Document:

Exhibit
10.19

 

STANDARD
INDUSTRIAL/COMMERCIAL MULTI-TENANT LEASE MODIFIED NET

 

1.             Basic
Provisions (“Basic Provision”).

 

1.1           Parties:  This Lease (“Lease”), dated for reference purposes only, September 27,
2005, is made by and between Oakmead Ventures LLC, a California Limited Liability
Company (“Landlord”) and Symyx Technologies, Inc.,
A Delaware Corporation (“Tenant”),
(collectively the “Parties,” or
individually a “Party”).

 

1.2(a)      Premises:  Initially
that certain portion of an approximately 60,000 square foot Building located at
415 Oakmead Parkway consisting initially of approximately 30,000 sq. ft. of
space, including all improvements therein or to be removed by Landlord under
the terms of this Lease, and commonly known as Suite 415A Oakmead Parkway,
located in the City of Sunnyvale, County of Santa Clara, State of California,
with zip code 95054 as outlined on Exhibit A attached hereto
(“Premises”). :  On June 1, 2007 the definition of
Premises shall be modified and expanded to then include the entire Building
located at 415 Oakmead Parkway consisting of approximately 60,000 sq. ft. of
space, including all improvements therein or to be removed by Landlord under
the terms of this Lease, and commonly known as Suites 415A and 415B Oakmead
Parkway, located in the City of Sunnyvale, County of Santa Clara, State
of California, with zip code 95054 as outlined on Exhibit A
attached hereto (“Premises”).  The “Building” is
that certain building containing the Premises and generally described as an
approximately 60,000 sq. ft. R&D building. 
The allocation of the Building between 415A and 415B will be mutually
agreed to by the parties.

 

In addition to Tenant’s
rights to use and occupy the Premises as hereinafter specified, Tenant shall
have non-exclusive rights to the Common Areas (as defined in Paragraph 2.7
below) as hereinafter specified.  The
Premises, the Building, the Common Areas, the land upon which they are located,
along with all other buildings and improvements thereon, are herein
collectively referred to as the “Industrial Center.”  (Also see Paragraph 2.)

 

1.2(b)      Parking: All vehicle parking spaces within the Industrial
Center.  (Also, see Paragraph 2.6)

 

1.3           Term: Ten years and -0- months (“Original
Term”) commencing upon December 1, 2005 (“Commencement
Date”) and ending November 15, 2015 (“Expiration
Date”).  (Also Paragraph 3.)

 

1.4           Early Possession: Upon Lessor purchasing the property (“Early Possession Date”). 
(Also Paragraphs 3.2 and 3.3.)

 

1.5           Base rent: $21,600 per month (“Base Rent”),
payable on the first day of each month commencing on December 1, 2005  (Also see Paragraph 4.  ) This rent is for 415 A or 1⁄2 of the
building.  Landlord shall be free to
lease the balance of the building (415B) for a term through 5/30/07 to another
tenant.  On June 1, 2007 the
definition of the Premises shall be expanded to include the balance of the
building defined as both 415A and 415B and the Base Rent shall be adjusted
upward to $45,000 NNN per month with the base
rent of $45,000 increasing 3% annually thereafter starting June 1, 2008.

 

1.6(a)      Base Rent Paid Upon Execution: $21,600 as Base Rent for the
first month.

 

1.6(b)      Tenant’s Share of Common Area Operating Expenses: 50% until June 1,
2007 then 100%  (“Tenant’s
Share”).

 

1.7           Security Deposit: $55,344 (“Security
Deposit”).  (Also see
Paragraph 5)

 

1.8           Permitted Use: office, R&D, Lab, light manufacturing,
warehousing or other legal uses (“Permitted Use”)
(Also see Paragraph 5.)

 

1.9           Insuring Party. 
Landlord is the “Insuring Party.”  (Also see Paragraph 8)

 

1.10(a)    Real Estate Brokers. 
The following real estate broker(s) (collectively, the “Brokers”) and brokerage relationships exist in this
transaction and are consented to by the Parties (check applicable boxes):

 

o            *****
represents Landlord exclusively (“Landlord’s Broker”);

 

ý            Grubb &
Ellis represents Tenant exclusively (“Tenant’s Broker”);
or

 

o            *****
 represents both Landlord and Tenant
(“Dual Agency”).  (/also see Par. 15.)

 

1.10(b)    Payment to Brokers. 
Upon the execution of this Lease by both Parties, Landlord shall pay to
said Broker(s)according to separate written agreement between Landlord and said
Broker(s).

 

1.11         Guarantor. 
Intentionally Deleted.

 

1.12         Addenda and Exhibits. 
Attached hereto is an Exhibit A all of which constitute a
part of this Lease.

 

MULTI-TENANT - MODIFIED NET

Eight-L 1993

Initials        /        

 

1

 

2.             Premises,
Parking and Common Areas.

 

2.1           Letting.  Landlord
hereby leases to Tenant, and Tenant hereby leases from Landlord, the Premises,
for the term, at the rental, and upon all of the terms, covenants and
conditions set forth in this Lease. The leaseable area is measured to the
outside edge of the outside walls, to the centerline of any demising walls,
including a pro rata share of the electrical room and other common spaces.  Unless otherwise provided herein, any
statement of square footage set forth in this Lease, or that may have been used
in calculating rental and/or Common Area Operating Expenses, is an
approximation which Landlord and Tenant agree is reasonable and the rental and
Tenant’s Share (as defined in Paragraph 1.6(b) based thereon is not
subject to revision whether or not the actual square footage is more or less.

 

2.2           Condition.  Landlord
shall deliver the Premises to Tenant clean and free of debris on the
Commencement Date.  Landlord does warrant
to Tenant that any of the existing plumbing from Building to the street,
electrical systems from street to the master control box, fire sprinkler system
except for the distribution,  and loading
doors, in the Premises will be in good working order but all other systems are “as
is.”  All correction of anything
non-compliant that are to be in good working order shall be the obligation of
Landlord at Landlord’s sole cost and expense, any other corrections or work
shall be at Tenant’s sole cost.

 

2.3           Warranties.          Tenant acknowledges that
neither landlord nor any of its agents made any representations or warranties
respecting the project, the buildings, or the leased premises, upon which
tenant relied in entering into this lease, which are not expressly set forth in
this lease. Tenant further acknowledges that neither Landlord nor any of its
agents made any representations as to (i) whether the leased premises may
be used for tenant’s intended use under existing law or; (ii) the
suitability of the leased premises for the conduct of tenant’s business or; (iii) the
exact square footage of the leased premises; that tenant relied solely upon its
own investigations respecting said premises (including but not limited to the
electrical and fire sprinkler systems, security, environmental aspects, seismic
and earthquake requirements, and compliance with the American with Disabilities
Act and applicable zoning, municipal, county, state and federal laws,
ordinances and regulations and any covenants or restrictions of record
(collectively, “Applicable Laws”) and that upon
its execution of this lease, accepts the leaseable area as specified
herein.  Tenant expressly waives any and
all claims for damage by reason of any statement, representation, warranty,
promise or other agreement of landlord or landlord’s agent(s), if any, not
contained in this lease or in any addenda hereto.

 

2.4           Tenant as Prior Owner/Occupant.  The warranties made by Landlord in this
Paragraph 2.2 shall be of no force or effect if immediately prior to the date
set forth in Paragraph 1.1 Tenant was the owner or occupant of the
Premises.  In such event, Tenant shall,
at Tenant’s sole cost and expense, correct any non-compliance of the Premises
with said warranties.

 

2.5           Vehicle Parking. 
Tenant shall be entitled to use all Parking Spaces specified in
Paragraph 1.2(b) on those portions of the Common Areas as exists at the
Commencement Date.  Said parking spaces
shall be used for parking by vehicles no larger than full-size passenger
automobiles, SUVs or pick-up trucks, herein called “Permitted
Size Vehicles.”  Vehicles
other than Permitted Size Vehicles shall be parked and loaded or unloaded as
directed by Landlord in the Rules and Regulations (as defined in Paragraph
40) issued by Landlord.  (Also see
Paragraph 2.9.)

 

(a)           Tenant
shall not permit or allow any vehicles that belong to or are controlled by
Tenant or Tenant’s employees, suppliers, shippers, customers, contractors or
invitees to be loaded, unloaded, or parked in areas other than those designated
by Landlord for such activities.

 

(b)           Landlord
shall at the Commencement Date of this Lease, provide the parking facilities
required by Applicable Law and this Lease.

 

2.6           Common Areas - Definition. 
The term “Common Areas” is defined as all
areas and facilities outside the Premises and within the exterior boundary line
of the Industrial Center and Interior utility raceways within the Premises that
are provided and designated by the Landlord from time to time for the general
non-exclusive use of Landlord, Tenant and other tenants of the Industrial
Center and their respective employees, suppliers, shippers, customers,
contractors and invitees, including parking areas, loading and unloading areas,
trash areas, roadways, sidewalks, walkways, parkways, driveways and landscaped
areas.

 

2.7           Common Areas - Tenant’s Rights.  Landlord hereby grants to Tenant, for the
benefit of Tenant and its employees, suppliers, shippers, contractors,
customers and invitees, during the term of this Lease, the non-exclusive right
to use, in common with others entitled to such use, the Common Areas as they
exist from time to time, subject to any rights, powers, and privileges reserved
by Landlord under the terms hereof or under the terms of any rules and
regulations or restrictions governing the use of the Industrial Center.  Under no circumstances shall the right herein
granted to use the Common Areas be deemed to include the right to store any
property, temporarily or permanently, in the Common Areas.  Any such storage shall be permitted only by
the prior written consent of Landlord or Landlord’s designated agent, which
consent may be revoked at any time.  In
the event that any unauthorized storage shall occur then Landlord shall have
the right,  without notice, in addition
to such other rights and remedies that it may have, to remove the property and
charge the cost to Tenant, which cost shall be immediately payable upon demand
by Landlord.

 

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2.8           Common Areas - Rules and Regulations.  Landlord or such other person(s) as Landlord
may appoint shall have the exclusive control and management of the Common Areas
and shall have the right, from time to time, to establish, modify, amend and
enforce reasonable Rules and Regulations with respect thereto in
accordance with Paragraph 40.  Tenant
agrees to abide by and conform to all such Rules and Regulations and to
cause its employees, suppliers, shippers, customers, contractors and invitees
to so abide and conform.  Landlord shall
not be responsible to Tenant for the non-compliance with said rules and
regulations by other tenants of the Industrial Center.

 

2.9           Common Areas - Changes. 
Landlord shall have the right prior to June 1, 2007 only and to be
effective only until June 1, 2007, in Landlord’s sole discretion, from
time to time:

 

(a)           To
make changes to the Common Areas, including, without limitation, changes in the
location, size, shape and number of driveways, entrances, parking spaces,
parking areas, loading and unloading areas, ingress, egress, direction of
traffic, landscaped areas, walkways and utility raceways;

 

(b)           To
close temporarily any of the Common Areas for maintenance purposes so long as
reasonable access to the Premises remains available;

 

(c)           To
designate other land outside the boundaries of the Industrial Center to be a
part of the Common Areas;

 

(d)           To
add additional buildings and improvements to the Common Areas;

 

(e)           To
use the Common Areas while engaged in making additional improvements, repairs
or alterations to the Industrial Center, or any portion thereof; and

 

(f)            To
do and perform such other acts and make such other changes in, to or with
respect to the Common Areas and Industrial Center as Landlord may, in the
exercise of sound business judgment, deem to be appropriate.

 

3.             Term.

 

3.1           Term. The Commencement Date, Expiration Date and Original
Term of this Lease are as specified in Paragraph 1.3.

 

3.2           Early Possession.  If
an Early Possession Date is specified in Paragraph 1.4 and if Tenant totally or
partially occupies the Premises after the Early Possession Date but prior to
the Commencement Date, the obligation to pay Base Rent or Operating Expenses
shall be abated for the period of such early occupancy.  All other terms of this Lease, however,
(including but not limited to the obligations to carry the insurance required
by Paragraph 8) shall be in effect during such period.  Any such early possession shall not affect
nor advance the Expiration Date of the Original Term.

 

3.3           Delay in Possession. 
If for any reason Landlord cannot deliver possession of the Premises to
Tenant by the Early Possession Date, if one is specified in Paragraph 1.4, or
if no Early Possession Date is specified, by the Commencement Date, Landlord
shall not be subject to any liability therefor, nor shall such failure affect
the validity of this Lease, or the obligations of Tenant hereunder, or extend
the term hereof, but in such case, Tenant shall not, except as otherwise
provided herein, be obligated to pay rent or perform any other obligation of
Tenant under the terms of this Lease.. 
If the Commencement Date does not happen by January 15 , 2006,
Tenant may, at its option, by notice in writing to Landlord within ten (10) days
after January  15, 2006, cancel this Lease, in which event the
parties shall be discharged from all obligations hereunder; provided further,
however, that if such written notice of Tenant is not received by Landlord
within said ten (10) day period, Tenant’s right to cancel this Lease
hereunder shall terminate and be of no further force or effect.

 

4.             Rent

 

4.1           Base Rent.  Tenant
shall pay Base Rent and other rent or charges, as the same may be adjusted from
time to time, to Landlord in lawful money of the United States, without offset
or deduction, on or before the 1st day of each month.  Base Rent and all other rent and charges for
any period during the term hereof which is for less than one full month shall
be prorated based upon the actual number of days of the month involved.  Payment of Base Rent and other charges shall
be made to Landlord at its address stated herein or to such other persons or at
such other addresses as Landlord may from time to time designate in writing to
Tenant.

 

4.2           Common Area Operating Expenses.  Tenant shall pay to Landlord during the term
hereof, in addition to the Base Rent, Tenant’s Share (as specified in Paragraph
1.6(b)) of all Common Area Operating Expenses, as hereinafter defined, during
each calendar year of the term of this Lease, in accordance with the following
provisions:

 

(a)           “Common Area Operating Expenses” are defined, for purposes of
this Lease, as all costs incurred by Landlord relating to the ownership and
operation of the Industrial Center, including, but not limited to, the
following:

 

(i)            The
operation, repair and maintenance, in neat, clean, good order and condition, of
the following:

 

(aa)         The
Common Areas, including parking areas, loading and unloading

 

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areas, trash areas,
roadways, sidewalks, walkways, parkways, driveways, landscaped areas, striping,
bumpers, irrigation systems, Common Area lighting facilities, fences and gates,
elevators and roof.

 

(bb)         Exterior
signs and any tenant directories.

 

(cc)         Fire
detection and sprinkler systems.

 

(ii)           The
cost of water, gas, electricity and telephone to service the Common Areas.

 

(iii)          Trash
disposal, property management fees of 2% of the gross monthly rental and
security services and the costs of any environmental inspections.

 

(iv)          Reserves
set aside for maintenance and repair of Common Areas.

 

(v)           Real
Property Taxes (as defined in Paragraph 10.2) to be paid by Landlord for the
Building and the Common Areas under Paragraph 10 hereof.

 

(vi)          The
cost of the premiums for the insurance policies maintained by Landlord under
Paragraph 8 hereof.

 

(vii)         One
half of any deductible portion of an insured loss concerning the building or
the Common Areas, except that Tenant shall pay all of the deductible for any
insurance requested by Tenant to be carried by Landlord for any tenant
installed improvements. Except that Tenant shall pay the lesser of one half any
deductible or 2.5% of the total replacement value of the building shell and $20
for tenant improvements and Tenant shall be solely responsible for any
remaining deductibles regarding any tenant improvements over $20 per ft.

 

(viii)        Any
other services to be provided by Landlord that are stated elsewhere in this
Lease to be a Common Area Operating Expense.

 

(b)           Any
common Area Operating Expenses and Real Property Taxes that are specifically
attributable to the Building or to any other building in the industrial Center
or to the operation, repair and maintenance thereof, shall be allocated
entirely to the Building or to such other building.  However, any Common Area Operating Expenses
and Real Property Taxes that are not specifically attributable to the Building
or to any other building or to the operation, repair and maintenance thereof,
shall be equitably allocated by Landlord to all buildings in the Industrial
Center.

 

(c)           The
inclusion of the improvements, facilities and services set forth in
subparagraph 4.2(a) shall not be deemed to impose an obligation upon
Landlord to either have said improvements or facilities or to provide those
services unless the Industrial Center already has the same, Landlord already
provides the services, or Landlord has agreed elsewhere in this Lease to
provide the same or some of them.

 

(d)           Following
shall not be included within Operating Expenses:  (i) the cost of constructing tenant
improvements for any other tenant of the Building; (ii) the cost of
special services, goods, or materials provided to any other tenant of the
Building; (iii) repairs covered by proceeds of insurance or from funds
provided by Tenant or any other tenant of the Building; (iv) legal fees,
advertising costs, or other related expenses incurred by Landlord in connection
with the leasing of space to individual tenants of the Building; (v) repairs,
alterations, additions, improvements, or replacements needed to rectify or
correct any defects in the original design, materials, or workmanship of Premises
or common areas; (vi) damage and repairs necessitated by the negligence or
willful misconduct of Landlord, Landlord’s employees, contractors, or agents; (vii) executive
salaries or salaries of service personnel to the extent that such personnel
perform services not in connection with the management, operation, repair, or
maintenance of the Premises; (viii) Landlord’s general overhead expenses
not related to the Premises; (ix) legal fees, accountants’ fees, and other
expenses incurred in connection with disputes of tenants; (x) costs incurred
due to a violation by Landlord of the terms and conditions of a lease; (xi)
costs of any service provided to Tenant or other occupants of the Building for
which Landlord is reimbursed.

 

(e)           Tenant’s
Share of Common Area Operating Expenses shall be payable by Tenant within
thirty (30) days after a reasonably detailed statement of actual expenses is presented
to Tenant by Landlord.  At Landlord’s
option, however, an amount may be estimated by Landlord from time to time of
Tenant’s Share of annual Common Area Operating Expenses and the same shall be
payable monthly or quarterly, as Landlord shall designate, during each 12-month
period of the Lease term, on the same day as the Base Rent is due
hereunder.  Landlord shall deliver to
Tenant within sixty (60) days after the expiration of each calendar year a
reasonably detailed statement showing Tenant’s Share of the actual Common Area
Operating Expenses incurred during the preceding year.  If Tenant’s payments under this Paragraph 4.2(d) during
said preceding year exceed Tenant’s Share as indicated on said statement,
Landlord shall be credited the amount of such over-payment against Tenant’s
Share of Common Area Operating Expenses next becoming due or reimbursed if not
sufficient due.  If Tenant’s payments
under this Paragraph 4.2(d) during said preceding year were less than
Tenant’s Share as indicated on said statement, Tenant shall pay to Landlord the
amount of the deficiency within thirty (30) days after delivery by Landlord to
Tenant of said statement.

 

(f)            Not
more often than once each calendar year, Tenant, upon thirty (30) days advance
written notice thereof to Landlord, at Tenant’s sole cost and expense, may
retain an independent Certified Public Accountant reasonably acceptable to
Landlord, or utilize an employee of Tenant, to review and audit Landlord’s
books and records with regard to the Operating Expenses for the Premises and
the calculations of Tenant’s

 

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proportionate share
thereof.  If it is reasonably determined
by such auditors that Tenant overpaid its share of Operating Expenses or that
Operating Expenses were over billed, Landlord shall refund to Tenant the amount
of such overpayment within thirty (30) days. 
If it is reasonably determined by such auditors that Tenant underpaid
its share of any Operating Expenses, Tenant shall pay to Landlord the amount of
such deficiency within thirty (30) days. 
If it is reasonably determined by such auditors that Tenant overpaid its
share of any Operating Expenses by more than five percent (5%), Landlord shall
reimburse Tenant for the reasonable costs of Tenant’s audit not to exceed one
thousand dollars ($1,000).

 

5.             Security Deposit. 
Tenant shall deposit with Landlord upon Tenant’s execution hereof the
Security Deposit set forth in Paragraph 1.7 as security for Tenant’s faithful
performance of Tenant’s obligations under this Lease.  If Tenant fails to pay Base Rent or other
rent or charges due hereunder, or otherwise Defaults under this Lease (as
defined in Paragraph 13.1), Landlord may use, apply or retain all or any portion
of said Security Deposit, Tenant shall within ten (10) days after written
request therefore deposit monies with Landlord sufficient to restore said
Security Deposit to the full amount required by this Lease.  Any time the Base Rent increases during the
term of this Lease, Tenant shall, upon written request from Landlord, deposit
additional monies with Landlord as an addition to the Security Deposit so that
the total amount of the Security Deposit shall at all times bear the same
proportion to the then current Base Rent as the initial Security Deposit bears
to the initial Base Rent set forth in Paragraph 1.5.  Landlord shall not be required to keep all or
any part of the Security Deposit separate from its general accounts.  Landlord shall, at the expiration or earlier
termination of the term hereof and after Tenant has vacated the Premises,
return to Tenant (or, at Landlord’s option, to the last assignee, if any, of
Tenant’s interest herein), that portion of the Security Deposit not used or
applied by Landlord.  Unless otherwise
expressly agreed in writing by Landlord, no part of the Security Deposit shall
be considered to be held in trust, to bear interest or other increment for its
use, or to be prepayment for any monies to be paid by Tenant under this Lease.

 

6.             Use.

 

6.1           Permitted Use.

 

(a)           Tenant
shall use and occupy the Premises only for the Permitted Use set forth in
Paragraph 1.8, or any other legal use which is reasonably comparable thereto,
and for no other purpose.  Tenant shall
not use or permit the use of the Premises in a manner that is unlawful, creates
waste or a nuisance, or that disturbs owners and/or occupants of, or causes
damage to the Premises or neighboring premises or properties.

 

(b)           Landlord
hereby agrees to not unreasonably withhold or delay its consent to any written
request by Tenant, Tenant’s assignees or subtenants, and by prospective
assignees and subtenants of Tenant, its assignees and subtenants, for a
modification of said Permitted Use, so long as the same will not impair the
structural integrity of the improvements on the Premises or in the Building or
the mechanical or electrical systems therein, does not conflict with uses by
other Tenants, is not significantly more burdensome to the Premises or the
Building and the improvements thereon, and is otherwise permissible pursuant to
this Paragraph 6.  If Landlord elects to
withhold such consent, Landlord shall within five (5) business days after
such request give a written notification of same, which notice shall include an
explanation of Landlord’s reasonable objections to the change in use.

 

6.2           Hazardous Substances.

 

(a)           Reportable Uses Require Consent.  The term “Hazardous Substance”
as used in this Lease shall mean any product, substance, chemical, material or
waste whose presence, nature, quantity and/or intensity of existence, use,
manufacture, disposal, transportation, spill, release or effect, either by
itself or in combination with other materials expected to be on the Premises,
is either: (i) potentially injurious to the public health, safety or
welfare, the environment, or the Premises; (ii) regulated or monitored by
any governmental authority; or (iii) a basis for potential liability of
Landlord to any governmental agency or third party under any applicable statute
or common law theory.  Hazardous
Substance shall include, but not be limited to, hydrocarbons, petroleum,
gasoline, crude oil or any products or by-products thereof.  Tenant shall not engage in any activity in or
about the Premises which constitutes a Reportable Use (as hereinafter defined)
of Hazardous Substances without complying with all Applicable Requirements (as
defined in Paragraph 6.3).  “Reportable Use” shall mean (i) the installation or use
of any above or below ground storage tank, (ii) the generation,
possession, storage, use, transportation, or disposal of a Hazardous Substance
that requires a permit from, or with respect to which a report, notice,
registration or business plan is required to be filed with, any governmental
authority, and (iii) the presence in, on or about the Premises of a
Hazardous Substance with respect to which any Applicable Laws require that a
notice be given to persons entering or occupying the Premises or neighboring
properties.  Notwithstanding the
foregoing, Tenant may, without Landlord’s prior consent, but in compliance with
all Applicable requirements, use any ordinary and customary materials
reasonably required to be used by Tenant in the normal course of the Permitted
Use, so long as such use is not a Reportable Use and does not expose the
Premises or neighboring properties to any meaningful risk of contamination or
damage or expose Landlord to any liability therefor.  In addition, Landlord may (but without any
obligation to do so) condition its consent to any Reportable Use of any
Hazardous Substance by Tenant upon Tenant’s giving Landlord such additional
assurances as Landlord, in its reasonable discretion, deems necessary to
protect itself, the public, the Premises and the environment against damage,
contamination or injury and/or liability therefor.

 

(b)           Duty to Inform Landlord. 
If Tenant knows, or has reasonable cause to believe, that a Hazardous
Substance has contaminated the the Premises, the Common Area or the
Building,  Tenant shall immediately give
Landlord written notice thereof, together with a copy of any statement, report,
notice, registration, application, permit, business plan, license, claim,
action, or proceeding given to, or received from, any governmental authority or
private party concerning the presence, spill, release, discharge of, or exposure
to, such Hazardous

 

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Substance including but
not limited to all such documents as may be involved in any Reportable Use
involving the Premises.  Tenant shall not
cause or permit any Hazardous Substance to be spilled or released in, on, under
or about the Premises (including, without limitation, through the prompting or
sanitary sewer system).

 

(c)           Indemnification by Tenant. 
Tenant shall indemnify, protect, defend and hold Landlord, its agents,
employees, lenders and ground lessor, if any, and the Premises, harmless from
and against any and all damages, liabilities, judgments, costs, claims, liens,
expenses, penalties, loss of permits and attorneys’ and consultants’ fees
arising out of or involving any Hazardous Substance brought onto the Premises
by or for Tenant or by anyone under Tenant’s control.  Tenant’s obligations under this paragraph 6.2(c) shall
include, but not be limited to, the effects of any contamination or injury to
person, property or the environment created or suffered by Tenant, and the cost
of investigation (including consultants’ and attorneys’ fees and testing),
removal, remediation, restoration and/or abatement thereof, or of any
contamination therein involved, and shall survive the expiration or earlier
termination of this Lease.  No
termination, cancellation or release agreement entered into by Landlord and
Tenant shall release Tenant from its obligations under this Lease with respect
to Hazardous Substances, unless specifically so agreed by Landlord in writing
at the time of such agreement.

 

(d)           Indemnification by Landlord. 
Tenant represents that it has received the “Phase I” report dated October 11,
2005 for the Premises.  Landlord shall
indemnify, protect, defend and hold Tenant, its agents and employees harmless
from and against any and all damages, liabilities, judgments, costs, claims,
expenses, penalties, loss of permits and attorneys’ and consultants’ fees
arising out of or involving any Hazardous Substance on, in or under the
Premises as of the Commencement Date. 
Landlord’s obligation under this Paragraph 6.2(d) shall include,
but not be limited to, the effects of any contamination or injury to person or
property, and the cost of investigation (including consultants’ and attorneys’
fees and testing), removal, remediation, restoration and/or abatement thereof,
and shall survive the expiration or earlier termination of this Lease.

 

6.3           Tenant’s Compliance with Requirements.  Tenant shall, at Tenant’s sole cost and
expense, fully, diligently and in a timely manner, comply with all “Applicable Requirements,” which term is used in this Lease
to mean all laws, rules, regulations, ordinances, directives, covenants,
easements and restrictions of record, permits, and the requirements of any
applicable fire insurance underwriter or rating bureau, relating in any manner
to the Premises (including but not limited to matters pertaining to (i) industrial
hygiene, (ii) environmental conditions on, in, under or about the
Premises, including soil and ground water conditions caused by Tenant or its
agents, or invitees, and (iii) the use, generation, manufacture,
production, installation, maintenance, removal, transportation, storage, spill,
or release of any Hazardous Substance), now in effect or which may hereafter
come into effect as such Applicable Requirements arise from Tenant’s particular
use, Tenant Improvements,
Alterations or other actions by Tenant or its agents.  Tenant shall, within five (5) days after
receipt of Landlord’s written request, provide Landlord with copies of all
documents and information, including but not limited to permits, registrations,
manifests, applications, reports and certificates, evidencing Tenant’s
compliance with any Applicable Requirements specified by Landlord, and shall
immediately upon receipt, notify Landlord in writing (with copies of any
documents involved) of any threatened or actual claim, notice, citation,
warning, complaint or report pertaining to or involving failure by Tenant or
the Premises to comply with any Applicable Requirements.

 

6.4           Inspection; Compliance with Law.  Landlord, Landlord’s agents, employees,
contractors and designated representatives, and the holders of any mortgages,
deeds of trust or ground leases on the Premises (“Lenders”)
shall have the right to enter the Premises at any time in the case of an
emergency, and otherwise at reasonable times, for the purpose of inspecting the
condition of the Premises and for verifying compliance by Tenant with this
Lease and all Applicable Requirements (as defined in Paragraph 6.3), and
Landlord shall be entitled to employ experts and/or consultants in connection
therewith to advise Landlord with respect to Tenant’s activities, including but
not limited to Tenant’s installation, operation, use, monitoring, maintenance,
or removal of any Hazardous Substance on or from the Premises.  The costs and expenses of any such
inspections shall be paid by the party requesting same, unless a Default or
Breach of this Lease by Tenant or a violation of Applicable Requirements or a
contamination, caused or materially contributed to by Tenant, is found to exist
or to be imminent, or unless the inspection is requested or ordered by a
governmental authority as the result of any such existing or imminent violation
or contamination.  In such case, Tenant
shall upon request reimburse Landlord or Landlord’s Lender, as the case may be,
for the costs and expenses of such inspections.

 

7.             Maintenance,
Repairs, Utility Installations, Trade Fixtures and Alterations.

 

7.1           Tenant’s Obligations.

 

(a)           Subject
to the provision of Paragraphs 2.2 (Condition), 
7.2 (Landlord’s Obligations), 9 (Damage or Destruction), and 14
(Condemnation), Tenant shall, at Tenant’s sole cost and expense and at all
times, keep the Premises and every part thereof in good order, condition and
repair (whether or not such portion of the Premises requiring repair, or the
means of repairing the same, are reasonably or readily accessible to Tenant,
and whether or not the need for such repairs occurs as a result of Tenant’s
use, any prior use, the elements or the age of such portion of the Premises),
including, without limiting the generality of the foregoing, all equipment or
facilities specifically serving the Premises, such as plumbing, heating, air
conditioning, ventilating, electrical, lighting facilities, boilers, fired or
unfired pressure vessels, fire hose connections if within the Premises,
fixtures, interior walls, interior surfaces of exterior walls, ceilings, roof
membrane, floors, windows, doors, plate glass, and skylights, but excluding any
items which are the responsibility of Landlord pursuant to Paragraph 7.2
below.  Tenant, in keeping the Premises
in good order, condition and repair, shall exercise and perform good
maintenance practices.  Tenant’s
obligations shall include restorations, replacements or renewals when necessary
to keep the Premises and all improvements thereon or a part thereof in good
order, condition and state of repair.

 

6

 

(b)           Tenant
shall, at Tenant’s sole cost and expense, procure and maintain a contract, with
copies to Landlord, in customary form and substance for and with a contractor
specializing and experienced in the inspection, maintenance and service of the
heating, air conditioning and ventilation system for the Premises.

 

(c)           If
Tenant fails to perform Tenant’s obligations under this Paragraph 7.1, Landlord
may enter upon the Premises after ten (10) days’ prior written notice to
Tenant (except in the case of an emergency, in which case no notice shall be
required), perform such obligations on Tenant’s behalf, and put the Premises in
good order, condition and repair, in accordance with Paragraph 13.2 below.

 

7.2           Landlord’s Obligations. 
Subject to the provisions of Paragraphs 2.2 (Condition),  4.2 (Common Area Operating Expenses ), 7
(Use), 7.1 (Tenant’s Obligations), 9 (Damage or Destruction) and 14
(Condemnation), Landlord, subject to reimbursement pursuant to Paragraph 4.2,
shall keep in good order, condition and repair the foundations, exterior walls,
structural condition of interior bearing walls, exterior roof, fire sprinkler
and/or standpipe and hose (if located in the Common Areas) or other automatic
fire extinguishing system including fire alarm and/or smoke detection systems
and equipment, fire hydrants, parking lots, walkways, parkways, driveways,
landscaping, fences, signs and utility systems serving the Common Areas and all
parts thereof, as well as providing the services for which there is a Common
Area Operating Expense pursuant to Paragraph 4.2.  Landlord shall not be obligated to paint the
exterior or interior surfaces of exterior walls nor shall Landlord be obligated
to maintain, repair or replace windows, doors or plate glass of the
Premises.  Tenant expressly waives the
benefit of any statute now or hereafter in effect which would otherwise afford
Tenant the right to make repairs at Landlord’s expense or terminate this Lease
because of Landlord’s failure to keep the Building, Industrial Center or Common
Areas in good order, condition and repair.

 

7.3           Utility Installations, Trade Fixtures, Alterations.

 

(a)           Definitions; Consent Required.  The term “Utility
Installations”  is used in
this Lease to refer to all air lines, power panels, electrical distribution, security,
fire protections systems, communications systems, lighting fixtures, heating,
ventilating and air conditioning equipment, plumbing, and fencing in, on or
about the Premises.  The term “Trade Fixtures” shall mean Tenant’s machinery and equipment
which can be removed without doing material damage to the Premises.  The term “Alterations”
shall mean any modification of the improvements on the Premises which are
provided by Landlord under the terms of this Lease, other than Utility
Installations or Trade Fixtures.  “Tenant-Owned Alterations and/or Utility Installations” are
defined as Alterations and/or Utility Installations made by Tenant that are not
yet owned by Landlord pursuant to Paragraph 7.4(a).  Tenant shall not make nor cause to be made
any Alterations or Utility Installations in, on, under or about the Premises
without Landlord’s prior written consent. 
Tenant may, however, make non-structural Utility Installations to the
interior of the Premises (excluding the roof) without Landlord’s consent but
upon notice to Landlord, so long as they are not visible from the outside of
the Premises, do not involve puncturing, relocating or removing the roof, or
changing or interfering with the fire sprinkler or fire detection systems and
the cost thereof for each Alteration does not exceed $75,000.00 with any
Alteration cost within a six (6) month period to be considered as one
Alteration for purposes of this limit.

 

(b)           Consent.  Any
Alterations or Utility Installations that Tenant shall desire to make and which
require the consent of the Landlord shall be presented to Landlord in written
form with detailed plans.  All consents
given by Landlord, whether by virtue of Paragraph 7.3(a) or by subsequent
specific consent, shall be deemed conditioned upon:  (i) Tenant’s acquiring all applicable
permits required by governmental authorities; (ii) the furnishing of
copies of such permits together with a copy of the plans and specifications for
the Alteration or Utility Installation to Landlord prior to commencement of the
work thereon; and (iii) the compliance by Tenant with all conditions of
said permits in a prompt and expeditious manner.  Any Alterations of Utility Installations by
Tenant during the term of this Lease shall be done in a good and workmanlike
manner, with good and sufficient materials, and be in compliance with all
Applicable Requirements.  Tenant shall
promptly upon completion thereof furnish Landlord with as-built plans and
specifications therefor.

 

(c)           Lien Protection. 
Tenant shall pay when due all claims for labor or materials furnished or
alleged to have been furnished to or for Tenant at or for use on the Premises,
which claims are or may be secured by any mechanic’s or materialmen’s lien
against the Premises or any interest therein. 
Tenant shall give Landlord not less than ten (10) days’ notice
prior to the commencement of any work in, on, or about the Premises, and
Landlord shall have the right to post notices of non-responsibility in or on
the Premises as provided by law.  If
Tenant shall, in good faith, contest the validity of any such lien, claim or
demand, then Tenant shall, at its sole expense, defend and protect itself,
Landlord and the Premises against the same and shall pay and satisfy any such
adverse judgment that may be rendered thereon before the enforcement thereof
against the Landlord or the Premises.  If
Landlord shall require, Tenant shall furnish to Landlord a surety bond
satisfactory to Landlord in an amount equal to one and one-half times the
amount of such contested lien claim or demand, indemnifying Landlord against
liability for the same,  as required by
law for the holding of the Premises free from the effect of such lien or
claim.  In addition, Landlord may require
Tenant to pay Landlord’s attorneys’ fees and costs in participating in such
action if Landlord shall decide it is to its best interest to do so and a
release bond has not been recorded.

 

7.4           Ownership, Removal, Surrender, and Restoration.

 

(a)           Ownership.  Subject to
Landlord’s right to require their removal and to cause Tenant to become the
owner thereof as hereinafter provided in this Paragraph 7.4, all Alterations
and Utility Installations made to the Premises by Tenant shall be the property
of and owned by Tenant, but considered a part of the Premises.  Landlord may, at any time and at its option,
elect in writing to Tenant to be the owner of all or any specified part of the
Tenant-Owned Alterations and Utility Installations.  Unless otherwise instructed per Subparagraph
7.4(b) hereof,

 

7

 

all Tenant-Owned
Alterations and Utility Installations shall, at the expiration or earlier
termination of this Lease, become the property of Landlord and remain upon the
Premises and be surrendered with the Premises by Tenant.

 

(b)           Removal.  Unless
otherwise agreed in writing, Landlord may require at the time of giving consent
and for those not needing or getting consent, then upon thirty (30) days notice
prior to Lease expiration or any time prior to Lease termination earlier than
expiration, that any or all Tenant-Owned Alterations or Utility Installations
or Tenant Improvements be removed by the expiration or earlier termination of
this Lease, notwithstanding that their installation may have been consented to
by Landlord.  Landlord may require the
removal at any time of all or any part of any Alterations or Utility
Installations made without the required consent of Landlord.

 

(c)           Surrender/Restoration.  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
subtenancies, or may, at the option of Landlord, operate as an assignment to
Landlord of any or all such subleases or subtenancies.  Immediately prior to the expiration or sooner
termination of this Lease, Tenant shall remove all of Tenant’s signs from the
exterior of the Building and shall remove all of Tenant’s equipment, trade
fixtures, furniture, supplies, wall decorations and other personal property
from the Leased Premises, and shall vacate and surrender the Leased Premises to
Landlord in the same condition, broom clean and freshly repainted, as existed
at the Lease Commencement Date plus the Tenant
Improvements and Alterations that do not have to be removed.  Tenant shall repair all damage to the Leased
Premises caused by Tenant or by Tenant’s removal of Tenant’s property and all
damage to the exterior of the Building caused by Tenant’s removal of Tenant’s
signs.  Tenant shall patch and refinish,
to Landlord’s reasonable satisfaction, all penetrations made by Tenant or its
employees to the floor, walls or ceiling of the Leased Premises, whether such
penetrations were made with Landlord’s approval or not.  Tenant shall replace all stained or damaged
ceiling tiles and shall repair or replace, as necessary, all wall coverings and
clean or replace, as may be required, floor coverings to the reasonable
satisfaction of Landlord.  Tenant shall
replace all burned out light bulbs and damaged or stained light lenses.  Tenant shall repair all damage caused by
Tenant to the exterior surface of the Building and the paved surfaces of the
outside areas adjoining the Leased Premises and, where necessary, replace or
resurface same.  Additionally, Tenant shall,
prior to the expiration or sooner termination of this Lease, remove any
improvements, constructed or installed by Tenant which Landlord requests be so
removed by Tenant per Paragraph 7.4(b) above, and repair all damage caused
by such removal.  If the Leased Premises
are not surrendered to Landlord in the condition required by this Article at
the expiration or sooner termination of this Lease, Landlord may, at Tenant’s
expense, so remove Tenant’s signs, property and/or improvements not so removed
and make such repairs and replacements not so made or hire, at Tenant’s
expenses, independent contractors to perform such work.  Tenant shall be liable to Landlord for all
costs incurred by Landlord in returning the Leased Premises to the required
condition.  Tenant shall be deemed to
have impermissibly held over until such time as such required work is completed
unless Landlord has taken over such required work at Tenant’s cost. Tenant
shall pay Base Monthly Rent and Additional Rent in accordance with the terms of
the Holding Over paragraph until such work is completed unless Landlord has
taken over such required work at Tenant’s cost and does not complete same
within 30 days.

 

8.             Insurance; Indemnity.

 

8.1           Payment of Premiums. 
The cost of the premiums for the insurance policies maintained by
Landlord under this Paragraph 8 shall be a Common Area Operating Expense
pursuant to Paragraph 4.2 hereof. 
Premiums for policy periods commencing prior to, or extending beyond,
the term of this Lease shall be prorated to coincide with the corresponding
Commencement Date or Expiration Date.

 

8.2           Liability Insurance.

 

(a)           Carried by Tenant. 
Tenant shall obtain and keep in force during the term of this Lease a
Commercial General Liability policy of insurance protecting Tenant, Landlord
and any Lender(s) whose names have been provided to Tenant in writing (as
additional insureds) against claims for bodily injury, personal injury and
property damage based upon, involving or arising out of the ownership, use,
occupancy or maintenance of the Premises and all areas appurtenant
thereto.  Such insurance shall be on an
occurrence basis providing single limit coverage in an amount not less than
$1,000,000 per occurrence with an “Additional Insured-Managers or Landlords of
Premises: endorsement and contain the “Amendment of the Pollution Exclusion”
endorsement for damage caused by heat, smoke or fumes from a hostile fire.  The policy shall not contain any
intra-insured exclusions as between insured persons or organizations, but shall
include coverage for liability assumed under this Lease as an “insured contract” for the performance of Tenant’s indemnity
obligations under this Lease.  The limits
of said insurance required by this Lease or as carried by Tenant shall not,
however, limit the liability of Tenant nor relieve Tenant of any obligation
hereunder.  All insurance to be required
by this Lease or as carried by Tenant shall not, however, limit the liability
of Tenant nor relieve Tenant of any obligation hereunder.  All insurance to be carried by Tenant shall
be primary to and not contributory with any similar insurance carried by
Landlord, whose insurance shall be considered excess insurance only.

 

(b)           Carried by Landlord. 
Landlord shall also maintain liability insurance described in Paragraph
8.2(a) above, in addition to and not in lieu of, the insurance required to
be maintained by Tenant.  Tenant shall
not be named as an additional insured therein.

 

8.3           Property Insurance-Building, Improvements and Rental Value.

 

(a)           Building and Improvements. 
Landlord shall obtain and keep in force during the term of this Lease a
policy or policies in the name of Landlord, with loss payable to Landlord and
to any Lender(s), insuring against loss or damage to the Premises.  Such insurance shall be for full replacement
cost, as the same shall exist

 

8

 

from time to time, or the
amount required by any Lender(s), but in no event more than the commercially
reasonable and available insurable value thereof if, by reason of the unique
nature or age of the improvements involved, such latter amount is less than
full replacement cost.  Tenant-Owned
Alterations and Utility Installations, Trade Fixtures and Tenant’s personal
property shall be insured by Tenant pursuant to Paragraph 8.4.  If the coverage is available and commercially
appropriate, Landlord’s policy or policies shall insure against all risks of
direct physical loss or damage (and at Landlord’s option the perils of flood
and/or earthquake), including coverage for any additional costs resulting from
debris removal and reasonable amounts of coverage for the enforcement of any
ordinance or law regulating the reconstruction or replacement of any undamaged
sections of the Building required to be demolished or removed by reason of the
enforcement of any building, zoning, safety or land use laws as the result of a
covered loss, but not including plate glass insurance.  Said policy or policies shall also contain an
agreed valuation provision in lieu of any co-insurance clause, waiver of
subrogation, and inflation guard protection causing an increase in the annual
property insurance coverage amount by a factor of not less than the adjusted
U.S. Department of Labor Consumer Price Index for All Urban Consumers for the city
nearest to where the Premises are located.

 

(b)           Rental Value. 
Landlord shall also obtain and keep in force during the term of this
Lease a policy or policies in the name of Landlord, with loss payable to
Landlord and any Lender(s), insuring the loss of the full rental and other
charges payable by all tenants of the Building to Landlord for at least one
year (including all Real Property Taxes, insurance costs, all Common Area
Operating Expenses and any scheduled rental increases).  Said insurance may provide that in the event
the Lease is terminated by reason of an insured loss, the period of indemnity
for such coverage shall be extended beyond the date of the completion of
repairs or replacement of the Premises, to provide for one full year’s loss of
rental revenues from the date of any such loss. 
Said insurance shall contain an agreed valuation provision in lieu of
any co-insurance clause, and the amount of coverage shall be adjusted annually
to reflect the projected rental income, Real Property Taxes, insurance premium
costs and other expenses, if any, otherwise payable, for the next 12-month
period.  Common Area Operating Expenses
shall include any deductible amount in the event of such loss only to the
extent set forth in Paragraph 4.2.

 

(c)           Adjacent Premises. 
Tenant shall pay for any increase in the premiums for the property
insurance of the Building and for the Common Areas if said increase is caused
by Tenant’s acts, omissions, use or occupancy of the Premises.

 

(d)           Tenant’s Improvements. 
Since Landlord is the Insuring Party, Landlord shall not be required to
insure Tenant-Owned Alterations and Utility Installations or Tenant Improvements and Tenant shall
procure their own insurance. Notwithstanding anything herein to the contrary,
in all events Tenant shall maintain Tenant’s own insurance on its trade
fixtures, lab equipment, and machinery and their related piping.

 

8.4           Tenant’s Property Insurance. 
Subject to the requirements of Paragraphs 8.3 and 8.5, Tenant at its
cost shall either by separate policy or, at Landlord’s option, by endorsement
to a policy already carried, maintain insurance coverage on all of Tenant’s
personal property, Trade Fixtures and Tenant-Owned Alterations and Utility
Installations, Tenant Improvements in, on, or about the Premises similar in
coverage to that carried by Landlord as the Insuring Party under Paragraph
8.3(a).  Such insurance shall be full
replacement cost coverage.  The proceeds
from any such insurance shall be used by Tenant for the replacement of personal
property and the restoration of Trade Fixtures and Tenant-Owned Alterations and
Utility Installations and Tenant Improvements. 
Upon request from Landlord, Tenant shall provide Landlord with written
evidence that such insurance is in force.

 

8.5           Insurance Policies. 
Insurance required hereunder shall be in companies duly licensed to
transact business in the state where the Premises are located, and maintaining
during the policy term a “General Policyholders Rating” of at least B+, V, or
such other rating as may be required by a Lender, as set forth in the most
current issue of “Best’s Insurance Guide.” 
Tenant shall not do or permit to be done anything which shall invalidate
the insurance policies referred to in this Paragraph 8.  Tenant shall cause to be delivered to
Landlord, within seven (7) days after the earlier of the Early Possession
Date or the Commencement Date, certified copies of, or certificates evidencing
the existence and amounts of, the insurance required under Paragraph 8.2(a) and
8.4.  No such policy shall be cancelable
or subject to modification except after thirty (30) days’ prior written notice
to Landlord.  Tenant shall at least ten (10) days
prior to the expiration of such policies, furnish Landlord with evidence of
renewals or “insurance binders” evidencing renewal thereof, or Landlord may
order such insurance and charge the cost thereof to Tenant, which amount shall
be payable by Tenant to Landlord upon demand.

 

8.6           Waiver of Subrogation. 
Without affecting any other rights or remedies, Tenant and Landlord each
hereby release and relieve the other, and waive their entire right to recover
damages (whether in contract or in tort) against the other, for loss or damage
to their property arising out of or incident to the perils required to be insured
against under Paragraph 8.  The effect of
such releases and waivers of the right to recover damages shall not be limited
by the amount of insurance carried or required, or by any deductibles
applicable thereto.  Landlord and Tenant
agree to have their respective insurance companies issuing property damage
insurance waive any right to subrogation that such companies may have against
Landlord or Tenant, as the case may be, so long as the insurance is not
invalidated thereby.

 

8.7           Indemnity.  Tenant,
shall, during the term of this lease, indemnify and save harmless Landlord and
any agents of Landlord from any and all loss, damage, claims of damage,
obligations, cause or causes of action, or liabilities of any kind or nature
(including reasonable costs of attorney’s fees if Landlord is made a party to
any action which Tenant’s indemnity runs hereunder) by reason of injury or
death of any person or persons or damage to any property of any kind and to
whomsoever belonging, including injury or death to the person or damage to the
property of Tenant, Tenant’s officers, directors, employees, agents, guests,
subtenants and assignees, concessionaires and licensees, and any other person,
firm or corporation selling or manufacturing merchandise or services upon or from
the demised premises, or any part thereof, from any cause or cause whatsoever
which result

 

9

 

from Tenant’s use or from
any other activity done, permitted or suffered by Tenant.  As a material part of the consideration to
Landlord, Tenant hereby assumes all risk of damage to property or injury to
persons in or about the Premises from any cause whatsoever (except that which
is cause by the sole active negligence or willful misconduct by Landlord or its
Agents or by the failure of Landlord to observe any of the terms and conditions
of this lease, if such failure has persisted for an unreasonable period after
written notice of such failure). . 
Tenant’s obligations under this paragraph shall survive the termination
of this lease.

 

8.8           Exemption of Landlord from Liability.  Landlord shall not be liable for injury or
damage which may be sustained by Tenant or to the person or goods, wares,
merchandise or other property of Tenant, Tenant’s employees, contractors, invitees,
customers, or any other person in or about the Premises, whether such damage or
injury is caused by or results from fire, earthquake, steam, electricity, gas,
water or rain, which may leak or from or into any part of the premises or from
the breakage, leakage, obstruction or other defects of pipes, fire sprinklers,
wires, appliances, plumbing, HVAC or lighting fixtures, or from any other
cause, whether said injury or damage results from conditions arising upon the
Premises or upon other portions of the Building of which the Premises are a
part, from other sources or places, and regardless of whether the cause of such
damage or injury or the means of preparing the same is accessible or not.  Landlord shall not be liable for any damages
arising from any act or neglect of any other tenant of Landlord nor from the
failure by Landlord to enforce the provisions of any other lease in the
Industrial Center.  Notwithstanding
Landlord’s negligence or breach of this Lease, Landlord shall under no
circumstances be liable for injury to Tenant’s business or for any loss of
income or profit therefrom.

 

9.             Damage or Destruction.

 

9.1           Definitions.

 

(a)           “Premises Partial Damage” 
shall mean damage or destruction to the Premises, other than
Tenant-Owned Alterations and Utility Installations, the time of repair is less
than 360 days from the date of casualty.

 

(b)           “Premises Total Destruction” shall mean damage or destruction
to the Premises, other than Tenant-Owned Alterations and Utility Installations,
the time of repair is more than 360 days from the date of casualty .

 

(c)           Intentionally
Omitted f

 

(d)           “Insured Loss” shall mean damage or destruction to the
Premises, other than Tenant-Owned Alterations and Utility Installations and
Trade Fixtures, which was caused by an event required to be covered by the
insurance described in Paragraph 8.3(a) irrespective of any deductible
amounts or coverage limits involved.

 

(e)           “Replacement Cost” shall mean the cost to repair or rebuild
the improvements owned by Landlord at the time of the occurrence to their
condition existing immediately prior thereto, including demolition, debris
removal and upgrading required by the operation of applicable building codes,
ordinances or laws, and without deduction for depreciation.

 

(f)            “Hazardous Substance Condition” shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination by, a
Hazardous Substance as defined in Paragraph 6.2(a), in, on, or under the
Premises.

 

9.2           Premises Partial or Total Damage - Insured or Uninsured Loss.  If Premises Partial or Total Damage that is
an Insured or Uninsured Loss occurs, then Landlord shall, at Landlord’s
expense, repair such damage (but not Tenant’s Trade Fixtures or Tenant-Owned
Alterations and Utility Installations or Tenant Improvements) as soon as
reasonably possible, but only to the extent of the available insurance
proceeds, if any, plus deductibles, and this Lease shall continue in full force
and effect.  In the event, however, that
there is a shortage of insurance proceeds and such shortage is due to any
reason including the fact that some but not all of which may include the fact
that, by reason of the unique nature of the improvements in the Premises, full
replacement cost insurance coverage was not commercially reasonable and
available, then Landlord shall have no obligation to pay for the shortage in
insurance proceeds or to fully restore the unique aspects of the Premises
unless Tenant provides Landlord with the funds to cover same, or adequate
assurance thereof, within ten (10) days following receipt of written
notice of such shortage and request therefor. 
If Landlord receives said funds or adequate assurance thereof within
said ten (10) day period, Landlord shall complete them as soon as
reasonably possible and this Lease shall remain in full force and effect.  If Landlord does not receive such funds or
assurance within said period, Landlord may nevertheless elect by written notice
to Tenant within ten (10) days thereafter to make such restoration and
repair as is commercially reasonable with Landlord paying any shortage in
proceeds, in which case this Lease shall remain in full force and effect.  If Landlord does not receive such funds or
assurance within such ten (10) day period, and if Landlord does not so elect
to restore and repair, then this Lease shall terminate sixty (60) days
following the occurrence of the damage or destruction.  Unless otherwise agreed, Tenant shall in no
event have any right to reimbursement from Landlord for any funds contributed
by Tenant to repair any such damage or destruction.  Tenant shall repair any damage or destruction
done to Tenant’s Tenant Improvements.

 

9.3           Intentionally Deleted.

 

9.4           Intentionallly
Deleted.

 

9.5           Damage Near End of Term. 
If at any time during the last twelve (12) months of the term of this

 

10

 

Lease there is damage for
which the cost to repair exceeds two month’s Base Rent, whether or not an
Insured Loss, either Landlord or Tenant may terminate this Lease effective
sixty (60) days following the date of occurrence of such damage by giving
written notice to the other of its election to do so within thirty (30) days
after the date of occurrence of such damage. 
Provided, however, if Tenant at that time has an exercisable option to
extend this Lease, then Tenant may preserve this Lease by exercising such
option and then Paragraph 9.2 above shall apply.  If Tenant fails to exercise such option, then
this Lease shall terminate as of the date set forth in the first sentence of
this Paragraph 9.5.

 

9.6           Abatement of Rent; Tenant’s Remedies.

 

(a)           In
the event of (i) Premises Partial Damage or (ii) Hazardous Substance
Condition for which Tenant is not legally responsible, the Base Rent, Common
Area Operating Expenses and other charges, if any, payable by Tenant hereunder
for the period during which such damage or condition, its repair, remediation
or restoration continues, shall be abated in proportion to the degree to which
Tenant’s use of the Premises is impaired. 
Except for abatement of Base Rent, Common Area Operating Expenses and
other charges, if any, as aforesaid, all other obligations of Tenant hereunder
shall be performed by Tenant, and Tenant shall have no claim against Landlord
for any damage suffered by reason of any such damage, destruction, repair,
remediation or restoration.

 

(b)           If
Landlord shall be obligated to repair or restore the Premises under the
provisions of this Paragraph 9 and shall not commence, in a substantial and
meaningful way and prosecute diligently to conclusion, the repair or
restoration of the Premises within ninety (90) days after such obligation shall
accrue or it is reasonably determined that the repairs will take longer than
360 days after the casualty, Tenant may, at any time within twenty (20) days
after notice of the time to repair or prior to the commencement of such repair
or restoration after ninety (90) days after the casualty, give written notice
to Landlord and to any Lenders of which Tenant has actual notice of Tenant’s
election to terminate this Lease on a date not less than sixty (60) days
following the giving of such notice.  If
Tenant gives such notice to Landlord and such Lenders because of the delay in
commencement of the repair and restoration and such repair or restoration is
not commenced within thirty (30) days after receipt of such notice, this Lease
shall terminate as of the date specified in said notice.  If Landlord or a Lender commences the repair
or restoration of the Premises within thirty (30) days after the receipt of
such notice, this Lease shall continue in full force and effect unless
terminated due to the duration of repair as set forth above.  “Commence” as
used in this Paragraph 9.6 shall mean either the unconditional authorization of
the preparation of the required plans, or the beginning of the actual work on
the Premises, whichever occurs first.

 

9.7           Hazardous Substance Conditions.  If a Hazardous Substance Condition occurs,
unless Tenant is legally responsible therefor (in which case Tenant shall make
the investigation and remediation thereof required by Applicable Requirements
and this Lease shall continue in full force and effect, but subject to Landlord’s
rights under Paragraph 6.2(c) and Paragraph 13), Landlord shall
investigate and remediate such Hazardous Substance Condition, as soon as
reasonably possible at Landlord’s expense.

 

9.8           Termination - Advance Payments.  Upon termination of this Lease pursuant to
this Paragraph 9, Landlord shall return to Tenant any advance payment made by
Tenant to Landlord and so much of Tenant’s Security Deposit as has not been, or
is not then required to be, used by Landlord under the terms of this Lease.

 

9.9           Waiver of Statutes. 
Landlord and Tenant agree that the terms of this Lease shall govern the
effect of any damage to or destruction of the Premises and the Building with
respect to the termination of this Lease and hereby waive the provisions of any
present or future statute to the extent it is inconsistent herewith.

 

10.           Real Property Taxes.

 

10.1         Payment of Taxes. 
Landlord shall pay the Real Property Taxes, as defined in Paragraph
10.2, applicable to the Industrial Center, and except as otherwise provided in
Paragraph 10.3, any such amounts shall be included in the calculation of Common
Area Operating Expenses in accordance with the provisions of Paragraph 4.2.

 

10.2         Real Property Tax Definition.  As used herein, the term “Real Property Taxes” shall include any form of real estate
tax or assessment, general, special, ordinary or extraordinary, and any license
fee, commercial rental tax, improvement bond or bonds, levy or tax (other than
inheritance, personal income or estate taxes) imposed upon the Industrial
Center by any authority having the direct or indirect power to tax, including
any city, state or federal government, or any school, agricultural, sanitary,
fire, street, drainage, or other improvement district thereof, levied against
any legal or equitable interest of Landlord in the Industrial Center or any
portion thereof, Landlord’s right to rent or other income therefrom, and/or
Landlord’s business of leasing the Premises. 
The term “Real Property Taxes” shall also
include any tax, fee, levy, assessment or charge, or any increase therein,
imposed by reason of events occurring, or changes in Applicable Law taking
effect, during the term of this Lease, including but not limited to a change in
the ownership of the Industrial Center or in the improvements thereon, the
execution of this Lease, or any modification, amendment or transfer thereof,
and whether or not contemplated by the Parties. 
In calculating Real Property Taxes for any calendar year, the Real
Property Taxes for any real estate tax year shall be included in the
calculation of Real Property Taxes for such calendar year based upon the number
of days which such calendar year and tax year have in common.

 

10.3         Additional Improvements. 
Tenant shall pay to Landlord the Common Area Operating Expenses as
payable under Paragraph 4.2, the entirety of any increase in Real Property
Taxes if assessed solely by reason of Alterations, Trade Fixtures or Utility
Installations placed upon the Premises by Tenant or at Tenant’s request.

 

10.4         Joint Assessment.  If
the Building is not separately assessed, Real Property Taxes allocated to

 

11

 

the Building shall be an
equitable proportion of the Real Property Taxes for all of the land and
improvements included within the tax parcel assessed or the industrial center,
such proportion to be determined by Landlord from the respective valuations
assigned in the assessor’s work sheets or such other information as may be
reasonably available.  Landlord’s
reasonable determination thereof, in good faith, shall be conclusive.

 

10.5         Tenant’s Property Taxes. 
Tenant shall pay prior to delinquency all taxes assessed against and
levied upon Tenant-Owned Alterations and Utility Installations, Trade Fixtures,
furnishings, equipment and all personal property of Tenant contained in the
Premises or stored within the Industrial Center.  When possible, Tenant shall cause its
Tenant-Owned Alterations and Utility Installations, Trade Fixtures,
furnishings, equipment and all other personal property to be assessed and
billed separately from the real property of Landlord.  If any of Tenant’s said property shall be
assessed with Landlord’s real property, Tenant shall pay Landlord the taxes
attributable to Tenant’s property within ten (10) days after receipt of a
written statement setting forth the taxes applicable to Tenant’s property.

 

11.           Utilities.  Tenant
shall pay directly for all utilities and services supplied to the Premises,
including but not limited to electricity, water, telephone, security, gas,
sewer, trash removal and cleaning of the Premises, together with any taxes
thereon.  If any such utilities or
services are not separately metered to the Premises or separately billed to the
Premises, Tenant shall pay to Landlord a reasonable proportion to be determined
by Landlord of all such charges jointly metered or billed with other premises
in the Building, in the manner and within the time periods set forth in
Paragraph 4.2(d).  Landlord shall not be
liable to Tenant for injury, damage, loss of Tenant’s business or profits, from
any failure, interruption, rationing or other curtailment in the supply of
electric, gas, water or other utilities from whatever cause. Tenant shall not consume water in excess of
that usually furnished or supplied for reasonable and normal drinking and
lavatory use in connection with an office environment (as determined by
Landlord), without first procuring the written consent of Landlord, which
Landlord may refuse, and in the event of consent, Landlord may have installed a
water meter in the Premises to measure the amount of water consumed. The cost
of any such meter and of its installation, maintenance and repair shall be paid
for by the Tenant, and Tenant agrees to pay to Landlord promptly upon demand
for all such water consumed as shown by said meters, at the rates charged for
such services by the local public utility plus any additional expense incurred
in keeping account of the water so consumed. If a separate meter is not
installed, the excess cost for such water shall be established by an estimate
made by a utility company or electrical engineer hired by Landlord at Tenant’s
expense.

 

12            Assignment and Subletting.

 

12.1         Landlord’s Consent Required.

 

(a)           Tenant
shall not assign this lease, nor any right hereunder, nor sublet the premises,
nor any part thereof, without the prior written consent of Landlord.  In exercising its reasonable discretion
Landlord may consider all commercially relevant factors involved in the leasing
of the premises including but not limited to the a) the creditworthiness and
financial stability of the prospective assignee or subtenant; b) references of
prior landlords; c) the past history of such subtenant, with respect to
involvement in litigation and bankruptcy proceedings; d) the use, generation or
disposal of hazardous materials.  The
presence of one negative factor enumerated above shall be deemed reasonable
justification for Landlord’s withholding consent.

 

(b)           The
involvement of Tenant or its assets in any transaction, or series of
transactions (by way of merger, sale, acquisition, financing, refinancing,
transfer, leveraged buy-out or otherwise), whether or not a formal assignment
or hypothecation of this Lease or Tenant’s assets occurs, which results or will
result in a reduction of the Net Worth of Tenant, as hereinafter defined, by an
amount equal to or greater than twenty-five percent (25%) of such Net Worth of
Tenant as it was represented to Landlord at the time of full execution and
delivery of this Lease or at the time of the most recent assignment to which
Landlord has consented, or as it exists immediately prior to said transaction or
transactions constituting such reduction, at whichever time said Net Worth of
Tenant was or is greater, shall be considered an assignment of this Lease by
Tenant to which Landlord may reasonably withhold its consent.  “Net Worth of Tenant”
for purposes of this Lease shall be the net worth of Tenant (excluding any
Guarantors) established under generally accepted accounting principles
consistently applied.

 

(c)           An
assignment or subletting of Tenant’s interest in this Lease without Landlord’s
specific prior written consent shall, at Landlord’s option, be a Default
curable after notice per Paragraph 13.1.

 

(d)           Tenant’s
remedy for any breach of this Paragraph 12.1 by Landlord shall be limited to
compensatory damages and/or injunctive relief.

 

12.2         Terms and Conditions Applicable to Assignment and Subletting.

 

(a)           Regardless
of Landlord’s consent, any assignment or subletting shall not (i) be
effective without the express written assumption by such assignee or subtenant
of the obligations of Tenant under this Lease, (ii) release Tenant of any
obligations hereunder, nor (iii) alter the primary liability of Tenant for
the payment of Base Rent and other sums due Landlord hereunder or for the
performance of any other obligations to be performed by Tenant under this Lease.

 

(b)           Landlord
may accept any rent or performance of Tenant’s obligations from any person
other than Tenant pending approval or disapproval of an assignment.  Neither a delay in the approval or
disapproval of such assignment nor the acceptance of any rent for performance
shall constitute a waiver or estoppel of Landlord’s right to exercise its
remedies for the Default or Breach by Tenant of any of the terms, covenants or
conditions of this Lease.

 

12

 

(c)           The
consent of Landlord to any assignment or subletting shall not constitute a
consent to any subsequent assignment or subletting by Tenant or to any
subsequent or successive assignment or subletting by the assignee or subtenant.  However, Landlord may consent to subsequent
or successive assignment or subletting by the assignee or subtenant.

 

(d)           In
the event of any Default or Breach of Tenant’s obligation under this Lease,
Landlord may proceed directly against Tenant, any guarantors or anyone else
responsible for the performance of the Tenant’s obligations under this Lease,
including any subtenant, without first exhausting Landlord’s remedies against
any other person or entity responsible therefor to Landlord, or any security
held by Landlord.

 

(e)           Each
request for consent to an assignment or subletting shall be in writing,
accompanied by information relevant to Landlord’s determination as to the
financial and operational responsibility and appropriateness of the proposed
assignee or subtenant, including but not limited to the intended use and/or
required modification of the Premises, if any, together with a non-refundable
deposit of $1,000, as reasonable consideration for Landlord’s considering and
processing the request for consent. 
Tenant agrees to provide Landlord with such other or additional
information and/or documentation as may be reasonably requested by Landlord.

 

(f)            Any
assignee of, or subtenant under, this Lease shall, by reason of accepting such
assignment or entering into such sublease, be deemed, for the benefit of
Landlord, to have assumed and agreed to conform and comply with each and every
term, covenant, condition and obligation herein to be observed or performed by
Tenant during the term of said assignment or sublease, other than such obligations
as are contrary to or inconsistent with provisions of an assignment or sublease
to which Landlord has specifically consented in writing.

 

12.3         Additional Terms and Conditions Applicable to Assignment and Subletting.  The following terms and conditions shall
apply to any subletting or assignment by Tenant of all or any part of the
Premises and shall be deemed included in all subleases and assignments under
this Lease whether or not expressly incorporated therein:

 

(a)           Tenant
hereby assigns and transfers to Landlord 50% off all Tenant’s interest in all
profits arising after the payment of brokers commissions and attorneys’ fees
and attributing .0125 cents per $1.00 dollars of tenant improvements spent in
the premises arising from the rentals, income or other consideration arising
from any sublease or assignment of all or a portion of the Premises hereafter
made by Tenant, and Landlord may collect such sums and apply same toward Tenant’s
obligations under this Lease.  Landlord
shall not, by reason of the foregoing provision or any other assignment of such
sublease to Landlord, nor by reason of the collection of the rents from a
subtenant, be deemed liable to the subtenant for any failure of Tenant to
perform and comply with any of Tenant’s obligations to such subtenant under
such Sublease.  In the event Tenant is in
monetary Breach of the Lease, Tenant hereby irrevocably authorizes and directs
any such subtenant, upon receipt of a written notice from Landlord and notice
of such Breach, to pay to Landlord the rents and other charges due and to
become due under the sublease.  Subtenant
shall rely upon any such statement and request from Landlord and shall pay such
rents and other charges to Landlord without any obligation or right to inquire
as to whether any Breach exists and notwithstanding any notice from or claim
from Tenant to the contrary.  Tenant
shall have no right or claim against such subtenant, or, until the Breach has
been cured, against Landlord, for any such rents and other charges so paid by
said subtenant to Landlord and any rents so collected by Landlord shall be
applied to Tenant’s obligations under this Lease.

 

(b)           In
the event the Lease is terminated due to a Breach by Tenant, Landlord, at its
option and without any obligation to do so, may require any subtenant to attorn
to Landlord, in which event Landlord shall undertake the obligations of the sub
landlord under such sublease from the time of the exercise of said option to
the expiration of such sublease; provided, however, Landlord shall not be
liable for any prepaid rents or security deposit paid by such subtenant to such
sub landlord or for any other prior defaults or breaches of such sub landlord
under such sublease.

 

(c)           No
subtenant under a sublease or assignee approved by Landlord shall further
assign or sublet all or any part of the Premises without Landlord’s prior
written consent.

 

(d)           Landlord
shall deliver a copy of any notice of Default or Breach by Tenant to the
subtenant, who shall have the right to cure the Default of Tenant within the
grace period, if any, specified in such notice. 
The subtenant shall have a right of reimbursement and offset from and
against Tenant for any such Defaults cured by the subtenant.

 

12.4         Permitted Transfer. 
Notwithstanding anything to the contrary in this Lease and after ten (10) days
prior written notice to Landlord, Tenant may, without Landlord’s prior written
consent and not subject to any recapture or bonus rent provisions, sublet the
Premises or assign the Lease to:  (i) a
subsidiary, affiliate, division or corporation controlling, controlled by or
under common control with Tenant; (ii) a successor corporation related to
Tenant by merger, consolidation, nonbankruptcy reorganization, or government
action; or (iii) a purchaser of substantially all of Tenant’s assets
located in the Premises.  In the even of
either (ii) or (iii) above, the assignee must have a net worth
greater than that of Tenant just prior to the merger or acquisition.  Any of the above are referenced hereafter as “Permitted
Transfer” and the transferee is referenced as “Permitted Transferee”.  For the purpose of this Lease, sale of Tenant’s
capital stock through any public exchange or issuances for purposes of raising
financing shall not be deemed an assignment, subletting, or any other transfer
of the Lease or the Premises.  Notwithstanding anything herein to the
contrary , in all events Tenant shall remain liable for this lease.

 

13

 

13.           Default; Breach; Remedies.

 

13.1         Default; Breach. 
Landlord and Tenant agree that if any attorney is consulted by Landlord
in connection with a Tenant Default or Breach (as hereinafter defined), $350.00
is a reasonable minimum sum per such occurrence for legal services and costs in
the preparation and service of a notice of Default, and that Landlord may
include the cost of such services and costs in said notice as rent due and
payable to cure said default.  a “Default” by Tenant is defined as a failure by Tenant to
observe, comply with or perform any of the terms, covenants, conditions or rules applicable
to Tenant under this Lease.  A “Breach” by Tenant is defined as the occurrence of any one or
more of the following Defaults, and, where a grace period for cure after notice
is specified herein, the failure by Tenant to cure such Default prior to the
expiration of the applicable grace period, and shall entitle Landlord to pursue
the remedies set forth in Paragraphs 13.2 and/or 13.3.

 

(a)           The
abandonment of the Premises or the failure to complete the initial tenant
improvements for 415 A in a timely manner.

 

(b)           Except
as expressly otherwise provided in this Lease, the failure by Tenant to make
any payment of Base Rent, Tenant’s Share of Common Area Operating Expenses, or
any other monetary payment required to be made by Tenant hereunder as and when
due, the failure by Tenant to provide Landlord with reasonable evidence of
insurance or surety bond required under this Lease, or the failure of Tenant to
fulfill any obligation under this Lease which endangers or threatens life or
property, where such failure continues for a period of three (3) days
following written notice thereof by or on behalf of Landlord to Tenant.

 

(c)           Except
as expressly otherwise provided in this Lease, the failure by Tenant to provide
Landlord with reasonable written evidence (in duly executed original form, if
applicable) of (i) compliance with Applicable Requirements per Paragraph
6.3, (ii) the inspection, maintenance and service contracts required under
Paragraph 7.1(b), (iii) the rescission of an unauthorized assignment or
subletting per Paragraph 12.1, (iv) a Tenancy Statement per Paragraphs 16
or 37, (v) the subordination or non-subordination of this Lease per
Paragraph 30, (vi) the guaranty of the performance of Tenant’s obligations
under this Lease if required under Paragraphs 1.11 and 37, (vii) the
execution of any document requested under Paragraph 42 (easements), or (viii) any
other documentation or information which Landlord may reasonably require of
Tenant under the terms of this lease, where any such failure continues for a
period of five (5) days following written notice by or on behalf of
Landlord to Tenant.

 

(d)           A
Default by Tenant as to the terms covenants, conditions or provisions of this
Lease, or of the rules adopted under Paragraph 40 hereof that are to be
observed, complied with or performed by Tenant, other than those described in
Subparagraphs 13.1(a), (b), or (c), above, where such Default continues for a
period of thirty (30) days after written notice thereof by or on behalf of
Landlord to Tenant; provided however, that if the nature of Tenant’s Default is
such that more than thirty (30) days are reasonably required for its cure, then
it shall not be deemed to be a Breach of this Lease by Tenant if Tenant commences
such cure within said thirty (30) day period and thereafter diligently
prosecutes such cure to completion.

 

(e)           The
occurrence of any of the following events: 
(i) the making by Tenant of any general arrangement or assignment
for the benefit of creditors; (ii) Tenant’s becoming a “debtor” as defined
in 11 U.S. Code Section 101 or any successor statute thereto  (unless, in the case of a petition filed
against Tenant, the same is dismissed within sixty (60) days); (iii) the
appointment of a trustee or receiver to take possession of substantially all of
Tenant’s assets located at the Premises or of Tenant’s interest in this Lease,
where possession is not restored to Tenant within thirty (30) days; or (iv) the
attachment, execution or other judicial seizure of substantially all of Tenant’s
assets located at the Premises or of Tenant’s interest in this Lease, where
such seizure is not discharged within thirty (30) days; provided, however, in
the event that any provision of this Subparagraph 13.1(e) is contrary to
any applicable law, such provision shall be of no force or effect, and shall
not affect the validity of the remaining provisions.

 

(f)            The
discovery by Landlord that any financial statement of Tenant or of any
Guarantor, given to Landlord by Tenant or any Guarantor, was materially false.

 

(g)           If
the performance of Tenant’s obligations under this Lease is guaranteed:  (i) the death of a Guarantor, (ii) the
termination of a Guarantor’s liability with respect to this Lease other than in
accordance with the terms of such guaranty, (iii) a Guarantor’s becoming
insolvent or the subject of a bankruptcy filing, (iv) a Guarantor’s
refusal to honor the guaranty, or (v) a Guarantor’s breach of its guaranty
obligation on an anticipatory breach basis, and Tenant’s failure, within sixty
(60) days following written notice by or on behalf of Landlord to Tenant of any
such event, to provide Landlord with written alternative assurances of
security, which, when coupled with the then existing resources of Tenant,
equals or exceeds the combined financial resources of Tenant and the Guarantors
that existed at the time of the execution of this Lease.

 

13.2         Remedies.  If Tenant
fails to perform any affirmative duty or obligation of Tenant under this Lease,
within ten (10) days after written notice to Tenant (or in case of an
emergency, without notice), Landlord may at its option (but without obligation
to do so), perform such duty or obligation on Tenant’s behalf, including but
not limited to the obtaining of reasonably required bonds, insurance policies,
or governmental licenses, permits or approvals. 
The costs and expenses of any such performance by Landlord shall be due
and payable by Tenant to Landlord upon invoice therefor.  If two checks or more given to Landlord by
Tenant shall not be honored by the bank upon which they are drawn, Landlord, at
its own option, may require all future payments to be made under this Lease by
Tenant to be made only by cashier’s check. 
In the event of a Breach of this Lease by Tenant (as defined in
Paragraph 13.1), with or without further notice or demand, and without limiting
Landlord in the exercise of any right or remedy which Landlord may have by
reason of such Breach, Landlord may:

 

14

 

(a)           Terminate
Tenant’s right to possession of the Premises by any lawful means, in which case
this Lease and the term hereof shall terminate and Tenant shall immediately
surrender possession of the Premises to Landlord.  In such event Landlord shall be entitled to
recover from Tenant: (i) the worth at the time of the award of the unpaid
rent which had been earned at the time of termination; (ii) the worth at
the time of award of the amount by which the unpaid rent which would have been
earned after termination until the time of award exceeds the amount of such
rental loss that the Tenant proves could have been reasonably avoided; (iii) the
worth at the time of award of the amount by which the unpaid rent for the
balance of the term after the time of award exceeds the amount of such rental
loss that the Tenant proves could be reasonably avoided; and (iv) any
other amount necessary to compensate Landlord for all the detriment proximately
caused by the Tenant’s failure to perform its obligations under this Lease or
which in the ordinary course of things would be likely to result therefrom,
including but not limited to the cost of recovering possession of the Premises,
expenses of reletting, including necessary renovation and alteration of the
Premises and reasonable attorneys’ fees. 
The worth at the time of award of the amount referred to in provision (iii) of
the immediately preceding sentence shall be computed by discounting such amount
at the discount rate of the Federal Reserve Bank of San Francisco or the
Federal Reserve Bank District in which the Premises are located at the time of
award plus one percent (1%).  Efforts by
Landlord to mitigate damages caused by Tenant’s Default or Breach of this Lease
shall not waive Landlord’s right to recover damages under this Paragraph
13.2.  If termination of this Lease is
obtained through the provisional remedy of unlawful detainer, Landlord shall
have the right to recover in such proceeding the unpaid rent and damages as are
recoverable therein, or Landlord may reserve the right to recover all or any
part thereof in a separate suit for such rent and/or damages.  If a notice and grace period required under
Subparagraph 13.1 (b), (c) or (d) was not previously given, a notice
to pay rent or quit, or to perform or quit, as the case may be, given to Tenant
under any statute authorizing the forfeiture of leases for unlawful detainer
shall also constitute the applicable notice for grace period purposes required
by Subparagraph 13.1 (b), (c) or (d). 
In such case, the applicable grace period under the unlawful detainer
statue shall run concurrently after the one such statutory notice, and the
failure of Tenant to cure the Default within the greater of the two (2) such
grace periods shall constitute both an unlawful detainer and a Breach of this
Lease entitling Landlord to the remedies provided for in this Lease and/or by
said statute.

 

(b)           Continue
the Lease and Tenant’s right to possession in effect (in California under
California Civil Code Section 1951.4) after Tenant’s Breach and recover
the rent as it becomes due, provided Tenant has the right to sublet or assign,
subject only to reasonably limitations. 
Landlord and Tenant agree that the limitations on assignment and
subletting in this Lease are reasonable. 
Acts of maintenance or preservation, efforts to relet the Premises, or
the appointment of a receiver to protect the Landlord’s interest under this
Lease, shall not constitute a termination of the Tenant’s right to possession.

 

(c)           Pursue
any other remedy now or hereafter available to Landlord under the laws or
judicial decisions of the state wherein the Premises are located.

 

(d)           The
expiration or termination of this Lease and/or the termination of Tenant’s
right to possession shall not relieve Tenant from liability under any indemnity
provisions of this Lease as to matters occurring or accruing during the term
hereof or by reason of Tenant’s occupancy of the Premises.

 

13. 3.  Intentionally Omitted.

 

13.           Late Charges.  Tenant
hereby acknowledges that late payment by Tenant to Landlord of rent and other
sums due hereunder 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 upon
Landlord by the terms of any ground lease, mortgage or deed of trust covering
the Premises.  Accordingly, if any
installment of rent or other sum due from Tenant shall not be received by
Landlord or Landlord’s designee within five (5) days after such amount
shall be due, then, without any requirement for notice to Tenant, Tenant shall
pay to Landlord a late charge equal to ten percent (10%) of such overdue
amount.  However, no late charge shall be
due until after the first late payment in any twelve (12) month period where
Tenant is given a three (3) day written notice that the payment is
late.  So long as Tenant pays within that
notice period, no late charge will be due on that payment.  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. 
Acceptance of such late charge be Landlord shall in no event constitute
a waiver of Tenant’s Default or Breach with respect to such overdue amount, nor
prevent Landlord from exercising any of the other rights and remedies granted
hereunder.  In the event that a late
charge is payable hereunder, whether or not collected, for three (3) consecutive
installments of Base Rent, then notwithstanding Paragraph 4.1 or any other
provision of this Lease to the contrary, Base Rent shall, at Landlord’s option,
become due and payable quarterly in advance.

 

13.5         Breach by Landlord. 
Landlord shall not be deemed in breach of this Lease unless Landlord
fails within a reasonable time to perform an obligation required to be
performed by Landlord.  For purposes of
this Paragraph 13.5, a reasonable time shall in no event be less than thirty
(30) days after receipt by Landlord, and by any Lender(s) whose name and
address shall have been furnished to Tenant in writing for such purpose, of
written notice specifying wherein such obligation of Landlord has not been
performed; provided, however, that if the nature of Landlord’s obligation is
such that more than thirty (30) days after such notice are reasonably required
for its performance, then Landlord shall not be in breach of this Lease if
performance is commenced within such thirty (30) day period and thereafter
diligently pursued to completion.

 

14.          Condemnation.  If the Premises or any portion thereof are
taken under the power of eminent domain or sold under the threat of the
exercise of said power (all of which are herein called “condemnation”), this
Lease shall terminate as to the part so taken as of the date the condemning
authority takes title or possession, whichever first occurs.  If more than ten percent (10%) of the floor
area of the Premises, or more than ten percent (10%) of the

 

15

 

portion of the Common
Areas designated for Tenant’s parking, is taken by condemnation, Tenant may, at
Tenant’s option, to be exercised in writing within ten (10) days after
Landlord shall have given Tenant written notice of such taking (or in the
absence of such notice, within ten (10) days after the condemning
authority shall have taken possession) terminate this Lease as of the date the
condemning authority takes such possession. 
If Tenant does not terminate this Lease in accordance with the foregoing,
this Lease shall remain in full force and effect as to the portion of the
Premises remaining, except that the Base Rent shall be reduced in the same
proportion as the rentable floor area of the Premises taken bears to the total
rentable floor area of the Premises.  No reduction
of the Base Rent shall occur if the condemnation does not apply to any portion
of the Premises.  Any award for the
taking of all or any part of the Premises under the power of eminent domain or
any payment made under threat of the exercise of such power shall be the
property of Landlord, whether such award shall be made as compensation for
diminution of value of the leasehold or for the taking of the fee, or as
severance damages; provided, however, that Tenant shall be entitled to any
compensation, separately awarded to Tenant for Tenant’s relocation expenses
and/or loss of Tenant’s Trade Fixtures and for the unamortized costs of Tenant Improvements.  In the event that this Lease is not
terminated by reason of such condemnation, Landlord shall to the extent of its
net severance damages received, over and above Tenant’s Share of the legal and
other expenses incurred by Landlord in the condemnation matter, repair any
damage to the Premises caused by such condemnation authority.

 

15.          Broker’s
Fees.

 

15.1         Procuring Cause.  The
Broker(s) named in Paragraph 1.10 is/are the procuring cause of this Lease.

 

15.2         Additional Terms. 
Unless Landlord and Broker(s) have otherwise agreed in writing, Landlord
agrees that:  (a) if Tenant
exercises any Option (as defined in Paragraph 39.1) granted under this Lease or
any Option subsequently granted, or (b) if Tenant acquires any rights to
the Premises or other premises in which Landlord has an interest, or (c) if
Tenant remains in possession of the Premises with the consent of Landlord after
the expiration of the term of this Lease after having failed to exercise an
Option, or (d) if said Brokers are the procuring cause of any other lease
or sale entered into between the Parties pertaining to the Premises and/or any
adjacent property in which Landlord has an interest, or (e) if Base Rent
is increased, whether by agreement or operation of an escalation clause herein,
then as to any of said transactions, Landlord shall not be liable to said
Broker(s) to pay a fee.

 

15.3         Assumption of Obligations. 
Any buyer or transferee of Landlord’s interest in this Lease, whether
such transfer is by agreement or by operation of law, shall be deemed to have
assumed Landlord’s obligation under this Paragraph 15.

 

15.4         Representations and Warranties.  Tenant and Landlord each represent and
warrant to the other that it has had no dealings with any person, firm, broker
or finder other than as named in Paragraph 1.10(a) in connection with the
negotiation of this Lease and/or the consummation of the transaction
contemplated hereby, and that no broker or other person, firm or entity other
than said named Broker(s) is entitled to any commission or finder’s fee in
connection with said transaction.  Tenant
and Landlord do each hereby agree to indemnify, protect, defend and hold the
other harmless from and against liability for compensation or charges which may
be claimed by any such unnamed broker, finder or other similar party by reason
of any dealings or actions of the indemnifying Party, including any costs,
expenses, and/or attorneys’ fees reasonably incurred with respect thereto.

 

16.          Tenancy
and Financial Statements.

 

16.1         Tenancy Statement. 
Each Party (as “Responding Party”)
shall within ten (10) days after written notice from the other Party (the “Requesting Party”) execute, acknowledge and deliver to the
Requesting Party a statement in writing in a form similar to the then most
current “Tenancy Statement” form published by
the American Industrial Real Estate Association, plus such additional information,
confirmation and/or statements as may be reasonably requested by the Requesting
Party.

 

16.2         Financial Statement. 
If Landlord desires to finance, refinance, or sell the Premises or the
Building, or any part thereof, Tenant and all the Guarantors shall deliver to
any potential lender or purchaser designated by Landlord such financial
statements of Tenant and such Guarantors as may be reasonably required by such
lender or purchaser, including but not limited to Tenant’s financial statements
for the past three (3) years.  All
such financial statements shall be received by Landlord and such lender or
purchaser in confidence and shall be used only for the purposes herein set
forth.

 

17.          Landlord’s Liability. 
The term “Landlord” as used herein shall mean
the owner or owners at the time in question of the fee title to the
Premises.  In the event of a transfer of
Landlord’s title or interest in the Premises or in this Lease, Landlord shall
deliver to the transferee or assignee (in cash or by credit) any unused
Security Deposit held by Landlord at the time of such transfer or
assignment.  Except as provided in
Paragraph 15.3, upon such transfer or assignment and delivery of the Security
Deposit, as aforesaid, the prior Landlord shall be relieved of all liability
with respect to the obligations and/or covenants under this Lease thereafter to
be performed by Landlord.  Subject to the
foregoing, the obligations and/or covenants in this Lease to be performed by
the Landlord shall be binding only upon the Landlord as herein above
defined.  Notwithstanding any other terms
or provisions of this lease, Tenant agrees that in the event of any default or
breach by Landlord with respect to any of the terms of the Lease to be observed
and performed by Landlord (a) Tenant shall look solely to the estate and
property (which is the subject of this lease) of Landlord or any successor in
interest in the property and the Building, for the satisfaction of Tenant’s
remedies for the collection of a judgment (or other judicial process) requiring
the payment of money by Landlord; (b) no other property or assets of
Landlord, its partners, members, shareholders, officers or any successor in
interest

 

16

 

shall be subject to levy, execution or
other enforcement procedure for the satisfaction if Tenant’s remedies;(c) no
personal liability shall at any time be asserted or enforceable against
Landlord, it’s partner’s, members or successors in interest (except to the
extent permitted in (a) above), and no judgment will be taken against any
partner, member, shareholder, officer or director of Landlord. The provisions
of this section shall apply only to the Landlord and the parties herein
described, and shall not be for the benefit of any insurer nor any other third
party.

 

18.          Severability.  The invalidity of any provision of this
Lease, as determined by a court of competent jurisdiction, shall in no way
affect the validity of any other provision hereof.

 

19.          Interest
on Past-Due Obligations.  Any
monetary payment due Landlord hereunder, other than late charges, not received
by Landlord within ten (10) days following the date on which it was due,
shall bear interest from the date due at the prime rate charged by the largest
state chartered bank in the state in which the Premises are located plus four
percent (4%) per annum, but not exceeding the maximum rate allowed by law, in
addition to the potential late charge provided for in Paragraph 13.4.

 

20.          Time
of Essence.  Time is of the essence
with respect to the performance of all obligations to be performed or observed
by the Parties under this Lease.

 

21.          Rent
Defined.  All monetary obligations of
Tenant to Landlord under the terms of this Lease are deemed to be rent.

 

22.          No
Prior or other Agreements; Broker Disclaimer.  This Lease contains all agreements between
the Parties with respect to any matter mentioned herein, and no other prior or
contemporaneous agreement or understanding shall be effective.  Landlord and Tenant each represents and
warrants to the Brokers that it has made, and is relying solely upon, its own
investigation as to the nature, quality, character and financial responsibility
of the other Party to this Lease and as to the nature, quality and character of
the Premises.  Brokers have no
responsibility with respect thereto or with respect to any default or breach
hereof by either Party.  Each Broker
shall be an intended third party beneficiary of the provisions of this
Paragraph 22.

 

23.          Notices.

 

23.1         Notice Requirements. 
All notices required or permitted by this Lease shall be in writing and
may be delivered in person (by hand or by messenger or courier service) or may
be sent by regular, certified or registered mail or U.S. Postal Service Express
Mail, with postage prepaid, or by facsimile transmission during normal business
hours, and shall be deemed sufficiently given if served in a manner specified
in this Paragraph 23.  The addresses
noted adjacent to a Party’s signature on this Lease shall be that Party’s
address for delivery or mailing of notice purposes.  Either Party may by written notice to the
other specify a different address for notice purposes, except that upon Tenant’s
taking possession of the Premises, the Premises shall constitute Tenant’s
address for the purpose of mailing or delivering notices to Tenant.  A copy of all notices required or permitted
to be given to Landlord hereunder shall be concurrently transmitted to such
party or parties at such addresses as Landlord may from time to time hereafter
designate by written notice to Tenant.

 

23.2         Date of Notice.  Any
notice sent by registered or certified mail, return receipt requested, shall be
deemed given on the date of delivery shown on the receipt card, or if no
delivery date is shown, the postmark thereon. 
If sent by regular mail, the notice shall be deemed given forty-eight
(48) hours after the same is addressed as required herein and mailed with
postage prepaid.  Notices delivered by
United States Express Mail or overnight courier that guarantees next day delivery
shall be deemed given twenty-four (24) hours after delivery of the same to the
United States Postal Service or courier. 
If any notice is transmitted by facsimile transmission or similar means,
the same shall be deemed served or delivered upon telephone or facsimile
confirmation of receipt of the transmission thereof, provided a copy is also
delivered via delivery or mail.  If
notice is received on a Saturday or a Sunday or a legal holiday, it shall be
deemed received on the next business day.

 

24.          Waivers.  No waiver by Landlord of the Default or
Breach of any term covenant or condition hereof by Tenant, shall be deemed a
waiver of any other term, covenant or condition hereof, or of any subsequent
Default or Breach by Tenant of the same or any other term, covenant or
condition hereof.  Landlord’s consent to,
or approval of, any such act shall not be deemed to render unnecessary the
obtaining of Landlord’s consent to, or approval of, any subsequent or similar
act by Tenant, or be construed as the basis of an estoppel to enforce the
provision or provisions of this Lease requiring such consent.  Regardless of Landlord’s knowledge of a
Default or Breach at the time of accepting rent, the acceptance of rent by
Landlord shall not be a waiver of any Default or Breach by Tenant of any
provision hereof.  Any payment given
Landlord by Tenant may be accepted by Landlord on account of moneys or damages
due Landlord, notwithstanding any qualifying statements or conditions made by
Tenant in connection therewith, which such statements and/or conditions shall
be of no force or effect whatsoever unless specifically agreed to in writing by
Landlord at or before the time of deposit of such payment.

 

25.          Recording.  Either Landlord or Tenant shall, upon request
of the other, execute, acknowledge and deliver to the other a short form
memorandum of this Lease for recording purposes.  The Party requesting recordation shall be
responsible for payment of any fees or taxes applicable thereto.

 

26.          No
Right To Holdover.  Tenant has no
right to retain possession of the Premises or any part thereof beyond the
expiration or earlier termination of this Lease.  In the event that Tenant holds over in
violation of this Paragraph 26 then the Base Rent payable from and after the
time of the expiration or earlier termination of this Lease shall be increased
to one hundred fifty percent (150%) of the Base Rent applicable during the
month immediately preceding such expiration or earlier termination.  Nothing contained herein shall be construed
as a consent by Landlord to any holding over by Tenant.

 

17

 

27.          Cumulative
Remedies.  No remedy or election
hereunder shall be deemed exclusive but shall, wherever possible, be cumulative
with all other remedies at law or in equity.

 

28.          Covenants
and Conditions.  All provisions of
this Lease to be observed or performed by Tenant are both covenants and
conditions.

 

29.          Binding
Effect; Choice of Law.  This Lease
shall be binding upon the Parties, their personal representatives, successors
and assigns and be governed by the laws of the State in which the Premises are
located.  Any litigation between the
Parties hereto concerning this Lease shall be initiated in the county in which
the Premises are located.

 

30.          Subordination;
Attornment; Non-Disturbance.

 

30.1         Subordination.  This
Lease and any Option granted hereby shall be subject and subordinate to any
ground lease, mortgage, deed of trust, or other hypothecation or security
device (collectively, “Security Device”),
now or hereafter placed by Landlord upon the real property of which the
Premises are a part, to any and all advances made on the security thereof, and
to all renewals, modifications, consolidations, replacements and extensions
thereof.  Tenant agrees that the Lenders
holding any such Security Device shall have no duty, liability or obligation to
perform any of the obligations of Landlord under this Lease, but that in the
event of Landlord’s default with respect to any such obligation, Tenant will
give any Lender whose name and address have been furnished Tenant in writing
for such purpose notice of Landlord’s default pursuant to Paragraph 13.5.  If any Lender shall elect to have this Lease
and/or any Option granted hereby superior to the lien of its Security Device
and shall give written notice thereof to Tenant, this Lease and such Options
shall be deemed prior to such Security Device, notwithstanding the relative
dates of the documentation or recordation thereof.

 

30.2         Attornment.  Subject
to the non-disturbance provisions of Paragraph 30.3, Tenant agrees to attorn to
a Lender or any other party who acquires ownership of the Premises by reason of
a foreclosure of a Security Device, and that in the event of such foreclosure,
such new owner shall not: (i) be liable for any act or omission of any
prior Landlord or with respect to events occurring prior to acquisition of
ownership, (ii) be subject to any offsets or defenses which Tenant might
have against any prior Landlord, or (iii) be bound by prepayment of more
than one month’s rent.

 

30.3         Non-Disturbance.  With
respect to Security Devices entered into by Landlord after the execution of
this lease, Tenant’s subordination of this Lease shall be subject to receiving
assurance (a “non-disturbance agreement”) from the Lender that Tenant’s
possession and this Lease, including any options to extend the term hereof,
will not be disturbed so long as Tenant is not in Breach hereof and attorns to
the record owner of the Premises.

 

30.4         Self-Executing.  The
agreements contained in this Paragraph 30 shall be effective without the
execution of any further documents; provided, however, that upon written
request from Landlord or a Lender in connection with a sale, financing or
refinancing of Premises, Tenant and Landlord shall execute such further
writings as may be reasonably required to separately document any such
subordination or non-subordination, attornment and/or non-disturbance agreement
as is provided for herein.

 

31.          Attorneys’
Fees.  If any Party or Broker brings an
action or proceeding to enforce the terms hereof or declare rights hereunder,
the Prevailing Party (as hereafter defined) in any such proceeding, action, or
appeal thereon, shall be entitled to reasonable attorneys’ fees.  Such fees may be awarded in the same suit or
recovered in a separate suit, whether or not such action or proceeding is
pursued to decision or judgment.  The
term “Prevailing Party” shall include,
without limitation, a Party or Broker who substantially obtains or defeats the
relief sought, as the case may be whether by compromise, settlement, judgment,
or the abandonment by the other Party or Broker of its claim or defense.  The attorneys’ fee award shall not be
computed in accordance with any court fee schedule, but shall be such as to full
reimburse all attorneys fees reasonably incurred.  Landlord shall be entitled to attorneys’
fees, costs and expenses incurred in preparation and service of notices of
Default and consultations in connection therewith, whether or not a legal
action is subsequently commenced in connection with such Default or resulting
Breach.  Broker(s) shall be intended
third party beneficiaries of this Paragraph 31.

 

32.          Landlord’s
Access; Showing Premises; Repairs. 
Landlord and Landlord’s agents shall have the right to enter the
Premises at any time, in the case of an emergency, and otherwise at reasonable
times for the purpose of showing the same to prospective purchasers, lenders,
or tenants, and make such alterations, repairs, improvements or additions to
the Premises or to the Building, as Landlord may reasonably deem
necessary.  Landlord may at any time
place on or about the Premises or Building any ordinary “For Sale” signs and
Landlord may at any time during the last one hundred eighty (180) days of the
term hereof place on or about the Premises any ordinary “For Lease” signs.  All such activities of Landlord shall be
without abatement of rent or liability to Tenant.

 

33.          Auctions.  Tenant shall not conduct, nor permit to be
conducted, either voluntarily or involuntarily, any auction upon the Premises
without first having obtained Landlord’s prior written consent.  Notwithstanding anything to the contrary in
this Lease, Landlord shall not be obligated to exercise any standard of
reasonableness in determining whether to grant such consent.

 

34.          Signs.  Tenant shall be able to, at Tenant’s sole
cost, place any sign upon the exterior of the Premises or the Building as
allowed by the City of Sunnyvale with Landlord’s reasonable approval.  The installation of any sign on

 

18

 

the Premises by or for
Tenant shall be subject to the provisions of Paragraph 7 (Maintenance, Repairs,
Utility Installations, Trade Fixtures and Alterations).  Tenant shall have the exclusive right to any
signage at or on the Premises or Building. 
Tenant shall remove all such signage at its sole cost at Lease
termination.

 

35.          Termination;
Merger.  Unless specifically stated
otherwise in writing by Landlord, the voluntary or other surrender of this Lease
by Tenant, the mutual termination or cancellation hereof, or a termination
hereof by Landlord for Breach by Tenant, shall automatically terminate any
sublease or lesser estate in the Premises; provided, however, Landlord shall,
in the event of any such surrender, termination or cancellation, have the
option to continue any one or all of any existing subtenancies.  Landlord’s failure within ten (10) days
of following any such event to make a written election to the contrary by
written notice to the holder of any such lesser interest, shall constitute
Landlord’s election to have such event constitute the termination of such
interest.

 

36.          Consents.

 

(a)           Except
for Paragraph 33 (Auctions) or as otherwise provided herein, wherever in this
Lease the consent of a Party is required to an act by or for the other Party,
such consent shall not be unreasonably withheld or delayed.  Landlord’s actual reasonable costs and
expenses (including but not limited to architects’. attorneys’, engineers’ and
other consultants’ fees) incurred in the consideration of, or response to, a
request by Tenant for any Landlord consent pertaining to this Lease or the
Premises, including but not limited to consents to an assignment a subletting
or the presence or use of a Hazardous Substance, shall be paid by Tenant to
Landlord upon receipt of an invoice and supporting documentation therefor.  Landlord’s consent to any act, assignment of
this Lease or subletting of the Premises by Tenant shall not constitute an
acknowledgment that no Default or Breach by Tenant of this Lease exists, nor
shall such consent be deemed a waiver of any then existing Default or Breach,
except as may be otherwise specifically stated in writing by Landlord at the
time of such consent.

 

(b)           All
conditions to Landlord’s consent authorized by this Lease are acknowledged by
Tenant as being reasonable.  The failure
to specify herein any particular condition to Landlord’s consent shall not
preclude the impositions by Landlord at the time of consent of such further or
other conditions as are then reasonable with reference to the particular matter
for which consent is being given.

 

37.          Guarantor.

 

37.1         Form of Guaranty. 
If there are to be any Guarantors of this Lease per Paragraph 1.11, the
form of the guaranty to be executed by each such Guarantor shall be in the form
most recently published by the American Industrial Real Estate Association, and
each such Guarantor shall have the same obligations as Tenant under this lease,
including but not limited to the obligation to provide the Tenancy Statement
and information required in Paragraph 16.

 

37.2         Additional Obligations of Guarantor.  It shall constitute a Default of the Tenant
under this Lease if any such Guarantor fails or refuses, upon reasonable
request by Landlord to give: (a) evidence of the due execution of the
guaranty called for by this Lease, including the authority of the Guarantor
(and of the party signing on Guarantor’s behalf) to obligate such Guarantor on
said guaranty, and resolution of its board of directors authorizing the making
of such guaranty, together with a certificate of incumbency showing the
signatures of the persons authorized to sign on its behalf, (b) current
financial statements of Guarantor as may from time to time be requested by
Landlord, (c) a Tenancy Statement, or (d) written confirmation that
the guaranty is still in effect.

 

38.          Quiet
Possession.  Upon payment by Tenant
of the rent for the Premises and the performance of all of the covenants,
conditions and provisions on Tenant’s part to be observed and performed under
this Lease, Tenant shall have quiet possession of the Premises for the entire
term hereof subject to all of the provisions of this Lease.

 

39.          Options.

 

39.1         Definition.  As used
in this Lease, the word “Option” has the following meaning: (a) the right
to extend the term of this Lease or to renew this Lease or to extend or renew
any lease that Tenant has on other property of Landlord.

 

39.2         Options Personal to Original Tenant.  Each Option granted to Tenant in this Lease
is personal to the original Tenant named in Paragraph 1.1 hereof and any
Permitted Transferee, and cannot be voluntarily or involuntarily assigned or
exercised by any person or entity other than said original Tenant and any
Permitted Transferee while the original Tenant or any Permitted Transferee is
in full and actual possession of the Premises and without the intention of
thereafter assigning or subletting.  The
Options, if any, herein granted to Tenant are not assignable, either as a part
of an assignment of this Lease or separately or apart therefrom, and no Option
may be separated from this Lease in any manner, by reservation or otherwise.

 

39.3         Multiple Options.  In
the event that Tenant has any multiple Options to extend or renew this Lease, a
later option cannot be exercised unless the prior Options to extend or renew
this Lease have been validly exercised.

 

39.4         Effect of Default on Options.

 

(a)           Tenant
shall have no right to exercise an Option, notwithstanding any provision in the
grant of Option to the contrary: (i) during the period commencing with the
giving of any notice of Default under Paragraph 13.1 and continuing until the
noticed Default is cured, or (ii) during the time Tenant is in Breach of
this

 

19

 

Lease, or (iii) in
the event that Landlord has given to Tenant three (3) or more notices of
separate Defaults under Paragraph 13.1 during the twelve (12) month period
immediately preceding the exercise of the Option, whether or not the Defaults
are cured.

 

(b)           The
period of time within which an Option may be exercised shall not be extended or
enlarged by reason of Tenant’s inability to exercise an Option because of the
provisions of Paragraph 39.4(a)

 

40.          Rules and
Regulations.  Tenant agrees that it
will abide by, and keep and observe all reasonable rules and regulations (“Rules and
Regulations”) which Landlord may make from time to time for the management,
safety, care, and cleanliness of the grounds, the parking and unloading of
vehicles and the preservation of good order, as well as for the convenience of
other occupants or tenants of the Building and the Industrial Center and their
invitees.

 

41.          Security
Measures.  Tenant hereby acknowledges
that the rental payable to Landlord hereunder does not include the cost of
guard service or other security measures, and that Landlord shall have no
obligation whatsoever to provide same. 
Tenant assumes all responsibility for the protection of the Premises,
Tenant, its agents and invitees and their property from the acts of third
parties.

 

42.          Reservations.  Landlord reserves the right, from time to
time, to grant, without the consent or joinder of Tenant, such easements,
rights of way, utility raceways, and dedications that Landlord deems necessary,
and to cause the recordation of parcel maps and restrictions, so long as such
easements, rights of way, utility raceways, dedications, maps and restrictions
do not reasonably interfere with the use of the Premises by Tenant.  Tenant agrees to sign any documents reasonably
requested by Landlord to effectuate any such easement rights, dedication, map
or restrictions.

 

43.          Performance
Under Protest.  If at any time a
dispute shall arise as to any amount or sum of money to be paid by one Party to
the other under the provisions hereof, the Party against whom the obligation to
pay the money is asserted shall have the right to make payment “under protest”
and such payment shall not be regarded as a voluntary payment and there shall
survive the right on the part of said Party to institute suit for recovery of
such sum.  If it shall be adjudged that
there was no legal obligation on the part of said Party to pay such sum or any
part thereof, said Party shall be entitled to recover such sum or so much
thereof as it was not legally required to pay under the provisions of this
Lease.

 

44.          Authority.  If either Party hereto is a corporation,
trust, limited liability company, or general or limited partnership, each
individual executing this Lease on behalf of such entity represents and warrants
that he or she is duly authorized to execute and deliver this Lease on it’s
behalf and that such entity is duly authorized and existing and qualified to do
business in California and that Tenant has the full right and legal authority
to enter into this lease.

 

45.          Conflict.  Any conflict between the printed provisions
of this Lease and the typewritten or handwritten provisions shall be controlled
by the typewritten or handwritten provisions.

 

46.          Offer.  Preparation of
this Lease by either Landlord or Tenant or Landlord’s agent or Tenant’s agent
and submission of same to Tenant or Landlord shall not be deemed an offer to
lease.  This Lease is not intended to be
binding until executed and delivered by all Parties hereto.

 

47.          Amendments.  This Lease may be modified only in writing,
signed by the parties in interest at the time of the modification.  The Parties shall amend this Lease from time
to time to reflect any adjustments that are made to the Base Rent or other rent
payable under this Lease.  As long as
they do not materially change Tenant’s obligations hereunder, Tenant agrees to
make such reasonable non-monetary modification to this Lease as may be
reasonably required by an institutional insurance company or pension plan
Lender in connection with the obtaining of normal financing or refinancing of
the property of which the Premises are a part.

 

48.          Multiple
Parties.  Except as otherwise
expressly provided herein, if more than one person or entity is named herein as
either Landlord or Tenant, the obligations of such multiple parties shall be
the joint and several responsibility of all persons or entities named herein as
such Landlord or Tenant.

 

49.          This
lease is contingent upon Landlord purchasing the building by December 15,
2005.

 

50.          Tenant Improvements:  Upon
notice from Tenant and Tenant depositing with Lessor $600,000 in cash (Lessor
to deposit said money in Landlord’s name in a savings account at Wells Fargo
however all interest will accrue to Tenant and be returned to Tenant unless
Tenant defaults hereunder), Landlord shall at its sole cost and expense
demolish all the interior improvements (“Landlord Work”) in 1⁄2 the building and
return the Premises to shell condition which shell condition shall include, but
not be limited to the removal of all HVAC units and patch the roof. The parties
shall agree on the definition shell condition prior to execution of this Lease.
 If the Landlord Work for 415A is
not complete within thirity (30) days of Tenant having posted the security
deposit for the Tenant Improvements, then Tenant shall be permitted to do the
demolition and deduct the cost of the demolition from the Base Rent.  Upon
Tenant finishing the Tenant
Improvements (as defined below),
Landlord shall immediately return the cash deposit and all interest to Tenant.
Upon notice from Tenant and Tenant depositing with Landlord an additional
$600,000 cash to be held in the same manner as the first cash deposit, Landlord
shall at its sole cost and expense demolish all the interior improvements in
the second half of the building and return the Premises to shell condition as
defined above (“Landlord Work”).  If
the Landlord Work for 415B is not complete within thirity (30) days of Tenant
having posted the security deposit for the Tenant Improvements, then Tenant
shall be permitted to do the demolition and deduct the cost of the demolition
from the Base Rent.  Upon Tenant finishing Tenant Improvements in this half of the building, Lessor shall
return the cash deposit and all accrued interest to Lessee.

 

20

 

This
is not a rent or lease guarantee but is rather a guarantee to replace the
improvements being demolished by Landlord at the request of Tenant.  The Landlord hereby approves of office,
R&D, lab, wet lab, light manufacturing and warehouse Tenant Improvements
being constructed in the Premises by Tenant. There will be no restriction to
the amount of lab space allowed in the facility.

 

All Tenant Improvements
are to be designed in a first class code compliant manner, built and paid for
by Tenant.  Landlord to approve Tenant’s plans,
Landlord’s approval shall not be unreasonably withheld or delayed. Tenant must
improve the space to at least an 75% office/lab/r&d buildout. Tenant shall
contract with their own general contractor, subject to Landlord’s sole approval
(Southbay Construction is hereby approved), and timely pay for all improvements
to the Premises.  Tenant shall commence
all Tenant Improvements within 6 months of turnover of space to Tenant and
diligently pursue the construction.  till
completion or landlord shall have the option to terminate this lease.  Tenant improvements shall include, but not be
limited to all drywall, insulation, wall coverings, window coverings, floor
coverings, restrooms, HVAC, fire sprinklers distributed (must be semi recessed
in dropped ceiling areas), lights, electric, plumbing, doors, plans and
permits.  All dropped ceilings to be a
minimum of ten foot in height  (12 foot
in lobby-lobby may be a gypboard ceiling) with a standard white 2x4 grid with
white doublelook ceiling tiles and 3 tube 2x4 drop in flourescent lights with
parabolic or prismatic lenses.  All doors
to be solid core prefinished birch- 9’ in height. All offices and conference
rooms to have a minimum of 3’ sidelight glass. 
Hallways to be a minimum of six feet wide. Carpet to be a minimum of 32
ounces looped pile.  Building must be
balanced with 100% HVAC distributed (a minimum of 1 ton per every 350 sq. ft.)
with either a VAV system or multiple prepackaged gas/electric units (Carrier or
Trane). Tenant to install at least two tiled restroom cores (with a separate
mens and womens room ) at a mutually acceptable location to landlord.  These building standards are defined here to
set a minimum standard of improvements to be performed by Tenant, Tenant shall
be allowed to upgrade any or all of these finishes and Lessor shall not
unreasonably withhold their approval.

 

Landlord
at Landlord’s sole cost and expense shall immediately paint the Building in
colors selected by Tenant and shall provide Tenant a $25,000 tenant improvement
allowance to upgrade the entrance to the Building and build a walkway between
this Building and 1263 Arques.

 

51.          OPTION TO EXTEND:      Subject to the terms and
conditions set forth below, Tenant may at its option extend the Terms of this
Lease for (1) period of ten (10) years.  Such period is called the “Renewal Term.”  The Renewal Term shall be upon the same terms
contained in this Lease, except that (i) Landlord shall have no obligation
to provide Tenant with any Tenant Improvement Allowance or demolition in
connection with the Renewal Term, (ii) the Base Rental during the Renewal
Term shall be calculated as set forth below, and (iii) any reference in
the Lease to the “Term” of the Lease shall be deemed to include the Renewal
Term and apply thereto, unless it is expressly provided otherwise.  Tenant shall have no additional extension
options.

 

A.  The Base
Rent during the Renewal Term shall be at ninety five percent (95%) of the then
fair market rate (defined hereinafter) for such space for a term commencing of
the first day of the Renewal Term.  “Market
Rate” shall mean the then prevailing market rate for a comparable term
commencing on the first day of the Renewal Term for tenants of comparable size
and creditworthiness for comparable space in the Building and other first class
R&D/Office buildings in the Sunnyvale-Oakmead Area.  In no event shall the rent be less than
$53,700 and shall increase a minimum of 3% per year.

 

B.  To exercise any option, Tenant must deliver a
binding written notice to Landlord not sooner than ten (10) months nor
later than six (6) months prior to the expiration of the initial Term of
this Lease.  Thereafter, the Market Rate
for the Renewal Term shall be calculated pursuant to Subsection A above
and Landlord shall inform Tenant of the Market Rate.  If the parties cannot agree on the Market
Rate, the parties shall each appoint a real estate broker or appraiser (with at
least 10 years experience in R&D leasing in Silicon Valley) to determine
the Market Rate. If the lower of the two is within 90% of the higher of the two
valuations, then the Market Rent shall be the average of the two. If the lower
of the two valuations is less than 90% of the higher valuation, then the two
brokers/appraisers originally selected by the parties shall select a third
broker/appraiser who shall present their final determination of Market Rate to
the third broker/appraiser, and the third broker/appraiser shall pick one of
those two as being the Market Rate. The determination of the third
broker/appraiser shall be binding on the parties. The market rent shall be
determined within 60 days of the date of Tenant’s exercise of its option. In no
event shall the rent be less than $53,732 and shall increase by a minimum of 3%
per year. If Tenant fails to timely give its notice of exercise, Tenant will be
deemed to have waived its option to extend.

 

52.          First Right of Offering: The Tenant shall have the right of first
offer to purchase the property should Landlord decide to sell the
property.  At the time Landlord decides
to sell the property, Landlord shall give Tenant written notice of the price
that Landlord intends to sell the building for and Tenant shall have 10
business days to inform Landlord by written notice that it intends to purchase
the building for all cash within 90 days. 
Failure of Tenant to purchase the building at that time will make this
right of first offer null and void forever. 
If Tenant fails to inform Landlord in writing that it intends to purchase
the building within 10 business days then Landlord shall be free to sell the
property to any third party as long as the purchase price is within 10% of the
price previously offered to Tenant. If the price is lower than 10% then Tenant
shall have five (5) business days to match said offer.  Tenant shall purchase the building “AS IS”
and sign a 1542 waiver releasing Landlord of all liability known or unknown
upon the close of escrow. Said Right of First Offer shall be subordinate to the
rights of a lender that is acquiring the property through a deed in lieu or a
foreclosure.

 

LANDLORD AND TENANT HAVE
CAREFULLY READ AND REVIEWED THIS LEASE AND EACH TERM AND PROVISION CONTAINED
HEREIN, AND BY THE EXECUTION OF THIS LEASE SHOW THEIR INFORMED AND VOLUNTARY
CONSENT THERETO.  THE PARTIES HEREBY
AGREE THAT, AT THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE ARE
COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF LANDLORD

 

21

 

AND TENANT WITH RESPECT
TO THE PREMISES.

 

THIS LEASE PREPARED FOR
YOUR ATTORNEY’S REVIEW AND APPROVAL. 
FURTHER, EXPERTS SHOULD BE CONSULTED TO THE PRESENCE OF ASBESTOS,
UNDERGROUND STORAGE TANKS OR HAZARDOUS SUBSTANCES.  NO REPRESENTATION OR RECOMMENDATION IS MADE
BY THE AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION OR BY THE REAL ESTATE
BROKERS OR THEIR CONTRACTORS, AGENTS OR EMPLOYEES AS TO THE LEGAL SUFFICIENCY,
LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT
RELATES; THE PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN COUNSEL AS
TO THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE.  IF THE SUBJECT PROPERTY IS IN A STATE OTHER
THAN CALIFORNIA, AN ATTORNEY FROM THE STATE WHERE THE PROPERTY IS LOCATED
SHOULD BE CONSULTED.

 

The parties hereto have
executed this Lease at the place and on the dates specified above their
respective signatures..

 

	
  Executed at:

  	
   

  	
   

  	
   

  	
  Executed at:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  on:

  	
   

  	
   

  	
   

  	
  on:

  	
   

  	
   

  
											

 

	
  By Landlord:

  	
   

  	
  By Tenant:

  
	
   

  	
   

  	
   

  
	
  Oakmead Ventures, LLC

  	
   

  	
  Symyx
  Technologies, Inc.

  
	
  By D&M Investors
  Fund I LLC

  	
   

  	
  A Delaware Corporation

  
	
  Its: Managing Member

  	
   

  	
   

  
	
  by D&M Ventures LP

  	
   

  	
   

  
	
  Its: Sole Member

  	
   

  	
   

  
	
  by David Dollinger
  Living Trust

  	
   

  	
   

  
	
  Its: General Partner

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  David
  Dollinger, Trustee

  	
   

  	
  Jeryl L. Hilleman

  
	
   

  	
   

  	
  Executive Vice
  President &

  
	
   

  	
   

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Address:

  	
  555 Twin Dolphin Dr.
  #500

  	
   

  	
  Address: 

  	
  3100 Central Expressway

  
	
   

  	
  Redwood City, Ca. 94010

  	
   

  	
   

  	
  Santa Clara, CA 95051

  
	
   

  	
   

  	
   

  	
   

  
	
  Telephone: (650)
  508-8666

  	
   

  	
  Telephone: (408)
  773-4070

  
	
   

  	
   

  	
   

  
	
  Facsimile: (650)
  508-8686

  	
   

  	
  Facsimile: (408)
  773-4068

  
									

 

22Exhibit 10.16

 

TRIPLE
NET LEASE

 

THIS TRIPLE NET LEASE (the “Lease”) is made this 14th day of November,
2005, by and between ROUTE 225 INVESTMENTS, LLC, a Nevada corporation, which is
hereinafter referred to as “Landlord,” and JACOBS ENTERTAINMENT, INC., a
Delaware limited liability company and/or assigns, which is hereinafter
referred to as “Tenant” (sometimes herein “Landlord” and “Tenant” are
singularly referred to as a “Party” and collectively as the “Parties”).

 

ARTICLE I

 

LEASEHOLD
PREMISES

 

Section 1.01.                             Leasehold Premises.  In consideration of Tenant’s agreement to pay
rent and to comply with the terms, covenants and conditions hereof, Tenant
hereby leases from Landlord and Landlord hereby leases to Tenant:

 

(a)                                  That certain real property which
is particularly described on Exhibit ”A”;
attached hereto and incorporated herein (the “Leasehold Real Property”);

 

(b)                                 all improvements situated on the
Leasehold Real Property which include a commercial building with a gross
interior floor space area of approximately 37,000 square feet (collectively the
“Leasehold Building”);

 

(c)                                  All personal property which is
located in, or is appurtenant to, the Leasehold Building (the “Leasehold
Personal Property”).

 

(d)                                 The Leasehold Real Property, the
Leasehold Building and the Leasehold Personal Property are hereinafter
collectively referred to as the “Leasehold Premises”.

 

Section 1.02                                As – Is.   Except
as expressly set out in this Lease to the contrary, Landlord makes no
warranties or representations regarding the Leasehold Premises.  Tenant declares that it has performed such
inquiries and investigations of the Leasehold Premises, and the circumstances
related to the Leasehold Premises as it deemed necessary or advisable under the
circumstances.  Except as expressly set
out in this Lease to the contrary, the warranties and representations which are
disclaimed hereby include without limitation, warranties and representations
with regard to: (i) the physical and environmental condition of the
Leasehold Premises; (ii) the compliance with any governmental rules or
regulations; (iii) the fitness of the

 

 

Leasehold
Premises for any particular purpose; and (iv) the propriety of using the
Leasehold Premises for any particular purpose.

 

ARTICLE II

 

TERM

 

Section 2.01.                             Commencement and Expiration.  The term of this Lease (the “Lease Term”)
shall commence on November 14, 2005 (hereinafter referred to as the “Commencement
Date”) and shall continue until October 31, 2010 for five (5) years,
unless sooner terminated or extended, as hereinafter provided.   The first five (5) year term described
in the immediately preceding sentence shall be sometimes referred to as the “Initial
Term”.

 

Section 2.02.                             Option to Renew.  Tenant shall have three (3) successive
options to extend the Lease Term (hereinafter respectively referred to as the “First
Option to Renew”, the “Second Option to Renew” and the “Third Option to Renew”).
The First Option to Renew, the Second Option to Renew and Third Option to Renew
are hereinafter collectively referred to as the “Options to Renew”.  In the event that any Option to Renew is not
validly exercised in accordance with Section 2.02(b), all
subsequent Options to Renew shall expire and shall no longer be enforceable.  The Options to Renew shall each be subject to
the following terms and conditions:

 

(a)                                  Renewal Periods.  Upon exercise of each Option to Renew, the
Lease Term shall be extended for a period of five (5) years (which periods
are respectively referred to herein as the “First Renewal Period”, the “Second
Renewal Period”, and the “Third Renewal Period”).  The First Renewal Period, the Second Renewal
Period and the Third Renewal Period are hereinafter collectively referred to as
the “Renewal Periods”.  The First Renewal
Period, the Second Renewal Period and the Third Renewal Period shall not be
deemed to comprise part of the Lease Term unless the applicable Option to Renew
relating to such Renewal Periods is executed by Tenant.

 

(b)                                 Renewal Exercise.  The Options to Renew shall be exercised by
written notice to Landlord which must be given in accordance with Section 15.14
below.  The First Option to Renew must be
exercised at least ninety (90) but no more than one hundred eighty (180) days
prior to expiration of the Initial Term. 
The Second Option to Renew must be exercised at least 90 but no more
than 180 days prior to expiration of the First Renewal Period.  The Third Option to Renew

 

2

 

must be exercised at
least ninety (90) but no more than one hundred eighty (180) days prior to
expiration of the Second Renewal Period. 
No Option to Renew may be exercised at any time when there is an uncured
Event of Default then existing.

 

(c)                                  Renewal Period Lease Terms.  During the Renewal Periods, the terms and
conditions of this Lease shall remain unchanged from the Initial Term except as
otherwise specifically set forth herein.

 

ARTICLE III

 

RENT

 

Section 3.01.                             Base Rent.  The minimum monthly rent to be paid to
Landlord by Tenant under this Lease shall be as follows:

 

(a) Initial Term.  The
base rent under this Lease (the “Base Rent”) during the Initial Term shall be
payable monthly in advance on the first day of each calendar month during such Initial
Term as follows:

 

	
  Minimum Rent
  payable on

  	
   

  	
   

  	
   

  
	
  each of the
  Rental Due

  	
   

  	
   

  	
   

  
	
  Dates
  occurring during

  	
   

  	
   

  	
   

  
	
  November 2005
  through

  	
   

  	
   

  	
   

  
	
  October 2006

  	
   

  	
  $

  	
  18,750.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Minimum Rent
  payable on

  	
   

  	
   

  	
   

  
	
  each of the
  Rental Due

  	
   

  	
   

  	
   

  
	
  Dates
  occurring during

  	
   

  	
   

  	
   

  
	
  November 2006

  	
   

  	
   

  	
   

  
	
  through October 2007

  	
   

  	
  $

  	
  31,250.00

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Minimum Rent
  payable on

  	
   

  	
   

  	
   

  
	
  each of the
  Rental Due

  	
   

  	
   

  	
   

  
	
  Dates
  occurring during

  	
   

  	
   

  	
   

  
	
  November 2007

  	
   

  	
   

  	
   

  
	
  through October 2010

  	
   

  	
  $

  	
  37,500.00

  	
   

  

 

(b)                                 Renewal
Periods.  In the event that any of
the Options to Renew are exercised, the Base Rent which is payable on the first
day of each month occurring during the applicable Renewal Periods shall be
Thirty-Seven Thousand Five Hundred

 

3

 

Dollars ($37,500.00)
(the “Renewal Period Base Rent”) as such amount may be increased, from time to
time in accordance with Section 3.02.

 

Section 3.02. Increases in Base Rent.  The amount of the Base Rent, which is set
forth by Section 3.01, above, shall be subject to adjustment (in
each case, a “Rent Adjustment”) on the on the first day of each Renewal Period (with
each such date being referred to herein as an “Adjustment Date”).  The amount of the Base Rent as so adjusted on
each Adjustment Date (the “Adjusted Rent”) shall be payable in advance on the
Adjustment Date for which it was determined, and on the first (1st) day of each
and every calendar month thereafter until, but not including, the next
succeeding Adjustment Date.  The amount
of the Adjusted Rent shall be determined as set forth below:

 

(a)                                  CPI
Escalation.  Each adjustment shall be
determined with reference to the Consumer Price Index for all Urban Consumers
for All Items (1982-1984=100)- “West Region Average”, published by the United
States Department of Labor, Bureau of Labor Statistics (the “Index”).  The Index which is published for August 2005
shall be the “Base Index,” and the Index which is published for the month of August immediately
preceding each Adjustment Date shall be the “Adjustment Index.”

 

(b)                                 Adjusted
Rent Calculation.  On each Adjustment
Date, the Adjustment Index shall be divided by the Base Index, and the
resulting quotient multiplied by the Renewal Period Base Rent.  The Adjusted Rent so determined shall be the
amount of the Base Rent which is payable on the applicable Adjustment Date and
on the same day of each succeeding month thereafter until, but not including,
the next succeeding Adjustment Date. However, the terms of this Section 3.03
notwithstanding, in no event shall the Adjusted Rent be less than the Renewal
Period Base Rent (or the most recently determined Adjusted Rent, as the case
may be).

 

(c)                                  Alternate
Indexes.  In the event the CPI Index referenced
above shall cease to be published during the Lease Term, then and in such event
only, the Adjusted Rent shall be determined on the basis of such other
comparable index as shall be then published by the United States Government,
or, if there be none, by the comparable index published by Standard &
Poor’s.  In the event none of the
foregoing indexes are published, it is understood and agreed that a Board of
Arbitrators shall be constituted as of each Adjustment Date to decide the
percentage of adjustment applicable to the rentals herein specified, based upon
their examination of retail prices in Reno, Nevada, unless Landlord and Tenant
agree  as to the amount

 

4

 

of such
adjustment.  Such Board of Arbitrators
shall be selected pursuant to the following:

 

(i)                                     The Board of
Arbitrators shall consist of three (3) disinterested persons.  Each Party shall appoint one (1) arbitrator,
and the two (2) appointed arbitrators shall appoint the third.

 

(ii)                                  The Board of
Arbitrators shall begin on the next business day after their selection at once
and proceed with all reasonable dispatch to determine questions referred to
them as herein provided, and their determination shall in each and every
instance be final and binding on the Parties.

 

(iii)                               If either Party at any
time prefers to have the adjustment of rental determined by the courts instead
of by arbitrators, the same may be done by the Party having such preference
beginning legal proceedings in the year prior to the appointment of the
arbitrators, but not afterward.

 

(iv)                              The Board of Arbitrators
shall report to the Parties  within
fifteen (15) days after the rental adjustment question has been submitted to
them, and their findings shall be in writing signed by not less than two (2) arbitrators.

 

(v)                                 If any one or more of such
arbitrators shall resign, die or become incapacitated before a full and final
determination is made, such arbitrator shall be replaced in the same manner as
he was originally appointed and shall have the same power and authority as
though he had been originally appointed.

 

(vi)                              The Parties shall share
equally the cost and expense of the arbitrators and all expenses connected
therewith.

 

Section 3.03 Additional Rent.  Subject to Tenant’s rights of contest and
appeal set out in this Lease, all taxes, charges, costs and expenses which the
Tenant is required to pay hereunder, together with all interest and penalties
that may accrue thereon in the event of the Tenant’s failure to pay such
amounts shall be deemed to be Additional Rent. In the event of nonpayment of
Additional Rent by Tenant, the Landlord shall have all the rights and
obligations with respect thereto as the Landlord has for the nonpayment of Base
Rent.  Notwithstanding the above, and
subject to Section 5.05, below, Tenant may in good faith contest
such taxes, charges, costs and

 

5

 

expenses and such
amounts shall not be deemed Additional Rent until a final, non-appealable
judgment from a court of competent jurisdiction is rendered concerning same.

 

Section 3.04.                             Late Rental Payments.  Subject to Tenant’s rights of contest and
appeal set out in this Lease, if any installment of rent or any sum due from
Tenant shall not be received by Landlord or Landlord’s designee within ten (10) days
after such amount is due, then Tenant shall pay to Landlord a late charge equal
to five percent (5%) of such overdue amount, plus any attorney’s fees incurred
by Landlord by reason of Tenant’s failure to pay rent and/or other charges when
due hereunder.  The Parties  agree that such late charges represent a fair
and reasonable estimate of the cost that Landlord will incur by reason of the
late payment of Tenant.  Acceptance of
such late charges by the Landlord shall in no event constitute a waiver of
Tenant’s default with respect to any of the other rights and remedies granted
hereunder for uncured defaults.

 

Section 3.05. Minimum Rent Net to Landlord.  It is the intention of the Landlord and the
Tenant that the Base Rent herein specified shall be net to the Landlord in each
year during the term of the Lease. 
Accordingly, all costs, expenses and obligations of every kind relating
to the Leasehold Premises (except as otherwise specifically provided in this
Lease) which may arise or become due during the Lease Term shall be paid by the
Tenant, and the Landlord shall be indemnified by the Tenant against such costs,
expenses and obligations due and owing by Tenant.  Subject to the various provisions of this
Lease to the contrary, including, but not limited to Section 3.06,
the Minimum Rent shall be paid to the Landlord without notice of demand and
without abatement, deduction, or setoff (except as otherwise specifically
provided in this Lease).

 

Section 3.06.  Credit/Offset Rights of Tenant. 
Notwithstanding any other provision of this Lease to the contrary,  Tenant
shall have the right, in Tenant’s election, to offset against any amount
due by Tenant under this Lease (as Base Rent, Additional Rent or otherwise) the
sum of $50,000.00 to be applied by Tenant against such obligations in the
manner and order as Tenant so elects (including the discharge of such obligations
in consecutive months, whether in partial discharge of such monthly obligations
or otherwise)(collectively, the “Offset Rights”). Tenant acknowledges that such
Offset Rights are the product of the negotiations of the Parties and further
based on the due diligence investigation of the Leasehold Premises by Tenant
and that as a result of such matters, Landlord shall have no obligations to
Tenant regarding any further repairs to the Leasehold Building.

 

6

 

Section 3.07                                Payment Terms.

 

(a)                                  Monthly
Payment.  The Base Rent described
above is to be paid in equal monthly installments in advance on the Commencement
Date and thereafter, on the first day of each and every calendar month of the Lease
Term (each a “Rental Due Date”).  The Base
Rent for any other portion of the Lease Term which is less than a complete
calendar month shall be the proration of the Base Rent above which the number
of days in such portion of the Lease Term bears to thirty (30).

 

(b)                                 Payments
Location.  Payments of Base Rental shall
be made to Landlord at the address specified in Section 15.14 hereof,
or at such other place as Landlord may from time to time in writing direct (not
less than thirty (30) days in advance of the date of the address change
effective date).

 

ARTICLE IV

 

USE
OF LEASEHOLD PREMISES

 

Section 4.01.                             Generally.  Except to the extent otherwise provided
herein, Tenant shall not use the Leasehold Premises for any purpose other
than:  (i) operation of a
nonrestricted gaming business (including any ancillary activities reasonably
related thereto); or (ii) any other lawful purpose, as permitted under the
laws of the State of Nevada.

 

Section 4.02.                             Prohibited Uses.  Except as permitted by the Terms of this
Lease or otherwise by Landlord, Tenant shall not suffer or permit the Leasehold
Premises to be used in any manner, or permit anything to be brought into or
kept in such areas which would in any way: 
(i) violate any law or requirement of public authorities (including
but not limited to, Environmental Laws and requirements, all as more particularly
set forth by Section 4.07 below); (ii) cause material structural
injury to the Leasehold Real Property or any part thereof; (iii) interfere
with the normal operations of the heating, air conditioning, ventilation,
plumbing or other mechanical or electrical systems of the building or the
elevators installed therein; (iv) constitute a public or private nuisance;
or (v) constitute a breach of any of the terms and conditions of this
Lease.  The provisions of this Section 4.02
shall not apply to items, materials, products, chemicals or the like which
are:  (i) permitted under this Lease
or (ii) relate to the conduct of Tenant’s ordinary course of business.

 

Section 4.03.                             Compliance with Law.  Tenant shall at Tenant’s sole cost and expense,
comply with all written requirements of all county, municipal, state, federal
and other applicable governmental authorities, now in force, or which may

 

7

 

hereafter be in
force, pertaining to the Leasehold Premises, and shall faithfully observe in
the use of the Leasehold Premises all municipal and county ordinances and state
and federal statutes now in force or which may hereafter be in force.  Tenant shall not permit the Leasehold Premises,
or any portion thereof, to be used or occupied in any manner which is in
violation of such governmental requirements, and shall timely comply with all
governmental administrative regulations, orders and pronouncements.  In furtherance of this Section 4.03,
Tenant shall provide Landlord with a copy of all inspection reports by state,
federal and local authorities.

 

Section 4.04. Tenant Indemnification.  Tenant shall indemnify, defend and hold
harmless Landlord, its managers, members officers, directors, owners, employees,
agents,  successors and assigns
(collectively, the “Landlord Indemnitees”) from and against any and all losses,
damages, claims, judgments, liabilities, enforcement actions, remedial actions,
fines, penalties, taxes, fees, costs and expenses (including, without
limitation, attorneys’ fees,
consultants’ fees, laboratory costs, and expert fees) suffered by any of them
and caused by, related to, arising out of, resulting from, or in any way
connected with:  (i) any
contamination of the Leasehold Premises with Hazardous Materials caused by
Tenant; or (ii) the breach by Tenant of any obligation which it may have
under this Section 4.04; or (iii) any violation of Environmental
Laws (as hereinafter defined) in or about the Leasehold Premises caused by
Tenant.  Subject
to the provisions of this Section 4.04,
Tenant shall promptly take, at its sole expense, all actions necessary to
investigate, clean up, remediate, and remove any Hazardous Materials which come
to be located in, on, under, or about the Leasehold Premises due to Tenant’s
(or its agents) use of or activities on or about the Leasehold Premises.  Tenant shall comply with all applicable
Environmental Laws (as defined herein) and the written requirements of
governmental authorities in undertaking such actions.  No consent of Landlord to the presence of
Hazardous Materials or Tenant’s compliance with Environmental Laws (as defined
herein) shall relieve Tenant of its indemnification obligations hereunder.

 

Section 4.05.                             Landlord
Indemnification.  Landlord shall
indemnify, defend and hold harmless Tenant, its managers, members, officers,
directors, owners, shareholders, partners, employees, agents,  successors and assigns (collectively, the “Tenant
Indemnitees”) from and against any and all losses, damages, claims, judgments,
liabilities, enforcement actions, remedial actions, fines, penalties, taxes,
fees, costs and expenses (including, without limitation, attorneys’ fees, consultants’ fees, laboratory costs, and expert
fees) suffered by any of them and caused by, related to, arising out of,
resulting from, or in any way connected with: 
(i) any contamination of the Leasehold Premises with Hazardous
Materials caused by Landlord; or (ii) the breach by Landlord of any
obligation which it may have under this Section 4.05; or (iii) any
violation of Environmental Laws (as hereinafter defined) in or

 

8

 

about the
Leasehold Premises caused by Landlord.  Subject to the provisions of this Section 4.05,
Landlord shall promptly take, at its sole expense, all actions necessary to
investigate, clean up, remediate, and remove any Hazardous Materials which come
to be located in, on, under, or about the Leasehold Premises due to Landlord’s
(or its agents) use of or activities on or about the Leasehold Premises, and
Landlord shall restore the Leasehold Premises, and any other properties
(including the Improvements), to the condition existing prior to the
introduction of such Hazardous Materials to the Leasehold Premises.  Landlord shall comply with all applicable
Environmental Laws (as defined herein) and the written requirements of
governmental authorities in undertaking such actions.  Landlord shall obtain Tenant’s prior written
approval of such actions and of any consultants or contractors to be used by
Landlord in connection therewith, such approval of Tenant not to be reasonably
withheld, conditioned or delayed.  No
consent of Tenant to the presence of Hazardous Materials or Landlord’s (or its
agents) compliance with Environmental Laws (as defined herein) shall relieve
Landlord of its indemnification obligations hereunder.

 

Section 4.06                                Representations and
Warranties of Landlord.

 

(a)                                  Landlord
Declaration.  Subject to the
provisions of subsection (b) below, Landlord represents and
warrants to Tenant, to Landlord’s knowledge, that:

 

(1)                                  The Leasehold Premises have not been
used by previous owners and/or operators, Landlord, or any tenant of Landlord
to generate, manufacture, refine, transport, treat, store, handle, or dispose
of Hazardous Materials.

 

(2)                                  The Leasehold Premises have not
contained, either asbestos, PCB, toxic materials or Hazardous Materials.

 

(3)                                  To Landlord’s
current, actual knowledge, the Leasehold Premises do not now contain either
asbestos, PCB, toxic materials or Hazardous Materials.

 

(4)                                  Landlord
has not received a summons, citation, directive, letter or other communication,
written or oral, from any agency or Department of the State of Nevada or the
U.S. Government or any other public agency or entity or any private agency or
entity concerning any intentional or unintentional action or omission on
Landlord’s part:  (i) concerning any
release or discharge of any Hazardous Materials on, under, above or adjacent to
the Leasehold Premises; or (ii) any alleged violation of any Environmental
Laws; or (iii) the releasing, spilling, leaking,

 

9

 

pumping, pouring, emitting, emptying, or dumping of Hazardous Materials
into waters or onto lands of the State of Nevada, or into waters or onto lands
outside the jurisdiction of the State of Nevada.  Landlord further represents and warrants to
Tenant that, to Landlord’s actual knowledge, there is no litigation pending or
threatened with respect to the Leasehold Premises concerning any Hazardous
Materials or the violation of any Environmental Laws.

 

(b)                                 Limitation.  Landlord’s representations and warranties set
out in subsections 4.06(a)(1) and (2) above shall be
limited to the scope of disclosures, representations and warranties made and
given to Landlord by its predecessors in the chain of title or by operation of
law.  Landlord further represents and
warrants to Tenant that Landlord has not received any other representations or
warranties from Landlord’s predecessors in the chain of title other than by
operation by law or by virtue of express warranties contained in Landlord’s
vesting deed.

 

Section 4.07                                Definitions.  As used herein, “Hazardous
Materials” shall mean and include: (i) any “hazardous waste”, “hazardous
substance” and “pollutant or contaminant”, all as such terms are defined in Section 101
of the Comprehensive Environmental Response Compensation and Liability Act, as
amended, 42 U.S.C. Section 9601 (including, without limitation, asbestos
and raw materials which include hazardous constituents); (ii) petroleum
and any petroleum byproduct or constituent; and (iii) any or other similar
substances, or materials which are included under or regulated by any local,
state, or federal law, rule, or regulation pertaining to environmental
regulation, contamination or clean-up, including, without limitation, “CERCLA”,
“RCRA”, “SARA”, or state superlien or environmental clean-up statutes (all such
laws, rules and regulations being referred to collectively as “Environmental
Laws”).  Any other terms mentioned in
this Article IV which are defined in state or federal statutes
and/or regulations promulgated in relation thereto shall have the meaning
subscribed to such terms in such statutes and regulations.

 

Section 4.08                                Disclosure
to Landlord.  Tenant further agrees
to provide Landlord with copies of any communications between Tenant and any
governmental authorities relating to any Hazardous Material on or affecting the
Leasehold Premises, and to grant to Landlord the right (but not the obligation)
to participate in any proceeding with any enforcement agency relating to any
Hazardous Material on or affecting the Leasehold Premises.

 

Section 4.09                                Reports.  Attached to this Lease as Exhibit ”B”
and incorporated herein by reference is a list of  all reports and correspondence which Landlord
has received (and which Landlord has delivered to Tenant) as of the date of

 

10

 

this Lease regarding any environmental status of the Leasehold Premises
or of any alleged violation of any Environmental Laws.  Landlord further agrees to promptly disclose
to Tenant (but in any event within five (5) days of Landlord’s receipt) of
any other reports, correspondence, claims, documents, pleadings or the like as
to any alleged violation of any Environmental Laws or of the environmental
status of the Leasehold Premises, which come into Landlord’s possession,
custody or control after the Commencement Date.

 

ARTICLE V

 

MAINTENANCE,
REPAIRS AND ALTERATIONS

 

Section 5.01.                             Maintenance and Repairs.

 

(a)                                  Tenant
Obligation.  Subject to the rights of
Tenant set out in Section 3.06, above, Tenant shall, at all times
during the Lease Term, at its own expense, put and maintain the Leasehold
Premises in thorough repair and in good and safe condition, including, but not
limited to, the roof, floors, walls, heating and air conditioning fixtures,
plumbing fixtures and sewage fixtures, together with all equipment situate
thereon, or therein, and all appurtenances thereto, both inside and outside,
structural and nonstructural, extraordinary and ordinary, however the necessity
or desirability for repairs may occur, and whether or not necessitated by wear,
tear, obsolescence, or defects, latent or otherwise.

 

(b)                                 Landlord Notice.  In the event Landlord determines (in its
reasonable, good faith judgment) that Tenant has failed to make the repairs
required by Tenant pursuant to subsection 5.01(a) above, Landlord
shall notify Tenant in writing as to the matters which have not been repaired
in accordance with the terms of this Lease and of the specific repairs which
remain outstanding (the “Repair Notice”).  The delivery of the Repair
Notice shall be a condition precedent to Landlord’s right of entry described in
subsection 5.01(c) below.

 

(c)                                  Landlord Rights.  In the event that Tenant fails to make the
repairs required by subsection 5.01(a), above, and subject to the
provisions set forthin Section 5.01(b), above, Landlord shall be
entitled, but shall be under no obligation (but only upon three (3) days
advance written notice to Tenant), to enter upon the Leasehold Premises for the
purpose of performing the repairs set out in the Repair Notice.  In the event that Landlord makes such
repairs, the actual cost paid by Landlord for same shall be considered Additional
Rent, which shall be payable by Tenant within thirty (30) days of Tenant’s
receipt of an invoice for same supported by

 

11

 

appropriate receipts.  Prior to commencing such repairs, Landlord
shall give Tenant fifteen (15) days’ additional written notice unless Landlord
determines, in its reasonable, good faith discretion, that immediate repairs
are necessary to avoid irreparable damage or rapid deterioration of the
condition of the Leasehold Premises.

 

Section 5.02.                             Alterations, Additions
and Fixtures. Subject to the provisions hereinafter set forth, Tenant shall
have the right, during the Lease Term to do any of the following (all of which
are collectively referred to herein as the “Improvements”);  (i) make such modifications to the
Leasehold Building (including, without limitation, alterations, expansions,
demolitions and additions); and (ii) construct such other buildings,
structures and infrastructure on the Leasehold  Real Property; in each case, as it deems
necessary or advisable, in its discretion, for conduct of its use of the
Leasehold Premises as permitted hereby. 
However, the terms of this Section 5.02
notwithstanding:  (i) without the
prior written consent of Landlord, which shall not be unreasonably delayed,
conditioned or denied, Tenant shall not cause or undertake any Improvements which
would, in the reasonable, good faith judgment of a structural engineer duly
licensed in the State of Nevada, result in a material  diminution of the structural integrity or
enclosure of the Leasehold Building, as it exists on the Commencement Date; and
(ii) all Improvements shall be constructed with reasonable diligence, in a
quality manner and in compliance with all applicable building codes, laws and
other governmental rules and regulations. 
All Improvements shall be deemed to constitute part of the Leasehold
Premises (but shall not cause an increase in the amount of any Base Rent).  Tenant agrees to provide Landlord with such
information regarding the Improvements, such as plans and specifications,
equipment warranties and similar information as Landlord may, from time to
time, reasonably request in writing to Tenant.

 

Section 5.03.                             Surrender of Premises.  Upon expiration of this Lease, Tenant shall
surrender the Leasehold Premises in a condition which would result from Tenant’s
complete compliance with all of its maintenance obligations hereunder.  Tenant shall surrender all keys for the Leasehold
Premises to Landlord at the place then fixed for the payment of rent and shall
inform Landlord of all combinations on locks, safes and vaults, if any, in the Leasehold
Premises.  At the expiration of the
Lease, Tenant shall remove from the Leasehold Premises all items which do not
become the property of Landlord under Section 5.02, above.  All such property not removed at the end of
the Lease shall be deemed abandoned.

 

Section 5.04.                             Removal of Trade
Fixtures.  Before surrendering the Leasehold
Premises to Landlord, Tenant shall repair any damage caused by removal of trade
fixtures, and the removal of any other items from the Leasehold Premises.  Such repairs shall be performed in a manner reasonably
satisfactory to the Landlord

 

12

 

and shall
include, but not necessarily be limited to: 
capping all plumbing fixtures, capping all electrical wiring and
fixtures, repairing all holes in walls, restoring any damaged floor and/or
ceiling tiles, and thoroughly cleaning the Leasehold Premises.  Provided, however, Tenant shall not be
obligated to restore diminution in condition caused by: (i) ordinary wear
and tear; or (ii) elements and damages due to casualty or condemnation; or
(iii) the construction of additional buildings, structures or other
improvements over, upon or under the Leasehold Premises; or (iv) the
demolition or alteration of existing buildings (including the Leasehold
Building), structures, or other improvements over, upon or under the Leasehold
Premises. Provided, however, subpart (ii) shall not relieve Tenant of its
obligation, under Section 8.02, and all matters described in subparts
, (iii) or (iv) shall be effected in compliance with Section 5.01,
above.

 

Section 5.05.                             Covenants Against Liens.

 

(a)                                  Discharge;
Reimbursement.  Except for any
indebtedness imposed on Tenant’s leasehold interest in the Leasehold Premises
by Tenant’s lenders pursuant to Article XIV, below (the “Tenant
Lender Liens”), Tenant covenants and agrees that it shall not, during the Lease
Term, suffer or permit any lien to be attached to or upon the Leasehold
Premises or any part thereof by reason of any act or omission on the part of
Tenant, and hereby agrees to save and hold harmless Landlord from or against
any such lien or claim of lien.  In the
event that any such lien (other than the Tenant Lender Liens) does so attach,
and is not released within ninety (90) days after Tenant’s receipt of written notice
thereof, or if Tenant has not indemnified Landlord against any such lien within
such ninety (90) day period, Landlord, in its sole discretion, may pay and
discharge the same and relieve the Leasehold Premises therefrom. Tenant agrees
to repay and reimburse Landlord for the amount so paid by Landlord within
thirty (30) days of Tenant’s receipt of an invoice for such charges supported
by detailed evidence of such expenditures.

 

(b)                                 Good
Faith Contest.  Notwithstanding the provisions
of Section 5.05(a), above, Tenant may in good faith contest any
mechanics, laborers’, materialmen’s or other liens filed or established against
the Leasehold Premises, and in such event may permit the items so contested to
remain undischarged and unsatisfied during the period of such contest and any
appeal therefrom.  Upon such
circumstances, Landlord shall not have the rights set out in Section 5.05(a),
above, unless by nonpayment of any such items the interest of Landlord will be
materially and imminently endangered or the Leasehold Premises or any part
thereof will be subject to imminent material loss or forfeiture in Landlord’s
reasonable, good faith determination, in which event Tenant shall promptly pay
and cause to be satisfied and

 

13

 

discharged all
such unpaid items or secure such payment by posting a bond, in form reasonably
satisfactory to Landlord, with the Landlord. 
Landlord will cooperate fully with the Tenant in any such contest
provided that Tenant shall fully and promptly reimburse Landlord for all
reasonable costs incurred by Landlord in connection with same.  Tenant shall hold Landlord whole and harmless
from any loss, cost or expenses Landlord may reasonably incur related to any
such contest.

 

(c)                                  Landlord
Representation.  Based solely on: 
(i) Landlord’s actual knowledge and that certain Title Commitment
dated October 26, 2005, issued by Stewart Title Guaranty Title Company and
(ii) all other items within Tenant’s actual knowledge, Landlord states to
Tenant in its good faith belief, that the Leasehold Premises are free from all
liens, encumbrances, claims, impediments to title, encroachments, restrictive
covenants, special taxing districts or the like (other than Exceptions 1
through 4 [with all taxes paid current] 5, 6 and 9, all as shown on Schedule B
Part II of the above referenced Title Commitment).  Based solely on: (i) that
certain letter from the City of Elko, Nevada Planning Department dated October 20,
2005 addressed to James M. Copenhaver, P.C.; and (ii) all other items
within Tenant’s actual knowledge, Landlord states to Tenant in its good faith
belief, that the Leasehold Premises are situated within a zoning and gaming
district which is compatible with the operation of a non-restricted gaming
business.

 

ARTICLE VI

 

UTILITIES
AND SERVICES

 

Tenant shall make arrangements, and shall be responsible, for all
utilities and services furnished to or used by it in occupation of the Leasehold
Premises including, without limitation, gas, electricity, water, telephone
service, sewer use fees and other services used in or about or supplied to the
Premises.  Tenant shall indemnify Landlord
from any obligation for any such expenses described above.

 

14

 

ARTICLE VII

 

INSURANCE
AND INDEMNITY

 

Section 7.01.                             Liability and Casualty Insurance.  Tenant agrees, at its sole expense, to
maintain in full force during the Lease Term:

 

(a) A Commercial General Liability policy with a One Million
Dollar ($1,000,000.00) combined single limit for bodily injury and property
damage, including all standard policy form extensions.  The policy must provide a Two Million Dollar
($2,000,000.00) general aggregate and be written on an “occurrence form.”  The Landlord (and such persons, firms, or
corporations as are designed by Landlord) will be named as Additional Insured
on the Tenant’s Commercial General Liability Policy to protect the Landlord’s
interest.  An Umbrella Policy shall be
purchased with a limit of not less than Ten Million Dollars ($10,000,000.00)
providing excess coverage of the required Commercial Liability Policy, which
umbrella policy shall be endorsed to include Landlord as an Additional Insured.

 

(b) Property insurance with special causes of loss, insuring the
Leasehold Building and any Improvements and the contents thereof with coverage
in an amount equal to at least ninety percent (90%) of the replacement cost (“Tenant’s
Property Policy”).  The Landlord (and
such persons, firms, or corporations as are designed by Landlord) will be named
as Loss Payee on the Tenant’s Property Policy to protect the Landlord’s
interest.

 

(c) Boiler and Machinery Policy with respect to all boilers and
hot water pressure vessels utilized in operation of the Leasehold Building
providing coverage in an amount which is reasonably acceptable to Landlord.

 

Section 7.02                                Policy/Certificate.  A copy of the policies or certificates of
insurance evidencing the required coverage shall be delivered to Landlord
before Tenant opens for business or before Tenant enters the Leasehold Premises
in order to prepare the Leasehold Premises for occupancy and, thereafter, from
time to time as reasonably requested by Landlord in writing, in order to
evidence continued enforceability of the required coverage.  Such policies shall contain a clause that the
insurer will not cancel or change the insurance without first giving the
Landlord thirty (30) days’ prior written notice by certified mail.  All insurance policies required in this Lease
shall be placed with insurance carriers qualified to do business in the State
of Nevada and rated no lower than “B+” in the most recent addition of A.M.
Best.

 

Section 7.03                                Landlord’s Right To
Procure.  Should Tenant fail to
obtain insurance coverage anywhere required in this Article VII, the
Landlord shall have the right, but not the obligation, to obtain such insurance
(but only to the extent of the coverages described herein) and to pay premiums
thereof. In such event, the entire amount of such premiums shall be paid by
Tenant to Landlord within thirty (30) days of

 

15

 

Tenant’s
receipt of an invoice for same supported by reasonable evidence and proof of
payment of same.

 

Section 7.04.                             Indemnification.

 

(a)                                  Tenant Obligation.  Tenant agrees to indemnify, defend and hold
Landlord, its officers, directors, employees, members, managers, successors,
assigns and agents harmless from and against any and all claims, actions,
damages, liability and expenses in connection with loss of life, personal
injury, and/or damage to property arising from or out of any occurrence in,
upon or at the Leasehold Premises or any part thereof, and occasioned wholly or
in part by any act or omission of Tenant, its agents, contractors, employees,
servants, tenants or subtenants (Tenant shall not be responsible for the
proportion of any such claims, injuries, causes of action, damages or the like
which arises out of the negligent or willful conduct of Landlord).  In case Landlord or its officers, directors,
employees, successors, assigns, and agents shall be made party to any
litigation, or action or claim commenced against Tenant, then (and provided
such claims, injuries, causes of action, damages or the like do not arise
primarily out of the negligent or willful conduct of Landlord) Tenant shall
protect and hold Landlord harmless and pay all costs, expenses and reasonable
attorney’s fees paid by Landlord in connection with such litigation.

 

(b)                                 Landlord Obligation.  Landlord agrees to indemnify, defend and hold
Tenant, its officers, directors, shareholders, owners, employees, successors,
assigns and agents harmless from and against any and all claims, actions, damages,
liability and expenses in connection with loss of life, personal injury, and/or
damage to property arising from or out of any occurrence in, upon or at the
Leasehold Premises or any part thereof, and occasioned wholly or in part by any
act or omission of Landlord, its agents, contractors, employees, servants,
tenants or subtenants. (Landlord shall not be responsible for the proportion of
any such claims, injuries, causes of action, damages or the like which arises
out of the negligent or willful conduct of Tenant).  In case Tenant or its officers, directors,
shareholders, owners, employees, successors, assigns, and agents shall be made
party to any litigation, or action or claim commenced against Landlord, then
(and provided such claims, injuries, causes of action, damages or the like do
not arise primarily out of the negligent or willful conduct of Tenant) Landlord
shall protect and hold Tenant harmless and pay all costs, expenses and
reasonable attorney’s fees  paid by
Tenant in connection with such litigation.

 

Section 7.05                                Waiver of Claims.  Landlord shall not be liable to Tenant or to
Tenant’s employees, agents, invitees, guests or visitors, or to any other
person

 

16

 

whomsoever, for any
injury to person or damage to property on or about the Leasehold Premises
caused by the negligence or misconduct of Tenant, its employees, subtenants,
licensees or concessionaires, or of any other person entering the Leasehold
Premises, or arising out of the use of the Leasehold Premises by Tenant and the
conduct of its business therein, or arising out of breach or default by Tenant
in the performance of its obligations hereunder (and provided that the
foregoing waiver shall not be applicable to any portion of such claims,
injuries, causes of action, damages or the like which arises out of the
negligent or willful conduct of Landlord).

 

Section 7.06.                             Property Loss or Damage.

 

(a)                                  Property Loss; Theft.  Landlord shall not be liable for any damage
to property of Tenant or of others located on Leasehold Premises, nor for the
loss of or damage to any property of Tenant or of others by theft or otherwise.

 

(b)                                 Casualty Loss.  Landlord shall not be liable for any injury
or damage to person or property resulting from fire, flood, explosions, falling
plaster, steam, gas, electricity, water, rain or snow, or leaks from any part
of the Leasehold Premises, or from the pipes, appliances or plumbing works or
by any such damage caused by any other tenants or person in the Leasehold Premises,
or the public, or caused by operations in construction of any private, public
or quasi-public work or from any other casualty in or about the Leasehold
Premises.

 

(c)                                  Exception.  Notwithstanding the above, Sections 7.06(a) and
(b) shall not apply to any portion of such damage, loss or injury
which is caused by the willful act or 
negligence of Landlord.

 

Section 7.07.                             Waiver of Subrogation.  Landlord and Tenant each hereby waive the
rights of recovery against the other or against the officers, employees,
agents, successors and representatives of the other, on account of loss or
damage occasioned to such waiving party of its property or the property of
others under its control caused by fire or any of the extended coverage risks
described above to the extent that such loss or damage is insured against under
any insurance policy in force at the time of such loss or damage.  The insuring party shall, upon obtaining the
policies of insurance required under this Lease, give notice to the insurance
carrier or carriers that the foregoing mutual waiver of subrogation is
contained in this Lease.

 

17

 

ARTICLE VIII

 

CONDEMNATION
OR DESTRUCTION OF PREMISES

 

Section 8.01                                Condemnation.

 

(a)                                  Assignment.  Subject to the rights of Tenant hereinafter
set forth in this Article VIII, Tenant hereby irrevocably assigns
to Landlord any award or payment to which Tenant may be or become entitled by
reason of any taking of the Leasehold Premises or any part thereof, in or by
condemnation or eminent domain proceedings pursuant to any law, general or
special.  Landlord shall be entitled to
participate in any such proceedings at Landlord’s expense.

 

(b)                                 Tenant
Property.   Notwithstanding any provision in this Article VIII
herein to the contrary, Tenant shall have the right to pursue a claim with and
retain any award from the condemning authority or entity for damage to or loss
of Tenant’s leasehold estate in the Leasehold Premises as well as for any other
separate damages that Tenant may suffer in relation to Improvements constructed
by Tenant on the Leasehold Premises or to any personal property of Tenant.

 

(c)                                  Governmental
Action.   In the event of the temporary requisition of
the use or occupancy of the Leasehold Premises or any part thereof, by any
governmental authority, civil or military, Tenant shall retain any award or
payment therefore, whether the same shall be paid or payable in respect of
Tenant’s leasehold interest in the Improvements constructed by Tenant on the
Leasehold Premises or to any personal property of Tenant or otherwise;
provided, however, that Tenant shall continue to pay Base Rent, and any other
sums payable by Tenant hereunder during the period of such temporary
requisition.

 

(d)                                 Right
of Termination Notwithstanding the provisions of Section 8.02,
above, if all of the Leasehold Premises (or so much thereof as to render the
Leasehold Premises unsuitable for Tenant’s business use, to be reasonably
determined by Tenant) be taken or appropriated by some public authority or
private corporation having the power of eminent domain (collectively, a “Condemnation”),
or if the Leasehold Premises be conveyed by the Landlord or its
successors-in-interest for the purpose of avoiding a Condemnation, this Lease
shall terminate as of the date of such appropriation or conveyance with the
same force and effect as if such date had been originally set forth herein as
the expiration date of the Lease Term. 
Upon such event, Landlord shall rebate to Tenant the amount of Base Rent
paid under this Lease relating to the time period after such date of
termination.

 

18

 

(e)                                  Partial
Taking.   If only a portion of the Leasehold Premises be
taken or appropriated by Condemnation and if the Leasehold Premises are still
suitable for Tenant’s business use, to be reasonably determined by Tenant (a “Partial
Taking”), after such taking, this Lease shall terminate as to that portion of
the Leasehold Premises so taken but shall remain in full force and effect as to
the remainder of the Leasehold Premises. 
Upon such event, the future rentals to be paid by the Tenant shall be
equitably abated in the ratio that the value of the Leasehold Premises taken
bears to the value of the whole of the Leasehold Premises.

 

(f)                                    Severance.  In the event of a Partial Taking, Tenant
shall be responsible for all repairs required as a result of such Partial
Taking (“Severance Repairs”).  All
severance damages awarded to any Party with respect to a Partial Taking shall
be applied towards satisfaction of the Severance Repairs resulting
therefrom.  To the extent that any such
severance damages are awarded to Landlord, Landlord shall make such funds
available to Tenant after receiving reasonable assurances that they will be
utilized towards satisfaction of the Severance Repairs.  To the extent that the aggregate of such
severance damages exceeds the cost of Severance Repairs, the excess amount
shall be divided among Landlord and Tenant in the same proportion that their
respective awards of severance damages bear to the total of such severance
damage awards.

 

(g)                                 Consent
Required.   For the purposes of this Lease, all amounts
payable pursuant to any agreement with a condemning authority which agreement
has been made in settlement of or under threat of any Condemnation, shall be
deemed to constitute an award made in such proceeding; provided, however, that
no such agreement shall be made with any condemning authority by either
Landlord or Tenant without the written consent of the other.

 

Section 8.02                                Total or Partial
Destruction of Premises.

 

(a)                                  Casualty
Event.

 

(1)                                  In
the event that all or any portion of the Leasehold Premises is damaged or
destroyed by fire, tornado or other casualty, it shall be deemed a “Casualty
Event”.

 

(2)                                  In
the event that all or substantially all of the Leasehold Building should be
damaged or destroyed by a Casualty Event (a “Total Casualty”), Tenant shall
either: (i) proceed with reasonable diligence to restore the Shell
Structure (defined below) of the Leasehold Building to substantially the same
condition in which

 

19

 

it was
immediately prior to the occurrence of the Total Casualty (“Shell Restoration”);
or (ii) make a payment to Landlord in an amount which is equal to the
Shell Value (defined below) (the “Total Casualty Payoff”) and provide for
demolition and removal of any structures or other improvements remaining on the
Leasehold Real Property, which demolition shall be performed with reasonable
diligence, in a workmanlike manner and in compliance with all applicable laws
and governmental regulations (the “Demolition”).

 

(3)                                  Upon
occurrence of a Casualty Event which does not constitute a Total Casualty (a “Partial
Casualty”), Tenant shall restore the Leasehold Premises in accordance with its
obligations under Section 5.01 (“Partial Casualty Restoration”),
and any insurance proceeds received by Landlord with regard to such Partial
Casualty shall be released to Tenant provided that Landlord is given reasonable
assurances that such proceeds will be utilized to complete the Partial Casualty
Restoration.  All such insurance proceeds
which exceed the cost of the Casualty Restoration shall become the property of
Tenant upon completion of the Partial Casualty Restoration.

 

(4)                                  Upon
occurrence of a Total Casualty: (i) if Tenant elects to perform the Shell
Restoration in accordance with subparagraph (2), Landlord shall make the
insurance proceeds received by Landlord with regard to such Total Casualty (“Total
Casualty Proceeds”) available to Tenant for completion of the Shell Restoration
provided that Landlord is given reasonable assurances that such proceeds will
be utilized to complete the Shell Restoration (with all Total Casualty Proceeds
remaining after completion of the Shell Restoration to be the property of
Tenant); and (ii) if Tenant elects to provide for the Total Casualty
Payoff and Demolition in accordance with subparagraph (2), Landlord
shall apply Total Casualty Proceeds as follows: (aa) first towards satisfaction
of the Total Casualty Payoff; (bb) after the Total Casualty Payoff has been
satisfied, the Total Casualty Proceeds shall then be made available to Tenant
for completion of the Demolition provided that Landlord is given reasonable
assurances that such proceeds will be utilized to complete the Demolition; and
(cc) all remaining Total Casualty Proceeds shall become the property of Tenant
upon completion of the Demolition.  In
the event that Tenant elects to provide for the Total Casualty Payoff and
Demolition, Tenant shall be responsible for the entire Total Casualty Payoff
and shall remain responsible to complete the Demolition notwithstanding the
amount of the Total Casualty Proceeds.

 

(5)                                  Upon
occurrence of a Casualty, Tenant shall remain liable for all rent and other
obligations which it may have under the Lease except as otherwise set forth by
this Section 8.02.

 

20

 

(6)                                  The
party carrying such insurance against loss or damage to the Leasehold Building
shall control the loss settlement process relating to such insurance.

 

(b)                                 Shell
Structure. 

 

(1)                                  For
purposes of this Section 8.02, the term “Shell Structure” shall
mean the state of the construction of the Leasehold Building as of the
Commencement Date.  Landlord and Tenant agree that the state of the
construction of the Leasehold Building as of the Commencement Date is such that
the Leasehold Building is comprised only of: 
(i) interior load bearing walls (comprised of concrete block and
steel columns – 30 feet on center); (ii) exterior walls comprised of
concrete block (rear) and stucco material (sides and front); and; (iii) a
roof comprised of a gravel covered, shingle membrane over a wood substructure
material and a concrete pad flooring.

 

(2)                                  Landlord
and Tenant further agree that the Shell Structure does not include any other
construction aspects or features including but not necessarily limited to the
following:  (i) utilities infrastructure (exclusive of utilities
stubbed to the Leasehold Building for connecting to public utilities); (ii) heating
and cooling systems; (iii) electrical wiring, conduits, finish
connections, breaker/circuit boxes or the like; (iv) interior fire
suppression/sprinkler systems (exclusive of the rough-in of such systems); (v) plumbing
infrastructure, sewer lines, sewer taps, sewer connections or plumbing fixtures
(exclusive of utilities stubbed to the Leasehold Building for connection to
public utilities); (vi) interior ceilings or ceiling support grids; or (vii) interior
wall coverings (i.e. sheetrock, paneling, etc.).  

 

(c)                                  Shell
Structure Value.  Landlord and Tenant
further agree that the value of the Shell Structure as of the date of the
Casualty Event shall be the sum of $1,500,000.00 (adjusted each year during the
Lease Term utilizing the CPI Escalation described in Section 3.02,
above) (the “Shell Structure Value”).

 

ARTICLE IX

 

DEFAULTS:  REMEDIES

 

Section 9.01                                Defaults.  The occurrence of any one or more of the
following events (each, an “Event of Default”) shall constitute a default
hereunder by Tenant:

 

21

 

(a)                                  The failure by Tenant to make
any payment of Base Rent, Additional Rent, or other payment required to be made
by Tenant hereunder within ten (10) days after written notice from
Landlord to Tenant is deemed received pursuant to Section 15.14,
below that such payment is due.

 

(b)                                 The failure by Tenant to observe
or perform any of the other covenants or conditions of this Lease, where such
failure continues for thirty (30) days after   written notice from Landlord to Tenant is
deemed received pursuant to Section 15.14, below.  However, if the nature of such default is
such that it cannot reasonably be cured within such thirty (30) day period,
Tenant shall not be deemed in default if Tenant shall commence to cure within
said thirty (30) day period, and shall diligently pursue same to conclusion.

 

(c)                                  The:  (i) making by Tenant of a general
assignment for the benefit of creditors; 
(ii) filing by or against Tenant of a petition to have Tenant
adjudged as bankrupt, or the filing of a petition for reorganization or
arrangement under any bankruptcy law (unless, in the case of a petition filed
against Tenant, the same is dismissed within sixty (60) days after said
filing); (iii) appointment of a trustee or receiver to take possession of
substantially all of Tenant’s assets or of Tenant’s interest in this Lease,
where possession is not restored to Tenant within thirty (30) days; or (iv) attachment,
or other judicial seizure, of substantially all of Tenant’s assets or of Tenant’s
interest in this Lease, where such seizure is not discharged within thirty (30)
days.

 

Section 9.02.  Landlord’s Remedies.

 

(a)                                  Lease Termination.  Subject to the Tenant Lender Rights set out
in Article XIV, below, in the event of any default by Tenant,
Landlord shall have the immediate option to terminate this Lease by giving
written notice.  In the event that
Landlord exercises such right of termination, Landlord shall recover from
Tenant (subject to applicable Nevada law and Landlord’s obligation to mitigate
its damages relevant to the current Lease Term) (the term “rent,” as used
herein, shall be deemed to mean Base Rental and all other sums required to be
paid by Tenant hereunder as Additional Rent or otherwise) the following:

 

(i)                                     The total amount of rent which
is due and owing as of the date of such termination, plus interest at the rate
of eighteen percent (18%) per annum, accruing from the date when such rent was
due and owing; plus

 

22

 

(ii)                                  The amount of the unpaid rent
for the unexpired portion of the Lease Term, discounted to its present value
based upon a discount rate which is equal to the discount rate being offered by
the Federal Reserve Bank of San Francisco at the time of the award, and plus
one percent (1%); further subject to however, Landlord’s mitigation of its
damages reasonably anticipated to result from its good faith efforts to relet
the Leasehold Premises; and plus

 

(iii)                               Landlord’s actual damages
proximately caused by Tenant’s failure to perform its obligations under this
Lease (without duplication of any amounts set forth by subparts (i) and (ii) above);

 

(b)  Without terminating this Lease, Landlord shall have the right
to either recover all rental as it becomes due or relet the Leasehold Premises,
or any part thereof, for such term or terms, and at such rental or rentals, and
upon such other terms and conditions as are commercially reasonable in a good
faith effort to mitigate its damages. In the event that Landlord shall elect to
relet, rentals received by Landlord shall be applied (1)  to the payment
of any reasonable cost of such reletting, including reasonable attorneys’ fees,
(2) to the payment of reasonable and necessary cost of any alterations and
repairs to the Leasehold Premises which are not recouped or contracted to be
recouped from any new Tenant, (3) to the payment of rent due and unpaid
hereunder; and (4) the residue, if any, shall be held by Landlord and
applied in payment of future rent as the same may become due and payable
hereunder.

 

(c)                                  Right of Entry.  Landlord shall also have the right to
re-enter the Leasehold Premises and to remove all persons and property from
same.  Such property may be removed and
stored in a public warehouse or elsewhere (pursuant to commercially reasonable
term) at the cost of, and for the account of, Tenant.  No re-entry or taking possession of the Leasehold
Premises by the Landlord, pursuant to this Section 9.02, shall be
construed as an election to terminate this Lease.  Nor shall it cause a forfeiture of rents or
other charges to be paid during the balance of the then current term unless a
written notice of such intention is given to Tenant, or unless termination is
decreed by a legal proceeding.  Notwithstanding
any reletting without termination by Landlord because of any default by Tenant,
Landlord may at any time after such reletting elect to terminate this Lease for
any such default.

 

Section 9.03                                Tenant Lender Rights. 
Notwithstanding anything in this Article IX to the contrary, all
rights of  Landlord set out in this Article IX (in addition to
all other provisions of this Lease) shall be expressly subject and subordinate
to the Tenant Lender Rights set out in Article XIV, below.

 

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Section 9.04.                             Default by Landlord.  Landlord shall not be deemed to be in default
in the performance of any obligation required to be performed by it hereunder
unless and until it has failed to perform such obligation within sixty (60)
days after written notice by Tenant to Landlord, which notice shall specify
with particularity the claimed default. 
However, if the nature of the default is such that more than sixty (60)
days are required for it to be cured, then Landlord shall not be deemed to be
in default if it shall commence such performance within such sixty (60) day
period and thereafter diligently prosecute the same to completion.  This Lease may not be canceled for any
default by Landlord.  Tenant’s sole
remedy for any default by Landlord shall be such damages or injunction relief
or declaratory relief as may be afforded by law (unless specified herein).

 

Section 9.05.                             Costs and Attorneys’ Fees.  If either Party incurs any expense, including
reasonable attorney’s fees, in connection with any action of proceeding,
including declaratory relief, instituted by either Party by reason of any
default or alleged default of the other Party hereunder, the Party prevailing
in such action or proceeding shall be entitled to recover its reasonable
expenses from the other Party.  In
addition, should it become necessary for either Party to employ legal counsel
to enforce any of the provisions herein contained, the non-prevailing Party
agrees to pay all legal fees and other costs reasonably incurred by the
prevailing Party.

 

Section 9.06                                Default
By Landlord For Appropriate Authority Violations.   Should
Landlord, at any time during the Lease Term, fail to obtain or maintain any
consents or approvals required of Landlord by any governmental or regulatory
authority (including, but not limited to, all federal, state and local gaming
authorities) having jurisdiction over gaming activities at the Leasehold
Premises (“Gaming Authorities”) or be in violation of any such rules,
regulations or laws established by any Gaming Authorities; then Landlord
shall:  (i) within ninety (90) days
(or such longer or shorter period as may be allowed by the applicable Gaming
Authority)  obtain the required consents
and approvals or cure such violation, as the case may be; or (ii) sell the
Leasehold Premises within one hundred twenty (120) days (or such longer or
shorter period as may be allowed by the applicable Gaming Authority); and upon
Landlord’s failure to, accomplish the matters in either (i) or (ii) within
the timeframe allotted above, Tenant may terminate this Lease upon written
notice without any further liability or obligation.

 

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ARTICLE X

 

ASSIGNMENT
AND SUBLETTING

 

Section 10.01.                       Landlord’s Consent.

 

(a)                                  General Restriction.  Except as set forth by Section 10.03
or as set forth in Article XIV, Tenant shall not, either
voluntarily or by operation of law, assign, sell, encumber, pledge or otherwise
transfer all or any part of Tenant’s leasehold estate hereunder, or permit the Leasehold
Premises to be occupied by any one other than Tenant or Tenant’s employees or
sublet the Premises or any portion thereof, without Landlord’s prior written
consent in each instance (which consent of Landlord may be withheld in Landlord’s
reasonable discretion).

 

(b)                                 Permitted Actions. Landlord shall not  withhold its consent to a transfer of Tenant’s
interest hereunder so long as:  (i) Tenant
remains liable for all obligations of Tenant’s transferee and executes such
documentation as may be reasonable and customary under Nevada law evidencing
such continued liability ; and (ii) there is no uncured Event of Default
then existing.

 

(c)                                  No Pay
Over.  Tenant shall be
entitled to retain all proceeds (whether in the form of rent or recoupment or
otherwise) generated from such assignment or sublease.

 

Section 10.02                          Landlord’s Right to Assign
Interest in Rents.  Subject to the Gaming Laws under the State of
Nevada, Landlord shall have the right, without selling its fee interest in the Leasehold
Premises or assigning its interest in this Lease, to assign from time to time
the whole of the  rent, at any time
payable hereunder, to persons, firms, corporations, trusts, or other entities
designated by the Landlord,  upon thirty
(30) day prior written notice to  Tenant,
and in any such case,  Tenant shall pay
the  rent, subject to the terms of this
Lease, to the Landlord’s designee at the address mentioned in any such notice
for the period covered by such assignment.

 

Section 10.03.                       Transfers to Affiliates and
Permitted Encumbrances.

 

(a)                                  Affiliate Transfers.  Notwithstanding anything herein in this Lease
to the contrary, Tenant shall be entitled to transfer its interest hereunder to
any “Affiliate of Tenant” , without the written consent of Landlord  provided that:  (i) there is no uncured Event of Default
then existing at the time of such transfer; and (ii) Tenant shall remain
liable for all of the transferee’s obligations hereunder and shall

 

25

 

execute such
documentation as may be reasonable and customary under Nevada law evidencing
such continued liability.

 

(b)                                 Affiliate
of Tenant Defined.  For purposes of
this Lease, the term “Affiliate of Tenant” shall mean any person, partnership,
joint venture, corporation or other form of enterprise, domestic or foreign,
including but not limited to subsidiaries whether one or more, that directly or
indirectly, control, are controlled by, or are under common control with or
have an ownership interest in, with or of Tenant.

 

ARTICLE XI

 

RIGHT
OF ENTRY

 

Section 11.01.                       Right of Entry.

 

(a)                                  Landlord’s Right.  Landlord or Landlord’s agents shall have the
right to enter the Leasehold Premises upon seventy two (72) hours advance
written notice (an “Authorized Entry”) for any of the following purposes:  (i) showing it to prospective purchasers
of the Leasehold Premises; (ii) making such repairs, alterations,
improvements or additions as Landlord may deem necessary or desirable (to the
extent that Landlord has the power or duty to make such repairs, alterations,
improvements or additions under the express terms of this Lease);  and (iii)   seeking in good faith to determine whether Tenant
is in compliance with the terms and conditions of this Lease.

 

(b)                                 Materials.  Landlord shall be allowed to take all
material into and upon such Leasehold Premises that may be required for the
matters described in subsection (a) above without the same
constituting an eviction of Tenant in whole or in part and the rent reserved
shall in no event abate, by reason of loss or interruption of business, or
otherwise, during the period when such repairs, alterations, improvements or
additions are being made.

 

(c)                                  Good Faith Obligation.  In making any Authorized Entry, Landlord
shall cooperate, in good faith, with Tenant to the greatest extent reasonably
possible and shall take all reasonable efforts to ensure that Tenant’s business
operations on the Leasehold Premises, in accordance with this Lease, are not
disturbed by any Authorized Entry.

 

26

 

 

ARTICLE XII

 

ESTOPPEL,
SUBORDINATION, ATTORNMENT, NON-DISTURBANCE

 

Section12.01.         Estoppel Certificates from
Tenant.

 

(a)           Within fifteen (15)
days after receipt of written notice from Landlord, Tenant shall execute,
acknowledge and deliver to Landlord a written certificate setting forth:

 

(i)            That
this Lease is unmodified and in full force and effect (or, if modified, stating
the nature of such modification and certifying that this Lease, as so modified,
is in full force and effect) and the date to which the monthly , Base Rent and Additional
Rent are paid in advance, if any;

 

(ii)           The
commencement and termination dates of this Lease;

 

(iii)          All
circumstances known to Tenant in Tenant’s current, actual knowledge which, as
of the date of the certificate, constitute an uncured default by Landlord
hereunder, or which with the lapse of any applicable notice period under this
Lease would constitute a default by Landlord.

 

(b)           Any certificate
which is delivered to Landlord under this Section 12.01 may be
relied on by any prospective purchaser of, or person encumbering, the Leasehold
Premises.

 

Section 12.02.        Subordination.  Landlord is hereby
irrevocably vested with full power and authority to subordinate this Lease to
any mortgage, deed of trust or other lien that may exist or hereafter be placed
upon the Leasehold Premises, or any portion thereof.  No further action shall be necessary on the
part of Tenant to effectuate the subordination which is provided for by this Section 12.02.  However, upon Landlord’s written request,
Tenant shall execute and return to Landlord any required instrument of
subordination, in a form which may be recorded with the Washoe County
Recorder.  Such instrument shall be returned
to Landlord within fifteen (15) days after it has been received by Tenant.

 

Section 12.03.        Tenant’s Rights Not Affected by Foreclosure.  In the event that Landlord’s interest in the
Premises is acquired pursuant to purchase at a

 

27

 

foreclosure sale (whether by a lien
instrument, operation of law, tax sale or otherwise), or pursuant to conveyance
in lieu of such foreclosure, Tenant shall attorn to and recognize said
acquiring party as Landlord under the terms of this Lease.  No such foreclosure or conveyance in lieu
thereof shall disturb, terminate or otherwise affect Tenant’s rights hereunder,
regardless of whether the lien foreclosed upon may have priority over this
Lease and such successor-in-interest to this Lease shall execute, cause to be
notarized and delivered to Tenant,  at
Tenant’s request, a non-disturbance agreement covenanting Landlord’s obligation
to permit Tenant’s continued peaceable use and enjoyment of the Leasehold
Premises (provided that there is no uncured Event of Default  then existing).

 

Section 12.04.  Estoppel
Certificates from Landlord.  Landlord
agrees to execute, cause to be notarized and delivered to Tenant from time to
time an estoppel certificate or certificates to Tenant’s lenders in accordance
with Article XIV below.

 

ARTICLE XIII

 

OPTION TO PURCHASE

 

Section 13.01         Grant
of Exclusive Option.  For the independent consideration of $10.00 and
other valuable consideration of (which Landlord acknowledges receipt), Landlord
hereby grants to Tenant the exclusive, non-revocable right and option (the “Option”)
to purchase the Leasehold Premises pursuant to the purchase price and terms
described below.

 

Section 13.02         Purchase
Price.  The purchase price for the Leasehold Premises in relation to
the Initial Term Exercise shall be Five Million and No/100 Dollars
($5,000,000.00). Purchase price for the Leasehold Premises in relation to the
Renewal Exercise shall be Five Million Three Hundred Ninety Eight and No/100
Dollars ($5,398,000.00).

 

Section 13.03         Exercise. 
The Option may be exercised by Tenant pursuant to any of the following notice
provisions (each, an “Exercise Notice”):

 

(1)           By written notice to
Landlord by Tenant at any time during the time period commencing with the
day after the last day of the first year of the Initial Term and ending on
the last day of the Initial Term (the “Initial Term Exercise”); or

 

28

 

(2)           By written notice to
Landlord by Tenant at any time during the First Renewal Period (the “Renewal
Exercise”).

 

The notices described above shall be referred to as an “Exercise Notice”.

 

Section 13.04         Real
Estate Contract.  Within twenty (20) days of Tenant’s delivery of
the applicable Exercise Notice, Landlord and Tenant shall execute and deliver a
Real Estate Purchase Contract containing such terms as are acceptable to
Landlord and Tenant and as are customary for commercial real estate
transactions of like nature and price in the Elko, Nevada area (the “Purchase
Contract”).  The Purchase Contract shall
provide for: (i) Landlord to sell the Leasehold Premises to Tenant without
warranty or representation other than the Title Warranties referred to below
and the warranties set out in this Lease from Landlord (such warranties of
Landlord to Tenant to be restated as warranties from Seller to Buyer); (ii) title
to be conveyed free and clear of all debts, liens, claims, encumbrances,
exceptions and conditions of title other than: (aa) Exceptions 1 through 6, 8
and 9 as set forth on the Commitment for Title Insurance issued by Stewart
Title Guaranty Company under its Order Number 05012821, dated October 26,
2005; (bb) real property taxes and assessments imposed by governmental
authorities (paid current); and (cc) matters 
asserted by any party not claiming by or through Landlord.  Any obligations which Landlord may have to
convey title shall be deemed satisfied so long as a reputable title company
doing business in Elko County, Nevada issues its title insurance policy free
and clear of such matter.

 

Section 13.05.        Memorandum
of Lease. Upon execution of this Lease, Landlord shall execute, cause
to be notarized and deliver to Tenant that certain Memorandum of Lease, in form
and substance as set out on Exhibit “C”, attached hereto and
incorporated herein.  Tenant shall have
the right to cause the recording of such Memorandum of Lease in the public
records of the State of Nevada.  Such
Memorandum of Lease shall address the basic terms of the Lease and shall
further state that Tenant shall have an option to purchase the Leasehold
Premises pursuant to the Terms set out in such Lease.  Upon the termination or other expiration of
this Option, Tenant agrees to deliver within twenty (20) days of Landlord’s
request a quitclaim of its interest in such Option.

 

29

 

ARTICLE XIV

 

TENANT
LENDER RIGHTS

 

Section 14.01

 

(a)           Tenant’s Right To
Encumber. Tenant may encumber all or any portion of its interest in this
Lease and the leasehold estate created by this Lease by a deed of trust,
mortgage or other security instrument (collectively, a “Leasehold Mortgage”),
provided that such Leasehold Mortgage, shall be a lien only on Tenant’s
interest in and to this Lease and the leasehold estate created hereby.  Provided that: (i) the Leasehold
Mortgage has been recorded in the Official Records of Elko County; and (ii) the
holder of such Leasehold Mortgage has given notice of the Leasehold Mortgage to
Leasehold Mortgagee in accordance with Section 15.14, which notice
shall include a file stamped copy of the recorded Leasehold Mortgage and a
statement setting forth the address to which notices required hereunder are to
be directed (as such notice may be changed from time to time in accordance with
Section 15.14, the “Leasehold Mortgagee’s Address”) such holder of
a Leasehold Mortgage or anyone claiming by or through or under such holder
shall be deemed to be a “Leasehold Mortgagee” for the purpose of this Section 14.01.

 

(b)           Rights of
Leasehold Mortgagee.

 

(1)           Rights
of Enforcement.  A Leasehold
Mortgagee may enforce its rights under its Leasehold Mortgage and acquire title
to the Tenant’s leasehold estate in the Leasehold Premises in any lawful
manner, and upon foreclosure under the Leasehold Mortgage and the issuance of
evidence of title, take possession of the Leasehold Premises, subject, however,
to all of the terms, provisions and conditions of this Lease.  During such time as a Leasehold Mortgagee or
any successor in interest is the owner and holder of the leasehold estate
created under this Lease, whether by foreclosure or otherwise, such interests
so acquired shall be subject to all of the terms, covenants and provisions of
this Lease.

 

(2)           Notice of Default.  Landlord shall deliver to such
Leasehold Mortgagee a copy of each notice of default under this Lease (a “Lease
Default”) given by Landlord to Tenant (a “Landlord Notice”) concurrently with
and whenever any such Landlord Notice shall be given by Landlord to Tenant.  No such Landlord Notice shall be deemed to
have been duly given unless and until delivery of such Landlord Notice to the Leasehold Mortgagee shall be deemed to be effective in
accordance with the terms and conditions hereof.

 

(3)           Landlord
Covenants.  Landlord
agrees that it will not:  (i) accept
the surrender of the Leasehold Premises by Tenant prior to the termination of
the Lease, or (ii) consent to the modification of any material term of
this Lease

 

30

 

or the termination of this Lease by Tenant, without prior written
notice to the Leasehold Mortgagee in each instance.  Landlord further agrees that it will not seek
to terminate this Lease by reason of any Lease Default  except in accordance with this Section 14.01.

 

(4)           Additional
Required Notices To Leasehold Mortgagee.  After the expiration of all
applicable notice and grace periods set forth in this Lease with respect to any
such default, Landlord shall give written notice to the Leasehold Mortgagee (“Mortgagee
Notice”) of the failure of Tenant to cure such Lease Default.  The Mortgagee Notice shall be sent by certified
mail, return receipt requested, or by a nationally recognized commercial
overnight delivery service, to the address set forth in the Leasehold Mortgage
(or such other address as may hereafter be designated in writing to Landlord by
the Leasehold Mortgagee).  Landlord shall
not declare or assert a termination of this Lease by reason of any such Lease
Default until a “reasonable period of time” (as defined below) shall have
elapsed following the receipt of the Mortgagee Notice during which period the Leasehold
Mortgagee shall have the right, but shall not be obligated, to remedy such
Lease Default.  Landlord hereby agrees to
accept performance by any such Leasehold Mortgagee of any covenant, condition
or agreement on Tenant’s part to be performed hereunder with the same force and
effect as though performed by Tenant.

 

(5)           Reasonable Period of Time Defined.  As used in Section 14.01
B.(4), above, “a reasonable period of time” shall be:  (i) thirty (30) days if such Lease
Default can be remedied during such thirty (30) day period, or (ii) if
such Lease Default cannot be remedied during such thirty (30) day period, then
such period of time as is necessary to remedy such Lease Default (not to
exceed, however, one hundred one hundred eighty (180) days), provided that the
Leasehold Mortgagee has commenced to cure such Lease Default or to foreclose
the lien of its Leasehold Mortgage within such initial thirty (30) day period
and continues to diligently prosecute such cure of foreclosure to completion
(and, upon completion of any foreclosure, promptly commences, and thereafter
diligently pursues, such cure).

 

(6)           Time Extension.  The time for the Leasehold
Mortgagee to cure any Lease Default by Tenant that reasonably requires the
Leasehold Mortgagee be in possession of the Leasehold Premises to do so, shall
be deemed extended to include the period of time required by such Leasehold
Mortgagee to obtain such possession or obtain Tenant’s interest in this Lease
(by foreclosure or otherwise); provided, however, as a condition precedent to

 

31

 

such extension:  (i) such
Leasehold Mortgagee shall have delivered to Landlord its written commitment to
cure all outstanding Lease Defaults reasonably requiring possession of the Lease
Premises; (ii) Leasehold Mortgagee shall continually and diligently pursue
the obtaining of such possession or leasehold interest; and (iii) during
such period all other obligations of Tenant under this Lease are being performed
and kept current by such Leasehold Mortgagee in accordance with the Lease.

 

(7)           New
Lease Covenants.  If this Lease is terminated for
any reason, (including without limitation, the rejection or disaffirmance of
this Lease pursuant to bankruptcy laws or laws affecting creditor rights), other
than a termination based upon Leasehold Mortgagee’s failure to cure a Lease
Default as permitted in this Section 14.01 Landlord will enter into
a new lease of the Leasehold Premises with the Leasehold Mortgagee, or any
party designated by the Leasehold Mortgagee within thirty (30) days after the
request of the Leasehold Mortgagee.  The
new lease shall be effective as of the date of the applicable termination,
rejection or disaffirmance of this Lease, and shall be upon the same terms,
covenants and provisions as are contained in this Lease, except that the
provisions of such new lease shall: (i) reflect expiration of that portion
of the Lease Term elapsing between the Commencement Date and the date of the
Lease termination; and (ii) require the tenant thereunder to promptly
commence, and thereafter diligently pursue, cure of any uncured Lease Default
which cannot be cured by the payment of money. 
In order to obtain a new lease, a Leasehold Mortgagee must make a
written request to Landlord for the new lease (a “Substitute Lease Request”)
within (30) days after the Leasehold Mortgagee is notified of the effective
date of the applicable termination, rejection or disaffirmance of this Lease in
which event no further action shall be taken by Landlord pending the execution
and delivery thereof.  In addition, prior
to making written request to Landlord for the new lease, the Leasehold
Mortgagee must cure all Lease Defaults that can be cured by the payment of
money and pay to Landlord all rent and other sums that would have been due and
payable by Tenant under this Lease but for the termination thereof.  Delivery of the Substitute Lease Request
shall constitute an agreement by Leasehold Mortgagee to promptly
reimburse Landlord for its reasonable costs and expenses (including attorneys
fees) incurred in good faith connection with termination of the Lease and entry
into the new lease (the “Substitute Lease Expenses”).  Within fifteen (15) days after receipt of the
Substitute Lease Request, Landlord shall deliver the new lease to Leasehold
Mortgagee and, within ten (10) days after Leasehold Mortgagee’s receipt of
the new lease, Leasehold Mortgagee shall: (i) cause the tenant under the
new lease to enter

 

32

 

into the new lease; (ii) pay Landlord the Substitute Lease
Expenses; and (iii) satisfy all monetary obligations which would have
accrued under the Lease, but for the Lease termination; (collectively, the “Substitute
Lease Conditions”).  If the Substitute
Lease Conditions are not satisfied within said ten (10) day period,
Landlord shall have no further obligations to enter into the new lease (and
Leasehold Mortgagee shall remain liable for any unsatisfied Substitute Lease
Expenses).

 

(8)           Separate
Rights; Use and Enjoyment.  To the
extent Landlord is able, Landlord shall undertake reasonable efforts at the
sole cost of the Leasehold Mortgagee,  to
provide for any new lease made pursuant hereto to be senior and superior to any
other encumbrances on the Leased Premises. 
The Leasehold Mortgagee’s right under this Section 14 are in
addition to and not limited by such Leasehold Mortgagee’s right to cure under Section 14.01(b)(4) and
(5), above.  The provisions of this Section 14
are a separate and independent contract made by Landlord and each Leasehold
Mortgagee.  From the effective date of
termination, rejection or disaffirmance of this Lease to the date of execution
and delivery of such new lease or the expiration of the period during which a
Leasehold Mortgagee may make a request, such Leasehold Mortgagee may, upon
payment of any rent and any other sums as may be due from Tenant, use, occupy
and enjoy the leasehold estate created by this Lease without hindrance by
Landlord.

 

(9)           Benefit.  The provisions of
this Section 14.01 are for the benefit of each Leasehold Mortgagee
and may be relied upon and shall be enforceable by each Leasehold
Mortgagee.  Neither a Leasehold Mortgagee
nor any other holder or owner of the indebtedness secured by a leasehold
mortgage or otherwise shall be liable with respect to the terms, covenants,
agreements or obligations of Tenant contained in this Lease, unless and until
such Leasehold Mortgagee or that holder or owner acquires the interest of
Tenant hereunder.

 

(10)         Estoppel.  Within fifteen (15) days from Tenant’s
written request, Landlord agrees to execute, have notarized, and deliver to
Tenant and Leasehold Mortgagee, an estoppel certificate (the “Lender’s Estoppel
Certificate”), in a form and substance reasonably requested by Leasehold Mortgagee,
setting forth Landlord’s representation that : 
(i) the Lease is in full force and effect; (ii) there exists
no condition of default by Landlord under the Lease and, to Landlord’s actual
knowledge, there exists no condition of default by Tenant under the Lease, or
if such condition of default by Landlord or Tenant does exist, a statement from
Landlord specifying the nature of such default

 

33

 

including the sums due from or action necessary of the defaulting party
in order to cure same;

 

(11)         Notices.  All notices to Landlord, or to a Leasehold
Mortgagee, which are required, or contemplated, under this Section 14.01,
shall be given, and shall be deemed effective, in accordance with Section 15.14
(except that notices to a Leasehold Mortgagee shall be directed to the Leasehold
Mortgagee’s Address).

 

ARTICLE XV

 

MISCELLANEOUS

 

Section 15.01.        Holding Over.  Any holding over by
Tenant after the expiration of the Lease Term shall be construed to be a
tenancy from month to month at a Base Rent of 110% of the Base Rent for the
immediately expired Lease Term(prorated on a monthly basis) and shall otherwise
be on the terms and conditions herein specified, so far as applicable.

 

Section 15.02.        Successors and Assigns.  All rights and
obligations of each Party hereunder shall extend to and bind the respective
heirs, executors, administrators, successors and assigns of the Parties; and if
there shall be more than one tenant, they shall all be bound jointly and
severally by the terms, covenants and agreements herein.  Subject to the provisions of Article X
above, no rights, however, shall inure to the benefit of any assignee of Tenant
unless the assignment to such assignee has been approved by Landlord in writing
as provided by Section 10.01, above.

 

Section 15.03.        Quiet Enjoyment.  Upon payment by the
Tenant of the rents herein provided, upon the observance and performance of all
the conditions of this Lease on Tenant’s part to be observed and performed, and
subject to the terms and conditions of this Lease, Tenant shall peaceably and
quietly hold and enjoy the Leasehold Premises for the Lease Term without
hindrance or interruption by Landlord or any other person or persons lawfully
or equitably claiming by, through or under Landlord.

 

Section 15.04.        Sale or Transfer of Premises.  If Landlord sells or transfers all or any
portion of the Leasehold Building, other improvements and land of which the Leasehold
Premises are a part, Landlord, on consummation of the sale or

 

34

 

transfer shall be released from any liability
thereafter accruing under this Lease, provided that Landlord’s successor shall
have assumed in writing, for the benefit of Tenant, Landlord’s obligations
hereunder and such successor-in-interest to this Lease shall execute, cause to
be notarized and delivered to Tenant, at Tenant’s request a non-disturbance
agreement covenanting Landlord’s obligation to permit Tenant’s continued
peaceable use and enjoyment of the Leasehold Premises (provided that Tenant is
not in default of this Lease, and that any default has not been timely cured by
Tenant).

 

Section 15.05.        Interpretation.  This Lease shall be construed and enforced in
accordance with the laws of the State of Nevada.

 

Section 15.06.        Waiver.  No waiver by Landlord of any provision of
this Lease shall be deemed to be a waiver of any other provision hereof or of
any subsequent breach by Tenant of the same or any other provision.  Landlord’s consent to or approval of any act
by Tenant, which act requires Landlord’s consent or approval, shall not
constitute a waiver of any requirement that Landlord consent to or approval of
any future acts by Tenant.  The terms of
this Section 15.06 notwithstanding, no waiver, consent or approval
by Landlord shall be effective unless such consent, approval or waiver is in
writing and is executed by Landlord or by Landlord’s agent.

 

Section 15.07.        Real Estate Brokers.  Landlord and Tenant
shall each indemnify and hold the other harmless from any and all claims which
may be asserted by any real estate broker on the basis of any alleged
commission obligation of the indemnifying party to said real estate broker,
pursuant to or in connection with this Lease.

 

Section 15.08.        Entire Agreement.  This Lease and the
exhibits attached hereto, if any, set forth all the covenants, agreements and
conditions between Landlord and Tenant concerning the Leasehold Premises, and
there are no covenants, agreements or conditions, either oral or written,
between them other than are herein set forth. 
Except as otherwise provided by the terms of this Lease, no subsequent
alteration, amendment, change or addition to this Lease shall be binding upon
Landlord or Tenant unless reduced to writing and signed by the party to be
charged with performance thereof.

 

Section 15.09.        Joint and Several Obligations.  “Party” shall mean Landlord or Tenant; and if
more than one person or entity is Landlord or Tenant, the obligations imposed
on that party shall be joint and several.

 

35

 

Section 15.10.        Severability.  If it shall be
determined by a court of competent jurisdiction that any term, covenant or
condition of this Lease is unenforceable as to any person or circumstance, such
determination shall not render such term, covenant or condition unenforceable
as to any other person or circumstance, and the remaining terms, covenants and
conditions of this Lease shall be unaffected and shall remain in full force and
effect.

 

Section 15.11.        Time is of the Essence.  Time is of the
essence of each provision of this Lease.

 

Section 15.12.        Relationship Between Parties.  Landlord shall not, by virtue of this Lease,
or the relationship created hereby, be deemed to be a partner, joint venturer,
agent or principal of Tenant, it being expressly understood that the singular
relationship of the Parties hereunder shall be that of Landlord and Tenant.

 

Section 15.13.        Delay.  If either Party, except as otherwise herein
specifically provided, shall be delayed or hindered in or prevented from the
performance of any act required hereunder by reason of strikes, lock-outs,
labor troubles, inability to procure materials, failure of power, restrictive
governmental laws or regulations, riots, insurrection, acts of terrorism, war
or other reason of a like nature not the fault of the Party delayed in
performing work or doing acts required under the terms of this Lease, then
performance of such act shall be excused for the period of delay and the period
of the performance of any such act shall be extended for a period equivalent to
the period of such delay.  It is
specifically provided, however, that the provisions of this Section 15.13
shall not operate to excuse Tenant from the prompt payment of Base Rent, Additional
Rent or any other payments required by the terms of this Lease.

 

Section 15.14.        Notices.   All
notices, objections and approvals referred to in this Lease must be given in
writing and will be effective:  (i) on
the day the notice is actually received by the addressee thereof after being
sent by overnight delivery (such as Federal Express) or having been personally
hand delivered by the sender; or (ii) two (2) days after being
deposited in the United States Mail, postage prepaid, registered or certified
mail, return receipt requested, and properly addressed to the party to receive
such notice; or (iii) on the day such notice is sent to the addressee by confirmed telecopier,
facsimile or similar transmission. The notice addresses of the Parties shall be
those specified below unless modified in writing by the appropriate party:

 

36

 

	
  Tenant:

  	
   

  	
  JACOBS
  ENTERTAINMENT, INC.

  	
   

  	
   

  
	
   

  	
   

  	
  17301 West Colfax Avenue

  	
   

  	
   

  
	
   

  	
   

  	
  Suite 250

  	
   

  	
   

  
	
   

  	
   

  	
  Golden, Colorado 80401

  	
   

  	
   

  
	
   

  	
   

  	
  Attention: Stephen R. Roark, CFO

  	
   

  	
   

  
	
   

  	
   

  	
  (303) 215-5201

  	
   

  	
   

  
	
   

  	
   

  	
  (303) 215-5219 facsimile

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  With A Copy To:

  	
   

  	
  Jones & Keller, P.C.

  	
   

  	
   

  
	
   

  	
   

  	
  1625 Broadway, 16th Floor

  	
   

  	
   

  
	
   

  	
   

  	
  Denver, Colorado 80202

  	
   

  	
   

  
	
   

  	
   

  	
  Attention: Samuel E. Wing, Esq.

  	
   

  	
   

  
	
   

  	
   

  	
  (303) 573-1600

  	
   

  	
   

  
	
   

  	
   

  	
  (303) 893-6506 (facsimile)

  	
   

  	
   

  
	
  Landlord:

  	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Route 225
  Investments, LLC

  	
   

  	
   

  
	
   

  	
   

  	
  1900
  Manzanita Lane

  	
   

  	
   

  
	
   

  	
   

  	
  Reno, Nevada
  89509

  	
   

  	
   

  
	
   

  	
   

  	
  (775)
  825-1364

  	
   

  	
   

  
	
   

  	
   

  	
  (775)
  825-1367 (facsimile)

  	
   

  	
   

  

 

37

 

	
  With A Copy To:

  	
   

  	
  Henderson &
  Morgan, LLC

  	
   

  	
   

  
	
   

  	
   

  	
  4600 Kietzke Lane

  	
   

  	
   

  
	
   

  	
   

  	
  Suite K228

  	
   

  	
   

  
	
   

  	
   

  	
  Reno, Nevada 89502

  	
   

  	
   

  
	
   

  	
   

  	
  Attention: Jim Morgan, Esq.

  	
   

  	
   

  
	
   

  	
   

  	
  Telephone No. (775) 825-7000

  	
   

  	
   

  
	
   

  	
   

  	
  Facsimile No. (775) 825-7738

  	
   

  	
   

  

 

or to such
other address as either party may from time to time by written notice designate
for this purpose.

 

Section 15.15.        Captions and Section Numbers.  The captions appearing in this Lease are
inserted as a matter of convenience only, and in no way shall they define,
limit, construe or otherwise describe the scope or intent of the sections or
articles herein.

 

Section 15.16         Further
Acts.  Landlord and Tenant agree to
undertake such further acts and execute and deliver such further documents in
order to effectuate the purpose and intent of this Lease.

 

Section 15.17         Counterpart
Execution.  This Lease may be
executed in multiple counterparts, each of which shall be fully effective as an
original, for which together shall constitute only one (1) instrument.

 

IN WITNESS WHEREOF, Landlord and Tenant have executed this Lease as of
the day and year first above written.

 

	
   

  	
  LANDLORD:

  
	
   

  	
   

  
	
   

  	
  ROUTE 225
  INVESTMENTS, LLC,

  
	
   

  	
  a Nevada
  limited liability company

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  	
  Ward
  Chilton,

  
	
   

  	
   

  	
  Its Manager

  

 

38

 

	
   

  	
  TENANT:

  
	
   

  	
   

  
	
   

  	
  JACOBS ENTERTAINMENT, INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Title

  	
   

  	
   

  
						

 

39

 

EXHIBIT “A”

 

LEASEHOLD REAL
PROPERTY

 

All that real
property situate in the City of Elko, County of Elko, State of Nevada,
described as follows:

 

Parcels 1, 2
and 3 as shown on that certain Parcel Map for SAFEWAY STORES, INC. filed in the
office of the County Recorder of Elko County, State of Nevada, on February 21,
1984, as File No. 188745, being a portion of Section 16, TOWNSHIP 34
NORTH, RANGE 55 EAST, M.D.B. & M.

 

40

 

EXHIBIT “B”

 

REPORTS AND CORRESPONDENCE REGARDING ENVIRONMENTAL STATUS

 

41

 

LIST
OF ENVIRONMENTAL REPORTS AND CORRESPONDENCE

 

The following is a list of all reports and correspondence which
Landlord has received as of the date of the Lease regarding the environmental
status of the Leasehold Premises or of any alleged violation any environmental
laws with respect to the Leasehold Premises, all of which have been delivered
to Tenant:

 

(1)           Phase I
Environmental Assessment Report prepared by Converse Consultants under their
Project No. 05-73182-01 and dated as of October 12, 2005 (the “Phase
I Environmental Report”);

 

(2)           Letter from Converse
Consultants to Ward Chilton dated October 14, 2005 as an addendum; and

 

(3)           Polarized light
microscopy analysis report prepared by Converse Consultants under Project No. 05-73182-01
and dated as of October 17, 2005.

 

(4)           Letter from George
M. Lostra, P.E. to Ward Chilton dated October 24, 2005.

 

42

 

EXHIBIT “C”

 

MEMORANDUM OF
LEASE

 

43

 

Prepared by
and when

recorded mail
to:

 

 

                     

                     

                     

                     

 

MEMORANDUM
OF LEASE

 

THIS MEMORANDUM OF LEASE, dated this       
day of                  ,
2005 is executed by ROUTE 225 INVESTMENTS, LLC, a Nevada limited liability
company, hereinafter collectively to as “Lessor”, and JACOBS ENTERTAINMENT,
INC., a Delaware corporation, hereinafter referred to as “Lessee”.

 

NOTICE IS HEREBY GIVEN THAT, concurrently, or substantially concurrent,
herewith, Lessor and Lessee have entered into a Triple Net Lease (the “Lease”),
with respect to the real property and Improvements which is particularly
described by Exhibit ”A” attached hereto and incorporated by reference
herein (the “Real Property”).  Lessor
hereby leases the Real Property to Lessee in accordance with the terms and
conditions of said Lease.  The term of
the Lease commences on                  ,
2005 and will expire on October 31, 2010, unless sooner terminated or
extended in accordance with the terms and conditions set forth in the
Lease.  The Lease also includes a grant,
from Lessor to Lessee, of an option to purchase the Real Property in accordance
with the terms and conditions set forth therein.

 

44

 

IN WITNESS WHEREOF, the parties have executed this Memorandum of Lease
as of the day and year first above written.

 

 

	
  LESSOR:

  	
  LESSEE:

  
	
   

  	
   

  
	
  ROUTE 225
  INVESTMENTS, LLC,

  	
  JACOBS
  ENTERTAINMENT, INC.,

  
	
  a Nevada
  limited liability company

  	
  a Delaware
  corporation

  
	
   

  	
   

  
	
   

  	
   

  
	
  By

  	
   

  	
   

  	
  By

  	
   

  	
   

  
	
   

  	
   

  
	
  Name

  	
   

  	
   

  	
  Name

  	
   

  	
   

  
	
   

  	
   

  
	
  Title

  	
   

  	
   

  	
  Title

  	
   

  	
   

  
										

 

	
  STATE OF

  	
  )

  
	
   

  	
  ) ss

  
	
  COUNTY OF

  	
  )

  

 

This instrument was acknowledged before me on                       ,
2005, by                                               
as                                           
of ROUTE 225 INVESTMENTS, LLC.

 

	
   

  	
   

  
	
  Notary
  Public

  

 

	
  STATE OF

  	
  )

  
	
   

  	
  ) ss

  
	
  COUNTY OF

  	
  )

  

 

This instrument was acknowledged before me on                       ,
2001, by                                   
as                                         
of JACOBS ENTERTAINMENT, INC.

 

 

	
   

  	
   

  
	
  Notary
  Public

  

 

45

 

LEGAL
DESCRIPTION

 

All that real
property situate in the City of Elko, County of Elko, State of Nevada,
described as follows:

 

Parcels 1, 2
and 3 as shown on that certain Parcel Map for SAFEWAY STORES, INC. filed in the
office of the County Recorder of Elko County, State of Nevada, on February 21,
1984, as File No. 188745, being a portion of Section 16, TOWNSHIP 34
NORTH, RANGE 55 EAST, M.D.B. & M.

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