Document:

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(MULTICURRENCY--CROSS BORDER)

                                 [ISDA(R) LOGO]

                  International Swap Dealers Association, Inc.

                                MASTER AGREEMENT

                           dated as of MARCH 12, 2002

             JPMORGAN CHASE BANK and WADDELL & REED FINANCIAL, INC.

have entered and/or anticipate entering into one or more transactions (each a
"Transaction") that are or will be governed by this Master Agreement, which
includes the schedule (the "Schedule"), and the documents and other confirming
evidence (each a "Confirmation") exchanged between the parties confirming those
Transactions.

Accordingly, the parties agree as follows:--

1.   INTERPRETATION

(a)  DEFINITIONS. The terms defined in Section 14 and in the Schedule will have
the meanings therein specified for the purpose of this Master Agreement.

(b)  INCONSISTENCY. In the event of any inconsistency between the provisions of
the Schedule and the other provisions of this Master Agreement, the Schedule
will prevail. In the event of any inconsistency between the provisions of any
Confirmation and this Master Agreement (including the Schedule), such
Confirmation will prevail for the purpose of the relevant Transaction.

(c)  SINGLE AGREEMENT. All Transactions are entered into in reliance on the fact
that this Master Agreement and all Confirmations form a single agreement between
the parties (collectively referred to as this "Agreement"), and the parties
would not otherwise enter into any Transactions.

2.   OBLIGATIONS

(a)  GENERAL CONDITIONS.

     (i)   Each party will make each payment or delivery specified in each
     Confirmation to be made by it, subject to the other provisions of this
     Agreement.

     (ii)  Payments under this Agreement will be made on the due date for value
     on that date in the place of the account specified in the relevant
     Confirmation or otherwise pursuant to this Agreement, in freely
     transferable funds and in the manner customary for payments in the required
     currency. Where settlement is by delivery (that is, other than by payment),
     such delivery will be made for receipt on the due date in the manner
     customary for the relevant obligation unless otherwise specified in the
     relevant Confirmation or elsewhere in this Agreement.

     (iii) Each obligation of each party under Section 2(a)(i) is subject to (1)
     the condition precedent that no Event of Default or Potential Event of
     Default with respect to the other party has occurred and is continuing, (2)
     the condition precedent that no Early Termination Date in respect of the
     relevant Transaction has occurred or been effectively designated and (3)
     each other applicable condition precedent specified in this Agreement.

         Copyright(C) 1992 International Swap Dealers Association, Inc.

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(b)  CHANGE OF ACCOUNT. Either party may change its account for receiving a
payment or delivery by giving notice to the other party at least five Local
Business Days prior to the scheduled date for the payment or delivery to which
such change applies unless such other party gives timely notice of a reasonable
objection to such change.

(c)  NETTING. If on any date amounts would otherwise be payable:--

     (i)  in the same currency; and

     (ii) in respect of the same Transaction,

by each party to the other, then, on such date, each party's obligation to make
payment of any such amount will be automatically satisfied and discharged and,
if the aggregate amount that would otherwise have been payable by one party
exceeds the aggregate amount that would otherwise have been payable by the other
party, replaced by an obligation upon the party by whom the larger aggregate
amount would have been payable to pay to the other party the excess of the
larger aggregate amount over the smaller aggregate amount.

The parties may elect in respect of two or more Transactions that a net amount
will be determined in respect of all amounts payable on the same date in the
same currency in respect of such Transactions, regardless of whether such
amounts are payable in respect of the same Transaction. The election may be made
in the Schedule or a Confirmation by specifying that subparagraph (ii) above
will not apply to the Transactions identified as being subject to the election,
together with the starting date (in which case subparagraph (ii) above will not,
or will cease to, apply to such Transactions from such date). This election may
be made separately for different groups of Transactions and will apply
separately to each pairing of Offices through which the parties make and receive
payments or deliveries.

(d)  DEDUCTION OR WITHHOLDING FOR TAX.

     (i)   GROSS-UP. All payments under this Agreement will be made without any
     deduction or withholding for or on account of any Tax unless such deduction
     or withholding is required by any applicable law, as modified by the
     practice of any relevant governmental revenue authority, then in effect. If
     a party is so required to deduct or withhold, then that party ("X") will:--

           (1) promptly notify the other party ("Y") of such requirement;

           (2) pay to the relevant authorities the full amount required to be
           deducted or withheld (including the full amount required to be
           deducted or withheld from any additional amount paid by X to Y under
           this Section 2(d)) promptly upon the earlier of determining that such
           deduction or withholding is required or receiving notice that such
           amount has been assessed against Y;

           (3) promptly forward to Y an official receipt (or a certified copy),
           or other documentation reasonably acceptable to Y, evidencing such
           payment to such authorities; and

           (4) if such Tax is an Indemnifiable Tax, pay to Y, in addition to the
           payment to which Y is otherwise entitled under this Agreement, such
           additional amount as is necessary to ensure that the net amount
           actually received by Y (free and clear of Indemnifiable Taxes,
           whether assessed against X or Y) will equal the full amount Y would
           have received had no such deduction or withholding been required.
           However, X will not be required to pay any additional amount to Y to
           the extent that it would not be required to be paid but for:--

               (A) the failure by Y to comply with or perform any agreement
               contained in Section 4(a)(i), 4(a)(iii) or 4(d); or

               (B) the failure of a representation made by Y pursuant to Section
               3(f) to be accurate and true unless such failure would not have
               occurred but for (I) any action taken by a taxing authority, or
               brought in a court of competent jurisdiction, on or after the
               date on which a Transaction is entered into (regardless of
               whether such action is taken or brought with respect to a party
               to this Agreement) or (II) a Change in Tax Law.

                                        2                           ISDA(R) 1992
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     (ii)  LIABILITY. If:--

           (1) X is required by any applicable law, as modified by the practice
           of any relevant governmental revenue authority, to make any deduction
           or withholding in respect of which X would not be required to pay an
           additional amount to Y under Section 2(d)(i)(4);

           (2) X does not so deduct or withhold; and

           (3) a liability resulting from such Tax is assessed directly
           against X,

     then, except to the extent Y has satisfied or then satisfies the liability
     resulting from such Tax, Y will promptly pay to X the amount of such
     liability (including any related liability for interest, but including any
     related liability for penalties only if Y has failed to comply with or
     perform any agreement contained in Section 4(a)(i), 4(a)(iii) or 4(d)).

(e)  DEFAULT INTEREST; OTHER AMOUNTS. Prior to the occurrence or effective
designation of an Early Termination Date in respect of the relevant Transaction,
a party that defaults in the performance of any payment obligation will, to the
extent permitted by law and subject to Section 6(c), be required to pay interest
(before as well as after judgment) on the overdue amount to the other party on
demand in the same currency as such overdue amount, for the period from (and
including) the original due date for payment to (but excluding) the date of
actual payment, at the Default Rate. Such interest will be calculated on the
basis of daily compounding and the actual number of days elapsed. If, prior to
the occurrence or effective designation of an Early Termination Date in respect
of the relevant Transaction, a party defaults in the performance of any
obligation required to be settled by delivery, it will compensate the other
party on demand if and to the extent provided for in the relevant Confirmation
or elsewhere in this Agreement.

3.   REPRESENTATIONS

Each party represents to the other party (which representations will be deemed
to be repeated by each party on each date on which a Transaction is entered into
and, in the case of the representations in Section 3(f), at all times until the
termination of this Agreement) that:--

(a)  BASIC REPRESENTATIONS.

     (i)   STATUS. It is duly organised and validly existing under the laws of
     the jurisdiction of its organisation or incorporation and, if relevant
     under such laws, in good standing;

     (ii)  POWERS. It has the power to execute this Agreement and any other
     documentation relating to this Agreement to which it is a party, to deliver
     this Agreement and any other documentation relating to this Agreement that
     it is required by this Agreement to deliver and to perform its obligations
     under this Agreement and any obligations it has under any Credit Support
     Document to which it is a party and has taken all necessary action to
     authorise such execution, delivery and performance;

     (iii) NO VIOLATION OR CONFLICT. Such execution, delivery and performance do
     not violate or conflict with any law applicable to it, any provision of its
     constitutional documents, any order or judgment of any court or other
     agency of government applicable to it or any of its assets or any
     contractual restriction binding on or affecting it or any of its assets;

     (iv)  CONSENTS. All governmental and other consents that are required to
     have been obtained by it with respect to this Agreement or any Credit
     Support Document to which it is a party have been obtained and are in full
     force and effect and all conditions of any such consents have been complied
     with; and

     (v)   OBLIGATIONS BINDING. Its obligations under this Agreement and any
     Credit Support Document to which it is a party constitute its legal, valid
     and binding obligations, enforceable in accordance with their respective
     terms (subject to applicable bankruptcy, reorganisation, insolvency,
     moratorium or similar laws affecting creditors' rights generally and
     subject, as to enforceability, to equitable principles of general
     application (regardless of whether enforcement is sought in a proceeding in
     equity or at law)).

                                        3                           ISDA(R) 1992
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(b)  ABSENCE OF CERTAIN EVENTS. No Event of Default or Potential Event of
Default or, to its knowledge, Termination Event with respect to it has occurred
and is continuing and no such event or circumstance would occur as a result of
its entering into or performing its obligations under this Agreement or any
Credit Support Document to which it is a party.

(c)  ABSENCE OF LITIGATION. There is not pending or, to its knowledge,
threatened against it or any of its Affiliates any action, suit or proceeding at
law or in equity or before any court, tribunal, governmental body, agency or
official or any arbitrator that is likely to affect the legality, validity or
enforceability against it of this Agreement or any Credit Support Document to
which it is a party or its ability to perform its obligations under this
Agreement or such Credit Support Document.

(d)  ACCURACY OF SPECIFIED INFORMATION. All applicable information that is
furnished in writing by or on behalf of it to the other party and is identified
for the purpose of this Section 3(d) in the Schedule is, as of the date of the
information, true, accurate and complete in every material respect.

(e)  PAYER TAX REPRESENTATION. Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(e) is accurate and true.

(f)  PAYEE TAX REPRESENTATIONS. Each representation specified in the Schedule as
being made by it for the purpose of this Section 3(f) is accurate and true.

4.   AGREEMENTS

Each party agrees with the other that, so long as either party has or may have
any obligation under this Agreement or under any Credit Support Document to
which it is a party:--

(a)  FURNISH SPECIFIED INFORMATION. It will deliver to the other party or, in
certain cases under subparagraph (iii) below, to such government or taxing
authority as the other party reasonably directs:--

     (i)   any forms, documents or certificates relating to taxation specified
     in the Schedule or any Confirmation;

     (ii)  any other documents specified in the Schedule or any Confirmation;
     and

     (iii) upon reasonable demand by such other party, any form or document that
     may be required or reasonably requested in writing in order to allow such
     other party or its Credit Support Provider to make a payment under this
     Agreement or any applicable Credit Support Document without any deduction
     or withholding for or on account of any Tax or with such deduction or
     withholding at a reduced rate (so long as the completion, execution or
     submission of such form or document would not materially prejudice the
     legal or commercial position of the party in receipt of such demand), with
     any such form or document to be accurate and completed in a manner
     reasonably satisfactory to such other party and to be executed and to be
     delivered with any reasonably required certification,

in each case by the date specified in the Schedule or such Confirmation or, if
none is specified, as soon as reasonably practicable.

(b)  MAINTAIN AUTHORISATIONS. It will use all reasonable efforts to maintain in
full force and effect all consents of any governmental or other authority that
are required to be obtained by it with respect to this Agreement or any Credit
Support Document to which it is a party and will use all reasonable efforts to
obtain any that may become necessary in the future.

(c)  COMPLY WITH LAWS. It will comply in all material respects with all
applicable laws and orders to which it may be subject if failure so to comply
would materially impair its ability to perform its obligations under this
Agreement or any Credit Support Document to which it is a party.

(d)  TAX AGREEMENT. It will give notice of any failure of a representation made
by it under Section 3(f) to be accurate and true promptly upon learning of such
failure.

(e)  PAYMENT OF STAMP TAX. Subject to Section 11, it will pay any Stamp Tax
levied or imposed upon it or in respect of its execution or performance of this
Agreement by a jurisdiction in which it is incorporated,

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organised, managed and controlled, or considered to have its seat, or in which a
branch or office through which it is acting for the purpose of this Agreement is
located ("Stamp Tax Jurisdiction") and will indemnify the other party against
any Stamp Tax levied or imposed upon the other party or in respect of the other
party's execution or performance of this Agreement by any such Stamp Tax
Jurisdiction which is not also a Stamp Tax Jurisdiction with respect to the
other party.

5.   EVENTS OF DEFAULT AND TERMINATION EVENTS

(a)  EVENTS OF DEFAULT. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified Entity
of such party of any of the following events constitutes an event of default (an
"Event of Default") with respect to such party:--

     (i)    FAILURE TO PAY OR DELIVER. Failure by the party to make, when due,
     any payment under this Agreement or delivery under Section 2(a)(i) or 2(e)
     required to be made by it if such failure is not remedied on or before the
     third Local Business Day after notice of such failure is given to the
     party;

     (ii)   BREACH OF AGREEMENT. Failure by the party to comply with or perform
     any agreement or obligation (other than an obligation to make any payment
     under this Agreement or delivery under Section 2(a)(i) or 2(e) or to give
     notice of a Termination Event or any agreement or obligation under Section
     4(a)(i), 4(a)(iii) or 4(d)) to be complied with or performed by the party
     in accordance with this Agreement if such failure is not remedied on or
     before the thirtieth day after notice of such failure is given to the
     party;

     (iii)  CREDIT SUPPORT DEFAULT.

            (1) Failure by the party or any Credit Support Provider of such
            party to comply with or perform any agreement or obligation to be
            complied with or performed by it in accordance with any Credit
            Support Document if such failure is continuing after any applicable
            grace period has elapsed;

            (2) the expiration or termination of such Credit Support Document or
            the failing or ceasing of such Credit Support Document to be in full
            force and effect for the purpose of this Agreement (in either case
            other than in accordance with its terms) prior to the satisfaction
            of all obligations of such party under each Transaction to which
            such Credit Support Document relates without the written consent of
            the other party; or

            (3) the party or such Credit Support Provider disaffirms, disclaims,
            repudiates or rejects, in whole or in part, or challenges the
            validity of, such Credit Support Document;

     (iv)   MISREPRESENTATION. A representation (other than a representation
     under Section 3(e) or (f)) made or repeated or deemed to have been made or
     repeated by the party or any Credit Support Provider of such party in this
     Agreement or any Credit Support Document proves to have been incorrect or
     misleading in any material respect when made or repeated or deemed to have
     been made or repeated;

     (v)    DEFAULT UNDER SPECIFIED TRANSACTION. The party, any Credit Support
     Provider of such party or any applicable Specified Entity of such party (1)
     defaults under a Specified Transaction and, after giving effect to any
     applicable notice requirement or grace period, there occurs a liquidation
     of, an acceleration of obligations under, or an early termination of, that
     Specified Transaction, (2) defaults, after giving effect to any applicable
     notice requirement or grace period, in making any payment or delivery due
     on the last payment, delivery or exchange date of, or any payment on early
     termination of, a Specified Transaction (or such default continues for at
     least three Local Business Days if there is no applicable notice
     requirement or grace period) or (3) disaffirms, disclaims, repudiates or
     rejects, in whole or in part, a Specified Transaction (or such action is
     taken by any person or entity appointed or empowered to operate it or act
     on its behalf);

     (vi)   CROSS DEFAULT. If "Cross Default" is specified in the Schedule as
     applying to the party, the occurrence or existence of (1) a default, event
     of default or other similar condition or event (however

                                        5                           ISDA(R) 1992
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     described) in respect of such party, any Credit Support Provider of such
     party or any applicable Specified Entity of such party under one or more
     agreements or instruments relating to Specified Indebtedness of any of them
     (individually or collectively) in an aggregate amount of not less than the
     applicable Threshold Amount (as specified in the Schedule) which has
     resulted in such Specified Indebtedness becoming, or becoming capable at
     such time of being declared, due and payable under such agreements or
     instruments, before it would otherwise have been due and payable or (2) a
     default by such party, such Credit Support Provider or such Specified
     Entity (individually or collectively) in making one or more payments on the
     due date thereof in an aggregate amount of not less than the applicable
     Threshold Amount under such agreements or instruments (after giving effect
     to any applicable notice requirement or grace period);

     (vii)  BANKRUPTCY. The party, any Credit Support Provider of such party or
     any applicable Specified Entity of such party:--

            (1) is dissolved (other than pursuant to a consolidation,
            amalgamation or merger); (2) becomes insolvent or is unable to pay
            its debts or fails or admits in writing its inability generally to
            pay its debts as they become due; (3) makes a general assignment,
            arrangement or composition with or for the benefit of its creditors;
            (4) institutes or has instituted against it a proceeding seeking a
            judgment of insolvency or bankruptcy or any other relief under any
            bankruptcy or insolvency law or other similar law affecting
            creditors' rights, or a petition is presented for its winding-up or
            liquidation, and, in the case of any such proceeding or petition
            instituted or presented against it, such proceeding or petition (A)
            results in a judgment of insolvency or bankruptcy or the entry of an
            order for relief or the making of an order for its winding-up or
            liquidation or (B) is not dismissed, discharged, stayed or
            restrained in each case within 30 days of the institution or
            presentation thereof; (5) has a resolution passed for its
            winding-up, official management or liquidation (other than pursuant
            to a consolidation, amalgamation or merger); (6) seeks or becomes
            subject to the appointment of an administrator, provisional
            liquidator, conservator, receiver, trustee, custodian or other
            similar official for it or for all or substantially all its assets;
            (7) has a secured party take possession of all or substantially all
            its assets or has a distress, execution, attachment, sequestration
            or other legal process levied, enforced or sued on or against all or
            substantially all its assets and such secured party maintains
            possession, or any such process is not dismissed, discharged, stayed
            or restrained, in each case within 30 days thereafter; (8) causes or
            is subject to any event with respect to it which, under the
            applicable laws of any jurisdiction, has an analogous effect to any
            of the events specified in clauses (1) to (7) inclusive); or (9)
            takes any action in furtherance of, or indicating its consent to,
            approval of, or acquiescence in, any of the foregoing acts; or

     (viii) MERGER WITHOUT ASSUMPTION. The party or any Credit Support Provider
     of such party consolidates or amalgamates with, or merges with or into, or
     transfers all or substantially all its assets to, another entity and, at
     the time of such consolidation, amalgamation, merger or transfer:--

            (1) the resulting, surviving or transferee entity fails to assume
            all the obligations of such party or such Credit Support Provider
            under this Agreement or any Credit Support Document to which it or
            its predecessor was a party by operation of law or pursuant to an
            agreement reasonably satisfactory to the other party to this
            Agreement; or

            (2) the benefits of any Credit Support Document fail to extend
            (without the consent of the other party) to the performance by such
            resulting, surviving or transferee entity of its obligations under
            this Agreement.

(b)  TERMINATION EVENTS. The occurrence at any time with respect to a party or,
if applicable, any Credit Support Provider of such party or any Specified Entity
of such party of any event specified below constitutes an Illegality if the
event is specified in (i) below, a Tax Event if the event is specified in (ii)
below or a Tax Event Upon Merger if the event is specified in (iii) below, and,
if specified to be applicable, a Credit Event

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Upon Merger if the event is specified pursuant to (iv) below or an Additional
Termination Event if the event is specified pursuant to (v) below:--

     (i)    ILLEGALITY. Due to the adoption of, or any change in, any applicable
     law after the date on which a Transaction is entered into, or due to the
     promulgation of, or any change in, the interpretation by any court,
     tribunal or regulatory authority with competent jurisdiction of any
     applicable law after such date, it becomes unlawful (other than as a result
     of a breach by the party of Section 4(b)) for such party (which will be the
     Affected Party):--

            (1) to perform any absolute or contingent obligation to make a
            payment or delivery or to receive a payment or delivery in respect
            of such Transaction or to comply with any other material provision
            of this Agreement relating to such Transaction; or

            (2) to perform, or for any Credit Support Provider of such party to
            perform, any contingent or other obligation which the party (or such
            Credit Support Provider) has under any Credit Support Document
            relating to such Transaction;

     (ii)   TAX EVENT. Due to (x) any action taken by a taxing authority, or
     brought in a court of competent jurisdiction, on or after the date on which
     a Transaction is entered into (regardless of whether such action is taken
     or brought with respect to a party to this Agreement) or (y) a Change in
     Tax Law, the party (which will be the Affected Party) will, or there is a
     Substantial likelihood that it will, on the next succeeding Scheduled
     Payment Date (1) be required to pay to the other party an additional amount
     in respect of an Indemnifiable Tax under Section 2(d)(i)(4) (except in
     respect of interest under Section 2(e), 6(d)(ii) or 6(e)) or (2) receive a
     payment from which an amount is required to be deducted or withheld for or
     on account of a Tax (except in respect of interest under Section 2(e),
     6(d)(ii) or 6(e)) and no additional amount is required to be paid in
     respect of such Tax under Section 2(d)(i)(4) (other than by reason of
     Section 2(d)(i)(4)(A) or (B));

     (iii)  TAX EVENT UPON MERGER. The party (the "Burdened Party") on the next
     succeeding Scheduled Payment Date will either (1) be required to pay an
     additional amount in respect of an Indemnifiable Tax under Section
     2(d)(i)(4) (except in respect of interest under Section 2(e), 6(d)(ii) or
     6(e)) or (2) receive a payment from which an amount has been deducted or
     withheld for or on account of any Indemnifiable Tax in respect of which the
     other party is not required to pay an additional amount (other than by
     reason of Section 2(d)(i)(4)(A) or (B)), in either case as a result of a
     party consolidating or amalgamating with, or merging with or into, or
     transferring all or substantially all its assets to, another entity (which
     will be the Affected Party) where such action does not constitute an event
     described in Section 5(a)(viii);

     (iv)   CREDIT EVENT UPON MERGER. If "Credit Event Upon Merger" is specified
     in the Schedule as applying to the party, such party ("X"), any Credit
     Support Provider of X or any applicable Specified Entity of X consolidates
     or amalgamates with, or merges with or into, or Transfers all or
     substantially all its assets to, another entity and such action does not
     constitute an event described in Section 5(a)(viii) but the
     creditworthiness of the resulting, surviving or transferee entity is
     materially weaker than that of X, such Credit Support Provider or such
     Specified Entity, as the case may be, immediately prior to such action
     (and, in such event, X or its successor or transferee, as appropriate, will
     be the Affected Party); or

     (v)    ADDITIONAL TERMINATION EVENT. If any "Additional Termination Event"
     is specified in the Schedule or any Confirmation as applying, the
     occurrence of such event (and, in such event, the Affected Party or
     Affected Parties shall be as specified for such Additional Termination
     Event in the Schedule or such Confirmation).

(c)  EVENT OF DEFAULT AND ILLEGALITY. If an event or circumstance which would
otherwise constitute or give rise to an Event of Default also constitutes an
Illegality, it will be treated as an Illegality and will not constitute an Event
of Default.

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6.   EARLY TERMINATION

(a)  RIGHT TO TERMINATE FOLLOWING EVENT OF DEFAULT. If at any time an Event of
Default with respect to a party (the "Defaulting Party") has occurred and is
then continuing, the other party (the "Non-defaulting Party") may, by not more
than 20 days' notice to the Defaulting Party specifying the relevant Event of
Default, designate a day not earlier than the day such notice is effective as an
Early Termination Date in respect of all outstanding Transactions. If, however,
"Automatic Early Termination" is specified in the Schedule as applying to a
party, then an Early Termination Date in respect of all outstanding Transactions
will occur immediately upon the occurrence with respect to such party of an
Event of Default specified in Section 5(a)(vii)(1), (3), (5), (6) or, to the
extent analogous thereto, (8), and as of the time immediately preceding the
institution of the relevant proceeding or the presentation of the relevant
petition upon the occurrence with respect to such party of an Event of Default
specified in Section 5(a)(vii)(4) or, to the extent analogous thereto, (8).

(b)  RIGHT TO TERMINATE FOLLOWING TERMINATION EVENT.

     (i)   NOTICE. If a Termination Event occurs, an Affected Party will,
     promptly upon becoming aware of it, notify the other party, specifying the
     nature of that Termination Event and each Affected Transaction and will
     also give such other information about that Termination Event as the other
     party may reasonably require.

     (ii)  TRANSFER TO AVOID TERMINATION EVENT. If either an Illegality under
     Section 5(b)(i)(1) or a Tax Event occurs and there is only one Affected
     Party, or if a Tax Event Upon Merger occurs and the Burdened Party is the
     Affected Party, the Affected Party will, as a condition to its right to
     designate an Early Termination Date under Section 6(b)(iv), use all
     reasonable efforts (which will not require such party to incur a loss,
     excluding immaterial, incidental expenses) to transfer within 20 days after
     it gives notice under Section 6(b)(i) all its rights and obligations under
     this Agreement in respect of the Affected Transactions to another of its
     Offices or Affiliates so that such Termination Event ceases to exist.

     If the Affected Party is not able to make such a transfer it will give
     notice to the other party to that effect within such 20 day period,
     whereupon the other party may effect such a transfer within 30 days after
     the notice is given under Section 6(b)(i).

     Any such transfer by a party under this Section 6(b)(ii) will be subject to
     and conditional upon the prior written consent of the other party, which
     consent will not be withheld if such other party's policies in effect at
     such time would permit it to enter into Transactions with the transferee on
     the terms proposed.

     (iii) TWO AFFECTED PARTIES. If an Illegality under Section 5(b)(i)(1) or a
     Tax Event occurs and there are two Affected Parties, each party will use
     all reasonable efforts to reach agreement within 30 days after notice
     thereof is given under Section 6(b)(i) on action to avoid that Termination
     Event.

     (iv)   RIGHT TO TERMINATE. If:--

            (1) a transfer under Section 6(b)(ii) or an agreement under Section
            6(b)(iii), as the case may be, has not been effected with respect to
            all Affected Transactions within 30 days after an Affected Party
            gives notice under Section 6(b)(i); or

            (2) an Illegality under Section 5(b)(i)(2), a Credit Event Upon
            Merger or an Additional Termination Event occurs, or a Tax Event
            Upon Merger occurs and the Burdened Party is not the Affected Party,

     either party in the case of an Illegality, the Burdened Party in the case
     of a Tax Event Upon Merger, any Affected Party in the case of a Tax Event
     or an Additional Termination Event if there is more than one Affected
     Party, or the party which is not the Affected Party in the case of a Credit
     Event Upon Merger or an Additional Termination Event if there is only one
     Affected Party may, by not more than 20 days notice to the other party and
     provided that the relevant Termination Event is then

                                        8                           ISDA(R) 1992
<Page>

     continuing, designate a day not earlier than the day such notice is
     effective as an Early Termination Date in respect of all Affected
     Transactions.

(c)  EFFECT OF DESIGNATION.

     (i)  If notice designating an Early Termination Date is given under Section
     6(a) or (b), the Early Termination Date will occur on the date so
     designated, whether or not the relevant Event of Default or Termination
     Event is then continuing.

     (ii) Upon the occurrence or effective designation of an Early Termination
     Date, no further payments or deliveries under Section 2(a)(i) or 2(e) in
     respect of the Terminated Transactions will be required to be made, but
     without prejudice to the other provisions of this Agreement. The amount, if
     any, payable in respect of an Early Termination Date shall be determined
     pursuant to Section 6(e).

(d)  CALCULATIONS.

     (i)    STATEMENT. On or as soon as reasonably practicable following the
     occurrence of an Early Termination Date, each party will make the
     calculations on its part, if any, contemplated by Section 6(e) and will
     provide to the other party a statement (1) showing, in reasonable detail,
     such calculations (including all relevant quotations and specifying any
     amount payable under Section 6(e)) and (2) giving details of the relevant
     account to which any amount payable to it is to be paid. In the absence of
     written confirmation from the source of a quotation obtained in determining
     a Market Quotation, the records of the party obtaining such quotation will
     be conclusive evidence of the existence and accuracy of such quotation.

     (ii)   PAYMENT DATE. An amount calculated as being due in respect of any
     Early Termination Date under Section 6(e) will be payable on the day that
     notice of the amount payable is effective (in the case of an Early
     Termination Date which is designated or occurs as a result of an Event of
     Default) and on the day which is two Local Business Days after the day on
     which notice of the amount payable is effective (in the case of an Early
     Termination Date which is designated as a result of a Termination Event).
     Such amount will be paid together with (to the extent permitted under
     applicable law) interest thereon (before as well as after judgment) in the
     Termination Currency, from (and including) the relevant Early Termination
     Date to (but excluding) the date such amount is paid, at the Applicable
     Rate. Such interest will be calculated on the basis of daily compounding
     and the actual number of days elapsed.

(e)  PAYMENTS ON EARLY TERMINATION. If an Early Termination Date occurs, the
following provisions shall apply based on the parties' election in the Schedule
of a payment measure, either "Market Quotation" or "Loss", and a payment method,
either the "First Method" or the "Second Method". If the parties fail to
designate a payment measure or payment method in the Schedule, it will be deemed
that "Market Quotation" or the "Second Method", as the case may be, shall apply.
The amount, if any, payable in respect of an Early Termination Date and
determined pursuant to this Section will be subject to any Set-off.

     (i)    EVENTS OF DEFAULT. If the Early Termination Date results from an
     Event of Default:--

            (1) FIRST METHOD AND MARKET QUOTATION. If the First Method and
            Market Quotation apply, the Defaulting Party will pay to the
            Non-defaulting Party the excess, if a positive number, of (A) the
            sum of the Settlement Amount (determined by the Non-defaulting
            Party) in respect of the Terminated Transactions and the Termination
            Currency Equivalent of the Unpaid Amounts owing to the
            Non-defaulting Party over (B) the Termination Currency Equivalent of
            the Unpaid Amounts owing to the Defaulting Party.

            (2) FIRST METHOD AND LOSS. If the First Method and Loss apply, the
            Defaulting Party will pay to the Non-defaulting Party, if a positive
            number, the Non-defaulting Party's Loss in respect of this
            Agreement.

            (3) SECOND METHOD AND MARKET QUOTATION. If the Second Method and
            Market Quotation apply, an amount will be payable equal to (A) the
            sum of the Settlement Amount (determined by the

                                        9                           ISDA(R) 1992
<Page>

            Non-defaulting Party) in respect of the Terminated Transactions and
            the Termination Currency Equivalent of the Unpaid Amounts owing to
            the Non-defaulting Party less (B) the Termination Currency
            Equivalent of the Unpaid Amounts owing to the Defaulting Party. If
            that amount is a positive number, the Defaulting Party will pay it
            to the Non-defaulting Party; if it is a negative number, the
            Non-defaulting Party will pay the absolute value of that amount to
            the Defaulting Party.

            (4) SECOND METHOD AND LOSS. If the Second Method and Loss apply, an
            amount will be payable equal to the Non-defaulting Party's Loss in
            respect of this Agreement. If that amount is a positive number, the
            Defaulting Party will pay it to the Non-defaulting Party; if it is a
            negative number, the Non-defaulting Party will pay the absolute
            value of that amount to the Defaulting Party.

     (ii)   TERMINATION EVENTS. If the Early Termination Date results from a
     Termination Event:--

            (1) ONE AFFECTED PARTY. If there is one Affected Party, the amount
            payable will be determined in accordance with Section 6(e)(i)(3), if
            Market Quotation applies, or Section 6(e)(i)(4), if Loss applies,
            except that, in either case, references to the Defaulting Party and
            to the Non-defaulting Party will be deemed to be references to the
            Affected Party and the party which is not the Affected Party,
            respectively, and, if Loss applies and fewer than all the
            Transactions are being terminated, Loss shall be calculated in
            respect of all Terminated Transactions.

            (2) TWO AFFECTED PARTIES. If there are two Affected Parties:--

                (A) if Market Quotation applies, each party will determine a
                Settlement Amount in respect of the Terminated Transactions, and
                an amount will be payable equal to (I) the sum of (a) one-half
                of the difference between the Settlement Amount of the party
                with the higher Settlement Amount ("X") and the Settlement
                Amount of the party with the lower Settlement Amount ("Y") and
                (b) the Termination Currency Equivalent of the Unpaid Amounts
                owing to X less (II) the Termination Currency Equivalent of the
                Unpaid Amounts owing to Y; and

                (B) if Loss applies, each party will determine its Loss in
                respect of this Agreement (or, if fewer than all the
                Transactions are being terminated, in respect of all Terminated
                Transactions) and an amount will be payable equal to one-half of
                the difference between the Loss of the party with the higher
                Loss ("X") and the Loss of the party with the lower Loss ("Y").

            If the amount payable is a positive number, Y will pay it to X; if
            it is a negative number, X will pay the absolute value of that
            amount to Y.

     (iii) ADJUSTMENT FOR BANKRUPTCY. In circumstances where an Early
     Termination Date occurs because "Automatic Early Termination" applies in
     respect of a party, the amount determined under this Section 6(e) will be
     subject to such adjustments as are appropriate and permitted by law to
     reflect any payments or deliveries made by one party to the other under
     this Agreement (and retained by such other party) during the period from
     the relevant Early Termination Date to the date for payment determined
     under Section 6(d)(ii).

     (iv)  PRE-ESTIMATE. The parties agree that if Market Quotation applies an
     amount recoverable under this Section 6(e) is a reasonable pre-estimate of
     loss and not a penalty. Such amount is payable for the loss of bargain and
     the loss of protection against future risks and except as otherwise
     provided in this Agreement neither party will be entitled to recover any
     additional damages as a consequence of such losses.

                                       10                           ISDA(R) 1992
<Page>

7.   TRANSFER

Subject to Section 6(b)(ii), neither this Agreement nor any interest or
obligation in or under this Agreement may be transferred (whether by way of
security or otherwise) by either party without the prior written consent of the
other party, except that:--

(a)  a party may make such a transfer of this Agreement pursuant to a
consolidation or amalgamation with, or merger with or into, or transfer of all
or substantially all its assets to, another entity (but without prejudice to any
other right or remedy under this Agreement); and

(b)  a party may make such a transfer of all or any part of its interest in any
amount payable to it from a Defaulting Party under Section 6(e).

Any purported transfer that is not in compliance with this Section will be void.

8.   CONTRACTUAL CURRENCY

(a)  PAYMENT IN THE CONTRACTUAL CURRENCY. Each payment under this Agreement will
be made in the relevant currency specified in this Agreement for that payment
(the "Contractual Currency"). To the extent permitted by applicable law, any
obligation to make payments under this Agreement in the Contractual Currency
will not be discharged or satisfied by any tender in any currency other than the
Contractual Currency, except to the extent such tender results in the actual
receipt by the party to which payment is owed, acting in a reasonable manner and
in good faith in converting the currency so tendered into the Contractual
Currency, of the full amount in the Contractual Currency of all amounts payable
in respect of this Agreement. If for any reason the amount in the Contractual
Currency so received falls short of the amount in the Contractual Currency
payable in respect of this Agreement, the party required to make the payment
will, to the extent permitted by applicable law, immediately pay such additional
amount in the Contractual Currency as may be necessary to compensate for the
shortfall. If for any reason the amount in the Contractual Currency so received
exceeds the amount in the Contractual Currency payable in respect of this
Agreement, the party receiving the payment will refund promptly the amount of
such excess.

(b)  JUDGMENTS. To the extent permitted by applicable law, if any judgment or
order expressed in a currency other than the Contractual Currency is rendered
(i) for the payment of any amount owing in respect of this Agreement, (ii) for
the payment of any amount relating to any early termination in respect of this
Agreement or (iii) in respect of a judgment or order of another court for the
payment of any amount described in (i) or (ii) above, the party seeking
recovery, after recovery in full of the aggregate amount to which such party is
entitled pursuant to the judgment or order, will be entitled to receive
immediately from the other party the amount of any shortfall of the Contractual
Currency received by such party as a consequence of sums paid in such other
currency and will refund promptly to the other party any excess of the
Contractual Currency received by such party as a consequence of sums paid in
such other currency if such shortfall or such excess arises or results from any
variation between the rate of exchange at which the Contractual Currency is
converted into the currency of the judgment or order for the purposes of such
judgment or order and the rate of exchange at which such party is able, acting
in a reasonable manner and in good faith in converting the currency received
into the Contractual Currency, to purchase the Contractual Currency with the
amount of the currency of the judgment or order actually received by such party.
The term "rate of exchange" includes, without limitation, any premiums and costs
of exchange payable in connection with the purchase of or conversion into the
Contractual Currency.

(c)  SEPARATE INDEMNITIES. To the extent permitted by applicable law, these
indemnities constitute separate and independent obligations from the other
obligations in this Agreement, will be enforceable as separate and independent
causes of action, will apply notwithstanding any indulgence granted by the party
to which any payment is owed and will not be affected by judgment being obtained
or claim or proof being made for any other sums payable in respect of this
Agreement.

(d)  EVIDENCE OF LOSS. For the purpose of this Section 8, it will be sufficient
for a party to demonstrate that it would have suffered a loss had an actual
exchange or purchase been made.

                                        11                          ISDA(R) 1992
<Page>

9.   MISCELLANEOUS

(a)  ENTIRE AGREEMENT. This Agreement constitutes the entire agreement and
understanding of the parties with respect to its subject matter and supersedes
all oral communication and prior writings with respect thereto.

(b)  AMENDMENTS. No amendment, modification or waiver in respect of this
Agreement will be effective unless in writing (including a writing evidenced by
a facsimile transmission) and executed by each of the parties or confirmed by an
exchange of telexes or electronic messages on an electronic messaging system.

(c)  SURVIVAL OF OBLIGATIONS. Without prejudice to Sections 2(a)(iii) and
6(c)(ii), the obligations of the parties under this Agreement will survive the
termination of any Transaction.

(d)  REMEDIES CUMULATIVE. Except as provided in this Agreement, the rights,
powers, remedies and privileges provided in this Agreement are cumulative and
not exclusive of any rights, powers, remedies and privileges provided by law.

(e)  COUNTERPARTS AND CONFIRMATIONS.

     (i)  This Agreement (and each amendment, modification and waiver in respect
     of it) may be executed and delivered in counterparts (including by
     facsimile transmission), each of which will be deemed an original.

     (ii) The parties intend that they are legally bound by the terms of each
     Transaction from the moment they agree to those terms (whether orally or
     otherwise). A Confirmation shall be entered into as soon as practicable and
     may be executed and delivered in counterparts (including by facsimile
     transmission) or be created by an exchange of telexes or by an exchange of
     electronic messages on an electronic messaging system, which in each case
     will be sufficient for all purposes to evidence a binding supplement to
     this Agreement. The parties will specify therein or through another
     effective means that any such counterpart, telex or electronic message
     constitutes a Confirmation.

(f)  NO WAIVER OF RIGHTS. A failure or delay in exercising any right, power or
privilege in respect of this Agreement will not be presumed to operate as a
waiver, and a single or partial exercise of any right, power or privilege will
not be presumed to preclude any subsequent or further exercise, of that right,
power or privilege or the exercise of any other right, power or privilege.

(g)  HEADINGS. The headings used in this Agreement are for convenience of
reference only and are not to affect the construction of or to be taken into
consideration in interpreting this Agreement.

10.  OFFICES; MULTIBRANCH PARTIES

(a)  If Section 10(a) is specified in the Schedule as applying, each party that
enters into a Transaction through an Office other than its head or home office
represents to the other party that, notwithstanding the place of booking office
or jurisdiction of incorporation or organisation of such party, the obligations
of such party are the same as if it had entered into the Transaction through its
head or home office. This representation will be deemed to be repeated by such
party on each date on which a Transaction is entered into.

(b)  Neither party may change the Office through which it makes and receives
payments or deliveries for the purpose of a Transaction without the prior
written consent of the other party.

(c)  If a party is specified as a Multibranch Party in the Schedule, such
Multibranch Party may make and receive payments or deliveries under any
Transaction through any Office listed in the Schedule, and the Office through
which it makes and receives payments or deliveries with respect to a Transaction
will be specified in the relevant Confirmation.

11.  EXPENSES

A Defaulting Party will, on demand, indemnify and hold harmless the other party
for and against all reasonable out-of-pocket expenses, including legal fees and
Stamp Tax, incurred by such other party by reason of the enforcement and
protection of its rights under this Agreement or any Credit Support Document

                                        12                          ISDA(R) 1992
<Page>

to which the Defaulting Party is a party or by reason of the early termination
of any Transaction, including, but not limited to, costs of collection.

12.  NOTICES

(a)  EFFECTIVENESS. Any notice or other communication in respect of this
Agreement may be given in any manner set forth below (except that a notice or
other communication under Section 5 or 6 may not be given by facsimile
transmission or electronic messaging system) to the address or number or in
accordance with the electronic messaging system details provided (see the
Schedule) and will be deemed effective as indicated:--

     (i)    if in writing and delivered in person or by courier, on the date it
     is delivered;

     (ii)   if sent by telex, on the date the recipient's answerback is
     received;

     (iii)  if sent by facsimile transmission, on the date that transmission is
     received by a responsible employee of the recipient in legible form (it
     being agreed that the burden of proving receipt will be on the sender and
     will not be met by a transmission report generated by the sender's
     facsimile machine);

     (iv)   if sent by certified or registered mail (airmail, if overseas) or
     the equivalent (return receipt requested), on the date that mail is
     delivered or its delivery is attempted; or

     (v)    if sent by electronic messaging system, on the date that electronic
     message is received,

unless the date of that delivery (or attempted delivery) or that receipt, as
applicable, is not a Local Business Day or that communication is delivered (or
attempted) or received, as applicable, after the close of business on a Local
Business Day, in which case that communication shall be deemed given and
effective on the first following day that is a Local Business Day.

(b)  CHANGE OF ADDRESSES. Either party may by notice to the other change the
address, telex or facsimile number or electronic messaging system details at
which notices or other communications are to be given to it.

13.  GOVERNING LAW AND JURISDICTION

(a)  GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the law specified in the Schedule.

(b)  JURISDICTION. With respect to any suit, action or proceedings relating to
this Agreement ("Proceedings"), each party irrevocably:--

     (i)    submits to the jurisdiction of the English courts, if this Agreement
     is expressed to be governed by English law, or to the non-exclusive
     jurisdiction of the courts of the State of New York and the United States
     District Court located in the Borough of Manhattan in New York City, if
     this Agreement is expressed to be governed by the laws of the State of New
     York; and

     (ii)   waives any objection which it may have at any time to the laying of
     venue of any Proceedings brought in any such court, waives any claim that
     such Proceedings have been brought in an inconvenient forum and further
     waives the right to object, with respect to such Proceedings, that such
     court does not have any jurisdiction over such party.

Nothing in this Agreement precludes either party from bringing Proceedings in
any other jurisdiction (outside, if this Agreement is expressed to be governed
by English law, the Contracting States, as defined in Section 1(3) of the Civil
Jurisdiction and Judgments Act 1982 or any modification, extension or
re-enactment thereof for the time being in force) nor will the bringing of
Proceedings in any one or more jurisdictions preclude the bringing of
Proceedings in any other jurisdiction.

(c)  SERVICE OF PROCESS. Each party irrevocably appoints the Process Agent (if
any) specified opposite its name in the Schedule to receive, for it and on its
behalf, service of process in any Proceedings. If for any

                                       13                           ISDA(R) 1992
<Page>

reason any party's Process Agent is unable to act as such, such party will
promptly notify the other party and within 30 days appoint a substitute process
agent acceptable to the other party. The parties irrevocably consent to service
of process given in the manner provided for notices in Section 12. Nothing in
this Agreement will affect the right of either party to serve process in any
other manner permitted by law.

(d)  WAIVER OF IMMUNITIES. Each party irrevocably waives, to the fullest extent
permitted by applicable law, with respect to itself and its revenues and assets
(irrespective of their use or intended use), all immunity on the grounds of
sovereignty or other similar grounds from (i) suit, (ii) jurisdiction of any
court, (iii) relief by way of injunction, order for specific performance or for
recovery of property, (iv) attachment of its assets (whether before or after
judgment) and (v) execution or enforcement of any judgment to which it or its
revenues or assets might otherwise be entitled in any Proceedings in the courts
of any jurisdiction and irrevocably agrees, to the extent permitted by
applicable law, that it will not claim any such immunity in any Proceedings.

14.  DEFINITIONS

As used in this Agreement:--

"ADDITIONAL TERMINATION EVENT" has the meaning specified in Section 5(b).

"AFFECTED PARTY" has the meaning specified in Section 5(b).

"AFFECTED TRANSACTIONS" means (a) with respect to any Termination Event
consisting of an Illegality, Tax Event or Tax Event Upon Merger, all
Transactions affected by the occurrence of such Termination Event and (b) with
respect to any other Termination Event, all Transactions.

"AFFILIATE" means, subject to the Schedule, in relation to any person, any
entity controlled, directly or indirectly, by the person, any entity that
controls, directly or indirectly, the person or any entity directly or
indirectly under common control with the person. For this purpose, "control" of
any entity or person means ownership of a majority of the voting power of the
entity or person.

"APPLICABLE RATE" means:--

(a)  in respect of obligations payable or deliverable (or which would have been
but for Section 2(a)(iii)) by a Defaulting Party, the Default Rate;

(b)  in respect of an obligation to pay an amount under Section 6(e) of either
party from and after the date (determined in accordance with Section 6(d)(ii))
on which that amount is payable, the Default Rate;

(c)  in respect of all other obligations payable or deliverable (or which would
have been but for Section 2(a)(iii)) by a Non-defaulting Party, the Non-default
Rate; and

(d)  in all other cases, the Termination Rate.

"BURDENED PARTY" has the meaning specified in Section 5(b).

"CHANGE IN TAX LAW" means the enactment, promulgation, execution or ratification
of, or any change in or amendment to, any law (or in the application or official
interpretation of any law) that occurs on or after the date on which the
relevant Transaction is entered into.

"CONSENT" includes a consent, approval, action, authorisation, exemption,
notice, filing, registration or exchange control consent.

"CREDIT EVENT UPON MERGER" has the meaning specified in Section 5(b).

"CREDIT SUPPORT DOCUMENT" means any agreement or instrument that is specified as
such in this Agreement.

"CREDIT SUPPORT PROVIDER" has the meaning specified in the Schedule.

"DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the relevant payee (as certified by it) if it
were to fund or of funding the relevant amount plus 1% per annum.

                                       14                           ISDA(R) 1992
<Page>

"DEFAULTING PARTY" has the meaning specified in Section 6(a).

"EARLY TERMINATION DATE" means the date determined in accordance with Section
6(a) or 6(b)(iv).

"EVENT OF DEFAULT" has the meaning specified in Section 5(a) and, if applicable,
in the Schedule.

"ILLEGALITY" has the meaning specified in Section 5(b).

"INDEMNIFIABLE TAX" means any Tax other than a Tax that would not be imposed in
respect of a payment under this Agreement but for a present or former connection
between the jurisdiction of the government or taxation authority imposing such
Tax and the recipient of such payment or a person related to such recipient
(including, without limitation, a connection arising from such recipient or
related person being or having been a citizen or resident of such jurisdiction,
or being or having been organised, present or engaged in a trade or business in
such jurisdiction, or having or having had a permanent establishment or fixed
place of business in such jurisdiction, but excluding a connection arising
solely from such recipient or related person having executed, delivered,
performed its obligations or received a payment under, or enforced, this
Agreement or a Credit Support Document).

"LAW" includes any treaty, law, rule or regulation (as modified, in the case of
tax matters, by the practice of any relevant governmental revenue authority) and
"LAWFUL" and "UNLAWFUL" will be construed accordingly.

"LOCAL BUSINESS DAY" means, subject to the Schedule, a day on which commercial
banks are open for business (including dealings in foreign exchange and foreign
currency deposits) (a) in relation to any obligation under Section 2(a)(i), in
the place(s) specified in the relevant Confirmation or, if not so specified, as
otherwise agreed by the parties in writing or determined pursuant to provisions
contained, or incorporated by reference, in this Agreement, (b) in relation to
any other payment, in the place where the relevant account is located and, if
different, in the principal financial centre, if any, of the currency of such
payment, (c) in relation to any notice or other communication, including notice
contemplated under Section 5(a)(i), in the city specified in the address for
notice provided by the recipient and, in the case of a notice contemplated by
Section 2(b), in the place where the relevant new account is to be located and
(d) in relation to Section 5(a)(v)(2), in the relevant locations for performance
with respect to such Specified Transaction.

"LOSS" means, with respect to this Agreement or one or more Terminated
Transactions, as the case may be, and a party, the Termination Currency
Equivalent of an amount that party reasonably determines in good faith to be its
total losses and costs (or gain, in which case expressed as a negative number)
in connection with this Agreement or that Terminated Transaction or group of
Terminated Transactions, as the case may be, including any loss of bargain, cost
of funding or, at the election of such party but without duplication, loss or
cost incurred as a result of its terminating, liquidating, obtaining or
reestablishing any hedge or related trading position (or any gain resulting from
any of them). Loss includes losses and costs (or gains) in respect of any
payment or delivery required to have been made (assuming satisfaction of each
applicable condition precedent) on or before the relevant Early Termination Date
and not made, except, so as to avoid duplication, if Section 6(e)(i)(1) or (3)
or 6(e)(ii)(2)(A) applies. Loss does not include a party's legal fees and
out-of-pocket expenses referred to under Section 11. A party will determine its
Loss as of the relevant Early Termination Date, or, if that is not reasonably
practicable, as of the earliest date thereafter as is reasonably practicable. A
party may (but need not) determine its Loss by reference to quotations of
relevant rates or prices from one or more leading dealers in the relevant
markets.

"MARKET QUOTATION" means, with respect to one or more Terminated Transactions
and a party making the determination, an amount determined on the basis of
quotations from Reference Market-makers. Each quotation will be for an amount,
if any, that would be paid to such party (expressed as a negative number) or by
such party (expressed as a positive number) in consideration of an agreement
between such party (taking into account any existing Credit Support Document

                                       15                           ISDA(R) 1992
<Page>

with respect to the obligations of such party) and the quoting Reference
Market-maker to enter into a transaction (the "Replacement Transaction") that
would have the effect of preserving for such party the economic equivalent of
any payment or delivery (whether the underlying obligation was absolute or
contingent and assuming the satisfaction of each applicable condition
precedent) by the parties under Section 2(a)(i) in respect of such Terminated
Transaction or group of Terminated Transactions that would, but for the
occurrence of the relevant Early Termination Date, have been required after
that date. For this purpose, Unpaid Amounts in respect of the Terminated
Transaction or group of Terminated Transactions are to be excluded but,
without limitation, any payment or delivery that would, but for the relevant
Early Termination Date, have been required (assuming satisfaction of each
applicable condition precedent) after that Early Termination Date is to be
included. The Replacement Transaction would be subject to such documentation
as such party and the Reference Market-maker may, in good faith, agree. The
party making the determination (or its agent) will request each Reference
Market-maker to provide its quotation to the extent reasonably practicable as
of the same day and time (without regard to different time zones) on or as
soon as reasonably practicable after the relevant Early Termination Date. The
day and time as of which those quotations are to be obtained will be selected
in good faith by the party obliged to make a determination under Section
6(e), and, if each party is so obliged, after consultation with the other. If
more than three quotations are provided, the Market Quotation will be the
arithmetic mean of the quotations, without regard to the quotations having
the highest and lowest values. If exactly three such quotations are provided,
the Market Quotation will be the quotation remaining after disregarding the
highest and lowest quotations. For this purpose, if more than one quotation
has the same highest value or lowest value, then one of such quotations shall
be disregarded. If fewer than three quotations are provided, it will be
deemed that the Market Quotation in respect of such Terminated Transaction or
group of Terminated Transactions cannot be determined.

"NON-DEFAULT RATE" means a rate per annum equal to the cost (without proof or
evidence of any actual cost) to the Non-defaulting Party (as certified by it)
if it were to fund the relevant amount.

"NON-DEFAULTING PARTY" has the meaning specified in Section 6(a).

"OFFICE" means a branch or office of a party, which may be such party's head
or home office.

"POTENTIAL EVENT OF DEFAULT" means any event which, with the giving of notice
or the lapse of time or both, would constitute an Event of Default.

"REFERENCE MARKET-MAKERS" means four leading dealers in the relevant market
selected by the party determining a Market Quotation in good faith (a) from
among dealers of the highest credit standing which satisfy all the criteria
that such party applies generally at the time in deciding whether to offer or
to make an extension of credit and (b) to the extent practicable, from among
such dealers having an office in the same city.

"RELEVANT JURISDICTION" means, with respect to a party, the jurisdictions (a)
in which the party is incorporated, organised, managed and controlled or
considered to have its seat, (b) where an Office through which the party is
acting for purposes of this Agreement is located, (c) in which the party
executes this Agreement and (d) in relation to any payment, from or through
which such payment is made.

"SCHEDULED PAYMENT DATE" means a date on which a payment or delivery is to be
made under Section 2(a)(i) with respect to a Transaction.

"SET-OFF" means set-off, offset, combination of accounts, right of retention
or withholding or similar right or requirement to which the payer of an
amount under Section 6 is entitled or subject (whether arising under this
Agreement, another contract, applicable law or otherwise) that is exercised
by, or imposed on, such payer.

"SETTLEMENT AMOUNT" means, with respect to a party and any Early Termination
Date, the sum of:--

(a)  the Termination Currency Equivalent of the Market Quotations (whether
positive or negative) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation is determined; and

(b)  such party's Loss (whether positive or negative and without reference to
any Unpaid Amounts) for each Terminated Transaction or group of Terminated
Transactions for which a Market Quotation cannot be determined or would not
(in the reasonable belief of the party making the determination) produce a
commercially reasonable result.

"SPECIFIED ENTITY" has the meaning specified in the Schedule.

                                       16                           ISDA(R) 1992
<Page>

"SPECIFIED INDEBTEDNESS" means, subject to the Schedule, any obligation (whether
present or future, contingent or otherwise, as principal or surety or otherwise)
in respect of borrowed money.

"SPECIFIED TRANSACTION" means, subject to the Schedule, (a) any transaction
(including an agreement with respect thereto) now existing or hereafter entered
into between one party to this Agreement (or any Credit Support Provider of such
party or any applicable Specified Entity of such party) and the other party to
this Agreement (or any Credit Support Provider of such other party or any
applicable Specified Entity of such other party) which is a rate swap
transaction, basis swap, forward rate transaction, commodity swap, commodity
option, equity or equity index swap, equity or equity index option, bond option,
interest rate option, foreign exchange transaction, cap transaction, floor
transaction, collar transaction, currency swap transaction, cross-currency rate
swap transaction, currency option or any other similar transaction (including
any option with respect to any of these transactions), (b) any combination of
these transactions and (c) any other transaction identified as a Specified
Transaction in this Agreement or the relevant confirmation.

"STAMP TAX" means any stamp, registration, documentation or similar tax.

"TAX" means any present or future tax, levy, impost, duty, charge, assessment or
fee of any nature (including interest, penalties and additions thereto) that is
imposed by any government or other taxing authority in respect of any payment
under this Agreement other than a stamp, registration, documentation or similar
tax.

"TAX EVENT" has the meaning specified in Section 5(b).

"TAX EVENT UPON MERGER" has the meaning specified in Section 5(b).

"TERMINATED TRANSACTIONS" means with respect to any Early Termination Date
(a) if resulting from a Termination Event, all Affected Transactions and (b) if
resulting from an Event of Default, all Transactions (in either case) in effect
immediately before the effectiveness of the notice designating that Early
Termination Date (or, if "Automatic Early Termination" applies, immediately
before that Early Termination Date).

"TERMINATION CURRENCY" has the meaning specified in the Schedule.

"TERMINATION CURRENCY EQUIVALENT" means, in respect of any amount denominated in
the Termination Currency, such Termination Currency amount and, in respect of
any amount denominated in a currency other than the Termination Currency (the
"Other Currency"), the amount in the Termination Currency determined by the
party making the relevant determination as being required to purchase such
amount of such Other Currency as at the relevant Early Termination Date, or, if
the relevant Market Quotation or Loss (as the case may be), is determined as of
a later date, that later date, with the Termination Currency at the rate equal
to the spot exchange rate of the foreign exchange agent (selected as provided
below) for the purchase of such Other Currency with the Termination Currency at
or about 11:00 a.m. (in the city in which such foreign exchange agent is
located) on such date as would be customary for the determination of such a rate
for the purchase of such Other Currency for value on the relevant Early
Termination Date or that later date. The foreign exchange agent will, if only
one party is obliged to make a determination under Section 6(e), be selected in
good faith by that party and otherwise will be agreed by the parties.

"TERMINATION EVENT" means an Illegality, a Tax Event or a Tax Event Upon Merger
or, if specified to be applicable, a Credit Event Upon Merger or an Additional
Termination Event.

"TERMINATION RATE" means a rate per annum equal to the arithmetic mean of the
 cost (without proof or evidence of any actual cost) to each party (as certified
 by such party) if it were to fund or of funding such amounts.

"UNPAID AMOUNTS" owing to any party means, with respect to an Early Termination
Date, the aggregate of (a) in respect of all Terminated Transactions, the
amounts that became payable (or that would have become payable but for
Section 2(a)(iii)) to such party under Section 2(a)(i) on or prior to such Early
Termination Date and which remain unpaid as at such Early Termination Date and
(b) in respect of each Terminated Transaction, for each obligation under
Section 2(a)(i) which was (or would have been but for Section 2(a)(iii))
required to be settled by delivery to such party on or prior to such Early
Termination Date and which has not been so settled as at such Early Termination
Date, an amount equal to the fair market

                                       17                           ISDA(R) 1992
<Page>

value of that which was (or would have been) required to be delivered as of the
originally scheduled date for delivery, in each case together with (to the
extent permitted under applicable law) interest, in the currency, of such
amounts, from (and including) the date such amounts or obligations were or would
have been required to have been paid or performed to (but excluding) such Early
Termination Date, at the Applicable Rate. Such amounts of interest will be
calculated on the basis of daily compounding and the actual number of days
elapsed. The fair market value of any obligation referred to in clause (b) above
shall be reasonably determined by the party obliged to make the determination
under Section 6(e) or, if each party is so obliged, it shall be the average of
the Termination Currency Equivalents of the fair market values reasonably
determined by both parties.

IN WITNESS WHEREOF the parties have executed this document on the respective
dates specified below with effect from the date specified on the first page of
this document.

         JPMORGAN CHASE BANK                 WADDELL & REED FINANCIAL, INC.
          (Name of Party)                           (Name of Party)

By: /s/ Melissa A. McMahon               By: /s/John E. Sundeen, Jr.
    Name: Melissa A. McMahon                 Name: John E. Sundeen, Jr.
    Title: Vice President & Asst.            Title: Sr. Vice President,
           General Counsel                          Treasurer and CFO
    Date: March 20, 2002                     Date: March 26, 2002

                                        18                          ISDA(R) 1992
<Page>

                        SCHEDULE TO THE MASTER AGREEMENT
                       DATED AS OF MARCH 12, 2002 BETWEEN
                         JPMORGAN CHASE BANK ("PARTY A")
                                       AND
                   WADDELL & REED FINANCIAL, INC. ("PARTY B")

          PART 1: TERMINATION PROVISIONS AND CERTAIN OTHER MATTERS

     (a)  "SPECIFIED ENTITY" means, in relation to Party A, for the purpose of:

          SECTION 5(a)(v), any Affiliate of Party A;

          SECTION 5(a)(vi), none;

          SECTION 5(a)(vii), none; and

          SECTION 5(b)(iv), none;

               and, in relation to Party B, for the purpose of:

          SECTION 5(a)(v), any Affiliate of Party B:

          SECTION 5(a)(vi), none;

          SECTION 5(a)(vii), none, and

          SECTION 5(b)(iv), any Affiliate of Party B.

     (b)  "SPECIFIED TRANSACTION" will have the meaning specified in Section 14.

     (c)  The "CROSS-DEFAULT" provisions of Section 5(a)(vi) will apply to Party
A and to Party B. In connection therewith, "SPECIFIED INDEBTEDNESS" will have
the meaning specified in Section 14, except that such term shall not include
obligations in respect of deposits received in the ordinary course of a party's
banking business, and "THRESHOLD AMOUNT" means (1) with respect to Party A, an
amount equal to three percent of such party's shareholders' equity and (2) with
respect to Party B, $5,000,000.

                                        1
<Page>

     (d)  The "CREDIT EVENT UPON MERGER" provisions of Section 5(b)(iv) will
apply to Party A and to Party B.

     (e)  The "AUTOMATIC EARLY TERMINATION" provision of Section 6(a) will apply
to Party A and to Party B.

     (f)  PAYMENTS ON EARLY TERMINATION. For the purpose of Section 6(e):

          (i)  Market Quotation will apply.

          (ii) The Second Method will apply.

     (g)  "TERMINATION CURRENCY" means United States Dollars.

                           PART 2: TAX REPRESENTATIONS

     (a)  TAX REPRESENTATIONS. For the purpose of Section 3(f) of this
          Agreement:

     (i)  Party A and Party B each represent, respectively, that it is the
          beneficial owner of each payment made or to be made under this
          Agreement and is a United States Person for U.S. federal income tax
          purposes.

     (ii) Party B represents in respect of each Transaction where Party A's
          Office for the Transaction is not located in the United States of
          America:

     Party B is fully eligible for the benefits of the "Business Profits" or
     "Industrial and Commercial Profits" provision, as the case may be, the
     "Interest" provision and the "Other Income" provision (if any) of the
     income tax treaty (if any), in effect between the jurisdiction of Party A's
     Office for the Transaction and the United States of America with respect to
     any payment described in such provisions and received or to be received by
     it in connection with this Agreement and no such payment is attributable to
     a trade or business carried on by it through a permanent establishment in
     the jurisdiction through which Party A has entered into the relevant
     Transaction.

                     PART 3: AGREEMENT TO DELIVER DOCUMENTS

For the purpose of Sections 4(a)(i) and (ii) of this Agreement, each party
agrees to deliver the following documents:

     (a)  Tax forms, documents or certificates to be delivered are: Tax forms,
          documents or certificates to be delivered are: For the purpose of
          Sections 4(a)(i) and (ii) of this

                                        2
<Page>

          Agreement, Party B agrees to deliver two complete and accurate United
          States Internal Revenue Service Forms W-9 (or any successor applicable
          forms), in a manner reasonably satisfactory to Party A, (I) upon
          execution of this Agreement; (II) promptly upon reasonable demand of
          Party A, and (III) promptly upon learning that any such form
          previously filed by Party B has become obsolete or incorrect

     (b)  Other documents to be delivered are:

<Table>
<Caption>
PARTY REQUIRED                                                                                       COVERED BY
  TO DELIVER                     FORM/DOCUMENT/                         DATE BY WHICH               SECTION 3(d)
   DOCUMENT                      CERTIFICATE                            TO BE DELIVERED            REPRESENTATION
--------------                   --------------                         ---------------            --------------
<S>                       <C>                                     <C>                                   <C>
Party B                   Opinion of internal counsel             Upon execution and delivery           No
                          satisfactory to Party A substantially   of this Agreement
                          in the form of Exhibit I hereto

Party B                   Certified copies of all corporate       Upon execution and delivery           Yes
                          authorizations and any other            of this Agreement and
                          documents with respect to the           thereafter upon the request
                          execution, delivery and performance     of Party A
                          of this Agreement

Party B                   Certificate of authority and specimen   Upon execution and delivery           Yes
                          signatures of individuals executing     of this Agreement and
                          this Agreement and Confirmations        thereafter upon request of
                                                                  Party A
</Table>

                              PART 4: MISCELLANEOUS

     (a)  ADDRESS FOR NOTICES. For the purpose of Section 12(a) of this
          Agreement:

Address for notice or communications to Party A:

Any notice relating to a particular Transaction shall be delivered to the
address or facsimile number specified in the Confirmation of such Transaction.
Any notice delivered for purposes of Sections 5 and 6 of this Agreement shall be
delivered to the following address:

     JPMorgan Chase Bank
     Attention:  Legal Department-Capital Markets Group

                                        3
<Page>

     270 Park Avenue, 40th Floor
     New York, New York  10017-2070
     Facsimile No.:  (212) 270-7468

Address for notice or communications to Party B:

     Waddell & Reed Financial, Inc.
     6300 Lamar Avenue
     Overland Park, Kansas 66202
     Attention:  Wendy Hills
     Facsimile No.:  (913) 236-2379

     (b)  PROCESS AGENT. For the purpose of Section 13(c):

     Party A appoints as its Process Agent:  Not applicable.
     Party B appoints as its Process Agent:  Not applicable.

     (c)  OFFICES. The provisions of Section 10(a) will apply to this Agreement.

     (d)  MULTIBRANCH PARTY. For the purpose of Section 10 of this Agreement:

     Party A is a Multibranch Party and may act through any Office specified in
a Confirmation.

     Party B is not a Multibranch Party.

     (e)  CALCULATION AGENT. The Calculation Agent is Party A, unless otherwise
specified in a Confirmation in relation to the relevant Transaction.

     (f)  CREDIT SUPPORT DOCUMENT. In respect of both parties, the ISDA Credit
Support Annex between Party A and Party B substantially in the form of Exhibit
II hereto shall be a Credit Support Document hereunder.

     (g)  CREDIT SUPPORT PROVIDER. Credit Support Provider means, in relation to
either party: not applicable.

     (h)  GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the laws of the State of New York (without reference to choice
of law doctrine).

     (i)  NETTING OF PAYMENTS. Subparagraph (ii) of Section 2(c) will not apply
to any Transaction unless specified in the relevant Confirmation.

     (j)  "AFFILIATE" will have the meaning specified in Section 14 of this
Agreement, except that with respect to Party B, Affiliate shall not include
Waddell & Reed Capital Trust, I, Waddell & Reed Park Owner's Association, Inc.,
Encino GP Investment Partners LLC or Encino Partners, L.P.

                                        4
<Page>

                            PART 5: OTHER PROVISIONS

     (a)  SET-OFF. Any amount (the "Early Termination Amount") payable to one
party (the "Payee") by the other party (the "Payer") under Section 6(e), in
circumstances where there is a Defaulting Party or one Affected Party in the
case where a Termination Event under Section 5(b)(iv) has occurred, will, at the
option of the party ("X") other than the Defaulting Party or the Affected Party
(and without prior notice to the Defaulting Party or the Affected Party), be
reduced by its set-off against any amount(s) (the "Other Agreement Amount")
payable (whether at such time or in the future or upon the occurrence of a
contingency) by the Payee to the Payer (irrespective of the currency, place of
payment or booking office of the obligation) under any other agreement(s)
between the Payee and the Payer or instrument(s) or undertaking(s) issued or
executed by one party to, or in favor of, the other party (and the Other
Agreement Amount will be discharged promptly and in all respects to the extent
it is so set-off). X will give notice to the other party of any set-off effected
under this Part 5(a).

For this purpose, either the Early Termination Amount or the Other Agreement
Amount (or the relevant portion of such amounts) may be converted by X into the
currency in which the other is denominated at the rate of exchange at which such
party would be able, acting in a reasonable manner and in good faith, to
purchase the relevant amount of such currency.

If an obligation is unascertained, X may in good faith estimate that obligation
and set-off in respect of the estimate, subject to the relevant party accounting
to the other when the obligation is ascertained.

Nothing in this Part 5(a) shall be effective to create a charge or other
security interest. This Part 5(a) shall be without prejudice and in addition to
any right of set-off, combination of accounts, lien or other right to which any
party is at any time otherwise entitled (whether by operation of law, contract
or otherwise).

     (b)  EXCHANGE OF CONFIRMATIONS. For each Transaction entered into
hereunder, Party A shall promptly send to Party B a Confirmation, via telex or
facsimile transmission. Party B agrees to respond to such Confirmation within 10
Local Business Days (for this purpose, Local Business Days refers to Local
Business Days in the location of the recipient), either confirming agreement
thereto or requesting a correction of any error(s) contained therein. Failure by
Party B to respond within such period shall not affect the validity or
enforceability of such Transaction and shall be deemed to be an affirmation of
the terms contained in such Confirmation, absent manifest error. The parties
agree that any such exchange of telexes or facsimile transmissions shall
constitute a Confirmation for all purposes hereunder.

     (c)  WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY HEREBY IRREVOCABLY WAIVES
ANY AND ALL RIGHTS TO TRIAL BY JURY WITH RESPECT TO ANY LEGAL PROCEEDING ARISING
OUT OF OR RELATING TO THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

                                        5
<Page>

     (d)  TELEPHONIC RECORDING. Each party (i) consents to the recording of the
telephone conversations of trading, marketing, and operations personnel of the
parties and their Affiliates in connection with this Agreement or any potential
Transaction and (ii) agrees to obtain any necessary consent of, and give notice
of such recording to, such personnel of it and its Affiliates.

     (e)  FURTHER REPRESENTATIONS. Each party represents to the other party
(which representation will be deemed to be repeated on each date on which a
Transaction is entered into) that it is an "eligible contract participant" as
such term is defined in Section 1(a)(12) of the Commodity Exchange Act, as
amended.

     (f)  RELATIONSHIP BETWEEN PARTIES. The following representation shall be
inserted as a new Section 3(g) of this Agreement:

     "(g) RELATIONSHIP BETWEEN PARTIES. Each party will be deemed to represent
to the other party on the date on which it enters into a Transaction that
(absent a written agreement between the parties that expressly imposes
affirmative obligations to the contrary for that Transaction):

          (i)   NON-RELIANCE. It is acting for its own account, and it has made
its own independent decisions to enter into that Transaction and as to whether
that Transaction is appropriate or proper for it based upon its own judgment and
upon advice from such advisers as it has deemed necessary. It is not relying on
any communication (written or oral) of the other party as investment advice or
as a recommendation to enter into that Transaction; it being understood that
information and explanations related to the terms and conditions of a
Transaction shall not be considered investment advice or a recommendation to
enter into that Transaction. No communication (written or oral) received from
the other party shall be deemed to be an assurance or guarantee as to the
expected results of that Transaction.

          (ii)  ASSESSMENT AND UNDERSTANDING. It is capable of assessing the
merits of and understanding (on its own behalf or through independent
professional advice), and understands and accepts, the terms, conditions and
risks of that Transaction. It is also capable of assuming, and assumes, the
risks of that Transaction.

          (iii) STATUS OF PARTIES. The other party is not acting as a fiduciary
for or an adviser to it in respect of that Transaction."

     (g)  "CREDIT AGREEMENT" means the Credit Agreement, dated as of October 12,
2001, among Party B, the Lenders party thereto, the Co-Syndication Agents named
therein and Party A, as Administrative Agent, as amended, supplemented or
otherwise modified from time to time; provided that if the obligations under the
Credit Agreement are paid in full, the Credit Agreement is otherwise terminated
or cancelled, or Party A shall for any reason cease to remain a party thereto,
Credit Agreement means the Credit Agreement as it existed immediately prior to
such event. Capitalized terms defined therein and not otherwise defined herein
shall have the meanings assigned in the Credit Agreement.

                                        6
<Page>

     (h)  FURTHER AGREEMENTS OF PARTY B. Party B agrees with Party A that Party
B will comply with each of the covenants set forth in Article V and VI of the
Credit Agreement.

     (i)  ADDITIONAL EVENT OF DEFAULT. With respect to Party B, it shall
constitute an Event of Default under this Agreement if there shall occur any
Event of Default under the Credit Agreement.

     (j)  FURTHER REPRESENTATION OF PARTY B. Party B represents and warrants to
Party A (which representation will be deemed to be repeated by Party B on each
date on which a Transaction is entered into) that each of the representations
and warranties made by Party B in Article III of the Credit Agreement is true
and correct and no Event of Default under the Credit Agreement has occurred and
is continuing.

Accepted and agreed:

JPMORGAN CHASE BANK                        WADDELL & REED FINANCIAL, INC.

By: /s/ Melissa A. Mcmahon                 By: /s/ JOHN E. SUNDEEN, JR.
    ----------------------                     -----------------------
Name: Melissa A. McMahon                   Name: John E. Sundeen, Jr.
Title: Vice President & Asst. General      Title: Sr. Vice President, Treasurer
       Counsel                                    & CFO

                                        7
<Page>

                                    EXHIBIT I

                      FORM OF OPINION OF COUNSEL TO PARTY B

                                                  Date:

JPMorgan Chase Bank
270 Park Avenue
New York, New York 10017

Ladies and Gentlemen:

     I am the [title] of Waddell & Reed Financial, Inc. (the "Counterparty"),
and I am delivering this opinion in connection with the Master Agreement, dated
as of March 12, 2002 (as supplemented by the Confirmations relating to the
Transactions entered into pursuant thereto, the "Agreement"), between the
Counterparty and JPMorgan Chase Bank (the "Bank"). Terms defined in the
Agreement are used herein as therein defined.

     In that connection, I have examined the originals, or copies certified to
my satisfaction, of the Agreement and such corporate records of the
Counterparty, certificates of public officials and of officers of the
Counterparty, and agreements, instruments, and documents, as I have deemed
necessary as a basis for the opinions hereinafter expressed. As to questions of
fact material to such opinions, I have, when relevant facts were not
independently established by me, relied upon certificates of the Counterparty,
or its officers or of public officials. I have assumed the due execution and
delivery of the Agreement by the Bank.

     Based upon the foregoing, I am of the following opinion:

     1.   The Counterparty is a corporation duly organized, validly existing and
in good standing under the laws of Delaware.

     2.   The Counterparty has the power to execute and deliver the Agreement
and to perform its obligations under the Agreement and has taken all necessary
action to authorize such execution and delivery and performance of such
obligations.

     3.   The execution and delivery of the Agreement by the Counterparty and
the Counterparty's performance of its obligations under the Agreement do not
violate or conflict with any law, rule or regulation applicable to it, any
provision of its charter or by-laws (or comparable constitutional documents),
any order or judgment of any court or other agency of government applicable to
it or any of its assets or any contractual restriction binding on or affecting
the Counterparty or any of its assets.

<Page>

     4.   All authorizations of and exemptions, actions or approvals by, and all
notices to or filings with, any governmental or other authority that are
required to have been obtained or made by the Counterparty with respect to the
Agreement have been obtained or made and are in full force and effect and all
conditions of any such authorizations, exemptions, actions or approvals have
been complied with.

     5.   The Agreement constitutes the Counterparty's legal, valid and binding
obligation enforceable against the Counterparty in accordance with its terms
(subject to applicable bankruptcy, reorganization, insolvency, moratorium or
similar laws affecting creditors' rights generally and subject, as to
enforceability, to equitable principles of general application (regardless of
whether enforcement is sought in a proceeding in equity or at law)).

     6.   To the best of my knowledge, after due inquiry, there is not pending
or threatened against the Counterparty or any of its Affiliates any action, suit
or proceeding at law or in equity or before any court, tribunal, government
body, agency or official or any arbitrator that is likely to affect the
legality, validity or enforceability against the Counterparty of the Agreement
or its ability to perform its obligations thereunder.

     I am qualified to practice law in the State of _________________ and do not
purport to be expert on, or to express any opinion herein concerning, any law
other than the laws of the State of _______________ , the Delaware General
Corporation Law and the federal laws of the United States of America.

                                                   Very truly yours,

                                        2
<Page>

                                                                      EXHIBIT II

(BILATERAL FORM)                  (ISDA AGREEMENTS SUBJECT TO NEW YORK LAW ONLY)

                                 [ISDA(R) LOGO]

                  International Swap Dealers Association, Inc.

                              CREDIT SUPPORT ANNEX

                             to the Schedule to the

                                MASTER AGREEMENT
                        -------------------------------
                           dated as of March 12, 2002

                                     between

          JPMORGAN CHASE BANK    and    WADDELL & REED FINANCIAL, INC.
              ("PARTY A")                         ("PARTY B")

This is Annex supplements, forms part of, and is subject to, the
above-referenced Agreement, is part of its Schedule and is a Credit Support
document under this Agreement with respect to each party.

Accordingly, the parties agree as follows:

PARAGRAPH 1. INTERPRETATION

(a)  DEFINITION AND INCONSISTENCY. Capitalized terms not otherwise defined
herein or elsewhere in this Agreement have the meanings specified pursuant to
Paragraph 12, and all references in this Annex to Paragraphs are to Paragraphs
of this Annex. In the event of any inconsistency between this Annex and the
other provisions of this Schedule, this Annex will prevail, and in the event of
any inconsistency between Paragraph 13 and the other provisions of this Annex,
Paragraph 13 will prevail.

(b)  SECURED PARTY AND PLEDGOR. All references in this Annex to the "Secured
Party" will be to either party when acting in that capacity and all
corresponding references to the "Pledgor" will be to the other party when acting
in that capacity; PROVIDED, HOWEVER, that if Other Posted Support is held by a
party to this Annex, all references herein to that party as the Secured Party
with respect to that Other Posted Support will be to that party as the
beneficiary thereof and will not subject that support or that party as the
beneficiary thereof to provisions of law generally relating to security
interests and secured parties.

PARAGRAPH 2. SECURITY INTEREST

Each party, as the Pledgor, hereby pledges to the other party, as the Secured
Party, as security for its Obligations, and grants to the Secured Party a first
priority continuing security interest in, lien on and right of Set-off against
all Posted Collateral Transferred to or received by the Secured Party hereunder.
Upon the Transfer by the Secured Party to the Pledgor of Posted Collateral, the
security interest and lien granted hereunder on that Posted Collateral will be
released immediately and, to the extent possible, without any further action by
either party.

                                        1                           ISDA(R) 1994
<Page>

PARAGRAPH 3. CREDIT SUPPORT OBLIGATIONS

(a)  DELIVERY AMOUNT. Subject to Paragraphs 4 and 5, upon a demand made by the
Secured Party on or promptly following a Valuation Date, if the Delivery Amount
for that Valuation Date equals or exceeds the Pledgor's Minimum Transfer Amount,
then the Pledgor will Transfer to the Secured Party Eligible Credit Support
having a Value as of the date of Transfer at least equal to the applicable
Delivery Amount (rounded pursuant to Paragraph 13). Unless otherwise specified
in Paragraph 13, the "DELIVERY AMOUNT" applicable to the Pledgor for any
Valuation Date will equal the amount by which:

     (i)  the Credit Support Amount exceeds

     (ii) the Value as of that Valuation Date of all Posted Credit Support held
          by the Secured Party.

(b)  RETURN AMOUNT. Subject to Paragraphs 4 and 5, upon a demand made by the
Pledgor on or promptly following a Valuation Date, if the Return Amount for that
Valuation Date equals or exceeds the Secured Party's Minimum Transfer Amount,
then the Secured Party will Transfer to the Pledgor Posted Credit Support
specified by the Pledgor in that demand having a Value as of the date of
Transfer as close as practicable to the applicable Return Amount (rounded
pursuant to Paragraph 13). Unless otherwise specified in Paragraph 13, the
"RETURN AMOUNT" applicable to the Secured Party for any Valuation Date will
equal the amount by which:

     (i)  the Value as of that Valuation Date of all Posted Credit Support held
          by the Secured Party exceeds

     (ii) the Credit Support Amount.

"CREDIT SUPPORT AMOUNT" means, unless otherwise specified in Paragraph 13, for
any Valuation Date (i) the Secured Party's Exposure for that Valuation Date plus
(ii) the aggregate of all Independent Amounts applicable to the Pledgor, if any,
minus (iii) all Independent Amounts applicable to the Secured Party, if any,
minus (iv) the Pledgor's Threshold; PROVIDED, HOWEVER, that the Credit Support
Amount will be deemed to be zero whenever the calculation of Credit Support
Amount yields a number less than zero.

PARAGRAPH 4. CONDITIONS PRECEDENT, TRANSFER TIMING, CALCULATIONS AND
SUBSTITUTIONS

(a)  CONDITIONS PRECEDENT. Each Transfer obligation of the Pledgor under
Paragraphs 3 and 5 and of the Secured Party under Paragraphs 3, 4(d)(ii), 5 and
6(d) is subject to the conditions precedent that:

     (i)  no Event of Default, Potential Event of Default or Specified Condition
has occurred and is continuing with respect to the other party; and

     (ii) no Early Termination Date for which any unsatisfied payment
obligations exist has occurred or been designated as the result of an Event of
Default or Specified Condition with respect to the other party.

(b)  TRANSFER TIMING. Subject to Paragraphs 4(a) and 5 and unless otherwise
specified, if a demand for the Transfer of Eligible Credit Support or Posted
Credit Support is made by the Notification Time, then the relevant Transfer will
be made not later than the close of business on the next Local Business Day; if
a demand is made after the Notification Time, then the relevant Transfer will be
made not later than the close of business on the second Local Business Day
thereafter.

(c)  CALCULATIONS. All calculations of Value and Exposure for purposes of
Paragraphs 3 and 6(d) will be made by the Valuation Agent as of the Valuation
Time. The Valuation Agent will notify each party (or the other party, if the
Valuation Agent is a party) of its calculations not later than the Notification
Time on the Local Business Day following the applicable Valuation Date (or in
the case of Paragraph 6(d), following the date of calculation).

                                        2                           ISDA(R) 1994
<Page>

(d)  SUBSTITUTIONS.

     (i)  Unless otherwise specified in Paragraph 13, upon notice to the Secured
          Party specifying the items of Posted Credit Support to be exchanged,
          the Pledgor may, on any Local Business Day, Transfer to the Secured
          Party substitute Eligible Credit Support (the "Substitute Credit
          Support"); and

     (ii) subject to Paragraph 4(a), the Secured party will Transfer to the
          Pledgor the items of Posted Credit Support specified by the Pledgor in
          its notice not later than the Local Business Day following the date on
          which the Secured Party receives the Substitute Credit Support, unless
          otherwise specified in Paragraph 13 (the "Substitution Date");
          PROVIDED that the Secured Party will only be obligated to Transfer
          Posted Credit Support with a Value as of the date of Transfer of that
          Posted Credit Support equal to the Value as of that date of the
          Substitute Credit Support.

PARAGRAPH 5. DISPUTE RESOLUTION

If a party (a "Disputing Party") disputes (I) the Valuation Agent's calculation
of a Delivery Amount or a Return Amount or (II) the Value of any Transfer of
Eligible Credit Support or Posted Credit Support, then (1) the Disputing Party
will notify the other party and the Valuation Agent (if the Valuation Agent is
not the other party) not later than the close of business on the Local Business
Day following (X) the date that the demand is made under Paragraph 3 in the case
of (I) above or (Y) the date of Transfer in the case of (II) above, (2) subject
to Paragraph 4(a), the appropriate party will Transfer the undisputed amount to
the other party not later than the close of business on the Local Business Day
following (X) the date that the demand is made under Paragraph 3 in the case
of (I) above or (Y) the date of Transfer in the case of (II) above, (3) the
parties will consult with each other in an attempt to resolve the dispute and
(4) if they fail to resolve the dispute by the Resolution Time, then:

     (i)   in the case of a dispute involving a Delivery Amount or Return
           Amount, unless otherwise specified in Paragraph 13, the Valuation
           Agent will recalculate the Exposure and the Value as of the
           Recalculation Date by:

           (A) utilizing any calculations of Exposure for the Transactions (or
               Swap Transactions) that the parties have agreed are not in
               dispute;

           (B) calculating the exposure for the Transactions (or Swap
               Transactions) in dispute by seeking four actual quotations at
               mid-market from Reference Market-makers for purposes of
               calculating Market Quotation, and taking the arithmetic average
               of those obtained; PROVIDED that if four quotations are not
               available for a particular Transaction (or Swap Transaction),
               then fewer than four quotations may be used for that Transaction
               (or Swap Transaction); and if no quotations are available for a
               particular Transaction (or Swap Transaction), then the Valuation
               Agent's original calculations will be used for that Transaction
               (or Swap Transaction); and

           (C) utilizing the procedures specified in Paragraph 13 for
               calculating the Value, if disputed, of Posted Credit Support.

     (ii)  in the case of a dispute involving the Value of any Transfer of
           Eligible Credit Support or Posted Credit Support, the Valuation Agent
           will recalculate the Value as of the date of Transfer pursuant to
           Paragraph 13.

Following a recalculation pursuant to this Paragraph, the Valuation Agent will
notify each party (or the other party, if the Valuation Agent is a party) not
later than the Notification Time on the Local Business Day following the
Resolution Time. The appropriate party will, upon demand following that notice
by the Valuation Agent or a resolution pursuant to (3) above and subject to
Paragraphs 4(a) and 4(b), make the appropriate Transfer.

                                        3                           ISDA(R) 1994
<Page>

PARAGRAPH 6. HOLDING AND USING POSTED COLLATERAL

(a)  CARE OF POSTED COLLATERAL. Without limiting the Secured Party's rights
under Paragraph 6(c), the Secured Party will exercise reasonable care to assure
the safe custody of all Posted Collateral to the extent required by applicable
law, and in any event the Secured Party will be deemed to have exercised
reasonable care if it exercises at least the same degree of care as it would
exercise with respect to its own property. Except as specified in the preceding
sentence, the Secured Party will have no duty with respect to Posted Collateral,
including, without limitation, any duty to collect any Distributions, or enforce
or preserve any rights pertaining thereto.

(b)  ELIGIBILITY TO HOLD POSTED COLLATERAL; CUSTODIANS.

     (i)   GENERAL. Subject to the satisfaction of any conditions specified in
           Paragraph 13 for holding Posted Collateral, the Secured party will be
           entitled to hold Posted Collateral or to appoint an agent (a
           "Custodian") to hold Posted Collateral for the Secured Party. Upon
           notice by the Secured Party to the Pledgor of the appointment of a
           Custodian, the Pledgor's obligations to make any Transfer will be
           discharged by making the Transfer to that Custodian. The holding of
           Posted Collateral by a Custodian will be deemed to be the holding of
           that Posted Collateral by the Secured Party for which the Custodian
           is acting.

     (ii)  FAILURE TO SATISFY CONDITIONS. If the Secured Party or its Custodian
           fails to satisfy any conditions for holding Posted Collateral, then
           upon a demand made by the Pledgor, the Secured Party will, not later
           than five Local Business Days after the demand, Transfer or cause its
           Custodian to Transfer all Posted Collateral held by it to a Custodian
           that satisfies those conditions or to the Secured Party if it
           satisfies those conditions.

     (iii) LIABILITY. The Secured Party will be liable for the acts or omissions
           of its Custodian to the same extent that the Secured Party would be
           liable hereunder for its own acts or omissions.

(c)  USE OF POSTED COLLATERAL. Unless otherwise specified in Paragraph 13 and
without limiting the rights and obligations of the parties under Paragraphs 3,
4(d)(ii), 5, 6(d) and 8, if the Secured party is not a defaulting Party or an
Affected Party with respect to a Specified Condition and no Early Termination
Date has occurred or been designated as the result of an Event of Default or
Specified Condition with respect to the Secured Party, then the Secured Party
will, notwithstanding Section 9-207 of the New York Uniform Commercial Code,
have the right to:

     (i)   sell, pledge, rehypothecate, assign, invest, use, commingle or
           otherwise dispose of, or otherwise use in its business any Posted
           Collateral it holds, free from any claim or right of any nature
           whatsoever of the Pledgor, including any equity or right of
           redemption by the Pledgor; and

     (ii)  register any Posted Collateral in the name of the Secured Party, its
           Custodian or a nominee for either.

For purposes of the obligation to Transfer Eligible Credit Support or Posted
Credit Support pursuant to Paragraphs 3 and 5 and any rights or remedies
authorized under this Agreement, the Secured Party will be deemed to continue to
hold all Posted Collateral and to receive Distributions made thereon, regardless
of whether the Secured Party has exercised any rights with respect to any Posted
Collateral pursuant to (i) or (ii) above.

(d)  DISTRIBUTIONS AND INTEREST AMOUNT.

     (i)   DISTRIBUTIONS. Subject to Paragraph 4(a), if the Secured Party
           receives or is deemed to receive Distributions on a Local Business
           Day, it will Transfer to the Pledgor not later than the following
           Local Business Day any Distributions it receives or is deemed to
           receive to the extent that a Delivery Amount would not be created or
           increased by that Transfer, as calculated by the Valuation Agent (and
           the date of calculation will be deemed to be a Valuation Date for
           this purpose).

                                        4                           ISDA(R) 1994
<Page>

     (ii)  INTEREST AMOUNT. Unless otherwise specified in Paragraph 13 and
           subject to Paragraph 4(a), in lieu of any interest, dividends or
           other amounts paid or deemed to have been paid with respect to Posted
           Collateral in the form of Cash (all of which may be retained by the
           Secured Party), the Secured Party will Transfer to the Pledgor at the
           times specified in Paragraph 13 the Interest Amount to the extent
           that a Delivery Amount would not be created or increased by that
           Transfer, as calculated by the Valuation Agent (and the date of
           calculation will be deemed to be a Valuation Date for this purpose).
           The Interest Amount or portion thereof not Transferred pursuant to
           this Paragraph will constitute Posted Collateral in the form of Cash
           and will be subject to the security interest granted under Paragraph
           2.

PARAGRAPH 7. EVENTS OF DEFAULT

For purposes of Section 5(a)(iii)(I) of this Agreement, an Event of Default will
exist with respect to a party if:

     (i)   that party fails (or fails to cause its Custodian) to make, when due,
           any Transfer of Eligible Collateral, Posted Collateral or the
           Interest Amount, as applicable, required to be made by it and that
           failure continues for two Local Business Days after notice of that
           failure is given to that party;

     (ii)  that party fails to comply with any restriction or probation
           specified in this Annex with respect to any of the rights specified
           in Paragraph 6(c) and that failure continues for five Local Business
           Days after notice of that failure is given to that party; or

     (iii) that party fails to comply with or perform any agreement or
           obligation other than those specified in Paragraphs 7(i) and 7(ii)
           and that failure continues for 30 days after notice of that failure
           is given to that party.

PARAGRAPH 8. CERTAIN RIGHTS AND REMEDIES

(a)  SECURED PARTY'S RIGHTS AND REMEDIES. If at any time (1) an Event or Default
or Specified Condition with respect to the Pledgor has occurred and is
continuing or (2) an Early Termination Date has occurred or been designated as
the result of an Event of Default or Specified Condition with respect to the
Pledgor, then, unless the Pledgor has paid in full all of its Obligations that
are then due, the Secured Party may exercise one or more of the following rights
and remedies:

     (i)   all rights and remedies available to a secured party under applicable
           law with respect to Posted Collateral held by the Secured Party;

     (ii)  any other rights and remedies available to the Secured Party under
           the terms of Other Posted Support, if any;

     (iii) the right to Set-off any amounts payable by the Pledgor with respect
           to any Obligations against any Posted collateral or the Cash
           equivalent of any Posted Collateral held by the Secured Party (or any
           obligation of the Secured Party to Transfer that Posted collateral);
           and

     (iv)  the right to liquidate any Posted Collateral held by the Secured
           Party through one or more public or private sales or other
           dispositions with such notice, if any, as may be required under
           applicable law, free from any claim or right of any nature whatsoever
           of the Pledgor, including any equity or right of redemption by the
           Pledgor (with the Secured Party having the right to purchase any or
           all of the Posted Collateral to be sold) and to apply the proceeds
           (or the Cash equivalent thereof) from the liquidation of the Posted
           Collateral to any amounts payable by the Pledgor with respect to any
           Obligations in that order as the Secured Party may elect.

     Each party acknowledges and agrees that Posted collateral in the form of
     securities may decline speedily in value and is of a type customarily sold
     on a recognized market, and, accordingly, the Pledgor is not entitled to
     prior notice of any sale of that Posted Collateral by the Secured Party,
     except any notice that is required under applicable law and cannot be
     waived.

                                        5                           ISDA(R) 1994
<Page>

(b)  PLEDGOR'S RIGHTS AND REMEDIES. If at any time an Early Termination Date has
occurred or been designated as the result of an Event of Default or Specified
Condition with respect to the Secured Party, then (except in the case of an
Early Termination Date relating to less than all Transactions (or Swap
Transactions) where the Secured Party has paid in full all of its obligations
that are then due under Section 6(e) of this Agreement):

     (i)   the Pledgor may exercise all rights and remedies available to a
           pledgor under applicable law with respect to Posted Collateral held
           by the Secured Party;

     (ii)  the Pledgor may exercise any other rights and remedies available to
           the Pledgor under the terms of Other Posted Support, if any;

     (iii) the Secured Party will be obligated immediately to Transfer all
           Posted Collateral and the Interest Amount to the Pledgor; and

     (iv)  to the extent that Posted Collateral or the Interest Amount is not so
           Transferred pursuant to (iii) above, the Pledgor may:

           (A) set-off any amounts payable by the Pledgor with respect to any
               Obligations against any Posted Collateral or the Cash equivalent
               of any Posted Collateral held by the Secured Party (or any
               obligation of the Secured Party to Transfer that Posted
               Collateral); and

           (B) to the extent that the Pledgor does not Set-off under (iv)(A)
               above, withhold payment of any remaining amounts payable by the
               Pledgor with respect to any Obligations, up to the Value of any
               remaining Posted Collateral held by the Secured Party, until that
               Posted Collateral is Transferred to the Pledgor.

(c)  DEFICIENCIES AND EXCESS PROCEEDS. The Secured Party will Transfer to the
Pledgor any proceeds and Posted Credit Support remaining after liquidation,
Set-off and/or application under Paragraphs 8(a) and 8(b) after satisfaction in
full of all amounts payable by the Pledgor with respect to any Obligations; the
Pledgor in all events will remain liable for any amounts remaining unpaid after
any liquidation, Set-off and/or application under Paragraphs 8(a) and 8(b).

(d)  FINAL RETURNS. When no amounts are or thereafter may become payable by the
Pledgor with respect to any Obligations (except for any potential liability
under Section 2(d) of this Agreement), the Secured Party will Transfer to the
Pledgor all Posted Credit Support and the Interest Amount, if any.

PARAGRAPH 9. REPRESENTATIONS

Each party represents to the other party (which representations will be deemed
to be repeated as of each date on which it, as the Pledgor, Transfers Eligible
Collateral) that:

     (i)   it has the power to grant a security interest in and lien on any
           Eligible Collateral it Transfers as the Pledgor and has taken all
           necessary actions to authorize the granting of that security interest
           and lien;

     (ii)  it is the sole owner of or otherwise has the right to Transfer all
           Eligible Collateral if Transfers to the Secured Party hereunder, free
           and clear of any security interest, lien, encumbrance or other
           restrictions other than the security interest and lien granted under
           Paragraph 2.

     (iii) upon the Transfer of any Eligible Collateral to the Secured Party
           under the terms of this Annex, the Secured Party will have a valid
           and perfected first priority security interest therein (assuming that
           any central clearing corporation or any third-party financial
           intermediary or other entity not within the control of the Pledgor
           involved in the Transfer of that Eligible Collateral gives the
           notices and takes the action required of it under applicable law for
           perfection of that interest); and

     (iv)  the performance by it of its obligations under this Annex will not
           result in the creation of any security interest, lien or other
           encumbrance on any Posted Collateral other than the security interest
           and lien granted under Paragraph 2.

                                        6                           ISDA(R) 1994
<Page>

PARAGRAPH 10. EXPENSES

(a)  GENERAL. Except as otherwise provided in Paragraphs 10(b) and 10(c), each
party will pay its own costs and expenses in connection with performing its
obligations under this Annex and neither party will be liable for any costs and
expenses incurred by the other party in connection herewith.

(b)  POSTED CREDIT SUPPORT. The Pledgor will promptly pay when due all taxes,
assessments or charges of any nature that are imposed with respect to Posted
Credit Support held by the Secured Party upon becoming aware of the same,
regardless of whether any portion of that Posted Credit Support is subsequently
disposed of under Paragraph 6(c), except for those taxes, assessments and
charges that result from the exercise of the Secured Party's rights under
Paragraph 6(c).

(c)  LIQUIDATION/APPLICATION OF POSTED CREDIT SUPPORT. All reasonable costs and
expenses incurred by or on behalf of the Secured Party or the Pledgor in
connection with the liquidation and/or application of any Posted Credit Support
under Paragraph 8 will be payable, on demand and pursuant to the Expenses
Section of this Agreement, by the Defaulting Party or, if there is no Defaulting
Party, equally by the parties.

PARAGRAPH 11. MISCELLANEOUS

(a)  DEFAULT INTEREST. A Secured Party that fails to make, when due, any
Transfer of Posted Collateral or the Interest Amount will be obligated to pay
the Pledgor (to the extent permitted under applicable law) an amount equal to
interest at the Default Rate multiplied by the Value of the items of property
that were required to be Transferred, from (and including) the date that Posted
Collateral or Interest Amount was required to be Transferred to (but excluding)
the date of Transfer of that Posted Collateral or Interest Amount. This interest
will be calculated on the basis of daily compounding and the actual number of
days elapsed.

(b)  FURTHER ASSURANCE. Promptly following a demand made by a party, the other
party will execute, deliver, file and record any financing statement, specific
assignment or other document and take any other action that may be necessary or
desirable and reasonably requested by that party to create, preserve, perfect or
validate any security interest or lien granted under Paragraph 2, to enable that
party to exercise or enforce its rights under this annex with respect to Posted
Credit support or an Interest Amount or to effect or document a release of a
security interest on Posted Collateral or an Interest Amount.

(c)  FURTHER PROTECTION. The Pledgor will promptly give notice to the Secured
Party of, and defend against, any suit, action, proceeding or lien that involves
Posted Credit Support Transferred by the Pledgor or that could adversely affect
the security interest and lien granted by it under Paragraph 2, unless that
suit, action, proceeding or lien results from the exercise of the Secured
Party's rights under Paragraph 6(c).

(d)  GOOD FAITH AND COMMERCIALLY REASONABLE MANNER. Performance of all
obligations under this Annex, including, but not limited to, all calculations,
valuations and determinations made by either party, will be made in good faith
and in a commercially reasonable manner.

(e)  DEMANDS AND NOTICES. All demands and notices made by a party under this
Annex will be made as specified in the Notices Section of this Agreement, except
as otherwise provided in Paragraph 13.

(f)  SPECIFICATIONS OF CERTAIN MATTERS. Anything referred to in this Annex as
being specified in Paragraph 13 also may be specified in one or more
Confirmations or other documents and this Annex will be construed accordingly.

                                        7                           ISDA(R) 1994
<Page>

PARAGRAPH 12. DEFINITIONS

As used in this Annex:

"CASH" means the lawful currency of the United States of America.

"CREDIT SUPPORT AMOUNT" has the meaning specified in Paragraph 3.

"CUSTODIAN" has the meaning specified in Paragraphs 6(b)(i) and 13.

"DELIVERY AMOUNT" has the meaning specified in Paragraph 3(a).

"DISPUTING PARTY" has the meaning specified in Paragraph 5.

"DISTRIBUTIONS" means with respect to Posted Collateral other than Cash, all
principal, interest and other payments and distributions of cash or other
property with respect thereto, regardless of whether the Secured Party has
disposed of that Posted Collateral under Paragraph 6(c). Distributions will not
include any item of property acquired by the Secured Party upon any disposition
or liquidation of Posted Collateral or, with respect to any Posted Collateral in
the form of Cash, any distributions on that collateral, unless otherwise
specified herein.

"ELIGIBLE COLLATERAL" means, with respect to a party, the items, if any,
specified as such for that party in Paragraph 13.

"ELIGIBLE CREDIT SUPPORT" means Eligible Collateral and Other Eligible Support.

"EXPOSURE" means for any Valuation Date or other date for which Exposure is
calculated and subject to Paragraph 5 in the case of a dispute, the amount, if
any, that would be payable to a party that is the Secured Party by the other
party (expressed as a positive number) or by a party that is the Secured Party
to the other party (expressed as a negative number) pursuant to Section
6(e)(ii)(2)(A) of this Agreement as if all Transactions (or Swap Transactions)
were being terminated as of the relevant Valuation Time: PROVIDED that Market
Quotation will be determined by the Valuation Agent using its estimates at
mid-market of the amounts that would be paid for Replacement Transactions (as
that term is defined in the definition of "Market Quotation").

"INDEPENDENT AMOUNT" means, with respect to a party, the amount specified as
such for that party in Paragraph 13; if no amount is specified, zero.

"INTEREST AMOUNT" means, with respect to an Interest Period, the aggregate sum
of the amounts of interest calculated for each day in that Interest Period on
the principal amount of Posted Collateral in the form of Cash held by the
Secured Party on that day, determined by the Secured Party for each such day as
follows:

     (x)   the amount of that Cash on that day; multiplied by

     (y)   the Interest Rate in effect for that day; divided by

     (z)   360.

"INTEREST PERIOD" means the period from (and including) the last Local Business
Day on which an Interest Amount was Transferred (or, if no Interest Amount has
yet been Transferred, the Local Business Day on which Posted Collateral in the
form of Cash was Transferred to or received by the Secured Party) to (but
excluding) the Local Business Day on which the current Interest Amount is to be
Transferred.

"INTEREST RATE" means the rate specified in Paragraph 13.

"LOCAL BUSINESS DAY" unless otherwise specified in Paragraph 13, has the meaning
specified in the Definitions Section of this Agreement, except that references
to a payment in clause (b) thereof will be deemed to include a Transfer under
this Annex.

                                        8                           ISDA(R) 1994
<Page>

"MINIMUM TRANSFER AMOUNT" means, with respect to a party, the amount specified
as such for that party in Paragraph 13; if no amount is specified, zero.

"NOTIFICATION TIME" has the meaning specified in Paragraph 13.

"OBLIGATIONS" means, with respect to a party, all present and future obligations
of that party under this Agreement and any additional obligations specified for
that party in Paragraph 13.

"OTHER ELIGIBLE SUPPORT" means, with respect to a party, the items, if any,
specified as such for that party in Paragraph 13.

"OTHER POSTED SUPPORT" means all Other Eligible Support Transferred to the
Secured Party that remains in effect for the benefit of that Secured Party.

"PLEDGOR" means either party, when that party (i) receives a demand for or is
required to Transfer Eligible Credit Support under Paragraph 3(a) or (ii) has
Transferred Eligible Credit Support under Paragraph 3(a).

"POSTED COLLATERAL" means all Eligible Collateral, other property,
Distributions, and all proceeds thereof that have been Transferred to or
received by the Secured Party under this Annex and not Transferred to the
Pledgor pursuant to Paragraph 3(b), 4(d)(ii) or 6(d)(i) or released by the
Secured Party under Paragraph 8. Any Interest Amount or portion thereof not
Transferred pursuant to Paragraph 6(d)(ii) will constitute Posted Collateral in
the form of Cash.

"POSTED CREDIT SUPPORT" means Posted Collateral and Other Posted Support.

"RECALCULATION DATE" means the Valuation Date that gives rise to the dispute
under Paragraph 5; PROVIDED, HOWEVER, that if a subsequent Valuation Date occurs
under Paragraph 3 prior to the resolution of the dispute, then the
"Recalculation Date" means the most recent Valuation Date under Paragraph 3.

"RESOLUTION TIME" has the meaning specified in Paragraph 13.

"RETURN AMOUNT" has the meaning specified in Paragraph 3(b).

"SECURED PARTY" means either party, when that party (i) makes a demand for or is
entitled to receive Eligible Credit Support under Paragraph 3(a) or (ii) holds
or is deemed to hold Posted Credit Support.

"SPECIFIED CONDITION" means, with respect to a party, any event specified as
such for that party in Paragraph 13.

"SUBSTITUTE CREDIT SUPPORT" has the meaning specified in Paragraph 4(d)(i).

"SUBSTITUTE DATE" has the meaning specified in Paragraph 4(d)(ii).

"THRESHOLD" means, with respect to a party, the amount specified as such for
that party in Paragraph 13; if no amount is specified, zero.

"TRANSFER" means, with respect to any Eligible Credit Support, Posted Credit
Support or Interest Amount, and in accordance with the instructions of the
Secured Party, Pledgor or Custodian, as applicable:

     (i)   in the case of Cash, payment or delivery by wire transfer into one or
           more bank accounts specified by the recipient:

     (ii)  in the case of certificated securities that cannot be paid or
           delivered by book-entry, payment or delivery in appropriate physical
           form to the recipient or its account accompanied by any duly executed
           instruments of transfer, assignments in blank, transfer tax stamps
           and any other documents necessary to constitute a legally valid
           transfer to the recipient:

     (iii) in the case of securities that can be paid or delivered by
           book-entry, the giving of written instructions to the relevant
           depository institution or other entity specified by the recipient,
           together with a written copy thereof to the recipient, sufficient if
           complied with to result in a legally effective transfer of the
           relevant interest to the recipient; and

     (iv)  in the case of Other Eligible Support or Other Posted Support, as
           specified in Paragraph 13.

                                        9                           ISDA(R) 1994
<Page>

"VALUATION AGENT" has the meaning specified in Paragraph 13.

"VALUATION DATE" means each date specified in or otherwise determined pursuant
to Paragraph 13.

"VALUATION PERCENTAGE" means, for any item of Eligible Collateral, the
percentage specified in Paragraph 13.

"VALUATION TIME" has the meaning specified in Paragraph 13.

"VALUE" means for any Valuation Date or other date for which Value is calculated
and subject to Paragraph 5 in the case of a dispute, with respect to:

     (i)   Eligible Collateral or Posted Collateral that is:

           (A) Cash, the amount thereof; and

           (B) A security, the bid price obtained by the Valuation Agent
               multiplied by the applicable Valuation Percentage, if any;

     (ii)  Posted Collateral that consists of items that are not specified as
           Eligible Collateral, zero; and

     (iii) Other Eligible Support and Other Posted Support, as specified in
           Paragraph 13.

                                       10                           ISDA(R) 1994
<Page>

                              CREDIT SUPPORT ANNEX

                             TO THE SCHEDULE TO THE
                                MASTER AGREEMENT

                           DATED AS OF MARCH 12, 2002

                                     BETWEEN

                         JPMORGAN CHASE BANK ("PARTY A")
                                       AND
                   WADDELL & REED FINANCIAL, INC. ("PARTY B")

PARAGRAPH 13. ELECTIONS AND VARIABLES

(a)  SECURITY INTEREST FOR "OBLIGATIONS". The term "Obligations" as used in this
     Annex includes no additional obligations with respect to either party.

(b)  CREDIT SUPPORT OBLIGATIONS.

     (i)   DELIVERY AMOUNT, RETURN AMOUNT AND CREDIT SUPPORT AMOUNT.

           (A)  "Delivery Amount" has the meaning specified in Paragraph 3(a).

           (B)  "Return Amount" has the meaning specified in Paragraph 3(b).

           (C)  "Credit Support Amount" has the meaning specified in Paragraph
                3(b).

     (ii)  ELIGIBLE COLLATERAL. The following items will qualify as "Eligible
           Collateral" for both parties:

<Table>
<Caption>
                                                           PARTY A AND         "VALUATION
                                                              PARTY B          PERCENTAGE"
------------ -------------------------------------------- ---------------- --------------------
<S>          <C>                                               <C>               <C>
(A)          USD Cash                                          [X]               [100]%
------------ -------------------------------------------- ---------------- --------------------
(B)          negotiable debt obligations issued by the         [X]                [99]%
             U.S. Treasury Department having a
             remaining maturity of one year or less
             from the Valuation Date
------------ -------------------------------------------- ---------------- --------------------
(C)          negotiable debt obligations issued by the         [X]                [98]%
             U.S. Treasury Department having a
             remaining maturity of more than one year
             but less than ten years from the Valuation
             Date
------------ -------------------------------------------- ---------------- --------------------
</Table>

<Page>

<Table>
------------ -------------------------------------------- ---------------- --------------------
<S>          <C>                                               <C>                <C>
(D)          negotiable debt obligations issued by the         [X]                [96]%
             U.S. Treasury Department having a
             remaining maturity of ten years or more
             from the Valuation Date
------------ -------------------------------------------- ---------------- --------------------
(E)          Agency Securities having a remaining              [X]                [98]%
             maturity of one year or less from the
             Valuation Date
------------ -------------------------------------------- ---------------- --------------------
(F)          Agency Securities having a remaining              [X]                [97]%
             maturity of more than one year but less
             than ten years from the Valuation Date
------------ -------------------------------------------- ---------------- --------------------
(G)          Agency Securities having a remaining              [X]                [95]%
             maturity of ten years or more from the
             Valuation Date
------------ -------------------------------------------- ---------------- --------------------
</Table>

For purposes of the foregoing:

(a)  "Agency Securities" means negotiable debt obligations which are fully
guaranteed as to both principal and interest by the Federal National Mortgage
Association, the Government National Mortgage Association or the Federal Home
Loan Mortgage Corporation, but excluding (i) interest only and principal only
securities and (ii) Collateralized Mortgage Obligations, Real Estate Mortgage
Investment Conduits and similar derivative securities.

(b)  "DTC" shall mean The Depository Trust & Clearing Corporation, or its
successor.

(c)  "Moody's" shall mean Moody's Investors Service, Inc., or its successor.

(d)  "S&P" shall mean Standard & Poor's Ratings Group, or its successor.

   (iii) OTHER ELIGIBLE SUPPORT. There shall be no "Other Eligible Support" for
either party for purposes of this Annex, unless agreed in writing between the
parties.

   (iv) THRESHOLDS.

          (A)  "Independent Amount" shall not apply for purposes of this Annex.

          (B)  "Threshold" means, with respect to both parties, $2,500,000,
               provided, that if at any time a party's Credit Rating shall be
               less than BBB/Baa2, then the Threshold for such party shall be
               $0. As used herein, "Credit Rating" means, with respect to a
               party, the rating assigned by either S&P

<Page>

               or Moody's to the long term, unsecured and unsubordinated
               indebtedness of such party.

          (C)  "Minimum Transfer Amount" means, with respect to a party,
               U.S.$500,000, PROVIDED, HOWEVER, that if an Event of Default has
               occurred and is continuing with respect to a party, the Minimum
               Transfer Amount shall be U.S.$0.

          (D)  Rounding. The Delivery Amount and the Return Amount will be
               rounded up and down to the nearest integral multiple of
               U.S.$10,000, respectively.

(c)  VALUATION AND TIMING.

     (i)   "Valuation Agent" means, for all purposes, JPMorgan Chase Bank.

     (ii)  "Valuation Date" means any Local Business Day.

     (iii) "Valuation Time" means the close of business in the city of the
     Valuation Agent on the Valuation Date or date of calculation, as
     applicable;

     PROVIDED that the calculations of Value and Exposure will be made as of
     approximately the same time on the same date.

     (iv)  "Notification Time" means by 12:00 noon, New York time, on a Local
     Business Day.

     (v)   EVENTS OF DEFAULT. Paragraph 7(i) of the Credit Support Annex is
     hereby amended by deleting the word "two" in the third line thereof and
     replacing it with the word "one".

(d)  CONDITIONS PRECEDENT. With respect to each party, any Additional
     Termination Event (if such party is the Affected Party with respect to such
     Termination Event) will be a "Specified Condition".

(e)  SUBSTITUTION.

     (i)   "Substitution Date" has the meaning specified in Paragraph 4(d)(ii).

     (ii)  CONSENT. Inapplicable.

(f)  DISPUTE RESOLUTION.

     (i)   "Resolution Time" means 12:00 noon, New York time, on the Local
     Business Day following the date on which notice is given that gives rise to
     a dispute under Paragraph 5.

<Page>

     (ii)  VALUE. For the purpose of Paragraphs 5(i)(C) and 5(ii), the Value of
     Posted Credit Support other than Cash will be calculated as follows:

               (A) with respect to any Eligible Collateral except Cash, the sum
          of (I) (x) the mean of the high bid and low asked prices quoted on
          such date by any principal market maker for such Eligible Collateral
          chosen by the Disputing Party, or (y) if no quotations are available
          from a principal market maker for such date, the mean of such high bid
          and low asked prices as of the first day prior to such date on which
          such quotations were available, plus (II) the accrued interest on such
          Eligible Collateral (except to the extent Transferred to a party
          pursuant to any applicable provision of this Agreement or included in
          the applicable price referred to in (I) of this clause (A)) as of such
          date; multiplied by the applicable Valuation Percentage.

     (iii) The provisions of Paragraph 5 will apply.

(g)  HOLDING AND USING POSTED COLLATERAL.

     (i)   ELIGIBILITY TO HOLD POSTED COLLATERAL; CUSTODIANS.

     Party A will be entitled to hold Posted Collateral itself or through a
     Custodian pursuant to Paragraph 6(b), PROVIDED that the following
     conditions applicable to it are satisfied:

           (1) Party A is not a Defaulting Party.

           (2) The Custodian is a Bank (as defined in the Federal Deposit
           Insurance Act) whose rating with respect to its long term unsecured,
           unsubordinated indebtedness is at least BBB+ by S&P or Baa1 by
           Moody's.

     Party B will be entitled to hold Posted Collateral itself or through a
     Custodian pursuant to Paragraph 6(b), PROVIDED that the following
     conditions applicable to it are satisfied:

           (1) Party B is not a Defaulting Party.

           (2) The Custodian is a Bank (as defined in the Federal Deposit
           Insurance Act) whose rating with respect to its long term unsecured,
           unsubordinated indebtedness is at least BBB+ by S&P or Baa1 by
           Moody's.

     (ii)  USE OF POSTED COLLATERAL.  The provisions of Paragraph 6(c) will
     apply.

(h)  DISTRIBUTIONS AND INTEREST AMOUNT.

     (i)   INTEREST RATE. The Interest Rate for any day means the Federal Funds
     Overnight Rate. For the purposes hereof, "Federal Funds Overnight Rate"
     means, for any day, an interest rate

<Page>

     per annum equal to the rate published as the Federal Funds Effective Rate
     that appears on Telerate Page 118 for such day.

     (ii)  TRANSFER OF INTEREST AMOUNT. The transfer of the Interest Amount will
     be made monthly on the second Local Business Day of each calendar month.

     (iii) ALTERNATIVE TO INTEREST AMOUNT. The provisions of Paragraph 6(d)(ii)
     will apply.

(i)  ADDITIONAL REPRESENTATIONS.

     None.

(j)  OTHER ELIGIBLE SUPPORT AND OTHER POSTED SUPPORT.

     (i)   "Value" shall have no meaning with respect to either party with
     respect to Other Eligible Support and Other Posted Support.

     (ii)  "Transfer" shall have no meaning with respect to either party with
     respect to Other Eligible Support and Other Posted Support.

(k)  DEMANDS AND NOTICES.

     All demands, specifications and notices made by a party to this Annex will
     be made pursuant to the Notices Section of this Agreement, unless otherwise
     specified here:

     With respect to Party A:

     JPMorgan Chase Bank
     Collateral Middle Office Americas 3/OPS2
     500 Stanton Christiana Road
     Newark, DE, 19713 USA
     Telephone No.: 302-634-3191
     Fax No.: 302-634-3270

     With respect to Party B:

     Waddell & Reed Financial, Inc.
     Attention:  Treasury Department - Brent Bloss
     6300 Lamar Avenue
     Overland Park, Kansas 66202

(l)  OTHER PROVISIONS. None.

<Page>

     Please confirm your agreement to the terms of the foregoing Paragraph 13 by
signing below.

                             JPMORGAN CHASE BANK

                             By:  /s/ Melissa A. McMahon
                                  Name:  Melissa A. McMahon
                                  Title:  Vice President & Asst. General Counsel

                                  WADDELL & REED FINANCIAL, INC.

                             By:  /s/ John E. Sundeen, Jr.
                                  Name:  John E. Sundeen, Jr.
                                  Title:  Sr. Vice President, Treasurer & CFOQuickLinks
 -- Click here to rapidly navigate through this document

 
 

EXHIBIT 10.12    
  

 
 

MASTER LEASE AND SECURITY AGREEMENT    
    
    Dated as of February 15, 2002    
    
    between    
    
    SMBC LEASING AND FINANCE, INC.    
    
    as Lessor    
    
    and    

 
    COHERENT, INC.    
    
    as Lessee    
  

	

	

THIS LEASE IS NOT INTENDED TO CONSTITUTE A TRUE LEASE FOR

INCOME TAX PURPOSES.

SEE SECTION 30.1
	

This Lease has been executed in several counterparts. To the extent, if any, that this Lease constitutes chattel paper (as such term is defined in the Uniform Commercial Code as in effect in any applicable jurisdiction), no lien on this Lease may be
created through the transfer or possession of any counterpart other than the original executed counterpart containing the receipt therefor executed by the Lessor immediately following the signature page hereof.
	

  

 
 

TABLE OF CONTENTS    
  

	 
	 	 
	 	Page

	ARTICLE I DEFINITIONS	 	1
	1.1.	 	Definitions; Interpretation	 	1
	ARTICLE II PURCHASE AND LEASE	 	1
	2.1.	 	Acceptance and Lease of Assets	 	1
	2.2.	 	Acceptance Procedure	 	2
	2.3.	 	Lease Term	 	2
	2.4.	 	End of Lease Term	 	2
	2.5.	 	Title	 	2
	ARTICLE III FUNDING OF ADVANCES	 	2
	3.1.	 	Lessor Commitment	 	2
	3.2.	 	Procedures for Advances	 	3
	3.3.	 	Funding Debt Contribution with Loans	 	4
	ARTICLE IV CONDITIONS PRECEDENT TO CLOSING DATE, ACQUISITION DATES AND ADVANCES	 	4
	4.1.	 	Closing Date	 	4
	4.2.	 	Acquisition Date Conditions	 	5
	4.3.	 	Conditions Precedent to Each Advance	 	7
	ARTICLE V CONDITIONS TO SUBSTANTIAL COMPLETION	 	8
	5.1.	 	Conditions to Substantial Completion of a Construction Property	 	8
	ARTICLE VI REPRESENTATIONS AND WARRANTIES	 	8
	6.1.	 	Representations of the Lessor	 	8
	6.2.	 	Representations of the Lessee	 	9
	6.3.	 	Representations of the Lessee with Respect to Each Advance	 	13
	ARTICLE VII PAYMENT OF RENT; FEES	 	14
	7.1.	 	Rent	 	14
	7.2.	 	Payment of Rent	 	14
	7.3.	 	Supplemental Rent	 	14
	7.4.	 	Fees	 	14
	7.5.	 	Method of Payment	 	15
	7.6.	 	Payments Free of Withholding	 	15
	7.7.	 	Withholding Certificates	 	15
	ARTICLE VIII QUIET ENJOYMENT; RIGHT TO INSPECT	 	15
	8.1.	 	Quiet Enjoyment	 	15
	8.2.	 	Right to Inspect	 	15
	ARTICLE IX NET LEASE	 	16
	9.1.	 	Net Lease	 	16
	9.2.	 	No Termination or Abatement	 	16
	ARTICLE X SUBLEASES	 	17
	10.1.	 	Subletting	 	17
	ARTICLE XI LESSEE ACKNOWLEDGMENTS	 	17
	11.1.	 	Condition of the Leased Assets	 	17
	11.2.	 	Risk of Loss	 	18
	ARTICLE XII POSSESSION AND USE	 	18
	12.1.	 	Possession and Use	 	18
	12.2.	 	Charges	 	18
	12.3.	 	Impositions	 	18
	12.4.	 	Compliance with Requirements of Law and Insurance Requirements	 	18

i

 

	ARTICLE XIII MAINTENANCE AND REPAIR; RETURN	 	19
	13.1.	 	Maintenance and Repair	 	19
	13.2.	 	Return	 	19
	ARTICLE XIV MODIFICATIONS	 	19
	14.1.	 	Modifications, Substitutions and Replacements	 	19
	ARTICLE XV WARRANT OF TITLE; EASEMENTS	 	20
	15.1.	 	Warrant of Title	 	20
	15.2.	 	Grants and Releases of Easements and Other Rights	 	20
	15.3.	 	Restrictions on Lessor's Acts	 	21
	ARTICLE XVI PERMITTED CONTESTS	 	21
	16.1.	 	Permitted Contests	 	21
	ARTICLE XVII INSURANCE	 	23
	17.1.	 	Public Liability and Workers' Compensation Insurance	 	23
	17.2.	 	Hazard and Other Insurance	 	23
	17.3.	 	Insurance Coverage	 	23
	ARTICLE XVIII CASUALTY AND CONDEMNATION; ENVIRONMENTAL MATTERS	 	25
	18.1.	 	Casualty and Condemnation	 	25
	18.2.	 	Environmental Matters	 	27
	18.3.	 	Notice of Environmental Claims	 	28
	ARTICLE XIX TERMINATION OF LEASE	 	28
	19.1.	 	Mandatory Termination upon Certain Events	 	28
	19.2.	 	Termination Procedures	 	28
	19.3.	 	Construction Properties	 	29
	ARTICLE XX EVENTS OF DEFAULT; REMEDIES	 	29
	20.1.	 	Events of Default	 	29
	20.2.	 	Remedies	 	30
	20.3.	 	Operative Document Remedies.	 	33
	20.4.	 	Waiver of Certain Rights	 	33
	20.5.	 	Initial Leased Assets	 	33
	ARTICLE XXI ASSIGNMENT	 	33
	21.1.	 	Assignment	 	33
	ARTICLE XXII PURCHASE PROVISIONS	 	34
	22.1.	 	Purchase Option	 	34
	22.2.	 	Acceleration of Purchase Obligation	 	35
	ARTICLE XXIII RENEWAL TERMS	 	35
	23.1.	 	Renewal	 	35
	ARTICLE XXIV TERMINATION OPTION	 	36
	24.1.	 	Option to Terminate	 	36
	24.2.	 	Certain Obligations Continue	 	39
	24.3.	 	Late Payment	 	39
	ARTICLE XXV PROCEDURES RELATING TO PURCHASE OPTION OR TERMINATION OPTION	 	39
	25.1.	 	Conveyance Upon Purchase by the Lessee	 	39
	25.2.	 	Conveyance Upon Termination by the Lessee	 	40
	25.3.	 	Closing Costs	 	40
	ARTICLE XXVI INDEMNIFICATION	 	40
	26.1.	 	General Indemnification	 	40
	26.2.	 	Environmental Indemnity	 	41
	26.3.	 	Tax Indemnity	 	42
	26.4.	 	Proceedings in Respect of Claims	 	43

ii

 

	ARTICLE XXVII ESTOPPEL CERTIFICATES	 	44
	27.1.	 	Estoppel Certificates	 	44
	ARTICLE XXVIII ACCEPTANCE OF SURRENDER	 	45
	28.1.	 	Acceptance of Surrender	 	45
	ARTICLE XXIX NO MERGER OF TITLE	 	45
	29.1.	 	No Merger of Title	 	45
	ARTICLE XXX INTENT OF THE PARTIES	 	45
	30.1.	 	Ownership of the Leased Assets	 	45
	ARTICLE XXXI PAYMENT OF EXPENSES; YIELD PROTECTION	 	46
	31.1.	 	Transaction Expenses	 	46
	31.2.	 	Brokers' Fees and Stamp Taxes	 	46
	31.3.	 	Funding Losses	 	46
	31.4.	 	Basis for Determining Reserve Adjusted LIBOR Inadequate or Unfair	 	47
	31.5.	 	Illegality	 	47
	31.6.	 	Increased Cost and Reduced Return	 	47
	ARTICLE XXXII OTHER COVENANTS AND AGREEMENTS OF LESSEE	 	49
	32.1.	 	Information	 	49
	32.2.	 	Other Covenants	 	49
	32.3.	 	Consents	 	50
	32.4.	 	Ground Lease	 	50
	32.5.	 	Pari Passu Ranking	 	51
	32.6.	 	Financial Covenants	 	51
	ARTICLE XXXIII MISCELLANEOUS	 	54
	33.1.	 	Survival; Severability; Etc.	 	54
	33.2.	 	Amendments and Modifications	 	54
	33.3.	 	No Waiver	 	54
	33.4.	 	Notices	 	54
	33.5.	 	Successors and Assigns	 	54
	33.6.	 	Headings and Table of Contents	 	54
	33.7.	 	Counterparts	 	54
	33.8.	 	GOVERNING LAW; SUBMISSION TO JURISDICTION	 	54
	33.9.	 	Original Lease	 	55

iii

 

	33.10.	 	Limitations on Recourse	 	55
	33.11.	 	WAIVER OF JURY TRIAL	 	55
	33.12.	 	Confidentiality	 	56

	SCHEDULES
	

Schedule I	
 	

Notice Information
	Schedule II	 	Existing Liens
	

ANNEXES
	

Annex 1	
 	

Description of Initial Leased Assets
	

APPENDIXES
	

Appendix 1	
 	

Definitions and Interpretation
	

EXHIBITS
	

Exhibit A	
 	

Form of Funding Request
	Exhibit B	 	Form of Responsible Employee's Certificate of Lessee
	Exhibit C-1	 	Form of Lease Supplement for Property other than Construction Property
	Exhibit C-2	 	Form of Lease Supplement for Construction Property
	Exhibit D	 	Form of Compliance Certificate

iv

 
 

MASTER LEASE AND SECURITY AGREEMENT    
  

        THIS MASTER LEASE AND SECURITY AGREEMENT (this "Lease"), dated as of February 15, 2002, is entered into
between SMBC LEASING AND FINANCE, INC., a Delaware corporation, as the Lessor, and COHERENT, INC., a Delaware corporation, as the Lessee. 

 
 

W I T N E S S E T H:    
  

        WHEREAS, on or around December 23, 1996, SMBC Leasing and Finance, Inc. f/k/a Sumitomo Bank Leasing and Finance, Inc. (referred to herein as
"SBLF") and Lessee entered into a purchase and sale and lease transaction with respect to the assets listed on Annex
1 whereby SBLF financed the purchase of, and acquired, such assets and leased such assets to the Lessee; 

        WHEREAS,
in connection with such purchase and sale and lease transaction, SBLF and Lessee entered into a Lease dated December 23, 1996 between SBLF, as landlord and the Lessee, as
tenant, a Participation Agreement dated as of January 8, 1997 among SBLF, Lessee and the Rent Purchasers party thereto and certain related agreements and instruments (such Lease, Participation
Agreement and related agreements and instruments, each as amended or modified and as in effect from time to time, the "Existing Transaction Documents"); 

        WHEREAS,
Lessor and Lessee desire to terminate the Existing Transaction Documents and enter into a new lease arrangement with respect to such assets pursuant to this Lease and Lessor
desires to refinance the indebtedness incurred by the Lessor in connection with the Existing Transaction Documents; 

        WHEREAS,
the Lessor and the Lessee mutually may agree in the future to have the Lessor acquire additional assets to be leased to the Lessee hereunder; 

        WHEREAS,
such additional assets may, if so agreed by the Lessor and the Lessee, include real property on which improvements are to be constructed, in which case the Lessor will finance
the cost of such improvements as provided herein and the Lessee will act as agent of Lessor for the construction of such improvements; and 

        WHEREAS,
in order to refinance the assets listed on Annex 1, the Lessor has entered into that certain Loan Agreement dated as of the date hereof among Lessor, the lenders parties thereto
and SMBC Leasing and Finance, Inc., as agent; and 

        NOW,
THEREFORE, in consideration of the foregoing, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows: 

 
 

ARTICLE I    
    
    DEFINITIONS    
  

        1.1.    Definitions; Interpretation.    Capitalized terms used but not otherwise defined in this Lease have the
respective meanings specified in Appendix 1 to this Lease; and the rules of interpretation set forth in  Appendix 1 to this Lease shall apply to
this Lease. 

 
 

ARTICLE II    
    
    PURCHASE AND LEASE    
  

        2.1.    Acceptance and Lease of Assets.    

        (a)    Properties other than Construction Properties.    Subject to the terms and conditions of this Lease, on the
Acquisition Date for each Property other than a Construction Property (i) the Lessor shall purchase a fee interest in such Property (except in the case of the assets listed on  Annex 1, which
the Lessor previously purchased pursuant to the Existing Transaction Documents) and (ii) the Lessor shall demise and lease
to the Lessee hereunder for the Lease Term applicable 

 

thereto such Property, and the Lessee hereby agrees to lease from the Lessor for such Lease Term, such Property. 

        (b)    Construction Properties.    Subject to the terms and conditions of this Lease, on the Acquisition Date for each
Construction Property (i) the Lessor shall purchase a fee interest in the relevant parcel of Land, or the Lessee shall convey a ground leasehold interest in such parcel of Land to the Lessor
pursuant to a Ground Lease, and (ii) the Lessor shall demise and lease to the Lessee hereunder for the Lease Term applicable thereto the Lessor's interest in such Land together with any
Improvements which then may be located thereon or thereafter may be constructed thereon pursuant to the Construction Agency Agreement or this Lease, and the Lessee hereby agrees to lease from the
Lessor for such Lease Term, the Lessor's interest in such Land together with the Lessor's interest in such Improvements. 

        2.2.    Acceptance Procedure.    The Lessee hereby agrees that the execution and delivery by the Lessee on each
Acquisition Date of an appropriately completed Lease Supplement shall, without further act, constitute the unconditional and irrevocable acceptance by the Lessee of all of the Leased Assets which are
the subject of such Lease Supplement for all purposes of this Lease and the other Operative Documents on the terms set forth therein and herein, and that all of such Leased Assets shall be deemed to
be included in the leasehold estate of this Lease and shall be subject to the terms and conditions of this Lease as of the applicable Acquisition Date. 

        2.3.    Lease Term.    This Lease shall be in full force and effect on the Closing Date. Although each Leased Asset
shall be subject to this Lease from the Acquisition Date for such Leased Asset, the Lessee shall not be required to pay Base Rent for any Leased Asset until the Lease Term for such Leased Asset
commences. The Lease Term for each Leased Asset shall commence on the Base Date for such Leased Asset and end on the Expiration Date for such Leased Asset. The Lease Term for each Leased Asset is
subject to renewal as provided in Article XXIII. 

        2.4.    End of Lease Term.    At or before the Expiration Date for each Leased Asset, the Lessee must elect, in
accordance with the terms of Article XXII, Article XXIII and  Article XXIV hereof in respect
of such Leased Asset either (a) if available with respect to such Leased Asset, the Renewal Option,
(b) the Termination Option or (c) the Purchase Option. In the event the Lessee shall fail to make any such election for any Leased Asset in accordance with the terms set forth herein,
the Lessee shall be deemed automatically and irrevocably to have elected the Purchase Option for such Leased Asset specifying a purchase date of the Expiration Date for such Leased Asset. 

        2.5.    Title.    Each Leased Asset is leased to the Lessee without, except as expressly set forth herein, any
representation or warranty, express or implied, by the Lessor and subject to the rights of parties in possession, the existing state of title (including, without limitation, Permitted Liens other than
Lessor Liens) and all applicable Requirements of Law. The Lessee shall in no event have any recourse against the Lessor for any defect in or exception to title to any Leased Asset other than to the
extent resulting from Lessor Liens. 

 
 

ARTICLE III    
    
    FUNDING OF ADVANCES    
  

        3.1.    Lessor Commitment.    Subject to the conditions and terms hereof, the Lessor shall, upon the written request
of the Lessee from time to time, make Advances on Funding Dates for the purpose of (i) in the case of any Property other than a Construction Property, financing the acquisition of such Property
(or refinancing such Property, in the case of the assets listed on Annex 1) and (ii) in the case of any Construction Property, financing
the acquisition, ownership, insurance, construction, renovation and improvement of such Property during the Construction Period applicable thereto. Except in the case of a Construction Property, the
Lessor shall not make more than a single Advance in respect of 

2

 

any Leased Asset, on the Acquisition Date with respect to such Leased Asset, unless otherwise agreed by the Lessor with respect to such Leased Asset. In addition, and notwithstanding any other
provision hereof, the Lessor shall not be obligated to make any Advance if, after giving effect thereto, the aggregate amount of Advances (x) with respect to the Leased Asset to be funded
thereby would exceed the Lessor Commitment relating thereto or (y) with respect to all Leased Assets would exceed the aggregate of the Lessor Commitment for all Leased Assets. The Lessor's
Commitment for each Leased Asset is set forth in the Lease Supplement for such Leased Asset. 

        3.2.    Procedures for Advances.    

        (a)  With
respect to each funding of an Advance, the Lessee shall give the Lessor and the Agent prior written notice not later than 3:00 p.m., New York City time, five
(5) Business Days prior to the date of the proposed funding, pursuant to a funding request substantially in the form of Exhibit A (a
"Funding Request"), specifying: (i) the proposed funding date (the "Funding Date"),
(ii) the amount of the Advance requested, (iii) whether such proposed Funding Date will also be an Acquisition Date, (iv) whether such Advance will bear interest by reference to
Reserve Adjusted LIBOR or the Base Rate and the Interest Period therefore and (v) the Leased Asset to which such Advance is being allocated and the allocation of such Advance among the various
categories of costs and expenses listed in clause (c) below. With respect to any Funding Request related to the acquisition of a Leased Asset, in
addition to the foregoing, the Lessee shall also specify: (i) the Leased Asset to be acquired, (ii) the
transferor thereof and (iii), in the case of a Construction Property, whether the Land component thereof is to be acquired through a fee interest or Ground Lease and the Estimated Improvement Costs
for such Property. 

        (b)  Except
as the parties may otherwise agree in writing, each Funding Date requested (i) for any Construction Property shall occur only on the Acquisition Date for
such Leased Asset, the last Business Day of the Construction Period for such Construction Property or a Scheduled Payment Date during such Construction Period, and (ii) for any Property other
than a Construction Property, shall occur only on the Acquisition Date for such Property as set forth in Section 3.1 above. 

        (c)  Advances
shall be made solely (i) for Properties other than the Construction Properties, to pay Property Acquisition Costs, (ii) for Construction
Properties only, to pay or to reimburse the Construction Agent for Land Acquisition Costs and Property Improvement Costs (including Capitalized Interest, Capitalized Fees and other capitalized costs
(including premiums for builder's risk insurance, rent under any Ground Lease and Impositions) relating to such Construction Property during the Construction Period), and (iii) for any
Property, to pay, or to reimburse the Lessee for, Transaction Expenses paid or payable by the Lessee in connection with the preparation, execution and delivery of the Operative Documents, any
up-front fees payable to the Lenders, the Collateral Agent, the Agent, the Lessor and, during the Construction Period only in respect of a Construction Property, all on-going
fees paid or payable by the Lessee to the Lenders, the Collateral Agent, the Agent and the Lessor under the Operative Documents in connection with such Construction Property. 

        (d)  All
remittances made by the Lessor for the funding of any Advance shall be made through the Agent on the applicable Funding Date in immediately available federal funds
by wire transfer to the account or accounts designated by the Lessee. 

        (e)  Notwithstanding
anything to the contrary contained therein, on each Payment Date during the Construction Period for any Construction Property, the Lessor shall be deemed
to have made an Advance in an amount equal to the Capitalized Interest and Capitalized Commitment Fee for such Property calculated as of such date, and the amount of such Advance shall be added to the
Lease Balance of such Property on such date. 

3

 

        (f)    The
Advance to be made on the Acquisition Date of the Leased Assets described on Lease Supplement No. 1 and Lease Supplement No. 2 shall initially bear
interest by reference to the Base Rate, and three Business Days thereafter, such Advance shall bear interest by reference to Reserve Adjusted LIBOR with an interest period ending on the Monthly Date
occurring in May 2002. 

        3.3.    Funding Debt Contribution with Loans.    The Lessee and Lessor acknowledge and agree that the Relevant
Percentage of each Advance made by Lessor hereunder in respect of the Property described on the Lease Supplement No. 1 and Lease Supplement No. 2 shall be funded with the proceeds of
Loans borrowed by the Lessor under the Loan Agreement and that a component of Base Rent is allocable to the Debt Contribution funded with such Loans. Accordingly, provided no Event of Default has
occurred and is continuing, Lessor and Lessee further acknowledge and agree that Lessor shall borrow Loans and otherwise exercise rights under  Section 2.03, Article III,  Section 4.08 and Section 10.10 of the Loan Agreement solely as directed by Lessee in
writing. 

 
 

ARTICLE IV    
    
    CONDITIONS PRECEDENT TO
  CLOSING DATE, ACQUISITION DATES AND ADVANCES    
  

        4.1.    Closing Date.    The closing date (the "Closing Date") shall
occur on the earliest date on which the following conditions precedent shall have been satisfied or waived: 

        (a)    Master Lease.    This Lease shall have been duly executed and delivered by the parties hereto. 

        (b)    Responsible Employee's Certificate of Lessee.    The Lessor shall have received a Responsible Employee's
Certificate of the Lessee, in substantially the form of Exhibit B, stating that (i) each and every representation and warranty of the
Lessee contained in each Operative Document to which it is a party is true and correct in all material respects on and as of the Closing Date; (ii) no Default or Event of Default has occurred
and is continuing; (iii) each Operative Document to which the Lessee is a party is in full force and effect with respect to it; and (iv) the Lessee has duly performed and complied with
all covenants, agreements and conditions contained herein or in any Operative Document required to be performed or complied with by it. 

        (c)    Resolutions and Incumbency Certificate of Lessee.    The Lessee shall have delivered to the Lessor (i) a
certificate of its Secretary or an Assistant Secretary attaching and certifying as to (A) the resolutions of its Board of Directors duly authorizing the execution, delivery and performance by
it of each Operative Document to which it is or will be a party, (B) its certificate of incorporation and by-laws, and (C) the incumbency and signature of persons authorized
to execute and deliver on its behalf the Operative Documents to which it is a party and (ii) a certificate of good standing with respect to it issued by the Secretary of State of the State of
its incorporation. 

        (d)    Opinion of Counsel.    Wilson, Sonsini, Goodrich & Rosati, special counsel to the Lessee, shall have
issued to the Lessor, the Agent, the Collateral Agent and the Lenders an opinion in form and scope satisfactory to each such party. 

        (e)    Lessor Fee Letter.    The Lessor Fee Letter shall have been duly executed and delivered by the Lessor and the
Lessee, and arrangements shall have been established to ensure that the Lessor shall receive that portion of the fees payable thereunder on the Closing Date. 

        (f)    Withholding Certificates.    Tax forms and related information properly certifying the absence of withholding
tax on payments to the Lessor and the Lenders shall have been provided. 

4

 

        4.2.    Acquisition Date Conditions.    

        (a)    All Assets.    The occurrence of each Acquisition Date with respect to any Leased Asset is subject to the
occurrence of the Closing Date and the satisfaction or waiver of the following conditions precedent: 

          (i)  Loan Agreement and Security Agreement.    Each of the Loan Agreement and the Security Agreement shall have
been duly authorized, executed and delivered by the parties thereto. 

        (ii)  Lease Supplement.    The Lease Supplement relating to such Leased Asset shall have been duly executed and
delivered by the parties hereto. 

        (iii)  Appraisal.    The Lessor shall have received an Appraisal of such Leased Asset in form and substance
satisfactory to the Lessor and the Agent and, if such Appraisal shows that the Fair Market Sales Value of such Leased Asset as of the Expiration Date will be less than the Lessor Commitment for such
Leased Asset, the Lessor and the Lessee shall have agreed on the Quarterly Amortization for such Leased Asset. 

        (iv)  Filings.    The Operative Documents (or memoranda thereof), any supplements thereto and any UCC Financing
Statements shall have been fully executed and delivered by the respective parties thereto and held for recording, registration or filing pursuant to escrow arrangements satisfactory to Lessor. 

        (v)  Taxes.    All taxes, assessments, fees and other charges in connection with the execution, delivery, recording,
filing and registration of the Operative Documents and the acquisition of such Leased Asset shall have been paid or provisions for such payment shall have been made to the satisfaction of the Lessor. 

        (vi)  Governmental Actions.    All Governmental Actions necessary in connection with the acquisition (or continued
ownership, in the case of the assets listed on Annex 1) of such Leased Asset by the Lessor shall have been obtained or made and be in full force
and effect. 

      (vii)  Requirements of Law.    In the opinion of the Lessor and its counsel, the acquisition (if applicable) and
ownership of such Leased Assets as contemplated by the Operative Documents do not and will not violate in any material respect any Requirements of Law and do not and will not subject the Lessor to any
material adverse regulatory prohibitions or constraints. 

      (viii)  Responsible Employee's Certificate.    The Lessor shall have received a Responsible Employee's Certificate
of the Lessee, in substantially the form of Exhibit B, dated as of such Acquisition Date. 

        (ix)  Insurance.    The Lessor shall have received evidence of insurance with respect to each Leased Asset required
to be maintained by Lessee pursuant to the Operative Documents, setting forth the respective coverages, limits of liability, carrier, policy number and period of coverage. 

        (x)  Other Conditions.    In addition to the conditions set forth in this  Section 4.2, the Lessee shall have satisfied each additional condition, if
any, set forth in the Lease Supplement for such Leased Asset. 

5

 

        (b)    Properties.    In addition to the conditions specified in (a) above, the occurrence of each Acquisition
Date with respect to any Leased Asset consisting of Property is subject to the following conditions precedent: 

          (i)  Deed or Ground Lease.    The Lessor shall have received a Deed or Ground Lease with respect to the Land
constituting a part of such Property. 

        (ii)  Mortgages.    Except as the Lessor and the Lessee may otherwise agree, the Lessor shall have received a
Mortgage relating to such Property duly executed and delivered by the Lessee and the Collateral Agent shall have received a Mortgage relating to such Property duly executed by the Lender. 

        (iii)  Memorandum of Lease.    A memorandum of lease, in a form appropriate for recording in the jurisdiction in
which such Property is located, shall have been duly executed and delivered by the Lessor and the Lessee. 

        (iv)  Opinion of Counsel.    Counsel to the Lessee in the jurisdiction where such Property is located shall have
delivered an opinion as to local law matters in form and substance satisfactory to the Lessor. 

        (v)  Environmental Audit.    The Lessor shall have received an Environmental Audit for the Land constituting a part
of or underlying such Property in form and substance satisfactory to the Lessor. 

        (vi)  Survey.    The Lessee shall have delivered to the Lessor an ALTA/ACSM Land Title Survey of the Land
constituting a part of or underlying such Property prepared by an independent, licensed registered public land surveyor and meeting the Minimum Standard Detail Requirements for ALTA/ACSM Land Title
Surveys and the Accuracy Standards for ALTA/ACSM Land Surveys as adopted by the American Land Title Association, the American Congress on Surveying and Mapping and the National Society of Professional
Surveyors in 1999, certified to the Lessor, the Collateral Agent and the Title Company and otherwise in form reasonably acceptable to the Lessor. Such surveyor shall also certify whether any portion
of the Land is located in an area identified as a special flood hazard area by the Federal Emergency Management Agency. 

      (vii)  Title Insurance.    The Lessor shall have received an ALTA owners or leasehold title insurance policy and a
mortgagee's title insurance policy (or an endorsement providing for the issuance thereof) covering such Property in favor of the Lessor and a mortgagee's title insurance policy in favor of the
Collateral Agent, each such policy to be dated as of the Acquisition Date and in an amount not less than the Lessor Commitment with respect to such Property and to be reasonably satisfactory to the
Lessor with an owner's comprehensive (ALTA 9) endorsement, a 3.0 zoning endorsement and/or other endorsements reasonably requested by the Lessor (if other evidence of zoning compliance of the
Property, satisfactory to the Lessor, is unavailable), in each case to the extent available in the State where such Property is located. 

        (c)    Construction Properties.    In addition to the conditions specified in (a) and (b) above, the
occurrence of the Acquisition Date with respect to each Construction Property is subject to the following conditions precedent: 

          (i)  Construction Agency Agreement.    The Construction Agency Agreement shall have been duly executed and
delivered by the Lessor and the Construction Agent. 

        (ii)  Construction Agency Agreement Supplement.    The Construction Agency Agreement Supplement relating to such
Property shall have been duly executed and delivered by the Lessor and the Construction Agent. 

6

 

        (iii)  Construction Documents.    The Lessor shall have received the Plans and Specifications, the Budget and the
Prime Construction Contract relating to such Property, all of which shall be in form and substance satisfactory to the Lessor. 

        (iv)  Prime Contractor's Certificate.    The Lessor shall have received a certificate from the Prime Contractor for
such Property, in form and scope satisfactory to the Lessor, certifying that (A) such Construction Property as improved in accordance with the Plans and Specifications and the contemplated use
thereof by the Lessee will comply in all material respects with all Requirements of Law and Insurance Requirements, (B) the Plans and Specifications (1) have been prepared in accordance
with applicable Requirements of Law, (2) describe all Improvements to be made, constructed or installed on such Construction Property, and (C) upon completion of the Improvements in
accordance with the Plans and Specifications, such Improvements on the Construction Property will not encroach in any manner onto any adjoining land (except as permitted by express written easements). 

        (v)  Construction Documents Assignment.    The Construction Documents Assignment relating to such Construction
Property shall have been duly executed and delivered by the Lessee and Lessor. 

        (vi)  Consents.    The Lessor shall have received duly executed consents from each of the Prime Contractor and the
Architect regarding the assignment of the Prime Contract and the Plans and Specifications. 

      (vii)  Additional Matters.    The Lessor shall have received such other or further documents, agreements or
instruments as it may reasonably request. 

        4.3.    Conditions Precedent to Each Advance.    The obligations of the Lessor to make an Advance on a Funding Date,
including the initial Advance occurring on any Acquisition Date, is subject to satisfaction or waiver of the following conditions precedent: 

        (a)    Funding Request.    The Lessor shall have received a fully executed counterpart of the applicable Funding
Request, executed by the Lessee. 

        (b)    Accuracy of Representations and Warranties.    On the applicable Funding Date the representations and
warranties of the Lessee contained herein and in each of the other Operative Documents to which it is a party shall each be true and correct in all material respects as though made on and as of such
date, except to the extent such representations or warranties relate solely to an earlier date, in which case such representations and warranties shall have been true and correct on and as of such
earlier date. 

        (c)    No Default.    There shall not have occurred and be continuing any Default or Event of Default and no Default
or Event of Default will have occurred after giving effect to the making of the Advance requested by such Funding Request. 

        (d)    No Event of Construction Agency Termination.    In the case of an Advance relating to a Construction Property,
there shall not have occurred and be continuing any Event of Construction Agency Termination, and no Event of Construction Agency Termination will have occurred after giving effect to the making of
the Advance requested by such Funding Request. 

        (e)    Title Policy Endorsement.    In the case of an Advance relating to a Construction Property, the Lessor shall
have received an endorsement to the title policy delivered pursuant to this Lease, dated on or one Business Day before the date of such Advance, (i) indicating that since the date of the
preceding Advance relating to such Property there has been no change in the state of title and no additional survey exceptions not theretofore approved by the Lessor and (ii) updating the title
policy to the date of such endorsement. 

7

 

        (f)    Construction Progress.    In the case of an Advance relating to a Construction Property, if requested by
Lessor, Lessor shall have received copies of (i) all progress reports delivered under the Construction Documents, (ii) all unpaid invoices, receipted bills, lien waivers and such other
reasonably available supporting information as Lessor may reasonably request, (iii) all Governmental Actions required to be obtained on or before the applicable Funding Date in connection with
the Construction of the Improvements for such Construction Property and (iv) a certificate from the Lessee as to the amount of any unreimbursed Construction costs incurred by the Construction
Agent and outstanding on the applicable Funding Date. 

        (g)    Statement of Expenditures.    In the case of an Advance relating to a Construction Property, if requested by
Lessor, Lessor shall have received a statement setting forth in reasonable detail (after giving effect to the Advance requested and all prior Advances made in respect of such Construction Property)
all remaining amounts to be paid under the Prime Construction Contract and other Construction Documents necessary to effect Substantial Completion. 

        (h)    Final Advance.    In the case of the final Advance relating to a Construction Property, the Lessee shall have
satisfied each and every condition to Substantial Completion of such Construction Property. 

        (i)    No Material Adverse Effect.    In the opinion of the Lessor, no event shall have occurred or condition shall
exist which has resulted in a Material Adverse Effect. 

 
 

ARTICLE V    
    
    CONDITIONS TO SUBSTANTIAL COMPLETION    
  

        5.1.    Conditions to Substantial Completion of a Construction Property.    Substantial Completion with respect to a
Construction Property shall be deemed to have occurred for purposes of the Operative Documents at such time as the Construction shall have been substantially completed in accordance with the Plans and
Specifications and all Requirements of Law and the Lessee shall have caused the Title Company to have delivered to the Lessor an endorsement removing the pending improvements and pending disbursements
provisions of its title insurance policy (and providing a final zoning endorsement satisfactory to the Lessor, unless other evidence of zoning compliance satisfactory to the Lessor is provided by
Lessee) and, if the Lease Balance for such Construction Property shall exceed the Permitted Lease Balance for such Construction Property, caused an as-built survey of the Construction
Property (satisfying the requirements of Section 4.2(b)(vi)) to have been prepared and delivered to the Lessor and the Title Company. In
addition, such Construction Property shall be ready for occupancy and operation, as evidenced by certificates of the Architect and the Construction Agent, the Prime Contractor's application for the
payment to be made upon substantial completion and the issuance by the appropriate Governmental Authority of certificates of occupancy for all of the Improvements contemplated by the Plans and
Specifications together with all other necessary Governmental Actions, all in form and substance reasonably satisfactory to the Lessor. 

 
 

ARTICLE VI    
    
    REPRESENTATIONS AND WARRANTIES    
  

        6.1.    Representations of the Lessor.    The Lessor represents and warrants to the Lessee that: 

        (a)  The
Lessor is not and will not be funding its Advances hereunder, and is not performing its obligations under the Operative Documents, with the assets of an "employee
benefit plan" (as defined in Section 3(3) of ERISA) which is subject to ERISA, or a "plan" (as defined in Section 4975(e)(1) of the Code). 

8

 

        (b)    Company Power and Authority.    The Lessor has the power and authority to execute, deliver and perform the
terms and provisions of the Operative Documents to which it is or will be a party and has taken all necessary corporate action to authorize the execution, delivery and performance of the Operative
Documents to which it is a party and has duly executed and delivered each Operative Document required to be executed and delivered by it and, assuming the due authorization, execution and delivery
thereof on the part of each other party thereto, each such Operative Document constitutes a legal, valid and binding obligation enforceable against it in accordance with its terms, except as the same
may be limited by insolvency, bankruptcy, reorganization or other similar laws relating to or affecting the enforcement of creditors' rights or by general equitable principles. 

        (c)    Investment Company Act.    The Lessor is not an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940, as amended. 

        6.2.    Representations of the Lessee.    The Lessee represents and warrants to the Lessor and each Lender that: 

        (a)    Corporate Status.    The Lessee (i) is a duly organized and validly existing corporation in good
standing under the laws of the State of Delaware and (ii) has duly qualified and is authorized to do business and is in good standing as a foreign corporation in all jurisdictions where the
failure to do so could reasonably be expected to have a Material Adverse Effect. 

        (b)    Corporate Power and Authority.    The Lessee has the corporate power and authority to execute, deliver and
perform the terms and provisions of the Operative Documents to which it is or will be a party and has taken all necessary corporate action to authorize the execution, delivery and performance of the
Operative Documents to which it is a party and has duly executed and delivered each Operative Document required to be executed and delivered by it and, assuming the due authorization, execution and
delivery thereof on the part of each other party thereto, each such Operative Document constitutes a legal, valid and binding obligation enforceable against it in accordance with its terms, except as
the same may be limited by insolvency, bankruptcy, reorganization and other similar laws relating to or affecting the enforcement of creditors' rights or by general equitable principles. 

        (c)    No Violation.    Neither the execution, delivery and performance by the Lessee of the Operative Documents to
which it is or will be a party nor compliance with the terms and provisions thereof, nor the consummation by the Lessee of the transactions contemplated therein (i) will result in a violation
by the Lessee of any applicable provision of any law, statute, rule, regulation, order, writ, injunction or decree of any court or Governmental Authority having jurisdiction over the Lessee or any
Leased Asset that could reasonably be expected to result in a Material Adverse Effect, (ii) will result in any breach which would constitute a default under, or (other than pursuant to the
Operative Documents) result in the creation or imposition of (or the obligation to create or impose) any Lien upon any of the property or assets of the Lessee pursuant to the terms of, any indenture,
loan or credit agreement, note, security agreement or lease or other material agreement to which the Lessee is a party or by which it or any of its property or assets is bound or to which it may be
subject (other than Permitted Liens), or (iii) will violate any provision of the certificate of incorporation or by-laws of the Lessee. 

        (d)    Financial Condition.    The Financial Statements of the Lessee and its Subsidiaries, which have been delivered
to Lessor and the Collateral Agent, (i) are in accordance with the books and records of the Lessee and its Subsidiaries, which have been maintained in accordance with good business practice;
(ii) have been prepared in conformity with GAAP (subject to normal year-end adjustments with respect to unaudited Financial Statements); and (iii) fairly present in all
material respects the financial condition and results of operations of the Lessee and its Subsidiaries as of 

9

 

the date thereof and for the period covered thereby (subject to normal year-end adjustments with respect to unaudited Financial Statements). Neither the Lessee nor any of its Subsidiaries
has any Contingent Obligations or other outstanding obligations (other than taxes) which are material in the aggregate, except as disclosed or reflected in the Financial Statements delivered to Lessor
and the Collateral Agent on or prior to the date hereof or pursuant to Section 32. Since September 30, 2001, no Material Adverse Effect has occurred and no event has occurred or
condition exists which is reasonably likely to result in a Material Adverse Effect. 

        (e)    Litigation.    There are no actions, suits or proceedings pending or, to the knowledge of the Lessee,
threatened (i) that are reasonably likely to be adversely determined and if adversely determined, could reasonably be expected to result in a Material Adverse Effect, or (ii) that
question the validity or enforceability of the Operative Documents or the rights to remedies of the parties thereunder. 

        (f)    Governmental Actions.    No Governmental Action by any Governmental Authority having jurisdiction over the
Lessee or any Leased Asset is required to authorize or is required in connection with the execution, delivery and performance by the Lessee of any Operative Document to which it is a party other than
filings or recordings required to be made in connection with the Security Documents. 

        (g)    Investment Company Act.    The Lessee is not an "investment company" or a company "controlled" by an
"investment company," within the meaning of the Investment Company Act of 1940, as amended. 

        (h)    Public Utility Holding Company Act.    The Lessee is not a "holding company" or a "subsidiary company", or an
"affiliate" of a "holding company" or of a "subsidiary company" of a "holding company", within the meaning of the Public Utility Company Act of 1935, as amended. 

        (i)    Provided Information.    The certificates, statements, information and materials which have been provided by
the Lessee or any Affiliate of the Lessee to the Lessor in connection with the Operative Documents or any of the transactions contemplated thereby are true and accurate in all material respects on the
date as of which such information and materials are dated or certified and are not incomplete by omitting to state any fact necessary to make such information (taken as a whole) not misleading at such
time in light of the circumstances under which such information was provided. 

        (j)    Taxes.    All United States Federal income tax returns and all other tax returns which are required to have
been filed by Lessee have been or will be filed by or on behalf of the Lessee by the respective due dates, including extensions, and all taxes due with respect to the Lessee shown on such returns or
pursuant to any assessment received by the Lessee have been or will be paid or are being contested in good faith by the Lessee by appropriate procedures. The charges, accruals and reserves on the
books of the Lessee in respect of taxes or other governmental charges have been made in accordance with GAAP. 

        (k)    Compliance with Laws.    The Lessee is in compliance with all Applicable Laws other than those the
non-compliance with which could not reasonably be expected to have a Material Adverse Effect. 

10

  

        (l)    Properties.    Each Property (as improved in accordance with the Plans and Specifications for such Property, in
the case of a Construction Property) and the contemplated use thereof by the Lessee and its agents, assignees, employees, lessees, licensees and tenants will comply in all material respects with all
Requirements of Law (including, without limitation, all zoning and land use laws) and Insurance Requirements, except for such Requirements of Law as the Lessee shall be contesting in accordance with  Section 16.1. All water, sewer, electric, gas, waste treatment, telephone and drainage facilities and all other utilities required to service
adequately the Improvements on each Property for its intended use are currently available and related services have been established or, in the case of a Construction Property, will be available and
established upon the Substantial Completion thereof, pursuant to, and in accordance with, all necessary permits and approvals (including any that may be required under applicable Environmental Laws).
All such utilities serving each Property are located in, and vehicular access to the Improvements on such Property is provided by, either public rights-of-way abutting such
Property or Appurtenant Rights. There is no action, suit or proceeding (including any proceeding in condemnation or eminent domain or under any Environmental Law) pending or, to the best of the
Lessee's knowledge, threatened with respect to the Lessee, its Affiliates or such Leased Asset, that is reasonably likely to have a material adverse effect on the title to, or the use, operation or
value of, such Leased Asset. No fire or other casualty with respect to any Property has occurred which fire or other casualty has had a material adverse effect on the value, condition or utility of
such Property. All Governmental Actions, easements and rights-of-way required for (x) the use, operation and occupancy of each Property and (y) the use,
treatment, storage, transport, disposal or disposition of any Hazardous Substance on, at, under or from each Property have either been obtained from the appropriate Governmental Authorities having
jurisdiction or from private parties, as the case may be, or will be obtained from the appropriate Governmental Authorities having jurisdiction or from private parties, as the case may be, at or
before the time required by all Requirements of Law. Except as otherwise identified on the survey delivered pursuant to Section 4.2(b), no
portion of any Property is located in an area identified as a special flood hazard area by the Federal Emergency Management Agency or other applicable agency. If any Property is located in such an
area, then flood insurance has been obtained for such Property in accordance with Section 17.2 and in accordance with the National Flood
Insurance Act of 1968, as amended. 

        (m)    Construction Properties.    Each Prime Construction Contract for a Construction Property provides for the
Construction of the Improvements described on the Plans and Specifications for such Construction Property, upon the Land described in the Deed or Ground Lease for such Construction Property for a
fixed price or a guaranteed maximum price on or before the expiration of the Construction Period for such Construction Property, and contains a retainage provision withholding an amount not less than
ten percent (10%) of the fixed or guaranteed maximum price to be paid by Construction Agent thereunder until the satisfactory completion of the services to be provided by the Prime Contractor
thereunder. All Governmental Actions (including building, demolition and environmental permits), easements and rights-of-way required for the Construction of the Improvements
on any Construction Property in accordance with the Plans and Specifications therefor and the Construction Agency Agreement have either been obtained from the appropriate Governmental Authorities
having jurisdiction or from private parties, as the case may be, or will be obtained from the appropriate Governmental Authorities
having jurisdiction or from private parties, as the case may be, at or before the time required by all Requirements of Law and otherwise in a manner so as not to impede the Substantial Completion of
such Construction on or before the expiration of the Construction Period for such Construction Property. 

        (n)    Title; Ground Lease.    The Lessor will at all times during the Lease Term have fee simple title to all Land
(or a valid leasehold interest, in the case of a Ground Lease), together with all Improvements (if covered by the applicable Lease Supplement), subject only to Permitted Liens. Each Deed, if any, is
in form and substance sufficient to convey to the Lessor good and 

11

 

marketable title to the applicable Property subject only to Permitted Liens. Each Ground Lease, if any, is in form and substance sufficient to convey a valid leasehold interest in the applicable
Land. 

        (o)    Insurance.    The Lessee carries insurance with reputable insurers in respect of its material assets, in such
manner, in such amounts and against such risks as is customarily maintained by other Persons of similar size engaged in similar business; provided that
Lessee self-insures for workers' compensation insurance and does not carry earthquake insurance. 

        (p)    Defaults.    The Lessee is not in default under (and no event has occurred which with the giving of notice or
lapse of time would result in a default under) any instrument evidencing any debt or any agreement relating thereto or any mortgage, deed of trust, security agreement, lease, franchise or other
agreement to which the Lessee is a party or by which the Lessee or any of its properties or assets is bound or to which it may be subject, except to the extent that any such default could not
reasonably be expected to result in a Material Adverse Effect. 

        (q)    Use of Advances.    All Advances have been used solely for the purposes set forth in  Section 3.2(c) and no part of any
Advance has been used directly or indirectly for any other purpose including the purchasing or carrying, or for
payment in full or in part of debt that was incurred for the purposes of purchasing or carrying, any margin security as such term is defined in Regulation U of the Board of Governors of the
Federal Reserve System. 

        (r)    Solvency.    The Lessee is Solvent. 

        (s)    Employee Benefit Plans.    

          (i)  Based
on the latest valuation of each Employee Benefit Plan subject to Title IV of ERISA that the Lessee or any ERISA Affiliate maintains or contributes to, or has any
obligation under (which occurred within twelve months of the date of this representation), the aggregate benefit liabilities of such plan
within the meaning of Section 4001 of ERISA did not exceed the aggregate value of the assets of such plan. Neither the Lessee nor any ERISA Affiliate has any liability with respect to any
post-retirement health benefit under any Employee Benefit Plan which is a welfare plan (as defined in Section 3(1) of ERISA), other than liability for continuation coverage
described in Part 6 of Title I(B) of ERISA, which liability for health plan contribution coverage is not reasonably likely to have a Material Adverse Effect. 

        (ii)  Each
Employee Benefit Plan complies, in both form and operation, in all material respects, with its terms, ERISA and the Code, and no condition exists or event has
occurred with respect to any such plan which would result in the incurrence by the Lessee or any ERISA Affiliate of any material liability, fine or penalty. To the knowledge of Lessee, no Employee
Benefit Plan is being audited or investigated by any government agency or is subject to any pending or threatened claim or suit. To the knowledge of Lessee, neither the Lessee nor any ERISA Affiliate
nor any fiduciary of any Employee Benefit Plan has engaged in a prohibited transaction under Section 406 of ERISA or Section 4975 of the Code which is not otherwise exempt under
Section 406 of ERISA or Section 4975 of the Code. The execution and delivery of the Operative Documents and performance by Lessee of the transactions contemplated thereby do not
constitute a prohibited transaction under Section 406 of ERISA or Section 4975 of the Code which is not otherwise exempt under Section 406 of ERISA or Section 4975 of the
Code. 

        (iii)  Neither
the Lessee nor any ERISA Affiliate contributes to or has any material contingent obligations to any Multiemployer Plan. Neither the Lessee nor any ERISA
Affiliate has incurred any material liability (including secondary liability) to any Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan under
Section 4201 of ERISA or as a result of a sale of assets described in Section 4204 of ERISA. Neither the 

12

 

Lessee nor any ERISA Affiliate has been notified that any Multiemployer Plan is in reorganization or insolvent under and within the meaning of Section 4241 or Section 4245 of ERISA or
that any Multiemployer Plan intends to terminate or has been terminated under Section 4041A of ERISA. 

        (t)    Environmental Laws.    The Lessee is in compliance with all Environmental Laws in all jurisdictions in which
all real property of the Lessee, including all Land, is located, other than those the non-compliance with which would not have a Material Adverse Effect. 

        (u)    Absence of Burdensome Restrictions.    No Requirement of Law or Contractual Obligation, in each case that is in
effect on the date hereof and applicable to the Lessee or any of its Subsidiaries, is reasonably likely to have a Material Adverse Effect. 

        (v)    Obligations.    The obligations of the Lessee hereunder and under the other Operative Documents to which it is
a party rank at least pari passu in right of payment with all other unsecured and unsubordinated Indebtedness of the Lessee. 

        6.3.    Representations of the Lessee with Respect to Each Advance.    The Lessee represents and warrants to the
Lessor as of each Funding Date as follows: 

        (a)    Representations.    The representations and warranties of the Lessee set forth in the Operative Documents are
true and correct in all material respects on and as of such Funding Date, except to the extent such representations or warranties expressly relate to an earlier date, in which case such
representations and warranties shall have been true and correct on and as of such earlier date. 

        (b)    No Default.    There exists no Default or Event of Default and no Default or Event of Default will occur as a
result of, or after giving effect to, the Advance requested by the Funding Request on such Funding Date. 

        (c)    Improvements.    In the case of a Funding Date for any Construction Property, (i) the Construction of
the Improvements to such Construction Property to date, if any, has been performed in a good and workmanlike manner, substantially in accordance with the Plans and Specifications for such Construction
Property and in compliance with all material Insurance Requirements and Requirements of Law, (ii) all necessary Governmental Approvals have been obtained for all of such items of Construction
completed in respect of such Construction Property, (iii) each item of Construction completed to date and which is the subject of the Advance requested by the Lessee on such Funding Date has
been completed in a manner and on or before a date that will not impede or prevent the completion of Construction of the Improvements on or before the Outside Completion Date for such Property, and
(iv) after giving effect to the Advance to be made on such Funding Date, on the basis of the actual progress of the Construction on such Funding Date, the unused portion of the Lessor
Commitment for such Construction Property is sufficient to pay for all remaining Estimated Improvements Costs set forth in the Budget necessary to achieve Substantial Completion of the Improvements. 

        (d)    Liens.    The Lessee has not permitted Liens to be placed against any Leased Asset (other than Permitted
Liens). 

        (e)    Advance.    The conditions precedent to such Advance set forth in  Article IV have been satisfied by the Lessee or
waived by the Lessor, with the consent of the Majority Lenders. In the case of an Advance with
respect to any Leased Asset other than a Construction Property, the amount of the Advance requested represents amounts owed to third parties in respect of the Property Acquisition Costs of such Leased
Asset. In the case of an Advance with respect to a Construction Property, the amount of the Advance requested represents amounts owed to third parties in respect of Land Acquisition Costs or owed or
paid by the Construction Agent to third 

13

 

parties in respect of Property Improvements Costs, in each case incurred prior to the date of such Advance and for which neither the Lessee nor the Construction Agent has previously been reimbursed
by an Advance, provided that this representation shall not apply to any portion of an Advance made on Substantial Completion which is to be used to pay
for open punch list items or other holdbacks. With respect to any portion of an Advance made on Substantial Completion which is to be used to pay for open punch list items or other holdbacks, the
Lessee represents that such portion will be used for such purpose to the extent that a contractor is entitled thereto and that neither the Lessee nor the Construction Agent has previously been
reimbursed therefor by an Advance. 

 
 

ARTICLE VII    
    
    PAYMENT OF RENT; FEES    
  

        7.1.    Rent.    The Lessee shall pay Base Rent in arrears on each Leased Asset on each Payment Date during the Lease
Term for such Leased Asset, on the date required under Section 24.1(i) in connection with the Lessee's exercise of the Termination Option and on
any date on which this Lease shall terminate. In addition, if all or any portion of the Lease Balance of any Leased Asset is paid on any date other than a Payment Date, then the Lessee shall also pay
Base Rent on such Leased Asset on such date in an amount equal to the accrued Base Rent on the Lease Balance so paid to the date of such payment. Base Rent for each Leased Asset shall be calculated as
provided in the Lease Supplement for such Leased Asset. 

        7.2.    Payment of Rent.    Subject to the terms of Section 7.7
with respect to withholding taxes only, Rent shall be paid absolutely net to the Lessor, so that this Lease shall yield to the Lessor the full amount thereof, without setoff, deduction or reduction.
Neither the Lessee's inability or failure to take possession of all or any portion of any Leased Asset when delivered by the Lessor, whether or not attributable to any act or omission of the Lessee or
any act or omission of the Lessor, or for any other reason whatsoever, shall delay or otherwise affect the Lessee's obligation to pay Rent for such Leased Asset in accordance with the terms of this
Lease. 

        7.3.    Supplemental Rent.    The Lessee shall pay to the Lessor any and all Supplemental Rent after receipt of an
invoice therefor as the same shall become due and payable, and if the Lessee fails to pay any Supplemental Rent, the Lessor shall have all rights, powers and remedies provided for herein or by law or
equity or otherwise in the case of nonpayment of Base Rent. The Lessee shall pay to the Lessor, as Supplemental Rent, among other things, on demand, interest at the applicable Overdue Rate on any
amount payable by the Lessee hereunder or under any other Operative Document not paid when due for the period for which the same shall be overdue until the same shall be paid. The expiration or other
termination of the Lessee's obligations to pay Base Rent hereunder shall not limit or modify the obligations of the Lessee with respect to Supplemental Rent. Unless expressly provided otherwise in
this Lease, in the event of any failure on the part of the Lessee to pay and discharge any Supplemental Rent as and when due, the Lessee shall also promptly pay and discharge any fine, penalty,
interest or cost which may be assessed or added under any agreement with a third party for nonpayment or late payment of such Supplemental Rent, all of which shall also constitute Supplemental Rent. 

        7.4.    Fees.    The Lessee hereby agrees to pay to the Lessor the fees set forth in this  Section 7.4. All such fees shall be
non-refundable and, to the extent provided in  Section 3.2(e), shall be capitalized and included in the Lease Balance.
 

        (a)    Lessor Fee Letter.    The Lessee shall pay to the Lessor the fees set forth in the Lessor Fee Letter executed
or acknowledged by the Lessee, under which certain amounts shall be payable on the Closing Date. 

14

 

        (b)    Commitment Fees.    The Lessee shall pay to the Lessor commitment fees in respect of each Leased Asset at the
times and in the amounts, if any, specified in the Lease Supplement therefor. 

        (c)    Upfront Fees.    The Lessee shall pay to the Lessor upfront fees in respect of each Leased Asset at the times
and in the amounts, if any, specified in the Lease Supplement therefor. 

        7.5.    Method of Payment.    Each payment of Rent or any other amount due hereunder shall be made by the Lessee to
the Lessor prior to 2:00 p.m., New York City time, at the Lessor's account at the Collateral Agent in funds consisting of lawful currency of the United States of America which shall be
immediately available on the scheduled date when such payment shall be due, unless such scheduled date shall not be a Business Day, in which case such payment shall be made on the next succeeding
Business Day. Payments received after 2:00 p.m., New York City time, on any day shall be deemed received on the next succeeding Business Day. 

        7.6.    Payments Free of Withholding.    Subject to the terms of  Section 7.7, all payments made by the Lessee under this Lease
shall be made free and clear of, and without deduction or withholding for or on
account of, all present and future Impositions. If any Impositions are required to be withheld from any amounts payable to Lessor hereunder, the amounts so payable shall be increased to the extent
necessary to yield (after payment of all Impositions) interest or any other amounts payable hereunder at the rates or in the amounts specified in this Lease or the other Operative Documents, as
applicable. Whenever any Impositions are payable by the Lessee, as promptly as possible thereafter, the Lessee shall send to Lessor a certified copy of an original official receipt received by the
Lessee showing payment thereof. The obligations of the Lessee under this Section 7.6 shall survive the payment and performance of the Obligations
and the termination of this Lease. 

        7.7.    Withholding Certificates.    The Lessor and each assignee of Lessor's rights and interests hereunder shall
provide to Lessee original executed copies of such tax forms or related certificates certifying no withholding tax is required to be deducted for United States federal income tax purposes from
payments to be made hereunder. The Lessor shall also provide to the Lessee duplicate original copies of all tax certificates received from the Lenders under  Section 10.10 of the Loan Agreement.
Whenever a lapse of time or a change in circumstance after the initial delivery of the forms or certificates
described in this Section 7.7 by Lessor (or its assignee) renders such forms or certificates obsolete or inaccurate, then Lessor (or such
assignee, as the case may be) shall promptly deliver to Lessee (i) new original copies of such forms or certificates certifying that no such deduction or withholding is required with respect to
payments to be made hereunder or (ii) written notification to the Lessee of its inability as a result of a change in law to deliver such forms or certificates. 

 
 

ARTICLE VIII    
    
    QUIET ENJOYMENT; RIGHT TO INSPECT    
  

        8.1.    Quiet Enjoyment.    Subject to Sections 2.4 and  8.2, and subject to the
rights of the Lessor contained herein and the other terms of the Operative Documents to which the Lessee is a party, the Lessee
shall peaceably and quietly have, hold and enjoy each Leased Asset for the Lease Term applicable thereto, free of any claim or other action by the Lessor or anyone claiming by, through or under the
Lessor (other than the Lessee) with respect to any matters arising from and after the Acquisition Date for such Leased Asset. Such right of quiet enjoyment is independent of, and shall not affect the
Lessor's rights otherwise to initiate legal action to enforce, the obligations of the Lessee under this Lease. 

        8.2.    Right to Inspect.    During the Lease Term with respect to a Leased Asset, the Lessee shall, upon reasonable
notice from the Lessor (except that no notice shall be required in the event of an emergency and one Business Day's notice shall be deemed reasonable if an Event of Default has 

15

 

occurred and is continuing), permit the Lessor and its authorized representatives to inspect such Leased Asset during normal business hours. Lessor and its authorized representatives shall comply
with all reasonable security measures and the rights of other occupants of the Property and maintain the confidentiality of any confidential information obtained during the course of any inspection
and, at the request and expense of the Lessee, shall execute and deliver non-disclosure agreements to such effect as may be reasonably appropriate. 

 
 

ARTICLE IX    
    
    NET LEASE    
  

        9.1.    Net Lease.    This Lease shall constitute a net lease. Any present or future law to the contrary
notwithstanding, this Lease shall not terminate, nor shall the Lessee be entitled to any abatement, suspension, deferment, reduction, setoff, deduction, counterclaim, or defense whatsoever with
respect to the Rent, nor shall the obligations of the Lessee hereunder be affected (except as expressly herein permitted and by performance of the obligations in connection therewith) by reason of:
(i) any defect in the condition, merchantability, design, construction, quality or fitness for use of any Leased Asset or any part thereof, or the failure of any Leased Asset to comply with all
Requirements of Law, including any inability to occupy or use any Leased Asset by reason of such non-compliance; (ii) any damage to, removal, abandonment, salvage, loss,
contamination of or Release from, scrapping or destruction of or any requisition or taking of any Leased Asset or any part thereof; (iii) any restriction, prevention or curtailment of or
interference with any use of the Leased Asset or any part thereof including eviction; (iv) any defect in title to or rights to any Leased Asset or any Lien on such title or rights or on any
Leased Asset (other than Lessor Liens); (v) any change, waiver, extension, indulgence or other action or omission or breach in respect of any obligation or liability of or by the Lessor;
(vi) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceedings relating to the Lessee or any other Person, or any action taken with
respect to this Lease by any trustee or receiver of the Lessee or any other Person, or by any court, in any such proceeding; (vii) any claim that the Lessee has or might have against any
Person, including without limitation the Lessor and any vendor, manufacturer, contractor of or for any portion of any Leased Asset; (viii) any failure on the part of the Lessor to perform or
comply with any of the terms of this Lease (other than performance by Lessor of its obligations set forth in Section 2.1), of any other Operative
Document or of any other agreement; (ix) any invalidity or unenforceability or illegality or disaffirmance of this Lease against or by the Lessee or any provision hereof or any of the other
Operative Documents or any provision of any thereof; (x) any restriction, prevention or curtailment of or interference with the construction on or any use of any Leased Asset or any part
thereof; or (xi) any other cause or circumstances, similar to the foregoing and whether or not the Lessee shall have notice or knowledge of any of the foregoing. The parties intend that the
obligations of the Lessee hereunder shall be covenants and agreements that are separate and independent from any obligations of the Lessor hereunder or under any other Operative Documents and the
obligations of the Lessee shall continue unaffected unless such obligations shall have been performed, modified or terminated in accordance with an express provision of this Lease. 

        9.2.    No Termination or Abatement.    The Lessee shall remain obligated under this Lease in accordance with its
terms and shall not take any action to terminate, rescind or avoid this Lease, notwithstanding any action for bankruptcy, insolvency, reorganization, liquidation, dissolution, or other proceeding
affecting the Lessor, or any action with respect to this Lease which may be taken by any trustee, receiver or liquidator of the Lessor or by any court with respect to the Lessor. The Lessee hereby
waives all right (i) to terminate or surrender this Lease (except as provided herein) or (ii) to avail itself of any abatement, suspension, deferment, reduction, setoff, deduction,
counterclaim or defense with respect to the payment of any Rent; provided, however, no such payment made
by the Lessee shall constitute a waiver of any claims Lessee may have. The Lessee shall remain obligated 

16

 

under this Lease in accordance with its terms and the Lessee hereby waives any and all rights now or hereafter conferred by statute or otherwise to modify or to avoid strict compliance with its
obligations under this Lease. Notwithstanding any such statute or otherwise, the Lessee shall be bound by all of the terms and conditions contained in this Lease. 

 
 

ARTICLE X    
    
    SUBLEASES    
  

        10.1.    Subletting.    The Lessee may not, without the consent of the Lessor, sublease any Leased Asset or any
portion thereof to any Person, except on the terms expressly provided below, and any such sublease that does not comply with such terms shall be null and void. No sublease or other relinquishment of
possession of such Leased Asset shall in any way affect, amend, reduce, discharge or diminish any of the Lessee's obligations to the Lessor hereunder and the Lessee shall remain directly and primarily
liable (and not as a guarantor or a surety) under this Lease as to such Leased Asset, or portion thereof, so sublet. Any sublease of such Leased Asset shall expressly be made subject to and
subordinated to this Lease and to the rights of the Lessor hereunder and shall expressly provide for the surrender of the Leased Asset by the sublessee thereof at the election of Lessor upon the
earlier to occur of (i) the termination of this Lease as to such Leased Asset, including any termination caused by or resulting from the exercise by the Lessor of its rights or remedies
hereunder or (ii) the Expiration Date for such Leased Asset. No such sublease may provide for use of such Leased Asset by the sublessee in a manner other than as permitted under this Lease or
provide for a term which extends beyond the last day of the Base Term for such Leased Asset. Lessee shall give Lessor prompt written notice of any sublease permitted under this  Article X, and
Lessee shall, within thirty (30) days after execution of any sublease, deliver to the Lessor and the Collateral Agent a
fully executed copy of such sublease. The Lessor acknowledges that it has received a copy of the sublease dated April 30, 2001, as amended to the date hereof, between the Lessee and
Lumenis Ltd.; provided that such acknowledgment does not constitute an acknowledgment by the Lessor that such sublease complies with this  Section 10.1 or a waiver by the Lessor of any rights it may have. 

 
 

ARTICLE XI    
    
    LESSEE ACKNOWLEDGMENTS    
  

        11.1.    Condition of the Leased Assets.    THE LESSEE ACKNOWLEDGES AND AGREES THAT IT IS LEASING EACH LEASED ASSET
"AS IS" WITHOUT, EXCEPT AS EXPRESSLY OTHERWISE PROVIDED HEREIN, REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) BY THE LESSOR AND SUBJECT TO (A) THE EXISTING STATE OF TITLE,
(B) THE RIGHTS OF ANY PARTIES IN POSSESSION THEREOF, (C) ANY STATE OF FACTS WHICH AN ACCURATE SURVEY OR PHYSICAL INSPECTION MIGHT SHOW, AND (D) VIOLATIONS OF REQUIREMENTS OF LAW
WHICH MAY EXIST ON THE DATE HEREOF OR AT ANY TIME
HEREAFTER. THE LESSOR HAS NOT MADE, EXCEPT AS EXPRESSLY OTHERWISE PROVIDED HEREIN, AND SHALL NOT BE DEEMED TO HAVE MADE ANY REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) AND SHALL NOT BE
DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE TITLE (OTHER THAN FOR LESSOR LIENS), VALUE, HABITABILITY, USE, CONDITION, DESIGN, OPERATION, OR FITNESS FOR USE OF ANY LEASED ASSET (OR ANY PART
THEREOF), OR ANY OTHER REPRESENTATION, WARRANTY OR COVENANT WHATSOEVER, EXPRESS OR IMPLIED (OTHER THAN EXPRESS COVENANTS OF THE LESSOR UNDER THE OPERATIVE DOCUMENTS), WITH RESPECT TO ANY LEASED ASSET
(OR ANY PART THEREOF) OR ANY MODIFICATION THERETO AND THE LESSOR SHALL NOT BE LIABLE FOR ANY LATENT, HIDDEN, OR PATENT DEFECT THEREIN (OTHER THAN FOR LESSOR LIENS) OR THE FAILURE OF ANY LEASED ASSET,
OR ANY PART 

17

 

THEREOF, TO COMPLY WITH ANY REQUIREMENTS OF LAW. THE LESSEE FURTHER ACKNOWLEDGES AND AGREES THAT ALTHOUGH THE LESSOR WILL OWN AND HOLD TITLE TO THE IMPROVEMENTS AND MAKE ADVANCES FOR THE CONSTRUCTION
OF SUCH IMPROVEMENTS ON THE TERMS AND SUBJECT TO THE CONDITIONS SET FORTH HEREIN AND IN THE CONSTRUCTION AGENCY AGREEMENT, THE CONSTRUCTION AGENT IS OTHERWISE SOLELY RESPONSIBLE UNDER THE TERMS OF THE
CONSTRUCTION AGENCY AGREEMENT FOR THE DESIGN, DEVELOPMENT, BUDGETING AND CONSTRUCTION OF THE IMPROVEMENTS TO ANY CONSTRUCTION PROPERTY. 

        11.2.    Risk of Loss.    During the Lease Term for any Leased Asset (or with respect to any Construction Property,
from and after the Substantial Completion thereof), subject to Article XVIII hereof, the risk of loss of or decrease in the enjoyment and
beneficial use of such Leased Asset as a result of the damage or destruction thereof by fire, the elements, casualties, thefts, riots, wars or otherwise is assumed by the Lessee, and the Lessor shall
in no event be answerable or accountable therefor. 

 
 

ARTICLE XII    
    
    POSSESSION AND USE    
  

        12.1.    Possession and Use.    Each Leased Asset may only be used as described in the applicable Lease Supplement
therefor and in a manner consistent with the standards applicable to properties of a similar nature in the geographic area in which such Leased Asset is located or operated and in any event not less
than the standards applied by the Lessee and its Affiliates for other comparable properties owned or leased by the Lessee and its Affiliates. The Lessee shall not commit or permit any waste of such
Leased Asset or any part thereof. 

        12.2.    Charges.    The Lessee shall pay, or cause to be paid, all charges and costs required in connection with the
use, operation, occupancy, maintenance and repair of such Leased Asset as contemplated by this Lease. The Lessee shall pay or cause to be paid all rents and charges for electricity, steam, gas, oil,
water, telephone, water, waste treatment, sewer and all other utilities and services used in or on or furnished to each Property through the Expiration Date. The Lessee shall be entitled to receive
any credit or refund with respect to any utility charge paid by the Lessee with respect to any Property and the amount of any credit or refund actually received by the Lessor on account of any such
utility charges, net of the costs and expenses reasonably incurred by the Lessor in obtaining such credit or refund, shall be promptly paid over to the Lessee. 

        12.3.    Impositions.    The Lessee shall pay, or cause to be paid, all Impositions. The Lessee shall be entitled to
receive any credit or refund with respect to any Imposition paid by the Lessee with respect to any Leased Asset and the amount of any credit or refund actually received by the Lessor on account of any
such Imposition, net of the costs and expenses reasonably incurred by the Lessor in obtaining such credit or refund, shall be promptly paid over to the Lessee. 

        12.4.    Compliance with Requirements of Law and Insurance Requirements.    Subject to  Section 16.1, the Lessee, at its sole
cost and expense, shall (i) comply in all material respects with all Requirements of Law and
Insurance Requirements relating to each Leased Asset, including the construction, use, operation, occupancy, maintenance, repair and restoration thereof and the remarketing thereof pursuant to  Article XXIV, whether or not compliance therewith shall require structural or extraordinary changes in any Improvements or interfere with the use
and enjoyment of such Leased Asset, and (ii) procure, maintain and comply in all material respects with all Governmental Actions and other authorizations required for the construction, use,
operation, occupancy, maintenance, repair and restoration of the Leased Assets. 

18

  

 
 

ARTICLE XIII    
    
    MAINTENANCE AND REPAIR; RETURN    
  

        13.1.    Maintenance and Repair.    

        (a)  The
Lessee, at its sole cost and expense, shall maintain each Leased Asset in good condition (ordinary wear and tear excepted) and, subject to  Article XVIII, make all necessary repairs thereto, of
every kind and nature whatsoever, whether interior or exterior, ordinary or extraordinary,
structural or nonstructural or foreseen or unforeseen, in each case as required by all Requirements of Law and Insurance Requirements and on a basis consistent with the operation and maintenance of
properties comparable in type and location to such Leased Asset and in no event less than the standards applied by the Lessee and its Affiliates in the operation and maintenance of other comparable
properties owned or leased by the Lessee and its Affiliates. 

        (b)  The
Lessor shall under no circumstances be required to build any improvements on any Property, make any replacements, alterations or renewals of any nature or
description to any Leased Asset or make any expenditure whatsoever in connection with this Lease (other than for Advances made in accordance with and pursuant to the terms of this Lease or the
Construction Agency Agreement, if applicable). The Lessor shall not be required to maintain, repair or rebuild all or any part of any Leased Asset, and the Lessee waives any right to
(i) require the Lessor to maintain, repair, or rebuild all or any part of any Leased Assets, or (ii) make repairs at the expense of the Lessor pursuant to any Requirement of Law,
Insurance Requirement, contract, agreement, or covenant, condition or restriction in effect at any time during the Lease Term applicable to any Leased Asset (other than to make amounts available to
Lessee under and in accordance with Article XVIII). 

        13.2.    Return.    Unless the Lessee has purchased such Leased Asset from the Lessor as provided herein, the Lessee
shall, upon the expiration or earlier termination of this Lease with respect to a Leased Asset, vacate and surrender such Leased Asset to the Lessor in its then-current condition, subject
to the terms of Sections 12.4, 13.1, 14.1,  15.1, 18.1(d), 18.2 and
24.1; provided, that nothing in this Section 13.2
shall
obligate the Lessee to remove any Lessor Liens or to repair any damage directly caused by the Lessor or its employees. 

 
 

ARTICLE XIV    
    
    MODIFICATIONS    
  

        14.1.    Modifications, Substitutions and Replacements.    After the date of Substantial Completion for any
Construction Property and after the Acquisition Date for any other Leased Asset, the Lessee, at its sole cost and expense, may at any time and from time to time make alterations, renovations,
improvements and additions to such Leased Asset or any part thereof and substitutions and replacements therefor (collectively, "Modifications");  provided,
however, that: (i) except for any Modification required to be made pursuant to any
Requirements of Law (a "Required Modification"), no Modification shall impair the value, utility or useful life of such Leased Asset or any part thereof
from that which existed immediately prior to such Modification; (ii) the Modification shall be done expeditiously and in a good and workmanlike manner; (iii) the Lessee shall comply in
all material respects with all Requirements of Law and Insurance Requirements applicable to the Modification, including the obtaining of all permits and certificates of occupancy, and the structural
integrity of such Leased Asset shall not be adversely affected; (iv) subject to Section 16.1, the Lessee shall pay all costs and expenses
and shall discharge (or cause to be insured or bonded over) within sixty (60) days after the same shall be filed (or otherwise become effective) any Liens arising with respect to the
Modification; (v) such Modifications shall comply with Section 13.1(a); and (vi) the Lessee shall be required to obtain the prior
written approval of the Lessor, which approval shall not be unreasonably 

19

 

withheld, with respect to any alterations (other than Required Modifications) that shall (A) materially affect any structural element of the Improvements to any Property or major building
system therein, (B) cost in excess of the Threshold Amount for any Property or (C) materially change the nature of the Improvements to any Property or the amount of usable area therein
or the utility thereof for the purposes contemplated by the Lessor and the Lessee as of the date hereof and the date of the Lease Supplement therefor. All Modifications shall remain part of such
Leased Asset and shall be subject to this Lease and title thereto shall immediately vest in the Lessor; provided,  however, that Modifications that meet
each of the following conditions shall not be subject to this Lease: (x) such Modifications are not
Required Modifications, (y) such Modifications were not financed by the Lessor and (z) such Modifications are capable of removal without impairing the value, utility or remaining useful
life of the related Leased Asset. The Lessee may place upon each Leased Asset any trade fixtures, machinery, equipment or other property belonging to the Lessee or third parties and may remove the
same at any time during the Lease Term, subject, however, to the terms of Sections 13.1 and 13.2. 

 
 

ARTICLE XV    
    
    WARRANT OF TITLE; EASEMENTS    
  

        15.1.    Warrant of Title.    

        (a)  Except
as otherwise provided herein and subject to Section 16.1, the Lessee shall not directly or indirectly
create or allow to remain, and shall promptly discharge at its sole cost and expense, any Lien, attachment or levy upon any Leased Asset or any Modifications or any Lien, attachment or levy with
respect to the Rent, other than Permitted Liens. 

        (b)  Nothing
contained in this Lease shall be construed as constituting the consent or request of the Lessor, expressed or implied, to or for the performance by any
contractor, mechanic, laborer, materialman, supplier or vendor of any labor or services or for the furnishing of any materials for any construction, modification, addition, repair or demolition of or
to any Leased Asset or any part thereof. NOTICE IS HEREBY GIVEN THAT THE LESSOR IS NOT AND SHALL NOT BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO THE LESSEE, OR TO
ANYONE HOLDING ANY LEASED ASSET OR ANY PART THEREOF THROUGH OR UNDER THE LESSEE, AND THAT NO MECHANIC'S OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST
OF THE LESSOR IN AND TO ANY LEASED ASSET. 

        15.2.    Grants and Releases of Easements and Other
Rights.    Provided that no Default or Event of Default shall have occurred and be continuing and subject to the
provisions of Articles XII, XIII and XIV, the Lessor
hereby consents in each instance to the following actions by the Lessee, but at the Lessee's sole cost and expense: (a) the granting of easements, licenses,
rights-of-way and other rights and privileges in the nature of easements reasonably necessary or desirable for the use, repair, or maintenance of any Property as herein
provided and to give effect to the state of title in effect for such Property as set forth in the title policy therefor; (b) the release of existing easements or other rights in the nature of
easements which are for the benefit of any Property; (c) if required by applicable Governmental Authority in connection with the Construction of Improvements at a Construction Property, the
dedication or transfer of unimproved portions of any Land for road, highway or other public purposes; and (d) the execution of amendments to any covenants and restrictions affecting any
Property; provided, however, that in each case (i) such grant, release, dedication, transfer or
amendment does not materially impair the value, utility or remaining useful life of any Property, (ii) such grant, release, dedication, transfer or amendment is reasonably necessary in
connection with the use, maintenance, alteration or improvement of any Property, (iii) such grant, release, dedication, transfer or amendment will not cause any Property or any portion thereof
to fail to comply in any material 

20

 

respect with the provisions of this Lease or any other Operative Document and all Requirements of Law; (iv) all Governmental Actions required prior to such grant, release, dedication, transfer
or amendment have been obtained, and all filings required prior to such action have been made; (v) such grant, release, dedication, transfer or amendment will not result in any
down-zoning of any Property or any portion thereof or a material reduction in the maximum density or development rights available to any Property under all Requirements of Law;
(vi) the Lessee shall remain obligated under this Lease and under any Operative Document executed by the Lessee consenting to the assignment of the Lessor's interest in this Lease as security
for Advances made by it to the Lessor, in each such case in accordance with their terms, as though such grant, release, dedication, transfer or amendment had not been effected; and (vii) the
Lessee shall pay and perform any obligations of the Lessor under such grant, release, dedication, transfer or amendment. The Lessor acknowledges the Lessee's right to finance and to secure under the
Uniform Commercial Code, inventory, furnishings, furniture, equipment, machinery, leasehold improvements and other personal property located at any Property other than such items of the foregoing that
constitute a portion of the Improvements owned and financed by the Lessor hereunder, and Lessor agrees to execute landlord waiver forms in favor of any purchase money seller, lessor or lender which
has financed or provided or may finance or provide in the future such items. Without limiting the effectiveness of the foregoing, provided that no
Default or Event of Default shall have occurred and be continuing, the Lessor shall, upon the request of the Lessee, and at the Lessee's sole cost and expense, execute and deliver from time to time
all documents, instruments and agreements reasonably requested by the Lessee in order to effect any such grant, release, dedication, transfer or amendment permitted under this  Section 15.2 in the
manner reasonably requested by the Lessee and within the time parameters reasonably requested by the Lessee;  provided that in each case, the Lessee could not reasonably effect such grant, release,
dedication, transfer or amendment without the execution or
participation of the Lessor and provided further, that each such document, instrument or agreement is in
form and substance reasonably satisfactory to the Lessor in all respects. The Lessee shall promptly reimburse the Lessor for, or at the Lessor's request, pay directly in advance, all reasonable costs,
expenses and other amounts incurred or required to be expended by the Lessor in order to comply with the Lessee's requests made in accordance with the terms of this  Section 15.2. 

        15.3.    Restrictions on Lessor's Acts.    Except where requested by the Lessee pursuant to  Section 15.2, the Lessor shall not
cause or give its written consent to (a) any land use or zoning change affecting any Property,
(b) any changes of street grade, (c) except in connection with an assignment, transfer or sale by Lessor of all of its rights in a Property and the related rights hereunder and under the
other Operative Documents, any transfer to any third party of any rights inuring to, or benefits associated with, any Property (including, without limitation, zoning rights, development rights, air
space rights, mineral, oil, gas or water rights), or (d) except as otherwise expressly contemplated by the Operative Documents, any mortgage, deed of trust, encumbrances or other title
exceptions with respect to any Property. Notwithstanding the foregoing, if an Event of Default has occurred and is continuing and the Lessor or Lenders are exercising rights against the Lessee, the
Lessor (with the consent of the Majority Lenders) may cause or give its written consent to any action or event described in the preceding sentence. 

 
 

ARTICLE XVI    
    
    PERMITTED CONTESTS    
  

        16.1.    Permitted Contests.    

        (a)  The
Lessee shall not be required to pay any Imposition on any Leased Asset, or to discharge or remove any Lien on any Leased Asset, or to comply or cause any Leased
Asset to comply with any Requirements of Law applicable thereto or the occupancy, use or operation thereof, so long as no Event of Default exists under this Lease and, in the reasonable opinion of 

21

 

the Lessee, the Lessee shall have reasonable grounds to contest the existence, amount, applicability or validity thereof by appropriate proceedings, which proceedings in the reasonable judgment of
the Lessor, (i) shall not involve any material danger that any Leased Asset or any Base Rent or any Supplemental Rent would be subject to sale, forfeiture or loss, as a result of failure to
comply therewith, (ii) shall not affect the payment of any Base Rent or any Supplemental Rent or other sums due and payable hereunder or result in any such sums being payable to any Person
other than the Lessor or the Collateral Agent, (iii) will not place the Lessor or any other Indemnitee in any danger of civil liability for which the Lessor or such Indemnitee is not adequately
indemnified (the Lessee's obligation under Section 26.1 of this Lease shall be deemed to be adequate indemnification if no Default or Event of
Default exists) or to any criminal liability, (iv) if involving Taxes, shall suspend the collection of such Taxes, and (v) shall be permitted under and be conducted in accordance with
the provisions of any other instrument to which the Lessee or the Leased Asset is subject and shall not constitute a default thereunder (a "Permitted
Contest"). Notwithstanding the foregoing, a proceeding to contest an Imposition after such Imposition has been paid (e.g., a refund claim) shall also constitute a Permitted
Contest provided that the conditions set forth in clauses (i), (ii), (iii) and  (v) above are satisfied. Such
reasonable grounds shall be conclusively established if Lessor receives from Lessee a copy of a letter or other writing
from counsel to Lessee which states that Lessee has reasonable grounds to contest. The Lessee shall conduct all Permitted Contests in good faith and with due diligence and shall promptly after the
final determination (including appeals) of any Permitted Contest, pay and discharge all amounts which shall be determined to be payable therein. The Lessor shall cooperate in good faith with the
Lessee with respect to all Permitted Contests conducted by the Lessee pursuant to this Section 16.1 and in the event that Applicable Law shall
require that Lessor, rather than the Lessee, pursue legal proceedings for such contest, Lessor will initiate and pursue such contest upon the Lessee's request and in accordance with the Lessee's
reasonable instructions (including, without limitation, the Lessee's instructions as to the selection of legal counsel and matters of strategy or settlement);  provided, however, that (a) Lessor shall not be subject to any liability whatsoever in connection
with any such participation, including for the payment of any costs or expenses in connection with any such contest or proceedings, and the Lessee will indemnify, defend and save harmless Lessor from
any such costs and expenses (including, without limitation, reasonable attorneys' fees, costs of court, appraisal costs and other out-of-pocket costs), reimbursing Lessor
therefor upon demand (or paying such costs and expenses directly when due, all as directed by Lessor) and (b) the
substance and nature of any such Permitted Contest and the Lessor's anticipated involvement therein shall be acceptable to Lessor in all respects. Notwithstanding the foregoing provisions of this
Section, the Lessee shall have the unconditional right to contest (without prior payment) any Impositions imposed by law upon the Lessee rather than the Lessor or any Leased Asset. 

        (b)  In
the event the Lessor deems, in its sole discretion, that its interests under this Lease or in any Leased Asset are not adequately protected in connection with a
Permitted Contest brought by the Lessee under this Section 16.1, the Lessee shall give such reasonable security, as may be demanded by the Lessor
to insure payment of such Imposition, discharge of such Lien and compliance with such Requirements of Law and to prevent any sale or forfeiture of any Leased Asset, any Base Rent or any Supplemental
Rent by reason of such nonpayment, nondischarge or noncompliance. The Lessee hereby agrees that the Lessor may assign such security provided by the Lessee to the Collateral Agent. 

        (c)  At
least ten (10) days prior to the commencement of any Permitted Contest, the Lessee shall notify the Lessor in writing thereof if the amount in contest exceeds
$100,000, and shall describe such proceeding in reasonable detail. In the event that a taxing authority or subdivision thereof proposes an additional assessment or levy of any Tax for which the Lessee
is obligated to reimburse the Lessor under this Lease, or in the event that the Lessor is notified of the 

22

 

commencement of an audit or similar proceeding which could result in such an additional assessment, then the Lessor shall in a timely manner notify the Lessee in writing of such proposed levy or
proceeding. 

 
 

ARTICLE XVII    
    
    INSURANCE    
  

        17.1.    Public Liability and Workers' Compensation Insurance.    During the Lease Term for each Property, the Lessee
shall procure and carry commercial general liability insurance for claims for bodily injury or death sustained by persons or damage to property while on such Property and such other public liability
coverages as are ordinarily procured by Lessee or its Affiliates who own or operate similar properties. Such insurance shall be on terms and in amounts that are materially no less favorable than
insurance maintained by Lessee or its Affiliates with respect to similar properties that they own and that are in accordance with normal industry practice in the jurisdiction in which such Property is
located, but in no case less than $10,000,000 per occurrence with respect to such commercial general liability coverage. The Lessee shall, in connection with the operation of any Property and the
making of any Modifications thereto, comply with, and cause any applicable contractor to comply with, all applicable workers' compensation laws. 

        17.2.    Hazard and Other Insurance.    

        (a)    Insurance.    During the Lease Term for each Property, the Lessee shall keep, or cause to be kept, such
Property insured against loss or damage by fire, flood and other risks (excluding earthquake) on terms and in amounts that are no less favorable than insurance covering other similar properties owned
by such Lessee or its Affiliates and that are in accordance with normal industry practice; provided that, subject to  Section 17.2(b) below, such
insurance shall at all times be in an amount not less than the greater of the Lease Balance of such Property or the
replacement cost thereof (exclusive of land, foundation, excavations, grading, landscaping, architectural and development fees and other items customarily excluded from such coverage and without any
deduction for depreciation). 

        (b)    Amount of Coverage.    In the event the replacement cost of any Leased Asset is less than the Lease Balance for
such Leased Asset resulting in the required amount of property damage and hazard coverage equal to the Lease Balance to be unavailable, then for so long as the higher limit of such required coverage
is unavailable, the Lessee shall procure and maintain such coverage in an amount not less than the replacement cost for such Leased Asset and the Monthly Amortization for such Leased Asset shall be
automatically amended in accordance with the Lease Supplement for such Leased Asset. 

        17.3.    Insurance Coverage.    

        (a)  The
insurance required under Sections 17.1 and 17.2 shall name the
Lessor, the Agent, the Collateral Agent and the Lenders as additional insureds with respect to liability coverage (excluding worker's compensation insurance) and name the Collateral Agent as loss
payee with respect to property coverage. All such insurance and any deductibles payable under such insurance shall be at the sole cost and expense of Lessee and shall be maintained with respect to
each Leased Asset from the Base Date thereof through the Expiration Date therefor. The insurance required under Sections 17.1 and  17.2 shall include a
provision for no less than thirty (30) days' advance written notice (or ten (10) days' notice for
non-payment of premium) by the insurer to the Lessor and the Collateral Agent in the event of cancellation or reduction of such insurance. All insurance provided to the Lessor and
additional insureds shall be considered primary and not excess or contributing with any insurance or self-insurance maintained by the Lessor or additional insureds. 

23

 

        (b)  The
Lessee agrees that the insurance policy or policies required by Sections 17.1 and  17.2, shall include an appropriate clause pursuant to which such policy
shall provide that the rights of the Lessor will not be invalidated should
Lessee waive, in writing, prior to a loss, any or all rights of recovery against any party for losses covered by such policy. The insurance required to be maintained by the Lessee under  Sections 17.1
and 17.2 shall include a clause which provides that it shall not be
invalidated or reduced by any act or omission or negligence of Lessee or any other Person having any interest in any Leased Asset. The Lessee and the Lessor each hereby waives any and all rights
against the other for loss or damage to or loss of use of its property to the extent of payments made under its property insurance so long as such waiver shall not affect its rights to recover under
such insurance. 

        (c)  Except
as otherwise permitted by clause (d), all such insurance required to be maintained hereunder shall be
written by reputable insurance companies licensed to write and issue insurance coverage in the jurisdiction where the Leased Assets are located and otherwise reasonably acceptable to the Lessor. All
insurance policies required by Section 17.2 shall include a multi-insured clause in form and substance satisfactory to the Lessor. Without
limiting the generality of the foregoing, each insurance company writing the insurance coverages required hereunder shall have a general policyholder rating of "A" or better and a financial rating of
"VIII" or better as published in the current A.M. Best Insurance Rating Guide; provided that if any such insurance company's general policyholder
rating shall be downgraded below "A" by A.M. Best and, at the time of such downgrade, due to industry-wide changes in the insurance market, it is not commercially practicable, in
the Lessor's reasonable judgment, for the Lessee to obtain insurance coverages from an insurance company with an "A" rating, then (i) the Lessor and the Lessee shall negotiate in good faith to
determine a new rating or other standard to be used in this provision that is acceptable to the Lessor and the Lessee, so long as the Majority Lenders consent thereto and (ii) during such
negotiations, the Lessee shall not be required to obtain insurance coverages from an insurance company with an "A" rating; provided,  further that the
Lessee shall not be permitted to obtain or maintain insurance coverages from an insurance company with a rating that is lower than
"A-" by A.M. Best. 

        (d)  The
Lessor shall not carry separate insurance concurrent in kind or form or contributing in the event of loss with respect to a Leased Asset with any insurance required
under this Article XVII except that the Lessor may carry separate liability insurance so long as (i) Lessee's insurance is designated as
primary and in no event excess or contributory to any insurance the Lessor may have in force which would apply to a loss covered under Lessee's policy and (ii) each such insurance policy will
not cause the Lessee's insurance required under this Article XVII to be subject to a coinsurance exception of any kind. Each policy maintained by
Lessee under this Article XVII shall specifically provide that the policy shall be considered primary insurance which shall apply to any loss or
claim before any contribution by any insurance which the Lessor may have in force. 

        (e)    Deductibles; Etc.    The insurance required to be obtained and maintained by the Lessee under this Lease may be
subject to deductible amounts and self-insured retentions as are consistent with the Lessee's or its Affiliates' practice for other properties similar to the applicable Property owned or
leased by the Lessee or its Affiliates, and may be carried under blanket or a combination of primary and umbrella policies maintained by or on behalf of the Lessee so long as such policies otherwise
comply with the provisions of this Section 17.3. The Lessee shall be fully responsible for the payment of all such deductibles or
self-insured retentions. 

        (f)    The
Lessee shall pay as they become due all premiums for the insurance required by Section 17.1 and  Section 17.2, and shall renew or replace each
policy prior to the expiration date thereof. Throughout the Base Term for any Leased Asset, at the
time each of the insurance policies in respect of such Leased Asset is renewed (but in no event less frequently than once each 

24

 

year), the Lessee shall deliver to the Lessor and the Collateral Agent certificates of insurance or other similar proof acceptable to Lessor evidencing that all insurance required by this  Article XVII with respect to such Asset is being maintained by the Lessee and is in effect. 

        (g)  All
insurance proceeds in respect of any property damage loss or occurrence for which the proceeds related thereto are (i) less than or equal to the Threshold
Amount, in the absence of the occurrence and continuance of an Event of Default, shall be adjusted by and paid to the Lessee for application toward the reconstruction, repair or refurbishment of the
applicable Leased Asset and (ii) greater than the Threshold Amount, shall be adjusted jointly by the Lessee, the Lessor and the Collateral Agent (unless an Event of Default has occurred and is
continuing, in which case such proceeds shall be adjusted solely by the Lessor and the Collateral Agent) and held by the Escrow Agent for application in accordance with  Article XVIII hereof.

 
 

ARTICLE XVIII    
    
    CASUALTY AND CONDEMNATION; ENVIRONMENTAL MATTERS    
  

        18.1.    Casualty and Condemnation.    

        (a)  During
the Lease Term for any Leased Asset, subject to the provisions of this Article XVIII and  Article XIX, if all or a portion of such Leased Asset is
damaged or destroyed in whole or in part by a Casualty, then in the case of a Casualty
where the cost of restoration of the affected Leased Asset in the reasonable judgment of the Lessor is (x) less than or equal to the Threshold Amount, any insurance proceeds payable with
respect to such Casualty shall be paid directly to the Lessee, or if received by the Lessor or Collateral Agent, shall be paid over to Lessee for the reconstruction, refurbishment and repair of such
Leased Asset, (y) greater than the Threshold Amount, any insurance proceeds payable with respect to such Casualty shall be paid to the Collateral Agent and applied in reduction of the Lease
Balance for such Leased Asset; provided that if no Event of Default has occurred and is continuing and within 60 days after the occurrence of such event of Casualty, Lessee submits to the
Lessor a Responsible Employee's Certificate to the effect that such Leased Asset can be fully restored to the condition required under this Lease within the earlier to occur of the Expiration Date for
such Leased Asset and 18 months after the occurrence of such event of Casualty and as to the cost of such restoration (accompanied by an Architect's certificate as to the foregoing matters)
together with a statement as to Lessee's affirmative ability to finance such restoration, then upon receipt of such certificate(s) in form and substance reasonably satisfactory to the Lessor, the
Lessor shall direct the Collateral Agent to transfer such insurance proceeds to an escrow agent acceptable to Lessor and Lessee (the "Escrow Agent") to
be held on such terms and conditions and escrow arrangements, in form and substance satisfactory to the Lessor and the Lessee, pending disbursement to the Lessee of
insurance proceeds solely for the purpose of reconstructing, refurbishing and repairing such Leased Asset in the manner contemplated by the Construction Agency Agreement with respect to Construction
of the Improvements and subsection 18.1(f) below; provided,  however, that if an Event of Default shall have
occurred and be continuing, or if any of the foregoing conditions are not satisfied or complied with,
such insurance proceeds shall be paid directly to the Collateral Agent for application in reduction of the Lease Balance for such Leased Asset. If, contrary to such provision, any such award,
compensation or insurance proceeds are paid to Lessee rather than to the Lessor, the Lessee hereby agrees to hold the same in trust for the benefit of the Lessor and to transfer promptly any such
payment to the Lessor. 

        (b)  During
the Lease Term for any Leased Asset, subject to the provisions of this Article XVIII and  Article XIX, if all or any portion of such Leased Asset
is the subject of a Condemnation, then the entire amount of any award or compensation
paid or payable in respect thereof shall be paid to the Lessor to be applied in reduction of the Lease Balance for such 

25

 

Leased Asset. To the extent such Leased Asset is, in the reasonable judgment of the Lessor, capable of being restored to a functional and architectural whole suitable for its continued use and
operation in the manner which existed immediately prior to such Condemnation for a restoration cost equal to or less than the aggregate compensation or award paid or payable with respect to such
Condemnation and such additional amounts as Lessee agrees to contribute then, so long as no Event of Default has occurred and is continuing, and in the opinion of the Lessor, such restoration can be
completed by the end of the Base Term, then such compensation and award shall be made available for the restoration of such Leased Asset on the same terms and escrow arrangements outlined in  Sections 18.1(a) and (f). Upon the occurrence and during the continuance of an Event of Default, all
such amounts so held in any such escrow arrangement shall be applied in accordance with the terms and in the manner provided in Section 18.1(c).
If contrary to the foregoing, any such award or compensation is paid to the Lessee, the Lessee shall hold all such amounts in trust for the Lessor and pay all such amounts over to the Lessor. 

        (c)  After
the occurrence and during the continuance of an Event of Default, all amounts held by the Lessor or the Escrow Agent hereunder on account of any award,
compensation or insurance proceeds either paid directly to the Lessor or turned over to the Lessor or the Escrow Agent shall in the Lessor's sole discretion either be (i) deposited with the
Collateral Agent to be held pending disbursement to the Lessee for the repair of damage caused by such Casualty or Condemnation in accordance with  clause (f) of this Section 18.1, or (ii) applied toward the payment of the Lease
Balance of the affected Leased Asset. 

        (d)  During
the Lease Term for any Leased Asset, the Lessee may appear in any proceeding or action to negotiate, prosecute, adjust or appeal any claim for any award,
compensation or insurance payment on account of any such Casualty or Condemnation and shall pay all expenses thereof. At the Lessee's reasonable request, and at Lessee's sole cost and expense, the
Lessor shall participate in any such proceeding, action, negotiation, prosecution or adjustment. The Lessor and the Lessee agree that this Lease shall control the rights of the Lessor and such Lessee
in and to any such award, compensation or insurance payment. 

        (e)  If
the Lessor or the Lessee shall receive notice of a Casualty or of an actual, pending or threatened Condemnation of any Leased Asset or any interest therein, the
Lessor or the Lessee, as the case may be, shall give notice thereof to the other promptly after the receipt of such notice. 

        (f)    If
pursuant to this Section 18.1 or Section 19.1 this Lease
shall continue in full force and effect following a Casualty or Condemnation with respect to any Leased Asset, the Lessee shall, at its sole cost and expense, promptly and diligently repair any damage
to such Leased Asset caused by such Casualty or Condemnation on or before the earlier to occur of the expiration of the Lease Term for such Leased Asset and 18 months after the date of such
Casualty and in any event in conformity with the requirements of Sections 13.1 and 14.1 using the
as-built Plans and Specifications for such Property (as modified to give effect to any subsequent Modifications, any Condemnation affecting such Property and all applicable Requirements of
Law) so as to restore such Asset (i) in the case of a Casualty, to at least the same condition, operation, function and value as existed immediately prior to such Casualty with such
Modification as the Lessee may elect in accordance with Section 14.1 or (ii) in the case of a Condemnation, to a functional and
architectural whole suitable for its continued use and operation in the manner which existed immediately prior to such Condemnation. All insurance proceeds held by the Lessor, the Collateral Agent or
the Escrow Agent shall be made available to the Lessee on the same terms, and subject to the same conditions, as Advances are made available to the Lessee hereunder. Lessee shall effect the
restoration of any Property affected by a Casualty or Condemnation at its sole cost and expense (and, without limitation, if any insurance or condemnation proceeds are insufficient to restore such
Property in accordance with the terms of this paragraph, Lessee shall pay any such shortfall). Upon completion of such restoration and repair, Lessee shall furnish the Lessor a 

26

 

Responsible Employee's Certificate and an Architect's certificate, in each case confirming that such restoration and repair has been completed pursuant to this Lease. 

        (g)  In
no event shall a Casualty or Condemnation affect the obligations of the Lessee to pay Rent pursuant to  Section 7.1 or to perform its obligations and pay any amounts due on any Expiration Date or
pursuant to Articles
XXII and XXV, except that any proceeds or awards applied in reduction of the Lease Balance for a Leased Asset shall, pursuant to
the terms of the Lease Supplement for such Leased Asset, reduce the amount of Base Rent payable in respect of such Leased Asset. 

        (h)  Any
Excess Proceeds received by the Lessor or Collateral Agent in respect of a Casualty or Condemnation affecting any Leased Asset shall be turned over to the Lessee
upon the full payment of the Lease Balance for such Leased Asset and all other amounts then due and payable by the Lessee hereunder and under any other Operative Document to which the Lessee is a
party. 

        (i)    Notwithstanding
the foregoing, upon the occurrence of any Casualty or Condemnation during the Construction Period for any Property, the provisions of the Construction
Agency Agreement and Section 19.3 hereof shall control. 

        18.2.    Environmental Matters.    Promptly upon Lessee's knowledge of the existence of an Environmental Violation
with respect to any Property, Lessee shall notify the Lessor in writing of such Environmental Violation. If the cost of remediation of such Environmental Violation would not exceed the limits set
forth in Section 19.1 and such Environmental Violation is not caused by Lessor or its agents, representatives or invitees, the Lessee will
promptly and diligently undertake any response, cleanup, remedial or other action required by Applicable Law of the Lessor or Lessee to remove, cleanup or remediate such Environmental Violation, at
Lessee's sole cost and expense. If the cost of such remediation would exceed the limits set forth in Section 19.1, the Lessor may elect to
terminate this Lease with respect to such Property pursuant to Section 19.1 or, alternatively, the Lessor may require that the Lessee undertake
any response, cleanup, remedial or other action required by Applicable Law of the Lessor or Lessee to remove, clean up or remediate the Environmental Violation in accordance with the terms of  Section 12.4, at the Lessee's sole cost and expense; provided that if the Lessor elects to
terminate this Lease with respect to any Property described in Lease Supplement No. 1 or Lease Supplement No. 2, then the Lessor will terminate this Lease with respect to all of the
Leased Assets described in Lease Supplement No. 1 and Lease Supplement No. 2. If the Lessor does not deliver a Termination Notice with respect to such Property pursuant to  Section 19.1,
then Lessee shall in accordance with Applicable Law undertake such response, cleanup, remedial or other action, and shall, upon
completion of such remedial action, cause to be prepared by an environmental consultant reasonably acceptable to the Lessor a report describing the Environmental Violation and the actions taken by
Lessee (or its agents) in response to such Environmental Violation, along with a statement by Lessee that the Environmental Violation has been remedied to the satisfaction of the Governmental
Authority exercising jurisdiction, or in compliance in all material respects with applicable Environmental Law. Nothing in this Section shall reduce or limit the obligations of the Lessee under the
indemnity provisions hereof. Notwithstanding anything to the contrary in this Section 18.2, in the event an Environmental Violation is caused by
Lessor, or its agents (other than the Construction Agent), representatives, or invitees, Lessor shall, in accordance with Applicable Law, promptly undertake such response, cleanup, remedial or other
action, and shall, upon completion of such remedial action, cause to be prepared by an environmental consultant reasonably acceptable to the Lessee a report describing the Environmental Violation and
the actions taken by Lessor (or its agents) in response to such Environmental Violation, along with a statement by Lessor that the Environmental Violation has been remedied to the satisfaction of the
Governmental Authority exercising jurisdiction, or in compliance in all material respects with applicable Environmental Law. 

27

  

        18.3.    Notice of Environmental Claims.    Promptly, but in any event within thirty (30) days from the date
Lessee has actual knowledge thereof, Lessee shall provide to the Lessor written notice of any pending or threatened claim, action or proceeding involving any Environmental Violation or any Release on
or in connection with any Property. All such notices shall describe in reasonable detail the nature of the claim, action or proceeding and the Lessee's proposed response thereto. In addition, Lessee
shall provide to the Lessor, within thirty (30) days of receipt, copies of all written communications with any Governmental Authority relating to any Environmental Violation in connection with
any Leased Asset. The Lessee shall also promptly provide such detailed reports of any such environmental claims as may reasonably be requested by the Lessor. In the event that the Lessor receives
written notice of any pending or threatened claim, action or proceeding involving any Environmental Violation or any Release on or in connection with any Property, the Lessor shall promptly give
notice thereof to the Lessee. 

 
 

ARTICLE XIX    
    
    TERMINATION OF LEASE    
  

        19.1.    Mandatory Termination upon Certain Events.    If, with respect to any Property, any of: 

        (a)  a
Significant Condemnation occurs; or 

        (b)  a
Casualty occurs which, in the reasonable judgment of the Lessor, is greater than the Threshold Amount and (a) pursuant to  Section 18.1 the insurance proceeds are applied in reduction of the
Lease Balance for the affected Leased Asset and the Lessee shall fail to
elect by written notice to the Lessor within 60 days after the occurrence of such event of Casualty to restore or reconstruct the affected Property using its own funds notwithstanding the
application of such proceeds in reduction of the Lease Balance for such Property or (b) the Lessee shall fail to cause such Property to be reconstructed or restored as required under  Section 18.1 hereof; or 

        (c)  an
Environmental Violation occurs or is discovered the cost of remediation of which, as determined by the Lessor and the Majority Lenders, would exceed the greater of
(i) 10% of the Lease Balance for the affected Property and (ii) $2,000,000, when aggregated with any other Environmental Violation occurring with respect to the Property described in
Lease Supplement No. 1 and Lease Supplement No. 2, in each case as of the date of such Environmental Violation; 

and
the Lessor shall have given written notice to the Lessee that this Lease as to the affected Leased Asset is to be terminated as a consequence of the occurrence of such an event (a
"Termination Notice") then, subject to Section 19.3 below, the Lessee shall be obligated to
purchase the Lessor's interest in such Property on the next Scheduled Payment Date occurring after the earlier to occur of (i) 90 days after the date of the Lessee's receipt of the
Termination Notice or (ii) the date on which Lessee collects the proceeds of any applicable insurance coverage or receives any compensation or award from any Governmental Authority, by paying
the Lessor an amount equal to the Lease Balance therefor on such date of payment; provided, however,
that the Lessor shall not give such notice with respect to any Environmental Violation if such Lessee (x) promptly submits an approved corrective action plan for the remediation of such
Environmental Violation to the Lessor, (y) provides reasonable security to the Lessor for the cost of the such remediation and (z) diligently pursues such remediation in accordance with
such plan; provided, further that if the Lessor delivers a Termination Notice with respect to any Leased
Asset described in Lease Supplement No. 1 or Lease Supplement No. 2, then such Termination shall be deemed to terminate this Lease with respect to each Leased Asset described in Lease
Supplement No. 1 and Lease Supplement No. 2. 

        19.2.    Termination Procedures.    Subject to Section 19.3, on
the date of the payment by the Lessee of the Lease Balance for the affected Property in accordance with the Termination Notice in 

28

 

accordance with Section 19.1, this Lease and the Lessor Commitment shall terminate with respect to such Property and the provisions of  Section 25.1 shall be applicable. 

        19.3.    Construction Properties.    If a Casualty or Condemnation shall affect any Construction Property for which
the Lease Term has not commenced, the terms of the Construction Agency Agreement shall apply. 

 
 

ARTICLE XX    
    
    EVENTS OF DEFAULT; REMEDIES    
  

        20.1.    Events of Default.    The occurrence of any one or more of the following events (whether such event shall be
voluntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or
governmental body) shall constitute "Event of Default": 

        (a)  the
Lessee shall fail to make any payment of the Purchase Option Price, Lease Balance or any other payment pursuant to  Section 19.1, 22.1, 22.2 or
Article XXIV on the date when due; 

        (b)  the
Lessee shall fail to make payment of any Base Rent, Supplemental Rent or any other amount payable by Lessee hereunder or under the other Operative Documents (other
than those described in Section 20.1(a)) within five (5) days after the due date therefore; 

        (c)  the
Lessee shall fail to maintain insurance as required by Article XVII or to observe or perform any term,
covenant or condition set forth in Section 32.1(f), 32.5 or  32.6; 

        (d)  the
Lessee shall fail to observe or perform any term, covenant or condition of the Lessee under this Lease or the other Operative Documents to which it is party (other
than those described in Sections 20.1(a), (b) or (c) or
the failure to achieve Substantial Completion for any Construction Property on or prior to the Outside Completion Date for such Construction Property or the failure to cause the progress of
Construction for any Construction Property to proceed during the Construction Period for such Construction Property without interruption or cessation for a period in excess of 75 days), and, in
each such case, such failure shall have continued for thirty (30) days after delivery to the Lessee of written notice thereof from the Lessor; 

        (e)  any
representation or warranty made by the Lessee in any of the Operative Documents to which it is a party or in any certificate or other document furnished pursuant
thereto shall prove to have been inaccurate in any material respect at the time made or shall be breached; 

        (f)    the
Lessee or any Subsidiary shall commence a voluntary case or other proceeding seeking liquidation, reorganization or other relief with respect to itself or its debts
under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee, receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, or shall consent to any such relief or to the appointment of or taking possession by any such official in an involuntary case or other proceeding commenced against
it, or shall make a general assignment for the benefit of creditors, or shall fail generally to pay its debts as they become due, or shall take any corporate action to authorize any of the foregoing; 

        (g)  an
involuntary case or other proceeding shall be commenced against the Lessee or any Subsidiary seeking liquidation, reorganization or other relief with respect to it or
its debts under any bankruptcy, insolvency or other similar law now or hereafter in effect or seeking the appointment of a trustee,
receiver, liquidator, custodian or other similar official of it or any substantial part of its property, and such involuntary case or other proceeding shall remain undismissed and unstayed for a
period of 60 days; or an order for relief shall be entered against the Lessee or any Subsidiary under the federal bankruptcy laws as now or hereafter in effect; 

29

 

        (h)  the
Lessee or any Subsidiary shall default in the payment when due of any principal of or interest on any Indebtedness having an aggregate outstanding principal amount
of at least $5,000,000 and such default shall continue beyond any applicable grace period; or any event or condition shall occur which results in the acceleration of the maturity of any such
Indebtedness or enables the holder of any such Indebtedness or any Person acting on such holder's behalf to accelerate the maturity thereof; 

        (i)    a
Construction Agency Agreement Event of Default shall occur, or an Event of Default (as defined therein) shall occur under any other Operative Document (other than a
Loan Event of Default under the Loan Agreement or an Event of Default under any Mortgage made by the Lessor); 

        (j)    (i)
one or more judgments, orders, decrees or arbitration awards requiring the Lessee or any Subsidiary to pay an aggregate amount of $5,000,000 or more (exclusive of
amounts covered by insurance issued by an insurer not an Affiliate of the Lessee) shall be rendered against the Lessee or any Subsidiary in connection with any single or related series of
transactions, incidents or circumstances and the same shall not be satisfied, vacated or stayed for a period of sixty (60) consecutive days; or (ii) any judgment, writ, assessment,
warrant of attachment, tax lien or execution or similar process shall be issued or levied against a substantial part of the property of the Lessee or any Subsidiary and the same shall not be released,
stayed, vacated, or otherwise dismissed within sixty (60) days after issue or levy; 

        (k)  the
Lessee shall directly or indirectly contest the validity of any Operative Document in any manner in any court of competent jurisdiction or any lien granted by any
Operative Document, or shall repudiate, or purport to discontinue or terminate, any Operative Document to which it is a party or any such Operative Document shall cease to be legal, valid and binding
obligation or shall cease to be in full force and effect for any reason (other than in connection with the expiration thereof in accordance with its express terms); or 

        (l)    a
Change of Control shall occur. 

        20.2.    Remedies.    

        (a)  Upon
the occurrence and during the continuance of any Event of Default and at any time thereafter, the Lessor may with respect to each Leased Asset (other than a
Construction Property for which the Lease Term has not commenced), do one or more of the following as the Lessor in its sole discretion shall determine, without limiting any other right or remedy the
Lessor may have on account of such Event of Default (including the obligation of the Lessee to purchase the Leased Assets as set forth in  Section 22.2) and without limiting Lessee's option to
purchase the Leased Assets after the occurrence and during the continuance of an Event of
Default under Section 22.1: 

          (i)  The
Lessor may, by notice to the Lessee, terminate this Lease as of the date specified in such notice; provided,  however, (A) no reletting, reentry or
taking of possession of any Leased Asset or all of the Leased Assets (or any portion thereof) by the Lessor
will be construed as an election on the Lessor's part to terminate this Lease unless a written notice of such intention is given to the Lessee, (B) notwithstanding any reletting, reentry or
taking of possession, the Lessor may at any time thereafter elect to terminate this Lease for a continuing Event of Default and (C) no act or thing done by the Lessor or any of its agents,
representatives or employees and no agreement accepting a surrender of any Leased Asset shall be valid unless the same be made in writing and executed by the Lessor; 

        (ii)  The
Lessor may (A) demand that the Lessee, and the Lessee shall upon the written demand of the Lessor, return any Leased Asset promptly to the Lessor in the
manner and condition required by Section 13.1 as if the Leased Asset were being returned at the end of 

30

 

the Lease Term, and the Lessor shall not be liable for the reimbursement of the Lessee for any costs and expenses incurred by the Lessee in connection therewith and (B) without prejudice to
any other remedy which the Lessor may have for possession of any Leased Asset, and to the extent and in the manner permitted by Applicable Law, enter upon such Leased Asset and take immediate
possession of (to the exclusion of the Lessee) such Leased Asset or any part thereof and expel or remove the Lessee and any other Person who may be occupying such Leased Asset, by summary proceedings
or otherwise, all without liability to the Lessee for or by reason of such entry or taking of possession, whether for the restoration of damage to property caused by such taking or otherwise and, in
addition to the Lessor's other damages, the Lessee shall be responsible for all costs and expenses incurred by the Lessor in connection with any reletting, including without limitation, reasonable
brokers' fees and all reasonable costs of any alterations or repairs made by the Lessor; 

        (iii)  This
Lease may also be terminated by a judgment specifically providing for termination. Any termination of this Lease under this  Section 20.2 shall not release Lessee from the payment of any sum then
due Lessor or from any claim for damages or rent previously accrued or
then accruing against Lessee. In no event shall any one or more of the following actions by Lessor constitute a termination of this Lease: (A) maintenance and preservation of the Leased Assets,
(B) efforts to relet the Leased Assets, (C) appointment of a receiver in order to protect Lessor's interest hereunder, (D) consent to any subletting of one or more Leased Assets
or assignment of this Lease by Lessee, whether pursuant to provisions hereof concerning subletting and assignment or otherwise; or (E) any other action by Lessor or Lessor's agents intended to
mitigate the adverse effects from any breach of this Lease by Lessee. In the event this Lease is terminated pursuant to this Section 20.2 or
otherwise, Lessor shall be entitled to damages in the following sums: (1) the worth at the time of award of the unpaid Rent which has been earned at the time of termination; plus (2) the
worth at the time of award of the amount by which the unpaid Rent which would have been earned after termination until the time of award exceeds the
amount of such rental loss that Lessee proves could have been reasonably avoided; plus (3) the worth at the time of award of the amount by which the unpaid Rent for the balance of the Lease
Term after the time of award exceeds the amount of such rental loss that Lessee proves could be reasonably avoided; and (4) any other amount necessary to compensate Lessor for all detriment
proximately caused by Lessee's failure to perform its obligations under this Lease, or which in the ordinary course of things would be likely to result therefrom including, without limitation,
reasonable expenses for cleaning, repairing or restoring the Leased Assets to the condition required under Article XIII, all real estate broker's
fees, advertising costs and other expenses of reletting any of the Leased Assets which are reasonably incurred by Lessor and applicable to the period after termination of this Lease, all costs of
carrying the Leased Assets such as taxes and insurance premiums thereon, utilities and security precautions not otherwise included in Supplemental Rent, all expenses in retaking possession of the
Leased Assets, and all attorneys' fees and court costs. As used herein, the "worth at the time of award" of the amounts referred to in above is computed by allowing interest at the Overdue Rate.
Without limiting the right of the Lessee to purchase the Leased Assets after the occurrence and during the continuance of an Event of Default under  Section 22.1, Lessee hereby waives any right of
redemption or relief from forfeiture under the laws of the State of California, or under any
other present or future law, including the provisions of Sections 1174 and 1179 of the California Code of Civil Procedure; 

        (iv)  The
Lessor may, at its option, elect not to terminate this Lease and continue to collect all Base Rent, Supplemental Rent, and all other amounts due the Lessor
(together with all costs of collection) and enforce the Lessee's obligations under this Lease as and when the same become due, or are to be performed, and at the option of the Lessor, upon any
abandonment of any Leased Asset by the Lessee, the Lessor may enforce, by suit or 

31

 

otherwise, all other covenants and conditions hereof to be performed or complied with by the Lessee hereunder and the other Operative Documents; 

        (v)  Unless
all of the Leased Assets have been sold in their entirety, the Lessor may, whether or not the Lessor shall have exercised or shall thereafter at any time exercise
any of its rights under paragraph (ii), (iii) or  (iv) of this Section 20.2 with respect to the Leased Assets or portions thereof, demand,
by written notice to the Lessee specifying a date not earlier than ten (10) Business Days after the date of such notice, that the Lessee purchase, on such date, all unsold Leased Assets (or the
remaining portion thereof) in accordance with the provisions of Article 22.2; provided,  however, that
no such written notice shall be required upon the occurrence of any Event of Default in  clause (f) or (g) of Section 20.1,
in which event the Lessee shall immediately and automatically be obligated to purchase all such Leased Assets in accordance with Section 22.2;
and 

        (vi)  The
Lessor may exercise any other right or remedy that may be available to it under Applicable Law, or proceed by appropriate court action (legal or equitable) to
enforce the terms hereof or to recover damages for the breach hereof. Separate suits may be brought to collect any such damages for any period(s), and such suits shall not in any manner prejudice the
Lessor's right to collect any such damages for any subsequent period(s), and such suits shall not in any manner prejudice the Lessor's right to collect any such damages for any subsequent period(s),
or the Lessor may defer any such right to suit until after the expiration of the Lease Term, in which event such right to suit shall be deemed not to have accrued until the expiration of the Lease
Term. 

        (b)  To
the maximum extent permitted by Applicable Law, the Lessee hereby waives the benefit of any appraisement, valuation, stay, extension, reinstatement and redemption
laws now or hereafter in force and all rights of marshalling in the event of any sale of any Leased Asset or any interest therein. 

        (c)  The
Lessor shall be entitled to enforce payment of the indebtedness and performance of the obligations secured hereby and to exercise all rights and powers under this
instrument or under any of the other Operative Documents or other agreement or any laws now or hereafter in force, notwithstanding some or all of the obligations secured hereby may now or hereafter be
otherwise secured, whether by mortgage, security agreement, pledge, lien, assignment or otherwise. Neither the acceptance of this instrument nor its enforcement shall prejudice or in any manner affect
the Lessor's right to realize upon or enforce any other security now or hereafter held by the Lessor, it being agreed that the Lessor shall be entitled to enforce this instrument and any other
security now or hereafter held by the Lessor in such order and manner as the Lessor may determine in its absolute discretion. No remedy herein conferred upon or reserved to the Lessor is intended to
be exclusive of any other remedy herein or by law provided or permitted, but each shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law
or in equity or by statute. Every power or remedy given by any of the Operative Documents to the Lessor or to which it may otherwise be entitled, may be exercised, concurrently or independently, from
time to time and as often as may be deemed expedient by the Lessor. In no event shall the Lessor, in the exercise of the remedies provided in this instrument (including, without limitation, in
connection with the assignment of rents to Lessor, or the appointment of a receiver and the entry of such receiver on to all or any part of the Leased Assets), be deemed a "mortgagee in possession,"
and the Lessor shall not in any way be made liable for any act, either of commission or omission, in connection with the exercise of such remedies. 

        (d)  An
action of mortgage foreclosure as now provided or hereafter prescribed by law, may forthwith be commenced and prosecuted to judgment, execution and sale, for the
collection of the whole amount of such Lease Balance secured thereby, together with all fees, costs and expenses of 

32

 

such proceedings, including a reasonable attorney's fees. And all errors in such proceedings, together with any stays of or exemptions from execution, or extensions of time of payment, which may be
given by any Applicable Law now in force, or which may be enacted hereafter, are hereby forever waived and released. 

        (e)  If,
pursuant to the exercise by the Lessor of its remedies pursuant to this Section 20.2, the Lease Balance for
all Leased Assets plus all other amounts due and owing from the Lessee under this Lease and the other Operative Documents shall have been paid in full, the Lessor shall remit to the Lessee any excess
amounts received by the Lessor. 

        20.3.    Operative Document Remedies.    In addition to any other rights and remedies herein, Lessor and/or the
Collateral Agent shall upon the occurrence of any Event of Default have the option to exercise any of their respective rights and remedies under each Mortgage, the Security Agreement and each other
Operative Document. Notwithstanding anything to the contrary set forth herein or in the other Operative Documents, in connection with the Lessor's exercise of remedies following the occurrence of an
Event of Default, the Lessor agrees that with respect to any Leased Asset, the Lessor will either (i) foreclose upon, or cause the exercise of the non-judicial power of sale with
respect to, such Leased Asset within five (5) years after the date of such Event of Default or (ii) through the exercise of commercially reasonable efforts (including the listing with a
real estate broker) cause the sale of such Leased Asset to an unaffiliated third party within five (5) years after the date on which the Lessee's rights to occupy such Leased Asset have been
terminated, the Lessee (and any sublessee or other party claiming by, through or under Lessee) has vacated and surrendered possession of such Leased Asset and the Lessee has executed and delivered a
written release of its rights and interests (other than its right to receive a portion of the Gross Proceeds from the sale of such Leased Asset to the extent provided in the Operative Documents) to,
and confirmation of its surrender of possession of, such Leased Asset. 

        20.4.    Waiver of Certain Rights.    

        (a)  If
this Lease shall be terminated pursuant to Section 20.2, the Lessee waives, to the fullest extent permitted by
law, (i) any notice of re-entry or the institution of legal proceedings to obtain re-entry or possession; (ii) any right of redemption, re-entry or
repossession; (iii) the benefit of any laws now or hereafter in force exempting property from liability for rent or for debt or limiting the Lessor with respect to the election of remedies; and
(iv) any other rights which might otherwise limit or modify any of the Lessor's rights or remedies under this Article XX. 

        (b)  Without
limiting the generality of the foregoing, the Lessee waives Section 1950.7 of the California Civil Code and any other Applicable Law that otherwise would
require the return of any security deposit or other form of security prior to the satisfaction of all of the Obligations. 

        20.5.    Initial Leased Assets.    The Lessor agrees that if it elects to exercise remedies pursuant to  Section 20.2 or
20.3 against any Leased Asset described in Lease Supplement No. 1 or Lease
Supplement No. 2 then, to the extent practicable, it will exercise such remedies against all of the Leased Assets described in Lease Supplement No. 1 and Lease Supplement No. 2. 

 
 

ARTICLE XXI    
    
    ASSIGNMENT    
  

        21.1.    Assignment.    The Lessee may not assign this Lease or any of its rights or obligations hereunder in whole or
in part to any Person without the consent of the Lessor; which consent shall be given or withheld in its sole discretion. The Lessor may transfer or assign (by way of an assignment or rent purchase
arrangement) all or any portion of its rights and interests in any Leased Asset and the Operative Documents related thereto (i) as specifically provided in the Operative Documents,
(ii) in connection with the exercise of any of its rights or remedies 

33

 

thereunder and (iii) to any Approved Substitute Lessor; provided, that any assignment or transfer of an interest in any Leased Asset to any
Substitute Lessor shall be accompanied by an assignment or transfer of a ratable interest in all of the rights and obligations of the Lessor hereunder and under the other Operative Documents in
respect of such Leased Asset; provided, further that (x) Lessor shall provide not less than
thirty (30) days' notice of such assignment and transfer to Lessee and (y) if Lessor assigns or transfers an interest in any Leased Asset described in Lease Supplement No. 1 or
Lease Supplement No. 2, then Lessor shall assign or transfer its interest in each Leased Asset described in Lease Supplement No. 1 and Lease Supplement No. 2. The Lessor shall
maintain a registry in accordance with United States Treasury Regulation Section 5f.103-1(c), in respect of Lessee's obligation to make payments under this Lease which, for federal
income tax purposes, constitute principal and interest payments. A transfer or assignment by the Lessor of the right to receive any such payments under this Lease pursuant to this  Section 21.1
shall be transferable only through an appropriate entry in such registry. 

 
 

ARTICLE XXII    
    
    PURCHASE PROVISIONS    
  

        22.1.    Purchase Option.    The Lessee shall have the option (exercisable by giving the Lessor irrevocable written
notice (the "Purchase Notice") of the Lessee's election to exercise such option) at any time (including during the existence of a Default or Event of
Default or after the commencement of exercising remedies against the Lessee, but in no event after the date which occurs 120 days after the date on which the Lessor or the Collateral Agent
sends a notice of default and demand for sale pursuant to the Lease or the Mortgage made by the Lessee) to purchase all of the Leased Assets under any Lease Supplement (unless provisions with respect
to joinder of purchase options for the Leased Assets under more than one Lease Supplement are set forth in a Lease Supplement, in which case such exercise must comply with such provisions) on the
Business Day specified in such Purchase Notice at a price equal to the Lease Balance for such Leased Assets (the "Purchase Option Price"). The Lessee
shall deliver the Purchase Notice to the Lessor not less than thirty (30) days prior to such purchase; provided that if the Lessee shall have
previously delivered a notice of its election of the Termination Option with respect to a Leased Asset, any Purchase Notice for such Leased Asset thereafter delivered to the Lessor during the
thirty-day period prior to the Expiration Date for such Leased Asset shall be delivered to the Lessor as far in advance as possible and, in any event, shall specify such Expiration Date as
the date for such purchase and sale. If the Lessee exercises its option to purchase one or more Leased Assets pursuant to this Section 22.1 (the
"Purchase Option"), the Lessor shall transfer to the Lessee or its designee all of the Lessor's right, title and interest in and to
the applicable Leased Assets as of the date specified in the Purchase Notice upon receipt of the Purchase Option Price in accordance with  Section 25.1. If the Lessee shall have previously delivered
notice of its election to exercise the Termination Option or if the Lessor or the
Collateral Agent shall have commenced the exercise of remedies against the Lessee or the applicable Leased Asset from and after the occurrence of an Event of Default, the Lessee shall pay to the
Lessor on the date set forth in the Purchase Notice in addition to the Purchase Option Price, all costs, fees and other expenses incurred by the Lessor or the Collateral Agent, as the case may be, in
connection with the transactions and obligations contemplated by the Termination Option set forth in Article XXIV, or the exercise of remedies
hereunder and under the other Operative Documents. The Lessee may designate, in a notice given to the Lessor not less than ten (10) Business Days prior to the closing of such purchase (time
being of the essence), the transferee or transferees to whom the conveyance shall be made (if other than to the Lessee), in which case such conveyance shall (subject to the terms and conditions set
forth herein) be made to such designee; provided, however, that such designation of a transferee or
transferees shall not cause the Lessee to be released, fully or partially, from any of its obligations under this Lease, including, without limitation, the obligation to pay the Lessor the Purchase
Option Price on the applicable Expiration Date. If with respect to any Leased Asset the Lessee shall (a) fail to exercise 

34

 

the Termination Option as set forth in Section 24.1 for such Leased Asset and (b) if a Renewal Option is then available for such Leased
Asset, fail to exercise the Renewal Option (or fail to agree upon mutually acceptable terms with the Lessee regarding such Renewal Option), then the Lessee shall be deemed automatically and
irrevocably to have exercised the Purchase Option under this Section 22.1, specifying as the purchase date the Expiration Date for such Leased
Asset. 

        22.2.    Acceleration of Purchase Obligation.    

        (a)  The
Lessee shall be obligated to purchase the Lessor's interest in all of the Leased Assets for an amount equal to the sum of the Lease Balances for all of the Leased
Assets (i) automatically and without notice upon the occurrence of any Event of Default specified in clause (f) or  (g) of Section 20.1 (notwithstanding any prior election to exercise its Purchase Option
pursuant to Section 22.1) and (ii) as provided for in  Section 20.2(a)(v) within ten (10) Business Days after written demand of the
Lessor upon the occurrence of any other Event of
Default. 

        (b)  The
Lessee shall be obligated to purchase the Lessor's interest in any Leased Assets for an amount equal to the Lease Balance within ten (10) Business Days after
written demand of the Lessor at any time during the term when (i) the Lessor ceases to have title to such Leased Assets as contemplated by  Section 15.1 or (ii) any related Security
Document to which the Lessee is a party shall cease to be in full force and effect, or shall
cease to give the Lessor and/or the Collateral Agent the Liens, rights, powers and privileges purported to be created thereby. The Lessee's obligations under  clause (ii) of this Section 22.2(b) shall not apply to any Leased Asset for which the Base
Date has not occurred unless the defect in the Security Document resulted from the Lessee's acts or failures to act in accordance with this Lease and the other Operative Documents to which it is a
party. 

        (c)  Any
purchase under Section 22.1 or this Section 22.2 shall
be in accordance with Section 25.1. 

 
 

ARTICLE XXIII    
    
    RENEWAL TERMS    
  

        23.1.    Renewal.    

        (a)  Subject
to the conditions set forth herein, and unless otherwise specified in the Lease Supplement applicable to any Leased Assets, the Lessee shall have the option (the
"Renewal Option"), to extend the Lease Term for any Leased Asset (the "Renewal Term") with each such
Renewal Term to commence on the first day following the Expiration Date for such Leased Asset then in effect. The Renewal Option with respect to each Leased Asset shall be subject to the satisfaction
of each of the following conditions: 

          (i)  the
Lessor and each Lender shall have consented to the renewal of the Lease in respect of such Leased Asset after receipt of Lessee's request therefor delivered to the
Lessor and the Agent not later than one hundred twenty (120) days prior to the Expiration Date for such Leased Asset, such consent to be given or withheld in their sole and absolute discretion, 

        (ii)  (A)    no
Event of Default under this Lease shall have occurred and be continuing, and (B) by exercise of such Renewal Option, the Lessee shall be
deemed to represent to the Lessor as to the matters set forth in clause (A) of this condition (ii); and 

        (iii)  the
Lessee shall not have exercised the Termination Option or the Purchase Option for such Leased Asset under this Lease. 

        (b)  Each
extension of this Lease for a Renewal Term shall be subject to the terms of this Lease, together with such amendments and modifications, if any, required to reflect
the mutually 

35

 

acceptable terms agreed to by the Lessee, the Lessor and each Lender in respect of such Renewal Term. 

        (c)  In
the event that the Lessor and each Lender have not agreed to extend this Lease in respect of a Leased Asset at least ninety (90) days prior to the Expiration
Date for such Leased Asset, the Lessee's request for extension shall be deemed to have been rejected. 

 
 

ARTICLE XXIV    
    
    TERMINATION OPTION    
  

        24.1.    Option to Terminate.    Subject to the fulfillment of each of the conditions set forth in this  Section 24.1, the Lessee
shall have the option (the "Termination Option") to market and complete
the sale of Lessor's interest in all of the Leased Assets under any Lease Supplement (unless provisions with respect to joinder of remarketing options for the Leased Assets under more than one Lease
Supplement are set forth in a Lease Supplement, in which case such exercise must comply with such provisions) on the Expiration Date for such Leased Asset. The Lessee's effective exercise and
consummation of the Termination Option shall be subject to the due and timely fulfillment of each of the following provisions as to such Leased Asset as of the dates set forth below. 

        (a)  Not
later than six (6) months prior to such Expiration Date for such Leased Asset, the Lessee shall give to the Lessor written notice of the Lessee's exercise of
the Termination Option, which exercise shall not preclude Lessee's right to exercise thereafter the Purchase Option with respect to such Leased Asset (in which case the exercise of the Purchase Option
shall prevail and be irrevocable). On the date of the Lessee's notice to the Lessor of the Lessee's exercise of the Termination Option, no Event of Default shall exist and, in the case of each
Construction Property included in such Leased Assets, the Improvements on such Property shall have been constructed in accordance with the Plans and Specifications and all conditions to Substantial
Completion for such Construction Property shall have been satisfied. 

        (b)  Not
later than one hundred twenty (120) days prior to such Expiration Date, the Lessee shall deliver to the Lessor an Environmental Audit for each Property
included in such Leased Assets. Such Environmental Audit shall be prepared by an environmental consultant selected by the Lessee and approved in advance by the Lessor and shall contain conclusions
satisfactory to the Lessor as to the environmental status of such Property. If any such Environmental Audit indicates any exceptions, the Lessee shall have also delivered a supplemental environmental
assessment by such environmental consultant in form and substance satisfactory to the Lessor and dated prior to such Expiration Date showing the completion of the remediation of such exceptions in
compliance with all Requirements of Law. 

        (c)  On
such Expiration Date, no Event of Default or Default shall exist and none of such Leased Assets shall be subject to a Permitted Contest. 

        (d)  On
such Expiration Date, the Lessee shall have completed all Modifications, restoration and rebuilding of such Leased Assets pursuant to  Section 14.1 and 18.1 (as the case may be) and shall have fulfilled all of the conditions and
requirements in connection therewith pursuant to said Sections, regardless of whether the same shall be within the Lessee's control. The Lessee shall have also paid the cost of all Modifications
commenced prior to such Expiration Date. The Lessee shall not have been excused pursuant to Section 16.1 from complying with any Requirements of
Law that involved the extension of the ultimate imposition of such Requirements of Law beyond such Expiration Date. 

        (e)  During
the Marketing Period, the Lessee shall use best efforts to sell the Lessor's interest in such Leased Assets and will attempt to obtain the highest purchase price
therefor and for not less than the Fair Market Sales Value of such Leased Assets. The Lessee will be responsible for 

36

 

hiring brokers and making such Leased Assets available for inspection by prospective purchasers. The Lessee shall promptly upon request permit inspection of such Leased Assets and any maintenance
records relating to such Leased Assets by any potential purchasers, and shall otherwise do all things necessary to sell and deliver possession of such Leased Assets to any purchaser. All such
marketing of such Leased Assets shall be at the Lessee's sole expense. The Lessee's agency under this clause shall, for the first three (3) months of the Marketing Period, be on an exclusive
basis. In the event the Lessee is unable to procure during such period a bona fide bid from a non-Affiliated Person with demonstrable financial capacity to consummate such bid for such
Leased Asset, from and after such third month, the agency hereunder shall be on a non-exclusive basis. 

        (f)    The
Lessee shall submit all offers to purchase such Leased Assets to the Lessor and the Lessor will have the right to review the same and the right to submit one or more
of its own offers. All offers shall be on an all-cash basis unless the Lessor shall otherwise agree in its sole discretion. No purchaser shall be the Lessee or an Affiliate of the Lessee.
Each offer must specify such Expiration Date as the closing date unless the Lessor shall otherwise agree in its sole discretion. 

        (g)  In
connection with any such sale of Lessor's interest in any Leased Assets, the Lessee will provide to the purchaser all customary "seller's" indemnities,
representations and warranties regarding absence of Liens (except Lessor Liens) and the condition of such Leased Assets, including, without limitation, an environmental indemnity for any Property, to
the extent the same are required by the purchaser. The Lessee shall have obtained, at its cost and expense, all required Governmental Actions and shall have made all filings as required by all
Requirements of Law in order to carry out and complete the transfer of such Leased Assets. As to the Lessor, any such sale of Lessor's interest in any Leased Assets shall be made on an "as is, with
all faults" and quitclaim basis without representation or warranty by the Lessor other than the absence of Lessor Liens. Any agreement as to such sale shall be made subject to the Lessor's rights
hereunder. 

        (h)  The
Lessee shall pay directly, and not from the sale proceeds, all prorations, credits, costs and expenses of the sale of Lessor's interest in such Leased Assets,
whether incurred by the Lessor or the Lessee, including the cost of all title insurance, surveys, environmental reports, appraisals, the Lessor's
reasonable attorneys' fees, the Lessee's attorneys' fees, commissions, escrow fees, recording fees, and all applicable documentary, transfer, recording and other taxes. 

        (i)    The
Lessee shall pay to the Lessor on or prior to such Expiration Date (or to such other Person as the Lessor shall notify the Lessee in writing) an amount equal to the
Guaranteed Residual Value for such Leased Assets, plus all Base Rent, Supplemental Rent and all other amounts hereunder which have accrued or will
accrue with respect thereto prior to or as of such Expiration Date plus the amount, if any, by which the Fair Market Sales Value of such Leased Asset has been reduced by excess wear and tear of any
Leased Asset. 

37

  

        (j)    (i)    If
the Lessee complies with all of the conditions and all of its obligations under clauses
(a) through (i) above and arranges for the sale of such Leased Assets, then, subject to the terms of  Section 24.1(l),
 the purchase of Lessor's interest in such Leased Assets shall be consummated on the Expiration Date and the Gross Proceeds of
the sale of such Leased Assets shall be paid directly to the Lessor. If the Gross Proceeds received by Lessor exceeds the Lease Balance for such Leased Assets plus all other costs, fees, expenses and
other payments outstanding hereunder as of such date, then such excess together with the amount of the Guaranteed Residual Value shall be paid to the Lessee on the Expiration Date. If the Gross
Proceeds received by the Lessor are less than the Lease Balance for such Leased Assets, then the Gross Proceeds shall be paid and applied as follows on the Expiration Date:  first, to the Lessor in an
amount equal to the difference between the Permitted Lease Balance and the Guaranteed Residual Value for such Leased Assets;  second, to the Lessee in an amount equal to the Guaranteed Residual Value for
such Leased Assets; third,
to the Lessor in an amount equal to the difference between the Lease Balance and the Permitted Lease Balance for such Leased Asset; and fourth, to the
Lessee to the extent the remaining Gross Proceeds, if any, are in excess of the Lease Balance for such Leased Assets and all carrying charges and selling costs. 

        (ii)  If
the Lessee complies with all of the conditions and all of its obligations under clauses (a) through  (i) above but does not arrange for the sale
of such Leased Assets or the Lessor refuses to consummate the sale pursuant to  Section 24.1(l) below, then the Lessee shall surrender all of its rights in the Leased Assets to the Lessor on such
Expiration Date as required
by Sections 13.2 and 25.2. 

        (iii)  If
the Lessee does not comply with any of the conditions or any of its obligations under clauses (a) through  (i) above with respect to such Leased
Assets, then the Lessor shall declare by written notice to the Lessee the Termination Option with respect
to such Leased Assets to be null and void (whether or not it has been theretofore exercised by the Lessee), in which event all of the Lessee's rights under this  Section 24.1 shall immediately
terminate and the Lessee shall be obligated to purchase Lessor's interest in such Leased Assets as if it had
exercised its option under Section 22.1 on the Expiration Date. 

        (k)  In
the event that the sale of all of such Leased Assets is not consummated on such Expiration Date, but such sale is consummated any time thereafter, the Lessor shall
pay and apply the Gross Proceeds, promptly after the consummation of the sale of such Leased Assets, in the manner specified in the third sentence of  Section 24.1(j)(i) above. Notwithstanding
anything to the contrary set forth in this  Section 24.1, Lessor shall not itself lease such Leased Assets or occupy such Leased Assets for use in its own business after such Expiration
Date, shall use commercially reasonable efforts to sell such Leased Assets (including listing such Leased Assets with a real estate broker) to one or more unaffiliated third parties and shall in all
events sell such Leased Assets no later than five (5) years after obtaining possession of such Leased Assets and shall disburse the proceeds of such sale as set forth above. 

        (l)    Except
as expressly set forth herein, the Lessee shall have no right, power or authority to bind the Lessor in connection with any proposed sale of Lessor's interest in
any Leased Asset. The Lessor shall have the right, but shall be under no duty, to solicit offers, to inquire into the efforts of the Lessee to obtain offers or otherwise to take action in connection
with any such sale of Lessor's interest in such Leased Assets, other than as expressly provided in this Section 24.1. Notwithstanding anything
herein to the contrary, Lessor shall not be obligated to sell any Leased Asset or consummate any sale arranged under this Section 24.1 if the
Gross Proceeds plus the Guaranteed Residual Value paid to Lessor is less than the Lease Balance for such Leased Asset plus the other costs, fees, expenses and other payments outstanding hereunder. 

38

 

        24.2.    Certain Obligations Continue.    During the Marketing Period for any Leased Assets, the obligation of the
Lessee to pay Rent shall continue undiminished until payment in full to the Lessor of the Guaranteed Residual Value and all other amounts due to the Lessor with respect to such Leased Assets under the
Operative Documents to which the Lessee is a party. 

        24.3.    Late Payment.    If Lessor does not receive all payments due under this Lease and any other Operative
Document (including all payments required hereunder on such Expiration Date), Lessee may nonetheless tender to Lessor the full Purchase Option Price and all amounts then due under this Lease, together
with interest on the total Purchase Option Price computed at the Overdue Rate from such Expiration Date to the date of tender and all other costs, fees and expenses incurred by the Lessor, the
Collateral Agent and any Lender in connection with such Event of Default and their respective rights and remedies under this Lease and the other Operative Documents, and if presented with such a
tender within thirty (30) days after such Expiration Date, Lessor must accept the tender and promptly thereafter deliver any escrowed proceeds, and all other documents as set forth in  Section 25.1 hereof. 

 
 

ARTICLE XXV    
    
    PROCEDURES RELATING TO PURCHASE OPTION OR TERMINATION OPTION    
  

        25.1.    Conveyance Upon Purchase by the Lessee.    In connection with the Lessee's purchase of the Leased Assets
under any Lease Supplement pursuant to Section 22.1 or 22.2, or in connection with a purchase
of Lessor's interest in any Leased Asset under Article XIX or under the Construction Agency Agreement: 

          (i)  the
Lessee shall pay the amounts set forth in Section 22.1, Section 22.2,  Article XIX or the Construction Agency Agreement, as applicable,
together with all accrued Rent relating to such Leased Assets and any other
amount then due and payable by the Lessee to the Lessor under this Lease or the other Operative Documents; 

        (ii)  the
Lessor shall execute and deliver to the Lessee (or to the Lessee's designee) at the Lessee's cost and expense a special warranty deed with respect to the
Improvements, a special warranty deed, release, assignment or termination of Ground Lease (as specified by Lessee in writing) with respect to the Land and an assignment of the Lessor's entire interest
in the Leased Assets being sold which shall include an assignment of all of the Lessor's right, title and interest in and to any Gross Proceeds then held by or on behalf of the Lessor, in each case in
recordable form and otherwise in conformity with local custom and warranting solely that the Lessor's interest therein is being conveyed free and clear of the Lien of each Mortgage and any Lessor
Liens attributable to the Lessor; 

        (iii)  the
Leased Assets being sold shall be conveyed to the Lessee (or to the Lessee's designee) "AS IS" and in their then present physical condition; and 

        (iv)  subject
to the terms of Section 33.10 hereof, nothing in this Lease, nor the performance without objection by
Lessee of its obligations hereunder, shall be construed as a waiver by Lessee of any right Lessee may have at law or in equity, following (A) any failure by Lessor to tender any escrowed
proceeds or any of the required conveyance documents with respect to a Leased Asset as required by paragraph (ii) of this  Section 25.1 upon the
payment by Lessee of all amounts required to be paid hereunder in respect of such Leased Asset, or (B) any failure
by Lessor to remove all Lessor Liens and the Lien evidenced by any Mortgage and encumbering such Leased Asset before conveying such Leased Asset to Lessee pursuant to this  Section 25.1, including
the right (i) to recover monetary damages proximately caused by such failure of Lessor if Lessor does not cure the
failure within thirty (30) days after receipt by Lessor of a written demand to cure such specified failures or (ii) to obtain a decree compelling specific performance of Lessor's
obligations 

39

 

hereunder; provided that in no event shall Lessor be liable in any manner for any special, indirect, consequential or punitive damages. 

        25.2.    Conveyance Upon Termination by the Lessee.    If the Lessee properly exercises the Termination Option with
respect to the Leased Assets under any Lease Supplement, then the Lessee shall, on the Expiration Date applicable thereto, and at its own cost, surrender possession of such Leased Assets to the
independent purchaser(s) thereof or the Lessor, as the case may be, in each case by surrendering the same into the possession of the Lessor or such purchaser(s), as the case may be, and transferring
all of its rights, title and interest in such Leased Assets free and clear of all Liens other than Lessor Liens, in the condition required under and in accordance with Sections
13.2 and 24.1. The Lessor
agrees to transfer all of its rights, title and interest in and to such Leased Assets to the independent purchaser thereof on the date set for such purchase and sale, all on the terms and subject to
the conditions set forth in Section 24.1 (including the execution and delivery, in recordable form, of a quitclaim deed, assignment of the Ground
Lease, if any, and other conveyance documents, if required by local custom). The Lessee shall, on and within a reasonable time before and up to one year after the Expiration Date, cooperate reasonably
with the Lessor and/or the independent purchaser(s) in order to facilitate the purchase by such purchaser(s) of such Leased Assets, which cooperation shall include the following, all of which the
Lessee shall do on or before the Expiration Date applicable thereto or as soon thereafter as is reasonably practicable: providing copies of all books and records regarding the maintenance and
ownership of such Leased Assets and all data and technical and all other information relating thereto, granting or assigning all licenses (to the extent such licenses are assignable under Applicable
Law) necessary for the operation and maintenance of such Leased Assets and cooperating reasonably in seeking and obtaining all necessary Governmental Action. The obligations of the Lessee under this
paragraph shall survive the expiration or termination of this Lease. 

        25.3.    Closing Costs.    In connection with any sale or purchase of any Leased Asset on the terms described in  Sections 25.1 or
25.2 above, the Lessee shall pay or cause to be paid in addition to the purchase price
therefor, all transfer taxes, recording charges, mortgage taxes, filing fees and all similar taxes, fees, expenses and closing costs in connection with such conveyance. 

 
 

ARTICLE XXVI    
    
    INDEMNIFICATION    
  

        26.1.    General Indemnification.    The Lessee agrees, whether or not any of the transactions contemplated hereby
shall be consummated, to indemnify, protect, defend, save and hold harmless each Indemnitee, on an After Tax Basis, from and against, any and all Claims that may be imposed on, incurred by or asserted
against such Indemnitee (whether because of action or omission by such Indemnitee or otherwise), whether or not such Indemnitee shall also be indemnified as to any such Claim by any other Person and
whether or not such Claim arises or accrues prior to the Closing Date or after the Expiration Date, in any way relating to or arising out of: 

        (a)  any
of the Operative Documents or any of the transactions contemplated thereby; 

        (b)  the
Leased Assets or any part thereof or interest therein; 

        (c)  the
purchase, design, construction, preparation, installation, inspection, delivery, non-delivery, acceptance, rejection, ownership, management, possession,
operation, rental, lease, sublease, repossession, maintenance, repair, alteration, modification, addition or substitution, storage, transfer of title, redelivery, use, financing, refinancing,
disposition, operation, condition, sale (including, without limitation, any sale pursuant to any provision hereof), return or other disposition of all or any part or any interest in any Leased Asset
or the imposition of any Lien (or incurring of any liability to refund or pay over any amount as a result of any Lien) thereon, including, without limitation: (1) Claims or penalties arising
from any violation of a Governmental 

40

 

Rule or Claims in tort (strict liability or otherwise) arising out of or in connection with any accident, injury or death of any person or loss or damage to any property, (2) latent or other
defects, whether or not discoverable, (3) any Claim based upon a violation or alleged violation of the terms of any restriction, easement, condition or covenant or other matter affecting title
to any Leased Asset, (4) the making of any Modifications in violation of any standards imposed by any insurance policies required to be maintained by the Lessee pursuant to this Lease which are
in effect at any time with respect to any Leased Asset or any part thereof, (5) any Claim for patent, trademark or copyright infringement, (6) Claims which would otherwise be covered by
insurance policies of the Lessee, as required by Article XVII, and (7) Claims arising from any public improvements with respect to any
Property resulting in any charge or special assessments being levied against the Property or any plans to widen, modify or realign any street or highway adjacent to any Property, or any Claim for
utility "tap-in" fees; 

        (d)  the
breach by the Lessee of any covenant, representation or warranty made by it or deemed made by it in any Operative Document or in any certificate delivered pursuant
to any Operative Document; 

        (e)  the
retaining or employment of any broker, finder or financial advisor by the Lessee to act on its behalf in connection with the transactions contemplated hereby; or 

        (f)    the
existence of any Lien on or with respect to any Leased Asset, any Base Rent or Supplemental Rent, or any interest therein including any Liens which arise out of the
possession, use, occupancy, construction, repair or rebuilding of any Leased Asset or by reason of labor or materials furnished or claimed to have been furnished to the Lessee, or any of its
contractors or agents or by reason of the financing of any personal property or equipment purchased or leased by the Lessee or Modifications constructed by the Lessee, except Lessor Liens and Liens in
favor of the Lessor; 

provided, however, the Lessee shall not be required to indemnify any Indemnitee under this  Section 26.1 for
any of the following: (1) any Claim to the extent resulting from the willful misconduct or gross negligence of such
Indemnitee (it being understood that the Lessee shall be required to indemnify an Indemnitee even if the ordinary (but not gross) negligence of such Indemnitee caused or contributed to such Claim) or
the breach of any representation, warranty or covenant of such Indemnitee set forth in any Operative Document, (2) any Claim to the extent attributable to acts or events occurring after the
expiration or termination of the Lease Term and the return or remarketing of any Leased Asset so long as the Lessor is not exercising remedies against the Lessee in respect of the Operative Documents,
or (3) any Claim arising from a breach or alleged breach by an Indemnitee of any agreement entered into in connection with the assignment or participation of Rent. It is expressly understood
and agreed that
the indemnity provided for herein shall survive the expiration or termination of and shall be separate and independent from any remedy under this Lease or any other Operative Document. Without
limiting the express rights of any Indemnitee hereunder, this Section 26.1 shall be construed as an indemnity only and not a guaranty of residual
value of any Leased Asset. 

        26.2.    Environmental Indemnity.    Without limitation of the other provisions of this  Article XXVI, the Lessee hereby agrees
to indemnify, protect, defend, save and hold harmless each Indemnitee, on an After Tax Basis, from and
against any and all Claims, including all costs incurred in connection with any investigation or monitoring of site conditions or any clean-up, remedial, removal or restoration work by any
Governmental Agency, that may be imposed on, incurred by or asserted against such Indemnitee, whether or not such Indemnitee shall also be indemnified as to any such Claim by any 

41

 

other Person and whether or not such Claim arises or accrues prior to the Closing Date or after the Expiration Date, in any way relating to or arising out of: 

        (a)  the
presence on or under any Property of any Hazardous Materials, or any releases or discharges of any Hazardous Materials on, under, from or onto any Property for which
any Indemnitee or Lessee may be legally liable, 

        (b)  any
activity for which any Indemnitee or Lessee may be legally liable, carried on or undertaken on or off the Property, and whether by the Lessee or any predecessor in
title or any employees, agents, contractors or subcontractors of the Lessee or any predecessor in title, or any other Persons (including such Indemnitee), in connection with the handling, treatment,
removal, storage, decontamination, clean-up, transport or disposal of any Hazardous Materials that at any time are located or present on or under or that at any time migrate, flow,
percolate, diffuse or in any way move onto or under any Property, 

        (c)  loss
of or damage to any property or the environment (including, clean-up costs, response costs, remediation and removal costs, cost of corrective action,
costs of financial assurance, fines and penalties and natural resource damages), or death or injury to any Person, and all expenses associated with the protection of wildlife, aquatic species,
vegetation, flora and fauna, and any mitigative action required by or under Environmental Laws for which any Indemnitee or Lessee may be legally liable, 

        (d)  any
claim concerning any Indemnitee's or Lessee's lack of compliance with Environmental Laws in respect of a Leased Asset, or any act or omission by any Indemnitee, the
Lessee or any of their agents, employees or contractors causing an environmental condition on or about such Leased Asset that requires remediation or would allow any Governmental Authority to record a
Lien on the land records, or 

        (e)  any
residual contamination on or under the Land, or affecting any natural resources, and to any contamination of any property or natural resources arising in connection
with the generation, use, handling, storage, transport or disposal of any such Hazardous Materials, and irrespective of whether any of such activities were or will be undertaken in accordance with
applicable laws, regulations, codes and ordinances for which any Indemnitee or Lessee may be legally liable; 

provided, however, the Lessee shall not be required to indemnify any Indemnitee under this  Section 26.2 for
(1) any Claim to the extent resulting from the willful misconduct or gross negligence of such Indemnitee or any of their
agents, representatives or invitees (other than the Construction Agent), or (2) any Claim to the extent attributable to acts or events occurring after the expiration of the Lease Term and the
return or remarketing of the Properties so long as the Lessor is not exercising remedies against the Lessee in respect of the Operative Documents. It is expressly understood and agreed that the
indemnity provided for herein shall survive the expiration or termination of and shall be separate and independent from any remedy under this Lease or any other Operative Document. 

        26.3.    Tax Indemnity.    

        (a)  The
Lessee agrees, whether or not any of the transactions contemplated hereby shall be consummated, to indemnify, protect, defend, save and hold harmless each
Indemnitee, on an After Tax Basis, from and against, any and all Impositions that may be imposed on, incurred by or asserted against such Indemnitee (whether because of action or omission by such
Indemnitee or otherwise), whether or not such Indemnitee shall also be indemnified as to any such Impositions by any other Person and whether or not such Impositions arises or accrues prior to the
Closing Date or after the Expiration Date applicable to any Leased Asset. 

42

 

        (b)  Any
Imposition indemnifiable under this Section 26.3 shall be paid directly when due to the applicable taxing
authority if direct payment is practicable and permitted. If direct payment to the applicable taxing authority is not permitted or is otherwise not made, any amount payable to an Indemnitee pursuant
to this Section 26.3 shall be paid within thirty (30) days after receipt of a written demand therefor from such Indemnitee accompanied by
a written statement describing in reasonable detail the amount so payable, but not before two (2) Business Days prior to the date that the relevant Taxes are due. Any payments made pursuant to
this Section 26.3 directly to the Indemnitee entitled thereto shall be made in immediately available funds at such bank or to such account as
specified by the payee in written directions to the payor, or, if no such direction shall have been given, by check of the payor payable to the order of the payee by certified mail, postage prepaid at
its address. Upon the request of any Indemnitee with respect to an Imposition that the Lessee is required to pay, the Lessee shall furnish such Indemnitee the original or a certified copy of a receipt
for the Lessee's payment of such Imposition or such other evidence of payment as is reasonably acceptable to such Indemnitee. 

        (c)  Except
in the case of a payment to any Lender, at the Lessee's request, the amount of any indemnity payment by the Lessee pursuant to this  Section 26.3 shall be verified and certified by an independent
public accounting firm mutually acceptable to the Lessee and the Indemnitee. The
Indemnitee shall provide such independent public accounting firm, on a confidential basis, the requisite financial information. The costs of such verification shall be borne by the Lessee unless such
verification shall result in an adjustment in the Lessee's favor in an amount not less than $10,000, in which case such fee shall be paid by the Indemnitee. In no event shall the Lessee have the right
to review the Indemnitee's tax returns or receive any other confidential information from the Indemnitee in connection with such verification. Any information provided to such independent public
accounting firm by any Person shall be and remain the exclusive property of such Person and shall be deemed by the parties to be (and the independent public accounting firm will confirm in writing
that they will treat such information as) the private, proprietary and confidential property of such Person, and no Person other than such Person and the independent public accounting firm shall be
entitled thereto and all such materials shall be returned to such Person. Such independent public accounting firm shall be requested to make its determination within thirty (30) days of the
Lessee's request for verification and the computations of the independent public accounting firm shall be final, binding and conclusive upon the Lessee and the Indemnitee. The parties agree that the
sole responsibility of the independent public accounting firm shall be to verify the amount of a payment pursuant to this Lease and that matters of interpretation of this Lease are not within the
scope of the independent public accounting firm's responsibilities. 

        (d)  The
Lessor represents and warrants that it will not, prior to the termination of this Lease, claim ownership of (or any tax benefits, including depreciation, with
respect to) the Leased Assets for any income tax purposes, it being understood that the Lessee is and will remain the owner of the Leased Assets for such income tax purposes until the termination of
this Lease. 

        26.4.    Proceedings in Respect of Claims.    In case any action, suit or proceeding shall be brought against any
Indemnitee in respect of any Claim for which such Indemnitee is entitled to be indemnified hereunder, such Indemnitee shall notify the Lessee of the commencement thereof, and the Lessee shall be
entitled, at its expense, to participate in, and, to the extent that the Lessee desires to, assume and control the defense thereof; provided,  however, that
the Lessee shall have acknowledged in writing its obligation to fully indemnify such Indemnitee in respect of such action, suit or
proceeding, and, the Lessee shall keep such Indemnitee fully apprised of the status of such action, suit or proceeding and shall provide such Indemnitee with all information with respect to such
action, suit or proceeding as such Indemnitee shall reasonably request, and provided, further, that the
Lessee shall not be entitled to assume and control the defense of any such action, suit or proceeding if and to the extent that, (A) in 

43

 

the reasonable opinion of such Indemnitee, (x) such action, suit or proceeding involves any risk of imposition of criminal liability or any risk of imposition of material civil liability on
such Indemnitee beyond that for which the Indemnitee is jointly and severally liable with the Lessor or will involve a material risk of the sale, forfeiture or loss of, or the creation of any Lien
(other than a Permitted Lien) on any Leased Asset or any part thereof unless, in the case of civil liability, the Lessee shall have posted a bond or other security satisfactory to the relevant
Indemnitees in respect to such risk or (y) the control of such action, suit or proceeding would involve a conflict of interest on the part of the Lessee, (B) such proceeding involves
Claims not fully indemnified by the Lessee which the Lessee and the Indemnitee have been unable to sever from the indemnified claim(s), or (C) an Event of Default has occurred and is
continuing. The Indemnitee may participate in a reasonable manner at its own expense and with its own counsel in any proceeding conducted by the Lessee in accordance with the foregoing.
The Lessee shall not enter into any settlement or other compromise with respect to any Claim which is entitled to be indemnified under  Section 26.1, 26.2 or 26.3 without the prior
written consent of the Indemnitee which consent shall not be unreasonably withheld in the case of a money settlement not involving an admission of liability of such Indemnitee;  provided, however, that in the event that such Indemnitee withholds consent to any settlement or other
compromise, the Lessee shall not be required to indemnify such Indemnitee under Section 26.1,  26.2 or 26.3 to the extent that the applicable Claim (x) is for legal fees and expenses incurred
after the date of the proposed settlement or (y) results in a judgment in excess of such offered money settlement. 

        Each
Indemnitee shall at the expense of the Lessee supply the Lessee with such information and documents reasonably requested by the Lessee and in the possession of such Indemnitee as
are necessary or advisable for the Lessee to participate in any action, suit or proceeding to the extent permitted by this Section 26.4. Unless
an Event of Default shall have occurred and be continuing under Section 20.1(a), (f) or  (g), no
Indemnitee shall enter into any settlement or other compromise with respect to any Claim for which it is entitled to be indemnified under  Section 26.1, 26.2 or 26.3 without the prior
written consent of the Lessee, which consent shall not be unreasonably withheld, unless such Indemnitee waives its right to be indemnified under  Section 26.1, 26.2 or 26.3 with respect to such
Claim. 

        The
Lessee shall forthwith upon demand reimburse any Indemnitee for any sum or sums expended by it and for which it is indemnified pursuant to  Section 26.1, 26.2 or 26.3 or, upon request of
any Indemnitee, will pay such amounts directly. Upon reimbursement of payment in full of any Claim by the Lessee pursuant to Section 26.1,  26.2 or
26.3 to or on behalf of an Indemnitee, the Lessee, without any further action, shall be
subrogated to any and all claims that such Indemnitee may have relating thereto (including claims in respect of insurance policies maintained by such Indemnitee at its own expense), and such
Indemnitee shall execute such instruments of assignment and conveyance, evidence of claims and payment and such other documents, instruments and agreements as may be necessary to preserve any such
claims and otherwise cooperate with the Lessee and give such further assurances as are necessary or advisable to enable the Lessee vigorously to pursue such claims. 

 
 

ARTICLE XXVII    
    
    ESTOPPEL CERTIFICATES    
  

        27.1.    Estoppel Certificates.    At any time and from time to time upon not less than twenty (20) days' prior
request by the Lessor or the Lessee (the "Requesting Party"), the other party (whichever party shall have received such request, the
"Certifying Party") shall furnish to the Requesting Party a certificate signed by an individual having the office of vice president or higher in the
Certifying Party certifying that this Lease is in full force and effect (or that this Lease is in full force and effect as modified and setting forth the modifications); the dates to which the Base
Rent and Supplemental Rent have been
paid; to the actual knowledge of the Certifying Party, whether or not the Requesting Party is in default under any of its obligations hereunder (and, if so, the nature of such alleged default); and 

44

 

such other matters under this Lease as the Requesting Party may reasonably request. Any such certificate furnished pursuant to this  Article XXVII may be relied upon by the Requesting Party, and any
existing or prospective mortgagee, purchaser or lender, and any accountant or
auditor, of, from or to the Requesting Party (or any Affiliate thereof). 

 
 

ARTICLE XXVIII    
    
    ACCEPTANCE OF SURRENDER    
  

        28.1.    Acceptance of Surrender.    No surrender to the Lessor of this Lease or of all or any portion of any Leased
Asset or of any part of any thereof or of any interest therein shall be valid or effective unless agreed to and accepted in writing by the Lessor, and no act by the Lessor or any representative or
agent of the Lessor, other than a written acceptance, shall constitute an acceptance of any such surrender. 

 
 

ARTICLE XXIX    
    
    NO MERGER OF TITLE    
  

        29.1.    No Merger of Title.    There shall be no merger of this Lease or of the leasehold estate created hereby by
reason of the fact that the same Person may acquire, own or hold, directly or indirectly, in whole or in part, (i) this Lease or the leasehold estate created hereby or any interest in this
Lease or such leasehold estate, (ii) the fee or ground leasehold estate in any Leased Asset, except as may expressly be stated in a written instrument duly executed and delivered by the
appropriate Person or (iii) a beneficial interest in the Lessor. 

 
 

ARTICLE XXX    
    
    INTENT OF THE PARTIES    
  

        30.1.    Ownership of the Leased Assets.    

        (a)  It
is the intent of the parties hereto that: (i) this Lease constitutes an operating lease from the Lessor to the Lessee for the purposes of the Lessee's
financial reporting, (ii) the Lease and other transactions contemplated hereby shall be treated as a financing arrangement, and Lessee shall be treated as the owner of each Leased Asset for
Federal, State and local and other income and property tax and bankruptcy purposes and (iii) the obligations of the Lessee to pay Base Rent and any part of the Lease Balance shall be treated as
payments of interest and principal, respectively, for Federal, State, local and other income tax and bankruptcy purposes and the Lessee alone shall be entitled to take any deduction, credit allowance
or other reporting, filing or other tax position consistent with such characterizations. The Lessee has granted a mortgage lien on and security interest in all of its right, title and interest in and
to each Leased Asset to, or for the benefit of, the Lessor, pursuant to each Mortgage made by Lessee, to secure the payment and performance by the Lessee of all of its obligations under the Lease and
the other Operative Documents that are attributable or allocable to the Lessor Contribution of the Advances comprising the Lease Balance for such Leased Assets. Each of the parties hereto agrees that
it will not, nor will it permit any Affiliate to at any time, take any action or fail to take any action, including any action with respect to the preparation or filing of any income tax return,
including an amended income tax return, to the extent that such action or such failure to take action would be inconsistent with the intention of the parties expressed in this  Section 30.1.

45

  

        (b)  Specifically,
without limiting the generality of clause (a) of this  Section 30.1, the parties hereto intend and agree that in the event of any insolvency or
receivership proceedings or a petition under the United
States bankruptcy laws or any other applicable insolvency laws or statute of the United States of America or any State or Commonwealth thereof affecting the Lessee, the Lessor, any other Person or any
collective actions, the transactions evidenced by the Operative Documents shall be regarded as loans made by the Lessor to the Lessee. 

        (c)  Accordingly,
and notwithstanding any other provision of this Lease to the contrary, Lessor and the Lessee agree and declare that (i) the transactions contemplated
hereby are intended to have a dual, rather than single, form and (ii) all references in this Lease to the "Lease" of any Leased Asset which fail to reference such dual form do so as a matter of
convenience only and do not reflect the intent of Lessor and the Lessee as to the true form of such arrangements. 

        (d)  The
Lessee acknowledges and agrees that it has retained accounting, tax and legal advisors to assist it in structuring the transactions contemplated by this Lease and
the other Operative Documents, and Lessee is not relying on any representations of Lessor regarding the proper treatment of such transactions for accounting, tax or any other purposes, although it is
understood that the Lessor will report such transactions consistently with Section 30.1(a). 

 
 

ARTICLE XXXI    
    
    PAYMENT OF EXPENSES; YIELD PROTECTION    
  

        31.1.    Transaction Expenses.    

        (a)  The
Lessee shall pay, or cause to be paid, from time to time all Transaction Expenses in respect of the transactions taking place on the Closing Date and on each Funding
Date on such respective date; provided, however, that, if the Lessee has not received written invoices
therefor two (2) days prior to
such date, such Transaction Expenses shall be paid on the date thirty-five (35) days after the Lessee has received written invoices therefor. 

        (b)  The
Lessee shall pay or cause to be paid (i) all reasonable Transaction Expenses from time to time incurred by the Lessor, the Collateral Agent, and the Agent in
entering into any future amendments or supplements with respect to any of the Operative Documents, or giving or withholding of waivers of consents hereto or thereto (whether or not such amendments,
supplements, consents or waivers are ultimately entered into or granted), in each case which have been requested or approved by the Lessee, (ii) all reasonable Transaction Expenses incurred by
the Lessor, the Collateral Agent and the Agent in connection with any purchase of any Leased Asset by the Lessee or other Person pursuant to this Lease and (iii) all Transaction Expenses
incurred by the Lessor, the Collateral Agent, the Agent and each Lender in respect of enforcement of any of their rights or remedies against the Lessee in respect of the Operative Documents. 

        31.2.    Brokers' Fees and Stamp Taxes.    The Lessee shall pay or cause to be paid any brokers' fees and any and all
stamp, transfer, recording and other similar taxes, fees and excises, if any, including any interest and penalties, which are payable in connection with the transactions contemplated by this Lease and
the other Operative Documents. The Lessor and the Lessee each represent to the other that it has not employed any brokers in connection with the transactions contemplated by the Operative Documents. 

        31.3.    Funding Losses.    If (i) any payment of Base Rent or any portion of a Lease Balance is made on any
day other than a Payment Date, (ii) any Advance is not accepted by Lessee on the date specified therefor in the related Funding Request or the Lessee revokes such Funding Request or
(iii) the Reserve Adjusted LIBOR applicable to any Advance is converted to the Base Rate pursuant to Section 31.4 or  31.5 on any day other than
the last day of an Interest Period, then the Lessee shall reimburse the Lessor within fifteen (15) days after demand
for any resulting loss or expense incurred 

46

 

by the Lessor and each Lender as a result thereof, including (without limitation) any loss incurred in obtaining, liquidating or employing deposits from third parties, but excluding loss of margin
for the period after any such payment, provided that the Lessor or such Lender, as the case may be, shall have delivered to the Lessee a certificate in
reasonable detail as to the amount of such loss or expense, which certificate shall be conclusive in the absence of manifest error. 

        31.4.    Basis for Determining Reserve Adjusted LIBOR Inadequate or Unfair.    If on or prior to the first day of any
Interest Period: 

        (a)  deposits
in dollars (in the applicable amounts) are not being offered to Lessor or any Lender in the relevant market for such Interest Period, or 

        (b)  the
Lessor or any Lender advises the Lessee that Reserve Adjusted LIBOR will not adequately and fairly reflect the cost to the Lessor or such Lender of funding Advances
or Loans, as the case may be, for such Interest Period, 

the
Lessor or such Lender shall forthwith give notice thereof to the Lessee, whereupon until the Lessor or such Lender notifies the Lessee that the circumstances giving rise to such suspension no
longer exist, (i) the obligation of the Lessor or such Lender to make Advances or Loans, as the case may be, based on the Reserve Adjusted LIBOR shall be suspended and all future Advances and
Loans shall be made on the basis of the Base Rate and (ii) each outstanding Advance and Loan shall begin to bear interest based upon the Base Rate on the last day of the then current Interest
Period applicable thereto. 

        31.5.    Illegality.    If, on or after the date hereof, the adoption of any applicable law, rule or regulation, or
any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration
thereof, or compliance by the Lessor or any Lender with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it
unlawful or impossible for the Lessor or such Lender to make, maintain or fund its Advances or Loans, as the case may be, based on the Reserve Adjusted LIBOR and the Lessor or such Lender shall so
notify the Lessee, then until the Lessor or such Lender notifies the Lessee that the circumstances giving rise to such suspension no longer exist, the obligation of the Lessor to make Advances or of
such Lender to make Loans, as the case may be, based on the Reserve Adjusted LIBOR shall be suspended and all future Advances by the Lessor or Loans by such Lender, as the case may be, shall be made
on the basis of the Base Rate. If such notice is given each Advance by the Lessor and each Loan by such Lender shall begin to bear interest based upon the Alternate Base Rate either (A) on the
last day of the then current Interest Period applicable thereto or (B) immediately, if the Lessor or such Lender shall determine that it may not lawfully continue to maintain and fund such
Advance or Loan, as the case may be, to such day. 

        31.6.    Increased Cost and Reduced Return.    

        (a)  In
the event that the adoption of any applicable law, rule or regulation, or any change therein or in the interpretation or application thereof by any governmental
authority, central bank or comparable agency charged with the interpretation or administration thereof or compliance by the Lessor or any Lender with any request or directive after the date hereof
(whether or not having the force of law) of any such authority, central bank or comparable agency (except for any adoption or change formally adopted and publicly announced prior to the date hereof
but with an effective date on or after the date hereof): 

          (i)  does
or shall subject the Lessor or any Lender to any additional tax of any kind whatsoever with respect to the Operative Documents or any Advance or Loan made by it,
or change the basis or the applicable rate of taxation of payments to the Lessor or such Lender of principal, interest or any other amount payable hereunder or under any other Operative 

47

 

Document (except for the imposition of or change in any tax on or measured by the overall net income of the Lessor or such Lender); 

        (ii)  does
or shall impose, modify or hold applicable any reserve, special deposit, insurance assessment, compulsory loan or similar requirement against assets held by, or
deposits or other liabilities in or for the account of, advances or loans by, or other credit extended by, or any other acquisition of funds by, the Lessor or such Lender which are not otherwise
included in determination of the rate of interest on Advances or Loans hereunder; or 

        (iii)  does
or shall impose on the Lessor or such Lender any other condition; 

and
the result of any of the foregoing is to increase the cost to the Lessor or such Lender of making or maintaining Advances or Loans, or to reduce any amount receivable hereunder, then in any such
case, the Lessee shall promptly pay to the Lessor or such Lender, upon demand, any additional amounts necessary to compensate the Lessor or such Lender for such increased cost or reduced amount
receivable. 

        (b)  If
Lessor or any Lender shall have determined that, after the date hereof, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any
change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration
thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency (except for any adoption or change
formally adopted and publicly announced prior to the date hereof but with an effective date on or after the date hereof), or if the Lessor or such Lender shall have determined that a change in the
risk weighting of its Lessor Commitment or Lender Commitment, as the case may be, is necessary, and any of the foregoing has or would have the effect of reducing the rate of return on capital of the
Lessor or such Lender (or any entity directly or indirectly controlling any of such Persons) as a consequence of its obligations under the Operative Documents to a level below that which it could have
achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy), then from time to time, within fifteen (15) days after
demand by the Lessor or such Lender, the Lessee shall pay to the Lessor or such Lender such additional amount or amounts as will compensate the Lessor or such Lender (or its controlling entities) for
such reduction. 

        (c)  The
Lessor and each Lender will promptly notify the Lessee of any event of which it has knowledge, occurring after the date hereof, which will require the Lessee to make
payments pursuant to this Section; provided, however, that Lessee shall have no obligation to make any
payment to any demanding party under this Section 31.6 on account of any such increased costs relating to any Interest Period that ended more
than six (6) months prior to such demand for payment or, if any increased costs or reduced amounts do not relate to a particular Interest Period, on account of any such increased costs or
reduced amounts about which the demanding party first knew or should have known more than six
(6) months prior to its first demand for payment. A certificate of the Person claiming compensation under this Section and setting forth in reasonable detail its computation of the additional
amount or amounts to be paid to it hereunder shall be conclusive in the absence of manifest error. In determining such amount, the affected Person may use any reasonable averaging and attribution
methods. 

        (d)  The
Lessor agrees to exercise any rights available to it under Sections 3.01,  3.02 and 3.06 of the Loan
Agreement upon request by the Lessee. 

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ARTICLE XXXII    
    
    OTHER COVENANTS AND AGREEMENTS OF LESSEE    
  

        32.1.    Information.    The Lessee will deliver to the Lessor and the Collateral Agent: 

        (a)  within
fifty (50) days after the last day of each fiscal quarter of the Lessee, a copy of the unaudited Financial Statements of the Lessee and its Subsidiaries
(prepared on a consolidated basis) for such quarter and for the fiscal year to date, certified by the chief financial officer, treasurer or controller of the Lessee to present fairly in all material
respects the financial condition, results of operations and other information reflected therein and to have been prepared in accordance with GAAP (subject to normal year-end audit
adjustments); 

        (b)  within
one-hundred (100) days after the close of each fiscal year of the Lessee, (A) copies of the audited Financial Statements of the Lessee
and its Subsidiaries (prepared on a consolidated and consolidating basis) for such year, audited by independent certified public accountants of recognized national standing and, (B) copies of
the unqualified opinions (or qualified opinions reasonably acceptable to the Lessor and the Collateral Agent) of such accountants; 

        (c)  contemporaneously
with the quarterly and year-end Financial Statements required by the foregoing clauses
(i) and (ii), a compliance certificate of the chief financial officer, treasurer or controller of the Lessee in
substantially the form of Exhibit D (a "Compliance Certificate"), which (A) states that no
Default has occurred and is continuing, or, if any such Default has occurred and is continuing, a statement as to the nature thereof and what action the Lessee proposes to take with respect thereto;
and (B) sets forth, for the quarter or year covered by such Financial Statements or as of the last day of
such quarter or year (as the case may be), the calculation of the financial ratios and tests provided in Section 32.6; 

        (d)  as
soon as available and in no event later than five (5) Business Days after they are sent, made available or filed, copies of (A) all registration
statements and reports filed by the Lessee or any of its Subsidiaries with the United States Securities and Exchange Commission (including, without limitation, all 10-Q, 10-K
and 8-K reports); and (B) all reports, proxy statements and financial statements sent or made available by the Lessee or any of its Subsidiaries to its security holders; 

        (e)  as
soon as available and in no event later than five (5) Business Days after the Lessee changes its legal name or the address of its chief executive office,
written notice setting forth the Lessee's new legal name and/or new address; 

        (f)    within
five (5) days after a Responsible Employee of the Lessee of the Lessee obtains knowledge of the occurrence of each Default or Event of Default continuing
on the date of such statement, a statement of an authorized officer setting forth details of such Default or Event of Default and the action that the Lessee proposes to take with respect thereto; 

        (g)  promptly
upon any change of the Lessee's independent public accountants, notification thereof; 

        (h)  from
time to time such additional information regarding the business, properties, financial condition, operations or prospects of the Lessee and its Subsidiaries, or
regarding the Leased Assets or the status of any construction thereon, as the Lessor may reasonably request, to the extent the delivery or distribution of such additional information is not prohibited
by Applicable Law or written confidentiality arrangements binding upon the Lessee. 

        32.2.    Other Covenants.    If any covenants are set forth in any Lease Supplement, then the Lessee will observe and
perform such covenants according to the terms thereof with the same force and effect as if set forth in full herein. 

49

 

        32.3.    Consents.    The Lessee consents and acknowledges to, and agrees with, the Lessor for the benefit of the
Lessor, the Collateral Agent and the Lenders as follows: 

        (a)    Receipts of Agreements.    The Lessee has received a copy of (i) the Security Agreement,
(ii) each Mortgage, (iii) the Loan Agreement and other Operative Documents as it has required in connection herewith. 

        (b)    Consent.    The Lessee consents to the execution, delivery and performance of the Security Documents, to the
assignment, pledge, transfer and grant to the Collateral Agent of a continuing security interest in, and a lien upon, the Collateral (including the rights of the Lessor under this Lease) in the manner
and for the purposes of the Security Documents, to all of the terms and provisions of the Security Documents and to the exercise by the Collateral Agent of any right, remedy, power or privilege
granted to the Collateral Agent under the Security Documents in accordance with the terms thereof and Applicable Law as now or at any time hereafter in effect. The Lessee further consents to the
execution, delivery and performance of the Lessor Fee Letter and to the terms and provisions thereof. 

        (c)    Payment of Assigned Amounts.    The Lessor hereby irrevocably instructs the Lessee to pay all amounts payable
to the Lessor under this Lease and the other Operative Documents directly to the Collateral Account. The Lessee hereby agrees to pay all such amounts in accordance with such instructions free and
clear of any setoff, counterclaim or defense whatsoever that the Lessee may have with respect thereto; provided,  however, that no payment by the Lessor to
the Collateral Agent shall be deemed a waiver of any rights the Lessee may have against the Lessor, the
Collateral Agent or any other Person. 

        (d)    Enforceability of Obligations.    By reason of the Security Documents, all of the obligations of the Lessee
under this Lease and the other Operative Documents, together with all of the rights and remedies of the Lessor thereunder, shall be enforceable by the Collateral Agent directly against the Lessee in
accordance with the respective terms thereof. Lessee acknowledges that each Indemnitee is an express third-party beneficiary of Article XXVI of
this Lease. 

        (e)    Assignments by the Collateral Agent.    The Collateral Agent may, in realizing upon the Collateral, assign all
or any part of the Lessor's rights and interests in this Lease or the other Operative Documents to any other Person without the Lessee's consent. Upon any such assignment, the assignee shall agree to
assume all duties of the Lessor under this Lease and the other Operative Documents directly related to the rights and interests assigned. 

        (f)    No Waiver; Cumulative Remedies.    No failure on the part of the Collateral Agent to exercise, and no delay in
exercising, any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy by the Collateral Agent preclude any
other or further exercise thereof or the exercise of any other right, power or remedy. All rights, powers and remedies hereunder are cumulative and are not exclusive of any other rights, powers and
remedies provided by law. 

        (g)    Legal Opinions.    The Lessor and the Lessee each hereby consent to and authorize and direct each of their
respective counsel to deliver legal opinions to the Collateral Agent and the Lenders in connection with the transactions contemplated by the Loan Agreement. 

        32.4.    Ground Lease.    

        (a)  The
Lessee covenants and agrees that while this Lease remains in effect with respect to each Leased Asset subject to a Ground Lease, if any, and at all times prior to
the date on which the Lessee's right to occupy such Leased Asset has been terminated by the Lessor, the Lessee (and any sublessee or other party claiming by, through or under Lessee) has actually
vacated such Leased Asset and the Lessee has executed and delivered to Lessor a written release of its rights 

50

 

and interests (other than its right to receive a portion of the Gross Proceeds from the sale of such Leased Asset) to, and confirmation of its surrender of possession in respect of, the Leased Asset,
(i) Lessee will perform and observe all of the terms, covenants, provisions, conditions and agreements of the Ground Lease for each Leased Asset on the Lessor's part as lessee thereunder to be
performed and observed (including, without limitation, payment of all rent, additional rent and other amounts payable by the Lessor as lessee thereunder) to the end that all things shall be done which
are necessary to keep unimpaired the rights of the Lessor as lessee thereunder, except to the extent such performance is solely under the control of the Lessor and (ii) the Lessor shall have no
obligation or responsibility to provide services or equipment required to be provided or repairs or restorations required to be made in accordance with the provisions of any Ground Lease, each of
which shall be provided, made or effected by the Lessee hereunder. The Lessor and the Lessee mutually agree to cooperate fully with each other to enforce the Lessor's rights as the lessee under each
Ground Lease as against the lessor under such Ground Lease. The obligations of the Lessee under this Section 32 shall survive the termination of
this Lease and the rights of the Lessee hereunder but shall not, for any Leased Asset, extend beyond the date after the termination of this Lease that Lessor shall have completed a sale or lease of
such Leased Asset to an unaffiliated third party. 

        (b)  The
Lessee covenants and agrees pursuant to Section 26.1 hereof to indemnify and hold harmless each Indemnitee
from and against any and all Claims by reason of the Lessee's failure to comply with the provisions of this Section 32.4, other than to the
extent arising from the gross negligence or willful misconduct of any such Indemnitee. 

        32.5.    Pari Passu Ranking.    The Lessee shall take, or cause to be taken, all actions necessary to ensure that the
obligations of Lessee hereunder and under the Operative Documents to which it is a party are and continue to rank at least pari passu in right of payment with all other unsecured and unsubordinated
Indebtedness of the Lessee. 

        32.6.    Financial Covenants.    Until the expiration or sooner termination of this Lease: 

        (a)    Quick Ratio.    The Lessee shall maintain a ratio, as of the last day of each fiscal quarter, of
(i) Quick Assets to (ii) Current Liabilities, of not less than 1.50 to 1.00. 

        (b)    Tangible Net Worth.    The Lessee shall maintain a Consolidated Tangible Net Worth, as of the last day of each
fiscal quarter, of not less than the sum of $500,000,000, plus an amount equal to the sum of (a) 75% of Consolidated Net Income, on an after-tax basis (without subtracting any net
losses), (b) the aggregate net proceeds received by the Lessee from any issuance or sale of its Equity Securities (including pursuant to any employee stock option, stock purchase, stock
incentive or similar plan) and (c) the amount of any increase in stockholders' equity of the Lessee resulting from any conversion of outstanding Indebtedness of the Lessee into Equity
Securities of the Lessee, in each case determined on a cumulative basis for each fiscal quarter ending after September 28, 2001. 

        (c)    Ratio of Total Indebtedness to Tangible Net Worth.    The Lessee shall not permit the ratio of
(i) aggregate consolidated Indebtedness of the Lessee and the Subsidiaries (determined in accordance with GAAP) to (ii) Consolidated Tangible Net Worth to exceed 0.5 to 1.0 as of the
last day of each fiscal quarter. 

        (d)    Net Operating Losses; Net After Tax Loss.    The Lessee shall not permit Consolidated Net Income both before
and after taxes: 

          (i)  to
be less than zero for more than one fiscal quarter in any fiscal year; 

        (ii)  to
be less than zero for any two consecutive fiscal quarters; and 

51

 

        (iii)  to
be less than zero for any fiscal quarter by a positive amount that exceeds 5% of Consolidated Tangible Net Worth as of the last day of the preceding fiscal quarter. 

        (e)    Cash Balances.    The Lessee shall at all times hold (a) unencumbered cash on hand held in the United
States or on deposit in commercial banks operating in the United States, (b) unencumbered certificates of deposit or banker's acceptances maturing within one year of such date and issued by
commercial banks operating in the United States having capital and surplus in excess of $500,000,000 and/or (c) shares of money market, mutual or similar funds located in the United States
which invest exclusively in assets satisfying one or both of clause (a) and (b) above, in
an aggregate collective amount of not less than $50,000,000. 

        (f)    Leverage Ratio.    The Lessee shall maintain a ratio, as of the last day of each fiscal quarter, of
(i) aggregate consolidated Indebtedness of the Lessee and the Subsidiaries (determined in accordance
with GAAP) to (ii) EBITDA for the four fiscal quarter period ending on such date of less than or equal to 1.75 to 1.0. 

        (g)    Liens.    Without limitation of the provisions of  Article XV, the Lessee shall not, nor shall it permit any Subsidiary
to, directly or indirectly, create, incur, assume or suffer to exist any
Lien upon any of its property or revenues, whether now owned or hereafter acquired; other than: 

          (i)  any
Lien existing on any asset of any Person existing at the time such Person becomes a Subsidiary and not created in contemplation of such event; 

        (ii)  any
Lien in favor of the Lessee or any Subsidiary; 

        (iii)  any
Lien in favor of any governmental body created to secure progress, advance or other payments pursuant to any contract or provision of any statute; 

        (iv)  any
Lien existing on any asset at the time of acquisition thereof by the Lessee or a Subsidiary and not created in contemplation of such acquisition; 

        (v)  any
Lien on any asset created to secure the payment of all or any part of the purchase price thereof or to secure any Indebtedness incurred prior to, at the time of, or
within 60 days after, the acquisition of such asset by the Lessee or a Subsidiary for the purpose of financing all or any part of the purchase price thereof; 

        (vi)  any
extension, renewal or replacement (or successive extensions, renewals or replacements), as a whole or in part, of any Lien referred to in the foregoing  clauses (i) to (v)
; provided that such extension,
renewal or replacement Lien shall not secure any additional Indebtedness and shall not encumber any additional asset (or any greater portion of any asset) than the Lien extended, renewed or replaced; 

      (vii)  Permitted
Liens; 

      (viii)  Liens
for taxes that either are not yet payable or overdue or are being contested in good faith by appropriate proceedings;  provided that adequate reserves have been established with respect thereto in
accordance with GAAP and steps are not being taken to actively enforce any
such; 

        (ix)  Liens
incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance and other types of social security,
materialmen's, mechanics', workers', repairmen's, employees', carriers', warehousemen's and other like Liens arising in the ordinary course of business for amounts that either are not past due or are
being contested in good faith by appropriate proceedings; provided that adequate reserves have been established with respect thereto in accordance with
GAAP and steps are not being taken to actively enforce any such Liens; 

52

 

        (x)  Liens
of any of the types referred to in clause (ix) above that have been bonded for not less than the full amount
in dispute (or as to which other security arrangements satisfactory to the Lessor have been made), which bonding (or arrangements) shall comply with applicable Requirements of Law, and has (or have)
effectively stayed any execution or enforcement of such Liens; 

        (xi)  easements,
rights of way and other encumbrances on title to real property incurred in the ordinary course of business;  provided that such easements, rights of way and other encumbrances do not, in the aggregate,
cause any property to fail to comply with any Requirement
of Law or materially affect the value or utility of any property; 

      (xii)  Liens
created by the Lessee with the consent of the Lessor; 

      (xiii)  Liens
existing on the date hereof and listed on Schedule II and any renewals or extensions thereof,  provided that the property covered thereby is not
increased and the Lien secures Indebtedness which is not greater in amount and has no material terms
less favorable to the Lessor and the Lenders than the Indebtedness secured by the existing Lien; 

      (xiv)  Liens
arising in respect of deposits to secure the performance of bids, trade contracts, contracts for the purchase of property, leases, statutory obligations, surety
and appeal bonds, performance bonds and other obligations of a like nature, in each case incurred in the ordinary course of business and not representing an obligation for borrowed money; 

      (xv)  any
Lien securing judgments against the Lessee or any Subsidiary to the extent that such Lien does not constitute an Event of Default; 

      (xvi)  Liens
arising by virtue of any contractual, statutory or common law provision relating to banker's liens, rights of set-off or similar rights and remedies
as to deposit accounts or other funds maintained with a creditor depository institution; provided that (i) such deposit account is not a
dedicated cash collateral account and is not subject to restrictions against access by the Lessee or the Subsidiaries in
excess of those set forth by the regulations promulgated by the Federal Reserve Board, and (ii) such deposit account is not intended by the Lessee or any Subsidiary to provide collateral to the
depository institution with respect to otherwise unrelated obligations of the Lessee or such Subsidiary to such depository institution; 

    (xvii)  Leases
or subleases (other than "synthetic" leases or subleases) and licenses or sublicenses granted to other Persons in the ordinary course of business which do not
in the aggregate materially detract from the value of any asset or interfere in any material respect with the business operations of the Lessee and the Subsidiaries; 

    (xviii)  Liens
in favor of customs and revenue authorities arising as a matter of law to secure payment of customs duties in connection with the importation of goods in the
ordinary course of business; 

      (xix)  Liens
on insurance proceeds securing the payment of financed insurance premiums; 

      (xx)  customary
Liens granted in favor of a trustee to secure fees and other amounts owing to such trustee under an indenture or other agreement pursuant to which
Indebtedness of the Lessee or any Subsidiary is created; and 

      (xxi)  Liens
not otherwise permitted by the foregoing clauses of this Section securing Indebtedness in an aggregate principal amount not to exceed $50,000,000. 

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ARTICLE XXXIII    
    
    MISCELLANEOUS    
  

        33.1.    Survival; Severability; Etc.    If any term or provision of this Lease or any application thereof shall be
declared invalid or unenforceable, the remainder of this Lease and any other application of such term or provision shall not be affected thereby. If any right or option of the Lessee provided in this
Lease would, in the absence of the limitation imposed by this sentence, be invalid or unenforceable as being in violation of the rule against perpetuities or any other rule of law relating to the
vesting of an interest
in or the suspension of the power of alienation of property, then such right or option shall be exercisable only during the period which shall end twenty-one (21) years after the
date of death of the last survivor of the descendants of Franklin D. Roosevelt, the former President of the United States, and John D. Rockefeller, the founder of the Standard Oil Company, known to be
alive on the date of the execution, acknowledgement and delivery of this Lease. 

        33.2.    Amendments and Modifications.    Neither this Lease nor any provision hereof may be amended, modified,
supplemented, waived, discharged or terminated except by an instrument in writing signed by the Lessor and the Lessee, with the consent of the Agent on behalf of the Lenders. 

        33.3.    No Waiver.    No failure by the Lessor or the Lessee to insist upon the strict performance of any term hereof
or to exercise any right, power or remedy upon a default hereunder, and no acceptance of full or partial payment of Rent during the continuance of any such default, shall constitute a waiver of any
such default or of any such term. To the fullest extent permitted by law, no waiver of any default shall affect or alter this Lease, and this Lease shall continue in full force and effect with respect
to any other then existing or subsequent default. 

        33.4.    Notices.    All notices and other communications provided for hereunder shall, unless otherwise stated
herein, be in writing (including facsimile communication) and shall be personally delivered or sent by United States certified mail, postage prepaid, or overnight courier or by facsimile, to the
intended party at the address or facsimile number of such party set forth on Schedule I hereto or at such other address or facsimile number as
shall be designated by such party in a notice to the other parties hereto as herein provided. No notice or other communication declaring or otherwise asserting a default or breach by any party
hereunder or required in connection with the exercise of remedies arising therefrom shall be made by facsimile transmission. All such notices and communications shall be effective, (i) if
personally delivered, when received, (ii) if sent by certified mail, three Business Days after having been deposited in the United States mail, postage prepaid, (iii) if sent by
overnight courier, one Business Day after having been sent, and (iv) if transmitted by facsimile during business hours on a Business Day, when sent, receipt confirmed by telephone or electronic
means (and if sent after hours or on a day other than a Business Day, on the next Business Day). 

        33.5.    Successors and Assigns.    All the terms and provisions of this Lease shall inure to the benefit of the
parties hereto and their respective successors and permitted assigns. 

        33.6.    Headings and Table of Contents.    The headings and table of contents in this Lease are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof. 

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

        33.8.    GOVERNING LAW; SUBMISSION TO JURISDICTION.    

        (a)  THIS
LEASE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES. 

54

 

        (b)  THE
LESSEE IRREVOCABLY SUBMITS TO THE NON-EXCLUSIVE JURISDICTION OF THE FEDERAL COURTS OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK AND ANY
COURT OF THE STATE OF NEW YORK LOCATED IN NEW YORK CITY IN ANY ACTION, SUIT OR PROCEEDING AGAINST THE LESSEE RELATING IN ANY WAY TO THIS LEASE OR THE OTHER OPERATIVE DOCUMENTS AND AGREES THAT SERVICE
OF PROCESS IN ANY SUCH ACTION, SUIT OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL, OR A FORM OF MAIL SUBSTANTIALLY EQUIVALENT THERETO, ADDRESSED TO IT AT ITS
ADDRESS AS PROVIDED FOR NOTICES HEREUNDER. NOTHING HEREIN SHALL AFFECT THE RIGHT OF ANY PERSON TO SERVE PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST THE LESSEE IN ANY OTHER JURISDICTION. EACH PARTY AGREES THAT A FINAL JUDGMENT IN ANY SUCH SUIT, ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY
SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. THE LESSEE HEREBY IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY OBJECTION WHICH IT MAY NOW OR HEREAFTER HAVE
TO THE LAYING OF VENUE OF ANY ACTION OR PROCEEDING IN THE FEDERAL COURTS OF THE UNITED STATES FOR THE SOUTHERN DISTRICT OF NEW YORK OR THE SUPREME COURT OF THE STATE OF NEW YORK, COUNTY OF NEW YORK
AND ANY CLAIM THAT ANY SUCH ACTION OR PROCEEDING BROUGHT IN ANY SUCH COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. 

        33.9.    Original Lease.    The single executed original of this Lease containing the receipt of the Lessor therefor
on or following the signature page thereof shall be the original executed counterpart of this Lease (the "Original Executed Counterpart"). To the extent
that this Lease constitutes chattel paper, as such term is defined in the Uniform Commercial Code as in effect in any applicable jurisdiction, no security interest in this Lease may be created through
the transfer or possession of any counterpart other than the Original Executed Counterpart. 

        33.10.    Limitations on Recourse.    The obligations of Lessor and Lessee under this Lease and the other Operative
Documents shall be without recourse to any partner, officer, trustee, beneficiary, shareholder, director, officer or employee of Lessor or Lessee. Except for the gross negligence or willful misconduct
of Lessor, or for breach of Lessor's obligation to fund the portion of any Advance allocable to the Lessor Contribution, Lessor's liability to the Lessee hereunder and under the other Operating
Documents shall be limited to its interest in the Leased Assets only; provided that during the Construction Period for any Leased Asset, the liability
of Lessor hereunder in respect of such Leased
Asset shall instead be limited to the Lessor's Commitment for such Leased Asset. In no circumstance shall Lessor be liable for any indirect, consequential or punitive damages. 

        33.11.    WAIVER OF JURY TRIAL.    THE PARTIES HERETO HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS
THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS LEASE AND/OR ANY OF THE OTHER OPERATIVE DOCUMENTS OR THE TRANSACTIONS
CONTEMPLATED THEREBY, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF SUCH PARTIES. THE PARTIES HERETO ACKNOWLEDGE AND AGREE THAT THEY HAVE RECEIVED
FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTIES ENTERING INTO THE LEASE AND EACH SUCH OTHER OPERATIVE DOCUMENTS. 

55

 

        33.12.    Confidentiality.    The Lessor agrees to take and to cause its Affiliates to take normal and reasonable
precautions and exercise due care (in a manner at least consistent with the standards Lessor uses to protect its own confidential information) to maintain the confidentiality of all information
identified as "confidential" or "secret" by the Lessee and provided to it by the Lessee or any Subsidiary under this Lease or any other Operative Document, and neither it nor any of its Affiliates
shall use any such information other than in connection with or in enforcement of this Lease and the other Operative Documents or in connection with other business now or hereafter existing or
contemplated with the Lessee or any Subsidiary; except that Lessor and its Affiliates shall not be required to maintain the confidentiality of information provided hereunder or under any other
Operative Document to the extent such information (i) was or becomes generally available to the public other than as a result of disclosure by the Lessor or its Affiliates, or (ii) was
or becomes available on a non-confidential basis from a source other than the Lessee, provided that such source is not bound by a
confidentiality agreement with the Lessee known to the Lessor or any of its Affiliates; provided,  however, that the Lessor may disclose such information
(A) at the request or pursuant to any requirement of any Governmental Authority to which
the Lessor is subject or in connection with an examination of the Lessor by any such authority (in which case Lessor will give notice thereof to the Lessee); (B) pursuant to subpoena or other
court process; (C) when required to do so in accordance with the provisions of any Applicable Law; (D) to the extent reasonably required in connection with the exercise of any remedy
hereunder or under any other Operative Document; (E) to the Lessor's independent auditors and other professional advisors; and (F) to any Lender, Loan Participant or Assignee, actual or
potential, provided that such Person agrees in writing to keep such information confidential to the same extent required of the Lessor hereunder. 

[signatures
begin on the following page] 

56

        IN WITNESS WHEREOF, the parties have caused this Lease be duly executed and delivered as of the date first above written. 

	 	 	SMBC LEASING AND FINANCE, INC.,

as Lessor
	

 	
 	

By:	
 	

 
	 	 	 	 	

	 	 	 	 	Name:	 
	 	 	 	 	Title:	 
	

 	
 	

COHERENT, INC.,

as Lessee
	

 	
 	

By:	
 	

 
	 	 	 	 	

	 	 	 	 	Name:	 
	 	 	 	 	Title:	 

THIS
COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART. 

        Receipt
of this original counterpart of the foregoing Lease is hereby acknowledged as of the date hereof. 

	SMBC LEASING AND FINANCE, INC.

as Lessor	 	 
	

By:	
 	

 	
 	

 
	 	 	
	 	 
	 	 	Name:	 	 	 
	 	 	Title:	 	 	 

  

 
 

SCHEDULE I    
    TO MASTER LEASE AND SECURITY AGREEMENT    
  

 
  Notice Information    
  

SMBC
Leasing and Finance, Inc.

277 Park Avenue

New York, New York 10172

Attention: Chief Credit Officer

Telecopy: (212) 224-5222

Telephone: (212) 224-5210 

Coherent, Inc.

5100 Patrick Henry Drive

Santa Clara, CA 95054

Attention: Chief Financial Officer

Telephone: (408) 764-4000

Fax: (408) 970-9998 

with
a copy to: 

Coherent, Inc.

5100 Patrick Henry Drive

Santa Clara, CA 95054

Attention: Treasurer

Telephone: (408) 764-4000

Fax: (408) 970-9998 

and
a copy to: 

Wilson
Sonsini Goodrich & Rosati

650 Page Mill Road

Palo Alto, CA 94304

Attn: Susan P. Reinstra

Telephone: 650-493-9300

Fax: 650-493-6811 

Sch 1-1

 
 
 

SCHEDULE II
  TO MASTER LEASE AND SECURITY AGREEMENT    
  

 
  Existing Liens    
  

	1.
	Coherent
(UK) Holdings Limited has entered into a real estate mortgage in the approximate amount of £1.4 million on the real property located at Greycaine Road,
Watford, Herts, England.

	2.
	Between
May 1999 and December 1999 Coherent entered into five-year equipment leasing agreements with Mellon Bank as follows: 

	Assets
	 	Original Amount

	VoiceMail System	 	$	500,373
	Optical Coater	 	$	1,181,831
	European Telecom System	 	$	277,525

	3.
	Coherent
Tutcore OY, a majority-owned subsidiary, has entered into an equipment lease agreement for the financing of certain manufacturing equipment at its facility in Tampere, Finland
in the approximate amount of $800,000. 

Sch 1-2

  

 
 

ANNEX 1
  TO MASTER LEASE AND SECURITY AGREEMENT    
  

 
  Description of
  Initial Leased Assets    
  

	 
	 	Asset

	1.	 	Land and Improvements located at 2400 Condesa Street, Santa Clara, California 95054

Annex 1-1

  

 
 

EXHIBIT A
  TO MASTER LEASE AND SECURITY AGREEMENT    
  

[Form
of Funding Request] 

FUNDING
REQUEST 

TO:    SMBC
Leasing and Finance, Inc., as Lessor 

        This
Funding Request is delivered to you pursuant to Section 3.2 of the Master Lease and Security Agreement, dated as of
February 15, 2002, (together with any amendments, supplements, amendments and restatements and other modifications, if any, from time to time thereafter made thereto, the
"Lease"), between Coherent, Inc. (the "Lessee"), as Lessee, and SMBC Leasing and
Finance, Inc. (the "Lessor"), as Lessor. Capitalized terms used but not otherwise defined herein have the respective meanings specified in  Appendix 1 to the Lease, and the rules of interpretation set forth in Appendix 1 to the
Lease shall apply to this Funding Request. 

        The
Lessee hereby notifies the Lessor that: 

          (i)  the
Lessee requests the making of an Advance on                         ,
             (the
"Funding Date"); 

        (ii)  the
amount of such Advance is $                        . 

        (iii)  the
proposed Funding Date [will] [will not] also be an Acquisition Date; 

        (iv)  the
Lessee requests that such Advance bear interest at a rate determined by reference to [Reserve Adjusted LIBOR with an Interest Period of
             months] [Base Rate]; 

        (v)  the
Advance described herein is requested to be made in respect of the Leased Assets described on Lease Supplement No.             ,
dated as of                         , between Lessor and Lessee, and such Advance is attributable to, and will be allocated
to the costs and expenses set forth on  Schedule A hereto;
 

        (1)[(vi)with
respect to each acquisition of a Leased Asset, the following information is set forth on Schedule B
hereto: (A) a description of the Leased Asset to be acquired, (B) the transferor of the Leased Asset and (C) if such Leased Asset is a Construction Property, whether the Land is
to be owned by the Lessor in fee simple or leased to the Lessor pursuant to a Ground Lease and the Estimated Improvement Costs for such Construction Property.] 

	(1)
	Include
paragraph if the Lessee is requesting an Advance in connection with the acquisition of a Leased Asset. 

        In
connection with such Advance, the Lessee hereby represents and warrants to you as follows: 

        (a)  On
the Funding Date, both immediately before and after giving effect to the making of the requested Advance and the application of the proceeds thereof, the statements
made by the Lessee in Section 6.3 of the Lease are true and correct except as may be expressly waived by the Lessor, which waiver is attached
hereto as Schedule B for purposes of this Funding Request. 

        (b)  After
giving effect to the Advance requested hereby, the aggregate outstanding amounts of the Advances with respect to the relevant Leased Asset do not exceed the
Commitment of the Lessor for such Leased Asset set forth in the Lease Supplement described in clause (iv) above. 

        (c)  All
of the conditions precedent set forth in Article IV of the Lease applicable to the Advance requested hereby have been satisfied or waived. 

Ex A-1

 

        Lessor
is hereby requested to pay all amounts of the Advance requested under this Funding Request in accordance with the following instructions: 

[Add Payment Instructions]

        The
Lessee has caused this Funding Request to be executed and delivered by its duly authorized Responsible Employee as of this
                         day of
                        ,             . 

	 	 	COHERENT, INC.
	

 	
 	

By:	
 	

 
	 	 	 	 	

	 	 	 	 	Name:	 
	 	 	 	 	Title:	 

Ex A-2

  

 
 

SCHEDULE A TO FUNDING REQUEST    
    
    ALLOCATION OF ADVANCE    
  

	Leased Asset Description
 
	 	Lease

Supp.

No.
	 	Lessor

Contribution
	 	Debt

Contribution
	 	Property

Acquisition

Cost
	 	Land

Acquisition

Cost

(Current

Advance

only)
	 	Property Improvement Cost

(Current Advance only)
	 	Transaction

Expenses

	1.            	 	No.	 	 	 	 	 	$	            	 	$	            	 	$	            	 	$	            
	

2.            	
 	

No.	
 	

 	
 	

 	
 	
$	

            	
 	
$	

            	
 	
$	

            	
 	
$	

            
	3.            	 	No.	 	 	 	 	 	$	            	 	$	            	 	$	            	 	$	            

Sch A-1

  

 
 

SCHEDULE B TO THE FUNDING REQUEST    
    
    INFORMATION REQUIRED
  FOR FUNDING ACQUISITION OF LEASED ASSET    
  

        1.    Description
of the Leased Asset:
                                         
       . 

        2.    The
transferor of the Leased Asset is:
                                         
       . 

        [3.    The
Leased Asset is a Construction Property which is to be [owned by the Lessor in fee simple] [leased to the Lessor
pursuant to a Ground Lease]]. 

        [4.    Seller/Ground
Lessor of the Leased Asset:                         ]. 

        [5.    Estimated
Improvement Costs Property: $                        .] 

        [6.    Estimated
Improvements Costs and Drawing Schedule for the Leased Asset is attached as Annex I to this
Schedule B.] 

Sch B-1

  

 
 

EXHIBIT B
  TO MASTER LEASE AND SECURITY AGREEMENT    
  

[Form
of Lessee's Responsible Employee's Certificate] 

 
 

RESPONSIBLE EMPLOYEE'S CERTIFICATE    
  

        The undersigned hereby certifies that [s]he is [the] [an] [a]
                        of Coherent, Inc., a Delaware corporation (the "Lessee"), and that, as such [s]he is authorized to
execute and deliver this Certificate pursuant to the Master Lease and Security Agreement, dated as of February 15, 2002, (together with any amendments, supplements, amendments and restatements
and other modifications, if any, from time to time thereafter made thereto, the "Lease"), between the Lessee, as Lessee, and SMBC Leasing and
Finance, Inc., as Lessor. Capitalized terms used but not otherwise defined herein have the respective meanings specified in Appendix 1 to
the Lease, and the rules of the interpretation set forth in Appendix 1 to the Lease shall apply to this Certificate. 

        The
undersigned further certifies as follows: 

        1.    To
the knowledge of the undersigned officer, each and every representation and warranty of the Lessee contained in the Lease or any other Operative Document to which it
is party is true and correct in all material respects on and as of the date hereof except for such representations and warranties that relate to a prior date, which representations and warranties are
true and correct in all material respects and as of such date. 

        2.    To
the knowledge of the undersigned officer, no Default or Event of Default has occurred and is continuing. 

        3.    To
the knowledge of the undersigned officer, each Operative Document to which the Lessee is a party is in full force and effect with respect to the Lessee. 

        IN
WITNESS WHEREOF, the undersigned has executed this Certificate as of this                        day
of                        ,            .
 

	

 	
 	

By:	
 	

 
	 	 	 	 	

	 	 	 	 	Name:	 
	 	 	 	 	Title:	 

Ex B-1

  

 
 

EXHIBIT C-1
  TO MASTER LEASE AND SECURITY AGREEMENT    
  

[Form
of Lease Supplement for Property (other than Construction Property)] 

 
 

LEASE SUPPLEMENT NO.              
  

        This Lease Supplement
No.    dated                        ,        , (this "Lease Supplement") is
delivered pursuant to the Master Lease and Security Agreement dated as of February 15, 2002 (the "Lease"), between Coherent, Inc., as the
Lessee, and SMBC Leasing and Finance, Inc., as the Lessor. Capitalized terms not otherwise defined herein are used herein as defined in  Appendix 1 to the Lease. 

	1.
	The
Property to which this Lease Supplement relates is described on Attachment 1 hereto.

	2.
	The
Acquisition Date is                        .

	3.
	The
Base Date for this Property shall occur on the Acquisition Date.

	4.
	The
Expiration Date for this Property is the [            ] anniversary of the Base Date.

	5.
	The
Base Term for this Property shall commence on the Base Date and end on the Expiration Date, unless the Base Term is earlier terminated as provided in the Lease. The Lessor shall
have no option to extend the Lease Term for this Property pursuant to Section 23.1 except pursuant to mutually acceptable
terms and conditions to be established and consented and agreed to by Lessee, Lessor and each Lender, each in their sole and absolute discretion.

	6.
	The
Guaranteed Residual Value for this Property will be determined by the Lessor as of the Base Date and will be equal to that amount which will cause the present value (discounted
using the Lease Rate for such Property) of the minimum Rent payments with respect to this Property, determined according to FASB No. 13, to be approximately equal to, but not to exceed, 89.9%
of the lesser of the fair value of this Property on the Base Date and the Lease Balance of this Property on the Base Date. For this Property, the Guaranteed Residual Value is equal to
$                        .

	7.
	The
Relevant Percentage for Advances made to fund this Property is [85]%.

	8.
	The
Title Company for this Property is                        .

	9.
	The
use restrictions for this Property are, in addition to those set forth in Section 12.2 of the Lease, described in  Attachment 2 hereto.

	10.
	Other
Covenants:            

	11.
	The
Debt Rate shall mean the weighted average of the rate applicable to all Base Rate Tranches and the rate applicable to all Eurodollar Tranches outstanding under the Loan Agreement.

	12.
	The
Lessor Rate shall mean a rate equal to Reserve Adjusted LIBOR plus the Lessor Applicable Margin for the Lessor Contribution.

	13.
	The
Lease Rate is the weighted average of the Lessor Rate and the Debt Rate.

	14.
	The
Monthly Amortization for this Property is set forth on Attachment 4 hereto;  provided, however, that if the
circumstances described in  Section 17.2(b) exist in respect of the Property described in this Lease Supplement, then (a) the Monthly Amortization set forth in
Attachment 3 hereto shall be automatically amended to require the payment of Monthly Amortization (as a component of Base Rent) on each Scheduled
Payment Date in the twelve consecutive calendar months next occurring after the effective date of the reduced amount of property damage and hazard insurance coverage but in no event prior to the Base
Date for such Property in twelve equal installments, each in an amount equal to the quotient yielded by dividing (i) the difference between the then 

Ex C-1-1

 

Lease
Balance for such Property and the amount of the replacement coverage obtained by the Lessee for such Property, by (ii) 12, and (b) the Guaranteed Residual Value shall be reduced
by the amount of such Monthly Amortization. 

	15.
	Base
Rent for this Property shall be calculated in accordance with Attachment 4 hereto.

	16.
	The
Lessor Commitment Fee is set forth on Attachment 4 hereto.

	17.
	The
Lender Commitment Fee is set forth on Attachment 4 hereto.

	18.
	The
Threshold Amount for this Property is $1,000,000.

	19.
	Lessee
may not exercise its option to purchase or remarket the Property described on Attachment 1 hereto pursuant to  Sections 22.1 or 24.1 of the Lease unless Lessee also exercises the identical right pursuant to  Sections 22.1 or 24.1, as the case may be,
of the Lease with respect to the Property described on  Attachment 1 of that certain Lease Supplement No. 2 executed by Lessee and Lessor with respect to the Lease.
 

        The
undersigned Lessee hereby agrees to perform all the obligations of Lessee under, and to be bound in all respects by the terms of, the Lease and the other Operative Documents. 

        The
undersigned hereby certifies that the representations and warranties of the Lessee contained in the Lease are true and correct on and as of the date hereof, and will be true and
correct on and as of the effective date of this Lease Supplement, with the same effect as if made on and as of such effective date. The undersigned acknowledges and consents to the assignment of the
Lease (including this Lease Supplement) by the Lessor to the Collateral Agent pursuant to the terms of the Security Agreement. 

        The
undersigned confirms that it has received a copy of the Lease and the other Operative Documents together with such other documents and agreements as it has required in connection
therewith. 

Ex C-1-2

 

        Dated
as of this            day of            ,            . 

	 	 	LESSOR
	

Lessor Commitment: [            ]	
 	

SMBC LEASING AND FINANCE, INC.
	

 	
 	

By:	
 	

 
	 	 	 	 	

	 	 	 	 	Name:	 	 
	 	 	 	 	Title:	 	 
	

 	
 	
LESSEE
	

 	
 	

COHERENT, INC.
	

 	
 	

By:	
 	

 
	 	 	 	 	

	 	 	 	 	Name:	 	 
	 	 	 	 	Title:	 	 

Ex C-1-3

 
 
 

Attachment 1 to Asset
  Supplement No.              
  

[Legal
Description of Property] 

Ex C-1-4

 
 
 

Attachment 2 to Asset
  Supplement No.              
  

[Use
Restriction] 

Ex C-1-5

 
 
 

Attachment 3 to Asset
  Supplement No.              
  

Monthly
Amortization 

Ex C-1-6

 
 
 

Attachment 4 to Asset
  Supplement No.              
  

 
  Calculation of Base Rent    
  

        Base Rent payable on each Payment Date with respect to the Interest Period then ending shall be payable monthly in arrears and equal to the sum of the following
for the Leased Asset subject to this Lease Supplement: 

        (A)  with
respect to the Debt Contribution, 

	(I)
	if
any Base Rate Tranche is outstanding during such Interest Period pursuant to the Loan Agreement, the product of (w) the principal amount
outstanding of such portion of such Base Rate Tranche during such Interest Period, (x) the number of days in such Interest Period during which such portion of such Base Rate Tranche was
outstanding, (y) the sum of (i) the Base Rate and (ii) the Lender Applicable Margin and (z) 1/365, plus

	(II)
	if
any Eurodollar Tranche is outstanding during such Interest Period pursuant to the Loan Agreement, the product of (w) the principal amount
outstanding of such portion of such Eurodollar Tranche during such Interest Period, (x) the number of days in such Interest Period during which such portion of such Eurodollar Tranche was
outstanding, (y) the sum of (i) the Reserve Adjusted LIBOR applicable to such Eurodollar Tranche and (ii) the Lender Applicable Margin and (z) 1/360;  plus

        (B)  with
respect to the Lessor Contribution, 

	(I)
	if
any portion of the Lessor Contribution bears interest based upon the Base Rate during such Interest Period, the product of (w) the principal
amount outstanding of such portion of the Lessor Contribution during such Interest Period, (x) the number of days in such Interest Period during which such portion of the Lessor Contribution
was outstanding, (y) the sum of (i) the Base Rate and (ii) the Lessor Applicable Margin and (z) 1/365, plus

	(II)
	if
any portion of the Lessor Contribution bears interest based upon Reserve Adjusted LIBOR during such Interest Period, the product of (w) the
principal amount outstanding of such portion of the Lessor Contribution during such Interest Period, (x) the number of days in such Interest Period during which such portion of the Lessor
Contribution was outstanding, (y) the sum of (i) Reserve Adjusted LIBOR applicable to such portion of the Lessor Contribution plus (ii) the Lessor Applicable Margin and
(z) 1/360; plus

        (C)  the
Monthly Amortization, if any, for such Leased Asset for such Scheduled Payment Date. 

        All
calculations of Base Rent shall be performed by the Lessor and shall be submitted to the Lessee no later than 11:00 a.m., New York City time, on the fifth Business Day prior
to the relevant Scheduled
Payment Date, together with reasonable detail supporting the calculations made. Such calculations shall be deemed final unless the Lessee can demonstrate to the Lessor that inaccuracies exist in the
calculations made. If such inaccuracies have been established by the Lessee and confirmed by the Lessor, the Lessee shall nevertheless make the Base Rent payment in accordance with the Lessor's
calculations but the subsequent Base Rent payment shall be adjusted. 

Ex C-1-7

 
 
 

Determination of Upfront Fee    
  

        The Lessee shall pay to the Lessor an upfront fee (the "Upfront Fee") in respect of the Leased Asset subject to
this Lease Supplement on the Acquisition Date for such Leased Asset in an amount equal to $                        . 

Ex C-1-8

  

 
 

EXHIBIT C-2
  TO MASTER LEASE AND SECURITY AGREEMENT    
  

[Form
of Lease Supplement for Construction Property] 

LEASE
SUPPLEMENT NO.            

        This
Lease Supplement No.    dated                        ,
            , (this "Lease Supplement") is delivered pursuant to the
Master Lease and Security Agreement dated as of February 15, 2002 (the "Lease"), between Coherent, Inc., as the Lessee, and SMBC Leasing
and Finance, Inc., as the Lessor. Capitalized terms not otherwise defined herein are used herein as defined in Appendix 1 to the Lease. 

	1.
	The
Construction Property to which this Lease Supplement relates is described on Attachment 1 hereto.

	2.
	The
Acquisition Date is                        .

	3.
	The
Base Date for this Construction Property shall occur on the earlier of (x) the Scheduled Payment Date next following the date of Substantial Completion and (y) the
Outside Completion Date.* 

	*
	The
Base Date must be a Scheduled Payment Date.

	4.
	The
Expiration Date for this Construction Property is the [            ] anniversary of the Base Date.

	5.
	The
Base Term for this Construction Property shall commence on the Base Date and end on the Expiration Date, unless the Base Term is earlier terminated as provided in the Lease. The
Lessor shall have no option to extend the Lease Term for this Construction Property pursuant to Section 23.1 except pursuant to mutually
acceptable terms and conditions to be established and consented and agreed to by Lessee, Lessor and each Lender, each in their sole and absolute discretion.

	6.
	The
Construction Period for this Construction Property is the period commencing on the Acquisition Date and ending on the Base Date.

	7.
	The
Outside Completion Date for this Construction Property is                        , as such date may be extended from time to time
by reason of a Force Majeure Event.

	8.
	The
Guaranteed Residual Value for this Construction Property will be determined by the Lessor as of the Base Date and will be equal to that amount which will cause the present value
(discounted using the Lease Rate for such Construction Property) of the minimum Rent payments with respect to this Construction Property, determined according to FASB No. 13, to be
approximately equal to, but not to exceed, 89.9% of the Property Improvement Costs of this Construction Property on the Base Date.

	9.
	The
Relevant Percentage for Advances made to fund this Construction Property is            %.

	10.
	The
Title Company for this Construction Property is                        .

	11.
	The
use restrictions for this Construction Property are, in addition to those set forth in Section 12.2 of the Agreement,
described in Attachment 2 hereto.

	12.
	Other
Covenants:            

	13.
	The
Estimated Improvement Costs and the Draw Schedule for this Construction Property are set forth on Attachment 3 hereto.

	14.
	The
Debt Rate shall mean the weighted average of the rate applicable to all Base Rate Tranches and the rate applicable to all Eurodollar Tranches outstanding under the Loan Agreement. 

Ex C-2-1

 
	15.
	The
Lessor Rate shall mean a rate equal to Reserve Adjusted LIBOR plus the Lessor Applicable Margin for the Lessor Contribution.

	16.
	The
Lease Rate is the weighted average of the Lessor Rate and the Debt Rate.

	17.
	The
Monthly Amortization for this Construction Property is set forth on Attachment 4 hereto;  provided, however,
that if the circumstances described in  Section 17.2(b) exist in respect of the Construction Property described in this Lease Supplement, then (a) the Monthly Amortization set
forth in Attachment 3 hereto shall be automatically amended to require the payment of Monthly Amortization (as a component of Base Rent) on each
Scheduled Payment Date in the twelve consecutive calendar months next occurring after the effective date of the reduced amount of property damage and hazard insurance coverage but in no event prior to
the Base Date for such Property in twelve equal installments, each in an amount equal to the quotient yielded by dividing (i) the difference between the then Lease Balance for such Construction
Property and the amount of the replacement coverage obtained by the Lessee for such Construction Property, by (ii) 12, and (b) the Guaranteed Residual Value shall be reduced by the
amount of such Monthly Amortization.

	18.
	Base
Rent for this Construction Property shall be calculated in accordance with Attachment 5 hereto.

	19.
	The
Lessor Commitment Fee is set forth on Attachment 5 hereto.

	20.
	The
Lender Commitment Fee is set forth on Attachment 5 hereto.

	21.
	The
Threshold Amount for this Construction Property is $1,000,000.

	22.
	Lessee
may not exercise its option to purchase or remarket the Property described on Attachment 1 hereto pursuant to  Sections 22.1 or 24.1 of the Lease unless Lessee also exercises the identical right pursuant to  Sections 22.1 or 24.1, as the case may be,
of the Lease with respect to the Property described on  Attachment 1 of that certain Lease Supplement No. 2 executed by Lessee and Lessor with respect to the Lease. 

        The
undersigned Lessee hereby agrees to perform all the obligations of Lessee under, and to be bound in all respects by the terms of, the Lease and the other Operative Documents. 

        The
undersigned hereby certifies that the representations and warranties of the Lessee contained in the Lease are true and correct on and as of the date hereof, and will be true and
correct on and as of the effective date of this Lease Supplement, with the same effect as if made on and as of such effective date. The undersigned acknowledges and consents to the assignment of the
Lease (including this Lease Supplement) by the Lessor to the Collateral Agent pursuant to the terms of the Security Agreement. 

        The
undersigned confirms that it has received a copy of the Lease and the other Operative Documents together with such other documents and agreements as it has required in connection
therewith. 

Ex C-2-2

 

        This
Lease Supplement shall be effective as to the undersigned upon satisfaction of the conditions precedent set forth in  Section 4.2 of the Lease. This Lease Supplement may be executed in any number of
counterparts, each of which shall be an original, but all of
which shall together constitute one and the same agreement. 

Dated
as of this            day of            ,            . 

	 	 	LESSOR
	Lessor Commitment: $	 	SMBC LEASING AND FINANCE, INC.
	

 	
 	

By:	
 	

 
	 	 	 	 	

	 	 	 	 	Name:	 	 
	 	 	 	 	Title:	 	 
	

 	
 	
LESSEE
	

 	
 	

COHERENT, INC.
	

 	
 	

By:	
 	

 
	 	 	 	 	

	 	 	 	 	Name:	 	 
	 	 	 	 	Title:	 	 

Ex C-2-3

 
 
 

Attachment 1 to Asset
  Supplement No.              
  

[Legal
Description of Construction Property] 

Ex C-2-4

 
 
 

Attachment 2 to Asset
  Supplement No.              
  

[Use
Restriction] 

Ex C-2-5

 
 
 

Attachment 3 to Asset
  Supplement No.              
  

Estimated
Improvement Costs and Draw Schedule 

Ex C-2-6

 
 
 

Attachment 4 to Asset
  Supplement No.              
  

Monthly
Amortization 

Ex C-2-7

 
 
 

Attachment 5 to Asset
  Supplement No.              
  

 
 

Calculation of Base Rent    
  

        Base Rent payable on each Payment Date with respect to the Interest Period then ending shall be payable monthly in arrears and equal to the sum of the following
for the Leased Asset subject to this Lease Supplement: 

        (A)  with
respect to the Debt Contribution, 

	(I)
	if
any Base Rate Tranche is outstanding during such Interest Period pursuant to the Loan Agreement, the product of (w) the principal amount
outstanding of such portion of such Base Rate Tranche during such Interest Period, (x) the number of days in such Interest Period during which such portion of such Base Rate Tranche was
outstanding, (y) the sum of (i) the Base Rate and (ii) the Lender Applicable Margin and (z) 1/365, plus

	(II)
	if
any Eurodollar Tranche is outstanding during such Interest Period pursuant to the Loan Agreement, the product of (w) the principal amount
outstanding of such portion of such Eurodollar Tranche during such Interest Period, (x) the number of days in such Interest Period during which such portion of such Eurodollar Tranche was
outstanding, (y) the sum of (i) the Reserve Adjusted LIBOR applicable to such Eurodollar Tranche and (ii) the Lender Applicable Margin and (z) 1/360;  plus

        (B)  with
respect to the Lessor Contribution, 

	(I)
	if
any portion of the Lessor Contribution bears interest based upon the Base Rate during such Interest Period, the product of (w) the principal
amount outstanding of such portion of the Lessor Contribution during such Interest Period, (x) the number of days in such Interest Period during which such portion of the Lessor Contribution
was outstanding, (y) the sum of (i) the Base Rate and (ii) the Lessor Applicable Margin and (z) 1/365, plus

	(II)
	if
any portion of the Lessor Contribution bears interest based upon Reserve Adjusted LIBOR during such Interest Period, the product of (w) the
principal amount outstanding of such portion of the
Lessor Contribution during such Interest Period, (x) the number of days in such Interest Period during which such portion of the Lessor Contribution was outstanding, (y) the sum of
(i) Reserve Adjusted LIBOR applicable to such portion of the Lessor Contribution plus (ii) the Lessor Applicable Margin and (z) 1/360;  plus

        (C)  the
Monthly Amortization, if any, for such Leased Asset for such Scheduled Payment Date. 

        All
calculations of Base Rent shall be performed by the Lessor and shall be submitted to the Lessee no later than 11:00 a.m., New York City time, on the fifth Business Day prior
to the relevant Scheduled Payment Date, together with reasonable detail supporting the calculations made. Such calculations shall be deemed final unless the Lessee can demonstrate to the Lessor that
inaccuracies exist in the calculations made. If such inaccuracies have been established by the Lessee and confirmed by the Lessor, the Lessee shall nevertheless make the Base Rent payment in
accordance with the Lessor's calculations but the subsequent Base Rent payment shall be adjusted. 

Determination of Lessor Commitment Fee  

        The Lessee shall pay to the Lessor a commitment fee (the "Lessor Commitment Fee") in respect of the Leased Asset
subject to this Lease Supplement on the daily average unused Lessor Commitment for such Leased Asset for the period from the Acquisition Date for such Leased Asset to the earlier of the Base Date for
such Leased Asset and the date of termination of such Lessor Commitment at a rate 

Ex C-2-8

 

per annum equal to    %. All of such Lessor Commitment Fee shall be capitalized pursuant to Section 3.2(e). The Lessor Commitment Fee
shall be computed on the basis of the actual number of days occurring during the period for which such fee is payable over a year of 360 days. 

Determination of Lender Commitment Fee  

        The Lessee shall pay to the Lessor a commitment fee (the "Lender Commitment Fee") in respect of the Leased Asset
subject to this Lease Supplement on the daily average unused Total Lender Commitment for the period from the Acquisition Date for such Leased Asset to the earlier of the Expiration Date for such
Leased Asset and the date of termination of such Total Lender Commitment at a rate per annum equal to    %. Except for any portion of such Lender Commitment Fee capitalized pursuant to  Section 3.2(e)
, such accrued Lender Commitment Fee shall be payable as Supplemental Rent on each Payment Date. The Lender Commitment Fee shall be
computed on the basis of the actual number of days occurring during the period for which such fee is payable over a year of 360 days. 

Ex C-2-9

  

 
 

EXHIBIT D
  TO MASTER LEASE AND SECURITY AGREEMENT    
  

[Form
of Lessee's Compliance Certificate] 

 
 

COMPLIANCE CERTIFICATE    
  

        The undersigned hereby certifies that [s]he is the [Chief Financial Officer] [Treasurer]
[Controller] of Coherent, Inc., a Delaware corporation (the "Lessee"), and that, as such [s]he is
authorized to execute and deliver this Certificate pursuant to the Master Lease and Security Agreement, dated as of February 15, 2002 (together with any amendments, supplements, amendments and
restatements and other modifications, if any, from time to time thereafter made thereto, the "Lease"), between the Lessee, as Lessee, and SMBC Leasing
and Finance, Inc., as Lessor. Capitalized terms used but not otherwise defined herein have the respective meanings specified in Appendix 1
to the Lease, and the rules of the interpretation set forth in Appendix 1 to the Lease shall apply to this Certificate. 

        The
undersigned further certifies as follows: 

        1.    To
the knowledge of the undersigned officer, no Default has occurred and is continuing. [If any such Default has occurred and is continuing, state that a
Default has occurred and is continuing and include a statement as to the nature of such Default and what action the Lessee proposes to take with respect to such Default.] 

        2.    As
of    , 200            [insert last day of most recently ended fiscal quarter], the calculation of the financial ratios and
tests set forth in Section 32.6 of the Lease is as follows: 

	(a)
	Quick Ratio.

	(i)
	The
amount of Quick Assets* is equal to $            .

	(ii)
	The
amount of Current Liabilities* is equal to $            .

	(iii)
	The
ratio of (i) above to (ii) above is            to            . [Refer to  Section 32.6(a)
 of the Lease to determine compliance.] 

	(b)
	Tangible Net Worth. Consolidated Tangible Net Worth* is $            . [Refer to  Section 32.6(b) of the Lease to determine compliance.]

	(c)
	Ratio of Total Indebtedness to Tangible Net Worth

	(i)
	The
aggregate consolidated Indebtedness* of the Lessee and its Subsidiaries (determined in accordance with GAAP) is $            .

	(ii)
	Consolidated
Tangible Net Worth* is $            .

	(iii)
	The
ratio of (i) above to (ii) above is            to            . [Refer to  Section 32.6(c)
 of the Lease to determine compliance.] 

	*
	Refer
to the definition of this term in Appendix 1 to the Lease. 

Ex D-1

 

	(d)
	Net Operating Loss; Net After Tax Loss.

	(i)
	Consolidated
Net Income* before taxes is $            . [Refer to  Section 32.6(d) of the Lease to determine compliance.]

	(ii)
	Consolidated
Net Income* after taxes is $            . [Refer to  Section 32.6(d) of the Lease to determine compliance.] 

	(e)
	Cash Balances. The Lessee held (i) unencumbered cash on hand held in the United States or on deposit in commercial banks
operating in the United States, (ii) unencumbered certificates of deposit or banker's acceptances maturing within one year of such date and issued by commercial banks operating in the United
States having capital and surplus in excess of $500,000,000 and/or (iii) shares of money market, mutual or similar funds located in the United States which invest exclusively in assets
satisfying one or both of clause (a) and (b) above (collectively,
"Unencumbered Cash") in an amount equal to $            . The Lessee has held Unencumbered Cash in an aggregate collective amount of not less
than
$50,000,000 at all times.

	(f)
	Leverage Ratio.

	(i)
	Aggregate
consolidated Indebtedness* of the Lessee and the Subsidiaries (determined in accordance with GAAP) is equal to $            .

	(ii)
	EBIDTA*
for the four fiscal quarter period ending on such date is equal to $            .

	(iii)
	The
ratio of (i) to (ii) above is            to            . [Refer to  Section 32.6(f)
 of the Lease to determine compliance.] 

	(g)
	Liens. The Lessee is, and at all times has been, in compliance with  Section 32.6(g) of the Lease. 

        3.    Determination of Lender Applicable Margin.    

        [The
Lender Applicable Margin is equal to 162.5 basis points] [Use for all periods prior to June 30, 2002.] 

        [Based
on the Leverage Ratio of    [insert ratio from  Section 2(f)(iii) above], the Lender Applicable Margin, as determined by the table in the definition of "Lender Applicable
Margin" in Appendix 1 to the Lease, is    basis points.] [Use on and after June 30, 2002.] 

        4.    Determination of Lessor Applicable Margin.    

        [The
Lessor Applicable Margin is equal to 200.0 basis points.] [Use for all periods prior to June 30, 2002.] 

        [Based
on the Leverage Ratio of    [insert ratio from  Section 2(f)(iii) above], the Lessor Applicable Margin, as determined by the table in  Schedule A to the Lessor Fee Letter*, is            basis points.] [Use on and after June 30,
2002.] 

Ex D-2

 
APPENDIX
1

TO MASTER LEASE AND SECURITY AGREEMENT 

 
 

DEFINITIONS AND INTERPRETATION    
  

        A.    Interpretation.    In each Operative Document, unless a clear contrary intention appears: 

          (i)  the
singular number includes the plural number and vice versa; 

        (ii)  reference
to any Person includes such Person's successors and assigns but, if applicable, only if such successors and assigns are permitted by the Operative Documents,
and, unless otherwise provided or the context otherwise requires, reference to a Person in a particular capacity excludes such Person in any other capacity or individually; 

        (iii)  reference
to any gender includes each other gender; 

        (iv)  reference
to any agreement (including any Operative Document), document or instrument means such agreement, document or instrument as amended or modified and in effect
from time to time in accordance with the terms thereof and, if applicable, the terms of the other Operative Documents and reference to any promissory note includes any promissory note which is an
extension or renewal thereof or a substitute or replacement therefor; 

        (v)  reference
to any Applicable Law means such Applicable Law as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time,
including rules and regulations promulgated thereunder, and reference to any section or other provision of any Applicable Law means that provision of such Applicable Law from time to time in effect
and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision; 

        (vi)  reference
in any Operative Document to any Article, Section, Appendix, Schedule or Exhibit means such Article or Section thereof or Appendix, Schedule or Exhibit
thereto; 

      (vii)  "hereunder",
"hereof", "hereto" and words of similar import shall be deemed references to an Operative Document as a whole and not to any particular Article, Section
or other provision thereof; 

      (viii)  "including"
(and with correlative meaning "include") means including without limiting the generality of any description preceding such term; and 

        (ix)  relative
to the determination of any period of time, "from" means "from and including" and "to" means "to but excluding". 

        B.    Accounting Terms.    In each Operative Document, unless expressly otherwise provided, accounting terms shall be
construed and interpreted, and accounting determinations and computations shall be made, in accordance with United States GAAP. 

        C.    Conflict in Operative Documents.    If there is any conflict between any Operative Documents, such Operative
Document shall be interpreted and construed, if possible, so as to avoid or minimize such conflict but, to the extent (and only to the extent) of such conflict, the Lease shall prevail and control. 

        D.    Legal Representation of the Parties.    The Operative Documents were negotiated by the parties with the benefit
of legal representation and any rule of construction or interpretation otherwise requiring the Operative Document to be construed or interpreted against any party shall not apply to any construction
or interpretation hereof or thereof. 

        E.    Defined Terms.    Unless a clear contrary intention appears, terms defined herein have the respective indicated
meanings when used in each Operative Document. 

Ex D-3

 

        "Acquisition Date" means with respect to each Leased Asset, the Acquisition Date set forth in the Lease Supplement for such Leased Asset. 

        "Acquisition Documents" means the documents set forth on Schedule III to the Loan
Agreement. 

        "Additional Payment Date" means (i) the last day of each Interest Period which does not end on a Scheduled Payment Date and
(ii) with respect to each Leased Asset, the Base Date and the Expiration Date therefor and each other date specified in the Lease Supplement therefor. 

        "Advance" means an advance of funds by the Lessor pursuant to Article III of the
Lease. 

        "Affiliate" means, when used with respect to any Person, any other Person directly or indirectly Controlling or Controlled by or under
direct or indirect common Control with such Person. 

        "After Tax Basis" means, with respect to any payment to be received, the amount of such payment increased so that, after deduction of the
amount of all taxes required to be paid by the recipient for the taxable period during which such payment is received with respect to the receipt by the recipient of such payment, such payment (as so
reduced) is equal to the payment otherwise required to be made, provided that the taxes required to be paid shall be determined on a net basis (taking into account, for example, tax benefits resulting
from any loss which relates to or causes the right to receive such payment). 

        "Agent" shall mean SMBC Leasing and Finance, Inc., in its capacity as agent for the Lenders under the Loan Agreement, and its
permitted successors and assigns. 

        "Agent-Related Persons" shall mean SMBC Leasing and Finance, Inc., and any successor agent arising under  Section 10.09 of the Loan Agreement or successor
collateral agent arising under  Section 5.8 of the Security Agreement, together with their respective Affiliates, and the officers, directors, employees, agents and
attorneys-in-fact of such Persons and Affiliates. 

        "Applicable Law" means all existing and future applicable laws, rules, regulations, statutes, treaties, codes, ordinances, permits,
certificates, orders and licenses of and interpretations by, any Governmental Authority, and applicable judgments, decrees, injunctions, writs, orders or like action of any court, arbitrator or other
administrative, judicial or quasi-judicial tribunal or agency of competent jurisdiction (including Environmental Laws) and those pertaining to the construction, use or occupancy of each Leased Asset)
and any restrictive covenant or deed restriction or easement of record affecting any Property. 

        "Appraisal" means, with respect to any Property or any portion thereof, an appraisal, prepared by a reputable appraiser selected by the
Lessor and the Collateral Agent, of such Property or such portion which complies with all of the provisions of the Financial Institutions Reform, Recovery and Enforcement Act of 1989, as amended, the
rules and regulations adopted pursuant thereto, and all other applicable Requirements of Law and, in the case of the Appraisal delivered on or prior to the Acquisition Date for such Property, will
appraise the Fair Market Sales Value of such Property (i) as built in accordance with the Plans and Specifications as of Substantial Completion for such Property (in the case of a Construction
Property) and (ii) as of the Expiration Date for such Leased Asset. 

        "Approved Substitute Lessor" shall mean, on any date of determination, any financial institution that has a minimum capital and surplus of
not less than $50,000,000 on such date and that satisfies all accounting criteria to permit the Lessee to account for the Lease under GAAP as an operating lease. 

        "Appurtenant Rights" means (i) all agreements, easements, rights of way or use, rights of ingress or egress, privileges,
appurtenances, tenements, hereditaments and other rights and benefits at any time belonging or pertaining to any Land or the related Improvements, if applicable, including, if applicable, the use of
any streets, ways, alleys, vaults or strips of land adjoining, abutting, adjacent or contiguous to such Land and (ii) all permits, licenses and rights, whether or not of record, appurtenant to
such Land. 

Ex D-4

 

        "Architect" means with respect to each Construction Property, an independent architect, engineer or other design professional employed by
Lessee in connection with the construction of Improvements to be located thereon and the use and occupancy thereof. 

        "Assignee" shall have the meaning set forth in Section 11.01(a) of the Loan
Agreement. 

        "Assignment Agreement" shall mean an assignment agreement entered into by a Lender and an assignee, in accordance with  Section 11.01 of the Loan Agreement, and in
substantially the form of Exhibit E to the
Loan Agreement. 

        "Attorney Costs" shall mean and include, without duplication, all reasonable fees and disbursements of any law firm or other external
counsel and all disbursements of internal counsel. 

        "Available Lessor Commitment" means, at any time with respect to a Leased Asset, an amount equal to the excess, if any, of (a) the
amount of the Lessor Commitment for such Leased Asset over (b) the aggregate original principal amount of all Advances made under the Lease in respect of such Leased Asset prior to such time. 

        "Base Date" means, with respect to each Leased Asset, the date designated as such in the Lease Supplement for such Leased Asset. 

        "Base Rate" shall mean, for any day, a rate of interest equal to 0.50% per annum above the Effective Fed Funds Rate. 

        "Base Rate Loan" shall mean a Loan which bears interest based upon the Base Rate. 

        "Base Rate Tranche" means a portion of a Lease Balance funded by a Debt Contribution which bears interest at a fluctuating rate based upon
the Base Rate. 

        "Base Rent" means with respect to each Leased Asset, the amount determined in the Lease Supplement for such Leased Asset. 

        "Base Term" with respect to each Leased Asset, the term set forth the Lease Supplement for such Leased Asset. The Base Term is subject to
extension as provided in Section 23.1 of the Lease. 

        "Board" means the Board of Governors of the Federal Reserve System of the United States (or any successor). 

        "Borrowing" shall mean the aggregate amount of Loans to be made by the Lenders to the Lessor pursuant to any one Notice of Borrowing. 

        "Budget" means, with respect to each Construction Property, the detailed budget of all costs and expenses to be incurred in connection
with the Construction of the Improvements and maintenance and insurance of the Land during the Construction Period including all carrying charges, Capitalized Interest, Impositions and premiums for
insurance. 

        "Business Day" shall mean a day on which banks are not required or authorized by law or executive order to close in San Francisco,
California, New York City and, if the applicable Business Day relates to any LIBOR Loan or the Interest Period therefor, on which dealings are carried on in the London interbank market. 

        "Capital Adequacy Regulation" means any guideline, request, directive, law, rule or regulation of any central bank or other Governmental
Authority, whether or not having the force of law, in each case, regarding capital adequacy of any lender or of any corporation controlling a lender. 

        "Capital Leases" shall mean any and all lease obligations that, in accordance with GAAP, are required to be capitalized on the books of a
lessee. 

Ex D-5

 

        "Capitalized Fees" means, with respect to any Construction Property prior to the Base Date therefor, an amount equal to the sum of the
accrued and unpaid Commitment Fees and the fees payable by the Lessee under the Lessor Fee Letter, in each case with respect to such Construction Property. 

        "Capitalized Interest" means, with respect to any Construction Property after the Acquisition Date therefor but prior to the Base Date
therefor, an amount for each Interest Period equal to the Base Rent payable under the Lease for such Interest Period with respect to such Construction Property. 

        "Casualty" means any damage or destruction of all or any portion of a Leased Asset as a result of a fire, collapse, flood, theft,
vandalism or other casualty. 

        "Certifying Party" is defined in Section 27.1 of the Lease. 

        "Change of Control" shall mean, with respect to the Lessee the acquisition after the date hereof by any person or group of persons (within
the meaning of Section 13 or 14 of the Securities Exchange Act of 1934 (as amended, the "Exchange Act")) of (A) beneficial ownership
(within the meaning of Rule 13d-3 promulgated by the Securities and Exchange Commission under the Exchange Act) of fifty-one percent
(51%) or more of the outstanding Equity Securities of the Lessee entitled to vote for members of the board of directors or (B) all or substantially all of the assets of the Lessee. 

        "Claims" means any and all obligations, liabilities, losses, actions, suits, judgments, penalties, fines, claims, demands, settlements,
fees, costs and expenses (including reasonable legal fees and expenses) of any nature whatsoever. 

        "Closing Date" is defined in Section 4.1 of the Lease. 

        "Code" means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto. 

        "Collateral" shall mean the collective reference to each Leased Asset (and all products and proceeds thereof) and all other assets or
properties now or hereafter encumbered by the lien and security interest created under any of the Security Documents. 

        "Collateral Account" shall have the meaning set forth in Section 4.06(a) of the
Loan Agreement. 

        "Collateral Agent" shall mean Sumitomo Mitsui Banking Corporation, in its capacity as collateral agent under the Security Agreement, the
Mortgage from Lessor and the other Security Documents. 

        "Commitment Fee" for each Leased Asset means the Lessor Commitment Fee and the Lender Commitment Fee for such Leased Asset, as set forth
in the Lease Supplement for such Leased Asset. 

        "Commitment Percentage" shall mean, with respect to any Lender, the percentage which such Lender's Lender Commitment represents of the
Total Lender Commitment. 

        "Commitment Termination Date" shall mean with respect to each Leased Asset, the Base Date for such Leased Asset. 

        "Company Material Adverse Effect" is defined in Section 6.02 of the Loan Agreement. 

        "Condemnation" means any condemnation, requisition, confiscation, seizure or other taking or sale of the use, access, occupancy, easement
rights or title to any Leased Asset or any part thereof, wholly or partially (temporarily or permanently), by or on account of any actual or threatened eminent domain proceeding or other taking of
action by any Person having the power of eminent domain, including an action by a Governmental Authority to change the grade of, or widen the streets adjacent to, any Property or alter the pedestrian
or vehicular traffic flow to such Property so as to result in change in access to such Property, or by or on account of an eviction by paramount title or any transfer made in 

Ex D-6

 

lieu of any such proceeding or action. A "Condemnation" shall be deemed to have occurred on the earliest of the dates that use, occupancy or title
vests in the condemning authority. 

        "Consolidated Net Income" means, for any period, the net income (or loss) of the Lessee and its Subsidiaries on a consolidated basis for
such period taken as a single accounting period and determined in conformity with GAAP. 

        "Consolidated Tangible Net Worth" means, as of any date of determination, in respect of the Lessee and its Subsidiaries on a consolidated
basis in accordance with GAAP, the excess of consolidated total assets on such date over consolidated total liabilities on such date; provided,  however,
that (i) the amount of any direct or indirect advance, loan or other extension of credit (including by way of any Guaranty Obligation)
by the Lessee or any Subsidiary to any employee, director, officer, shareholder or other Affiliate of the Lessee or any Subsidiary or to any Subsidiary other than any wholly-owned Subsidiary, in each
case made after the date of the Lease and outstanding on such date, and (ii) the amount of Intangible Assets on such date, shall be excluded from any determination of consolidated total assets
on such date. 

        "Construction" means, with respect to each Construction Property, the construction, equipping and installation of all Improvements on such
Construction Property contemplated by the Plans and Specifications for such Construction Property. 

        "Construction Agency Agreement" means a master construction agency agreement, in form and substance satisfactory to the Agent, between the
Lessor and the Construction Agent. 

        "Construction Agency Agreement Event of Default" is defined in the Construction Agency Agreement. 

        "Construction Agency Agreement Supplement" means, with respect to each Construction Property, a supplement to the Construction Agency
Agreement substantially in the form of Exhibit A to the Construction Agency Agreement duly completed as to such Construction Property. 

        "Construction Agent" means Coherent, Inc., a Delaware corporation, as construction agent under the Construction Agency Agreement. 

        "Construction Documents" is defined in the Construction Agency Agreement. 

        "Construction Documents Assignment" means, with respect to each Construction Property, the Construction Documents Assignment executed by
the Construction Agent and the Lessor substantially in the form of Annex I to the Construction Agency Agreement. 

        "Construction Guaranty Amount" shall mean, on any date of determination with respect to each Construction Property, the sum of
(a) 89.9% of the Property Improvement Costs and 100% of the Land Acquisition Costs on such date for such Construction Property, less  (b) the sum of any payments made by Construction Agent in
respect of the Construction of Improvements for such Construction Property on or before such date of
determination for which no Advance has been made by the Lessor, future valued to such date at the Lease Rate, less (c) the present discounted
value of all future payments in respect of such Construction of Improvements that the Lessee is, as of such date of determination, obligated to make, discounted to such date of determination at the
Lease Rate, less (d) all Transaction Expenses not permitted to be included in such Construction Guarantee Amount in accordance with EITF
97-10. 

        "Construction Period" means, with respect to each Construction Property, the period set forth in the Lease Supplement therefor. 

        "Construction Property" means any Property the Lessor and the Lessee elect to make subject to the Construction Agency Agreement, as
evidenced by the execution and delivery of a Construction Agency Agreement Supplement. 

Ex D-7

 

        "Contingent Obligation" shall mean, with respect to any Person, (a) any Guaranty Obligation of that Person; and (b) any
direct or indirect obligation or liability, contingent or otherwise, of that Person (i) in respect of any Surety Instrument issued for the account of that Person or as to which that Person is
otherwise liable for reimbursement of drawings or payments or (ii) in respect to any Rate Contract that is not entered into in connection with a bona fide hedging operation that provides
offsetting benefits to such Person. The amount of any Contingent Obligation shall (subject, in the case of Guaranty Obligations, to the last sentence of the definition of
"Guaranty Obligation") be deemed equal to the maximum reasonably anticipated liability in respect thereof, and shall, with respect to item
(b)(ii) of this definition be marked to market on a current basis. 

        "Contractual Obligation" of any Person shall mean, any indenture, note, lease, loan agreement, security, deed of trust, mortgage, security
agreement, guaranty, instrument, contract, agreement or other form of contractual obligation or undertaking to which such Person is a party or by which such Person or any of its property is bound. 

        "Control" means (including the correlative meanings of the terms "controlled by" and "under common control with"), as used with respect to
any Person, the possession directly or indirectly, of the power to direct or cause the direction of the management policies of such Person, through the ownership of voting securities. 

        "Current Liabilities" means, as of any date of determination, in respect of the Lessee and its Subsidiaries on a consolidated basis in
accordance with GAAP, all liabilities treated as current liabilities in accordance with GAAP, other than the obligations under Articles XXII,  XXIII,
XXIV and XXV of the Lease, but including without
limitation (a) all obligations payable on demand or within one year after such date and (b) installment and sinking fund payments required to be made within one year after such date, but
excluding all such liabilities or obligations which are renewable or extendable at the option of the obligor thereof to a date more than one year after such date. 

        "Debt Contribution" means, with respect to any Leased Asset, that amount of outstanding Advances made by the Lessor for such Leased Asset
funded by the borrowing of Loans under the Loan Agreement. 

        "Debt Rate" means, with respect to each Leased Asset, the rate designated as such in the Lease Supplement for such Leased Asset. 

        "Deed" means each special warranty deed with respect to Land, in conformity with Applicable Law and appropriate for recording with the
applicable Governmental Authorities, conveying fee simple title to such Land to the Lessor subject only to Permitted Exceptions. 

        "Default" means any event or condition which, with the lapse of time or the giving of notice, or both, would constitute an Event of
Default. 

        "Dollars" and "$" mean dollars in lawful currency of the United States of America. 

        "Draw Schedule" means, with respect to any Leased Asset, the schedule, if any, of projected drawings of Advances to be made under the
Lease with respect to such Leased Asset set forth in the Lease Supplement applicable thereto. 

        "EBITDA" means, for any period, Consolidated Net Income; plus the following, to the extent
deducted in calculating Consolidated Net Income: (i) interest expense, (ii) taxes, (iii) depreciation expense, (iv) amortization expense, (v) non-cash
charges and (vi) the amount of rent payments made with respect to "synthetic" leases; and minus, to the extent added in calculating Consolidated
Net Income, non-cash gains. 

        "Effective Fed Funds Rate" shall mean, with respect to any day, the interest rate per annum equal to the weighted average of the rates on
effective federal funds transactions with members of the 

Ex D-8

 

Federal Reserve System arranged by federal funds brokers, as published in the weekly statistical release designated H.15(519) for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if such rate is not so published for any day which is a Business Day, the average of the quotations for such day on such
transactions received by the Agent from three federal funds brokers of recognized standing selected by it. 

        "Employee Benefit Plan" shall mean, with respect to any party, any employee benefit plan within the meaning of section 3(3) of
ERISA maintained or contributed to by such party, any Subsidiary or any ERISA Affiliate, other than a Multiemployer Plan. 

        "Environmental Audit" means, with respect to any Property, a Phase One environmental site assessment (the scope and performance of which
meets or exceeds ASTM Standard Practice E1527-93 Standard Practice for Environmental Site Assessments: Phase One Environmental Site Assessment Process) of such Property. 

        "Environmental Law" means, whenever enacted or promulgated, any applicable Federal, state, county or local law, statute, ordinance, rule,
regulation, license, permit, authorization, approval, covenant, enforceable guideline or criteria, administrative or court order, judgment, decree, injunction, code or requirement or any agreement
with a Governmental Authority: 

        (x)  relating
to pollution (or the cleanup, removal, remediation or encapsulation thereof, or any other response thereto), or the regulation or protection of human health,
safety or the environment, including air, water, vapor, surface water, groundwater, drinking water, land (including surface or subsurface), plant, aquatic and animal life, or 

        (y)  concerning
exposure to, or the use, containment, storage, recycling, treatment, generation, discharge, emission, Release or threatened Release, transportation,
processing, handling, labeling, containment, production, disposal or remediation of any Hazardous Substance, Hazardous Condition or Hazardous Activity, 

        in
each case as amended and as now or hereafter in effect, and any common law or equitable doctrine (including, without limitation, injunctive relief and tort doctrines such as
negligence, nuisance, trespass and strict liability) that may impose liability or obligations for injuries (whether personal or property) or damages due to or threatened as a result of the presence
of, exposure to, or ingestion of, any Hazardous Substance, whether such common law or equitable doctrine is now or hereafter recognized or developed. 

        "Environmental Violation" means any activity, occurrence or condition that violates or results in non-compliance with any
Environmental Law in any material respect. For purposes of this definition, an Environmental Violation which is not reasonably likely to cause or result in fines, penalties, costs or damages in excess
of $25,000 shall not be deemed material. 

        "Equity Securities" of any Person shall mean (a) all common stock, preferred stock, participations, shares, partnership interests
or other equity interests in and of such Person (regardless of how designated and whether or not voting or non-voting) and (b) all warrants, options and other rights to acquire any
of the foregoing. 

        "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, or any successor Federal statute. 

        "ERISA Affiliate" shall mean any Person which is treated as a single employer with the Lessee or any Subsidiary under
Section 414(b), (c), (m) or (o) of the Code. 

        "Escrow Agent" is defined in Section 18.1(a) of the Lease. 

Ex D-9

   
        "Estimated Improvement Costs" means, with respect to any Construction Property as of any date, an amount equal to the aggregate amount
which the Construction Agent in good faith expects to be expended in order to achieve Substantial Completion with respect to Improvements to be constructed on such Property (including
(i) Capitalized Interest and Capitalized Fees and (ii) Transactions Expenses in each case allocated with respect to such Property during its Construction Period). 

        "Eurodollar Reserve Percentage" shall have the meaning given to such term in the definition of "Reserve Adjusted LIBOR" in this  Appendix I. 

        "Eurodollar Tranche" means a portion of a Lease Balance funded by a Debt Contribution made with reference to Reserve Adjusted LIBOR. 

        "Event of Default" is defined in Section 20.1 of the Lease. 

        "Event of Construction Agency Termination" is defined in the Construction Agency Agreement. 

        "Excess Proceeds" means, with respect to any Leased Asset, the excess, if any, of the aggregate of all awards, compensation or insurance
proceeds payable in connection with a Casualty or Condemnation over the sum of the Lease Balance paid by the Lessee pursuant to Articles XVIII and  XIX of
the Lease with respect to such Casualty or Condemnation and all proceeds received by the Lessor in connection with any sale of such Leased Asset
pursuant to the Lessor's exercise of remedies under Section 20.2 of the Lease or the Lessee's exercise of the Termination Option under  Article XXIV of the Lease. 

        "Expiration Date" means, with respect to each Leased Asset, the later of the date (x) set forth in the Lease Supplement for such
Leased Asset, or (y) the scheduled expiration of the then current Renewal Term, if any; provided,  however, that if such Leased Asset is purchased
pursuant to Section 22 of the Lease or the Lease
Balance therefor is paid pursuant to Section 20.2 of the Lease, then the Expiration Date shall be the date of such purchase or payment, as the
case may be. 

        "Fair Market Sales Value" means, with respect to any Leased Asset, the amount, which in any event shall not be less than zero, that would
be paid in cash in an arm's-length transaction between an informed and willing purchaser and an informed and willing seller, neither of whom is under any compulsion to purchase or sell, respectively,
for the ownership of such Leased Asset. The Fair Market Sales Value of the Leased Assets shall be determined based on the assumption that, except for purposes of  Article XX of the Lease, the Leased
Assets are in the condition and state of repair required under  Section 13.1 of the Lease and the Lessee is in compliance with the other requirements of the Operative Documents.
 

        "Final Date" means February 15, 2007, or, if extended pursuant to  Section 4.08 of the Loan Agreement, then the date as so extended. 

        "Financial Statements" means, with respect to any accounting period for any Person, consolidated statements of income, shareholders'
equity and cash flows of such Person and its subsidiaries for such period, and a consolidated balance sheet of such Person and its subsidiaries as of the end of such period, setting forth in each case
in comparative form figures for the corresponding period in the preceding fiscal year if such period is less than a full fiscal year or, if such period is a full fiscal year, corresponding figures
from the preceding annual audit, all prepared in reasonable detail and in accordance with GAAP. 

        "Financing Arrangement" means each credit agreement, loan agreement, note purchase agreement, security agreement, indenture, mortgage,
deed of trust, and each other agreement or arrangement (including the Loan Agreement) between the Lessor and a lender or lenders to the Lessor or other Person or Persons providing credit to or equity
investments in the Lessor or to debt issued by or on behalf of the Lessor related to the financing or refinancing of Property or other Leased Assets, as any of the same may be amended, restated,
modified or supplemented from time to time. 

Ex D-10

 

        "Financing Costs" means all interests costs (including, without limitation, interest at a default rate), other costs, fees, expenses and
other payments incurred by Lessor under the Loan Agreement or such other Financing Arrangement entered into with the consent of the Lessee excluding, however, any such costs, expenses or payments
arising out of the occurrence of a Loan Event of Default not caused by an Event of Default under the Lease. 

        "Fixtures" means all fixtures relating to any Improvements, including all components thereof, located in or on such Improvements, together
with all replacements, modifications, alterations and additions thereto. 

        "Force Majeure Costs" means, in respect of any Construction Property, the excess, if any, of (i) the aggregate amount of all funds
advanced, and all costs or other fees incurred, by Lessor in respect of such Construction Property from and after the occurrence of any one or more Force Majeure Events affecting such Construction
Property (whether such costs are incurred to effect and finance the Construction of Improvements on such Construction Property, to remediate, cure or terminate any such Force Majeure Event, to pay
carrying charges, Taxes or other expenses in connection with the ownership or operation of such Construction Property, the payment of insurance premiums or deductibles, or otherwise) and before the
Base Date for such Construction Property, over (ii) the aggregate amount of net insurance proceeds actually received by Lessor from claims arising out of the events or circumstances causing
such Force Majeure Events. 

        "Force Majeure Event" shall mean any event (the existence of which was not known and could not have been discovered through the exercise
of due diligence by the Construction Agent prior to the relevant Acquisition Date) beyond the direct or indirect control of the Construction Agent (including any subcontractor acting as the
Construction Agent's agent), including, but not limited to, strikes, lockouts, adverse soil conditions, acts of God, adverse weather conditions, inability to obtain labor or materials, government
activities, civil commotion and enemy action; but excluding any event, cause or condition that results from the Construction Agent's financial condition or failure to pay or any event, cause or
condition which could have been avoided or which could be remedied through the exercise of commercially reasonable efforts or the commercially reasonable expenditure of funds. 

        "Funding Date" is defined in Section 3.2(a) of the Lease. 

        "Funding Office" means the office of the Lessor identified on its signature page to the Lease as its Funding Office. 

        "Funding Request" is defined in Section 3.2(a) of the Lease. 

        "GAAP" means United States generally accepted accounting principles (including principles of consolidation), in effect from time to time. 

        "Governmental Action" means all permits, authorizations, registrations, consents, approvals, waivers, exceptions, variances, orders,
judgments, written interpretations, decrees, licenses, exemptions, filings, notices to and declarations of or with, or required by, any Governmental Authority, or required by any Applicable Law, and
shall include, without limitation, all environmental, construction and operating permits and licenses that are required for the full use, occupancy, zoning and construction of any Property. 

        "Governmental Authority" means any nation or government, any state or other political subdivision thereof and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or pertaining to government (whether foreign or domestic). 

        "Governmental Rule" shall mean any law, rule, regulation, ordinance, order, code, interpretation, judgment, decree, directive, guideline,
policy or similar form of decision of any Governmental Authority. 

Ex D-11

 

        "Gross Proceeds" means, with respect to any Leased Asset, all amounts paid in connection with any Casualty or Condemnation or any sale of
such Leased Asset pursuant to Lessor's exercise of remedies under Section 20.2 of the Lease or the Lessee's exercise of the Termination Option
under Article XXIV of the Lease, less the expense of claiming and collecting such amounts, including all costs and expenses in connection
therewith for which the Lessor is entitled to be reimbursed pursuant to the Lease. 

        "Ground Lease" means each mortgageable Ground Lease pursuant to which the Lessor acquires a ground leasehold interest in any Land in form
and substance reasonably satisfactory to the Lessor. 

        "Guaranteed Residual Value" means the guaranteed portion of the Lease Balance determined in accordance with the "90%" test set forth in
FASB No. 13 which, with respect to each Leased Asset, is set forth in, or determined pursuant to, the Lease Supplement therefor. 

        "Guaranty Obligation" shall mean, with respect to any Person, any direct or indirect liability of that Person with respect to any
indebtedness, lease, dividend, letter of credit or other obligation (the "primary obligations") of another Person (the "primary obligor"), including any obligation of that Person, whether or not
contingent, (a) to purchase, repurchase or otherwise acquire such primary obligations or any property constituting direct or indirect security therefor, or (b) to advance or provide
funds (i) for the payment or discharge of any such primary obligation, or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth
or solvency or any balance sheet item, level of income or financial condition of the primary obligor, or (c) to purchase property, securities or services primarily for the purpose of assuring
the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation, or (d) otherwise to assure or hold harmless the holder of any such
primary obligation against loss in respect thereof. The amount of any Guaranty Obligation shall be deemed equal to (i) the stated or determinable amount of the primary obligation in respect of
which such Guaranty Obligation is made or, if not stated or if indeterminable, the maximum reasonably anticipated liability in respect thereof or (ii) if the stated amount of the Guaranty
Obligation is less than the amount of the primary obligation, the stated maximum amount of such Guaranty Obligation. 

        "Hazardous Activity" means any activity, process, procedure or undertaking that directly or indirectly (i) produces, generates or
creates any Hazardous Substance; (ii) causes or results in (or threatens to cause or result in) the Release of any Hazardous Substance into the environment (including air, water vapor, surface
water, groundwater, drinking water, land (including surface or subsurface), plant, aquatic and animal life); (iii) involves the containment or storage of any Hazardous Substance; or
(iv) would be regulated as hazardous waste treatment, storage or disposal within the meaning of any Environmental Law. 

        "Hazardous Condition" means any condition that materially violates or threatens to materially violate, or that results in or threatens
material noncompliance with, any Environmental Law. 

        "Hazardous Substance" means any of the following: (i) any petroleum or petroleum product, explosives, radioactive materials,
asbestos, ureaformaldehyde, polychlorinated biphenyls, lead and radon gas; (ii) any substance, material, product, derivative, compound or mixture, mineral, chemical, waste, gas, medical waste,
or pollutant, in each case whether naturally occurring, man-made or the by-product of any process, that is toxic, harmful or hazardous to the environment or human health or
safety, as defined under any Environmental Law; or (iii) any substance, material, product, derivative, compound or mixture, mineral, chemical, waste, gas, medical waste or pollutant that would
support the assertion of any claim under any Environmental Law, whether or not defined as hazardous as such under any Environmental Law. 

        "Impositions" means any and all Claims for Taxes, which at any time may be levied, assessed or imposed upon or with respect to
(a) any Indemnitee (as a result of the Operative Documents), any 

Ex D-12

 

Leased Asset or any part thereof or interest therein, or the Lessee or any sublessee or user of any Leased Asset; (b) the financing, refinancing, demolition, construction, substitution,
subleasing, assignment, control, condition, occupancy, servicing, maintenance, repair, ownership, possession, purchase, rental, lease, activity conducted on, delivery, insuring, use, operation,
improvement, transfer, return or other disposition of such Leased Asset or any part thereof or interest therein; (c) indebtedness with respect to any Leased Asset or any part thereof or
interest therein or transfer thereof; (d) the rentals, receipts or earnings arising from any Leased Asset or any part thereof or interest therein; (e) the Operative Documents or any
payment made or accrued pursuant thereto; (f) the income or other proceeds received with respect to any Leased Asset or any part thereof or interest therein upon the sale or disposition
thereof; (g) any contract (including the Construction Agency Agreement) relating to the construction, acquisition or delivery of the Improvements or any part thereof or interest therein; or
(h) otherwise in connection with the transactions contemplated by the Operative Documents. 

        Notwithstanding
anything in the first paragraph of this definition (except as provided in the final paragraph of this definition) the term
"Imposition" shall not mean or include: 

          (i)  Taxes
(other than Taxes that are, or are in the nature of, sales, use, rental, transfer or property taxes) that are imposed under the Code or by any Governmental
Authority and that are based upon or measured by gross or net income; 

        (ii)  any
Tax to the extent, but only to such extent, it relates to any act, event or omission that occurs, or relates to a period, after the termination of the Lease and the
return of the Leased Assets (but not any Tax or imposition that relates to any period prior to the termination of the Lease with respect to the Leased Asset to which such Imposition relates); 

        (iii)  any
Tax for so long as, but only for so long as, it is being contested in accordance with the provisions of  Section 16.1 of the Lease, provided that the
foregoing shall not limit the Lessee's obligation to
advance to the relevant Indemnitee any expenses incurred by such Indemnitee in connection with such contest; 

        (iv)  any
Taxes imposed against or payable by an Indemnitee resulting from, or that would not have been imposed but for, the gross negligence or willful misconduct of such
Indemnitee; 

        (v)  Taxes
imposed on or payable by an Indemnitee to the extent such Taxes would not have been imposed but for a breach by such Indemnitee or any Affiliate thereof of any
representations, warranties or covenants set forth in the Operative Documents (unless such breach is caused by the Lessee's breach of its representations, warranties or covenants set forth in the
Operative Documents); 

        (vi)  Taxes
which are included in Property Acquisition Cost, Land Acquisition Cost or Property Improvements Cost or are otherwise expressly subject to reimbursement or
repayment by Lessee under the Operative Documents other than as an Imposition; 

      (vii)  Taxes
that would have been imposed in the absence of the transactions contemplated by the Operative Documents and Taxes imposed on or with respect to or payable as a
result of activities of an Indemnitee or Affiliate thereof unrelated to the transactions contemplated by the Operative Documents; 

      (viii)  Notwithstanding
the foregoing, the exclusions from the definition of Impositions set forth in clauses (i) through (vii) above shall not apply to any
Taxes or any increase in Taxes imposed on an Indemnitee, to the extent that such Taxes would not have been imposed or such tax increase would not have occurred if the Lessee were the owner of the
Leased Assets for accounting purposes and the Lessor or the Lenders had financed the Leased Assets by making loans directly to the Lessee; 

Ex D-13

 

        Impositions
for any given year shall exclude assessment installments that are not due and payable during such tax year. 

        "Improvements" means, with respect to each Property, all buildings, structures, Fixtures, and other improvements of every kind existing at
any time and from time to time (consisting of those constructed or purchased with (i) amounts advanced by the Lessor as Advances or amounts otherwise advanced by Lessor to effect Substantial
Completion of Improvements, (ii) amounts disbursed for repair or restoration from proceeds of insurance or other awards or compensation or (iii) amounts funded by the Lessee to comply
with terms of the Lease and the other Operative Documents) on or under the Land comprising a part of such Property (to the extent included in the applicable Lease Supplement), together with any and
all appurtenances to such buildings, structures or improvements, including sidewalks, utility pipes, conduits and lines, parking areas and roadways, and including all Modifications and other additions
thereto or changes therein at any time. 

        "Imputed Equity Return" means, with respect to any Leased Asset, the cost to the Lessor of maintaining its investment in such Leased Asset
after the Expiration Date applicable thereto determined by multiplying (i) the average daily Lease Balance of such Leased Asset outstanding, (ii) the number of days from and excluding
the Expiration Date to and including the date of sale of such Leased Asset, (iii) the Overdue Rate and (iv) 1/360. 

        "Indebtedness" of any Person shall mean, without duplication, the following (each, unless otherwise noted, calculated in accordance with
GAAP): 

        (a)  All
obligations of such Person evidenced by notes, bonds, debentures or other similar instruments and all other obligations of such Person for borrowed money (including
obligations to repurchase receivables and other assets sold with recourse); 

        (b)  All
obligations of such Person for the deferred purchase price of property or services other than accounts payable to suppliers incurred in the ordinary course of
business and paid when due (including obligations under letters of credit and other credit facilities which secure or finance such purchase price, and the capitalized amount reported for income tax
purposes with respect to obligations under "synthetic" leases); 

        (c)  All
obligations of such Person under conditional sale or other title retention agreements with respect to property acquired by such Person (to the extent of the value of
such property if the rights and remedies of the seller or lender under such agreement in the event of default are limited solely to repossession or sale of such property); 

        (d)  All
obligations of such Person as lessee under or with respect to Capital Leases; 

        (e)  All
Contingent Obligations of such Person; provided that, for purposes of this  clause (e), the term "Guaranty Obligation" contained in the definition of
"Contingent Obligation" shall be limited to any direct or indirect
liability with respect to indebtedness or other obligations of the type described in clauses (a) through  (d) above and in
clause (b) of the definition of "Contingent Obligation"; and 

        (f)    All
obligations of other Persons of the types described in clauses (a) through  (e) above to the extent secured by (or for which any holder of such
obligations has an existing right, contingent or otherwise, to be secured by)
any Lien in any property (including accounts and contract rights) of such Person, even though such Person has not assumed or become liable for the payment of such obligations. 

        "Indemnified Liabilities" shall have the meaning given to such term in  Section 11.04 of the Loan Agreement. 

Ex D-14

 

        "Indemnitee" shall mean the Lessor, the Agent, the Collateral Agent, each Lender, and each of their respective successors, assigns,
directors, shareholders, partners, members, officers, employees and agents; provided, however, that with
respect to any Claim for any Construction Property arising during the Construction Period for such Property (i) except as provided in clause (ii) below, the term Indemnitee shall not
include the Agent, the Collateral Agent or any Lender (or their respective successors, assigns, directors, shareholders, partners, members, officers, employees and agents) for purposes of  Sections 26.1,
26.2 and 26.3 of the Lease but
(ii) the term Indemnitee shall include such Persons for purposes of Section 26.2 of the Lease if such Claim arises from acts or omissions
occurring, or circumstances or conditions created or existing, at any time on or before the Acquisition Date for such Property. 

        "Insurance Requirements" means all terms and conditions of any insurance policy either required by the Lease to be maintained by the
Lessee or required by the Construction Agency Agreement to be maintained by the Construction Agent, and all requirements of the issuer of any such policy. 

        "Intangible Assets" means as of any date of determination, in respect of the Lessee and its Subsidiaries on a consolidated basis in
accordance with GAAP, the total amount of all assets that are properly classified as "intangible assets" in accordance with GAAP and, in any event, shall include, without limitation, goodwill,
patents, trade names, trademarks, copyrights, franchises, experimental expense, organization expense, unamortized debt discount and expense, and deferred charges other than prepaid insurance and
prepaid taxes and current deferred taxes which are classified on the Lessee's consolidated balance sheet as a current asset and with which classification Lessee's independent public accountants
concur. 

        "Interest Period" means, with respect to any Advance under the Lease or Loan under the Loan Agreement, (a) initially, with respect
to each Leased Asset, the period commencing on the initial Funding Date for such Leased Asset and ending on the Monthly Date occurring in May 2002; and (b) thereafter, each period
commencing on one Monthly Date and ending on the Monthly Date occurring one, two, three, six or nine months thereafter, as selected by Lessee; provided
that the foregoing provisions relating to Interest Periods are subject to the following: 

          (i)  any
Interest Period with respect to an Advance that would otherwise extend beyond the Expiration Date for the Leased Asset funded by such Advance shall end on such
Expiration Date; 

        (ii)  any
Interest Period with respect to a Loan that would otherwise extend beyond the Final Date shall end on the Final Date; and 

        (iii)  during
the Construction Period for a Construction Property, the Interest Period for each Advance and Loan related to such Construction Property shall be limited to one
month. 

        "Land" means each parcel of real property described on a Lease Supplement for a Property, together with all Appurtenant Rights attached
thereto. 

        "Land Acquisition Cost" means, with respect to any Construction Property, the amount of the Advance funded for the purpose of acquiring
Lessor's fee or ground lease interest in the Land comprising a part of such Property and paying Transaction Expenses relating to such acquisition. 

        "Lease" means the Master Lease and Security Agreement dated as of February 15, 2002 between Lessor and Lessee. 

        "Lease Balance" means with respect to each Leased Asset, as of any date of determination, the sum of all Advances for such Leased Asset
made under the Lease on or before such date, together with all amounts expended by Lessor to effect and complete the Substantial Completion of Improvements for such Leased Asset from and after the
occurrence of an Event of Construction Agency Termination (net of all insurance proceeds and other compensation actually received by Lessor as a result of such Event of Construction Agency
Termination) in accordance with the Construction 

Ex D-15

 

Agency Agreement less the sum of (i) all Monthly Amortization paid by the Lessee with respect thereto on or before such date, (ii) all
proceeds of any casualty or condemnation affecting such Leased Asset applied to reduce the Lease Balance pursuant to the Lease, (iii) all payments by Lessee of Purchase
Option Price, Lease Balance, Guaranteed Residual Value, Construction Guarantee Amount and other amounts paid by Lessee under Articles XX,  XXII,
XXIV and XXV of the Lease or the provisions of the
Construction Agency Agreement and applied in reduction of such Lease Balance in accordance with the terms thereof, (iv) the net sale (or rental) proceeds from any sale (or lease) of such Leased
Asset in accordance with Article XX or Article XXV of the Lease and the provisions of the
Construction Agency Agreement, and (v) the aggregate of all amounts received by the Lessor or the Collateral Agent in respect of the Lease or the Improvements or any related agreement that are
not otherwise applied to reduce such Lease Balance and which constitute a repayment or reduction of the principal amounts placed at risk by the Lessor (whether through the realization upon Collateral
or otherwise) excluding for purposes hereof all amounts paid as Rent (exclusive of Monthly Amortization) under the Lease, reimbursement expenses, indemnity payments, carrying charges, fees and similar
items payable by the Lessee under the Operating Documents or payable out of Gross Proceeds. 

        "Lease Rate" means, with respect to any Leased Asset, the rate designated as such in the Lease Supplement for such Leased Asset. 

        "Lease Supplement" means, with respect to each Leased Asset, a lease supplement substantially in the form of  Exhibit C-1 or C-2 to the Lease, duly completed as to such Leased Asset. 

        "Lease Term" means, with respect to each Leased Asset, the period commencing on the Base Date for such Leased Asset and ending on the
Expiration Date for such Leased Asset. 

        "Leased Asset" shall mean any and all Land, Improvements and Fixtures described on any Lease Supplement. 

        "Lender" shall mean each lender listed on the signature pages of the Loan Agreement under the caption "Lenders" and each other lender that
has become a "Lender" thereunder as provided in Section 11.01(a) of the Loan Agreement. 

        "Lender Applicable Margin" shall mean, on any day (i) prior to and including June 30, 2002, an amount equal to 162.5 basis
points, and (ii) after June 30, 2002, the amount set forth in the table below corresponding to the ratio, as of the last day of the Lessee's most recently completed fiscal quarter ending
prior to such day, of (i) aggregate consolidated Indebtedness of the Lessee and the Subsidiaries (determined in accordance with GAAP) to (ii) EBITDA for the four fiscal quarter period
ending the last day of such recently completed fiscal quarter: 

	Ratio of Indebtedness to EBITDA (determined as provided above)
 
	 	Lender

Applicable

Margin

	 
	 	(amount in basis points)
 

	Less than 0.5 to 1.0	 	125
	

Greater than or equal to 0.5 to 1.0 but less than 0.8 to 1.0	
 	

137.5
	

Greater than or equal to 0.8 to 1.0 but less than 1.1 to 1.0	
 	

150
	

Greater than or equal to 1.1 to 1.0 but less than 1.3 to 1.0	
 	

162.5
	

Greater than or equal to 1.3 to 1.0 but less than 1.5 to 1.0	
 	

187.5
	

Greater than or equal to 1.5 to 1.0 but less than 1.75 to 1.0	
 	

200.0

        "Lender Commitment" shall mean, as to each Lender, the obligation of such Lender to make a Loan in an amount set forth on  Schedule I to the Loan Agreement under the
caption "Lender Commitment," or in an Assignment Agreement executed and delivered by such Lender
pursuant to 

Ex D-16

 

 Section 11.01 of the Loan Agreement (as the same may be reduced pursuant to Sections 4.05 and  9.02 of the
Loan Agreement). 

        "Lender Commitment Fee" for each Leased Asset is set forth and determined pursuant to the Loan Agreement and the Lease Supplement for such
Leased Asset. 

        "Lending Office" shall mean (a) with respect to any Lender, the office specified below its name on the signature page of the Loan
Agreement or in an Assignment Agreement executed and delivered by such Lender pursuant to Section 11.01 of the Loan Agreement or
(b) subject to the provisions of Section 11.01(b) of the Loan Agreement, such other office or offices as any Lender may designate in
writing to the Agent to be its lending office for purposes of the Loan Agreement. 

        "Lessee" means Coherent, Inc., a Delaware corporation, as lessee under the Lease. 

        "Lessor" means SMBC Leasing and Finance, Inc. 

        "Lessor Applicable Margin" shall have the meaning given to such term in the Lessor Fee Letter. 

        "Lessor Commitment" shall mean, with respect to each Leased Asset, the obligation of the Lessor to make Advances to the Lessee under the
Lease in an aggregate principal amount up to the amount designated as such in the Lease Supplement for such Leased Asset. 

        "Lessor Commitment Fee" for each Leased Asset is set forth and determined in the Lease Supplement for such Leased Asset. 

        "Lessor Contribution" means, with respect to any Leased Asset, that amount of outstanding Advances for such Leased Asset made by the
Lessor to the Lessee and funded by the Lessor otherwise than through the borrowing of Loans under the Loan Agreement. 

        "Lessor Fee Letter" means the letter agreement dated as of February 15, 2002 between the Lessor and the Lessee executed and
delivered in connection with the transactions occurring on the Closing Date. 

        "Lessor Lien" means any Lien, true lease or sublease or disposition of title arising as a result of (a) any claim against the
Lessor not resulting from the transactions contemplated by the Operative Documents, (b) any act or omission of the Lessor which is not required by the Operative Documents or is in violation of
any of the terms of the Operative Documents, (c) any claim against the Lessor with respect to Taxes or Transaction Expenses against which Lessee is not required to indemnify Lessor pursuant to
the Lease or (d) any claim against the Lessee arising out of any transfer by the Lessor of all or any portion of the interest of the Lessor in any Leased Asset or the Operative Documents other
than the transfer of title to or possession of any Property by the Lessor pursuant to and in accordance with the Lease or pursuant to the exercise of the remedies set forth in  Article XX of the
Lease. 

        "Lessor Rate" means, with respect to any Leased Asset, the rate designated as such in the Lease Supplement for such Leased Asset. 

        "LIBOR" shall have the meaning given to such term in the definition of "Reserve Adjusted LIBOR" in this  Appendix I. 

        "LIBOR Loan" shall mean a Loan which bears interest at a rate based upon Reserve Adjusted LIBOR. 

        "Lien" means any mortgage, deed of trust, pledge, security interest, encumbrance, lien, easement, servitude or charge of any kind,
including, without limitation, any irrevocable license, conditional sale or other title retention agreement, any lease in the nature thereof, or any other right of or arrangement with any creditor to
have its claim satisfied out of any specified property or leased asset with the proceeds therefrom prior to the satisfaction of the claims of the general creditors of the owner thereof, whether or not
filed or recorded, or the filing of, or agreement to execute as "debtor", any financing or 

Ex D-17

 

continuation statement under the Uniform Commercial Code of any jurisdiction or any federal, state or local lien imposed pursuant to any Environmental Law. 

        "Loan" shall mean each loan made by any Lender to the Lessor pursuant to the Loan Agreement. 

        "Loan Agreement" means the Loan Agreement, dated as of February 15, 2002, among Lessor, the lenders from time to time parties
thereto, the Agent and the Collateral Agent. 

        "Loan Event of Default" shall mean each of the events set forth in Section 9.01 of
the Loan Agreement. 

        "Loan Participants" shall have the meaning set forth in Section 11.01(c) of the
Loan Agreement. 

        "Majority Lenders" shall mean Lenders having Lender Commitments comprising more than 662/3% of the Total Lender Commitment
or, if the Lender Commitments have been terminated or cancelled in full, Lenders owed more than 662/3% of the outstanding Loans. 

        "Marketing Period" means the period commencing on the date six (6) months prior to the Expiration Date and ending on the Expiration
Date. 

        "Material Adverse Effect" shall mean a material adverse effect on (a) the business, assets, operations or financial condition of
the Lessee and its Subsidiaries, taken as a whole; (b) the ability of the Lessee to pay or perform its Obligations in accordance with the terms of the Lease and the other Operative Documents;
(c) the rights and remedies of the Lessor, the Agent, the Collateral Agent or any Lender under the Lease or the other Operative Documents; or (d) the value of the Collateral, the
Agent's, the
Collateral Agent's or any Lender's security interest in the Collateral or the perfection or priority of such security interests. 

        "Modifications" is defined in Section 14.1 of the Lease. 

        "Monthly Amortization" shall mean, with respect to any Payment Date during the Base Term of any Leased Asset, the amount of amortization
specified for such Payment Date in the Lease Supplement for such Leased Asset. 

        "Monthly Date" means the 15th day of each calendar month (unless such date is not a Business Day, in which case the Monthly
Date shall mean the next succeeding Business Day). 

        "Mortgage" shall mean, with respect to any Property or Ground Lease, a mortgage, a deed of trust or other security document appropriate
for recording in the jurisdiction in which such Property or Ground Lease is located and reasonably satisfactory to the Agent, sufficient to create a Lien on such Property or Ground Lease. 

        "Multiemployer Plan" shall mean any multiemployer plan within the meaning of section 3(37) of ERISA maintained or contributed to by
the Lessee, any Subsidiary or any ERISA Affiliate. 

Ex D-18

   
        "Note" shall means a promissory note substantially in the form of Exhibit A to the
Loan Agreement. 

        "Note Register" shall have the meaning given to such term in Section 2.09 of the
Loan Agreement. 

        "Notice of Borrowing" shall mean an irrevocable notice, substantially in the form of  Exhibit B-1 to the Loan Agreement, given to the Agent by the Lessor pursuant to
 Section 2.03 of the Loan Agreement. 

        "Notice of Conversion" shall mean an irrevocable notice substantially in the form of  Exhibit B-2 to the Loan Agreement, given to the Agent by the Lessor pursuant to
 Section 2.03 of the Loan Agreement. 

        "Obligations" shall mean any and all of the debts, obligations and liabilities of the Lessee provided for or arising under the Operative
Documents to which the Lessee is a party (including, without limitation, the obligation to repay Advances and to pay interest thereon), whether now existing or hereafter arising, voluntary or
involuntary, direct or indirect, absolute or contingent, liquidated or unliquidated, whether or not from time to time decreased or extinguished and later increased, created or incurred. 

        "Operative Documents" means the following: 

	(a)
	the
Lease;

	(b)
	the
Construction Agency Agreement;

	(c)
	each
Lease Supplement;

	(d)
	each
Construction Agency Agreement Supplement;

	(e)
	each
Deed, if any;

	(f)
	each
Ground Lease, if any;

	(g)
	each
Mortgage given by the Lessee to the Lessor, and each Mortgage given by the Lessor to the Collateral Agent;

	(h)
	the
Loan Agreement;

	(i)
	each
Construction Documents Assignment;

	(j)
	each
Note;

	(k)
	the
Security Agreement;

	(l)
	the
Lessor Fee Letter; and

	(m)
	each
Funding Request. 

        "Other Taxes" shall mean any stamp, court or documentary taxes or any other excise or property taxes, charges or similar levies which
arise from any payment made by the Lessor under the Loan Agreement or from the execution, delivery, performance, enforcement or registration of, or otherwise with respect to any Operative Documents. 

        "Outstanding" shall mean all Loans made by the Lenders pursuant to the Loan Agreement and not repaid by the Lessor, except Loans to be
repaid or prepaid from new Loans being made on the date such Loans are repaid or prepaid. 

        "Outside Completion Date" means, with respect to each Construction Property, the date designated as such in the Lease Supplement for such
Property. 

Ex D-19

 

        "Overdue Rate" means in respect of any amount due for any Leased Asset, (a) during the Base Term for such Leased Asset, the Lease
Rate plus 2.00% per annum and (b) after the Expiration Date for such Leased Asset, the Reserve Adjusted LIBOR plus the Lessor Applicable Margin plus 2.00% per annum. 

        "Participant" means each Lender and the Lessor. 

        "Payment Date" means each Scheduled Payment Date and each Additional Payment Date. 

        "PBGC" means the Pension Benefit Guaranty Corporation or any entity succeeding to any or all of its functions under ERISA. 

        "Permitted Assets" shall mean the collective reference to the leased assets described on  Schedule II to the Loan Agreement that the Lessor is permitted to acquire
pursuant to the terms of the Loan Agreement. 

        "Permitted Investments" shall have the meaning set forth in Section 8.01 of the
Loan Agreement. 

        "Permitted Lease Balance" means, in respect of any Construction Property, the Lease Balance for such Construction Property less all Force
Majeure Costs for such Construction Property. 

        "Permitted Liens" means, with respect to any Leased Asset: 

        (iv)  the
respective rights and interests of the parties to the Operative Documents as provided in the Operative Documents; 

        (v)  the
rights of any sublessee or assignee under a sublease or an assignment expressly permitted by the terms of the Lease; 

        (vi)  Liens
for Taxes that either are not yet payable or overdue or are being contested in accordance with the provisions of  Section 16.1 of the Lease. 

      (vii)  Liens
arising by operation of law, Liens incurred or deposits made in the ordinary course of business in connection with workers' compensation, unemployment insurance
and other types of social security, materialmen's, mechanics', workers', repairmen's, employees', carriers', warehousemen's and other like Liens relating to the Construction of the Improvements or in
connection with any Modifications or arising in the ordinary course of business for amounts that either are not past due or are being contested in accordance with the provisions of  Section 16.1 of
the Lease; 

      (viii)  Liens
of any of the types referred to in clause (iv) above that have been bonded for not less than the full
amount in dispute (or as to which other security arrangements satisfactory to the Lessor have been made), which bonding (or arrangements) shall comply with applicable Requirements of Law, and has (or
have) effectively stayed any execution or enforcement of such Liens; 

        (ix)  Liens
arising out of judgments or awards with respect to which appeals or other proceedings for review are being prosecuted in good faith and for the payment of which
adequate reserves have been provided as required by GAAP or other appropriate provisions have been made, so long as such proceedings have the effect of staying the execution of such judgments or
awards and satisfy the conditions for the continuation of proceedings to contest set forth in Section 16.1 of the Lease; 

        (x)  easements,
rights of way and other encumbrances on title to real property pursuant to Section 15.2 of the Lease; 

        (xi)  Lessor
Liens; 

      (xii)  Liens
created by the Lessee with the consent of the Lessor; and 

Ex D-20

 

      (xiii)  Liens
described on each title insurance policy delivered pursuant to the Lease. 

        "Person" shall mean any individual, corporation, natural person, joint venture, partnership, limited liability company, trust, limited
liability company, unincorporated association or organization or any Governmental Authority. 

        "Plans and Specifications" means, with respect to any Construction Property, the plans and specifications for the Construction of the
Improvements to such Property, as more particularly described in Schedule 2 to the Construction Agency Agreement Supplement for such Property, as
such plans and specifications may be amended from time to time in accordance with the Construction Agency Agreement. 

        "Potential Loan Default" shall mean an event which, with notice or lapse of time or both, would constitute a Loan Event of Default. 

        "Potential Payment Default" shall mean a Potential Loan Default arising from a failure of the Lessor or the Lessee to pay any amount owing
by it under the Operative Documents to which it is a party, which Potential Loan Default has not yet become a Loan Event of Default due to the effect of a grace period applicable thereto. 

        "Prime Construction Contract" means, with respect to each Construction Property, each construction, design-build or other contract between
the Construction Agent and the Prime Contractor for such Construction Property, as it may be amended from time to time in accordance with the Construction Agency Agreement, providing for the
construction and installation of all Improvements shown on the Plans and Specifications for such Construction Property on or before the Outside Completion Date for such Construction Property for a
fixed or guaranteed maximum price not to exceed the Estimated Improvement Costs for such Construction Property. 

        "Prime Contractor" means, with respect to each Construction Property, the construction contractor, design-builder designated as such in
each Prime Construction Contract for such Construction Property or such other Person who shall, with the prior consent of the Lessor, have been designated by the Lessee to act as the general
contractor for purposes of the Construction of the Improvements to such Construction Property. 

        "Property" means any (i) Land and/or (ii) Improvements at any time located on or under land as the Lessor and Lessee may
elect to make subject to the Lease, as evidenced by the execution and delivery of a Lease Supplement relating thereto. 

        "Property Acquisition Costs" means, with respect to any Property other than a Construction Property, the amount of the Advance with
respect to such Property for the purpose of acquiring title to such Property or refinancing such Property, in the case of the assets listed on Annex 1,
to the Lease, and paying Transaction Expenses relating to such acquisition or refinancing. 

        "Property Improvement Costs" means, with respect to any Construction Property, the aggregate amount of (i) Advances funded to the
Construction Agent for such Construction Property for the purpose of designing and constructing Improvements on such Construction Property (including all site development and preparation costs) and
paying the Transaction Expenses relating to such funding and construction and (ii) Advances made for Capitalized Interest, Capitalized Fees and accrued and unpaid real estate taxes relating to
such Construction Property during the Construction Period for such Construction Property. 

        "Pro Rata Basis" means, with respect to any Participant, the ratio, expressed as a percentage, of (i) such Participant's
outstanding Loans, in the case of a Lender, or outstanding Lessor Contribution, in the case of the Lessor, to (ii) the sum of all outstanding Advances. 

        "Purchase Notice" is defined in Section 22.1 of the Lease. 

Ex D-21

 

        "Purchase Option" is defined in Section 22.1 of the Lease. 

        "Purchase Option Price" is defined in Section 22.1 of the Lease. 

        "Quick Assets" means as of any date of determination, in respect of the Lessee and its Subsidiaries on a consolidated basis in accordance
with GAAP, the sum (without duplication of any item) of: 

	(xiv)	 	unencumbered cash on hand or on deposit in banks;
	

(xv)	
 	

unencumbered securities maturing within one year of such date and issued by the United States or any agency thereof and fully guaranteed by the United States, or unencumbered corporate notes and bonds issued by any Person rated A or the equivalent
thereof by Standard & Poor's Ratings Group, a division of the McGraw-Hill Companies, or A2 or the equivalent thereof by Moody's Investor Service, Inc., or unencumbered commercial paper issued by any Person rated at least A-2 or the
equivalent thereof by Standard & Poor's Ratings Group, a division of the McGraw-Hill Companies, or P-2 or the equivalent thereof by Moody's Investor Service, Inc.;
	

(xvi)	
 	

unencumbered certificates of deposit or banker's acceptances maturing within one year of such date and issued by commercial banks operating in the United States having (or the holding company of which has) capital and surplus in excess of
$500,000,000;
	

(xvii)	
 	

unencumbered accounts receivable (determined net of reserves for uncollectible amounts in accordance with GAAP);
	

(xviii)	
 	

securities with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, by any political subdivision or taxing authority of any such state, commonwealth,
territory, political subdivision or taxing authority, rated at least A or the equivalent thereof by Standard & Poor's Ratings Group, a division of the McGraw-Hill Companies, or A by Moody's Investor Service, Inc.; and
	

(xix)	
 	

shares of money market, mutual or similar funds which invest exclusively in assets satisfying the requirements of one or more of clauses (i) through (v) of this definition.

Assets
described in clauses (ii), (iii) or (v) that have a maturity in excess of one year from the date of a determination of Quick Assets will be included in Quick Assets only to the
extent that they are both (1) readily marketable and (2) reported, for purposes of this definition, in an amount not in excess of their fair market value, regardless of whether GAAP
would permit reporting at a higher historical costs. (In contrast, any assets described in the preceding clauses (ii), (iii) or (v) with a maturity of less than one year from the date of
a determination of Quick Assets will be included in Quick Assets, for purposes of this definition, as reported by Lessee on its books and records in accordance with GAAP, regardless of whether GAAP
requires reporting at cost or market value). 

        "Rate Contracts" shall mean swap agreements (as that term is defined in Section 101 of the Federal Bankruptcy Reform Act of 1978,
as amended) and any other agreements or arrangements designed to provide protection against fluctuations in interest rates, currency exchange rates or commodity prices. 

        "Reference Lender" means Sumitomo Mitsui Banking Corporation. 

        "Release" means any release, pumping, pouring, emptying, injecting, escaping, leaching, dumping, seepage, spill, leak, flow, discharge,
disposal or emission of a Hazardous Substance. 

        "Release Date" is defined in Section 2.3 of the Security Agreement. 

Ex D-22

 

        "Relevant Percentage" means, with respect to any Advance, the percentage of such Advance to be funded by the borrowing of Loans under the
Loan Agreement, as designated in the Lease Supplement for the Leased Asset to which such Advance relates. 

        "Renewal Option" is defined in Section 23.1 of the Lease. 

        "Renewal Term" has the meaning set forth in Section 23.1 of the Lease. 

        "Rent" means, collectively, Capitalized Interest, Capitalized Fees, the Base Rent and the Supplemental Rent, in each case payable under
the Lease. 

        "Requesting Party" is defined in Section 27.1 of the Lease. 

        "Required Payment" shall have the meaning set forth in Section 4.07 of the Loan
Agreement. 

        "Required Modification" is defined in Section 14.1 of the Lease. 

        "Requirement of Law" means all Federal, state, county, municipal and other governmental statutes, laws, rules, orders, regulations,
ordinances, judgments, decrees and injunctions applicable to any Leased Asset or the demolition, construction, use, occupancy, operation or alteration thereof, whether now or hereafter enacted and in
force, including any that require repairs, modifications or alterations in or to such Leased Asset or in any way limit the use and enjoyment thereof (including all building, zoning and fire codes and
any other similar Federal, state or local laws or ordinances and the regulations promulgated thereunder) and any that may relate to environmental requirements (including all Environmental Laws), and
all permits, certificates of occupancy, licenses, authorizations and regulations relating thereto, and all covenants, agreements, restrictions and encumbrances contained in any instruments which are
either of record or known to the Lessee affecting any Property, the Appurtenant
Rights and any easements, licenses or other agreements entered into pursuant to Section 15.2 of the Lease. 

        "Reserve Adjusted LIBOR" shall mean, for any Interest Period, the rate of interest per annum (rounded upward to the next
1/100th of 1%) determined by the Agent as follows: 

                  LIBOR                  

1.00—Eurodollar Reserve Percentage 

Where,

"Eurodollar Reserve Percentage" means for any day for any Interest Period the maximum reserve percentage (expressed as a decimal, rounded upward to the
next 1/100th of 1%) in effect on such day (whether or not applicable to any Lender) under regulations issued from time to time by the Board for determining the maximum reserve
requirement (including any emergency, supplemental or other marginal reserve requirement) with respect to Eurocurrency funding (currently referred to as "Eurocurrency Liabilities"); and 

"LIBOR" means (i) with respect to the first Interest Period applicable to the Advances and the Loans, the rate equal to LIBOR (Reference Lender)
for such Interest Period and (ii) with respect to each other Interest Period, the average of the rates at which Dollar deposits are offered to the major commercial banks listed on the Reuters
Screen LIBO Page (or any successor page) (rounded upward, if necessary, to the nearest multiple of one-sixteenth of one percent), in each case at or about 11:00 a.m. (London time)
two Business Days prior to the beginning of such Interest Period for delivery on the first day of such Interest Period for the number of days comprised therein or, if such rates are not available, the
rate for deposits in Dollars for a period equal to such Interest Period which appears on the Telerate Page 3750 as of 11:00 a.m., London time, on the day that is two (2) Business Days
preceding the first day of such Interest Period; and 

Ex D-23

 

"LIBOR (Reference Lender)" means, with respect to any Interest Period, the rate determined by the Agent on the basis of the rates at which deposits in
Dollars are offered by the Reference Lender at approximately 11:00 a.m., London time, on the day that is two Business Days preceding the first day of such Interest Period to prime banks in the
London interbank market for a period equal to such Interest Period commencing on the first day of such Interest Period and in the approximate amount of the amount of the LIBOR Loan to be made,
continued as, or converted to, a LIBOR Loan by such Reference Lender. The Agent will request the principal London office of the Reference Lender to
provide a quotation of its rate. If at least two such quotations are provided, the rate in respect of that Interest Period will be the arithmetic mean of the quotations. 

        "Responsible Employee" means, with respect to any Person, the Chairman, the President, the Chief Financial Officer, any Vice President,
the Controller or the Treasurer of such Person. 

        "Responsible Employee's Certificate" means, with respect to any Person, a certificate signed by any Responsible Employee of such Person,
which certificate shall certify as true and correct the subject matter being certified to in such certificate. 

        "Scheduled Payment Date" means with respect to each Interest Period, the Monthly Date occurring at the end of such Interest Period and, if
such Interest Period has a duration of six or nine months, the Monthly Date occurring on three month intervals after the commencement of such Interest Period. 

        "Secured Obligations" is defined in Section 2.2 of the Security Agreement. 

        "Securities Act" means the Securities Act of 1933, as amended, together with the rules and regulations promulgated thereunder. 

        "Security" means any mortgage, lien, pledge, charge, security interest or other encumbrance. 

        "Security Agreement" means the Intercreditor and Security Agreement, dated as of February 15, 2002, among the Lessee, the Lessor,
the Agent and the Collateral Agent. 

        "Security Documents" means the collective reference to the Security Agreement, each Mortgage and all other security documents now or
hereafter delivered to the Lessor and to the Collateral Agent granting a Lien on any leased asset or leased assets of any Person to secure the obligations and liabilities of the Lessee under the Lease
and the other Operative Documents and/or of the Lessor under the Loan Agreement and the other Operative Documents. 

        "Significant Condemnation" means (a) a Condemnation that involves a taking of all or substantially all of Lessor's interest in any
Leased Asset or (b) a Condemnation that in the reasonable judgment of the Lessor either (i) renders any Leased Asset unsuitable for use as property of the type contemplated by the Lease
or (ii) is such that (A) in the case of any Leased Asset for which the Lease Term has commenced, restoration of such Leased Asset (other than Land) to substantially its condition as
existed immediately prior to such Condemnation would be impracticable or impossible to effect on or before
the Expiration Date for such Leased Asset or (B) in the case of any Construction Property during the Construction Period applicable thereto, completion of Construction of such Construction
Property for an amount not exceeding the relevant Lessor Commitment would be impracticable or impossible to effect on or before the relevant Outside Completion Date.. 

        "Solvent" shall mean, with respect to any Person on any date, that on such date (a) the fair value of the property of such Person
is greater than the total amount of the liabilities (including contingent, subordinated, matured and unliquidated liabilities) of such Person, (b) the present fair saleable value of the assets
of such Person is greater than the amount that will be required to pay the probable liability of such Person on its debts as they become absolute and matured, (c) such person does not intend
to, and does not believe that it will, incur debts or liabilities beyond such Person's ability to pay as such 

Ex D-24

 

debts and liabilities mature and (d) such Person is not engaged in or about to engage in business or transactions for which such Person's property would constitute unreasonably small capital. 

        "Subsidiary" means any corporation or other entity of which securities or other ownership interests having ordinary voting power to elect
a majority of the board of directors or other persons performing similar functions are at the time directly or indirectly owned by the Lessee. 

        "Substantial Completion" means, with respect to any Property, such time as the conditions set forth in  Article V of the Lease are satisfied for such Property.

        "Supplemental Rent" means all amounts required to be paid by Lessee under the Operative Documents (other than Base Rent) and amounts
necessary to reimburse Lessor for its obligations, costs and expenses (not previously included in Base Rent) expressly provided for in the Operative Documents and incurred in acquiring, financing and
leasing Leased Assets (including all Financing Costs). 

        "Surety Instruments" shall mean all letters of credit (including standby and commercial), banker's acceptances, bank guaranties, shipside
bonds, surety bonds and similar instruments. 

        "Taxes" means all U.S. federal, state, local or foreign taxes or other like levies, fees, imposts, duties, charges, assessments or
withholdings of any nature whatsoever including, without limitation, (i) real and personal property taxes, including personal property taxes on any property covered by the Lease that is
classified by Governmental Authorities as personal property, and real estate or ad valorem taxes in the nature of property taxes; (ii) sales taxes, use taxes and other similar taxes (including
rent taxes and intangibles taxes); (iii) any excise taxes; (iv) real estate transfer taxes, conveyance taxes, mortgage taxes, intangible taxes, stamp taxes and documentary recording
taxes and fees; (v) taxes that are or are in the nature of franchise, income, value added, gross receipts, privilege and doing business taxes, license and registration fees; and
(vi) assessments on any Leased Asset, including all assessments for public
improvements or benefits, whether or not such improvements are commenced or completed prior to the relevant Expiration Date, and in each case all interest, additions to tax and penalties thereon. 

        "Termination Notice" is defined in Section 19.1 of the Lease. 

        "Termination Option" is defined in Section 24.1 of the Lease. 

        "Threshold Amount" means, with respect to each Leased Asset, the amount set forth in the Lease Supplement for such Leased Asset. 

        "Title Company" means, with respect to each Property, the Person designated in the Lease Supplement therefor. 

        "Total Lender Commitment" shall mean, at any time, an amount equal to the aggregate amount of the Lender Commitments of all the Lenders at
such time. 

        "Transaction Expenses" means all costs and expenses incurred in connection with the preparation, execution and delivery of the Operative
Documents and the transactions contemplated by the Operative Documents including: 

	(a)
	the
reasonable fees, out-of-pocket expenses and disbursements of counsel for each of the Lessor and the Lessee in negotiating the terms of the Operative
Documents and the other transaction documents, preparing for the closing under, and rendering opinions in connection with, such transactions and in rendering other services customary for counsel
representing parties to transactions of the types involved in the transactions contemplated by the Operative Documents subject to the limit agreed to by Lessee and Lessor; 

Ex D-25

 

	(b)
	the
reasonable fees, out-of-pocket expenses and disbursements of any law firm or other external counsel, and all disbursements of internal counsel of the
Lessor, the Collateral Agent and each Lender in connection with (1) any amendment, supplement, waiver or consent with respect to any Operative Documents requested or approved by the Lessee and
(2) any enforcement of any rights or remedies against the Lessee in respect of the Operative Documents;

	(c)
	any
and all Taxes and fees incurred in recording, registering or filing any Operative Document or any other transaction document, any deed, declaration, mortgage, security agreement,
notice or financing statement with any public office, registry or governmental agency in connection with the transactions contemplated by the Operative Documents;

	(d)
	any
survey fees, title fees, premiums, brokerage commissions and escrow costs and other expenses relating to title insurance and the closings contemplated by the Operative Documents;

	(e)
	all
expenses relating to all Environmental Audits;

	(f)
	all
expenses relating to all Appraisals; and

	(g)
	the
financial advisory fee to be paid to Lund Financial Corp. 

        "UCC Financing Statements" means UCC financing statements appropriately completed and executed for filing in the applicable jurisdiction
in order to perfect the Lessor's interest under the Lease to the extent the Lease is a security agreement. 

        "Uniform Commercial Code" and "UCC" mean the Uniform Commercial Code as in effect in any
applicable jurisdiction. 

Ex D-26

  

 
 

LEASE SUPPLEMENT NO. 1    
  

        This Lease Supplement No. 1 dated February 15, 2002 (this "Lease Supplement") is delivered pursuant
to the Master Lease and Security Agreement dated as of February 15, 2002 (the "Lease"), between Coherent, Inc., as the Lessee, and SMBC
Leasing and Finance, Inc., as the Lessor. Capitalized terms not otherwise defined herein are used herein as defined in Appendix 1 to the
Lease. 

        2.    1.    The
Property to which this Lease Supplement relates is described on Attachment 1 hereto. 

        3.    2.    The
Acquisition Date is February 15, 2002. 

        4.    3.    The
Base Date for this Property shall occur on the Acquisition Date. 

        5.    4.    The
Expiration Date for this Property is the fifth (5th) anniversary of the Base Date. 

        6.    5.    The
Base Term for this Property shall commence on the Base Date and end on the Expiration Date, unless the Base Term is earlier terminated as provided in
the Lease. The Lessor shall have no option to extend the Lease Term for this Property pursuant to Section 23.1 except pursuant to mutually
acceptable terms and conditions to be established and consented and agreed to by Lessee, Lessor and each Lender, each in their sole and absolute discretion. 

        7.    6.    The
Guaranteed Residual Value for this Property will be determined by the Lessor as of the Base Date and will be equal to that amount which will cause the
present value (discounted using the Lease Rate for such Property) of the minimum Rent payments with respect to this Property, determined according to FASB No. 13, to be approximately equal to,
but not to exceed, 89.9% of the lesser of the fair value of this Property on the Base Date and the Lease Balance of this Property on the Base Date. For this Property, the Guaranteed Residual Value is
equal to $14,630,000.00. 

        8.    7.    The
Relevant Percentage for Advances made to fund this Property is 89.21%. 

        9.    8.    The
Title Company for this Property is First American Title Guaranty Company. 

        10.  9.    The
Debt Rate shall mean the weighted average of the rate applicable to all Base Rate Tranches and the rate applicable to all Eurodollar Tranches
outstanding under the Loan Agreement. 

        11.  10.    The
Lessor Rate shall mean a rate equal to Reserve Adjusted LIBOR plus the Lessor Applicable Margin for the Lessor Contribution. 

        12.  11.    The
Lease Rate is the weighted average of the Lessor Rate and the Debt Rate. 

        13.  12.    The
Monthly Amortization for this Property is set forth on Attachment 2 hereto;  provided, however, that if the
circumstances described in  Section 17.2(b) exist in respect of the Property described in this Lease Supplement, then (a) the Monthly Amortization set forth in  Attachment 2 hereto shall be automatically amended to require the payment of Monthly Amortization (as a component of Base Rent) on each Scheduled
Payment Date in the twelve consecutive calendar months next occurring after the effective date of the reduced amount of property damage and hazard insurance coverage but in no event prior to the Base
Date for such Property in twelve equal installments, each in an amount equal to the quotient yielded by dividing (i) the difference between the then Lease Balance for such Property and the
amount of the replacement coverage obtained by the Lessee for such Property, by (ii) 12, and (b) the Guaranteed Residual Value shall be reduced by the amount of such Monthly
Amortization. 

        14.  13.    Base
Rent for this Property shall be calculated in accordance with Attachment 3 hereto. 

        15.  14.    The
Lessor Commitment Fee is set forth on Attachment 4 hereto. 

        16.  15.    The
Lender Commitment Fee is set forth on Attachment 4 hereto. 

        17.  16.    The
Threshold Amount for this Property is $1,000,000. 

Ex D-27

 

        18.  17.    Lessee
may not exercise its option to purchase or remarket the Property described on Attachment 1 hereto
pursuant to Sections 22.1 or 24.1 of the Lease unless Lessee also exercises the identical right pursuant
to Sections 22.1 or 24.1, as the case may be, of the Lease with respect to the Property described on  Attachment 1 of that certain Lease Supplement No. 2 executed by Lessee and Lessor with respect to the Lease. 

        The
undersigned Lessee hereby agrees to perform all the obligations of Lessee under, and to be bound in all respects by the terms of, the Lease and the other Operative Documents. 

        The
undersigned hereby certifies that the representations and warranties of the Lessee contained in the Lease are true and correct on and as of the date hereof, and will be true and
correct on and as of the effective date of this Lease Supplement, with the same effect as if made on and as of such effective date. The undersigned acknowledges and consents to the assignment of the
Lease (including this Lease Supplement) by the Lessor to the Collateral Agent pursuant to the terms of the Security Agreement. 

        The
undersigned confirms that it has received a copy of the Lease and the other Operative Documents together with such other documents and agreements as it has required in connection
therewith. 

[NO
FURTHER TEXT ON THIS PAGE] 

Ex D-28

 
Dated
as of this 15th day of February 2002. 

	Lessor Commitment: $16,400,000.00	 	LESSOR
	

 	
 	

SMBC LEASING AND FINANCE, INC.
	

 	
 	

By:	
 	

 
	 	 	 	 	

	 	 	 	 	Name:	 
	 	 	 	 	Title:	 
	

 	
 	
LESSEE
	

 	
 	

COHERENT, INC.
	

 	
 	

By:	
 	

 
	 	 	 	 	

	 	 	 	 	Name:	 
	 	 	 	 	Title:	 

Ex D-29

 
 
 

Attachment 1 to Asset
  Supplement No. 1    
  

 
  Legal Description of Property    
  

        Real Property in the City of Santa Clara, County of Santa Clara, State of California, described as follows: 

        All
of Parcel T, as shown on that certain Map entitled, "Parcel Map Lands Formerly of Bracher Fruit Co.", which Map was filed for record in the Office of the Recorder of the County of
Santa Clara, State of California on January 2, 1973 in Book 314 of Maps, page 29. 

        Excepting
therefrom that portion of said land conveyed to the City of Santa Clara, a chartered municipal corporation in the Deed recorded November 4, 1997 as Instrument
No. 13922600, Official Records being more particularly described as follows: 

        Beginning
at the Northeast corner of Parcel T as shown on that certain Parcel Map recorded in Book 314 of Maps, at page 29, Santa Clara County Records; 

        Thence
from said Point of Beginning, Westerly along the Northerly line of Parcel T, South 89° 15' 13" West, 8.54 feet; 

        Thence,
from a tangent bearing South 60° 25' 20" East, along the arc of a curve concave to the Southwest, having a radius of 20 feet, through a central angle of
53° 17' 23", and an arc length of 18.60 feet; 

        Thence,
from a tangent bearing North 7° 07' 57" West, along the arc of a curve concave to the East, having a radius of 70 feet, through a central angle of 7° 24'
00", and an arc length of 9.04 feet to a point of reverse curvature; 

        Thence,
from said point of reverse curvature, along a curve concave to the West, having a radius of 20 feet, through a central angle of 17° 27' 18", and an arc length of 6.09
feet to the Point of Beginning. 

APN:
216-28-128

ARB: 216-28-49 

Ex D-30

 
 
 

Attachment 2 to Asset
  Supplement No. 1    
  

 
 

Monthly Amortization    
  

None.

Ex D-31

 
 
 

Attachment 3 to Asset
  Supplement No. 1    
  

 
  Calculation of Base Rent    
  

        Base Rent payable on each Payment Date with respect to the Interest Period then ending shall be payable monthly in arrears and equal to the sum of the following
for the Leased Asset subject to this Lease Supplement: 

        (A)  with
respect to the Debt Contribution, 

	(I)
	if
any Base Rate Tranche is outstanding during such Interest Period pursuant to the Loan Agreement, the product of (w) the principal amount
outstanding of such portion of such Base Rate Tranche during such Interest Period, (x) the number of days in such Interest Period during which such portion of such Base Rate Tranche was
outstanding, (y) the sum of (i) the Base Rate and (ii) the Lender Applicable Margin and (z) 1/365, plus

	(II)
	if
any Eurodollar Tranche is outstanding during such Interest Period pursuant to the Loan Agreement, the product of (w) the principal amount
outstanding of such portion of such Eurodollar Tranche during such Interest Period, (x) the number of days in such Interest Period during which such portion of such Eurodollar Tranche was
outstanding, (y) the sum of (i) the Reserve Adjusted LIBOR applicable to such Eurodollar Tranche and (ii) the Lender Applicable Margin and (z) 1/360;  plus

        (B)  with
respect to the Lessor Contribution, 

	(I)
	if
any portion of the Lessor Contribution bears interest based upon the Base Rate during such Interest Period, the product of (w) the principal
amount outstanding of such portion of the Lessor Contribution during such Interest Period, (x) the number of days in such Interest Period during which such portion of the Lessor Contribution
was outstanding, (y) the sum of (i) the Base Rate and (ii) the Lessor Applicable Margin and (z) 1/365, plus

	(II)
	if
any portion of the Lessor Contribution bears interest based upon Reserve Adjusted LIBOR during such Interest Period, the product of (w) the
principal amount outstanding of such portion of the Lessor Contribution during such Interest Period, (x) the number of days in such Interest Period during which such portion of the Lessor
Contribution was outstanding, (y) the sum of (i) Reserve Adjusted LIBOR applicable to such portion of the Lessor Contribution plus (ii) the Lessor Applicable Margin and
(z) 1/360; plus

        (C)  the
Monthly Amortization, if any, for such Leased Asset for such Scheduled Payment Date. 

        All
calculations of Base Rent shall be performed by the Lessor and shall be submitted to the Lessee no later than 11:00 a.m., New York City time, on the fifth Business Day prior
to the relevant Scheduled Payment Date, together with reasonable detail supporting the calculations made. Such calculations shall be deemed final unless the Lessee can demonstrate to the Lessor that
inaccuracies exist in the calculations made. If such inaccuracies have been established by the Lessee and confirmed by the Lessor, the Lessee shall nevertheless make the Base Rent payment in
accordance with the Lessor's calculations but the subsequent Base Rent payment shall be adjusted. 

Determination of Upfront Fee  

        The Lessee shall pay to the Lessor an upfront fee (the "Upfront Fee") in respect of the Leased Asset subject to
this Lease Supplement on the Acquisition Date for such Leased Asset in an amount equal to $36,575.00. 

Ex D-32

 
 
 

Attachment 4 to Asset
  Supplement No. 1    
  

None. 

Ex D-33

  

 
 

LEASE SUPPLEMENT NO. 2    
  

        This Lease Supplement No. 2 dated February 15, 2002 (this "Lease Supplement") is delivered pursuant
to the Master Lease and Security Agreement dated as of February 15, 2002 (the "Lease"), between Coherent, Inc., as the Lessee, and SMBC
Leasing and Finance, Inc., as the Lessor. Capitalized terms not otherwise defined herein are used herein as defined in Appendix 1 to the
Lease. 

        19.  1.    The
Property to which this Lease Supplement relates is described on Attachment 1 hereto. 

        20.  2.    The
Acquisition Date is February 15, 2002. 

        21.  3.    The
Base Date for this Property shall occur on the Acquisition Date. 

        22.  4.    The
Expiration Date for this Property is the fifth (5th) anniversary of the Base Date. 

        23.  5.    The
Base Term for this Property shall commence on the Base Date and end on the Expiration Date, unless the Base Term is earlier terminated as provided in
the Lease. The Lessor shall have no option to extend the Lease Term for this Property pursuant to Section 23.1 except pursuant to mutually
acceptable terms and conditions to be established and consented and agreed to by Lessee, Lessor and each Lender, each in their sole and absolute discretion. 

        24.  6.    The
Guaranteed Residual Value for this Property will be determined by the Lessor as of the Base Date and will be equal to that amount which will cause
the present value (discounted using the Lease Rate for such Property) of the minimum Rent payments with respect to this Property, determined according to FASB No. 13, to be approximately equal
to, but not to exceed, 89.9% of the lesser of the fair value of this Property on the Base Date and the Lease Balance of this Property on the Base Date. For this Property, the Guaranteed Residual Value
is equal to $6,625,000.00. 

        25.  7.    The
Relevant Percentage for Advances made to fund this Property is 80.79%. 

        26.  8.    The
Title Company for this Property is First American Title Guaranty Company. 

        27.  9.    The
Debt Rate shall mean the weighted average of the rate applicable to all Base Rate Tranches and the rate applicable to all Eurodollar Tranches
outstanding under the Loan Agreement. 

        28.  10.    The
Lessor Rate shall mean a rate equal to Reserve Adjusted LIBOR plus the Lessor Applicable Margin for the Lessor Contribution. 

        29.  11.    The
Lease Rate is the weighted average of the Lessor Rate and the Debt Rate. 

        30.  12.    The
Monthly Amortization for this Property is set forth on Attachment 2 hereto;  provided, however, that if the
circumstances described in  Section 17.2(b) exist in respect of the Property described in this Lease Supplement, then (a) the Monthly Amortization set forth in  Attachment 2 hereto shall be automatically amended to require the payment of Monthly Amortization (as a component of Base Rent) on each Scheduled
Payment Date in the twelve consecutive calendar months next occurring after the effective date of the reduced amount of property damage and hazard insurance coverage but in no event prior to the Base
Date for such Property in twelve equal installments, each in an amount equal to the quotient yielded by dividing (i) the difference between the then Lease Balance for such Property and the
amount of the replacement coverage obtained by the Lessee for such Property, by (ii) 12, and (b) the Guaranteed Residual Value shall be reduced by the amount of such Monthly
Amortization. 

        31.  13.    Base
Rent for this Property shall be calculated in accordance with Attachment 3 hereto. 

        32.  14.    The
Lessor Commitment Fee is set forth on Attachment 4 hereto. 

        33.  15.    The
Lender Commitment Fee is set forth on Attachment 4 hereto. 

        34.  16.    The
Threshold Amount for this Property is $1,000,000. 

Ex D-34

 

          i)  17.    Lessee
may not exercise its option to purchase or remarket the Property described on Attachment 1 hereto
pursuant to Sections 22.1 or 24.1 of the Lease unless Lessee also exercises the identical right pursuant
to Sections 22.1 or 24.1, as the case may be, of the Lease with respect to the Property described on  Attachment 1 of that certain Lease Supplement No. 1 executed by Lessee and Lessor with respect to the Lease. 

        The
undersigned Lessee hereby agrees to perform all the obligations of Lessee under, and to be bound in all respects by the terms of, the Lease and the other Operative Documents. 

        The
undersigned hereby certifies that the representations and warranties of the Lessee contained in the Lease are true and correct on and as of the date hereof, and will be true and
correct on and as of the effective date of this Lease Supplement, with the same effect as if made on and as of such effective date. The undersigned acknowledges and consents to the assignment of the
Lease (including this Lease Supplement) by the Lessor to the Collateral Agent pursuant to the terms of the Security Agreement. 

        The
undersigned confirms that it has received a copy of the Lease and the other Operative Documents together with such other documents and agreements as it has required in connection
therewith. 

[NO
FURTHER TEXT ON THIS PAGE] 

Ex D-35

 

        Dated
as of this 15th day of February, 2002. 

	Lessor Commitment: $8,200,000.00	 	LESSOR
	

 	
 	

SMBC LEASING AND FINANCE, INC.
	

 	
 	

By:	
 	

 
	 	 	 	 	

	 	 	 	 	Name:	 
	 	 	 	 	Title:	 
	

 	
 	
LESSEE
	

 	
 	

COHERENT, INC.
	

 	
 	

By:	
 	

 
	 	 	 	 	

	 	 	 	 	Name:	 
	 	 	 	 	Title:	 

Ex D-36

 
 
 

Attachment 1 to Asset
  Supplement No. 2    
  

 
 

Description of Property    
  

        The Improvements located on the real property in the City of Santa Clara, County of Santa Clara, State of California, described as follows: 

        All
of Parcel T, as shown on that certain Map entitled, "Parcel Map Lands Formerly of Bracher Fruit Co.", which Map was filed for record in the Office of the Recorder of the County of
Santa Clara, State of California on January 2, 1973 in Book 314 of Maps, page 29. 

        Excepting
therefrom that portion of said land conveyed to the City of Santa Clara, a chartered municipal corporation in the Deed recorded November 4, 1997 as Instrument
No. 13922600, Official Records being more particularly described as follows: 

        Beginning
at the Northeast corner of Parcel T as shown on that certain Parcel Map recorded in Book 314 of Maps, at page 29, Santa Clara County Records; 

        Thence
from said Point of Beginning, Westerly along the Northerly line of Parcel T, South 89° 15' 13" West, 8.54 feet; 

        Thence,
from a tangent bearing South 60° 25' 20" East, along the arc of a curve concave to the Southwest, having a radius of 20 feet, through a central angle of
53° 17' 23", and an arc length of 18.60 feet; 

        Thence,
from a tangent bearing North 7° 07' 57" West, along the arc of a curve concave to the East, having a radius of 70 feet, through a central angle of 7° 24'
00", and an arc length of 9.04 feet to a point of reverse curvature; 

        Thence,
from said point of reverse curvature, along a curve concave to the West, having a radius of 20 feet, through a central angle of 17° 27' 18", and an arc length of 6.09
feet to the Point of Beginning. 

APN:
216-28-128

ARB: 216-28-49 

Ex D-37

 
 
 

Attachment 2 to Asset
  Supplement No. 2    
  

 
  Monthly Amortization    
  

None.

Ex D-38

 
 
 

Attachment 3 to Asset
  Supplement No. 2    
  

 
  Calculation of Base Rent    
  

        Base Rent payable on each Payment Date with respect to the Interest Period then ending shall be payable monthly in arrears and equal to the sum of the following
for the Leased Asset subject to this Lease Supplement: 

        (A)  with
respect to the Debt Contribution, 

	(I)
	if
any Base Rate Tranche is outstanding during such Interest Period pursuant to the Loan Agreement, the product of (w) the principal amount
outstanding of such portion of such Base Rate Tranche during such Interest Period, (x) the number of days in such Interest Period during which such portion of such Base Rate Tranche was
outstanding, (y) the sum of (i) the Base Rate and (ii) the Lender Applicable Margin and (z) 1/365, plus

	(II)
	if
any Eurodollar Tranche is outstanding during such Interest Period pursuant to the Loan Agreement, the product of (w) the principal amount
outstanding of such portion of such Eurodollar Tranche during such Interest Period, (x) the number of days in such Interest Period during which such
portion of such Eurodollar Tranche was outstanding, (y) the sum of (i) the Reserve Adjusted LIBOR applicable to such Eurodollar Tranche and (ii) the Lender Applicable Margin and
(z) 1/360; plus

        (B)  with
respect to the Lessor Contribution, 

	(I)
	if
any portion of the Lessor Contribution bears interest based upon the Base Rate during such Interest Period, the product of (w) the principal
amount outstanding of such portion of the Lessor Contribution during such Interest Period, (x) the number of days in such Interest Period during which such portion of the Lessor Contribution
was outstanding, (y) the sum of (i) the Base Rate and (ii) the Lessor Applicable Margin and (z) 1/365, plus

	(II)
	if
any portion of the Lessor Contribution bears interest based upon Reserve Adjusted LIBOR during such Interest Period, the product of (w) the
principal amount outstanding of such portion of the Lessor Contribution during such Interest Period, (x) the number of days in such Interest Period during which such portion of the Lessor
Contribution was outstanding, (y) the sum of (i) Reserve Adjusted LIBOR applicable to such portion of the Lessor Contribution plus (ii) the Lessor Applicable Margin and
(z) 1/360; plus

        (C)  the
Monthly Amortization, if any, for such Leased Asset for such Scheduled Payment Date. 

        All
calculations of Base Rent shall be performed by the Lessor and shall be submitted to the Lessee no later than 11:00 a.m., New York City time, on the fifth Business Day prior
to the relevant Scheduled Payment Date, together with reasonable detail supporting the calculations made. Such calculations shall be deemed final unless the Lessee can demonstrate to the Lessor that
inaccuracies exist in the calculations made. If such inaccuracies have been established by the Lessee and confirmed by the Lessor, the Lessee shall nevertheless make the Base Rent payment in
accordance with the Lessor's calculations but the subsequent Base Rent payment shall be adjusted. 

Determination of Upfront Fee  

        The Lessee shall pay to the Lessor an upfront fee (the "Upfront Fee") in respect of the Leased Asset subject to
this Lease Supplement on the Acquisition Date for such Leased Asset in an amount equal to $16,562.50. 

Ex D-39

 
 
 

Attachment 4 to Asset
  Supplement No. 2    
  

None.

Ex D-40

QuickLinks

EXHIBIT 10.12

MASTER LEASE AND SECURITY AGREEMENT Dated as of February 15, 2002 between SMBC LEASING AND FINANCE, INC. as Lessor and COHERENT, INC. as Lessee

TABLE OF CONTENTS

MASTER LEASE AND SECURITY AGREEMENT

W I T N E S S E T H

ARTICLE I DEFINITIONS

ARTICLE II PURCHASE AND LEASE

ARTICLE III FUNDING OF ADVANCES

ARTICLE IV CONDITIONS PRECEDENT TO CLOSING DATE, ACQUISITION DATES AND ADVANCES

ARTICLE V CONDITIONS TO SUBSTANTIAL COMPLETION

ARTICLE VI REPRESENTATIONS AND WARRANTIES

ARTICLE VII PAYMENT OF RENT; FEES

ARTICLE VIII QUIET ENJOYMENT; RIGHT TO INSPECT

ARTICLE IX NET LEASE

ARTICLE X SUBLEASES

ARTICLE XI LESSEE ACKNOWLEDGMENTS

ARTICLE XII POSSESSION AND USE

ARTICLE XIII MAINTENANCE AND REPAIR; RETURN

ARTICLE XIV MODIFICATIONS

ARTICLE XV WARRANT OF TITLE; EASEMENTS

ARTICLE XVI PERMITTED CONTESTS

ARTICLE XVII INSURANCE

ARTICLE XVIII CASUALTY AND CONDEMNATION; ENVIRONMENTAL MATTERS

ARTICLE XIX TERMINATION OF LEASE

ARTICLE XX EVENTS OF DEFAULT; REMEDIES

ARTICLE XXI ASSIGNMENT

ARTICLE XXII PURCHASE PROVISIONS

ARTICLE XXIII RENEWAL TERMS

ARTICLE XXIV TERMINATION OPTION

ARTICLE XXV PROCEDURES RELATING TO PURCHASE OPTION OR TERMINATION OPTION

ARTICLE XXVI INDEMNIFICATION

ARTICLE XXVII ESTOPPEL CERTIFICATES

ARTICLE XXVIII ACCEPTANCE OF SURRENDER

ARTICLE XXIX NO MERGER OF TITLE

ARTICLE XXX INTENT OF THE PARTIES

ARTICLE XXXI PAYMENT OF EXPENSES; YIELD PROTECTION

ARTICLE XXXII OTHER COVENANTS AND AGREEMENTS OF LESSEE

ARTICLE XXXIII MISCELLANEOUS

SCHEDULE I TO MASTER LEASE AND SECURITY AGREEMENT

Notice Information

SCHEDULE II TO MASTER LEASE AND SECURITY AGREEMENT

Existing Liens

ANNEX 1 TO MASTER LEASE AND SECURITY AGREEMENT

Description of Initial Leased Assets

EXHIBIT A TO MASTER LEASE AND SECURITY AGREEMENT

SCHEDULE A TO FUNDING REQUEST ALLOCATION OF ADVANCE

SCHEDULE B TO THE FUNDING REQUEST INFORMATION REQUIRED FOR FUNDING ACQUISITION OF LEASED ASSET

EXHIBIT B TO MASTER LEASE AND SECURITY AGREEMENT

RESPONSIBLE EMPLOYEE'S CERTIFICATE

EXHIBIT C-1 TO MASTER LEASE AND SECURITY AGREEMENT

LEASE SUPPLEMENT NO.

Attachment 1 to Asset Supplement No.

Attachment 2 to Asset Supplement No.

Attachment 3 to Asset Supplement No.

Attachment 4 to Asset Supplement No.

Calculation of Base Rent

Determination of Upfront Fee

EXHIBIT C-2 TO MASTER LEASE AND SECURITY AGREEMENT

Attachment 1 to Asset Supplement No.

Attachment 2 to Asset Supplement No.

Attachment 3 to Asset Supplement No.

Attachment 4 to Asset Supplement No.

Attachment 5 to Asset Supplement No.

Calculation of Base Rent

EXHIBIT D TO MASTER LEASE AND SECURITY AGREEMENT

COMPLIANCE CERTIFICATE

DEFINITIONS AND INTERPRETATION

LEASE SUPPLEMENT NO. 1

Attachment 1 to Asset Supplement No. 1

Legal Description of Property

Attachment 2 to Asset Supplement No. 1

Monthly Amortization

Attachment 3 to Asset Supplement No. 1

Calculation of Base Rent

Attachment 4 to Asset Supplement No. 1

LEASE SUPPLEMENT NO. 2

Attachment 1 to Asset Supplement No. 2

Description of Property

Attachment 2 to Asset Supplement No. 2

Monthly Amortization

Attachment 3 to Asset Supplement No. 2

Calculation of Base Rent

Attachment 4 to Asset Supplement No. 2

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