Document:

Nuvelo, Inc. Form 10-K  12/31/02

 

Exhibit 10.43

 

GUARANTY

     THIS GUARANTY (“Guaranty”) is made as of October 1, 2002 by George
Rathmann, an individual (“Guarantor”), in favor of AMB PROPERTY, L.P., a
Delaware limited partnership (“Seller”).

RECITALS

     A.     Seller, as landlord, and Hyseq, Inc., a Nevada corporation (“Buyer”),
as tenant, are parties to that certain lease dated as of June 23, 2000 (the
“Original Lease”), which Original Lease has been previously amended by that
certain First Amendment to Lease Agreement dated December 14, 2000
(collectively, the “Lease”) relating to certain real property and improvements
located at 225, 249 and 257 Humboldt Court, Sunnyvale, California (the
“Property”), all as more particularly described in the Lease.

     B.     Pursuant to that certain Termination Agreement dated as of October 1,
2002 by and among Buyer, Seller and Guarantor (the “Termination Agreement”),
Seller has agreed to terminate the Lease.

     C.     Pursuant to the terms of that certain Real Property Option and Sale
Agreement and Joint Escrow Instructions dated as of October 1, 2002 by and
between Buyer and Seller (“Option Agreement”), Seller has agreed to afford
Buyer an option (“Option”) to purchase the Property upon the terms and
conditions set forth in the Option Agreement. Initially capitalized terms not
otherwise defined herein shall have the meaning given to them in the Option
Agreement.

     D.     Pursuant to the Option Agreement, Buyer has executed or will execute in
favor of Seller a promissory note (“Note”) in the principal amount of Two
Million Six Hundred Thousand Dollars ($2,600,000). The Note, the Option
Agreement, and the Termination Agreement are collectively referred to herein as
the “Transaction Documents”.

     THEREFORE, to induce Seller to afford the Option to Buyer and to enter
into the Transaction Documents, and in consideration thereof, Guarantor
unconditionally guarantees and agrees as follows:

	 	1.	 	GUARANTY.

     1.1. Guarantor hereby guarantees and promises to pay to Seller or order,
on demand, in lawful money of the United States, in immediately available
funds, the principal amount of the Note, together with all accrued interest,
fees and charges on the entire principal amount of the Note.

     1.2. In addition to Guarantor’s obligations under Section 1.1 above,
Guarantor hereby guarantees and promises to pay (a) any avoidance by Buyer,
Buyer’s successor or Buyer’s creditors of all or any part of the sum of
$3,100,000, which amount represents a portion of the termination fee heretofore
paid to Seller pursuant to the Termination Agreement, or the recovery of any
portion of such termination fee directly or indirectly from Seller as a
preference, fraudulent transfer or otherwise under the Bankruptcy Code or other
similar laws and (b) all legal costs and expenses incurred by Seller as a
result of the occurrence of any of the events described

 

 

 in clause (a) above; provided that Guarantor’s liability under this
Section 1.2 shall terminate as of February 3, 2003.

     1.3. The obligations of Buyer to Seller described in Sections 1.1 and 1.2
are sometimes collectively referred to herein as the “Obligations.”

     2.     REMEDIES. If Guarantor fails to promptly perform its obligations under
this Guaranty, Seller may from time to time, and without first requiring
performance by Buyer, bring any action at law or in equity or both to compel
Guarantor to perform its obligations hereunder, and to collect in any such
action compensation for all loss, cost, damage, injury and expense sustained or
incurred by Seller as a direct or indirect consequence of the failure of
Guarantor to perform its obligations together with interest thereon at the
default rate of interest applicable to the principal balance of the Note, as
specified therein.

     3.     RIGHTS OF LENDER. Guarantor authorizes Seller, without giving notice
to Guarantor or obtaining Guarantor’s consent and without affecting the
liability of Guarantor, from time to time to: (a) declare all sums owing to
Seller under the Note due and payable upon the occurrence of an Event of
Default (as defined in the Note); (b) take and hold security for the
performance of Buyer’s obligations under the Note or the other Transaction
Documents and exchange, enforce, waive and release any such security; (c) make
extensions in the dates specified for payments of any sums payable in periodic
installments under the Note or any other Transaction Document; (d) apply such
security and direct the order or manner of sale thereof as Seller in its
discretion may determine; (e) release, substitute or add any one or more
endorsers of the Note or guarantors of Buyer’s obligations under the Note or
the other Transaction Documents; (f) except as expressly directed by Buyer in
writing to Seller with respect to particular payments, apply payments received
by Seller from Buyer to any obligations of Buyer to Seller, in such order as
Seller shall determine in its sole discretion, whether or not any such
obligations are covered by this Guaranty; (g) assign this Guaranty in whole or
in part; and (h) assign, transfer or negotiate all or any part of the
indebtedness guaranteed by this Guaranty.

     4.     GUARANTOR’S WAIVERS. Guarantor waives: (a) any defense based upon the
death, incapacity, lack of authority or termination of existence of, or
revocation hereof by, any person or entity, or the substitution of any party
hereto, or any legal disability or other defense of Buyer, any other guarantor
or other person, or by reason of the cessation or limitation of the liability
of Buyer from any cause other than full payment of all sums payable under the
Note or any of the other Transaction Documents (subject to the provisions of
Section 7 hereof); (b) any defense based upon any lack of authority of the
officers, directors, shareholders or agents acting or purporting to act on
behalf of Buyer or any principal of Buyer or any defect in the formation of
Buyer or any principal of Buyer; (c) any and all rights and defenses arising
out of an election of remedies by Seller; (d) any defense based upon Seller’s
or Buyer’s failure to disclose to Guarantor any information concerning Buyer’s
financial condition or any other circumstances bearing on Buyer’s ability to
pay all sums payable under the Note or any of the other Transaction Documents;
(e) any defense based upon any statute or rule of law which provides that the
obligation of a surety must be neither larger in amount nor in any other
respects more burdensome than that of a principal; (f) any defense based upon
Seller’s election, in any proceeding instituted under the Federal Bankruptcy
Code, of the application of Section 1111(b)(2) of the Federal Bankruptcy Code
or any successor statute; (g) any defense based upon any borrowing or any grant
of a security interest under Section 364 of the Federal Bankruptcy Code; (h)
any right to enforce any remedy which Seller may have against Buyer and any
right to

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 participate in, or benefit from, any security for the Note or the other
Transaction Documents now or hereafter held by Seller; (i) presentment, demand,
protest and notice of any kind; and (j) the benefit of any statute of
limitations affecting the liability of Guarantor hereunder or the enforcement
hereof. Guarantor further waives any and all rights and defenses that
Guarantor may have in the event that Buyer’s obligations under any of the
Transaction Documents is secured by real property; this means, among other
things, that: (1) Seller may collect from Guarantor without first foreclosing
on any real or personal property collateral pledged by Buyer; (2) if Seller
forecloses on any real property collateral pledged by Buyer, then (A) the
amount of the debt may be reduced only by the price for which that collateral
is sold at the foreclosure sale, even if the collateral is worth more than the
sale price, and (B) Seller may collect from Guarantor even if Seller, by
foreclosing on the real property collateral, has destroyed any right Guarantor
may have to collect from Buyer. The foregoing sentence is an unconditional and
irrevocable waiver of any rights and defenses Guarantor may have because
Buyer’s debt is secured by real property. These rights and defenses being
waived by Guarantor include, but are not limited to, any rights or defenses
based upon Section 580a, 580b, 580d or 726 of the California Code of Civil
Procedure. Without limiting the generality of the foregoing or any other
provision hereof, Guarantor further expressly waives for the period in which
any of the Obligations remain outstanding any and all rights and defenses which
might otherwise be available to Guarantor under California Civil Code Sections
2787 to 2855, inclusive, 2899 and 3433, or under California Code of Civil
Procedure Sections 580a, 580b, 580d and 726, or any of such sections. Finally,
Guarantor agrees that the performance of any act or any payment which tolls any
statute of limitations applicable to the Note or any of the Transaction
Documents shall similarly operate to toll the statute of limitations applicable
to Guarantor’s liability hereunder.

     5.     GUARANTOR’S WARRANTIES. Guarantor warrants and acknowledges that: (a)
Seller would not enter into the Transaction Documents but for this Guaranty;
(b) there are no conditions precedent to the effectiveness of this Guaranty;
(c) Guarantor has established adequate means of obtaining from sources other
than Seller, on a continuing basis, financial and other information pertaining
to Buyer’s financial condition and the status of Buyer’s performance of
obligations under the Transaction Documents, and Guarantor agrees to keep
adequately informed from such means of any facts, events or circumstances which
might in any way affect Guarantor’s risks hereunder and Seller has made no
representation to Guarantor as to any such matters; (d) the most recent
financial statements of Guarantor previously delivered to Seller are true and
correct in all material respects, and fairly present the financial condition of
Guarantor as of the respective dates thereof, and no material adverse change
has occurred in the financial condition of Guarantor since the respective dates
thereof; (e) Guarantor has not and will not, without the prior written consent
of Seller, sell, lease, assign, encumber, hypothecate, transfer or otherwise
dispose of all or substantially all of Guarantor’s assets; and (f) Guarantor
has the capacity and is legally competent to enter into this Guaranty.

     6.     SUBORDINATION. Guarantor subordinates all present and future
indebtedness owing by Buyer to Guarantor to the Obligations. Upon the
occurrence of an Event of Default (as defined in the Note), Guarantor agrees to
make no claim for such indebtedness until all Obligations have been fully
satisfied. Guarantor further agrees not to assign all or any part of such
indebtedness unless Seller is given prior notice and the assignee acknowledges
to Seller in writing that such indebtedness is subordinated to the Obligations
to the same extent as provided under the terms of this Guaranty. Upon the
occurrence of an Event of Default, any payment received by Guarantor on account
of such indebtedness shall be held in trust by Guarantor for

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 Seller, and forthwith paid over to Seller, until such time as the
Obligations have been satisfied in full.

     7.     BANKRUPTCY OF BORROWER. In any bankruptcy or other proceeding
occurring during the period in which any of the Obligations remain outstanding
in which the filing of claims is required by law, Guarantor shall file all
claims which Guarantor may have against Buyer relating to any indebtedness of
Buyer to Guarantor and shall assign to Seller all rights of Guarantor
thereunder. If Guarantor does not file any such claim, Seller, as
attorney-in-fact for Guarantor, is hereby authorized to do so in the name of
Guarantor or, in Seller’s discretion, to assign the claim to a nominee and to
cause proof of claim to be filed in the name of Seller’s nominee. The
foregoing power of attorney is coupled with an interest and cannot be revoked.
Seller or its nominee shall have the right, in its reasonable discretion, to
accept or reject any plan proposed in such proceeding and to take any other
action which a party filing a claim is entitled to do. In all such cases,
whether in administration, bankruptcy or otherwise, the person or persons
authorized to pay such claim shall pay to Seller the amount payable on such
claim unless and until the Obligations have been satisfied in full and, to the
full extent necessary for that purpose, Guarantor hereby assigns to Seller all
of Guarantor’s rights to any such payments or distributions; provided, however,
Guarantor’s obligations hereunder shall not be satisfied except to the extent
that Seller receives cash by reason of any such payment or distribution. If
Seller receives anything hereunder other than cash, the same shall be held as
collateral for amounts due under this Guaranty. Subject to the limitations set
forth in Section 1.2, if all or any portion of the obligations guaranteed
hereunder are paid or performed, the obligations of Guarantor hereunder shall
continue and shall remain in full force and effect in the event that all or any
part of such payment or performance is avoided or recovered directly or
indirectly from Seller as a preference, fraudulent transfer or otherwise under
the Bankruptcy Code or other similar laws, irrespective of (a) any notice of
revocation given by Guarantor prior to such avoidance or recovery, (b) full
payment and performance of all of the indebtedness and obligations evidenced by
the Transaction Documents, or (c) Seller’s surrender or cancellation or
exoneration of this Guaranty.

     8.     ADDITIONAL, INDEPENDENT AND UNSECURED OBLIGATIONS. This Guaranty is a
continuing guaranty of payment and not of collection and cannot be revoked by
Guarantor and shall continue to be effective with respect to any indebtedness
referenced in Section 1 hereof arising or created after any attempted
revocation hereof or after the death of Guarantor, in which event this Guaranty
shall be binding upon Guarantor’s estate and Guarantor’s legal representatives
and heirs. The obligations of Guarantor hereunder shall be in addition to and
shall not limit or in any way affect the obligations of Guarantor under any
other existing or future guaranties unless said other guaranties are expressly
modified or revoked in writing. This Guaranty is independent of the obligations
of Buyer under the Note and the other Transaction Documents. Seller may bring a
separate action to enforce the provisions hereof against Guarantor without
taking action against Buyer or any other party or joining Buyer or any other
party as a party to such action. This Guaranty is not secured and shall not be
deemed to be secured by any security instrument unless such security instrument
expressly recites that it secures this Guaranty.

     9.     ATTORNEYS’ FEES; ENFORCEMENT. If any attorney is engaged by Seller to
enforce or defend any provision of this Guaranty or the Note or the
Subordination Agreement (as defined in the Option Agreement), or as a
consequence of any default under the Note, this

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 Guaranty or the Subordination Agreement, with or without the filing of any
legal action or proceeding, Guarantor shall pay to Seller, immediately upon
demand all reasonable attorneys’ fees and costs incurred by Seller in
connection therewith, together with interest thereon from the date of such
demand until paid at the default rate of interest applicable to the principal
balance of the Note as specified therein.

     10.     RULES OF CONSTRUCTION. The word “Buyer” as used herein shall include
both the named Buyer and any other person at any time assuming or otherwise
becoming primarily liable for all or any part of the obligations of the named
Buyer under the Note and the other Transaction Documents. The term “person” as
used herein shall include any individual, company, trust or other legal entity
of any kind whatsoever. If this Guaranty is executed by more than one person,
the term “Guarantor” shall include all such persons. When the context and
construction so require, all words used in the singular herein shall be deemed
to have been used in the plural and vice versa. All headings appearing in this
Guaranty are for convenience only and shall be disregarded in construing this
Guaranty.

     11.     CREDIT REPORTS. Each legal entity and individual obligated under and
executing this Guaranty hereby authorizes Seller to order and obtain from time
to time, from a credit reporting agency of Seller’s choice, a third party
credit report on such legal entity and individual.

     12.     GOVERNING LAW. This Guaranty shall be governed by, and construed and
enforced in accordance with, the laws of the State of California, except to the
extent preempted by federal laws. Guarantor and all persons and entities in
any manner obligated to Seller under this Guaranty consent to the jurisdiction
of any federal or state court within the State of California having venue in
San Francisco, California, and also consent to service of process by any means
authorized by California or federal law.

     13.     MISCELLANEOUS. The provisions of this Guaranty will bind and benefit
the heirs, executors, administrators, legal representatives, nominees,
successors and assigns of Guarantor and Seller. The liability of all persons
and entities who are in any manner obligated hereunder shall be joint and
several. If any provision of this Guaranty shall be determined by a court of
competent jurisdiction to be invalid, illegal or unenforceable, that portion
shall be deemed severed from this Guaranty and the remaining parts shall remain
in full force as though the invalid, illegal or unenforceable portion had never
been part of this Guaranty.

     14.     ENFORCEABILITY. Guarantor hereby acknowledges that: (a) the
obligations undertaken by Guarantor in this Guaranty are complex in nature, and
(b) numerous possible defenses to the enforceability of these obligations may
presently exist and/or may arise hereafter, and (c) as part of Seller’s
consideration for entering into this transaction, Seller has specifically
bargained for the waiver and relinquishment by Guarantor of all such defenses,
and (d) Guarantor has sought and received legal advice from skilled legal
counsel in the area of financial transactions of the type contemplated herein.
Given all of the above, Guarantor does hereby represent and confirm to Seller
that Guarantor is fully informed regarding, and that Guarantor does thoroughly
understand: (i) the nature of all such possible defenses, and (ii) the
circumstances under which such defenses may arise, and (iii) the benefits which
such defenses might confer upon Guarantor, and (iv) the legal consequences to
Guarantor of waiving such defenses. Guarantor acknowledges that Guarantor
makes this Guaranty with the intent that this Guaranty and all of the informed
waivers herein shall each and all be fully enforceable by Seller,

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 and that Seller is induced to enter into this transaction and the
Transaction Documents in material reliance upon the presumed full
enforceability thereof.

     15.     WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY TO THIS GUARANTY, AND BY
ITS ACCEPTANCE HEREOF, SELLER, HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING UNDER THE
TRANSACTION DOCUMENTS, INCLUDING, WITHOUT LIMITATION, ANY PRESENT OR FUTURE
MODIFICATION THEREOF OR (b) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL
TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THE
TRANSACTION DOCUMENTS (AS NOW OR HEREAFTER MODIFIED) OR ANY OTHER INSTRUMENT,
DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR THE
TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE WHETHER NOW EXISTING OR
HEREAFTER ARISING, AND WHETHER SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND
EACH PARTY AND SELLER HEREBY AGREES AND CONSENTS THAT ANY PARTY TO THIS
GUARANTY AND SELLER MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS SECTION
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO AND
SELLER TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY. EACH PARTY HERETO AND
SELLER CONSENTS TO THE JURISDICTION OF ANY FEDERAL OR STATE COURT WITHIN THE
STATE OF CALIFORNIA HAVING VENUE IN SAN FRANCISCO, CALIFORNIA.

[SIGNATURE PAGE FOLLOWS]

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     IN WITNESS WHEREOF, Guarantor has executed this Guaranty as of the date
appearing on the first page of this Guaranty.

	 	 	 	 	 
	 	 	
GUARANTOR:
	 
	 	 	 	 	 
	 
	 	 	
By:	 	

	 	 	 	 	 
George Rathmann, an individual
	 
	 	 	
SSN:	 	

	 
	 
	 	 	 	 	 
	 
	 	 	
APPROVED AS TO FORM:
	 	 	 	 	 
	 
	 	 	
 

Alan D. Smith, Attorney for Guarantor

CONSENT OF SPOUSE:

     The undersigned, the wife of George Rathmann, hereby consents to the
foregoing Guaranty and acknowledges that such Guaranty creates binding
obligations on George Rathmann and the undersigned, and of their individual,
joint and community assets.

	 	 	 	 
	By:	 	 
	 	 	

	 	 	
Frances Joy Rathmann
	SSN:	 	 
	 	 	

7Nuvelo, Inc. Form 10-K  12/31/02

 

Exhibit 10.44

 

CONDITIONAL LEASE TERMINATION AGREEMENT

     THIS CONDITIONAL LEASE TERMINATION AGREEMENT (this “Termination
Agreement”) is made as of the 1st day of October, 2002 by and among AMB
PROPERTY, L.P., a Delaware limited partnership (“Landlord”), HYSEQ, INC., a
Nevada corporation (“Tenant”), and GEORGE RATHMANN, an individual
(“Guarantor”).

RECITALS:

	 	A.	 	Landlord and Tenant are parties to that certain lease dated
as of June 23, 2000 (the “Original Lease”), which Original Lease has
been previously amended by that certain First Amendment to Lease
Agreement dated December 14, 2000 (collectively, the “Lease”)
relating to approximately 59,300 rentable square feet located at
225, 249 and 257 Humboldt Court, Sunnyvale, California (the
“Premises”), all as more particularly described in the Lease.
Capitalized terms used herein but not otherwise defined shall have
the meanings given them in the Lease.
	 
	 	B.	 	George Rathmann, an individual (“Guarantor”), guarantied the
obligations of Tenant under the Lease pursuant to that certain
Guaranty of Lease executed in connection with the Lease (the
“Existing Guaranty”).
	 
	 	C.	 	The Term of the Lease is scheduled to expire on July 31, 2011
(the “Scheduled Expiration Date”), and the parties have agreed to
terminate the Lease prior to the Scheduled Expiration Date upon and
subject to the terms and conditions contained in this Termination
Agreement.
	 
	 	D.	 	Concurrently herewith, the parties are entering into a Real
Property Option and Sale Agreement and Joint Escrow Instructions
(the “Option Agreement”), providing for the grant of a six-month
option (the “Option”) to purchase the land, buildings and other
improvements in which the Premises are located on the terms and
conditions contained therein (the “Property”).

		
	 	     NOW, THEREFORE, in consideration of the above recitals which by this
reference are incorporated herein, the mutual covenants and conditions
contained herein and other valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as
follows:

	 	1.	 	Effective Termination Date. Upon and subject to the payment
of the Termination Fee (as defined below), the payment of the
Initial Option Consideration (as defined in the Option Agreement),
and the delivery and effectiveness of the letter of credit, funds
and documents required to be delivered by Tenant and Guarantor under
Paragraphs 5, 7 and 11 of this Termination Agreement and under
Section 2.1.1 and Section 2.2.1 of the Option Agreement, in each
case on or before 5:00 p.m. (Pacific Standard Time) on November 1,
2002 (the “Contingency Date”), and provided the representations and
warranties of Tenant and Guarantor set forth in Paragraph 6(a) of
this Termination Agreement shall be true and correct in all material
respects as of the Contingency Date, the Lease and the Existing
Guaranty (as reaffirmed by the Reaffirmation of Guaranty referred to
below) shall be deemed terminated retroactively as of October 1,
2002 (the “Effective Termination Date”) and the Term of the Lease
shall be deemed to expire with

 

 

	 	 	 	the same force and effect as if the Term was, by the provisions
thereof, fixed to expire on the Effective Termination Date.
	 
	 	2.	 	Release of Landlord. Subject to the effectiveness of the
release of Tenant and Guarantor under Paragraph 3 below, effective
as of the Effective Termination Date, Tenant and Guarantor each
hereby forever (a) remises, releases, quitclaims and surrenders to
Landlord, its successors and assigns, the Lease and all of the
estate and rights of Tenant and/or Guarantor in and to the Lease and
the Premises, and (b) waives, and releases and discharges Landlord
and its past and present partners and affiliates, including AMB
Property Corporation, a Maryland corporation, AMB Capital Partners,
and their respective past and present trustees, members, principals,
beneficiaries, shareholders, beneficial owners, partners, officers,
directors, employees, mortgagee(s), managers, representatives and
agents, and their respective successors and assigns (collectively,
the “Landlord Parties”) from, any and all claims, demands or causes
of action whatsoever, including, without limitation, any and all
rights, obligations, liabilities, indebtedness, breaches of
contract, breaches of duty or any relationship, acts, omissions,
misfeasance, malfeasance, debts, defenses, sums of money, accounts,
compensations, contracts, controversies, promises, damages, costs,
losses and expenses of every type, kind, nature, description or
character, and irrespective of how, why, or by reason of what facts,
whether heretofore or now existing, or that could, might, or may be
claimed to exist, of whatever kind or name, whether known or
unknown, suspected or unsuspected, liquidated or unliquidated,
claimed or unclaimed, whether based on contract, tort, breach of any
duty, or other legal or equitable theory of recovery, each as though
fully set forth herein at length, arising or accruing out of or in
connection with the Premises or the Lease or the Existing Guaranty.
Notwithstanding the foregoing, nothing contained herein shall
release the parties from their respective obligations and agreements
under this Termination Agreement, the Option Agreement, the Guaranty
(as defined in the Option Agreement) or any other documents entered
into in connection with this Termination Agreement or the Option
Agreement.
	 
	 	3.	 	Release of Tenant and Guarantor. Subject to the
effectiveness of the release of the Landlord Parties under
Paragraph 2 above, and subject to the satisfaction of the
conditions set forth below in this Paragraph 3, Landlord (a) agrees
to accept the surrender of the Lease and the Premises from and
after the Effective Termination Date, and (b) effective as of the
Effective Termination Date waives, and releases and discharges
Tenant and Guarantor and their respective past and present partners
and affiliates, and their respective past and present trustees,
members, principals, beneficiaries, shareholders, beneficial
owners, partners, officers, directors, employees, mortgagee(s),
managers, representatives and agents, and their respective
successors and assigns (collectively, the “Tenant Parties”) from,
any and all claims, demands or causes of action whatsoever,
including, without limitation, any and all rights, obligations,
liabilities, indebtedness, breaches of contract, breaches of duty
or any relationship, acts, omissions, misfeasance, malfeasance,
debts, defenses, sums of money, accounts, compensations, contracts,
controversies, promises, damages, costs, losses and expenses of
every type, kind, nature, description or character, and
irrespective of how, why, or by reason of what facts, whether
heretofore or now existing, or that could, might, or may be claimed
to exist, of whatever kind or name, whether known or unknown,
suspected or unsuspected, liquidated or unliquidated, claimed or
unclaimed, whether based on contract, tort, breach of any duty, or
other legal or equitable theory of recovery, each as

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	 	 	 	though fully set forth herein at length, arising or accruing out of
or in connection with the Premises or the Lease or the Existing
Guaranty. Notwithstanding the foregoing, nothing contained herein
shall release the parties from their respective obligations and
agreements under this Termination Agreement, the Option Agreement,
the Guaranty or the other documents entered into in connection with
this Termination Agreement or the Option Agreement.
	 
	 	 	 	The termination of the Lease and the Existing Guaranty pursuant to
the provisions of Paragraph 1 and the foregoing releases under
Paragraph 2 above and this Paragraph 3 shall be subject to the
following conditions precedent: (i) Landlord shall have received
the Termination Fee in full, (ii) Tenant and Guarantor shall have
delivered to Landlord the letter of credit, funds and documents
required under Paragraphs 5, 7 and 11 hereof and under Section
2.1.1 and Section 2.2.1 of the Option Agreement, including the
Initial Option Consideration, when and as required hereunder and
thereunder; and (iii) the representations and warranties of Tenant
and Guarantor under Paragraph 6(a) shall be true and correct as of
the Contingency Date in all material respects. If any such
conditions are not satisfied when and as required hereunder or
under the Option Agreement, the termination of the Lease and
Existing Guaranty pursuant to Paragraph 1 and the foregoing
releases shall be null and void and of no force or effect.
	 
	 	4.	 	Waiver. With respect to the releases set forth in Paragraphs
2 and 3 above, the parties acknowledge that they have been advised
by legal counsel and are familiar with the provisions of California
Civil Code Section 1542 which provides as follows:
	 
	 	 	 	“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR
DOES NOT KNOW OR SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF
EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM, MUST HAVE MATERIALLY
AFFECTED HIS SETTLEMENT WITH THE DEBTOR.”
	 
	 	 	 	THE UNDERSIGNED, BEING AWARE OF SAID CODE SECTION, HEREBY EXPRESSLY
WAIVE ALL RIGHTS THEY MAY HAVE THEREUNDER, AS WELL AS ANY OTHER
STATUTES OR COMMON LAW PRINCIPLES OF SIMILAR EFFECT PERTAINING TO
THE RELEASES SET FORTH HEREIN.
	 
	 	 	 	Tenant and Guarantor specifically acknowledge that they have
carefully reviewed the provisions of this Termination Agreement,
including without limitation, Paragraphs 2 and 4 hereof, and
discussed their import with skilled legal counsel, and further
acknowledge that the provisions of Paragraphs 2 and 4 are a
material part of this Termination Agreement.

	 	 	 	 
	 
	 	
	 	

	 	Tenant	 	
Guarantor

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	 	5.	 	Covenants. (a) On or prior to the Contingency Date,
Tenant covenants to completely vacate and surrender the Premises
to Landlord in its existing condition and free of all movable
furniture and equipment, shall repair any damage caused by any
such removal, and shall deliver all keys and access cards to the
Premises to Landlord or Landlord’s designee. On or prior to
November 1, Tenant shall cause all construction materials to be
removed from the Premises.
	 
	 	 	 	(b) Tenant shall restore the Premises as required under Exhibit A
attached hereto on or prior to (i) 60 days after the expiration of
the Option Period (as defined in the Option Agreement) if Tenant
does not exercise the Option under the Option Agreement or the
Option Agreement terminates for any reason (provided that if Tenant
has commenced and is diligently pursuing such obligations but is
unable despite such efforts to complete such obligations as
required hereunder within such 60 day period, Tenant shall be
entitled to an additional 30 days to complete such obligations), or
(ii) one year after the date of the Closing Date (as defined in the
Option Agreement) under the Option Agreement if the Option is
validly exercised by Tenant and the Closing occurs under (and as
defined in) the Option Agreement. Notwithstanding the foregoing,
Landlord and Tenant shall cooperate to agree on an earlier date for
performing such repair obligations in connection with any new Lease
(as defined in the Option Agreement) proposal to which Tenant is
willing to give or has given its consent in accordance with the
Option Agreement. As a condition to the effectiveness of this
Termination Agreement, Tenant shall deliver to Landlord, on or
before the Contingency Date, a letter of credit issued by Union
Bank, N.A. (“Union Bank”) or other bank acceptable to Landlord in
an amount to be agreed upon by Landlord and Tenant prior to the
Contingency Date, and in the form of Exhibit B attached hereto (the
“Repair Letter of Credit”) to secure Tenant’s obligations under
this Paragraph 5(b) and in Exhibit A. The Repair Letter of Credit
shall be returned by Landlord if and when Tenant’s obligations
under this Paragraph 5(b) are satisfied fully as provided herein
and Tenant has provided to Landlord unconditional lien waivers from
all contractors, subcontractors, materialmen and suppliers
performing services or providing materials in connection with such
restoration obligations, and the time period for filing claims with
respect to such services or materials has expired. If such
obligations are not so satisfied by the applicable date set forth
in clauses (i) and (ii) above, Landlord shall be entitled to draw
on the Repair Letter of Credit and apply the proceeds thereof to
the costs incurred by Landlord to perform such obligations.
	 
	 	 	 	(c) The provisions of this Paragraph 5 shall survive any
termination of the Lease and Existing Guaranty pursuant hereto, and
the closing of the purchase and sale of the Property pursuant to
the Option Agreement.
	 
	 	6.	 	Representations and Warranties. (a) Tenant and Guarantor
each represents and warrants that: (i) Tenant is the owner of all of
the Tenant’s interest in the Lease; (ii) Tenant has not made any
disposition, assignment, sublease, or conveyance of the Lease or
Tenant’s interest therein; (iii) neither Tenant nor Guarantor has
any knowledge of any fact or circumstance which would give rise to
any claim, demand, obligation, liability, action or cause of action
arising out of or in connection with Tenant’s occupancy of the
Premises; (iv) no other person or entity has an interest in Tenant’s
interest in the Lease; (v) there are no outstanding contracts for
the supply of labor or material and no work has been done or is
being done in, to or about the Premises which has not been fully
paid for and for which appropriate waivers of mechanic’s liens have

4

 

	 	 	 	not been obtained; (vi) Tenant is duly formed, validly existing and
in good standing under the laws of the State of Nevada and is
qualified to do business in and in good standing under the laws of
the State of California; (vii) Tenant and Guarantor each has the
capacity, power and authority to enter into this Termination
Agreement, and Tenant’s representatives are duly authorized to
execute and deliver this Termination Agreement on behalf of Tenant,
to execute and deliver the instruments specified herein, and
generally to perform Tenant’s and Guarantor’s obligations hereunder
and thereunder; (viii) this Termination Agreement and all documents
executed by Tenant and Guarantor which are to be delivered
hereunder do not and at the Contingency Date will not violate any
provision of any agreement or judicial order to which Tenant or
Guarantor is a party or to which Tenant or Guarantor is subject;
(ix) neither Tenant nor Guarantor has (A) made a general assignment
for the benefit of creditors, (B) filed any voluntary petition in
bankruptcy or suffered the filing of any involuntary petition by
Tenant’s or Guarantor’s creditors, (C) suffered the appointment of
a receiver to take possession of all, or substantially all, of
Tenant’s or Guarantor’s assets, (D) suffered the attachment or
other judicial seizure of all, or substantially all, of Tenant’s or
Guarantor’s assets, (Ei) admitted in writing its inability to pay
its debts as they come due, or (F) made an offer of settlement,
extension or composition to its creditors generally; and (x) the
financial statements of Tenant and Guarantor delivered to Landlord
pursuant to the Option Agreement are each true and correct in all
respects and fairly present the financial condition of Guarantor
and Tenant, respectively, as of the respective dates thereof, and
no material adverse change has occurred in the financial condition
of Guarantor or Tenant since the respective dates thereof.
	 
	 	 	 	(b) Landlord represents and warrants that: (i) Landlord is the
owner of all of the landlord’s interest in the Lease; (ii) Landlord
has not made any disposition, assignment, sublease or conveyance of
the Lease or landlord’s interest therein; (iii) Landlord has no
knowledge of any fact or circumstance which would give rise to any
claim, demand, obligation, liability, action or cause of action
arising out of or in connection with Tenant’s occupancy of the
Premises; (iv) no other person or entity has an interest in
Landlord’s interest in the Lease; (v) Landlord is duly formed,
validly existing and in good standing under the laws of the State
of Delaware and is qualified to do business in and in good standing
under the laws of the State of California; (vi) Landlord has the
capacity, power and authority to enter into this Termination
Agreement, and Landlord’s representatives are duly authorized to
execute and deliver this Termination Agreement on behalf of
Landlord, to execute and deliver the instruments specified herein,
and generally to perform Landlord’s obligations hereunder and
thereunder; (vii) this Termination Agreement and all documents
executed by Landlord which are to be delivered hereunder do not and
at the Contingency Date will not violate any provision of any
agreement, mortgage or deed of trust or judicial order to which
Landlord is a party or to which Landlord is subject; (viii)
Landlord has not (A) made a general assignment for the benefit of
creditors, (B) filed any voluntary petition in bankruptcy or
suffered the filing of any involuntary petition by Landlord’s
creditors, (C) suffered the appointment of a receiver to take
possession of all, or substantially all, of Landlord’s assets, (D)
suffered the attachment or other judicial seizure of all, or
substantially all, of Landlord’s assets, (E) admitted in writing
its inability to pay its debts as they come due, or (F) made an
offer of settlement, extension or composition to its creditors
generally.

5

 

	 	 	 	(c) The foregoing representations and warranties shall be deemed to
be remade by Tenant and Guarantor and Landlord in full as of the
Contingency Date.
	 
	 	7.	 	Termination Fee. As consideration for and as a condition of
the waivers, releases, covenants and other agreements of Landlord
herein, Landlord shall receive the sum of $5,400,000.00 (the
“Termination Fee”) at the following times and in the following
manner: (a) upon the full execution and delivery of this
Termination Agreement, Landlord shall retain and apply toward the
Termination Fee the sum of $3,100,000.00 currently being held by
Landlord in the form of (i) the Security Deposit under the Lease in
the amount of $410,522.00 and (ii) prepaid rent currently held by
Landlord under the Lease in the amount of $2,689,478.00; and (b) on
or before the Contingency Date, Guarantor (but not Tenant), shall
pay directly to Landlord, from Guarantor’s funds which have not be
received by Tenant, by cashier’s or certified check or by wire
transfer of immediately available funds to an account designated by
Landlord, the sum of $2,300,000.00. In the event that Landlord does
not receive, on or before the Contingency Date: (A) the entire
Termination Fee as required above, (B) the Initial Option
Consideration, and (C) all of the documents required to be delivered
on or before the Contingency Date hereunder and under the Option
Agreement, including without limitation, the Repair Letter of Credit
and the Guaranty, and current financial statements for Guarantor
reasonably acceptable to Landlord and demonstrating that Guarantor
has the ability to meet his obligations hereunder, under the
Guaranty and under the Option Agreement, or if Landlord and Tenant
are unable to agree on the amount of the Repair Letter of Credit on
or before the Contingency Date or if Tenant fails to fulfill its
obligations under Paragraph 5(a) above on or before the Contingency
Date, or if any of the representations and warranties of Tenant or
Guarantor under Paragraph 6(a) is not true and correct as of the
Contingency Date in any material respect, then in any such event (1)
notwithstanding anything to the contrary contained in the
Pre-Negotiation Agreement dated October 18, 2002 executed by the
parties (the “Pre-Negotiation Agreement”), Tenant shall be in
default under the Lease for failure to pay rent and all other
amounts due under the Lease for October 2002, and it shall be a
default hereunder and under the Option Agreement, (2) this
Termination Agreement and the Option Agreement shall terminate and
be of no force of effect, and the provisions hereof, including,
without limitation the termination of the Lease and Existing
Guaranty under Paragraph 1 above, and the releases set forth in
Paragraphs 2 and 3 above, shall be null and void, but not including
the provisions hereof or of the Option Agreement which expressly
survive a termination hereof or thereof, (3) the Lease and Existing
Guaranty (as reaffirmed by the Reaffirmation of Guaranty) shall not
be deemed terminated and shall remain in full force and effect, (4)
the portion of the Termination Fee described in clause (a)(ii) of
the first sentence of this Paragraph 7 shall be deemed to be prepaid
rent paid pursuant to the terms of the Lease, and (5) Tenant shall
be liable to Landlord for all of Landlord’s reasonable out-of-pocket
costs and expenses incurred (including without limitation attorneys’
fees) in connection with the transactions contemplated by this
Termination Agreement and the Option Agreement. The foregoing
provisions shall survive the termination of this Termination
Agreement.
	 
	 	 	 	Provided neither Tenant nor Guarantor is in default under this
Termination Agreement, the Option Agreement or the Guaranty, or any
documents entered into in connection with the Option Agreement, in
each case at the Effective Termination Date and as of the
Contingency Date, as applicable, and provided further that all
conditions and contingencies set forth herein and in the Option
Agreement (to the extent the conditions in the Option Agreement are
required to be satisfied by the Option Payment Date, as defined in
the Option Agreement) have been satisfied as of the Contingency
Date, including without limitation, execution and delivery of the
Guaranty and the

6

 

	 	 	 	Reaffirmation of Guaranty and all other documents required under
Sections 2.1.1 and 2.2.1 of the Option Agreement, and receipt by
Landlord of the entire Termination Fee as required hereunder and of
the Initial Option Consideration as required under the Option
Agreement, and provided the representations and warranties of
Tenant and Guarantor under Paragraph 6(a) are true and correct as
of the Effective Termination Date and the Contingency Date in all
material respects, then Landlord shall return the existing Letter
of Credit issued by Union Bank in the amount of $3,000,000.00 (less
any amounts previously applied by Landlord) held by Landlord
pursuant to Section 17 of the Original Lease (the “Existing Letter
of Credit”), on the Contingency Date as provided in this Paragraph 7. On or before the Contingency Date, Landlord shall agree to
place the original Existing Letter of Credit in trust with Union
Bank for it to be returned by Union Bank to Tenant or Guarantor or
cancelled (as applicable) upon receipt by Union Bank of written
notice from Landlord that all of the foregoing conditions and
contingencies have been so satisfied, provided that an agreement
acceptable in form and substance to Landlord has been entered into
among Landlord, Tenant, Guarantor and Union Bank providing for the
return of the original Existing Letter of Credit by Union Bank to
Landlord promptly upon Union Bank’s receipt of notice from Landlord
that any such conditions and contingencies are not satisfied as of
the Contingency Date, and further providing that neither Tenant nor
Guarantor nor their representatives or agents will give Union Bank
any instructions contrary to those of Landlord.
	 
	 	8.	 	Operating Expenses and Property Taxes. Notwithstanding
anything in this Termination Agreement to the contrary, Tenant shall
remain liable for its obligations under the Lease arising or
accruing prior to the Effective Termination Date regarding year-end
adjustments with respect to Tenant’s Share of Operating Expenses
(including Property Taxes) for that portion of the calendar year up
to and including the Effective Termination Date but only to the
extent such obligations exceed $5,000. Such amount (if owed by
Tenant hereunder) shall be paid by Tenant at the time, in the manner
and otherwise in accordance with the terms of the Lease,
specifically Sections 4.2 and 10 of the Original Lease, unless
otherwise specified herein. If, however, Tenant is owed a credit
for such obligations, Landlord shall have no obligation to pay such
amounts to Tenant if the Lease is terminated as provided herein
unless and only to the extent such amount exceeds $5,000. At
Landlord’s option, any such amounts owed to Tenant may be paid by
offset against the Additional Option Consideration (as defined in
the Option Agreement).
	 
	 	9.	 	Surviving Provisions. Notwithstanding anything to the
contrary contained herein, Sections 6.2(c), 8.5 and 8.6 of the
Original Lease, and any provisions of the Lease which state that
they survive a termination of the Lease, shall survive the
termination of the Lease and Existing Guaranty hereunder.
	 
	 	10.	 	Confidentiality. Tenant and Guarantor hereby acknowledge and
agree that neither Tenant nor Guarantor nor any of their respective
agents or any other parties acting on behalf of Tenant or Guarantor
shall disclose any matters set forth in this Termination Agreement,
the Option Agreement or any documents entered into in connection
herewith or therewith, or disseminate or distribute any information
concerning the terms, details or conditions hereof or thereof, to
any person, firm or entity without obtaining the express written
consent of Landlord; provided, however, that the foregoing
prohibition shall not apply to (a) disclosures to attorneys,
accountants, lenders, investors and insurers provided that such
parties are informed of the confidential nature of the terms and
conditions of this Termination Agreement, the Option Agreement and
such other

7

 

	 	 	 	documents, and, provided further, that such parties are directed to
treat such terms and conditions as confidential, or (b) disclosures
required by any applicable law or regulation and, in such event,
the disclosing party shall disclose only the specific matters set
forth in this Termination Agreement, the Option Agreement or such
other documents as are required by law. The provisions of this
Paragraph 10 shall survive any termination of this Termination
Agreement or the Option Agreement and the closing of the purchase
and sale of the Property pursuant to the Option Agreement.
	 
	 	11.	 	Contingency. In addition to the other conditions set forth
herein, this Termination Agreement is contingent upon Landlord and
Tenant entering into the Option Agreement, payment by Guarantor (and
not by Tenant) of the Initial Option Consideration from Guarantor’s
funds which have not been received by Tenant and delivery by
Guarantor to Landlord of the Reaffirmation of Guaranty (as defined
in the Option Agreement) and the Guaranty, and the other documents
or items required under Paragraph 2.1.1 of the Option Agreement, in
each case concurrently herewith. If any such contingencies is not
satisfied concurrently with the execution of this Termination
Agreement, or if this Termination Agreement and such other documents
are not fully executed and delivered by the parties, in each case on
or before October 25, 2002, then this Termination Agreement shall
terminate and be null and void and of no force or effect (other than
the provisions of Paragraphs 7, 10, 11, 13(b) and 13(j) hereof which
shall survive any termination of this Termination Agreement), and
the Lease and Existing Guaranty (as reaffirmed by the Reaffirmation
of Guaranty) shall continue in full force and effect as if this
Termination Agreement had not been executed, without any notice or
further action by the parties and, notwithstanding anything to the
contrary contained in the Pre-Negotiation Agreement, Tenant shall be
in default for failure to pay rent and all other amounts due under
the Lease for October, 2002; provided, however, that, if requested
by Landlord, Tenant shall execute a reaffirmation of the Lease, in
the form provided by Landlord reaffirming the Lease and Guarantor
shall execute the Reaffirmation of Guaranty; provided, further,
however that the failure of Tenant or Guarantor to do so shall not
affect the validity or enforceability of the Lease or the Existing
Guaranty or the rights and remedies of Landlord thereunder.
	 
	 	12.	 	Guarantor. This Termination Agreement shall be of no force
and effect unless and until accepted by the Guarantor and his
spouse, who each hereby and pursuant to the Reaffirmation of
Guaranty reaffirm their obligations under the Existing Guaranty, and
if the Guarantor and his spouse do not execute and deliver the
Option Agreement, the Reaffirmation of Guaranty and the Guaranty
concurrently herewith (in addition to the other conditions and
contingencies set forth herein). Guarantor acknowledges that the
execution of this Termination Agreement, the Reaffirmation of
Guaranty, the Option Agreement and the Guaranty by Guarantor and his
spouse is a material inducement to Landlord to enter into this
Termination Agreement and the Option Agreement.
	 
	 	13.	 	Miscellaneous.

	 
	 	a.	 	Voluntary Agreement. The parties have read this
Termination Agreement and the mutual releases contained in it,
and on advice of counsel they have freely and voluntarily
entered into this Termination Agreement.
	 
	 	b.	 	Attorneys’ Fees. Each party shall bear their own
attorneys’ fees and costs incurred in connection with the
preparation and negotiation of this Termination

8

 

	 	 	 	Agreement (except as provided in Paragraph 7). If either
party commences an action against the other party arising out
of or in connection with this Termination Agreement, the
prevailing party shall be entitled to recover from the losing
party reasonable attorneys’ fees and costs of suit. The
foregoing provisions shall survive any termination of this
Termination Agreement.
	 
	 	c.	 	Successors. This Termination Agreement shall be
binding upon and inure to the benefit of parties and their
respective successors, heirs, representatives, assigns and
related entities.
	 
	 	d.	 	Counterparts; Facsimile Signatures. This
Termination Agreement may be executed in two or more
counterparts, each of which shall be deemed to be a duplicate
original, but all of which together shall constitute one and
the same instrument. The parties hereby agree that the
facsimile signatures shall be binding upon the parties to this
Termination Agreement.
	 
	 	e.	 	Governing Law. This Termination Agreement shall
be governed by and construed in accordance with the laws of
the State of California.
	 
	 	f.	 	Additional Documents. Each of the parties hereto
specifically agrees to execute such other and further
instruments and documents, as may be reasonably required to
effectuate the terms, conditions and objectives of this
Termination Agreement.
	 
	 	g.	 	Entire Agreement. This Termination Agreement,
together with the Option Agreement, the Guaranty, the
Reaffirmation of Guaranty and the documents to be executed in
connection with the Option Agreement and the Pre-Negotiation
Agreement, constitute the entire understanding of the parties
hereto and supersedes all prior agreements, understandings,
discussions, statements and negotiations of the parties
relating to the subject matter herein contained.
	 
	 	h.	 	Authority. Each person signing this Termination
Agreement on behalf of the respective parties represents and
warrants that he or she has the capacity and is authorized to
execute and deliver this Termination Agreement, and that this
Termination Agreement will thereby become binding upon such
party, respectively.
	 
	 	i.	 	Headings and Titles. The headings and titles to
the Paragraphs of this Termination Agreement are for
convenience only and shall have no effect on the
interpretation of any part of this Termination Agreement.
	 
	 	j.	 	WAIVER OF RIGHT TO TRIAL BY JURY. EACH PARTY TO
THIS TERMINATION AGREEMENT HEREBY EXPRESSLY WAIVES ANY RIGHT
TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF
ACTION (a) ARISING UNDER THIS TERMINATION AGREEMENT,
INCLUDING, WITHOUT LIMITATION, ANY PRESENT OR FUTURE
MODIFICATION HEREOF OR (b) IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO OR
ANY OF THEM WITH RESPECT TO THIS TERMINATION AGREEMENT (AS NOW
OR

9

 

	 	 	 	HEREAFTER MODIFIED) OR ANY OTHER INSTRUMENT, DOCUMENT OR
AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH, OR
THE TRANSACTIONS RELATED HERETO OR THERETO, IN EACH CASE
WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER
SOUNDING IN CONTRACT OR TORT OR OTHERWISE; AND EACH PARTY
HEREBY AGREES AND CONSENTS THAT ANY PARTY TO THIS TERMINATION
AGREEMENT MAY FILE AN ORIGINAL COUNTERPART OR A COPY OF THIS
SECTION WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF
THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY
JURY. EACH PARTY HERETO CONSENTS TO THE JURISDICTION OF ANY
FEDERAL OR STATE COURT WITHIN THE STATE OF CALIFORNIA HAVING
VENUE IN SAN FRANCISCO, CALIFORNIA. THE PROVISIONS OF THIS
PARAGRAPH SHALL SURVIVE ANY TERMINATION OF THIS TERMINATION
AGREEMENT OR THE OPTION AGREEMENT, AND THE CLOSING OF THE
PURCHASE AND SALE PURSUANT TO THE OPTION AGREEMENT.
	 
	 	k.	 	ADVICE OF COUNSEL. THE PARTIES REPRESENT AND
DECLARE TO EACH OTHER THAT THEY HAVE CAREFULLY READ THIS
TERMINATION AGREEMENT AND KNOW THE CONTENTS THEREOF, AND THAT
THEY SIGN THE SAME FREELY AND VOLUNTARILY. EACH OF THE
SIGNATORIES HERETO WARRANTS AND REPRESENTS THAT THEY ARE
EFFECTING THIS SETTLEMENT AND EXECUTING THIS TERMINATION
AGREEMENT AFTER HAVING RECEIVED FULL LEGAL ADVICE AS TO THEIR
RESPECTIVE RIGHTS FROM THEIR ATTORNEYS. THIS TERMINATION
AGREEMENT IS THE PRODUCT OF NEGOTIATIONS AND PREPARATION BY
AND AMONG EACH PARTY HERETO AND HIS, HER OR ITS RESPECTIVE
COUNSEL. THEREFORE, THE PARTIES HERETO ACKNOWLEDGE AND AGREE
THAT THIS TERMINATION AGREEMENT SHALL NOT BE DEEMED PREPARED
OR DRAFTED BY ONE PARTY OR ANOTHER AND SHALL BE CONSTRUED
ACCORDINGLY.
	 
	 	l.	 	Notwithstanding anything to the contrary in this
Termination Agreement, Tenant and Guarantor hereby agree that
recovery against Landlord or any Landlord Party for any breach
or other action arising out of this Termination Agreement
shall be limited to Landlord’s interest in the Property.
	 
	 	m.	 	All of the understandings, covenants, and
agreements contained herein are solely for the benefit of
Landlord and Tenant and their respective successors and
permitted assigns, and no other person or party is intended to
be benefited, in any way, by this Termination Agreement.
	 
	 	n.	 	Each party to this Termination hereby confirms
and admits that she, he or it has read and understands this
Termination Agreement and that she, he or it has been fully
advised and represented by counsel with respect to this
Termination Agreement and all negotiations giving rise to it,
and that he or it has fully

10

 

	 	 	 	discussed this Termination Agreement and its terms,
consequences and ramifications with her, his or its
respective counsel.

IN WITNESS WHEREOF, the parties have executed this Termination Agreement
on the day and year first above written.

	 	 	 	 	 	 	 
	 	 	
LANDLORD:	 	 	 	 
	 
	 	 	
AMB PROPERTY, L.P., a Delaware limited partnership	 	 	 	 
	 
	 	 	
By:
	 	AMB PROPERTY CORPORATION, a Maryland

corporation, its general partner	 	 
	 
	 	 	 	 	By:	 	 
	 	 	 	 	 	 	

	 	 	 	 	 	 	John L. Rossi
	 
	 	 	 	 	Its: 	 	Vice President

	 	 	 	 	 
	 
	 
	 	 	
TENANT:
	 
	 	 	
HYSEQ, INC., a Nevada corporation
	 	 	 	 	 
	 	 	
By:	 	 
	 	 	 	 	

	 	 	
Name:	 	 
	 	 	 	 	

	 	 	
Title:	 	 
	 	 	 	 	

	 
	 	 	
By:	 	 
	 	 	 	 	

	 	 	
Name:	 	 
	 	 	 	 	

	 	 	
Title:	 	 
	 	 	 	 	

11

 

	 	 	 	 	 
	 	 	
GUARANTOR:
	 	 	 	 	 
	 	 	

	 	 	
George Rathmann
	 	 	 	 	 
	 	 	
SSN #:
	 	 	 	 	

	 	 	
The undersigned, the wife of George Rathmann, hereby consents to the foregoing
Termination Agreement and acknowledges that such agreement and the other
documents entered into by George Rathmann in connection therewith creates
binding obligations of George Rathmann and the undersigned, and their
individual, joint and community assets.
	 	 	 	 	 
	 	 	
SPOUSE OF GUARANTOR:
	 	 	 	 	 
	 	 	 	 	 
	 	 	

	 	 	
Frances Joy Rathmann
	 	 	 	 	 
	 	 	
SSN #:
	 	 	 	 	

12

 

EXHIBIT A

RESTORATION OBLIGATIONS

Tenant shall perform the following repair and restoration work in the Premises
in accordance with this Exhibit A and Paragraph 5(b) of this Termination
Agreement.

1.     Fill in holes and penetrations in concrete flooring which shall be doweled
to prevent ripping and shall be adequately tied into the existing structural
components of the building.

2.     Rebuild and replace all bathroom cores.

3.     Restore lighting distribution system and replace lighting fixtures,
sufficient to create a minimally acceptable illuminating level compatible with
the square footage of the Premises.

     The foregoing work shall be performed in a good and workmanlike manner, in
accordance with industry standards, by reputable contractors and subcontractors
reasonably acceptable to Landlord who are licensed in California and who are
bonded pursuant to a surety bond in form and issued by a surety acceptable to
Landlord, in an amount equal to not less than 150% of the total estimated cost
of the work, and in a manner so as not to unreasonably interfere with other
tenants in the building (if any) and otherwise reasonably acceptable to
Landlord.

     All contractors performing any portion of the work shall maintain
Commercial General Liability insurance covering bodily injury and property
damage liability occurring in or about the Premises and arising out of
performance of the work. Such insurance shall have a minimum combined single
limit of liability of at least Three Million Dollars ($3,000,000) and shall
name Landlord as an additional insured.

     Landlord shall provide Tenant and Tenant’s contractors reasonable access
to the Premises to perform the work during the applicable time period for
performing the work specified in Paragraph 5(b) of this Termination Agreement.
Such access shall be during hours reasonably determined by Landlord and in
accordance with rules and regulations as may be reasonably established by
Landlord and modified by Landlord from time to time.

     Tenant hereby acknowledges that the use of the Premises by Tenant and
Tenant’s employees, agents and contractors who perform the work shall be at
their own risk and Tenant shall indemnify, defend by counsel reasonably
acceptable to Landlord, protect and hold Landlord and Landlord Parties (as
defined in this Termination Agreement) harmless from and against any and all
claims, liabilities, losses, costs, loss of rents, liens, damages, injuries or
expenses, including, without limitation, reasonable attorneys’ fees and other
professional fees, which may be imposed upon, incurred by, or asserted against
Landlord or any Landlord Parties and arising out of or in connection with any
damage or injury occurring in connection with the work.

     Tenant agrees to provide 10 days’ written notice to Landlord prior to
commencement of any portion of the work to enable Landlord to file a Notice of
Non-Responsibility with respect to the work.

A-1

 

EXHIBIT B

REPAIR LETTER OF CREDIT

IRREVOCABLE STANDBY LETTER OF CREDIT NO. ______________

Date: ______________, 2002

To: AMB Property, L.P.

By Mail or Messenger:

	 	 	AMB Property, L.P.

Pier 1, Bay 1

San Francisco, CA 94111

ATTN: John L. Rossi

	1.	 	By the order of our client, HYSEQ, INC., a Nevada corporation
(“Applicant”), we hereby issue in favor of AMB PROPERTY, L.P., a Delaware
limited partnership, or its transferee, (“Beneficiary”), our Irrevocable
Standby Letter of Credit No.                      for the amount of
                    
U.S. Dollars (U.S. $                     ) (“Letter of
Credit”).
	 
	2.	 	This Letter of Credit is issued by [INSERT NAME OF ISSUING BANK], with an
address at [INSERT LOCAL ADDRESS OF BANK].
	 
	3.	 	This Letter of Credit is effective immediately and expires at 5:00 p.m.
(Pacific daylight or standard time, whichever is then in effect) on
                    ,
200     [INSERT DATE WHICH IS 1 YEAR PLUS 90 DAYS AFTER
CLOSING DATE UNDER THE OPTION AGREEMENT] at our address specified above
(“Expiration Date”). The “Term” of this Letter of Credit shall be the
period commencing as of the date first set forth above and continuing
through and including the Expiration Date.
	 
	4.	 	Beneficiary may make full or multiple partial draws from time to time
upon this Letter of Credit upon presentation to us (at our branch and
address specified above, or if Beneficiary is not able for any reason so
to present such document, to us at any other branch or to us by telecopier
(at telecopier number                     ) of one or more certificates, each
signed by Beneficiary, in the forms of Exhibit “A” and Exhibit “B”
attached hereto. We acknowledge and agree that upon receipt of the
documentation required herein, we will honor your draws against this
Letter of Credit without inquiry into the accuracy of Beneficiary’s signed
certificate(s) regardless of whether Applicant disputes the content of
such certificate(s).
	 
	5.	 	Each payment under this Letter of Credit will be made, upon presentation
of the documents specified herein, by wire transfer of immediately
available funds in U.S. Dollars to:

B-1

 

	 	 
	Bank:	Bank of America
	Location:	Dallas, Texas
	ABA Number:	111000012
	Account Name: AMB PROPERTY, L.P.
	 	Legacy Partners
	 	Account Number:    3750788679
	Reference:	Hyseq, Inc.

	 	 	or to any other bank account of which Beneficiary notifies us. For all
purposes of this Letter of Credit, the term “business day” means any day
other than a Saturday, Sunday or other day on which banks are authorized
or required to be closed in the City of San Francisco.
	 
	6.	 	Applicant shall pay all costs of, or in connection with, this Letter of
Credit, including without limitation for any amendment hereto or transfers
hereof.
	 
	7.	 	This Letter of Credit cannot be amended, discharged or terminated except
by a writing signed by authorized representatives of Beneficiary and the
undersigned on or before the Expiration Date.
	 
	8.	 	This Letter of Credit sets forth in full the terms of our undertaking,
and such terms shall not in any way be modified, amended, amplified or
limited by reference to any document, instrument or agreement referred to
herein; and any such reference shall not be deemed to incorporate in this
Letter of Credit by reference any document, instrument or agreement.
	 
	9.	 	Except as otherwise stated herein, this Letter of Credit is subject to
the Uniform Customs and Practice for Documentary Credits, 1993 revision,
International Chamber of Commerce Publication Brochure No. 500 (“UCP”).
As to matters not covered by the UCP and to the extent not inconsistent
with the UCP, this Letter of Credit shall be governed by and construed in
accordance with the laws of the State of California.
	 
	(c)	 	Please address all communications regarding this Letter of Credit to us
at [INSERT CORRESPONDENCE ADDRESS OF BANK], mentioning specifically our
Letter of Credit No.                     .
	 
	(d)	 	This Letter of Credit may be successively transferred upon request of and
without charge to Beneficiary, without any action by Applicant.

	 
	Very truly yours,
	 
	[BANK]
	 
	 

By:
	 
	 
	 

Its: ______________________________________[Authorized Signature]

B-2

 

EXHIBIT “A”

___________________, 200____

	 	 	 
	[ISSUING	 	
BANK

BRANCH AND ADDRESS]

Re: Irrevocable Standby Letter of Credit No. _______________     (the “Letter of Credit”)

The undersigned, an authorized representative of [INSERT NAME OF BENEFICIARY],
the beneficiary under the above-referenced Letter of Credit (the
“Beneficiary”), hereby certifies that it is entitled to the sums to be drawn
under the Letter of Credit pursuant to the Conditional Lease Termination
Agreement as of October 1, 2002 between AMB Property, L.P., a Delaware limited
partnership, Hyseq, Inc., a Nevada corporation, and George Rathmann.

[INSERT SIGNATURE BLOCK OF BENEFICIARY IF NOT AMB PROPERTY, L.P.]

AMB PROPERTY, L.P., a Delaware limited partnership

	 	 	 	 
	By:	 	
AMB PROPERTY CORPORATION,

a Maryland corporation, its general partner
	 	 	 
	 	 	
By:
	 	 	

	 	 	
Name:
	 	 	

	 	 	
Its:
	 	 	

This Exhibit “A” is considered as an integral part of our Irrevocable Standby
Letter of Credit No. __________________ dated _______________.

B-3

 

EXHIBIT “B”

SIGHT DRAFT

 

Drawn under

Irrevocable Standby Letter of Credit No. ______________

	 	 	 
	U.S. $_____________	 	
_________________, 200____

To: [INSERT NAME OF BANK AND ADDRESS]

AT SIGHT, Pay to the order of AMB PROPERTY, L.P, [OR INSERT NAME OF BENEFICIARY
IF NOT AMB PROPERTY, L.P.] _________________  United States Dollars (U.S. 
$______________).

[INSERT SIGNATURE BLOCK OF BENEFICIARY IF NOT AMB PROPERTY, L.P.]

AMB PROPERTY, L.P., a Delaware limited partnership

	 	 	 	 
	By:	 	
AMB PROPERTY CORPORATION,

a Maryland corporation, its general partner
	 
	 	 	
By:
	 	 	

	 	 	 
	 	 	
Name:
	 	 	

	 	 	 
	 	 	
Its:
	 	 	

This Exhibit “B” is considered as an integral part of our Irrevocable Standby
Letter of Credit No. ________________ dated ________________.

B-4

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