Exhibit
10.40


 


CONSTRUCTION FUNDING
AGREEMENT


 


THIS
CONSTRUCTION FUNDING AGREEMENT (this “Agreement”), is made
effective as of this 18th day March, 2004, by and between LEXINGTON LION CLARITA L.P.,
a Delaware limited partnership, having an office c/o Lexington Corporate
Properties Trust, One Penn Plaza, Suite 4015, New York, New York 10119-4015
(“Owner”) and SPECIALTY LABORATORIES, INC., a California corporation, having
an address at 2211 Michigan Avenue, Santa Monica, California 90404 (“Tenant”).


 


RECITALS:


 


A.    Tenant has
owned and previously caused the partial construction of a research and
development and office facility (“Building”) containing approximately Two
Hundred One Thousand Three Hundred Thirty square feet (201,330) with related
improvements including parking, lighting and landscaping (collectively, the
“Improvements”) pursuant to the Construction Documents (as hereinafter defined)
on an approximately 13.78 acre site in the City of Santa Clarita, California,
and more particularly described on Exhibit A attached hereto (the
“Land”) (the Land and Improvements are herein together referred to as the
“Premises”).


 


B.    Pursuant to
a certain Agreement for Sale and Leaseback dated February 11, 2004 (the “Sale
Agreement”) between Tenant as seller and Owner as buyer, Owner is purchasing
the Premises, including the Improvements in their current state of completion,
from Tenant effective as of today’s date.


 


C.    Simultaneously
herewith, Owner, as landlord, and Tenant, as tenant, are entering into a
certain lease dated even date herewith (the “Lease”) with respect to the
Premises.


 


D.    Owner and
Tenant desire to set forth their agreement pursuant to which Tenant will cause
completion of the Improvements in accordance with the Construction Documents
and Owner will fund the cost of such construction, subject to the terms and
conditions hereinafter set forth.


 


AGREEMENT


 


NOW,
THEREFORE, in consideration of the mutual promises and
covenants contained herein and in consideration of other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged by
both Tenant and Owner, it is hereby 


agreed as follows:


 

















 


1. 
Construction of Improvements.  (a) Tenant shall cause the construction of
the Improvements (the “Work”) to be performed in accordance with the Drawings
and Specifications attached hereto as Exhibit B, the Project Management
Agreement, as amended (the “PMA”) between Tenant and Lowe Enterprises Southwest
(“Lowe”), the Cost-Plus Contract with Guaranteed Maximum Price and Guaranty
dated February 25, 2002, as amended and including change orders #1 through 7
inclusive (the “GMP Contract”) between Lowe and Tectonics Construction, Inc.
(the “Contractor”) and in full compliance with all applicable federal, state
and local laws, ordinances, codes, rules and regulations, all at Owner’s
expense in accordance with the Budget and in no event to exceed Owner’s Maximum
Cost (as defined in Section 2(a) below).


 


(b)  Simultaneously herewith, Tenant is
delivering estoppel certificates from Lowe and Contractor together with true
and complete copies of amendments to the PMA and GMP Contract which together
provide in substance that the PMA and GMP Contract have been re-instated, that
all sums due Lowe and the Contractor have been paid, that the cost to complete
the Improvements is consistent with the Budget (as defined in Section 2(a)
below) and that, subject to the terms and conditions of the PMA and the GMP
Contract, the Improvements will be completed in accordance with the Project
Schedule attached hereto as Exhibit D.


 


(c)  Tenant shall cause Lowe and the Contractor
to construct the Improvements in accordance with the Project Schedule attached
hereto as Exhibit D and cause Substantial Completion (hereinafter
defined) of the Work to occur on or before June 30, 2004 (the “Projected
Substantial Completion Date”), subject to Unavoidable Delays (hereinafter
defined) and approved Change Orders.


 


2.   Funding of Construction.  (a) The parties acknowledge that the total
project cost for acquisition of the Land and construction of the Building and
related improvements and fixturization in accordance with the Drawings and
Specifications is Fifty-Seven Million Seven Hundred Ninety Five Thousand Three
Hundred Eighty Three Dollars ($57,795,383.00) as set forth on the detailed line
item budget and schedule of values (the “Budget”) on Exhibit C attached
hereto and consists of (i) a purchase price of Forty Seven Million Dollars
($47,000,000.00) (the “Purchase Price”) payable by Owner pursuant to the Sale
Agreement to acquire the Land and the Improvements, of which $27,830,049.74
Owner is funding at Closing (the “Closing Funds”) and the balance of
$19,169,950.26 (the “Holdback Funds”) are to be disbursed in accordance with
this Agreement, (ii) Ten Million Seven Hundred Ninety Five Thousand Three
Hundred Eighty Three Dollars ($10,795,383.00) in costs for construction and
fixturization of the Improvements previously funded by Tenant (“Tenant’s
Contribution”) in accordance with the Tenant Contribution Budget attached
hereto as Exhibit E, and (iii) subject to the terms and conditions
herein set forth, the balance of the construction costs of the Improvements,
which cost is currently anticipated to be $5,004,750.86 (the “Completion
Funds”).  The Holdback Funds in the
amount of $19,169,950.26 is hereafter sometimes referred to as “Owner’s Maximum
Cost”. Subject to the limits on Change Orders set forth in Section 8, in no
event shall Owner’s payments exceed Owner’s Maximum Cost as


 


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such amount may be decreased, from time to time, pursuant to Section
9.  The parties acknowledge that the
Budget contains $0 in contingencies (the “Contingency”).


 


(b)  Any change by Tenant to the Drawings and
Specifications, the Project Schedule and/or the Budget which constitutes a
“Material Deviation” from the standards set forth in the Specifications shall
be submitted by Tenant in writing to Owner (“Change Order(s)”), and Owner shall
not unreasonably withhold its consent thereto, so long as appropriate
adjustments are made to the Drawings and Specifications, the Project Schedule
and the Budget.  As used herein, a
“Material Deviation” shall be deemed to mean one which either (1) results in an
increase or decrease in the square footage of the Building of one percent (1%)
or more, (2) changes the footprint of the Building, (3) alters the structure of
the Building (including the specifications of the structure), or (4) alters the
mechanical systems, heating, ventilation and air conditioning system, electrical
system and/or the main lines of the plumbing or fire system. Any reduction in
construction and development costs associated with any such Change Order(s)
shall decrease the Fixed Rent in accordance with Section 9 and shall be subject
to the limits set forth in Section 8. 
Alternatively, any increase in construction and development costs shall
be paid directly by Tenant in accordance with the costs of any such Change
Order(s) in which event there shall not be any increase in Fixed Rent by reason
of such Change Order.  In no case shall
Owner be required to (i) compensate for costs associated with Change Orders
that have not been approved, in advance in writing, by Owner and (ii) pay any
amount to Tenant in addition to the Closing Funds in excess of Owner’s Maximum
Cost.  All Change Orders shall specify
the Change in the Specifications, the adjustments, if any, to the Budget, the
decrease, if any, in Fixed Rent and the adjustment, if any, to the Project
Schedule and must be approved in writing by Owner and Tenant.  In addition, Tenant shall not make any
change to Tenant’s Contribution which effects any reduction in quantity or
quality of equipment, materials or facilities constituting the Improvements
without first obtaining Owner’s consent which may be granted or withheld in its
sole discretion.  Owner shall respond to
any request for approval of a Change Order within five (5) business days of its
receipt thereof, failing which it shall be deemed to have approved such Change
Order.


 


(c) Owner shall
fund to Tenant, or at Tenant’s request, directly to Lowe and/or the Contractor,
after the Substantial Completion Date (as defined in Section 10 below) up to an
amount equal to Owner’s Maximum Cost, as the same may be adjusted in accordance
with the terms and conditions of this Agreement (the “Final Payment”) within
ten (10) days after satisfaction of the following conditions and delivery to
Owner of the following documents:


 


(i) Tenant shall
submit to Owner an application for payment in form reasonably satisfactory to
Owner which shall include (a) copies of the Job Cost Reports and Job Cost
Detailed Reports received from the Lowe, (b) the AIA G 702/703 forms containing
the itemized schedule of values, for the construction work and all costs
incurred for construction pursuant to each category of such schedule of values
set forth in the Budget and (c) a separate itemization of costs incurred for
equipment, construction and non-construction expenses in connection with the
Premises and the Improvements (which shall be itemized under the line item on
the Budget, with copies of


 


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invoices for all such amounts)  The accuracy of the costs shall be certified
to Owner by Tenant and Lowe and shall be reviewed and approved by National
Assessment Corp. (the “Construction Inspector”).


 


(ii) The completed
construction work with respect to the Improvements in the application for
payment must be reviewed and approved by the Construction Inspector as a
condition to funding, which approval shall not be unreasonably withheld,
delayed or conditioned. Tenant will contact the Construction Inspector and
coordinate delivery of applications for payment with an inspection by the
Construction Inspector in order to allow Construction Inspector to review the
completed construction work.  The
Construction Inspector will review and certify to Owner and Tenant its opinion
of compliance with the Specifications and the amounts to be funded, which shall
be determined in accordance with this Agreement.


 


(iii) Owner shall
be provided with written notice of, but its consent shall not be required with
regard to, any Change Order that is not a Material Deviation from the
Specifications.


 


(iv) In no event
shall Owner be obligated to advance the Final Payment unless it receives (1) a
final unconditional lien waiver from Lowe, (2) final unconditional lien waivers
from the Contractor, any subcontractor or supplier receiving in excess of
$100,000 and any contractor, subcontractor and material supplier who has served
a 20 day preliminary notice on Owner, (3) a copy of the permanent certificate
of occupancy for the Premises from the City of Santa Clarita (provided however
that a temporary certificate of occupancy shall be deemed to satisfy this
condition so long as the only items to be completed before the issuance of the
permanent certificate of occupancy are the punchlist items, that the right to
lawful occupancy of the Premises cannot be terminated prior to the issuance of
a permanent certificate of occupancy and that Tenant diligently and
continuously prosecutes all matters necessary to obtaining the permanent
certificate of occupancy), (4) evidence satisfactory to Owner that Tenant’s
Contribution has been fully constructed and installed and (5) evidence that all
other requirements of Sections 2(c)(i) and 2(c)(ii) have been satisfied;


 


(v) The Final
Payment shall be reduced by an amount equal to the greater of (A) two times the
agreed punch list value or (B) $100,000, which sum shall be due and payable
upon completion of the punch list items and shall be for all outstanding sums
not subject to dispute or offset due under the Agreement;


 


(vi) Anything in
this Agreement to the contrary notwithstanding, in no event shall Owner be
obligated to fund the Final Payment if:


 


(1) Tenant has
failed to make the deliveries required hereunder, including but not limited to,
those specified in Sections 2(c)(i) and 2(c)(ii); or


 


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(2) There is any
event of default outstanding under this Agreement for which notice has been
given in accordance with Section13 which remains uncured; or


 


(3) There is any
Event of Default outstanding under the Lease.


 


(vii) The
conditions and limitations of this Section 2 may be waived by Owner at Owner’s
sole option without notice.


 


(viii) Anything in
this Agreement to the contrary notwithstanding, Owner shall nonetheless pay to
Tenant in the Final Payment the full amount of sums due to Tenant in
constructing the Improvements (subject to Section 2(c)(v)), but not in any
event to exceed Owner’s Maximum Cost, as such amount may be decreased pursuant
to Section 9.


 


(d)             In addition, in consideration of its use
and occupancy of the Premises for the period from the date hereof until the
“Acceptance Date” (as defined in the Lease) during which time Tenant shall
construct and install “Tenant’s Initial Alterations” (as defined in the Lease),
Tenant shall pay rent for the use and occupancy rights with respect to the
Premises in the amount of $784,590.81 on the date hereof.


 


3. 
Fixed Rent. 
The Fixed Rent to be paid by Tenant to Owner under the terms of the
Lease was determined by the parties based on an estimated cost to complete
construction of the Improvements pursuant to the Budget attached as Exhibit
C hereto previously delivered to and approved by Tenant and Owner.


 


4. 
Additional Costs.  Owner shall not be responsible for funding any costs in addition
to the Closing Funds and the Owner’s Maximum Cost, as such amount may be
decreased pursuant to Section 9.  To the
extent that any cost is incurred in connection with the acquisition of the
Premises (including but not limited to title insurance premiums) or in the
ownership and development of the Premises prior to Substantial Completion,
including but not limited to the fees and expenses of the Construction
Inspector and real estate taxes, such costs shall either be directly paid by
Tenant or, to the extent funded by Owner and not reimbursed by Tenant, shall
dollar for dollar be applied against Owner’s Maximum Cost.


 


5.  Construction Documents.  As used in this Agreement, the term
“Construction Documents” shall mean and include (i) the Drawings and
Specifications attached hereto as Exhibit B, (ii) the PMA between Tenant
and Lowe and (iii) the GMP Contract between Lowe and Contractor.  Owner shall have the right to inspect the
Work at all reasonable times.  If Owner
discovers that the Work which fails to comply with the Construction Documents,
Owner shall notify Tenant and Tenant shall cause Lowe and/or the Contractor to
take all necessary action to correct the deficiencies.


 


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6. Contractor Warranties.
(a) Notwithstanding any terms or conditions of the Lease, Tenant shall cause
the Contractor to guarantee to Owner and Tenant that the Improvements will be
constructed without defective workmanship and materials, latent or otherwise,
for a period of one (1) year from the Substantial Completion Date (the
“Warranty Period”).  The Contractor shall
also guarantee the foundations, slab, structural frame, roof deck, roof and
roof membrane and exterior walls of the Improvements against defective,
workmanship and materials, latent or otherwise, for a period of one (1) years
from the Substantial Completion Date (the “Structural Warranty Period”).  The landscaping warranty shall be one year
for all trees and six months for all plant materials, including shrubs and
groundcover.  The Construction Documents
shall require, among other provisions, that the Contractor obtain a warranty on
the roof membrane of not less than 20 years and to assign such warranty to
Owner.


 


(b)         By
virtue of the foregoing guaranties, the Contractor shall repair or replace at
its sole cost and expense any defective item occasioned by defective,
workmanship or materials that Tenant or Owner discovers during the Warranty
Period or the Structural Warranty Period, as the case may be.  On the expiration of the Warranty Period or
the Structural Warranty Period, as the case may be, and with the exception of
any equipment or roof warranty, provided that such warranties have theretofore
been assigned pursuant to Section 6(a), the Contractor shall assign and deliver
to Owner originals of all continuing assignable guaranties and warranties
(whether express or implied) issued or made in connection with the construction
of the Improvements and any and all claims against vendors or others who
provided materials or construction during the construction of the Improvements
and must assign to Owner, free and clear of all liens and encumbrances, the
Contractor’s interest in those guaranties, warranties and claims by means of a
duly executed and acknowledged assignment in form and substance satisfactory to
Owner.  In addition, the Contractor
shall warrant to Owner and Tenant that it will replace all landscape plantings
at the Premises during the initial year of the term of the Lease, except for
those which do not survive by reason of neglect or intentional misconduct.


 


(c)         Tenant acknowledges and agrees that its sole remedy
for any defect in construction of the Improvements shall be an action for
specific performance and/or damages against the Contractor.  Tenant specifically waives any right which
Tenant may otherwise have at law or in equity to make any claim against Owner
for any latent or patent defect in construction of the Improvements, including
but not limited to, any right to offset against or deduct from rent due to
Owner under the Lease.


 


7. 
Representatives.  Owner designates Brendan Mullinix, phone:  (212) 692-7200, fax:  (212) 986-6972 and e-mail: bmullinix@LXP.com
to act on behalf of Owner relating to the construction of the
Improvements.  Tenant designates Reid
McCartney of CRESA Partners, phone: 
(310)-207-1700 to act on behalf of Tenant relating to the construction
of the Improvements.  Any party may
change its representatives by giving written notice of a change of designation
to the other party.  Each party will
exert its commercially reasonable efforts to render decisions and take actions
in a timely manner so as to avoid unreasonable delay in the other party’s work
and action relating to the Improvements.


 


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8.  Limits on Change Orders.  Any Change Order approved by Tenant and
Owner shall require a corresponding change to the Budget (both specific line
item and total cost of the Work), and, if applicable, the Projected Substantial
Completion Date. Such Change Order shall not be implemented unless and until
both the change to the Plans, the corresponding change to the Budget, and, if applicable,
the corresponding change to the Projected Substantial Completion Date are
approved in writing by Owner and Tenant. 
In no event, however, shall any Change Order result in a reduction of
the quality or utility of the Improvements or obligate Owner to fund an amount
in excess of Owner’s Maximum Cost as set forth in the Budget attached hereto as
Exhibit C .


 


9.  Actual Cost of Work.  In the event the final actual cost of
the Work is less than the amount set forth in the Budget, excluding the Contingency,
as may have been adjusted, as a result of Change Orders approved by Tenant and
Owner in accordance with this Agreement, then such amount shall be evidenced by
a decrease in the Fixed Rent provided in the Lease.  The annual decrease in the initial Fixed Rent under the Lease per
$10,000 deviation from the Budget shall be $752.00. Upon Substantial Completion
(defined in Section 10), Owner and Tenant shall execute and deliver an
amendment to the Lease to make any changes to the Fixed Rent to reflect the final
actual cost of the Work.  Such final
actual cost of the Work shall be certified to Tenant by Lowe and the Contractor
which certification shall be accompanied by evidence of such costs incurred.  Owner and Tenant will each have the right to
review, copy and audit Contractor’s books and records with respect to all costs
of the Work at Contractor’s place of business during reasonable business hours.


 


10.  Substantial Completion.  The “Substantial Completion Date” shall mean
the date after issuance of the Completion Certificate (as defined in Section 11
below) which is the first to occur of (i) the issuance of a Certificate of
Occupancy (temporary or permanent) from the applicable building department,
permitting Tenant to immediately occupy the Building for Tenant’s intended
purpose, but not including completion or correction of all customary “punch
list” items; or (ii) Tenant’s conduct of normal business operations at the
Building (the first to occur of (i) and (ii), “Substantial Completion”).  Tenant shall keep Owner informed from time
to time in writing of the anticipated Substantial Completion Date.  Subject to delays resulting from force
majeure and long lead items beyond its reasonable control, the Contractor shall
complete the punch list items within thirty (30) days of the later to occur of
the (i) Tenant’s delivery of the punch list to Owner, and (ii) issuance of the
permanent Certificate of Occupancy. 
“Punch List” items shall be agreed to by a mutual inspection of the
Improvements by Owner and Tenant in accordance with Section 23.2(c) of the
Lease.  The aggregate cost of all punch
list items (other than those which do not affect use and occupancy of the
Premises) shall not exceed $100,000.


 


11.  Completion Certificate.  Upon Substantial Completion of the
Improvements, Tenant shall cause the Contractor and the architect to execute
and deliver to Tenant and Owner a certificate (the “Completion Certificate”)
that shall expressly provide the following representations and warranties: (a)
the Premises have been substantially


 


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completed in accordance
with the Drawings and Specifications and are free of any mechanic’s,
materialmen’s, architects’, suppliers’ or other similar liens or, if such liens
exist, they have been bonded in accordance with applicable law or the Title
Company has issued title insurance for the benefit of Owner and Tenant in form
reasonably acceptable to Owner and Tenant over such liens; and (b) the
Improvements are in compliance with all laws, ordinances, rules and regulations
of any state, federal, municipal or other governmental agency having
jurisdiction of the Premises that relate to the intended use, condition or
occupancy of the Premises prior to Tenant’s occupancy thereof.  The parties hereto further agree to provide
any necessary documentation to the Title Company to remove any exceptions
related to mechanics’ or materialmens’ liens contained in any title policy
issued to Owner and Tenant after Substantial Completion, provided however, in
the event of any dispute with a lienor, the contesting party shall have the
right bond off such lien.


 


12.  Unavoidable Delays.  The time for completion of construction
(including punch list items) of the Improvements as provided herein shall be
extended for the number of days equal to such delays and their effects caused
by Unavoidable Delays. For purposes of this Agreement, the term “Unavoidable
Delays” shall mean causes and events beyond a party’s reasonable control which
prevent or materially interferes with such party’s performance under this
Agreement, which events may include; acts of God, fire, earthquake, flood,
storm, explosion, war, sabotage, terrorism, invasion, insurrection, civil
commotion, embargo, riots, offsite and third party lockouts, strikes and
picketing, litigation involving the Premises which cannot be resolved by the
payment of sums certain by a party to this Agreement, delays caused by or
resulting from the delay or failure of the public utilities and public
authorities to perform and complete their service requirements, including
water, electricity, gas, sanitation, roads and authorization for curb and road
cuts, in a timely manner, in accordance with the schedule for completion of the
Work, failure of transportation, condemnation, unavailability of materials or
extraordinary delays in delivery, governmental restriction, including weather
delays in excess of five (5) aggregate days of inclement weather.  In the event of a failure of transportation,
the unavailability or shortages of materials and/or offsite and third party
lockouts, strikes or picketing, each party agrees to use its good faith
reasonable efforts to locate alternative sources and, if appropriate, in other
geographic areas.  The party claiming
Unavoidable Delay shall provide to the other party, within five (5) business
days after becoming aware of such Unavoidable Delay (i) evidence of the
occurrence of each instance thereof reasonably satisfactory to the other
parties hereto; and (ii) good faith estimated notice of the number of days of
Unavoidable Delay that the party is claiming, as so evidenced. If Tenant
reasonably believes that an item of Unavoidable Delay will affect the
Substantial Completion Date, then Tenant shall notify Owner in writing.  Failure to give such notice or to provide
such evidence shall result in a loss of the days of claimed Unavoidable Delay.


 


13.  Default/Termination.  (a) No party hereto shall be deemed to be in
default under this Agreement unless and until (i) it has received written notice
from the other party specifying the particulars in which such party has failed
to perform its obligation


 


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hereunder and (ii) fifteen (15) days have expired from the receipt of
such notice and the default specified has not been cured.


 


(b) 
Notwithstanding the provisions of Section 13(a), in the event that a
default is not susceptible to immediate cure, a defaulting party shall be
afforded such additional time as may be reasonably necessary to cure its default
provided that (i) such cure commences during the initial fifteen (15) day
period, (ii) is prosecuted diligently and continuously to completion and (iii)
in no event exceeds sixty (60) days from receipt of the original notice of
default.


 


(c)  In the event
of any such default which remains uncured after the applicable cure period, the
non-defaulting party shall have all of the rights and remedies available to
such party at law or in equity.


 


14.
 Notices.  Any notice or demand which either party
hereto either is required to or may desire to serve upon the other, must be in
writing, and shall be sufficiently served if (i) personally delivered, (ii)
sent by registered or certified mail, postage prepaid, or (iii) sent by
commercial overnight carrier, and addressed to:


 


	
  Owner:

  	
   

  	
  Lexington Lion Clarita L.P.

  
	
   

  	
   

  	
  c/o Lexington Corporate Properties Trust

  
	
   

  	
   

  	
  One Penn Plaza, Suite 4015

  
	
   

  	
   

  	
  New York, New York 10119-4015

  
	
   

  	
   

  	
  Attn: 
  Richard J. Rouse

  
	
   

  	
   

  	
  Facsimile No.: 
  (212) 594-6600

  
	
   

  	
   

  	
   

  
	
  With a copy to:

  	
   

  	
  Crowe Deegan LLP

  
	
   

  	
   

  	
  535 Fifth Avenue – Suite 611

  
	
   

  	
   

  	
  New York, New York 10017

  
	
   

  	
   

  	
  Attn: 
  Richard C. Hamlin, Esq.

  
	
   

  	
   

  	
  Facsimile No.: 
  (212) 557-7270

  
	
   

  	
   

  	
   

  
	
  Tenant:

  	
   

  	
  Specialty Laboratories Inc.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2211 Michigan Avenue

  
	
   

  	
   

  	
  Santa Monica, California  90404

  
	
   

  	
   

  	
  Attn:  Chief
  Financial Officer

  
	
   

  	
   

  	
  Facsimile No.:

  



 


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  With a copy to:

  	
   

  	
  Specialty Laboratories Inc.

  
	
   

  	
   

  	
  2211 Michigan Avenue

  
	
   

  	
   

  	
  Santa Monica, California  90404

  
	
   

  	
   

  	
  Attn: 
  General Counsel

  
	
   

  	
   

  	
  Facsimile No.:

  
	
   

  	
   

  	
   

  
	
  And to:

  	
   

  	
  O’Melveny & Myers LLP

  
	
   

  	
   

  	
  400 South Hope Street

  
	
   

  	
   

  	
  Los Angeles, California 90071

  
	
   

  	
   

  	
  Attn: 
  Christine H. Suh, Esq.

  
	
   

  	
   

  	
  Facsimile No.: 
  213-430-6407

  



 


or any other address
which the parties notice to the other. 
Such notice shall be deemed to have been received on the third business
day following the mailing thereof or upon receipt in the event of personal
service and on the following business day if by overnight courier.  Each party may send notices by facsimile
provided the sender confirms receipt by the party to whom the notice was
addressed.


 


15.  Governing Law.  If any term or provision of this Agreement
shall to any extent be held invalid or unenforceable, the remaining terms and
provisions of this Agreement shall not be affected thereby, but each term and
provision of this Agreement shall be valid and be enforced to the fullest
extent under the laws of the State of California.  If any conflict exists or occurs between this Agreement and the
Lease, the terms of this Agreement shall be controlling.


 


16.  Attorneys’ Fees.  Each party shall pay the other party’s
reasonable legal costs and attorney’s fees incurred in successfully enforcing
against the other party any covenants, terms or conditions of this Agreement.


 


17.  Due Authorization.  Owner and Tenant each represent that the
execution and delivery of this Agreement and the performance of all of the
covenants and agreements contained herein have been duly authorized, ratified
and confirmed by all necessary corporate action on the part of each of said
parties.


 


18.  Successors and Assigns.  The covenants and agreements herein
contained shall bind and inure to the benefit of Owner, its successors and
assigns, and Tenant and its permitted successors and assigns.  No party shall have the right to assign this
Agreement or any interest herein to third party without first obtaining the
prior written consent of the other parties hereto which consent may be granted
or withheld in such party’s sole and absolute discretion.  Capitalized terms shall have the meanings as
defined herein or, if not defined in this Agreement, as set forth the Lease.


 


19.          Dispute
Resolution.  Any dispute or controversy between Owner and
Tenant arising out of this Agreement shall be resolved exclusively through
binding arbitration in Los Angeles, California pursuant to California Code of
Civil Procedure Sections 1282 through 1284.2 . 
In the event of such arbitration, unless otherwise required by law,


 


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Tenant and Owner shall each pay one-half of
the costs and expenses of such arbitration, and shall separately pay its
counsel fees and expenses. Notwithstanding any provision in this Section,
neither party shall be prohibited from seeking injunctive relief as necessary
to maintain the status quo pending an arbitration proceeding regarding the
breach of this Agreement.


 


20.          Limitation
on Liability for Indemnification.    Anything in this Agreement
to the contrary notwithstanding, in no event shall Tenant be obligated to
indemnify Owner or any of its officers, directors, employees, contractors,
agents or consultants (“Owner Parties”) for any act or omission constituting
gross negligence or willful misconduct by such Owner Parties nor shall Tenant
be deemed to have released any of the Owner Parties for any act or omission
constituting gross negligence or willful misconduct by such Owner Parties.


 


[Balance of Page Left Blank Intentionally]


 


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


 


	
  OWNER:

  	
  LEXINGTON
  LION CLARITA L.P.

  
	
   

  	
  By:  

  	
  Lexington
  Lion Clarita GP LLC

  
	
   

  	
   

  	
  By:  

  	
  Lexington/Lion Venture L.P.

  
	
   

  	
   

  	
  By:

  	
  Lex GP, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /S/
  BRENDEN P. MULLINIX

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Brenden
  P. Mullinix

  
	
   

  	
   

  	
  Title:

  	
  Vice President

  
	
   

  	
   

  
	
   

  	
   

  
	
  TENANT:

  	
  SPECIALTY
  LABORATORIES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
  /S/
  FRANK J. SPINA

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Frank
  J. Spina

  
	
   

  	
   

  	
  Title:

  	
  Senior
  Vice President &

  Chief Financial Officer

  
												



 


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