Document:

exv10w15

 

EXHIBIT 10.15

June 29, 2005

Guru Denim Inc.

1525 Rio Vista Avenue

Los Angeles, CA 90023

	ATTN:  	 	Mr. Mark Saltzman &
Mr. Charles Lesser

Gentlemen :

Reference is made to the Discount Factoring Agreement of 12/2/2004 , as amended. The
contract is amended as follows :

	 	 	 
	Effective 7/1/2005 to 12/31/2005
Factoring Commission

	 	From .75% to .70%
	 
	 	 
	Effective 1/1/2006

Factoring Commission

	 	From .70% to .65%
	 
	 	 
	Effective 7/1/2005

Interest Rate

	 	From Prime plus 1% to

Prime plus 1/2 %
	 
	 	 
	EXTENSION

	 	To 12/2/2006

All other terms and conditions of the above Discount Factoring Agreement remain unchanged.

Please indicate your acceptance by signing in the space provided, and returning the original to me. The copy is for your file.

Very truly yours,
 
 

/s/

Donald Nunnari

DONALD NUNNARI

Vice President

READ AND AGREED:

GURU DENIM INC.

/s/ Jeffrey Lubell

JEFFREY LUBELL

Presidentexv10w16

 

Exhibit 10.16

 A D D E N D U M 

TERMS OF LEASE (2 YEARS + 3 YEARS OF OPTION)

	1.	 	1ST YEAR — MONTHLY RENT: $6,960.00
	 
	2.	 	2ND YEAR — MONTHLY RENT: $7,169.00

ADDITIONAL THREE (3) YEARS TERMS OF OPTION

	1.	 	3RD YEAR — MONTHLY RENT: $7,384.00
	 
	2.	 	4TH YEAR — MONTHLY RENT: $7,606.00
	 
	3.	 	5TH YEAR — MONTHLY RENT: $7,834.00

	**	 	DEPOSITS: FIRST MONTH RENT + SECURITY DEPOSIT $13,920.00

THERE IS A “RENT FREE” FOR THE MONTH OF JULY, 2005

OWNER WILL CLEAN OFFICE, CARPETING AND REPAINT WHERE NECESSARY.

	 	 	 
	/s/ CHARLES A. LESSER

	 	 
	 

	GURU DENIM INC.      (LESSEE)
	 	 
	 
	 	 
	 

	L.A. FABRIC IMPORTS, INC.       (LESSOR)
	 	 

 

AIR COMMERCIAL REAL ESTATE ASSOCIATION

STANDARD INDUSTRIAL/COMMERCIAL

SINGLE-TENANT SUB-LEASE-GROSS

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

1.
Basic Provisions (“Basic Provisions”).

     1.1
Parties. This Lease (“Lease”), dated for
reference purposes only July 1, 2005, is
made by and between L.A. FABRIC IMPORTS INC.
(“Lessor”) and GURU DENIM INC. (“Lessee”),
(collectively the “Parties,” or individually a
“Party”).

     1.2 Premises. That certain real property, including all improvements therein or to be
provided by Lessor under the terms of this Lease, commonly known as
1557 S, RIO VISTA AVE.,
LOS ANGELES, CALIF, 90023, located in the County of LOS ANGELES,
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 8,700 square feet
industrial building situated on an approximately 27,710 square feet of land. (“Premises”). (see also Paragraph 2)

     1.3
Term: Two (2) years and 0 months
(“Original Term”) commencing August 1, 2005
(“Commencement Date”) and ending August 1, 2007
(“Expiration Date”). (See also Paragraph 3)

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

     1.5
Base Rent: $ 6,960.00 per month (“Base Rent”), payable on the 1st day of
each month commencing August 1, 2005. (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: $ 6,9600.00 for the period August 1,
2005 thru August 1, 2007.
	 
	 	(b)	 	Security Deposit: $ 13,920.00 (“Security
Deposit”). (See also Paragraph 5)
	 
	 	(c)	 	Association Fees: $ N/A for the period N/A
	 
	 	(d)	 	Other: $ N/A for N/A
	 
	 	(e)	 	Total Due Upon Execution of this Lease: $ 20,880.00.

     1.7 Agreed Use: Design, warehousing and distribution of garments. (See also Paragraph 6)

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

     1.9
Real Estate Brokers: (See also Paragraph 15)

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

þ Coldwell Banker/George Realty represents Lessor exclusively (“Lessor’s Broker”);

þ Colliers Seeley represents Lessee exclusively (“Lessee’s Broker”); or

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

          (b) Payment to Brokers. Upon execution and delivery of this Lease by both Parties, Lessor
shall pay to the Broker the fee agreed to in their separate written
agreement (or if there is
no such agreement, the sum of ___ or 5% of the total Base Rent) for the brokerage
services rendered by the Brokers.

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

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

o an Addendum consisting of Paragraphs ____ through ______;

o
a plot plan depicting the Premises;

o a current set of the Rules and Regulations;

o a work Letter;

þ
other (specify): ** PLEASE SEE ATTACHED “ADDENDUM” —
TERMS OF LEASE.
THE LESSEE ACKNOWLEDGES THAT
L.A. FABRIC IMPORTS INC. IS SUB-LEASING THE PREMISES AND HAS A LEASE WITH BBK VISTA LLC.

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, convenants and conditions set forth in
this Lease. Unless otherwise provided herein, any statement of size set

	 	 	 	 	 
	                    

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forth in this Lease, or that may have been used in calculating Rent, is an approximation which
the Parties agree is reasonable and any payments based thereon are not subject to revision whether
or not the actual size is more or less. Note: Lessee is advised to verify the actual size prior to
executing this Lease.

     2.2  Condition Lessor shall deliver the Premises to Lessee broom clean and free of debris on the
Commencement Date or the Early Possession,Date whichever first occurs (“Start Date”), and, so long
as the required service contracts described in Paragraph 7.1(b) below are obtained by Lessee and in
effect within thirty days following the Start Date, warrants that the
existing electrical, plumbing,
fire sprinkler, lighting, heating, ventilating and air conditioning systems (“HVAC”), loading
doors, sump pumps, if any, and all other such elements in the Premises, other than those
constructed by Lessee, shall be in good operating condition on said date and that the surface and
structural elements of the roof, bearing walls and foundation of any buildings on the Premises (the
“Building”) shall be free of material defects. If a non-compliance with said warranty exists as of
the Start Date, or if one of such systems or elements should malfunction or fail within the
appropriate warranty period, Lessor shall, as Lessor’s sole obligation with respect to such matter,
except as otherwise provided in this Lease, promptly after receipt of written notice from Lessee
setting forth with specificity the nature and extent of such non-compliance, malfunction or
failure, rectify same at Lessor’s expense. The warranty periods shall be as follows: (i) 6 months
as to the HVAC systems, and (ii) 30 days as to the remaining systems and other elements of the
Building. If Lessee does not give Lessor the required notice within the appropriate warranty
period, correction of any such non-compliance, malfunction or failure shall be the obligation of
Lessee at Lessee’s sole cost and expense, except for the roof, foundations, and bearing walls which
are handled as provided in paragraph 7.

     2.3 Compliance. Lessor warrants that 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.

3. Term.

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

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

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

	 	 	 
	                    

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     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 concurrent with the Start Date, shall occur but Lessor may elect to withhold possession until such condition 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 to
pay Rent, or otherwise Defaults under this Lease, Lessor may use, apply or retain all or any
portion of said Security Deposit for the payment of any amount due Lessor or to reimburse or
compensate Lessor for any liability, expense, loss or damage which Lessor may suffer or incur by
reason thereof. If Lessor uses or applies all or any portion of the Security Deposit, Lessee shall
within 10 days after written request 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 bore to the initial Base Rent. Should
the Agreed Use be amended to accommodate a
material change in the business of Lessee or to accommodate a sublessee or assignee, Lessor shall
have the right to increase the Security Deposit to the extent necessary, in Lessor’s reasonable
judgment, to account for any increased wear and tear that the Premises may suffer as a result
thereof. If a change in control of Lessee occurs during this Lease and following such change the
financial condition of Lessee is, in Lessor’s reasonable
judgment, significantly reduced, Lessee
shall deposit such additional monies with Lessor as shall be sufficient to cause the Security
Deposit to be at a commercially reasonable level based on such change in financial condition.
Lessor shall not be required to keep the Security Deposit separate from its general accounts.
Within 14 days after the expiration or termination of this Lease, if Lessor elects to apply the
Security Deposit only to unpaid Rent, and otherwise within 30 days after the Premises have been
vacated pursuant to Paragraph 7.4(c) below, Lessor shall return that portion of the Security
Deposit not used or applied by Lessor. No part of the Security Deposit shall be considered to be
held in trust, to bear interest or to be prepayment for any monies to be paid by Lessee under this
Lease.

6.  Use.

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

          (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

	 	 	 
	                    

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

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

     7.1 Lessee’s Obligations.

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

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

	 	 	 
	                    

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	 	Initials

			
	 	 	 
	©2002 — AIR Commercial Real Estate Association
	 	FORM STG-8-7/01

PAGE 4 of 15

 

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

     7.3 Utility Installations;Trade Fixtures; Alterations.

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

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

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

     7.4
Ownership; Removal; Surrender; and Restoration.

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

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

          (c) Surrender; Restoration. Lessee shall surrender the Premises by the Expiration Date or any
earlier termination date, with all of the improvements, parts and surfaces thereof broom clean and
free of debris, and in good operating order, condition and state of repair, ordinary wear and tear
excepted. “Ordinary wear and tear” shall not include any damage or deterioration that would have
been prevented by good maintenance practice. Notwithstanding the foregoing, if this Lease is for 12
months or less, then Lessee shall surrender the Premises in the same condition as delivered to
Lessee on the Start Date with NO allowance for ordinary wear and tear. Lessee shall repair any
damage occasioned by the installation, maintenance or removal of Trade Fixtures, Lessee owned
Alterations and/or Utility Installations, furnishings, and equipment as well as the removal of any
storage tank installed by or for Lessee. Lessee shall completely remove from the Premises any and
all Hazardous Substances brought onto the Premises by or for Lessee, or any third party (except
Hazardous Substances which were deposited via underground migration from areas outside of the
Premises, or if applicable the 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 of Premium Increases.

          (a) Lessee shall pay to Lessor any insurance cost increase (“Insurance Cost Increase”) occurring
during the term of this Lease. Insurance Cost Increase is defined as any increase in the actual
cost of the insurance required under Paragraph 8.2(b) 8.3(a) and 8.3(b) (“Required Insurance”),
over and above the Base Premium as hereinafter defined calculated on an annual basis. Insurance
Cost Increase shall include but not be limited to increases resulting from the nature of Lessee’s
occupancy, any act or omission of Lessee, requirements of the holder of mortgage or deed of trust
covering the Premises, increased valuation of the Premises and/or a premium rate increase. The
parties are encouraged to fill in the Base Premium in paragraph 1.8 with a reasonable premium for
the Required Insurance based on the Agreed Use of the Premises. If the parties fail to insert a
dollar amount in Paragraph 1.8, then the Base Premium shall be
the lowest annual premium reasonably
obtainable for the Required Insurance as of the commencement of the
Original Term for the Agreed
Use of the Premises. In no event, however, shall Lessee be responsible for any portion of the
increase in the premium cost attributable to liability insurance carried by Lessor under Paragraph
8.2(b) in excess of $2,000,000 per occurrence.

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

8.2 Liability Insurance.

          (a) Carried by Lessee. Lessee shall obtain and keep in force a Commercial General Liability policy
of insurance protecting Lessee and Lessor as an additional insured against claims for bodily
injury, personal injury and property damage based upon or arising out of the ownership, use,
occupancy or maintenance of the Premises and all areas appurtenant thereto. Such insurance shall be
on an occurrence basis providing single limit coverage in an amount not
less than $1,000,000 per occurrence with an annual aggregate of

	 	 	 
	                    

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	Initials

	 	Initials

			
	 	 	 
	©2002 — AIR Commercial
Real Estate Association
	 	FORM STG-8-7/01

PAGE 5 of 15

 

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

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

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

     8.4 Lessee’s Property; Business Interruption Insurance.

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

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

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

     8.5 Insurance Policies. Insurance required herein shall be by companies duly licensed or admitted
to transact business in the state where the Premises are located, and maintaining during the policy
term a “General Policyholders Rating” of at least 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.

     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 deductions 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.

	 	 	 
	                    

	 	     CAL       
	 
	 	 
	                    

	 	                    
	Initials

	 	Initials
	 

			
	 	 	 
	©2002 — AIR Commercial
Real Estate Association
	 	FORM STG-8-7/01

Page 6 of 15

 

9. Damage or Destruction.

     9.1 Definitions.

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

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

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

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

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

     9.2 Partial Damage — Insured Loss. If a Premises Partial Damage that is an Insured Loss occurs,
then Lessor shall, at Lessor’s expense repair such damage (but not Lessee’s Trade Fixtures or
Lessee Owned Alterations and Utility Installations) as soon as reasonably possible and this Lease
shall continue in full force and effect; provided, however, that Lessee shall, at Lessor’s
election, make the repair of any damage or destruction the total cost to repair of which is $10,000
or less, and, In such event, Lessor shall make any applicable insurance proceeds available to
Lessee on a reasonable basis for that purpose. Notwithstanding the foregoing, if the required
insurance was not in force or the insurance proceeds are not sufficient to effect such repair, the
Insuring Party shall promptly contribute the shortage in proceeds (except as to the deductible
which is Lessee’s responsibility) as and when required to complete said repairs. In the event,
however, such shortage was due to the fact that, by reason of the unique nature of the
improvements, full replacement cost insurance coverage was not commercially reasonable and
available, Lessor shall have no obligation to pay for the shortage in insurance proceeds or to
fully restore the unique aspects of the Premises unless Lessee provides Lessor with the funds to
cover same, or adequate assurance thereof, within 10 days following receipt of written notice of
such shortage and request therefor. If Lessor receives said funds or adequate assurance thereof
within said 10 day period, the party responsible for making the repairs shall complete them as soon
as reasonably possible and this Lease shall remain in full force and effect. If such funds or
assurance are not received, Lessor may nevertheless elect by written notice to Lessee within 10
days thereafter to: (i) make such restoration and repair as is commercially reasonable with Lessor
paying any shortage in proceeds, in which case this Lease shall remain in full force and effect, or
(ii) have this Lease terminate 30 days thereafter. Lessee shall not be entitled to reimbursement of
any funds contributed by Lessee to repair any such damage or destruction. Premises Partial Damage
due to flood or earthquake shall be subject to Paragraph 9.3, notwithstanding that there may be
some insurance coverage, but the net proceeds of any such insurance shall be made available for the
repairs if made by either Party.

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

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

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

     9.6
Abatement of Rent; Lessee’s Remedies.

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

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

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

     9.8 Waive Statutes. Lessor and Lessee agree that the terms of this Lease shall govern the
effect of any damage to or destruction of the Premises with respect to the termination of this
Lease and hereby waive the provisions of any present or future statute to the extent inconsistent
herewith.

	 	 	 
	                    

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	 	FORM STG-8-7/01

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10. Real Property Taxes.

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

     10.2

          (a) Payment of Taxes. Lessor shall pay the Real Property Taxes applicable to the Premises provided,
however, that Lessee shall pay to Lessor the amount, if any, by which Real Property Taxes
applicable to the Premises increase over the fiscal tax year during which the Commencement Date
occurs (“Tax Increase”). Payment of any such Tax Increase shall be made by Lessee to Lessor within
30 days after receipt of Lessor’s written statement setting forth the amount due and the
computation thereof. If any such taxes shall cover any period of time prior to or after the
expiration or termination of this Lease, Lessee’s share of such taxes shall be prorated to cover
only that portion of the tax bill applicable to the period that this Lease is in effect. In the
event Lessee incurs a late charge on any Rent payment, Lessor may estimate the current Real Property
Taxes, and require that the Tax Increase be paid in advance to Lessor by Lessee monthly in advance
with the payment of the Base Rent. Such monthly payment shall be an amount equal to the amount of
the estimated installment of the Tax Increase divided by the number of months remaining before the
month in which said installment becomes delinquent. When the actual amount of the applicable Tax
Increase is known, the amount of such equal monthly advance payments shall be adjusted as required
to provide the funds needed to pay the applicable Tax Increase. If the amount collected by Lessor
is insufficient to pay the Tax Increase when due, Lessee shall pay Lessor, upon demand, such
additional sums as are necessary to pay such obligations. Advance payments may be intermingled with
other moneys of Lessor and shall not bear interest. In the event of a Breach by Lessee in the
performance of its obligations under this Lease, then any such advance payments may be treated by
Lessor as an additional Security Deposit.

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

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

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

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

12. Assignment and Subletting.

     12.1 Lessor’s Consent Required.

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

          (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,

	 	 	 
	                    

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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 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) Terminate Lessee’s right to possession of the Premises by any lawful means, in which case this
Lease shall terminate and Lessee shall immediately surrender possession to Lessor. In such event
Lessor shall be entitled to recover from Lessee: (i) the unpaid Rent which had been earned at the
time of termination; (ii) the worth at the time of award of the amount by which the unpaid rent
which would have been earned after termination until the time of award exceeds the amount of such
rental loss that the Lessee proves could have been reasonably avoided; (iii) the worth at the time
of award of the amount by which the unpaid rent for the balance of the term after the time of award
exceeds the amount of such rental loss that the Lessee proves could be reasonably avoided: and (iv)
any other amount necessary to compensate Lessor for all the detriment proximately caused by the
Lessee’s failure to perform its obligations under this Lease or which in the ordinary course of
things would be likely to result therefrom, including but not limited to the cost of recovering
possession of the Premises, expenses of reletting, including necessary renovation and alteration of
the Premises, reasonable attorneys’ fees, and that portion of any leasing commission paid by Lessor
in connection with this Lease applicable to the unexpired term

	 	 	 	 	 
	                    

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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 10% of each such overdue amount or $100, whichever is
greater. The Parties hereby agree that such late charge represents a fair and reasonable estimate
of the costs Lessor will incur by reason of such late payment. Acceptance of such late charge by
Lessor shall in no event constitute a waiver of Lessee’s Default or Breach with respect to such
overdue amount, nor prevent the exercise of any of the other rights and remedies granted hereunder.
In the event that a late charge is payable hereunder, whether or not collected, for 3 consecutive
installments of Base Rent, then notwithstanding any provision of this Lease to the contrary, Base
Rent shall, at Lessor’s option, become due and payable quarterly in advance.

     13.5 Interest. Any monetary payment due Lessor hereunder, other than late charges, not received
by Lessor, when due as to scheduled payments (such as Base Rent) or within 30 days following the
date on which it was due for non-scheduled payment, shall bear interest from the date when due, as
to scheduled payments, or the 31st day after it was due as to non-scheduled payments. The interest
(“Interest”) charged shall be computed at the rate of 10% per annum but shall not exceed the
maximum rate allowed by law. Interest is payable in addition to the potential late charge provided
for in Paragraph 13.4.

13.6 Breach by Lessor.

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

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

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

15. Brokerage Fees.

     15.1 Additional Commission. In addition to the payments owed pursuant to Paragraph 1.9 above, and
unless Lessor and the Brokers otherwise agree in writing, Lessor agrees that: (a) if Lessee
exercises any Option, (b) if Lessee 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 the Premises, with the consent of Lessor, after the expiration of
this Lease, or (d) if Base Rent is increased, whether by agreement or operation of an escalation
clause herein, then, Lessor shall pay Brokers a fee in accordance with the schedule of the Brokers
in effect at the time of the execution of this Lease.

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

	 	 	 
	                    

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

16. Estoppel Certificates.

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

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

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

17.
Definition of Lessor. The term “Lessor” as used herein shall mean the owner or owners at the
time in question of the fee title to the Premises, or, if this is a sublease, of the Lessee’s
interest In the prior lease. in the event of a transfer of Lessor’s title or interest in the
Premises or this Lease, Lessor shall deliver to the transferee or assignee (in cash or by credit)
any unused Security Deposit held by Lessor. Except as provided in Paragraph 15 upon such transfer
or assignment and delivery of the Security Deposit, as aforesaid, the prior Lessor shall be
relieved of all liability with respect to the obligations and/or covenants under this Lease
thereafter to be performed by the Lessor. Subject to the foregoing, the obligations and/or
covenants in this Lease to be performed by the Lessor shall be binding only upon the Lessor as
hereinabove defined.

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

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

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

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

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

	 	 	 
	                    

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               (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 does not involve the
affirmative duties set forth above.

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

          (b) Brokers have no responsibility with respect to any default or breach hereof by either
Party. The 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 or willful
misconduct of such Broker.

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

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

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

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

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.

	 	 	 
	                    

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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 and auction.

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

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

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

37. Guarantor.

     37.1 Execution. The Guarantors, if any, shall each execute a guaranty in the form most recently
published by the AIR Commercial Real Estate Association, 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 the case of a corporate
Guarantor, a certified copy of a resolution of its board of directors authorizing the making of
such guaranty, (b) current financial statements, (c) an Estoppel Certificate, or (d) written
confirmation that the guaranty is still in effect.

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

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

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

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

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

     39.4 Effect of Default on Options.

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

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

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

40. 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.

	 	 	 
	                    

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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 my 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 o
is not attached to this Lease.

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

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

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

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

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

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

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

	 	 	 	 	 	 	 
	Executed at:

	 	 	 	Executed at:
	 	LOS ANGELES
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	on:

	 	 	 	on:
	 	7/2/05
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	By LESSOR:	 	By LESSEE:	 	 
	 
	 	 	 	 	 	 
	L.A. FABRIC IMPORTS INC.
	 	GURU DENIM,INC., A CALIFORNIA CORP.

	 	 	 
	 
	 	 	 	 	 	 
	 	 	 
	 
	 	 	 	 	 	 
	By:

	 	 	 	By:
	 	/s/ CHARLES A. LESSER
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	Name Printed:	 	Name Printed:	 	 
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	Title:

	 	 	 	Title:
	 	CFO
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	By:

	 	 	 	By:	 	 
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	Name Printed:	 	Name Printed:	 	 
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	Title:

	 	 	 	Title:	 	 
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	Address:

	 	1565 RIO VISTA AVE.
	 	Address:	 	 
	 

	 	 
	 	 	 	 
	 

	 	LOS ANGELES, CALIF.90023	 	 	 	 
	 	 	 
	 
	 	 	 	 	 	 
	Telephone:(  )	 	Telephone: (  )
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	Facsimile: (   )	 	Facsimile: (   )
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	Federal ID No.	 	Federal ID No.
	 

	 	 
	 	 	 	 

	 	 	 	 	 
	                    

	 	 	 	                    
	 

	 	 	 	 
	                    

	 	 	 	                    
	Initials

	 	 	 	Initials

			
	 	 	 
	©2002 — AIR Commercial Real Estate Association
	 	FORM STG-8-7/01
	 	 	 

PAGE  14  of 15

 

	 	 	 	 	 	 	 
	BROKER:

	 	 	 	BROKER:	 	 
	 
	 	 	 	 	 	 
	Coldwell Banker/George Realty	 	Colliers Seeley
	 	 	 
	 
	 	 	 	 	 	 
	 	 	 
	 
	 	 	 	 	 	 
	Attn:

	 	James C. Chou
	 	Attn:
	 	PHil Norton
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	Title:

	 	Vice President
	 	Title:	 	 
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	Address:

	 	1611 S. Garfield Ave., #200
	 	Address:
	 	5801 E. Slauson Ave., Ste. 160
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	Alhambra, Calif. 91801
	 	 	 	Commerce, Calif. 90040

	 	 	 
	 
	 	 	 	 	 	 
	Telephone:

	 	(626) 823-6660
	 	Telephone:
	 	(323) 278-3115
	 
	 	 	 	 	 	 
	Facsimile:

	 	(626) 457-2353
	 	Facsimile:
	 	(323) 278-3000
	 
	 	 	 	 	 	 
	Email:

	 	 	 	Email:	 	 
	 

	 	 
	 	 	 	 
	 
	 	 	 	 	 	 
	Federal ID No.	 	Federal ID No.
	 

	 	 
	 	 	 	 

	 	 	 
	NOTE:

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

©Copyright
2002 — By AIR Commercial Real Estate Association. All rights
reserved. No part of these works may be reproduced in any form without permission In writing.

	 	 	 	 	 
	                    

	 	 	 	                    
	 

	 	 	 	 
	                    

	 	 	 	                    
	Initials

	 	 	 	Initials

			
	 	 	 
	©2002 — AIR Commercial Real Estate Association
	 	FORM STG-8-7/01
	 	 	 

PAGE  15  of 15

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