Document:

Exhibit

EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT (“Agreement”) is effective as of August 1, 2017 (the “Effective Date”), by and between EMMIS OPERATING COMPANY, an Indiana company (“Employer”), and PATRICK WALSH, an Indiana resident (“Executive”).
RECITALS
WHEREAS, Employer and its affiliates are engaged in the ownership and operation of radio and other businesses (together, the “Emmis Group”); and
WHEREAS, Employer desires to employ Executive and Executive desires to be so employed.
NOW, THEREFORE, in consideration of the foregoing, the mutual promises and covenants set forth in this Agreement, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties, intending to be legally bound, hereby agree as follows:
AGREEMENT
1.Employment Status and Duties.  Upon the terms and subject to the conditions set forth in this Agreement, Employer hereby employs Executive, and Executive hereby accepts exclusive employment with Employer.  During the Term (as defined below), Executive shall serve as President and Chief Operating Officer.  Executive shall have direct operating responsibility for the radio division or such other duties, functions, authority and responsibilities as are commensurate with the position of President and Chief Operating Officer.  Executive’s services hereunder shall be performed on an exclusive, full‐time basis in a professional, diligent and competent manner to the best of Executive’s abilities.  Executive shall not undertake any outside employment or business activities without the prior written consent of Employer.  It is understood and agreed that the location for the performance of Executive’s duties and services pursuant to this Agreement shall be the offices designated by Employer in the Indianapolis-Carmel-Anderson Metropolitan Statistical Area as its principal executive offices.  Executive shall be permitted to serve on the board of charitable, civic and/or for-profit organizations so long as such services: (i) are approved in writing in advance by Employer; and (ii) do not interfere with Executive’s duties and obligations under this Agreement.  Employer hereby approves of Executive’s membership on the following boards, so long as such membership complies with this Section 1: National Association of Broadcasters, Radio Advertising Bureau, Radio Music License Committee, Alumni Board of Governors at University of Michigan’s Ross School of Business Administration and Center for Leadership Development.  Executive is currently a member of the Board of Directors of Emmis Communications Corporation (“ECC”), and he shall continue to serve in such position during the Term, subject to election by ECC’s shareholders, 

 
 

without additional remuneration (unless Employer elects to remunerate “inside directors”) but shall be entitled to the benefit of indemnification pursuant to the terms of Section 18.10.   Executive shall also serve without additional remuneration as a director and/or officer of one (1) or more of Employer’s subsidiaries or affiliates if appointed to such position(s) by Employer and shall also be entitled to the benefit of indemnification pursuant to the terms of Section 18.10.
2.    Term.  The term of this Agreement shall commence on the Effective Date and continue through and including July 31, 2019, unless earlier terminated in accordance with the provisions set forth in this Agreement (the “Term”).  The one year period commencing on the Effective Date shall be the “First Contract Year”; and the one year period commencing on August 1, 2018 shall be the “Second Contract Year” (each of the foregoing, a “Contract Year”).  Notwithstanding the foregoing, in the event that Executive accepts (during the Term) a bona fide Chief Executive Officer position (as defined below) that (i) represents a good faith opportunity to advance Executive’s career and (ii) is with an employer that is not a Competitor (as defined below), Executive may terminate his employment with Employer provided that Executive shall give Employer prompt written notice of such acceptance and such notice is at least sixty (60) days prior to termination of Executive’s employment if he accepts such a position.  In the event that Executive terminates his employment prior to the original expiration of the Term in compliance with this Section 2, the Term shall run through Executive’s termination date.  Thereafter, Executive shall have no further obligations or liabilities hereunder except Executive’s obligations under Sections 7 and 8, and Employer shall have no further obligations or liabilities hereunder except Employer’s obligations set forth in Section 9.2(ii). For purposes of this Section 2, “Chief Executive Officer position” shall mean a position in which Executive’s primary duties are those generally associated with a Chief Executive Officer.    
3.    Base Salary; Auto Allowance.  Upon the terms and subject to the conditions set forth in this Agreement, Employer shall pay or cause to be paid to Executive an annualized base salary of Six Hundred Twenty Five Thousand Dollars ($625,000) (the “Base Salary”), payable pursuant to Employer’s customary payroll practices and subject to applicable taxes and withholdings as required by law.  Executive’s Base Salary shall be increased at the beginning of each Fiscal Year (as defined below) during the Term by a percentage equal to the average percentage merit increase, if any, for Employer’s corporate employees who do not have an employment agreement, but in no event shall any such increase exceed two and one half percent (2.5%) of Executive’s Base Salary in effect immediately prior to such increase. 
Except as otherwise set forth herein, Employer shall have no obligation to pay Executive the Base Salary for any periods during which Executive fails or refuses to render services pursuant to this Agreement (except that Executive shall not be considered to have failed or refused to render services during any periods of 

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Executive’s incapacity or absence from work due to sickness or other approved leave of absence in accordance with the Employer’s policies, subject to Employer’s right to terminate Executive’s employment pursuant to Section 11) or for any period following the expiration or termination of this Agreement.  In addition, it is understood and agreed that Employer may, at its sole election, pay up to ten percent (10%) of Executive’s Base Salary in Shares (as defined below); provided that: (i) the Shares are registered with the U.S. Securities and Exchange Commission (the “SEC”) on a then-effective Form S-8 or other applicable registration statement and are issued without restriction on resale (and further provided that the Shares are listed on a securities exchange or over-the-counter market, which does not include listing on the “pink sheets,” at the time of issuance), subject to any restrictions on resale under ECC’s Securities Trading Policy and applicable federal and state law; and (ii) the percentage of Executive’s Base Salary payable in Shares shall be consistent with, and the exact number of Shares to be awarded to Executive shall be determined in the same manner as, that utilized for the Key Executive Group.  The term “Key Executive Group” refers to the Employer’s Chief Financial Officer and General Counsel (or, if either of those positions are no longer comparable to Executive’s position, any other positions mutually agreed upon by the parties).
During the Term, Executive shall receive a monthly auto allowance in the amount of One Thousand Dollars ($1,000) (subject to withholding and applicable taxes as required by law) consistent with Employer’s policy or practices regarding such allowances, as such policy or practices may be amended from time to time during the Term in Employer’s sole and absolute discretion; provided, however, that in no event shall the auto allowance amount paid to Executive pursuant to this provision be reduced.
4.    Incentive Compensation.
4.1    Option Grants.  As of the Effective Date, Executive shall be granted an option (the “Option”) to acquire Sixty Two Thousand Five Hundred (62,500) shares of Class A Common Stock of ECC (“Shares”), which shall vest on the condition that Executive remains employed by Employer, on a full-time, continuous basis, through the end of the Second Contract Year, subject to the terms of this Section 4.1 and Section 10.  The Options granted pursuant to this Section 4.1 shall: (i) have an exercise price per share equal to the Fair Market Value (“FMV”) of the stock on the date of grant (as FMV is defined in the 2017 Equity Compensation Plan, or any subsequent equity compensation or similar plan adopted by ECC and generally used to make equity-based awards to executive-level employees of the Emmis Group (the “Plan”); (ii) notwithstanding any other provisions in this Agreement, be granted according to the terms and subject to the conditions of the Plan; (iii) be evidenced by a written grant agreement containing such terms and conditions as are generally provided for other executive‐level employees of the Emmis Group; and (iv) be exercisable for Shares with restrictive legends on the certificates as may be required by the Plan or applicable securities laws.  Employer shall use reasonable efforts to 

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register the Shares subject to the awards on a Form S-8 or other applicable registration statement at such time as the Shares are issued to Executive.  The Options granted pursuant to this Section 4.1 are intended to satisfy the regulatory exemption from the application of Code Section 409A for certain options for service recipient shares, and shall be interpreted and administered accordingly. 
4.2     Fiscal Year Bonus Amounts.  Upon the terms and subject to the conditions set forth in this Section 4, in connection with each of Employer’s fiscal years ending February 28, 2018 and February 28, 2019 (each, a “Fiscal Year”), Executive shall be eligible to receive one (1) performance bonus in an annualized target amount equivalent to Executive’s Base Salary (each, a “Fiscal Year Bonus”), the exact amount of which, if any, shall be determined based upon Executive’s attainment of certain performance and financial goals as determined each Fiscal Year by the Compensation Committee of the Board of Directors of ECC (the “Compensation Committee”), in its sole and absolute discretion, and communicated to Executive within ten (10) days after a final determination by the Compensation Committee.  
In the event that either (i) Executive’s employment with Employer ends at expiration of the Term (following July 31, 2019), or (ii) Executive continues to be employed by Employer after the Term expires, and Executive’s employment with Employer is terminated by Employer without this Agreement having been renewed or a replacement employment agreement having been entered into, then the Fiscal Year Bonus earned by Executive with respect to Employer’s Fiscal Year ending February 29, 2020, if any would have been earned had Executive worked through February 29, 2020, as determined by the Compensation Committee, in its reasonable discretion, shall be pro-rated according to the following formula: the amount of the Fiscal Year Bonus that Executive would have earned had Executive worked such entire Fiscal Year multiplied by a fraction, the numerator of which shall be five (5), the denominator of which shall be twelve (12).   The Fiscal Year Bonus, if any is awarded, shall be paid to Executive within two weeks after the earlier of (A) the end of Executive’s employment with Employer or (B) when bonuses for the fiscal year ended February 29, 2020 are paid to other executive officers of Employer.
4.3    Performance-Based Completion Bonus.  Except as provided below, and otherwise upon the terms and subject to the conditions set forth in this Section 4, on the condition that Executive remains employed by Employer, on a full-time, continuous basis, through the end of the Second Contract Year, Employer shall pay to Executive (i) Three Hundred Thousand Dollars ($300,000), if ASP (as defined below) as of the final day of the Second Contract Year is equal to or more than Nine Dollars ($9.00) but less than Twelve Dollars ($12.00), or (ii) Five Hundred Thousand Dollars ($500,000), if ASP as of the final day of the Second Contract Year is equal to or greater than Twelve Dollars ($12.00) but less than Fifteen Dollars ($15.00), or (iii) Seven Hundred Thousand Dollars ($700,000), if ASP as of the final day of the Second Contract Year is equal to or greater than Fifteen Dollars ($15.00) (the 

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“PBCB”).  The PBCB award, if any is earned, shall be made to Executive on or within seven (7) business days after August 1, 2019.  “ASP” shall mean an adjusted share price, calculated as follows: the average Volume-Weighted Average Price as determined by NASDAQ of one (1) Share during the thirty (30) calendar day period prior to and including the final day of the relevant measuring period, plus the amount of all dividends paid on one (1) Share between the Effective Date and the final day of the relevant measuring period.  In addition, it is understood and agreed that Employer may, at its sole election, pay up to one hundred percent (100%) of PBCB award in Shares (as defined below); provided that, the Shares are registered with the U.S. Securities and Exchange Commission (the “SEC”) on a then-effective Form S-8 or other applicable registration statement and are issued without restriction on resale (and further provided that the Shares are listed on a securities exchange or over-the-counter market, which does not include listing on the “pink sheets,” at the time of issuance), subject to any restrictions on resale under ECC’s Securities Trading Policy and applicable federal and state law.  If Executive is paid in Shares under this Section 4.3, the number of Shares awarded to Executive shall be calculated by dividing the dollar amount of the award payable hereunder by the FMV (as defined in the Plan) on the day before the Shares are issued.   
Notwithstanding the foregoing, if Executive’s employment is terminated prior to the end of the Second Contract Year and such termination is: (a) due to Executive’s death or (b) on account of Executive’s incapacity pursuant to Section 11, then Employer shall make to Executive, within two (2) weeks after termination of his employment, the PBCB award, if any would have been earned based on ASP on Executive’s termination date, as if Executive had been employed by Employer, on a full-time, continuous basis through the Second Contract Year. 
4.4    Stock Completion Bonus.  On the Effective Date, Employer shall grant to Executive restricted Shares having a FMV (as defined in the Plan) on the Effective Date of Five Hundred Thousand Dollars ($500,000) (the “Restricted Shares”).  Half of the Restricted Shares shall vest upon completion of the First Contract Year, and the other half shall vest upon the completion of the Second Contract Year, in each case subject to the terms of this Section 4.  In the event that any dividends are paid on Restricted Shares during the vesting period for the Restricted Share grant, Employer shall pay dividends with respect to Executives’ Restricted Shares that are scheduled to vest at the end of the Contract Year in which the dividend is paid, in the same form and at the same time as dividends are paid to other shareholders in respect of vested, unrestricted Shares, and dividends on the remaining Restricted Shares shall be paid upon vesting of such Restricted Shares.  The Restricted Shares granted pursuant to this Section 4.4 shall be granted according to the terms and subject to the conditions of the Plan and the Restricted Share Grant Agreement, and shall include a restrictive legend as provided for by the Plan.  Upon the vesting of any Restricted Shares, Employer shall withhold a sufficient number of Shares to satisfy all federal, state and local withholding requirements unless Executive has otherwise remitted funds sufficient to satisfy any such withholding 

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requirements, and Executive shall be permitted to elect additional share withholding for taxes under Section 16(a)(ii) of the Plan.    
4.5    Payment/Award of Bonuses.  Employer shall pay, cause to be paid or award, as applicable, to Executive the bonuses, if earned according to the terms and conditions set forth in Sections 4.2, 4.3 and 4.4; provided that, unless provided otherwise in Sections 4.2, 4.3 and 4.4 or Sections 9, 10, 11 or 12 of this Agreement, through the final day of the applicable measuring period for such bonus: (i) this Agreement is in full force and effect and has not been terminated for any reason (other than due to a material breach of this Agreement by Employer); and (ii) Executive is fully performing all of Executive’s material duties and obligations pursuant to this Agreement and is not in breach of any of the material terms and conditions of this Agreement (provided that Executive’s failure or inability to perform his duties and obligations because of his death or incapacity (pursuant to Section 11), including during leaves of absence, shall not be considered a breach of this Agreement or non-performance under this provision).  In addition, it is understood and agreed that Employer may, at its sole election, pay any bonus amounts earned by Executive pursuant to this Section 4 in cash or Shares.  Any Shares awarded pursuant to this Section 4 shall be registered with the SEC on a then-effective Form S-8 or other applicable registration statement and are issued without restriction on resale (and further provided that the Shares are listed on a securities exchange or over-the-counter market, which does not include listing on the “pink sheets,” at the time of issuance), subject to any restrictions on resale under ECC’s Securities Trading Policy and applicable federal and state law.  In the event that Employer elects pursuant to this Section 4.5 to pay any Fiscal Year Bonus amounts in Shares, the percentage of such bonus amounts payable in Shares shall be consistent with, and the exact number of Shares to be awarded to Executive shall be determined in the same manner as, that utilized for the Key Executive Group. Any Fiscal Year Bonus amounts earned by Executive pursuant to the terms and conditions of Section 4.2 shall be paid after the end of the Fiscal Year for which the bonus is earned (but in no event later than ninety (90) days after the end of such Fiscal Year), except any pro-rated Fiscal Year Bonus earned by Executive for the period ending at the end of the Second Contract Year shall be paid within two (2) weeks after the end of the Second Contract Year.  Any and all bonus amounts payable by Employer to Executive pursuant to this Section 4 shall be subject to applicable taxes and withholdings as required by law.   Notwithstanding any other provisions of this Agreement, any bonus pursuant to Sections 4.2, 4.3 or 4.4 shall be paid to Executive by the earlier of the date specified herein or the date that is no later than two-and-a-half months after the end of either Employer’s or Executive’s first taxable year (whichever period is longer) in which any such bonus is no longer subject to a substantial risk of forfeiture for purposes of Section 409A of the Internal Revenue Code of 1986, as amended (“Code”).   
5.    Expenses; Travel.  Employer shall pay or reimburse Executive for all reasonable expenses actually incurred or paid by Executive during the Term in connection with the performance of Executive’s services hereunder upon 

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presentation of expense statements, vouchers or other supporting documentation as Employer may require of Executive; provided that, such expenses are otherwise in accordance with Employer’s policies.  Executive shall undertake such travel as may be required in the performance of Executive’s duties pursuant to this Agreement. 
6.    Fringe Benefits.  
6.1    Vacation and Other Benefits.  Each Contract Year, Executive shall be entitled to four (4) weeks of paid vacation in accordance with Employer’s applicable policies and procedures for executive-level employees.  Executive shall also be eligible to participate in and receive the fringe benefits generally made available to other executive‐level employees of Employer in accordance with and to the extent that Executive is eligible under the general provisions of Employer’s fringe benefit plans or programs; provided, however, that Executive understands that these benefits may be increased, changed, eliminated or added from time to time during the Term as determined in Employer’s sole and absolute discretion.
6.2    Insurance and Estate Planning.  Each Contract Year, Employer agrees to reimburse Executive in an amount not to exceed Five Thousand Dollars ($5,000) for the annual premium and other fees and expenses associated with estate planning services for Executive, including legal and tax services, and/or Executive’s purchase or maintenance of a life or disability insurance policy or other insurance policies on the life, or related to the care, of Executive.  Executive shall be entitled to freely select and change the beneficiary or beneficiaries under such policy or policies.  Notwithstanding anything to the contrary contained in this Agreement, Employer’s obligations under this Section 6.2 are expressly contingent upon Executive providing required information and taking all necessary actions required of Executive in order to obtain and maintain the subject services, policy or policies, including without limitation passing any required physical examinations.  Reimbursements pursuant to this Section 6.2 with respect to a Contract Year shall be made as soon as administratively feasible after Executive submits the information and documentation required for reimbursement; provided, however, under no circumstances shall such reimbursement be paid later than two-and-a-half months after the end of the calendar year or Employer’s taxable year in which such Contract Year commenced.   
7.    Non-Disclosure; Work Product; Injunctive Relief.
7.1    Non‐Disclosure.  Executive acknowledges that certain information concerning the business of the Emmis Group and its members (including but not limited to trade secrets and other proprietary information) is of a highly confidential nature, and that, as a result of Executive’s employment with Employer prior to and during the Term, Executive shall receive and develop proprietary and confidential information concerning the business of Employer and/or other members of the Emmis Group which, if known to Employer’s competitors, would damage Employer, other members of the Emmis Group and their respective businesses.  Accordingly, Executive hereby agrees that during the Term and thereafter, Executive shall not 

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divulge or appropriate for Executive’s own use, or for the use or benefit of any third party (other than Employer and its representatives, or as directed in writing by Employer), any information or knowledge concerning the business of Employer, or any other member of the Emmis Group, which is not generally available to the public other than through the activities of Executive.  Executive further agrees that, immediately upon termination of Executive’s employment for any reason, Executive shall promptly surrender to Employer all documents, brochures, plans, strategies, writings, illustrations, client lists, price lists, sales, financial or marketing plans, budgets and any and all other materials (regardless of form or character) which Executive received from or developed on behalf of Employer or any member of the Emmis Group in connection with Executive’s employment prior to or during the Term.  Executive acknowledges that all such materials shall remain at all times during the Term and thereafter the sole and exclusive property of Employer and that nothing in this Agreement shall be deemed to grant Executive any right, title or interest in such material.
7.2    Work Product.  Executive acknowledges and agrees that all writings, works of authorship, technology, inventions, discoveries, ideas and other work product of any nature whatsoever, that are created, prepared, produced, authored, edited, amended, conceived or reduced to practice by Executive individually or jointly with others during the period of Executive’s employment by Employer and relating in any way to the business or contemplated business, research or development of the Emmis Group (regardless of when or where the Work Product is prepared or whose equipment or other resources is used in preparing the same) and all printed, physical and electronic copies, all improvements, rights and claims related to the foregoing, and other tangible embodiments thereof (collectively, “Work Product”), as well as any and all rights in and to copyrights, trade secrets, trademarks (and related goodwill), patents and other intellectual property rights therein arising in any jurisdiction throughout the world and all related rights of priority under international conventions with respect thereto, including all pending and future applications and registrations therefor, and continuations, divisions, continuations-in-part, reissues, extensions and renewals thereof (collectively, “Intellectual Property Rights”), shall be the sole and exclusive property of Employer.  Executive acknowledges that, by reason of being employed by Employer at the relevant times, to the extent permitted by law, all of the Work Product consisting of copyrightable subject matter is "work made for hire" as defined in 17 U.S.C. § 101 and such copyrights are therefore owned by Employer.  To the extent that the foregoing does not apply, Executive hereby irrevocably assigns to Employer, for no additional consideration, Executive's entire right, title and interest in and to all Work Product and Intellectual Property Rights therein, including the right to sue, counterclaim and recover for all past, present and future infringement, misappropriation or dilution thereof, and all rights corresponding thereto throughout the world.  Nothing contained in this Agreement shall be construed to reduce or limit Employer’s rights, title or interest in any Work Product or Intellectual Property Rights so as to be less in any respect than that Employer would have had in the absence of this Agreement.  

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During and after his employment, Executive agrees to reasonably cooperate with Employer to (a) apply for, obtain, perfect and transfer to Employer the Work Product as well as an Intellectual Property Right in the Work Product in any jurisdiction in the world; and (b) maintain, protect and enforce the same, including, without limitation, executing and delivering to Employer any and all applications, oaths, declarations, affidavits, waivers, assignments and other documents and instruments as shall be requested by Employer.  Executive hereby irrevocably grants Employer power of attorney to execute and deliver any such documents on Executive's behalf in his name and to do all other lawfully permitted acts to transfer the Work Product to Employer and further the transfer, issuance, prosecution and maintenance of all Intellectual Property Rights therein, to the full extent permitted by law, if Executive does not promptly cooperate with Employer’s request (without limiting the rights Employer shall have in such circumstances by operation of law).  The power of attorney is coupled with an interest and shall not be affected by Executive's subsequent incapacity.  Executive understands that this Agreement does not, and shall not be construed to, grant Executive any license or right of any nature with respect to any Work Product or Intellectual Property Rights or any confidential information, materials, software or other tools made available to him by Employer or the Emmis Group.
7.3    Injunctive Relief.  Executive acknowledges that Executive’s breach of this Section 7 will cause irreparable harm and damage to Employer, the exact amount of which will be difficult to ascertain; that the remedies at law for any such breach would be inadequate; and that the provisions of this Section 7 have been specifically negotiated and carefully written to prevent such irreparable harm and damage.  Accordingly, if Executive breaches this Section 7, Employer shall be entitled to injunctive relief (including attorneys’ fees and costs) enforcing this Section 7 to the extent reasonably necessary to protect Employer’s legitimate interests, without posting bond or other security.
8.    Non‐Competition; Non-Solicitation; Anti-Raiding; Injunctive Relief.
8.1    To the extent permitted by law, Executive (whether on Executive’s own behalf or on behalf of any other person or entity) shall not directly or indirectly:
(i)    During the Term, and for a period of one (1) year (which shall be extended by the length of any period during which Executive is in violation of this Section 8.1(i)) immediately following the expiration or early termination of the Term for any reason, voluntary or involuntary (“Termination”), within the “Geographic Territory” (as defined below), own, manage, operate, or otherwise engage or participate in any business that competes directly or indirectly with the business of Employer or any member of the Emmis Group (“Competitor”) if Executive performs any duties, responsibilities, or functions on behalf of the Competitor that (a) are the same as or similar to the duties, responsibilities, or functions Executive performed 

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for Employer or a member of the Emmis Group during any portion of the 24-month period immediately preceding the Termination (“Pre-Termination Period”), (b) relate in any respect to any aspect of the business of a member of the Emmis Group as to which, during any portion of the Pre-Termination Period, Executive performed any duties or services or received any confidential information, or (c) relate in any respect to, or would benefit from the use of, any confidential information Executive received during the Pre-Termination Period.  For purposes of this Section 8.1(i), Geographic Territory shall mean Indiana, United States, and/or any other state, market, country, or geographic territory in which Employer or a member of the Emmis Group delivered, sold or marketed its products or services or conducted business during the Pre-Termination Period.  The parties acknowledge and agree that Employer’s and the Emmis Group’s business is generally located at least within the Geographic Territory, extends throughout the Geographic Territory and is not limited to any particular region of the Geographic Territory.   As long as Executive does not engage in any activity prohibited by this Section 8.1(i), Executive’s ownership of less than five percent (5%) of the issued and outstanding stock of any corporation whose stock is traded on an established securities market shall not constitute competition with Employer or the Emmis Group for the purpose of this Section 8.1.  Notwithstanding the foregoing, (A) with Employer’s written consent, which shall not be unreasonably withheld, Executive may join a commercial enterprise with multiple divisions or business lines, even if a division or business line engages in a business competitive with Employer, if such competitive business represents an insignificant portion of the commercial enterprise’s operations and revenue and Executive's services are not primarily for the competitive divisions or business lines, and (B) nothing in this Section 8.1(i) shall prohibit Executive from directly or indirectly owning, managing, operating or otherwise engaging or participating in any terrestrial radio broadcasting station or any magazine other than in a Designated Market Area (as defined by Nielsen or its successor) in which a member of the Emmis Group holds an interest in a radio station or magazine as of the termination of Executive’s employment with Employer; provided however, that Executive shall continue to comply with Executive’s obligations under Section 7.  
(ii)    During the Term, and for a period of two (2) years (which shall be extended by the length of any period during which Executive is in violation of this Section 8.1(ii)) immediately following Termination, sell or otherwise provide or solicit the sale or provision of (or participate in or provide information with respect to such activities) any products or services that directly or indirectly compete with any products or services of Employer or any member of the Emmis Group to any person or entity as to which, during any portion of the Pre-Termination Period, Executive sold or assisted in the sale of products or services, or otherwise performed any duties or 

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services on behalf of Employer or a member of the Emmis Group, or received any confidential information. Nothing in this Section 8.1(ii) shall prohibit Executive from directly or indirectly selling or assisting in the sale of products or services for any non-competitive terrestrial radio broadcasting station or any magazine, except for businesses spending more than $250,000 with the Emmis Group during any twelve month period during the Pre-Termination Period; provided however that Executive shall continue to comply with Executive’s obligations under Section 7.  Employer will provide Executive a summary of all such businesses within two weeks following Termination.    
(iii)    During the Term, and for a period of two (2) years (which shall be extended by the length of any period during which Executive is in violation of this Section 8.1(iii)) immediately following Termination, hire or otherwise engage any employee of Employer or a member of the Emmis Group, or any other person or entity who during any portion of the three (3) months immediately preceding Termination had an actual or prospective employment, consulting, or contractor relationship with Employer or a member of the Emmis Group or solicit, induce, or influence any such employee or other person or entity to discontinue, reduce, reject, or otherwise change in any manner adverse to the interests of Employer or a member of the Emmis Group the nature or extent of such relationship with Employer or a member of the Emmis Group.  
8.2    Injunctive Relief.  Executive acknowledges the special and unique nature of Executive’s employment with Employer as an executive-level employee, and understands that, as a result of Executive’s employment with Employer prior to and during the Term, Executive has gained and will continue to gain knowledge of and have access to highly sensitive and valuable information regarding the operations of Employer and its subsidiaries and affiliated entities, including but not limited to the confidential information described more fully in Section 7.1.  Accordingly, Executive acknowledges Employer’s interest in preventing the disclosure of such information through the engagement of Executive’s services by any of Employer’s or the Emmis Group’s competitors following the expiration or termination of the Term for any reason.  Executive acknowledges and agrees that the provisions of this Section 8 have been specifically negotiated and carefully worded in recognition of the opportunities which will be afforded to Executive by Employer by virtue of Executive’s continued association with Employer during the Term, and the influence that Executive has and will continue to have over Employer’s and the Emmis Group’s employees, customers and suppliers.  Executive further acknowledges that Executive’s breach of Section 8.1 herein will cause irreparable harm and damage to Employer, the exact amount of which will be difficult to ascertain; that the remedies at law for any such breach would be inadequate; and that the provisions of this Section 8 have been specifically negotiated and carefully written to prevent such irreparable harm and damage.  Accordingly, if Executive breaches Section 8.1, Employer shall be entitled to injunctive relief (including attorneys’ fees and costs) 

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enforcing Section 8.1, to the extent reasonably necessary to protect Employer’s legitimate interests, without posting bond or other security.  Notwithstanding anything to the contrary contained in this Agreement, if Executive violates Section 8.1, and Employer brings legal action for injunctive or other relief, Employer shall not, as a result of the time involved in obtaining such relief, be deprived of the benefit of the full restrictive covenant periods set forth therein.  Accordingly, the obligations set forth in Section 8.1 shall have the duration set forth therein, computed from the date such relief is granted but reduced by the time expired between the date the restrictive period began to run and the date of the first violation of the obligation(s) by Executive.
8.3    Construction.  Despite the express agreement herein between the parties, in the event that any provisions set forth in this Section 8 shall be determined by any court or other tribunal of competent jurisdiction to be unenforceable for any reason whatsoever, the parties agree that this Section 8 shall be interpreted to extend only to the maximum extent as to which it may be enforceable, and that this Section 8 shall be severable into its component parts, all as determined by such court or tribunal.  
9.    Termination of Agreement by Employer for Cause.
9.1    Termination.  Employer may terminate this Agreement and Executive’s employment hereunder for Cause (as defined in Section 9.3 below) in accordance with the terms and conditions of this Section 9.  Following a determination by Employer that Executive should be terminated for Cause, Employer shall give written notice (the “Preliminary Notice”) to Executive specifying the grounds for such termination, and Executive shall have ten (10) days after receipt of the Preliminary Notice to attempt to cure any acts or omissions giving rise to Cause, if applicable, and/or to respond to Employer in writing.  If following the expiration of such ten (10) day period Employer reaffirms its determination that Executive should be terminated for Cause, such termination shall be effective upon delivery by Employer to Executive of a final notice of termination.
9.2    Effect of Termination.  In the event of termination for Cause
 
as provided in Section 9.1 above:
(i)    Executive shall have no further obligations or liabilities hereunder except Executive’s obligations under Sections 7 and 8, which shall survive the termination of this Agreement, and except for any obligations arising in connection with any conduct of Executive described in Section 9.3;

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(ii)    Employer shall have no further obligations or liabilities hereunder, except that Employer shall, not later than two (2) weeks after the termination date:
(a)    Pay to Executive any Base Salary which has been earned on or prior to the termination date, but which remains unpaid as of the termination date subject to any applicable taxes and other withholdings as required by law; and
(b)    Pay to Executive any bonus amounts which have been earned on or prior to the termination date pursuant to Section 4, if any, but which remain unpaid as of the termination date.
Additionally, Employer shall comply with the applicable provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) and the provisions of any Employer benefit plans in which Executive or Executive’s eligible dependents or beneficiaries are participating at the time of termination.
9.3    Definition of Cause.  For purposes of this Agreement, “Cause” shall be defined to mean any of the following:  (i) Executive’s failure, refusal or neglect to perform any of Executive’s material duties or obligations under this Agreement, or any material duties assigned to Executive consistent with the terms of this Agreement (Executive’s inability or failure to perform his obligations hereunder because of his death or incapacity, subject to Employer’s right to terminate Executive’s employment pursuant to Section 11, including during approved periods of absence, or any accommodation in job duties or function as a result of Executive’s disability, shall not be considered Cause for termination under this provision), or abide by any applicable policy of Employer, or Executive’s breach of any material term or condition of this Agreement, and continuation of such failure, refusal, neglect, or breach after written notice and the expiration of a ten (10) day cure period; provided, however, that it is not the parties’ intention that the Employer shall be required to provide successive such notices, and in the event Employer has provided Executive with a notice and opportunity to cure pursuant to this Section 9.3, Employer may terminate this Agreement for a subsequent breach similar or related to the breach for which notice was previously given or for a continuing series or pattern of breaches (whether or not similar or related) without providing notice and an opportunity to cure; (ii) commission of any felony or any other crime involving an act of moral turpitude which is harmful to Employer’s business or reputation; (iii) Executive’s action or omission, or knowing allowance of actions or omissions, which are in violation of any law or any of the rules or regulations of the Federal Communications Commission, or which otherwise jeopardize any of the licenses granted to Employer or any member of the Emmis Group in connection with the ownership or operation of any radio station; (iv) theft in any amount; (v) actual or threatened violence against any individual (in connection with his employment hereunder) or another employee; (vi) sexual or other prohibited harassment of others 

13
 
 

that is actionable under applicable laws; (vii) unauthorized disclosure or use of trade secrets or proprietary or confidential information, as described more fully in Section 7.1; (viii) any action which brings Employer or any member of the Emmis Group into public disrepute, contempt, scandal or ridicule, and which is harmful to Employer’s business or reputation; and (ix) any matter constituting cause or gross misconduct under applicable laws.
10.    Termination by Employer Without Cause or Voluntary Resignation by Executive for Good Reason.  
10.1    Effect of the Termination.  If Employer Terminates Executive’s Employment (as defined below) during the Term without Cause and not pursuant to Sections 11, 12 or 13, or Executive Terminates his Employment during the Term for Good Reason (as defined below), then:
(i)    Executive shall have no further obligations or liabilities hereunder, except Executive’s obligations under Sections 7 and 8, which shall survive the termination of this Agreement.
(ii)    Employer shall have no further obligations or liabilities hereunder, except that Employer shall:
(a)    Pay to Executive any Base Salary which has been earned on or prior to the termination date, but which remains unpaid as of the termination date, in a lump-sum cash payment within two (2) weeks of the termination date, which amount will be paid whether or not Executive signs a Release (as defined below).

(b)    Pay to Executive any bonus amounts, if any, which Executive earned prior to the termination date pursuant to Section 4 but which are unpaid as of the termination date, in a lump-sum cash payment within two (2) weeks of the termination date, which amount will be paid whether or not Executive signs a Release.

(c)    Pay to Executive a lump-sum cash payment within two (2) weeks of the Release Effective Date (as defined below) equal to One Million One Hundred Fifty Thousand Dollars ($1,150,000) less any Fiscal Year Bonus amounts (for the Fiscal Year in which the termination occurs) either paid or required to be paid pursuant to Sections 4.2 and 10.1(ii)(b), subject to any applicable tax withholding and deductions as required by law.

(d)     If such termination occurs during the Second Contract Year, award to Executive a pro-rated portion of the PBCB, if any would have been earned at the end of the Second Contract Year, using the number of days Executive was employed during the Term divided 

14
 
 

by seven hundred thirty (730).  Such  award shall be made on the later of (i) the date that the PBCB grant would have been made had Executive been employed on a full-time, continuous basis through the Second Contract Year and (ii) the Release Effective Date.

(e)    Pay or reimburse, for up to one (1) year from Executive’s date of termination of employment, any medical, dental or vision insurance premiums (up to the amount that Employer is paying on behalf of Executive and his eligible dependents immediately prior to the date of termination, e.g., the employer-paid premium) for the continuation of such health coverage for Executive and Executive’s dependents pursuant to the provisions of COBRA or applicable state law.  If Executive becomes eligible to participate in any other group insurance program of another employer and elects coverage thereunder, Executive shall promptly notify Employer upon such coverage and these payments shall cease at that time.  

(f)    Accelerate in full the vesting of any Options and Restricted Shares granted to Executive prior to the termination date.  
(iii)    Executive shall execute a general release and waiver of claims in favor of Employer and the Emmis Group in a customary form provided by Employer (a “Release”) no later than twenty-one (21) days after the receipt of the Release.  The date the Release is effective and can no longer be revoked is the “Release Effective Date.”  Each of the payments and grants set forth in Sections 10.1(ii)(c)-(f), if any, are entirely contingent upon Executive’s execution of the Release.  To the extent any severance pay or benefits described above are considered to be “deferred compensation” under Section 409A of the Code, and the maximum period during which Executive may consider whether to sign and revoke the release spans two calendar years, then to the extent required by Section 409A, no payments or benefits will occur or be paid until the later calendar year. 
(iv)    Each of the payments set forth in this Section, if any, shall be subject to any applicable taxes and other withholdings as required by law.
10.2    Definition of Termination of Employment.  For purposes of this Agreement, when capitalized, “Terminates Employment,” “Termination of Employment,” or any variation of that term means a separation from service within the meaning of Section 409A (defined below).  If Executive’s employment terminates but does not qualify as a separation from service under Section 409A, then Executive shall become entitled to receive the severance pay and benefits set forth in this Agreement at such time as he incurs a separation from service.  

15
 
 

10.3    Definition of Good Reason.  For purposes of this Section 10, the term “Good Reason” shall be defined to mean, without Executive’s written consent: (i) a reduction by Employer in Executive’s Base Salary or target Fiscal Year Bonus opportunity from the amounts set forth in this Agreement; (ii) failure of Employer to provide Executive an office in Employer’s principal executive offices (such offices to be located in the Indianapolis-Carmel-Anderson Metropolitan Statistical Area), except for required travel on business of the Employer or the Emmis Group, or (iii) a material breach of the terms of this Agreement by Employer; provided that Executive has given Employer written notice of such breach within thirty (30) days of the initial occurrence of the event that is alleged to constitute Good Reason, such breach remains uncured in the thirty (30) day period after such notice, and Executive terminates his employment no later than ten (10) days after the cure period has expired.  Employer shall not take any position that a resignation by Executive for Good Reason fails to constitute on involuntary separation from service for purposes of Section 409A.
11.    Termination of Agreement by Employer for Incapacity.
11.1    Termination.  If Executive shall become incapacitated (as defined in the Employer’s employee handbook or, if that is not applicable, as reasonably determined by Employer), in each case, consistent with applicable state and federal law, Employer shall continue to compensate Executive under the terms of this Agreement without diminution and otherwise without regard to such incapacity or nonperformance of duties until Executive has been incapacitated for a cumulative period of six (6) months, at which time Employer may, in its sole discretion, elect to terminate Executive’s employment, subject to applicable state and federal law.  The date that Executive’s employment terminates pursuant to this Section 11 is referred to herein as the “Incapacity Termination Date.”
11.2    Obligations after Termination.  Executive shall have no further obligations or liabilities hereunder after an Incapacity Termination Date except Executive’s obligations under Sections 7 and 8, which shall survive the termination or expiration of this Agreement.  After an Incapacity Termination Date, Employer shall have no further obligations or liabilities hereunder except that Employer shall, not later than two (2) weeks after an Incapacity Termination Date, pay to Executive those amounts described in Sections 4.3, if earned, and 9.2(ii), provided, however, that in the event an Incapacity Termination Date occurs at least six (6) months after the commencement of a Fiscal Year during the Term, Employer shall pay to Executive a pro-rated portion of the Fiscal Year Bonus for the Fiscal Year during which the Incapacity Termination Date occurs, such amount to be determined in the sole discretion of Employer.  Additionally, Employer shall comply with the provisions of COBRA and the provisions of any Employer benefit plans in which Executive or Executive’s eligible dependents or beneficiaries are participating at the time of termination.  Nothing in this Section 11 shall affect the amount of any benefits which may be payable to Executive under any insurance plan or policy maintained by 

16
 
 

Employer or Executive or pursuant to any Employer company practice, plan or program applicable to other executive-level employees of the Emmis Group. 
12.    Death of Executive.  This Agreement shall terminate immediately upon Executive’s death.  In the event of such termination, Employer shall have no further obligations or liabilities hereunder except that Employer shall, not later than two (2) weeks after Executive’s date of death, pay or grant to Executive’s estate or designated beneficiary those amounts described in Sections 4.3, if earned, and 9.2(ii).  Additionally, Employer shall comply with the provisions of COBRA and the provisions of any Employer benefit plans in which Executive or Executive’s eligible dependents or beneficiaries are participating at the time of termination.  In the event that Executive dies after termination of this Agreement pursuant to Sections 9, 10 or 11, all amounts required to be paid by Employer prior to Executive’s death in connection with such termination that remain unpaid as of Executive’s date of death shall be paid to Executive’s estate or designated beneficiary.  
13.    Termination of the Agreement because of Non-renewal.  If this Agreement expires at the end of the Second Contract Year and is not renewed or extended by the parties, Executive shall have no further obligations or liabilities hereunder, except Executive’s obligations under Sections 7 and 8, which shall survive the expiration of this Agreement.  Employer shall have no further obligations or liabilities hereunder, except the liabilities and obligations set forth in Section 9.2(ii) above, and shall award the PBCB, if earned, in accordance with Section 4.3. 
14.    Change in Title/Duties.  Notwithstanding anything to the contrary contained herein, at any time upon prior notice to Executive, Employer and ECC may change Executive’s duties and responsibilities hereunder.  Employer and ECC may also change Executive’s titles with Executive’s consent in Executive’s sole discretion to a comparable title, or Employer and ECC may promote Executive to the position of Chief Executive Officer, Chairman or Vice Chairman of the Employer and ECC without Executive’s consent.  If Employer and ECC elect to exercise the rights under this Section 14, Employer shall continue for the remainder of the Term (i) to provide Executive with an office at the location of the Employer’s principal executive offices in the Indianapolis-Carmel-Anderson Metropolitan Statistical Area and (ii) to perform its obligations under Sections 3, 4, 5 and 6 of this Agreement.
15.    Application of Internal Revenue Code Section 409A.  Notwithstanding anything to the contrary set forth herein, any payments and benefits provided under this Agreement (the “Severance Benefits”) that constitute “deferred compensation” within the meaning of Section 409A of the Code and the regulations and other guidance thereunder and any state law of similar effect (collectively “Section 409A”) shall not commence in connection with Executive’s termination of employment unless and until Executive has also incurred a “separation from service” (as such term is defined in Treasury Regulation Section 1.409A-1(h) (“Separation From Service”), unless Employer reasonably determines that such 

17
 
 

amounts may be provided to Executive without causing Executive to incur the additional 20% tax under Section 409A.  
It is intended that each installment of the Severance Benefits payments provided for in this Agreement is a separate “payment” for purposes of Treasury Regulation Section 1.409A-2(b)(2)(i).  For the avoidance of doubt, it is intended that payments of the Severance Benefits set forth in this Agreement satisfy, to the greatest extent possible, the exemptions from the application of Section 409A provided under Treasury Regulation Sections 1.409A-1(b)(4), 1.409A-1(b)(5) and 1.409A-1(b)(9).  However, if Employer (or, if applicable, the successor entity thereto) determines that the Severance Benefits constitute “deferred compensation” under Section 409A and Executive is, on the termination of service, a “specified employee” of Employer or any successor entity thereto, as such term is defined in Section 409A(a)(2)(B)(i) of the Code, then, solely to the extent necessary to avoid the incurrence of the adverse personal tax consequences under Section 409A, the timing of the Severance Benefit payments shall be delayed until the earlier to occur of: (i) the date that is six months and one day after Executive’s Separation From Service, or (ii) the date of Executive’s death (such applicable date, the “Specified Employee Initial Payment Date”), the Employer (or the successor entity thereto, as applicable) shall (A) pay to Executive a lump sum amount equal to the sum of the Severance Benefit payments that Executive would otherwise have received through the Specified Employee Initial Payment Date if the commencement of the payment of the Severance Benefits had not been so delayed pursuant to this Section and (B) commence paying the balance of the Severance Benefits in accordance with the applicable payment schedules set forth in this Agreement.

This Agreement is intended to comply with Section 409A, and it is intended that no amounts payable hereunder shall be subject to tax under Section 409A.  Employer shall use commercially reasonable efforts to comply with Section 409A with respect to payments of benefits hereunder.

16.    Adjustments for Changes in Capitalization of Employer.  In the event of any change in Employer’s outstanding Shares during the Term by reason of any reorganization, recapitalization, reclassification, merger, stock split, reverse stock split, stock dividend, asset spin-off, share combination, consolidation or other event, the number and class of Shares and/or Options awarded pursuant to Section 4 (and any applicable Option exercise price) and the Share used in the calculation of ASP in Section 4.3 shall be adjusted by the Compensation Committee in its sole and absolute discretion and, if applicable, in accordance with the terms of the Plan, and the option agreement evidencing the grant of the Option.  The determination of the Compensation Committee shall be conclusive and binding.  All adjustments pursuant to this Section shall be made in a manner that does not result in taxation to the Executive under Section 409A. 

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17.    Notices.  All notices, requests, consents and other communications, required or permitted to be given hereunder, shall be made in writing and shall be deemed to have been made as of: (a) the date that is three (3) days after the date of mailing, if sent via the U.S. postal service, first-class, postage-prepaid, (b) the date that is the next date upon which an overnight delivery service (Federal Express or UPS only) will make such delivery, if sent via such overnight delivery service, postage prepaid, (c) the date such delivery is made, if delivered in person to the notice party specified below or (d) the date such delivery is made, if delivered via email.   Such notice shall be delivered as follows (or to such other or additional address as either party shall designate by notice in writing to the other in accordance herewith):  
(i)    If to Employer:

Jeffrey H. Smulyan, Chairman & CEO
Emmis Operating Company
40 Monument Circle, Suite 700
Indianapolis, Indiana 46204
Email: Jeff@emmis.com 

With a copy to:
Legal Department
Emmis Operating Company
40 Monument Circle, Suite 700
Indianapolis, Indiana 46204
Email: legal@emmis.com 

(ii)    If to Executive, to Executive at Executive’s address in the personnel records of Employer.
18.    Miscellaneous.
18.1    Governing Law.  This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Indiana without regard to its conflict of law principles.  All payments made or required to be made hereunder by Employer shall be subject to applicable and other withholdings as required by law.
18.2    Captions.  The section headings contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of any of the terms and conditions of this Agreement.
18.3    Entire Agreement.  This Agreement shall supersede and replace, in all respects, any prior employment agreement entered into between the parties and any such agreement shall immediately terminate and be of no further force or effect.   

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For purposes of the preceding sentence, any change in control, restricted stock, option and other benefits-related agreement shall not constitute a “prior employment agreement.”
18.4    Assignment.  This Agreement, and Executive’s rights and obligations hereunder, may not be assigned by Executive to any third party; provided, however, that Executive may designate pursuant to Section 18.6 one (1) or more beneficiaries to receive any amounts that would otherwise be payable hereunder to Executive’s estate.  Employer may assign all or any portion of its rights and obligations hereunder to any other member of the Emmis Group or to any successor or assignee of Employer pursuant to a reorganization, recapitalization, merger, consolidation, sale of substantially all of the assets or stock of Employer, or otherwise.
18.5    Amendments; Waivers.  Except as expressly provided in the following sentence, this Agreement cannot be changed, modified or amended, and no provision or requirement hereof may be waived, without the written consent of Executive and Employer.  Employer may amend this Agreement to the extent that Employer reasonably determines that such change is necessary to comply with Section 409A and further guidance thereunder, provided that such change does not reduce the amounts payable to Executive hereunder.  The failure of a party at any time to require performance of any provision hereof shall in no manner affect the right of such party at a later time to enforce such provision.  No waiver by a party of the breach of any term or covenant contained in this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed to be, or construed as, a further or continuing waiver of any such breach or a waiver of the breach of any other term or covenant contained in this Agreement.  
18.6    Beneficiaries.  Whenever this Agreement provides for any payment to Executive’s estate, such payment may be made instead to such beneficiary as Executive may have designated in a writing filed with Employer.  Executive shall have the right to revoke any such designation and to re‐designate a beneficiary by written notice to Employer (or to any applicable insurance company).
18.7    Change in Fiscal Year.  If, at any time during the Term, Employer changes its fiscal year, Employer shall make such adjustments to the various dates and target amounts included herein as are necessary or appropriate, provided that no such change shall affect the date on which any amount is payable hereunder. 
18.8    Executive’s Warranty and Indemnity.  Executive hereby represents and warrants that Executive:  (i) has the full and unqualified right to enter into and fully perform this Agreement according to each and every term and condition contained herein; (ii) has not made any agreement, contractual obligation or commitment in contravention of any of the terms and conditions of this Agreement or which would prevent Executive from performing according to any of the terms and conditions contained herein; and (iii) has not entered into any agreement with any prior employer or other person, corporation or entity which would in any way 

20
 
 

adversely affect Executive’s or Employer’s right to enter into this Agreement.  Furthermore, Executive hereby agrees to fully indemnify and hold harmless Employer and each of its subsidiaries, affiliates and related entities, and each of their respective officers, directors, employees, agents, attorneys, shareholders, insurers and representatives from and against any and all losses, costs, damages, expenses (including attorneys’ fees and expenses), liabilities and claims, arising from, in connection with, or in any way related to, Executive’s breach of any of the representations or warranties contained in this Section 18.8.
18.9    Venue.  Any action to enforce, challenge or construe the terms or making of this Agreement or to recover for its breach shall be litigated exclusively in a state court located in Marion County, Indiana, except that the Employer may elect, at its sole and absolute discretion, to litigate the action in the county or state where any breach by Executive occurred or where Executive can be found.  Executive acknowledges and agrees that this venue provision is an essential provision of this Agreement and Executive hereby waives any defense thereto, including but not limited to, lack of personal jurisdiction, improper or wrong venue, or inconvenience.  
18.10    Indemnification.  Executive shall be entitled to the benefit of the indemnification provisions set forth in Employer’s Amended and Restated Articles of Incorporation and/or By‐Laws, or any applicable corporate resolution, as the same may be amended from time to time during the Term (not including any limiting amendments or additions, but including any amendments or additions that add to or broaden the protection afforded to Executive at the time of execution of this Agreement) to the fullest extent permitted by applicable law, and in the Director and Officer Indemnification Agreement dated December 15, 2011 between Executive and ECC.  Additionally, Employer shall cause Executive to be indemnified in accordance with Chapter 37 of the Indiana Business Corporation Law (the “IBCL”), as the same may be amended from time to time during the Term, to the fullest extent permitted by the IBCL as required to make Executive whole in connection with any indemnifiable loss, cost or expense incurred in Executive’s performance of Executive’s duties and obligations pursuant to this Agreement.  Employer shall also maintain during the Term, and for a commercially reasonable period after the Term, an insurance policy providing directors’ and officers’ liability coverage in a commercially reasonable amount.  It is understood that the foregoing indemnification obligations shall survive the expiration or termination of the Term.
18.11    Change in Control.  
(i)    Executive and Employer acknowledge that Employer intends to supersede and replace all of the Emmis Operating Company Change in Control Severance Agreements to which it is currently a party to reduce the Employer’s obligations thereunder so that those obligations more appropriately reflect the current size of the enterprise.  Executive and Employer have previously entered into that certain Emmis Operating 

21
 
 

Company Change in Control Severance Agreement effective as of September 4, 2011 (the “2011 CIC Agreement”).  Executive and Employer acknowledge and agree that the 2011 CIC Agreement, and all rights and obligations thereunder, shall terminate as of the Effective Date and no provision of the 2011 CIC Agreement shall survive following such termination.  
(ii)    Upon the execution of a new Change in Control Severance Agreement by either member of the Key Executive Group (a “New Key Executive Group CIC Agreement”), the Emmis Group shall offer to Executive for signature a new Change in Control Severance Agreement containing terms and conditions no less favorable to Executive than the New Key Executive Group CIC Agreement, plus any applicable amendments to reflect the terms of this Agreement (such new Change in Control Severance Agreement offered to Executive, the “New CIC Agreement”).  
(iii)    If, prior to Executive being offered a New CIC Agreement, a “Change in Control” (as defined in the Emmis Operating Agreement Change in Control Severance Agreement that is currently in effect with either member of the Key Executive Group) occurs, Executive shall be entitled to the benefits and be bound by the obligations of the 2011 CIC Agreement as if the 2011 CIC Agreement were still in effect; provided, however, that the value of the benefits received by Executive shall not exceed the highest value of the benefits received by either member of the Key Executive Group.  
(iv)    For purposes of this Agreement, references to the “CIC Agreement” shall mean (i) for the period from the Effective Date until Executive is offered a New CIC Agreement, only those rights and obligations of Executive under Section 18.11(iii), and (ii) for the period after Executive is offered a New CIC Agreement, the New CIC Agreement, but only to the extent that such New CIC Agreement is signed by Executive and delivered to Employer.    
18.12    Survival.  Provisions of this Agreement shall survive the termination or expiration of this Agreement to the extent necessary in order to effectuate the intent of the parties hereunder, including without limitation Sections 2, 7, 8, 9, 10, 11, 12, 13, 14 and 18.  
18.13    [Signatures on Following Page]

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IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the date first written above.
	
				
	 
	EMMIS OPERATING COMPANY
	 

	 
	("Employer")
	 

	 
	 
	 
	 

	 
	By:
	/s/ Jeffrey H. Smulyan
	 

	 
	 
	Jeffrey H. Smulyan
	 

	 
	 
	Chief Executive Officer
	 

	 
	 
	 
	 

	 
	PATRICK WALSH
	 

	 
	("Executive")
	 

	 
	 
	 
	 

	 
	/s/ Patrick Walsh
	 

	 
	Patrick Walshsage-ex101_13.htm

 

EXHIBIT 10.1

SIXTH AMENDMENT TO LEASE

THIS SIXTH AMENDMENT TO LEASE (this “Sixth Amendment”) is made as of May 8, 2017, by and between ARE-MA REGION NO. 38, LLC, a Delaware limited liability company (“Landlord”), and SAGE THERAPEUTICS, INC., a Delaware corporation (“Tenant”).

RECITALS

A.Landlord and Tenant are now parties to that certain Lease Agreement dated as of December 21, 2011, as amended by that certain First Amendment to Lease dated as of October 26, 2012, as further amended by that certain Second Amendment to   Lease dated as of May 9, 2013, as further amended by that certain Third Amendment to Lease dated as of September 9, 2015 (the “Third Amendment”), as further amended by that certain Fourth Amendment to Lease dated as of October 27, 2015 (the “Fourth Amendment”), and as further amended by that certain Fifth Amendment to Lease dated as of December 9, 2015 (as amended, the “Lease”).  Pursuant to the Lease, Tenant leases certain premises consisting of approximately 22,067 rentable square feet of space (“Existing Premises”) in a building located at 215 First Street, Cambridge, Massachusetts (“Building”).  The Existing Premises are more particularly described in the Lease.  Capitalized terms used herein without definition shall have the meanings defined for such terms in the Lease.

B.Landlord and Tenant desire, subject to the terms and conditions set forth below, to amend the Lease to, among other things, expand the size of the Existing Premises by adding approximately 32,876 rentable square feet of space on the third floor of the Building, consisting of (i) that portion of the third floor containing approximately 8,200 rentable square feet (the “Initial Fifth Expansion Premises”), and (ii) that portion of the third floor containing approximately 24,676 rentable square feet (the “Subsequent Fifth Expansion Premises”), all as shown on Exhibit A attached to this Sixth Amendment.  The Initial Fifth Expansion Premises and the Subsequent Fifth Expansion Premises may be collectively referred to herein as the “Fifth Expansion Premises.” 

NOW, THEREFORE, in consideration of the foregoing Recitals, which are incorporated herein by this reference, the mutual promises and conditions contained herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows:

	
1.
	
Fifth Expansion Premises.  In addition to the Existing Premises, commencing on (a) the Initial Fifth Expansion Premises Commencement Date (as defined below) with respect to the Initial Fifth Expansion Premises, and (b) the Subsequent Fifth Expansion Premises (as defined below) with respect to the Subsequent Fifth Expansion Premises, Landlord leases to Tenant, and Tenant leases from Landlord, the Initial Fifth Expansion Premises and the Subsequent Fifth Expansion Premises. 

	
2.
	
Delivery.  

a.Initial Fifth Expansion Premises.  Landlord shall use reasonable efforts to deliver (“Delivery” or “Deliver”) the Initial Fifth Expansion Premises to Tenant on or before the Target Initial Fifth Expansion Premises Commencement Date with Landlord’s Work in the Initial Fifth Expansion Premises Substantially Completed.  If Landlord fails to timely Deliver the Initial Fifth Expansion Premises, Landlord shall not be liable to Tenant for any loss or damage resulting therefrom, and the Lease with respect to the Initial Fifth Expansion Premises shall not be void or voidable.  As used herein, the terms “Landlord’s Work,” “Tenant Delays” and “Substantially Completed” shall have the meanings set forth for such terms in the work letter attached to this Sixth Amendment as Exhibit B (“Fifth Expansion Premises Work Letter”).

 

	
723422957.4
	
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The “Initial Fifth Expansion Premises Commencement Date” shall be the earlier to occur of: (i) the date that Landlord delivers the Initial Fifth Expansion Premises to Tenant with Landlord’s Work with respect to the Initial Fifth Expansion Premises Substantially Completed, or (ii) the date that Landlord could have delivered the Initial Fifth Expansion Premises to Tenant with Landlord’s Work with respect to the Initial Fifth Expansion Premises Substantially Completed but for Tenant Delays.  The “Target Initial Fifth Expansion Premises Commencement Date” shall be August 15, 2017.  Notwithstanding the foregoing, Tenant acknowledges and agrees that the Initial Fifth Expansion Premises Commencement Date may occur prior to the Target Initial Fifth Expansion Premises Commencement Date if Landlord’s Work in the Initial Fifth Expansion Premises is Substantially Completed prior to the Target Initial Fifth Expansion Premises Commencement Date.  

Except as set forth in the Fifth Expansion Premises Work Letter: (i) Tenant shall accept the Initial Fifth Expansion Premises in their condition as of the Initial Fifth Expansion Premises Commencement Date; (ii) Landlord shall have no obligation for any defects in the Initial Fifth Expansion Premises; and (iii) Tenant’s taking possession of the Initial Fifth Expansion Premises shall be conclusive evidence that Tenant accepts the Initial Fifth Expansion Premises and that the Initial Fifth Expansion Premises were in good condition at the time possession was taken.  The Initial Fifth Expansion Premises shall be delivered to Tenant without any furniture.

b.Subsequent Fifth Expansion Premises.  Landlord shall use reasonable efforts to Deliver the Subsequent Fifth Expansion Premises to Tenant on or before the Target Subsequent Fifth Expansion Premises Commencement Date with Landlord’s Work in the Subsequent Fifth Expansion Premises Substantially Completed.  If Landlord fails to timely Deliver the Subsequent Fifth Expansion Premises, Landlord shall not be liable to Tenant for any loss or damage resulting therefrom, and the Lease with respect to the Subsequent Fifth Expansion Premises shall not be void or voidable.  

The “Subsequent Fifth Expansion Premises Commencement Date” shall be the earlier to occur of: (i) the date that Landlord delivers the Subsequent Fifth Expansion Premises to Tenant with Landlord’s Work with respect to the Subsequent Fifth Expansion Premises Substantially Completed, (ii) the date that Landlord could have delivered to Subsequent Fifth Expansion Premises to Tenant with Landlord’s Work with respect to the Subsequent Fifth Expansion Premises Substantially Completed but for Tenant Delays, or (iii) the date that Tenant actually occupies the Subsequent Fifth Expansion Premises (i.e., employees of Tenant have been moved into offices and cubes in all or a portion of the Subsequent Fifth Expansion Premises).  The “Target Subsequent Fifth Expansion Premises Commencement Date” shall be January 1, 2018.  Notwithstanding anything to the contrary contained herein, if Landlord notifies Tenant prior to the Target Subsequent Fifth Expansion Premises Commencement Date that Landlord’s Work with respect to the Subsequent Fifth Expansion Premises has been Substantially Completed, Tenant may elect, by written notice to Landlord, to have the Subsequent Fifth Expansion Premises Commencement Date occur prior to the Target Subsequent Fifth Expansion Premises Commencement Date (provided, however, that Landlord shall have no obligation to Substantially Complete Landlord’s Work in the Subsequent Fifth Expansion Premises prior to the Target Subsequent Fifth Expansion Premises Commencement Date).

Except as set forth in the Fifth Expansion Premises Work Letter: (i) Tenant shall accept the Subsequent Fifth Expansion Premises in their condition as of the Subsequent Fifth Expansion Premises Commencement Date; (ii) Landlord shall have no obligation for any defects in the Subsequent Fifth Expansion Premises; and (iii) Tenant’s taking possession of the Subsequent Fifth Expansion Premises shall be conclusive evidence that Tenant accepts the Subsequent Fifth Expansion Premises and that the Subsequent Fifth Expansion Premises were in good condition at the time possession was taken.  The Subsequent Fifth Expansion Premises shall be delivered to Tenant without any furniture.

 

	
723422957.4
	
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c.Upon request of Landlord, Tenant shall execute and deliver a written acknowledgment of the Initial Fifth Expansion Premises Commencement Date, the Subsequent Fifth Expansion Premises Commencement Date and the expiration date of the Lease in a form substantially similar to the form of the “Acknowledgement of Commencement Date” attached to the Lease as Exhibit G; provided, however, Tenant’s failure to execute and deliver such acknowledgment shall not affect Landlord’s rights hereunder. 

Tenant agrees and acknowledges that neither Landlord nor any agent of Landlord has made any representation or warranty with respect to the condition of all or any portion of the Fifth Expansion Premises, and/or the suitability of the Fifth Expansion Premises for the conduct of Tenant’s business, and Tenant waives any implied warranty that the Fifth Expansion Premises are suitable for the Permitted Use.  

	
3.
	
Definition of Premises.  

a.Commencing on the Initial Fifth Expansion Premises Commencement Date, the defined term “Premises” on Page 1 of the Lease is deleted in its entirety and replaced with the following:

“Premises:  That portion of the Building (as defined below) containing approximately 30,267 rentable square feet, consisting of (i) approximately 5,900 rentable square feet on the second floor (“Original Premises”), (ii) approximately 600 rentable square feet on the second floor (“Expansion Premises”), (iii) approximately 4,100 rentable square feet on the second floor (“Second Expansion Premises”), (iv) approximately 7,962 rentable square feet on the second floor (“Third Expansion Premises”), (v) approximately 3,505 rentable square feet on the first floor (“Fourth Expansion Premises”), and (vi) approximately 8,200 rentable square feet on the third floor (the “Initial Fifth Expansion Premises”), all as determined by Landlord, as shown on Exhibit A.”

Exhibit A attached to the Lease is amended as of the Initial Fifth Expansion Premises Commencement Date to include the Initial Fifth Expansion Premises as shown on Exhibit A attached to this Sixth Amendment. 

b.Commencing on the Subsequent Fifth Expansion Premises Commencement Date, the defined term “Premises” on Page 1 of the Lease is deleted in its entirety and replaced with the following:

“Premises:  That portion of the Building (as defined below) containing approximately 54,943 rentable square feet, consisting of (i) approximately 5,900 rentable square feet on the second floor (“Original Premises”), (ii) approximately 600 rentable square feet on the second floor (“Expansion Premises”), (iii) approximately 4,100 rentable square feet on the second floor (“Second Expansion Premises”), (iv) approximately 7,962 rentable square feet on the second floor (“Third Expansion Premises”), (v) approximately 3,505 rentable square feet on the first floor (“Fourth Expansion Premises”), (vi) approximately 8,200 rentable square feet on the third floor (the “Initial Fifth Expansion Premises”), and (vii) approximately 24,676 rentable square feet on the third floor (the “Subsequent Fifth Expansion Premises”), all as determined by Landlord, as shown on Exhibit A.”

Exhibit A attached to the Lease is amended as of the Subsequent Fifth Expansion Premises Commencement Date to include the Subsequent Fifth Expansion Premises as shown on Exhibit A attached to this Sixth Amendment.

 

	
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4.
	
Base Rent. 

a.Existing Premises.  Tenant shall continue to pay Base Rent for the Existing Premises as provided for in the Lease through February 28, 2022.  Commencing on March 1, 2022, Tenant shall commence paying Base Rent with respect to the Existing Premises at the same annual rate then being paid by Tenant with respect to the Fifth Expansion Premises (subject to adjustment pursuant to Sections 4(b) and (c) below). 

b.Initial Fifth Expansion Premises.  Commencing on the Initial Fifth Expansion Premises Commencement Date, Tenant shall (in addition to Base Rent for the Existing Premises) commence paying Base Rent with respect to the Initial Fifth Expansion Premises at the rate of $52.00 per rentable square foot of the Initial Fifth Expansion Premises per year.  Thereafter, on each annual anniversary of the Initial Fifth Expansion Premises Commencement Date (each, an “Initial Fifth Expansion Premises Adjustment Date”), Base Rent payable with respect to Initial Fifth Expansion Premises shall be increased by multiplying the Base Rent payable with respect to the Initial Fifth Expansion Premises immediately before such Initial Fifth Expansion Premises Adjustment Date by 3% and adding the resulting amount to the Base Rent payable with respect to the Initial Fifth Expansion Premises immediately before such Initial Fifth Expansion Premises Adjustment Date.  

c.Subsequent Fifth Expansion Premises.  Commencing on the Subsequent Fifth Expansion Premises Commencement Date, Tenant shall (in addition to Base Rent for the Existing Premises and the Initial Fifth Expansion Premises) commence paying Base Rent with respect to the Subsequent Fifth Expansion Premises at the rate of $52.00 per rentable square foot of the Subsequent Fifth Expansion Premises per year.  Thereafter, on each annual anniversary of the Subsequent Fifth Expansion Premises Commencement Date (each, a “Subsequent Fifth Expansion Premises Adjustment Date”), Base Rent payable with respect to Subsequent Fifth Expansion Premises shall be increased by multiplying the Base Rent payable with respect to the Subsequent Fifth Expansion Premises immediately before such Subsequent Fifth Expansion Premises Adjustment Date by 3% and adding the resulting amount to the Base Rent payable with respect to the Subsequent Fifth Expansion Premises immediately before such Subsequent Fifth Expansion Premises Adjustment Date.

	
5.
	
Tenant’s Share.

a.Commencing on the Initial Fifth Expansion Premises Commencement Date, the defined term “Tenant’s Share” on page 1 of the Lease is deleted in its entirety and replaced with the following:

“Tenant’s Share for Original Premises and Expansion Premises:  1.77%

Tenant’s Share for Second Expansion Premises:  1.12%

Tenant’s Share of Third Expansion Premises:  2.17%

Tenant’s Share of Fourth Expansion Premises: 0.96%

Tenant’s Share of Initial Fifth Expansion Premises:  2.24%”

 

	
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b.Commencing on the Subsequent Fifth Expansion Premises Commencement Date, the defined term “Tenant’s Share” on page 1 of the Lease is deleted in its entirety and replaced with the following:

“Tenant’s Share for Original Premises and Expansion Premises:  1.77%

Tenant’s Share for Second Expansion Premises:  1.12%

Tenant’s Share of Third Expansion Premises:  2.17%

Tenant’s Share of Fourth Expansion Premises: 0.96%

Tenant’s Share of Initial Fifth Expansion Premises:  2.24%

Tenant’s Share of Subsequent Fifth Expansion Premises:  6.73%”

	
6.
	
Base Term.  

a.Commencing on the Initial Fifth Expansion Premises Commencement Date, the defined term “Base Term” on page 1 of the Lease is deleted in its entirety and replaced with the following:

“Base Term:  Beginning (i) with respect to the Original Premises, on the Commencement Date, (ii) with respect to the Expansion Premises, on the Expansion Premises Commencement Date, (iii) with respect to the Second Expansion Premises, on the Second Expansion Premises Commencement Date, (iv) with respect to the Third Expansion Premises, on the Third Expansion Premises Commencement Date, (v) with respect to the Fourth Expansion Premises, on the Fourth Expansion Premises Commencement Date, and (vi) with respect to the Initial Fifth Expansion Premises, on the Initial Fifth Expansion Premises Commencement Date, and ending with respect to the entire Premises on the date that is 84 months after the Initial Fifth Expansion Premises Commencement Date (“Expiration Date”).”

b.Commencing on the Subsequent Fifth Expansion Premises Commencement Date, the defined term “Base Term” on page 1 of the Lease is deleted in its entirety and replaced with the following:

“Base Term:  Beginning (i) with respect to the Original Premises, on the Commencement Date, (ii) with respect to the Expansion Premises, on the Expansion Premises Commencement Date, (iii) with respect to the Second Expansion Premises, on the Second Expansion Premises Commencement Date, (iv) with respect to the Third Expansion Premises, on the Third Expansion Premises Commencement Date, (v) with respect to the Fourth Expansion Premises, on the Fourth Expansion Premises Commencement Date, (vi) with respect to the Initial Fifth Expansion Premises, on the Initial Fifth Expansion Premises Commencement Date, and (vii) with respect to the Subsequent Fifth Expansion Premises, on the Subsequent Fifth Expansion Premises Commencement Date, and ending with respect to the entire Premises on the date that is 84 months after the Initial Fifth Expansion Premises Commencement Date (“Expiration Date”).”

 

	
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7.
	
Rentable Area of Premises.  

a.Commencing on the Initial Fifth Expansion Premises Commencement Date, the defined term “Rentable Area of Premises” on page 1 of the Lease is deleted in its entirety and replaced with the following:

“Rentable Area:  Approximately 30,267 square feet”

b.Commencing on the Subsequent Fifth Expansion Premises Commencement Date, the defined term “Rentable Area of Premises” on page 1 of the Lease is deleted in its entirety and replaced with the following:

“Rentable Area:  Approximately 54,943 square feet”

	
8.
	
Parking.  

a.Notwithstanding anything to the contrary contained herein, commencing on the Initial Fifth Expansion Premises Commencement Date, the number of parking spaces that Tenant is entitled to license pursuant to Section 8 of the Lease (as amended by Section 11 of the Third Amendment and Section 8 of the Fourth Amendment) shall be increased from 22 to 29 parking spaces and all references to “22” contained in Section 8 of the Lease (as amended by Section 11 of the Third Amendment and Section 8 of the Fourth Amendment) shall be deleted and replaced with “29.”  

b.Notwithstanding anything to the contrary contained herein, commencing on the Subsequent Fifth Expansion Premises Commencement Date, the number of parking spaces that Tenant is entitled to license pursuant to Section 8 of the Lease (as amended by Section 11 of the Third Amendment and Section 8 of the Fourth Amendment) shall be increased from 29 to 50 parking spaces and all references to “29” contained in Section 8 of the Lease (as amended by Section 11 of the Third Amendment and Section 8 of the Fourth Amendment) shall be deleted and replaced with “50.”

	
9.
	
Fifth Expansion Premises Utilities.  The Initial Fifth Expansion Premises and the Subsequent Fifth Expansion Premises shall be separately submetered and electricity to the Initial Fifth Expansion Premises and the Subsequent Fifth Expansion Premises shall be charged directly to Tenant by Landlord.  The Initial Fifth Expansion Premises and the Subsequent Fifth Expansion Premises shall be subject to the terms of Section 9(a) of the original Lease with respect to Utilities.  

	
10.
	
Security Deposit.  Commencing on the date of this Sixth Amendment, the defined term “Security Deposit” on Page 1 of the Lease is deleted in its entirely and replaced with the following:

“Security Deposit:  $323,767.33”

Landlord currently holds a Security Deposit in the amount of $38,842.00 under the Lease.  Concurrently with Tenant’s delivery of a signed original of this Sixth Amendment to Landlord, Tenant shall deliver to Landlord an amended Letter of Credit which increases the amount of the existing Letter of Credit being held by Landlord to $323,767.33 or an additional Letter of Credit in the amount of $284,925.33.

 

	
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11.
	
Existing Second Floor Premises Allowance.  Tenant may apply all or a portion of the TI Allowance (as defined in the Fifth Expansion Premises Work Letter) for the design and construction of improvements in the Second Floor Premises (as defined in Section 14(a) below) of a fixed and permanent nature desired by Tenant and reasonably acceptable to Landlord (the “Second Floor Improvements”).  Tenant acknowledges that upon the expiration of the Term of the Lease, the Second Floor Improvements shall become the property of Landlord and may not be removed by Tenant.  Except for the portion of the TI Allowance that Tenant elects to apply toward the Second Floor Improvements, Tenant shall be solely responsible for all of the costs of the Second Floor Improvements.  If the cost of the Second Floor Improvements exceeds the portion of the TI Allowance that Tenant elects to apply toward the Second Floor Improvements, Tenant shall reimburse Landlord for such additional costs within 10 days after Landlord’s delivery to Tenant of an invoice therefor.  Tenant shall have no right to any portion of the TI Allowance that is not disbursed to pay the costs of the Second Floor Improvements prior to the date that is 18 months after the date of this Sixth Amendment.

Following the date of this Sixth Amendment, Landlord and its contractors and agents shall have the right to enter into the Second Floor Premises to perform the Second Floor Improvements, and Tenant shall cooperate with Landlord in connection with the same.  Landlord shall use reasonable efforts to minimize interruption with Tenant’s operations in the Premises during the performance of the Second Floor Improvements.  At Tenant’s request, Landlord shall perform the Second Floor Improvements outside of regular business hours.  Any additional or overtime costs incurred in connection with performing the Second Floor Improvements outside of regular business hours shall be payable out of the TI Fund (as defined in the Fifth Expansion Premises Work Letter).  Tenant acknowledges that the Second Floor Improvements may adversely affect Tenant’s use and occupancy of the Second Floor Premises.  Except to the extent that Tenant is entitled to an abatement of Base Rent pursuant to Section 11 of the original Lease in connection with a Service Interruption, Tenant waives all claims for rent abatement against Landlord in connection with the Second Floor Improvements.

	
12.
	
First Floor Premises Termination Right.  Tenant shall have the one-time right, subject to the provisions of this Section 12, to terminate the Lease (“Early Termination Right”) with respect to the Fourth Expansion Premises (i.e. that portion of the Premises consisting of approximately 3,505 rentable square feet located on the first floor of the Building) no earlier than August 1, 2017 and no later than January 31, 2018, upon 30 days advance written notice to Landlord (an “Early Termination Notice”), which Early Termination Notice, for the avoidance of doubt, must be received by Landlord on or before December 31, 2017).  If Tenant timely delivers an Early Termination Notice, Landlord and Tenant shall enter into an amendment to the lease to memorialize the reduction of the rentable square footage of the Fourth Expansion Premises from the Premises and the corresponding reduction in Tenant’s Share of Operating Expenses and parking spaces, and Tenant shall vacate the Fourth Expansion Premises on or before the date that is 30 days after Landlord’s receipt of such Early Termination Notice (the “Early Termination Date”) and deliver possession thereof to Landlord in the condition required pursuant to the Lease including, with out limitation, in accordance with the surrender requirements of the Lease, on or before the Early Termination Date and Tenant shall have no further obligations under the Lease with respect to the Fourth Expansion Premises except for those accruing prior to the Early Termination Date and those which, pursuant to the terms of the Lease, survive the expiration or early termination of the Lease.  If Tenant does not deliver to Landlord an Early Termination Notice within the time period provided in this paragraph, Tenant shall be deemed to have waived its Early Termination Right and the provisions of this Section 12 shall have no further force or effect.

 

	
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13.
	
Right to Extend Term.  For the avoidance of doubt, Tenant shall continue to have the right to extend the Term of the Lease pursuant to Section 34 of the Lease (as the same is amended by Section 9 of the Third Amendment.  Tenant may only exercise its right to extend the Term of the Lease with respect to the entire then-existing Premises.

	
14.
	
Right of First Refusal.

a.Expansion on the Third Floor.  Subject to the rights granted to Sarepta Therapeutics, Inc., each time during the Base Term that Landlord intends to accept a written proposal (the “Pending Deal”) to lease all or a portion of the ROFR Space (as hereinafter defined) to a third party, Landlord shall deliver to Tenant written notice (the “Pending Deal Notice”) of the existence of such Pending Deal.  For purposes of this Section 14(a), “ROFR Space” shall mean that certain portion of the third floor of the Building containing approximately 29,352 rentable square feet, as shown on Exhibit C attached hereto, which is not occupied by a tenant or which is occupied by an existing tenant whose lease is expiring within 9 months or less and such tenant does not wish to renew (whether or not such tenant has a right to renew) its occupancy of such space.  Tenant shall be entitled to exercise its right under this Section 14(a) only with respect to the entire ROFR Space described in such Pending Deal Notice (“Identified Space”).  Within 10 days after Tenant’s receipt of the Pending Deal Notice, Tenant shall deliver to Landlord written notice (the “Space Acceptance Notice”) if Tenant elects to lease the Identified Space.  Tenant’s right to receive the Pending Deal Notice and election to lease or not lease the Identified Space pursuant to this Section 14(a) is hereinafter referred to as the “Right of First Refusal.”  If Tenant elects to lease the Identified Space described in the Pending Deal Notice by delivering the Space Acceptance Notice within the required 10 day period, and such election is made within 120 days after the date of this Sixth Amendment, then Tenant shall be deemed to agree to lease the Identified Space on the same general terms and conditions as the Lease; provided, however, that (i) the commencement date of the Lease with respect to the Identified Space shall occur upon Landlord’s delivery of the Identified Space to Tenant with any work in the space to be performed by Landlord, if any, substantially completed (the “ROFR Space Commencement Date”), (ii) Tenant shall continue to pay Base Rent for the then-existing Premises as provided in the Lease, and in addition thereto, beginning on the ROFR Space Commencement Date, Tenant shall pay Base Rent for the Identified Space at the rate of $52.00 per rentable square foot of the Identified Space per year, subject to increase pursuant to Section 4(b) of this Sixth Amendment, (iii) Tenant’s Share of Operating Expenses shall be proportionately adjusted to include the Identified Space, (iv) Tenant shall commence paying Tenant’s Share of Operating Expenses with respect to the Identified Space upon the ROFR Space Commencement Date, (v) the parties shall enter into a work letter reasonably acceptable to both parties for the construction of fixed and permanent improvements in the Identified Space which work letter shall provide for a tenant improvement allowance with respect to the Identified Space equal to $20.00 per rentable square foot of the Identified Space (the “ROFR Space Allowance”), which ROFR Space Allowance shall, if applicable, be decreased as provided in the immediately following paragraph, and (vi) the term of the Lease with respect to the Identified Space shall expire on the then-current Expiration Date (except to the extent Tenant has exercised its right to extend the Term of the Lease pursuant to Section 34 of the Lease, in which case the term of the Lease with respect to the Identified Space shall expire upon the expiration of the extended Term). If Tenant elects to lease the Identified Space by delivering the Space Acceptance Notice and such Space Acceptance Notice is delivered after the date that is 120 days after the date of this Sixth Amendment, then Tenant shall be deemed to agree to lease the Identified Space on the same general terms and conditions as the Lease except that the terms of the Lease shall be modified with respect to the Identified Space to reflect the terms of the Pending Deal.  The term of the Lease with respect to the Identified Space shall be the term reflected in the Pending Deal, which Tenant acknowledges and agrees may not be co-terminous with the Term of the Lease with respect to the then-existing Premises.  Notwithstanding anything to the contrary contained herein, in no event shall the Fifth 

 

	
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Expansion Premises Work Letter apply to the Identified Space.  If Tenant fails to deliver a Space Acceptance Notice to Landlord within the required 10 day period, Tenant shall be deemed to have waived its rights under this Section 14(a) with respect to the Identified Space and Landlord shall have the right to lease such Identified Space to the third party subject to the Pending Deal (or an affiliate of such third party).  Tenant’s Right of First Refusal shall be ongoing during the Base Term; provided, however that Tenant shall have no right to exercise the Right of First Refusal and the provisions of this Section 14(a) shall no longer apply after the date that is 9 months prior to the expiration of the Base Term if Tenant has not exercised its Extension Right pursuant to Section 34 of the Lease.

If Tenant exercises its Right of First Refusal with respect to at least 29,352 rentable square feet of the ROFR Space pursuant to the immediately preceding paragraph, then Tenant shall have the one-time right, subject to the provisions of this paragraph, to terminate the Lease (“Second Floor Early Termination Right”) with respect to the Original Premises, the Expansion Premises, the Second Expansion Premises and the Third Expansion Premises containing 18,562 rentable square feet in the aggregate (the “Second Floor Premises”) on the date that is 30 days after the ROFR Space Commencement Date (the “Early Second Floor Termination Date”) by delivery of written notice to Landlord concurrently with Tenant’s delivery of the Space Acceptance Notice to Landlord (an “Early Second Floor Termination Notice”).  If Tenant timely delivers an Early Second Floor Termination Notice, Landlord and Tenant shall enter into an amendment to the Lease to memorialize the reduction of the rentable square footage of the Second Floor Premises from the Premises and the corresponding reduction in parking spaces as of the Early Second Floor Termination Date, and Tenant shall vacate the Second Floor Premises on or before the Early Second Floor Termination Date and deliver possession thereof to Landlord in the condition required pursuant to the Lease including, with out limitation, in accordance with the surrender requirements of the Lease, on or before the Early Second Floor Termination Date and Tenant shall have no further obligations under the Lease with respect to the Second Floor Premises except for those accruing prior to the Early Second Floor Termination Date and those which, pursuant to the terms of the Lease, survive the expiration or early termination of the Lease. Notwithstanding anything to the contrary contained in this Sixth Amendment, if Tenant exercises its Second Floor Early Termination Right pursuant to this  Section 14(b), Landlord shall have the right to enclose the Communicating Stairwell (as defined in the Fifth Expansion Premises Work Letter), at Landlord’s cost and expense; provided, that the rentable square footage of the remaining Premises shall in no event be decreased in connection with such enclosure of the Communicating Stairwell.  If Tenant does not deliver to Landlord an Early Second Floor Termination Notice within the time period provided in this paragraph, Tenant shall be deemed to have waived its Early Second Floor Termination Right and the provisions of this paragraph shall have no further force or effect.  Notwithstanding anything to the contrary contained in this Sixth Amendment, if Tenant elects to exercise its Second Floor Early Termination Right pursuant to this paragraph within 120 days after the date of this Sixth Amendment, and any portion of the TI Allowance and/or the Existing Premises Allowance (as such terms are defined in the Fifth Expansion Premises Work Letter) have been expended for Tenant improvements in the Second Floor Premises, then the ROFR Space Allowance shall be reduced by an amount equal to any such TI Allowance and/or Existing Premises Allowance expended by Tenant in the Second Floor Premises.

b.Amended Lease.  If: (i) Tenant fails to timely deliver a Space Acceptance Notice, or (ii) after the expiration of a period of 30 days after Landlord’s delivery to Tenant of a lease amendment for Tenant’s lease of the Identified Space, no lease amendment for the Identified Space acceptable to both parties each in their reasonable discretion, has been executed, Tenant shall be deemed to have waived its right to lease such Identified Space.

 

	
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c.Exceptions.  Notwithstanding the above, the Right of First Refusal shall, at Landlord’s option, not be in effect and may not be exercised by Tenant:

(i)during any period of time that Tenant is in Default under any provision of the Lease; or

(ii)if Tenant has been in Default under any provision of the Lease 3 or more times, whether or not the Defaults are cured, during the 12 month period prior to the date on which Tenant seeks to exercise the Right of First Refusal.

d.Termination.  The Right of First Refusal shall, at Landlord’s option, terminate and be of no further force or effect even after Tenant’s due and timely exercise of the Right of First Refusal, if, after such exercise, but prior to the commencement date of the lease of such Identified Space, (i) Tenant fails to timely cure any Default by Tenant under the Lease; or (ii) Tenant has Defaulted 3 or more times during the period from the date of the exercise of the Right of First Refusal to the date of the commencement of the lease of the Identified Space, whether or not such Defaults are cured.

e.Rights Personal.  The Right of First Refusal is personal to Tenant (and successors pursuant to a Permitted Assignment) and is not assignable without Landlord’s consent, which may be granted or withheld in Landlord’s sole discretion separate and apart from any consent by Landlord to an assignment of Tenant’s interest in the Lease, except that they may be assigned in connection with any Permitted Assignment of the Lease.

f.No Extensions.  The period of time within which the Right of First Refusal may be exercised shall not be extended or enlarged by reason of Tenant’s inability to exercise the Right of First Refusal.

	
15.
	
Indemnity. Landlord and Tenant hereby agree that, in order to reflect changes in applicable Legal Requirements, retroactive to the date of the original Lease, the language of Section 13 of the original Lease which reads “unless caused solely by the willful misconduct or negligence of Landlord,” is hereby deleted in its entirety and replaced with the following: “except to the extent caused by the willful misconduct or negligence of Landlord,”.

	
16.
	
Signage.  If Tenant exercises its Right of First Refusal with respect to all of the ROFR Space pursuant to Section 14 and so long as Tenant continues to lease and occupy no less than 80,790 rentable square feet at the Project, Tenant shall have the non-exclusive right, at Tenant’s sole cost and expense, to display, 1 sign bearing Tenant’s name on a location on the Building designated by Landlord and reasonably acceptable to Tenant (“Building Sign”).  Tenant acknowledges and agrees that Tenant’s Building Sign including, without limitation, the size, color and type, shall be subject to Landlord’s prior written approval, which shall not be unreasonably withheld and shall be consistent with Landlord’s signage program at the Project and applicable Legal Requirements including, without limitation, any requirements imposed by the Boston Redevelopment Authority. Tenant shall be responsible, at Tenant‘s sole cost and expense, for the maintenance of Tenant’s Building Sign, for the removal of Tenant’ s Building Sign at the expiration or earlier termination of this Lease and, if Tenant or any Tenant Party performs such removal, for the repair all damage resulting from such removal.

	
17.
	
Brokers.  Landlord and Tenant each represents and warrants that it has not dealt with any broker, agent or other person (collectively, “Broker”) in connection with the transaction reflected in this Sixth Amendment and that no Broker brought about this transaction, other than Transwestern RBJ.  Landlord and Tenant each hereby agrees to indemnify and hold the other harmless from and against any claims by any Broker claiming a commission or other form of compensation by virtue of having dealt with Tenant or Landlord, as applicable, with regard to this Sixth Amendment.  

 

	
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18.
	
OFAC.  Tenant and Landlord are currently (a) in compliance with and shall at all times during the Term of the Lease remain in compliance with the regulations of the Office of Foreign Assets Control (“OFAC”) of the U.S. Department of Treasury and any statute, executive order, or regulation relating thereto (collectively, the “OFAC Rules”), (b) not listed on, and shall not during the term of the Lease be listed on, the Specially Designated Nationals and Blocked Persons List, Foreign Sanctions Evaders List or the Sectoral Sanctions Identifications List, which are all maintained by OFAC and/or on any other similar list maintained by OFAC or other governmental authority pursuant to any authorizing statute, executive order, or regulation, and (c) not a person or entity with whom a U.S. person is prohibited from conducting business under the OFAC Rules.

	
19.
	
Miscellaneous.

a.This Sixth Amendment is the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior and contemporaneous oral and written agreements and discussions.  This Sixth Amendment may be amended only by an agreement in writing, signed by the parties hereto.

b.This Sixth Amendment is binding upon and shall inure to the benefit of the parties hereto, their respective successors and assigns.

c.This Sixth Amendment may be executed in any number of counterparts, each of which shall be deemed an original, but all of which when taken together shall constitute one and the same instrument.  The signature page of any counterpart may be detached therefrom without impairing the legal effect of the signature(s) thereon provided such signature page is attached to any other counterpart identical thereto except having additional signature pages executed by other parties to this Sixth Amendment attached thereto.

d.Except as amended and/or modified by this Sixth Amendment, the Lease is hereby ratified and confirmed and all other terms of the Lease shall remain in full force and effect, unaltered and unchanged by this Sixth Amendment.  In the event of any conflict between the provisions of this Sixth Amendment and the provisions of the Lease, the provisions of this Sixth Amendment shall prevail.  Whether or not specifically amended by this Sixth Amendment, all of the terms and provisions of the Lease are hereby amended to the extent necessary to give effect to the purpose and intent of this Sixth Amendment.

[Signatures are on next page]

 

	
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IN WITNESS WHEREOF, the parties hereto have executed this Sixth Amendment as of the day and year first above written.

 

	
TENANT:

	
 

	
SAGE THERAPEUTICS, INC.,

	
a Delaware corporation

	
 
	
 
	
 

	
By:
	
 
	
/s/ Jeffrey Jonas

	
Its:
	
 
	
CEO

	
 
	
 
	
 

	
LANDLORD:

	
 

	
ARE-MA REGION NO. 38, LLC,

	
a Delaware limited liability company

	
 
	
 
	
 

	
By:
	
 
	
Alexandria Real Estate Equities, L.P.,

	
 
	
 
	
a Delaware limited partnership, managing member

	
 
	
 
	
 

	
 
	
 
	
By:
	
ARE-QRS CORP.,

	
 
	
 
	
 
	
a Maryland corporation,

	
 
	
 
	
 
	
general partner

	
 
	
 
	
 

	
 
	
 
	
 
	
By:
	
/s/ Eric S. Johnson

	
 
	
 
	
 
	
Its:
	
Senior Vice President, RE Legal Affairs

	
 
	
 
	
 
	
 
	
 

 

 

 

 

	
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EXHIBIT A

Initial Fifth Expansion Premises and Subsequent Fifth Expansion Premises

 

	
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EXHIBIT B

Fifth Expansion Premises Work Letter

THIS FIFTH EXPANSION PREMISES WORK LETTER dated ________________, 2017 (this “Fifth Expansion Premises Work Letter”) is made and entered into by and between ARE-MA REGION NO. 38, LLC, a Delaware limited liability company (“Landlord”), and SAGE THERAPEUTICS, INC., a Delaware corporation (“Tenant”), and is attached to and made a part of that certain Lease Agreement dated as of December 21, 2011, as amended by that certain First Amendment to Lease dated as of October 26, 2012, as further amended by that certain Second Amendment to Lease dated as of May 9, 2013, as further amended by that certain Third Amendment to Lease dated as of September 9, 2015, as further amended by that certain Fourth Amendment to Lease dated as of October 27, 2015, as further amended by that certain Fifth Amendment to Lease dated as of December 9, 2015, and as further amended by that certain Sixth Amendment to Lease of even date herewith (the “Sixth Amendment”) (as amended, the “Lease”), by and between Landlord and Tenant.  Any initially capitalized terms used but not defined herein shall have the meanings given them in the Lease.

1.General Requirements.

(a)Tenant’s Authorized Representative.  Tenant designates Etchell Cordero and Kimi Iguchi (either such individual acting alone, “Tenant’s Representative”) as the only persons authorized to act for Tenant pursuant to this Fifth Expansion Premises Work Letter.  Landlord shall not be obligated to respond to or act upon any request, approval, inquiry or other communication (“Communication”) from or on behalf of Tenant in connection with this Fifth Expansion Premises Work Letter unless such Communication is in writing from Tenant’s Representative.  Tenant may change either Tenant’s Representative at any time upon not less than 5 business days advance written notice to Landlord.  Neither Tenant nor Tenant’s Representative shall be authorized to direct Landlord’s contractors in the performance of Landlord’s Work (as hereinafter defined).

(b)Landlord’s Authorized Representative.  Landlord designates Jeff McComish and William DePippo (either such individual acting alone, “Landlord’s Representative”) as the only persons authorized to act for Landlord pursuant to this Fifth Expansion Premises Work Letter.  Tenant shall not be obligated to respond to or act upon any request, approval, inquiry or other Communication from or on behalf of Landlord in connection with this Fifth Expansion Premises Work Letter unless such Communication is in writing from Landlord’s Representative.  Landlord may change either Landlord’s Representative at any time upon not less than 5 business days advance written notice to Tenant. Landlord’s Representative shall be the sole persons authorized to direct Landlord’s contractors in the performance of Landlord’s Work.

(c)Architects, Consultants and Contractors.  Landlord and Tenant hereby acknowledge and agree that:  (i) the general contractor and any subcontractors for the Tenant Improvements shall be selected by Landlord, subject to Tenant’s approval, which approval shall not be unreasonably withheld, conditioned or delayed, and (ii) Spagnolo Gisness & Associates shall be the architect (the “TI Architect”) for the Tenant Improvements.  

2.Tenant Improvements.

(a)Tenant Improvements Defined.  As used herein, “Tenant Improvements” shall mean all improvements to the Fifth Expansion Premises of a fixed and permanent nature as shown on the TI Construction Drawings, as defined in Section 2(c) below, which Tenant Improvements may, at Tenant’s election include, an internal communicating stairwell connecting the Second Floor Premises and the Fifth Expansion Premises (the “Communication Stairwell”).  If Tenant elects to include a Communicating Stairwell as part of the Tenant Improvements, Tenant shall (i) not be required to remove or restore the 

	
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Communicating Stairwell to its original configuration at the expiration or earlier termination of the Term, or (ii) be required to pay the cost for the removal or restoration of the same at the expiration or earlier termination of the Term.  Other than Landlord’s Work (as defined in Section 3(a) below), Landlord shall not have any obligation whatsoever with respect to the finishing of the Fifth Expansion Premises for Tenant’s use and occupancy.  Notwithstanding anything to the contrary contained in the Lease, Landlord and Tenant acknowledge and agree that the Tenant Improvements in the Initial Fifth Expansion Premises and the Subsequent Fifth Expansion Premises may be constructed in phases.

(b)Tenant’s Space Plans.  Landlord and Tenant acknowledge and agree that that certain plan for the Initial Fifth Expansion Premises attached hereto as Schedule 1 (the “Space Plan”) has been approved by Landlord and Tenant.  Tenant shall deliver to Landlord and the TI Architect schematic drawings and outline specifications (the “Subsequent Premises Space Plans”) detailing Tenant’s requirements for the Tenant Improvements in the Subsequent Fifth Expansion Premises on or before August 1, 2017.  Not more than 7 days thereafter, Landlord shall deliver to Tenant the written objections, questions or comments of Landlord and the TI Architect with regard to the Subsequent Premises Space Plans.  Tenant shall cause the Subsequent Premises Space Plans to be revised to address such written comments and shall resubmit said drawings to Landlord for approval within 7 days thereafter.  Such process shall continue until Landlord has approved the Subsequent Premises Space Plans.

(c)Working Drawings.  Landlord shall cause the TI Architect to prepare and deliver to Tenant for review and comment construction plans, specifications and drawings for the Tenant Improvements (“TI Construction Drawings”), which TI Construction Drawings shall be prepared substantially in accordance with the Space Plan and the Subsequent Premises Space Plans, respectively.  Tenant shall be solely responsible for ensuring that the TI Construction Drawings reflect Tenant’s requirements for the Tenant Improvements with respect to the Initial Fifth Expansion Premises and the Subsequent Fifth Expansion Premises, respectively.  Tenant shall deliver its written comments on the TI Construction Drawings to Landlord not later than 10 business days after Tenant’s receipt of the same; provided, however, that Tenant may not disapprove any matter that is consistent with the Space Plan or the Subsequent Premises Space Plans, respectively, without submitting a Change Request.  Landlord and the TI Architect shall consider all such comments in good faith and shall, within 10 business days after receipt, notify Tenant how Landlord proposes to respond to such comments, but Tenant’s review rights pursuant to the foregoing sentence shall not delay the design or construction schedule for the Tenant Improvements with respect to the Initial Fifth Expansion Premises or the Subsequent Fifth Expansion Premises.  Any disputes in connection with such comments shall be resolved in accordance with Section 2(d) hereof.  Provided that the design reflected in the TI Construction Drawings is consistent with the Space Plan and the Subsequent Premises Space Plans, respectively, Tenant shall approve the TI Construction Drawings submitted by Landlord, unless Tenant submits a Change Request.  Once approved by Tenant, subject to the provisions of Section 4 below, Landlord shall not materially modify the TI Construction Drawings except as may be reasonably required in connection with the issuance of the TI Permit (as defined in Section 3(b) below).

(d)Approval and Completion.  It is hereby acknowledged by Landlord and Tenant that (i) the permit set of TI Construction Drawings for the Initial Fifth Expansion Premises must be completed and approved no later than May 1, 2017, in order for the Landlord’s Work in the Initial Fifth Expansion Premises to be Substantially Completed by the Target Initial Fifth Expansion Premises Commencement Date (as defined in the Sixth Amendment) and (ii) the permit set of TI Construction Drawings for the Subsequent Fifth Expansion Premises must be completed and approved no later than August 15, 2017, for Landlord’s Work in the Subsequent Fifth Expansion Premises to be Substantially Completed by the Target Subsequent Fifth Expansion Premises Commencement Date (as defined in the Sixth Amendment).  Upon any dispute regarding the design of the Tenant Improvements, which is not settled within 10 business days after notice of such dispute is delivered by one party to the other, Tenant may make the final decision regarding the design of the Tenant Improvements, provided (i) Tenant acts reasonably and such final decision is either consistent with or a compromise between Landlord’s and Tenant’s positions with respect to such dispute, (ii) that all costs and expenses resulting from any such 

	
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decision by Tenant shall be payable out of the TI Fund (as defined in Section 5(d) below), and (iii) Tenant’s decision will not affect the base Building, structural components of the Building or any Building Systems.  Any changes to the TI Construction Drawings following Landlord’s and Tenant’s approval of same requested by Tenant shall be processed as provided in Section 4 hereof.  Notwithstanding anything to the contrary contained in this Fifth Expansion Premises Work Letter, any failure of the permit set of TI Construction Drawings for the Initial Fifth Expansion Premises to be completed and approved by May 1, 2017, or any failure of the permit set of TI Construction Drawings for the Subsequent Fifth Expansion Premises to be completed and approved by August 15, 2017, shall constitute a Tenant Delay.

3.Performance of Landlord’s Work.

(a)Definition of Landlord’s Work.  As used herein, “Landlord’s Work” shall mean the work of constructing the Tenant Improvements.

(b)Commencement and Permitting.  Landlord shall commence construction of the Tenant Improvements upon obtaining a building permit (the “TI Permit”) authorizing the construction of the Tenant Improvements consistent with the TI Construction Drawings approved by Tenant.  The cost of obtaining the TI Permit shall be payable from the TI Fund.  Tenant shall assist Landlord in obtaining the TI Permit.  If any Governmental Authority having jurisdiction over the construction of Landlord’s Work or any portion thereof shall impose terms or conditions upon the construction thereof that:  (i) are inconsistent with Landlord’s obligations hereunder, (ii) increase the cost of constructing Landlord’s Work, or (iii) will materially delay the construction of Landlord’s Work, Landlord and Tenant shall reasonably and in good faith seek means by which to mitigate or eliminate any such adverse terms and conditions.

(c)Completion of Landlord’s Work.  Landlord shall (i) substantially complete or cause to be substantially completed Landlord’s Work in a good and workmanlike manner, in accordance with the TI Permit subject, in each case, to Minor Variations and normal “punch list” items of a non-material nature that do not interfere with the use of the Fifth Expansion Premises, and (ii)  obtain a certificate or temporary certificate of occupancy (or an equivalent approval) for the Initial Fifth Expansion Premises and the Subsequent Fifth Expansion Premises, respectively, permitting lawful occupancy of the Initial Fifth Expansion Premises and the Subsequent Fifth Expansion Premises, respectively (but specifically excluding any permits, licenses or other governmental approvals required to be obtained in connection with Tenant’s operations in the Fifth Expansion Premises) (“Substantial Completion” or “Substantially Complete”).  Upon Substantial Completion of Landlord’s Work in the Initial Fifth Expansion Premises and the Subsequent Fifth Expansion Premises, respectively, Landlord shall require the TI Architect and the general contractor to execute and deliver, for the benefit of Tenant and Landlord, a Certificate of Substantial Completion in the form of the American Institute of Architects (“AIA”) document G704.  For purposes of this Fifth Expansion Premises Work Letter, “Minor Variations” shall mean any modifications reasonably required:  (i) to comply with all applicable Legal Requirements and/or to obtain or to comply with any required permit (including the TI Permit); (ii) to comply with any request by Tenant for modifications to Landlord’s Work; (iii) to comport with good design, engineering, and construction practices that are not material; or (iv) to make reasonable adjustments for field deviations or conditions encountered during the construction of Landlord’s Work.  

(d)Selection of Materials.  Where more than one type of material or structure is indicated on the TI Construction Drawings approved by Landlord and Tenant, the option will be selected at Landlord’s sole and absolute subjective discretion.  As to all building materials and equipment that Landlord is obligated to supply under this Fifth Expansion Premises Work Letter, Landlord shall select the manufacturer thereof in its sole and absolute subjective discretion.

	
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(e)Delivery of the Fifth Expansion Premises.  When Landlord’s Work is Substantially Complete in the Initial Fifth Expansion Premises and the Subsequent Fifth Expansion Premises, subject to the remaining terms and provisions of this Section 3(e), Tenant shall accept the Initial Fifth Expansion Premises and the Subsequent Fifth Expansion Premises, respectively.  Tenant’s taking possession and acceptance of the Initial Fifth Expansion Premises and the Subsequent Fifth Expansion Premises shall not constitute a waiver of:  (i) any warranty with respect to workmanship (including installation of equipment) or material (exclusive of equipment provided directly by manufacturers), (ii) any non-compliance of Landlord’s Work with applicable Legal Requirements, or (iii) any claim that Landlord’s Work was not completed substantially in accordance with the TI Construction Drawings (subject to Minor Variations and such other changes as are permitted hereunder) (collectively, a “Construction Defect”).  Tenant shall have with respect to the Initial Fifth Expansion Premises, one year after Substantial Completion of the Tenant Improvements in the Initial Fifth Expansion Premises, and with respect to the Subsequent Fifth Expansion Premises, one year after Substantial Completion of the Tenant Improvements in the Subsequent Fifth Expansion Premises, within which to notify Landlord of any such Construction Defect discovered by Tenant, and Landlord shall use reasonable efforts to remedy or cause the responsible contractor to remedy any such Construction Defect within 30 days thereafter.  Notwithstanding the foregoing, Landlord shall not be in default under the Lease if the applicable contractor, despite Landlord’s reasonable efforts, fails to remedy such Construction Defect within such 30-day period, in which case Landlord shall have no further obligation with respect to such Construction Defect other than to cooperate, at no cost to Landlord, with Tenant should Tenant elect to pursue a claim against such contractor. 

Tenant shall be entitled to receive the benefit of all construction warranties and manufacturer’s equipment warranties relating to equipment installed in the Fifth Expansion Premises.  If requested by Tenant, Landlord shall attempt to obtain extended warranties from manufacturers and suppliers of such equipment, but the cost of any such extended warranties shall be borne solely out of the TI Fund.  Landlord shall promptly undertake and complete, or cause to be completed, all punch list items.

(f)Fifth Expansion Premises Commencement Date Delay.  Except as otherwise provided in the Lease, Delivery of the Initial Fifth Expansion Premises and the Subsequent Fifth Expansion Premises, respectively shall occur when Landlord’s Work in the Initial Fifth Expansion Premises and the Subsequent Fifth Expansion Premises, respectively, has been Substantially Completed, except to the extent that completion of Landlord’s Work shall have been actually delayed by any one or more of the following causes (“Tenant Delay”):

(i)Tenant’s Representative was not available within 2 business day to give or receive any Communication or to take any other action required to be taken by Tenant hereunder;

(ii)Tenant’s request for Change Requests (as defined in Section 4(a) below) whether or not any such Change Requests are actually performed;

(iii)Construction of any Change Requests;

(iv)Tenant’s request for materials, finishes or installations requiring unusually long lead times, provided that promptly after Landlord learns of such long lead times, Landlord informs Tenant that the requested items will require unusually long lead times;

(v)Tenant’s delay in reviewing, revising or approving plans and specifications beyond the periods set forth herein;

(vi)Tenant’s delay in providing information critical to the normal progression of the Project.  Tenant shall provide such information as soon as reasonably possible, but in no event longer than one week after receipt of any request for such information from Landlord;

	
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(vii)Tenant’s delay in making payments to Landlord for Excess TI Costs (as defined in Section 5(b) below); or

(viii)Any other act or omission by Tenant or any Tenant Party (as defined in the Lease), or persons employed by any of such persons.

If Delivery of the Initial Fifth Expansion Premises or the Subsequent Fifth Expansion Premises is delayed for any of the foregoing reasons, then Landlord shall cause the TI Architect to certify the date on which the Tenant Improvements would have been Substantially Completed in the Initial Fifth Expansion Premises or the Subsequent Fifth Expansion Premises, as applicable, but for such Tenant Delay and such certified date shall be the date of Delivery.

4.Changes.  Any changes requested by Tenant to the Tenant Improvements after the delivery and approval by Landlord of the Space Plan shall be requested and instituted in accordance with the provisions of this Section 4 and shall be subject to the written approval of Landlord and the TI Architect, such approval not to be unreasonably withheld, conditioned or delayed.

(a)Tenant’s Request For Changes.  If Tenant shall request changes to the Tenant Improvements (“Changes”), Tenant shall request such Changes by notifying Landlord in writing in substantially the same form as the AIA standard change order form (a “Change Request”), which Change Request shall detail the nature and extent of any such Change.  Such Change Request must be signed by Tenant’s Representative.  Landlord shall, before proceeding with any Change, respond to Tenant as soon as is reasonably possible with an estimate of:  (i) the time it will take, and (ii) the architectural and engineering fees and costs that will be incurred, to analyze such Change Request (which costs shall be paid from the TI Fund to the extent actually incurred, whether or not such change is implemented).  Landlord shall thereafter submit to Tenant in writing, within 5 business days of receipt of the Change Request (or such longer period of time as is reasonably required depending on the extent of the Change Request), an analysis of the additional cost or savings involved, including, without limitation, architectural and engineering costs and the period of time, if any, that the Change will extend the date on which Landlord’s Work will be Substantially Complete.  Any such delay in the completion of Landlord’s Work caused by a Change, including any reasonable suspension of Landlord’s Work while any such Change is being evaluated and/or designed, shall be Tenant Delay.

(b)Implementation of Changes.  If Tenant: (i) approves in writing the cost or savings and the estimated extension in the time for completion of Landlord’s Work, if any, and (ii) deposits with Landlord any Excess TI Costs required pursuant to Section 5(b) below in connection with such Change, Landlord shall cause the approved Change to be instituted.  Notwithstanding any approval or disapproval by Tenant of any estimate of the delay caused by such proposed Change, the TI Architect’s determination of the amount of Tenant Delay in connection with such Change shall be final and binding on Landlord and Tenant.

5.Costs.

(a)Budget For Tenant Improvements.  Before the commencement of construction of the Tenant Improvements, Landlord shall obtain a detailed breakdown by trade of the costs incurred or that will be incurred in connection with the design and construction of the Tenant Improvements (the “Budget”).  

(b)TI Allowance.  Landlord shall provide to Tenant a tenant improvement allowance (the “TI Allowance”) in the amount o $1,665,040 in the aggregate.  The TI Allowance shall be disbursed in accordance with this Work Letter.

	
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Tenant shall have no right to the use or benefit (including any reduction to or payment of Base Rent) of any portion of the TI Allowance not required for the construction of (i) the Tenant Improvements described in the TI Construction Drawings approved pursuant to Section 2(d) or (ii) any Changes pursuant to Section 4.  

(c)Costs Includable in TI Fund.  The TI Fund shall be used solely for the payment of design, permits and construction costs in connection with the construction of the Tenant Improvements, including, without limitation, the cost of electrical power and other utilities used in connection with the construction of the Tenant Improvements, the cost of preparing the Space Plan, the Subsequent Premises Space Plan and the TI Construction Drawings, all costs set forth in the Budget, including Landlord’s out-of-pocket expenses, costs resulting from Tenant Delays and the cost of Changes (collectively, “TI Costs”).  Notwithstanding anything to the contrary contained herein, the TI Fund shall not be used to purchase any furniture, personal property or other non-Building system materials or equipment, including, but not limited to, Tenant’s voice or data cabling, non-ducted biological safety cabinets and other scientific equipment not incorporated into the Tenant Improvements.

(d)Excess TI Costs.  Landlord shall have no obligation to bear any portion of the cost of any of the Tenant Improvements except to the extent of the TI Allowance.  If at any time the remaining TI Costs under the Budget exceed the remaining unexpended TI Allowance (“Excess TI Costs”), Tenant shall deposit with Landlord, as a condition precedent to Landlord’s obligation to complete the Tenant Improvements, 50% of the then current TI Costs in excess of the remaining TI Allowance, and the remaining 50% of the Excess TI Costs upon Substantial Completion of the Tenant Improvements.  If Tenant fails to deposit any Excess TI Costs with Landlord, Landlord shall have all of the rights and remedies set forth in the Lease for nonpayment of Rent (including, but not limited to, the right to interest at the Default Rate and the right to assess a late charge).  For purposes of any litigation instituted with regard to such amounts, those amounts will be deemed Rent under the Lease.  The TI Allowance and Excess TI Costs are herein referred to as the “TI Fund.”  Funds deposited by Tenant shall be the first disbursed to pay TI Costs.  Notwithstanding anything to the contrary set forth in this Section 5(d), Tenant shall be fully and solely liable for TI Costs and the cost of Minor Variations in excess of the TI Allowance.  If upon completion of the Tenant Improvements and the payment of all sums due in connection therewith there remains any undisbursed portion of the TI Fund, Tenant shall be entitled to such undisbursed TI Fund solely to the extent of any Excess TI Costs deposit Tenant has actually made with Landlord.  

6.Tenant Access.

(a)Tenant’s Access Rights.  Landlord hereby agrees to permit Tenant access, at Tenant’s sole risk and expense, to the Fifth Expansion Premises (i) 14 days prior to the Fifth Expansion Premises Commencement Date to perform any work (“Tenant’s Work”) required by Tenant other than Landlord’s Work, provided that such Tenant’s Work is coordinated with the TI Architect and the general contractor, and complies with the Lease and all other reasonable restrictions and conditions Landlord may impose (except the obligation to pay Base Rent or Operating Expenses with respect to the Fifth Expansion Premises), and (ii) prior to the completion of Landlord’s Work, to inspect and observe work in process; all such access shall be during normal business hours or at such other times as are reasonably designated by Landlord.  Any entry by Tenant shall comply with all established safety practices of Landlord’s contractor and Landlord until completion of Landlord’s Work and acceptance thereof by Tenant.

(b)No Interference.  Neither Tenant nor any Tenant Party (as defined in the Lease) shall interfere with the performance of Landlord’s Work, nor with any inspections or issuance of final approvals by applicable Governmental Authorities, and upon any such interference, Landlord shall have the right to exclude Tenant and any Tenant Party from the Fifth Expansion Premises until Substantial Completion of Landlord’s Work.

	
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(c)No Acceptance of Fifth Expansion Premises.  The fact that Tenant may, with Landlord’s consent, enter into the Fifth Expansion Premises prior to the date Landlord’s Work is Substantially Complete for the purpose of performing Tenant’s Work shall not be deemed an acceptance by Tenant of possession of the Fifth Expansion Premises, but in such event Tenant shall defend with counsel reasonably acceptable by Landlord, indemnify and hold Landlord harmless from and against any loss of or damage to Tenant’s property, completed work, fixtures, equipment, materials or merchandise, and from liability for death of, or injury to, any person, caused by the act or omission of Tenant or any Tenant Party.

7.Miscellaneous.

(a)Consents.  Whenever consent or approval of either party is required under this Fifth Expansion Premises Work Letter, that party shall not unreasonably withhold, condition or delay such consent or approval, unless expressly set forth herein to the contrary.

(b)Modification.  No modification, waiver or amendment of this Fifth Expansion Premises Work Letter or of any of its conditions or provisions shall be binding upon Landlord or Tenant unless in writing signed by Landlord and Tenant.

(c)Default.  Notwithstanding anything set forth herein or in the Lease to the contrary, Landlord shall not have any obligation to perform any work hereunder or to fund any portion of the TI Costs during any period that there is a Default by Tenant under the Lease.

	
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Schedule 1

 

Space Plan

 

 

	
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EXHIBIT C

ROFR Space

	
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