Document:

EXHIBIT 10.1

 

AGREEMENT OF LEASE

     FOR AND IN CONSIDERATION of the mutual covenants herein contained, the
parties hereto do hereby agree as follows:

          1. Incorporated Terms. The following terms are incorporated by reference
into this Agreement:

	 	(a)	 	DATE OF LEASE:
	 
	 	 	 	September 16, 2004
	 
	 	(b)	 	NAME AND ADDRESS OF LANDLORD:
	 
	 	 	 	NORTH JERSEY GREEN 501 LLC

a New Jersey limited liability company

c/o North Jersey Development Group, Inc.

101 Roundhill Drive

Rockaway, New Jersey 07866
	 
	 	(c)	 	NAME AND ADDRESS OF TENANT:
	 
	 	 	 	PARTY CITY CORPORATION

400 Commons Way

Rockaway, New Jersey 07866

Attn: General Counsel
	 
	 	(d)	 	DESCRIPTION OF PREMISES:
	 
	 	 	 	That portion of the building known as 25 Green Pond Road,
Rockaway, New Jersey, consisting of approximately 106,000
square feet, shown outlined in red on the Floor Plan Rider
(the Premises and the Building shall be measured in
accordance with Section 4(b) below), together with (i) a
total of 400 parking spaces consisting of 250 existing
parking spaces (which parking spaces are subject to
reconfiguration as part of the site plan approval to be
obtained by Landlord as provided herein) and 150 new parking
spaces to be constructed on the adjoining lot (the “Adjoining
Lot Parking Spaces”), which 400 parking spaces are shown
striped on the Plot Plan Rider and are reserved for the
exclusive use of Tenant, (ii) the non-exclusive use of the
roof for telecommunications equipment, and (iii) the right to
locate a back-up generator in a located within the Project
reasonably acceptable to Landlord and Tenant as provided
herein. The existing 250 parking spaces are located within
the area indicate on the attached Plot Plan Rider (the
Existing Parking Area”). To the extent that site plan
application as approved by Tenant proposes the
reconfiguration of the Existing Parking Area resulting in the
reduction of the number of spaces within the Existing Parking
Area, Tenant agrees to accept such lesser number of parking
spaces in the existing parking area. The attached Plot Plan
Rider reflects the existing conditions at the Project, and is
subject to amendment by the parties to reflect those site
improvements to be performed as part of Landlord’s Work and
Tenant’s Work and will be finalized for submission as part of
the site plan application to be submitted by Landlord as
provided herein. Upon finalization of the Plot Plan Rider,
the parties shall enter into an amendment of this Lease to
replace the attached Plot Plan Rider with the final Plot Plan
Rider as agreed upon by the parties.
	 
	 	(e)	 	TERM OF LEASE:

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	 	 	 	Commencing on the later of (1) date on which Landlord has
received all unappealable zoning, land use and site plan
approvals required for (i) the use of the Premises for the
Intended Uses and the construction of the Adjoining Lot
Parking Spaces and (ii) all exterior signage (including
illuminated signage if desired by Tenant) provided Tenant
submits to Landlord its proposed plans and specifications for
same by September 15, 2004, and (2) the date upon which the
Premises are delivered to Tenant in a broom clean condition
(the “Commencement Date”) and ending twelve (12) Lease Years
after the Rent Start Date, as may be extended by Tenant
pursuant to the Extension Options Rider. Items (i) and (ii)
are collectively referred to herein as the “Approvals”. If
Tenant fails to submit one or more of the proposed plans and
specifications on or before September 15, 2004, then the
Tenant shall be deemed to have waived the requirement for the
item(s) for which the plans and specifications have not been
timely submitted.
	 
	 	(f)	 	PERMITTED USE:
	 
	 	 	 	General offices including, without limitation, (1) computer,
electronic data processing equipment and business machines,
including computer networks and printing and duplicating
equipment (2) training facilities; (3) cafeteria or other
dining and cooking facilities or vending machines for the
purpose of preparing and serving food and beverages for the
respective officers, directors, employees and guests of
Tenant and its related entities and their respective
subtenants, and for the sale of snack foods, beverages,
confections, newspapers and other convenience items by
vending machines or otherwise for such personnel; (4) meeting
rooms, auditoriums, exercise, health, medical and day care
facilities, (5) messenger service; (6) a barber shop or
shoeshine service; (7) the storage of supplies, furniture,
furnishings and equipment, books, records and files and other
items incidental to office uses or incidental to cafeteria
use; (8) the installation of “private” lavatory or bathroom
facilities; (9) the operation of “ATM” machines, vending
machines and similar equipment; (10) UPS generator, (11) a
showroom, (12) the installation of telecommunications,
specialty photography (or “dark”) rooms and other electronic
and technological support systems in connection with the
foregoing uses and (13) a mock store, and/or for any other
use which may be operated consistent with a first-class
office project (the “Intended Uses”) and for no other
purpose. Landlord acknowledges and agrees that it will not
lease or otherwise permit the use of the balance of the
Project for any use other than for the Intended Uses or for
any other use which may be operated consistent with a
first-class office project.
	 
	 	(g)	 	SECURITY DEPOSIT:
	 
	 	 	 	$344,500.00 in form of cash or letter of credit, subject to
return upon the second anniversary of this Lease as provided
in Section 35 hereof.
	 
	 	(h)	 	BROKER:
	 
	 	 	 	Cushman & Wakefield of New Jersey, Inc.; commission to be
paid by Landlord.

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	 	(i)	 	RIDERS TO LEASE:
	 
	 	 	 	Rent Rider

Extension Options Rider

Plot Plan Rider

Floor Plan Rider

Permitted Exceptions Rider
	 
	 	(j)	 	PROPORTIONATE SHARE:
	 
	 	 	 	Tenant’s Proportionate Share shall be 87.6%, which represents
the percentage obtained by dividing the total square foot
area of the Premises by the total square foot area of the
Building.

          2. Description of Premises. Landlord hereby leases to Tenant and Tenant
hereby hires from Landlord, the premises described in Section 1(d) (the
“Premises”). The Premises is part of a multi-tenant building (the “Building”)
located on the land (the “Land”) shown on the Plot Plan Rider (the Land and
Building and other improvements thereon, collectively, the “Project”). The
Project, other than the Premises, may be altered from time to time by Landlord,
without Tenant’s consent, provided that no such alterations or any other change
shall be made by Landlord to the Project without Tenant’s prior consent (which
consent shall not be unreasonably withheld, delayed or conditioned) if such
change would: (a) materially adversely affect access to, the Premises; (b)
materially increase Tenant’s cost to operate its business within the Premises;
(c) materially reduce Landlord’s obligations under this Lease; (d) materially
adversely affect Tenant’s business at or use and occupancy of the Premises; (e)
cause relocation of the parking spaces allocated to Tenant by the terms hereof
unless reasonably geographically comparable parking is provided; or (f) result
in the Project failing to be a first class project.

          3. Term. The term of the Lease (the “Term”) shall commence on the
Commencement Date and terminate on the date described in Section 1(e) (the
“Expiration Date”), except as hereinafter provided. Landlord represents that
the Project is presently zoned industrial. Landlord shall have until January
15, 2005 to obtain the Approvals (the “Approvals Requirement”). Landlord
agrees to use diligent efforts, at Landlord’s sole cost, to satisfy the
Approvals Requirement. In the event that Landlord shall not have satisfied
the Approvals Requirement by January 15, 2005, Landlord and Tenant shall each
have the right, at any time thereafter but prior to the satisfaction of the
Approvals Requirement upon written notice to the other, to elect to terminate
this Lease. The foregoing January 15, 2005 date shall not be subject to
extension by reason of the institution of any appeal of any approval by a third
party, or force majeure. Notwithstanding the foregoing, if Landlord and Tenant
are merely waiting for an appeal period to run, either Landlord or Tenant may
extend the January 15, 2005 date to the date which shall be the first business
day following the expiration of the appeal period. If Tenant delays Landlord’s
prosecution of the Approvals, then the January 15th date shall be extended one
day for each such day that Tenant shall have delayed Landlord. Landlord and
Tenant shall execute an instrument setting forth the Commencement Date, the
Rent Start Date and Expiration Date.

          The first Lease Year shall be the period commencing on the Rent Start Date
(as defined in the attached Rent Rider) and ending twelve calendar months
thereafter, provided, however, that if the Rent Start Date is not the first day
of a month, the first Lease Year shall commence on the Rent Start Date and end
twelve calendar months from the last day of the month in which the Rent Start
Date occurs. Each succeeding twelve calendar month period thereafter shall be
a Lease Year.

          Tenant shall, from and after the date the Landlord delivers possession of
the Premises to Tenant and prior to the Rent Start Date, have free access to
the Premises to perform the Tenant’s Work, provided that Tenant shall pay all
costs of utilities used, ordered or consumed by it with respect to the
Premises, and prior to coming in to the Premises, shall furnish Landlord with
valid and effective policies of insurance in accordance with the provisions of
this Lease. Said installations and the performance thereof shall otherwise
comply with the terms hereof, including, without limitation,

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Section 25 hereof.

          4. Base Rent. (a) Tenant shall pay to Landlord at the address set forth
in Section 1(b), or to such other person or at such other place as Landlord may
from time to time designate, without previous demand therefor and without
counterclaim, deduction or set-off (except as otherwise provided herein), the
rent (“Base Rent”) set forth on the Rent Rider annexed hereto in lawful money
of the United States, such Base Rent to be payable in monthly installments in
advance on the first day of each month during the term of the Lease. If the
Rent Start Date shall be other than the first day of a calendar month, Tenant
shall pay Landlord on the particular Rent Start Date the proportionate amount
of Base Rent for the balance of such month. The first full monthly installment
of Base Rent shall be paid by Tenant on execution of this Lease. In the event
that Landlord shall be unable to satisfy the Approvals Requirement and Landlord
or Tenant shall terminate this Lease, then Landlord shall return to Tenant the
first installment of Base Rent.

          (b) The Base Rent set forth on the Rent Rider and Extension Options Rider
has been calculated upon the assumption that the Premises has an aggregate
floor area of precisely 106,000 square feet. Prior to the Commencement Date,
Landlord shall furnish to Tenant a certification from Benjamin Harten
Architect and Design of the aggregate floor area of the Premises and the
Building. In the event that the aggregate floor area of the Premises is other
than 106,000 square feet, the Base Rent shall be proportionately adjusted. The
square foot area of the Premises and the Building shall be measured in
accordance with BOMA 1996.

          (c) The Rent Start Date shall be the later to occur of (i) April 1, 2005,
or (ii) the date which shall be ninety (90) days following the date the
Landlord shall satisfy the Approvals Requirement. If the Tenant delays the
Landlord’s prosecution of the Approvals, then the Rent Start Date shall be
accelerated by one day for each such day of delay, but in no event shall the
Rent Start Date be earlier than April 1, 2005.

          5. Net Lease. It is the intention of Landlord and Tenant that this is a
net lease, and that, except as provided herein, the Base Rent shall be net to
Landlord and that, except as provided herein, Tenant shall be responsible for
and pay all costs for the use, operation, maintenance, care and repair of the
Premises and its proportionate share of the same with respect to the Project.
All obligations with respect to the Premises and Project payable by Tenant
other than the Base Rent are additional rent under this Lease. The term “rent”
means the Base Rent and additional rent.

          6. Real Property Taxes. (a) Tenant shall pay to Landlord its
Proportionate Share set forth in Section 1(j) of all real property impositions
during the Term in accordance with Section 2 of the Rent Rider. As used
herein, the term “real property impositions” means the aggregate amount of (i)
any tax, assessment or other governmental charge of any kind which at any time
during the Term may be assessed, levied, imposed upon or become due and payable
with respect to the Building or the Project; (ii) any tax on Landlord’s right
to receive or the receipt of rent from the Project or against Landlord’s
business of leasing the building or the Project (provided that such tax shall
not include any federal, state or local income tax); (iii) any tax or charge
for fire protection, normal office refuse collection, streets, sidewalks or
road maintenance or other services provided to the Building or the Project by
any governmental agency; (iv) any tax replacing or supplementing in whole or in
part any tax previously included within the definition of real property
impositions under this Lease; and (v) the cost of prosecuting any appeal of the
real property impositions, contesting the validity or amount of any real
property impositions or in retaining a refund of real property impositions with
respect to the Project, including attorneys’ fees, appraisers’ fees, limited to
the extent of any savings in such impositions. The real property impositions
payable by Tenant shall be prorated for the fraction of the tax fiscal year
included in the Term. Tenant shall not be responsible for any increase in real
estate taxes arising solely by reason of the sale or refinancing of the
Project.

          (b) If an assessment for public improvements is levied against the
Project, Landlord shall be deemed to have elected to pay such assessment in the
maximum number of installments then permitted by law (whether or not Landlord
actually so elects), and Tenant shall pay its Proportionate Share of the
installments payable as a result of such election or deemed election

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during or attributable to the Term, together with any interest due as a
result of the installment payments. Any installment for a period during which
the Commencement Date or Expiration Date occurs shall be prorated for the
fraction of the period included in the Term.

          (c) Real property impositions do not include Landlord’s federal or state
income, franchise, inheritance or estate taxes.

          (d) If at any time during the Term hereof, Tenant shall desire to contest
or prosecute an appeal for any real estate tax assessment affecting the
Project, Tenant shall notify Landlord in writing of its desire to do so, and
Landlord shall permit the Tenant to prosecute such appeal, and shall cooperate
with Tenant in the filing and prosecution of such appeal. Notwithstanding the
foregoing, if Landlord does not believe, in its reasonable judgment, that the
tax appeal would be advisable, then Tenant shall not bring a tax appeal during
the last two (2) years of the Term or any extension thereof. Any such appeal
shall be prosecuted by Tenant without cost and expense to Landlord or the other
tenants of the Project, other than reasonable attorneys’ fees, appraisal costs
and court costs in the event of a successful appeal.

          7. Insurance. (a) Throughout the Term, Tenant shall pay to Landlord in
accordance with Section 2 of the Rent Rider its Proportionate Share set forth
in Section 1(j) of the following policies of insurance for the Project
maintained by Landlord: (i) insurance covering all risk of physical loss or
damage to the Building in the full amount of its replacement value (including
agreed amount endorsement), but in no event less than the amount required by
any mortgagee of the Project (“Landlord’s Mortgagee”) (such policy shall
provide protection against all perils included within the classification of
fire, extended coverage, vandalism, malicious mischief, special extended
perils, including demolition and increased cost of construction, water damage,
sprinkler leakage, and any other perils which are normally included in the
standard “all-risk” property insurance policy); (ii) rental income insurance in
an amount equal to one year’s fixed rent of the Project, estimated real
property impositions and insurance premiums; (iii) insurance against loss or
damage by boiler or machinery or internal explosion or breakdown of boilers,
equipment or electrical appurtenances, in an amount reasonably required by
Landlord or any Landlord’s Mortgagee; (iv) insurance against breakage of all
plate glass; (v) flood hazard insurance in the amount of the full replacement
cost of the Building, or if such amount of insurance is not obtainable at
commercially reasonably rates, in the maximum amount which is obtainable at
such commercially reasonable rates; and (vi) such other insurance as Landlord
or any Landlord’s Mortgagee may reasonably require consistent with similar
commercial office buildings in the Morris County area. All proceeds payable
under any such policy shall be paid to Landlord or Landlord’s Mortgagee, as
their respective interests may appear. Tenant acknowledges that Landlord shall
not carry insurance on and shall not be responsible for damage to, trade
fixtures, equipment, furniture and other personalty and that Landlord shall not
carry insurance against, or be responsible for any loss suffered by Tenant due
to, interruption of Tenant’s business.

          (b) Throughout the Term, Tenant shall procure and maintain, at its
expense, a policy of commercial public liability insurance, including
contractual liability coverage insuring Tenant as insured and Landlord,
Landlord’s managing agent, Landlord’s Mortgagee as additional insureds against
loss or damage to person or property insured under the standard form of
commercial public liability insurance arising out of the use, occupancy or
maintenance of the Premises or any act or negligence of Tenant. Tenant’s
insurance shall be written on an occurrence basis and shall be primary with
respect to the Premises. The minimum initial amount of such insurance required
to be carried pursuant to this subparagraph (b) shall be at least $3,000,000 in
combined single limit with respect to injury or death in any one accident, and
at least $1,000,000 for damage to property. However, the amount of such
insurance shall not limit Tenant’s liability hereunder.

          (c) Each of Tenant’s insurance policies shall name as additional insureds
Landlord, Landlord’s managing agent, and any Landlord’s Mortgagee of which
Landlord has given Tenant no less than thirty (30) days’ written notice, as
their respective interests may appear. All insurance policies shall be
maintained with insurance companies authorized to transact insurance business
in the state in which the Project is located and holding a “General
Policyholder’s Rating” of A- or better, as set forth in the most current issue
of “Best’s Insurance Guide” and a financial rating of at least IX.
Certificates evidencing the insurance that Tenant is required to maintain
hereunder

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shall be deposited with Landlord at least ten (10) days prior to the
Commencement Date. Evidence of renewals or replacements of all policies shall
be deposited with Landlord not less than ten (10) days prior to the end of the
term of each such policy. Such insurance shall not be subject to
cancellation, coverage reduction or material modification, except after at
least ten (10) days prior written notice to Landlord, Landlord’s agents and
Landlord’s Mortgagee, by certified mail, return receipt requested. In
addition, upon receipt by Tenant of any notice of cancellation or any other
notice from the insurance carrier which may adversely affect the coverage of
the insureds under such policy, Tenant shall promptly deliver to Landlord and
any other additional insured hereunder a copy of such notice.

          (d) Landlord and Tenant hereby release the other from any and all
liability or responsibility to the other or anyone claiming through or under
them by way of subrogation or otherwise for any loss or damage to property
covered by any insurance then required to be maintained by the releasing party,
even if such loss or damage shall have been caused by the fault or negligence
of the other party, or anyone for whom such party may be responsible. Tenant
and Landlord shall each obtain for each property insurance policy procured by
such regarding the Project or any property located thereon, an appropriate
clause therein or endorsement thereto pursuant to which each such insurance
company waives its subrogation rights against the other party.

          (e) In the event Tenant’s use and occupancy of the Premises, or Tenant’s
manner of use, causes any additional charge or increase in the insurance
premiums on the Project in excess of those rates which would normally be
imposed for insuring a Building of similar construction, Tenant shall pay the
amount of such additional charge or increase in the insurance premiums upon
Landlord’s demand therefor.

          (f) Tenant shall have the right to self-insure for the insurance required
in subparagraph (b) above, on the following terms and conditions:

               (i) “Self-insure” shall mean that Tenant is itself acting as though it
were the insurance company providing the insurance required under the
provisions hereof and Tenant shall pay any amounts due in lieu of insurance
proceeds which would have been payable if the insurance policies had been
carried, which amounts shall be treated as insurance proceeds for all purposes
under this Lease.

               (ii) All amounts which Tenant pays or is required to pay and all loss or
damages resulting from risks for which Tenant has elected to self-insure shall
be subject to the waiver of subrogation provisions hereof and shall not limit
Tenant’s indemnification obligations set forth in Paragraph 25 hereof.

               (iii) Tenant’s right to self-insure and to continue to self-insure is
conditioned upon and subject to the following:

                    (1) The Tenant’s earnings before interest, taxes, depreciation and
amortization (“EBITDA”) in the applicable fiscal year of Tenant shall be at
least thirty million dollars ($30,000,000);

                    (2) Tenant shall provide to Landlord by May 1 of each year for which
Tenant has elected to self-insure, a statement advising Landlord of Tenant’s
intent to continue to self-insure in accordance with the provisions of this
Section 7(g), together with financial statements which shall establish and
confirm that Tenant has the required EBITDA.

               (iv) In the event Tenant fails to satisfy the requirements of subparagraph
(iii), then Tenant shall immediately lose the right to self-insure and shall be
required to provide the insurance hereinabove specified.

               (v) In the event Tenant elects to self-insure, all of the provisions
relating to insurance required to be maintained by Tenant shall apply as if
Tenant had in fact maintained policies of insurance in lieu of such
self-insurance, including, but is not limited to,

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indemnification of Landlord to the extent Landlord would have been
indemnified by insurers under insurance policies set forth above and additional
insured provisions.

               (vi) Tenant shall provide notice to Landlord of Tenant’s election to
self-insure and shall provide to Landlord such evidence as required under this
Section 7(g) in order for Tenant to satisfy the conditions for such
self-insurance at least ten (10) days prior to the commencement of such
self-insurance..

          8. Utilities. Tenant shall pay, directly to the appropriate supplier, the
cost of all light, electricity, HVAC, elevator, cleaning services, power,
natural gas, fuel, oil, sewer service, sprinkler stand-by service, water,
telephone, refuse disposal and other utilities and services supplied to the
Premises. Landlord agrees that Tenant’s electric usage for the Premises
(including HVAC) shall be separately metered. Tenant may obtain such service
directly from the existing utility or any other utility that may be selected by
Tenant in its sole discretion during the Term hereof. If any utilities or
services other than electricity are jointly metered with other property,
Landlord shall make a reasonable determination of Tenant’s share of the cost of
such utilities and Tenant shall pay such share to Landlord in accordance with
Section 2 of the Rent Rider. Landlord shall not be responsible or liable to
Tenant in the event of any interruption, failure or inadequacy of any utility
service supplied to the Premises. Such interruption, failure or inadequacy
shall not constitute an actual or constructive eviction, in whole or in part,
or entitle Tenant to any compensation or to any abatement or diminution of
rent, or relieve Tenant from any of its obligations under this Lease.
Notwithstanding the foregoing, if such interruption or failure of utility
service arises out of the negligent acts or willful misconduct of Landlord, and
if such interruption or failure of utility service is not cured by Landlord
within ten (10) days, and if Tenant is unable to open for business by reason of
such interruption or failure of utility service, then Tenant’s rent shall abate
from the eleventh day following such interruption or failure until the date
such utility service shall be restored.

          9. Use of Premises. (a) The Premises may only be used for the use set
forth in Section 1(f). No part of the Premises may be used for warehousing or
storage of any hazardous materials or so-called “red-labeled” materials or
substances, other than deminimus quantities of hazardous materials that are
commonly used in standard office operations and maintained by Tenant in
compliance with applicable laws.

          (b) Notwithstanding the foregoing, Tenant shall not use or permit the
Premises to be used for (i) any unlawful purpose; (ii) in violation of any
certificate of occupancy covering the Premises ; (iii) any use which
constitutes a public or private nuisance or make voidable any insurance in
force relating to the Premises; or (iv) any purpose which creates or produces
noxious odors, smoke, fumes, emissions, noise or vibrations. Tenant, at
Tenant’s expense, shall at all times keep the Premises orderly, neat, safe,
clean and free from rubbish and dirt, and vermin, and shall store all trash,
garbage and solid waste within the Premises.

          (c) Tenant shall not cause or permit any overloading of the floors of the
Building. Tenant shall not install any equipment or other items upon or
through the roof, or cause openings to be made in the roof, without Landlord’s
prior written consent, which consent shall not be unreasonably withheld,
conditioned or delayed. The installation of Tenant’s improvements and
equipment shall be done in such manner and at such times reasonably designated
by Landlord.

          (d) No storage of any goods, equipment or materials shall be permitted
outside the Building.

          (e) Tenant shall have access to the Premises twenty-four (24) hours per
day, seven (7) days per week.

          10. Landlord’s Work. Except for delivering the Premises to Tenant in
broom clean condition and Landlord’s obligation to provide separate metering
for electric service, and subject to Landlord’s obligation to construct the
Adjacent Parking Spaces and Landlord’s environmental obligations hereunder, and
Tenant shall accept the Premises in its condition as of the date hereof.

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          11. Maintenance and Repairs. (a) Except as set forth in Sections 11(b)
and (c) below, Tenant shall keep and maintain the Premises (including all
non-structural, interior, exterior, systems and equipment) in good order,
condition and repair during the Term. Tenant shall promptly replace any
portion of the Premises or any systems or equipment thereof which cannot be
fully repaired. All repairs and replacements shall be performed in a good and
workmanlike manner to the reasonable satisfaction of Landlord. All of Tenant’s
obligations to maintain and repair the Premises shall be accomplished at
Tenant’s sole expense.

          (b) Landlord shall keep and maintain the structural portions of the
Building in good order, condition and repair and keep the roof free of leaks,
at Landlord’s sole cost and expense. Structural portions of the Building shall
include the Building’s footings, foundations, interior structural steel
columns, roof deck, roof joists, and other structural members supporting the
roof; floor slabs; load-bearing walls; and other load-bearing elements of the
Building. Notwithstanding the foregoing, however, any damage, loss or injury
to the Premises to the extent caused by Tenant’s negligence or intentional acts
and not otherwise covered by Landlord’s insurance shall be restored at the sole
cost and expense of Tenant, and any loss or injury to the Premises to the
extent caused by Landlord’s negligence or intentional acts shall be restored at
the sole cost and expense of Landlord. Tenant shall receive the benefit of any
assignable warranties or guarantees (if any) obtained by Landlord from
Landlord’s contractors.

          (c) Landlord shall maintain and repair the parking areas (filling pot
holes and striping), driveways, parking lot lighting, storm drainage facilities
and landscaped areas of the Project. Landlord shall also arrange for the
removal of accumulations of snow and ice from the parking areas and driveways.
Tenant shall, upon demand, pay Landlord its Proportionate Share of Landlord’s
reasonable cost therefore; provided, however, that Landlord shall be
responsible for , at Landlord’s sole cost and expense, correcting any
construction defects to the parking areas, driveways, parking lot lighting, and
storm drainage facilities of the Project. In the event Landlord elects to
perform any capital improvement to the parking areas, driveways, parking lot
lighting, and storm drainage facilities of the Project, Tenant shall not be
responsible for the cost of any other capital expenditure made by Landlord, to
the parking areas, driveways, parking lot lighting, and storm drainage
facilities of the Project, unless authorized in writing by Tenant, in which
event the cost thereof shall be amortized over the useful life of such
improvement (which useful life shall be as determined under the Internal
Revenue Code), and Tenant shall be responsible for Tenant’s Proportionate Share
of the amortized cost thereof allocable to the remaining Term. Tenant
acknowledges that Landlord is not obligated hereunder to make any such
improvements (other than the construction of the Adjacent Parking Spaces to be
performed by Landlord in accordance with the provisions of this Lease at
Landlord’s sole cost and expense).

          (d) Tenant, at Tenant’s sole cost and expense, shall procure and maintain
a service contract for the inspection, service, maintenance and repair of all
heating, ventilating and air conditioning equipment serving the Premises (the
inspection pursuant to such contract shall be made at least annually). The
identity of the contractor and the contract shall be subject to Landlord’s
reasonable approval. Copies of reports of inspections made hereunder shall be
promptly supplied to Landlord.

          12. Alterations and Improvements. (a) Except as provided in this Section
12, Tenant shall not make any alterations, additions or improvements to the
Premises (the “Alterations”) without Landlord’s prior written consent, which
consent shall not be unreasonably withheld, conditioned or delayed. Landlord’s
consent shall not be required for interior non-structural Alterations which (i)
are not visible from the outside of the Building, (ii) consent is not required
under the terms of any mortgage on the Project, and (iii) does not violate the
provisions of the certificate of occupancy for the Building or the Premises or
adversely affect in any material respect any structural parts of the Building,
HVAC or other Building systems or the strength of the Building. In no event
shall Alterations reduce the size or cubic content of the Building or reduce
the value of the Premises. Tenant shall submit to Landlord plans and
specifications in reasonable detail for Alterations requiring Landlord’s
consent, which shall be reviewed by Landlord without charge. Landlord shall
grant or deny its consent to any proposed Alteration within ten (10) business
days of

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receipt of Tenant’s written request accompanied by plans and
specifications describing the proposed Alteration. In the event Landlord fails
to consent or deny its consent within ten (10) business days after submission
by Tenant to Landlord, Tenant shall have the right to thereafter deliver notice
to Landlord advising Landlord of its failure to consent or deny its consent to
the proposed Alterations within the ten (10) business day period as specified
above, which notice shall expressly state in bold type as follows: “IN THE
EVENT LANDLORD FAILS TO CONSENT OR DENY ITS CONSENT TO THE REQUESTED
ALTERATIONS WITHIN FIVE (5) BUSINESS DAYS FROM THE DATE OF THIS NOTICE,
LANDLORD’S CONSENT SHALL BE DEEMED GRANTED”. In the event that in the event
Landlord fails to consent or deny its consent within five (5) business days
from the date of such notice, Landlord’s consent shall be deemed granted. Any
denial of Landlord’s consent shall set forth the specific reasons for
Landlord’s objection thereto. Tenant shall also provide to Landlord for its
reasonable approval the identity of the contractor and architect Tenant
proposes to employ to construct the Alterations. All Alterations shall be
accomplished in accordance with the following conditions:

          (1) Tenant shall procure all governmental permits and authorizations for
the Alterations, and obtain and provide to Landlord an official certificate of
occupancy and/or compliance upon completion of the Alterations, if appropriate.
At Tenant’s request, Landlord shall, at Tenant’s cost, join with Tenant in
applying for all necessary permits to be obtained from governmental authorities
for any Alterations to be performed by Tenant in or to the Premises and
Landlord shall, at Tenant’s cost, subject to Landlord’s review and approval of
same, execute any consents and applications as such governmental authorities
may require.

          (2) Tenant shall arrange for extension of the general liability insurance
provided for in Section 7(b) to apply to the construction of the Alterations.
Further, Tenant shall procure and maintain Builders Risk Casualty Insurance in
the amount of the full replacement cost of the Alterations and statutory
Workers Compensation Insurance covering persons employed in connection with the
work. All such insurance shall conform to the requirements of Section 7(c).
Evidence of such coverage, and payment of all premiums therefor, reasonably
satisfactory to Landlord shall be delivered to Landlord prior to commencing
such Alterations.

          (3) Tenant shall construct the Alterations in a good and workmanlike
manner utilizing materials of first class quality in accordance with the plans
and specifications approved by Landlord, if any, in compliance with all laws
and governmental regulations and no such materials shall be subject to any
lien, encumbrance, chattel mortgage, title retention or security agreement.

          (b) Upon completion of the Alterations, Tenant shall, to the extent
available, provide Landlord with “as built” CAD plans of the Alterations.

          (c) Alterations shall be the property of Tenant until the termination of
the Lease, provided that any Alterations (other than trade fixtures, movable
equipment or furniture owned by Tenant] shall become the property of Landlord
and shall remain on the Premises upon termination of the Lease, provided that
Tenant shall remove any and all Alterations installed in the Premises which are
items not ordinarily found in first class office premises (including items such
as bank vaults and vertical penetrations, but expressly excluding partitions,
mezzanines [including any stairways or elevators for accessing such
mezzanines], skylights, finishes, slab reinforcements, kitchen (and related
exhaust), wiring, supplemental HVAC and conduit communications systems and
rooftop telecommunication equipment) (“Non-Standard Office Alterations”).
Notwithstanding the foregoing, if Tenant has requested, at the time of Tenant’s
request for Landlord’s consent to such Alterations that Landlord advise Tenant
whether any proposed Non-Standard Alterations will be required to be removed
upon the expiration or earlier termination of this Lease, and Landlord does not
notify Tenant at the time of Landlord’s consent thereto that Landlord will
require Tenant to remove such Non-Standard Office Alterations, Tenant shall
have no obligation to remove such Non-Standard Office Alterations.

          13. Covenant Against Liens. Tenant shall not have any right to subject
Landlord’s interest in the Project to any construction lien or any other lien
whatsoever. If any construction lien or other lien, charge or order for
payment of money shall be filed as a result of the

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act or omission of Tenant, Tenant shall cause such lien, charge or order
to be discharged or appropriately bonded so as to be discharged within thirty
(30) days after notice from Landlord thereof, and Tenant shall indemnify and
save Landlord harmless from all liabilities and costs resulting therefrom. If
Tenant fails to discharge same within said thirty (30) days, in addition to
Landlord’s other remedies, Landlord may, but shall not be obligated to
discharge same and Tenant shall pay all expenses incurred by Landlord in
connection therewith within thirty (30) days of demand as additional rent.

          14. Signs. Subject to receipt of all requisite governmental approvals,
Tenant may place its name and logo on a sign on the Building exterior face, on
a monument sign at the exterior of the Project, and on a sign at the main
entrance to the Building. All exterior signage may, at Tenant’s option, be
illuminated. In no event shall any sign be installed on the roof or above the
parapet height of the Building. Tenant shall remove its signs upon termination
of this Lease and restore the Project to its condition prior to installation of
the signs, reasonable wear and tear and casualty excluded.

          15. Compliance With Law. Tenant, at Tenant’s sole cost and expense, shall
conform to and comply with all laws, orders and regulations of any governmental
authority or the commercially reasonable requirements of Landlord’s or Tenant’s
insurers, now or hereafter applicable to the Premises or Tenant’s use or
occupancy of the Premises and notify Landlord of any notice of violation
received by Tenant. Tenant, at Tenant’s sole cost and expense, shall obtain
all permits (other than the Approvals), including a certificate of occupancy,
necessary for Tenant’s occupancy and use of the Premises.

          16. Environmental Law Compliance. (a) Tenant shall, at Tenant’s sole
cost and expense, subject to the limitations set forth below, comply with all
environmental laws, now or hereafter applicable to Tenant’s use or occupancy of
the Premises.

          (b) Tenant shall indemnify, defend and hold harmless Landlord from all
fines, suits, procedures, claims and actions of any kind arising out of or in
any way connected with any spills or discharges of hazardous substances or
wastes within the Premises, or outside the Premises if caused by Tenant or its
agents, employees, licensees or invitees.

          (c) Tenant covenants and agrees that it shall not bring onto or cause to
be brought onto the Premises any Hazardous Materials in violation of any
federal, state or local law, ordinance or regulation, other than deminimus
quantities of Hazardous Materials commonly used in office uses.

          (d) The term “Hazardous Materials” as used in this Lease includes without
limitation (i) any hazardous or toxic substance, solid waste, hazardous waste,
hazardous material, pollutants, flammable explosives, radioactive material or
any other material defined in or regulated under any local, state or federal
environmental statute, ordinance, rule or regulation (including without
limitation, the federal statutes commonly known as the Comprehensive
Environmental Response, Compensation and Liability Act, the Resource
Conservation and Recovery Act, the Solid Waste Disposal Act, the Hazardous
Materials Transportation Act, the Toxic Substances Control Act, the Clean Air
Act, the Clean Water Act, the Occupational Safety and Health Act or any
regulations promulgated under any of the foregoing Acts, (ii) any substance
that contains gasoline, diesel fuel or other petroleum hydrocarbons or
derivatives, (iii) polychlorinated biphenyls, (iv) paint containing lead, (v)
urea formaldehyde foam insulation and (vi) any other substance which
contaminates soil or ground water and causes degradation of the soil or water
to the extent that remediation or other actions are needed to restore the soil
and water to their natural states.

          (e) Notwithstanding anything to the contrary set forth in this Lease, in the
event that, during the term of this Lease, any Hazardous Materials are
discovered in or under the Premises or the Project, including, but not
limited to, asbestos, and such Hazardous Materials were present prior to the
date that Landlord delivered possession of the Premises to Tenant, or in the
event Landlord, its agents, employees, contractors , licensees and invitees,
shall bring onto or cause to be brought onto the Premises or the Project any
Hazardous Materials in violation of any federal, state or local laws,
Landlord shall undertake remediation or other action to remove the Hazardous
Materials from the Premises and the Project at Landlord’s expense and to the
extent that such remediation or other

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action renders the Premises partially or wholly untenantable, Base Rent and
additional rent shall abate based upon the portion of the Premises rendered
untenantable until such time as the Premises are rendered tenantable. Any
remediation by Landlord shall be performed in compliance with all applicable
Laws governing handling, removal, or disposal of such Hazardous Material and
so as to minimize any interference with Tenant’s business operations. If the
presence of Hazardous Substances at the Premises renders the Premises
untenantable, and if within nine (9) months after receipt of Tenant’s notice
Landlord has not rendered the Premises tenantable, Tenant shall have the
option upon written notice to Landlord, as Tenant’s sole remedy, to
terminate this Lease. Landlord may vitiate any such notice by making the
Premises tenantable within thirty (30) days following Landlord’s receipt of
Tenant’s notice of termination.

          (f) Landlord’s and Tenant’s obligations under this Section shall survive
the expiration of this Lease.

     17. Landlord’s Access. Landlord and its representatives may enter the
Premises at all reasonable times (or at any time in the event of emergency) for
the purpose of inspecting the Premises, or making any repairs, replacements or
improvements or to show the Premises to prospective purchasers, investors,
encumbrancers, tenants or other parties, or for any other purpose Landlord
deems necessary. In the event Landlord so enters the Premises, it shall:

(a) except in the case of emergency, give Tenant reasonable advance
notice of such entry, and permit Tenant at all times to have a
representative present during any entry by Landlord hereunder;

(b) so effect such repairs and installations and store such
equipment and materials as to minimize, so far as practicable,
interference with Tenant’s normal business operation; and

(c) with reasonable promptness, restore the portion of the Premises
adversely affected by such repairs or installations.

          18. Assignment and Subletting. (a) Tenant may assign this Lease or sublet
the Premises, without Landlord’s consent, to any corporation or other entity
which controls, is controlled by or is under common control with Tenant, or to
any corporation or other entity resulting from the merger of or consolidation
with Tenant, (an “Affiliate”), provided such Affiliate shall assume in writing
all of Tenant’s obligations under this Lease, and further provided any merger
or consolidation is not primarily for the purpose of avoiding or materially
limiting the liability of Tenant for its obligations under the Lease.

          (b) If Tenant desires to assign this Lease or sublet all or any portion
of the Premises, other than to an Affiliate, Tenant shall submit to Landlord a
written request for Landlord’s approval thereof, setting forth the name,
principal business address, and nature of business of the proposed assignee or
sublessee; the financial, banking and other credit information relating to the
proposed assignee or sublessee; and the details of the proposed assignment or
subletting, including a copy of the proposed assignment or sublease instrument
and plans for any Alterations required for the proposed assignee or sublessee.
Tenant shall also furnish any other information reasonably requested by
Landlord. Landlord approval of any such assignment or subletting shall not be
unreasonably withheld, conditioned or delayed. Landlord’s acceptance of rent
from a proposed assignee or sublessee shall not be construed to constitute its
consent to an attempted assignment or subletting. Tenant shall promptly
deliver to Landlord an assumption by any such assignee and copies of all lease
assignments and subleases.

          (c) No assignment or subletting hereunder, whether or not with Landlord’s
consent, shall release Tenant from any obligations under this Lease, and Tenant
shall continue to be primarily liable hereunder. If Tenant’s assignee or
sublessee defaults under this Lease, Landlord may proceed directly against
Tenant without pursuing its remedies against the assignee or sublessee.
Consent to one assignment or subletting shall not be deemed a consent to any
subsequent assignment or

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subletting. Landlord may consent to subsequent assignments or
modifications of this Lease or sublettings without notice to Tenant and Tenant
shall not be relieved of liability under this Lease.

          (d) Landlord agrees that, within thirty (30) days following the written
request of Tenant and provided that no default by Tenant exists, Landlord shall
enter into a non-disturbance, recognition, and attornment agreement
(“Nondisturbance Agreement”) with a Qualifying Subtenant, as hereinafter
defined, pursuant to which Landlord shall agree that if this Lease is
terminated prior to the scheduled Expiration Date as a result of a default by
Tenant hereunder (unless caused by a default by the Qualifying Subtenant),
Landlord shall not disturb the Qualifying Subtenant’s possession under the
Qualified Sublease, as hereinafter defined, and shall otherwise recognize the
Qualifying Subtenant’s right to continued possession of the portion of the
Premises subleased to such Qualifying Subtenant, subject to the terms and
conditions set forth herein. The Nondisturbance Agreement shall contain the
following conditions:

          (i) Notwithstanding anything to the contrary in the Qualifying Sublease,
in the event of a termination of this Lease, the Qualifying Subtenant shall pay
to Landlord a per square foot Base Rent that shall be the greater of: (x) the
per square foot Base Rent otherwise payable by Tenant under this Lease at the
time of the Lease termination, or (y) the per square foot Base Rent otherwise
payable by the Qualifying Subtenant under the Qualifying Sublease at the time
of the Lease termination. The Qualifying Subtenant shall attorn to Landlord,
as its lessor, and such attornment shall be effective and self-operative
without the execution of any further instruments on the part of either party;

          (ii) Notwithstanding anything to the contrary in the Qualifying Sublease,
in the event of a termination of this Lease, the Qualifying Subtenant will
perform and abide by the same obligations under this Lease as Tenant with
respect to the subleased premises under the Qualifying Sublease, including, but
not limited to, the obligation to pay Base Rent and Additional Rent, provided
however that Subtenant will have no right to exercise any of the renewal
options under the Extension Options Rider, the right of first offer option
under Section 39, the purchase option under Section 40, or any other similar
options that may be included in this Lease;

          (iii) Notwithstanding anything to the contrary in the Qualifying Sublease,
in the event of a termination of this Lease, Landlord’s obligations or
liability as sub-landlord under the Qualifying Sublease will not be greater
than Landlord’s obligations or liability under this Lease. In addition,
Landlord shall not be: (i) liable for any previous act or omission by Tenant
under any such sublease; (ii) subject to any offset of rent or defenses that
shall thereunto have accrued to any such sublessee against Tenant; (iii) bound
by any previous prepayment of rent made by any such Qualified Subtenant to
Tenant, unless such prepayment was actually received by Landlord; (iv) liable
to Qualified Subtenant for any security deposit made by any such Qualified
Subtenant to Tenant, unless such security deposit was actually received by
Landlord; (v) be liable for any representations or warranties given or made by
Tenant to Qualified Subtenant; and (vi) Landlord’s liability under such
Qualified Sublease shall be limited as set forth in Section 30 of this Lease
and as otherwise set forth in this Lease.

          (iv) Notwithstanding anything to the contrary in the Qualifying Sublease,
in the event of a termination of this Lease, Landlord will have the right, at
its option, to require that the Qualifying Subtenant enter into a new lease
directly with Landlord for the subleased premises for the remainder of the Term
hereof consistent with the rights and obligations of Landlord and Subtenant
under the provisions of this Section 18 (d), in which event the Qualifying
Sublease will become null and void. In the event Landlord and Qualifying
Subtenant enter into a direct lease pursuant to this subparagraph, Landlord
will not be liable for any commission due to a broker with whom Tenant or the
Qualifying Subtenant has dealt, and Subtenant shall indemnify, defend, and hold
harmless Landlord and the Additional Insureds from and against all threatened
or asserted claims, liabilities, costs or damages (including, without
limitation, reasonable attorney’s fees and disbursements) which may be asserted
against or incurred by Landlord as a result of any claim of any broker in
connection therewith.

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For the purposes of this Paragraph, the following definitions shall apply:

(1) A “Qualifying Subtenant” shall mean a subtenant, as of the date of
the execution of the Nondisturbance Agreement and as of the Lease
termination:

(A) that complies with all requirements of this Section 18(d);

(B) is not an affiliate of Tenant;

(C) is an “investment grade” credit (i.e., BBB or higher as rated
by Standard and Poors), or if such subtenant is not otherwise
rated, has at such time a “shadow rating” (as determined using the
same criteria utilized by Standard and Poors, Moodys or in the
event neither entity remains in existence, such other rating agency
generally recognized by the investment banking industry reasonably
acceptable to Landlord) that is an “investment grade” credit;

(D) is not in default of any of its obligations under a Qualifying
Sublease.

(2) A “Qualifying Sublease” shall mean a sublease with a Qualifying
Subtenant:

(A) that complies with all requirements of this Section 18(d); and

(B) under which the subleased premises consists of at least 50,000
rentable square feet and with entrances separate from the balance
of the Demised Premises, is separately demised with walls and
submetered from the balance of the Premises;

(C) The remainder of the Premises that are not sublet constitute a
commercially reasonable leasable space as approved by Landlord,
which approval shall not be unreasonably withheld, conditioned or
delayed.

     19. Casualty. If the Project (excluding Tenant’s trade fixtures,
equipment, furniture and personal property) is damaged by fire or other
casualty, and (i) the insurance proceeds received by Landlord on account of
such damage, together with any deductibles maintained by Landlord, are
sufficient to pay for the necessary repairs, (ii) Landlord’s Mortgagee permits
Landlord to utilize the insurance proceeds to repair such damage (provided that
if the existing Mortgagee does not permit Landlord to utilize the insurance
proceeds Landlord is unable, despite diligent efforts, to obtain replacement
financing for the reconstruction or repair), and (iii) the Project can be fully
repaired within nine (9) months after such casualty occurred, this Lease shall
remain in effect and Landlord shall repair the damage as soon as reasonably
possible. If any of the foregoing conditions requiring Landlord to repair the
Project is not met, either Landlord or Tenant may elect either to (i) terminate
this Lease; or (ii) repair the damage as soon a reasonably possible, in which
event this Lease shall remain in full force and effect (but Tenant shall then
have the right to terminate this Lease if the Premises cannot be fully repaired
within nine (9) months after such casualty occurred). Landlord shall, within
thirty (30) days of such casualty provide Tenant with a written notice (the
“Landlord’s Notice”) setting forth either (i) Landlord’s election to terminate
the Lease as permitted under this Section 19, or (ii) Landlord’s estimate for
reconstruction of the Premises or portions of the Building as hereinafter
provided in accordance with this Section 19. If Landlord’s Notice indicates
that such reconstruction of the Project shall exceed nine (9) months and
Landlord does not elect to terminate this Lease as provided in Landlord’s
Notice, Tenant shall have the right, to be exercised within thirty (30) days
after receipt of Landlord’s Notice, to elect, by notice to Landlord, to cancel
this Lease, (hereinafter called “Tenant’s Notice”). In the event this Lease is
not terminated by either Landlord or Tenant as hereinabove permitted, Landlord
shall commence and proceed with reasonable diligence to restore the portion of
the Building so damaged. If Landlord indicates in its notice that the Project
can be restored within nine (9) months and the Project is not restored within
nine (9) months after the date of such casualty, or if Landlord in Landlord’s
Notice indicates that it will take a period longer than nine (9) months to
restore said the Project, and Tenant shall not have elected to terminate this
Lease and said portions are not restored within such longer period, then this
Lease and the Term

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hereof may at the election of Tenant be terminated by notice in writing
from Tenant to Landlord at any time after expiration of the nine (9) month
restoration period or such longer period, if applicable, which notice shall be
effective thirty (30) days after the giving of such notice if the Premises have
not been restored by that date. In the event this Lease shall remain in full
force and effect following a casualty, Base Rent and additional rent shall
abate based upon the portion of the Premises rendered untenantable until such
time as the Premises are rendered tenantable. Tenant waives the protection of
any law which grants a tenant the right to terminate a lease in the event of
the destruction of a leased property, and agrees that the provisions of this
paragraph shall govern in the event of any destruction of the Building.
Landlord shall not be required to repair any of Tenant’s trade fixtures,
equipment, furniture or personal property. Tenant shall promptly notify
Landlord of any fire or other casualty to the Premises.

          20. Condemnation. If all of the land, the Building and/or the Premises
is taken and/or more than twenty-five (25%) percent of the Land and/or Building
shall be taken under the power of eminent domain or sold under the threat
thereof (“Condemnation”) and Tenant’s use of the Premises is materially
adversely affected in the reasonable opinion of Tenant exercised in good faith,
this Lease shall terminate on the date on which title to the Premises or
portion thereof shall vest in the condemning authority. If this Lease shall
remain in effect as to the portion of the Premises not taken, Landlord shall
restore that part of the Premises not taken as nearly as reasonably practicable
to a self-contained rental unit, including any Tenant’s Alterations for which
Landlord is entitled to receive any award in connection therewith. The Base
Rent shall be reduced proportionately in accordance with the reduction in the
square foot area of the Premises following the Condemnation. Landlord shall be
entitled to receive the entire award in any Condemnation proceeding relating to
the Premises, except that Tenant may assert a separate claim to an award for
its moving expenses and for trade fixtures and personal property installed by
Tenant at its expense. It is understood that Tenant shall have no claim
against Landlord for the value of the unexpired Term of this Lease or any
options granted under this Lease. No temporary taking shall cause a
termination of this Lease, but Tenant shall continue the payment of rent and
other sums hereunder without reduction and be entitled to receive any award for
such taking paid during the term hereof, provided that any payment that covers
a period after this Lease is no longer in effect shall belong to Landlord.

          21. Surrender of Premises. Upon termination of the Lease, Tenant shall
surrender the Premises to Landlord broom clean, and in good order and
condition, except for ordinary wear and tear, and damage by casualty which
Tenant was not obligated to remedy under Section 19. Tenant shall remove its
machinery and equipment and repair any damage to the Premises caused by such
removal. Tenant shall not remove any power wiring or power panels, lighting or
lighting fixtures, wall coverings, blinds or other window coverings, carpets or
other floor coverings, heaters or air conditioners or fencing or gates, except
if installed by Tenant and required by Landlord to be removed from the
Premises. All personal property of Tenant remaining on the Premises after
Tenants removal shall be deemed abandoned and at Landlord#s election may either
be retained by Landlord or may be removed from the Premises at Tenants expense,
including the reasonable out-of-pocket cost of repairing any damage to the
Premises caused by such removal.

          22. Holdover. The parties recognize and agree that the damage to Landlord
resulting from any failure by Tenant to timely surrender possession of the
Premises, as set forth in Article 21 hereof, will be extremely substantial,
will exceed the amount of the monthly rent theretofore payable hereunder, and
will be impossible to accurately measure. Therefore, in the event Tenant
remains in possession of the Premises after the expiration of the term of this
Lease (the “Holdover Period”), Tenant shall pay to Landlord a rental for the
Holdover Period at the rate of 150% of (i) the annual rent payable during the
last lease year of the term on a per diem basis, plus 100% of (ii) all items of
additional rent and other charges with respect to the Premises payable by
Tenant. Nothing herein contained shall be deemed to give Tenant any right to
remain in possession of the Premises after the expiration of the Term of this
Lease. The sum due to Landlord hereunder shall be payable by Tenant upon
demand. The provisions of this Article 22 shall survive the expiration of this
Lease.

          23. Events of Default; Remedies. (a) Tenant shall be in default upon the

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occurrence of one or more of the following events (an “Event of Default”):
(i) Tenant fails to pay rent or any other sum of money required to be paid by
Tenant hereunder within ten (10) days after written notice from Landlord that
such amount was due and remains unpaid; (ii) Tenant fails to perform any of
Tenant’s non-monetary obligations under this Lease within thirty (30) days
after written notice thereof from Landlord (provided that if more than thirty
(30) days are required to complete such performance, Tenant shall not be in
default if Tenant promptly commences such performance within such thirty (30)
day period and thereafter diligently pursues its completion); (iii) Tenant
makes an assignment for the benefit of creditors, or if a petition for
adjudication of bankruptcy or for reorganization is filed by or against Tenant
and if filed against Tenant and without its consent or permission, is not
dismissed within thirty (30) days, or if a receiver or trustee is appointed for
a substantial part of Tenant’s property and if such receiver is appointed
without Tenant’s consent or permission, such appointment is not vacated within
thirty (30) days.

          (b) On the occurrence of an Event of Default, without limiting any other
right or remedy Landlord may have, without notice or demand, Landlord may:

               (i) Terminate this Lease and Tenant’s right to possession of the Premises
by summary dispossession proceeding or other appropriate judicial action, in
which event Tenant shall immediately surrender possession of the Premises to
Landlord in accordance with Article 21 of this Lease. Landlord may thereupon
occupy the Premises or cause the Premises to be redecorated, altered, divided,
consolidated with other adjoining property, or otherwise prepared for
reletting, and may relet the Premises or any part thereof for a term or terms
to expire prior to, at the same time or subsequent to the original Expiration
Date, at such rent and upon such other conditions, which may include
concessions or free rent periods, as Landlord, in its reasonable discretion,
may determine, without relieving Tenant of any liability under this Lease or
otherwise affecting any such liability. In the event of a reletting by
Landlord, Landlord shall receive the rent therefor, applying the sums received
first to the payment of such expenses as Landlord may have incurred in
connection with the recovery of possession, preparing for reletting and the
reletting itself, including brokerage and attorneys fees, and then to the
payment of damages in amounts equal to the rent hereunder and to the cost and
expense of performance of the other covenants of Tenant under this Lease.
Tenant agrees to pay to Landlord damages equal to the rent and other sums
payable by Tenant under this Lease for the period which would otherwise have
constituted the unexpired portion of the term, reduced by the net proceeds of
the reletting, if any, collected by Landlord as ascertained from time to time.
Tenant shall in no event be entitled to any rents collected or payable under
any reletting, whether or not such rents exceed the rental reserved in this
Lease. Landlord shall use reasonable efforts to mitigate its damages in the
event Tenant is in default under this Lease.

               (ii) Permit Tenant to remain in possession of the Premises, in which event
this Lease shall continue in effect. Landlord shall be entitled to enforce all
of Landlord’s rights and remedies under this Lease, including the right to
receive the rent as it becomes due under this Lease.

               (iii) Pursue any other remedy now or hereafter available under the laws of
the jurisdiction in which the Premises is located.

          (c) The remedies available to Landlord herein specified are cumulative,
are not intended to be exclusive and shall not preclude Landlord from
exercising any other remedy or means of redress to which Landlord may be
lawfully entitled. In addition to other remedies provided in this Lease,
Landlord shall be entitled to restraint by injunction of any violation or
threatened violation by Tenant of any of the provisions of this Lease.
Landlord’s exercise of any right or remedy shall not prevent Landlord from
exercising any other right or remedy.

          (d) In the event Landlord is the prevailing party in any litigation,
Tenant agrees to pay, as additional rent, all attorneys’ fees and other
expenses incurred by Landlord in the enforcement of any of the agreements or
obligations of Tenant under this Lease.

          24. Service Fee; Interest; Legal Fees.

     Service Fee; Interest. (a) Tenant’s failure to pay promptly Base Rent,
additional rent or

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make other payments required under this Lease may cause Landlord to incur
unanticipated costs which are impractical to ascertain. Therefore, if Landlord
does not receive any payment of Annual Rent, Additional Rent or other sum due
from Tenant to Landlord within ten (10) days after it becomes due, Tenant shall
pay Landlord, as additional rent, a service fee equal to five (5%) percent
of the overdue amount (“Service Fee”).

          (b) Any amount owed by Tenant to Landlord which is not paid when due shall
bear interest at a rate equal to the lesser of (i) the maximum legal rate of
interest allowed by law or (ii) two (2) percentage points over the per annum
prime or base rate (the “Prime Rate”) announced from time to time by Citibank,
N.A., which interest shall be deemed Additional Rent hereunder, payable upon
demand by Landlord, commencing thirty (30) days after the due date of such
amount. The payment of Default Interest on such amounts shall not extend the
due date of any amount owed. Notwithstanding anything to the contrary
contained in this Section 24, Landlord shall not assess a Service Fee or
Default Interest as set forth in this Section for the first failure by Tenant
to timely pay the Base Rent or Additional Rent in any consecutive twelve (12)
month period provided that such payment is made by Tenant to Landlord no later
than ten (10) days after notice from Landlord to Tenant of such delinquency.

          25. Indemnification. (a) Tenant shall indemnify and hold harmless
Landlord, Landlord’s managing agent from and against all liability, claims or
costs, including legal fees and disbursements, arising from (i) Tenant’s use of
the Premises; (ii) any breach of this Lease by Tenant; (iii) any other act,
omission or negligence of Tenant, its contractors, licensees, agents, servants,
employees, invitees or visitors; or (iv) any injury to person or damage to
property occurring within the Premises, except to the extent caused by the
negligent acts or willful misconduct of Landlord. Tenant shall defend Landlord
against any such claim of a third party, with counsel reasonably acceptable to
Landlord.

          (b) Landlord shall indemnify and hold harmless Tenant from and against
all liability, claims or costs, including legal fees and disbursements, arising
from (i) any breach of this Lease by Landlord or (ii) any negligent act or
willful misconduct of Landlord, its contractors, agents, or employees, except
to the extent such claims or costs are caused by the negligence or willful
misconduct of Tenant. Landlord shall defend Tenant against any such claim of a
third party, with counsel reasonably acceptable to Tenant.

          (c) The provisions of this Article 25 shall survive the expiration or
earlier termination of this Lease.

          26. Landlord’s Right to Cure Tenant’s Default. If Tenant fails to make
any payment or perform any act on its part to be made or performed beyond any
applicable notice and cure period provide herein, then Landlord, without
waiving or releasing Tenant from such obligation, may make such payment or
perform such act on Tenant’s part, and the reasonable out-of-pocket costs
incurred by Landlord in connection with such payment or performance, together
with Default Interest thereon, shall be paid by Tenant to Landlord within
thirty (30) days of invoicing by Landlord as additional rent.

          27. Waiver of Liability. Notwithstanding anything in this Lease to the
contrary, Tenant acknowledges and agrees that Landlord shall not be liable for
any injury or damage to the business, equipment, merchandise or other property
of Tenant, resulting from any cause, including, but not limited to: (i) fire,
steam, electricity, water, gas or rain; or (ii) leakage, obstruction or other
defects of pipes, sprinklers, wires, plumbing, air conditioning, boilers or
lighting fixtures.

          28. Force Majeure. If either party is unable to perform any of its
obligations due to events beyond such party’s reasonable control, the time
provided to such party for performing such obligations shall be extended by a
period of time equal to the duration of such events, except for any monetary
obligation of either party. Events beyond a party’s reasonable control
include, but are not limited to, acts of God, war, civil commotion, labor
disputes, strikes, casualty, weather conditions, labor or material shortages,
or government regulation or restriction.

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          29. Landlord’s Default. In the event (a) Landlord fails to perform or
observe any of the covenants of this Lease on Landlord’s part to be performed
or observed within thirty (30) days after receiving notice from Tenant thereof
(or, if same cannot reasonably be cured within thirty (30) days, if Landlord
shall fail to promptly commence and diligently prosecute said cure to
completion), or (b) Landlord materially breaches any warranty or representation
under this Lease (any of (a) or (b) above being hereinafter referred to as a
“Landlord’s Default”), then Tenant, may, in its sole discretion:

          (i) as applicable, perform such obligation(s) of Landlord in accordance
with the provisions of this Lease on behalf of, and at the expense of Landlord
(provided that if, in Tenant’s reasonable judgment, an emergency (i.e., posing
imminent material harm to persons or property or imminent material disruption
to the normal conduct of business operations in the Premises) shall exist,
Tenant may, at its election, and without prior notice to Landlord, exercise
self-help); and/or

          (ii) bring suit for the collection of any amounts for which Landlord is in
default, seek injunctive relief, or seek specific performance for any other
covenant or agreement of Landlord. In the event that Landlord fails to make
such payment when due, it shall bear interest until paid at the Default
Interest Rate.

          If Landlord fails to reimburse Tenant under for any costs for the
performance of Landlord’s obligations as provided in subparagraph (i) above
within 30 days after Landlord’s receipt Tenant’s written demand therefor (and
accompanying documentation), Tenant may seek the entry of a judgment against
Landlord for the amount thereof, plus interest at the Default Interest Rate and
Tenant’s reasonable costs of collection (including reasonable attorney’s fees).
If Tenant thereafter obtains a judgment against Landlord from a court of
competent jurisdiction, and Landlord does not pay said judgment within ten (10)
days of its entry, Tenant shall have the right to offset the amount of such
judgment against rent hereunder.

          In addition to the remedies set forth in this Section, Tenant shall have
the right to terminate this Lease, provided that: (1) Landlord’s Default
materially interferes with the normal conduct of any business operations in the
Premises, (2) Landlord’s Default is not reasonably capable of being cured by
Tenant, and (3) Tenant gives notice of Landlord’s Default to any mortgagee of
whom Landlord shall have previously given Tenant notice (including its
address), and such mortgagee shall not have cured Landlord’s Default within
ninety (90) days after such notice is given (or, if such default cannot
reasonably be cured within ninety (90) days, such Mortgagee fails to promptly
commence and diligently prosecute said cure to completion). In the event
Tenant exercises its remedy to terminate this Lease, such termination shall
constitute Tenant’s exclusive remedy as to Landlord’s Default, except for
Landlord’s Default in the reimbursement of Tenant’s Allowance in which event
Tenant’s election to exercise its termination right hereunder shall not be to
the exclusion of any other remedies available to Tenant.

          30. Landlord’s Liability Limited. There shall be no personal liability of
Landlord or any member, partner, manager, stockholder, officer, director or
other principal, direct and indirect, comprising Landlord in connection with
this Lease. Tenant agrees to look solely to the interest of Landlord in the
Project (including, without limitation, all proceeds thereof and all rents to
become payable after the date of such default) for the collection of any
judgment or other judicial process requiring the payment of money by Landlord
in the event of any default or breach by Landlord with respect to this Lease or
in any way relating to the Premises. No other assets of Landlord or any
principal of Landlord shall be subject to levy, execution or other procedures
for the satisfaction of Tenant’s remedies. In the event of any sale,
conveyance, transfer or assignment of the Project or the Building by any
Landlord, said Landlord shall have no further obligations and liabilities
arising after said sale, conveyance, transfer or assignment, and the transferee
shall be deemed to have assumed the same.

          31.
Estoppel Statement; Financial Statement. (a) Upon
Landlord’s
request, Tenant shall execute, acknowledge and deliver to Landlord and/or
Landlord’s Mortgagee a written statement certifying: (i) the Commencement Date;
(ii) the Expiration Date; (iii) that this Lease is in full force and effect and
unmodified (or if modified, stating the modifications); (iv) the last date of

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payment of the Base Rent and other charges and the time period covered by
each payment; (v) that, to Tenant knowledge, Landlord is not in default under
this Lease (or, if Landlord is claimed to be in default, stating the nature of
the default); and (vi) such other matters as may be reasonably required by
Landlord or any Landlord’s Mortgagee. Tenant shall deliver such statement to
Landlord within ten (10) business days after Landlord’s request. Any such
statement may be given to and relied upon by any prospective purchaser or
encumbrancer of the Project.

          (b) Upon Tenant’s request, Landlord shall execute, acknowledge and
deliver to Tenant a written statement certifying: (i) the Commencement Date;
(ii) the Expiration Date; (iii) that this Lease is in full force and effect and
unmodified (or if modified, stating the modifications); (iv) the last date of
payment of the Base Rent and other charges and the time period covered by each
payment; (v) that, to Landlord’s knowledge, Tenant is not in default under this
Lease (or, if Tenant is claimed to be in default, stating the nature of the
default); and (vi) such other matters as may be reasonably required by Tenant.
Landlord shall deliver such statement to Tenant within ten (10) business days
after Tenant’s request.

          (c) If Landlord shall be unable to obtain financial information about
Tenant through public sources, then, within ten (10) days after Landlord’s
request, Tenant shall deliver to Landlord such financial statements as are
reasonably required to verify the net worth of Tenant. Any such statement may
be given by Landlord to any Landlord’s Mortgagee or prospective encumbrancer of
the Project, but otherwise shall be kept confidential by Landlord. Tenant
shall represent to Landlord that each such financial statement is a true and
accurate statement as of the date of such statement.

          32. Quiet Enjoyment. (a) Landlord covenants that as long as Tenant pays
the Base Rent and additional rent and performs its other obligations under this
Lease, Tenant shall peaceably and quietly have, hold and enjoy the Premises for
the term provided by this Lease, subject to the provisions of this Lease.

          (b) Landlord reserves to itself such access and utility easements over,
under and across the Premises as may be required by Landlord from time to time
in connection with the ownership, use or operation of any other property of
Landlord or any affiliated party of Landlord. No such easement shall
materially interfere with Tenant’s use of the Premises, the parking area or any
access roadway.

          33. Subordination; Attornment. (a) Subject to the non-disturbance
subordination provisions of paragraph (b), this Lease is subject and
subordinate to each and every ground lease or mortgage which may now or
hereafter encumber the Building or Project, and any renewals, modifications,
consolidations, replacements or extensions thereof.

          (b) Landlord agrees to obtain an Non-Disturbance and Attornment Agreement
(“NDA”), in a form acceptable to Tenant and any such mortgagee, from all
mortgagees of the Project that this Lease and Tenant’s occupancy shall not be
disturbed by any mortgage foreclosure action as long as Tenant shall not be in
default of its obligations hereunder beyond any applicable notice and cure
period. Landlord shall deliver a non-disturbance agreement from any existing
mortgagee within thirty (30) days of the execution of this Lease.

          (c) If Landlord’s interest in the Building or Project is acquired by any
mortgagee, or purchaser at a foreclosure sale, Tenant shall attorn to the
transferee of, or successor to, Landlord’s interest in the Project and
recognize such transferee or successor as landlord under this Lease. Such
transferee or successor shall not be liable for any act or omission of any
prior landlord (except for any default of a continuing nature) or be subject to
any offsets or defenses Tenant might have against any prior Landlord other than
any offsets or defenses expressly permitted in this Lease, or be bound by any
Base Rent which Tenant might have paid for more than the current month to any
prior landlord, or be liable for any security deposit under this Lease unless
actually transferred to such transferee or successor.

          (d) As long as any superior ground lease (with respect only to the
Adjoining

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Parking Lot) or mortgage affecting the Project shall exist, Tenant shall
not seek to terminate this Lease by reason of any act or omission of Landlord
unless Tenant shall have given written notice of such act or omission to all
lessor and mortgagees, and if any such lessor or mortgagee, as the case may be,
shall have notified Tenant of its intention to remedy such act or omission,
such lessor or mortgagee shall have the right, but not the obligation, to
remedy such act or omission within forty-five (45) days after such lessor’s or
mortgagee’s receipt of Tenant’s notice.

          (e) The foregoing provisions shall be self-operative and no further
instrument or act on the part of Tenant shall be necessary to effect the same.
Tenant shall nevertheless sign and deliver any document, in recordable form,
necessary or appropriate to evidence the subordination, attornment or agreement
above provided.

          34. Brokerage. Each party represents to the other that it did not deal
with any real estate broker in connection with this Lease, other than the real
estate broker whose identity is set forth in Section 1(h). The commission of
such broker shall be paid by the party as set forth in Section 1(h). Each
party shall indemnify and hold the other harmless from any claim for a
commission or other fee made by any broker with whom the indemnifying party has
dealt, other than the broker identified in Section 1(h).

          35. Security Deposit. Upon execution of this Lease, Tenant shall deposit
with Landlord the sum set forth in Section (g) as security for the performance
by Tenant of its obligations under this Lease (the “Security Deposit”). In
lieu of a cash Security Deposit, Tenant shall have the right to post such
Security Deposit in the form of a Letter of Credit in such form as may be
reasonable acceptable to Landlord. Landlord shall have the right to use the
Security Deposit to cure any default of Tenant hereunder, including, but not
limited to, payment of Base Rent, additional rent, or other debts of Tenant due
Landlord, or repair or restoration of the Premises. If Landlord uses any part
of the Security Deposit, Tenant shall restore the Security Deposit to its full
amount within thirty (30) days after Landlord’s demand therefor. Provided that
no monetary Event of Default has occurred as of the second (2nd) anniversary of
the Commencement Date, Landlord shall return any cash Security Deposit to
Tenant without interest on the second (2nd) anniversary of the Commencement
Date, or if such Security Deposit is in the form of a letter of credit, shall
return to Tenant the original letter of credit. If a monetary Event of Default
has occurred prior to the second anniversary of the Commencement Date, Landlord
shall return any cash Security Deposit to Tenant without interest at such time
as a period of two (2) years has elapsed without the occurrence of an Event of
Default, or if such Security Deposit is in the form of a letter of credit,
shall return to Tenant the original letter of credit. If Tenant shall not be
so entitled to the return of the Security Deposit as provided above, then
Landlord shall return the Security Deposit to Tenant without interest on the
date thirty (30) days after the surrender of the Premises by Tenant. Landlord
shall deliver the Security Deposit to the purchaser or other transferee of
Landlord’s interest in the Project in the event the Project is sold or
otherwise transferred, and upon such transfer Landlord shall be discharged from
any further liability with respect to the Security Deposit.

          36. Notices. All notices in connection with this Lease or the Premises
shall be in writing and shall be personally delivered, sent by overnight
delivery or sent by certified mail, return receipt requested, postage prepaid.
Notices to Landlord shall be delivered to the address specified in Section
1(b). Notices to Tenant shall be delivered to the address specified in Section
1(c). All notices shall be effective upon delivery or attempted delivery in
accordance with this provision. Either party may change its notice address
upon written notice to the other party given in accordance with this provision.

          37. Memorandum of Lease. Tenant shall not record this Lease. However,
either Landlord or Tenant may require that a memorandum of this Lease executed
by both parties be recorded. Such memorandum shall include such portions of
this Lease as either party may reasonably require, but shall not specify the
amount of Base Rent payable hereunder.

          38. Improvement Allowance. Prior to commencement of its regular business
operations, Tenant shall have the right to make interior and exterior
improvements and alterations to the Premises of a nature and design necessary
for the improvement of the Premises, excluding

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Tenant’s trade fixtures, equipment, furniture and personal property, but
including all wiring cabling, telecommunications equipment and back-up
generator (the “Tenant’s Work”). Tenant shall not remove the Tenant’s Work at
the expiration of the Lease. Prior to commencing such Tenant’s Work, Tenant
shall submit plans and specifications therefor in reasonable detail to Landlord
for its approval, which approval shall not be unreasonably withheld, condition
or delayed. In the event Landlord fails to approve or deny its approval within
ten (10) business days after submission by Tenant to Landlord, Tenant shall
have the right to thereafter deliver notice to Landlord advising Landlord of
its failure to approve or deny the plans and specifications, which notice shall
expressly state “IN THE EVENT LANDLORD FAILS TO APPROVE OR DENY ITS APPROVAL TO
THE REQUESTED ALTERATIONS WITHIN FIVE (5) BUSINESS DAYS FROM THE DATE OF THIS
NOTICE, LANDLORD’S CONSENT SHALL BE DEEMED GRANTED”. In the event that in the
event Landlord fails to approve or deny its approval within five days from the
date of such notice, Landlord’s approval shall be deemed granted. Tenant shall
obtain all necessary governmental consents and permits for the Tenant’s Work.
All materials shall be new and both workmanship and materials shall be in good
condition and in compliance with applicable laws. Tenant shall comply with the
requirements of Section 12 in performing the Tenant’s Work. Landlord shall
provide Tenant with an improvement allowance (“Tenant Allowance”) in the amount
of up to $7,000,000.00 for the performance the Tenant’s Work. The Tenant
Allowance shall be paid by Landlord to Tenant within thirty (30) days following
the date that (a) Tenant obtains a certificate of occupancy for Tenant’s Work
and (b) Tenant delivers to Landlord of (i) a statement certified by the chief
financial officer of Tenant showing in reasonable detail the actual amount
spent for the performance of Tenant’s Work; (ii) a description of the work
performed; (iii) and a lien waiver from Tenant’s general contractor and all
subcontractors having a contract in excess of $100,000.00 (the “Reimbursement
Documentation”). If Tenant fails to utilize the entire Tenant Allowance of
$7,000,000.00 as of the date that is the earlier (a) sixty (60) days after a
final or temporary certificate of occupancy is issued for all of Tenant’s Work
or (b) the date Tenant delivers to Landlord the Reimbursement Documentation,
then the Base Rent shall be adjusted as set forth in the Rent Rider, but Tenant
shall be deemed to have waived any right to utilize the balance of said sum.
Tenant shall reimburse Landlord for all reasonable out-of-pocket expenses
incurred by Landlord in connection with its review of the detailed plans and
specifications. Tenant shall also provide to Landlord for its approval the
identity of the contractor and architect Tenant proposes to employ to construct
the Tenant’s Work. Tenant agrees that Landlord or its affiliates shall have
the right to bid upon the Tenant’s Work, provided that Tenant shall have no
obligation to award such bid to Landlord. If Landlord fails to reimburse
Tenant under this Section 38 within 30 days after the date on which a
certificate of occupancy is issued for Tenant’s Work and Landlord’s receipt
Tenant’s documentation as provided in this Section 38, such unpaid amount shall
accrue interest at the Default Interest Rate, and in addition to all other
remedies which Tenant may have either under this Lease or as permitted at law
or in equity, Tenant shall have the right to offset any such unpaid amount and
accrued interest against rent hereunder.

          39. Right of First Refusal. Landlord does hereby grant to Tenant a right
of first refusal, as more particularly hereinafter defined, during the Term, to
purchase the Project from Landlord, such right of first refusal in favor of
Tenant shall be conditioned upon this Lease shall then be in good standing and
that the Tenant shall not as of the date of exercise by it of the right of
first refusal herein granted to it or as of the closing date with respect to
the exercise of such right of first refusal then be in material, uncured
default of any of its obligations hereunder beyond applicable grace periods and
that the Tenant named in Section 1(c) of this Lease shall not have assigned the
Lease, except to an Affiliate. Landlord shall, prior to entering into any
agreement for the sale of all of Project (Landlord to have no right to sell
less than all of the Project so long as Tenant shall have the right of first
refusal granted herein), first notify Tenant of all of the terms and conditions
pursuant to which Landlord is willing to sell the Project, said notice to be
accompanied by a copy of the firm, written offer from a third party pursuant to
which the proposed sale is to be made. Upon receipt of such notice, Tenant
shall have a period of ten (10) business days from such receipt within which to
elect, by notice to Landlord, whether or not to purchase Project upon the same
terms and conditions as are set forth in such notice. In the event Tenant fails
to notify Landlord of Tenant’s election to purchase as aforesaid within the ten
(10) business day period, Tenant shall be deemed to have elected not to
purchase Project. In the event that Tenant elects to purchase, Tenant and
Landlord shall

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proceed to close title with respect to Project in accordance with the
terms and conditions set forth in the offer annexed to Landlord’s aforesaid
notice and on the closing date therein specified (‘time being of the essence”).
In the event Tenant elects not to purchase, either by notice to Landlord or
by Tenant’s failure to give any notice within the period specified, Tenant
shall thereafter have no further right of first refusal with respect to any
subsequent transfer, and Landlord shall have the right to sell Project for a
purchase price no less than 95% of the purchase price contained in Landlord’s
notice and otherwise on substantially the same terms and conditions as set
forth in Landlord’s notice free and clear of Tenant’s within defined right of
first refusal; provided, however, that if the closing of title to the third
party that issued the firm, written offer does not occur within the time period
required for closing under Landlord’s notice, as may be reasonably extended,
Tenant’s right of first refusal shall be reinstated. Notwithstanding the
foregoing, in the event of a transfer of the Project other than pursuant to an
arms-length sale to a bona-fide third party that is not an affiliated with
Landlord, Tenant’s right of first refusal shall survive such transfer.

          40. Option to Purchase. Provided that this Lease shall then be in good
standing and that the Tenant shall not as of the date of exercise by it of the
option herein granted to it then be in material, uncured default of any of its
obligations hereunder beyond applicable grace periods and that the Tenant named
in Section 1(c) of the Lease shall not have assigned the Lease, except to an
Affiliate, Landlord does hereby grant to Tenant the right and option to
purchase the Project on the Closing Date set forth below for the purchase price
set forth below, upon full compliance by Tenant with all of the conditions and
requirements set forth in the within Section.

          (a) Conditions of Exercise of Option and Establishment of Closing Date

          The within option shall be exercised, if at all, only in the following
manner:

          Tenant shall notify Landlord by certified or registered mail of its
intention to exercise the within option, which notice shall be accompanied by
Tenant’s check for good funds in the sum of $250,000 (the “Deposit”), which
Deposit shall be maintained in an interest bearing account and which Deposit
and any interest accrued thereon shall be allowed as a credit to Tenant against
the purchase price at closing. Except as otherwise herein provided, said
notice must be received by Landlord not earlier than the first day of the
eleventh Lease Year of the Term hereof and not later than the later of: (a) the
last day of the eleventh Lease Year of the Term hereof or (b) thirty (30) days
after Tenant receives notice from Landlord of Tenant’s option right to purchase
the Project (“Purchase Option Reminder Notice”). The Purchase Option Reminder
Notice may not be sent earlier than thirty days prior to the last day of the
eleventh Lease Year of the Term hereof. The last day of the twelfth Lease Year
of the Term shall be deemed to be the Closing Date. In the event that the
Closing Date shall be a Sunday or a legal holiday, then and in such event the
date of closing shall be postponed until the next following business day. The
Closing Date and the last date for the exercise of Tenant’s option to purchase
hereunder shall each be a “time of essence date”.

          The closing shall take place at the offices of Landlord between 10:00 A.M.
and 4:00 P.M. or at such other time and place as shall be mutually satisfactory
to the parties. Interest on any institutional mortgage to which the conveyance
is subject shall be adjusted and apportioned between the parties as of the date
of closing. In the event that the Project shall be subject to the lien of a
bona fide first institutional mortgage, the Landlord shall have the right and
option to convey the Project subject to the lien of such mortgage, and Tenant
shall assume all of the obligations arising under the note or other obligations
secured by said mortgage from and after the said closing, and the Tenant shall
be allowed a credit in the amount of the then existing unpaid principal balance
of such mortgage. Notwithstanding the foregoing, Tenant shall have the right
to require the Landlord to deliver the Premises free and clear of any such
first institutional mortgage, provided that Tenant shall pay all prepayment
premiums charged by such first institutional mortgagee in connection with the
prepayment of any such mortgage Landlord shall provide Tenant with copies of
the Loan Documents so that Tenant may review same and may confirm the amount of
any prepayment premium. At the said closing of title, Landlord shall pay any
fee required by the holder of any first institutional mortgage in order to
permit the transfer of title to take place.

          Landlord shall furnish and Tenant shall accept at closing, as conclusive
evidence of

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the amount of any transfer fee or prepayment fee set forth therein, a
letter or certification from the holder of any mortgage affecting the Project
evidencing the amount of the unpaid principal balance and interest thereon, the
amount of any fee required to permit the transfer, and the date of maturity
thereof and the rate of interest thereon.

     Upon the exercise of the Purchase Option, Tenant shall have a period of
thirty (30) days thereafter to confirm all physical, environmental and other
matters regarding the Property. Landlord agrees to provide all information and
permit all investigations as may be reasonably required by Tenant for the
purpose of conducting Tenant’s due diligence investigation, including, but not
limited to, all other leases or other occupancy agreements for the Project, all
mortgage documents, all environmental reports, structural and other engineering
reports relating to the improvements, all plans and surveys, and all existing
service agreements. Tenant shall have the right, in Tenant’s sole discretion,
to withdraw its exercise of its Purchase Option no later than the thirtieth
(30th) day following the date of Tenant’s notice exercising its Purchase
Option.

          (b) Documents to be Delivered at Closing:

          Title to the Project shall be conveyed by seller’s Bargain and Sale Deed
with covenant against Grantor’s Acts conveying to Tenant the fee simple of the
Project free of all encumbrances except:

          (i) those items of exception appearing on the Permitted Title Exceptions
Rider; and

          (ii) any institutional mortgage referred to above (and all related loan
documentation), subject to which the Landlord has the right to convey title to
Tenant; and

          (iii) drainage and utility easements, provided such easement shall not
unreasonably interfere with the use and operation of the Project; and

          (iv) liens, encumbrances or title defects imposed or consented to in
writing by Tenant.

All of the foregoing items are herein referred to as the Permitted Exceptions.

Additional closing documents include an Affidavit of Title in standard form
(subject to the foregoing encumbrances), FIRPTA certificate, assignment of
leases, bill of sale, assignment of all zoning and land use approvals,
warranties, if any, and other general intangibles relating to the Project, as
well as fee title to the portion of the lot upon which the Adjoining Lot
Parking Spaces are located or an irrevocable easement upon such lot permitting
the exclusive use, of the Adjacent Parking Space.

     The exercise by Tenant of its right to purchase the Project shall not
otherwise affect this Lease or the relationship of the parties as Landlord and
Tenant hereunder and Tenant shall continue to perform all obligations and to
pay all rentals due hereunder until the closing of title. Such relationship
shall continue until title to the Project shall have closed and until the full
consideration for the purchase price shall have been paid. Tenant shall not in
any event be deemed to be a vendee in possession of the Project; nor shall the
exercise by Tenant of any such right entitle Tenant to any reduction in Base
Rent or additional rent.

          (c) Purchase Price:

          The purchase price to be paid by Tenant to Landlord in connection with the
purchase of the Project shall be paid by wire or federal funds or bank check.

          The purchase price shall be the greater of (i) the fair market value of
the Project, or (ii) the sum which shall be the greater of (1) $13,000,000.00
or (2) the sum (which sum shall in no event exceed $17,000,000) determined by
multiplying the sum of $13,000,000.00 by a fraction, the numerator of which
shall consist of the level of the “Index” (s hereinafter defined) existing on
the last day of the eleventh Lease Year and the denominator of which shall
consist of the level of the

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“Index” existing as of the date of execution hereof. The term of the “Index”
as employed herein shall mean and shall refer to the Revised Consumer Price
Index, All Urban Consumers (CPI-U), for the New York-Northern New Jersey-Long
Island, NY-NJ-CT Area, All Items, (1967 = 100) of the U.S. Bureau of Labor
Statistics of the U.S. Department of Labor. In the event that the Index is no
longer published or issued, such other index as is then generally recognized
and accepted as a basis for wage negotiations shall be used and employed in the
place and stead thereof. In the event the Index shall hereafter be converted
to a different standard reference base or otherwise revised, the determination
shall be made with the use of such conversion factor, formula or table for
converting the Index as may be published by the Bureau of Labor Statistics or,
if said Bureau shall not publish the same, then with the use of such conversion
factor, formula or table as may be published by Prentice Hall, Inc., or,
failing such publication, by any other nationally recognized publisher of
similar statistical information.

          The “fair market value of the Project” shall be determined as follows:

     Following receipt by Landlord of Tenant’s notice of Tenant’s exercise of
the option to purchase, Landlord shall notify Tenant of the “fair market value”
of the Project (including the use of the Adjoining Lot Parking Spaces) as of
the Closing Date. The fair market value of the Project shall include the value
of all Tenant Work or other Tenant improvements or alterations. If Tenant
disagrees with Landlord’s determination, Tenant shall, within thirty (30) days
after receipt of Landlord’s determination, notify Landlord that Tenant disputes
Landlord’s determination and shall submit to Landlord with such notice Tenant’s
good faith determination of the fair market value . In the event Tenant
notifies Landlord that Tenant disputes Landlord’s determination, then Landlord
and Tenant shall attempt to agree upon the fair market value. If Landlord and
Tenant fail to reach agreement within thirty (30) days following Tenant’s
notice to Landlord disputing Landlord’s determination (“Outside Purchase Option
Agreement Date”), then each party shall, within fifteen (15) days of the
Outside Purchase Option Agreement Date, mutually agree upon a Qualified
Appraiser and each shall submit to such Qualified Appraiser within twenty (20)
days of the Outside Purchase Option Agreement Date its sealed final
determination of the fair market value (provided that Landlord’s sealed final
determination shall in no event be greater than the fair market value set forth
in Landlord’s determination, and Tenant’s sealed final determination shall in
no event be less than Tenant’s determination as set forth in Tenant’s original
notice disputing Landlord’s original determination). Each of the Landlord and
Tenant may submit to the independent Qualified Appraiser documentation in
support of its determination of fair market value. If the parties are unable
to agree upon such independent Qualified Appraiser, either party may request
the American Arbitration Association in Somerset, New Jersey, to appoint such
independent Qualified Appraiser which request shall be made no later than
fifteen (15) days after the Outside Purchase Option Agreement Date. The
independent Qualified Appraiser shall, within thirty (30) days of his/her
appointment, make a determination of fair market value, which determination
shall be binding upon both Landlord and Tenant. The parties shall share
equally in the cost of any independent Qualified Appraiser. Both Landlord and
Tenant agree to be irrevocably bound by the final decision in arbitration,
provided that Tenant have the right to withdraw Tenant’s exercise of its
purchase option within ten (10) days of a final determination of the fair
market value.

          41. Miscellaneous. (a) The failure of either party to insist on strict
performance of any provision of this Lease, or to exercise any right contained
herein, shall not be construed as a waiver of such provision or right in any
other instance. All amendments to this Lease shall be in writing and signed by
both parties. No act or thing done by Landlord, its employees or agents,
including the delivery of any keys to such parties, shall be deemed an
acceptance of a surrender of this Lease, and no agreement to accept or
surrender shall be valid unless signed by Landlord. The receipt by Landlord of
any rent with knowledge of a breach of this Lease shall not be deemed a waiver
thereof.

          (b) The captions in this Lease are intended to assist the parties in
reading this Lease and are not a part of the provisions of this Lease.
Whenever required by the context of this Lease, the singular shall include the
plural and the plural shall include the singular. The masculine, feminine and
neuter genders shall each include the other.

-23-

 

          (c) Landlord and Tenant hereby waive trial by jury in any legal proceeding
brought by either of them against the other with respect to any matters arising
out of or in any way connected with this Lease or the Premises.

          (d) The laws of the state in which the Project is located shall govern
this Lease.

          (e) If Tenant is a corporation, limited liability company or partnership,
each person signing this Lease on behalf of Tenant represents that he has full
authority to do so and that this Lease binds the corporation, limited liability
company or partnership, as the case may be. If Landlord is a corporation,
limited liability company or partnership, each person signing this Lease on
behalf of Landlord represents that he has full authority to do so and that this
Lease binds the corporation, limited liability company or partnership, as the
case may be.

          (f) Tenant shall have the exclusive right to use the roof of the Building
(subject only to Landlord’s right to access the roof for the performance of
Landlord’s obligations hereunder) to erect or place one or more
telecommunications dish antenna or similar telecommunications equipment (the
“Telecommunications Equipment”) on the roof of the Building, in accordance with
the following provisions, which Telecommunications Equipment shall be designed
in accordance with the specifications to be provided by Tenant and approved by
Landlord with respect to the size, weight, location, screening, mounting and
connection of the Telecommunications Equipment, such approval not to be
unreasonably withheld, conditioned or delayed, and any rejection by Landlord
shall specify its basis for such rejection. Upon approval of Tenant’s plans
and specifications, the Telecommunications Equipment shall be installed by
Tenant at Tenant’s expense, subject to reasonable supervision by Landlord with
respect thereto. Subsequent to the installation of the Telecommunications
Equipment, Tenant shall comply with all applicable laws and keep the Premises,
Building and Land free and clear from liens arising from or related to Tenant’s
installation. Tenant shall be responsible for obtaining any requisite
licenses, approvals or permits that may be required for the installation and
use of any Telecommunications Equipment and the related support systems or
operation of any equipment served thereby. Landlord and Tenant shall each
reasonably cooperate with the other in procuring such licenses, approvals and
permits. Upon termination or expiration of this Lease, Tenant shall not remove
any Telecommunications Equipment installed by it as part of Tenant Work. In
the event Tenant elects to remove any Telecommunications Equipment that is not
installed as part of Tenant Work, Tenant shall restore any damage caused by
such removal. Tenant agrees that any such Telecommunications Equipment shall
not be installed in any manner which would void or invalidate any roof
warranties or bonds obtained by Landlord with respect to the roof at the
Premises. Tenant shall cause the satellite system to be installed by a roofing
contractor selected by Tenant and reasonably approved by Landlord, at Tenant’s
cost, and in accordance with all applicable laws, rules and regulations.
Additionally, Tenant shall defend, indemnify, and hold Landlord harmless from
and against any claims, costs or expenses incurred by Landlord as a result of
such installation. Tenant shall be solely responsible for all roof leaks
caused by the installation and maintenance of the Telecommunications Equipment.

          (g) Subject to compliance with applicable laws, Tenant shall have the
right, to install back-up generator(s) for the exclusive use of Tenant
(“Tenant’s Generator”) on the Property in such location as may be approved by
Landlord (which approval shall not be unreasonably withheld, delayed or
conditioned and in accordance with the provisions of this paragraph. Tenant
shall furnish detailed plans and specifications for each Tenant’s Generator,
the associated fuel tank (which shall be located above-ground) or other fuel
supply source required for the operation of Tenant’s Generator (“Tenant’s
Tank”) and all wires, lines, pipes conduits and other apparatus in connection
with Tenant’s Generator to Landlord for its prior approval, which approval
shall not be unreasonably withheld, conditioned, or delayed. Upon approval of
Tenant’s plans and specifications, Tenant shall have the right to install
Tenant’s Generator and Tenant’s Tank, at Tenant’s expense subject to Landlord’s
reasonable supervision. Landlord shall not charge any supervisory fee, review
charge or surcharge in connection with this installation. Tenant shall comply
with all applicable laws in connection with the installation and maintenance of
Tenant’s Generator, Tenant’s Tank and all lines, wiring, pipes, conduits, other
apparatus in connection therewith and Tenant shall keep the Premises, Building
and Land free and clear from liens arising from or related to the installation,
maintenance and repair thereof. In all other cases, Tenant shall be
responsible for procuring whatever approvals, licenses or

-24-

 

permits may be required for the installation and use of Tenant’s Generator
and the related support systems or operation of any equipment served thereby.
Landlord agrees that, at no cost to Landlord, it shall cooperate with Tenant in
Tenant’s pursuit of any such approvals, licenses, or permits, which cooperation
shall include executing any necessary owner’s consent forms. Upon termination
or expiration of this Lease, Tenant shall not remove Tenant’s Generator and
any fuel tank. Landlord and Tenant shall cooperate in the design and
allocation of routing for any Tenant’s Generator.

          (h) This Lease is binding upon any party who legally acquires any rights
or interest in this Lease from Landlord or Tenant; provided, however, Landlord
shall have no obligation to Tenant’s successor unless the interest of Tenant’s
successor in this Lease is acquired in accordance with Section 18.

          (i) The submission of this Lease to Tenant shall not be deemed to be an
offer and shall not bind either party until duly executed by Landlord and
Tenant.

          (j) This Lease may be executed in counterparts, and, when all counterpart
documents are executed, the counterparts shall constitute a single binding
instrument.

          (k) A determination by a court of competent jurisdiction that any
provision of this Lease or any part thereof is illegal or unenforceable shall
not invalidate the remainder of this Lease or such provision, which shall
continue to be in effect.

          (l) Tenant shall have the right to the exclusive use of the 400 parking
areas, walkways, sidewalks and driveways shown on the Plot Plan Rider, except
for those areas designated as “Excepted.”

          (n) This Lease contains the entire agreement between the parties and
supercedes all prior understandings, if any, with respect thereto. This Lease
shall be construed without any presumption against the party causing this Lease
to be drafted.

          (o) Tenant hereby (a) irrevocably consents and submits to the jurisdiction
of any Federal, state, county or municipal court sitting in the State of New
Jersey in respect to any action or proceeding brought therein by Landlord
against Tenant concerning any matters arising out of or in any way relating to
this Lease; (b) irrevocably waives personal service of any summons and
complaint and consents to the service upon it of process in any such action or
proceeding by mailing of such process to Tenant at the address set forth
herein; (c) agrees that the laws of the State of New Jersey shall govern in any
such action or proceeding and waives any defense to any action or proceeding
granted by the laws of any other country or jurisdiction unless such defense is
also allowed by the laws of the State of New Jersey; and (d) agrees that any
final judgment rendered against it in any such action or proceeding shall be
conclusive and may be enforced in any other jurisdiction by suit on the
judgment or in any other manner provided by law. Tenant further agrees that
any action or proceeding by Tenant against Landlord in respect to any matters
arising out of or in any way relating to this Lease shall be brought only in
the State of New Jersey.

          (p) Landlord hereby expressly subordinates any lien granted to Landlord,
statutory, contractual or otherwise, with respect to Tenant’s personal
property, trade fixtures, inventory or stock-in-trade in or on the Demised
Premises for non-payment of Base Rent, additional rent, default by Tenant or
any other reason whatsoever. Landlord shall reasonably cooperate with any
lender of Tenant in executing and delivering such lender’s standard form of
Landlord’s subordination of lien.

          (q) Landlord acknowledges that the Adjacent Parking Spaces are located on
a parcel adjacent to the Property that is not presently owned by Landlord, but
is ground leased to North Jersey Green 502 LLC, an affiliate of Landlord
(“Landlord’s Affiliate”), with the option for Landlord’s Affiliate to acquire
fee title to the Adjacent Parcel. Landlord has provided to Tenant a true and
complete copy of the existing ground lease and option to purchase. Landlord
covenants that, prior to the Rent Start Date, Landlord shall either (i) acquire
fee title to the Adjacent Parcel, (ii) cause the lease to be assigned from
Landlord’s affiliate to Landlord and extend the lease for the

-25-

 

Adjacent Parcel for a term co-terminus with the Term hereof, or (iii)
obtain an easement for the exclusive use of the Adjacent Parking Spaces.
Notwithstanding anything contained in this Lease, Landlord shall be solely
responsible for, and Tenant shall have not obligation to pay or reimburse
Landlord for, any ground rent, purchase price, easement consideration or other
cost or expense in connection with the acquisition of the Adjacent Parcel or
any rights therein. Landlord shall be solely responsible for all costs
incurred for the construction of the Additional Parking Spaces and any other
improvements constructed by Landlord upon the Adjacent Parcel. In the event
Landlord continues to lease the Adjacent Parcel, Landlord shall obtain for the
benefit of Tenant a non-disturbance, recognition, and attornment agreement from
the owner of the Adjacent Parcel in form reasonably acceptable to Tenant and
the fee owner of such lot, pursuant to which Tenant shall continue to maintain
its right to the exclusive use of the Adjacent Parking Spaces notwithstanding
any default by Landlord under such ground lease or any early termination of
such ground lease.

          (r) Landlord covenants that (i) Landlord shall provide Tenant with not
less than 40 parking spaces on the Adjacent Lot in a mutually acceptable
location reasonably proximate to the Building (which area need not be paved but
will have a gravel base if necessary for reasonable use) on or before the date
upon which a certificate of occupancy is issued for Tenant’s Work, and (ii)
shall substantially complete the Adjacent Parking Space by June 30, 2005.
Landlord’s failure to provide the parking by the dates as provided above shall
immediately constitute a Landlord’s Default, and shall permit Tenant to
immediately avail itself of the remedies as set forth in this Lease upon the
occurrence of a Landlord’s Default.

          (s) Tenant shall have the right at any time during the Lease Term in which
Tenant leases the entire Building, upon thirty (30) days’ prior written notice
to Landlord to elect to furnish any of the services or utilities for the
Premises that Landlord is required to furnish pursuant to this Lease for which
Tenant is responsible for the cost thereof.

          The riders enumerated in Section 1(i) are attached hereto and made a part
of this lease as fully as if set forth herein at length. The terms used in the
riders have the same meanings as set forth in the Lease. The provisions of a
rider shall prevail over any provisions of this Lease which are inconsistent or
conflict with the provisions of the rider.

          (q) Landlord represents to Tenant that:

               (1) Landlord is the record fee owner of the Project, other than the
Adjacent Parcel. The Adjacent Parcel is presently leased to Landlord’s
Affiliate, and Landlord has the full right and authority to construct the
Adjoining Parking Spaces upon the Adjacent Parcel and to grant to Tenant the
right to use the Adjoining Parking Spaces on an exclusive basis;

               (2) To the best of Landlord’s knowledge, and in reliance upon the owner’s
title insurance policy no. 72107-724083 issued by Chicago Title Insurance
Company dated August 2, 2002, a copy of which has been supplied to Tenant, the
Property is free and clear of all encumbrances and restrictions, except those
described in the Permitted Title Exceptions Rider;

-26-

 

               (3) Landlord and each person executing this Lease on behalf of Landlord
(or in any representative capacity) have full right and lawful authority to
enter into this Lease;

     IN WITNESS WHEREOF, the parties hereby have duly executed this Lease as of
the date set forth in Section 1(a).

	 	 	 	 	 	 	 	 	 
	 	 	LANDLORD:
	 
	 	 	 	 	 	 	 	 
	 	 	NORTH JERSEY GREEN 501 LLC
	 	 	a New Jersey limited liability company
	 
	 	 	 	 	 	 	 	 
	 	 	BY:	 	North Jersey Green Associates LLC, a New Jersey limited liability company, its Sole Member
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	By:	 	North Jersey Green Pond LLC, a Delaware limited liability company, co-managing member
	 
	 	 	 	 	 	 	 	 
	WITNESS:
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	/s/ Gladys Spong

	 	 	 	 	 	By:
	 	/s/ Daniel Cohen
	
 

	 	 	 	 	 	 	 	
 
	

	 	 	 	 	 	 	 	Daniel Cohen, Member
	 
	 	 	 	 	 	 	 	 
	ATTEST:	 	PARTY CITY CORPORATION
	 
	 	 	 	 	 	 	 	 
	/s/ Joseph J. Zepf	 	BY:	 	/s/ Richard H. Griner

	
 	 	 	 	
 

The undersigned, as the current lessee of the Adjacent Parcel, hereby executes
this Lease to acknowledge and confirm Tenant’s rights hereunder for the
exclusive use of the Adjacent Parking Spaces, and shall recognize and be bound
by the provisions of Sections 1(d), 39, 40, 41(g) and 41 (h) with respect to
the Adjacent Parking Spaces. Landlord’s Affiliate’s obligations hereunder with
respect to the Adjacent Parking Spaces shall continue until such time as
Landlord’s Affiliate conveys to Landlord its entire interest in the portion of
the Adjoining Parcel upon which the Adjacent Parking spaces are located.

	 	 	 	 	 	 	 	 	 
	 	 	NORTH JERSEY GREEN 502 LLC
	 	 	a New Jersey limited liability company
	 
	 	 	 	 	 	 	 	 
	 	 	BY:	 	North Jersey Green Associates LLC, a New Jersey limited liability company, its Sole Member
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	By:	 	North Jersey Green Pond LLC, a Delaware limited liability company, co-managing member
	 
	 	 	 	 	 	 	 	 
	WITNESS:
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	/s/ Gladys Spong

	 	 	 	 	 	By:
	 	/s/ Daniel Cohen
	
 

	 	 	 	 	 	 	 	
 
	

	 	 	 	 	 	 	 	Daniel Cohen, Member

-27-

 

RENT RIDER

	 	 	 
	Date of Lease:

	 	September 16, 2004
	 
	 	 
	Landlord:

	 	North Jersey Green 501 LLC
	 
	 	 
	Tenant:

	 	Party City Corporation

          1 Base Rent. The Base Rent payable by Tenant to Landlord during the
Term shall be at the annual amounts and for the periods and be payable in the
monthly installments as follows:

	 	 	 	 	 	 	 	 	 
	 	 	Monthly	 	Annual
	Period
	 	Installment
	 	Amount

	Lease Years 1-6

	 	$	136,978.42	 	 	$	1,643,741.00	 
	Lease Years 7-12

	 	$	145,811.75	 	 	$	1,749,741.00	 

          2. Adjustment. The Base Rent set forth herein has been calculated upon
the assumption that the Tenant has utilized the full Tenant Allowance of
$7,000,000. Prior to the Rent Start Date, Tenant shall deliver to the Landlord
a notice of the actual amount of the Tenant Allowance to be utilized by Tenant.
If Tenant elects to use less than $7,000,000.00, then the Base Rent shall be
adjusted as follows (Tenant hereby acknowledges that, Tenant may only reduce
the Tenant Allowance by a number evenly divisable by $100,000.00):

	 	 	 	 	 	 	 	 	 
	Tenant	 	Monthly Rent	 	Yearly Rent
	Allowance
	 	Reduction
	 	Reduction

	$6,900,000
	 	$	980.11	 	 	$	11,761.36	 
	$6,800,000
	 	$	1,960.23	 	 	$	23,522.71	 
	$6,700,000
	 	$	2,940.34	 	 	$	35,284.07	 
	$6,600,000
	 	$	3,920.45	 	 	$	47,045.43	 
	$6,500,000
	 	$	4,900.57	 	 	$	58,806.78	 
	$6,400,000
	 	$	5,880.68	 	 	$	70,568.14	 
	$6,300,000
	 	$	6,860.79	 	 	$	82,329.50	 
	$6,200,000
	 	$	7,840.90	 	 	$	94,090.86	 
	$6,100,000
	 	$	8,821.02	 	 	$	105,852.21	 
	$6,000,000
	 	$	9,801.13	 	 	$	117,613.57	 
	$5,900,000
	 	$	10,781.24	 	 	$	129,374.93	 
	$5,800,000
	 	$	11,761.36	 	 	$	141,136.28	 
	$5,700,000
	 	$	12,741.47	 	 	$	152,897.64	 
	$5,600,000
	 	$	13,721.58	 	 	$	164,659.00	 
	$5,500,000
	 	$	14,701.70	 	 	$	176,420.35	 
	$5,400,000
	 	$	15,681.81	 	 	$	188,181.71	 
	$5,300,000
	 	$	16,661.92	 	 	$	199,943.07	 
	$5,200,000
	 	$	17,642.04	 	 	$	211,704.42	 
	$5,100,000
	 	$	18,622.15	 	 	$	223,465.78	 
	$5,000,000
	 	$	19,602.26	 	 	$	235,227.14	 
	$4,900,000
	 	$	20,582.37	 	 	$	246,988.50	 
	$4,800,000
	 	$	21,562.49	 	 	$	258,749.85	 
	$4,700,000
	 	$	22,542.60	 	 	$	270,511.21	 
	$4,600,000
	 	$	23,522.71	 	 	$	282,272.57	 
	$4,500,000
	 	$	24,502.83	 	 	$	294,033.92	 
	$4,400,000
	 	$	25,482.94	 	 	$	305,795.28	 
	$4,300,000
	 	$	26,463.05	 	 	$	317,556.64	 

-28-

 

	 	 	 	 	 	 	 	 	 
	Tenant	 	Monthly Rent	 	Yearly Rent
	Allowance
	 	Reduction
	 	Reduction

	$4,200,000
	 	$	27,443.17	 	 	$	329,317.99	 
	$4,100,000
	 	$	28,423.28	 	 	$	341,079.35	 
	$4,000,000
	 	$	29,403.39	 	 	$	352,840.71	 
	$3,900,000
	 	$	30,383.51	 	 	$	364,602.06	 
	$3,800,000
	 	$	31,363.62	 	 	$	376,363.42	 
	$3,700,000
	 	$	32,343.73	 	 	$	388,124.78	 
	$3,600,000
	 	$	33,323.84	 	 	$	399,886.14	 
	$3,500,000
	 	$	34,303.96	 	 	$	411,647.49	 
	$3,400,000
	 	$	35,284.07	 	 	$	423,408.85	 
	$3,300,000
	 	$	36,264.18	 	 	$	435,170.21	 
	$3,200,000
	 	$	37,244.30	 	 	$	446,931.56	 
	$3,100,000
	 	$	38,224.41	 	 	$	458,692.92	 
	$3,000,000
	 	$	39,204.52	 	 	$	470,454.28	 

     Landlord and Tenant shall execute an agreement which shall confirm any
such reduction in the Base Rent.

	 	 	 
	

	 	Initials:
	 
	 	 
	

	 	Landlord
	

	 	 
	

	 	
 
	 
	 	 
	

	 	Tenant
	

	 	 
	

	 	
 

-29-

 

EXTENSION OPTIONS RIDER

	 	 	 
	Date of Lease:

	 	September 16, 2004
	 
	 	 
	Landlord:

	 	North Jersey Green 501 LLC
	Tenant:

	 	Party City Corporation
	Premises:

	 	Portion of 25 Green Pond Road, Rockaway, New Jersey

          1. Grant of Options. Subject to the provisions of Section 3 of this
Rider, Landlord hereby grants to Tenant option(s) (each such option is referred
to as the “Option”) to extend the Term following the expiration of the original
term hereof (the “Initial Term”) for two (2) additional term(s) of five (5)
years each (each such additional term is hereinafter referred to as the
“Extension Term”).

          2. Exercise of Options. Each Option shall be exercised only by written
notice (the “Extension Notice”) delivered to Landlord in accordance with
Section 36 of the Lease no later than the later of: (a) twelve (12) months
prior to the expiration of the Term then in effect; or (b) five (5) business
days after Tenant receives notice from Landlord of Tenant’s right to extend the
Term (“Renewal Reminder Notice”). The Renewal Reminder Notice applicable to
each of the two- five (5) year extension periods may not be sent earlier than
thirteen (13) months before what would otherwise be the last day of the
otherwise expiring Term. If Tenant fails to deliver any Extension Notice
within the specified time period, the Option related thereto and any succeeding
Options (if any) shall lapse, and Tenant shall have not further right to extend
the Term.

          3. Conditions Precedent to Options. Each Option shall be exercisable by
Tenant and the Lease shall continue for the Extension Term on all of the
following conditions:

          (a) At the time Landlord receives the Extension Notice, Tenant shall not
be in default under any of the provisions of the Lease, beyond any applicable
notice and grace period.

          (b) At the time Landlord receives the Extension Notice, the Tenant named
in Section 1(c) of the Lease shall not have assigned the Lease, except as
permitted in Section 18(a) of the Lease.

          (c) With respect to any Option for an Extension Term following the first
Extension Term, Tenant shall have theretofore timely expressed all prior
Options.

          4. Extension Term Provisions. Each Extension Term shall be on all of the
same terms and conditions set forth in the Lease and applicable to the Initial
Term, except the Base Rent payable by Tenant during a particular Extension Term
shall be equal to the greater of (i) the Base Rent immediately prior to the
Extension Term or (ii) ninety-five (95%) percent of the fair market rental for
the Premises, as of the date which is two hundred seventy (270) days prior to
the commencement of such Extension Term. At least two hundred ten (210) days
prior to the commencement of the applicable Extension Term, Landlord shall
notify Tenant of the Base Rent to be charged during that Extension Term, based
upon the fair market rental as calculated below. All provisions for the
payment of Additional Rent shall continue to apply without limitation except as
otherwise provided.

          The “fair market rental value” shall be determined as follows:

          Following receipt by Landlord of Tenant’s notice of Tenant’s exercise of
the option to extend for such Extension Term, Landlord shall notify Tenant of
the “fair market rental value” of the Premises as of the New Rental Valuation
Date. The parties agree that fair market value shall be determined by taking
into account the Tenant Work or any other improvements made by Tenant to the
Premises, and that there shall be no break in the rent stream for lease-up
time, construction time, free rent or other lease procurement costs, and shall
otherwise take into account all other matters relevant to the leasing of the
Premises, including the net nature of the Lease. If Tenant disagrees

-30-

 

with Landlord’s determination, Tenant shall, within thirty (30) days after
receipt of Landlord’s determination, notify Landlord that Tenant disputes
Landlord’s determination and shall submit to Landlord with such notice Tenant’s
good faith determination of the fair market rental value and the annual Base
Rent. In the event Tenant notifies Landlord that Tenant disputes Landlord’s
determination, then Landlord and Tenant shall attempt to agree upon the fair
market rental value. If Landlord and Tenant fail to reach agreement within
thirty (30) days following Tenant’s notice to Landlord disputing Landlord’s
determination (“Outside Renewal Agreement Date”), then each party shall, within
fifteen (15) days of the Outside Renewal Agreement Date, mutually agree upon an
appraiser who is a member of the Appraisal Institute and who has at least five
(5) years experience in the appraisal of office buildings in the Morris County,
New Jersey area (“Qualified Appraiser”) and each shall submit to such Qualified
Appraiser within twenty (20) days of the Outside Renewal Agreement Date its
sealed final determination of the fair market rent (provided that Landlord’s
sealed final determination shall in no event be greater than the rental set
forth in Landlord’s determination, and Tenant’s sealed final determination
shall in no event be less than Tenant’s determination as set forth in Tenant’s
original notice disputing Landlord’s original determination). Each of the
Landlord and Tenant may submit to the independent Qualified Appraiser
documentation in support of its determination of fair market rent. If the
parties are unable to agree upon such independent Qualified Appraiser, either
party may request the American Arbitration Association in Somerset, New Jersey,
to appoint such independent Qualified Appraiser which request shall be made no
later than fifteen (15) days after the Outside Renewal Agreement Date. The
independent Qualified Appraiser shall, within thirty (30) days of his/her
appointment, determine the fair market rent, which determination shall be
binding upon both Landlord and Tenant. The parties shall share equally in the
cost of any independent Qualified Appraiser. Both Landlord and Tenant agree to
be irrevocably bound by the final decision in arbitration, provided that Tenant
have the right to withdraw Tenant’s exercise of its option to renew within ten
(10) days of a final determination of the fair market rent.

          All provisions for the payment of Additional Rent shall continue to apply
without limitation except as otherwise provided. The Extension Term shall,
upon the commencement thereof, be deemed a part of the term of this Lease.
Notwithstanding anything to the contrary herein, Tenant shall have no further
right to renew or extend the term of this Lease upon the expiration of the
second Extension Term.

	 	 	 
	

	 	Initials:
	 
	 	 
	

	 	Landlord
	

	 	 
	

	 	
 
	 
	 	 
	

	 	Tenant
	

	 	 
	

	 	
 

-31-

 

RIGHT OF FIRST OFFER RIDER

	 	 	 
	Date of Lease:

	 	September 16, 2004
	 
	 	 
	Landlord:

	 	North Jersey Green 501 LLC
	Tenant:

	 	Party City Corporation
	Premises:

	 	Portion of 25 Green Pond Road, Rockaway, New Jersey

     Provided no Event of Default remains uncured at the time, Landlord grants
to Tenant the right to lease any space in the Building (the “First Offer
Space”) if such space becomes available during the Term hereof (which shall not
apply to the initial leasing thereof provide Landlord enters into a lease for
such space within six (6) months of the date hereof), upon the following terms
and conditions:

          (i) Landlord shall provide Tenant with written notice (“Landlord’s
Notice”) of the availability of the First Offer Space, specifying the terms and
conditions upon which Landlord will offer the First Offer Space to Tenant.
Tenant shall have the right, by furnishing Landlord with written notice of its
election (“Tenant’s Notice”), to lease the First Offer Space, which Tenant’s
Notice shall be received by Landlord no later than fifteen (15) days after
Tenant’s receipt of Landlord’s Notice of the availability of the First Offer
Space. The failure by Tenant to furnish Tenant’s Notice to Landlord in a
timely manner as provided above shall constitute a waiver by Tenant of all of
Tenant’s rights under this Rider for such space set forth in Landlord’s Notice,
and shall release Landlord from any further obligation to offer to Tenant the
First Offer Space described in Landlord’s Notice (unless Landlord has not
entered into a lease for such space within six (6) months of the date of
Landlord’s Notice, or such space again become vacant after the next leasing
thereof, at which time the provisions of this Rider shall again apply), and
Tenant shall have no further right to the leasing of such space, except as
expressly provided in this Rider. In the event Tenant timely delivers written
notice to Landlord of its election to lease the First Offer Space, described in
the written notice delivered to Tenant Landlord and Tenant shall, within ten
(10) days after receipt of Tenant’s Notice, enter into an amendment of this
Lease, providing for those terms and conditions as set forth in Landlord’s
offer; provided that the term for such First Offer Space shall be co-terminus
with the Term hereof, and such First Offer Space shall be included as part of
the Premises for the purpose of exercise the renewal options hereunder. In the
event that Tenant elects not to exercise its Right of First Offer for the First
Offer Space, Landlord shall be entitled to market and lease the First Offer
Space to other parties provided Landlord shall not have the right to lease the
First Offer Space for a base rent of less than ninety-five (95%) percent of the
base rent quoted to Tenant in Landlord’s Notice (without again providing Tenant
with Landlord’s Notice, revised to reflect the revised terms upon which
Landlord is willing to lease the First Offer Space (the “Revised Notice”).
Thereafter Tenant shall have a period of five (5) business days from the
receipt of the Revised Notice to furnish Landlord with written notice of its
election to lease the First Offer Space on such terms and conditions as set
forth in the Revised Notice, which period shall be deemed time of the essence.
In the event that Tenant elects not to exercise its Right of First Offer for
the First Offer Space within the time period provided above, Landlord shall be
entitled to market and lease the First Offer Space to other parties, provided
Landlord shall not have the right to lease the First Offer Space at a base rent
of less than ninety-five (95%) percent of the base rent quoted to Tenant in
Landlord’s Revised Notice without again offering the First Offer Space to
Tenant pursuant to the above provisions.

-32-exv10w19

 

Exhibit 10.19

CORRECTED

CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS OF

SERIES A 8.0% CONVERTIBLE PREFERRED STOCK

OF

MEDICOR LTD.

     The undersigned officer of MediCor Ltd. (the “Corporation”), a corporation
duly organized and existing under the General Corporation Law of the State of
Delaware, does hereby certify (1) in accordance with Section 103(f) thereof,
that the prior filing of the Certificate of Designation relating to the
Corporation’s Series A 8.0% Convertible Preferred Stock was inaccurate as
stated in the Corrected Certificate of Designation executed on July 28, 2004
and that the Corrected Certificate of Designation was also inaccurate in its
statement of the definition of the term “Qualifying Liquidity Event” and (2) in
accordance with Section 103 of the General Corporation Law of the State of
Delaware that, pursuant to authority conferred on the Board of Directors of the
Corporation by the amended Certificate of Incorporation of the Corporation and
pursuant to Section 151 of the General Corporation Law of the State of
Delaware, the Board of Directors, by unanimous written consent of all of the
Directors dated as of July 5, 2004, adopted the following resolution creating a
series of 45,000 shares of preferred stock designated as Series A 8.0%
Convertible Preferred Stock:

     “RESOLVED that pursuant to Article Fourth of the amended
Certificate of Incorporation of the Corporation, the Board of
Directors hereby creates and provides for the issuance of a series of
preferred stock, par value $.001 per share and with a liquidation
preference of $1,000 per share, of the Corporation and hereby fixes
the number, voting powers, designations, preferences, and relative,
participating, optional or other special rights and such
qualifications, limitations or restrictions thereof, and other
matters relating to, said series as follows (capitalized terms used
herein but not defined in Sections 1 through 9 below have the
meanings ascribed to them in Section 10):

     1. Designation and Amount. There is hereby constituted out
of the shares of preferred stock of the Corporation a series
designated as “Series A 8.0% Convertible Preferred Stock.” The
Series A 8.0% Convertible Preferred Stock (the “Series A Preferred
Stock”) shall have a par value of $0.001 per share, and the number
of shares constituting such series shall be 45,000.

     2. Rank. The Series A Preferred Stock shall, with respect
to dividend rights, rank senior to all classes of the
Corporation’s common stock, par value $0.001 per share (“Common
Stock”) and any other series or class of the Corporation’s stock
created after the date hereof that by its terms ranks junior as to
dividends to the Series A Preferred Stock, when and if issued (“Junior Dividend
Stock”), and priority as to distributions of

 

 

assets upon
liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, over the Common Stock and any other
series or class of the Corporation’s stock issued after the date
hereof that by its terms ranks junior as to liquidation,
dissolution and winding up to the Series A Preferred Stock, when
and if issued (“Junior Liquidation Stock”). The Common Stock and
any other Capital Stock that is both Junior Dividend Stock and
Junior Liquidation Stock, is referred to herein as “Junior
Stock”). The Series A Preferred Stock will be junior as to
dividends to any series or class of the Corporation’s stock issued
after the date hereof that by its terms ranks senior as to
dividends to the Series A Preferred Stock, when and if issued
(“Senior Dividend Stock”) and junior as to distributions of assets
upon liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, to any series or class of the
Corporation’s stock issued after the date hereof that by its terms
ranks senior as to liquidation, dissolution and winding up to the
Series A Preferred Stock, when and if issued (“Senior Liquidation
Stock” and, collectively with the Senior Dividend Stock, “Senior
Stock”). The Series A Preferred Stock will have parity as to
dividends with any series or class of the Corporation’s stock
issued after the date hereof that by its terms ranks on a parity
as to dividends with the Series A Preferred Stock, when and if
issued (“Parity Dividend Stock”) and parity as to any series or
class of the Corporation’s stock issued after the date hereof that
by its terms ranks on a parity as to liquidation, dissolution and
winding up with the Series A Preferred Stock, when and if issued
(“Parity Liquidation Stock” and, collectively with the Parity
Dividend Stock, “Parity Stock”). The Series A Preferred Stock
shall be subject to the creation of Junior Stock. The Series A
Preferred Stock shall be subject to the creation of Parity Stock
and Senior Stock only if the provisions of Section 7(c)(ii) or
(iii) have been complied with. The respective definitions of
Senior Dividend Stock, Senior Liquidation Stock, Junior Dividend
Stock, Junior Liquidation Stock, Parity Dividend Stock and Parity
Liquidation Stock shall also include any warrants, rights, calls,
options or any other convertible securities, exercisable for or
convertible into any of the Senior Dividend Stock, Senior
Liquidation Stock, Junior Dividend Stock, Junior Liquidation
Stock, Parity Dividend Stock and Parity Liquidation Stock, as the
case may be.

     3. Dividends.

     (a) When and as declared by the Corporation’s Board of
Directors (the “Board”) and to the extent permitted under
applicable law, the Corporation shall pay preferential dividends
in cash to the holders of Series A Preferred Stock, as provided in
this Section 3; provided that, subject to Section 3(f) below, the
Corporation shall be permitted to pay any accrued and unpaid
dividends on the Series A Preferred Stock by issuing to each
record holder of Series A Preferred Stock a number of additional
shares of Series A Preferred Stock that have an aggregate
Liquidation Value
(as defined in Section 10) equal to the amount of such
accrued and unpaid dividends (such shares of Series A Preferred
Stock issued as dividends, “Dividend Shares”). Dividends on each
share of Series A Preferred Stock (each share of Series A
Preferred Stock, a “Share”) shall accrue on daily

2

 

basis at the
rate of 8.0% per annum compounded annually of the Liquidation
Value plus accumulated and unpaid dividends thereon. Such
dividends on the Shares shall accrue in each case from and
including the date of issuance of such Share to and including the
first to occur of the date on which (i) the liquidation payment of
such Share is paid to the holder thereof in connection with a
Liquidation Event, (ii) such Share is redeemed by the Corporation
pursuant to the provisions hereof, (iii) such Share is converted
into shares of Conversion Stock hereunder or (iv) such Share is
otherwise acquired by the Corporation. The dividend payment
period for any dividend payable with respect to a Dividend
Reference Date (as defined in clause (b) below) shall be the
period beginning on the immediately preceding Dividend Reference
Date (or on the issue date in the case of the first dividend
payment period) and ending on the day preceding such later
Dividend Reference Date. If any date on which a payment of a
dividend or any other amount is due in respect of Series A
Preferred Stock is not a Business Day, such payment shall be made
on the next day that is a Business Day. Such dividends shall
accrue whether or not they have been declared and whether or not
there are profits, surplus or other funds of the Corporation
legally available for the payment of dividends. The date on which
the Corporation initially issues any Share shall be deemed to be
its “date of issuance” regardless of the number of times transfer
of such Share is made on the stock records maintained by or for
the Corporation and regardless of the number of certificates which
may be issued to evidence such Share. No fractional shares of
Series A Preferred Stock shall be issued upon payment of a
dividend in shares of Series A Preferred Stock, and in lieu of any
fractional Shares to which the holder would otherwise be entitled,
such amount shall be paid in cash. All dividends paid in
additional shares of Series A Preferred Stock shall be deemed
issued on the applicable Dividend Reference Date and will
thereupon be fully paid and nonassessable and free of all taxes,
liens and charges for the issue thereof.

     (b) June 30 and December 31 of each year shall each be a
“Dividend Reference Date” and collectively, the “Dividend
Reference Dates.” Dividends payable with respect to the dividend
payment period ending on each Dividend Reference Date shall be
paid on or before the 10th day following such Dividend Reference
Date (each such date “Dividend Payment Date” and collectively, the
“Dividend Payment Dates”). To the extent not paid on a Dividend
Payment Date, beginning on the first Dividend Payment Date
following the initial issuance of the Series A Preferred Stock,
all dividends which have accrued on each Share outstanding during
the six-month period (or shorter period in the case of the initial
Dividend Reference Date) ending upon each such Dividend Reference
Date shall be accumulated and shall remain accumulated dividends
with respect to such Share until paid to the holder thereof.
Notwithstanding anything to the contrary contained herein,
with respect to the Dividend Reference Date occurring on June 30
of each year, the Liquidation Value on which dividends calculable
on such date shall be based shall be the Liquidation Value of the
Shares as of the preceding December 31 without regard to any
additional Dividend Shares issued in respect of the Dividend
Reference Date occurring on such preceding December 31.

3

 

     (c) Except as otherwise provided herein, if at any time the
Corporation pays less than the total amount of dividends then
accrued with respect to the Series A Preferred Stock, such payment
shall be distributed pro rata among the holders thereof based upon
the aggregate accrued but unpaid dividends on the Shares held by
each such holder.

     (d) So long as any Shares are outstanding (i) no Junior
Securities shall be redeemed, purchased or otherwise acquired for
any consideration (or any moneys be paid to or made available for
a sinking fund for the redemption of any shares of any such stock)
by the Corporation, directly or indirectly (except by conversion
into or exchange for Junior Securities on in connection with
terminations of employment or consulting services), and (ii) no
dividends or distributions shall be declared or paid on any Junior
Security other than Common Stock, in each case without the prior
written consent of the holders of a majority of the Shares then
outstanding.

     (e) Notwithstanding anything to the contrary herein,
following the 180th day after the authorization of the Common
Stock after the Series A Closing Date for quotation or listing on
The New York Stock Exchange, Inc., the American Stock Exchange,
Inc., The Nasdaq National Market or The Nasdaq SmallCap Market,
the Corporation may only pay accrued and unpaid dividends on the
Series A Preferred Stock by issuing to each record holder of
Series A Preferred Stock a number of additional shares of Series A
Preferred Stock if (i) (x) a shelf registration statement covering
resales of the Conversion Stock is effective and available for use
on the applicable Dividend Reference Date and is expected to
remain effective and available for use for not less than ninety
(90) days following the Dividend Reference Date or (y) the
Conversion Stock may be sold by the holders thereof pursuant to
Rule 144(k) under the Securities Act, (ii) the Conversion Stock is
authorized for quotation or listing on The New York Stock
Exchange, Inc., the American Stock Exchange, Inc., The Nasdaq
National Market or The Nasdaq SmallCap Market, (iii) no written
threat of suspension of such authorization by any such exchange or
market shall have been made and not withdrawn and (iv) the
Corporation shall not have fallen below the minimum listing
maintenance requirements of such exchange or market at any time
during the forty-five (45) days prior to the applicable Dividend
Reference Date.

     (f) Dividends payable on any Dividend Payment Date shall be
payable to the holders of record of the Series A Preferred Stock
as they appear on the stock transfer books of the Corporation at
the close of business on the Dividend Reference Date
immediately preceding the Dividend Payment Date, or such
other date that the Board of Directors designates that is not more
than 30 nor less than 10 days prior to the Dividend Payment Date.

     (g) If at any time the Corporation shall have failed to pay
all dividends which have accrued on any outstanding shares of
Senior Dividend Stock at the times such dividends are payable,
unless otherwise provided in the terms of the Senior Dividend
Stock, no dividend shall be declared by the Board of Directors or
paid or set apart for payment by the Corporation on shares of the
Series A Preferred Stock unless prior to or concurrently

4

 

with such
declaration, payment or setting apart for payment, all accrued and
unpaid dividends on all outstanding shares of such Senior Dividend
Stock shall have been or be declared, paid or set apart for
payment. Dividends on the Series A Preferred Stock shall accrue
whether or not the Corporation has earnings, whether or not there
are assets legally available for the payment of such dividends and
whether or not such dividends are declared.

     (h) No dividends (other than dividends payable solely in
Junior Stock) shall be paid or declared and set apart for payment
on any Junior Dividend Stock, and no payment shall be made on
account of the purchase, redemption, retirement, or other
acquisition of Junior Dividend Stock or Junior Liquidation Stock
(other than acquisitions thereof pursuant to employee or director
incentive or benefit plans or arrangements, or in exchange solely
for Junior Stock), unless all accrued and unpaid dividends on the
Series A Preferred Stock for all dividend payment periods ending
on or before the date of payment of such dividends on Junior
Dividend Stock, or such payment for such Junior Dividend Stock or
Junior Liquidation Stock, shall have been paid or declared and set
apart for payment.

     (i) Except as set forth in the second following sentence, no
dividends shall be paid or declared and set apart for payment on
the Series A Preferred Stock unless all accrued and unpaid
dividends for all dividend payment periods through such Dividend
Payment Date on any Parity Dividend Stock have been paid or
declared and set apart for payment or are contemporaneously paid
or declared and set apart for payment. Except as set forth in the
following sentence, no dividends shall be paid or declared and set
apart for payment on any Parity Dividend Stock unless all accrued
and unpaid dividends for all dividend payment periods through such
Dividend Payment Date on the Series A Preferred Stock have been
paid or declared and set apart for payment or are
contemporaneously paid or declared and set apart for payment.
Whenever all accrued and unpaid dividends have not been paid upon
the Series A Preferred Stock or any other Parity Dividend Stock
for all dividend payment periods through such Dividend Payment
Date, all dividends paid or declared and set apart for payment on
the Series A Preferred Stock or any other Parity Dividend Stock
shall be paid or declared pro rata so that the amount of dividends
declared and paid per share on the Series A Preferred Stock and
such Parity Dividend Stock will bear to each other the same ratio
that the
accrued and unpaid dividends to the date of payment, on the
Series A Preferred Stock and such Parity Dividend Stock, bear each
other.

     (j) No payment shall be made on account of the purchase,
redemption, retirement or other acquisition of Parity Stock (other
than acquisitions thereof pursuant to employee or director or
incentive or benefit plans or arrangements, or in exchange solely
for Junior Stock) unless all accrued and unpaid dividends on the
Series A Preferred Stock for all dividend payment periods ending
on or before such payment for such Parity Stock shall have been
paid or declared and set apart for payment.

5

 

     (k) Originally Issued Shares shall only be transferable
together with the Dividend Shares issued with respect to such
Originally Issued Shares.

     (l) The Corporation shall take all action necessary to ensure
that enough shares of Series A Preferred Stock are available for
issuance as required pursuant to this Section 3.

     (m) Certificates representing Dividend Shares shall contain a
notation indicating the denomination of such Shares as Dividend
Shares. Notwithstanding anything to the contrary contained
herein, Dividend Shares will be subject to the limitations of
clause (k) above and to the special provisions of Section 4(g) in
the event of a redemption of the Series A Preferred Stock at the
option of the Corporation pursuant to Section 5(b).

     4. Liquidation Preference.

     (a) In the case of the voluntary or involuntary liquidation,
dissolution or winding up of the Corporation (a “Liquidation
Event”), holders of outstanding shares of Series A Preferred Stock
shall be entitled to receive a liquidation preference from the net
assets of the Corporation available for distribution to
stockholders in an amount in cash which for each such Share shall
equal $1,000 per whole Share, subject to any stock splits, subject
to any adjustment pursuant to clause (f) below and subject to the
special provisions of clause (g) below (the “Liquidation
Preference”), plus a similar amount for any accrued and unpaid
dividends to date of such Liquidation Event (it being understood
that such amount shall be calculated by including dividends
accruing to the actual date of such Liquidation Event, rather than
the most recent Dividend Reference Date), as set forth herein,
before any payment or distribution is made to the holders of
Common Stock or any other Junior Liquidation Stock, and such
holders shall not be entitled to any further payment, but the
holders of the shares of the Series A Preferred Stock will not be
entitled to receive the liquidation preference of such shares
until the liquidation preference of any Senior Liquidation Stock
has been paid in full.

     (b) The holders of Series A Preferred Stock and any Parity
Liquidation Stock shall share ratably in any liquidation,
distribution or winding up of the Corporation (after
payment of the liquidation preference of the Senior
Liquidation Stock) in which the net assets or the proceeds thereof
are not sufficient to pay in full the aggregate of the amounts
payable thereon, in the same ratio that the respective amounts
which would be payable on such distribution, if the amounts to
which the holders of all the outstanding shares of Series A
Preferred Stock and Parity Liquidation Stock are entitled were
paid in full, bear to each other.

     (c) Not less than 30 days prior to the payment date stated
therein, the Corporation shall mail written notice of any
Liquidation Event to each record holder of Series A Preferred
Stock, setting forth in reasonable detail the amount of proceeds
payable under clauses (a) and (b) above with respect to each
Share.

6

 

     (d) Any (i) consolidation, merger, combination,
reorganization or other transaction in which the holders of the
Corporation’s Common Stock immediately prior to such transaction
hold shares of voting common or ordinary capital stock
representing less than 50% of the shares of the voting common or
ordinary capital stock of the surviving entity immediately
following consummation of such transaction or (ii) sale or other
disposition of all or substantially all of the assets of the
Corporation will be considered a Liquidation Event for purposes of
this Section 4.

     (e) After payment shall have been made in full to the holders
of the Series A Preferred Stock, as provided in this Section 4,
any other series or class or classes of Junior Securities shall,
subject to the respective terms and provisions (if any) applying
thereto, be entitled to receive any and all assets remaining to be
paid or distributed to holders of capital stock of the
Corporation, and the holders of the Series A Preferred Stock shall
not be entitled to share therein.

     (f) If (i) the Corporation has not, during any period of four
consecutive quarters ending prior to the respective Target Dates
set forth below, generated EBITDA at least equal to the respective
EBITDA Target Amounts set forth below and (b) there has not
occurred on or before June 30, 2008 a Qualifying Liquidity Event
(as defined below), then, on July 1, 2008, the cumulative
Liquidation Preference of all Originally Issued Shares (but not
Dividend Shares) shall be adjusted by adding thereto the amount
calculated below (such amount, the “Additional Liquidation
Preference”).

	 	 	 	 	 	 	 	 	 
	 	 	Target Date
	 	EBITDA Target Amount

	 
	 	June 30, 2006	 	$	11,000,000	 
	 
	 	June 30, 2007	 	$	14,000,000	 
	 
	 	June 30, 2008	 	$	18,000,000	 

     If actual EBITDA for the fiscal year ended June 30,
2008 (the “Actual EBITDA”) is less than $18,000,000,
then the amount of the Additional Liquidation
Preference shall be calculated from the following
equation:

($18,000,000 - E) • 18 • (0.15 • L/$20,000,000) = x

where: x equals the Additional Liquidation Preference amount; E
equals the Actual EBITDA; 18 represents an EBITDA multiple of 18;
and L equals the aggregate initial Liquidation Preference of all
Shares initially issued by the Corporation (but not including the
Liquidation Preference of Dividend Shares issued in payment of
dividends on the Series A Preferred Stock); provided that the
Additional Liquidation Preference amount will be subject to the
Cap (as defined below).

     For example: If Actual EBITDA (E) equals $17,000,000 and
$20,000,000 in Liquidation Preference of Series A Preferred Stock
is initially issued by the Corporation

7

 

and is outstanding, then
the Additional Liquidation Preference of all outstanding
Originally Issued Shares (x) will equal $2,700,000 or ($18,000,000
 - $17,000,000) • 18 • 0.15, and the resulting Liquidation
Preference will equal $22,700,000 ($20,000,000 plus $2,700,000).
Such Additional Liquidation Preference shall be allocated ratably
across all outstanding Originally Issued Shares.

     Notwithstanding actual EBITDA, and assuming that $20,000,000
in Liquidation Preference of Series A Preferred Stock is initially
issued by the Corporation, the maximum Additional Liquidation
Preference amount will be $16,667,000 (the “Cap”). Such
percentage shall be reduced ratably based upon the aggregate
Liquidation Preference of the Series A Preferred Stock that is
actually initially issued by the Corporation

     A “Qualifying Liquidity Event” shall be a firm commitment
underwritten public offering of Common Stock by the Corporation
with gross sale proceeds of at least $25 million and in which the
implied equity value of the Corporation is at least equal to the
sum of (a) $83,000,000 plus the aggregate initial Liquidation
Value of the Originally Issued Shares (without regard to any
Additional Liquidation Preference) plus (b) 25% per annum from
June 30, 2004, based on the pricing mid-point contained in the
preliminary prospectus for such offering.

     (g) Notwithstanding anything to the contrary contained
herein, the Liquidation Preference of the Dividend Shares shall be
equal to the par value of such Dividend Shares in the event of a
redemption of the Series A Preferred Stock at the option of the
Corporation pursuant to Section 5(b).

     5. Redemption.

     (a) Mandatory Redemption. All outstanding Shares of the
Series A Preferred Stock shall be mandatorily redeemed by the
Corporation on June 30, 2011 at a redemption price of $1,000 per
Share plus $1,000 per whole Share for all accrued and unpaid
paid-in-kind dividends and any other accrued and unpaid dividends
whether or not declared (the “Mandatory Redemption Price”), which
amount will be payable by the Corporation in cash.

8

 

     (b) Optional Redemption. At any time after June 30, 2006 and
until June 30, 2010, the Corporation may redeem the Series A
Preferred Stock in whole or in part on at least 15 days prior
written notice on the terms set forth in this clause (b). If the
Corporation so elects to redeem Shares it may redeem Originally
Issued Shares at a price per Share (the “Optional Original Share
Redemption Price”) equal to the following premiums of the
Liquidation Preference of the Shares:

	 	 	 	 	 	 	 	 	 
	 
	 	July 1, 2006 to June 30, 2007	 	 	169	%
	 
	 	July 1, 2007 to June 30, 2008	 	 	220	%
	 
	 	July 1, 2008 to June 30, 2009	 	 	286	%
	 
	 	July 1, 2009 to June 30, 2010	 	 	371	%

     Concurrent with the redemption of any Originally Issued
Shares, the Corporation shall concurrently redeem the Dividend
Shares issued in respect of such Originally Issued Shares at a
price per Share (the “Optional Dividend Share Redemption Price,”
and together with the Mandatory Redemption Price and the Optional
Original Share Redemption Price, the “Redemption Price”) equal to
the par value of such Dividend Shares.

     (c) The Corporation shall be obligated on the Redemption Date
(as defined in clause (d) below) to pay to each holder of Series A
Preferred Stock with respect to each Share held by such holder an
amount in cash in immediately available funds equal to the
applicable Redemption Price of such Share plus all accrued and
unpaid dividends thereon.

     (d) The Corporation will mail written notice of each
redemption of Series A Preferred Stock pursuant to clause (a) or
(b) of this Section 5 to each record holder no less than thirty
(30) days and not more than sixty (60) days prior to the date on
which
such redemption is to be made (the “Redemption Date”). The
date on which such notice is mailed is the “Redemption Notice
Date.” Each such notice of redemption shall specify the date
fixed for redemption, the place or places of payment, that payment
will be made upon presentation and surrender of such Shares and
the current Conversion Price. Each Share shall be convertible
into Conversion Stock at the option of the holder thereof in
accordance with the provisions of Section 6 at any time prior to
the Redemption Date.

     (e) No Share shall be entitled to any rights, preferences or
privileges hereunder after the date on which the applicable
Redemption Price of such Share is paid in full to the holder of
such Share. On such date, all rights of the holder of such Share
shall cease, and such Share shall no longer be deemed to be issued
and outstanding.

     (f) Any Shares which are redeemed or otherwise acquired by
the Corporation shall be canceled and retired and shall not be
reissued, sold or transferred.

9

 

     (g) Notwithstanding anything herein to the contrary,
following the authorization of the Common Stock after the Series A
Closing Date for quotation or listing on The New York Stock
Exchange, Inc., the American Stock Exchange, Inc. or The Nasdaq
National Market or The Nasdaq SmallCap Market, no redemptions may
be made under this Section 5(b) unless (i) (x) a shelf
registration statement covering resales of the Conversion Stock is
effective and available for use and is at all times during the
period beginning on the Redemption Notice Date and ending on the
Redemption Date and is expected to remain effective and available
for use for not less than ninety (90) days following the
Redemption Date or (y) the Conversion Stock may be sold by the
holders thereof pursuant to Rule 144(k) under the Securities Act,
(ii) the Conversion Stock is authorized for quotation or listing
on The New York Stock Exchange, Inc., the American Stock Exchange,
Inc. or The Nasdaq National Market or The Nasdaq SmallCap Market,
(iii) no written threat of suspension of such authorization by any
such exchange or market shall have been made and not withdrawn and
(iv) the Corporation shall not have fallen below the minimum
listing maintenance requirements of such exchange or market at any
time during the ninety (90) days prior to the Redemption Date.

     6. Conversion.

     (a) (i) Each holder of Shares shall have the right, at any
time at any time (except that, with respect to any Shares of
Preferred Stock which shall be called for redemption, such right
shall terminate, except as provided in the second sentence of
Section 6(a)(v) hereof, at the close of business on the date fixed
for redemption of such shares of Preferred Stock unless the
Corporation shall default in payment due upon redemption thereof),
at such holder’s option, to convert its outstanding Shares, in
whole or in part, into fully paid and non-assessable shares of
Conversion Stock. The
number of shares of Conversion Stock deliverable upon
conversion of one Share shall be equal to the Liquidation Value of
such Share on the date of conversion, divided by the Conversion
Price on the date of conversion. In order to exercise the
conversion privilege set forth in this Section 6(a), the holder of
the Shares to be converted shall surrender the certificate
representing such Shares at the principal office of the
Corporation, with a written notice of election to convert
completed and signed, specifying the number of Shares to be
converted. Each conversion pursuant to this Section 6(a) shall be
deemed to have been effected immediately prior to the close of
business on the date on which the certificates for Shares shall
have been surrendered and such notice received by the Corporation
as aforesaid, and the person in whose name or names any
certificate or certificates for shares of Conversion Stock shall
be issuable upon such conversion shall be deemed to have become
the holder of record of the shares of Conversion Stock represented
thereby at such time on such date. Effective upon such
conversion, the Shares so converted shall no longer be deemed to
be outstanding, and all rights of a holder with respect to such
Shares surrendered for conversion shall immediately terminate
except the right to receive the Conversion Stock and other amounts
payable pursuant to this Section 6.

10

 

     (ii) Notwithstanding any other provision hereof, if a
conversion of Shares is to be made in connection with any
transaction, the conversion of any Shares may, at the election of
the holder thereof, be conditioned upon the consummation of such
transaction in which case such conversion shall not be deemed to
be effective until immediately prior to the time such transaction
has been consummated.

     (iii) As soon as practicable after a conversion has been
effected, the Corporation shall deliver to the converting holder
(A) the number of shares of Conversion Stock issuable by reason of
such conversion in such name or names and such denomination or
denominations as the converting holder has specified, (B) payment
in an amount equal to the amount, if any, payable under Section
6(a)(vii) below with respect to such conversion; (C) payment in
cash of an amount equal to all accrued dividends with respect to
each Share converted which have not been paid thereto and (D) a
certificate representing any Shares which were represented by the
certificate or certificates delivered to the Corporation in
connection with such conversion but which were not converted. The
Corporation shall effect delivery of Conversion Stock, as long as
the Corporation’s designated transfer agent or co-transfer agent
in the United States for the Common Stock (the “Transfer Agent”)
participates in the Depository Trust Corporation (“DTC”) Fast
Automated Securities Transfer program (“FAST”), by crediting the
account of the holder or its nominee at DTC (as specified in the
applicable notice of election to convert) with the number of
Conversion Shares required to be delivered, no later than the
close of business on the delivery date. In the event that the
Transfer Agent is not a participant in FAST or if the holder so
specifies in its notice of election to convert or otherwise in
writing, the Corporation shall effect
delivery of Conversion Shares by delivering to the holder or
its nominee physical certificates representing such Conversion
Shares, no later than the close of business on the delivery date.

     (iv) The issuance of certificates for shares of Conversion
Stock upon conversion of Series A Preferred Stock shall be made
without charge to the holders of such Series A Preferred Stock for
any issuance tax in respect thereof or other cost incurred by the
Corporation in connection with such conversion and the related
issuance of shares of Conversion Stock. Upon conversion of each
Share, the Corporation shall take all such actions as are
necessary in order to ensure that the Conversion Stock issuable
with respect to such conversion shall be validly issued, fully
paid and nonassessable, and free and clear of all taxes, liens,
charges and encumbrances with respect to the issuance thereof.

     (v) The Corporation shall not close its books against the
transfer of Series A Preferred Stock or of Conversion Stock issued
or issuable upon conversion of Series A Preferred Stock in any
manner which interferes with the timely conversion of Series A
Preferred Stock unless such transfer is prohibited by applicable
law or governmental regulation. Notwithstanding the foregoing, if
on any date Share certificates are surrendered for conversion
under this Section 6(a) the stock transfer books of the
Corporation shall be closed, then the person in whose name the
certificates are to be

11

 

issued shall be constituted as the record
holder thereof for all purposes on the next succeeding day on
which such stock transfer books are open, but such conversion
shall be at the conversion price in effect on the date upon which
such Series A Preferred Stock certificate shall have been
surrendered. The Corporation shall use its commercially
reasonable efforts to assist and cooperate with any holder of
Shares required to make any governmental filings or obtain any
governmental approval prior to or in connection with any
conversion of Shares hereunder (including making any filings
required to be made by the Corporation).

     (vi) The Corporation shall at all times following the
issuance of the Series A Preferred Stock reserve and keep
available out of its authorized but unissued shares of Common
Stock, solely for the purpose of issuance upon the conversion of
the Series A Preferred Stock, such number of shares of Common
Stock issuable upon the conversion of all outstanding Series A
Preferred Stock. The Corporation shall take all such actions as
may be necessary to ensure that all such shares of Common Stock
may be so issued without violation of any applicable law or
governmental regulation or any requirements of any domestic
securities exchange upon which shares of Common Stock may be
listed (except for official notice of issuance which shall be
delivered by the Corporation upon each such issuance). The
Corporation shall not take any action which would cause the number
of authorized but unissued shares of Common Stock to be less than
the number of such shares required to be reserved hereunder for
issuance upon conversion of the Series A Preferred Stock.

     (vii) In connection with the conversion of any Shares, no
fractional shares of Conversion Stock shall be issued, but in lieu
thereof the Corporation shall pay to the holder thereof the value
of such share of Conversion Stock in cash as determined by
reference to the Average Market Price on the date of conversion.

     (b) Conversion Price.

     (i) The initial “Conversion Price” is $3.85. In order to
prevent dilution of the conversion rights granted under this
Section 6, the Conversion Price shall be subject to adjustment
from time to time pursuant to this Section 6(b).

     (ii) Subdivision or Combination of Common Stock. If the
Corporation at any time subdivides (by any stock split, stock
dividend, recapitalization or otherwise) one or more classes of
its outstanding shares of Common Stock into a greater number of
shares, the Conversion Price in effect immediately prior to such
subdivision shall be proportionately reduced, and if the
Corporation at any time combines (by reverse stock split or
otherwise) one or more classes of its outstanding shares of Common
Stock into a smaller number of shares, the Conversion Price in
effect immediately prior to such combination shall be
proportionately increased.

12

 

     (iii) Reorganization, Reclassification, Consolidation, Merger
or Sale. Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the
Corporation’s assets or other transaction, in each case which is
effected in such a manner that the holders of Common Stock are
entitled to receive (either directly or upon subsequent
liquidation) stock, securities or assets with respect to or in
exchange for Common Stock, is referred to herein as an “Organic
Change.” Prior to the consummation of any Organic Change, the
Corporation shall make appropriate provisions (in form and
substance reasonably satisfactory to the holders of a majority of
the Series A Preferred Stock then outstanding) to insure that each
of the holders of Series A Preferred Stock shall thereafter have
the right to acquire and receive, in lieu of the shares of Common
Stock immediately theretofore acquirable and receivable upon the
conversion of such holder’s Series A Preferred Stock, such shares
of stock, securities or assets as such holder would have received
in connection with such Organic Change if such holder had
converted its Series A Preferred Stock into Common Stock
immediately prior to such Organic Change. The Corporation shall
not effect any such consolidation, merger or sale, unless prior to
the consummation thereof, the successor entity (if other than the
Corporation) resulting from consolidation or merger or the entity
purchasing such assets assumes by written instrument (in form and
substance reasonably satisfactory to the holders of a majority of
the Series A Preferred Stock then outstanding), the obligation to
deliver to each such holder such shares of stock, securities or
assets as, in accordance with the foregoing provisions, such
holder may be entitled to acquire.

     (iv) Certain Events. If any event occurs of the type
contemplated by the provisions of this Section 6 but not expressly
provided for by such provisions, then the Board shall make an
appropriate adjustment in the Conversion Price so as to protect
the rights of the holders of Series A Preferred Stock; provided
that no such adjustment shall increase the Conversion Price as
otherwise determined pursuant to this Section 6 or decrease the
number of shares of Common Stock issuable upon conversion of each
Share.

     (v) Optional Reductions of Conversion Price. To the extent
permitted by applicable law, the Corporation from time to time may
reduce the Conversion Price by any amount for any period of time
if the period is at least 20 days, the reduction is irrevocable
during the period and the Board shall have made a determination
that such reduction would be in the best interests of the
Corporation, which determination shall be conclusive and described
in a resolution of the Board. Whenever the Conversion Price is
reduced pursuant to the preceding sentence, the Corporation shall
mail to each record holder of Series A Preferred Stock a written
notice of the reduction at least 15 days prior to the date the
reduced Conversion Price takes effect, and such notice shall state
the reduced Conversion Price and the period during which it will
be in effect.

13

 

     (c) Notices.

     (i) Immediately upon any adjustment of the Conversion Price,
the Corporation shall give written notice thereof to all holders
of Series A Preferred Stock, setting forth in reasonable detail
and certifying the calculation of such adjustment.

     (ii) The Corporation shall give written notice to all holders
of Series A Preferred Stock at least 20 days prior to the date on
which the Corporation closes its books or sets a record date (a)
with respect to any dividend or distribution upon Common Stock,
(b) with respect to any pro rata subscription offer to holders of
Common Stock or (c) for determining rights to vote with respect to
any Organic Change or Liquidation Event.

     (iii) The Corporation shall also give written notice to the
holders of Series A Preferred Stock at least 20 days prior to the
date on which any Organic Change shall take place.

     7. Voting Rights.

     (a) Except as otherwise provided in Section 7(b) or as
required by law, each holder of Series A Preferred Stock shall be
entitled to vote on all matters subject to a stockholders vote
(other than the election of directors) and shall be entitled to
that number of votes equal to the number of shares of Common Stock
into which such holder’s Shares could be converted, pursuant to
the provisions of Section 6 hereof, on the record date for the
determination of stockholders entitled to vote on such matter or,
if no such record date is established, on the date such vote
is taken or any written consent of stockholders is solicited.
Except as otherwise expressly provided herein or as required by
law, the holders of Shares and the holders of Common Stock shall
vote together as a single class on all matters.

     (b) For so long as at least 7,500 Shares remain outstanding
(as such share number is proportionately adjusted to reflect any
stock dividend, stock split, reverse stock split or other
combination or subdivision of the Series A Preferred Stock after
the Series A Closing Date), the holders of the Series A Preferred
Stock, voting separately as a single class to the exclusion of all
other classes of the Corporation’s capital stock and with each
Share entitled to one vote, shall be entitled to elect two
directors to serve on the Board until such directors’ successors
are duly elected by the holders of the Series A Preferred Stock or
such directors are removed from office by the holders of the
Series A Preferred Stock. If the number of directors is increased
to a number greater than seven directors, the number of directors
the holders of the Series A Preferred Stock are entitled to elect
shall be increased such that the holders of the Series A Preferred
Stock shall be entitled to elect one additional director for every
four directors that are added to the Board. For example, if the
number of directors on the Board is increased to 11, the holders
of the Series A Preferred shall be entitled to elect a total of
three directors. If the holders of the Series A Preferred Stock
for any reason fail to elect anyone to fill any such
directorships,

14

 

such positions shall remain vacant until such time
as the holders of the Series A Preferred Stock elect a director to
fill such position and shall not be filled by resolution or vote
of the Board or the Corporation’s other stockholders.
Notwithstanding anything herein to the contrary, during the period
beginning on the Series A Closing Date and ending on the earlier
of (i) the 180th day after the Series A Closing Date and (ii) the
date the number of directors serving on the Board is equal to six
or more, the holders of the Series A Preferred Stock shall only be
entitled to elect one director to serve on the Board.

     (c) In addition, so long as (1) any shares of Series A
Preferred Stock remain outstanding with respect to the following
clauses (i), (iv), (v), (vi) or (vii) and (2) at least 7,500
shares of the Series A Preferred Stock remain outstanding with
respect to the following clauses (ii) and (iii) (as such share
number is proportionately adjusted to reflect any stock dividend,
stock split, reverse stock split or other combination or
subdivision of the Series A Preferred Stock after the Series A
Closing Date), the affirmative vote of the holders of a majority
of the outstanding Shares shall be necessary to:

     (i) alter or change the preferences, rights or powers of the
Series A Preferred Stock, whether by amendment of the Certificate
of Designations of the Series A Preferred Stock or as a result of
a recapitalization, reorganization, reclassification,
consolidation, merger or otherwise;

     (ii) create, authorize or issue any capital stock that ranks
prior (whether with respect to dividend rights or upon
liquidation, dissolution, winding up or other similar event) to
the Series A Preferred Stock;

     (iii) create, authorize or issue any capital stock that ranks
pari passu (whether with respect to dividend rights or upon
liquidation, dissolution, winding up or other similar event) to
the Series A Preferred Stock, provided that the affirmative vote
of the holders of a majority of the outstanding Shares shall not
be necessary to create, authorize or issue up to $20,000,000 of
capital stock that ranks pari passu (whether with respect to
dividend rights or upon liquidation, dissolution, winding up or
other similar event) to the Series A Preferred Stock;

     (iv) increase the authorized number of Shares;

     (v) effect a Change of Control, provided that the affirmative
vote of the holders of a majority of the outstanding Shares shall
not be necessary to effect a Change of Control if as a result of
such Change in Control each Share will be entitled to receive not
less than 100% of the Liquidation Value of such Share plus all
accrued and unpaid dividends thereon in accordance with Section 4
above;

     (vi) effect a voluntary liquidation, dissolution, winding up
or other similar event of the Corporation, provided that the
affirmative vote of the holders of a majority of the outstanding
Shares shall not be necessary to effect a voluntary liquidation,
dissolution, winding up or other similar event of the Corporation
if each Share, as a result of such

15

 

voluntary liquidation,
dissolution, winding up or other similar event, will be entitled
to receive not less than 100% of the Liquidation Value of such
Share plus all accrued and unpaid dividends thereon in accordance
with Section 4 above; or

     (vii) become subject to (including by way of amendment to or
modification of) any agreement or instrument which by its terms
would (under any circumstances) restrict the Corporation’s right
to comply with these terms of the Series A Preferred Stock.

     8. Notices. All notices required to be sent by the
Corporation hereunder shall be sent by certified mail, return
receipt requested. At the same time that the Corporation delivers
any written notice to the record holders of the Series A Preferred
Stock, the Corporation shall send a copy of such notice by email
to those holders that have provided an email address to the
Corporation.

     9. Compliance. The Corporation will not, through any
reorganization, transfer of assets, consolidation, merger,
dissolution, issue or sale of securities or any other voluntary
action, avoid the observance or performance of any of the terms to
be observed or performed hereunder by the Corporation.

     10. Definitions. The following terms, as used herein, shall
have the following meanings:

     “Average Market Price” of any security for any time period
means the volume-weighted average of the sale prices for such
security during such time period on all securities exchanges on
which such security may at the time be listed, or, if such
security is not so listed during such time period, the
volume-weighted average of the sale prices for such security
during such time period quoted in the Nasdaq system, or, if such
security is not quoted in the Nasdaq system during such time
period, the volume-weighted average of the sale prices for such
security during such time period on the domestic over-the-counter
market as reported by the Pink Sheets LLC, or any similar
successor organization. If such security is not listed on any
securities exchange or quoted in the Nasdaq system or the
over-the-counter market during the relevant time period, the
“Average Market Price” shall be the fair value thereof determined
jointly by the Corporation and the holders of a majority of the
Series A Preferred Stock. If such parties are unable to reach
agreement within a reasonable period of time, such fair value
shall be determined by an independent appraiser experienced in
valuing securities selected by the Board and reasonably acceptable
to the holders of a majority of the Series A Preferred Stock. The
determination of such appraiser shall be final and binding upon
the parties, and the Corporation shall pay the fees and expenses
of such appraiser.

     “Business Day” means any day excluding Saturday, Sunday, and
any day which is a legal holiday under the laws of the State of
New York or is a day on which banking institutions located in such
state are authorized or required by law or other governmental
action to close.

16

 

     “Change of Control” means: (i) the sale, lease, transfer,
conveyance or other disposition, in one or a series of related
transactions, of all or substantially all the assets of the
Corporation and its subsidiaries taken as a whole to any “person”
(as such term is used in Section 13(d)(3) of the Exchange Act), or
(ii) the consummation of any transaction (including any merger or
consolidation) the result of which is that any “person” (as
defined above) other than Donald K. McGhan and his affiliates or
associates becomes the beneficial owner (as determined in
accordance with Rules 13d-3 and 13d-5 under the Exchange Act
except that a person will be deemed to have beneficial ownership
of all shares that such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of
time), directly or indirectly, of more than 50% of the Voting
Securities of the Corporation.

     “Conversion Stock” means shares of the Common Stock; provided
that if there is a change such that the securities issuable upon
conversion of the Series A Preferred Stock are issued by an entity
other than the Corporation or there is a change in the type or
class of securities so issuable, then the term “Conversion Stock”
shall mean one
share of the security issuable upon conversion of the Series
A Preferred Stock if such security is issuable in shares, or shall
mean the smallest unit in which such security is issuable if such
security is not issuable in shares.

     “EBITDA” means earnings before interest, taxes, depreciation,
and amortization, determined in accordance with GAAP.

     “Exchange Act” means the Securities Exchange Act of 1934, as
amended.

     “GAAP” means generally accepted accounting principles,
applied on a consistent basis, as set forth in (i) opinions of the
Accounting Principles Board of the American Institute of Certified
Public Accountants, (ii) statements of the Financial Accounting
Standards Board and (iii) interpretations of the Securities and
Exchange Commission and the Staff of the Securities and Exchange
Commission and each of their respective successors and which are
applicable in the circumstances as of the date in question.
Accounting principles are applied on a “consistent basis” when the
accounting principles applied in a current period are comparable
in all material respects to those accounting principles applied in
a preceding period.

     “Liquidation Value” on any date means, with respect to one
whole Share, $1,000 (as such dollar amount is proportionately
adjusted to reflect any stock dividend, stock split, reverse stock
split or other combination or subdivision of the Series A
Preferred Stock after the Series A Closing Date) and, with respect
to Originally Issued Shares only, following any addition of
Additional Liquidation Preference pursuant to Section 4(f), the
sum of the Liquidation Preference and the Additional Liquidation
Preference of such Share (as such dollar amount is proportionately
adjusted to reflect any stock dividend, stock split, reverse stock
split or other combination or subdivision of the Series A
Preferred Stock after the Series A Closing Date).

17

 

     “Originally Issued Shares” means Shares that are not Dividend
Shares.

     “Person” or “person” means any corporation, individual,
limited liability company, joint stock company, joint venture,
partnership, unincorporated association, governmental regulatory
entity, country, state or political subdivision thereof, trust,
municipality or other entity.

     “Securities Act” means the Securities Act of 1933, as
amended.

     “Series A Closing Date” means the date of the initial
issuance by the Corporation of any Shares of Series A Preferred
Stock.

     “Voting Securities” means securities of the Corporation
ordinarily having the power to vote for the election of directors
of the Corporation; provided that when the term “Voting
Securities” is used with respect to any other Person it means the
capital stock or other equity interests of any class or kind
ordinarily having the power
to vote for the election of directors or other members of the
governing body of such Person.”

     IN WITNESS WHEREOF, MediCor Ltd. has caused this Corrected Certificate of
Designation to be duly executed on August 6, 2004.

	 	 	 	 	 
	 	 	MEDICOR LTD.
	 
	 	 	 	 
	

	 	By:
	 	/s/ Donald K. McGhan
	

	 	 	 	

	

	 	 	 	Name: Donald K. McGhan
	

	 	 	 	Title: Chairman

18

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