California-El Segundo-200 Center Street Lease - Time Realty Investments Inc. and Briazz Inc.
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE - NET (DO NOT USE THIS FORM FOR MULTI-TENANT BUILDINGS) 1. Basic Provisions ("Basic Provisions"). 1.1 Parties. This Lease ("Lease"), dated for reference purposes only, December 15, 1997, is made by and between TIME REALTY INVESTMENTS, INC. - a ----------------- --------------------------------- California corporation, Fred W. Plotke - Pres./CEO Business Address: 1511 - --------------------------------------------------------------------------- 18/th/ Street, Santa Monica, California 90404 ("Lessor") and BRIAZZ, INC. - a ----------------------------------------------------------------------------- Washington corporation, James A. McDermet is President/CEO (on 12/15/97) Main ----------------------------------------------------------------------------- Address: 1011 SW Klickitat Way - Suite 202, Seattle, Washington 98134 Phone: ----------------------------------------------------------------------------- 206/467-0994 FAX: 206/467-1970 Fed. Tax ID #91-1672311 ("Lessee"), ---------------------------------------------------------- (collectively the "Parties," or individually a "Party"). 1.2. Premises. That certain property, including all improvements therein or to be provided by Lessor under the terms of this Lease, and commonly known as 200 Center Street, El Segundo, California 90245 (APN #4139-005-034 & APN #4139- ------------------------------------------------------------------------------ 005-035) 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). A - single-story concrete tilt-up type office/industrial building of approximately ------------------------------------------------------------------------------ 14,500 sq. ft. located on 30,000+ sq. ft. industrially zoned lot in the City ---------------------------------------------------------------------------- of El Segundo, CA 90245. The dimensions of the parcel are approx. 215 ft. --------------------------------------------------------------------------- (NS) X 149 (EW). The building has a fire sprinkler system and has approx. 3000 ------------------------------------------------------------------------------- sq. ft. of office space including three (3) bathrooms. Description is in its ----------------------------------------------------------------------------- present configuration. It is anticipated that the Lessee will make ------------------------------------------------------------------ modifications, as set forth on Exhibit II. ("Premises"). (See also Paragraph 2) ------------------------------------------ 1.3 Term. Four Years (48 mos) years and --- months ("Original Term") ------------------- --- commencing 3/1/1998 ("Commencement Date") and ending 2/28/2002 ("Expiration ------------------- --------- Date"). (See also Paragraph 3). 1.4 Early Possession. On or about 3/1/98 ("Early Possession Date") (See ------------------ also Paragraph 3.2) Base Rent. $9500.00 per month ("Base Rent"), payable on the First day of -------- each month commencing May 1, 1998 (5/1/98) (See also Paragraph 4) -------------------- [_] If this box is checked, there are provisions in this Lease for the Base Rent to be adjusted. A special one-time rate of $4,750 shall apply for any occupancy prior to May 1, 1998. 1.6 Base Rent Paid Upon Execution. $4,750.00 for the period prior to --------- 5/1/98 (See Para. #50 of ADDENDUM) ---------------------------------- 1.7 Security Deposit. $15,000.00 ("Security Deposit"). (See also ---------- Paragraph 5) [Initialed] -1- <PAGE> 1.8 Agreed Use. Commissary facility for a group of sandwich shops and ----------------------------------------------------- fast-food kiosks operated by BRIAZZ, INC. and its permitted transferees, and ----------------------------------------------------------------------------- related business activities. (See also Paragraph 6) ---------------------------- 1.9 Insuring Party. Lessor is the "Insuring Party" unless otherwise stated herein. (See also Paragraph 8). By mutual agreement, the parties may change the Insuring Party. 1.10 Real Estate Brokers. (See also Paragraph 15) (a) Representation. The following real estate brokers (collectively, the "Brokers") and brokerage relationships exist in this transaction (check applicable boxes): [_] ___________________ represents Lessor exclusively ("Lessor's Broker"); [_] ___________________ represents Lessee exclusively ("Lessee's Broker"); or [X] Richard Kato - ALCOM, Inc., 268 N. Lincoln Ave. 278, Corona, CA 91720 ----------------------------------------------------------------------- represents both Lessor and Lessee ("Dual Agency"). Lessor will pay all commissions owing to said party. (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 ---% of the total Base Rent for the brokerage services rendered by said Broker). Separate Agreement with Lessor. 1.11 Guarantor. The obligations of the Lessee under this Lease are to be guaranteed by N.A. ("Guarantor"). (See also Paragraph 37) ---- 1.12 Addenda and Exhibits. Attached hereto is an Addendum or Addenda consisting of Paragraphs #50 through #57 and Exhibits EXHIBIT I - Intentionally --- --- ------------------------- Deleted. EXHIBIT II - DIAGRAM OF PREMISES. EXHIBIT III - Intentionally ------------------------------------------------------------------------ Deleted, ALL OF WHICH CONSTITUTE A PART OF THIS LEASE. 2. Premises 2.1 Letting. Lessor hereby leases to Lessee, and Lessee hereby leases from Lessor, the Premises, for the term, at the rental, and upon all of the terms, covenants and conditions set forth in this Lease. Unless otherwise provided herein, any statement of size set forth in this Lease, or that may have been used in calculating rental, is an approximation which the Parties agree is reasonable and the rental based thereon is not subject to revision whether or not the actual size is more or less. 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 within ninety (90) days following the Start Date, warrants that the existing electrical, plumbing, fire sprinkler, lighting, heating, ventilating and air conditioning systems ("HVAC"), loading doors, if any, and all other such elements in the Premises, other than those constructed by Lessee, shall be in good operating condition on said date and that the structural elements on the roof, bearing walls and foundation of any buildings on the Premises (the [Initialed] -2- <PAGE> "Building") shall be free of material defects. If a non-compliance with said warranty exists as of the Start Date, Lessor shall, as Lessor's sole obligation with respect to such matter, except as otherwise provided in this Lease, promptly after receipt of written notice from Lessee setting forth with specificity the nature and extent of such non-compliance, rectify same at Lessor's expense. If, after the Start Date, Lessee does not give Lessor written notice of any non-compliance with this warranty within: (i) one year as to the surface of the roof and the structural portions of the roof, foundations and bearing walls, (ii) six (6) months as to the HVAC systems, (iii) thirty (30 days as to the remaining systems and other elements of the Building, correction of such non-compliance shall be the obligation of Lessee at Lessee's sole cost and expense. See Addendum Paragraph 52 for modifications to the foregoing. 2.3 Compliance. Lessor warrants that the improvements on the Premises comply with all applicable laws, covenants or restrictions of record, building codes, regulations and ordinances ("Applicable Requirements") in effect on the Start Date. Said warranty does not apply to the use to which Lessee will put the Premises 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 zoning is 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 nine (9) 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 (as opposed to being in existence at the Start Date, which is addressed in (Paragraph 6.2(e) below) so as to require during the term of this Lease the construction of an addition to or an alteration of the Building, the remediation of any Hazardous Substance, or the reinforcement or other physical modification of the 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 two (2) years of this Lease and the cost thereof exceeds six (6) months' Base Rent, Lessee may instead terminate this Lease unless Lessor notifies Lessee, in writing, within ten (10) days after receipt of Lessee's termination notice that Lessor has elected to pay the difference between the actual cost thereof and the amount equal to six (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 ninety (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. In addition, Lessee's responsibility for any and all capital costs shall be capped at $60,000 (for the purpose of this Section 2.3(a) only, in any four-year period. Lessor will be responsible for the cost of correcting any noncompliance that exceeds said amount. [Initialed] -3- <PAGE> (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), the Lessor and lessee shall allocate the obligation to pay for such costs by using the proration formula set forth in Paragraph 7.1(c); provided, however, that if such Capital Expenditure is required during the last two 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 ninety (90) days prior written notice to Lessee unless Lessee notifies Lessor, in writing, within ten (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 thirty (30) days written notice to Lessor. In addition, Lessee's responsibility for any and all such capital costs shall be capped at $50,000 in any four-year period. Lessor will be responsible for the cost of correcting any noncompliance that exceeds said amount, if Lessor elects pay such difference in order to maintain the tenancy hereunder. (c) Notwithstanding the above, the provisions concerning Capital Expenditures are intended only to apply to non-voluntary, unexpected, and new Applicable Requirements. If Capital Expenditures are instead triggered by Lessee as a result of an actual or proposed change in use from the use described in Section 1.8, a change in intensity of use from the level initially contemplated hereunder, or modification to the Premises occurring after Lessee's initial improvements are completed, then Lessee shall be fully responsible for the cost thereof, and Lessee shall not have any right to terminate this Lease. (d) INTENTIONALLY DELETED. 2.4 Acknowledgments. 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 their suitability for Lessee's intended use, (b) Lessee has made such investigation as it deems necessary with reference to such matters and (except as otherwise provided in Lease) assumes all responsibility therefor as the same relate to its occupancy of the Premises, and (c) neither Lessor, Lessor's agents, nor any Broker has 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: (a) Broker has made no representations, promises or warranties concerning Lessee's ability to honor the Lease or suitability to occupy the Premises, and (b) 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. [Initialed] -4- <PAGE> 3. Term. Also see Para. #50 of ADDENDUM 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, Real Property Taxes, and insurance premiums shall be abated for the period of such early possession. All other terms of this Lease (excluding the obligations to pay Real Property Taxes and insurance premiums and to maintain the Premises) shall, however, be in effect during such period. Any such early possession shall not affect the Expiration Date. Lessee's responsibility to pay real estate taxes and insurance shall commence on 4/15/98. 3.3 Delay in Possession: INTENTIONALLY DELETED 3.4 Lessee Compliance. Lessor shall not be required to tender possession of the Premises to Lessee until Lessee complies with its obligation to provide evidence of insurance (Paragraph 8.5). Pending delivery of such evidence, Lessee shall be required to perform all of its obligations under this Lease from and after the Start Date, including the payment of Rent, notwithstanding Lessor's election to withhold possession pending receipt of such evidence of insurance. Further, if Lessee is required to perform any other conditions prior to or concurrent with the Start Date, the Start Date shall occur but Lessor may elect to withhold possession until such conditions are satisfied. 4. Rent 4.1 Rent Defined. All monetary obligations of Lessee to Lessor under the terms of this Lease (except for the Security Deposit) are deemed to be rent ("Rent"). 4.2 Payment. Lessee shall cause payment of Rent to be received by Lessor in lawful money of the United States, without offset or deduction, on or before the day on which it is due. Rent for any period during the term hereof which is for less than one (1) 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. 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 said Security Deposit, Lessee shall within ten (10) days after written request therefor deposit monies with [Initialed] -5- <PAGE> Lessor sufficient to restore said Security Deposit to the full amount required by this Lease. 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 said change in financial condition. Lessor shall not be required to keep the Security Deposit separate from its general accounts. Within fourteen (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 thirty (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, or to be prepayment for any monies to be paid by Lessee under this Lease. Lessor agrees to pay interest of 4% per annum on the Security Deposit payable on March 1st of each successive year commencing 3/1/99. 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 owners and/or occupants of, or causes damage to neighboring 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, is not significantly more burdensome to the Premises. If Lessor elects to withhold consent, Lessor shall within five (5) business days after such request give written notification of same, which notice shall include an explanation of Lessor's objections to the change in use. Also see Para.#51 of ADDENDUM. 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 of 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. [Initialed] -6- <PAGE> "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 disposable 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 Substances 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, 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 Substances has come to be located in, on, or under or about the Premises after the Commencement Date, other than as previously consented to by Lessor, Lessee shall immediately give written notice of such fact to Lessor, and to provide Lessor with a copy of any report, notice, claim or other documentation which it has concerning the presence of such Hazardous Substances. (c) Lessee Remediation. Lessee shall not cause or intentionally permit any Hazardous Substances 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, 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 Substances 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 Substances 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 any contamination occurring prior to the Commencement Date, nor for any underground migration of any Hazardous Substances under the Premises from adjacent properties). Lessee's obligations shall include, but not be limited to, the effects of any contamination or injury to person, property or the environment created or suffered by Lessee, and the cost of investigation, removal, remediation, restoration and/or abatement, and shall survive the expiration or termination of this Lease. No termination, cancellation or release agreement entered into by Lessor and Lessee shall release Lessee from its [Initialed] -7- <PAGE> 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 which existed as a result of Hazardous Substances on the Premises prior to the Commencement Date or which are caused by the negligence, or intentional acts of Lessor, its agents or employees. Lessor's obligations, as and when required by the Applicable Requirements, shall include, but not be limited to, the cost of investigation, removal, remediation, restoration and/or abatement, and shall survive the expiration or termination of this Lease. (f) Investigations and Remediations. Lessor shall retain the responsibility and pay for any investigations or remediation measures required by governmental entities having jurisdiction with respect to the existence of Hazardous Substances on the Premises prior to the Start Date. 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 Substances Condition 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 Substances 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 twelve (12) times the then monthly Base Rent or $100,000, whichever is greater, give written notice to Lessee, within thirty (30) days after receipt by Lessor of knowledge of the occurrence of such Hazardous Substances Condition, of Lessor's desire to terminate this Lease as of the date sixty (60) days following the date of such notice. In the event Lessor elects to give a termination notice, Lessee may, within ten (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 Substances Condition exceeds an amount equal to twelve (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 thirty (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. If neither party elects to complete such remediation. then Lessor shall pay Lessee $300,000, less a sum equal to $37,500, multiplied by the number of full or partial lease years (rounded to the nearest full month) elapsed between the Commencement Date and the date of Lessor's notice of termination. [Initialed] -8- <PAGE> 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 (a) Applicable Requirements and the reasonable safety-related requirements of any applicable fire insurance underwriter or rating bureau, and (b) the reasonable safety- related recommendations of Lessor's engineers and/or consultants which relate in any manner to the Premises, without regard to whether said requirements are now in effect or become effective after the Start Date. Lessee shall, within ten (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 all permits and other documents, and the information evidencing Lessee's compliance with any Applicable Requirements specified by Lessors) 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. Regardless of the other terms of this paragraph, Lessee's liability for costs relating to the above requirements shall be limited to a maximum of $50,000 in any four-year period. 6.4 Inspection; Compliance. Lessor and Lessor's Lender and consultants shall have the right to enter into Premises at any time, in the case of an emergency, and otherwise at reasonable times, 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 contamination for which Lessee is responsible under the terms of this Lease 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 reasonable and competitive cost of such inspections, to the extent such inspection is reasonably related to the violation or contamination. 7. Maintenance; Repairs, Utility Installations; Trade Fixtures and Alterations 7.1 Lessee's Obligations. See Para.#52 of ADDENDUM for modifications. (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, and Alterations in good order, condition and repair (whether or not the portion of the Premises requiring repairs, of 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, electrical, lighting facilities, fire protection system, fixtures, interior walls, ceilings, floors, windows, doors, plate glass, skylights, landscaping, fences, and signs located in, on, or adjacent to the Premises. Lessee, in keeping the Premises in good order, condition and repair, shall exercise and perform good maintenance practices, specifically including the procurement and maintenance of the service contracts required by Paragraph 7.1(b) below. Lessee's obligations [Initialed] -9- <PAGE> 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 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. Regardless of the foregoing language, Lessor shall, during the first 8 years of the Term, repair, maintain, and replace as necessary all water and sewer pipes serving the Premises, to the extent outside of the building or under the concrete slab of the building. Lessor shall not, however, be required to clean out the drains or pipes, which shall be Lessee's responsibility. After the first 8 years of the Term, Lessee shall bear such costs. (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. ("Basic Elements"), if any, as and when installed on the Premises: (i) HVAC equipment, (ii) Intentionally Deleted, (iii) fire protection systems, (iv) Intentionally Deleted, (v) Intentionally Deleted, (vi) Intentionally Deleted, (vii) clarifiers and/or grease traps (as applicable), and (viii) any other equipment, as reasonably required by Lessor. In addition, Lessee shall maintain the landscaping in clean and orderly condition. Lessee shall keep the roof, roof drains, and downspouts free of debris. (c) 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 the Basic Elements 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 Basic Elements, then such Basic Elements 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 the number of months of the useful life of such replacement as such useful life is specified pursuant to Federal income tax regulations or guidelines for depreciation thereof (including interest on the unamortized balance as is then commercially reasonable in the judgment of Lessor's accountants), with lessee reserving the right to prepay its obligation at any time. 7.2 Lessor's Obligations. Subject to the provisions of Paragraphs 2.2 (Condition), 2.3 (Compliance), 9 (Damage or Destruction) and 14 (Condemnation) and to any other contrary provision of this Lease and the Addendum attached to it, it is intended by the Parties hereto that Lessor have no obligation, in any manner whatsoever, to repair and maintain the Premises, or the equipment therein, all of which obligations are intended to be that of the Lessee. It is the intention of the Parties that the terms of this Lease govern the respective obligations of the Parties as to maintenance and repair of the Premises, and they expressly waive the benefit of any statute now or hereafter in effect to the extent it is inconsistent with the terms of this Lease. See Paragraph 52 of ADDENDUM for modifications. [Initialed] -10- <PAGE> 7.3 Utility Installations; Trade Fixtures; Alterations. (a) Definitions; Consent Required. The term "Utility Installations" refers to all floor and window coverings, air lines, power panels, electrical distribution, security and fire protection systems, communication systems, lighting fixtures, HVAC equipment, plumbing, and fencing in or on the Premises. The term "'Trade Fixtures" shall mean Lessee's machinery and equipment installed in the Premises by or for Lessee and which is used primarily for the purpose of conducting Lessee's Permitted Use. Lessee shall pay all costs to restore any damage caused to the Premises by such removal. 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). Lessee shall not make any Alterations or Utility Installations to the Premises without Lessor's prior written consent, which shall not be unreasonably withheld. 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, and the cumulative cost thereof during this Lease as extended does not exceed $50,000 in the aggregate or $10,000 in any one year. Lessee may remove all of its Trade Fixtures, so long as it repairs any damage done to the Premises as a result of such removal. If the Lease expires or is terminated prior to the end of the eighth anniversary of the Commencement Date, then Lessee shall reimburse Lessor for a fraction of the reasonable costs of removing any improvements to the Premises as necessary to restore the Premises to a condition readily usable for warehousing and/or general purpose light manufacturing. The numerator of said fraction shall be the number of full calendar months remaining prior to the eighth anniversary of the Commencement Date, and the denominator of said fraction shall be 96. If the eighth anniversary of the Commencement Date shall have passed at the time the Lease expires or otherwise terminates, then Lessee shall not be required to incur any expense with respect to the removal of said items. Regardless of the above, Lessee shall in all events return the slab inside the Premises to a smooth, level condition. (b) Consent. Lessor hereby approves* Lessee's plans for its initial improvements to the Premises. As to any subsequent 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 redlined plans and specifications. For work which costs an amount equal to the greater of one month's Base Rent, or $10,000, Lessee shall give Lessor at least ten (10) days written notice prior to commencing such work, so that Lessor may post notices of nonresponsibility on the Premises. If any lien is asserted against the Premises because of any *As of 3/10/98 plans have not yet been submitted to Lessor. Lessor will approve plans when submitted if they do not affect structural integrity of building. J.W.P [Handwritten on bottom of page in original.] [Initialed] -11- <PAGE> work contracted for by Lessee, Lessee will immediately post a lien bond in an amount equal to one and one-half times the estimated cost of such work. (c) Indemnification. 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 ten (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 one and one-half times 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 and as modified under Section 7.3(a), 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. Except as stated in Section 7.3(a), by delivery to Lessee of written notice from Lessor not later than ninety (90) 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 and damage from casualty and condemnation excepted. "Ordinary wear and tear" shall not include any damage or deterioration that would have been prevented by good maintenance practice. Lessee shall repair and damage occasioned by the installation, maintenance or removal of Trade Fixtures, furnishings, and equipment as well as the removal of any storage tank installed by or for Lessee, and the removal, replacement, or remediation of any soil, material or groundwater contaminated by Lessee. Trade Fixtures shall remain the property of Lessee and shall be removed by Lessee. The failure by Lessee to timely vacate the Premises [Initialed] -12- <PAGE> 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 (See also Paragraph 55) 8.1 Payment For Insurance. Lessee shall pay for all insurance required under Paragraph 8 except to the extent of the cost attributable to liability insurance carried by Lessor under Paragraph 8.2(b), which shall be paid for by Lessor. Premiums for policy periods commencing prior to or extending beyond the Lease term shall be prorated to correspond to the Lease term. It is anticipated that Lessee will pay applicable insurance premiums directly. However, if Lessor contracts for basic fire/liability coverage, Lessee shall reimburse Lessor for this expense on a monthly basis, at the same time as Lessee reimburses Lessor for its share of Real Estate Taxes. 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 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 $2,000,000 per occurrence with an "Additional Insured-Managers or Lessors of Premises Endorsement" and contain the "Amendment of the Pollution Exclusion Endorsement" for damage caused by heat, smoke or fumes from a hostile fire. The Policy shall not contain any intra-insured exclusions as between insured persons or organizations, but shall include coverage for liability assumed under this Lease as an "insured contract" for the performance of Lessee's indemnity obligations under this Lease. The limits of said insurance shall not, however, limit the liability of Lessee nor relieve Lessee of any obligation hereunder. All insurance carried by Lessee shall be primary to and not contributory with any similar insurance carried by Lessor, whose insurance shall be considered excess insurance only. (b) Carried by Lessor. Lessor shall maintain liability insurance as described in Paragraph 8.2(a), in addition to, and not in lieu of, the insurance required to be maintained by Lessee. Lessee shall not be named as an additional insured therein. 8.3 Property Insurance - Building, Improvements and Rental Value. (a) Building and Improvements. The Lessee shall obtain and keep in force a policy or policies in the name of Lessor, with loss payable to 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 Lenders, but in no event more than the commercially reasonable and available insurable value thereof. If the coverage is available and commercially appropriate, such policy or policies shall insure against all risks of direct physical loss or damage and flood (except [Initialed] -13- <PAGE> earthquake), 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 $25,000 per occurrence (unless Lessee delivers a letter of credit in favor of Lessor for the difference between the actual deductible and $25,000, which shall be kept in force for so long as such higher deductible applies), 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 (1) year. Said insurance shall provide that in the event the Lease is terminated by reason of an insured loss, the period of indemnity for such coverage shall be extended beyond the date of the completion of repairs or replacement of the Premises, to provide for one full year's loss of Rent from the date of any such loss. 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 twelve (12) month period. Lessee shall be liable for any deductible amount up to $10,000 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 $25,000 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. If Lessee desires a higher deductible than those required above, Lessee shall deliver a letter of credit in favor of Lessor for the difference between the actual deductibles and the deductibles required above, which shall be kept in force for so long as such higher deductibles apply. (b) Business Interruption. If reasonably available, and if Lessor requests Lessee to do so in writing, 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 [Initialed] -14- <PAGE> 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 intentionally 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 thirty (30) days prior written notice to Lessor. Lessee shall, at least thirty (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 deductibles applicable hereto. The Parties agree to have their respective property damage insurance carriers waive any right to subrogation that such companies may have against Lessor or Lessee, as the case may be, so long as the insurance is not invalidated thereby. 8.7 Indemnity. Except for Lessor's negligence or intentional 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. Except to the extent caused by Lessor's negligence, intentional misconduct, or breach of this Lease (for which Lessor will remain liable) Lessor shall not be liable for injury or damage to the person or goods, wares, merchandise or [Initialed] -15- <PAGE> 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. 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 Alternations and Utility Installations, which can reasonably be repaired in six (6) months or less from the date of the damage or destruction. Lessor shall notify Lessee in writing within thirty (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, which cannot reasonably be repaired in six (6) months or less from the date of the damage or destruction. Lessor shall notify Lessee in writing within thirty (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. 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 [Initialed] -16- <PAGE> 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 ten (10) days following receipt of written notice of such shortage and request therefor. If Lessor receives said funds or adequate assurance thereof within said ten (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 ten (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 have this Lease terminate thirty (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 thirty (30) days after receipt by Lessor of knowledge of the occurrence of such damage. Such termination shall be effective sixty (60) days following the date of such notice. In the event Lessor elects to terminate this Lease, Lessee shall have the right within ten (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 thirty (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 sixty (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 six (6) months of this Lease, or any extension thereof, the Premises is damaged by casualty, for which the cost to repair [Initialed] -17- <PAGE> exceeds one (1) month's Base Rent, whether or not an Insured Loss, either party may terminate this Lease effective sixty (60) days following the date of occurrence of such damage by giving a written termination notice to the other within thirty (30) days after the date of occurrence of such damage. Notwithstanding the foregoing: (i) a party shall not be entitled to terminate the lease if such damage was caused by that party's intentional or reckless act, and (ii) 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 ten 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. Notwithstanding the foregoing, if such activities are not completed before Lessee's right to a rent abatement expires, Lessee may terminate this Lease upon written notice to Lessor, effective as of the date such abatement right expires. (b) Remedies. If Lessor shall be obligated to repair or restore the Premises and does not actually commence such repair or restoration within ninety (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 sixty (60) days following the giving of such notice. If Lessee gives such notice and such repair or restoration is not commenced within thirty (30) days thereafter, this Lease shall terminate as of the date specified in said notice. If the repair or restoration is commenced within said thirty (30) days, this Lease shall continue in full force and effect. If Lessor's delay is caused by delay in obtaining permits, inspections, or other land use permits and approvals that is not reasonably avoidable by Lessor, then the deadline for Lessor's performance stated above shall be extended day for day for the period of such unavoidable delay. 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 [Initialed] -18- <PAGE> Base Rent and any other advance payments made by Lessee to Lessor. Lessor shall, in addition, return to Lessee so much of Lessee's Security Deposit as has not been, or is not then required to be, used by Lessor. 9.8 Waive Statutes. Lessor and Lessee agree that the terms of this Lease shall govern the effect of any damage to or destruction of the Premises with respect to the termination of this Lease and hereby waive the provisions of any present or future statute to the extent inconsistent herewith. 10. Real Property Taxes See Para. #54 and Para. 955 of ADDENDUM for modifications. 10.1 Definition of "Real Property Taxes." As used herein, the term "Real Property Taxes" shall include any form of improvement bond or assessment (but only in the same proportion that the benefit corresponding to such bond or assessment accrues during the Term); real estate, general, special, ordinary or extraordinary, or rental levy or tax (other than inheritance, personal income or estate taxes); and/or license fee imposed upon or levied against any legal or equitable interest of Lessor in the Premises. 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. The term "Real Property Taxes" shall also include any tax, fee, levy, assessment or charge, or any increase therein, 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. Lessor will seek to pay any assessments or bonds in installments, to the greatest extent possible, and Lessee shall only be responsible for that portion of installments accruing during the term of the Lease. 10.2 (a) Payment of Taxes. Lessee shall pay the Real Property Taxes applicable to the Premises during the term of this Lease. Subject to Paragraph 10.2(b), all such payments shall be made at least ten (10) days prior to any delinquency date. Lessee shall promptly furnish Lessor with satisfactory evidence that such taxes have been paid. 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, and Lessor shall reimburse Lessee for any overpayment. If Lessee shall fail to pay any required Real Property Taxes. Lessor shall have the right to pay the same, and Lessee shall reimburse Lessor therefor upon demand. (b) Advance Payment. In the event Lessee incurs a late charge on any Rent payment, Lessor may, at Lessor's option, estimate the current Real Property Taxes, and require that such taxes be paid in advance to Lessor by Lessee, either: (i) in a lump sum amount equal to the installment due, at least twenty (20) days prior to the applicable delinquency date, or (ii) monthly in advance with the payment of the Base Rent. If Lessor elects to require payment monthly in advance, the monthly payment shall be an amount equal to the amount of the [Initialed] -19- <PAGE> estimated Rent. If Lessor elects to require payment monthly in advance, the monthly payment shall be an amount equal to the amount of the estimated installment of taxes divided by the number of months remaining before the month in which said installment becomes delinquent. When the actual amount of the applicable tax bill is known, the amount of such equal monthly advance payments shall be adjusted as required to provide the funds needed to pay the applicable taxes. If the amount collected by Lessor is insufficient to pay such Real Property Taxes when due, Lessee shall pay Lessor, upon demand, such additional sums as are necessary to pay such obligations. All monies paid to Lessor under this Paragraph may be intermingled with other monies 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 balance of funds paid to Lessor under the provisions of this Paragraph may at the option of Lessor, be treated as an additional Security Deposit. 10.3 Joint Assessment. If the Premises are not separately assessed, Lessee's liability shall be an equitable proportion of the Real Property Taxes for all of the land and improvements included within the tax parcel assessed, such proportion to be conclusively determined by Lessor from the respective valuations assigned in the assessor's work sheets or such other information as may be reasonably available. 10.4 Personal Property Taxes. Lessee shall pay, prior to delinquency, all taxes assessed against and levied upon Lessee Owned Alterations, Utility Installations, Trade Fixtures, furnishings, equipment and all personal property of Lessee. When possible, Lessee shall cause such property to be assessed and billed separately from the real property of Lessor. If any of Lessee's said personal property shall be assessed with Lessor's real property, Lessee shall pay Lessor the taxes attributable to Lessee's property within ten (10) days after receipt of a written statement. 11. Utilities. 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 to Lessee, Lessee shall pay a reasonable proportion, to be determined by Lessor, of all charges jointly metered. 12. Assignment and Subletting. 12.1 Lessor's Consent Required. (a) Lessee shall not voluntarily or by operation of law assign, transfer, mortgage or encumber (collectively, "assign or assignment") or sublet all or any part of Lessee's interest in this Lease or in the Premises without Lessor's prior written consent, which shall not be unreasonably withheld or delayed. (b) No merger, conversion, or consolidation of Lessee into or with another entity, nor any sale, issuance, or transfer of stock of Lessee shall be considered a prohibited or regulated assignment, sublet, or other transfer requiring consent of the Lessor, so long as the [Initialed] -20- <PAGE> same is not done as a means of accomplishing a transfer of the Lease otherwise prohibited hereunder. (c) An assignment or subletting without consent shall, at Lessor's opinion, 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 thirty (30) days written notice, increase the monthly Base Rent to one hundred ten percent (110%) of the Base Rent then in effect. Further, in the event of such Breach and rental adjustment, (i) the purchase 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 One Hundred Ten Percent (110%) of the scheduled adjusted rent. (d) 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, any assignment or subletting shall not: (i) be effective without the express written assumption by such assignee or sublessee of the obligations of Lessee under this Lease, (ii) release Lessee of any obligations hereunder, or (iii) alter the primary liability of Lessee for the payment of Rent or for the performance of any other obligations to be performed by Lessee. (b) Lessor may accept Rent or performance of Lessee's obligations from any person other than Lessee pending approval or disapproval of an assignment. Neither a delay in the approval or disapproval of such assignment nor the acceptance of Rent or performance shall constitute a waiver or estoppel of Lessor's right to exercise its remedies for Lessee's Default or Breach. (c) Lessor's consent to any assignment or subletting shall not constitute a consent to any subsequent assignment or subletting. (d) In the event of any Default or Breach by Lessee, Lessor may proceed directly against Lessee, any Guarantors or anyone else responsible for the performance of Lessee's obligations under this Lease, including any assignee or sublessee, without first exhausting Lessor's remedies against any other person or entity responsible therefore to Lessor, or any security held by Lessor. (e) Each request for consent to an assignment or subletting shall be in writing, accompanied by information relevant to Lessor's determination as to the financial and operational responsibility and appropriateness of the proposed assignee or sublessee, including but not limited to the intended use and/or required modification of the Premises, if any. Lessee shall, upon receipt of actual paid invoices therefor, reimburse Lessor for Lessor's reasonable attorney fees incurred in connection with Lessor's review of such request, not to exceed the [Initial] -21- <PAGE> greater of $500 or 5% of the then-current monthly installment of Base Rent due hereunder. Lessee agrees to provide Lessor with such other or additional information and/or documentation as may be reasonably requested. (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. 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. 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, which shall not be unreasonably withheld or delayed. (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 [Initial] -22- <PAGE> 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 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 (provided that Lessee shall not be deemed to have abandoned the Premises so long as it continues to pay rent and other charges due hereunder); 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 other monetary payment 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 three (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 recession of an unauthorized assignment or subletting, (iv) a Tenancy Statement, (v) a requested subordination, (vi) evidence concerning any guaranty and/or Guarantor, (vii) any document requested under Paragraph 42 (easements), or (viii) 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 ten (10) days following written notice to Lessee. (d) 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 thirty (30) days after written notice; provided, however, that if the nature of Lessee's Default is such that more than thirty (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 thirty (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. (S) 101 or any successor statute thereto (unless, in the case of a petition filed against Lessee, the same is dismissed within sixty (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 thirty (30) days; [Initial] -23- <PAGE> 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 thirty (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 sixty (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 ten (10) days after written notice (or after such longer period of notice and opportunity to cure that may be provided for elsewhere in this Lease), 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. The commercially reasonable costs and expenses of any such performance by Lessor shall be due and payable by Lessee upon receipt of invoice therefor. If any check given to Lessor by Lessee shall not be honored by the bank upon which it is drawn, Lessor, at its option, may require all future payments to be made by Lessee to be by cashier's check. 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) except as limited by the other terms of this Section, 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 such renovation and [Initial] -24- <PAGE> alteration of the Premises as may be necessary to return it to the condition in which Lessee was obligated to leave it upon expiration or sooner termination of the Lease, reasonable attorneys' fees required to regain possession of the Premises and to collect any amounts owed by Lessee to Lessor hereunder, and that portion of any leasing commission paid by Lessor in connection with this lease applicable to the unexpired term of this Lease. The worth at the time of award of the amount referred to in provision (iii) of the immediately preceding sentence shall be computed by discounting such amount at the discount rate of the Federal Reserve Bank of the District within which the Premises are located at the time of award plus one percent (1%). 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 11 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 a termination of this Lease by Lessor following a 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 a portion of 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, in the same proportion that the then-expired term of the Lease bears to the initial four-year term. The foregoing paragraph shall not apply to, and there shall be no recapture of, the $10,000 contribution by Lessor toward the cost of certain electrical work on the Premises. [Initial] -25- <PAGE> 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 five (5) days after such amount shall be due, then, without any requirement for notice to Lessee, Lessee shall pay to Lessor a one-time late charge equal to ten percent (10%) of each such overdue amount. 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 three (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 within thirty (30) days following the date on which it was due, shall bear interest from the thirty-first (31st) day after it was due. The interest ("Interest") charged shall be equal to the prime rate charged by the largest state chartered bank in the state in which the Premises are located plus 4%, but shall not exceed the maximum rate allowed by law. Interest is payable in addition to the potential late charges 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 thirty (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 thirty (30) days are reasonably required for its performance, then Lessor shall not be in breach if performance is commenced within such thirty (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 thirty (30) days after receipt of said notice, of 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 an amount equal to the greater of one month's Base Rent or the Security Deposit, and to pay an excess of such expense under protest, reserving Lessee's right to reimbursement from Lessor. Lessee shall document the cost of said cure and supply said documentation to Lessor. 14. Condemnation. If the entire Premises or reasonable access to it 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 a condemning [Initial] -26- <PAGE> authority takes title or possession, whichever first occurs. If more than ten percent (10%) of any building, or more than twenty-five percent (25%) of the land area not occupied by any building, is taken by Condemnation, Lessee may, at Lessee's option, to be exercised in writing within ten (10) days after Lessor shall have given Lessee written notice of such taking (or in the absence of such notice, within ten (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. Commissions have been handled with a separate agreement between Lessor and Broker. J.W.P. [Handwritten on original.] 15. Broker's Fee. 15.1 Additional Commission. In addition to the payments owed pursuant to Paragraph 1.10 above, and unless Lessor and the Brokers otherwise agree in writing, Lessor agrees that: (a) if Lessee exercises any Option, (b) if Lessee acquires 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 said 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. Each Broker shall be a third party beneficiary of the provisions of Paragraphs 1.10, 15, 22 and 31. If Lessor fails to pay to a Broker any amounts due as and for commissions 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 ten (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. 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 [Initial] -27- <PAGE> 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. Tenancy Statement/Estoppel Certificate. 16.1 Each Party (as "Responding Party"') shall within ten (10) days after written notice from the other Party (the "Requesting Party") execute, acknowledge and deliver to the Requesting Party an estoppel certificate in writing, in form similar to the then most current "Tenancy Statement" form published by the American Industrial Real Estate Association, plus such additional information, confirmation and/or statements as may be reasonably requested by the Requesting Party. 16.2 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 three (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. Notwithstanding the above, the original Lessor under this Lease, and all subsequent holders of the Lessor's interest in this Lease shall remain liable and responsible with regard to the potential duties and liabilities of Lessor pertaining to Hazardous Substances as outlined in Paragraph 6 above. 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. Except with respect to Lessor's fraud, gross negligence or willful misconduct, the obligations of Lessor under this Lease shall not constitute personal obligations of Lessor, the individual partners of Lessor or its or their individual partners, [Initial] -28- <PAGE> 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 the individual partners of Lessor, or its or their individual partners, 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 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 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 upon 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 forty-eight (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 twenty-four (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, 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. [Initial] -29- <PAGE> 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 he provision or provisions of this Lease requiring such consent. The acceptance of Rent by Lessor shall not be a waiver of any default or Breach by Lessee. Any payment by Lessee may be accepted by Lessor on account of monies or damages due Lessor, notwithstanding any qualifying statements or conditions made by Lessee in connection therewith, which such statements and/or conditions shall be of no force or effect whatsoever unless specifically agreed to in writing by Lessor at or before the time of deposit of such payment. 25. Recording. Either Lessor or Lessee shall, upon request of the other, execute, acknowledge and deliver to the other a short form memorandum of this Lease for recording purposes. The Party requesting recordation shall be responsible for payment of any fees applicable thereto. 26. No Right To Holdover. Lessee has not 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 one hundred fifty percent (150%) of the Base Rent applicable during the month immediately preceding the expiration or termination. Nothing contained herein shall be construed as consent by Lessor to any holding over by Lessee. (See Paragraph 56 of Addendum for modifications.) 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 [Initial] -30- <PAGE> 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 shall have no liability or obligation to perform any of the obligations of Lessor under this Lease, unless and until such party acquires title to the Premises. 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. 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. Subject to the non-disturbance provisions of Paragraph 30.3, Lessee agrees to attorn to a Lender or any other party who acquires ownership of the Premises by reason of a foreclosure of a Security Device, and that in the event of such foreclosure, such new owner shall not: (i) be liable for any act or omission of any prior lessor or with respect to events occurring prior to acquisition of ownership; (ii) be subject to any offsets or defenses which Lessee might have against any prior lessor, or (iii) be bound by prepayment of more than one (1) month's rent. 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 sixty (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 sixty (60) days, then Lessee may, at Lessee's option, directly contact Lessor's 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. Attorney's Fees. If any Party or Broker brings an action or proceeding to enforce the terms hereof or 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 [Initial] -31- <PAGE> 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. 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 for the purpose of showing the same to prospective purchasers, lenders, or lessees, and making such repairs to the Premises as Lessor may be required to do under this Lease. All such activities shall be without abatement of rent or liability to Lessee, so long as Lessor uses reasonable care to avoid disrupting Lessee's business on the Premises. Lessor may at any time place on the Premises any ordinary "For Sale" signs and Lessor may during the last six (6) months of the term hereof place on the Premises any ordinary "For Lease" signs. Lessee may at any time place on or about the Premises any ordinary "For Sublease" sign. Landlord may make other general purpose improvements to Premises that do not disrupt Tenant's operations on the Premises. 33. Auctions. Lessee shall not conduct, nor permit to be conducted, any auction upon the Premises without Lessor's prior written consent. Lessor shall not be obligated to exercise any standard of reasonableness in determining whether to permit an auction. 34. Signs. Except for reasonable Signage identifying Lessee's business upon the Premises and ordinary "For Sublease" signs, Lessee shall not place any sign upon the Premises without Lessor's prior written consent, which shall not be unreasonably withheld or delayed. 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 ten (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. Except as expressly limited elsewhere in this Lease, 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. In the event that [Initial] -32- <PAGE> 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 ten (10) business days following such request. 37. Guarantor. 37.1 Execution. The Guarantors if any, shall each execute a guaranty in the form most recently published by the American Industrial Real Estate Association, and each such Guarantor shall have the same obligations as Lessee under this Lease. 37.2 Default. It shall constitute a Default of the Lessee if any Guarantor fails or refuses, upon request to provide: (a) evidence of the execution of the guaranty, including the authority of the party signing on Guarantor's behalf to obligate Guarantor, and in 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) a Tenancy Statement, 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 See Addendum Paragraph 53 for Options to Extend Term of Lease. 39.1 Definition. "Option" shall mean: (a) the right to extend the term of or renew this Lease or to extend or renew any lease that Lessee has on other property of Lessor; (b) the right of first refusal or first offer to lease either the Premises or other Property of Lessor; (c) the right to purchase or the right of first refusal to purchase the Premises or other property of Lessor. 39.2 Options Personal To Original Lessee. INTENTIONALLY DELETED. 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 to Lessee), (iii) during the time Lessee is in Breach of this Lease, or (iv) in the event that Lessee has been given three (3) or more notices of Default, whether or not the Defaults are cured, during the twelve (12) month period immediately preceding the exercise of the Option. [Initial] -33- <PAGE> (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, (i) Lessee fails to pay Rent for a period of thirty (30) days after such Rent becomes due (without any necessity of Lessor to give notice thereof), (ii) Lessor gives to Lessee three (3) or more notices of separate Default during any twelve (12) month period, whether or not the Defaults are cured, or (iii) if Lessee commits a Breach of this Lease. 40. Multiple Buildings. INTENTIONALLY DELETED. 41. Security Measures. Lessee hereby acknowledges that the rental 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 agent 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 easement, 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. 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 thirty (30) days after request, deliver to the other party satisfactory evidence of such authority. 45. Conflict. Any conflict between the printed provisions of this Lease and the typewritten or handwritten provisions shall be controlled by the typewritten or handwritten provisions. [Initial] -34- <PAGE> 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 rights or obligations hereunder or those of Lessor, Lessee agrees to make such reasonable non-monetary modifications to this Lease as may be reasonably required by a Lender in connection with the obtaining of normal financing or refinancing of the Premises. 48. Multiple Parties. If more than one person or entity is named herein as either Lessor or Lessee, such multiple Parties shall have joint and several responsibility to comply with the terms of this Lease. 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 [ ] is, [X] is not attached to this Lease. See ADDENDUM and EXHIBITS attached to this Lease which are an integral part of this Agreement. LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY AGREE THAT AT THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LESSOR AND LESSEE WITH RESPECT TO THE PREMISES. ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN --------- INDUSTRIAL REAL ESTATE ASSOCIATION OR BY ANY BROKER AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT RELATES. THE PARTIES ARE URGED TO: 1. SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE. 2. RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE CONDITION OF THE PREMISES. SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE LIMITED TO: THE POSSIBLE PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF THE PREMISES, THE STRUCTURAL INTEGRITY, THE CONDITION OF THE ROOF AND OPERATING SYSTEMS AND THE SUITABILITY OF THE PREMISES FOR LESSEE'S INTENDED USE. WARNING: IF THE PREMISES IS LOCATED IN A STATE OTHER THAN CALIFORNIA, CERTAIN ------- PROVISIONS OF THE LEASE MAY NEED TO BE REVISED TO COMPLY WITH THE LAWS OF THE STATE IN WHICH THE PREMISES IS LOCATED. [Initial] -35- <PAGE> ADDENDUM (Paragraphs 50 - 57 on Pages 37-41) and EXHIBIT 11 is attached hereto and is part of this Lease Agreement. The parties hereto have executed this Lease at the place and on the dates specified above their respective signatures. Executed at: Santa Monica, California Executed at: Seattle, Washington ------------------------ ------------------- on: March 10, 1998 on: March, 1998 -------------- ------------- By LESSOR: By LESSEE: CENTER/NEVADA ASSOCIATES BRIAZZ, INC. ------------------------------------------- ------------------------------------------- A California General Partnership A Washington State Corporation ------------------------------------------- ------------------------------------------- Fred W. Plotke - Managing Partner Federal ID# 91-1672311 ------------------------------------------- ------------------------------------------- By: /s/ Fred W. Plotke By: _______________________________________ ---------------------------------------- Name Printed: Fred W. Plotke Name Printed: Bruce D. Boxer ----------------------------- ----------------------------- Title: Managing Partner Title: Vice-President ------------------------------------ ------------------------------------ CENTER/NEVADA ASSOCIATES Real Estate and Development Principal/President TIME REALTY INVESTMENTS, INC. xx: Business Address By: /s/ James A .McDermet ---------------------------------------- --------------------------------------- Name Printed: TIME REALTY INVESTMENTS, INC. Name Printed: James A .McDermet ----------------------------- ------------------------------ Title: 1511 - 18/th/ Street Title: President ------------------------------------- ------------------------------------ Address: Santa Monica, CA 90404 Address: 1011 Klickitat Way - Suite 202 ----------------------------------- ---------------------------------- Telephone: 310/828-4481 Telephone: 206/467-0994 --------------------------------- -------------------------------- Facsimile: 310/453-2216 Facsimile: 206/467-1970 --------------------------------- -------------------------------- Federal ID No.: 95-4083570 (TRI, INC.) Federal ID No.: 91-1672311 ---------------------------- --------------------------- 95-4223148 (CENTER/NEVADA) (ASSOCIATES) BROKER: BROKER: Executed at:___________________ Executed at:________________________ on:____________________________ on:_________________________________ By:____________________________ By:_________________________________ Name Printed:__________________ Name Printed:_______________________ Title:_________________________ Title:______________________________ Address:_______________________ Address:____________________________ Telephone:_____________________ Telephone:__________________________ Facsimile:_____________________ Facsimile:__________________________ 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: [Initial] -36- <PAGE> AMERICAN REAL ESTATE ASSOCIATION, 700 So. Flower Street, Suite 600, Los Angeles, California 90017. (213) 687-8777. Fax No. (213) 687-8616. [Initial] -37- <PAGE> ADDENDUM TO THE LEASE DATED DECEMBER 15, 1997 50. Rental Payments During Initial Term of Lease and First Option Period (First 96 Months). The base rental rate for the first 12 months of the lease term shall be $9500/month payable in advance on the first day of each successive month. The rent shall be increased 3%/year, compounded annually, on the anniversary date (March 1st) of each successive year. More specifically, the base rental rates during the initial term of the lease and first option period (96 months) of the lease term, rounded to the nearest $50 are as follows: 1) 3/1/98 - 2/28/99 Base Rental Rate = $9500/month (except for 3/1/98-4/30/98, for which $4,750 shall be paid) 2) 3/1/99 - 2/28/00 Base Rental Rate = 9800/month 3) 3/1/00 - 2/29/01 Base Rental Rate = 10100/month 4) 3/1/01 - 2/28/02 Base Rental Rate = 10400/month 5) Year 1 - 1st Option 3/1/02 - 2/28/03 Base Rental Rate = 10700/month 6) Year 2 - 1st Option 3/1/03 - 2/29/04 Base Rental Rate = 11000/month 7) Year 3 - 1st Option 3/1/04 - 2/28/05 Base Rental Rate = 11350/month 8) Year 4 - 1st Option 3/1/05 - 2/28/06 Base Rental Rate = 11700/month Lessor acknowledges that Lessee has previously deposited $15,000 with Lessor. Upon execution of the Lease, such funds shall be held as a Security Deposit. Lessee shall also then pay $4,750 advance rent for the period through 4/30/98 (total of $19,750). Lessor agrees to pay interest on the Security Deposit at the rate of 4% annum payable on March 1st of each successive year with the first interest payment of $600 to be paid on 3/1/98, and with payments thereafter at the rate of $600 per year on each March 1st. 51. Use of the Premises. This paragraph modifies Para. 6 of the Lease Agreement. The subject premises shall be used by Lessee for the following lawful purpose: commissary facility for a group of sandwich shops and fast-food kiosks operated by BRIAZZ, INC., and/or its permitted transferees. The intended activities to be conducted within the subject premises shall include food storage and preparation, delivery and catering, office support activities and other related uses. The subject premises may be also used for other legally permitted business activities, unless such activities create significant additional physical and/or legal hazards beyond [Initial] -38- <PAGE> those associated with the intended initial use (food preparation commissary), (e.g., uses such as manufacturing of inflammable spray paints, manufacture or distribution of lacquers or insecticides, warehousing and distribution of fireworks, or use as an automotive body shop --even though such uses may be technically legal in this area of the City of El Segundo). 52. Condition of Premises. This paragraph modifies Paragraphs 2.2 and 7.1(b) and 7.1(c) of the Lease Agreement. Lessee shall accept the subject premises in their current existing condition as of the date of Lease commencement, except that Lessor shall deliver the subject premises broom-swept clean and with all currently existing plumbing, electrical and HVAC systems and equipment in good operating condition. Lessor shall meet all obligations as generally described in Para. 2.2 of the Lease Agreement. Lessor will also accept responsibility for maintenance of the roof (including the roof membrane), exterior walls, foundation, and parking lot areas over the lease term (presuming normal use by Lessee). 53. Options to Extend the Term of Lease. Lessee shall have certain Options to Extend the Term of Lease for three additional 48 month periods as follows: --First Option Period: 3/l/2002 - 2/28/2006 --Second Option Period: 3/l/2006 - 2/28/2010 --Third Option Period: 3/1/2010 - 2/28/2014 Rent for the first option period shall be as set forth in the schedule in Paragraph 50 above. The base rental rates for the second option period shall be determined by establishing a new "fair market rent" on 3/l/2006 and then using consumer price index adjustments for the next three years of the second option period. The new "fair market rent" (FMRI) on 3/l/2006 shall be determined by the following procedure: Four months prior to the first day of the second option term (the "Market Rental Value (MRV) Adjustment Date"), Lessor and Lessee shall meet to establish an agreed upon new MRV for the specified term. If agreement cannot be reached, then: i) Lessor and Lessee shall immediately appoint a mutually acceptable appraiser or broker to establish the new MRV within the next 30 days. Any associated costs will be split equally between the parties, or ii) Both Lessor and Lessee shall each immediately select and pay the appraiser or broker of their choice to establish a MRV within the next 30 days. If, for any reason, either one of the appraisals is not completed within the next 30 days, as stipulated, then the appraisal that is completed at that time shall automatically become the new MRV. If both appraisals are completed and the two appraisers/brokers cannot agree on a reasonable average MRV then they shall immediately select a third mutually acceptable appraiser/broker to establish a third MRV within the next 30 days. The average of the two appraisals closest in value shall then become the new MRV. The costs of the third appraisal will be split equally between the parties. [Initial] -39- <PAGE> iii) In any event, the new MRV shall not be less than the rent payable for the month immediately preceding the date for rent adjustment. The base rental rates for the second option period shall be determined as follows: Base Rental Rate FMR1 determined on 3/l/06 3/l/06 - 2/28/07 by procedure indicated above Base Rental Rate CPI on 3/l/07 X FMRI Minimum Rent = 3% more than ------------- 3/l/07 - 2/28/08 CPI on 3/l/06 previous rate Maximum Rent = 6% more than previous rate Base Rental Rate CPI on 3/l/09 X FMR1 Minimum Rent = 3% increase ------------- 3/l/09 - 2/28/10 CPI on 3/l/06 Maximum Rent = 6% increase Base Rental Rate CPI on 3/1/11 X FMR1 Minimum Rent = 3% increase ------------- 3/1/11 - 2/28/12 CPI on 3/l/06 Maximum Rent = 6% increase The base rental rates for the third option period shall be determined by the establishment of a new "fair market rent" on 3/1/10 and then using CPI adjustments for the next three years of the third option period. The CPI Index to be used shall be the CONSUMER PRICE INDEX FOR URBAN WAGE EARNERS AND CLERICAL WORKERS - ALL U.S. CITIES (National CPI Index) which is published by the U.S. Bureau of Labor Statistics and is updated monthly. The new "fair market rent" (FMR2) on 3/1/10 shall be determined by the same procedure as indicated above for FMR1. The rental rate adjustments for the 2nd, 3rd and 4th years of the third option period shall be computed by reference to the Consumer Price Index (CPI) using 3/l/10 as the base period and FMR2 as the base rent. The rental rate computations for the second option period are as follows: Base Rental Rate FMR1 determined on 3/l/10 3/l/01 - 2/28/11 by procedure indicated above Base Rental Rate CPI on 3/l/2011 X FMR2 Minimum Rent = 3% more than --------------- previous rate 3/l/11 - 2/28/12 CPI on 3/l/2010 Maximum Rent = 6% more than previous rate Base Rental Rate CPI on 3/l/2012 X FMR2 Minimum Rent = 3% increase --------------- 3/l/12 - 2/28/13 CPI on 3/l/2010 Maximum Rent = 6% increase Base Rental Rate CPI on 3/1/2013 X FMR2 Minimum Rent = 3% increase --------------- [Initial] -40- <PAGE> 3/1/13 - 2/28/14 CPI on 3/1/2010 Maximum Rent = 6% increase To exercise the Option(s) to Extend the Term of Lease (first, second or third Options to Extend), Lessee must not be in violation of any of the general terms and conditions of the Lease, rental payments must be current, and Lessee must give Lessor a minimum of ninety (90) days advance written Notice of its intent to exercise the Option(s) to Extend which Notice shall be delivered to Lessor's address as set forth on the first page of this Lease. However, Lessor shall be obligated to give a written Notice to Lessee at least 100 days prior to the expiration date of the Lease (or extended term of Lease), indicating that the Lease will be terminating which Notice shall be sent to Lessee's address set forth on the first page of this Lease. Either party may change its address for notice by written notice to the other party, given in accordance with the terms of this Lease. Lessee shall have at least 10 days advance notice of the necessity to respond to Lessor, if Lessee wishes to extend the Lease term. If Lessor does not receive timely Notice of Lessee's intent to extend the Lease, Lessor shall have no further obligation to Lessee to extend the Lease and shall be free to make alternative leasing commitments for the Subject Premises. 54. Limitation on Lessee's Obligation for R.E. Taxes during Initial Lease Term. This paragraph modifies Para. 10 of this Lease Agreement. During the initial term of the Lease (first 48 months) Lessee's responsibility for R.E. Taxes shall be limited to those based on valuation assessments which would be normally be imposed on the ownership of the property in the absence of a sale or transfer of the property (which could result in a valuation re-assessment). However, this limitation shall not be applicable if the term of the Lease is extended (i.e., after 3/1/2002). 55. Payment of Real Estate Property Taxes and Insurance Premiums. This Paragraph modifies Para. 10 of the Lease Agreement. Lessee shall pay Lessor 1/12 of the estimated annual R.E. Taxes applicable to the subject leased premises each month. The monthly R.E. Tax Payments shall be due and payable on the first day of each successive calendar month together with the Net Monthly Rental Payment also due on the first day of each month. Any required adjustment in the total R.E. Taxes due and/or paid shall be made annually on the anniversary date of this Lease (March 1st of each successive year) upon presentation of the documented R.E. Tax billing to Lessee. This arrangement for estimated monthly R.E. Tax payments shall be applicable during the entire term of the Lease including the initial 48 month period as well as extended periods. The monthly allocation for R.E. Taxes shall be deemed additional rent payable. The terms and conditions indicated in this paragraph are subject to the limitation on Lessee's total R.E. Tax obligations during the first 48 months of the Lease terms as indicated in Para. 54 above. For the initial twelve (12) month period of this Lease (3/1198 - 2/28/2002) the estimated monthly R.E. Tax allocation shall be $800/Month (except that there shall be no real estate taxes paid by Lessee for the period from 3/1/98 to 4/14/98). This initial estimate of the monthly R.E. Tax allocation is based on the anticipated assessment of the subject property as of 3/1/98. If Lessee [Initial] -41- <PAGE> elects to have Lessor insure the Premises in the manner provided in the Lease, Lessee shall reimburse Lessor for 1/12 the cost of such premiums at the time Lessee pays its monthly installment of Real Estate Taxes. By December 1 of each year, Lessor will forward to Lessee a reconciliation of amounts impounded versus amounts actually paid by Lessee. If Lessee has overpaid or underpaid any of the above amounts, future impounds due for the then-coming calendar year will be adjusted up or down to compensate for such overpayment or underpayment, or if a full year does not remain in the term of the lease, then the adjustment will be made over the remaining months of the lease. 56. Holding Over by Lessee. In the event that Lessee shall hold the premises after the expiration of the term of the Lease hereof or any extension thereof, such holding over shall, in the absence of a superseding written agreement, be deemed to have created a tenancy on a month-to-month basis terminable upon thirty (30) days written Notice by either party to the other. In the event that Lessee shall hold possession of the subject premises after the expiration of the initial lease term (i.e., after 2/28/2002), Lessee shall pay Lessor a monthly rental rate of $12,000/month commencing 3/l/2002. In the event that Lessee shall hold the premises upon expiration of the first, second, or third Option Extension Terms (after 2/28/2006, 2/28/2010 or 2/28/2014), Lessee shall pay Lessor the established prevailing monthly base rent for the previous month plus $2500/Month on a month-to-month basis until such arrangement is superseded with a written agreement or until Lessee terminates tenancy of the subject premises. 57. Lessor's Contribution to Costs of Electrical Work. Lessor will pay $10,000 of the cost of modifying the electrical system serving the Premises in connection with Lessee's initial improvements. Such payment will be made upon presentation to Lessor by Lessee of invoices equal to or exceeding such amount. END OF ADDENDUM TO THE LEASE [Initial] -42- <PAGE> 200 CENTER STREET BRIAZZ, INC. - A WASHINGTON STATE CORPORATION EL SEGUNDO, CA 90245 EXHIBIT I - DIAGRAM OF THE SUBJECT PREMISES ------------------------------------------- NOTE: This diagram indicates the initial configuration - prior to Lessee's planned Tenant Improvement (TI) modifications. [Graphics showing layout and floor design] [Initial] <PAGE> 200 CENTER STREET BRIAZZ, INC. - A WASHINGTON STATE CORPORATION EL SEGUNDO, CA 90245 EXHIBIT II -- SAMPLE CPI SCHEDULE --------------------------------- \PFS\CPI Revised 1/22/98 CONSUMER PRICE INDEX, ALL ITEMS U.S. CITY AVERAGE This Consumer Price Index (CPI) is published by the U.S. Department of Labor Bureau of Labor Statistics. Statistics are updated monthly. For national and local CPI information you may contact the local office of the Bureau of Labor Statistics at (213) 252-7528 or (213) 252-7521. Data prior to January 1978 is used with the CPI for all Urban Wage Earners and Clerical Workers (CPI-W). CONSUMER PRICE INDEX FOR URBAN WAGE EARNERS AND CLERICAL WORKERS (CPI-W) Annual Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Average 1978 187.1 188.4 189.7 191.4 193.3 195.3 196.7 197.7 199.1 200.7 201.8 202.9 195.3 1979 204.7 207.1 209.3 211.8 214.3 216.9 219.4 221.5 223.7 225.6 227.6 230.0 217.7 1980 233.1 236.5 239.9 242.6 245.1 247.8 248.0 249.6 251.9 254.1 256.4 258.7 247.0 1981 260.7 263.5 265.2 266.8 269.1 271.4 274.6 276.5 279.1 279.7 280.4 281.1 272.8 1982 282.1 282.9 282.5 283.7 280.5 290.1 291.8 292.4 292.8 293.6 293.2 292.0 288.6 1983 292.1 292.3 293.0 294.9 296.3 297.2 298.2 299.5 300.8 301.3 301.4 301.5 297.4 1984 302.7 303.3 303.3 304.1 305.4 306.2 307.5 310.3 312.1 312.2 311.9 312.2 307.0 1985 312.6 313.9 315.3 316.7 317.8 318.7 319.1 319.6 320.5 321.3 322.6 323.4 318.5 1986 324.3 321.2 321.4 320.4 321.4 323.0 322.9 323.4 324.9 325.0 325.4 325.7 323.4 1987 327.7 329.0 330.5 332.2 333.4 334.9 335.6 337.4 339.1 340.0 340.4 340.2 334.3 1988 341.0 341.6 343.0 344.7 346.1 347.6 349.1 350.7 343.0 354.2 354.6 355.0 348.4 1989 356.7 358.0 360.0 362.9 364.9 365.9 366.8 367.0 368.3 369.8 370.6 371.1 365.2 1990 375.0 376.6 378.5 379.2 379.9 382.1 383.4 386.9 390.5 393.0 393.8 393.8 384.4 1991 395.4 395.7 396.1 397.1 398.5 399.6 400.0 401.0 402.8 403.2 404.5 404.7 399.9 1992 405.2 406.2 408.1 408.9 490.9 411.4 412.1 413.3 414.5 415.8 416.5 416.3 411.5 [Initial] <PAGE> Annual Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Average 1993 417.8 419.2 420.4 421.6 422.6 423.1 423.2 424.2 424.9 426.7 427.1 426.9 423.1 1994 427.7 428.8 430.2 430.9 431.7 433.2 434.3 436.4 437.5 437.8 438.6 438.6 433.8 1995 440.2 441.7 443.0 444.6 445.6 446.5 446.5 447.4 448.5 449.6 449.5 449.5 446.1 1996 451.9 453.2 455.6 457.6 458.7 459.1 459.7 460.2 451.9 463.2 464.2 464.3 459.1 1997 465.7 467.0 467.8 468.3 468.3 468.8 470.0 470.0 471.5 472.3 472.2 471.3 469.4 1998 471.9 472.5 473.1 473.7 Note: Boldface figures are estimated figures based on the latest available ---- figures. In the chart above, the latest available figures are for December 1997. To project the estimated figures for January through April 1998, we have added the average monthly increase over the previous year, i.e. the CPI in December 1997 = 471.3 less the CPI in December 1996 of 464.3 = 7.0 Index Points per year and when divided by 12 months = an average increase of 0.6 Index Points per month. So, 0.6 Index Points have been added to each of the estimated months above beginning with January 1998 (i.e., December figure of 471.3 + 0.6 = 471.9).