**Exhibit 10.56**

 

Execution Document

 

 

**LEASEAGREEMENTBetween**

 

 

**GENERAL ELECTRIC CAPITAL CORPORATIONa Delaware corporation,as Lessor,andINAMED CORPORATION,a Delaware corporationas Lessee**

 

 

**Dated as of October 1, 2002**

 

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| ARTICLE I     |                                                               |
|---------------|--------------------------------------------------------------------|
|          |                                                               |
| Section 1.01. | Lease of Premises; Title and Condition                             |   |
| Section 1.02. | Use                                                                |   |
| Section 1.03. | Term                                                               |   |
| Section 1.04. | Rent                                                               |   |
| Section 1.05. | Payment of Rent                                                    |   |
| Section 1.06. | Late Payment Charge                                                |   |
|          |                                                               |   |
| ARTICLE II    |                                                               |
|          |                                                               |
| Section 2.01. | Disclaimer of Representation by Lessor                             |   |
| Section 2.02. | Premises Leased “As Is”                                  |   |
| Section 2.03. | Maintenance and Repair                                             |   |
| Section 2.04. | Alterations, Replacements and Additions                            |   |
| Section 2.05. | Encumbrances                                                       |   |
| Section 2.06. | Replacement of Lessor’s Fixtures and  Lessor’s Equipment |   |
| Section 2.07. | Lessee To Comply With Covenants                                    |   |
| Section 2.08. | Lessor’s Cooperation Clause                                   |   |
| Section 2.09. | No Third-party Claims Against Lessor                               |   |
|          |                                                               |   |
| ARTICLE III   |                                                               |
|          |                                                               |   |
| Section 3.01. | Removal                                                            |   |
|          |                                                               |   |
| ARTICLE IV    |                                                               |
|          |                                                               |   |
| Section 4.01. | Restriction on Assignment or Other  Transfer                       |   |
| Section 4.02. | Information About Proposed Transferee                              |   |
| Section 4.03. | Terms Relating to Consent                                          |   |
| Section 4.04. | Subleases                                                          |   |
| Section 4.05. | Original Documents to Lessor                                       |   |
| Section 4.06. | Effect of Transfer                                                 |   |
| Section 4.07. | Collection of Rent                                                 |   |
| Section 4.08. | Affiliate Transfers                                                |   |
|          |                                                               |   |
| ARTICLE V     |                                                               |
|          |                                                               |   |
| Section 5.01. | Net Lease                                                          |   |
| Section 5.02. | Taxes and Assessments; Compliance With  Law                        |   |
| Section 5.03. | Utility Services                                                   |   |
| Section 5.04. | No Adverse Possession                                              |   |
| Section 5.05. | Entry by Lessor                                                    |   |
| Section 5.06. | Liens                                                              |   |
| Section 5.07. | Indemnification                                                    |   |
| Section 5.08. | Environmental Compliance                                           |   |

 

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| ARTICLE VI     |                                                        |
|----------------|-------------------------------------------------------------|
|           |                                                        |   |
| Section 6.01.  | Compensation                                                |   |
| Section 6.02.  | Casualty                                                    |   |
| Section 6.03.  | Condemnation                                                |   |
| Section 6.04.  | Required Insurance Coverage                                 |   |
| Section 6.05.  | Separate Insurance Coverages                                |   |
| Section 6.06.  | Compliance With Insurance Requirements                      |   |
| Section 6.07.  | Additional Coverages                                        |   |
| Section 6.08.  | Policy Provisions                                           |   |
| Section 6.09.  | Companies and Form of Policies                              |   |
| Section 6.10.  | Handling of Proceeds by Lessee                              |   |
| Section 6.11.  | Handling of Proceeds by Depository                          |   |
| Section 6.12.  | Certificates of Coverage                                    |   |
| Section 6.13.  | Procurement by Lessor                                       |   |
|           |                                                        |   |
| ARTICLE  VII   |                                                        |
|           |                                                        |   |
| Section 7.01.  | Events of Default                                           |   |
| Section 7.02.  | Remedies Upon Lessee’s Default                         |   |
|           |                                                        |   |
| ARTICLE  VIII  |                                                        |
|           |                                                        |   |
| Section 8.01.  | Lessee’s Notices and Remedies                          |   |
| Section 8.02.  | Fee Mortgagee’s Right To Cure                          |   |
|           |                                                        |   |
| ARTICLE  IX    |                                                        |
|           |                                                        |   |
| Section 9.01.  | Subordination and Nondisturbance                            |   |
| Section 9.02.  | Election Not To Subordinate                                 |   |
| Section 9.03.  | Attornment                                                  |   |
| Section 9.04.  | Limitations on Lessee                                       |   |
| Section 9.05.  | No Merger of Fee and Leasehold Estates                      |   |
| Section 9.06.  | Changes to Lease Required by Fee  Mortgagee                 |   |
|           |                                                        |   |
| ARTICLE  X     |                                                        |
|           |                                                        |   |
| Section 10.01. | Estoppel Certificate                                        |   |
| Section 10.02. | Financial Information                                       |   |
|           |                                                        |   |
| ARTICLE  XI    |                                                        |
|           |                                                        |   |
| Section 11.01. | Quiet Enjoyment                                             |   |
|           |                                                        |   |
| ARTICLE  XII   |                                                        |
|           |                                                        |   |
| Section 12.01. | Lessor’s Reversionary Interest; Surrender  of Premises |   |
| Section 12.02. | Delivery of Rents and Records                               |   |

 

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| Section 12.03. | Acceptance of Surrender                      |   |
|----------------|----------------------------------------------|--------|
| Section 12.04. | Holding Over                                 |   |
|           |                                         |   |
| ARTICLE  XIII  |                                         |
|           |                                         |   |
| Section 13.01. | Definition of “Lessor”             |   |
| Section 13.02. | Exculpation of Lessor                        |   |
|           |                                         |   |
| ARTICLE  XIV   |                                         |
|           |                                         |   |
| Section 14.01. | No Waiver, etc., by Parties                  |   |
| Section 14.02. | Notices, Etc                                 |   |
| Section 14.03. | Separability                                 |   |
| Section 14.04. | Headings                                     |   |
| Section 14.05. | Relationship of Parties; Disclaimer          |   |
| Section 14.06. | Operating Lease                              |   |
| Section 14.07. | Joint Obligation                             |   |
| Section 14.08. | Prior Agreements                             |   |
| Section 14.09. | Recording                                    |   |
| Section 14.10. | Proration of Rent                            |   |
| Section 14.11. | Authorization of Lease                       |   |
| Section 14.12. | Applicable Law                               |   |
| Section 14.13. | United States Funds                          |   |
| Section 14.14. | Time of Performance                          |   |
| Section 14.15. | “Force Majeure” Delays             |   |
| Section 14.16. | Waiver of Jury Trial                         |   |
| Section 14.17. | Attorneys’ Fees                         |   |
| Section 14.18. | Amendments                                   |   |
| Section 14.19. | Successors and Assigns                       |   |
| Section 14.20. | Brokers                                      |   |
| Section 14.21. | Construction                                 |   |
| Section 14.22. | Execution In Counterparts                    |   |
| Section 14.23. | Exhibits and Riders                          |   |
|           |                                         |   |
| ARTICLE  XV    |                                         |
|           |                                         |   |
| Section 15.01. | Lessee’s Right of First Refusal         |   |
|           |                                         |   |
| ARTICLE  XVI   |                                         |
|           |                                         |   |
| Section 16.01. | Lessee’s Expansion of the Improvements: |   |
|           |                                         |   |
| ARTICLE  XVII  |                                         |
|           |                                         |   |
| Section 17.01. | Specific Enforcement                         |   |

 

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| SCHEDULE A | LEGAL DESCRIPTION                     |   |
|------------|---------------------------------------|--------|
| SCHEDULE B | [OMITTED]                             |   |
| SCHEDULE C | PERMITTED EXCEPTIONS                  |   |
| SCHEDULE D | LESSEE INSURANCE                      |   |
| SCHEDULE E | PERMANENT LOAN INSURANCE REQUIREMENTS |   |

 

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**LEASE AGREEMENT**

** **

THIS LEASEAGREEMENT (this “Lease”) is made and entered into as of the 1st day of October,2002 by and between GENERAL ELECTRIC CAPITAL CORPORATION, a Delawarecorporation (“Lessor”), and INAMED CORPORATION, a Delaware corporation (herein,together with permitted successors and assigns, called “Lessee”).

 

WHEREAS,pursuant to that certain Facility Lease, dated as of March 15, 1989 (assupplemented April 4, 1989, the “Existing Lease”), between Heleasco Seven,Inc., a Delaware corporation (“Heleasco”), as landlord, and Collagen Corporation,a Delaware corporation (“Collagen”), as tenant, Heleasco leased to Collagencertain land, improvements and equipment, all located at 48490 Milmont Drive,Fremont, California (the “Property”), for the term and on the terms andconditions set forth in the Existing Lease; and

 

WHEREAS,Lessor purchased Heleasco’s interest in the Existing Lease and the Property,and Lessee purchased Collagen’s interest in the Existing Lease; and

 

WHEREAS,Lessor and Lessee have amended the Existing Lease to apply only to certainitems of equipment leased by Lessor to Lessee and wish to replace the ExistingLease with this Lease as to the Premises (as defined below), as of October 1,2002.

 

NOW,THEREFORE, in consideration of the mutual promises contained herein, Lessor andLessee agree as follows.

 

**ARTICLE I**

** **

**Section 1.01.****                         Leaseof Premises; Title and Condition**.  Inconsideration of the rents and covenants herein stipulated to be paid andperformed by Lessee and upon the terms and conditions herein specified, Lessorhereby leases to Lessee, and Lessee hereby leases from Lessor, the premises(the “Premises”) consisting of:

 

(a)                                  thatparcel of land more particularly described in Schedule A attached hereto andmade a part hereof (the “Land”) having an address at 48490 Milmont Drive,Fremont, California;

 

(b)                                 allof the buildings, structures, facilities, installations and other improvementsof every kind and description now or hereafter in, on, over and under the Land(collectively, the “Improvements”);

 

(c)                                  anymovable or not permanently affixed fixtures, machinery, equipment, furnishings,moveable walls or partitions, or other personal property used or procured foruse in connection with the operation, maintenance and protection of thePremises, which are located on or in the Improvements on the Commencement Date(as defined in Section 1.03), including (without limitation) plumbing, gas,electrical, heating, ventilating, lighting and air conditioning systems,facilities used to provide any utility services, parking and common areafacilities, refrigeration, garbage disposal, and all landscaping, paving andparking areas, but except items, if any, included within the category of 

 

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Lessee’s Equipment (collectively referred to herein as“Lessor’s Equipment”).  “Lessee’s Equipment”shall mean all machinery, equipment, furniture, furnishings and other personalproperty (i) installed by Lessee or its permitted sublessees or permittedoccupants in, on or about the Premises (whether before, after or on theCommencement Date) and (ii) not used or procured for use in connection with theoperation, maintenance and protection of the Premises, as such, but used orprocured for use directly in connection with the business conducted thereon;

 

(d)                                 allfixtures, machinery, equipment, and other items of property, now or hereafterpermanently affixed to or incorporated into the Improvements, including(without limitation) boilers, furnaces, heaters, electrical equipment,incineration, air and water pollution control, waste disposal, sprinkler systems,fire and theft protection equipment, plumbing, heating, ventilating, lightingand air conditioning systems, facilities used to provide any utility services,parking and common area facilities, and refrigeration systems and equipment,together with all replacements, modifications, and alterations thereto, all ofwhich, to the greatest extent permitted by law, are hereby deemed by theparties hereto to constitute real estate except to the extent that any suchitem is an item of Lessee’s Equipment (collectively referred to herein as “Lessor’sFixtures”) (all the foregoing being included within the term “Improvements”);and

 

(e)                                  allof Lessor’s right, title and interest, if any, in and to all easements,rights-of-way, appurtenances and other rights and benefits associated with theLand and to all public or private streets, roads, avenues, alleys or passways,open or proposed, on or abutting the Land, including (without limitation) theContractual Requirements (as defined in Section 2.07 hereof) attached hereto asExhibit B (all of the foregoing being included within the term “Land”).

 

The Premisesare leased to Lessee in their present condition without representation orwarranty by Lessor and subject to the rights of parties in possession, to theexisting state of title, the existing state and quality of Improvements, anystate of facts that an accurate survey or physical inspection thereof mightshow, all zoning regulations, restrictions, rules and ordinances, buildingrestrictions and other laws and regulations now in effect or hereafter adoptedby any governmental authority having jurisdiction, to all applicable LegalRequirements (as defined in Subsection 5.02(b)) now or hereafter in effect andto Permitted Exceptions listed in Schedule C attached hereto.  Lessee has examined the Premises and title tothe Premises and has found all of the same satisfactory for all purposes.

 

**Section 1.02.****                         Use**.  Lessee may use the Premises or cause it to beused only for Permitted Uses.  “PermittedUses” are defined as all uses permitted by law, the certificate of occupancyand regulations of the applicable local planning, building and otheragencies.  Lessee shall not use thePremises for any other purpose without the prior written consent of Lessor,which consent may be withheld in its absolute discretion.  Without limiting the generality of theforegoing, Lessor may condition or withhold such consent if the proposed usewill materially alter the character or purpose or materially detract ordiminish the value or operating efficiency of the Premises, materially impairthe revenue-producing capability of the Premises, materially adversely affectthe ability of Lessee to comply with this Lease, materially increase the use, 

 

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handling, generation,storage, transportation or disposal of any Hazardous Materials or constitute anuisance.

 

**Section 1.03.****                         Term**.

 

1.03.1                  ThisLease shall be for a term of ten (10) years (the “Lease Term”) commencing onOctober 1, 2002 (the “Commencement Date”) and ending at midnight on September30, 2012 (the “Expiration Date”) or such earlier date as this Lease isterminated pursuant to its terms.

 

1.03.2                  Providedthat Lessee is not in default hereunder (after the giving of any written noticerequired hereunder and the expiration of any applicable cure period), Lesseeshall have the option to extend the Lease Term for three (3) additional terms(each, an “Option Term”) of five (5) years each, exercisable by giving writtennotice to Lessor not later than ninety (90) days prior to the end of thethen-current term.

 

**Section 1.04.****                         Rent**.

 

1.04.1                  (a)  During the Lease Term, Lessee shall pay toLessor the Basic Rent as follows:

 

•                                          October1, 2002 — September 30, 2003, $65,000.00 per month.

•                                          October1, 2003 — September 30, 2004, $66,560.00 per month.

•                                          October1, 2004 — September 30, 2005, $68,157.44 per month.

•                                          October1, 2005 — September 30, 2006, $69,793.21 per month.

•                                          October1, 2006 — September 30, 2007, $71,468.24 per month.

•                                          October1, 2007 — September 30, 2008, $73,183.47 per month.

•                                          October1, 2008 — September 30, 2009, $74,939.87 per month.

•                                          October1, 2009 — September 30, 2010, $76,738.42 per month.

•                                          October1, 2010 — September 30, 2011, $78,580.14 per month.

•                                          October1, 2011 — September 30, 2012, $80,466.06 per month.

 

(b)                                 Forthe first Option Term Lessee shall pay Basic Rent in an amount equal to ninetypercent (90%) of the Market Rate for the Premises (as defined in Section 1.04.2hereof), payable in equal monthly installments (but in no event shall such rentbe less than $80,466.06 per month).

 

(c)                                  Forthe second Option Term Lessee shall pay Basic Rent in an amount equal to in anamount equal to ninety-five percent (95%) of the Market Rate for the Premises,payable in equal monthly installments (but in no event shall such rent be lessthan the rent payable in the previous Option Term).

 

(c)                                  Forthe third Option Term Lessee shall pay Basic Rent in an amount equal to in anamount equal to ninety-five percent (95%) of the Market Rate for the Premises,payable in equal monthly installments (but in no event shall such rent be lessthan the rent payable in the previous Option Term).

 

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1.04.2                  Forthe purpose of this Lease, the “Market Rate for the Premises” shall mean anannual rental determined (as of one hundred eighty (180) days prior to thecommencement of the pertinent Option Term (an “Option Term Commencement Date”))for the then-prevailing market rate for space, comparable to the Premises,within a five (5) mile radius of the Premises. In determining such market rate, Lessor and Lessee shall take intoconsideration the “net” character of this Lease, the quality, size, loading,parking, design and location of the Premises, the condition and age of thePremises and any tenant improvements made by Lessee; provided, however, thatthe Market Rate for the Premises shall be adjusted to take into account imputedLeasing Costs and Tenant Concessions (as defined below) which Lessor wouldotherwise have to pay for or provide (as the context may require) for a newtenancy in the absence of Lessee’s exercise of its option to extend the LeaseTerm.  As used herein, the term (i) “TenantConcessions” shall include, without limitation, so-called free rent, tenant improvementallowances and work, moving allowances and lease takeovers; and (ii) “LeasingCosts” shall include an amount equal to leasing commissions and fees thatLessor would have to pay to a real estate broker if Lessor were to lease thePremises to a new tenant.

 

1.04.3                  Inthe event that Lessor and Lessee shall be unable to agree on the Market Ratefor the Premises for any Option Term not later than one hundred sixty(160) daysprior to the relevant Option Term Commencement Date, then not later than one hundredfifty (150)) days before such Option Term Commencement Date, Lessor and Lesseeshall each appoint a real estate broker, licensed in the State of Californiaand having ten (10) or more years experience in leasing industrial properties,who has participated (within one (1) year of the Option Term Commencement Date,and not on behalf of either party to this Lease) in a lease transaction forindustrial space within a five (5) mile radius of the Premises.  Not later than one hundred thirty-five (135))days prior to the Option Term Commencement Date, such brokers shall determinethe Market Rate for the Premises.  Ifsuch brokers are unable to agree upon the Market Rate for the Premises by suchdeadline, then not later than one hundred twenty (120) days prior to the OptionTerm Commencement Date, such brokers shall appoint a third industrial realestate broker, licensed in the State of California, having ten (10) or moreyears experience in leasing industrial properties, who has participated (withinone year of the Option Term Commencement Date, and not on behalf of eitherparty to this Lease) in a lease transaction for industrial space within a five(5) mile radius of the Premises, and he shall, not later than one hundred five(105) days prior to the Option Term Commencement Date, determine the MarketRate for the Premises and communicate it to Lessor and Lessee.  Such determination shall bind Lessor andLessee.  Lessee and Lessor shall pay thecosts and fees of their respective brokers and shall split equally the costsand fees of the third broker.

 

1.04.4                  TheBasic Rent shall be payable in equal monthly installments, in advance, on thefirst day of each and every month. Lessee shall perform all its obligations under this Lease at its solecost and expense, and shall pay all Basic Rent, additional charges and anyother sum due hereunder when due and payable, without notice or demand.

 

1.04.5                  Lesseeshall pay, as additional rent, all other amounts, costs, expenses, liabilitiesand obligations that Lessee herein assumes or agrees to pay,, and willreimburse Lessor for any payments thereof made by Lessor in accordance with theterms and requirements of this Lease (collectively, “Additional Rent’).  Such expenses shall include (withoutlimitation) (i) the cost of air conditioning, electricity, heating, mechanical,ventilation, water and sewer, and any 

 

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elevator systems and allother utilities, and the cost of supplies and equipment, and maintenance andservice contracts in connection therewith, (ii) the cost of repairs,maintenance and cleaning of any common areas, (iii) the cost of fire, extendedcoverage, sprinkler, public liability, property damage and other insurance,(iv) fees, charges and other costs, including, if an Event of Default shallhave occurred and be continuing hereunder, management fees, consulting fees,legal fees and accounting fees, of all independent contractors engaged byLessor, (v) the cost of any license or permit fees, (vi) all taxes and assessmentspursuant to Section 5.02(a) and (vii) any other costs and expenses of any otherkind whatsoever reasonably incurred in managing, operating, maintaining andrepairing the Premises, but excluding costs of any special services rendered toindividual tenants (including Lessee) for which a special charge is made, othercosts billed to and paid by individual tenants (including Lessee) and costspaid by proceeds of insurance.  In theevent of any failure by Lessee to pay any of the Additional Rent, Lessor shallhave all rights, powers and remedies provided for herein or by law as in thecase of nonpayment of the Basic Rent.

 

**Section 1.05****.****                         Paymentof Rent**.  Lessee will pay to Lessorall Basic Rent and Additional Rent by good check or checks subject to collection,at the principal office of Lessor, or at such other place or to such agent asLessor from time to time may designate by written notice to Lessee given notlater than the twentieth day of the month for the following and subsequentmonths.

 

**Section 1.06****.****                         LatePayment Charge**.  If Lessee shall failto make payment of any installment of Basic Rent, any payment of AdditionalRent or any payment of any other sums required by this Lease as provided inthis Lease within ten days after notice is given to Lessee stating that suchpayment is past due (regardless of any notice requirements for purposes ofArticle VII), Lessee shall pay to Lessor, in addition to such Basic Rent,Additional Rent or other sum, a late charge equal to 5% of the amount sodelinquent, said charge being intended as stipulated compensation for theadditional costs and expenses incurred by Lessor because of such late paymentand not as a penalty.

 

**ARTICLE II**

 

**Section 2.01.****                         Disclaimerof Representation by Lessor**.  Lesseeis fully familiar with the physical condition of the Premises and allImprovements.  Lessor has made norepresentation as to the condition of the Premises or Improvements or thefitness or availability thereof for any particular.  use and none shall be implied from this Lease,and Lessor shall not be liable for any latent or patent defect therein.

 

**Section 2.02.****                         PremisesLeased “As Is”**.  THE PREMISES,INCLUDING IMPROVEMENTS, ARE DEMISED AND LEASED TO LESSEE “AS IS” AND IN THEIRPRESENT CONDITION WITHOUT ANY REPRESENTATION OR WARRANTY BY LESSOR AS TO THEIRCOMPLIANCE WITH APPLICABLE LEGAL REQUIREMENTS AND INSURANCE REQUIREMENTS (ASDEFINED IN SECTION 6.04) NOW OR HEREAFTER IN EFFECT OR AS TO THEIR COMPLIANCEWITH APPLICABLE TERMS AND CONDITIONS OF ANY CONTRACTUAL REQUIREMENTS (ASDEFINED IN SECTION 2.07).

 

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LESSEE HASINSPECTED, IS FULLY FAMILIAR WITH AND HEREBY ACCEPTS THE PREMISES AND HAS FOUNDTHE SAME TO BE SATISFACTORY TO IT FOR ALL PURPOSES RELATING TO THIS LEASE.  LESSOR SHALL HAVE NO LIABILITY WHATSOEVER TOLESSEE IN RESPECT OF OR ARISING OUT OF THE EXISTING STATE OF TITLE TO THEPREMISES OR OF THE EXISTING CONDITION, STAGE OF COMPLETION OR QUALITY OFCONSTRUCTION OF THE IMPROVEMENTS.

 

LESSOR MAKESNO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE PREMISESOR OF ANY FIXTURES OR OTHER ITEMS CONSTITUTING ANY PORTION THEREOF, OR THELOCATION, USE, DESCRIPTION, DESIGN, MERCHANTABILITY, FITNESS FOR USE FOR APARTICULAR PURPOSE, CONDITION OR DURABILITY THEREOF, OR AS TO THE QUALITY OFTHE MATERIAL OR WORKMANSHIP THEREIN, OR WITH RESPECT TO LESSOR’S TITLE THERETOOR OWNERSHIP THEREOF, AND ALL RISKS INCIDENT THERETO SHALL BE BORNE BY LESSEE.

 

**Section 2.03.****                         Maintenanceand Repair**.

 

(a)                                  Lesseeacknowledges that it has received the Premises in good order and repair.  Lessee, at its own expense, will maintain allparts of the Premises in good repair and condition and will take all action andwill make all structural and nonstructural, foreseen and unforeseen and ordinaryand extraordinary changes and repairs that may be required to keep all parts ofthe Premises in good repair and condition (including, without limitation, allpainting, glass, utilities, conduits, fixtures and equipment, foundation, roof,exterior walls, heating and air conditioning systems, wiring, plumbing,sprinkler systems and other utilities, and all paving, sidewalks, roads,parking areas, curbs and gutters and fences). Lessor shall not be required to maintain, repair or rebuild all or anypart of the Premises.  Lessee waives theright to require Lessor to maintain, repair or rebuild all or any part of thePremises or make repairs at the expense of Lessor pursuant to any LegalRequirement, agreement, contract, covenant, condition or restrictions at anytime.

 

(b)                                 Replacementof or major repairs to all structural or mechanical systems shall be undertakenby Lessee at its sole cost and expense. Such replacements shall be made pursuant to and in accordance with plansand specifications approved in advance by Lessor as required for MajorAlterations.

 

(c)                                  Lesseeshall have the benefit of, and the right to enforce, all builders’ andmanufacturers’ warranties issued for the benefit of the Premises so long asLessee is not in default under the terms of this Lease and all costs of Lessor’scooperation are borne by Lessee Lessor agrees to promptly cooperate with Lesseeto the extent necessary or desirable to enforce the provisions of allwarranties.

 

**Section 2.04.****                         Alterations,Replacements and Additions**.  Withrespect to any alteration, change, addition or improvement (herein collectivelyreferred to as an “Alteration”) to any portion of the Premises:

 

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(a)                                  Ifsuch Alteration is not structural in nature and does not affect the conditionof the Improvements or any utilities and does not lessen the value of thePremises as it is at the commencement of such work, and if the cost thereof isless than $125,000 (which amount shall be increased by a factor of two and fourtenths percent (2.4%) annually during. the tern of this Lease (such amount being referred to herein at the “AlterationConsent Trigger”), Lessor’s consent to such Alteration shall not berequired.  Such Alterations (referred toherein as “Minor Alterations”) shall be expeditiously completed in a good andworkmanlike manner and in compliance with all applicable Legal Requirements andInsurance Requirements.  Lessee shall paythe increased premium, if any, charged by the insurance companies carrying insurancepolicies on the Premises, to cover the additional risk during the course ofsuch work.  Lessee shall provide Lessorupon request with evidence of payment for all work done within 90 days aftercompletion thereof.  All such Alterationsmade by Lessee to the existing (as of the date of this Lease) Improvements,Lessor’s Fixtures and Lessor’s Equipment shall be and become part of thePremises.

 

(b)                                 Ifsuch Alteration is structural in nature or adversely affects the value orutility of the Improvements or lessens the value of the Premises as it is atthe commencement of such work in any material respect, or if the cost thereofexceeds the Alteration Consent Trigger, Lessor’s prior written consent to suchalteration thereto shall be required, but such consent shall not beunreasonably withheld, delayed or conditioned. Such Alterations (referred to herein as “Major Alterations”) shall beperformed in accordance with the following requirements:

 

(i)                                     Beforecommencing any Major Alteration, Lessee shall, upon request, at Lessee’s owncost and expense, deliver to Lessor an endorsement to the commercial generalliability policy required by this Lease, which endorsement shall provide thatsuch insurance will cover work in progress;

 

(ii)                                  Lesseeshall pay the increased premium, if any, charged by the insurance companiescarrying insurance policies on the Premises, to cover the additional riskduring the course of such work;

 

(iii)                               Allsuch Alterations made by Lessee to the existing (as of the date of this Lease)Improvements, Lessor’s Fixtures and Lessor’s Equipment shall be and become apart of the Premises;

 

(iv)                              Lesseeshall, prior to the commencement of such work, submit plans and specificationsto Lessor for Lessor’s approval.  IfLessor approves such plans and specifications, Lessee shall obtain allnecessary approvals from municipal departments and bureaus and from any othermunicipal, state and federal authorities having supervision or jurisdiction ofthe Premises, and a copy of all such necessary approvals shall be delivered toLessor;

 

(v)                                 Allof such work shall be completed substantially in accordance with the plans andspecifications approved by Lessor and in accordance with all LegalRequirements;

 

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(vi)                              Nobuilding now or hereafter erected upon the Premises shall be demolished, norshall Major Alteration be made thereto, without the prior written consent ofLessor;

 

(vii)                           Lesseeshall provide Lessor upon request with evidence of payment for all work donewithin 90 days after completion thereof; and

 

(viii)                        Priorto the commencement of any such work, Lessee shall furnish Lessor such securityor assurances as are reasonably required by Lessor to assure completion of theMajor Alteration and payment of the costs thereof, including Lessor’sreasonable approval of the proposed construction budget or estimated costs ofconstruction and Lessee’s assurance that Lessee can and will pay all costs ofconstruction and will discharge all construction liens which may be asserted onaccount of the work.

 

(c)                                  Theprovisions of this Section shall also apply with respect to any Alterationsundertaken by any subtenant of any portion of the Premises.

 

**Section 2.05.****                         Encumbrances**.  If all or any part of the Improvements shallencroach upon any property, street or right-of-way adjoining or adjacent to thePremises, or shall violate the agreements or conditions affecting the Premisesor any part thereof, or shall hinder, obstruct or impair any easement orright-of-way to which the Premises are subject, then, promptly after writtenrequest of Lessor (unless such encroachment, violation, hindrance, obstructionor impairment is not material) or of any person so affected, Lessee shall, atits expense, either (a) obtain valid and effective waivers or settlements ofall claims, liabilities and damages resulting therefrom or (b) if Lessorconsents thereto, make such changes, including alteration or removal, to theImprovements and take such other action as shall be necessary to remove or eliminatesuch encroachments, violations, hindrances, obstructions or impairments.

 

**Section 2.06.****                         Replacementof Lessor’s Fixtures and Lessor’s Equipment**.

 

(a)                                  Lesseemay, from time to time, subject to Lessor’s prior written consent and upon notless than 30 days’ prior written notice to Lessor, remove and dispose of any ofLessor’s Fixtures and Lessor’s Equipment constituting a major component of thePremises (i.e.  plumbing, gas,electrical, heating, ventilating, lighting and air conditioning systems.  Lessor’s consent shall not be unreasonablywithheld so long as Lessee promptly replaces such Lessor’s Fixtures and Lessor’sEquipment, constituting a major component of the Premises, with items which areat least equal in value and general utility to those removed, which are free ofany liens or security interests and the fee title to which is conveyed directlyto Lessor and made subject to this Lease (provided, however, that Lessee shallnot be required to replace a component of the Premises if its function is obsolete).

 

(b)                                 Lesseemay, from time to time, and upon not less than 30 days’ prior written notice toLessor, remove and dispose of any of Lessor’s Fixtures and Lessor’s Equipmentwhich does not constitute a major component of the Premises so long as Lessee promptlyreplaces such Lessor’s Fixtures and Lessor’s Equipment which are not 

 

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majorcomponents of the Premises with items which are at least equal in value andgeneral utility to those removed (provided, however, that Lessee shall not berequired to replace a component of the Premises if its function isobsolete).  Such components must be freeof any liens or security interests and the fee title to such must be, uponplacement of such components upon the Premises, conveyed directly to Lessor andmade subject of this Lease.

 

**Section 2.07.****                         LesseeTo Comply With Covenants**.  Lesseeagrees that it will not use the Premises, or any part thereof, or suffer orpermit the same to be used in any manner or suffer or do anything upon thePremises or any part thereof which may violate any material covenant,condition, reservation, agreement, easement or restriction to which thePremises may be subject on the Commencement Date or which may be imposed aftersaid date which are consented to in writing by Lessee, and Lessee agrees thatit will observe and perform and will comply with and carry out the provisionsof all Contractual Requirements during the Lease Term.  “Contractual Requirements” are defined as allobligations required under any covenants, conditions and restrictions, easementagreements, operating agreements, equipment leases or other contractualobligations applicable to and binding upon the Premises.

 

**Section 2.08.****                         Lessor’sCooperation Clause**.  Upon reasonablerequest from time to time, Lessor shall join with Lessee in executing: (a) anyconveyance, dedication, grant of easement or license or other instrument asshall be reasonably necessary to provide public utility service to the Premisesor in order to allow the Permitted Uses of the Premises by Lessee and (b) tothe extent that the signature or approval of Lessor is required by anygovernmental body, applications for such permits or other governmentalauthorization or approvals.  Lessor willjoin in such applications or other documentation without any cost or liabilityto Lessor in connection therewith, and Lessee shall indemnify and hold Lessorharmless from any cost, liability or expense arising therefrom.

 

**Section 2.09.****                         NoThird-party Claims Against Lessor**. Nothing contained in this Lease shall constitute the consent or requestof Lessor, express or implied, by inference or otherwise, to any person, firmor entity for the performance of any labor or the furnishing of any materialsor other property in respect of the Premises or any part thereof, or as givingLessee any authority to contract for or permit the rendering of any services orthe furnishing of any materials or other property so as to permit the making ofany claim against Lessor.  Nothing in thisLease shall be deemed as giving Lessee any right, power or authority tocontract for or permit the rendering of any service or the furnishing of anymaterial that would give rise to any mechanic’s or other lien against Lessor’sinterest in the Premises.  NOTICE ISHEREBY GIVEN THAT LESSOR WILL NOT BE LIABLE FOR ANY LABOR, SERVICES ORMATERIALS FURNISHED OR TO BE FURNISHED TO LESSEE, OR TO ANYONE HOLDING ANINTEREST IN THE PREMISES (OR ANY PART THEREOF) THROUGH OR UNDER LESSEE, ANDTHAT NO CONSTRUCTION, MECHANIC’S OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES ORMATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF LESSOR IN THE PREMISES.

 

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**ARTICLE III**

 

**Section 3.01.****                         Removal**.  Lessee may remove Lessee’s Equipment at anytime during the Lease Term, and Lessee shall remove Lessee’s Equipment upontermination of this Lease.  Any of Lessee’sEquipment not removed by Lessee prior to the expiration of the Lease or earliertermination shall be considered abandoned by Lessee and may be appropriated,sold, destroyed or otherwise disposed of by Lessor without notice toLessee.  Lessee shall pay Lessor upondemand all reasonable costs and expenses incurred by Lessor in removing, storingand disposing of same.  Lessee will repairat its expense (or shall reimburse Lessor upon demand for all expenses incurredby Lessor in repairing) all damage to the Premises caused to the Premises bythe removal of Lessee’s Equipment, except where such damage is due to the grossnegligence or intentional misconduct of Lessor or its contractors.

 

**ARTICLE IV**

 

**Section 4.01.****                         Restrictionon Assignment or Other Transfer**. Lessee covenants and agrees for Lessee and its successors, assigns andlegal representatives that neither this Lease nor the Lease Term and estatehereby granted, nor any part hereof or thereof, will be assigned, mortgaged,pledged or encumbered by Lessee or otherwise transferred (whether voluntarily,involuntarily, by operation of law, or otherwise) or for any purpose other thanas set forth herein, without the prior written consent of Lessor in every case(a “Transfer”), except in accordance with this Section (such consent shall notbe unreasonably withheld, delayed or conditioned provided the conditions inSection 4.02 have been satisfied).  Forthe purposes of this Section, a Transfer shall be deemed to include anytransfer, assignment or encumbrance of the controlling interests in Lessee,whether occurring by reason of one transaction or cumulatively in any two ormore transactions; and in any event a Transfer shall not be deemed to occursolely as a result of the death of any natural person or the transfer of anyinterest to a trust for estate planning purposes without the release of thetransferor.

 

Notwithstandingthe foregoing, Lessee may, without consent, assign or sublet up to one hundredpercent (100%) of the leaseable floor area of the Premises to an Affiliate ofLessee (as defined in Section 4.08 below), provided that Lessee shall agree inwriting to remain fully liable for the obligations of the “Lessee”hereunder.  Lessee shall give Lessorprompt written notice of any such assignment or subletting as required bySection 4.05 below.  In the case of anassignment, Lessee shall also execute and deliver to Lessor an agreement inform and substance in all respects reasonably satisfactory to Lessor wherebyLessee ratifies and guarantees all of the obligations of the assignee Affiliateof Lessee under this Lease.

 

Except as isset forth above, any sublease of more than twenty-five percent (25%) of theleaseable floor area of the Premises will be deemed a Transfer..  If the Transfer involves an assignment ofthis Lease (including a Transfer to an Affiliate of Lessee), the assignee shallexecute and deliver to Lessor an agreement in form and substance in allrespects reasonably satisfactory to Lessor whereby such assignee assumes andagrees to be bound by and perform all of the obligations of Lessee under thisLease.

 

**Section 4.02.****                         InformationAbout Proposed Transferee**. Notwithstanding anything contained in Section 4.01, in the event Lesseewishes to assign or otherwise make a Transfer of 

 

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this Lease, Lessee shallfirst notify Lessor of the name of the proposed transferee and of the materialterms, provisions and conditions contained in the proposed Transfer, and shallprovide Lessor with such information as to the proposed transferee’s financialcondition, business experience and standing as Lessor may reasonably require.

 

**Section 4.03.****                         TermsRelating to Consent**.  Lessor shallhave the right to withhold or condition its consent (subject, however, to itscovenant not to unreasonably withhold, delay or condition such consent) to anyproposed Transfer unless the following conditions are met:

 

(a)                                  theproposed transferee is of a financial standing which in Lessor’s judgment willallow such proposed transferee to meet its obligations under this Lease as theybecome due;

 

(b)                                 thePremises will be used by such transferee for a Permitted Use;

 

(c)                                  thereshall be no material default by Lessee which has not been cured within any (ifany) applicable cure period under any of the terms, covenants and conditions ofthis Lease at the time that Lessor’s consent to any such Transfer is requestedor on the effective date of the Transfer, and

 

(d)                                 Lesseeshall reimburse Lessor for any reasonable expenses that may be incurred byLessor in connection with the proposed Transfer, including (without limitation)the costs of making investigations as to the acceptability of a proposedtransferee and all reasonable legal fees and legal expenses incurred inconnection with the granting of any requested consent to the Transfer;

 

(e)                                  anyrequest for an assignment of this Lease shall be accompanied by the proposedinstrument of assignment and the assignment document will provide that theassignee cannot further transfer its interest without complying with thetransfer .  requirements of this Lease.

 

**Section 4.04.****                         Subleases**.  Lessee may sublease all or any part of the Premisesto one or more subtenants without the consent of Lessor, provided the subleaseis subordinate to this Lease and to the Fee Mortgage, and the sublessee doesnot require a nondisturbance agreement with Lessor.

 

In the eventthat a subtenant requests a nondisturbance agreement, then Lessor will grant areasonably acceptable nondisturbance agreement to such subtenant, provided thatsuch subtenant and sublease are reasonably acceptable to Lessor under itsthen-current underwriting standards for similar properties and transactions,and to the extent that a proposed subtenant requests a nondisturbanceagreement, such sublease shall be submitted to Lessor for review and approval(which shall not be unreasonably withheld, conditioned or delayed) together withsuch financial information regarding the proposed subtenant as Lessor mayreasonably request.  Notwithstanding theforegoing, Lessor shall grant a reasonable nondisturbance agreement to aproposed subtenant if (a) such subtenant has a tangible net worth (orstockholder equity, as the context may require) of not less than $100,000,000,and (b) the rent payable under the sublease is reasonable under thethen-prevailing market for sublease space, of the type and size being subleasedin the Premises, in the Fremont, California, industrial market.

 

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“Fee Mortgage”means any mortgage, deed of trust or similar instrument encumbering realproperty to secure an obligation made by Lessor which is at any time a lien onLessor’s interest in the Premises, the beneficiary of which is referred toherein as “Fee Mortgagee.” Any sublease of all or a portion of the Premisesshall specifically state that it is subject and subordinate to the terms andconditions of this Lease and to the Fee Mortgage, that it shall be limited bythe provisions hereof and that the lessee thereunder shall not have any otheror further rights than Lessee has under this Lease.  No sublease shall extend for any periodlonger than the then-current term of this Lease.

 

**Section 4.05.****                         OriginalDocuments to Lessor**.  In the eventthis Lease is assigned or if more than twenty-five percent (25%) of thePremises is sublet a duplicate original of the instrument of assignment orsubletting, as the case may be, shall be sent to Lessor within 10 days afterthe effective date thereof.  Any assigneeof this Lease shall assume the obligations of Lessee hereunder and a duplicateoriginal of such assumption shall be delivered to Lessor together with theaforesaid duplicate original of the assignment instrument.

 

**Section 4.06.****                         Effectof Transfer**.  Unless Lessor shallotherwise agree in writing at the time of an assignment, Transfer, or sublease,no such assignment, Transfer or sublease shall release Lessee from liability hereunderor affect or reduce any obligations.  ofLessee named herein or of any other Lessee assuming this Lease or affect orreduce the rights of Lessor hereunder. All obligations of Lessee named herein and of any other Lessee assumingthis Lease shall continue in full effect as the joint and several obligationsof a principal and not of a guarantor or surety, as though no assignment,Transfer or sublease had been made.  Inconnection therewith, Lessee named herein and each succeeding Lessee assumingthis Lease agrees that the joint and several liability of each hereunder shallcontinue in full force and effect and shall not be terminated or affected byany action which Lessor may take or fail to take against any Lessee hereunderor by reason of any waiver of, or failure to enforce, any rights or remediesreserved to Lessor, or otherwise.

 

**Section 4.07.****                         Collectionof Rent**.  If Lessee’s interest inthis Lease is assigned, whether or not in violation of the provisions hereof,Lessor may collect Basic Rent and Additional Rent from the assignee.  If the Premises is sublet to, or occupied by,or used by, any person other than Lessee, whether or not in violation hereof,Lessor after default by Lessee under this Lease, may collect Basic Rent andAdditional Rent from the subtenant, user or occupant.  In either case, no such assignment, subleaseor collection shall affect Lessee’s obligations hereunder, and Lessor shallapply the net amount collected to the Basic Rent, Additional Rent and otherobligations of Lessee reserved in this Lease in such order as Lessor elects.

 

**Section 4.08.****                         AffiliateTransfers**.  Notwithstanding anythingto the contrary in this Section 4, Lessee may assign this Lease or sublease thePremises (or any portion thereof) without Lessor’s consent to any Affiliate ofLessee or to any person or entity which acquires all of the stock or assets ofLessee as a going concern; provided that Lessee shall deliver to Lessor, notlater than twenty (20) days after the effective date of such transaction, a trueand complete copy of the instrument -by which such transaction is effected or amemorandum thereof.  In the event ofassignment of this Lease pursuant to this paragraph the assignee shall bedeemed to have assumed all of the obligations of Lessee under this Lease.  As used herein, “Affiliate of Lessee” shallmean any corporation or other entity that controls, is controlled by or isunder common 

 

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control with Lessee orany corporation or other entity resulting from the merger or consolidation withLessee.  The foregoing notwithstanding,no such transfer to an Affiliate of Lessee shall release Lessee of liabilityhereunder unless Lessor shall otherwise agree in writing at the time of thetransfer.

 

**ARTICLE V**

 

**Section 5.01****.****                         Net Lease**.

 

(a)                                  Itis expressly understood and agreed by and between the parties that this Leaseis an absolute net lease, and the Basic Rent and all other sums payablehereunder to or on behalf of Lessor shall be paid without notice or demand andwithout setoff, counterclaim, abatement, suspension, deduction or defense.

 

(b)                                 Exceptas otherwise expressly provided in the Lease, this Lease shall not terminate,nor shall Lessee have any right to terminate this Lease or be entitled to theabatement of any rent or any reduction thereof, nor shall the obligationshereunder of Lessee be otherwise affected, by reason of any damage to ordestruction of all or any part of the Premises from whatever cause, the takingof the Premises or any portion thereof by condemnation or otherwise, theprohibition, limitation or restriction of Lessee’s use of the Premises, orinterference with such use by any private person or corporation, or by reasonof any eviction by paramount title or otherwise, or for any other cause whethersimilar or dissimilar to the foregoing, any present or future law to thecontrary notwithstanding, it being the intention of the parties hereto that therent and all other charges payable hereunder to or on behalf of Lessor shallcontinue to be payable in all events and the obligations of Lessee hereundershall continue unaffected, unless the requirement to pay or perform the sameshall be terminated pursuant to an express provision of this Lease.  Nothing contained in this Section shall be deemeda waiver by Lessee of any rights that it may have to bring a separate actionwith respect to any default by Lessor hereunder or under any other agreement.

 

(c)                                  Lesseecovenants and agrees that it will remain obligated under this Lease inaccordance with its terms and that Lessee will not take any action toterminate, rescind or avoid this Lease, notwithstanding the bankruptcy,insolvency, reorganization, composition, readjustment, liquidation,dissolution, winding-up or other proceeding affecting Lessor in any suchproceeding and notwithstanding any action with respect to this Lease which maybe taken by any trustee or receiver of Lessor in any such proceeding or by anycourt in any such proceeding.

 

(d)                                 Exceptas may be otherwise expressly provided in this Lease with respect tocondemnation and casualty, Lessee waives all rights now or hereafter conferredby law (i) to quit, terminate or surrender this Lease or the Premises or anypart thereof or (ii) to any abatement, suspension, deferment or reduction ofthe rent, or any other sums payable hereunder to or on behalf of Lessor,regardless of whether such rights shall arise from any present or futureconstitution, statute or rule of law.

 

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**Section 5.02.****                         Taxesand Assessments; Compliance With Law**.

 

(a)                                  Lesseeshall pay, prior to any interest, penalty, fine or cost that may be added fornonpayment: (i) all taxes, assessments, levies, fees, water and sewer rents andcharges and all other governmental charges, general and special, ordinary andextraordinary, foreseen and unforeseen, which are, at any time prior to orduring the Lease Term hereof, imposed or levied upon or assessed against orwhich arise with respect to (A) the Premises, (B) any Basic Rent, AdditionalRent or other sums payable hereunder, (C) this Lease or the leasehold estatehereby created or (D) the operation, possession or use of the Premises; (ii)all taxes imposed or levied upon, assessed against or measured by any BasicRent, Additional Rent or other sums payable hereunder, specifically excluding,however, income taxes of Lessor; (iii) all sales, value added, ad valorem, useand similar taxes at any time levied, assessed or payable on account of theacquisition, ownership, leasing, operation, possession or use of the Premises;and (iv) all charges of utilities, communications and similar services servingthe Premises.  Lessee shall not berequired to pay any franchise, estate, inheritance, transfer, income, capitalgains or similar tax of Lessor unless such tax is imposed, levied or assessedin substitution for any other tax, assessment, charge or levy which Lessee isrequired to pay pursuant to this Section; provided, however, that if, of anytime during the Lease Term, the method of taxation shall be such that thereshall be assessed, levied, charged or imposed on Lessor a capital levy or othertax directly on the rents received therefrom, or upon the value of the Premisesor any present or future improvement or improvements on the Premises, then allsuch levies and taxes or the part thereof so measured or based shall be payableby Lessee, and Lessee shall pay and discharge the same as herein provided.  Lessee will furnish to Lessor, promptly afterdemand therefor, proof of payment of all items referred to above which arepayable by Lessee.  If any suchassessment may legally be paid in installments, Lessee may pay such assessmentin installments; in such event, Lessee shall be liable only for installmentswhich become due and payable with respect to any tax period occurring in wholeor in part during the Lease Term hereof, provided, however, that all amountsreferred to in this Section for the fiscal or tax year in which the Lease Termshall expire shall be apportioned so that Lessee shall pay those portionsthereof which correspond with the portion of such year as are within the LeaseTerm hereby demised.  Lessee shall havethe right to contest taxes assessed against the Premises by appropriateproceedings in good faith, timely filed, provided that Lessee shall first paysuch taxes or (at its expense) bond over such taxes or (at its expense) takesuch other steps as may be required to avoid delinquency or foreclosure of thelien of such taxes.  Lessor may requirethat Lessee post security for payment of such lien.

 

(b)                                 Lesseeshall comply with and cause the Premises to comply with and shall assume allobligations and liabilities with respect to (i) all laws, ordinances andregulations and other governmental rules, orders and determinations presentlyin effect or hereafter enacted, made or issued, whether or not presentlycontemplated (collectively, “Legal Requirements”), applicable to the Premisesor the ownership, operation, use or possession thereof and (ii) all agreements,contracts, insurance policies (including, without limitation, to the extentnecessary to prevent cancellation thereof and to insure full payment of anyclaims made under such policies), agreements, covenants, conditions andrestrictions now or hereafter applicable to the Premises or the ownership,operation,

 

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useor possession thereof, including (without limitation) all such LegalRequirements, contracts, agreements, covenants, conditions and restrictionsthat require structural, unforeseen or extraordinary changes; provided,however, that, with respect to any of the obligations of Lessee in clause (ii)above which are not now in existence, Lessee shall not be required to so complyunless Lessee is either a party thereto or has given its written consentthereto, or unless the same is occasioned by Legal Requirements or Lessee’sdefault (including any failure or omission by Lessee) under this Lease.  Nothing in clause (ii) of the immediatelypreceding sentence or the following sentence shall modify the obligations ofLessee under Section 5.07.

 

(c)                                  Ifan Event of Default shall occur and be continuing, upon the request of Lessor,Lessee shall, in addition to and concurrently with the payment of Basic Rent asrequired in Subsection 1.04(a), each month pay .one-twelfth of the amount (asestimated by Lessor) of the annual taxes and assessments described inSubsection 5.02(a) and the annual premiums for insurance required in Section6.04 next becoming due and payable with respect to the Premises, and Lesseeshall also pay to Lessor on demand therefor the amount by which the actualtaxes and assessments and insurance premiums exceed the payment by Lesseerequired in this subsection.  In theevent that Lessee shall timely pay any such sums to Lessor or Lessor’sdesignee, then Lessor shall cause such sums to be timely paid to the relevanttaxing authority to cover such taxes.

 

**Section 5.03.****                         UtilityServices**.  Lessee agrees to arrangefor, and to pay or cause to be paid all charges for, gas, water, sewer,electricity, light, heat, power, telephone or other communication service orother utility or service used, rendered or supplied to, upon or in connectionwith the Premises or any portion thereof, throughout the Lease Term, and toindemnify Lessor and save it harmless against any liability or damages arisingfrom any interruption, curtailment or stoppage of any such utility orservice.  Lessee shall also, at its solecost and expense, procure or cause to be procured any and all necessary permits,licenses or other authorizations required for the lawful and proper use and forthe installation and maintenance upon the Premises of wires, pipes, conduits,tubes and other equipment and appliances for use in supplying any such utilityservice to or upon the Premises.  Lesseeexpressly agrees that Lessor is not, nor shall it be, required to furnish toLessee or any other occupant of the Premises, during the demised term, anywater, sewer service, gas, heat, electricity, light, power or any other facilities,equipment, labor, materials or services of any kind whatsoever.

 

**Section 5.04.****                         NoAdverse Possession**.  Lessee shall notsuffer or permit the Premises or any part or parts thereof to be used in suchmanner as might reasonably tend to impair Lessor’s title to the Premises or anyportion thereof, or in such manner.  asmight reasonably make possible a claim or claims of adverse usage or adversepossession, or of implied dedication of the Premises or any portion thereof.

 

**Section 5.05.****                         Entryby Lessor**.  Lessor, the Fee Mortgageeand their authorized representatives shall have the right to enter the Premisesor any portion thereof at all reasonable times upon reasonable-prior notice(except in cases of emergency, where no notice will be required) to Lessee (a)for the purpose of inspecting the same (including without limitation anyenvironmental inspection) or, after the occurrence of an Event of Default byLessee in completing any alterations or repairs required hereunder, for thepurpose of doing any work, and 

 

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may take all such actionthereon as may be necessary or appropriate for any such purpose (but nothingcontained in this Lease or otherwise shall create or imply any duty upon thepart of Lessor to make any such inspection or do any such work), and (b) forthe purpose of showing the Premises to prospective purchasers and mortgageesand, within 12 months prior to the expiration of the Lease Term, for thepurpose of showing the same to prospective lessees.  No such entry shall constitute an eviction ofLessee.

 

**Section 5.06.****                         Liens**.  Lessee will remove and discharge any charge,lien, security interest or encumbrance upon the Premises or upon any BasicRent, Additional Rent or other sums payable hereunder which arises for anyreason, including (without limitation) all liens which arise out of thepossession, use, occupancy, construction, repair or rebuilding of the Premisesor by reason of labor or materials furnished or claimed to have been furnished toLessee or for the Premises, but not including (a) the liens and encumbrancesset forth in Schedule C, (b) this Lease and any assignment hereof or anysublease permitted hereunder and (c) any mortgage, charge, lien, securityinterest or encumbrance created or caused by Lessor or its agents, employees orrepresentatives without the consent of Lessee. Lessee may provide a bond or other security acceptable to Lessor toremove or pay all costs associated with the removal of any such lien.  Nothing contained in this Lease shall beconstrued as constituting the consent or request of Lessor, express or implied,to or for the performance (on behalf of or for the benefit of Lessor) by anycontractor, laborer, materialman or vendor, of any labor or services or for thefurnishing of any materials for any construction, alteration, addition, repairor demolition of or to the Premises or any part thereof.  Notice is hereby given that Lessor will notbe liable for any labor, services or materials furnished or to be furnished toLessee, or to anyone holding an interest in the Premises or any part thereofthrough or under Lessee, and that no mechanic’s or other liens for any suchlabor, services or materials shall attach to or affect the interest of Lessorin and to the Premises.  Lessee shallhave the right to contest any such lien, by appropriate proceedings in goodfaith, timely filed, provided, however, that Lessee shall bond over such lienor otherwise take such steps (at its expense) as may be required in order toavoid delinquency or foreclosure of such lien. Lessor may require that Lessee post security for payment of such lien.

 

**Section 5.07.****                         Indemnification**.  Lessee will defend, protect, indemnify andsave harmless Lessor, its agents and employees and the Fee Mortgagee, from andagainst any and all liabilities, obligations, damages, losses, penalties,claims, causes of action, costs, charges and/or expenses (excludingconsequential damages), including reasonable attorneys’ fees and expenses,which may be imposed upon or incurred by or asserted against Lessor,.  its agents or employees or the Fee Mortgageeby reason of (a) any accident, injury to any person (including death) or damageto property occurring on or about the Premises from all causes whatsoever(except to the extent caused by any act of sole negligence or willfulmisconduct of Lessor or Fee Mortgagee), (b) any loss arising out of any workperformed on Premises by Lessee or any agent, employee or contractor of Lesseeor by any assignee or sublessee of Lessee or any agent, employee or contractorof any such assignee or sublessee, (c) any default on the part of Lessee toperform or comply with any term of this Lease, (d) any claim for theperformance of labor or the furnishing of materials or other property at Lessee’srequest or at the request of anyone claiming under Lessee or performed byLessor in respect of the Premises or any part thereof, (e) any action orproceeding pertaining to the Premises to which Lessor, its agents or employeesor the Fee Mortgagee is made a party or in which it becomes necessary in thejudgment of Lessor to defend 

 

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or uphold the validity ofthe interest of Lessor in the Premises (but excluding title claims not causedor incurred by Lessee, it being understood that Lessor, and not Lessee, shallhave the obligation and bear the expense and consequences of title claims whichare asserted by third parties and which are not caused by any act or omissionof Lessee) and (f) any acts, omissions, or negligence of Lessee or thesublessees, contractors, agents, employees, invitees, customers,concessionaires or licensees of Lessee (except to the extent caused by any actof sole negligence or willful misconduct of Lessor or Fee Mortgagee).

 

**Section 5.08.****                         EnvironmentalCompliance**.

 

(a)                                  **Lessee’s Representations**. As a material inducement for Lessor to enter into this Lease, Lesseerepresents and warrants that (i) except as may be permitted by applicable law,throughout the Lease Term (A) all parts of the Premises will be kept free (byLessee and others) of Hazardous Materials (as defined below) and (B) no part ofthe Premises will be used by Lessee or others to generate, manufacture, refine,transport, treat, store, handle, dispose of, transfer, produce or processHazardous Materials and (ii) Lessee will not suffer or permit any activity in,at or from all or any part of the Premises that will cause or contribute topollution (by petroleum or petroleum products, or otherwise) of the Premises inwhole or in part or any other property.  “HazardousMaterials” shall mean all materials which because of their quantity,concentration or physical, chemical or infectious characteristics may cause orpose a present or potential hazard to human health or the environment whenimproperly handled, treated, stored, transported, disposed of or otherwisemanaged.  The term shall include (withoutlimitation) all petroleum, petroleum products, explosives, - radioactivematerials, hazardous wastes, hazardous or toxic substances, any materialcontaining 1% or more asbestos by weight or any other substance or material nowor hereafter defined as a “hazardous” or “toxic” substance, material or productby the U.S.  Environmental ProtectionAgency or the state in which the Premises is located under the ComprehensiveEnvironmental Response, Compensation and Liability Act (CERCLA), the ResourceConservation and Recovery Act (RCRA), the Toxic Substances Control Act (TSCA),the Federal Water Pollution Control Act (FWPCA) or comparable state statutesand other Environmental Requirements (as defined below).  Lessee shall comply fully with allEnvironmental Requirements.  “EnvironmentalRequirements” shall mean all applicable laws pertaining to the protection ofhuman health and the environment, including (without limitation) employee andcommunity right-to-know laws and all laws regarding the use, generation,storage, transportation, treatment, disposal or other handling of HazardousMaterials...  The only HazardousMaterials permitted on the Premises are cleaning products and pharmaceuticalproducts, chemicals and solvents used in connection with the manufacturing,testing, storage and distribution of Lessee’s pharmaceutical products, andother materials in ordinary quantities which are used in the ordinary course ofbusiness and necessary for the conduct of the Permitted Uses and which Lesseeuses in strict compliance with all applicable Environmental Requirements.

 

(b)                                 **Lessee’s Remediation**. If during the Lease Term any Hazardous Materials are dumped, released,discharged, spilled or leaked onto or into the Premises or found to becontaminating the Premises (or if a party has reasonable cause to believe thatsuch dumping, releasing, discharge, spilling or leak may have occurred or thatsuch 

 

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HazardousMaterials may be contaminating the Premises), the party will notify the otherparty in writing (except in cases of an emergency as described in Section 5.05in which event the party shall have the right to take action without suchnotice as provided therein) as to the matter in question.  In such event or at any other time as may berequested by Lessor, the parties will cooperate in having reasonable examinations,tests or investigations performed at Lessee’s expense to determine the extentof the problem and nature of appropriate corrective action (or if Lessee failsto cause such examinations or investigations to be performed after notice ofthe required action Lessor will have the right to perform them on Lessee’sbehalf and at Lessee’s expense).  If suchexaminations demonstrate that the Premises is contaminated by HazardousMaterials at levels requiring remedial action under applicable laws, Lesseewill have 30 days (or such longer time as may be reasonably necessary under thecircumstances or such lesser time as may be required by emergency conditions,by law, regulation or judicial order, or by any governmental entity, whicheveris sooner) after written notice from Lessor to eliminate same and (to theextent necessary) to restore the Premises to prior condition but with newnon-Hazardous Materials, failing which Lessor may either terminate this Leaseon written notice to Lessee or take all action deemed desirable by Lessor toeffect such elimination and (to the extent necessary) restoration.  If Lessor elects the latter, upon request andas Additional Rent, Lessor will be entitled to receive from Lessee allreasonable costs and expenses in any way associated therewith, plus interest atthe rate provided in Section 7.02(k) hereof.

 

(c)                                  **Lessee’s Indemnity**. Lessee, for itself, its successors and assigns, hereby agrees to defend,indemnify, hold harmless and reimburse Lessor, its successors and assigns, andany Fee Mortgagee from, against and for any and all damages, claims, demands,liabilities, losses, penalties and expenses (excluding consequential damagesbut including, without limitation, court costs and reasonable attorneys’ fees),including, without limitation, any diminution in the value of the Premises,which are in any manner caused in whole or in part by the presence of anyHazardous Materials on or about the Premises or the failure of Lessee or anysubtenant, agent, employee or contractor of Lessee or the Premises to complywith any Environmental Requirements, whether or not the same are known to orcaused by Lessee and whether the same occur during the term of this Lease, anytime prior to the term of this Lease or, with respect to any occurrence orcondition on or about the Premises which is caused by any condition, act oromission prior to the expiration of this Lease, after the term of theLease.  This indemnity shall survive thetermination, expiration or forfeiture of this Lease.  Notwithstanding the foregoing, suchindemnities shall not be deemed to cover any acts or omissions which occurredprior to January 1, 1989, or which first occur after the expiration or earliertermination of the Lease Term.

 

(d)                                 **Lessor’s Cooperation and Acknowledgment**.  Unless an Event of Default shall existhereunder or Lessee shall not be diligently performing its obligations undersubsections (b) and (c) above, Lessor agrees to cooperate with Lessee inconnection with (i) any claim Lessor and/or Lessee may have against any thirdparty for the cost of any remediation conducted or to be conducted on, in andunder the Premises or with respect to any damage caused to the Premises, and(ii) any insurance covering such remediation and/or damage to thePremises.  Lessor hereby assigns toLessee any 

 

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andall rights, claims or causes of action Lessor may have with against such thirdparty or in connection with such insurance to the extent of any sums paid byLessee in fulfillment of its obligations under subsections (b) and (c) aboveexcept to the extent that such rights, claims, causes of action or insuranceproceeds are necessary to fully compensate Lessor with respect to any suchremediation or damage to the Premises. Lessee agrees to pay all Lessor’s out-of-pocket costs incurred by Lessorin connection with such cooperation by Lessor in connection with a claim madeby or against Lessee.  Lessoracknowledges that Lessee’s operations in the Premises involve themanufacturing, testing, storage and distribution of pharmaceutical products anduse of chemicals and solvents in connection with the manufacturing, testing,storage and distribution of such products; provided, however, that suchacknowledgment shall not affect or impair Lessee’s obligations under this Section 5.08.

 

**ARTICLE VI**

 

**Section 6.01.****                         Compensation**.  Except as provided in Subsection 6.02(a)(i),Lessee hereby irrevocably assigns to Lessor any award, compensation orinsurance payment to which Lessee may become entitled by reason of Lessee’sinterest in the Premises (a) if the use, occupancy or title of the Premises orany part thereof is taken, requisitioned or sold in, by or on account of anyactual or threatened eminent domain proceeding or other action by any personhaving the power of eminent domain (“Condemnation”) or (b) if the Premises orany part thereof is damaged or destroyed by fire, flood or other casualty,including (without limitation) vandalism (“Casualty”).  All awards, compensations, damages andinsurance payments on account of any Condemnation or Casualty are hereincollectively called “Compensation.” Lessor may appear in any such proceeding oraction to negotiate, prosecute and adjust any claim for any Compensation, andLessor shall collect any such Compensation. Lessee shall pay all of Lessor’s reasonable costs and expenses inconnection with each such proceeding, action, negotiation, prosecution andadjustment.  Lessee shall be entitled toparticipate in any such proceeding, action, negotiation, prosecution, appeal oradjustment as contemplated herein. Notwithstanding anything to the contrary contained in this Article VI,if permissible under applicable law, any separate Compensation made to Lesseefor its moving and relocation expenses, anticipated loss of business profits,loss of goodwill or fixtures and equipment paid for by Lessee and which are notpart of the Premises (including, without limitation, Lessee’s Equipment) shallbe paid directly to and shall be retained by Lessee (and shall not be deemed tobe Compensation).  .  All Compensation shall be applied pursuant tothis Article VI, and all such Compensation (less the expense of collecting suchCompensation) may be called the “Net Proceeds.”

 

**Section 6.02.****                         Casualty**.

 

(a)                                  **Payment of Proceeds**.

 

(i)                                     Incase of any Casualty to the Premises or any part thereof where the insuranceproceeds to be collected are less than $75,000 (which amount shall be increasedannually by a factor of two and four tenths percent (2..4%)) (said amount beingreferred to herein as the “Casualty Proceeds Threshold”), the proceeds of anysuch insurance shall be paid to, and may be adjusted by, Lessee alone.

 

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(ii)                                  Incase of any Casualty to the Premises or any part thereof where the insuranceproceeds to be collected exceed the Casualty Proceeds Threshold, the proceedsof any such insurance shall be paid to a depository (the “Depository”) chosenby Lessor or, if there is a Fee Mortgagee, by the Fee Mortgagee, to bedisbursed in accordance with Section 6.02(e) below, and will be adjusted byLessee with the reasonable approval of Lessor or, if there is a Fee Mortgagee,the Fee Mortgagee.  Lessor or the FeeMortgagee may be the Depository.

 

(b)                                 **Restoration of Premises**. In case of any Casualty to the Premises or any part thereof, Lesseewill, at Lessee’s expense, whether or not there are insurance proceedsavailable or sufficient for the purpose, promptly commence and complete withdue diligence the restoration of the Premises to as nearly as possible itsvalue, condition and character immediately prior to such Casualty; provided,however, that if no Event of Default shall have occurred and be continuinghereunder, Lessor shall timely make such insurance proceeds available to Lesseefor restoration.

 

(c)                                  **Prompt Performance**. Restoration of the Premises under this Section 6.02 shall be performedin accordance with Section 2.04(b) hereof. If the work of repairing, replacing or rebuilding said damaged ordestroyed Premises or portion thereof shall not have been commenced promptlyfollowing the receipt of all required approvals of Lessee’s plans andspecifications, or having been commenced, shall not be expeditiouslyproceeding, Lessor shall have all rights under this Lease in respect of adefault by Lessee subject, however, to force majeure.

 

(d)                                 **No Abatement**. Regardless of any Casualty to the Premises or any part thereof, Lesseeshall not be entitled to any-abatement of Basic Rent, Additional Rent, or anyother payment Lessee is required to make pursuant to this Lease.

 

(e)                                  **Substantial Casualty; Proceeds Held by Depository**.  If the insurance proceeds to be collectedfollowing a Casualty exceed the Casualty Proceeds Threshold (a “SubstantialCasualty”), then Lessee shall promptly notify Lessor.  and the Fee Mortgagee in writing of suchCasualty.  In case of any SubstantialCasualty, the proceeds of insurance (excluding, however, proceeds payable or onaccount of Lessee’s Equipment) will be paid directly to the Depository andremitted by the Depository to Lessee or to the persons designated by Lessee forthe costs of labor and materials as the work of repair, replacement and/orrestoration progresses upon Lessee’s request and against:

 

(i)                                     acertificate by Lessee dated not more than 15 days prior to the request, settingforth the following: (A) that the sum then requested either has been paid byLessee or is justly due to contractors, subcontractors, materialmen, engineers,architects or other persons who have rendered services or furnished materialsfor the work therein specified, and giving a brief description of such servicesand materials and the several amounts so paid or due to each of said persons inrespect thereto and (B) that the cost, as estimated by the person signing suchcertificate, of the work required to be done subsequent to the date of such 

 

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certificatein order to complete it does not exceed the funds remaining in the hands of theDepository after payment of the sum requested in such certificate; and

 

(ii)                                  lienwaivers or other evidence reasonably satisfactory to the Depository and Lessor,to the effect that there has not been or may not be filed with respect to thePremises or any part thereof any construction, mechanics’, laborers’,materialmen’s or other like lien which has not been discharged of record exceptsuch as will be discharged by payment of the amount requested or contested byappropriate legal action by Lessee in accordance with Section 5.06.  In the event the insurance proceeds exceedthe cost of restoration work, such excess shall be paid equally to the Lesseeand the Lessor or the Fee Mortgagee, as applicable.

 

Anystructural work required to be performed by Lessee under the provisions ofSection 6.02(b) which involves a cost exceeding the Casualty Proceeds Threshold(as estimated by a licensed architect selected by Lessee and reasonablyacceptable to Lessor and the Fee Mortgagee) shall be performed under thesupervision of an architect selected by Lessee and reasonably satisfactory to Lessorand the holder of the first Fee Mortgage, and the aforesaid certificate shallalso be signed by such architect as to the matters in paragraph (e)(i)above.  Any nonstructural work requiredto be performed by Lessee under the provisions of Section 6.02(b) whichinvolves a cost exceeding the Casualty Proceeds Threshold (as estimated by alicensed architect selected by Lessee and reasonably acceptable to Lessor andthe Fee Mortgagee) shall be performed under the supervision of an architectselected by Lessee and reasonably satisfactory to Lessor and the holder of thefirst Fee Mortgage, and the aforesaid certificate shall also be signed by sucharchitect as to the matters in paragraph (e)(i) above.

 

(f)                                    **Requirements of Fee Mortgagee**.  Subject to Section 9.06 hereof, in the eventthe Fee Mortgagee requires changes to this Lease with respect to the amounts ortypes of insurance coverages, the duties for repair or restoration, thehandling of proceeds, the application of casualty or condemnation proceeds to therestoration of the Premises or to the indebtedness secured by the Fee Mortgageor other matters, Lessee will cooperate in executing any clarification oramendment of this Lease required by the Fee Mortgagee as a condition toproviding financing to Lessor.

 

**Section 6.03.****                         Condemnation**.

 

(a)                                  **Notice of Condemnation**. In the event of a Condemnation of any or all of the Premises, Lesseeshall provide notice of such Condemnation to Lessor.

 

(b)                                 **Substantial Condemnation**. In the event of any Condemnation of all of the Premises or so muchthereof that the remainder is insufficient to permit the continued operation ofLessee’s business thereon, even if restored to an architectural unit under theprovisions of this Lease (any such event being a “Substantial Condemnation”),then Lessee may, within one hundred twenty (120) days after the SubstantialCondemnation, deliver to.  Lessor anotice (a “Termination Notice”) of its intention to terminate this 

 

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Leaseon the next date for payment of Basic Rent occurring not less than 120 daysafter delivery of the Termination Notice (the “Termination Date”).  If Lessee does not deliver a TerminationNotice pursuant to the foregoing provisions, then this Lease shall remain infull force and effect and Lessor shall make the Net Proceeds of theCompensation available to Lessee to repair or restore the Premises.

 

(c)                                  **Award on Substantial Condemnation**.  In the event of a termination of this Leaseby reason of a Substantial Condemnation, the whole of any Compensation for thePremises shall be paid solely to Lessor, who shall be entitled to keep saidaward, including consequential and other damages and compensation of any sortfor such Substantial Condemnation, without deduction therefrom for anyleasehold or other interest in the Premises owned by Lessee, and in no eventshall Lessee be entitled to any part of the Compensation for the Premises.  Lessee agrees to execute any documents thatmay be required to facilitate collection by Lessor of any Compensation for thePremises.  The foregoing shall not beconstrued to negate any right which Lessee might have to compensation for ataking of Lessee’s personal property (not including, however, the leaseholdestate created hereby) or Lessee’s Equipment, for business interruption, or formoving expenses.

 

(d)                                 **Continuance of Lease on Less Than Substantial Condemnation**.  In the event of a Condemnation of any part ofthe Premises and if the part not taken is sufficient to permit the reasonableoperation of Lessee’s business if restored as an architectural unit (in Lessee’sreasonable judgment), this Lease shall remain in full force and effect, except:

 

(i)                                     Theannual Basic Rent under this Lease, commencing on the date that title shallvest by reason of such taking (the “Vesting Date”), shall be reduced by anamount which bears the same proportion to the Basic Rent payable immediatelyprior to such taking as the then fair market rental value of the part of thePremises so taken shall bear to the then fair market rental value of the wholeof the Premises immediately prior to such taking.

 

(ii)                                  Lessorshall be entitled to and shall receive and retain the Compensation payable inrespect of the portion of the Premises so taken, subject to the provisions ofsubdivision (iii) below.

 

(iii)                               Promptlyafter such taking Lessee shall at Lessee’s expense, whether or not there arecondemnation proceeds available or sufficient for the purpose (and providedthat, if no Event of Default shall have occurred and be continuing hereunder,Lessor makes available to Lessee the Net Proceeds of the award), restore thatpart of the Premises which remains to as nearly its former condition ascircumstances will permit.  The awardwith respect to any Improvements shall be payable to the Depository fordisbursement subject to the provisions of Section 6.02(e).  Subject to the same provisions andlimitations set forth for payments in Section 6.02(e), Lessee shall receiveadvances from said award for the payment of the costs of labor and materials asthe restoration and construction progresses. Any balance remaining after payment of all such costs of labor andmaterials shall be paid to Lessor.

 

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(e)                                  **Cooperation of Parties**. Nothing herein contained shall be construed or deemed to vest in Lesseeany ownership or title of or to the Premises. Lessor and Lessee shall cooperate with each other and Lessor shall havethe right to designate counsel to represent Lessor and if an Event of Defaulthas occurred and is continuing hereunder, Lessee, in any proceeding relating toa Condemnation.

 

(f)                                    **Temporary Condemnation**. In the event of a Condemnation of all or any portion of the Premises fortemporary use, the foregoing provisions of this Section shall be inapplicablethereto, this Lease shall continue in full force and effect without reductionor abatement of Basic Rent or Additional Rent. In such event, Lessee alone shall be entitled to make claim for, recoverand retain any Compensation recoverable in respect of such temporary usewhether in the form of rental or otherwise; provided, that any Compensationpaid for any period beyond the term of this Lease shall be paid to Lessor.

 

**Section 6.04.****                         RequiredInsurance Coverage**.  During the LeaseTerm, Lessee shall, at Lessee’s sole cost and expense, secure and keep thefollowing insurance (the “Insurance Requirements”) in full force and effect:

 

(a)                                  “All-risk”of physical damage coverage insurance, including earthquake damage coverage,covering the Improvements, Lessor’s Fixtures and Lessor’s Equipment on areplacement cost basis, in an amount sufficient to avoid application of anyco-insurance clause and with an “agreed amount” endorsement voidingcoinsurance, including a full “replacement cost” endorsement together withappropriate “demolition and increased costs of construction” endorsements.  Lessee shall be responsible for determiningthe applicability of “demolition and increased costs of construction” endorsements.  Lessor reserves the right to reasonablydisapprove any exclusions from the “all-risk” coverage furnishedhereunder.  If Lessee elects to provideblanket “all-risk” coverage over locations in addition to the Premises, Lessorreserves the right to require a specific endorsement or endorsements from theinsurance companies affording such coverage evidencing coverage over thePremises in a sufficient amount to provide recovery on a replacement costbasis.  Lessee’s coverage may provide forreasonable self-insured retentions.

 

(b)                                 Commercialgeneral liability insurance for the benefit of Lessor, Lessee and the FeeMortgagee, fully protecting Lessor, Lessee and the Fee Mortgagee in respect ofpersonal injuries and death to persons and property damage, with a combinedsingle limit of not less than $5,000,000 for personal injuries and death topersons and property damage.  In theevent Lessee maintains blanket liability coverage, the total limits ofliability required hereunder must be available to the Premises.

 

(c)                                  Businessinterruption/loss of rents insurance covering all risks referenced in Section6.04(a) for the benefit of Lessor, Lessee and, if Lessor so directs, for thebenefit of the Fee Mortgagee, as their interests may appear, covering risk ofloss during the lesser of the first 12 months of reconstruction or the actualreconstruction period necessitated by the occurrence of any of the coveredhazards, in such amounts as may be customary for comparable properties in thearea and in an amount sufficient to prevent Lessor or Lessee from becoming aco-insurer.  Lessee’s obligation forpayment of rent 

 

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shallbe reduced dollar for dollar by the amount of rent insurance received by Lessoror Fee Mortgagee.

 

(d)                                 Boilerand machinery coverage covering loss or damage, on a replacement cost basis,from explosion of any steam and pressure boilers, hot water heaters, andsimilar apparatus located in, on or about the Premises with limits of not lessthan the replacement cost of the Improvements. In the event coverage hereunder is afforded by more than one insurancecompany, all such companies shall furnish a joint loss endorsement to thepolicies covering the risk set forth in this Section.

 

(e)                                  Flood(if the Premises is located in whole or in part within any flood plain area asdesignated by any department or agency of the United States Government havingjurisdiction) and such other hazards and in such amounts as may be customaryfor comparable properties in the area, provided the same is available at rateswhich are economically practical in relation to the risks covered, asdetermined by Lessee and reasonably approved by Lessor.

 

(f)                                    Workers’compensation insurance coverage for all persons employed by Lessee on thePremises with statutory limits and otherwise with limits of and provisions inaccordance with the requirements of applicable local, state and federal law.

 

(g)                                 Duringthe course of any construction or reconstruction in connection with any addition,renovation or any Casualty or Condemnation, “builder’s risk” coverage for thePremises written on an “all risk” basis with privilege granted to occupy in anamount not less than the full amount of the construction or reconstructioncost, during the period of any Major Alteration, which shall include the valueof building materials on the Premises, covering loss or damage by fire,lightning, windstorm, hail, explosion, riot, riot attending a strike, civilcommotion, aircraft vehicles, smoke, earthquakes, vandalism and maliciousmischief, and flood insurance (if the Premises is in a flood hazard area), andsuch other hazards as may be included in broad form of extended coverage fromtime to time available.

 

(h)                                 Withoutlimiting the generality of the foregoing, during the Lease Term, Lessee shall,at Lessee’s sole cost and expense, secure and keep the insurance coverages asrequired in Schedule D hereto in full force and effect.

 

**Section 6.05.****                         SeparateInsurance Coverages**.  Without theprior written consent of Lessor (which shall not be unreasonably withheld ordelayed), Lessee shall not obtain or carry separate insurance concurrent inform or contributing in the event of loss with that required by Section 6.04 tobe furnished by Lessee unless Lessor and Lessee are included therein asadditional named insureds, with loss payable as in this Lease except withrespect to insurance covering Lessee’s Equipment and other personal property inthe Premises and except with respect to business interruption insurance (provided,however, that as to loss of rents coverage Lessor shall be named as the losspayee).  Except with respect to suchcoverage, Lessee shall promptly notify Lessor whenever any such separateinsurance is obtained and shall deliver to Lessor certificates evidencing thesame.

 

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**Section 6.06.****                         ComplianceWith Insurance Requirements**.  Lesseeshall not violate or permit to be violated any of the conditions or provisionsof any of the insurance policies, and Lessee shall so perform and satisfy therequirements of the companies writing such policies.  Lessee further agrees to reasonably cooperatewith Lessor as and when requested to comply with loss prevention programs.

 

**Section 6.07.****                         AdditionalCoverages**.  On reasonable demand ofLessor or the Fee Mortgagee, Lessee shall provide such other forms of insurancein such amounts, and/or the foregoing insurance in such additional amounts asthe parties may from time to time approve, as are customarily furnished by Lesseesunder comparable leases in the case of property similar in use to the Premisesand located in the area in which the Premises is situated, provided the same isavailable at rates which are economically practical in relation to the riskcovered.  Without limiting the generalityof the foregoing, if Lessor is or becomes the Fee Mortgagee with respect to thePremises, then Lessee shall be required to maintain insurance meeting therequirements specified in Schedule E hereto and such other requirements as Lessormay specify.

 

**Section 6.08.****                         PolicyProvisions**.  All insurance policiesmaintained by Lessee pursuant to Section 6.04 shall name Lessee as insured, andLessor and the Fee Mortgagee as additional insureds and shall provide (a) thatlosses shall be payable notwithstanding any act or negligence of Lessee and (b)that no cancellation, nonrenewal, or material alteration in the terms andconditions of coverage thereof shall be effective until at least 30 days afterwritten notice thereof delivered by certified mail, return-receipt requested,is given to Lessor and to the Fee Mortgagee.

 

**Section 6.09.****                         Companiesand Form of Policies**.  All policiesof insurance procured by Lessee shall be issued by insurance companies licensedto do business in the State in which the Premises are located and authorized toissue such policy or policies.  Allpolicies shall be in a form and with companies reasonably acceptable to Lessorand may be part of blanket coverage relating to various properties operated byLessee.

 

**Section 6.10.****                         Handlingof Proceeds by Lessee**.  Insuranceproceeds which are payable to Lessee alone in. accordance with the provisions of Section 6.02(a)(i) shall be held byLessee and used solely by Lessee to pay for the cost of making repairs,alterations and improvements to the Premises and doing such work as may benecessary to protect the Premises against further damage and for no otherpurpose.  If the proceeds of insurancepayable to Lessee alone under Section 6.02(a)(i) shall exceed such costs,one-half of such excess shall be promptly paid by Lessee to Lessor.

 

**Section 6.11.****                         Handlingof Proceeds by Depository**.  TheCompensation payable to the Depository in accordance with the provisions ofthis Lease shall be held in trust for the purpose of paying for the cost of thework required to be performed by Lessee under Sections 6.02 and 6.03 and thecost of making repairs, alterations and improvements to the Premises and doingsuch work as may be necessary to protect the Premises against further injuryand shall be disbursed as provided in Section 6.02(e).  The Depository shall be entitled toreasonable compensation payable out of such funds.  If the insurance proceeds held by the Depositoryshall exceed such cost, such excess shall belong to and be paid over to theLessor upon the completion of and payment for such work.

 

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**Section 6.12.****                         Certificatesof Coverage**.  Upon the execution ofthis Lease, Lessee shall deliver to Lessor and to the Fee Mortgagee acertificate of insurance coverage as to the policies required by this Leaseevidencing compliance with the terms of this Lease and bearing evidence ofpayment of all premiums therefor. Thereafter, as to policy renewals, Lessee will provide Lessor and theFee Mortgagee with certificates or assurances of continued coverage within 15days prior to expiration of such policies.

 

**Section 6.13.****                         Procurementby Lessor**.  If premiums on anyinsurance policy shall not be paid or if the memoranda of policies orcertificates or evidence of payment of the premiums thereon shall not be sodelivered to Lessor as required herein, or if Lessor learns of any cancellationof any policy required hereunder, Lessor may procure and/or pay for any suchinsurance for Lessor’s benefit only and not for the benefit of Lessee, with orwithout notice to Lessee.  Lessee mayrestore such coverage effective one year after the effective date of theinsurance procured by Lessor provided Lessee furnishes evidence of suchcoverage and payment therefor at least 60 days prior to the expiration of saidone-year policy in the form required by Section 6.04.  The amount so paid by Lessor with interestthereon at the interest rate specified in Section 7.02(k) hereof from the dateof payment shall become due and payable by Lessee as Additional Rent with thenext or any subsequent installment of Basic Rent which shall become due aftersuch payment by Lessor, it being expressly covenanted that payment by Lessor ofany such premium shall not be deemed to waive or release the default in thepayment thereof by Lessee, or the right of Lessor to take such action as may bepermissible hereunder as in the case of default in the payment of Basic Rent.

 

**ARTICLE VII**

 

**Section 7.01.****                         Eventsof Default**.  Lessee shall be indefault under this Lease if any one or more of the following events (referredto herein as “Events of Default” or “Event of Default”) shall occur:

 

(a)                                  ifdefault shall be made in the procurement or maintenance of any insurancerequired under this Lease; or

 

(b)                                 ifdefault shall be made in the payment when due of any Basic Rent or AdditionalRent and such default shall continue for ten days after Lessor gives Lesseewritten notice of such nonpayment; or

 

(c)                                  ifdefault shall be made in the payment of any other sum payable under this Leaseand such default shall continue for ten days after Lessor gives Lessee writtennotice of nonpayment; or

 

(d)                                 ifdefault shall be made by Lessee in the performance of or compliance with any ofthe terms of this Lease other than those referred to in any of the othersubparagraphs in this Section, and such default shall continue for a period of60 days after.  Lessor gives Lesseewritten notice thereof (or if such default cannot reasonably be cured within 60days after notice, then in the event that Lessee shall fail to commence suchcure within 60 days and thereafter diligently pursue such cure to completion);or

 

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(e)                                  ifLessee or any guarantor of Lessee’s obligations under this Lease (each, if any,a “Guarantor”) shall file a voluntary petition in bankruptcy or shall beadjudicated a bankrupt or insolvent, or shall file any petition or answerseeking any reorganization, arrangement, composition or readjustment, orsimilar relief for itself under any present or future federal, state or otherstatute, law or regulation, or shall seek or consent to or acquiesce in theappointment of any trustee, receiver or liquidator of itself or of all or anysubstantial part of its or of the property, or shall take any generalassignment for the benefit of creditors or shall admit in writing its inabilityto pay debts generally as they become due; or

 

(f)                                    ifa petition shall be filed against Lessee or any Guarantor seeking anyreorganization, arrangement, composition, readjustment, liquidation,dissolution or similar relief under any present or future federal, state orother statute, law or regulation, and shall remain undismissed or unstayed fora period of 60 days, or if in connection with any such event any trustee,receiver or liquidator of Lessee or such Guarantor, or of all or anysubstantial part of any of its property, shall be appointed without its consentor acquiescence and such appointment shall remain unvacated or unstayed for aperiod of 30 days; or

 

(g)                                 ifLessee shall vacate or abandon the Premises; provided, however, a failure tooccupy the Premises shall not constitute a default hereunder so long as Lesseeshall pay rent and all other amounts when due and perform all other obligationshereunder; or

 

(h)                                 ifthis Lease or the estate of Lessee hereunder shall be transferred to or shallpass to or devolve upon any other person except in a manner expressly permittedherein.

 

**Section 7.02****.****                         RemediesUpon Lessee’s Default**.

 

(a)                                  **Repossession, Reletting, etc., by Lessor**.  At any time after any Event of Default,Lessor, without further notice except as required by applicable law and with noliability to Lessee for any action in accordance with applicable law, mayrepossess the Premises by any means provided by law, including (withoutlimitation) summary or eviction proceedings, ejectment or otherwise, and mayremove Lessee and all other persons and any and all property from thesame.  At any time or from time to timethereafter, Lessor may (but shall be under no obligation to) relet the Premisesor any part thereof for the account of Lessee, in the name of Lessee or Lessoror otherwise, without notice to Lessee, for such term or terms (which may begreater or less than the period which would otherwise have constituted thebalance of the term of this Lease) and on such conditions (which may includeconcessions or free rent) and for such purposes as Lessor in its reasonablediscretion may determine, and may collect and receive the rents therefor.  Lessor shall not be liable for any failure tocollect any rent due upon any such reletting.

 

(b)                                 **Payment of Damages**. No such expiration or sooner termination of this Lease or of Lessee’sright of possession shall relieve Lessee of its liability and 

 

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obligationsunder this Lease, all of which shall survive any such expiration or soonertermination.  In the event of any suchexpiration or sooner termination, Lessee will pay to Lessor the Basic Rent andall Additional Rent and other sums required to be paid by Lessee up to the timeof such expiration or sooner termination, and thereafter Lessee, until the endof what would have been the term of this Lease in the absence of suchexpiration or sooner termination, and whether or not the Premises or any partthereof shall have been relet, shall be liable to Lessor for, and shall pay toLessor, as and for liquidated and agreed current damages for Lessee’s default,the Basic Rent and all Additional Rent and other sums which would be payablethereafter under this Lease by Lessee, less the net proceeds, if any, of anyreletting effected for the account of Lessee pursuant to Section 7.02(a) duringthe period which would otherwise have constituted the balance of the term of thisLease, after deducting all of Lessor’s reasonable expenses in connection withsuch reletting, including (without limitation) all repossession costs,brokerage commissions, attorneys’ fees, expenses of employees, costs incurredin alterations to the Improvements required in connection with the reletting ofthe Premises for use by another lessee and expenses of preparation for suchreletting.  Lessee will pay such amountsto Lessor monthly on the days on which such Basic Rent, Additional Rent and allother sums would have been payable under this Lease, and Lessor shall beentitled to recover the same from Lessee on each such day.

 

(c)                                  **Lump-sum Damage Payment**. At any time after such expiration or sooner termination of this Lease asprovided herein or pursuant to law, whether or not Lessor shall have recoveredany amounts under Section 7.02(b), Lessor shall be entitled to recover fromLessee and Lessee shall pay to Lessor, on demand, as and for liquidated andagreed final damages for Lessee’s default, an amount equal to the sum of thefollowing, as of the date of such payment by Lessee:

 

(i)                                     theworth of the unpaid Basic Rent and Additional Rent and other sums due andpayable which had been earned at the time of such expiration or soonertermination; plus

 

(ii)                                  theworth of the unpaid Basic Rent and Additional Rent and other sums due andpayable after such expiration or sooner termination and on or before the timeof Lessee’s lump-sum payment pursuant hereto, after deducting from such unpaidamounts any (if any) portion thereof that Lessee proves could have beenreasonably avoided; plus

 

(iii)                               theworth of the unpaid Basic Rent and Additional Rent and other sums due andpayable for the balance of the Lease Term or, if termination occurs during anExtension Period, such Extension Period, after deducting from such unpaidamounts any (if any) portion thereof that Lessee proves can be reasonablyavoided; plus

 

(iv)                              anyother amount which is necessary to compensate Lessor for all the detrimentproximately caused by Lessee’s failure to perform Lessee’s obligations underthis Lease or which would be likely to result therefrom, including (withoutlimitation) any costs or expense incurred by Lessor: (A) in 

 

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retakingpossession of the Premises; (B) in maintaining, repairing, preserving,restoring, replacing, cleaning, altering or rehabilitating the Premises or anyportion thereof, including such acts for reletting to a new tenant or tenants;(C) for leasing commissions; or (D) for any other costs necessary orappropriate to relet the Premises.

 

The “worth”of the amounts referred to in subparagraphs (i) and (ii) of this Section iscomputed by accruing interest at the Default Rate on the unpaid rent and othersums due and payable from the respective due dates for such amounts untilLessee’s lump-sum payment pursuant hereto. The “worth” of the amount referred to in subparagraph (iii) of thisSection is computed by discounting such amount at a rate equal to the weeklyaverage yield 10-year U.S.  TreasuryConstant Maturities (as published in Federal Reserve Statistical ReleaseH-15 [519]) on or nearest to the Friday immediately preceding the date ofLessee’s lump-sum payment pursuant hereto.

 

(d)                                 **Receiver**.  Lessor mayhave a receiver appointed for Lessee to take possession of the Premises and toapply any rent collected from the Premises and to exercise all other rights andremedies granted to Lessor as an attorney-in-fact for Lessee.

 

(e)                                  **Lessee’s Equipment**. At any time after the occurrence of an Event of Default, Lessor may sendwritten notice to Lessee to remove all of Lessee’s Equipment and property fromthe Premises.  If Lessee shall fail toremove such Equipment and property within ten business days after receipt ofsuch notice from Lessor, then Lessor may remove such Equipment and propertyfrom the Premises and arrange for storage of such Equipment and property atanother location, all at the sole cost and expense of Lessee.  In the event of any such removal of Lessee’sEquipment and other property from the Premises by Lessor, Lessee waives any andall claims against Lessor regarding the removal and storage of its Equipmentand property including, without limitation, the manner of removal, cost ofremoval, location of storage, cost of storage and damage to or missingEquipment and property.

 

(f)                                    **Bankruptcy or Insolvency**.

 

(i)                                     IfLessee shall become a debtor in a case filed under Chapter 7 or Chapter 11 ofthe Bankruptcy Code and Lessee or Lessee’s trustee shall fail to elect toassume this Lease within 60 days after the filing of such petition or suchadditional time as provided by the court, this Lease shall be deemed to havebeen rejected.  Immediately thereupon,Lessor shall be entitled to possession of the Premises without furtherobligation to Lessee or Lessee’s trustee, and this Lease, upon the election ofLessor, shall terminate, but Lessor’s right to be compensated for damages(including, without limitation, liquidated damages pursuant to any provisionhereof) or the exercise of any other remedies in any such proceeding shallsurvive, whether or not this Lease shall be terminated.

 

(ii)                                  Anassumption of this Lease in accordance with Section 7.02(f)(i) shall not limitLessor’s right to declare an Event of. Default hereunder and exercise any and all remedies available to it if,at any time after such assumption, 

 

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Lesseeis liquidated or files or has filed against it a subsequent petition underChapter 7 or Chapter 11 of the Bankruptcy Code.

 

(iii)                               When,pursuant to the Bankruptcy Code, Lessee’s trustee or the debtor-in-possessionshall be obligated to pay reasonable use and occupancy charges for the use ofthe Premises, such charges shall not be less than the Basic Rent, AdditionalRent and other sums payable by Lessee under this Lease.

 

(iv)                              Neitherthe whole nor any portion of Lessee’s interest in this Lease or its estate inthe Premises shall pass to any trustee, receiver, assignee for the benefit ofcreditors or any other person or entity, by operation of law or otherwise underthe laws of any state having jurisdiction of the person or property of Lessee,unless Lessor shall have consented to such transfer.  No acceptance by Lessor of rent or any otherpayments from any such trustee, receiver, assignee, person or other entityshall be deemed to constitute such consent by Lessor nor shall it be deemed awaiver of Lessor’s right to terminate this Lease for any transfer of Lessee’sinterest under this Lease without such consent.

 

(g)                                 **Limitation by Law**.  Ifany statute or rule of law governing a proceeding in which liquidated finaldamages provided for in Section 7.02 are to be proved shall validly limit theamount thereof to an amount less than the amount above agreed upon, Lessorshall be entitled to the maximum amount allowable under such statute or rule oflaw.

 

(h)                                 **Remedies Cumulative, Etc**. Each right, power and remedy provided for in this Lease or now orhereafter existing at law or in equity or by statute or otherwise shall becumulative and concurrent and shall be in addition to every other right, poweror remedy provided for in this Lease or now or hereafter existing at law or inequity or by statute or otherwise, and the exercise or beginning of theexercise of any one or more of the rights, powers or remedies provided for inthis Lease or now or hereafter existing in law or in equity or by statute orotherwise shall not preclude the simultaneous or later exercise of any or allother such rights, powers or remedies. The collection of any late payment charge or any interest at the DefaultRate shall not be deemed an election of remedies or in lieu of any otherremedies or damages.  Lessor shall havethe right to specifically enforce this Lease and to enjoin any default orprospective or anticipated default hereunder.

 

(i)                                     **Statutory Rights**. Lessee retains any rights of notice or rights of redemption, if any, asmay be required by applicable State law. “State” shall mean the State where the Premises are located.  However, any such notice required by law maybe given by Lessor in (or, at Lessor’s option, separate from) any noticerequired to be given by Lessor under this Lease, and the time periods providedin this Lease and required under applicable law will not be “tacked” onto eachother but will commence running from the original date of delivery of suchnotices.

 

(j)                                     **Application of Funds**. Any payments received by Lessor under any of the provisions of thisLease during the existence or continuance of any Event of Default 

 

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(andany payment made to Lessor rather than Lessee due to the existence of an Eventof Default) shall be applied to Lessee’s obligations in such order as Lessormay determine or, if prescribed by the laws of the State, in accordance withsuch laws.

 

(k)                                  **Late Interest**.  IfLessee shall fail to make any payment of any sums required by this Lease withinten days after Lessor gives notice of nonpayment, Lessee shall pay to Lessor,in addition to such sums, interest thereon at the rate of 5% per annum higherthan and varying daily with the highest prime rate then being quoted from timeto time by the Wall Street Journal, as an interest index for loans to itscommercial customers (the “Default Rate”), computed from the date such paymentwas due to and including the date of payment in full.  If the Wall Street Journal ceases to quotesuch rate, Lessor shall have the right to substitute a reasonably comparableindex for such prime rate.

 

(l)                                     **No Usury**.  The intentionof the parties being to conform strictly to the usury laws now in force,whenever any provision in this Lease provides for payment by Lessee to Lessorof interest at a rate in excess of the legal rate permitted to be charged, suchrate herein provided to be paid shall be deemed reduced to such legal rate.

 

**ARTICLE VIII**

 

**Section 8.01.****                         Lessee’sNotices and Remedies**.  In the eventLessor fails to perform its responsibilities pursuant to this Lease, Lessee’snotice as to Lessor’s nonperformance will be sent simultaneously to Lessor andthe Fee Mortgagee.  Lessor will be indefault under this Lease if Lessor fails to cause such responsibilities to befully performed within 30 days after written notice by Lessee to Lessorspecifying the nature of the default with reasonable particularity.  If the default is of such a nature that itcannot be remedied fully within the 30-day period, this requirement shall besatisfied if Lessor begins correction of the default within the 30-day periodand thereafter proceeds with reasonable diligence and in good faith to effectthe remedy as soon as reasonably practicable. Lessee shall not have the right to terminate this Lease as a result ofLessor’s default.  In the event of suchdefault, Lessee shall have all remedies available under law for breach ofcontract, including (without limitation) the right of specificperformance.  In addition, Lessee mayelect in its discretion to perform the required action or take correctiveaction reasonably required to cure the default if it pertains to the Premises,in which event Lessor shall reimburse Lessee for the reasonable out-of-pocketcosts of such action, together with reasonable and necessary costs anddisbursements and interest, and such amounts may be deducted from the rent thereafterto become due under this Lease, after at least 20 days’ written notice toLessor (and the Fee Mortgagee) as to the costs so incurred.

 

**Section 8.02.****                         FeeMortgagee’s Right To Cure**.  The FeeMortgagee that has notified Lessee of its address in the manner provided fornotices in this Lease will have the right to cure any default by Lessor.  The cure period will commence on delivery ofnotice to such Fee Mortgagee of the default and extend for a period ending 30days after the end of the time period for Lessor to cure a default.  In this connection, any representative of theFee Mortgagee shall have the right to enter upon the Premises for the purposeof curing Lessor’s default.

 

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**ARTICLE IX**

 

**Section 9.01****.****                         Subordinationand Nondisturbance**.  This Lease andall rights of Lessee under this Lease are, and shall at the option of Lessorremain, subject and subordinate in all respects to the Fee Mortgage and to alladvances made or hereafter to be made under any such mortgage, and to allrenewals, modifications, consolidations, correlations, replacements andextensions of, and substitutions for, the Fee Mortgage, provided that the FeeMortgagee shall execute and deliver to Lessee a nondisturbance and attornmentagreement in form and substance approved by the Fee Mortgagee and reasonablyacceptable to Lessee which provides in substance that (a) if Lessor defaultsunder its mortgage, the Fee Mortgagee will not disturb the occupancy of Lesseeand this Lease shall remain in full force and effect in accordance with itsterms, provided that no Event of Default has occurred and is continuing (in theevent of any such Event of Default, the Fee Mortgagee shall have such rightsand remedies with respect to such default as are provided herein) and (b)Lessee shall, at the Fee Mortgagee’s option, attorn to such Fee Mortgagee andthe Lease shall continue as a direct lease between such Fee Mortgagee andLessee.  The provisions of this Sectionshall be self-operative.  Lessee shall alsoprovide to the Fee Mortgagee any and all other assurances or instruments theFee Mortgagee may reasonably request to evidence and confirm suchprovisions.  All such agreements shall bein form suitable for recording.

 

**Section 9.02.****                         ElectionNot To Subordinate**.  Notwithstandingthe provisions of Section 9.01, the holder of any mortgage to which this Leaseis subject and subordinate, as provided in said Section 9.01, shall have theright, at its sole option, at any time, to subordinate and subject its mortgage,in whole or in part, to this Lease by recording a unilateral declaration tosuch effect.

 

**Section 9.03.****                         Attornment**.  At any time prior to the expiration of theLease Term, Lessee agrees, at the election and upon demand of any owner of thePremises, or of the Fee Mortgagee, to attorn, from time to time, to any suchowner or holder, upon the then executors’ terms and conditions of this Lease,for the remainder of the term originally demised in this Lease and for anyrenewal term, provided that such owner or holder, as the case may be, shallthen be entitled to possession of the Premises subject to the provisions ofthis Lease.  The provisions of thisSection shall inure to the benefit of any such owner or holder, shall applynotwithstanding that, as a matter of law, this Lease may terminate upon theforeclosure of any such mortgage, shall be self-operative upon any such demand,and no further instrument shall be required to give effect to saidprovisions.  Lessee, however, upon demandof any such owner or holder agrees to execute, from time to time, instrumentsin confirmation of the foregoing provisions of this Section, satisfactory toany such owner or holder acknowledging such attornment and setting forth theterms and conditions of its tenancy. Nothing contained in this Section shall be construed to impair any rightotherwise exercisable by any such owner or holder.

 

**Section 9.04.****                         Limitationson Lessee**.  Lessee agrees that, ifrequested by Lessor or the Fee Mortgagee, Lessee shall enter into an agreementwith the Fee Mortgagee whereby Lessee shall agree for the benefit of such FeeMortgagee that Lessee will not, without in each case the prior written consentof such Fee Mortgagee, (a) amend, modify, cancel or surrender the term of thisLease except as expressly permitted by the provisions of this Lease, or enterinto any 

 

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agreement with Lessor soto do or (b) pay any installment of Basic Rent more than one month.  in advance of the due date thereof orotherwise than in the manner provided for in this Lease.

 

**Section 9.05.****                         NoMerger of Fee and Leasehold Estates**. There shall be no merger of this Lease nor of the leasehold estatecreated by this Lease with the fee estate in the Premises or any part thereofby reason of the fact that the same person, firm or corporation or other entitymay acquire or own such estates directly or indirectly; and no such mergershall occur until all persons, firms, corporations and other entitled,including the Fee Mortgagee, having any interest in this Lease and theleasehold estate created hereby and the fee estate in the Premises or any partythereof shall join in a written instrument effecting such merger and shall dulyrecord it.

 

**Section 9.06.****                         Changesto Lease Required by Fee Mortgagee**. In the event the Fee Mortgagee shall require reasonable modifications ofthis Lease which do not materially increase the obligation of Lessee hereunderor interfere with or diminish Lessee’s rights, Lessee agrees to execute suchmodification(s) upon request of Lessor.

 

**ARTICLE X**

 

**Section 10.01.****                  EstoppelCertificate**.  Upon request, eitherparty will, without charge, execute, acknowledge and deliver to the otherparty, within 15 days after request therefor, a certificate certifying (a) thatthis Lease is unmodified and in full force and effect (or, if there have beenmodifications, that this Lease is in full force and effect as modified andstating the modifications), (b) the date, if any, to which the Basic Rent hasbeen paid, (c) whether or not there are, to the knowledge of the party, thenexisting any defaults under this Lease (if so, specifying the same) and (d)such other matters as may be reasonably required.  Any such certificate may be relied upon as tothe facts stated therein by any actual or prospective mortgagee or purchaser ofthe Premises from Lessor or any actual or prospective sublessee or assignee ofLessee’s interest in this Lease in connection with one of the transactionspermitted or approved under.  Article IV.

 

**Section 10.02.****                  FinancialInformation**.  Upon the request ofLessor from time to time, and upon Lessee’s receipt of a confidentialityagreement reasonably acceptable to Lessee, Lessee shall furnish to Lessor acopy of Lessee’s balance sheet and profit and loss statement, which shall beprepared in accordance with generally accepted accounting principles andpractices consistently applied and accompanied by the annual audit report of anindependent certified public accountant reasonably acceptable to Lessor.  The foregoing notwithstanding, Lessee’sobligation to provide the foregoing financial information will only apply inthe event that Lessee is not a publicly traded company subject to the financialreporting requirements of the Securities and Exchange Commission, and Lessor isnot able to obtain such financial information by other means.

 

**ARTICLE XI**

 

**Section 11.01.****                  QuietEnjoyment**.  So long as no Event ofDefault has occurred and is continuing hereunder, Lessor covenants that Lesseeshall, subject to the terms of this Lease, lawfully, peaceably and quietlyhold, occupy, possess and enjoy the Premises during the term of 

 

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this Lease, withouthindrance or molestation by Lessor or others claiming through Lessor, subject,however, to the terms of this Lease.

 

**ARTICLE XII**

 

**Section 12.01****.****                  Lessor’sReversionary Interest; Surrender of Premises**.  Upon expiration or termination of this Lease,Lessor shall, at no charge to Lessor, become the owner of, and have thereversionary interest in, all of the Improvements.  Lessee shall surrender the Premises to Lessorin good repair, operating condition, working order and appearance, subject toreasonable wear and tear and (to the extent provided herein for terminationafter casualty) damage by fire and other casualty.  All repairs for which Lessee is responsiblewill be completed to the latest practical date prior to such surrender.  If this Lease is terminated in connectionwith a Casualty, Lessee will assign to Lessor the entire insurance proceedspertaining to the Premises that revert to Lessor.  Lessee shall promptly remove all of its ownsigns, inventory, Lessee’s Equipment and other personal property that remainthe property of Lessee and will restore any physical damage caused by suchremoval.

 

**Section 12.02.****                  Deliveryof Rents and Records**.  Uponsurrendering the Premises to Lessor, Lessee will pay to Lessor all deposits orother security and all prepaid rents received from subtenants and otheroccupants whose tenancies may continue beyond the last day of the Lease Term orthe sooner termination thereof and will deliver to Lessor all originalsubleases and modifications thereof, lease files, plans, records, registers andall other papers and documents which may be required for the proper operationand management of the Premises and are then in Lessee’s possession or under itscontrol.  Lessee shall have access to anyrecords, papers and documents so delivered to such extent and at such times asthe same may be reasonably required after the last day of the term of thisLease Term or such sooner termination thereof. Nothing herein shall require Lessor to recognize any such existingsublease as continuing in effect after such last day or sooner termination.  The provisions of this Section shall survivethe expiration or sooner termination of this Lease.

 

**Section 12.03.****                  Acceptanceof Surrender**.  No surrender to Lessorof this Lease or of the Premises or any part thereof, or of any interesttherein, prior to the expiration of the Lease Term, shall be valid or effectiveunless agreed to and accepted in writing by Lessor, and no act by Lessor or anyrepresentative or agent of Lessor, other than such a written acceptance byLessor, shall constitute an acceptance of any such surrender.

 

**Section 12.04.****                  HoldingOver**.  If Lessee remains inpossession of the Premises or any part thereof after the expiration or soonertermination of the term of this Lease (or any renewal term hereof) without theexecution of a new lease, such holding over, in the absence of a writtenagreement to the contrary, shall be deemed, if Lessor so elects, to havecreated a tenancy from month-to-month terminable on 30 days’ notice by eitherparty to the other.  Such month-to-monthtenancy will be at a monthly rental equal to 125% of the sum of the monthlyinstallment of Basic Rent payable during the last year of the Lease Term, andLessee will otherwise continue to pay Additional Rent as provided in this Leaseand perform its other obligations hereunder.

 

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**ARTICLE XIII**

 

**Section 13.01.****                  Definitionof “Lessor”**.  The term “Lessor,” asused in this Lease so far as covenants or obligations on the part of Lessor areconcerned, shall be limited to mean and include only the owner or owners of thePremises or holder of the Fee Mortgage in possession at the time in question ofthe Premises.  In the event of anytransfer or transfers of the title of the Premises, Lessor herein named (and incase of any subsequent transfers or conveyances, the then grantor) shall beautomatically freed and relieved of its liabilities accruing from and after thedate of such transfer and conveyance of all liability as respects theperformance of any covenants or obligations on the part of Lessor contained inthis Lease thereafter to be performed.

 

**Section 13.02.****                  Exculpationof Lessor**.  Notwithstanding anythingcontained in the preceding paragraph or in any other provision hereof, Lesseeshall look solely to the estate and interest of Lessor, its successors, and assignsin the Premises (and any condemnation, insurance or other proceeds thereof) forthe collection of any judgment recovered against Lessor based upon the breachby Lessor of any of the terms, conditions or covenants of this Lease on thepart of Lessor to be performed, and no other property or assets of Lessor shallbe subject to levy, execution or other enforcement procedures for thesatisfaction of Lessee’s remedies under or with respect to either this Lease,the relationship of Lessor and Lessee hereunder or Lessee’s use and occupancyof the Premises.

 

**ARTICLE XIV**

 

**Section 14.01.****                  NoWaiver, etc., by Parties**.  No failureby a party to insist upon the strict performance of any term of this Lease orto exercise any right, power or remedy consequent upon a breach thereof, and noacceptance of full or partial rent by Lessor during the continuance of any suchbreach, shall constitute a waiver of any such breach or of any such term.

 

**Section 14.02.****                  Notices,Etc**.  All notices and demands whichare required or permitted to be given by either party on the other hereundershall be in writing.  All notices anddemands shall be sent by United States Mail, certified or registered mail,return-receipt requested, or by recognized overnight courier service (such asFederal Express), or by facsimile or other telecommunication device capable oftransmitting and creating a written record. Notices shall be effective two business days following the date they aredeposited in the United States Mail, one business day after delivery to anovernight courier and on the day they are telefaxed (if a confirmation reportresults).  Unless a party designatesanother address for notices (by notice given pursuant to this Section, noticesshall be sent to the following address:

 

If to Lessor:                                GeneralElectrical Capital Corporation

Suite 500

10900 NE 4th Street

Bellevue, Washington 98004

Attention: Vice President/Manager, Real Estate

 

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With a courtesy copies to:

 

General Electrical Capital Corporation

Suite 500

10900 NE 4th Street

Bellevue, Washington 98004

Attention: Linda K. Bracken, V.P. & General Counsel

 

Hunter Maclean Exley & Dunn, P.C.

200 East Saint Julian Street

Savannah, Georgia 31401

Attention: Dorothea Summerell

 

If to Lessee:                               InamedCorporation

5540 Ekwill Drive

Santa Barbara, California 93111

Attention: Facilities Manager

 

With courtesy copies to:

 

Inamed Corporation

5540 Ekwill Drive

Santa Barbara, California 93111

Attention: General Counsel

 

Inamed Corporation

48490 Milmont Drive

Fremont, California 94538

Attention: Facility Manager

 

Anynotices to be provided to the Fee Mortgagee shall be to such address as shallbe provided to the parties in writing by the Fee Mortgagee.  The failure to provide any courtesy copy of anotice as specified above shall not make ineffective any notice given to Lessoror Lessee hereunder.

 

**Section 14.03.****                  Separability**.  Each and every covenant and agreementcontained in this Lease is, and shall be construed to be, a separate andindependent covenant and agreement, and the breach of any such covenant oragreement by Lessor shall not discharge or. relieve Lessee from its obligation to perform the same.  If any term or provision of this Lease or theapplication thereof to any person or circumstance shall to any extent beinvalid and unenforceable, the remainder of this Lease, or the application ofthe term or provision to persons or circumstances other than those as to whichit is invalid or unenforceable, shall not be affected thereby, and each termand provision of this Lease shall be valid and shall be enforced to the extentpermitted by law.

 

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**Section 14.04.****                  Headings**.  The headings to the various Sections of thisLease have been inserted for convenience of reference only and shall not limitor otherwise affect the meaning thereof.

 

**Section 14.05.****                  Relationshipof Parties; Disclaimer**.  Therelationship of the parties to this Lease is landlord and tenant.  Lessor is not a partner, joint venturer,joint employer, principal or agent of or with or a lender to Lessee in anyrespect or for any purpose in the conduct of Lessee’s business orotherwise.  No provision of this Lease orprevious (or subsequent) conduct or activities of Lessee or Lessor will beconstrued:

 

(a)                                  asmaking either party a partner, joint venturer, joint employer, principal oragent of or with each other or

 

(b)                                 asmaking Lessee or Lessor responsible for payment or reimbursement of any costsincurred by each other (except as may be expressly set forth herein or asexpressly set forth in other written agreements executed by the parties).

 

**Section 14.06.****                  OperatingLease**.  This Lease is specificallyintended by the parties to be a true lease. Lessor holds fee simple absolute title to the Premises, and such titlewas not acquired or intended to be held as any type of mortgage or securityinterest.  This Lease is intended byLessor and Lessee to be an operating lease under generally accepted accountingprinciples.

 

**Section 14.07.****                  JointObligation**.  If there be more thanone Lessee or assignee of Lessee, the obligations imposed upon Lessee hereundershall be joint and several.

 

**Section 14.08.****                  PriorAgreements**.  This Lease (includingattached Exhibits) is the entire, final and complete agreement of the partiesonly with respect to the specific matters set forth in this Lease andsupersedes and replaces all written and oral agreements previously orcontemporaneously made or existing by and between the parties or theirrepresentatives with respect to such specific matters.

 

**Section 14.09.****                  Recording**.  This Lease shall not be recorded, but, uponthe request of either party, the parties shall execute and acknowledge amemorandum of this Lease in recordable form that may be recorded by Lessor orLessee.

 

**Section 14.10.****                  Prorationof Rent**.  If this Lease starts orends during a rental period, Rent and Additional Rent shall be prorated as ofsuch date using a 30-day month and a 360-day year.  Upon termination other than for default,prepaid rent shall be refunded, if applicable.

 

**Section 14.11.****                  Authorizationof Lease**.  Each of Lessee and Lessorhereby covenants and warrants to the other that (a) it is duly qualified to dobusiness in the state in which the Premises is located, (b) it has full rightand authority to enter into this Lease and to perform all of its obligationshereunder and (c) each person (and all of the persons if more than one signs)signing this on its behalf is duly and validly authorized to do so.

 

**Section 14.12.****                  ApplicableLaw**.  This Lease shall be governed byand construed and enforced in accordance with the laws of the State (as definedin Section 7.02(i)).

 

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**Section 14.13.****                  UnitedStates Funds**.  All sums hereinmentioned shall be conclusively deemed to refer to and shall be measured by andpayable in the lawful currency of the United States.

 

**Section 14.14.****                  Timeof Performance**.  Time is of theessence of this Lease and each and all of its provisions in which performanceis a factor.

 

**Section 14.15.****                  “ForceMajeure” Delays**.  In the event thateither party hereto shall be delayed or hindered in or prevented from theperformance of any act required hereunder by reason of strikes, lockouts, labortroubles, inability to procure materials, failure of power, restrictivegovernmental laws or regulations, riots, insurrection, war or other reason oflike nature not the fault of the party delayed in performing work of doing actsrequired under the terms of this Lease (a delay resulting from financial inabilityto perform, excepted) (collectively, force majeure” events), then performanceof such work or act shall be excused for the period of the delay, and theperiod for the performance of any such work or act shall be extended for aperiod equivalent to the period of such delay. This provision shall not operate to excuse Lessee from prompt payment ofBasic Rent, Additional Rent or any other payments required by the terms of thisLease, unless the commencement date or periods permitting Lessee to abatementof rent are postponed or extended by such delays.

 

**Section 14.16.****                  Waiverof Jury Trial**.  LESSOR AND LESSEEHEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OFACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS LEASE, ANY OFTHE RELATED DOCUMENTS, ANY DEALINGS AMONG LESSEE OR LESSOR RELATING TO THESUBJECT MATTER OF THE TRANSACTIONS CONTEMPLATED BY THIS LEASE OR ANY RELATEDTRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED AMONG LESSORAND LESSEE.  THE SCOPE OF THIS WAIVER ISINTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED INANY COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT, CLAIMS, TORT CLAIMS, BREACHOF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS).  THIS WAIVER IS IRREVOCABLE, MEANING THAT ITMAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TOANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THISLEASE, ANY RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATINGTO THE TRANSACTIONS CONTEMPLATED BY THIS LEASE OR ANY RELATEDTRANSACTIONS.  IN THE EVENT OFLITIGATION, THIS LEASE MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THECOURT.

 

**Section 14.17.****                  Attorneys’Fees**.  In the event of any action orproceeding by either party against the other under this Lease, the prevailingparty shall be entitled to recover for the fees of its attorneys in such actionor proceeding, including costs of appeal, if any, in such amount as the courtmay adjudge reasonable as attorneys’ fees.

 

**Section 14.18****.****                  Amendments**.  Neither this Lease nor any term hereof may bechanged, waived, discharged or terminated orally, but only by an instrument inwriting signed by the party against whom the enforcement of the change, waiver,discharge or termination is sought.

 

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**Section 14.19.****                  Successorsand Assigns**.  This Lease shall bindand inure to the benefit of Lessor and its successors and assigns and Lesseeand its successors and, without limiting Article IV hereof, its assigns.  Any assignment of this Lease by Lessor shallnot terminate such Lessor’s rights under the environmental and otherindemnities provided by Lessee in this Lease. In furtherance of any proposed assignment by Lessor, Lessor may sharewith the proposed assignee Lessee’s financial information and Premisesinformation, provided such proposed assignee is directed to treat suchinformation confidentially (Lessor hereby agreeing to be responsible for anyfailure of any such proposed assignee to so treat any such information).

 

**Section 14.20.****                  Brokers**.  Lessee warrants that except with respect toJeffrey Weil of Colliers International (the “Broker”), it has had no dealingswith any real estate broker or agent in connection with the negotiation of thisLease and it knows of no real estate broker or agent who is entitled to acommission in connection with this Lease. Lessee shall defend and indemnify Lessor against all claims for anybroker’s or agent’s fees, commissions and expenses, except to the extent Lessorhas agreed to pay the same in writing.

 

**Section 14.21.****                  Construction**.  Each party to this Lease has had theopportunity to consult with its legal counsel, and this Lease shall not beconstrued against either party.  Allpronouns or any variation thereof in this Lease shall be deemed to refer tomasculine, feminine, neuter, singular or plural as the identity of the personor persons may require.  All of theprovisions of this Lease shall be deemed and construed to be “conditions” aswell as “covenants” as though the words specifically expressing or importingcovenants and conditions be used in each separate provision hereof.

 

**Section 14.22.****                  ExecutionIn Counterparts**.  This Lease may beexecuted in any number of counterparts, each of which shall be an original, butall of which shall constitute one and the same instrument.

 

**Section 14.23.****                  Exhibitsand Riders**.  All Exhibits, schedules,plats, riders and addenda, if any, and other attachments to this Lease are apart hereof.

 

**ARTICLE XV**

** **

**Section 15.01.****                  Lessee’sRight of First Refusal**.  If Lessorreceives an offer to buy, transfer or exchange (the “Offer”) all or anyinterest in the Premises (the “Offered Interest”) at any time prior toexpiration or earlier termination of the Lease Term (including any extensionthereof) and Lessor desires to accept such Offer, then Lessor shall notifyLessee of the terms of the Offer.  IfLessee, within ten (10) days after receipt of Lessor’s notice, notifies Lessorin writing of its agreement to purchase the Offered Interest on the termsstated in the Offer, Lessor shall sell and convey the Offered Interest toLessee on the terms stated in the Offer. If Lessee does not notify Lessor in writing of its agreement to purchasethe Offered Interest within the ten (10) day period, Lessor thereafter shallhave the right to sell and convey the Offered Interest (subject to Lessee’srights under this Lease, including the right of first refusal provided in thisArticle XV with respect to subsequent sales, transfers or exchanges) on theterms stated in the Offer.  If Lessordoes not sell and convey the Offered Interest within one hundred eighty (180)days after expiration of the ten (10) day period, any further transaction shallbe deemed a new Offer and the provisions of this Article XV shall beapplicable.  Notwithstanding theforegoing, 

 

 

39

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the provisions of thisArticle XV shall not apply to a contemplated sale or transfer by Lessor of allor any interest in the Premises to any parent of Lessor or any entity undercommon control with Lessor, or any joint venture, partnership, corporation(foreign or domestic), or other entity of which Lessor or a subsidiary ofLessor or any corporation controlled by or under common control with Lessorowns at least fifty percent (50%) of the net assets or fifty percent (50%) ofthe voting stock or other equity interest.

 

**ARTICLE XVI**

 

**Section 16.01.****                  Lessee’sExpansion of the Improvements:**

 

16.01.1                                    Providedthat no Event of Default shall have occurred and be continuing hereunder, andprovided further that Lessee shall have delivered to Lessor not later thanMarch 31, 2003, written notice of its intent to expand the Improvements inaccordance with this Article XVI (the “Expansion Notice”), then, subject to theterms and conditions set forth below, Lessor shall make available funds in theamount of One Million Five Hundred Thousand and no hundredths Dollars($1;500,000.00) (the “Expansion Contribution”) toward the cost of the designand construction of an expansion of the Improvements (the “Expansion”),according to plans and specifications generated by Lessee and subject to Lessor’sprior approval for approximately 32,253 square feet (and in any event not lessthan thirty thousand (30,000) square feet) of additional space of Improvements(the “Expansion Plans”).

 

16.01.2                                    Lesseeshall be required to provide to Lessor (a) a fixed-price contract (“Fixed PriceContract”) for such Expansion from the contractor described in Section 16.01.4below, in accordance with a pro-forma budget subject to Lessor’s reasonableapproval, and (b) a clean, irrevocable letter of credit in the principal faceamount of One Million Five Hundred Thousand and no hundredths Dollars($1,500,000.00) (or such higher amount as may be required as set forth below),in form and substance satisfactory to Lessor, from a national bank reasonablyacceptable to Lessor, naming Lessor as beneficiary (the “Letter of Credit”).  The Letter of Credit shall be returned toLessee upon the “Completion of the Expansion” (as defined below).  While in no event shall Lessor be required tocontribute more than One Million Five Hundred Thousand and no hundredthsDollars ($1,500,000.00) for the Expansion, the provisions of Section 16.01.1above shall not be construed to limit the maximum size of the Expansion;provided, however, that (a) in no event shall Lessee be entitled to cause,permit, or suffer any deed of trust, mortgage, security agreement, or otherlien to be filed against the Premises, Improvements, sign or construction ofthe Expansion, the foregoing shall be not deemed to limit the cost or theExpansion, or any part thereof, and (b) in the event that the Fixed PriceContract shall be for an amount in excess of the Expansion Contribution, theprincipal face amount of Letter of Credit shall be increased accordingly toreflect such increased cost.  TheExpansion Contribution shall be available for any and all “hard” and “soft”costs of the design and construction of the Expansion (excluding Lessee’sinternal costs and wages and salaries of Lessee’s employees), including withoutlimitation the purchase of fixtures and equipment for use in the expandedImprovements (which fixtures and equipment shall constitute Lessor’s Fixturesand shall be a part of the Improvements and shall not constitute Lessee’sEquipment).

 

16.01.3                                    TheExpansion shall be performed according to the Expansion Plans, which shall besubject to Lessor’s prior written consent (which consent shall not be 

 

40

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unreasonably withheld,conditioned or delayed, if (a) no Event of Default shall have occurred and becontinuing, (b) Lessor shall have been furnished with the Letter of Credit andthe Fixed Price Contract required above, and (c) it has been demonstrated toLessor’s satisfaction that the proposed Expansion Improvements will impairneither the structural integrity nor the value of the existing Improvements),it being understood that the Expansion shall be designed to Lessee’s reasonablespecifications, according to Lessee’s perceived needs for additionalmanufacturing, processing, laboratory, testing, office, warehouse ordistribution space (or any combination of any of such uses), all in Lessee’sreasonable discretion.

 

16.01.4                                    TheExpansion shall be performed and constructed according to the Expansion Plans,as the same may be amended from time to time, subject to Lessor’s writtenconsent for all material modifications. Without limiting the foregoing, Lessor’s consent shall be required forany modification or modifications which, individually or in the aggregate,would increase the projected cost of the Expansion by more than Twenty-FiveThousand and no hundredths Dollars ($25,000.00) (whether such cost is to beborne by Lessor or Lessee).  Lessor’sconsent to modifications shall not be unreasonably withheld, conditioned ordelayed, if it has been demonstrated to Lessor’s satisfaction that the proposedmodification will impair neither the structural integrity nor the value of theexisting Improvements nor of the Expansion. All of the Expansion shall be performed by a insured, bonded contractorlicensed to do business in the State of California, selected by Lessee andreasonably acceptable to Lessor.  TheExpansion Contribution shall be funded by Lessor into a Depository anddisbursed by the Depository as though such work were to repair the Premisesafter a casualty, pursuant to Section 6.02(e) hereof.  Lessor may require that it be named as beneficiaryunder a performance bond in connection with the Expansion.  During the construction of the Expansion,Lessee shall provide such builder’s risk insurance as Lessor may require withrespect thereto, and Lessor shall be named as loss payee thereunder, to’ theextent of the Expansion Contribution.

 

16.01.5                                    Commencingon the first day of the first month following Lessor’s disbursement of theExpansion Contribution into the Depository, Lessee’s Basic Rent due underSection 1.04 of this Lease shall be increased by an amount equal to $0.50multiplied by the gross square footage of the Expansion, such amount to beincreased annually by two and four tenths percent (2.4%) during the Lease Term.

 

16.01.6                                    “Completionof the Expansion” shall mean (a) that Lessor has been furnished a final,unconditional certificate of occupancy issued for the Expansion and (b) thatLessor has been furnished a final lien waiver from Lessee’s contractor and suchother evidence of payment and lien-free completion as Lessor and Lessor’s titleinsurer may reasonably require.  UponCompletion of the Expansion, the Lease Term for the entire Premises, includingbut not limited to the Expansion, shall be adjusted so that the Lease Term(exclusive of any option terms permitted under Section 1.03 of this Lease)shall end on the date which is ten (10) years from the last day of the month inwhich Completion of the Expansion occurs.

 

41

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**ARTICLE XVII**

 

**Section 17.01.****                  SpecificEnforcement**.  Lessee’s rightscontained in Section 1.04 and Articles 15 and 16 hereof shall be specificallyenforceable, Lessor’s failure or refusal to honor such rights not being readilycompensable by an award of damages.

 

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; EXECUTION PAGE FOLLOWS.]

 

42

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INWITNESS WHEREOF, the parties hereto have caused this Lease to be executed as ofthe date first above written.

 
|   | Lessor:                                   |
|--------|-------------------------------------------|
|   |                                      |
|   | **GENERAL ELECTRIC CAPITAL CORPORATION**, |
|   | a Delaware corporation                    |
|   |                                      |
|   | By:                                       |  /s/ LINDA K. BRACKEN |   |
|   | Print:                                    | Linda K. Bracken |   |
|   | Its:                                      | Vice President |   |
|   |                                      |
|   |                                      |
|   | Lessee:                                   |
|   |                                      |
|   | **INAMED CORPORATION**, a                 |
|   | Delaware corporation                      |
|   |                                      |
|   | By:                                       |  /s/ NICHOLAS L. TETI |   |
|   | Print:                                    | Nicholas L. Teti |   |
|   | Its:                                      |  Chairman, President and C.E.O. |   |
|        |                                           |  |  |  |  |  |  |

 

[EXECUTION PAGE OF LEASE AGREEMENT]

 

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**SCHEDULE A**

 

**LEGAL DESCRIPTION**

 

Lots 1 and 2, Tract 4642, filed March 10, 1982, Map Book 126, Pages 30to 33, inclusive, Alameda County Records.

 

APN: 519-1010-085-01 011432986.3A

 

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**SCHEDULE B**

 

**CONTRACTUAL REQUIREMENTS**

 

**[NOT APPLICABLE]**

 

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**SCHEDULE C**

 

**PERMITTED EXCEPTIONS**

 

1.                                       Thelien of supplemental taxes, if any, assessed pursuant to Chapter 3.5 commencingwith Section 75 of the California Revenue and Taxation Code, not yet due andpayable.

 

2.                                       Aneasement for ingress and egress and incidental purposes, recorded March 28,1955 as Book 7611, Page 373 of Official Records.

 
| In Favor of: |   | Frank F. Serpa and Emila F. Serpa, his wife |
|--------------|--------|---------------------------------------------|
| Affects:     |   | A portion of Lot 1                          |

 

3.                                       Aneasement for sewer and incidental purposes, recorded August 3, 1970 as Reel2666, Image 13 of Official Records.
| In Favor of: |   | Union Sanitary District            |
|--------------|--------|------------------------------------|
| Affects:     |   | The northwesterly 15 feet of Lot 1 |

 

4.                                       Covenants,conditions, restrictions and easements in the document recorded March 30, 1979 asSeries No. 79-059885 of Official Records, which provide that a violationthereof shall not defeat or render invalid the lien of any first mortgage ordeed of trust made in good faith and for value, but deleting any covenant,condition or restriction indicating a preference, limitation or discriminationbased on race, color, religion, sex, handicap, familial status, nationalorigin, sexual orientation, marital status, ancestry, source of income ordisability, to the extent such covenants, conditions or restrictions violateTitle 42, Section 3604(c), of the United States Codes or Section 12955 of theCalifornia Government Code.  Lawfulrestrictions under state and federal law on the age of occupants in seniorhousing or housing for older persons shall not be construed as restrictionsbased on familial status.

 

5.                                       Covenants,conditions, restrictions and easements in the document recorded May 21, 1980 asSeries No. 80-089233 of Official Records, which provide that a violationthereof shall not defeat or render invalid the lien of any first mortgage ordeed of trust made in good faith and for value, but deleting any covenant,condition or restriction indicating a preference, limitation or discriminationbased on race, color, -religion, sex, handicap, familial status, nationalorigin, sexual orientation, marital status, ancestry, source of income ordisability, to the extent such covenants, conditions or restrictions violateTitle 42, Section 3604(c), of the United States Codes or Section 12955 of theCalifornia Government Code.  Lawfulrestrictions under state and federal law on the age of occupants in seniorhousing or housing for older persons shall hot be construed as restrictionsbased on familial status.

 

Document(s) declaring modifications thereof recorded July 10, 1981 asSeries No. 81-115085 of Official Records.

 

6.                                       Aneasement shown or dedicated on the Map as referred to in the legal description For:                                                           public utilities and incidental purposes.

 

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Affects the southwesterly 10 feet of Lots 1and 2.

 

7.                                       Theterms and provisions contained in the document entitled “Spur Track EasementAgreement” recorded April 19, 1982 as Series No. 82-055298 of Official Records.  By Setter Hill Limited, a Californiacorporation and between Amarok Ltd., a California corporation

 

An easement as contained in the abovedocument.

For:                                                SpurTrack and incidental purposes.

 

Affects the northerly portion of the land andother property.

 

8.                                       Theterms and provisions contained in the document entitled “Assignment andAssumption of Rights, Powers and Reservations” recorded October 5, 1982 asSeries No. 82-151328 of Official Records. By Foremost-Mckesson, Inc., a Maryland corporation as successor toCrocker Land Company and between Sutter Hill Limited, a California corporation

 

9.                                       Awaiver of any claims for damages by reason of the location,construction,-landscaping or maintenance of a contiguous freeway, highway orroadway, as contained in the document recorded March 28, 1955 as Book 7611,Page 375 of official Records.

 

10.                                 Anyfacts, rights, interests or claims that may exist or arise by reason of thefollowing matters disclosed by an ALTA/ACSM survey made by Duryea &associates on September 11, 2002, designated Job Number 23597.

 

A.  The fact that there is amonitoring well, water meter, electric vaults, electric transformer andtelephone vaults on various locations of the land.

 

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**SCHEDULE D**

 

**LESSEE INSURANCE REQUIREMENTS**

 
| NAME OF INSURED:         |   | Inamed Corporation                       |
|--------------------------|--------|------------------------------------------|
|                     |   |                                     |
| INSURED MAILING ADDRESS: |   | 5540 Ekwill Drive                        |
|                     |   | Santa Barbara, California 93111          |
|                     |   |                                     |
| PROPERTY ADDRESS(s):     |   | 48490 Milmont Drive, Fremont, California |
|                     |   |                                     |
| ADDITIONAL INSURED:      |   |                                     |

 

**General Electric Capital Corporation** (“GECapital”), a Delaware corporation, its successors and assigns, 10900 NE 4thStreet, Suite 500 Bellevue, WA 98004

 

LEASE NO.:                               001-         -001

 

 

**INSURANCE REQUIREMENTS:**

 

HAZARD INSURANCE:

 

Evidenced on Form **Acord 27 - Evidence ofInsurance**, naming **General Electric CapitalCorporation**, a Delaware corporation, its successors and/or assigns,as Additional Insured as respects the subject property.

 

Perils:                Fireand Extended coverage, vandalism and malicious mischief, Boiler and Machinery,and if applicable, Flood and Earthquake Insurance.

 

Values:         100%Replacement cost value of property/Limit of $5,000 deductible

 

**Endorsements Required**:

•                  InflationGuard, and Agreed Amount and Replacement Cost endorsements

•                  Listof Locations and Schedule of Values, if Blanket Policy

•                  30Days Notice of Cancellation

•                  AgreedAmount endorsement

 

Co-insurance should not be a condition of any insurance provided.

 

**Loss of Rents/Business Interruption** for 12months (or in an amount equivalent to at least 12 months rent) **is required**.

 

**Boiler and Machinery Coverage will berequired.**

 

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LIABILITY:

 

Coverage to be On Occurrence basis only.

 

Evidence of Insurance, showing comprehensive general liability on anOccurrence Basis, in an amount **not less than $5,000,000(per occurrence)** to include:

 

Bodily injury and property damage liability (primary and excessumbrella acceptable to satisfy limits).

 

**General Electric Capital Corporation**is to be named Additional Insured as respects this property and the AdditionalInsured endorsement should be attached to the certificate.

 

SPECIAL INSTRUCTIONS

 

**General Electric Capital Corporation**is to be provided with an **Evidence of Insurance**and a **Certificate of Insurance** from aninsurance company having a **Best’s Rating of A/X**or better for, respectively, hazard and liability coverage and must be executedby the insurance company or its authorized agent.  The evidence and certificate must itemize theabove coverage and endorsements.  **WITHIN 90 DAYS OF ISSUANCE OF THE EVIDENCE OF INSURANCE, THE INSURANCECOMPANY IS TO PROVIDE A CERTIFIED COPY OF THE INSURANCE POLICY INCLUDING ALLENDORSEMENTS AND AMENDMENTS**.

 

2

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**SCHEDULE E**

 

**PERMANENT LOAN INSURANCE REQUIREMENTS**

 
| NAME OF INSURED:         |   | (NAMED CORPORATION                       |
|--------------------------|--------|------------------------------------------|
|                     |   |                                     |
| INSURED MAILING ADDRESS: |   | 5540 Ekwill Drive                        |
|                     |   | Santa Barbara, California 93111          |
|                     |   |                                     |
| PROPERTY ADDRESS(s):     |   | 48490 Milmont Drive, Fremont, California |
|                     |   |                                     |
| MORTGAGEE/LOSS PAYEE:    |   |                                     |

 

                     (“Lender”).

 

LOAN NO.:

 

**INSURANCE REQUIREMENTS:**

 

HAZARD INSURANCE:

 

Evidenced on Form **Acord 27 - Evidence ofProperty Insurance**, naming **Lender**, itssuccessors and/or assigns, as Loss Payee and Mortgagee as respects thesubject property.  **If thecredit tenant is to provide the insurance coverage, the Borrower must be namedas Additional Insured**.

 

Perils:  Fire and Extended coverage, vandalism andmalicious mischief, Boiler and Machinery, and if applicable, Flood andEarthquake Insurance.

 

Values:         100%Replacement cost value of property/Limit of $5,000 deductible

 

**Endorsements Required:**

 

•                                          InflationGuard, and Agreed Amount and Replacement Cost endorsements

•                                          Listof Locations and Schedule of Values, if Blanket Policy

•                                          **438BFU (Loss Payee Endorsement** - see copy attached, withenlargement of same for easier reading), in favor of **Lender**amended to 30 days notice of change, cancellation or non-renewal.

•                                          30Days Notice of Cancellation

o                                    Waiverof Subrogation endorsement is required, unless property is owner occupied.

 

Co-insurance should not be a condition of any insurance provided.

 

**Loss of Rents/Business Interruption**for 12 months (or in an amount equivalent to at least 12 months rent) **is required**.

 

**Boiler and Machinery coverage is required**.  If the insurance carrier for the Boiler AMachinery coverage is different from that of the Property Coverage, a **Joint Loss**

 

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**Agreement**endorsement must be reflected on the evidences of insurance for both Propertycoverage and Boiler & Machinery coverage.

 

If the 438BFU Lender’s Loss Payable Endorsement is not available,please submit another Loss Payable endorsement for review by **General Electric Capital Corporation and Lender**.

 

LIABILITY:

 

Evidenced on Form **Accord 25 - Certificate ofLiability Insurance**

 

Coverage to be On Occurrence basis only.

 

Evidence of Insurance, showing comprehensive general liability on anOccurrence Basis, in an amount **not less than $2,000,000(per occurrence)** to include;

 

Bodily injury and property damage liability (primary and excessumbrella acceptable to satisfy limits).

 

**General Electric Capital Corporation**and Lender are to be named Additional Insureds as respects this property onlyand the Additional Insured endorsement should be attached to the certificate.  If the credit tenant is to provide theinsurance coverage, the Borrower must be named as Additional Insured as well.

 

SPECIAL INSTRUCTIONS

 

**General Electric Capital Corporation** andLender are to be provided with an **Evidence of PropertyInsurance** and a **Certificate of LiabilityInsurance** from an insurance company having a Best’s Rating of A/X orbetter for both hazard and liability coverage and must be executed by theinsurance company or its authorized agent. The evidence and certificate must itemize all the above endorsements andthe evidence must include a copy of the completed and signed 438BFU endorsement(a copy of which is attached).  **WITHIN 90 DAYS OF ISSUANCE OF THE EVIDENCE OF INSURANCE, THE INSURANCECOMPANY IS TO PROVIDE A CERTIFIED COPY OF THE INSURANCE POLICY INCLUDING ALLENDORSEMENTS AND AMENDMENTS.**

 

2

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**LENDER’S LOSS PAYABLE ENDORSEMENT - 438 BFU**

 

1.                                       Lossor damage, if any, under this policy shall be paid to                **[Lender]**                   ,its successors and assigns, hereinafter referred to as the “Lender,” inwhatever form or capacity its interests may appear and whether said interest bevested in said Lender in its individual or in its disclosed or undisclosedfiduciary or representative capacity, or otherwise, or vested in a nominee ortrustee of said Lender.  .

 

2.                                       Theinsurance under this policy, or any rider or endorsement attached thereto, asto the interest only of the Lender, its successors and assigns, shall not beinvalidated nor suspended: (a) by any error, omission or change respecting theownership, description, possession or location of the subject of the insuranceor the interest therein, or the title thereto; (b) by the commencement offoreclosure proceedings or the giving of notice of sale of any of the propertycovered by this policy by virtue of any mortgage or trust deed; (c) by anybreach of warranty, act, omission, neglect or noncompliance with any of theprovisions of this policy, including any and all riders now or hereafterattached thereto, by the named insured, the borrower, mortgagor, trustor,vendee, owner, tenant, warehouseman, custodian, occupant, or by the agents ofeither of any of them or by the happening of any event permitted by them oreither of them, or their agents, or which they failed to prevent, whetheroccurring before or after the attachment of this endorsement, or whether beforeor after a loss, which under the provisions of this policy of insurance or ofany rider or endorsement attached thereto would invalidate or suspend theinsurance as to the named insured, excluding herefrom, however, any acts oromissions of the Lender while exercising active control and management of theproperty.

 

3.                                       Inthe event of failure of the insured to pay any premium or additional premiumwhich shall be or become due under the terms of this policy or on account ofany change in occupancy or increase in hazard not permitted by this policy,this Company agrees to give written notice to the Lender of such nonpayment ofpremium after sixty (60) days from and within one hundred and twenty (120) daysafter due date of such premium and it is a condition of the continuance of therights of the Lender hereunder that the Lender when so notified in writing bythis Company of failure of the insured to pay such premium shall pay or causeto be paid the premium due within ten (10) days following receipt of theCompany’s demand in writing therefor.  Ifthe Lender shall decline to pay said premium or additional premium, the rightsof the Lender under this Lender’s Loss Payable Endorsement shall not beterminated before ten (10) days after receipt of said written notice by theLender.

 

4.                                       Wheneverthis Company shall pay to the Lender any sum for loss or damage under thispolicy and shall claim that as to the insured no liability therefor exists,this Company, at its option, may pay to the Lender the whole principal sum andinterest and other indebtedness due or to become due from the insured, whethersecured or unsecured (with refund of all interest not accrued), and thisCompany, to the extent of such payment, shall thereupon receive a fullassignment and transfer, without recourse, of the debt and all rights andsecurities held as collateral thereto.

 

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5.                                       Ifthere be any other insurance upon the within described property, this Companyshall be liable under this policy as to the Lender for the proportion of suchloss or damage that the sum hereby insured bears to the entire insurance ofsimilar character on said property under policies held by, payable to andexpressly consented to by the Lender.  AnyContribution Clause included in any Fallen Building Clause Waiver or any ExtendedCoverage Endorsement attached to this contract of insurance is herebynullified, and also any Contribution Clause in any other endorsement or riderattached to this contract of insurance is hereby nullified except ContributionClauses for the compliance with which the insured has received reduction in therate charged or has received extension of the coverage to include hazards otherthan fire and compliance with such Contribution Clause is made a part of theconsideration for insuring such other hazards. The Lender upon the payment to if of the full amount of its claim willsubrogate this Company (pro rata with all other insurers contributing to saidpayment) to all of the Lender’s rights of contribution under said otherinsurance.

 

6.                                       ThisCompany reserves the right to cancel this policy at any time, as provided byits terms, but in such case this policy shall continue in force for the benefitof the Lender for thirty (30) days after written notice of such cancellation isreceived by the Lender and shall then cease.

 

7.                                       Thispolicy shall remain in full force and effect as to the interest of the Lenderfor a period of ten (10) days after its expiration unless an acceptable policyin renewal therefor with loss thereunder payable to the Lender in accordancewith the terms of this Lender’s Loss Payable Endorsement shall have been issuedby some insurance company accepted by the Lender.

 

8.                                       Shouldlegal title to and beneficial ownership of any of the property covered underthis policy become vested in the Lender or its agents, insurance under thispolicy shall continue for the term thereof for the benefit of the Lender, but,in such event, any privileges granted by this Lender’s Loss Payable Endorsementwhich are not also granted the insured under the terms and conditions of thispolicy and/or under other riders or endorsements attached thereto shall notapply to the insurance hereunder as respects such property.

 

9.                                       Allnotices herein provided to be.  given bythe Company to the Lender in connection with this policy and this Lender’s LossPayable Endorsement shall be mailed to or be delivered to the Lender at itsoffice or branch at:                                [addressof Lender]                                          .

 
| Attached to Policy No. |   |   |   |
|------------------------|--------|--------|--------|
| Of:                    |   |   |   |
| Issued to:             |   |   |   |
| Agency at:             |   |   | Date:  |   |   |
|                        |        |        |        |  |  |  |  |  |

 

2

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**AMENDMENT TO FACILITY LEASE**

 

This Amendment to Facility Lease (this “Amendment”) is made as of the1st day of October, 2002, by and between GENERAL ELECTRIC CAPITAL CORPORATION,a Delaware corporation and the successor in interest to Heleasco Seven,Inc.  (“Lessor”), and INAMED CORPORATION,a Delaware corporation and the successor in interest to Collagen Corporation (“Lessee”),with regard to the following facts:

 

A.                                   Lessorand Lessee are parties to that certain Facility Lease, dated as of March 15,1989 (the “Lease”).

 

B.                                     Lessorand Lessee wish to amend the Lease by terminating it with regard to the realestate described therein and by extending the term and modifying the rent withregard to the equipment described therein.

 

NOW, THEREFORE, for good and valuable consideration, the receipt andsufficiency of which are hereby acknowledged by Lessor and Lessee, Lessor andLessee hereby agree as follows:

 

1.                                       **Definitions**.  Capitalizedterms used in this Amendment without definition shall have the respectivemeanings assigned to those terms in the Lease. For reference purposes, such definitions are set forth in Schedule Aattached to this Amendment and by this reference incorporated into thisAmendment.

 

2.                                       **Equipment Lease Only**. The Lease is hereby terminated with regard to the real estate describedtherein and shall apply hereafter only with regard to the equipment describedin Schedule B attached to this Amendment and by this reference incorporatedinto this Amendment.  Accordingly, asused in the Lease, the term “Leased Property” shall hereafter only refer tosuch equipment.

 

3.                                       **Base Lease Term Extension**. The Base Lease Term is hereby extended to, and will expire at the closeof business on, September 30, 2007 (the Base Lease Term Expiration Date, asamended by this Amendment).

 

4.                                       **Basic Rent**.  BasicRent shall be $2,250,000 ($450,000 per year), payable in advance in sixty (60)equal monthly installments of $37,.500 each, commencing on October 1, 2002.

 

5.                                       **Lessee’s Rights to Purchase**. Lessee shall have the right to purchase all of the Leased Property atthe then-unamortized value (together with accrued but unpaid interest as of thedate of the purchase, all according to the amortization schedule annexed heretoas Schedule C) at ‘any time.  Lesseeshall have the right to purchase the Leased Property at the end of the BaseLease Term for One ($1.00) Dollar, which the Lessor and Lessee anticipate to bethe fair market value of the Leased Property on the Base Lease Term ExpirationDate..

 

6.                                       **Casualty Loss Value**.  TheCasualty Loss Value for any Item of Leased Property shall be modified if and asnecessary so that, at any given time, such Casualty Loss Value is equal to thecost of that Item which then remains outstanding presuming that the Basic Rentpayments hereafter received are first applied to earned but unpaid interest at7.5% per

 

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annum.  As used in the foregoingsentence, “cost” shall refer to the pro rata portion of $1,871,449 attributableto such Item of Leased Property (which portion shall be based upon the originalcost of such Item relative to the original cost of all Items at thecommencement of this Lease, which original costs are set forth in Schedule B tothis Amendment).

 

7.                                       **Casualty Loss Value Upon Default**.  The text of Section 16(a)(iii)(A) of theLease is hereby stricken and replaced with the following:  “the Casualty Loss Value of all Items ofLeased Property”, subject, however, to Section 6 of this Amendment.

 

8.                                       **Assignment; Subleases**. Lessee may assign this Lease to any person to whom Lessee assigns its lease(the “Premises Lease”) of the real property located at 48490 Milmont Drive,Fremont, California (the “Premises”), provided such assignment of the PremisesLease is permitted under the Premises Lease. Lessee may sublet the Leased Property to any person to whom Lesseesublets the Premises, provided such subletting of the Premises is permittedunder the Premises Lease.  No suchassignment or sublease shall constitute a release of Lessee from itsobligations under this Lease.

 

9.                                       **Notices**.  All noticesand demands which are required or permitted to be given by either party on theother hereunder shall be in writing.  Allnotices and demands shall be sent by United States Mail, certified orregistered mail, return-receipt requested, or by recognized overnight courier service(such as Federal Express), or by facsimile or other telecommunication devicecapable of transmitting and creating a written record.  Notices shall be effective two business daysfollowing the date they are deposited in the United States Mail, one businessday after delivery to an overnight courier and on the day they are telefaxed(if a confirmation report results).  Unlessa party designates another address for notices (by notice given pursuant tothis Section, notices shall be sent to the following address:

 
| If to Lessor.   |   | General Electrical Capital Corporation         |
|-----------------|--------|------------------------------------------------|
|            |   | Suite 500                                      |
|            |   | 10900 NE 4th Street                            |
|            |   | Bellevue, WA 98004                             |
|            |   | Attention: Vice President/Manager, Real Estate |
|            |   |                                           |
| If to Lessee:   |   | Inamed Corporation                             |
|            |   | 5540 Ekwill Drive                              |
|            |   | Santa Barbara, California 93111                |
|            |   | Attention: Facilities Manager                  |
|            |   |                                           |
| With copies to: |
|            |   | Inamed Corporation                             |
|            |   | 5540 Ekwill Drive                              |
|            |   | Santa Barbara, California 93111                |
|            |   | Attention: General Counsel                     |

 

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|   |   | Inamed Corporation          |
|--------|--------|-----------------------------|
|   |   | 48490 Milmont Drive         |
|   |   | Fremont, California 94538   |
|   |   | Attention: Facility Manager |

 

10.                                 **Ratification of Lease**. As amended pursuant to this Amendment, the Lease remains in full forceand effect.

 

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IN WITNESS WHEREOF, Lessor and Lessee have caused their respective dulyauthorized representatives to executed and deliver this Amendment as of the dayand year first above written.

 

GENERAL ELECTRIC CAPITAL CORPORATION

 

 
| By:                |  /s/ LINDA K. BRACKEN           |   |
|--------------------|--------------------------------------|--------|
| Title:             |  Vice President                 |   |
|               |                                 |   |
|               |                                 |   |
| INAMED CORPORATION |                                 |
|               |                                 |
|               |                                 |
| By:                |  /s/ NICHOLAS L. TETI           |   |
| Title:             |  Chairman, President and C.E.O. |   |
|                    |                                      |        |  |

 

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**SCHEDULE A**

 

**Definitions**

 

Addition or Improvementmeans any addition or improvement to any item of Leased Property that does notconstitute Additional Equipment.

 

Additional Equipmentmeans the property described in Schedule C to the Purchase Agreement.

 

Adjustment Date meansthe date occurring on the 120th day following the Base Lease Term CommencementDate.

 

Affiliate of aPerson means any other Person who is a shareholder of, or who directly orindirectly controls, or is controlled by, such Person.

 

Applicable Law meansthe federal, state and local statutes, regulations, ordinances and codes,including, without limitation, the Code, and all applicable lawful rules, regulations,interpretations and orders of any commissions, boards or other legislative,executive, judicial or other governmental bodies or officers having power toregulate or supervise the Facility or its ownership, construction, manufactureruse, operation, maintenance or repair.

 

Appraisal Procedure meansthe procedure specified in the succeeding sentences for determining the FairMarket Value or Fair Rental Value of a given Item of Leased Property.  Lessor and Lessee shall consult for thepurpose of determining such amount by mutual agreement.  If no agreement is reached, either party maygive written notice (the “Notice”) to the other, requesting determination ofsuch amount by appraisal and in such event the parties shall consult for thepurpose of appointing a mutually acceptable qualified independent appraiser,experienced in the biotechnology or pharmaceutical industries, who shah.  determine the Fair Market Value or FairRental Value.  If the parties are unableto agree on an appraiser within twenty days of the giving of the Notice, theFair Market Value or Fair Rental Value shall be determined by each of twoindependent appraisers so experienced, one of whom shall be selected by Lesseeand the other of whom shall be selected by Lessor on or before the twenty-firstday following the giving of the Notice.  Theappraisers so selected shall make them: determinations within ton daysfollowing their appointment.  If thedetermination made by the appraiser opining as to the greater value does notexceed the lower value by more than ten percent of, the lower value, the two valuesshall be averaged and such determination shall constitute the determination ofthe appraisers.  If such excess isgreater than ten percent of the lower value, a third appraiser shall beselected by the two appraisers or by the American Arbitration Association inaccordance with its procedures, if the other two are unable to agree upon athird appraiser within ten days.  Thethird appraiser shall make his determination, the appraisal which differs mostfrom the other two appraisals shall be excluded, the remaining twodeterminations shall be averaged, and such average shall constitute the FairMarket Value or Fair Rental Value, as appropriate.

 

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Appraiser means thefirm of Arthur D.  Little Valuation,Inc., or another independent appraiser selected by Lessor qualified and expertin the appraisal of facilities or equipment used in the biotechnology orpharmaceutical industries.

 

Assignment of Facility, Agreementsmeans the assignment of the Construction Contracts, Governmental Authorizationsand vendor Agreements in the form of Exhibit E to the Purchase Agreement.

 

Base Lease Termmeans the period beginning on the Base Lease Term Commencement Date and endingon the ease Lease Term Expiration Date.

 

Base Lease Term Commencement Datemeans October 1, 1989.

 

Base Lease Term Expiration Datemeans September 30, 2004.

 

Basic Rent means anyof the amounts provided to be paid by Lessee under Sections 3(b) or 3(c) of theLease.

 

Bill of Sale means,with respect to a given Item of Leased property, a valid and sufficient bill ofsale in the form of Exhibit A to the Purchase Agreement, made by Lessee infavor of Lessor, dated the Item’s Delivery Date.

 

Business Day means aday which is not a Saturday, Sunday, or a day on which banks are authorized orrequired by law to be closed in the State of California or in the State of.  Delaware or under the laws of either suchState or of the United States.

 

Casualty Event hasthe meaning given in Section 10 (b) (i) of the Lease.

 

Casualty Loss Payment Datemeans (a) the last day of the first month following the date on which Lessee isobligated to notify Lessor of the happening of a Casualty Event pursuant toSection 10(b)(i) of the Lease; and (b) if Lessee has attempted to exercise itsoption to replace Casualty Property under Section 10(b)(Iii) but has failed todo so within the period there provided, the 30th day following the last day ofsuch period.

 

Casualty Loss Value ofany Item of Leased Property (a) as of any date during the Basic Lease Term,means the amount determined by multiplying the appropriate percentage on TableOne of Schedule H to the Lease by Lessor’s Cost of the Item, and (b) as of anydate during a Renewal.  Term, means theFair Market Value of the Item as of the commencement of the Renewal Term.

 

Casualty Payment hasthe meaning given in Section 10(b)(ii) of the Lease.

 

Casualty Property meansany Item of Leased Property suffering a Casualty Event.

 

Change in Tax Lawmeans a change in the Code, the issuance of new or revised TreasuryRegulations, revenue procedures, revenue rulings or other administrativepublications or a change 3.n judicial interpretation of existing law which, to theextent it relates to a given Item of Leased Property, is enacted, made orissued in final or temporary form, on

 

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or prior to the Placed in Service Date of such Item, and as to which,if reasonably requested by Lessee, Special. Counsel has delivered an opinion that the change affects the taxbenefits anticipated by Lessor to be obtained from the overall Transaction asset out in Schedule D, to the extent and in the manner set out in Lessor’snotice of the need for adjustment.

 

Claim has themeaning given in Section 13(a) of the Purchase Agreement.

 

Code means theInternal Revenue Code of 1986, as amended, or any successor tax code.

 

Comparable Companieshas the meaning given in Section 6(a) of the Lease.

 

Completion means thecompletion, in all significant respects, of the construction of improvementsupon the Plant and the.  Site and theinstallation of equipment in the Plant, all as set out in the ConstructionContract and the Construction and Design Documents as the same are in effect asof the first Delivery Date, or as the same are supplemented or amended inaccordance with the provisions of the Consent Lo Assignment of ConstructionContract, provided that any such supplement or amendment is in every material.  respect consistent with the assumptions andconclusions of the Appraisal.  Completionshall be evidenced by, and shall be doomed to occur on the date of delivery toLessor of a duly executed Completion Certificate.

 

Completion Certificatemeans the certificate of Rudolph & Sletten, Inc.  in the form of Exhibit J to the PurchaseAgreement.

 

Construction and Design Documentsmeans all of the plans, specifications, working drawings and otherarchitectural, engineering or design documents related to the Plant or theAdditional Equipment, whether existing on the First Delivery Date or createdthereafter.

 

Construction Contractmeans the construction agreement between Lessee and Contractor dated as ofAugust 15, 1988 as amended including Control Estimate No. 6 dated July 27, 1988as revised February 5, 1989.

 

Contemplated Liens meansthe rights and encumbrances created by the Overall Transaction.

 

Contractor meansRudolph & Sletten Inc., of Foster City, California.

 

Default means adefault under any Fundamental Agreement other than the Lease, or the happeningof an event which, with the giving of notice or the passage of time, couldbecome an Event of Default.

 

Default Rate means aper annum rate of interest equal to the lesser of (1) the prime rate announcedfrom time to time by Chase Manhattan Hank, New York as its prime lending orbase rate plus four percent (4%), or (ii) the maximum interest rate allowed bylaw.

 

Delivery Date meansthe First Delivery Date or any Subsequent Delivery Date.

 

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Environmental Consultantmeans Woodward-Clyde Consultants of Oakland, California.

 

Event of Default hasthe meaning given in Section 15 of the Lease.

 

Expiration Datemeans the last day of the Lease Term.

 

Facility means thePlant, the Site and the Additional Equipment, taken together, including allNonseverable Improvements.

 

Fair Market Rentmeans, with respect to a given Item of Leased Property, an amount determined inaccordance with the Appraisal Procedure as of a given time, which amount equalsthe rent which would be obtained in an arm’s length lease of the Item betweenan informed and willing lessee engaged in the pharmaceutical, manufacturing ormedical device industry (other than such a lessee currently in possession), andan informed and willing lessor under no compulsion to lease, without regard tothe costs and expenses that are reasonably anticipated would be incurred inconnection with such a transaction.

 

Fair Market Valuemeans, with respect to a given Item of Leased Property, an amount determined inaccordance with the Appraisal Procedure as of a given time, which amount equalsthe value which would be obtained in an arm’s length purchase and saletransaction with respect to -the Item between an informed and willing buyerengaged in the pharmaceutical, manufacturing or medical device industry (otherthan such a buyer currently in possession), and an informed and willing sellerunder no compulsion to sell, without regard to the costs and expenses that arereasonably anticipated would be incurred in connection with such a transaction.

 

FDA Validation meansthe written authorization of the United states Food and Drug Administration andof California Department of Health Services to carry out the manufacturing ofmedical devices products at the Facility.

 

Financing Statement meansa statement filed at the office of the secretary of State of California, in theform prescribed by the Uniform Commercial Code of California.

 

First Delivery Date meansa Business bay selected by Lessee for the sale to Lessor of the Plant and theSite under the Purchase Agreement, provided that Lessee gives Lessor note lessthan five Business Days’ prior notice thereof.

 

Fundamental Agreementsmeans the agreements described in Section 3(a)(i) of the Purchase Agreementtogether with each other Bill of Sale, Grant Dead or Lease supplement as andwhen delivered in connection with the transactions contemplated by Section2(a)(ii) of the Purchase Agreement.

 

Governmental Authorizationmeans any consent, right, exemption, concession, permit, license, authorization,certificate, order, franchise, determination, or approval of any federal,state, municipal or governmental department, commission, board agency orinstrumentality with respect to the Facility, any Item or any portion thereof.

 

Grant Deed means adeed in the form of Exhibit D to the Purchase Agreement.

 

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Guaranteed Maximum Pricemeans the price identified as such under the Construction Contract.

 

Hazardous Substance hasthe meaning given in Section 8(f)(v) of the Lease.

 

Hazardous Substance Lawshas the meaning given in Section 8(f)(i) of the Lease.

 

Imposition has themeaning given in Section 14 of the Purchase Agreement or Section 18 of theLease.

 

Indemnitee meansLessor and its successors, assigns, employees, agents, shareholders and Personsthat control, are in common control with, or are controlled by Lessor.

 

Interim Rent meansthe amount provided to be paid by Lessee under Section 3(a) of the Lease.

 

Interim Term meanswith respect to a given Item of Leased Property, the period beginning on itsDelivery Date and ending on the day prior to the Base Lease Term Commencement Date.

 

Item or Item of Leased Propertymeans any discrete component of the Plant, the Site or any Additional Equipmentor of any appliance, part, instrument, appurtenance, accessory, furnishing andother equipment of whatever nature that from time to time may be incorporatedor installed in or attached to the Facility, including, without limitation, anyspare parts that are included as part of the Facility.

 

Lease means theFacility Lease between Lessee and Lessor dated as of March 15, 1989 and eachLease Supplement executed pursuant thereto.

 

Lease Term means,the period commencing on the First Delivery Date and ending on September 30, 2004,or, if Lessee has renewed the Lease pursuant to Section S(a) of the Lease, on,the last day of the last Renewal Term to occur, except that (a) if a CasualtyEvent has occurred with respect to the entire Facility, the Lease Term ends onthe Casualty Loss Payment Date corresponding to such Casualty Event and (b) if Lesseehas made a determination that a Special Casualty Event has occurred underSection 7(a) or 8(e)(viii) of the Lease, or Lessor has made a determinationthat a Special Casualty Event has occurred under Section 10(c)(i) of the Lease,the Tease Term ends on the Special Casualty Loss Payment Date corresponding tosuch Special Casualty Event.

 

Leased Propertymeans the Plant, the Site and the Additional Equipment, taken together,including all Nonseverable.  Improvements.

 

Lease Rate Factors meanseach of the decimal numbers set out in Section 3(b) of the Lease.

 

Lease supplementmeans each supplement in the form of Exhibit A to the Lease evidencing thedelivery and acceptance of Leased Property and the confirming Lessee’sobligation for Rent with respect thereto.

 

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Lessee meansCollagen Corporation, a Delaware corporation.

 

Lessee Confidential Informationhas the meaning given in Section 8(e) of the Lease.

 

Lessee Documentsmeans each of the Fundamental Agreements, and each of the Related Documents towhich Lessee is a party.

 

Lessor meansHeleasco Seven, Inc., a Delaware corporation, and its successors and assigns.

 

Lessor’s Cost means,as to a given Item of Leased Property, the Purchase Price thereof, togetherwith an amount equal to the product of Transaction Costs and a fraction havingas its numerator the Purchase Price of the Item and as the denominator theaggregate Purchase price of all Items, and as to the Facility, the aggregate ofLessor’s Cost of each Item of Leased Property. Lessor’s Cost of the Facility shall in no event exceed $16,000,000.

 

Lessor’s Liens meansliens, charges, encumbrances or adverse claims of title, against the Facilityor any Item of- Leased Property created or incurred by or through Lessor.

 

Net Economic Return meansthe after tax yield (federal, state and local), after tax cash flows andperiodic book income which Lessor anticipates as of the date of the PurchaseAgreement.

 

Nonseverable Additionmean (i) a replacement part installed can the Facility as required by Section8(a) of the Lease, (ii) an Addition or improvement made pursuant to Section7(b) of the Lease, and (iii) an Addition or Improvement which is not readilyremovable without causing material damage to the Facility or any item.

 

Overall Transaction meansthe transactions contemplated by the Fundamental Agreements taken together.

 

Payment Date meansthe last Business Day of each March and September during the Lease Term.  Following the Base Lease Term CommencementDate, and the Expiration Date, except that if any such date occurs on a daythat is not a Business Day, then Payment Date means the Business Day followingsuch date.

 

Permitted Contest meansa contest, including any appeal rights, with respect to any Imposition or theapplicability of any legal requirement which:

 

is made in good faith by appropriateproceedings timely commenced and diligently prosecuted;

 

(b)                                 doesnot involve any significant risk of:

 

(i)                                     thesale, forfeiture, inability to use, or loss of any of Lessor’s interest in theFacility or any Item of Leased Property,

 

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(ii)                                  anymaterial civil or any criminal, liability to Lessor, or

 

(iii)                               anymaterial reduction in the value or the economic utility of the Facility or theItem of Leased Property; and

 

(c)                                  isnot in conflict with any requirement of insurance to be maintained pursuant toSection 6 of the Lease.

 

Permitted Encumbrancemeans any of the following:

 

(a)                                  liensfor Impositions (i) not yet delinquent or (ii) being contested in a PermittedContest, so long as adequate reserves have been set aside for the payment ofsuch Impositions;

 

(b)                                 materialmen’s,mechanic’s, vendor’s, workmen’s, repairmen’s, warehousemen’s, employee’s orother similar Liens arising in the ordinary course of business securingobligations (i) Which are not yet delinquent or (ii) which have been bonded orthe enforcement of which shall have been suspended (but only for the durationof such suspension);

 

(c)                                  theContemplated Liens;

 

(d)                                 liensarising out of judgments or awards against the party or parties obligated tokeep the subject asset free of liens with respect to which a timely appeal orproceeding for review is being prosecuted in good faith by a Permitted Contestso long as adequate reserves have been set aside for the payment of suchjudgments and awards and there has been obtained a stay of execution pendingsuch appeal or proceeding for review, or Lessor is otherwise satisfied thejudgment lien wall not be foreclosed upon during the pendency of such appeal orreview;

 

(e)                                  TitleEncumbrances;

 

(f)                                    Liensarising out of pre-judgment garnishment, attachment or other similar actions orproceedings, provided the same are removed or fully bonded within 15 days ofthe date of creation thereof; and

 

(g)                                 LessorLiens.

 

Permitted Substancemeans a substance described in Schedule E to the Lease, as the same may bemodified as provided in Section B(f)(vii) of the Lease.

 

Person means anyindividual, corporation, partnership, estate, joint venture, association, joint—stockcompany, trust, unincorporated organization, or any government or any agency orpolitical subdivision thereof.

 

Placed-in-Service Datemeans, with respect to a given Item, the date such item is “placed in service”within the meaning of Section 167 of the Code.

 

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Plant means thebuildings, improvements and equipment described in Schedule A to the PurchaseAgreement.

 

Professional Advisorsmeans each of the Appraiser, and each environmental engineer or other engineeror professional advisor delivering any report or opinion to Lessor or Lessee inconnection with the Overall.  Transactionor with respect to the Facility and/or the ownership, use or maintenancethereof, or of the conduct of Lessee’s business.

 

Purchase Agreementmeans the Agreement to Purchase and Lease dated as of March 15, 1989 betweenLessee and Lessor.

 

Purchase Pricemeans, as to a given Item of Leased property, the amount set out next to thedescription of that Item in Schedule A or Schedule C to the Purchase Agreementand definitively established in the Lease Supplement related thereto.

 

Renewal Term means afive-year period beginning on the Base Lease Term Expiration Date or on theexpiration of another expiring Renewal Term.

 

Rent means InterimRent, Basic Rent and Supplemental Rent collectively.

 

Responsible Officermeans, with respect to either party hereto, any officer or assistant officerthereof who at the time is authorized to act in connection with the OverallTransaction.

 

Severable Additionmeans any Addition or Improvement (other than a Nonseverable Addition) that isreadily removable from the Facility without causing material damage to theFacility or any Item.

 

Site means the zealproperty described in Schedule B to the purchase Agreement.

 

Special Casualty Eventhas the meaning given in Sections-7(e), B(f)(viii), and 10(c)(i) of the Lease.

 

Special Casualty Loss Payment Date,means (a) if Lessee has determined that a Special Casualty Event has occurredunder Section 7(e) or 8(f)(viii) of the Lease, the 60th day following Lessee’snotice to Lessor thereof and (b) if Lessor has determined that a SpecialtyCasualty Event has occurred pursuant to Section 10(c)(i) of the Lease, the 90thday following Lessor’s notice to Lessee thereof.

 

Special Casualty Loss Valueof any item of Leased Property (a) as of any date during the Basic Lease Term,means, with respect to a Special Casualty Event described in Section 10(c)(i)of the Lease only, the amount determined by multiplying the appropriatepercentage on Table One on Schedule H to the Lease by Lessor’s Cost of the Item..and means, with respect to a special Casualty Event described in Sections7(e)(iii) and 8(f)(viii) of the Lease, the amount determined by multiplying theappropriate percentage on Table Two on Schedule H to the Lease by Lessor’s Costof the Item and (b) as of any date during a Renewal Term means the Fair MarketValue of the Item plus such additional amount as may be required to maintainNet Economic Return.

 

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Special Casualty Paymenthas the meaning given in section 10(c)(ii) of the Lease.

 

Special Counselmeans Saul, Ewing, Remick & Saul.

 

Subsequent Delivery Datemeans a Business Day selected by Lessee for the sale to Lessor of anyAdditional Equipment under the Purchase Agreement, provided that Lessee givesLessor not less than five Business Days’ prior notice thereof and that suchBusiness Day occurs do or prior to September 30, 1989.

 

Supplemental Rentmeans the amounts payable by Lessee to Lessor or others pursuant to Section3(e) of the Lease.

 

Survey Exception meansthe regional exception commonly known as a “survey exception” and commonlyshown as exception number 4 1.n Schedule B, Part 1 of an American Land TitleAssociation Owners Policy (19    ) (excepting “[d]iscrepancies,conflicts in boundary lines, shortage in area, encroachments, or any otherfacts which a current survey would disclose, and which are not shown by thepublic records”).

 

Tax Indemnity Agreementmeans the Tax Indemnity Agreement in the form of Exhibit D to the PurchaseAgreement between Lessee and Lessor and dated as of March 15, 1989.

 

Title Company meansFirst American Title Insurance Company.

 

Title Encumbrances meansthe exceptions shown as 6, 7, 8, 9, 10, 11 and 12 in preliminary report no. 172808of First American Title Insurance Company dated as of November 21, 1988.

 

Transaction Expenseshas the meaning given in Section 5(a) of the Purchase Agreement.

 

Title Policy has themeaning given in Section 3(a)(iv) of the Purchase Agreement.

 

Vendor means anyseller or other supplier of any item of Leased Property, other than Lessee.

 

Vendor Agreement meanseach agreement between Lessee and a vendor with respect to the Plant or anyitem of Additional Equipment.

 

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