Document:

Exhibit 10.11

 

NET, NET, NET

LEASE

 

THIS
LEASE dated May 1, 1996, for reference purposes only is made
between the Lessor and the Lessee named below, effective on the later of the
dates set forth under their respective signatures.

BASIC LEASE PROVISIONS ‘

 

	
  1.

  	
   

  	
  Premises:

  	
   

  	
  As depicted
  on Exhibit A.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Project Name:

  	
   

  	
  Santa Barbara Tech Center

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Building Name:

  	
   

  	
  N/A

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Premises Address:

  	
   

  	
  5520 Ekwill Street

  
	
   

  	
   

  	
   

  	
   

  	
  Santa Barbara, California 93111

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Use of Premises:

  	
   

  	
  Office or permitted industrial

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  Leased Area:

  	
   

  	
  As depicted on Exhibit A

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Square Feet:

  	
   

  	
  4,468

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Lessee’s Percentages:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Building:

  	
   

  	
  10.52%

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Common
  Area:

  	
   

  	
  5.27%

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Initial Annual Rent

  	
   

  	
  $61,122.24

  	
  ($1.14 per square foot per month)

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Rental Deposit

  	
   

  	
  $5,093.52

  	
  (First month’s rent)

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Rent Adjustment

  	
   

  	
  Rent to be $1.14 per square foot per month for the first eight (8)
  months of this Lease.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Initial Monthly Rental Installments:

  	
   

  	
  $5,093.52

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  Term:

  	
   

  	
  Ten (10) years and 3 months. One 5-year renewal option.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
   

  	
  Commencement Date:

  	
   

  	
  May 1, 1996

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Termination Date:

  	
   

  	
  July 31, 2006

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
   

  	
  Security Deposit:

  	
   

  	
  $5,093.52

  

 

 

	
  9.

  	
   

  	
  Broker(s):

  	
   

  	
  None

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
   

  	
  Parking Spaces Provided:

  	
   

  	
  12

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
   

  	
  Address for Payments and Notices (if different From below:

  	
   

  	
  None

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
   

  	
  Submission of this instrument for examination or signature by the
  Lessee does not constitute a reservation of or option for space and it is not
  effective as a lease or otherwise until execution by both the Lessee and the
  Lessor. This document will be deemed withdrawn by the Lessor if not executed
  by the Lessee and delivered to the Lessor by                                              .

  

 

IN WITNESS WHEREOF, the parties hereto have
executed this Lease, consisting of the foregoing Basic Lease Provisions,
Articles I through 17 which follow, and any attached Exhibits or Addendums, as
of the date first above written.

 

	
   

  	
  LESSOR:

  
	
   

  	
   

  
	
  Date:                           ,
  1996

  	
  EKWILL PARTNERS, LTD., a California limited

  partnership

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ JEFFREY C. BERMANT

  	
   

  
	
   

  	
   

  	
  Jeffrey C. Bermant,

  
	
   

  	
   

  	
  General Partner

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  	
  130 Cremona Drive, Suite D

  
	
   

  	
   

  	
  Goleta, CA 93117

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  LESSEE:

  
	
   

  	
   

  
	
  Date:                           ,
  1996

  	
  McGHAN MEDICAL CORPORATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ DONALD C. MCGHAN

  	
   

  
	
   

  	
   

  	
  Donald C. McGhan

  
	
   

  	
   

  	
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
  Address:

  
	
   

  	
   

  
	
   

  	
   

  	
  5540 Ekwill Street

  
	
   

  	
   

  	
  Santa Barbara,,  CA  93111

  
						

 

 

TABLE OF CONTENTS

 

	
  1.

  	
   

  	
  LEASE of PREMISES

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  1.1

  	
  Initial Premises

  	
   

  
	
   

  	
   

  	
  1.2

  	
  First Right
  to Lease Additional Space

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  TERM

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  2.1

  	
  Commencement of Term

  	
   

  
	
   

  	
   

  	
  2.2

  	
  Delay in Commencement

  	
   

  
	
   

  	
   

  	
  2.3

  	
  Option to Extend

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  RENT

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  3.1

  	
  Initial Annual Rent

  	
   

  
	
   

  	
   

  	
   

  	
  3.1.1     Rental
  Deposit

  	
   

  
	
   

  	
   

  	
  3.2

  	
  Additional Rent

  	
   

  
	
   

  	
   

  	
  3.3

  	
  No Reduction or Offset

  	
   

  
	
   

  	
   

  	
  3.4

  	
  Definitions

  	
   

  
	
   

  	
   

  	
  3.5

  	
  Rent
  Adjustment for Consumer Price Index

  	
   

  
	
   

  	
   

  	
  3.6

  	
  Calculation and Payment

  	
   

  
	
   

  	
   

  	
  3.7

  	
  End of Term

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  SECURITY DEPOSIT

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  USE

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  5.1

  	
  Use

  	
   

  
	
   

  	
   

  	
  5.2

  	
  Compliance with Law;
  Nuisance

  	
   

  
	
   

  	
   

  	
  5.3

  	
  Insurance Cancellation

  	
   

  
	
   

  	
   

  	
  5.4

  	
  Hazardous Substances

  	
   

  
	
   

  	
   

  	
  5.5

  	
  Environmental Laws

  	
   

  
	
   

  	
   

  	
   

  	
  (a)

  	
  Compliance with
  Environmental Laws

  	
   

  
	
   

  	
   

  	
   

  	
  (b)

  	
  Hazardous Materials
  Handling

  	
   

  
	
   

  	
   

  	
   

  	
  (c)

  	
  Notices

  	
   

  
	
   

  	
   

  	
   

  	
  (d)

  	
  Indemnification of
  Lessor

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  6.

  	
   

  	
  MAINTENANCE,
  REPAIRS AND ALTERATIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  6.1

  	
  Lessor’s Obligations

  	
   

  
	
   

  	
   

  	
  6.2

  	
  Lessee’s Obligations

  	
   

  
	
   

  	
   

  	
  6.3

  	
  Alterations and
  Additions

  	
   

  
	
   

  	
   

  	
  6.4

  	
  Surrender

  	
   

  
	
   

  	
   

  	
  6.5

  	
  Lessor’s Rights

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  7.

  	
   

  	
  INSURANCE,

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  7.1

  	
  Lessee’s Liability
  Insurance

  	
   

  
	
   

  	
   

  	
  7.2

  	
  Lessee’s
  Worker’s Compensation Insurance

  	
   

  
	
   

  	
   

  	
  7.3

  	
  Lessee’s
  Fire and Extended Coverage Insurance

  	
   

  

 

i

 

	
   

  	
   

  	
  7.4

  	
  Policy Requirements

  	
   

  
	
   

  	
   

  	
  7.5

  	
  Lessor’s Rights

  	
   

  
	
   

  	
   

  	
  7.6

  	
  Lessor’s Insurance

  	
   

  
	
   

  	
   

  	
  7.7

  	
  Indemnification

  	
   

  
	
   

  	
   

  	
  7.8

  	
  Exemption of
  Lessor from Liability

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  8.

  	
   

  	
  DAMAGE OR DESTRUCTION

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  8.1

  	
  Partial Damage

  	
   

  
	
   

  	
   

  	
  8.2

  	
  Damage Near End of Term

  	
   

  
	
   

  	
   

  	
  8.3

  	
  Abatement of
  Rent; Lessee’s Remedies

  	
   

  
	
   

  	
   

  	
  8.4

  	
  Insurance
  Proceeds Upon Termination

  	
   

  
	
   

  	
   

  	
  8.5

  	
  Restoration

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  9.

  	
   

  	
  PERSONAL PROPERTY TAXES

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
   

  	
  UTILITIES

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
   

  	
  ASSIGNMENT AND SUBLETTING

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
   

  	
  DEFAULTS; REMEDIES

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  12.1

  	
  Default by Lessee

  	
   

  
	
   

  	
   

  	
  12.2

  	
  Remedies for
  Default by Lessee

  	
   

  
	
   

  	
   

  	
  12.3

  	
  Default by Lessor

  	
   

  
	
   

  	
   

  	
  12.4

  	
  Late Charges

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  13.

  	
   

  	
  CONDEMNATION OR
  RESTRICTION ON USE

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  13.1

  	
  Eminent Domain

  	
   

  
	
   

  	
   

  	
  13.2

  	
  Abatement of Rent

  	
   

  
	
   

  	
   

  	
  13.3

  	
  Temporary Taking

  	
   

  
	
   

  	
   

  	
  13.4

  	
  Voluntary Sale as Taking

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  14.

  	
   

  	
  BROKERS

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  15.

  	
   

  	
  LESSOR’S LIABILITY

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  16.

  	
   

  	
  PARKING

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  17.

  	
   

  	
  GENERAL PROVISIONS

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  17.1

  	
  Estoppel Certificate

  	
   

  
	
   

  	
   

  	
  17.2

  	
  Severability

  	
   

  
	
   

  	
   

  	
  17.3

  	
  Time of Essence

  	
   

  
	
   

  	
   

  	
  17.4

  	
  Captions

  	
   

  
	
   

  	
   

  	
  17.5

  	
  Notices

  	
   

  
	
   

  	
   

  	
  17.6

  	
  Waivers

  	
   

  
	
   

  	
   

  	
  17.7

  	
  Holding Over

  	
   

  
	
   

  	
   

  	
  17.8

  	
  Cumulative Remedies

  	
   

  
	
   

  	
   

  	
  17.9

  	
  Inurement

  	
   

  

 

ii

 

	
   

  	
   

  	
  17.10

  	
  Choice of Law

  	
   

  
	
   

  	
   

  	
  17.11

  	
  Subordination

  	
   

  
	
   

  	
   

  	
  17.12

  	
  Attorneys’ Fees

  	
   

  
	
   

  	
   

  	
  17.13

  	
  Lessor’s Access

  	
   

  
	
   

  	
   

  	
  17.14

  	
  Corporate Authority

  	
   

  
	
   

  	
   

  	
  17.15

  	
  Surrender or
  Cancellation

  	
   

  
	
   

  	
   

  	
  17.16

  	
  Entire Agreement

  	
   

  
	
   

  	
   

  	
  17.17

  	
  Signs

  	
   

  
	
   

  	
   

  	
  17.18

  	
  Gender; Number

  	
   

  
	
   

  	
   

  	
  17.19

  	
  Recording of Lease

  	
   

  
	
   

  	
   

  	
  17.20

  	
  Waiver of Subrogation.

  	
   

  
	
   

  	
   

  	
  17.21

  	
  Confidentiality of
  Lease

  	
   

  
	
   

  	
   

  	
  17.22

  	
  Quiet Enjoyment

  	
   

  
	
   

  	
   

  	
  17.23

  	
  Window Coverage

  	
   

  
	
   

  	
   

  	
  17.24

  	
  Materials Storage
  Restrictions

  	
   

  
	
   

  	
   

  	
  17.25

  	
  No Agency

  	
   

  
	
   

  	
   

  	
  17.26

  	
  Force Majeure

  	
   

  
	
   

  	
   

  	
  17.27

  	
  Accord and Satisfaction

  	
   

  
	
   

  	
   

  	
  17.28

  	
  Financial Statements

  	
   

  
	
   

  	
   

  	
  17.29

  	
  Supersedes Proposal
  to Lease

  	
   

  
	
   

  	
   

  	
  17.30

  	
  Construction

  	
   

  
	
   

  	
   

  	
  17.31

  	
  Non-Disturbance
  Agreement

  	
   

  

 

iii

 

1.                                       LEASE OF PREMISES

 

1.1                                 Initial Premises. 
The Lessor hereby leases to the Lessee and the Lessee leases from the
Lessor for the term, at the rental, and upon all of the conditions set forth in
this Lease, the Premises identified in Item 1 of the Basic Lease Provisions,
together with the non-exclusive use, in common, with the Lessor and other
tenants of the Building and their respective invitees, of common areas in or
about the Building and the parking garage (if any) or parking.  areas adjoining the Building.  The Lessee and the Lessor have agreed on the
square footage set forth in item 2 of the Basic Lease Provisions and each party
will be bound by item 2 through the term of this Lease or any extension
thereof.  The approximate anticipated
configuration of the Project and the location of the Building, Premises and
associated common and parking areas is indicated on Exhibit “B”.  The size, location and function of the
buildings and related structures depicted here are approximate.  The configuration of the development, the
design, size, function and location of all other improvements, and the identity
and location of other tenants to the extent depicted are subject to change
without notice for any reason deemed sufficient by the owner.  The Lessor reserves the right to alter the
configuration of the Project to construct additional improvements thereon, to
withdraw areas therefrom from time to time and alter the configuration of the
associated common and parking areas, provided that the number of parking spaces
intended for the Lessee’s use shall not thereby be materially diminished and
provided that Lessee’s access to the Premises will not thereby be
affected.  The Lessee shall be allocated
the number of parking spaces set forth in item 10 of the Basic Lease Provisions
and the Lessee acknowledges that the Lessor shall have no responsibility to
supervise or police the usage of the parking lot by the tenants of the
Building.  Nothing in this Lease shall
cause the Lessor in any way to be construed as an employer, employee,
fiduciary, a partner, a joint venturer or otherwise associated in any way with
the Lessee in the operation of the Premises, or to subject the Lessor to any
obligation, loss, charge or expense connection with or arising from the Lessee’s
operation or use of the Premises.

 

Pursuant to
Section 1652 of the California Civil Code, it is understood and agreed that the
general intent and purpose of this Lease is that this !.ease shall be an
absolute triple net lease with respect to the Lessor.  The Lessee shall pay its pro rata share of
all insurance, utilities, all operating costs for file Premises, the common
areas of the Building, the Building and the land on which it is situated.  It is intended that the rental return to the
Lessor shall not be reduced, offset or diminished directly or indirectly by any
cost, charge, or expense due from the Lessee and others in connection with the
Premises, Building or land upon which it is situated, nor subject to suspension
or termination for any reason.  It is
acknowledged and agreed that all provisions of this Lease shall be interpreted
in a manner consistent with and subordinate to such general intent anti
purpose.

 

1.2                                 First Right to Lease Additional Space.  In the event that additional space within the
Building (the “Additional Space”) shall become available during the term of
this Lease and the Lessee is not then in default under the terms of this Lease
or the lease for the adjacent building at 5540 Ekwill Street, Santa Barbara,
California, the Lessor shall give the Lessee written notice of the Lessee’s first
right to lean: such Additional Space. 
The Notice from the Lessor shall describe the Additional Space,
including any unique features thereof, and the date upon which the lease for
the Additional Space will commence.  The
lease for the Additional Space shall commence upon the date that the Additional
Space is first available for occupancy

 

 

and shall continue for a
term coincidental with the term of this Lease. 
The terms and conditions of the lease for the Additional Space shall be
the same: as the terms of this Lease, including without limitation the per
square foot rental payable hereunder and the obligation of the Lessee to pay
Additional Rent.  Rental adjustments for
the lease for the Additional Space shall be made to coincide with rental
adjustments under this Lease.  The lease
of the Additional Space shall be strictly on an “AS IS” basis, and the Lessor
shall have no obligation to make any changes, alterations, modifications or
repairs whatsoever to the Additional Space.

 

The Lessee
shall have 10 business days from the date of receipt of the Lessor’s written
notice to agree to lease the Additional Space. 
The Lessee’s election to lease the Additional Space shall only be
effective if its written agreement to lease is received by the Lessor within said
time period and is accompanied by a check in an amount equal to the full first
month’s rent plus a security deposit of one month’s rent (collectively the “Additional
Space Deposit”).  In the event the Lessee
fails to give timely written notice to the Lessor of its agreement to lease the
Additional Space together with the required Additional Space Deposit, the
Lessee’s rights hereunder shall terminate and the Lessor shall be free to lease
or otherwise treat the Additional Space as it sees fit.  Upon receipt of the Lessee’s agreement to
lease the Additional Space and the Additional Space Deposit, the Lessor shall
prepare an amendment to this Lease and deliver it to the Lessee.  The Lessee shall execute and return the
amendment to the Lessor within 10 business clays of receipt.

 

2.                                       TERM

 

2.1                                 Commencement of Term

 

(a)                                  The
term of the Lease shall be as shown in item 6 of the Basic Lease Provisions,
commencing on the Commencement Date, which the lessor and the Lessee expect to
be the Commencement Date as shown in item 7 of the Basic Lease Provisions, but
which may be such other date as herein provided, and ending on tire Termination
Dale, unless sooner terminated pursuant to any provision hereof.

 

(b)                                 Notwithstanding
the foregoing, the term of this Lease and the payment of rent shall commence
upon delivery of possession of the Premises. 
Delivery of possession of the Premises shall occur upon written tender
of the same by the Lessor.

 

(c)                                  If
delivery of possession occurs prior to the Commencement Date, the term of this
Lease shall commence on such (late; of delivery of possession, but the
Termination Date shall not be advanced.

 

2.2                                 Delay in Commencement.  Notwithstanding the Commencement Date, if for
any reason the Lessor cannot deliver possession of the Premises to the Lessee
on or before said date, the Lessor shall not be subject to any liability
therefor, nor shall such failure affect the validity of this Lease or the
obligations of the Lessee hereunder or extend the term hereof provided,
however, that if the Lessor shall not have delivered possession of the Premises
within six (6) months after the Commencement Date, the Lessee may, at the
Lessee’s option by notice in writing to the Lessor, within ten (10) days
thereafter, cancel this Lease, in which event the

 

2

 

parties shall be
discharged from all obligations hereunder. 
The Lessee shall not be obligated to pay rent until delivery of
possession of the Premises has occurred.

 

2.3                                 Option to Extend. 
Provided that the Lessee is not then in default under the terms of this
lease or the lease for the adjacent Building at 5540 Ekwill Street, Santa
Barbara, California, Lessee shall have the right to extend the term of this
Lease as to the entire Premises then leased from the Lessor by the Lessee for a
term of five (5) years, on the same terms and conditions thereof, including
without limitation the annual rental adjustments under Article 3.

 

3.                                       RENT

 

3.1                                 Initial Annual Rent. 
The Lessee shall pay to the Lessor as rent for the Premises an Initial
Annual Rent in the amount specified in item 4 of the Basic Lease Provisions in
equal monthly installments in the amount specified in item 5 of’ the Basic
Lease Provisions in advance on the first day of each month.

 

3.1.1                        Rental Deposit. 
Upon Lease execution, the Lessee shall deposit with the Lessor an amount
equivalent to the first and last month’s rent as provided in item 4 of the
Basic Lease Provisions.

 

3.2                                 Additional Rent. 
The Lessee shall reimburse the Lessor, as additional rent, in the manner
and at the times provided, for the Lessee’s proportionate share of all Building
Operating Expenses and Common Area Operating Expenses (as hereinafter defined)
incurred by the Lessor.  The Lessee’s
proportionate share of such Building Operating Expenses and Common Area
Operating Expenses shall be based upon the Lessee’s Building Percentage in the
case of Building Operating Expenses, and upon the Lessee’s Common Area
percentage in the case of Common Area Operating Expenses, all as defined herein.

 

3.3                                 No Reduction or Offset.  All Rent due under this Lease shall be
payable without deduction, abatement or offset.

 

3.4                                 Definitions.  For
purposes of this Article 3:

 

(a)                                  The
Lessee’s Building Percentage is a percentage calculated by dividing the Leased
Area of the Premises by the leasable area of the Building, and is stipulated to
be as shown in item 3 of the Basic Lease Provisions.

 

(b)                                 Building
Operating Expenses shall mean the sum of all expenses incurred by the Lessor in
connection with the operation, repair and maintenance of the Building,
including, but not limited to, heating and air conditioning; all real property
taxes (as hereinafter defined) imposed upon or with respect to the Building and
related improvements (exclusive of the land underlying all such improvements);
all fire and extended coverage, earthquake, loss of rents, vandalism, malicious
mischief and other insurance covering the Building and losses suffered which
fall below the insurance deductible; utilities; materials and supplies;
salaries, wages and other expenses incurred with respect to the operation,
repair and maintenance of the Building, the cost of repainting, security and
fire protection; amortization of capital investments for improvements which are
designed to reduce operating costs, improve operations or comply with
governmental conservation or safety programs over such reasonable period as the
Lessor

 

3

 

shall determine (together
with interest at five (5) percentage points above the discount rate of the
Federal Reserve Bank of San Francisco on the unamortized amount); and an amount
equal to fifteen percent (15%) of all such expenses to cover the Lessor’s
administrative and overhead expenses.  Building
Operating Expenses attributable to the utilities and services furnished
pursuant to Article 10 shall be apportioned among the tenants of the Building
receiving such services (excluding those tenants furnishing or paying for their
own utilities and janitorial services) based on the respective leased areas
occupied by such tenants.

 

(c)                                  Lessee’s
Common Area Percentage is a percentage figure calculated by the project
architect by dividing the Leased Area of the Premises by the average leasable
area in all improvements, including the Building and other buildings, shown on
Exhibit “B”, during such year as is initially stipulated to be as shown in item
3 of the Basic Lease Provisions.  Should
the Building and/or landscape area become a separate legal lot, or should
additional improvements or common area be added to or deleted from Exhibit “B”,
the Lessor may, at its option, calculate the Lessee’s Common Area Percentage by
comparing the common area attributable to the Premises with the common area on
such legal lot or otherwise within Exhibit “B” as so revised.

 

(d)                                 Common
Area Operating Expenses shall mean the sum of all expenses incurred by the
Lessor in connection with the operation and maintenance of driveways,
landscaping, walkways, plazas, parking facilities, and perimeter property
including, but not limited to: all items described in Section 6.1 hereof; all
real properly taxes (its hereinafter defined) imposed upon or with respect to the
land included within Exhibit “B”; all public liability insurance covering
Exhibit “B”, and losses suffered which fall below the insurance deductible;
security and fire protection; salaries, wages and other expenses incurred with
respect to maintenance of the common areas, gardening, landscaping, repaving,
repainting and trash removal; depreciation of equipment used in such
maintenance; amortization of capital investments for improvements which comply
with governmental conservation or safety programs over such reasonable period
as the Lessor shall determine (together with interest at five (5) percentage
points above the discount rate of the Federal Reserve Bank of San Francisco on
the unamortized amount); and an amount equal to fifteen percent (15%) of all
such expenses to cover the Lessor’s administrative and overhead expenses.  General overhead and depreciation of
improvements shall not be included in the expenses except as specifically set
forth in the foregoing.  Any governmental
surcharge, fee or assessment imposed with respect to the parking facilities
within Exhibit “B” shall, to the extent paid by the Lessor and not passed on to
the users of said parking facilities, be included in Common Area Operating
Expenses.

 

(e)                                  Real
Properly Taxes shall mean all real and personal property taxes and assessments
incurred during any calendar year, including, but not limited to: special and
extraordinary assessments, meter and sewer rates and charges, occupancy taxes
or similar taxes imposed on or with respect to the real or personal property,
whether or not imposed on or measured by the rent payable by the Lessee, and
other governmental levies and charges, general and special, ordinary and
extraordinary, unforeseen as well as foreseen, of any kind and nature
whatsoever relating to the real or personal property, and any gross rental,
license or business tax measured by or levied on rent payable or space occupied.  If, by law, any property taxes are payable,
or may at the option of the taxpayer be paid, in installments (whether or not
interest shall accrue on the unpaid balance of such property taxes), the Lessor
may, at the Lessor’s

 

4

 

option, pay the same and,
in such event, any accrued interest on the unpaid balance of Such property
taxes shall be deemed to be Real Property Taxes as defined herein.  Real Property Taxes shall also include all
expenses reasonably incurred by the Lessor in seeking a reduction by the taxing
authorities of Real Property Taxes applicable to the Project.  Real Property Taxes shall not include any
capital levy, franchise, estate, inheritance, succession, gift or transfer tax
of the Lessor, or any income, profits or excess profits tax, assessment, charge
or levy upon the income of the Lessor; provided, however, that if at any time
during the term of this lease under the laws of the United States or the State
of California, or any political subdivision of either, a tax or excise on
rents, space or other aspects of real property, is levied or assessed against the
Lessor, the same shall be deemed to be Real Property Taxes.  If any such property taxes upon the income of
the Lessor shall be imposed on a graduated scale, based upon the Lessor’s
aggregate rental income, Real Property Taxes shall include only such portion of
such property taxes as would be payable if the rent payable with respect to the
Building and Common Areas were the only rental income of the Lessor subject thereto.

 

3.5                                 Rent Adjustment for Consumer Price Index.  As specified in item 4 of the Basic Lease
Provisions, the annual rent shall be increased as of the expiration of each full
or partial calendar year of the lease term (the “Adjustment Date”) to reflect
any increase in the United States Department of Labor, Bureau of Labor
Statistics, Consumer Price Index, “Urban Wage Earners and Clerical Workers
(Revised) Series) All Items - Los Angeles - Anaheim Riverside Average
(1982-1984=100)”.  The index for said
subgroup applicable for the month of December (or the month preceding the
Commencement Date for the first full or partial calendar year of the lease term)
preceding each Adjustment Date shall be considered the “base”, and the annual
rent following each Adjustment Date shall be computed by adjusting the annual
rent payable for the preceding calendar year thereof by the percentage change
in the index as of the adjustment date over the “base”; provided, however, in
no event shall the rent payable for any year be less than the rent payable for
the preceding period on account of the adjustment pursuant to this Section 3.5,
notwithstanding the fact that the index may, as of some Adjustment Date, be
less than the “base”.  The adjustment
effective January 1, 1997 shall be based upon the changes in the index for the
full prior 12 months.  If as of any Adjustment
Date there shall not exist the Consumer Price Index in the same format as set
forth above, the parties shall substitute any official index published by the
Bureau of Labor Statistics or any successor or similar Governmental agency as
may then be in existence and shall be most nearly equivalent thereto.  If the parties shall be unable to agree upon
it successor index, the parties shall refer the choice to arbitration in
accordance with the rules of the American Arbitration Association.  This provision shall not apply to the
Building Operating Expenses or Common Area Operating Expenses.

 

3.6                                 Calculation and Payment

 

(a)                                  Annual
rent shall be payable to the Lessor without deduction or offset, in lawful
money of the United States at the Lessor’s address herein or to such other
persons or at such other places as the Lessor designates in writing.  Rent payable for any period for less than one
(1) month shall be prorated based upon a thirty (30) day month.

 

Prior to the
commencement of the lease term and of each December thereafter, the Lessor
shall give the Lessee a written estimate of the Lessee’s share of Building and
Common Area Operating Expenses for the ensuing year or portion thereof.  The Lessee shall

 

5

 

pay such estimated amount to
the Lessor in equal monthly installments, in advance.  Within ninety (90) days after the end of each
calendar year, the Lessor shall furnish to the Lessee a statement showing in
reasonable detail the actual Building and Common Area Operating Expenses
incurred by the Lessor during such period, and the parties shall within thirty
(30) days make any payment or allowance necessary to adjust the Lessee’s
estimated payment to the Lessee’s actual proportionate share as shown by such
annual statement.  Any amount due the
Lessee shall be credited against installments next coming due under this
paragraph.  The Lessee or its
representatives shall be entitled to examine the Lessor’s books and records
pertaining to such costs upon reasonable advance notice to the Lessor.

 

(b)                                 Within
ninety (90) days after each Adjustment Date, the Lessor shall furnish the Lessee
with a written statement showing the percentage change in the index for the
period ending on the Adjustment Date and specifying the increase, if any, in the
annual rent subsequent to the Adjustment Date, taking into account all prior
adjustments to annual rent for the period preceding the Adjustment Date
pursuant to this paragraph above and applying any percentage increase in the
index to the annual rent as previously adjusted.  At the rental payment date next following the
Lessee’s receipt of such statement, the Lessee shall pay to the Lessor an
amount equal to one-twelfth (1/12th) of the adjustment pursuant to this
Paragraph (b) multiplied by the number of rent payment dates (including the current
one) since the relevant Adjustment Date. 
Subsequent rental payments shall be increased by one-twelfth (1/12th) of
the adjustment pursuant to this Paragraph (b).

 

3.7                                 End of Term.  Upon
the expiration or earlier termination of this Lease, the Lessee shall pay the
Lessor, as additional rent, the aggregate rental increase which would have been
payable by the Lessee pursuant to this Article 3, except for such expiration or
termination, for the portion of the year in which termination or expiration
occurs through the Termination Date.  The
amount of such payment shall be calculated by the Lessor based upon Sections
3.2, 3.3 and 3.5 (using the expiration or Termination Date as the Adjustment
Date for Section 3.5) and the best information then available to the Lessor,
and shall give effect to all prior adjustments and payments on account by
Lessee pursuant to this Article 3.

 

4.                                       SECURITY DEPOSIT

 

Concurrently
with the Lessee’s execution of this lease, the Lessee shall deposit with the
Lessor the sum specified in item 8 of the Basic Lease Provisions as security
for the faithful performance by the Lessee of all covenants and conditions of
this Lease.  If the Lessee shall breach
or default in the performance of any covenants or conditions of this Lease,
including the payment of rent, the Lessor may use, apply or retain the whole or
any part of such security deposit for the payment of any rent in default or for
any other sum which the Lessor may spend or be required to spend by reason of
the Lessee’s default.  If the Lessor so
uses or applies all or any portion of said deposit, the Lessee shall, within ten
(10) days after written demand therefor, deposit cash with the Lessor in an amount
sufficient to restore said deposit to the full amount hereinabove stated and the
Lessee’s failure to do so shall be a material breach of this Lease.  Should the Lessee comply with all covenants
and conditions of this Lease, the security deposit or any balance thereof shall
be returned to the Lessee (or at the option of the Lessor, to the last assignee
of the Lessee’s interest in this Lease) at the expiration of the term.  The Lessee shall not be entitled to interest
on the security deposit and the Lessor shall have the right to commingle

 

6

 

said security
deposit with other funds of the Lessor.  Should
the Lessor sell its interest in the Premises, the Lessor may transfer to the
purchaser thereof the then unexpended or unappropriated deposit and thereupon the
Lessor shall be discharged from any liability for such funds.

 

5.                                       USE

 

5.1                                 Use.  The
Premises shall be used and occupied for the purposes described in item 1 of the
Basic Lease Provisions, permitted under applicable ordinances and other
Governmental requirements, the covenants, conditions and restrictions affecting
the Project, as the same may be amended from time to time, and the Rules and
Regulations as the Lessor may from time to time reasonably adopt for the
safety, care and cleanliness of the Building and the Project or the
preservation of good order.  The Rules
and Regulations presently in effect are attached hereto as Exhibit “C”.  The Lessor shall not be responsible to the
Lessee for the nonperformance of any of said Rules and Regulations, or
non-compliance with said covenants, conditions and restrictions, by any other
tenant of the Building.

 

5.2                                 Compliance with Law; Nuisance.  The Lessee, at the Lessee’s sole cost and
expense, shall comply promptly and at all times with all laws, requirements,
ordinances, statutes, and regulations of all municipal, state or federal
authorities, or any board of fire insurance underwriters, or other similar
bodies, now in force or which may hereafter be in force, pertaining to the
Building and the Premises and the occupancy thereof, including any law that
requires alteration, maintenance or restoration of the Premises as the result
of the Lessee’s use thereof.  The
judgment of any court of competent jurisdiction, or the admission of the Lessee
in any action or proceeding against the Lessee, whether the Lessor is a party
thereto or not, that the Lessee violated any such ordinances or statutes in the
use of the Premises shall be conclusive of that fact as between the Lessor and
the Lessee.  The Lessee, at its sole
expense, shall also comply with all requirements for fire extinguishers or fire
extinguisher systems required in the Premises.

 

The Lessee
shall not commit, or suffer to be committed, any waste of the Premises, or any
nuisance, annoyance or other unreasonable annoyance which may disturb the quiet
enjoyment of adjoining premises or of the Building by the owners or occupants
thereof.

 

5.3                                 Insurance Cancellation.  Notwithstanding the provisions of Paragraph 5.1
above, the Lessee shall not do or permit anything to be done in or about the
Premises nor bring or keep anything therein, including all uses permitted under
Section 5.1 above, which will in any way increase the existing rate of or
affect any fire or other insurance upon the Building, or any other part
thereof, or any of its contents, and if the Lessee’s use of the Premises causes
all increase in said insurance rates, the Lessee shall pay as additional rent
the amount of such increase.  The Lessee
shall be in default under this Lease should the Lessee cause the cancellation
of fire or other insurance upon the Building or Property or should the Lessee
fail to pay any increased insurance rate attributable to the Lessee’s use of
the Premises.  In determining whether
increased premiums are a result of the Lessee’s use or occupancy of the
Premises or Building, a schedule issued by the Lessor’s insurer computing the
insurance rate on the Premises or Building, or the leasehold improvements
showing the various components of such rate, shall be conclusive evidence of
the several items and charges which make up such rate.  The Lessee

 

7

 

shall promptly comply
with all reasonable requirements of the insurance authority or of any insurer
now or hereafter in effect relating to the Premises.

 

5.4                                 Hazardous Substances. 
Any corrosive, flammable, hazardous or other special waste or materials
shall be handled or disposed of as directed by applicable state, Federal,
County and City regulations.  The Lessee
shall handle, store or dispose of such materials in a careful and prudent
manner.  At the termination of the Lease,
or any option period thereof, the Lessee shall fully clean the Premises in such
a manner that no residue of such materials or waste shall remain on the
Premises.  The Lessee shall notify the
appropriate governmental authority of the presence and amount of any such
material or waste, and shall comply with all conditions imposed by such authority.  The Lessee shall contact the appropriate
governmental authority prior to occupancy to determine the existence of any
records for the Building and/or Premises. 
Specifically thirty (30) days prior to occupancy, the Lessee shall
submit a Hazardous Materials Management Plan (HMMP) and a Hazardous Materials
Floor Plan (HMF) to the Lessor and the appropriate governmental authority for
approval.  These plans shall be attached
in full to this Lease.

 

The HMMP shall
include the following:

 

(a)                                  The
company name, address and contact person.

 

(b)                                 General
facility description with map showing location of all buildings and structures.

 

(c)                                  Facility
hazardous material storage map showing the location of each proposed hazardous
material storage area and access to such facilities.  The map shall be updated annually by the
occupant and submitted by January l each year.

 

(d)                                 A
floor plan showing the location of each hazardous material storage area,
storage area access, and the location of emergency equipment.

 

The HMF shall
include file following:

 

(a)                                  Hazardous
Materials Handling Report describing the safe handling of hazardous materials
to prevent accidents.

 

(b)                                 Separation
or Hazardous Material Report outlining the methods to be utilized to insure
separation and protection of hazardous materials from such factors that could
cause fire, explosion, spills, etc.

 

(c)                                  Inspection
and Record Keeping Plan indicating the procedures for inspecting each storage
facility.  An authorized record of
inspection shall be maintained by the Lessee.

 

(d)                                 Employee
“training Program to insure that employees know how to safety handle hazardous
materials.

 

8

 

(e)                                  Hazardous
Materials Contingency Plan that clearly describes appropriate response
procedures and measures in case of an accident.

 

(f)                                    A
floor plan identifying the location and quantity of each hazardous material,
including the chemical name and quantity limit for each class.

 

The Lessee
shall pay inspection fees, based on the hourly inspection rate, for an
environmental audit to be conducted by the appropriate governmental authority,
or the Lessor at the termination of the Lease and prior to reoccupation of the
Building and/or the Premises, if hazardous materials were in use on the
Building and/or Premises.  The
appropriate governmental authority shall perform or the Lessee shall arrange
for such an audit in a timely manner to prevent economic hardship to the Lessor
and shall certify that the Premises are available for reoccupation, or shall
specify clean-up measures that will render the Premises safe for reoccupation.  The Lessee shall be responsible for any
clean-up that may be required as a result of the audit.

 

Should the
Lessee fail to comply with any duty set forth in this Section 5.4, the Lessor
may, in addition to all other remedies now or hereafter provided by this Lease,
or by law, perform such duty or make good such default, and any amounts which the
Lessor shall advance pursuant thereto shall be repaid by the Lessee to the
Lessor on demand.

 

5.5                                 Environmental Laws.

 

(a)                                  Compliance with Environmental Laws.  The Lessee, in its conduct of business on or
in any activity, work, thing done, permitted or suffered by the Lessee, its
agents, contractors, employees or invitees on the Premises, shall at all times
and in all respects comply with all federal, state and county laws, ordinances
and regulations (the “Hazardous Materials Laws”) relating to industrial
hygiene, environmental protection or the use, analysis, generation,
manufacture, storage, disposal or transportation of any oil, flammable
explosives, asbestos, radioactive materials or waste, or other hazardous,
toxic, contaminated or polluting materials, substances, or wastes, including,
without limitation, any “hazardous substances,” “hazardous wastes,” “hazardous
materials,” or “toxic substances” under any such laws, ordinances or
regulations (collectively, the “Hazardous Materials”).  Such laws, ordinances or regulations shall
include, but not be limited to, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 9601, et
seq; the Hazardous Materials Transportation Act, 49 U.S.C. Section 1801, et
seq; the Resource Conservation and Recovery Act of 1976, 42 U.S.C. Section 6901
et seq; the Clean Water Act, 33 U.S.C. Section 466, et seq; the Safe Drinking
Water Act, 14 U.S.C. Section 1401, et seq; the Superfund Amendment and
Reauthorization Act of 1986; Public Law 99-499, 100 Stat. 1613; the Toxic
Substances Control Act, 15 U.S.C. Section 2601, et seq, as amended; those
substances defined as “hazardous waste”, “extremely hazardous waste”, “restricted
hazardous waste” or “hazardous substance” in the Hazardous Waste Control Act,
Section 25100 et seq of the California Health & Safety Code; and those
materials and substances similarly described in the Federal Insecticide,
Fungicide and Rodenticide Act, 7 U.S.C. Section 136, et seq., as amended; the
Atomic Energy Act of 1954, 42 U.S.C. Section 2011, et seq., as amended; the
Porter Cologne Water Quality Control Act, Section 1300 et seq. of the
California Health & Safety Code; and any regulations adopted and
publications promulgated pursuant to said Laws.

 

9

 

(b)                                 Hazardous Materials Handling.  The Lessee shall, at its own expense,
procure, maintain in effect and comply with all conditions of any and all
permits, licenses and other governmental and regulatory approvals required for
the Lessee’s use of the Premises, including, without limitation, discharge of
(appropriately treated) materials or wastes into or through any sanitary sewer
serving the Premises.  Except as
discharged into the sanitary sewer in strict accordance and conformity with all
applicable Hazardous Materials Laws, the Lessee shall cause any and all
hazardous Materials removed from the Premises to be removed and transported
solely by duly licensed haulers to duly licensed facilities for final disposal
of such materials and wastes.  The Lessee
shall in all respects handle, treat, deal with and manage any and all Hazardous
Materials in, on, under or about the Premises in total conformity with all
applicable Hazardous Materials Laws and prudent industry practices regarding
management of such Hazardous Materials.  Upon
expiration or earlier termination of the term of the Lease, the Lessee shall
cause all Hazardous Materials to be removed from the Premises and transported
for use, storage or disposal in accordance and compliance with all applicable
Hazardous Materials Laws.  The Lessee
shall not take any remedial action in response to the presence of any Hazardous
Materials in or about the Premises or the Building, nor enter into any
settlement agreement, consent, decree or other compromise; in respect to any
claims relating to any Hazardous Materials in any way connected with the
Premises or the Building, without first notifying the Lessor of the Lessee’s
intention to do so and affording the Lessor ample opportunity to appear,
intervene or otherwise appropriately assert and protect the Lessor’s interest
with respect thereto.

 

(c)                                  Notices.  The
Lessee shall immediately notify the Lessor in writing of any of the following
activities relating to the Lessee’s operations on the Premises: (i) any
enforcement, clean-up, removal or other governmental or regulatory action
instituted, completed or threatened pursuant to any Hazardous Materials laws;
(ii) any claim made or threatened by any person against the Lessee, the
Premises or the Building relating to damage, contribution, cost recovery
compensation, loss or injury resulting from or claimed to result from any
Hazardous Materials in, on or removed from the Premises or the Building; and (iii)
any reports made to any environmental agency arising out of or in connection
with any Hazardous Materials in or removed from the Premises or the Building,
including any complaints, notices, warnings or asserted violations in
connection therewith.  The Lessee shall
also supply to the Lessor as promptly as possible, and in any event within five
(5) business days after the Lessee first receives or sends the same, with
copies of all claims, reports, complaints, notices, warnings or asserted
violations relating in any way to the Premises, the Building or the Lessee’s
use thereof.  The Lessee shall promptly
deliver to the Lessor copies of hazardous waste manifests reflecting the legal and
proper disposal of all Hazardous Materials removed from the Premises.

 

(d)                                 Indemnification of Lessor.  The Lessee shall indemnify, defend, protect,
and hold the Lessor, and each of the Lessor’s partners, employees, agents,
attorneys, successors and assigns, free and harmless from and against any and
all claims, liabilities, penalties, forfeitures, losses or expenses (including
attorneys’ fees) for death of or injury to any person or damage to any property
whatsoever arising from or caused in whole or in part, directly or indirectly,
by (A) the presence in, on, under or about the Premises or the Building, or
discharge in or from the Premises or the Building of any Hazardous Materials or
the Lessee’s use, analysis, storage, transportation, disposal, release,
threatened release, discharge or generation of Hazardous Materials to, in, on,
under, about or from the Premises or the Building,

 

10

 

but only to the extent
such Hazardous Materials are present as a result of actions of the Lessee, its
officers, employees, invitees, assignees, contractors, or agents, or (B) the
Lessee’s failure to comply with any Hazardous Materials Law.  The Lessee’s obligations hereunder shall
include, without limitation, and whether foreseeable or unforeseeable, all
costs of any required or necessary repair, clean-tip or detoxification or
decontamination of the Premises or the Building, and the preparation and
implementation of any closure, remedial action or other required plans in
connection therewith, and shall survive the expiration or earlier termination of
the term of the Lease.  For purposes of
the release and indemnity provisions hereof, any acts or omissions of the
Lessee, or by officers, invitees, employees, agents, assignees, contractors or
subcontractors of the Lessee or others acting for or on behalf of the Lessee
(to the extent any such individual is acting within the scope of his
relationship with the Lessee), whether or :lot such acts or omissions are
negligent, intentional, willful or unlawful, shall be strictly attributable to
the Lessee.

 

6.                                       MAINTENANCE, REPAIRS AND ALTERATIONS

 

6.1                                 Lessor’s Obligations. 
The Lessor shall cause to be maintained, in good order, condition and
repair, the foundation, structural walls and exterior walls, common windows and
doors of the Building (excluding the interior surface thereof), heating,
venting and air conditioning systems, and any public and common areas in the
Building, as well as all parking areas, driveways, sidewalks, private roads or
streets, landscaping and all other areas located within the Project other than
areas occupied by other buildings (such non-building areas being herein
referred to as “Common Areas”).  The
costs of such maintenance are chargeable to the Lessee pursuant to Section 3.2
hereof.

 

6.2                                 Lessee’s Obligations. 
The Lessee shall, during the term of this Lease, keep in good order,
condition and repair, the roof and roof membrane, the interior of the Premises
and every part thereof, including, but not limited to, all interior windows and
doors in and to the Premises.  The Lessor
shall incur no expense nor have any obligation of any kind whatsoever in
connection with the maintenance of the interior of the Premises and the Lessee
expressly waives the benefits of any statute now or hereafter in effect which
would otherwise afford the Lessee the right to make repairs at the Lessor’s
expense or to terminate this Lease because of any failure to keep the interior
of the Premises in good order, condition and repair.  Notwithstanding the foregoing, the Lessor
shall be liable for maintenance or repairs which are caused by the Lessor’s
gross negligence.  The Lessee shall be
responsible for interior janitorial services.

 

6.3                                 Alterations and Additions.

 

(a)                                  The
Lessee shall not, without the Lessor’s prior written consent, which shall not
be unreasonably withheld, make any alterations, improvements, additions or
utility installations in, on or about the Premises unless such work is
non-structural and does not exceed TWENTY THOUSAND DOLLARS ($20,000).  For all work, the Lessee will provide the
Lessor with as-built drawings reflecting any changes to the Premises.  As used in this Paragraph 6.3, the term “utility
installations” shall include bus ducting, power panels, fluorescent fixtures,
space heaters, conduits and wiring.  As a
condition to giving such consent, the Lessor may require that the Lessee (i)
agree to remove any such alterations, improvements, additions or utility
installations at the expiration or sooner termination of the terms, and to
restore the

 

11

 

Premises to their prior
condition and/or (ii) provide the Lessor, at the Lessee’s sole cost and
expenses, a lien and completion bond in an amount equal to one and one-half (1
1/2) times the estimated cost of such improvements, to insure the Lessor against
any liability for mechanics’ and materialmen’s liens and to insure completion
of work.

 

(b)                                 All
alterations, improvements and additions to the Premises shall be performed by
the Lessor’s contractor for the Project or other licensed contractor approved
by the Lessor, which approval shall not be unreasonably withheld.  The Lessee shall pay, when due, all claims
for labor or materials furnished to or for the Lessee at or for use in the
Premises, which claims are or may be secured by any mechanics’ or materialmen’s
lien against the Premises or any interest therein, and the Lessor shall have the
right to post notices of non-responsibility in or on the Premises as provided
by law.

 

6.4                                 Surrender.  On the
last day of the term hereof, or on any sooner termination, the Lessee shall
surrender to the Lessor the Premises and, subject to the provisions of
Paragraph 6.3(a) hereof, all alterations, additions and improvements thereto,
in the same condition as when received or made, ordinary wear and tear
excepted; provided, however, that the Lessee’s machinery, equipment and trade
fixtures (including utility installations) which may be removed without
irreparable or material damage to the Premises, shall remain the property of
the Lessee and be removed by the Lessee. 
The Lessee shall repair any damage to the Premises occasioned by the
removal of the Lessee’s furnishings, machinery, equipment and trade fixtures,
which repair shall include the patching and filing of holes and repair of
structural damage.

 

6.5                                 Lessor’s Rights. 
If the Lessee fails to perform the Lessee’s obligations under this
Article 6, the Lessor may, at its option (but shall not be required to), and
with a five (5) day written notice to the Lessee, perform such obligations on
behalf of the Lessee, and the cost thereof, together with interest thereon at
the rate specified in Paragraph 12.2(a) hereof, shall immediately become due
and payable as additional rent to the Lessor.

 

7.                                       INSURANCE

 

The Lessee, at
its sole cost and expense, shall, commencing on the date the Lessee is given
access to the Premises for any purpose, and during the entire term hereof,
procure, pay for and keep in full force and effect:

 

7.1                                 Lessee’s Liability Insurance.  Comprehensive general liability insurance
with respect to the Premises and the operations of or on behalf of the Lessee
in, on or about the Premises, including, but not limited to, personal injury,
product liability (if applicable), blanket contractual, owner’s protective,
broad form property damage liability coverage, host liquor liability and owned
and non-owned automobile liability in an amount not less than TWO MILLION
DOLLARS ($2,000,000) Combined Single Limit. 
Such policy shall contain (i) severability of interest, (ii) cross
liability, and (iii) an endorsement stating in substance that “such insurance
as is afforded by this policy for the benefit of the Lessor shall be primary as
respects any liability or claims arising out of the occupancy of the Premises
by the Lessee, or out of the Lessee’s operations, and any insurance carried by the
Lessor shall be excess and noncontributory. 
“

 

12

 

7.2                                 Lessee’s Worker’s Compensation Insurance.  Worker’s Compensation coverage as required by
law, together with Employer liability coverage.

 

7.3                                 Lessee’s Fire and Extended Coverage Insurance.  Insurance against fire, vandalism, malicious
mischief and such other additional perils its now are or hereafter may be
included in a standard “All Risks” coverage, insuring all improvements and betterments
made to the Premises, the Lessee’s trade fixtures, furnishings, equipment,
stock, loss of income or extra expense, and other items of personal property in
an amount not less than 100% of replacement value.  Such insurance shall contain (i) no coinsurance
or contribution clauses, (ii) a Replacement Cost Endorsement, and (iii)
deductible amounts acceptable to the Lessor.

 

7.4                                 Policy Requirements. 
All policies of insurance required to be carried by the Lessee pursuant
to these requirements shall be written by responsible insurance companies
authorized to do business in the State of California.  Any such insurance required by the Lessee
hereunder may be furnished by the Lessee under any blanket policy carried by it
or under a separate policy therefor.  A
true and exact copy of each paid up policy evidencing such insurance or a
certificate of the insurer, certifying that such policy has been issued,
providing the coverage required and containing the provisions specified herein,
shall he delivered to the Lessor prior to the date the Lessee is given the
right to possession of the Premises, and upon renewals, not less than thirty
(30) days prior to the expiration of such coverage.  The Lessor may, at any time, and from time to
time, inspect and/or copy any and all insurance policies required hereunder.  In no event shall the then limits of any
policy be considered as limiting the liability of the Lessee under this Lease.

 

Each policy
evidencing insurance required to be carried by the Lessee pursuant to, these requirements
shall contain, in form and substance satisfactory to the Lessor: (i) a
provision including the Lessor, any lender holding a security interest in the
Building and any other parties in interest designated by cite Lessor as an
additional insured; (ii) a waiver by the Lessee’s insurer of any right to
subrogation against the Lessor, its agents, employees and representatives which
arise or might arise by reason of any payment under such policy or by reason of
any act or omission of the Lessor, its agents, employees or representatives,
and (iii) a provision that the insurer will not cancel or materially change the
coverage provided by such policy without first giving the Lessor thirty (30)
days’ prior written notice.

 

7.5                                 Lessor’s Rights. 
If the Lessee fails to procure, maintain and/or pay for at the times and
for the durations specified in this Lease, the insurance required hereunder, or
fails to carry insurance required by any governmental requirement, the Lessor
may (but without obligation to do so), and with twenty-four (24) hours advance
notice to the Lessee, perform such obligations on behalf of the Lessee, and the
cost thereof, together with interest thereon at the rate specified in Paragraph
12.2(a) hereof, shall immediately become due and payable as additional rent to
the Lessor.

 

7.6                                 Lessor’s Insurance. 
The Lessor shall maintain during the term of this Lease such insurance
against physical damage to the Building, comprehensive liability insurance and
other insurance as the Lessor may, from time to time, determine.  The Lessor will determine the limits of
coverage, deductibles and specific perils insured against.  The Lessor may, but shall not be obliged to,
take out and carry any other form or forms of insurance as it or the mortgagees

 

13

 

of the Lessor may
reasonably determine advisable.  Any
policies carried by the Lessor shall include a waiver by the Lessor’s insurer
of any right to subrogation against the Lessee, its agents, employees and representatives
which arise by right or might arise by reason of any payment under such policy
or by reason of any act or omission of the Lessee, its agents, employees or
representatives.  Notwithstanding any
contributions by the Lessee to the cost of insurance premiums, with respect to
the Building or any alterations of the Premises as may be provided herein, the
Lessee acknowledges that it has no right to receive any proceeds from any such
insurance policies carried by the Lessor.

 

7.7                                 Indemnification. 
To the fullest extent permitted by law, the parties shall each defend,
indemnify and hold harmless one another from and against any and all claims
arising from the indemnifying party’s use of the Premises or the conduct of its
business or from any activity, work or thing done, permitted or suffered by the
indemnifying party, its agents, contractors, employees or invitees in or about
the Premises or elsewhere, and shall further indemnify and hold harmless one
another from and against any and all claims arising from any breach or default
in the performance of any obligation on the indemnifying party’s part to be
performed hereunder, or arising from any act, neglect, fault or omission of the
indemnifying party, or of its agents, employees, or invitees, and from and against
all costs, attorney’s fees, expenses and liabilities incurred in or about such
claim or any action or proceeding brought thereon.  In case any action or proceeding be brought
against one party by reason of any such claim, the indemnifying party upon
notice from the other party, shall defend the same at the indemnifying party’s
expense by counsel approved in writing by the other party.  The Lessee, as a material part of the consideration
to the Lessor hereunder, hereby assumes all risk of damage to property or
injury to persons in, upon or about the Premises from any cause whatsoever,
except that which is caused by the failure of the Lessor to observe any of the
terms and conditions of this Lease and such failure has persisted for an
unreasonable period of time after written notice of such failure, and the
Lessee hereby waives all of its claims in respect thereof against the Lessor.

 

7.8                                 Exemption of Lessor from Liability.  Except for its gross negligence or willful
misconduct, the Lessor shall not be liable for injury to the Lessee’s business
or any loss of income therefrom or for damage to the property of the Lessee,
the Lessee’s employees, invitees, customers or any other person in or about the
Premises, nor shall the Lessor be liable for injury to the person of the
Lessee, the Lessee’s employees, agents or contractors, whether such damage or
injury is caused by or results from fire, explosion, falling plaster,
electricity, gas, water or rain, or from the breakage, leakage, obstruction or
other defects of pipes, sprinklers, wires, appliances, plumbing, air
conditioning or lighting fixtures, or from any other cause, whether such damage
or injury results form conditions arising upon the Premises or upon other
portions of the Building, or from other sources or places and regardless of
whether the cause of such damage or injury or the means of repairing the same
is inaccessible.  The Lessor shall not be
liable for incorporeal hereditaments including interference or obstruction of
light, air or view.  The Lessor shall not
he liable for any damages arising from any act or neglect of any other tenant
of the Building or the other portions of the Project.

 

14

 

8.                                       DAMAGE OR DESTRUCTION

 

8.1                                 Partial Damage. 
If the Premises, or so much of the Building as to cause the Premises to
be uninhabitable, are damaged by any casualty, and the damage (exclusive of any
property or improvements installed by the lessee in the Premises) can be
repaired within ninety (90) days without the payment of overtime, the Lessor
shall, at the Lessor’s expense, repair such damage (exclusive of any property
of the Lessee or improvements installed by the Lessee in the Premises) as soon
as practicable and this Lease shall continue in full force and effect.  If the Premises, or so much of the Building
as to cause the Premises to be uninhabitable, are damaged by any casualty, and the
damage (exclusive of any property of the Lessee or improvements installed by the
Lessee in the Premises) cannot be repaired within ninety (90) days without the
payment of overtime or other premiums, the Lessor may, at the Lessor’s option,
either (i) repair such damage as soon as practicable at the Lessor’s expense,
in which event this Lease shall continue in full force and effect, or (ii) give
written notice to Lessor within thirty (30) days after the date of the
occurrence of such damage of the Lessor’s intention to terminate this Lease, in
which event this Lease shall terminate as of the date of the occurrence of such
damage.

 

8.2                                 Damage Near End of Term.  If the Premises, or so much of the Building
as to cause the Premises to be uninhabitable, are damaged during the last six
(6) months of the term of this Lease, or any renewal thereof, the Lessor may,
at the Lessor’s option, terminate this Lease as of the date of occurrence of
such damage by giving written notice to Lessee of the Lessor’s election to do
so within thirty (30) days after the date of occurrence of such damage;
provided, however, that if the term of this Lease has been extended for any
reason whatsoever, the Lessor’s right to terminate this Lease shall only apply
during the last six (6) months of the then current term of this Lease.

 

8.3                                 Abatement of Rent; Lessee’s Remedies.

 

(a)                                  If
lime Lessor is obligated or elects to repair the Premises as provided above, the
rent payable for the period during which such repair continues shall be abated,
in proportion to the degree to which the Lessee’s use of the Premises is
impaired; provided, however, that the aggregate period of abatement hereunder
shall not exceed six (6) months.  Except
for such abatement, if any, the Lessee shall have no claim against the Lessor
for any damage suffered by reason of any such damage, destruction, repair or
restoration.

 

(b)                                 If
the Lessor is obligated or elects to repair the Premises as provided above, but
does not commence such repair within ninety (90) days after such obligation
shall occur, subject to any extension or up to another sixty (60) days for
delays beyond the reasonable control of the Lessor, the Lessee may, at the
Lessee’s option, terminate this Lease by giving the Lessor written notice of the
Lessee’s election to do so at any time prior to the commencement of such repair
or restoration, in which event this Lease shall terminate as of the date of
such destruction.

 

8.4                                 Insurance Proceeds Upon Termination.  If this Lease is terminated pursuant to any
right given the Lessee or the Lessor to do so under this Article 8, all
insurance proceeds payable under Section 7.6 with respect to the damage giving
rise to such right of

 

15

 

termination shall be paid
to the lessor and any encumbrances of the Premises, as their interests may
appear.

 

8.5                                 Restoration.  The
Lessor’s obligation to restore shall not include the restoration or replacement
of the Lessee’s furnishings, machinery, equipment, trade fixtures or other
personal property or any improvements or alterations made by the lessee to the
Premises.

 

9.                                       PERSONAL PROPERTY TAXES

 

The Lessee shall
pay prior to delinquency all Real Property Taxes and other taxes assessed
against, levied upon or attributable to its furnishings, machinery, equipment,
trade fixtures or other personal property contained in the Premises or
elsewhere and, if required, all improvements to the Premises in excess of the
Lessor’s “building standard” improvements, provided, however, that nothing
contained herein shall require the Lessor to insure the accuracy of any
segregation of the same for purposes of Section 3.4(b) hereof.  When practicable, the Lessee shall cause said
furnishings, machinery, equipment, trade fixtures and all other personal
property to be assessed and billed separately from the real property of the
Lessor.

 

10.                                 UTILITIES

 

The Lessee
shall pay for all water, gas, heat, light, power, janitorial services and other
utilities and services supplied to the Premises, together with any taxes
thereon.  If any such services are not
separately metered or charged to the Lessee, the Lessee shall pay a pro rata
proportion, as part of operating expenses, based on leasable area, of all
charges jointly metered or charged with other premises.  Water charges include costs of operating the
wafer system as well as amortization of costs for the water system as described
in Exhibit “D”.  The Lessor shall not be
liable in damages or otherwise unless due to the Lessor’s gross negligence for
any failure or interruption of any utility services being furnished to the
building and no such failure or interruption shall entitle the Lessee to
terminate this Lease.  In no event shall
the Lessor be liable for any such failure or interruption caused by the
exercise of governmental authority, strikes, riots, acts of God, war, adverse
weather conditions, fire, flood or casualties or acts of third parties beyond the
Lessor’s control.  The operation and
control of utilities, air conditioning and any other energy system is subject
to compliance with any government authority governing the regulation and use of
energy systems within the commercial office or industrial building structure.  The Lessee shall not subject any of the
mechanical, electrical, plumbing, sewer or other utility or service systems or
equipment to exercise or use which causes damage to said systems or equipment.  Any such damages to equipment caused by the
lessee overloading such equipment shall be rectified by the Lessee, or may, at the
Lessor’s option, be rectified by the Lessor, at the Lessee’s sole cost and
expense.

 

11.                                 ASSIGNMENT AND SUBLETTING

 

11.1                           The
Lessee shall not voluntarily or by operation of law sublet, assign, transfer,
mortgage or otherwise encumber, or grant concessions, licenses or franchises
with respect to all or any part of the Lessee’s interest in this Lease or the
Premises without the prior written consent of the Lessor, which shall not be
unreasonably withheld.  If the Lessee
desires at any time to assign this Lease or to sublet the Premises or any
portion thereof, it shall first notify

 

16

 

the Lessor of its desire
to do so and shall submit in writing to the Lessor (i) the name of the proposed
sublessee or assignee; (ii) the nature of the proposed sublessee or assignee;
(iii) the nature of the proposed sublessee’s or assignee’s business to be
carried on in the Premises; (iv) the terms and provisions of the proposed
sublease or assignment; (v) such reasonable financial information as the Lessor
may request concerning the proposed sublessee or assignee, including, but not
limited to, a balance sheet as of a date within ninety (90) days of the request
for the Lessor’s consent, statements of income or profit and loss for the two
(2) year period preceding the request for the Lessor’s consent, and a written
statement in reasonable details as to the business experience of the proposed
sublessee or assignee during the five (5) years preceding the request for the
Lessor’s consent; and (vi) the name and address of sublessee’s or assignee’s
present or previous landlord.  The Lessor
may, as a condition to granting such consent, require that the obligations of
any assignee which is a subsidiary or affiliate of another corporation be
guaranteed by the parent or controlling corporation.  Any sublease, license, concession, franchise
or other permission to use the Premises shall be expressly subject and
subordinate to all applicable terms and conditions of this Lease.  Any purported or attempted assignment,
transfer, mortgage, encumbrance, subletting, license, concession, franchise or
other permission to use the Premises contrary to the provisions of this
paragraph shall be void and, at the option of the Lessor, shall terminate this
Lease.

 

11.2                           If
the Lessee is a corporation, any transfer of its stock, or any dissolution,
merger or consolidation which results in a change in the control of the lessee
from the person or persons owning a majority of its voting stock immediately
prior thereto, or the sale or other transfer of all or substantially all of the
assets of the Lessee and which results in a reduction in the net worth of the
entity following such action shall constitute an assignment of the Lessee’s
interest in this Lease within the meaning of this Article 11 and the provisions
requiring consent contained herein.  The
Lessor may require, as a condition to giving such consent, that the new
controlling person(s) execute a guaranty of this Lease.  If the Lessee is a corporation which, under
then current guidelines published by the California Commissioner of
Corporations, is not deemed to be a public corporation, the transfer, assignment
or hypothecation of any interest in such corporation in the aggregate in excess
of twenty-five percent (25%) (other than a transfer occurring by operation of
law upon the death of the holder of such interest) shall be deemed an
assignment within the provisions of this Article.

 

11.3                           No
subletting, assignment, license, concession, franchise or other permission to
use the Premises shall relieve the Lessee of its obligations to pay the rent or
to perform all of the other obligations to be performed by the Lessee
hereunder.  The acceptance of rent by the
Lessor from any other person shall not be deemed to be a waiver by the Lessor
of any provisions of this Lease.

 

11.4                           At
any time within twenty (20) days after the Lessor’s receipt of the information
specified in Section 11.1 above, the Lessor may by written notice to the Lessee
elect (a) to sublease the Premises or the portion thereof so proposed to be
subleased by the Lessee, or to take an assignment of the Lessee’s leasehold
estate hereunder, upon the same terms as those offered to the proposed
sublessee or assignee, as the case may be; or (b) disapprove such assignment or
subletting.  If the Lessor does not act
within the twenty (20) days, such failure to act is deemed a disapproval of
such request for assignment or subletting.

 

17

 

11.5                           Each
assignee or transferee, other than the Lessor, shall assume all obligations of
the Lessee under this Lease and shall be and remain liable jointly and
severally with the Lessee for the payment of the rent, and for the due
performance of all the terms, covenants, conditions and agreements to be
performed by the Lessee hereunder; provided, however, that a transferee other
than an assignee shall be liable to the Lessor for rent only in the amount set
forth in the assignment or transfer.  No
assignment shall be binding on the Lessor unless such assignee or Lessee shall
deliver to the Lessor a counterpart of such assignment and an instrument in
recordable form which contains a covenant of assumption by such assignee
satisfactory in substance and form to the Lessor, consistent with the
requirements of this Section 11.5, but the failure or refusal of such assignee
to execute such instrument of assumption shall not release or discharge such
assignee from its liability as set forth above.

 

11.6                           Consent
by the Lessor to any subletting or assignment shall be conditioned upon payment
by the Lessee to the Lessor of all “Transfer Consideration” (as hereafter
defined) received or to be received, directly or indirectly, by the Lessee on
account of such assignment or subletting. 
Transfer Consideration shall be paid to the Lessor at the same time or
times as the same is due to the Lessee. 
Failure to pay the Lessor the Transfer Consideration, or any portion or
installment thereof, shall be deemed a default under this Lease, entitling the
Lessor to exercise all remedies available to it under law including, but not
limited to, those specified in Article 12 of this Lease.  “Transfer Consideration” shall mean a) in the
case of a subletting, any consideration paid or given, directly or indirectly,
by the sublessee to the Lessee pursuant to the sublease for the use of the
Premises, or any portion thereof, over and above the rent and any additional
rent, however denominated, in this Lease, payable by the Lessee to the Lessor for
the use of the Premises (or portion thereof), prorating as appropriate the
amount payable by the Lessee to the Lessor under this Lease, if less than all
of the Premises is sublet, and (b) in the case of an assignment or a sublease,
any consideration paid or given, directly or indirectly, by the sublessee or
assignee to the Lessee in exchange for entering into the sublease or
assignment, but shall not include reimbursement for any security deposit,
reimbursement of any improvements, fixtures or furnishings installed in the
Premises by the Lessee or any payment for personal property of the Lessee not
in excess of the Lessee’s book value thereof. 
As used herein, consideration shall include consideration in any form,
including, but not limited to, money, property, assumption of liabilities other
than those arising under this Lease, discounts, services, credits or any other
item or thing of value.  Irrespective of
the form of such consideration, the Lessor shall be entitled to be paid in cash
in an amount equivalent to the aggregate of the cash portion of the Transfer
Consideration and the value of any non-cash portion of the Transfer
Consideration.  If any Transfer
Consideration is to be paid or given in installments, the Lessee shall pay each
such installment at the time the same is to be paid or given.

 

12.                                 DEFAULTS; REMEDIES

 

12.1                           Default by Lessee. 
The occurrence of any one or more of the following events shall
constitute a default of this Lease by the Lessee:

 

(a)                                  The
vacating or abandonment of the Premises by the Lessee combined with the failure
to pay rent;

 

18

 

(b)                                 The
failure of the Lessee to make any payment of rent or any other payment required
to be made by the Lessee hereunder, as and when due, where such failure shall
continue for a period of three (3) days after written notice thereof from the
Lessor to the Lessee; provided, however, that any such notice shall be in lieu
of, and not in addition to, any notice required under California Code of Civil
Procedure Section 1161;

 

(c)                                  The
failure by the Lessee to observe or perform any of the covenants, conditions or
provisions of this Lease (or the covenants, conditions and restrictions
governing the Project) to be observed or performed by the Lessee, other than
described in Paragraph 12.1(b) hereof, where such failure shall continue for a
period of thirty (30) days after written notice thereof from the Lessor to the
Lessee; provided, however, that any such notice shall be in lieu of, and not in
addition to, any notice required under California Code of Civil Procedure
Section 1161; provided, further, that if the nature of the Lessee’s default is
such that more than thirty (30) days are reasonably required for its cure, then
the Lessee shall not be deemed to be in default if the Lessee commences such
cure within said thirty (30) day period and thereafter diligently prosecutes
such cure to completion; or

 

(d)                                 The
making by the Lessee of any general assignment or general arrangement for the
benefit of creditors; the filing by or against the Lessee of a petition to have
the Lessee adjudged a bankrupt or a petition for reorganization or arrangement
under any law relating to bankruptcy (unless, in the case of a petition filed
against the Lessee, the same is dismissed within sixty (60) days); the
appointment of a trustee or receiver to take possession of substantially all of
the Lessee’s assets located at the Premises, or of the Lessee’s interest in
this Lease, where possession is not restored to the Lessee within thirty (30)
days; or the attachment, execution or other judicial seizure of substantially
all of the Lessee’s assets located at the Premises or of the Lessee’s interest
in this Lease, where such seizure is not discharged within thirty (30) days.

 

12.2                           Remedies for Default by Lessee.  In the event of any such default, the Lessor
may at any time thereafter, upon notice and demand and without limiting the
Lessor in the exercise of any other right or remedy which the Lessor may have
by reason of such default or breach:

 

(a)                                  Terminate
the Lessee’s right to possession of the Premises by any lawful means, in which
case this Lease shall terminate and the Lessee shall immediately surrender
possession of the Premises to the Lessor. 
In such event, the Lessor shall be entitled to recover from the Lessee:

 

(1)                                  The
worth at the time of award of the unpaid rent which has been earned at the time
of termination;

 

(2)                                  The
worth at the time of award of the amount by which the unpaid rent which would
have been earned after termination until the time of award exceeds the amount
of such rental loss that the Lessee proves could have been reasonably avoided;

 

19

 

(3)                                  The
worth at the time of award of the amount by which the unpaid rent for the
balance of the term after the time of award exceeds the amount of such rental
loss that the Lessee proves could be reasonably avoided; and

 

(4)                                  Any
other amount necessary to compensate the Lessor for all the detriment
proximately caused by the Lessee’s failure to perform its obligations under
this Lease or which in the ordinary course of things would be likely to result
therefrom, including, but not limited to: the cost of recovering possession of
the Premises, expenses of releasing including necessary renovation and
alteration of the Premises, reasonable attorneys’ fees and any other reasonable
cost.  The “worth at the time of award”
of the amounts referred to in subparagraphs (1) and (2) above shall be computed
by allowing interest at five (5) percentage points above the discount rate of
the Federal Reserve Bank of San Francisco at the time of the award.  The “worth at the time of award” of the
amount referred to in subparagraph (3) above shall be computed by discounting
such amount at one (1) percentage point above such discount rate.

 

(b)                                 Require
the Lessee to make payment of all rental obligations in cash or by certified
cashier’s check.

 

(c)                                  Pursue
any other remedy now or hereafter available to the Lessor under the laws or
judicial decisions of the Sate of California, including, but not limited to,
the remedy provided in California Civil Code Section 1951.4 to continue this
Lease in effect.

 

(d)                                 The
Lessor, in addition to the rights hereinbefore given in the case of the Lessee’s
breach or default, may pursue any other remedy available to the Lessor at law
or in equity.

 

(e)                                  The
Lessor shall have, and the Lessee hereby grants to the Lessor, a present
security interest in the furniture, fixtures, equipment, improvements and other
personal property of the Lessee presently, or which may hereinafter be located
on the leased Premises, and all proceeds therefrom in accordance with the
Uniform Commercial Code of the State of California.  The security interest granted by the Lessee
to the Lessor hereunder shall secure the full and prompt performance and
observance by the Lessee of all of the Lessee’s obligations under this Lease,
and the Lessee will execute any financing statement required by the Lessor, or
any other document necessary to perfect such security interest, and should the
Lessee fail to do so, the Lessee authorizes the Lessor to execute such
financing statements or other documents to perfect such security interest.

 

12.3                           Default by Lessor. 
‘The Lessor shall not be in default of any, of the obligations of the
Lessor under the Lease, unless the Lessor fails to perform such obligations
within a reasonable time, but in no event less than thirty (30) days after
written notice by the Lessee to the Lessor specifying wherein the Lessor has
failed to perform such obligations; provided, however, that if the nature of
the Lessor’s default is such that more than thirty (30) days are required for
its cure, the Lessor shall not be in default if the Lessor commences such cure
within such thirty (30) day period and thereafter diligently prosecutes the
same to completion.  In the event of any
such default by the Lessor, the Lessee may pursue any remedy now or hereafter
available to the Lessee under the laws of judicial decisions of the State of

 

20

 

California, except that
the Lessee shall not have the right to terminate this Lease except as expressly
provided herein nor to set off against any payments due under this Lease.  The Lessee waives any right to deduct the expenses
of repairs done by the Lessor on the Lessor’s behalf from the rent and waives,
except as herein provided, any of the Lessor’s obligations for tenantability of
the Building or the Premises.

 

Copies of any
notice required under this Article 12.3 shall also be sent to any lender
holding a security in the Building.  The
lender shall have thirty (30) days to effect a cure beyond the 30-day cure
period granted to the Lessor under this Article 12.3.  If the default is not one which is capable of
cure within the lender’s 30-day cure period, the Lessor shall not be in default
if the lender commences such cure within the 30-day period and thereafter
diligently prosecutes the same to completion.

 

12.4                           Late Charges. 
The Lessee acknowledges that the late payment by the Lessee to the
Lessor of rent and other sums due hereunder will cause the Lessor to incur
costs not contemplated by this Lease, the exact amount of which will be
extremely difficult to ascertain.  Such
costs include, but are not limited to, processing and accounting charges and
late charges which may be imposed on the Lessor by the terms of any mortgage or
trust deed covering the Premises. 
Accordingly, if any installment of rent or any other sum due from the
Lessee shall not be received by the Lessor, or the Lessor’s designee, within
ten (10) days after the same is due, the Lessee shall pay to the Lessor a late
charge equal to fifteen percent (15%) of such overdue amount, monthly, until
such overdue amount is paid.  The Lessee acknowledges
that such late charge represents a fair and reasonable estimate of the cost
that the Lessor will incur by reason of a late payment by the Lessee.  Acceptance of such late charge by the Lessor
shall in no event constitute a waiver of the Lessee’s default with respect to
such overdue amounts nor prevent the Lessor from exercising any of the other
rights and remedies granted hereunder.

 

13.                                 CONDEMNATION OR RESTRICTION ON USE

 

13.1                           Eminent Domain. 
If the whole of the Premises, or so much thereof as to render the
balance unusable by the Lessee, shall be taken under power of eminent domain,
this Lease shall automatically terminate as of the date of such condemnation,
or as of the date possession is taken by the condemning authority, whichever is
earlier.  No award for any partial or
entire taking shall be apportioned, and the Lessee hereby assigns to the Lessor
any award which may be made in such taking or condemnation, together with any
and all rights of the Lessee now or hereafter arising in or to the same or any
part thereof; provided, however, that nothing contained herein shall be deemed
to give the Lessor any interest in or to require the Lessee to assign to the
Lessor any award made to the Lessee for its relocation expenses, the taking of
personal property and fixtures belonging to the Lessee, the interruption of or
damage to the Lessee’s business and/or for the Lessee’s unamortized cost of
leasehold improvements.  The unamortized
portion of the Lessee’s expenditures for improving the Premises shall be
determined by multiplying such expenditures by a fraction, the numerator of
which shall be the number of years of the term of this Lease which shall not
have expired at the time of such appropriation or taking and the denominator of
which shall be the number of years of the term of this Lease which shall not
have expired at the time of improving the Premises.  In no event shall options to renew or extend
be taken into consideration in determining the payment to be made to the
Lessee.  The

 

21

 

Lessee’s right to receive
compensation or damages for its fixtures and personal property shall not be
affected in any manner thereby.

 

13.2                           Abatement of Rent. 
In the event of a partial or temporary taking which does not result in a
termination of this Lease, rent shall be abated in proportion to that part of
the Premises so made unusable by the Lessee.

 

13.3                           Temporary Taking. 
No temporary taking of the Premises and/or of the Lessee’s rights
therein or under this Lease shall terminate this Lease and any award made by
reason of any such temporary taking shall belong entirely to the Lessor.

 

13.4                           Voluntary Sale as Taking.  A voluntary sale by the Lessor to any public
body or agency having the power of eminent domain, either under threat of condemnation
while condemnation proceedings are pending, shall be deemed to be a taking
under the power of eminent domain for the purpose of this Article 13.

 

14.                                 BROKERS

 

The Lessor
acknowledges its obligation to pay a single commission to the broker(s) specified
in item 9 of the Basic Lease Provisions, if any.  The Lessee represents and warrants that it
has neither incurred nor is aware of any other broker’s, finder’s, or similar
fee in connection with the origin, negotiation, execution or performance of this
Lease and agrees to indemnify and hold harmless the Lessor from any loss,
liability, damage, cost or expense incurred by reason of a breach of this
representation.

 

15.                                 LESSOR’S LIABILITY

 

15.1                           The
term “Lessor” as used herein shall mean only the owner or owners at the time in
question of the fee title or a Lessee’s interest in a ground lease of the
Building.  In the event of any transfer
of such title or interest, the Lessor herein named (and in case of any
subsequent transfers, the then grantor) shall be relieved from, and after the
date of such transfers of all liability for the Lessor’s obligations thereafter
to be performed; provided, however, that any funds in the hands of the Lessor
or the then grantor at the time of such transfer in which the Lessee has an
interest shall be delivered to the grantee. 
The obligations contained in this Lease to be performed by the Lessor
shall, subject as aforesaid, be binding on the Lessor’s successors and assigns
only during their respective periods of ownership and no successor or assignee
shall be liable for the obligations of its predecessor Lessor hereunder.

 

15.2                           The
initial Lessor hereunder is a joint venture operating as a California
partnership.  In consideration of the
benefits accruing hereunder, the Lessee, its successors and assigns, agree
that, in the event of any actual or alleged failure, breach or default
hereunder by the initial Lessor:

 

(a)                                  The
sole and exclusive remedy shall be against the assets of the joint venture;

 

(b)                                 No
joint venturer shall be sued or named a party in any suit or action (except as
may be necessary to secure jurisdiction of the joint venture);

 

22

 

(c)                                  No
service of process shall be made against any joint venturer (except as may be
necessary to secure jurisdiction of the joint venture);

 

(d)                                 No
joint venturer shall be required to answer or otherwise plead to any service of
process;

 

(e)                                  No
judgment will be taken against any joint venturer;

 

(f)                                    Any
judgment taken against any joint venturer may be vacated and set aside at any
time nine pro tune;

 

(g)                                 No
writ of execution will ever be levied against the assets of any joint venturer;
and

 

(h)                                 These
covenants and agreements are enforceable by the Lessor and also by any joint
venturer thereof.

 

16.                                 PARKING

 

During the
term of this Lease, the Lessee shall have the right in common with other
tenants of the Building (if any) and any adjacent buildings, to use the parking
area available to tenants of the Building. 
The Lessee’s use of such parking facilities or that of its invitees
shall be limited to a maximum of the number of parking spaces shown in item 10
of the Basic Lease Provisions (but such space will not be separately identified
and the Lessor shall have no obligation to monitor the use of such parking
facility), and shall be subject to such rules and regulations as may be
established, from time to time, by the Lessor for the effective use of such
parking facilities.  Such rules and
regulations may include, but shall not be limited to, designation of specific
areas for use by, invitees of the Lessee and the Lessor; hours during which
parking shall be available for use; parking attendants; a parking validation or
other control system to prevent parking abuse; and such other matters affecting
the parking operation to the end that said facilities shall be utilized to
maximum efficiency and in the best interest of the Lessor, the Lessee and their
respective invitees.  The Lessor may
temporarily close any part of the Common Area for such periods of time as may
be necessary to prevent the public from obtaining prescriptive rights or to
make repair or alterations.  The Lessor
shall not have any express or implied obligation to enforce or police the
parking lot usage.  The Lessee’s right to
use any area for parking purposes shall be subject to restrictions or other
limitations resulting from any laws, statutes, ordinances and governmental
rules, regulations or requirements now in force or which may hereafter be in
force, and no such event shall in any way affect this Lease, abate rent,
relieve the Lessee of any liabilities or obligations under this Lease, or give
rise to any claim whatsoever against the Lessor; specifically, the Lessee’s
right to use any area for parking purposes shall be subject to any preferential
parking program for participants in any ridesharing program established by the
Lessor.  If the Lessor reasonably
determines that the Lessee is regularly using in excess of the number of
parking spaces specified in item 10 of the Basic Lease Provisions, the Lessor
may, in addition to any other remedy, impose a reasonable charge for such
excess, usage, payable by the Lessee upon demand.

 

23

 

17.                                 GENERAL PROVISIONS 

 

17.1                           Estoppel Certificate

 

(a)                                  The
Lessee shall at any time, and from time to time, upon not less than ten (10)
days’ prior written notice from the Lessor, execute, acknowledge and deliver to
the Lessor a statement in writing (i) certifying that this Lease is unmodified
and in full force and effect (or, if modified, stating the nature of such
modification and certifying that this Lease, as so modified, is in full force
and effect) and the date to which the rent and other charges are paid in
advance, if any, and (ii) acknowledging that there are no, to the Lessee’s
knowledge, uncured defaults on the part of the Lessor hereunder, or specifying
such defaults if any are claimed.  Any
such statement may be conclusively relied upon by any prospective purchaser or
encumbrancer of the Premises.

 

(b)                                 The
Lessee’s failure to deliver such statement within such time shall be conclusive
upon the Lessee that (i) this Lease is in full force and effect without
modification except as may be represented by the Lessor, (ii) there are no
uncured defaults in the Lessor’s performance, and (iii) not more than one (1)
month’s rent has been paid in advance.

 

(c)                                  If
the Lessor desires to finance or refinance the Premises, or any part thereof,
the Lessee shall deliver to any lender designated by the Lessor such financial
statements of the Lessee as may be reasonably required by such lender.  All such financial statements shall be
received by the Lessor in confidence and shall be used only for the purposes
herein set forth.  In the case of the
named Lessee, it shall have the right to deliver directly to any lender, bank
or financial institution designated by the Lessor its most recent Form 10K
documents filed with the Securities and Exchange Commission in satisfaction of
its obligations hereunder.

 

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

 

17.3                           Time of Essence. 
Time is of the essence in the performance of all terms and conditions of
this Lease in which time is an element.

 

17.4                           Captions. 
Article and paragraph captions have been inserted solely as a matter of
convenience and such captions in no way define or limit the scope or intent of
any provision of this Lease.

 

17.5                           Notices.  Any
notice required or permitted to be given hereunder shall be in writing and may
be served personally or by regular mail, addressed to the Lessor and the Lessee
respectively at the addresses set forth before their signatures in item 11 of
the Basic Lease Provisions, or to such other or additional persons or at such
other addresses as may, from time to time, be designated in writing by the
Lessor or the Lessee by notice pursuant hereto.

 

17.6                           Waivers.  No
waiver of any provision hereof shall be deemed a waiver of any other provision
hereof.  Consent to or approval of any
act by one of the parties hereto shall not be deemed to render unnecessary the
obtaining of such party’s consent to or approval of any

 

24

 

subsequent act.  The acceptance of rent hereunder by the
Lessor shall not be a waiver of any preceding breach by the Lessee of any
provision hereof, other than the failure of the Lessee to pay the particular
rent so accepted, regardless of the Lessor’s knowledge of such preceding breach
at the time of acceptance of such rent.

 

17.7                           Holding Over. 
If the Lessee holds over after the expiration or earlier termination of
the term hereof without the express written consent of the Lessor, the Lessee
shall become a tenant at sufferance only at one hundred fifty percent (150%) of
the monthly rent for the Premises then in effect for the space, in effect upon
the date of such expiration or earlier termination (subject to adjustment as
provided in Article 3 hereof and prorated on a daily basis), and otherwise upon
the terms, covenants and conditions herein specified, so far as
applicable.  Acceptance by the Lessor of
rent after such expiration or earlier termination shall not constitute a
consent to a holdover hereunder or result in a renewal.  The foregoing provisions of this paragraph
are in addition to and do not affect the Lessor’s right of re-entry or any
other rights of the Lessor hereunder or as otherwise provided by law.

 

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

 

17.9                           Inurement. 
Subject to any provisions hereof restricting assignment or subletting by
the Lessee and subject to the provisions of Article 15 hereof, the terms and
conditions contained in this Lease shall bind the parties, their personal
representatives, successors and assigns.

 

17.10                     Choice of Law. 
This Lease shall be governed by the laws of the State of California.

 

17.11                     Subordination. 
This Lease shall, at the Lessor’s option, be either superior or
subordinate to mortgages or deeds of trust on file Premises, whether now
existing or hereinafter created.  The
Lessee shall, upon written demand by the Lessor, execute such instruments as
may be required, from time to time, to subordinate the rights and interest of
the Lessee under this Lease to the lien of any mortgage or deed of trust on the
Building.  Notwithstanding any such subordination,
so long as the Lessee is not in default hereunder, this Lease shall not be
terminated or the Lessee’s quiet enjoyment of the Premises disturbed in the
event such mortgage or deed of trust is foreclosed.  In the event of such foreclosure, the Lessee
shall thereupon become a Lessee of, and attorn to, the successor in interest to
the Lessor on the same terms and conditions as are contained in this Lease.

 

17.12                     Attorneys’ Fees. 
If any action at law or equity, including an action for declaratory
relief, is brought to enforce the provisions of this Lease, the prevailing
party shall be entitled to recover actual attorneys’ fees incurred in bringing
such action and/or enforcing any judgment granted therein, all of which shall
be deemed to have accrued upon the commencement of the action and shall be paid
whether or not such action is prosecuted to judgment.  The attorneys’ fees to be awarded the
prevailing party may be determined by the court in the same action or in a
separate action brought for that purpose. 
Any judgment or order entered in such action shall contain a specific
provision providing for file recovery of actual attorneys’ fees and

 

25

 

costs incurred in
enforcing such judgment.  The award of
attorneys’ fees shall not be computed in accordance with any court schedule,
but shall be made so as to fully reimburse the prevailing party for all
attorneys’ fees, paralegal fees, costs and expenses actually incurred in good
faith, regardless of the size of the judgment, it being the intention of the
parties to fully compensate the prevailing party for all attorneys’ fees,
paralegal fees, costs and expenses paid or incurred in good faith.  For purposes of this section, attorneys’ fees
shall include, without limitation, attorneys’ fees, paralegal fees, costs and
expenses incurred in relation to any of the following: post-judgment motions;
contempt proceedings, garnishment, levy and debtor or third party examinations;
discovery; and bankruptcy litigation.

 

17.13                     Lessor’s Access. 
The Lessor and the Lessor’s agents shall have the right to enter the
Premises with reasonable notice at reasonable times for the purpose of
inspecting the same, showing the same to prospective purchasers, lessees, or
lenders, and making such alterations, repairs, improvements or additions to the
Premises or to the Building as the Lessor may deem necessary or desirable.  The Lessor may at any time place on or about
the Building any ordinary “For Sale” signs and the Lessor may, at any time
during the last one hundred eighty (180) days of the term hereof (or during any
period in which the Lessee is in default under this Lease), place on or about
the Building any ordinary “For Sale”, “For Lease” or similar signs, all without
rebate of rent or liability to the Lessee.

 

17.14                     Corporate Authority. 
If the Lessee is a corporation, the Lessee shall, at the Lessor’s
request, require that each individual executing this Lease on behalf of said
corporation represent and warrant that he is duly authorized to execute and
deliver this Lease on behalf of said corporation in accordance with a duly
adopted resolution of the Board of Directors of said corporation or in
accordance with the Bylaws of said corporation, and that this Lease is binding
upon said corporation in accordance with its terms.  The Lessee shall also, at the Lessor’s
request, within thirty (30) days after execution of this Lease, deliver to the
Lessor a certified copy of a resolution of the Board of Directors of said
corporation authorizing or ratifying the execution of this Lease.

 

17.15                     Surrender or Cancellation.  The voluntary or other surrender of this
Lease by the Lessee, or a mutual cancellation thereof, shall not work a merger,
and shall terminate all or any existing subleases, unless the Lessor elects to
treat such surrender or cancellation as an assignment to the Lessor of any or
all of such subleases.

 

17.16                     Entire Agreement. 
This Lease, the exhibits hereto which by this reference are incorporated
herein as though set forth in full herein, covers in full each and every
agreement of every kind or nature whatsoever between the parties hereto
concerning the Premises and the Building, and all preliminary negotiations and
agreements of whatsoever kind or nature are merged herein.  The Lessor has made no representations or promises
whatsoever with respect to the Premises or the Building, or the design
configuration of the Project, except those contained herein, and no other
person, form or corporation has at any time had any authority from the Lessor
to make nay representations or promises on behalf of the Lessor.  If any such representations or promises have
been made by others, the Lessee hereby waives all right to rely thereon.  No verbal agreement or implied covenant shall
be held to vary the provisions hereof, any statute, law or custom to the
contrary notwithstanding.

 

26

 

Except as
otherwise provided herein, nothing expressed or implied herein is intended or
shall be construed to confer upon or grant any person any rights or remedies
under or by reason of any term or condition contained in this Lease.

 

17.17                     Signs.  No
sign, placard, picture, advertisement, name or notice shall be inscribed,
displayed, printed or affixed to or near any part of the outside or inside of
the Building without the written consent of the Lessor first had and obtained
and without full compliance with all governmental requirements and with the
Project Signage Plan and any other required consents.  The Lessor shall have the right to remove any
such sign, placard, picture, advertisement, name or notice without notice to
and at the expense of the Lessee.  All
approved signs shall be installed at the Lessee’s sole cost and expense.  The Lessee further agrees to maintain any
such approved signs, as may be approved by the Lessor, in good condition and
repair at all times.  The Lessee shall
not place any sign on a vehicle or movable or non-movable object in or on the
street adjacent to the Project.

 

17.18                     Gender; Number. 
Whenever the context of this Lease requires, the masculine gender
includes the feminine or neuter, and the singular number includes the plural.

 

17.19                     Recording of Lease. 
The Lessee shall not record this Lease. 
The Lessee may prepare a memorandum of lease which shall be signed by
the Lessor, provided said memorandum meets with the Lessor’s approval, which
will not be unreasonably withheld.  ‘The
Lessee may record said memorandum of lease with the Santa Barbara County
Recorder, provided a conformed copy is furnished to the Lessor.  The Lessee shall be responsible for all costs
in preparing and recording the memorandum of lease.  At the expiration or sooner termination of
this Lease, the Lessee shall execute, acknowledge and deliver to the Lessor,
within ten (10) days after written demand from the Lessor, any quitclaim deed
or other document reasonably required by any reputable title company to remove
the cloud of this Lease from the title of the real property subject to the
Lease.

 

17.20                     Waiver of Subrogation..  The Lessor and the Lessee each hereby waive
any and all rights of recovery against the other, or against the officers,
employees and agents and representatives of the other, for loss of or any
damage to such waiving party or its property, or the property of others under
its control, to the extent that such loss or damage is insured against under
any valid and collectible insurance policy in force at the time of such loss or
damages.  The Lessee shall, upon
obtaining the policies of insurance required hereunder, give notice to the
insurance carrier or carriers that the foregoing mutual waiver of subrogation
is contained in this Lease.

 

17.21                     Confidentiality of Lease.  The Lessee acknowledges and agrees that the
terms of this Lease are confidential and constitute proprietary information of
the Lessor.  Disclosure of the terms
hereof could adversely affect the ability of the Lessor to negotiate other
leases with respect to the Building and impair the Lessor’s relationship with
other tenants of the Building.  The
Lessee agrees that it, its partners, officers, directors, employees and
attorneys, shall not disclose the terms and conditions of this Lease to any
other person without the prior written consent of the Lessor.  It is understood and agreed that damages
would be an inadequate remedy for the breach of this provision by the Lessee,
and the Lessor shall have the right to specific performance of this provision
and to injunctive relief to prevent its breach or continued

 

27

 

breach.  Notwithstanding the foregoing, the named
Lessee shall have the right to disclose the terms of this Lease to the Security
and Exchange Commission if required as a part of any reports which the Lessee
must provide.

 

17.22                     Quiet Enjoyment. 
Provided the Lessee has performed all of the terms, covenants,
agreements and conditions of this Lease, including the payment for rent and all
other sums due hereunder, the Lessee shall peaceably and quietly hold and enjoy
the Premises for the term hereof, but subject to the provisions and conditions
of this Lease against the Lessor and all persons claiming by, through or under
the Lessor.  The Lessee’s right to use
the Premises and the Common Area as herein provided shall be subject to
restrictions or other limitations or prohibitions resulting from any laws,
statutes, ordinances and governmental rules, regulations or requirements now in
force or which may hereafter be in force and no such event shall in any way
affect this Lease, abate rent, relieve the Lessee of any liabilities or obligations
under this Lease or give rise to any claim whatsoever against the Lessor.

 

17.23                     Window Coverage. 
The Lessor shall select a standard mini-blind type and color for all
windows to be covered by the Lessee.  No
window covering, including, but not limited to, coatings or draperies, shall be
used by the Lessor without the Lessor’s written approval.

 

17.24                     Materials Storage Restrictions.  The Lessee agrees to conduct its business so
as not to violate or exceed the design standards of the fire protection system
or any insurance policies maintained by the Lessor pursuant to Article 7.

 

17.25                     No Agency. 
Neither party is the agent or partner of the other, and the legal
relationship between the parties hereto shall be governed solely by the terms
of this Lease when duly executed by both parties with respect to the
transactions contemplated hereby.

 

17.26                     Force Majeure. 
Notwithstanding any of the items set forth above, the Lessor shall bear
no liability of whatever kind to the Lessee if, despite the Lessor’s exercise
of due diligence, the Lessor’s carrying out of its obligations, as defined
herein, prevented or delayed by legal action, nor by the exercise of
governmental authority, whether Federal, State of County, or other or by force
majeure, strikes, riots, acts of God, war, adverse weather conditions, fire,
unavoidable casualties, or acts of third parties beyond the Lessor’s control.

 

17.27                     Accord and Satisfaction.  No payment by the Lessee or receipt by the
Lessor of a lesser amount than the rent herein stipulated shall be deemed to be
other than on account of the earliest stipulated rent, nor shall any
endorsement or statement on any check or any letter accompanying any check or
payment as rent be deemed an accord and satisfaction, and the Lessor may accept
such check or payment without prejudice to the Lessor’s right to recover the
balance of such rent or pursue any other remedy provided in this Lease.

 

17.28                     Financial Statements. 
The Lessee shall deliver to the Lessor, prior to the execution of this
Lease, its financial statement, and the annual financial statements of the
Lessee within ninety (90) days after the end of the Lessee’s fiscal year, which
shall be certified by the Lessee as true and correct.  The Lessee shall also provide financial
statements of any guarantor of this Lease, which shall be certified as true and
correct by such guarantor.  Such
financial

 

28

 

statements shall be based
upon generally accepted accounting principles applied on a consistent
basis.  The financial statements shall
clearly show sufficient information to accurately depict the financial
condition of the Lessee as of the date thereof. 
Any misrepresentations in the Lessee’s or the Guarantor’s financial
statements will be considered, at the Lessor’s option, as a breach of a
material provision of this Lease.  If the
Lessee is a partnership or joint venture, such financial statements shall, upon
the Lessor’s request, be accompanied by similar financial statements of each
general partner or joint venture of the Lessee. 
Such similar statements shall be certified to be true and correct by the
subject thereof.  Within five (5) days
following written request by the Lessor delivered after any default by the
Lessee in the payment of any sums owing under this Lease, whether or not any
time period allowed for the cure of such default has expired, the Lessee shall
provide the Lessor with copies of the Lessee’s financial statement for the end
of the most recent quarter of the Lessee’s fiscal year, and the Lessee’s
financial statement (including year to date information) for the end of the
month preceding such default.  In each
case, such financial statement shall meet all of the preceding requirements for
annual financial statements.  The Lessee’s
failure to deliver the financial statements contemplated hereby within the time
specified shall constitute a material default by the Lessee under this Lease.

 

17.29                     Supersedes Proposal to Lease.  This Lease supersedes any proposals regarding
the leasing of the Premises, whether written or oral, and any such proposals
will be terminated, and of no force or effect, effective upon the execution of
this Lease.

 

17.30                     Construction. 
The provisions of this Lease should be liberally construed to effectuate
its purposes.  The language of all parts
of this Lease shall be construed simply according to its, plain meaning and
shall not be construed for or against either party, as each party has
participated in the drafting of this Lease and had the opportunity to have
their counsel review it.  Whenever the
context and construction so requires, all words used in the singular shall be
deemed to be used in the plural, all masculine shall include the feminine and
neuter, and vice versa.

 

17.31                     Non-Disturbance Agreement.  The parties shall execute, concurrently with
the execution of this Lease, the Subordination, Non-Disturbance and Attornment
Agreement attached as Exhibit “E”, which is incorporated by this
reference.  The Lessor shall obtain its
lender’s execution of said agreement as soon as reasonably practical after
execution by the parties, and furnish the Lessee with a fully executed copy.

 

29

 

EXHIBIT E

 

SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT
AGREEMENT

 

 

SUBORDINATION, NON-DISTURBANCE AND 

ATTORNMENT AGREEMENT

 

THIS AGREEMENT is dated the                    
day of                       ,
19      , and is made between                                                                                                                                          
(“Mortgagee”), and                                                                                                                                                                            (“Tenant”).

 

RECITALS:

 

(a)  Tenant has entered into a
certain lease (“Lease”) dated                                           
with                                                    
as lessor (“Landlord”), covering certain premises known as                                                          
and located in                                                         
(the “Demised Premises”); and

 

(b)  Mortgagee has agreed to make
a mortgage loan in the amount of                           
(the “Mortgage”) to the Landlord, secured by the Demised Premises, and the
parties desire to set forth their agreement herein.

 

NOW, THEREFORE, in consideration of the Demised Premises and of the sum
of ONE DOLLAR ($1.00) by each party in hand paid to the other, the receipt of
which is hereby “acknowledged, the parties hereby agree as follows:

 

1.  Said Lease is and shall be
subject and subordinate to the Mortgage insofar as it affects the real property
of which the Demised Premises form a part, and to all renewals, modifications;
consolidations, replacements and extensions thereof to the full extent of
amounts secured thereby and interest thereon.

 

2.  Tenant agrees that it will
attorn to and recognize any purchaser at a foreclosure sale under the Mortgage,
any transferee who acquires the Demised Premises by deed in lieu of
foreclosure, and the successors and assigns of such purchaser(s), as its
landlord for the unexpired balance (and any extensions, if exercised) of the
term of said Lease upon the same terms and conditions set forth in said Lease.

 

3.  If it becomes necessary to
foreclose the Mortgage, Mortgagee will not terminate said Lease nor join Tenant
in summary or foreclosure proceedings so long as tenant is not in default under
any of the terms, covenants, or conditions of said Lease.

 

4.  If Mortgagee succeeds to the
interest of Landlord under the Lease, Mortgagee shall not be:

 

a.  liable for any act or
omission of any prior landlord (including Landlord) or

 

b.  liable for the return of any
security deposit; or

 

c. 
subject to any offsets or defenses which Tenant might have against any
prior landlord (including Landlord); or

 

 

d. 
bound by any rent or additional rent which Tenant might have paid for
more than the current month to any prior landlord (including Landlord); or

 

e. 
bound by any amendment or modification of the Lease made without its
consent; or

 

f. 
bound by an representation or warranty made by any prior landlord
(including Landlord).

 

5.  This Agreement shall be binding upon and
shall insure to the benefit of the parties hereto and their successors and
assigns.

 

6.  Tenant agrees to give Mortgagee, by
registered mail, a copy of any notice of default served upon the Landlord, to
be sent to the address of such Mortgagee indicated following Mortgagee’s
signature line below.  Tenant further
agrees that if Landlord shall have failed to cure such defaults within the time
provided for in this Lease, then the Mortgagee shall have an additional sixty
(60) days within which to cure such default or if such default cannot be cured
within that time, then such additional time as may be necessary to cure such
default shall be granted if within such sixty (60) days Mortgagee has commenced
and is diligently pursuing the remedies necessary to cure such default
(including, but not limited to, commencement of foreclosure proceedings, if
necessary to effect such cure), in which event the Lease shall not be
terminated while such remedies are being so diligently pursued.

 

IN WITNESS WHEREOF, the parties hereto have
executed these presents as of the day and year first above written.

	
   

  	
   

  	
   

  
	
   

  	
   

  	
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  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address: c/o Aetna Realty Investors

  
	
   

  	
   

  	
  1740 Technology Drive

  
	
   

  	
   

  	
  San Jose, CA 95110

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Copy to: c/o Aetna Realty Investors

  
	
   

  	
   

  	
  242 Trumbull Street

  
	
   

  	
   

  	
  Hartford, CT 06156

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Tenant:

  	
   

  
	
  Date

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  
									

 

 

FIRST AMENDMENT TO LEASE

 

THIS FIRST AMENDMENT TO LEASE is made and entered into as of May 5,
1996, between EKWILL PARTNERS, Ltd., a California limited Partnership (“Lessor”)
and McGHAN MEDICAL CORPORATION, a California corporation (“Lessee”).

 

RECITALS:

 

A.                                   Lessor
and Lessee entered into a Lease dated for reference May 1, 1996 (the “Lease”)
pursuant to which Lessor leased to Lessee and Lessee hired from Lessor 4,468
sq.ft.  (the “Premises”) of the building
commonly known as 5520 Ekwill Street, Santa Barbara, California (the “Building”).

 

B.                                     Lessee
currently subleases from Geodynamics Corporation an additional 15,956
sq.ft.  in the Building (the “Additional
Space”).  Lessee’s sublease with Geodynamics
Corporation expires February 28, 1997. 
Lessee desires to lease directly from Lessor the Additional Space
effective upon the termination of Lessee’s Sublease with Geodynamics
Corporation on the terms and conditions described in the Lease.

 

NOW, THEREFORE, in consideration of the premises described above, and
other good and valuable consideration, the parties agree as follows:

 

1.                                       BASIC
LEASE PROVISIONS

 

Effective March 1, 1997, Items 2 and 3 of the Basic Lease Provisions of
the Lease are deleted in their entirety and replaced with the following:

 

“2.                                 Leased
Area:  20,424 Square Feet.

 

3.                                       Lessee’s
Percentages:  Building:  48.10%; Common Area:  24.09%.”

 

2.                                       COMMENCEMENT
OF TERM

 

The term of the Lease for the Additional Space shall commence on March
1, 1997 and terminate on July 31, 2006.

 

3.                                       RIGHT
TO EXTEND

 

The right to extend the term of the Lease set forth in Section 2.3
shall apply to both the Premises and the Additional Space in their entirety.

 

1

 

4.                                       INITIAL
ANNUAL RENT

 

The Initial Annual Rent for the Additional Space shall be a per sq.ft.
amount equal to the per sq.ft. rent then payable under the terms of the Lease
as to the Premises, multiplied by the total square footage in the Additional
Space of 15,956 sq.ft.  Rental
installments for the Additional Space shall be adjusted at the same time and in
the same manner as rental adjustments for the Premises.  The rental adjustment effective January 1,
1998, shall be based upon the change in the index for the full prior 12 months
so as to remain equal to the per sq.ft. rent payable under the Lease with
respect to the Premises.

 

5.                                       ADDITIONAL
RENT

 

Lessee shall pay Additional Rent for the Additional Space on the same
terms and conditions as for the Premises. 
Lessee’s proportionate share of all Building Operating Expenses for the
Premises and the Additional Space is 48.10%. 
Lessee’s proportionate share of Common Area Operating Expenses for the
Premises and the Additional Space is 24.09%.

 

6.                                       SECURITY
DEPOSIT

 

As soon as the Initial Annual Rent for the Additional Space is known,
but no later than March 1, 1997, Lessee shall deliver to Lessor cash in an
amount equal to the first month’s rent for the Additional Space, which sum
shall be added to the security deposit previously delivered to Lessor with
respect to the Premises.  The initial
security deposit for the Premises and the additional security deposit delivered
with respect to the Additional Space shall be treated as a single deposit and
used, applied or attained by Lessor on the terms and provisions in Paragraph 4
of the Lease.

 

7.                                       CONDITION
OF ADDITIONAL SPACE

 

Lessee acknowledges and agrees that it has been in possession of the
Additional Space for an extended period of time and is fully familiar with the
condition thereof, and accepts the Additional Space strictly on an “AS IS”
basis.

 

8.                                       NO
FURTHER AMENDMENTS

 

Except as expressly set forth herein, all of the terms and provisions
of the Lease are hereby ratified and approved and shall constitute the agreement
of the parties for the lease of the Premises and the Additional Space.

 

2

 

IN WITNESS WHEREOF, the parties have executed this First Amendment as
of the date first written above.

 

 

	
  LESSOR:

  	
  EKWILL PARTNERS, LTD., a California

  limited partnership

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   /s/ JEFFREY C. BERMANT

  	
   

  
	
   

  	
   

  	
  Jeffrey C. Bermant,

  
	
   

  	
   

  	
  General Partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  130 Cremona Drive, Suite D

  
	
   

  	
   

  	
  Goleta, CA 93117

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  LESSEE:

  	
  McGHAN MEDICAL CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ DONALD K. MCGHAN

  	
   

  
	
   

  	
   

  	
  Donald K. McGhan,

  
	
   

  	
   

  	
  Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  5540 Ekwill Street

  
	
   

  	
   

  	
  Santa Barbara, CA 93111

  

 

3

 

SMRH DRAFT

(05/21/02)

 

SECOND AMENDMENT TO LEASE

 

This SECOND AMENDMENT TO LEASE, dated as of May 21, 2002 (this “Amendment”),
is between EKWILL PARTNERS, LTD., a California limited partnership (the “Lessor”),
and McGHAN MEDICAL CORPORATION, a California corporation (the “Lessee”).

 

R  E  C  I
T  A  L  S:

 

A.                                   The
Lessor and the Lessee are parties to that certain Net, Net, Net Lease, dated
May 1, 1996 (as amended by a First Amendment to Lease, dated as of May 5, 1996,
the “Lease”), pursuant to which the Lessor has leased to the Lessee
certain premises located at the property commonly known as the Santa Barbara
Tech Center located at 5520 Ekwill Street in Goleta, California 93111.

 

B.                                     The
parties now desire to amend the Lease, as set forth herein.

 

NOW, THEREFORE, in consideration of the mutual covenants and promises
herein contained, and for other good and valuable consideration, the receipt
and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

 

A  G  R  E
E  M  E  N  T:

 

1.                                       Definitions.  Except as otherwise defined herein, terms
defined in the Lease are used in this Amendment as defined therein.

 

2.                                       Amendments. 
Subject to the provisions of Section 5, the parties hereto agree to
amend the Lease, as follows:

 

(a)                                  Basic Lease Provisions.  Items 1 through 4 and Item
10 of the Basic Lease Provisions shall be amended and restated in their
entireties as follows:

 

“BASIC LEASE PROVISIONS

 

	
  1.

  	
  Premises:

  	
   

  	
  As depicted on Exhibit A; provided, however, on
  the Effective Date (as defined in Section 5 of the Second Amendment to
  Lease, dated as of May 31, 2002 (the “Second Amendment”)), the
  Premises shall be as depicted on Exhibit A-1 of the Second Amendment.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Project Name:

  	
   

  	
  SANTA BARBARA TECH CENTER

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Premises Address:

  	
   

  	
  5520 Ekwill Street

  
	
   

  	
   

  	
   

  	
  Goleta, CA 93111

  

 

1

 

	
   

  	
  Use of Premises:

  	
   

  	
  Office or permitted industrial

  
	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
  Leased Area:

  	
   

  	
  20,424 rentable square feet; provided, however, on the
  Effective Date (as defined in Section 5 of the Second Amendment), the
  square footage of the Leased Area shall be decreased by approximately 7,485
  square feet (the “Terminated Space”) for a total square footage of
  approximately 12,939 square feet.

  
	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
  Lessee’s Percentages:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Building:

  	
   

  	
  48.10%; provided, however, on the Effective Date (as
  defined in Section 5 of the Second Amendment), Lessee’s Percentage of
  the Building shall be decreased to 30.47%.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Common Area:

  	
   

  	
  24.09%; provided, however, on the Effective Date (as
  defined in Section 5 of the Second Amendment), Lessee’s Percentage of
  the Common Area shall be decreased to 15.23%

  
	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
  Initial Monthly Rent:

  	
   

  	
  $26,477.71 ($1.29 per square foot per month); provided, however,
  on the Effective Date (as defined in Section 5 of the Second
  Amendment), the Monthly Rent shall be decreased to $16,755.40 ($1.29 per
  square foot per month).

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Rental Deposit:

  	
   

  	
  $23,797.65

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
  Rent Adjustment:

  	
   

  	
  Annual and Monthly Rent to be adjusted annually in accordance with
  the provisions of this Lease.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  * * *

  
	
   

  	
   

  	
   

  	
   

  
	
  10.

  	
  Parking Spaces Provided:

  	
   

  	
  58 unreserved spaces in common with other tenants of the project;
  provided, however, on the Effective Date (as defined in Section 5
  of the Second Amendment), Lessee’s parking allocation shall be reduced to 37
  unreserved spaces in common with other tenants of the project.”

  

 

(b)                                 No Option to Renew.  Notwithstanding anything to the contrary in
the Lease or this Amendment, any option to renew or extend the Lease and any
first right to lease additional space set forth in the Lease shall not apply to
the Terminated Space.

 

(c)                                  References to “Lease”.  On the Effective Date (as defined in Section
5 below), references in the Lease to “this Lease” and similar references
shall be deemed to be

 

2

 

references to the Lease, as amended by this Amendment.  Except as expressly provided in this
Amendment, the Lease shall continue in full force and effect in accordance with
its terms.

 

3.                                       Representations.  Each party represents to the other that it
has full power and authority to execute this Amendment.  Each party represents to the other that it
has not made any assignment, sublease, transfer, conveyance or other
disposition of the Lease or any interest therein or the Premises, and has no
knowledge of any existing or threatened claim, demand, obligation, liability,
action or cause of action arising from or in any manner connected with the
Lease or the Premises by any other party. 
Lessee represents that it has not, at any time, done or suffered, and
will not do or suffer, any act or thing whereby the Premises or any part
thereof are or may be in any way charged, affected or covered by any lien or
claim, and shall indemnify and hold Lessor harmless from all liability,
expenses, damages or costs arising therefrom, including without limitation
attorneys’ fees.  The warranties,
representations, amendments and obligations contained herein shall the survive
the execution and delivery of this Amendment and shall survive any and all
performances in accordance herewith.  If
any party obtains a judgment against any other party by reason of breach
hereof, reasonable attorneys’ fees as fixed by the court shall be included in
such judgment.  This Amendment shall be
binding on and inure to the benefit of the heirs, successors and assigns of the
parties hereto.  The parties acknowledge
and agree that the Termination Date of the Lease is July 31, 2006.

 

4.                                       Integration And Modification.  This Amendment shall constitute the entire
agreement between the parties with respect to the amendment of the Lease and
supersedes all prior and contemporaneous communications with respect
thereto.  No supplement, modification or
waiver of this Amendment shall be binding unless executed in writing by both
parties to this Amendment.  No waiver of
any of the provisions of this Amendment shall be deemed or shall constitute a
waiver of any other provision hereof (whether or not similar), nor shall such
waiver constitute a continuing waiver unless otherwise expressly provided.

 

5.                                       Effectiveness.  The provisions of Section 2 of this Amendment
shall not become effective unless and until the first date on which all of the
following conditions are fulfilled in form and substance satisfactory to the
Lessor in its sole discretion (such date, the “Effective Date”): (i) all
parties hereto shall have executed and delivered this Amendment pursuant to due
authorization; (ii) the Lessee pays all . 
unpaid rent accrued up to (but excluding) the Effective Date; (iii) the
Lessee pays to the Lessor a nonrefundable termination fee in the amount of
$25,000; (iv) the Lessor shall have notified the Lessee in writing that another
tenant acceptable to the Lessor has exercised its right of first refusal to
lease all of the Terminated Space and shall have executed and delivered a
written amendment to its lease reflecting the foregoing and otherwise on terms
acceptable to the Lessor; and (v) the Lessee shall not be in default of any of
its obligations under the Lease or this Amendment, including its obligations
with respect to surrender of the Terminated Space.

 

6.                                       Agreement Regarding Brokers.  The Lessee represents and warrants to the
Lessor that no broker or agent has negotiated or brought about the transaction
contemplated by this Amendment on behalf of the Lessee.  The Lessee shall indemnify and save harmless
the Lessor from and against any claim which may be asserted against the Lessor
by any broker or agent if the claim is made in connection with this
transaction.  The Lessor represents and
warrants to the Lessee that no broker or agent has negotiated or brought about
the transaction

 

3

 

contemplated by this Amendment on behalf of the Lessor.  The Lessor shall indemnify and save harmless
the Lessee from and against any claim which may be asserted against the Lessee
by any broker or agent if the claim is made in connection with this
transaction.

 

7.                                       Governing Law.  This Amendment shall be governed by and
construed in accordance with the laws of the State of California, without
regard to the conflicts of laws provisions of the State of California.

 

8.                                       Counterparts.  This Amendment may be signed in any number of
counterparts all of which shall constitute one and the same agreement.  Signatures may be exchanged by telecopy, With
original signatures to follow.  Each
parry hereto agrees that it will be bound by its own telecopied signature and
that it accepts the telecopied signature of the other party to this Amendment.

 

9.                                       Default.  Any misrepresentation made by the Lessee in
any material respect in this Amendment or any failure of the Lessee to comply
in any material respect with any covenant or obligation contained in this
Amendment shall constitute a default by the Lessee under the Lease which shall
enable the Lessor to exercise remedies thereunder, including termination of the
Lease.

 

10.                                 Continuing Lease Obligations.  Notwithstanding anything to the contrary in
this Amendment, the Lessee agrees to comply with all of its obligations under
the Lease and this Amendment, including the Lessee’s obligations relating to
surrender of the Terminated Space.

 

The parties hereby agree that the Lease, as amended hereby, shall
remain in full force and effect and the parties hereto hereby ratify and affirm
the Lease as so amended.

 

IN WITNESS WHEREOF,
the Lessee and the Lessor have signed this Amendment on the date above
specified.

 

	
  LESSOR:

  	
   

  	
  LESSEE:

  
	
   

  	
   

  	
   

  
	
  EKWILL PARTNERS, LTD.,

  	
   

  	
  McGHAN MEDICAL CORPORATION,

  
	
  a California limited partnership

  	
   

  	
  a California corporation

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Jeffrey C.
  Bermant

  	
   

  	
   

  	
  Name:

  	
  Vicente Trelles

  
	
   

  	
  Title:

  	
  General
  Partner

  	
   

  	
   

  	
  Title:

  	
  Chief Operating Officer

  
	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
  Address:

  
	
   

  	
   

  	
   

  
	
  5383 Hollister Avenue, Suite 150

  	
   

  	
  5540 Ekwill Street

  
	
  Santa Barbara, CA 93111

  	
   

  	
  Goleta, CA 93111

  
								

 

4Exhibit 10.56

 

Execution Document

 

 

LEASE
AGREEMENT

Between

 

 

GENERAL ELECTRIC CAPITAL CORPORATION

a Delaware corporation,

as Lessor,

and

INAMED CORPORATION,

a Delaware corporation

as Lessee

 

 

Dated as of October 1, 2002

 

 

	
  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

  	
   

  

 

ii

 

	
  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

  	
   

  

 

iii

 

	
  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

  	
   

  

 

iv

 

	
  SCHEDULE A

  	
  LEGAL DESCRIPTION

  	
   

  
	
  SCHEDULE B

  	
  [OMITTED]

  	
   

  
	
  SCHEDULE C

  	
  PERMITTED EXCEPTIONS

  	
   

  
	
  SCHEDULE D

  	
  LESSEE INSURANCE

  	
   

  
	
  SCHEDULE E

  	
  PERMANENT LOAN INSURANCE REQUIREMENTS

  	
   

  

 

v

 

LEASE AGREEMENT

 

THIS LEASE
AGREEMENT (this “Lease”) is made and entered into as of the 1st day of October,
2002 by and between GENERAL ELECTRIC CAPITAL CORPORATION, a Delaware
corporation (“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 (as
supplemented 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 Collagen
certain land, improvements and equipment, all located at 48490 Milmont Drive,
Fremont, California (the “Property”), for the term and on the terms and
conditions 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 certain
items of equipment leased by Lessor to Lessee and wish to replace the Existing
Lease 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 and
Lessee agree as follows.

 

ARTICLE I

 

Section 1.01.                         Lease
of Premises; Title and Condition.  In
consideration of the rents and covenants herein stipulated to be paid and
performed by Lessee and upon the terms and conditions herein specified, Lessor
hereby leases to Lessee, and Lessee hereby leases from Lessor, the premises
(the “Premises”) consisting of:

 

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

 

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

 

(c)                                  any
movable or not permanently affixed fixtures, machinery, equipment, furnishings,
moveable walls or partitions, or other personal property used or procured for
use in connection with the operation, maintenance and protection of the
Premises, 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 area
facilities, refrigeration, garbage disposal, and all landscaping, paving and
parking areas, but except items, if any, included within the category of 

 

 

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

 

(d)                                 all
fixtures, machinery, equipment, and other items of property, now or hereafter
permanently 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, lighting
and 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 of
which, to the greatest extent permitted by law, are hereby deemed by the
parties hereto to constitute real estate except to the extent that any such
item is an item of Lessee’s Equipment (collectively referred to herein as “Lessor’s
Fixtures”) (all the foregoing being included within the term “Improvements”);
and

 

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

 

The Premises
are leased to Lessee in their present condition without representation or
warranty by Lessor and subject to the rights of parties in possession, to the
existing state of title, the existing state and quality of Improvements, any
state of facts that an accurate survey or physical inspection thereof might
show, all zoning regulations, restrictions, rules and ordinances, building
restrictions and other laws and regulations now in effect or hereafter adopted
by any governmental authority having jurisdiction, to all applicable Legal
Requirements (as defined in Subsection 5.02(b)) now or hereafter in effect and
to Permitted Exceptions listed in Schedule C attached hereto.  Lessee has examined the Premises and title to
the 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 be
used only for Permitted Uses.  “Permitted
Uses” are defined as all uses permitted by law, the certificate of occupancy
and regulations of the applicable local planning, building and other
agencies.  Lessee shall not use the
Premises 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 the
foregoing, Lessor may condition or withhold such consent if the proposed use
will materially alter the character or purpose or materially detract or
diminish the value or operating efficiency of the Premises, materially impair
the revenue-producing capability of the Premises, materially adversely affect
the ability of Lessee to comply with this Lease, materially increase the use, 

 

2

 

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

 

Section 1.03.                         Term.

 

1.03.1                  This
Lease shall be for a term of ten (10) years (the “Lease Term”) commencing on
October 1, 2002 (the “Commencement Date”) and ending at midnight on September
30, 2012 (the “Expiration Date”) or such earlier date as this Lease is
terminated pursuant to its terms.

 

1.03.2                  Provided
that Lessee is not in default hereunder (after the giving of any written notice
required hereunder and the expiration of any applicable cure period), Lessee
shall 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 written
notice to Lessor not later than ninety (90) days prior to the end of the
then-current term.

 

Section 1.04.                         Rent.

 

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

 

•                                          October
1, 2002 — September 30, 2003, $65,000.00 per month.

•                                          October
1, 2003 — September 30, 2004, $66,560.00 per month.

•                                          October
1, 2004 — September 30, 2005, $68,157.44 per month.

•                                          October
1, 2005 — September 30, 2006, $69,793.21 per month.

•                                          October
1, 2006 — September 30, 2007, $71,468.24 per month.

•                                          October
1, 2007 — September 30, 2008, $73,183.47 per month.

•                                          October
1, 2008 — September 30, 2009, $74,939.87 per month.

•                                          October
1, 2009 — September 30, 2010, $76,738.42 per month.

•                                          October
1, 2010 — September 30, 2011, $78,580.14 per month.

•                                          October
1, 2011 — September 30, 2012, $80,466.06 per month.

 

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

 

(c)                                  For
the second Option Term Lessee shall pay Basic Rent in an amount equal to in an
amount 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 less
than the rent payable in the previous Option Term).

 

(c)                                  For
the third Option Term Lessee shall pay Basic Rent in an amount equal to in an
amount 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 less
than the rent payable in the previous Option Term).

 

3

 

1.04.2                  For
the purpose of this Lease, the “Market Rate for the Premises” shall mean an
annual rental determined (as of one hundred eighty (180) days prior to the
commencement 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 into
consideration the “net” character of this Lease, the quality, size, loading,
parking, design and location of the Premises, the condition and age of the
Premises and any tenant improvements made by Lessee; provided, however, that
the Market Rate for the Premises shall be adjusted to take into account imputed
Leasing Costs and Tenant Concessions (as defined below) which Lessor would
otherwise have to pay for or provide (as the context may require) for a new
tenancy in the absence of Lessee’s exercise of its option to extend the Lease
Term.  As used herein, the term (i) “Tenant
Concessions” shall include, without limitation, so-called free rent, tenant improvement
allowances and work, moving allowances and lease takeovers; and (ii) “Leasing
Costs” shall include an amount equal to leasing commissions and fees that
Lessor would have to pay to a real estate broker if Lessor were to lease the
Premises to a new tenant.

 

1.04.3                  In
the event that Lessor and Lessee shall be unable to agree on the Market Rate
for the Premises for any Option Term not later than one hundred sixty(160) days
prior to the relevant Option Term Commencement Date, then not later than one hundred
fifty (150)) days before such Option Term Commencement Date, Lessor and Lessee
shall each appoint a real estate broker, licensed in the State of California
and 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 for
industrial 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 determine
the Market Rate for the Premises.  If
such brokers are unable to agree upon the Market Rate for the Premises by such
deadline, then not later than one hundred twenty (120) days prior to the Option
Term Commencement Date, such brokers shall appoint a third industrial real
estate broker, licensed in the State of California, having ten (10) or more
years experience in leasing industrial properties, who has participated (within
one year of the Option Term Commencement Date, and not on behalf of either
party 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 Market
Rate for the Premises and communicate it to Lessor and Lessee.  Such determination shall bind Lessor and
Lessee.  Lessee and Lessor shall pay the
costs and fees of their respective brokers and shall split equally the costs
and fees of the third broker.

 

1.04.4                  The
Basic Rent shall be payable in equal monthly installments, in advance, on the
first day of each and every month. 
Lessee shall perform all its obligations under this Lease at its sole
cost and expense, and shall pay all Basic Rent, additional charges and any
other sum due hereunder when due and payable, without notice or demand.

 

1.04.5                  Lessee
shall pay, as additional rent, all other amounts, costs, expenses, liabilities
and obligations that Lessee herein assumes or agrees to pay,, and will
reimburse Lessor for any payments thereof made by Lessor in accordance with the
terms and requirements of this Lease (collectively, “Additional Rent’).  Such expenses shall include (without
limitation) (i) the cost of air conditioning, electricity, heating, mechanical,
ventilation, water and sewer, and any 

 

4

 

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

 

Section 1.05.                         Payment
of Rent.  Lessee will pay to Lessor
all 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 as
Lessor from time to time may designate by written notice to Lessee given not
later than the twentieth day of the month for the following and subsequent
months.

 

Section 1.06.                         Late
Payment Charge.  If Lessee shall fail
to make payment of any installment of Basic Rent, any payment of Additional
Rent or any payment of any other sums required by this Lease as provided in
this Lease within ten days after notice is given to Lessee stating that such
payment is past due (regardless of any notice requirements for purposes of
Article 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 so
delinquent, said charge being intended as stipulated compensation for the
additional costs and expenses incurred by Lessor because of such late payment
and not as a penalty.

 

ARTICLE II

 

Section 2.01.                         Disclaimer
of Representation by Lessor.  Lessee
is fully familiar with the physical condition of the Premises and all
Improvements.  Lessor has made no
representation as to the condition of the Premises or Improvements or the
fitness 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.                         Premises
Leased “As Is”.  THE PREMISES,
INCLUDING IMPROVEMENTS, ARE DEMISED AND LEASED TO LESSEE “AS IS” AND IN THEIR
PRESENT CONDITION WITHOUT ANY REPRESENTATION OR WARRANTY BY LESSOR AS TO THEIR
COMPLIANCE WITH APPLICABLE LEGAL REQUIREMENTS AND INSURANCE REQUIREMENTS (AS
DEFINED IN SECTION 6.04) NOW OR HEREAFTER IN EFFECT OR AS TO THEIR COMPLIANCE
WITH APPLICABLE TERMS AND CONDITIONS OF ANY CONTRACTUAL REQUIREMENTS (AS
DEFINED IN SECTION 2.07).

 

5

 

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

 

LESSOR MAKES
NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH RESPECT TO THE PREMISES
OR OF ANY FIXTURES OR OTHER ITEMS CONSTITUTING ANY PORTION THEREOF, OR THE
LOCATION, USE, DESCRIPTION, DESIGN, MERCHANTABILITY, FITNESS FOR USE FOR A
PARTICULAR PURPOSE, CONDITION OR DURABILITY THEREOF, OR AS TO THE QUALITY OF
THE MATERIAL OR WORKMANSHIP THEREIN, OR WITH RESPECT TO LESSOR’S TITLE THERETO
OR OWNERSHIP THEREOF, AND ALL RISKS INCIDENT THERETO SHALL BE BORNE BY LESSEE.

 

Section 2.03.                         Maintenance
and Repair.

 

(a)                                  Lessee
acknowledges that it has received the Premises in good order and repair.  Lessee, at its own expense, will maintain all
parts of the Premises in good repair and condition and will take all action and
will make all structural and nonstructural, foreseen and unforeseen and ordinary
and extraordinary changes and repairs that may be required to keep all parts of
the Premises in good repair and condition (including, without limitation, all
painting, 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 any
part of the Premises.  Lessee waives the
right to require Lessor to maintain, repair or rebuild all or any part of the
Premises or make repairs at the expense of Lessor pursuant to any Legal
Requirement, agreement, contract, covenant, condition or restrictions at any
time.

 

(b)                                 Replacement
of or major repairs to all structural or mechanical systems shall be undertaken
by Lessee at its sole cost and expense. 
Such replacements shall be made pursuant to and in accordance with plans
and specifications approved in advance by Lessor as required for Major
Alterations.

 

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

 

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

 

6

 

(a)                                  If
such Alteration is not structural in nature and does not affect the condition
of the Improvements or any utilities and does not lessen the value of the
Premises as it is at the commencement of such work, and if the cost thereof is
less than $125,000 (which amount shall be increased by a factor of two and four
tenths percent (2.4%) annually during. 
the tern of this Lease (such amount being referred to herein at the “Alteration
Consent Trigger”), Lessor’s consent to such Alteration shall not be
required.  Such Alterations (referred to
herein as “Minor Alterations”) shall be expeditiously completed in a good and
workmanlike manner and in compliance with all applicable Legal Requirements and
Insurance Requirements.  Lessee shall pay
the increased premium, if any, charged by the insurance companies carrying insurance
policies on the Premises, to cover the additional risk during the course of
such work.  Lessee shall provide Lessor
upon request with evidence of payment for all work done within 90 days after
completion thereof.  All such 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 part of the
Premises.

 

(b)                                 If
such Alteration is structural in nature or adversely affects the value or
utility of the Improvements or lessens the value of the Premises as it is at
the commencement of such work in any material respect, or if the cost thereof
exceeds the Alteration Consent Trigger, Lessor’s prior written consent to such
alteration thereto shall be required, but such consent shall not be
unreasonably withheld, delayed or conditioned. 
Such Alterations (referred to herein as “Major Alterations”) shall be
performed in accordance with the following requirements:

 

(i)                                     Before
commencing any Major Alteration, Lessee shall, upon request, at Lessee’s own
cost and expense, deliver to Lessor an endorsement to the commercial general
liability policy required by this Lease, which endorsement shall provide that
such insurance will cover work in progress;

 

(ii)                                  Lessee
shall pay the increased premium, if any, charged by the insurance companies
carrying insurance policies on the Premises, to cover the additional risk
during the course of such work;

 

(iii)                               All
such 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 a
part of the Premises;

 

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

 

(v)                                 All
of such work shall be completed substantially in accordance with the plans and
specifications approved by Lessor and in accordance with all Legal
Requirements;

 

7

 

(vi)                              No
building now or hereafter erected upon the Premises shall be demolished, nor
shall Major Alteration be made thereto, without the prior written consent of
Lessor;

 

(vii)                           Lessee
shall provide Lessor upon request with evidence of payment for all work done
within 90 days after completion thereof; and

 

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

 

(c)                                  The
provisions of this Section shall also apply with respect to any Alterations
undertaken by any subtenant of any portion of the Premises.

 

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

 

Section 2.06.                         Replacement
of Lessor’s Fixtures and Lessor’s Equipment.

 

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

 

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

 

8

 

major
components of the Premises with items which are at least equal in value and
general utility to those removed (provided, however, that Lessee shall not be
required to replace a component of the Premises if its function is
obsolete).  Such components must be free
of any liens or security interests and the fee title to such must be, upon
placement of such components upon the Premises, conveyed directly to Lessor and
made subject of this Lease.

 

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

 

Section 2.08.                         Lessor’s
Cooperation Clause.  Upon reasonable
request from time to time, Lessor shall join with Lessee in executing: (a) any
conveyance, dedication, grant of easement or license or other instrument as
shall be reasonably necessary to provide public utility service to the Premises
or in order to allow the Permitted Uses of the Premises by Lessee and (b) to
the extent that the signature or approval of Lessor is required by any
governmental body, applications for such permits or other governmental
authorization or approvals.  Lessor will
join in such applications or other documentation without any cost or liability
to Lessor in connection therewith, and Lessee shall indemnify and hold Lessor
harmless from any cost, liability or expense arising therefrom.

 

Section 2.09.                         No
Third-party Claims Against Lessor. 
Nothing contained in this Lease shall constitute the consent or request
of Lessor, express or implied, by inference or otherwise, to any person, firm
or entity for the performance of any labor or the furnishing of any materials
or other property in respect of the Premises or any part thereof, or as giving
Lessee any authority to contract for or permit the rendering of any services or
the furnishing of any materials or other property so as to permit the making of
any claim against Lessor.  Nothing in this
Lease shall be deemed as giving Lessee any right, power or authority to
contract for or permit the rendering of any service or the furnishing of any
material that would give rise to any mechanic’s or other lien against Lessor’s
interest in the Premises.  NOTICE IS
HEREBY GIVEN THAT LESSOR WILL NOT BE LIABLE FOR ANY LABOR, SERVICES OR
MATERIALS FURNISHED OR TO BE FURNISHED TO LESSEE, OR TO ANYONE HOLDING AN
INTEREST IN THE PREMISES (OR ANY PART THEREOF) THROUGH OR UNDER LESSEE, AND
THAT NO CONSTRUCTION, MECHANIC’S OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR
MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF LESSOR IN THE PREMISES.

 

9

 

ARTICLE III

 

Section 3.01.                         Removal.  Lessee may remove Lessee’s Equipment at any
time during the Lease Term, and Lessee shall remove Lessee’s Equipment upon
termination of this Lease.  Any of Lessee’s
Equipment not removed by Lessee prior to the expiration of the Lease or earlier
termination shall be considered abandoned by Lessee and may be appropriated,
sold, destroyed or otherwise disposed of by Lessor without notice to
Lessee.  Lessee shall pay Lessor upon
demand all reasonable costs and expenses incurred by Lessor in removing, storing
and disposing of same.  Lessee will repair
at its expense (or shall reimburse Lessor upon demand for all expenses incurred
by Lessor in repairing) all damage to the Premises caused to the Premises by
the removal of Lessee’s Equipment, except where such damage is due to the gross
negligence or intentional misconduct of Lessor or its contractors.

 

ARTICLE IV

 

Section 4.01.                         Restriction
on Assignment or Other Transfer. 
Lessee covenants and agrees for Lessee and its successors, assigns and
legal representatives that neither this Lease nor the Lease Term and estate
hereby 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 than
as set forth herein, without the prior written consent of Lessor in every case
(a “Transfer”), except in accordance with this Section (such consent shall not
be unreasonably withheld, delayed or conditioned provided the conditions in
Section 4.02 have been satisfied).  For
the purposes of this Section, a Transfer shall be deemed to include any
transfer, assignment or encumbrance of the controlling interests in Lessee,
whether occurring by reason of one transaction or cumulatively in any two or
more transactions; and in any event a Transfer shall not be deemed to occur
solely as a result of the death of any natural person or the transfer of any
interest to a trust for estate planning purposes without the release of the
transferor.

 

Notwithstanding
the foregoing, Lessee may, without consent, assign or sublet up to one hundred
percent (100%) of the leaseable floor area of the Premises to an Affiliate of
Lessee (as defined in Section 4.08 below), provided that Lessee shall agree in
writing to remain fully liable for the obligations of the “Lessee”
hereunder.  Lessee shall give Lessor
prompt written notice of any such assignment or subletting as required by
Section 4.05 below.  In the case of an
assignment, Lessee shall also execute and deliver to Lessor an agreement in
form and substance in all respects reasonably satisfactory to Lessor whereby
Lessee ratifies and guarantees all of the obligations of the assignee Affiliate
of Lessee under this Lease.

 

Except as is
set forth above, any sublease of more than twenty-five percent (25%) of the
leaseable floor area of the Premises will be deemed a Transfer..  If the Transfer involves an assignment of
this Lease (including a Transfer to an Affiliate of Lessee), the assignee shall
execute and deliver to Lessor an agreement in form and substance in all
respects reasonably satisfactory to Lessor whereby such assignee assumes and
agrees to be bound by and perform all of the obligations of Lessee under this
Lease.

 

Section 4.02.                         Information
About Proposed Transferee. 
Notwithstanding anything contained in Section 4.01, in the event Lessee
wishes to assign or otherwise make a Transfer of 

 

10

 

this Lease, Lessee shall
first notify Lessor of the name of the proposed transferee and of the material
terms, provisions and conditions contained in the proposed Transfer, and shall
provide Lessor with such information as to the proposed transferee’s financial
condition, business experience and standing as Lessor may reasonably require.

 

Section 4.03.                         Terms
Relating to Consent.  Lessor shall
have the right to withhold or condition its consent (subject, however, to its
covenant not to unreasonably withhold, delay or condition such consent) to any
proposed Transfer unless the following conditions are met:

 

(a)                                  the
proposed transferee is of a financial standing which in Lessor’s judgment will
allow such proposed transferee to meet its obligations under this Lease as they
become due;

 

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

 

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

 

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

 

(e)                                  any
request for an assignment of this Lease shall be accompanied by the proposed
instrument of assignment and the assignment document will provide that the
assignee cannot further transfer its interest without complying with the
transfer .  requirements of this Lease.

 

Section 4.04.                         Subleases.  Lessee may sublease all or any part of the Premises
to one or more subtenants without the consent of Lessor, provided the sublease
is subordinate to this Lease and to the Fee Mortgage, and the sublessee does
not require a nondisturbance agreement with Lessor.

 

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

 

11

 

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

 

Section 4.05.                         Original
Documents to Lessor.  In the event
this Lease is assigned or if more than twenty-five percent (25%) of the
Premises is sublet a duplicate original of the instrument of assignment or
subletting, as the case may be, shall be sent to Lessor within 10 days after
the effective date thereof.  Any assignee
of this Lease shall assume the obligations of Lessee hereunder and a duplicate
original of such assumption shall be delivered to Lessor together with the
aforesaid duplicate original of the assignment instrument.

 

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

 

Section 4.07.                         Collection
of Rent.  If Lessee’s interest in
this 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 and
Additional Rent from the subtenant, user or occupant.  In either case, no such assignment, sublease
or collection shall affect Lessee’s obligations hereunder, and Lessor shall
apply the net amount collected to the Basic Rent, Additional Rent and other
obligations of Lessee reserved in this Lease in such order as Lessor elects.

 

Section 4.08.                         Affiliate
Transfers.  Notwithstanding anything
to the contrary in this Section 4, Lessee may assign this Lease or sublease the
Premises (or any portion thereof) without Lessor’s consent to any Affiliate of
Lessee or to any person or entity which acquires all of the stock or assets of
Lessee as a going concern; provided that Lessee shall deliver to Lessor, not
later than twenty (20) days after the effective date of such transaction, a true
and complete copy of the instrument -by which such transaction is effected or a
memorandum thereof.  In the event of
assignment of this Lease pursuant to this paragraph the assignee shall be
deemed to have assumed all of the obligations of Lessee under this Lease.  As used herein, “Affiliate of Lessee” shall
mean any corporation or other entity that controls, is controlled by or is
under common 

 

12

 

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

 

ARTICLE V

 

Section 5.01.                         Net Lease.

 

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

 

(b)                                 Except
as 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 the
abatement of any rent or any reduction thereof, nor shall the obligations
hereunder of Lessee be otherwise affected, by reason of any damage to or
destruction of all or any part of the Premises from whatever cause, the taking
of the Premises or any portion thereof by condemnation or otherwise, the
prohibition, limitation or restriction of Lessee’s use of the Premises, or
interference with such use by any private person or corporation, or by reason
of any eviction by paramount title or otherwise, or for any other cause whether
similar or dissimilar to the foregoing, any present or future law to the
contrary notwithstanding, it being the intention of the parties hereto that the
rent and all other charges payable hereunder to or on behalf of Lessor shall
continue to be payable in all events and the obligations of Lessee hereunder
shall continue unaffected, unless the requirement to pay or perform the same
shall be terminated pursuant to an express provision of this Lease.  Nothing contained in this Section shall be deemed
a waiver by Lessee of any rights that it may have to bring a separate action
with respect to any default by Lessor hereunder or under any other agreement.

 

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

 

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

 

13

 

Section 5.02.                         Taxes
and Assessments; Compliance With Law.

 

(a)                                  Lessee
shall pay, prior to any interest, penalty, fine or cost that may be added for
nonpayment: (i) all taxes, assessments, levies, fees, water and sewer rents and
charges and all other governmental charges, general and special, ordinary and
extraordinary, foreseen and unforeseen, which are, at any time prior to or
during the Lease Term hereof, imposed or levied upon or assessed against or
which arise with respect to (A) the Premises, (B) any Basic Rent, Additional
Rent or other sums payable hereunder, (C) this Lease or the leasehold estate
hereby created or (D) the operation, possession or use of the Premises; (ii)
all taxes imposed or levied upon, assessed against or measured by any Basic
Rent, Additional Rent or other sums payable hereunder, specifically excluding,
however, income taxes of Lessor; (iii) all sales, value added, ad valorem, use
and similar taxes at any time levied, assessed or payable on account of the
acquisition, ownership, leasing, operation, possession or use of the Premises;
and (iv) all charges of utilities, communications and similar services serving
the Premises.  Lessee shall not be
required to pay any franchise, estate, inheritance, transfer, income, capital
gains or similar tax of Lessor unless such tax is imposed, levied or assessed
in substitution for any other tax, assessment, charge or levy which Lessee is
required to pay pursuant to this Section; provided, however, that if, of any
time during the Lease Term, the method of taxation shall be such that there
shall be assessed, levied, charged or imposed on Lessor a capital levy or other
tax directly on the rents received therefrom, or upon the value of the Premises
or any present or future improvement or improvements on the Premises, then all
such levies and taxes or the part thereof so measured or based shall be payable
by Lessee, and Lessee shall pay and discharge the same as herein provided.  Lessee will furnish to Lessor, promptly after
demand therefor, proof of payment of all items referred to above which are
payable by Lessee.  If any such
assessment may legally be paid in installments, Lessee may pay such assessment
in installments; in such event, Lessee shall be liable only for installments
which become due and payable with respect to any tax period occurring in whole
or in part during the Lease Term hereof, provided, however, that all amounts
referred to in this Section for the fiscal or tax year in which the Lease Term
shall expire shall be apportioned so that Lessee shall pay those portions
thereof which correspond with the portion of such year as are within the Lease
Term hereby demised.  Lessee shall have
the right to contest taxes assessed against the Premises by appropriate
proceedings in good faith, timely filed, provided that Lessee shall first pay
such taxes or (at its expense) bond over such taxes or (at its expense) take
such other steps as may be required to avoid delinquency or foreclosure of the
lien of such taxes.  Lessor may require
that Lessee post security for payment of such lien.

 

(b)                                 Lessee
shall comply with and cause the Premises to comply with and shall assume all
obligations and liabilities with respect to (i) all laws, ordinances and
regulations and other governmental rules, orders and determinations presently
in effect or hereafter enacted, made or issued, whether or not presently
contemplated (collectively, “Legal Requirements”), applicable to the Premises
or the ownership, operation, use or possession thereof and (ii) all agreements,
contracts, insurance policies (including, without limitation, to the extent
necessary to prevent cancellation thereof and to insure full payment of any
claims made under such policies), agreements, covenants, conditions and
restrictions now or hereafter applicable to the Premises or the ownership,
operation,

 

14

 

use
or possession thereof, including (without limitation) all such Legal
Requirements, contracts, agreements, covenants, conditions and restrictions
that 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 comply
unless Lessee is either a party thereto or has given its written consent
thereto, or unless the same is occasioned by Legal Requirements or Lessee’s
default (including any failure or omission by Lessee) under this Lease.  Nothing in clause (ii) of the immediately
preceding sentence or the following sentence shall modify the obligations of
Lessee under Section 5.07.

 

(c)                                  If
an 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 as
required in Subsection 1.04(a), each month pay .one-twelfth of the amount (as
estimated by Lessor) of the annual taxes and assessments described in
Subsection 5.02(a) and the annual premiums for insurance required in Section
6.04 next becoming due and payable with respect to the Premises, and Lessee
shall also pay to Lessor on demand therefor the amount by which the actual
taxes and assessments and insurance premiums exceed the payment by Lessee
required in this subsection.  In the
event that Lessee shall timely pay any such sums to Lessor or Lessor’s
designee, then Lessor shall cause such sums to be timely paid to the relevant
taxing authority to cover such taxes.

 

Section 5.03.                         Utility
Services.  Lessee agrees to arrange
for, and to pay or cause to be paid all charges for, gas, water, sewer,
electricity, light, heat, power, telephone or other communication service or
other utility or service used, rendered or supplied to, upon or in connection
with the Premises or any portion thereof, throughout the Lease Term, and to
indemnify Lessor and save it harmless against any liability or damages arising
from any interruption, curtailment or stoppage of any such utility or
service.  Lessee shall also, at its sole
cost 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 for
the installation and maintenance upon the Premises of wires, pipes, conduits,
tubes and other equipment and appliances for use in supplying any such utility
service to or upon the Premises.  Lessee
expressly agrees that Lessor is not, nor shall it be, required to furnish to
Lessee or any other occupant of the Premises, during the demised term, any
water, sewer service, gas, heat, electricity, light, power or any other facilities,
equipment, labor, materials or services of any kind whatsoever.

 

Section 5.04.                         No
Adverse Possession.  Lessee shall not
suffer or permit the Premises or any part or parts thereof to be used in such
manner as might reasonably tend to impair Lessor’s title to the Premises or any
portion thereof, or in such manner.  as
might reasonably make possible a claim or claims of adverse usage or adverse
possession, or of implied dedication of the Premises or any portion thereof.

 

Section 5.05.                         Entry
by Lessor.  Lessor, the Fee Mortgagee
and their authorized representatives shall have the right to enter the Premises
or 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 any
environmental inspection) or, after the occurrence of an Event of Default by
Lessee in completing any alterations or repairs required hereunder, for the
purpose of doing any work, and 

 

15

 

may take all such action
thereon as may be necessary or appropriate for any such purpose (but nothing
contained in this Lease or otherwise shall create or imply any duty upon the
part of Lessor to make any such inspection or do any such work), and (b) for
the purpose of showing the Premises to prospective purchasers and mortgagees
and, within 12 months prior to the expiration of the Lease Term, for the
purpose of showing the same to prospective lessees.  No such entry shall constitute an eviction of
Lessee.

 

Section 5.06.                         Liens.  Lessee will remove and discharge any charge,
lien, security interest or encumbrance upon the Premises or upon any Basic
Rent, Additional Rent or other sums payable hereunder which arises for any
reason, including (without limitation) all liens which arise out of the
possession, use, occupancy, construction, repair or rebuilding of the Premises
or by reason of labor or materials furnished or claimed to have been furnished to
Lessee or for the Premises, but not including (a) the liens and encumbrances
set forth in Schedule C, (b) this Lease and any assignment hereof or any
sublease permitted hereunder and (c) any mortgage, charge, lien, security
interest or encumbrance created or caused by Lessor or its agents, employees or
representatives without the consent of Lessee. 
Lessee may provide a bond or other security acceptable to Lessor to
remove or pay all costs associated with the removal of any such lien.  Nothing contained in this Lease shall be
construed 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 any
contractor, laborer, materialman or vendor, of any labor or services or for the
furnishing of any materials for any construction, alteration, addition, repair
or demolition of or to the Premises or any part thereof.  Notice is hereby given that Lessor will not
be liable for any labor, services or materials furnished or to be furnished to
Lessee, or to anyone holding an interest in the Premises or any part thereof
through or under Lessee, and that no mechanic’s or other liens for any such
labor, services or materials shall attach to or affect the interest of Lessor
in and to the Premises.  Lessee shall
have the right to contest any such lien, by appropriate proceedings in good
faith, timely filed, provided, however, that Lessee shall bond over such lien
or otherwise take such steps (at its expense) as may be required in order to
avoid 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 and
save harmless Lessor, its agents and employees and the Fee Mortgagee, from and
against any and all liabilities, obligations, damages, losses, penalties,
claims, causes of action, costs, charges and/or expenses (excluding
consequential 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 Mortgagee
by reason of (a) any accident, injury to any person (including death) or damage
to property occurring on or about the Premises from all causes whatsoever
(except to the extent caused by any act of sole negligence or willful
misconduct of Lessor or Fee Mortgagee), (b) any loss arising out of any work
performed on Premises by Lessee or any agent, employee or contractor of Lessee
or by any assignee or sublessee of Lessee or any agent, employee or contractor
of any such assignee or sublessee, (c) any default on the part of Lessee to
perform or comply with any term of this Lease, (d) any claim for the
performance of labor or the furnishing of materials or other property at Lessee’s
request or at the request of anyone claiming under Lessee or performed by
Lessor in respect of the Premises or any part thereof, (e) any action or
proceeding pertaining to the Premises to which Lessor, its agents or employees
or the Fee Mortgagee is made a party or in which it becomes necessary in the
judgment of Lessor to defend 

 

16

 

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

 

Section 5.08.                         Environmental
Compliance.

 

(a)                                  Lessee’s Representations. 
As a material inducement for Lessor to enter into this Lease, Lessee
represents 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 (by
Lessee and others) of Hazardous Materials (as defined below) and (B) no part of
the Premises will be used by Lessee or others to generate, manufacture, refine,
transport, treat, store, handle, dispose of, transfer, produce or process
Hazardous 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 to
pollution (by petroleum or petroleum products, or otherwise) of the Premises in
whole or in part or any other property.  “Hazardous
Materials” shall mean all materials which because of their quantity,
concentration or physical, chemical or infectious characteristics may cause or
pose a present or potential hazard to human health or the environment when
improperly handled, treated, stored, transported, disposed of or otherwise
managed.  The term shall include (without
limitation) all petroleum, petroleum products, explosives, - radioactive
materials, hazardous wastes, hazardous or toxic substances, any material
containing 1% or more asbestos by weight or any other substance or material now
or hereafter defined as a “hazardous” or “toxic” substance, material or product
by the U.S.  Environmental Protection
Agency or the state in which the Premises is located under the Comprehensive
Environmental Response, Compensation and Liability Act (CERCLA), the Resource
Conservation and Recovery Act (RCRA), the Toxic Substances Control Act (TSCA),
the Federal Water Pollution Control Act (FWPCA) or comparable state statutes
and other Environmental Requirements (as defined below).  Lessee shall comply fully with all
Environmental Requirements.  “Environmental
Requirements” shall mean all applicable laws pertaining to the protection of
human health and the environment, including (without limitation) employee and
community right-to-know laws and all laws regarding the use, generation,
storage, transportation, treatment, disposal or other handling of Hazardous
Materials...  The only Hazardous
Materials permitted on the Premises are cleaning products and pharmaceutical
products, chemicals and solvents used in connection with the manufacturing,
testing, storage and distribution of Lessee’s pharmaceutical products, and
other materials in ordinary quantities which are used in the ordinary course of
business and necessary for the conduct of the Permitted Uses and which Lessee
uses 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 be
contaminating the Premises (or if a party has reasonable cause to believe that
such dumping, releasing, discharge, spilling or leak may have occurred or that
such 

 

17

 

Hazardous
Materials may be contaminating the Premises), the party will notify the other
party in writing (except in cases of an emergency as described in Section 5.05
in which event the party shall have the right to take action without such
notice as provided therein) as to the matter in question.  In such event or at any other time as may be
requested by Lessor, the parties will cooperate in having reasonable examinations,
tests or investigations performed at Lessee’s expense to determine the extent
of the problem and nature of appropriate corrective action (or if Lessee fails
to cause such examinations or investigations to be performed after notice of
the required action Lessor will have the right to perform them on Lessee’s
behalf and at Lessee’s expense).  If such
examinations demonstrate that the Premises is contaminated by Hazardous
Materials at levels requiring remedial action under applicable laws, Lessee
will have 30 days (or such longer time as may be reasonably necessary under the
circumstances or such lesser time as may be required by emergency conditions,
by law, regulation or judicial order, or by any governmental entity, whichever
is sooner) after written notice from Lessor to eliminate same and (to the
extent necessary) to restore the Premises to prior condition but with new
non-Hazardous Materials, failing which Lessor may either terminate this Lease
on written notice to Lessee or take all action deemed desirable by Lessor to
effect such elimination and (to the extent necessary) restoration.  If Lessor elects the latter, upon request and
as Additional Rent, Lessor will be entitled to receive from Lessee all
reasonable costs and expenses in any way associated therewith, plus interest at
the 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, and
any Fee Mortgagee from, against and for any and all damages, claims, demands,
liabilities, losses, penalties and expenses (excluding consequential damages
but 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 any
Hazardous Materials on or about the Premises or the failure of Lessee or any
subtenant, agent, employee or contractor of Lessee or the Premises to comply
with any Environmental Requirements, whether or not the same are known to or
caused by Lessee and whether the same occur during the term of this Lease, any
time prior to the term of this Lease or, with respect to any occurrence or
condition on or about the Premises which is caused by any condition, act or
omission prior to the expiration of this Lease, after the term of the
Lease.  This indemnity shall survive the
termination, expiration or forfeiture of this Lease.  Notwithstanding the foregoing, such
indemnities shall not be deemed to cover any acts or omissions which occurred
prior to January 1, 1989, or which first occur after the expiration or earlier
termination of the Lease Term.

 

(d)                                 Lessor’s Cooperation and Acknowledgment.  Unless an Event of Default shall exist
hereunder or Lessee shall not be diligently performing its obligations under
subsections (b) and (c) above, Lessor agrees to cooperate with Lessee in
connection with (i) any claim Lessor and/or Lessee may have against any third
party for the cost of any remediation conducted or to be conducted on, in and
under the Premises or with respect to any damage caused to the Premises, and
(ii) any insurance covering such remediation and/or damage to the
Premises.  Lessor hereby assigns to
Lessee any 

 

18

 

and
all rights, claims or causes of action Lessor may have with against such third
party or in connection with such insurance to the extent of any sums paid by
Lessee in fulfillment of its obligations under subsections (b) and (c) above
except to the extent that such rights, claims, causes of action or insurance
proceeds are necessary to fully compensate Lessor with respect to any such
remediation or damage to the Premises. 
Lessee agrees to pay all Lessor’s out-of-pocket costs incurred by Lessor
in connection with such cooperation by Lessor in connection with a claim made
by or against Lessee.  Lessor
acknowledges that Lessee’s operations in the Premises involve the
manufacturing, testing, storage and distribution of pharmaceutical products and
use of chemicals and solvents in connection with the manufacturing, testing,
storage and distribution of such products; provided, however, that such
acknowledgment 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 or
insurance payment to which Lessee may become entitled by reason of Lessee’s
interest in the Premises (a) if the use, occupancy or title of the Premises or
any part thereof is taken, requisitioned or sold in, by or on account of any
actual or threatened eminent domain proceeding or other action by any person
having the power of eminent domain (“Condemnation”) or (b) if the Premises or
any part thereof is damaged or destroyed by fire, flood or other casualty,
including (without limitation) vandalism (“Casualty”).  All awards, compensations, damages and
insurance payments on account of any Condemnation or Casualty are herein
collectively called “Compensation.” Lessor may appear in any such proceeding or
action to negotiate, prosecute and adjust any claim for any Compensation, and
Lessor shall collect any such Compensation. 
Lessee shall pay all of Lessor’s reasonable costs and expenses in
connection with each such proceeding, action, negotiation, prosecution and
adjustment.  Lessee shall be entitled to
participate in any such proceeding, action, negotiation, prosecution, appeal or
adjustment as contemplated herein. 
Notwithstanding anything to the contrary contained in this Article VI,
if permissible under applicable law, any separate Compensation made to Lessee
for its moving and relocation expenses, anticipated loss of business profits,
loss of goodwill or fixtures and equipment paid for by Lessee and which are not
part of the Premises (including, without limitation, Lessee’s Equipment) shall
be paid directly to and shall be retained by Lessee (and shall not be deemed to
be Compensation).  .  All Compensation shall be applied pursuant to
this Article VI, and all such Compensation (less the expense of collecting such
Compensation) may be called the “Net Proceeds.”

 

Section 6.02.                         Casualty.

 

(a)                                  Payment of Proceeds.

 

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

 

19

 

(ii)                                  In
case of any Casualty to the Premises or any part thereof where the insurance
proceeds to be collected exceed the Casualty Proceeds Threshold, the proceeds
of any such insurance shall be paid to a depository (the “Depository”) chosen
by Lessor or, if there is a Fee Mortgagee, by the Fee Mortgagee, to be
disbursed in accordance with Section 6.02(e) below, and will be adjusted by
Lessee with the reasonable approval of Lessor or, if there is a Fee Mortgagee,
the Fee Mortgagee.  Lessor or the Fee
Mortgagee may be the Depository.

 

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

 

(c)                                  Prompt Performance. 
Restoration of the Premises under this Section 6.02 shall be performed
in accordance with Section 2.04(b) hereof. 
If the work of repairing, replacing or rebuilding said damaged or
destroyed Premises or portion thereof shall not have been commenced promptly
following the receipt of all required approvals of Lessee’s plans and
specifications, or having been commenced, shall not be expeditiously
proceeding, Lessor shall have all rights under this Lease in respect of a
default by Lessee subject, however, to force majeure.

 

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

 

(e)                                  Substantial Casualty; Proceeds Held by Depository.  If the insurance proceeds to be collected
following a Casualty exceed the Casualty Proceeds Threshold (a “Substantial
Casualty”), then Lessee shall promptly notify Lessor.  and the Fee Mortgagee in writing of such
Casualty.  In case of any Substantial
Casualty, the proceeds of insurance (excluding, however, proceeds payable or on
account of Lessee’s Equipment) will be paid directly to the Depository and
remitted by the Depository to Lessee or to the persons designated by Lessee for
the costs of labor and materials as the work of repair, replacement and/or
restoration progresses upon Lessee’s request and against:

 

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

 

20

 

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

 

(ii)                                  lien
waivers 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 the
Premises or any part thereof any construction, mechanics’, laborers’,
materialmen’s or other like lien which has not been discharged of record except
such as will be discharged by payment of the amount requested or contested by
appropriate legal action by Lessee in accordance with Section 5.06.  In the event the insurance proceeds exceed
the cost of restoration work, such excess shall be paid equally to the Lessee
and the Lessor or the Fee Mortgagee, as applicable.

 

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

 

(f)                                    Requirements of Fee Mortgagee.  Subject to Section 9.06 hereof, in the event
the Fee Mortgagee requires changes to this Lease with respect to the amounts or
types of insurance coverages, the duties for repair or restoration, the
handling of proceeds, the application of casualty or condemnation proceeds to the
restoration of the Premises or to the indebtedness secured by the Fee Mortgage
or other matters, Lessee will cooperate in executing any clarification or
amendment of this Lease required by the Fee Mortgagee as a condition to
providing financing to Lessor.

 

Section 6.03.                         Condemnation.

 

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

 

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

 

21

 

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

 

(c)                                  Award on Substantial Condemnation.  In the event of a termination of this Lease
by reason of a Substantial Condemnation, the whole of any Compensation for the
Premises shall be paid solely to Lessor, who shall be entitled to keep said
award, including consequential and other damages and compensation of any sort
for such Substantial Condemnation, without deduction therefrom for any
leasehold or other interest in the Premises owned by Lessee, and in no event
shall Lessee be entitled to any part of the Compensation for the Premises.  Lessee agrees to execute any documents that
may be required to facilitate collection by Lessor of any Compensation for the
Premises.  The foregoing shall not be
construed to negate any right which Lessee might have to compensation for a
taking of Lessee’s personal property (not including, however, the leasehold
estate created hereby) or Lessee’s Equipment, for business interruption, or for
moving expenses.

 

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

 

(i)                                     The
annual Basic Rent under this Lease, commencing on the date that title shall
vest by reason of such taking (the “Vesting Date”), shall be reduced by an
amount which bears the same proportion to the Basic Rent payable immediately
prior to such taking as the then fair market rental value of the part of the
Premises so taken shall bear to the then fair market rental value of the whole
of the Premises immediately prior to such taking.

 

(ii)                                  Lessor
shall be entitled to and shall receive and retain the Compensation payable in
respect of the portion of the Premises so taken, subject to the provisions of
subdivision (iii) below.

 

(iii)                               Promptly
after such taking Lessee shall at Lessee’s expense, whether or not there are
condemnation proceeds available or sufficient for the purpose (and provided
that, if no Event of Default shall have occurred and be continuing hereunder,
Lessor makes available to Lessee the Net Proceeds of the award), restore that
part of the Premises which remains to as nearly its former condition as
circumstances will permit.  The award
with respect to any Improvements shall be payable to the Depository for
disbursement subject to the provisions of Section 6.02(e).  Subject to the same provisions and
limitations set forth for payments in Section 6.02(e), Lessee shall receive
advances from said award for the payment of the costs of labor and materials as
the restoration and construction progresses. 
Any balance remaining after payment of all such costs of labor and
materials shall be paid to Lessor.

 

22

 

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

 

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

 

Section 6.04.                         Required
Insurance Coverage.  During the Lease
Term, Lessee shall, at Lessee’s sole cost and expense, secure and keep the
following 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 a
replacement cost basis, in an amount sufficient to avoid application of any
co-insurance clause and with an “agreed amount” endorsement voiding
coinsurance, including a full “replacement cost” endorsement together with
appropriate “demolition and increased costs of construction” endorsements.  Lessee shall be responsible for determining
the applicability of “demolition and increased costs of construction” endorsements.  Lessor reserves the right to reasonably
disapprove any exclusions from the “all-risk” coverage furnished
hereunder.  If Lessee elects to provide
blanket “all-risk” coverage over locations in addition to the Premises, Lessor
reserves the right to require a specific endorsement or endorsements from the
insurance companies affording such coverage evidencing coverage over the
Premises in a sufficient amount to provide recovery on a replacement cost
basis.  Lessee’s coverage may provide for
reasonable self-insured retentions.

 

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

 

(c)                                  Business
interruption/loss of rents insurance covering all risks referenced in Section
6.04(a) for the benefit of Lessor, Lessee and, if Lessor so directs, for the
benefit of the Fee Mortgagee, as their interests may appear, covering risk of
loss during the lesser of the first 12 months of reconstruction or the actual
reconstruction period necessitated by the occurrence of any of the covered
hazards, in such amounts as may be customary for comparable properties in the
area and in an amount sufficient to prevent Lessor or Lessee from becoming a
co-insurer.  Lessee’s obligation for
payment of rent 

 

23

 

shall
be reduced dollar for dollar by the amount of rent insurance received by Lessor
or Fee Mortgagee.

 

(d)                                 Boiler
and machinery coverage covering loss or damage, on a replacement cost basis,
from explosion of any steam and pressure boilers, hot water heaters, and
similar apparatus located in, on or about the Premises with limits of not less
than the replacement cost of the Improvements. 
In the event coverage hereunder is afforded by more than one insurance
company, all such companies shall furnish a joint loss endorsement to the
policies 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 as
designated by any department or agency of the United States Government having
jurisdiction) and such other hazards and in such amounts as may be customary
for comparable properties in the area, provided the same is available at rates
which are economically practical in relation to the risks covered, as
determined by Lessee and reasonably approved by Lessor.

 

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

 

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

 

(h)                                 Without
limiting the generality of the foregoing, during the Lease Term, Lessee shall,
at Lessee’s sole cost and expense, secure and keep the insurance coverages as
required in Schedule D hereto in full force and effect.

 

Section 6.05.                         Separate
Insurance Coverages.  Without the
prior written consent of Lessor (which shall not be unreasonably withheld or
delayed), Lessee shall not obtain or carry separate insurance concurrent in
form or contributing in the event of loss with that required by Section 6.04 to
be furnished by Lessee unless Lessor and Lessee are included therein as
additional named insureds, with loss payable as in this Lease except with
respect to insurance covering Lessee’s Equipment and other personal property in
the Premises and except with respect to business interruption insurance (provided,
however, that as to loss of rents coverage Lessor shall be named as the loss
payee).  Except with respect to such
coverage, Lessee shall promptly notify Lessor whenever any such separate
insurance is obtained and shall deliver to Lessor certificates evidencing the
same.

 

24

 

Section 6.06.                         Compliance
With Insurance Requirements.  Lessee
shall not violate or permit to be violated any of the conditions or provisions
of any of the insurance policies, and Lessee shall so perform and satisfy the
requirements of the companies writing such policies.  Lessee further agrees to reasonably cooperate
with Lessor as and when requested to comply with loss prevention programs.

 

Section 6.07.                         Additional
Coverages.  On reasonable demand of
Lessor or the Fee Mortgagee, Lessee shall provide such other forms of insurance
in such amounts, and/or the foregoing insurance in such additional amounts as
the parties may from time to time approve, as are customarily furnished by Lessees
under comparable leases in the case of property similar in use to the Premises
and located in the area in which the Premises is situated, provided the same is
available at rates which are economically practical in relation to the risk
covered.  Without limiting the generality
of the foregoing, if Lessor is or becomes the Fee Mortgagee with respect to the
Premises, then Lessee shall be required to maintain insurance meeting the
requirements specified in Schedule E hereto and such other requirements as Lessor
may specify.

 

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

 

Section 6.09.                         Companies
and Form of Policies.  All policies
of insurance procured by Lessee shall be issued by insurance companies licensed
to do business in the State in which the Premises are located and authorized to
issue such policy or policies.  All
policies shall be in a form and with companies reasonably acceptable to Lessor
and may be part of blanket coverage relating to various properties operated by
Lessee.

 

Section 6.10.                         Handling
of Proceeds by Lessee.  Insurance
proceeds which are payable to Lessee alone in. 
accordance with the provisions of Section 6.02(a)(i) shall be held by
Lessee 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 be
necessary to protect the Premises against further damage and for no other
purpose.  If the proceeds of insurance
payable 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.                         Handling
of Proceeds by Depository.  The
Compensation payable to the Depository in accordance with the provisions of
this Lease shall be held in trust for the purpose of paying for the cost of the
work required to be performed by Lessee under Sections 6.02 and 6.03 and the
cost of making repairs, alterations and improvements to the Premises and doing
such work as may be necessary to protect the Premises against further injury
and shall be disbursed as provided in Section 6.02(e).  The Depository shall be entitled to
reasonable compensation payable out of such funds.  If the insurance proceeds held by the Depository
shall exceed such cost, such excess shall belong to and be paid over to the
Lessor upon the completion of and payment for such work.

 

25

 

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

 

Section 6.13.                         Procurement
by Lessor.  If premiums on any
insurance policy shall not be paid or if the memoranda of policies or
certificates or evidence of payment of the premiums thereon shall not be so
delivered to Lessor as required herein, or if Lessor learns of any cancellation
of any policy required hereunder, Lessor may procure and/or pay for any such
insurance for Lessor’s benefit only and not for the benefit of Lessee, with or
without notice to Lessee.  Lessee may
restore such coverage effective one year after the effective date of the
insurance procured by Lessor provided Lessee furnishes evidence of such
coverage and payment therefor at least 60 days prior to the expiration of said
one-year policy in the form required by Section 6.04.  The amount so paid by Lessor with interest
thereon at the interest rate specified in Section 7.02(k) hereof from the date
of payment shall become due and payable by Lessee as Additional Rent with the
next or any subsequent installment of Basic Rent which shall become due after
such payment by Lessor, it being expressly covenanted that payment by Lessor of
any such premium shall not be deemed to waive or release the default in the
payment thereof by Lessee, or the right of Lessor to take such action as may be
permissible hereunder as in the case of default in the payment of Basic Rent.

 

ARTICLE VII

 

Section 7.01.                         Events
of Default.  Lessee shall be in
default under this Lease if any one or more of the following events (referred
to herein as “Events of Default” or “Event of Default”) shall occur:

 

(a)                                  if
default shall be made in the procurement or maintenance of any insurance
required under this Lease; or

 

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

 

(c)                                  if
default shall be made in the payment of any other sum payable under this Lease
and such default shall continue for ten days after Lessor gives Lessee written
notice of nonpayment; or

 

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

 

26

 

(e)                                  if
Lessee or any guarantor of Lessee’s obligations under this Lease (each, if any,
a “Guarantor”) shall file a voluntary petition in bankruptcy or shall be
adjudicated a bankrupt or insolvent, or shall file any petition or answer
seeking any reorganization, arrangement, composition or readjustment, or
similar relief for itself under any present or future federal, state or other
statute, law or regulation, or shall seek or consent to or acquiesce in the
appointment of any trustee, receiver or liquidator of itself or of all or any
substantial part of its or of the property, or shall take any general
assignment for the benefit of creditors or shall admit in writing its inability
to pay debts generally as they become due; or

 

(f)                                    if
a petition shall be filed against Lessee or any Guarantor seeking any
reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future federal, state or
other statute, law or regulation, and shall remain undismissed or unstayed for
a 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 any
substantial part of any of its property, shall be appointed without its consent
or acquiescence and such appointment shall remain unvacated or unstayed for a
period of 30 days; or

 

(g)                                 if
Lessee shall vacate or abandon the Premises; provided, however, a failure to
occupy the Premises shall not constitute a default hereunder so long as Lessee
shall pay rent and all other amounts when due and perform all other obligations
hereunder; or

 

(h)                                 if
this Lease or the estate of Lessee hereunder shall be transferred to or shall
pass to or devolve upon any other person except in a manner expressly permitted
herein.

 

Section 7.02.                         Remedies
Upon 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 no
liability to Lessee for any action in accordance with applicable law, may
repossess the Premises by any means provided by law, including (without
limitation) summary or eviction proceedings, ejectment or otherwise, and may
remove Lessee and all other persons and any and all property from the
same.  At any time or from time to time
thereafter, Lessor may (but shall be under no obligation to) relet the Premises
or any part thereof for the account of Lessee, in the name of Lessee or Lessor
or otherwise, without notice to Lessee, for such term or terms (which may be
greater or less than the period which would otherwise have constituted the
balance of the term of this Lease) and on such conditions (which may include
concessions or free rent) and for such purposes as Lessor in its reasonable
discretion may determine, and may collect and receive the rents therefor.  Lessor shall not be liable for any failure to
collect any rent due upon any such reletting.

 

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

 

27

 

obligations
under this Lease, all of which shall survive any such expiration or sooner
termination.  In the event of any such
expiration or sooner termination, Lessee will pay to Lessor the Basic Rent and
all Additional Rent and other sums required to be paid by Lessee up to the time
of such expiration or sooner termination, and thereafter Lessee, until the end
of what would have been the term of this Lease in the absence of such
expiration or sooner termination, and whether or not the Premises or any part
thereof shall have been relet, shall be liable to Lessor for, and shall pay to
Lessor, 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 payable
thereafter under this Lease by Lessee, less the net proceeds, if any, of any
reletting effected for the account of Lessee pursuant to Section 7.02(a) during
the period which would otherwise have constituted the balance of the term of this
Lease, after deducting all of Lessor’s reasonable expenses in connection with
such reletting, including (without limitation) all repossession costs,
brokerage commissions, attorneys’ fees, expenses of employees, costs incurred
in alterations to the Improvements required in connection with the reletting of
the Premises for use by another lessee and expenses of preparation for such
reletting.  Lessee will pay such amounts
to Lessor monthly on the days on which such Basic Rent, Additional Rent and all
other sums would have been payable under this Lease, and Lessor shall be
entitled 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 as
provided herein or pursuant to law, whether or not Lessor shall have recovered
any amounts under Section 7.02(b), Lessor shall be entitled to recover from
Lessee and Lessee shall pay to Lessor, on demand, as and for liquidated and
agreed final damages for Lessee’s default, an amount equal to the sum of the
following, as of the date of such payment by Lessee:

 

(i)                                     the
worth of the unpaid Basic Rent and Additional Rent and other sums due and
payable which had been earned at the time of such expiration or sooner
termination; plus

 

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

 

(iii)                               the
worth of the unpaid Basic Rent and Additional Rent and other sums due and
payable for the balance of the Lease Term or, if termination occurs during an
Extension Period, such Extension Period, after deducting from such unpaid
amounts any (if any) portion thereof that Lessee proves can be reasonably
avoided; plus

 

(iv)                              any
other amount which is necessary to compensate Lessor for all the detriment
proximately caused by Lessee’s failure to perform Lessee’s obligations under
this Lease or which would be likely to result therefrom, including (without
limitation) any costs or expense incurred by Lessor: (A) in 

 

28

 

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

 

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

 

(d)                                 Receiver.  Lessor may
have a receiver appointed for Lessee to take possession of the Premises and to
apply any rent collected from the Premises and to exercise all other rights and
remedies 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 send
written notice to Lessee to remove all of Lessee’s Equipment and property from
the Premises.  If Lessee shall fail to
remove such Equipment and property within ten business days after receipt of
such notice from Lessor, then Lessor may remove such Equipment and property
from the Premises and arrange for storage of such Equipment and property at
another location, all at the sole cost and expense of Lessee.  In the event of any such removal of Lessee’s
Equipment and other property from the Premises by Lessor, Lessee waives any and
all claims against Lessor regarding the removal and storage of its Equipment
and property including, without limitation, the manner of removal, cost of
removal, location of storage, cost of storage and damage to or missing
Equipment and property.

 

(f)                                    Bankruptcy or Insolvency.

 

(i)                                     If
Lessee shall become a debtor in a case filed under Chapter 7 or Chapter 11 of
the Bankruptcy Code and Lessee or Lessee’s trustee shall fail to elect to
assume this Lease within 60 days after the filing of such petition or such
additional time as provided by the court, this Lease shall be deemed to have
been rejected.  Immediately thereupon,
Lessor shall be entitled to possession of the Premises without further
obligation to Lessee or Lessee’s trustee, and this Lease, upon the election of
Lessor, shall terminate, but Lessor’s right to be compensated for damages
(including, without limitation, liquidated damages pursuant to any provision
hereof) or the exercise of any other remedies in any such proceeding shall
survive, whether or not this Lease shall be terminated.

 

(ii)                                  An
assumption of this Lease in accordance with Section 7.02(f)(i) shall not limit
Lessor’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, 

 

29

 

Lessee
is liquidated or files or has filed against it a subsequent petition under
Chapter 7 or Chapter 11 of the Bankruptcy Code.

 

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

 

(iv)                              Neither
the whole nor any portion of Lessee’s interest in this Lease or its estate in
the Premises shall pass to any trustee, receiver, assignee for the benefit of
creditors or any other person or entity, by operation of law or otherwise under
the 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 other
payments from any such trustee, receiver, assignee, person or other entity
shall be deemed to constitute such consent by Lessor nor shall it be deemed a
waiver of Lessor’s right to terminate this Lease for any transfer of Lessee’s
interest under this Lease without such consent.

 

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

 

(h)                                 Remedies Cumulative, Etc. 
Each right, power and remedy provided for in this Lease or now or
hereafter existing at law or in equity or by statute or otherwise shall be
cumulative and concurrent and shall be in addition to every other right, power
or remedy provided for in this Lease or now or hereafter existing at law or in
equity or by statute or otherwise, and the exercise or beginning of the
exercise of any one or more of the rights, powers or remedies provided for in
this Lease or now or hereafter existing in law or in equity or by statute or
otherwise shall not preclude the simultaneous or later exercise of any or all
other such rights, powers or remedies. 
The collection of any late payment charge or any interest at the Default
Rate shall not be deemed an election of remedies or in lieu of any other
remedies or damages.  Lessor shall have
the right to specifically enforce this Lease and to enjoin any default or
prospective or anticipated default hereunder.

 

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

 

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

 

30

 

(and
any payment made to Lessor rather than Lessee due to the existence of an Event
of Default) shall be applied to Lessee’s obligations in such order as Lessor
may determine or, if prescribed by the laws of the State, in accordance with
such laws.

 

(k)                                  Late Interest.  If
Lessee shall fail to make any payment of any sums required by this Lease within
ten 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 higher
than and varying daily with the highest prime rate then being quoted from time
to time by the Wall Street Journal, as an interest index for loans to its
commercial customers (the “Default Rate”), computed from the date such payment
was due to and including the date of payment in full.  If the Wall Street Journal ceases to quote
such rate, Lessor shall have the right to substitute a reasonably comparable
index for such prime rate.

 

(l)                                     No Usury.  The intention
of 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 Lessor
of interest at a rate in excess of the legal rate permitted to be charged, such
rate herein provided to be paid shall be deemed reduced to such legal rate.

 

ARTICLE VIII

 

Section 8.01.                         Lessee’s
Notices and Remedies.  In the event
Lessor fails to perform its responsibilities pursuant to this Lease, Lessee’s
notice as to Lessor’s nonperformance will be sent simultaneously to Lessor and
the Fee Mortgagee.  Lessor will be in
default under this Lease if Lessor fails to cause such responsibilities to be
fully performed within 30 days after written notice by Lessee to Lessor
specifying the nature of the default with reasonable particularity.  If the default is of such a nature that it
cannot be remedied fully within the 30-day period, this requirement shall be
satisfied if Lessor begins correction of the default within the 30-day period
and thereafter proceeds with reasonable diligence and in good faith to effect
the remedy as soon as reasonably practicable. 
Lessee shall not have the right to terminate this Lease as a result of
Lessor’s default.  In the event of such
default, Lessee shall have all remedies available under law for breach of
contract, including (without limitation) the right of specific
performance.  In addition, Lessee may
elect in its discretion to perform the required action or take corrective
action reasonably required to cure the default if it pertains to the Premises,
in which event Lessor shall reimburse Lessee for the reasonable out-of-pocket
costs of such action, together with reasonable and necessary costs and
disbursements and interest, and such amounts may be deducted from the rent thereafter
to become due under this Lease, after at least 20 days’ written notice to
Lessor (and the Fee Mortgagee) as to the costs so incurred.

 

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

 

31

 

ARTICLE IX

 

Section 9.01.                         Subordination
and Nondisturbance.  This Lease and
all rights of Lessee under this Lease are, and shall at the option of Lessor
remain, subject and subordinate in all respects to the Fee Mortgage and to all
advances made or hereafter to be made under any such mortgage, and to all
renewals, modifications, consolidations, correlations, replacements and
extensions of, and substitutions for, the Fee Mortgage, provided that the Fee
Mortgagee shall execute and deliver to Lessee a nondisturbance and attornment
agreement in form and substance approved by the Fee Mortgagee and reasonably
acceptable to Lessee which provides in substance that (a) if Lessor defaults
under its mortgage, the Fee Mortgagee will not disturb the occupancy of Lessee
and this Lease shall remain in full force and effect in accordance with its
terms, provided that no Event of Default has occurred and is continuing (in the
event of any such Event of Default, the Fee Mortgagee shall have such rights
and 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 and
the Lease shall continue as a direct lease between such Fee Mortgagee and
Lessee.  The provisions of this Section
shall be self-operative.  Lessee shall also
provide to the Fee Mortgagee any and all other assurances or instruments the
Fee Mortgagee may reasonably request to evidence and confirm such
provisions.  All such agreements shall be
in form suitable for recording.

 

Section 9.02.                         Election
Not To Subordinate.  Notwithstanding
the provisions of Section 9.01, the holder of any mortgage to which this Lease
is subject and subordinate, as provided in said Section 9.01, shall have the
right, 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 to
such effect.

 

Section 9.03.                         Attornment.  At any time prior to the expiration of the
Lease Term, Lessee agrees, at the election and upon demand of any owner of the
Premises, or of the Fee Mortgagee, to attorn, from time to time, to any such
owner 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 any
renewal term, provided that such owner or holder, as the case may be, shall
then be entitled to possession of the Premises subject to the provisions of
this Lease.  The provisions of this
Section shall inure to the benefit of any such owner or holder, shall apply
notwithstanding that, as a matter of law, this Lease may terminate upon the
foreclosure of any such mortgage, shall be self-operative upon any such demand,
and no further instrument shall be required to give effect to said
provisions.  Lessee, however, upon demand
of any such owner or holder agrees to execute, from time to time, instruments
in confirmation of the foregoing provisions of this Section, satisfactory to
any such owner or holder acknowledging such attornment and setting forth the
terms and conditions of its tenancy. 
Nothing contained in this Section shall be construed to impair any right
otherwise exercisable by any such owner or holder.

 

Section 9.04.                         Limitations
on Lessee.  Lessee agrees that, if
requested by Lessor or the Fee Mortgagee, Lessee shall enter into an agreement
with the Fee Mortgagee whereby Lessee shall agree for the benefit of such Fee
Mortgagee that Lessee will not, without in each case the prior written consent
of such Fee Mortgagee, (a) amend, modify, cancel or surrender the term of this
Lease except as expressly permitted by the provisions of this Lease, or enter
into any 

 

32

 

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

 

Section 9.05.                         No
Merger of Fee and Leasehold Estates. 
There shall be no merger of this Lease nor of the leasehold estate
created by this Lease with the fee estate in the Premises or any part thereof
by reason of the fact that the same person, firm or corporation or other entity
may acquire or own such estates directly or indirectly; and no such merger
shall occur until all persons, firms, corporations and other entitled,
including the Fee Mortgagee, having any interest in this Lease and the
leasehold estate created hereby and the fee estate in the Premises or any party
thereof shall join in a written instrument effecting such merger and shall duly
record it.

 

Section 9.06.                         Changes
to Lease Required by Fee Mortgagee. 
In the event the Fee Mortgagee shall require reasonable modifications of
this Lease which do not materially increase the obligation of Lessee hereunder
or interfere with or diminish Lessee’s rights, Lessee agrees to execute such
modification(s) upon request of Lessor.

 

ARTICLE X

 

Section 10.01.                  Estoppel
Certificate.  Upon request, either
party will, without charge, execute, acknowledge and deliver to the other
party, within 15 days after request therefor, a certificate certifying (a) that
this Lease is unmodified and in full force and effect (or, if there have been
modifications, that this Lease is in full force and effect as modified and
stating the modifications), (b) the date, if any, to which the Basic Rent has
been paid, (c) whether or not there are, to the knowledge of the party, then
existing 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 to
the facts stated therein by any actual or prospective mortgagee or purchaser of
the Premises from Lessor or any actual or prospective sublessee or assignee of
Lessee’s interest in this Lease in connection with one of the transactions
permitted or approved under.  Article IV.

 

Section 10.02.                  Financial
Information.  Upon the request of
Lessor from time to time, and upon Lessee’s receipt of a confidentiality
agreement reasonably acceptable to Lessee, Lessee shall furnish to Lessor a
copy of Lessee’s balance sheet and profit and loss statement, which shall be
prepared in accordance with generally accepted accounting principles and
practices consistently applied and accompanied by the annual audit report of an
independent certified public accountant reasonably acceptable to Lessor.  The foregoing notwithstanding, Lessee’s
obligation to provide the foregoing financial information will only apply in
the event that Lessee is not a publicly traded company subject to the financial
reporting requirements of the Securities and Exchange Commission, and Lessor is
not able to obtain such financial information by other means.

 

ARTICLE XI

 

Section 11.01.                  Quiet
Enjoyment.  So long as no Event of
Default has occurred and is continuing hereunder, Lessor covenants that Lessee
shall, subject to the terms of this Lease, lawfully, peaceably and quietly
hold, occupy, possess and enjoy the Premises during the term of 

 

33

 

this Lease, without
hindrance or molestation by Lessor or others claiming through Lessor, subject,
however, to the terms of this Lease.

 

ARTICLE XII

 

Section 12.01.                  Lessor’s
Reversionary Interest; Surrender of Premises.  Upon expiration or termination of this Lease,
Lessor shall, at no charge to Lessor, become the owner of, and have the
reversionary interest in, all of the Improvements.  Lessee shall surrender the Premises to Lessor
in good repair, operating condition, working order and appearance, subject to
reasonable wear and tear and (to the extent provided herein for termination
after casualty) damage by fire and other casualty.  All repairs for which Lessee is responsible
will be completed to the latest practical date prior to such surrender.  If this Lease is terminated in connection
with a Casualty, Lessee will assign to Lessor the entire insurance proceeds
pertaining to the Premises that revert to Lessor.  Lessee shall promptly remove all of its own
signs, inventory, Lessee’s Equipment and other personal property that remain
the property of Lessee and will restore any physical damage caused by such
removal.

 

Section 12.02.                  Delivery
of Rents and Records.  Upon
surrendering the Premises to Lessor, Lessee will pay to Lessor all deposits or
other security and all prepaid rents received from subtenants and other
occupants whose tenancies may continue beyond the last day of the Lease Term or
the sooner termination thereof and will deliver to Lessor all original
subleases and modifications thereof, lease files, plans, records, registers and
all other papers and documents which may be required for the proper operation
and management of the Premises and are then in Lessee’s possession or under its
control.  Lessee shall have access to any
records, papers and documents so delivered to such extent and at such times as
the same may be reasonably required after the last day of the term of this
Lease Term or such sooner termination thereof. 
Nothing herein shall require Lessor to recognize any such existing
sublease as continuing in effect after such last day or sooner termination.  The provisions of this Section shall survive
the expiration or sooner termination of this Lease.

 

Section 12.03.                  Acceptance
of Surrender.  No surrender to Lessor
of this Lease or of the Premises or any part thereof, or of any interest
therein, prior to the expiration of the Lease Term, shall be valid or effective
unless agreed to and accepted in writing by Lessor, and no act by Lessor or any
representative or agent of Lessor, other than such a written acceptance by
Lessor, shall constitute an acceptance of any such surrender.

 

Section 12.04.                  Holding
Over.  If Lessee remains in
possession of the Premises or any part thereof after the expiration or sooner
termination of the term of this Lease (or any renewal term hereof) without the
execution of a new lease, such holding over, in the absence of a written
agreement to the contrary, shall be deemed, if Lessor so elects, to have
created a tenancy from month-to-month terminable on 30 days’ notice by either
party to the other.  Such month-to-month
tenancy will be at a monthly rental equal to 125% of the sum of the monthly
installment of Basic Rent payable during the last year of the Lease Term, and
Lessee will otherwise continue to pay Additional Rent as provided in this Lease
and perform its other obligations hereunder.

 

34

 

ARTICLE XIII

 

Section 13.01.                  Definition
of “Lessor”.  The term “Lessor,” as
used in this Lease so far as covenants or obligations on the part of Lessor are
concerned, shall be limited to mean and include only the owner or owners of the
Premises or holder of the Fee Mortgage in possession at the time in question of
the Premises.  In the event of any
transfer or transfers of the title of the Premises, Lessor herein named (and in
case of any subsequent transfers or conveyances, the then grantor) shall be
automatically freed and relieved of its liabilities accruing from and after the
date of such transfer and conveyance of all liability as respects the
performance of any covenants or obligations on the part of Lessor contained in
this Lease thereafter to be performed.

 

Section 13.02.                  Exculpation
of Lessor.  Notwithstanding anything
contained in the preceding paragraph or in any other provision hereof, Lessee
shall look solely to the estate and interest of Lessor, its successors, and assigns
in the Premises (and any condemnation, insurance or other proceeds thereof) for
the collection of any judgment recovered against Lessor based upon the breach
by Lessor of any of the terms, conditions or covenants of this Lease on the
part of Lessor to be performed, and no other property or assets of Lessor shall
be subject to levy, execution or other enforcement procedures for the
satisfaction of Lessee’s remedies under or with respect to either this Lease,
the relationship of Lessor and Lessee hereunder or Lessee’s use and occupancy
of the Premises.

 

ARTICLE XIV

 

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

 

Section 14.02.                  Notices,
Etc.  All notices and demands which
are required or permitted to be given by either party on the other hereunder
shall be in writing.  All notices and
demands shall be sent by United States Mail, certified or registered mail,
return-receipt requested, or by recognized overnight courier service (such as
Federal Express), or by facsimile or other telecommunication device capable of
transmitting and creating a written record. 
Notices shall be effective two business days following the date they are
deposited in the United States Mail, one business day after delivery to an
overnight courier and on the day they are telefaxed (if a confirmation report
results).  Unless a party designates
another address for notices (by notice given pursuant to this Section, notices
shall be sent to the following address:

 

If to Lessor:                                General
Electrical Capital Corporation

Suite 500

10900 NE 4th Street

Bellevue, Washington 98004

Attention: Vice President/Manager, Real Estate

 

35

 

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:                               Inamed
Corporation

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

 

Any
notices to be provided to the Fee Mortgagee shall be to such address as shall
be provided to the parties in writing by the Fee Mortgagee.  The failure to provide any courtesy copy of a
notice as specified above shall not make ineffective any notice given to Lessor
or Lessee hereunder.

 

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

 

36

 

Section 14.04.                  Headings.  The headings to the various Sections of this
Lease have been inserted for convenience of reference only and shall not limit
or otherwise affect the meaning thereof.

 

Section 14.05.                  Relationship
of Parties; Disclaimer.  The
relationship 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 any
respect or for any purpose in the conduct of Lessee’s business or
otherwise.  No provision of this Lease or
previous (or subsequent) conduct or activities of Lessee or Lessor will be
construed:

 

(a)                                  as
making either party a partner, joint venturer, joint employer, principal or
agent of or with each other or

 

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

 

Section 14.06.                  Operating
Lease.  This Lease is specifically
intended by the parties to be a true lease. 
Lessor holds fee simple absolute title to the Premises, and such title
was not acquired or intended to be held as any type of mortgage or security
interest.  This Lease is intended by
Lessor and Lessee to be an operating lease under generally accepted accounting
principles.

 

Section 14.07.                  Joint
Obligation.  If there be more than
one Lessee or assignee of Lessee, the obligations imposed upon Lessee hereunder
shall be joint and several.

 

Section 14.08.                  Prior
Agreements.  This Lease (including
attached Exhibits) is the entire, final and complete agreement of the parties
only with respect to the specific matters set forth in this Lease and
supersedes and replaces all written and oral agreements previously or
contemporaneously made or existing by and between the parties or their
representatives with respect to such specific matters.

 

Section 14.09.                  Recording.  This Lease shall not be recorded, but, upon
the request of either party, the parties shall execute and acknowledge a
memorandum of this Lease in recordable form that may be recorded by Lessor or
Lessee.

 

Section 14.10.                  Proration
of Rent.  If this Lease starts or
ends during a rental period, Rent and Additional Rent shall be prorated as of
such 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.                  Authorization
of Lease.  Each of Lessee and Lessor
hereby covenants and warrants to the other that (a) it is duly qualified to do
business in the state in which the Premises is located, (b) it has full right
and authority to enter into this Lease and to perform all of its obligations
hereunder 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.                  Applicable
Law.  This Lease shall be governed by
and construed and enforced in accordance with the laws of the State (as defined
in Section 7.02(i)).

 

37

 

Section 14.13.                  United
States Funds.  All sums herein
mentioned shall be conclusively deemed to refer to and shall be measured by and
payable in the lawful currency of the United States.

 

Section 14.14.                  Time
of Performance.  Time is of the
essence of this Lease and each and all of its provisions in which performance
is a factor.

 

Section 14.15.                  “Force
Majeure” Delays.  In the event that
either party hereto shall be delayed or hindered in or prevented from the
performance of any act required hereunder by reason of strikes, lockouts, labor
troubles, inability to procure materials, failure of power, restrictive
governmental laws or regulations, riots, insurrection, war or other reason of
like nature not the fault of the party delayed in performing work of doing acts
required under the terms of this Lease (a delay resulting from financial inability
to perform, excepted) (collectively, force majeure” events), then performance
of such work or act shall be excused for the period of the delay, and the
period for the performance of any such work or act shall be extended for a
period equivalent to the period of such delay. 
This provision shall not operate to excuse Lessee from prompt payment of
Basic Rent, Additional Rent or any other payments required by the terms of this
Lease, unless the commencement date or periods permitting Lessee to abatement
of rent are postponed or extended by such delays.

 

Section 14.16.                  Waiver
of Jury Trial.  LESSOR AND LESSEE
HEREBY WAIVE THEIR RESPECTIVE RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF
ACTION BASED UPON OR ARISING OUT OF, DIRECTLY OR INDIRECTLY, THIS LEASE, ANY OF
THE RELATED DOCUMENTS, ANY DEALINGS AMONG LESSEE OR LESSOR RELATING TO THE
SUBJECT MATTER OF THE TRANSACTIONS CONTEMPLATED BY THIS LEASE OR ANY RELATED
TRANSACTIONS, AND/OR THE RELATIONSHIP THAT IS BEING ESTABLISHED AMONG LESSOR
AND LESSEE.  THE SCOPE OF THIS WAIVER IS
INTENDED TO BE ALL ENCOMPASSING OF ANY AND ALL DISPUTES THAT MAY BE FILED IN
ANY COURT (INCLUDING, WITHOUT LIMITATION, CONTRACT, CLAIMS, TORT CLAIMS, BREACH
OF DUTY CLAIMS AND ALL OTHER COMMON LAW AND STATUTORY CLAIMS).  THIS WAIVER IS IRREVOCABLE, MEANING THAT IT
MAY NOT BE MODIFIED EITHER ORALLY OR IN WRITING, AND THIS WAIVER SHALL APPLY TO
ANY SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS
LEASE, ANY RELATED DOCUMENTS, OR TO ANY OTHER DOCUMENTS OR AGREEMENTS RELATING
TO THE TRANSACTIONS CONTEMPLATED BY THIS LEASE OR ANY RELATED
TRANSACTIONS.  IN THE EVENT OF
LITIGATION, THIS LEASE MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE
COURT.

 

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

 

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

 

38

 

Section 14.19.                  Successors
and Assigns.  This Lease shall bind
and inure to the benefit of Lessor and its successors and assigns and Lessee
and its successors and, without limiting Article IV hereof, its assigns.  Any assignment of this Lease by Lessor shall
not terminate such Lessor’s rights under the environmental and other
indemnities provided by Lessee in this Lease. 
In furtherance of any proposed assignment by Lessor, Lessor may share
with the proposed assignee Lessee’s financial information and Premises
information, provided such proposed assignee is directed to treat such
information confidentially (Lessor hereby agreeing to be responsible for any
failure of any such proposed assignee to so treat any such information).

 

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

 

Section 14.21.                  Construction.  Each party to this Lease has had the
opportunity to consult with its legal counsel, and this Lease shall not be
construed against either party.  All
pronouns or any variation thereof in this Lease shall be deemed to refer to
masculine, feminine, neuter, singular or plural as the identity of the person
or persons may require.  All of the
provisions of this Lease shall be deemed and construed to be “conditions” as
well as “covenants” as though the words specifically expressing or importing
covenants and conditions be used in each separate provision hereof.

 

Section 14.22.                  Execution
In Counterparts.  This Lease may be
executed in any number of counterparts, each of which shall be an original, but
all of which shall constitute one and the same instrument.

 

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

 

ARTICLE XV

 

Section 15.01.                  Lessee’s
Right of First Refusal.  If Lessor
receives an offer to buy, transfer or exchange (the “Offer”) all or any
interest in the Premises (the “Offered Interest”) at any time prior to
expiration or earlier termination of the Lease Term (including any extension
thereof) and Lessor desires to accept such Offer, then Lessor shall notify
Lessee of the terms of the Offer.  If
Lessee, within ten (10) days after receipt of Lessor’s notice, notifies Lessor
in writing of its agreement to purchase the Offered Interest on the terms
stated in the Offer, Lessor shall sell and convey the Offered Interest to
Lessee on the terms stated in the Offer. 
If Lessee does not notify Lessor in writing of its agreement to purchase
the Offered Interest within the ten (10) day period, Lessor thereafter shall
have the right to sell and convey the Offered Interest (subject to Lessee’s
rights under this Lease, including the right of first refusal provided in this
Article XV with respect to subsequent sales, transfers or exchanges) on the
terms stated in the Offer.  If Lessor
does not sell and convey the Offered Interest within one hundred eighty (180)
days after expiration of the ten (10) day period, any further transaction shall
be deemed a new Offer and the provisions of this Article XV shall be
applicable.  Notwithstanding the
foregoing, 

 

 

39

 

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

 

ARTICLE XVI

 

Section 16.01.                  Lessee’s
Expansion of the Improvements:

 

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

 

16.01.2                                    Lessee
shall be required to provide to Lessor (a) a fixed-price contract (“Fixed Price
Contract”) for such Expansion from the contractor described in Section 16.01.4
below, in accordance with a pro-forma budget subject to Lessor’s reasonable
approval, and (b) a clean, irrevocable letter of credit in the principal face
amount 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 reasonably
acceptable to Lessor, naming Lessor as beneficiary (the “Letter of Credit”).  The Letter of Credit shall be returned to
Lessee upon the “Completion of the Expansion” (as defined below).  While in no event shall Lessor be required to
contribute more than One Million Five Hundred Thousand and no hundredths
Dollars ($1,500,000.00) for the Expansion, the provisions of Section 16.01.1
above 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 other
lien to be filed against the Premises, Improvements, sign or construction of
the Expansion, the foregoing shall be not deemed to limit the cost or the
Expansion, or any part thereof, and (b) in the event that the Fixed Price
Contract shall be for an amount in excess of the Expansion Contribution, the
principal face amount of Letter of Credit shall be increased accordingly to
reflect such increased cost.  The
Expansion Contribution shall be available for any and all “hard” and “soft”
costs of the design and construction of the Expansion (excluding Lessee’s
internal costs and wages and salaries of Lessee’s employees), including without
limitation the purchase of fixtures and equipment for use in the expanded
Improvements (which fixtures and equipment shall constitute Lessor’s Fixtures
and shall be a part of the Improvements and shall not constitute Lessee’s
Equipment).

 

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

 

40

 

unreasonably withheld,
conditioned or delayed, if (a) no Event of Default shall have occurred and be
continuing, (b) Lessor shall have been furnished with the Letter of Credit and
the Fixed Price Contract required above, and (c) it has been demonstrated to
Lessor’s satisfaction that the proposed Expansion Improvements will impair
neither the structural integrity nor the value of the existing Improvements),
it being understood that the Expansion shall be designed to Lessee’s reasonable
specifications, according to Lessee’s perceived needs for additional
manufacturing, processing, laboratory, testing, office, warehouse or
distribution space (or any combination of any of such uses), all in Lessee’s
reasonable discretion.

 

16.01.4                                    The
Expansion shall be performed and constructed according to the Expansion Plans,
as the same may be amended from time to time, subject to Lessor’s written
consent for all material modifications. 
Without limiting the foregoing, Lessor’s consent shall be required for
any modification or modifications which, individually or in the aggregate,
would increase the projected cost of the Expansion by more than Twenty-Five
Thousand and no hundredths Dollars ($25,000.00) (whether such cost is to be
borne by Lessor or Lessee).  Lessor’s
consent to modifications shall not be unreasonably withheld, conditioned or
delayed, if it has been demonstrated to Lessor’s satisfaction that the proposed
modification will impair neither the structural integrity nor the value of the
existing Improvements nor of the Expansion. 
All of the Expansion shall be performed by a insured, bonded contractor
licensed to do business in the State of California, selected by Lessee and
reasonably acceptable to Lessor.  The
Expansion Contribution shall be funded by Lessor into a Depository and
disbursed by the Depository as though such work were to repair the Premises
after a casualty, pursuant to Section 6.02(e) hereof.  Lessor may require that it be named as beneficiary
under 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 with
respect thereto, and Lessor shall be named as loss payee thereunder, to’ the
extent of the Expansion Contribution.

 

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

 

16.01.6                                    “Completion
of the Expansion” shall mean (a) that Lessor has been furnished a final,
unconditional certificate of occupancy issued for the Expansion and (b) that
Lessor has been furnished a final lien waiver from Lessee’s contractor and such
other evidence of payment and lien-free completion as Lessor and Lessor’s title
insurer may reasonably require.  Upon
Completion of the Expansion, the Lease Term for the entire Premises, including
but 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 in
which Completion of the Expansion occurs.

 

41

 

ARTICLE XVII

 

Section 17.01.                  Specific
Enforcement.  Lessee’s rights
contained in Section 1.04 and Articles 15 and 16 hereof shall be specifically
enforceable, Lessor’s failure or refusal to honor such rights not being readily
compensable by an award of damages.

 

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK; 

EXECUTION PAGE FOLLOWS.]

 

42

 

IN
WITNESS WHEREOF, the parties hereto have caused this Lease to be executed as of
the 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]

 

 

SCHEDULE A

 

LEGAL DESCRIPTION

 

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

 

APN: 519-1010-085-01 011432986.3A

 

 

SCHEDULE B

 

CONTRACTUAL REQUIREMENTS

 

[NOT APPLICABLE]

 

 

SCHEDULE C

 

PERMITTED EXCEPTIONS

 

1.                                       The
lien of supplemental taxes, if any, assessed pursuant to Chapter 3.5 commencing
with Section 75 of the California Revenue and Taxation Code, not yet due and
payable.

 

2.                                       An
easement 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.                                       An
easement for sewer and incidental purposes, recorded August 3, 1970 as Reel
2666, 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 as
Series No. 79-059885 of Official Records, which provide that a violation
thereof shall not defeat or render invalid the lien of any first mortgage or
deed of trust made in good faith and for value, but deleting any covenant,
condition or restriction indicating a preference, limitation or discrimination
based on race, color, religion, sex, handicap, familial status, national
origin, sexual orientation, marital status, ancestry, source of income or
disability, to the extent such covenants, conditions or restrictions violate
Title 42, Section 3604(c), of the United States Codes or Section 12955 of the
California Government Code.  Lawful
restrictions under state and federal law on the age of occupants in senior
housing or housing for older persons shall not be construed as restrictions
based on familial status.

 

5.                                       Covenants,
conditions, restrictions and easements in the document recorded May 21, 1980 as
Series No. 80-089233 of Official Records, which provide that a violation
thereof shall not defeat or render invalid the lien of any first mortgage or
deed of trust made in good faith and for value, but deleting any covenant,
condition or restriction indicating a preference, limitation or discrimination
based on race, color, -religion, sex, handicap, familial status, national
origin, sexual orientation, marital status, ancestry, source of income or
disability, to the extent such covenants, conditions or restrictions violate
Title 42, Section 3604(c), of the United States Codes or Section 12955 of the
California Government Code.  Lawful
restrictions under state and federal law on the age of occupants in senior
housing or housing for older persons shall hot be construed as restrictions
based on familial status.

 

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

 

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

 

 

Affects the southwesterly 10 feet of Lots 1
and 2.

 

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

 

An easement as contained in the above
document.

For:                                                Spur
Track and incidental purposes.

 

Affects the northerly portion of the land and
other property.

 

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

 

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

 

10.                                 Any
facts, rights, interests or claims that may exist or arise by reason of the
following 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 a
monitoring well, water meter, electric vaults, electric transformer and
telephone vaults on various locations of the land.

 

 

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 (“GE
Capital”), a Delaware corporation, its successors and assigns, 10900 NE 4th
Street, Suite 500 Bellevue, WA 98004

 

LEASE NO.:                               001-         -001

 

 

INSURANCE REQUIREMENTS:

 

HAZARD INSURANCE:

 

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

 

Perils:                Fire
and 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:

•                  Inflation
Guard, and Agreed Amount and Replacement Cost endorsements

•                  List
of Locations and Schedule of Values, if Blanket Policy

•                  30
Days Notice of Cancellation

•                  Agreed
Amount endorsement

 

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 will be
required.

 

 

LIABILITY:

 

Coverage to be On Occurrence basis only.

 

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

 

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

 

General Electric Capital Corporation
is to be named Additional Insured as respects this property and the Additional
Insured 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 an
insurance company having a Best’s Rating of A/X
or better for, respectively, hazard and liability coverage and must be executed
by the insurance company or its authorized agent.  The evidence and certificate must itemize the
above coverage and endorsements.  WITHIN 90 DAYS OF ISSUANCE OF THE EVIDENCE OF INSURANCE, THE INSURANCE
COMPANY IS TO PROVIDE A CERTIFIED COPY OF THE INSURANCE POLICY INCLUDING ALL
ENDORSEMENTS AND AMENDMENTS.

 

2

 

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 of
Property Insurance, naming Lender, its
successors and/or assigns, as Loss Payee and Mortgagee as respects the
subject property.  If the
credit tenant is to provide the insurance coverage, the Borrower must be named
as Additional Insured.

 

Perils:  Fire and 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:

 

•                                          Inflation
Guard, and Agreed Amount and Replacement Cost endorsements

•                                          List
of Locations and Schedule of Values, if Blanket Policy

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

•                                          30
Days Notice of Cancellation

o                                    Waiver
of 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 A
Machinery coverage is different from that of the Property Coverage, a Joint Loss

 

 

Agreement
endorsement must be reflected on the evidences of insurance for both Property
coverage 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 of
Liability Insurance

 

Coverage to be On Occurrence basis only.

 

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

 

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

 

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

 

SPECIAL INSTRUCTIONS

 

General Electric Capital Corporation and
Lender are to be provided with an Evidence of Property
Insurance and a Certificate of Liability
Insurance from an insurance company having a Best’s Rating of A/X or
better for both hazard and liability coverage and must be executed by the
insurance company or its authorized agent. 
The evidence and certificate must itemize all the above endorsements and
the 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 INSURANCE
COMPANY IS TO PROVIDE A CERTIFIED COPY OF THE INSURANCE POLICY INCLUDING ALL
ENDORSEMENTS AND AMENDMENTS.

 

2

 

LENDER’S LOSS PAYABLE ENDORSEMENT - 438 BFU

 

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

 

2.                                       The
insurance under this policy, or any rider or endorsement attached thereto, as
to the interest only of the Lender, its successors and assigns, shall not be
invalidated nor suspended: (a) by any error, omission or change respecting the
ownership, description, possession or location of the subject of the insurance
or the interest therein, or the title thereto; (b) by the commencement of
foreclosure proceedings or the giving of notice of sale of any of the property
covered by this policy by virtue of any mortgage or trust deed; (c) by any
breach of warranty, act, omission, neglect or noncompliance with any of the
provisions of this policy, including any and all riders now or hereafter
attached thereto, by the named insured, the borrower, mortgagor, trustor,
vendee, owner, tenant, warehouseman, custodian, occupant, or by the agents of
either of any of them or by the happening of any event permitted by them or
either of them, or their agents, or which they failed to prevent, whether
occurring before or after the attachment of this endorsement, or whether before
or after a loss, which under the provisions of this policy of insurance or of
any rider or endorsement attached thereto would invalidate or suspend the
insurance as to the named insured, excluding herefrom, however, any acts or
omissions of the Lender while exercising active control and management of the
property.

 

3.                                       In
the event of failure of the insured to pay any premium or additional premium
which shall be or become due under the terms of this policy or on account of
any 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 of
premium after sixty (60) days from and within one hundred and twenty (120) days
after due date of such premium and it is a condition of the continuance of the
rights of the Lender hereunder that the Lender when so notified in writing by
this Company of failure of the insured to pay such premium shall pay or cause
to be paid the premium due within ten (10) days following receipt of the
Company’s demand in writing therefor.  If
the Lender shall decline to pay said premium or additional premium, the rights
of the Lender under this Lender’s Loss Payable Endorsement shall not be
terminated before ten (10) days after receipt of said written notice by the
Lender.

 

4.                                       Whenever
this Company shall pay to the Lender any sum for loss or damage under this
policy 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 and
interest and other indebtedness due or to become due from the insured, whether
secured or unsecured (with refund of all interest not accrued), and this
Company, to the extent of such payment, shall thereupon receive a full
assignment and transfer, without recourse, of the debt and all rights and
securities held as collateral thereto.

 

 

5.                                       If
there be any other insurance upon the within described property, this Company
shall be liable under this policy as to the Lender for the proportion of such
loss or damage that the sum hereby insured bears to the entire insurance of
similar character on said property under policies held by, payable to and
expressly consented to by the Lender.  Any
Contribution Clause included in any Fallen Building Clause Waiver or any Extended
Coverage Endorsement attached to this contract of insurance is hereby
nullified, and also any Contribution Clause in any other endorsement or rider
attached to this contract of insurance is hereby nullified except Contribution
Clauses for the compliance with which the insured has received reduction in the
rate charged or has received extension of the coverage to include hazards other
than fire and compliance with such Contribution Clause is made a part of the
consideration for insuring such other hazards. 
The Lender upon the payment to if of the full amount of its claim will
subrogate this Company (pro rata with all other insurers contributing to said
payment) to all of the Lender’s rights of contribution under said other
insurance.

 

6.                                       This
Company reserves the right to cancel this policy at any time, as provided by
its terms, but in such case this policy shall continue in force for the benefit
of the Lender for thirty (30) days after written notice of such cancellation is
received by the Lender and shall then cease.

 

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

 

8.                                       Should
legal title to and beneficial ownership of any of the property covered under
this policy become vested in the Lender or its agents, insurance under this
policy 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 Endorsement
which are not also granted the insured under the terms and conditions of this
policy and/or under other riders or endorsements attached thereto shall not
apply to the insurance hereunder as respects such property.

 

9.                                       All
notices herein provided to be.  given by
the Company to the Lender in connection with this policy and this Lender’s Loss
Payable Endorsement shall be mailed to or be delivered to the Lender at its
office or branch at:                                [address
of Lender]                                          .

 

	
  Attached to Policy No.

  	
   

  	
   

  	
   

  
	
  Of:

  	
   

  	
   

  	
   

  
	
  Issued to:

  	
   

  	
   

  	
   

  
	
  Agency at:

  	
   

  	
   

  	
  Date:

  	
   

  	
   

  
									

 

2

 

AMENDMENT TO FACILITY LEASE

 

This Amendment to Facility Lease (this “Amendment”) is made as of the
1st 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.                                   Lessor
and Lessee are parties to that certain Facility Lease, dated as of March 15,
1989 (the “Lease”).

 

B.                                     Lessor
and Lessee wish to amend the Lease by terminating it with regard to the real
estate described therein and by extending the term and modifying the rent with
regard to the equipment described therein.

 

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

 

1.                                       Definitions.  Capitalized
terms used in this Amendment without definition shall have the respective
meanings assigned to those terms in the Lease. 
For reference purposes, such definitions are set forth in Schedule A
attached to this Amendment and by this reference incorporated into this
Amendment.

 

2.                                       Equipment Lease Only. 
The Lease is hereby terminated with regard to the real estate described
therein and shall apply hereafter only with regard to the equipment described
in Schedule B attached to this Amendment and by this reference incorporated
into this Amendment.  Accordingly, as
used in the Lease, the term “Leased Property” shall hereafter only refer to
such equipment.

 

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

 

4.                                       Basic Rent.  Basic
Rent 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 at
the then-unamortized value (together with accrued but unpaid interest as of the
date of the purchase, all according to the amortization schedule annexed hereto
as Schedule C) at ‘any time.  Lessee
shall have the right to purchase the Leased Property at the end of the Base
Lease Term for One ($1.00) Dollar, which the Lessor and Lessee anticipate to be
the fair market value of the Leased Property on the Base Lease Term Expiration
Date..

 

6.                                       Casualty Loss Value.  The
Casualty Loss Value for any Item of Leased Property shall be modified if and as
necessary so that, at any given time, such Casualty Loss Value is equal to the
cost of that Item which then remains outstanding presuming that the Basic Rent
payments hereafter received are first applied to earned but unpaid interest at
7.5% per

 

 

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

 

7.                                       Casualty Loss Value Upon Default.  The text of Section 16(a)(iii)(A) of the
Lease is hereby stricken and replaced with the following:  “the Casualty Loss Value of all Items of
Leased 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 Premises
Lease is permitted under the Premises Lease. 
Lessee may sublet the Leased Property to any person to whom Lessee
sublets the Premises, provided such subletting of the Premises is permitted
under the Premises Lease.  No such
assignment or sublease shall constitute a release of Lessee from its
obligations under this Lease.

 

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

  

 

2

 

	
   

  	
   

  	
  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 force
and effect.

 

3

 

IN WITNESS WHEREOF, Lessor and Lessee have caused their respective duly
authorized representatives to executed and deliver this Amendment as of the day
and 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.

  	
   

  
				

 

4

 

SCHEDULE A

 

Definitions

 

Addition or Improvement
means any addition or improvement to any item of Leased Property that does not
constitute Additional Equipment.

 

Additional Equipment
means the property described in Schedule C to the Purchase Agreement.

 

Adjustment Date means
the date occurring on the 120th day following the Base Lease Term Commencement
Date.

 

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

 

Applicable Law means
the 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 to
regulate or supervise the Facility or its ownership, construction, manufacturer
use, operation, maintenance or repair.

 

Appraisal Procedure means
the procedure specified in the succeeding sentences for determining the Fair
Market Value or Fair Rental Value of a given Item of Leased Property.  Lessor and Lessee shall consult for the
purpose of determining such amount by mutual agreement.  If no agreement is reached, either party may
give written notice (the “Notice”) to the other, requesting determination of
such amount by appraisal and in such event the parties shall consult for the
purpose of appointing a mutually acceptable qualified independent appraiser,
experienced in the biotechnology or pharmaceutical industries, who shah.  determine the Fair Market Value or Fair
Rental Value.  If the parties are unable
to agree on an appraiser within twenty days of the giving of the Notice, the
Fair Market Value or Fair Rental Value shall be determined by each of two
independent appraisers so experienced, one of whom shall be selected by Lessee
and the other of whom shall be selected by Lessor on or before the twenty-first
day following the giving of the Notice.  The
appraisers so selected shall make them: determinations within ton days
following their appointment.  If the
determination made by the appraiser opining as to the greater value does not
exceed the lower value by more than ten percent of, the lower value, the two values
shall be averaged and such determination shall constitute the determination of
the appraisers.  If such excess is
greater than ten percent of the lower value, a third appraiser shall be
selected by the two appraisers or by the American Arbitration Association in
accordance with its procedures, if the other two are unable to agree upon a
third appraiser within ten days.  The
third appraiser shall make his determination, the appraisal which differs most
from the other two appraisals shall be excluded, the remaining two
determinations shall be averaged, and such average shall constitute the Fair
Market Value or Fair Rental Value, as appropriate.

 

1

 

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

 

Assignment of Facility, Agreements
means the assignment of the Construction Contracts, Governmental Authorizations
and vendor Agreements in the form of Exhibit E to the Purchase Agreement.

 

Base Lease Term
means the period beginning on the Base Lease Term Commencement Date and ending
on the ease Lease Term Expiration Date.

 

Base Lease Term Commencement Date
means October 1, 1989.

 

Base Lease Term Expiration Date
means September 30, 2004.

 

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

 

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

 

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

 

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

 

Casualty Loss Payment Date
means (a) the last day of the first month following the date on which Lessee is
obligated to notify Lessor of the happening of a Casualty Event pursuant to
Section 10(b)(i) of the Lease; and (b) if Lessee has attempted to exercise its
option to replace Casualty Property under Section 10(b)(Iii) but has failed to
do so within the period there provided, the 30th day following the last day of
such period.

 

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

 

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

 

Casualty Property means
any Item of Leased Property suffering a Casualty Event.

 

Change in Tax Law
means a change in the Code, the issuance of new or revised Treasury
Regulations, revenue procedures, revenue rulings or other administrative
publications or a change 3.n judicial interpretation of existing law which, to the
extent it relates to a given Item of Leased Property, is enacted, made or
issued in final or temporary form, on

 

2

 

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 tax
benefits anticipated by Lessor to be obtained from the overall Transaction as
set out in Schedule D, to the extent and in the manner set out in Lessor’s
notice of the need for adjustment.

 

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

 

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

 

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

 

Completion means the
completion, in all significant respects, of the construction of improvements
upon the Plant and the.  Site and the
installation of equipment in the Plant, all as set out in the Construction
Contract and the Construction and Design Documents as the same are in effect as
of the first Delivery Date, or as the same are supplemented or amended in
accordance with the provisions of the Consent Lo Assignment of Construction
Contract, provided that any such supplement or amendment is in every material.  respect consistent with the assumptions and
conclusions of the Appraisal.  Completion
shall be evidenced by, and shall be doomed to occur on the date of delivery to
Lessor of a duly executed Completion Certificate.

 

Completion Certificate
means the certificate of Rudolph & Sletten, Inc.  in the form of Exhibit J to the Purchase
Agreement.

 

Construction and Design Documents
means all of the plans, specifications, working drawings and other
architectural, engineering or design documents related to the Plant or the
Additional Equipment, whether existing on the First Delivery Date or created
thereafter.

 

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

 

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

 

Contractor means
Rudolph & Sletten Inc., of Foster City, California.

 

Default means a
default under any Fundamental Agreement other than the Lease, or the happening
of an event which, with the giving of notice or the passage of time, could
become an Event of Default.

 

Default Rate means a
per annum rate of interest equal to the lesser of (1) the prime rate announced
from time to time by Chase Manhattan Hank, New York as its prime lending or
base rate plus four percent (4%), or (ii) the maximum interest rate allowed by
law.

 

Delivery Date means
the First Delivery Date or any Subsequent Delivery Date.

 

3

 

Environmental Consultant
means Woodward-Clyde Consultants of Oakland, California.

 

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

 

Expiration Date
means the last day of the Lease Term.

 

Facility means the
Plant, the Site and the Additional Equipment, taken together, including all
Nonseverable Improvements.

 

Fair Market Rent
means, with respect to a given Item of Leased Property, an amount determined in
accordance with the Appraisal Procedure as of a given time, which amount equals
the rent which would be obtained in an arm’s length lease of the Item between
an informed and willing lessee engaged in the pharmaceutical, manufacturing or
medical device industry (other than such a lessee currently in possession), and
an informed and willing lessor under no compulsion to lease, without regard to
the costs and expenses that are reasonably anticipated would be incurred in
connection with such a transaction.

 

Fair Market Value
means, with respect to a given Item of Leased Property, an amount determined in
accordance with the Appraisal Procedure as of a given time, which amount equals
the value which would be obtained in an arm’s length purchase and sale
transaction with respect to -the Item between an informed and willing buyer
engaged in the pharmaceutical, manufacturing or medical device industry (other
than such a buyer currently in possession), and an informed and willing seller
under no compulsion to sell, without regard to the costs and expenses that are
reasonably anticipated would be incurred in connection with such a transaction.

 

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

 

Financing Statement means
a statement filed at the office of the secretary of State of California, in the
form prescribed by the Uniform Commercial Code of California.

 

First Delivery Date means
a Business bay selected by Lessee for the sale to Lessor of the Plant and the
Site under the Purchase Agreement, provided that Lessee gives Lessor note less
than five Business Days’ prior notice thereof.

 

Fundamental Agreements
means the agreements described in Section 3(a)(i) of the Purchase Agreement
together with each other Bill of Sale, Grant Dead or Lease supplement as and
when delivered in connection with the transactions contemplated by Section
2(a)(ii) of the Purchase Agreement.

 

Governmental Authorization
means 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 or
instrumentality with respect to the Facility, any Item or any portion thereof.

 

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

 

4

 

Guaranteed Maximum Price
means the price identified as such under the Construction Contract.

 

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

 

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

 

Imposition has the
meaning given in Section 14 of the Purchase Agreement or Section 18 of the
Lease.

 

Indemnitee means
Lessor and its successors, assigns, employees, agents, shareholders and Persons
that control, are in common control with, or are controlled by Lessor.

 

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

 

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

 

Item or Item of Leased Property
means any discrete component of the Plant, the Site or any Additional Equipment
or of any appliance, part, instrument, appurtenance, accessory, furnishing and
other equipment of whatever nature that from time to time may be incorporated
or installed in or attached to the Facility, including, without limitation, any
spare parts that are included as part of the Facility.

 

Lease means the
Facility Lease between Lessee and Lessor dated as of March 15, 1989 and each
Lease 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 Casualty
Event has occurred with respect to the entire Facility, the Lease Term ends on
the Casualty Loss Payment Date corresponding to such Casualty Event and (b) if Lessee
has made a determination that a Special Casualty Event has occurred under
Section 7(a) or 8(e)(viii) of the Lease, or Lessor has made a determination
that 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 to
such Special Casualty Event.

 

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

 

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

 

Lease supplement
means each supplement in the form of Exhibit A to the Lease evidencing the
delivery and acceptance of Leased Property and the confirming Lessee’s
obligation for Rent with respect thereto.

 

5

 

Lessee means
Collagen Corporation, a Delaware corporation.

 

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

 

Lessee Documents
means each of the Fundamental Agreements, and each of the Related Documents to
which Lessee is a party.

 

Lessor means
Heleasco 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, together
with an amount equal to the product of Transaction Costs and a fraction having
as its numerator the Purchase Price of the Item and as the denominator the
aggregate Purchase price of all Items, and as to the Facility, the aggregate of
Lessor’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 means
liens, charges, encumbrances or adverse claims of title, against the Facility
or any Item of- Leased Property created or incurred by or through Lessor.

 

Net Economic Return means
the after tax yield (federal, state and local), after tax cash flows and
periodic book income which Lessor anticipates as of the date of the Purchase
Agreement.

 

Nonseverable Addition
mean (i) a replacement part installed can the Facility as required by Section
8(a) of the Lease, (ii) an Addition or improvement made pursuant to Section
7(b) of the Lease, and (iii) an Addition or Improvement which is not readily
removable without causing material damage to the Facility or any item.

 

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

 

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

 

Permitted Contest means
a contest, including any appeal rights, with respect to any Imposition or the
applicability of any legal requirement which:

 

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

 

(b)                                 does
not involve any significant risk of:

 

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

 

6

 

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

 

(iii)                               any
material reduction in the value or the economic utility of the Facility or the
Item of Leased Property; and

 

(c)                                  is
not in conflict with any requirement of insurance to be maintained pursuant to
Section 6 of the Lease.

 

Permitted Encumbrance
means any of the following:

 

(a)                                  liens
for Impositions (i) not yet delinquent or (ii) being contested in a Permitted
Contest, so long as adequate reserves have been set aside for the payment of
such Impositions;

 

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

 

(c)                                  the
Contemplated Liens;

 

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

 

(e)                                  Title
Encumbrances;

 

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

 

(g)                                 Lessor
Liens.

 

Permitted Substance
means a substance described in Schedule E to the Lease, as the same may be
modified as provided in Section B(f)(vii) of the Lease.

 

Person means any
individual, corporation, partnership, estate, joint venture, association, joint—stock
company, trust, unincorporated organization, or any government or any agency or
political subdivision thereof.

 

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

 

7

 

Plant means the
buildings, improvements and equipment described in Schedule A to the Purchase
Agreement.

 

Professional Advisors
means each of the Appraiser, and each environmental engineer or other engineer
or professional advisor delivering any report or opinion to Lessor or Lessee in
connection with the Overall.  Transaction
or with respect to the Facility and/or the ownership, use or maintenance
thereof, or of the conduct of Lessee’s business.

 

Purchase Agreement
means the Agreement to Purchase and Lease dated as of March 15, 1989 between
Lessee and Lessor.

 

Purchase Price
means, as to a given Item of Leased property, the amount set out next to the
description of that Item in Schedule A or Schedule C to the Purchase Agreement
and definitively established in the Lease Supplement related thereto.

 

Renewal Term means a
five-year period beginning on the Base Lease Term Expiration Date or on the
expiration of another expiring Renewal Term.

 

Rent means Interim
Rent, Basic Rent and Supplemental Rent collectively.

 

Responsible Officer
means, with respect to either party hereto, any officer or assistant officer
thereof who at the time is authorized to act in connection with the Overall
Transaction.

 

Severable Addition
means any Addition or Improvement (other than a Nonseverable Addition) that is
readily removable from the Facility without causing material damage to the
Facility or any Item.

 

Site means the zeal
property described in Schedule B to the purchase Agreement.

 

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

 

Special Casualty Loss Value
of 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 appropriate
percentage 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 Sections
7(e)(iii) and 8(f)(viii) of the Lease, the amount determined by multiplying the
appropriate percentage on Table Two on Schedule H to the Lease by Lessor’s Cost
of the Item and (b) as of any date during a Renewal Term means the Fair Market
Value of the Item plus such additional amount as may be required to maintain
Net Economic Return.

 

8

 

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

 

Special Counsel
means Saul, Ewing, Remick & Saul.

 

Subsequent Delivery Date
means a Business Day selected by Lessee for the sale to Lessor of any
Additional Equipment under the Purchase Agreement, provided that Lessee gives
Lessor not less than five Business Days’ prior notice thereof and that such
Business Day occurs do or prior to September 30, 1989.

 

Supplemental Rent
means the amounts payable by Lessee to Lessor or others pursuant to Section
3(e) of the Lease.

 

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

 

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

 

Title Company means
First American Title Insurance Company.

 

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

 

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

 

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

 

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

 

Vendor Agreement means
each agreement between Lessee and a vendor with respect to the Plant or any
item of Additional Equipment.

 

9

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