Document:

Exhibit 10.4

 

SUBLEASE AGREEMENT

 

 

by and between

 

 

CYMER INC.,

a Nevada corporation

 

(“Sublessor”)

 

 

and

 

NORTHROP GRUMMAN SYSTEMS CORPORATION,

a Delaware corporation

 

(“Sublessee”)

 

 

November 5, 2004

 

 

TABLE OF CONTENTS

 

	
  1.

  	
  Demise of Subleased
  Premises

  	
   

  	
   

  	 

	
   

  	
  1.1

  	
  First Floor of the Subject
  Building

  	
   

  	
   

  
	
   

  	
  1.2

  	
  Second Floor

  	
   

  	
   

  
	
   

  	
  1.3

  	
  The Parking Facilities

  	
   

  	
   

  
	
   

  	
  1.4

  	
  The Project Common Areas

  	
   

  	
   

  
	
   

  	
  1.5

  	
  Sublessor’s Assurances

  	
   

  	
   

  
	
   

  	
  1.6

  	
  Alterations to Project Common
  Areas and Parking Facilities

  	
   

  	
   

  
	
   

  	
  1.7

  	
  Access to Subleased Premises,
  Parking Facilities and Project Common Areas

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	 

	
  2.

  	
  Term and Possession

  	
   

  	
   

  	 

	
   

  	
  2.1

  	
  Term

  	
   

  	
   

  	 

	
   

  	
  2.2

  	
  Option to Extend

  	
   

  	
   

  	 

	
   

  	
  2.3

  	
  Holding Over

  	
   

  	
   

  	 

	
   

  	
  2.4

  	
  Sublessee’s Option to Terminate

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
  3.

  	
  Rent.

  	
   

  	
   

  	 

	
   

  	
  3.1

  	
  Base Rent

  	
   

  	
   

  	 

	
   

  	
  3.2

  	
  Rent Abatement

  	
   

  	
   

  	 

	
   

  	
  3.3

  	
  Additional Rent

  	
   

  	
   

  	 

	
   

  	
  3.4

  	
  Exclusions from Project
  Operating Expenses and Building Operating Expenses

  	
   

  	
   

  	 

	
   

  	
  3.5

  	
  Procedure for Payment of
  Operating Expenses

  	
   

  	
   

  	 

	
   

  	
  3.6

  	
  Proposition 13 Protection

  	
   

  	
   

  	 

	
   

  	
  3.7

  	
  Vacancy Credit

  	
   

  	
   

  	 

	
   

  	
  3.8

  	
  Audit Right

  	
   

  	
   

  	 

	
   

  	
  3.9

  	
  Rent Payment Address

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
  4.

  	
  Sublessor’s
  Work and Condition of Subleased Premises

  	
   

  	
   

  	 

	
   

  	
  4.1

  	
  Performance of Sublessor’s Work

  	
   

  	
   

  	 

	
   

  	
  4.2

  	
  Approved Plans

  	
   

  	
   

  	 

	
   

  	
  4.3

  	
  Failure to Substantially
  Complete by Outside Completion Date

  	
   

  	
   

  	 

	
   

  	
  4.4

  	
  Punchlist

  	
   

  	
   

  	 

	
   

  	
  4.5

  	
  Sublessor Warranty

  	
   

  	
   

  	 

	
   

  	
  4.6

  	
  Substantial Completion

  	
   

  	
   

  	 

	
   

  	
  4.7

  	
  Delivery of As-Builts

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
  5.

  	
  Sublessee Alterations
  and Additions

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
  6.

  	
  Disturbance
  of Possession by Sublessor

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
  7.

  	
  Fire and Other Casualty

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
  8.

  	
  Surrender
  and Restoration

  	
   

  	
   

  	 

	
   

  	
   

  	
   

  	
   

  	 

	
  9.

  	
  Connection
  to Other Facilities

  	
   

  	
   

  	 

 

 

	
  10.

  	
  U.S. Government Security
  Regulations

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  11.

  	
  Miscellaneous
  Charges

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  12.

  	
  Elevators

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  13.

  	
  Use of Premises

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  14.

  	
  Assignment/Subletting

  	
   

  	
   

  
	
   

  	
  14.1

  	
  Right to Assign or Sublease

  	
   

  	
   

  
	
   

  	
  14.2

  	
  Transfer to Affiliates

  	
   

  	
   

  
	
   

  	
  14.3

  	
  No Right to Recapture

  	
   

  	
   

  
	
   

  	
  14.4

  	
  Permitted Occupants

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  15.

  	
  Maintenance
  and Repair/Damage and Destruction

  	
   

  	
   

  
	
   

  	
  15.1

  	
  Sublessor’s Responsibilities

  	
   

  	
   

  
	
   

  	
  15.2

  	
  Sublessee’s Responsibilities

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  16.

  	
  Insurance

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  17.

  	
  Utilities.

  	
   

  	
   

  
	
   

  	
  17.1

  	
  Background

  	
   

  	
   

  
	
   

  	
  17.2

  	
  Sublessor Provided Utilities

  	
   

  	
   

  
	
   

  	
  17.3

  	
  Meters

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  18.

  	
  Parking

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  19.

  	
  Signage

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  20.

  	
  Security

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  21.

  	
  Nondisturbance

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  22.

  	
  Roof
  Rights

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  23.

  	
  Secured Areas

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  24.

  	
  Hazardous
  Materials

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  25.

  	
  Right to Repair

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  26.

  	
  Indemnity

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  27.

  	
  The Prime Lease

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  28.

  	
  Quiet Enjoyment

  	
   

  	
   

  

 

 

	
  29.

  	
  Condemnation

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  30.

  	
  Sublessee’s
  Default

  	
   

  	
   

  
	
   

  	
  30.1

  	
  Event of Default

  	
   

  	
   

  
	
   

  	
  30.2

  	
  Remedies

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  31.

  	
  Obligation
  to Mitigate

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  32.

  	
  Brokerage
  Commission

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  33.

  	
  Sublessor
  Default

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  34.

  	
  Notices

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  35.

  	
  Attorneys’
  Fees

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  36.

  	
  Termination
  of Prime Lease

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  37.

  	
  Entire Agreement

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  38.

  	
  Counterparts

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  39.

  	
  Estoppel
  Certificates

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  40.

  	
  Time is of the
  Essence

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  41.

  	
  Miscellaneous

  	
   

  	
   

  
	
   

  	
  41.1

  	
  Severability

  	
   

  	
   

  
	
   

  	
  41.2

  	
  No Waiver

  	
   

  	
   

  
	
   

  	
  41.3

  	
  Amendments

  	
   

  	
   

  
	
   

  	
  41.4

  	
  Captions

  	
   

  	
   

  
	
   

  	
  41.5

  	
  Government Law

  	
   

  	
   

  
	
   

  	
  41.6

  	
  Construction

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  42.

  	
  Authority

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  43.

  	
  Sublessor
  Bankruptcy

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  44.

  	
  Sublessee’s
  Fixtures

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  45.

  	
  Governmental
  Requirements

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  46.

  	
  PRIME LESSOR’S
  CONSENT

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  47.

  	
  NONBINDING
  DRAFTS

  	
   

  	
   

  

 

 

SUBLEASE
AGREEMENT

(Entire Building)

 

This SUBLEASE AGREEMENT (“Sublease” or “Agreement”),
dated for reference purposes as of November 5, 2004, is made by and
between CYMER, INC., a Nevada corporation (“Sublessor”), and NORTHROP GRUMMAN
SYSTEMS CORPORATION, a Delaware corporation (“Sublessee”).  The “Effective Date” of this Sublease shall
be the date of the later to occur of (i) the actual execution and delivery to
the other party of this Sublease by the latter of the Sublessor and Sublessee
and (ii) the execution and delivery by the “Prime Lessor” of the “Master
Landlord’s Consent” as such terms are hereinafter defined.

 

WHEREAS, Sublessor is the tenant under that certain
Single-Tenant Industrial Lease (Triple Net) between Sublessor and AEW/LBA
Acquisition Co. II, LLC, a California limited liability company dated December 19,
1996, as amended by that certain First Amendment to Single-Tenant Industrial
Lease dated April 1, 1997, that certain Second Amendment to Single-Tenant
Industrial Lease dated December 2, 1997, that certain Third Amendment to
Single-Tenant Industrial Lease dated December 12, 1997, that certain
Amendment No. 4 to Single-Tenant Industrial Lease dated January 21, 1999,
and that certain Fifth Amendment to Lease made and entered into as of the 21st
day of February, 2000 by and between Arden Realty Finance III, LLC, a Delaware
limited liability company (“Prime Lessor”) and Sublessor (collectively, the “Prime
Lease”, a copy of which is attached hereto and incorporated by reference as Exhibit ”A”),
which affects all of the real property hereinafter described as the “Land.

 

WHEREAS, the Land consists of two (2) legal parcels
more particularly described on Exhibit “B” attached hereto and made a
part hereof.

 

WHEREAS, the Land is improved with two 2-story
buildings, including the building located at 16710 Via del Campo Court, San
Diego, California (the “Subject Building”), surface parking, a two (2) story
parking structure, an outdoor amphitheatre, an outdoor basketball court,
exterior eating areas and two (2) buildings comprising a central plant from
which electricity and heating and air conditioning are provided by Sublessor
(the “Central Plant”).  The Land and all
of the improvements thereon are depicted on the site plan attached hereto as Exhibit
“C” (the “Site Plan”) and are hereinafter sometimes collectively referred
to as the “Project”.

 

WHEREAS, the Subject Building consists of
approximately 108,290
rentable square feet and the other building on the Land
consists of approximately 36,959 rentable square feet and
is located at 16750 Via del Campo Court, San Diego, California, 92127 (the “Adjacent
Building”).  The Subject Building and the
Adjacent Building shall be collectively hereinafter referred to as the “Buildings.”

 

WHEREAS, Sublessee desires to sublet from Sublessor
the Subject Building, the surface of that certain portion of the Land legally
described as Parcel “A” on Exhibit “B” (the “Building Parcel”) and all
of the parking areas shown on the Site Plan with the exception of 115 stalls
reserved for the use of the occupant of the Adjacent Building and to obtain the
nonexclusive

 

1

 

right in common with the tenants and occupants of the
Adjacent Building to use the handicapped parking spaces, outdoor amphitheatre,
outdoor basketball court, and exterior eating areas on the Land (collectively
the “Project Amenities”) from Sublessor in accordance with the terms and
conditions contained herein;

 

WHEREAS, the Land is subject to the terms of that
certain Declaration of Parking and Access Easements and Maintenance Agreement
dated as of the March 2, 1998 and recorded on March 5, 1998 as
Instrument No. 1998-0118053 in the Official Records of San Diego County,
California, as amended by that certain Amendment No. 1 to Declaration of
Parking and Access Easements and Maintenance Agreement dated as of January 21,
1999 and recorded on February 1, 1999 as Document number 1999-0056829 in
the Official Records of San Diego County, California and the quitclaim deed
dated January 26, 1999 and recorded in the Official Records of San Diego
County, California on  February 1,
1999 as Document No 1999-0056828 (collectively the “Declaration”).

 

NOW, THEREFORE, in consideration of the mutual
promises and covenants set forth in this Sublease Agreement, the parties hereby
agree as follows:

 

1.             Demise of Subleased Premises.  Sublessor hereby subleases to Sublessee, and
Sublessee agrees to sublease from Sublessor, the following premises (the
“Subleased Premises”):

 

1.1                                 First
Floor of the Subject Building.  The first
(1st) floor (the “First Floor Subleased Premises” or “First Floor”) consisting
of approximately 65,540 rentable square feet of office, lobby, and cafeteria
space as outlined on the Space Plan with the most recent revision dated  December 10, 2004 (the “Space Plan”)
attached hereto and incorporated by reference as Exhibit ”D” and
generally referred to in the Space Plan as Areas H, I, J (the Main Lobby), K,
L, M (including the cafeteria space therein contained and all of the existing
cafeteria equipment), N, O-1, O-2, Q and S, together with approximately 7,375
rentable square feet of warehouse space generally referred to in the Space Plan
as Areas O and P (the “First Floor Warehouse Space”), for an aggregate of
72,915 rentable square feet of office and warehouse space combined.

 

1.2                                 Second
Floor.  The second (2nd) floor of the
Subject Building (the “Second Floor Subleased Premises” or “Second Floor”)
consisting of approximately 30,385 rentable square feet of office space as
outlined on the Space Plan and generally referred to therein as Areas A, A-1,
B, C, together with approximately 4,990 rentable
square feet of warehouse space generally referred to in the Space Plan as Area
D, for an aggregate of 35,375 rentable square feet of office and warehouse
space combined.  Areas E, F, and G,
containing the mechanical room, the electrical closet, and certain space
otherwise referred to as warehouse space, are excluded from the rentable area
of the Second Floor.

 

1.3                                 The
Parking Facilities.  All of the
areas shown on the Site Plan for parking, including without limitation the
Parking Structure, but excluding the 115 stalls designated on the map as “G.A.
Parking” and listed as “CSD-1 Tenant Parking Allocation” (the “Adjacent
Building Parking Area”) and such other parking facilities as shall hereafter be
provided to Sublessor under the Declaration (collectively the “Parking
Facilities”); provided however in no event shall the number of parking stalls
provided to Sublessee for its exclusive use

 

2

 

on the
Land be less than one hundred fifty-six (156) the parking stalls in the parking
garage, one hundred seventy-three (173) existing surface parking stalls, and
twenty-five (25) new surface parking stalls which Sublessor shall cause to be
striped for parking on the surface area adjacent to the “Warehouse Area” (as
hereinafter defined), for a total of not less than three hundred fifty-four
(354) parking stalls.  In addition,
eleven (11) handicapped parking stalls as shown on the Site Plan shall be
available for Sublessee’s non-exclusive use shared with the tenant of the
Adjacent Building.

 

1.4                                 The
Project Common Areas.  The
non-exclusive right in common with the other occupants of the Buildings to use
the improvements on the Land not within any Buildings that are intended for use
by the occupants of the Buildings (the “Project Common Areas”), including
without limitation the Project Amenities, the Central
Plant, the trash storage area for the Project, all landscaping areas, driveways
through the parking areas, and the driveways for ingress and egress to and from
Via del Campo Court and the parking areas located on the Adjacent Parcel.  The maintenance building shown on the Site
Plan is not part of the Subleased Premises or the Project Common Areas.  Sublessor shall retain the exclusive right to
use the Maintenance Building and shall be solely responsible for maintaining
and repairing same.

 

1.5                                 Sublessor’s
Assurances.  Sublessor represents and warrants to
Sublessee each of the following:

 

(a)                                  that
Sublessor holds all of the Tenant’s interest under the Prime Lease in and to
the Subleased Premises;

 

(b)                                 that
Sublessor’s interest under the Prime Lease has not been assigned or
hypothecated by Sublessor;

 

(c)                                  that to the
best of Sublessor’s knowledge, the Land, the Buildings and the Project are free
and clear of all exceptions to title except for the matters set forth on that
certain Preliminary Title Report issued as of November 3, 2004 by First
American Title Insurance Company;

 

(d)                                 that the
Project, including without limitation the Buildings, the Project Common Area,
the Parking Facilities, the Project Amenities and the other improvements to the
Land are in compliance with applicable laws, rules, ordinances, and restrictive
covenants now affecting the Land

 

(e)                                  that with the
exception of the “Sublessor’s Work” (as hereinafter defined), and the approvals
required to be delivered to Sublessee under Section 2.1(f), Sublessor has
obtained and secured all consents, approvals and authorizations required to
permit Sublessee to use and occupy the Subleased Premises for the purposes
permitted by this Sublease;

 

(f)                                    that the
Prime Lease attached hereto is a true and complete copy of the same; and

 

3

 

(g)                                 that the
Prime Lease is free from default by Sublessor and the Prime Lessor as of the
date of this Sublease.

 

1.6                                 Alterations
to Project Common Areas and Parking Facilities.  Sublessor and Sublessee each acknowledges and
agrees that it shall not materially alter or reconfigure the Project Common
Areas and/or the Parking Facilities and/or restripe the parking stalls to
reduce the number of parking stalls or grant any other party the right to use
the Parking Facilities except for the occupants of the Buildings.

 

1.7                                 Access
to Subleased Premises, Parking Facilities and Project Common Areas.  Subject to the terms of this Sublease, Sublessor shall
provide Sublessee and its employees and invitees access to the Subleased
Premises and the Project Common Areas and Parking Facilities seven (7) days a
week, twenty-four (24) hours a day, three hundred sixty five (365) days a year
during the term of this Sublease. 
Sublessor shall enforce the terms of the Prime Lease to maintain
Sublessee’s unrestricted access to the Subleased Premises, the Project, the
Project Common Areas and the Parking Facilities.  Notwithstanding the forgoing, Sublessee’s use
of the amphitheatre shall be scheduled and reserved in advance with Sublessor
and shall be subject to any prior reservation previously scheduled by the
occupant of the Adjacent Building. 
Sublessee’s right to use the basketball court shall be on a first come
first serve basis.

 

2.                                       Term and
Possession.

 

2.1                                 Term.  Subject to all the terms and conditions of
this Sublease, this Sublease shall be effective on the date of full execution
and delivery of this Sublease by Sublessor and Sublessee.  The term (the “Initial Sublease Term”)
of this Sublease shall consist of two (2) staggered terms applicable as to two
(2) different portions of the Subleased Premises (each a “Phase”), as provided
in this Section 2.1.  The first
Phase of the Subleased Premises to be delivered to Sublessee (hereinafter “First
Phase”) is comprised of the Second Floor, the Land and the Parking
Facilities.  The second Phase of the
Subleased Premises to be delivered to Sublessee (hereinafter “Second Phase”) is
comprised of the First Floor Subleased Premises.  The Initial Sublease Term for each Phase
shall be:

 

(a)                                  First
Phase.  The Initial Sublease Term with
respect to the First Phase (the “First Phase Initial Term”) shall be a period
commencing on the date of delivery by Sublessor of the First Phase in the “Required
Condition” (as hereinafter defined) and the acceptance by Sublessee of the same
(the “First Phase Delivery Date”) and terminating on the Expiration Date (as
defined in Section 2.1(b) below), unless otherwise extended or sooner
terminated in accordance with the provisions of this Sublease or by mutual
written agreement of the parties. 
Sublessor shall deliver the First Phase to Sublessee in the Required Condition
so as to insure that the First Phase Delivery Date shall occur on or before a
date which is twenty-five (25) calendar days following the Effective Date (the “First
Phase Outside Delivery Date”).

 

(b)                                 Second
Phase.  The Initial Sublease Term with respect
to the Second Phase (the “Second Phase Initial Term”) shall be for a period of
thirty six (36)

 

4

 

months
commencing on the date of delivery by Sublessor of the Second Phase in the
Required Condition and acceptance of same by Sublessee (the “Second Phase
Delivery Date”), and terminating on the date that is thirty six (36) months
later (the “Expiration Date”), unless otherwise extended or sooner terminated
in accordance with the provisions of this Sublease or by mutual written
agreement of the parties; provided, however, that in the event the Second Phase
Delivery Date does not fall on the first day of a month, then the Initial
Sublease Term shall be extended so that the Expiration Date occurs on the last
day of the calendar month during which this Sublease would otherwise
expire.  Sublessor shall deliver the
Second Phase to Sublessee in the Required Condition on or before a date which
is eighty-six (86) calendar days following the Effective Date (the “Second
Phase Outside Delivery Date”).

 

(c)                                  Confirmation
of Sublease Dates.  Following the
determination of the Effective Date, Sublessor and Sublessee shall confirm the
same in writing which confirmation shall occur no later than the date rent
shall commence under this Sublease for any Phase.  Following the determination of the First
Phase Delivery Date and the Second Phase Delivery Date, respectively, Sublessor
and Sublessee shall confirm in writing the commencement dates for each Phase
(which shall be such delivery dates and shall be the respective dates of
commencement of rent for each Phase) and the Expiration Date applicable to this
Sublease.

 

(d)                                 Failure
to Timely Deliver one or more Phase. 
Sublessor
acknowledges that the timely delivery to Sublessee of possession of each Phase
on or before the Outside Delivery Dates for same described in this Section in
the Required Condition is a critical element in connection with Sublessee’s
business operations.  Notwithstanding the
foregoing, however, each Phase Outside Delivery Date shall be extended, for a
period not to exceed thirty (30) days, to the extent Sublessor is delayed by
reason of the occurrence of acts of God, man-made or natural disasters,
earthquakes, fire, riots, flood, material shortages, or strikes, but solely to
the extent that such events or circumstances cannot reasonably be mitigated
within Sublessor’s reasonable control. 
The term “Required Condition” for each Phase shall mean that:
(1) Substantial Completion of the Sublessor’s Work for such Phase shall
have occurred; (2) Sublessor shall have delivered possession of such Phase
to Sublessee, broom clean and ready for occupancy in good working order and
repair and in compliance with all Applicable Laws, Governmental Requirements
and other rules and regulations including without limitation the mechanical,
electrical, lighting, plumbing and HVAC equipment.

 

(i)                                     In the event
Sublessor does not deliver to Sublessee any Phase in the Required Condition on
or before the Outside Delivery Date for such Phase, or in the event Sublessor
does not deliver the “Prime Lease Approvals” (as hereinafter defined in 2.1(f)
below) on or before a date which is fifteen (15) calendar days following the
Effective Date, unless thereafter, not later than thirty (30) days following
the delivery by Sublessee to Sublessor of written notice of Sublessor’s default
with respect thereto, Sublessor delivers such Phase in the Required Condition
and the Prime Lease Approvals, if and to the extent not previously delivered,
then Sublessor shall be in material default of this Sublease

 

5

 

and
Sublessee shall be entitled to exercise all remedies available at law or in
equity by reason of such failure.  Such
remedies may include, without limitation, the right of Sublessee to terminate
this Sublease upon delivering written notice to Sublessor of Sublessor’s
election to do so, either as part of or separate from the written notice
provided for above in this Section 2.1(d)(i).  If Sublessee exercises this right of
termination, then this Sublease shall terminate and become of no further force
or effect effective on the date specified by Sublessor in the written notice,
which date shall be no sooner than thirty (30 days following the delivery by
Sublessee to Sublessor of the written notice of its election to terminate this
Sublease  With or without written notice
from Sublessee to Sublessor as provided for in this Section 2.1(d)(i),
Sublessee shall receive a credit against the Base Rent and Additional Rent payable
under this Sublease in the amount of two (2) days of free rent for
(A) every day from the First Phase Outside Delivery Date until the later
to occur of the First Phase Delivery Date and the date the Prime Lease
Approvals are delivered for the First Phase, and (B) every day from the Second
Phase Outside Delivery Date until the Second Phase Delivery Date, with respect
to the Second Phase.  Nothing herein
shall limit Sublessee’s right to be awarded its attorneys fees and costs in
enforcing this provision.

 

(ii)                                  Sublessor
shall keep Sublessee promptly informed of all developments in connection with
the construction of the Sublessor’s Work for each Phase, including periodic
updates (written progress reports) as to the status of construction, city
inspections and developments relating to the build-out of the Subleased
Premises such that Sublessee will be able to accurately measure the progress
and completion of such work.  Sublessee
shall be entitled to send a representative to attend all meetings regarding
construction and scheduling.  In
addition, Sublessor shall use all commercially reasonable efforts to provide to
Sublessee fifteen (15) days’ advance notice as to the expected delivery date of
the First Phase and Second Phase, respectively.

 

(iii)                               In the event
of a termination of this Sublease pursuant to this Section 2.1, Sublessee
shall surrender that portion of the Subleased Premises so terminated in
accordance with the provisions of this Section 2.1 and in accordance with
the terms and provisions of this Sublease with respect to vacation and
surrender of the Subleased Premises. 
This Sublease shall thereupon terminate with respect to such portions of
the Subleased Premises included in the termination notice as of the effective
date of such termination as if such date were the originally specified
Expiration Date for such portion of the Subleased Premises, and Sublessor and
Sublessee shall each be released from any liability, responsibility or
obligation accruing thereafter with respect to such terminated portions of the
Subleased Premises.

 

(e)                                  Work
by Sublessee.  Notwithstanding
anything to the contrary contained herein, Sublessee shall have the right to
enter the Subleased Premises at any time following the Effective Date to
perform such work (“Sublessee’s Work”) as Sublessee deems necessary to install
its furniture, fixtures and equipment and/or to

 

6

 

perform
the alterations described on the Schedule of Sublessee’s Work attached
hereto as Exhibit “E”, including the “SCIF Work” (as hereinafter
defined).  In performing Sublessee’s
Work, Sublessee shall use commercially reasonable efforts to avoid any
interference with the performance by Sublessor of the Sublessor’s Work then
being conducted.  Sublessor and Sublessee
shall cooperate with each other to expedite and to avoid interfering with the
work being performed by each of them. 
The parties acknowledge and agree that Sublessee shall have the right,
notwithstanding any other provision of this Sublease and/or the Prime Lease to
the contrary, to cause certain improvements (the “SCIF Work”) to be made within
those portions of the Subleased Premises depicted as “SCIF and “Secret SAR” on
the floor plan attached hereto and made a part hereof as Exhibit “G” (the
SCIF Areas”) as necessary to complete within the SCIF Areas each of the
requirements described on Exhibit “E” attached hereto and made a part
hereof and hereinafter referred to as the “SCIF Scope of Work.” Sublessee
agrees to perform such work in a good and workmanlike manner.

 

(f)                                    Approvals
by Prime Lessor and its Lender.  As of the
Effective Date, Sublessor represents and warrants to Sublessee that (a)
Sublessor has obtained all approvals (including waivers of time periods for
consents, if applicable) required to be obtained by Sublessor (with respect to
this Sublease and its terms) under the terms of the Prime Lease, including
Prime Lessor’s written consent (the “Master Landlord Consent”) to this Sublease
and the terms hereof and the work permitted to be performed by Sublessor and
Sublessee pursuant to the terms of this Sublease and (b) the Prime Lease is
free from default by Sublessee and that no event has occurred with notice or
the passage of time that would constitute a default by Sublessee under the Prime
Lease.  Upon request of Sublessee,
Sublessor shall use its commercially reasonable best efforts to provide to
Sublessee, as soon as reasonably possible, the consent by Lehman Brothers
Realty Corporation, or its successor as first trustee lender on the Land (“Lender”)  to this Sublease as and to the extent
required by the terms of Lender’s agreements.

 

2.2                                 Option
to Extend.  Provided Sublessee is not in default beyond
the expiration of any applicable notice or grace period, Sublessee shall have
two (2) options to extend the term of this Sublease as to either or both of the
Phases (each an “Extension Option”) for one (1) year each.  If Sublessee elects to exercise an Extension
Option, Sublessee shall exercise such Extension Option by providing Sublessor
with prior written notice (the “Extension Notice”) specifying the Phase(s) for
which Sublessee elects to extend the Initial Sublease Term or Extension Term,
as applicable, and the expiration date of the term as so extended (the “Extension
Term”), as to each applicable Phase in the Extension Notice.  Such Extension Notice shall be given not less
than six (6) months prior to the expiration of the Initial Sublease Term or, as
applicable, the first Extension Term. 
The Base Rent for the Extension Term of any Phase shall be equal to one
hundred four percent (104%) of the Base Rent payable for such portion of the
Subleased Premises during the immediately preceding term (Initial Sublease Term
or first Extension Term, as applicable). 
Notwithstanding such right, in the event Sublessee elects to occupy less
than all of the Subject Building, the parties shall agree upon such drywall and
paint work as may be required to demise and separate the First Floor from the
Second Floor in accordance with applicable laws and regulations to render the
same usable by more than one tenant.  In
the event the parties reach agreement as to the scope of the work required to
so demise

 

7

 

the
Subject Building (the “Agreed Upon Demising Work”) within thirty (30) days
following the delivery by Sublessee of its election to extend the Initial Term
of the Sublease for less than the entire Subject Building, and Sublessee fails
to complete the Agreed Upon Demising Work on or prior to the expiration of such
six (6) month period, then Sublessee shall continue to pay Base Rent to
Sublessor for the entire Subject Building until the date the Agreed Upon
Demising Work has been substantially completed. 
If the Agreed Upon Demising Work is not determined prior to the
expiration of such thirty (30) day period, then Sublessor shall have the right,
but not the obligation, at its sole cost and expense, to perform such demising
work as Sublessor deems appropriate and, whether or not Sublessor elects to do
so, Sublessee’s only obligation shall be to perform such work when and if it is
determined provided such determination is made no later than 6 months prior to
the expiration of the Extension Term.

 

2.3                                 Holding
Over.  Sublessee shall have the right to holdover in
the Subleased Premises provided Sublessee delivers to Sublessor a written
notice of intent to do so (the “Holdover Notice”) not later than sixty (60)
days prior to the Expiration Date or the expiration date of any Extension
Term.  The Holdover Notice shall specify
the length of time that Sublessee requires to remain in the Subleased Premises
(the “Permitted Holdover Period”) which shall not extend beyond the lesser of
six (6) months or the initial term of the Prime Lease (or the extended term, if
any, which Sublessor advises is not anticipated).  Any such holdover during the Permitted
Holdover Period shall be upon the same terms and conditions as were applicable
during the last month of the Initial Sublease Term or Extension Term, as
applicable; provided, however, that the Base Rent shall be increased to one
hundred twenty percent (120%) of the Base Rent in effect during the last month
of the Initial Sublease Term or Extension Term, as applicable.  Any holding over by Sublessee beyond the
Permitted Holdover Period with the consent of Sublessor shall be deemed a
month-to-month tenancy at one hundred fifty percent (150%) of the Base Rent in
effect during the last month of the Initial Sublease Term or Extension Term, as
applicable.  Any holding over by
Sublessee beyond the Permitted Holdover Period without the consent of Sublessor
shall be deemed a tenancy at sufferance at one hundred seventy-five percent
(175%) of the Base Rent in effect during the last month of the Initial Sublease
Term or Extension Term, as applicable. 
To the extent Sublessee holds over in the Subleased Premises beyond the
Permitted Holdover Period without obtaining Sublessor’s consent, Sublessee
shall defend, indemnify and hold Sublessor harmless from and against all loss
or liability resulting from or arising out of Sublessee’s failure to surrender
the Subleased Premises by such date, including, but not limited to, any amounts
required to be paid to any sublessee or prospective sublessee who was to have
occupied the Subleased Premises after said termination or expiration and any
related attorneys’ fees and brokerage commissions incurred as a result of
Sublessee’s failure to vacate the Subleased Premises on or before the
expiration of the Permitted Holdover Period. 
Notwithstanding the foregoing, in the event of a holdover not permitted
or expressly authorized pursuant to the terms of this Section 2.2 above,
which ends on or before the applicable term of the Prime Lease, Sublessee shall
not be liable to Sublessor for consequential damages for its failure to vacate
the applicable portion of the Subleased Premises.  Nothing herein shall be deemed to be
Sublessor’s consent to a holding over by Sublessee beyond the Permitted
Holdover Period.

 

2.4                                 Sublessee’s
Option to Terminate.  Commencing on
the date that is (i) twenty-four (24) calendar months following the Second
Phase Delivery Date, Sublessee shall

 

8

 

have the
right (the “Early Termination Right”) to elect to terminate this Sublease as to
all or any of such Phases, if either of the following circumstances occur: (i)
any contract entered into between Sublessee and the United States Government
that Sublessee is using the Subleased Premises to support is terminated, not
renewed, replaced by another government contract and/or modified so that the
funding by the United States Government of the sums required to be paid
thereunder is reduced by fifty percent (50%) or more; or (ii) the United States
Government expressly directs a relocation of the place of performance of the
such contract which results in a reduction of the contract price performed at
the site of the Subleased Premises by an amount of fifty percent (50%) or more.

 

(a)                                  Sublessee’s
Early Termination Right shall be exercised by Sublessee by providing to
Sublessor at least one hundred eighty (180) days’ prior written notice to
Sublessor of Sublessee’s intent to exercise this right of early termination
accompanied by reasonable evidence that one of the above referenced conditions
has occurred and designation of the effective date of such termination.

 

(b)                                 Sublessee may
exercise its Early Termination Right by reducing the Subleased Premises only in
the following combinations:  (i) all
of the First Floor and Second Floor; (ii) all of the Second Floor or (iii)
all of the First Floor.

 

(c)                                  To the extent
that the Early Termination Right is exercised with respect to the Second Floor
prior to the Expiration Date, Sublessee shall pay to Sublessor an amount equal
to the sum of the then unamortized portion of (i) the total cost, not to exceed
Four Hundred Ninety-one Thousand Seven Hundred Seventy-five Dollars ($490,050.00), of the
First Phase Sublessor’s Work plus (ii) the brokerage commissions for the Second
Floor.  (The brokerage commissions for
the Second Floor shall equal the product of the dollar amount of the brokerage
commissions for the Subleased Premises times 32.67.)  Such termination payment shall be made in
full no later than thirty (30) business days after the effective date of such
termination.  The unamortized portion of
the First Phase Sublessor’s Work and brokerage commission shall be the dollar
amount of the remaining principal balance which would be due as of the date of
termination of a loan in an original principal amount equal to the total dollar
amount of the First Phase Sublessor’s Work and brokerage commission, amortized
on an even monthly payment basis (using a 30-day month, with interest at the
rate of 9% per annum) over the scheduled term of the First Phase Initial Term.

 

(d)                                 To the extent
that the Early Termination Right is exercised with respect to the First Floor
prior to the Expiration Date, Sublessee shall pay to Sublessor (in addition to
the amount due under Section 2.4(c) above, if any) an amount equal to the
sum of the then unamortized portion of (i) the total cost, not to exceed One
Million Eight Thousand Two Hundred Twenty-five Dollars ($1,009,950.00), of the
Second Phase Sublessor’s Work plus (ii) the brokerage commissions for the First
Floor.  (The brokerage commissions for
the First Floor shall equal the product of the dollar amount of the brokerage
commissions for the Subleased Premises times 67.33.)  The unamortized portion of the Second Phase
Sublessor’s Work and brokerage commission shall be the dollar amount of the
remaining principal balance which would be due as of the date of

 

9

 

termination
of a loan in an original principal amount equal to the total dollar amount of
the Second Phase Sublessor’s Work and brokerage commission, amortized on an
even monthly payment basis (using a 30-day month, with interest at the rate of
9% per annum) over the scheduled term of the Second Phase Initial Term;

 

(e)                                  No later than
thirty (30) days following the date Base Rent shall commence for each Phase,
Sublessor shall give to Sublessee written notice of the actual total cost of
the Sublessor’s Work for such Phase.

 

(f)                                    In the event
of any such termination, Sublessee shall surrender that portion of the
Subleased Premises so terminated in accordance with the provisions of this Section 2.4
and in accordance with the terms and provisions of this Sublease with respect
to vacation and surrender of the Subleased Premises. This Sublease shall
thereupon terminate with respect to such portions of the Subleased Premises
included in the termination notice as of the effective date of such termination
as if such date were the originally specified Expiration Date for such portion
of the Subleased Premises, and Sublessor and Sublessee shall each be released
from any liability, responsibility or obligation accruing thereafter with
respect to such terminated portions of the Subleased Premises.  Notwithstanding the forgoing, in the event
Sublessee elects to partially terminate this Sublease, the parties shall agree
upon the work required to demise the Subject Building in accordance with
applicable laws and regulations to render the same usable by more than one
tenant and in the event the parties reach agreement as to the scope of the work
required to so demise the Subject Building (the “Agreed Upon Demising Work”)
within thirty (30) days following the exercise of the Early Termination Right,
and Sublessee fails to complete the Agreed Upon Demising Work on or prior to
the expiration of such six (6) month period, then Sublessee shall continue to
pay Base Rent to Sublessor for the entire Subject Building until the date the
Agreed Upon Demising Work has been substantially completed.  If the Agreed Upon Demising Work is not
determined prior to the expiration of such thirty (30) day period, then
Sublessor shall have the right, but not the obligation, at its sole cost and
expense, to perform such demising work as Sublessor deems appropriate and,
whether or not Sublessor elects to do so, Sublessee’s only obligation shall be
to perform such work when and if it is determined provided such determination
is made no later than 6 months prior to the expiration of the Extension Term.

 

3.                                       Rent.

 

3.1                                 Base
Rent.  From and after the Second Phase Delivery
Date, Sublessee shall pay to Sublessor base rent (“Base Rent”) based upon the
following schedule:

 

10

 

	
  Period

  	
   

  	
  Class

  	
   

  	
  Square Feet

  	
   

  	
  Amt/sq. ft.

  Per Month

  	
   

  	
  Aggregate

  Amount

  	
   

  	
  Total Monthly

  Amount

  	
   

  
	
  Interim Period (prior to Second
  Phase Delivery Date)

  	
   

  	
   

  	
  Office

  	
   

  	
  30,385

  	
   

  	
  $

  	
  1.40

  	
   

  	
  $

  	
  42,539

  	
   

  	
  $

  	
    45,284

  	
   

  
	
   

  	
  Warehouse

  	
   

  	
  4,990

  	
   

  	
  $

  	
  0.55

  	
   

  	
  $

  	
  2,745

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Months 1-12 (from Second Phase
  Delivery Date)

  	
   

  	
   

  	
  Office

  	
   

  	
  95,925

  	
   

  	
  $

  	
  1.40

  	
   

  	
  $

  	
  134,295

  	
   

  	
   

  	
   

  
	
   

  	
  Warehouse

  	
   

  	
  12,365

  	
   

  	
  $

  	
  0.55

  	
   

  	
  $

  	
  6,801

  	
   

  	
  $

  	
  141,096

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Months 13-24

  	
   

  	
   

  	
  Office

  	
   

  	
  95,925

  	
   

  	
  $

  	
  1.4490

  	
   

  	
  $

  	
  138,995

  	
   

  	
   

  	
   

  
	
   

  	
  Warehouse

  	
   

  	
  12,365

  	
   

  	
  $

  	
  0.5693

  	
   

  	
  $

  	
  7,039

  	
   

  	
  $

  	
  146,034

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Months 25-36

  	
   

  	
   

  	
  Office

  	
   

  	
  95,925

  	
   

  	
  $

  	
  1.4997

  	
   

  	
  $

  	
  143,860

  	
   

  	
   

  	
   

  
	
   

  	
  Warehouse

  	
   

  	
  12,365

  	
   

  	
  $

  	
  0.5892

  	
   

  	
  $

  	
  7,285

  	
   

  	
  $

  	
  151,145

  	
   

  

 

Except as provided below or in Section 2.1 above,
Base Rent shall be payable monthly in advance on the first day of each calendar
month and shall be sent to Sublessor at the rent payment address set forth in Section 3.9
below, or such other address as may be designated by Sublessor.  For any month in which Sublessee’s obligation
to pay Base Rent is for less than a full month, then such rent shall be
prorated for such partial month.  On the
first day of the Initial Term of each Phase, Sublessee shall pay to Sublessor
Base Rent in advance equal to the first full calendar month’s Base Rent due for
such Phase, notwithstanding that the Base Rent for such Phase may commence
other than on the first day of the calendar month.  The installment of Base Rent so paid shall be credited
to the first full calendar month following the applicable Rent Commencement
Date.  The Base Rent due for the partial
month between the applicable Rent Commencement Date and the first day of first
full calendar month thereafter shall be paid in arrears no later than thirty
(30) days after the amount of Base Rent due for such partial month is
determined and receipt by Sublessee of an invoice therefore from
Sublessor.   The Base Rent for the third calendar month and
each month thereafter shall be paid on the first day of the month in the full
amount of the Base Rent due for such calendar month.  Base Rent and Additional Rent (as that term
is defined in Section 3.3 below) shall sometimes herein be referred to as “Rent”.

 

3.2                                 Rent
Abatement.  If during the Initial Sublease Term, or
during the Extension Term, Sublessor’s Rent abates pursuant to the provisions
of the Prime Lease, then Sublessee’s Rent under this Sublease shall be abated
in accordance with the provisions of this Sublease and the Prime Lease.

 

11

 

3.3                                 Additional
Rent.

 

(a)                                  Sublessee’s
Obligation.  In addition to Base Rent, Sublessee shall pay
Sublessor as additional rent (“Additional Rent”) an amount equal to the sum of:
(1) Sublessee’s pro rata share (“Project Expense Share”) of Project
Operating Expenses for each Phase of the Subleased Premises as set forth below
and (2) Sublessee’s pro rata share (“Building Expense Share”) of Building
Operating Expenses.  Sublessee’s Project
Expense Share and Building Expense Share shall vary in accordance with the area
of the Subleased Premises.  Sublessee’s
Project Expense Share shall be equal to the ratio of the rentable area of the
Subleased Premises, as the same may change, to the total rentable area of the
Project.  The total rentable area of the
Project is agreed to be 145,249 sq. ft.  Sublessee’s Building Expense Share shall be
equal to the ratio of the rentable area of the Subleased Premises, as the same
may change, to the total rentable area of the Subject Building.  The total rentable area of the Subject
Building is agreed to be 108,290 sq. ft. 
Initially, Sublessee’s Project Expense Share and Building Expense Share
shall be as set forth in Table 3.3(a) below:

 

TABLE 3.3(a)

 

SUBLESSEE’S
INITIAL PROJECT AND BUILDING EXPENSE SHARES

 

	
   

  	
   

  	
  Period

  	
   

  	
  Project Expense Share

  	
   

  	
  Building Expense

  Share

  	
   

  
	
  1

  	
   

  	
  Interim Period (prior to Second
  Phase Delivery Date)

  	
   

  	
  24.4

  	
  %

  	
  32.7

  	
  %

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2

  	
   

  	
  Month 1 (from and after Second
  Phase Delivery Date) and thereafter until rentable area of Subleased Premises
  changes

  	
   

  	
  74.6

  	
  %

  	
  100.0

  	
  %

  

 

(b)                                 Project
Operating Expenses.  The term “Project
Operating Expenses” means the costs and expenses incurred by Sublessor during
the “Full Sublease Term” (consisting of the Initial Sublease Term, together
with any Extension Term, and otherwise as the same may be extended or renewed),
that are shared by the occupants of the Project for Real Estate Taxes under Section 10.1
of the Prime Lease (attributable to such Full Sublease Term), insurance
premiums payable by Sublessor under Section 20.1 of the Prime Lease
(attributable to such Full Sublease Term and excluding premiums for earthquake
insurance), utilities under Section 16 of the Prime Lease (attributable to
such Full Sublease Term), costs incurred during the Full Sublease Term to
maintain and repair the Project Common Area including the Parking Facilities
and landscaped areas in the manner required by Section 15.1 below, the
cost of operating the Central Plant, exterior illumination in the Project
Common Area, trash removal for the Project, the maintenance

 

12

 

and
repair of the Project Common Area, including restriping, and the other line
item expenses set forth in the 2004 Project Operating Expense Budget delivered
by Sublessor to Sublessee prior to the date of this Sublease, but excluding any
line item for work to be performed by Sublessee under this Sublease (including
the Sublessee’s Obligations), the Building Operating Expenses, all expenses
incurred in connection with or relating to the Adjacent Building, and the
Operating Expense exclusions listed in Section 3.4 below.

 

(c)                                  Building
Operating Expenses.  The term “Building Operating
Expenses” means the costs and expenses incurred by Sublessor during the “Full
Sublease Term” (consisting of the Initial Sublease Term, together with any
Extension Term, and otherwise as the same may be extended or renewed), that are
shared by the occupants of the Subject Building costs to maintain and repair
the Subject Building in accordance with the terms of Section 15.1 below
and the other line item expenses set forth in the 2004 Building Operating
Expense Budget delivered by Sublessor to Sublessee prior to the date of this
Sublease, but excluding any line item for work to be performed by Sublessee
pursuant to the terms of this Sublease, all Project Operating Expenses, and the
Operating Expense exclusions listed in Section 3.4 below.

 

(d)                                 Allocation.  Project Operating Expenses and Building
Operating Expenses shall be allocated to the Subleased Premises as if the
Buildings were each one hundred percent (100%) occupied and improved and as if
all sublessees and occupants were paying full rent, as contrasted with free
rent, half rent and the like.  Sublessor
estimates that the Project Operating Expenses and Building Operating Expenses
initially payable by Sublessee will be $.28 per rentable square foot per month,
not including the cost of the Sublessor Provided Utilities as provided in Section 17.2
below.

 

3.4                                 Exclusions
from Project Operating Expenses and Building Operating Expenses.  Notwithstanding anything in the definition of
Operating Expenses in the Prime Lease or this Sublease to the contrary, neither
Project Operating Expenses or Building Operating Expenses shall include the
following, except to the extent specifically permitted by a specific exception
to the following:

 

(a)                                  Any Rent or
other sums payable under or as a result of a breach of the Prime Lease or
ground lease rental, except for the actual amount of the management fee payable
to the Prime Lessor under the terms of the Prime Lease;

 

(b)                                 Costs of
items considered capital repairs, replacements, improvements and equipment
under generally accepted accounting principles consistently applied or otherwise
(“Capital Items”);

 

(c)                                  Rentals for
items (except when needed in connection with normal repairs and maintenance of
permanent systems) which if purchased, rather than rented, would constitute a
Capital Item which is specifically excluded in subsection 3.4(b) above
(excluding, however, equipment not affixed to the Buildings which is used in
providing janitorial or similar services for any Building);

 

13

 

(d)                                 Costs
incurred by Sublessor for the repair of damage to the Buildings and Parking
Facilities to the extent that Sublessor is or should be reimbursed by insurance
proceeds and costs of all capital replacements, regardless of whether such
repairs are covered by insurance and cost of earthquake repairs in excess of
Twenty Five Thousand Dollars ($25,000.00) per earthquake (which for this
purpose, an earthquake is defined collectively as the initial earthquake and
the aftershocks that relate to such initial earthquake);

 

(e)                                  Insurance
deductibles in excess of $10,000 per year for normal casualties and amounts
which are in excess of $1.00 per rentable square foot of the Subleased Premises
in any year for damage caused by floods, hurricanes, tornadoes, and/or
terrorist acts;

 

(f)                                    Costs,
including permit, license and inspection costs, incurred with respect to the
installation of Sublessee’s or other occupants’ improvements in the Buildings
or incurred in renovating or otherwise improving, decorating, painting or
redecorating vacant space for sublessees or other occupants of the Buildings;

 

(g)                                 Depreciation,
amortization and interest payments, except as provided herein and except on
materials, tools, supplies and vendor-type equipment purchased by Sublessor on
competitive terms to enable Sublessor to supply services Sublessor might
otherwise contract for with a third party where such depreciation, amortization
and interest payments would otherwise have been included in the charge for such
third party’s services, all as determined in accordance with generally accepted
accounting principles, consistently applied, and when depreciation or
amortization is permitted or required, the item shall be amortized over its
reasonably anticipated useful life;

 

(h)                                 Marketing
costs, including without limitation, leasing commissions, attorneys’ fees in
connection with the negotiation and preparation of letters, deal memos, letters
of intent, leases, subleases and/or assignments, space planning costs, and
other costs and expenses incurred in connection with lease, sublease and/or assignment
negotiations and transactions with Sublessee or present or prospective
sublessees, Sublessor or other occupants of the Buildings;

 

(i)                                     Expenses in
connection with services or other benefits which are not offered to Sublessee
or for which Sublessee is charged for directly or contracts for directly;

 

(j)                                     Overhead and
profit increment paid to Prime Lessor or Sublessor or to subsidiaries or
affiliates of Prime Lessor or Sublessor for goods and/or services in or to the
to the extent the same exceeds the costs of such goods and/or services rendered
by unaffiliated third parties on a competitive basis;

 

(k)                                  Interest,
principal, points and fees on debts or amortization on any mortgage or
mortgages or any other debt instrument encumbering the Buildings, the

 

14

 

Land,
the Parking Facilities or any portion thereof (except as permitted in subsection 3.4(g)
above);

 

(l)                                     Prime Lessor’s
and Sublessor’s general corporate overhead and general and administrative expenses;

 

(m)                               Any
compensation paid to clerks, attendants or other persons in commercial
concessions operated by Sublessor;

 

(n)                                 Rentals and
other related expenses incurred in leasing HVAC systems, elevators or other
equipment ordinarily considered to be Capital Items, except for
(1) expenses in connection with making minor repairs on or keeping
Building Systems in operation while minor repairs are being made and
(2) costs of equipment not affixed to the Subject Building which is used
in providing janitorial or similar services;

 

(o)                                 Advertising
and promotional expenditures, and costs of signs in or on the Buildings, the
Land and/or the Parking Facilities identifying the owner of the same, Sublessor
or other sublessees’ or other occupant’s signs;

 

(p)                                 The cost of
any electric power used by any sublessee or other occupant of all or any
portion of the Buildings in excess of the Building standard amount (or, prior
to separate metering, otherwise shown to be unreasonably high), or electric
power costs for which any such sublessee or other occupant directly contracts
with the local public service company or of which any Sublessee or other
occupant is separately metered or sub-metered and pays directly; provided,
however, that if any Sublessee in the Buildings contracts directly for electric
power service or is separately metered or sub-metered during any portion of the
relevant period, the total electric power costs for the Buildings shall be “grossed
up” to reflect what those costs would have been had each Sublessee in the
Buildings used the Building standard amount of electric power;

 

(q)                                 Services and
utilities provided, taxes attributable to, and costs incurred in connection
with the operation of the retail, parking (to the extent same services the
retail operations of the Buildings), and restaurant operations, if any, in the
Buildings, except to the extent the square footage of such operations are
included in the rentable square feet of the Buildings and do not exceed the
services, utility and tax costs which would have been incurred had the retail
and/or restaurant space been used for general office purposes;

 

(r)                                    Costs
incurred in connection with upgrading or modifying the Buildings, the Land
and/or the Parking Facilities and/or to render the same in compliance with
life, fire and safety codes, ordinances, statutes or other laws in effect prior
to the Second Phase Delivery Date, including, without limitation, the ADA,
including penalties or damages incurred due to such non-compliance;

 

(s)                                  Tax penalties
incurred as a result of Prime Lessor’s and/or Sublessor’s failure to make
payments and/or to file any tax or informational returns when due, including
without limitation those shown on the Preliminary Title Report;

 

15

 

(t)                                    Except for
the management fees payable to the Prime Lessor under the Prime Lease on the
day of the this Sublease, any management fees computed by using a percentage of
gross revenue in excess of the lower of (a) one percent (1%) and
(b) the percentage used during any Base Year;

 

(u)                                 Costs arising
from the negligence or fault of other sublessees or Sublessor or Prime Lessor;

 

(v)                                 Notwithstanding
any contrary provision of the Prime Lease or this Sublease, including, without
limitation, any provision relating to capital expenditures, any and all costs
arising from the presence of asbestos or any hazardous materials or substances
(as defined by applicable laws in effect on the date this Sublease is executed
and as subsequently modified) in or about the Subleased Premises or the
Buildings or the Land including, without limitation, hazardous substances in
the ground water or soil, not placed in the Subleased Premises by Sublessee;

 

(w)                               Costs arising
from Sublessor’s charitable or political contributions;

 

(x)                                   Costs for
Sublessor’s Work and/or defects in the base, shell or core of the Buildings,
the Project Common Area, the Parking Facilities, the Land and/or improvements
installed by Sublessor, its agents, contractors, employees, sublessees and/or
invitees and/or repairs thereof;

 

(y)                                 Costs for
structural defects, repairs or alterations to the Buildings, the Parking
Facilities and/or other improvements to the Land, except to the extent damage
to the same is caused by Sublessee.

 

(z)                                   Costs arising
from any mandatory or voluntary special assessment on the Buildings, the
Parking Facilities or the Land by any transit district authority or any other
governmental entity having the authority to impose such assessment in
connection with the initial construction of the Buildings;

 

(aa)                            Costs for the
acquisition of (as contrasted with the incidental cleaning and maintenance of)
sculpture, paintings or other objects of art;

 

(bb)                          Costs
(including in connection therewith all attorneys’ fees and costs of settlement
judgments and payments in lieu thereof) arising from claims, disputes or
potential disputes in connection with potential or actual claims litigation or
arbitrations pertaining to the Prime Lease, Sublessor and/or the Land (and not
arising out of any breach of this Sublease by Sublessee), including without
limitation any sums payable under the Declaration and the Settlement Agreement
dated as of November 21, 1997 by and among Sublessor, AEW/LBA Acquisition
Co. II, LLC., a California limited liability company, Rancho Bernardo Corporate
Center Property Owners Association and Rudolph & Sietten;

 

(cc)                            Costs
associated with the operation of the business of the partnership or entity
which constitutes Prime Lessor and Sublessor as the same are

 

16

 

distinguished
from the costs of operation of the Buildings, including partnership accounting
and legal matters, costs of defending any lawsuits with or claims by any
mortgagee, costs of selling, syndicating, financing, mortgaging or hypothecating
any of Prime Lessor’s and/or Sublessor’s interest in the Land, the Buildings
and/or the Project, costs of any disputes between Prime Lessor, Sublessor and
their employees (if any) not engaged in operation of the Subject Building,
disputes of Prime Lessor and/or Sublessor and their employees with management
of the Buildings, or outside fees paid in connection with disputes with other
sublessees or occupants of the Buildings;

 

(dd)                          Any
supplemental taxes arising from a Transfer occurring prior to the date of this
Sublease and/or any increases of, or reassessment in, Real Property Taxes and
assessments in excess of two percent (2%) of the taxes for the previous year
(except as may result from Sublessor’s Work or Sublessee’s Work), and any
increase in Real Property Tax resulting from a change in ownership of the Land,
the Project and/or the Prime Lease other than by the Prime Lessor or from major
alterations, improvements, modifications or renovations to the Buildings,
construction of the Parking Facilities or from major alterations, improvements,
modifications or renovations to the same or the Land (collectively, “Transfers”);

 

(ee)                            Costs of any “tap
fees” or any sewer or water connection fees for the benefit of any particular
sublessee or other occupant of the Buildings;

 

(ff)                                Any expenses
incurred by Sublessor for use of any portions of the Buildings to accommodate
events including, but not limited to shows, promotions, kiosks, displays,
filming, photography, private events or parties, ceremonies and advertising
beyond the normal expenses otherwise attributable to providing Building
services, such as lighting and HVAC to such public portions of the Buildings in
normal operations during standard Building hours of operation;

 

(gg)                          Any
entertainment, dining or travel expenses of Sublessor for any purpose;

 

(hh)                          Any flowers,
gifts, balloons, etc. provided to any entity whatsoever, including, but not
limited to Sublessee, other sublessees, Sublessees, employees, vendors,
contractors, brokers, prospective sublessees and agents;

 

(ii)                                  Any “validated”
parking for any entity;

 

(jj)                                  Any “finders
fees,” brokerage commissions, job placement costs or job advertising cost.

 

(kk)                            Any “above-standard”
cleaning, including, but not limited to construction cleanup or special
cleanings associated with parties/events and specific requirements of
sublessees or other Building occupants in excess of service provided to
Sublessee, including related trash collection, removal, hauling and dumping;

 

17

 

(ll)                                  The cost of
any “tenant relations” parties, events or promotion not consented to by an
authorized representative of Sublessee in writing;

 

(mm)                      “In-house”
legal and/or accounting fees;

 

(nn)                          Any other
expenses which, in accordance with generally accepted accounting principles,
consistently applied, would not normally be treated as Operating Expenses by
comparable sublessors of comparable buildings.

 

(oo)                          Reserves for
bad debts or for future improvements, repairs, additions, etc.;

 

(pp)                          Janitorial
expenses, electrical expenses and telephone expenses to any occupant’s premises
(as contrasted with janitorial, electrical and telephone expenses to the common
areas of the Buildings);

 

(qq)                          Any expenses
for repairs or maintenance that are reimbursed through warranties or service
contracts;

 

(rr)                                Costs and
expenses incurred in moving, storing or disposing of the personal property of
former Sublessees;

 

(ss)                            Costs
incurred by Sublessor due to the violation by Sublessor of the Prime Lease,
this Sublease, or any other sublessee of the terms and conditions of any lease
of space in the Buildings;

 

(tt)                                Costs payable
under the Declaration and/or any other recorded instrument affecting the Land;
and

 

(uu)                          Rents
associated with Areas E, F and G and the Central Plant.

 

It is understood that
Project Operating Expenses and Building Operating Expenses shall be reduced by
all cash discounts, trade discounts, quantity discounts, rebates or other
amounts received by Sublessor in the purchase of any goods, utilities, or
services in connection with the operation of the Buildings and the
Project.  To the extent that an expense
included in Project Operating Expenses includes an expense related to the
Project and not the Building, then the word “Building” utilized in these
exclusions shall mean and be extended to include the Project.

 

The cost of Sublessee’s
performance of its maintenance obligations under this Sublease shall not be
deemed to be a Project Operating Expense or a Building Operating Expense.

 

3.5                                 Procedure
for Payment of Operating Expenses.  Sublessee’s
Project Expense Share and Sublessee’s Building Expense Share shall be payable
by Sublessee monthly on an estimated basis concurrently with the payment of
Base Rent.  Said estimated amount for
Operating Expenses items other than Sublessor Provided Utilities for the first
calendar year shall

 

18

 

be equal
to twenty-eight cents ($0.28) per square foot of rentable area within the
Subleased Premises as the same shall be increased with the delivery of each
Phase or decreased in accordance with the terms of this Sublease.  The actual amount of Sublessor Provided
Utilities, as provided for in Section 17.2 below, shall be paid
separately, in arrears, monthly upon receipt by Sublessee of Sublessor’s
invoice therefore.  Sublessor shall
deliver to Sublessee within sixty (60) days after the expiration of each lease
year or as soon thereafter as reasonably possible a detailed statement of the
actual Project Operating Expenses and Building Operating Expenses for the
preceding lease year.  If Sublessee’s
estimated payments under this Section 3.5 for the preceding year were less
than Sublessee’s Project Expense Share and Building Expense Share as indicated
on such statement, Sublessee shall pay Sublessor the amount of the deficiency
within thirty (30) days after delivery by Sublessor of the statement.  If Sublessee’s estimated payments under this Section 3.5
during the preceding year exceed Sublessee’s Project Expense Share and Building
Expense Share  as indicated on such
statement, Sublessor shall credit such overpayment against the Rent next due
and owing under this Sublease.  If this
Sublease shall have terminated, Sublessor shall pay to Sublessee a refund of
the difference within thirty (30) days after the delivery of the statement.

 

3.6                                 Proposition
13 Protection. 
Notwithstanding anything in this Sublease to the contrary, to the extent
there is a sale, transfer or other change of ownership by any party other than
the Prime Lessor of the Land, of any of the Buildings, the Parking Facility
and/or the Subleased Premises (collectively, a “Transfer”) during the Full
Sublease Term, Project Operating Expenses shall not include any increase of, or
reassessment in, real property taxes and assessments attributable to any such
Transfer occurring during the Full Sublease Term

 

3.7                                 Vacancy
Credit.  In the event Sublessee ceases to occupy (but
still leases) the Subleased Premises, Sublessee shall receive a credit against
Project Operating Expenses and Building Operating Expenses equal to the cost of
the Central Plant, the water, HVAC and any other variable expenses to the
extent not incurred as a result of such vacancy, as reasonably determined by
Sublessor and Sublessee and Sublessee shall have no obligation to pay the same
to the extent otherwise required by the terms of this Sublease.

 

3.8                                 Audit
Right.  Sublessee shall have the right to audit and
inspect Sublessor’s records with respect to Project Operating Expenses and/or
Building Operating Expenses, as well as all other additional rent components
payable by Sublessee hereunder for any year of this Sublease.  Sublessee shall give Sublessor not less than
thirty (30) days prior written notice of its intention to conduct any such
audit.  Sublessor shall cooperate with
Sublessee during the course of such audit, which shall be conducted during
normal business hours in Sublessor’s office. Sublessor agrees to make such
personnel available to Sublessee as is reasonably necessary for Sublessee, or
for Sublessee’s employees or agents, to conduct such audit. If such audit
discloses that the amount paid by Sublessee as Project Operating Expenses or
Building Operating Expenses for the lease year in question and, or any other
additional rental payable by Sublessee hereunder, has been overstated by more
than two percent (2%), then, in addition to immediately repaying such
overpayment to Sublessee with interest at the maximum legal rate, Sublessor
shall also pay the reasonable costs incurred by Sublessee in connection with
such audit.  If after Sublessee reviews
the records for Operating Expenses, Sublessor and Sublessee fail to agree as to
the amount of Operating Expenses that should have been charged

 

19

 

with respect
to a statement in dispute, Sublessee shall have the right to cause another
review of that portion of the statement to be made by a firm of independent
certified accountants of national standing selected by Sublessee which are not
then retained by Sublessee and (b) reasonably approved by Sublessor (“Independent
Accountant”).  The review of the
Independent Accountant shall be deemed to be correct and shall be conclusively
binding on both Sublessor and Sublessee. 
In the event the results of the review by the Independent Accountant
indicate that the actual dollar amount of Sublessee’s Project Expense Share and
Building Expense Share  for the period
covered by the statement in question have been overstated by more than two
percent (2%), then Sublessor shall be responsible for the fees and expenses of
the Independent Accountant and Sublessor shall reimburse Sublessee for the
actual fees and expenses of Sublessee’s accountant(s) and the amount of any
overpayment by Sublessee of Project Operating Expenses and/or Building
Operating Expenses for the period in question, which amount shall be credited
against Sublessee’s next succeeding installment of Rent.

 

3.9                                 Rent
Payment Address.  All payments
of Rent due under this Sublease shall be paid to:

 

Cymer Inc.

17075 Thornmint Court

San Diego, CA 
92127

Attention: 
Accounts Receivable

 

4.                                       Sublessor’s
Work and Condition of Subleased Premises.

 

4.1                                 Performance
of Sublessor’s Work.  Except as
provided to the contrary below, prior to the delivery of each Phase of the
Subleased Premises to Sublessee, Sublessor shall perform the work in such Phase
of the Subleased Premises in a good and workmanlike manner at its sole cost and
expense and as more particularly described on the Space Plan and as more fully
required by this Section 4 (collectively, “Sublessor’s Work”).  The Sublessor’s Work shall insure the
delivery of each Phase to Sublessor on or before the Outside Delivery Dates
provided in Section 1 above in the Required Condition.  All of Sublessor’s Work identified on the Space
Plan, including without limitation the HVAC systems, the plumbing and lighting
fixtures, the floor and ceiling tiles shall be constructed of and installed
with first class and new materials and parts and in compliance with all “Governmental
Requirements” (as hereinafter defined), laws, rules and regulations. The
Sublessor’s Work includes the turnkey leasehold improvements for the Subleased
Premises, except for the Sublessee’s Work under Section 2.1(e) above and
Sections 5, 9, 10, and 22 below.  All
interior finishes, including carpet and paint color shall be  as set forth on the Space Plan, Exhibit “D”
attached hereto, which is hereby approved.

 

4.2                                 Approved
Plans.  Sublessor shall submit to Sublessee any
changes to the Space Plans required by any governmental official or body as a
condition for the issuance of building and/or occupancy permits.  If required for any requisite approval by
Prime Lessor and/or its Lender and/or any governmental permit or approval,
Sublessor shall prepare, at Sublessor’s sole cost and expense, and submit to
Sublessee a set of more detailed plans and specifications and/or construction
drawings, including without limitation, if and to the extent

 

20

 

required,
a fully coordinated set of architectural, structural, mechanical, electrical
and plumbing working drawings in a form which is complete to allow
subcontractors to bid on the work and to obtain all applicable permits
(collectively, the “Plans and Specifications”) for the Sublessor’s Work, based
on the Space Plan.  Such Plans and
Specifications will show, without limitation, each of the items described in
the Space Plan.  Sublessee shall have
five (5) business days after receipt of any such Plans and Specifications in
which to review and to give to Sublessor written notice of Sublessee’s approval
of the same or its requested changes to the Plans and Specifications.  If Sublessee requests any changes to the
Space Plan and/or the Plans and Specifications, Sublessor shall make those
changes which are reasonably requested by Sublessee and shall within ten (10)
days of Sublessor’s receipt of such request submit the revised portion of the
Space Plan and/or the Plans and Specifications to Sublessee for its review and
approval.  Sublessor shall use reasonable
speed and diligence to “Substantially Complete” (as hereinafter defined) the
Sublessor’s Work in accordance with the Space Plan and any other Plans and
Specifications approved by Sublessee (the “Approved Plans”); in first class
condition at Sublessor’s sole cost and expense, (including, without limitation,
the cost of all engineering, permits, licenses and fees of any governmental
authority, the cost of any changes in the base, shell or core of the Subject
Building when such changes are required by the Space Plan and the other
Approved Plans or are otherwise required by law as a result of the construction
of the Sublessor’s Work, the cost of any changes to the Sublessor’s Work
required by applicable building code or any other Governmental Requirement; and
the sales and use taxes and Title 24 fees), and deliver possession of the First
Phase of the Subleased Premises to Sublessee in the Required Condition on or
before a date which is twenty-five (25) calendar days following the Effective
Date.

 

4.3                                 Failure
to Substantially Complete by Outside Completion Date.  Sublessor expressly acknowledges and agrees
that the failure of Sublessor to cause the Sublessor’s Work to be Substantially
Complete and to deliver each Phase to Sublessor in the Required Condition in
the manner required by this Section 4.3 will extend the First Phase
Delivery Date or Second Phase Delivery Date, as applicable, and the concomitant
commencement of payment of rent thereunder, for every day that Sublessor fails
to deliver any Phase of the Subleased Premises to Sublessee for occupancy in
the manner required by this Article 4 and in accordance with the terms of Section 2.1
above, Sublessee shall have the right to terminate this Sublease, by giving
written notice of termination to Sublessor at any time following the First
Phase Outside Delivery Date, with respect to the First Phase, and the Second
Phase Outside Delivery Date, with respect to the Second Phase (respectively the
“Outside Completion Date”), until delivery of possession to Sublessee in the
condition required by this Article 4 and Article 1 above; provided,
however, that the Outside Completion Date shall be extended one (1) day for
every day that the delay is caused by Sublessee’s failure to timely approve any
required Plans and Specifications within the time provided by Section 4.2
above or by change orders requested by Sublessee after completion of the work
in accordance with the Approved Plans that resulted in a delay of the
Substantial Completion and Sublessee was advised in writing by Sublessor of
such delay prior to the approval of such change order.

 

4.4                                 Punchlist.  Upon Substantial Completion of the Sublessor’s Work
for each Phase, Sublessor will promptly give written notice to Sublessee and
shall deliver the Subleased Premises to Sublessee in the Required Condition and
clean and free of debris.  Sublessor

 

21

 

represents
and warrants to Sublessee that on the First Phase Delivery Date and the Second
Phase Delivery Date the plumbing, electrical, fire sprinkler system, lighting,
air conditioning, heating, and loading doors and elevators, if any, in the
Subleased Premises, shall be in good operating condition and repair and in
compliance with all Governmental Requirements and Applicable Laws, and that the
roof, foundation, and all other Structural Components of the Subject Building,
and the Project, storm drain and other drainage facilities in the Project
Common Areas and Project shall be in good operating condition and repair, that
Substantial Completion of Sublessor’s Work for such Phase shall have occurred
and that all permits required for Sublessee’s legal occupancy and use of such
Phase of the Subleased Premises shall have been issued.  Within five (5) business days after the
occurrence of Substantial Completion, a representative of Sublessor and a
representative of Sublessee together shall inspect the Subleased Premises and
generate a punchlist of defective or uncompleted items relating to the
completion of construction of the Improvements (the “Punchlist”).  Sublessor shall, immediately after the
Punchlist is prepared and agreed upon by Sublessor and Sublessee, complete such
incomplete work and remedy such defective work as is set forth on the
Punchlist.

 

4.5                                 Sublessor
Warranty.  Sublessor hereby warrants to Sublessee, which
warranty (“Sublessor’s Warranty”) shall survive for the one (1) year period
following the First Phase Delivery Date or Second Phase Delivery Date,
respectively, for each Phase, that (i) the materials and equipment
furnished by Sublessor’s contractors in the completion of the Sublessor’s Work
will be of good quality and new, and (ii) such materials and equipment and
the work of such contractors shall be free from defects not inherent in the
quality required or permitted hereunder and (iii) the Sublessor’s Work complies
with Governmental Requirements and Applicable Laws and the Prime Lease.  This warranty shall exclude damages caused by
Sublessee or Sublessee’s Affiliates, improper or insufficient maintenance, and
improper operation.  Sublessor further
warrants that (1) as of the First Phase Delivery Date for the First Phase,
and the Second Phase Delivery Date for the Second Phase, the Subleased Premises
and the Sublessor’s Work will be compliance with requirements of the Americans
with Disabilities Act of 1990 (2) the Sublessor’s Work will be constructed
and installed by Sublessor in compliance with the Approved Plans and such
warranty shall remain in effect throughout the Full Sublease Term. Sublessor
shall, following written notice from Sublessee setting forth with specificity
the nature and extent of any noncompliance with this warranty, promptly rectify
the same at Sublessor’s expense.

 

4.6                                 Substantial
Completion.  For purposes of this Sublease, the terms “Substantially
Complete” and “Substantial Completion” (or any variation thereof) shall mean
completion of construction of the Sublessor’s Work in accordance with the
Approved Plans as modified by any change orders approved by Sublessee, subject
only to Punchlist items established pursuant to Section 4.4 above,
evidence of payment by Sublessor of all costs in connection with such
construction, including without limitation final lien release and waivers from
each contractor, subcontractor, material supplier and labor supplier providing
services and materials to the Subleased Premises for the Sublessor’s Work,
final inspection of the Sublessor’s Work by the governmental authority having
jurisdiction; recordation of a Notice of Completion and the lapse of
thirty-five (35) days from the date of recording the Notice; issuance of
permanent certificates of occupancy if required for Sublessee to legally occupy
the Subleased Premises and each Phase thereof; and the delivery to Sublessee
copies of all construction

 

22

 

warranties
and guarantees in connection with the Sublessor’s Work which Sublessee is
required to maintain under the terms of this Sublease and the delivery by
Sublessor to Sublessee of a Certificate of Substantial Completion for the
Improvements on Standard AIA Form G-704 certified by Sublessor’s
architect.  In the event Substantial
Completion is delayed because of a change order approved by Sublessee which
also resulted in a delay of the date set for Substantial Completion as advised
by Sublessor prior to Sublessee’s approval of the change order (“Sublessee
Delay”), then for the purpose of establishing the First Phase Delivery Date or
Second Phase Delivery Date and any other date tied to the date of Substantial
Completion, Substantial Completion shall be deemed to mean the date when
Substantial Completion would have been achieved but for such Sublessee Delay.

 

4.7                                 Delivery
of As-Builts.  Sublessor shall
cause a set of “as-built” plans and specifications to be delivered to Sublessee
within one hundred twenty (120) days after Substantial Completion if Sublessor
is required to prepare and deliver same to any of the Prime Lessor, the Lender,
or by Governmental Requirement.

 

5.                                       Sublessee
Alterations and Additions.  Sublessee
shall not make or permit to be made any alterations, improvements, or additions
to the Subleased Premises (a “Sublessee’s Change”), without first obtaining on
each occasion (a) Sublessor’s prior written consent (which consent Sublessor
agrees not to unreasonably withhold, delay or condition) and (b) Prime Lessor’s
prior written consent (if such consent is required); provided, however, that
Sublessee shall have the right, without the prior written consent of Sublessor
and Prime Lessor (but otherwise subject to the provisions of this Section 5),
to make Sublessee Changes that: (i)  are consistent with the SCIF Work to
be performed in the Subject Building; or (ii) qualify as “Pre-Approved Changes”
within the meaning of Section 12.1(a) of the Prime Lease, i.e. the cost of
such a Sublessee Change is less than Fifty Thousand Dollars ($50,000).  Sublessor shall use its commercially
reasonable best efforts to secure any consents from Prime Lessor to alterations
not otherwise expressly permitted to be made by Sublessee in items (i) and (ii)
above or as provided in this Section below with respect to
Telecommunications Equipment.  Sublessee
shall have the right without Sublessor’s and Prime Lessor’s prior written
consent and without compliance with the other provisions of this Section 5
to install, maintain and repair towers, antennas, satellite dishes and/or other
communications equipment (“Telecommunications Equipment”) on the roof of the
Subject Building as hereinafter provided in Section 22 of this
Sublease.  All Sublessee’s Changes shall
be performed in accordance with all legal requirements applicable thereto and
in a good and workmanlike manner with first-class materials.  Sublessee shall maintain insurance reasonably
satisfactory to Sublessor during the construction of all Sublessee’s
Changes.  If Sublessor or Prime Lessor at
the time of giving its approval to any Sublessee’s Change not otherwise
expressly permitted by the terms of this Section then notifies Sublessee
in writing that approval is conditioned upon restoration, then Sublessee shall,
at its sole cost and expense and at Sublessor’s option upon the termination or
expiration of this Lease, remove the same and restore the Subleased Premises to
its condition prior to such Sublessee’s Change. 
Sublessee shall pay the full cost of any Sublessee’s Change.

 

Except
as otherwise provided herein, all Sublessee’s Changes and all repairs and all
other property attached to or installed on the Subleased Premises by or on behalf
of Sublessee (not including Sublessee’s personal property and removable trade
fixtures, which will remain the

 

23

 

property
of Sublessee at all times during the Full Sublease Term) shall immediately upon
completion or installation thereof be and become part of the Subleased Premises
and the property of Sublessor without payment therefor by Sublessor and shall
be surrendered to Sublessor upon the expiration or earlier termination of this
Sublease.  Sublessee agrees to hold
Sublessor harmless against all liens, claims and liabilities of every kind,
nature and description which may arise out of or in any way be connected with
such work.  Sublessee shall not permit
the Subleased Premises to become subject to any mechanics’, laborers’ or
materialmen’s lien on account of labor, material or services furnished to
Sublessee or claimed to have been furnished to Sublessee in connection with
work of any character performed or claimed to have been performed for the Subleased
Premises by, or at the direction or sufferance of Sublessee and if any such
liens are filed against the Subleased Premises, Sublessee shall promptly
discharge the same; provided, however, that Sublessee shall have the right to
contest, in good faith and with reasonable diligence, the validity of any such
lien or claimed lien.

 

6.                                       Disturbance
of Possession by Sublessor.  In the event
that Sublessee is actually prevented from using, and does not use, the
Subleased Premises or any portion thereof, or the same or any portion thereof
is untenable for three (3) consecutive business days or ten (10) business days
in any twelve (12) month period or such lesser periods if covered by insurance,
(the “Eligibility Period”) as a result of (1) any damage or destruction to
the Subleased Premises, any Project Common Areas, the Parking Facilities and/or
the Subject Building, (2) any repair, maintenance or alteration performed
by Sublessor after the First Phase Delivery Date which interferes with
Sublessee’s use of the Subleased Premises, the Project Common Area, the Parking
Facilities or the Subject Building, (3) an eminent domain proceeding,
(4) the presence of Hazardous Substances (from a source other than acts or
omissions of Sublessee or its agents, employees or contractors) in, on or
around the Project, the Subleased Premises or the Subject Building which could
pose a health risk to occupants of the Subleased Premises, and those using the
Project Common Areas, (5) any failure of Sublessor to provide access as required
by Section 1.7, or (6) or if there is an interruption of utilities or
other essential services to be provided by Sublessor under this Sublease, Base
Rent shall be proportionately abated or reduced, as the case may be, after
expiration of the Eligibility Period for such time that Sublessee continues to
be so actually prevented from using, and does not use, the Subleased Premises
or a portion thereof (including the Parking Facilities and/or the Project
Common Area), in the proportion that the area of the portion of the Subleased
Premises (including the Parking Facility and/or Building Project Area) that
Sublessee is prevented from using, and does not use, bears to the total
Subleased Premises (including the Parking Facility and/or Project Common Area).
However, in the event that Sublessee is prevented from conducting, and does not
conduct, its business in any portion of the building area of the Subleased
Premises for a period of time in excess of the Eligibility Period, and the
remaining portion of the building area of the Subleased Premises is not
sufficient to allow Sublessee to effectively conduct its business therein, and
if Sublessee does not conduct its business from such remaining portion, then
for such time after expiration of the Eligibility Period during which Sublessee
is so prevented from effectively conducting its business therein, the Rent for
the entire Subleased Premises shall be abated; provided, however, if Sublessee
reoccupies and conducts its business from any portion of the building area of
the Subleased Premises during such period, the Base Rent allocable to such
reoccupied portion, based on the proportion that the rentable area of such
reoccupied portion of the Subleased Premises bears to the total Subleased
Premises, shall be payable by Sublessee from the date such

 

24

 

business
operations commence.  If Sublessee’s
right to abatement occurs because of an eminent domain taking or because of
damage or destruction to the Subleased Premises, the Parking Facilities or the
Project Common Area, Sublessee’s abatement period shall continue until
Sublessor has either completed the reconstruction of the Subleased Premises
within the time and in the manner required by Sections 7 and 29.  To the extent Sublessee is entitled to
abatement without regard to the Eligibility Period, because of an event covered
in either Sections 7 or 29 of this Sublease, then the abatement shall continue
under whichever provision provides for the greatest relief to Sublessee. To the
extent Sublessee has prepaid rent (as it does each month since Base Rent is due
on the first day of each month) and Sublessee is subsequently entitled to an
abatement, such prepaid, and subsequently abated, Base Rent should be refunded
to, and paid by Sublessor to, Sublessee within thirty (30) days after the end
of the appropriate month.

 

In
addition to anything in this Section 6 and/or any of the other provisions
of this Sublease, in the event that Sublessee is notified or becomes aware of
the fact that as a result of:

 

(a)                                  the inability
of Sublessor to provide essential services as required under this Sublease to
the Subleased Premises, the Project Common Area, the Parking Facility and/or
the Subject Building so as to interfere substantially with Sublessee’s use of
all or a material portion of the Subleased Premises (“material” being defined
as at least 20% of the rentable area of the Subleased Premises or the Project
Common Area for the purpose of this clause), the Parking Facilities, and/or the
Subject Building; or

 

(b)                                 any discovery
of Hazardous Materials in, on or around the Subleased Premises, the Subject
Building and/or the Land not placed or permitted by applicable Governmental
Requirements to be placed in, on or around the Subleased Premises, the Subject
Building and/or the Land by Sublessee, that may, in Sublessee’s opinion,
considering the nature and amount of the substances involved, interfere with
Sublessee’s use of all or a portion of the Subleased Premises (or which may
present a health risk to any occupants of the Subleased Premises); or the
discovery of any other hazardous condition with respect to the Subleased
Premises, the Parking Facility, the Building Common Area and/or the Subject
Building which would make it dangerous or unsafe for Sublessee and its
employees to conduct their normal and customary business operations (each of
the items set forth in provisions (a) and (b) being referred to herein as a “Trigger
Event”),

 

(c)                                  if Sublessee
cannot, within eight (8) months (“Non-Use Period”) of the occurrence of the
Trigger Event, be given reasonable use of, and access to, a fully repaired,
restored, safe and healthful Subleased Premises, the Building Common Area and
the Subject Building, the Parking Facility and the utilities and services
pertaining to the Subleased Premises and the Subject Building, all suitable for
the conduct of Sublessee’s normal business operations therefrom (“Full
Restoration to the Premises”), then Sublessee may thereafter elect at any time
to exercise an on-going right to terminate this Sublease upon ten (10) days’
written notice sent to Sublessor at any time following the expiration of the
Non-Use Period but before the Full Restoration to the Subleased Premises,
whereupon such termination right shall lapse. 
Notwithstanding the foregoing, Sublessee may terminate this Sublease
prior to the expiration of the Non-Use Period in

 

25

 

the
event of an occurrence of a Trigger Event if it is apparent that Sublessee will
not have use of the entire Subleased Premises by the expiration of the Non-Use
Period.

 

In the
event of any Trigger Event occurring during the last six (6) months of the
Initial Sublease Term or, if an applicable Extension Option has been exercised,
during the last six (6) months of any Extension Term, should the Non-Use Period
continue for thirty (30) consecutive days, Sublessee may elect to exercise an
on-going right to terminate this Sublease upon ten (10) days’ written notice
sent to Sublessor at any time following the expiration of the thirty (30) day
Non-Use Period, but before the Full Restoration to the Subleased Premises.

 

7.                                       Fire
and Other Casualty.  Subject to
compliance with terms and conditions of the Prime Lease relating to repairs,
reconstruction, and restoration, in the event the Subleased Premises are
damaged by fire or other casualty insured by Sublessor, Sublessor agrees to
promptly restore and repair the Subleased Premises at Sublessor’s expense,
including the Sublessor’s Work and any other improvements to be insured by
Sublessor, but only to the extent Sublessor receives insurance proceeds
therefor (plus the amount of any deductible in the insurance carried by
Sublessor, which deductible will be paid by Sublessor, in addition to available
insurance proceeds, toward restoration costs), including the proceeds from both
the insurance required to be carried by Sublessor pursuant to the Prime Lease
and this Sublease.  Notwithstanding the
foregoing, in the event that the Subleased Premises are (i) so destroyed
that they cannot be repaired or rebuilt within one hundred eighty (180) days
after the date of such damage; or (ii) destroyed by a casualty which is
not covered by Sublessor’s insurance carried by Sublessor, or if such casualty
is covered by Sublessor’s insurance but Prime Lessor or other party entitled to
insurance proceeds fails to make such proceeds available to Sublessor in an
amount sufficient for restoration of the Subleased Premises, then Sublessor
shall give written notice to Sublessee of such determination (the “Determination
Notice”) within sixty (60) days of such casualty.  Either Sublessor or Sublessee may terminate
and cancel this Lease effective as of the date of such casualty by giving
written notice to the other party within thirty (30) days after Sublessee’s
receipt of the Determination Notice. 
Upon the giving of such termination notice, all obligations hereunder
with respect to periods from and after the effective date of termination shall
thereupon cease and terminate.  If no
such termination notice is given, Sublessor shall, to the extent of the
available insurance proceeds, make such repair or restoration of the Subleased
Premises to the approximate condition existing prior to such casualty, promptly
and in such manner as not to unreasonably interfere with Sublessee’s use and
occupancy of the Subleased Premises (if Sublessee is still occupying the
Subleased Premises).  Base Rent and
Additional Rent shall proportionately abate during the time that the Subleased
Premises or any part thereof are unusable by reason of any such damage
thereto.  In the event of any conflict
between the terms of this Section 7 and the Prime Lease, the terms of the
Prime Lease shall control notwithstanding the terms of Section 27 below to
the contrary.

 

8.                                       Surrender
and Restoration.  Sublessee
may, at the expiration or earlier termination of this Sublease or any Phase
thereof, surrender such Phase of the Subleased Premises to Sublessor in its
then current “as is” condition.  In
addition, Sublessee shall remove any of its personal property, furniture,
fixtures and equipment, provided Sublessee promptly repairs any damage to such
phase of the Subleased Premises caused by such removal.  Notwithstanding the foregoing or anything to
the contrary in this Sublease and/or in the Prime Lease, and except as

 

26

 

expressly
provided in Sections 19 and 22 below, Sublessor hereby agrees that Sublessee
shall not be required to remove any alterations or improvements unless Sublessor
required such removal at the time consent was required and given by Sublessor
to Sublessee at the time of Sublessee’s request of a Sublessee Change.

 

9.                                       Connection
to Other Facilities.  Sublessor and
Sublessee hereby acknowledge that Sublessee does business or may be doing
business in more than one facility in close proximity to the Subleased
Premises.  As part of Sublessee’s Work or
in connection with subsequent alterations to the Subleased Premises, Sublessee
shall have the right, at its sole cost and expense, to “connect” Sublessee’s
other facilities to the Subleased Premises in order to provide voice/data
communications, employee and visitor interaction and/or access to the Subleased
Premises from Sublessee’s other facilities.

 

10.                                 U.S.
Government Security Regulations. 
In addition to the SCIF Work, Sublessor hereby agrees to cooperate with
Sublessee and any governmental agency doing business either directly or
indirectly with the Sublessee at the Subleased Premises to the extent
alterations are necessary to separate and demise the Subleased Premises from
the remainder of the Subject Building in order to conform to the U.S.
Government Security Regulations and Sublessee’s internal security
requirements.  Except as otherwise
specifically set forth in this Sublease, Sublessee shall be responsible for all
costs and expenses in connection with such alterations.  Upon reasonable request of Sublessor at the
end of the Sublease Term, Sublessee will remove any such alternations which
interfere with normal use of the premises.

 

11.                                 Miscellaneous
Charges.  Except to the
extent payable as Project Operating Expenses and/or Building Operating
Expenses, neither Sublessee nor any of its contractors, subcontractors,
employees, architects, designers and agents shall be charged for, and Sublessor
shall provide, parking, electricity, water, toilet facilities, HVAC (from 6:30
a.m. to 6:00 p.m., Monday through Friday, and 9:00 a.m. to 1:00 p.m. on
Saturdays (“Normal Construction Hours”)), elevators and loading docks prior to
the date of delivery by Sublessor to Sublessee of each Phase.

 

12.                                 Elevators.  At all times during the Full Sublease Term,
Sublessee shall have the use of all building elevators for use by Sublessee and
its employees, occupants, invitees, assignees and sublessees and if Sublessee
desires, Sublessee may install access devices so as to permit access to the
elevators only by Sublessee and its employees. 
So long as the Subleased Premises include all of the Subject Building,
Sublessee shall cause the elevators to be maintained in good working order and
repair, provided however, that Sublessee shall have no obligation to make
capital repairs to the elevators or to retrofit the same to comply with
Applicable Laws and Sublessor shall make all such improvements following notice
from Sublessee to insure the continuous operation of the elevators in
accordance with Applicable Laws and Governmental Requirements.

 

13.                                 Use
of Premises.  The Subleased
Premises shall be occupied and used for general office purposes, storage purposes,
light industrial/lab purposes, assembly purposes, and purposes incidental
thereto, or any other lawful uses permitted under the Prime Lease and
Applicable Law.  Except for the
representations and covenants of Sublessor under this Sublease, Sublessee shall

 

27

 

satisfy
itself as to any existing zoning and restrictive covenants.  Descriptions or identification herein of
spaces within the Subleased Premises as “office”, “warehouse”, or otherwise,
shall not limit the manner in which Sublessee shall be the entitled to use the
space.

 

14.                                 Assignment/Subletting.

 

14.1                           Right
to Assign or Sublease.  Sublessee
shall have the right to assign this Sublease or sublease all or a portion of
the Subleased Premises upon the receipt of Sublessor’s consent, which consent
shall not be unreasonably withheld, conditioned or delayed except as provided
in this Section 14.1.  Sublessee
shall advise Sublessor by notice of (i) Sublessee’s intent to assign this
Sublease or sublease all or a portion of the Subleased Premises, (ii) the
name of the proposed assignee or sublessee, and (iii) the terms of the
proposed assignment or sublease.  In
addition, Sublessee shall provide Sublessor with the necessary financial
information for the assignee.  Sublessor
shall, within fifteen (15) days of receipt of such notice, and any additional
information requested by Sublessor concerning the proposed assignee’s or
sublessee’s financial responsibility, elect to: 
(a) consent to such proposed assignment or sublease; or
(b) refuse such consent, which refusal shall be on reasonable grounds.

 

14.2                           Transfer
to Affiliates. 
Notwithstanding anything to the contrary in the Prime Lease or this Article 14,
Sublessee shall be entitled to assign or sublet the Subleased Premises without
consent by Prime Lessor or Sublessor to any entity controlling Sublessee or any
affiliate or entity under common control or controlled in common by Sublessee
or any of its related entities. 
Sublessee may also assign this Sublease, without Prime Lessor’s and
Sublessor’s consent, to any successor entity, whether by merger, consolidation
or otherwise, or to any person or entity who purchases all or substantially all
of the assets of Sublessee.  Sublessee
shall send Sublessor a notice of any transfer pursuant to this Section 14.2.

 

14.3                           No
Right to Recapture.  Sublessor
shall have no right to recapture any portion of the Subleased Premises should
Sublessee contemplate an assignment or sublease of all or a portion of the
Subleased Premises.

 

14.4                           Permitted
Occupants.  Sublessor hereby agrees that without
Sublessor’s consent, Sublessee may enter into occupancy agreements with
clients, partners, governmental agencies and instrumentalities thereof, vendors
or affiliates of Sublessee (“Permitted Occupants”) allowing Permitted Occupants
to occupy portions of the Subleased Premises as long as such relationship was
not created as a subterfuge to avoid the obligations set forth in this Article 14.  Sublessee shall provide Sublessor with
reasonable prior notice of its intent to enter into any occupancy agreements,
which notice shall identify the Permitted Occupant.

 

15.                                 Maintenance and
Repair/Damage and Destruction.

 

15.1                           Sublessor’s
Responsibilities.  Sublessor
shall continue to retain responsibility and shall maintain, repair and restore
the Buildings, the Project Common Area, including without limitation the
Parking Facilities, the Central Plant and all lines and other building systems
connected to the Central Plant, the Land, and the Subleased Premises, and shall
comply with all obligations under the Prime Lease, and this Sublease.  Except for Sublessee’s

 

28

 

obligations
under (a) Section 3 of this Sublease for the payment of Project Operating
Expenses and Building Operating Expenses, and (b) Section 15.2 below,
Sublessee shall have no responsibility for such maintenance and repair.  In carrying out Sublessor’s maintenance and
repair obligations hereunder, Sublessor hereby agrees to perform such obligations
in a manner at least equal to the level of performance of such obligations
provided by comparable sublessors to other comparable office buildings in the
City of San Diego.  The obligations of
Sublessor hereunder shall include the maintenance, repair and/or capital
replacements of (a) the HVAC system, except as expressly provided in Section 15.2
to the contrary; (b) all “Building Systems”(as hereinafter defined) and the
Central Plant, (c) imbedded plumbing and electrical (d) “Life Safety Systems”
(as hereinafter defined), (e) the roof, the roof drainage systems and the roof
membrane, (f) exterior walls, (g) foundations, slabs, floors and retaining
walls (h) all structural portions of the Buildings (i) the Project Common Area,
including without limitation the Parking Facilities, (j) curtain wall, exterior
glass and mullions, columns, beams, shafts (including elevator shafts except to
the extent Sublessee is obligated to do so under Section 12), elevator
cabs (except to the extent Sublessee is obligated to do so under Section 12),
plazas, pavement, sidewalks, curbs, entrances, driveways, art work,
landscaping, exterior signage other than Sublessee’s, electrical and telephone
closets.  The term “Building Systems” as
used herein shall mean and refer to the base building mechanical, electrical,
life, safety, plumbing, sprinkler systems and HVAC which are not constructed
solely for the benefit of Sublessee.  The
term “Life Safety Systems” shall mean all devices installed and/or required by
Applicable Law to be installed in and around the Buildings to protect against
injury to person and property resulting from fire, earthquake or other
casualty, including without limitation sprinkler systems.  Sublessor shall also maintain all of the
Project Common Areas and the Parking Facilities in first class condition and
repair and promptly remove any graffiti. 
Sublessee hereby agrees that Sublessor shall have the right, on
reasonable prior notice (subject to the provisions of this Sublease which limit
and condition Sublessor’s rights of entry), to enter the Subleased Premises in
order to perform its obligations under this Sublease, but shall use all
reasonable efforts to minimize disruption to Sublessee’s business in the
performance of any such work.

 

15.2                           Sublessee’s
Responsibilities.  Subject to
Sublessor’s obligations in Section 15.1 above, Sublessee shall, at
Sublessee’s sole cost and expense, keep the First Floor of the Subleased
Premises and the Second Floor of the Subleased Premises in good and sanitary
condition at all times during the Full Sublease Term.  So long as Sublessee is the sole occupant of the
Subject Building, and thereafter, to the extent that the following exclusively
service the building space of the Subleased Premises in the Subject Building,
Sublessee shall cause to maintained (a) the following portions of the HVAC
system: air handlers on the roof (repair and maintenance only) and ducting
within the interior of the Subject Building (repair and maintenance only), (b)
non-embedded electrical outlets and facilities servicing the rentable square
footage of the Subleased Premises in the Subject Building, (c) interior
ceilings and floor coverings of the rentable square footage of the Subleased
Premises in the Subject Building,(d) interior paint of the rentable square
footage of the Subleased Premises in the Subject Building, (e) interior window
glass, (f) janitorial work customary for office and warehouse use, (g) lights
and lighting within the rentable area of the Subleased Premises in the Subject
Building, (h) Subject Building security systems, and Sublessee shall keep all
of such in good operating condition and (i) the specific obligations of
Sublessee in Section 12 pertaining to the elevators (collectively, “Sublessee’s
Obligations”).  All of Sublessee’s Obligations
shall be performed at

 

29

 

Sublessee’s
sole cost and expense and shall be excluded from Building Operating
Expenses.  All damage, injury or breakage
to any part or portion of the Subleased Premises (other than the Building
Structure and Building Systems) caused by the negligence or willful misconduct
of Sublessee shall be promptly repaired by Sublessee, at Sublessee’s sole cost
and expense; provided, however, that Sublessee shall be entitled to reimbursement
for any portion of such repair or restoration expense to the extent that the
cost of any such repair is or should be covered by insurance obtained or
required to be obtained by Sublessor under this Sublease.  Under no circumstances shall Sublessee’s
Obligations include any obligation to repair any defects (latent or patent) in
the Buildings and/or in the Project Common Area, including without limitation
Parking Facilities and/or to make the Buildings, the Project Common Areas
and/or the Parking Facilities in compliance with applicable laws, ordinances,
rules and regulations and/or permits (“Applicable Laws”) (and through the Full
Sublease Term any change in Applicable Laws), unless and only to the extent
that such compliance becomes necessary solely due to Sublessee’s use of the
Subleased Premises for other than general office use and warehouse use or for a
use which is not permitted by the current applicable zoning regulations for the
City of San Diego.  A portion of the
Subleased Premises consists of a cafeteria. 
During all portions of the Full Sublease Term during which Sublessee is
in possession and control of the cafeteria, Sublessee shall maintain the grease
trap in the cafeteria.

 

16.                                 Insurance.  During the Full Sublease Term, Sublessee agrees
to provide the liability insurance required of Sublessor, as Tenant, under Section 20.1(b)
of the Prime Lease (but excluding contractual liability for indemnification
under the Prime Lease) and property insurance for Sublessee’s furniture,
fixtures and personal property as required of Sublessor under Section 12.2(a)(ii)
of the Prime Lease (which shall provide for a waiver of subrogation in favor of
Sublessor and Prime Lessor) and shall name Sublessor and the Prime Lessor as
additional named insureds on such insurance policies.  Sublessee shall also be required to obtain
workers’ compensation insurance as required by law.  Sublessor shall continue to maintain all
other coverages of insurance required by the Prime Lease.

 

17.                                 Utilities.

 

17.1                           Background. The Project
was originally developed so that the Subject Building and the Adjacent Building
would be occupied by a single user. This means that the Project is served by
only one electric meter and one gas meter. 
The same is true of water consumed by the Central Plant.  Therefore, Sublessor has developed a cost
allocation model (the “Operating Expense Allocation Model”) attached hereto as
Exhibit “I” and incorporated herein by this reference, for the effective
allocation of the cost of electricity, natural gas, and Central Plant Water
between the Subject Building and the Adjacent Building.

 

17.2                           Sublessor
Provided Utilities.  Sublessor
shall provide electric power and natural gas service to the Subject Building
and Central Plant Water for the HVAC system in the Subleased Premises
(collectively, the “Sublessor Provided Utilities”).  The cost of the Sublessor Provided Utilities
shall be  excluded and paid separately
from Project Operating Expenses, and shall be allocated between Sublessee and
Sublessor or other Building tenants according to the Operating Expense
Allocation Model.  So long as Sublessee
is the sole tenant of the Subject Building, Sublessee shall pay to Sublessor
for the Sublessor Provided Utilities in accordance

 

30

 

with Section 3.5
above, as illustrated on the Operating Expense Allocation Model.  Sublessee shall be responsible for obtaining
and paying for, separate and apart from, and in addition to the Operating
Expenses, all costs of domestic water service, telephone service, and any other
utilities other than those specified above that Sublessee requires in the
Subleased Premises.  No maintenance
and/or repair of the utilities serving the Subleased Premises and/or the
Subject Building by Sublessor which could cause a disruption of such utility
services shall be scheduled by Sublessor without obtaining Sublessee’s prior
consent as to the timing of such maintenance or repair.

 

17.3                           Meters.  Sublessor shall use commercially reasonable
efforts to cause sub-meters for electrical power and natural gas service to be
installed in the Subject Building before the First Phase Delivery Date in order
to measure Sublessee’s consumption of electricity and natural gas; provided,
however, that delays in installing such sub-meters shall not delay or excuse
Sublessee’s obligation to pay for electricity and natural gas effective as of
the First Phase Delivery Date.  Upon
installation of the sub-meters, the Operating Expense Allocation Model will be
modified to provide for direct payment by Sublessee of the utility or utilities
for which meters are installed.

 

18.                                 Parking.  Sublessee shall be entitled to use all parking spaces
in the “Parking Facilities” except for the 115 parking stalls within the
Adjacent Building Parking Area. 
Sublessor represents and warrants to Sublessee that no occupant of the
Adjacent Building has any right under its lease or other agreement to use any
portion of the Project Common Area for the parking of motor vehicles except for
the Adjacent Building Parking Area. 
Sublessee shall have no obligation to pay for the parking rights
provided in this Sublease during the Full Sublease Term.  No later than the Commencement Date of the
First Phase, Sublessor shall cause all of the parking stalls in the Parking
Facilities to be marked to indicate whether Sublessee or the occupant of the
Adjacent Building is permitted to use the same for parking in accordance with
the Site Plan attached as Exhibit “C”. 
Sublessor shall enforce the terms of the lease and other agreements
affecting the Adjacent Building to insure that Sublessee’s exclusive use of the
Parking Facilities other than the Adjacent Building Parking Area is not
interfered with or interrupted.  It is
understood that Sublessee intends to block the driveway on the westerly
boundary of the Subject Parcel that connects the Land with property owned by
Sublessor abutting the westerly boundary of the Subject Parcel.  Sublessee shall not have any right of ingress
or egress to use such driveway to travel across Sublessor’s adjoining property
at any time during the Sublease Term.

 

19.                                 Signage.  Subject to the approval by Prime Lessor under
the Prime Lease and to all Applicable Laws, Sublessee shall have the right to
exclusive building top and other signage as Sublessee desires.  Such exclusive rights shall include
monument
signs, exterior building entrance directional signage, lobby signage, including
Sublessee’s logo and name, on the entrance doors, in the lobby and in the
elevator lobby on any Floor comprising part of the Subleased Premises.  Sublessor shall have no right to maintain
Sublessor identification signs in any other location in, on, or about the
Subject Building and the Parking Facilities shall remove all existing “Cymer”
signage prior to the First Phase Delivery Date. 
The cost of all such signs, including the installation, maintenance and
removal thereof, shall be at Sublessee’s sole cost and expense.  In the event of an assignment of this
Sublease or a sublease of all or a portion of the

 

31

 

Subleased
Premises by Sublessee (to other than a Section 14.2 Affiliate), the
signage rights granted to Sublessee herein may only be transferred to the
extent Sublessee’s transferee has a reputation in the corporate community with
respect to image and reputation that would be generally acceptable to the
mainstream business community. 
Notwithstanding the foregoing, if there are other tenants in the
building, they shall be entitled to reasonable signage,

 

20.                                 Security.  Sublessee may provide, at Sublessee’s sole
cost and expense, such security personnel as it determines to be necessary in
the Subleased Premises.

 

21.                                 Nondisturbance.  Upon request of Sublessee, Sublessor shall use its
commercially reasonable best efforts to provide Sublessee with a
Non-Disturbance Agreement acceptable to Sublessee from any current or future
ground lessors, mortgage holders or lien holders of all or any portion of the
Land, the Buildings and the Project Common Area.  Sublessee shall cooperate with Sublessor in
obtaining any such agreement. Delays in obtaining such agreement shall not
delay or postpone the Effective Date or Sublessee’s obligation to pay
Rent.  Such Non-Disturbance Agreement
shall acknowledge Sublessee’s right of possession and Sublessee’s offset rights
and that, to the extent any of the concessions to be provided to Sublessee have
not been fully funded or performed by Sublessor or Prime Lessor at the time of
a foreclosure, deed in lieu of foreclosure or any other transfer of the Subject
Building as a result of a default of Prime Lessor or Sublessor under the terms
of the applicable ground lease, loan documents, etc., subject to any lender
protections set forth in the lease. 
Sublessee, to the extent Sublessee pays or has paid such unfunded
amount, may deduct the unfunded amount or equivalent value thereof, together
with interest, from the any rent and other amounts owed by Sublessee to
Sublessor next becoming due and payable. 
The non-disturbance agreement from Prime Lessor will provide, among
other things, that in the event the Prime Lease terminates, this Sublease will
become a direct lease between Sublessee and the successor to Prime Lessor
and/or Prime Lessor’s interest in the Subject Building.  Prime Lessor agrees that Sublessee’s
possession of the Subleased Premises shall not be disturbed, nor shall this
Sublease be terminated in the event of Sublessor’s default under, and a
subsequent termination of, the Prime Lease, and this Sublease shall continue in
full force and effect with Prime Lessor undertaking the obligations of
Sublessor hereunder, or Prime Lessor, at its option, may elect to enter into a
new direct lease with Sublessee upon the same terms and conditions as set forth
herein upon such a termination of the Prime Lease.  Sublessor agrees that it shall be a condition
precedent to any subsequent loan that such lender agree that it will provide a
non-disturbance agreement in form reasonable acceptable to Sublessee with
respect to this Sublease.

 

22.                                 Roof
Rights.  At any time
during the Full Sublease Term, subject to Applicable Laws Sublessee may
install, at Sublessee’s sole cost and expense, telecommunications antennas,
microwave dishes and other communications equipment (“Telecommunications
Equipment”) upon the roof of the Subleased Premises.  The physical appearance of the
Telecommunications Equipment shall be subject to Sublessor’s reasonable
approval.  Such approval shall be deemed
to have been granted unless prior to the expiration of the ten (10) day period
immediately following Sublessor’s receipt of the request for approval, together
with plans depicting the location of same, Sublessor fails to deliver to
Sublessee written notice of its disapproval of same and provide reasons for
such disapproval.  The designated location
shall provide for the proper functioning of Sublessee’s Telecommunications
Equipment.  At the time of the request
for

 

32

 

approval,
Sublessor may require Sublessee to install screening around such Telecommunications
Equipment, at Sublessee’s sole cost and expense, as reasonably designated by
Sublessor.  Sublessee shall be
responsible for securing the approval of all governmental authorities and all
permits required by governmental authorities having jurisdiction over such
approvals and permits for the Telecommunications Equipment, and shall provide
copies of such approvals and permits to Sublessor.  Sublessee shall maintain such
Telecommunications Equipment, at Sublessee’s sole cost and expense.  In addition, Sublessee shall, at Sublessee’s
sole cost and expense, prior to the expiration or earlier termination of this
Sublease, remove any Telecommunications Equipment and restore the affected area
to the condition existing prior to Sublessee’s installation thereof, reasonable
wear and tear and damage from casualty and condemnation, excepted.  Sublessor acknowledges that Sublessee may be
storing classified or confidential materials and information in connection with
its business operations from the Subleased Premises.  Accordingly, from and after delivery of
possession to Sublessee, neither Sublessor, Sublessor, or other occupant of the
Subject Building, nor any of their respective agents, employees or contractors
shall go onto the roof without providing Sublessee at least five (5) business
days’ prior written notice of the specific date and time of such intended
entry, which entry shall at all times be accompanied by a representative of
Sublessee; provided, however, that Sublessee may also elect to reschedule such
inspection upon notice to Sublessor.  In
addition, neither Prime Lessor, Sublessor, their respective agents and
employees, nor any other person shall install any equipment or make other
alterations to the roof without the prior written notice to Sublessee, which
approval shall not be withheld if such installation and use will not interfere
with the proper operation of Sublessee’s equipment on the roof and Sublessee’s
security considerations.  In connection
with providing such consent, Sublessee shall have the right to review and
approve any such equipment or alterations desired to be installed or made to
the roof (including make and manufacturer), designate or approve the contractor
or installer performing such work, and have a representative of Sublessee
accompany such contractor or installer at any time such work on the roof is
being performed.

 

23.                                 Secured
Areas.  Sublessor
acknowledges that Sublessee is engaged in activities relating to the national
defense of the United States requiring strict compliance with applicable U.S.
Government security requirements and regulations.  Accordingly, Sublessor and Prime Lessor shall
not exercise any right in the Prime Lease or herein set forth to enter the
Subleased Premises except in the case of emergency or in the event of a
Sublessor inspection, in which case Sublessor shall provide Sublessee with five
(5) business days’ prior written notice of the specific date and time of such
Sublessor inspection; provided, however, that Sublessee may elect to reschedule such
inspection upon notice to Sublessor.  A
representative of Sublessee shall be present upon any entry by Sublessor into
the Subleased Premises.  Sublessor agrees
to cooperate with Sublessee in taking all such measures as may be necessary or
appropriate to limit access to the Subleased Premises or otherwise to comply
with applicable U.S. Government security standards and regulations and shall
not permit anyone to take pictures or videos of the Subleased Premises or any
portion thereof without the express written consent of Sublessee.  During the time Sublessee subleases the
Subleased Premises, all of Sublessor’s and Prime Lessor’s employees may be
required to undergo background investigations and shall obtain a security badge
from Sublessee to be allowed access into the Subject Building.  All Sublessor employees who do not have a
security badge issued by Sublessee for the Subject Building, as well as their
visitors, shall be required to notify Sublessee’s security personnel at least
forty-eight (48) hours

 

33

 

in
advance of their visit to the Subject Building to enable Sublessee or its
security personnel the time necessary to perform background
investigations.  Sublessee retains the
right to exclude any person from entering the Subject Building, in its
reasonable discretion.  To the extent
Sublessor performs work on or leases any other portions of the Subject
Building, Sublessor shall notify Sublessee in advance of same and shall
coordinate the performance of any requisite work with Sublessee to maintain at
all times the security of the Subleased Premises.  Sublessee shall have the right to install
such security equipment, including without limitation, badge readers and key card
access devices, and other security related hardware and equipment, all of which
shall remain the property of Sublessee and shall be removed from the Subleased
Premises by Sublessee upon the termination or expiration of this Sublease.  Sublessee shall promptly repair any damage to
the Subleased Premises occasioned by the removal of such fixtures, hardware or
equipment.

 

24.                                 Hazardous
Materials.  Sublessor
hereby agrees that to the extent any Hazardous Materials are currently located
in, on or around the Subleased Premises and to the extent any Hazardous
Materials are found in, on or around the Subleased Premises and/or the Land
after the date of full execution and delivery of this Sublease and same were
not placed in the Subleased Premises by Sublessee, its agents, employees,
contractors, invitees or licensees, Sublessor shall be responsible for all
costs in connection with same, which costs shall not be included in Operating
Expenses.  Sublessor agrees to promptly
remediate all such Hazardous Materials to the extent required by law (or any
governmental agency with jurisdiction thereon) to be removed, shall keep
Sublessee informed as to the scheduling of any such remedial or related work,
and shall indemnify, defend and hold Sublessee harmless in connection
therewith.  Sublessor acknowledges that in
connection with this Sublease, Sublessee shall be performing a Phase 1
environmental survey and conducting other environmental and related
testing.  Sublessor warrants, that except
as provided by Exhibit “H” attached hereto and made a part hereof (the “Disclosure
Notice”), neither Sublessor, the Prime Lessor nor any preceding owners, lessees
or sublessees of the Land or Subleased Premises have used all, or any portion,
of same for the production, disposal or storage of any Hazardous Materials (as
defined below), and Sublessor is not aware of any such prior use or any
proceeding or inquiry by a governmental authority with respect to the presence
of such waste or substance on the property or the movement thereof from or to
adjoining property. Sublessor warrants there is no asbestos in the Subject
Building and Parking Facility.  Sublessor
will not, at any time, use or permit the use of any portion of Subleased
Premises, the Buildings, Parking Facilities, the Land beneath any of them, or
the Site, to be used in violation of any Applicable Laws, including those
relating to environmental conditions on, under or about the Site, including but
not limited to asbestos, soil and ground water conditions and Hazardous
Materials.  Further, Sublessor’s cost for
the removal of Hazardous Materials from Sublessor’s Subleased Premises or the
Project shall be excluded from Operating Expenses which would otherwise be
passed through to Sublessee inclusive of any material which is deemed toxic
presently or in the future. Sublessor shall defend, indemnify and hold
Sublessee harmless from and against any and all losses, costs (including
reasonable attorneys’ fees), liabilities and claims arising from any violations
of the Applicable Laws and/or the existence of Hazardous Materials that are now
or hereinafter become located in, on or under the Site, and shall assume full
responsibility and cost to remedy such violations and/or the existence of
Hazardous Materials, provided and to the extent that such violation or the
existence of Hazardous Materials is not caused by Sublessee.  Hazardous Materials shall include, but shall
not be limited to, substances requiring investigation, removal or remediation
under any federal,

 

34

 

state or
local statute, regulation, ordinance or policy including substances defined as “hazardous
substances” or “toxic substances” in the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended, 42 U.S.C. Section 1802;
the Resource Conservation Recovery Act, 42 U.S.C. Section 6901, et. seq.;
or those substances defined as “hazardous wastes” in applicable codes in the
State of California or the State where the Premises are located and in the
regulations adopted and publications promulgated to such codes.  Sublessee shall have the right to use and
store Hazardous Materials (so long as such does not require a permit under the
Resource Conservation Recovery Act) in the Subleased Premises with concurrent notice
of such to Sublessor including any applicable Material Safety Data Sheets.  Sublessee shall not, at any time, use any
portion of the Subleased Premises or Project in violation of any
Regulations.  Sublessee shall defend,
indemnify and hold Sublessor harmless from and against any and all losses,
costs (including reasonable attorneys’ fees), liabilities and claims arising
from the existence of Hazardous Materials that hereinafter become located in,
on or under the Project caused by Sublessee.

 

25.                                 Right
to Repair.  Sublessee
shall have the right (but not the obligation) to fulfill Sublessor’s
obligations with respect to the maintenance and repair of the Subleased
Premises and the Project(and Sublessee shall have access to utility systems and
elements outside the Subleased Premises which service the Subleased Premises in
order to do so) in the event Sublessor fails to do same under this Sublease
and/or under the Prime Lease and after the expiration of appropriate notice
from Sublessee and Sublessor’s failure to cure same within thirty (30) days. In
such event, Sublessee shall have the right to deduct its actual cost so
incurred from the next monthly installment(s) of Base Rent and Additional Rent
due.  Notwithstanding any provision set
forth in this Sublease or the Prime Lease to the contrary, if Sublessee
provides written notice (or oral notice in the event of an emergency such as
damage or destruction to or of any portion of the Building Structure and/or the
Building Systems, the Parking Facilities and/or anything that could cause
material disruption to Sublessee’s business) to Sublessor of an event or
circumstance which requires the action of Sublessor with respect to repair
and/or maintenance, and Sublessor fails to provide such action within a
reasonable period of time, given the circumstances, after the receipt of such
notice, but in any event not later than seven (7) days after receipt of such
notice, then Sublessee may proceed to take the required action upon delivery of
an additional three (3) business days’ notice to Sublessor specifying that
Sublessee is taking such required action (provided, however, that neither of
the notices shall be required in the event of an emergency which threatens life
or where there is imminent danger to property or a possibility that a failure
to take immediate action could cause a material disruption in Sublessee’s
normal and customary business activities), and if such action was required
under the terms of this Sublease to be taken by Sublessor and was not taken by
Sublessor within such ten (10) day period (unless such notice was not required
as provided above), then Sublessee shall be entitled to prompt reimbursement by
Sublessor of Sublessee’s costs and expenses in taking such action on a
commercially reasonable basis plus interest thereon at the rate of ten percent
(10%) plus rent abatement to the extent Sublessee would have otherwise been
entitled to rent abatement under the Sublease. 
Notwithstanding anything to the contrary in this Lease, if Sublessee has
not received payment of any sums due from Sublessor as of the end of the
thirtieth (30th) day following Sublessor’s receipt of a statement or
notice thereof, Sublessee shall have the right to offset said sums against each
month’s payment of Rent due under this Sublease until the total amount of such
sums due to Sublessee has been recaptured by Sublessee through such
offset.  Sublessor agrees that Sublessee

 

35

 

will
have access to the Subleased Premises, the Building Systems and Building
Structure and the other portions of the Project to the extent necessary to
perform the work contemplated by this provision.

 

26.                                 Indemnity.  Sublessee shall at its expense defend,
indemnify, and hold Sublessor and Sublessor’s agents, contractors, licensees,
employees, directors, officers, partners, trustees and invitees harmless from
and against any and all claims, costs, liability, damage or expense, including
but not limited to, penalties, fines, reasonable attorneys’ fees or costs,
resulting from Sublessee’s breach or failure to perform its obligations under
this Sublease.  Sublessor shall at its
expense defend, indemnify, and hold Sublessee and Sublessee’s agents,
contractors, licensees, employees, directors, officers, partners, trustees and
invitees harmless from and against any and all claims, costs, liability, damage
or expense, including but not limited to, penalties, fines, reasonable
attorneys’ fees or costs, resulting from Sublessor’s breach or failure to
perform its obligations under this Sublease.

 

27.                                 The
Prime Lease.  Sublessor,
not Sublessee, shall be solely responsible for paying Rent and all other
amounts to be paid to Prime Lessor under the Prime Lease, and complying with
all of the terms and provisions of the Prime Lease that relate to matters other
than the use and occupancy of the Subject Premises by Sublessee.  Sublessor and Sublessee shall be jointly
responsible for obtaining any requisite approvals from Prime Lessor to the
extent required thereunder.  Sublessee
shall be responsible for complying with the terms and conditions of the Prime
Lease arising out of or relating to the use and occupancy of the Subleased
Premises by Sublessee.  Sublessee agrees
that Sublessee shall not perform any tests or studies affecting the soils or
subsurface areas of the Premises Subleased by the Prime Lease except to the
extent permitted by Section 2.3 of the Prime Lease.

 

28.                                 Quiet
Enjoyment.  Sublessor
covenants and agrees that Sublessee shall peaceably and quietly have, hold and
enjoy the Subleased Premises in accordance with the terms of this Sublease.

 

29.                                 Condemnation.  Subject to the terms of the Prime Lease, if
all of the Subleased Premises (or any of the Parking Facilities or Building
Common Area) is taken or condemned for a public or quasi-public use, or if a
material portion of the Subleased Premises (or any of the Subject Building, the
Parking Facilities or Building Common Area) is taken or condemned for a public
or quasi-public use and the remaining portion thereof is not usable by
Sublessee for the normal conduct of its business in the manner conducted
immediately prior to the taking, this Sublease shall terminate as of the
earlier of the date title to the condemned real estate vests in the condemner
or the date on which Sublessee is deprived of possession of the Subleased
Premises (or the applicable portion thereof or of the Parking Facilities or
Building Common Area).  In such event,
the Base Rent herein reserved and all Additional Rent and other sums payable
hereunder shall be apportioned and paid in full by Sublessee to Sublessor to
that date, all Base Rent, Additional Rent and other sums payable hereunder
prepaid for periods beyond that date shall forthwith be repaid by Sublessor to
Sublessee, and neither party shall thereafter have any liability hereunder,
except that any obligation or liability of either party, actual or contingent,
under this Sublease which has accrued on or prior to such termination date
shall survive.  If only part of the
Subleased Premises is taken or condemned for a public or quasi-public use and
this

 

36

 

Sublease
does not terminate, Sublessor shall, to the extent of the award it receives,
restore the Subleased Premises to a condition and to a size as nearly
comparable as reasonably possible to the condition and size thereof immediately
prior to the taking, and there shall be an equitable adjustment to the Base
Rent and Additional Rent based on the actual loss of use of the Subleased
Premises including the applicable portion thereof or of the Parking Facilities
or Building Common Area suffered by Sublessee from the taking.  Sublessor shall be entitled to receive the
entire award in any proceeding with respect to any taking provided for in this Section 29,
without deduction therefrom for any estate vested in Sublessee by this Lease,
and Sublessee shall receive no part of such award.  Nothing herein contained shall be deemed to
prohibit Sublessee from making a separate claim, against the condemner, to the
extent permitted by law, for the value of Sublessee’s moveable trade fixtures,
machinery and moving and relocation expenses.

 

30.                                 Sublessee’s
Default.

 

30.1                           Event
of Default.  The occurrence of any one
or more of the following events shall constitute an event of default (herein
referred to as an “Event of Default”) of Sublessee under this Sublease:

 

(a)                                  if Sublessee
fails to pay Base Rent or any Additional Rent hereunder as and when such rent
becomes due and such failure shall continue for more than ten (10) business
days after receipt of written notice from Sublessor of such failure; provided,
however, that any such notice will be in lieu of, and not in addition to, any
notice required under applicable law (including, without limitation, the
provisions of California Code of Civil Procedure Section 1161 regarding
unlawful detainer actions or any successor statute or law of a similar nature);

 

(b)                                 if Sublessee
fails to perform or observe any other term of this Sublease and such failure
shall continue for more than thirty (30) days after Sublessor gives Sublessee
notice of such failure, or, if such failure cannot reasonably be corrected
within such thirty (30) day period, if Sublessee does not commence to correct
such default within said thirty (30) day period and thereafter diligently
prosecute the correction of same to completion within a reasonable time and in
any event prior to the time a failure to complete such correction could cause
Sublessor to be subject to criminal prosecution for violation of any law, rule,
ordinance or regulation.

 

30.2                           Remedies.  Upon the occurrence of any one or more Events of
Default, Sublessor without any demand or notice whatsoever (except as expressly
required in this Section 30) shall have the immediate right to pursue the
following remedies (all of which shall be cumulative and in addition to any
other remedies available to Sublessor at law or in equity):

 

(a)                                  In addition
to any other remedies available to Sublessor at law or in equity under
Applicable Law (including, without limitation, the remedies of California Civil
Code Section 1951.4 and any successor statute or similar law), Sublessor
will have the immediate right and option to terminate this Sublease and all
rights of Sublessee hereunder.  If
Sublessor elects to terminate this Sublease then, to the extent permitted under
applicable law, Sublessor may recover from Sublessee (a) the worth at the
time of

 

37

 

award of
any unpaid rent which had been earned at the time of such termination; plus
(b) 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 rent loss that Sublessee proves could have been reasonably
avoided; plus (c) the worth at the time of award of the amount by which
the unpaid rent for the balance of the term of the Sublease for which Sublessee
remains obligated hereunder after the time of award exceeds the amount of such
rent loss that Sublessee proves could be reasonably avoided; plus (d) any other
amount necessary to compensate Sublessor for all the detriment proximately
caused by Sublessee’s failure to perform its obligations under this Sublease or
which, in the ordinary course of things, results therefrom including but not
limited to, to the extent permitted under Applicable Law, attorneys’ fees and
costs; brokers’ commissions; the costs of refurbishment, alterations,
renovation and repair of the Subleased Premises, and removal (including the
repair of any damage caused by such removal) and storage (or disposal) of
Sublessee’s personal property, equipment, fixtures, alterations and any other
items which Sublessee is required under this Sublease to remove but does not
remove.  As used in subsection 30.2(a)
above, the “worth at the time of award” is computed by allowing interest at the
Interest Rate by discounting such amount at the discount rate of the Federal
Reserve Bank of San Francisco at the time of award plus one percent (1%).

 

(b)                                 Sublessor has
the remedy described in California Civil Code Section 1951.4 (lessor may
continue lease in effect after lessee’s breach and abandonment and recover rent
as it becomes due, if lessee has right to sublet or assign, subject only to
reasonable limitations).  Accordingly,
upon the occurrence of an Event of Default and abandonment of the Subleased
Premises by Sublessee or in the event that Sublessor elects to re-enter the
Subleased Premises or takes possession of the Subleased Premises pursuant to
legal proceeding or pursuant to any notice provided by law, then if Sublessor
does not elect to terminate this Sublease, Sublessor may from time to time,
without terminating this Sublease, either recover all rent as it becomes due or
relet the Subleased Premises or any part thereof on terms and conditions as
Sublessor in its sole and absolute discretion may deem advisable with the right
to make alterations and repairs to the Subleased Premises in connection with
such reletting.  If Sublessor elects to
relet the Subleased Premises, then rents received by Sublessor from such
reletting will be applied; first, to the payment of any indebtedness other than
rent due hereunder from Sublessee to Sublessor; second, to the payment of any
cost of such reletting; third, to the payment of the reasonable cost of any
alterations and repairs to the Subleased Premises incurred in connection with
such reletting; fourth, to the payment of rent due and unpaid hereunder and the
residue, if any, will be held by Sublessor and applied to payment of future
rent as the same may become due and payable hereunder.  Should that portion of such rents received
from such reletting during any month, which is applied to the payment of rent
hereunder, be less than the rent payable during that month by Sublessee
hereunder, then Sublessee agrees to pay such deficiency to Sublessor
immediately upon demand therefor by Sublessor. 
Such deficiency will be calculated and paid monthly.

 

(c)                                  Event of
Default hereunder shall not be construed as a waiver of such Event of Default
(except as to acceptance by Sublessor of payment in full of all

 

38

 

Base
Rent and Additional Rent past due at the time of such acceptance or as
otherwise indicated by Sublessor in writing).

 

(d)                                 The rights
granted to Sublessor in this Section 30.2 shall be cumulative of every
other right or remedy provided in this Sublease or which Sublessor may
otherwise have at law or in equity or by statute, and the exercise of one or
more rights or remedies shall not prejudice or impair the concurrent or subsequent
exercise of other rights or remedies or constitute a forfeiture or waiver of
Base Rent, Additional Rent or damages accruing to Sublessor by reason of any
Event of Default.

 

31.                                 Obligation
to Mitigate.  Nothing
contained in this Sublease will relieve Sublessor of any obligation which
Sublessor may have under the laws of the state of California to mitigate its
damages resulting from an Event of Default.

 

32.                                 Brokerage
Commission.  Sublessor
shall be responsible for the payment of a real estate brokerage commission to
Sublessee’s brokers Trammell Crow Services, Inc., doing business as Trammell
Crow Company and to Sublessor’s brokers Colliers International (collectively
the “Brokers”) pursuant to the terms of a separate written agreement, a copy of
which shall be provided to Sublessee (“Brokers Agreement”).  Sublessor and Sublessee represent and warrant
to each other that, with the exception of Brokers, no brokers were involved in
connection with the negotiation or consummation of this Sublease.  Each party agrees to indemnify the other, and
hold it harmless, from and against any and all claims, damages, losses,
expenses and liabilities (including reasonable attorneys’ fees) incurred by
said party as a result of a breach of this representation and warranty by the
other party and Sublessor agrees to indemnify and hold harmless Sublessee from
and against any and all claims, damages, losses, expenses and liabilities
(including reasonable attorneys’ fees) incurred by Sublessee as a result of a
breach by Sublessors of its obligations under this Section 32.

 

33.                                 Sublessor
Default.  If Sublessor
fails to pay to Sublessee when due any sum of money required to be paid by
Sublessor to Sublessee pursuant to the terms of this Sublease (a “Sublessor
Monetary Default”) and such failure continues for more than ten (10) business
days after Sublessee gives Sublessor written notice of such failure, or if
Sublessor fails to perform or observe or otherwise breaches any other term of
this Sublease (each, a “Sublessor Performance Default”) and such failure shall
continue for more than thirty (30) days after Sublessee gives Sublessor written
notice of such failure, or, if such other failure cannot be corrected within
such thirty (30) day period, if Sublessor does not commence to correct such
default within such thirty (30) day period and thereafter diligently prosecute
the correction of same to completion within a reasonable time, a “Sublessor
Event of Default” shall exist under this Sublease.  Upon the occurrence of a Sublessor Event of Default,
Sublessee may at Sublessee’s option, exercise any rights provided in Section 25
above.

 

34.                                 Notices.  All notices and demands that may be required
or permitted hereunder shall be in writing and shall be deemed given upon
actual receipt with proof thereof (or proof of refusal of delivery) and shall
be sent by certified or registered United States Mail, postage prepaid, return
receipt requested, or by a nationally recognized overnight courier, with proof
of delivery, to the following addresses, unless otherwise designated by written
notice:

 

39

 

 

	
  To Sublessor:

  	
   

  	
  Cymer Inc.

  
	
   

  	
   

  	
  17075 Thornmint Court

  
	
   

  	
   

  	
  Attn: Nancy Baker

  
	
   

  	
   

  	
  San Diego, California 92127-1815

  
	
   

  	
   

  	
  Attn: Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  Higgs, Fletcher &
  Mack LLP

  
	
   

  	
   

  	
  First National Bank Building,

  
	
   

  	
   

  	
  401 West “A” Street, Suite 2600

  
	
   

  	
   

  	
  San Diego, California 92101

  
	
   

  	
   

  	
  Attn: William Reavey, Esq.

  
	
   

  	
   

  	
   

  
	
  To Sublessee:

  	
   

  	
  Northrop Grumman System
  Corporation

  
	
   

  	
   

  	
  Attn: Real Estate Department - Legal Notices

  
	
   

  	
   

  	
  1840 Century Park East

  
	
   

  	
   

  	
  Los Angeles, California 90067

  
	
   

  	
   

  	
   

  
	
  with a copy to:

  	
   

  	
  Northrop Grumman
  Systems Corporation

  
	
   

  	
   

  	
  M/S 9900/P04-220

  
	
   

  	
   

  	
  2000 W. NASA Blvd.

  
	
   

  	
   

  	
  Melbourne, FL 32904

  
	
   

  	
   

  	
  Attn: Manager, Sector Real Estate

  
	
   

  	
   

  	
   

  
	
  And to:

  	
   

  	
  Rutan & Tucker, LLP

  
	
   

  	
   

  	
  611 Anton Blvd., 14th Floor

  
	
   

  	
   

  	
  Costa Mesa,
  California 92626

  
	
   

  	
   

  	
  Attn: Mary M.
  Green, Esq.

  

 

35.                                 Attorneys’ Fees.  If either party shall commence legal action to
specifically enforce or otherwise seek redress under or for breach of this
Sublease, the prevailing party in such action shall be entitled to recover its
costs and reasonable attorneys’ fees therein, including costs and fees incurred
in any appellate proceeding, in addition to any other relief.

 

36.                                 Termination of
Prime Lease.  If for any reason the term
of the Prime Lease shall terminate prior to the Expiration Date (other than in
connection with Sublessor’s Default), this Sublease shall automatically be
terminated and Sublessor shall not be liable to Sublessee by reason thereof
unless said termination shall have been caused by the default of Sublessor
under the Prime Lease, and said Sublessor default was not as a result of a
Sublessee default hereunder. 
Notwithstanding the foregoing, in no event shall Sublessor or Sublessor
agree to a voluntary termination or cancellation of the Prime Lease without the
prior written consent of Sublessee.

 

37.                                 Entire
Agreement.  It is
understood and acknowledged that there are no oral agreements between the
parties hereto affecting this Sublease and this Sublease supersedes and cancels
any and all previous negotiations, arrangements, brochures, agreements and
understandings, if any, between the parties hereto or displayed by Sublessor to
Sublessee with respect to the subject matter thereof, and none thereof shall be
used to interpret or construe this

 

40

 

Sublease.  This Sublease, and the exhibits and schedules
attached hereto, contain all of the terms, covenants, conditions, warranties
and agreements of the parties relating in any manner to the rental, use and
occupancy of the Subleased Premises and shall be considered to be the only
agreements between the parties hereto and their representatives and
agents.  None of the terms, covenants,
conditions or provisions of this Sublease can be modified, deleted or added to
except in writing signed by the parties hereto. 
All negotiations and oral agreements acceptable to both parties have
been merged into and are included herein. 
There are no other representations or warranties between the parties,
and all reliance with respect to representations is based totally upon the
representations and agreements contained in this Sublease.

 

38.                                 Counterparts.  This Sublease may be executed in counterparts
with the same effect as if both parties hereto had executed the same
document.  Both counterparts shall be
construed together and shall constitute a single sublease.

 

39.                                 Estoppel
Certificates.  Sublessee
agrees, from time to time, within fifteen (15 business days after Sublessee’s
receipt of a request of Sublessor or Prime Lessor, to execute and deliver to
Sublessor, or Sublessor’s designee, an estoppel certificate stating, to the
best of Sublessee’s knowledge without inquiry, that this Sublease is in full
force and effect, the date to which rent has been paid, that Sublessor is not
in default thereunder (or specifying in detail the nature of Sublessor’s
default), and the termination date of this Sublease.

 

40.                                 Time
is of the Essence.  TIME IS OF
THE ESSENCE OF THIS SUBLEASE.

 

41.                                 Miscellaneous.

 

41.1                           Severability.  If any clause or provision of this Sublease
is determined to be illegal, invalid or unenforceable under present or future
laws effective during the Full Sublease Term, then and in that event, it is the
intention of the parties hereto that the remainder of this Sublease shall not
be affected thereby, and that in lieu of such illegal, invalid or unenforceable
clause or provision there shall be substituted a clause or provision as similar
in terms to such illegal, invalid or unenforceable clause or provision as may
be possible and be legal, valid and enforceable.

 

41.2                           No
Waiver.  No failure of Sublessor or Sublessee
to exercise any power given Sublessor or Sublessee hereunder or to insist upon
strict compliance by Sublessor or Sublessee with its obligations hereunder, and
no custom or practice of the parties at variance with the terms hereof shall
constitute a waiver of Sublessor’s or Sublessee’s rights to demand exact
compliance with the terms hereof.

 

41.3                           Amendments.  This Sublease contains the entire agreement
of the parties hereto as to the subject matter of this Sublease and no prior
representations, inducements, letters of intent, promises or agreements, oral
or otherwise, between the parties not embodied herein shall be of any force and
effect.  Any future amendment to this
Sublease must be in writing and signed by the parties hereto.  The masculine (or neuter) pronoun, singular
number shall include the masculine, feminine and neuter gender and the singular
and plural number.

 

41

 

41.4                           Captions.  The captions of this Sublease are for
convenience only and are not a part of this Sublease, and do not in any way
define, limit, describe or amplify the terms or provisions of this Sublease or
the scope or intent thereof.

 

41.5                           Government
Law.  This Sublease shall be interpreted
under the laws of the State of California.

 

41.6                           Construction.  The parties acknowledge that this Sublease is the
result of negotiations between the parties, and in construing any ambiguity
hereunder no presumption shall be made in favor of either party.  No inference shall be made from any item
which has been stricken from this Sublease other than the deletion of such item.

 

42.                                 Authority.  Sublessee represents to Sublessor that
Sublessee is authorized by all required corporate or partnership action to
enter into this Sublease and the individual(s) signing this Sublease on behalf
of Sublessee are each authorized to bind Sublessee to its terms and that the
consummation of this Sublease is not in conflict with any agreement, contract
or order to which Sublessee is a party. 
Sublessor represents to Sublessee that Sublessor is authorized by all
required corporate or partnership action to enter into this Sublease and the
individual(s) signing this Sublease on behalf of Sublessor are each authorized
to bind Sublessor to its terms and that the consummation of this Sublease is
not in conflict with any agreement, contract or order to which Sublessor is a
party.

 

43.                                 Sublessor
Bankruptcy.  If Sublessor
files for bankruptcy protection, Sublessee may remain in the Subleased Premises
even if the Sublease is rejected.  In the
event that the obligations of Sublessor under the Sublease are not performed
during the pendency of a bankruptcy or insolvency proceeding involving the
Sublessor as the debtor, or following the rejection of the Sublease in
accordance with Section 365 of the United States Bankruptcy Code, then
notwithstanding any provision of this Sublease to the contrary, Sublessee shall
have the right to set off against all Rent and other sums required to be paid
under this Sublease next due and owing (a) any and all damages caused by such
non-performance of Sublessor’s obligations under the Sublease by Sublessor,
debtor-in-possession, or the bankruptcy trustee, and (b) any and all damages
caused by the non-performance of Sublessor’s obligations under the Sublease
following any rejection of the Sublease in accordance with Section 365 of
the United States Bankruptcy Code.

 

44.                                 Sublessee’s
Fixtures.  Sublessor and
Prime Lessor agree to execute a waiver, subordination and consent letter, in
favor of any lender holding a security interest in property of Sublessee
located at the Subleased Premises, acknowledging the security interest of the
lender and confirming that Sublessor will not interfere with the exercise by
the lender of its rights under agreements with Sublessee, subject to the
conditions that the lender must act in accordance with applicable laws, may
never undertake any form of forcible entry into the Subleased Premises and must
repair any damage caused by entry and removal of property.  Sublessor and Prime Lessor waives any lien
rights it may have in Sublessee’s trade fixtures and personal property.

 

45.                                 Governmental Requirements.  Sublessee shall promptly comply throughout the
Full Sublease Term, at Sublessee’s sole cost and expense, with all present and
future laws,

 

42

 

ordinances,
orders, rules, regulations or requirements of all federal, state and municipal
governments and appropriate departments, commissions, boards and officers
thereof (collectively, “Governmental Requirements”) relating to Sublessee’s use
of all or any part of the Subleased Premises including the Subject Building and
the Building  December 21, 2004 Common Area.  Notwithstanding the foregoing, Sublessor, at
Sublessor’s sole cost and expense, shall be responsible for compliance with all
Governmental Requirements relating to the Land, the Subject Building, the
Parking Facilities and the Project Common Area and shall make all improvements
and repairs required to render the same in compliance with all applicable
Governmental Requirements.  Sublessee
shall also observe and comply with the requirements of all policies of public
liability, fire and other policies of insurance at any time in force with
respect to the Subleased Premises.

 

46.                                 PRIME
LESSOR’S CONSENT.  As a
condition to the effectiveness of this Sublease, the parties shall obtain from
the Prime Lessor its consent to the terms and conditions of this Sublease and
the work and other activities contemplated by Sublessee hereunder, in form and
substance acceptable to Sublessee, and including, without limitation, consent
to Section 4 (Sublessor’s Work and Condition of Subleased Premises), Section 5
(Alterations), Section 9 (Connection to Other Facilities), Section 10
(U.S. Government Security Regulations), Section 14
(Assignment/Subletting), Section 19 (Signage), Section 21
(Non-Disturbance), Section 22 (Roof Rights), Section 23 (Secured
Areas), Section 24 (Hazardous Materials), Section 27 (The Prime
Lease), and Section 44 (Sublessee’s Fixtures).

 

47.                                 NONBINDING
DRAFTS.  ALL SUBLEASE
DRAFTS ARE TO BE CONSTRUED ONLY AN INVITATION TO NEGOTIATE.  NEITHER THIS SUBLEASE DRAFT OR ANY PRIOR
LETTERS OF INTENT OR REQUESTS FOR PROPOSAL SHALL BE CONSTRUED OR INTERPRETED TO
BE AN OFFER OR A CONTRACT OR OTHER AGREEMENT BINDING ON THE PARTIES.  SUBLESSEE RESERVES THE RIGHT TO NEGOTIATE
WITH OTHER PARTIES.  NO PARTY SHALL HAVE
ANY LEGAL RIGHTS OR OBLIGATIONS WITH RESPECT TO ANY OTHER PARTY, AND NO PARTY
SHOULD TAKE ANY ACTION OR FAIL TO TAKE ANY ACTION IN DETRIMENTAL RELIANCE UPON
ANY SUCH DRAFTS, OR STATEMENTS MADE BY ANY AGENT OR REPRESENTATIVE OF EITHER
PARTY UNLESS AND UNTIL A SUBLEASE AGREEMENT IS FULLY EXECUTED AND DELIVERED BY
ALL PARTIES INVOLVED.

 

	
  /s/ EPH

  	
   

  	
   

  	
  /s/ AJP

  	
   

  
	
  Sublessor’s Initials

  	
   

  	
  Sublessee’s Initials

  

 

43

 

IN WITNESS WHEREOF, the parties through their duly
authorized representatives have executed this Sublease on the dates written
below:

 

	
   

  	
  CYMER, INC.,

  
	
   

  	
  a Nevada corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Edward P. Holtaway

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  EVP, CORP OPERATIONS

  
	
   

  	
   

  	
   

  
	
   

  	
  Date:

  	
  12/22/04

  
	
   

  	
   

  
	
   

  	
  “Sublessor”

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  NORTHROP GRUMMAN SYSTEMS

  
	
   

  	
  CORPORATION, a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ A.J. Paz

  
	
   

  	
   

  	
   

  
	
   

  	
  Title:

  	
  Corporate Director of
  Real Estate

  
	
   

  	
   

  
	
   

  	
  Date:

  	
  12/22/04

  
	
   

  	
   

  	
   

  
	
   

  	
  “Sublessee”

  
							

 

44Exhibit
10.7(a)

 

FIRST AMENDMENT TO LEASE

 

THIS
FIRST AMENDMENT TO LEASE (“First Amendment”) is made as of           November 12            ,
2004, by and between TRANSWESTERN GREAT LAKES, L.P., a Delaware limited
partnership (“Landlord”), as successor in interest to Great Lakes REIT, Inc.,
and AKSYS, LTD., a Delaware corporation (“Tenant”).

 

WHEREAS,
Landlord and Tenant are parties (by succession or assignment) to a written
lease dated July 15, 1996 (the “Lease”) for the lease of the entire
commercial building consisting of approximately 41,500 rentable square feet,
and located at Two Marriott Drive, Lincolnshire, Illinois  60069; and

 

WHEREAS,
Landlord and Tenant now desire to amend the Lease and extend the term of the
Lease, all on the terms and conditions hereinafter set forth.

 

NOW,
THEREFORE, in consideration of the mutual covenants and conditions hereinafter contained, the receipt and sufficiency of which are hereby
acknowledged, Landlord and Tenant hereby agree as follows:

 

1.                                       Lease
Term.  The term of the Lease shall be
extended from the current expiration date of August 31, 2006, until December 31,
2011 (the “Extension Term”).

 

2.                                       Annual
Rent.  Effective as of June 1,
2005, Tenant shall pay the following amounts as Annual Rent and Monthly
Installment of Rent for the Premises for the remainder of the term of the Lease
(including the Extension Term):

 

	
  Period

  	
   

  	
  Annual Rent/ RSF

  	
   

  	
  Annual Rent

  	
   

  	
  Monthly Installment of Rent

  	
   

  
	
  6/1/05 – 12/31/05

  	
   

  	
  $

  	
  8.50

  	
   

  	
  $

  	
  352,750.00

  	
   

  	
  $

  	
  29,395.83

  	
   

  
	
  1/1/06 – 12/31/06

  	
   

  	
  $

  	
  8.80

  	
   

  	
  $

  	
  365,200.00

  	
   

  	
  $

  	
  30,433.33

  	
   

  
	
  1/1/07 – 12/31/07

  	
   

  	
  $

  	
  9.10

  	
   

  	
  $

  	
  377,650.00

  	
   

  	
  $

  	
  31,470.83

  	
   

  
	
  1/1/08 – 12/31/08

  	
   

  	
  $

  	
  10.50

  	
   

  	
  $

  	
  435,750.00

  	
   

  	
  $

  	
  36,312.50

  	
   

  
	
  1/1/09 – 12/31/09

  	
   

  	
  $

  	
  11.25

  	
   

  	
  $

  	
  466,875.00

  	
   

  	
  $

  	
  38,906.25

  	
   

  
	
  1/1/10 – 12/31/10

  	
   

  	
  $

  	
  12.50

  	
   

  	
  $

  	
  518,750.00

  	
   

  	
  $

  	
  43,229.17

  	
   

  
	
  1/1/11 – 12/31/11

  	
   

  	
  $

  	
  13.25

  	
   

  	
  $

  	
  549,875.00

  	
   

  	
  $

  	
  45,822.92

  	
   

  

 

3.                                       Rent
Adjustment.  In addition to Annual
Rent, for the remainder of the term of the Lease, including the Extension Term,
Tenant shall continue to pay to Landlord Direct Expenses and Taxes for each
Lease Year, as set forth in the Lease.

 

4.                                       Improvements.  Landlord has no obligation to improve, alter
or remodel the Premises; provided
however, that Landlord shall provide up to but not in excess of $290,500 (an
amount equal to $7.00 per rentable square foot in the Premises) (“Tenant
Allowance”) for Tenant’s use for the purpose of redecorating, altering,
furnishing and/or remodeling the Premises, provided however, in no event shall
the cost of furnishing the Premises exceed $124,500.00 (an amount equal to
$3.00 per rentable square foot in the Premises).  No work may be performed prior to Landlord’s
written approval of such work and/or the detailed plans of such work, if
necessary and available.  All contractors
must be approved by Landlord in advance, which approval shall not be
unreasonably withheld, and shall be licensed, bonded and/or insured to Landlord’s
reasonable satisfaction.  The cost of
performing such work shall include any and all architectural fees, fees for
building permits and approvals, and Landlord’s construction management fee of
three percent (3%) of the cost of the work. 
Landlord shall provide Construction Management Services to Tenant for
its improvements.  If the cost of such
work exceeds the amount of the Tenant Allowance, Tenant shall be directly
responsible for said excess amount or shall pay to Landlord said excess amount
within fifteen (15) days of Tenant’s receipt of Landlord’s statement of such
excess costs.  If the actual cost of the

 

64

 

work
is less than the Tenant Allowance, Tenant shall not be entitled to receive any
payment or credit for such difference. 
Such work must be completed by, and any request for reimbursement from
the Tenant Allowance must be made to Landlord no later than, December 31,
2005.  Unless otherwise provided herein,
any installations shall remain the property of Landlord.

 

5.                                       Electricity.  All electricity used by Tenant in the
Premises shall be paid for by Tenant by a separate charge or charges billed by
the utility company providing electrical service and payable by Tenant directly
to such utilities company.  Landlord
shall have the right at any time and from time-to-time during the Lease Term to
contract for electricity service from such providers of such services as
Landlord shall elect (each being an “Electric Service Provider”).  Tenant shall cooperate with Landlord, and the
applicable Electric Service Provider, at all times and, as reasonably
necessary, shall allow Landlord and such Electric Service Provider reasonable
access to the Building’s electric lines, feeders, risers, wiring, and any other
machinery within the Premises.  Tenant’s
use of electrical services furnished by Landlord shall not exceed in voltage,
rated capacity, or overall load that which is standard for the Building.

 

6.                                       Security
Deposit / Letter of Credit.

 

A.           Landlord
and Tenant hereby acknowledge that Tenant has previously deposited with
Landlord an irrevocable letter of credit (“Letter of Credit”) running in favor
of Landlord, in the current face amount of $600,000.00, as provided in Section 5
of the Lease.  No later than June 1,
2005, Tenant shall either: (i) cause the issuer of the Letter of Credit to
deliver to Landlord a valid and binding amendment to the Letter of Credit
pursuant to which the face amount of the Letter of Credit shall be increased to
$750,000.00; or (ii) provide to Landlord a new letter of credit in the amount
of $750,000.00 in a form and from a bank reasonably acceptable to Landlord.

 

B.             Paragraphs
(i) and (ii) of Section 5 of the Lease are hereby deleted.  Notwithstanding the terms of this Paragraph 6
or Section 5 of the Lease, if Tenant has not, as of the applicable date
set forth below or prior, defaulted in the performance of any of its obligations
under the Lease beyond any applicable notice or cure period, then the Letter of
Credit may be reduced as follows:

 

(i) at any time after January 1, 2006, Tenant may reduce
the face amount of the Letter of Credit to $600,000.00;

 

(ii) at any time after January 1, 2007, Tenant may reduce
the face amount of the Letter of Credit to $500,000.00;

 

(iii) at any time after January 1, 2008, Tenant may reduce
the face amount of the Letter of Credit to $400,000.00; and

 

(iv)
at any time after January 1, 2009, and each January 1 thereafter,
Tenant may reduce the face amount of the Letter of Credit by not more than
$250,000.00 per year, provided that Tenant first demonstrates to Landlord that
Tenant’s income from continuing operations for the immediately preceding fiscal
year is greater than $2,000,000.00 (as evidenced by Tenant’s audited financial
statements); provided however, in no event shall the face amount of the Letter
of Credit be less than $150,000.00 at any time during the term of the Lease.

 

C.                                     The use, application or retention of the
Letter of Credit, or any portion thereof, by Landlord shall not prevent
Landlord from exercising any other right or remedy provided by the Lease or by
law (it being intended

 

65

 

that Landlord shall not first be required to
proceed against the collateral) and shall not operate as a limitation on any
recovery to which Landlord may otherwise be entitled.

 

D.                                    In
the event of a transfer of Landlord’s interest in the Building, Landlord shall
have the right to (i) transfer the Letter of Credit to the transferee, or (ii)
to require Tenant to cause the  issuer of
the Letter of Credit to deliver a valid and binding amendment changing the
beneficiary of the Letter of Credit to the transferee, and thereupon the
Landlord shall, without any further agreement between the parties, be released
by Tenant from all liability therefor, and it is agreed that the provisions
hereof shall apply to every transfer or assignment of the Letter of Credit to a
new Landlord.  Tenant shall pay upon
Landlord’s demand, as additional rent, any and all costs or fees charged in
connection with the Letter of Credit that arise due to: (i) Landlord’s sale or
transfer of all or a portion of the Building; or (ii) the addition, deletion,
or modification of any beneficiaries under the Letter of Credit.

 

7.                                       Option
To Renew.

 

A.                                   Tenant
shall have and is hereby granted one (1) option to renew the Lease with respect
to all (but not less than all) of the Premises for five (5) years (the “Renewal
Term”) by notice in writing received by Landlord no later than December 31,
2010, time being of the essence for the giving of such notice.  All of the
covenants, conditions and provisions of the Lease shall be applicable to the
Renewal Term, except that the Annual and Monthly Base Rent shall be adjusted to
the current “Market Rental Rate” for the Premises as of the date the Renewal
Term is to commence with appropriate increases each year thereafter.  Landlord shall advise Tenant of the new monthly
rental rate for a Renewal Term within fifteen (15) days after a request
therefore from Tenant; provided however that Tenant’s failure to timely make
such request shall not extend the date upon which Tenant must give notice of
its exercise of the option to renew.  In
no event shall the Annual and Monthly Base Rent be subject to determination or
modification by any person, entity, court or authority other than as expressly
set forth herein.  Tenant shall have
thirty (30) days from the receipt of Landlord’s notice to either accept or
dispute Landlord’s determination of the Market Rental Rate.  In the event that Tenant disputes Landlord’s
determination, Tenant shall so notify Landlord and advise Landlord of Tenant’s
determination of the Market Rental Rate for the Renewal Term.  If, after engaging in good faith
negotiations, Landlord and Tenant cannot agree upon the Market Rental Rate
within thirty (30) days after Landlord’s receipt of Tenant’s notice of
objection to Landlord’s determination of the Market Rental Rate, the “Dispute
Resolution Mechanism” described in subparagraph D below shall apply.

 

B.                                     Tenant’s
exercise of the foregoing option to renew is subject to the conditions that (i)
the Lease is in full force and effect, (ii) there is no uncured default by
Tenant the time of notification of its exercise of the renewal option or any
time prior to commencement of the Renewal Term, and (iii) that both at the time
of notification and commencement there has been no material adverse change in
the financial condition of the Tenant since the date of the Lease, as
reasonably determined by Landlord.

 

C.                                     For
purposes of this Lease, “Market Rental Rate” shall mean the rental, as of the
date for which such Market Rental Rate is being calculated, per annum per
rentable square foot, for lease renewals for comparable space of comparable
size in buildings comparable to the Building in the applicable office
submarket, taking into account prevailing market conditions, including the
concessions customary for a lease renewal of the size and term contained
herein, including but not limited to free rent, tenant improvement allowance
(or cash equivalent or rental abatement in lieu of tenant improvement
allowance), and any other inducements which are customary for such a transaction.

 

D.                                    The Dispute Resolution
Mechanism shall be as follows:  no later
than fifteen (15) days after the end of the 30-day period described in
subparagraph A above, Landlord and Tenant shall jointly appoint as arbitrator a
commercial real estate broker licensed in Illinois with a minimum of ten (10)
years experience in the applicable market. 
If Landlord and Tenant cannot agree on an acceptable arbitrator,
Landlord and Tenant shall each choose, within an additional fifteen (15) days
thereafter, its own arbitrator who meets the qualifications described
above.  The arbitrators shall then
jointly select, within an additional ten (10) days, an arbitrator to serve as
the arbitrator hereunder.  If either
Landlord or Tenant fails to choose its own arbitrator within said fifteen (15)
day period, then the arbitrator chosen by the other shall resolve the
dispute.  Within ten (10) days after
appointment (whether mutually by

 

66

 

the
parties, by default of one party to choose an arbitrator, or by selection by
the two arbitrators), Landlord and Tenant shall each submit to the
arbitrator(s) in writing its good faith estimate of the Market Rental Rate for
the Renewal Term.  Within ten (10) days
after receipt of the last of the determinations, the arbitrator(s) shall choose
either Landlord’s or Tenant’s determination of Market Rental Rate.  The cost of the arbitrator(s) shall be borne
by the party whose determination of the Market Rental Rate was not selected by
the arbitrator.

 

E.              Landlord
shall have no obligation to make improvements, decorations, repairs,
alterations or additions to the Premises as a condition to Tenant’s obligations
to pay Rent during the Renewal Term unless otherwise agreed to by the parties
at the time the amendment set forth below is executed.  In the event that Tenant exercises the
renewal option set forth herein, Tenant agrees to enter into an amendment to
the Lease incorporating the Renewal Term and the Annual and Monthly Base Rent
applicable thereto within thirty (30) days following the exercise of the
renewal option, but in no event shall a delay in the full execution of such
amendment nullify Tenant’s exercise of the option to renew.

 

8.                                       Superseded Provisions.  Section 29
and Exhibit B of the Lease are hereby deleted and shall be of no further force
or effect.

 

9.                                       Notices.  The Lease is hereby modified to provide that
the address for rent payments and notices to Landlord shall be addressed as
follows:

 

	
  Landlord:

  	
  Transwestern
  Commercial Services

  
	
   

  	
   

  	
  3000 Lakeside
  Drive, Suite 113S

  
	
   

  	
   

  	
  Bannockburn,
  Illinois 60015

  
	
   

  	
   

  	
  Attn: Property
  Manager

  
	
   

  	
   

  	
   

  
	
  with
  a copy to:

  	
   

  	
  Transwestern
  Investment Company

  
	
   

  	
   

  	
  150 North Wacker
  Drive, Suite 800

  
	
   

  	
   

  	
  Chicago,
  Illinois 60606

  
	
   

  	
   

  	
  Attn: Owner’s
  Representative

  
	
   

  	
   

  	
   

  
	
  and
  to:

  	
   

  	
  Drane, Freyer
  and Lapins

  
	
   

  	
   

  	
  150 North Wacker
  Drive, 8th Floor

  
	
   

  	
   

  	
  Chicago,
  Illinois 60606

  
	
   

  	
   

  	
  Attn: Wendy
  Freyer, Esq.

  
	
   

  	
   

  	
   

  
	
  Payments
  of Rent shall be made payable to the order of: Transwestern Two Marriott, at
  the following address:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Transwestern
  Commercial Services

  
	
   

  	
   

  	
  3000 Lakeside
  Drive, Suite 113S

  
	
   

  	
   

  	
  Bannockburn,
  Illinois 60015

  
	
   

  	
   

  	
  Attn: Property
  Manager

  

 

or
such other name and address as Landlord shall, from time to time, designate.

 

10.                                 Broker’s
Commission.  Landlord and Tenant each
represent to the other that the only broker with whom either has dealt in
connection with this First Amendment are Transwestern Commercial Services as
Landlord’s agent and CB Richard Ellis, Inc. at Tenant’s agent.

 

11.                                 Indemnification.  The following is hereby added at the end of Section 10
of the Lease:

 

67

 

“Tenant shall not be liable to Landlord, and Landlord
waives all claims against Tenant, for any damage to any property in or about
the Premises or the Building by or from any cause whatsoever except to the
extent caused by or arising from the gross negligence or willful misconduct of
Tenant (or its agents, employees, or contractors).  Landlord shall protect, indemnify, and hold
Tenant harmless from and against any and all loss, claims, liability, or costs
(including court costs and reasonable attorneys fees) incurred by reason of (a)
any damage to any property of any third party, or any injury (including but not
limited to death) to any person occurring in, on or about the Premises or the
Building to the extent that such injury or damage shall be caused by or arise
from any actual or alleged act, neglect, fault or omission by or of Landlord,
its agents, servants, employees, or invitees to meet any standards imposed by
any duty with respect to the injury or damage; (b) Landlord’s failure to comply
with any and all governmental laws, ordinances, and regulations applicable to
the condition of the Building (other than those that are the responsibility of
Tenant); or (c) any breach or default on the part of Landlord in the
performance of any covenant or agreement on its part to be performed pursuant
to this Lease.

 

The provisions of this Section shall survive the
termination of this Lease with respect to any claims or liability accruing prior
to such termination.”

 

12.                                 Insurance.  Section 11.1 of the Lease is hereby
modified to provide that during the term of the Lease Landlord shall carry
property damage insurance for the Building at replacement cost.

 

13.                                 Services
and Utilities.  The following is
hereby added at the end of Section 13.1 of the Lease:

 

“Notwithstanding anything to the contrary
contained in this Section 13.1, if: (i) Landlord ceases to furnish any
service in the Building for a period in excess of five (5) consecutive Business
Days after Tenant notifies Landlord of such cessation (the “Interruption Notice”);
(ii) such cessation does not arise as a result of an act or omission of Tenant;
(iii) such cessation is not caused by a fire or other casualty (in which case Section 22
shall control); (iv) the restoration of such service is reasonably within the
control of Landlord; and (v) as a result of such cessation, the Premises or a
material portion thereof, is rendered untenantable and Tenant in fact ceases to
use the Premises, or material portion thereof, then Tenant, as its sole remedy,
shall be entitled to receive an abatement of Base Rent payable hereunder during
the period beginning on the sixth (6th) consecutive Business Day of such
cessation and ending on the day when the service in question has been
restored.  In the event the entire
Premises has not been rendered untenantable by the cessation in service, the
amount of abatement that Tenant is entitled to receive shall be prorated based
upon the percentage of the Premises so rendered untenantable and not used by
Tenant.”

 

14.                                 Remedies.  Sections 19.1.1, 19.1.4.1,
19.1.4.2, and 19.6 of the Lease are hereby modified to read as follows:

 

(a)                                  The
beginning of Section 19.1.1 of the Lease shall read as follows:  “Landlord may, at its election seek to
terminate this Lease or seek to terminate Tenant’s right...”

 

(b)                                 The
following is added to the end of Section 19.1.4.1:  “Landlord shall at all times make
commercially reasonable efforts to mitigate its damages hereunder.”

 

(c)                                  The
beginning of Section 19.1.4.2 of the Lease shall read as follows:   “Landlord shall use commercially
reasonable to relet the Premises or any part thereof for such rent and upon
such terms as Landlord, in its sole discretion, shall determine (including the
right to relet the premises for a greater or lesser term than that remaining
under this Lease, the right to relet the Premises as a part of a larger area,
and the right to change the character or use made of the Premises).  In connection with or in preparation for any
reletting, Landlord may, but shall not be required to, make repairs,
alterations and additions in or to the Premises and redecorate the same to the
extent Landlord deems necessary or desirable, and Tenant shall, upon demand,
pay the cost thereof, together with Landlord’s expenses of reletting,
including, without

 

68

 

limitation, any commission
incurred by Landlord.  If Landlord
decides to relet the Premises or a duty to relet is imposed upon Landlord by law,
Landlord and Tenant agree that nevertheless Landlord shall at most be required
to use only the same efforts Landlord then uses to lease premises in the
Building generally....”

 

(d)                                 Section 19.6
of the Lease is hereby deleted, and the following is inserted in its
place:  “To secure the payment of all
rentals and other sums of money becoming due from Tenant under this Lease,
Landlord shall have and Tenant grants to Landlord a first lien upon the
leasehold interest of Tenant under this Lease, which lien may be enforced in
equity, but Landlord shall not under any circumstances have any security
interest in any of Tenant’s personal property.”

 

15.                                 Damage by Fire.  In Section 22.2
of the Lease, the words “sixty (60) days” are hereby replaced with “thirty
(30) days”.

 

16.                                 Sale
by Landlord.  The beginning of Section 24
of the Lease shall be modified to read as follows:  “In the event of sale or conveyance by
Landlord of the Building, and assumption of this Lease in writing by the
purchaser or transferee, the same shall operate to release Landlord...”

 

17.                                 Estoppel
Certificates.  In line 7 of Section 25
of the Lease, the word “reasonably” is hereby inserted before the word “requested”,
and by deletion of the remainder of the sentence after the word “purchaser” in
line 9 of Section 25.

 

18.         Surrender
of Premises.  The beginning of Section 26.1
of the Lease is hereby modified to read as follows:  “Both Landlord and Tenant will make
commercially reasonable efforts to schedule a joint inspection of the
Building at least 30 days before the last day of the Term...”

 

19.                                 Authority.  If a party to this First Amendment signs as a
corporation each of the persons executing this Lease on behalf of such parties
represents and warrants that such party has been and is qualified to do business
in the state in which the Building is located, and that the corporation has
full right and authority to enter into this First Amendment and that all
persons signing on behalf of the corporation were authorized to do so by
appropriate corporate action.  Such party
agrees to furnish promptly upon request a corporate resolution, proof of due
authorization by partners or other appropriate documentation evidencing the due
authorization of such party to enter into this First Amendment.

 

20.                                 Terms
of Lease.  Capitalized terms used but
not defined herein shall have the meanings ascribed thereto in the Lease.

 

21.                                 Incorporation
of the Lease.  Except as otherwise
amended hereby, the terms and covenants of the Lease remain in full force and
effect.

 

69

 

IN WITNESS WHEREOF, Landlord and Tenant have executed
this First Amendment as of the day and year first above written.

 

	
  TENANT:

  	
  LANDLORD:

  
	
   

  	
   

  	
   

  
	
  AKSYS,
  LTD., a Delaware corporation

  	
  TRANSWESTERN GREAT LAKES, L.P.,
  a 

  Delaware limited partnership

  
	
   

  	
   

  
	
  By:

  	
  /s/ Lawrence D. Damron

  	
   

  	
  By:

  	
  Transwestern
  Great Lakes GP, L.L.C., a

  
	
  Name:

  	
   Lawrence D. Damron

  	
   

  	
   

  	
  Maryland limited liability company,

  
	
  Title:

  	
   Sr. VP and
  Chief Financial Officer

  	
   

  	
   

  	
  its general
  partner

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Transwestern Investment Company,

  
	
   

  	
   

  	
   

  	
  L.L.C.,
  its authorized agent

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Betsy J. Nelson

  
	
   

  	
   

  	
  Name:

  	
   Betsy J. Nelson

  
	
   

  	
   

  	
  Title:

  	
   Vice President

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  WITNESS/ATTEST

  	
  WITNESS/ATTEST

  
	
  By:

  	
  /s/ Rose A. Upton

  	
   

  	
  By:

  	
  /s/ Jennifer Del Boccio

  
	
  Name:

  	
   Rose A. Upton

  	
   

  	
  Name:

  	
   Jennifer
  Del Boccio

  
	
  Title:

  	
   Exec. Office Coordinator

  	
   

  	
  Title:

  	
   Administrative
  Assistant

  
																			

 

70

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