SUBGROUND LEASE AGREEMENT

Exhibit 10.2.2

SUBGROUND LEASE AGREEMENT

Dated as of April 7, 2006

between

Inland Western Stockton Ground Tenant, L.L.C., as Lessor

and

Cost Plus, Inc.

as Lessee

 

Property:

Cost Plus World Market

Stockton, California

 

TABLE OF CONTENTS

 

 

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Table of Contents(Cont’d)

 

 

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THIS SUBGROUND LEASE AGREEMENT (this “ Agreement ”) is made and entered into as of April 7, 2006, by and between Inland Western Stockton Ground Tenant, L.L.C., as Lessor (“ Lessor ”), having its principal place of business at 2901 Butterfield Road, Oak Brook, Illinois, 60523, and Cost Plus, Inc., a California corporation, (“ Lessee ”), having a place of business at 200 Fourth Street, Oakland, California 94607.

RECITALS

A. Lessee was the owner of the Property, which is now owned by Inland Western Stockton Airport Way, L.L.C. (“Ground Lessor);

B. Lessor leases the Property from Ground Lessor pursuant to the terms of a ground lease (“Ground Lease”) of even date herewith. Lessee hereby acknowledges that its rights to use and occupy the Property are subject and subordinate to the rights of the Ground Lessor under the Ground Lease.

C. Lessor and Lessee now desire to enter into this Agreement;

D. Lessor desires to grant and delegate to Lessee, and Lessee desires to accept and assume from Lessor, certain rights and duties as described in this Agreement;

TERMS

NOW THEREFORE, in consideration of the mutual agreements herein contained and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows:

ARTICLE 1

DEFINITIONS

Definitions. The capitalized terms used herein and not otherwise defined shall have the meanings assigned thereto in Appendix A hereto for all purposes hereof.

ARTICLE 2

LEASE OF PROPERTY

Section 2.1 Demise and Lease. (a) Lessor hereby demises and leases the Property to Lessee, and Lessee does hereby rent and lease the Property from Lessor, for the Base Term (as such Base Term may be modified pursuant to the provisions of Article 4) and, subject to the exercise by Lessee of its renewal options as provided in Article 5 hereof, for the Renewal Terms.

(b) Lessee may from time to time own or hold under lease or license from Persons other than Lessor furniture, equipment and personal property, including Lessee’s Equipment and

 

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Personalty, located on or about the Property, which shall not be subject to this Lease. Lessor shall from time to time, upon the reasonable request of Lessee, promptly acknowledge in writing to Lessee or other Persons that Lessor does not own or, except as provided in Article 10, have any other right or interest in or to such furniture, equipment and personal property, including Lessee’s Equipment and Personalty, whether now owned or hereafter acquired, and Lessor hereby waives any such right, title or interest.

ARTICLE 3

RENT

Section 3.1 Base Rent . Lessee shall pay to Lessor Base Rent on each Rent Payment Date during the Base Term in the amount (except to the extent such amount may be modified pursuant to the provisions of Article 4 of this Lease), set forth on Schedule 3.1 attached hereto and incorporated herein, and shall pay to Lessor Base Rent on each Rent Payment Date during any Renewal Term as prescribed by Article 5. Each installment of Base Rent is payable monthly in advance.

Section 3.2 Supplemental Rent . Lessee shall pay to Lessor, or to such other Person as shall be entitled thereto in the manner contemplated herein or as otherwise required by Lessor, any and all Supplemental Rent as the same shall become due and payable. In the event of Lessee’s failure to pay when due and payable any Supplemental Rent, Lessor shall have all rights, powers and remedies provided for herein.

Section 3.3 Method of Payment . All Base Rent and Supplemental Rent (other than Excepted Payments) payable to Lessor shall, be paid to Lessor, or if Lessor directs (on at least ten (10) Business Days prior notice), to Lessor’s Lender in each case to the Rent Collection Account, as directed by Lessor or Lender as applicable, in immediately available funds as of the relevant payment date to the Rent Collection Account, or such other account or accounts in the continental United States as the Lender may from time to time designate (on at least ten (10) Business Days’ prior written notice) to Lessee. Upon payment in full of all amounts due to the Lender, as reasonably evidenced to Lessee, which evidence must include a written statement to that effect from the Lender, or evidence of release or assignment of the Lien of the Mortgage, or other similar evidence, Lessee shall accept instructions from Lessor (or its new lender, if so instructed by Lessor) as to the payment of Base Rent and Supplemental Rent. Each such payment of Rent shall be made by Lessee by wire or other transfer of funds consisting of lawful currency of the United States of America which shall be immediately available no later than 4:00 PM (New York City time) at the place of receipt on the scheduled date when such payment shall be due, unless such scheduled date shall not be a Business Day, in which case such payment shall be made at such time on the immediately following Business Day, with the same force and effect as though made on such scheduled dates. If any payment of Base Rent or Supplemental Rent is received after 4:00 PM (New York City time) on the dates when such rent is due, such rent shall be deemed received on the next succeeding Business Day.

Section 3.4 Late Payment . If any payment of Base Rent or any Supplemental Rent payable to Lessor shall be delinquent, Lessee shall pay interest thereon from the date such payment became due and payable to the date of receipt thereof by Lessor at a rate per annum equal to the Default Rate.

 

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Section 3.5 Net Lease, No Setoff, Etc. It is the intention of the parties hereto that the obligations of Lessee hereunder shall be separate and independent covenants and agreements, and that Base Rent, Supplemental Rent and all other sums payable by Lessee hereunder shall continue to be payable in all events, and that the obligations of Lessee hereunder shall continue unaffected, unless the requirement to pay or perform the same shall have been terminated pursuant to an express provision of this Lease. This Lease is a net lease and it is agreed and intended that Base Rent, Supplemental Rent and any other amounts payable hereunder by Lessee shall be paid without notice (except with respect to Supplemental Rent for which notice is specifically required herein), demand, counterclaim, setoff, deduction or defense and without abatement, diminution or reduction and that Lessee’s obligation to pay all such amounts, throughout the Base Term and all applicable Renewal Terms is absolute and unconditional. Under no circumstances shall Lessor be obligated to repay Lessee, refund to Lessee, or return to Lessee, any Base Rent.

This Lease shall not terminate and Lessee shall not have any rights to terminate this Lease, during the Base Term and any Renewal Terms (except as otherwise expressly provided in Article 12). Except to the extent otherwise expressly specified in this Lease, Lessee shall not take any action to terminate, rescind or void this Lease and the obligations and liabilities of Lessee hereunder shall in no way be released, discharged or otherwise affected for any reason, including without limitation: (a) any defect in the condition, merchantability, design, quality or fitness for use of the Property or any part thereof, or the failure of the Property to comply with all Applicable Laws, including any inability to occupy or use the Property by reason of such noncompliance; (b) any damage to, removal, abandonment, salvage, loss, condemnation (except as set forth in Article 12), theft, scrapping or destruction of or any requisition or taking of the Property or any part thereof, or any environmental conditions on the Property or any property in the vicinity of the Property; (c) any restriction, prevention or curtailment of or interference with any use of the Property or any part thereof including eviction; (d) any defect in title to or rights to the Property or any Lien on such title or rights to the Property; (e) any change, waiver, extension, indulgence or other action or omission or breach in respect of any obligation or liability of or by any Person; (f) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceedings relating to Lessee, Lessor or any other Person, or any action taken with respect to this Lease by any trustee or receiver of Lessee or any other Person, or by any court, in any such proceeding; (g) any right or claim that Lessee has or might have against any Person, including without limitation Lessor, the Lender, or any vendor, manufacturer, contractor of or for the Property; (h) any failure on the part of Lessor or any other Person to perform or comply with any of the terms of this Lease; (i) any invalidity, unenforceability, rejection or disaffirmance of this Lease by operation of law or otherwise against or by Lessee or Lessor or any provision hereof; (j) the impossibility of performance by Lessee or Lessor, or both; (k) any action by any court, administrative agency or other Governmental Authority; (l) any interference, interruption or cessation in the use, possession or quiet enjoyment of the Property; (m) the exercise of any remedy, including foreclosure, under the Mortgage, (n) any action with respect to this Lease (including the disaffirmance or rejection hereof) which may be taken by Lessor or Lessee under the Federal Bankruptcy Code or by any trustee, receiver or liquidator of Lessor or Lessee or by any court under the Federal Bankruptcy Code or otherwise, (o) the prohibition or restriction of Lessee’s use of the

 

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Property under any Applicable Laws or otherwise, (p) the eviction of Lessee from possession of the Property, by paramount title or otherwise, (q) any breach or default by the Lessor hereunder or under any other agreement between Lessor and Lessee; or (r) any other occurrence whatsoever, whether similar or dissimilar to the foregoing, whether foreseeable or unforeseeable, and whether or not Lessee shall have notice or knowledge of any of the foregoing. Except as specifically set forth in this Lease, this Lease shall be noncancellable by Lessee for any reason whatsoever and, except as expressly provided in this Lease, Lessee, to the extent now or hereafter permitted by Applicable Laws, waives all rights now or hereafter conferred by statute or otherwise to quit, terminate or surrender this Lease or to any diminution, abatement or reduction of Rent payable hereunder. Under no circumstances or conditions shall Lessor be expected or required to make any payment of any kind hereunder or have any obligations with respect to the use, possession, control, maintenance, alteration, rebuilding, replacing, repair, restoration or operation of all or any part of the Property, so long as the Property or any part thereof is subject to this Lease, and Lessee expressly waives the right to perform any such action at the expense of Lessor whether hereunder or pursuant to any law. Lessee waives all rights which are not expressly stated herein but which may now or hereafter otherwise be conferred by law (i) to quit, terminate or surrender this Lease or any of the Property; (ii) to have any setoff, counterclaim, recoupment, abatement, suspension, deferment, diminution, deduction, reduction or defense of or to Base Rent, Supplemental Rent, or any other sums payable under this Lease, except as otherwise expressly provided herein; and (iii) to have any statutory lien or offset right against Lessor or its property.

ARTICLE 4

IMPROVEMENTS

4.1 The Improvements. Lessee, at its sole cost and expense, may at any time during the first six (6) years of the Base Term, construct a new building (the “Improvements”) on the Property. The Improvements if and when constructed shall be built in accordance with plans and specifications reasonably acceptable to Lessor and pursuant to a budget (“Approved Budget”) which remain subject to Lessor’s approval and which approval shall not unreasonably be denied; provided such Approved Budget is subject to reasonable modifications (which modifications shall in no event, in the aggregate, exceed ten percent (10%) of the initial Approved Budget), which modifications remain subject to Lessor’s approval, which approval shall not unreasonably be denied. All Improvements shall be built in compliance with all Applicable Laws, the applicable provisions of this Lease and for a cost which will not exceed the Approved Budget as the Approved Budget may be modified pursuant to the immediately preceding sentence. The Property consists of approximately 56.5492 acres and is part of a larger parcel (“Total Parcel”) of land consisting of approximately 79.3533 acres. The portion of Total Parcel other then the Property (“Adjacent Parcel”) consists of approximately 22.8041 acres and is leased by Lessor to Lessee pursuant to a Lease (“Building Lease”). There is an existing building (“Existing Building”) located on the Adjacent Parcel. The Adjacent Parcel and approximately 32.5487 acres upon which the Improvements will be constructed (“Improvements Parcel”) are sometimes collectively referred to as the “Merged Parcel”. Lessee intends, at its sole cost and expense, to subdivide the Total Parcel into two (2) parcels as soon as reasonably possible following the date of this Lease. The two parcels consist of the Merged Parcel, and the remainder parcel (“Remainder Parcel”) consisting of approximately 24.0005 acres. The approximate location and descriptions of the Improvements

 

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Parcel, the Adjacent Parcel and the Remainder Parcel are shown and described on Exhibits C-1-C-3 attached hereto. Lessee shall use commercially reasonable efforts to legally resubdivide the Total Parcel into the Merged Parcel and Remainder Parcel. Lessee shall obtain separate tax identification numbers for each of the Adjacent Parcel, Improvements Parcel and the Remainder Parcel. Subject to Lessee’s obligation, at its sole cost and expense, to retain all liability, including, but not limited to, environmental liability related thereto (subject to the provisions of Section 8.5(a) and Article 19), Lessor shall permit the use of the Remainder Parcel to store fill material relating to construction of the Improvements.

4.2 Construction Loan Financing . Provided that Lessee’s net worth and net income, at the date of the first funding of the Construction Loan, both remain, at least, at a level which is, at least, ninety percent (90%) of its net worth (except for reductions in Lessee’s net worth resulting from Lessee’s repurchase of its own stock) and annual net income, respectively, as of the effective date of this Lease, Lessor on behalf of itself and its affiliates hereby agrees to provide construction financing (“Construction Loan”) until the end of the sixth Lease Year for construction of the Improvements. If actual physical construction of the Improvements is commenced on or before June 30, 2006 the Construction Loan shall earn interest at the rate of 7.16936% (“Base Rent Divider”) and if the actual physical construction of the Improvements commences after June 30, 2006 and prior to the end of the sixth (6 ^th ) Lease Year, the Construction Loan shall earn interest at an interest rate (“Combined Interest Rate”) equal to the sum of the (i) ten (10) year Treasury Rate at the time the Construction Loan is funded, plus (ii) 2.01436% plus (iii) a “lender’s spread” based upon the average of three (3) quotes above the ten (10) year Treasury Rate from institutional lenders (one of which will be Bank of America) primarily engaged in the business of commercial real estate and construction loan financing of leases and tenants similar to the Lease and of a credit the same or similar to Lessee. The Construction Loan documents will be on forms generally acceptable in the industry for large commercial warehouse facilities. The Construction Loan documents will require a guaranty of completion of the Improvements, from Lessee, by no later than 455 days after the first funding of the Construction Loan plus such additional time as may be required solely due to force majeure items i.e. those items beyond Lessee’s reasonable control, but not including delays which are caused by matters that are merely inconvenient or should have been anticipated. Lessee’s net worth for the fiscal year ending January 28, 2006 was approximately $316,081,000 and Lessee’s net income for the fiscal year ending January 28, 2006 was approximately $20,233,000.

4.3 Earnout: Upon satisfaction of all of the following items (i) – (vi) Lessor shall pay Lessee an earnout payment equal to the total cost of construction of the Improvements (“Total Cost”): (i) completion of the Improvements in accordance with all Applicable Laws, the approved plans and specifications, and the Approved Budget, (ii) issuance by the City of Stockton of an unconditional certificate of occupancy, together with evidence that the Lessee is in occupancy of the Improvements and is conducting its business therein, (iii) issuance by the Title Company of a date down title policy subject only to Permitted Exceptions insuring the Lessor’s interest in the Property lien free and insuring the value of the Improvements, and including such endorsements as Lessor reasonably requests, (iv) issuance of an ALTA survey including all Table A Items 1, 2, 3, 4, 6, 7(a), (b)(i) (c), 8, 9, 10, 11(a), 12-16 and certified to Lessor and Lender, (v) issuance of a zoning letter from the City of Stockton confirming that the Improvements located on the Property are in compliance with all applicable zoning laws and constitute a conforming use, and (vi) a modification

 

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of this Lease to (a) extend Lessee’s right to early termination until, at least, ten (10) years from the effective date of the modification, (b) increase the Base Rent to an amount equal to the product obtained by multiplying the (i) Total Cost times the Combined Interest Rate plus (ii) the Base Rent payable under this Lease as of the effective date of the modification of this Lease with five percent (5%) increases to the Base Rent every five (5) years commencing on the first day of the initial Base Term and (c) extend Lessee’s right of early termination until, at least, ten (10) years following the date of the modification, which shall be a period coterminous with the Building Lease. As an example, if construction of the Improvements was completed in December 2007 the expiration date of the Building Lease would continue as April 30, 2026, but, for purposes of early termination, Lessee’s tenth (10 ^th ) Lease Year shall commence in December, 2016, and end in December, 2017 with the first five percent (5%) increases to the Base Rent commencing on May 1, 2011 i.e. five (5) years following the commencement date of the initial Base Term. For purposes hereof Total Cost shall mean the actual hard cost of construction of the Improvements and the cost to prepare the plans and specifications, all fees and costs of regulating agencies and utility companies; all professional fees and costs; and all other costs that are customary in the development of this type of building, but in no event including the cost of the Property, the cost of the racking systems and distribution systems which are to be installed as part of the Improvements, commissions, developer fees or amounts in excess of the Approved Budget, as such Approved Budget may be modified pursuant to Subsection 4.1

4.4 Remainder Parcel .

(a) Not later than thirty (30) days immediately following Lessor’s receipt of written notice from Lessee of the subdivision of the Remainder Parcel from the Total Parcel, together with evidence of such subdivision reasonably acceptable to Lessor and (i) a revised survey of the Property reflecting the deletion of the Remainder Parcel and (ii) a revised title policy reflecting the deletion of the Remainder Parcel, but otherwise containing all of the endorsements contained in the title insurance policy issued to Ground Lessor on the Closing Date including, but not limited to, a zoning endorsement, separate tax index number endorsement, comprehensive endorsement and access endorsement, Lessor shall cause Ground Lessor to convey the Remainder Parcel to Lessee by grant deed, at no additional consideration, and cause the Mortgage to be released against the Remainder Parcel. Simultaneous with such conveyance the Lease will be modified to delete the reference to the Remainder Parcel without, however, reducing the Rent. Lessor shall retain all cross easement rights as is reasonably deemed necessary for parking, access and signage. Lessee shall be responsible for payment of documentary transfer taxes, escrow and recording fees, closing costs, all survey costs and the premium for an owner’s policy of title insurance with respect to such conveyance of the Remainder Parcel. During Ground Lessor’s period of ownership of the Remainder Parcel, Lessor shall not, and shall ensure that Ground Lessor does not, transfer any interest in the Remainder Parcel or take any action that would materially impair or otherwise materially negatively affect the value of the Remainder Parcel or give rise to any lien or encumbrance affecting the Remainder Parcel.

 

(b)

If Lessee, despite its diligent, good faith, efforts, is unable to subdivide the Remainder Parcel from the Total Parcel within twelve (12) months after the Closing Date and there is no uncured Lease Event of Default, Lessor shall

 

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cause Ground Lessor to deliver written instructions to the Escrow Agent (as defined in the “Purchase and Sale Agreement” of even date herewith by and between Lessee, as Seller, and Ground Lessor, as Buyer) to promptly disburse to Lessee the Holdback Amount (as defined in the Purchase and Sale Agreement), together with all interest accrued thereon. In that event, Schedule 3.1 shall be modified to reflect an increase in Base Rent attributable to the rent payable for the Remainder Parcel.

4.5 Condominium Regime: Lessee shall, at its sole cost and expense including, but not limited to, all engineering, survey and legal costs necessary to legally create a condominium regime (except for Lessor’s agreement to pay one half of all legal costs not to exceed Twelve Thousand Five Hundred Dollars ($12,500)), use commercially reasonable efforts to create a condominium regime for the Total Parcel comprised of separate condominium units for the Improvements Parcel, Adjacent Property and the Remainder Parcel, including, but not limited to preparation and filing of a condominium map, creation of an association for the operation of the parcels as condominium units and preparation of covenants, conditions or restrictions for the mutual benefit and protection of the condominium unit owners and occupants. Provided, in the event the Remainder Parcel has been legally subdivided from the Adjacent Property prior to creation of the condominium regime, the Remainder Parcel may be excluded therefrom. The form of condominium map and ancillary condominium documents shall comply with all applicable laws, ordinances and regulations and shall be subject to the prior written approval of Lessor and Lender. Nothing contained herein shall be construed as authorizing Lessee to execute documents creating the condominium regime on behalf or as agent for Lessor. Lessor shall cooperate and shall cause the Ground Lessor to cooperate with Lessee and will cause Ground Lessor to execute all documents necessary to create the condominium regime as owner of the Improvements Parcel and the Adjacent Property. In the event Lessee after using its commercially reasonable efforts to form the condominium regime as soon as reasonably possible after the Closing Date, is unable to complete the condominium regime not later than one hundred and eighty (180) days immediately following the Closing Date then, at the sole option of Lessor, such attempts to create a condominium regime may be abandoned. Following creation of the condominium regime Lessee shall assume all of Lessor’s obligations as a condominium owner of the Improvements Parcel as are set forth in the condominium covenants, conditions and restrictions or otherwise established by separate document or by applicable law except to the extent inconsistent with the allocation of obligations between Lessor and Lessee as set forth in the Lease. The parties

 

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hereto hereby release each other from any and all claims arising out of or in connection with creation of the condominium regime and covenant not to sue each other in connection therewith; provided that each party hereby covenants to cooperate with one another and to take all action reasonably necessary to remediate any error which is subsequently discovered regarding development, creation or operation of the condominium regime.

ARTICLE 5

RENEWAL OPTIONS

Section 5.1 . Renewal Options.

Lessor hereby grants to Lessee the option to extend the term of this Lease for the following periods (each, a “ Renewal Term ”):

(a) for two consecutive terms of five (5) years each and a third consecutive terms of four (4) years, the first commencing on the date that is the day after the expiration of the Base Term and ending on the fifth (5th) anniversary of the expiration of the Base Term (the “ First Renewal Term ”); the second (the “ Second Renewal Term ”) commencing on the day that is the day after the expiration of the First Renewal Term and ending on the fifth (5th) anniversary thereof and the third (“ Third Renewal Term ”) commencing on the day that is the day after the expiration of the Second Renewal Term and ending on the fourth (4 ^th ) anniversary thereof (collectively, the “ Renewal Terms ”).

In order to exercise its option to extend this Lease for any Renewal Term, the Lessee shall give Lessor written notice of its intent to exercise its option to extend the term of this Lease not less than twelve (12) months prior to the expiration of the Base Term or the then current Renewal Term, time being of the essence. If Lessee fails to provide such notice for any Renewal Term Lessee will be deemed to have waived its right to renew.

(b) The monthly Base Rent for the Renewal Terms shall be as set forth on Schedule 3.1 hereof.

(c) The right of Lessee to extend the term of this Lease for any Renewal Term is contingent upon there not being any Lease Event of Default in existence on the date of Lessee’s exercise of such right or on the date that the Renewal Term commences.

5.2 Lease Provisions Applicable During Renewal . All the provisions of this Lease shall be applicable during each Renewal Term and the number of Renewal Terms shall be correspondingly reduced.

 

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ARTICLE 6

LESSEE’S ACCEPTANCE OF PROPERTY, ENFORCEMENT OF WARRANTIES

Section 6.1 . Waivers. The Property is demised and let by Lessor “AS IS” in its present condition, subject to (a) the rights of any parties in possession thereof (other than rights, if any, granted by Lessor), (b) the state of the title thereto existing at the time of the commencement of the Lease Term (other than defects in, or exceptions to, title, if any, created by Lessor, but including liens created by the Mortgage and related debt documents), (c) any state of facts which an accurate survey or physical inspection might show, (d) all Applicable Laws, (e) any violations of Applicable Laws which may exist at the commencement of the Lease Term and (f) the presence of any Hazardous Materials at or under the Property or at or under any property in the vicinity of the Property. NONE OF LESSOR, LENDER OR ANY AFFILIATE THEREOF HAS MADE OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, OR SHALL BE DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE VALUE, HABITABILITY, COMPLIANCE WITH ANY PLANS AND SPECIFICATIONS, CONDITION, DESIGN, OPERATION, LOCATION, USE, DURABILITY, MERCHANTABILITY, CONDITION OF TITLE, OR FITNESS FOR USE OF THE PROPERTY (OR ANY PART THEREOF) FOR ANY PARTICULAR PURPOSE, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE PROPERTY (OR ANY PART THEREOF) AND NONE OF LESSOR, ANY AFFILIATE THEREOF OR LENDER OR ANY DESIGNEE THEREOF SHALL BE LIABLE FOR ANY LATENT, HIDDEN, OR PATENT DEFECT THEREIN OR FOR THE FAILURE OF THE PROPERTY TO BE CONSTRUCTED IN ACCORDANCE WITH ANY PLANS AND SPECIFICATIONS THEREFOR, FOR THE COMPLIANCE OF THE PLANS AND SPECIFICATIONS FOR THE PROPERTY WITH APPLICABLE LAWS OR FOR THE FAILURE OF THE PROPERTY, OR ANY PART THEREOF, TO OTHERWISE COMPLY WITH ANY APPLICABLE LAWS. It is agreed that Lessee or an Affiliate of Lessee has occupied the Property as tenant or owner immediately prior to entering into this Lease, has inspected the Property, is satisfied with the results of its inspections of the Property and is entering into this Lease solely on the basis of the results of its own inspections and all risks incident to the matters discussed in the preceding sentence. The provisions of this Article 6 have been negotiated, and the foregoing provisions are intended to be a complete exclusion and negation of any representations or warranties by Lessor, any Affiliate thereof or a Lender, express or implied, with respect to the Property, that may arise pursuant to any law now or hereafter in effect, or otherwise and specifically negating any warranties under the Uniform Commercial Code.

Section 6.2. Lessee’s Right to Enforce Warranties.

(a) Lessor hereby assigns and sets over to, and Lessee hereby accepts the assignment of all of Lessor’s right, title and interest, and estate in, to and under, any and all warranties and other claims against dealers, manufacturers, vendors, contractors and subcontractors relating to the construction, use and maintenance of the Property or any portion thereof now existing or hereafter acquired (excluding from such assignment any such warranties and claims which by their terms are

 

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not assignable by Lessor without loss of some or all of the benefits of such warranties or claims); provided , however , that Lessor shall have no obligations under, or liabilities with respect to, any such warranties and claims.

(b) Lessor authorizes Lessee (directly or through agents) at Lessee’s expense to assert during the Lease Term, all of Lessor’s rights (if any) under any applicable warranty and any other claim that Lessee or Lessor may have against any dealer, vendor, manufacturer, contractor or subcontractor with respect to the Property or any portion thereof.

(c) Lessor agrees, at Lessee’s expense, to cooperate with Lessee and take all other action necessary as specifically requested by Lessee to enable Lessee to enforce all of Lessee’s rights (if any) under this Section 6.2, such rights of enforcement to be exclusive to Lessee, and Lessor will not, during the Lease Term, amend, modify or waive, or take any action under, any applicable warranty and any other claim that Lessee may have under this Section 6.2 without Lessee’s prior written consent.

ARTICLE 7

LIENS

Section 7.1 . Liens . Lessee shall not directly or indirectly create, incur, assume or suffer to exist any Lien on or with respect to any and all of the Property, title thereto or any interest therein, to this Lease or the leasehold interest created hereby or to Rent actually paid to Lessor or the rentals payable with respect to the subletting of the Property (up to the amount of such rentals payable to Lessor hereunder), except Permitted Liens. Lessee shall promptly, but not later than sixty (60) days after receipt of notice of the filing thereof, at its own expense, take such action as may be necessary duly to discharge or eliminate or bond in a manner reasonably satisfactory to Lessor any such Lien (other than Permitted Liens); provided, however, Lessee may contest such Lien in good faith, upon satisfaction of the conditions contained in Section 8.6, below, and need not discharge or bond such Lien while so doing provided (i) Lessee has a long term unsecured debt rating equal to or above the Trigger Rating; (ii) no action to foreclose the Lien has been brought in any judicial or quasi-judicial action; and (iii) no Lease Event of Default is then continuing.

NOTHING CONTAINED IN THIS LEASE SHALL BE CONSTRUED AS CONSTITUTING THE CONSENT OR REQUEST OF LESSOR, EXPRESS OR IMPLIED, TO OR FOR THE PERFORMANCE BY ANY CONTRACTOR, LABORER, MATERIALMAN, OR VENDOR OF ANY LABOR OR SERVICES OR FOR THE FURNISHING OF ANY MATERIALS FOR ANY CONSTRUCTION, ALTERATION, ADDITION, REPAIR OR DEMOLITION OF OR TO THE PROPERTY OR ANY PART THEREOF, WHICH WOULD RESULT IN ANY LIABILITY OF LESSOR FOR PAYMENT THEREFOR. NOTICE IS HEREBY GIVEN THAT LESSOR WILL NOT BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO LESSEE, OR TO ANYONE HOLDING AN INTEREST IN THE PROPERTY OR ANY PART THEREOF THROUGH OR UNDER LESSEE, AND THAT NO MECHANICS OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF LESSOR IN AND TO THE PROPERTY.

 

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Notwithstanding the foregoing paragraph, Lessor agrees to reasonably cooperate with Lessee (without exposing its interest in the Property), at no cost to Lessor, to allow Lessee to perform alterations on the Property in accordance with Section 8.3.

ARTICLE 8

USE AND REPAIR

Section 8.1. Use. The Property may be used (“ Permitted Use ”) for any lawful purpose, except (a) for the operation of a public nuisance, or any other use that would materially increase the risk of Lessor incurring environmental liability, (b) for any use that would make it impossible to obtain or would invalidate any insurance policy of the Property, provided such policy is required to be maintained hereunder, (c) for any use that would involve the mining for, or removal of, any oil, gas or minerals, or (d) for any use that involves the storage, handling or processing of Hazardous Materials in violation of Applicable Law. Lessor agrees that Lessee may exercise the rights of Lessor under any property association now existing or hereafter existing, provided (i) Lessee takes no action which could result in either a violation of this Lease or a material adverse effect on the Property, and (ii) Lessee does not encumber the Property by any lien for the payment of money, which could survive expiration of the Lease, or execute documents on behalf of the Lessor unless such documents will not have a material adverse effect on the Property, or Lessor’s interest therein.

Section 8.2. Maintenance . Lessee, at its own expense, shall at all times, (i) maintain the Property in good condition and repair appropriate for its use, reasonable wear and tear excepted, and (ii) maintain the Property in accordance with the requirements of all insurance policies relating to the Property required to be maintained hereunder and in compliance with Applicable Laws and (iii) make repairs and Alterations of the Property necessary to keep the same in the condition required by the preceding clauses (i) and (ii), whether interior or exterior, structural or nonstructural, ordinary or extraordinary, foreseen or unforeseen and regardless of whether such expenditures would constitute capital expenses under GAAP if made by the owner of the Property; provided, if such repairs are structural and pursuant to Section 8.3 require the consent of the Lessor, Lessee shall obtain such consent before performing such repairs in accordance with the applicable provisions of Section 8.3 below. In no event shall Lessor be entitled to any management fee, supervisory fee, administrative fee, or any other fee payable by Lessee relating to its ownership of the Property.

Section 8.3. Alterations . (a)  At any time and from time to time, after completion of the Improvements pursuant to the provisions of Article 4 of this Lease, and without Lessor’s consent, Lessee, at its sole cost and expense, may make (1) non-structural Alterations to the Property; (2) structural Alterations to the Property costing, for each scope of work, as reasonably determined by Lessee, less than the Threshold Amount with prior notice to Lessor; and (3) Structural Alterations in an amount, for each scope of work, as reasonably determined by Lessee, at or above the Threshold Amount after giving prior written notice to Lessor, and obtaining Lessor’s prior written consent, which shall not be unreasonably withheld, conditioned or delayed; provided that no Alteration (whether consent is necessary or not) shall (i) impair in any material respect the utility, remaining useful life, or fair market value of the Property, in each case assuming that the Improvements are

 

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then being operated and maintained in accordance with this Article 8, or (ii) create a violation of this Lease, or (iii) increase in any material respect the risk of liability to the Lessor including any material risk of liability under any Environmental Laws, or (iv) materially and permanently reduce the rentable square footage of the Improvements, or (v) materially weaken, temporarily (other than during construction or repair of the structure) or permanently, the structure of the Improvements or any part thereof, or (vi) reduce the permitted uses thereof under applicable zoning or land use laws so as to reduce the fair market value of the Property. Notwithstanding the requirements for notice and consent set forth above, Lessee may, in good faith, make any repairs (structural or non-structural) required by virtue of an emergency, without satisfying any otherwise applicable notice and/or consent requirement, provided Lessee notifies Lessor of such repair (to the extent otherwise required) as promptly as is reasonably practical, after the emergency and obtains Lessor’s consent in the manner required in Section 8.3(c), below, to the repairs made, and otherwise satisfies the provisions of this Section 8.3, all as promptly as practicable. Lessor shall consent to any work already performed or being performed unless such work either violates the terms of this Lease or violates Applicable Law.

(b) Every Alteration shall comply with the following terms (which compliance shall be at Lessee’s sole cost and expense): (i) except (unless required by Applicable Law) for Alterations costing less than $2,000,000 (or $500,000.00 if Lessee does not have a Required Rating equal to at least the Trigger Rating) for each scope of work, as reasonably determined by Lessee, the Alteration shall be made with plans prepared by a certified architect or civil engineer who shall be licensed in the appropriate jurisdiction to the extent required for the filing of any plans in connection with such Alteration (which architect may be an employee of Lessee or its Affiliates), and shall be done under the supervision of such architect or engineer, or other reasonably capable person, and copies of such plans and specifications shall be delivered to Lessor prior to construction, (ii) the structural integrity of the existing Improvements will not be impaired upon completion of such work, (iii) Lessee shall obtain any licenses, approvals or permits required (including final approvals), copies of which shall be delivered to Lessor upon written request by such party, and (iv) such Alterations, except as permitted pursuant to an easement granted in accordance with subsection 8.3(d) of this Lease, will not encroach upon any adjacent premises. Lessor agrees to cooperate with Lessee (at no cost to Lessor) in signing permit applications and similar documents to the extent required for any Alteration. Lessee shall submit such applications or similar documents to Lessor to the extent Lessor’s approval is required for the subject Alteration. Lessee may execute such applications or similar documents on behalf of and (if necessary) in the name of, Lessor for all Alterations for which Lessor’s consent is not required, and for Alterations for which Lessor’s consent is required, has been granted, but Lessor does not execute such documents within 10 days of request therefore. Lessee shall promptly furnish Lessor with copies of all documents Lessee has signed on behalf of Lessor. Nothing herein shall be deemed to impose any liability or responsibility on Lessor for performance or payment of such Alteration. Any Claim asserted against or incurred by Lessor arising out of the foregoing shall be indemnified by Lessee pursuant to the terms of Section 19.1, below. In connection with any Alteration, Lessee shall perform and complete all work promptly and in a good, worker-like manner in compliance with Applicable Laws and the plans and specifications submitted to Lessor, if applicable. Lessee shall either (i) maintain or cause to be maintained at all times during construction builder’s all risks insurance and comprehensive general liability insurance required under this Lease naming Lessor and Lender as loss payees as their interests may appear under such

 

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property insurance, and as additional insureds under such liability insurance or (ii) self insure the risk otherwise insured by the policies required in subsection (i) hereof, which self insurance shall be subject to, and available only upon satisfaction of, the provisions of Section 9.1(b). In the event Lessor and Lessee cannot agree as to whether Lessor unreasonably withheld its consent to a proposed Alteration, the parties agree to submit such dispute to the American Arbitration Association in California for binding resolution in accordance with its expedited arbitration procedures.

(c) With respect to such structural Alterations for which Lessee must obtain the consent of Lessor pursuant to the terms of this Lease, Lessor shall each have fifteen (15) days after Lessee’s delivery of its request for consent, together with preliminary drawings and specifications for such Alterations, within which Lessor, may grant or not grant Lessee’s request for consent. If Lessor shall have not within such 15-day period responded to Lessee, Lessee may give a second notice which clearly shall state in bold-face type that the failure to respond within five (5) days shall be deemed consent. If Lessor shall not, within five (5) days after such second notice, notify Lessee that such consent will not be granted, such consent shall be deemed to have been granted. All reasonable out-of-pocket costs of review incurred by Lessor (whether or not the Alteration is approved) shall be paid by Lessee within thirty (30) days of receipt of an invoice therefore.

(d) Improvements may connect to and attach to the Existing Building leased to Lessee on the Adjacent Property. Lessor hereby consents to the construction of the Improvements as necessary to permit the attachment of the Improvements to the Existing Building, access between the Property and the Adjacent Property and shall include, without limitation, access between the Existing Building and the Improvements and to the execution of a party wall agreement upon completion of the Improvements to permit the continued existence of all connection points between the Improvements and the Existing Building all in a form reasonably acceptable to Lessor and Lessee and provided all of the following conditions are satisfied to Lessor’s reasonable satisfaction: (i) both the Improvements and the Existing Building shall be capable of complete independent operation and shall, upon completion of a demising wall be separate, independent fully operational buildings in compliance with all Applicable Laws (except that no computer or information technology room will be required as part of the Improvements), (ii) a cost sharing agreement shall have been executed allocating the cost for repair and replacement of all common areas, (iii) a date down title insurance policy shall have been issued by the Title Insurance Company subject only to the Permitted Encumbrances and (iv) Lessee indemnifies Lessor its successors and assigns from all losses Lessor may incur as a result of the construction and operation of the Alterations connecting the Improvements to the Existing Building. At Lessor’s request, submitted in writing at least sixty (60) days in advance, Lessee shall deliver the Property prior to the expiration or earlier termination of this Lease with a demising wall separating the Improvements and the Existing Building (to the extent permissible under Applicable Laws). Lessee shall be responsible for all costs and expenses in connection with the construction of the demising wall.

Section 8.4 . Title to Alterations. Title to Alterations shall without further act vest in Lessor and shall be deemed to constitute a part of the Property and be subject to this Lease in the following cases:

(a) such Alteration shall be in replacement of or in substitution for a portion of the Improvements as of the date hereof,

 

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(b) such Alteration shall be required to be made pursuant to the terms of Section 8.2; or

(c) such Alteration shall be Nonseverable.

If an Alteration is not within any of the categories set forth in Section 8.4(a) through Section 8.4(c), then title to such Alteration shall vest in Lessee and shall be removed by Lessee to the extent required in accordance with Article 10 hereof. All Alterations to which title shall vest in Lessee as aforesaid, and all Lessee’s Equipment and Personalty, so long as removal thereof shall not result in the violation of any Applicable Laws or this Lease, may be removed at any time by Lessee, provided that Lessee shall, at its expense, repair any damage to the Property caused by the removal of such Alteration. Lessee shall provide “AS-BUILT” plans to Lessor for any structural Alterations within a single scope of work (as reasonably determined by Lessee) costing in excess of $2,000,000.00.

Section 8.5. Compliance with Law; Environmental Compliance.

(a) Lessee, at Lessee’s expense, shall comply, and shall cause its subtenants and other users of the Property to comply, in all material respects at all times with all Applicable Laws, including Environmental Laws. Such compliance includes, without limitation, Lessee’s obligation, at its expense, to take Remedial Action when required by Applicable Laws (in accordance with Applicable Laws, and this Lease) whether such requirement is now or hereafter existing, currently known or unknown to Lessee and/or Lessor, as and when such requirements are known to Lessee. Lessee shall not however, be responsible to take Remedial Action in connection with a Release caused solely by the active (but not passive) actions of Lessor or its employees, agents or contractors. In the event that Lessee is required or elects to enter into any plan relating to a Material Remedial Action in connection with the Property with respect to any Environment Laws, Lessee shall periodically apprise Lessor of the status of such remediation plan and, upon Lessor’s request, provide copies of all correspondence, plans, proposals, contracts and other documents relating to such plan or proposed plan. Lessee may in good faith contest the applicability or alleged liability under any Environmental Law to the Property, provided (i) such contest will not result in a lien, encumbrance or judgment against the Property or Lessor, (ii) such contest satisfies the conditions set forth in subsections 8.6(i), (ii), (iii), (iv), (v), (vi) and (vii), below, (iii) Lessee then has a Required Rating equal to or better than the Trigger Rating, and (iv) compliance with such Law will be satisfied as of the expiration date or earlier termination of the Lease, and if not completed by the expiration date, Lessee will continue to remain liable to comply with such Law and shall diligently prosecute such plan, and Lessor shall provide access to the Property to allow Lessee to finish its remediation plan. Lessee shall keep Lessor regularly apprised of the status of such contest. In all events Lessee must pay any cost, fine, penalty, assessment or other charge after the contest is either adversely decided or terminated voluntarily by Lessee or because it no longer has the right to contest pursuant to the terms of the Lease. In the event Lessee does not have a Required Rating equal to or in excess of the Trigger Rating, Lessee may nonetheless contest the applicability of any Environmental Law provided that Lessee and Lessor agree upon an Approved Environmental Consultant who shall, at Lessee’s sole cost and expense, prepare a report within sixty (60) days of being retained, which report shall state the costs the Approved Environmental Consultant reasonably

 

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believes is likely to be incurred by Lessee to comply with the Environmental Law in the event Lessee loses its contest. If, within thirty (30) days of receipt of said report, Lessee procures a letter of credit or other bonds in a form reasonably acceptable to Lessor or deposits cash with the Proceeds Trustee an amount equal to 110% of the cost estimated by the Approved Environmental Consultant to comply with the Environmental Law, Lessee may continue the contest, provided the other terms of this Section 8.5 are met. In the event Lessee loses the contest and is forced to incur costs to comply with the Environmental Law, the Proceeds Trustee shall dispense the amount retained by it pursuant to this paragraph from time to time, in accordance with the provisions of Section 12.4 below, with any balance remaining thereafter to be disbursed to Lessee provided no Lease Event of Default then exists and is continuing. Lessor and Lessee shall reasonably cooperate in selecting the Approved Environmental Consultant.

(b) Lessee shall notify Lessor promptly if (i) Lessee becomes aware of the presence or Release of any Hazardous Material at, on, under, emanating from, or migrating to, the Property in any quantity or manner, which could reasonably be expected to violate in any material respect any Environmental Law or give rise to any Material liability, or (ii) Lessee receives any written notice, claim, demand, request for information, or other communication from a Governmental Authority or a third party regarding the presence or Release of any Hazardous Material at, on, under, within, emanating from, or migrating to the Property or related to the Property which could reasonably be expected to violate in any material respect any Environmental Law or give rise to any Material liability. In connection with any actions undertaken by Lessee or at Lessee’s direction pursuant to this Lease, Lessee shall at all times comply with all applicable Environmental Laws and with all other Applicable Laws and shall use an Approved Environmental Consultant to perform any Remedial Action.

Section 8.6. Payment of Impositions.

(a) Lessee shall pay or cause to be paid all Impositions before any fine, penalty, premium, further interest (except as provided in the immediately succeeding sentence with respect to installments) or cost may be assessed or added for nonpayment, such payments to be made directly to the taxing authorities where feasible. If requested, Lessee shall deliver to Lessor copies of receipts, canceled checks or other documentation reasonably satisfactory to Lessor evidencing payment of Impositions to the extent Lessee maintains such documentation as part of its customary retention policy; provided, however, that Lessee shall maintain in its records evidence of payment of Taxes for a period of no less than four (4) years. If any such Imposition may, at the option of the taxpayer, lawfully be paid in installments (regardless whether interest shall accrue on the unpaid balance of such Imposition), Lessee may exercise the option to pay the same in installments, and in such event Lessee shall pay only those installments that become due and payable during the Lease Term or relate to the Lease Term, as the same become due and before any fine, penalty, premium, further interest or cost may be assessed or added thereto.

(b) Lessee shall pay to Lessor on each Rent Payment Date one-twelfth of the Taxes that Lessor estimates will be payable during the next ensuing twelve (12) months in order to accumulate with Lessor sufficient funds to pay all such Taxes at least thirty (30) days prior to their respective due dates and (said amounts are hereinafter called the “ Tax Escrow Fund”). The Tax Escrow Fund

 

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and the other payments of Rent, shall be added together and shall be paid, monthly, as an aggregate sum by Lessee to Lessor. Lessor will apply the Tax Escrow Fund to payments of Taxes required to be made by Lessee pursuant to this Lease. In making any payment relating to the Tax Escrow Fund, Lessor may do so according to any bill, statement or estimate procured from the appropriate public office or from Lessee without inquiry into the accuracy of such bill, statement or estimate or into the validity of any tax assessment, sale, forfeiture, tax lien or title or claim thereof, provided, however, Lessor shall use reasonable efforts to pay such real property taxes sufficiently early to obtain the benefit of any available discounts of which it has knowledge. If the amount of the Tax Escrow Fund shall exceed the amounts due for Taxes, Lessor shall, in its sole discretion, return any excess to Lessee or credit such excess against future payments to be made to the Tax Escrow Fund. Any amount remaining in the Tax Escrow Fund in excess of the Taxes payable by Tenant hereunder shall be promptly returned to Lessee upon the expiration or earlier termination of the Lease. If at any time Lessor reasonably determines that the Tax Escrow Fund is not or will not be sufficient to pay Taxes by the dates set forth above, Lessor shall notify Lessee of such determination and Lessee shall increase its monthly payments to Lessor by the amount that Lessor estimates is sufficient to make up the deficiency at least thirty (30) days prior to delinquency of the Taxes.

(c) Notwithstanding the foregoing paragraphs (a) and (b), Lessee shall have the right to contest any Imposition, subject to the following: (i) such contest shall be at its sole cost and expense, (ii) if the Imposition being contested is in the amount of $2,000,000.00 or more, Lessee shall provide prompt notice to Lessor of such Imposition and contest and the grounds thereof, and either (A) have a Required Rating equal to the Trigger Rating or (B) post a letter of credit or other bond in a form reasonably acceptable to Lessor or deposit cash with the Proceeds Trustee in an amount equal to 110% of the amount contested, as reasonably determined by the Lender, to the extent such contested Imposition is not paid to the applicable Governmental Authority, (iii) such contest shall be by appropriate legal proceedings conducted in good faith and with due diligence, (iv) such contest will operate to suspend the collection of, or other realization upon, such Imposition, from any Property or other interest of Lessor or from any Rent (or otherwise affect Lessee’s obligation to pay, and Lessor’s right to receive, Rent), (v) such contest will not adversely affect the Lender’s lien on any Property, or Lessor’s right to any Property (for purposes hereof, “adversely affecting” being deemed to mean such lien or Lessor’s right is subject to reasonable likelihood of extinguishment), (vi) such contest will not materially and adversely interfere with the possession, use or occupancy or sale of any Property, (vii) such contest will not subject Lessor or the Lender to any civil (other than for the amounts being contested) or criminal liability, (viii) Lessee shall not postpone the payment of any Imposition for such length of time as shall permit the Property to become subject to a lien created by such item being contested that is prior to the lien of the Mortgage (other than a lien of real property taxes which are already a first lien) and (ix) no Lease Event of Default is existing. Lessee shall pay any Imposition (and related costs) promptly after forgoing any contest or after receipt of a final non-appealable adverse judgment.

Section 8.7. Adjustment of Impositions. Impositions with respect to the Property for a billing period during which Lessee’s obligation to indemnify Lessor pursuant to this Lease expires or terminates as to the Property shall be adjusted and prorated on a daily basis between Lessor and Lessee, whether or not such Imposition is imposed before or after such expiration or

 

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termination, and Lessee’s and Lessor’s obligation to pay its pro rata share thereof shall survive such expiration or termination (to the extent, with respect to Lessor, it is obligated to reimburse Lessee for Impositions paid by Lessee for periods after expiration of the Lease Term). Lessor acknowledges that Lessee may bring any tax certiorari or other actions for refunds of Impositions or adjustments of Impositions for which Lessee is liable under this Lease, or relating to periods prior to the commencement date of the Term and Lessee shall be entitled to all such refunds; provided Lessee shall take no such action which could increase any Imposition for a period after the expiration of the Lease. During the Term, Lessor agrees to cooperate with Lessee in such proceedings, at no cost to Lessor.

Section 8.8. Utility Charges. Lessee shall pay or cause to be paid, directly to the party entitled, all charges for electricity, power, gas, oil, water, telephone, sanitary sewer services and all other utilities used in or on the Property prior to and during the Lease Term, and such obligation on the part of Lessee shall survive the expiration or earlier termination of this Lease until all such outstanding balances for services rendered prior to or during the term of this Lease have been paid. Any refunds of such charges attributable to the Term or the period prior to the commencement of the Term shall be the property of Lessee, and Lessor shall pay the same to Lessee promptly upon its receipt thereof. Lessee shall have the right to select all service providers for the Property. Lessor shall not be entitled to charge any fees associated with Lessee’s acquisition and/or use of utilities.

Section 8.9. Litigation; Zoning; Joint Assessment . Lessee shall give prompt written notice to Lessor of any litigation or governmental proceedings pending or threatened against Lessee or the Property of which Lessee has actual knowledge, which could reasonably be expected to materially adversely affect the condition or business of the Property. Without the prior written consent of Lessor, which consent shall not be unreasonably withheld, conditioned, or delayed, Lessee shall not initiate any zoning reclassification for the Property, or any portion thereof, or seek any variance under any existing zoning ordinances or use or permit the use of any portion of the Property in any manner that could result in such use becoming a non-conforming use under any zoning ordinance or any other Applicable Law. Lessee shall not initiate any proceeding to cause the Property to be jointly assessed with any other property or with any personal property of Lessee, or take any other action or initiate any proceeding which might cause the personal property of the Lessee to be taxed in a manner whereby such taxes or levies could be assessed against the Property.

ARTICLE 9

INSURANCE

Section 9.1. Coverage .

(a) Subject to Section 9.1(b), Lessee shall maintain insurance of the types and in the amounts set forth on Schedule 9.1 attached hereto and made a part hereof.

(b) So long as (i) no Lease Event of Default has occurred and is continuing and (ii) Lessee has a Required Rating at least equal to the Trigger Rating, Lessee shall be entitled to self-insure against any and all risks it would otherwise be required to insure against under Section 9.1(a), provided that such self-insurance program of this subsection (b) does not violate any Applicable Law. During any period that Lessee is self insuring, Lessee shall not be required to

 

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deliver any policies, certificates or other evidence of insurance other than a certificate of self-insurance acknowledging Lessee’s insurance obligation under the Lease, and confirming Lessee’s decision to self-insure (to the extent Lessee is in fact self insuring). If Lessee does not, or is not permitted to, self-insure, then (i) Lessee shall maintain a policy or policies of commercial general liability insurance with respect to the Property, and shall cause Lessor and the Lender to be named as an additional insured on such policy or policies and (ii) Lessee shall maintain a policy or policies of property insurance with respect to the Property, and Lessee shall cause Lessor and the Lender to be named loss payee as their interests may appear on such policy or policies, all in forms and amounts as set forth in Schedule 9.1.

(c) Nothing in this Article 9 shall prohibit the Lessee from maintaining at its expense insurance on or with respect to the Property, naming the Lessee as insured and/or loss payee for an amount greater than the insurance required to be maintained under this Section 9.1, unless such insurance would conflict with or otherwise limit the availability of or coverage afforded by insurance required to be maintained under Section 9.1. Nothing in this Section 9.1 shall prohibit the Lessor from maintaining at its expense other insurance on or with respect to the Property or the operation, use and occupancy of the Property, naming the Lessor as insured and/or payee, unless such insurance would conflict with, cause the Lessor to be a coinsurer or otherwise limit or adversely affect the ability to obtain, or the cost of the insurance required to be maintained under Section 9.1.

(d) Copies of any certificates required to be delivered under Schedule 9.1 shall be delivered to Lessor at the same time delivered to the Lender.

(e) Irrespective of the cause thereof, Lessor shall not be liable for any loss or damage to any buildings or other portion of the Property resulting from fire, explosion or any other casualty. In the event of Lessee’s failure to obtain or maintain the insurance called for under this Lease after notice and applicable grace, Lessor shall have the right, together with Lessor’s remedies set forth herein, to obtain the policies of insurance required under this Lease and to bill Lessee for the premium payments therefore, together with interest at the Default Rate. Lessor shall have no obligation to maintain insurance of any nature or type whatsoever.

(f) In the event Lessee elects to self-insure, it shall be obligated to use or pay to third parties, all amounts that Lessor, or such third party, would have received had Lessee not self-insured. The foregoing shall not, however, act as a limit on Lessee’s liability. Sums due from Lessee in lieu of insurance proceeds because of Lessee’s self-insurance program shall be treated as insurance proceeds for all purposes under this Lease.

(g) Each policy required to be carried by Lessee under this Lease shall also provide that any loss otherwise payable thereunder shall be payable notwithstanding any act or omission of Lessor or Lessee which might, absent such provision, result in a forfeiture of all or a part of such insurance payment.

(h) Lessee shall comply with all insurance requirements applicable under any insurance policies required to be maintained under this Lease.

(i) All insurance shall contain waivers of the right of subrogation.

 

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ARTICLE 10

RETURN OF PROPERTY TO LESSOR

Section 10.1. Return of Property to Lessor . Lessee shall, upon the expiration or termination of this Lease, and at its own expense, return the Property to Lessor by surrendering the same into the possession of Lessor:

(a) free and clear of all Liens (whether by payment or bonding), except that Lessee shall have no responsibility or liability in respect of (i) Lessor Liens, (ii) any Lien created by the Mortgage and related debt documents, and (iii) Liens for taxes not yet due and payable; and

(b) in compliance in all material respects with all Applicable Laws and in compliance with the maintenance conditions required by this Lease. All Alterations and Lessee’s Equipment and Personalty not removed by Lessee by the last day of the Lease Term (but in the event of a termination other than upon the expiration of the Base Term or any Renewal Term, within thirty (30) days after said termination of this Lease), other than those Alterations as to which title shall vest in Lessor pursuant to Section 8.4, shall be deemed abandoned in place by Lessee and shall become the property of Lessor. Lessee shall pay or reimburse Lessor for any reasonable, actual, out-of-pocket costs incurred by Lessor in connection with the removal or disposal of such relinquished property, which obligation shall survive the expiration or termination of this Lease. In no event shall Lessee be required to remove or pay for the removal of any built in, permanent fixtures or improvements existing on, or within, the Property as of the date of this Lease or for any raised computer floors built during the Term or for any other Alterations made in compliance with the terms of this Agreement, or for any cabling or wiring (or similar property) now or hereafter located on or in the Property.

Upon the return of the Property, Lessee shall deliver therewith:

(i) all transferable licenses and permits pertaining to the Property by general assignment, without warranty or recourse;

(ii) as built-drawings including plans for HVAC, mechanical and electrical systems, to the extent in Lessee’s possession and not previously delivered to Lessor, without warranty or recourse;

(iii) keys to the Property; and

(iv) assignment of all maintenance contracts (to the extent required by Lessor) and existing warranties applicable to the Property by general assignment, without warranty or recourse to the extent assignable.

Lessee agrees to reasonably cooperate with Lessor and its representatives to effectuate a smooth transition of the operation and maintenance of the Property. Notwithstanding anything

 

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expressly to the contrary hereunder, providing Lessee surrenders the Property and all Alterations and Equipment upon the expiration or termination of this Lease in compliance with all Applicable Laws, the failure to remove any of Lessee’s Alterations or Equipment in accordance with the provisions hereof shall not result in Lessee being deemed a holdover tenant hereunder.

ARTICLE 11

ASSIGNMENT BY LESSEE

Section 11.1. Assignment by Lessee . So long as no Lease Event of Default has occurred and is continuing, Lessee may, at Lessee’s sole expense, without the consent of Lessor, (but, except for assignments to an Affiliate of Lessee, not prior to occupancy by Lessee of the Improvements following construction thereof in accordance with the provisions of Article 4 of this Lease) assign this Lease for a period that does not extend beyond the Lease Term, to any Person, provided, however , that any such Person or other Person is not a debtor or debtor-in- possession in a voluntary or involuntary bankruptcy proceeding at the commencement of the assignment. For purposes hereof, an assignment shall include a merger or consolidation of Lessee. Any assignee shall assume in writing any obligations of Lessee arising from and after the effective date of the assignment, provided, however , that no such assignment shall become effective until (i) a fully executed copy of an assignment and assumption agreement shall have been delivered to Lessor and the Lender, and (ii) such assignee shall have executed such instruments and other documents and provided such further assurances as the Lender shall reasonably request to ensure that such assignment is subject to the Mortgage and any related debt documents. Notwithstanding any such assignment, Lessee shall not be released from its primary liability hereunder and shall continue to be obligated for all obligations of “Lessee” in this Lease, which obligations shall continue in full effect as obligations of a principal and not of a guarantor, as though no assignment had been made. Lessee will have the right, subsequent to any assignment (a) to receive a duplicate copy of each notice of default sent by Lessor to any assignee (but such notice shall be effective as against the Lessee, as well as any subsequent assignees, even if a copy has not been delivered to such requesting assignee), and (b) to cure any default by any assignee under the Lease within the cure period provided for hereunder. Lessee’s liability hereunder shall continue notwithstanding the rejection of this Lease by an assignee or any sublease of this Lease pursuant to Section 365 of Title 11 of the United States Code, any other provision of the Bankruptcy Code, or any similar law relating to bankruptcy, insolvency, reorganization or the rights of creditors, which arises subsequent to such assignment. In the event Lessee assigns this Lease and it shall thereafter be rejected in a bankruptcy or similar proceeding, a new lease identical to this Lease shall be re-instituted as between Lessor and Lessee without further act of either party, provided Lessor shall not be obligated to deliver to Lessee possession of the Property free of any tenancy created or caused by Lessee or any entity holding by or through Lessee but Lessee may, in Lessor’s name, but at Lessee’s expense, take such action as it deems appropriate to have such assignee removed from the Property. Lessor shall reasonably cooperate with Lessee in such efforts. Nothing herein shall be construed to permit Lessee to mortgage, pledge, hypothecate or otherwise collaterally assign in any manner or nature whatsoever Lessee’s interest under this Lease in whole or in part. Lessee shall provide written notice to Lessor and the Lender of any assignment of this Lease within thirty (30) days after the effective date thereof and an executed copy of the

 

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approved agreement of assignment and assumption within thirty (30) days after the execution thereof. To the extent an assignee of this Lease fails to perform on behalf of Lessee the obligations of Lessee hereunder, and Lessee performs such obligations, then Lessee shall be subrogated to the rights of Lessor as against such assignee in respect of such performance.

ARTICLE 12

LOSS; DESTRUCTION; CONDEMNATION OR DAMAGE

Section 12.1. Event of Loss . If there should be an Event of Loss after commencement but prior to completion of the construction of the Improvements, Lessee shall repair all damage, regardless of the availability of insurance proceeds and continue to pay all Rent without abatement of any kind. If there shall occur (i) an Event of Loss to the Existing Building pursuant to the terms of the Building Lease prior to substantial completion of the Improvements and the Lessee thereunder agrees to purchase the Affected Property pursuant to the terms of the Building Lease or (ii) an Event of Loss to the Improvements following substantial completion of construction of the Improvements (or with respect to condemnation prior to completion of construction of the Improvements) with respect to the Property (the “ Affected Property (for purposes of this Lease, the Affected Property being the entire Property)”), Lessee shall give Lessor prompt written notice thereof and elect, within sixty (60) days after the occurrence of the Event of Loss, one of the following options:

(i) Offer to purchase the Affected Property from Ground Lessor, on a Rent Payment Date, (the “ Stipulated Loss Value Date ”), and which Rent Payment Date shall be the first Rent Payment Date at least forty (40) days after Ground Lessor accepts such offer, for a purchase price equal to the sum of (A) the Stipulated Loss Value for the Affected Property, determined as of such Stipulated Loss Value Date, plus (B) all unpaid Rent with respect to the Affected Property due but unpaid through such Stipulated Loss Value Date, plus (C) an amount equal to the reasonable out-of-pocket attorneys’ fees of Ground Lessor and Lessor relating to the purchase by Lessee as a result of such Event of Loss. Ground Lessor (subject to the consent of the Lender), shall have sixty (60) days from the date of receipt of Lessee’s offer to decide whether to reject such offer. If Lessee has not received a response after forty (40) days, it may send a second notice to the foregoing parties, stating clearly in boldface that Ground Lessor’s failure to reject such offer by the later of (i) the original sixty (60) day period, or (ii) ten (10) days after delivery of such second notice, shall be deemed Ground Lessor’s acceptance of such offer; or

(ii) Restore and rebuild the Improvements damaged as a result of such Event of Loss (regardless of the availability of any insurance proceeds) so as to have a value, utility and remaining useful life as nearly as reasonably practicable equal to the value, utility and remaining useful life of the Affected Property immediately prior to such Event of Loss, and in all events as required by Section 8.2, such restoration to be done as expeditiously as is commercially reasonable and to be substantially completed, subject to force majeure , within twenty four months from the date of the Event of Loss, and in any event by the expiration of the Lease Term (and Lessee shall remain liable for the completion of such restoration beyond the expiration of the Lease Term to the extent not completed prior to such expiration but Lessee’s obligation to complete the Improvements shall not constitute a holdover by Lessee, who shall be granted access to the Property for such completion).

 

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In the event, due to force majeure events, restoration cannot be completed by the expiration of the Term, Lessee shall diligently complete the restoration thereafter and shall be liable to pay Base Rent (based on the Base Rent in effect on the day prior to the expiration of the Term (on a per diem basis)) and Supplemental Rent, until such restoration is complete.

Notwithstanding the options described in subsections 12.1(i) and (ii) and following completion of construction of the Improvements if the Event of Loss occurs in the last two (2) years of the Term, Lessee shall have the right to terminate the Lease effective as of the date of delivery of a notice of termination to Lessor not later than sixty (60) days following the Event of Loss. Upon such termination Lessor shall be entitled to all insurance proceeds and Lessee shall credit Lessor with all deductible amounts and Rent until the effective date of such termination. Lessee shall not have the right to terminate this Lease if Lessee has exercised or intends to exercise its early termination right as provided for in the definition of Base Term. In other words Lessee does not, under any circumstances, have the right to exercise both rights of early termination and the right to terminate this Lease upon an Event of Loss pursuant to this paragraph.

If Lessee makes an offer to purchase pursuant to clause (i) above of this Section 12.1, and Ground Lessor accepts such offer or is deemed to accept such offer within the sixty (60) day period referred to in the last sentence of clause (i) above, the conveyance shall occur, and Lessee shall pay to Ground Lessor the Stipulated Loss Value and Rent described in said clause (i) on the Stipulated Loss Value Date; provided that any Net Proceeds related to the Affected Property then held by Ground Lessor or the Lender shall be credited against the portion of such purchase price payable to Ground Lessor and the balance of Net Proceeds, if any, shall be paid to or retained by Lessee. Concurrently with the payment in full of the amounts payable pursuant to said clause (i), the terms of Article 22 shall be complied with.

In the event Ground Lessor rejects the offer of Lessee to purchase the Affected Property as provided in clause (i) of this Section 12.1 (which it may not do without the Lender’s written consent unless it first pays to the Lender an amount sufficient to pay all amounts due Lender with respect to the Affected Property ), the following amount shall be paid to or retained by Lessor on such Stipulated Loss Value Date: (A) all Net Proceeds related to the Affected Property, provided that , if Lessee is self-insured (as permitted above) by means of deductibles, retained risks or no insurance whatsoever, Lessee shall pay such amounts or additional amounts so that Lessor receives in total (including any Net Proceeds) an amount that would have been paid by a third-party insurer under a customary commercial all-risk full replacement-value insurance policy substantially similar to that described in Schedule 9.01(a)(ii) without deductibles or retained risks (but in any case amounts paid to Lessor will not be in excess of the replacement value of the Improvements immediately preceding the Event of Loss, which replacement value shall be as mutually agreed between Lessee and Lessor and, failing such agreement within fifteen (15) days of the request of either party to do so, by the Appraisal Procedure), plus (B) unpaid Rent due with respect to the Affected Property on and through such Stipulated Loss Value Date.

Upon payment in full of the amounts set forth in clauses (A) and (B) of the preceding paragraph (in the event Ground Lessor rejected Lessee’s offer) or upon payment in full of the amounts set forth in clause (i) of the first sentence of this Section 12.1 and consummation of the sale to Lessee (or its designee) (in the event Ground Lessor accepted Lessee’s offer to purchase), (1) the

 

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Lease Term shall end, and (2) the obligations of Lessee hereunder (other than any obligations expressed herein as surviving termination of this Lease) shall terminate as of the date of such payment.

If Ground Lessor elects to reject the offer of Lessee hereunder to purchase the Property pursuant to this Section 12.1 while a Mortgage encumbers the Property, any notice of rejection shall only be effective, and Ground Lessor shall only be entitled to reject such offer, if such notice is in writing and either such rejection is concurrently consented to in writing by the Lender or Ground Lessor concurrently with delivery of its rejection notice pays to the Lender all amounts secured by the Mortgage with respect to the Affected Property, and reasonably evidences such payment to Lessee, and absent such repayment or consent by the Lender within the period referred to in the last sentence of clause (i) above, Ground Lessor shall be deemed to have accepted Lessee’s offer.

Section 12.2. Application of Payments Upon an Event of Loss When Lease Continues . Payments received at any time by Lessor or Lessee from any Governmental Authority or insurance carrier or other Person with respect to any Event of Loss following completion of construction of the Improvements in a case in which this Lease will not terminate (and there will occur no abatement or reduction of rent) because Lessee has elected to proceed under clause (ii) of Section 12.1, shall be paid to Lessee to be applied, as necessary, to the repair or restoration of the Property as described in clause (ii) of Section 12.1. Any excess insurance proceeds remaining thereafter shall be retained by Lessee. In the event of a condemnation which does not result in a termination of the Lease, the proceeds of the Condemnation award remaining after repair and restoration, to the extent the excess equals or exceeds $500,000.00, shall be paid to the Lessor. The first $500,000.00 of excess Condemnation proceeds shall be allocated between Lessor and Lessee as set forth on Schedule 12.2 attached hereto. In no event shall Rent be adjusted.

Section 12.3 . Application of Payments Not Relating to an Event of Loss . In case of a Condemnation or Casualty which is not an Event of Loss or which does not result in a termination of this Lease in accordance with the above provisions of Article 12, this Lease shall remain in full force and effect, without any abatement or reduction of Rent. Subject to Section 12.4, all Net Casualty Proceeds and all Net Condemnation Proceeds, as the case may be, shall be paid to Lessee to be applied, as necessary, to the repair or restoration of the Property so such Property shall have a value, utility and remaining useful life as close as reasonably practicable to the value, utility and remaining useful life existing immediately prior to such Casualty or Condemnation. Any excess insurance proceeds remaining thereafter shall be retained by Lessee and any excess condemnation award remaining thereafter in excess of $500,000.00 shall be paid to Lessor. The first $500,000.00 of excess condemnation proceeds shall be divided by Lessor and Lessee as set forth on Schedule 12.2.

Section 12.4. Other Dispositions . Net Casualty Proceeds or Net Condemnation Proceeds, as the case may be, in excess of the Threshold Amount (each, as applicable, the “ Restoration Fund ”) in respect of such Casualty or Condemnation, as the case may be, shall be paid to the Proceeds Trustee for release to Lessee as restoration progresses, subject to and in accordance with Section 12.4(a). Lessor and Lessee hereby authorize and direct (i) any insurer, to make payment in excess of the Threshold Amount under policies of casualty insurance required to be maintained by Lessee pursuant to Section 9.1(a) directly to the Proceeds Trustee instead of to Lessor and Lessee jointly, and (ii) any Governmental Agency to make payments of any Net Condemnation Proceeds in

 

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excess of the Threshold Amount directly to the Proceeds Trustee instead of to Lessor and/or Lessee; and each of Lessee and Lessor hereby appoints the Proceeds Trustee as its attorney-in-fact to endorse any draft therefore for the purposes set forth in this Lease after approval by Lessee of the Proceeds Trustee, if the Proceeds Trustee is other than the Lender. In the event that a Casualty shall occur at such time as Lessee shall not have maintained property or casualty insurance to the extent required by said Section 9.1(a) ( i.e. , Lessee is self insuring in whole, or in part), Lessee shall be obligated to pay itself towards restoration the amount it self insures. Lessee shall be obligated to pay the Threshold Amount (or any amount it self-insured) towards restoration costs prior to the disbursement of any funds from the Restoration Fund.

 

(a)

The Restoration Fund, if any, shall be disbursed by the Proceeds Trustee by wire transfer of immediately available funds within five (5) Business Days of the last submission made pursuant to and in accordance with the following conditions (provided that there shall be no more than one disbursement during each month):

(i) At the time of any disbursement, no Lease Event of Default shall exist and, subject to Article 7, no mechanics’ or materialmen’s liens shall have been filed and remain undischarged, unbonded or not insured over.

(ii) Disbursements (subject to the holdback in Section 12.4(a)(iv) below) shall be made from time to time in an amount not exceeding the hard and soft cost of the work and costs incurred since the last disbursement upon receipt of (1) satisfactory evidence, including architects’ certificates when required pursuant to Section 8.3, of the stage of completion, of the estimated cost of completion and of performance of the work to date in a good and workmanlike manner in accordance with the contracts, plans and specifications, (2) partial releases of liens from Lessee’s general contractor in respect of the disbursement made pursuant to the immediately preceding request, and (3) other reasonable evidence of cost incurred (whether or not paid) so that the Proceeds Trustee is able to verify that the amounts disbursed from time to time are represented by work that is completed in place or delivered to the site and free and clear of (subject to Article 7), mechanics’ and materialmen’s lien claims.

(iii) Each request for disbursement shall be accompanied by a certificate of Lessee (1) agreeing to use amounts disbursed for the costs described in Section 12.4(a)(ii), (2) describing the work, materials or other costs or expenses for which payment is requested, (3) stating the cost incurred in connection therewith, (4) stating that Lessee has paid costs and expenses for such work in an amount equal to the self insured and/or deductible amounts as permitted by Section 9.1(b) (and attaching thereto evidence thereof reasonable satisfactory to Lessor) and (5) stating that Lessee has not previously received payment for such work or expense and the certificate to be delivered by Lessee upon completion of the work shall, in addition, state that the work has been substantially completed and complies with the applicable requirements of this Lease.

(iv) The Proceeds Trustee shall retain ten percent (10%) of the amounts otherwise disbursable until the restoration is at least fifty percent (50%) complete, and thereafter five percent (5%) until the restoration is substantially complete.

 

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(v) The Restoration Fund shall be kept by the Proceeds Trustee in a separate interest-bearing federally insured account or invested in Permitted Investments (as directed by, or on behalf of, Lessee).

(vi) Prior to commencement of restoration and at any time during restoration, if the estimated cost of restoration, as reasonably determined by the Proceeds Trustee, exceeds the then amount of the Restoration Fund, Lessee shall fund at its own expense the costs of such restoration until the remaining Restoration Fund is sufficient for the completion of the restoration. In the case of Casualty, any sum in the Restoration Fund which remains in the Restoration Fund upon the completion of restoration shall be paid to Lessee. In the case of Condemnation, any sum in the Restoration Fund which remains in the Restoration Fund upon the completion of restoration shall be applied as set forth in Section 12.2.

Section 12.5 Negotiations . In the event the Property becomes subject to condemnation or requisition proceedings, Lessee shall control the negotiations with the relevant Governmental Authority, unless: (i) a Lease Event of Default shall be continuing, or (ii) the Net Condemnation Proceeds will likely be in excess of the Threshold Amount (which determination shall be made in Lessor’s reasonable discretion), in which case Lessor may elect in writing to control such negotiations; provided that in any event Lessor may elect to participate in such negotiations. Lessee shall give to Lessor and the Lender such information, and copies of such documents, which relate to such proceedings and are in the possession of Lessee, as are reasonably requested by Lessor or the Lender. Lessor shall confer with Lessee as to any negotiations with Governmental Authorities material to Lessee’s operations and shall not agree to any act that would have a material adverse effect on Lessee’s business. Notwithstanding the foregoing, in jurisdictions where a separate award may be granted for Lessee’s Equipment and Personalty, moving and relocation expenses, business loss, business damages, loss of goodwill, unamortized costs of any Alterations title for which has not vested in Lessor pursuant to the terms of this Lease, and Lessee’s attorneys’ fees, costs and expenses in the proceedings, Lessee may assert claims for and control the negotiations pertaining to such interests, provided that the Lessor’s award in respect to the Property is not diminished by the award to Lessee. Lessee acknowledges that no payments shall be permitted hereunder other than on a Rent Payment Date.

 

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ARTICLE 13

INTENTIONALLY OMITTED

ARTICLE 14

SUBLEASE

Section 14.1. Subleasing Permitted; Lessee Remains Obligated . Provided that no Lease Event of Default shall have occurred and be continuing at the time the sublease is entered into, upon fifteen (15) days’ prior written notice to Lessor (except for subleases to Affiliates, in which case no notice shall be required), Lessee may at any time (but, except for a sublet to an Affiliate, not prior to occupancy by Lessee of the Improvements following construction of the Improvements in accordance with the provisions of Article 4) and from time to time sublease the Property or any portion or portions thereof to any Person or permit the occupancy of the Property or any portion or portions thereof by any Person who is not a debtor or debtor-in-possession in a voluntary or involuntary bankruptcy proceeding at the commencement of the sublease term. Any such sublease, sub-sublease, license, occupancy agreement or similar agreement (each, a “ Sublease ”) shall not release Lessee from its primary liability for the performance of its duties and obligations hereunder, and Lessee shall continue to be obligated for all obligations of “Lessee” in this Lease, which obligations shall continue in full effect as obligations of a principal and not of a guarantor, as though no Sublease had been made. From time to time, but in no event more than once annually, upon Lessor’s request, Lessee shall forward to Lessor the names, businesses and square footage leased (or location) of all subtenants (other than Subleases to Affiliates).

Section 14.2. Provisions of Subleases . Each Sublease will:

 

(a)

be expressly subject and subordinate to this Lease and any mortgage (including (the Mortgage) encumbering the Property;

 

(b)

not extend beyond the Lease Term minus one day; and

 

(c)

terminate upon any termination of this Lease, unless Lessor elects in writing (which election must be consented to by the Lender), to cause the sublessee to attorn to and recognize Lessor as the Lessor under such Sublease, whereupon such Sublease shall continue as a direct lease between the sublessee and Lessor upon all the terms and conditions of such Sublease (it being agreed that all Subleases with Affiliates of Lessee shall automatically terminate upon termination of this Lease).

Section 14.3. Assignment of Sublease Rents . To secure the prompt and full payment by Lessee of the Rent and the faithful performance by Lessee of all the other terms and conditions herein contained on its part to be kept and performed, Lessee hereby absolutely, presently assigns, transfers and sets over unto Lessor, subject to the conditions hereinafter set forth in this Section 14.3, all of Lessee’s right, title and interest in and to all Subleases, and hereby confers upon Lessor, its agents and representatives, a right of entry in, and sufficient possession of, the Property to permit and ensure the collection by Lessor of the rentals and other sums payable under the Subleases, and further agrees that the exercise of the right of entry and qualified possession by Lessor shall not

 

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constitute an eviction of Lessee from the Property or any portion thereof; provided, however , that Lessee shall continue to have the right to collect, use, enjoy and distribute all Sublease revenue (a) except during the continuance of a Lease Event of Default, or (b) until this Lease and the Lease Term shall be canceled or terminated pursuant to the terms, covenants and conditions hereof, or (c) until there occurs repossession under a dispossess warrant or other judgment, order or decree of a court of competent jurisdiction and then only as to such of the Subleases that Lessor may elect to take over and assume. Notwithstanding the foregoing, if the events described in Section 14.3(b) and Section 14.3(c) herein above have not occurred and if the Lease Event of Default which caused such collection of revenue by Lessor shall have been cured by Lessee or otherwise not continue to exist, upon the written demand of Lessee, Lessor shall cease to exercise the rights granted hereunder to Lessor with respect to the Subleases, and amounts collected under the Subleases and not applied to Lessee’s obligations hereunder shall promptly be paid over to Lessee.

ARTICLE 15

INSPECTION

Section 15.1 . Inspection . Upon at least five (5) Business Days’ prior written notice to Lessee (or immediately if a Lease Event of Default shall be continuing) Lessor or its respective representatives and agents (each, an “ Inspecting Party ”), may, in a commercially reasonable manner and at their own risk, inspect the Property, during normal business hours, to verify compliance with the provisions of this Lease. No Sublease shall contain any restrictions on inspection other than as set forth herein. The Inspecting Party shall repair any damage caused by any inspection performed pursuant to Section 15.1. Unless a Lease Event of Default is continui