Document:

Exhibit 10.41

 

 

FINAL EXECUTION COPY

 

 

LEASE

 

BETWEEN

 

LEXINGTON LION CLARITA L.P., Landlord

 

AND

 

 

SPECIALTY LABORATORIES, INC., Tenant

 

 

Dated:  March 18,
2004

 

Property:

 

27027 Tourney Road

Santa Clarita, California

 

 

 

 

INDEX

 

	
  ARTICLE 1

  	
  PROPERTY AND TERM

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 2

  	
  FIXED RENT AND ADDITIONAL RENT

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 3

  	
  IMPOSITIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 4

  	
  USE OF PROPERTY

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 5

  	
  CONDITION OF PROPERTY, ALTERATIONS AND
  REPAIRS

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 6

  	
  INSURANCE

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 7

  	
  DAMAGE OR DESTRUCTION

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 8

  	
  CONDEMNATION

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 9

  	
  ASSIGNMENT AND SUBLETTING

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 10

  	
  SUBORDINATION

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 11

  	
  OBLIGATIONS OF TENANT

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 12

  	
  DEFAULT; REMEDIES

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 13

  	
  NO WAIVER

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 14

  	
  ESTOPPEL CERTIFICATE

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 15

  	
  QUIET ENJOYMENT

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 16

  	
  SURRENDER

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 17

  	
  ACCESS

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 18

  	
  ENVIRONMENTAL MATTERS

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 19

  	
  FINANCIAL STATEMENTS

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 20

  	
  MISCELLANEOUS PROVISIONS

  	
   

  

 

 

	
  ARTICLE 21

  	
  SECURITY DEPOSIT

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 22

  	
  MEMORANDUM OF LEASE

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 23

  	
  INITIAL IMPROVEMENTS

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 24

  	
  TENANT’S INITIAL ALTERATIONS

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 25

  	
  ANTENNA INSTALLATION

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 26

  	
  LIMITATION OF LIABILITY

  	
   

  
	
   

  	
   

  	
   

  
	
  ARTICLE 27

  	
  EXPANSION PROVISIONS

  	
   

  

 

 

Exhibits

 

	
  Exhibit “A”

  	
  -

  	
  Description of the Land

  
	
   

  	
   

  	
   

  
	
  Exhibit “B”

  	
  -

  	
  Schedule of Removable
  Personal Property

  
	
   

  	
   

  	
   

  
	
  Exhibit “C”

  	
  -

  	
  Form of Memorandum of
  Lease

  
	
   

  	
   

  	
   

  
	
  Exhibit “D”

  	
  -

  	
  Expansion Area

  

 

 

LEASE

 

THIS LEASE (the “Lease”) is made as of the 18th day of
March, 2004 between LEXINGTON LION CLARITA
L.P., a Delaware limited partnership (“Landlord”), having an office
for the conduct of business c/o Lexington Corporate Properties Trust, One Penn
Plaza, Suite 4015, New York, New York 10119-4015, and SPECIALTY LABORATORIES, INC., a California
corporation (“Tenant”), having an office for the conduct of business at 2211
Michigan Avenue, Santa Monica, California 90404.

 

W  I  T  N  E  S  S
E  T  H:

 

The parties hereto, for
themselves, their heirs, distributees, executors, administrators, legal
representatives, successors and assigns, hereby covenant as follows:

 

ARTICLE A

 

CERTAIN LEASE PROVISIONS

 

	
  1.

  	
   

  	
  Address for

  the Property:

  	
   

  	
  27027 Tourney Road, Santa
  Clarita, California

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  2.

  	
   

  	
  (a)

  	
  Term:

  	
   

  	
  (i) An Initial Term
  commencing on the Commencement Date and expiring on the day before the Rent
  Commencement Date.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  (ii) A Primary Term of
  approximately Twenty (20) years, beginning on the Rent Commencement Date, and
  ending on the Expiration Date.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
  (iii) Option to Extend
  Term:  Two (2) renewal options of five
  (5) years each and a third renewal option of four (4) years and six (6)
  months in no event expiring later than February 28, 2039.

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (b)

  	
  Commencement

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Date:

  	
   

  	
  March        ,
  2004

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (c)

  	
  Expiration

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Date:

  	
   

  	
  Twenty (20) years after
  the first day in the calendar month in which the Rent Commencement Date
  occurs, which shall be August 31, 2024 (subject to adjustment if the
  Rent Commencement Date occurs prior to September 1, 2004), unless sooner
  terminated or extended pursuant to this Lease.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  3.

  	
   

  	
  Fixed Rent

  	
   

  	
   

  
	
   

  	
   

  	
  During the

  	
   

  	
   

  

 

 

	
   

  	
   

  	
  Primary Term:

  	
   

  	
  $3,562,610 per annum in
  equal monthly installments of $296,884.17 subject to adjustment as provided
  in Sections 2.5 and 2.6.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  4.

  	
   

  	
  Use of the

  Property:

  	
   

  	
  Laboratory testing
  services, medical testing, clinical trial testing, research and development,
  administrative and general office and uses incidental thereto.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  5.

  	
   

  	
  Address for

  Notice:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  For Landlord:

  	
   

  	
  Lexington Lion Clarita
  L.P.

  
	
   

  	
   

  	
   

  	
   

  	
  c/o Lexington Corporate
  Properties Trust

  
	
   

  	
   

  	
   

  	
   

  	
  One Penn Plaza

  
	
   

  	
   

  	
   

  	
   

  	
  Suite 4015

  
	
   

  	
   

  	
   

  	
   

  	
  New York, New York
  10119-4015

  
	
   

  	
   

  	
   

  	
   

  	
  Attention: Mr. William N.
  Cinnamond, Jr.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  With a copy of

  	
   

  	
   

  
	
   

  	
   

  	
  any notices of

  	
   

  	
   

  
	
   

  	
   

  	
  default only, to:

  	
   

  	
  Crowe Deegan LLP

  
	
   

  	
   

  	
   

  	
   

  	
  535 Fifth Avenue, Suite
  611

  
	
   

  	
   

  	
   

  	
   

  	
  New York, New York 10017

  
	
   

  	
   

  	
   

  	
   

  	
  Attention:  Richard C. Hamlin, Esq.

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  For Tenant:

  	
   

  	
  Specialty Laboratories,
  Inc.

  
	
   

  	
   

  	
   

  	
   

  	
  2211 Michigan Avenue

  
	
   

  	
   

  	
   

  	
   

  	
  Santa Monica,
  California  90404

  
	
   

  	
   

  	
   

  	
   

  	
  Attention:  General Counsel

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  With a copy of

  	
   

  	
   

  
	
   

  	
   

  	
  any notices of

  	
   

  	
   

  
	
   

  	
   

  	
  default only, to:

  	
   

  	
  O’Melveny & Myers LLP

  
	
   

  	
   

  	
   

  	
   

  	
  400 South Hope Street

  
	
   

  	
   

  	
   

  	
   

  	
  Los Angeles, California
  90071

  
	
   

  	
   

  	
   

  	
   

  	
  Attention:  Christine H. Suh, Esq.

  

 

 

ARTICLE B

 

CERTAIN
DEFINITIONS

 

“Acceptance Date” is defined
in Section 23.2(d).

 

“Additional Rent” is defined
in Section 2.2.

 

“Alterations” is defined in Section 5.4.

 

“Antenna Equipment” is
defined in  Section 25.1.

 

“Antenna Premises” is
defined in Section 25.1.

 

“Bankruptcy Code” means the
provisions of 11 U.S.C. Section 101 et seq. or any statute of similar
purpose or nature as more particularly set forth in Section 9.10.

 

“Building” means collectively
the buildings, building. equipment and improvements now or hereinafter erected
on the Land.

 

“Business Day” is every day
which most large banks based in New York, New York are open for the ordinary
conduct of business.

 

“Capitalized Rent” is
defined in Section 2.6(c).

 

“Claims” is defined in Section 11.3.

 

“Commencement Date” is
defined in Article A, Section 2(b).

 

“Construction Funding
Agreement” means that certain agreement dated even date herewith between
Lexington and Tenant having as its subject matter the completion of
construction of the Initial Improvements.

 

“Corporate Transfer” is
defined in Section 9.8(b).

 

“Default” means an event has
occurred which constitutes an Event of Default or which, with the giving of
notice, the lapse of time or both would constitute an Event of Default.

 

“Default Rate” means three
percent (3%) over the prime reference rate announced from time to time by
Citibank, N.A. in New York, New York, as such prime reference rate may be
adjusted and announced from time to time, or if unavailable, the parties shall
use the prime reference rate for major New York banks as reported in the Wall
Street Journal.

 

“Deficiency” is defined in Section 12.4(c).

 

 

“Environmental Laws” is
defined in Section 18.10.

 

“Event of Default” is
defined in Section 12.1.

 

“Existing L/C” is defined in
Section 21.8.

 

“Expansion” is defined in Section 27.1.

 

“Expansion Area” is defined
in Section 27.1.

 

“Expansion Contract” is
defined in Section 27.2.

 

“Expansion Notice” is
defined in Section 27.1.

 

“Expiration Date is defined
in Article A, Section 2(c).

 

“Fixed Rent” is defined in Article A,
Section 3.

 

“Hazardous Substances” is
defined in Section 18.11.

 

“Impositions” is defined in Section 3.1.

 

“Indemnified Parties” is
defined in Section 11.3.

 

“Initial Improvements” means
those improvements to the Land constructed and installed pursuant to the
Construction Funding Agreement.

 

“Land” means that certain
real property described on Exhibit “A”, attached hereto and incorporated
herein by this reference.

 

“Landlord” is defined in the
introductory paragraph to this Lease.

 

“Lease” means this lease
made between Landlord, as landlord, and Tenant, as tenant.

 

“Lease Year” shall mean each
twelve month period during the Primary Term and each Extended Term.  The first Lease Year shall commence on the
Rent Commencement Date and continue until to and include the last day of the
calendar month in which the first anniversary of the Rent Commencement Date
occurs, unless the Rent Commencement Date is on the first day of the month, in
which case it shall end on the day immediately preceding such first
anniversary.

 

“Lexington” means Lexington
Corporate Properties Trust, a Maryland statutory real estate investment trust.

 

 

“Mortgage” is defined in Section 3.2.

 

“Mortgagee” is defined in Section 3.2.

 

“Non-Disturbance Agreement”
is defined in Section 10.1.

 

“Permanent Improvements” is
defined in Section 24.3.

 

“Permitted Encumbrances” is
defined in Section 1.1.

 

“Project Close-Out” is
defined in Section 2.6(c).

 

“Property” means
collectively the Land and the Building.

 

“Remedial Work” is defined
in Section 18.7.

 

“Removable Improvements” is
defined in Section 24.3.

 

“Rent” is defined in Section 2.3.

 

“Rent Commencement Date” is
defined in Section 23.2(e).

 

“Report” is defined in Section 18.1.

 

“Replacement L/C” is defined
in Section 21.8.

 

“Replacement Notice” is
defined in Section 21.8.

 

“Requirements” is defined in
Section 11.1.

 

“Restoration” is defined in Section 7.1.

 

“Sale Agreement” means the
Agreement for Sale and Leaseback dated as of February 11, 2004 between
Lexington, as buyer, and Tenant, as seller.

 

“Security Deposit” is
defined in Section 21.1.

 

“Substantial Completion
Date” is defined in Section 23.2(b).

 

“Subtenant” is defined in Section 9.2.

 

“Tenant” is defined in the
introductory paragraph to this Lease.

 

“Tenant Knowledge” is
defined in Section 18.13 and Section 20.15.

 

 

“Term” is defined in Article A,
Section 2(a).

 

“Third Party” means any
third party other than Tenant, Landlord, any affiliate of Landlord and/or any
Mortgagee.

 

“Threshold Amount” is
defined in Section 5.4.

 

“Total Project Cost” is
defined in Section 2.6(c).

 

“Transfer” is defined in Section 9.1.

 

“Work” is defined in Section 5.5.

 

ARTICLE 1

 

PROPERTY
AND TERM

 

Section 1.1. During the
Term, Landlord, in consideration of the rents herein reserved and of the terms,
provisions, covenants and agreements on the part of Tenant to be kept, observed
and performed, does hereby lease and demise the Property unto Tenant, and
Tenant does hereby hire and take the Property from Landlord, subject to each
and every matter affecting title to the Property including, without limitation,
all of the following which are in effect as of the Commencement Date: all
easements, rights of way, declarations, covenants, conditions and restrictions,
liens, encumbrances, encroachments, licenses, notices of pendency, charges,
zoning laws, ordinances, regulations, building codes and other governmental
laws, rules and orders affecting the Property, and other exceptions to Landlord’s
title, whether or not the same are of public record (collectively, “Permitted
Encumbrances”).  Tenant covenants and
agrees that it will timely perform all obligations and duties under, and timely
comply with the terms and conditions of, 
all Permitted Encumbrances.

 

Section 1.2. Tenant
shall lease the Property for the Term, unless sooner terminated as hereinafter
provided or pursuant to law.

 

Section 1.3. (a)
Provided there is no then uncured Event of Default, Tenant shall have the
right, at its option, to extend the Term for two (2) additional five (5) year
periods and a third additional period of four (4) years and six months (each,
an “Extension Term”) in the manner, and subject to the conditions, set forth
below. The first Extension Term shall commence on the day after the Expiration
Date and shall expire on the day immediately preceding the fifth anniversary of
the Expiration Date unless the Extension Term shall sooner end pursuant to any
of the terms, covenants or conditions of this Lease or pursuant to law. The
second Extension Term shall commence on the day after the first Extension Term
shall expire and shall expire on the

 

 

fifth anniversary of the day
the second Extension Term commenced, unless such second Extension Term shall
sooner end pursuant to any of the terms, covenants or conditions of this Lease
or pursuant to law.  The third Extension
Term shall commence on the day after the second Extension Term expires and
shall expire on the day that is four years and six months later, but in no
event later than February 28, 2039, unless such third Extension Term shall
sooner end pursuant to any of the terms, covenants or conditions of this Lease
or pursuant to law.  Provided this Lease
shall then be in full force and effect and there is then no uncured Event of
Default hereunder, Tenant may exercise its option to extend the Term by giving
Landlord written notice of such election no sooner than two (2) years prior to
the Expiration Date or the expiration of the then current Extension Term, as
the case may be, and no later than three hundred sixty five (365) days prior to
the Expiration Date or the expiration of the then current Extension Term, as
the case may be, the time of exercise being of the essence, and upon the giving
of such notice, this Lease and the Term shall be extended without execution or
delivery of any other or further documents, with the same force and effect as
if such Extension Term had originally been included in the Term and the
Expiration Date shall thereupon be deemed to be the last day of such Extension
Term.  Notwithstanding Tenant’s exercise
of its option under this Section 1.3, if there shall then be a
uncured Event of Default hereunder as of the Expiration Date, as such
Expiration Date may have been extended, Landlord shall have the right to cancel
such exercise by Tenant, in which event the Term shall expire on the Expiration
Date or the expiration date of the then current Extension Term, as the case may
be and the provisions of this Section 1.3 shall be deemed null and
void and of no further force or effect. Except as provided in subsections (b)
and (c) below, all of the terms, covenants and conditions of this Lease shall
continue in full force and effect during each Extension Term, including items
of Additional Rent which shall remain payable on the terms herein set
forth.  For purposes of this Section 1.3
and notwithstanding anything to the contrary contained herein, if a Default
shall have occurred three (3) times within the preceding twenty four (24) month
period prior to (i) Tenant’s exercise of any right to extend the Term or (ii)
the Expiration Date, as such Expiration Date may have been extended, then
notwithstanding that such Defaults were cured within the applicable grace
periods, Landlord shall have the right to cancel such exercise by Tenant, in
which event the Term shall expire on the Expiration Date and the provisions of
this Section 1.3 shall be deemed null and void and of no further
force or effect.

 

(b) Fixed Rent during each
Extension Term shall be equal to one hundred (100%) percent of the fair market
rent (the “Fair Market Rent”) as determined in accordance with the procedure
set forth below.

 

(c) The Fair  Market Rent for the purpose of this Section 1.3
shall be determined in the following manner:

 

(i) The Fair Market Rent
shall be the triple “net” rent generally payable in the market area in which
the Property is located for equivalent space in a single tenant Class A office
building of approximately the same quality, size and condition as the Building,
giving due consideration to the quality of the design of the Building, the
condition of the Property as improved, the location of the Property and the
Building, the length of the extended Term, the

 

 

credit-worthiness of the
Tenant and all other factors that would be relevant to a willing landlord and a
willing tenant unaffiliated with the Landlord desiring to enter into a lease of
the Property for the Term.  Landlord and
Tenant shall attempt to reach an agreement as to the determination of the Fair
Market Rent within thirty (30) days after the date of Landlord’s receipt of
Tenant’s election to renew the Term of the Lease.  Tenant shall specify the name and address of its designated
appraiser with each election made by Tenant to extend the Term of this Lease
pursuant to Section 1.3(a). If, within thirty (30) days after
Landlord’s receipt of Tenant’s election to renew the Term of the Lease, the
parties have not agreed upon the Fair Market Rent, Landlord shall thereafter
give written notice to Tenant specifying the name and address of its designated
appraiser. Such two appraisers shall, within thirty (30) days after the
designation of the Landlord’s appraiser, each make their determination of the
Fair Market Rent in writing and simultaneously shall give written notice
thereof to each other and to Landlord and Tenant. Such two appraisers shall
have twenty (20) days after the receipt of notice of each other’s
determinations to confer with each other and to attempt to reach agreement as
to the determination of the Fair Market Rent. If such appraisers shall fail to
concur as to such determination within said twenty (20) day period, they shall
give written notice thereof to Landlord and Tenant and shall immediately
designate a third appraiser. If the two appraisers shall fail to agree upon the
designation of such third appraiser within five (5) days after said twenty (20)
day period, they or either of them shall give written notice of such failure to
agree to Landlord and Tenant and, if Landlord and Tenant fail to agree upon the
selection of such third appraiser within five (5) days after the appraisers
appointed by the Landlord and Tenant give notice as aforesaid, then either
party on behalf of both may apply to the American Arbitration Association or
any successor thereto, or on its failure, refusal, or inability to act, to a
court of competent jurisdiction, for the designation of such third appraiser.

 

(ii) All appraisers shall be
independent MAI real estate appraisers who shall have had at least fifteen (15)
years’ continuous experience in the business of appraising leased real estate
in the metropolitan area in which the Property is located.

 

(iii) The third appraiser
shall conduct such investigations as he or she may deem appropriate and shall,
within twenty (20) days after the date of his or her designation, make an
independent determination of the Fair Market Rent.

 

(iv) If none of the
determinations of the appraisers varies from the mean of the determinations of
the other appraisers by more than ten percent (10%), the mean of the
determinations of the three appraisers shall be the Fair Market Rent.  If, on the other hand, the determination of
any single appraiser varies from the mean of the determinations of the other two
appraisers by more than ten percent (10%), the mean of the determination of the
two appraisers whose determinations are closest shall be the Fair Market Rent.

 

(v) The determination of the
appraisers, as provided above, shall be conclusive upon Landlord and Tenant and
shall have the same force and effect as a judgment made in a court of competent
jurisdiction.

 

 

(vi) Each party shall pay
fees, costs and expenses of the appraiser selected by it and its own counsel
fees and one-half (1/2) of all other expenses and fees of any such appraisal,
including, but not limited to, the fees, costs and expenses of the third
appraiser.

 

(d)           If for any reason the Fair Market Rent for an Extension Term has not
been determined by the first day of that Extension Term (“the Extension Term
Commencement Date”), then, until such Fair Market Rent has been determined in
accordance herewith, Tenant shall continue to pay Fixed Rent at the rate in
effect at the end of the previous Term. 
Commencing on the first day of the first calendar month following
determination of the Fair Market Rent, Tenant shall pay Fixed Rent in the
amount of the Fair Market Rent.  Also,
on the first day of the first calendar month following the determination of the
Fair Market Rent, Tenant also shall pay Landlord a lump sum equal to the
increase in the Fixed Rent for that Extension Term over the Fixed Rent for the
previous Term, multiplied by the number of months that have elapsed since the
Extension Term Commencement Date.

 

ARTICLE 2

 

FIXED
RENT AND ADDITIONAL RENT

 

Section 2.1. Tenant
shall pay to Landlord as Fixed Rent for the Property during the (a) Primary
Term the amounts stated in Article A, Section 3, subject to
adjustment pursuant to Sections 2.5 and 2.6 and (b) each Extension Term
the amounts determined in accordance with Section 1.3(b). Fixed
Rent shall be payable in equal monthly installments in advance on the first day
of each and every month during the Term, without previous demand therefor and
without offset or deduction of any kind whatsoever.  Notwithstanding the foregoing, Tenant shall pay the partial
month’s installment of Fixed Rent (with respect to the remaining days of the
month in which Rent Commencement Date occurs) on the Rent Commencement Date.

 

Section 2.2. Except as
otherwise provided in the Construction Funding Agreement, Tenant shall also pay
and discharge as additional rent (the “Additional Rent”) all other amounts,
liabilities and obligations of whatsoever nature relating to the Property,
including, without limitation, all Impositions (as defined in Section 3.1)
arising under any declarations, easements, restrictions, or other similar
agreements affecting the Property or any adjoining property thereto, and all
interest and penalties that may accrue thereon in the event of Tenant’s failure
to pay such amounts when due, and all damages, costs and expenses which
Landlord may incur by reason of any default of Tenant or failure on Tenant’s
part to comply with the terms of this Lease, all of which Tenant hereby agrees
to pay upon demand or as is otherwise provided herein.  Upon any failure by Tenant to pay any of the
Additional Rent, Landlord shall have all legal, equitable and contractual
rights, powers and remedies provided either in this Lease or by statute or
otherwise in the case of nonpayment of the Fixed Rent.  The term Additional Rent shall be deemed
rent for all purposes hereunder.

 

 

Section 2.3. The term
“Rent” shall mean all Fixed Rent and all Additional Rent.  All Rent payable to Landlord hereunder shall
be made payable to Landlord and sent to Landlord’s address set forth in Article A,
or to such other person or persons or at such other place as may be designated
by notice from Landlord to Tenant made in accordance with Section 20.8,
from time to time, and shall be made in United States currency which shall be
legal tender for all debts, public and private.  At Landlord’s request, Rent shall be payable when due by wire
transfer of immediately available funds to an account designated from time to
time by Landlord.  Notwithstanding the
foregoing, Impositions shall be payable to the parties to whom they are due,
except as otherwise provided herein.

 

Section 2.4. This Lease
shall be deemed and construed to be a “net lease”, and Tenant shall pay to
Landlord, absolutely net throughout the Term, the Rent, free of any charges,
assessments, impositions or deductions of any kind and without abatement,
deduction or set-off whatsoever, except as otherwise expressly provided
herein.  Under no circumstances or
conditions, whether now existing or hereafter arising, or whether beyond the
present contemplation of the parties, shall Landlord be expected or required to
make any payment of any kind whatsoever or be under any other obligation or
liability hereunder, except as herein otherwise expressly set forth.  Tenant shall pay all costs, expenses and
charges of every kind and nature relating to the Property, except debt service
on any Mortgage or any other indebtedness of Landlord, which may arise or
become due or payable prior to, during or after (but attributable to a period
falling prior to or within) the Term, as may be extended.  Except as otherwise specifically provided in
this Lease, Tenant’s obligation to pay Rent hereunder shall not terminate prior
to the date definitely fixed for the expiration of the Term (as may be
extended) notwithstanding the exercise by Landlord of any or all of its rights
under Article 12 hereof or otherwise, and the obligations of Tenant
hereunder shall not be affected (except as is otherwise specifically provided
herein to the contrary) by reason of: any damage to or destruction of the
Property or any part thereof, any taking of the Property or any part thereof or
interest therein by condemnation or otherwise, any prohibition, limitation,
restriction or prevention of Tenant’s use, occupancy or enjoyment of the
Property or any part thereof, or any interference with such use, occupancy or
enjoyment by any person or for any reason, any matter affecting title to the
Property any eviction by paramount title or otherwise, any default by Landlord
hereunder, the impossibility, impracticability or illegality of performance by
Landlord, Tenant or both, any action of any governmental authority, Tenant’s
acquisition of ownership of all or part of the Property (unless this Lease
shall be terminated by a writing signed by all persons, including any
mortgagee, having an interest in the Property), any breach of warranty or
misrepresentation, or any other cause whether similar or dissimilar to the
foregoing and whether or not Tenant shall, have notice or knowledge hereof and
whether or not such cause shall now be foreseeable.  The parties intend that the obligations of Tenant under this
Lease shall be separate and independent covenants and agreements and shall
continue unaffected unless such obligations have modified or terminated
pursuant to an express provision of this Lease.

 

Section 2.5.  Upon completion of the Initial Improvements,
Landlord and Tenant will confirm whether any adjustment to the Fixed Rent
provided for in Article A, Section 3 is required
pursuant to the Construction Funding Agreement by means of amendment to this
Lease (the “First Lease Amendment”).  In
addition to confirming the annual and monthly Fixed Rent

 

 

for the first five years of
the Primary Term, the First Lease Amendment shall confirm the Rent Commencement
Date and the Expiration Date of the Primary Term.

 

Section 2.6. (a) The
Fixed Rent shall be adjusted on the fifth anniversary of the Rent Commencement
Date as follows:

 

(i) Monthly Fixed Rent for
Lease Years 6 through 10 inclusive of the Primary Term shall be an amount equal
to the Capitalized Rent,

 

(ii)  Fixed Rent for Lease Years 6 through 10
inclusive of the Primary Term shall be estimated by Landlord at least sixty
(60) days prior to the first day of the sixth Lease Year.  The parties shall execute a memorandum
confirming the new amount of Fixed Rent on or before the first day of the sixth
Lease Year.

 

(b) On the first day of the
eleventh and the sixteenth Lease Years of the Primary Term, the Fixed Rent for
the next five (5) Lease Years shall be increased by the product of  (i) the Fixed Rent for the preceding year
and (ii) ten (10%) percent.

 

(c) Definitions.  For purposes of this Section 2.6,
the following terms apply:

 

(i)  “Capitalized Rent” means the amount
necessary to fully amortize the Total Project Cost over 15 years at an interest
rate equal to the sum of the then interpolated 15 year U.S. Treasury Bonds and
75 basis points.

 

(ii)  “Project Close-Out” is the first date
following that (aa) all contractors, subcontractors, suppliers, and others who
supplied labor or materials for the construction of the Initial Improvements
have been paid in full; (bb) all conditions required for the occurrence of the
Acceptance Date have been satisfied; and (cc) all punch list items have been
completed.

 

(iii) “Total Project Cost”
shall mean without duplication all amounts advanced by Landlord pursuant to
Paragraphs 2 and 4 of the Construction Funding Agreement, including, without
limitation, the sum of (A) the Closing Funds ( as such term is defined in the
Construction Funding Agreement) paid by Landlord pursuant to the Sale Agreement
plus (B) all amounts advanced by Landlord to complete construction of the
Initial Improvements, including hard costs and soft costs incurred by Landlord
through Project Close-Out to construct the Initial Improvements and related
paving, landscaping and utility lines in accordance with, and as funded
pursuant to, the Construction Funding Agreement and as separately funded by
Landlord.  Total Project Cost shall also
include all direct, actual costs incurred by Landlord as a result of the
Acceptance Date not being achieved by the applicable date set forth in the
Construction Funding Agreement, unless such delay is caused by a breach of the
Lease by Landlord or the Construction Funding Agreement by Lexington.

 

Section 2.7.  If Tenant shall fail to make payment of any
installment off Fixed Rent or Additional Rent payable to Landlord hereunder
within five (5) business days from the date upon which the same shall first have
been due hereunder then and in each such event Tenant

 

 

shall pay Landlord on
demand, in addition to the installment or other payment due, as Additional Rent
hereunder, a late payment fee to compensate Landlord for legal, accounting and
other expenses incurred by Landlord in administering the delinquent account by
reason of such late payment an additional sum of five (5%) percent of the
amount due as a late charge.  For the
purposes of this Section 2.7, payments shall be deemed made upon
the date of actual receipt by Landlord at the place specified in or pursuant to
Article A, Section 5 hereof. 
The late payment fee required to be paid by Tenant pursuant to this Section 2.7
shall be in addition to all other rights and remedies provided herein or by Law
to Landlord for such nonpayment.

 

ARTICLE 3

 

IMPOSITIONS

 

Section 3.1.  From and after the Commencement Date and
throughout the Term, Tenant shall pay and discharge not later than fifteen (15)
days before any fine, penalty, interest or cost may be added thereto for the
non-payment thereof, all taxes, assessments, water rents, sewer rents and
charges, duties, impositions, license and permit fees, charges for public
utilities of any kind, all common area maintenance charges and other payments
due under all Permitted Encumbrances, payments and other charges of every kind
and nature whatsoever, foreseen or unforeseen, general or special, in said
categories, together with any interest or penalties imposed upon the late
payment thereof, which, pursuant to past, present or future law, during, prior
to or after (but attributable to a period falling prior to or within) the Term,
shall have been or shall be levied, charged, assessed, imposed upon or become
due and payable out of or for or have become a lien on the Property or any part
thereof, any improvements or personal property in or on the Property, the Rents
and income payable by Tenant or on account of any use of the Property and such
franchises as may be appurtenant to the use and occupation of the Property (all
of the foregoing being hereinafter referred to as “Impositions”). Tenant shall
submit to Landlord the proper and sufficient receipts or other evidence of
payment and discharge of the same promptly after payment thereof.  If any Impositions are not paid when due under
this Lease, Landlord shall have the right but shall not be obligated to pay the
same, provided Tenant does not contest the same as herein provided.  If Landlord shall make such payment,
Landlord shall thereupon be entitled to repayment by Tenant on demand as
Additional Rent hereunder.

 

Section 3.2. Tenant
shall have the right to protest and contest any Impositions imposed against the
Property or any part thereof, provided (a) the same is done at Tenant’s sole
cost and expense, (b) nonpayment will not subject the Property or any part
thereof to sale or other liability by reason of such nonpayment, and (c) such
contest shall not subject Landlord or the holder (the “Mortgagee”) of any
mortgage or deed of trust (a “Mortgage”) encumbering all or any part of the
Property to the risk of any criminal or civil liability.

 

Section 3.3. To the
extent permitted by law, Tenant shall have the right to apply for the
conversion of any Impositions to make the same payable in annual installments
over a period of years, and upon such conversion Tenant shall pay and discharge
said annual installments as they shall become due and payable.  Tenant shall pay all such deferred
installments prior to the expiration or sooner termination of the Term,
notwithstanding that such

 

 

installments shall not then
be due and payable; provided, however, that any Impositions other
than one converted by Tenant so as to be payable in annual installments as
aforesaid relating to a fiscal period of the taxing authority, a part of which
is included in a period of time after the Expiration Date, shall (whether or
not such Impositions shall be assessed, levied, confirmed, imposed or become
payable, during the Term) be adjusted between Landlord and Tenant as of the
Expiration Date, so that Landlord shall pay that portion of such Impositions
which relate to that part of such fiscal period included in the period of time
after the Expiration Date, and Tenant shall pay the remainder thereof.

 

Section 3.4. If at any
time during the Term, a tax or excise on Rents or other tax, however described,
is levied or assessed with respect to the Rent or any part thereof (as opposed
to the income of Landlord) or against Landlord as a substitute in whole or in
part for any Impositions theretofore payable by Tenant, Tenant shall pay and
discharge such tax or excise on Rents or other tax before it becomes
delinquent, and the same shall be deemed to be an Imposition levied against the
Property.

 

Section 3.5. Except as
set forth in Section 3.4 above, Tenant shall not be obligated to
pay any franchise, excise, corporate, estate, inheritance, succession, capital,
levy or transfer tax of Landlord or any income, profits or revenue tax upon the
income of Landlord.

 

Section 3.6. In the
event that Landlord is required pursuant to the terms of any Mortgage to make
monthly or other tax escrow payments to any Mortgagee, or a Default occurs,
Tenant agrees that, on demand made by Landlord, it shall: (a) deposit with
Mortgagee (but not with Landlord), on the day of demand and on the same day
each month thereafter until thirty (30) days prior to the date when the next
installment of impositions is due to the authority or other person to whom the
same is paid, an amount equal to said next installment of Impositions divided
by the number of months over which such deposits are to be made; and (b)
thereafter during the Term deposit with Mortgagee (but not Landlord) an amount
each month estimated by Mortgagee to be adequate to create a fund which, as
each succeeding installment of Impositions becomes due, will be sufficient,
thirty (30) days prior to such due date, to pay such installment in full.  If at any time the amount of any Imposition
is increased or Mortgagee believes that it will be, said monthly deposits shall
be increased upon demand by Mortgagee so that, thirty (30) days prior to the
due date for each installment of Impositions, there will be deposits on hand
with Mortgagee (but not Landlord) sufficient to pay such installments in
full.  To the extent permitted by
applicable law, Mortgagee shall not be required to deposit any such amounts in
an interest bearing account.  For the
purpose of determining whether Mortgagee has on hand sufficient moneys to pay
any particular Imposition at least thirty (30) days prior to the due date
therefor, deposits for each category of Imposition shall be treated separately,
it being the intention that Mortgagee shall not be obligated to use moneys
deposited for the payment of an item not yet due and payable to the payment of
an item that is due and payable. 
Notwithstanding the foregoing, it is understood and agreed that to the
extent permitted by applicable law, deposits provided for hereunder may be held
by Mortgagee in a single bank account and commingled with other funds of
Mortgagee.  Upon a transfer of the
Property, the transferor shall be deemed to be released from all liability with
respect to the deposits made hereunder to the extent that the transferor has
transferred deposits of Impositions made hereunder to the transferee and Tenant
agrees to look to

 

 

the transferee solely with
respect thereto, and the provisions hereof shall apply to each successive
transfer of the said deposits.  At such
time as any Mortgage is released as a lien on the Property, any deposit made
hereunder shall be transferred to a new Mortgagee, or if there is no Mortgage,
to Landlord to be returned to Tenant.

 

Section 3.7.   Landlord shall not be required to join in
any proceedings referred to in this Article unless the provisions of any
law, rule or regulation at the time in effect shall require that such
proceedings be brought by and/or in the name of Landlord, in which event,
Landlord, at Tenant’s sole risk and expense, shall join and cooperate in such
proceedings or permit the same to be brought in its name but shall not be
liable for the payment of any costs or expenses in connection with any such
proceedings.

 

Section 3.8.  Notwithstanding anything to the contrary
contained in this Lease, in the event that, at any time during the first five
(5) years of the Primary Term, any sale (other than a foreclosure sale) of the
Property or any portion thereof or Building (if the Property is parcelized) is
consummated other than pursuant to Article 27 hereof, and as a
result thereof, and to the extent that in connection therewith, the Property or
Building, as applicable, is reassessed (the “Reassessment”) for real estate tax
purposes by the appropriate governmental authority pursuant to the terms of
Proposition 13, then the terms of this Section 3.8 shall apply to
such Reassessment of the Property or Building, as applicable.

 

(a)           For purposes of this Section 3.8 , the term “Tax Increase”
shall mean that portion of the Impositions, as calculated immediately following
the Reassessment, which is attributable solely to the Reassessment.

 

(b)           During the first five (5) years of the Primary Term, Tenant shall not
be obligated to pay any portion of the Tax Increase.

 

(c)           The amount of Impositions which Tenant is not obligated to pay or will
not be obligated to pay during the Term in connection with a particular
Reassessment pursuant to the terms of this Section 3.8 shall be
sometimes referred to hereafter as a “Proposition 13 Protection Amount.”  If the occurrence of a Reassessment is
reasonably forseeable by Landlord and the Proposition 13 Protection Amount
attributable to such Reassessment can be reasonably quantified or estimated for
each year commencing with the year in which the Reassessment will occur, the
terms of this Section 3.8(c) shall apply to each such
Reassessment.  Upon notice to Tenant,
Landlord shall have the right to purchase the Proposition 13 Protection Amount
relating to the applicable Reassessment (the “Applicable Reassessment”), at any
time during the first five (5) years of the Primary Term, by paying to Tenant
an amount equal to the “Proposition 13 Purchase Price,” as that term is defined
below.  As used herein, “Proposition 13
Purchase Price” shall mean the present value of the Propsition 13 Protection
Amount remaining during the first five (5) years of the Primary Term, as of the
date of payment of the Proposition 13 Purchase Price by Landlord.  Such present value shall be calculated (i)
by using the portion of the Proposition 13 Protection Amount attributable to
each remaining year (as though the portion of such Proposition 13 Protection
Amount benefitted Tenant at the end of each year), as the amounts to be
discounted, and (ii) by using discount rates for each amount to

 

 

be discounted equal to (A)
the average rates of yield for United States Treasury Obligations with maturity
dates as close as reasonably possible to the end of each year during which the
portions of the Proposition 13 Protection Amount would have benefitted Tenant,
which rates shall be those in effect as of Landlord’s exercise of its right to
purchase, as set forth in this Section 3.8(c), plus (B) two percent
(2%) per annum.  Upon such payment of
the Proposition 13 Purchase Price, the provisions of Section 3.8(b)
of this Lease shall not apply to any Tax Increase attributable to the
Applicable Reassessment.  Since Landlord
is estimating the Proposition 13 Purchase Price because a Reassessment has not
yet occurred, then when such Reassessment occurs, if Landlord has
underestimated the Proposition 13 Purchase Price, then upon notice by Landlord
to Tenant, Tenant’s Fixed Rent next due shall be credited with the amount of
such underestimation, and if Landlord overestimates the Proposition 13 Purchase
Price, then upon notice by Landlord to Tenant Fixed Rent next due shall be
increased by the amount of the overestimation.

 

Section 3.9. The
provisions of this Article 3 shall survive the expiration or
earlier termination of this Lease.

 

ARTICLE 4

 

USE
OF PROPERTY

 

Section 4.1. The
Property may be used and occupied only for the purposes set forth in Article A,
Section 4.  Tenant shall not
create or suffer to exist any public or private nuisance, hazardous or illegal
condition or waste on or with respect to the Property.

 

Section 4.2. Tenant
hereby represents and warrants to Landlord that all necessary certificates of
occupancy, permits, licenses and consents from any or all appropriate
governmental authorities have been obtained by or on behalf of Tenant or will
be obtained prior to the Rent Commencement Date and are or will be prior to the
Rent Commencement Date in full force and effect as may be required by law for
Tenant to occupy the Property and conduct business thereon.

 

ARTICLE 5

 

CONDITION
OF PROPERTY, ALTERATIONS AND REPAIRS

 

Section 5.1. Tenant has
examined the Property, is familiar with the physical condition, expenses,
operation and maintenance, zoning, status of title and use that may be made of
the Property and every other matter or thing affecting or related to the
Property, and is leasing the same in its “As Is” condition, subject to
Landlord’s obligations pursuant to Article 23.  Landlord has not made and does not make any
representations or warranties whatsoever with respect to the Property or
otherwise with respect to this Lease. 
Tenant assumes all risks resulting from any defects (patent or latent) in
the Property or from any failure of the same to comply with

 

 

any governmental law or
regulation applicable to the Property or the uses or purposes for which the
same may be occupied.

 

Section 5.2. During the
Primary Term and each Extended Term, at Tenant’s sole cost and expense, Tenant
shall keep the Property and the adjoining sidewalks and curbs, if any, clean
and in good condition and repair, free of accumulations of dirt, rubbish, snow
and ice, and Tenant shall make all repairs and replacements, structural and
non-structural, foreseen and unforeseen, and shall perform all maintenance,
necessary to maintain the Property and any sidewalks and curbs adjacent thereto
in good condition and repair.  When used
in this Section 5.2, the term “repairs” shall include all necessary
additions, alterations, improvements, replacements, renewals and
substitutions.  All repairs made by
Tenant shall be not less than equal in quality and class to the original
Alteration and shall be made in compliance with all Requirements (hereinafter
defined).  Except as provided in Article 23,  Landlord shall not be required to furnish
any services or facilities or to make any repairs or alterations to the
Property, and Tenant hereby assumes the full and sole responsibility for the condition,
operation, repair, replacement, maintenance and management of the Property, and
all costs and expenses incidental thereto.

 

Section 5.3. Except as
provided in Article 23, Landlord shall not be responsible for the
cost of any alterations of or repairs to the Property of any nature whatsoever,
structural or otherwise, whether or not now in the contemplation of the
parties.  To the extent not prohibited
by law, Tenant hereby waives and releases all rights now or hereinafter
conferred by statute or otherwise which would have the effect of limiting or
modifying any of the provisions of this Article 5.

 

Section 5.4. Tenant
shall have the right at any time and from time to time during the Term to make,
at its sole cost and expense, changes, alterations, additions or improvements
(collectively, “Alterations”) in or to the Property subject, in each case, to
all of the following:

 

(a)  No Alteration other than in connection with
Tenant’s initial build-out of the Property shall be undertaken except after
fifteen (15) days’ prior notice to Landlord, provided that no such notice shall
be required with respect to any nonstructural Alteration involving an estimated
cost of less than the Threshold Amount (hereinafter defined) (as estimated by a
licensed architect or engineer reasonably approved by Landlord) or involving an
actual cost (based on a lump sum or guaranteed maximum price contract) less
than the Threshold Amount.

 

(b)  No structural Alteration, and no other
Alteration involving an estimated cost of more than the Threshold Amount other
than in connection with Tenant’s initial build-out of the Property (as
estimated by a licensed architect or engineer reasonably approved by Landlord)
shall be made without the prior written consent of Landlord, which consent shall
not be unreasonably withheld, delayed or conditioned.  Notwithstanding the foregoing, Tenant may make Alterations
consisting of normal painting, carpeting, wall coverings, installation, removal
or reconfiguration of cubicles, demountable wall partitions or other similar
office installations and office decorations without Landlord’s prior written
consent.

 

 

(c)  Any Alteration when completed shall be of
such a character as not to reduce the value of the Property below its value
immediately before such Alteration.

 

(d)  No Alteration shall be performed by Tenant
if the same would materially reduce the cubic content of the usable area of the
Building, or weaken, temporarily or permanently, the structure of the Building
or any part thereof, or impair any zoning or materially impair other amenities
of the Property.

 

(e)  The reasonable cost and expense of
Landlord’s, and the cost and expense of Mortgagee’s review of any plans and
specifications required to be furnished pursuant to Section 5.5
below shall be paid by Tenant to Landlord, within ten (10) days after demand,
or, at the option of Landlord, as Additional Rent.

 

(f)  For purposes of Sections 5.4  and 5.5,the “Threshold Amount” shall
mean an amount equal to $200,000, exclusive of equipment.   For purposes of determining the Threshold
Amount, an Alteration shall include any series of related improvements
(exclusive of equipment) whose cost, in the aggregate equals or exceeds
$200,000.

 

(g)  The provisions and conditions of Section 5.5
shall apply to any work performed by Tenant under this Article, other than in
connection with Tenant’s initial build-out of the Property.

 

Section 5.5. Tenant
agrees that all Alterations, repairs, Restoration and other work that Tenant
shall be required or permitted to do under the provisions of this Lease (each
hereinafter called the “Work”) shall be (i) performed in a first-class,
workmanlike manner, and in accordance with all Requirements, as well as any
plans and specifications therefor which shall have been approved by Landlord to
the extent that such approval is required hereunder, (ii) commenced and
completed promptly and (iii) done in accordance with all of the following terms
and conditions:

 

(a)           If the Work shall (i) involve any structural repair, Alterations, Restoration
or other Work, or (ii) cost in excess of the Threshold Amount, then the Work
shall not be commenced until detailed plans and specifications (including
layout, architectural, mechanical and structural drawings), prepared by a
licensed architect or engineer reasonably approved by Landlord shall have been
submitted to and approved by Landlord, which approval shall not be unreasonably
withheld, conditioned or delayed.

 

(b)           All Work shall be commenced only after all required municipal and other
governmental permits, authorizations and approvals shall have been obtained by
Tenant, at its own cost and expense, and true and complete copies of the
originals thereof delivered to Landlord. 
Landlord will, on Tenant’s written request, promptly execute any documents
necessary to be signed by Landlord to obtain any such permits, authorizations
and approvals, provided that Tenant shall bear any expense or liability of
Landlord in connection therewith.

 

 

(c)           No Work (excluding installation of laboratory equipment) costing more
than $200,000.00 shall be undertaken except under the supervision of a licensed
architect or engineer approved by Landlord, which approval shall not be
unreasonably withheld.

 

(d)           If the Work (excluding installation of laboratory equipment) will cost
more than the $750,000.00 (as estimated in writing by a licensed architect or
engineer reasonably approved by Landlord or based upon the actual cost of the
Work (based on a lump sum or guaranteed maximum price contract for the Work),
it shall not be commenced until Tenant shall have obtained from its general
contractor and delivered to Landlord, a performance bond and a labor and
materials payment bond (issued by a corporate surety licensed to do business in
the state in which the Property is located and reasonably satisfactory to
Landlord), each in an amount equal to the estimated cost of such Work and in
form otherwise reasonably satisfactory to Landlord.

 

(e)           Subject to Tenant’s contest rights pursuant to Section 11.4,
the cost of all Work shall be paid promptly so that the Property and Tenant’s
leasehold estate therein shall at all times be free from (i) liens for labor or
materials supplied or claimed to have been supplied to the Property or Tenant,
and (ii) chattel mortgages, conditional sales contracts, title retention
agreements, security interests and agreements, and financing agreements and
statements.

 

(f)            At all times when any Work is in progress,
Tenant shall maintain or cause to be maintained with such companies and for
such periods as Landlord may require (i) workmen’s compensation insurance
covering all persons employed in connection with the Work, in an amount at
least equal to the minimum amount of such insurance required by law; and (ii)
for the mutual protection of Landlord, Tenant and any Mortgagee, (1) builder’s
risk insurance, completed value form, covering all physical loss, in an amount
reasonable satisfactory to Landlord, and (2) commercial general liability
insurance against all hazards, with limits for bodily injury or death to any
one person, for bodily injury or death to any number of persons in respect of
any one accident or occurrence, and for Property damage in respect of one
accident or occurrence in such amounts as Landlord may reasonably require.  Such commercial general liability insurance
may be satisfied by the insurance required under Section 6.1(a),
but may be effected by an endorsement, if obtainable, upon the insurance policy
referred to in said Section. The provisions and conditions of Article 6
hereof shall apply to any insurance which Tenant shall be required to maintain
or cause to be maintained under this subsection.

 

(g)           Upon completion of any Work, Tenant, at Tenant’s expense, shall obtain
certificates of final approval of such Work required by any governmental or
quasi-governmental authority and shall furnish Landlord with copies thereof,
together with “as-built” plans and specifications for such Work (if the Work
undertaken by Tenant required the filing of any plans with any governmental
authority).

 

(h)           The conditions of Section 5.4 shall have been complied
with, to the extent applicable to the Work.

 

 

Section 5.6. Any Work
shall be subject to inspection at any reasonable time and from time to time and
when accompanied by a representative of Tenant (except in the event of an
emergency), by Landlord, its architect and Mortgagee, or their duly authorized
representatives, and if Landlord’s architect or Mortgagee upon any such
inspection shall be of the opinion, which opinion shall not be unreasonable,
that the Work is not being performed substantially in accordance with the
provisions of this Article 5 or the plans and specifications, or
that any of the materials or Workmanship are not first-class or are unsound or
improper, Tenant shall correct any such failure and shall replace any unsound
or improper materials or workmanship.

 

Section 5.7. For
purposes of this Lease, the word “structural” when used in connection with any
Work shall mean Work affecting the load bearing walls, support beams,
structural components of the roof, any replacement of the roof (whether or not
of structural components), foundation of the Building or that affects the
proper functioning of the Building’s mechanical, electrical, sanitary,
plumbing, heating, air-conditioning, ventilating, utility or any other service
systems.

 

Section 5.8. All
fixtures, structures and other improvements other than trade fixtures
(including, without limitation, process equipment and compressors) de-mountable
wall partitions, Tenant’s generator, and those items listed on Exhibit “B”,
installed in or upon the Property at any time during the Term shall become the
property of Landlord and shall remain upon and be surrendered with the
Property.  Prior to the commencement of
any Work, Landlord will, upon written request by Tenant, notify Tenant whether
Landlord will require such Work to be removed from the Property prior to the
Expiration Date or earlier termination of this Lease.  If Tenant fails to request such determination at the time of any
such Work, Landlord may notify Tenant no later than one hundred twenty (120)
days prior to the Expiration Date, that Landlord elects to have the same
removed by the Expiration Date at Tenant’s expense.  All property permitted or required to be removed by Tenant at the
end of the Term remaining in the Property after Tenant’s removal shall be
deemed transferred and assigned to Landlord and may, at the election of
Landlord, either be retained as Landlord’s property or may be removed from the
Property by Landlord at Tenant’s expense. Tenant shall be responsible for, and
shall reimburse Landlord within three(3) business days after written demand
therefor, any damage to the Property caused in whole or in part by the removal
or demolition of Tenant’s fixtures, structures or other improvements which
Tenant is required to remove pursuant to this Section 5.8 or which
Tenant elects under the provisions of this Lease to remove. The provisions of
this Section 5.8 shall survive the expiration or earlier
termination of the Term.

 

ARTICLE 6

 

INSURANCE

 

Section 6.1. Throughout
the Primary Term and each Extended Term, Tenant shall, at its own cost and
expense, provide and keep in force, for the benefit of Landlord, Tenant and any
Mortgagee:

 

 

(a)           broad form commercial general liability insurance (including protective
liability coverage on operations of independent contractors engaged in
construction and blanket contractual liability insurance) protecting and
indemnifying Landlord, Tenant and any Mortgagee against all claims for damages
to person or property or for loss of life or of property occurring upon, in, or
about the Property, if any, written on a per-occurrence basis with limits of
liability of not less than $5,000,000.00 with respect to bodily injury and
property damage arising from any one occurrence and $10,000,000.00 in general
aggregate limit and an umbrella policy in an amount not less than $10,000,000
in excess coverage, or such greater limits as may be reasonably required from
time to time by any Mortgagee or as may be reasonably required from time to
time by Landlord consistent with insurance coverage on properties similarly
constructed, occupied and maintained. 
Such coverage shall waive the insurer’s rights of subrogation against
Landlord;

 

(b)           a standard all-risk property insurance policy in respect of the
Property and all installations, additions and improvements which may now or
hereafter be erected thereon, including, without limitation, Broad Form Flood
(if the Property is in a flood zone as designated by FEMA), ICC, demolition
coverage of not less than $1,000,000 and full coverage for Contingent Operation
of Building Laws, and, to the extent required by any Mortgagee, Earthquake for
the replacement value of the Property (subject to a PML study and a five
percent (5%) deductible with respect to such coverage), and certified and
uncertified terrorism coverage, all of the foregoing coverages shall be in
amounts sufficient to prevent Landlord and Tenant from becoming co-insurers and
in any event in an amount not less than one hundred percent (100%) of the
actual replacement value thereof (i.e., including the cost of debris removal
but excluding foundations and excavations) as reasonably determined by Landlord
from time to time;

 

(c)           business interruption insurance covering risk of loss due to the
occurrence of any of the hazards covered by the insurance to be maintained by
Tenant described in Section 6.1(b) with coverage, for a period of
at least eighteen (18) months following the insured-against peril, of 100% of
all Rent to be paid by Tenant under this Lease. Coverage under this
section (c) arising out of an act of terrorism shall be limited to a
period of twelve (12) months;

 

(d)           Worker’s compensation insurance (including employers, liability
insurance) covering all persons employed at the Property by Tenant to the
extent required by the laws and statutes of the state in which the Property is
located, including, without limitation, during the course of Work to the
Property;

 

(e)           boiler insurance, if applicable, in an amount not less than one hundred
percent (100%) of the actual replacement value thereof and of any improvements
in which any such boiler is located (including the cost of debris removal but
excluding foundations and excavations) as reasonably determined by Landlord from
time to time which insurance includes combined direct damage and business
interruption on a comprehensive basis subject to a deductible of no greater
than $100,000;

 

(f)            if a sprinkler system is located in the
Building, sprinkler leakage insurance in amounts reasonably approved by
Landlord provided that earthquake sprinkler coverage is subject to what is then
commercially available in the market where the Property is located;

 

 

(g)           all-risk property insurance for Tenant’s personal property located at the
Property, including its furniture, fixtures, equipment and leasehold
improvements in the amount of their replacement value; and

 

(h)           such other or further insurance, in such amounts, with such deductibles
and in such form, as is customarily obtained by owners of properties similarly
located, constructed, occupied and maintained and is available at commercially
reasonable rates, or as otherwise reasonably required by any Mortgagee.

 

Section 6.2. Whenever
under the terms of this Lease Tenant is required to maintain insurance for the
benefit of Landlord, Landlord shall be (a) an additional named insured in all
such liability insurance policies and (b) an additional named insured and as
loss payee in all such property policies. 
In the event that the Property shall be subject to any Mortgage, the
commercial general liability insurance shall, if required by such Mortgage,
name the Mortgagee as an additional named insured and all other insurance
provided hereunder shall name the Mortgagee as an additional insured under a
standard “non-contributory mortgagee” endorsement or its equivalent.  All policies of insurance shall provide that
such coverage shall be primary and that any insurance maintained separately by
Landlord or the Mortgagee shall be excess insurance only.  The original certificates of insurance and
endorsements for all policies required to be maintained by Tenant under this
Lease and legible copies of the original property policies shall be delivered
to Landlord and any Mortgagee.

 

Section 6.3. The amounts
payable under any and all insurance policies insuring against property damage
to the Building shall, subject to Article 7, be made available or
“paid over” to Mortgagee or, if there is none, to Landlord.  All property insurance policies required by this
Lease (other than the insurance required pursuant to Section 6.1(h)) shall
provide that all adjustments for claims with the insurers in excess of Fifty
Thousand Dollars ($50,000.00) (exclusive of any deductible) shall be made with
Landlord, Tenant and any Mortgagee. 
Subject to the terms of any Mortgage, any adjustments for claims with
the insurers involving sums of Fifty Thousand Dollars ($50,000.00) (exclusive
of any deductible) or less shall be made with Tenant.

 

Section 6.4. All of the
above-mentioned insurance policies and/or certificates shall be obtained by
Tenant and delivered to Landlord on or prior to the date hereof, and thereafter
as provided for herein, and shall be written by insurance companies: (a) rated
A:XII or better in “Best’s Insurance Guide” (or any substitute guide acceptable
to Landlord); (b) authorized to do business in the state where the Property is
located; and (c) of recognized responsibility and which are satisfactory to
Landlord and any Mortgagee.  Any
deductible amounts shall not exceed $100,000 per occurrence under any property
insurance policy hereunder.  In the
event any of Tenant’s insurance policies contain deductible amounts, Tenant
agrees to pay the amount of such deductibles in the event of a claim.

 

Section 6.5. At least
thirty (30) days prior to the expiration of any policy or policies of such
insurance, Tenant shall renew such insurance, by delivering to Landlord or

 

 

Mortgagee, within the said
period of time, certificates of insurance and the copies of original policies
evidencing the coverage described in this Article 6.  All coverage described in this
Article 6 shall provide Landlord and Mortgagee with thirty (30) days’
notice of cancellation or change in terms. 
If Tenant shall fail to procure the insurance required under this Article 6
in a timely fashion or to deliver certificates of insurance and the original
policies as required hereunder, Landlord may, at its option and in addition to
Landlord’s other remedies in the event of a Default by Tenant, on a date which
is no sooner than ten (10) days to the expiration of any such policy or
policies and upon not less than three (3) business days written notice to
Tenant (unless Tenant’s insurance will expire prior thereto, in which event no
such prior notice shall be required), procure the same for the account of
Tenant, and the cost thereof shall be paid to Landlord as Additional Rent.

 

Section 6.6. Tenant
shall not violate, or permit to be violated, any of the conditions of any of
the said policies of insurance, and Tenant shall perform and satisfy the
requirements of the companies writing such policies so that companies of good
standing, reasonably satisfactory to Landlord, shall be willing to write and/or
continue such insurance.

 

Section 6.7. Tenant
shall not carry separate or additional insurance effecting the coverage
described in Section 6.1 (b) and (c), concurrent in form and
contributing in the event of any loss or damage to the Property with any
insurance required to be obtained by Tenant under this Lease, unless such
separate or additional insurance shall comply with and conform to all of the
provisions and conditions of this Article. 
Tenant shall promptly give notice to Landlord of such separate or
additional insurance.

 

Section 6.8. The
insurance required by this Lease, at the option of Tenant, may be effected by
blanket and/or umbrella policies issued to Tenant covering the Property and
other properties owned or leased by Tenant, provided that the policies
otherwise comply with the provisions of this Lease and allocate to the Property
the specified coverage, without possibility of reduction or coinsurance by
reason of, or damage to, any other premises named therein, and if the insurance
required by this Lease shall be effected by any such blanket or umbrella
policies, Tenant shall furnish to Landlord or Mortgagee certified copies or
duplicate originals of such policies in place of the originals, with schedules
thereto attached showing the amount of insurance afforded by such policies
applicable to the Property.

 

Section 6.9.  Landlord shall not be limited in the proof
of any damages which Landlord may claim against Tenant arising out of or by
reason of Tenant’s failure to provide and keep in force insurance, as aforesaid,
to the amount of the insurance premium or premiums not paid or incurred by
Tenant and which would have been payable under such insurance, but Landlord
shall also be entitled to recover as damages for such breach, the uninsured
amount of any loss, to the extent of any deficiency in the insurance required
by the provisions of this Lease and damages, costs and expenses of suit
suffered or incurred by reason of damage to, or destruction of, the Property,
occurring during any period when Tenant shall have failed or neglected to
provide insurance as aforesaid.

 

 

Section 6.10 Landlord
and Tenant hereby waive any rights each may have against the other on account
of any loss or damage occasioned to Landlord or Tenant, as the case may be,
their respective property, the Property, or its contents, arising from any risk
covered by the required to be carried hereunder, provided that such waiver does
not invalidate such policies or prohibit recovery thereunder and is applicable
only to the extent of receipt of the insurance proceeds.  The parties hereto each agree to cause their
respective insurance carriers insuring the property of either Landlord or
Tenant against any such loss, to waive any right of subrogation that such
insurers may have against Landlord or Tenant, as the case may be.

 

ARTICLE 7

 

DAMAGE
OR DESTRUCTION

 

Section 7.1. (a) If the
Property or any part thereof shall be damaged or destroyed by fire or other
casualty (including any casualty for which insurance was not obtained or
obtainable) of any kind or nature, ordinary or extraordinary, foreseen or
unforeseen, (i) Landlord shall, subject to Sections 7.2 and 7.3, pay
over to Tenant, upon the terms set forth in Section 7.2, any moneys
which may be recovered by Landlord from property insurance, (ii) this Lease
shall be unaffected thereby and shall continue in full force and effect, and
(iii) Tenant shall, at Tenant’s sole cost and expense, expeditiously and in a
good and workmanlike manner, cause such damage or destruction to be remedied or
repaired (the “Restoration”) by restoring the Property to its condition
immediately prior to such damage, or destruction.  All Restoration Work shall be performed in accordance with the
provisions of this Lease, including, without limitation, the provisions of Sections
5.4 and 5.5 hereof.  Tenant hereby
waives the provisions of any law or statute to the contrary and agrees that the
provisions of this Article shall govern and control in lieu thereof.  If Tenant shall fail or neglect to restore
the Property with reasonable diligence, or having so commenced such
Restoration, shall fail to complete the same with reasonable diligence, or if
prior to the completion of any such Restoration by Tenant, this Lease shall
expire or be terminated for any reason, Landlord shall have the right, but not
the obligation, to complete such Restoration at Tenant’s cost and expense and
the cost thereof shall be payable on demand as Additional Rent, together with
interest thereon at the Default Rate. 
In addition, if Landlord so completes the Restoration as provided
hereunder, Landlord shall be entitled to a supervision fee in the amount of
five percent (5%) of the cost of the Restoration Work from Tenant to compensate
Landlord for administering the Restoration.

 

(b)           Notwithstanding anything contained herein to the contrary, provided (i)
a material portion of the Property is damaged or destroyed by fire or other
casualty and such damage is of such a nature that the Restoration cannot be
substantially completed within eighteen (18) months after the occurrence of the
casualty, as estimated by a licensed architect or engineer retained by Tenant
and reasonably approved by Landlord (for purposes of such estimate, such
Restoration shall not include Alterations made by Tenant and installation of
personal property, equipment and trade fixtures of Tenant), (ii) there is then
no Event of Default (including without limitation any uncured Event of Default
with respect to the matters set forth in Section 6.1), (iii) the
insurance proceeds actually available to Landlord for Restoration, together
with any other

 

 

funds Tenant may elect to
contribute (including, but not limited to, the amount of any deductible under
the insurance then carried by Tenant), equal or exceed the cost of such
Restoration (as estimated in writing by a licensed architect retained by
Landlord), and (iv) such amounts are paid to Landlord, Tenant may terminate
this Lease in which event this Lease shall be of no further force and effect as
of the date of such termination, except that any obligation or liability of
Tenant, actual or contingent, under this Lease which has accrued on or prior to
such termination date shall survive.

 

Section 7.2. Subject to
the provisions of this Article 7, Landlord shall pay over to Tenant
from time to time, upon the following terms, any moneys which may be received
by Landlord from property insurance provided by Tenant but, in no event, to any
extent or in any sum exceeding the amount actually collected by Landlord upon
the loss; provided, however, that Landlord, before paying such
moneys over to Tenant, shall be entitled to reimburse itself therefrom to the
extent, if any, of the expenses actually paid or incurred by Landlord in
collection of such moneys.  Landlord
shall pay to Tenant, as herein provided, the aforesaid insurance proceeds, for
the purpose of Restoration to be made by Tenant to restore the Property to a
value which shall be not less than their value prior to such fire or other
casualty.  Prior to making any
Restoration, Tenant shall furnish Landlord with an estimate of the cost of such
Restoration, prepared by a licensed architect or engineer reasonably approved
by Landlord.  Such insurance proceeds
shall be paid to Tenant from time to time thereafter in installments as the
Restoration progresses, upon application to be submitted by Tenant to Landlord
showing the cost of labor and material incorporated in the Restoration, or
incorporated therein since the last previous application, and paid for by
Tenant.  If any vendor’s, mechanic’s,
laborer’s, or materialman’s lien is filed against the Property or any part
thereof, or if any public improvement lien is created or permitted to be
created by Tenant and is filed against Landlord, or any assets of, or funds
appropriated to, Landlord, Tenant shall not be entitled to receive any further
installment until such lien is satisfied or otherwise discharged, unless such
lien is contested by Tenant in good faith and Tenant has obtained and delivered
a bond issued by a surety, in an amount equal to the lien amount and in form
otherwise reasonably satisfactory to Landlord. 
The amount of any installment to be paid to Tenant shall be such
proportion of the total insurance moneys received by Landlord as the cost of
labor and materials theretofore incorporated by Tenant in the Restoration bears
to the total estimated cost of the Restoration by Tenant, less (a) all payments
theretofore made to Tenant out of said insurance proceeds, and (b) ten percent
(10%) of the amount so determined. Upon completion of and payment for the
Restoration by Tenant, including reimbursement to Tenant of such ten percent
(10%) retention, the balance of any and all insurance proceeds held by Landlord
shall be paid to Tenant.  In the event
that the insurance proceeds are insufficient for the purpose of paying for the
Restoration, Tenant shall nevertheless be required to make the Restoration and
pay any additional sums required for the Restoration in accordance with the
provisions of Section 7.4 hereof. 
Notwithstanding the foregoing, if Landlord makes the Restoration at
Tenant’s expense, as provided in Section 7.1 hereof, then Landlord
shall use any amounts held by Landlord to pay for the cost of such
Restoration.  Notwithstanding anything
contained herein to the contrary, Tenant may retain insurance proceeds for any
Restoration the estimated cost of which is less than $100,000, provided Tenant
uses such proceeds for such Restoration.

 

 

Section 7.3. When
insurance proceeds are retained by Landlord pursuant to Section 7.2
above, the following shall be conditions precedent to each payment made to
Tenant as provided in Section 7.2 above:

 

(a)           there shall be submitted to Landlord the certificate of the aforesaid
architect stating (i) that the sum then requested to be withdrawn either has
been paid by Tenant and/or is justly due to contractors, subcontractors,
materialmen, engineers, architects or other persons (whose names and addresses
shall be stated) who have rendered or furnished certain services or materials
for the Work and giving a brief description of such services and materials and
the principal subdivisions or categories thereof and the several amounts so
paid or due to each of such persons in respect thereof, and stating in
reasonable detail the progress of the Work up to the date of said certificate,
(ii) that no part of such expenditures has been or is being made the basis, in
any previous or then pending request, for the withdrawal of insurance money or
has been made out of the proceeds of insurance received by Tenant, (iii) that
the sum then requested does not exceed ninety (90%) percent of the cost of the
services and materials described in the certificate and (iv) that the balance
of any insurance proceeds held by Landlord, together with such other sums, if
any, which Tenant has made or will (for which evidence of Tenant’s intention
and ability shall be to Landlord’s reasonable satisfaction) make available for
the Restoration in accordance with Section 7.4 hereof and to
Landlord’s satisfaction will be sufficient upon completion of the Restoration
to pay for the same in full, and stating in reasonable detail an estimate of
the cost of such completion;

 

(b)           there shall be furnished to Landlord an official search, or a
certificate of a title insurance company satisfactory to Landlord, or other
evidence satisfactory to Landlord, showing that there has not been filed any
vendor’s, mechanic’s, laborer’s or materialman’s statutory or other similar
lien affecting the Property or any part thereof, or any public improvement lien
created or permitted to be created by Tenant affecting Landlord, or the assets
of, or funds appropriated to, Landlord, which has not been discharged of
record, except such as will be discharged upon payment of the amount then
requested to be withdrawn, or unless any such lien is contested by Tenant in
good faith and Tenant has obtained and delivered a bond issued by a surety, in
an amount equal to the lien amount and in form otherwise reasonably
satisfactory to Landlord; and

 

(c)           at the time of making such payment, no Default shall have occurred and
be continuing.

 

Section 7.4. If the
estimated cost of any Restoration, determined as provided in Section 7.2
hereof, exceeds the net insurance proceeds then, prior to the commencement of
any Restoration, Tenant hereby covenants to obtain from its general contractor
and deliver to Landlord a bond, or other security satisfactory to Landlord in
the amount of such excess, to be held and applied by Landlord in accordance
with the provisions of Section 7.2 hereof, as security for the
completion of the Work, free of public improvement, vendor’s, mechanic’s,
laborer’s or materialman’s statutory or other similar liens.

 

 

Section 7.5. As
material consideration to Landlord for its agreement to enter into this Lease,
the parties agree that, except as expressly set forth in the provisions of this
Article 7, (i) this Lease shall not terminate or be forfeited or be
affected in any manner, and there shall be no reduction or abatement of the
Rent payable hereunder, by reason of damage to or total, substantial or partial
destruction of the Property or any part thereof or by reason of the
untenantability of the same or any part thereof, for or due to any damage or
destruction to the Property from any cause whatsoever, and, (ii)
notwithstanding any law or statute, present or future, Tenant waives any and
all rights to quit or surrender the Property or any part thereof on account of
any damage or destruction of the Property. 
Tenant expressly agrees that its obligations hereunder, including the
payment of Rent payable by Tenant hereunder, shall continue as though the
Property had not been damaged or destroyed and without abatement, suspension,
diminution or reduction of any kind.

 

Section 7.6.  Landlord and Tenant waive the provisions of
California Civil Code Section 1932, clause 2, and Section 1933,
clause 4.  Landlord and Tenant agree
that in the event of damage to or destruction of the Property, the provisions
of this Article 7 shall govern; and in the event of a taking of all or
part of the Property by eminent domain, the provisions of Article 8 of
this Lease shall govern, notwithstanding any contrary provision of any statute
or law of the United States or the State of California.

 

ARTICLE 8

 

CONDEMNATION

 

Section 8.1. If the
whole or substantially all of the Property shall be taken by condemnation or
other eminent domain proceedings pursuant to any law, general or special, then
at Tenant’s option, this Lease and the Term shall terminate and expire on the
date of such taking and the Rent payable by Tenant hereunder shall be
apportioned as of the date of such taking. 
If Tenant chooses to execute the option to cancel the Lease provided for
herein, Tenant shall notify Landlord in writing within twenty (20) days of the
date that Tenant receives notice of such taking.  For purposes of this Article 8 “substantially all of
the Property” shall be deemed to mean such portion of the Property as, when so
taken, would leave remaining a balance of the Property which, due either to the
area so taken or the location of the part so taken in relation to the part not
so taken, would not under economic conditions, applicable zoning laws, building
regulations then existing or prevailing, readily accommodate Tenant’s business
existing at the date of such taking and after performance of all covenants,
agreements, terms and provisions herein and by law provided to be performed and
paid by Tenant.  Tenant, in cooperation
with Landlord, shall have the right to participate in any condemnation
proceedings and be represented by counsel for the purpose of protecting its
interests hereunder.  Landlord agrees
that it will not enter into any agreement with any condemning authority in
settlement of or on the threat of any condemnation or other eminent domain
proceeding affecting the Property without the consent of Tenant, which consent
shall not be unreasonably withheld or delayed.

 

 

Section 8.2. If only a
portion of the Property shall be so taken and Section 8.1 does not
apply, this Lease shall be unaffected by such taking, and Tenant shall continue
to pay the Fixed and Additional Rent pursuant to Article 2  except that the Rent shall be equitably
reduced to a just and appropriate amount according to the nature and extent of
the taking as mutually agreed in writing by Landlord and Tenant.  In no event, however, shall Additional Rent
be reduced as a result of any such taking.

 

Section 8.3. (a)
Landlord shall be entitled to receive the entire award in any proceeding with
respect to any taking provided for in this Article 8 without
deduction therefrom for any estate vested in Tenant by this Lease and Tenant
shall receive no part of such award, except as otherwise provided in
Section 8.1 hereof. Tenant hereby assigns to Landlord all of its right,
title and interest in or to every such award. 
Nothing herein contained shall be deemed to prohibit Tenant from making
a separate claim, to the extent permitted by law, for the value of Tenant’s
loss of good will, inventory, movable trade fixtures, machinery and moving
expenses, provided that the making of such claim does not adversely affect or diminish
Landlord’s award.

 

(b)           Notwithstanding the foregoing, in the event Section 8.2 is
applicable, Landlord shall pay over to Tenant from time to time any moneys
which may be received by Landlord on account of exercise of the power of
eminent domain with respect to the Property, provided, however,
that Landlord, before paying such moneys over to Tenant, shall be entitled to
reimburse itself therefrom to the extent, if any, of the expenses paid or
incurred by Landlord in the collection of such moneys.  Such moneys shall be paid over to Tenant
solely for purposes of the Restoration of the Property, on the terms and
subject to the conditions set forth in Article 7, as if, for this
purpose, such moneys were insurance proceeds resulting from casualty to the Property.  Tenant agrees to undertake such Restoration
on such terms and subject to such conditions.

 

Section 8.4. In the
event of any taking of the Property which does not result in a termination of
this Lease, Tenant at Tenant’s expense, subject to the provisions of Articles
5 and 7 and whether or not any award or awards shall be sufficient for the
purpose, shall proceed with reasonable diligence to Restore the remaining parts
of the Property to substantially the condition existing immediately prior to
the date of taking to the extent that the same may be feasible and so as to
constitute a complete and tenantable Property. 
If the proceeds of such award or awards are not sufficient to pay the
full cost thereof as estimated by a licensed architect or engineer approved by
Landlord, Tenant shall pay such deficit, and if the cost of the Restoration
will cost more than $350,000, Tenant shall obtain from its general contractor
and deliver to Landlord a bond or other security reasonably satisfactory to
Landlord and Mortgage in the amount of such deficiency to be held as security
for the completion of such Work.  If,
upon completion of Restoration any portion of the award shall remain, Landlord
shall retain same.

 

Section 8.5  If during the Initial Term, the temporary
use or occupancy of all or any part of the Property shall be lawfully taken by
condemnation or in any other manner for any public or quasi-public use or
purpose, Landlord shall be entitled to receive all of the award for such taking
and this Lease shall continue and remain unaffected by such taking.  If the temporary

 

 

use or occupancy of all or
any part of the Property shall be lawfully taken by condemnation or in any
other manner for any public or quasi-public use or purpose during the Primary
Term or any Extended Term of this Lease, Tenant shall be entitled, except as
hereinafter set forth, and unless a Default shall occur and be continuing, to
receive that portion of the award for such taking which represents compensation
for the use and occupancy of the Property and, if so awarded, for the taking of
Tenant’s loss of good will, inventory, movable trade fixtures, machinery and
for moving expenses, and that portion which represents reimbursement for the
cost of Restoration of the Property. 
This Lease shall be and remain unaffected by such taking and Tenant
shall be responsible for all obligations hereunder not affected by such taking
and shall continue to pay in full when due the Fixed Rent, Additional Rent and
all other sums required to be paid by Tenant pursuant to the provisions of this
Lease.  If the period of temporary use
or occupancy shall extend beyond the Expiration Date, that part of the award
which represents compensation for the use or occupancy of the Property (or a
part thereof) shall be divided between Landlord and Tenant so that Tenant shall
receive so much thereof as represents the period to and including the
Expiration Date and Landlord shall receive so much as represents the period
subsequent to the Expiration Date and Landlord shall be entitled to receive
that portion which represents reimbursement for the cost of Restoration of the
Property and the remainder of such award.

 

Section 8.6.  In case of any governmental action, not
resulting in the taking or condemnation of any portion of the Property but
creating a right to compensation therefor, such as the changing of the grade of
any street upon which the Property abut, this Lease shall continue in full
force and effect without reduction or abatement of Rent and the award shall be
paid to Landlord.

 

ARTICLE 9

 

ASSIGNMENT
AND SUBLETTING

 

Section 9.1.            Without the prior written consent of Landlord
and any Mortgagee, which shall not be unreasonably withheld, delayed or
conditioned, this Lease shall not be sold, assigned, sublet or otherwise transferred
(a “Transfer”).  Notwithstanding
anything to the contrary herein, Tenant may, without the written consent of but
with written notice to Landlord, assign, transfer or sublet to any Affiliate of
Tenant, provided such Affiliate remains an Affiliate of Tenant and such
Transfer is subject to the remaining provisions of this Article 9.  For purposes of this Article 9,
the term Affiliate shall mean any entity controlling, controlled by or under
common control with Tenant and the terms “control” or “controlling” shall mean
possession, direct or indirect, of the power to direct, or cause the direction
of, the management and policies of any person or entity, whether through the
ownership of voting securities, or partnership interest, by contract or otherwise.

 

Section 9.2             It shall be deemed reasonable for Landlord to
be satisfied with the following criteria, among other commercially reasonable
standards, in determining whether to consent to Tenant’s request in accordance
with the provisions of this Article 9:

 

 

(i)            at the time of such request and at the time
of the Transfer, no Default shall have occurred and be continuing;

(ii)           the proposed assignee has a net worth and credit rating (as determined
by either Moody’s Investors Services, Inc. or Standard & Poor’s Rating
Group (or if such corporations shall, for any reason, no longer perform the
functions of a rating agency any other nationally recognized statistical rating
agency designated by Landlord)) at least equal to that of the Tenant at the
time of such Transfer;

(iii)          the proposed assignee shall be of a character, be engaged in a business
and propose to use the Property in a manner in keeping with Landlord’s then
reasonable investment standards in respect of tenancy of the Property;

(iv)          the proposed use of the Property is expressly permitted by this Lease;
and

(v)           Tenant, as sublandlord, shall enter into such documents as reasonably
requested by Landlord in connection with any proposed sublease.

 

Section 9.3.            If Tenant shall desire Landlord’s consent to
a Transfer, Landlord shall be given not less than twenty (20) days’ advance
written notice of the proposed effective date of such Transfer, which written
notice shall be delivered to Landlord together with (a) either an executed
counterpart or, if unavailable, a copy of the proposed instrument(s) of the
Transfer and (b) such other documents as Landlord may reasonably request.

 

Section 9.4             Any consent by Landlord under this Article 9
shall apply only to the specific transaction thereby authorized and shall not
relieve Tenant from the requirement of obtaining the prior written consent of
Landlord to any further Transfer of this Lease.  No Transfer of all or a portion of this Lease shall release or
relieve the transferor from any obligations of Tenant hereunder, and the
transferor shall remain liable for the performance of all obligations of Tenant
hereunder.  Any Transfer hereunder
(regardless of whether the consent of Landlord is required) shall be only for
the permitted use pursuant to Article A, Section 4 and for no
other purpose.

 

Section 9.5.            Tenant shall cause each subtenant permitted
pursuant to this Article 9 (a “Subtenant”) to comply with its
obligations under its respective sublease, and Tenant shall diligently enforce
all of its rights as the sublandlord thereunder in accordance with the terms of
such sublease and this Lease.

 

Section 9.6.            The fact that a violation or breach of any of
the terms, provisions or conditions of this Lease results from or is caused by
an act or omission by any of the subtenants shall not relieve Tenant of
Tenant’s obligation to cure the same. Tenant shall take all necessary steps to
prevent any such violation or breach.

 

Section 9.7.  If this Lease is assigned or sublet,
Landlord may, after termination of this Lease, collect Rent from the assignee
or subtenant, and apply the net amount collected to the Rent herein reserved,
but no such assignment or collection shall be deemed a waiver of this covenant,
or the acceptance of the assignee or subtenant as tenant, or a release of
Tenant from the further performance by Tenant of the terms, covenants, and
conditions on the part of Tenant to be

 

 

observed or performed
hereunder.  After any assignment,
Tenant’s liability with respect to any subsequent modification or amendment hereof
shall apply only to the extent that Tenant has consented to such modification
or amendment and with respect to those obligations hereunder which have not
been increased by such modification or amendment.  In addition, Tenant’s liability shall continue in the event that
Landlord elects to release any subsequent tenant hereunder from any liability,
to all of which Tenant hereby consents in advance.  The consent by Landlord to any Transfer shall not in any way be
construed to relieve Tenant from obtaining the express written consent of
Landlord to any further Transfer.

 

Section 9.8.            (a)  A
Transfer shall be deemed to have occurred and Landlord’s consent thereto shall
be required, in the event Tenant ceases to be a corporation, the outstanding
stock of which is listed on a recognized security exchange.  Notwithstanding the foregoing, if the
proposed Transfer constitutes the sale of all of the stock of Tenant,
Landlord’s consent will not be required provided that (i) the successor tenant
or corporate guarantor of this Lease either has a tangible net worth of not
less than $200 million or its senior unsecured debt is rated BBB- or better by
Standard & Poor’s Rating Group and Baa 3 by Moody’s Inc.; (ii) there is no
Event of Default then outstanding; and (iii) Tenant otherwise complies with the
requirements of Sections 9.1 and 9.3. 
Tenant shall have the right to effect compliance of subsection (i)
of the preceding sentence by a guaranty of this Lease in form and content
acceptable to Landlord from a corporate parent of successor owner or an
Affiliate thereof.

 

(b)   Notwithstanding anything to the contrary
contained herein, and except as set forth in Section 9.8(a), Tenant
may assign its entire interest under this Lease or sublet the Property to an
Affiliate of Tenant or to any successor to Tenant by purchase, merger,
consolidation or reorganization (hereinafter collectively referred to as
“Corporate Transfer”) without the consent of Landlord, provided:  (i) there is no uncured Event of Default
then outstanding; (ii) if such proposed transferee is a successor to Tenant by
purchase, said proposed transferee shall acquire all or substantially all of
the stock or assets of Tenant’s business or, if continuing or surviving
corporation shall own all or substantially all of the assets of Tenant and
shall have a net worth which is at least equal to Tenant’s net worth on the
Commencement Date; and (iii) such proposed transferee operates the business in
the Premises for the permitted use pursuant to Article A,
Section 4 and no other purpose. 
Tenant shall give Landlord written notice at least thirty (30) days
prior to the effective date of such Corporate Transfer.

 

Section 9.9.            Tenant covenants and agrees that all
subleases hereafter entered into affecting the Property shall provide that (a)
they are subject to this Lease, (b) the term thereof should end one (1) day or
more prior to the Expiration Date hereof, but not later than one (1) day prior
to the Expiration Date hereof, unless Landlord shall consent otherwise, which
consent may be withheld in Landlord’s sole discretion, (c) the subtenants will
not do, authorize or execute any act, deed or thing whatsoever or fail to take
any such action which will or may cause Tenant to be in violation of any of its
obligations under this Lease, (d) the subtenants will not pay rent or other
sums under the subleases with Tenant for more than one (1) month in advance,
(e) the subtenants shall give to Landlord at the address and otherwise in the
manner specified in Section 20.8 hereof, a copy of any notice of
default by Tenant as the sublandlord under the subleases at the same time as,
and whenever, any such notice of default shall be given by the

 

 

subtenants to Tenant, and
(f) in the event of the termination or expiration of this Lease prior to the
Expiration Date hereof, any such subtenant, at Landlord’s election (in its sole
and absolute discretion) shall be obligated to attorn to and recognize Landlord
as the lessor under such sublease, in which event such sublease shall continue
in full force and effect as a direct lease between Landlord and the subtenant
upon all the terms and conditions of such sublease, except as hereinafter
provided.  If Landlord does not elect to
require such attornment, the termination of this Lease shall effect the
immediate termination of such sublease, the subtenant shall immediately
surrender physical possession of the Property to Landlord and Landlord shall be
without duty or liability to such subtenant by reason of the early termination
of its sublease.  Any attornment
required by Landlord of such subtenant shall be effective and self-operative as
of the date of any such termination or expiration of this Lease without the
execution of any further instrument; provided, however, that such
subtenant shall agree, upon the request of Landlord, to execute and deliver any
such instruments in recordable form and otherwise in form and substance
satisfactory to Landlord to evidence such attornment.  With respect to any attornment required by Landlord of any
subtenant hereunder, (i) at the option of Landlord, Landlord shall recognize
all rights of Tenant as the lessor under such sublease and the subtenant
thereunder shall be obligated to Landlord to perform all of the obligations of
the subtenant under such sublease and (ii) Landlord shall have no liability,
prior to its becoming lessor under such sublease, to such subtenant nor shall
the performance by such subtenant of its obligations under the sublease,
whether prior to or after any such attornment, be subject to any defense,
counterclaim or setoff by reason of any default by Tenant in the performance of
any obligation to be performed by Tenant as lessor under such sublease, nor
shall Landlord be bound by any prepayment of more than one (1) month’s rent
unless such prepayment shall have been expressly approved in writing by
Landlord.  The provisions of this Section 9.9
shall survive the expiration or earlier termination of the Term.

 

Section 9.10.          If Tenant assumes this Lease and proposes to assign the same pursuant
to the provisions of Title 11 of the United States Code or any statute of
similar purpose or nature (the “Bankruptcy Code”) to any person or entity who
shall have made a bona  fide offer to accept an assignment of this
Lease on terms acceptable to the Tenant, then notice of such proposed
assignment shall be given to Landlord by Tenant no later than twenty (20) days
after receipt of such offer by Tenant, but in any event no later than ten (10)
days prior to the date that Tenant shall file any application or motion with a
court of competent jurisdiction for authority and approval to enter into such
assumption and assignment.  Such notice
shall set forth (a) the name and address of the assignee, (b) all of the terms
and conditions of such offer, and (c) the proposal for providing adequate
assurance of future performance by such person under the Lease, including,
without limitation, the assurance referred to in Section 365 of the
Bankruptcy Code. Any person or entity to which this Lease is assigned pursuant
to the provisions of the Bankruptcy Code shall be deemed without further act or
deed to have assumed all of the obligations arising under this Lease from and
after the date of such assignment.  Any
such assignee shall execute and deliver to Landlord upon demand an instrument
confirming such assumption.

 

Section 9.11.          The term “adequate assurance of future performance” as used in this
Lease shall mean (in addition to the assurances called for in Bankruptcy Code
Section 365(l)) that any proposed assignee shall, among other things, (a)
deposit with Landlord on the

 

assumption of this Lease an amount equal to the greater of (i) three
(3) times the then monthly Fixed Rent and Additional Rent or (ii) such other
amount deemed by the Bankruptcy Court to be reasonably necessary for the
adequate protection of Landlord under the circumstances, as security for the
faithful performance and observance by such assignee of the terms and
obligations of this Lease, (b) furnish Landlord with financial statements of
such assignee for the prior three (3) fiscal years, as finally determined after
an audit and certified as correct by a certified public accountant, which
financial statements shall show a net worth at least equal to the amount of the
deposit referenced in (a) above, (c) if determined by the Bankruptcy Court to
be appropriate under the circumstances, grant to Landlord a security interest
in such property of the proposed assignee as Landlord shall deem necessary to
secure such assignee’s future performance under this Lease, and (d) provide
such other information or take such action as Landlord, in its reasonable
judgment, shall determine is necessary to provide adequate assurance of the
performance by such assignee of its obligations under the Lease.

 

Section 9.12. The provisions of Sections 9.7, 9.8, 9.9, 9.10 and
9.11 hereof shall survive the expiration or earlier termination of this
Lease.

 

Section 9.13. In no event shall Tenant mortgage, encumber, pledge,
grant a security interest in, collaterally assign or conditionally transfer
this Lease or any Subleases or any of the rents, issues and profits therefrom.

 

ARTICLE 10

 

SUBORDINATION

 

Section 10.1. This Lease shall be subject and subordinate to all
Mortgages now or hereinafter in effect and to all renewals, modifications,
consolidations, replace­ments and extensions of any such Mortgages; provided,
however, that the Mortgagee shall execute and deliver to Tenant an
agreement in such form as may be reasonably requested by the Mortgagee (the
“Non-Disturbance Agreement”) to the effect that, if there shall be a
foreclosure of its Mortgage, such Mortgagee will not make Tenant a party
defendant to such foreclosure, unless necessary under applicable law for the
Mortgagee to foreclose, or if there shall be a foreclosure of such Mortgage,
such Mortgagee shall not evict Tenant, disturb Tenant’s leasehold estate or
rights hereunder, in all events provided that no Event of Default then exists,
and Tenant shall attorn to the Mortgagee or any successor-in-interest
to Landlord or the Mortgagee.  Tenant
shall, together with the Mortgagee, execute and deliver promptly any
certificate or further agreement that Landlord may request in confirmation of
such subordination.  If, in connection
with the financing of the Property, any lending institution or Landlord shall
request reasonable modifications of this Lease that do not increase the
monetary obligations of Tenant under this Lease or materially increase the
other obligations of Tenant under this Lease or materially and adversely affect
the rights of Tenant under this Lease, Tenant shall make such modifica­tions.  Any Non-Disturbance Agreement may be made on
the condition that neither the Mortgagee nor any­one claiming by, through or
under such Mortgagee shall be:

 

 

(a)    liable
for any act or omission of any prior Landlord (including, without limitation,
the then defaulting Landlord), or

 

(b)    subject
to any defense or offsets which Tenant may have against any prior Landlord
(including, without limitation, the then defaulting Landlord), or

 

(c)    bound
by any payment of Rent which Tenant might have paid for more than the current
month to any prior Landlord (including, without limitation, the then defaulting
Landlord), or

 

(d)    bound
by any obligation to make any payment to Tenant which was required to be made
prior to the time such Landlord succeeded to any prior Landlord’s interest, or

 

(e)    bound
by any obligation to perform any work or to make improvements to the Property,
or

 

(f)     accountable
for the Security Deposit or any other monies or security deposited with any
prior Landlord, except to the extent such monies are actually received by such
Mortgagee.

 

If required by any Mortgagee, Tenant promptly
shall join in any Non-Disturbance Agreement to indicate its concurrence with
the provisions thereof and its agreement, in the event of a foreclosure of any
Mortgage or the cancellation, expiration or termination of any superior lease
to attorn to such Mortgagee, as Tenant’s landlord hereunder.  Tenant shall promptly so accept, execute and
deliver any Non-Disturbance Agreement proposed by any Mortgagee which conforms
with the provisions of this Section 10.1.  Any Non-Disturbance Agree­ment may also contain other terms and
conditions as may otherwise be required by any Mortgagee which do not
materially increase Tenant’s monetary obligations or materially and adversely
affect the rights or obligations of Tenant under this Lease.

 

Section 10.2. Tenant hereby agrees to give to
any Mortgagee copies of all notices given by Tenant of default by Landlord
under this Lease at the same time and in the same manner as, and whenever,
Tenant shall give any such notice of default to Landlord, provided the name and
address of such Mortgagee has been furnished in writing to Tenant.  Such Mortgagee shall have the right to
remedy any default under this Lease, or to cause any default of Landlord under
this Lease to be remedied, and for such purpose Tenant hereby grants such
Mortgagee such period of time as may be reasonable to enable such Mortgagee to
remedy, or cause to be remedied, any such default in addition to the period
given to Landlord for remedying, or causing to be remedied, any such default
which is a default.  Tenant shall accept
performance by such Mortgagee of any term, covenant, condition or agreement to
be performed by Landlord under the Lease with the same force and effect as
though performed by Landlord.  No
default under the Lease shall exist or shall be deemed to exist (a) as long as
such Mortgagee, in good faith, shall have commenced to cure such default and
shall be prosecuting the same to completion with reasonable diligence, subject
to force majeure, or (b) if possession of the Property is required in order to
cure such default, or if such default is not susceptible of being cured by such
Mortgagee,

 

 

as long as such Mortgagee, in good faith, shall have notified Tenant
that such Mortgagee intends to institute proceedings under the Mortgage and,
thereafter, as long as such proceedings shall have been instituted and shall
prosecute the same with reasonable diligence and, after having obtained
possession, prosecutes the cure to completion with reasonable diligence.  Neither such Mortgagee nor its designee or
nominee shall become liable under the Lease unless and until such Mortgagee or
its designee or nominee becomes, and then only for so long as such Mortgagee or
its designee or nominee re­mains, the fee owner of the Property. Such Mortgagee
shall have the right, without Tenant’s consent, to foreclose the Mortgage or to
accept a deed in lieu of foreclosure of such Mortgage.

 

ARTICLE 11

 

OBLIGATIONS OF TENANT

 

Section 11.1. Tenant shall promptly comply with all laws, ordinances,
orders, rules, regulations, and requirements of all federal, state, municipal
or other governmental or quasi-governmental authorities or bodies then
having jurisdiction over the Property (or any part thereof) and/or the use and
occupation thereof by Tenant, whether any of the same relate to or require (a)
structural changes to or in and about the Property, or (b) changes or
requirements incident to or as the result of any use or occupation thereof or
otherwise (collectively, the “Requirements”), and subject to Article 7,Tenant
shall so perform and comply, whether or not such laws, ordinances, orders,
rules, regulations or requirements shall now exist or shall hereafter be
enacted or promulgated and whether or not the same may be said to be within the
present contemplation of the parties hereto.

 

Section 11.2(a). Tenant agrees to give Landlord notice of any law,
ordinance, rule, regulation or require­ment which to Tenant’s knowledge is
enacted, passed, promulgated, made, issued or adopted by any of the
governmental departments or agencies or authorities hereinbefore mentioned
affecting in a material adverse manner (i) the Property, or  (ii) Tenant’s use thereof, a copy of which
is served upon or received by Tenant, or a copy of which is posted on, or
fastened or attached to the Property, or otherwise brought to the attention of
Tenant, by mailing within seven (7) business (or such later time if such
disclosure would violate applicable securities laws or regulations) days after
such service, receipt, posting, fastening or attaching or after the same
otherwise comes to the attention of Tenant, a copy of each and every one
thereof to Landlord.  At the same time,
Tenant will inform Landlord as to the Work which Tenant proposes to do or take
in order to comply therewith.

 

(b)  Notwithstanding the
foregoing, however, if such Work would require any Alterations which would, in
Landlord’s opinion, reduce the value of the Property or change the general
character, design or use of the Building or other improvements thereon, and if
Tenant does not desire to contest the same, Tenant shall, if Landlord so
requests, defer compliance therewith in order that Landlord may, if Landlord
wishes, contest or seek modification of or other relief with respect to such
Requirements, so long as Tenant is not put in violation of any law, ordinance,
rule, regulation or requirement enacted, passed, promulgated, made, issued or
adopted by any such governmental departments or agencies or authorities, but
nothing herein shall relieve

 

 

Tenant of the duty and
obligation, at Tenant’s sole cost and expense, to comply with such
Requirements, or such Requirements as modified, whenever Landlord shall so
direct.

 

(c)  Tenant shall have the right
to contest any such Requirement provided (i) the same is done at Tenant’s sole
cost and expense, (ii) such contest will not subject Tenant or the Property to
penalty or forfeiture, (iii) such contest will not adversely affect Landlord’s
interest in the Property, and (iv) such contest shall not subject Landlord or
any Mortgagee to the risk of any criminal or civil liability.

 

Section 11.3. Tenant shall, to the extent not caused by the gross
negligence or willful misconduct of Landlord, defend, indemnify and save
harmless Landlord, any partners or members of Landlord, any partners of any
partners of Landlord or any members of any members of Landlord and any
officers, stockholders, directors or employees of any of the foregoing
(collectively, “Indemnified Parties”) from (a) any and all liabilities, losses,
claims, causes of actions, suits, damages and expenses (collectively, “Claims”)
arising from (i) any Work or thing whatsoever done, or any condition created in
or about the Property during the Term, (ii) any use, non-use, possession,
occupation, Alteration, repair, condition, operation, management or maintenance
of the Property or any part thereof or of any street, alley, sidewalk, curb,
vault, passageway, common area or space comprising a part thereof or adjacent
thereto, (iii) any act or omission of Tenant or any of its subtenants or
licensees or its or their employees, agents, contractors or subcontractors,
(iv) any accident, injury (including death) or damage to any person or property
occurring in, on or about the Property or any part thereof or in, on or about
any street, alley, sidewalk, curb, vault, passageway, common area or space
comprising a part thereof or adjacent thereto, (v) any contest by, or at the
request of, Tenant of Impositions, Requirements or other matters permitted by
this Lease and (vi) any breach, violation or non-performance of any covenant,
condition or agreement in this Lease to be fulfilled, kept, observed or
performed by Tenant; and (b) all costs, expenses and liabilities incurred,
including, without limitation, attorney’s fees and disbursements through and
including appellate proceedings, in or in connection with any of such
Claims.  If any action or proceeding
shall be brought against any of the Indemnified Parties by reason of any such
Claims, Tenant, upon notice from any of the Indemnified Parties, shall resist
and defend such action or proceeding, at its sole cost and expense by counsel
chosen by Tenant who shall be reasonably satisfactory to such Indemnified
Party.  Tenant or its counsel shall keep
each Indemnified Party fully apprised at all times of the status of such
defense.  Counsel for Tenant’s insurer
shall be deemed satisfactory to such Indemnified Party.  Notwithstanding the foregoing, if an
Indemnified Party reasonably determines that such counsel cannot adequately
defend such Indemnified Party or that there is a conflict of interest with
Tenant, an Indemnified Party may retain its own attorneys to defend or assist
in defending any claim, action or proceeding involving potential liability in
excess of One Hundred Thousand Dollars ($100,000), and the Tenant shall pay the
reasonable fees and disbursements of such attorneys. Anything in this Lease to
the contrary notwithstanding, in no event shall Tenant be obligated to indemnify
any Indemnified Party for any act or omission constituting gross negligence or
willful misconduct by such Indemnified Party nor shall Tenant be deemed to have
released any of the Indemnified Parties for any act or omission constituting
gross negligence or willful misconduct by such Indemnified Parties. The
provisions of this Section 11.3 shall survive the expiration or earlier
termination of this Lease.

 

 

Section 11.4. If at any time prior to or during the Term (or within the
statutory period thereafter if attributable to Tenant), any mechanic’s or other
lien or order for payment of money, which shall have been either created by,
caused (directly or indirectly) by, or during the Primary Term and any Extended
Term, suffered against Tenant, shall be filed against the Property or any part
thereof, Tenant, at its sole cost and expense, shall cause the same to be
discharged by payment, bonding or otherwise, within twenty (20) days after the
filing thereof.  Tenant shall, upon
notice and request in writing by Landlord, defend for Landlord, at Tenant’s
sole cost and expense, any action or proceeding which may be brought on or for
the enforcement of any such lien or order for payment of money, and will pay
any damages and satisfy and discharge any judgment entered in such action or
proceeding and save harmless Landlord from any liability, claim or damage
resulting therefrom. In default of Tenant’s procuring the discharge of any such
lien as aforesaid Landlord may, without notice, and without prejudice to its
other remedies hereunder, procure the discharge thereof by bonding or pay­ment
or otherwise, and all cost and expense which Landlord shall incur shall be paid
by Tenant to Landlord as Addi­tional Rent forthwith.

 

Section 11.5. EXCEPT AS EXPRESSLY PROVIDED IN THIS LEASE, LANDLORD
SHALL NOT UNDER ANY CIRCUMSTANCES BE LIABLE TO PAY FOR ANY WORK, LABOR OR
SERVICES RENDERED OR MATERIALS FURNISHED TO OR FOR THE ACCOUNT OF TENANT UPON
OR IN CONNECTION WITH THE PROPERTY, AND NO MECHANIC’S OR OTHER LIEN FOR SUCH WORK,
LABOR OR SERVICES OR MATERIAL FURNISHED SHALL, UNDER ANY CIRCUM­STANCES, ATTACH
TO OR AFFECT THE REVERSIONARY INTEREST OF LANDLORD IN AND TO THE PROPERTY OR
ANY ALTERATIONS, REPAIRS, OR IMPROVEMENTS TO BE ERECTED OR MADE THEREON.  NOTHING CONTAINED IN THIS LEASE SHALL BE
DEEMED OR CONSTRUED IN ANY WAY AS CONSTITUTING THE REQUEST OR CONSENT OF
LANDLORD, EITHER EXPRESS OR IMPLIED, TO ANY CONTRACTOR, SUBCONTRACTOR, LABORER
OR MATERIALMEN FOR THE PERFORMANCE OF ANY LABOR OR THE FURNISHING OF ANY
MATERIALS FOR ANY SPECIFIC IMPROVEMENT, ALTERATION TO OR REPAIR OF THE PROPERTY
OR ANY PART THEREOF, NOR AS GIVING TENANT ANY RIGHT, POWER OR AUTHORITY TO
CONTRACT FOR OR PERMIT THE RENDERING OF ANY SERVICES OR THE FURNISHING OF ANY
MATERIALS ON BEHALF OF LANDLORD THAT WOULD GIVE RISE TO THE FILING OF ANY LIEN
AGAINST THE PROPERTY.

 

Section 11.6. Neither Landlord nor its agents shall be liable for any
loss of or damage to the property of Tenant or others by reason of casualty,
theft or otherwise, or for any injury or damage to persons or property
resulting from any cause of whatsoever nature, unless caused by or due to the
negligence or willful misconduct of Landlord, its agents, servants or
employees.

 

Section 11.7. Landlord shall not be required to furnish to Tenant any
facilities or services of any kind whatsoever, including, but not limited to,
water, steam, heat, gas, oil, hot water, and/or electricity, all of which
Tenant represents and warrants that Tenant has obtained

 

 

from the public utility
supplying the same, at Tenant’s sole cost and expense.  Upon Tenant’s written request, however,
Landlord agrees to cooperate with Tenant (at no cost to Landlord) with respect
to such services.

 

ARTICLE 12

 

DEFAULT; REMEDIES

 

Section 12.1. Each of the following shall be deemed an event of default
(an “Event of Default”) and a breach of this Lease by Tenant:

 

(a)         If
the Fixed Rent which is due and payable shall not be paid by Tenant for a
period of five (5) business days after Landlord has provided written notice of
such failure.

 

(b)        If
Tenant shall fail to pay any Additional Rent required to be paid by Tenant
hereunder which is due and payable for a period of ten (10) business days after
Landlord has provided written notice of such failure.

 

(c)         If
Tenant shall Default in the perfor­mance or observance of any of the other
agreements, conditions, covenants or terms herein contained, then if such
Default shall continue for twenty (20) Business Days after written notice by
Landlord to Tenant (or if such Default is of such a nature that it cannot be
completely remedied within said twenty (20) Business Day period, then if Tenant
does not agree in writing within such twenty (20) Business Day period to cure
the same, commence and thereafter diligently prosecute the cure and complete
the cure within a reasonable period of time under the circumstances after such
original written notice of default by Landlord to Tenant).

 

(d)        If
Tenant abandons the Property.

 

(e)         If
Tenant shall Transfer all or any of its interest in this Lease without
compliance with the provisions of this Lease applicable thereto.

 

(f)         If
(i) Tenant shall commence any case, proceeding or other action (A) under any
existing or future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking to have an
order for relief entered with respect to Tenant, or seeking to adjudicate
Tenant a bankrupt or insolvent, or seeking reorganization, arrange­ment,
adjustment, liquidation, dissolution, composition or other relief with respect
to Tenant or Tenant’s debts, or (B) seeking appointment of a receiver, trustee,
custodian or other similar official for Tenant or for all or any substantial
part of Tenant’s property; or (ii) Tenant shall make a general assignment for
the benefit of Tenant’s creditors; or (iii) there shall be commenced against
Tenant any case, proceeding or other action of a nature referred to in clause
(i) above or seeking issuance of a warrant of attachment, execution, distraint
or similar process against all or any substantial part of Tenant’s property,
which case, proceeding or other action (A) results in the entry of an order for
relief or (B) remains un-dismissed, un-discharged or un-bonded for a period of
sixty (60) days; or (iv) Tenant shall take any action

 

 

consenting to or approving of
any of the acts set forth in clause (i) or (ii) above; or (v) Tenant shall
generally not, or shall be unable to, pay Tenant’s debts as they become due or
shall admit in writing Tenant’s inability to pay Tenant’s debts.

 

(g)        If
Tenant shall cease to exist as a valid legal entity in accordance with the laws
of any state of the United States, then if Tenant does not completely remedy
such default immedi­ately.

 

(h)        If
Tenant fails to deliver to Landlord the Security Deposit within five (5) days
after written notice from Landlord that the Security Deposit is due.

 

(i)          If
Tenant fails to deliver an amendment to the Letter of Credit or a replacement
Letter of Credit by a date which is at least twenty (20) days from its
scheduled expiration, which amendment or replacement extends the term of the
Letter of Credit for at least one year, or if either Tenant fails to deliver a
Replacement L/C within thirty (30) of receipt of a Replacement Notice or the
Replacement L/C fails to meet the requirements for an Existing L/C; provided
however, that if Landlord draws on the Letter of Credit and collects the
proceeds therefrom, the proceeds shall be held as the Security Deposit in
accordance with Article 21 and the Event of Default pursuant to this Section
12.1(i) shall be deemed cured.

 

Section 12.2.  If an Event of Default shall occur, Landlord may elect to declare
all Rent for the remainder of the Term (as same may be extended as provided
herein) due and payable and, if Landlord shall make such an election, the
present value of the Rent shall be due and payable five (5) days after written
notice by Landlord to Tenant of such election. 
The aforesaid present value shall be determined by discounting each
monthly installment of Rent for the remainder of the Term from the date such
installment would have been due and payable to the date of Landlord’s election
to accelerate, by a rate of one (1%) percent per annum less than the interest
rate paid under a United States Treasury Bond of comparable duration.  Landlord also may elect to proceed by
appropriate judicial proceedings, either at law or in equity, to enforce
performance or observance by Tenant of the applicable provisions of this Lease
and/or to recover damages for breach thereof.

 

Section 12.3.  (a)  If an Event of Default (i) described in Sections
12.1(c) or (e) hereof shall occur and Landlord, at any time thereafter, at
its option, gives written notice to Tenant stating that this Lease shall
terminate on the date specified in such written notice, which date shall be not
less than five (5) days after the giving of such written notice, and if, on the
date specified in such notice, Tenant shall have failed to cure the default
which was the basis for the Event of Default, or (ii) described in Sections
12.1 (a), (b), (d), (f) or (g) hereof shall occur, then all rights of
Tenant under this Lease shall terminate and Tenant immediately shall quit and
surrender the Property, which termination shall not relieve Tenant from any
liability then or thereafter accruing hereunder.

 

(b)           If an Event of
Default described in Sections 12.1(a) or (b) hereof shall occur, or this
Lease shall be terminated as provided in Section 12.2 hereof, Landlord,
without notice, and with or without court proceedings, (i) may re-enter and
repossess the Property, or (ii)

 

 

may dispossess Tenant by
summary proceedings or otherwise, which re-entry and repossession by
Landlord shall not relieve Tenant from any liability then or thereafter
accruing hereunder.

 

Section 12.4. If this Lease shall be terminated as provided in Section
12.2 hereof and/or Tenant shall be dispossessed by summary proceedings or
otherwise as provided in Section 12.3 (b) hereof:

 

(a)         Tenant
shall pay to Landlord all Rent payable under this Lease by Tenant to Landlord
to the date upon which this Lease shall have been terminated or to the date of
re-entry upon the Property by Landlord, as the case may be.

 

(b)        Landlord
may repair and alter the Property in such manner as Landlord may deem necessary
or advisable without relieving Tenant of any liability under this Lease or
otherwise affecting any such liability, and/or let or relet the Property or any
parts thereof for the whole or any part of the remainder of the Term or for a
longer period, in Landlord’s name or as agent of Tenant, and out of any rent
and other sums collected or received as a result of such reletting Landlord
shall: (i) first, pay to itself the cost and expense of terminating this Lease,
re-entering, retaking, repossessing, repairing and/or altering the Property, or
any part thereof, and the cost and expense of removing all persons and property
therefrom, including in such costs, brokerage commissions, advertising costs,
legal expenses and attorneys’ fees and disbursements, (ii) second, pay to
itself the cost and expense sustained in securing any new tenants and other
occupants, including in such costs, brokerage commissions, advertising costs,
legal expenses and attorneys’ fees and disbursements and other expenses of,
preparing the Property for reletting, and, if Landlord shall maintain and
operate the Property, the cost and expense of operating and maintaining the
Property, and (iii) third, pay to itself any balance remaining on account of
the liability of Tenant to Landlord. 
Landlord in no way shall be responsible or liable for any failure to
relet the Property or any part thereof, or for any failure to collect any rent
due on any such reletting, and no such failure to relet or to collect rent
shall operate to relieve Tenant of any liability under this Lease or to
otherwise affect any such liability;

 

(c)         Tenant
shall be liable for and shall pay to Landlord, as damages, any deficiency
(“Deficiency”), between the Rent reserved in this Lease for the period which
otherwise would have constituted the unexpired portion of the Term and the net
amount, if any, of rents collected under any reletting effected pursuant to the
provisions of Section 12.4(b) hereof for any part of such period, first
deducting from the rents collected under any such reletting all of the payments
to Landlord described in Section 12.4(b) hereof; any such Deficiency
shall be paid in installments by Tenant on the days specified in this Lease for
payment of installments of Rent and Landlord shall be entitled to recover from
Tenant each Deficiency installment as the same shall arise, and no suit to
collect the amount of the Deficiency for any installment period shall prejudice
Landlord’s right to collect the Deficiency for any subsequent installment
period by a similar proceeding; and

 

(d)        whether
or not Landlord shall have collected any Deficiency installments as aforesaid,
Landlord shall be entitled to recover from Tenant, and Tenant shall pay to
Landlord, on demand, in lieu of any further Deficiencies, as and for liquidated
and agreed final damages (it

 

 

being agreed that it would be
impracticable or extremely difficult to fix the actual damage), a sum equal to
the amount by which the Rent reserved in this Lease for the period which
otherwise would have constituted the unexpired portion of the Term exceeds the
then fair and reasonable rental value of the Property for the same period, both
discounted to present worth at a rate equal to the then applicable rate of
United States Treasury Bonds having terms to maturity most closely matching the
unexpired portion of the Term, less the aggregate amount of Deficiencies
theretofore collected by Landlord pursuant to the provisions of Section
12.4(c) hereof for the same period; it being agreed that before
presentation of proof of such liquidated damages to any court, commission or
tribunal, if the Property, or any part thereof, shall have been relet by
Landlord in an arm’s length transaction for the period which otherwise would
have constituted the unexpired portion of the Term, or any part thereof, the
amount of rent reserved upon such reletting shall be deemed, prima  facie,
to be the fair and reasonable rental value for the part or the whole of the
Property so relet during the term of the reletting.

 

Section 12.5. No termination of this Lease pursuant to Section 12.2
hereof, and no taking possession of and/or reletting the Property, or any part
thereof, pursuant to Sections 12.3(b) and 12.4(b) hereof, shall relieve
Tenant of its liabilities and obligations hereunder, all of which shall survive
such expiration, termination, repossession or reletting.

 

Section 12.6. To the extent not prohibited by law, Tenant hereby
knowingly and voluntarily waives and releases all rights (legal and equitable)
now or hereafter conferred by statute or otherwise which would have the effect
of limiting or modifying any of the provisions of this Article 12.  Tenant shall execute, acknowledge and
deliver any instruments which Landlord may request, whether before or after the
occurrence of an Event of Default, evidencing such waiver or release.

 

Section 12.7. The Rent payable by Tenant here­under and each and every
installment thereof, and all costs, actual and customary attorneys’ fees and
disbursements and other expenses which may be incurred by Landlord in enforcing
the provisions of this Lease on account of any delinquency of Tenant in
carrying out the provisions of this Lease shall be and they hereby are declared
to constitute a valid lien upon the interest of Tenant in this Lease and in the
Property.

 

Section 12.8. Suit or suits for the recovery of damages, or for a sum
equal to any installment or installments of Rent payable hereunder or any
Deficiencies or other sums payable by Tenant to Landlord pursuant to this Article
12, may be brought by Landlord from time to time at Landlord’s election,
and nothing herein contained shall be deemed to require Landlord to await the
date whereon this Lease or the Term would have expired by limitation had there
been no Event of Default by Tenant and termination.

 

Section 12.9. Nothing contained in this Article 12 shall limit
or prejudice the right of Landlord to prove and obtain as liquidated damages in
any bankruptcy, insolvency, receivership, reorganization or dissolution
proceeding an amount equal to the maximum allowed by a statute or rule of law
governing such proceeding and in effect at the time when such

 

 

damages are to be proved,
whether or not such amount shall be greater than, equal to or less than the
amount of the damages referred to in any of the preceding Sections of this Article
12.

 

Section 12.10. No receipt of moneys by Landlord from Tenant after
termination of this Lease, or after the giving of any notice of the termination
of this Lease shall reinstate, continue or extend the Term or affect any of the
right of Landlord to enforce the payment of Rent payable by Tenant hereunder or
thereafter falling due, or operate as a waiver of the right of Landlord to
recover possession of the Property by proper remedy, except as herein otherwise
expressly provided or as provided by applicable law, it being agreed that after
the service of notice to terminate this Lease or the commencement of any suit
or summary proceedings, or after a final order or judgment for the possession
of the Property, Landlord may demand, receive and collect any monies due or
thereafter falling due without in any manner affecting such notice,
proceedings, order, suit or judgment, all such monies collected being deemed
payments on account of Tenant’s liability hereunder.

 

Section 12.11. Except as otherwise expressly provided herein or as
prohibited by applicable law, Tenant hereby expressly knowingly and voluntarily
waives the service of any notice of inten­tion to re-enter provided for
in any statute, or of the institution of legal proceedings to that end, and
Tenant, for and on behalf of itself and all persons claiming through or under
Tenant, also knowingly and voluntarily waives any and all right of redemption
provided by any law or statute now in force or hereafter enacted or otherwise,
or re-entry or repossession or to restore the operation of this Lease in
case Tenant shall be dispossessed by a judgment or by warrant of any court or
judge or in case of re-entry or repossession by Landlord or in case of
any expiration or termination of this Lease, and Landlord and Tenant waive and
shall waive trial by jury in any action, proceeding or counterclaim brought by
either of the parties hereto against the other on any matter whatsoever arising
out of or in any way connected with this Lease, the relationship of Landlord
and Tenant, Tenant’s use or occupancy of the Property, or any claim of injury
or damage.

 

Section 12.12. No failure by Landlord to insist upon the strict
performance of any covenant, agreement, term or condition of this Lease or to
exercise any right or remedy consequent upon a breach thereof, and no
acceptance of full or partial Rent during the continuance of any such breach,
shall constitute waiver of any such breach or of such covenant, agreement, term
or condition.  No covenant, agreement,
term or condition of this Lease to be performed or complied with by Tenant, and
no breach thereof, shall be waived, altered or modified except by a written
instrument executed by Landlord.  No
waiver of any breach shall affect or alter this Lease, but each and every
covenant, agreement, term and condition of this Lease shall continue in full
force and effect with respect to any other then existing or subsequent breach
hereof.

 

Section 12.13. In the event of the occurrence of any Event of Default,
Landlord shall be entitled to a decree compelling performance of any of the
provisions hereof, and shall have the right to invoke any rights and remedies
allowed at law or in equity or by statute or otherwise as though re-entry,
summary proceedings, and other remedies were not provided for in this Lease.

 

 

Section 12.14. Tenant shall pay to Landlord all costs and expenses,
including, without limitation, attor­neys’ fees and disbursements, incurred by
Landlord in any action or proceeding to which Landlord may be made a party by
reason of any act or omission of Tenant. Tenant also shall pay to Landlord all
costs and expenses, including, without limitation, attorneys’ fees and
disbursements, incurred by Landlord in enforcing any of the covenants and
provisions of this Lease and incurred in any action brought by Landlord against
Tenant on account of the provisions hereof, and all such costs, expenses and
attorneys’ fees and disbursements may be included in and form a part of any
judgment entered in any proceeding brought by Landlord against Tenant on or
under this Lease.  All of the sums paid
or obligations incurred by Landlord as aforesaid, with interest and costs,
shall be paid by Tenant to Landlord on demand.

 

Section 12.15. If an Event of Default shall occur under this Lease or
if Tenant shall fail to comply with its obligations under this Lease with
respect to insurance in accordance with Article 6 and/or the payment of
Impositions prior to delinquency, Landlord may, (a) perform the same for the
account of Tenant and/or (b) make any expenditure or incur any obligation for
the payment of money in connection with any obligation owed to Landlord,
including, but not limited to, attorney’s fees and disbursements in
instituting, prosecuting or defending any action or proceeding, with interest
thereon at the Default Rate and such amounts shall be deemed to be Additional
Rent hereunder and shall be paid by Tenant to Landlord immediately upon demand
therefor. Default Rate shall have the meaning ascribed to it in Article B
of this Lease; provided, however, that for purposes of this Article 12,
such Default Rate shall never exceed the maximum non-usurious rate
permitted by applicable law.

 

Section 12.16. If Tenant shall fail to pay any installment of Fixed
Rent when due or any Additional Rent within ten (10) days after the date when
such payment is due, Tenant shall pay to Landlord, in addition to such
installment of Fixed Rent or such Additional Rent, as the case may be, interest
on the amount unpaid at the Default Rate, computed from the date such payment
was due to and including the date of payment.

 

Section 12.17.  Unless otherwise
provided herein to the contrary, following an Event of Default by Tenant,
Landlord shall be entitled to enjoin such breach and shall have the right to
invoke any right or remedy allowed at law or in equity or by statute or
otherwise as though entry, re-entry, summary proceedings and other remedies
were not provided for in this Lease, provided however, that in the event of a
Default by Tenant which creates an imminent threat of loss of life or injury to
property or both, Landlord shall be entitled to enjoin such breach or seek
other injunctive relief.

 

Section 12.18.  Each right or
remedy of Landlord provided for in this Lease shall be cumulative and shall be
in addition to every other right or remedy provided for in this Lease or now or
hereafter existing at law or in equity or by statute or otherwise, and the
exercise or the beginning of the exercise by Landlord of any one or more of the
rights or remedies provided for in this Lease or now or hereafter existing at
law or in equity or by statute or otherwise shall not preclude the simultaneous
or later exercise by Landlord of any or all other rights or remedies

 

 

provided for in this Lease or
now or hereafter existing at law or in equity or by statute or otherwise.

 

Section 12.19.  Any of the
following occurrences, conditions or acts by Landlord shall constitute a “Landlord Event of Default”:

 

(a)           Landlord’s failure
to make any payments of money properly due Tenant or any third party due under
this Lease,  (if any), hereunder within
ten (10) days after the receipt of written notice from Tenant that same is
overdue; or

 

(b)           Landlord’s failure
to perform any nonmonetary obligation of Landlord hereunder within thirty (30)
days after receipt of written notice from Tenant to Landlord specifying such
default and demanding that the same be cured, provided that, if such default
cannot with due diligence be wholly cured within such thirty (30) day period, Landlord
shall have such longer period as may be reasonably necessary to cure the
default, so long as Landlord proceeds promptly to commence the cure of same
within such thirty (30) day period and diligently prosecutes the cure to
completion and provided further that in the case of an emergency, Tenant shall
be required to give only such notice as is reasonable under the circumstances.

 

Section 12.20.  Upon the
occurrence of a Landlord Event of Default, at Tenant’s option, Tenant may elect
one or more of the following remedies:

 

(a)           Without its actions
being deemed an election of remedies or a cure of Landlord’s default, Tenant
may pay or perform such obligations and, if any amounts payable to Tenant arise
out of Landlord’s failure to perform its obligations pursuant to Articles 7
and 8 of this Lease are not paid within ten (10) days after written demand
therefore, offset Tenant’s reasonable and actual cost of performance and/or any
amounts not paid, including any and all transaction costs and attorneys’ fees against
the Fixed Rent and any and all other amounts and charges due Landlord
hereunder, provided, however, Tenant shall not have any right of
offset against Fixed Rent or other amounts due to Landlord hereunder unless and
until Tenant shall have obtained a final non-appealable judgment from a court
of competent jurisdiction after actual notice of such proceeding to Landlord,
or

 

(b)           Exercise all other
remedies which it may have at law and/or in equity.

 

(c)           In the event Tenant
is awarded a money judgment against Landlord, Tenant’s sole recourse for
satisfaction of such judgment shall be limited to execution against the
Property or attachment upon any rent, sale, financing, insurance, condemnation
or other proceeds relating to the Property receivable by Landlord from and
after Landlord’s receipt of notice of default specifying the default upon which
Tenant ultimately obtains judgment.

 

 

ARTICLE 13

 

NO WAIVER

 

Section 13.1. No receipt of moneys by Landlord from Tenant after the
termination or cancellation of this Lease shall reinstate, continue or extend
the Term, or affect any notice heretofore given to Tenant, or operate as a
waiver of the right of Landlord to enforce the payment of Fixed Rent or
Additional Rent then due, or thereafter fall­ing due, or operate as a waiver of
the right of Landlord to recover possession of the Property by proper suit,
action, proceeding or remedy; it being agreed that, after the service of notice
to terminate or cancel this Lease, or the commencement of suit, action or summary
proceedings, or any other remedy, or after a final order or judgment for the
possession of the Property, Landlord may demand, receive and collect any moneys
due, or thereafter falling due, without, in any manner whatsoever, affecting
such notice, proceeding, suit, action, order or judgment; and any and all such
moneys collected shall be deemed to be payments on account of the use and
occupation of the Property or, at the election of Landlord, on account of
Tenant’s liability hereunder.

 

Section 13.2. The failure of Landlord or Tenant to enforce any
agreement, condition, covenant or term, by reason of its breach by Tenant or
Landlord, as the case may be, shall not be deemed to void, waive or affect the
right of Landlord or Tenant to enforce the same agreement, condition, covenant
or term on the occasion of a subsequent default or breach.

 

Section 13.3. The specific remedies to which Landlord may resort under
the terms of this Lease are cumulative and are not intended to be exclusive of
any other remedies or means of redress to which Landlord may be law­fully
entitled in case of any breach or threatened breach by Tenant of any of the
terms, covenants and conditions of this Lease. 
Unless otherwise agreed in writing by Landlord, the failure of Landlord
or Tenant to insist in any one or more cases upon the strict performance of any
of the terms, covenants and conditions of this Lease, or to exercise any right
or remedy herein contained, shall not be construed as a waiver or
relinquishment for the future performance of such terms, covenants and
conditions.  The receipt by Landlord, or
payment by Tenant, of Rent with knowledge of the breach of any of such terms,
covenants and conditions shall not be deemed a waiver of such breach.  The acceptance of any check or payment
bearing or accompanied by any endorsement, legend or statements shall not, of
itself, constitute any change in or termination of this Lease.  No surrender of the Property by Tenant
(prior to any termina­tion of this Lease) shall be valid unless consented to in
writing by Landlord. In addition to the other remedies in this Lease provided,
Landlord or Tenant shall be entitled to the restraint by injunction of the
violation or attempted or threatened violation or any of the terms, covenants
and conditions of this Lease or to a decree compelling performance of any of
such terms, covenants and conditions.

 

ARTICLE 14

 

ESTOPPEL CERTIFICATE

 

Section 14.1. Each party agrees that it shall, at any time and from
time to time in connection with the financing or sale of the Property and
otherwise not more frequently than

 

 

three (3) times per calendar
year, upon not less than ten (10) Business Days prior notice by the requesting
party execute, acknowledge and deliver to the requesting party or any other
party specified by the requesting party a statement in writing certifying that
this Lease is unmodified and in full force and effect (or if there have been
any modifications, that the Lease is in full force and effect as modified and
stating the modifications), the dates to which the Fixed Rent and Additional
Rent have been paid, and stating whether or not the requesting party is in
default in keeping, observing or performing any term, covenant, agreement,
provision, condition or limitation contained in this Lease and, if in default,
specifying each such default, the Commencement Date, the Rent Commencement Date
and Expiration Date for the current Term, and any other matters reasonably
requested by the requesting party; it being intended that any such statement
delivered pursuant to this Article 14 may be relied upon by the
requesting party or any prospective purchaser of the Property or any Mortgagee
thereof or any assignee of any Mortgage upon the Property.

 

ARTICLE 15

 

QUIET ENJOYMENT

 

Section 15.1. Tenant, upon payment of the Rents herein reserved and
upon the due performance and observance of all the covenants, conditions and
agreements herein contained on Tenant’s part to be performed and observed,
shall and may at all times during the Term peaceably and quietly have, hold and
enjoy the Property without any manner of suit, trouble or hindrance of and from
any person claiming by, through or under Landlord, subject, neverthe­less, to
the terms and provisions of this Lease. 
No failure by Landlord to comply with the foregoing covenant shall give
Tenant any right to cancel or terminate this Lease or to abate, reduce or make
a deduction from or offset against the Fixed Rent or any Additional Rent, or to
fail to perform any other obligation of Tenant hereunder.

 

ARTICLE 16

 

SURRENDER

 

Section 16.1. Tenant shall, on the last day of the Term, or upon the
sooner termination of the Term, quit and surrender to Landlord the Property
vacant, free of all equipment, furniture and other movable personal property of
Tenant, and in good order and condition, reasonable wear and tear and damage
due to casualty (subject to the provisions of Article 7) or condemnation
(subject to the provisions of Article 8) excepted, and Tenant shall
remove or demolish all of the fixtures, structures and other improvements which
Landlord shall have elected to cause Tenant to remove pursuant to and in
accordance with Section 5.8 hereof. Tenant’s obligation to observe and
perform this covenant shall survive the expiration or earlier termination of
the Term.

 

Section 16.2. Upon the expiration of the Term, all Fixed Rent and
Additional Rent and other items payable by Tenant under this Lease shall be
apportioned to the date of termination.

 

 

Section 16.3. Tenant acknowledges that possession of the Property must
be surrendered to Landlord at the expi­ration or sooner termination of the Term
of this Lease.  Tenant agrees to
indemnify Landlord against and save Landlord harmless from all costs, claims,
loss or liability resulting from the failure or delay by Tenant in so
surrendering the Property, including, without limitation, any claims made by
any succeeding tenant founded on such failure or delay.  The parties recognize and agree that the
damage to Landlord resulting from any failure by Tenant to timely surrender
possession of the Property as aforesaid will be extremely substantial, will
exceed the amount of the Fixed Rent and Additional Rent theretofore payable
here­under, and will be impossible to accurately measure.  Tenant therefore agrees that if possession
of the Property is not surrendered to Landlord upon the expiration or sooner
termination of the Term of this Lease, then Tenant shall pay to Landlord, as
liquidated damages for each month and for each portion of any month during
which Tenant holds over in the Property after the expiration or sooner
termination of the Term of this Lease, in addition to any sums payable pursuant
to the foregoing indemnity, one hundred fifty percent (150%) of the Fixed Rent
and Addi­tional Rent which was payable under this Lease with respect to the
last month of the Term hereof.  Nothing
herein contained shall be deemed to permit Tenant to retain posses­sion of the
Property after the expiration or sooner termina­tion of the Term of this
Lease.  If Tenant holds over in possession
after the expiration or termination of the Term of the Lease, such holding over
shall not be deemed to extend the Term or renew this Lease, but the tenancy
there­after shall continue as a tenancy from month to month upon the terms and
conditions of this Lease at the Fixed Rent and Additional Rent as herein
increased.  Tenant hereby knowingly and
voluntarily waives the benefit of any law or statute or equitable right in
effect in the state where the Property is located which would contravene or
limit the provisions set forth in this Section 16.3. This provision
shall survive the expiration or earlier termina­tion of this Lease.

 

ARTICLE 17

 

ACCESS

 

Section 17.1. Landlord shall at all times during the Term have the
right and privilege to enter the Property at reasonable times during business
hours upon reasonable advance notice which shall not unreasonably interfere
with normal operations of the Property for the purpose of inspecting the same
or for the purpose of showing the same to prospective purchasers or Mortgagees
thereof.  Landlord shall also have the
right and privilege at all times during the Term to post notices of
non-responsibility for Work performed by or on behalf of Tenant and, during the
last one (1) year of the Term, Landlord shall have the right and privilege (a)
to display the customary “For Sale” sign on the Building and (b) following
reasonable notice from Landlord and so long as such entry does not unduly
interfere with Tenant’s normal business operations, to enter the Property at
reasonable times during business hours for the purpose of exhibiting the same
to prospective new tenants and to display the customary “To Let” signs on the
Building.

 

Section 17.2. Landlord shall at all times during the Term have the
right to enter the Property or any part thereof, following reasonable notice
from Landlord (except in the event

 

 

of an emergency) and so long as
Landlord uses its reasonable best efforts to not unduly interfere with Tenant’s
normal business operations, for the purpose of making such repairs or
Alterations therein as Landlord deems necessary or advisable, but such right of
access shall not be construed as obligating Landlord to make any repairs to or
replacements to the Property or as obligating Landlord to make any inspection
or examination of the Building.

 

ARTICLE 18

 

ENVIRONMENTAL MATTERS

 

Section 18.1. Landlord has caused to be performed a Phase I
Environmental Site Assessment dated November 25, 2003, prepared by National
Assessment Corporation (the “Report”). 
Tenant represents and warrants to Landlord that Tenant has conducted an
appropriate inquiry and that, to Tenant’s Knowledge, and except as set forth in
the Report, no Hazardous Substance (as defined below) has been used, generated,
manufactured, produced, stored, released, discharged or disposed of on, under,
from or about the Property and that no Hazardous Substance is located on or
below the Property, except for quantities of Hazardous Substances utilized in
the construction of the Building or customarily employed in the ordinary course
of businesses similar to Tenant (“De Minimis Hazardous Substances”) provided
such Hazardous Substances are used and maintained in accordance with
Environmental Laws (as defined below) (e.g. the use of solvents and fungicides
in cleaning the Property, the use of pesticides in rendering the Property free
of vermin and insects or the use of herbicides in maintaining the landscaping
of the Property).  Tenant will not use,
generate, manufacture, produce, store, release, discharge or dispose of on,
under, from or about the Property or transport to or from the Property any
Hazardous Substance, except in accordance with Environmental Laws, and will use
its best efforts not to allow or suffer any other person or entity to do so.

 

Section 18.2. Tenant shall keep and maintain the Property in compliance
with, and shall not use, cause, permit or suffer the Property to be in
violation of any Environmental Law.

 

Section 18.3. Tenant represents and warrants to Landlord that Tenant
has not received any notice of a violation of any Environmental Law, nor
incurred any previous liability therefor with respect to the Property.  Tenant shall give prompt written notice to
Landlord of:

 

(i)            Tenant’s logs
maintained in the ordinary course of its business which document any use,
generation, manufacture, production, storage, release, discharge or disposal of
any Hazardous Substance on, under, from or about the Property or the migration
thereof to or from other property, including specifically those Hazardous
Substances used in Tenant’s business notwithstanding the fact that such
Hazardous Substances are used in compliance with Environmental Laws, provided
that such logs shall only be produced upon Landlord’s written request therefore
and no more frequently than quarterly;

 

(ii)           Tenant’s receipt of
notice of the commencement, institution or threat of any proceeding, inquiry or
action by or notice from any local, state or federal governmental

 

 

authority with respect to the
use or presence of any Hazardous Substance on the Property or the migration
thereof from or to other property;

 

(iii)          Tenant’s actual
knowledge of all claims made or threatened by any third party against Tenant or
the Property relating to any damage, contribution, cost recovery, compensation,
loss or injury resulting from any Hazardous Substance;

 

(iv)          Tenant’s actual
knowledge of any occurrence or condition on any real property adjoining or in
the vicinity of the Property that could cause the Property or any part thereof
to be subject to any restrictions on the ownership, occupancy, transferability
or use of the Property under any Environmental Law, or any regu­lation adopted
in accordance therewith, or to be otherwise subject to any restrictions on the
ownership, occupancy, transferability or use of the Property under any
Environmental Law; and

 

(v)           Tenant’s actual
knowledge of any incurrence of expense by any governmental authority or others
in con­nection with the assessment, containment or removal of any Hazardous
Substance located on, under, from or about the Property or any property
adjoining or in the vicinity of the Property.

 

Section 18.4. Landlord shall have the right, but not the obligation, to
join and participate in, as a party if it so elects, any legal proceedings or
actions initiated with respect to the Property in connection with any
Environmental Law and have its attorneys’ fees and disbursements in connection
therewith paid by Tenant or be defended by Tenant from and against any such
proceedings or actions with counsel chosen by Landlord (provided that Landlord
and Tenant shall attempt, in good faith, to agree on one counsel to represent
both Landlord and Tenant, if in Landlord’s good faith determination such joint
representation is feasible or appropriate under the circumstances), and shall
have the right to make inquiry of and disclose all information to appropriate
governmental authorities when advised by counsel that such disclosure may be
required under applicable law.

 

Section 18.5. Without Landlord’s prior written consent, which consent
shall not be unreasonably withheld or delayed, Tenant shall not take any
remedial action, other than pursuant to the plan developed in accordance with Sec­tion
18.7, in response to the presence of any Hazardous Sub­stance on, under,
from or about the Property, nor enter into any settlement, consent or
compromise which might, in Land­lord’s judgment, impair the value of Landlord’s
interest in the Property under this Lease; provided, however,
that Landlord’s prior consent shall not be neces­sary if the presence of
Hazardous Substance on, under, from or about the Property either poses an
immediate threat to the health, safety or welfare of any individual or is of
such a nature that an immediate remedial response is neces­sary and it is not
practical or possible to obtain Land­lord’s consent before taking such
action.  In such event Tenant shall
notify Landlord as soon as practicable of any action so taken. Landlord agrees
not to withhold its con­sent, where such consent is required hereunder, if
either (a) a particular remedial action is ordered by a court or any agency of
competent jurisdiction, or (b) Tenant establishes to the reasonable
satisfaction of Landlord that there is no reasonable alternative to such
remedial action which would result in less impairment of Landlord’s security
hereunder.

 

 

Section 18.6. Tenant shall protect, indemnify and hold harmless the
Indemnified Parties from and against any and all claims, losses, dam­ages,
costs, expenses, liabilities, fines, penalties, charges, administrative and
judicial proceedings and orders, judg­ments, remedial action requirements,
enforcement actions of any kind (including, without limitation, attorneys’ fees
and disbursements) directly or indirectly arising out of or attributable to, in
whole or in part, the breach of any of the covenants, representations and
warranties of this Article 18 or the use, generation, manufacture,
production, storage, release, threatened release, discharge, disposal, or
presence of a Hazardous Substance on, under, from or about the Property, or any
other activity carried on or undertaken on or off the Property, whether prior
to or during the Term and whether by Tenant or any predecessor in title or any
employees, agents, contractors or subcontractors of Tenant or any predecessor
in title, or any third persons at any time occupying or present on the
Property, in connection with the handling, treatment, removal, storage,
decontamination, clean-up, transport or disposal of any Hazardous
Substance at any time located or present on, under, from or about the Property,
including, without limitation: (a) the costs of any required or necessary
repair, cleanup or detoxification of the Property and the preparation and
implementation of any closure, remedial or other required plans including,
without limitation, (i) the costs of removal or remedial action incurred by the
United States Government or the state in which the Property is located, or
response costs incurred by any other person, or damages from injury to,
destruction of, or loss of natural resources, including the costs of assessing
such injury, destruction on loss, incurred pursuant to any Environmental Law;
(ii) the clean-up costs, fines, damages or penalties incurred pursuant to the
provisions of applicable state law; and (iii) the cost and expenses of
abatement, correction or clean-up, fines, damages, response costs or penalties
which arise from the provisions of any other statute, state or federal; and (b)
liability for personal injury or property damage, including damages assessed
for the maintenance of the public or private nuisance, response costs or for
the carrying on of an abnormally dangerous activity.

 

The foregoing indemnity shall further apply to any residual
contamination on, under, from or about the Property, or affecting any natural
resources arising in connection with the use, generation, manufacturing,
product­ion, handling, storage, transport, discharge or disposal of any such
Hazardous Substance, and irrespective or whether any of such activities were or
will be undertaken in accordance with Environmental Law or other applicable
laws, regulations, codes and ordinances. 
This indemnity is intended to be operable under 42 U.S.C. Section
9607(e)(1), and any successor section thereof and shall survive the expiration or
earlier termination of this Lease and any transfer of all or a portion of the
Property by Tenant.

 

The foregoing indemnity shall in no manner be construed to limit or
adversely affect Landlord’s rights under this Article 18, including,
without limitation, Landlord’s rights to approve any Remedial Work (as defined
below) or the contractors and consulting engineers retained in connection
therewith.

 

Section 18.7. In the event that any investiga­tion, site monitoring,
containment, cleanup, removal, restoration or other remedial Work of any kind
or nature (the “Remedial Work”) is required by any applicable local, state or
federal law or regulation, any judicial order, or by any governmental entity or
person because of, or in connection with, the current or future

 

 

presence, suspected presence,
release or suspected release of a Hazardous Substance in or into the air, soil,
groundwater, surface water or soil vapor at, on, about, under or within the
Property (or any portion thereof), Tenant shall promptly, but in no event later
than forty five (45) days after written demand for performance thereof by
Landlord (or such shorter period of time as may be required under any
applicable law, regulation, order or agreement), commence to perform, or cause
to be commenced, and thereafter diligently prosecute to completion within such
period of time as may be required under any applicable law, regulation, order
or agreement, all such Remedial Work at Tenant’s sole expense in accordance
with the requirements of any applicable governmental authority or Environmental
Law.  All Remedial Work shall be
performed by one or more contractors, approved in advance in writing by
Landlord, and under the supervision of a consulting engineer approved in
advance in writing by Landlord, which approvals shall not be unreasonably
withheld.  All costs and expenses of
such Remedial Work shall be paid by Tenant, including, without limitation, the
charges of such contractor(s) and/or the consulting engineer, and Landlord’s
reasonable attorneys’ fees and disbursements incurred in connection with moni­toring
or review of such Remedial Work.  In the
event Tenant shall fail to timely commence, or cause to be commenced, or fail
to complete the Remedial Work within the time required above, Landlord may, but
shall not be required to, cause such Remedial Work to be performed and all
costs and expenses thereof, or incurred in connection therewith shall be
Additional Rent.

 

Section 18.8. Upon the reasonable belief that an Environmental Law has
been violated, Landlord shall have the right to engage or cause Tenant to
engage, each at Tenant’s sole cost and expense, an environmental consultant
acceptable to both Landlord and Tenant, to review compliance by Tenant with all
applicable Environmental Laws and Requirements and standards existing at such
time with respect to the practice relating to contamination or hazardous waste
methods, conditions and procedures and Tenant’s development of a plan to
identify, contain and remediate problems caused by such Hazardous Substances.  In the event that Landlord reasonably
believes that there has been a violation or threatened violation by Tenant of
any Environmental Law or a violation or threatened violation by Tenant of any
covenant under this Article 18, Landlord is authorized, but not
obligated, by itself, its agents, employees or workmen to enter at any
reasonable time upon any part of the Property for the purposes of inspecting
the same for Hazardous Substances and Tenant’s compliance with this Article
18, and such inspections may include, without limitation, soil
borings.  Tenant agrees to pay to
Landlord, upon Landlord’s demand, all expenses, costs or other amounts incurred
by Landlord in performing any inspection for the purposes set forth in this Section
18.8.

 

Section 18.9. All costs and expenses incurred by Landlord under this Article
18 shall be immediately due and payable as Additional Rent upon demand and
shall bear interest at the Default Rate from the date of notice of such payment
by Landlord and the expiration of any grace period provided herein until
repaid.

 

Section 18.10. “Environmental Laws” shall mean any federal, state or
local law, statute, ordinance or regulation pertaining to health, workplace
health and safety, hazard­ous waste or the environmental conditions on, under,
from or about the Property, including, without limitation, the laws listed in
the definition of Hazardous Substances below.

 

 

Section 18.11. “Hazardous Substances” shall mean any element, asbestos,
compound, chemical mixture, contaminant, pollutant, infectious substance,
material, waste or other substance which is defined, determined or identified
as a “hazardous substance”, “hazardous waste” or “hazardous material” under any
federal, state or local statute, regulation or ordinance applicable to any real
property or the Property, as well as any amendments and successors to such
statutes and regulations, as may be enacted and promulgated from time to time,
including, without limitation, the following: (i) the Comprehensive Environmental
Response, Compensation and Liability Act of 1980 (codified in scattered
sections of 26 U.S.C., 33 U.S.C., 42 U.S.C. and 42 U.S.C. § 9601 et  seq.);
(ii) the Resource Conservation and Recovery Act of 1976 (42 U.S.C. § 6901 et.
seq.); (iii) the Hazardous Materials Transportation Act (49 U.S.C. § 1801 et.
seq.); (iv) the Toxic Substances Control Act (15 U.S.C. § 2601 et.
seq.); (v) the Clean Water Act (33 U.S.C. § 1251 et. seq.); (vi) the
Clean Air Act (42 U.S.C. § 7401 et. seq.); (vii) the Safe Drinking Water
Act (21 U.S.C. § 349; 42 U.S.C. § 201 and § 300f et.  seq.);
(viii) the National Environmental Policy Act of 1969 (42 U.S.C. § 3421); (ix)
the Superfund Amendment and Reauthorization Act of 1986 (codified in scattered
sections of 10 U.S.C., 29 U.S.C., 33 U.S.C. and 42 U.S.C.); and (x) Title III
of the Superfund Amendment and Reauthorization Act (40 U.S.C. 1101 et.  seq.).  Hazardous Substances shall also be deemed to
include any and all biohazardous wastes, substances and materials which are, or
in the future become, regulated under applicable Environmental Laws for the
protection of health or the environment or which are classified as hazardous or
toxic substances, materials, wastes, pollutants or contaminants, including
without limitation radioactive materials and waste, any medical waste including
without limitations any blood containing or blood tainted items or materials,
animal remains or waste and materials that threaten human health, ecology or
the environment.

 

Section 18.12. All representations and warranties contained in this Article
18 shall supersede any previous disclosures, written or oral, made by
Tenant or its agents to Landlord with respect to the Property.  Landlord and any Mortgagee shall be entitled
to rely on the representations and warranties contained herein in pursuit of
its rights and remedies for a breach thereof without regard to any such
previous disclosures.

 

Section 18.13.  As used in this Article
18, the term to “Tenant’s Knowledge” shall mean the actual and constructive
knowledge of the officers, directors and senior management of Tenant as well as
all employees having responsibility for the management of the Property and
compliance with Environmental Laws.

 

Section 18.14. All representations, warranties, covenants and
indemnities of Tenant in this Article 18 shall continue to be binding
upon Tenant, and its successors and assigns, after the expiration or earlier
termination of this Lease.

 

 

ARTICLE 19

 

FINANCIAL STATEMENTS

 

Section 19.1.  Tenant shall make
available to Landlord not later than one hundred (100) days after the end of
its fiscal year, an audited balance sheet of Tenant as at the close of such
year, together with the related statements of profit and loss and changes in
financial position for such period, setting forth in each case, in comparative
form, the corresponding figures for the preceding fiscal year, audited and
certified by an indepen­dent certified public accounting firm of recognized
standing.  In addition, upon request
from Landlord, within one hundred (100) days after the end of each of the first
three (3) quarters of each of its respective fiscal years, the Tenant shall
furnish an unaudited balance sheet as at the close of such quarter, together
with the related unaudited statement of profit and loss and changes in
financial position, all certified by a treasurer or comptroller of the
Tenant.  All financial statements
furnished by Tenant to Landlord hereunder shall be prepared in accordance with
generally accepted accounting principles consistently applied.

 

Section 19.2.  Notwithstanding
the provisions of Section 19.1, so long as Tenant is a public company
and its current financial statements are publicly available through the
Securities and Exchange Commission, Tenant will not be obligated to separately
and directly provide its financial statements to Landlord or otherwise comply
with the requirements of Section 19.1.

 

ARTICLE 20

 

MISCELLANEOUS PROVISIONS

 

Section 20.1. It is mutually agreed by and between Landlord and Tenant
that the respective parties shall and they hereby do waive trial by jury in any
action, proceeding or counterclaim brought by either of the parties hereto
against the other on any matters whatsoever arising out of or in any way
connected with this Lease, Tenant’s use or occupancy of the Property, and/or
any claim of injury or damage excluding any claim for personal injury or
property damage.

 

Section 20.2. Upon Landlord’s prior written approval, Tenant may place
such signs on the Property as Tenant deems appropriate to indicate the nature
of the business of Tenant and such parties. The signs shall be lawful under
applicable sign codes and subdivision covenants and Tenant shall obtain all
appropriate licenses and approvals in connection with such signs.  Signs existing on the Commencement Date
shall be deemed approved by Landlord provided such signs comply with all
applicable sign codes and laws.

 

Section 20.3. (a) The term “Landlord” as used herein shall mean only
the owner for the time being of the Property, so that in the event of any sale,
transfer or conveyance of the Property, Landlord shall be and hereby is
entirely freed and relieved of all agreements, covenants and obligations of
Landlord thereafter accruing hereunder, and it shall be deemed and construed
without further agreement between the parties or their successors in interest
or between the parties and the purchaser, transferee or grantee at any such
sale, transfer or conveyance that such purchaser, transferee or grantee has
assumed and agreed to carry out any and all agreements, covenants and
obligations of Landlord hereunder.

 

 

(b)           The term “Tenant” as
used herein shall mean the tenant named herein, and from and after any valid
assignment or transfer in whole of said Tenant’s interest under this Lease
pursuant to the provisions of Article 9, shall mean only the assignee or
transferee thereof; but the foregoing shall not release the assignor or
transferor from liability under this Lease.

 

(c)           The words “enter”,
“re-enter”, “entry” and “re-entry” as used in this Lease shall not
be restricted to their technical legal meaning.

 

(d)           The
use herein of the neuter pronoun in any reference to Landlord or Tenant shall
be deemed to include any individual Landlord or Tenant, and the use herein of
the words “successor and assigns” or “successors or assigns” of Landlord or
Tenant shall be deemed to include the heirs, executors, administrators,
representatives and assigns of any individual Landlord or Tenant.

 

Section 20.4. The headings herein are inserted only as a matter of
convenience and for reference and in no way define, limit or describe the scope
or intent of this Lease.

 

Section 20.5. This Lease shall be governed by and construed in
accordance with the substantive laws of the State of California.  Under no circumstances whatsoever shall this
Lease be construed as creating either a partnership, an agency or an employment
relationship between the parties hereto.

 

Section 20.6. This Lease contains the entire agreement between the
parties with respect to the leasing of the Property and may not be extended, re­newed,
terminated or otherwise modified in any manner except by an instrument in
writing executed by the party against whom enforcement of any such modification
is sought.  All prior understandings and
agreements between the parties and all prior working drafts of this Lease are
merged in this Lease, which alone expresses the agreement of the parties. The
parties agree that no inferences shall be drawn from matters deleted from any
working drafts of this Lease.

 

Section 20.7. The agreements, terms, covenants and conditions herein
shall bind and inure to the benefit of Landlord and Tenant and their respective
heirs, personal representatives, successors and, except as is otherwise
provided herein, their assigns.

 

Section 20.8. Notice whenever provided for herein shall be in writing
and shall be given either by personal delivery, overnight express mail or by
certified or registered mail, return receipt requested, to Landlord and Tenant
at the addresses hereinabove set forth in Article A, Section 5 or
to such other persons or at such other addresses as may be designated from time
to time by written notice from either party to the other. Notices shall be
deemed given (i) when delivered personally if delivered on a business day (or
if the same is not a business day, then the next business day after delivery),
(ii) three (3) business days after being sent by United States mail, registered
or certified mail, postage prepaid, return receipt requested or (iii) if
delivery is made by Federal Express or a similar, nationally recognized
overnight courier service for 10:00

 

 

a.m. delivery, then on the date
of delivery (or if the same is not a business day, then the next business day
after delivery), if properly sent and addressed in accordance with the terms of
this Section 20.8.

 

Section 20.9. If any provision of this Lease shall be invalid or
unenforceable, the remainder of the provisions of this Lease shall not be
affected thereby and each and every provision of this Lease shall be
enforceable to the fullest extent permitted by law.

 

Section 20.10. Tenant represents and warrants to Landlord that Tenant
has not dealt with any real estate broker in connection with this Lease and
that the only advisor that it has used in this transaction is CRESA Partners,
whose fee shall be paid by Tenant pursuant to a separate written
agreement.  Tenant agrees to indemnify
the Landlord and save the Landlord harmless from any and all claims for
brokerage commissions by any person, firm, corporation or other entity claiming
to have brought about this Lease transaction as a result of Tenant’s actions.
Landlord represents and warrants to Tenant that Landlord has not dealt with any
real estate broker in connection with this transaction.  Landlord agrees to indemnify and hold Tenant
harmless from any and all claims for brokerage commissions by any person, firm,
corporation or other entity claiming to have brought about this Lease
transaction as a result of Landlord’s actions.. The provisions of this Section
20.10 shall survive the expiration or earlier termination of this Lease.

 

Section 20.11. The parties took equal part in drafting this Lease and
no rule of construction that would cause any of the terms hereof to be
construed against the drafter shall be applicable to the interpretation of this
Lease.

 

Section 20.12. Upon the occurrence and during the continuance of an
Event of Default, Tenant shall and hereby does appoint Landlord the attorney-in-fact
of Tenant, irrevocably, to execute and deliver any documents provided for in Section
14.1 and/or Section 22.1 for and in the name of Tenant, such power,
being coupled with an interest, being irrevocable.

 

Section 20.13. TIME IS STRICTLY OF THE ESSENCE with respect to each and
every term and provision of this Lease.

 

Section 20.14. Tenant represents and warrants to Landlord that:  (a) Tenant is a corporation duly formed,
validly existing and in good standing under the laws of the State of
California, (b) the persons executing this Lease and the other documents
executed herewith on behalf of Tenant are duly appointed and authorized by
Tenant to execute such documents, (c) this Lease and the other documents which
will be delivered and executed by Tenant will, when delivered, have been duly
authorized and executed by Tenant and will constitute the legal, valid and
binding obligations of Tenant, enforceable against Tenant in accordance with
their terms subject to applicable bankruptcy, insolvency, reorganization,
moratorium, or other laws affecting the rights of creditors, generally, (d)
Tenant has full power and authority to execute, deliver and perform its
obligations under this Lease and the other documents which are executed and
delivered by Tenant and to carry on its business as presently conducted, (e)
Tenant has obtained

 

 

all necessary permits,
licenses, entitlements and/or approvals required to comply with the provisions
of this Lease and the other documents which are executed and delivered by
Tenant, and  (f)  the execution, delivery and performance of
this Lease and the other documents executed and delivered herewith do not
violate any provisions of any agreement or document to which Tenant is a party
or by which Tenant is bound, or of any order or regulation of any court,
regulatory body, administrative agency or governmental body having jurisdiction
over Tenant.

 

Section 20.15.  As used herein,
the term “to Tenant’s Knowledge” shall mean the actual and constructive
knowledge, after due investigation and inquiry, of Tenant’s officers, directors
and senior management as well as all members of Tenant’s Corporate Real Estate
Department.

 

Section 20.16.  Notwithstanding
anything to the contrary provided in this Lease, in any instance where the
consent of Mortgagee is required, Landlord shall not be required to give its
consent unless the Mortgagee has given its consent.

 

ARTICLE 21

 

SECURITY DEPOSIT

 

Section 21.1.  On or before the
Rent Commencement Date, Tenant shall deliver to Landlord the Letter of Credit
(as hereafter defined) in the amount of Nine Million Dollars ($9,000,000.00) as
security for the full performance by Tenant of all the Provisions to be
performed by Tenant (the “Security Deposit”).

 

Section 21.2.  Upon the
occurrence of an Event of Default by Tenant, Landlord may disburse funds from
the Security Deposit.

 

Section 21.3  Tenant shall
deliver an irrevocable letter of credit, in a form approved by Landlord, issued
by a bank whose long term debt obligation rating of AA- or better (or its
equivalent) by Standard & Poors Rating Group (“S&P”) and otherwise
reasonably acceptable to Landlord in the amount of $9,000,000.00 (the “Letter
of Credit”) to Landlord. 
Notwithstanding the foregoing, Tenant shall have the right to use Union
Bank of California as the issuing bank so long as its long term debt
obligations are rated A- or better by S&P.   The Letter of Credit shall be in favor of Landlord and shall be
available for immediate drawdown by sight drafts at offices of the issuing bank
in New York City, New York or Los Angeles, California and without condition,
except that Landlord must deliver to the issuing bank a written certificate,
certifying that an Event of Default has occurred and is continuing under this
Lease.  Drafts drawn under and in
compliance with the terms of the Letter of Credit shall be duly honored on due
presentation to the issuing bank.  The
Letter of Credit shall have a term of at least one year.  In the event that Tenant fails to deliver an
amendment to the Letter of Credit or a replacement Letter of Credit by a date
which is at least twenty (20) days from its scheduled expiration, which
amendment or replacement extends the term of the Letter of Credit for at least
one year, Landlord shall cause the Letter of Credit to be drawn and the
proceeds shall be held as the Security Deposit in accordance with this Section
21.

 

 

Section 21.4.   Upon written
demand by Tenant to Landlord, Landlord shall return the Letter of Credit, upon
presentation to Landlord of evidence that: 
(a) the senior unsecured debt of Tenant receives a rating of BBB- or
better from Standard & Poor’s Rating Group and Baa3 from Moody’s Inc.; or
(b) this Lease has terminated or the Expiration Date has occurred and there are
no outstanding claims under the Lease by Landlord against Tenant.

 

Section 21.5.  (a) In the event
of a sale or other conveyance of the Property by Landlord, Landlord shall
assign all its rights in the Security Deposit to the successor owner and
Landlord shall thereupon have no further liability relating to the Security
Deposit. Landlord and Tenant shall take such action as is reasonably necessary
to cause the successor owner to be substituted for Landlord as beneficiary of
the Letter of Credit and if such substitution is not made, Tenant shall cause a
substitute Letter of Credit to be issued showing the successor owner as the
beneficiary.

 

(b)           Landlord shall also
have the right to pledge and/or assign the Security Deposit to a Mortgagee,
including the right to assign the proceeds of the Letter of Credit to a
Mortgagee and to transfer custody of the Letter of Credit to a Mortgagee and/or
require that the issuing bank amend or re-issue the Letter of Credit to name
the Mortgagee as beneficiary.  Tenant
shall fully and promptly cooperate with all such requests by Landlord.

 

Section 21.6  In the event that
at any time during the term of this Lease (a) the issuing bank no longer has a
long term debt obligation rating of AA- or better (or its equivalent) by
S&P, or in the case of Union Bank of California, no longer has a long term
debt obligation of A- or better by S&P or (b) the issuing bank files for
protection under any chapter of the United States Bankruptcy Code or the
bankruptcy code of the state or country of its formation or is seize by the
appropriate regulatory authorities of the State of New York, the United States
or the state or nation of its formation and a s a result thereof is incapable
of, unable to, or prohibited from honoring the then existing Letter of Credit
(hereinafter referred to as the “Existing L/C”) in accordance with the terms
thereof, then, upon the happening of either of the foregoing, Landlord may send
written notice to Tenant (hereinafter referred to as the “Replacement Notice”)
requiring Tenant within thirty (30) days to replace the Existing L/C with a new
letter of credit (hereinafter referred to as the “Replacement L/C”) from an
issuing bank meeting the qualifications described in Section 21.3.  Upon receipt of a Replacement L/C meeting
the qualifications of Section 21.3, Landlord shall forthwith return the
Existing L/C to Tenant.  In the event
that either Tenant fails to deliver a Replacement L/C or the Replacement L/C
fails to meet the requirements for an Existing L/C, the Existing L/C may be
presented for payment by Landlord and the proceeds thereof shall be held by
Landlord in accordance with Section 21.1 subject, however, to Tenant’s
right, at any time thereafter prior to a Tenant’s default hereunder, to replace
such cash security with a new letter of credit meeting the qualifications set
forth in Section 21.3.  Tenant
shall have the right from time to time and at any time to substitute the
Existing L/C with a Letter of Credit meeting the qualifications set forth in Section
21.3.

 

Section 21.7.  Provided Tenant
is not in default under this Lease, which default continues after any notice
required under this Lease and the expiration of any applicable cure

 

 

period, on the first
anniversary of the Rent Commencement Date, and each year thereafter, Landlord
will, upon written request of Tenant, exchange the then existing Letter of
Credit for a new Letter of Credit which shall be $450,000 less than the Letter
of Credit, for the preceding Lease Year.

 

ARTICLE 22

 

MEMORANDUM OF
LEASE

 

Section 22.1.  Landlord or
Tenant shall have the right at any time to record a memorandum of lease in the
form attached hereto as Exhibit “C” with the Recorder of Deeds
in and for the County in which the Property is located, in which case the other
party shall promptly execute and deliver such memorandum to the requesting
party.  Tenant hereby agrees that, in
the event a memorandum of lease is recorded, on or prior to the Expiration Date
(or earlier termination of this Lease) Tenant shall execute and deliver to
Landlord a termination of such memorandum of lease in such form as is required
to record and discharge such memorandum of lease from record.

 

ARTICLE 23

 

INITIAL IMPROVEMENTS

 

Section 23.1.  Tenant agrees to
cause the construction of the Initial Improvements in accordance with that
certain Construction Funding Agreement dated even date herewith (the
“Construction Funding Agreement”) between Landlord and Tenant.  The parties acknowledge that in the event of
any breach of any term, condition or undertaking of Landlord under the
Construction Funding Agreement, Tenant’s remedies shall be limited to those set
forth in the Construction Funding Agreement and in no event shall Tenant have
the right to offset, reduce or abate Fixed Rent or Additional Rent otherwise
due pursuant to this Lease.  The parties
further agree that any default by Tenant under the Construction Funding Agreement
which remains uncured after the giving of any required notice and the
expiration of any applicable cure period shall constitute a default under this
Lease.

 

Section 23.2.  (a)  Subject to Unavoidable Delays, Tenant shall
cause Contractor (as defined in the Construction Funding Agreement) to
diligently proceed with the construction of the Property in accordance with the
terms of the GMP Contract (as defined in the Construction Funding
Agreement).  Tenant shall commence
Tenant’s Initial Alterations (as defined below) to, and the installation of
Tenant’s Personal Property on, the Property on or before August 4, 2004.

 

(b) 
The “Substantial Completion Date” shall be the date after issuance of
the Completion Certificate (as defined in the Construction Funding Agreement)
which is the first to occur of (i) the issuance of a Certificate of Occupancy
(temporary or Permanent) from the applicable building department, permitting
Tenant to immediately occupy

 

 

the Building for Tenant’s
intended purpose, but not including completion or correction of all normal
“punch list” items; or (ii) Tenant’s conduct of normal business operations at
the Building.

 

(c) 
Tenant shall notify Landlord in writing approximately ten (10) days
before the estimated Substantial Completion Date.  Within five (5) days of the anticipated Substantial Completion
Date, Landlord, and Tenant shall jointly inspect the Property and agree upon a
punch list of items in accordance with the Construction Funding Agreement
needing completion or correction.  Tenant shall use all reasonable diligent efforts to cause
Contractor to complete all punch list items within thirty (30) days after
agreement upon the punch list, subject, however, to long lead time items which
must be ordered and to seasonal requirements for any landscaping and exterior
work.

 

(d) 
Within five (5) days after Substantial Completion Date, Tenant shall
execute and deliver to Landlord a letter of acceptance of delivery of the
Property and confirmation of the Substantial Completion Date.  The “Acceptance Date” shall be the
Substantial Completion Date.  Except for
Landlord’s non-compliance with Laws and as otherwise specifically provided for
in this Lease, upon the Substantial Completion Date, Tenant shall have and hold
the Property as the same shall then be without any liability or obligation on
the part of Landlord for making any further alterations or improvements of any
kind in or about the Property during the Term.

 

(e) 
The “Rent Commencement Date” shall be the date on which Tenant’s obligations
to pay Fixed Rent and Additional Rent shall commence which shall be the first
to occur of (a) the Acceptance Date and (b) September 1, 2004.

 

ARTICLE 24

 

TENANT’S INITIAL ALTERATIONS

 

Section 24.1.  Subject to
Landlord’s right of approval as specifically set forth herein, Tenant shall
have the right, at its sole cost and expense, to install Tenant’s Personal
Property, including its machinery, equipment, fixtures (laboratory equipment,
interior partitioning, telecommunications equipment and the like) and to stock
the Building with inventory and other items of Tenant’s Personal Property to
bring the Building to operating condition (“Tenant Initial Alterations”)
according to the following.  No changes
or alterations shall be made to the Building structural members, roof or
foundation.  No changes or alterations
shall be made to the Building electrical, mechanical or plumbing systems other
than connections made in the ordinary course of Tenant’s Initial Alterations, without
the prior consent in writing of the Landlord, which consent shall not
unreasonably be withheld, conditioned or delayed.

 

Section 24.2.  No less than ten
(10) business days prior to the commencement of Tenant’s Initial Alterations,
Tenant agrees to submit to Landlord, for its approval, (which approval not to
be unreasonably withheld, conditioned or delayed), copies of all proposed plans

 

 

for Tenant’s Initial
Alterations to be constructed by or at the direction of Tenant.  Any proposed plans submitted to Landlord
shall be deemed approved if no disapproval as to all or any part of such plans
is communicated in writing to Tenant within seven (7) business days of
Landlord’s actual receipt of such plans. 
Tenant has a continuing obligation to provide Landlord with copies of
all proposed plans for Tenant’s Initial Alterations.

 

Section 24.3.  Tenant shall be
solely responsible for obtaining all permits, variances, approvals and
licenses, if any are required, of the installations and operation of the
Tenant’s Initial Alterations from the appropriate governmental regulatory
agencies; however, Landlord agrees that it shall execute for Tenant’s benefit
all instruments necessary, and to take such other actions as may be reasonably
requested by Tenant, to obtain such licenses and permits from the applicable
governmental authorities, provided Landlord incurs no costs or liability
associated therewith.  All additions and
improvements made by Tenant to the Property which cannot be removed at the time
of Lease termination without altering the internal or external structure of the
Building (“Permanent Improvements”) shall become the property of Landlord upon
the termination of this Lease without any compensation to Tenant, and shall be
surrendered at such time as a part of the Property.  The additions and improvements made by Tenant which can be
removed without altering the internal or external structure of the Building are
the “Removable Improvements”) and shall be deemed to be part of Tenant’s
Personal Property.  For tax purposes,
Tenant shall be deemed the owner of all Permanent and Removable Improvements
made to the Premises by Tenant until termination of the Lease.

 

Section 24.4.  Except for costs
and expenses for any work performed by or on behalf of Landlord which shall be
the responsibility of Landlord, all costs and expenses incurred after the
Acceptance Date for work performed by or on behalf of Tenant shall be the sole
responsibility of Tenant, as is provided elsewhere in this Lease.  In addition, Tenant shall be responsible for
all costs and expenses associated with any proposed Removable Improvements
which are incurred prior to the Lease Date, including, but not limited to, the
costs of preparation of plans, or the procurement of supplies, materials or
labor.

 

Section 24.5.  Tenant shall be
solely responsible for any loss, injury, or liability to Tenant, Tenant’s
employees, invitees, contractors and subcontractors and their employees which
may arise out of Tenant’s installation of the Tenant’s Initial
Alterations.  Tenant acknowledges that
the Building and related improvements are still under construction and that
Landlord shall have no responsibility or liability for the security of Tenant’s
Initial Alterations and materials stored on site.

 

Section 24.6.  If this Lease
terminates for any reason other than the default of Landlord, and except as may
be specifically provided for elsewhere in this Lease, Tenant shall have no
claim against Landlord, or any other party, for recovery or reimbursement of
any costs and expenses of Tenant’s Initial Alterations.

 

 

ARTICLE 25

 

ANTENNA INSTALLATION

 

Section 25.1  Landlord grants
Tenant the right to install, operate and maintain, at Tenant’s expense and
risk, a lawfully permitted antenna(e), satellite dish and associated equipment
(the “Antenna Equipment”) at a location on the Property to be determined by
Tenant and reasonably acceptable to Landlord provided the roof warranty is not
voided or impaired as a result thereof (the “Antenna Premises”) on the
following terms and conditions:

 

(a)           Tenant shall make
all required conduit or cable connections between Tenant’s equipment in the
Property and the Antenna Equipment utilizing Building services subject to
approval of such connections by Landlord, which approval shall not be
unreasonably withheld, conditioned or delayed;

 

(b)           Landlord shall not
erect or permit the erection of any antenna(e) so as to interfere with the
operation of any Antenna Equipment previously erected by Tenant;

 

(c)           Tenant, its
employees, agents and contractors shall, at all reasonable times, have the
unrestricted right to enter or leave the Antenna Premises and Landlord agrees
that it will not give unauthorized persons access to Tenant’s Antenna Premises
or Antenna Equipment;

 

(d)           Tenant shall obtain
all necessary municipal, state and federal permits and authorizations required
to install, maintain and operate the Antenna Equipment and pay any charges
levied by government agencies which are the sole result of Tenant having the
Antenna Equipment and Tenant shall comply with any applicable restrictive
covenants.  Landlord agrees to fully
cooperate with Tenant in obtaining all such permits and authorizations, at no
cost or expense to Landlord;

 

(e)           Tenant agrees to
maintain the Antenna Equipment and Antenna Premises in a good state of repair
and to save Landlord harmless from any claims, liability or expenses resulting
from the erection, maintenance, existence or removal of the Antenna Equipment,
including but not limited to, any impairment of the roof warranty, to the
extent that such loss, costs or damages are not due, in whole or in part, to
the negligence or willful misconduct of Landlord, its agents, employees or
contractors;

 

(f)            At the conclusion
of the Term, unless Landlord permits otherwise, Tenant shall remove the Antenna
Equipment and surrender and restore the Antenna Premises to Landlord in
substantially as good condition as when entered, except for loss or damages
resulting from casualty, condemnation, act of God or ordinary wear and tear;
and

 

(g)           The
liability insurance to be carried by Tenant pursuant to the provisions of this
Lease shall include coverage for Tenant’s activity on the Antenna Premises.

 

 

ARTICLE 26

 

LIMITATION OF LIABILIITY

 

Section 26.1.          NOTWITHSTANDING
ANYTHING TO THE CONTRARY CONTAINED IN THIS LEASE, THE LIABILITY OF LANDLORD
(AND OF ANY SUCCESSOR LANDLORD HEREUNDER) TO TENANT FOR ANY MONETARY DAMAGES OR
JUDGMENT SHALL BE LIMITED TO THE INTEREST OF LANDLORD IN THE PROPERTY
(INCLUDING RENTAL INCOME AND THE PROCEEDS FROM THE SALE OF THE PROPERTY), AND
TENANT AGREES TO LOOK SOLELY TO LANDLORD’S INTEREST IN THE PROPERTY FOR THE
RECOVERY OF ANY JUDGMENT OR AWARD AGAINST THE LANDLORD, IT BEING INTENDED THAT
LANDLORD SHALL NOT BE PERSONALLY LIABLE FOR ANY JUDGMENT OR DEFICIENCY.  NOTHING HEREIN SHALL BE DEEMED TO LIMIT
TENANT’S RIGHT TO SEEK SPECIFIC PERFORMANCE OR AN INJUNCTION.

 

ARTICLE 27

 

EXPANSION PROVISIONS

 

Section 27.1.  Provided Tenant
is not in default, Tenant shall have the option (subject to the terms in this Article
27) to request that Landlord expand the Building by construction of an
addition to the Building or a new building of not less than 75,000 square feet
and not more than 275,000 square feet (the “Expansion”), on that portion of the
Land specified as Exhibit D under this Lease (the
“Expansion Area”).  Such option shall be
exercised by notice from Tenant to Landlord (the “Expansion Notice”) at least
twelve (12) months prior to the expiration of the Primary Term.

 

Section 27.2.  Tenant shall
provide with the Expansion Notice:

 

(a)            Copies
of the preliminary plans and specifications for the Expansion in substantially
the same form as provided in the Construction Funding Agreement; and

 

(b)           A
guaranteed maximum price contract with a contractor to construct the Expansion
for Landlord at a fixed price (the “Expansion Contract”), such construction to
be completed within fifteen (15) months after the date of the Expansion Notice.

 

Section 27.3.  Landlord shall,
within thirty (30) days after receipt of the Expansion Notice, acknowledge its
receipt of the Expansion Notice and either advise Tenant that it does not wish
to proceed with the Expansion or advise Tenant of the following:

 

 

(a)            Landlord’s
approval or disapproval of the plans and specification for the Expansion;

 

(b)           Landlord’s
approval or disapproval of the Expansion Contract; and

 

(c)            Landlord’s
proposal for an increase in Fixed Rent on account of the Expansion.

 

Section 27.4.  In the event that
Tenant exercises its option for the Expansion and Landlord agrees to construct
the Expansion, prior to the commencement of construction of the Expansion,
Landlord shall elect to proceed with the Expansion utilizing one of the
following structures: either (a) the parties shall execute and deliver an
amendment to this Lease in form and substance satisfactory to both parties
providing that all terms herein shall apply to the Expansion except the Fixed
Rent shall be increased by the amount mutually agreed to by Landlord and Tenant
and in the event that less than fifteen years remain on the Primary Term and
any Extension Term which has been exercised from the substantial completion
date of the Expansion (the Expansion Rent Commencement Date”), increase the
remaining term of the Lease to not less than fifteen (15) years or (b) the
Property shall be subdivided so that the Expansion Area constitutes a legally
separate lot with its own tax parcel number, the Expansion Area shall be
conveyed to an affiliate of Landlord and a separate lease shall be executed and
delivered by such affiliate as landlord and Tenant which shall be identical to
this Lease except that (i) the Fixed Rent shall be as mutually agreed to by
Landlord and Tenant, (ii) the primary term shall be for a period commencing as
of the Expansion Rent Commencement Date and continuing for the greater of
fifteen (15) years or the remaining term of this Lease, including years
remaining on the Primary Term and any Extension Term which has been exercised;
(iii) amending this Lease so that it is coterminous with the lease for the
Expansion (but in no event for a period less than fifteen (15) years after the
Expansion Rent Commencement Date); and (iv) there shall not be any further
right to expand.

 

Section 27.5.  In the event that
Landlord elects not to proceed to construct the Expansion for any reason,
Tenant shall have the right to construct the Expansion itself or through a
third party, in which case:

 

(a)            the
plans and specification for the Expansion shall be subject to Landlord’s
approval, which approval shall not be unreasonably withheld; provided it shall
not be deemed unreasonable for Landlord to withhold approval if (i) such plans
and specifications fail to satisfy the requirements set forth in Article 5
for Tenant Alterations, (ii) the Expansion as built would cause the existing
Building and/or Property to violate any law, zoning requirement or building
code, or (iii) such plans and specifications would require any material
alteration of the existing Building so that the existing improvements could not
reasonably be operated as a separate facility; and

 

(b)           Landlord
shall cooperate with Tenant and/or a third party in taking such action as may
be necessary to allow construction of the Expansion and ownership of the
Expansion by Tenant or a third party, including without limitation, granting a
nominal

 

 

unsubordinated ground lease for
the Land on which the Expansion will be constructed, granting access and
utility easements as may be necessary or appropriate, entering into party wall
and other such agreements as may be necessary or appropriate under the
circumstances and otherwise taking such steps as may be necessary or
appropriate to provide Tenant and/or a third party the ability to finance, own
and operate the Expansion as a stand alone project, including entering into
necessary and appropriate agreements with Landlord’s lender, Tenant’s lender or
such third party’s lender(s), if any; provided however, the foregoing matters
are accomplished without expense or liability to Landlord, without encumbering
Landlord’s interest in the Property (other than the Expansion Area) and without
adversely affecting the value or utility of Landlord’s interest in the Property
(other than any diminution in value on account of granting the ground lease).

 

 

[Balance of Page Left Blank Intentionally]

 

 

The parties hereto have executed this Lease as of the day and year
first above set forth.

 

	
   

  	
  LANDLORD:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  LEXINGTON LION CLARITA L.P.

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  Lexington Lion Clarita GP LLC, its general partner

  	
   

  
	
   

  	
   

  	
   

  	
  By:  Lexington/Lion Venture
  L.P., its sole member

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  By: Lex GP, LLC, its general partner

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  By:

  	
  /S/ BRENDEN P. MULLINIX

  	
   

  
	
   

  	
   

  	
   

  	
  Its:

  	
  Vice President

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
  TENANT:

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  SPECIALTY LABORATORIES, INC.

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /S/ FRANK J. SPINA

  	
   

  	
   

  
	
   

  	
   

  	
  Its:

  	
  Senior Vice President &

  Chief Financial OfficerExhibit
10.42

 

SEPARATION
AGREEMENT AND RELEASE OF ALL CLAIMS

 

This Separation Agreement and Release of All
Claims (“Agreement”) is voluntarily entered into by Frank J. Spina (“Employee”)
and Specialty Laboratories, Inc. (“Specialty”
or “Company”) to settle fully and finally all obligations and/or differences
between them, disputed and/or undisputed, arising out of, relating to or
resulting from Employee’s employment with Specialty
and separation from employment. 
Employee and Specialty
agree:

 

1.     Employee acknowledges that he has resigned from employment and from all
of his positions with Specialty
and any of its subsidiaries effective March 19, 2004 (the “Termination
Date”).  On that date Employee’s service
with Specialty and any of its
subsidiaries will automatically and immediately cease for all purposes except
as provided below.  Also on that date,
the Company will provide Employee with a final paycheck, which will include
payment for hours worked up through and including the Termination Date, plus
all earned and untaken vacation.

 

2.     As full and final settlement of all claims, demands, damages,
liabilities and/or causes of action of any kind whatsoever, known or unknown
(“Claims”) that employee has or may have against Specialty, its officers, directors, shareholders, owners,
parent companies, subsidiaries, affiliates, predecessors, successors, assigns,
agents, employees and representatives (“Specialty,
et al”), and in reliance upon Employee’s termination of employment, release,
covenants and promises contained herein, Specialty
agrees to provide Employee with the following upon cessation of Employee’s
employment:

 

Specialty agrees that Employee will be entitled to the following:

 

A lump sum payment equal to
fifty thousand dollars ($50,000), minus applicable required deductions and tax withholding.  Such payment shall be made eight (8) days
after Employee’s delivery of the signed Agreement; provided, Employee has not revoked the Agreement pursuant to
Section 16(f) below.  No bonuses or other payment shall be paid to
Employee except as specifically provided herein.

 

Extension of the period of
exercisability of any outstanding non-qualified stock options granted to
Employee to purchase shares of Specialty,
to the extent such options are vested, to a period of one (1) year from the
Termination Date.

 

Employee’s participation in
any medical, dental and/or vision plans will terminate on March 31, 2004.  Following March 31, 2004, Employee may elect
to continue any medical, dental and/or vision plan coverage under COBRA.  Any continuation of coverage under COBRA
beyond March 31, 2004 will be at Employee’s expense; provided, however, that Specialty
agrees to reimburse Employee for his COBRA expenses for up to three (3) months
upon presentation of appropriate evidence of expenses.  Employee must comply with the terms and
conditions of COBRA to maintain eligibility.

 

1

 

Employee’s coverage in the
Company’s Life Insurance and Long Term Disability plans will end on the Termination
Date.

 

Employee acknowledges that
the amounts to be paid to him/her pursuant to this Agreement are more than Specialty is required to pay under its
normal policies and procedures.

 

3.     In consideration of the
above, Employee and Specialty
waive, release and forever discharge each other, et al, from all Claims that
Employee or Specialty has or may
have against each other, et al, arising out of, relating to, or resulting from
any events occurring before the execution of this Agreement, including but not limited
to any Claims arising out of, relating to or resulting from Employee’s
employment with Specialty, the
cessation of that employment, any Claims for violation of Specialty’s policies or procedures, breach
of fiduciary duty, wrongful termination, breach of contract, breach of the
covenant of good faith and fair dealing, violation of public policy, negligent
and/or intentional infliction of emotional distress and/or stress, negligence,
injury to the psyche and/or internal organs, negligent and/or intentional
misrepresentation, fraud and/or deceit, defamation and/or invasion of privacy,
any claims for physical, mental and/or psychological injuries, attorneys’ fees,
costs, any Claims under the California Labor Code, the California Workers’
Compensation Act, the California Fair Employment and Housing Act, Title VII of
the Civil Rights Act of 1964, the Civil Rights Act of 1866, the Civil Rights
Act of 1991, the Equal Pay Act, the Age Discrimination in Employment Act, the
Americans with Disabilities Act, the Family and Medical Leave Act, the
California Family Rights Act, the Consolidated Omnibus Budget Reconciliation
Act of 1985 and/or the Employee Retirement Income Security Act of 1974 and/or
any Claims under any other federal, state of local law, constitution,
regulation or ordinance.  Employee and Specialty further agree not to bring,
continue or maintain any legal proceedings of any nature whatsoever against
each other, et al, before any court, administrative agency, arbitrator or any
other tribunal or forum by reason of any such Claims.

 

Specifically
included in this release are all Claims of age discrimination, whether under
the Federal Age Discrimination in Employment Act of 1967, 29 U.S.C. Section 621
et seq., the California Fair Employment and Housing Act, California Government
Code Section 12941 et seq. or any other law.

 

Furthermore,
in consideration of the services provided by Employee to Company prior
to the Termination Date, the Company covenants not to bring any claims, demands, and/or causes of action of
any kind whatsoever against Employee arising out of or related to
Employees services for the Company from the period beginning with the execution
of this Agreement up through and including the Termination Date.

 

4.     This Agreement is intended to
be effective as a bar to all Claims as stated in paragraph 3.  Accordingly, Employee and Specialty hereby expressly waive all
rights and benefits conferred by Section 1542 of the California Civil Code,
which states:

 

“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.”

 

2

 

Employee
and Specialty acknowledge that
they may hereafter discover Claims or facts in addition to or different from
those which they now know or believe to exist with respect to the subject
matter of this Agreement and which, if known or suspected this Agreement, may
have materially affected this settlement. 
Nevertheless, Employee and Specialty hereby
waive any right, claim or cause of action that might arise as a result of such
different or additional claims or facts. 
Employee and Specialty
acknowledge that they understand the significance and consequence of such
release and such specific waiver of Section 1542.

 

5.     Employee acknowledges and agrees he has signed the “Agreement with
Respect to Confidential Information, Inventions and Works of Authorship”
(“Confidentiality Agreement”), which is fully incorporated herein by this
reference.  Employee warrants and
represents he has not breached any of his obligations under the Confidentiality
Agreement and agrees to abide by all promises, terms, obligations and covenants
agreed to, made and/or assumed by employee under the Confidentiality Agreement.

 

6.     Employee acknowledges and agrees he will make only truthful remarks and
statements about and will not disparage Specialty
and/or Specialty’s business
operations, products, services, practices, procedures, policies, officers,
directors, shareholders, agents, employees and representatives.  The Company acknowledges and agrees
that no member of Company’s Directors, Officers, and senior management will
make disparaging or untrue remarks about Employee.

 

7.     Employee agrees that upon completion of the consulting period outlined
in Section 22 with the Company, Employee will transfer to the Company within 30
days, all drawings, manuals, guides, records, notebooks, papers, writings, computer
software or programs in any form and other documents and materials, including
all copies thereof, which are in Employee’s possession or under Employee’s
control, whether or not such items were prepared by Employee, which would not
be in the possession of the Employee except for the employment of the Employee
by the Company.  Company agrees, for the
period outlined in Section 22 hereof, that Employee may continue to use the
Company’s laptop computer, currently used by Employee for his daily work duties
for the Company.  Company shall fully
image the hard drive of such computer for backup, archival, and document
retention purposes prior to Employee being permitted to use such computer
following the Termination Date. 
Employee agrees that such computer will remain the property of Company,
and that it will only be used for the services contemplated in Section 22
hereof, and not for any other purpose. 
Employee acknowledges and agrees that he may not delete, remove or alter
any files or information from such computer that may be relevant to any
litigation involving the Company, including without limitation, the shareholder
class action suit pending in the Central District of California.  Employee further agrees that he will, within
30 days of the completion of the consulting period described in Section 22
hereof, return such computer to Company without any deletion, removal or
alteration of such files and information.

 

8.     Employee agrees not to disclose this Agreement or any of its terms to
anyone except his attorney, or tax advisor, if any.  Employee agrees and acknowledges that Specialty may issue a press release and file a Form 8-K
regarding Employee’s separation from Specialty
and that Specialty may describe
and disclose the contents of this Agreement in any of its filings with the
Securities and Exchanges Commission and may provide this Agreement as an
exhibit to any filings made by Specialty
with the Securities and Exchange

 

3

 

Commission or any filings pursuant
to the federal securities laws or other applicable law, to the extent Specialty deems necessary or desirable.

 

9.     Specialty expressly denies any violation of any of its policies, procedures,
state or federal laws or regulations. 
Accordingly, while this Agreement resolves all issues between Employee
and Specialty relating to any
alleged violation of Specialty’s
policies or procedures or any state or federal law or regulation, this
Agreement does not constitute an adjudication or finding on the merits and it
is not, and shall not be construed as, an admission by Specialty of any violation of its
policies, procedures, state or federal laws or regulations.

 

10.   The consideration described in paragraph 2 above constitutes the sole
and exclusive consideration provided Employee under this Agreement.  Employee acknowledges and agrees he has
received all wages, bonuses, commissions, compensation remuneration, and all
other moneys due him arising out of, relating to or resulting from his
employment with Specialty subject
to the final paycheck as noted in section 1 of this agreement, up through the
Termination Date, including but not limited to all moneys due him under any and
all benefit plans established and/or maintained by Specialty.  The
Company acknowledges that Employee has participated in the Company’s Deferred
Compensation Plan, and may continue to so participate up to and including the
Termination Date. Notwithstanding anything herein to the contrary, the Company
hereby agrees that Employee shall be paid out the amounts due to Employee as
part of the Company’s Deferred Compensation Plan, in accordance with the terms
of such Deferred Compensation Plan.

 

11.   Employee and Specialty
each acknowledge and agree that any payments and benefits provided hereunder are
in full satisfaction of any obligations under Employee’s employment agreement
with Specialty dated as of
September 11, 2003 (the “Employment Agreement”).

 

12.   Employee acknowledges and agrees that his termination of employment and
resignation from his positions with Specialty
do not constitute either a termination of employment by Specialty without Cause or a resignation
by Employee for Good Reason within the meaning of the Employment Agreement.

 

13.   Employee and Specialty
each represent and warrant they have not transferred or assigned to any person
or entity any rights or Claims released herein.

 

14.   This Agreement is binding upon and inures to the benefits of Employee’s
spouse, family, heirs, successors, assigns, executors, administrators and
personal representatives and is binding upon the inures to the benefit of the
successors and assigns of Specialty.

 

15.   Except as explicitly provided herein, neither party will be liable to
the other party for any costs or attorneys’ fees, including any provided by
statutes.

 

16.   Employee fully understands,
acknowledges and agrees among the various rights and Claims he is waiving,
releasing and forever discharging by the execution of this Agreement are all
rights and Claims arising under the Federal Age Discrimination in

 

4

 

Employment Act
of 1967, 29 U.S.C. Section 621, et. seq. (the “ADEA”).  Employee further understands, acknowledges
and agrees that:

 

a.             In return for this
Agreement, Employee will receive compensation beyond that which Employee was
already entitled to receive before entering into this Agreement.

 

b.             Employee has had at
least twenty-one (21) days within which to consider this waiver and release
relating to the ADEA;

 

c.             Employee has
carefully read and fully understands all of the provisions of this Agreement;

 

d.             Employee is, by the
execution of this Agreement, waiving, releasing and forever discharging Specialty, et al, from all Claims that he
has or may have against Specialty,
et al, individually and/or collectively, including but not limited to all
Claims of age discrimination;

 

e.             Employee was
previously advised, and is hereby further advised, in writing to consult with
an attorney before executing this Agreement;

 

f.              Employee was
informed that Employee has a period of seven (7) days following the execution
of this Agreement by both parties to revoke this Agreement by providing written
notice of such revocation to Specialty’s
Human Resources Department and was previously advised, and is hereby further
advised, in writing that this Agreement shall not become effective or
enforceable until this seven (7) day revocation period has expired without him
having exercised his right of revocation.

 

17.   This is the entire agreement between the parties and supersedes all
previous negotiations, agreements and understandings, with the exception
of the Confidentiality Agreement referenced in Section 5 hereof and the
Indemnification Agreement referenced in Section 23 hereof.  Any
oral representations regarding this Agreement shall have no force or
effect.  No modifications of this
Agreement can be made except in writing signed by Employee and an authorized
representative of Specialty.  If any action or other legal proceeding is
brought by either party for damages, specific performance or other injunctive
relief by reason of any asserted violation of this Agreement, the prevailing
party shall be entitled to recover its reasonable costs and attorney fees.

 

18.   Employee acknowledges and agrees that he has been advised this
Agreement is a final and binding legal document, that he has had reasonable and
sufficient time and opportunity to consult with an attorney of his own choosing
before signing this Agreement and that in signing this Agreement, he has acted
voluntarily of his own free will and has not relied upon any representation
made by Specialty or any of its
agents, employees or representatives regarding this Agreement’s subject matter
or its effect.

 

19.   Employee agrees to return all Company
property, including but not limited to all computer equipment, credit
cards, telephone equipment, and dictation equipment 30 days following the
completion of the consulting services described in Section 22 hereof.  Employee agrees to use this property solely
of the purpose of completing consulting

 

5

 

services as
noted in Section 22 hereof.  Employee
agrees to return the leased vehicle to the Company on the Termination Date.

 

20.   In addition to any obligations
under the Confidentiality Agreement, for a period of one (1) year after the
execution of this Agreement by both parties, Employee shall not:  (a) directly or indirectly, on his own
behalf or on behalf of any other person or business, solicit for employment any
person employed by Specialty or
its affiliates; or (b) will not use any confidential information obtained from
or while at or Specialty to
directly or indirectly, on his own behalf or on behalf of any other person or
business, induce, attempt to induce or knowingly encourage any Customer (as
defined below) not to do business with Specialty
or to divert any business or income from Specialty
or any of its affiliates or to stop or alter the manner in which the
Customer is then doing business with Specialty
or any of its affiliates.  “Customer”
shall mean any individual or business that was or is a customer or client of Specialty or any of its affiliates,
regardless of whether such customer was generated, in whole or in part, by
Employee’s efforts.

 

21.   Any dispute or controversy between Employee, on the one hand, and Specialty, on the other hand, in any way
arising out of, related to, or connected with this Agreement or the subject
matter thereof, or otherwise in any way arising out of, related to, or
connected with Employee’s employment with Specialty
or the termination of Employee’s employment with Specialty, shall be resolved through final and binding
arbitration in Los Angeles, California, pursuant to California Civil Procedure
Code §§ 1282 – 1284.2.  In the event of
such arbitration, unless otherwise required by law, each party shall pay its
own attorneys’ fees and costs and Specialty shall
pay the arbitrator’s fees and any and all other administrative costs of the
arbitration.  Notwithstanding any
provision in this Section 21, neither party shall be prohibited from seeking
injunctive relief as necessary to maintain the status quo pending an
arbitration proceeding regarding the breach
or threatened breach of the Confidentiality Agreement or any other
confidentiality obligations owed to the other party.  The provisions of this Section 21 supersede and replace in their
entirety any prior arbitration agreement(s) that may exist between Employee and
Specialty.

 

22.   Employee agrees that he will provide assistance to Specialty on a consulting basis for up to
ten (10) hours per month for a transition period up to the date of filing of Specialty’s periodic report on Form 10-Q
for the first quarter of 2004.  In
addition, the Employee will make himself available at mutually agreeable times
as requested by Specialty to use
his reasonable efforts to cooperate with Specialty
in any litigation or government investigations or proceedings now
pending or which may later arise in which Specialty
requires or desires his cooperation as a witness or otherwise.  Specialty
will reimburse Employee for reasonable travel and other out-of-pocket expenses
incurred as a result of providing such cooperation.  It is understood that Employee’s availability will be for
reasonable periods of time during normal business and employment activities
elsewhere and that his availability for assistance in such litigation
activities on behalf of Specialty will
not unreasonably interfere with his efforts to pursue such other business and
employment activities.

 

a.             In order to allow
Employee to perform the consulting services under this Section 22, the Company
may provide Employee with certain confidential information of the Company
subsequent to the Termination Date.  It
is understood by the parties that Employee’s future employer may be a direct

 

6

 

competitor of the Company, and any such information
provided to Employee after the Termination Date is provided by the Company
voluntarily to assist in the transition of Employee’s duties to other Company
employees, and to assist the Company’s preparation of it first quarter 2004
financial earnings release and Company’s Form 10-Q for the first quarter of
2004.

 

b.             The Company agrees
that it will limit any such information shared with Employee following the
Termination Date to materials related to historical information of the Company
and information concerning the Company’s first quarter 2004 operating
results.  Under no circumstances will
Company provide employee with information related to the Company’s second
quarter 2004 or later operating results. 
Employee agrees that he will not trade in the Company’s securities at
any time he is in possession of material non-public information.

 

c.             Employee agrees that
he will keep any such confidential information provided by the Company strictly
confidential, and will not share or make available such information with his
new employer or any unauthorized third party. 
Employee further agrees to return any such information provided by the
Company upon request, or alternatively destroy any such information and certify
to the Company in writing that he has done so.

 

d.             Notwithstanding
anything to the contrary herein, the Company hereby agrees that Employee’s
possession and use of any information provided to it by the Company subsequent
to the Termination Date will not be governed by or under the Confidentiality
Agreement, and Company may not bring any claims, demands, and/or causes of
action of any kind whatsoever against Employee or his future employer for
violation of the Confidentiality Agreement based upon or related to the
confidential information provided to Employee subsequent to the Termination
Date.

 

e.             In consideration of
the services provided by Employee under this Section 22, the Company agrees to
indemnify and hold harmless Employee from and against all Claims arising out of
or related to the consulting services provided by Employee under this Section
22.  Such indemnification of Employee by
Company shall be to the fullest extent allowed by law, and in any event to no
lesser degree that the terms provided by the Indemnification Agreement (as
defined in Section 23 hereof). 
Furthermore, in consideration of the services provided by Employee under
this Section 22, the Company covenants not to bring any claims, demands, and/or
causes of action of any kind whatsoever against Employee arising out of or
related to the consulting services provided by Employee under this Section 22.

 

f.              The parties agree
that any consulting services under this Section 22 are within the Company’s
sole discretion, and that Company may decide to forego any such consulting
services, or cease the consulting services at any time.  The parties acknowledge that the
consideration provided to Employee under Section 2 hereof will not be reduced
in any way by any such decision by the Company, and shall constitute full and
adequate consideration for the

 

7

 

consulting services under this Section 22, and no
further consideration shall be owed or paid to Employee for such services.

 

23.   Specialty acknowledges that, as provided in Section 5 of the Indemnification
Agreement dated December 6, 2000 by and between Employee and the Company (the
“Indemnification Agreement”), the Indemnification Agreement shall continue
after the Termination Date for so long as Employee shall be subject to any
possible claim or threatened, pending or completed action, suit or proceeding,
whether civil, criminal or investigative, by reason of the fact that Employee
was an officer or director of the Company or serving in any other capacity
referred to in the Indemnification Agreement. 
Company acknowledges that the Company’s Directors and Officers Insurance
Policy is in effect at the time of the execution of this Agreement, that
Employee is covered under such policy as an officer of the Company, and that
the policy is a “claims made” policy that provides coverage for former officers
of the Company following their termination of employment.

 

24.   If any provision of this Agreement or the application thereof is held
invalid the invalidity shall not affect other provisions or applications of
this Agreement which can be given effect without the invalid provisions or
applications and to this end the provisions of this Agreement are declared to
be severable.

 

I HAVE COMPLETELY AND CAREFULLY READ THE
FOREGOING, INCLUDING THE WAIVER AND RELEASE OF CLAIMS SET FORTH IN PARAGRAPHS
2, 3, 4, 10, 15 AND 16 ABOVE AND FULLY UNDERSTAND AND VOLUNTARILY AGREE TO ITS
TERMS.

 

THIS AGREEMENT CONTAINS A
WAIVER OF CLAIMS UNDER THE AGE DISCRIMINATION IN EMPLOYMENT ACT. YOU ARE
ADVISED TO CONSULT WITH AN ATTORNEY PRIOR TO SIGNING THIS AGREEMENT.

 

 

	
  Dated:   

  	
  March 14, 2004

  	
   

  	
  /s/ Frank J. Spina

  
	
   

  	
  Frank J. Spina

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  SPECIALTY LABORATORIES,
  INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
  Dated:   

  	
  March 14, 2004

  	
   

  	
  /s/ Douglas S. Harrington

  
	
   

  	
  Douglas S. Harrington,
  M.D.

  
	
   

  	
  Chief
  Executive Officer

  

 

8

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