Document:

Exhibit 10.10

 

SUPPLEMENTAL RETIREMENT AND

DEFERRED COMPENSATION PLAN

RESTATED AND AMENDED

Effective as of January 1, 1998

 

RECITALS

 

This
Kanawha Insurance Company Supplemental Retirement and Deferred Compensation
Plan (the Plan) is adopted by Kanawha Insurance Company and Kanawha Healthcare
Solutions, Inc. (the Employer) for certain of its executive or highly
compensated employees.  The purpose of
the Plan is to provide those employees with supplemental retirement income and
to offer those employees an opportunity to elect to defer the receipt of
compensation in order to provide termination of employment and related benefits
taxable pursuant to Section 451 of the Internal Revenue Code of 1986, as
amended (the Code).  The Plan is intended
to be a Top Hat Plan (i.e., an unfunded deferred compensation plan maintained
for a select group of management or highly compensated employees) under
Sections 201(2), 301(a)(3), and 401(a)(1) of the Employee Retirement
Income Security Act of 1974 (ERlSA).

 

Accordingly,
the following Plan is adopted.

 

ARTICLE I. DEFINITIONS

 

1.1                               ACCOUNT means the balance credited to a
Participant’s or Beneficiary’s Plan account, including contribution credits and
deemed income, gains, and losses (to the extent realized as determined by the
Employer, in its discretion) credited thereto. 
A Participant’s or Beneficiary’s Account shall be determined as of the
date of reference.

 

1.2                               BENEFICIARY means any person or persons so
designated in accordance with the provisions of Article VII.

 

1.3                               CODE means the Internal Revenue Code of 1986
and the regulations thereunder, as amended from time to time.

 

1.4                                COMPENSATION means the total current cash
remuneration paid by the Employer to an Eligible Employee with respect to his
or her service for the Employer (as determined by the Employer).

 

1.5                                 DESIGNATION DATE means the date or dates as
of which a designation of deemed investment directions by an individual
pursuant to Section 4.5, or any change in a prior designation of deemed investment
directions by an individual pursuant to Section 4.5, shall become
effective.  The Designation Dates in any
Plan Year shall be designated by the Employer.

 

 

1.6                                 EFFECTIVE DATE means the effective date of
the restatement of the Plan, which shall be January 1, 1998.

 

1.7                                 ELIGIBLE EMPLOYEE means, for any Plan Year
(or applicable portion thereof), a person employed by the Employer who is
determined by the Employer to be a member of a select group of management or
highly compensated employees and who is designated by the Employer to be an
Eligible Employee under the Plan.  By
each November 1, the Employer shall notify those individuals, if any, who
will be Eligible Employees for the next Plan Year.  If the Employer determines that an individual
first becomes an Eligible Employee during a Plan Year, the Employer shall
notify such individual of its determination and of the date during the Plan
Year on which the individual shall first become an Eligible Employee.

 

1.8                                 EMPLOYER means Kanawha Insurance Company
(Kanawha) and its successors and assigns unless otherwise herein provided, or
any other corporation or business organization that, with the consent of
Kanawha or its successors or assigns, assumes the Employer’s obligations
hereunder, or any other corporation or business organization that agrees, with
the consent of Kanawha, to become a party to the Plan.

 

1.9                                 ENTRY DATE with respect to an individual
means the first day of the pay period following the date on which the
individual first becomes an Eligible Employee.

 

1.10                           PARTICIPANT means any person so designated in
accordance with the provisions of Article II, including, where appropriate
according to the context of the Plan, any former employee who is or may become
(or whose Beneficiaries may become) eligible to receive a benefit under the
Plan.

 

1.11                           PARTICIPANT ENROLLMENT AND ELECTION FORM means
the form on which a Participant elects to defer Compensation hereunder and on
which the Participant makes certain other designations as required thereon.

 

1.12                           PLAN means this Kanawha Insurance Company
Supplemental Retirement and Deferred Compensation Plan, as amended from time to
time.

 

1.13                           PLAN YEAR means the twelve (12) month period
ending on the December 31 of each year during which the Plan is in effect.

 

1.14                           TRUST means the trust fund established
pursuant to the Plan.

 

1.15                           TRUSTEES means the trustees named in the
agreement establishing the Trust and such successor and/or additional trustees
as may be named pursuant to the terms of the agreement establishing the Trust.

 

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1.16                         VALUATION DATE means the December 31 of
each Plan Year and any other date that the Employer, in its sole discretion,
designates as a Valuation Date.

 

ARTICLE II. ELIGIBILITY AND PARTICIPATION

 

2.1                                 REQUIREMENTS. 
Every Eligible Employee on the Effective Date shall be eligible to
become a Participant on the Effective Date.  Every other Eligible Employee shall be
eligible to become a Participant on the first Entry Date occurring on, or after
the date on which he or she becomes an Eligible Employee.  No individual shall become a Participant,
however, if he or she is not an Eligible Employee on the date his or her
participation is to begin.

 

Participation in the Plan is
voluntary.  In order to participate, an
otherwise eligible Employee must make written application in such manner as may
be required by Section 3.1 and by the Employer and must agree to make
Compensation Deferrals as provided in Article III.

 

2.2                                 REEMPLOYMENT. 
If a Participant whose employment with the Employer is terminated is
subsequently reemployed, he or she shall become a Participant in accordance
with the provisions of Section 2.1.

 

2.3                                 CHANGE OF EMPLOYMENT CATEGORY.  During any period in which a Participant
remains in the employ of the Employer, but ceases to be an Eligible Employee, he or she shall not be
eligible to make Compensation Deferrals hereunder.

 

ARTICLE III. CONTRIBUTIONS AND CREDITS

 

3.1                                 CONTRIBUTION TO THE PLAN PRIOR TO JANUARY 1,
1998.  Subject to the provisions of Section 3.3
below, all contributions and accrued interest additions to the Plan prior to January 1,
1998 shall be held by the Trustees in the Balanced Fund Account identified in Article VIII.  The Employer shall establish and maintain a
separate Plan account in the name of each Participant or Beneficiary as the
case may be.  The Account shall at all
times be one hundred percent (100%) vested in the Participant or Beneficiary
and to which shall be credited or debited: (a) amounts equal to the
Participant’s Compensation Deferrals and (b) amounts equal to any deemed income,
gains, or losses (to the extent realized, based upon deemed fair market value
of the account’s deemed assets, as determined by the Employer, in its
discretion), attributable or allocable to (a).  The Employer shall have the discretion to
allocate such deemed income, gains, or losses among Plan Accounts pursuant to
such allocation rules as the Employer deems to be reasonable and
administratively practicable.  As to the
contribution and accrued additions under this Section 3.1, the Employer
shall maintain an Allocation Account for each

 

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Participant.  The Allocation Account of each Participant
shall be credited on the last day of each calendar quarter with the interest on
the averaged monthly ending balance in such Account during such calendar
quarter.  The amount equivalent to
interest shall be at the prime rate of interest charged by Manufacturers
Hanover Trust Company, New York City (or another major New York City bank, if
the named bank is not in business or has merged or become inactive in the
commercial field) on the date such credit is made.

 

At such time as the Participant
(or his or her Beneficiary) is entitled to receive benefits under Article VI,
or shall elect to transfer any portion of the Plan Account from the Balanced
Fund Account to another investment option provided by the Plan, the Employer
will compare the amount of the Participant’s Compensation Deferrals, plus
accumulated interest, as shown in the Participant’s Allocation Account, to the
total shown in the Participant’s Balanced Fund Account.  Should the amount in the Allocation Account
be greater than the amount in the Balanced Fund Account, then in such event,
the Employer will contribute the amount of this difference to the Participant's
Balanced Account.

 

Should a portion of the
Balanced Fund be transferred the computation above shall be made and in the
event the Allocation Account is greater, a prorated amount shall be contributed
to the Balanced Fund Account.

 

During the payout period, an
amount determined as stated above, shall be paid to the Participants or
Beneficiary as determined in Article VI. 
This interest amount shall be computed each calendar quarter on the
average unpaid monthly ending balances during each calendar quarter, during the
period of payment of benefits under Article VI.

 

The Participant or Beneficiary shall
have the opportunity under the provision of Article IV to make an
irreversible transfer of any portion of the contribution and amounts equal to
any deemed income, gains or losses, to other investment options provided by the
Plan.  As to such funds transferred, the
guarantee of the prime rate of interest shall cease.

 

3.2                                 PARTICIPANT COMPENSATION DEFERRALS AND EMPLOYER
CONTRIBUTION CREDITS ON OR AFTER JANUARY 1, 1998.  In accordance with rules established by
the Employer, a Participant may elect to defer Compensation that is due to be
earned and that would otherwise be paid to the Participant, in a lump sum or in
any fixed periodic dollar amounts designated by the Participant.  Amounts so deferred will be considered a
Participant’s “Compensation Deferrals.” Ordinarily, a Participant shall make
such an election with respect to a coming twelve (12) month Plan Year during the
period beginning on the November 1 and ending on the December 31 of
the prior Plan Year or during such other period established by the Employer.

 

Compensation Deferrals shall be
made through regular payroll deductions or through an election by the Participant
to defer the payment of a bonus not yet payable to him or her at the time of
the election.  The Participant may reduce
his or her payroll deduction Compensation deferral amount as of, and by written
notice delivered to the Employer at

 

4

 

least thirty (30) days prior
to, the beginning of any regular payroll period, with such reduction being
first effective for Compensation to be earned in that payroll period.  Once made, a Compensation Deferral payroll deduction
election shall continue in force indefinitely, until changed by the Participant
on a subsequent Participant Enrollment and Election Form provided by the
Employer.  Compensation Deferrals shall
be deducted by the Employer from the pay of a deferring Participant and shall
be credited to the Account of the deferring Participant.

 

There shall be established
and maintained by the Employer a separate Plan Account in the name of each
Participant, which shall at all times be one hundred percent (100%) vested in
the Participant and to which shall be credited or debited: (a) an amount
per Plan Year beginning in the first Plan Year of the Participant’s
participation and ending the Plan Year prior to the Plan Year in which the
Participant terminates employment, equal to a percentage of Compensation (from
0% to 35%) determined by the Employer for the Plan Year; a percentage of any
anticipated bonus (from 0% to 100%) determined by the Employer for the Plan Year;
and the difference in the amount elected to be contributed to the Participants’
401(k) Plan and the amount of the contribution actually contributed due to
non-discrimination test required by law; and (c) amounts equal to any
deemed income, gains, or losses (to the extent realized, based upon deemed fair
market value of the Account’s deemed assets, as determined by the Employer, in
its discretion), attributable or allocable to (a).  The Employer shall have the discretion to
allocate such deemed income, gains, or losses among Plan Accounts pursuant to
such allocation rules as the Employer deems to be reasonable and
administratively practicable.

 

Amounts equal to the
Compensation Deferrals and Employer contribution credits will be paid by the
Employer to the Trust with reasonable promptness after the total of such
Compensation Deferrals and Employer contribution credits during any month or
other period has been determined.

 

3.3                                 PARTICIPANTS
IN PAYOUT STATUS.  Participants who are
receiving monthly payments under the Plan on December 31, 1997, shall
continue to have their Fund Accounts held by the Employer, and will receive
payments under the terms of the Plan and its rules of operation in effect
at the time their first payment was received.

 

3.4                                 EMPLOYER
DISCRETIONARY CONTRIBUTION.  The Employer
may, in its sole discretion, credit to the Account of any Participant employed
by the Employer, an amount determined by the Employer in its sole discretion
(an “Employer Discretionary Contribution”) for a Plan Year.  Any Employer Discretionary Contribution for a
Plan Year will be credited to a Participant’s Account as of the Valuation Date
Specified by the Employer.

 

3.5                                 ADDITIONAL
EMPLOYER CONTRIBUTION.  For each Plan
year under the Employer’s Noncontributory Retirement Plan during which a
Participant in this Plan is also a participant in the Noncontributory
Retirement Plan, there shall be credited to the Account

 

5

 

of such Participant an amount
equal to the actuarial equivalent single sum value of any additional accrued
benefit the Participant would have earned under the Noncontributory Retirement
Plan for such Plan Year if the Participant had not elected to defer
compensation under this Plan during such Plan Year.

 

3.6                                 OBLIGATION TO PAY AN UNSECURED DEBT.  The obligation to pay Participant the amount
deferred, with the adjustments provided for in the Plan, shall be carried on
the books of the Employer as an unsecured debt (the “Deferred Account”).  The balance at any time in the Deferral
Account is not held in trust for Participant, and neither Participant, his or
her estate or personal representative(s) nor his or her beneficiaries shall
have any right, title or interest in or to any funds in the Deferral Account,
which is established by the Employer merely for the purpose of recording such
unsecured contractual obligation.  All
funds in the Deferral Account shall continue to be part of the general funds of
the Employer and subject to the claims of its general creditors.

 

ARTICLE IV. ALLOCATION OF FUNDS

 

4.1                                ALLOCATION
OF DEEMED EARNINGS OR LOSSES ON ACCOUNTS. 
Pursuant to Section 4.5, each Participant shall have the right to
direct the Employer as to how amounts in his or her Plan Account shall be
deemed to be invested.  In such a case,
the Employer shall direct the Trustees to invest the Account maintained in the
Trust on behalf of the Participant pursuant to the direction the Employer has
received from that Participant.  The
Trustees may, in their sole discretion, comply with a Participant’s direction
with respect to investment of assets of the Trust that are equal to the value
of the Participant’s Account in the investment options.  The Trustees shall provide the investment
options stated in Article VIII.  The
Participant’s Plan Account will be credited or debited with the increase or
decrease in the realizable net asset value or credited interest, as applicable,
of the designated deemed investments, as follows.  As of each Valuation Date, an amount equal to
the net increase or decrease in realizable net asset value or credited interest,
as applicable (as determined by the Employer), of each deemed investment option
within the Trust since the preceding Valuation Date shall be allocated among
all Participants'  Accounts deemed to be invested in that investment
option in accordance with the ratio that the portion of the Account of each
Participant that is deemed to be invested within that investment option,
determined as provided herein, bears to the aggregate of all amounts deemed to
be invested within that investment option.

 

4.2                                ACCOUNTING
FOR DISTRIBUTIONS.  As of the date of any
distribution hereunder, the distribution to a Participant or his or her
Beneficiary or Beneficiaries shall be charged to such Participant’s Account.

 

6

 

4.3                                 SEPARATE ACCOUNTS.  A separate account under the Plan shall be
established and maintained by the Employer to reflect the Account for each
Participant with subaccounts to show separately the deemed earnings and losses
credited or debited to such Account and the applicable deemed investments of
the Account.

 

4.4                                 INTERIM VALUATIONS.  If it is determined by the Employer that the
value of the Trust as of any date on which distributions are to be made differs
materially from the value of the Trust on the prior Valuation Date upon which
the distribution is to be based, the Employer, in its discretion, shall have
the right to designate any date in the interim as a Valuation Date for the
purpose of revaluing the Trust so that the Account from which the distribution is
being made will, prior to the distribution, reflect its share of such material
difference in value.

 

4.5                                 DEEMED INVESTMENT DIRECTIONS OF PARTICIPANTS.  Subject to such limitations as may from time
to time be required by law, imposed by the Employer or the Trustees, or
contained elsewhere in the Plan, and subject to such operating rules and
procedures as may be imposed from time to time by the Employer or the Trustees,
prior to and effective for each Designation Date, each Participant may
communicate to the Employer a direction as to how his or her Account should be
deemed to be invested among such categories of deemed investments as may be
made available by the Employer hereunder. 
Such direction shall designate the percentage (in whole percentages in multiples
of five) of each portion of the Participant’s Account that is requested to be
deemed to be invested in such categories of deemed investments and shall be
subject to the following rules:

 

(a)                    Any initial or subsequent deemed investment
direction shall be in writing, on a form supplied by and filed with the
Employer, and shall be effective as of the next Designation Date that is at
least ten (10) business days after such filing.

 

(b)                   All amounts credited to the Participant’s
Account shall be deemed to be invested in accordance with the then effective
deemed investment direction, and, as of the effective date of any new deemed
investment direction, all or a portion of the Participant’s Account at that
date shall be reallocated among the designated deemed investment funds
according to the percentages specified in the new deemed investment direction
unless and until a subsequent deemed investment direction shall be filed and
become effective.  An election concerning
deemed investment choices shall continue indefinitely as provided in the
Participant’s most recent Participant Enrollment and Election Form or
other form specified by the Employer.

 

(c)                     If the Employer receives an initial or
revised deemed investment direction that it deems to be incomplete, unclear, or
improper, the Participant’s investment direction then in effect shall remain in
effect (or, in the case of a deficiency in an initial deemed investment
direction, the Participant shall be deemed to have filed

 

7

 

no
deemed investment direction) until the next Designation Date, unless the
Employer provides for, and permits the application of corrective action prior
thereto.

 

(d)                    If the Employer possesses at any time
directions as to the deemed investment of less than all of a Participant’s
Account, the Participant shall be deemed to have directed that the undesignated
portion of the Account be deemed to be invested in The Balanced Fund Account
made available under the Plan as determined by the Employer in its discretion
and set forth in Article VII.

 

(e)                     Each Participant hereunder, as a condition to
his or her participation hereunder, agrees to indemnify and hold harmless the
Employer and Its agents and representatives from any losses or damages of any kind
relating to the deemed investment of the Participant’s Account hereunder.

 

(f)                       Each reference in this Section to a
Participant shall be deemed to include, where applicable, a reference to a
Beneficiary.

 

The Trustees, may in their sole
discretion, comply with a Participant’s direction with respect to investment of
assets of the Trust that are equal to the value of the Participant’s Account in
the investment options.

 

ARTICLE V. ENTITLEMENT TO BENEFITS

 

5.1                                 TERMINATION OF EMPLOYMENT.  When a Participant terminates employment with
the Employer for any reason or because of death, on or after the Participant’s
early retirement date, as that term is defined in the Employer’s
Non-Contributory Retirement Plan, the Participant’s Plan Account at such date
of termination or death shall be valued and payable according to the provisions
of Article VI.

 

5.2                                 HARDSHIP
DISTRIBUTIONS.  In the event of financial
hardship of the Participant, as hereinafter defined, the Participant may apply
to the Employer for the distribution of all or any part of his or her Account.  The Employer shall consider the circumstances
of each such case and the best interests of the Participant and his or her
family and shall have the right, in its sole discretion, if applicable, to
allow such distribution, or, if applicable, to direct a distribution of part of
the amount requested or to refuse to allow any distribution.  Upon a finding of financial hardship, the
Employer shall instruct the Trustees to make the appropriate distribution to
the Participant from amounts contributed to the Trust by the Employer in
respect of the Participant’s Account.  In
no event shall the aggregate amount of the distribution exceed either the full
value of the Participant’s Account or the amount determined by the Employer to
be necessary to alleviate the Participant’s financial hardship (which financial
hardship may be considered to include any taxes due because of the

 

8

 

distribution occurring because
of this Section), and that is not reasonably available from other resources of
the Participant.  For purposes of this
Section, the value of the Participant’s Account shall be determined as of the
date of the distribution.  Financial hardship means (a) a severe
financial hardship to the Participant resulting from a sudden and unexpected
illness or accident of the Participant or of a dependent (as defined in Code Section 152(a))
of the Participant, (b) loss of the Participant’s property due to
casualty, or (c) other similar extraordinary and unforeseeable
circumstances arising as a result of events beyond the control of the
Participant, each as determined to exist by the Employer.  A distribution may be made under this Section only
with the consent of the Employer’s board of directors.

 

5.3                                 REEMPLOYMENT OF RECIPIENT.  If a Participant receiving installment
distributions pursuant to Section 6.2 is reemployed by the Employer, the
remaining distributions due to the Participant shall be suspended until such
time as the Participant (or his or her Beneficiary) once again becomes eligible
for benefits under Section 5.1, 5.2, or 5.3, at which time such
distribution shall commence, subject to the limitations and conditions
contained in this Plan.

 

ARTICLE VI. DISTRIBUTION OF BENEFITS

 

6.1                                 AMOUNT. 
A Participant (or his or her Beneficiary) shall become entitled to
receive, on or about the date of the Participant’s termination of employment
with the Employer, a distribution in an aggregate amount equal to the
Participant’s Account, which amount, depending on (a) the performance of
the deemed investments elected from time to time by the Participant, the
Beneficiary, and/or the Employer, as applicable, and (b) the extent to
which the investments of the Trust relating to the Participant’s deemed
investments under Sections 4.1 and 4.5 actually are realized by the Trust, may
be less than, equal to, or greater than the aggregate amount of the Participant’s
Compensation Deferrals.  Any payment due
hereunder from the Trust that is not paid by the Trust will be paid by the
Employer from its general assets.

 

6.2                                 METHOD OF PAYMENT.

 

(a)                     Cash Payments.  All payments under the Plan shall be made in
cash.  Accounts with an aggregate amount
of $20,000.00 or less will be paid in a lump sum.

 

(b)                    Timing and Manner of Payment.  In the case of distributions to a Participant
or his or her Beneficiary by virtue of an entitlement pursuant to Section 5.2,
an aggregate amount equal, to the Participant’s Account will be paid by the
Trust or the Employer, as provided by Section 6.1, in a lump sum.

 

9

 

In
the event a Participant becomes entitled to benefits under Section 5.1, an
aggregate amount equal to the Participant’s Account will be paid by the Trust
or the Employer, as provided by Section 6.1, in a lump sum, on or about
the date of the Participant’s termination, or in annual installments made aver
a period selected by the Participant.  Such
installments may be deferred for a period of time not to exceed age 75 of the Participant.  Such amount may be paid in the form of an
annuity for the life of the Participant (or the joint lives of the Participant
and his or her spouse) of actuarially equivalent value to the Participant’s
lump sum benefit.  The timing and manner
of payments of distributions of Participant Account established to comply with Section 3.1,
must be paid in accordance with the Schedule stated in Article XIII,
for the guarantee of interest set forth in Section 3.1 to continue.

 

All
such selections must be made by the Participant prior to his or her death or
termination of employment.  If a
Participant fails to designate properly the manner of payment of the
Participant’s benefit under the Plan, such payment will be made in accordance
with the Schedule of Payment stated in Article XIII, to begin on or
about the date of the Participant’s death or termination of employment.

 

If the whole or any part of a
payment hereunder by the Trust of the Employer is to be in installments, the
total to be so paid shall continue to be deemed to be invested pursuant to
Sections 4.1 and 4.5 under such procedures as the
Employer may establish, in which case, subject to the limitations of Section 6.1,
any deemed income, gain, or loss attributable thereto (to the extent realized,
as determined by the Employer, in its discretion) shall be reflected in the
installment payments, in such equitable manner as the Employer shall determine.

 

6.3                                 DEATH BENEFITS.  If a Participant dies before terminating his
or her employment with the Employer or before the commencement of payments to
the Participant hereunder, the entire value of the Participant’s Account shall
be paid, as provided in Section 6.2,
to the person or persons designated in accordance with Section 7.1.

 

Upon the death of a
Participant after payments hereunder have begun but before he or she has
received all payments to which he or she is entitled under the Plan, the
remaining benefit payments shall be paid to the person or persons designated in
accordance with Section 7.1, in the manner in which such benefits were
payable to the Participant, unless the Beneficiary elects a more rapid form or schedule of
distribution.

 

ARTICLE VII. BENEFICIARIES; PARTICIPANT DATA

 

7.1                                 DESIGNATION OF BENEFICIARIES.  Each Participant from time to time may
designate any person or persons (who may be named contingently or successively)
to

 

10

 

receive such benefits as may be
payable under the Plan upon or after the Participant’s death, and such
designation may be changed from time to time by the Participant by filing a new
designation.  Each designation will
revoke all prior designations by the same Participant, shall be in a form
prescribed by the Employer, and will be effective only when filed in writing
with the Employer during the Participant’s lifetime.

 

In the absence of a valid
Beneficiary designation, or if, at the time any benefit payment is due to a
Beneficiary, there is no living Beneficiary validly named by the Participant,
the Employer shall pay any such benefit payment to the Participant’s spouse, if
then living, but otherwise to the Participant’s then living descendants, if
any, per  stirpes,
but, if none, to the Participant’s estate.  In determining the existence or identity of
anyone entitled to a benefit payment, the Employer may rely conclusively upon information
supplied by the Participant’s personal representative, executor, or
administrator.  If a question arises as
to the existence or identity of anyone entitled to receive a benefit payment as
aforesaid, or if a dispute arises with respect to any such payment, then,
notwithstanding the foregoing, the Employer, in its sole discretion, may
distribute such payment to the Participant’s estate without liability for any tax or other
consequences that might flow therefrom or may take such other action as the
Employer deems to be appropriate.

 

7.2                                 INFORMATION TO BE FURNISHED BY PARTICIPANTS
AND BENEFICIARIES; INABILITY TO LOCATE PARTICIPANTS OR BENEFICIARIES.  Any communication, statement, or notice addressed
to a Participant or to a Beneficiary at his or her last post office address as
shown on the Employer’s records shall be binding on the Participant or
Beneficiary for all purposes of the Plan. 
The Employer shall not be obliged to search for any Participant or
Beneficiary beyond the sending of a registered letter to such last known
address.  If the Employer notifies any
Participant or Beneficiary that he or she is entitled to an amount under the
Plan and the Participant or Beneficiary fails to claim such amount or make his
or her location known to the Employer within three (3) years thereafter,
then, except as otherwise required by law, if the location of one or more of
the next of kin of the Participant is known to the Employer, the Employer may
direct distribution of such amount to any one or more or all of such next of
kin, and in such proportions as the Employer determines.  If the location of none of the foregoing
persons can be determined, the Employer shall have the right to direct that the
amount payable shall be deemed to be a forfeiture, except that the dollar
amount of the forfeiture, unadjusted for deemed gains or losses in the interim,
shall be paid by the Employer if a claim for the benefit subsequently is made
by the Participant or the Beneficiary to whom it was payable.  If a benefit payable to an unlocated
Participant or Beneficiary is subject to escheat pursuant to applicable state
law, the Employer shall not be liable to any person for any payment made in
accordance with such law.

 

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ARTICLE VIII. THE TRUST

 

8.1                               ESTABLISHMENT OF TRUST.  The Employer shall establish the Trust with
the Trustees, pursuant to such terms and conditions as are set forth in the
Trust agreement to be entered into between the Employer and the Trustees.  The Trust is intended to be treated as a
grantor trust under the Code, and the establishment of the Trust is not intended
to cause Participants to realize current income on amounts contributed thereto
and the Trust shall be so interpreted.

 

8.2                                INVESTMENT
OPTIONS.  The Trust shall provide investments
in the following Funds of the American Funds Group.  The Trustees, may in their sole discretion,
comply with a Participant’s direction with respect to investment of assets of
the Trust that are equal to the value of the Participant’s Account In the
investment options.

 

	
  Growth Funds:

  
	
   

  	
  EuroPacific Growth Fund

  
	
   

  	
  The Growth Fund of America

  
	
   

  	
  Smallcap World Fund

  
	
   

  
	
  Growth and Income Funds

  
	
   

  	
  Washington Mutual
  Investors Fund

  
	
   

  
	
  Balanced Funds

  
	
   

  	
  American Balanced Fund

  
	
   

  
	
  Income Funds

  
	
   

  	
  The Bond Fund of America

  
	
   

  
	
  Money Market Funds

  
	
   

  	
  The Cash Management Trust
  of America

  

 

ARTICLE IX. ADMINISTRATION

 

9.1                                 ADMINISTRATIVE AUTHORITY.  Except as otherwise specifically provided
herein, the Employer shall have the sole responsibility for and the sole
control of the operation and administration of the Plan and shall have the
power and authority to take all action and to make all decisions and
interpretations that may be necessary or appropriate in order to administer and
operate the Plan, including, without limiting the generality of the foregoing,
the power, duty, and responsibility to

 

(a)                    Resolve and determine all disputes or
questions arising under the Plan, including the power to determine the rights
of Eligible Employees, Participants, and Beneficiaries, and their respective
benefits, and to remedy any ambiguities, inconsistencies, or omissions in the
Plan.

 

12

 

(b)                   Adopt such rules of procedure and
regulations as in its opinion may be necessary for the proper and efficient
administration of the Plan and as are consistent with the Plan.

 

(c)                    Implement the Plan in accordance with its
terms and the rules and regulations adopted as above.

 

(d)                   Make determinations with respect to the
eligibility of any Eligible Employee as a Participant and make determinations
concerning the crediting and distribution of Plan Accounts.

 

(e)                    Appoint any persons or firms, or otherwise act
to secure specialized advice or assistance, as it deems necessary or desirable
in connection with the administration and operation of the Plan, and the
Employer shall be entitled to rely conclusively upon, and shall be fully
protected in any action or omission taken by it in good faith reliance upon,
the advice or opinion of such firms or persons. 
The Employer shall have the power and authority to delegate from time to
time by written instrument all or any part of its duties, powers, or
responsibilities under the Plan, both ministerial and discretionary, as it
deems appropriate, to any person or committee, and in the same manner to revoke
any such delegation of duties, powers, or responsibilities.  Any action of such person or committee in the
exercise of such delegated duties, powers, or responsibilities shall have the
same force and effect for all purposes hereunder as if such action had been
taken by the Employer.  Further, the
Employer may authorize one or more persons to execute any certificate or
document on behalf of the Employer, in which event any person notified by the
Employer of such authorization shall be entitled to accept and conclusively
rely upon any such certificate or document executed by such person as
representing action by the Employer until such third person shall have been
notified of the revocation of such authority.

 

9.2                                 MUTUAL EXCLUSION OF RESPONSIBILITY.  Neither the Trustees nor the Employer shall be
obliged to inquire into or be responsible for any act or failure to act, or the
authority therefor, on the part of the other.

 

9.3                                 UNIFORMITY OF DISCRETIONARY ACTS.  Whenever in the administration or operation
of the Plan discretionary actions by the Employer are required or permitted,
such actions shall be consistently and uniformly applied to all persons similarly
situated, and no such action shall be taken that shall discriminate in favor of
any particular person or group of persons.

 

9.4                                 LITIGATION. 
Except as may be otherwise required by law, in any action or judicial
proceeding affecting the Plan, no Participant or Beneficiary shall be entitled
to any notice or service of process, and any final judgment entered in such
action shall be binding on all persons interested in, or claiming under, the
Plan.

 

13

 

9.5                                 PAYMENT OF ADMINISTRATION EXPENSES.  All expenses incurred in the administration
and operation of the Plan and the Trust, including any taxes payable by the
Employer in respect of the Plan or Trust or payable by or from the Trust
pursuant to its terms, shall be paid by the Employer.

 

9.6                                 CLAIMS PROCEDURE.  Any person claiming a benefit under the Plan
(a Claimant) shall present the claim, in writing, to the Employer, and the
Employer shall respond in writing.  If
the claim is denied, the written notice of denial shall state, in a manner
calculated to be understood by the Claimant:

 

(a)                     The specific reason or reasons for the
denial, with specific references to the Plan provisions on which the denial is
based;

 

(b)                    A description of any additional material or information
necessary for the Claimant to perfect his or her claim and an explanation of
why such material or information is necessary; and

 

(c)                     An explanation of the Plan’s claims review
procedure.

 

The written notice denying or
granting the Claimant’s claim shall be provided to the Claimant within ninety
(90) days after the Employer’s receipt of the claim, unless special
circumstances require an extension of time for processing the claim.  If such an extension is required, written
notice of the extension shall be furnished by the Employer to the Claimant
within the initial ninety (90) day period and in no event shall such an
extension exceed a period of ninety (90) days from the end of the initial
ninety (90) day period.  Any extension
notice shall indicate the special circumstances requiring the extension and the
date on which the Employer expects to render a decision on the claim.  Any claim not granted or denied within the
period noted above shall be deemed to have been denied.

 

Any Claimant whose claim is
denied or deemed to have been denied under the preceding sentence (or such
Claimant’s authorized representative) may, within sixty (60) days after the
Claimant’s receipt of notice of the denial or after the date of the deemed
denial, request a review of the denial by notice given, in writing, to the
Employer.  Upon such a request for
review, the claim shall be reviewed by the Employer (or its designated
representative), which may, but shall not be required to, grant the Claimant a
hearing.  In connection with the review,
the Claimant may have representation, may examine pertinent documents, and may
submit issues and comments in writing.

 

The decision on review normally
shall be made within sixty (60) days of the Employer’s receipt of the request
for review.  If an extension of time is
required due to special circumstances, the Claimant shall be notified, in
writing, by the Employer, and the time limit for the decision on review shall
be extended to one hundred twenty (120) days. 
The decision on review shall be in writing and shall state, in a manner
calculated to be understood by the Claimant, the specific reasons for the
decision and shall include

 

14

 

references to the relevant Plan
provisions on which the decision is based. 
The written decision on review shall be given to the Claimant within the
sixty (60) day (or, if applicable, the one hundred twenty (120) day) time limit
discussed above.  If the decision on
review is not communicated to the Claimant within the sixty (60) day (or, if
applicable, the one hundred twenty (120) day) period discussed above, the claim
shall be deemed to have been denied upon review.  All decisions on review shall be final and
binding with respect to all concerned parties.

 

ARTICLE X. AMENDMENT

 

10.1                           RIGHT
TO AMEND.  The Employer, by written
instrument executed by the Employer, shall have the right to amend the Plan, at
any time and with respect to any provisions hereof, and all parties hereto or
claiming any interest hereunder shall be bound by such amendment; provided,
however, that no such amendment shall deprive a Participant or a Beneficiary of
a right accrued hereunder prior to the date of the amendment.

 

10.2                           AMENDMENTS TO ENSURE PROPER CHARACTERIZATION
OF PLAN.  Notwithstanding the provisions
of Section 10.1, the Plan and the Trust agreement may be amended by the
Employer at any time, retroactively if required, if found necessary, in the
opinion of the Employer, in order to ensure that the Plan is characterized as a
plan of deferred compensation maintained for a select group of management or
highly compensated employees as described under ERISA Sections 201(2),
301(a)(3), and 401(a)(1) and to conform the Plan to the provisions and
requirements of any applicable law (including ERISA and the Code).  No such amendment shall be considered prejudicial
to any interest of a Participant or a Beneficiary hereunder.

 

ARTICLE XI. TERMINATION

 

11.1                           EMPLOYER’S RIGHT TO TERMINATE OR SUSPEND PLAN.  The Employer reserves the right, at any time,
to terminate the Plan and/or its obligation to make further credits to Plan accounts.  The Employer also reserves the right, at any
time, to suspend the operation of the Plan for a fixed or indeterminate period
of time.

 

11.2                           AUTOMATIC TERMINATION OF PLAN.  The Plan, but not the Trust, automatically shall
terminate upon the dissolution of the Employer or upon its merger into or consolidation
with any other corporation or business organization if there is a failure by
the surviving corporation or business organization to adopt specifically and
agree to continue the Plan.

 

15

 

11.3                           SUSPENSION OF DEFERRALS.  In the event of a suspension of the Plan, the Employer
shall continue all aspects of the Plan, other than Compensation Deferrals and Employer
contribution credits under Section 3.1, during the period of the suspension, in
which event payments hereunder will continue to be made during the period of
the suspension in accordance with Articles V and VI.

 

11.4                           ALLOCATION AND DISTRIBUTION.  This Section shall become operative upon a complete
termination of the Plan.  The provisions
of this Section also shall become operative in the event of a partial
termination of the Plan, as determined by the Employer, but only with respect
to that portion of the Plan attributable to the Participants to whom the partial
termination is applicable.  Upon the
effective date of any such event, notwithstanding any other provisions of the
Plan, (i) no persons who were not theretofore Participants shall be eligible to
become Participants, and (ii) the value of the interest of all Participants and
Beneficiaries shall be determined and, after deduction of estimated expenses in
liquidating and, if applicable, paying Plan benefits, paid to them as soon as is
practicable after such termination.

 

11.5                           SUCCESSOR TO EMPLOYER.  Any corporation or other business
organization that is a successor to the Employer by reason of a consolidation,
merger, or purchase of substantially all of the assets of the Employer shall
have the right to become a party to the Plan by adopting the same by resolution
of the entity’s board of directors or other appropriate governing body.  If, within ninety (90) days from the
effective date of such consolidation, merger, or sale of assets, such new
entity does not become a party hereto, as above provided, the Plan
automatically shall be terminated, and the provisions of Section 11.4 shall
become operative.

 

ARTICLE XII. MISCELLANEOUS

 

12.1                         LIMITATIONS ON LIABILITY OF EMPLOYER.  Neither the establishment of the Plan or any
modification thereof, nor the creation of any account under the Plan, nor the
payment of any benefits under the Plan shall be construed as giving to any
Participant or other person any legal or equitable right against the Employer
or any officer or employer thereof, except as provided by law or by any Plan
provision.  Except as to the provisions
of Article 3.1, the Employer does not in any way guarantee any Participant’s
Account from loss or depreciation, whether caused by poor investment
performance of a deemed investment or the inability to realize upon an
investment due to an insolvency affecting an investment vehicle or any other
reason.  In no event shall the Employer,
or any successor, employee, officer, director, or stockholder of the Employer,
be liable to any person on account of any claim arising by reason of the
provisions of the Plan or of any instrument or instruments implementing its
provisions, or for the failure of any Participant, Beneficiary, or other person
to be entitled to any particular tax consequences with respect to the Plan, or
any credit or distribution hereunder.

 

16

 

12.2                          CONSTRUCTION. 
If any provision of the Plan is held to be illegal or void, such illegality
or invalidity shall not affect the remaining provisions of the Plan, but shall
be fully severable, and the Plan shall be construed and enforced as if said
illegal or invalid provision had never been inserted herein.  For all purposes of the Plan, where the
context admits, the singular shall include the plural, and the plural shall include
the singular.  Headings of Articles and
Sections herein are inserted only for convenience of reference and are not to
be considered in the construction of the Plan. 
The laws of the state of South Carolina shall govern, control, and
determine all questions of law arising with respect to the Plan and the
interpretation and validity of its respective provisions, except where those laws
are preempted by the laws of the United States. 
Participation under the Plan will not give any Participant the right to
be retained in the service of the Employer nor any right or claim to any
benefit under the Plan unless such right or claim has specifically accrued hereunder.

 

The Plan is intended to be and at all times shall be
interpreted and administered so as to qualify as an unfunded deferred
compensation plan, and no provision of the Plan shall be interpreted so as to
give any individual any right in any assets of the Employer which right is
greater than the rights of a general unsecured creditor of the Employer.

 

12.3                          SPENDTHRIFT PROVISION.  No amount payable to a Participant or a
Beneficiary under the Plan will, except as otherwise specifically provided by law,
be subject in any manner to anticipation, alienation attachment, garnishment,
sale, transfer, assignment (either at law or in equity), levy, execution,
pledge, encumbrance, charge, or any other legal or equitable process, and any
attempt to do so will be void; nor will any benefit be in any manner liable for
or subject to the debts, contracts, liabilities, engagements, or torts of the
person entitled thereto.  Further, the
withholding of taxes from Plan benefit payments; the recovery under the Plan of
overpayments of benefits previously made to a Participant or Beneficiary; if
applicable, the transfer of benefit rights from the Plan to another plan; or
the direct deposit of benefit payments to an account in a banking institution
(if not actually part of an arrangement constituting an assignment or
alienation) shall not be construed as an assignment or alienation.

 

In the event that any
Participant’s or Beneficiary’s benefits hereunder are garnished or attached by
order of any court, the Employer may bring an action or a declaratory judgment in
a court of competent jurisdiction to determine the proper recipient of the
benefits to be paid under the Plan.  During
the pendency of said action, any benefits that become payable shall be held as
credits to the Participant’s or Beneficiary’s Account or, if the Employer
prefers, paid into the court as they become payable, to be distributed by the
court to the recipient as the court deems proper at the close of said action.

 

17

 

ARTICLE XIII. SCHEDULE OF PAYMENTS

 

13.1               PAYMENT OF CERTAIN BENEFITS.  Benefit payments referencing this Article
XIII shall be paid as follows:

 

	
  Participant’s Balance in

  Deferred Compensation Account

  	
   

  	
  How Benefits Are Paid

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  $20,000 or
  less

  	
   

  	
   

  	
   

  	
  Lump Sum Paid

  
	
  Over

  	
   

  	
  Less Than

  	
   

  	
  Equal monthly installments(1)

  
	
  $20,000

  	
   

  	
  50,000

  	
   

  	
   

  	
  60

  
	
  $50,000

  	
  -

  	
  75,000

  	
   

  	
   

  	
  72

  
	
  $75,000

  	
  -

  	
  100,000

  	
   

  	
   

  	
  84

  
	
  $100,000

  	
  -

  	
  150,000

  	
   

  	
   

  	
  96

  
	
  $150,000

  	
  -

  	
  200,000

  	
   

  	
   

  	
  108

  
	
  $200,000 and
  above

  	
   

  	
  120

  

 

(1)
Accumulated interest will be paid on or before March 1 of each year.

 

IN WITNESS WHEREOF, the
Employer has caused the Plan to be executed and its seal to be affixed hereto,
effective as of the 1st day of January 1, 1998.

 

	
  Attest:

  	
   

  	
  Kanawha Insurance Company

  
	
   

  	
   

  	
   

  
	
  /s/ Thomas W. Thomas

  	
   

  	
   

  	
  By:

  	
  /s/ Stanley D. Johnson

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Date:

  	
  Feb. 16, 1998

  	
   

  
							

 

18

 

AMENDMENT NUMBER ONE

SUPPLEMENTAL RETIREMENT AND DEFERRED COMPENSATION PLAN

RESTATED AND AMENDED

Effective as of January 1, 1998

 

Article VI.  Distribution of Benefits is amended as
follows:

 

Paragraph 6.2, subparagraph
(b) is restated as follows:

 

(b)                                 Timing and Manner of Payment.  In the case of distributions to a Participant
or his or her Beneficiary by virtue of an entitlement pursuant to Section 5.2,
an aggregate amount equal, to the Participant’s Account will be paid by the
Trust or the Employer, as provided by Section 6.1, in a lump sum.

 

In
the event a Participant becomes entitled to benefits under Section 5.1, an
aggregate amount equal to the Participant’s Account will be paid by the Trust
or the Employer, as provided by Section 6.1, in a lump sum, on or about the
date of the Participant’s termination, or in installments made over a period
selected by the Participant.  Such installments
may be deferred for a period of time not to exceed age 75 of the Participant.  Such amount may be paid in the form of an
annuity for the life of the Participant (or the joint lives of the Participant
and his or her Primary Beneficiary) of actuarially equivalent value to the
Participant’s lump sum benefit.  The
timing and manner of payments of distributions of Participant Account
established to comply with Section 3.1, must be paid in accordance with the
Schedule stated in Article XIII, for the guarantee of interest set forth in
Section 3.1 to continue.

 

All
such selections must be made by the Participant prior to his or her death or
termination of employment.  If a
Participant fails to designate properly the manner of payment of the
Participant’s benefit under the Plan, such payment will be made in accordance
with the Schedule of Payment stated in Article XIII, to begin on or about the date of the Participant’s death or
termination of employment.

 

IN WITNESS WHEREOF, the
Employer has caused this Amendment to be executed and its seal to be affixed
hereto, effective as of the first day of January, 1998.

 

	
  ATTEST:

  	
   

  	
  KANAWHA INSURANCE COMPANY

  
	
   

  	
   

  	
   

  
	
  /s/ Thomas W. Thomas

  	
   

  	
   

  	
  /s/ Stanley D. Johnson

  	
   

  
	
  Secretary

  	
   

  	
  President
  and Chief Executive Officer

  
					

 

 

TRUST AGREEMENT

 

TRUST UNDER THE KANAWHA INSURANCE COMPANY

DEFERRED COMPENSATION PLAN

 

(a)                        This Agreement made this first day of
January, 1998, by and between Kanawha Insurance Company (Company) and the
Trustees whose signatures appear below.

 

(b)                       WHEREAS, Company has adopted the Nonqualified
Deferred Compensation Plans as listed in Appendix I;

 

(c)                        WHEREAS, Company has incurred or expects to incur liability under the terms
of such Plans with respect to the individuals participating in such Plans;

 

(d)                       WHEREAS, Company wishes to establish a trust
(hereinafter called “Trust”) and to contribute to the Trust assets that shall
be held therein, subject to the claims of Company’s creditors in the event of
Company’s Insolvency, as herein defined in Section 3(a), until paid to
Plan participants and their beneficiaries in such manner and at such times as
specified in the plans;

 

(e)                        WHEREAS, it is the intention of the parties
that this Trust shall constitute an unfunded arrangement and shall not affect
the status of the Plans as an
unfunded plan maintained for the purpose of providing deferred compensation for
a select group of management or highly compensated employees for purposes of
Title I of the Employee Retirement Income Security Act of 1974;

 

(f)                          WHEREAS, it is the intention of Company to
make contributions to the Trust to provide itself with a source of funds to
assist in the meeting of its liabilities under the Plans;

 

NOW, THEREFORE, the parties do hereby establish the
Trust and agree that the Trust shall be comprised, held and disposed of as
follows:

 

Section
1. Establishment of Trust.

 

(a)                        Company hereby deposits with Trustee in trust
the amount set forth in Exhibit A, referred to herein as the amount deposited which
shall become the principal of the Trust to be held, administered and disposed
of by Trustee as provided in this Trust Agreement.

 

(b)                       The Trust shall become irrevocable upon
approval by the Board of Directors.

 

(c)                        The Trust is intended to be a grantor trust,
of which Company is the grantor, within the meaning of subpart E, part I,
subchapter J, chapter 1, subtitle A of the Internal Revenue Code of 1986, as
amended, and shall be construed accordingly.

 

 

(d)                       The
principal of the Trust, and any earnings thereon shall be held separate and
apart from other funds of Company and shall be used exclusively for the uses
and purposes of Plan participants and general creditors as herein set
forth.  Plan participants and their
beneficiaries shall have no preferred claim on, or any beneficial ownership
interest in, any assets of the Trust.  Any rights created under the Plans and this
Trust Agreement shall be mere unsecured contractual rights of Plan participants
and their beneficiaries against Company. 
Any assets held by the Trust will be subject to the claims of Company’s
general creditors under federal and state law in the event of Insolvency, as
defined in Section 3(a) herein.

 

(e)                        Company,
in its sole discretion, may at any time, or from time to time, make additional
deposits of cash or other property in trust with Trustee to augment the
principal to be held, administered and disposed of by Trustee as provided in
this Trust Agreement.  Neither Trustee nor
any Plan participant or beneficiary shall have any right to compel such
additional deposits.

 

Section 2.  Payments to Plan Participants and Their
Beneficiaries.

 

(a)                        Company
shall deliver to Trustee a schedule (the Payment Schedule) that indicates the
amounts payable in respect of each Plan participant (and his or her
beneficiaries), that provides a formula or other instructions acceptable to
Trustee for determining the amounts so payable, the form in which such amount
is to be paid (as provided for or available under the Plans), and the time of
commencement for payment of such amounts. 
Except as otherwise provided herein, Trustee shall make payments to the
Plan participants and their beneficiaries in accordance with such Payment
Schedule.  The Trustee shall make
provisions for the reporting and withholding of any federal, state or local
taxes that may be required to be withheld with respect to the payment of
benefits pursuant to the terms of the Plans and shall pay amounts withheld to
the appropriate taxing authorities or determine that such amounts have been
reported, withheld and paid by Company.

 

(b)                       The
entitlement of a Plan participant or his or her beneficiaries to benefits under
the Plan shall be determined by Company or such party as it shall designate
under the Plan, and any claim for such benefits shall be considered and
reviewed under the procedures set out in the Plans.

 

(c)                        Company
may make payment of benefits directly to Plan participants or their
beneficiaries as they become due under the terms of the Plans.  Company shall notify Trustee of its decision
to make payment of, benefits directly prior to the time amounts are payable to
participants or their beneficiaries.  In
addition, if the principal of the Trust, and any earnings thereon, are not
sufficient to make payments of benefits in accordance with the terms of the
Plans, Company shall make the balance of each such payment as it falls due.
Trustee shall notify Company where principal and earnings are not sufficient.

 

 

Section 3.  Trustee Responsibility Regarding Payments to
Trust Beneficiary When Company Is Insolvent.

 

(a)                       Trustee shall cease payment of benefits to
Plan participants and their beneficiaries if the Company is Insolvent.  Company shall be considered Insolvent for
purposes of this Trust Agreement if (i) Company is unable to pay its debts as
they become due, or (ii) Company is subject to a pending proceeding as a debtor
under the United States Bankruptcy Code, or (iii) Company is determined to be
insolvent by The South Carolina Director of Insurance.

 

(b)                      At all times during the continuance of this
Trust, as provided in Section 1 (d) hereof, the principal and income of the Trust
shall be subject to claims of general creditors of Company under federal and
state law as set forth below.

 

(1)                                  The Board of Directors and the Chief
Executive Officer of Company shall have the duty to inform Trustee in writing
of Company’s Insolvency.  If a person
claiming to be a creditor of Company alleges in writing to Trustee that Company
has become Insolvent, Trustee shall determine whether Company is Insolvent and,
pending such determination, Trustee shall discontinue payment of benefits to
Plan participants or their beneficiaries.

 

(2)                                  Unless Trustee has actual knowledge of
Company’s insolvency, or has received notice from Company or a person claiming
to be a creditor alleging that Company is Insolvent, Trustee shall have no duty
to inquire whether Company is Insolvent.  Trustee may in all events rely on such
evidence concerning Company’s solvency as may be furnished to Trustee and that
provides Trustee with a reasonable basis for making a determination concerning
Company’s solvency.

 

(3)                                  If at any time Trustee has determined that
Company is Insolvent, Trustee shall discontinue payments to Plan participants
or their beneficiaries and shall hold the assets of the Trust for the benefit
of Company’s general creditors.  Nothing
in the Trust shall in any way diminish any rights of Plan participants or their
beneficiaries to pursue their rights as general creditors of Company with
respect to benefits due under the Plans or otherwise.

 

(4)                                  Trustee shall resume the payment of benefits
to Plan participants or their beneficiaries in accordance with Section 2 of
this Trust Agreement only after Trustee has determined that Company is not
Insolvent (or is no longer Insolvent).

 

(c)                       Provided that there are sufficient assets, if
Trustee discontinues the payment of benefits from the Trust pursuant to Section
3 (b) hereof and subsequently resumes such payments, the first payment
following such discontinuance shall include the aggregate amount of all
payments due to Plan participants or their beneficiaries under the terms of the
Plans for the period of such discontinuance, less the aggregate amount of any
payments made to Plan participants or their beneficiaries by Company in lieu of
the payments provided for hereunder during any such period of discontinuance.

 

 

Section 4.  Payments to Company.

 

Except as provided in
Section 3 hereof, after the Trust has become irrevocable, Company shall have no
right or power to direct Trustee to return to Company or to divert to others
any of the Trust assets before all payments of benefits have been made to Plan
participants and their beneficiaries pursuant to the terms of the Plans.

 

Section
5.  Investment Authority.

 

In
no event may Trustee invest in securities
(including stock or rights to acquire stock) or obligations issued by Company,
other than a de minimis amount held in common investment vehicles in which
Trustee invests.  All rights associated
with assets of the Trust shall be exercised by Trustee or the person designated
by Trustee, and shall in no event be exercisable by or rest with Plan
participants.

 

Section 6.  Disposition
of Income.

 

During
the term of this Trust, all income received by the Trust, net of expenses and
taxes, shall be accumulated and reinvested.

 

Section
7.  Accounting by Trustee.

 

Trustee
shall keep accurate and detailed records of all investments, receipts,
disbursements, and all other transactions required to be made, including such
specific records as shall be agreed upon in writing between Company and Trustee.  Within 60 days following the close of each
calendar year and within 30 days after the removal or resignation of Trustee,
Trustee shall deliver to Company a written account of its administration of the
Trust during such year or during the period from the close of the last
preceding year to the date of such removal or resignation, setting forth all investments,
receipts, disbursements
and other transactions effected by it, including a description of all
securities and investments
purchased and sold with the cost or net proceeds of such purchases or sales
(accrued interest paid or receivable being shown separately), and showing all
cash, securities and other property held in the Trust at the end of such year
or as of the date of such removal or resignation, as the case may be. 

 

Section
8.  Responsibility of Trustee.

 

(a)                      Trustee shall act with the care, skill,
prudence and diligence under the circumstances then prevailing that a prudent
person acting in like capacity and familiar with such matters would use in the
conduct of an enterprise of a like character and with like aims, provided,
however, that Trustee shall incur no liability to any person for any action
taken pursuant to a direction, request or approval given by Company which is
contemplated by, and in conformity with, the terms of the Plans or this Trust
and is given in writing by Company.  In the
event of a dispute between Company and a party, Trustee may apply to a court of competent jurisdiction to
resolve the dispute.

 

 

(b)                      If
Trustee undertakes or defends any litigation arising in connection with this
Trust, Company agrees to indemnify Trustee against Trustee’s costs, expenses
and liabilities (including, without limitation, Attorney’s fees and expenses)
relating thereto and to be primarily liable for such payments.  If Company does not pay such costs, expenses
and liabilities in a reasonably timely manner, Trustee may obtain payment from
the Trust.

 

(c)                       Trustee
may hire agents, accountants, actuaries, investment advisors, financial
consultants or other professionals to assist it in performing any of its duties
or obligations hereunder.

 

(d)                      Trustee
shall have, without exclusion, all powers conferred in Trustees by applicable
law, unless expressly provided otherwise herein, provided, however, that if an
insurance policy is held as an asset of the Trust, Trustee shall have no power
to name a beneficiary of the policy other than the Trust, to assign the policy
(as distinct from conversion of the policy to a different form) other than to a
successor Trustee, or to loan to any person the proceeds of any borrowing
against such policy.

 

(d)                      Notwithstanding
any powers granted to Trustee pursuant to this Trust Agreement or to applicable
law, Trustee shall not have any power that could give this Trust the objective
of carrying on a business and dividing the gains therefrom, within the meaning
of Section 301.7701-2 of the Procedure and Administrative Regulations
promulgated pursuant to the Internal Revenue Code.

 

Section 9.  Compensation and Expenses of Trustee.

 

Company shall pay all administrative
and Trustee’s fees and expenses.  If not
so paid, the fees and expenses shall be paid from the Trust.

 

Section 10.  Resignation and Removal of Trustee.

 

(a)                       Trustee
may resign at any time by written notice to Company, which shall be effective
30 days after receipt of such notice unless Company and Trustee agree
otherwise.

 

(b)                      Trustee
may be removed by Company on 60 days notice or upon shorter notice accepted by
Trustee.

 

(c)                       Upon
resignation or removal of Trustee and appointment of a successor Trustee, all
assets shall subsequently be transferred to the successor Trustee.  The transfer shall be completed within 60
days after receipt of notice of resignation, removal or transfer, unless
Company extends the time limit.

 

(d)                      If
trustee resigns or is removed, a successor shall be appointed, in accordance
with Section 11 hereof, by the effective date of resignation or removal under
paragraphs (a) or (b) of this section.  If no such appointment has been made, Trustee
may apply to a court of competent jurisdiction for appointment of a successor
or for instructions.  All expenses of
Trustee in connection with the proceeding shall be allowed as administrative
expenses of the Trust.

 

 

Section 11.  Appointment of Successor

 

(a)                       If Trustee resigns or is removed in
accordance with Section 10(a) or (b) hereof, Company may appoint any third
party, such as a bank trust department or other party that may be granted
corporate trustee powers under state law, as a successor to replace Trustee
upon resignation or removal.  The
appointment shall be effective when accepted in writing by the new Trustee, who
shall have all of the rights and powers of the former Trustee, including ownership
rights in the Trust assets.  The former
Trustee shall execute any instrument necessary or reasonably requested by
Company or the successor Trustee to evidence the transfer

 

(b)                      The successor Trustee need not examine the
records and acts of any prior Trustee and may retain or dispose of existing
Trust assets, subject to Sections 7 and 8 hereof.  The successor Trustee shall not be
responsible for and Company shall indemnify and defend the successor Trustee
from any claim or liability resulting from any action or inaction of any prior
Trustee or from any other past event, or any condition existing at the time it
becomes successor Trustee.

 

Section
12.  Amendment or Termination.

 

(a)                        This Trust Agreement may be amended by a
written instrument executed by Trustee and Company.  Notwithstanding the foregoing, no such
amendment shall conflict with the terms of the Plans or shall make the Trust
revocable after it has become irrevocable in accordance with Section 1(b)
hereof.

 

(b)                       The Trust shall not terminate until the date
on which Plan participants and their beneficiaries are no longer entitled to benefits
pursuant to the terms of the Plans.

 

Section 13.  Miscellaneous.

 

(a)                        Any
provision of this Trust Agreement prohibited by law shall be ineffective to the
extent of any such prohibition, without invalidating the remaining provisions
hereof.

 

(b)                       Benefits payable to Plan participants and
their beneficiaries under this Trust Agreement may not be anticipated, assigned
(either at law or in equity), alienated, pledged, encumbered or subjected to
attachment, garnishment, levy,
execution or other legal or equitable process.

 

(c)                        This Trust Agreement shall be governed by and
construed in accordance with the laws of the State of South Carolina.

 

 

The effective date of this
Trust Agreement shall be the first day of January, 1998.

 

 

	
  KANAWHA
  INSURANCE COMPANY

  	
   

  	
  TRUSTEE

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ Stanley
  D. Johnson

  	
   

  	
   

  	
  By:

  	
  /s/ Stanley
  D. Johnson

  	
   

  
	
   

  	
  President
  & CEO

  	
   

  	
   

  	
   

  	
  /s/ Robert
  E. Matthews

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  /s/ Thomas
  W. Thomas

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  /s/ Arthur
  M. Burch

  	
   

  

 

 

APPENDIX I

 

NONQUALIFIED DEFERRED COMPENSATION PLANS

 

Kanawha Insurance Company Supplemental Retirement and Deferred
Compensation PlanExhibit
10.13

 

 

 

METROPOLITAN
LIFE INSURANCE COMPANY,

on behalf of a commingled
separate account,

 

as Landlord

 

 

AND

 

 

KMG
AMERICA CORPORATION, a Virginia corporation

 

as Tenant

 

 

 

LEASE AGREEMENT

 

 

 

Dated:  February 2, 2005

 

12600 Whitewater Drive

Minnetonka, Minnesota 55343

 

 

 

 

TABLE OF
CONTENTS

 

	
  ARTICLE 1

  	
  REFERENCE DATA AND DEFINITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2

  	
  DEMISED
  PREMISES AND TERM

  	
   

  
	
   

  	
   

  	
   

  
	
  2.1

  	
  Demised Premises and Storage Space

  	
   

  
	
   

  	
   

  	
   

  
	
  2.2

  	
  Term

  	
   

  
	
   

  	
   

  	
   

  
	
  2.3

  	
  Tenant’s Entry upon Demised Premises before
  Commencement Date

  	
   

  
	
   

  	
   

  	
   

  
	
  2.4

  	
  Temporary Premises

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3

  	
  RENT
  AND SECURITY DEPOSIT

  	
   

  
	
   

  	
   

  	
   

  
	
  3.1

  	
  Fixed Rent

  	
   

  
	
   

  	
   

  	
   

  
	
  3.2

  	
  Additional Rent

  	
   

  
	
   

  	
   

  	
   

  
	
  3.3

  	
  Past Due Rent

  	
   

  
	
   

  	
   

  	
   

  
	
  3.4

  	
  Security Deposit

  	
   

  
	
   

  	
   

  	
   

  
	
  3.5

  	
  Rent Payments

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4

  	
  TENANT’S
  SHARE OF OPERATING COSTS AND TAXES

  	
   

  
	
   

  	
   

  	
   

  
	
  4.1

  	
  Definitions

  	
   

  
	
   

  	
   

  	
   

  
	
  4.2

  	
  Tenant’s Payment Of Operating Costs And
  Taxes

  	
   

  
	
   

  	
   

  	
   

  
	
  4.3

  	
  Refunds; Other Items

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5

  	
  COMPLETION
  AND OCCUPANCY OF DEMISED PREMISES

  	
   

  
	
   

  	
   

  	
   

  
	
  5.1

  	
  Completion of Demised Premises

  	
   

  
	
   

  	
   

  	
   

  
	
  5.2

  	
  Occupancy of Demised Premises

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6

  	
  CONDUCT
  OF BUSINESS BY TENANT

  	
   

  
	
   

  	
   

  	
   

  
	
  6.1

  	
  Use of Demised Premises

  	
   

  
	
   

  	
   

  	
   

  
	
  6.2

  	
  Compliance with Laws and Requirements of
  Public Authorities

  	
   

  
	
   

  	
   

  	
   

  
	
  6.3

  	
  Rules and Regulations

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7

  	
  COMMON
  AREA

  	
   

  
	
   

  	
   

  	
   

  
	
  7.1

  	
  Control of Common Area

  	
   

  
	
   

  	
   

  	
   

  
	
  7.2

  	
  Parking

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8

  	
  REPAIRS,
  ALTERATIONS AND MECHANICS’ LIENS

  	
   

  
	
   

  	
   

  	
   

  
	
  8.1

  	
  Repairs

  	
   

  
	
   

  	
   

  	
   

  
	
  8.2

  	
  Alterations

  	
   

  
	
   

  	
   

  	
   

  
	
  8.3

  	
  Mechanics’ Liens

  	
   

  

 

i

 

	
  8.4

  	
  Indemnification

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 9

  	
  UTILITIES
  AND BUILDING SERVICES

  	
   

  
	
   

  	
   

  	
   

  
	
  9.1

  	
  Heating, Ventilating and Air Conditioning

  	
   

  
	
   

  	
   

  	
   

  
	
  9.2

  	
  Cleaning Service

  	
   

  
	
   

  	
   

  	
   

  
	
  9.3

  	
  Elevator Service

  	
   

  
	
   

  	
   

  	
   

  
	
  9.4

  	
  Electricity

  	
   

  
	
   

  	
   

  	
   

  
	
  9.5

  	
  Telecommunications

  	
   

  
	
   

  	
   

  	
   

  
	
  9.6

  	
  Interruption of Services

  	
   

  
	
   

  	
   

  	
   

  
	
  9.7

  	
  Overtime Services

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 10

  	
  PERSONAL
  PROPERTY TAXES

  	
   

  
	
   

  	
   

  	
   

  
	
  10.1

  	
  Tenant’s Personal Property

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 11

  	
  INSURANCE
  AND INDEMNITY

  	
   

  
	
   

  	
   

  	
   

  
	
  11.1

  	
  Tenant’s Insurance

  	
   

  
	
   

  	
   

  	
   

  
	
  11.2

  	
  Indemnity and Non-Liability

  	
   

  
	
   

  	
   

  	
   

  
	
  11.3

  	
  Waiver of Subrogation

  	
   

  
	
   

  	
   

  	
   

  
	
  11.4

  	
  Landlords’ Insurance

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 12

  	
  DAMAGE
  BY CASUALTY

  	
   

  
	
   

  	
   

  	
   

  
	
  12.1

  	
  Notice

  	
   

  
	
   

  	
   

  	
   

  
	
  12.2

  	
  Restoration of Improvements

  	
   

  
	
   

  	
   

  	
   

  
	
  12.3

  	
  Damage During Last Year of Lease Term

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 13

  	
  EMINENT
  DOMAIN

  	
   

  
	
   

  	
   

  	
   

  
	
  13.1

  	
  Taking of Demised Premises

  	
   

  
	
   

  	
   

  	
   

  
	
  13.2

  	
  Partial or Temporary Taking of Building

  	
   

  
	
   

  	
   

  	
   

  
	
  13.3

  	
  Termination

  	
   

  
	
   

  	
   

  	
   

  
	
  13.4

  	
  Surrender

  	
   

  
	
   

  	
   

  	
   

  
	
  13.5

  	
  Rent Adjustment for Partial Taking of
  Demised Premises

  	
   

  
	
   

  	
   

  	
   

  
	
  13.6

  	
  Awards

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 14

  	
  RIGHTS
  RESERVED TO LANDLORD

  	
   

  
	
   

  	
   

  	
   

  
	
  14.1

  	
  Access to Demised Premises

  	
   

  
	
   

  	
   

  	
   

  
	
  14.2

  	
  Additional Rights

  	
   

  

 

ii

 

	
  ARTICLE 15

  	
  ASSIGNMENT
  AND SUBLETTING

  	
   

  
	
   

  	
   

  	
   

  
	
  15.1

  	
  Consent Required

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 16

  	
  BANKRUPTCY

  	
   

  
	
   

  	
   

  	
   

  
	
  16.1

  	
  Bankruptcy

  	
   

  
	
   

  	
   

  	
   

  
	
  16.2

  	
  Measure of Damages

  	
   

  
	
   

  	
   

  	
   

  
	
  16.3

  	
  Adequate Assurance

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 17

  	
  DEFAULT

  	
   

  
	
   

  	
   

  	
   

  
	
  17.1

  	
  Events of Default

  	
   

  
	
   

  	
   

  	
   

  
	
  17.2

  	
  Damages

  	
   

  
	
   

  	
   

  	
   

  
	
  17.3

  	
  Waiver of Jury Trial

  	
   

  
	
   

  	
   

  	
   

  
	
  17.4

  	
  Other Remedies

  	
   

  
	
   

  	
   

  	
   

  
	
  17.5

  	
  Landlord Default

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 18

  	
  SURRENDER

  	
   

  
	
   

  	
   

  	
   

  
	
  18.1

  	
  Possession

  	
   

  
	
   

  	
   

  	
   

  
	
  18.2

  	
  Merger

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 19

  	
  HOLDING
  OVER

  	
   

  
	
   

  	
   

  	
   

  
	
  19.1

  	
  Holding Over

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 20

  	
  NO
  WAIVER

  	
   

  
	
   

  	
   

  	
   

  
	
  20.1

  	
  No
  Waiver

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 21

  	
  ESTOPPEL
  CERTIFICATE, SUBORDINATION, ATTORNMENT

  	
   

  
	
   

  	
   

  	
   

  
	
  21.1

  	
  Estoppel Certificate

  	
   

  
	
   

  	
   

  	
   

  
	
  21.2

  	
  Subordination

  	
   

  
	
   

  	
   

  	
   

  
	
  21.3

  	
  Attornment

  	
   

  
	
   

  	
   

  	
   

  
	
  21.4

  	
  Mortgages

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 22

  	
  QUIET
  ENJOYMENT

  	
   

  
	
   

  	
   

  	
   

  
	
  22.1

  	
  Quiet Enjoyment

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 23

  	
  NOTICES

  	
   

  
	
   

  	
   

  	
   

  
	
  23.1

  	
  Notices

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 24

  	
  MISCELLANEOUS
  PROVISIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  24.1

  	
  Time

  	
   

  

 

iii

 

	
  24.2

  	
  Applicable Law, Construction and
  Arbitration of Disputes

  	
   

  
	
   

  	
   

  	
   

  
	
  24.3

  	
  Parties Bound

  	
   

  
	
   

  	
   

  	
   

  
	
  24.4

  	
  No Representations by Landlord

  	
   

  
	
   

  	
   

  	
   

  
	
  24.5

  	
  Brokers

  	
   

  
	
   

  	
   

  	
   

  
	
  24.6

  	
  Consulting Fee

  	
   

  
	
   

  	
   

  	
   

  
	
  24.7

  	
  Severability

  	
   

  
	
   

  	
   

  	
   

  
	
  24.8

  	
  Force Majeure

  	
   

  
	
   

  	
   

  	
   

  
	
  24.9

  	
  Definition of Landlord

  	
   

  
	
   

  	
   

  	
   

  
	
  24.10

  	
  No
  Option

  	
   

  
	
   

  	
   

  	
   

  
	
  24.11

  	
  Exculpatory Clause

  	
   

  
	
   

  	
   

  	
   

  
	
  24.12

  	
  No Recording

  	
   

  
	
   

  	
   

  	
   

  
	
  24.13

  	
  Financial Statements

  	
   

  
	
   

  	
   

  	
   

  
	
  24.14

  	
  ERISA

  	
   

  
	
   

  	
   

  	
   

  
	
  24.15

  	
  Signage

  	
   

  
	
   

  	
   

  	
   

  
	
  24.16

  	
  Maintenance

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 25

  	
  OPTION
  TO RENEW

  	
   

  
	
   

  	
   

  	
   

  
	
  25.1

  	
  Option to Renew

  	
   

  
	
   

  	
   

  	
   

  
	
  25.2

  	
  Fair Market Rent

  	
   

  
	
   

  	
   

  	
   

  
	
  25.3

  	
  Dispute of Fair Market Rent

  	
   

  
	
   

  	
   

  	
   

  
	
  25.4

  	
  Arbitration of Fair Market Rent

  	
   

  
	
   

  	
   

  	
   

  
	
  25.5

  	
  Conditions

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 26

  	
  TENANT
  FINISH

  	
   

  

 

iv

 

	
  EXHIBITS

  
	
   

  	
   

  	
   

  
	
  EXHIBIT A

  	
  DEMISED PREMISES

  	
   

  
	
  EXHIBIT A-1

  	
  DEMISED PREMISES OCCUPIED (FIRST 24 MOS.)

  	
   

  
	
  EXHIBIT A-2

  	
  STORAGE SPACE

  	
   

  
	
  EXHIBIT A-3

  	
  TEMPORARY SPACE

  	
   

  
	
  EXHIBIT B

  	
  LEGAL DESCRIPTION OF LAND

  	
   

  
	
  EXHIBIT C

  	
  RULES AND REGULATIONS

  	
   

  
	
  EXHIBIT D

  	
  WORK LETTER

  	
   

  
	
  EXHIBIT E

  	
  PERMIT SET OF DRAWINGS

  	
   

  
	
  EXHIBIT F

  	
  PARKING RIDER

  	
   

  
	
  EXHIBIT G

  	
  CLEANING SPECIFICATIONS

  	
   

  

 

v

 

LEASE

 

This Lease is made between Landlord and
Tenant named in Article l as of the date set forth therein.  Landlord and Tenant, in consideration of the
covenants and agreements contained herein, agree as follows:

 

ARTICLE 1

REFERENCE DATA AND DEFINITIONS

 

The following are definitions of terms used
in this Lease, and each reference in this Lease to any of the following
subjects shall be construed to incorporate the data, terms, covenants and
provisions stated for that subject in this Article 1, subject to the terms
of the balance of this Lease: 

 

	
  DATE OF EXECUTION 

  OF THIS LEASE:

  	
   

  	
  February 2, 2005 (“Date of Execution of Lease”)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  LANDLORD:

  	
   

  	
  Metropolitan Life Insurance Company, a New
  York corporation, on behalf of a commingled separate account

  
	
   

  	
   

  	
   

  
	
  MANAGING AGENT:

  	
   

  	
  CB Richard Ellis, Inc.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  LANDLORD’S ADDRESS:

  	
   

  	
  c/o CB Richard Ellis, Inc.

  88 South 6th Street 

  Suite 350 

  Minneapolis, MN 55402 

  Attn: Real Estate Manager

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  with a copy to:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  c/o BlackRock Realty Advisors, Inc..

  10 Park Avenue

  Morristown, NJ 07962 

  Attn: Cathy Bernstein

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TENANT:

  	
   

  	
  KMG America Corporation, a Virginia
  corporation

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TENANT’S ADDRESS:

  	
   

  	
  Date of Execution of Lease to Rent
  Commencement Date:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  7760 France Avenue South

  Suite 1000 

  Minneapolis, MN 55435 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Rent Commencement Date to Expiration Date:

  	
   

  	
   

  

 

1

 

	
   

  	
   

  	
  12600 Whitewater Drive

  Suite 150

  Minnetonka, MN 55343 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  with a copy to: 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  KMG America Corp.

  c/o John D. Piller 

  Kanawha Insurance Company 

  210 S. White St. 

  Lancaster, SC 29720

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  DEMISED PREMISES:

  	
   

  	
  16,931 rentable square feet located on the
  first floor, as shown on Exhibit A. For all purposes of this Lease,
  the Demised Premises is agreed to be 16,931 rentable square feet and the
  Building is agreed to be 70,705 rentable square feet, subject only to the
  following: 

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  For the first 24 months of this Lease, it
  is anticipated Tenant shall only Occupy (defined below) and pay Fixed Rent
  (defined below) on 10,000 square feet of rentable space for the first 24
  months of the Lease. If Tenant requires the use of and Occupies more than the
  area identified and described on Exhibit A-1 before the 25th
  month of this Lease, then Tenant shall pay the per square foot charge as
  Fixed Rent for any such additional space. 

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  The term “Occupy,” as used in this Lease, shall not be deemed to
  have occurred solely because Tenant exercises its rights under Section 2.3
  to enter the Demised Premises early, or that the Demised Premises is improved
  with cubicles or that Tenant’s ingress and egress to the Demised Premises or
  the Building’s interior elevator is through such space, but in the event
  Tenant’s materials or people otherwise occupy such space, such space shall be
  deemed to be Occupied.

  
	
   

  	
   

  	
   

  
	
  STORAGE SPACE:

  	
   

  	
  Approximately 662 rentable square feet of
  storage space as shown on Exhibit A-2 (“Storage Space”). Landlord shall install the demising
  wall shown on Exhibit A-2 prior to Commencement Date, but such
  installation may not be prior to Entry Date (defined below).

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TEMPORARY SPACE:

  	
   

  	
  Approximately 3500 rentable square feet
  shown on Exhibit A-3. Landlord agrees at Landlord’s cost such space
  shall be improved with carpeting, a ceiling and a single power pole to
  provide electricity for 4 to 6 stations. If Tenant wished to install cabling
  and wiring in such space, Tenant shall make such improvements at Tenant’s
  sole cost and expense provided Tenant has obtained 

  

 

2

 

	
   

  	
   

  	
  Landlord’s prior written approval for such
  work and shall remove such cabling at the expiration or earlier termination
  of the Lease pursuant to Section 9.5 (e).

  
	
   

  	
   

  	
   

  
	
  LAND:

  	
   

  	
  The Land described on Exhibit B.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  BUILDING:

  	
   

  	
  12600 Whitewater Drive, Minnetonka,
  Minnesota

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  PROPERTY:

  	
   

  	
  The Land, the Building and all other
  improvements located on the Land, including, without limitation, parking
  areas, driveways, walkways and landscaped areas.

  
	
   

  	
   

  	
   

  
	
  SCHEDULED

  COMMENCEMENT DATE:

  	
   

  	
  April 1, 2005 so long as the Date of
  Execution of this Lease is not later than 5:00 p.m. Central Time on February 2,
  2005

  
	
   

  	
   

  	
   

  
	
  SCHEDULED 

  EXPIRATION DATE:

  	
   

  	
  June 30, 2010, based on the
  Commencement Date being no later than April 1, 2005.

  
	
   

  	
   

  	
   

  
	
  RENT COMMENCEMENT 

  DATE:

  	
   

  	
  October 1, 2005

  
	
   

  	
   

  	
   

  
	
  TERM:

  	
   

  	
  Five (5) years and three (3) months,
  subject to adjustment as provided in Section 2.2 below.

  
	
   

  	
   

  	
   

  
	
  RENEWAL TERM:

  	
   

  	
  One (1) Renewal Term of five (5) years.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  FIXED RENT:

  	
   

  	
  Initial Term:

  

  (Note: Commencing with the first month following the expiration of the Rent
  Abatement Period (as defined below), the Monthly Rent amounts shall be 1/12th
  of the annual Fixed Rent amount due and payable. It is anticipated that
  Tenant will only occupy the space shown on Exhibit A-1 from the
  Commencement Date to the first day of 25th month of the Term, and
  Tenant shall pay commencing the 1st day of the seventh month of
  the Term at a minimum for such period annual Fixed Rent of $105,000 and
  monthly Fixed Rent of $8,750.00. To the extent during such

  	
   

  	
   

  

 

3

 

	
   

  	
   

  	
  period Tenant Occupies more than the square
  feet shown on Exhibit A-1, then Tenant shall pay monthly 1/12th
  of the annual Fixed Rent at the per square foot charge on the amount of space
  Occupied, with the charge for the space in excess of the square feet shown on
  Exhibit A-1 being prorated based on the number of days such excess
  space is Occupied. From and after the first day of the twenty-fifth month
  after the Commencement Date through the expiration of the Term, Fixed Rent
  shall be payable on 16,931 square feet regardless of the amount of space
  Tenant actually Occupies.)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  From Rent Commencement Date until the last
  day of the sixth month after the Commencement Date (the “Rent Abatement Period”):

  	
   

  	
  $0.00 per square foot 

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  From the first day of the seventh month
  after the Commencement Date until the last day of the twelfth month after the
  Commencement Date: 

  	
   

  	
  $10.50 per square foot

  Occupied per annum 

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  From the first day of the thirteenth month
  after the Commencement Date until the last day of the twenty- fourth month
  after the Commencement Date: 

  	
   

  	
  $10.75 per square foot

  Occupied per annum 

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  From the first day of the twenty-fifth
  month after the Commencement Date until the last day of the thirty-sixth
  month after the Commencement Date: 

  	
   

  	
  $11.25 per square foot 

  times 16,931 square feet 

  /$190,473.75 per annum 

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  From the first day of the thirty-seventh
  month after the Commencement Date until the last day of the forty-eighth
  month after the Commencement Date: 

  	
   

  	
  $11.50 per square foot

  times 16,931 square feet 

  /$194,706.50 per annum 

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  From the first day of the forty-ninth month
  after the Commencement Date until the last day of the sixtieth month after
  the Commencement Date: 

  	
   

  	
  $11.75 per square foot 

  times 16,931 square feet 

  /$198,939.25 per annum

  

 

4

 

	
   

  	
   

  	
  From the first day of the sixty-first month
  after the Commencement Date until the last day of the sixty-third month after
  the Commencement Date:

  	
   

  	
  $12.25 per square foot 

  times 16,931 square feet 

  /$207,404.75 per annum

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Storage Space Rent
  (but not during the Rent Abatement Period)

  	
   

  	
  $10.00 gross per square 

  foot of the Storage Space.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Renewal Term: 

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Fair Market Rent (as defined in Section 25.2)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  TENANT’S 

  PROPORTIONATE SHARE 

  (excludes Storage Space):

  	
   

  	
  
From Commencement Date to the last
  day of the twenty-fourth month after the Commencement Date: that fraction
  whose denominator is 70,705 and whose numerator is 10,000 square feet. To the
  extent Tenant actually Occupies more than that area identified and described
  on Exhibit A-1 during the first twenty-four months after the Commencement
  Date, such fraction shall be adjusted and the percentage prorated based on
  the number of days such excess space is Occupied. 

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  From the first day of the twenty-fifth
  month after the Commencement Date until the last day of the sixty-third month
  after the Commencement Date: 23.95%.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  DEFAULT RATE:

  	
   

  	
  The lesser of (1) twelve percent (12%)
  per annum, or (2) the maximum rate of interest permitted by law.

  
	
   

  	
   

  	
   

  
	
  SECURITY DEPOSIT AMOUNT:

  	
   

  	
  $8,750.00 if required by the terms of Section 3.4
  below.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  NORMAL BUSINESS HOURS:

  	
   

  	
  Monday through Friday: 7:00 A.M. to 6:00
  P.M. Saturdays: 8:00 A.M. to 1:00 P.M.

  
	
   

  	
   

  	
   

  
	
  BROKER:

  	
   

  	
  CB Richard Ellis, Inc.

  	
   

  	
   

  

 

5

 

ARTICLE 2

 

DEMISED PREMISES AND
TERM

 

2.1                               Demised
Premises and Storage Space.

 

Landlord hereby leases unto Tenant, and
Tenant hereby leases from Landlord, the Demised Premises and Storage Space,
subject to the covenants, agreements, terms, conditions, limitations,
exceptions and reservations of this Lease.

 

2.2                               Term.

 

(a)                                  The Term shall mean
the period set forth in Article 1 and shall commence on the earlier to
occur of (the “Commencement Date”):
(i) the later to occur of (A) April 1, 2005, and (B) the date that
the Demised Premises are available for occupancy, as determined under Section 5.1,
or (ii) the date on which Tenant or anyone claiming by, under or through
Tenant shall first Occupy any portion of the Demised Premises for any purpose
other than to prepare the Demised Premises for the conduct of Tenant’s
business; and shall end, unless sooner terminated as herein provided or
pursuant to law, at the close of business on the Scheduled Expiration Date.

 

(b)                                 If for any reason other
than a Tenant Delay (defined below in Section 5.1), the Demised Premises
are not substantially completed and permitted under Applicable Law as being
available for occupancy (“Turn Over
Condition”) March 31, 2005 (such date being referred to as
the “Finish Date”),
Landlord shall pay to Tenant the Daily Fee (defined below) for each day after
the Finish Date the Demised Premises are not in Turn Over Condition, but the
aggregate of such amount shall not exceed seven Thousand Dollars ($7,000.00) (“Cap”). 
By Tenant’s execution of this Lease, Tenant hereby expressly approves
the permit set of drawings referred to in Exhibit E and such drawings
are defined as the “Permit Set of Drawings”).  The Daily Fee shall be the per diem amount
payable by Tenant at its existing executive suite space located at 7760 France
Avenue South, Minneapolis, Minnesota (“Existing
Lease”), but in no event more than the Cap.  Landlord shall not be liable for any other
claims, damages or liabilities in connection with such failure, nor shall the
same make this Lease void or voidable. 
In any event, in the event of such delay in delivery of the Demised
Premises to Tenant, Tenant agrees to use its good faith reasonable efforts to
mitigate damages under its Existing Lease so as to mitigate Landlord’s
obligations as set forth herein.

 

(c)                                  The expiration date
(the “Expiration Date”) of
the Term shall be the Scheduled Expiration Date set forth in the Schedule,
unless, however, the Commencement Date occurs after the Scheduled Commencement
Date set forth in the Schedule, in which event the Expiration Date shall be
extended to a date which shall allow the term of this Lease to be the complete
Term set forth in the Schedule; provided, however, that if such extended
Expiration Date would occur on a day other than the last day of a calendar
month, then the Expiration Date shall be the last day of such calendar month.

 

6

 

(d)                                 Following the
Commencement Date, the parties shall, at either party’s request, execute a
supplemental agreement to become a part hereof setting forth the Commencement
Date and Expiration Date of the Term, as determined under the provisions of
this Article.  The parties’ failure to
execute such supplemental agreement shall in no way affect Tenant’s obligation
to perform under this Lease.

 

2.3                               Tenant’s
Entry upon Demised Premises before Commencement Date.

 

Provided that Tenant complies at all times
with the provisions and requirements of this Lease (other than the obligation
to pay Fixed Rent and, except as provided for below, the obligation to pay
Additional Rent (as defined below)), Tenant may (i) access and use the Building’s
interior elevator beginning on the Date of Execution of Lease and (ii) enter
the Demised Premises prior to the Commencement Date, but not earlier than the
Entry Date defined below to install trade fixtures and furnishings and to make
the Demised Premises ready for the conduct of Tenant’s business provided,
however, that except as set forth in the last sentence of this Section 2.3,
Tenant does not interfere with Landlord’s Work (as defined below), if any, and
provided further that such contractors as Tenant may engage to undertake such
installations and other preparatory work shall be subject to Landlord’s (or
Landlord’s duly appointed agent’s) written approval (which approval shall not
be unreasonably withheld) prior to engagement. 
The “Entry Date” shall be March 25,
2005 so long as the Tenant has fully executed and delivered this Lease to
Landlord no later than February 2, 2005. 
If Tenant fails to so execute and deliver, then the Entry Date shall be
the date named by Landlord using Landlord’s commercially reasonable efforts to
promptly commence Landlord’s Work. 
Tenant acknowledges that Landlord may not be able to install the storage
demising wall during the Temporary Premises Term.

 

2.4                               Temporary
Premises.

 

Upon the Date of Execution of Lease, Tenant
may lease and occupy the Temporary Space (“Temporary
Premises”) for all uses permitted under the Lease, including but
not limited to the installation of wires and cables to accommodate workstations
(“Temporary Space Wiring”).  Tenant’s lease of the Temporary Premises
shall be subject to all of the terms, conditions and limitations regarding the
Demised Premises as set forth in this Lease, except as follows:

 

(a)                                  The term for Tenant’s
lease of the Temporary Premises shall be the period commencing on the Date of
Execution of Lease and expiring on the Commencement Date (“Temporary Premises Term”).

 

(b)                                 The rent for the Temporary
Premises shall be $0.00 per rentable square foot of the Temporary Premises
during the Temporary Premises Term (“Temporary
Premises Rent”).  Tenant
shall not be obligated to pay any Additional Rent (as defined below) in
connection with Tenant’s lease of the Temporary Premises.

 

(c)                                  Tenant agrees that
(i) Tenant shall accept the Temporary Premises in its current “as-is”
condition, except Landlord shall deliver the Temporary Premises to Tenant in
broom-clean condition, with carpet, ceiling installed and a single power pole
providing electricity to 4 to 6 work stations, (ii) Except for the carpet and
ceiling,

 

7

 

Landlord shall not be required to construct
any improvements in the Temporary Premises and (iii) Landlord has not made any
representation or warranty regarding the Temporary Premises or its suitability
for the conduct of Tenant’s business.

 

ARTICLE 3

 

RENT AND SECURITY
DEPOSIT

 

3.1                               Fixed
Rent.

 

Commencing on the Rent Commencement Date,
Tenant shall pay to Landlord, without any prior demand therefor and without any
deduction or setoff whatsoever, the Fixed Rent set forth in Article 1.  Fixed Rent shall be due and payable in
monthly installments each equal to the Monthly Fixed Rent set forth in Article l,
in advance on the first day of each and every calendar month during the
Term.  Tenant shall pay to Landlord upon
execution of this Lease an amount equal to the first Monthly Fixed Rent, which
amount shall be held by Landlord without interest and applied to the first
Monthly Fixed Rent obligation of Tenant.

 

3.2                               Additional
Rent.

 

Any sums or charges to be paid by Tenant
pursuant to the provisions of this Lease, other than the Fixed Rent, shall be
designated as “Additional Rent”
and shall be payable within 5 days after Landlord gives written notice that
payment is due, unless otherwise provided in this Lease.  Without limiting the generality of the
foregoing, Additional Rent includes Tenant’s Expense Charge.  Landlord shall have the same rights against
Tenant for default in payment of Additional Rent as for default in payment of
the Fixed Rent.  As used in this Lease,
the term “Rent” shall mean
the Fixed Rent and Additional Rent.

 

3.3                               Past
Due Rent.

 

Any amount due from Tenant to Landlord which
is not paid when due shall bear interest at the Default Rate from the date such
payment is due, after the expiration of any applicable grace period and
provided Tenant is notified by Landlord and fails to cure such default as
described in Section 17.1(a) herein, until paid.  The rate so determined shall continue in
effect following any default by Tenant pursuant to this Lease.  Payment of such interest shall not excuse or
cure any default by Tenant under this Lease. 
The parties agree that the payment of interest is to compensate Landlord
for its inability to use the money improperly withheld by Tenant and for its
additional administrative expenses in handling and processing delinquent
payments.

 

3.4                               Security
Deposit.

 

(a)                                  Tenant shall be
required to provide to Landlord a Security Deposit (as defined below), and
Tenant shall deposit with Landlord the Security Deposit within five business
days after the Date of Execution of Lease and, thereafter throughout the Term
shall keep on deposit with Landlord, the Security Deposit Amount set forth in Article 1
as security for the payment by Tenant of the Rent and for the faithful
performance of all the terms, conditions and covenants of this Lease (the “Security Deposit”).  Landlord shall

 

8

 

not be obligated to keep the Security Deposit
as a separate fund, but may commingle the Security Deposit with Landlord’s own
funds.

 

(b)                                 Landlord may, but
shall not be required to, use the Security Deposit, or so much thereof as
necessary, in payment of any Rent in default, or in reimbursement of any
expense incurred by Landlord or in payment of the damages incurred by Landlord
by reason of Tenant’s default, after any applicable grace and cure period.  In such event, Tenant shall, upon written
demand from Landlord, immediately remit to Landlord a sufficient amount in cash
to restore the Security Deposit to equal the Security Deposit Amount.  Within 30 days after the expiration of this
Lease and surrender of the Demised Premises in accordance with the terms and
conditions of this Lease, and in the event the Security Deposit has not been
utilized as aforesaid, the Security Deposit, or as much thereof as has not been
utilized for such purposes, shall be refunded to Tenant without interest.  Landlord may deliver the Security Deposit to
the purchaser of Landlord’s interest in the Demised Premises in the event such
interest is sold, and, in such instance, Landlord named herein shall be
discharged from any further liability with respect to the Security Deposit and
Tenant shall look to Landlord’s successor for the return of the Security
Deposit.  Notwithstanding the foregoing,
if any claims of Landlord exceed the amount of the Security Deposit, Tenant
shall remain liable for the balance of such claims.

 

3.5                               Rent
Payments.

 

All Rent payments shall be made to Landlord
at the address set forth in Article l, or at such other place designated
by Landlord in writing, in lawful currency of the United States of
America.  Rent payments applicable to
partial months falling within the Term or occurring as a result of the
application of the Monthly Fixed Rent payable upon Lease execution shall be
prorated.

 

ARTICLE 4

 

TENANT’S SHARE OF
OPERATING COSTS AND TAXES

 

4.1                               Definitions.

 

As used herein:

 

(a)                                  “Operating Costs” shall mean any and all
costs, charges, expenses and disbursements of every kind and nature which
Landlord shall pay or become obligated to pay in connection with the operation,
ownership, maintenance, property management, and repair of the Property (and no
other properties), including, without being limited to, the following:

 

(1)                                  All wage, salary and
labor costs of all persons but only for that portion of the time such persons
are engaged in the operation, maintenance, property management, and repair of
the Property and no other properties (including, without being limited to, all
applicable taxes, insurance and benefits), but expressly excluding any one
performing asset management services.

 

9

 

(2)                                  Costs of any utilities
supplied by Landlord (including, without being limited to, heat, electricity,
gas, water and sewer), fuel and supplies and materials and costs of the
operation and maintenance of all Property systems (including, without being
limited to, heating, ventilation and air-conditioning (“HVAC”) systems and telecommunications
systems).

 

(3)                                  Costs to insure the
Property (and no other properties) and incidents relating to the Property (and
no other properties), including, without being limited to, casualty, workers’
compensation, rental and liability insurance; provided, however that
deductibles of such insurance coverage shall not exceed commercially reasonable
amounts from time to time for similar properties owned by similar entities in
the reasonable and prudent judgment of such entities.

 

(4)                                  Subject to Section 9.2,
costs of all maintenance and service agreements for the Property (and no other
properties), including, without being limited to, window and other cleaning,
snow removal, painting in parking lot, security, elevator maintenance, and
janitorial service.

 

(5)                                  Subject to terms and
conditions set forth in Sections 4.1 (a) (vii) and 4.1(a)(xix), costs of
repairs, replacements, decorations, and general maintenance for the Property
(and no other properties), including, without being limited to, exterior
building maintenance, paving, curbs, drainage, lighting, sidewalks and
landscaping.

 

(6)                                  Professional fees and
expenses (including, without being limited to, reasonable legal and accounting
fees) limited solely to that portion of those fees which directly arises out of
and relates to the operation of the Building as defined herein.

 

(7)                                  All costs of making
any alterations to the Building for life-safety systems or energy conservation
or other capital improvements required by any governmental requirement enacted
or amended after the date hereof or which are primarily for the purpose of
reducing or stabilizing Operating Costs or providing additional or increased
services to the tenants of the Building, amortized over the useful life of such
improvements, with a return on capital at the rate of ten percent (10%) per
annum.

 

(8)                                  All property
management fees, costs and expenses. 
Said fees, costs and expenses shall be limited to the current market
rate for such services from time to time during the Term of the Lease.

 

If Landlord is
not furnishing any particular work or service (the cost of which if performed
by Landlord would constitute an Operating Cost) to a tenant (other than Tenant)
who has undertaken to perform such work or service in lieu of the performance
thereof by Landlord, Operating Costs shall be increased by an amount equal to
the additional Operating Costs which would have been incurred during such
period by Landlord if it had at its own expense furnished such work or services
to such tenant.  In

 

10

 

determining the amount of Operating Costs for
any calendar year, if less than 95% of the net rentable square feet of the
Building shall have been occupied by tenant(s) at any time during such calendar
year, Operating Costs shall be determined for such year to be an amount equal
to the like expenses which would have been incurred had such occupancy been 95%
throughout such year. The foregoing adjustment in Operating Costs shall only be
applied with respect to Operating Costs which vary with the level of occupancy.

 

The following
expenses are excluded from Operating Costs:

 

(i)                                     depreciation and
amortization;

 

(ii)                                  expenses incurred by
Landlord to prepare, renovate, repaint, redecorate or perform any other work in
any space leased to an existing tenant or prospective tenant of the Building;

 

(iii)                               expenses incurred by
Landlord or other tenants for repairs or other work occasioned by fire,
windstorm, or other insurable casualty or condemnation;

 

(iv)                              expenses incurred by
Landlord to lease space to new tenants or to retain existing tenants including
leasing commissions, advertising and promotional expenditures in connection
with leasing or releasing of space;

 

(v)                                 expenses insured by
Landlord to resolve disputes, enforce or negotiate lease terms with prospective
or existing tenants or in connection with any financing, sale or syndication of
the Building;

 

(vi)                              interest, principal,
points and fees, amortization or other costs associated with any debt and rent
payable under any lease to which this Lease is subject and all costs and
expenses associated with any such debt or lease and any ground lease rent,
irrespective of whether this Lease is subject or subordinate thereto;

 

(vii)                           Capital improvements will
not be passed through, except that capital improvements that are intended to
reduce Operating Costs or required by law will be passed through under
generally accepted accounting principles as specified in Section 4.1(a)(7),
which includes amortizing such capital improvements over the useful life of
such improvement;

 

(viii)                        expenses for the replacement of
any item covered under warranty;

 

(ix)                                any penalty or fine
incurred by Landlord due to Landlord’s violation of any federal, state or local
law or regulation or failure to comply with any agreement;

 

11

 

(x)                                   cost of repairs
necessitate by Landlord’s negligence or willful misconduct;

 

(xi)                                expenses for any item
or service which Tenant pays directly to a third party or separately reimburses
Landlord and expenses incurred by Landlord to the extent the same are
reimbursable or reimbursed by another tenant, insurance or other third parties;

 

(xii)                             expenses for any item or
service not provided to Tenant but exclusively to certain other tenants in the
Building;

 

(xiii)                          salaries of (A) employees
above the grade of Building superintendent or Building manager, and (B)
employees, to the extent such employee’s time is not spent in the operation of
the Property;

 

(xiv)                         Landlord’s general corporate
overhead and administrative expenses;

 

(xv)                            fees paid to affiliates of
Landlord in excess of competitive rates for comparable services;

 

(xvi)                         costs to remove, abate,
encapsulate, test or otherwise handle or dispose of hazardous material to
comply with current environmental laws;

 

(xvii)                      legal fees related to any action
involving tenants or prospective tenants in the Building; and

 

(xviii)                   costs of complying with requirements
of the Americans With Disabilities Act applicable to the Common Area (as
defined in Section 7.1 below) of the Building as of the date of this
Lease.

 

(xix)                           costs or expenses related to
window replacement or repairs and related damage arising from defects in
windows and from seepage of moisture into the curtain wall and condensation
from such defects (ordinary operating expenses for maintenance, repair and
replacement of windows, including caulking, shall not be excluded hereby).

 

(xx)                              costs or expenses of
environmental air quality inspections and reports concerning mold, mold spores,
excessive bacteria in the Demised Premises and repairs and replacements arising
from negative results from such inspections and reports (ordinary operating
expenses for maintenance, repair and replacement of air quality equipment and
systems shall not be excluded hereby).

 

The foregoing
definition, and exclusions, of Operating Costs are intended to permit Landlord
to recover Operating Costs actually incurred by Landlord only and is not 

 

12

 

intended to permit Landlord to recover more
than 100% of Operating Costs incurred by Landlord.

 

(b)                                 “Taxes” shall mean the aggregate amount
of real estate and personal property taxes and any special assessments levied,
due and payable upon the Property, or any portion thereof, other than any water
or sewer charge to the extent the same are included in Operating Costs for the
applicable calendar year, except, however, Taxes shall not include any estate,
inheritance, succession, transfer, gift, corporate franchise, excise or
personal or corporate net income or property tax imposed upon Landlord.  If because of any change in the taxation of
real estate, any other tax, assessment or surcharge of any kind or nature
(including, without being limited to, any franchise, income, profit, sales,
use, occupancy, gross receipts or rental tax) is imposed upon, against or with
respect to Landlord, or the occupancy, rents or income there from, either in
lieu of, in substitution for or in addition to any of the foregoing Taxes, such
other tax, assessment or surcharge (which shall be measured as if the Property,
or applicable portion thereof, as the case may be, were the only asset of
Landlord or such owner) shall be deemed part of Taxes.  With respect to any calendar year, all
expenses, including attorneys’, accounting and experts’ fees and expenses and
administration costs and expenses, incurred in contesting the validity or
amount of Taxes, the assessed valuation of the Property, or any portion
thereof, or in obtaining a refund of Taxes shall be considered as part of Taxes
for such year.  However, no such
attorneys’, accounting and/or expert fees, expenses or administration costs
shall be considered as part of Taxes unless a net tax savings is realized
during that calendar year.

 

4.2                               Tenant’s
Payment Of Operating Costs And Taxes.

 

(a)                                  For each calendar
year, or portion thereof, during the Term, Tenant shall pay to Landlord, as
Additional Rent, at the times and in the manner provided below, Tenant’s
Proportionate Share of the sum of (1) Operating Costs for such calendar
year, and (2) Taxes for such calendar year (collectively, “Tenant’s Expense Charge”).

 

(b)                                 At any time during the
Term, Landlord shall have the right to compute and deliver to Tenant an
estimate (an “Estimate”) of
Tenant’s Expense Charge for the applicable calendar year and, without further
notice, Tenant shall pay to Landlord commencing with the next payment of
Monthly Fixed Rent and continuously thereafter with payments of Monthly Fixed
Rent until delivery of the next Estimate, monthly installments equal to
one-twelfth of the amount set forth in such Estimate, together with, in the
case of the first such monthly payment, an amount equal to the difference
between (i) the amount of such monthly installment times the number of
months occurring during the Term in such year preceding the first monthly
payment based on such Estimate, less (ii) the amount of any monthly
installments in respect of the prior Estimate theretofore paid to Landlord
during the Term in such year.  In the
event Landlord is required under any mortgage of any portion of the Property,
including the Building, to escrow Operating Costs and/or Taxes, Landlord may
(without obligation) use the amount required to be escrowed as a basis for
determining the Estimate.

 

13

 

(c)                                  Landlord will deliver
to Tenant within 120 days after the end of each calendar year during the Term a
written statement (the “Statement”)
setting out in reasonable detail Tenant’s Expense Charge for such year
certified to be correct by Landlord.  If
the aggregate of the monthly installments actually paid by Tenant to Landlord
on account of the estimated Tenant’s Expense Charge during any calendar year
(the “Actual Payments”)
differs from the amount of Tenant’s Expense Charge payable according to the
Statement (the “Obligated Payments”),
Tenant shall (1) if the Obligated Payments shall exceed the Actual
Payments, pay to Landlord, within 30 days after the date of delivery of the
Statement, an amount equal to such excess, or (2) if the Actual Payments
shall exceed the Obligated Payments, be granted a credit against the next
installments of Tenant’s Expense Charge in an amount equal to such overpayment.

 

(d)                                 Tenant shall have the
right to examine Landlord’s books and records with respect to the items in a
Statement during Normal Business Hours (except, however, Saturdays) at any time
within forty-five (45) days following the furnishing of the Statement to
Tenant.  In conducting such examination,
Tenant must utilize either its own full time salaried employees or an
independent certified public accountant (“CPA”),
which CPA shall be paid by Tenant on an hourly fee for services rendered basis,
and not on a contingency fee basis, and which CPA shall be subject to Landlord’s
reasonable prior approval.  Unless Tenant
takes written exception to any item on the subject Statement within ninety (90)
days after the furnishing of the Statement, such Statement shall be considered
as final and accepted by Tenant.  If
Tenant timely provides such written exception to Landlord, but if Landlord and
Tenant disagree on the accuracy of Tenant’s Expense Charge as set forth in the
Statement, Tenant shall nevertheless make payment in accordance with the
Statement, but the disagreement shall immediately be referred by Landlord for
prompt decision to a mutually acceptable public accountant or other
professional consultant (provided, however, that Landlord and Tenant agree that
such accountant or other professional consultant shall not have provided
services to Landlord in connection with the Building during the prior three
years and shall not have provided services to Tenant during the prior three
years) who shall be deemed to be acting as an expert and not as an arbitrator,
and a determination signed by the selected expert shall be final and binding on
both Landlord and Tenant.  If Landlord
and Tenant shall fail to agree on such an expert within 15 days after Tenant’s
notice of disagreement (as hereinafter described), such expert shall be
selected by the president of the local chapter of the National Association of
Real Estate Boards.  If an adjustment is
required to be made by reason of any such determination, then (i) if
Tenant owes Landlord an amount as a result of such adjustment, Tenant shall pay
such amount within thirty (30) days after final determination or (ii) if
Landlord owes Tenant an amount as a result of such adjustment, Landlord shall
credit such amount against the next installment of Tenant’s Expense
Charge.  If the adjustment is greater
than 5% and the amount of the adjustment is to be paid to Tenant, Landlord will
pay the cost of the expert; otherwise Tenant will pay the cost of the expert.

 

4.3                               Refunds;
Other Items.

 

In the event a refund of any Operating Costs
or Taxes is obtained and actually paid to Landlord, Landlord shall credit
Tenant’s pro rata portion thereof (after deducting any

 

14

 

unrecouped actual expenses incurred in connection with obtaining such
refund) to the next installment(s) of Tenant’s Expense Charge.

 

ARTICLE 5

 

COMPLETION AND
OCCUPANCY OF DEMISED PREMISES

 

5.1                               Completion
of Demised Premises

 

The Demised Premises shall be deemed
available for occupancy when Landlord notifies Tenant, in writing, that the
work required to be performed by Landlord (“Landlord’s Work”), if any, described in Exhibit D to
this Lease (the “Work Letter”)
and the Permit Set of Drawings has been substantially completed and permitted
under Applicable Law as being available for occupancy.  Landlord’s Work shall be deemed substantially
completed notwithstanding that (a) certain minor or non-material details
of construction, mechanical adjustment or decoration (“punch list items”) are incomplete, or
(b) portions of Landlord’s Work are incomplete because such work cannot be
performed until work to be performed by or on behalf of Tenant is
completed.  In the event Landlord is
delayed in completing Landlord’s Work by any delay, interference or hindrance,
directly or indirectly, of such work (1) by Tenant, Tenant’s contractors
or any of their employees or agents, (2) by any Additional Work (as
defined in the Work Letter) requested by Tenant and agreed to by Landlord, or
(3) by Tenant’s failure to timely and properly perform any of its
obligations imposed pursuant to the Work Letter or if Tenant’s furniture vendor
does not complete furniture installation before March 31, 2005 so long as
Landlord provides Tenant access on the Entry Date (any of the foregoing being a
“Tenant Delay”), the
Demised Premises shall be conclusively deemed substantially completed and
available for occupancy on the date on which the same would have occurred in
the absence of such Tenant Delay, which date shall be determined by Landlord
and documented to Tenant.

 

5.2                               Occupancy
of Demised Premises.

 

The occupancy of the Demised Premises or any
part thereof for business by Tenant or anyone claiming by, under or through
Tenant shall be conclusive evidence that (a) Tenant accepts possession;
(b) the Demised Premises were in good and satisfactory condition, subject
to latent defects; and (c) Landlord’s Work, if any, was satisfactorily
completed at the time such occupancy was so taken, subject to punch list items,
if any, indicated on a list delivered by Tenant to Landlord and agreed to by
Landlord on or before the date Tenant takes occupancy of the Demised Premises
pursuant to Exhibit D.

 

ARTICLE 6

 

CONDUCT OF BUSINESS
BY TENANT

 

6.1                               Use
of Demised Premises

 

Tenant shall use the Demised Premises during
the Term solely for general office uses and for no other purpose and shall not
violate the Restrictions.

 

15

 

6.2                               Compliance
with Laws and Requirements of Public Authorities.

 

(a)                                  At all times during
the Term, Tenant shall give prompt notice to Landlord of any notice Tenant
receives of any violation of any law or requirement of a governmental
authority, or any regulation of the board of fire underwriters having
jurisdiction over the Property, affecting the Demised Premises (“Applicable Law”), and, at its sole cost
and expense, shall comply with all Applicable Laws, including any violation,
order or duty imposed upon Landlord or Tenant, arising from or relating to
(1) Tenant’s use of the Demised Premises; (2) the manner or conduct
of Tenant’s business or operation of its installations, equipment or other
property therein; (3) any event or condition caused or permitted by
Tenant; or (4) breach of any of Tenant’s obligations hereunder.  Further, Tenant, at its sole cost and
expense, shall comply with the requirements of the Americans With Disabilities
Act applicable to the Demised Premises. 
To the extent that Landlord receives such notice directly, Landlord agrees
promptly to provide Tenant with a copy of such notice after Landlord’s receipt
of the same and Tenant’s time to respond shall run from the date of Tenant’s
actual receipt of such notice, whether received directly or from Landlord, in
order that Tenant might comply therewith.

 

(b)                                 Tenant shall not do,
permit or suffer any act or thing to be done which is injurious to the Property
or the Demised Premises, which is immoral, a nuisance, contrary to Applicable
Law or in violation of the certificate of occupancy issued for the Building or
which would result in the cancellation of, or any increase in premiums for,
insurance maintained by Landlord with respect to the Property or the Demised
Premises.

 

(c)                                  Tenant shall not, nor
shall Tenant allow any person to, generate, manufacture, process, transport,
recycle, spill, leak, emit, use, handle, possess, treat, store, dispose of,
transfer, release, convey or recover Hazardous Materials (as hereinafter
defined) in, on, under or from the Demised Premises; provided, however, any
Hazardous Material lawfully permitted and generally recognized as necessary and
appropriate for general office use may be stored and used on the Demised
Premises so long as (i) such storage and use is in the ordinary course of
Tenant’s business permitted under this Lease; (ii) such storage and use is
performed in compliance with all applicable Environmental Laws (as hereinafter
defined) and in compliance with the highest standards prevailing in the
industry for the storage and use of such materials; and (iii) Tenant
delivers prior written notice to Landlord of the identity and quantity of such
materials and such other information regarding such materials as Landlord may
request.  Without limiting other rights
or remedies available to Landlord under this Lease or at law or equity, in the
event of a default by Tenant under this Section, Landlord shall immediately
have the right to injunctive relief.  “Hazardous Materials” shall mean
(i) any solid, liquid or gaseous waste, substance or emission or any
combination thereof which may (a) cause or significantly contribute to an
increase in mortality or serious illness, or (b) pose the risk of a
substantial present or potential hazard to human health, to the environment or
otherwise to animal or plant life and/or (ii) hazardous substances as defined
by the Comprehensive Environmental Response, Compensation and Liability Act of
1980, as amended; petroleum and any of its derivatives or byproducts; asbestos;
polychlorinated biphenyls; radon; and any material and/or substance defined as,
or regulated as, a 

 

16

 

pollutant, waste, hazardous, extremely
hazardous, toxic, or dangerous under any law, regulation or ordinance
including, without limitation, any Environmental Law.  Tenant shall immediately notify Landlord of
the presence or suspected presence of any Hazardous Materials on or about the
Demised Premises and shall deliver to Landlord any notice received by Tenant
relating thereto.  “Environmental Laws” means any and all
present and future federal, state and local laws, regulations, rules, orders,
guidelines, policies and requirements of any governmental authority relating
to: the protection, remediation or restoration of the environment, natural
resources or wildlife; pollution; Hazardous Materials; or public health and/or
safety.

 

(d)                                 Tenant agrees that it
shall not keep, use, sell or offer for sale in or upon the Demised Premises any
article that may be prohibited by any then available standard forms of
fire insurance policies with extended coverage. 
Tenant agrees to pay to Landlord any increase in premiums for insurance
maintained by Landlord with respect to the Demised Premises or the Property
resulting from the use of the Demised Premises by Tenant, whether, or not
Landlord has consented to such use.

 

(e)                                  Tenant shall pay all
costs, expenses, fines, penalties or damages that may be imposed upon Landlord
by reason of Tenant’s failure to comply with the provisions of this Section 6.2.

 

6.3                               Rules
and Regulations.

 

Tenant and its agents, employees, contractors
and invitees shall faithfully observe and comply with the rules and regulations
attached hereto as Exhibit C and incorporated herein by this reference,
and such changes thereto, whether by modification, elimination or addition, as
Landlord may, at any time and from time to time, make in respect of the Demised
Premises and/or the Property (the “Rules
and Regulations”).  Such
changes shall be effective upon prior written notice thereof from Landlord to
Tenant.  In the case of any conflict or
inconsistency between the provisions of this Lease and any of the Rules and
Regulations, as originally promulgated or as changed, the provisions of this
Lease shall control.  Nothing contained
in this Lease shall be construed to impose upon Landlord any duty or obligation
to enforce the Rules and Regulations, or the provisions in any other lease, as
against any other tenant; provided, however, that Landlord shall not enforce
the Rules and Regulations so as unjustly to discriminate against Tenant.

 

ARTICLE 7

 

COMMON AREA

 

7.1                               Control
of Common Area.

 

(a)                                  As used in this
Lease, the term “Common Area”
shall mean that part of the interior and exterior portions of the Property
designated by Landlord for the common use of all tenants, which includes
parking area, sidewalks, landscaping, curbs, driveways, delivery passages,
loading areas, seating areas, private streets and alleys, lighting facilities,
drinking fountains, meeting rooms, lunch/break room, public toilets and the

 

17

 

like. 
Landlord grants Tenant a nonexclusive license for the Term, to use in
common with the invitees of Landlord and Tenant and such other persons as
Landlord and Tenant shall designate, the Common Area, subject to the terms and
conditions of this Lease and to the Rules and Regulations.

 

(b)                                 Landlord reserves the
right, at any time and from time to time, without incurring any liability to
Tenant therefor, to change the arrangement, dimensions and/or location of
public entrances, passageways, doors, doorways, corridors, elevators, stairs,
toilets, parking areas, seating areas, or other parts of the Common Area so
long as Tenant’s use and access of the Premises is not materially and adversely
affected.  In such event, Landlord shall
repair any physical damage caused to the Demised Premises.  Notwithstanding the foregoing, Landlord
agrees not to relocate or decrease the dimensions of the current lunch/break
room without prior written notice to and approval by Tenant.  Tenant agrees to review and approve or
disapprove such changes in good faith within ten days after Tenant’s receipt of
written request for approval.  If Tenant
shall fail to respond to such request within such ten days, Tenant shall be
deemed to have approved such change. 
Furthermore, to the extent Landlord otherwise alters any aspect of the
lunch/break room other than location and dimensions, Landlord agrees to
maintain a first class quality facility.

 

(c)                                  Subject to Tenant’s
right of quiet enjoyment as set forth in Section 22.1 herein, Landlord
reserves the right, at any time and from time to time, to use portions of the
Common Areas for art and other displays, promotional events and other uses not
inconsistent with the character of the Building.

 

7.2                               Parking.

 

Tenant shall have only such parking rights as
are provided in the Parking Rider set forth as Exhibit F attached
hereto.

 

ARTICLE 8

 

REPAIRS, ALTERATIONS
AND MECHANICS’ LIENS

 

8.1                               Repairs.

 

(a)                                  Landlord shall make
all necessary repairs to keep the roof, exterior walls, foundation and structural
frame of the Building, the common Building systems, fixtures and equipment
(such as elevators, common Building heating, ventilating and air-conditioning
systems, windows, and common Building telecommunications, electrical and
plumbing systems, provided, however, that Landlord shall have no responsibility
for any such equipment owned or maintained by tenants or other third parties or
any damage to such systems caused by tenants or other third parties) and the
Common Area in good order and repair, excluding, however, all repairs which
Tenant is obligated to make or pay for pursuant to this Section 8.1 and
all repairs which any other tenant of the Building is required to make pursuant
to the terms of such tenant’s lease. Tenant shall give Landlord prompt notice
of any defective condition in any ventilating, air-conditioning,

 

18

 

plumbing, heating system, electrical lines or
windows located in, servicing or passing through the Demised Premises and
following such notice, Landlord shall use commercially reasonable efforts where
practicable to initiate all repairs promptly and to remedy the condition with
due diligence, subject to unavoidable delay, but at the expense of Tenant if
repairs are necessitated by any act attributable to Tenant, Tenant’s servants,
agents, employees, invitees or licensees; provided, however, that no liability
of Landlord to Tenant shall accrue hereunder unless and until Tenant has given
notice to Landlord of the specific repair to be made.  Tenant shall have the right from time to time
at its election to test the air quality in the Demised Premises.  Such tests shall be at Tenant’s sole cost and
expense except that Landlord shall reimburse Tenant the actual and reasonable
cost of such test in the event the test results show an unacceptable air
quality condition according to industry standards reasonably determined.

 

(b)                                 Tenant, at its sole
cost and expense, shall take good care of the Demised Premises, including all
floor coverings and doors in the Demised Premises, and Tenant’s property and
fixtures.  All repairs made by or on
behalf of Tenant shall be made and performed in accordance with the provisions
of Section 8.2 and shall be at least equal in quality and design to the
original construction of the Demised Premises and the Building.  If Tenant fails to proceed with due diligence
to make repairs required to be made by Tenant, and such failure shall continue
for 10 days after notice from Landlord, the same may be made by Landlord at the
expense of Tenant and the amount so incurred by Landlord shall be paid to
Landlord by Tenant immediately upon submission of a bill or statement therefor
by Landlord.  Tenant shall have no
responsibility for the maintenance or upkeep of plate glass or windows in the
Demised Premises, except to the extent Tenant is responsible for the breakage
of such plate glass or windows in which case the above provisions of Article 8.1
would otherwise apply.

 

8.2                               Alterations.

 

Tenant shall not make any alterations, additions
or improvements (collectively, “Alterations”)
in or to the Demised Premises without Landlord’s prior written consent, which
consent shall not be unreasonably withheld or delayed.  The Work (as defined in the Work Letter
attached as Exhibit D) is not considered Alterations and, accordingly is
not subject to the terms of this Section 8.2.  Tenant shall only utilize contractors
approved by Landlord, which approval shall not be unreasonably withheld or
delayed.  Tenant shall, before making any
Alterations, at its expense, obtain all permits, approvals and certificates
required by any governmental or quasi-governmental bodies and (upon completion)
certificates of final approval thereof and shall deliver promptly duplicates of
all such permits, approvals and certificates to Landlord, and Tenant agrees to
carry, and to cause Tenant’s contractors and sub-contractors to carry such
workers’ compensation, general liability, personal and property damage
insurance as Landlord may reasonably require. 
Upon completion of any Alterations, Tenant shall deliver to Landlord one
set of “as-built” plans and specifications therefor.  All fixtures and all paneling, partitions,
railing and like Alterations, installed in the Demised Premises, either by
Tenant or by Landlord on Tenant’s behalf, shall become the property of Landlord
and shall remain upon and be surrendered with the Demised Premises upon the
expiration or earlier termination of the Lease, unless Landlord, by notice to
Tenant given no later than 20 days prior to the Expiration Date of this Lease
(or within 20 days after the earlier termination hereof), elects to have them
removed

 

19

 

by Tenant, in which event, the same shall be removed from the Demised
Premises by Tenant.  Notwithstanding the
foregoing, at the time Tenant requests Landlord’s consent to a contemplated
Alteration, Tenant may request that Landlord determine whether or not such
Alteration will be required to be removed upon the expiration or earlier
termination of this Lease.  Upon receipt
of such request from Tenant, Landlord shall notify Tenant at the time Landlord
consents to such Alteration whether or not Landlord will require removal upon
the expiration or earlier termination of this Lease.  Nothing in this section shall be
construed to give Landlord title to or to prevent Tenant’s removal of trade
fixtures, moveable office furniture and equipment, but upon removal of any such
equipment and fixtures from the Demised Premises or upon removal of other installations
as may be required by Landlord, Tenant shall immediately and at its expense,
repair and restore the Demised Premises to the condition existing prior to
installation (subject to ordinary wear and tear) and repair any damage to the
Demised Premises or the Property due to such removal.  All property that was permitted or required
to be removed by Tenant at the end of the Term but which remains in the Demised
Premises for 10 days after Tenant vacates the Demised Premises shall be deemed
abandoned and may, at the election of Landlord, either be retained as Landlord’s
property or may be removed from the Demised Premises by Landlord at Tenant’s
expense.

 

8.3                               Mechanics’
Liens.

 

Tenant shall (a) pay before delinquency all
costs and expenses of work done or caused to be done by Tenant in the Demised
Premises; (b) keep the title to the Property and every part thereof free
and clear of any lien or encumbrance in respect of such work; and
(c) indemnify, reimburse and hold harmless Landlord Protected Parties
(defined below) against any claim, loss, cost, demand (including reasonable
legal fees), whether in respect of liens or otherwise, arising out of the
supply of material, services or labor for such work.  Tenant shall immediately notify Landlord of
any lien, claim of lien or other action of which Tenant has knowledge and which
affects the title to the Property or any part thereof, and promptly shall cause
the same to be paid or removed by the filing of a bond but in any event no
later than 60 days after Tenant has knowledge of such lien.  If Tenant shall fail to pay or bond, Landlord
may take such action as Landlord deems necessary to remove the same and the
entire cost thereof shall be immediately due and payable by Tenant to Landlord
and such amount shall bear interest at the Default Rate. Nothing contained in
this section or elsewhere in this Lease shall be deemed or construed in
any way as giving Tenant any right, power or authority to contract for or
permit the rendering of any services or the furnishing of any materials that
would give rise to the filing of a materialmen’s, mechanics’ or other lien
against the Demised Premises or any other portion of the Property.

 

8.4                               Indemnification.

 

Without limitation of any other
indemnification provisions contained in this Lease, Tenant hereby agrees to
indemnify, protect, defend and hold harmless Landlord, and Landlord’s agents,
employees, contractors, officers, trustees, directors, shareholders, members,
managers, partners and principles (disclosed or undisclosed), managing agent
and advisors (including, but not limited to, BlackRock Realty Advisors, Inc.)
and their officers, directors, members, managers, employees and agents
(collectively, the “Landlord Protected
Parties”) from and against all claims, liabilities, losses,
damages and expenses of whatever nature arising out of or in connection with
any Alterations, including, without limitation, the cost of any repairs to the

 

20

 

Demised Premises or Project necessitated by activities of Tenant or
Tenant’s contractors and bodily injury to persons, except, however to the
extent any such claims, liabilities, lawsuits, damages and expenses are caused
by the negligence or willful misconduct of the indemnified party.

 

ARTICLE 9

 

UTILITIES AND
BUILDING SERVICES

 

9.1                               Heating,
Ventilating and Air Conditioning.

 

(a)                                  Subject to
limitations and restrictions imposed by federal, state and/or local
authorities, Landlord shall furnish heating and air-conditioning to the Demised
Premises during Normal Business Hours with a range of 69 and 74 degrees.  In addition, Landlord agrees that the
Building HVAC system will be activated after Normal Business Hours if the
temperature in the Building drops below 65o F or rises above 80o F.  The foregoing temperature conditions assume
that Tenant will not overload Buildings systems with unusually high
concentrations of personnel or heat generating equipment.  Accordingly, and without limiting the
generality of the effect of the foregoing, whenever heat generating machines or
equipment are used in the Demised Premises which may affect the temperature
which would otherwise be maintained by the Building air-conditioning system,
Landlord reserves the right to install supplementary air-conditioning units for
the Demised Premises at the expense of Tenant and the costs of operation and
maintenance thereof shall be paid by Tenant to Landlord at commercially
reasonable rates determined by Landlord. 
Any air-conditioning units required for Tenant’s computer systems shall
be described in Exhibit D to the Lease and shall be installed with all
connections needed for operation by and at the expense of Landlord.  Landlord agrees that Tenant may operate the
air-conditioning units required for Tenant’s computer systems twenty-four (24)
hours per day, seven (7) days per week, and Tenant may only be subject to
Additional Rent for electricity charges pursuant to Section 9.4 (b) if
Tenant’s units and operation change materially from the description in Exhibit
E.  The costs of maintenance of such
units shall be paid by Tenant using contractors reasonably approved by Landlord
who abide by the rules and regulations for vendors at the Building, including,
without limitation, the delivery of insurance certificates.

 

(b)                                 Tenant recognizes
that, outside of Normal Business Hours, Tenant may require overtime HVAC
services in order to render the Demised Premises comfortable and tenantable and
that Tenant shall have no claim against Landlord for the condition of the
Demised Premises outside of Normal Business Hours, except as provided under Section 9.1(a)
above with respect to temperature conditions outside of Normal Business Hours,
and except that, overtime HVAC services can be provided by Landlord to Tenant
at an additional cost at the standard hourly rate for such services in effect
at such time (“Standard Rate”), which Standard Rate Landlord and Tenant agree
on the Date of Execution of this Lease is $45.00 per hour.  Landlord agrees to provide Tenant upon Tenant’s
written request the amount of the Standard Rate then in effect.  This Section 9.1 (b) shall not apply to
the operation of the air conditioning units required for the computer room as
described in Section 9.1 (a) above, and Tenant shall not be subject to
Additional

 

21

 

Rent for electricity charges pursuant to Section 9.4
(b) unless Tenant’s units and operation change materially from the description
in Exhibit E.

 

9.2                               Cleaning
Service.

 

Landlord shall provide Class A building
standard cleaning services, more fully described in Exhibit G attached
hereto and made a party hereof by reference, five (5) days a week, Monday
through Friday, holidays excepted.  As
used herein holidays shall mean New Years Day, Memorial Day, Independence Day,
Labor Day, Thanksgiving and Christmas and such other holidays as are generally
recognized by other similar class buildings in the Minnetonka, Minnesota area.

 

Tenant shall not provide any cleaning
services without Landlord’s consent and then only at Tenant’s sole
responsibility and expense and by cleaning contractors or employees and in a
manner at all times satisfactory to Landlord. 
Tenant shall pay to Landlord the cost of removal of any of Tenant’s
refuse and rubbish to the extent that such refuse and rubbish removed by
Landlord exceeds the refuse and rubbish normally attendant upon the use of the
Demised Premises as offices.

 

9.3                               Elevator
Service.

 

Landlord shall furnish automatic elevator
service at all times, which elevator may also, subject to the Building Rules
and Regulations set forth in Exhibit C, be used as a freight elevator.

 

9.4                               Electricity.

 

(a)                                  Landlord shall,
during Normal Business Hours only, supply electricity to the Demised Premises
for normal office lighting and business machines that operate on standard 110
voltage and do not require special or additional air conditioning.  Except as may be approved in writing by
Landlord (including as may be approved in writing by Landlord in the Working
Drawings (as defined in the Work Letter), Tenant’s use of electricity in the
Demised Premises shall be for the operation of Building standard lighting,
electrical fixtures, personal computers and other office machines and lamps
(expressly excluding high electrical consumption business machines and space
heaters, except, however, for radiant space heaters approved by Landlord when
necessary due to extreme weather conditions) and shall not at any time exceed
the capacity of any of the electrical conductors and equipment in or otherwise
serving the Demised Premises.

 

(b)                                 Tenant agrees to pay
to Landlord, as Additional Rent, Landlord’s charges for electricity and other
energy consumed by Tenant (i) during hours other than Normal Business
Hours (A) for normal office lighting and business machines and
(B) subject to Section 9.1, for heating and air conditioning, and
(ii) for business machines other than as permitted by Section 9.4(a)
hereof.  Such electrical and other energy
shall be payable monthly, at the Standard Rate, together with payments of
Monthly Fixed Rent.

 

(c)                                  Tenant shall not,
without Landlord’s prior written consent (which consent shall not be
unreasonably withheld or delayed) in each instance, connect any additional
fixtures, appliances or equipment (other than normal office electrical
fixtures, lamps,

 

22

 

personal computers and similar office
machines) to the Building’s electric distribution system or make any
alterations or additions to the electric system of the Demised Premises
existing at the commencement of the Term. 
If Landlord grants such consent, unless paid for by the service provider
with no charge to Landlord, the cost of all additional risers and other
equipment required therefor shall be paid as Additional Rent by Tenant to
Landlord upon demand.  Furthermore,
Tenant shall, at Landlord’s option, pay on demand as Additional Rent to
Landlord, the cost of any electric current or other energy for the operation of
heavy reproduction equipment, computer equipment or other equipment requiring
more electrical current or energy than is necessary for normal business office
use as determined by Landlord.  If Tenant
shall require additional electricity and such electricity is available to the
Demised Premises and for the Building, Landlord may either (i) at Tenant’s
expense, install a meter in the Demised Premises and cause the Demised Premises
to be connected directly with the lines of the public utility company supplying
electricity to the Building and thereafter Tenant shall pay all the charges of
such company for furnishing electrical current; or (ii) shall measure the
current supplied to Tenant by a meter installed in the Demised Premises, in
which case Tenant shall pay to Landlord monthly as Additional Rent the sums
which Tenant would be required to pay to the public utility company serving the
Building if Landlord had connected Tenant to the lines of such public utility
company.

 

(d)                                 Landlord, at Tenant’s
expense, shall purchase and install all light bulbs, fluorescent and other
lighting tubes, ballasts and any incandescent lamps used in Building-standard
lighting fixtures installed by Landlord in the Demised Premises upon
notification from Tenant that such installation is required.  Tenant shall use only such electrical
lighting fixtures and lamps as may be approved by Landlord.  Tenant shall replace, as necessary, all bulbs
and fluorescent tubes in non-Building-standard lighting fixtures, if any,
installed in the Demised Premises.  If
Tenant shall fail to make any such replacement within five (5) days after
written notice from Landlord, Landlord may make such replacement and charge the
cost of labor and materials involved therein to Tenant as additional rent.

 

(e)                                  Notwithstanding
anything herein to the contrary, both Landlord and Tenant may at their option
install meters in the Demised Premises and take such other steps as they may
consider desirable in assisting in determining Tenant’s consumption of
electricity.  Tenant shall pay the costs
of installing and maintaining such meters.

 

9.5                               Telecommunications.

 

(a)                                  All telephone, video
and other telecommunications connections to the Demised Premises (but not
networking and connections within the Demised Premises, which do not affect
Building systems), which Tenant may desire shall be first approved by Landlord
(or Landlord’s duly appointed agent) in writing before the same are installed,
and the location of all wires and the work in connection therewith shall be
performed by contractors reasonably approved by Landlord and shall be subject
to the direction of Landlord.  Landlord
reserves the right to reasonably designate and control the entity or entities
providing repair and maintenance in the Building and to restrict and control
access to telephone cabinets. Notwithstanding anything contained herein to the

 

23

 

contrary, the refusal of Landlord to grant
its approval to any prospective provider in accordance with the terms hereof
shall not be deemed a default or breach by Landlord of its obligations under
this Lease.  The provisions herein are
solely for the benefit of Tenant and are not for the benefit of any other party
and specifically, but without limitation, no telephone or other
telecommunications services provider shall be deemed a third party beneficiary
of this Lease.  Fiber optic capacity is
currently serviced to the Building by Qwest, with the main point of presence
located on the lower level telecommunications room.  Notwithstanding the foregoing, Landlord
agrees that Tenant’s provider, Network Design, Inc. and Consultedge shall be
acceptable for the purposes of the initial installation of all network cabling
and phone service provided such vendors comply with the rules and regulations
for vendors at the Building and supply certificates of insurance.

 

(b)                                 Tenant shall be
responsible for and shall pay all costs incurred in connection with the
installation of telephone cables and related wiring in the Demised Premises,
including, without limitation, any hook-up, access and maintenance fees related
to the installation of such wires and cables in the Demised Premises and the
commencement of service therein, and the maintenance thereafter of such wire
and cables; and there shall be included in Operating Costs for the Building all
installation, hook-up or maintenance costs incurred by Landlord in connection
with telephone cables and related wiring installed in the Building after the
Date of Execution of Lease that are not allocable to any individual tenants of
such service but are allocable to the Building generally.  If Tenant fails to maintain all telephone
cables and related wiring in the Demised Premises and such failure affects or
interferes with the operation or maintenance of any other telephone cables or
related wiring in the Building, and if Tenant does not commence to cure such
failure promptly and diligently thereafter pursue such cure after written
notice from Landlord, then Landlord or any vendor hired by Landlord may enter
into and upon the Demised Premises forthwith and perform such repairs, restorations
or alterations as Landlord deems necessary in order to eliminate any such
interference (and Landlord may recover from Tenant all of Landlord’s reasonable
costs in connection therewith and Landlord shall have no liability to Tenant by
reason thereof).

 

(c)                                  Tenant agrees that
neither Landlord nor any of its agents or employees shall be liable to Tenant,
or any of Tenant’s employees, agents customers or invitees or anyone claiming
through, by or under Tenant, for any damages, injuries, losses, expenses, claims
or causes of action because of any interruption, diminution, delay or
discontinuance at any time for any reason in the furnishing of any telephone
service to the Demised Premises and the Building.  However, Landlord agrees promptly after
receipt of actual notice of any such interruption, diminution, delay or
discontinuance to use its commercially reasonable good faith efforts to notify
appropriate vendors of such service and upon compliance with commercially
reasonable requirements, to allow access by such vendors to the Building to
permit correction of such problem.

 

(d)                                 Landlord shall have
the right, upon reasonable prior notice to Tenant, to interrupt or turn off
such connections and services in the event of emergency or as necessary in
connection with maintenance, repairs or construction at the Building or
installation of equipment for other tenants of the Building or on account of
violation by

 

24

 

the Tenant’s provider or owner of the
equipment of any obligation to Landlord or in the event that Tenant’s use of
the telecommunications infrastructure of the Building materially interferes
with the telecommunications services of other tenants of the Building.  Tenant shall not utilize any wireless
telecommunications services equipment (other than usual and customary cellular
telephones), including antennae and satellite dishes, within the Demised
Premises without Landlord’s prior written consent, which consent shall not be
unreasonably withheld, conditioned or delayed or within the Building, or
attached to the outside walls or roof of the Building without Landlord’s prior
written consent, which consent may be withheld in Landlord’s sole
discretion.  In the event that any
telephone, video or other telecommunication equipment of any type installed by
or at the request of Tenant within the Demised Premises, on the roof, or
elsewhere within or on the Building causes interference to equipment previously
installed and then in use by another party, Tenant shall cease using such
equipment until the source of the interference is identified and eliminated and
Tenant shall assume all liability related to such interference.  Tenant shall cooperate with Landlord and
other parties, to eliminate such interference promptly.  In the event that Tenant is unable to do so,
Tenant will substitute alternative equipment that remedies the situation.  If such interference persists, Tenant shall,
at Landlord’s sole discretion, remove such equipment.

 

(e)                                  Upon the Expiration
Date, Tenant agrees to remove all telephone cables and related wiring installed
by Tenant for and during Tenant’s occupancy, unless Landlord provides written
notice to Tenant at least thirty (30) days prior to the Expiration Date that
Landlord will not require Tenant to remove such telephone cables and related
wiring.

 

9.6                               Interruption
of Services.

 

Landlord does not covenant that Building
services will be free from interruptions caused by repairs, improvements,
changes of service, alterations, strikes, lockouts, labor controversies,
accidents, inability to obtain fuel, water or supplies, actions of other
tenants, licensees or other occupants of the Building or other third parties or
any other cause beyond the reasonable control of Landlord.  No such interruption of service shall be
deemed a constructive eviction or disturbance of Tenant’s use and possession of
the Demised Premises or any part thereof, or otherwise render Landlord liable
to Tenant for damages, by abatement of rent or otherwise, or otherwise relieve
Tenant from performance of Tenant’s obligations under this Lease.  Tenant hereby waives and releases all claims
against Landlord for damages for interruption or stoppage of Building
services.  In the event of any such
interruption or stoppage of Building services, Landlord shall use commercially
reasonable efforts to have such services promptly resumed.  Landlord shall be deemed to have observed and
performed the terms and conditions to be performed by Landlord under this Lease,
including those relating to the provision of utilities and services, if in so
doing it acts in accordance with a directive, policy or request of a
governmental or quasi-governmental authority serving the public interest in the
fields of energy conservation or security. 
Notwithstanding the foregoing, in the event any such interruption in
services to be provided by Landlord under this Article is caused by the
negligence or willful misconduct of Landlord, and if such interruption causes
the Demised Premises to be untenantable, and as a result thereof Tenant in fact
ceases to use all or any portion of the Demised Premises for a period in excess
of five (5) consecutive days, then commencing on the sixth (6th) consecutive
day of

 

25

 

such untenantability and non-use, Fixed Rent and Additional Rent
payable by Tenant shall be abated until the earliest to occur of (a) the
date upon which such interruption has been remedied and the Demised
Premises are again tenantable or (b) the date Tenant resumes use of the
Demised Premises.  Notwithstanding the
foregoing, however, in the event Tenant is entitled to recover Fixed Rent or
Additional Rent, or both, for such period of untenantability from Tenant’s
business interruption insurance or otherwise, then Tenant shall not be entitled
to such abatement, it being the intent and agreement of Tenant to first proceed
against its insurance carrier for any such loss of use.

 

9.7                               Overtime
Services.

 

In the event Tenant requires any utilities or
services during periods other than as provided in this Article and
provided that Tenant shall have given Landlord notice no later than 2:00 P.M.
of the last business day prior to Tenant’s need for such services, Landlord
shall provide Tenant with such services, and Tenant shall pay Landlord, as
Additional Rent, Landlord’s then existing charges in respect thereto.  Subject to Section 9.1, Landlord’s
charges for after hours HVAC shall be its Standard Rate.

 

ARTICLE 10

 

PERSONAL PROPERTY
TAXES

 

10.1                        Tenant’s
Personal Property.

 

Tenant shall pay directly all taxes on any
and all personal property leased, owned, installed, used, or located in the
Demised Premises.  Tenant shall indemnify
and hold harmless Landlord Protected Parties against any claim, loss, cost,
demand (including reasonable legal fees), whether in respect of liens or
otherwise, arising out of such taxes.

 

ARTICLE 11

 

INSURANCE AND
INDEMNITY

 

11.1                        Tenant’s
Insurance.

 

At all times Tenant shall keep in full force
and effect a policy of commercial general liability and property damage
insurance with respect to the Demised Premises, in such limits as may be
reasonably required from time to time by Landlord.  The limits of commercial liability insurance
on the Commencement Date shall be not less than $3,000,000.00 for death or injury
to any number of persons or for property damage, for each occurrence.  In no event shall the limits of any coverage
maintained by Tenant pursuant to this Section 11.1 be considered as
limiting Tenant’s liability under this Lease. 
These policies shall name Landlord, any person, firms or corporations
(including, without being limited to, any mortgagee or lessor of Landlord)
designated by Landlord and Tenant as insureds, shall include blanket
contractual liability coverage which insures contractual liability under the
indemnifications set forth in Section 11.2 hereof and shall contain a
clause that the insurer will not cancel or change the insurance without first
giving Landlord 30 days prior written notice. 
The insurance shall be written by an insurance company, licensed and
qualified to do business in the State in which the Property is located, 

 

26

 

which is reasonably acceptable to Landlord.  An original copy of the policy or a
certificate of insurance shall be delivered to Landlord upon the execution and
delivery of this Lease and replacement certificates shall be delivered not less
than ten (10) days prior to the expiration of any then existing coverage.  The insurance which Tenant is required to
maintain in force and effect under this Section 11.1 shall be primary
insurance as respects Landlord (and any other additional insureds designated by
Landlord) and not excess over or contributory with any other available
insurance.  Certificates of insurance
evidencing the liability insurance coverage required under this Section 11.1
shall contain an endorsement to such effect. 
In addition, at all times during the Term hereof, Tenant shall procure
and maintain Worker’s Compensation Insurance in accordance with the laws of the
State in which the Property is located.

 

11.2                        Indemnity
and Non-Liability.

 

(a)                                  Neither Landlord nor
Landlord’s agents (including, without being limited, to the Managing Agent),
employees, contractors, officers, trustees, directors, shareholders, partners
or principals (disclosed or undisclosed) shall be liable to Tenant or Tenant’s
agents, employees, contractors, invitees or licensees or any other occupant of
the Demised Premises, and Tenant shall save Landlord, its successors and
assigns and their respective agents, employees, contractors, officers,
trustees, directors, shareholders, partners and principals (disclosed or
undisclosed) harmless from any loss, cost, liability, claim, damage, expense
(including reasonable attorneys’ fees and disbursements), penalty or fine
incurred in connection with or arising from any injury to Tenant or to any
other person or for any damage to, or loss (by theft or otherwise) of, any of
Tenant’s property or of the property of any other person, irrespective of the
cause of such injury, damage or loss (including the acts or negligence of any
tenant or of any owners or occupants of adjacent or neighborhood property or
caused by operations in construction of any private, public or quasi-public
work) unless due to the negligence or willful misconduct of Landlord or
Landlord’s agents or employees.  However,
even if such loss or damage is caused by the negligence or willful misconduct
of Landlord, its agents or employees, Tenant waives, to the full extent
permitted by law, any claim for consequential damages in connection
therewith.  To the extent of Tenant’s
insurance coverage, Landlord, and its agents and employees, shall not be
liable, for any loss or damage to any person or property due to the negligence
of Landlord, its agents or employees.

 

(b)                                 Neither any
(1) performance by Landlord, Tenant or others of any repairs,
improvements, alterations, additions, installations, substitutions, betterments
or decorations in or to the Property or the Building, the Building equipment
and systems, the Common Areas or the Demised Premises, (2) failure of
Landlord or others to make any such repairs or improvements, (3) damage to
the Property or the Building, the Building equipment and systems, the Common
Areas, the Demised Premises or Tenant’s property, (4) injury to any
persons, caused by other tenants or persons in the Building, or by operations
in the construction of any private, public, or quasi-public work, or by any
other cause, (5) latent defect in the Building, the Building equipment and
systems, the Common Areas or the Demised Premises, nor (6) inconvenience
or annoyance to Tenant or injury to or interruption of Tenant’s business by
reason of any of the events or occurrences referred to in the foregoing
subdivisions (1) through (5) shall impose any liability on Landlord to Tenant,
other than, subject to Section 24.10 hereof, such liability 

 

27

 

as may be imposed upon Landlord by law for
Landlord’s negligence or the negligence of Landlord’s agents or employees in
the operation or maintenance of the Building, the Building equipment and
systems or the Common Areas or for the breach by Landlord of any express
covenant of this Lease on Landlord’s part to be performed.  No representation, guaranty or warranty is
made or assurance given that the communications or security systems, devices or
procedures of the Building, including the proximity card read access system
with remote monitoring cameras, will be effective to prevent injury to Tenant
or any other person or damage to, or loss (by theft or otherwise) of, any of
Tenant’s property or of the property of any other person.  Furthermore, Landlord agrees that it shall
not reduce the security service provided at the Date of Execution of the Lease
without the prior written consent of and approval by Tenant.  Tenant agrees to review and approve or
disapprove any such request for a reduction in security service, in good faith,
within ten days after Tenant’s receipt of written request for approval from
Landlord.  If Tenant shall fail to
respond to such request within ten days after receipt of such request, Tenant
shall be deemed to have approved such change.

 

(c)                                  Tenant hereby
indemnifies and holds harmless Landlord Protected Parties from any loss, cost,
liability, claim, damage, expense (including reasonable attorneys’ fees and
disbursements), penalty or fine incurred in connection with or arising from
(1) any default by Tenant in the performance of any of the terms of this
Lease on Tenant’s part to be performed, or (2) the use or occupancy or
manner of use or occupancy of the Demised Premises by Tenant or (3) any
acts or omissions resulting from or arising out of the gross negligence or
willful misconduct of Tenant, or the contractors, agents, employees, invitees,
licensees, assignees or sublessees of Tenant, or (4) any accident, injury
or damage whatsoever caused to any person or to the property of any person and
occurring in or about the Demised Premises. 
Tenant’s obligations under this Section 11.2 shall survive the
expiration or earlier termination of this Lease.

 

(d)                                 After Tenant’s review
and approval for accuracy, Tenant shall pay to Landlord as Additional Rent,
within thirty (30) days after receipt by Tenant of bills or statements therefor,
sums equal to all losses, costs, liabilities, claims, damages, fines, penalties
and expenses referred to in this Section 11.2.  Tenant shall be deemed to have approved such
Additional Rent charge if Tenant does not notify landlord of any objections as
to accuracy within such 30 days.

 

11.3                        Waiver of
Subrogation.

 

(a)                                  Landlord and Tenant
shall each endeavor to procure an appropriate clause in, or endorsement to,
each of its policies for industry standard form of property insurance which, as
of the date of this Lease, is known as “causes of loss - special form,”
pursuant to which the insurance company waives subrogation or consents to
waiver of its right of recovery against the other party, which, in the case of
Tenant, shall be deemed to include any subtenant in the Demised Premises, and
having obtained such clause or endorsement of waiver of subrogation or consent
to a waiver of the right of recovery, such party hereby agrees that it will not
make any claim against or seek to recover from the other for any loss or damage
to its property or the property of others covered by such property damage
insurance coverage; provided, however, that the release, discharge and

 

28

 

covenant not to sue herein contained shall be
limited by the terms and provisions of the waiver of subrogation clause or
endorsement, or the clause or endorsement consenting to a waiver of right of
recovery, and shall be co-extensive therewith.

 

(b)                                 If either party hereto
shall not be able to obtain such clause or endorsement on a particular policy
or if the inclusion of such clause or endorsement would result in an increase
in premium, then that party shall so notify the other party hereto at least 15
days from the date the party is informed by its property insurance carrier of
the same.  To the extent that such clause
or endorsement is available at an increased premium, the other party shall be
obligated to pay the amount of any increase in premium resulting from the
inclusion of such clause or endorsement, unless such other party notifies the
party obtaining the insurance, within twenty (20) days following notice of the
amount of such increase, that such other party declines to pay such increase,
in which event the party holding the insurance shall have no obligation to the
other party with regard to the inclusion of such clause or endorsement or the
lack thereof.  If a party shall fail to
give notice either of inability to obtain such clause or endorsement or notice
of an increase in premium, then that party shall be deemed to have waived its
right of recovery from the other party with respect to any loss or damage
insured against by the policy with respect to which notice was not given as
provided above.

 

11.4                        Landlords’
Insurance.

 

Landlord agrees to purchase and keep in force
and effect commercial general liability insurance with respect to the Common
Areas and insurance on the Building improvements and on the items included in
Landlord’s Work so long as such item are not trade fixtures, moveable office
furniture and movable equipment which Tenant is entitled to remove at the
expiration or earlier termination of this Lease (“Insurable Items of Landlord’s Work”) (but not including,
however, any tenant improvements, alterations or additions made after the
initial improvements made pursuant to Landlord’s Work) in amounts and with
coverages consistent with amounts and coverages carried by prudent owners of
the class of buildings in the Minnetonka, Minnesota area that are equal to the
class of building of the Building at such time.

 

ARTICLE 12

 

DAMAGE BY CASUALTY

 

12.1                        Notice.

 

Tenant shall give written notice to Landlord
of any damage caused to the Demised Premises by fire or other casualty within
twenty-four (24) hours of the date on which Tenant becomes aware of such event.

 

12.2                        Restoration
of Improvements.

 

(a)                                  In the event the
Demised Premises are damaged by fire or other casualty, Landlord shall, unless
this Lease is terminated as hereinafter provided, proceed with reasonable
diligence and at its sole cost and expense to repair the Demised Premises,
including the Insurable Items of Landlord’s Work (but not including, however,
any tenant

 

29

 

improvements, alterations or additions made
after the initial improvements made pursuant to Landlord’s Work or trade
fixtures, moveable office furniture and movable equipment which Tenant is
entitled to remove at the expiration or earlier termination of this Lease), and
then only to the extent of available insurance proceeds received.  Tenant shall promptly, at its sole cost and
expense, remove such of its furniture and other belongings from the Demised
Premises as Landlord shall require in order to repair and restore the Demised
Premises.  Until any such repairs to the
Demised Premises are completed, the Fixed Rent and Additional Rent shall be
abated in proportion to the part of the Demised Premises, if any, that is
unusable by Tenant in the conduct of its business.  If the fire or other casualty is due to the
gross negligence or willful misconduct of Tenant, its agents, employees,
contractors or invitees, there shall be no abatement of Fixed Rent or
Additional Rent.

 

(b)                                 If (1) the
Demised Premises shall be (i) totally destroyed or substantially damaged,
or (ii) partially destroyed or damaged by a casualty not sufficiently, in
Landlord’s reasonable judgment, covered by insurance or, even if covered by
insurance, which, in Landlord’s reasonable judgment, cannot be restored to
tenantable condition within 180 days after the casualty, or (2) the
Building shall be destroyed to the extent of one-quarter or more of its then
value or so damaged that, in Landlord’s reasonable judgment, substantial
alteration, demolition or reconstruction of the Building shall be required,
whether or not covered by Landlord’s insurance, then in either such event
Landlord may elect to proceed to rebuild and repair the Demised Premises or to
terminate this Lease, effective upon giving notice of such election to Tenant
within 30 days after the occurrence of such casualty. Landlord’s obligation to
rebuild and repair under this Section shall in any event be limited to
restoring the Building and the Demised Premises to substantially the condition
in which they existed prior to the casualty (in no event shall Landlord be
required to repair any of Tenant’s leasehold improvements, fixtures, equipment,
furniture, furnishings and personal property or any improvements, fixtures,
equipment, furniture, furnishing and personal property of any third party
provider of Tenant, such as Tenant’s telecommunications provider) and then only
to the extent that insurance proceeds shall be sufficient to pay for such
restoration.  Tenant agrees that,
promptly after the completion of such work by Landlord, it will proceed with reasonable
diligence and at its sole cost and expense to rebuild, repair and restore its
fixtures, equipment and other installations.

 

(c)                                  Tenant shall have no
right to terminate this Lease in the event of the damage or destruction of the
Demised Premises other than as set forth in this Section and hereby waives
the provision of any Applicable Law granting Tenant such right.

 

12.3                        Damage
During Last Year of Lease Term.

 

Without limiting Landlord’s rights under Section 12.2,
in the event the Building or Demised Premises shall, in Landlord’s reasonable
judgment, be substantially damaged during the last year of the term of this
Lease, Landlord may elect either to rebuild or repair the Demised Premises or
to terminate this Lease effective upon giving notice of such election, in
writing, to Tenant within thirty (30) days after the happening of the fire or
other casualty.

 

30

 

 

ARTICLE 13

 

EMINENT DOMAIN

 

13.1                        Taking of
Demised Premises.

 

If during the Term all of the Demised
Premises shall be taken for any public or quasi-public use under any statute or
by right of eminent domain, or sale-in-lieu of such taking, this Lease shall
automatically terminate on the date on which the condemning authority takes
possession of the Demised Premises (hereinafter called the “Date of Taking”).  If so much of the Demised Premises (but less
than all) is taken as shall render the Demised Premises untenantable, Tenant
and Landlord shall each have the right to terminate this Lease by giving
written notice to the other party of termination within 30 days after the Date
of Taking.

 

13.2                        Partial or
Temporary Taking of Building.

 

(a)                                  If during the Term, a
portion of the Property shall be taken for any public or quasi-public use under
any statute or by right of eminent domain, or sale-in-lieu of such taking, then
(1) if in the reasonable opinion of Landlord substantial alteration or
reconstruction of the Property is necessary as a result thereof, whether or not
the Demised Premises are or may be affected; (2) if one-quarter or more of
the value, in Landlord’s sole judgment, of the Property is included in such
taking or sale; or (3) if such portion of the Common Areas, including any
parking areas or driveways, shall be taken as, in Landlord’s reasonable
judgment, to materially interfere or prevent access to the Building or reduce
the value of Property by more than one-quarter; then, Landlord shall have the right
to terminate this Lease by giving to Tenant at least 30 days’ written notice
thereof.

 

(b)                                 If during the Term,
the Building or the Common Areas, or any portion thereof, shall be taken as set
out in subsection (a) above for a period of less than 90 days, this Lease
shall remain in full force and effect subject to Section 13.5 hereof.  If such a taking shall be for a period of 90
days or more, then the provisions of Section 13.1 and Section 13.2(a),
as the case may be, shall be applicable.

 

(c)                                  If a Partial or
Temporary Taking as set forth in Section 13.2 (a) affects any portion of
the Demised Premises, Tenant shall have the right to terminate this Lease by
giving written notice to Landlord no later than 30 days after the date of such
Partial or Temporary Taking.

 

13.3                        Termination.

 

If either party exercises its rights of
termination under Section 13.1 or 13.2 (and any such right must be
exercised within 30 days after the Date of Taking, failing which such right
shall be deemed waived), this Lease shall terminate on the date stated in the
notice, provided, however, that no termination pursuant to notice hereunder may
occur later than 60 days after the Date of Taking.

 

31

 

13.4                        Surrender.

 

On the date of termination under this Lease
under Section 13.1 or 13.2, Tenant shall immediately surrender to Landlord
the Demised Premises and all interests therein under this Lease and Tenant
shall pay Landlord Rent through the date of termination (or through the Date of
Taking if such date shall not be the same as the date of termination).  Landlord may re-enter and take possession of
the Demised Premises and remove Tenant there from.  Upon such surrender, Tenant shall remove its
equipment and personal property and, to the extent Demised Premises are
directly affected by the Taking, restore the Demised Premises to as good
condition as prior to the date of this Lease (subject to ordinary wear and
tear) and repair any damage to the Demised Premises or the Property due to such
removal.

 

13.5                        Rent
Adjustment for Partial Taking of Demised Premises.

 

If any portion of the Demised Premises (but
less than the whole thereof) is so taken, and no rights of termination herein
conferred are timely exercised, the Term shall expire (or, in respect of a
taking pursuant to Section 13.2(b) hereof, have no force and effect for
the period of such temporary taking) with respect to the portion so taken on
(or from) the Date of Taking.  In such
event, the Rent thereafter payable under this Lease shall be adjusted pro rata
by Landlord in order to account for the resulting reduction (either temporarily
or permanently) in the number of rentable square feet in the Demised Premises.

 

13.6                        Awards.

 

Upon any taking or sale described in this
Article, Landlord shall be entitled to receive and retain the entire award or
consideration for the affected lands and improvements, and Tenant shall not
have nor advance any claim against Landlord or anyone else for the value of its
property or its leasehold estate under this Lease, or for the costs or removal
or relocation, or business interruption expense or any other damages arising
out of such taking or purchase.  Nothing
herein shall give Landlord any interest in or preclude Tenant from seeking and
recovering on its own account a separate award from the condemning authority
attributable to the taking or purchase of Tenant’s trade fixtures, or the
removal or relocation of its business and effects, or the interruption of its
business provided that Landlord’s award is not diminished thereby.  If any such award made or compensation paid
to either party specifically includes an award or amount for the other, the
party first receiving the same shall promptly account therefor to the other.

 

ARTICLE 14

 

RIGHTS RESERVED TO LANDLORD

 

14.1                        Access to Demised Premises.

 

Landlord and Landlord’s agents shall have the
right (but shall not be obligated) to enter the Demised Premises in any
emergency at any time, and to perform any acts related to the safety,
protection or preservation thereof or of the Building.  At other reasonable times, and upon
reasonable notice, Landlord may enter the Demised Premises (1) to examine
and make such repairs, replacements and improvements as Landlord may deem
necessary or reasonably

 

32

 

desirable to the Demised Premises or to any other portion of the
Building, (2) for the purpose of complying with laws, regulations and
other requirements of governmental authorities or the provisions of this Lease,
(3) for the purpose of posting notices of nonresponsibility, or
(4) for the purposes of showing the same to prospective purchasers or
mortgagees of the Building, and during the last 12 months of the Term, for the
purpose of showing the same to prospective tenants.  Tenant shall permit Landlord to use and
maintain and replace unexposed pipes and conduits in and through the Demised
Premises and to erect new unexposed pipes and conduits therein.  Landlord may, during the progress of any work
in the Demised Premises, take all necessary materials and equipment into the
Demised Premises and close or temporarily suspend operation of entrances,
doors, corridors, elevators or other facilities without such interference
constituting an eviction.  Tenant shall
not be entitled to any damages by reason of loss or interruption of business or
otherwise during such periods; provided, however that the foregoing shall not
be deemed or construed to limit Tenant’s rights under Section 9.6 above
with respect to Rent abatement in the event of certain interruption of
services.  During such periods Landlord
shall use reasonable efforts to minimize any interference with Tenant’s use of
the Demised Premises, including, but not limited to, performing any required
work after Normal Business Hours as necessary. 
If Tenant is not present to open and permit an entry into the Demised
Premises, Landlord or Landlord’s agents may enter the same whenever such entry
may be necessary or permissible by master key or otherwise, provided reasonable
care is exercised to safeguard Tenant’s property.  Such entry shall not render Landlord or its
agents liable therefor, nor in such event shall the obligations of Tenant
hereunder be affected.

 

14.2                        Additional
Rights.

 

Landlord shall have the following additional
rights exercisable without notice (except as provided below) and without
liability to Tenant for damage or injury to property, person or business, all
claims for damage being hereby released, and without effecting an eviction or
disturbance of Tenant’s use or possession or giving rise to any claim for
setoffs, or abatement of Rent:

 

(a)                                  To change the name,
number or designation by which the Building may be known; provided, however,
that Landlord shall not during the term of this Lease, under any circumstance,
allow the existing tenant, CFG, to have its name on the exterior of Building or
as the designation by which the Building is known, so long as Tenant is not in
default beyond applicable notice and cure periods under any of the terms and
conditions of this Lease; and provided that Tenant is occupying the Demised
Premises;

 

(b)                                 To make such changes
in or to the Building, including the building equipment and systems, as
Landlord may deem necessary or desirable, provided that any such change does
not deprive Tenant of a reasonable means of access to the Demised Premises or
unreasonably interfere with the use of the Demised Premises;

 

(c)                                  To grant to anyone
the exclusive right to conduct any business or render any services (including,
without being limited to, the right to designate all suppliers or persons
furnishing sign painting and lettering, beverages, foods, towels, vending
machines or toilet supplies used or consumed on the Demised Premises) in the
Building, provided such exclusive right shall not operate to exclude Tenant
from the use expressly

 

33

 

permitted by Article 6,
specifically including, without limitation, Tenant’s right to conduct business
in the Demised Premises as general offices;

 

(d)                                 To close the Building
at any such reasonable times after Normal Business Hours as Landlord may
determine, subject, however, to Tenant’s unrestricted right to access the
Building, the Demised Premises and all Common Areas twenty-four (24) hours per
day, seven (7) days per week, three hundred sixty-five (365) days per year
pursuant to commercially reasonable rules and regulations; and

 

(e)                                  To perform any act,
obligation or other commitment required of or by Tenant, which Tenant has not
performed for any reason whatsoever (including, without being limited to,
obtaining insurance coverage), and to charge Tenant as Additional Rent all
reasonable costs and expenses incurred by Landlord for such performance,
together with interest thereon at the Default Rate from the dates of Landlord’s
expenditures until paid.

 

ARTICLE 15

 

ASSIGNMENT AND
SUBLETTING

 

15.1                        Consent
Required.

 

(a)                                  Tenant shall not,
voluntarily or involuntarily, by operation of law or
otherwise:  (i) assign, mortgage, pledge, encumber or in any
manner transfer this Lease in whole or in part, or (ii) sublet all or any
part of the Demised Premises, or allow any other person to occupy all or any
part thereof, without the prior written consent of Landlord in each instance,
which consent, as more fully provided below, shall not be unreasonably
withheld, and any attempt to do any of such acts without such consent shall be
null and void and of no effect.  Tenant
shall reimburse Landlord for all third party costs and third party expenses
incurred by Landlord in reviewing said request, including, without limitation,
reasonable outside attorneys’ fees, but such reimbursement of such costs,
expenses and fees shall not to exceed $2,500.00 in the aggregate.  In the event of a transfer of control of
Tenant, including, without being limited to, a transfer of stock or partnership
interest or the merger, consolidation, sale of all or substantially all of the
other assets of Tenant or other corporate or other reorganization of Tenant
(whether or not Tenant shall be the surviving entity) (such event being a “Transfer of Control Event” and the entity
assigned this Lease a “Transfer of Control
Assignee”).  Tenant shall
give Landlord written notice within 30 days after a Transfer of Control Event
and furnish reasonable evidence that such assignee has a net worth of equal to
or greater than the net worth as of the Date of Execution of Lease of Kanawha
Insurance Company (“Required Net Worth”).  In the event the assignee shall have the
Required Net Worth such Transfer of Control Event shall not be deemed an
assignment under this Lease and shall not require Landlord’s prior
consent.  Such assignment shall be
subject to all the provisions of this Article. In the event the Transfer
Control Assignee shall not have the Required Net Worth, then such Transfer of
Control Event shall be deemed an assignment and Landlord shall have all of its
rights in connection with an assignment or sublet as set forth in Section 15
(c).  The consent by Landlord to any
assignment, mortgage, pledge,

 

34

 

encumbrance,
transfer or subletting shall not constitute a waiver of the necessity for such
consent to any subsequent assignment, mortgage, pledge, encumbrance, transfer
or subletting.

 

(b)                                 In the event Tenant
desires to assign this Lease or sublet all or a portion of the Demised
Premises, Tenant shall submit to Landlord: (a) the proposed sublease or
assignment, which is not to commence prior to thirty (30) days from the
date the submission to Landlord occurs, and (b) sufficient information to
permit Landlord to determine the acceptability, financial responsibility, and
character of subtenant or assignee.

 

(c)                                  Within
fifteen (15) business days after receipt of the materials and information
set forth in Section 15.1(b), Landlord shall respond by, either:
(a) granting or refusing its consent to the proposed sublease or
assignment, as provided in subsection (d) below.  (b) terminating this Lease on the date
the assignment was to commence; or (c) as to a sublease, terminating this
Lease for only the portion of the Demised Premises to be subleased (the “Subject Premises”) as of the date on
which the sublease was to commence. 
Tenant shall remain liable for all payments due under this Lease through
the date of termination even though such amounts may be billed subsequent to
termination.

 

(d)                                 If Landlord does not
terminate this Lease in the case of a proposed assignment or terminate the
Lease as to the Subject Premises pursuant to subsection (c) above,
Landlord shall not unreasonably withhold its consent to the proposed sublease
or assignment.  Such consent shall be
deemed to be reasonably withheld if: (i) in the judgment of Landlord, the
subtenant or assignee is of a character or engaged in a business which is not
in keeping with the standards of Landlord for the Building; (ii) in the
judgment of Landlord the purposes for which the subtenant or assignee intends
to use the Demised Premises or the portion of the Demised Premises to be
subleased (the “Subject Premises”),
as the case may be, are not in keeping with the standards of Landlord for the
Building or the terms of this Lease, or are in violation of the terms of any
other lease in the Building; (iii) in the judgment of Landlord the
proposed use of the Demised Premises or Subject Premises, as the case may be,
by the subtenant or assignee would increase traffic into and out of the
Building or otherwise increase the use of the Common Areas, including parking
areas; (iv) Tenant is in default under this Lease; (v) the Subject
Premises or the remaining balance of the Demised Premises, if any, is not
regular in shape with appropriate means of ingress and egress and suitable for
normal renting purposes; (vi) the proposed subtenant or assignee is either
a governmental unit (or subdivision or agency thereof) a present occupant of or
negotiating for space in the Building; (vii) the assignee or sublessee is
not, in the sole judgment of Landlord, solvent or does not have unencumbered
assets of a value at least equal to twice the projected costs of the
obligations to be assumed for the unexpired term of this Lease; (viii) in
the judgment of Landlord such a sublease or assignment would violate any term,
condition, covenant, or agreement of the Landlord involving the Building, or
any other tenant’s lease within it; (ix) the proposed use or occupancy of
the Demised Premises or Subject Premises, as the case may be, by the assignee
or sublessee is not a Permitted Use or would either violate any applicable law,
statute, ordinance, code or regulation or would impose any obligation upon
Landlord to comply with any of the foregoing or increase 

 

35

 

Landlord’s obligation to comply with any of
the foregoing; or (x) any such proposed sublease or assignment would cause
a breach of the ERISA representations set forth in Section 24.14
below.  Notwithstanding anything to the
contrary contained in this Lease, Tenant’s sole right and remedy in any dispute
as to whether Landlord’s consent to a proposed sublease or proposed assignment
has been unreasonably withheld shall be an action for declaratory judgment or
specific performance, and Tenant shall not be entitled to any damages if
Landlord is adjudged to have unreasonably withheld such consent.

 

(e)                                  If Landlord grants consent
to any assignment or sublease hereunder, it shall be upon and subject to the
following terms: (i) the terms and conditions of this Lease shall in no
way be deemed modified, abrogated or amended; (ii) the consent shall not
be deemed a consent to any further subletting or assignments by either Tenant,
subtenants or assignees; and (iii) such other terms and conditions as are set
forth in Landlord’s standard consent form. 
In addition to the foregoing conditions, if Tenant shall assign this
Lease, the assignee shall expressly assume all obligations of Tenant hereunder
in a written instrument satisfactory to Landlord and furnished to Landlord by
Tenant not later than fifteen (15) days prior to the effective date of the
assignment; if Tenant shall sublease any portion or all of the Demised Premises
as permitted herein, Tenant shall obtain and furnish to Landlord, not later
than fifteen (15) days prior to the effective date of such sublease and in form
satisfactory to Landlord, the written agreement of such subtenant to the effect
that the subtenant will attorn to Landlord, at Landlord’s option and written
request, in the event this Lease terminates before the expiration of the
sublease.  Tenant shall not be released
from any obligations or liabilities under this Lease as a result of any
assignment of this Lease or sublet of all or any portion of the Demised
Premises.

 

(f)                                    If Tenant shall
assign this Lease or sublet all or any portion of the Demised Premises pursuant
to the terms of this Article, then Tenant shall pay Landlord as additional
Rent, all of the excess payments or other economic consideration whether
denominated as rent or otherwise (together with escalations) payable to Tenant
under the sublease or assignment which might be in excess of the Fixed Rent
plus Additional Rent payable to Landlord under this Lease (or, if only a
portion of the Demised Premises is being sublet, the excess payments or other
economic consideration allocable on a rentable square footage basis to the
space sublet).  Notwithstanding the
foregoing, any payment by Tenant to Landlord, as contemplated in this
subsection, shall be net of any Tenant’s costs to secure the assignment or
sublease, including but not limited to, broker fees and subtenant improvements.

 

ARTICLE 16

 

BANKRUPTCY

 

16.1                        Bankruptcy.

 

If at any time after the execution and
delivery of this Lease, there shall be entered an Order for Relief against
Tenant in any court pursuant to any statute either of the United States or any
court of any State in connection with a petition in bankruptcy or insolvency or
for reorganization or for the appointment of a receiver or trustee or
conservator of all or a portion of 

 

36

 

Tenant’s property, or if Tenant makes an assignment for the benefit of
creditors, this Lease, (a) if such event shall occur prior to the later of
the Commencement Date or the date that Landlord’s Work, if any, is completed,
shall ipso facto be cancelled and terminated, or (b) if such event shall
occur on or after the Commencement Date, at the option of Landlord to be
exercised within 60 days after notice of the happening of any one or more of
such events, may be cancelled and terminated, and in any such event of
termination neither Tenant nor any person claiming through or under Tenant or
by virtue of any statute or of an order of any court shall be entitled to
possession or to remain in possession of the Demised Premises but shall
forthwith quit and surrender the Demised Premises, and Landlord, in addition to
the other rights and remedies granted by virtue of any other provision in this
Lease or by virtue of any statute or rule of law, may retain as damages any
Rent, Security Deposit, or moneys received by it from Tenant or others on
behalf of Tenant.

 

16.2                        Measure of
Damages.

 

In the event of the termination of this Lease
pursuant to Section 16.1 above, Landlord shall be entitled to the same
rights and remedies as set forth in Article 17.

 

16.3                        Adequate
Assurance.

 

(a)                                  If Tenant or a
trustee elects to assume this Lease subsequent to the filing of a petition
under the Bankruptcy Code, Tenant, as debtor and as debtor in possession, and
any trustee who may be appointed agree as follows: (i) to cure each and
every existing breach by Tenant within not more than ninety (90) days of
assumption of this Lease; and (ii) to compensate Landlord for any actual
pecuniary loss resulting from any existing breach, including without
limitation, Landlord’s reasonable costs, expenses and attorneys’ fees incurred
as a result of the breach, as determined by a court of competent jurisdiction,
within ninety (90) days of assumption of this Lease; and (iii) in the
event of an existing breach, to provide adequate assurance of Tenant’s future
performance, including without limitation (A) the deposit of an additional
sum equal to three months’ Rent to be held (without any allowance for interest
thereon) to secure Tenant’s obligations under the Lease; and (B) the
production to Landlord of written documentation establishing that Tenant has
sufficient present and anticipated financial ability to perform each and every
obligation of Tenant under this Lease; and (C) assurances, in form
acceptable to Landlord, as may be required under any applicable provision of
the Bankruptcy Code; and (iv) the assumption will not breach any provision
of this Lease; and (v) the assumption will be subject to all of the
provisions of this Lease unless the prior written consent of Landlord is
obtained.

 

(b)                                 If Tenant assumes this
Lease and proposes to assign the same pursuant to the provisions of the
Bankruptcy Code to any person or entity who shall have made a bona  fide
offer to accept an assignment of this Lease on terms acceptable to Tenant, then
notice of such proposed assignment, setting forth (i) the name and address
of such person, (ii) all the terms and conditions of such offer, and
(iii) the adequate assurance to be provided Landlord to assure such person’s
future performance under the Lease, including, without limitation, the
assurances referred to in any applicable provision of the Bankruptcy Code,
shall be given to Landlord by Tenant no later than twenty (20) days 

 

37

 

after receipt by Tenant, but in any event no
later than ten (10) days prior to the date that Tenant shall make
application to a court of competent jurisdiction for authority and approval to
enter into such assignment and assumption, and Landlord shall thereupon have
the prior right and option, to be exercised by notice to Tenant given at any
time prior to the effective date of such proposed assignment, to accept an
assignment of this Lease upon the same terms and conditions and for the same
consideration, if any, as the bona  fide offer made by such
person, less any brokerage commissions which may be payable out of the
consideration to be paid by such person for the assignment of this Lease.  The adequate assurance to be provided
Landlord to assure the assignee’s future performance under the Lease shall
include without limitation: (A) the deposit of a sum equal to three months’
Rent to be held (without any allowance for interest thereon) as security for
performance hereunder; and (B) a written demonstration that the assignee
meets all reasonable financial and other criteria of Landlord as did Tenant and
its business at the time of execution of this Lease, including the production
of the most recent audited financial statement of the assignee prepared by a
certified public accountant; and (C) the assignee’s use of the Demised
Premises will be in compliance with the terms of this Lease; and
(D) assurances, in form acceptable to Landlord, as to all matters
identified in any applicable provision of the Bankruptcy Code.

 

ARTICLE 17

 

DEFAULT

 

17.1                        Events of
Default.

 

This Lease and the Term and estate hereby
granted are subject to the limitation that:

 

(a)                                  whenever Tenant shall
have failed to pay any installment of Rent, or any portion thereof when the
same shall be due and payable, and Tenant shall have failed to pay same for a
period of five (5) business days after the due date of such payment (“Grace Period”), and for an additional
period of five (5) days following the date on which Tenant receives written
notice of default under this subsection from Landlord.  Landlord shall not, however, be required to
give Tenant written notice more than two times in any consecutive twelve (12)
month period of the failure to timely pay any installment of Rent; or

 

(b)                                 whenever Tenant shall
have failed to comply with, shall have violated or shall be in default in the
performance of any other provision of this Lease and Tenant shall have failed
to cure such default within 30 days after written notice from Landlord of such
noncompliance, violation or default (in the case of a default which cannot with
due diligence be cured within a period of 30 days, Tenant shall have such
additional time to cure same as may reasonably be necessary, provided Tenant
commences curing such default within the 30 day period and proceeds promptly,
effectively, continuously and with due diligence to cure such default after
delivery of said notice); or

 

(c)                                  whenever
Tenant shall abandon the Demised Premises and also fail to timely pay Rent
hereunder following said abandonment; or

 

38

 

(d)                                 whenever any warranty,
representation or statement made or furnished by Tenant to Landlord in writing
at any time in connection with this Lease or any other agreement to which
Tenant and Landlord are parties is determined to have been, and which Tenant
was aware at the time was false or misleading in any material respect when made
or furnished in writing;

 

then regardless and notwithstanding the fact that Landlord has or may
have some other remedy under this Lease or by virtue hereof, or in law or in
equity, Landlord may give to Tenant a notice (the “Termination Notice”) (which notice is
in addition to, and not in lieu of, the notice and cure periods provided under Section 17.1
above), of the intention of Landlord to end the term of this Lease specifying a
day not less than five (5) days thereafter and, upon the giving of the
Termination Notice and upon Tenant’s failure to cure the default at the
expiration of the relevant cure period described above, this Lease and the Term
and estate hereby granted shall expire and terminate upon the day so specified
in the Termination Notice as fully and completely and with the same force and
effect as if the day so specified were the Expiration Date and all rights of
Tenant shall terminate and Tenant shall remain liable for damages as hereinafter
provided.  From and after any date upon
which Landlord is entitled to give a Termination Notice, Landlord, without
further notice and with or without giving such Termination Notice, may enter
upon, re-enter, possess and repossess itself of the Demised Premises, by force,
summary proceedings, ejection or otherwise, and may dispossess and remove
Tenant and all other persons and property from the Demised Premises and may
have, hold and enjoy the Demised Premises and the right to receive all rental
and other income of and from the same. 
As used in this Lease the words “enter” and “re-enter” are not
restricted to their technical legal meanings.

 

Upon and after such entry into possession
Landlord shall use reasonable efforts to mitigate its damages and in connection
therewith shall use reasonable efforts to relet the Demised Premises, or
portions thereof, for the account of Tenant, to any person, firm or
corporation, other than Tenant, for such Rent, for such time and upon such
terms as Landlord, in Landlord’s reasonable discretion, shall determine, and
Landlord shall not be required to accept any tenant offered by Tenant or to
observe any instruction given by Tenant about such reletting.

 

17.2                        Damages.

 

(a)                                  Tenant covenants and
agrees that in the event of the termination of this Lease or re-entry by
Landlord, under any of the provisions of this Article or pursuant to law,
by reason of default hereunder on the part of Tenant,
Tenant shall pay to Landlord, as damages with respect to this Lease, at the
election of Landlord:

 

(1)                                  a sum which at the
time of such termination of this Lease or at the time of any re-entry by
Landlord, as the case may be, represents the present value (using a discount
rate of 8%) of the excess, if any, of:

 

(i)                                     the aggregate of
the Rent which would have been payable by Tenant for the period commencing with
such earlier termination of this Lease or the date of any such re-entry, as the
case may be, and ending with the Expiration Date of this Lease, had this Lease
not so terminated or had Landlord not so re-entered the Demised Premises over

 

39

 

(ii)                                  the
aggregate fair market rental value of the Demised Premises for the same period;
or

 

(iii)                               sums equal to the Rent
which would have been payable by Tenant had this Lease not so terminated, or
had Landlord not so re-entered the Demised Premises, payable upon the days
specified in this Lease following such termination or such re-entry and until
the Expiration Date of this Lease, provided, however, that if the Demised
Premises shall be leased or re-let during said period, Landlord shall credit
Tenant with the net rents, if any, received by Landlord from such leasing or re-letting,
such net Rent to be determined by first deducting from the gross rents as and
when received by Landlord from such leasing or re-letting the expenses incurred
or paid by Landlord in terminating this Lease or of re-entering the Demised
Premises and of securing possession thereof, as well as the expense of leasing
and re-letting, including altering and preparing any portion of the Demised
Premises for new tenants, brokers’ commissions and all other expenses properly
chargeable against the Demised Premises and the rental there from; but in no
event shall Tenant be entitled to receive any excess of such net rents over the
Rent, payable by Tenant to Landlord hereunder.

 

(b)                                 Suit or suits for the
recovery of any and all damages, or any installments thereof, provided for
hereunder may be brought by Landlord from time to time at its election, and
nothing contained herein shall be deemed to require Landlord to postpone suit
until the date when the term of this Lease would have expired if it had not
been terminated under the provisions of this Article, or under provisions of
any law, or had Landlord not re-entered the Demised Premises.

 

(c)                                  Nothing herein
contained shall be construed as limiting or precluding the recovery by Landlord
against Tenant of any damages to which Landlord may lawfully be entitled in any
case other than those particularly provided for above.

 

17.3                        Waiver of
Jury Trial.

 

To the fullest extent permitted by the
applicable law, the parties hereto shall and they hereby do waive trial by jury
in any action, proceeding or counterclaim brought by either of the parties
hereto against the other on any matters whatsoever arising out of or in any way
connected with this Lease or the interpretation thereof, the relationship of
Landlord and Tenant, Tenant’s use or occupancy of the Demised Premises, and/or
any claim of injury or damage.

 

17.4                        Other
Remedies.

 

In the event of a default, and upon Tenant’s
failure to cure the default at the expiration of the relevant cure period
described above, Landlord may, but shall not be obligated to, perform any
obligation of Tenant under this Lease, and, if Landlord so elects, all
reasonable costs and expenses paid by Landlord in performing such obligation,
together with interest at the Default Rate, shall be reimbursed by Tenant to
Landlord on demand.  Any and all remedies
set forth in 

 

40

 

this Lease:  (a) shall be in addition to any and all
other remedies Landlord may have at law or in equity; (b) shall be
cumulative; and (c) may be pursued successively or concurrently as
Landlord may elect.  The exercise of any
remedy by Landlord shall not be deemed an election of remedies or preclude
Landlord from exercising any other remedies in the future.

 

17.5                        Landlord
Default.

 

In the event of a default by Landlord, and
failure of Landlord to remedy such default after notice from Tenant, Tenant may
exercise any and all remedies available at law or in equity and may pursue such
remedies successively or concurrently as Tenant may elect.  The failure of Tenant to pursue any remedy
shall not be deemed as a waiver by reason of any subsequent breach or breaches
by the Landlord.  The exercise of any
remedy by Tenant shall not be deemed an election of remedies or preclude Tenant
from exercising any other remedies in the future.  In no event shall Landlord be responsible for
consequential damages.

 

ARTICLE 18

 

SURRENDER

 

18.1                        Possession.

 

Upon the expiration or earlier termination of
this Lease, Tenant shall immediately quit and surrender to Landlord possession
of the Demised Premises in as good a state and condition as they were when
entered into, reasonable wear and tear and casualty damage (other than that
which Tenant is obligated to repair) excepted and repair any damage to the
Demised Premises or the Property due to such removal.  Upon such surrender, all right, title and
interest of Tenant in the Demised Premises shall cease.

 

18.2                        Merger.

 

The voluntary or other surrender of this
Lease by Tenant or the cancellation of this Lease by mutual agreement of Tenant
and Landlord shall not work a merger, but shall, at Landlord’s option,
terminate all or any subleases and subtenancies or operate as an assignment to
Landlord of all or any subleases or subtenancies.  Landlord’s option hereunder shall be
exercised by notice to Tenant and all known sublessees or subtenants in the Demised
Premises or any part thereof.

 

ARTICLE 19

 

HOLDING OVER

 

19.1                        Holding
Over.

 

If Tenant retains possession of the Demised
Premises or any part thereof after the expiration or earlier termination of
this Lease, Tenant shall pay as Rent a sum equal to 150% times the amount of
Fixed Rent and 100% of Additional Rent payable hereunder for the month
preceding such holding over computed on a daily basis for each day that Tenant
remains in possession.  Tenant also shall
be liable for and shall pay to Landlord, all direct damages (but not
consequential damages), sustained by reason of Tenant’s holding over.  The provisions of this 

 

41

 

section do not waive Landlord’s right of re-entry or right to
regain possession by actions at law or in equity or any other rights hereunder,
and any receipt of payment by Landlord shall not be deemed a consent by
Landlord to Tenant’s remaining in possession or be construed as creating or
renewing any lease or right of tenancy between Landlord and Tenant.

 

ARTICLE 20

 

NO WAIVER

 

20.1                        No Waiver.

 

No waiver by Landlord or Tenant of a breach
of any covenants, agreements, obligations or conditions of this Lease shall be
construed to be a waiver of any future breach of the same or any other
covenant, agreement, obligation or condition hereof.  No receipt of money by Landlord from Tenant
after notice of default, or after the termination of this Lease or the
commencement of any suit or final judgment of possession of the Demised
Premises, shall reinstate, continue or extend the term of this Lease or affect
any notice, demand or suit.

 

ARTICLE 21

 

ESTOPPEL CERTIFICATE,
SUBORDINATION, ATTORNMENT

 

21.1                        Estoppel
Certificate.

 

Tenant shall at any time upon the request of
Landlord, execute and deliver in recordable form and in substance satisfactory
to Landlord, an estoppel certificate certifying to the best of Tenant’s
knowledge and understanding on the date the estoppel certificate is
issued:  the date Tenant accepted
occupancy of the Demised Premises; the date to which Rent has been paid; the
amount of any Security Deposit; that this Lease is in full force and effect and
has not been modified or amended (or if modified or amended, describing the
same) and that Tenant is not aware of any defenses or offsets thereto or
defaults of Landlord under this Lease (or if any be claimed, describing the
same); that the Demised Premises have been completed in accordance with the
terms and provisions hereof, that Tenant has accepted the Demised Premises and
the condition thereof and of all improvements thereto and has no claims against
Landlord or any other party with respect thereto (or if Tenant does not believe
the Demised Premises have been satisfactorily completed or believes it has any
claims against Landlord, a full and complete explanation thereof); and such
other matters as Landlord may reasonably request.  Tenant’s failure to deliver such certificate
within fifteen (15) days of the demand therefor shall be a default hereunder.

 

21.2                        Subordination.

 

This Lease is and shall be subject and
subordinate to all ground or underlying leases, mortgages and deeds of trust
which now or hereafter affect the Land, Building, Property and/or any ground or
underlying leases thereof and to all renewals, modifications, consolidations,
replacements and extensions thereof.  The
provisions of this section shall be automatic and shall not require any
further action.  In confirmation of such
subordination, Tenant will execute and deliver upon demand of Landlord any and
all instruments desired by Landlord subordinating this 

 

42

 

lease to such
lease, mortgage or deed of trust. Landlord is hereby irrevocably appointed and
authorized as agent and attorney-in-fact of Tenant to execute and deliver all
such subordination instruments in the event Tenant fails to execute and deliver
said instruments within fifteen (15) days after notice from Landlord requesting
the execution thereof.

 

21.3                        Attornment.

 

Tenant agrees that, at the option of the
landlord under any ground lease now or hereafter affecting the real property of
which Demised Premises forms a part, Tenant shall attorn to said landlord in
the event of the termination or cancellation of such ground lease and if
requested by said landlord, enter into a new lease with said landlord (or a
successor ground-lessee designated by said landlord) for the balance of the
term then remaining hereunder upon the same terms and conditions as those
herein provided.  Landlord represents
that as of the Date of Execution of Lease there is no such ground lease.

 

21.4                        Mortgages.

 

Landlord represents that on the Date of
Execution of Lease, there is no mortgage affecting the Land, Building and/or
Property.  Tenant covenants and agrees
that, if by reason of default under any mortgage or deed of trust which may
hereafter affect the Land, Building and/or Property, the mortgagee thereunder
enters into and becomes possessed of the said mortgaged property either through
possession, foreclosure action, deed in lieu of foreclosure, or other
proceeding, or in the event of the sale of the said mortgaged property as a
result of any action or proceeding to foreclosure the said mortgage, Tenant
will attorn to the mortgagee or such then owner as its landlord under this
Lease.  Tenant agrees to execute and
deliver, at any time and from time to time, upon the request of the mortgagee
or the then owner of the said mortgaged property of which the Demised Premises
forms a part any instrument which may be necessary or appropriate to evidence
such attornment and Tenant hereby appoints the mortgagee or the then owner of
the said mortgaged property the attorney-in-fact, irrevocable, of Tenant to
execute and deliver for and on behalf of Tenant any such instrument.  In the event there hereafter exists a
mortgage or deed of trust that affects the Land, Building and/or Property, and
such mortgagee desires to subordinate this Lease, such Subordination shall not
be effective until and unless such mortgagee executes a non-disturbance,
subordination and attornment agreement reasonably acceptable to Tenant whereby
such mortgagees agree not to disturb Tenant’s possession under this Lease so
long as no event of default by Tenant beyond applicable notice and cure periods
exists.  Tenant shall be deemed to have
approved such mortgagee’s form of non-disturbance, subordination and attornment
agreement if Tenant fails to accept or make comments to such form within 15
days after written receipt of request to review and approve or disapprove such
form.

 

43

 

ARTICLE 22

 

QUIET ENJOYMENT

 

22.1                        Quiet
Enjoyment.

 

Landlord covenants and agrees with Tenant
that upon payment by Tenant of the Rent hereunder and upon the observance and
performance of all of the terms, covenants and conditions on Tenant’s part to
be observed and performed, Tenant may peaceably and quietly enjoy the Demised
Premises, free of all claims from Landlord, but subject, nevertheless, to the
other terms and/or conditions of this Lease.

 

ARTICLE 23

 

NOTICES

 

23.1                        Notices.

 

Whenever any notice or consent is required or
permitted hereunder, such notice or consent shall be in writing.  Any notice or document required or permitted
to be delivered hereunder shall be deemed to be delivered (a) upon receipt
or refusal of receipt when sent by recognized overnight courier or
(b) upon receipt or refusal of receipt when deposited in the United States
Mail, postage prepaid, Registered or Certified Mail, Return Receipt Requested,
addressed to the parties hereto at the addresses set forth in Article l,
or at such other addresses as they have theretofore specified by written notice
delivered in accordance herewith.

 

ARTICLE 24

 

MISCELLANEOUS
PROVISIONS

 

24.1                        Time.

 

Time is and shall be of the essence of this
Lease and all its provisions.

 

24.2                        Applicable
Law, Construction and Arbitration of Disputes.

 

(a)                                  This Lease shall be
governed by and construed under the laws of the State in which the Property is
located.

 

(b)                                 The necessary
grammatical changes required to make the provisions of this Lease apply in the
plural sense where there is more than one tenant and to either corporations,
associations, partnerships or individuals, males or females, shall in all
instances be assumed as though fully expressed. 
If there is more than one person or entity who or which are Tenant under
this Lease, the obligations imposed upon Tenant under this Lease shall be joint
and several.  The relationship between
Landlord and Tenant created hereunder shall be that of lessor and lessee and
nothing herein shall be construed as creating any joint venture or
partnership.  The captions used in this
Lease 

 

44

 

are for
convenience only and do not in any way limit or amplify the terms and
provisions hereof.

 

(c)                                  In the event of any
dispute, claim, or disagreement arising from or related to this Lease, or the
breach thereof, Landlord and Tenant shall use their reasonable good faith
efforts to settle the dispute, claim, or disagreement.

 

24.3                        Parties
Bound.

 

It is agreed that this Lease, and each and
all the covenants and obligations hereof, shall be binding upon and inure to
the benefit of, as the case may be, the parties hereto, their respective heirs,
executors, administrators, successors and assigns, subject to all agreements
and restrictions herein contained with respect to assignment or other transfer
of Tenant’s interest herein.

 

24.4                        No
Representations by Landlord.

 

Neither Landlord nor Landlord’s advisors or
agents have made any representations or promises with respect to the physical
condition of the Property or the Building, the Demised Premises, permissible
uses of Demised Premises, the rents, leases, expenses of operation or any other
matter or thing affecting or related to the Demised Premises except as
expressly set forth, and no rights, easements, or licenses are acquired by
Tenant by implication or otherwise except as expressly set forth in the
provisions of this Lease.  Upon
acceptance of delivery of possession of the Demised Premises, Tenant shall be
deemed to have accepted the Demised Premises and Building in “as is” condition
subject to completion of Landlord’s Work, if any, and
subject to Landlord’s obligations hereunder and the representations set forth
below.  All understandings and agreements
heretofore made between the parties hereto are merged in this Lease, which
alone fully and completely expresses the agreement between Landlord and Tenant,
and any executory agreement hereafter made shall be ineffective to change,
modify, discharge or effect an abandonment of it, in whole or in part, or a
surrender of this Lease or of the Demised Premises or any part thereof or of
any interest of Tenant therein unless such executory agreement is in writing
and signed by Landlord and Tenant. 
Landlord represents to Tenant that to Landlord’s knowledge, as of the
date hereof, the common Building mechanical, electrical, plumbing and elevator
systems are in good working order.

 

24.5                        Brokers.

 

Tenant warrants that it has had no dealings
with any broker or agent in connection with the negotiation or execution of
this Lease other than the broker(s) identified in Article 1.  Tenant agrees to indemnify and hold harmless
the Landlord Protected Parties from and against any and all cost, expense, or
liability for commissions or other compensation and charges claimed by any
broker or agent (other than the broker(s) identified in Article 1) with
respect to this Lease as a result of a broker who was retained by Tenant or
claims compensation as a result of actions for the benefit of Tenant or it is
otherwise found that such broker was a procuring cause of the Lease based on
Tenant’s actions.  Landlord warrants that
it has had no dealings with any broker or agent in connection with the
negotiation or execution of this Lease other than the broker(s) identified in Article 1.  Landlord agrees to indemnify, reimburse and
hold harmless the Tenant from and against any and all cost, expense, or
liability for commissions or other compensation 

 

45

 

and charges claimed by any broker or agent (other than the broker(s)
identified in Article 1) with respect to this Lease as a result of a
broker who was retained by Landlord or claims compensation as a result of
actions for the benefit of Landlord or it is otherwise found that such broker
was a procuring cause of the Lease based on Landlord’s actions.

 

24.6                        Consulting
Fee.

 

Landlord, upon the execution of this Lease by
both parties hereto, will pay to Tenant a consulting fee in the amount of $67,724.00.  One-half of the consulting fee
will be due and payable upon lease execution and delivery and one-half upon
occupancy of the Demised Premises by Tenant.

 

24.7                        Severability.

 

The invalidity or unenforceability of any
provision of this Lease shall not affect or impair the validity of any other
provision.

 

24.8                        Force
Majeure.

 

In the event Landlord or Tenant shall be
delayed or hindered in or prevented from the performance of any act required
hereunder by reason of strikes, lock-outs, labor troubles, inability to procure
materials, failure of power, restrictive governmental laws or regulations,
riots, insurrection, war or other reason of a like nature beyond the reasonable
control of Landlord or Tenant, as the case may be, in performing work or doing
acts required under the terms of this Lease, then performance of such act shall
be extended for a period equivalent to the period of such delay; provided,
however, that in no event shall Tenant’s obligation to pay Rent hereunder or
Tenant’s cure periods under Section 17.1 above be extended as a result of
any such delay.

 

24.9                        Definition
of Landlord.

 

As used in this Lease, the term “Landlord” shall mean only the owner, or
the mortgagee in possession, for the time being, of the Property or the owner
of a lease of the Property so that in the event of any sale of the Property or
in the event of a lease of the Property said Landlord shall be and hereby is
entirely freed and relieved of all covenants and obligations of Landlord
hereunder thereafter to be performed or observed, and it shall be deemed and
construed without further agreement between the parties or their successors in
interest, or between the parties and any such purchaser or lessee, that such
purchaser or lessee has assumed and agreed to performed and observe any and all
covenants and obligations of Landlord hereunder first arising from and after
the effective date of such transfer.

 

24.10                 No Option.

 

The submission of this Lease for examination
or execution does not constitute a reservation of or option for the Demised Premises, and this Lease becomes effective as a lease only
upon execution and delivery thereof by Landlord and Tenant.

 

46

 

24.11                 Exculpatory
Clause.

 

All separate and personal liability of
Landlord or any trustee, director, officer, partner principal (disclosed or
undisclosed), managing agent, or advisor (including, but not limited to
BlackRock Realty Advisors, Inc.) thereof of every kind or nature, if any, is
waived by Tenant, and by every person now or hereafter claiming by, through or
under Tenant; and Tenant shall look solely to Landlord’s estate in the Property
for the payment of any claim against Landlord.

 

24.12                 No Recording.

 

Unless required by law, Tenant shall not
record this Lease, or any portion or any reference hereto.  In the event Tenant records this Lease, or
permits or causes this Lease, or any portion hereof or reference hereto to be
recorded, this Lease shall terminate at Landlord’s option or Landlord may
declare a default hereunder and pursue any and all of its remedies provided in
this Lease.

 

24.13                 Financial
Statements.

 

Tenant, within 30 days after Landlord’s
written request, shall provide Landlord with a copy of the most recent annual
financial statement available and such other information as Landlord may
reasonably request in order to create a “business profile” of Tenant and
determine Tenant’s ability to fulfill its obligations under this Lease.

 

24.14                 ERISA.

 

Tenant hereby represents and warrants to
Landlord that no portion of or interest in the Lease will be treated as the
asset of any (i) “employee benefit plan” (within the meaning of Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended), (ii) “plan”
(within the meaning of Section 4975(e)(1) of the Internal Revenue Code of
1986, as amended ) or (iii) entity whose underlying assets include “plan assets”
by reason of a plan’s investment in such entity.

 

24.15                 Signage.

 

Provided that Tenant is not in default and no
uncured event of default exists under any of the terms and conditions of this
Lease; and provided that Tenant is occupying the Demised Premises, Tenant shall
have the right to erect one (1) identifying sign panel on the existing monument
sign in front of the Building (“Tenant’s Monument Signage”).  Landlord shall be responsible, at its sole
cost and expense, for the purchase, installation, maintenance (in a first-class
manner) and removal, at the expiration or earlier termination of this Lease, of
Tenant’s Monument Signage.  The design,
specifications and panel location of Tenant’s Monument Signage shall be subject
to the prior approval of Landlord and Landlord’s architect, which approval
shall not be unreasonably withheld, conditioned or delayed.  Tenant shall be responsible for compliance
with all applicable laws, orders and regulations of the municipality in which
the Building is located.  Notwithstanding
any such review and approval by Landlord and Landlord’s architect, Tenant shall
be responsible in all respects for Tenant’s Monument Signage, including
compliance with all the applicable laws.

 

47

 

All of Tenant’s signage rights hereunder are
personal to the initial Tenant hereunder and may not be assigned or subleased.

 

24.16                 Maintenance.

 

Subject to Section 8.1, Landlord hereby
agrees that it shall be obligated at all times to maintain the Building,
Property, Demised Premises, Storage Space, or any other area utilized by Tenant
pursuant to this Lease, in a first class manner.

 

ARTICLE 25

 

OPTION TO RENEW

 

25.1                        Option to
Renew.

 

Provided that the conditions set forth in Section 25.5
are satisfied on the Expiration Date of the initial Term, Tenant shall have the
right to extend the Term for the Renewal Term described in Article 1 hereof
upon the same terms and conditions as are herein provided, except that
(a) Fixed Rent during the Renewal Term shall be at an annual rate equal to
the annual Fair Market Rent (as hereinafter defined) for the Demised Premises
for the Renewal Term, (b) Tenant shall have no option to renew this Lease
beyond the expiration of the Renewal Term (subject to Section 25.5) and
(c) Landlord shall have no obligation to pay a tenant improvement
allowance or make any other concession. 
Such right shall be exercised by Tenant by giving written notice (the “Notice to Renew”) to Landlord at least
twelve (12) months prior to the Expiration Date.  Time shall be of the essence for the exercise
of such option. The renewal options set forth in this Section 25.1 are
personal to KMG America Corp. and to a Transfer of Control Assignee who had the
Required Net Worth and shall not inure to the benefit of any third party or
assignee.

 

25.2                        Fair
Market Rent.

 

For the purposes of this Article, “Fair Market Rent” shall mean the Fixed
Rent, on a so-called “net” basis, that would be paid by a willing tenant, not
compelled to lease, and accepted by a willing landlord, not compelled to lease,
for premises similar to the Demised Premises in comparable buildings in the
southwest and west suburban Minneapolis/St. Paul, Minnesota, area as of the
pertinent date.  In determining the Fair
Market Rent for the Demised Premises, whether or not Landlord will be providing
an allowance or other concession to Tenant for the Renewal Term, and whether
Tenant will be accepting the Demised Premises in their “as is” condition, shall
be considered.  Fair Market Rent shall be
determined by Landlord in a notice (“Fair
Market Rent Notice”) delivered to Tenant not later than thirty
(30) days after written request from Tenant for the Fair Market Rent Notice,
but in no event shall Landlord be obligated to provide the Fair Market Rent
Notice sooner than thirteen (13) months prior to the commencement of the
Renewal Term.

 

48

 

25.3                        Dispute of
Fair Market Rent.

 

In the event Tenant shall elect to dispute
Landlord’s determination of the Fair Market Rent (“Landlord’s Amount”), Tenant shall be
required to notify Landlord of such dispute in writing (the “Dispute Notice”) within thirty (30)
days after delivery to Tenant of the Fair Market Rent Notice.  Failure by Tenant to so notify Landlord of
Tenant’s dispute of the amount thereof shall be deemed to constitute Tenant’s
acceptance thereof.  If Tenant shall
timely notify Landlord of Tenant’s dispute, then the determination of Fair
Market Rent shall be determined by arbitration as hereinafter set forth.  If such arbitration concerning Fair Market
Rent shall not be concluded prior to the commencement of the applicable Renewal
Term, Tenant shall nevertheless pay all Fixed Rent and Additional Rent to
Landlord with respect thereto from and after the commencement of the applicable
Renewal Term, which shall include Fixed Rent as specified in the Fair Market
Rent Notice.  If the applicable Fair
Market Rent as determined by arbitration is greater than or less than that
specified in the Fair Market Rent Notice, then such adjustment as shall be
needed to correct the amount previously paid by Tenant on such overpaid or
underpaid amount, as the case may be, computed from the date of such
overpayment or underpayment, as the case may be, to the date of refund or
payment, as appropriate, shall be made in a payment by the appropriate party
within thirty (30) days after the arbitration determination.  In the event the Fair Market Rent determined
by arbitration is greater than Landlord’s Amount, Tenant shall have the right
to revoke its exercise of its right to extend the Term for the Renewal Term
within ten (10) days after receipt of the notice of the arbitration
determination.  In the event Tenant shall
not so revoke its exercise, the Lease will be extended at the Fair Market Rent
set forth in the arbitration determination.

 

25.4                        Arbitration
of Fair Market Rent.

 

In the event that arbitration of the Fair Market
Rent shall be required pursuant to this Article, then the following procedures
shall apply:

 

(i)                                     If Landlord or
Tenant desires to invoke the arbitration procedure set forth in this Article,
the party invoking the arbitration procedure shall give a notice to the other
party and shall in such notice appoint a person as arbitrator on its
behalf.  Within thirty (30) days after
such notice, the other party by notice to the original party shall appoint a
second person as arbitrator on its behalf. 
The arbitrators thus appointed shall appoint a third person, and such
three arbitrators shall as promptly as possible determine such matter;
provided, however, that:

 

(A)                              If
the second arbitrator shall not have been appointed within the thirty (30) day
period as aforesaid, the first arbitrator shall proceed to determine such
matter and shall render his decision and award in writing within thirty (30)
days after the expiration of said thirty (30) day period; and

 

(B)                                If
the two arbitrators are appointed by the parties and shall be unable to agree,
within ten (10) days after the appointment of the second arbitrator, upon the
appointment of a third arbitrator, they shall give written notice to the
parties of such failure to agree, and if the parties fail to agree upon the
selection of such third arbitrator within ten (10) days after the arbitrators 

 

49

 

appointed by the parties give notice as
aforesaid, then within five (5) days thereafter either of the parties upon
notice to the other party may request such appointment by the nearest office of
the American Arbitration Association or any organization which is the successor
thereof (the “AAA”), or in
its absence, refusal, failure or inability to act, may apply to a trial court
of the state in which the Building is located having jurisdiction over the Land
(the “Court”), for the
appointment of such arbitrator and the other party shall not raise any question
as to the Court’s full power and jurisdiction to entertain the application and
make the appointment.

 

(ii)                                  The arbitration shall
be conducted in accordance with the then prevailing rules of the AAA, modified
as follows:

 

(A)                              To
the extent that any statute of the state in which the Property is located
imposes requirements different than those of the AAA in order for the decision
of the arbitrator or arbitrators to be enforceable in the courts of such state,
such requirements shall be complied with in the arbitration;

 

(B)                                Each
arbitrator shall be disinterested and shall not be affiliated with Landlord or
Tenant; and

 

(C)                                The
arbitrators, if more than one, shall render their decision and award in
writing, upon the concurrence of at least two of their number, within thirty
(30) days after the appointment of the third arbitrator.

 

(iii)                               Such decision and award
or the decision and award of arbitrators, if more than one, as provided in this
Article, shall be binding and conclusive on the parties, shall constitute an “award”
by the arbitrator within the meaning of the AAA rules and applicable law, and
counterpart copies thereof shall be delivered to each of the parties.  In rendering such decision and award, the
arbitrators shall not add to, subtract from or otherwise modify the provisions
of this Lease.  Judgment may be had on
the decision and award of the arbitrators so rendered in any court of competent
jurisdiction.

 

(iv)                              Each party shall pay the
fees and expenses of one of the two original arbitrators appointed by or for
such party and the fees and expenses of the third arbitrator and all other
expenses of the arbitration (other than the fees and disbursements of attorneys
or witnesses for each party) shall be borne by the parties equally.

 

25.5                        Conditions.

 

Tenant may exercise its option to renew
hereunder, and an exercise thereof shall be only effective, if at the time of
Tenant’s exercise of the option and on the commencement date of the Renewal
Term, (i) this Lease is in full force and effect and (ii) an uncured event of
default does not exist, and (iii) inasmuch as this option is intended only for
the benefit of KMG America Corp. or a Transfer of Control Assignee who had the
Required Net Worth, the entire Demised Premises are occupied by KMG America
Corp or a Transfer of Control Assignee who had the Required Net Worth, and the
Tenant has neither assigned this Lease nor sublet any portion of the

 

50

 

Demised Premises other than to a Transfer of
Control Assignee who had the Required Net Worth.

 

ARTICLE 26

 

TENANT FINISH

 

Landlord shall, at its own cost and expense,
complete the work to build out the Demised Premises according to the Work
Letter and the Permit Set of Drawings. 
Tenant’s architect shall provide fully compliant signed documents to be
submitted to the City for all applicable approvals and permits, and Landlord
shall reimburse Tenant’s architect $16,931.00. 
Tenant shall bear the entire cost of any improvements in the Demised
Premises in excess of the work required by the Permit Set of Drawings.

 

In the event Tenant desires to make changes
to the Permit Set of Drawings and such change results in a cost savings (“Savings Changes”), and further such
changes do not delay the completion of Landlord’s Work (whether such change
shall result in a delay being in Landlord’s sole determination) (“Determined Delay”) Landlord shall
permit such change and apply such cost savings as Landlord and Tenant mutually
agree in writing.  If any such Savings
Change shall cause such a Determined Delay, Tenant shall not be permitted to
make such Savings Change unless Tenant agrees in writing that the date under Section 2.2(a)(i) shall be deemed to be the Scheduled Commencement Date,
and that Landlord shall not pay to Tenant the Daily Fee under any
circumstances.

 

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left blank]

 

51

 

IN WITNESS WHEREOF,
the parties hereto have caused this Lease to be executed as of the 8th
day of February, 2005.

 

 

	
   

  	
  LANDLORD:

  
	
   

  	
   

  
	
   

  	
  METROPOLITAN LIFE INSURANCE

  COMPANY, a New York corporation, on

  behalf of a commingled separate account

  
	
   

  	
   

  
	
   

  	
  By:

  	
  BlackRock Realty Advisors, Inc., its 

  investment advisor

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Cathy Bernstein

  	
   

  
	
   

  	
   

  	
  Name: Cathy Bernstein

  
	
   

  	
   

  	
  Title: Asset Manager

  

 

[SIGNATURES CONTINUE ON
FOLLOWING PAGE]

 

52

 

	
   

  	
  TENANT

  
	
   

  	
   

  	
   

  
	
   

  	
  KMG AMERICA CORP., a
  Virginia 

  corporation

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Thomas D. Sass

  	
   

  
	
   

  	
  Name: Thomas D. Sass

  
	
   

  	
  Title: Senior Vice President - Operations

  
					

 

53

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