Document:

Exhibit 10.1

 

	
  

  	
    AMERICAN
  INDUSTRIAL REAL ESTATE ASSOCIATION

  

STANDARD INDUSTRIAL/COMMERCIAL
SINGLE-TENANT LEASE — NET

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

 

1.             Basic Provisions (“Basic
Provisions”).

 

1.1          Parties: This
Lease (“Lease”), dated for reference purposes
only, June 18, 2004, is made by and
between T.M. Cobb Company, a California corporation (“Lessor”)
and Aldila Golf Corporation, a Delaware corporation (“Lessee”), (collectively the “Parties,”
or individually a “Party”).

 

1.2          Premises: That
certain real property, including all improvements therein or to be provided by
Lessor under the terms of this Lease, and commonly known as 13450 Stowe Drive, Poway,
located in the County of San Diego, State of California., and generally described
as (describe briefly the nature of the property and, if applicable, the “Project”, if the property is located within a Project) an approximately 73,000 square foot building. See
legal description attached hereto as Exhibit “A”. See floor plan attached hereto as Exhibit “B”.
(“Premises”). (See also Paragraph 2)

 

1.3          Term: 5 years and 0 months (“Original Term”) commencing December 1, 2004 (“Commencement Date”) and ending November 30, 2009 (“Expiration Date”). (See also Paragraph 3)

 

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

 

1.5          Base Rent: $40,150.00
per month (“Base Rent”), payable on the first
day of each month commencing December 1, 2004. Increases will occur as set forth
in addendum attached hereto. (See also Paragraph 4)

 

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

 

1.6          Base Rent and Other
Monies Paid Upon Execution:

 

(a)           Base Rent: $40,150.00 for the period December 1, 2004 through
December 31, 2004.

 

(b)           Security Deposit:
$29,475.00 (“Security Deposit”). (See also
Paragraph 5)

 

(c)           Association Fees:
$                           
for the period

 

(d)           Other:
$                                      
for

 

(e)           Total Due Upon Execution
of this Lease: $40,150.00.
The deposit funds already in the possession of Lessor  from the previous
leases between Lessor  and Lessee for the Premises,
totalling $29,475.00, shall be maintained  by Lessor as the deposit under this Lease.

 

1.7          Agreed Use: Manufacturing, storing and office purposes
(See also Paragraph 6)

 

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

 

1.9          Real Estate Brokers:
(See also Paragraph 15)

 

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

 

o
                                                                               
represents Lessor exclusively (“Lessor’s Broker”):

 

o
                                                                          
represents Lessee exclusively (“Lessee’s Broker”);
or o
                                       
                                       
represents both Lessor and Lossee (“Dual Agency”):

 

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

 

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

 

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

 

x   an Addendum consisting of
Paragraphs 51 through 55;

 

o    a plot plan depicting the
Premises;

 

o    a current set of the Rules and Regulations;

 

o    a Work Letter;

 

x   other (specify): Exhibit “A” - Exhibit
“B”.

 

2.             Premises.

 

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

 

2.2          Condition.  Lessor shall deliver the Premises to
Lessee broom clean and free of debris on the Commencement Date or the Early
Possession Date, whichever first occurs (“Start Date”),
and, so long as the required service contracts described in Paragraph 7.1(b)
below are obtained by Lessee and in effect within thirty days following the
Start Date, warrants that the existing electrical, plumbing, fir sprinkler,
lighting, heating, ventilating and air conditioning systems (“HVAC”), loading
doors, sump pumps, if any, and all other such elements in the Premises, other
than those constructed by Lessee, shall be in good operating condition on said
date and that the structural elements of the roof, bearing walls and foundation
of any buildings on the Premises (the “Building”)
shall be free of material defects. if a non-compliance with said warranty
exists as of the Start Date, or if one of such systems or elements

 

	
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  ©2001 -
  American Industrial Real Estate Association

  	
  REVISED

  	
  FORM STN-7-4/01E

  

 

1

 

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
Building. If Lessee does not give Lessor the required notice within the
appropriate warranty period, correction of any such non-compliance, malfunction
or failure shall be the obligation of Lessee at Lessee’s sole cost and expense.

 

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

 

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

 

(b)           If
such Capital Expenditure is not the result of the specific and unique use of
the Premises by Lessee (such as, governmentally mandated seismic
modifications), then Lessor and Lessee shall allocate the obligation to pay for
such costs pursuant to the provisions of 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, however, have
any right to terminate this Lease.

 

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

 

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

 

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 Promises prior to the Commencement
Date, the obligation to pay Base Rent shall be abated for the period of such
early possession. All other terms of this Lease (including but not limited to
the obligations to pay Real Property Taxes and insurance premiums and to
maintain the Premises) shall, however, be in effect during such period. Any
such early possession shall not affect the Expiration Date.  Lessee currently occupies the entirety of the Premises under two
separate leases with Lessor. The terms of these aforementioned leases shall
control any matters occuring prior to the Commencement Date.

 

                3.3          Delay in Possession.
Lessor agrees to use its best commercially reasonable efforts to deliver
possession of the Premises to Lessee by the Commencement Date. If, despite said
efforts, Lessor is unable to deliver possession by such date, Lessor shall not
be subject to any liability therefor, nor shell such failure affect the
validity of this Lease, Lessee shall not, however, be obligated to pay Rent or
perform its other obligations until Lessor delivers possession of the Premises
and any period of rent abatement that Lessee would otherwise have enjoyed shall
run from the date of delivery of possession and continue for a period equal to
what Lessee would otherwise have enjoyed under the terms hereof, but minus any
days of delay caused by the acts or omissions of Lessee. If possession is not
delivered within 60 days after the Commencement Date, Lessee may, at its
option, by notice in writing within 10 days after the end of such 60 day
period, cancel this Lease, in which event the Parties shall be discharged from
all obligations hereunder. If such written notice is not received by Lessor
within said 10 day period. Lessee’s right to cancel shall terminate. If
possession of the Premises is not delivered within 120 days after the
Commencement Date, this Lease shall terminate unless other agreements are
reached between Lessor and Lessee, in writing.  Lessee is
currently in possession of the Premises.

 

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

 

4.            Rent.

 

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

 

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

 

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

 

5.             Security Deposit. Lessee shall deposit with Lessor upon
execution hereof the Security Deposit as security for Lessee’s faithful
performance of its obligations under this Lease. If Lessee fails lo 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 far any liability, expense, loss or damage
which Lessor may suffer or incur by reason thereof. If Lessor uses or applies
all or any portion of the Security Deposit, Lessee shall within 10 days after
written request therefor deposit monies with Lessor sufficient to restore said
Security Deposit to the full amount required by this Lease. If the Base Rent
Increases during the term of this Lease. Lessee shall, upon written request
from Lessor, deposit additional moneys 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 here 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
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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
thereto, and for no other purpose. Lessee shall not use or permit the use of
the Premises in a manner that is unlawful, creates damage, waste or a nuisance,
or that disturbs occupants of or causes damage to neighboring premises or
properties. Lessor shall not unreasonably withhold or delay its consent to any
written request for a modification of the Agreed Use, so long as the same will
not impair the structural integrity of the improvements on the Premises or the
mechanical or electrical systems therein, and/or is not significantly more
burdensome to the Premises. If Lessor elects to withhold consent, Lessor shall
within 7 days after such request give written notification of same, which
notice shall include an explanation of Lessor’s objections to the change in the
Agreed Use.

 

6.2          Hazardous Substances.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

7.1          Lessee’s Obligations.

 

(a)  In General. Subject
to the provisions of Paragraph 2.2 (Condition), 2.3 (Compliance), 6.3 (Lessee’s
Compliance with Applicable

 

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

 

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

 

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

 

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

 

7.2          Lessor’s Obligations. Subject to the provisions of Paragraphs
2.2 (Condition), 2.3 (Compliance), 9 (Damage or Destruction) and 14
(Condemnation), it is intended by the Parties hereto that Lessor have no
obligation, in any manner whatsoever, to repair and maintain the Premises, or
the equipment therein, all of which obligations are intended to be that of the
Lessee. It is the intention of the Parties that the terms of this Lease govern
the respective obligations of the Parties as to maintenance and repair of the
Premises, and they expressly waive the benefit of any statute now or hereafter
in effect to the extent it is inconsistent with the terms of this Lease.

 

7.3          Utility Installations;
Trade Fixtures; Alterations.

 

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

 

(b)           Consent.
Lessee shall not make any Alterations or Utility Installations to
the Premises without Lessor’s prior written consent. Lessee may, however, make
non-structural Utility Installations to the interior of the Premises (excluding
the roof) without such consent but upon notice to Lessor, as long as they are
not visible from the outside, do not involve puncturing, relocating or removing
the roof or any existing walls, will not affect the electrical, plumbing, HVAC,
and/or life safety systems, and the cumulative cost thereof during this Lease
as extended does not exceed a sum equal to 3 month’s Base Rent in the aggregate
or a sum equal to one month’s Base Rent in any one year. Notwithstanding the
foregoing, Lessee shall not make or permit any roof penetrations and/or install
anything on the roof without the prior written approval of Lessor. Lessor may,
as a precondition to granting such approval, require Lessee to utilize a
contractor chosen and/or approved by Lessor. Any Alterations or Utility Installations
that Lessee shall desire to make and which require the consent of the Lessor shall
be presented to Lessor in written form with detailed plans. If Lessor does not
respond in writing to the request for consent within twenty (20) days after receipt of a written
request for consent from Lessee,
Lessor shall be deemed to have consented. Consent shall be deemed conditioned upon Lessee’s:
(i) acquiring all applicable governmental permits, (ii) furnishing
Lessor with copies of both the permits and the plans and specifications prior
to commencement of the work, and (iii) compliance with all conditions of
said permits and other Applicable Requirements in a prompt and expeditious
manner. Any Alterations or Utility Installations shall be performed in a
workmanlike manner with good and sufficient materials. Lessee shall promptly
upon completion furnish Lessor with as-built plans and specifications. For work
which costs an amount in excess of one month’s Base Rent, Lessor may condition
its consent upon Lessee providing a lien and completion bond in an amount equal
to 150% of the estimated cost of such Alteration or Utility Installation and/or
upon Lessee’s posting an additional Security Deposit with Lessor.

 

                                                                                                (c)           Liens; Bonds. Lessee shall pay, when due,
all claims for labor or materials furnished or alleged to have been furnished
to or for Lessee at or for use on the Premises, which claims are or may be
secured by any mechanic’s or materialmen’s lien against the Premises or any
interest therein. Lessee shall give Lessor not less than 10 days notice prior
to the commencement of any work in, on or about the Premises, and Lessor shall
have the right to post notices of non-responsibility. If Lessee shall contest
the validity of any such lien, claim or demand, then Lessee shall, at its sole
expense defend and protect itself, Lessor and the Premises against the same and
shall pay and satisfy any such adverse judgment that may be rendered thereon
before the enforcement thereof. If Lessor shall require, Lessee shall furnish a
surety bond in an amount equal to 150% of the amount of such contested lien,
claim or demand, indemnifying Lessor against liability for the same. If Lessor
elects to participate in any such action, Lessee shall pay Lessor’s attorneys’
fees and costs.

 

7.4          Ownership; Removal;
Surrender; and Restoration.

 

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

 

(b)           Removal.
By delivery to Lessee of written notice from Lessor not earlier than
90 and not later than 30 days prior to the end of the term of this Lease,
Lessor may require that any or all Lessee Owned Alterations or Utility installations
be removed by the expiration or termination of this Lease. Lessor may require
the removal at any time of all or any part of any Lessee Owned Alterations or
Utility installations made without the required consent. Notwithstanding
anything to the contrary contained
in this Lease, within ninety (90)
days after Lessor’s receipt of proposed
plans for Alterations by Lessee, Lessor shall inform Lessee of the
Alterations described in such
proposed plans which must be removed at
the expiration of the Term or any option period of the Lease. If
Lessor fails to so inform Lessee within such ninety (90) day period, Lessor will be deemed to have not required
removal of any such Alteration at the expiration of the Term. Further, In no event will Lessee be required to
remove any Utility Installations or other Alterations existing on the Premises
as of the Commecement Date of this Lease at the expiration date or earlier
termination of this Lease.

 

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

 

8.             Insurance; Indemnity.

 

8.1          Payment For Insurance. Lessee shall pay for all insurance
required under Paragraph 8 except to the extent of the cost attributable to  liability insurance carried by Lessor under Paragraph
8.2(b) in excess of $2,000,000 per occurrence. Premiums for policy periods
commencing prior to or extending beyond the Lease term shall be prorated to
correspond to the Lease term. Payment shall be made by Lessee to Lessor within
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receipt of an invoice.

 

8.2                               Liability
Insurance.

 

(a)           Carried by Lessee. Lessee shall obtain and keep
in force a Commercial General Liability policy of insurance protecting Lessee
and Lessor as an additional insured against claims for bodily injury, personal
injury and property damage based upon or arising out of the ownership, use,
occupancy or maintenance of the Premises and all areas appurtenant thereto.
Such insurance shall be on an occurrence basis providing single limit coverage
in an amount not less than $1,000,000 per occurrence with an annual aggregate
of not less than $2,000,000, an “Additional Insured-Managers or Lessors of
Premises Endorsement” and contain the “Amendment of the Pollution Exclusion
Endorsement” for 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.
All insurance carried by Lessee shall be primary to and not contributory with
any similar insurance carried by Lessor, whose insurance shall be considered
excess insurance only.

 

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

 

8.3                               Property
Insurance - Building, Improvements and Rental Value.

 

(a)           Building and Improvements.
The Insuring Party shall obtain and keep in force a policy or policies in the name
of Lessor, with loss payable to Lessor, any ground-lessor, and to any Lender
insuring loss or damage to the Premises. The amount of such insurance shall be
equal to the full replacement cost of the Premises, as the same shall exist
from time to time, or the amount required by any Lender, but in no event more
than the commercially reasonable and available insurable value thereof. If
Lessor is the Insuring Party, however, Lessee Owned Alterations and Utility
Installations, Trade Fixtures, and Lessee’s personal property shall be insured
by Lessee under Paragraph 8.4 rather than by Lessor. If the coverage is
available and commercially appropriate, such policy or policies shall insure
against special causes of loss  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, and Lessee shall be liable for such deductible amount in the event
of an Insured Loss.

 

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

 

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

 

8.4                               Lessee’s
Property; Business Interruption Insurance.

 

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

 

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

 

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

 

8.5                               Insurance
Policies. Insurance required herein shall be by companies duly licensed or
admitted to transact business in the state where the Premises are located, and
maintaining during the policy term a “General Policyholders Rating” of at least
B+, V, 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 30 days prior to the expiration of such policies, furnish Lessor with
evidence of renewals or “insurance binders” evidencing renewal thereof, or
Lessor may order such insurance and charge the cost thereof to Lessee, which
amount shall be payable by Lessee to Lessor upon demand. Such policies shall be
for a term of at least one year, or the length of the remaining term of this
Lease, whichever is less. If either Party shall fail to procure and maintain
the insurance required to be carried by it, the other Party may, but shall not
be required to, procure and maintain the same. Lessor or
Lessee may each maintain the Insurance coverage required of either of them
hereunder pursuant to “blanket” policies which cover other properties In which
either Lessor or Lessee
has interest, so long as the coverage of the other properties under any such “blanket” policy does not diminish the
coverage required herein.

 

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

 

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

 

8.8                               Exemption
of Lessor from Liability. Lessor shall not be liable for 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, or from the breakage, leakage,
obstruction or other defects of pipes, fire sprinklers, wires, appliances,
plumbing, HVAC or lighting fixtures, or from any other cause, whether the said
injury or damage results from conditions arising upon the Premises or upon
other portions of the building of which the Premises are a part, or from other
sources or places. Lessor shall not be liable for any damages arising from any
act or neglect of any other tenant of Lessor nor from the failure of Lessor to
enforce the provisions of any other lease in the Project. Notwithstanding
Lessor’s negligence or breach of this Lease, Lessor shall under no
circumstances be liable for injury to Lessee’s business or for any loss of
income or profit therefrom.

 

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 increase
in Base Rent shall in no event constitute a waiver of Lessee’s Default or
Breach with respect to the failure to maintain such insurance, prevent the
exercise of any of the other rights and remedies granted hereunder, nor relieve
Lessee of its obligation to maintain the insurance specified in this Lease.

 

9.                                      Damage
or Destruction.

 

9.1                               Definitions.

 

(a)           “Premises Partial
Damage” shall mean damage or destruction to the improvements on the
Premises, other than Lessee Owned Alterations and Utility Installations, which
can reasonably be repaired in 6 months or less from the date of the damage or
destruction. Lessor shell 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.

 

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

 

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

 

(d)           “Replacement Cost”
shall mean the cost to repair or rebuild the improvements owned by Lessor at
the time of the occurrence to their condition existing immediately prior
thereto, including demolition, debris removal and upgrading required by the
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(e)           “Hazardous Substance Condition” shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the Premises
which requires repair, remediation, or restoration.

 

9.2                               Partial
Damage - Insured Loss. If a Premises Partial Damage that is an Insured Loss
occurs, then Lessor shall, at Lessor’s expense, repair such damage (but not
Lessee’s Trade Fixtures or Lessee Owned Alterations and Utility Installations)
as soon as reasonably possible and this Lease shall continue in full force and
effect; provided, however, that Lessee shall, at Lessor’s election, make the
repair of any damage or destruction the total cost to repair of which is
$10,000 or less, and, in such event, Lessor shall make any applicable insurance
proceeds available to Lessee on a reasonable basis for that purpose.
Notwithstanding the foregoing, if the required insurance was not in force or
the insurance proceeds are not sufficient to effect such repair, the Insuring
Party shall promptly contribute the shortage in proceeds (except as to the
deductible which is Lessee’s responsibility) as and when required to complete
said repairs. In the event, however, such shortage was due to the fact that, by
reason of the unique nature of the improvements, full replacement cost
insurance coverage was not commercially reasonable and available, Lessor shall
have no obligation to pay for the shortage in insurance proceeds or to fully
restore the unique aspects of the Premises unless Lessee provides Lessor with
the funds to cover same, or adequate assurance thereof, within 10 days
following receipt of written notice of such shortage and request 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 or Lessee may
terminate this Lease effective 60 days following the date of occurrence of such
damage by giving a written termination notice to Lessee or Lessor
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 to the extent inconsistent herewith.

 

10.                               Real
Property Taxes.

 

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

 

10.2                        Payment of
Taxes. In addition to Base Rent, Lessee shall pay to Lessor an amount equal
to the Real Property Tax installment due at least 20 days prior to the
applicable delinquency date. If any such installment shall cover any period of
time prior to or after the expiration or termination of this Lease, Lessee’s share
of such installment shall be prorated. In the event Lessee incurs a late charge
on any Rent payment, Lessor may estimate the current Real Property Taxes, and
require that such taxes be paid in advance to Lessor by Lessee monthly in
advance with the payment of the Base Rent. Such monthly payments shall be an
amount equal to the amount of the estimated installment of taxes divided by the
number of months remaining before the month in which said installment becomes
delinquent. When the actual amount of the applicable tax bill is known, the
amount of such equal monthly advance payments shall be adjusted as required to
provide the funds needed to pay the applicable taxes. If the amount collected
by Lessor is insufficient to pay such Real Property Taxes when due, Lessee
shall pay Lessor, upon demand, such additional sum as is necessary. Advance
payments may be intermingled with other moneys of Lessor and shall not bear
interest. In the event of a Breach by Lessee in the performance of its
obligations under this Lease, then any such advance payments may be treated by
Lessor as an additional Security Deposit.

 

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

 

10.4                        Personal
Property Taxes. Lessee shall pay, prior to delinquency, all taxes assessed
against and levied upon Lessee Owned Alterations, Utility Installations, Trade
Fixtures, furnishings, equipment and all personal property of Lessee. When
possible, Lessee shall cause its Lessee Owned Alterations and Utility Installations,
Trade Fixtures, furnishings, equipment end 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 Promises, together with any taxes  thereon.
If any such services are not separately metered or billed to Lessee, Lessee
shall pay a reasonable proportion, to be determined by Lessor, of all charges
jointly metered or billed. There shall be no abatement of rent and Lessor shall
not be liable in any respect whatsoever for the inadequacy, stoppage,
interruption or discontinuance of any utility or service due to riot, strike,
labor dispute, breakdown, accident, repair or other cause beyond Lessor’s reasonable
control or in cooperation with governmental request or directions.

 

12.                               Assignment
and Subletting.

 

12.1                        Lessor’s
Consent Required.

 

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

 

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 therefor to
Lessor, or any security held by Lessor.

 

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

 

(f)            Any assignee of, or
sublessee under, this Lease shall, by reason of accepting such assignment or
entering into such sublease, 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 obligations
any such excess shall be refunded to Lessee. Lessor shall not, by reason of the
foregoing or any assignment of such sublease, nor by reason of the collection
of Rent, be deemed liable to the sublessee for any failure of Lessee to perform
and comply with any of Lessee’s obligations to such sublessee. Lessee hereby
irrevocably authorizes and directs any such sublessee, upon receipt of a
written notice from Lessor stating that a Breach exists in the performance of
Lessee’s obligations under this Lease, to pay to Lessor all Rent due and to become
due under the sublease. Sublessee shall rely upon any such notice from Lessor
and shall pay all Rents to Lessor without any obligation or right to inquire as
to whether such Breach exists, notwithstanding any claim from Lessee to the
contrary.

 

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

 

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

 

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

 

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

 

13.          Default; Breach;
Remedies.

 

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

 

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

 

(b)           The failure of Lessee
to make any payment of Rent or any Security Deposit required to be made by
Lessee hereunder, whether to Lessor or to a third party, when due, to provide
reasonable evidence of insurance or surety bond, or to fulfill any obligation
under this Lease which endangers or threatens life or property, where such
failure continues for a period of five (5) 3 business days following
written notice to Lessee.

 

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

 

(d)           A Default by Lessee
as to the terms, covenants, conditions or provisions of this Lease, or of the rules adopted
under Paragraph 40 hereof, other than those described in subparagraphs 13.1(a),
(b) or (c), 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.

 

(e)           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 (e) is
contrary to any applicable law, such provision shall be of no force or effect,
and not affect the validity of the remaining provisions.

 

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

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

 

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

 

(a)           Terminete 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
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at the time of termination; (ii) the
worth at the time of award of the amount by which the unpaid rent which would
have been earned after termination until the time of award exceeds the amount
of such rental loss that the Lessee proves could have been reasonably avoided; (iii) the
worth at the time of award of the amount by which the unpaid rent for the
balance of the term after the time of award exceeds the amount of such rental
loss that the Lessee proves could be reasonably avoided; and (iv) any
other amount necessary to compensate Lessor for all the detriment proximately
caused by the Lessee’s failure to perform its obligations under this Lease or
which in the ordinary course of things would be likely to result therefrom,
including but not limited to the cost of recovering possession of the Premises,
expenses of reletting, including necessary renovation and alteration of the
Premises, reasonable attorneys’ fees, and that portion of any leasing
commission paid by Lessor in connection with this Lease applicable to the
unexpired term of this Lease. The worth at the time of award of the amount
referred to in provision (iii) of the immediately preceding sentence shall
be computed by discounting such amount at the discount rate of the Federal
Reserve Bank of the District within which the Premises are located at the time
of award plus one percent. Efforts by Lessor to mitigate damages caused by
Lessee’s Breach of this Lease shall not waive Lessor’s right to recover damages
under Paragraph 12. If termination of this Lease is obtained through the provisional
remedy of unlawful detainer, Lessor shall have the right to recover in such
proceeding any unpaid Rent and damages as are recoverable therein, or Lessor
may reserve the right to recover all or any part thereof in a separate suit. If
a notice and grace period required under Paragraph 13.1 was not previously
given, a notice to pay rent or quit, or to perform or quit given to Lessee
under the unlawful detainer statute shall also constitute the notice required
by Paragraph 13.1. In such case, the applicable grace period required by
Paragraph 13.1 and the unlawful detainer statute shall run concurrently, and
the failure of Lessee to cure the Default within the greater of the two such
grace periods shall constitute both an unlawful detainer and a Breach of this
Lease entitling Lessor to the remedies provided for in this Lease and/or by
said statute.

 

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

 

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

 

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

 

13.4        Late Charges. Lessee hereby
acknowledges that late payment by Lessee of Rent will cause Lessor to incur
costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain. Such costs include, but are not limited to,
processing and accounting charges, and late charges which may be imposed upon
Lessor by any Lender. Accordingly, if any Rent shall not be received by Lessor
within 5 days after such amount shall be due, then, without any requirement for
notice to Lessee, Lessee shall immediately pay to Lessor a one-time late charge
equal to 640% 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 610%
per annum but shall not exceed the maximum rate allowed by law. Interest is
payable in addition to the potential late charge provided for in Paragraph
13.4.

 

13.6        Breach by Lessor.

 

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

 

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

 

14.          Condemnation. If the Premises
or any portion thereof are taken under the power of eminent domain or sold
under the threat of the exercise of said power (collectively “Condemnation”), this Lease shall terminate as to the part
taken as of the date the condemning authority takes title or possession,
whichever first occurs. If more than 10% of the Building, or more than 25% of
that portion of the Pramises not occupied by any building, is taken by
Condemnation, Lessee may, at Lessee’s option, to be exercised in writing within
thirty (30) 10 days after Lessor
shall have given Lessee written notice of such taking (or in the absence of
such notice, within thirty (30) 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 1.0 above, and
unless Lessor-and the Brokers otherwise agree in writing, Lessor agrees that:
(a) if Lessee exercises any Option, (b) if Lessee acquires any rights
to the Premises or other premises owned by Lessor and located within the same
Project, if any, within which the Premises is located, (c) if Lessee remains
in possession of tho Promises, with the concent 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, Lecsor shall pay Brokers a fee
in accordance with the schedule of tho Brokers in effect at the time of the
execution of this Lease.

 

15.2        Assumption of
Obligations. Any buyer or transferee of Lessor’s interest in this
Lease shall be deemed to have assumed Lessor’s obligation hereunder. Brokers
shall be third party beneficiaries of the provisions of Paragraphs 1,9, 15, 22
and 31. If Lessor fails to pay to Brokers any amounts due as and for brokerage
fees pertaining to this Lease when due, then such amounts shall accrue
Interest. In addition, if Lessor fails to pay any amounts to Lessee’s Broker
when due. Lessee’s Broker may send written notice to Lessor and Lessee of such
failure and if Lessor fails to pay such amounts within 10 days after
said notice, Lessee shall pay said monios to its Broker and offect 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
20 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 American Industrial 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 20 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

 

	
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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 and as to the
use, nature, quality and character of the Premises. Brokers have no responsibility
with respect thereto or with respect to any default or breach hereof by either
Party. The liability (including court costs and attorneys’ 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 a manner specified in this Paragraph 23. The addresses noted adjacent
to a Party’s signature on this Lease shall be that Party’s address for delivery
or mailing of notices. Either Party may by written notice to the other specify
a different address for notice, except that upon Lessee’s taking possession of
the Premises, the Premises shall constitute Lessee’s address for notice. A copy
of all notices to Lessor shall be concurrently transmitted to such party or
parties at such addresses as Lessor may from time to time hereafter designate in
writing.

 

23.2        Date of Notice. Any notice sent
by registered or certified mail, return receipt requested, shall be deemed
given on the date of delivery shown on the receipt card, or if no delivery date
is shown, the postmark thereon. If sent by regular mail the notice shall be
deemed given 48 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 or Breach of any term, covenant or condition hereof by Lessee, shall be
deemed a waiver of any other term, covenant or condition hereof, or of any
subsequent Default or Breach by Lessee of the same or of any other term,
covenant or condition hereof. Lessor’s consent to, or approval of, any act
shall not be deemed to render unnecessary the obtaining of Lessor’s consent to,
or approval of, any subsequent or similar act by Lessee, or be construed as the
basis of an estoppel to enforce the provision or provisions of this Lease
requiring such consent. The acceptance of Rent by Lessor shall not be a waiver
of any Default or Breach by Lessee. Any payment by Lessee may be accepted by
Lessor on account of moneys or damages due Lessor, notwithstanding any
qualifying statements or conditions made by Lessee in connection therewith,
which such statements and/or conditions shall be of no force or effect
whatsoever unless specifically agreed to in writing by Lessor at or before the time
of deposit of such payment.

 

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

 

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

 

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

 

(ii)           Lessee’s Agent.  An agent can agree to act as agent for the
Lessee only.   In these situations, the
agent is not the Lessor’s agent, even if by agreement the agent may receive
compensation for services rendered, either in full or in part from the Lessor.
An agent acting only for a Lessee has the following affirmative obligations. To
the Lessee: A fiduciary duty of utmost care, integrity, honesty, and
loyalty in dealings with the Lessee. To the Lessee-and the Lessor: a.
Diligent exercise of reasonable skills and care in performance of the agent’s
duties. b. A duty of honest and fair dealing and good faith. c. A duty to
disclose all facts known to the agent materially affecting the value or
desirability of the property that are not known-to, or within the diligent
attention and observation of, the Parties. An agent is not obligated to reveal
to either Party any confidential information obtained from the other Party
which docs not involve the affirmative duties set forth above.

 

(iii)          Agent Representing Both Lessor and
Lessee.   A real estate agent, either
acting directly or through one or more associate licenses, can legally be the
agent of both the Lessor and the Lessee in a transaction, but only with the
knowledge and consent of both the Lessor and the Lessee. In a dual agency
situation, the agent has the following affirmative obligations to both the
Lessor and the Lessee: a. A fiduciary duty of utmost care, integrity, honesty
and loyalty in the dealings with cither 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 liability
(including court costs and attorneys’ fees), of any Broker with respect to any
breach of duty, error or omission relating to this Lease 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 of willful misconduct of such Broker.

 

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

 

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

 

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

 

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

 

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

 

30.          Subordination;
Attornment; Non-Disturbance.

 

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

 

30.2        Attornment.
In the event that Lessor transfers title to the Premises, or the
Premises are acquired by another upon the foreclosure or termination of a
Security Device to which this Lease is subordinated (i) Lessee shall, subject
to the non-disturbance provisions of Paragraph 30.3, attorn to such new owner,
and upon request, enter into a new lease, containing all of the terms and
provisions of this Lease, with such new owner for the remainder of the term
hereof, or, at the election of such new owner, this Lease shall automatically
become a new Lease between Lessee and such new owner, upon all of the terms and
conditions hereof, for the remainder of the term hereof, and (ii) Lessor
shall thereafter be relieved of any further obligations hereunder and such new
owner shall assume all of Lessor’s obligations hereunder, 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 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 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. Lessor and
Lessor’s agents shall have the right to enter the Premises at any time, in the
case of an emergency, and otherwise at reasonable times after reasonable prior
notice for the purpose of showing the same to prospective purchasers, lenders,
or tenants, and making such alterations, repairs, improvements or additions to
the Premises as Lessor may deem necessary or desirable and the erecting, using
and maintaining of utilities, services, pipes and conduits through the Premises
and/or other premises as long as there is no material adverse effect to
Lessee’s use of the Premises. All such activities shall be without abatement of
rent or liability to Lessee.

 

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

 

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

 

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 American Industrial Real
Estate Association, and each such Guarantor shall have the same obligations as
Lessee under this Lease.

 

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

 

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

 

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

 

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

 

44.         Authority; Multiple Parties; Execution.

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

 

	
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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 AMERICAN INDUSTRIAL REAL ESTATE
ASSOCIATION OR BY ANY BROKER AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX
CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT RELATES. THE PARTIES
ARE URGED TO:

 

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

 

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

 

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

 

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

 

	
  Executed at:

  	
  Riverside Cal

  	
   

  	
  Executed at:

  	
   

  
	
  on:

  	
  9/29/04

  	
   

  	
  on:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By LESSOR:

  	
   

  	
   

  	
  By LESSEE:

  	
   

  
	
  T.M. Cobb Company

  	
   

  	
  Aldila Golf Corporation

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Raymond S. Cobb

  	
   

  	
  By:

  	
  /s/ Robert J. Cierzan

  
	
  Name Printed:

  	
  Raymond S. Cobb

  	
   

  	
  Name Printed:

  	
  Robert J. Cierzan

  
	
  Title:

  	
  President, T.M. Cobb
  Company

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
  Name Printed:

  	
   

  	
   

  	
  Name Printed:

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  
	
  Address:

  	
  500 Palmyrita Ave.,
  Riverside, CA 92507

  	
   

  	
  Address:

  	
  13450 Stowe Drive Poway, CA
  92064

  
	
  Telephone/Facsimile:

  	
  (909) 248-2440/(909)
  248-2488

  	
   

  	
  Telephone/Facsimile:

  	
  (858) 513-1801/ (858)
  513-1870

  
	
  Federal ID No.

  	
   

  	
   

  	
  Federal ID No.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BROKER:

  	
   

  	
   

  	
  BROKER:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Attn:

  	
   

  	
   

  	
  Attn:

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  
	
  Address:

  	
   

  	
   

  	
  Address:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Telephone/Facsimile:

  	
   

  	
  Telephone/Facsimile:

  
	
  Federal ID No.

  	
   

  	
   

  	
  Federal ID No.

  	
   

  
							

 

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

 

© Copyright 1997 - By American Industrial Real Estate Association. All
rights reserved.

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

 

 

	
  RC

  	
   

  	
   

  	
   

  	
  RJC

  
	
  Initials

  	
   

  	
   

  	
   

  	
  Initials

  

 

12

 

LEGAL DESCRIPTION

 

Parcel 106 of Parcel Map No. 16320,
in the City of Poway, County of San Diego, State of California, filed in the
Office of the County Recorder of San Diego County.

 

EXHIBIT “A”

 

 

FLOOR PLAN

 

 

EXHIBIT “B”

 

 

ADDENDUM TO LEASE

 

This Addendum to the Lease dated June 18, 2004,
(“Addendum”) is entered into by and between T.M. Cobb Company, a California
corporation (“Lessor”), on the one hand, and Aldila Golf Corporation, a
Delaware corporation (“Lessee”) on the other hand (hereinafter collectively
referred to as the “Parties”). The lease dated June 18, 2004, along with
this Addendum and Exhibits A through B, will hereinafter be referred to as the
“Lease”. In the event of a conflict between the provisions of this Addendum and
the provisions of the balance of the Lease, this Addendum shall control.

 

51.                               Increases
to Base Rent. The Base Rent under the
Lease shall increase periodically as follows: 

 

	
  Date

  	
   

  	
  Base Rent

  
	
   

  	
   

  	
   

  
	
  December 1, 2005-November 30, 2006

  	
   

  	
  $41,355.00 per month

  
	
   

  	
   

  	
   

  
	
  December 1, 2006-November 30, 2007

  	
   

  	
  $42,595.00 per month

  
	
   

  	
   

  	
   

  
	
  December 1, 2007-November 30, 2008

  	
   

  	
  $43,873.00 per month

  
	
   

  	
   

  	
   

  
	
  December 1, 2008-November 30, 2009

  	
   

  	
  $45,189.00 per month

  

 

52.                               Option
to Extend Lease. Lessee shall have the option
to extend the term of the Lease for a period of five (5) years from
December 1, 2009 through November 30, 2014. Such option to extend the
term of the Lease may be exercised by Lessee by delivering written notice of
Lessee’s intent to exercise said option to Lessor on or before May 31,
2009. If the option set forth herein is exercised, the extended term under the
option shall be subject to all terms and conditions of this Lease. The Base
Rent for the period of the extended Lease shall be as follows:

 

	
  Date

  	
   

  	
  Base Rent

  
	
   

  	
   

  	
   

  
	
  December 1, 2009-November
  30, 2010

  	
   

  	
  $46,545.00 per month

  
	
   

  	
   

  	
   

  
	
  December 1, 2010-November
  30, 2011

  	
   

  	
  $47,941.00 per month

  
	
   

  	
   

  	
   

  
	
  December 1, 2011-November
  30, 2012

  	
   

  	
  $49,379.00 per month

  
	
   

  	
   

  	
   

  
	
  December 1, 2012-November
  30, 2013

  	
   

  	
  $50,861.00 per month

  
	
   

  	
   

  	
   

  
	
  December 1, 2013-November
  30, 2014

  	
   

  	
  $52,387.00 per month

  

 

53.                               Workers
Compensation Insurance. Tenant shall maintain a workers
compensation insurance policy for all employees employed by Lessee on the
Premises in accordance with all applicable laws of the State of California.
Proof of such workers compensation insurance, as required herein, shall be
provided to Lessor within five (5) days upon request.

 

54.                               Installation
of Additional Air Conditioning Units. Lessee shall be entitled to
install additional air conditioning units prior to the Commencement Date at
Lessee’s sole cost and expense. Said installation of air conditioning units, as
set forth in this paragraph, and plans for such installation shall be approved
by Lessor’s architect prior to the beginning of any installation of any air
conditioning units. Lessor and Lessor’s architect will not unreasonably
withhold approval for the installation of said air conditioning units. Said
installation of air conditioning units shall also comply with all applicable
laws and regulations, and Lessee is solely responsible for any permits or
licenses necessary for same. Lessee shall also be required to provide notice to
Lessor of any changes to plans approved by Lessor’s architect prior to
proceeding forward with any changes to the plans.

 

55.                               Environmental
Inspection of Premises. Prior to the Commencement
Date, an environmental inspection of the Premises shall be conducted by an
environmental inspector selected by Lessor. Said environmental inspection shall
determine the compliance with all applicable environmental laws effecting the
Premises by Lessee. The cost and expense of the environmental inspection shall
be split equally between Lessor and Lessee. If any environmental conditions
requiring remediation are found on the Premises, and are present as a result of
the acts or omissions of Lessee and Lessee’s occupation of the Premises, Lessee
shall be responsible for all such remediation, and all costs and expenses
associated with said remediation.

 

56.                               Parking. Lessor hereby agrees that all of the parking spaces on
the Premises shall be for Lessee’s exclusive use.

 

57.                               Approval of Assignment and
Subletting. Lessor’s
consent to any assignment or subletting of the Lease shall not be unreasonably
withheld. Further, in the event Lessor does not respond to a proposed
assignment or subletting within thirty (30) days of certified and acknowledged
receipt by Lessor of the Proposed assignment or sublease, Lessor shall be
deemed to have consented to such assignment or sublease.

 

1

 

58.                               Payment
for Insurance Policies. Notwithstanding
anything herein to the contrary, Lessor shall be required to pay for all
insurance policies and premiums obtained by Lessor under paragraph 8.2(b) of
the Lease. Further Lessee shall be required to pay for all insurance policies
and premiums obtained by Lessee as required under paragraph 8 of the Lease.

 

	
   

  	
   

  	
   

  	
   

  	
  T.M. Cobb Company

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Dated:

  	
  9/29/04, 2004

  	
   

  	
  By:

  	
  /s/ Ray Cobb

  
	
   

  	
   

  	
   

  	
   

  	
  Ray Cobb

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  Aldila Golf Corporation

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Dated:

  	
  Sept. 29, 2004

  	
   

  	
  By:

  	
  /s/ Robert J. Cierzan

  

 

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  Exhibit 10.109    
    

 Summary of Discretionary Bonus Program  

        The Named Executive Officers participate in the Company's Discretionary Bonus Program. Under the discretionary bonus program, each
named executive officer is given key performance metrics and key results area (or KRA's), such as the performance of the particular officer or the accomplishment of specific objectives by such officer
and may include such other objective factors as the Company's profitability, revenue, cash flow, customer generation, market share and industry position. If the named executive officer achieves his
KRA's he is eligible to receive a bonus. No bonuses under the Discretionary Bonus Program are paid unless the Company achieves certain financial objectives. Discretionary Bonuses, if any, are paid
after the Audit Committee receives the audited financial statements, are distributed within two and one-half months of the close of the Company's fiscal year and are subject to certain
clawback provisions. The existence of the Discretionary Bonus Program does not entitle any of participants to receive any bonus under the Discretionary Bonus Program. The Discretionary Bonus Program
may be terminated or amended in whole or in part at any time by the Board of Directors or the Compensation Committee of the Board of Directors in its sole and absolute discretion. 

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Exhibit 10.109

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