Document:

Exhibit 10.16

 

AIR COMMERCIAL REAL ESTATE ASSOCIATION

STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE —
NET

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

 

RECORDING OF THIS LEASE PROHIBITED

 

1.             Basic Provisions (“Basic
Provisions”).

 

1.1  Parties: This
Lease (“Lease”), dated for reference purposes only APRIL 21, 2008 is made
by and between HILLSIDE ASSOCIATES II, LLC. (“Lessor”) and AEROVIRONMENT,
INC, A DELAWARE CORPORATION (“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 994 FLOWER GLEN STREET, SIMI VALLEY located in the County
of VENTURA, 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) FREE STANDING SINGLE STORY 45,888 SQUARE
FOOT BUILDING LOCATED WITHIN THE HILLSIDE INDUSTRIAL CENTER PROJECT *SEE PARAGRAPH
#2 OF ADDENDUM (“Premises”). (See also Paragraph 2)

 

1.3  Term: FIVE (5) years
and SIX (6) months (“Original Term”) commencing
March 1, 2007 (“Commencement Date”) and ending APRIL 30, 2014 (“Expiration
Date”). (See also Paragraph 3)

 

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

 

1.5  Initial Base Rent:
$34,416.00 per month (“Base Rent”), payable on the FIRST (1st) day of each
month commencing NOVEMBER 1, 2008. (See also Paragraph 4)

 

o  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: $17,208.00 for the period
11/1/08 THROUGH 11/30/08.

 

(b) Security Deposit: $ -0- (“Security
Deposit”). (See also Paragraph 5)

 

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

 

(d) Other:
$ N/A for N/A

 

(e) Total Due Upon Execution of this
Lease: $17,208.00 (based on the Base Rent credit described in Section 4 of
the Addendum)

 

1.7  Agreed Use: OFFICE & WAREHOUSE FOR LIGHT
MANUFACTURING. (See also Paragraph 6)

 

1.8  Insuring
Party: Lessor is the “Insuring Party” unless otherwise stated
herein. (See also Paragraph 8)

 

1.9  Real
Estate Brokers: (See also Paragraph 15)

 

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

 

	
  o

  	
   

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

  
	
   

  	
   

  	
   

  	
   

  
	
  x

  	
   

  	
  JOSEF
  FARRAR/EQUIS  represents Lessee
  exclusively (Lessee’s Broker”); or

  
	
   

  	
   

  	
   

  	
   

  
	
  o

  	
   

  	
                                             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
5% 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 N/A (“Guarantor”). (See also Paragraph 37)

 

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

 

	
  x  an Addendum consisting of Paragraphs 1
  through 2

  
	
  o

  	
   

  	
  a plot plan depicting the
  Premises (Exhibit A);

  
	
  o

  	
   

  	
  a current set of the
  Rules and Regulations;

  
	
  o

  	
   

  	
  a Work Letter;

  
	
  x

  	
   

  	
  other (specify): RENT
  ADJUSTMENT, RENT CONCESSION AGREEMENT, ADDENDUM, ATTACHMENT, OPTION TO RENEW.

  

 

 

 

2.             Premises.

 

2.1  Letting.
Lessor hereby teases 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,

 

 

	
   

  	
   

  	
   

  	
   

  
	
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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. Subject to (I) all of the terms and
conditions of this Lease, (II) Force Majeure events, (III) Lessor’s
commercially reasonable security requirements, and (lV) the Applicable
Requirements, Lessee shall have access to the Premises twenty-four (24) hours
per day, seven (7) days per week throughout the Lease Term.

 

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, that the 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 Premises do 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, 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) 90 days as to the HVAC systems, and (ii) 9O
days as to the remaining systems and 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.

 

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 as of the date hereof.  
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 Lessees 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 90 days 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 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 satisfied itself with respect to the condition of the Premises (including
but not limited to the electrical, HVAC and fire sprinkler systems, security,
environmental aspects, and compliance with Applicable Requirements and the
Americans with Disabilities Act), and their suitability for Lessee’s intended
use, (b) Lessee has made such investigation as it deems necessary with
reference to such matters and assumes all responsibility therefore as the same
relate to its occupancy of the Premises, and (c) neither Lessor, nor
Lessor’s agents have made any oral or written representations or warranties
with respect to said matters other than as set forth in this Lease.

 

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

 

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

 

 

	
   

  	
   

  	
   

  	
   

  
	
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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 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 therefore, 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 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 Rent be paid by
cashier’s check. Payments will be applied first to accrued late charges and
attorney’s fees, second to accrued interest, then to Base Rent and any
additional rent, and any remaining amount to any other outstanding charges or
costs.

 

5.             Security Deposit.     Lessee
shall deposit with Lessor upon execution hereof the Security Deposit (if any)
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 therefore deposit monies with Lessor
sufficient to restore said Security Deposit to the full amount required by this
Lease. If the Base Rent increases during the term of this Lease, Lessee shall,
upon written request from Lessor, deposit additional monies with Lessor so that
the total amount of the Security Deposit shall at all times bear the same
proportion to the increased Base Rent as the initial Security Deposit bore to
the initial Base Rent. Should the Agreed Use be amended to accommodate a
material change in the business of Lessee or to accommodate a sublessee or
assignee, Lessor shall have the right to increase the Security Deposit to the
extent necessary, in Lessor’s reasonable judgment, to account for any increased
wear and tear that the Premises may suffer as a result thereof, if a change in
control of Lessee occurs during this Lease and following such change the
financial condition of Lessee is, in Lessor’s reasonable judgment,
significantly reduced, Lessee shall deposit such additional monies with Lessor
as shall be sufficient to cause the Security Deposit to be at a commercially
reasonable level based on such change in financial condition. Lessor shall not
be required to keep the Security Deposit separate from its general accounts.

 

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.

 

 

	
   

  	
   

  	
   

  	
   

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

 

(b)  Duty to Inform Lessor. If Lessee knows, or
has reasonable cause to believe, that a Hazardous Substance has come to be
located in, on, under or about the Premises, other than as previously consented
to by Lessor, Lessee shall immediately give written notice of such fact to
Lessor, and provide Lessor with a copy of any report, notice, claim or other
documentation which it has concerning 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 Lessors agents to have reasonable access to the
Premises at reasonable times in order to carry out Lessor’s investigative and
remedial responsibilities,

 

(g)  Lessor Termination Option. If a Hazardous
Substance Condition (see Paragraph 9.1(e)) occurs during the term of this
Lease, unless Lessee is legally responsible therefore (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 8.2(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

 

 

	
   

  	
   

  	
   

  	
   

  
	
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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 therefore.

 

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,  roof membrane, 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, 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) parking lot,  landscaping and irrigation systems, (v) roof covering
and drains, (vi) clarifiers (vii) basic utility feed to the perimeter
of the Building, and (viii) any other equipment, if reasonably required by
Lessor. *(See attachment)

 

(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, end 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 (i.e. 1/144th of the cost per month). Lessee
shall pay Interest on the unamortized balance but may prepay its obligation at
any time, provided, however, that
the denominator for purposes of any roof replacement shall be 300.

 

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: provided, however, that Lessor shall, at its
sole cost and expense, be responsible for the structure of the building
(including the structural portions of the roof (excluding the roof membrane))
unless the necessity for repairs to the same are necessitated due to Lessee’s
acts or omissions (in which event Lessee shall be responsible for the same). 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 tong 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. Notwithstanding the foregoing, Lessee shall not

 

 

	
   

  	
   

  	
   

  	
   

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

 

7.4           Ownership; Removal;
Surrender; and Restoration.

 

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

 

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

 

(c)  Surrender; Restoration. Lessee shall
surrender the Premises by the Expiration Date or any earlier termination date,
with all of the improvements, parts and surfaces thereof broom clean and free
of debris, and in good operating order, condition and state of repair, ordinary
wear and tear excepted. “Ordinary wear and tear” shall not include any damage
or deterioration that would have been prevented by good maintenance practice.
Notwithstanding the foregoing, if this Lease is for 12 months or less, then
Lessee shall surrender the Premises in the same condition as delivered to
Lessee on the Start Date with NO allowance for ordinary wear and tear. Lessee
shall repair any damage occasioned by the installation, maintenance or removal
of Trade Fixtures, Lessee owned Alterations and/or Utility Installations,
furnishings, and equipment as well as the removal of any storage tank installed
by or for Lessee, Lessee shall 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 For Insurance. Lessee shall pay for all insurance required
under Paragraph 8 except to the extent of the cost attributable to liability
insurance carried by Lessor under Paragraph 8.2(b) in excess of $2,000,000
per occurrence. Premiums for policy periods commencing prior to or extending
beyond the Lease term shall be prorated to correspond to the Lease term.
Payment shall be made by Lessee to Lessor within 30 days following receipt of an invoice,

 

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 $5,000,000, 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
and coverage shall also be extended to include damage caused by heat, smoke or
fumes from a hostile fire. The policy shall not contain any intra-insured
exclusions as between insured persons or organizations, but shall include
coverage for liability assumed under this Lease as an “insured contract” for
the performance of Lessee’s indemnity obligations under this Lease. The limits
of said insurance shall not, however, limit the liability of Lessee nor relieve
Lessee of any obligation hereunder. Lessee shall provide an endorsement on its
liability policy(is) 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 at Lessee’s
sole cost  and expense have the
right, but not the obligation, to maintain liability insurance and such other
Insurance that may be required by any lender of Lessor, which insurance shall
be  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, at Lessee’s sole cost and expense, 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 8.4 rather than by
Lessor. If the

 

 

	
   

  	
   

  	
   

  	
   

  
	
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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 otherwise desired by Lessor),
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.

 

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.    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 modification except after 30 days prior
written notice to Lessor. Lessee shall use good faith  efforts to furnish Lessor with evidence of renewals or “insurance
binders” evidencing renewal thereof prior to the expiration of such policies.
In the event Lessor does not receive such evidence within ten (10) days
after such expiration, then 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 (collectively, “Claims”) 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, 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 there from. Instead,
it is intended that Lessee’s sole recourse in the event of such damages or
injury be to file a claim on the insurance policy(ies) that Lessee is required
to maintain pursuant to the provisions of paragraph 8.

 

8.9           Failure to Provide
insurance. Lessee
acknowledges that any failure on its part to obtain or maintain the insurance
required herein will expose Lessor to risks and potentially cause Lessor to
incur costs not contemplated by this Lease, the extent of which will be
extremely difficult to ascertain. Accordingly, for any month or portion thereof
that Lessee does not maintain the required insurance and/or does not provide
Lessor with the required binders or certificates evidencing the existence of
the required insurance, and If such failure continues for five (5) days’
after Lessor’s notice to lessee of such failure, 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 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.

 

 

	
   

  	
   

  	
   

  	
   

  
	
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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., except as provided in Section 7.1(d).

 

(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 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 therefore. 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. *(See attachment)

 

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.
*(See attachment)

 

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. lf Lessee fails to exercise such
option and provide such funds or assurance during such period, then this Lease
shall terminate on the date specified in the termination notice and Lessee’s
option shall be extinguished.

 

9.6           Abatement of Rent; Lessee’s
Remedies.

 

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

 

 

	
   

  	
   

  	
   

  	
   

  
	
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damage, destruction,
remediation, repair or restoration except as provided herein.

 

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

 

9.7           Termination; Advance
Payments. Upon termination of this Lease pursuant to Paragraph 6.2(g) or
Paragraph 9, an equitable adjustment shall be made concerning advance Base Rent
and any other advance payments made by Lessee to Lessor. Lessor shall, in
addition, return to Lessee ant remaining portion of Lessee’s Security Deposit
as 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, and (ii) levied or assessed on machinery or equipment
provided by Lessor to Lessee pursuant to this Lease,

 

10.2         Payment of Taxes.
In addition to Base Rent, Lessee shall pay to Lessor an amount equal to the
Real Property Tax installment due at least 20 days prior to the applicable
delinquency date. If any such installment shall cover any period of time prior
to or after the expiration or termination of this Lease, Lessee’s share of such
installment shall be prorated. In the event Lessee incurs a late charge on any
Rent payment, Lessor may estimate the current Real Property Taxes, and require
that such taxes be paid in advance to Lessor by Lessee monthly in advance with
the payment of the Base Rent. Such monthly payments shall be an amount equal to
the amount of the estimated installment of taxes divided by the number of
months remaining before the month in which said installment becomes delinquent.
When the actual amount of the applicable tax bill is known, the amount of such
equal monthly advance payments shall be adjusted as required to provide the
funds needed to pay the applicable taxes. If the amount collected by Lessor is
insufficient to pay such Real Property Taxes when due, Lessee shall pay Lessor,
upon demand, such additional sum as is necessary. 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.

 

10.3         Joint Assessment.
If the Premises are not separately assessed, Lessee’s liability shall be an
equitable proportion of the Real Property Taxes for all of the land and
improvements included within the tax parcel assessed, such proportion to be
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 taw assign,
transfer, mortgage or encumber (collectively, “assign or assignment”) or sublet
all or any part of Lessee’s interest in this Lease or in the Premises without
Lessor’s prior written consent.

 

(b)   Unless Lessee is a corporation and its stock is publicly traded on
a national stock exchange, a change in the control of Lessee shall constitute
an assignment requiring consent. The transfer, on a cumulative basis, of 25% or
more of the voting control of Lessee shall constitute a change in control for
this purpose.

 

(c)   Except as otherwise provided in Section 8 of the addendum,
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

 

 

	
   

  	
   

  	
   

  	
   

  
	
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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.

 

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

 

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

 

(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.

 

(c)   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

 

 

	
   

  	
   

  	
   

  	
   

  
	
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following written notice to
Lessee. *(See attachment)

 

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

 

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

 

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

 

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

 

 

	
   

  	
   

  	
   

  	
   

  
	
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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 (“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 document 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 therefore. 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         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 or such other form
as may be reasonably

 

 

	
   

  	
   

  	
   

  	
   

  
	
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12

 

required by the Requesting
Party, 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, subject to receipt of commercially
reasonable nondisclosure agreements, deliver to any potential lender or
purchaser designated by Lessor such financial statements as may be reasonably
required by such lender or purchaser, including but not limited to Lessee’s
financial statements for the past 3 years. All such financial statements shall
be received by Lessor and such lender or purchaser in confidence and shall be
used only for the purposes herein set forth.

 

17.           Definition of Lessor.   The term “Lessor”
as used herein shall mean the owner or owners at the time in question of the
fee title to the Premises, or, if this is a sublease, of the Lessee’s interest
in the prior tease. 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 alt 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; 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  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.

 

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 and, in the case of notice
to Lessee, a copy to the Premises.  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 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

 

 

	
   

  	
   

  	
   

  	
   

  
	
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13

 

STATUTE IS INCONSISTENT WITH THIS LEASE.

 

25.           lntentionally Omitted.

 

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

 

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

 

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

 

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

 

30.           Subordination; Attornment;
Non-Disturbance.

 

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

 

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 Device 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, for the remainder of the
term hereof, 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

 

 

	
   

  	
   

  	
   

  	
   

  
	
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14

 

ownership; (b) be
subject to any offsets or defenses which Lessee might have against any prior
lessor, (c) be bound by prepayment of more than one month’s rent, or (d) be
liable for the return of any security deposit paid to any prior lessor.

 

30.3         Non-Disturbance. With respect to Security Devices entered
into by Lessor after the execution of this Lease, Lessee’s subordination of
this Lease shall be subject to receiving a commercially reasonable
non-disturbance agreement (a “Non-Disturbance Agreement”) from the Lender which
Non-Disturbance Agreement provides that Lessee’s possession of the Premises,
and this Lease, including any options to extend the term hereof, wilt 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.

 

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

 

32.           Lessor’s Access; Showing
Premises; Repairs. Lessor
and Lessor’s agents shall have the right to enter the Premises at any time, in
the case of an emergency, and otherwise at reasonable times after reasonable
prior notice (in no event less than 24 hours’ notice (except In cases of
emergency)) 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
sub-tenancies, 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 therefore. Lessor’s consent
to any act, assignment or subletting shall not constitute an acknowledgment
that no Default or Breach by Lessee of this Lease exists, nor shall such
consent be deemed a waiver of any then existing Default or Breach, except as
may be otherwise specifically stated in writing by Lessor at the time of such
consent. The failure to specify herein any particular condition to Lessor’s
consent shall not preclude the imposition by Lessor at the time of consent of
such further or other conditions as are then reasonable with reference to the
particular matter for which consent is being given. In the event that either
Party disagrees with any determination  made
by the other hereunder and reasonably requests the reasons for such
determination, the determining party shall furnish its reasons in writing and
in reasonable detail within 10 business days following such request.

 

37.           Intentionally Omitted.

 

38.           Quiet Possession. Subject to payment by Lessee of the Rent and performance of all of the
covenants, conditions and provisions on

 

 

	
   

  	
   

  	
   

  	
   

  
	
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15

 

Lessee’s part to be observed and performed under this Lease, Lessee
shall have quiet possession and quiet enjoyment of the Premises during the term
hereof.

 

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

 

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

 

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

 

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

 

39.4         Effect of Default on Options.

 

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

 

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

 

(c) An Option shall terminate and be of
no further force or effect, notwithstanding Lessee’s due and timely exercise of
the Option, if, after such exercise and prior to the commencement of the
extended term 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.           lntentionally Omitted.

 

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” with 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.

 

(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.           Intentionally Omitted

 

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.

 

 

	
   

  	
   

  	
   

  	
   

  
	
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16

 

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

 

49.           Mediation and Arbitration of
Disputes. An Addendum
requiring the Mediation and/or the Arbitration of all disputes between the Parties
and/or Brokers arising out of this Lease x
is o is not attached to this Lease. *(See
attachment)

 

50.           Americans with Disabilities
Act. Subject to Lessor’s
representations and warranties contained herein, 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, subject to Lessor’s express obligations set forth herein, 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:

 

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.

 

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

 

RECORDING OF THIS LEASE PROHIBITED

 

	
  Executed at:

  	
  Simi Valley, CA

  	
   

  	
  Executed at:

  	
  Monrovia, CA

  
	
  On:

  	
  6/3/08

  	
   

  	
  On:

  	
  5/19/08

  
	
   

  	
   

  	
   

  
	
  By LESSOR:

  	
   

  	
  By LESSEE:

  
	
  HILLSIDE ASSOCIATES II,
  LLC

  	
   

  	
  AEROVIRONMENT, INC.,

  
	
   

  	
   

  	
  A DELAWARE CORPORATION

  
							

 

	
  By:

  	
   

  	
   

  	
  By:

  	
  /s/ Cathleen
  S. Cline

  
	
  Name Printed:

  	
   

  	
   

  	
  Name Printed: 

  	
  CATHLEEN S. CLINE, VP
  ADMIN

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  
	
  By:

  	
  /s/ Margaret M. Kestly

  	
   

  	
  By:

  	
   

  
	
  Name Printed:

  	
  MARGARET M. KESTLY

  	
   

  	
  Name Printed:

  	
   

  
	
  Title: 

  	
  AUTHORIZED AGENT

  	
   

  	
  Title:

  	
   

  
	
  Address:

  	
   

  	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
  Telephone:

  	
  (   )

  	
   

  	
  Telephone: 

  	
  (   )

  
	
  Facsmile:

  	
  (   )

  	
   

  	
  Facsmile: 

  	
  (   )

  
	
  Federal ID No.

  	
   

  	
   

  	
  Federal ID No.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  BROKER:

  	
   

  	
  BROKER:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Attn:

  	
   

  	
   

  	
  Attn:

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  
	
  Address:

  	
   

  	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Telephone:

  	
  (   )

  	
   

  	
  Telephone:

  	
  (   )

  
	
  Facsmile:

  	
  (   )

  	
   

  	
  Facsmile:

  	
  (   )

  
	
  Federal ID No.

  	
   

  	
   

  	
  Federal ID No.

  	
   

  
																																	

 

 

	
   

  	
   

  	
   

  	
   

  
	
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  ©2001 –
  AIR COMMERCIAL REAL ESTATE ASSCOCIATION

  	
   

  	
   

  	
  FORM STN-10-6/07E

  	
   

  

 

17

 

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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  ©2001 –
  AIR COMMERCIAL REAL ESTATE ASSCOCIATION

  	
   

  	
   

  	
  FORM STN-10-6/07E

  	
   

  

 

18

 

AIR COMMERCIAL REAL ESTATE ASSOCIATION

STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE – NET

 

ATTACHMENT

 

7.1 (b)     However,
if in Lessor’s sole opinion one or more service providers contracted for by
Lessee is performing in a ubstandard fashion, Lessor may give Lessee 30 days’
written notice to cure the problem. 
Should Lessee fail to cure the substandard performance within that 30
day period, then Lessor may, at its option, procure and maintain a substitute
service provider(s), the cost for which Lessee shall reimburse Lessor, upon
demand.

 

9.2           ...,
except emergency repairs required in the judgment of Lessee to prevent
additional loss to real or personal property of the parties hereto.

 

9.4           ... 7
days after Lessor determines that damage is Total Destruction.

 

13.1(c)    No default
or breach shall occur when access is denied by Lessee when Lessor or its
employees or agents do not comply with the citizenship and status requirements
of the International Traffic in Arms Regulations require that anyone allowed
access to the building must be a U.S. citizen, legal permanent resident or a
member of a protected class since items produced in the premises are listed on
the U.S. Munitions list of the ITAR.

 

32.           No
default or breach shall occur when access is denied by Lessee when Lessor or
its employees or agents do not comply with the citizenship and status
requirements of the International Traffic in Arms Regulation of the United
States Government.  Such regulations
require that anyone allowed access to the building must be a U.S. citizen,
legal permanent resident or a member of a protected class since items produced
in the premises are listed on the U.S. Munitions list of the ITAR.

 

45.           Agreement
constitutes the entire agreement between the parties, regardless of any prior
negotiations.  This Agreement shall only
be amended or otherwise changed through a writing, signed by both Lessor and
Lessee.

 

49.           The
parties shall agree to first attempt mediation of any disputes, with an agreed
to mediator and his/her cost shared equally by the parties.  If said mediation does not occur within 30
days of the dispute arising, then either party may proceed to Court.  Notwithstanding the foregoing, lessor shall
not be obligated to engage in mediation for any cause of action seeking
possession and/or rents owed by Lessee. 
In such cases, the Civil code and the Code of Civil Procedure shall
govern the dispute resolution.

 

 

	
   

  	
   

  
	
   

  	
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ADDENDUM

 

Date: APRIL 21, 2008

 

By and
Between (Lessor) HILLSIDE
ASSOCIATES II, LLC

(Lessee)
AEROVIRONEMTN, INC., A DELAWARE CORPORATION

 

Address
of Premises: 994
FLOWER GLEN STREET

SIMI
VALLEY, CA 93065

 

1.     ROOF:

 

Notwithstanding
the language contained in the body of this Lease, the Parties agree that the
Lessor shall guaranty the roof as of the execution date of the lease.

 

During
the time in which Lessee occupies the Premises, any work or repairs to the roof
performed by Lessee or its agent or subcontractor or anyone acting by or
through it, shall be performed only after Lessee receives prior written consent
from Lessor.  Upon receiving consent from
Lessor, the work shall be performed by SBR Roofing company, or another
contractor approved in writing by Lessor.

 

Any
conflict between the language of this Addendum and the language of the body of
the Lease shall be resolved in favor of the language contained within this
Addendum.

 

2.     The parking shall be at least three (3)/per thousand square feet plus
tenant shall be legally able to use both the truck wells and truck turning
areas as it sees fit to maximize parking, at its sole expense.

 

 

	
   

  	
   

  	
   

  	
   

  
	
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1

 

RENT ADJUSTMENT(S)

STANDARD LEASE ADDENDUM

 

	
  Dated:

  	
  APRIL
  21, 2008

  
	
   

  	
   

  
	
  By and Between (Lessor)  

  	
  HILLSIDE
  ASSOCIATES II, LLC

  
	
   

  	
   

  
	
  (Lessee)  

  	
  AEROVIRONMENT,
  INC., A DELAWARE CORPORATION

  

 

Address of Premises: 994 FLOWER GLEN STREET

SIMI
VALLEY, CA 93065

 

Paragraph      

 

A.                            RENT ADJUSTMENTS:

 

The
monthly rent for each month of the adjustment period(s) specified below
shall be increased using the method(s) indicated below:

 

(Check
Method(s) to be Used and Fill in Appropriately)

 

o   I.              Cost of Living Adjustment(s) (COLA)

 

a.     On (Fill in COLA Dates): N/A

 

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

 

N/A,
All Items (1982-1984 = 100), herein referred to as “CPI”.

 

b.     The monthly rent payable in accordance with
paragraph A.I.a. of this Addendum shall be calculated as follows: the Base Rent
set forth in paragraph 1.5 of the attached Lease, shall be multiplied by a
fraction the numerator of which shall be the CPI of the calendar month 2 months
prior to the month(s) specified in the paragraph A.I.a. above during which
the adjustment is to take effect, and the denominator of which shall be the CPI
of the calendar month which is 2 months prior to (select one): the _ first
month of the term of this Lease as set forth in paragraph 1.3 (“Base Month”) or
_ (Fill In Other “Base Month”): N/A.  The
sum so calculated shall constitute the new monthly rent hereunder, but in no
event, shall any such new monthly rent be less than the rent payable for the
month immediately preceding the rent adjustment.

 

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

 

o   II.             Market Rental Value Adjustment(s) (MRV)

 

a.     On (Fill In MRV Adjustment Date(s): N/A

 

The
Base Rent shall be adjusted to the “Market Rental Value” of the property as
follows:

 

1)     Four months prior to each Market Rental Value
Adjustment Date described above, the Parties shall attempt to agree upon what
the new MRV will be on the adjustment date. 
If agreement cannot be reached within thirty days, then:

 

(a)       Lessor
and Lessee shall immediately appoint a mutually acceptable appraiser or broker
to establish the new MRV within the next 30 days.  Any associated costs will be split equally
between the Parties, or

 

(b)       Both
Lessor and Lessee shall each immediately make a reasonable determination of the
MRV and submit such determination, in writing, to arbitration in accordance
with the following provisions:

 

(i)            Within 15 days thereafter, Lessor and Lessee
shall each select an _ appraiser or _ broker (“Consultant”
– check one) of their choice to act as an arbitrator.  The two arbitrators so appointed shall
immediately select a third mutually acceptable Consultant to act as a third
arbitrator.

 

(ii)           The 3 arbitrators shall within 30 days of the
appointment of third arbitrator reach a decision as to what the actual MRV for
the premises is, and whether Lessor’s or Lessee’s submitted MRV is the closest
thereto.  The decision of majority of the
arbitrators shall be binding on the Parties. 
The submitted MRV which is determined to be the closest to the actual
MRV shall thereafter be used by the Parties.

 

 

	
   

  	
   

  	
   

  	
   

  
	
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  ©2000 -
  AIR COMMERCIAL REAL ESTATE ASSOCIATION

  	
   

  	
   

  	
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1

 

(iii)          If either of the Parties fails to appoint an
arbitrator within the specified 15 days, the arbitrator timely appointed by one
of them shall reach a decision on his or her own, and said decision shall be
binding on the Parties.

 

(iv)          The entire cost of such arbitration shall be
paid by the party whose submitted MRV is not selected, i.e., the one that is
NOT the closes to the actual MRV.

 

2)     Notwithstanding the foregoing, the new MRV
shall not be less than the rent payable for the month immediately preceding the
rent adjustment.

 

b.     Upon the establishment of each New Market Rental Value:

 

1)     the new MRV will become the new “Base Rent” for the purpose of
calculating any further Adjustments, and

 

2)     the first month of each Market Rental Value
term shall become the new “Base Month” for the purpose of calculating any
further Adjustments.

 

x   III.           Fixed Rental Adjustment(s) (FRA)

 

The Base Rent shall be increased to the following amounts on the dates
set forth below:

 

	
  On (Fill In FRA Adjustment
  Date(s):

  	
   

  	
  The New Base Rent shall be:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  NOVEMBER 1, 2009

  	
   

  	
  $

  	
  35,448.00

  	
   

  
	
  NOVEMBER 1, 2010

  	
   

  	
  $

  	
  36,511.00

  	
   

  
	
  NOVEMBER 1, 2011

  	
   

  	
  $

  	
  37,606.00

  	
   

  
	
  NOVEMBER 1, 2012

  	
   

  	
  $

  	
  38,734.00

  	
   

  
	
  NOVEMBER 1, 2013

  	
   

  	
  $

  	
  39,896.00

  	
   

  

 

B.            NOTICE:

 

Unless
specified otherwise herein, notice of any such adjustments, other than Fixed
Rental Adjustments, shall be made as specified in paragraph 23 of the Lease.

 

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

 

 

	
   

  	
   

  	
   

  	
   

  
	
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  ©2000 -
  AIR COMMERCIAL REAL ESTATE ASSOCIATION

  	
   

  	
   

  	
  FORM RA-3-8/00E

  	
   

  

 

2

 

RENT CONCESSION AGREEMENT

 

This document shall set-forth the agreement of HILLSIDE
ASSOCIATES II, LLC, Lessor, and AEROVIRONMENT, INC., A
DELAWARE CORPORATION, Lessee concerning the Rent Concessions offered
to Lessee in connection with that certain Lease dated APRIL 21,
2008 by and between Lessor and Lessee for the premises located at: 994 FLOWER GLEN STREET, City of SIMI VALLEY,
State of California.

 

AS MATERIAL CONSIDERATION for the Rent Concession set-forth herein is
Lessee’s agreement to lease the Premises on all terms and provisions of the
Lease for the entire Lease term.  Lessee
acknowledges that the Free Rent as set-forth below (herein called “Rent
Concession”) is a concession given to Lessee for leasing the Premises for a
term stated in the Lease Agreement.  In
the event Lessee becomes in default of any Lease provision at any time during
the Lease term, Lessor and Lessee agree that: (a) in addition to any other
remedy available to Lessor, Lessor shall be entitled to recover from Lessee the
total rental amount of all Rent Concessions taken by Lessee prior to such
default date, (b) Lessee agrees to pay such amount to Lessor within the
next rental payment, and (c) future Rent Concessions shall then be null,
void and of no force or effect.  Lessee
shall be entitled to Free Rent and /or Rent Concession(s) for the period
of time referenced below:

 

NOVEMBER 1, 2008 THROUGH AUGUST 31, 2009 — $17,208.00 PER MONTH

 

Rent
Concession(s) referenced above equal a fair rental value in a sum as
determined at the time the Rent Concession commences.

 

THIS
DOCUMENT shall not be deemed binding upon Lessor unless and until it is
executed by Lessor a copy delivered to Lessee

 

Dated
this 19th day of May, 2008.

 

	
  LESSOR:

  	
   

  	
  LESSEE:

  
	
  HILLSIDE ASSOCIATES II,
  LLC

  	
   

  	
  AEROVIRONMENT, INC.,

  
	
  By
  MID VALLEY PROPERTIES,

  	
   

  	
  A DELAWARE CORPORATION

  
	
  Managing
  Agent

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  BY:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  BY:

  	
   /s/ Cathleen S. Cline

  
	
   

  	
   

  	
   

  	
  CATHLEEN S. CLINE, VP
  ADMIN

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  BY:

  	
   /s/ Margaret M. Kestly

  	
   

  	
   

  
	
   

  	
  MARGARET M. KESTLY,
  AUTHORIZED AGENT

  	
   

  	
   

  

 

	
   

  	
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OPTION TO RENEW

 

Tenant
is granted one option to extend the within lease for a period of 5 years
commencing immediately after the expiration of the basic lease term.  It shall be the obligation of the tenant to
notify the Landlord of its intention to exercise its option to renew within the
period between 270 days and 360 days prior to the day that the current lease
expires.  The notification of the intent
to exercise its option shall be sent by tenant in writing by U.S. mail
certified, overnight courier delivery or registered with return receipt
requested.

 

The
commencement rent for the first month of the option period shall be equal to
the comparable market rent for a similar building located within a ten-mile
radius of the leases property giving consideration to all concessions, tenant
improvement allowance and rental abatement for a non-renewal and non-sublease
space.  In analyzing the comparable
building properties, the parties may take into account all factors including
ceiling height, parking ratio, loading docks, loading doors and height/size of
those doors, HVAC, office build out, electrical power and distribution,
skylights, yard space, the general location and the view from inside the
building.

 

Upon
receipt within the time period spelled out above, of tenant’s exercise of its
option to extend said lease, both parties will meet and confer in an attempt to
arrive at the beginning rent during the option period.  If the parties are not able to agree on the
option period rent, each party shall designate a licensed real estate broker
who has dealt in the industrial property in the Simi Valley area for not less
than 5 years from the date of his appoint, and is at that time employed by an
established real estate brokerage firm. 
If both brokers are unable to agree on the reasonable commencement rent
for the option period, then both brokers will attempt to designate a third
broker with qualifications at least as stringent as those required of the
original brokers.  Said third broker
shall be given all of the material used by the original brokers to base their
reasonable market value, and said broker shall make his own investigation.  The third broker then shall select the
opinion of one broker as the most correct value, and the value selected buy
said third broker shall be binding upon the parties.

 

If
the two original brokers cannot agree on a third broker, of if the third broker
is unacceptable to the parties as defined herein, then either party may request
that the presiding judge of the Superior Court of the County of Ventura select
a commercial real estate broker from the list annually kept by said presiding
judge, and said appointed brokers opinion shall be absolutely binding on all
parties.

 

Any
outside broker representing the tenant will receive a market commission for the
comparable building as outlined above.

 

Not
withstanding the foregoing, the new Market Rental Value shall not be less than
the rent payable for the month immediately preceding the rent adjustment.

 

Entered
into this 19th day of May, 2008 in the City of Simi
Valley, State of California.

 

	
  LANDLORD:

  	
   

  	
  LESSEE:

  
	
  HILLSIDE ASSOCIATES II, LLC

  	
   

  	
  AEROVIRONMENT, INC.,

  
	
  A
  California Limited Liability Company

  	
   

  	
  A DELAWARE CORPORATION

  
	
   

  	
   

  	
   

  
	
  By:

  	
   /s/ Margaret M. Kestly

  	
   

  	
  By:

  	
   /s/ Cathleen S. Cline

  
	
   

  	
  Margaret M. Kestly

  	
   

  	
   

  	
   CATHLEEN S. CLINE,
  VP ADMIN

  
	
   

  	
  Authorized AgentExhibit 4.27

 

EXECUTION VERSION

 

FOURTH AMENDMENT, dated as of June 4, 2007
(this “Amendment”), to the Amended and Restated Collateral Trust and
Intercreditor Agreement dated as of June 27, 2001, as amended and restated
as of May 28, 2003, as amended by the First Amendment dated as of September 22,
2004, as amended by the Second Amendment dated as of September 30, 2005
and as amended by the Third Amendment dated as of November 8, 2006 (as
further amended, supplemented or otherwise modified from time to time, the “Collateral
Trust and Intercreditor Agreement”), among RITE AID CORPORATION, a Delaware
corporation (the “Borrower”), each SUBSIDIARY party thereto or which
becomes a party thereto pursuant to Section 8.11 thereof (each such
Subsidiary, individually, a “Subsidiary Guarantor”, and collectively,
the “Subsidiary Guarantors”), WILMINGTON TRUST COMPANY, a Delaware
banking corporation, as collateral trustee for the holders from time to time of
the Second Priority Debt Obligations, CITICORP NORTH AMERICA, INC., a Delaware
corporation, as collateral processing agent for the Senior Secured Parties (in
such capacity, the “Senior Collateral Agent”), BNY MIDWEST TRUST
COMPANY, as trustee under the 8.125% Note Indenture and the 7.5% Note
Indenture, and each other Second Priority Representative which becomes a party
thereto pursuant to Section 8.12 thereof.

 

RECITALS

 

A. 
Reference is made to the Senior Credit Agreement dated as of June 27,
2001, as amended and restated as of November 8, 2006 and as amended and
restated as of June 4, 2007 (as further amended, restated, supplemented or
otherwise modified from time to time, the “Senior Credit Agreement”),
among the Borrower, the lenders party thereto, the Administrative Agent, the
Senior Collateral Agent and Bank of America, N.A., as Syndication Agent.

 

B.  The
Borrower has requested that certain provisions of the Collateral Trust and
Intercreditor Agreement be modified as set forth in this Amendment, and the
Senior Lenders, the Senior Collateral Agent and the Second Priority Instructing
Group are willing to agree to such modifications as provided for in this
Amendment.  The Senior Collateral Agent
and the Second Priority Instructing Group hereby instruct the Second Priority
Collateral Trustee to execute and deliver this Amendment.

 

AGREEMENTS

 

Accordingly, in consideration of the mutual
agreements herein contained and other good and valuable consideration, the
sufficiency and receipt of which are hereby acknowledged, and subject to the
conditions set forth herein, the parties hereby agree as follows:

 

 

SECTION 1.  Defined Terms.  Capitalized terms used and not defined herein
shall have the meanings given to them in the Senior Credit Agreement or the
Collateral Trust and Intercreditor Agreement (including the Definitions Annex
annexed thereto) as amended hereby.

 

SECTION 2.  Amendments. (a)  On the Effective
Date (as defined below), the Definitions Annex referred to in Section 1.02
of the Collateral Trust and Intercreditor Agreement is hereby amended and
restated in the form of the Definitions Annex attached as Exhibit A
to this Amendment.

 

SECTION 3.  Representations and Warranties.  To induce the other parties hereto to enter
into this Amendment, the Borrower represents to each of the Secured Parties,
the Senior Collateral Agent and the Second Priority Instructing Group:

 

(a)  after giving effect to this
Amendment, the representations and warranties set forth in Article III of
the Senior Credit Agreement are true and correct in all material respects on
the date hereof with the same effect as if made on the Effective Date, except
for such representations and warranties that expressly relate to an earlier
date (which representations and warranties were true and correct in all
material respects as of such earlier date).

 

(b)  after giving effect to this
Amendment, no Default or Event of Default has occurred and is continuing under
the Senior Credit Agreement; and

 

(c) this Amendment has been duly
executed and delivered by the Borrower and constitutes a legal, valid and
binding obligation of the Borrower, enforceable in accordance with its terms.

 

SECTION 4.  Effectiveness.  This Amendment shall become effective as of
the first date (the “Effective Date”) on which the Senior Collateral
Agent (or its counsel) shall have received counterparts hereof that, when taken
together, bear the signatures of the Borrower, the Senior Collateral Agent and
the Second Priority Instructing Group.

 

SECTION 5.  Effect of the Amendment.  (a) Except as expressly set forth
herein, this Amendment shall not by implication or otherwise limit, impair,
constitute a waiver of, amend or otherwise affect the rights and remedies of,
the Secured Parties, the Senior Collateral Agent or the Second Priority
Instructing Group under the Collateral Trust and Intercreditor Agreement or any
other Senior Loan Document or Second Priority Debt Document, and shall not
alter, modify, amend or in any way affect any of the terms, conditions,
obligations, covenants or agreements contained in the Collateral Trust and
Intercreditor Agreement or any other Senior Loan Document or Second Priority
Debt Document, all of which are ratified and affirmed in all respects and shall
continue in full force and effect. 
Nothing herein shall be deemed to entitle any Loan Party to a consent
to, or a waiver, amendment, modification or other change of, any of the terms,
conditions, obligations, covenants or agreements contained in the Collateral
Trust and Intercreditor Agreement or any other Senior Loan Document or Second
Priority Debt Document in similar or different circumstances.  This Amendment shall apply to and be
effective only 

 

2

 

with respect to the matters
expressly referred to herein.  After the
Effective Date, any reference to the Collateral Trust and Intercreditor
Agreement shall mean such Collateral Trust and Intercreditor Agreement, as
modified hereby.

 

SECTION 6.  Governing Law.  This Amendment shall be governed by, and
construed in accordance with, the laws of the State of New York.

 

SECTION 7.  Costs and Expenses.  The Borrower agrees to reimburse the Senior
Collateral Agent for its reasonable out-of-pocket expenses in connection with
this Amendment, including the reasonable fees, charges and disbursements of
counsel for the Senior Collateral Agent.

 

SECTION 8.  Counterparts.  This Amendment may be executed in any number
of counterparts and by different parties hereto in separate counterparts, each
of which when so executed and delivered shall be deemed an original, but all
such counterparts together shall constitute but one and the same
instrument.  Delivery of any executed
counterpart of a signature page of this Amendment by facsimile
transmission or other electronic imaging means shall be as effective as
delivery of a manually executed counterpart hereof.

 

SECTION 9.  Headings.  The headings of this Amendment are for
purposes of reference only and shall not limit or otherwise affect the meaning
hereof.

 

3

 

IN WITNESS WHEREOF, the parties hereto have
caused this Amendment to be duly executed by their respective officers as of
the date first written above.

 

 

	
   

  	
  RITE
  AID CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  	
  by

  
	
   

  	
   

  	
  /s/
  Robert B. Sari

  
	
   

  	
   

  	
  Name:
  Robert B. Sari

  
	
   

  	
   

  	
  Title: Executive Vice President,

  Secretary and General Counsel

  
					

 

 

	
   

  	
  THE
  SUBSIDIARY GUARANTORS

  LISTED ON PART I OF SCHEDULE A

  HERETO,

  
	
   

  	
   

  
	
   

  	
   

  	
  by

  
	
   

  	
   

  	
  /s/
  Robert B. Sari

  
	
   

  	
   

  	
  Name:
  Robert B. Sari

  
	
   

  	
   

  	
  Title: Executive Vice President,

  Secretary and General Counsel

  
					

 

 

	
   

  	
  THRIFTY PAYLESS, INC., as a Subsidiary

  Guarantor

  
	
   

  	
   

  
	
   

  	
   

  	
  by

  
	
   

  	
   

  	
  /s/
  Robert B. Sari

  
	
   

  	
   

  	
  Name:
  Robert B. Sari

  
	
   

  	
   

  	
  Title: Executive Vice President,

  Secretary and General Counsel

  
					

 

 

	
   

  	
  CITICORP
  NORTH AMERICA, INC., as

  Senior Collateral Agent,

  
	
   

  	
   

  
	
   

  	
   

  	
  by

  
	
   

  	
   

  	
  /s/
  Jeffrey Nitz

  
	
   

  	
   

  	
  Name:
  Jeffrey Nitz

  
	
   

  	
   

  	
  Title:
  Director

  
					

 

 

	
   

  	
  THE BANK OF NEW YORK TRUST

  COMPANY, N.A., as successor to,

  BNY MIDWEST TRUST COMPANY, as

  Trustee under the 8.125% Note Indenture and

  the 7.5% Note Indenture, 

  
	
   

  	
   

  
	
   

  	
   

  	
  by

  
	
   

  	
   

  	
  /s/
  D.G. Donovan

  
	
   

  	
   

  	
  Name:
  D.G. Donovan

  
	
   

  	
   

  	
  Title:
  Vice President

  
					

 

 

	
   

  	
  THE BANK OF NEW YORK TRUST

  COMPANY, N.A., as Trustee under the 2017

  7.5% Note Indenture,

  
	
   

  	
   

  
	
   

  	
   

  	
  by

  
	
   

  	
   

  	
  /s/
  D.G. Donovan

  
	
   

  	
   

  	
  Name:
  D.G. Donovan

  
	
   

  	
   

  	
  Title:
  Vice President

  
					

 

 

	
   

  	
  WILMINGTON TRUST COMPANY, as

  Second Priority Collateral Trustee,

  
	
   

  	
   

  
	
   

  	
   

  	
  by

  
	
   

  	
   

  	
  /s/
  James J. McGinley

  
	
   

  	
   

  	
  Name:
  James J. McGinley

  
	
   

  	
   

  	
  Title:
  Authorized Signer

  
					

 

 

SCHEDULE A

to Fourth Amendment to

Collateral Trust and
Intercreditor Agreement

 

Subsidiary Guarantors

 

Part I

 

1.     112 Burleigh Avenue Norfolk, LLC

 

2.     1515 West State Street Boise, Idaho, LLC

 

3.     1740 Associates, L.L.C.

 

4.     3581 Carter Hill Road – Montgomery Corp.

 

5.     4042 Warrensville Center Road – Warrensville Ohio, Inc.

 

6.     5277 Associates, Inc.

 

7.     537 Elm Street Corp.

 

8.     5600 Superior Properties, Inc.

 

9.     657-659 Broad St. Corp.

 

10.   764 South Broadway- Geneva, Ohio, LLC

 

11.   Ann & Government Streets -  Mobile, Alabama, LLC

 

12.   Apex Drug Stores, Inc.

 

13.   Broadview and Wallings- Broadview Heights Ohio, Inc.

 

14.   Central Avenue and Main Street – Petal, MS, LLC

 

15.   Eagle Managed Care Corp.

 

16.   Eighth and Water Streets – Urichsville, Ohio, LLC

 

17.   England Street-Asheland Corporation

 

18.   Fairground, L.L.C.

 

19.   GDF, Inc.

 

20.   Gettysburg and Hoover-Dayton, Ohio, LLC

 

21.   Harco, Inc.

 

 

22.   K & B Alabama Corporation

 

23.   K & B Louisiana Corporation

 

24.   K & B Mississippi Corporation

 

25.   K & B Services, Incorporated

 

26.   K & B Tennessee Corporation

 

27.   K & B, Incorporated

 

28.   K & B Texas Corporation

 

29.   Keystone Centers, Inc.

 

30.   Lakehurst and Broadway Corporation

 

31.   Mayfield & Chillicothe Roads – Chesterland, LLC

 

32.   Munson & Andrews, LLC

 

33.   Name Rite, L.L.C.

 

34.   Northline & Dix – Toledo – Southgate, LLC

 

35.   Patton Drive and Navy Boulevard Property Corporation

 

36.   Paw Paw Lake Road & Paw Paw Avenue – Coloma, Michigan,
LLC

 

37.   PDS-1 Michigan, Inc.

 

38.   Perry Distributors, Inc.

 

39.   Perry Drug Stores, Inc.

 

40.   Ram-Utica, Inc.

 

41.   RDS Detroit, Inc.

 

42.   Read’s Inc.

 

43.   Rite Aid Drug Palace, Inc.

 

 

44.   Rite Aid Hdqtrs. Corp.

 

45.   Rite Aid Hdqtrs. Funding, Inc.

 

46.   Rite Aid of Alabama, Inc.

 

47.   Rite Aid of Connecticut, Inc.

 

48.   Rite Aid of Delaware, Inc.

 

49.   Rite Aid of Florida, Inc.

 

50.   Rite Aid of Georgia, Inc.

 

51.   Rite Aid of Illinois, Inc.

 

52.   Rite Aid of Indiana, Inc.

 

53.   Rite Aid of Kentucky, Inc.

 

54.   Rite Aid of Maine, Inc.

 

55.   Rite Aid of Maryland, Inc.

 

56.   Rite Aid of Massachusetts, Inc.

 

57.   Rite Aid of Michigan, Inc.

 

58.   Rite Aid of New Hampshire, Inc.

 

59.   Rite Aid of New Jersey, Inc.

 

60.   Rite Aid of New York, Inc.

 

61.   Rite Aid of North Carolina, Inc.

 

62.   Rite Aid of Ohio, Inc.

 

63.   Rite Aid of Pennsylvania, Inc.

 

64.   Rite Aid of South Carolina, Inc.

 

65.   Rite Aid of Tennessee, Inc.

 

 

66.   Rite Aid of Vermont, Inc.

 

67.   Rite Aid of Virginia, Inc.

 

68.   Rite Aid of Washington, D.C., Inc.

 

69.   Rite Aid of West Virginia, Inc.

 

70.   Rite Aid Realty Corp.

 

71.   Rite Aid Rome Distribution Center, Inc.

 

72.   Rite Aid Services, L.L.C.

 

73.   Rite Aid Transport, Inc.

 

74.   Rite Fund, Inc.

 

75.   Rite Investments Corp.

 

76.   Rx Choice, Inc.

 

77.   Seven Mile and Evergreen – Detroit, LLC

 

78.   Silver Springs Road – Baltimore, Maryland/One, LLC

 

79.   Silver Springs Road – Baltimore, Maryland/Two, LLC

 

80.   State & Fortification Streets – Jackson, Mississippi, LLC

 

81.   State Street and Hill Road – Gerard, Ohio, LLC

 

82.   The Lane Drug Company

 

83.   Thrifty Corporation

 

84.   Tyler and Sanders Roads, Birmingham – Alabama, LLC

 

Part II

 

1.               Thrifty PayLess, Inc.

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