pay for all water, gas, heat, light, power, telephone, trash disposal and
other utilities and services supplied to the Premises, together with any taxes
thereon. If any such services are not separately metered or billed to Lessee,
Lessee shall pay a reasonable proportion, to be determined by Lessor, of all
charges jointly metered or billed. There shall be no abatement of rent and
Lessor shall not be liable in any respect whatsoever for the inadequacy,
stoppage, interruption or discontinuance of any utility or service due to riot,
strike, labor dispute, breakdown, accident, repair or other cause beyond
Lessor’s reasonable control or in cooperation with governmental request or
directions.

     

    12. Assignment
and Subletting.

     

    12.1 Lessor’s
Consent Required.

     

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

     

    (b) Unless Lessee is a
corporation and its stock is publicly traded on a national stock exchange, a
change in the control of Lessee shall constitute an assignment
requiring

     

    

    
      
        
          
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     consent. The
transfer, on a cumulative basis, of 25% or more of the voting control of Lessee
shall constitute a change in control for this purpose.

     

    (c) The involvement of Lessee
or its assets in any transaction, or series of transactions (by way of merger,
sale, acquisition, financing, transfer, leveraged buy-out or otherwise), whether
or not a formal assignment or hypothecation of this Lease or Lessee’s assets
occurs, which results or will result in a reduction of the Net Worth of Lessee
by an amount greater than 25% of such Net Worth as it was represented at the
time of the execution of this Lease or at the time of the most recent assignment
to which Lessor has consented, or as it exists immediately prior to said
transaction or transactions constituting such reduction, whichever was or is
greater, shall be considered an assignment of this Lease to which Lessor may
withhold its consent. “Net Worth of Lessee” shall mean the net worth of Lessee
(excluding any guarantors) established under generally accepted accounting
principles.

     

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

     

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

     

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

     

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

     

    12.2 Terms
and Conditions Applicable to Assignment and Subletting.

     

    (a) Regardless
of Lessor’s consent, no assignment or subletting shall: (i) be effective without
the express written assumption by such assignee or sublessee of the obligations
of Lessee under this Lease, (ii) release Lessee of any obligations hereunder, or
(iii) alter the primary liability of Lessee for the payment of Rent or for the
performance of any other obligations to be performed by Lessee.

     

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

     

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

     

    

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

     

    (e) Each
request for consent to an assignment or subletting shall be in writing,
accompanied by information relevant to Lessor’s determination as to the
financial and operational responsibility and appropriateness of the proposed
assignee or sublessee, including but not limited to the intended use and/or
required modification of the Premises, if any, together with a fee of $500 as
consideration for Lessor’s considering and processing said request. Lessee
agrees to provide Lessor with such other or additional information and/or
documentation as may be reasonably requested. (See also Paragraph
36)

     

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

     

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

     

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

     

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

     

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

     

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

     

    

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

     

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

     

    13. Default;
Breach; Remedies.

     

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

     

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

     

    (b) The
failure of Lessee to make any payment of Rent or any Security Deposit required
to be made by Lessee hereunder, whether to Lessor or to a third party, when due,
to provide reasonable evidence of insurance or surety bond, or to fulfill any
obligation under this Lease which endangers or threatens life or property, where
such failure continues for a period of 3 business days following written notice
to Lessee. THE ACCEPTANCE BY LESSOR OF A PARTIAL PAYMENT OF RENT OR SECURITY
DEPOSIT SHALL NOT CONSTITUTE A WAIVER OF ANY OF LESSOR’S RIGHTS, INCLUDING
LESSOR’S RIGHT TO RECOVER POSSESSION OF THE PREMISES.

     

    (c) The
failure of Lessee to allow Lessor and/or its agents access to the Premises or
the commission of waste, act or acts constituting public or private nuisance,
and/or an illegal activity on the Premises by Lessee, where such actions
continue for a period of 3 business days following written notice to
Lessee.

     

    (d) The
failure by Lessee to provide (i) reasonable written evidence of compliance with
Applicable Requirements, (ii) the service contracts, (iii) the rescission of an
unauthorized assignment or subletting, (iv) an Estoppel Certificate or financial
statements, (v) a requested subordination, (vi) evidence concerning any guaranty
and/or Guarantor, (vii) any document requested under Paragraph 42, (viii)
material safety data sheets (MSDS), or (ix) any other documentation or
information which Lessor may reasonably require of Lessee under the terms of
this Lease, where any such failure continues for a period of 10 days following
written notice to Lessee.

     

    (e) A Default
by Lessee as to the terms, covenants, conditions or provisions of this Lease, or
of the rules adopted under Paragraph 40 hereof, other than those described in
subparagraphs 13.1(a), (b), (c) or (d), above, where such Default continues for
a period of 30 days after written notice; provided, however, that if the nature
of Lessee’s Default is such that more than 30 days are reasonably required for
its cure, then it shall not be deemed to be a Breach if Lessee commences such
cure within said 30 day period and thereafter diligently prosecutes such cure to
completion.

     

    (f) The
occurrence of any of the following events: (i) the making of any general
arrangement or assignment for the benefit of creditors; (ii) becoming a “debtor” as defined in
11

     

    

    
      
        
          
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     U.S.C.
§101 or any successor statute thereto (unless, in the case of a petition filed
against Lessee, the same is dismissed within 60 days); (iii) the appointment of
a trustee or receiver to take possession of substantially all of Lessee’s assets
located at the Premises or of Lessee’s interest in this Lease, where possession
is not restored to Lessee within 30 days; or (iv) the attachment, execution or
other judicial seizure of substantially all of Lessee’s assets located at the
Premises or of Lessee’s interest in this Lease, where such seizure is not
discharged within 30 days; provided, however, in the event that any provision of
this subparagraph (e) is contrary to any applicable law, such provision shall be
of no force or effect, and not affect the validity of the remaining
provisions.

     

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

     

    (h) If the
performance of Lessee’s obligations under this Lease is guaranteed: (i) the
death of a Guarantor, (ii) the termination of a Guarantor’s liability with
respect to this Lease other than in accordance with the terms of such guaranty,
(iii) a Guarantor’s becoming insolvent or the subject of a bankruptcy filing,
(iv) a Guarantor’s refusal to honor the guaranty, or (v) a Guarantor’s breach of
its guaranty obligation on an anticipatory basis, and Lessee’s failure, within
60 days following written notice of any such event, to provide written
alternative assurance or security, which, when coupled with the then existing
resources of Lessee, equals or exceeds the combined financial resources of
Lessee and the Guarantors that existed at the time of execution of this
Lease.

     

    13.2 Remedies. If Lessee fails to
perform any of its affirmative duties or obligations, within 10 days after
written notice (or in case of an emergency, without notice), Lessor may, at its
option, perform such duty or obligation on Lessee’s behalf, including but not
limited to the obtaining of reasonably required bonds, insurance policies, or
governmental licenses, permits or approvals. Lessee shall pay to Lessor an
amount equal to 115% of the costs and expenses incurred by Lessor in such
performance upon receipt of an invoice therefor. In the event of a Breach,
Lessor may, with or without further notice or demand, and without limiting
Lessor in the exercise of any right or remedy which Lessor may have by reason of
such Breach:

     

    (a) Terminate
Lessee’s right to possession of the Premises by any lawful means, in which case
this Lease shall terminate and Lessee shall immediately surrender possession to
Lessor. In such event Lessor shall be entitled to recover from Lessee: (i) the
unpaid Rent which had been earned at the time of termination; (ii) the worth at
the time of award of the amount by which the unpaid rent which would have been
earned after termination until the time of award exceeds the amount of such
rental loss that the Lessee proves could have been reasonably avoided; (iii) the
worth at the time of award of the amount by which the unpaid rent for the
balance of the term after the time of award exceeds the amount of such rental
loss that the Lessee proves could be reasonably avoided; and (iv) any other
amount necessary to compensate Lessor for all the detriment proximately caused
by the Lessee’s failure to perform its obligations under this Lease or which in
the ordinary course of things would be likely to result therefrom, including but
not limited to the cost of recovering possession of the Premises, expenses of
reletting, including necessary renovation and alteration of the Premises,
reasonable attorneys’ fees, and that portion of any leasing commission paid by
Lessor in connection with this Lease applicable to the unexpired term of this
Lease. The worth at the time of award of the amount referred to in provision
(iii) of the immediately preceding sentence shall be computed by discounting
such amount at the discount rate of the Federal Reserve Bank of the District
within which the Premises are located at the time of award plus one percent.
Efforts by Lessor to mitigate damages caused by Lessee’s Breach of this Lease
shall not waive Lessor’s right to recover damages under Paragraph 12. If
termination of this Lease is obtained through the provisional remedy of unlawful
detainer, Lessor shall have the right to recover in such proceeding any unpaid
Rent and damages as are recoverable therein, or Lessor may reserve the right
to

     

    

    
      
        
          
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     recover
all or any part thereof in a separate suit. If a notice and grace period
required under Paragraph 13.1 was not previously given, a notice to pay rent or
quit, or to perform or quit given to Lessee under the unlawful detainer statute
shall also constitute the notice required by Paragraph 13.1. In such case, the
applicable grace period required by Paragraph 13.1 and the unlawful detainer
statute shall run concurrently, and the failure of Lessee to cure the Default
within the greater of the two such grace periods shall constitute both an
unlawful detainer and a Breach of this Lease entitling Lessor to the remedies
provided for in this Lease and/or by said statute.

     

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

     

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

     

    13.3 Inducement Recapture. Any
agreement for free or abated rent or other charges, or for the giving or paying
by Lessor to or for Lessee of any cash or other bonus, inducement or
consideration for Lessee’s entering into this Lease, all of which concessions
are hereinafter referred to as “Inducement Provisions,” shall
be deemed conditioned upon Lessee’s full and faithful performance of all of the
terms, covenants and conditions of this Lease. Upon Breach of this Lease by
Lessee, any such Inducement Provision shall automatically be deemed deleted from
this Lease and of no further force or effect, and any rent, other charge, bonus,
inducement or consideration theretofore abated, given or paid by Lessor under
such an inducement Provision shall be immediately due and payable by Lessee to
Lessor, notwithstanding any subsequent cure of said Breach by Lessee. The
acceptance by Lessor of rent or the cure of the Breach which initiated the
operation of this paragraph shall not be deemed a waiver by Lessor of the
provisions of this paragraph unless specifically so stated in writing by Lessor
at the time of such acceptance.

     

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

     

    13.5 Interest. Any monetary payment
due Lessor hereunder, other than late charges, not received by Lessor, when due
as to scheduled payments (such as Base Rent) or within 30 days following the
date on which it was due for non-scheduled payment, shall bear interest from the
date when due, as to scheduled payments, or the 31st day after it was due as to
non-scheduled payments. The interest

     

    

    
      
        
          
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     (“Interest”) charged shall be
computed at the rate of 10% per annum but shall not exceed the maximum rate
allowed by law. Interest is payable in addition to the potential late charge
provided for in Paragraph 13.4.

     

    13.6 Breach
by Lessor.

     

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

     

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

     

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

     

    15. Brokerage
Fees.

     

    15.1 Additional Commission. In
addition to the payments owed pursuant to Paragraph 1.9 above, and unless Lessor
and the Brokers otherwise agree in writing, Lessor agrees that: (a) if Lessee
exercises any Option, (b) if Lessee or anyone affiliated with Lessee acquires
any rights to the

     

    

    
      
        
          
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     Premises
or other premises owned by Lessor and located within the same Project, if any,
within which the Premises is located, (c) if Lessee remains in possession of the
Premises, with the consent of Lessor, after the expiration of this Lease, or (d)
if Base Rent is increased, whether by agreement or operation of an escalation
clause herein, then, Lessor shall pay Brokers a fee in accordance with the
schedule of the Brokers in effect at the time of the execution of this
Lease.

     

    15.2 Assumption of Obligations. Any
buyer or transferee of Lessor’s interest in this Lease shall be deemed to have
assumed Lessor’s obligation hereunder. Brokers shall be third party
beneficiaries of the provisions of Paragraphs 1.9, 15, 22 and 31. If Lessor
fails to pay to Brokers any amounts due as and for brokerage fees pertaining to
this Lease when due, then such amounts shall accrue Interest. In addition, if
Lessor fails to pay any amounts to Lessee’s Broker when due, Lessee’s Broker may
send written notice to Lessor and Lessee of such failure and if Lessor fails to
pay such amounts within 10 days after said notice, Lessee shall pay said monies
to its Broker and offset such amounts against Rent. In addition, Lessee’s Broker
shall be deemed to be a third party beneficiary of any commission agreement
entered into by and/or between Lessor and Lessor’s Broker for the limited
purpose of collecting any brokerage fee owed.

     

    15.3 Representations and Indemnities of
Broker Relationships. Lessee and Lessor each represent and warrant to the
other that it has had no dealings with any person, firm, broker or finder (other
than the Brokers, if any) in connection with this Lease, and that no one other
than said named Brokers is entitled to any commission or finder’s fee in
connection herewith. Lessee and Lessor do each hereby agree to indemnify,
protect, defend and hold the other harmless from and against liability for
compensation or charges which may be claimed by any such unnamed broker, finder
or other similar party by reason of any dealings or actions of the indemnifying
Party, including any costs, expenses, attorneys’ fees reasonably incurred with
respect thereto.

     

    16. Estoppel
Certificates.

     

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

     

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

     

    (c) If Lessor
desires to finance, refinance, or sell the Premises, or any part thereof, Lessee
and all Guarantors shall within 10 days after written notice from Lessor deliver
to any potential lender or purchaser designated by Lessor such financial
statements as may be reasonably required by such lender or purchaser, including
but not limited to Lessee’s financial statements for the past 3 years. All such
financial statements shall be received by Lessor and such lender or purchaser in
confidence and shall be used only for the purposes herein set
forth.

     

    

    
      
        
          
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    17. Definition of Lessor. The term
“Lessor” as used herein
shall mean the owner or owners at the time in question of the fee title to the
Premises, or, if this is a sublease, of the Lessee’s interest in the prior
lease. In the event of a transfer of Lessor’s title or interest in the Premises
or this Lease, Lessor shall deliver to the transferee or assignee (in cash or by
credit) any unused Security Deposit held by Lessor. Upon such transfer or
assignment and delivery of the Security Deposit, as aforesaid, the prior Lessor
shall be relieved of all liability with respect to the obligations and/or
covenants under this Lease thereafter to be performed by the Lessor. Subject to
the foregoing, the obligations and/or covenants in this Lease to be performed by
the Lessor shall be binding only upon the Lessor as hereinabove
defined.

     

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

     

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

     

    20. Limitation on Liability. The
obligations of Lessor under this Lease shall not constitute personal obligations
of Lessor or its partners, members, directors, officers or shareholders, and
Lessee shall look to the Premises, and to no other assets of Lessor, for the
satisfaction of any liability of Lessor with respect to this Lease, and shall
not seek recourse against Lessor’s partners, members, directors, officers or
shareholders, or any of their personal assets for such
satisfaction.

     

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

     

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

     

    23. Notices.

     

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

     

    23.2 Date of Notice. Any notice
sent by registered or certified mail, return receipt requested, shall be deemed
given on the date of delivery shown on the receipt card, or if no delivery date
is shown, the postmark thereon. If sent by regular mail the notice shall be
deemed given 72 hours after the

     

    

    
      
        
          
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    same is
addressed as required herein and mailed with postage prepaid. Notices delivered
by United States Express Mail or overnight courier that guarantee next day
delivery shall be deemed given 24 hours after delivery of the same to the Postal
Service or courier. Notices transmitted by facsimile transmission or similar
means shall be deemed delivered upon telephone confirmation of receipt
(confirmation report from fax machine is sufficient), provided a copy is also
delivered via delivery or mail. If notice is received on a Saturday, Sunday or
legal holiday, it shall be deemed received on the next business
day.

     

    24. Waivers.

     

    (a) No waiver
by Lessor of the Default or Breach of any term, covenant or condition hereof by
Lessee, shall be deemed a waiver of any other term, covenant or condition
hereof, or of any subsequent Default or Breach by Lessee of the same or of any
other term, covenant or condition hereof. Lessor’s consent to, or approval of,
any act shall not be deemed to render unnecessary the obtaining of Lessor’s
consent to, or approval of, any subsequent or similar act by Lessee, or be
construed as the basis of an estoppel to enforce the provision or provisions of
this Lease requiring such consent.

     

    (b) The
acceptance of Rent by Lessor shall not be a waiver of any Default or Breach by
Lessee. Any payment by Lessee may be accepted by Lessor on account of moneys or
damages due Lessor, notwithstanding any qualifying statements or conditions made
by Lessee in connection therewith, which such statements and/or conditions shall
be of no force or effect whatsoever unless specifically agreed to in writing by
Lessor at or before the time of deposit of such payment.

     

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

     

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

     

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

     

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

     

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

     

    

    
      
        
          
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     the Lessor: a.
Diligent exercise of reasonable skills and care in performance of the agent’s
duties. b. A duty of honest and fair dealing and good faith. c. A duty to
disclose all facts known to the agent materially affecting the value or
desirability of the property that are not known to, or within the diligent
attention and observation of, the Parties. An agent is not obligated to reveal
to either Party any confidential information obtained from the other Party which
does not involve the affirmative duties set forth above.

     

    (iii) Agent Representing Both
Lessor and Lessee. A real estate agent, either acting directly or through
one or more associate licenses, can legally be the agent of both the Lessor and
the Lessee in a transaction, but only with the knowledge and consent of both the
Lessor and the Lessee. In a dual agency situation, the agent has the following
affirmative obligations to both the Lessor and the Lessee: a. A fiduciary duty
of utmost care, integrity, honesty and loyalty in the dealings with either
Lessor or the Lessee. b. Other duties to the Lessor and the Lessee as stated
above in subparagraphs (i) or (ii). In representing both Lessor and Lessee, the
agent may not without the express permission of the respective Party, disclose
to the other Party that the Lessor will accept rent in an amount less than that
indicated in the listing or that the Lessee is willing to pay a higher rent than
that offered. The above duties of the agent in a real estate transaction do not
relieve a Lessor or Lessee from the responsibility to protect their own
interests. Lessor and Lessee should carefully read all agreements to assure that
they adequately express their understanding of the transaction. A real estate
agent is a person qualified to advise about real estate. If legal or tax advice
is desired, consult a competent professional.

     

    (b) Brokers
have no responsibility with respect to any default or breach hereof by either
Party. The Parties agree that no lawsuit or other legal proceeding involving any
breach of duty, error or omission relating to this Lease may be brought against
Broker more than one year after the Start Date and that the liability (including
court costs and attorneys’ fees), of any Broker with respect to any such lawsuit
and/or legal proceeding shall not exceed the fee received by such Broker
pursuant to this Lease; provided, however, that the foregoing limitation on each
Broker’s liability shall not be applicable to any gross negligence or willful
misconduct of such Broker.

     

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

     

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

     

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

     

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

     

    

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

     

    30. Subordination;
Attornment; Non-Disturbance.

     

    30.1 Subordination. This Lease and
any Option granted hereby shall be subject and subordinate to any ground lease,
mortgage, deed of trust, or other hypothecation or security device
(collectively, “Security
Device”), now or hereafter placed upon the Premises, to any and all
advances made on the security thereof, and to all renewals, modifications, and
extensions thereof. Lessee agrees that the holders of any such Security Devices
(in this Lease together referred to as “Lender”) shall have no
liability or obligation to perform any of the obligations of Lessor under this
Lease. Any Lender may elect to have this Lease and/or any Option granted hereby
superior to the lien of its Security Device by giving written notice thereof to
Lessee, whereupon this Lease and such Options shall be deemed prior to such
Security Device, notwithstanding the relative dates of the documentation or
recordation thereof.

     

    30.2 Attornment. In the event that
Lessor transfers title to the Premises, or the Premises are acquired by another
upon the foreclosure or termination of a Security Devise to which this Lease is
subordinated (i) Lessee shall, subject to the non-disturbance provisions of
Paragraph 30.3, attorn to such new owner, and upon request, enter into a new
lease, containing all of the terms and provisions of this Lease, with such new
owner for the remainder of the term hereof, or, at the election of the new
owner, this Lease will automatically become a new lease between Lessee and such
new owner, and (ii) Lessor shall thereafter be relieved of any further
obligations hereunder and such new owner shall assume all of Lessor’s
obligations, except that such new owner shall not: (a) be liable for any act or
omission of any prior lessor or with respect to events occurring prior to
acquisition of ownership; (b) be subject to any offsets or defenses which Lessee
might have against any prior lessor, (c) be bound by prepayment of more than one
month’s rent, or (d) be liable for the return of any security deposit paid to
any prior lessor which was not paid or credited to such new owner.

     

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

     

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

     

    

    
      
        
          
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    31. Attorneys’ Fees. If any Party
or Broker brings an action or proceeding involving the Premises whether founded
in tort, contract or equity, or to declare rights hereunder, the Prevailing
Party (as hereafter defined) in any such proceeding, action, or appeal thereon,
shall be entitled to reasonable attorneys’ fees. Such fees may be awarded in the
same suit or recovered in a separate suit, whether or not such action or
proceeding is pursued to decision or judgment. The term, “Prevailing Party” shall
include, without limitation, a Party or Broker who substantially obtains or
defeats the relief sought, as the case may be, whether by compromise,
settlement, judgment, or the abandonment by the other Party or Broker of its
claim or defense. The attorneys’ fees award shall not be computed in accordance
with any court fee schedule, but shall be such as to fully reimburse all
attorneys’ fees reasonably incurred. In addition, Lessor shall be entitled to
attorneys’ fees, costs and expenses incurred in the preparation and service of
notices of Default and consultations in connection therewith, whether or not a
legal action is subsequently commenced in connection with such Default or
resulting Breach ($200 is a reasonable minimum per occurrence for such services
and consultation).

     

    32. Lessor’s Access; Showing Premises;
Repairs. Lessor and Lessor’s agents shall have the right to enter the
Premises at any time, in the case of an emergency, and otherwise at reasonable
times after reasonable prior notice for the purpose of showing the same to
prospective purchasers, lenders, or tenants, and making such alterations,
repairs, improvements or additions to the Premises as Lessor may deem necessary
or desirable and the erecting, using and maintaining of utilities, services,
pipes and conduits through the Premises and/or other premises as long as there
is no material adverse effect to Lessee’s use of the Premises. All such
activities shall be without abatement of rent or liability to
Lessee.

     

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

     

    34. Signs. Lessor may place on the
Premises ordinary “For Sale” signs at any time and ordinary “For Lease” signs
during the last 6 months of the term hereof. Except for ordinary “for sublease”
signs, Lessee shall not place any sign upon the Premises without Lessor’s prior
written consent. All signs must comply with all Applicable
Requirements.

     

    35. Termination; Merger. Unless
specifically stated otherwise in writing by Lessor, the voluntary or other
surrender of this Lease by Lessee, the mutual termination or cancellation
hereof, or a termination hereof by Lessor for Breach by Lessee, shall
automatically terminate any sublease or lesser estate in the Premises; provided,
however, that Lessor may elect to continue any one or all existing subtenancies.
Lessor’s failure within 10 days following any such event to elect to the
contrary by written notice to the holder of any such lesser interest, shall
constitute Lessor’s election to have such event constitute the termination of
such interest.

     

    36. Consents. Except as otherwise
provided herein, wherever in this Lease the consent of a Party is required to an
act by or for the other Party, such consent shall not be unreasonably withheld
or delayed. Lessor’s actual reasonable costs and expenses (including but not
limited to architects’, attorneys’, engineers’ and other consultants’ fees)
incurred in the consideration of, or response to, a request by Lessee for any
Lessor consent, including but not limited to consents to an assignment, a
subletting or the presence or use of a Hazardous Substance, shall be paid by
Lessee upon receipt of an invoice and supporting documentation therefor.
Lessor’s consent to any act, assignment or subletting shall not constitute an
acknowledgment that no Default or Breach by Lessee of this Lease exists, nor
shall such consent be deemed a waiver of any then existing Default or Breach,
except as may be otherwise

     

    

    
      
        
          
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     specifically
stated in writing by Lessor at the time of such consent. The failure to specify
herein any particular condition to Lessor’s consent shall not preclude the
imposition by Lessor at the time of consent of such further or other conditions
as are then reasonable with reference to the particular matter for which consent
is being given. In the event that either Party disagrees with any determination
made by the other hereunder and reasonably requests the reasons for such
determination, the determining party shall furnish its reasons in writing and in
reasonable detail within 10 business days following such request.

     

    37. Guarantor.

     

    37.1 Execution. The Guarantors, if
any, shall each execute a guaranty in the form most recently published by the
AIR Commercial Real Estate Association.

     

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

     

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

     

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

     

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

     

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

     

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

     

    39.4 Effect
of Default on Options.

     

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

     

    

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

     

    (c) An Option
shall terminate and be of no further force or effect, notwithstanding Lessee’s
due and timely exercise of the Option, if, after such exercise and prior to the
commencement of the extended term or completion of the purchase, (i) Lessee
fails to pay Rent for a period of 30 days after such Rent becomes due (without
any necessity of Lessor to give notice thereof), or (ii) if Lessee commits a
Breach of this Lease.

     

    40. Multiple Buildings. If the
Premises are a part of a group of buildings controlled by Lessor, Lessee agrees
that it will abide by and conform to all reasonable rules and regulations which
Lessor may make from time to time for the management, safety, and care of said
properties, including the care and cleanliness of the grounds and including the
parking, loading and unloading of vehicles, and to cause its employees,
suppliers, shippers, customers, contractors and invitees to so abide and
conform. Lessee also agrees to pay its fair share of common expenses incurred in
connection with such rules and regulations.

     

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

     

    42. Reservations. Lessor reserves
to itself the right, from time to time, to grant, without the consent or joinder
of Lessee, such easements, rights and dedications that Lessor deems necessary,
and to cause the recordation of parcel maps and restrictions, so long as such
easements, rights, dedications, maps and restrictions do not unreasonably
interfere with the use of the Premises by Lessee. Lessee agrees to sign any
documents reasonably requested by Lessor to effectuate any such easement rights,
dedication, map or restrictions.

     

    43. Performance Under Protest. If
at any time a dispute shall arise as to any amount or sum of money to be paid by
one Party to the other under the provisions hereof, the Party against whom the
obligation to pay the money is asserted shall have the right to make payment
“under protest” and such payment shall not be regarded as a voluntary payment
and there shall survive the right on the part of said Party to institute suit
for recovery of such sum. If it shall be adjudged that there was no legal
obligation on the part of said Party to pay such sum or any part thereof, said
Party shall be entitled to recover such sum or so much thereof as it was not
legally required to pay. A Party who does not initiate suit for the recovery of
sums paid “under protest” within 6 months shall be deemed to have waived its
right to protest such payment.

     

    44. Authority;
Multiple Parties; Execution.

     

    (a) If either
Party hereto is a corporation, trust, limited liability company, partnership, or
similar entity, each individual executing this Lease on behalf of such entity
represents and warrants that he or she is duly authorized to execute and deliver
this Lease on its behalf. Each Party shall, within 30 days after request,
deliver to the other Party satisfactory evidence of such authority.

     

    

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

     

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

     

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

     

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

     

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

     

    48. Waiver of Jury Trial. THE PARTIES HEREBY WAIVE THEIR
RESPECTIVE RIGHTS TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING INVOLVING THE
PROPERTY OR ARISING OUT OF THIS AGREEMENT.

     

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

     

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

     

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

    

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

    

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

    

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

    

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

    

    

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

    

    
      	
              Executed
      at:                                                                  

            	
              Executed
      at:                                                                  

            
	
              On:                                                                  

            	
              On:                                                                  

            
	 
      	 
      
	
              By
      LESSOR:

            	
              By
      LESSEE:

            
	
              Domenigoni-Barton
      Properties                                                                  

            	
              Advance Display Technologies,
      Inc.

            
	 
      	 
      
	
              By:                                                                  

            	
              By:                                                                  

            
	
              Name
      Printed:                                                                  

            	
              Name
      Printed: Matthew W. Shankle

            
	
              Title:                                                                  

            	
              Title:
      President & CEO

            
	 
      	 
      
	
              By:                                                                  

            	
              By:                                                                  

            
	
              Name
      Printed:                                                                  

            	
              Name
      Printed:                                                                  

            
	
              Title:                                                                  

            	
              Title:                                                                  

            
	
              Address:                                                                  

            	
              Address:
      7334 South Alton Way, Suite F

            
	 
      	
              Centennial,
      CO 80112

            
	
              Telephone:
      (
      )                                                                  

            	
              Telephone:
      (303) 267.0111

            
	
              Facsimile:
      (
      )                                                                  

            	
              Facsimile:
      (303) 267.0330

            
	
              Federal
      ID
      No.                                                                  

            	
              Federal
      ID
      No.                                                                  

            
	 
      	 
      
	
              BROKER:

            	
              BROKER:

            
	
              D. L. Phares &
      Associates                                                                  

            	
              Rancon Real
      Estate                                                                  

            
	 
      	 
      
	
              Att:
      Mark K. O’Connor

            	
              Att:
      Glen Caldwell

            
	
              Title:                                                                  

            	
              Title:                                                                  

            
	
              Address:
      43620 Ridge Park Drive, Suite 320

            	
              Address:
      27740 Jefferson Avenue, Suite 100

            
	 
      	
              Temecula,
      CA 92590

            
	
              Telephone:
      (951) 695.7600

            	
              Telephone:(951)
      676.8418

            
	
              Facsimile:
      (951) 695.7603

            	
              Facsimile:(951)
      699.0387

            
	
              Federal
      ID No. 33-0260825

            	
              Federal
      ID
      No.                                                                  

            

    

    

    NOTICE:
These forms are often modified to meet changing requirements of law and industry
needs.  Always write or call to make sure you are utilizing the most
current form: AIR Commercial Real Estate Association, 800 W 6th Street, Suite
800, Los Angeles, CA 90017.

    Telephone
No. (213) 687-8777. Fax No.: (213) 687-8616.

    

    ©
Copyright 2001 - By AIR Commercial Real Estate Association. All rights
reserved.

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

    

    

    
      
        
          
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      ADDENDUM

      

      ADDENDUM
TO THE STANDARD LEASE DATED FEBRUARY 25, 2008 AND BETWEEN DOMENIGONI-BARTON
PROPERTIES, A CALIFORNIA GENERAL PARTNERSHIP (“LESSOR”) AND ADVANCE DISPLAY
TECHNOLOGIES, INC. (“LESSEE”) FOR THE PREMISES LOCATED AT 42230 ZEVO DRIVE,
TEMECULA, CA 92590.

      

      
        	
                1.  

              	
                Early
      Occupancy:

              

      

       

      Lessor
shall grant Lessee occupancy to the premises prior to the Lease Commencement
Date only if Lessee has delivered the following to Lessor or Lessor’s
Agent.

       

      
        	
                A.  

              	
                Fully
      executed Lease

              

      

       

      
        	
                B.  

              	
                Cashier’s
      check in the amount of $28,804.90 payable to Domenigoni-Barton
      Properties.

              

      

       

      
        	
                C.  

              	
                Certificate
      of liability insurance per Paragraph 8.2 of the Lease naming
      Domenigoni-Barton Properties and Sky Canyon Enterprises, LLC as additional
      insureds.

              

      

       

      
        	
                2.  

              	
                Insurance:

              

      

       

      
        	
                 
      

              	
                Lessee
      will furnish a Certificate of Insurance at lease signing for not less than
      $2,000,000 liability and $500,000 fire damage naming Domenigoni-Barton
      Properties, Lessor, and Sky Canyon Enterprises, LLC, as additional
      insureds.

              

      

       

      
        	
                3.  

              	
                Base
      Rent:

              

      

       

      April 1,
2008 to March 31, 2009

       

      $13,552.00  per
month, Modified Gross

       

      April 1,
2009 to March 31, 2010

       

      $13,958.56
per month, Modified Gross

       

      April 1,
2010 to March 31, 2011

       

      $14,377.32
per month, Modified Gross

       

      April 1,
2011 to March 31, 2012

       

      $14,808.64
per month, Modified Gross

       

      April 1,
2012 to March 31, 2013

       

      $15,252.90
per month, Modified Gross

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

         

      

      
        	
                4.  

              	
                Other
      Expenses:

              

      

       

      
        	
                Lessor
      Expenses:

              	
                Lessor
      shall be responsible for the payment of the property owners’ association
      expenses.

              

      

       

      
        	
                Lessee
      Expenses:

              	
                Lessee
      shall be responsible for utilities, landscaping, trash removal, fire
      detection, sprinkler monitoring, and security alarm
      system.  Lessor shall bill Lessee monthly/quarterly for fire
      detection, landscaping, and sprinkler
  monitoring.

              

      

       

      
        	
                5.  

              	
                Option
      to Extend:

              

      

       

      In
reference to Paragraph 39 of the Lease:

       

      Lessee
shall have one 5-year Option to Extend Lease Term

       

      Lessee
shall have the right to exercise the Option to Extend not more than nine months
but not less than six months prior to the completion of original Lease
Term

       

      Fixed
Rental Adjustments (FRA) shall be used to calculate the New Base Rent. FRA
Adjustment Date shall be April 1, 2013 and shall be calculated as an additional
3% of the Base Rent in effect prior to the execution of the Option to Extend; 3%
annual increases thereafter.

       

      
        	
                6.  

              	
                Signage:

              

      

       

      Lessee
shall be allowed signage in accordance with project design guidelines and
appropriate City of Temecula and POA ordinance(s).

       

      
        	
                7.  

              	
                Condition
      of Premises:

              

      

       

      Lessor
shall deliver the premises with the lighting, loading doors, and mechanical
systems in good operating condition.

       

      
        	
                8.  

              	
                Tenant
      Improvements:

              

      

       

      Lessor at
Lessor’s expense shall deliver the premises to the Lessee with the following
modifications and endeavor to complete these modifications on or before April 1,
2008.

       

      
        	
                1.  

              	
                Passage
      way walled up between the two front offices on the
  right.

              

      

       

      
        	
                2.  

              	
                Passage
      way created  from office to warehouse area on the
      left.

              

      

       

      
        	
                3.  

              	
                Office
      area painted and carpeted.

              

      

       

      
        	
                4.  

              	
                Warehouse
      floor area cleaned in preparation of Lessee sealing the warehouse
      floor.

              

      

       

      
        
          
          

        

        
          
          

          
            

          

        

        
          
          

        

         

      

      Prior to
Lessee commencing any construction on the building or offices, plans shall be
submitted to the Lessor in writing and are subject to the Lessor’s review and
reasonable approval.  Lessee’s Tenant Improvement Plans shall also be
subject to approval and permits of the City of Temecula.

       

      
        	
                9.  

              	
                Commission:

              

      

       

      Rancon
Real Estate represents Lessee and D.L. Phares & Associates represents
Lessor.  Upon mutual execution by Lessor and Lessee of the AIR
Standard Industrial/Commercial Single-Tenant Lease-Gross, commission shall be
due and payable by Lessor according to the rents specified in Section 3 of this
Addendum. The commission shall be split evenly (50/50) by Rancon Real Estate and
D.L. Phares & Associates per the following schedule.

       

      Year 1:
6% of annual Rent

      Year
2:  6% of annual Rent

      Year 3:
5% of annual Rent

      Year 4:
4% of annual Rent

      Year 5:
4% of annual Rent

      

      
        	
                10.  

              	
                Arbitration
      of Disputes:

              

      

       

      Any
controversy arising under or relating to this Agreement shall be determined by
binding arbitration to be conducted by the American Arbitration Association in
accordance with its commercial rules.  Arbitration hearings shall be
held in the county where the property is located.

       

      Notice:
By initialing in the space below, you are agreeing to have any dispute arising
out of the matters included in the “Arbitration of Disputes” provision decided
by neutral arbitration as provided by California law, and you are giving up any
rights you might possess to have the dispute litigated in a court or jury
trial.  By initialing in the space below, you are giving up your
judicial rights to discovery and appeal, unless those rights are specifically
included in the “Arbitration of Disputes” provision. If you refuse to submit to
arbitration after agreeing to this provision, you may be compelled to arbitrate
under the authority of the California Code of Civil Procedure.  Your
agreement to this arbitration provision is voluntary.

       

      We have
read and understand the foregoing and agree to submit disputes arising out of
the matters included in the “Arbitration of Disputes” provision to neutral
arbitration.

       

      
        	 
      	 
      	 
      
	
                Owner’s
      Initials

              	 
      	
                Agent’s
      Initials

              

      

      

      

      
        	 
      	 
      	 
      
	 
      	 
      	 
      
	
                INITIALS

              	 
      	
                INITIALS

              

      

      

      
        
          
             

          

           

        

        
           

          
            

          

        

        
           

        

      

      AIR
COMMERCIAL REAL ESTATE ASSOCIATION

       

      GUARANTY
OF LEASE

       

      WHEREAS,
Domenigoni-Barton Properties, a California general partnership, hereinafter
“Lessor”, and Advance Display Technologies, Inc., hereinafter “Lessee”, are
about to execute a document entitled “Lease” dated February 25, 2008
concerning the premises commonly known as 42230 Zevo Drive, Temecula,
California, wherein Lessor will lease the premises to Lessee, and

       

      WHEREAS,
Advance Display Technologies, Inc. hereinafter “Guarantor” have a financial
interest in Lessee, and

       

      WHEREAS,
Lessor would not execute the Lease if Guarantor did not execute and deliver to
Lessor this Guaranty of Lease.

       

      NOW
THEREFORE, in consideration of the execution of said Lease by Lessor and as a
material inducement to Lessor to execute said Lease, Guarantor hereby jointly,
severally, unconditionally and irrevocably guarantees the prompt payment by
Lessee of all rents and all other sums payable by Lessee under said Lease and
the faithful and prompt performance by Lessee of each and every one of the
terms, conditions and covenants of said Lease to be kept and performed by
Lessee.

       

      It is
specifically agreed by Lessor and Guarantor that: (i) the terms of the foregoing
Lease may be modified by agreement between Lessor and Lessee, or by a course of
conduct, and (ii) said Lease may be assigned by Lessor or any assignee of Lessor
without consent or notice to Guarantor and that this Guaranty shall guarantee
the performance of said Lease as so modified.

       

      This
Guaranty shall not be released, modified or affected by the failure or delay on
the part of Lessor to enforce any of the rights or remedies of the Lessor under
said Lease.

       

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

       

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

       

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

       

      Guarantor
does hereby subordinate all existing or future indebtedness of Lessee to
Guarantor to the obligations owed to Lessor under the Lease and this
Guaranty.

       

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

       

      The
obligations of Lessee under the Lease to execute and deliver estoppel statements
and financial statements, as therein provided, shall be deemed to also require
the Guarantor to do and provide the same to Lessor. The failure of the Guarantor
to provide the same to Lessor shall constitute a default under the
Lease.

       

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

       

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

       

      Any
recovery by Lessor from any other guarantor or insurer shall first be credited
to the portion of Lessee’s indebtedness to Lessor that exceeds the maximum
liability of Guarantor under this Guaranty.

       

      Any
recovery by Lessor from any other guarantor or insurer shall first be credited
to the portion of Lessee’s indebtedness to Lessor that exceeds the maximum
liability of Guarantor under this Guaranty.

       

      No
provision of this Guaranty or right of the Lessor can be waived, nor can the
Guarantor be released from its obligations except in writing signed by the
Lessor.

       

      Any
litigation concerning this Guaranty shall be initiated in a state court of
competent jurisdiction in the county in which the leased premises are located
and the Guarantor consents to the jurisdiction of such court. This Guaranty
shall be governed by the laws of the State in which the leased premises are
located and for the purposes of any rules regarding conflicts of law the parties
shall be treated as if they were all residents or domiciles of such
State.

       

      In the
event any action be brought by said Lessor against Guarantor hereunder to
enforce the obligation of Guarantor hereunder, the unsuccessful party in such
action shall pay to the prevailing party therein a reasonable attorney’s fee.
The attorney’s fee award shall not be computed in accordance with any court fee
schedule, but shall be such as to full reimburse all attorney’s fees reasonably
incurred.

       

      If any
Guarantor is a corporation, partnership, or limited liability company, each
individual executing this Guaranty on said entity’s behalf represents and
warrants that he or she is duly authorized to execute this Guaranty on behalf of
such entity.

       

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

       

      
        	 
      	
                ADVANCE
      DISPLAY TECHNOLOGIES, INC.

              
	
                Executed
      at:                                                                   

              	 
      
	
                On:                                                                   

              	
                By:
      Matthew W. Shankle,President

              
	
                Address:                                                                   

              	 
      
	 
      	
                By:
      James P. Martindale, Vice President

              

      

      ©1996 -
AIR COMMERCIAL REAL ESTATE ASSOCIATION FORM
GR-2-09/06Eexhibit.htm

    Exhibit
10.1

    

    

    SECOND
AMENDMENT TO

    SECOND
AMENDED AND RESTATED CREDIT AGREEMENT

    

    This SECOND AMENDMENT TO SECOND AMENDED
AND RESTATED CREDIT AGREEMENT (“Amendment”) dated as of March 27, 2008 is among
M/I HOMES, INC., an Ohio corporation (“Borrower”), the Lenders party hereto and
JPMORGAN CHASE BANK, N.A., as Agent (the “Agent”).

    

    RECITALS

    

    WHEREAS, Borrower, the Lenders and
Agent are parties to that certain Second Amended and Restated Credit Agreement
dated as of October 6, 2006 (as amended by a First Amendment to Second Amended
and Restated Credit Agreement dated as of August 28, 2007 and as further
amended, renewed and restated from time to time, the “Credit
Agreement”).

    

    WHEREAS, Borrower and the Lenders
desire to amend the Credit Agreement to reduce the Aggregate Commitment (as such
term and other capitalized terms used, but not otherwise defined in this
Amendment, are defined in the Credit Agreement), to revise financial covenants
and to make certain other changes in the Credit Agreement.

    

    NOW, THEREFORE, for good and valuable
consideration, the parties hereto hereby agree as follows:

    

    1.           Amendments.

    

    (a)           Amendments to
Definitions.  Subsection 1.1 of the Credit Agreement is amended
to add, in correct alphabetical order, new definitions for “ACFO Ratio,”
“Adjusted Cash Flow from Operations,” “Deferred Tax Valuation Allowance,” “Loan
Party,” “Senior Notes,” “Second Amendment” and “Unrestricted Cash” and the
definitions of “Borrowing Base Indebtedness” and “Secured Indebtedness” are
amended, each to read as follows:

    

    “ACFO Ratio” shall
mean, for the period ending the last day of any fiscal quarter, the ratio of (i)
Adjusted Cash Flow from Operations for the four fiscal quarters then ended to
(ii) Consolidated Interest Incurred by the Borrower and its
Subsidiaries for such four fiscal quarters.

    

    “Adjusted Cash Flow from
Operations” shall mean, for any period of four consecutive fiscal
quarters of the Borrower, the sum of (a) cash provided by (used in) operating
activities, as calculated using the “net cash provided by (used in) operating
activities” line item of the Borrower and its Subsidiaries’ Consolidated
Statement of Cash Flow for the four consecutive quarters then ended as
determined in accordance with GAAP, plus (b) Consolidated Interest Incurred of
the Borrower and its Subsidiaries on a consolidated basis for such four
consecutive fiscal quarters.

    

    “Borrowing Base
Indebtedness” shall mean at any date (i) the sum of (a) Consolidated
Indebtedness, (b) an amount equal to ten percent (10%) of the aggregate
commitment under the M/I Financial Corp. Loan Agreement, (c) an amount equal to
ten percent (10%) of the face amount of surety bonds and undrawn Performance
Letters of Credit issued by, for the account of or guaranteed by the Borrower or
any of its Subsidiaries and (d) to the extent not included in Consolidated
Indebtedness, Borrower’s and its Subsidiaries’ pro rata share of Indebtedness of
any Joint Venture in respect of which Borrower or any of its Subsidiaries has
made an Investment in Joint Venture, all as of such date less (ii) the sum of
(a) Secured Indebtedness, (b) Subordinated Indebtedness, (c) Indebtedness under
the M/I Financial Corp. Loan Agreement, and (d) to the extent included in
Consolidated Indebtedness, the Borrower’s and its Subsidiaries’ pro rata share
of Indebtedness of any Joint Venture in respect of which Borrower or any of its
Subsidiaries has made an Investment in Joint Venture, all as of such
date.

    

    “Deferred Tax Valuation
Allowance” shall mean any valuation allowance applied to deferred income
tax assets as determined in accordance with GAAP and included in the financial
statements of the Borrower.

    

    “Loan Party” shall
mean the Borrower or any Guarantor.

    

    “Second Amendment”
shall mean the Second Amendment to this Agreement dated as of March 27, 2008
among Borrower, Agent and the Lenders.

    

    “Secured Indebtedness”
shall mean, as of any date, all Indebtedness (including without limitation
purchase money Indebtedness, non-recourse Indebtedness and Capital Lease
obligations) of Borrower or any of its Subsidiaries (excluding Indebtedness
owing to Borrower or any of its Subsidiaries) that is non-recourse or fully
secured by a Lien on assets of Borrower or any of its Subsidiaries.

    

    “Senior Notes” shall
mean the 6-7/8% Senior Notes due 2012 issued under and pursuant to the Indenture
dated as of March 24, 2005 among Borrower, the guarantors named therein and U.S.
Bank National Association, as Trustee.

    

    “Unrestricted Cash”
shall mean cash and Cash Equivalents of the Loan Parties that are maintained
with Agent free and clear of all Liens (other than Liens securing the
Obligations) and not subject to any restrictions on the use thereof to pay
Indebtedness and other obligations of the Borrower and its
Subsidiaries.

    

    (b)           Reduction of Aggregate
Commitment.  Pursuant to subsection 2.6(a) of the Credit
Agreement, the Aggregate Commitment is hereby reduced from $500,000,000 to
$250,000,000 and allocated to each Lender’s Commitment ratably in proportion to
its Ratable Share.  The amounts of the reduced Commitments of the
Lenders are set forth in Schedule 1
hereto.

    

    (c)           Pricing.  Subsection
2.5(d) of the Credit Agreement is amended to read “Intentionally Omitted,” and
subsection 2.5(b) of the Credit Agreement is amended and restated to read as
follows:

    

    (b)           The
Applicable Margins and the Applicable Commitment Rate shall be determined by
reference to the Senior Debt Rating in accordance with the following table and
provisions of this subsection 2.5(b):

    

    
      	 
      	
              Level
      I

            	
              Level
      II

            	
              Level
      III

            	
              Level
      IV

            	
              Level
      V

            
	
              Senior
      Debt Rating

            	
              BB+/Ba1
      or higher

            	
              BB/Ba2

            	
              BB-/Ba3

            	
              B+/B1

            	
              B/B2
      or lower or no Senior Debt Rating

            
	
              Applicable
      Eurodollar Margin

              and
      Applicable Facility L/C Rate

            	
              2.00%

            	
              2.25%

            	
              2.50%

            	
              2.75%

            	
              3.00%

            
	
              Applicable
      ABR Margin

            	
              0.375%

            	
              0.375%

            	
              0.375%

            	
              0.375%

            	
              0.375%

            
	
              Applicable
      Commitment Rate

            	
              0.375%

            	
              0.375%

            	
              0.375%

            	
              0.375%

            	
              0.375%

            

    

    

    (d)           Payment of
Obligations.  Subsection 6.6 of the Credit Agreement is amended
to add at the end thereof:

    

    Except
for payments made when due on the Senior Notes in accordance with their terms in
effect on the date of the Second Amendment to this Agreement, Borrower shall not
directly or indirectly prepay, redeem or otherwise acquire any Senior Note or
make any payments, transfers on account of or, unless contemporaneously
therewith effective provision is made similarly to secure the Obligations on an
equal and ratable basis, provide a Lien to secure the Senior Notes.

    

    (e)           Consolidated Tangible Net
Worth.  Subsection 6.11 of the Credit Agreement is amended and
restated to read as follows:

    

    6.11           Maintenance of Consolidated
Tangible Net Worth.  Maintain at all times during the
Commitment Period a Consolidated Tangible Net Worth (“Minimum Tangible Net
Worth”) in amounts equal to or exceeding (i) $400,000,000 plus (ii) fifty
percent (50%) of the Consolidated Earnings for each quarter after December 31,
2007 (excluding any quarter in which the Consolidated Earnings are less than
zero) plus (iii) fifty percent (50%) of the net proceeds or other consideration
received by Borrower for any capital stock issued on or after December 31, 2007
minus (iv) the cumulative net amount of any Deferred Tax Valuation Allowance as
of the date of determination; provided, however, that in no event shall the
Minimum Tangible Net Worth be less than $335,000,000.

    

    (f)           Leverage
Ratio.  Subsection 6.12 of the Credit Agreement is amended and
restated to read as follows:

    

    6.12           Maintenance of Leverage
Ratio.  Maintain during the Commitment Period a Leverage Ratio
not in excess of (a) 1.00 to 1.00 at any time at which the Interest Coverage
Ratio is less than 1.00 to 1.00, (b) 1.20 to 1.00 at any time at which the
Interest Coverage Ratio is greater than or equal to 1.00 to 1.00 and less than
1.25 to 1.00, and (c) 1.40 to 1.00 at all other times.

    

    (g)           Interest Coverage
Ratio.  Subsection 6.13 of the Credit Agreement is amended and
restated to read as follows:

    

    6.13           Maintenance of Interest
Coverage Ratio.  As of the end of each fiscal quarter, maintain
during the Commitment Period an Interest Coverage Ratio of not less than 1.50 to
1.00.  Notwithstanding the foregoing, the maintenance of an Interest
Coverage Ratio of less than 1.50 to 1.00 as of the end of any fiscal quarter
shall not constitute a violation of this subsection 6.13(a) as long as Borrower,
as of the end of such fiscal quarter, is in compliance with subsections 6.12 and
6.17.

    

    (h)           Minimum
Liquidity.  A new subsection 6.17 is added immediately after
subsection 6.16 of the Credit Agreement to read as follows:

    

    6.17           Minimum
Liquidity.  If, for the period ending the last day of any
fiscal quarter during the Commitment Period (a) the Interest Coverage Ratio is
less than 1.50 to 1.00 and (b) the ACFO Ratio is less than 1.50 to 1.00, the
Borrower shall thereafter maintain Unrestricted Cash in an amount not less than
$25,000,000 until the last day of the next succeeding fiscal quarter when either
the Interest Coverage Ratio is not less than 1.50 to 1.00 or the ACFO Ratio is
not less than 1.50 to 1.00.

    

    (i)           Secured
Indebtedness.  Subsection 7.1 of the Credit Agreement is
amended to replace the amount of “$50,000,000” with “$25,000,000.”

    

    (j)           Limitation on
Investments.  Subsection 7.6(b) of the Credit Agreement is
amended to replace the words “two and one-half percent (2.5%)” with “five
percent (5%).”

    

    (k)           Events of
Default.  Subsection (4) in Section 9 of the Credit Agreement
is amended to insert “6.17,” immediately after “6.16;” “or” is added after
subsection (10); and a new subsection (11) is added immediately after subsection
(10) to read as follows:

    

    (11)           Borrowing
Base Indebtedness shall exceed the Pro Forma Borrowing Base for more than five
(5) consecutive calendar days, where "Pro Forma Borrowing Base" means the
Borrowing Base reflected in any Borrowing Base Certificate delivered pursuant to
subsection 6.3 recalculated by replacing twenty-five percent (25%) in clause
(vi) with ten percent (10%) and replacing forty-five percent (45%) in the last
paragraph with forty percent (40%);

    

     

    2.           Form of
Certificate.  Exhibit F to the
Credit Agreement is hereby replaced by Exhibit F
hereto.

     

    3.           Conditions
Precedent.  This Amendment shall be effective as of the date
("Amendment Effective Date") upon which the following conditions are
satisfied:

     

    (a) The
Agent shall have received from the Borrower and the Required Lenders a
counterpart of this Amendment signed on behalf of each such party.

     

    (b) The
Agent shall have received from the Guarantors the Consent and Agreement
substantially in the form attached hereto as Appendix
A.

     

    (c) The
Agent shall have received such documents and certificates as the Agent or its
counsel may reasonably request relating to the organization or formation,
existence and good standing of the Borrower, the authorization of this Amendment
and any other legal matters relating to the Borrower, the Agreement or this
Amendment, all in form and substance satisfactory to the Agent and its
counsel.

     

    (d) The
Agent shall have received all fees and other amounts due and payable on or prior
to the Amendment Effective Date, including reimbursement or payment of all
out-of-pocket expenses required to be reimbursed or paid by the Borrower
hereunder.

     

    The
Agent shall notify the Borrower and the Lenders of the Amendment Effective Date,
and such notice shall be conclusive and binding.

     

    4.           Representations and
Warranties.  The Borrower hereby represents and warrants that
as of the date hereof:

     

    (a) The
representations and warranties of the Borrower in the Credit Agreement are true
and correct in all material respects.

    

    (b) There
exists no Default or Event of Default.

    

    5.           Ratification.  This
Amendment supersedes the Letter Amendment. The Credit Agreement, as amended
hereby, is hereby ratified and remains in full force and effect.

    

    6.           Counterparts.  This
Amendment may be executed in any number of counterparts, all of which taken
together shall constitute one agreement and any of the parties hereto may
execute this Amendment by signing any such counterpart.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

    IN
WITNESS WHEREOF, the Borrower and the Lenders have caused this Amendment to be
duly executed as of the date first above written.

    
      	 
      	
              BORROWER:

              M/I
      HOMES, INC.

              By:         

              Phillip
      G. Creek

              Executive
      Vice President, Chief Financial Officer and Assistant
      Secretary

               

            

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    
      	 
      	
              LENDERS:

              JPMORGAN CHASE BANK,
      N.A., As Lender and Agent

              By:         

              Name:
      _________________________________

              Title:  __________________________________

            

    

    

    
      
         

      

      
         

        
          

        

      

      
         

        
          SIGNATURE
PAGE TO SECOND AMENDMENT TO SECOND AMENDED AND

           

          RESTATED
CREDIT AGREEMENT WITH M/I HOMES, INC.

           

        

      

    

    

    
      	 
      	
              WACHOVIA
      BANK, NATIONAL ASSOCIATION

              By:         

              Name:
      _________________________________

              Title:  _________________________________

               

            

    

    

    
      
         

      

      
         

        
          

        

      

      
         

        
          SIGNATURE
PAGE TO SECOND AMENDMENT TO SECOND AMENDED AND

           

          RESTATED
CREDIT AGREEMENT WITH M/I HOMES, INC.

           

        

      

    

    

    
      	 
      	
              THE
      HUNTINGTON NATIONAL BANK

              By:         

              Name:
      _________________________________

              Title:  __________________________________

               

            

    

    
      
         

      

      
         

        
          

        

      

      
         

        
          SIGNATURE
PAGE TO SECOND AMENDMENT TO SECOND AMENDED AND

           

          RESTATED
CREDIT AGREEMENT WITH M/I HOMES, INC.

           

        

      

    

    

    
      	 
      	
              KEYBANK
      NATIONAL ASSOCIATION

              By:         

              Name:
      _________________________________

              Title:  __________________________________

               

            

    

    
      
         

      

      
         

        
          

        

      

      
         

        
          SIGNATURE
PAGE TO SECOND AMENDMENT TO SECOND AMENDED AND

           

          RESTATED
CREDIT AGREEMENT WITH M/I HOMES, INC.

           

        

      

    

    

    
      	 
      	
              CHARTER
      ONE BANK, N.A.

              By:         

              Name:
      _________________________________

              Title:  __________________________________

               

            

    

    
      
         

      

      
         

        
          

        

      

      
         

        
          SIGNATURE
PAGE TO SECOND AMENDMENT TO SECOND AMENDED AND

           

          RESTATED
CREDIT AGREEMENT WITH M/I HOMES, INC.

           

        

      

    

    

    
      	 
      	
              SUNTRUST
      BANK

              By:         

              Name:
      _________________________________

              Title:  __________________________________

               

            

    

    
      
         

      

      
         

        
          

        

      

      
         

        
          SIGNATURE
PAGE TO SECOND AMENDMENT TO SECOND AMENDED AND

           

          RESTATED
CREDIT AGREEMENT WITH M/I HOMES, INC.

           

        

      

    

    

    
      	 
      	
              REGIONS
      BANK

              By:         

              Name:
      _________________________________

              Title:  __________________________________

               

            

    

    
      
         

      

      
         

        
          

        

      

      
         

        
          SIGNATURE
PAGE TO SECOND AMENDMENT TO SECOND AMENDED AND

           

          RESTATED
CREDIT AGREEMENT WITH M/I HOMES, INC.

           

        

      

    

    

    
      	 
      	
              BANK
      OF MONTREAL

              By:         

              Name:
      _________________________________

              Title:  __________________________________

               

            

    

    
      
         

      

      
         

        
          

        

      

      
         

        
          SIGNATURE
PAGE TO SECOND AMENDMENT TO SECOND AMENDED AND

           

          RESTATED
CREDIT AGREEMENT WITH M/I HOMES, INC.

           

        

      

    

    

    
      	 
      	
              GUARANTY
      BANK

              By:         

              Name:
      _________________________________

              Title:  __________________________________

               

            

    

    
      
         

      

      
         

        
          

        

      

      
         

        
          SIGNATURE
PAGE TO SECOND AMENDMENT TO SECOND AMENDED AND

           

          RESTATED
CREDIT AGREEMENT WITH M/I HOMES, INC.

           

        

      

    

    

    
      	 
      	
              NATIONAL
      CITY BANK

              By:         

              Name:
      _________________________________

              Title:  __________________________________

               

            

    

    
      
         

      

      
         

        
          

        

      

      
         

        
          SIGNATURE
PAGE TO SECOND AMENDMENT TO SECOND AMENDED AND

           

          RESTATED
CREDIT AGREEMENT WITH M/I HOMES, INC.

           

        

      

    

    

    
      	 
      	
              U.S. BANK NATIONAL
      ASSOCIATION

              By:         

              Name:
      _________________________________

              Title:  __________________________________

               

            

    

    
      
         

      

      
         

        
          

        

      

      
         

        
          SIGNATURE
PAGE TO SECOND AMENDMENT TO SECOND AMENDED AND

           

          RESTATED
CREDIT AGREEMENT WITH M/I HOMES, INC.

           

        

      

    

    

    
      	 
      	
              LASALLE
      BANK NATIONAL ASSOCIATION

              By:         

              Name:
      _________________________________

              Title:  __________________________________

               

            

    

    
      
         

      

      
         

        
          

        

      

      
         

        
          SIGNATURE
PAGE TO SECOND AMENDMENT TO SECOND AMENDED AND

           

          RESTATED
CREDIT AGREEMENT WITH M/I HOMES, INC.

           

        

      

    

    

    
      	 
      	
              PNC
      BANK, NATIONAL ASSOCIATION

              By:         

              Name:
      _________________________________

              Title:  __________________________________

               

            

    

    
      
         

      

      
         

        
          

        

      

      
         

        
          SIGNATURE
PAGE TO SECOND AMENDMENT TO SECOND AMENDED AND

           

          RESTATED
CREDIT AGREEMENT WITH M/I HOMES, INC.

           

        

      

    

    

    
      	 
      	
              CITY
      NATIONAL BANK, a national banking association

              By:         

              Name:
      _________________________________

              Title:  _________________________________

               

            

    

    
      
         

      

      
         

        
          

        

      

      
         

        
          SIGNATURE
PAGE TO SECOND AMENDMENT TO SECOND AMENDED AND

           

          RESTATED
CREDIT AGREEMENT WITH M/I HOMES, INC.

           

        

      

    

    

    
      	 
      	
              FIFTH
      THIRD BANK, an Ohio banking corporation

              By:         

              Name:
      _________________________________

              Title:  __________________________________

               

            

    

    
      
         

      

      
         

        
          

        

      

      
         

        
          SIGNATURE
PAGE TO SECOND AMENDMENT TO SECOND AMENDED AND

           

          RESTATED
CREDIT AGREEMENT WITH M/I HOMES, INC.

           

        

      

    

    

    
      	 
      	
              FRANKLIN
      BANK, S.S.B., a Texas chartered bank

              By:         

              Name:
      _________________________________

              Title:  __________________________________

               

            

    

    
      
         

      

      
         

        
          

        

      

      
         

        
          SIGNATURE
PAGE TO SECOND AMENDMENT TO SECOND AMENDED AND

           

          RESTATED
CREDIT AGREEMENT WITH M/I HOMES, INC.

           

        

      

    

    

    
      	 
      	
              COMERICA
      BANK

              By:         

              Name:
      _________________________________

              Title:  __________________________________

               

            

    

    
      
         

      

      
         

        
          

        

      

      
         

        
          SIGNATURE
PAGE TO SECOND AMENDMENT TO SECOND AMENDED AND

           

          RESTATED
CREDIT AGREEMENT WITH M/I HOMES, INC.

           

        

      

    

    

    
      	 
      	
              COMPASS
      BANK

              By:         

              Name:
      _________________________________

              Title:  __________________________________

               

            

    

    
      
         

      

      
         

        
          

        

      

      
         

        
          SIGNATURE
PAGE TO SECOND AMENDMENT TO SECOND AMENDED AND

           

          RESTATED
CREDIT AGREEMENT WITH M/I HOMES, INC.

           

        

      

    

    

    
      	 
      	
              BANK
      UNITED, FSB

              By:         

              Name:
      _________________________________

              Title:  __________________________________

               

            

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    SCHEDULE
1

     

    COMMITMENTS

     

    
      	
              Lender

            	 
      	
              Commitment

            	 
      	
              Ratable Share

            
	
              JPMorgan
      Chase Bank, N.A.

            	 
      	
              $22,115,384.62

            	 
      	
              8.846153846%

            
	
              Wachovia
      Bank, National Association

            	 
      	
              $22,115,384.62

            	 
      	
              8.846153846

            
	
              The
      Huntington National Bank

            	 
      	
              $21,153,846.15

            	 
      	
              8.461538461

            
	
              KeyBank
      National Association

            	 
      	
              $17,307,692.31

            	 
      	
              6.923076923

            
	
              Charter
      One Bank, N.A.

            	 
      	
              $15,384,615.38

            	 
      	
              6.153846153

            
	
              SunTrust
      Bank

            	 
      	
              $15,384,615.38

            	 
      	
              6.153846153

            
	
              Regions
      Bank

            	 
      	
              $13,461,538.46

            	 
      	
              5.384615384

            
	
              Bank
      of Montreal

            	 
      	
              $13,461,538.46

            	 
      	
              5.384615384

            
	
              Guaranty
      Bank

            	 
      	
              $13,461,538.46

            	 
      	
              5.384615384

            
	
              National
      City Bank

            	 
      	
              $13,461,538.46

            	 
      	
              5.384615384

            
	
              US
      Bank National Association

            	 
      	
              $13,461,538.46

            	 
      	
              5.384615384

            
	
              LaSalle
      Bank National Association

            	 
      	
              $11,538,461.54

            	 
      	
              4.615384615

            
	
              PNC
      Bank, N.A.

            	 
      	
              $11,538,461.54

            	 
      	
              4.615384615

            
	
              City
      National Bank

            	 
      	
              $9,615,384.62

            	 
      	
              3.846153846

            
	
              Fifth
      Third Bank

            	 
      	
              $9,615,384.62

            	 
      	
              3.846153846

            
	
              Franklin
      Bank, S.S.B.

            	 
      	
              $9,615,384.62

            	 
      	
              3.846153846

            
	
              Comerica
      Bank

            	 
      	
              $7,692,307.69

            	 
      	
              3.076923076

            
	
              Compass
      Bank

            	 
      	
              $5,769,230.77

            	 
      	
              2.307692307

            
	
              Bank
      United, F.S.B.

            	 
      	
              $3,846,153.84

            	 
      	
              1.538461538

            
	
              Total

            	 
      	
              $
      250,000,000.00

            	 
      	
              100%

            

    

    

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

     

    EXHIBIT
F

    

    [LETTERHEAD
OF M/I HOMES, INC.]

    [DATE]

    

    To:
Agent and each Lender

    

    Ladies
and Gentlemen:

     

    This
letter is being sent to you to comply with subsection 6.2 of the Second Amended
and Restated Credit Agreement effective as of October 6, 2006 (as amended, the
"Credit Agreement") and is being delivered to you for the period of [insert
yearly or quarterly period as appropriate] for which period the undersigned has
heretofore delivered, or is herewith delivering, the financial statements
provided for in subsection 6.1 of the Credit Agreement (the "Financial
Statements"). [The undersigned hereby certifies that such Financial Statements
are true and accurate in all material respects, subject to normal year-end audit
adjustments (Note: only required with delivery of unaudited Financial
Statements)]. Capitalized terms used but not defined herein have the meanings
given to such terms in the Credit Agreement.

     

    The
undersigned certifies that, after due examination by the undersigned and to the
best of the knowledge of the undersigned, M/I Homes, Inc. and each of its
Subsidiaries during the period stated above has observed or performed in all
material respects all of its covenants and other agreements, and satisfied every
condition, contained in the Credit Agreement, the Notes and the Guaranty
Agreement to be observed, performed or satisfied by it, and that the undersigned
has no knowledge of any Default or Event of Default except [list any Defaults or
Events of Default; if none, end sentence before "except"].

     

    Additionally,
I have enclosed a statement showing in detail the calculation of ratios and
other covenants, in accordance with corresponding subsections of the Credit
Agreement, as required by the Credit Agreement.

     

    Yours
very truly,

    

    By:                                                                     

     

    Printed
Name:                                                                     

     

    Title:                                                                     

     

     

    Enclosure

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    CONFIDENTIAL

    STATEMENT
OF CALCULATION OF CERTAIN COVENANTS

    [Date]

    
      	
              Subsection No.

            	
              Covenant

            
	
               

              1. 6.11

            	
              Maintain
      Consolidated Tangible Net Worth of: (i) $400,000,000 plus (ii) fifty
      percent (50%) of the Consolidated Earnings for each quarter after December
      31, 2007 (excluding any quarter in which Consolidated Earnings are less
      than zero (0)) plus (iii) fifty percent (50%) of the net proceeds or other
      consideration received by Borrower for any capital stock issued or sold
      after December 31, 2007 minus (iv) the cumulative net amount of any
      Deferred Tax Valuation Allowance as of the date of determination;
      provided, however, that in no event shall the Minimum Tangible Net Worth
      be less than $300,000,000.

              (i)
      above:                                                                                                                                                         
      $400,000,000

              Plus
      (ii)
      above:                                                                                                                                                 
      $                   

              Plus
      (iii)
      above:                                                                                                                                                
      $                   

              Minus
      (iv)
      above:                                                                                                                                             
      $                   

              Minimum
      Consolidated Tangible Net
      Worth:                                                                                                      
      $                   

              [greater
      of sum of above or [$335,000,000]]

              Consolidated
      Tangible Net Worth
      =                                                                                                                   
      $                   

            
	
              2.           6.12

            	
              Maintain
      a Leverage Ratio not in excess of _____1  to
      1.00

            
	 
      	
              Consolidated
      Indebtedness:                                                                                                                              
       $                         

            
	 
      	
              Consolidated
      Tangible Net
      Worth:                                                                                                                     
      $                         

            
	 
      	
              Leverage
      Ratio = _____________ to 1.00

            
	
              3.           6.13

            	
              Maintain
      an Interest Coverage Ratio of not less than 1.50 to 1.00

               

              The
      maintenance of an Interest Coverage Ratio of less than 1.50 to 1.00 as of
      the end of any fiscal quarter shall not constitute a violation of
      subsection 6.13(a) as long as Borrower, as of the end of such fiscal
      quarter, is in compliance with subsections 6.12 and
  6.17.

            
	 
      	
              EBITDA
      (for four
      quarters)                                                                                                                              
       $                         

            
	 
      	
              Consolidated
      Interest Incurred (for four
      quarters):                                                                                              
       $

            
	 
      	
              Interest
      Coverage Ratio = _____________ to 1.00

            
	
              5.           6.17

            	
              If,
      for the period ending the last day of the most recently ended fiscal
      quarter (a) the Interest Coverage Ratio is less than 1.50 to 1.00 and (b)
      the ratio of (i) Adjusted Cash Flow from Operations (“ACFO Ratio”) for the
      four fiscal quarters then ended to (ii) Consolidated Interest Incurred by
      the Borrower
      and its Subsidiaries for such four fiscal quarters is less than 1.50 to
      1.00, until the end of the next fiscal quarter when the Interest Coverage
      Ratio is not less than 1.50 to 1.00 or the ACFO Ratio is not less than
      1.50 to 1.00, the Borrower shall maintain Unrestricted Cash in an amount
      not less than $25,000,000.

            
	 
      	
              (i)
      Adjusted Cash Flow From
      Operations:                                                                                                 $

               

              (ii)
      Consolidated Interest
      Incurred:                                                                                                                     
      $

               

              (iii)
      Ratio of (i) to
      (ii):                                                _______
      to _____

            
	 
      	
              Unrestricted
      Cash
      =                                                                                                                                         
      $_____________

            
	
              6.           7.1

            	
              Secured
      Indebtedness not to exceed $25,000,000

            
	 
      	
              Secured
      Indebtedness
      =                                                                                                                                    
      $                         

            

    

    

      

    

      
      1 Insert
applicable requirement per subsection 6.12.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    
      	
              7.           7.5

            	
              Adjusted
      Land Value not to exceed 125% of the sum of (a) Consolidated Tangible Net
      Worth plus (b) 50% of Subordinated Indebtedness

               

              Adjusted Land Value

               

              (i)
      book value of all
      Land:                                                                                                                             
      $                         

              less
      (ii) the sum of

               

                   (a)
      book value of Land and Lots under Contract:$

                    and
      (b) the lesser of (1) the product of (x) number

                    of  Housing
      Units contracted for during the last

                    six
      months and (y) average book value of all

                    Finished
      Lots and Lots under Contract
      or:                                                                                                 $

               

              (2)
      25% of Consolidated Tangible Net
      Worth:                                                                                                 $

               

              Adjusted Land
      Value:                                                                                                                                  
       $                         

               

              (a)
      Consolidated Tangible Net
      Worth:                                                                                                           
       $                         

               

              Plus
      (b) 50% of Subordinated
      Indebtedness:                                                                                                   
      $

               

              Total
      [(a) + (b)]
      =                                                                                                                                         
      $                         

               

              X
      1.25
      =                                                                                                                                                       
      $                         

            
	
              8.           7.6(b)

            	
              Limit
      on extension of credit in connection
      with                                                                                                 $

              the
      sale of land of 5% of Consolidated

              Tangible
      Net Worth

               

              5%
      of Consolidated Tangible Net
      Worth:                                                                                                       
      $

               

              Aggregate
      amount of extensions of credit
      in                                                                                                   
      $

              connection
      with the sale of land:

               

              Maximum
      maturity of any such extensions of

              credit
      not to exceed five
      years:                                                                         ________________

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    
      	
              9.           7.6(e)

            	
              Limit
      on Investments in Joint Ventures of fifteen percent (15%) of Consolidated
      Tangible Net Worth, provided that Borrower has no less than a 20% interest
      in each such joint venture and that management and control decisions for
      each such joint venture require Borrower's consent and
      approval.

               

              15%
      of Consolidated Tangible Net
      Worth:                                                                                                 $

               

              Investments
      in Joint
      Ventures:                                                                         $                         

               

              Lowest
      percentage interest of Borrower in a joint
      venture:   ___________%

               

            
	
              10.           7.13

            	
              The
      number of Speculative Housing Units, as at the end of any fiscal quarter,
      not to exceed the greater of (a) the number of Housing Unit Closings
      occurring during the period of twelve (12) months ending on the last day
      of such fiscal quarter, multiplied by thirty percent (30%) or (b) the
      number of Housing Unit Closings occurring during the period of six (6)
      months ending on the last day of such fiscal quarter, multiplied by sixty
      percent (60%).

               

              Speculative
      Housing Units:

               

              (a)
      Housing Unit Closings in last 12 months:________ x 30% =

               

              (b)
      Housing Unit Closings in last 6 months:________ x 60% =

               

              (c)  Speculative
      Housing
      Units:                                                                         

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    Appendix
A

     

    CONSENT
AND AGREEMENT OF GUARANTORS

     

    THIS
CONSENT AND AGREEMENT OF GUARANTORS ("Consent") is executed and delivered as of
March 27, 2008, by the undersigned (the "Guarantors"), in favor of the "Lenders"
under that certain Second Amended and Restated Credit Agreement dated October 6,
2006, among M/I Homes, Inc., the Lenders from time to time parties thereto and
JPMorgan Chase Bank, N.A., in its capacity as Agent. Such Credit Agreement, as
it has been and may be amended, modified or supplemented from time to time, is
hereinafter referred to as the "Credit Agreement." Unless otherwise defined
herein, capitalized terms used herein shall have the meanings ascribed to them
in the Credit Agreement.

     

    WITNESSETH:

     

    WHEREAS,
the Guarantors have executed and delivered a Guaranty dated October 6, 2006 in
favor of the Lenders under the Credit Agreement or a Supplemental Guaranty
thereto (collectively, the "Guaranty"); and

     

    WHEREAS,
the Borrower, the Agent and certain Lenders have entered into that certain
Second Amendment to Second Amended and Restated Credit Agreement of even date
herewith amending the Credit Agreement (the "Amendment"); and

     

    WHEREAS,
it is a condition to the Amendment that the Guarantors shall have executed this
Consent;

     

    NOW
THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Guarantors hereby consent to the Amendment
and agree that the Guaranty continues in full force and effect.

     

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    IN
WITNESS WHEREOF, this Consent has been duly executed by the Guarantors as of the
day and year first set forth above.

     

    

     

    M/I
FINANCIAL CORP., an Ohio corporation

     

    

    By:                                                                

    Name:                      Phillip
G. Creek

    Title:                      Chief
Financial Officer and Treasurer

    

    

    NORTHEAST
OFFICE VENTURE, LIMITED LIABILITY COMPANY, a Delaware limited liability
company

     

    By:  M/I
Homes, Inc., its sole member

     

    

    By:                                                                

    Name:                      Phillip
G. Creek

    
      	
               
      

            	
              Title:

            	
               
      Executive Vice President, Chief Financial Officer and Assistant
      Secretary

            

    

    

    

    M/I
HOMES SERVICE, LLC, an Ohio limited liability company

     

    By
M/I Homes, Inc., its sole member

     

    

    By:                                                                

    Name:                      Phillip
G. Creek

    
      	
               
      

            	
              Title:

            	
               
      Executive Vice President and Chief Financial
  Officer

            

    

    

    

    MHO,
LLC, a Florida limited liability company

     

    

    By:                                                                

    Name:                      J.
Thomas Mason

    Title:     President
and Assistant Secretary

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    MHO
HOLDINGS, LLC, a Florida limited liability company

     

    

    By:                                                                

    Name:                      J.
Thomas Mason

    Title:      Senior
Vice President, General Counsel and Secretary

    

    

    

    M/I
PROPERTIES LLC, an Ohio limited liability company

     

    By:  M/I
Homes, Inc., its sole member

     

    

    By:                                                                

    Name:                      Phillip
G. Creek

    
      	
               
      

            	
              Title:

            	
               
      Executive Vice President, Chief Financial Officer and Assistant
      Secretary

            

    

    

    

    M/I
HOMES OF FLORIDA, LLC, a Florida limited liability company

    By:  M/I
Homes, Inc., its sole member

    

    By:                                                                

    Name:                      Phillip
G. Creek

    
      	
               
      

            	
              Title:

            	
               
      Executive Vice President, Chief Financial Officer and Assistant
      Secretary

            

    

    

    

    M/I
HOMES OF ORLANDO, LLC, a Florida limited liability company

     

    

    By:                                                                

    Name:                      Phillip
G. Creek

    
      	
               
      

            	
              Title:

            	
               
      Senior Vice President, Chief Financial Officer and Assistant
      Secretary

            

    

    

    

    M/I
HOMES OF TAMPA, LLC, a Florida limited liability company

     

    

    By:                                                                

    Name:                      Phillip
G. Creek

    
      	
               
      

            	
              Title:

            	
               
      Senior Vice President, Chief Financial Officer and Assistant
      Secretary

            

    

    

    

    M/I
HOMES OF WEST PALM BEACH, LLC, a Florida limited liability company

     

    

    By:                                                                

    Name:                      Phillip
G. Creek

    
      	
               
      

            	
              Title:

            	
               
      Senior Vice President, Chief Financial Officer and Assistant
      Secretary

            

    

    

    

    K-TAMPA,
LLC, a Florida limited liability company, by M/I Homes of Tampa, LLC, its
manager

     

    

    By:                                                                

    Name:                      Phillip
G. Creek

    
      	
               
      

            	
              Title:

            	
               
      Senior Vice President, Chief Financial Officer and Assistant
      Secretary

            

    

    

    

    M/I
HOMES OF DC, LLC, a Delaware limited liability company

     

    

    By:                                                                

    Name:                      Phillip
G. Creek

    
      	
               
      

            	
              Title:

            	
               
      Senior Vice President, Chief Financial Officer and Assistant
      Secretary

            

    

    

    

    M/I
HOMES OF CHARLOTTE, LLC, a Delaware limited liability company

     

    

    By:                                                                

    Name:                      Phillip
G. Creek

    
      	
               
      

            	
              Title:

            	
               
      Senior Vice President, Chief Financial Officer and Assistant
      Secretary

            

    

    

    

    M/I
HOMES OF RALEIGH, LLC, a Delaware limited liability company

     

    

    By:                                                                

    Name:                      Phillip
G. Creek

    
      	
               
      

            	
              Title:

            	
               
      Senior Vice President, Chief Financial Officer and Assistant
      Secretary

            

    

    

    

    THE
FIELDS AT PERRY HALL, L.L.C., a Maryland limited liability company

     

    

    By:                                                                

    Name:                      Phillip
G. Creek

    Title:  Senior
Vice President and Chief FinancialOfficer

    

    

    WILSON
FARM, L.L.C., a Maryland limited liability company

    

    

    By:                                                                

    Name:                      Phillip
G. Creek

    
      	
               
      

            	
              Title:

            	
               
      Senior Vice President and Chief Financial
  Officer

            

    

    

    

    M/I
HOMES OF CENTRAL OHIO, LLC, an Ohio limited liability company

     

    

    By:                                                                

    Name:                      Phillip
G. Creek

    
      	
               
      

            	
              Title:

            	
               
      Senior Vice President, Chief Financial Officer and Assistant
      Secretary

            

    

    

    

    M/I
HOMES OF CINCINNATI, LLC, an Ohio limited liability company

    

    

    By:                                                                

    Name:                      Phillip
G. Creek

    
      	
               
      

            	
              Title:

            	
               
      Senior Vice President, Chief Financial Officer and Assistant
      Secretary

            

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    M/I
HOMES OF INDIANA, L.P., an Indiana limited partnership

    By
M/I Homes First Indiana LLC, its sole general partner

    

    

    By:                                                                

    Name:                      Phillip
G. Creek

    
      	
               
      

            	
              Title:

            	
               
      Senior Vice President, Chief Financial Officer and Assistant
      Secretary

            

    

    

    

    M/I
HOMES FIRST INDIANA LLC, an Indiana limited liability company

    

    

    By:                                                                

    Name:                      Phillip
G. Creek

    
      	
               
      

            	
              Title:

            	
               
      Senior Vice President, Chief Financial Officer and Assistant
      Secretary

            

    

    

    M/I
HOMES SECOND INDIANA LLC, an Indiana limited liability company

    By:  M/I
Homes, Inc., its sole member

    

    

    By:                                                                

    Name:                      Phillip
G. Creek

    
      	
               
      

            	
              Title:

            	
               
      Executive Vice President, Chief Financial Officer and Assistant
      Secretary

            

    

    

    

    TRANSOHIO
RESIDENTIAL TITLE AGENCY, LTD., an Ohio limited liability company

    By:  M/I
Homes, Inc., its sole member

    

    

    By:                                                                

    Name:                      Phillip
G. Creek

    
      	
               
      

            	
                
      Title:

            	
               
      Executive Vice President, Chief Financial Officer and Assistant
      Secretary

            

    

    

    

    
      
        
           

        

         

      

      
         

        
          

        

      

      
         

      

    

    M/I-MAJESTIC
OAKS GP, LLC, a Florida limited liability company

    By:  M/I
Homes of Tampa, LLC, its sole member

    

    By:                                                                

    Name:                      Phillip
G. Creek

    
      	
               
      

            	
              Title:

            	
               
      Senior Vice President, Chief Financial Officer and Assistant
      Secretary

            

    

    

    

    M/I
HOMES OF CHICAGO, LLC, a Delaware limited liability company

    

    

    By:                                                                

    Name:                      Phillip
G. Creek

    
      	
               
      

            	
              Title:

            	
               
      Senior Vice President, Chief Financial Officer and Assistant
      Secretary

            

    

    

    

    M/I
TITLE AGENCY LTD., an Ohio limited liability company

    

    By:                                                                

    Name:                      Phillip
G. Creek

    
      	
               
      

            	
              Title:

            	
               
      Chief Financial Officer and
Treasurer

            

    

    

    

    
      
        
           

        

         

      

      
         

        
          

        

      

      
         

      

    

    CERTIFICATE
OF AUTHORIZED OFFICER

     

    

    The
undersigned hereby certifies to Agent and each Lender that (1) each Loan Party
has previously delivered to Agent a true, correct and  complete copy
of such Loan Party’s organizational documents (collectively, the “Delivered Organization
Documents”), (2) since such delivery, there has been no change in the
Delivered Organization Documents except for those changes attached hereto, and,
except as disclosed on an attachment, no such document has been repealed,
revoked, rescinded or amended in any respect, and each remains in full force and
effect, (3) each Loan Party remains in good standing in the jurisdiction of its
organization, (4) except for those resolutions attached hereto (which were duly
adopted by the parties named therein), the resolutions (the “Delivered
Resolutions”) previously delivered to Agent by the Loan Parties authorize
the execution, delivery and performance of the foregoing Amendment by the Loan
Parties, (5) the Delivered Resolutions authorize Person(s) holding the office(s)
indicated above or, if none, the office(s) held by the Person(s) executing the
foregoing (the “Authorized Executing
Office”) to execute the foregoing Amendment on behalf of the applicable
Loan Parties, (6) the Person executing the foregoing Amendment on behalf of each
Loan Party has been duly elected and now holds the Authorized Executing Office
set forth below his(her) name, and the signature set forth above is his(her)
true signature, (7) the undersigned is authorized to deliver this Certificate on
behalf of each Loan Party, and (8) Agent and each Lender may conclusively rely
on this Certificate unless and until superseding documents shall be delivered to
Agent.

    

    M/I
HOMES, INC., as the Borrower and the parent of each Guarantor

    

    By:   ___________________________________________

    J.
Thomas Mason,

     

    Executive
Vice President, General Counsel and Secretary

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