Document:

EXHIBIT 10.1

 

CHANGE OF
CONTROL AGREEMENT

 

	
  Parties:

  	
   

  	
  Ciprico Inc.

  	
   

  	
  (“Company”)

  
	
   

  	
   

  	
  17400 Medina Road

  	
   

  	
   

  
	
   

  	
   

  	
  Plymouth, MN 55447

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Donald L. McDonell

  	
   

  	
  (“Employee”)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Effective Date:

  	
   

  	
  April 24, 2006

  	
   

  	
   

  

 

RECITALS:

 

1.                                       Employee is
employed by Company in various capacities, has extensive knowledge and
expertise relating to Company’s business.

 

2.                                       The parties
recognize that a “Change of Control” may materially change or diminish Employee’s
responsibilities and substantially frustrate Employee’s commitment to the
Company.

 

3.                                       The parties
further recognize that it is in the best interests of the Company and its
stockholders to provide certain benefits payable upon a “Change of Control
Termination” to encourage Employee to continue in his position in the event of
a Change of Control, although no such Change of Control is now contemplated or
foreseen.

 

4.                                       The parties
further desire to provide for certain benefits payable upon certain involuntary
terminations of Employee’s employment.

 

AGREEMENTS:

 

In consideration of the mutual covenants set
forth herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as follows:

 

1.                                       Term of Agreement.  The term of this Agreement shall commence on
the Effective Date and shall continue in effect until termination of Employee’s
employment which does not constitute a Change of Control Termination; provided,
however, that if a Change of Control of the Company shall occur during the term
of this Agreement, this Agreement shall instead continue in effect for a period
of twelve (12) months following the date of such Change of Control.  Any rights and obligations accruing before
the termination or expiration of this Agreement shall survive to the extent
necessary to enforce such rights and obligations.

 

2.                                       “Change of Control.”  For purposes of this Agreement, “Change of
Control” shall mean any of the following events occurring after the date of
this Agreement:

 

1

 

(a)                                  A merger or
consolidation to which the Company is a party if the individuals and entities
who were shareholders of the Company immediately prior to the effective date of
such merger or consolidation have, immediately following the effective date of
such merger or consolidation, beneficial ownership (as defined in Rule 13d-3
under the Securities Exchange Act of 1934) of less than fifty percent (50%) of
the total combined voting power of all classes of securities issued by the
surviving corporation for the election of directors of the surviving
corporation;

 

(b)                                 The
acquisition of direct or indirect beneficial ownership (as defined in Rule 13d-3
under the Securities Exchange Act of 1934) of securities of the Company by any
person or entity or by a group of associated persons or entities acting in
concert in one or a series of transactions, which causes the aggregate
beneficial ownership of such person, entity or group to equal or exceed twenty
percent (20%) or more of the total combined voting power of all classes of the
Company’s then issued and outstanding securities;

 

(c)                                  The
sale of substantially all of the assets of the Company to any person or entity
that is not a wholly-owned subsidiary of the Company;

 

(d)                                 The
approval by the stockholders of the Company of any plan or proposal for the
liquidation of the Company;

 

(e)                                  A change in the
composition of the Board of the Company at any time during any consecutive
twenty-four (24) month period such that the “Continuity Directors” no longer
constitute at least a seventy percent (70%) majority of the Board.  For purposes of this event, “Continuity
Directors” means those members of the Board who were directors at the beginning
of such consecutive twenty-four (24) month period or were elected by, or on the
nomination or recommendation of, at least a two thirds (2/3) majority of the
then-existing Board of Directors; or

 

(f)                                    The execution by
the Company of a letter of intent, an agreement in principle or a definitive
agreement relating to an event described in Section 2(a), 2(b), 2(c), 2(d) or
2(e) that ultimately results in such a Change of Control, or a tender or
exchange offer or proxy contest is commenced that ultimately results in an
event described in Section 2(b) or 2(e).

 

3.                                       Termination.  For purposes of this Agreement, “Change of
Control Termination” shall mean any of the following events occurring within
twelve (12) months after a change of control occurring during the term of this
Agreement.

 

(a)                                  The
termination of Employee’s employment by the Company for any reason except Good
Cause.  For purposes of this Agreement, “Good
Cause” shall include, but not be limited to, the following:

 

2

 

(i)                                     Employee’s
conviction of or plea of guilty or nolo
contendere to a felony resulting from conduct occurring on or after
the date of the Change of Control;

 

(ii)                                  Employee’s
willful and repeated failure to fulfill his employment duties with the Company;
provided, however, that for purposes of this clause (ii), an act or failure to
act by Employee shall not be “willful” unless it is done, or omitted to be
done, in bad faith and without any reasonable belief that Employee’s action or
omission was in the best interests of the Company;

 

(iii)                               Employee’s
incurable breach of any material element of any proprietary or confidential
information agreement with the Company;

 

(iv)                              Employee’s
conduct that is materially detrimental to Company’s business reputation or
goodwill;

 

(v)                                 Any
dishonesty in dealing between Employee and Company or between Employee and
Company’s vendors, advisors, other employees, or customers;

 

(vi)                              Employee’s
active use of alcohol or controlled substances in a manner which impairs
Employee’s ability to perform his duties;

 

(vii)                           Employee’s
violation of any material portion of this Agreement;

 

(viii)                        Employee’s
failure to substantially perform his material duties, which failure is not
cured within thirty (30) days after Employee’s receipt of written notice from
Company specifying the non-performance.

 

In no event shall Employee’s death or
disability (as defined below) constitute Good Cause.  “Disability” shall mean Employee’s failure or
inability, for reasons of health, to perform Employee’s usual and customary
duties on behalf of the Company in the usual and customary manner for a total
of more than 90 consecutive business days (excluding Saturdays, Sundays and
days during which the Company is closed due to a recognized holiday).

 

(b)                                 The termination of
employment with the Company by Employee for Good Reason.  Such termination shall be accomplished by,
and effective upon, Employee giving written notice to the Company of his
decision to terminate.  “Good Reason”
shall mean a good faith determination by Employee, in Employee’s sole and
absolute judgment that any one or more of the following events has occurred on
or after the date of the Change of Control without the Employee’s express
written consent:

 

(i)                                     A change in
Employee’s reporting responsibilities, titles or offices as in effect
immediately prior to the date of the Change of Control, or any removal of
Employee from or any failure to re-elect Employee to any of such

 

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positions,
which has the effect of diminishing Employee’s responsibility or authority;

 

(ii)                                  A
reduction in Employee’s base salary in effect immediately prior to the date of
the Change of Control;

 

(iii)                               Requiring Employee to
move to or work from a location that is outside of a fifty (50) mile radius of
Employee’s job location on the date of the Change of Control;

 

(iv)                              Without
the adoption of a replacement plan, program or arrangement that provides
benefits to Employee that are equal to or greater than those benefits that are
discontinued or adversely affected:

 

(A)                              The
Company’s failure to continue in effect, within its maximum stated term, any
pension, bonus, incentive, stock ownership, stock purchase, stock option, life
insurance, health, accident, disability, or any other employee compensation or
benefit plan, program or arrangement, in which Employee is participating
immediately prior to the date of the Change of Control; or

 

(B)                                The
Company taking any action that would adversely affect Employee’s participation
or materially reduce Employee’s benefits under any of such plans, programs or
arrangements; or

 

(v)                                 Any
material breach by the Company of this Agreement so long as Employee has given
the Company thirty (30) days notice of such breach, and the Company has not
cured the breach during that thirty (30) day period.

 

Termination for “Good Reason” shall not
include Employee’s death or a termination of employment by Employee for any
reason other than the events specified in clauses (1) through (5) above.

 

4.                                       Compensation and Benefits.  Subject to the limitations contained in Section 5
below, upon a Change of Control Termination, Employee shall be entitled to the
following compensation and benefits:

 

(a)                                  The Company shall pay
to Employee:

 

(i)                                     Within
five (5) days of the Change of Control Termination, all salary and other
compensation earned by Employee through the date of the Change of Control
Termination at the rate in effect immediately prior to such Change of Control
Termination;

 

(ii)                                  Within fifteen (15)
days of the Change of Control Termination, all other amounts to which Employee
may be entitled to receive under any 

 

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compensation plan maintained by
the Company, subject to any distribution requirements contained in such
compensation plans; and

 

(iii)                               A
severance benefit in a single lump sum payment, an aggregate amount equal to
one hundred percent (100%) of Employee’s then current annual base salary.

 

(b)                                 The Company shall
provide, at no cost to Employee, continued coverage under the Company’s group
life, health or dental benefit plans, if any, at a level comparable to the
benefits which Employee was receiving or entitled to receive immediately prior
to the Change of Control Termination or, if greater, at a level comparable to
the benefits which Employee was receiving immediately prior to the event which constituted
Good Reason.  Employee shall be entitled
to such continued coverage for a six month period following such Change of
Control Termination or, if earlier, until Employee is eligible to be covered
for such benefits through his employment with another employer.  The Company may, in its sole discretion,
provide such coverage through the purchase of individual insurance contracts
for Employee.

 

5.                                       Payment of Attorneys Fees and Other Costs.  If, after a Change in Control of the Company,
a good faith dispute arises with respect to the enforcement of Employee’s
rights under this Agreement or if any legal or arbitration proceeding shall be
brought in good faith to enforce or interpret any provision contained herein or
to recover damages for breach hereof, Employee shall recover from the Company (a) reasonable
attorneys’ fees and necessary costs and disbursements incurred by Employee as a
result of such dispute or such legal or arbitration proceeding, and (b) prejudgment
interest on any money judgment or arbitration award obtained by Employee
calculated at the prime rate announced from time to time by Wells Fargo Bank
Minnesota, N. A., or the maximum rate permitted under Section 280G(d)(4) of
the Internal Revenue Code of 1986, as amended, or any successor provision,
whichever rate is lower, such prejudgment interest to be paid from the date
that payments to Employee should have been made under this Agreement.

 

6.                                       Withholding Taxes. The Company shall be
entitled to deduct from all payments or benefits provided for under this
Agreement any federal, state or local income and employment related taxes
required by law to be withheld with respect to such payments or benefits.

 

7.                                       Successors and Assigns.  This Agreement shall inure to the benefit of
and shall be enforceable by Employee, his heirs and the personal representative
of his estate, and shall be binding upon and inure to the benefit of the
Company and its successors and assigns. 
The Company will require the transferee of any sale of all or
substantially all of the business and assets of the Company or the survivor of
any merger, consolidation or other transaction expressly to agree to honor this
Agreement in the same manner and to the same extent that the Company would be
required to perform this Agreement if no such event had taken place.  Failure of the Company to obtain such
agreement before the effective date of such event shall be a breach of this
Agreement and shall entitle Employee to the benefits provided in Section 4
as if Employee had terminated employment for Good Reason following a Change in
Control.

 

5

 

8.                                       Notices. 
For the purpose of this Agreement, notices and all other communications
provided for in the Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by United States certified or
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement or to
such other address as either party may have furnished to the other in writing
in accordance herewith, except that notice of change of address shall be
effective only upon receipt.  All notices
to the Company shall be directed to the attention of the Board of Directors of
the Company.

 

	
  For Ciprico:

  	
   

  	
  17400 Medina
  Road

  
	
   

  	
   

  	
  Plymouth, MN
  55447

  
	
   

  	
   

  	
   

  
	
  For
  Employee:

  	
   

  	
  3234 Wind
  River Circle

  
	
   

  	
   

  	
  Westlake
  Village, CA 91362

  

 

9.                                       Captions. 
The headings or captions set forth in this Agreement are for convenience
only and shall not affect the meaning or interpretation of this Agreement.

 

10.                                 Governing Law.  The validity, interpretation, construction
and performance of this Agreement shall be governed by the laws of the State of
Minnesota.

 

11.                                 Construction.  Wherever possible, each term and provision of
this Agreement shall be interpreted in such manner as to be effective and valid
under applicable law.  If any term or
provision of this Agreement is invalid or unenforceable under applicable law, (a) the
remaining terms and provisions shall be unimpaired, and (b) the invalid or
unenforceable term or provision shall be deemed replaced by a term or provision
that is valid and enforceable and that comes closest to expressing the
intention of the unenforceable term or provision.

 

12.                                 Amendment; Waivers.  This Agreement may not be modified, amended,
waived or discharged in any manner except by an instrument in writing signed by
both parties hereto.  The waiver by
either party of compliance with any provision of this Agreement by the other
party shall not operate or be construed as a waiver of any other provision of
this Agreement, or of any subsequent breach by such party of a provision of
this Agreement.

 

13.                                 Entire Agreement.  This Agreement supersedes all prior or
contemporaneous negotiations, commitments, agreements (written or oral) and
writings between the Company and Employee with respect to the subject matter
hereof and constitutes the entire agreement and understanding between the
parties hereto.  All such other negotiations,
commitments, agreements and writings will have no further force or effect, and
the parties to any such other negotiation, commitment, agreement or writing
will have no further rights or obligations thereunder.

 

14.                                 Counterparts.  This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute one and the same instrument.

 

6

 

IN WITNESS WHEREOF, the parties hereto have
caused this Agreement to be duly executed and delivered as of the day and year
first above written.

 

	
   

  	
  CIPRICO INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ James W. Hansen

  	
   

  
	
   

  	
  Its: 

  	
  President / CEO

  
	
   

  	
   

  
	
   

  	
  /s/ Donald L. McDonell

  	
   

  
	
   

  	
  Donald L. McDonell

  
					

 

7Exhibit 10.1

 

PURCHASE AND SALE AGREEMENT

 

	
  DATE:

  	
   

  	
  April 18,
  2006

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  SELLER:

  	
   

  	
  CATALYTICA
  ENERGY SYSTEMS, INC., a Delaware corporation

  	
   

  	
   

  
	
   

  	
   

  	
  Address:

  	
  1388 North
  Tech Boulevard

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Gilbert,
  Arizona 85253

  	
   

  	
   

  
	
   

  	
   

  	
  Attention:
  Rich Weinroth

  	
   

  	
   

  
	
   

  	
   

  	
  Telephone:
  480-556-5568

  	
   

  	
   

  
	
   

  	
   

  	
  Facsimile:
  480-998-5089

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BUYER:

  	
   

  	
  WILSHIRE
  PROPERTY COMPANY, LLC, a California limited liability company

  
	
   

  	
   

  	
  Address:

  	
  1230
  Rosecrans Avenue, Suite 100

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Manhattan
  Beach, California 90266

  	
   

  	
   

  
	
   

  	
   

  	
  Attention:
  John Ghiselli

  	
   

  	
   

  
	
   

  	
   

  	
  Telephone:
  310-802-2917

  	
   

  	
   

  
	
   

  	
   

  	
  Facsimile:
  310-802- 2994

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  ESCROW AGENT:

  	
   

  	
  STEWART
  TITLE & TRUST OF PHOENIX, INC.

  	
   

  	
   

  
	
   

  	
   

  	
  Address:

  	
  6263 North
  Scottsdale Road, No. 225

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Scottsdale,
  Arizona 85250

  	
   

  	
   

  
	
   

  	
   

  	
  Telephone:
  480-557-4561

  	
   

  	
   

  
	
   

  	
   

  	
  Facsimile:
  480-991-9756

  	
   

  	
   

  
	
   

  	
   

  	
  Escrow
  Officer: Lynne Russell

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PROPERTY:

  	
   

  	
  The real
  property described in Exhibit A attached hereto located at 1388 North
  Tech Boulevard, Gilbert, Arizona, together with Seller’s interest, if any,
  in: (i) all improvements located thereon, (ii) all rights,
  benefits, privileges, easements, tenements, hereditaments, and appurtenances
  appertaining thereto, and (iii) all right, title, and interest of Seller
  in and to all strips and gores and any land lying in the bed of any street,
  road or alley, open or proposed, adjoining such real property (“Property”).

  

 

1.             Agreement.
At the Closing: (i) Seller shall sell the Property to Buyer, subject to the
Loan and Loan Documents (as those terms are defined in Section 6) and the
Tenant Leases (as defined in Section 6), (ii) Buyer shall buy the Property, subject
to the Loan and the Loan Documents and the Tenant Leases, and Buyer shall
assume all of Seller’s obligations under the Loan and the Loan Documents and
Seller shall obtain a full and complete release under the Loan and Loan
Documents, (iii) Seller shall assign to Buyer and Buyer shall accept and assume
all of Seller’s interest in the Tenant Leases, (iv) Seller shall lease from
Buyer and Buyer shall lease to

 

 

Seller that portion of the
Property that is identified as Suite No. 101, on the terms and conditions set
forth in the AIR Commercial Real Estate Association Standard
Industrial/Commercial Multi-Tenant Lease - Gross attached hereto as Exhibit
B (the “New Lease”), and (v) Seller shall execute and deliver to Buyer the
Guaranty of Lease (in form and content attached hereto as Exhibit C)
(the “Lease Guaranty”) relative to the Transcription Express Lease.

 

2.             Opening
and Closing Dates. Escrow shall be deemed opened when one (1) fully
executed original or copy of this Agreement, together with Buyer’s initial
earnest money deposit of $100,000.00, has been delivered to Escrow Agent. Escrow
Agent shall advise Buyer and Seller in writing of the date when escrow is
opened (the “Opening Date”). If the Opening Date has not occurred on or before
the date that is three (3) business days after execution of this Agreement by
Seller and Buyer, then this Agreement shall terminate. The close of escrow
shall take place (the “Closing” or “Closing Date”) on or before the thirtieth (30th)
day following the expiration of the Feasibility Period (as that term is defined
in Section 9 hereof).

 

3.             Escrow.
An escrow for this transaction shall be established with Escrow Agent, and
Escrow Agent is hereby engaged to administer the escrow. This Agreement
constitutes escrow instructions to the Escrow Agent and a copy shall be
deposited with Escrow Agent for this purpose. Should Escrow Agent require the
execution of its standard form printed escrow instructions, Buyer and Seller
agree to execute those instructions (as may be modified by Buyer’s or Seller’s
reasonable requests); however, those instructions shall be construed as
applying only to Escrow Agent’s engagement, and if there are conflicts between
the terms of this Agreement and the terms of the printed escrow instructions,
the terms of this Agreement shall control. By accepting this escrow, Escrow
Agent agrees to the terms of this Agreement as they relate to the duties of
Escrow Agent. Escrow Agent is hereby authorized and instructed to file, if
necessary, Internal Revenue Service Form 1099-B, Proceeds from Real Estate,
Broker, and Barter Exchange Transactions, as required by Section 6045(e)
of the Internal Revenue Code of 1986.

 

4.             Earnest
Money. Simultaneously with Buyer’s execution of this Agreement and delivery
thereof to Escrow Agent, Buyer shall deposit in the escrow established by this
Agreement an initial earnest money deposit of $100,000.00. At the end of the
Feasibility Period described in Section 9, if Buyer has not canceled this Agreement
according to its terms, the initial earnest money deposit shall become
non-refundable to Buyer. Escrow Agent is hereby instructed to deposit all such
funds deposited in escrow (collectively the “Earnest Money”) in a money market
account, subject to immediate withdrawal, at a federally insured financial
institution located in Phoenix, Arizona. All interest on the Earnest Money
shall be paid to the party entitled to receive the Earnest Money according to
this Agreement.

 

5.             Purchase
Price. The total purchase price (the “Purchase Price”) to be paid for the
Property shall be FOUR MILLION SEVEN HUNDRED SEVENTY-FIVE THOUSAND AND NO/100
DOLLARS ($4,775,000.00), which consists of Buyer’s assumption of the unpaid
principal balance under the Loan and Loan Documents as of the Closing Date (the
“Principal Balance of the Loan”), and the payment to Seller at the Closing in
cash of the difference between the Purchase Price and the Principal Balance of
the Loan (“Seller’s Equity”). Seller’s Equity

 

2

 

shall be paid to Seller in cash
at the Closing. All Earnest Money shall be applied against the Purchase Price
at the Closing.

 

6.             Seller’s
Information. In connection with Buyer’s investigation of the Property,
within five (5) days of the Opening Date, Seller shall deliver to Buyer copies
of the following materials (to the extent such are in Seller’s possession) for
Buyer’s review:

 

a.             Phase I Environmental
Site Assessment dated March 21, 2006, prepared by Certified Environmental
Service, Inc. (Project No. 06061S01R05E03BA/D (the “Environmental Report”);

 

b.             2005 real estate
valuation notices and tax bills and rent roll, any survey of the Property (the “Survey”),
and any service agreements affecting the Property. Furthermore, prior to the
expiration of the Feasibility Period, Seller will make reasonably available to
Buyer (at Seller’s offices) all building plans in Seller’s actual possession;

 

c.             Lease dated October
28, 2004, between Seller, as landlord, and Westcor Construction, a Nevada
corporation, as tenant, together with Addendum to Lease dated October 28, 2004,
Arbitration Agreement dated October 28, 2004, and Rules and Regulations dated
October 28, 2004 (the “Westcor Lease”), and the lease dated May 5, 2003,
between Seller, as landlord, and Transcription Express, Inc. (“Transcription
Express”), as tenant, together with Addendum to Lease dated May 5, 2003,
Arbitration Agreement dated May 5, 200, Rent Adjustment dated May 5, 2003,
Rules and Regulations dated May 5, 2003, and Guaranty of Lease dated May 24,
2003 (the “Transcription Express Lease”)(collectively, the “Tenant Leases”);
and

 

d.             Promissory Note dated
March 18, 2002, in the original principal amount of $3,010,000.00 made by
Seller and payable to the order of the Arizona State Compensation Fund (the “State
Compensation Fund”), Amended and Restated Promissory Note dated August 9, 2004,
Deed of Trust and Assignment of Rents dated March 18, 2002, made by Seller, as
trustor, for the benefit of the State Compensation Fund, as beneficiary, and
recorded on March 20, 2002, as Instrument No. 2002-0286155, Official Records of
Maricopa County, Arizona, First Modification to Deed of Trust dated Security
Agreement dated March 18, 2002, and Loan Modification Agreement dated August 9,
2004 (collectively, the “Loan Documents”). The obligations evidenced by the
Loan Documents shall be referred to as the “Loan.”

 

Escrow Agent shall provide Buyer and Seller with Stewart Title
commitment No. 06100017, Amendment No. 2, dated March 21, 2006, along with
copies of all schedule B documents (“Title Report”).

 

7.             Updated
Survey. Buyer, at Buyer’s sole cost and expense, may update any Survey.

 

8.             Environmental
Report. Buyer, at Buyer’s sole cost and expense, may update the
Environmental Report.

 

3

 

9.             Buyer’s
Due Diligence.

 

a.             Title Report. Buyer
shall have until the expiration of the Feasibility Period to approve or
disapprove the status of title as shown by the Title Report by giving written
notice to Escrow Agent and Seller. If Escrow Agent issues a supplemental or
amended Title Report showing additional exceptions to title (“Additional
Exceptions”), Buyer shall have five (5) days from the date of receipt
thereof in which to give notice of dissatisfaction as to any Additional
Exceptions. If Buyer does not object within the applicable time periods, Buyer
will be deemed to have approved the Title Report or any Additional Exceptions. If
Buyer is dissatisfied with any exception to title as shown in the Title Report
(or any supplement or amendment thereto), other than the Tenant Leases and the
Loan and Loan Documents, then, at Buyer’s sole option, Buyer may either cancel
this Agreement by giving written notice thereof to Escrow Agent and Seller within
the applicable time periods described above, or Buyer may provisionally accept
the title subject to the Seller’s removal of any disapproved exceptions or
objections, in which case Seller may, at Seller’s sole and absolute discretion
and option, agree to use reasonable efforts to remove such matters or obtain
title insurance endorsements, reasonably satisfactory to Buyer, against such
matters within 10 days of receipt of Buyer’s notice of disapproval (the “Notice”).
If Seller cannot or will not remove such matters within 10 days of Seller’s
receipt of the Notice (or if Seller fails to notify Buyer within such 10-day
period of Seller’s election), then Buyer may cancel this Agreement by giving
written notice thereof to Escrow Agent and Seller no later than 5 days after
the expiration of such 10-day period, or Buyer may waive its objections in
writing and the transaction shall close as scheduled. In the event of any
cancellation under this Section, the Earnest Money shall be refunded and all
obligations of Seller and Buyer hereunder shall terminate, except for those
obligations of Buyer that survive the termination of this Agreement.

 

b.             Feasibility. After
the Opening Date and Buyer’s deposit of the Earnest Money, Buyer shall have the
right to enter the Property (upon prior written notice to Seller in each
instance) for purposes of investigating the Property, provided that neither
Buyer nor Buyer’s agents, employees, contractors or consultants (“Buyer’s
Related Parties”) shall perform any intrusive testings, soil borings, or
similar tests or samplings without Seller’s prior written consent, which
consent shall not be unreasonably withheld, and further provided that any entry
by Buyer or Buyer’s Related Parties onto the Property shall be subject to the
rights of the tenants under the Tenant Leases, and Buyer shall not disrupt,
disturb, or interfere with the business operations and activities of Seller or
the tenants under the Tenant Leases. In the event Buyer, in its sole and
absolute discretion, is dissatisfied with its investigation, Buyer may cancel
this Agreement by giving written notice thereof to Escrow Agent and Seller on
or before the date that is thirty (30) calendar days after the Opening Date
(the “Feasibility Period”). Buyer agrees to defend (with legal counsel
acceptable to Seller), indemnify and hold harmless Seller and Seller’s agents,
contractors, representatives, tenants, employees, officers, directors,
successors, assigns, and invitees (hereinafter called “Seller’s Related
Parties”) for, from, and against any and all claims, demands, liens,
obligations, liabilities, losses, damages, fines, fees, costs,

 

4

 

expenses,
reasonable attorneys’ fees, court costs, judgments, actions, and lawsuits
arising out of or relating in any manner to Buyer’s or Buyer’s Related Parties’
exercise of the rights granted by this Section (collectively, “Claims”), and
this duty to defend and obligation to indemnity will survive the Closing and
any termination of this Agreement. Buyer shall be responsible for any damages
or injuries caused by Buyer or Buyer’s Related Parties on or at the Property,
and Buyer shall repair any damage to the Property caused by Buyer or Buyer’s
Related Parties to the satisfaction of Seller, which duties of Buyer shall
survive the Closing and any termination of this Agreement. Prior to Buyer or
Buyer’s Related Parties entering onto the Property for purposes of exercising
their rights under this Section, Buyer shall deliver to Seller an original
policy or a satisfactory certificate of insurance evidencing coverage for
commercial general liability insurance in an amount not less than One Million
Dollars per occurrence. Such insurance must include acts or omissions of Buyer
and Buyer’s Related Parties and be written by an insurance company licensed to
do business in Arizona. Seller must be named in such insurance as an additional
insured by endorsement. This insurance must be on an occurrence basis, provide
primary and non-contributory coverage to Seller, and provide that it may not be
amended or canceled without thirty (30) days prior written notice to Seller. This
insurance must be maintained in full force by Buyer at all times until the
Closing or earlier termination of this Agreement. Upon the expiration of the Feasibility
Period and provided Buyer shall not have terminated this Agreement, Seller
agrees not to enter into any new leasing transaction without Buyer’s prior
written consent, which consent shall not be unreasonably withheld.

 

10.           Closing
Documents; Conditions. At the Closing, Seller shall convey fee simple title
to the Property to Buyer by a special warranty deed, in form and substance attached
hereto as Exhibit D. Buyer and Seller agree to execute and deliver at
the Closing such other documents as may be reasonably necessary or appropriate
to consummate this transaction in accordance with the terms of this Agreement,
including the New Lease, the Lease Guaranty and an assignment and assumption in
form and substance attached hereto as Exhibit E, pursuant to which the
Tenant Leases shall be assigned to Buyer, along with all contracts and
agreements affecting the Property. It shall be a condition precedent to Seller’s
obligations to consummate the transaction contemplated by this Agreement that
Seller obtain a full and complete release and discharge from the Loan and Loan
Documents, all in a manner acceptable to Seller, and at the Closing, Buyer
shall pay the Purchase Price, along with the Additional Cash Payment (as that
term is defined in Section 18(f) hereof).

 

11.           Title
Policy. At the Closing, Escrow Agent shall provide Buyer with an ALTA
extended coverage owner’s policy of title insurance issued by Escrow Agent in
the full amount of the Purchase Price, effective as of the Closing, insuring
Buyer that fee simple title to the Property is vested in Buyer, subject only to
the usual printed exceptions contained in such title insurance policies and to
the matters accepted in writing by Buyer pursuant to Section 9 above, along
with the New Lease and the Tenant Leases. The cost of a standard owner’s policy
shall be paid by Seller and any additional cost of extended coverage and title
endorsements shall be paid by Buyer.

 

5

 

12.           Possession.
Possession of the Property shall be delivered to Buyer upon the Closing,
subject to the Loan and Loan Documents and the rights of Seller under the New
Lease and the tenants under the Tenant Leases.

 

13.           Representations.
A. Seller makes the following representations and warranties which are agreed
to constitute a material part of the consideration hereunder, which are true
and accurate as of the Opening Date, which will be true and accurate as of the Closing,
and which shall survive the Closing for a period of one (1) year.

 

a.             Incorporation; Authority.
Seller is duly incorporated, validly existing and in good standing in the State
of Delaware, and has full power and authority to enter into and to perform its
obligations under this Agreement and the other documents to be executed by Buyer
under this Agreement. The persons executing this Agreement on behalf of Seller
have full power and authority to do so and to perform every act and to execute
and deliver every document and instrument necessary or appropriate to
consummate the transactions contemplated hereby.

 

b.             Enforceable Nature
of Agreement. This Agreement and each of the documents and agreements to be
delivered by Seller at the Closing, constitute legal, valid and binding
obligations of Seller, enforceable against Seller in accordance with their
respective terms.

 

c.             Violations;
Consents; Defaults. Neither the execution of this Agreement nor the
performance by Seller of its obligations under this Agreement will result in
any breach or violation of the terms of any law, rule, ordinance, or regulation
or of any decree, judgment or order to which Seller or any officer, director or
shareholder of Seller is a party now in effect from any court or governmental
body. There are no consents, waivers, authorizations or approvals from any
third party necessary to be obtained by Seller in order to carry out the
transactions contemplated by this Agreement, other than as may be required by
the Loan, the Loan Documents and the Tenant Leases. The execution and delivery
of this Agreement and performance by Seller of its obligations under this
Agreement will not conflict with or result in a breach or default (or
constitute an event which, with the giving of notice or the passage of time, or
both, would constitute a default) under Seller’s articles of incorporation or
bylaws.

 

d.             Litigation. To
Seller’s actual knowledge, without a duty to investigate, Seller is not: (i) a
party to any pending or threatened legal or administrative action arising from
or relating to the Property or to the past or present operations and activities
upon or relating to the Property, or (ii) aware of any actual or threatened
improvement lien assessments, condemnations, takings, or required dedications
affecting the Property.

 

e.             Governmental
Restrictions. To Seller’s actual knowledge, without a duty to investigate, the
Property is not in violation of any governmental laws, ordinances, rules or
regulations, and Seller has not received, nor is aware of, any notifications,

 

6

 

restrictions,
or stipulations from any local, state, or federal political subdivision or
agency either requiring any work to be done on the Property or threatening the
use of the Property.

 

f.              Leases and
Agreements. To Seller’s actual knowledge, without a duty to investigate, except
as specifically disclosed in writing to Buyer, there are no leases, options,
contracts or rights of first refusal, recorded or unrecorded, affecting the
Property, other than the Loan, the Loan Documents, the Tenant Leases and at the
Closing the New Lease, and all information which has been given to Buyer by
Seller is complete and accurate.

 

g.             Environmental
Matters. To Seller’s actual knowledge, without a duty to investigate, and
except as disclosed in the Environmental Report, neither Seller nor the
Property is in material violation of any applicable environmental law,
regulation, ordinance or order of any government entity relating to
contamination of or adverse effects on the environment.

 

EXCEPT AS EXPRESSLY
REPRESENTED OR WARRANTED BY SELLER IN THIS AGREEMENT, BUYER ACKNOWLEDGES THAT
NEITHER SELLER NOR ANY MEMBER, MANAGER, AGENT, OFFICER, DIRECTOR, EMPLOYEE OR
REPRESENTATIVE OF SELLER HAS MADE ANY STATEMENT, PROMISE, WARRANTY OR
REPRESENTATION, AND SELLER HEREBY DISCLAIMS ANY SUCH STATEMENT, PROMISE,
WARRANTY OR REPRESENTATION REGARDING THE PROPERTY, INCLUDING WITHOUT LIMITING
THE GENERALITY OF THE FOREGOING, ANY STATEMENT OR REPRESENTATION AS TO THE
EXISTENCE OR AVAILABILITY OF PERMITS OR APPROVALS, THE PHYSICAL NATURE OR
CONDITION OF THE PROPERTY, SOIL AND SUBSOIL CONDITIONS, SURFACE WATER,
UNDERGROUND WATER, THE PROPERTY’S FEASIBILITY FOR ANY PARTICULAR PURPOSE,
DEVELOPMENT, USE, IMPROVEMENT OR OPERATION, THE VALUE, CONDITION OF OR
COMPLIANCE BY THE PROPERTY WITH APPLICABLE LAWS, OR ANY OTHER MATTER OR THING
AFFECTING OR RELATED TO THE PROPERTY OR ANY FUTURE USE, IMPLEMENTATION,
DEVELOPMENT, ENJOYMENT OR OPERATION THEREOF. BUYER AGREES THAT BUYER, IN
EXECUTING, DELIVERING AND/OR PERFORMING THIS AGREEMENT, HAS NOT AND DOES NOT
RELY UPON, AND SELLER DISCLAIMS AND IS NOT LIABLE OR BOUND IN ANY MANNER BY,
ANY EXPRESS OR IMPLIED WARRANTY (INCLUDING ANY WARRANTY AS TO THE PROPERTY’S
FITNESS FOR A PARTICULAR USE OR PURPOSE), GUARANTY, PROMISE, STATEMENT,
REPRESENTATION, ASSURANCE, PROPOSAL OR INFORMATION PERTAINING TO THE PROPERTY
OR THE PROPERTY’S ZONING, POTENTIAL USE OR DEVELOPMENT, MADE OR FURNISHED BY
SELLER OR ANY MEMBER, MANAGER, AGENT, EMPLOYEE OR OTHER PERSON REPRESENTING OR
PURPORTING TO REPRESENT SELLER, EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT,
WHETHER MADE OR GIVEN DIRECTLY OR INDIRECTLY, VERBALLY OR IN WRITING. EXCEPT AS
EXPRESSLY SET FORTH IN THIS AGREEMENT, BUYER ACCEPTS THE PROPERTY IN ITS “AS IS”
CONDITION “WITH ALL DEFECTS AND FAULTS.” BUYER HAS REQUESTED THAT SELLER PURSUANT
TO SECTION 6 HEREOF

 

7

 

FURNISH BUYER WITH THE
INFORMATION AND MATERIALS LISTED THEREIN, AND AS AN ACCOMMODATION TO BUYER,
SELLER HAS AGREED TO FURNISH SUCH INFORMATION TO BUYER; HOWEVER, BUYER HEREBY
ACKNOWLEDGES AND AGREES THAT SELLER IS MAKING ABSOLUTELY NO REPRESENTATION OR
WARRANTY WHATSOEVER WITH RESPECT TO ANY OF SUCH INFORMATION PROVIDED BY SELLER
TO BUYER.

 

B.            Representations
and Warranties as to Buyer. Buyer represents and warrants to Seller as follows,
which are true and accurate as of the Opening Date, which will be true and
accurate as of the Closing, and which shall survive the Closing for a period of
one (1) year:

 

(a)           Organization;
Authority. Buyer is duly organized, validly existing and in good standing
in the State of California, and is qualified to transact business in the State
of Arizona, and has full power and authority to enter into and to perform its
obligations under this Agreement and the other documents to be executed by
Buyer under this Agreement. The persons executing this Agreement on behalf of
Buyer have full power and authority to do so and to perform every act and to
execute and deliver every document and instrument necessary or appropriate to
consummate the transactions contemplated by this Agreement. Buyer has all
necessary power and authority to own its properties and to conduct its business
as now owned and conducted by Buyer.

 

(b)           Entity
Action. All action on the part of Buyer and its members and managers which
is required for the execution, delivery and performance by Buyer of this
Agreement and each of the documents and agreements to be delivered by Buyer at
the Closing has been or will be duly and effectively taken.

 

(c)           Enforceable
Nature of Agreement. This Agreement and each of the documents and
agreements to be delivered by Buyer at the Closing, constitute legal, valid and
binding obligations of Buyer, enforceable against Buyer in accordance with
their respective terms.

 

(d)           Violations;
Consents; Defaults. Neither the execution of this Agreement nor the
performance by Buyer of its obligations under this Agreement will result in any
breach or violation of the terms of any law, rule, ordinance, or regulation or
of any decree, judgment or order to which Buyer or any member, manager,
officer, director or shareholder of Buyer is a party now in effect from any
court or governmental body. There are no consents, waivers, authorizations or
approvals from any third party necessary to be obtained by Buyer in order to
carry out the transactions contemplated by this Agreement. The execution and
delivery of this Agreement and performance by Buyer of its obligations under
this Agreement will not conflict with or result in a breach or default (or
constitute an event which, with the giving of notice or the passage of time, or
both, would constitute a default) under Buyer’s articles of organization or
operating agreement or any indenture, mortgage, lease, agreement, or other
instrument to which Buyer is a party or by which Buyer or any of its assets may
be bound.

 

8

 

14.           Remedies.

 

a.             If Buyer fails to
close escrow for reasons which constitute a default by Buyer under this
Agreement, Seller’s sole and exclusive remedy (other than the right to enforce
Buyer’s duty to defend and obligation to indemnify Seller and Buyer’s duty to
restore the Property after Buyer’s inspections) shall be to terminate this
Agreement and the escrow, such cancellation to be effective immediately upon
Seller giving written notice of cancellation to Buyer and Escrow Agent. Upon
such cancellation, Escrow Agent shall deliver to Seller the Earnest Money
deposited in escrow as liquidated damages, as consideration for acceptance of
this Agreement and for taking the Property off the market, and not as a
penalty, the parties agreeing and hereby stipulating that the exact amount of
damages would be extremely difficult to ascertain and that the Earnest Money
constitutes a reasonable and fair approximation of such damages.

 

b.             If Seller fails to
perform when due any act required of Seller by this Agreement or in any way
defaults under this Agreement, then Buyer shall have the right to have specific
performance of this Agreement, or Buyer may terminate this Agreement and the
escrow, in which event Escrow Agent shall return the Earnest Money deposited in
escrow to Buyer.

 

c.             Notwithstanding
anything contained herein to the contrary, no omission, event or action shall
be deemed a default hereunder unless the alleged default is not cured within
five (5) days after receipt by the other party of written notice of such
alleged default from the party alleging such default.

 

15.           Representations
as to Brokers.

 

a.             Buyer warrants that
Buyer has dealt with no brokers in connection with this transaction, and Seller
warrants that Seller has dealt with no brokers in connection with this
transaction other than Dalzell Commercial Real Estate and Kawa & Associates
(collectively, the “Brokers”). This Agreement shall not inure to the benefit of
the Brokers and the Brokers shall not be third-party beneficiaries (express or
implied) of this Agreement.

 

b.             If any person or
entity shall assert a claim to a finder’s fee, brokerage commission or other
compensation on account of alleged employment as a finder or broker or
performance of services as a finder or broker in connection with this
transaction, the party hereto under whom the finder or broker is claiming shall
indemnify and hold the other party harmless for, from and against any such
claim or action or proceeding brought thereon, including, but not limited to,
counsel and witness fees and court costs in defending against such claim. This
indemnity shall survive the Closing or the cancellation of this Agreement.

 

c.             At the Closing,
Seller agrees to pay a brokerage commission to Brokers in accordance with a
separate agreement between Seller and Brokers.

 

9

 

d.             Buyer has disclosed
that the principal of Buyer, John Ghiselli, is an experienced real estate
broker, but is not licensed in the State of Arizona.

 

16.           Risk
of Loss. The risk of loss or damage to the Property until the Closing shall
be borne by Seller, subject to Buyer’s duties and obligations under this
Agreement.

 

17.           Costs.
Buyer and Seller shall each pay one-half of all escrow fees.

 

18.           Prorations.
The following shall be prorated and adjusted by Escrow Agent between Seller and
Buyer on the basis that Buyer is the owner of the Property as of the Closing,
unless the amount of pro-ration cannot then be established, in which event the
amount to be credited shall be paid to the applicable party as provided below
or (if no such provision is made) within thirty (30) days after the amount is
established:

 

(a)           Any
unpaid real estate taxes, assessments, general as well as special, and water
and sewer use charges which are due and payable against the Property as of the
Closing Date shall be paid by Seller. Current taxes and assessments shall be
prorated and adjusted as of the Closing Date between Seller and Buyer;

 

(b)           Utility
charges, payments on contracts affecting the Property, and other expenses
relating to the Property that are due and payable on or before the Closing will
be the responsibility of Seller; all other charges, payments and expenses shall
be prorated between Seller and Buyer through Escrow as of the Closing in a
manner reasonably acceptable to Seller and Buyer. All prorations and/or
adjustments called for in this Agreement will be made on the basis of a 365 day
year unless otherwise specifically instructed in writing by Seller and Buyer.

 

(c)           Any
unapplied tenant security deposit pertaining to the Tenant Leases shall be
credited to Buyer at the Closing. All rents and other revenues payable under
the Tenant Leases will be prorated and otherwise handled as follows:

 

If Seller has actually received
rents or any other lease revenue, such as common area maintenance payments,
relating to periods extending beyond the Closing, such items will be prorated
between Buyer and Seller as of the Closing with Buyer receiving a credit for
payments relating to periods from and after the Closing.

 

Rents and other revenues
actually collected by Seller prior to Closing and relating to periods prior to
Closing belong to Seller and will not be prorated. Rents and other revenues actually
collected by Buyer following the Closing and relating to periods following the
Closing belong to Buyer and will not be prorated.

 

If following the Closing, Buyer
receives rents or any other lease revenue, such as common area maintenance
payments, relating to periods prior to the Closing, Buyer shall promptly pay
such amounts to Seller. Seller will be entitled to all claims for unpaid rent
and other lease revenues from Tenant Leases relating to periods prior to
Closing.

 

10

 

(d)           All
past-due payment obligations under the Loan Documents shall be paid by Seller,
and all current payment obligations under the Loan and Loan Documents shall be
prorated between Seller and  Buyer. From
and after the Closing, all payment obligations under the Loan and Loan
Documents shall be the sole responsibility of Buyer.

 

(e)           All
other items customarily prorated or required by any other provision of this
Agreement to be prorated or adjusted.

 

(f)            At
the Closing, Buyer shall pay to Seller, in addition to the Purchase Price, an
amount equal to $229,261.00 (which is the amount of the Cash Reserve, as that
term is defined in the Loan Documents)(the “Additional Cash Payment”).

 

19.           Binding
Effect. Except as provided in Section 29, the provisions of this
Agreement shall inure to the benefit of, and shall be binding upon, the
respective heirs, personal representatives, successors and assigns of the
parties hereto.

 

20.           Attorneys’
Fees. If any action is brought by either party with respect to its rights
under this Agreement, the prevailing party shall be entitled to reasonable
attorneys’ fees and court costs as determined by the court.

 

21.           Waivers.
No waiver of any of the provisions of this Agreement shall constitute a waiver
of any other provision, whether or not similar, nor shall any waiver be a
continuing waiver. Except as expressly provided in this Agreement, no waiver
shall be binding unless executed in writing by the party making the waiver. Either
party may waive any provision of this Agreement intended for its benefit;
provided, however, such waiver shall in no way excuse the other party from the
performance of any of its other obligations under this Agreement.

 

22.           Further
Documentation. Each party agrees in good faith to execute such further or
additional documents as may be necessary or appropriate to fully carry out the
intent and the purpose of this Agreement.

 

23.           Construction.
This Agreement shall be construed according to Arizona law, and shall be
construed as a whole, in accordance with the fair meaning of its language, and
shall not be construed for or against either party.

 

24.           Headings
and Counterparts. The headings of this Agreement are for purposes of
reference only and shall not limit or define the meaning of any provision of
this Agreement. This Agreement may be executed in any number or counterparts,
each of which may be executed by one or more of the parties hereto with the
same force and effect as though all such parties had executed but one
instrument.

 

25.           Time
Periods. Time is of the essence of this Agreement. The time for performance
of any obligation or other action under this Agreement shall be deemed to
expire at 5:00 P.M. (M.S.T.) on the last day of the applicable time period
provided for herein. If the time for the performance of any obligation or other
action under this Agreement expires on a

 

11

 

Saturday, Sunday or legal
holiday, the time for performance shall be extended to the next succeeding day
which is not a Saturday, Sunday or legal holiday.

 

26.           Notices.
Notices shall be in writing and shall be given by personal delivery, commercial
air courier service, telephone facsimile transmission (“Fax”) or by deposit in
the United States mail, certified mail, return receipt requested, postage
prepaid, addressed to Seller, Buyer or Escrow Agent, as applicable, at the
addresses set forth on the first page of this Agreement or at such other
address as a party may designate in writing. The date notice is effective shall
be the date on which the notice is delivered if notice is given by personal
delivery, the date on which the notice is received, if notice is given by Fax
or commercial air courier service, or three (3) days following such deposit in
the mail, if notice is sent through the United States mail. Notice to Buyer
shall also be given to:

 

	
  L. Douglas Brown, CA

  
	
  Law Offices of L. Douglas Brown

  
	
  1888 Century Park East, Suite 1550

  
	
  Los Angeles, California 90067-1720

  
	
  Phone: (310) 277-7747

  
	
  Facsimile: (310) 277-2576

  

 

Notice to Seller shall also be
given to:

 

	
  Kevin J. Morris

  
	
  Greenberg Traurig, LLP

  
	
  2375 East Camelback Road, Suite 700

  
	
  Phoenix, Arizona 85016

  
	
  Phone:

  	
  602-445-8235

  
	
  Facsimile:

  	
  602-445-8100

  

 

27.           Escrow
Cancellation Charges. If the escrow fails to close because of Seller’s
default, Seller shall be liable for all reasonable escrow cancellation charges.
If the escrow fails to close because of Buyer’s default, Buyer shall be liable
for all escrow cancellation charges. If the escrow fails to close as a result
of Buyer’s exercise of its rights under Section 9(b), then Buyer shall pay all
escrow charges; otherwise, if escrow fails to close for any other reason,
Seller and Buyer shall each be liable for one-half (1/2) of all customary
escrow cancellation charges.

 

28.           The
Feasibility Period. On or before the expiration of the Feasibility Period,
the following shall occur and be performed:

 

(a)           Buyer,
at Buyer’s sole cost and expense, shall use commercially reasonable efforts to
obtain the approval of the State Compensation Fund and Bank One Trust Company,
NA, for the sale of the Property to Buyer and for Buyer’s assumption of the
Loan and Loan Documents, together with a full and complete release and
discharge of Seller under the Loan and Loan Documents. Buyer shall be solely
responsible for payment of all transfer and assumption fees and charges; and

 

12

 

(b)           Buyer,
at Buyer’s sole cost and expense, shall have the right to seek to obtain from
the tenants under the Tenant Leases a tenant estoppel certificate in form
reasonably acceptable to Buyer (or in the form provided in the Tenant Leases,
if applicable); and

 

(c)           Buyer
shall determine if Buyer intends to purchase Seller’s personal property located
on the Property, including furniture, security system, and phone system (the “Personal
Property”) for an amount equal to $25,000.00, in which event such additional
amounts shall be paid to Seller at the Closing, in addition to the Purchase
Price and the Additional Cash Payment, and Seller shall execute and deliver to
Buyer a bill of sale (in form and substance acceptable to Seller). If Buyer
determines not to purchase the Personal Property from Seller, then Seller shall
have a reasonable period of time following the Closing to remove the Personal
Property from the Property.

 

29.           Assignment.
Upon written notice to Seller and Escrow Agent at any time prior to the date
that is 10 days before the scheduled Closing, Buyer may assign its rights under
this Agreement to a newly formed limited liability company of which Buyer is
the managing member or to a newly formed limited partnership of which Buyer is
the general partner, provided that: (i) Buyer’s assignee shall execute and
deliver to Seller a document (in form and substance reasonably acceptable to
Seller) in which the assignee assumes the duties, obligations and liabilities
of Buyer under this Agreement and agrees to perform those duties and
obligations, (ii) Buyer will not be released from any duties, obligations or
liabilities under this Agreement, and (iii) Buyer shall have provided Seller
with evidence reasonably satisfactory to Seller (including certified financial
statements of such assignee) that Buyer’s assignee has the financial
wherewithal to consummate the transaction contemplated by this Agreement. Subject
to the above conditions, Buyer shall not assign its interest under this
Agreement in whole or in part to any other party without the prior written
consent of Seller, which consent shall not be unreasonably withheld. Seller
shall have the right to assign its interest in this Agreement, as long as any
such assignee takes such assignment subject to the terms of this Agreement.

 

30.           Merger.
This Agreement, together with the Exhibits attached hereto, each of which is
attached hereto and incorporated herein by reference, constitutes the entire
agreement between the parties pertaining to the subject matter contained in
this Agreement. All prior and contemporaneous agreements, representations and
understandings, written or oral, are superseded by and merged in this Agreement.
No supplement, modification or amendment of this Agreement shall be binding
unless in writing and executed by both Buyer and Seller.

 

31.           I.R.C.
§1445. Seller shall furnish to Buyer on or before the Closing a sworn
affidavit stating under penalty of perjury that Seller is not a “foreign person”
as such term is defined in Section 1445(f)(3) of the Internal Revenue Code
of 1954, as amended (the “Code”), or such other evidence and information that
Buyer is not required to withhold taxes from the purchase price under
Section 1445(a) of the Code as Buyer may reasonably determine as meeting
the requirements of Sections 1445(b)(4) and (5) of the Code.

 

13

 

32.           Condemnation.
In the event of a condemnation (or sale in lieu thereof) of all or any portion
of the Property prior to the Closing, Buyer, at Buyer’s sole discretion, shall
have the right to cancel this Agreement by giving written notice to Seller and Escrow
Agent prior to the Closing, or Buyer may elect to close the escrow and receive
all awards or payments by the condemning authority relative to such
condemnation. In the event of any cancellation under this Section, the Earnest
Money shall be refunded and all obligations hereunder shall terminate, except
for Buyer’s duties and obligations that survive a termination of this
Agreement.

 

33.           1031
Exchange. Either party  may
consummate (and the other party at no cost of liability shall reasonably
cooperate with) the sale of the Property as part of a so-called like kind
exchange (the “Exchange”) pursuant to §1031 of the Internal Revenue Code
of 1986, as amended, provided that: 
(i) the Closing Date shall not be delayed or affected by reason for
the Exchange nor shall the consummation or accomplishment of the Exchange be a
condition precedent or condition subsequent to any party’s obligations under
this Agreement; and (ii) no party shall be required to acquire or hold
title to any real property for purposes of consummating the other party’s
Exchange, and (iii) neither party shall incur any cost or liability in
connection the other party’s exchange. No party shall by this Agreement or
acquiescence to the other party’s Exchange have its rights under this Agreement
affected or diminished in any manner or be responsible for compliance with or
be deemed to have warranted to the other party that any Exchange in fact
complies with §1031 of the Internal Revenue Code of 1986, as amended.

 

[SIGNATURE PAGE FOLLOWS]

 

14

 

IN WITNESS WHEREOF, the parties
have entered into this Agreement as of the date appearing on the first page
hereof.

 

 

	
   

  	
  CATALYTICA
  ENERGY SYSTEMS, INC., a Delaware corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Rob Zack

  	
   

  
	
   

  	
  Its:

  	
  CEO

  	
   

  
	
   

  	
   

  
	
   

  	
  “Seller”

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WILSHIRE
  PROPERTY COMPANY, LLC, a California limited liability company

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John
  Ghiselli

  	
   

  
	
   

  	
  Its:

  	
  Managing Member

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  “Buyer”

  
	
   

  	
   

  
	
   

  	
   

  
	
  Accepted and
  Agreed to:

  	
   

  
	
   

  	
   

  
	
  STEWART
  TITLE & TRUST OF PHOENIX, INC.

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
    Its:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  “Escrow
  Agent”

  	
   

  
									

 

15

 

EXHIBIT A

 

(Attach Legal Description)

 

 

Order Number: 06100017, Amend.
No. 2

 

Exhibit A

 

Parcel No. 1:

 

Lot 2, of GH Tech I Amended,
according to the Plat recorded in Book 555 of Maps, page 43, Maricopa County,
Arizona.

 

Parcel No. 2:

 

An easement for drainage as
created in Drainage Easement recorded March 20, 1998 as 98-0216447 of Official
Records.

 

Parcel No. 3:

 

An easement for ingress and
egress and for maneuvering areas as more fully set forth in Declaration of
Easements and Restrictions recorded May 11, 2001 as 2001-0399167 of Official
Records.

 

 

EXHIBIT B

 

(Form of New Lease)

 

 

	
  

  	
  AIR COMMERCIAL REAL ESTATE ASSOCIATION

  STANDARD INDUSTRIAL/COMMERCIAL

  MULTI-TENANT LEASE - GROSS

  	
  

  

 

1.             Basic
Provisions (“Basic Provisions”).

 

1.1           Parties:
This Lease (“Lease”), dated for reference
purposes only April 3, 2006 is made by and between To be determined (“Lessor”) and Catalytica Energy Systems, Inc. (“Lessee”), (collectively the “Parties”,
or individually a “Party”).

 

1.2(a)      Premises: That certain portion of the Project (as defined
below), including all improvements therein or to be provided by Lessor under
the terms of this Lease, commonly known by the street address of 1388 N. Tech
Boulevard, located in the City of Gilbert, County of Maricopa, State of
Arizona, with zip code 85233, as outlined on Exhibit A attached hereto (“Premises”) and generally described as (describe briefly the
nature of the Premises): 15,606 SF office space (shown as Suite 101 Premises Site
Plan “PSP”); and 11,576 SF of warehouse space (shown as Warehouse space on the
PSP. In addition to Lessee’s rights to use and occupy the Premises as
hereinafter specified, Lessee shall have non-exclusive rights to any utility raceways
of the building containing the Premises (“Building”) and to the Common Areas (as defined in Paragraph 2.7 below),
but shall not have any rights to the roof, or exterior walls of the Building or
to any other buildings in the Project. The Premises, the Building, the Common
Areas, the land upon which they are located, along with all other buildings and
improvements thereon, are herein collectively referred to as the “Project.” (See also Paragraph 2)

 

1.2(b)      Parking: 30, ten are covered unreserved vehicle parking
spaces. (See also Paragraph 2.6)

 

1.3           Term: 1 year years and
            months (“Original Term”) commencing June 1, 2006 (“Commencement
Date”) and ending May 30, 2007 (“Expiration Date”).
(See also Paragraph 3)

 

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

 

1.5           Base Rent: $ 15,704.44 per month (“Base Rent”),
payable on the 1st day of each month commencing June 1, 2006. (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           Lessee’s
Share of Common Area Operating Expenses: na percent (na%) (“Lessee’s Share”). Lessee’s Share has been calculated by
dividing the approximate square footage of the Premises by the approximate square
footage of the Project. In the event that that size of the Premises and/or the
Project are modified during the term of this Lease, Lessor shall recalculate
Lessee’s Share to reflect such modification.

 

1.7           Base Rent and Other Monies Paid Upon Execution:

(a)           Base Rent:
$ na for the period na.

(b)           Common Area
Operating Expenses: $ na for the period na

(c)           Security
Deposit: $15, 704.44
           (“Security Deposit”). (See also Paragraph 5)

(d)           Other:
$na for                  

(e)           Total Due
Upon Execution of this Lease: $15,704.44

 

1.8           Agreed Use:  office and manufacturing space. (See
also Paragraph 6)

 

1.9           Insuring Party. Lessor is the “Insuring
Party”. (See also Paragraph 8)

 

1.10         Real Estate Brokers: (See also Paragraph 15)

 

(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”);

 

ý  Kawa & Associates, Inc.
& Dalzell Commercial RE 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 Brokers the brokerage fee agreed
to in a separate written agreement (or if there is no such agreement, the sum
of       or      % of the
total Base Rent for the brokerage services rendered by the Brokers).

 

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

 

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

 

ý an Addendum consisting of Paragraphs 49 through
49;

 

ý a site plan depicting the Premises;

 

ý a site plan depicting the Project;

 

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

 

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

 

1

 

£ a Work Letter;

 

£ other
(specify):                                                                                                                                                                         

 

 

2.             Premises.

 

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

 

2.2           Condition. Lessor shall
deliver that portion of the Premises contained within the Building (“Unit”) 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 Unit, 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 the Unit shall be free of material
defects, and that the Unit does not contain hazardous levels of any mold or
fungi defined as toxic under applicable state or federal law. If a non-compliance
with such warranty exists as of the Start Date, or if one of such systems or
elements should malfunction or fail within
the appropriate warranty period, Lessor shall, as Lessor’s sole obligation
with respect to such matter, except as otherwise provided in this Lease,
promptly after receipt of written notice from Lessee setting forth with
specificity the nature and extent of such non-compliance, malfunction or
failure, rectify same at Lessor’s expense. The warranty periods shall be as follows: (i) 6 months as to the HVAC
systems, and (ii) 30 days as to the remaining systems and other elements of the
Unit. If Lessee does not give Lessor the required notice within the appropriate
warranty period, correction of any such non-compliance, malfunction or failure
shall be the obligation of Lessee at Lessee’s sole cost and expense (except for
the repairs to the fire sprinkler systems, roof, foundations, and/or bearing
walls - see Paragraph 7).

 

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

 

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

 

(b) If such Capital Expenditure is not the result of the specific and
unique use of the Premises by Lessee (such as, governmentally mandated seismic
modifications), then Lessor and Lessee shall allocate the obligation to pay for
the portion of such costs reasonably attributable to the Premises pursuant to
the formula set out in Paragraph 7.1(d); provided, however, that if such
Capital Expenditure is required during the last 2 years of this Lease or if
Lessor reasonably determines that it is not economically feasible to pay its
share thereof, Lessor shall have the option to terminate this Lease upon 90
days prior written notice to Lessee unless Lessee notifies Lessor, in writing,
within 10 days after receipt of Lessor’s termination notice that Lessee will
pay for such Capital Expenditure. If Lessor does not elect to terminate, and
fails to tender its share of any such Capital Expenditure, Lessee may advance such
funds and deduct same, with Interest, from Rent until Lessor’s share of such
costs have been fully paid. If Lessee is unable to finance Lessor’s share, or
if the balance of the Rent due and payable for the remainder of this Lease is
not sufficient to fully reimburse Lessee on an offset basis, Lessee shall have the
right to terminate this Lease upon 30 days written notice to Lessor.

 

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

 

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

 

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

 

2.6           Vehicle Parking. Lessee shall
be entitled to use the number of Parking Spaces specified in Paragraph 1.2(b)
on those portions of the Common Areas designated from time to time by Lessor
for parking. Lessee shall not use more parking spaces than said number. Said
parking spaces shall be used for parking by vehicles no larger than full-size
passenger automobiles or pick-up trucks, herein called “Permitted
Size Vehicles.”

 

2

 

Lessor may regulate the loading and unloading of vehicles by adopting
Rules and Regulations as provided in Paragraph 2.9. No vehicles other than
Permitted Size Vehicles may be parked in the Common Area without the prior
written permission of Lessor. In addition:

 

(a)           Lessee
shall not permit or allow any vehicles that belong to or are controlled by
Lessee or Lessee’s employees, suppliers, shippers, customers, contractors or
invitees to be loaded, unloaded, or parked in areas other than those designated
by Lessor for such activities.

 

(b)           Lessee
shall not service or store any vehicles in the Common Areas.

 

(c)           If
Lessee permits or allows any of the prohibited activities described in this
Paragraph 2.6, then Lessor shall have the right, without notice, in addition to
such other rights and remedies that it may have, to remove or tow away the
vehicle involved and charge the cost to Lessee, which cost shall be immediately
payable upon demand by Lessor.

 

2.7           Common Areas - Definition. The
term “Common Areas” is defined as all areas
and facilities outside the Premises and within the exterior boundary line of
the Project and interior utility raceways and installations within the Unit
that are provided and designated by the Lessor from time to time for the
general non-exclusive use of Lessor, Lessee and other tenants of the Project
and their respective employees, suppliers, shippers, customers, contractors and
invitees, including parking areas, loading and unloading areas, trash areas,
roadways, walkways, driveways and landscaped areas.

 

2.8           Common Areas - Lessee’s Rights. Lessor grants to Lessee, for
the benefit of Lessee and its employees, suppliers, shippers, contractors,
customers and invitees, during the term of this Lease, the non-exclusive right
to use, in common with others entitled to such use, the Common Areas as they
exist from time to time, subject to any rights, powers, and privileges reserved
by Lessor under the terms hereof or under the terms of any rules and
regulations or restrictions governing the use of the Project. Under no
circumstances shall the right herein granted to use the Common Areas be deemed
to include the right to store any property, temporarily or permanently, in the
Common Areas. Any such storage shall be permitted only by the prior written
consent of Lessor or Lessor’s designated agent, which consent may be revoked at
any time. In the event that any unauthorized storage shall occur, then Lessor
shall have the right, without notice, in addition to such other rights and
remedies that it may have, to remove the property and charge the cost to
Lessee, which cost shall be immediately payable upon demand by Lessor.

 

2.9           Common Areas - Rules and Regulations. Lessor or such other
person(s) as Lessor may appoint shall have the exclusive control and management
of the Common Areas and shall have the right, from time to time, to establish,
modify, amend and enforce reasonable rules and regulations (“Rules and
Regulations”) for the management, safety, care and cleanliness of
the grounds, the parking and unloading of vehicles and the preservation of good
order, as well as for the convenience of other occupants or tenants of the
Building and the Project and their invitees. Lessee agrees to abide by and
conform to all such Rules and Regulations, and shall use its best efforts to
cause its employees, suppliers, shippers, customers, contractors and invitees
to so abide and conform. Lessor shall not be responsible to Lessee for the
non-compliance with said Rules and Regulations by other tenants of the Project.

 

2.10         Common Areas - Changes. Lessor shall
have the right, in Lessor’s reasonable discretion, from time to time:

 

(a)           To
make changes to the Common Areas, including, without limitation, changes in the
location, size, shape and number of driveways, entrances, parking spaces,
parking areas, loading and unloading areas, ingress, egress, direction of
traffic, landscaped areas, walkways and utility raceways;

 

(b)           To
close temporarily any of the Common Areas for maintenance purposes so long as
reasonable access to the Premises remains available;

 

(c)           To
designate other land outside the boundaries of the Project to be a part of the
Common Areas;

 

(d)           To
add additional buildings and improvements to the Common Areas;

 

(e)           To
use the Common Areas while engaged in making additional improvements, repairs
or alterations to the Project, or any portion thereof; and

 

(f)            To
do and perform such other acts and make such other changes in, to or with
respect to the Common Areas and Project as Lessor may, in the exercise of sound
business judgment, deem to be appropriate.

 

3.             Term.

 

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

 

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

 

3.3           Delay in Possession. Lessor agrees to use its best
commercially reasonable efforts to deliver possession of the Premises to Lessee
by the Commencement Date. If, despite said efforts, Lessor is unable to deliver
possession as agreed, Lessor shall not be subject to any liability therefore,
nor shall such failure affect the validity of this Lease or change the
Expiration Date. 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 the delivery of possession and continue for a period equal to
what Lessee would otherwise have enjoyed, 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. Except as otherwise provided, if possession is
not tendered to Lessee by the Start Date and Lessee does not terminate this
Lease, as aforesaid, 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 of the Premises is not delivered within 4 months 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 tender possession of the Premises to Lessee until Lessee
complies with its obligation to provide evidence of insurance (Paragraph 8.5).
Pending delivery of such evidence, Lessee shall be required to perform all of
its obligations under this Lease from and after the Start Date, including 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           Common Area Operating Expenses. Lessee shall pay to Lessor during the term hereof, in addition to the
Base Rent, Lessee’s Share (as specified in Paragraph 1.6.) of all Common Area
Operating Expenses, as hereinafter defined, during each calendar year of the
term of this Lease, in accordance with the following provisions: Lessee’s
total obligation to pay Common Area Operating Expenses has been included in
Base Rent Paragraph 1.5 of the Lease. (a) “Common Area Operating
Expenses” are defined, for purposes of this Lease, as all costs
incurred by Lessor relating to the ownership and operation of the Project,
including, but not limited to, the following:

 

3

 

(i)            The
operation, repair and maintenance, in neat, clean, good order and condition,
and if necessary the replacement, of the following:

 

(aa)         The
Common Areas and Common Areas improvements, including parking areas, loading
and unloading areas, trash areas, roadways, parkways, walkways, driveways,
landscaped areas, bumpers, irrigation systems, Common Area lighting facilities,
fences and gates, elevators, roofs, and roof drainage systems.

 

(bb)         Exterior
signs and any tenant directories.

 

(cc)         Any
fire sprinkler systems.

 

(ii)                           The
cost of water, gas, electricity and telephone to service the Common Areas and
any utilities not separately metered.

 

(iii)                          Trash
disposal, pest control services, property management, security services,
owner’s association dues and fees, the cost to repaint the exterior of any
structures and the cost of any environmental inspections.

 

(iv)                          Reserves
set aside for maintenance and/or replacement of Common Area improvements and
equipment.

 

(v)                           Any
increase above the Base Real Property Taxes (as defined in Paragraph 10).

 

(vi)                          Any
“Insurance Cost Increase” (as defined in Paragraph 8).

 

(vii)                         Any
deductible portion of an insured loss concerning the Building or the Common
Areas.

 

(viii)                        Auditors’,
accountants’ and attorneys’ fees and costs related to the operation,
maintenance, repair and replacement of the Project.

 

(ix)                           The
cost of any capital improvement to the Building or the Project not covered
under the provisions of Paragraph 2.3 provided: however, that Lessor shall
allocate the cost of any such capital improvement over a 12 year period and
Lessee shall not be required to pay more than Lessee’s Share of 1/144th
of the cost of such capital improvement in any given month.

 

(x)                            Any
other services to be provided by Lessor that are stated elsewhere in this Lease
to be a Common Area Operating Expense.

 

(b)           Any
Common Area Operating Expenses and Real Property Taxes that are specifically
attributable to the Unit, the Building or to any other building in the Project
or to the operation repair and maintenance thereof, shall be allocated entirely
to such Unit, Building, or other building. However, any Common Area Operating
Expenses and Real Property Taxes that is not specifically attributable to the
Building or to any other building or to the operation, repair and maintenance
thereof, shall be equitably allocated by Lessor to all buildings in the
Project.

 

(c)           The
inclusion of the improvements, facilities and services set forth in
Subparagraph 4.2(a) shall not be deemed to impose an obligation upon Lessor to
either have said improvements or facilities or to provide those services unless
the Project already has the same, Lessor already provides the services, or
Lessor has agreed elsewhere in this Lease to provide the same or some of them.

 

(d)           Lessee’s
Share of Common Area Operating Expenses is payable monthly on the same day as
the Base Rent is due hereunder. The amount of such payments shall be based on
Lessor’s estimate of the annual Common Area Operating Expenses. Within 60 days
after written request (but not more than once each year) Lessor shall deliver
to Lessee a reasonably detailed statement showing Lessee’s share of the actual
common Area Operating Expenses incurred during the preceding year. If lessee’s
payments during such year exceed lessee’s Share, Lessor shall credit the amount
of such over-payment against Lessee’s future payments. If Lessee’s payments
during such year were less than Lessee’s Share, Lessee shall pay to Lessor the
amount of the deficiency within 10 days after delivery by Lessor to Lessee of
the statement.

 

(e)           Except
as provided in paragraph 4.2(a)(viii), Common Area Operating Expenses shall not
include the cost of replacing equipment or capital components such as the roof,
foundations, exterior walls or Common Area capital improvements, such as the
parking lot paving, elevators, fences that have a useful life for accounting
purposes of 5 years or more.

 

(f)            Common
Area Operating Expenses shall not include any expenses paid by any tenant
directly to third parties, or as to which lessor is otherwise reimbursed by any
third party, other tenant, or insurance proceeds.

 

4.3           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 nearest whole dollar. In
the event that any statement or invoice prepared by Lessor is inaccurate such
inaccuracy shall not constitute a waiver and Lessee shall be obligated to pay
the amount set forth in this Lease. Rent for any period during the term hereof
which is for less than one full calendar month shall be prorated based upon the
actual number of days of said month. Payment of Rent shall be made to Lessor at
its address stated herein or to such other persons or place as Lessor may from
time to time designate in writing. 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 Common Area Operating Expenses, and any remaining amount to any
other outstanding charges or costs.

 

4.4           Rental Taxes. In addition to Base Rent and Common Area
Operating Expenses, Lessee shall pay to Lessor each month an amount equal to
any rental taxes, gross receipts taxes, transaction privilege taxes, sales
taxes, or similar taxes (“Rental Taxes”) levied on the Base Rent then due or
otherwise assessed in connection with the rental activity. Said monies shall be
paid at the same time and in the same manner as the Base Rent.

 

5.             Security
Deposit. Lessee shall deposit with Lessor
upon execution hereof the Security Deposit as security for Lessee’s faithful
performance of its obligations under this Lease. If Lessee fails to pay Rent,
or otherwise Defaults under this Lease, Lessor may use, apply or retain all or
any portion of said Security Deposit for the payment of any amount due Lessor
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. Within 14 days after the expiration
or termination of this Lease, if
Lessor elects to apply the Security Deposit only to unpaid Rent, and otherwise
within 30 days after the Premises have been vacated pursuant to Paragraph
7.4(c) below, Lessor shall return that portion of the Security
Deposit not used or applied by Lessor. No part of the Security Deposit shall be
considered to be held in trust, to bear interest or to be prepayment for any
monies to be paid by Lessee under this Lease.

 

6.             Use.

 

6.1           Use. Lessee shall use and occupy the Premises only for the
Agreed Use, or any other legal use which is reasonably comparable

 

4

 

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 cause damage to neighboring premises or properties. Other than
guide, signal and seeing eye dogs, Lessee shall not keep or allow in the
Premises any pets, animals, birds, fish, or reptiles. Lessor shall not
unreasonably withhold or delay its consent to any written request for a
modification of the Agreed Use, so long as the same will not impair the
structural integrity of the Building or the mechanical or electrical systems
therein, and/or is not significantly more burdensome to the Project. If Lessor
elects to withhold consent, Lessor shall within 7 days after such request give
written notification of same, which notice shall include an explanation of
Lessor’s objections to the change in the Agreed Use.

 

6.2           Hazardous
Substances.

 

(a)           Reportable
Uses Require Consent. The term “Hazardous Substance” as
used in this Lease shall mean any product, substance, or waste whose presence,
use, manufacture, disposal, transportation, or release, either by itself or in
combination with other materials expected to be on the Premises, is either, (i)
potentially injurious to the public health, safety or welfare, the environment
or the Premises, (ii) regulated or monitored by any governmental authority, or
(iii) a basis for potential liability of Lessor to any governmental agency or
third party under any applicable statute or common law theory. Hazardous
Substances shall include, but not be limited to, hydrocarbons, petroleum,
gasoline, and/or crude oil or any products, by-products or fractions thereof.
Lessee shall not engage in any activity in or on the Premises which constitutes
a Reportable Use of Hazardous Substances without the express prior written
consent of Lessor and timely compliance (at Lessee’s expense) with all
Applicable Requirements. “Reportable Use”
shall mean (i) the installation or use of any above or below ground storage
tank, (ii) the generation, possession, storage, use, transportation, or
disposal of a Hazardous Substance that requires a permit from, or with respect
to which a report, notice, registration or business plan is required to be
filed with, any governmental authority, and/or (iii) the presence at the
Premises of a Hazardous Substance with respect to which any Applicable
Requirements requires that a notice be given to persons entering or occupying
the Premises or neighboring properties. Notwithstanding the foregoing, Lessee
may use any ordinary and customary materials reasonably required to be used in
the normal course of the Agreed Use, ordinary office supplies (copier toner,
liquid paper, glue, etc.) and common household cleaning materials, so long as
such use is in compliance with all Applicable Requirements, is not a Reportable Use, and does
not expose the Premises or neighboring property to any meaningful risk of
contamination or damage or expose Lessor to any liability 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. Lessor hereby acknowledges and approves of Lessee’s use of hazardous
materials as described in the Phase I Environmental Site Assessment dated March
21, 2006, prepared by Certified Environmental Services, Inc. (Project No. 06061S
01R05E03BA/D)

 

(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) in violation of applicable requirements 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 reasonable attorneys’ and consultants’ fees
arising out of or involving any Hazardous Substance brought onto the Premises
by or for Lessee, (provided, however, that Lessee shall have no liability under
this Lease with respect to underground migration of any Hazardous Substance
under the Premises from areas outside of the Project not caused or contributed
to by Lessee). Lessee’s obligations shall include, but not be limited to, the
effects of any contamination or injury to person, property or the environment
created 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 suffered as a direct result of Hazardous Substances on the Premises prior
to Lessee taking possession 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 taking possession, unless such remediation measure is
required as a result of Lessee’s use (including “Alterations”, as defined in
paragraph 7.3(a) below) of the Premises, in which event Lessee shall be
responsible for such payment. Lessee shall cooperate fully in any such
activities at the request of Lessor, including allowing Lessor and Lessor’s
agents to have reasonable access to the Premises at reasonable times in order
to carry out Lessor’s investigative and remedial responsibilities.

 

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

 

6.3           Lessee’s
Compliance with Applicable Requirements. Except
as otherwise provided in this Lease, Lessee shall, at Lessee’s sole expense,
fully, diligently and in a timely manner, materially comply with all Applicable
Requirements, the requirements of any applicable fire 

 

5

 

insurance underwriter or rating bureau, and the
recommendations of Lessor’s engineers and/or consultants which
relate in any manner to such Requirements, without regard to whether said
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
9.1e) is found to exist or be imminent, or the inspection is requested or
ordered by a governmental authority. In such case, Lessee shall upon request
reimburse Lessor for the cost of such inspection, so long as such inspection is
reasonably related to the violation or contamination. In addition, Lessee shall
provide copies of all relevant material safety data sheets (MSDS)
to Lessor within 10 days of the receipt of written request therefor.

 

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

 

7.1                                 Lessee’s
Obligations. See Paragraph 49 e of the Addendum To Lease  (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, fixtures, interior
walls, interior surfaces of exterior walls, ceilings, floors, windows, doors,
plate glass, and skylights but excluding any items which are the responsibility
of Lessor pursuant to Paragraph 7.2. Lessee, in keeping the Premises in good
order, condition and repair, shall exercise and perform good maintenance
practices, specifically including the procurement and maintenance of the
service contracts required by Paragraph 7.1(b) below. Lessee’s obligations
shall include restorations, replacements or renewals when necessary to keep the
Premises and all improvements thereon or a part thereof in good order,
condition and state of repair.

 

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

 

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

 

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

 

7.2                                 Lessor’s
Obligations. Subject to the provisions of Paragraphs 2.2
(Condition), 2.3 (Compliance), 4.2 (Common Area Operating Expenses), 6 (Use),
7.1 (Lessee’s Obligations), 9 (Damage or Destruction) and 14 (Condemnation),
Lessor, subject to reimbursement pursuant to Paragraph 4.2, shall keep in good
order, condition and repair the foundations, exterior walls, structural
condition of interior bearing walls, exterior roof, fire sprinkler system, Common
Area fire alarm and/or smoke detection systems, fire hydrants, parking lots,
walkways, parkways, driveways, landscaping, fences, signs and utility systems
serving the Common Areas and all parts thereof, as well as providing the
services for which there is a Common Area Operating Expense pursuant to
Paragraph 4.2. Lessor shall not be obligated to paint the exterior or interior
surfaces of exterior walls nor shall Lessor be obligated to maintain, repair or
replace windows, doors or plate glass of the Premises. Lessee expressly waives
the benefit of any statute now or hereafter in effect to the extent it is
inconsistent with the terms of this Lease.

 

7.3                                 Utility Installations; Trade Fixtures; Alterations.

 

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

 

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

 

6

 

estimated cost of such Alteration or Utility Installation and/or upon
Lessee’s posting an additional Security Deposit with Lessor.

 

(c)           Liens; Bonds.
Lessee shall pay, when due, all claims for labor or materials furnished or
alleged to have been furnished to or for Lessee at or for use on the Premises,
which claims are or may be secured by any mechanic’s or materialmen’s lien
against the Premises or any interest therein. Lessee shall give Lessor not less
than 10 days notice prior to the commencement of any work in, on or about the
Premises, and Lessor shall have the right to post notices of
non-responsibility. If Lessee shall contest the validity of any such lien,
claim or demand, then Lessee shall, at its sole expense defend and protect
itself, Lessor and the Premises against the same and shall pay and satisfy any
such adverse 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, Lessees 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 also
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) 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 Lesssor may desire. The failure by Lessee to
timely vacate the Premises pursuant to this Paragraph 7.4(c) without the
express written consent of Lessor shall constitute a holdover under the
provisions of Paragraph 26 below.

 

8.                                       Insurance; Indemnity.

 

8.1                                 Payment of Premium Increases.

 

(a)           As used herein, the term “Insurance Cost
Increase” is defined as any increase in the actual cost of the insurance
applicable to the Building and/or the Project and required to be carried by
Lessor, pursuant to Paragraphs 8.2(b), 8.3(a) and 8.3(b), (“Required Insurance”),
over and above the Base Premium, as hereinafter defined, calculated on an
annual basis. Insurance Cost Increase shall include, but not be limited to,
requirements of the holder of a mortgage or deed of trust covering the
Premises, Building and/or Project, increased valuation of the Premises,
Building and/or Project, and/or a general premium rate increase. The term
Insurance Cost Increase shall not, however, include any premium increases
resulting from the nature of the occupancy of any other tenant of the Building.
If the parties insert a dollar amount in Paragraph 1.9, such amount shall be
considered the “Base Premium.” The Base Premium
shall be the annual premium applicable to the 12 month period immediately
preceding the Start Date. If, however, the Project was not insured for the
entirety of such 12 month period, then the Base Premium shall be the lowest
annual premium reasonably obtainable for the Required Insurance as of the Start
Date, assuming the most nominal use possible of the Building. In no event,
however, shall Lessee be responsible for any portion of the premium cost
attributable to liability insurance coverage in excess of $2,000,000 procured
under Paragraph 8.2(b).

 

(b)           Lessee shall pay any Insurance Cost Increase
to Lessor pursuant to Paragraph 4.2. Premiums for policy periods commencing
prior to, or extending beyond, the term of this Lease shall be prorated to
coincide with the corresponding Start Date or Expiration Date.

 

8.2                                 Liability Insurance.

 

(a)           Carried by
Lessee. Lessee shall obtain and keep in force a Commercial General
Liability policy of insurance protecting Lessee and Lessor as an additional
insured against claims for bodily injury, personal injury and property damage
based upon or arising out of the ownership, use, occupancy or maintenance of
the Premises and all areas appurtenant thereto. Such insurance shall be on an
occurrence basis providing single limit coverage in an amount not less than
$1,000,000 per occurrence with an annual aggregate of not less than $2,000,000.
Lessee shall add Lessor as an additional insured by means of an endorsement at
least as broad as 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(ies) which provides that its insurance shall be primary
to and not contributory with any similar insurance carried by Lessor, whose
insurance shall be considered excess insurance only.

 

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

 

8.3                                 Property Insurance - Building, Improvements and Rental Value.

 

(a)           Building and
Improvements. Lessor shall obtain and keep in force a policy or
policies of insurance in the name of Lessor, with loss payable to Lessor, any
ground-lessor, and to any Lender insuring loss or damage to the Premises. The
amount of such insurance shall be equal to the full insurable replacement cost
of the Premises, as the same shall exist from time to time, or the amount
required by any Lender, but in no event more than the commercially reasonable
and available insurable value thereof. Lessee Owned Alterations and Utility
Installations, Trade Fixtures, and Lessee’s personal property shall be insured
by Lessee under Paragraph 8.4. If the coverage is available and commercially
appropriate, such policy or policies shall insure against all risks of direct
physical loss or damage (except the perils of flood and/or earthquake unless
required by a Lender), including coverage for debris removal and the
enforcement of any Applicable Requirements requiring the upgrading, demolition,
reconstruction or replacement 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.

 

7

 

(b)           Rental Value.
Lessor shall also 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.

 

(c)           Adjacent
Premises. Lessee shall pay for any increase in the premiums for the
property insurance of the Building and for the Common Areas or other buildings
in the Project if said increase is caused by Lessee’s acts, omissions, use or
occupancy of the Premises.

 

(d)           Lessee’s
Improvements. Since Lessor is the Insuring Party, Lessor shall not
be required to insure Lessee Owned Alterations and Utility Installations unless
the item in question has become the property of Lessor under the terms of this
Lease.

 

8.4                                 Lessee’s Property; Business Interruption Insurance.

 

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

 

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

 

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

 

8.5                                 Insurance Policies. Insurance required herein shall be by
companies duly licensed or admitted to transact business in the state where the
Premises are located, and maintaining during the policy term a “General
Policyholders Rating” of at least A-, VI, as set forth in the most current
issue of “Best’s Insurance Guide”, or such other rating as may be required
by a Lender. Lessee shall not do or permit to be done anything which
invalidates the required insurance policies. Lessee shall, prior to the Start
Date, deliver to Lessor certified copies of policies of such insurance or
certificates evidencing the existence and amounts of the required insurance. No
such policy shall be cancelable or subject to modification except after 30 days
prior written notice to Lessor. Lessee shall, at least 10 days prior to the
expiration of such policies, furnish Lessor with evidence of renewals or “insurance
binders” evidencing renewal thereof, or Lessor may 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 produce and maintain the insurance required to be carried
by it, the other Party may, but shall not be required to, procure and maintain
the same.

 

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

 

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

 

8.8                                 Exemption of Lessor and its Agents from Liability.
Notwithstanding the negligence or breach of this Lease by Lessor or its agents,
neither Lessor nor its agents shall be liable under any circumstances for: (i) injury
or damage to the person or goods, wares, merchandise or other property of
Lessee, Lessee’s employees, contractors, invitees, customers, or any other
person in or about the Premises, whether such damage or injury is caused by or
results from fire, steam, electricity, gas, water or rain, indoor air quality,
the presence of mold or from the breakage, leakage, obstruction or other
defects of pipes, fire sprinklers, wires, appliances, plumbing, HVAC or
lighting fixtures, not caused by Lessor, or from any other cause, whether the said injury or damage results from
conditions arising upon the Premises or upon other portions of the Building, or
from other sources or places, (ii) any damages arising from any act or neglect of any other
tenant of Lessor or from the failure of Lessor or its agents to enforce the
provisions of any other lease in the Project, or (iii) injury to Lessee’s
business or for any loss of income or profit therefrom. Instead, it is intended
that Lessee’s sole recourse in the event of such damages or injury be to file a
claim on the insurance policy(ies) that Lessee is required to maintain pursuant
to the provisions of paragraph 8.

 

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

 

9                                          Damage or Destruction.

 

9.1                                 Definitions.

 

(a)           “Premises
Partial Damage” shall mean damage or destruction to the improvements
on the Premises, other than Lessee Owned Alterations and Utility Installations,
which can reasonably be repaired in 3 months or less from the date of the
damage or destruction, and the cost thereof does not exceed a sum equal to 6
month’s Base Rent. Lessor shall notify Lessee in writing within 30 days from
the date of the damage or destruction as to whether or not the damage is
Partial or Total. Notwithstanding the foregoing, Premises Partial Damage shall
not include damage to windows, doors, and/or other similar items which Lessee
has the responsibility to repair or replace pursuant to the provisions of
Paragraph 7.1.

 

(b)           “Premises
Total Destruction” shall mean damage or destruction to the
improvements on the Premises, other than Lessee Owned Alterations and Utility
Installations and Trade Fixtures, which cannot reasonably be repaired in 3
months or less from the date of the damage or destruction and/or the cost
thereof exceeds a sum equal to 6 month’s Base Rent. 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

 

8

 

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

 

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

 

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

 

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

 

9.6           Abatement of Rent; Lessee’s Remedies.

 

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

 

(b)           Remedies. If
Lessor 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 so much of
Lessee’s Security Deposit as has not been, or is not then required to be, used
by Lessor.

 

9.8           Waive Statutes. Lessor and Lessee agree that the terms of
this Lease shall govern the effect of any damage to or destruction of the
Premises with respect to the termination of this Lease and hereby waive the
provisions of any present or future statute, including but not limited to ARS §33-343,
to the extent inconsistent herewith.

 

10.           Real Property Taxes.

 

10.1         Definitions.

 

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

 

9

 

(b)           “Base Real Property Taxes.” As used herein, the term “Base Real
Property Taxes” shall be the amount of Real Property Taxes, which
are assessed against the Premises, Building, Project or Common Areas in the
calendar year during which the Lease is executed. In calculating Real Property
Taxes for any calendar year, the Real Property Taxes for any real estate tax
year shall be included in the calculation of Real Property Taxes for such
calendar year based upon the number of days which such calendar year and tax
year have in common.

 

10.2         Payment of Taxes. Except as
otherwise provided in Paragraph 10.3, Lessor shall pay the Real Property Taxes
applicable to the Project, and said payments shall be included in the
calculation of Common Area Operating Expenses in accordance with the provisions
of Paragraph 4.2.

 

10.3         Additional Improvements. Common Area Operating Expenses
shall not include Real Property Taxes specified in the tax assessor’s records
and work sheets as being caused by additional improvements placed upon the
Project by other lessees or by Lessor for the exclusive enjoyment of such other
lessees. Notwithstanding Paragraph
10.2 hereof, Lessee shall, however, pay to Lessor at the time Common Area
Operating Expenses are payable under Paragraph 4.2, the entirety of any
increase in Real Property Taxes if assessed solely by reason of Alterations,
Trade Fixtures or Utility Installations placed upon the Premises by Lessee or
at Lessee’s request or by reason of any alterations or improvements to the
Premises made by Lesser subsequent to the execution of this Lease by the
Parties.

 

10.4         Joint Assessment. If the Building is not separately
assessed, Real Property Taxes allocated to the Building 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 determined by
Lessor from the respective valuations assigned in the assessor’s work sheets or
such other information as may be reasonably available. Lessor’s reasonable
determination thereof, in good faith, shall be conclusive.

 

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

 

11.           Utilities and Services. Lessee shall pay for all water, gas, heat, light, power,
telephone trash disposal and
other utilities and services supplied to the Premises, together with any taxes
thereon. Notwithstanding the provisions of Paragraph 4.2, if at any time in
Lessor’s sole judgment, Lessor determines that Lessee is using a
disproportionate amount of water, electricity or other commonly metered
utilities, or that Lessee is generating such a large volume of trash as to
require an increase in the size of the trash receptacle and/or an increase in
the number of times per month that it is emptied, then Lessor may increase
Lessee’s Base Rent by an amount equal to such increased costs. There shall be
no abatement of Rent and Lessor shall not be liable in any respect whatsoever
for the inadequacy, stoppage, interruption or discontinuance of any utility or
service due to riot, strike, labor dispute, breakdown, accident, repair or
other cause beyond Lessor’s reasonable control or in cooperation with
government request or directions.

 

12.           Assignment
and Subletting.

 

12.1         Lessor’s
Consent Required.

 

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

 

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

 

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

 

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

 

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

 

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

 

(g)           Notwithstanding the foregoing,
allowing a diminimus 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)

 

10

 

(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. Sublease 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 following written notice to Lessee.

 

(d)           The
failure by Lessee to provide (i) reasonable written evidence of compliance with
Applicable Requirements, (ii) the service contracts, (iii) the rescission of an
unauthorized assignment or subletting, (iv) an Estoppel Certificate, (v) a
requested subordination, (vi) evidence concerning any guaranty and/or Guarantor,
(vii) any document requested under Paragraph 41, (viii) material data safety
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 2.9 hereof, other than those
described in subparagraphs 13.1(a), (b), (c) or (d), above, where such Default
continues for a period of 30 days after written notice; provided, however, that
if the nature of Lessee’s Default is such that more than 30 days are reasonably
required for its cure, then it shall not be deemed to be a Breach if Lessee
commences such cure within said 30 day period and thereafter diligently
prosecutes such cure to completion.

 

(f)            The
occurrence of any of the following events: (i) the making of any general
arrangement or assignment for the benefit of creditors; (ii) becoming a “debtor” as defined in 11 U.S.C. § 101 or any successor
statute thereto (unless, in the case of a petition filed against Lessee, the
same is dismissed within 60 days); (iii) the appointment of a trustee or
receiver to take possession of substantially all of Lessee’s assets located at
the Premises or of Lessee’s interest in this Lease, where possession is
not  restored to Lessee within 30 days;
or (iv) the attachment, execution or other judicial seizure of substantially
all of Lessee’s assets located at the Premises or of Lessee’s interest in this
Lease, where such seizure is not discharged within 30 days; provided, however,
in the event that any provision of this subparagraph is contrary to any
applicable law, such provision shall be of no force or affect, and not effect
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 100% of the reasonable costs and expenses incurred by Lessor in
such performance upon receipt of an invoice therefor. In the event of a Breach,
Lessor may, with or without further notice or demand, and without limiting
Lessor in the exercise of any right or remedy which Lessor may have by reason
of such Breach subject to Lessor’s duty to mitigate damages: (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

 

11

 

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

 

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

 

13.5         Interest. Any monetary payment due Lessor hereunder, other
than late charges, not received by Lessor, when due as to scheduled payments
(such as Base Rent) or within 30 days following the date on which it was due
for non-scheduled payment, shall bear interest from the date when due, as to
scheduled payments, or the 31st day
after it was due as to non-scheduled payments. The interest (“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 reimbursement from Lessor for any
such expense in excess of such offset. Lessee shall document the cost of said
cure and supply said documentation to Lessor.

 

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

 

15.           Brokerage Fees.

 

15.1         Additional Commission. In addition to the payments owed
pursuant to Paragraph 1.10 above, and unless Lessor and the Brokers otherwise
agree in writing, Lessor agrees that: (a) if Lessee exercises any Option, (b)
if Lessee acquires from Lessor any rights to the Premises or other premises
owned by Lessor and located within the Project, (c) if Lessee remains in
possession of the Premises, with the consent of Lessor, after the expiration of
this Lease, or (d) if Base Rent is increased, whether by agreement or operation
of an escalation clause herein, then, Lessor shall pay

 

12

 

Brokers a fee in accordance with the schedule
of the Brokers in effect at the time of the execution of this Lease.

 

15.2         Assumption of Obligations. Any buyer or transferee of Lessor’s
interest in this Lease shall be deemed to have assumed Lessor’s obligation
hereunder. Brokers shall be third party beneficiaries of the provisions of
Paragraphs 1.10, 15, 22 and 31. If Lessor fails to pay to Brokers any amounts
due as and for brokerage fees pertaining to this Lease when due, then such
amounts shall accrue interest. In addition, if Lessor’s fails to pay any
amounts to Lessee’s Broker when due, Lessee’s Broker may send written notice to
Lessor and Lessee of such failure and if Lessor fails to pay such amounts
within 10 days after said notice, Lessee shall pay said monies to its Broker
and offset such amounts against Rent. In addition, Lessee’s Broker shall be
deemed to be a third party beneficiary of any commission agreement entered into
by and/or between Lessor and Lessor’s Broker for the limited purpose of
collecting any brokerage fee owed.

 

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

 

16.           Estoppel Certificates.

 

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

 

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

 

(c)           If Lessor desires to finance, refinance, or sell the
Premises, or any part thereof, Lessee and all Guarantors shall 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 lease. In the event of a transfer of Lessor’s title or interest in
the Premises or this Lease, Lessor shall deliver to the transferee or assignee
(in cash or by credit) any unused Security Deposit held by Lessor. Except as
provided in Paragraph 15, upon such transfer or assignment and delivery of the
Security Deposit, as aforesaid, the prior Lessor shall be relieved of all
liability with respect to the obligations and/or covenants under this Lease thereafter
to be performed by the Lessor. Subject to the foregoing, the obligations and/or
covenants in this Lease to be performed by the Lessor shall be binding only
upon the Lessor as hereinabove defined.

 

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

 

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

 

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

 

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

 

22.           No Prior or Other Agreements;
Broker Disclaimer. This
Lease contains all agreements between the Parties with respect to any matter
mentioned herein, and no other prior or contemporaneous agreement or
understanding shall be effective. Lessor and Lessee each represents and
warrants to the Brokers that it has made, and is relying solely upon, its own
investigation as to the nature, quality, character and financial responsibility
of the other Party to this Lease as to the use, nature, quality and character
of the Premises. Brokers have no responsibility with respect thereto or with
respect to any default or breach hereof by either Party. The Liability
(including court costs and attorney’s fees), of any Broker with respect to
negotiation, execution, delivery or performance by either Lessor or Lessee
under this Lease or any amendment or modification hereto shall be limited to an
amount up to the fee received by such Broker pursuant to this Lease; provided,
however, that the foregoing limitation on each Broker’s liability shall not be
applicable to any gross negligence or willful misconduct of such Broker.

 

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 an manner
specified in this Paragraph 23. The addresses noted adjacent to a Party’s
signature on this Lease shall be that Party’s address for delivery or mailing
of notices. Either Party may by written notice to the other specify a different
address for notice, except that upon Lessee’s taking possession of the
Premises, the Premises shall constitute Lessee’s address for notice. A copy of
all notices to Lessor shall be concurrently transmitted to such party or
parties at such addresses as Lessor may from time to time hereafter designate
in writing.

 

23.2         Date of Notice. Any notice sent by registered or certified
mail, return receipt requested, shall be deemed given on the date of delivery
shown on the receipt card, or if no delivery date is shown, the postmark
thereon. If sent by regular mail the notice shall be deemed given 72 hours
after the 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. No waiver by Lessor of the Default of
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. The acceptance of Rent by Lessor shall not be a waiver of any Default
or Breach by Lessee. Any payment by Lessee may be accepted by Lessor on account
of monies or damages due Lessor, notwithstanding any qualifying statements or
conditions made by Lessee in connection therewith, which such statements and/or
conditions shall be of no force or effect whatsoever unless specifically agreed
to in writing by Lessor at or before the time

 

13

 

of deposit of such payment.

 

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

 

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

 

(i)            Lessor’s Agent. A Lessor’s agent
under a listing agreement with the Lessor acts as the agent for the Lessor
only. A Lessor’s agent or subagent has the following affirmative obligations: To the Lessor: A fiduciary duty and
a duty to protect and promote the Lessor’s interests. To the
Lessee and Other Parties:: A duty to deal fairly with the Lessee
and other parties to the transactions. To All Parties. A duty to disclose in
writing any information known to the agent materially affecting the
consideration to be paid by any Party or the value or desirability of the
property. An agent is not obligated to reveal to either Party any confidential
information obtained from the other Party which does not involve the
affirmative duties set forth above.

 

(ii)           Lessee’s Agent. An agent can agree
to act as agent for the Lessee only. In these situations, the agent is not the
Lessor’s agent, even if by agreement the agent may receive compensation for
services rendered, either in full or in part from the Lessor. An agent acting
only for a Lessee has the following affirmative obligations. To the Lessee: A fiduciary duty and
a duty to protect and promote the Lessee’s interests. To the
Lessor and Other Parties : A duty to deal fairly with the
Lessor and other parties to the transation. To All Parties. A duty to disclose
in writing any information known to the agent materially affecting the
consideration to be paid by any Party or the value or desirability of the property.
An agent is not obligated to reveal to either Party any confidential
information obtained from the other Party which does not involve the
affirmative duties set forth above.

 

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

 

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

 

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

 

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

 

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

 

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

 

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. Subject to Section 30.3. 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 unless the holder(s) succeeds to Lessor’s interest. 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, and (ii)
Lessor shall thereafter be relieved of any further obligations hereunder and
such new owner shall assume all of Lessor’s obligations, except that such new
owner shall not: (a) be liable for any act or omission of any prior lessor or
with respect to events occurring prior to acquisition of ownership; (b) be
subject to any offsets or defenses which Lessee might have against any prior
lessor, (c) be bound by prepayment of more than one month’s rent, or (d) be
liable for the return of any security deposit paid to any prior lessor.

 

30.3         Non-Disturbance. With respect to Security Devices entered
into by Lessor after the execution
of this Lease, Lessee’s subordination of this Lease shall be subject
to receiving a commercially reasonable non-disturbance agreement (a “Non-Disturbance Agreement”) from the Lender which
Non-Disturbance Agreement provides that Lessee’s possession of the Premises,
and this lease, including any options to extend the term hereof, will not be
disturbed so long as Lessee is not in Breach hereof and attorns to the record
owner of the Premises. Further, within
60 days after upon the execution of this Lease, Lessor shall 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

 

14

 

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

 

32.           Lessor’s Access;  Showing Premises; Repairs.
Showing Premises; Repairs. Lessor and Lessor’s agents shall have the right to
enter the Premises at any time, in the case of an emergency, and otherwise at
reasonable times after reasonable prior notice for the purpose of showing the
same to prospective purchasers, lenders, or tenants, and making such
alterations, repairs, improvements or additions to the Premises as Lessor may
deem necessary or desirable and the erecting, using and maintaining of
utilities, services, pipes and conduits through the Premises and/or other
premises as long as there is no material adverse effect on  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 which may be placed
only on the Premises, Lessee shall not place any sign upon the Project without
Lessor’s prior written consent. All signs must comply with all Applicable
Requirements. Lessee may place its signs on the Premises.

 

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

 

36.           Consents. Except as otherwise provided herein, wherever in
this Lease the consent of a Party is required to an act by or for the other
Party, such consent shall not be unreasonably withheld or delayed. Lessor’s
actual reasonable costs and expenses (including but not limited to architects’,
attorneys’, engineers’ and other consultants’ fees) incurred in the
consideration of, or response to, a request by Lessee for any Lessor consent,
including but not limited to consents to an assignment, a subletting or the
presence or use of a Hazardous Substance, shall be paid by Lessee upon receipt
of an invoice and supporting documentation therefor. Lessor’s consent to any
act, assignment or subletting shall not constitute an acknowledgment that no
Default or Breach by Lessee of this Lease exists, nor shall such consent be
deemed a waiver of any then existing Default or Breach, except as may be
otherwise specifically stated in writing by Lessor at the time of such consent.
The failure to specify herein any particular condition to Lessor’s consent
shall not preclude the imposition by Lessor at the time of consent of such
further or other conditions as are then reasonable with reference to the
particular matter for which consent is being given. In the event that either
Party disagrees with any determination made by the other hereunder and
reasonably requests the reasons for such determination, the determining party
shall furnish its reasons in writing and in reasonable detail within 10
business days following such request.

 

37.           Guarantor.

 

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

 

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

 

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

 

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

 

39.1         Definition. “Option” shall mean:
(a) the right to extend 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, 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.           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.

 

41.           Reservations. Lessor reserves the right: (i) to grant,
without the consent or joinder of Lessee, such easements, rights and
dedications that Lessor deems necessary, (ii) to cause the recordation of
parcel maps and restrictions, and (iii) to create and/or install new utility raceways,
so long as such casements, rights, dedications, meps, restrictions, and utility
raceways do not unreasonably interfere with the use of the Premises by Lessee.
Lessee agrees to sign any documents reasonably requested by Lessor to
effectuate such rights.

 

15

 

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

 

43.           Authority.; Multiple Parties; Execution.

 

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

 

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

 

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

 

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

 

45.           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.

 

46.           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.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

Note: If
either Party to this Lease is a married individual, both spouses may need to
execute this Lease in order to bind the marital community.

 

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

 

	
  Executed at:

  	
   

  	
   

  	
  Executed at:

  	
   

  
	
   

  	
   

  	
   

  
	
  On:

  	
   

  	
   

  	
  On:

  	
   

  
	
   

  	
   

  	
   

  
	
  By
  LESSOR:

  	
   

  	
  By
  LESSEE:

  
	
   

  	
   

  	
  Catalytica Energy
  Systems, Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Name
  Printed:

  	
  John
  Ghiselli

  	
   

  	
  Name
  Printed:

  	
  Robert Zack

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
  CEO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Name
  Printed:

  	
   

  	
   

  	
  Name
  Printed:

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address: 

  	
  1230
  Rosecrans Avenue, Suite 100

  	
   

  	
  Address: 

  	
  1388 N. Tech
  Boulevard

  
														

 

16

 

 

	
  Manhattan
  Beach, CA 90266

  	
   

  	
  Gilbert, AZ
  85233

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Telephone: 

  	
  (310)
  802-2917

  	
   

  	
  Telephone: 

  	
  (480)
  556-5555

  
	
  Facsimile: 

  	
  (310)
  802-2994

  	
   

  	
  Facsimile: 

  	
  (   )

  
	
  Federal ID
  No.

  	
   

  	
   

  	
  Federal ID
  No.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  LESSOR’S
  BROKER:

  	
   

  	
  LESSEE’S
  BROKER:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Att:

  	
   

  	
   

  	
  Att:

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  
	
  Address:

  	
   

  	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  
	
  Telephone: 

  	
  (   )

  	
   

  	
  Telephone:

  	
  (   )

  
	
  Facsimile:

  	
  (   )

  	
   

  	
  Facsimile: 

  	
  (   )

  
	
  Federal ID
  No.

  	
   

  	
   

  	
  Federal ID
  No:

  	
   

  
								

 

These
forms are often modified to meet changing requirements of law and needs of the
industry. Always write or call to make sure you are utilizing the most current
form: AIR COMMERCIAL REAL ESTATE ASSOCIATION, 700 South Flower Street, Suite
600, Los Angeles, CA 90017. (213) 687-8777. FAX No. (213) 687-8616

 

(c) Copyright 1998 By AIR Commercial Real Estate Association

 

All rights reserved.

 

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

 

17

 

Addendum To Lease

 

Date of Lease            ,
2006

 

Lessor:                         

Lessee:                   Catalytica Energy
Systems Inc,

Building:                1388
N. Tech boulevard, Gilbert, AZ 85284

 

Paragraph
49 Additional Lease Provisions

 

This Lease is being entered
into by the parties as part of the consideration of the purchase and sale of
the Building. The following are additional Lease terms agreed to by the parties,
should there be a conflict between the terms and conditions contained in the
Lease form, the terms contained in this Addendum shall be the controlling
document.

 

a.     The Term of the Lease with
respect to the Warehouse space shall expire on July 31, 2006 at which time
Lessee shall no longer have use of the Warehouse space and Lessee shall no
longer have any duties, obligations or liabilities with respect to the
Warehouse space; and Lessee agrees to remove its furniture, fixtures,
equipment, ventilating systems, etc. (“Equipment Removal”) from the Warehouse
space by July 31, 2006. Within fifteen days after Lessee is no longer using the
Warehouse space and has completed the Equipment Removal, Lessor shall (at
Lessor’s cost) separate the electrical service between the office and Warehouse
space so that the Office and Warehouse spaces are on their own separate
electrical meter.

 

b.     Lessor may terminate Lessee’s
Lease by giving Lessor sixty (60) days prior written notice. Upon receipt of
such notice, Lessee agrees to vacate the Premises within the sixty (60) day
period at which time the Lease shall terminate and be of no force or effect.

 

c.     The Base Rent plus Rent Tax
(paid monthly) described in Paragraph 1.5 constitutes total consideration be
paid by Lessee for the term of the Lease, Lessee shall not be responsible for
any other cost or expense whatsoever including but not limited to Property
Taxes, Insurance, Common Area Operating Expenses, repairs or maintenance with
the premises as described in 43d. Lessee shall however be responsible for its
electricity and janitorial service.

 

d.     Lessor shall be responsible
to manage, repair and maintain the Premises in good working condition and
repair. Such repair and maintenance shall include but not be limited to plumbing
(toilets, lavatories, faucets, etc.), electrical, lighting, air conditioning
repairs and preventative maintenance, glass, doors & locks, landscaping,
parking lot sweeping and maintenance. Lessor shall provide Lessee with contact
information for the property manager to report and request repair and
maintenance matters; Lessor agrees to complete all such requests in a timely
manner. Notwithstanding the foregoing, Lessor shall not be responsible for the
costs of repairing any defects that exist on the Premises prior to the date of
the Lease.

 

e.     Lessor shall have the right
during the term of the Lease to modify and alter the Premises, provided such
modifications and alternations do not interfere with or disrupt Lessee’s use
and quiet enjoyment of the premises, all such work shall be coordinated with
Lessee.

 

f.      Lessee agrees to pay for the
cost to provide electrical service to Suite 102 provided it is occupied by
Transcription Express.

 

	
  Agreed and
  accepted:

  	
   

  
	
  Lessor

  	
  Lessee

  
	
   

  	
  Catalytica
  Energy Systems, Inc.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
				

 

 

 

 

 

 

EXHIBIT C

 

(Form of Lease Guaranty)

 

GUARANTY OF LEASE

 

WHEREAS, a certain Standard Multi-Tenant Office Lease dated May 5, 2003
(the “Lease”), has been executed by and between CATALYTICA ENERGY SYSTEMS,
INC., a Delaware corporation, as landlord, and Transcription Express, Inc., as
tenant (“Tenant”), together with Addendum to Lease dated May 5, 2003,
Arbitration Agreement dated May 5, 200, Rent Adjustment dated May 5, 2003, and
Rules and Regulations dated May 5, 2003, relating to the leasing of Suite B
(consisting of approximately 6,556 rentable square feet)(the “Premises”)
in the office building located at 1388 North Tech Boulevard, Gilbert, Arizona
(the “Office Building”); and

 

WHEREAS, CATALYTICA ENERGY SYSTEMS, INC., a Delaware corporation, as
seller, has sold to         
       
         (“Buyer”), the Office
Building, and has assigned to Buyer all of its interest in the Lease, and Buyer
is now the landlord (“Landlord”) under the Lease; and

 

WHEREAS, Landlord requires that the undersigned, CATALYTICA ENERGY
SYSTEMS, INC., a Delaware corporation (the “Guarantor”), guaranty the
payment and performance of the duties and obligations of Tenant under the Lease
and execute and deliver to Landlord this Guaranty of Lease (“Guaranty”).

 

NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged:

 

1.             Guarantor hereby
guarantees the payment and performance of the terms, covenants and conditions
of the Lease to be kept and performed by Tenant, including the payment of all
rent and other charges thereunder, arising and accruing under the Lease from
and after the date of this Guaranty to, through and including February 28,
2007, together with the payment of Base Rent (as defined in the Lease), at the
rate in effect as of February 28, 2007, from and after March 1, 2007, to,
through and including May 31, 2007. The Guarantor’s guaranty of the payment of
rent under the Lease, as described in (and limited by) the preceding sentence
is herein defined as the “Guaranteed Obligations.”   In no event shall this Guaranty guarantee
any obligations under the Lease after May 31, 2007, regardless of whether the
Lease is extended or renewed. If Tenant vacates the Premises or if the Premises
becomes available for leasing prior to May 31, 2007, then Guarantor may attempt
to lease the Premises (or cause Landlord to lease the Premises to a tenant
identified or procured by Guarantor) in an effort to limit Guarantor’s
liability under this Guaranty, and Landlord shall cooperate in any reasonable
manner with Guarantor in such leasing efforts.

 

2.             Guarantor and
Landlord agree as follows:

 

A.            Landlord may, without
notice, assign this Guaranty in whole or in part, and no assignment or transfer
of the Lease shall operate to extinguish or diminish the liability of the

 

 

Guarantor hereunder.

 

B.            Landlord agrees to
exhaust its rights and remedies relative to the Security Deposit (as defined in
the Lease) prior to enforcing its rights and remedies under this Guaranty.

 

C.            Guarantor shall pay
Landlord’s reasonable attorneys’ fees and all reasonable costs and other
expenses incurred in any collection or attempted collection or in any
negotiations relative to the obligations hereby guaranteed or enforcing this
Guaranty against Guarantor.

 

D.            Landlord shall give
Guarantor a copy of any notice of default or notice of termination sent to
Tenant under the Lease.

 

3.             Guarantor expressly
waives notice of acceptance of this Guaranty, protest and notice of protest,
demand, and notice of dishonor. Guarantor expressly waives any defense arising
by reason of any disability or other defense of Tenant, by reason of the
cessation from any cause whatsoever of the liability of Tenant, or by reason of
Landlord’s election of any remedy against Tenant or Guarantor, or both,
including without limitation, election of Landlord to exercise its right to
terminate the Lease. Guarantor further waives all defenses afforded Guarantor
or based on suretyship or impairment of collateral under the laws of the State
of Arizona, including but not limited to: (1) the benefits of the provisions of
Arizona Revised Statutes Sections 12-1641 and 12-1642 et seq. and Rule 17(f) of
the Arizona Rules of Civil Procedures for the Superior Courts of Arizona, which
set forth certain rights and obligations among Guarantor, debtors and
creditors, to the extent applicable; and (2) the benefits of any statutory
provision limiting the right of Landlord to recover a deficiency judgment, or
to otherwise proceed, against any person or entity obligated for payment of the
any of Tenant’s obligations after any foreclosure or trustee’s sale of any
collateral securing any part of the Guaranteed Obligations; and (3) any implied
right of reimbursement or contribution from Tenant or any other claim against
Tenant at law or in equity.

 

4.             If any term or
provision of this Guaranty shall be determined to be illegal or unenforceable,
all other terms and provisions hereof shall nevertheless remain effective and
shall be enforced to the fullest extent permitted by law.

 

5.             This Guaranty shall
be governed by the laws of the state of Arizona.

 

[THE REMAINDER
OF THIS PAGE IS INTENTIONALLY LEFT BLANK.]

 

 

IN WITNESS WHEREOF, this Guaranty has been
executed as of the date set forth below.

 

	
  Executed as of  

  	
                                       
  

  	
  , 2006.

  	
  GUARANTOR: 

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  CATALYTICA ENERGY SYSTEMS,

  INC., a Delaware corporation 

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
  Executed as of 

  	
   

  	
  , 2006.

  	
  Its:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  LANDLORD:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Its:

  	
   

  	
   

  
									

 

 

EXHIBIT D

 

(Form of Special Warranty Deed)

 

	
  When recorded return to:

  

 

SPECIAL WARRANTY DEED

 

For the consideration of Ten Dollars, and other valuable
considerations, CATALYTICA ENERGY SYSTEMS, INC., a Delaware corporation (the
“Grantor”), hereby conveys to                                        ,
the real property situated in Maricopa County, Arizona, legally described on
Exhibit “A” hereto, together with all of Grantor’s rights and privileges, if
any, appurtenant thereto, including all improvements located thereon, all
rights, benefits, privileges, easements, tenements, hereditaments, and
appurtenances appertaining thereto, and all right, title, and interest of
Seller in and to all strips and gores and any land lying in the bed of any
street, road or alley, open or proposed, adjoining such real property
(collectively, the “Property”).

 

SUBJECT TO all
current taxes and assessments, zoning and other governmental restrictions,
patent reservations, all covenants, conditions, restrictions, reservations,
easements and declarations, encumbrances, liens, obligations, liabilities or
other matters of record, and all matters that could be discovered by a complete
inspection and accurate survey of the Property.

 

The Grantor
warrants title against all acts of the Grantor only and no other, subject to
those matters described above.

 

	
  DATED this          day
  of                    ,
  2006.

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  CATALYTICA ENERGY SYSTEMS, INC., a Delaware
  corporation

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
  Its:

  	
   

  
				

 

 

	
  STATE OF
  ARIZONA

  	
  )

  
	
   

  	
  ) ss.

  
	
  County of
  Maricopa

  	
  )

  

 

The foregoing
instrument was acknowledged before me this         day
of                  ,
2006, by                            
the                                   of
CATALYTICA ENERGY SYSTEMS, INC., a Delaware corporation, on behalf of the
corporation.

 

	
   

  	
   

  
	
   

  	
  Notary Public

  	
   

  

 

	
  My Commission
  Expires:

  
	
   

  
	
   

  	
   

  

 

 

EXHIBIT E

 

(Form of Assignment and Assumption)

 

ASSIGNMENT AND ASSUMPTION

 

THIS
ASSIGNMENT AND ASSUMPTION (“Assignment”) is made and entered into this            
day of                          ,
2006, by CATALYTICA ENERGY SYSTEMS, INC., a Delaware corporation (“Assignor”),
for the benefit of                                         
(“Assignee”).

 

RECITALS

 

Assignor and
Assignee’s predecessor in interest entered into a Purchase and Sale Agreement
dated April         , 2006 (hereafter
referred to as the “Agreement”). Capitalized terms used in this Assignment
shall have the meanings attributed to them in the Agreement. Assignor and
Assignee, for valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, agree as follows:

 

1.             Assignment. To
the extent assignable, Assignor hereby assigns to Assignee (without
representation, warranty or covenant, express or implied) all of Assignor’s
right, title and interest, if any, in and to the following:

 

(a)           All
utility, maintenance, service contracts and other contracts, agreements, and
obligations (the “Contracts”) currently affecting the Property;

 

(b)           All
intangibles, guaranties and warranties arising under the Contracts and all
transferable or assignable permits and licenses relating to the Property (the
“Intangible Assets”);

 

(c)           Lease
dated October 28, 2004, between Assignor, as landlord, and Westcor
Construction, a Nevada corporation, as tenant, together with Addendum to Lease
dated October 28, 2004, Arbitration Agreement dated October 28, 2004, and Rules
and Regulations dated October 28, 2004 (the “Westcor Lease”);

 

(d)           Lease
dated May 5, 2003, between Assignor, as landlord, and Transcription Express,
Inc., as tenant, together with Addendum to Lease dated May 5, 2003, Arbitration
Agreement dated May 5, 200, Rent Adjustment dated May 5, 2003, Rules and
Regulations dated May 5, 2003, and Guaranty of Lease dated May 24, 2003 (the
“Transcription Express Lease”)(the Westcor Lease and the Transcription Express
Lease shall be referred to as the “Tenant Leases”); and

 

(e)           Cash
Reserve (as that term is defined in the Loan Modification Agreement dated
August 9, 2004, between the Arizona State Compensation Fund, and Assignor).

 

 

2.             Assumption.
Assignee hereby accepts the assignment of the Contracts and Intangible Assets
and the Tenant Leases and agrees to perform the duties and obligations of the
owner under the Contracts and the duties and obligations of the landlord under
the Tenant Leases arising from and after the date of this Assignment.

 

3.             Binding
Effect; Counterparts. This Assignment shall inure to the benefit of and
shall be binding upon the parties hereto and their respective successors and
assigns. This Assignment may be executed in any number of counterparts.

 

IN WITNESS
WHEREOF, Assignor and Assignee have executed this Assignment as of the date set
forth above.

 

 

	
   

  	
  CATALYTICA ENERGY SYSTEMS, INC., a Delaware corporation 

  
	
   

  	
   

  
	
   

  	
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