Document:

exv10w6

 

Exhibit 10.6

NET LEASE AGREEMENT

(Single Tenant)

For and in consideration of the rentals, covenants, and conditions hereinafter
set forth, Landlord hereby leases to Tenant, and Tenant hereby rents from
Landlord, the following described Premises for the term, at the rental and
subject to and upon all of the terms, covenants and agreements set forth in
this Net Lease Agreement, including Landlord’s right to recover the Premises
pursuant to Paragraph 24 below (“Lease”):

	 	1.	 	Summary of Lease Provisions
	 
	 	1.1	 	Tenant: Laserscope, a California corporation (“Tenant”).
	 
	 	1.2	 	Landlord: Realtec Properties I, L.P., a
California limited partnership (“Landlord”).
	 
	 	1.3	 	Date of Lease, for reference purposes only:
October 5, 2004.
	 
	 	1.4	 	Premises: Those certain two (2) buildings located
in the City of San Jose, County of Santa Clara, State of
California, shown cross-hatched on the site plan attached
hereto as Exhibit A (a) and Exhibit A (b), and commonly
referred to as 3070 Orchard Drive (“Building A”) and 3052
Orchard Drive (“Building B”), San Jose, CA.
	 
	 	 	 	The portion of the Premises located at 3070 Orchard Drive
contains approximately 31,020 rentable square feet. The
portion of the Premises located at 3052 Orchard Drive
contains approximately 37,624 rentable square feet.
	 
	 	1.5	 	Term: Eight (8) years (Paragraph 3)
	 
	 	1.6	 	Commencement Date: November 1, 2004, subject to
the provisions of Paragraph 3 below. (Paragraph 3)
	 
	 	1.7	 	Ending Date: October 31, 2012, unless sooner
terminated pursuant to the terms of this Lease. (Paragraph 3)
	 
	 	1.8	 	Rent:

	 	 	 
	Months 01 to 12:

	 	$58,347.40 per month
	Months 13 to 24:

	 	$59,514.35 per month
	Months 25 to 36:

	 	$60,704.64 per month
	Months 37 to 48:

	 	$61,918.73 per month
	Months 49 to 60:

	 	$63,157.10 per month
	Months 61 to 72:

	 	$64,420.24 per month
	Months 73 to 84:

	 	$65,708.65 per month
	Months 85 to 96:

	 	$67,022.82 per month

(Paragraph 4)

Receipt of the first month’s Rent is hereby acknowledged by
Landlord.

 

 

	 	1.9	 	Use of Premises: General Office Use,
Manufacturing, Storage, and Research and Development, and
other legal related uses.
	 
	 	 	 	(Paragraph 6)
	 
	 	1.10	 	Security Deposit: Fifty-Eight Thousand Three
Hundred Forty-Seven and 40/100 Dollars ($58,347.40).
	 
	 	 	 	(Paragraph 5)
	 
	 	1.11	 	Addresses for Notices:

	 	 	 	 	 
	

	 	To Landlord:
	 	Realtec Properties I, L.P.

3880 South Bascom Avenue, Suite 210

San Jose, CA 95124
	 
	 	 	 	 
	

	 	To Tenant:
	 	To the Premises, with a courtesy copy to:
	 
	 	 	 	 
	

	 	 	 	Legal Department

Laserscope

3070 Orchard Drive

San Jose, CA 95134

	 	1.12	 	Nonexclusive Right to Use No More Than: one
hundred thirteen (113) parking spaces within that portion of
the Common Area associated with Building A; and one hundred
thirty-eight (138) parking spaces within that portion of the
Common Area associated with Building B. (Paragraph 2.1)

          1.13 Summary Provisions in General. Parenthetical references in this
Paragraph 1 to other paragraphs in this Lease are for convenience of reference,
and designate some of the other Lease paragraphs where applicable provisions
are set forth. All of the terms and conditions of each such referenced
paragraph shall be construed to be incorporated within and made a part of each
of the above referring Summary of Lease Provisions. In the event of any
conflict between any Summary of Lease Provision as set forth above and the
balance of the Lease, the latter shall control.

     2. Property Leased

          2.1 Premises. Landlord hereby leases to Tenant and Tenant hereby leases
from Landlord, upon the terms and conditions herein set forth, those certain
buildings (“Premises”) referred to in Paragraph 1.4 above, shown cross-hatched
on the site plan attached hereto as Exhibit A (a) and Exhibit A (b). In
addition, Tenant shall have the following rights with respect to the real
property more particularly described in the legal descriptions attached as
Exhibits B (a) and B (b) attached hereto (if applicable) and outlined in red on
Exhibit A (a) and Exhibit A (b) (“Common Area”): (i) the non exclusive right to
use no more than the number of parking spaces set forth in Paragraph 1.12
above, as shown on Exhibit A (a) and Exhibit A (b), for the respective
Buildings the location of which may be redesignated from time to time by
Landlord; (ii) the nonexclusive right to use any other parking spaces within
the Common Area not allocated for the exclusive use of another tenant of
Landlord; and (iii) such other rights as are necessary and convenient to
Tenant’s possession of the Premises or performance of Tenant’s obligations
under this Lease. (Notwithstanding the number of parking spaces designated for
Tenant’s exclusive use, in the event by reason of any rule, regulation, order,
law, statute, ordinance or other requirement of any governmental or
quasi-governmental authority now or hereafter in effect (collectively, “Laws”)
relating to or affecting parking on the Common Area, or any other cause beyond
Landlord’s reasonable control, Landlord is required to reduce the number of
parking spaces on the Common Area, Landlord shall have the right to
proportionately reduce the number of parking spaces designated herein for
Tenant’s exclusive use.) In addition, Landlord grants to Tenant a
non-exclusive easement for vehicular ingress and

 

 

egress in and over the paved roadways in the Common Area and pedestrian ingress
and egress in and over the Common Area.

     Landlord reserves the right to grant to tenants of the buildings or
improvements which now exist or may hereafter be constructed upon the Common
Area or upon real property owned by Landlord adjacent to the Common Area, and
to the agents, employees, servants, invitees, contractors, guests, employees,
servants, invitees, contractors, guests, customers and representatives of such
tenants or to any other user authorized by Landlord, the non-exclusive right to
use the Common Area for pedestrian and vehicular ingress and egress and
vehicular parking and the exclusive right to use parking spaces on the Common
Area (excluding only that portion of the Common Area designated herein for
Tenant’s exclusive use for vehicular parking).

          2.2 Improvements. Landlord shall contribute up to Four Hundred Eleven
Thousand Six Hundred Eighty-Four Dollars ($411,684.00) (the “Improvement
Allowance”) toward the cost of the tenant improvements in the Premises.
Landlord shall also contribute an additional Sixty-five Thousand Dollars
($65,000) (the “Additional Allowance”) to be used by Tenant in accordance with
the provisions of this Section. The balance, if any, of the cost of the tenant
improvements in the Premises (“Additional Cost”), including, but not limited
to, usual markups for overhead, supervision and profit, shall be paid by
Tenant. Tenant shall pay Landlord 50% of the Additional Cost based upon the
final cost estimate prior to the commencement of construction of the tenant
improvements in the Premises. The balance of the actual Additional Cost shall
be paid to Landlord as construction of the tenant improvements in the Premises
progresses, based upon the percentage of completion of such improvements,
within ten (10) days after receipt of Landlord’s invoice therefore. Landlord
will use reasonable care in preparing the cost estimates, but they are
estimates only and do not limit Tenant’s obligation to pay for the actual
Additional Cost of the tenant improvements, whether or not it exceeds the
estimated amounts.

At least one-half (1/2) of the Improvement Allowance shall be used for costs
associated with the design, space planning and construction of the tenant
improvements in the Premises in accordance with construction plans mutually
approved by Landlord and Tenant. Tenant may use the remaining portion of the
Improvement Allowance, not to exceed one-half (1/2) of the Improvement
Allowance, for fixturization and/or waiver of Rent, provided that if Tenant
elects to use such portion of the Improvement Allowance for waiver of Rent
Tenant must notify Landlord of such waiver at least five (5) days prior to the
Commencement Date. Any such waiver of Rent under the immediately preceding
sentence shall be applied against Rent as it comes due following the
Commencement Date, and continuing until any unused portion of the Improvement
Allowance is used up.

Tenant may use the Additional Allowance for construction of tenant improvements
in the Premises, for moving expenses and/or for consulting fees.

Landlord shall, at Landlord’s sole cost and expense, install up to six (6)
skylights in the roof of 3052 Orchard Drive, at a cost not to exceed Ten
Thousand Dollars ($10,000) in accordance with plans mutually agreed to by
Landlord and Tenant. Tenant shall not be required to remove such skylights at
the expiration or termination of this Lease.

Landlord shall construct tenant improvements using a general contractor
selected by Landlord. For all major subcontracting work Landlord shall require
the general contractor to obtain bids from at least two (2) subcontractors. In
connection with the construction of tenant improvements in the Premises
Landlord shall not charge a construction management fee for any supervision of
the contractor and subcontractors.

Landlord shall construct all tenant improvements in the Premises in accordance
with construction plans prepared by a licensed architect mutually approved by
Landlord and Tenant. Such construction plans shall be subject to approval by
Landlord and Tenant prior to Landlord’s construction contractor commencing
construction of any tenant improvements.

 

 

The improvements to be constructed by Landlord for Tenant’s use in the Premises
are set forth in detail on the attached Exhibit C. The work described in
Exhibit C includes any additional improvements to the Premises and/or the
Common Area that may be required pursuant to Title 24 and Title III of the
Americans with Disabilities Act of 1990, 42 U.S.C. section 12101 et. seq., and
the regulations promulgated thereunder (the “ADA”) by reason of the
construction of the improvements in the Premises (including entry doors).
Tenant shall be responsible for the costs to comply with ADA inside the
Premises, and for ADA compliance outside the Premises directly caused by any
Tenant’s exterior improvements or modifications requested or undertaken by
Tenant. Landlord shall be responsible for all other costs to comply with ADA
in the Common Areas, at Landlord’s sole cost and expense, which compliance
costs shall not be included as a part of Operating Costs, notwithstanding any
other provision of this Lease to the contrary.

     In the event of changes to any of the work set forth in Exhibit C (whether
such changes are required by any public agency, or by reason of any error or
omission in plans because of information provided to Landlord by Tenant, or
because requested in writing by Tenant and accepted in writing by Landlord),
Tenant shall pay to Landlord Landlord’s costs related to such changes before
work in regard to such changes is commenced; provided, however, in no event
shall Landlord’s failure to demand such payment before commencement of work in
regard to such changes, or Tenant’s failure to pay for the same before
commencement of work in regard to such changes be deemed to be a waiver of
Landlord’s right to require or enforce collection of such payment for changes
at any time thereafter. Landlord’s costs related to the changes shall include,
without limitation, all architectural, contractor, and engineering expenses,
and the cost of all building and other permits and inspection fees. Tenant
acknowledges that Landlord or a person or entity related to Landlord and/or
controlled by Landlord may serve as Landlord’s architect, engineer and/or
contractor in regard to the above-described work and in the event of any
changes, Landlord’s costs shall be deemed to include architect, engineering
and/or contractor expenses at the rates charged to third parties by Landlord
and/or such related person or entity for such services, unless otherwise
expressly provided in this Lease.

Tenant and its representatives shall not interfere with Landlord or Landlord’s
contractor in completing any construction in or at the Premises, including
construction of any tenant improvements.

During the term of this Lease, including any extension of the term, Tenant
shall have the right to use, at Tenant’s election and at no additional cost,
any existing cubicle stations, office and conference room furniture, chairs,
data wiring, telephone and any security system (collectively, the “Personal
Property”) located at 3052 Orchard Drive. A list of such Personal Property is
contained in Exhibit B attached hereto and made a part hereof. Tenant agrees
that Landlord owns the Personal Property. At the expiration or termination of
this Lease Tenant shall return the Personal Property to Landlord in reasonably
good condition, normal wear and tear excepted.

          2.3 Acceptance of Premises. By taking possession of the Premises, Tenant
shall be deemed to have accepted the Premises as being in good and sanitary
order, condition and repair and to have accepted the Premises in their
condition existing as of the date Tenant takes possession of the Premises,
subject to all applicable laws, covenants, conditions, restrictions, easements
and other matters of public record and the reasonable rules and regulations
from time to time promulgated by Landlord (and non-discriminatorily applied)
governing the use of the Premises and Common Area, and Landlord completing the
tenant improvements in accordance with the plans and specifications for such
improvements, subject only to completion of items on Landlord’s punch list.
Tenant acknowledges that neither Landlord nor Landlord’s agents have made any
representation or warranty as to the suitability of the Premises for the
conduct of Tenant’s business, the condition of the Premises, or the use or
occupancy which may be made thereof and Tenant has independently investigated
and is satisfied that the Premises are suitable for Tenant’s intended use and
that the Premises meets all governmental requirements for such intended use.

     Notwithstanding anything to the contrary contained in this Lease, Tenant’s
acceptance of the Premises or submission of a “punch list” shall not be deemed
a waiver of Tenant’s right to have defects in the improvements constructed by
Landlord pursuant to Paragraph 2.2 or in the Premises corrected at no cost to
Tenant. Tenant shall give notice to Landlord whenever any such defect becomes
reasonably apparent, and Landlord shall correct the defect as soon as
practicable. Landlord also hereby assigns to Tenant all warranties with
respect to the Premises, including warranties that would reduce Tenant’s
maintenance obligations under this Lease, and shall cooperate with Tenant to
enforce such warranties. Finally, notwithstanding anything to the contrary
contained in this Lease, as of the Commencement Date, the

 

 

roof (including roof screens and membrane), plumbing, electrical (including all
outlets), heating and air conditioning systems in the Premises shall be in good
working order and repair.

     3. Term

          3.1 Commencement Date. The term of this Lease (“Lease Term”) shall be for
the period specified in Paragraph 1.5 above, commencing on the date set forth
in Paragraph 1.6 (“Commencement Date”).

          3.2 Delay of Commencement Date. Landlord shall not be liable for any
damage or loss incurred by Tenant for Landlord’s failure for whatever cause to
deliver possession of the Premises by any particular date (including the
Commencement Date), nor shall this Lease be void or voidable on account of such
failure to deliver possession of the Premises; provided that if Landlord does
not deliver possession of the Premises to Tenant by the date which is one
hundred eighty (180) days from the date this Lease is executed by both parties,
Tenant shall have the right to terminate this Lease by written notice delivered
to Landlord within five (5) days thereafter, and Landlord and Tenant shall be
relieved of their respective obligations hereunder; provided further that said
one hundred eighty (180) day period shall be extended by the number of days
work on the Premises is delayed due to fault or neglect of Tenant, acts of
Tenant or Tenant’s agents, or due to acts of God, labor disputes, strikes,
fires, rainy or stormy weather, acts or failures to act of public agencies,
inability to obtain labor or materials, earthquake, war, insurrection, riots
and other causes beyond Landlord’s reasonable control, excluding, however,
delays caused solely by Landlord, its agents, employees, contractors or
invitees.

          3.3 Early Occupancy. If Tenant takes possession of the Premises prior to
the Commencement Date, Tenant shall do so subject to all of the terms and
conditions hereof except for the obligation to pay the Rentals (as defined in
Section 4.3 below) provided for herein prior to the Commencement Date.

          3.4 Tenant’s Physical Occupany of the Premises. The date of Tenant’s
physical occupancy of the Premises shall in no event extend the Commencement
Date, the Lease Termination date or the date the payment of Rentals hereunder
commences.

          3.5 Termination of Existing Leases.

               (a) 3070 Orchard Drive Lease. Tenant has been leasing the 3070 Orchard
Drive portion of the Premises pursuant to a Net Lease dated June 20, 2002 (the
“3070 Lease”) between Landlord and Tenant. On the Commencement Date of this
Lease the 3070 Lease shall terminate without any penalty or fee. Upon such
termination of the 3070 Lease Landlord and Tenant shall have no further
obligations accruing after such termination of the 3070 Lease; provided, that
Landlord and Tenant shall remain liable for those obligations which survive any
termination of the 3070 Lease and are not inconsistent with this Lease.

               (b) 3075 N. First Street Lease. Tenant has been leasing space located at
3075 N. First Street (the “3075 N. First Premises”) pursuant to a Net Lease
dated October 18, 2000 (the “3075 N. First Lease”) between Landlord and Tenant.
On the Commencement Date of this Lease the 3075 N. First Street Lease shall
terminate without any penalty or fee; provided that Tenant shall have the right
to extend such termination of the 3075 N. First Lease for up to sixty (60) days
(the “Temporary Extension”) by giving Landlord written notice on or before
October 22, 2004 exercising such extension. During such Temporary Extension
Tenant shall not be obligated to pay the Rent called for in Section 1.8 of the
3075 N. First Lease, but during the Temporary Extension Tenant shall remain
liable for all other costs and expenses payable under the 3075 N. First Lease.
If Tenant holds over in the 3075 N. First Premises beyond the expiration of the
Temporary Extension, Tenant shall pay Rent at the applicable rate called for in
Section 1.8 of the 3075 N. First Lease commencing on the day following the end
of the Temporary Extension, and continuing until Tenant vacates the 3075 N.
First Premises. Upon the later to occur of (i) the termination of the 3075 N.
First Lease (whether at the Commencement Date of this Lease, or at the
expiration of the Temporary Extension, whichever occurs first) or (ii)

 

 

the date Tenant vacates the 3075 N. First Premises, Tenant shall have no
further obligations accruing after such termination of the 3075 N. First Lease;
provided that Landlord and Tenant shall remain liable for those obligations
which survive any termination of the 3075 N. First Lease and are not
inconsistent with this Lease. Notwithstanding any provision contained in the
3075 N. First Lease to the contrary, Tenant shall not be obligated to remove
tenant improvements from the 3075 N. First Premises, but Tenant shall remain
liable for any damage to the 3075 N. First Premises caused by Tenant’s removal
of Tenant’s property from the 3075 N. First Premises.

               (c) Concurrent with the termination of the Existing Leases and payment of
Security Deposits under this Lease, Landlord shall refund all existing security
deposits and promptly notify Lessee’s bank of the release of all obligations
relating to the Existing Leases which may be guaranteed by any standby letters
of credit.

          3.6 Right of First Offer.

               (a) Provided that Laserscope has not assigned this Lease or sublet any or
all of the Premises (it being intended that all rights pursuant to this
provision are and shall be personal to the original Tenant under this Lease and
shall not be transferable or exercisable for the benefit of any transferee),
and provided Tenant is not in default under this Lease at the time of the
exercise of any such right or at any time thereafter until delivery of
possession of the space to Tenant, and subject to any and all rights of other
tenants in the Project with respect to such space (including renewal and
extension rights and rights of first offer, first negotiation, first refusal or
other expansion rights) existing as of the date of this Lease, then during the
initial Term Tenant shall have a continuous right of first offer to lease the
3075 N. First Premises (as defined above, and for the purposes of this Section
called the “ROFO Space”). Tenant shall not have such right of first offer
during any Extension Period (as defined in Section 3.7 below).

               (b) Such right of first offer (i) may only be exercised with respect to
vacant space or space which has been previously leased and as to which an
existing tenant in has elected not to extend its lease or re-lease such space
and (ii) may only be exercised with respect to all of the space being offered
by Landlord. If the ROFO Space becomes available to lease, Landlord shall
offer to lease such space to Tenant at the same rent and on the same terms that
Landlord intends to offer to other prospective tenants. Tenant shall have five
(5) Business Days following receipt of Landlord’s offer with respect to the
ROFO Space within which to notify Landlord in writing of its intention to lease
the ROFO Space, and such notice, if given by Tenant, shall constitute an
acceptance of Landlord’s terms for the lease of the ROFO Space. If Tenant
exercises such right of first offer, the space to be leased by Tenant shall be
leased on the same terms and conditions as are contained in this Lease except
for the economic and other terms specifically set forth in Landlord’s notice,
and the parties shall execute an amendment to this Lease to include such space
in the Premises and otherwise to provide for the leasing of such space on such
terms; provided, however, such amendment shall also take into account that the
ROFO Space is contained in a multi-tenant building whereas the Premises
consists of two (2) single tenant buildings. If Tenant fails so to exercise
Tenant’s right of first offer within such five (5) Business Day period,
Landlord may thereafter lease the ROFO Space to other prospective tenants;
provided, however, that if Landlord proposes to lease such space at an
effective rent that is less than ninety percent (90%) of the effective rent
proposed to Tenant, or upon other terms which are substantially more favorable
to the prospective tenant, Landlord shall first re-offer such space to Tenant
at such lower rent and/or more favorable terms in accordance with the
provisions of this paragraph.

          3.7 Extension Option. In consideration for Tenant not having been in
default under this Lease more than twice within any one (1) year period during
the

 

 

Lease Term, Landlord hereby grants to Tenant one (1) option to extend the Lease
Term for a period of five (5) years (“Extended Term”), on the following terms
and conditions:

               (a) Tenant must give Landlord notice in writing of its exercise of the
option to extend the Lease Term no earlier than twelve (12) months nor later
than nine (9) months before the date the Lease Term would end but for said
exercise. Time is of the essence.

               (b) Tenant may not extend the Lease Term pursuant to the option granted
by this Section 3.7 if Tenant has been in default in the performance of any of
the terms and conditions of the Lease more than twice within any one (1) year
period during the Lease Term, or if Tenant shall have assigned or otherwise
transferred its interest in this Lease and/or the Premises whether or not
Landlord’s consent to such assignment or transfer has been given. If Tenant is
in default under this Lease on the date that the Extended Term is to commence,
then Landlord may elect to terminate this Lease, notwithstanding any notice
given by Tenant of an exercise of its option to extend.

               (c) All terms and conditions of this Lease shall apply during the
Extended Term, except that the Rent for the Extended Term shall be determined
in accordance with this Section 3.7, below.

               (d) Once Tenant delivers notice of its exercise of the option to extend
the Lease Term, Tenant may not withdraw such exercise and, subject to the
provisions of this Section 3.7, such notice shall operate to extend the Lease
Term. Upon the extension of the Lease Term, the term “Lease Term” as used in
this Lease shall thereafter include the Extended Term and the Lease Termination
date shall be the expiration date of the Extended Term.

               (e) Rent During the Extended Term. If Tenant elects to extend the Lease
Term pursuant to this Section 3.7, the annual Rent for the Extended Term shall
be an amount equal to the fair market value of the Premises (together with
any applicable cost of living or other rental adjustments) in relation to
market conditions at the time of the extension (including, but not limited to,
rental rates for comparable space with comparable tenant improvements and
taking into consideration any adjustments to rent based upon direct costs
(operating expenses) and taxes, load factors, financing charges, and/or cost of
living or other rental adjustments; the relative strength of the tenants; the
size of the space; and any other factors which affect market rental values at
the time of extension); and provided further, that the annual Rent for the
Extended Term shall in no event be lower than the Rent for the last Lease Year
of the original term. Tenant acknowledges that Landlord shall not be obligated
or requested to pay any leasing commissions during or for the Extended Term.
The Rent for the Extended Term shall be determined as follows:

               (f) Mutual Agreement. After timely receipt by Landlord of Tenant’s
notice of exercise of the option to extend the Lease Term, Landlord and Tenant
shall have a period of thirty (30) days in which to agree on the Rent for the
Extended Term. If Landlord and Tenant agree on said Rent during that period,
they shall immediately execute an amendment to this Lease stating the Rent for
the Extended Term. If Landlord and Tenant are unable to agree on the Rent for
the Extended Term as aforesaid, Tenant shall have the right to withdraw its
election to extend the Lease Term by written notice to Landlord given five (5)
days after the expiration of said thirty (30) day period, in which event the
Lease shall terminate on the expiration date of the Lease Term.

               (g) Appraisal. If Tenant does not withdraw its election to extend the
Lease Term within five (5) days after the expiration of the thirty (30) day
period described in Section 3.7 (g) above, each party, at its cost and by
giving notice to the other party, shall appoint an M.A.I. real estate
appraiser, with at least five (5) years full-time commercial appraisal
experience in the area in which the Premises are located to appraise and set
the fair market rental value of the Premises. If a party does not appoint an
appraiser within five (5) days after the other party has given notice of the
name of its appraiser, the single appraiser appointed shall be the sole
appraiser and shall set the fair market rental value. The cost of such
appraiser shall be borne equally by the parties. If two appraisers are
appointed by the parties as provided in this paragraph, the two appraisers
shall meet promptly and attempt to set the fair market value rental value. If
they are unable to agree within twenty (20) days after the last appraiser has
been appointed, then the two appraisers shall attempt to select a third
appraiser meeting the qualifications stated in Paragraph 44(b) above within ten
(10) working days after the last day the two appraisers are given to set the
fair

 

 

market rental value. If they are unable to agree on the third appraiser,
either of the parties to this Lease, by giving ten (10) days notice to the
other party, may apply to the presiding judge of the Superior Court of Santa
Clara County for a selection of a third appraiser who meets the qualifications
stated above. Each of the parties shall bear one-half (1/2) of the cost of
appointing the third appraiser’s fee. The third appraiser, however selected,
shall be a person who has not previously acted in any capacity for either
party. Within twenty (20) days after the selection of the third appraiser, the
majority of the appraisers shall set the fair market rental value. If the
majority of the appraisers are unable to set the fair market rental value
within said twenty (20) day period, the three appraisals shall be added
together and the total divided by three; the resulting quotient shall be the
fair market rental value and shall be deemed incorporated herein, provided,
however, that if any appraisal differs from the median appraisal by amount
equal to more than ten percent (10%) of such median appraisal, that appraisal
shall be disregarded, and the average of the remaining appraisals (or the
remaining appraisal) shall be the fair market rental value. In establishing
the fair market rental value, the appraiser or appraisers shall consider the
reasonable market rental value for the highest and best use of the Premises
(including, but not limited to, rental rates for comparable space with
comparable tenant improvements and any adjustments to rent based upon direct
costs (operating expenses) and taxes, load factors, financing charges, and/or
cost of living or other rental adjustments; the relative strength of the
tenants; and of size of the space); without regard to the existence of this
Lease but taking into consideration the absolute nature of this Lease.

     4. Rent

          4.1 Rent. Tenant shall pay to Landlord as rent for the Premises
(“Rent”), in advance, on the first day of each calendar month, commencing on
the date specified in Paragraph 1.6 and continuing throughout the Lease Term
the Rent set forth in Paragraph 1.8 above. Rent shall be prorated, based on
thirty (30) days per month, for any partial month during the Lease Term. Rent
shall be payable without deduction, offset, prior notice or demand in lawful
money of the United States to Landlord at the address herein specified for
purposes of notice or to such other persons or such other places as Landlord
may designate in writing.

          4.2 Late Charge. Tenant hereby acknowledges that late payment by Tenant
to Landlord of Rent will cause Landlord to incur costs not contemplated by this
Lease, the exact amount of which will be extremely difficult to ascertain.
Such costs include, but are not limited to, processing and accounting charges,
and late charges which may be imposed on Landlord by the terms of any mortgage
or deed of trust covering the Premises. Accordingly, Tenant shall pay to
Landlord, as Additional Rent (as defined in Paragraph 4.3 below), without the
necessity of prior notice or demand, a late charge equal to ten percent (10%)
of any installment of Rent which is not received by Landlord within ten (10)
days after the due date for such installment. The parties hereby agree that
such late charge represents a fair and reasonable estimate of the costs
Landlord will incur by reason of late payment by Tenant. In no event shall
this provision for a late charge be deemed to grant to Tenant a grace period or
extension of time within which to pay any installment of Rent or prevent
Landlord from exercising any right or remedy available to Landlord upon
Tenant’s failure to pay such installment of Rent when due, including without
limitation the right to terminate this Lease. In the event any installment of
Rent is not received by Landlord by the thirtieth (30th) day after the due date
for such installment, such installment shall bear interest at the annual rate
set forth in Paragraph 34 below, commencing on the thirty-first (31st) day
after the due date for such installment and continuing until such installment
is paid in full.

          4.3 Additional Rent. All taxes, charges, costs and expenses and other
sums which Tenant is required to pay hereunder (together with all interest and
charges that may accrue thereon in the event of Tenant’s failure to pay the
same), and all damages, costs and reasonable expenses which Landlord may incur
by reason of any Default by Tenant shall be deemed to be additional rent
hereunder (“Additional Rent”). Additional Rent shall accrue commencing on the
Commencement Date. In the event of nonpayment by Tenant of any Additional
Rent, Landlord shall have all the rights and remedies with respect thereto as
Landlord has for the nonpayment of Rent. The term “Rentals” as used in this
Lease shall mean Rent and Additional Rent.

     5. Security Deposit. Concurrently with Tenant’s execution of this Lease,
Tenant shall deposit with Landlord a security deposit (“Security Deposit”) in
the amount set forth in Paragraph 1.10 above. The Security Deposit shall be
held by Landlord as security for the faithful performance by Tenant of each and
every term,

 

 

covenant and condition of this Lease applicable to Tenant, and not as
prepayment of Rent. If Tenant shall at any time fail to keep or perform any
term, covenant or condition of this Lease applicable to Tenant, including,
without limitation, the payment of Rentals or those provisions requiring Tenant
to repair damage to the Premises caused by Tenant or to surrender the Premises
in the condition required pursuant to Paragraph 35 below, Landlord may, but
shall not be obligated to and without waiving or releasing Tenant from any
obligation under this Lease, use, apply or retain the whole or any part of the
Security Deposit reasonably necessary for the payment of any amount which
Landlord may spend by reason of Tenant’s default or as necessary to compensate
Landlord for any loss or damage which Landlord may suffer by reason of Tenant’s
default. In the event Landlord uses or applies any portion of the Security
Deposit, Tenant shall, within five (5) business days after written demand by
Landlord, remit to Landlord sufficient funds to restore the Security Deposit to
its original sum. Failure by Tenant to so remit funds shall be a Default by
Tenant. Should Tenant comply with all of the terms, covenants and conditions
of this Lease applicable to Tenant, the balance of the Security Deposit shall
be returned to Tenant within fourteen (14) days after Lease Termination and
surrender of the Premises by Tenant; provided, however, if any portion of the
Security Deposit is to be applied to repair damages to the Premises caused by
Tenant or Tenant’s agents, to clean the Premises, or to remove alterations and
restore the Premises pursuant to Paragraph 13.2 below, then the balance of the
Security Deposit shall be returned to Tenant no later than thirty (30) days
after the date Landlord receives possession of the Premises.

     6. Use of Premises.

          6.1 Permitted Uses. Tenant shall use the Premises and the Common Area
only in conformance with applicable Laws for the purposes set forth in
Paragraph 1.9 above, and for no other purpose without the prior written consent
of Landlord, which consent shall not be unreasonably withheld or delayed,
provided that such other use is in conformance with applicable Laws. Any
change in use of the Premises or the Common Area without the prior written
consent of Landlord shall be a Default by Tenant. Tenant and Tenant’s agents
shall comply with the provisions of any Declaration of Covenants, Conditions,
and Restrictions affecting the Premises and the Common Area.

          6.2 Tenant to Comply with Legal Requirements. Tenant shall, at its sole
cost, promptly comply with all Laws relating to or affecting Tenant’s
particular use or occupancy of the Premises or the Common Area, now in force,
or which may hereafter be in force, including without limitation those relating
to utility usage and load or number of permissible occupants or users of the
Premises, whether or not the same are now contemplated by the parties; with the
provisions of all recorded documents affecting the Premises or the Common Area
insofar as the same relate to or affect Tenant’s particular use or occupancy of
the Premises or use of the Common Area; and with the requirements of any board
of fire underwriters (or similar body now or hereafter constituted) relating to
or affecting Tenant’s particular use or occupancy of the Premises or use of the
Common Area. Tenant’s obligations pursuant to this Paragraph 6.2 shall
include, without limitation, maintaining or restoring the Premises and the
Common Area and making structural and non-structural alterations and additions
in compliance and conformity with all Laws and recorded documents (including,
without limitation, alterations or additions to the Premises and/or Common Area
that are required pursuant to the ADA), each relating to Tenant’s particular
use or occupancy of the Premises during the Lease Term or alterations made to
the Premises by Tenant. Any alterations or additions undertaken by Tenant
pursuant to this Paragraph 6.2 shall be subject to the requirements of
Paragraph 13.1 below. At Landlord’s option, Landlord may make the required
alteration, addition or change upon prior notification to Tenant, and Tenant
shall pay the cost thereof as Additional Rent. The foregoing notwithstanding,
Landlord shall make any alteration or addition required to bring the Premises
or the Common Area into compliance with legal requirements in effect at the
time the Premises, any improvements installed therein by Landlord, or the
Common Area, respectively, were originally constructed. The cost of any
structural alterations as may be hereafter required due to a change in laws and
unrelated to Tenant’s specific use of the Premises shall be the responsibility
of Landlord.

     Tenant shall obtain prior to taking possession of the Premises any
permits, licenses or other authorizations required for the lawful operation of
its business at the Premises. The judgment of any court of competent
jurisdiction or the admission of Tenant in any action or proceeding against
Tenant, regardless of whether Landlord is a party thereto or not, that Tenant
has violated such Law or recorded document relating to Tenant’s particular use
or occupancy of the Premises or use of the Common Area shall be conclusive of
the fact of such violation by Tenant.

 

 

          6.3 Prohibited Uses. Tenant and Tenant’s agents shall not commit or
suffer to be committed any waste upon the Premises. Tenant and Tenant’s agents
shall not do or permit anything to be done in or about the Premises or Common
Area which will in any way obstruct or interfere with the rights of any
authorized users of the Common Area or occupants of neighboring property, or
injure or annoy them. Tenant shall not conduct or permit any auction or sale
open to the public to be held or conducted on or about the Premises or Common
Area. Tenant and Tenant’s agents shall not use or allow the Premises to be
used for any unlawful, immoral or hazardous purpose or any purpose not
permitted by this Lease, nor shall Tenant or Tenant’s agents cause, maintain,
or permit any nuisance in, on or about the Premises. Tenant and Tenant’s
agents shall not do or permit anything to be done in or about the Premises or
Common Area nor bring or keep anything in the Premises or Common Area which
will in any way increase the rate of any insurance upon the Premises or Common
Area or any part thereof or any of its contents, or cause a cancellation of any
insurance policy covering the Premises or Common Area or any part thereof or
any of its contents, nor shall Tenant or Tenant’s agents keep, use or sell or
permit to be kept, used or sold in or about the Premises any articles which may
be prohibited by a standard form policy of fire insurance. In the event the
rate of any insurance upon the Premises or Common Area or any part thereof or
any of its contents is increased because of Tenant’s particular use of the
Premises or that of Tenant’s agents, Tenant shall pay, as Additional Rent, the
full cost of such increase; provided however this provision shall in no event
be deemed to constitute a waiver of Landlord’s right to declare a default
hereunder by reason of the act or conduct of Tenant or Tenant’s agents causing
such increase or of any other rights or remedies of Landlord in connection
therewith. Tenant and Tenant’s agents shall not place any loads upon the
floor, walls or ceiling of the Premises which would endanger the Premises or
the structural elements thereof, nor place any harmful liquids in the drainage
system of the Premises. No waste materials or refuse shall be dumped upon or
permitted to remain upon any part of the Premises or Common Area except in
enclosed trash containers designated for that purpose by Landlord. No
materials, supplies, equipment, finished products (or semi-finished products),
raw materials, or other articles of any nature shall be stored upon, or be
permitted to remain on, any portion of the Common Area.

          6.4 Hazardous Materials. Neither Tenant nor Tenant’s agents shall
permit the introduction, placement, use, storage, manufacture, transportation,
release or disposition (collectively “Release”) of any Hazardous Material(s)
(defined below) on or about any portion of the Premises or Common Area without
the prior written consent of Landlord, which consent may be withheld in the
sole and absolute discretion of Landlord without any requirement of
reasonableness in the exercise of that discretion. Notwithstanding the
immediately preceding sentence to the contrary, Tenant may use de minimis
quantities of the types of materials which are technically classified as
Hazardous Materials but commonly used in domestic or office use to the extent
not in an amount, which, either individually or cumulatively, would be a
“reportable quantity” under any applicable Law. Furthermore, Tenant may use
those hazardous materials attached in Exhibit G which are necessary in Tenant’s
business operations in accordance with all legal and governmental regulations
and guidelines. Tenant covenants that, at its sole cost and expense, Tenant
will comply with all applicable Laws with respect to the Release by Tenant, its
agents, employees, contractors or invitees of such permitted Hazardous
Materials. Any Release beyond the scope allowed in this paragraph shall be
subject to Landlord’s prior consent, which may be withheld in Landlord’s sole
and absolute discretion, and shall require an amendment to the Lease in the
event Landlord does consent which shall set forth the materials, scope of use,
indemnification and any other matter required by Landlord in Landlord’s sole
and absolute discretion. Tenant shall indemnify, defend and hold Landlord and
Landlord’s agents harmless from and against any and all claims, losses,
damages, liabilities, or expenses arising in connection with the Release of
Hazardous Materials in violation of Hazardous Materials Laws by Tenant,
Tenant’s agents or any other person using the Premises with Tenant’s knowledge
and consent or authorization. Tenant’s obligation to defend, hold harmless and
indemnify pursuant to this Paragraph 6.4 shall survive Lease Termination.

     The foregoing indemnity shall not apply to, and Tenant shall not be
responsible for, the presence of Hazardous Materials on, under, or about the
Premises or Common Area to the extent caused by any third parties or by
Landlord or Landlord’s employees, agents, contractors or invitees.

     Notwithstanding anything to the contrary contained in this Lease, Landlord
hereby represents and warrants to Tenant that, to the best of Landlord’s
knowledge, (i) the Premises and the Common Area are in compliance with all laws
regarding Hazardous Materials (“Hazardous Materials Laws”); (ii) no
asbestos-containing materials exist in or on the

 

 

Premises or the Common Area; and (iii) any handling, transportation, storage or
use of Hazardous Materials that occurred in the Premises or the Common Area
prior to the Commencement Date is now in compliance with all Hazardous
Materials Laws. Landlord further represents and warrants that, to the best of
Landlord’s knowledge, no litigation has been brought or threatened, nor any
settlements reached with any governmental or private party, concerning the
actual or alleged presence of Hazardous Materials on or about the Premises or
the Common Area, nor has Landlord received any notice of any violation, or
alleged violation, of any Hazardous Materials Laws, pending claims or pending
investigations with respect to the presence of Hazardous Materials on or about
the Premises or the Common Area. Landlord’s representations and warranties set
forth in this paragraph shall survive termination of this Lease.

     As used in this Lease, the term “Hazardous Materials” means any chemical,
substance, waste or material which has been or is hereafter determined by any
federal, state or local governmental authority to be capable of posing risk of
injury to health or safety, including without limitation, those substances
included within the definitions of “hazardous substances,” “hazardous
materials,” “toxic substances,” or “solid waste” under the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, the Resource
Conservation and Recovery Act of 1976, and the Hazardous Materials
Transportation Act, as amended, and in the regulations promulgated pursuant to
said laws; those substances defined as “hazardous wastes” in section 25117 of
the California Health & Safety Code, or as “hazardous substances” in section
25316 of the California Health & Safety Code, as amended, and in the
regulations promulgated pursuant to said laws; those substances listed in the
United States Department of Transportation Table (49 CFR 172.101 and amendments
thereto) or designated by the Environmental Protection Agency (or any successor
agency) as hazardous substances (see, e.g., 40 CFR Part 302 and amendments
thereto); such other substances, materials and wastes which are or become
regulated or become classified as hazardous or toxic under any Laws, including
without limitation the California Health & Safety Code, Division 20, and Title
26 of the California Code of Regulations; and any material, waste or substance
which is (i) petroleum, (ii) asbestos, (iii) polychlorinated biphenyls, (iv)
designated as a “hazardous substance” pursuant to section 311 of the Clean
Water Act of 1977, 33 U.S.C. sections 1251 et seq. (33 U.S.C. § 1321) or listed
pursuant to section 307 of the Clean Water Act of 1977 (33 U.S.C. § 1317), as
amended; (v) flammable explosives; (vi) radioactive materials; or (vii) radon
gas.

     Landlord shall have the right, upon reasonable advance notice to Tenant,
to inspect, investigate, sample and/or monitor the Premises and Common Area,
including any soil, water, groundwater, or other sampling, to the extent
reasonably necessary to determine whether Tenant is complying with the terms of
this Lease with respect to Hazardous Materials. Unless a previous inspection
has disclosed a violation by Tenant of the covenants contained in this
Paragraph 6.4, such inspections, investigations, sampling and/or monitoring
shall be performed not more often than semi-annually. In connection therewith,
Tenant shall provide Landlord with reasonable access to all portions of the
Premises; provided, however, that Landlord shall avoid any unreasonable
interference with the operation of Tenant’s business on the Premises. All
costs incurred by Landlord in performing such inspections, investigation,
sampling and/or monitoring shall be reimbursed by Tenant to Landlord as
Additional Rent within ten (10) days after Landlord’s demand for payment.

     During the term of this Lease Landlord shall notify Tenant of any change
Landlord becomes aware of in the status of Hazardous Materials at the Premises,
the Common Areas and the land upon which the Premises and Common Areas are
situated.

     7. Taxes

          7.1 Personal Property Taxes. Tenant shall cause Tenant’s trade fixtures,
equipment, furnishings, furniture, merchandise, inventory, machinery,
appliances and other personal property installed or located on the Premises
(collectively the “personal property”) to be assessed and billed separately
from the Premises. Tenant shall pay before delinquency any and all taxes,
assessments and public charges levied, assessed or imposed upon or against
Tenant’s personal property. If any of Tenant’s personal property shall be
assessed with the real property comprising the Common Area or with the
Premises, Tenant shall pay to Landlord, as Additional Rent, the amounts
attributable to Tenant’s personal property within thirty (30) days after
receipt of a written statement from Landlord setting forth the amount of such
taxes, assessments and public charges attributable to Tenant’s personal
property. Tenant shall comply with the provisions of any Law which requires
Tenant to file a report of Tenant’s personal property located on the Premises.

 

 

          7.2 Other Taxes Payable Separately by Tenant. Tenant shall pay (or
reimburse Landlord, as Additional Rent, if Landlord is assessed), prior to
delinquency or within thirty (30) days after receipt of Landlord’s statement
thereof, any and all taxes, levies, assessments or surcharges payable by
Landlord or Tenant and relating to this Lease or the Premises (other than
Landlord’s net income, succession, transfer, gift, franchise, estate or
inheritance taxes, and Taxes, as that term is defined in Paragraph 7.3(a)
below, payable as an Operating Expense), whether or not now customary or within
the contemplation of the parties hereto, whether or not now in force or which
may hereafter become effective, including but not limited to taxes:

               (a) Upon, allocable to, or measured by the area of the Premises or the
Rentals payable hereunder, including without limitation any gross rental
receipts, excise, or other tax levied by the state, any political subdivision
thereof, city or federal government with respect to the receipt of such
Rentals;

               (b) Upon or with respect to the use, possession, occupancy, leasing,
operation and management of the Premises or any portion thereof;

               (c) Upon this transaction or any document to which Tenant is a party
creating or transferring an interest or an estate in the Premises; or

               (d) Imposed as a means of controlling or abating environmental pollution
or the use of energy or any natural resource (including without limitation gas,
electricity or water), including, without limitation, any parking taxes, levies
or charges or vehicular regulations imposed by any governmental agency. Tenant
shall also pay, prior to delinquency, all privilege, sales, excise, use,
business, occupation, or other taxes, assessments, license fees or charges
levied, assessed or imposed upon Tenant’s business operations conducted at the
Premises.

     In the event any such taxes are payable by Landlord and it shall not be
lawful for Tenant to reimburse Landlord for such taxes, then the Rentals
payable hereunder shall be increased to net Landlord the same net Rental after
imposition of any such tax upon Landlord as would have been payable to Landlord
prior to the imposition of any such tax.

          7.3 Common Taxes.

               (a) Definition of Taxes. The term “Taxes” as used in this Lease shall
collectively mean (to the extent any of the following are not paid by Tenant
pursuant to Paragraphs 7.1 and 7.2 above) all real estate taxes and general and
special assessments (including, but not limited to, assessments for public
improvements or benefit); personal property taxes; taxes based on vehicles
utilizing parking areas on the Common Area; taxes computed or based on rental
income or on the square footage of the Premises (including without limitation
any municipal business tax but excluding federal, state and municipal net
income taxes); environmental surcharges; excise taxes; gross rental receipts
taxes; sales and/or use taxes; employee taxes; water and sewer taxes, levies,
assessments and other charges in the nature of taxes or assessments (including,
but not limited to, assessments for public improvements or benefit); and all
other governmental, quasi-governmental or special district impositions of any
kind and nature whatsoever; regardless of whether any of the foregoing are now
customary or within the contemplation of the parties hereto and regardless of
whether resulting from increased rate and/or valuation, or whether
extraordinary or ordinary, general or special, unforeseen or foreseen, or
similar or dissimilar to any of the foregoing and which during the Lease Term
are laid, levied, assessed or imposed upon Landlord and/or become a lien upon
or chargeable against the Premises and/or Common Area under or by virtue of any
present or future laws, statutes, ordinances, regulations, or other
requirements of any governmental, quasi-governmental or special district
authority whatsoever. The term “environmental surcharges” shall include any
and all expenses, taxes, charges or penalties imposed by the Federal Department
of Energy, Federal Environmental Protection Agency, the Federal Clean Air Act,
or any regulations promulgated thereunder, or imposed by any other local, state
or federal governmental agency or entity now or hereafter vested with the power
to impose taxes, assessments or other types of surcharges as a means of
controlling or abating environmental pollution or the use of energy or any
natural resource in regard to the use, operation or occupancy of the Premises
and/or the Common Area. The term “Taxes” shall include (to the extent the same
are not paid by Tenant pursuant to Paragraphs 7.1 and 7.2 above), without
limitation, all taxes, assessments, levies, fees, impositions or charges

 

 

levied, imposed, assessed, measured, or based in any manner whatsoever upon or
with respect to the use, possession, occupancy, leasing, operation or
management of the Premises and/or Common Area or in lieu of or equivalent to
any Taxes set forth in this Paragraph 7.3(a). In the event any such Taxes are
payable by Landlord and it shall not be lawful for Tenant to reimburse Landlord
for such Taxes, then the Rentals payable hereunder shall be increased to net
Landlord the same net Rental after imposition of any such Tax upon Landlord as
would have been payable to Landlord prior to the imposition of any such Tax.

     Notwithstanding anything to the contrary contained in this Lease, Tenant
shall not be required to pay any portion of any tax or assessment (i) in excess
of the amount which would be payable if the tax or assessment were paid in
installments over the longest possible term; or (ii) imposed on land and
improvements other than the Premises and Common Area. If Tenant shall so
elect, upon prior written notice to Landlord, Tenant shall have the right to
audit any Taxes at its sole cost and expense.

               (b) Operating Expenses. All Taxes which are levied or assessed or which
become a lien upon the Premises and/or Common Area or which become due or
accrue during the Lease Term shall be an Operating Expense, and Tenant shall
pay as Additional Rent each month during the Lease Term 1/12th of such Taxes,
based on Landlord’s estimate thereof, pursuant to Paragraph 12 below. Taxes
during any partial tax fiscal year(s) within the Lease Term shall be prorated
according to the ratio which the number of days during the Lease Term or of
actual occupancy of the Premises by Tenant, whichever is greater, during such
year bears to 365.

     8. Insurance; Indemnity; Waiver.

          8.1 Insurance by Landlord. Landlord shall, during the Lease Term,
procure and keep in force the following insurance, the cost of which shall be
an Operating Expense, payable by Tenant pursuant to Paragraph 12 below:

               (a) Property Insurance. “All risk” property insurance, including,
without limitation, boiler and machinery (if applicable); sprinkler damage;
vandalism; malicious mischief; full coverage plate glass insurance; and
demolition, increased cost of construction and contingent liability from change
in building laws on the Premises and Common Area, including any improvements or
fixtures constructed or installed on the Premises and Common Area by Landlord.
Such insurance shall be in the full amount of the replacement cost of the
foregoing, with reasonable deductible amounts, which deductible amounts shall
be an Operating Expense, payable by Tenant pursuant to Paragraph 12. Such
insurance shall also include rental income insurance, insuring that one hundred
percent (100%) of the Rentals (as the same may be adjusted hereunder) will be
paid to Landlord for a period of up to twelve (12) months if the Premises are
destroyed or damaged, or such longer period as may be required by any
beneficiary of a deed of trust or any mortgagee of any mortgage affecting the
Premises. Such insurance shall not cover any leasehold improvements installed
in the Premises by Tenant at its expense, or Tenant’s equipment, trade fixtures
inventory, fixtures or personal property located on or in the Premises;

               (b) Liability Insurance. Comprehensive general liability (lessor’s risk)
insurance against any and all claims for personal injury, death or property
damage occurring in or about the Premises or Common Area. Such insurance shall
have a combined single limit of not less than Three Million Dollars
($3,000,000) per occurrence and Five Million Dollars ($5,000,000) aggregate;
and

               (c) Other. Such other insurance as Landlord deems necessary and
prudent.

          8.2 Insurance by Tenant. Tenant shall, during the Lease Term, at
Tenant’s sole cost and expense, procure and keep in force the following
insurance:

               (a) Personal Property Insurance. “All risk” property insurance,
including, without limitation, coverage for boiler and machinery (if
applicable); sprinkler damage; vandalism; malicious

 

 

mischief; and demolition, increased cost of construction and contingent
liability from changes in building laws on all leasehold improvements installed
in the Premises by Tenant at its expense (if any), and on all equipment, trade
fixtures, inventory, fixtures and personal property located on or in the
Premises, including improvements or fixtures hereinafter constructed or
installed on the Premises. Such insurance shall be in an amount equal to the
full replacement cost of the aggregate of the foregoing and shall provide
coverage comparable to the coverage in the standard ISO all risk form, when
such form is supplemented with the coverages required above.

               (b) Liability Insurance. Comprehensive general liability insurance for
the mutual benefit of Landlord and Tenant, against any and all claims for
personal injury, death or property damage occurring in or about the Premises
and Common Area, or arising out of Tenant’s or Tenant’s agents’ use of the
Common Area, use or occupancy of the Premises or Tenant’s operations on the
Premises. Such insurance shall have a combined single limit of not less than
One Million Dollars ($1,000,000) per occurrence and Three Million Dollars
($3,000,000) aggregate. Such insurance shall contain a cross-liability
(severability of interests) clause and an extended (“broad form”) liability
endorsement, including blanket contractual coverage. The minimum limits
specified above are the minimum amounts required by Landlord, and may be
revised by Landlord from time to time to meet changed circumstances, including
without limitation to reflect (i) changes in the purchasing power of the
dollar, (ii) changes indicated by the amount of plaintiffs’ verdicts in
personal injury actions in the State of California, or (iii) changes consistent
with the standards required by other landlords in the county in which the
Premises are located. Such liability insurance shall be primary and not
contributing to any insurance available to Landlord, and Landlord’s insurance
(if any) shall be in excess thereto. Such insurance shall specifically insure
Tenant’s performance of the indemnity, defense and hold harmless agreements
contained in Paragraph 8.4, although Tenant’s obligations pursuant to Paragraph
8.4 shall not be limited to the amount of any insurance required of or carried
by Tenant under this Paragraph 8.2(b). Tenant shall be responsible for
insuring that the amount of insurance maintained by Tenant is sufficient for
Tenant’s purposes.

               (c) Other. Such other insurance as required by law, including, without
limitation, workers’ compensation insurance.

               (d) Form of the Policies. The policies required to be maintained by
Tenant pursuant to Paragraphs 8.2(a), (b), and (c) above shall be with
companies, on forms, with deductible amounts (if any), and loss payable clauses
reasonably satisfactory to Landlord, shall include Landlord and the beneficiary
or mortgagee of any deed of trust or mortgage encumbering the Premises and/or
the real property comprising the Common Area as additional insureds, and shall
provide that such parties may, although additional insureds recover for any
loss suffered by Tenant’s negligence. Certified copies of policies or
certificates of insurance shall be delivered to Landlord prior to the
Commencement Date; a new policy or certificate shall be delivered to Landlord
at least ten (10) business days prior to the expiration date of the old policy.
Tenant shall have the right to provide insurance coverage which it is
obligated to carry pursuant to the terms hereof in a blanket policy, provided
such blanket policy expressly affords coverage to the Premises and to Tenant as
required by this Lease. Tenant shall obtain a written obligation on the part
of Tenant’s insurer(s) to notify Landlord and any beneficiary or mortgagee of a
deed of trust or mortgage encumbering the Premises and/or the real property
comprising the Common Area in writing of any delinquency in premium payments
and at least thirty (30) days prior to any cancellation or modification of any
policy. Tenant’s policies shall provide coverage on an occurrence basis and
not on a claims made basis. In no event shall the limits of any policies
maintained by Tenant be considered as limiting the liability of Tenant under
this Lease.

          8.3 Failure by Tenant to Obtain Insurance. If Tenant does not take out the
insurance required pursuant to Paragraph 8.2 or keep the same in full force and
effect, Landlord may, but shall not be obligated to, take out the necessary
insurance and pay the premium therefore, and Tenant shall repay to Landlord, as
Additional Rent, the amount so paid promptly upon demand. In addition,
Landlord may recover from Tenant and Tenant agrees to pay, as Additional Rent,
any and all reasonable expenses (including reasonable attorneys’ fees) and
damages which Landlord may sustain by reason of the failure of Tenant to obtain
and maintain such insurance, it being expressly declared that the expenses and
damages of Landlord shall not be limited to the amount of the premiums thereon.

 

 

          8.4 Indemnification. Tenant shall indemnify, hold harmless, and defend
Landlord with competent counsel reasonably satisfactory to Landlord (except for
Landlord’s negligence or willful misconduct, or that of its agents, employees,
contractors or invitees) against all claims, losses, damages, expenses or
liabilities for injury or death to any person or for damage to or loss of use
of any property arising out of any occurrence in, on or about the Premises or
Common Area, if caused or contributed to by Tenant or Tenant’s agents, or
arising out of any occurrence in, upon or at the Premises or on account of the
use, condition, occupational safety or occupancy of the Premises. Tenant’s
indemnification, defense and hold harmless obligations under this Lease shall
include and apply to reasonable attorneys’ fees, investigation costs, and other
costs actually incurred by Landlord. Tenant shall further indemnify, defend
and hold harmless Landlord from and against any and all claims, losses,
damages, liabilities or expenses arising from any breach or default in the
performance of any obligation on Tenant’s part to be performed under the terms
of this Lease. The provisions of this Paragraph 8.4 shall survive Lease
Termination with respect to any damage, injury, death, breach or default
occurring prior to such termination. Except as set forth in this Paragraph
8.4, this Lease is made on the express condition that Landlord shall not be
liable for, or suffer loss by reason of, injury to person or property, from
whatever cause, in any way connected with the condition, use, occupational
safety or occupancy of the Premises specifically including, without limitation,
any liability for injury to the person or property of Tenant or Tenant’s
agents.

          8.5
Claims by Tenant. Except as expressly provided in Paragraph 8.4,
Landlord shall not be liable to Tenant, and Tenant waives all claims against
Landlord, for injury or death to any person, damage to any property, or loss of
use of any property in the Premises or Common Area by and from all causes,
including without limitation, any defect in the Premises or Common Area and/or
any damage or injury resulting from fire, steam, electricity, gas, water or
rain, which may leak or flow from or into any part of the Premises, or from
breakage, leakage, obstruction or other defects of pipes, sprinklers, wires,
appliances, plumbing, air conditioning or lighting fixtures, whether the damage
or injury results from conditions arising upon the Premises or Common Area or
from other sources. Neither Landlord nor Tenant shall be liable for any
damages arising from any act or negligence of any other user of the Common
Area. Tenant or Tenant’s agents shall immediately notify Landlord in writing
of any known defect in the Premises or Common Area. The provisions of this
Paragraph 8.5 shall not apply to any damage or injury caused by Landlord’s
willful misconduct or negligence, or that of its agents, employees, contractors
or invitees.

          8.6 Mutual Waiver of Subrogation. Landlord hereby releases Tenant, and
Tenant hereby releases Landlord, and their respective officers, agents,
employees and servants, from any and all claims or demands of damages, loss,
expense or injury to the Premises or the Common Area, or to the furnishings,
fixtures, equipment, inventory or other property of either Landlord or Tenant
in, about or upon the Premises or the Common Area, which is caused by or
results from perils, events or happenings which are the subject of insurance
carried by the respective parties pursuant to this Paragraph 8 and in force at
the time of any such loss, whether due to the negligence of the other party or
its agents and regardless of cause or origin; provided, however, that such
waiver shall be effective only to the extent permitted by the insurance
covering such loss, to the extent such insurance is not prejudiced thereby, and
to the extent insured against.

     9. Utilities. Tenant shall pay during the Lease Term and prior to
delinquency all charges for water, gas, light, heat, power, electricity,
telephone or other communication service, janitorial service, trash pick-up,
sewer and all other services supplied to Tenant or consumed by Tenant on the
Premises (collectively the “Services”) and all taxes, levies, fees or
surcharges therefor. Tenant shall arrange for Services to be supplied to the
Premises and shall contract for all of the Services in Tenant’s name prior to
the Commencement Date. The Commencement Date shall not be delayed by reason of
any failure by Tenant to so contract for Services. In the event that any of
the Services cannot be separately billed or metered to the Premises, or if any
of the Services are not separately metered as of the Commencement Date, the
cost of such Services shall be an Operating Expense and Tenant shall pay such
cost to Landlord, as Additional Rent, as provided in Paragraph 12 below, except
that Tenant’s proportionate share of such Services shall be the percentage
obtained by dividing the gross leasable square footage contained in the
Premises by the total gross leasable square footage located in all buildings
utilizing such Services. The lack or shortage of any Services due to any cause
whatsoever (except for a lack or shortage proximately caused by the negligent
acts or willful misconduct Landlord or that of its agents, employees,
contractors or invitees) shall not affect any obligation of Tenant

 

 

hereunder,
and Tenant shall faithfully keep and observe all the terms, conditions and
covenants of this Lease and pay all Rentals due hereunder, all without
diminution, credit or deduction.

     10. Repairs and Maintenance.

          10.1 Landlord’s Responsibilities. Subject to the provisions of
Paragraph 15 below, Landlord shall maintain in reasonably good order and repair
the structural roof, roof membrane, structural and exterior walls (including
painting thereof) and foundations of the Premises. In addition, Landlord shall
maintain the service contract (covering periodic inspection and servicing) for
the heating and air conditioning systems of the Premises. Tenant shall give
prompt written notice to Landlord of any known maintenance work required to be
made by Landlord pursuant to this Paragraph 10.1. The costs of (i) repairs and
maintenance of the roof membrane, (ii) periodic inspection and regular
servicing of the heating and air conditioning systems of the Premises, and
(iii) painting the exterior of the Premises which are the obligation of
Landlord hereunder shall be an Operating Expense and Tenant shall pay such
costs to Landlord as Additional Rent, as provided in Paragraph 12 below. The
costs of maintenance, repair, and replacement of the structural parts of the
Premises (including foundations, floor slab, load bearing walls and roof
structure) which are the obligation of Landlord hereunder shall be at the cost
and expense of Landlord and shall not be an Operating Expense, except for any
repairs required because of the wrongful act of Tenant or Tenant’s agents,
which repairs shall be made at the expense of Tenant and as Additional Rent.

          10.2 Tenant’s Responsibilities. Except as expressly provided in
Paragraph 10.1 above, and subject to the provisions of Paragraph 2.3 above,
Tenant shall, at its sole cost, maintain the entire Premises and every part
thereof, including without limitation, windows, skylights, window frames, plate
glass, freight docks, doors and related hardware, interior walls and
partitions, and the electrical, plumbing, lighting, heating and air
conditioning systems in good order, condition and repair. Tenant’s obligations
with respect to the heating and air conditioning systems of the Premises shall
include the replacement of components thereof. If Tenant fails to make repairs
or perform maintenance work required of Tenant hereunder within fourteen (14)
days after written notice from Landlord specifying the need for such repairs or
maintenance work, Landlord or Landlord’s agents may, in addition to all other
rights and remedies available hereunder or by law and without waiving any
alternative remedies, enter into the Premises and make such repairs and/or
perform such maintenance work. If Landlord makes such repairs and/or performs
such maintenance work, Tenant shall reimburse Landlord upon demand and as
Additional Rent, for the cost of such repairs and/or maintenance work.
Landlord shall use reasonable efforts to avoid causing any inconvenience to
Tenant or interference with the use of the Premises by Tenant or Tenant’s
agents during the performance of any such repairs or maintenance. Landlord
shall have no liability to Tenant for any damage, inconvenience or interference
with the use of the Premises by Tenant or Tenant’s agents as a result of
Landlord performing any such repairs or maintenance (except for the negligent
acts or willful misconduct Landlord or that of its agents, employees,
contractors or invitees). Tenant shall reimburse Landlord, on demand and as
Additional Rent, for the cost of damage to the Premises and/or Common Area
caused by Tenant or Tenant’s agents. Tenant expressly waives the benefits of
any statute now or hereafter in effect (including without limitation the
provisions of subsection 1 of Section 1932, Section 1941 and Section 1942 of
the California Civil Code and any similar law, statute or ordinance now or
hereafter in effect) which would otherwise afford Tenant the right to make
repairs at Landlord’s expense (or to deduct the cost of such repairs from
Rentals due hereunder) or to terminate this Lease because of Landlord’s failure
to keep the Premises in good and sanitary order.

     11. Common Area.

          11.1 In General. Subject to the terms and conditions of this Lease and
such rules and regulations as Landlord may from time to time prescribe, Tenant
and Tenant’s agents shall have the nonexclusive right to use during the Lease
Term the access roads, sidewalks, landscaped areas and other facilities on the
Common Area. This right to use the Common Area shall terminate upon Lease
Termination. Neither Tenant nor Tenant’s agents shall at any time park or
permit the parking of their vehicles in any portion of the Common Area not
designated by Landlord as a parking area.

     Landlord reserves the right to promulgate such reasonable rules and
regulations relating to the use of all or any portion of the Common Area and to
amend such rules and regulations from time to time, with or without advance
notice,

 

 

as Landlord may deem appropriate. Any amendments to the rules and
regulations shall be effective as to Tenant, and binding on Tenant, upon
delivery of a copy of such rules and regulations to Tenant. Tenant and
Tenant’s agents shall observe such rules and regulations and any failure by
Tenant or Tenant’s agents to observe and comply with the rules and regulations
shall be a Default by Tenant. Landlord shall not be responsible for the
nonperformance of the rules and regulations by any tenants or occupants of the
buildings or improvements which now exist or may hereafter be constructed upon
the Common Area or upon the real property owned by Landlord adjacent to the
Common Area or by any other user authorized by Landlord.

     Provided that Tenant’s use, occupancy and enjoyment of the Premises or
access to the Premises is not unreasonably interfered with, Landlord shall have
the right to close, at reasonable times, all or any portion of the
Common Area for any reasonable purpose, including without limitation, the
prevention of a dedication thereof, or the accrual of rights of any person or
public therein.

          11.2 Maintenance by Landlord. Landlord shall maintain the Common Area
in good repair and condition and shall manage the Common Area to reasonable and
customary standards. The expenditures for such maintenance shall be at the
reasonable discretion of Landlord. The cost of such maintenance shall be an
“Operating Expense”, and Tenant shall pay such costs to Landlord, as Additional
Rent, as provided in Paragraph 12 below. Alternatively, Landlord may elect at
any time, at its option, to require Tenant to operate, manage and maintain all
or any portion of the Common Area. If Landlord so elects, Tenant shall
operate, manage and maintain that portion of the Common Area designated by
Landlord at Tenant’s sole cost and expense.

     12. Operating Expenses.

          12.1 Definition. “Operating Expense” or “Operating Expenses” as used in
this Lease shall mean and include all items identified in other paragraphs of
this Lease as an Operating Expense and the total cost paid or incurred by
Landlord for the operation, maintenance, repair, and management of the Premises
and Common Area, which costs shall include, without limitation: the cost of
Services and utilities supplied to the Premises and Common Area (to the extent
the same are not separately charged or metered to Tenant); water; sewage; trash
removal; fuel; electricity; heat; lighting systems; professional management fee
(not to exceed three percent (3%) of the Premises’ gross rental income); fire
protection systems; storm drainage and sanitary sewer systems; periodic
inspection and regular servicing of the heating and air conditioning systems of
the Premises; maintaining, repairing and replacing the roof membrane; property
and liability insurance covering the Premises and any other insurance carried
by Landlord pursuant to Paragraph 8 above; window cleaning; cleaning, sweeping,
striping, resurfacing of parking and driveway areas; cleaning the Common Area
following storms or other severe weather; cleaning and repairing of sidewalks,
curbs, stairways; costs related to irrigation systems; the cost of complying
with Laws, including, without limitation, maintenance, alterations and repairs
required in connection therewith (subject to the provisions of Paragraph 12.3
hereof); costs related to landscape maintenance; and the cost of contesting the
validity or applicability of any governmental enactments which may affect
Operating Expenses. If the Common Area is used by more than one (1) building
at any time during the Lease Term, then the term “Operating Expenses” shall
mean and include all of the Operating Expenses allocable to the Premises and a
proportionate share (based on the square footage of gross leasable area in the
Premises as a percentage of the total of square footage of gross leasable area
of the buildings utilizing the Common Area at the time in question) of all
Operating Expenses which are related to such buildings in general and are not
allocated to any one building utilizing the Common Area. Operating Expenses
shall not include any accounting fee by Landlord. The cost of (i) capital
repair items (i.e., items which Landlord is required to capitalize and not
expense in the current year for federal income tax purposes), (ii) replacement
of the roof membrane, (iii) resurfacing the parking lot, and (iv) repainting
the exterior of the Premises, shall be amortized at ten percent (10%) over the
useful life of the repair or item, and be paid monthly by Tenant from the date
of installation or repair through Lease Termination.

     The specific examples of Operating Expenses stated in this Paragraph 12.1
are in no way intended to and shall not limit the costs comprising Operating
Expenses, nor shall such examples be deemed to obligate Landlord to incur such
costs or to provide such services or to take such actions except as Landlord
may be expressly required in other portions of this Lease, or except as
Landlord, in its reasonable discretion, may elect. All reasonable costs
incurred by

 

 

Landlord in good faith for the operation, maintenance, repair and
management of the Premises and Common Area shall be deemed conclusively binding
on Tenant.

     Notwithstanding anything to the contrary contained in this Lease, within
thirty (30) days after receipt by Tenant of Landlord’s statement of Operating
Expenses prepared pursuant to Paragraph 12.2 hereof for any prior annual period
during the Lease Term, Tenant or its authorized representative shall have the
right to inspect the books of Landlord during the business hours of Landlord at
Landlord’s office or, at Landlord’s option, such other location as Landlord
reasonably may specify, for the purpose of verifying the information contained
in the statement. Unless Tenant asserts specific errors within thirty (30)
days after receipt of the statement, the statement shall be deemed correct as
between Landlord and Tenant, except as to individual components subsequently
determined to be in error by future audit.

          12.2 Payment of Operating Expenses by Tenant. Prior to the Commencement
Date, and annually thereafter, Landlord shall deliver to Tenant an estimate of
Operating Expenses for the succeeding year. Tenant’s payment of Operating
Expenses shall be based upon Landlord’s estimate of Operating Expenses and
shall be payable in equal monthly installments in advance on the first day of
each calendar month commencing on the date
specified in Paragraph 1.6 and continuing throughout the Lease Term. Tenant
shall pay the Operating Expenses to Landlord as Additional Rent and without
deduction or offset.

     Landlord shall revise its estimate of Operating Expenses on an annual
basis, and Landlord may adjust the amount of Tenant’s monthly installment in
the event of a material change in Operating Expenses during any year. Landlord
shall furnish Tenant an annual statement (and a statement within one hundred
eighty (180) days after Lease Termination) showing the actual Operating
Expenses for the period to which Landlord’s estimate pertains and shall
concurrently either bill Tenant for the balance due (payable upon demand by
Landlord) or credit Tenant’s account for the excess previously paid.

     Alternatively, Operating Expenses actually incurred or paid by Landlord
but not theretofore billed to Tenant, as invoiced by Landlord, shall be payable
by Tenant within ten (10) days after receipt of Landlord’s invoice, but not
more often than once each calendar month.

          12.3 Exclusions From Common Area Charges. Notwithstanding anything to
the contrary contained in this Lease, in no event shall Tenant have any
obligation to perform, to pay directly, or to reimburse Landlord for, all or
any portion of the following repairs, maintenance, improvements, replacements,
premiums, claims, losses, fees, commissions, charges, disbursements, attorneys’
fees, experts’ fees, costs and expenses (collectively, “Costs”).

               (a) Losses Caused by Others and Construction Defects. Costs occasioned
by the act, omission or violation of Law by Landlord, or Landlord’s agents,
employees or contractors, or Costs to correct any construction defect in the
Premises (other than alterations constructed by Tenant), or costs arising out
of the failure to construct the Premises, tenant improvements installed by
Landlord pursuant to Paragraph 2.2, or Common Areas in accordance with Laws and
private restrictions applicable at the time of construction thereof.

               (b) Condemnation Costs. Costs occasioned by the exercise of the power of
eminent domain.

               (c) Reimbursable Expenses. Costs for which Landlord has a right of
reimbursement from others, or Costs which Tenant pays directly to a third
person.

               (d) Reserves. Depreciation, amortization or other expense reserves.

 

 

               (e) Mortgages. Interest, charges and fees incurred on debt, payments or
mortgages and rent under ground leases.

               (f) Hazardous Materials. Costs incurred to investigate the presence of
any Hazardous Material, Costs to respond to any claim of Hazardous Material
contamination or damage, Costs to remove any Hazardous Material from the
Premises or Common Area or to remediate any Hazardous Material contamination,
and any judgments or other Costs incurred in connection with any Hazardous
Material exposure or release, except to the extent such Costs are incurred by
Landlord in accordance with Paragraph 6.4 or incurred by Landlord or caused by
reason of the storage, use or disposal of the Hazardous Material in question by
Tenant, its agents, employees, contractors or invitees.

               (g) Management. Any fee, profit or compensation retained by Landlord or
its affiliates for management and administration of the Premises in excess of
the management fee specified in Paragraph 12.1, or any accounting fee.

               (h) Capital Improvements Required by Law. Costs for structural
alterations required by Law that do not relate solely to Tenant’s particular
use or occupancy of the Premises, and Costs of retrofitting any part of the
Common Area in order to comply with the ADA (other than as may be required in
connection with the improvements installed by Landlord pursuant to Paragraph
2.2.).

     13. Alterations and Improvements.

          13.1 In General. Tenant shall not make, or permit to be made, any
alterations, removals, changes, enlargements, improvements or additions
(collectively “Alterations”) in, on, about or to the Premises, or any part
thereof, including Alterations required pursuant to Paragraph 6.2, without the
prior written consent of Landlord (which consent shall not be unreasonably
withheld or delayed) and without acquiring and complying with the conditions of
all permits required for such Alterations by any governmental authority having
jurisdiction thereof. The term “Alterations” as used in this Paragraph 13
shall also include all heating, lighting, electrical (including all wiring,
conduit, outlets, drops, buss ducts, main and subpanels), air conditioning, and
partitioning in the Premises made by Tenant, regardless of how affixed to the
Premises. As a condition to the giving of its consent, Landlord may impose
such reasonable requirements as Landlord reasonably may deem necessary,
including without limitation, the manner in which the work is done; a right of
approval of the contractor by whom the work is to be performed; the requirement
that Tenant post a completion bond in an amount and form reasonably
satisfactory to Landlord; and the requirement that Tenant reimburse Landlord,
as Additional Rent, for Landlord’s actual costs for outside consultants
incurred in reviewing any proposed Alteration, whether or not Landlord’s
consent is granted. In the event Landlord consents to the making of any
Alterations by Tenant, the same shall be made by Tenant at Tenant’s sole cost
and expense, in accordance with the plans and specifications approved by
Landlord. Tenant shall give written notice to Landlord five (5) days prior to
employing any laborer or contractor to perform services related to, or
receiving materials for use upon the Premises, and prior to the commencement of
any work of improvement on the Premises. Any Alterations to the Premises made
by Tenant shall be made in accordance with applicable Laws and in a first-class
workmanlike manner. Tenant further agrees to provide Landlord with updated CAD
architectural drawings whenever any Alterations are completed. In making any
such Alterations, Tenant shall, at Tenant’s sole cost and expense, file for and
secure and comply with any and all permits or approvals required by any
governmental departments or authorities having jurisdiction thereof and any
utility company having an interest therein. In no event shall Tenant make any
structural changes to the Premises or make any changes to the Premises which
would weaken or impair the structural integrity of the Premises.

 

 

          13.2 Removal Upon Lease Termination. At the time Tenant requests
Landlord’s consent for extraordinary Alterations not in the nature of regular
office or research and development Alterations (“Extraordinary Improvements”),
Tenant shall request a decision from Landlord in writing as to whether Landlord
will require Tenant, at Tenant’s expense, to remove any such Extraordinary
Improvements and restore the Premises to their prior condition at Lease
Termination. In the event Tenant fails to earlier obtain Landlord’s written
decision as to whether Tenant will be required to remove any Extraordinary
Improvements, then no less than ninety (90) nor more than one hundred twenty
(120) days prior to the expiration of the Lease Term, Tenant by written notice
to Landlord shall request Landlord to inform Tenant whether or not Landlord
desires to have any of such Extraordinary Improvements by Tenant removed at
Lease Termination. Following receipt of such notice, Landlord may elect to
have all or a portion of such Extraordinary Improvements removed from the
Premises at Lease Termination, and Tenant shall, at its sole cost and expense,
remove at Lease Termination such Extraordinary Improvements designated by
Landlord for removal and repair all damage to the Premises and Common Area
arising from such removal. In the event Tenant fails to so request Landlord’s
decision or fails to remove any such Extraordinary Improvements designated by
Landlord for removal, Landlord may remove any Extraordinary Improvements made
to the Premises by Tenant and repair all damage to the Premises and Common Area
arising from such removal, and may recover from Tenant all reasonable costs and
expenses incurred thereby. Tenant’s obligation to pay such costs and expenses
to Landlord shall survive Lease Termination. Unless Landlord elects to have
Tenant remove (or, upon Tenant’s failure to obtain Landlord’s decision,
Landlord removes) any such Extraordinary Improvements, all such Extraordinary
Improvements, except for moveable furniture, personal property and equipment,
and trade fixtures of Tenant not affixed to the Premises, shall become the
property of Landlord upon Lease Termination (without any payment therefore) and
remain upon and be surrendered with the Premises at Lease Termination.

          13.3 Landlord’s Improvements. All fixtures, improvements or equipment
which are installed, constructed on or attached to the Premises or Common Area
by Landlord shall be a part of the realty and belong to Landlord.

     14. Default and Remedies.

          14.1 Events of Default. The term “Default by Tenant” as used in this
Lease shall mean the occurrence of any of the following events:

               (a) Tenant’s failure to pay when due any Rentals;

               (b) Commencement and continuation for at least sixty (60) days of any
case, action or proceeding by, against or concerning Tenant under any federal
or state bankruptcy, insolvency or other debtor’s relief law, including without
limitation, (i) a case under Title 11 of the United States Code concerning
Tenant, whether under Chapter 7, 11, or 13 of such Title or under any other
Chapter, or (ii) a case, action or proceeding seeking Tenant’s financial
reorganization or an arrangement with any of Tenant’s creditors;

               (c) Voluntary or involuntary appointment of a receiver, trustee, keeper,
or other person who takes possession for more than sixty (60) days of
substantially all of Tenant’s assets or of any asset used in Tenant’s business
on the Premises, regardless of whether such appointment is as a result of
insolvency or any other cause;

               (d) Execution of an assignment for the benefit of creditors of
substantially all assets of Tenant available by law for the satisfaction of
judgment creditors;

               (e) Commencement of proceedings for winding up or dissolving (whether
voluntary or involuntary) the entity of Tenant, if Tenant is a corporation or a
partnership;

               (f) Levy of a writ of attachment or execution on Tenant’s interest under
this Lease, if such writ continues for a period of thirty (30) days;

 

 

               (g) Transfer or attempted Transfer of this Lease or the Premises by Tenant
contrary to the provisions of Paragraph 24 below; or

               (h) Breach by Tenant of any term, covenant, condition, warranty, or other
provision contained in this Lease or of any other obligation owing or due to
Landlord.

          14.2 Remedies. Upon any Default by Tenant, Landlord shall have the
following remedies, in addition to all other rights and remedies provided by
law, to which Landlord may resort cumulatively, or in the alternative:

               14.2.1 Termination. Upon any Default by Tenant, Landlord shall have the
right (but not the obligation) to give written notice to Tenant of such default
and terminate this Lease and Tenant’s right to possession of the Premises if
(i) such default is in the payment of Rentals and is not cured within seven (7)
days after any such notice, or, (ii) with respect to the defaults referred to
in subparagraphs 14.1(d), (e), (g) and (h), such default is not cured within
thirty (30) days after any such notice (or if a default under subparagraph
14.1(h) cannot be reasonably cured within thirty (30) days, if Tenant does not
commence to cure the default within the thirty (30) day period or does not
diligently and in good faith prosecute the cure to completion), or, (iii) with
respect to the defaults specified in subparagraphs 14.1(b), (c) and (f), such
default is not cured within the respective time periods specified in those
subparagraphs. The parties agree that any notice given by Landlord to Tenant
pursuant to this Paragraph 14.2.1 shall be sufficient notice for purposes of
California Code of Civil Procedure Section 1161 and Landlord shall not be
required to give any additional notice in order to be entitled to commence an
unlawful detainer proceeding. Upon termination of this Lease and Tenant’s
right to possession of the Premises, Landlord shall have the right to recover
from Tenant:

                    (a) The worth at the time of award of the unpaid Rentals which had been
earned at the time of termination;

                    (b) The worth at the time of award of the amount by which the Rentals
which would have been earned after termination until the time of award exceeds
the amount of such rental loss that Tenant proves could have been reasonably
avoided;

                    (c) The worth at the time of award (computed by discounting at the
discount rate of the Federal Reserve Bank of San Francisco at the time of award
plus one percent) of the amount by which the Rentals for the balance of the
Lease Term after the time of award exceed the amount of such rental loss that
Tenant proves could be reasonably avoided;

                    (d) Any other amounts necessary to compensate Landlord for all detriment
proximately caused by the Default by Tenant or which in the ordinary course of
events would likely result, including without limitation the following:

                         (i) Expenses in retaking possession of the Premises;

                         (ii) Expenses for cleaning, repairing or restoring the Premises;

                         (iii) Any unamortized real estate brokerage commission paid in connection
with this Lease;

                         (iv) Expenses for removing, transporting, and storing any of Tenant’s
property left at the Premises (although Landlord shall have no obligation to
remove, transport, or store any such property);

 

 

                         (v) Expenses of reletting the Premises, including without limitation,
brokerage commissions and reasonable attorneys’ fees;

                         (vi) Reasonable attorneys’ fees and court costs; and

                         (vii) Costs of carrying the Premises such as repairs, maintenance, taxes
and insurance premiums, utilities and security precautions (if any).

                    (e) The “worth at the time of award” of the amounts referred to in
subparagraphs (a) and (b) of this Paragraph 14.2.1 is computed by allowing
interest at an annual rate equal to the greater of: ten percent (10%); or five
percent (5%) plus the rate established by the Federal Reserve Bank of San
Francisco, as of the twenty-fifth (25th) day of the month immediately preceding
the Default by Tenant, on advances to member banks under Sections 13 and 13(a)
of the Federal Reserve Act, as now in effect or hereafter from time to time
amended, not to exceed the maximum rate allowable by law.

               14.2.2 Continuance of Lease. Upon any Default by Tenant and unless and
until Landlord elects to terminate this Lease pursuant to Paragraph 14.2.1
above, this Lease shall continue in effect after the Default by Tenant and
Landlord may enforce all its rights and remedies under this Lease, including
without limitation, the right to recover payment of Rentals as they become due.
Neither efforts by Landlord to mitigate damages caused by a Default by Tenant
nor the acceptance of any Rentals shall constitute a waiver by Landlord of any
of Landlord’s rights or remedies, including the rights and remedies specified
in Paragraph 14.2.1 above.

     15. Damage or Destruction.

          15.1 Definition of Terms. For the purposes of this Lease, the term: (a)
“Insured Casualty” means damage to or destruction of the Premises from a cause
actually insured against, or required by this Lease to be insured against, for
which the insurance proceeds paid or made available to Landlord are sufficient
to rebuild or restore the Premises under then-existing building codes to the
condition existing immediately prior to the damage or destruction; and (b)
“Uninsured Casualty” means damage to or destruction of the Premises from a
cause not actually insured against, or not required to be insured against, or
from a cause actually insured against but for which the insurance proceeds paid
or made available to Landlord are for any reason insufficient to rebuild or
restore the Premises under then-existing building codes to the condition
existing immediately prior to the damage or destruction, or from a cause
actually insured against but for which the insurance proceeds are not paid or
made available to Landlord within ninety (90) days of the event of damage or
destruction.

          15.2 Insured Casualty.

               15.2.1 Rebuilding Required. In the event of an Insured Casualty where the
extent of damage or destruction is less than twenty-five percent (25%) of the
then full replacement cost of the Premises, Landlord shall rebuild or restore
the Premises to the condition existing immediately prior to the damage or
destruction, provided the damage or destruction was not a result of a negligent
or willful act of Tenant, and that there exist no governmental codes or
regulations that would interfere with Landlord’s ability to so rebuild or
restore.

               15.2.2 Landlord’s Election. In the event of an Insured Casualty where the
extent of damage or destruction is equal to or greater than twenty-five percent
(25%) of the then full replacement cost of the Premises, Landlord may, at its
option and at its sole discretion, rebuild or restore the Premises to the
condition existing immediately prior to the damage or destruction, or terminate
this Lease. Landlord shall notify Tenant in writing within sixty (60) days
after the event of damage or destruction of Landlord’s election to either
rebuild or restore the Premises or terminate this Lease.

 

 

               15.2.3 Continuance of Lease. If Landlord is required to rebuild or
restore the Premises pursuant to Paragraph 15.2.1 or if Landlord elects to
rebuild or restore the Premises pursuant to Paragraph 15.2.2, this Lease shall
remain in effect and Tenant shall have no claim against Landlord for
compensation for inconvenience or loss of business during any period of repair
or restoration.

          15.3 Uninsured Casualty.

               15.3.1 Landlord’s Election. In the event of an Uninsured Casualty,
Landlord may, at its option and at its sole discretion (i) rebuild or restore
the Premises as soon as reasonably possible at Landlord’s expense (unless the
damage or destruction was caused by a negligent or willful act of Tenant, in
which event Tenant shall pay all costs of rebuilding or restoring), in which
event this Lease shall continue in full force and effect or (ii) terminate this
Lease, in which event Landlord shall give written notice to Tenant within sixty
(60) days after the event of damage or destruction of Landlord’s election to
terminate this Lease as of the date of the event of damage or destruction, and
if the damage or destruction was caused by a negligent or willful act of
Tenant, Tenant shall be liable therefore to Landlord.

               15.3.2 Tenant’s Ability to Continue Lease. If Landlord elects to
terminate this Lease and the extent of damage or destruction is less than
twenty-five percent (25%) of the then full replacement cost of the Premises or
the proceeds paid or made available to Landlord are for any reason insufficient
to rebuild or restore the Premises under then-existing building codes to the
condition existing immediately prior to the damage or destruction, and if there
exist no governmental codes or regulations that would interfere with Landlord’s
ability to so repair or restore, then Tenant may nevertheless cause the Lease
to continue in effect by (i) notifying Landlord in writing within ten (10) days
after Landlord’s notice of termination of Tenant’s agreement to pay all costs
of rebuilding or restoring not covered by insurance, and (ii) providing
Landlord with reasonable security for or assurance of such payment. Tenant
shall pay to Landlord in cash no later than thirty (30) days prior to the date
of commencement of construction the reasonable estimated cost of rebuilding or
restoring. In the event Tenant fails to pay such cost to Landlord by the date
specified, Landlord may immediately terminate the Lease and recover from Tenant
all reasonable costs incurred by Landlord in preparation for construction. If
the actual cost of rebuilding or restoring exceeds the estimated cost of such
work, Tenant shall pay the difference to Landlord in cash upon notification by
Landlord of the final cost. If the cost of rebuilding or restoring is less
than the estimated cost of such work, Tenant shall be entitled to a refund of
the difference upon completion of the rebuilding or restoring and determination
of final cost.

          15.4 Tenant’s Election. Notwithstanding anything to the contrary
contained in this Paragraph 15, Tenant may elect to terminate this Lease in the
event the Premises are damaged or destroyed and, in the reasonable opinion of
Landlord’s architect or construction consultants, the restoration of the
Premises cannot be substantially completed within one hundred eighty (180) days
after the event of damage or destruction. Tenant’s election shall be made by
written notice to Landlord within ten (10) days after Tenant receives from
Landlord the estimate of the time needed to complete repair or restoration of
the Premises. If Tenant does not deliver said notice within said ten (10) day
period, Tenant may not later terminate this Lease even if substantial
completion of the rebuilding or restoration occurs subsequent to said one
hundred eighty (180) day period, provided that Landlord is proceeding with
diligence to rebuild or restore the Premises. If Tenant delivers said notice
within said ten (10) day period, this Lease shall terminate as of the date of
the event of damage or destruction.

          15.5 Damage or Destruction Near End of Lease Term. Notwithstanding
anything to the contrary contained in this Paragraph 15, in the event the
Premises are damaged or destroyed in whole or in part (regardless of the extent
of damage) from any cause during the last twelve (12) months of the Lease Term,
Landlord or Tenant may, at its option, terminate this Lease as of the date of
the event of damage or destruction by giving written notice to the other of its
election to do so within thirty (30) days after the event of such damage or
destruction. For purposes of this Paragraph 15.5, if Tenant has been granted
an option to extend or renew the Lease Term pursuant to
another provision of this Lease, then the damage or destruction shall be deemed
to have occurred during the last twelve (12) months of the Lease Term if Tenant
fails to exercise its option to extend or renew within twenty (20) days after
the event of damage or destruction.

 

 

          15.6 Termination of Lease. If the Lease is terminated pursuant to this
Paragraph 15, the unused balance of the Security Deposit shall be refunded to
Tenant. The current Rent shall be proportionately reduced during the period
following the event of damage or destruction until the date on which Tenant
surrenders the Premises, based upon the extent to which the damage or
destruction interferes with Tenant’s business conducted in the Premises, as
reasonably determined by Landlord and Tenant, to the extent such loss is
covered as an insured peril by the insurance carried by Landlord pursuant to
Paragraph 8.1. All other Rentals due hereunder shall continue unaffected
during such period. The proceeds of insurance carried by Tenant pursuant to
Paragraph 8.2 shall be paid to Landlord and Tenant, as their interests appear.

          15.7 Abatement of Rentals. If the Premises are to be rebuilt or restored
pursuant to this Paragraph 15, the then current Rentals shall be
proportionately reduced during the period of repair or restoration, based upon
the extent to which the making of repairs interferes with Tenant’s business
conducted in the Premises, as reasonably determined by Landlord and Tenant, to
the extent such loss is covered as an insured peril by the insurance carried,
or required to be carried, by Landlord pursuant to Paragraph 8.1.

          15.8 Liability for Personal Property. Except for the negligent acts or
willful misconduct Landlord or that of its agents, employees, contractors or
invitees, in no event shall Landlord have any liability for, nor shall it be
required to repair or restore, any injury or damage to any Alterations to the
Premises made by Tenant, trade fixtures, equipment, merchandise, furniture, or
any other property installed by Tenant or at the expense of Tenant. If
Landlord or Tenant do not elect to terminate this Lease pursuant to this
Paragraph 15, Tenant shall be obligated to promptly rebuild or restore the same
to the condition existing immediately prior to the damage or destruction in
accordance with the provisions of Paragraph 13.1.

          15.9 Waiver of Civil Code Remedies. Landlord and Tenant acknowledge that
the rights and obligations of the parties upon damage or destruction of the
Premises are as set forth herein; therefore Tenant hereby expressly waives any
rights to terminate this Lease upon damage or destruction of the Premises,
except as specifically provided by this Lease, including without limitation any
rights pursuant to the provisions of Subdivision 2 of Section 1932 and
Subdivision 4 of Section 1933 of the California Civil Code, as amended from
time to time, and the provisions of any similar law hereinafter enacted, which
provisions relate to the termination of the hiring of a thing upon its
substantial damage or destruction.

     16. Condemnation.

          16.1 Definition of Terms. For the purposes of this Lease, the term: (a)
“Taking” means a taking of the Premises or Common Area or damage related to the
exercise of the power of eminent domain and includes, without limitation, a
voluntary conveyance, in lieu of court proceedings, to any agency, authority,
public utility, person or corporate entity empowered to condemn property; (b)
“Total Taking” means the Taking of the entire Premises or so much of the
Premises or Common Area as to prevent or substantially impair the use thereof
by Tenant for the uses herein specified; provided, however, that in no event
shall the Taking of less than twenty percent (20%) of the Premises be
considered a Total Taking; (c) “Partial Taking” means the Taking of only a
portion of the Premises or Common Area which does not constitute a Total
Taking; (d) “Date of Taking” means the date upon which the title to the
Premises or Common Area or a portion thereof, passes to and vests in the
condemnor or the effective date of any order for possession if issued prior to
the date title vests in the condemnor; and (e) “Award” means the amount of any
award made, consideration paid, or damages ordered as a result of a Taking.

 

 

          16.2 Rights. The parties agree that in the event of a Taking all rights
between them or in and to an Award shall be as set forth herein.

          16.3 Total Taking. In the event of a Total Taking during the Lease Term:
(a) the rights of Tenant under this Lease and the leasehold estate of Tenant in
and to the Premises shall cease and terminate as of the Date of Taking; (b)
Landlord shall refund to Tenant any prepaid Rent and the unused balance of the
Security Deposit; (c) Tenant shall pay Landlord any Rentals due Landlord under
the Lease, prorated as of the Date of Taking; (d) to the extent the Award is
not payable to the beneficiary or mortgagee of a deed of trust or mortgage
affecting the Premises, Tenant shall receive from the Award those portions of
the Award attributable to trade fixtures of Tenant; and (e) the remainder of
the Award shall be paid to and be the property of Landlord. Nothing contained
in this Paragraph 16.3 shall be deemed to deny Tenant its right to recover
awards made by the condemning authority for moving costs, relocation costs, and
costs attributable to goodwill and leasehold improvements installed by Tenant.

          16.4 Partial Taking. In the event of a Partial Taking during the Lease
Term: (a) the rights of Tenant under the Lease and the leasehold estate of
Tenant in and to the portion of the Premises taken shall cease and terminate as
of the Date of Taking; (b) from and after the Date of Taking the Rent shall be
an amount equal to the product obtained by multiplying the then current Rent by
the quotient obtained by dividing the fair market value of the Premises
immediately after the Taking by the fair market value of the Premises
immediately prior to the Taking; (c) to the extent the Award is not payable to
the beneficiary or mortgagee of a deed of trust or mortgage affecting the
Premises, Tenant shall receive from the Award the portions of the Award
attributable to trade fixtures of Tenant; and (d) the remainder of the Award
shall be paid to and be the property of Landlord. Each party waives the
provisions of California Code of Civil Procedure Section 1265.130 allowing
either party to petition the Superior Court to terminate this Lease in the
event of a Partial Taking. Nothing contained in this Paragraph 16.4 shall be
deemed to deny Tenant its right to recover awards made by the condemning
authority for moving costs, relocation costs, and costs attributable to
goodwill and leasehold improvements installed by Tenant.

     17. Liens.

          17.1 Premises to Be Free of Liens. Tenant shall pay for all labor and
services performed for, and all materials used by or furnished to Tenant,
Tenant’s agents, or any contractor employed by Tenant with respect to the
Premises. Tenant shall indemnify, defend and hold Landlord harmless from and
keep the Premises and Common Area free from any liens, claims, demands,
encumbrances, or judgments, including all costs, liabilities and attorneys’
fees with respect thereto, created or suffered by reason of any labor or
services performed for, or materials used by or furnished to Tenant or Tenant’s
agents or any contractor employed by Tenant with respect to the Premises.
Landlord shall have the right, at all times, to post and keep posted on the
Premises any notices permitted or required by law, or which Landlord shall deem
proper, for the protection of Landlord and the Premises and Common Area, and
any other party having an interest therein, from mechanics’ and materialmen’s
liens, including without limitation a notice of non-responsibility. In the
event Tenant is required to post an improvement bond with a public agency in
connection with any work performed by Tenant on or to the Premises, Tenant
shall include Landlord as an additional obligee.

          17.2 Notice of Lien; Bond. Should any claims of lien be filed against, or
any action be commenced affecting, the Premises, Tenant’s interest in the
Premises or the Common Area, Tenant shall give Landlord notice of such lien or
action within five (5) business days after Tenant receives notice of the filing
of the lien or the commencement of the action. In the event that Tenant shall
not, within twenty (20) days following the imposition of any such lien, cause
such lien to be released of record by payment or posting of a proper bond,
Landlord shall have, in addition to all other remedies provided herein and by
law, the right, but not the obligation, to cause the same to be released by
such means as Landlord shall deem proper, including payment of the claim giving
rise to such lien or posting of a proper bond. All such sums paid by Landlord
and all expenses incurred by Landlord in connection therewith, including
attorneys’ fees and costs, shall be payable to Landlord by Tenant as Additional
Rent on demand.

 

 

     18. Landlord’s Right of Access to Premises. Landlord reserves and shall
have the right and Tenant and Tenant’s agents shall permit Landlord and
Landlord’s agents to enter the Premises at any reasonable time during normal
business hours (except in the event of an emergency) and subject to any
security measures of Tenant that are applied to visitors to the Premises on a
non-discriminatory basis for the purpose of (i) inspecting the Premises, (ii)
performing Landlord’s maintenance and repair responsibilities set forth herein,
(iii) posting notices of non-responsibility, (iv) placing upon the Premises at
any time “For Sale” signs, (v) placing on the Premises ordinary “For Lease”
signs at any time
within one hundred eighty (180) days prior to Lease Termination, or at any time
Tenant is in uncured default hereunder, or at such other times as agreed to by
Landlord and Tenant, (vi) protecting the Premises in the event of an emergency,
and (vii) exhibiting the Premises to prospective purchasers or lenders at any
reasonable time or to prospective tenants within one hundred eighty (180) days
prior to Lease Termination. In the event of an emergency, Landlord shall have
the right to use any and all means which Landlord reasonably may deem proper to
gain access to the Premises. Any entry to the Premises by Landlord or
Landlord’s agents in accordance with this Paragraph 18 or any other provision
of this Lease shall not under any circumstances be construed or deemed to be a
forcible or unlawful entry into, or a detainer of the Premises, or an eviction
of Tenant from the Premises or any portion thereof nor give Tenant the right to
abate the Rentals payable under this Lease. Except to the extent caused by the
negligence or willful misconduct of Landlord, its agents, employees,
contractors or invitees, Tenant hereby waives any claims for damages for any
injury or inconvenience to or interference with Tenant’s business, any loss of
occupancy or quiet enjoyment of the Premises, and any other loss occasioned by
Landlord’s or Landlord’s agents’ entry into the Premises as permitted by this
Paragraph 18 or any other provision of this Lease. Notwithstanding anything to
the contrary contained in this Lease, Landlord and Landlord’s agents, except in
the case of emergency, shall provide Tenant with twenty-four (24) hours’ notice
prior to entry of the Premises. Any entry by Landlord and Landlord’s agents
shall not impair Tenant’s operations more than reasonably necessary, and Tenant
shall have the right to have an employee accompany Landlord at all times that
Landlord is present on the Premises.

     19. Landlord’s Right to Perform Tenant’s Covenants. Except as otherwise
expressly provided herein, if Tenant shall at any time fail to make any payment
or perform any other act required to be made or performed by Tenant under this
Lease, Landlord may upon ten (10) days written notice to Tenant, but shall not
be obligated to and without waiving or releasing Tenant from any obligation
under this Lease, make such payment or perform such other act to the extent
that Landlord may deem desirable, and in connection therewith, pay expenses and
employ counsel. All reasonable sums so paid by Landlord and all penalties,
interest and reasonable costs in connection therewith shall be due and payable
by Tenant as Additional Rent upon demand.

     20. Lender Requirements.

          20.1 Subordination. This Lease, at Landlord’s option, shall be subject
and subordinate to the lien of any mortgages or deeds of trust (including all
advances thereunder, renewals, replacements, modifications, supplements,
consolidations, and extensions thereof) in any amount(s) whatsoever now or
hereafter placed on or against or affecting the Premises and/or the real
property comprising the Common Area or Landlord’s interest or estate therein,
without the necessity of the execution and delivery of any further instruments
on the part of Tenant to effectuate such subordination. If any mortgagee or
beneficiary shall elect to have this Lease prior to the lien of its mortgage or
deed of trust, and shall give written notice thereof to Tenant, this Lease
shall be deemed prior to such mortgage or deed of trust, whether this Lease is
dated prior or subsequent to the date of such mortgage or deed of trust or the
date of the recording thereof.

          20.2 Subordination Agreements. Tenant shall execute and deliver without
charge therefore, such further instruments evidencing subordination of this
Lease to the lien of any mortgages or deeds of trust affecting the Premises
and/or real property comprising the Common Area as may be required by Landlord
within ten (10) days following Landlord’s request therefore; provided that such
mortgagee or beneficiary under such mortgage or deed of trust agrees in writing
that this Lease shall not be terminated or modified in any material way in the
event of any foreclosure if Tenant is not in default

 

 

under this Lease. Failure
of Tenant to execute such instruments evidencing subordination of this Lease
shall constitute a Default by Tenant hereunder.

          20.3 Approval by Lenders. Tenant recognizes that the provisions of this
Lease may be subject to the approval of any financial institution that may make
a loan secured by a new or subsequent deed of trust or mortgage affecting the
Premises and/or real property comprising the Common Area. If the financial
institution should require, as a condition to such financing, any modifications
of this Lease in order to protect its security interest in the Premises,
including without limitation, modification of the provisions relating to damage
to and/or condemnation of the Premises, Tenant agrees to negotiate in good
faith with Landlord and such financial institution to agree on mutually
acceptable modifications and execute the appropriate amendments; provided,
however, that no modification shall substantially change the size, location or
dimension of the Premises, or increase the Rentals payable by Tenant hereunder.
If Tenant refuses to execute any such amendment, Landlord may, in Landlord’s
reasonable discretion, terminate this Lease.

          20.4 Attornment. In the event of foreclosure or the exercise of the power
of sale under any mortgage or deed of trust made by Landlord and covering the
Premises and/or real property comprising the Common Area, Tenant shall attorn
to the purchaser upon any such foreclosure or sale and recognize such purchaser
as the Landlord under this Lease, provided such purchaser expressly agrees in
writing to be bound by the terms of the Lease, including, but not limited to,
the quiet enjoyment provisions of Paragraph 40.

Landlord and Tenant shall diligently seek to obtain and execute a
Subordination, Attornment, and Non-Disturbance Agreement upon execution of the
Lease. Landlord makes no representation as to Landlord’s ability to obtain
such Subordination, Attornment, and Non-Disturbance Agreement upon execution of
the Lease.

          20.5 Estoppel Certificates and Financial Statements.

               (a) Delivery by Tenant. Tenant shall, within ten (10) business days
following request by Landlord therefore and without charge, execute and deliver
to Landlord any and all documents, estoppel certificates, and current financial
statements of Tenant reasonably requested by Landlord in connection with the
sale or financing of the Premises and/or real property comprising the Common
Area, or requested by any lender making a loan affecting the Premises and/or
real property comprising the Common Area. Landlord may require that Tenant in
any estoppel certificate shall (i) certify that this Lease is unmodified and in
full force and effect (or, if modified, state the nature of such modification
and certify that this Lease, as so modified, is in full force and effect) and
has not been assigned, (ii) certify the date to which Rentals are paid in
advance, if any, (iii) acknowledge that there are not, to Tenant’s knowledge,
any uncured defaults on the part of Landlord hereunder, or specify such
defaults if claimed, (iv) evidence the status of this Lease as may be required
either by a lender making a loan to Landlord to be secured by a deed of trust
or mortgage covering the Premises and/or real property comprising the Common
Area or a purchaser of the Premises and/or real property comprising the Common
Area from Landlord, (v) warrant that in the event any beneficiary of any
security instrument encumbering the Premises and/or real property comprising
the Common Area forecloses on the security instrument or sells the Premises
and/or real property comprising the Common Area pursuant to any power of sale
contained in such security instrument, such beneficiary shall not be liable for
the Security Deposit, unless the Security Deposit actually has been received by
the beneficiary from Landlord, (vi) certify the date Tenant entered into
occupancy of the Premises and that Tenant is conducting business at the
Premises, (vii) certify that all improvements to be constructed on the Premises
by Landlord have been substantially completed except for punch list items which
do not prevent Tenant from using the Premises for its intended use, and (viii)
certify such other matters relating to the Lease and/or Premises as may be
reasonably requested by a lender making a loan to Landlord or a purchaser of
the Premises and/or real property comprising the Common Area from Landlord.
Any such estoppel certificate may be conclusively relied upon by any
prospective purchaser or encumbrancer of the Premises and/or real property
comprising the Common Area. Any financial statements of Tenant shall include
an opinion of a certified public accountant (if available) and a balance sheet
and profit and loss statement for the most recent fiscal year, or a reasonable
substitute for the form of such financial information, all prepared in
accordance with generally accepted accounting principles consistently applied.

 

 

               (b) Nondelivery by Tenant. Tenant’s failure to deliver an estoppel
certificate as required pursuant to Paragraph 20.5(a) above shall be conclusive
upon Tenant that (i) this Lease is in full force and effect, without
modification except as may be represented by Landlord and has not been
assigned, (ii) there are now no uncured defaults in Landlord’s performance,
(iii) no Rentals have been paid in advance except those that are set forth in
this Lease, (iv) no beneficiary of any security instrument encumbering the
Premises and/or real property comprising the Common Area shall be liable for
the Security Deposit in the event of a foreclosure or sale under such security
instrument, unless the Security Deposit actually has been received by the
beneficiary from Landlord, (v) the improvements to be constructed on the
Premises by Landlord have been substantially completed except for punch list
items which do not prevent Tenant from using the Premises for its intended use,
and (vi) Tenant has entered into occupancy of the Premises on such date as may
be represented by Landlord and is open and conducting business at the Premises.
Tenant’s failure to deliver any financial statements, estoppel certificates or
other documents as required pursuant to Paragraph 20.5(a) above shall be a
Default by Tenant.

     21. Holding Over. This Lease shall terminate without further notice at
the expiration of the Lease Term. It is the desire of Landlord either to enter
into a new lease with Tenant for the Premises prior to the expiration of the
Lease Term, or to have Tenant vacate the Premises upon expiration of the Lease
Term pursuant to Paragraph 35 below. Therefore, any holding over by Tenant
after Lease Termination shall not constitute a renewal or extension of the
Lease Term, nor give Tenant any rights in or to the Premises except as
expressly provided in this Lease. Any holding over after Lease Termination
with the consent of Landlord shall be construed to be a tenancy from month to
month, at one
hundred fifty percent (150%) of the monthly Rent for the month preceding Lease
Termination in addition to all Additional Rent payable hereunder, and shall
otherwise be on the terms and conditions herein specified insofar as
applicable. If Tenant remains in possession of the Premises after Lease
Termination without Landlord’s consent, Tenant shall indemnify, defend and hold
Landlord harmless from and against any loss, damage, expense, claim or
liability resulting from Tenant’s failure to surrender the Premises, including
without limitation, any claims made by any succeeding tenant based on delay in
the availability of the Premises.

     22. Notices. Any notice required or desired to be given under this Lease
shall be in writing, and all notices shall be given by personal delivery or
mailing. All notices personally given on Tenant may be delivered to any person
apparently in charge at the Premises, on any corporate officer or agent of
Tenant if Tenant is a corporation, or on any one signatory party if more than
one party signs this Lease on behalf of Tenant; any notice so given shall be
binding upon all signatory parties as if served upon each such party
personally. Any notice given pursuant to this Paragraph 22 shall be deemed to
have been given when personally delivered, or if mailed, when three (3)
business days have elapsed from the time when such notice was deposited in the
United States mail, certified or registered mail and postage prepaid, addressed
to the party at the last address given for purposes of notice pursuant to the
provisions of this Paragraph 22. At the date of execution of this Lease, the
addresses of Landlord and Tenant are set forth in Paragraph 1.11 above.

     23. Attorneys’ Fees. In the event either party hereto shall bring any
action or legal proceeding for damages for an alleged breach of any provision
of this Lease, to recover Rentals, to enforce an indemnity defense or hold
harmless obligation, to terminate the tenancy of the Premises, or to enforce,
protect, interpret, or establish any term, condition, or covenant of this Lease
or right or remedy of either party, the prevailing party shall be entitled to
recover, as a part of such action or proceeding, reasonable attorneys’ fees and
court costs, including reasonable attorneys’ fees and costs for appeal, as may
be fixed by the court or jury. Notwithstanding anything to the contrary
contained in this Lease, “prevailing party” as used in this paragraph shall
include the party who dismisses an action for recovery hereunder in exchange
for sums allegedly due, performance of covenants allegedly breached or
considerations substantially equal to the relief sought in the action.

     24. Assignment, Subletting and Hypothecation.

          24.1 In General. Tenant shall not voluntarily sell, assign or transfer
all or any part of Tenant’s interest in this Lease or in the Premises or any
part thereof, sublease all or

 

 

any part of the Premises, or permit all or any
part of the Premises to be used by any person or entity other than Tenant or
Tenant’s employees, except as specifically provided in this Paragraph 24.

          24.2 Voluntary Assignment and Subletting.

               (a) Notice to Landlord. Tenant shall, by written notice, advise Landlord
of Tenant’s desire on a stated date (which date shall not be less than fifteen
(15) days nor more than ninety (90) days after the date of Tenant’s notice) to
assign this Lease or to sublet all or any part of the Premises for any part of
the Lease Term. Said notice shall state that the notice constitutes an offer
to terminate the Lease pursuant to Paragraph 24.2(b) if the notice applies to a
proposed assignment of the Lease or Tenant’s interest herein. Tenant’s notice
shall state the name, legal composition and address of the proposed assignee or
subtenant, and Tenant shall provide the following information to Landlord with
said notice: a true and complete copy of the proposed assignment agreement or
sublease; a financial statement of the proposed assignee or subtenant prepared
in accordance with generally accepted accounting principles within one year
prior to the proposed effective date of the assignment or sublease; the nature
of the proposed assignee’s or subtenant’s business to be carried on in the
Premises; the payments to be made or other consideration to be given on account
of the assignment or sublease; a current financial statement of Tenant; and
such other pertinent information as may be requested by Landlord, all in
sufficient detail to enable Landlord to evaluate the proposed assignment or
sublease and the prospective assignee or subtenant. Tenant’s notice shall not
be deemed to have been served or given until such time as Tenant has provided
Landlord with all information reasonably requested by Landlord pursuant to this
Paragraph 24.2. Tenant shall immediately notify Landlord of any modification
to the proposed terms of such assignment or sublease. Tenant may withdraw its
notice at any time prior to or after exercise by Landlord of Landlord’s right
to terminate as described in Paragraph 24.2(b).

               (b) Offer to Terminate. If Tenant notifies Landlord of its desire to
assign this Lease or Tenant’s interest herein, Tenant’s notice shall constitute
an offer to terminate this Lease and Landlord shall have the right, to be
exercised by giving written notice to Tenant within fifteen (15) days after
receipt of Tenant’s notice, to
terminate the Lease. If Landlord elects to terminate, then within ten
(10) days after receipt of Landlord’s election, Tenant shall have the right to
rescind its request to assign, and this Lease shall continue in full force and
effect. If Tenant does not rescind its request, this Lease shall terminate on
the date stated in the notice given by Tenant pursuant to Paragraph 24.2(a),
subject to any obligations which have accrued and are unfulfilled as of such
date.

               (c) Landlord’s Consent. If Landlord does not exercise its right to
terminate pursuant to Paragraph 24.2(b) within fifteen (15) days after receipt
of Tenant’s notice or if Tenant proposes a sublease, Landlord shall not
unreasonably withhold or delay its consent to the proposed assignment or
subletting, on the terms and conditions specified in said notice. If Tenant’s
notice fails to state that it constitutes an offer to terminate the Lease as
may be required pursuant to Paragraph 24.2(a), such notice shall be deemed
insufficient for the purposes of this Paragraph 24.2, and Landlord may withhold
its consent to the proposed assignment in Landlord’s absolute discretion.
Without otherwise limiting the criteria upon which Landlord may withhold its
consent to any proposed assignment or sublease, if Landlord withholds its
consent where Tenant is in default at the time of the giving of Tenant’s notice
or at any time thereafter, or where the net worth of the proposed assignee
(according to generally accepted accounting principles) is less than the
greater of (i) the net worth of Tenant immediately prior to the assignment (ii)
or the net worth of Tenant at the time this Lease is executed, such withholding
of consent shall be presumptively reasonable. Fifty percent (50%) of any and
all rent paid by an assignee or subtenant in excess of the Rentals to be paid
under this Lease (prorated in the event of a sublease of less than the entire
Premises), after Tenant’s deduction therefrom of all reasonable costs to effect
the assignment or subletting, including without limitation, brokerage
commissions, attorneys’ fees, and the cost of leasehold improvements or
alterations installed or redecorating performed by Tenant for the sublessee,
shall be paid directly to Landlord, as Additional Rent, at the time and place
specified in this Lease. For the purposes of this Paragraph 24, the term
“rent” shall include any consideration of any kind received, or to be received,
by Tenant from an assignee or subtenant, if such sums are related to Tenant’s
interest in this Lease or in the Premises, including, but not limited to key
money, bonus money, and payments (in excess of the fair market value thereof)
for Tenant’s assets, fixtures, trade fixtures, inventory, accounts, goodwill,
equipment, furniture, general intangibles, and any capital stock or other
equity ownership interest of Tenant. Any assignment or subletting without
Landlord’s consent shall be voidable at

 

 

Landlord’s option, and shall constitute
a Default by Tenant. Landlord’s consent to any one assignment or sublease
shall not constitute a waiver of the provisions of this Paragraph 24 as to any
subsequent assignment or sublease nor a consent to any subsequent assignment or
sublease; further, Landlord’s consent to an assignment or sublease shall not
release Tenant from Tenant’s obligations under this Lease, and Tenant shall
remain jointly and severally liable with the assignee or subtenant.

               (d) Assumption of Obligations. In the event Landlord consents to any
assignment, such consent shall be conditioned upon the assignee expressly
assuming and agreeing to be bound by each of Tenant’s covenants, agreements and
obligations contained in this Lease, pursuant to a written assignment and
assumption agreement in a form reasonably approved by Landlord. Landlord’s
consent to any assignment or sublease shall be evidenced by Landlord’s
signature on said assignment and assumption agreement or on said sublease or by
a separate written consent. In the event Landlord consents to a proposed
assignment or sublease, such assignment or sublease shall be valid and the
assignee or subtenant shall have the right to take possession of the Premises
only if an executed original of the assignment or sublease is delivered to
Landlord, and such document contains the same terms and conditions as stated in
Tenant’s notice to Landlord given pursuant to Paragraph 24.2(a) above, except
for any such modifications to which Landlord has consented in writing.

          24.3 Collection of Rent. Tenant hereby irrevocably gives to and confers
upon Landlord, as security for Tenant’s obligations under this Lease, the
right, power and authority to collect all rents from any assignee or subtenant
of all or any part of the Premises as permitted by this Paragraph 24, or
otherwise, and Landlord, as assignee of Tenant, or a receiver for Tenant
appointed on Landlord’s application, may collect such rent and apply it toward
Tenant’s obligations under this Lease; provided, however, that until the
occurrence of any Default by Tenant, subject to applicable cure periods, or
except as provided by the provisions of Paragraph 24.2(c) above, Tenant shall
have the right to collect such rent. Upon the occurrence of any Default by
Tenant, Landlord may at any time without notice in Landlord’s own name sue for
or otherwise collect such rent, including rent past due and unpaid, and apply
the same, less costs and expenses of operation and collection, including
reasonable attorneys’ fees, toward Tenant’s obligations under this Lease.
Landlord’s collection of such rents shall not constitute an acceptance by
Landlord of attornment by such subtenants. In the event of a Default by
Tenant, Landlord shall have all rights provided by this Lease and by law, and
Landlord may, upon re-entry and taking possession of the Premises, eject all
parties in possession or eject some and not others, or eject none, as Landlord
shall determine in Landlord’s sole discretion.

          24.4 Corporations and Partnerships. If Tenant is a partnership, any
withdrawal or substitution (whether voluntary, involuntary, or by operation of
law and whether occurring at one time or over a period of time) of any
partner(s) owning fifty percent (50%) or more (cumulatively) of the
partnership, any assignment(s) of fifty percent (50%) or more (cumulatively) of
any interest in the capital or profits of the partnership, or the dissolution
of the partnership shall be deemed an assignment of this Lease requiring the
prior written consent of Landlord. If Tenant is a corporation, any
dissolution, merger, consolidation or other reorganization of Tenant, any sale
or transfer (or cumulative sales or transfers) of the capital stock of Tenant
in excess of fifty percent (50%), or any sale (or cumulative sales) of all of
the assets of Tenant shall be deemed an assignment of this Lease requiring the
prior written consent of Landlord. Any such withdrawal or substitution of
partners or assignment of any interest in or dissolution of a partnership
tenant, and any such sale of stock or assets of a corporate tenant without the
prior written consent of Landlord shall be a Default by Tenant hereunder. The
foregoing notwithstanding, the sale or transfer of any or all of the capital
stock of a corporation, the capital stock of which is now or hereafter becomes
publicly traded, shall not be deemed an assignment of this Lease.

 

 

     Notwithstanding anything to the contrary contained in this Lease, Tenant,
without Landlord’s prior written consent (but with notice to Landlord), may
sublet the Premises or assign this Lease to (i) a subsidiary, affiliate,
division or corporation controlled by or under common control with Tenant; (ii)
a successor corporation related to Tenant by merger, consolidation,
non-bankruptcy reorganization or government action; or (iii) a purchaser of
substantially all of Tenant’s assets located at the Premises, provided that in
either of the latter two instances the successor or purchaser has a net worth
not less than the net worth of Tenant at the time that Tenant executes this
Lease (each, a “Permitted Assignee”). Notwithstanding that a Transfer is made
to a Permitted Assignee, Tenant shall not be released from any of its
obligations under this Lease and such Permitted Assignee shall be required to
assume all of Tenant’s obligations hereunder as a condition to such transfer
being permitted without Landlord’s prior written consent.

          24.5 Reasonable Provisions. Tenant expressly agrees that the provisions
of this Paragraph 24 are not unreasonable standards or conditions for purposes
of Section 1951.4(b)(2) of the California Civil Code, as amended from time to
time, under bankruptcy laws, or for any other purpose.

          24.6 Professional Fees. Tenant shall pay, as Additional Rent,
Landlord’s reasonable attorneys’ fees for reviewing, investigating, processing
and/or documenting any requested assignment or sublease, whether or not
Landlord’s consent is granted.

          24.7 Involuntary Transfer. No interest of Tenant in this Lease shall be
assignable, involuntarily or by operation of law, including, without
limitation, the transfer of this Lease by testacy or intestacy. Each of the
following acts shall be considered an involuntary assignment:

               (a) If Tenant is or becomes bankrupt or insolvent, makes an assignment for
the benefit of creditors, or a proceeding under any bankruptcy law is
instituted in which Tenant is the bankrupt; or, if Tenant is a partnership or
consists of more than one person or entity, if any partner of the partnership
or other person or entity is or becomes bankrupt or insolvent, or makes an
assignment for the benefit of creditors;

               (b) Levy of a writ of attachment or execution on this Lease;

               (c) Appointment of a receiver with authority to take possession of the
Premises in any proceeding or action to which Tenant is a party; or

               (d) Foreclosure of any lien affecting Tenant’s interest in the Premises,
which lien was not consented to by Landlord pursuant to Paragraph 24.9.

An involuntary assignment shall constitute a Default by Tenant and Landlord
shall have the right to terminate this Lease, in which case this Lease shall
not be treated as an asset of Tenant. In the event the Lease is not
terminated, the provisions of Paragraph 24.2(c) regarding rents paid by an
assignee or subtenant shall apply. If a writ of attachment or execution is
levied on this Lease, or if any involuntary proceeding in bankruptcy is brought
against Tenant or a receiver is appointed, Tenant shall have sixty (60) days in
which to cause the attachment or execution to be removed, the involuntary
proceeding dismissed, or the receiver removed.

          24.8 Hypothecation. Tenant shall not hypothecate, mortgage or encumber
Tenant’s interest in this Lease or in the Premises or otherwise use this Lease
as a security device in any manner without the consent of Landlord, which
consent Landlord may withhold in its sole and absolute discretion. Consent by
Landlord to any such hypothecation or creation of a lien or mortgage shall not
constitute consent to an assignment or other transfer of this Lease following
foreclosure of any permitted lien or mortgage.

          24.9 Binding on Successors. The provisions of this Paragraph 24 expressly
apply to all heirs, successors, sublessees, assignees and transferees of
Tenant.

 

 

     25. Successors. Subject to the provisions of Paragraph 24 above and
Paragraph 30.2(a) below, the covenants, conditions, and agreements contained in
this Lease shall be binding on the parties hereto and on their respective
heirs, successors and assigns.

     26. Landlord Default; Mortgagee Protection. Landlord shall not be in
default under this Lease unless Tenant shall have given Landlord written notice
of the breach and, within thirty (30) days after notice, Landlord has not cured
the breach or, if the breach is such that it cannot reasonably be cured under
the circumstances within thirty (30) days, has not commenced diligently to
prosecute the cure to completion. Any money judgment obtained by Tenant based
upon Landlord’s breach of this Lease shall be satisfied only out of the
proceeds of the sale or disposition of Landlord’s interest in the Premises
(whether by Landlord or by execution of judgment). In the event of any default
on the part of Landlord under this Lease, Tenant shall give notice by
registered or certified mail to any beneficiary of a deed of trust or any
mortgagee of a mortgage affecting the Premises and/or the real property
comprising the Common Area whose address shall have been furnished to Tenant,
and shall offer such beneficiary or mortgagee a reasonable opportunity to cure
the default, including time to obtain possession of the Premises by power of
sale or judicial foreclosure, if such should prove necessary to effect a cure.

     27. Exhibits. All exhibits attached to this Lease shall be deemed to be
incorporated herein by the individual reference to each such exhibit, and all
such exhibits shall be deemed to be a part of this Lease as though set forth in
full in the body of the Lease.

     28. Surrender of Lease Not Merger. The voluntary or other surrender of
this Lease by Tenant, or a mutual cancellation thereof, shall not work a merger
and shall, at the option of Landlord, terminate all or any existing subleases
or subtenants, or may, at the option of Landlord, operate as an assignment to
Landlord of any or all such subleases or subtenants.

     29. Waiver. The waiver by Landlord of any breach of any term, covenant or
condition herein contained (or the acceptance by Landlord of any performance by
Tenant after the time the same shall become due) shall not be deemed to be a
waiver of such term, covenant or condition or any subsequent breach thereof or
of any other term, covenant or condition herein contained, unless otherwise
expressly agreed to by Landlord in writing. The acceptance by Landlord of any
sum less than that which is required to be paid by Tenant shall be deemed to
have been received only on account of the obligation for which it is paid (or
for which it is allocated by Landlord, in Landlord’s reasonable discretion, if
Tenant does not designate the obligation as to which the payment should be
credited), and shall not be deemed an accord and satisfaction notwithstanding
any provisions to the contrary written on any check or contained in any letter
of transmittal. The acceptance by Landlord of any sum tendered by a purported
assignee or transferee of Tenant shall not be deemed a consent by Landlord to
any assignment or transfer of Tenant’s interest herein. No custom or practice
which may arise between the parties hereto in the administration of the terms
of this Lease shall be construed as a waiver or diminution of Landlord’s right
to demand performance by Tenant in strict accordance with the terms of this
Lease.

     30. General.

          30.1 Captions and Headings. The captions and paragraph headings used in
this Lease are for convenience of reference only. They shall not be construed
to limit or extend the meaning of any part of this Lease, and shall not be
deemed relevant in resolving any question of interpretation or construction of
any paragraph of this Lease.

          30.2 Definitions.

               (a) Landlord. The term Landlord as used in this Lease, so far as the
covenants or obligations on the part of Landlord are concerned, shall be
limited to mean and include only the owner at the time in question of the fee
title to the Premises. In the event of any transfer(s) of such interest, the
Landlord herein named (and in case of any subsequent transfers or conveyances,
the then grantor) shall have no further liability under this Lease to Tenant
except as to matters of liability which have accrued and are unsatisfied as

 

 

of
the date of such transfer, it being intended that the covenants and obligations
contained in this Lease on the part of Landlord shall be binding on Landlord
and its successors and assigns only during and in respect of their respective
periods of ownership of the fee; provided that any funds in the possession of
Landlord or the then grantor and as to which Tenant has an interest, less any
deductions permitted by law or this Lease, shall be turned over to the grantee.
The covenants and obligations contained in this Lease on the part of Landlord
shall, subject to the provisions of this Paragraph 30.2(a), be binding upon
each Landlord and such Landlord’s heirs, personal representatives, successors
and assigns only during its respective period of ownership. Except as provided
in this Paragraph 30.2(a), this Lease shall not be affected by any transfer of
Landlord’s interest in the Premises, and Tenant shall attorn to any transferee
of Landlord provided that all of Landlord’s obligations hereunder are assumed
in writing by such transferee.

               (b) Agents. For purposes of this Lease and without otherwise affecting
the definition of the word “agent” or the meaning of an “agency”, the term
“agents” shall be deemed to include the agents, employees, officers, directors,
servants, invitees, contractors, successors, representatives subcontractors,
guests, customers, suppliers, partners, affiliated companies, and any other
person or entity related in any way to the respective party, Tenant or
Landlord.

               (c) Interpretation of Terms. The words “Landlord” and “Tenant” as used
herein shall include the plural as well as the singular. Words in the neuter
gender include the masculine and feminine and words in the masculine or
feminine gender include the neuter.

          30.3 Copies. Any executed copy of this Lease shall be deemed an original
for all purposes.

          30.4 Time of Essence. Time is of the essence as to each and every
provision in this Lease requiring performance within a specified time.

          30.5 Severability. In case any one or more of the provisions contained
herein shall for any reason be held to be invalid, illegal or unenforceable in
any respect, such invalidity, illegality or unenforceability shall not affect
any other provision of this Lease, but this Lease shall be construed as if such
invalid, illegal or unenforceable provision had not been contained herein.
However, if Tenant’s obligation to pay the Rentals is determined to be invalid
or unenforceable, this Lease at the option of Landlord shall terminate.

          30.6 Governing Law. This Lease shall be construed and enforced in
accordance with the laws of the State of California.

          30.7 Joint and Several Liability. If Tenant is more than one person or
entity, each such person or entity shall be jointly and severally liable for
the obligations of Tenant hereunder. If Tenant is a husband and wife, the
obligations hereunder shall extend to their sole and separate property as well
as community property.

          30.8 Construction of Lease Provisions. Although printed provisions of
this Lease were prepared by Landlord, this Lease shall not be construed either
for or against Tenant or Landlord, but shall be construed in accordance with
the general tenor of the language to reach a fair and equitable result.

          30.9 [Intentionally Deleted].

          30.10 Tenant’s Financial Statements. Tenant hereby warrants that all
financial statements delivered by Tenant to Landlord are true, correct, and
complete, and prepared in accordance with generally accepted accounting
principles. Tenant acknowledges and agrees that Landlord is relying on such
financial statements in accepting this Lease, and that a breach of Tenant’s
warranty as to such financial statements shall constitute a Default by Tenant.
Notwithstanding anything to the contrary contained in

 

 

this Lease, Landlord
shall keep confidential all such financial information received from Tenant,
except that Landlord may provide such financial information to Landlord’s
lenders or prospective lenders with respect to the Premises.

          30.11 Withholding of Landlord’s Consent. Notwithstanding any other
provision of this Lease, where Tenant is required to obtain the consent
(whether written or oral) of Landlord to do any act, or to refrain from the
performance of any act, Tenant agrees that if Tenant is in default with respect
to any term, condition, covenant or provision of this Lease, then Landlord
shall be deemed to have acted reasonably in withholding its consent if said
consent is, in fact, withheld.

     31. Signs. Tenant shall not place or permit to be placed any sign or
decoration on the Common Area or the exterior of the Premises or that would be
visible from the exterior of the Premises, without the prior written consent of
Landlord, which consent shall not be unreasonably withheld or delayed. Tenant
may place “for lease” signs in connection with efforts to assign or sublease
the Premises, subject to the prior written consent of Landlord, which consent
shall not be unreasonably withheld or delayed; provided that all such signs
shall be removed not later than the one hundred eightieth (180th) day prior to
Lease Termination. In no event shall any such sign revolve, rotate, move or
create the illusion of revolving, rotating or moving or be internally
illuminated and there shall be no exterior spotlighting or other illumination
on any such sign. Tenant, upon written notice by Landlord, shall immediately
remove any of Tenant’s signs or decorations that are visible from the exterior
of the Premises or that Tenant has placed or permitted to be placed on the
Common Area or the exterior of the Premises without the prior written consent
of Landlord, or which remain beyond the one hundred eightieth (180th) day prior
to Lease Termination. If Tenant fails to so remove such sign or decoration
within five (5) days after Landlord’s written notice, Landlord may enter the
Premises and remove such sign or decoration and Tenant shall pay Landlord, as
Additional Rent upon demand, the cost of such removal. All signs placed on the
Premises or Common Area by Tenant shall comply with all recorded documents
affecting the Premises, including but not limited to any Declaration of
Conditions, Covenants and Restrictions: the sign criteria attached hereto as
Exhibit E, if applicable (as the same may be amended from time to time); and
applicable statutes, ordinances, rules and regulations of governmental agencies
having jurisdiction thereof. At Landlord’s option, Tenant shall at Lease
Termination remove any sign which it has placed on the Premises or the Common
Area, and shall, at its sole cost, repair any damage caused by the installation
or removal of such sign.

     32. Landlord as Party Defendant. If, by reason of any act or omission by
Tenant or Tenant’s agents, Landlord is made a party defendant concerning this
Lease, the Premises, or the Common Area, Tenant shall indemnify Landlord
against all liability actually incurred (or threatened against) Landlord as a
party defendant, including all damages, costs and reasonable attorneys’ fees.

     33. Landlord Not a Trustee. Landlord shall not be deemed to be a trustee
of any funds paid to Landlord by Tenant (or held by Landlord for Tenant)
pursuant to this Lease, including without limitation the Security Deposit.
Landlord shall not be required to keep any such funds separate from Landlord’s
general funds. Any funds held by Landlord pursuant to this Lease shall not
bear interest.

     34. Interest. Any payment due from Tenant to Landlord, except for Rent
received by Landlord within thirty (30) days after the same is due, shall bear
interest from the date due until paid, at an annual rate equal to the greater
of: ten percent (10%); or five percent (5%) plus the rate established by the
Federal Reserve Bank of San Francisco, as of the twenty-fifth (25th) day of the
month immediately preceding the due date, on advances to member banks under
Sections 13 and 13(a) of the Federal Reserve Act, as now in effect or hereafter
from time to time amended. In addition, Tenant shall pay all costs and
reasonable attorneys’ fees incurred by Landlord in the collection of such
amounts.

     35. Surrender of Premises. On the last day of the Lease Term or upon the
sooner termination of this Lease, Tenant shall, to the reasonable satisfaction
of Landlord, surrender the Premises to Landlord in good condition (reasonable
wear and tear excepted) with all originally painted interior walls washed, or
re-painted if marked or damaged, and other interior walls cleaned and repaired
or replaced, all carpets cleaned and in good condition, the air conditioning,
ventilating and heating equipment inspected, serviced and repaired by a
reputable and licensed service firm (unless Landlord has elected to maintain
heating and air conditioning

 

 

systems pursuant to Paragraph 10.1 above), and all
floors cleaned and waxed. Tenant shall remove all of Tenant’s personal
property and trade fixtures from the Premises, and all property not so removed
shall be deemed abandoned by Tenant. Furthermore, Tenant shall immediately
remove all Extraordinary Alterations designated by Landlord for removal under
the provisions of Article 13 of this Lease, repair all damage to the Premises
and Common Area caused by any such removal. If the Premises are not so
surrendered at Lease Termination, Tenant shall indemnify, defend and hold
Landlord harmless from and against any loss, damage, expense, claim or
liability resulting from delay by Tenant in so surrendering the Premises
including, without limitation, any claims made by any succeeding tenant or
losses to Landlord due to lost opportunities to lease to succeeding tenants.

     36. Labor Disputes. In the event Tenant shall in any manner be involved
in or be the object of a labor dispute which subjects the Premises or any part
of the Project to any picketing, work stoppage or other concerted activity
which in the reasonable opinion of Landlord is detrimental to the operation of
the Project or its tenants, Landlord shall have the right to require Tenant, at
Tenant’s own expense and within a reasonable period of time, to use Tenant’s
best efforts to either resolve such labor dispute or terminate or control any
such picketing, work stoppage or other concerted activity to the extent
necessary to eliminate any interference with the operation of the Project. To
the extent such labor dispute interferes with the performance of Landlord’s
duties hereunder, Landlord shall be excused from the performance of such
duties. Failure by Tenant to use its best efforts to so resolve such dispute
or terminate or control such picketing, work stoppage or other concerted
activity within a reasonable period of time shall constitute a Default by
Tenant hereunder. Nothing contained in this Paragraph 36 shall be construed as
placing Landlord in an employer/employee relationship with any of Tenant’s
employees or with any other employees who may be involved in such labor
dispute.

     37. No Partnership or Joint Venture. Nothing in this Lease shall be
construed as creating a partnership or joint venture between Landlord, Tenant,
or any other party, or cause Landlord to be responsible for the debts or
obligations of Tenant or any other party.

     38. Entire Agreement. Any agreements, warranties, or representations not
expressly contained herein shall in no way bind either Landlord or Tenant, and
Landlord and Tenant expressly waive all claims for damages by reason of any
statement, representation, warranty, promise or agreement, if any, not
contained in this Lease. This Lease supersedes and cancels any and all
previous negotiations, arrangements, brochures, agreements and understandings,
whether written or oral, between Landlord and its agents and Tenant and its
agents with respect to the Premises, Common Area or this Lease. This Lease
constitutes the entire agreement between the parties hereto and no addition to,
or modification of, any term or provision of this Lease shall be effective
until and unless set forth in a written instrument signed by both Landlord and
Tenant.

     39. Submission of Lease. Submission of this instrument for Tenant’s
examination or execution does not constitute a reservation of space nor an
option to lease. This instrument shall not be effective until executed by both
Landlord and Tenant. Execution of this Lease by Tenant shall constitute an
offer by Tenant to lease the Premises, which offer shall be deemed accepted by
Landlord when this Lease is executed by Landlord and delivered to Tenant.

     40. Quiet Enjoyment. Landlord covenants and agrees with Tenant that upon
Tenant paying Rentals and performing its covenants and conditions under the
Lease, Tenant shall and may peaceably and quietly have, hold and enjoy the
Premises for the Lease Term, subject, however, to the terms of this Lease and
of any mortgages or deeds of trust affecting the Premises and/or the real
property comprising the Common Area, and the rights reserved by Landlord
hereunder. Any purchaser upon any foreclosure or exercise of the power of sale
under any mortgage or deed of trust made by Landlord and covering the Premises
to whom Tenant attorns pursuant to Paragraph 20.4 above shall be bound by the
terms of this Paragraph 40.

     42. Authority. The undersigned parties hereby warrant that they have
proper authority and are empowered to execute this Lease on behalf of the
Landlord and Tenant, respectively. If Tenant is a corporation (or
partnership), each individual executing this Lease on behalf of said
corporation (or partnership) represents and warrants that he is duly authorized
to execute and deliver this Lease on behalf of said

 

 

corporation in accordance
with a duly adopted resolution of the Board of Directors of said corporation or
in accordance with the by-laws of said corporation (or on behalf of said
partnership in accordance with the partnership agreement of such partnership),
and that this Lease is binding upon said corporation (or partnership) in
accordance with its terms. If Tenant is a corporation, and this Lease is not
executed by two corporate officers, Tenant shall upon execution of this Lease,
deliver to Landlord evidence of the authority of the individual executing this
Lease on behalf of Tenant to execute this Lease on behalf of Tenant. In the
event Tenant should fail to deliver such evidence to Landlord upon execution of
this Lease, Landlord shall not be deemed to have waived its right to require
delivery of such evidence, and at any time during the Lease Term Landlord may
request Tenant to deliver the same, and Tenant agrees it shall thereafter
promptly deliver such evidence to Landlord. If Tenant is a corporation, Tenant
warrants that:

               (a) Tenant is a valid and existing corporation;

               (b) Tenant is qualified to do business in California;

               (c) All fees and all franchise and corporate taxes are paid to date, and
will be paid when due;

               (d) All required forms and reports will be filed when due; and

               (e) The signers of this Lease are properly authorized to execute this
Lease.

 

 

     IN WITNESS WHEREOF, the parties have executed this Lease effective as of
the date set forth below.

	 	 	 	 	 	 	 	 	 	 	 
	LANDLORD:	 	TENANT:
	 
	 	 	 	 	 	 	 	 	 	 
	REALTEC PROPERTIES, I,L.P.	 	LASERSCOPE
	 
	 	 	 	 	 	 	 	 	 	 
	By

	 	/s/Larry Russell
	 	By
	 	/s/ Eric Reuter	 	 	 	 
	

	 	
 
	 	 	 	
 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Title

	 	General Partner
	 	Title
	 	President and CEO	 	 	 	 
	

	 	
 
	 	 	 	
 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Date

	 	October 11, 2004
	 	Date
	 	October 11, 2004	 	 	 	 
	

	 	
 
	 	 	 	
 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By

	 	/s/ Thomas Masters
	 	By
	 	/s/ Dennis LaLumandiere	 	 	 	 
	

	 	
 
	 	 	 	
 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Title

	 	General Partner
	 	Title
	 	Vice President, Finance and Chief Financial Officer	 	 	 	 
	

	 	
 
	 	 	 	
 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	Date

	 	October 11, 2004
	 	Date
	 	October 11, 2004	 	 	 	 
	

	 	
 
	 	 	 	
 	 	 	 	 

 

 

EXHIBITS

	 	 	 	 	 
	A (a) and A (b)

	 	Legal Description
	 	Paragraph 1.4
	 
	 	 	 	 
	B

	 	Personal Property
	 	Paragraph
	 
	 	 	 	 
	C

	 	Improvements
	 	Paragraph 2.2
	 
	 	 	 	 
	D

	 	[Intentionally Deleted]	 	 
	 
	 	 	 	 
	E

	 	Sign Criteria
	 	Paragraph 31
	 
	 	 	 	 
	F

	 	[Intentionally Deleted]	 	 
	 
	 	 	 	 
	G

	 	Tenant Hazardous Materials List	 	 

 

 

NET LEASE AGREEMENT

(Single Tenant)

by and between

LASERSCOPE

(“Tenant”)

and

REALTEC PROPERTIES I, L.P.

EXHIBIT “A”

 

 

Site Plan

Attached

 

 

EXHIBIT “B”

Personal Property

The attached Bill of Sale shall be verified by the Parties for completeness
prior to the Lease Commencement Date.

 

 

EXHIBIT “C”

Improvements

To be attached

 

 

EXHIBIT “D”

[INTENTIONALLY DELETED]

 

 

EXHIBIT “E”

Sign Criteria

Tenant shall be allowed signage on the property consistent with the other
tenants in the project and other signage on the Premises subject to approval of
the City of San Jose and the Landlord, which shall not be unreasonably
withheld.

 

 

EXHIBIT “F”

[INTENTIONALLY DELETED]

 

 

EXHIBIT “G”

Tenant Hazardous Materials List

To be attached<PAGE>

                                                                     EXHIBIT 4.4

                            FORM OF SENIOR INDENTURE

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

                         PARALLEL PETROLEUM CORPORATION

                                    as Issuer

                                       and

                          -----------------------------

                                   as Trustee

                                -----------------

                                    Indenture

                       Dated as of _________ , __________

                               ------------------

                                 Debt Securities

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------
--------------------------------------------------------------------------------

<PAGE>

                         PARALLEL PETROLEUM CORPORATION

         RECONCILIATION AND TIE BETWEEN TRUST INDENTURE ACT OF 1939 AND
                     INDENTURE, DATED AS OF __________,_____

<TABLE>
<CAPTION>
         Section of
           Trust
         Indenture                                          Section(s) of
         Act of 1939                                          Indenture
------------------------                                    --------------
<S>                                                         <C>
  Section  310    (a)(1)                                    7.10
                  (a)(2)                                    7.10
                  (a)(3)                                    Not Applicable
                  (a)(4)                                    Not Applicable
                  (a)(5)                                    7.10
                  (b)                                       7.08, 7.10

  Section  311    (a)                                       7.11
                  (b)                                       7.11
                  (c)                                       Not Applicable

  Section  312    (a)                                       2.07
                  (b)                                       10.03
                  (c)                                       10.03

  Section  313    (a)                                       7.06
                  (b)                                       7.06
                  (c)                                       7.06
                  (d)                                       7.06

  Section  314    (a)                                       4.03, 4.04
                  (b)                                       Not Applicable
                  (c)(1)                                    10.04
                  (c)(2)                                    10.04
                  (c)(3)                                    Not Applicable
                  (d)                                       Not Applicable
                  (e)                                       10.05

  Section  315    (a)                                       7.01(b)
                  (b)                                       7.05
                  (c)                                       7.01(a)
                  (d)                                       7.01(c)
                  (d)(1)                                    7.01(c)(1)
                  (d)(2)                                    7.01(c)(2)
                  (d)(3)                                    7.01(c)(3)
                  (e)                                       6.11

  Section  316    (a)(1)(A)                                 6.05
                  (a)(1)(B)                                 6.04
                  (a)(2)                                    Not Applicable
                  (a)(last sentence)                        2.11
                  (b)                                       6.07

  Section  317    (a)(1)                                    6.08
                  (a)(2)                                    6.09
                  (b)                                       2.06

  Section  318    (a)                                       10.01
</TABLE>

                                     - 2 -

<PAGE>

Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.

                                TABLE OF CONTENTS
<TABLE>
<S>                    <C>
ARTICLE I              DEFINITIONS AND INCORPORATION BY REFERENCE

   SECTION 1.01        Definitions.
   SECTION 1.02        Other Definitions.
   SECTION 1.03        Incorporation by Reference of Trust Indenture Act.
   SECTION 1.04        Rules of Construction.

ARTICLE II             THE SECURITIES

   SECTION 2.01        Amount Unlimited; Issuable in Series.
   SECTION 2.02        Denominations.
   SECTION 2.03        Forms Generally.
   SECTION 2.04        Execution, Authentication, Delivery and Dating.
   SECTION 2.05        Registrar and Paying Agent.
   SECTION 2.06        Paying Agent to Hold Money in Trust.
   SECTION 2.07        Holder Lists.
   SECTION 2.08        Transfer and Exchange.
   SECTION 2.09        Replacement Securities.
   SECTION 2.10        Outstanding Securities.
   SECTION 2.11        Original Issue Discount, Foreign-Currency Denominated and Treasury Securities.
   SECTION 2.12        Temporary Securities.
   SECTION 2.13        Cancellation.
   SECTION 2.14        Payments; Defaulted Interest.
   SECTION 2.15        Persons Deemed Owners.
   SECTION 2.16        Computation of Interest.
   SECTION 2.17        Global Securities; Book-Entry Provisions.

ARTICLE III            REDEMPTION

   SECTION 3.01        Applicability of Article.
   SECTION 3.02        Notice to the Trustee.
   SECTION 3.03        Selection of Securities To Be Redeemed.
   SECTION 3.04        Notice of Redemption.
   SECTION 3.05        Effect of Notice of Redemption.
   SECTION 3.06        Deposit of Redemption Price.
   SECTION 3.07        Securities Redeemed or Purchased in Part.
   SECTION 3.08        Purchase of Securities.
   SECTION 3.09        Mandatory and Optional Sinking Funds.
   SECTION 3.10        Satisfaction of Sinking Fund Payments with Securities.
   SECTION 3.11        Redemption of Securities for Sinking Fund.

ARTICLE IV             COVENANTS

   SECTION 4.01        Payment of Securities.
</TABLE>

                                     - 3 -

<PAGE>

<TABLE>
<S>                    <C>
   SECTION 4.02        Maintenance of Office or Agency.
   SECTION 4.03        SEC Reports; Financial Statements.
   SECTION 4.04        Compliance Certificate.
   SECTION 4.05        Corporate Existence.
   SECTION 4.06        Waiver of Stay, Extension or Usury Laws.
   SECTION 4.07        Additional Amounts.

ARTICLE V              SUCCESSORS

   SECTION 5.01        Limitations on Mergers and Consolidations.
   SECTION 5.02        Successor Person Substituted.

ARTICLE VI             DEFAULTS AND REMEDIES

   SECTION 6.01        Events of Default.
   SECTION 6.02        Acceleration.
   SECTION 6.03        Other Remedies.
   SECTION 6.04        Waiver of Defaults.
   SECTION 6.05        Control by Majority.
   SECTION 6.06        Limitations on Suits.
   SECTION 6.07        Rights of Holders to Receive Payment.
   SECTION 6.08        Collection Suit by Trustee.
   SECTION 6.09        Trustee May File Proofs of Claim.
   SECTION 6.10        Priorities.
   SECTION 6.11        Undertaking for Costs.

ARTICLE VII            TRUSTEE

   SECTION 7.01        Duties of Trustee.
   SECTION 7.02        Rights of Trustee.
   SECTION 7.03        May Hold Securities.
   SECTION 7.04        Trustee's Disclaimer.
   SECTION 7.05        Notice of Defaults.
   SECTION 7.06        Reports by Trustee to Holders.
   SECTION 7.07        Compensation and Indemnity.
   SECTION 7.08        Replacement of Trustee.
   SECTION 7.09        Successor Trustee by Merger, etc.
   SECTION 7.10        Eligibility; Disqualification.
   SECTION 7.11        Preferential Collection of Claims Against the Company.

ARTICLE VIII           DISCHARGE OF INDENTURE

   SECTION 8.01        Termination of the Company's Obligations.
   SECTION 8.02        Application of Trust Money.
   SECTION 8.03        Repayment to Company.
   SECTION 8.04        Reinstatement.

ARTICLE IX             SUPPLEMENTAL INDENTURES AND AMENDMENTS

   SECTION 9.01        Without Consent of Holders.
   SECTION 9.02        With Consent of Holders.
</TABLE>

                                     - 4 -

<PAGE>

<TABLE>
<S>                    <C>
   SECTION 9.03        Compliance with Trust Indenture Act.
   SECTION 9.04        Revocation and Effect of Consents.
   SECTION 9.05        Notation on or Exchange of Securities.
   SECTION 9.06        Trustee to Sign Amendments, etc.

ARTICLE X              MISCELLANEOUS

   SECTION 10.01       Trust Indenture Act Controls.
   SECTION 10.02       Notices.
   SECTION 10.03       Communication by Holders with Other Holders.
   SECTION 10.04       Certificate and Opinion as to Conditions Precedent.
   SECTION 10.05       Statements Required in Certificate or Opinion.
   SECTION 10.06       Rules by Trustee and Agents.
   SECTION 10.07       Legal Holidays.
   SECTION 10.08       No Recourse Against Others.
   SECTION 10.09       Governing Law.
   SECTION 10.10       No Adverse Interpretation of Other Agreements.
   SECTION 10.11       Successors.
   SECTION 10.12       Severability.
   SECTION 10.13       Counterpart Originals.
   SECTION 10.14       Table of Contents, Headings, etc.
</TABLE>

                                     - 5 -

<PAGE>

      INDENTURE dated as of ______________ , _______ between Parallel Petroleum
Corporation, a Delaware corporation (the "Company"), and _____________, as
trustee (the "Trustee").

      Each party agrees as follows for the benefit of the other party and for
the equal and ratable benefit of the Holders of the Company's unsecured
debentures, notes or other evidences of indebtedness (the "Securities") to be
issued from time to time in one or more series as provided in this Indenture:

                                   ARTICLE I
                   DEFINITIONS AND INCORPORATION BY REFERENCE

      SECTION 1.01 Definitions.

      "Additional Amounts" means any additional amounts required by the express
terms of a Security or by or pursuant to a Board Resolution, under circumstances
specified therein or pursuant thereto, to be paid by the Company with respect to
certain taxes, assessments or other governmental charges imposed on certain
Holders and that are owing to such Holders.

      "Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by, or under direct or indirect common
control with, such specified Person. For purposes of this definition, "control"
of a Person shall mean the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" shall have meanings correlative to the foregoing.

      "Agent" means any Registrar or Paying Agent.

      "Bankruptcy Law" means Title 11 of the United States Code or any similar
federal, state or foreign law for the relief of debtors.

      "Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized, with respect to any particular matter, to act
by or on behalf of the Board of Directors of the Company.

      "Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.

      "Business Day" means any day that is not a Legal Holiday.

      "Company" means the Person named as the "Company" in the first paragraph
of this instrument until a successor Person shall have become such pursuant to
the applicable provisions of this Indenture, and thereafter "Company" shall mean
such successor Person; provided, however, that for purposes of any provision
contained herein which is required by the TIA, "Company" shall also mean each
other obligor (if any) on the Securities of a series.

      "Company Order" and "Company Request" mean, respectively, a written order
or request signed in the name of the Company by two Officers of the Company, and
delivered to the Trustee.

      "Corporate Trust Office of the Trustee" means the office of the Trustee
located at __________, Attention: __________, and as may be located at such
other address as the Trustee may give notice to the Company.

      "Default" means any event, act or condition that is, or after notice or
the passage of time or both would be, an Event of Default.

                                     - 6 -

<PAGE>

      "Depositary" means, with respect to the Securities of any series issuable
or issued in whole or in part in global form, the Person specified pursuant to
Section 2.01 hereof as the initial Depositary with respect to the Securities of
such series, until a successor shall have been appointed and become such
pursuant to the applicable provision of this Indenture, and thereafter
"Depositary" shall mean or include such successor.

      "Dollar" or "$" means a dollar or other equivalent unit in such coin or
currency of the United States as at the time shall be legal tender for the
payment of public and private debt.

      "Exchange Act" means the Securities Exchange Act of 1934, as amended, and
any successor statute.

      "GAAP" means generally accepted accounting principles in the United States
set forth in the opinions and pronouncements of the Accounting Principles Board
of the American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a significant segment of
the accounting profession of the United States, as in effect from time to time.

      "Global Security" means a Security that is issued in global form in the
name of the Depositary with respect thereto or its nominee.

      "Government Obligations" means, with respect to a series of Securities,
direct obligations of the government that issues the currency in which the
Securities of the series are payable for the payment of which the full faith and
credit of such government is pledged, or obligations of a Person controlled or
supervised by and acting as an agency or instrumentality of such government, the
payment of which is unconditionally guaranteed as a full faith and credit
obligation by such government.

      "Holder" means a Person in whose name a Security is registered.

      "Indenture" means this Indenture as amended or supplemented from time to
time pursuant to the provisions hereof, and includes the terms of a particular
series of Securities established as contemplated by Section 2.01.

      "interest" means, with respect to an Original Issue Discount Security that
by its terms bears interest only after Maturity, interest payable after
Maturity.

      "Interest Payment Date," when used with respect to any Security, shall
have the meaning assigned to such term in the Security as contemplated by
Section 2.01.

      "Issue Date" means, with respect to Securities of a series, the date on
which the Securities of such series are originally issued under this Indenture.

      "Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in any of The City of New York, New York; Midland, Texas or a Place
of Payment are authorized or obligated by law, regulation or executive order to
remain closed.

      "Maturity" means, with respect to any Security, the date on which the
principal of such Security or an installment of principal becomes due and
payable as therein or herein provided, whether at the Stated Maturity thereof,
or by declaration of acceleration, call for redemption or otherwise.

      "Officer" means the Chairman of the Board, the President, any Vice
Chairman of the Board, any Vice President, the Chief Financial Officer, the
Treasurer, any Assistant Treasurer, the Controller, the Secretary or any
Assistant Secretary of a Person.

      "Officers' Certificate" means a certificate signed by two Officers of a
Person.

                                     - 7 -

<PAGE>

      "Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. Such counsel may be an employee of or counsel to the
Company or the Trustee.

      "Original Issue Discount Security" means any Security that provides for an
amount less than the principal amount thereof to be due and payable upon a
declaration of acceleration of the Maturity thereof pursuant to Section 6.02.

      "Person" means any individual, corporation, partnership, limited liability
company, joint venture, incorporated or unincorporated association, joint stock
company, trust, unincorporated organization or government or other agency,
instrumentality or political subdivision thereof or other entity of any kind.

      "Place of Payment" means, with respect to the Securities of any series,
the place or places where the principal of, premium (if any) and interest on and
any Additional Amounts with respect to the Securities of that series are payable
as specified in accordance with Section 2.01 subject to the provisions of
Section 4.02.

      "principal" of a Security means the principal of the Security plus, when
appropriate, the premium, if any, on the Security.

      "Redemption Date" means, with respect to any Security to be redeemed, the
date fixed for such redemption by or pursuant to this Indenture.

      "Redemption Price" means, with respect to any Security to be redeemed, the
price at which it is to be redeemed pursuant to this Indenture.

      "Responsible Officer" means any officer within the corporate trust
department of the Trustee, including any vice president, assistant vice
president, assistant secretary, assistant treasurer, trust officer or any other
officer of the Trustee who customarily performs functions similar to those
performed by the Persons who at the time shall be such officers, respectively,
or to whom any corporate trust matter is referred because of such person's
knowledge of and familiarity with the particular subject and who shall have
direct responsibility for the administration of this Indenture.

      "Rule 144A Securities" means Securities of a series designated pursuant to
Section 2.01 as entitled to the benefits of Section 4.03(b).

      "SEC" means the Securities and Exchange Commission.

      "Securities" has the meaning stated in the preamble of this Indenture and
more particularly means any Securities authenticated and delivered under this
Indenture.

      "Security Custodian" means, with respect to Securities of a series issued
in global form, the Trustee for Securities of such series, as custodian with
respect to the Securities of such series, or any successor entity thereto.

      "Stated Maturity" means, when used with respect to any Security or any
installment of principal thereof or interest thereon, the date specified in such
Security as the fixed date on which the principal of such Security or such
installment of principal or interest is due and payable.

      "Subsidiary" of a Person means an Affiliate controlled by such Person
directly, or indirectly through one or more intermediaries.

      "TIA" means the Trust Indenture Act of 1939, as amended, as in effect on
the date hereof.

      "Trustee" means the Person named as such above until a successor replaces
it in accordance with the applicable provisions of this Indenture, and
thereafter "Trustee" means each Person who is then a Trustee hereunder, and if
at

                                     - 8 -

<PAGE>

any time there is more than one such Person, "Trustee" as used with respect to
the Securities of any series means the Trustee with respect to Securities of
that series.

      "United States" means the United States of America (including the States
and the District of Columbia) and its territories and possessions, which include
Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa, Wake Island and the
Northern Mariana Islands.

      "U.S. Government Obligations" means Government Obligations with respect to
Securities payable in Dollars.

                                     - 9 -

<PAGE>

      SECTION 1.02 Other Definitions.

<TABLE>
<CAPTION>
                                                                     Defined in
       Term                                                           Section
       ----                                                          ----------
<S>                                                                  <C>
"Agent Members"                                                         2.17
"Bankruptcy Custodian"                                                  6.01
"Conversion Event"                                                      6.01
"covenant defeasance"                                                   8.01
"Event of Default"                                                      6.01
"Exchange Rate"                                                         2.11
"Judgment Currency"                                                     6.10
"legal defeasance"                                                      8.01
"mandatory sinking fund payment"                                        3.09
"optional sinking fund payment"                                         3.09
"Paying Agent"                                                          2.05
"Registrar"                                                             2.05
"Required Currency"                                                     6.10
"Successor"                                                             5.01
</TABLE>

      SECTION 1.03 Incorporation by Reference of Trust Indenture Act.

      Whenever this Indenture refers to a provision of the TIA, the provision is
incorporated by reference in and made a part of this Indenture (and if the
Indenture is not qualified under the TIA at that time, as if it were so
qualified unless otherwise provided). The following TIA terms used in this
Indenture have the following meanings:

      "Commission" means the SEC.

      "indenture securities" means the Securities.

      "indenture security holder" means a Holder.

      "indenture to be qualified" means this Indenture.

      "indenture trustee" or "institutional trustee" means the Trustee.

      "obligor" on the indenture securities means the Company or any other
obligor on the Securities.

      All terms used in this Indenture that are defined by the TIA, defined by a
TIA reference to another statute or defined by an SEC rule under the TIA have
the meanings so assigned to them.

      SECTION 1.04 Rules of Construction.

      Unless the context otherwise requires:

            (1) a term has the meaning assigned to it;

            (2) an accounting term not otherwise defined has the meaning
            assigned to it in accordance with GAAP;

            (3) "or" is not exclusive;

                                     - 10 -

<PAGE>

            (4) words in the singular include the plural, and in the plural
            include the singular;

            (5) provisions apply to successive events and transactions; and

            (6) all references in this instrument to Articles and Sections are
            references to the corresponding Articles and Sections in and of this
            instrument.

                                   ARTICLE II
                                 THE SECURITIES

      SECTION 2.01 Amount Unlimited; Issuable in Series.

      The aggregate principal amount of Securities that may be authenticated and
delivered under this Indenture is unlimited.

      The Securities may be issued in one or more series. There shall be
established in or pursuant to a Board Resolution, and set forth, or determined
in the manner provided, in an Officers' Certificate of the Company or in a
Company Order, or established in one or more indentures supplemental hereto,
prior to the issuance of Securities of any series:

                  (1) the title of the Securities of the series (which shall
            distinguish the Securities of the series from the Securities of all
            other series);

                  (2) if there is to be a limit, the limit upon the aggregate
            principal amount of the Securities of the series that may be
            authenticated and delivered under this Indenture (except for
            Securities authenticated and delivered upon registration of transfer
            of, or in exchange for, or in lieu of, other Securities of the
            series pursuant to Section 2.08, 2.09, 2.12, 2.17, 3.07 or 9.05 and
            except for any Securities which, pursuant to Section 2.04 or 2.17,
            are deemed never to have been authenticated and delivered
            hereunder); provided, however, that unless otherwise provided in the
            terms of the series, the authorized aggregate principal amount of
            such series may be increased before or after the issuance of any
            Securities of the series by a Board Resolution (or action pursuant
            to a Board Resolution) to such effect;

                  (3) whether any Securities of the series are to be issuable
            initially in temporary global form and whether any Securities of the
            series are to be issuable in permanent global form, as Global
            Securities or otherwise, and, if so, whether beneficial owners of
            interests in any such Global Security may exchange such interests
            for Securities of such series and of like tenor of any authorized
            form and denomination and the circumstances under which any such
            exchanges may occur, if other than in the manner provided in Section
            2.17, and the initial Depositary and Security Custodian, if any, for
            any Global Security or Securities of such series;

                  (4) the manner in which any interest payable on a temporary
            Global Security on any Interest Payment Date will be paid if other
            than in the manner provided in Section 2.14;

                  (5) the date or dates on which the principal of and premium
            (if any) on the Securities of the series is payable or the method of
            determination thereof;

                  (6) the rate or rates, or the method of determination thereof,
            at which the Securities of the series shall bear interest, if any,
            whether and under what circumstances Additional Amounts with respect
            to such Securities shall be payable, the date or dates from which
            such interest shall accrue, the Interest Payment Dates on which such
            interest shall be payable and the record date for the interest
            payable on any Securities on any Interest Payment Date, or if other
            than provided herein, the Person to whom any interest on Securities
            of the series shall be payable;

                  (7) the place or places where, subject to the provisions of
            Section 4.02, the principal of, premium (if any) and interest on and
            any Additional Amounts with respect to the Securities of the series
            shall be payable;

                                     - 11 -

<PAGE>

                  (8) the period or periods within which, the price or prices
            (whether denominated in cash, securities or otherwise) at which and
            the terms and conditions upon which Securities of the series may be
            redeemed, in whole or in part, at the option of the Company, if the
            Company is to have that option, and the manner in which the Company
            must exercise any such option, if different from those set forth
            herein;

                  (9) the obligation, if any, of the Company to redeem, purchase
            or repay Securities of the series pursuant to any sinking fund or
            analogous provisions or at the option of a Holder thereof and the
            period or periods within which, the price or prices (whether
            denominated in cash, securities or otherwise) at which and the terms
            and conditions upon which Securities of the series shall be
            redeemed, purchased or repaid in whole or in part pursuant to such
            obligation;

                  (10) if other than denominations of $1,000 and any integral
            multiple thereof, the denomination in which any Securities of that
            series shall be issuable;

                  (11) if other than Dollars, the currency or currencies
            (including composite currencies) or the form, including equity
            securities, other debt securities (including Securities), warrants
            or any other securities or property of the Company or any other
            Person, in which payment of the principal of, premium (if any) and
            interest on and any Additional Amounts with respect to the
            Securities of the series shall be payable;

                  (12) if the principal of, premium (if any) or interest on or
            any Additional Amounts with respect to the Securities of the series
            are to be payable, at the election of the Company or a Holder
            thereof, in a currency or currencies (including composite
            currencies) other than that in which the Securities are stated to be
            payable, the currency or currencies (including composite currencies)
            in which payment of the principal of, premium (if any) and interest
            on and any Additional Amounts with respect to Securities of such
            series as to which such election is made shall be payable, and the
            periods within which and the terms and conditions upon which such
            election is to be made;

                  (13) if the amount of payments of principal of, premium (if
            any) and interest on and any Additional Amounts with respect to the
            Securities of the series may be determined with reference to any
            commodities, currencies or indices, values, rates or prices or any
            other index or formula, the manner in which such amounts shall be
            determined;

                  (14) if other than the entire principal amount thereof, the
            portion of the principal amount of Securities of the series that
            shall be payable upon declaration of acceleration of the Maturity
            thereof pursuant to Section 6.02;

                  (15) any additional means of satisfaction and discharge of
            this Indenture and any additional conditions or limitations to
            discharge with respect to Securities of the series pursuant to
            Article VIII or any modifications of or deletions from such
            conditions or limitations;

                  (16) any deletions or modifications of or additions to the
            Events of Default set forth in Section 6.01 or covenants of the
            Company set forth in Article IV pertaining to the Securities of the
            series;

                  (17) any restrictions or other provisions with respect to the
            transfer or exchange of Securities of the series, which may amend,
            supplement, modify or supersede those contained in this Article II;

                  (18) if the Securities of the series are to be convertible
            into or exchangeable for capital stock, other debt securities
            (including Securities), warrants, other equity securities or any
            other securities or property of the Company or any other Person, at
            the option of the Company or the Holder or upon the occurrence of
            any condition or event, the terms and conditions for such conversion
            or exchange;

                  (19) if the Securities of the series are to be entitled to the
            benefit of Section 4.03(b) (and accordingly constitute Rule 144A
            Securities), that fact; and

                                     - 12 -

<PAGE>

                  (20) any other terms of the series (which terms shall not be
            prohibited by the provisions of this Indenture).

      All Securities of any one series shall be substantially identical except
as to denomination and except as may otherwise be provided in or pursuant to the
Board Resolution referred to above and (subject to Section 2.03) set forth, or
determined in the manner provided, in the Officers' Certificate or Company Order
referred to above or in any such indenture supplemental hereto.

      If any of the terms of the series are established by action taken pursuant
to a Board Resolution, a copy of an appropriate record of such action, together
with such Board Resolution, shall be set forth in an Officers' Certificate or
certified by the Secretary or an Assistant Secretary of the Company and
delivered to the Trustee at or prior to the delivery of the Officers'
Certificate or Company Order setting forth the terms of the series.

      SECTION 2.02 Denominations.

      The Securities of each series shall be issuable in such denominations as
shall be specified as contemplated by Section 2.01. In the absence of any such
provisions with respect to the Securities of any series, the Securities of such
series denominated in Dollars shall be issuable in denominations of $1,000 and
any integral multiples thereof.

      SECTION 2.03 Forms Generally.

      The Securities of each series shall be in fully registered form and in
substantially such form or forms (including temporary or permanent global form)
established by or pursuant to a Board Resolution or in one or more indentures
supplemental hereto. The Securities may have notations, legends or endorsements
required by law, securities exchange rule, the Company's certificate of
incorporation, bylaws or other similar governing documents, agreements to which
the Company is subject, if any, or usage (provided that any such notation,
legend or endorsement is in a form acceptable to the Company). A copy of the
Board Resolution establishing the form or forms of Securities of any series
shall be delivered to the Trustee at or prior to the delivery of the Company
Order contemplated by Section 2.04 for the authentication and delivery of such
Securities.

      The definitive Securities of each series shall be printed, lithographed or
engraved on steel engraved borders or may be produced in any other manner, all
as determined by the Officers executing such Securities, as evidenced by their
execution thereof.

      The Trustee's certificate of authentication shall be in substantially the
following form:

            "This is one of the Securities of the series designated therein
      referred to in the within-mentioned Indenture.

                                            ___________________ , as Trustee

                                            By:
                                                 _______________________________

                                                 Authorized Signatory".

      SECTION 2.04 Execution, Authentication, Delivery and Dating.

      Two Officers of the Company shall sign the Securities on behalf of the
Company by manual or facsimile signature. If an Officer of the Company whose
signature is on a Security no longer holds that office at the time the Security
is authenticated, the Security shall be valid nevertheless.

      A Security shall not be entitled to any benefit under this Indenture or be
valid or obligatory for any purpose until authenticated by the manual signature
of an authorized signatory of the Trustee, which signature shall be conclusive
evidence that the Security has been authenticated under this Indenture.
Notwithstanding the foregoing, if any Security has been authenticated and
delivered hereunder but never issued and sold by the Company, and the

                                     - 13 -

<PAGE>

Company delivers such Security to the Trustee for cancellation as provided in
Section 2.13, together with a written statement (which need not comply with
Section 10.05 and need not be accompanied by an Opinion of Counsel) stating that
such Security has never been issued and sold by the Company, for all purposes of
this Indenture such Security shall be deemed never to have been authenticated
and delivered hereunder and shall never be entitled to the benefits of this
Indenture.

      At any time and from time to time after the execution and delivery of this
Indenture, the Company may deliver Securities of any series executed by the
Company to the Trustee for authentication, and the Trustee shall authenticate
and deliver such Securities for original issue upon a Company Order for the
authentication and delivery of such Securities or pursuant to such procedures
acceptable to the Trustee as may be specified from time to time by Company
Order. Such order shall specify the amount of the Securities to be
authenticated, the date on which the original issue of Securities is to be
authenticated, the name or names of the initial Holder or Holders and any other
terms of the Securities of such series not otherwise determined. If provided for
in such procedures, such Company Order may authorize (1) authentication and
delivery of Securities of such series for original issue from time to time, with
certain terms (including, without limitation, the Maturity dates or dates,
original issue date or dates and interest rate or rates) that differ from
Security to Security and (2) may authorize authentication and delivery pursuant
to oral or electronic instructions from the Company or its duly authorized
agent, which instructions shall be promptly confirmed in writing.

      If the form or terms of the Securities of the series have been established
in or pursuant to one or more Board Resolutions as permitted by Section 2.01, in
authenticating such Securities, and accepting the additional responsibilities
under this Indenture in relation to such Securities, the Trustee shall be
entitled to receive (in addition to the Company Order referred to above and the
other documents required by Section 10.04), and (subject to Section 7.01) shall
be fully protected in relying upon:

                        (a) an Officers' Certificate setting forth the Board
                  Resolution and, if applicable, an appropriate record of any
                  action taken pursuant thereto, as contemplated by the last
                  paragraph of Section 2.01; and

                        (b) an Opinion of Counsel to the effect that:

                            (i) the form of such Securities has been
                        established in conformity with the provisions of this
                        Indenture;

                            (ii) the terms of such Securities have been
                        established in conformity with the provisions of this
                        Indenture; and

                            (iii) that such Securities, when authenticated and
                        delivered by the Trustee and issued by the Company in
                        the manner and subject to any conditions specified in
                        such Opinion of Counsel, will constitute valid and
                        binding obligations of the Company, enforceable against
                        the Company in accordance with their terms, except as
                        the enforceability thereof may be limited by applicable
                        bankruptcy, insolvency, reorganization, moratorium,
                        fraudulent conveyance or other similar laws in effect
                        from time to time affecting the rights of creditors
                        generally, and the application of general principles of
                        equity (regardless of whether such enforceability is
                        considered in a proceeding in equity or at law).

      If all the Securities of any series are not to be issued at one time, it
shall not be necessary to deliver an Officers' Certificate and Opinion of
Counsel at the time of issuance of each such Security, but such Officers'
Certificate and Opinion of Counsel shall be delivered at or before the time of
issuance of the first Security of the series to be issued.

      The Trustee shall not be required to authenticate such Securities if the
issuance of such Securities pursuant to this Indenture would affect the
Trustee's own rights, duties or immunities under the Securities and this
Indenture or otherwise in a manner not reasonably acceptable to the Trustee.

      The Trustee may appoint an authenticating agent acceptable to the Company
to authenticate Securities. Unless limited by the terms of such appointment, an
authenticating agent may authenticate Securities whenever the Trustee

                                     - 14 -

<PAGE>

may do so. Each reference in this Indenture to authentication by the Trustee
includes authentication by such agent. An authenticating agent has the same
rights as an Agent to deal with the Company or an Affiliate of the Company.

      Each Security shall be dated the date of its authentication.

      SECTION 2.05 Registrar and Paying Agent.

      The Company shall maintain an office or agency for each series of
Securities where Securities of such series may be presented for registration of
transfer or exchange ("Registrar") and an office or agency where Securities of
such series may be presented for payment ("Paying Agent"). The Registrar shall
keep a register of the Securities of such series and of their transfer and
exchange. The Company may appoint one or more co-registrars and one or more
additional paying agents. The term "Registrar" includes any co-registrar and the
term "Paying Agent" includes any additional paying agent.

      The Company shall enter into an appropriate agency agreement with any
Registrar or Paying Agent not a party to this Indenture. The agreement shall
implement the provisions of this Indenture that relate to such Agent. The
Company shall notify the Trustee of the name and address of any Agent not a
party to this Indenture. The Company may change any Paying Agent or Registrar
without notice to any Holder. If the Company fails to appoint or maintain
another entity as Registrar or Paying Agent, the Trustee shall act as such. The
Company or any Subsidiary may act as Paying Agent or Registrar.

      The Company initially appoints the Trustee as Registrar and Paying Agent.

      SECTION 2.06 Paying Agent to Hold Money in Trust.

      The Company shall require each Paying Agent other than the Trustee to
agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal of, premium, if any, or interest on or any Additional Amounts with
respect to Securities and will notify the Trustee of any default by the Company
in making any such payment. While any such default continues, the Trustee may
require a Paying Agent to pay all money held by it to the Trustee and to account
for any funds disbursed. The Company at any time may require a Paying Agent to
pay all money held by it to the Trustee and to account for any funds disbursed.
Upon payment over to the Trustee and upon accounting for any funds disbursed,
the Paying Agent (if other than the Company or a Subsidiary) shall have no
further liability for the money. If the Company or a Subsidiary acts as Paying
Agent, it shall segregate and hold in a separate trust fund for the benefit of
the Holders all money held by it as Paying Agent. Each Paying Agent shall
otherwise comply with TIA Section 317(b).

      SECTION 2.07 Holder Lists.

      The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
Holders and shall otherwise comply with TIA Section 312(a). If the Trustee is
not the Registrar with respect to a series of Securities, the Company shall
furnish to the Trustee at least five Business Days before each Interest Payment
Date with respect to such series of Securities, and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Holders of such
series, and the Company shall otherwise comply with TIA Section 312(a).

      SECTION 2.08 Transfer and Exchange.

      Except as set forth in Section 2.17 or as may be provided pursuant to
Section 2.01:

      When Securities of any series are presented to the Registrar with the
request to register the transfer of such Securities or to exchange such
Securities for an equal principal amount of Securities of the same series of
like tenor and of other authorized denominations, the Registrar shall register
the transfer or make the exchange as requested if its requirements and the
requirements of this Indenture for such transactions are met; provided, however,
that the Securities presented or surrendered for registration of transfer or
exchange shall be duly endorsed or accompanied by a written instruction of
transfer in form reasonably satisfactory to the Registrar duly executed by the
Holder thereof or by his attorney, duly authorized in writing, on which
instruction the Registrar can rely.

                                     - 15 -

<PAGE>

      To permit registrations of transfers and exchanges, the Company shall
execute and the Trustee shall authenticate Securities at the Registrar's written
request and submission of the Securities or Global Securities. No service charge
shall be made to a Holder for any registration of transfer or exchange (except
as otherwise expressly permitted herein), but the Company may require payment of
a sum sufficient to cover any transfer tax or similar governmental charge
payable in connection therewith (other than such transfer tax or similar
governmental charge payable upon exchanges pursuant to Section 2.12, 3.07 or
9.05). The Trustee shall authenticate Securities in accordance with the
provisions of Section 2.04. Notwithstanding any other provisions of this
Indenture to the contrary, the Company shall not be required to register the
transfer or exchange of (a) any Security selected for redemption in whole or in
part pursuant to Article III, except the unredeemed portion of any Security
being redeemed in part, or (b) any Security during the period beginning 15
Business Days prior to the mailing of notice of any offer to repurchase
Securities of the series required pursuant to the terms thereof or of redemption
of Securities of a series to be redeemed and ending at the close of business on
the day of mailing.

      SECTION 2.09 Replacement Securities.

      If any mutilated Security is surrendered to the Trustee, or if the Holder
of a Security claims that the Security has been destroyed, lost or stolen and
the Company and the Trustee receive evidence to their satisfaction of the
destruction, loss or theft of such Security, the Company shall issue and the
Trustee shall authenticate a replacement Security of the same series if the
Trustee's requirements are met. If any such mutilated, destroyed, lost or stolen
Security has become or is about to become due and payable, the Company in its
discretion may, instead of issuing a new Security, pay such Security. If
required by the Trustee or the Company, such Holder must furnish an indemnity
bond that is sufficient in the judgment of the Trustee and the Company to
protect the Company, the Trustee, any Agent or any authenticating agent from any
loss that any of them may suffer if a Security is replaced. The Company and the
Trustee may charge a Holder for their expenses in replacing a Security.

      Every replacement Security is an additional obligation of the Company.

      SECTION 2.10 Outstanding Securities.

      The Securities outstanding at any time are all the Securities
authenticated by the Trustee except for those canceled by it, those delivered to
it for cancellation, those reductions in the interest in a Global Security
effected by the Trustee hereunder and those described in this Section 2.10 as
not outstanding.

      If a Security is replaced pursuant to Section 2.09, it ceases to be
outstanding unless the Trustee receives proof satisfactory to it that the
replaced Security is held by a bona fide purchaser.

      If the principal amount of any Security is considered paid under Section
4.01, it ceases to be outstanding and interest on it ceases to accrue.

      A Security does not cease to be outstanding because the Company or an
Affiliate of the Company holds the Security.

      SECTION 2.11 Original Issue Discount, Foreign-Currency Denominated and
Treasury Securities.

      In determining whether the Holders of the required principal amount of
Securities have concurred in any direction, amendment, supplement, waiver or
consent, (a) the principal amount of an Original Issue Discount Security shall
be the principal amount thereof that would be due and payable as of the date of
such determination upon acceleration of the Maturity thereof pursuant to Section
6.02, (b) the principal amount of a Security denominated in a foreign currency
shall be the Dollar equivalent, as determined by the Company by reference to the
noon buying rate in The City of New York for cable transfers for such currency,
as such rate is certified for customs purposes by the Federal Reserve Bank of
New York (the "Exchange Rate") on the date of original issuance of such
Security, of the principal amount (or, in the case of an Original Issue Discount
Security, the Dollar equivalent, as determined by the Company by reference to
the Exchange Rate on the date of original issuance of such Security, of the
amount determined as provided in (a) above), of such Security and (c) Securities
owned by the Company or any other obligor upon the Securities or any Affiliate
of the Company or of such other obligor shall be disregarded,

                                     - 16 -

<PAGE>

except that, for the purpose of determining whether the Trustee shall be
protected in relying upon any such direction, amendment, supplement, waiver or
consent, only Securities that a Responsible Officer of the Trustee actually
knows are so owned shall be so disregarded.

      SECTION 2.12 Temporary Securities.

      Until definitive Securities of any series are ready for delivery, the
Company may prepare and the Trustee shall authenticate temporary Securities.
Temporary Securities shall be substantially in the form of definitive
Securities, but may have variations that the Company considers appropriate for
temporary Securities. Without unreasonable delay, the Company shall prepare and
the Trustee shall authenticate definitive Securities in exchange for temporary
Securities. Until so exchanged, the temporary Securities shall in all respects
be entitled to the same benefits under this Indenture as definitive Securities.

      SECTION 2.13 Cancellation.

      The Company at any time may deliver Securities to the Trustee for
cancellation. The Registrar and the Paying Agent shall forward to the Trustee
any Securities surrendered to them for registration of transfer, exchange,
payment or redemption or for credit against any sinking fund payment. The
Trustee shall cancel all Securities surrendered for registration of transfer,
exchange, payment, redemption, replacement or cancellation or for credit against
any sinking fund. Unless the Company shall direct in writing that canceled
Securities be returned to it, after written notice to the Company all canceled
Securities held by the Trustee shall be disposed of in accordance with the usual
disposal procedures of the Trustee, and the Trustee shall maintain a record of
their disposal. The Company may not issue new Securities to replace Securities
that have been paid or that have been delivered to the Trustee for cancellation
or for credit against any sinking fund payment.

      SECTION 2.14 Payments; Defaulted Interest.

      Unless otherwise provided as contemplated by Section 2.01, interest
(except defaulted interest) on any Security that is payable, and is punctually
paid or duly provided for, on any Interest Payment Date shall be paid to the
Persons who are registered Holders of that Security at the close of business on
the record date next preceding such Interest Payment Date, even if such
Securities are canceled after such record date and on or before such Interest
Payment Date. The Holder must surrender a Security to a Paying Agent to collect
principal payments. Unless otherwise provided with respect to the Securities of
any series, the Company will pay the principal of, premium (if any) and interest
on and any Additional Amounts with respect to the Securities in Dollars. Such
amounts shall be payable at the offices of the Trustee or any Paying Agent,
provided that at the option of the Company, the Company may pay such amounts (1)
by wire transfer with respect to Global Securities or (2) by check payable in
such money mailed to a Holder's registered address with respect to any
Securities.

      If the Company defaults in a payment of interest on the Securities of any
series, the Company shall pay the defaulted interest in any lawful manner plus,
to the extent lawful, interest on the defaulted interest, in each case at the
rate provided in the Securities of such series and in Section 4.01. The Company
may pay the defaulted interest to the Persons who are Holders on a subsequent
special record date. At least 15 days before any special record date selected by
the Company, the Company (or the Trustee, in the name of and at the expense of
the Company upon 20 days' prior written notice from the Company setting forth
such special record date and the interest amount to be paid) shall mail to
Holders a notice that states the special record date, the related payment date
and the amount of such interest to be paid.

      SECTION 2.15 Persons Deemed Owners.

      The Company, the Trustee, any Agent and any authenticating agent may treat
the Person in whose name any Security is registered as the owner of such
Security for the purpose of receiving payments of principal of, premium (if any)
or interest on or any Additional Amounts with respect to such Security and for
all other purposes. None of the Company, the Trustee, any Agent or any
authenticating agent shall be affected by any notice to the contrary.

      SECTION 2.16 Computation of Interest.

                                     - 17 -

<PAGE>

      Except as otherwise specified as contemplated by Section 2.01 for
Securities of any series, interest on the Securities of each series shall be
computed on the basis of a year comprising twelve 30-day months.

      SECTION 2.17 Global Securities; Book-Entry Provisions.

      If Securities of a series are issuable in global form as a Global
Security, as contemplated by Section 2.01, then, notwithstanding clause (10) of
Section 2.01 and the provisions of Section 2.02, any such Global Security shall
represent such of the outstanding Securities of such series as shall be
specified therein and may provide that it shall represent the aggregate amount
of outstanding Securities from time to time endorsed thereon and that the
aggregate amount of outstanding Securities represented thereby may from time to
time be reduced or increased, as appropriate, to reflect exchanges, transfers or
redemptions. Any endorsement of a Global Security to reflect the amount, or any
increase or decrease in the amount, of outstanding Securities represented
thereby shall be made by the Trustee (i) in such manner and upon instructions
given by such Person or Persons as shall be specified in such Security or in a
Company Order to be delivered to the Trustee pursuant to Section 2.04 or (ii)
otherwise in accordance with written instructions or such other written form of
instructions as is customary for the Depositary for such Security, from such
Depositary or its nominee on behalf of any Person having a beneficial interest
in such Global Security. Subject to the provisions of Section 2.04 and, if
applicable, Section 2.12, the Trustee shall deliver and redeliver any Security
in permanent global form in the manner and upon instructions given by the Person
or Persons specified in such Security or in the applicable Company Order. With
respect to the Securities of any series that are represented by a Global
Security, the Company authorizes the execution and delivery by the Trustee of a
letter of representations or other similar agreement or instrument in the form
customarily provided for by the Depositary appointed with respect to such Global
Security. Any Global Security may be deposited with the Depositary or its
nominee, or may remain in the custody of the Trustee or the Security Custodian
therefor pursuant to a FAST Balance Certificate Agreement or similar agreement
between the Trustee and the Depositary. If a Company Order has been, or
simultaneously is, delivered, any instructions by the Company with respect to
endorsement or delivery or redelivery of a Security in global form shall be in
writing but need not comply with Section 10.05 and need not be accompanied by an
Opinion of Counsel.

      Members of, or participants in, the Depositary ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depositary, or the Trustee or the Security Custodian as its
custodian, or under such Global Security, and the Depositary may be treated by
the Company, the Trustee or the Security Custodian and any agent of the Company,
the Trustee or the Security Custodian as the absolute owner of such Global
Security for all purposes whatsoever. Notwithstanding the foregoing, (i) the
registered holder of a Global Security of a series may grant proxies and
otherwise authorize any Person, including Agent Members and Persons that may
hold interests through Agent Members, to take any action that a Holder of
Securities of such series is entitled to take under this Indenture or the
Securities of such series and (ii) nothing herein shall prevent the Company, the
Trustee or the Security Custodian, or any agent of the Company, the Trustee or
the Security Custodian, from giving effect to any written certification, proxy
or other authorization furnished by the Depositary or shall impair, as between
the Depositary and its Agent Members, the operation of customary practices
governing the exercise of the rights of a beneficial owner of any Security.

      Notwithstanding Section 2.08, and except as otherwise provided pursuant to
Section 2.01: Transfers of a Global Security shall be limited to transfers of
such Global Security in whole, but not in part, to the Depositary, its
successors or their respective nominees. Interests of beneficial owners in a
Global Security may be transferred in accordance with the rules and procedures
of the Depositary. Securities shall be transferred to all beneficial owners in
exchange for their beneficial interests in a Global Security if, and only if,
either (1) the Depositary notifies the Company that it is unwilling or unable to
continue as Depositary for the Global Security and a successor Depositary is not
appointed by the Company within 90 days of such notice, (2) an Event of Default
has occurred with respect to such series and is continuing and the Registrar has
received a request from the Depositary to issue Securities in lieu of all or a
portion of the Global Security (in which case the Company shall deliver
Securities within 30 days of such request) or (3) the Company determines not to
have the Securities represented by a Global Security.

      In connection with any transfer of a portion of the beneficial interests
in a Global Security to beneficial owners pursuant to this Section 2.17, the
Registrar shall reflect on its books and records the date and a decrease in the
principal amount of the Global Security in an amount equal to the principal
amount of the beneficial interests in the Global Security to be transferred, and
the Company shall execute, and the Trustee upon receipt of a Company Order

                                     - 18 -

<PAGE>

for the authentication and delivery of Securities shall authenticate and
deliver, one or more Securities of the same series of like tenor and amount.

      In connection with the transfer of all the beneficial interests in a
Global Security to beneficial owners pursuant to this Section 2.17, the Global
Security shall be deemed to be surrendered to the Trustee for cancellation, and
the Company shall execute, and the Trustee shall authenticate and deliver, to
each beneficial owner identified by the Depositary in exchange for its
beneficial interests in the Global Security, an equal aggregate principal amount
of Securities of authorized denominations.

      Neither the Company nor the Trustee will have any responsibility or
liability for any aspect of the records relating to, or payments made on account
of, Securities by the Depositary, or for maintaining, supervising or reviewing
any records of the Depositary relating to such Securities. Neither the Company
nor the Trustee shall be liable for any delay by the related Global Security
Holder or the Depositary in identifying the beneficial owners, and each such
Person may conclusively rely on, and shall be protected in relying on,
instructions from such Global Security Holder or the Depositary for all purposes
(including with respect to the registration and delivery, and the respective
principal amounts, of the Securities to be issued).

      The provisions of the last sentence of the third paragraph of Section 2.04
shall apply to any Global Security if such Global Security was never issued and
sold by the Company and the Company delivers to the Trustee the Global Security
together with written instructions (which need not comply with Section 10.05 and
need not be accompanied by an Opinion of Counsel) with regard to the
cancellation or reduction in the principal amount of Securities represented
thereby, together with the written statement contemplated by the last sentence
of the third paragraph of Section 2.04.

      Notwithstanding the provisions of Sections 2.03 and 2.14, unless otherwise
specified as contemplated by Section 2.01, payment of principal of, premium (if
any) and interest on and any Additional Amounts with respect to any Global
Security shall be made to the Person or Persons specified therein.

                                   ARTICLE III
                                   REDEMPTION

      SECTION 3.01 Applicability of Article.

      Securities of any series that are redeemable before their Stated Maturity
shall be redeemable in accordance with their terms and (except as otherwise
specified as contemplated by Section 2.01 for Securities of any series) in
accordance with this Article III.

      SECTION 3.02 Notice to the Trustee.

      If the Company elects to redeem Securities of any series pursuant to this
Indenture, it shall notify the Trustee of the Redemption Date and the principal
amount of Securities of such series to be redeemed. The Company shall so notify
the Trustee at least 45 days before the Redemption Date (unless a shorter notice
shall be satisfactory to the Trustee) by delivering to the Trustee an Officers'
Certificate stating that such redemption will comply with the provisions of this
Indenture and of the Securities of such series. Any such notice may be canceled
at any time prior to the mailing of such notice of such redemption to any Holder
and shall thereupon be void and of no effect.

      SECTION 3.03 Selection of Securities To Be Redeemed.

      If less than all the Securities of any series are to be redeemed (unless
all of the Securities of such series of a specified tenor are to be redeemed),
the particular Securities to be redeemed shall be selected not more than 60 days
prior to the Redemption Date by the Trustee from the outstanding Securities of
such series (and tenor) not previously called for redemption, either pro rata,
by lot or by such other method as the Trustee shall deem fair and appropriate
and that may provide for the selection for redemption of portions (equal to the
minimum authorized denomination for Securities of that series or any integral
multiple thereof) of the principal amount of Securities of such series of a
denomination larger than the minimum authorized denomination for Securities of
that series or of the principal amount of Global Securities of such series.

                                     - 19 -

<PAGE>

      The Trustee shall promptly notify the Company and the Registrar in writing
of the Securities selected for redemption and, in the case of any Securities
selected for partial redemption, the principal amount thereof to be redeemed.

      For purposes of this Indenture, unless the context otherwise requires, all
provisions relating to redemption of Securities shall relate, in the case of any
of the Securities redeemed or to be redeemed only in part, to the portion of the
principal amount thereof which has been or is to be redeemed.

      SECTION 3.04 Notice of Redemption.

      Notice of redemption shall be given by first-class mail, postage prepaid,
mailed not less than 30 nor more than 60 days prior to the Redemption Date, to
each Holder of Securities to be redeemed, at the address of such Holder
appearing in the register of Securities maintained by the Registrar.

      All notices of redemption shall identify the Securities to be redeemed and
shall state:

                  (1) the Redemption Date;

                  (2) the Redemption Price;

                  (3) that, unless the Company defaults in making the redemption
            payment, interest on Securities called for redemption ceases to
            accrue on and after the Redemption Date, and the only remaining
            right of the Holders of such Securities is to receive payment of the
            Redemption Price upon surrender to the Paying Agent of the
            Securities redeemed;

                  (4) if any Security is to be redeemed in part, the portion of
            the principal amount thereof to be redeemed and that on and after
            the Redemption Date, upon surrender for cancellation of such
            Security to the Paying Agent, a new Security or Securities in the
            aggregate principal amount equal to the unredeemed portion thereof
            will be issued without charge to the Holder;

                  (5) that Securities called for redemption must be surrendered
            to the Paying Agent to collect the Redemption Price and the name and
            address of the Paying Agent;

                  (6) that the redemption is for a sinking or analogous fund, if
            such is the case; and

                  (7) the CUSIP number, if any, relating to such Securities.

      Notice of redemption of Securities to be redeemed at the election of the
Company shall be given by the Company or, at the Company's written request, by
the Trustee in the name and at the expense of the Company.

      SECTION 3.05 Effect of Notice of Redemption.

      Once notice of redemption is mailed, Securities called for redemption
become due and payable on the Redemption Date and at the Redemption Price. Upon
surrender to the Paying Agent, such Securities called for redemption shall be
paid at the Redemption Price, but interest installments whose maturity is on or
prior to such Redemption Date will be payable on the relevant Interest Payment
Dates to the Holders of record at the close of business on the relevant record
dates specified pursuant to Section 2.01.

      SECTION 3.06 Deposit of Redemption Price.

      On or prior to 11:00 a.m., New York City time, on any Redemption Date, the
Company shall deposit with the Trustee or the Paying Agent (or, if the Company
is acting as the Paying Agent, segregate and hold in trust as provided in
Section 2.06) an amount of money in same day funds sufficient to pay the
Redemption Price of, and (except if the Redemption Date shall be an Interest
Payment Date) accrued interest on and any Additional Amounts with respect to,
the Securities or

                                     - 20 -

<PAGE>

portions thereof which are to be redeemed on that date, other than Securities or
portions thereof called for redemption on that date which have been delivered by
the Company to the Trustee for cancellation.

      If the Company complies with the preceding paragraph, then, unless the
Company defaults in the payment of such Redemption Price, interest on the
Securities to be redeemed will cease to accrue on and after the applicable
Redemption Date, whether or not such Securities are presented for payment, and
the Holders of such Securities shall have no further rights with respect to such
Securities except for the right to receive the Redemption Price upon surrender
of such Securities. If any Security called for redemption shall not be so paid
upon surrender thereof for redemption, the principal, premium, if any, any
Additional Amounts, and, to the extent lawful, accrued interest thereon shall,
until paid, bear interest from the Redemption Date at the rate specified
pursuant to Section 2.01 or provided in the Securities or, in the case of
Original Issue Discount Securities, such Securities' yield to maturity.

      SECTION 3.07 Securities Redeemed or Purchased in Part.

      Upon surrender to the Paying Agent of a Security to be redeemed in part,
the Company shall execute and the Trustee shall authenticate and deliver to the
Holder of such Security without service charge a new Security or Securities, of
the same series and of any authorized denomination as requested by such Holder
in aggregate principal amount equal to, and in exchange for, the unredeemed
portion of the principal of the Security so surrendered that is not redeemed.

      SECTION 3.08 Purchase of Securities.

      Unless otherwise specified as contemplated by Section 2.01, the Company
and any Affiliate of the Company may, subject to applicable law, at any time
purchase or otherwise acquire Securities in the open market or by private
agreement. Any such acquisition shall not operate as or be deemed for any
purpose to be a redemption of the indebtedness represented by such Securities.
Any Securities purchased or acquired by the Company may be delivered to the
Trustee and, upon such delivery, the indebtedness represented thereby shall be
deemed to be satisfied. Section 2.13 shall apply to all Securities so delivered.

      SECTION 3.09 Mandatory and Optional Sinking Funds.

      The minimum amount of any sinking fund payment provided for by the terms
of Securities of any series is herein referred to as a "mandatory sinking fund
payment," and any payment in excess of such minimum amount provided for by the
terms of Securities of any series is herein referred to as an "optional sinking
fund payment." Unless otherwise provided by the terms of Securities of any
series, the cash amount of any sinking fund payment may be subject to reduction
as provided in Section 3.10. Each sinking fund payment shall be applied to the
redemption of Securities of any series as provided for by the terms of
Securities of such series and by this Article III.

      SECTION 3.10 Satisfaction of Sinking Fund Payments with Securities.

      The Company may deliver outstanding Securities of a series (other than any
previously called for redemption) and may apply as a credit Securities of a
series that have been redeemed either at the election of the Company pursuant to
the terms of such Securities or through the application of permitted optional
sinking fund payments pursuant to the terms of such Securities, in each case in
satisfaction of all or any part of any sinking fund payment with respect to the
Securities of such series required to be made pursuant to the terms of such
series of Securities; provided that such Securities have not been previously so
credited. Such Securities shall be received and credited for such purpose by the
Trustee at the Redemption Price specified in such Securities for redemption
through operation of the sinking fund and the amount of such sinking fund
payment shall be reduced accordingly.

      SECTION 3.11 Redemption of Securities for Sinking Fund.

      Not less than 45 days prior (unless a shorter period shall be satisfactory
to the Trustee) to each sinking fund payment date for any series of Securities,
the Company will deliver to the Trustee an Officers' Certificate of the Company
specifying the amount of the next ensuing sinking fund payment for that series
pursuant to the terms of that series, the portion thereof, if any, which is to
be satisfied by payment of cash and the portion thereof, if any, which is to be
satisfied by delivery of or by crediting Securities of that series pursuant to
Section 3.10 and will also

                                     - 21 -

<PAGE>

deliver or cause to be delivered to the Trustee any Securities to be so
delivered. Failure of the Company to timely deliver or cause to be delivered
such Officers' Certificate and Securities specified in this paragraph, if any,
shall not constitute a default but shall constitute the election of the Company
(i) that the mandatory sinking fund payment for such series due on the next
succeeding sinking fund payment date shall be paid entirely in cash without the
option to deliver or credit Securities of such series in respect thereof and
(ii) that the Company will make no optional sinking fund payment with respect to
such series as provided in this Section.

      If the sinking fund payment or payments (mandatory or optional or both) to
be made in cash on the next succeeding sinking fund payment date plus any unused
balance of any preceding sinking fund payments made in cash shall exceed
$100,000 (or the Dollar equivalent thereof based on the applicable Exchange Rate
on the date of original issue of the applicable Securities) or a lesser sum if
the Company shall so request with respect to the Securities of any particular
series, such cash shall be applied on the next succeeding sinking fund payment
date to the redemption of Securities of such series at the sinking fund
redemption price together with accrued interest to the date fixed for
redemption. If such amount shall be $100,000 (or the Dollar equivalent thereof
as aforesaid) or less and the Company makes no such request then it shall be
carried over until a sum in excess of $100,000 (or the Dollar equivalent thereof
as aforesaid) is available. Not less than 30 days before each such sinking fund
payment date, the Trustee shall select the Securities to be redeemed upon such
sinking fund payment date in the manner specified in Section 3.03 and cause
notice of the redemption thereof to be given in the name of and at the expense
of the Company in the manner provided in Section 3.04. Such notice having been
duly given, the redemption of such Securities shall be made upon the terms and
in the manner stated in Sections 3.05, 3.06 and 3.07.

                                   ARTICLE IV
                                    COVENANTS

      SECTION 4.01 Payment of Securities.

      The Company shall pay the principal of, premium (if any) and interest on
and any Additional Amounts with respect to the Securities of each series on the
dates and in the manner provided in the Securities of such series, in this
Indenture, and in any supplemental indenture hereto. Principal, premium,
interest and any Additional Amounts shall be considered paid on the date due if
the Paying Agent (other than the Company or a Subsidiary) holds on that date
money deposited by the Company designated for and sufficient to pay all
principal, premium, interest and any Additional Amounts then due.

      The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium (if any),
at a rate equal to the then applicable interest rate on the Securities to the
extent lawful; and it shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue installments of interest and
any Additional Amount (without regard to any applicable grace period) at the
same rate to the extent lawful.

      SECTION 4.02 Maintenance of Office or Agency.

      The Company will maintain in each Place of Payment for any series of
Securities an office or agency (which may be an office of the Trustee, the
Registrar or the Paying Agent) where Securities of that series may be presented
for registration of transfer or exchange, where Securities of that series may be
presented for payment and where notices and demands to or upon the Company in
respect of the Securities of that series and this Indenture may be served.
Unless otherwise designated by the Company by written notice to the Trustee,
such office or agency shall be the office of the Trustee in The City of
_____________, which on the date hereof is located at __________. The Company
will give prompt written notice to the Trustee of the location, and any change
in the location, of such office or agency. If at any time the Company shall fail
to maintain any such required office or agency or shall fail to furnish the
Trustee with the address thereof, such presentations, surrenders, notices and
demands may be made or served at the Corporate Trust Office of the Trustee.

      The Company may also from time to time designate one or more other offices
or agencies where the Securities of one or more series may be presented or
surrendered for any or all such purposes and may from time to time rescind such
designations; provided, however, that no such designation or rescission shall in
any manner relieve the Company of its obligation to maintain an office or agency
in each Place of Payment for Securities of any series for

                                     - 22 -

<PAGE>

such purposes. The Company will give prompt written notice to the Trustee of any
such designation or rescission and of any change in the location of any such
other office or agency.

      SECTION 4.03 SEC Reports; Financial Statements.

      (a) If the Company is subject to the requirements of Section 13 or 15(d)
of the Exchange Act, the Company shall file with the Trustee, within 15 days
after it files the same with the SEC, copies of the annual reports and the
information, documents and other reports (or copies of such portions of any of
the foregoing as the SEC may by rules and regulations prescribe) that the
Company is required to file with the SEC pursuant to Section 13 or 15(d) of the
Exchange Act. If this Indenture is qualified under the TIA, but not otherwise,
the Company shall also comply with the provisions of TIA Section 314(a).
Delivery of such reports, information and documents to the Trustee shall be for
informational purposes only, and the Trustee's receipt thereof shall not
constitute constructive notice of any information contained therein or
determinable from information contained therein, including the Company's
compliance with any of its covenants hereunder (as to which the Trustee is
entitled to rely exclusively on Officers' Certificates or certificates delivered
pursuant to Section 4.04).

      (b) If the Company is not subject to the requirements of Section 13 or
15(d) of the Exchange Act, the Company shall furnish to all Holders of Rule 144A
Securities and prospective purchasers of Rule 144A Securities designated by the
Holders of Rule 144A Securities, promptly upon their request, the information
required to be delivered pursuant to Rule 144A(d)(4) promulgated under the
Securities Act of 1933, as amended.

      SECTION 4.04 Compliance Certificate.

      (a) The Company shall deliver to the Trustee, within 120 days after the
end of each fiscal year of the Company, a statement signed by an Officer of the
Company, which need not constitute an Officers' Certificate, complying with TIA
Section 314(a)(4) and stating that in the course of performance by the signing
Officer of his duties as such Officer of the Company he would normally obtain
knowledge of the keeping, observing, performing and fulfilling by the Company of
its obligations under this Indenture, and further stating that to the best of
his knowledge the Company has kept, observed, performed and fulfilled each and
every covenant contained in this Indenture and is not in default in the
performance or observance of any of the terms, provisions and conditions hereof
(or, if a Default or Event of Default shall have occurred, describing all such
Defaults or Events of Default of which such Officer may have knowledge and what
action the Company is taking or proposes to take with respect thereto).

      (b) The Company shall, so long as Securities of any series are
outstanding, deliver to the Trustee, forthwith upon any Officer of the Company
becoming aware of any Default or Event of Default under this Indenture, an
Officers' Certificate specifying such Default or Event of Default and what
action the Company is taking or proposes to take with respect thereto.

      SECTION 4.05 Corporate Existence.

      Subject to Article V, the Company shall do or cause to be done all things
necessary to preserve and keep in full force and effect its existence.

      SECTION 4.06 Waiver of Stay, Extension or Usury Laws.

      The Company covenants (to the extent that it may lawfully do so) that it
will not at any time insist upon, or plead, or in any manner whatsoever claim or
take the benefit or advantage of, any stay or extension law or any usury law or
other law that would prohibit or forgive it from paying all or any portion of
the principal of or interest on the Securities as contemplated herein, wherever
enacted, now or at any time hereafter in force, or which may affect the
covenants or the performance of this Indenture; and (to the extent that it may
lawfully do so) the Company hereby expressly waives all benefit or advantage of
any such law, and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.

      SECTION 4.07 Additional Amounts.

                                     - 23 -

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      If the Securities of a series expressly provide for the payment of
Additional Amounts, the Company will pay to the Holder of any Security of such
series Additional Amounts as expressly provided therein. Whenever in this
Indenture there is mentioned, in any context, the payment of the principal of or
any premium or interest on, or in respect of, any Security of any series or the
net proceeds received from the sale or exchange of any Security of any series,
such mention shall be deemed to include mention of the payment of Additional
Amounts provided for in this Section 4.07 to the extent that, in such context,
Additional Amounts are, were or would be payable in respect thereof pursuant to
the provisions of this Section 4.07 and express mention of the payment of
Additional Amounts (if applicable) in any provisions hereof shall not be
construed as excluding Additional Amounts in those provisions hereof where such
express mention is not made.

                                    ARTICLE V
                                   SUCCESSORS

      SECTION 5.01 Limitations on Mergers and Consolidations.

      The Company shall not, in any transaction or series of transactions,
consolidate with or merge into any Person, or sell, lease, convey, transfer or
otherwise dispose of all or substantially all of its assets to any Person,
unless:

                  (1) either (a) the Company shall be the continuing Person or
            (b) the Person (if other than the Company) formed by such
            consolidation or into which the Company is merged, or to which such
            sale, lease, conveyance, transfer or other disposition shall be made
            (collectively, the "Successor"), is organized and validly existing
            under the laws of the United States, any political subdivision
            thereof or any State thereof or the District of Columbia, and
            expressly assumes by supplemental indenture the due and punctual
            payment of the principal of, premium (if any) and interest on and
            any Additional Amounts with respect to all the Securities and the
            performance of the Company's covenants and obligations under this
            Indenture and the Securities;

                  (2) immediately after giving effect to such transaction or
            series of transactions, no Default or Event of Default shall have
            occurred and be continuing or would result therefrom; and

                  (3) the Company delivers to the Trustee an Officers'
            Certificate and an Opinion of Counsel, each stating that the
            transaction and such supplemental indenture comply with this
            Indenture.

      SECTION 5.02 Successor Person Substituted.

      Upon any consolidation or merger of the Company or any sale, lease,
conveyance, transfer or other disposition of all or substantially all of the
assets of the Company in accordance with Section 5.01, the Successor formed by
such consolidation or into or with which the Company is merged or to which such
sale, lease, conveyance, transfer or other disposition is made shall succeed to,
and be substituted for, and may exercise every right and power of the Company
under this Indenture and the Securities with the same effect as if such
Successor had been named as the Company herein and the predecessor Company, in
the case of a sale, conveyance, transfer or other disposition, shall be released
from all obligations under this Indenture and the Securities.

                                   ARTICLE VI
                              DEFAULTS AND REMEDIES

      SECTION 6.01 Events of Default.

      Unless either inapplicable to a particular series or specifically deleted
or modified in or pursuant to the supplemental indenture or Board Resolution
establishing such series of Securities or in the form of Security for such
series, an "Event of Default," wherever used herein with respect to Securities
of any series, occurs if:

                  (1) the Company defaults in the payment of interest on or any
            Additional Amounts with respect to any Security of that series when
            the same becomes due and payable and such default continues for a
            period of 30 days;

                                     - 24 -

<PAGE>

                  (2) the Company defaults in the payment of (A) the principal
            of any Security of that series at its Maturity or (B) premium (if
            any) on any Security of that series when the same becomes due and
            payable;

                  (3) the Company defaults in the deposit of any sinking fund
            payment, when and as due by the terms of a Security of that series,
            and such default continues for a period of 30 days;

                  (4) the Company fails to comply with any of its other
            covenants or agreements in, or provisions of, the Securities of such
            series or this Indenture (other than an agreement, covenant or
            provision that has expressly been included in this Indenture solely
            for the benefit of one or more series of Securities other than that
            series) which shall not have been remedied within the specified
            period after written notice, as specified in the last paragraph of
            this Section 6.01;

                  (5) the Company pursuant to or within the meaning of any
            Bankruptcy Law:

                              (A) commences a voluntary case,

                              (B) consents to the entry of an order for relief
                        against it in an involuntary case,

                              (C) consents to the appointment of a Bankruptcy
                        Custodian of it or for all or substantially all of its
                        property, or

                              (D) makes a general assignment for the benefit of
                        its creditors;

                  (6) a court of competent jurisdiction enters an order or
            decree under any Bankruptcy Law that remains unstayed and in effect
            for 90 days and that:

                              (A) is for relief against the Company as debtor in
                        an involuntary case,

                              (B) appoints a Bankruptcy Custodian of the Company
                        or a Bankruptcy Custodian for all or substantially all
                        of the property of the Company, or

                              (C) orders the liquidation of the Company; or

                  (7) any other Event of Default provided with respect to
            Securities of that series occurs.

      The term "Bankruptcy Custodian" means any receiver, trustee, assignee,
liquidator or similar official under any Bankruptcy Law.

      The Trustee shall not be deemed to know or have notice of any Default or
Event of Default unless a Responsible Officer of the Trustee has actual
knowledge thereof or unless written notice of any event which is in fact such a
Default or Event of Default is received by the Trustee at the Corporate Trust
Office of the Trustee, and such notice references the Securities and this
Indenture.

      When a Default is cured, it ceases.

      Notwithstanding the foregoing provisions of this Section 6.01, if the
principal of, premium (if any) or interest on or Additional Amounts with respect
to any Security is payable in a currency or currencies (including a composite
currency) other than Dollars and such currency or currencies are not available
to the Company for making payment thereof due to the imposition of exchange
controls or other circumstances beyond the control of the Company (a "Conversion
Event"), the Company will be entitled to satisfy its obligations to Holders of
the Securities by making such payment in Dollars in an amount equal to the
Dollar equivalent of the amount payable in such other currency, as determined by
the Company by reference to the Exchange Rate on the date of such payment, or,
if such rate is not then available, on the basis of the most recently available
Exchange Rate. Notwithstanding the foregoing provisions of this Section 6.01,
any payment made under such circumstances in Dollars where the required payment
is in a currency other than Dollars will not constitute an Event of Default
under this Indenture.

                                     - 25 -

<PAGE>

      Promptly after the occurrence of a Conversion Event, the Company shall
give written notice thereof to the Trustee; and the Trustee, promptly after
receipt of such notice, shall give notice thereof in the manner provided in
Section 10.02 to the Holders. Promptly after the making of any payment in
Dollars as a result of a Conversion Event, the Company shall give notice in the
manner provided in Section 10.02 to the Holders, setting forth the applicable
Exchange Rate and describing the calculation of such payments.

      A Default under clause (4) or (7) of this Section 6.01 is not an Event of
Default until the Trustee notifies the Company, or the Holders of at least 25%
in principal amount of the then outstanding Securities of the series affected by
such Default (or, in the case of a Default under clause (4) of this Section
6.01, if outstanding Securities of other series are affected by such Default,
then at least 25% in principal amount of the then outstanding Securities so
affected) notify the Company and the Trustee, of the Default, and the Company
fails to cure the Default within 90 days after receipt of the notice. The notice
must specify the Default, demand that it be remedied and state that the notice
is a "Notice of Default."

      SECTION 6.02 Acceleration.

      If an Event of Default with respect to any Securities of any series at the
time outstanding (other than an Event of Default specified in clause (5) or (6)
of Section 6.01) occurs and is continuing, the Trustee by notice to the Company,
or the Holders of at least 25% in principal amount of the then outstanding
Securities of the series affected by such Event of Default (or, in the case of
an Event of Default described in clause (4) of Section 6.01, if outstanding
Securities of other series are affected by such Event of Default, then at least
25% in principal amount of the then outstanding Securities so affected) by
notice to the Company and the Trustee, may declare the principal of (or, if any
such Securities are Original Issue Discount Securities, such portion of the
principal amount as may be specified in the terms of that series) and all
accrued and unpaid interest on all then outstanding Securities of such series or
of all series, as the case may be, to be due and payable. Upon any such
declaration, the amounts due and payable on the Securities shall be due and
payable immediately. If an Event of Default specified in clause (5) or (6) of
Section 6.01 hereof occurs, such amounts shall ipso facto become and be
immediately due and payable without any declaration, notice or other act on the
part of the Trustee or any Holder. The Holders of a majority in principal amount
of the then outstanding Securities of the series affected by such Event of
Default or all series, as the case may be, by written notice to the Trustee may
rescind an acceleration and its consequences (other than nonpayment of principal
of or premium or interest on or any Additional Amounts with respect to the
Securities) if the rescission would not conflict with any judgment or decree and
if all existing Events of Default with respect to Securities of that series (or
of all series, as the case may be) have been cured or waived, except nonpayment
of principal, premium, interest or any Additional Amounts that has become due
solely because of the acceleration.

      SECTION 6.03 Other Remedies.

      If an Event of Default occurs and is continuing, the Trustee may pursue
any available remedy to collect the payment of principal of, or premium, if any,
or interest on the Securities or to enforce the performance of any provision of
the Securities or this Indenture.

      The Trustee may maintain a proceeding even if it does not possess any of
the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder in exercising any right or remedy accruing
upon an Event of Default shall not impair the right or remedy or constitute a
waiver of or acquiescence in the Event of Default. All remedies are cumulative
to the extent permitted by law.

      SECTION 6.04 Waiver of Defaults.

      Subject to Sections 6.07 and 9.02, the Holders of a majority in principal
amount of the then outstanding Securities of any series or of all series (acting
as one class) by notice to the Trustee may waive an existing or past Default or
Event of Default with respect to such series or all series, as the case may be,
and its consequences (including waivers obtained in connection with a tender
offer or exchange offer for Securities of such series or all series or a
solicitation of consents in respect of Securities of such series or all series,
provided that in each case such offer or solicitation is made to all Holders of
then outstanding Securities of such series or all series (but the terms of such
offer or solicitation may vary from series to series)), except (1) a continuing
Default or Event of Default in the payment of the principal of, or premium, if
any, or interest on or any Additional Amounts with respect to any

                                     - 26 -

<PAGE>

Security or (2) a continued Default in respect of a provision that under Section
9.02 cannot be amended or supplemented without the consent of each Holder
affected. Upon any such waiver, such Default shall cease to exist, and any Event
of Default arising therefrom shall be deemed to have been cured for every
purpose of this Indenture; but no such waiver shall extend to any subsequent or
other Default or impair any right consequent thereon.

      SECTION 6.05 Control by Majority.

      With respect to Securities of any series, the Holders of a majority in
principal amount of the then outstanding Securities of such series may direct in
writing the time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on it
relating to or arising under an Event of Default described in clause (1), (2),
(3) or (7) of Section 6.01, and with respect to all Securities, the Holders of a
majority in principal amount of all the then outstanding Securities affected may
direct in writing the time, method and place of conducting any proceeding for
any remedy available to the Trustee or exercising any trust or power conferred
on it not relating to or arising under such an Event of Default. However, the
Trustee may refuse to follow any direction that conflicts with applicable law or
this Indenture, that the Trustee determines may be unduly prejudicial to the
rights of other Holders, or that may involve the Trustee in personal liability;
provided, however, that the Trustee may take any other action deemed proper by
the Trustee that is not inconsistent with such direction. Prior to taking any
action hereunder, the Trustee shall be entitled to indemnification satisfactory
to it in its sole discretion from Holders directing the Trustee against all
losses and expenses caused by taking or not taking such action.

      SECTION 6.06 Limitations on Suits.

      Subject to Section 6.07 hereof, a Holder of a Security of any series may
pursue a remedy with respect to this Indenture or the Securities of such series
only if:

                  (1) the Holder gives to the Trustee written notice of a
            continuing Event of Default with respect to such series;

                  (2) the Holders of at least 25% in principal amount of the
            then outstanding Securities of such series make a written request to
            the Trustee to pursue the remedy;

                  (3) such Holder or Holders offer to the Trustee indemnity
            satisfactory to the Trustee against any loss, liability or expense;

                  (4) the Trustee does not comply with the request within 60
            days after receipt of the request and the offer of indemnity; and

                  (5) during such 60-day period the Holders of a majority in
            principal amount of the Securities of that series do not give the
            Trustee a direction inconsistent with the request.

      A Holder may not use this Indenture to prejudice the rights of another
Holder or to obtain a preference or priority over another Holder.

      SECTION 6.07 Rights of Holders to Receive Payment.

      Notwithstanding any other provision of this Indenture, the right of any
Holder of a Security to receive payment of principal of and premium, if any, and
interest on and any Additional Amounts with respect to the Security, on or after
the respective due dates expressed in the Security, or to bring suit for the
enforcement of any such payment on or after such respective dates, is absolute
and unconditional and shall not be impaired or affected without the consent of
the Holder.

      SECTION 6.08 Collection Suit by Trustee.

      If an Event of Default specified in clause (1) or (2) of Section 6.01
hereof occurs and is continuing, the Trustee is authorized to recover judgment
in its own name and as trustee of an express trust against the Company for the

                                     - 27 -

<PAGE>

amount of principal, premium (if any), interest and any Additional Amounts
remaining unpaid on the Securities of the series affected by the Event of
Default, and interest on overdue principal and premium, if any, and, to the
extent lawful, interest on overdue interest, and such further amount as shall be
sufficient to cover the costs and expenses of collection, including the
reasonable compensation, expenses, disbursements and advances of the Trustee,
its agents and counsel.

      SECTION 6.09 Trustee May File Proofs of Claim.

      The Trustee is authorized to file such proofs of claim and other papers or
documents and to take such actions, including participating as a member, voting
or otherwise, of any committee of creditors, as may be necessary or advisable to
have the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel) and the Holders allowed in any judicial proceedings relative to the
Company or its creditors or properties and shall be entitled and empowered to
collect, receive and distribute any money or other property payable or
deliverable on any such claims and any Bankruptcy Custodian in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the
Trustee, and in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due to it for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, and any other amounts due the Trustee under
Section 7.07. To the extent that the payment of any such compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, and any other
amounts due the Trustee under Section 7.07 out of the estate in any such
proceeding, shall be denied for any reason, payment of the same shall be secured
by a lien on, and shall be paid out of, any and all distributions, dividends,
money, securities and other properties which the Holders of the Securities may
be entitled to receive in such proceeding whether in liquidation or under any
plan of reorganization or arrangement or otherwise. Nothing herein contained
shall be deemed to authorize the Trustee to authorize or consent to or accept or
adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Securities or the rights of any Holder
thereof, or to authorize the Trustee to vote in respect of the claim of any
Holder in any such proceeding.

      SECTION 6.10 Priorities.

      If the Trustee collects any money pursuant to this Article VI, it shall
pay out the money in the following order:

                  First: to the Trustee for amounts due under Section 7.07;

                  Second: to Holders for amounts due and unpaid on the
            Securities in respect of which or for the benefit of which such
            money has been collected, for principal, premium (if any), interest
            and any Additional Amounts ratably, without preference or priority
            of any kind, according to the amounts due and payable on such
            Securities for principal, premium (if any), interest and any
            Additional Amounts, respectively; and

                  Third: to the Company.

      The Trustee, upon prior written notice to the Company, may fix record
dates and payment dates for any payment to Holders pursuant to this Article VI.

      To the fullest extent allowed under applicable law, if for the purpose of
obtaining a judgment against the Company in any court it is necessary to convert
the sum due in respect of the principal of, premium (if any) or interest on or
Additional Amounts with respect to the Securities of any series (the "Required
Currency") into a currency in which a judgment will be rendered (the "Judgment
Currency"), the rate of exchange used shall be the rate at which in accordance
with normal banking procedures the Trustee could purchase in The City of New
York the Required Currency with the Judgment Currency on the Business Day in The
City of New York next preceding that on which final judgment is given. Neither
the Company nor the Trustee shall be liable for any shortfall nor shall it
benefit from any windfall in payments to Holders of Securities under this
Section 6.10 caused by a change in exchange rates between the time the amount of
a judgment against it is calculated as above and the time the Trustee converts
the Judgment Currency into the Required Currency to make payments under this
Section 6.10 to Holders of Securities, but payment of such judgment shall
discharge all amounts owed by the Company on the claim or claims underlying such
judgment.

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      SECTION 6.11 Undertaking for Costs.

      In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees, against any party litigant in the suit, having due regard to
the merits and good faith of the claims or defenses made by the party litigant.
This Section 6.11 does not apply to a suit by the Trustee, a suit by a Holder
pursuant to Section 6.07, or a suit by a Holder or Holders of more than 10% in
principal amount of the then outstanding Securities of any series.

                                   ARTICLE VII
                                     TRUSTEE

      SECTION 7.01 Duties of Trustee.

      (a) If an Event of Default has occurred and is continuing, the Trustee
shall exercise such of the rights and powers vested in it by this Indenture, and
use the same degree of care and skill in such exercise, as a prudent person
would exercise or use under the circumstances in the conduct of such person's
own affairs.

      (b) Except during the continuance of an Event of Default with respect to
the Securities of any series:

                  (1) the Trustee need perform only those duties that are
            specifically set forth in this Indenture and no others, and no
            implied covenants or obligations shall be read into this Indenture
            against the Trustee; and

                  (2) in the absence of bad faith on its part, the Trustee may
            conclusively rely, as to the truth of the statements and the
            correctness of the opinions expressed therein, upon certificates or
            opinions furnished to the Trustee and conforming to the requirements
            of this Indenture. However, the Trustee shall examine such
            certificates and opinions to determine whether, on their face, they
            appear to conform to the requirements of this Indenture.

      (c) The Trustee may not be relieved from liabilities for its own negligent
action, its own negligent failure to act or its own willful misconduct, except
that:

                  (1) this paragraph does not limit the effect of Section
            7.01(b);

                  (2) the Trustee shall not be liable for any error of judgment
            made in good faith by a Responsible Officer, unless it is proved
            that the Trustee was negligent in ascertaining the pertinent facts;
            and

                  (3) the Trustee shall not be liable with respect to any action
            it takes or omits to take in good faith in accordance with a
            direction received by it pursuant to Section 6.05.

      (d) Whether or not therein expressly so provided, every provision of this
Indenture that in any way relates to the Trustee is subject to the provisions of
this Section 7.01.

      (e) No provision of this Indenture shall require the Trustee to expend or
risk its own funds or incur any liability. The Trustee may refuse to perform any
duty or exercise any right or power unless it receives indemnity satisfactory to
it against any loss, liability or expense.

      (f) The Trustee shall not be liable for interest on any money received by
it except as the Trustee may agree in writing with the Company. Money held in
trust by the Trustee need not be segregated from other funds except to the
extent required by law. All money received by the Trustee shall, until applied
as herein provided, be held in trust for the payment of the principal of,
premium (if any) and interest on and Additional Amounts with respect to the
Securities.

      SECTION 7.02 Rights of Trustee.

                                     - 29 -

<PAGE>

      (a) The Trustee may conclusively rely on any document believed by it to be
genuine and to have been signed or presented by the proper Person. The Trustee
need not investigate any fact or matter stated in the document.

      (b) Before the Trustee acts or refrains from acting, it may require
instruction, an Officers' Certificate or an Opinion of Counsel or both to be
provided. The Trustee shall not be liable for any action it takes or omits to
take in good faith in reliance on such instruction, Officers' Certificate or
Opinion of Counsel. The Trustee may consult at the Company's expense with
counsel of its selection and the written advice of such counsel or any Opinion
of Counsel shall be full and complete authorization and protection in respect of
any action taken, suffered or omitted by it hereunder in good faith and in
reliance thereon.

      (c) The Trustee may act through agents and shall not be responsible for
the misconduct or negligence of any agent appointed with due care.

      (d) The Trustee shall not be liable for any action it takes or omits to
take in good faith which it believes to be authorized or within its rights or
powers conferred upon it by this Indenture.

      (e) Unless otherwise specifically provided in this Indenture, any demand,
request, direction or notice from the Company shall be sufficient if signed by
an Officer of the Company.

      SECTION 7.03 May Hold Securities.

      The Trustee in its individual or any other capacity may become the owner
or pledgee of Securities and may otherwise deal with the Company or any of its
Affiliates with the same rights it would have if it were not Trustee. Any Agent
may do the same with like rights and duties. However, the Trustee is subject to
Sections 7.10 and 7.11.

      SECTION 7.04 Trustee's Disclaimer.

      The Trustee makes no representation as to the validity or adequacy of this
Indenture or the Securities, it shall not be accountable for the Company's use
of the proceeds from the Securities or any money paid to the Company or upon the
Company's direction under any provision hereof, it shall not be responsible for
the use or application of any money received by any Paying Agent other than the
Trustee and it shall not be responsible for any statement or recital herein or
any statement in the Securities other than its certificate of authentication.

      SECTION 7.05 Notice of Defaults.

      If a Default or Event of Default with respect to the Securities of any
series occurs and is continuing and it is known to the Trustee, the Trustee
shall mail to Holders of Securities of such series a notice of the Default or
Event of Default within 90 days after it occurs. Except in the case of a Default
or Event of Default in payment of principal of, premium (if any) and interest on
and Additional Amounts or any sinking fund installment with respect to the
Securities of such series, the Trustee may withhold the notice if and so long as
a committee of its Responsible Officers in good faith determines that
withholding the notice is in the interests of Holders of Securities of such
series.

      SECTION 7.06 Reports by Trustee to Holders.

      Within 60 days after __________ ____ of each year after the execution of
this Indenture, the Trustee shall mail to Holders of a series and the Company a
brief report dated as of such reporting date that complies with TIA Section
313(a); provided, however, that if no event described in TIA Section 313(a) has
occurred within the twelve months preceding the reporting date with respect to a
series, no report need be transmitted to Holders of such series. The Trustee
also shall comply with TIA Section 313(b). The Trustee shall also transmit by
mail all reports if and as required by TIA Sections 313(c) and 313(d).

      A copy of each report at the time of its mailing to Holders of a series of
Securities shall be filed by the Company with the SEC and each securities
exchange, if any, on which the Securities of such series are listed. The Company
shall notify the Trustee if and when any series of Securities is listed on any
securities exchange.

                                     - 30 -

<PAGE>

      SECTION 7.07 Compensation and Indemnity.

      The Company agrees to pay to the Trustee for its acceptance of this
Indenture and services hereunder such compensation as the Company and the
Trustee shall from time to time agree in writing. The Trustee's compensation
shall not be limited by any law on compensation of a trustee of an express
trust. The Company agrees to reimburse the Trustee upon request for all
reasonable disbursements, advances and expenses incurred by it. Such expenses
shall include the reasonable compensation, disbursements and expenses of the
Trustee's agents and counsel.

      The Company hereby indemnifies the Trustee and any predecessor Trustee
against any and all loss, liability, damage, claim or expense, including taxes
(other than taxes based upon, measured by or determined by the income of the
Trustee), incurred by it arising out of or in connection with the acceptance or
administration of its duties under this Indenture, except as set forth in the
next following paragraph. The Trustee shall notify the Company promptly of any
claim for which it may seek indemnity. The Company shall defend the claim and
the Trustee shall cooperate in the defense. The Trustee may have separate
counsel and the Company shall pay the reasonable fees and expenses of such
counsel. The Company need not pay for any settlement made without its consent.

      The Company shall not be obligated to reimburse any expense or indemnify
against any loss or liability incurred by the Trustee through the Trustee's
negligence or bad faith.

      To secure the payment obligations of the Company in this Section 7.07, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee, except that held in trust to pay principal of,
premium (if any) and interest on and any Additional Amounts with respect to
Securities of any series. Such lien and the Company's obligations under this
Section 7.07 shall survive the satisfaction and discharge of this Indenture.

      When the Trustee incurs expenses or renders services after an Event of
Default specified in Section 6.01(5) or (6) occurs, the expenses and the
compensation for the services are intended to constitute expenses of
administration under any Bankruptcy Law.

      SECTION 7.08 Replacement of Trustee.

      A resignation or removal of the Trustee and appointment of a successor
Trustee shall become effective only upon the successor Trustee's acceptance of
appointment as provided in this Section 7.08.

      The Trustee may resign and be discharged at any time with respect to the
Securities of one or more series by so notifying the Company. The Holders of a
majority in principal amount of the then outstanding Securities of any series
may remove the Trustee with respect to the Securities of such series by so
notifying the Trustee and the Company. The Company may remove the Trustee if:

                  (1) the Trustee fails to comply with Section 7.10;

                  (2) the Trustee is adjudged a bankrupt or an insolvent or an
            order for relief is entered with respect to the Trustee under any
            Bankruptcy Law;

                  (3) a Bankruptcy Custodian or public officer takes charge of
            the Trustee or its property; or

                  (4) the Trustee otherwise becomes incapable of acting.

      If the Trustee resigns or is removed or if a vacancy exists in the office
of Trustee for any reason, with respect to the Securities of one or more series,
the Company shall promptly appoint a successor Trustee or Trustees with respect
to the Securities of that or those series (it being understood that any such
successor Trustee may be appointed with respect to the Securities of one or more
or all of such series and that at any time there shall be only one Trustee with
respect to the Securities of any particular series). Within one year after the
successor Trustee with respect to the Securities of any series takes office, the
Holders of a majority in principal amount of the Securities of such series then
outstanding may appoint a successor Trustee to replace the successor Trustee
appointed by the Company.

                                     - 31 -

<PAGE>

      If a successor Trustee with respect to the Securities of any series does
not take office within 30 days after the retiring or removed Trustee resigns or
is removed, the retiring or removed Trustee, the Company or the Holders of at
least 10% in principal amount of the then outstanding Securities of such series
may petition any court of competent jurisdiction for the appointment of a
successor Trustee with respect to the Securities of such series.

      If the Trustee with respect to the Securities of a series fails to comply
with Section 7.10, any Holder of Securities of such series may petition any
court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee with respect to the Securities of such
series.

      In case of the appointment of a successor Trustee with respect to all
Securities, each such successor Trustee shall deliver a written acceptance of
its appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the retiring
Trustee under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders. The retiring Trustee shall promptly transfer all property
held by it as Trustee to the successor Trustee, subject to the lien provided for
in Section 7.07.

      In case of the appointment of a successor Trustee with respect to the
Securities of one or more (but not all) series, the Company, the retiring
Trustee and each successor Trustee with respect to the Securities of one or more
(but not all) series shall execute and deliver an indenture supplemental hereto
in which each successor Trustee shall accept such appointment and that (1) shall
confer to each successor Trustee all the rights, powers and duties of the
retiring Trustee with respect to the Securities of that or those series to which
the appointment of such successor Trustee relates, (2) if the retiring Trustee
is not retiring with respect to all Securities, shall confirm that all the
rights, powers and duties of the retiring Trustee with respect to the Securities
of that or those series as to which the retiring Trustee is not retiring shall
continue to be vested in the retiring Trustee and (3) shall add to or change any
of the provisions of this Indenture as shall be necessary to provide for or
facilitate the administration of the trusts hereunder by more than one Trustee.
Nothing herein or in such supplemental indenture shall constitute such Trustees
co-trustees of the same trust, and each such Trustee shall be trustee of a trust
or trusts hereunder separate and apart from any trust or trusts hereunder
administered by any other such Trustee. Upon the execution and delivery of such
supplemental indenture, the resignation or removal of the retiring Trustee shall
become effective to the extent provided therein and each such successor Trustee
shall have all the rights, powers and duties of the retiring Trustee with
respect to the Securities of that or those series to which the appointment of
such successor Trustee relates. On request of the Company or any successor
Trustee, such retiring Trustee shall transfer to such successor Trustee all
property held by such retiring Trustee as Trustee with respect to the Securities
of that or those series to which the appointment of such successor Trustee
relates.

      Notwithstanding replacement of the Trustee or Trustees pursuant to this
Section 7.08, the obligations of the Company under Section 7.07 shall continue
for the benefit of the retiring Trustee or Trustees.

      SECTION 7.09 Successor Trustee by Merger, etc.

      Subject to Section 7.10, if the Trustee consolidates, merges or converts
into, or transfers all or substantially all of its corporate trust business to,
another corporation, the successor corporation without any further act shall be
the successor Trustee; provided, however, that in the case of a transfer of all
or substantially all of its corporate trust business to another corporation, the
transferee corporation expressly assumes all of the Trustee's liabilities
hereunder.

      In case any Securities shall have been authenticated, but not delivered,
by the Trustee then in office, any successor by merger, conversion or
consolidation to such authenticating Trustee may adopt such authentication and
deliver the Securities so authenticated; and in case at that time any of the
Securities shall not have been authenticated, any successor to the Trustee may
authenticate such Securities either in the name of any predecessor hereunder or
in the name of the successor to the Trustee; and in all such cases such
certificates shall have the full force which it is anywhere in the Securities or
in this Indenture provided that the certificate of the Trustee shall have.

      SECTION 7.10 Eligibility; Disqualification.

                                     - 32 -

<PAGE>

      There shall at all times be a Trustee hereunder which shall be a
corporation or banking or trust company or association organized and doing
business under the laws of the United States, any State thereof or the District
of Columbia and authorized under such laws to exercise corporate trust power,
shall be subject to supervision or examination by Federal or State (or the
District of Columbia) authority and shall have, or be a subsidiary of a bank or
bank holding company having, a combined capital and surplus of at least $50
million as set forth in its most recent published annual report of condition.

      The Indenture shall always have a Trustee who satisfies the requirements
of TIA Sections 310(a)(1), 310(a)(2) and 310(a)(5). The Trustee is subject to
and shall comply with the provisions of TIA Section 310(b) during the period of
time required by this Indenture. Nothing in this Indenture shall prevent the
Trustee from filing with the SEC the application referred to in the penultimate
paragraph of TIA Section 310(b).

      SECTION 7.11 Preferential Collection of Claims Against the Company.

      The Trustee is subject to and shall comply with the provisions of TIA
Section 311(a), excluding any creditor relationship listed in TIA Section
311(b). A Trustee who has resigned or been removed shall be subject to TIA
Section 311(a) to the extent indicated therein.

                                  ARTICLE VIII
                             DISCHARGE OF INDENTURE

      SECTION 8.01 Termination of the Company's Obligations.

      (a) This Indenture shall cease to be of further effect with respect to the
Securities of a series (except that the Company's obligations under Section
7.07, the Trustee's and Paying Agent's obligations under Section 8.03 and the
rights, powers, protections and privileges accorded the Trustee under Article
VII shall survive), and the Trustee, on demand of the Company, shall execute
proper instruments acknowledging the satisfaction and discharge of this
Indenture with respect to the Securities of such series, when:

                  (1) either:

                              (A) all outstanding Securities of such series
                        theretofore authenticated and issued (other than
                        destroyed, lost or stolen Securities that have been
                        replaced or paid) have been delivered to the Trustee for
                        cancellation; or

                              (B) all outstanding Securities of such series not
                        theretofore delivered to the Trustee for cancellation:

                                          (i) have become due and payable, or

                                          (ii) will become due and payable at
                                    their Stated Maturity within one year, or

                                          (iii) are to be called for redemption
                                    within one year under arrangements
                                    satisfactory to the Trustee for the giving
                                    of notice of redemption by the Trustee in
                                    the name, and at the expense, of the
                                    Company,

      and, in the case of clause (i), (ii) or (iii) above, the Company has
      irrevocably deposited or caused to be deposited with the Trustee as funds
      (immediately available to the Holders in the case of clause (i)) in trust
      for such purpose (x) cash in an amount, or (y) Government Obligations,
      maturing as to principal and interest at such times and in such amounts as
      will ensure the availability of cash in an amount or (z) a combination
      thereof, which will be sufficient, in the opinion (in the case of clauses
      (y) and (z)) of a nationally recognized firm of independent public
      accountants expressed in a written certification thereof delivered to the
      Trustee, to pay and discharge the entire indebtedness on the Securities of
      such series for principal and interest to the date of such deposit (in the
      case of Securities which have become due and payable) or for principal,
      premium, if any, and interest to the Stated Maturity or Redemption Date,
      as the case may be; or

                                     - 33 -

<PAGE>

                              (C) the Company has properly fulfilled such other
                        means of satisfaction and discharge as is specified, as
                        contemplated by Section 2.01, to be applicable to the
                        Securities of such series;

                  (2) the Company has paid or caused to be paid all other sums
            payable by it hereunder with respect to the Securities of such
            series; and

                  (3) the Company has delivered to the Trustee an Officers'
            Certificate stating that all conditions precedent to satisfaction
            and discharge of this Indenture with respect to the Securities of
            such series have been complied with, together with an Opinion of
            Counsel to the same effect.

      (b) Unless this Section 8.01(b) is specified as not being applicable to
Securities of a series as contemplated by Section 2.01, the Company may, at its
option, terminate certain of its obligations under this Indenture ("covenant
defeasance") with respect to the Securities of a series if:

                  (1) the Company has irrevocably deposited or caused to be
            irrevocably deposited with the Trustee as trust funds in trust for
            the purpose of making the following payments, specifically pledged
            as security for and dedicated solely to the benefit of the Holders
            of Securities of such series, (i) money in the currency in which
            payment of the Securities of such series is to be made in an amount,
            or (ii) Government Obligations with respect to such series, maturing
            as to principal and interest at such times and in such amounts as
            will ensure the availability of money in the currency in which
            payment of the Securities of such series is to be made in an amount
            or (iii) a combination thereof, that is sufficient, in the opinion
            (in the case of clauses (ii) and (iii)) of a nationally recognized
            firm of independent public accountants expressed in a written
            certification thereof delivered to the Trustee, to pay the principal
            of and premium (if any) and interest on all Securities of such
            series on each date that such principal, premium (if any) or
            interest is due and payable and (at the Stated Maturity thereof or
            upon redemption as provided in Section 8.01(e)) to pay all other
            sums payable by it hereunder; provided that the Trustee shall have
            been irrevocably instructed to apply such money and/or the proceeds
            of such Government Obligations to the payment of said principal,
            premium (if any) and interest with respect to the Securities of such
            series as the same shall become due;

                  (2) the Company has delivered to the Trustee an Officers'
            Certificate stating that all conditions precedent to satisfaction
            and discharge of this Indenture with respect to the Securities of
            such series have been complied with, and an Opinion of Counsel to
            the same effect;

                  (3) no Default or Event of Default with respect to the
            Securities of such series shall have occurred and be continuing on
            the date of such deposit;

                  (4) the Company shall have delivered to the Trustee an Opinion
            of Counsel from a nationally recognized counsel acceptable to the
            Trustee or a tax ruling to the effect that the Holders will not
            recognize income, gain or loss for U.S. Federal income tax purposes
            as a result of the Company's exercise of its option under this
            Section 8.01(b) and will be subject to U.S. Federal income tax on
            the same amount and in the same manner and at the same times as
            would have been the case if such option had not been exercised;

                  (5) the Company has complied with any additional conditions
            specified pursuant to Section 2.01 to be applicable to the discharge
            of Securities of such series pursuant to this Section 8.01; and

                  (6) such deposit and discharge shall not cause the Trustee to
            have a conflicting interest as defined in TIA Section 310(b).

      In such event, this Indenture shall cease to be of further effect (except
as set forth in this paragraph), and the Trustee, on demand of the Company,
shall execute proper instruments acknowledging satisfaction and discharge under
this Indenture. However, the Company's obligations in Sections 2.05, 2.06, 2.07,
2.08, 2.09, 4.01, 4.02, 7.07, 7.08 and 8.04, the Trustee's and Paying Agent's
obligations in Section 8.03 and the rights, powers, protections and privileges
accorded the Trustee under Article VII shall survive until all Securities of
such series are no longer outstanding. Thereafter, only the Company's
obligations in Section 7.07 and the Trustee's and Paying Agent's obligations in
Section 8.03 shall survive with respect to Securities of such series.

                                     - 34 -

<PAGE>

      After such irrevocable deposit made pursuant to this Section 8.01(b) and
satisfaction of the other conditions set forth herein, the Trustee upon request
shall acknowledge in writing the discharge of the Company's obligations under
this Indenture with respect to the Securities of such series except for those
surviving obligations specified above.

      In order to have money available on a payment date to pay principal of or
premium (if any) or interest on the Securities, the Government Obligations shall
be payable as to principal or interest on or before such payment date in such
amounts as will provide the necessary money. Government Obligations shall not be
callable at the issuer's option.

      (c) If the Company has previously complied or is concurrently complying
with Section 8.01(b) (other than any additional conditions specified pursuant to
Section 2.01 that are expressly applicable only to covenant defeasance) with
respect to Securities of a series, then, unless this Section 8.01(c) is
specified as not being applicable to Securities of such series as contemplated
by Section 2.01, the Company may elect that its obligations to make payments
with respect to Securities of such series be discharged ("legal defeasance"),
if:

                  (1) no Default or Event of Default under clauses (5) and (6)
            of Section 6.01 hereof shall have occurred at any time during the
            period ending on the 91st day after the date of deposit contemplated
            by Section 8.01(b) (it being understood that this condition shall
            not be deemed satisfied until the expiration of such period);

                  (2) unless otherwise specified with respect to Securities of
            such series as contemplated by Section 2.01, the Company has
            delivered to the Trustee an Opinion of Counsel from a nationally
            recognized counsel acceptable to the Trustee to the effect referred
            to in Section 8.01(b)(4) with respect to such legal defeasance,
            which opinion is based on (i) a private ruling of the Internal
            Revenue Service addressed to the Company, (ii) a published ruling of
            the Internal Revenue Service pertaining to a comparable form of
            transaction or (iii) a change in the applicable federal income tax
            law (including regulations) after the date of this Indenture;

                  (3) the Company has complied with any other conditions
            specified pursuant to Section 2.01 to be applicable to the legal
            defeasance of Securities of such series pursuant to this Section
            8.01(c); and

                  (4) the Company has delivered to the Trustee a Company Request
            requesting such legal defeasance of the Securities of such series
            and an Officers' Certificate stating that all conditions precedent
            with respect to such legal defeasance of the Securities of such
            series have been complied with, together with an Opinion of Counsel
            to the same effect.

      In such event, the Company will be discharged from its obligations under
this Indenture and the Securities of such series to pay principal of, premium
(if any) and interest on and any Additional Amounts with respect to Securities
of such series, the Company's obligations under Sections 4.01 and 4.02 shall
terminate with respect to such Securities, and the entire indebtedness of the
Company evidenced by such Securities shall be deemed paid and discharged.

      (d) If and to the extent additional or alternative means of satisfaction,
discharge or defeasance of Securities of a series are specified to be applicable
to such series as contemplated by Section 2.01, the Company may terminate any or
all of its obligations under this Indenture with respect to Securities of a
series and any or all of its obligations under the Securities of such series if
it fulfills such other means of satisfaction and discharge as may be so
specified, as contemplated by Section 2.01, to be applicable to the Securities
of such series.

      (e) If Securities of any series subject to subsections (a), (b), (c) or
(d) of this Section 8.01 are to be redeemed prior to their Stated Maturity,
whether pursuant to any optional redemption provisions or in accordance with any
mandatory or optional sinking fund provisions, the terms of the applicable trust
arrangement shall provide for such redemption, and the Company shall make such
arrangements as are reasonably satisfactory to the Trustee for the giving of
notice of redemption by the Trustee in the name, and at the expense, of the
Company.

                                     - 35 -

<PAGE>

      SECTION 8.02 Application of Trust Money.

      The Trustee or a trustee satisfactory to the Trustee and the Company shall
hold in trust money or Government Obligations deposited with it pursuant to
Section 8.01 hereof. It shall apply the deposited money and the money from
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal of, premium (if any) and interest on and
any Additional Amounts with respect to the Securities of the series with respect
to which the deposit was made.

      SECTION 8.03 Repayment to Company.

      The Trustee and the Paying Agent shall promptly pay to the Company any
excess money or Government Obligations (or proceeds therefrom) held by them at
any time upon the written request of the Company.

      Subject to the requirements of any applicable abandoned property laws, the
Trustee and the Paying Agent shall pay to the Company upon written request any
money held by them for the payment of principal, premium (if any), interest or
any Additional Amounts that remain unclaimed for two years after the date upon
which such payment shall have become due. After payment to the Company, Holders
entitled to the money must look to the Company for payment as general creditors
unless an applicable abandoned property law designates another Person, and all
liability of the Trustee and the Paying Agent with respect to such money shall
cease.

      SECTION 8.04 Reinstatement.

      If the Trustee or the Paying Agent is unable to apply any money or
Government Obligations deposited with respect to Securities of any series in
accordance with Section 8.01 by reason of any legal proceeding or by reason of
any order or judgment of any court or governmental authority enjoining,
restraining or otherwise prohibiting such application, the obligations of the
Company under this Indenture with respect to the Securities of such series and
under the Securities of such series shall be revived and reinstated as though no
deposit had occurred pursuant to Section 8.01 until such time as the Trustee or
the Paying Agent is permitted to apply all such money or Government Obligations
in accordance with Section 8.01; provided, however, that if the Company has made
any payment of principal of, premium (if any) or interest on or any Additional
Amounts with respect to any Securities because of the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Securities to receive such payment from the money or Government Obligations
held by the Trustee or the Paying Agent.

                                   ARTICLE IX
                     SUPPLEMENTAL INDENTURES AND AMENDMENTS

      SECTION 9.01 Without Consent of Holders.

      The Company and the Trustee may amend or supplement this Indenture or the
Securities or waive any provision hereof or thereof without the consent of any
Holder:

                  (1) to cure any ambiguity, omission, defect or inconsistency;

                  (2) to comply with Section 5.01;

                  (3) to provide for uncertificated Securities in addition to or
            in place of certificated Securities, or to provide for the issuance
            of bearer Securities (with or without coupons);

                  (4) to provide any security for, or to add any guarantees of
            or additional obligors on, any series of Securities;

                  (5) to comply with any requirement in order to effect or
            maintain the qualification of this Indenture under the TIA;

                  (6) to add to the covenants of the Company for the benefit of
            the Holders of all or any series of Securities (and if such
            covenants are to be for the benefit of less than all series of
            Securities, stating that

                                     - 36 -

<PAGE>

            such covenants are expressly being included solely for the benefit
            of such series), or to surrender any right or power herein conferred
            upon the Company;

                  (7) to add any additional Events of Default with respect to
            all or any series of the Securities (and, if any Event of Default is
            applicable to less than all series of Securities, specifying the
            series to which such Event of Default is applicable);

                  (8) to change or eliminate any of the provisions of this
            Indenture; provided that any such change or elimination shall become
            effective only when there is no outstanding Security of any series
            created prior to the execution of such amendment or supplemental
            indenture that is adversely affected in any material respect by such
            change in or elimination of such provision;

                  (9) to establish the form or terms of Securities of any series
            as permitted by Section 2.01;

                  (10) to supplement any of the provisions of this Indenture to
            such extent as shall be necessary to permit or facilitate the
            defeasance and discharge of any series of Securities pursuant to
            Section 8.01; provided, however, that any such action shall not
            adversely affect the interest of the Holders of Securities of such
            series or any other series of Securities in any material respect; or

                  (11) to evidence and provide for the acceptance of appointment
            hereunder by a successor Trustee with respect to the Securities of
            one or more series and to add to or change any of the provisions of
            this Indenture as shall be necessary to provide for or facilitate
            the administration of the trusts hereunder by more than one Trustee,
            pursuant to the requirements of Section 7.08.

      Upon the request of the Company, accompanied by a Board Resolution, and
upon receipt by the Trustee of the documents described in Section 9.06, the
Trustee shall, subject to Section 9.06, join with the Company in the execution
of any supplemental indenture authorized or permitted by the terms of this
Indenture and make any further appropriate agreements and stipulations that may
be therein contained.

      SECTION 9.02 With Consent of Holders.

      Except as provided below in this Section 9.02, the Company and the Trustee
may amend or supplement this Indenture with the written consent (including
consents obtained in connection with a tender offer or exchange offer for
Securities of any one or more series or all series or a solicitation of consents
in respect of Securities of any one or more series or all series, provided that
in each case such offer or solicitation is made to all Holders of then
outstanding Securities of each such series (but the terms of such offer or
solicitation may vary from series to series)) of the Holders of at least a
majority in principal amount of the then outstanding Securities of all series
affected by such amendment or supplement (acting as one class).

      Upon the request of the Company, accompanied by a Board Resolution, and
upon the filing with the Trustee of evidence of the consent of the Holders as
aforesaid, and upon receipt by the Trustee of the documents described in Section
9.06, the Trustee shall, subject to Section 9.06, join with the Company in the
execution of such amendment or supplemental indenture.

      It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment,
supplement or waiver, but it shall be sufficient if such consent approves the
substance thereof.

      The Holders of a majority in principal amount of the then outstanding
Securities of one or more series or of all series may waive compliance in a
particular instance by the Company with any provision of this Indenture with
respect to Securities of such series (including waivers obtained in connection
with a tender offer or exchange offer for Securities of such series or a
solicitation of consents in respect of Securities of such series, provided that
in each case such offer or solicitation is made to all Holders of then
outstanding Securities of such series (but the terms of such offer or
solicitation may vary from series to series)).

                                     - 37 -

<PAGE>

      However, without the consent of each Holder affected, an amendment,
supplement or waiver under this Section 9.02 may not:

                  (1) reduce the amount of Securities whose Holders must consent
            to an amendment, supplement or waiver;

                  (2) reduce the rate of or change the time for payment of
            interest, including default interest, on any Security;

                  (3) reduce the principal of, any premium on or any mandatory
            sinking fund payment with respect to, or change the Stated Maturity
            of, any Security or reduce the amount of the principal of an
            Original Issue Discount Security that would be due and payable upon
            a declaration of acceleration of the Maturity thereof pursuant to
            Section 6.02;

                  (4) reduce the premium, if any, payable upon the redemption of
            any Security or change the time at which any Security may or shall
            be redeemed;

                  (5) change any obligation of the Company to pay Additional
            Amounts with respect to any Security;

                  (6) change the coin or currency or currencies (including
            composite currencies) in which any Security or any premium, interest
            or Additional Amounts with respect thereto are payable;

                  (7) impair the right to institute suit for the enforcement of
            any payment of principal of, premium (if any) or interest on or any
            Additional Amounts with respect to any Security pursuant to Sections
            6.07 and 6.08, except as limited by Section 6.06;

                  (8) make any change in the percentage of principal amount of
            Securities necessary to waive compliance with certain provisions of
            this Indenture pursuant to Section 6.04 or 6.07 or make any change
            in this sentence of Section 9.02; or

                  (9) waive a continuing Default or Event of Default in the
            payment of principal of, premium (if any) or interest on or
            Additional Amounts with respect to the Securities.

      A supplemental indenture that changes or eliminates any covenant or other
provision of this Indenture which has expressly been included solely for the
benefit of one or more particular series of Securities, or which modifies the
rights of the Holders of Securities of such series with respect to such covenant
or other provision, shall be deemed not to affect the rights under this
Indenture of the Holders of Securities of any other series.

      The right of any Holder to participate in any consent required or sought
pursuant to any provision of this Indenture (and the obligation of the Company
to obtain any such consent otherwise required from such Holder) may be subject
to the requirement that such Holder shall have been the Holder of record of any
Securities with respect to which such consent is required or sought as of a date
identified by the Company in a notice furnished to Holders in accordance with
the terms of this Indenture.

      After an amendment, supplement or waiver under this Section 9.02 becomes
effective, the Company shall mail to the Holders of each Security affected
thereby a notice briefly describing the amendment, supplement or waiver. Any
failure of the Company to mail such notice, or any defect therein, shall not,
however, in any way impair or affect the validity of any such amendment,
supplement or waiver.

      SECTION 9.03 Compliance with Trust Indenture Act.

      Every amendment or supplement to this Indenture or the Securities shall
comply in form and substance with the TIA as then in effect.

      SECTION 9.04 Revocation and Effect of Consents.

                                     - 38 -

<PAGE>

      Until an amendment, supplement or waiver becomes effective, a consent to
it by a Holder is a continuing consent by the Holder and every subsequent Holder
of a Security or portion of a Security that evidences the same debt as the
consenting Holder's Security, even if notation of the consent is not made on any
Security. However, any such Holder or subsequent Holder may revoke the consent
as to his or her Security or portion of a Security if the Trustee receives
written notice of revocation before a date and time therefor identified by the
Company in a notice furnished to such Holder in accordance with the terms of
this Indenture or, if no such date and time shall be identified, the date the
amendment, supplement or waiver becomes effective. An amendment, supplement or
waiver becomes effective in accordance with its terms and thereafter binds every
Holder.

      The Company may, but shall not be obligated to, fix a record date (which
need not comply with TIA Section 316(c)) for the purpose of determining the
Holders entitled to consent to any amendment, supplement or waiver or to take
any other action under this Indenture. If a record date is fixed, then
notwithstanding the provisions of the immediately preceding paragraph, those
Persons who were Holders at such record date (or their duly designated proxies),
and only those Persons, shall be entitled to consent to such amendment,
supplement or waiver or to revoke any consent previously given, whether or not
such Persons continue to be Holders after such record date. No consent shall be
valid or effective for more than 90 days after such record date unless consents
from Holders of the principal amount of Securities required hereunder for such
amendment or waiver to be effective shall have also been given and not revoked
within such 90-day period.

      After an amendment, supplement or waiver becomes effective, it shall bind
every Holder, unless it is of the type described in any of clauses (1) through
(9) of Section 9.02 hereof. In such case, the amendment, supplement or waiver
shall bind each Holder who has consented to it and every subsequent Holder that
evidences the same debt as the consenting Holder's Security.

      SECTION 9.05 Notation on or Exchange of Securities.

      If an amendment or supplement changes the terms of an outstanding
Security, the Company may require the Holder of the Security to deliver it to
the Trustee. The Trustee may place an appropriate notation on the Security at
the request of the Company regarding the changed terms and return it to the
Holder. Alternatively, if the Company so determines, the Company in exchange for
the Security shall issue and the Trustee shall authenticate a new Security that
reflects the changed terms. Failure to make the appropriate notation or to issue
a new Security shall not affect the validity of such amendment or supplement.

      Securities of any series authenticated and delivered after the execution
of any amendment or supplement may, and shall if required by the Trustee, bear a
notation in form approved by the Trustee as to any matter provided for in such
amendment or supplement.

      SECTION 9.06 Trustee to Sign Amendments, etc.

      The Trustee shall sign any amendment or supplement authorized pursuant to
this Article if the amendment or supplement does not adversely affect the
rights, duties, liabilities or immunities of the Trustee. If it does, the
Trustee may, but need not, sign it. In signing or refusing to sign such
amendment or supplement, the Trustee shall be entitled to receive, and, subject
to Section 7.01 hereof, shall be fully protected in relying upon, an Officers'
Certificate and an Opinion of Counsel provided at the expense of the Company as
conclusive evidence that such amendment or supplement is authorized or permitted
by this Indenture, that it is not inconsistent herewith, and that it will be
valid and binding upon the Company in accordance with its terms.

                                    ARTICLE X
                                  MISCELLANEOUS

      SECTION 10.01 Trust Indenture Act Controls.

      If any provision of this Indenture limits, qualifies or conflicts with the
duties imposed by operation of TIA Section 318(c), the imposed duties shall
control.

      SECTION 10.02 Notices.

                                     - 39 -

<PAGE>

      Any notice or communication by the Company or the Trustee to the other is
duly given if in writing and delivered in person or mailed by first-class mail
(registered or certified, return receipt requested), telex, facsimile or
overnight air courier guaranteeing next day delivery, to the other's address:

      If to the Company:

      Parallel Petroleum Corporation
      1004 N. Big Spring, Suite 400
      Midland, Texas 79701
      Attn: _______________
      Telephone: (432) 684-3727
      Facsimile: (432) ____-______

      If to the Trustee:

      ____________________________________

      ____________________________________

      ____________________________________

      Attn: _______________________________

      Telephone:   ________________________

      Facsimile:   ________________________

      The Company or the Trustee by notice to the other may designate additional
or different addresses for subsequent notices or communications.

      All notices and communications shall be deemed to have been duly given: at
the time delivered by hand, if personally delivered; five Business Days after
being deposited in the mail, postage prepaid, if mailed; when answered back, if
telexed; when receipt acknowledged, if by facsimile; and the next Business Day
after timely delivery to the courier, if sent by overnight air courier
guaranteeing next day delivery.

      Any notice or communication to a Holder shall be mailed by first-class
mail, postage prepaid, to the Holder's address shown on the register kept by the
Registrar. Failure to mail a notice or communication to a Holder or any defect
in it shall not affect its sufficiency with respect to other Holders.

      If a notice or communication is mailed in the manner provided above within
the time prescribed, it is duly given, whether or not the addressee receives it,
except in the case of notice to the Trustee, it is duly given only when
received.

      If the Company mails a notice or communication to Holders, it shall mail a
copy to the Trustee and each Agent at the same time.

      All notices or communications, including without limitation notices to the
Trustee or the Company by Holders, shall be in writing, except as otherwise set
forth herein.

      In case by reason of the suspension of regular mail service, or by reason
of any other cause, it shall be impossible to mail any notice required by this
Indenture, then such method of notification as shall be made with the approval
of the Trustee shall constitute a sufficient mailing of such notice.

                                     - 40 -

<PAGE>

      SECTION 10.03 Communication by Holders with Other Holders.

      Holders may communicate pursuant to TIA Section 312(b) with other Holders
with respect to their rights under this Indenture or the Securities. The
Company, the Trustee, the Registrar and anyone else shall have the protection of
TIA Section 312(c).

      SECTION 10.04 Certificate and Opinion as to Conditions Precedent.

      Upon any request or application by the Company to the Trustee to take any
action under this Indenture, the Company shall, if requested by the Trustee,
furnish to the Trustee at the expense of the Company:

                  (1) an Officers' Certificate (which shall include the
            statements set forth in Section 10.05) stating that, in the opinion
            of the signers, all conditions precedent and covenants, if any,
            provided for in this Indenture relating to the proposed action have
            been complied with; and

                  (2) an Opinion of Counsel (which shall include the statements
            set forth in Section 10.05 hereof) stating that, in the opinion of
            such counsel, all such conditions precedent and covenants have been
            complied with.

      SECTION 10.05 Statements Required in Certificate or Opinion.

      Each certificate or opinion with respect to compliance with a condition or
covenant provided for in this Indenture (other than a certificate provided
pursuant to TIA Section 314(a)(4)) shall comply with the provisions of TIA
Section 314(e) and shall include:

                  (1) a statement that the Person making such certificate or
            opinion has read such covenant or condition;

                  (2) a brief statement as to the nature and scope of the
         examination or investigation upon which the statements or opinions
         contained in such certificate or opinion are based;

                  (3) a statement that, in the opinion of such Person, he or she
            has made such examination or investigation as is necessary to enable
            him or her to express an informed opinion as to whether or not such
            covenant or condition has been complied with; and

                  (4) a statement as to whether or not, in the opinion of such
            Person, such condition or covenant has been complied with.

      SECTION 10.06 Rules by Trustee and Agents.

      The Trustee may make reasonable rules for action by or at a meeting of
Holders. The Registrar or the Paying Agent may make reasonable rules and set
reasonable requirements for its functions.

      SECTION 10.07 Legal Holidays.

      If a payment date is a Legal Holiday at a Place of Payment, payment may be
made at that place on the next succeeding day that is not a Legal Holiday, and
no interest shall accrue for the intervening period.

      SECTION 10.08 No Recourse Against Others.

      A director, officer, employee, stockholder, partner or other owner of the
Company or the Trustee, as such, shall not have any liability for any
obligations of the Company under the Securities or for any obligations of the
Company or the Trustee under this Indenture or for any claim based on, in
respect of or by reason of such obligations or their creation. Each Holder by
accepting a Security waives and releases all such liability. The waiver and
release shall be part of the consideration for the issue of Securities.

                                     - 41 -

<PAGE>

      SECTION 10.09 Governing Law.

      THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS TO THE EXTENT THE LAWS OF ANOTHER
JURISDICTION WOULD BE REQUIRED THEREBY.

      SECTION 10.10 No Adverse Interpretation of Other Agreements.

      This Indenture may not be used to interpret another indenture, loan or
debt agreement of the Company or any Subsidiary. Any such indenture, loan or
debt agreement may not be used to interpret this Indenture.

      SECTION 10.11 Successors.

      All agreements of the Company in this Indenture and the Securities shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successors.

      SECTION 10.12 Severability.

      In case any provision in this Indenture or in the Securities shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall, to the fullest extent permitted by applicable
law, not in any way be affected or impaired thereby.

      SECTION 10.13 Counterpart Originals.

      The parties may sign any number of copies of this Indenture. Each signed
copy shall be an original, but all of them together represent the same
agreement.

      SECTION 10.14 Table of Contents, Headings, etc.

      The table of contents, cross-reference table and headings of the Articles
and Sections of this Indenture have been inserted for convenience of reference
only, are not to be considered a part hereof and shall in no way modify or
restrict any of the terms or provisions hereof.

                                     - 42 -

<PAGE>

      IN WITNESS WHEREOF, the parties hereto have caused this Indenture to be
duly executed as of the day and year first above written.

                                                  PARALLEL PETROLEUM CORPORATION

                                                  By:_________________________

                                                      Name:

                                                      Title:

                                                  ____________________________ ,

                                                      as Trustee

                                                  By: __________________________

                                                      Name:
                                                      Title:

                                     - 43 -

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