CUBIC CORP /DE/ (Form: 10-Q, Received: 05/02/2019 16:07:18)

Institution

Commitment Amount

Commitment Percentage

Bankers Commercial Corporation

Aggregate Lessor Commitment:

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarter Ended March 31, 2019

001-08931

Commission File Number

CUBIC CORPORATION

Exact Name of Registrant as Specified in its Charter


Delaware		95-1678055
State of Incorporation		IRS Employer Identification No.

9333 Balboa Avenue
San Diego, California 92123
Telephone (858) 277-6780

Securities registered pursuant to Section 12(b) of the Securities Exchange Act of 1934:


Common Stock	CUB	New York Stock Exchange, Inc.
Title of each class	Trading symbol	Name of exchange on which registered

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months, and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.


Large accelerated filer ☒		Accelerated filer ☐

Non-accelerated filer ☐		Small Reporting Company ☐

Emerging Growth Company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12-b-2 of the Exchange Act). Yes ☐ No ☒

As of April 18, 2019, registrant had only one class of common stock of which there were 31,157,398 shares outstanding (after deducting 8,945,300 shares held as treasury stock).

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CUBIC CORPORATION

QUARTERLY REPORT ON FORM 10-Q

For the Quarter Ended March 31, 2019

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		Page

	PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Statements of Operations	3
	Condensed Consolidated Statements of Comprehensive Income (Loss)	4
	Condensed Consolidated Balance Sheets	5
	Condensed Consolidated Statements of Cash Flows	6
	Condensed Consolidated Statements of Changes in Shareholders’ Equity	6
	Notes to Condensed Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	44
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	53
Item 4.	Controls and Procedures	53

	PART II - OTHER INFORMATION

Item 1.	Legal Proceedings	55
Item 1A.	Risk Factors	55
Item 5.	Other Information	56
Item 6.	Exhibits	57

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PART I - FINANCIAL INFORMATION

ITEM 1 - FINANCIAL STATEMENTS

CUBIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

(amounts in thousands, except per share data)


	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2019		2018		2019		2018
Net sales:
Products	$	222,744	$	157,445	$	404,997	$	289,188
Services		114,595		121,141		237,601		237,789
		337,339		278,586		642,598		526,977
Costs and expenses:
Products		167,567		117,093		293,052		208,666
Services		82,212		78,457		174,997		164,674
Selling, general and administrative expenses		66,195		63,773		129,181		125,453
Research and development		13,754		14,202		25,766		26,179
Amortization of purchased intangibles		12,395		6,484		22,960		13,835
Restructuring costs		1,757		256		3,749		1,751
		343,880		280,265		649,705		540,558

Operating loss		(6,541)		(1,679)		(7,107)		(13,581)

Other income (expenses):
Interest and dividend income		1,413		625		2,647		1,107
Interest expense		(4,531)		(2,911)		(8,563)		(5,585)
Other income (expense), net		(3,602)		2,028		(8,355)		1,950

Loss from continuing operations before income taxes		(13,261)		(1,937)		(21,378)		(16,109)

Income tax (benefit) provision		(3,831)		1,409		(1,334)		(1,328)

Loss from continuing operations		(9,430)		(3,346)		(20,044)		(14,781)
Net income (loss) from discontinued operations		(1,339)		1,335		(1,339)		2,984
Net loss		(10,769)		(2,011)		(21,383)		(11,797)

Less noncontrolling interest in loss of VIE		(1,377)		—		(5,404)		—

Net loss attributable to Cubic	$	(9,392)	$	(2,011)	$	(15,979)	$	(11,797)

Amounts attributable to Cubic:
Net loss from continuing operations	$	(8,053)	$	(3,346)	$	(14,640)	$	(14,781)
Net income (loss) from discontinued operations		(1,339)		1,335		(1,339)		2,984
Net loss attributable to Cubic	$	(9,392)	$	(2,011)	$	(15,979)	$	(11,797)

Net income (loss) per share:
Basic
Continuing operations attributable to Cubic	$	(0.26)	$	(0.12)	$	(0.49)	$	(0.54)
Discontinued operations	$	(0.04)	$	0.05	$	(0.04)	$	0.11
Basic earnings per share attributable to Cubic	$	(0.30)	$	(0.07)	$	(0.54)	$	(0.43)

Diluted
Continuing operations attributable to Cubic	$	(0.26)	$	(0.12)	$	(0.49)	$	(0.54)
Discontinued operations	$	(0.04)	$	0.05	$	(0.04)	$	0.11
Diluted earnings per share attributable to Cubic	$	(0.30)	$	(0.07)	$	(0.54)	$	(0.43)

Dividends per common share	$	0.14	$	0.14	$	0.14	$	0.14

Weighted average shares used in per share calculations:
Basic		31,150		27,223		29,821		27,215
Diluted		31,150		27,223		29,821		27,215

See accompanying notes.

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CUBIC CORPORATION

CONDENSED CONSOLIDATED

STATEMENTS OF COMPREHENSIVE INCOME (LOSS ) (UNAUDITED)

(in thousands)


	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2019		2018		2019		2018
Net loss	$	(10,769)	$	(2,011)	$	(21,383)	$	(11,797)
Other comprehensive income (loss):
Foreign currency translation		2,962		3,544		(356)		3,352
Change in unrealized gains/losses from cash flow hedges:
Change in fair value of cash flow hedges, net of tax		(762)		(790)		581		(763)
Adjustment for net gains/losses realized and included in net income, net of tax		286		95		262		599
Total change in unrealized gains/losses realized from cash flow hedges, net of tax		(476)		(695)		843		(164)
Total other comprehensive income		2,486		2,849		487		3,188
Total comprehensive income (loss)		(8,283)		838		(20,896)		(8,609)
Noncontrolling interest in comprehensive loss of consolidated VIE, net of tax		(1,377)		—		(5,404)		—
Comprehensive income (loss) attributable to Cubic, net of tax	$	(6,906)	$	838	$	(15,492)	$	(8,609)

See accompanying notes.

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CUBIC CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

(in thousands)


	March 31,		September 30,
	2019		2018
ASSETS
Current assets:
Cash and cash equivalents	$	42,483	$	111,834
Cash in consolidated VIE		362		374
Restricted cash		19,064		17,400
Restricted cash in consolidated VIE		9,967		10,000
Accounts receivable:
Long-term contracts		159,246		393,691
Allowance for doubtful accounts		(1,714)		(1,324)
		157,532		392,367

Contract assets		296,920		—
Recoverable income taxes		5,910		91
Inventories		119,870		84,199
Assets held for sale		12,620		8,177
Other current assets		44,471		43,705
Other current assets in consolidated VIE		43		—
Total current assets		709,242		668,147

Long-term contracts receivables		—		6,134
Long-term contracts financing receivables		41,758		—
Long-term contracts financing receivables in consolidated VIE		68,779		—
Long-term capitalized contract costs		—		84,924
Long-term capitalized contract costs in consolidated VIE		—		1,258
Property, plant and equipment, net		129,367		117,546
Deferred income taxes		4,798		4,713
Goodwill		579,648		333,626
Purchased intangibles, net		184,104		73,533
Other assets		14,290		14,192
Other assets in consolidated VIE		1,114		810
Total assets	$	1,733,100	$	1,304,883

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings	$	209,000	$	—
Trade accounts payable		129,686		125,414
Trade accounts payable in consolidated VIE		156		165
Contract liabilities		78,352		—
Customer advances		—		75,941
Accrued compensation and other current liabilities		93,256		118,233
Accrued compensation and other current liabilities in consolidated VIE		204		—
Income taxes payable		2,690		8,586
Current portion of long-term debt		10,714		—
Total current liabilities		524,058		328,339

Long-term debt		189,095		199,793
Long-term debt in consolidated VIE		25,602		9,056
Other long-term liabilities		41,290		43,486
Other long-term liabilities in consolidated VIE		9,866		13

Shareholders’ equity:
Common stock		264,612		45,008
Retained earnings		801,486		801,834
Accumulated other comprehensive loss		(110,156)		(110,643)
Treasury stock at cost		(36,078)		(36,078)
Shareholders’ equity related to Cubic		919,864		700,121
Noncontrolling interest in consolidated VIE		23,325		24,075
Total shareholders’ equity		943,189		724,196
Total liabilities and shareholders’ equity	$	1,733,100	$	1,304,883

See accompanying notes.

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CUBIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

(in thousands)


	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2019		2018		2019		2018
Operating Activities:
Net loss	$	(10,769)	$	(2,011)	$	(21,383)	$	(11,797)
Net (income) loss from discontinued operations		1,339		(1,335)		1,339		(2,984)
Adjustments to reconcile net loss to net cash provided by (used in) operating activities:
Depreciation and amortization		17,587		11,058		33,598		23,491
Share-based compensation expense		3,638		870		6,358		2,497
Change in fair value of contingent consideration		241		154		670		452
Loss on disposal of assets		—		(1,474)		—		(1,474)
Deferred income taxes		(5,825)		(185)		(5,825)		(185)
Changes in operating assets and liabilities, net of effects from acquisitions:		(28,754)		5,417		(98,467)		(9,021)
NET CASH PROVIDED BY (USED IN) CONTINUING OPERATING ACTIVITIES		(22,543)		12,494		(83,710)		979
NET CASH PROVIDED BY OPERATING ACTIVITIES FROM DISCONTINUED OPERATIONS		—		21,556		—		6,133
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES		(22,543)		34,050		(83,710)		7,112

Investing Activities:
Acquisition of businesses, net of cash acquired		(148,704)		(4,884)		(395,854)		(9,534)
Purchases of property, plant and equipment		(10,132)		(5,468)		(22,177)		(11,786)
Proceeds from sale of assets		—		2,400		—		2,400
Purchase of non-marketable debt and equity securities		—		(579)		—		(1,250)
NET CASH USED IN INVESTING ACTIVITIES		(158,836)		(8,531)		(418,031)		(20,170)

Financing Activities:
Proceeds from short-term borrowings		242,500		37,120		614,500		119,120
Principal payments on short-term borrowings		(98,000)		(48,120)		(405,500)		(97,120)
Proceeds from long-term borrowings in consolidated VIE		9,700		—		15,498		—
Proceeds from stock issued under employee stock purchase plan		783		798		783		798
Purchase of common stock		—		(68)		(3,419)		(2,324)
Dividends paid		(4,205)		(3,676)		(4,205)		(3,676)
Contingent consideration payments related to acquisitions of businesses		(385)		—		(820)		(656)
Proceeds from equity offering, net		—		—		215,832		—
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES		150,393		(13,946)		432,669		16,142

Effect of exchange rates on cash		(622)		(1,209)		1,340		(532)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(31,608)		10,364		(67,732)		2,552

Cash and cash equivalents at the beginning of the period		103,484		60,765		139,608		68,577

CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD	$	71,876	$	71,129	$	71,876	$	71,129

Supplemental disclosure of non-cash investing and financing activities:
Receivable recognized in connection with the acquisition of Trafficware, net	$	—	$	—	$	1,588	$	—
Receivable recognized in connection with the acquisition of Gridsmart, net	$	442	$	—	$	442	$	—
Receivable recognized in connection with the acquisition of Nuvotronics, net	$	166	$	—	$	166	$	—
Liability incurred to acquire Nuvotronics, net	$	4,900	$	—	$	4,900	$	—

See accompanying notes.

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CUBIC CORPORATION

CONDENSED CONSOLIDATED STATEMENTS OF

CHANGES IN SHAREHOLDERS’ EQUITY (UNAUDITED)


					Accumulated
					Other				Noncontrolling		Number
	Common		Retained		Comprehensive		Treasury		Interest in		of Shares
(in thousands except per share amounts)	Stock		Earnings		Loss		Stock		VIE		Outstanding

October 1, 2018	$	45,008	$	801,834	$	(110,643)	$	(36,078)	$	24,075	27,255

Net loss		—		(15,979)		—		—		(5,404)	—
Other comprehensive loss, net of tax		—		—		487		—		—	—
Stock issued under employee stock purchase plan		783		—		—		—		—	15
Purchase of common stock		(3,419)		—		—		—		—	(47)
Stock-based compensation		6,358		—		—		—		—	132
Cumulative effect of accounting standard adoption		—		19,834		—		—		4,655	—
Stock issued under equity offering		215,832		—		—		—		—	3,795
Cash dividends paid -- $.14 per share of common stock		—		(4,205)		—		—		—	—
Other		50		2		—		—		(1)	—

March 31, 2019	$	264,612	$	801,486	$	(110,156)	$	(36,078)	$	23,325	31,150


					Accumulated
					Other				Noncontrolling		Number
	Common		Retained		Comprehensive		Treasury		Interest in		of Shares
(in thousands except per share amounts)	Stock		Earnings		Loss		Stock		VIE		Outstanding

October 1, 2017	$	37,850	$	794,485	$	(106,626)	$	(36,078)	$	—	27,127

Net loss		—		(11,797)		—		—		—	—
Other comprehensive loss, net of tax		—		—		3,188		—		—	—
Stock issued under employee stock purchase plan		798		—		—		—		—	14
Purchase of common stock		(2,324)		—		—		—		—	(43)
Stock-based compensation		3,755		—		—		—		—	127
Cash dividends paid -- $.14 per share of common stock		—		(3,676)		—		—		—	—

March 31, 2018	$	40,079	$	779,012	$	(103,438)	$	(36,078)	$	—	27,225

See accompanying notes.

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CUBIC CORPORATION

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

March 31, 2019

Note 1 — Basis for Presentation

Cubic Corporation (“we”, “us”, and “Cubic”) has prepared the accompanying unaudited condensed consolidated financial statements in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all information and footnotes required by accounting principles generally accepted in the United States for complete financial statements.

In our opinion, the accompanying financial statements reflect all adjustments, consisting of normal recurring adjustments, considered necessary for a fair presentation of the results for the interim periods presented. Operating results for the three- and six-month periods ended March 31, 2019 are not necessarily indicative of the results that may be expected for the year ending September 30, 2019. For further information, refer to the consolidated financial statements and footnotes thereto included in our Annual Report on Form 10-K for the year ended September 30, 2018.

The preparation of the financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Through September 30, 2017 our principal lines of business were fare collection and real time information systems and services, defense training and command, control, communication, computers, intelligence, surveillance and reconnaissance ( C4ISR) systems, and defense services. On April 18, 2018, we entered into a stock purchase agreement with Nova Global Supply & Services, LLC (Purchaser), an entity affiliated with GC Valiant, LP, under which we agreed to sell our Cubic Global Defense Services (CGD Services) business to the Purchaser. The sale closed on May 31, 2018. As a result of the sale, the operating results and cash flows of CGD Services have been classified as discontinued operations in the Consolidated Statements of Operations and Consolidated Statements of Cash Flows for all periods presented. Refer to “Note 3 – Acquisitions and Divestitures” for additional information about the sale of CGD Services and the related discontinued operation classification. In addition, we concluded that Cubic Mission Solutions become a separate operating and reportable segment beginning on October 1, 2017. As a result, we now operate in three reportable segments: Cubic Transportation Systems (CTS), Cubic Global Defense Systems (CGD) and Cubic Mission Solutions (CMS).

Recently Adopted Accounting Pronouncements – Revenue Recognition

Revenue Recognition: Effective October 1, 2018, we adopted Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers, as amended (commonly referred to as ASC 606), using the modified retrospective transition method. The adoption of ASC 606 resulted in a change in our significant accounting policy regarding revenue recognition, and resulted in changes in our accounting policies regarding contract estimates, backlog, inventory, contract assets, long-term capitalized contract costs, and contract liabilities as described below.

The cumulative effect of applying the standard was an increase of $24.5 million to shareholders' equity as of October 1, 2018. Our Condensed Consolidated Statements of Operations for the quarter and six-months ended March 31, 2019 and our Condensed Consolidated Balance Sheet as of March 31, 2019 are presented under ASC 606, while our Condensed Consolidated Statements of Operations for the quarter and six months ended March 31, 2018 and our Condensed Consolidated Balance Sheet as of September 30, 2018 are presented under the legacy revenue recognition guidance under ASC 605. See Note 2 for disclosure of the impact of the adoption of ASC 606 on our Condensed Consolidated Statements of Operations for the quarter and six months ended March 31, 2019 and our Condensed Consolidated Balance Sheet as of March 31, 2019, and the effect of changes made to our Condensed Consolidated Balance Sheet as of October 1, 2018.

We generate revenue from the sale of integrated solutions such as mass transit fare collection systems, air and ground combat training systems, and products with C4ISR capabilities. A significant portion of our revenues are generated from

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long-term fixed-price contracts with customers that require us to design, develop, manufacture, modify, upgrade, test and integrate complex systems according to the customer’s specifications. We also generate revenue from services we provide, such as the operation and maintenance of fare systems for mass transit customers and the support of specialized military training exercises mainly for international customers . Our contracts are primarily with the U.S. government, state and local municipalities, international government customers, and international local municipal transit agencies. We classify sales as products or services in our Condensed Consolidated Statements of Operations based on the attributes of the underlying contracts.

We account for a contract when it has approval and commitment from both parties, the rights of the parties are identified, payment terms are identified, the contract has commercial substance and collectability of consideration is probable. For certain contracts that meet the foregoing requirements, primarily international direct commercial sale contracts, we are required to obtain certain regulatory approvals. In these cases where regulatory approval is required in addition to approval from both parties, we recognize revenue based on the likelihood of obtaining timely regulatory approvals based upon all known facts and circumstances.

To determine the proper revenue recognition method, we evaluate each contractual arrangement to identify all performance obligations. A performance obligation is a promise in a contract to transfer a distinct good or service to the customer. The majority of our contracts have a single performance obligation because the promise to transfer the individual good or service is not separately identifiable from other promises within the contract and is, therefore, not distinct. These contractual arrangements either require the use of a highly specialized engineering, development and manufacturing process to provide goods according to customer specifications or represent a bundle of contracted goods and services that are integrated and together represent a combined output, which may include the delivery of multiple units.

Some of our contracts have multiple performance obligations, primarily (i) related to the provision of multiple goods or services or (ii) due to the contract covering multiple phases of the product lifecycle (for instance: development and engineering, production, maintenance and support). For contracts with more than one performance obligation, we allocate the transaction price to the performance obligations based upon their relative standalone selling prices. For such contracts we evaluate whether the stated selling prices for the products or services represent their standalone selling prices. In cases where a contract requires a customized good or service, our primary method used to estimate the standalone selling price is the expected cost plus a margin approach. In cases where we sell a standard product or service offering, the standalone selling price is based on an observable standalone selling price. Our contracts with the U.S. government, including contracts under the U.S. Department of Defense’s Foreign Military Sales program (FMS Contracts), are subject to the Federal Acquisition Regulations (FAR) and the price is typically based on estimated or actual costs plus a reasonable profit margin. As a result of these regulations, the standalone selling price of products or services in our contracts with the U.S. government and FMS Contracts are typically equal to the selling price stated in the contract. Therefore, we typically do not need to allocate (or reallocate) the transaction price to multiple performance obligations in our contracts with the U.S. government.

The majority of our sales are from performance obligations satisfied over time. Sales are recognized over time when control is continuously transferred to the customer during the contract or the contracted good does not have alternative use to us. For U.S. government contracts, the continuous transfer of control to the customer is supported by contract clauses that provide for (i) progress or performance-based payments or (ii) the unilateral right of the customer to terminate the contract for its convenience, in which case we have the right to receive payment for costs incurred plus a reasonable profit for products and services that do not have alternative uses to us. Our contracts with international governments and local municipal transit agencies contain similar termination for convenience clauses, or we have a legally enforceable right to receive payment for costs incurred and a reasonable profit for products or services that do not have alternative uses to us.

For those contracts for which control transfers over time, revenue is recognized based on the extent of progress towards completion of the performance obligation. The selection of the method to measure progress towards completion requires judgment and is based on the nature of the products or services to be provided. For our design and build type contracts, we generally use the cost-to-cost measure of progress because it best depicts the transfer of control to the customer which occurs as we incur costs on our contracts. Under the cost-to-cost measure of progress, the extent of progress towards completion is measured based on the ratio of costs incurred to date to the total estimated costs at completion of the performance obligation. Revenues, including estimated fees or profits, are recorded proportionally as costs are incurred. Contract costs include material, labor and subcontracting costs, as well as an allocation of indirect costs, and

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are generally expensed as incurred for these contracts. For contracts with the U.S. government, general and administrative costs are included in contract costs; however, for purposes of revenue measurement, general and administrative costs are not considered contract costs for any other customers.

Sales from performance obligations satisfied at a point in time are typically for standard goods and are recognized when the customer obtains control, which is generally upon delivery and acceptance. Costs of sales are recorded in the period in which revenue is recognized.

We record sales under cost-reimbursement-type contracts as we incur the costs. For cost-reimbursement type contracts with the U.S. government, the FAR provides guidance on the types of costs that we will be reimbursed in establishing the contract price.

Sales under service contracts are generally recognized as services are performed or value is provided to our customers. We measure the delivery of value to our customers using a number of metrics including ridership, units of work performed, and costs incurred. We determine which metric represents the most meaningful measure of value delivery based on the nature of the underlying service activities required under each individual contract. In certain circumstances we recognize revenue based on the right to bill when such amounts correspond to the value being delivered in a billing cycle. Certain of our transportation systems service contracts contain service level penalties or bonuses, which we recognize in each period incurred or earned. These contract penalties or bonuses are generally incurred or earned on a monthly basis; however, certain contracts may be based on a quarterly or annual evaluation. Sales under service contracts that do not contain measurable units of work performed are recognized on a straight-line basis over the contractual service period, unless evidence suggests that the revenue is earned, or obligations fulfilled, in a different manner. Costs incurred under these service contracts are generally expensed as incurred.

Due to the nature of the work required to be performed on many of our performance obligations, the estimation of total revenue and cost at completion is complex, subject to many variables and requires significant judgment. It is common for our long-term contracts to contain bonuses, penalties, transactional variable based fees, or other provisions that can either increase or decrease the transaction price. These variable amounts generally are incurred or earned upon certain performance metrics, program milestones, transactional based activities and other similar contractual events. We estimate variable consideration at the most likely amount to which we expect to be entitled. We include estimated amounts in the transaction price to the extent it is probable that a significant reversal of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is resolved. Our estimates of variable consideration and determination of whether to include estimated amounts in the transaction price are based largely on an assessment of our anticipated performance and all information (historical, current and forecasted) that is reasonably available to us.

Billing timetables and payment terms on our contracts vary based on a number of factors, including the contract type. Typical payment terms under fixed-price contracts to deliver complex systems provide that the customer pays either performance-based payments based on the achievement of contract milestones or progress payments based on a percentage of costs we incur. For the majority of our service contracts, we generally bill on a monthly basis which corresponds with the satisfaction of our monthly performance obligation under these contracts. We recognize a liability for payments received in excess of revenue recognized, which is presented as a contract liability on the balance sheet. The portion of payments retained by the customer until final contract settlement is not considered a significant financing component because the intent is to protect the customer from our failure to adequately complete some or all of the obligations under the contract. Payments received from customers in advance of revenue recognition are not considered to be significant financing components because they are used to meet working capital demands that can be higher in the early stages of a contract. For certain of our multiple-element arrangements, the contract specifies that we will not be paid upon the delivery of certain performance obligations, but rather we will be paid when subsequent performance obligations are satisfied. Generally, in these cases we have determined that a separate financing component exists as a performance obligation under the contract. In these instances, we allocate a portion of the transaction price to this financing component. We determine the value of the embedded financing component by discounting the repayment of the financed amount over the implied repayment term using the effective interest method. This discounting methodology uses an implied interest rate which reflects the credit quality of the customer and represents an interest rate that would be similar to what we would offer the customer in a separate financing transaction. Unpaid principal and interest amounts associated with the financed performance obligation and the value of the embedded financing component are presented as long-term contracts financing receivables in our consolidated balance sheet. We recognize the allocated transaction price of the financing component as interest income over the implied financing term.

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For fixed-price and cost-reimbursable contracts, we present revenues recognized in excess of billings as contract assets on the balance sheet. Amounts billed and due from our customers under both contract types are classified as receivables on the balance sheet.

We only include amounts representing contract change orders, claims or other items in the contract value when we believe the rights and obligations become enforceable. Contract modifications routinely occur to account for changes in contract specifications or requirements. In most cases, contract modifications are for goods or services that are not distinct and, therefore, are accounted for as part of the existing contract. Transaction price estimates include additional consideration for submitted contract modifications or claims when we believe there is an enforceable right to the modification or claim, the amount can be reliably estimated, and its realization is reasonably assured. Amounts representing modifications accounted for as part of the existing contract are included in the transaction price and recognized as an adjustment to sales on a cumulative catch-up basis.

In addition, we are subject to audit of incurred costs related to many of our U.S. government contracts. These audits could produce different results than we have estimated for revenue recognized on our cost-based contracts with the U.S. government; however, our experience has been that our costs are acceptable to the government.

Contract Estimates: Use of the cost-to-cost or other similar methods of revenue recognition requires us to make reasonably dependable estimates regarding the revenue and cost associated with the design, manufacture and delivery of our products and services. Revisions or adjustments to estimates of the transaction price, estimated costs at completion and estimated profit or loss of a performance obligation are often required as work progresses under a contract, as experience is gained, as facts and circumstances change and as new information is obtained, even though the scope of work required under the contract may not change. Revisions or adjustments may also be required if contract modifications occur. The impact of revisions in profit or loss estimates are recognized on a cumulative catch-up basis in the period in which the revisions are made. The revisions in contract estimates, if significant, can materially affect our results of operations and cash flows, and in some cases result in liabilities to complete contracts in a loss position. The aggregate impact of net changes in contract estimates are presented in the table below (amounts in thousands).


	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2019		2018		2019		2018
Operating income (loss)	$	(817)	$	311	$	308	$	(2,178)
Net income (loss) from continuing operations		(503)		268		292		(1,600)
Diluted earnings per share		(0.02)		0.01		0.01		(0.06)

Backlog: Backlog (i.e., unfulfilled or remaining performance obligations) represents the sales we expect to recognize for our products and services for which control has not yet transferred to the customer. It comprises both funded backlog (firm orders for which funding is authorized and appropriated) and unfunded backlog. Unexercised contract options and indefinite delivery indefinite quantity (IDIQ) contracts are not included in backlog until the time the option or IDIQ task order is exercised or awarded. For our cost-reimbursable and fixed-priced-incentive contracts, the estimated consideration we expect to receive pursuant to the terms of the contract may exceed the contractual award amount. The estimated consideration is determined at the outset of the contract and is continuously reviewed throughout the contract period. In determining the estimated consideration, we consider the risks related to the technical, schedule and cost impacts to complete the contract and an estimate of any variable consideration. Periodically, we review these risks and may increase or decrease backlog accordingly As of March 31, 2019, our ending backlog was $ 3.796 billion. We expect to recognize approximately 30% of our March 31, 2019 backlog over the next 12 months and approximately 45% over the next 24 months as revenue, with the remainder recognized thereafter.

Disaggregation of Revenue: See Note 14 for information regarding our sales by customer type, contract type and geographic region for each of our segments. We believe those categories best depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors.

Accounts Receivable: Receivables consist of billed amounts due from our customers. Due to the nature of our customers, we generally do not require collateral. We have limited exposure to credit risk as we have historically collected substantially all of our receivables. We generally require minimal allowance for doubtful accounts for our customers, which amounted to $1.7 million and $ 1.3 million as of March 31, 2019 and September 30, 2018, respectively.

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Inventories: We state our inventories at the lower of cost or market. We determine cost using the first-in, first-out (FIFO) method, which approximates current replacement cost. We value our work in process at the actual production and engineering costs incurred to date, including applicable overhead. Any inventoried costs in excess of estimated realizable value are immediately charged to cost of sales.

Contract Assets : Contract assets include unbilled amounts typically resulting from sales under contracts when the percentage-of-completion cost-to-cost method of revenue recognition is utilized and revenue recognized exceeds the amount billed to the customer. The amounts may not exceed their estimated net realizable value. Contract assets are classified as current assets and, in accordance with industry practice, include amounts that may be billed and collected beyond one year due to the long-cycle nature of many of our contracts.

Long-term Capitalized Contract Costs: Through September 30, 2018, and prior to the adoption of ASC 606 long-term capitalized contract costs included costs incurred on contracts to develop and manufacture transportation systems for customers for which revenue recognition did not begin until the customers begin operating the systems. Upon adoption of ASC 606, revenue recognition and cost recognition are no longer deferred in these situations and therefore we no longer have long-term capitalized contract costs.

Contract Liabilities : Contract liabilities (formerly referred to as customer advances prior to the adoption of ASC 606) include advance payments and billings in excess of revenue recognized. Contract liabilities are classified as current liabilities based on our contract operating cycle and calculated on a contract-by-contract basis, net of revenue recognized, at the end of each reporting period.

Recently Adopted Accounting Pronouncements – Income Taxes

On December 22, 2017 the U.S. government enacted the “Tax Cuts and Jobs Act of 2017” (Tax Act). Due to the complexity of the Tax Act, the SEC issued guidance in SAB 118 which clarified the accounting for income taxes under ASC 740 if certain information was not yet available, prepared or analyzed in reasonable detail to complete the accounting for income tax effects of the Tax Act. SAB 118 provided for a measurement period of up to one year after the enactment of the Tax Act, during which time the required analyses and accounting must be completed. During fiscal year 2018, we recorded provisional amounts for the income tax effects of the changes in tax law and tax rates, as reasonable estimates were determined by management during this period. The SAB 118 measurement period subsequently ended on December 22, 2018. Although we no longer consider these amounts to be provisional, the determination of the Tax Act’s income tax effects may change following future legislation or further interpretation of the Tax Act based on the publication of recently proposed U.S. Treasury regulations and guidance from the Internal Revenue Service and state tax authorities.

Recently Adopted Accounting Pronouncements – Other

In November 2016, the FASB issued ASU 2016-18, Restricted Cash , which requires amounts generally described as restricted cash and restricted cash equivalents be included with cash and cash equivalents when reconciling the total beginning and ending amounts for the periods shown on the statement of cash flows. ASU 2016-18 was adopted by us beginning October 1, 2018. The application of this accounting standard update did not impact financial results, but resulted in a retrospective change in the presentation of restricted cash, including the inclusion of our restricted cash balances within the beginning and ending amounts of cash and cash equivalents in our Statements of Cash Flows. In addition, changes in the total of cash, cash equivalents and restricted cash are now reflected in our Statements of Cash Flows for all periods presented.

Recent Accounting Pronouncements – Not Yet Adopted

In February 2016, the FASB issued ASU 2016-02, Leases . Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (a) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted basis; and (b) a right-of-use asset, which is an asset that represents the lessee’s right to use, or control the use of, a specified asset for the lease term. The ASU will be effective for us beginning October 1, 2019 with early adoption permitted. ASU 2016-02 will be adopted on a modified retrospective transition basis for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. We are currently evaluating the impact of the

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application of this accounting standard update on our consolidated financial statements and we have determined we will not adopt the new guidance early.

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment. This standard removes the second step of the goodwill impairment test, where a determination of the fair value of individual assets and liabilities of a reporting unit was needed to measure the goodwill impairment. Under this updated standard, goodwill impairment will now be the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The guidance will be effective for us in our fiscal year beginning October 1, 2020 with early adoption permitted. Adoption of ASU 2017-04 will have no immediate impact on our consolidated financial statements and would only have the potential to impact the amount of any goodwill impairment recorded after the adoption of the ASU. We are currently evaluating whether to adopt the guidance early.

In August 2017, the FASB issued ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities, which aims to improve the financial reporting of hedging relationships to better portray the economic results of an entity’s risk management activities in its financial statements. The amendments in this ASU are intended to better align an entity’s risk management activities and financial reporting for hedging relationships through changes to both the designation and measurement guidance for qualifying hedging relationships and the presentation of hedge results. To satisfy that objective, the amendments expand and refine hedge accounting for both non-financial and financial risk components, and align the recognition and presentation of the effects of the hedging instrument and the hedged item in the financial statements. Additionally, the amendments (1) permit hedge accounting for risk components in hedging relationships involving non-financial risk and interest rate risk; (2) change the guidance for designating fair value hedges of interest rate risk and for measuring the change in fair value of the hedged item in fair value hedges of interest rate risk; (3) continue to allow an entity to exclude option premiums and forward points from the assessment of hedge effectiveness; and (4) permit an entity to exclude the portion of the change in fair value of a currency swap that is attributable to a cross-currency basis spread from the assessment of hedge effectiveness. The amendments in this ASU are effective for us in our annual period beginning October 1, 2019 and interim periods within that year, with early adoption permitted. We are currently evaluating the impact of the application of this accounting standard update on our consolidated financial statements as well as whether to adopt the new guidance early.

In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement - Disclosure Framework (Topic 820) . The updated guidance modifies the disclosure requirements on fair value measurements. The amendments in this accounting standard update are effective for us in our annual period beginning October 1, 2020 and interim periods within that annual period. Early adoption is permitted for any removed or modified disclosures. We are currently evaluating the impact of the application of this accounting standard update on our consolidated financial statements as well as whether to adopt the new guidance early.

In August 2018, the FASB issued ASU 2018-14, Defined Benefit Plan - Disclosure Framework (Topic 715) , which modifies the disclosure requirements for employers that sponsor defined benefit pension or other postretirement benefit plans. The guidance removes disclosures that are no longer considered cost beneficial, clarifies the specific requirements of disclosures and adds disclosure requirements identified as relevant. The amendments in this accounting standard update are effective for us in our annual period beginning October 1, 2020. Early adoption is permitted. We are currently evaluating the impact of the application of this accounting standard update on our consolidated financial statements as well as whether to adopt the new guidance early.

Note 2 — Implementation of the New Revenue Recognition Standard

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers , as amended (commonly referred to as ASC 606), which replaces numerous requirements in U.S. GAAP, including industry-specific requirements, and provides companies with a single revenue recognition model for recognizing revenue from contracts with customers and significantly expands the disclosure requirements for revenue arrangements. The new standard, as amended, was effective for us beginning on October 1, 2018.

As discussed in Note 1, we adopted ASC 606 using the modified retrospective transition method. Results for reporting periods beginning after September 30, 2018 are presented under ASC 606, while prior period comparative information has not been restated and continues to be reported in accordance with ASC 605, the accounting standard in effect for periods ending prior to October 1, 2018.

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Based on contracts in process at September 30, 2018, upon adoption of ASC 606 we recorded a net increase to retained earnings of $24.5 million, which includes the acceleration of net sales of approximately $114.9 million and the related cost of sales of $90.4 million. The adjustment to retained earnings primarily relates to multiple element transportation contracts that previously required the deferral of revenue and costs during the design and build phase, as the collection of all customer payments occurs during the subsequent operate and maintain phase. Under ASC 606, deferral of such revenue and costs is not required. In addition, the adjustment to retained earnings is attributed to contracts previously accounted for under the units-of-delivery method, which are now recognized under ASC 606 earlier in the performance period as costs are incurred, as opposed to when the units are delivered under ASC 605. In accordance with the modified retrospective transition provisions of ASC 606, we will not recognize any of the accelerated net sales and related cost of sales through October 1, 2018 in our Condensed Consolidated Statements of Operations for any historical or future period.

We made certain presentation changes to our Consolidated Balance Sheet on October 1, 2018 to comply with ASC 606. The component of accounts receivable that consisted of unbilled contract receivables as reported under ASC 605 has been reclassified as contract assets under ASC 606, after certain adjustments described below. The adoption of ASC 606 resulted in an increase in unbilled contract receivables (referred to as contract assets under ASC 606) primarily from converting contracts previously applying the units-of-delivery method to the cost-to-cost method with a corresponding reduction in inventoried contract costs. Additionally, the adoption of ASC 606 resulted in an increase in unbilled receivables from converting multiple element transportation contracts that previously deferred all revenue and costs during the design and build phase, with a corresponding reduction in long-term capitalized contract costs. Advance payments and deferred revenue, previously primarily classified in customer advances, are now presented as contract liabilities.

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The table below presents the cumulative effect of the changes made to our Condensed Consolidated Balance Sheet as of October 1, 2018 due to the adoption of ASC 606 (in thousands):


			Adjustments		October 1, 2018
	September 30,		Due to		As Adjusted
	2018		ASC 606		Under ASC 606
ASSETS
Current assets:
Cash and cash equivalents	$	111,834	$	—	$	111,834
Cash in consolidated VIE		374		—		374
Restricted cash		17,400		—		17,400
Restricted cash in consolidated VIE		10,000		—		10,000
Accounts receivable, net		392,367		(236,743)		155,624
Contract assets		—		272,210		272,210
Recoverable income taxes		91		—		91
Inventories		84,199		(22,511)		61,688
Assets held for sale		8,177		—		8,177
Other current assets		43,705		—		43,705
Total current assets		668,147		12,956		681,103

Long-term contracts receivables		6,134		(6,134)		—
Long-term contracts financing receivables		—		56,228		56,228
Long-term contracts financing receivables in consolidated VIE		—		38,990		38,990
Long-term capitalized contract costs		84,924		(84,924)		—
Long-term capitalized contract costs in consolidated VIE		1,258		(1,258)		—
Property, plant and equipment, net		117,546		—		117,546
Deferred income taxes		4,713		389		5,102
Goodwill		333,626		—		333,626
Purchased intangibles, net		73,533		—		73,533
Other assets		14,192		—		14,192
Other noncurrent assets in consolidated VIE		810		—		810
Total assets	$	1,304,883	$	16,247	$	1,321,130

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings	$	—	$	—	$	—
Trade accounts payable		125,414		(3,011)		122,403
Trade accounts payable in consolidated VIE		165		—		165
Contract liabilities		—		70,127		70,127
Customer advances		75,941		(75,941)		—
Accrued compensation and other current liabilities		118,233		583		118,816
Income taxes payable		8,586		—		8,586
Total current liabilities		328,339		(8,242)		320,097

Long-term debt		199,793		—		199,793
Long-term debt in consolidated VIE		9,056		—		9,056
Other long-term liabilities		43,486		—		43,486
Other long-term liabilities in consolidated VIE		13		—		13

Shareholders’ equity:
Common stock		45,008		—		45,008
Retained earnings		801,834		19,834		821,668
Accumulated other comprehensive loss		(110,643)		—		(110,643)
Treasury stock at cost		(36,078)		—		(36,078)
Shareholders’ equity related to Cubic		700,121		19,834		719,955
Noncontrolling interest in VIE		24,075		4,655		28,730
Total shareholders’ equity		724,196		24,489		748,685
Total liabilities and shareholders’ equity	$	1,304,883	$	16,247	$	1,321,130

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The table below presents how the adoption of ASC 606 affected certain line items on our Condensed Consolidated Statements of Operations for the three and six months ended March 31, 2019 (in thousands):


	Three months ended March 31, 2019						Six months ended March 31, 2019
					As Reported						As Reported
	Under		Effect of		Under		Under		Effect of		Under
	ASC 605		ASC 606		ASC 606		ASC 605		ASC 606		ASC 606
Net sales:
Products	$	195,588	$	27,156	$	222,744	$	348,150	$	56,847	$	404,997
Services		114,047		548		114,595		238,309		(708)		237,601
		309,635		27,704		337,339		586,459		56,139		642,598
Costs and expenses:
Products		145,156		22,411		167,567		245,700		47,352		293,052
Services		82,212		—		82,212		174,997		—		174,997
Selling, general and administrative expenses		66,295		(100)		66,195		129,118		63		129,181
Research and development		13,754		—		13,754		25,766		—		25,766
Amortization of purchased intangibles		12,395		—		12,395		22,960		—		22,960
Restructuring costs		1,757		—		1,757		3,749		—		3,749
		321,569		22,311		343,880		602,290		47,415		649,705

Operating loss		(11,934)		5,393		(6,541)		(15,831)		8,724		(7,107)

Other income (expenses):
Interest and dividend income		74		1,339		1,413		130		2,517		2,647
Interest expense		(4,531)		—		(4,531)		(8,563)		—		(8,563)
Other income (expense), net		(3,602)		—		(3,602)		(8,355)		—		(8,355)

Loss from continuing operations before income taxes		(19,993)		6,732		(13,261)		(32,619)		11,241		(21,378)

Income tax benefit		(4,053)		222		(3,831)		(1,580)		246		(1,334)

Loss from continuing operations		(15,940)		6,510		(9,430)		(31,039)		10,995		(20,044)
Net loss from discontinued operations		(1,339)		—		(1,339)		(1,339)		—		(1,339)
Net loss		(17,279)		6,510		(10,769)		(32,378)		10,995		(21,383)

Less noncontrolling interest in loss of VIE		(3,885)		2,508		(1,377)		(9,866)		4,462		(5,404)

Net loss attributable to Cubic	$	(13,394)	$	4,002	$	(9,392)	$	(22,512)	$	6,533	$	(15,979)

Amounts attributable to Cubic:
Net loss from continuing operations		(12,055)		4,002		(8,053)		(21,173)		6,533		(14,640)
Net loss from discontinued operations		(1,339)		—		(1,339)		(1,339)		—		(1,339)
Net loss attributable to Cubic	$	(13,394)	$	4,002	$	(9,392)	$	(22,512)	$	6,533	$	(15,979)

Net income (loss) per share:
Basic earnings per share attributable to Cubic	$	(0.43)	$	0.13	$	(0.30)	$	(0.75)	$	0.22	$	(0.54)
Diluted earnings per share attributable to Cubic	$	(0.43)	$	0.13	$	(0.30)	$	(0.75)	$	0.22	$	(0.54)

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The table below quantifies the impact of adopting ASC 606 on segment net sales and operating income (loss) for the three and six months ended March 31, 2019 (in thousands):


	Three months ended March 31, 2019						Six months ended March 31, 2019
					As Reported						As Reported
	Under		Effect of		Under		Under		Effect of		Under
	ASC 605		ASC 606		ASC 606		ASC 605		ASC 606		ASC 606
Sales:
Cubic Transportation Systems	$	182,571	$	18,122	$	200,693	$	355,299	$	27,201	$	382,500
Cubic Mission Solutions		62,677		(742)		61,935		108,040		288		108,328
Cubic Global Defense		64,387		10,324		74,711		123,120		28,650		151,770
Total sales	$	309,635	$	27,704	$	337,339	$	586,459	$	56,139	$	642,598

Operating income (loss):
Cubic Transportation Systems	$	5,673	$	3,122	$	8,795	$	14,859	$	4,912	$	19,771
Cubic Mission Solutions		(7,911)		(512)		(8,423)		(13,232)		(131)		(13,363)
Cubic Global Defense		2,390		2,783		5,173		4,127		3,943		8,070
Unallocated corporate expenses		(12,086)		—		(12,086)		(21,585)		—		(21,585)
Total operating income (loss)	$	(11,934)	$	5,393	$	(6,541)	$	(15,831)	$	8,724	$	(7,107)

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The table below presents how the impact of the adoption of ASC 606 affected certain line items on our Condensed Consolidated Balance Sheet at March 31, 2019 (in thousands):


					As Reported
	Under		Effect of		Under
	ASC 605		ASC 606		ASC 606
ASSETS
Current assets:
Cash and cash equivalents	$	42,483	$	—	$	42,483
Cash in consolidated VIE		362		—		362
Restricted cash		19,064		—		19,064
Restricted cash in consolidated VIE		9,967		—		9,967
Accounts receivable, net		406,180		(248,648)		157,532
Contract assets		—		296,920		296,920
Recoverable income taxes		5,700		210		5,910
Inventories		153,035		(33,165)		119,870
Assets held for sale		12,620		—		12,620
Other current assets		44,471		—		44,471
Other current assets in consolidated VIE		43		—		43
Total current assets		693,925		15,317		709,242

Long-term contracts receivables		3,474		(3,474)		—
Long-term contracts financing receivables		—		41,758		41,758
Long-term contracts financing receivables in consolidated VIE		—		68,779		68,779
Long-term capitalized contract costs		109,318		(109,318)		—
Long-term capitalized contract costs in consolidated VIE		1,846		(1,846)		—
Property, plant and equipment, net		129,367		—		129,367
Deferred income taxes		4,563		235		4,798
Goodwill		579,648		—		579,648
Purchased intangibles, net		184,104		—		184,104
Other assets		14,290		—		14,290
Other noncurrent assets in consolidated VIE		1,114		—		1,114
Total assets	$	1,721,649	$	11,451	$	1,733,100

LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Short-term borrowings	$	209,000	$	—	$	209,000
Trade accounts payable		132,040		(2,354)		129,686
Trade accounts payable in consolidated VIE		156		—		156
Contract liabilities		—		78,352		78,352
Customer advances		100,520		(100,520)		—
Accrued compensation and other current liabilities		93,256		—		93,256
Accrued compensation and other current liabilities in consolidated VIE		204		—		204
Income taxes payable		2,234		456		2,690
Current portion of long-term debt		10,714		—		10,714
Total current liabilities		548,124		(24,066)		524,058

Long-term debt		189,095		—		189,095
Long-term debt in consolidated VIE		25,602		—		25,602
Other long-term liabilities		41,290		—		41,290
Other long-term liabilities in consolidated VIE		9,866		—		9,866

Shareholders’ equity:
Common stock		264,612		—		264,612
Retained earnings		775,102		26,384		801,486
Accumulated other comprehensive loss		(110,156)		—		(110,156)
Treasury stock at cost		(36,078)		—		(36,078)
Shareholders’ equity related to Cubic		893,480		26,384		919,864
Noncontrolling interest in VIE		14,192		9,133		23,325
Total shareholders’ equity		907,672		35,517		943,189
Total liabilities and shareholders’ equity	$	1,721,649	$	11,451	$	1,733,100

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Note 3 — Acquisitions and Divestitures

Sale of CGD Services

On April 18, 2018, we entered into a stock purchase agreement with the Purchaser, an entity affiliated with GC Valiant, LP, under which we agreed to sell our CGD Services business to the Purchaser. We concluded that the sale of the CGD Services business met all of the required conditions for discontinued operations presentation in the second quarter of fiscal 2018. Consequently, in the second quarter of fiscal 2018, we recognized a $6.9 million loss within discontinued operations, which was calculated as the excess of the carrying value of the net assets of CGD Services less the estimated sales price in the stock purchase agreement less estimated selling costs.

The sale closed on May 31, 2018. In accordance with the terms of the stock purchase agreement, the Purchaser agreed to pay us $135.0 million in cash upon the closing of the transaction, adjusted for the estimated working capital of CGD Services at the date of the sale compared to a working capital target. In the third quarter of fiscal 2018, we received $133.8 million in connection with the sale and we recorded a receivable from the Purchaser for the estimated amount due related to the working capital settlement. The balance of this receivable was $3.7 million at December 31, 2018. In the second quarter of fiscal 2019, we worked with the Purchaser and revised certain estimates related to the working capital settlement. In connection with the revision of these estimates, we reduced the receivable from the Purchaser by $1.3 million and recognized a loss on the sale of CGD Services in the second quarter of fiscal 2019. Certain remaining working capital settlement estimates, primarily related to the fair value of accounts receivable, have not yet been settled with the Purchaser.

In addition to the amounts described above, we are eligible to receive an additional cash payment of $3.0 million based on the achievement of pre-determined earn-out conditions related to the award of certain government contracts. No amount has been recorded as a receivable related to the potential achievement of earn-out conditions based upon our assessment of the probability of achievement of the required conditions.

The operations and cash flows of CGD Services are reflected in our Consolidated Statements of Operations and Consolidated Statements of Cash Flows as discontinued operations through May 31, 2018, the date of the sale. The following table presents the composition of net income from discontinued operations, net of taxes for the three- and six-month periods ended March 31, 2019 and March 31, 2018 (in thousands).


	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2019		2018		2019		2018

Net sales	$	—	$	98,068	$	—	$	190,361
Costs and expenses:
Cost of sales		—		87,562		—		170,682
Selling, general and administrative expenses		—		3,876		—		7,543
Amortization of purchased intangibles		—		489		—		1,097
Restructuring costs		—		7		—		7
Other income		—		(8)		—		(13)
Earnings from discontinued operations before income taxes		—		6,142		—		11,045
Net loss on sale		1,339		6,900		1,339		6,900
Income tax provision		—		(2,093)		—		1,161
Net income (loss) from discontinued operations	$	(1,339)	$	1,335	$	(1,339)	$	2,984

Business Acquisitions

Each of the following acquisitions has been treated as a business combination for accounting purposes. The results of operations of each acquired business has been included in our consolidated financial statements since the respective date of each acquisition.

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Nuvotronics, Inc.

In March 2019, we acquired all of the outstanding capital stock of Nuvotronics, Inc. (Nuvotronics), a provider of microfabricated radio frequency (RF) products. Based in Durham, North Carolina, Nuvotronics’ patented PolyStrata technology enables the design and production of uniquely packaged RF devices, such as antennas, filters, and combiners, all of which are components in Cubic’s advanced technology product offerings. Nuvotronics is expected to provide synergies from combining its capabilities with our existing CMS business .

Nuvotronics’ sales and results of operations included in our operating results were as follows (in millions):


	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2019		2018		2019		2018
Sales	$	0.7	$	—	$	0.7	$	—
Operating loss		(1.7)		—		(1.7)		—
Net loss after taxes		(1.7)		—		(1.7)		—

Nuvotronics’ operating results above included the following amounts (in millions):


	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2019		2018		2019		2018
Amortization	$	0.1	$	—	$	0.1	$	—
Acquisition-related expenses		1.8		—		1.8		—

The acquisition-date fair value of consideration is $66.2 million, which is comprised of net cash paid of $61.5 million, plus the estimated fair value of contingent consideration of $4.9 million, less a $0.2 million receivable due from the sellers for the difference between the net working capital acquired and the targeted working capital amounts. The acquisition was financed primarily with proceeds from draws on our line of credit. Under the purchase agreement, we will pay the sellers up to $8.0 million of contingent consideration if Nuvotronics meets certain gross profit goals for the 12-month periods ended December 31, 2020 and December 31, 2021. The contingent consideration liability will be re-measured to fair value at each reporting date until the contingencies are resolved and any subsequent changes in fair value are recognized in earnings.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in millions):


Technology	$	23.0
Trade name		1.5
Backlog		1.4
Non-compete agreements		0.7
Customer relationships		0.6
Accounts receivable		3.0
Fixed assets		2.7
Accounts payable and accrued expenses		(2.4)
Deferred taxes		(3.5)
Other net assets acquired (liabilities assumed)		(0.6)
Net identifiable assets acquired		26.4
Goodwill		39.8
Net assets acquired	$	66.2

The estimated fair values of assets acquired and liabilities assumed, including purchased intangibles are preliminary estimates pending the finalization of our valuation analyses and the receipt of further information from the seller regarding its assets and liabilities. The estimated fair values of purchased intangibles were determined using the valuation methodology deemed to be the most appropriate for each type of asset being valued. The trade name valuation

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used the relief from royalty method, the customer relationships valuation used the with-and-without valuation method, and the technology and backlog valuations used the excess earnings method.

The intangible assets are being amortized using straight-line methods based on the expected period of undiscounted cash flows that will be generated by the assets, over an average useful life of nine years from the date of acquisition.

The goodwill resulting from the acquisition consists primarily of the synergies expected from combining the operations of Nuvotronics with our existing CMS business, and strengthening our capability of developing and integrating products in our CMS portfolio. The goodwill also includes the value of the assembled workforce that became our employees following the close of the acquisition. The amount recorded as goodwill is allocated to our CMS segment and is not expected to be deductible for tax purposes.

The estimated amortization expense related to the intangible assets recorded in connection with our acquisition of Nuvotronics is as follows (in millions):


Year Ended
September 30,
2019	$	1.3
2020		4.1
2021		3.0
2022		3.0
2023		2.9
Thereafter		12.9

GRIDSMART Technologies, Inc.

In January 2019, we acquired all of the outstanding capital stock of GRIDSMART Technologies, Inc. (GRIDSMART), a provider of differentiated video tracking to the Intelligent Traffic Systems (ITS) market. Based in Knoxville, Tennessee, GRIDSMART specializes in video detection at the intersection utilizing advanced image processing, computer vision modeling and machine learning along with a single camera solution providing best-in-class data for optimizing the flow of people and traffic through intersections. GRIDSMART is expected to provide synergies from combining its capabilities with our existing CTS business.

GRIDSMART’s sales and results of operations included in our operating results were as follows (in millions):


	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2019		2018		2019		2018
Sales	$	6.3	$	—	$	6.3	$	—
Operating loss		(2.0)		—		(2.0)		—
Net loss after taxes		(2.0)		—		(2.0)		—

GRIDSMART’s operating results above included the following amounts (in millions):


	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2019		2018		2019		2018
Amortization	$	1.4	$	—	$	1.4	$	—
Acquisition-related expenses		1.8		—		1.8		—

The acquisition-date fair value of consideration is $86.8 million, which is comprised of net cash paid of $87.2 million less a $0.4 million receivable due from the sellers for the difference between the net working capital acquired and the targeted working capital amounts. The acquisition was financed primarily with proceeds from draws on our line of credit.

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The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in millions):



Technology	$	25.7
Customer relationships		3.6
Trade name		2.4
Inventory		4.3
Accounts receivable		1.7
Accounts payable and accrued expenses		(2.5)
Deferred taxes		(3.9)
Other net assets acquired		0.5
Net identifiable assets acquired		31.8
Goodwill		55.0
Net assets acquired	$	86.8

The estimated fair values of assets acquired and liabilities assumed, including purchased intangibles, are preliminary estimates pending the finalization of our valuation analyses, including the filing of pre-acquisition income tax returns. The estimated fair values of purchased intangibles were determined using the valuation methodology deemed to be the most appropriate for each type of asset being valued. The trade name valuation used the relief from royalty method, the customer relationships valuation used the with-and-without valuation method, and the technology and backlog valuations used the excess earnings method.

The goodwill resulting from the acquisition consists primarily of the synergies expected from combining the operations of GRIDSMART with our existing CTS business, and strengthening our capability of developing and integrating products in our CTS portfolio. The goodwill also includes the value of the assembled workforce that became our employees following the close of the acquisition. The amount recorded as goodwill is allocated to our CTS segment and is not expected to be deductible for tax purposes.

The estimated amortization expense related to the intangible assets recorded in connection with our acquisition of GRIDSMART is as follows (in millions):


Year Ended
September 30,
2019	$	4.0
2020		5.3
2021		3.9
2022		3.5
2023		3.5
Thereafter		11.5

Advanced Traffic Solutions Inc.

In October 2018, we acquired all of the outstanding capital stock of Advanced Traffic Solutions Inc. (Trafficware), a provider of intelligent traffic solutions for the transportation industry based in Sugar Land, Texas. Trafficware provides a fully integrated suite of software, Internet of Things devices, and hardware solutions that optimize the flow of motorist and pedestrian traffic. Trafficware is expected to provide synergies from combining its capabilities with our existing CTS business.

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Trafficware’s sales and results of operations included in our operating results were as follows (in millions):


	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2019		2018		2019		2018
Sales	$	11.7	$	—	$	22.2	$	—
Operating loss		(5.2)		—		(8.5)		—
Net loss after taxes		(5.2)		—		(8.5)		—

Trafficware’s operating results above included the following amounts (in millions):


	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2019		2018		2019		2018
Amortization	$	5.3	$	—	$	9.6	$	—
Acquisition-related expenses		2.1		—		3.5		—

The acquisition-date fair value of consideration is $237.6 million, which is comprised of net cash paid of $239.2 million less a $1.6 million receivable due from the sellers for the difference between the net working capital acquired and the targeted working capital amounts. The acquisition was financed primarily with proceeds from draws on our line of credit.

The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in millions):



Technology	$	43.3
Customer relationships		21.9
Backlog		4.8
Trade name		4.6
Accounts receivable		10.4
Inventory		9.9
Accounts payable and accrued expenses		(6.6)
Other net assets acquired (liabilities assumed)		(1.9)
Net identifiable assets acquired		86.4
Goodwill		151.2
Net assets acquired	$	237.6

The estimated fair values of assets acquired and liabilities assumed, including purchased intangibles, are preliminary estimates pending the finalization of our valuation analyses and the filing of pre-acquisition income tax returns. The estimated fair values of purchased intangibles were determined using the valuation methodology deemed to be the most appropriate for each type of asset being valued. The trade name valuation used the relief from royalty method, the customer relationships valuation used the with-and-without valuation method, and the technology and backlog valuations used the excess earnings method.

The goodwill resulting from the acquisition consists primarily of the synergies expected from combining the operations of Trafficware with our existing CTS business, and strengthening our capability of developing and integrating products in our CTS portfolio. The goodwill also includes the value of the assembled workforce that became our employees following the close of the acquisition. The amount recorded as goodwill is allocated to our CTS segment and is not expected to be deductible for tax purposes.

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The estimated amortization expense related to the intangible assets recorded in connection with our acquisition of Trafficware is as follows (in millions):


Year Ended
September 30,
2019	$	15.3
2020		11.4
2021		11.4
2022		11.4
2023		6.4
Thereafter		18.8

Shield Aviation, Inc.

In July 2018, we acquired the assets of Shield Aviation (Shield), based in San Diego, California, a provider of autonomous aircraft systems (AAS) for intelligence, surveillance and reconnaissance services. The addition of Shield expands our C4ISR portfolio for our CMS segment and will provide our customers with a rapidly deployable, medium AAS that offers unique mission enabling capabilities. We already provide the data link as well as the command and control link for the Shield AAS.

Shield’s sales and results of operations included in our operating results were as follows (in millions):


	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2019		2018		2019		2018
Sales	$	—	$	—	$	—	$	—
Operating loss		(1.9)		—		(2.8)		—
Net loss after taxes		(1.9)		—		(2.8)		—

Shield’s operating results above included the following amounts (in millions):


	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2019		2018		2019		2018
Amortization	$	0.2	$	—	$	0.4	$	—
Acquisition-related expenses		0.3		—		0.3		—

The acquisition-date fair value of consideration is $12.8 million, which is comprised of estimated fair value of contingent consideration of $5.6 million, extinguishment of secured loans and warrants due from Shield of $5.2 million, cash paid of $1.3 million, plus additional consideration to be paid in the future of $0.7 million. Under the purchase agreement, we will pay the sellers up to $10.0 million of contingent consideration if Shield meets certain sales goals from the date of acquisition through July 31, 2025. The contingent consideration liability will be re-measured to fair value at each reporting date until the contingencies are resolved and any subsequent changes in fair value are recognized in earnings.

The acquisition of Shield was paid for with funds from existing cash resources. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in millions):



Technology	$	6.0
Other net assets acquired		0.3
Net identifiable assets acquired		6.3
Goodwill		6.5
Net assets acquired	$	12.8

The technology asset valuation used the excess earnings approach and is being amortized using the straight-line method over eight years, which is based on the expected period of cash flows that will be generated by the asset.

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The goodwill resulting from the acquisition consists primarily of the synergies expected from combining the operations of Shield with our existing CMS business, and strengthening our capability of developing and integrating products and services in our CMS portfolio. The goodwill also includes the value of the assembled workforce that became our employees following the close of the acquisition. The amount recorded as goodwill is allocated to our CMS segment and is expected to be deductible for tax purposes.

The estimated amortization expense related to the intangible assets recorded in connection with our acquisition of Shield is as follows (in millions):


Year Ended
September 30,
2019	$	0.8
2020		0.8
2021		0.8
2022		0.8
2023		0.8
Thereafter		2.1

MotionDSP

In October 2017 we paid cash of $4.7 million to purchase 49% of the outstanding capital stock of MotionDSP, a private artificial intelligence software company based in Burlingame, California, which specializes in real-time video enhancement and computer vision analytics. On February 21, 2018, we paid net cash of $4.8 million to purchase the remaining outstanding capital stock of MotionDSP. The addition of MotionDSP enhances the capabilities in real-time video processing of our CMS business and expands our customer base in the public safety and other adjacent markets.

MotionDSP’s sales and results of operations included in our operating results since its consolidation in our financial statements were as follows (in millions):


	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2019		2018		2019		2018
Sales	$	0.2	$	0.1	$	0.4	$	0.1
Operating loss		(0.2)		(0.2)		(0.6)		(0.2)
Net loss after taxes		(0.2)		(0.2)		(0.6)		(0.2)

MotionDSP’s operating results above included the following amounts (in millions):


	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2019		2018		2019		2018
Amortization	$	0.2	$	0.1	$	0.4	$	0.1
Acquisition-related expenses		0.1		0.4		0.2		0.6

The acquisition of MotionDSP was paid for with funds from existing cash resources. The following table summarizes the estimated fair values of the assets acquired and liabilities assumed at the acquisition date (in millions):


Customer relationships	$	0.2
Technology		4.5
Trade name		0.1
Accounts payable and accrued expenses		(0.3)
Other noncurrent liabilities		(0.8)
Other net liabilities assumed		(0.9)
Net identifiable assets acquired		2.8
Goodwill		6.7
Net assets acquired	$	9.5

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The fair values of purchased intangibles were determined using the valuation methodology deemed to be the most appropriate for each type of asset being valued. The trade name valuation used the relief from royalty method, the customer relationships valuation used the with-and-without valuation method, and the technology valuation used the excess earnings method.

The intangible assets are being amortized using straight-line methods based on the expected cash flows from the assets, over a useful life of seven years from the date of acquisition.

The goodwill resulting from the acquisition was deemed to consist primarily of the synergies expected from combining the operations of MotionDSP with our CMS operating segment, enhancing our capabilities in real-time video processing and computer vision analytics of our CMS portfolio, as well as the value of the assembled workforce that became our employees following the close of the acquisition. The amount recorded as goodwill in connection with the acquisition of MotionDSP is not expected to be deductible for tax purposes.

The estimated amortization expense related to the intangible assets recorded in connection with our acquisition of MotionDSP is as follows (in millions):


Year Ended
September 30,
2019	$	0.7
2020		0.7
2021		0.7
2022		0.7
2023		0.7
Thereafter		0.8

Pro forma information

The following unaudited pro forma information presents our consolidated results of operations as if Nuvotronics, GRIDSMART, Trafficware, Shield, and MotionDSP had been included in our consolidated results since October 1, 2017 (in millions):


	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2019		2018		2019		2018
Net sales	$	340.0	$	300.1	$	656.9	$	569.0

Net loss	$	(9.2)	$	(7.4)	$	(18.3)	$	(25.0)

The pro forma information includes adjustments to give effect to pro forma events that are directly attributable to the acquisitions and have a continuing impact on operations including the amortization of purchased intangibles and the elimination of interest expense for the repayment of debt. No adjustments were made for transaction expenses, other adjustments that do not reflect ongoing operations or for operating efficiencies or synergies. The pro forma financial information is not necessarily indicative of what the consolidated financial results of our operations would have been had the acquisitions been completed on October 1, 2017, and it does not purport to project our future operating results.

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Goodwill

Changes in goodwill for the six months ended March 31, 2019 were as follows for each of our reporting units (in thousands):



	Cubic Transportation		Cubic Mission		Cubic Global
	Systems		Solutions		Defense		Total

Net balances at September 30, 2018	$	49,786	$	138,127	$	145,713	$	333,626
Acquisitions		206,106		39,827		—		245,933
Foreign currency exchange rate changes		9		—		80		89
Net balances at March 31, 2019	$	255,901	$	177,954	$	145,793	$	579,648

Goodwill represents the purchase price paid in excess of the fair value of net tangible and intangible assets acquired. Goodwill is not amortized but is subject to an impairment test at a reporting unit level on an annual basis and when circumstances indicate that an impairment is more-likely-than-not. Circumstances that might indicate an impairment is more-likely-than-not include a significant adverse change in the business climate for one of our reporting units or a decision to dispose of a reporting unit or a significant portion of a reporting unit.

The test for goodwill impairment is a two-step process. The first step of the test is performed by comparing the fair value of each reporting unit to its carrying value, including recorded goodwill. If the carrying value of a reporting unit exceeds its fair value, the second step is performed to measure the amount of the impairment, if any, by comparing the implied fair value of goodwill to its carrying value. Any resulting impairment determined would be recorded in the current period.

Our most recent annual goodwill impairment test was our 2018 annual impairment test completed as of July 1, 2018. The results of our 2018 annual impairment test indicated that the estimated fair value for our CTS reporting unit exceeded its carrying value by over 100% while the estimated fair values of our CGD and CMS reporting units each exceeded their respective carrying values by over 40%. Subsequent to the effective dates of the tests for each of our reporting units, we do not believe that circumstances have occurred that indicate that an impairment for any of our reporting units is more-likely-than-not. As such, no subsequent interim impairment tests have been performed.

Note 4 – Variable Interest Entities

In accordance with ASC 810, Consolidation , we assess our partnerships and joint ventures at inception, and when there are changes in relevant factors, to determine if any meet the qualifications of a variable interest entity (VIE). We consider a partnership or joint venture a VIE if it has any of the following characteristics: (a) the total equity investment is not sufficient to permit the entity to finance its activities without additional subordinated financial support, (b) characteristics of a controlling financial interest are missing (either the ability to make decisions through voting or other rights, the obligation to absorb the expected losses of the entity or the right to receive the expected residual returns of the entity), or (c) the voting rights of the equity holders are not proportional to their obligations to absorb the expected losses of the entity and/or their rights to receive the expected residual returns of the entity, and substantially all of the entity's activities either involve or are conducted on behalf of an investor that has disproportionately few voting rights.

We perform a qualitative assessment of each VIE to determine if we are its primary beneficiary. We conclude that we are the primary beneficiary and consolidate the VIE if we have both (a) the power to direct the activities that most significantly impact the VIE’s economic performance and (b) the obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE. We consider the VIE design, the contractual agreements that define the ownership structure, distribution of profits and losses, risks, responsibilities, indebtedness, voting rights and board representation of the respective parties in determining if we are the primary beneficiary. We also consider all parties that have direct or implicit variable interests when determining whether we are the primary beneficiary. As required by ASC 810, our primary beneficiary assessment is continuously performed.

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Transit Authority (MBTA) for the financing, development, and operation of a next-generation fare payment system in Boston (the MBTA Contract). HoldCo is 90% owned by John Laing and 10% owned by Cubic. Collectively, HoldCo and OpCo are referred to as the P3 Venture. Based on our assessment under ASC 810, we have concluded that OpCo and HoldCo are VIE’s and that we are the primary beneficiary of OpCo. Consequently, we have consolidated the financial statements of OpCo within Cubic’s consolidated financial statements. We have concluded that we are not the primary beneficiary of HoldCo, and thus we have not consolidated the financial statements of HoldCo within Cubic’s consolidated financial statements.

The MBTA Contract consists of a design and build phase of approximately three years and an operate and maintain phase of approximately ten years. The design and build phase is planned to be completed in 2021 and the operate and maintain phase will span from 2021 through 2031. MBTA will make fixed payments of $558.5 million, adjusted for incremental transaction-based fees, inflation, and performance penalties, to OpCo in connection with the MBTA Contract over the ten- year operate and maintain phase. All of OpCo’s contractual responsibilities regarding the design and development and the operation and maintenance of the fare system have been subcontracted to Cubic by OpCo. Cubic will receive fixed payments of $427.6 million, adjusted for incremental transaction-based fees, inflation, and performance penalties, under its subcontract with OpCo.

Upon creation of the P3 Venture, John Laing made a loan to HoldCo of $24.3 million in the form of a bridge loan that is intended to be converted to equity in the future in accordance with its equity funding responsibilities. Concurrently, HoldCo made a corresponding equity contribution to OpCo in the same amount which is included within equity of Noncontrolling interest in VIE within Cubic’s consolidated financial statements. Also, upon creation of the P3 Venture, Cubic issued a letter of credit for $2.7 million to HoldCo in accordance with Cubic’s equity funding responsibilities. HoldCo is able to draw on the Cubic letter of credit in certain liquidity instances, but no amounts have been drawn on this letter of credit as of March 31, 2019.

Upon creation of the P3 Venture, OpCo entered into a credit agreement with a group of financial institutions (the OpCo Credit Agreement) which includes a long-term debt facility and a revolving credit facility . The long-term debt facility allows for draws up to a maximum amount of $212.4 million; draws may only be made during the design and build phase of the MBTA Contract. The long-term debt facility, including interest and fees incurred during the design and build phase, is required to be repaid on a fixed monthly schedule over the operate and maintain phase of the MBTA Contract. The long-term debt facility bears interest at variable rates of LIBOR plus 1.3% and LIBOR plus 1.55% over the design and build and operate and maintain phases of the MBTA Contract, respectively. At March 31, 2019, the outstanding balance on the long-term debt facility was $25.6 million, which is presented net of unamortized deferred financing costs of $8.8 million. The revolving credit facility allows for draws up to a maximum amount of $13.9 million and is only available to be drawn on during the operate and maintain phase of the MBTA Contract. OpCo’s debt is nonrecourse with respect to Cubic and its subsidiaries. The fair value of the long-term debt facility approximates its carrying value.

The OpCo Credit Agreement contains a number of covenants which require that OpCo and Cubic maintain progress on the delivery of the MBTA Contract within a specified timeline and budget and provide regular reporting on such progress. The OpCo Credit Agreement also contains a number of customary events of default including, but not limited to, the delivery of a customized fare collection system to MBTA by a pre-determined date. Failure to meet such delivery date will result in OpCo, and Cubic via its subcontract with OpCo, to incur penalties due to the lenders .

OpCo has entered into pay-fixed/receive-variable interest rate swaps with a group of financial institutions to mitigate variable interest rate risk associated with its long-term debt. The interest rate swaps contain forward starting notional principal amounts which align with OpCo’s expected draws on its long-term debt facility. At March 31, 2019, the outstanding notional principal amounts on open interest rate swaps were $89.0 million. The fair value of OpCo’s interest rate swaps at March 31, 2019 was $9.9 million and is recorded as a liability in other long-term liabilities in our Consolidated Balance Sheets. OpCo’s interest rate swaps were not designated as effective hedges at March 31, 2019 and as such any unrealized gains/losses are included in other income (expense), net . Unrealized losses as a result of changes in the fair value of OpCo’s interest rate swaps were $3.8 million and $9.9 million for the three and six months ended March 31, 2019, respectively. See Note 13 for a description of the measurement of fair value of derivative financial instruments, including OpCo’s interest rate swaps.

OpCo holds a restricted cash balance which is required by the MBTA Contract to allow for the delivery of future change orders and unplanned expansions as directed by MBTA .

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The assets and liabilities of OpCo that are consolidated into our Condensed Consolidated Balance Sheets at March 31, 2019 and September 30, 2018 are as follows:


	March 31,		September 30,
	2019		2018
	(in thousands)
Cash	$	362	$	374
Restricted cash		9,967		10,000
Other current assets		43		—
Long-term capitalized contract costs		—		33,818
Long-term contracts financing receivable		68,779		—
Other noncurrent assets		1,114		810
Total assets	$	80,265	$	45,002

Trade accounts payable	$	156	$	165
Accrued compensation and other current liabilities		204		—
Due to Cubic		21,226		11,724
Other long-term liabilities		9,866		13
Long-term debt		25,602		9,056
Total liabilities	$	57,054	$	20,958
Total Cubic equity		(114)		(304)
Noncontrolling interests		23,325		24,348
Total liabilities and owners' equity	$	80,265	$	45,002

The assets of OpCo are restricted for its use only and are not available for the general operations of Cubic. OpCo’s debt is non-recourse to Cubic. Cubic’s maximum exposure to loss as a result of its equity interest in the P3 Venture is limited to the $2.7 million outstanding letter of credit, which will be converted to a cash contribution upon completion of the design and build phase of the MBTA Contract.

Prior to the adoption of ASC 606, Cubic and OpCo were precluded from recognizing revenue on the MBTA Contract because MBTA was not required to make payments to OpCo until the operate and maintain phase of the contract began. During this time period Cubic and OpCo were capitalizing costs associated with designing and building the system for MBTA. Upon the adoption of ASC 606, Cubic and OpCo are now permitted to recognize revenue related to the MBTA contract and therefore costs are now recognized as incurred and are no longer capitalized.

The revenue, operating income, and other income (expense), net of OpCo that are included in our Condensed Consolidated Statements of Operations are as follows:


	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2019		2018		2019		2018
Revenue	$	2,325	$	—	$	4,286	$	—
Operating income		2,030		—		3,698		—
Other income (expense), net		(3,720)		—		(9,853)		—
Interest income		757		—		1,260		—
Interest expense		(598)		—		(1,110)		—

Note 5 — Net Income (Loss) Per Share

Basic net income (loss) per share (EPS) is computed by dividing the net income (loss) attributable to Cubic for the period by the weighted average number of common shares outstanding during the period, including vested restricted stock units (RSUs).

In periods with a net income from continuing operations attributable to Cubic, diluted EPS is computed by dividing the net income for the period by the weighted average number of common and common equivalent shares outstanding

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during the period. Common equivalent shares consist of dilutive restricted stock units. Dilutive restricted stock units are calculated based on the average share price for each fiscal period using the treasury stock method. For RSUs with performance-based vesting, no common equivalent shares are included in the computation of diluted EPS until the related performance criteria have been met. In periods with a net loss from continuing operations attributable to Cubic, common equivalent shares are not included in the computation of diluted EPS, because to do so would be anti-dilutive.

The weighted-average number of shares outstanding used to compute net loss per common share were as follows (in thousands):


	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2019		2018		2019		2018

Weighted average shares - basic		31,150		27,223		29,821		27,215
Effect of dilutive securities		—		—		—		—
Weighted average shares - diluted		31,150		27,223		29,821		27,215

Number of anti-dilutive securities		976		1,029		988		1,033

Note 6 — Contract Assets and Liabilities

Contract assets include unbilled amounts typically resulting from sales under contracts when the percentage-of-completion cost-to-cost method of revenue recognition is utilized and revenue recognized exceeds the amount billed to the customer. Contract liabilities (formerly referred to as customer advances prior to the adoption of ASC 606) include advance payments and billings in excess of revenue recognized. Contract assets and contract liabilities were as follows (in thousands):



	March 31,		October 1,
	2019		2018

Contract assets	$	296,920	$	272,210
Contract liabilities	$	78,352	$	70,128

Contract assets increased $24.7 million during the six months ended March 31, 2019, primarily due to the recognition of revenue related to the satisfaction or partial satisfaction of performance obligations during the six months ended March 31, 2019 for which we have not yet billed. There were no significant impairment losses related to our contract assets during the six months ended March 31, 2019 and 2018.

Contract liabilities increased $8.2 million during the six months ended March 31, 2019, primarily due to payments received in excess of revenue recognized on these performance obligations. During the three and six months ended March 31, 2019, we recognized $14.1 million and $34.8 million, respectively, of our contract liabilities at October 1, 2018 as revenue. We expect our contract liabilities to be recognized as revenue over the next twelve months.

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Note 7 — Balance Sheet Details

Accounts Receivable

The components of accounts receivable are as follows (in thousands):


	March 31,		September 30,
	2019		2018

Accounts receivable
Billed	$	159,246	$	156,948
Unbilled		—		242,877
Allowance for doubtful accounts		(1,714)		(1,324)
Total accounts receivable		157,532		398,501
Less estimated amounts not currently due		—		(6,134)
Current accounts receivable	$	157,532	$	392,367

Inventories

Inventories consist of the following (in thousands):


	March 31,		September 30,
	2019		2018

Finished products	$	14,405	$	7,099
Work in process and inventoried costs under long-term contracts		62,172		63,169
Materials and purchased parts		43,293		23,710
Customer advances		—		(9,779)
Net inventories	$	119,870	$	84,199

At March 31, 2019, work in process and inventoried costs under long-term contracts includes approximately $1.4 million in costs incurred outside the scope of work or in advance of a contract award compared to $0.9 million at September 30, 2018. We believe it is probable that we will recover the costs inventoried at March 31, 2019, plus a profit margin, under contract change orders or awards within the next year.

Capitalized Software

We capitalize certain costs associated with the development or purchase of internal-use software. The amounts capitalized are included in property, plant and equipment in our Condensed Consolidated Balance Sheets and are amortized on a straight-line basis over the estimated useful life of the software, which ranges from three to seven years. No amortization expense is recorded until the software is ready for its intended use.

As a part of our efforts to upgrade our current information systems, early in fiscal 2015 we purchased new enterprise resource planning (ERP) software and began the process of designing and configuring this software and other software applications to manage our operations. Various components of our ERP system became ready for their intended use and were placed into service in phases from fiscal 2016 through fiscal 2018. As each component became ready for its intended use, the component’s costs were transferred into completed software and we began amortizing these costs over their seven-year estimated useful life.

Excluding businesses that we acquired in fiscal 2019, we completed the planned implementation of our ERP system in the fourth quarter of fiscal 2018. We continue to capitalize costs associated with the development of certain ERP features and upgrades that are not yet ready for their intended use. We capitalized costs related to ERP components in development totaling $0.1 million and $0.6 million for the three- and six-month periods ended March 31, 2019, respectively, and $2.0 million and $4.6 million for the three- and six-month periods ended March 31, 2018, respectively.

In addition to software costs that were capitalized, during the three- and six-months periods ended March 31, 2019, we recognized expenses related to the development and implementation of our ERP system of $0.2 million and $1.0 million,

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respectively, compared to $4.0 million and $10.3 million during the three- and six-month periods ended March 31, 2018, respectively, for costs that did not meet the requirements for capitalization. Amounts that were expensed in connection with the development and implementation of these systems are classified within selling, general and administrative expenses in the Condensed Consolidated Statements of Operations.

Deferred Compensation Plan

We have a non-qualified deferred compensation plan offered to a select group of highly compensated employees. The plan provides participants with the opportunity to defer a portion of their compensation in a given plan year. The liabilities associated with the non-qualified deferred compensation plan are included in other long-term liabilities in our Condensed Consolidated Balance Sheets and totaled $11.5 million at March 31, 2019 and at September 30, 2018.

We have made contributions to a rabbi trust to provide a source of funds for satisfying a portion of these deferred compensation liabilities. The carrying values of assets set aside to fund deferred compensation liabilities totaled $6.4 million at March 31, 2019 and at September 30, 2018 and were comprised entirely of life insurance contracts. The carrying value of the life insurance contracts is based on the cash surrender value of the policies. Changes in the carrying value of the deferred compensation liability, and changes in the carrying value of the assets held in the rabbi trust are reflected in our Condensed Consolidated Statements of Operations.

Note 8 — Fair Value of Financial Instruments

The valuation techniques required to determine fair value are based upon observable and unobservable inputs. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect internal market assumptions. The two types of inputs create the following fair value hierarchy:

Level 1 - Quoted prices for identical instruments in active markets.

Level 2 - Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable.

Level 3 - Significant inputs to the valuation model are unobservable.

The following table presents assets and liabilities measured and recorded at fair value on our balance sheets on a recurring basis (in thousands):


	March 31, 2019								September 30, 2018
	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
Assets
Cash equivalents	$	—	$	—	$	—	$	—	$	9,000	$	—	$	—	$	9,000
Current derivative assets		—		2,727		—		2,727		—		1,803		—		1,803
Noncurrent derivative assets		—		325		—		325		—		314		—		314
Total assets measured at fair value	$	—	$	3,052	$	—	$	3,052	$	9,000	$	2,117	$	—	$	11,117
Liabilities
Current derivative liabilities		—		1,460		—		1,460		—		1,657		—		1,657
Noncurrent derivative liabilities		—		—		—		—		—		75		—		75
Contingent consideration to seller of Deltenna		—		—		1,424		1,424		—		—		1,081		1,081
Contingent consideration to seller of Shield		—		—		5,912		5,912		—		—		5,618		5,618
Contingent consideration to seller of TeraLogics - revenue targets		—		—		—		—		—		—		1,750		1,750
Contingent consideration to seller of H4 Global		—		—		313		313		—		—		665		665
Contingent consideration to seller of Nuvotronics		—		—		4,900		4,900		—		—		—		—
Total liabilities measured at fair value	$	—	$	1,460	$	12,549	$	14,009	$	—	$	1,732	$	9,114	$	10,846

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The fair value of certain of our cash equivalents are based upon quoted prices for identical instruments in active markets. The fair value of our other cash equivalents is based upon a discounted cash flow model and approximate cost. Derivative financial instruments are measured at fair value, the material portions of which are based on active or inactive markets for identical or similar instruments or model-derived valuations whose inputs are observable. Where model-derived valuations are appropriate, we use the applicable credit spread as the discount rate. Credit risk related to derivative financial instruments is considered minimal and is managed by requiring high credit standards for counterparties and through periodic settlements of positions.

The fair value of contingent consideration liabilities to the sellers of businesses that we have acquired are revalued to their fair value each period and any increase or decrease is recorded into selling, general and administrative expense. Any changes in the assumed timing and amount of the probability of payment scenarios could impact the fair value.

At March 31, 2019, we have the following remaining contingent consideration arrangements with the sellers of companies which we acquired:

H4 Global: Payment of up to $3.0 million of contingent consideration based upon the value of contracts entered into over the five-year period ending September 30, 2020.

Deltenna: Payments of up to $7.1 million of contingent consideration if Deltenna meets certain sales goals from the date of acquisition through the year ending September 30, 2022.

Shield: Payments of up to $10.0 million of contingent consideration if Shield meets certain sales goals from the date of acquisition through July 31, 2025.

Nuvotronics: Payments of up to $8.0 million of contingent consideration if Nuvotronics meets certain gross profit goals for the 12-month periods ended December 31, 2020 and December 31, 2021.

In addition, we have a contingent consideration arrangement with the Purchaser of our CGD Services business under which we are eligible to receive a cash payment of $3.0 million if the Purchaser is awarded certain government contracts in the future.

The fair value of Deltenna contingent consideration was valued using the real option approach. Under this approach, each payment was modeled using long digital options written on the underlying revenue metric. The strike price for each option is the respective revenue as specified in the related agreement, and the spot price is calibrated to the revenue forecast by calculating the present value of the corresponding projected revenues using a risk-adjusted discount rate. The volatility for the underlying revenue metrics was based upon analysis of comparable guideline public companies and was 40% as of March 31, 2019 and 53% as of September 30, 2018. The risk-free rate was selected based on the quoted yields for U.S. Treasury securities with terms matching the earn-out payment period.

The maximum remaining payout to the sellers of H4 Global is $3.0 million at March 31, 2019, and is based upon the value of contracts entered into over the five-year period ending September 30, 2020. The fair value of the H4 Global contingent consideration was estimated using a probability weighted approach. Subject to the terms and conditions of the H4 Global purchase agreement, contingent consideration will be paid over a five year term that commenced on October 1, 2015 and ends on September 30, 2020. The payments will be calculated based on the award of certain contracts during the specified period. The fair value of the contingent consideration was determined by applying probabilities to different scenarios and summing the present value of any future payments.

The fair value of the Shield contingent consideration was estimated based on Monte Carlo simulations. Under the purchase agreement, we will pay the sellers up to $10.0 million if Shield meets certain sales goals from the date of acquisition through July 31, 2025. The fair value of the contingent consideration was determined based upon a probability distribution of values based on 1,000,000 simulation trials. Key inputs for the simulation include projected revenues, assumed discount rates for projected revenues and cash flows, and volatility. The volatility and revenue risk adjustment factors were determined based on analysis of publicly traded comparable companies and as of March 31, 2019 were 20.0% and 13.1%, respectively, and as of September 30, 2018 were 20.0% and 14.5%, respectively. The discount rate used was based on our expected borrowing rate under our financing arrangements, which was determined to be 4.0% at March 31, 2019 and 3.9% at September 30, 2018.

The fair value of the Nuvotronics contingent consideration was estimated based on Monte Carlo simulations. Under the purchase agreement, we will pay the sellers up to $8.0 million if Nuvotronics meets certain gross profit goals for the 12- month periods ended December 31, 2020 and December 31, 2021. The fair value of the contingent consideration was

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determined based upon a probability distribution of values based on 1,000,000 simulation trials. Key inputs for the simulation include projected gross profits, assumed discount rates for projected gross profits, and gross profit volatility. The volatility factor used as of March 31, 2019 was 13.7% and was determined based on analysis of publicly traded comparable companies. The discount rate used as of March 31, 2019 was 8.4%, which was based on our risk-free rate of return adjusted for our gross profit required risk premium.

The inputs to each of the contingent consideration fair value models include significant unobservable inputs and therefore represent Level 3 measurements within the fair value hierarchy. Significant judgment is employed in determining the appropriateness of these assumptions as of the acquisition dates and each subsequent period. Accordingly, changes in the assumptions described above can materially impact the amount of contingent consideration expense we record in any period .

As of March 31, 2019, the following table summarizes the change in fair value of our Level 3 contingent consideration liabilities (in thousands):


	H4 Global		TeraLogics (Revenue Targets)		Deltenna		Shield		Nuvotronics		Total
Net balances at September 30, 2018	$	665	$	1,750	$	1,081	$	5,618	$	—	$	9,114
Initial measurement recognized at acquisition		—		—		—		—		4,900		4,900
Cash paid to seller		(385)		(1,750)		—		—		—		(2,135)
Total remeasurement loss recognized in earnings		33		—		343		294		—		670
Balance as of March 31, 2019	$	313	$	—	$	1,424	$	5,912	$	4,900	$	12,549

We carry certain financial instruments, including accounts receivable, short-term borrowings, accounts payable and accrued liabilities at cost, which we believe approximates fair value because of the short-term maturity of these instruments.

The fair value of long-term debt is calculated by discounting the value of the note based on market interest rates for similar debt instruments, which is a Level 2 technique. The following table presents the estimated fair value and carrying value of our long-term debt (in millions):


	March 31,		September 30,
	2019		2018
Fair value	$	197.2	$	193.7
Carrying value	$	200.0	$	200.0

We did not have any significant non-financial assets or liabilities measured at fair value on a non-recurring basis in the first half of fiscal 2019 or 2018 other than assets and liabilities acquired in business acquisitions described in Note 3 and the restricted stock units that were granted in the first quarter of fiscal 2019 that contain performance and market-based vesting criteria described in Note 11.

Note 9 — Financing Arrangements

In December 2018, we completed an underwritten public offering of 3,300,000 shares of our common stock. We granted the underwriters a 30-day option to purchase up to an additional 495,000 shares of common stock. In December 2018, the underwriters exercised their option to purchase the additional 495,000 shares. All shares were offered by us at a price to the public of $60.00 per share. Net proceeds were $215.8 million, after deducting underwriting discounts and commissions and offering expenses of $11.9 million. We used the net proceeds to repay a portion of our outstanding borrowings under our revolving credit agreement which was used to finance the acquisition of Trafficware and general corporate purposes.

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also contained a provision that the coupon rate would increase by a further 0.50% should the company’s leverage ratio exceed a certain level. On February 2, 2016, we revised the note purchase agreement and we issued an additional $75.0 million of senior unsecured notes bearing interest at 3.93% and maturing on March 12, 2026. Interest payments on these notes are due semi-annually and principal payments are due from 2020 through 2026. At the time of the issuance of this last series of notes, certain terms and conditions of the note purchase and private shelf agreement were revised in coordination with the revision and expansion of the revolving credit agreement as discussed below in order to increase our leverage capacity. The interest rates on all of the term notes described above may be adjusted upwards by up to 0.75% should our leverage ratio exceed certain levels.

As of March 31, 2019, we had a committed revolving credit agreement with a group of financial institutions in the amount of $400.0 million which was scheduled to expire in August 2021 (Revolving Credit Agreement). At March 31, 2019, the weighted average interest rate on outstanding borrowings under the Revolving Credit Agreement was 3.95%. Debt issuance and modification costs of $2.3 million and $1.3 million were incurred in connection with February 2, 2016 and August 11, 2016 amendments to the Revolving Credit Agreement, respectively. Costs incurred in connection with establishment of and amendments to this credit agreement are recorded in other assets on our Condensed Consolidated Balance Sheets, and are being amortized as interest expense using the effective interest method over the stated term of the Revolving Credit Agreement. At March 31, 2019, our total debt issuance costs have an unamortized balance of $1.6 million. The available line of credit is reduced by any letters of credit issued under the Revolving Credit Agreement. As of March 31, 2019, there were $209.0 million of borrowings under this agreement and there were letters of credit outstanding totaling $31.2 million, which reduce the available line of credit to $159.8 million. The $31.2 million of letters of credit includes both financial letters of credit and performance guarantees.

In late April 2019, we executed the Fourth Amended and Restated Credit Agreement, which amended and restated the prior revolving credit agreement to increase the permitted borrowings to $800.0 million, extend the maturity to April 30, 2024, add seven new financial institutions to the group of creditors, and amend certain terms and covenants. Borrowings under the agreement bear a variable rate of interest which is calculated based upon the U.S. Dollar LIBOR rate plus a contractually defined credit spread that is based upon the tenor of the specific borrowing.

We maintain a cash account with a bank in the United Kingdom for which the funds are restricted as to use. The account is required to secure the customer’s interest in cash deposited in the account to fund our activities related to our performance under a fare collection services contract in the United Kingdom. The balance in the account as of March 31, 2019 was $19.1 million and is classified as restricted cash in our Condensed Consolidated Balance Sheets.

As of March 31, 2019, we had letters of credit and bank guarantees outstanding totaling $40.8 million, which includes the $31.2 million of letters of credit on the Revolving Credit Agreement above and $9.6 million of letters of credit issued under other facilities. The total of $40.8 million of letters of credit and bank guarantees includes $35.3 million that guarantees either our performance or customer advances under certain contracts and financial letters of credit of $5.5 million which primarily guarantee our payment of certain self-insured liabilities. We have never had a drawing on a letter of credit instrument, nor are any anticipated; therefore, we estimate the fair value of these instruments to be zero.

We have entered into a short-term borrowing arrangement in the United Kingdom in the amount of £20.0 million British pounds (equivalent to approximately $25.9 million) to help meet the short-term working capital requirements of our subsidiary. At March 31, 2019, no amounts were outstanding under this borrowing arrangement.

The terms of certain of our lending and credit agreements include provisions that require and/or limit, among other financial ratios and measurements, the permitted levels of debt, coverage of cash interest expense, and under certain circumstances, payments of dividends or other distributions to shareholders. As of March 31, 2019, these agreements have no restrictions on distributions to shareholders, subject to certain tests in these agreements.

Our self-insurance arrangements are limited to certain workers’ compensation plans, automobile liability and product liability claims. Under these arrangements, we self-insure only up to the amount of a specified deductible for each claim. Self-insurance liabilities included in other current liabilities on the balance sheet amounted to $8.3 million at March 31, 2019 and $8.6 million at September 30, 2018.

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Note 10 — Pension Plans

The components of net periodic pension cost (benefit) are as follows (in thousands):


	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2019		2018		2019		2018
Service cost	$	150	$	155	$	299	$	306
Interest cost		1,921		1,901		3,831		3,781
Expected return on plan assets		(3,034)		(3,570)		(6,043)		(7,095)
Amortization of actuarial loss		534		706		1,062		1,398
Administrative expenses		97		110		194		220
Net pension cost (benefit)	$	(332)	$	(698)	$	(657)	$	(1,390)

Note 11 - Stockholders’ Equity

Long-Term Equity Incentive Plan

In 2013, the Executive Compensation Committee of the Board of Directors (Compensation Committee) approved a long-term equity incentive award program. To date, the Compensation Committee has approved three general categories of grant awards: RSUs with time-based vesting, RSUs with performance-based vesting, and RSUs with performance and market-based vesting. Through March 31, 2019, the Compensation Committee has granted 1,307,912 RSUs with time-based vesting, 1,173,766 RSUs with performance-based vesting, and 219,890 RSUs with performance and market-based vesting under this program.

Each RSU with time-based vesting or performance-based vesting represents a contingent right to receive one share of our common stock. Each RSU with performance and market-based vesting represents a contingent right to receive up to 1.25 shares of our common stock. Dividend equivalent rights accrue with respect to the RSUs when and as dividends are paid on our common stock and vest proportionately with the RSUs to which they relate. Vested shares are delivered to the recipient following each vesting date.

The RSUs granted with time-based vesting generally vest in four equal installments on each of the four October 1 dates following the grant date, subject to the recipient’s continued service through such vesting date.

The performance-based RSUs granted to participants vest over three-year performance periods based on Cubic’s achievement of performance goals established by the Compensation Committee over the performance periods, subject to the recipient’s continued service through the end of the respective performance periods. For the performance-based RSUs granted prior to September 30, 2018, the vesting is contingent upon Cubic meeting one of three types of vesting criteria over the performance period, including revenue growth targets, earnings growth targets, and return on equity targets. The level at which Cubic performs against scalable targets over the performance periods will determine the percentage of the RSUs that will ultimately vest.

In fiscal 2019, the Compensation Committee granted RSUs with performance and market-based vesting criteria. The performance and market-based RSUs granted to participants vest over three-year performance periods based on Cubic’s achievement of revenue growth targets and earnings growth targets subject to the recipient’s continued service through the end of the respective performance periods. The level at which Cubic performs against scalable targets over the performance periods impact the percentage of the RSUs that will ultimately vest. For these RSUs, Cubic’s relative total stock return (TSR) as compared to the Russell 2000 Index (Index) over the performance period will result in a multiplier for the number of RSUs that will vest. If the TSR performance exceeds the performance of the Index based on a scale established by the Compensation Committee, the multiplier will result in up to an additional 25% of RSUs vesting at the end of the performance period. If the TSR performance is below the performance of the Index based on a scale established by the Compensation Committee, the multiplier could result in a reduction of up to 25% of these RSUs vesting at the end of the performance period.

The grant date fair value of each RSU with time-based vesting or performance-based vesting is the fair market value of one share of our common stock at the grant date.

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The grant date fair value of each RSU with performance and market-based vesting was calculated using a Monte Carlo simulation valuation method. Under this method, the prices of the Index and our common stock were simulated through the end of the performance period. The correlation matrix between our common stock and the index as well as our stock and the Index’s return volatilities were developed based upon an analysis of historical data. The following table includes the assumptions used for the valuation of the RSUs with performance and market-based vesting that were granted during fiscal 2019:



			RSU's granted during the six
			months ended March 31, 2019

Date of grant			November 21, 2018
Closing average share value (mean)			$68.56
Performance period begins			October 1, 2018
Performance period ends			September 30, 2021
Risk-free interest rate			2.8%
Expected volatility			34%

As a result of the valuation analysis, the fair value of the RSUs with performance and market-based vesting granted in the first six months of fiscal 2019 was calculated at $67.40 per RSU.

At March 31, 2019, the total number of unvested RSUs that are ultimately expected to vest, after consideration of expected forfeitures and estimated vesting of performance-based RSUs, is 351,563 RSUs with time-based vesting, 115,252 RSUs with performance-based vesting, and 156,012 RSUs with performance and market-based vesting.

The following table summarizes our RSU activity:


	Unvested Restricted Stock Units
		Weighted-Average
	Number of Shares	Grant-Date Fair Value
Unvested at September 30, 2018	366,460	$	52.31
Granted	217,385		63.63
Vested	(131,990)		50.43
Forfeited	(22,446)		52.53
Unvested at March 31, 2019	429,409	$	58.60


	Unvested Restricted Stock Units with Performance Based Vesting
		Weighted-Average
	Number of Shares	Grant-Date Fair Value
Unvested at September 30, 2018	635,628	$	50.11
Granted	—		—
Vested	—		—
Forfeited	(308,111)		44.22
Unvested at March 31, 2019	327,517	$	55.65


	Unvested Restricted Stock Units with Performance and Market Based Vesting
		Weighted-Average
	Number of Shares	Grant-Date Fair Value
Unvested at September 30, 2018	—	$	—
Granted	219,890		67.40
Vested	—		—
Forfeited	(2,534)		67.40
Unvested at March 31, 2019	217,356	$	67.40

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We recorded non-cash compensation expense related to stock-based awards as follows (in thousands):


	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2019		2018		2019		2018
Cost of sales	$	425	$	216	$	738	$	372
Selling, general and administrative		3,213		654		5,620		2,125
	$	3,638	$	870	$	6,358	$	2,497

As of March 31, 2019, there was $48.4 million of unrecognized compensation cost related to unvested RSUs. Based upon the expected forfeitures and the expected vesting of performance based RSUs, the aggregate fair value of RSUs expected to ultimately vest is $37.3 million. This amount is expected to be recognized over a weighted-average period of 1.7 years.

We estimate forfeitures at the time of grant and revise those estimates in subsequent periods on a cumulative basis in the period the estimated forfeiture rate changes for all stock-based awards when significant events occur. We consider our historical experience with employee turnover as the basis to arrive at our estimated forfeiture rate. The forfeiture rate was estimated to be 12.5% per year as of March 31, 2019. To the extent the actual forfeiture rate is different from what we have estimated, stock-based compensation related to these awards will be different from our expectations.

Note 12 – Income Taxes

U.S. Tax Cuts and Jobs Act

On December 22, 2017, the U.S. government enacted the Tax Act. Due to the complexity of the Tax Act, the SEC issued guidance in SAB 118 which clarified the accounting for income taxes under ASC 740 if certain information was not yet available, prepared or analyzed in reasonable detail to complete the accounting for income tax effects of the Tax Act. SAB 118 provided for a measurement period of up to one year after the enactment of the Tax Act, during which time the required analyses and accounting must be completed. During fiscal year 2018, we recorded provisional amounts for the income tax effects of the changes in tax law and tax rates, as reasonable estimates were determined by management during this period.

The SAB 118 measurement period ended on December 22, 2018. Although we no longer consider these amounts to be provisional, the determination of the Tax Act’s income tax effects may change following future legislation or further interpretation of the Tax Act based on the publication of recently proposed U.S. Treasury regulations and guidance from the Internal Revenue Service and state tax authorities.

The Tax Act includes provisions for Global Intangible Low-Tax Income (GILTI) under which taxes on foreign income are imposed on the excess of a deemed return on tangible assets of foreign subsidiaries. Consistent with accounting guidance, we have elected to account for the tax on GILTI as a period cost and thus have not adjusted any net deferred tax assets of our foreign subsidiaries in connection with the Tax Act.

Effective Tax Rate

During interim periods, we generally utilize the estimated annual effective tax rate method which involves the use of forecasted information. Under this method, the provision is calculated by applying an estimate of the annual effective tax rate for the full fiscal year to “ordinary” income or loss (pretax income or loss excluding unusual or infrequently occurring discrete items) for the reporting period. For the six-month period ended March 31, 2019, we believe it is more appropriate to use a blend of the discrete effective tax rate method and the estimated annual effective tax rate method to calculate income tax expense for the period. Since income from U.S. operations fluctuates throughout the year, we determined the discrete tax rate method should be utilized to determine a more reliable estimate of U.S. income tax expense for the period.

The income tax benefit recognized on pre-tax losses from continuing operations for the three and six months ended March 31, 2019 resulted in an effective tax rate of 29% and 6%, respectively, which differs from the U.S. statutory tax rate of 21% primarily due to the jurisdictional mix of pre-tax income (loss) and discrete tax benefits recorded in the three months ended March 31, 2019 related to the release of a portion of the existing U.S. deferred tax valuation allowance due to deferred tax liabilities acquired in business combinations. The effective tax rate for the six months ended March

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31, 2019 differs from the effective tax rate of 8% and 48% for the six months ended March 31, 2018 and the year ended September 30, 2018, respectively, primarily due to differences in the jurisdictional mix of pre-tax income (loss), partially offset by discrete benefits resulting from the enactment of the Tax Act and by discrete benefits recorded related to the release of a portion of the existing U.S. deferred tax valuation allowance due to deferred tax liabilities acquired in business combinations.

Deferred Tax Balances

As of March 31, 2019, we maintained a valuation allowance against U.S. deferred tax assets as realization of such assets does not meet the more-likely-than-not threshold required under accounting guidelines. We will continue to assess the need for a valuation allowance on deferred tax assets by evaluating positive and negative evidence that may exist. Through March 31, 2019, a total valuation allowance of $74.8 million has been established for U.S. net deferred tax assets, certain foreign operating losses and other foreign assets.

Note 13 — Derivative Instruments and Hedging Activities

In order to manage our exposure to fluctuations in interest and foreign currency exchange rates we utilize derivative financial instruments such as forward starting swaps and foreign currency forwards for periods typically up to three years. We do not use any derivative financial instruments for trading or other speculative purposes.

All derivatives are recorded at fair value, however, the classification of gains and losses resulting from changes in the fair values of derivatives are dependent on the intended use of the derivative and its resulting designation. If a derivative is designated as a fair value hedge, then a change in the fair value of the derivative is offset against the change in the fair value of the underlying hedged item and only the ineffective portion of the hedge, if any, is recognized in earnings. If a derivative is designated as a cash flow hedge, then the effective portion of a change in the fair value of the derivative is recognized as a component of accumulated other comprehensive income (loss) until the underlying hedged item is recognized in earnings, or the forecasted transaction is no longer probable of occurring. If a derivative does not qualify as a highly effective hedge, any change in fair value is immediately recognized in earnings. We formally document all hedging relationships for all derivative hedges and the underlying hedged items, as well as the risk management objectives and strategies for undertaking the hedge transactions. We classify the fair value of all derivative contracts as current or noncurrent assets or liabilities, depending on the realized and unrealized gain or loss position of the hedged contract at the balance sheet date, and the timing of future cash flows. The cash flows from derivatives treated as hedges are classified in the Condensed Consolidated Statements of Cash Flows in the same category as the item being hedged.

The following table shows the notional principal amounts of our outstanding derivative instruments as of March 31, 2019 and September 30, 2018 (in thousands):


	Notional Principal
	March 31, 2019		September 30, 2018
Instruments designated as accounting hedges:
Foreign currency forwards	$	157,574	$	169,406

Instruments not designated as accounting hedges:
Foreign currency forwards	$	15,474	$	27,909

Included in the amounts not designated as accounting hedges at March 31, 2019 and September 30, 2018 were foreign currency forwards with notional principal amounts of $6.3 million and $14.7 million, respectively, that have been designed to manage exposure to foreign currency exchange risks, and for which the gains or losses of the changes in fair value of the forwards has approximately offset an equal and opposite amount of gains or losses related to the foreign currency exposure. Unrealized gains of $0.3 million and $0.2 million were recognized in other income (expense), net for the three months ended March 31, 2019 and 2018, respectively, related to these foreign currency forward contracts not designated as accounting hedges . For the six months ended March 31, 2019 unrealized gains offset unrealized losses, compared to a net u nrealized loss of $0.2 million included in other income (expense) for the six months ended March 31, 2018, related to foreign currency forwards not designated as accounting hedges.

The notional principal amounts for outstanding derivative instruments provide one measure of the transaction volume outstanding and do not represent the amount of our exposure to credit or market loss. Credit risk represents our gross exposure to potential accounting loss on derivative instruments that are outstanding or unsettled if all counterparties

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failed to perform according to the terms of the contract, based on then-current interest or currency exchange rates at each respective date. Our exposure to credit loss and market risk will vary over time as a function of interest and currency exchange rates. The amount of credit risk from derivative instruments and hedging activities was not material for the periods ended March 31, 2019 and September 30, 2018. Although the table above reflects the notional principal amounts of our foreign exchange instruments, it does not reflect the gains or losses associated with the exposures and transactions that the foreign exchange instruments are intended to hedge. The amounts ultimately realized upon settlement of these financial instruments, together with the gains and losses on the underlying exposures, will depend on actual market conditions during the remaining life of the instruments.

We generally enter into master netting arrangements, which reduce credit risk by permitting net settlement of transactions with the same counterparty. We present our derivative assets and derivative liabilities at their gross fair values. We did not have any derivative instruments with credit-risk related contingent features that would require us to post collateral as of March 31, 2019 or September 30, 2018.

The table below presents the fair value of our derivative financial instruments that qualify for hedge accounting as well as their classification in the Condensed Consolidated Balance Sheets (in thousands):


		Fair Value
	Balance Sheet Location	March 31, 2019		September 30, 2018
Asset derivatives:
Foreign currency forwards	Other current assets	$	2,727	$	1,803
Foreign currency forwards	Other noncurrent assets		325		314
		$	3,052	$	2,117
Liability derivatives:
Foreign currency forwards	Other current liabilities	$	1,460	$	1,657
Foreign currency forwards	Other noncurrent liabilities		—		75
Total		$	1,460	$	1,732

The tables below present gains and losses recognized in other comprehensive income (loss) related to derivative financial instruments designated as cash flow hedges, as well as the amount of gains and losses reclassified into earnings (in thousands):

Six Months Ended

March 31, 2019

March 31, 2018

Gains (losses)

reclassified into

recognized in

earnings -

Gains (losses)

earnings -

Derivative Type

OCI

Effective Portion

recognized in OCI

Effective Portion

Foreign currency forwards

(822)

373

(203)

(798)

Three Months Ended

March 31, 2019

March 31, 2018

Gains (losses)

reclassified into

recognized in

earnings -

Gains (losses)

earnings -

Derivative Type

OCI

Effective Portion

recognized in OCI

Effective Portion

Foreign currency forwards

1,079

405

(859)

(24)

The amount of unrealized gains and losses from derivative instruments and hedging activities classified as not highly effective did not have a material impact on the results of operations for the three- and six-month periods ended March 31, 2019 and 2018. The amount of estimated unrealized net gains from cash flow hedges which are expected to be reclassified to earnings in the next twelve months is $1.1 million, net of income taxes.

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Note 14 — Segment Information

We define our operating segments and reportable segments based on the way our chief executive officer, who we have concluded is our chief operating decision maker, manages our operations for purposes of allocating resources and assessing performance and we continually reassess our operating segment and reportable segment designation based upon these criteria. We evaluate performance and allocate resources based on total segment operating income or loss. The accounting policies of the reportable segments are the same as those described in the summary of significant accounting policies. Intersegment sales and transfers are immaterial and are eliminated in consolidation.

Our reportable segments are business units that offer different products and services. Operating results for each segment are reported separately to senior corporate management to make decisions as to the allocation of corporate resources and to assess performance.

Business segment financial data is as follows (in millions):


	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2019		2018		2019		2018
Sales:
Cubic Transportation Systems	$	200.7	$	167.0	$	382.5	$	313.5
Cubic Mission Solutions		61.9		36.1		108.3		69.2
Cubic Global Defense		74.7		75.5		151.8		144.3
Total sales	$	337.3	$	278.6	$	642.6	$	527.0

Operating income (loss):
Cubic Transportation Systems	$	8.8	$	14.2	$	19.8	$	24.1
Cubic Mission Solutions		(8.5)		(7.8)		(13.4)		(16.7)
Cubic Global Defense		5.2		5.3		8.1		6.7
Unallocated corporate expenses		(12.0)		(13.4)		(21.6)		(27.7)
Total operating income (loss)	$	(6.5)	$	(1.7)	$	(7.1)	$	(13.6)

Depreciation and amortization:
Cubic Transportation Systems	$	9.5	$	3.0	$	17.2	$	6.3
Cubic Mission Solutions		5.8		5.2		11.2		11.1
Cubic Global Defense		1.5		2.0		3.7		4.1
Corporate		0.8		0.9		1.5		2.0
Total depreciation and amortization	$	17.6	$	11.1	$	33.6	$	23.5

Unallocated corporate costs in the second quarter of 2019 include costs of strategic and IT system resource planning as part of our One Cubic Initiatives, which totaled $2.3 million compared to $5.7 million in the second quarter of last year. Unallocated corporate costs included $3.9 million of costs incurred in the first half of 2019 for strategic and IT system resource planning compared to $13.7 million in the first half of last year. As described in Note 3, the operating results of CGD Services have been classified as discontinued operations in the Condensed Consolidated Statements of Operations for all periods presented.

Disaggregation of Total Net Sales . We disaggregate our sales from contracts with customers by end customer, contract type, deliverable type and revenue recognition method for each of our segments, as we believe these factors affect the nature, amount, timing, and uncertainty of our revenue and cash flows.

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Sales by Geographic Region (in millions) :


	Three months ended March 31, 2019								Six months ended March 31, 2019
	CTS		CMS		CGD		Total		CTS		CMS		CGD		Total

United States	$	106.9	$	60.5	$	34.0	$	201.4	$	198.2	$	106.0	$	69.7	$	373.9
United Kingdom		53.2		0.7		4.3		58.2		104.1		1.1		8.6		113.8
Australia		30.4		0.1		7.1		37.6		60.2		0.2		12.7		73.1
Far East/Middle East		3.5		0.2		12.3		16.0		7.9		0.6		30.7		39.2
Other		6.7		0.4		17.0		24.1		12.1		0.4		30.1		42.6
Total sales	$	200.7	$	61.9	$	74.7	$	337.3	$	382.5	$	108.3	$	151.8	$	642.6

Sales by End Customer. We are the prime contractor for the vast majority of our sales. The table below presents total net sales disaggregated by end customer (in millions):


	Three months ended March 31, 2019								Six months ended March 31, 2019
	CTS		CMS		CGD		Total		CTS		CMS		CGD		Total

U.S. Federal Government and State and Local Municipalities	$	96.7	$	58.1	$	37.6	$	192.4	$	187.5	$	103.9	$	70.0	$	361.4
Other		104.0		3.8		37.1		144.9		195.0		4.4		81.8		281.2
Total sales	$	200.7	$	61.9	$	74.7	$	337.3	$	382.5	$	108.3	$	151.8	$	642.6

Sales by Contract Type. Substantially all of our contracts are fixed-price type contracts. Sales included in Other contract types represent cost plus and time and material type contracts.

On a fixed-price type contract, we agree to perform the contractual statement of work for a predetermined sales price. On a cost-plus type contract, we are paid our allowable incurred costs plus a profit which can be fixed or variable depending on the contract’s fee arrangement up to predetermined funding levels determined by the customer. On a time-and-material type contract, we are paid on the basis of direct labor hours expended at specified fixed-price hourly rates (that include wages, overhead, allowable general and administrative expenses and profit) and materials at cost. The table below presents total net sales disaggregated by contract type (in millions):


	Three months ended March 31, 2019								Six months ended March 31, 2019
	CTS		CMS		CGD		Total		CTS		CMS		CGD		Total

Fixed Price	$	197.5	$	60.6	$	68.2	$	326.3	$	375.7	$	106.4	$	139.8	$	621.9
Other		3.2		1.3		6.5		11.0		6.8		1.9		12.0		20.7
Total sales	$	200.7	$	61.9	$	74.7	$	337.3	$	382.5	$	108.3	$	151.8	$	642.6

Sales by Deliverable Type: The table below presents total net sales disaggregated by the type of deliverable, which is determined by us at the performance obligation level (in millions):


	Three months ended March 31, 2019								Six months ended March 31, 2019
	CTS		CMS		CGD		Total		CTS		CMS		CGD		Total

Product	$	113.8	$	56.1	$	52.8	$	222.7	$	205.8	$	96.7	$	102.5	$	405.0
Service		86.9		5.8		21.9		114.6		176.7		11.6		49.3		237.6
Total sales	$	200.7	$	61.9	$	74.7	$	337.3	$	382.5	$	108.3	$	151.8	$	642.6

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Revenue Recognition Method: The table below presents total net sales disaggregated based on the revenue recognition method applied (in millions):


	Three months ended March 31, 2019								Six months ended March 31, 2019
	CTS		CMS		CGD		Total		CTS		CMS		CGD		Total

Point in Time	$	21.8	$	58.8	$	1.4	$	82.0	$	38.5	$	93.2	$	1.9	$	133.6
Over Time		178.9		3.1		73.3		255.3		344.0		15.1		149.9		509.0
Total sales	$	200.7	$	61.9	$	74.7	$	337.3	$	382.5	$	108.3	$	151.8	$	642.6

Note 15 — Legal Matters

We consider all legal matters to be ordinary proceedings incidental to our business. We believe the outcome of these proceedings will not have a materially adverse effect on our financial position, results of operations, or cash flows.

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CUBIC CORPORATION

ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

March 31, 2019

Cubic Corporation is a technology-driven, market-leading global provider of innovative, mission-critical solutions that reduce congestion and increase operational readiness and effectiveness through increased situational understanding. Cubic designs, integrates and operates systems, products and services focused in the transportation, command, control, communication, computers, intelligence, surveillance and reconnaissance (C4ISR), and training markets. We offer integrated payment and information systems, expeditionary communications, cloud-based computing and intelligence delivery, as well as state-of-the-art training systems and readiness solutions. We believe that we have significant transportation and defense industry expertise which, combined with our innovative technology capabilities, contributes to our leading market positions and allows us to deepen and further expand each of our business segments in key markets.

Through September 30, 2017 our principal lines of business were transportation systems and services, defense systems, and defense services. On May 31, 2018, we sold the non-Original Equipment Manufacturer (OEM) Cubic Global Defense Services (CGD Services) business. In March 2018, all of the criteria were met for the classification of CGD Services as a discontinued operation. As a result, the operating results, assets, liabilities, and cash flows of CGD Services have been classified as discontinued operations for all periods presented and have been excluded from amounts described below. In addition, we concluded that Cubic Mission Solutions became a separate operating segment and reportable segment beginning on October 1, 2017. As a result, we now operate in three reportable business segments: Cubic Transportation Systems (CTS), Cubic Mission Solutions (CMS), and Cubic Global Defense Systems (CGD). All of our business segments share a common mission of increasing situational awareness to create enhanced value for our customers worldwide through common technologies. Our defense customers benefit from increased readiness and effectiveness, while our transportation customers benefit from enhanced efficiency and reduced congestion.

CTS specializes in the design, development, production, installation, maintenance and operation of automated fare payment, intelligent traffic management and enforcement solutions, real-time information systems, and revenue management infrastructure and technologies for transportation agencies. As part of our turnkey solutions, CTS also provides these customers with a comprehensive suite of business process outsourcing (BPO) services and expertise, such as card and payment media management, central systems and application support, retail network management, customer call centers and financial clearing and settlement support. As transportation authorities seek to optimize their operations by outsourcing bundled systems and services, CTS has transformed itself from a provider of automated fare collection (AFC) systems into a systems integrator and services company focused on the intelligent transportation market. Advanced Traffic Solutions Inc. (Trafficware) and GRIDSMART Technologies, Inc. (GRIDSMART), which we acquired in fiscal 2019, when combined with our existing transportation capabilities, are expected to enhance our ability to offer compelling solutions to reduce urban congestion using their intelligent, data-rich intersection management technology.

CMS provides C4ISR capabilities for defense, intelligence, security and commercial missions. CMS’ core competencies include protected wide-band communications for command, control and intelligence, surveillance and reconnaissance (C2ISR) systems, expeditionary satellite communication solutions, real-time processing, exploitation and dissemination of full motion video, deployable secure tactical cloud computing, communication gateways, and intelligence, surveillance and reconnaissance (ISR) services.

CGD is a leading diversified supplier of live, virtual, constructive and game-based training solutions to the U.S. Department of Defense, other U.S. government agencies and allied nations. We offer a full range of training solutions for military and security forces. Our customized systems and services accelerate combat readiness in the air, on the ground and at sea while meeting the demands of evolving operations globally. Our range design business offers complete range design solutions for military, law enforcement, special forces and security training centers, including laser-engagement training simulation systems, live-fire range design, exercise planning, expert support and detailed After Action Reviews.

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Consolidated Overview

We adopted Accounting Standards Update (ASU) 2014-09, Revenue from Contracts with Customers (commonly known as ASC 606), effective October 1, 2018 using the modified retrospective transition method. In accordance with the modified retrospective transition method, the three- and six-month periods ended March 31, 2019 are presented under ASC 606, while the three- and six-month periods ended March 31, 2018 are presented under ASC 605, Revenue Recognition , the accounting standard in effect for periods ending prior to October 1, 2018. The cumulative effect of the change in accounting for periods prior to October 1, 2018 was recognized through retained earnings at the date of adoption.

The table below quantifies the impact of adopting ASC 606 on net sales and operating income (loss) for the three and six months ended March 31, 2019 (in thousands) :


	Three months ended March 31, 2019						Six months ended March 31, 2019
					As Reported						As Reported
	Under		Effect of		Under		Under		Effect of		Under
	ASC 605		ASC 606		ASC 606		ASC 605		ASC 606		ASC 606
Sales:
Cubic Transportation Systems	$	182,571	$	18,122	$	200,693	$	355,299	$	27,201	$	382,500
Cubic Mission Solutions		62,677		(742)		61,935		108,040		288		108,328
Cubic Global Defense		64,387		10,324		74,711		123,120		28,650		151,770
Total sales	$	309,635	$	27,704	$	337,339	$	586,459	$	56,139	$	642,598

Operating income (loss):
Cubic Transportation Systems	$	5,673	$	3,122	$	8,795	$	14,859	$	4,912	$	19,771
Cubic Mission Solutions		(7,911)		(512)		(8,423)		(13,232)		(131)		(13,363)
Cubic Global Defense		2,390		2,783		5,173		4,127		3,943		8,070
Unallocated corporate expenses		(12,086)		—		(12,086)		(21,585)		—		(21,585)
Total operating income (loss)	$	(11,934)	$	5,393	$	(6,541)	$	(15,831)	$	8,724	$	(7,107)

Sales for the quarter ended March 31, 2019 increased 21% to $337.3 million from $278.6 million in the same quarter last year, which includes the impact of the adoption of the new revenue recognition standard described and quantified above. The average exchange rates between the prevailing currency in our foreign operations and the U.S. dollar had unfavorable impacts on sales of $7.2 million for the second quarter of fiscal 2019 and $12.7 million for the first half of fiscal 2019 compared to the same periods last year. For the quarter, sales from CMS and CTS increased by 71% and 20%, respectively while sales from CGD decreased by less than 1%. For the first six months of fiscal 2019, consolidated sales increased 22% to $642.6 million compared to $527.0 million last year. For the first half of fiscal 2019, sales from CTS, CMS and CGD increased by 22%, 57% and 5%, respectively. Sales generated by businesses we acquired during fiscal 2019 and 2018 totaled $18.9 million and $29.6 million for the three- and six-month periods ended March 31, 2019, respectively, compared to $0.9 million and $3.1 million for the three- and six-month periods ended March 31, 2018, respectively. See the segment discussions below for further analysis of segment sales.

Our consolidated operating loss was $6.5 million in the second quarter of fiscal 2019 compared to an operating loss of $1.7 million in the second quarter of last year. The average exchange rates between the prevailing currency in our foreign operations and the U.S. had an unfavorable impact on our quarterly operating results of $1.3 million in the second quarter compared to the same quarter last year. CTS operating income decreased to $8.8 million for the second quarter compared to $14.2 million last year while CGD had operating income of $5.2 million in the second quarter compared to $5.3 million last year. The CMS operating loss for the second quarter increased to $8.5 million this year compared to $7.8 million last year. The operating results of CTS and CMS were significantly impacted by the impacts of accounting for businesses acquired during fiscal 2019, as further described in the segment discussions below. On a consolidated basis, businesses we acquired during fiscal 2019 and 2018 had operating losses totaling $11.0 million and $15.6 million for the three- and six-month periods ended March 31, 2019, respectively, compared to $1.3 million and $2.1 million for the three- and six-month periods ended March 31, 2018, respectively. Unallocated corporate and other costs for the second quarter of fiscal 2019 were $12.0 million compared to $13.4 million in the same period last year. Unallocated corporate costs included unallocated IT costs which totaled $4.2 million in the second quarter of fiscal 2019 compared to $8.0 million for the same period last year. The reduction in unallocated IT costs is the result of many of our IT projects reaching or approaching finalization in the first half of fiscal 2019.

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Our consolidated operating loss for the first half of fiscal 2019 decreased 48% to $7.1 million from $13.6 million for the same period last year. The average exchange rates between the prevailing currency in our foreign operations and the U.S. had an unfavorable impact on our operating results of $1.9 million in the first half of fiscal 2019 compared to the same period last year. The operating loss for CMS decreased 20% in the first six months of fiscal 2019 compared to the first six months of last year, while the CGD Systems operating income for the first half of fiscal 2019 increased by 21% and CTS operating income decreased by 18%. Both the CMS and CTS operating results were significantly impacted by accounting for businesses acquired in fiscal 2019. See the segment discussions below for further analysis of segment operating income (loss) including the impacts of business acquisition accounting. Unallocated corporate and other costs for the first half of fiscal 2019 were $21.6 million compared to $27.7 million in the same period last year. The decrease in unallocated corporate costs included a decrease in unallocated IT costs which totaled $6.1 million in the first half of fiscal 2019 compared to $17.4 million for the first half of last year.

Our gross margin percentage on product sales decreased slightly to 25% in the second quarter of fiscal 2019 from 26% in the second quarter last year . Our gross margin percentage on products sales remained at 28% for the first half of fiscal 2019 and the first half of 2018 . The decrease in product sales gross margins in the second quarter was primarily due to sales mix. Our gross margin percentage on service sales was 28% in the second quarter of fiscal 2019 compared to 35% in the second quarter of last year, and decreased to 26% for the first half of fiscal 2019 compared to 31% for the first half of last year. The decrease in total services sales and gross margins on service sales was primarily driven by the completion of a services contract in Australia in late fiscal 2018, which had relatively high gross margins. In addition, margins were lower due to increased costs on certain international CGD service contracts.

Selling, general and administrative (SG&A) expenses increased in the second quarter of fiscal 2019 to $66.2 million compared to $63.8 million in the same period last year. For the six-months ended March 31, 2019, SG&A expenses increased to $129.2 million compared to $125.5 million for the same period last year. As a percentage of sales, SG&A expenses were 20% for the three- and six-month period ended March 31, 2019, compared to 23% and 24% for the three- and six-month periods ended March 31, 2018, respectively . The increase in SG&A expense for the second quarter and first half of fiscal 2019 was primarily due to the SG&A expenses incurred by three businesses we acquired in the first half of fiscal 2019 including Trafficware in October 2018, GRIDSMART in January 2019, and Nuvotronics in March 2019. These increases in SG&A were partially offset by the reduction in unallocated corporate costs, including the reduction of unallocated IT costs described above.

Company funded research and development (R&D) expenditures decreased slightly to $13.8 million for the second quarter of fiscal 2019 compared to $14.2 million for the same period last year, and decreased to $25.8 million for the six-month period this year compared to $26.2 million last year . For the second quarter and first half of fiscal 2019 there was a slight shift in the mix of R&D expenditures between our business segments with CMS R&D expenditures increasing as a percent of our total R&D spend and CGD decreasing as a percentage of total R&D expense. In the second quarter and first half of fiscal 2019 CTS continued to make R&D investments in new transportation product development, including fare collection technologies, real-time passenger information and development of intelligent transport systems and analytic technologies. CGD’s R&D expenditures focused on next generation live, virtual, constructive training systems and CMS’ R&D expenditures were driven by the development of secure communications and ISR as a service technologies.

Amortization of purchased intangibles for the second quarter of fiscal 2019 increased to $12.4 million from $6.5 million in the same period last year and increased to $23.0 million in the first half of fiscal 2019 as compared to $13.8 million in the first half last year. These increases were driven by the amortization of intangible assets from businesses acquired in the first half of fiscal 2019.

Interest expense for the second quarter of fiscal 2019 was $4.5 million, compared to $2.9 million in the second quarter of last year. Interest expense for the first half of fiscal 2019 increased to $8.6 million, compared to $5.6 million in the first half of last year. The increase in interest expense was primarily caused by the increase in our average outstanding debt balances for the second quarter and first half of fiscal 2019 compared to the second quarter and first half of fiscal 2018. The average outstanding borrowings under our revolving credit agreement increased during the first half of fiscal 2019 primarily to finance the acquisition of three businesses.

The income tax benefit recognized on pre-tax losses from continuing operations for the six months ended March 31, 2019 resulted in an effective tax rate of 6.2%, which differs from the effective tax rates of 48% for the year ended September 30, 2018 and 8.2% for the six months ended March 31, 2018, primarily due to the difference in jurisdictional mix of pre-tax income (loss), offset by discrete benefits resulting from the enactment of the Tax Cuts and Jobs Act of

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2017 (the Tax Act) and by discrete benefits recorded related to the release of a portion of the existing U.S. deferred tax valuation allowance due to deferred tax liabilities acquired in business combinations. Through March 31, 2019, a total valuation allowance of $74.8 million has been established for U.S. net deferred tax assets, certain foreign operating losses and other foreign assets. The change in the valuation allowance does not have any impact on our consolidated operations or cash flows, nor does such an allowance preclude us from using loss carryforwards or other deferred tax assets in the future.

Our effective tax rate could be affected by, among other factors, the mix of business between U.S. and foreign jurisdictions, fluctuations in the need for a valuation allowance against deferred tax assets, our ability to take advantage of available tax credits and audits of our records by taxing authorities. After considering the impact of the U.S. valuation allowance, we have determined that a reliable estimate of the annual effective tax rate for fiscal year 2019 cannot be made, since relatively small changes in our projected income produce a significant variation in our effective tax rate .

Our net loss from continuing operations attributable to Cubic in the second quarter of fiscal 2019 was $8.1 million compared to net income of $3.3 million in the second quarter last year. The increase in net loss from continuing operations attributable to Cubic from the second quarter of fiscal 2018 to the second quarter of fiscal 2019 was driven primarily by the increase in operating loss described above including the impact of purchase accounting on business acquisitions, partially offset by the income tax benefit recognized in the second quarter of fiscal 2019 as described above. For the first half of fiscal 2019, our net loss from continuing operations attributable to Cubic was $14.6 million compared to $14.8 million last year. The change in net loss from continuing operations attributable to Cubic from the first half of fiscal 2018 to the first half of fiscal 2019 was favorably impacted by the reduction in our operating loss described above despite higher amortization expense from the acquisitions, partially offset by an increase in interest expense as described above. In addition, nonoperating expense in the second quarter and first half of fiscal 2019 included unrealized losses of $3.8 million and $9.9 million, respectively, caused by the change in the fair value of an interest rate swap held by a variable interest entity (VIE) that is consolidated by Cubic. The 90 percent noncontrolling interest in the net loss of the consolidated VIE, which is comprised primarily of the VIE’s loss on its interest rate swap, is added back to our net loss to arrive at net loss attributable to Cubic.

Cubic Transportation Systems Segment (CTS)


	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2019		2018		2019		2018
	(in millions)
Transportation Systems Segment Sales	$	200.7	$	167.0	$	382.5	$	313.5

Transportation Systems Segment Operating Income	$	8.8	$	14.2	$	19.8	$	24.1

CTS sales increased 20% in the second quarter of fiscal 2019 to $200.7 million compared to $167.0 million last year, and increased 22% for the first half of fiscal 2019 to $382.5 million from $313.5 million in the same period last year, including the impact of the adoption of the new revenue recognition standard described above. For the second quarter and first half of fiscal 2019, sales increased in North America significantly compared to these same periods last year, while sales in the U.K decreased slightly for such periods. Sales in Australia were relatively flat for the second quarter and first half of fiscal 2019. Sales were higher in the U.S. primarily due to revenue from system development on the MBTA contract, as well as sales from two U.S. businesses acquired in fiscal 2019, Trafficware and GRIDSMART. Sales for Trafficware and GRIDSMART totaled $18.0 million and $28.5 million for the three- and six-month periods ended March 31, 2019, respectively. The decrease in sales in the U.K. was primarily caused by the impact of foreign currency exchange rates. The average exchange rates between the prevailing currency in our foreign operations and the U.S. dollar resulted in a decrease in sales of $6.3 million for the second quarter of fiscal 2019 and $11.1 million for the six-month period compared to the same periods last year, primarily due to the strengthening of the U.S. dollar against the British pound and Australian dollar.

CTS operating income decreased 38% in the second quarter of fiscal 2019 to $8.8 million compared to operating income of $14.2 million in the second quarter of last year, and decreased 18% for the first half of fiscal 2019 to $19.8 million from $24.1 million for the first half of last year. The decrease in operating income was caused by the operating losses generated by businesses that CTS acquired during fiscal 2019, which totaled $7.2 million and $10.5 million for the three- and six-month periods ended March 31, 2019, respectively, driven by acquisition-related expenses of $3.9 million and $5.3 million for the three- and six-month periods ended March 31, 2019, respectively, and amortization of purchased

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intangibles of $6.7 million and $11.0 million for the three- and six-month periods ended March 31, 2019, respectively. The average exchange rates between the prevailing currency in our foreign operations and the U.S. dollar resulted in a decrease in operating income of $1.2 million for the second quarter of fiscal 2019 and $1.9 million for the first half of fiscal 2019 compared to the same periods last year. For the second quarter and first half of fiscal 2019, operating income was higher from increased volumes of system development work, including work on the MBTA contract and for train operating companies in the U.K.

Cubic Mission Solutions Segment (CMS)


	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2019		2018		2019		2018
	(in millions)
Cubic Mission Solutions Segment Sales	$	61.9	$	36.1	$	108.3	$	69.2

Cubic Mission Solutions Segment Operating Loss	$	(8.5)	$	(7.8)	$	(13.4)	$	(16.7)

CMS sales increased 71% in the second quarter of fiscal 2019 to $61.9 million compared to $36.1 million in the second quarter last year, and increased 57% for the first half of fiscal 2019 to $108.3 million from $69.2 million for the first half of last year. The increase in sales for the second quarter and first half of the year were primarily due to increased orders and shipments of expeditionary satellite communications products, secure network products, and C2ISR products. Sales generated by businesses acquired by CMS during fiscal 2019 and 2018 totaled $0.9 million and $1.1 million for the three- and six-month periods ended March 31, 2019, respectively, compared to $0.1 million for each of the three- and six-month periods ended March 31, 2018.

The CMS operating loss was $8.5 million in the second quarter of fiscal 2019 compared to $7.8 million in the second quarter last year, and $13.4 million for the first half of fiscal 2019 compared to $16.7 million for the first half of last year . For the second quarter of fiscal 2019 compared to the second quarter last year, CMS had increased operating profits from expeditionary satellite communications products, secure network products, and C2ISR products and services due to increased sales . The changes in operating loss for the second quarter and first half of fiscal 2019 compared to the same periods last year were significantly impacted by operating losses incurred by businesses that CMS acquired during fiscal 2019 and 2018 which totaled $3.8 million and $5.1 million for the three- and six-month periods ended March 31, 2019, respectively, compared to $0.2 million for each of the three- and six-month periods ended March 31, 2018. The operating losses of businesses acquired by CMS included acquisition-related expenses of $2.2 million and $2.3 million for the three- and six-month periods ended March 31, 2019, respectively, compared to $0.4 million and $0.6 million for the three- and six-month periods ended March 31, 2018, respectively, and included amortization of purchased intangibles of $0.5 million and $0.9 million for the three- and six-month periods ended March 31, 2019, respectively, compared to $0.1 million in each of the three- and six-month periods ended March 31, 2018 . Additionally, for the second quarter and first half of fiscal 2019, CMS operating losses were impacted by increases in R&D expenditures of $2.3 million and $2.1 million, respectively, compared to the same periods in fiscal 2018.

Cubic Global Defense Segment (CGD)


	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2019		2018		2019		2018
	(in millions)
Cubic Global Defense Segment Sales	$	74.7	$	75.5	$	151.8	$	144.3

Cubic Global Defense Segment Operating Income	$	5.2	$	5.3	$	8.1	$	6.7

CGD sales decreased by 1% in the second quarter of fiscal 2019 to $74.7 million compared to $75.5 million in the second quarter of last year and increased 5% for the first half of fiscal 2019 to $151.8 million from $144.3 million for the first half of last year. The timing of sales recognition was significantly impacted by the adoption of the new revenue recognition standard described and quantified above. Under the new revenue recognition standard, a number of our CGD contracts, most significantly in air combat training and ground live training, for which revenue was historically recorded upon delivery of products to the customer, are now accounted for on the percentage-of-completion cost-to-cost method of revenue recognition. For the second quarter of fiscal 2019, sales were slightly lower from air combat training system and simulation product development contracts. For the first half of fiscal 2019, sales were higher from ground combat

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training systems. The average exchange rates between the prevailing currency in our foreign operations and the U.S. dollar resulted in a decrease in sales of $0.9 million and $1.6 million for the second quarter and first half of fiscal 2019, respectively, compared to the same periods last year.

CGD operating income was $5.2 million in the second quarter of fiscal 2019 compared to $5.3 million in the second quarter last year and increased 21% for the first half of fiscal 2019 to $8.1 million from $6.7 million for the first half of last year. F or the second quarter of fiscal 2019, operating profits were slightly lower, compared to the same period last year, due to decreased air combat training system and simulation product sales, partially offset by increased sales of ground combat trainings systems. For the first half of fiscal 2019, operating profits were higher, compared to the same period last year, primarily due to increased sales of ground combat training systems . The average exchange rates between the prevailing currency in our foreign operations and the U.S. dollar did not have a significant impact on CGD’s operating income for the second quarter or first half of fiscal 2019.

Backlog


	March 31,		September 30,
	2019		2018
	(in millions)
Total backlog
Cubic Transportation Systems	$	3,276.3	$	3,544.9
Cubic Mission Solutions		186.6		77.0
Cubic Global Defense		332.7		442.6
Total	$	3,795.6	$	4,064.5

Total backlog decreased by $268.9 million from September 30, 2018 to March 31, 2019 as sales outpaced new business orders in the first half of fiscal 2019. In addition, we recorded a net decrease to backlog of $104.5 million on October 1, 2018 for the impact of the adoption of ASC 606. Changes in exchange rates between the prevailing currency in our foreign operations and the U.S. dollar as of the end of the quarter decreased backlog by $10.2 million compared to September 30, 2018.

Liquidity and Capital Resources

Operating activities used cash of $83.7 million for the first half of fiscal 2019 due to timing of cash flows on CTS design and build contracts, inventory builds for upcoming scheduled deliveries as well as payment of certain scheduled annual expenditures.

Investing activities for the first half of fiscal 2019 included $239.2 million of cash paid related to the acquisition of Trafficware and $87.2 million of cash paid related to the acquisition of GRIDSMART in our CTS segment, $61.5 million of cash paid related to the acquisition of Nuvotronics in our CMS segment, and $8.0 million of payments of holdback amounts made to the former owners of DTECH.

Financing activities for the six-month period ended March 31, 2019 included net short-term borrowings of $209.0 million, and $215.8 million of net proceeds from our underwritten public offering of 3,795,000 shares of our common stock at a price to the public of $60.00 per share, which we completed in December 2018. We used the net proceeds from the offering to repay a portion of our outstanding borrowings under our revolving credit agreement, which has been used to finance the acquisition of Trafficware, and the remainder for general corporate purposes. The proceeds from the increase in short-term borrowings were primarily used to finance the acquisitions of GRIDSMART and Nuvotronics. In addition, we used $3.4 million for the repurchase of common stock in connection with our stock-based compensation plan and paid dividends to shareholders of $4.2 million.

In March 2018, Cubic and John Laing, an unrelated company that specializes in contracting under public-private partnerships (P3), jointly formed Boston AFC 2.0 HoldCo. LLC (HoldCo). Also in March 2018, HoldCo created a wholly owned entity, Boston AFC 2.0 OpCo. LLC (OpCo) which entered into a contract with the Massachusetts Bay Transit Authority (MBTA) for the financing, development, and operation of a next-generation fare payment system in Boston (the MBTA Contract). HoldCo is 90% owned by John Laing and 10% owned by Cubic. Collectively, HoldCo and OpCo are referred to as the P3 Venture. Based on our assessment under ASC 810, we have concluded that OpCo and HoldCo are VIE’s and that we are the primary beneficiary of OpCo. Consequently, we have consolidated the financial statements of OpCo within Cubic’s consolidated financial statements. We have concluded that we are not the primary

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beneficiary of HoldCo, and thus we have not consolidated the financial statements of HoldCo within Cubic’s consolidated financial statements.

The MBTA Contract consists of a design and build phase of approximately three years and an operate and maintain period of approximately ten years. The design and build phase is planned to be completed in 2021 and the operate and maintain phase will span from 2021 through 2031. MBTA will make fixed payments of $558.5 million, adjusted for incremental transaction-based fees, inflation, and performance penalties, to OpCo in connection with the MBTA contract over the ten-year operate and maintain phase. All of OpCo’s contractual responsibilities regarding the design and development and the operation and maintenance of the fare system have been subcontracted to Cubic by OpCo. Cubic will receive fixed payments of $427.6 million, adjusted for incremental transaction-based fees, inflation, and performance penalties, under its subcontract with OpCo.

Upon creation of the P3 Venture, John Laing made a loan to HoldCo of $24.3 million in the form of an equity bridge loan. The loan carries a 2.5% interest rate and matures at the end of the design and build phase of the MBTA contract. Cubic issued a letter of credit for $2.7 million to HoldCo in accordance with Cubic’s equity funding responsibilities. HoldCo is able to draw on the Cubic letter of credit in certain liquidity instances, but no amounts have been drawn on this letter of credit as of March 31, 2019.

Upon creation of the P3 Venture, OpCo entered into a credit agreement with a group of financial institutions (the OpCo Credit Agreement) which includes a long-term debt facility and a revolving credit facility . The long-term debt facility allows for draws up to a maximum amount of $212.4 million; draws may only be made during the design and build phase of the MBTA Contract. The long-term debt facility, including interest and fees incurred during the design and build phase, is required to be repaid on a fixed monthly schedule over the operate and maintain phase of the MBTA Contract. The long-term debt facility bears interest at variable rates of LIBOR plus 1.3% and LIBOR plus 1.55% over the design and build and operate and maintain phases of the MBTA Contract, respectively . At March 31, 2019, the outstanding balance on the long-term debt facility was $25.6 million, which is presented net of unamortized deferred financing costs of $8.8 million. The revolving credit facility allows for draws up to a maximum amount of $13.9 million and is only available to be drawn on during the operate and maintain phase of the MBTA Contract. OpCo’s debt is nonrecourse with respect to Cubic and its subsidiaries.

A change in exchange rates between foreign currencies, primarily between the Australian dollar and the U.S. dollar and between the British Pound and the U.S. dollar, resulted in an increase of $1.3 million to our cash balance as of March 31, 2019 compared to September 30, 2018.

In March 2013, we entered into a note purchase and private shelf agreement pursuant to which we issued $100.0 million of senior unsecured notes, bearing interest at a rate of 3.35% and maturing in March 2025. In addition, pursuant to the agreement, in July 2015, we issued an additional $25.0 million of senior unsecured notes bearing interest at a rate of 3.70% and maturing in March 2025. Interest payments on the notes issued in 2013 and 2015 are due semi-annually and principal payments are due from 2021 through 2025. The agreement pertaining to the aforementioned notes also contained a provision that the coupon rate would increase by a further 0.50% should the company’s leverage ratio exceed a certain level. In February 2016, we revised the note purchase agreement and issued an additional $75.0 million of senior unsecured notes bearing interest at 3.93% and maturing in March 2026. Interest payments on these notes are due semi-annually and principal payments are due from 2020 through 2026. At the time of the issuance of this last series of notes, certain terms and conditions of the note purchase and private shelf agreement were revised in coordination with the revision and expansion of the revolving credit agreement as discussed below in order to increase our leverage capacity. The interest rates on all of the term notes described above may be adjusted upwards by up to 0.75% should our leverage ratio exceed certain levels.

As of March 31, 2019, we had a committed revolving credit agreement with a group of financial institutions in the amount of $400.0 million which was scheduled to expire in August 2021 (Revolving Credit Agreement). Debt issuance and modification costs of $2.3 million and $1.3 million were incurred in connection with February 2, 2016 and August 11, 2016 amendments to the Revolving Credit Agreement, respectively. Costs incurred in connection with establishment of and amendments to the Revolving Credit Agreement are recorded in other assets on our Condensed Consolidated Balance Sheets, and are being amortized as interest expense using the effective interest method over the stated term of the Revolving Credit Agreement. At March 31, 2019, our total debt issuance costs have an unamortized balance of $1.6 million. The available line of credit is reduced by any letters of credit issued under the Revolving Credit Agreement. As of March 31, 2019, there were $209.0 million of borrowings under this agreement and there were letters of credit outstanding totaling

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$31.2 million, which reduce the available line of credit to $159.8 million. The $31.2 million of letters of credit includes both financial letters of credit and performance guarantees.

In late April 2019, we executed the Fourth Amended and Restated Credit Agreement, which amended and restated the prior revolving credit agreement to increase the permitted borrowings to $800.0 million, extend the maturity to April 30, 2024, add seven new financial institutions to the group of creditors, and amend certain terms and covenants. Borrowings under the agreement bear a variable rate of interest which is calculated based upon the U.S. dollar LIBOR rate plus a contractually defined credit spread that is based upon the tenor of the specific borrowing.

Our Revolving Credit Agreement and note purchase and private shelf agreement each contain a number of customary covenants, including requirements for us to maintain certain interest coverage and leverage ratios and restrictions on our and certain of our subsidiaries’ abilities to, among other things, incur additional debt, create liens, consolidate or merge with any other entity, or transfer or sell substantially all of their assets, in each case subject to certain exceptions and limitations. These agreements also contain customary events of default, including, without limitation: (a) failure by Cubic to pay principal or interest on the notes when due; (b) failure by Cubic or certain of its subsidiaries to comply with the covenants in the agreements; (c) failure of the representations and warranties made by Cubic or certain of its subsidiaries to be correct in any material respect; (d) cross-defaults with other indebtedness of Cubic or certain of its subsidiaries resulting in the acceleration of the maturity thereof; (e) certain bankruptcy and insolvency events with respect to Cubic or certain of its subsidiaries; (f) failure by Cubic or certain of its subsidiaries to satisfy certain final judgments when due; and (g) a change in control of Cubic, in each case subject to certain exceptions and limitations. The occurrence of any event of default under these agreements may result in all of the indebtedness then outstanding becoming immediately due and payable.

As of March 31, 2019, virtually all of the of the $71.9 million of our cash and cash equivalents, including restricted cash, was held by our foreign subsidiaries, primarily in the United Kingdom, New Zealand and Australia.

Subsequent to enactment of the Tax Act, future repatriations of foreign earnings will generally be exempt from U.S. tax. We will continue to monitor our intentions to repatriate foreign earnings and provide applicable deferred taxes and withholding taxes that would be due upon repatriation of the undistributed foreign earnings.

Our financial condition remains strong with working capital of $185.2 million and a current ratio of 1.4 to 1 at March 31, 2019. We expect that cash on hand, cash flows from operations, and our unused lines of credit will be adequate to meet our liquidity requirements for the foreseeable future.

Recent Accounting Pronouncements

See “Recent Accounting Pronouncements” in Note 1 of the Condensed Consolidated Financial Statements of this Form 10-Q, which are hereby incorporated by reference.

Critical Accounting Policies, Estimates and Judgments

Our financial statements are prepared in accordance with accounting principles that are generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. We continually evaluate our estimates and judgments, the most critical of which are those related to revenue recognition, income taxes, valuation of goodwill, purchased intangibles, accounting for business combinations, and pension costs. We base our estimates and judgments

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on historical experience and other factors that we believe to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known.

Besides the estimates identified above that are considered critical, we make many other accounting estimates in preparing our financial statements and related disclosures. All estimates, whether or not deemed critical, affect reported amounts of assets, liabilities, revenues and expenses, as well as disclosures of contingent assets and liabilities. These estimates and judgments are also based on historical experience and other factors that are believed to be reasonable under the circumstances. Materially different results can occur as circumstances change and additional information becomes known, even for estimates and judgments that are not deemed critical.

Effective October 1, 2018, we adopted Accounting Standards Update 2014-09, Revenue from Contracts with Customers, as amended (commonly referred to as ASC 606), which changed the way we recognize revenue for certain contracts. See “Recently Adopted Accounting Pronouncements – Revenue Recognition” within “Note 1 – Basis for Presentation” included in our Notes to Consolidated Financial Statements for changes to our critical accounting policies as a result of adopting ASC 606. Other than changes to our revenue recognition policy as a result of adopting ASC 606 there have been no significant changes to the critical accounting policies disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended September 30, 2018.

CAUTIONARY STATEMENT ABOUT FORWARD-LOOKING INFORMATION

This report, including the documents incorporated by reference herein, contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 that are subject to the safe harbor created by such Act. Any statements about our expectations, beliefs, plans, objectives, assumptions, future events or our future financial and/or operating performance are not historical and may be forward-looking. These statements are often, but not always, made through the use of words or phrases such as “may,” “will,” “anticipate,” “estimate,” “plan,” “project,” “continuing,” “ongoing,” “expect,” “believe,” “intend,” “predict,” “potential,” “opportunity” and similar words or phrases or the negatives of these words or phrases. These forward-looking statements involve risks, estimates, assumptions and uncertainties, including those discussed in “Part I - Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended September 30, 2018 and in “Part II - Item 1A. Risk Factors” in our Quarterly Report on Form 10-Q for the quarter ended December 31, 2018, and throughout this report that could cause actual results to differ materially from those expressed in these statements. Such risks, estimates, assumptions and uncertainties include, among others:

our ability to monitor and evaluate the effectiveness of new processes and procedures we have implemented to remediate the material weaknesses that previously existed in our internal control over financial reporting;

our dependence on U.S. and foreign government contracts;

delays in approving U.S. and foreign government budgets and cuts in U.S. and foreign government defense expenditures;

the ability of certain government agencies to unilaterally terminate or modify our contracts with them;

the effects of sequestration on our contracts;

our assumptions covering behavior by public transit authorities;

our ability to successfully integrate new companies into our business and to properly assess the effects of such integration on our financial condition;

the U.S. government’s increased emphasis on awarding contracts to small businesses, and our ability to retain existing contracts or win new contracts under competitive bidding processes;

negative audits by the U.S. government;

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the effects of politics and economic conditions on negotiations and business dealings in the various countries in which we do business or intend to do business;

competition and technology changes in the defense and transportation industries;

changse in the way transit agencies pay for transit systems;

our ability to accurately estimate the time and resources necessary to satisfy obligations under our contracts;

the effect of adverse regulatory changes on our ability to sell products and services;

our ability to identify, attract and retain qualified employees;

unforeseen problems with the implementation and maintenance of our information systems;

business disruptions due to cyber security threats, physical threats, terrorist acts, acts of nature and public health crises;

our involvement in litigation, including litigation related to patents, proprietary rights and employee misconduct;

our reliance on subcontractors and on a limited number of third parties to manufacture and supply our products;

our ability to comply with our development contracts and to successfully develop, introduce and sell new products, systems and services in current and future markets;

defects in, or a lack of adequate coverage by insurance or indemnity for, our products and systems;

changes in U.S. and foreign tax laws, exchange rates or our economic assumptions regarding our pension plans; and

other factors discussed elsewhere in this report.

Because the risks, estimates, assumptions and uncertainties referred to above could cause actual results or outcomes to differ materially from those expressed in any forward-looking statements made by us or on our behalf, you should not place undue reliance on any forward-looking statements. In addition, past financial and/or operating performance is not necessarily a reliable indicator of future performance and you should not use our historical performance to anticipate results or future period trends. Further, any forward-looking statement speaks only as of the date on which it is made, and, except as required by law, we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events. New factors emerge from time to time, and it is not possible for us to predict which factors will arise. In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Our market risks at March 31, 2019 have not changed materially from those described under “Item 7A. Quantitative and Qualitative Disclosures about Market Risk” in our Annual Report on Form 10-K for the year ended September 30, 2018.

ITEM 4 - CONTROLS AND PROCEDURES

We performed an evaluation of the effectiveness of our disclosure controls and procedures as of March 31, 2019. The evaluation was performed with the participation of senior management of each business segment and key corporate functions, and under the supervision of our Chief Executive Officer and our Chief Financial Officer. Based on our evaluation, we concluded that our disclosure controls and procedures were operating and effective as of that date.

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Disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act)) are designed to provide reasonable assurance that information required to be disclosed in reports we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the Securities and Exchange Commission and that such information is accumulated and communicated to our management, including our Chief Executive Officer and our Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures.

We have implemented changes to our processes, systems and controls with respect to the adoption of Accounting Standards Update 2014-09, Revenue from Contracts with Customers, as amended (commonly referred to as ASC 606) . These changes included the development of policies and procedures, training, ongoing contract review requirements, internal management reports, controls related to information systems, and disclosures. There have not been any other significant changes in our internal control over financial reporting during the quarter ended March 31, 2019, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II - OTHER INFORMATION

ITEM 1 - LEGAL PROCEEDINGS

ITEM 1A - RISK FACTORS

There have been no material changes to the risk factors disclosed in “Part I - Item 1A. Risk Factors” of our Annual Report on Form 10-K for the year ended September 30, 2018, other than as previously disclosed in our Quarterly Report on Form 10-Q for the quarter ended December 31, 2018.

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ITEM 5 – OTHER INFORMATION

Fourth Amended and Restated Credit Agreement

On April 30, 2019 Cubic Corporation (“Cubic”) and Cubic’s subsidiaries Cubic Transportation Systems, Inc. (“Transportation”) and Cubic Defense Applications, Inc. (“Defense”), entered into a Fourth Amended and Restated Credit Agreement (the “Credit Agreement”) by and among Cubic Corporation, Transportation, Defense, collectively as borrowers, the other subsidiaries of Cubic which become borrowers thereunder from time to time, JPMorgan Chase Bank, N.A., as administrative agent (“JPMorgan Chase”), and the other lenders party thereto. The Credit Agreement amends and restates in its entirety Cubic’s Third Amended and Restated Credit Agreement, dated as of August 11, 2016, by and among Cubic, JPMorgan Chase, and the other lenders party thereto, as amended.

The Credit Agreement provides for a revolving line of credit of $800.0 million (the "Revolving Line of Credit"), a $200.0 million portion of which may be used for the issuance of letters of credit. Up to a $200.0 million dollar equivalent amount of the Revolving Line of Credit may be denominated in certain agreed upon foreign currencies. Commitments under the revolving line of credit terminate on April 30, 2024. Under certain conditions, Cubic may add one or more tranches of term loans and/or increase revolving commitments under the Credit Agreement in an additional amount of up $300.0 million. Borrowings under the Credit Agreement bear interest, at Cubic’s option, at either (1) the Adjusted LIBO Rate (as described in the Credit Agreement) applicable to the applicable currency plus an applicable margin of 1.00% to 2.00% or (2) the Alternate Base Rate (as described in the Credit Agreement) plus an applicable margin of 0.00% to 1.00%. In the case of each of (1) and (2) above, the applicable margin is based on Cubic’s net leverage ratio (as described in the Credit Agreement). The Credit Agreement is unsecured, but is required to be guaranteed by certain significant domestic subsidiaries of Cubic. Additional subsidiaries of Cubic may become borrowers under the Credit Agreement subject to certain conditions. Cubic is required to pay certain fees in connection with the Credit Agreement, including, without limitation, unused commitment fees, letter of credit participation fees and letter of credit fronting fees, in each case quarterly in arrears.

The Credit Agreement contains various customary representations, warranties, affirmative covenants and negative covenants, including financial covenants setting a maximum leverage ratio and a minimum interest coverage ratio. In addition, the Credit Agreement contains covenants that restrict, among other things, Cubic’s and certain of Cubic’s subsidiaries ability to sell assets, incur indebtedness, make investments and acquisitions, grant liens, engage in sale and leaseback transactions, enter in to certain restrictive agreements, pay dividends and make other restricted payments. The Credit Agreement also contains customary events of default. Upon the occurrence and during the continuance of an event of default, the lenders may declare all outstanding amounts under the Credit Agreement immediately due and payable, and may terminate commitments to make any additional advances thereunder.

The Credit Agreement also contains a "most favor nation" provision which requires that if at any time the Second Amended and Restated Note Purchase and Private Shelf Agreement dated as of August 11, 2016 (as amended, the “Note Agreement”), by and among Cubic, certain of its subsidiaries as guarantors, and PGIM, Inc. and certain of its affiliates, or any agreement or document related thereto, includes (a) any covenant, event of default or similar provision that is not provided for in the Credit Agreement, or (b) any covenant, event of default or similar provision that is more restrictive than the same or similar covenant, event of default or similar provision provided in the Credit Agreement, then any such covenant, event of default or similar provision shall immediately and automatically be incorporated by reference into the Credit Agreement. In addition, certain provisions of the Credit Agreement will only be effective under the Credit Agreement or, conversely, shall cease to have effect, upon the occurrences of certain events with respect to the Note Agreement.

Certain of the lenders under the Credit Agreement and their respective affiliates have performed, and may in the future perform, for Cubic and its affiliates various commercial banking, investment banking, financial advisory or other services, for which they have received and may in the future receive customary compensation and expense reimbursement.

The description of the Credit Agreement contained herein does not purport to be complete and is qualified in its entirety by reference to the complete text of the Credit Agreement, which is attached as Exhibit 10.8 to this report and is incorporated herein by reference.

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ITEM 6 - EXHIBIT S

(a) The following exhibits are included herein:


Exhibit No.		Description
3.1		Amended and Restated Certificate of Incorporation. Incorporated by reference to Form 8-K filed February 19, 2019, file No. 001-08931, Exhibit 3.1.
3.2		Amended and Restated Bylaws. Incorporated by reference to Form 8-K filed November 14, 2018, file No. 001-08931, Exhibit 3.1.
10.1*		Amended and Restated Cubic Corporation 2015 Incentive Award Plan. Incorporated by reference to Appendix B to the Definitive Proxy Statement on Schedule 14A filed on January 18, 2019, file No. 001-08931.
10.2*		Form of Stock Payment Award under the Amended and Restated Cubic Corporation 2015 Incentive Award Plan.
10.3		Construction and Development Agreement, dated as of February 5, 2019, between Cubic Corporation and Bankers Commercial Corporation.
10.4		Ground Lease, dated as of February 5, 2019, between Cubic Corporation and Bankers Commercial Corporation.
10.5		Lease Agreement, dated as of February 5, 2019, between Cubic Corporation and Bankers Commercial Corporation.
10.6 †		Participation Agreement, dated as of February 5, 2019, by and among Cubic Corporation, Bankers Commercial Corporation, MUFG Bank, LTD and MUFG Union Bank, N.A.
10.7 †		Memorandum of Lease, Fee and Leasehold Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing, dated as of February 5, 2019, by and among Cubic Corporation, Bankers Commercial Corporation Chicago Title Company, as deed of trust trustee for the benefit of MUFG Union Bank, N.A.
10.8 †		Fourth Amended and Restated Credit Agreement, dated as of April 30, 2019, by and among Cubic Corporation, JP Morgan Chase Bank, N.A. (as administrative agent) and the other lenders party thereto.
31.1		Certification of Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certification of Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350
32.2		Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350
101		Financial statements from the Cubic Corporation Quarterly Report on Form 10-Q for the quarter ended March 31, 2019, formatted in Extensible Business Reporting Language (XBRL): (i) Condensed Consolidated Statements of Operations, (ii) Condensed Consolidated Statements of Comprehensive Income (Loss), (iii) Condensed Consolidated Balance Sheets, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements.

*Indicates management contract or compensatory plan or arrangement.

†Portions of this exhibit have been omitted.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


		CUBIC CORPORATION

Date	May 2, 2019	/s/ Anshooman Aga
		Anshooman Aga
		Executive Vice President and Chief Financial Officer
		(Principal Financial Officer)


Date	May 2, 2019	/s/ Mark A. Harrison
		Mark A. Harrison
		Senior Vice President and Corporate Controller
		(Principal Accounting Officer)

Exhibit 10.2

CUBIC CORPORATION

2015 INCENTIVE AWARD PLAN

STOCK PAYMENT AWARD GRANT NOTICE AND

STOCK PAYMENT AWARD AGREEMENT

Cubic Corporation, a Delaware corporation (the “ Company ”), pursuant to its 2015 Incentive Award Plan (the “ Plan ”), hereby grants to the participant listed below (“ Participant ”), an award (the " Award ") of shares of the Company’s Common Stock (the “ Shares ”) indicated below. This Award is subject to all of the terms and conditions as set forth herein, in the Stock Payment Award Agreement attached hereto as Exhibit A (the “ Stock Payment Award Agreement ”) and in the Plan, each of which are incorporated herein by reference. Unless otherwise defined herein, the terms defined in the Plan shall have the same defined meanings in this Grant Notice and the Stock Payment Award Agreement.


Participant:	%%FIRST_NAME%-% %%MIDDLE_NAME%-% %%LAST_NAME%-%
Grant Date:	%%OPTION_DATE ,'Month DD, YYYY' %-%
Number of Shares:	%%TOTAL_SHARES_GRANTED ,'999,999,999' %-%
Vesting Schedule:	The Shares shall be fully vested on the Grant Date.

By electronically accepting this Grant Notice, Participant agrees to be bound by the terms and conditions of the Plan, the Stock Payment Award Agreement and this Grant Notice. In addition, Participant explicitly acknowledges and agrees to be bound by the Restrictive Covenants set forth in Section 2.5 of the Stock Payment Award Agreement. Participant has reviewed the Stock Payment Award Agreement, the Plan and this Grant Notice in their entirety, has had an opportunity to obtain the advice of counsel prior to executing this Grant Notice and fully understands all provisions of this Grant Notice, the Stock Payment Award Agreement and the Plan. Participant has been provided with a copy or electronic access to a copy of the prospectus for the Plan. Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board (or any Committee to which administration of the Plan has been delegated by the Board) upon any questions arising under the Plan, this Grant Notice or the Stock Payment Award Agreement. The Award is subject to the terms and conditions of the Plan which are incorporated herein by reference. In the event of any inconsistency between the Plan and the Stock Payment Award Agreement, the terms of the Plan shall control.

Participant acknowledges that his or her acceptance of the terms and conditions of the Plan, the Stock Payment Award Agreement and this Grant Notice by his or her electronic acceptance of the Grant Notice is a condition to the receipt of this Award. As a result, unless otherwise determined by the Board (or any Committee to which administration of the Plan has been delegated by the Board), in the event Participant does not electronically accept this Grant Notice within ninety (90) days of the Grant Date, this Award shall be forfeited and Participant shall have no further rights thereto.

Participant acknowledges that Section 3.5 of the Stock Payment Award Agreement amends the governing law of Participant’s Invention & Secrecy Agreement (as defined in the Stock Payment Award Agreement) and hereby agrees to such amendment.

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EXHIBIT A

TO STOCK PAYMENT AWARD GRANT NOTICE

STOCK PAYMENT AWARD AGREEMENT

Pursuant to the Stock Payment Award Grant Notice (the “ Grant Notice ”) to which this Stock Payment Award Agreement (this “ Agreement ”) is attached, the Company has granted to Participant the Shares set forth in the Grant Notice, subject to all of the terms and conditions set forth in this Agreement, the Grant Notice and the Plan.

ARTICLE I

AWARD OF SHARES

1.1 Award of Shares .

(a) Award . In consideration of Participant’s past or continued employment or service with the Company or any Affiliate thereof and for other good and valuable consideration, the Company hereby grants to Participant the Shares set forth in the Grant Notice, subject to all of the terms and conditions set forth in this Agreement, the Grant Notice and the Plan.

(b) Distribution of Shares . The Shares shall be distributed to Participant within ten (10) days following the date on which Participant electronically accepts the Grant Notice.

(c) Generally . Shares issued under the Award shall be issued to Participant, at the sole discretion of the Board (or any Committee to which administration of the Plan has been delegated by the Board), in either (i) uncertificated form, with the Shares recorded in the name of Participant in the books and records of the Company’s transfer agent with appropriate notations regarding the restrictions on transfer imposed pursuant to this Agreement; or (ii) certificate form.

1.2 Tax Withholding . Participant acknowledges that he or she has been informed that there will be a recognition of taxable income to Participant equal to the Fair Market Value of the Shares on the date such Shares are issued to Participant. The Company shall not be obligated to deliver any certificate representing the Shares to Participant or his or her legal representative unless and until Participant or his or her legal representative shall have paid or otherwise satisfied in full the amount of all federal, state, local and foreign taxes applicable with respect to the taxable income of Participant resulting from the issuance of the Shares or any other taxable event related to the Shares.

ARTICLE II

RESTRICTIONS

2.1 Rights as Stockholder . Neither Participant nor any person claiming under or through Participant shall have any of the rights or privileges of a stockholder of the Company in respect of any Shares issuable hereunder unless and until certificates representing such Shares (which may be in uncertificated form) will have been issued and recorded on the books and records of the Company or its transfer agents or registrars, and delivered to Participant (including through electronic delivery to a brokerage account). After such issuance, recordation and delivery, Participant shall have all the rights of a

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stockholder of the Company, including with respect to the right to vote the Shares and the right to receive any cash or share dividends or other distributions paid to or made with respect to the Shares.

2.2 Trading Restrictions . The Company may establish periods from time to time during which Participant’s ability to engage in transactions involving the Company’s Common Stock is subject to specific restrictions (“ Restricted Periods ”). Participant may be subject to restrictions giving rise to a Restricted Period for any reason that the Company determines appropriate, including, restrictions generally applicable to employees or groups of employees or restrictions applicable to Participant during an investigation of allegations of misconduct or conduct detrimental to the Company or any Affiliate by Participant.

2.3 Award Subject to Clawback . The Shares are subject to forfeiture, recovery by the Company or other action pursuant to, in addition to the provisions set forth in Section 2.5 of this Agreement, any clawback or recoupment policy which the Company may adopt from time to time pursuant to laws or regulations, including without limitation, any such policy which the Company may be required to adopt under the Dodd-Frank Wall Street Reform and Consumer Protection Act and implementing rules and regulations thereunder, or as otherwise required by applicable law.

2.4 Conditions to Issuance of Shares or Settlement of Award . The Company shall not be required to issue or deliver the Shares prior to the fulfillment of all of the following conditions: (a) the admission of the Shares to listing on all stock exchanges on which such Shares are then listed, (b) the completion of any registration or other qualification of the Shares under any state or federal law or under rulings or regulations of the U.S. Securities and Exchange Commission or other governmental regulatory body, which the Board (or any Committee to which administration of the Plan has been delegated by the Board) shall, in its sole and absolute discretion, deem necessary and advisable, (c) the obtaining of any approval or other clearance from any state or federal governmental agency that the Board (or any Committee to which administration of the Plan has been delegated by the Board) shall, in its absolute discretion, determine to be necessary or advisable, and (d) the receipt by the Company of full payment of any applicable withholding tax in any manner permitted under Section 1.2 above.

2.5 Restrictive Covenants .

(a) Forfeiture for Violation of Restrictive Covenants . The grant of the Shares provided herein and Participant’s agreement to the Restrictive Covenants (as defined below) are intended to be mutually dependent promises and in the event Participant breaches or threatens to breach the Restrictive Covenants, then to the greatest extent permitted by applicable law: (i) any Shares issued pursuant to this Award during the time period that is twelve (12) months prior to and twelve (12) months following Participant’s Termination of Service that have not yet been sold by Participant shall be forfeited back to the Company for no consideration; and (ii) if Participant received Shares pursuant to this Award during the time period that is twelve (12) months prior to and twelve (12) months following Participant’s Termination of Service and subsequently sold the received Share(s), any gain represented by the fair market value of the Shares on the issuance date multiplied by the number of Shares issued to Participant shall be paid by Participant to the Company, in cash, without regard to any market price decrease or increase subsequent to the issuance of the Shares.

(b) Certain Covenants . Participant acknowledges that, to assist Participant in the performance of Participant’s duties, the Company agrees to provide and shall provide and has provided Participant with Confidential Information (as defined below) and materials. Due to the sensitive nature of this Confidential Information, Participant acknowledges that the Company has legitimate business and competitive interests and legal rights to require non-disclosure of the Confidential Information to other companies and/or individuals and to require that the Confidential Information be used only for the benefit

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of the Company. Therefore, in order to protect the Company’s Confidential Information and the Company’s business goodwill and competitive position, and in exchange for the Company providing Participant the consideration set forth herein, and in order to protect the value of the equity-based compensation provided to Participant in this Agreement, Participant agrees:

(i) At any time during the term of Participant’s service to the Company and thereafter for so long as such Confidential Information remains confidential, other than by reason of its wrongful disclosure (whether directly or indirectly) by Participant, Participant will not use, disclose or allow to be disclosed to any person, firm, or corporation, the Company’s Confidential Information, unless previously authorized by the Company for use in the pursuit of Company business;

(ii) During the term of Participant’s service to the Company (which for purposes of this Section shall be deemed to include any period for which Participant continues to be paid by the Company following termination or resignation) and for a period of twelve (12) months following Participant’s termination of service, whether voluntary or involuntary, Participant will not, anywhere in the world, directly or indirectly, compete with any portion of the Business (as defined below) of the Company in any way, or act as an officer, director, employee, consultant, lender, partner, trustee, member, shareholder, or agent of any person or entity that is engaged in any business in competition with the Business as now conducted by the Company or its Affiliates or in which the Company or its Affiliates becomes engaged during the term of Participant’s service to the Company, including, without limitation, any member of the Competitive Group. Notwithstanding the foregoing, this clause (ii) shall not (A) preclude Participant from going to work for a separate business unit of any member of the Competitive Group that is not engaged in the Business, or (B) apply to services rendered by Participant in California after the date Participant’s service by the Company terminates (which for purposes of this Section shall be deemed to include any period for which Participant continues to be paid by the Company following termination or resignation); and

(iii) Both during Participant’s service to the Company and for a period of twelve (12) months following Participant’s termination of service, whether voluntary or involuntary, Participant will not: (A) directly or indirectly solicit, entice, induce or attempt to induce or influence any employee or independent contractor of the Company to terminate or alter his, her or its relationship with the Company; and (B) provide any information about the Company’s employees or independent contractors to any other person for the purpose of assisting any third party to solicit the Company’s employees for outside employment.

(c) Use of Certain Information . Participant shall not knowingly use in his or her work for the Company, any ideas, processes, code, inventions, improvements, developments and discoveries subject to any right or obligation of a third party, including trade secrets, patents, copyrights, trademarks, or open source obligations.

(d) Business Opportunities . Participant will promptly disclose to the Company any business opportunity of which Participant becomes aware during his/her employment or service to the Company that relates to any products or services planned, under development, developed, produced or marketed by the Company. Participant will not take advantage of or divert any such opportunity for his/her (or any other person or entity) own gain, profit or benefit, without the prior written consent of the Company.

(e) Company Materials . All Company Materials are the Company’s property and may not be copied or removed from the Company’s premises (physically or electronically), unless done for the sole benefit of the Company as part of Participant’s job responsibilities or expressly approved by an authorized representative of the Company, for the benefit of the Company.

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(f) Return of Company Materials . Immediately upon the Participant’s Termination of Service for any reason, or upon Company’s request at any other time, Participant will deliver to Company all Company Materials. Participant shall not retain, copy, or remove (either physically or electronically) any Company Materials from Company premises, computers, or other electronic equipment or storage devices.

(g) Definitions . For purposes of this Section 2.5:

(i) The term “ Business ” shall mean the business of providing integrated payment and information solutions and related services for intelligent travel applications to transportation and traffic management entities, as well as providing mission-centered training systems and services, C4ISR systems, intelligence, and cyber solutions for the United States and allied nations.

(ii) The term “ Confidential Information ” or “ Company Confidential Information ” means all forms and types of business, technical, financial, economic, sales, marketing or customer information of the Company that Participant receives, develops or has access to as a result of his/her employment or service to the Company, which has not been previously disclosed to the general public by an authorized Company representative or customer, regardless of whether such information would be deemed a trade secret under applicable law. Confidential Information shall be interpreted broadly and includes, but is not limited to, business strategies and plans, financial information, projections, pricing and cost information, proposals, lists of present or future customers, all information obtained from or about current or future customers, supplier lists and information, plans and results of research and development, reports, manuals, policies, personnel information (other than Participant’s own information), evaluations, designs, specifications, blueprints, drawings, patterns, compilations, formulas, programs, software, prototypes, methods, processes, devices, procedures, “Inventions,” special techniques of any kind peculiar to the Company’s operations, or other confidential or proprietary information or intellectual property related to the Business, products, services, or plans of the Company, whether tangible or intangible, and whether stored or memorialized physically, electronically, photographically, or in Participant’s memory. This specifically includes all information the Company receives from customers or other third parties that is not generally known to the public or is subject to a confidentiality agreement.

(iii) The term “ Company ” means the Company, its subsidiaries and its Affiliates.

(iv) The term “ Company Materials ” means all forms of written or recorded information, data, or materials, including, but not limited to, documents, files, memoranda, notes, lists, as well as photographs, drawings, blueprints, and schematics (and all copies thereof) relating to the Company’s business, customers, suppliers, products or services, whether in tangible or electronic form (including items stored in computer memories, computer disks, thumb drives, CDs, or any other electronic means), whether made or compiled by Participant or others.

(v) The term “ Competitive Group ” includes, but is not limited to, the following entities: ACS, Accenture, Active Exhaust, BAE Systems, Bering Sea Environmental, Boeing, Booz Allen Hamilton, DRS Training & Control Systems, Elbit Systems, Engility, General Dynamics, HP Enterprise Services, Information Assurance Specialist, IBM, Israeli Aircraft Industries, Kapsch-Group Beteiligungs, L-3, LG, Leidos, Lockheed Martin, Northrup Grumman, Raytheon, Rockwell Collins, Royal Imtech, Ruag, SAIC, Saab Training Systems, Scheidt and Bachmann, Thales, Xerox, Siemens, TransCore, Trapeze Group, IVU Traffic Technologies, Indra Sistemas, Init AG (and U.S. subsidiaries), Econolite Group, Trafficware, and Q-Free ASA (and U.S. subsidiaries), as well as any entity that is a successor to, acquires a majority of the assets of, or merges in whole or in part with any of the foregoing entities.

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(vi) The term “ Inventions ” includes, but is not limited to, any creation, discovery, development, idea, technique, formula, method, process, use, apparatus, product, device, machine, composition, code, design, program, technical data, configuration of any kind, or improvements to any of these things, which is discovered, conceived, developed, made or produced by Participant (alone or in conjunction with others), whether or not patentable or registerable under patent, copyright or similar statutes.

(vii) The term “ Restrictive Covenants ” means the restrictions set forth in this Section 2.5 or, if Participant is a party to an employment agreement with the Company, which agreement sets forth provisions regarding Confidential Information, non-solicitation or non-competition that are more restrictive than the provisions set forth in this Section 2.5, the provisions set forth in such employment agreement.

(h) Reasonableness of Restrictions . Participant has carefully read and considered the Restrictive Covenants, and, having done so, agrees and acknowledges that the Restrictive Covenants limit Participant’s ability to engage in competition during the period provided for above. Participant expressly warrants and represents that these restrictions with respect to time and scope of activity are reasonable and necessary to protect the Confidential Information and the Company’s business goodwill and competitive position.

(i) Remedies for Breach . In the event of a breach of any of the Restrictive Covenants, in addition to the forfeiture provisions set forth in Section 2.5(a), the Company shall have the right to seek monetary damages for any such breach. In addition, in the event of a breach or threatened breach of any of the Restrictive Covenants, the Company shall have the right to seek equitable relief, including specific performance by means of an injunction against Participant or against Participant’s partners, agents, representatives, servants, employers, employees, and/or any and all persons acting directly or indirectly by or with him or her, to prevent or restrain any such breach.

(j) Blue Penciling . In the event a court of competent jurisdiction determines that the geographic area, duration, or scope of activity of any restriction under this Agreement is more extensive than is necessary to protect the legitimate business interests of the Company and its affiliates or are otherwise unenforceable, the Company may, in its sole discretion, reform and modify the restrictions under this Agreement to the extent required to render them valid and enforceable under applicable law.

(k) Defend Trade Secrets Act . The federal Defend Trade Secrets Act of 2016 provides immunity in certain circumstances to employees, contractors, and consultants for limited disclosures of a company’s trade secrets. Specifically, employees, contractors, and consultants may disclose trade secrets: (i) in confidence, either directly or indirectly, to a federal, state, or local government official, or to an attorney, solely for the purpose of reporting or investigating a suspected violation of law; or (ii) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Additionally, employees, contractors, and consultants who file retaliation lawsuits for reporting a suspected violation of law may also: (A) disclose the trade secret to his/her attorney, and (B) use the information in related court proceeding, as long as the individual files documents containing the trade secret under seal, and does not otherwise disclose the trade secret except pursuant to court order.

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ARTICLE III

OTHER PROVISIONS

3.1 No Right to Continued Employment, Service or Awards .

(a) Nothing in the Plan, the Grant Notice, or this Agreement shall confer upon Participant any right to continue in the employ or service of the Company or any Affiliate or shall interfere with or restrict in any way the rights of the Company and any Affiliate, which rights are hereby expressly reserved, to discharge or terminate the services of Participant at any time for any reason whatsoever, except to the extent expressly provided otherwise in a written agreement between the Company or any Affiliate and Participant.

(b) The grant of the Award is a one-time benefit and does not create any contractual or other right to receive a grant of Awards or benefits in lieu of Awards in the future. Future grants, if any, will be at the sole discretion of the Company. In addition, the value of the Award is an extraordinary item of compensation outside the scope of any employment contract. As such, the Award is not part of normal or expected compensation for purposes of calculating any severance, resignation, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments. The future value of the underlying Common Stock is unknown and cannot be predicted with certainty.

3.2 Adjustments . Participant acknowledges that the Award is subject to adjustment in the discretion of the Board (or any Committee to which administration of the Plan has been delegated by the Board) upon the occurrence of certain events as provided in this Agreement and Section 11 of the Plan.

3.3 Notices . Any notice to be given under the terms of this Agreement to the Company shall be addressed to the Company in care of the Secretary of the Company at the Company’s corporate headquarters or to the then-current email address for the Secretary of the Company, and any notice to be given to Participant shall be addressed to Participant at the most recent physical or email address for Participant listed in the Company’s personnel records. By a notice given pursuant to this Section 3.3, either party may hereafter designate a different address for notices to be given to that party. Any notice shall be deemed duly given when sent via email or when sent by certified mail (return receipt requested) and deposited (with postage prepaid) in a post office or branch post office regularly maintained by the United States Postal Service.

3.4 Titles . Titles are provided herein for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

3.5 Governing Law; Venue; Severability . The laws of the state in which Participant resides shall govern the interpretation, validity, administration, enforcement and performance of the terms of this Agreement regardless of the law that might be applied under principles of conflicts of laws. The parties agree that any suit, action, or proceeding arising out of or relating to the Plan or this Agreement shall be brought in the United States District Court for the Southern District of California (or should such court lack jurisdiction to hear such action, suit or proceeding, in a California state court in San Diego County, California) and that the parties shall submit to the jurisdiction of such court. The parties irrevocably waive, to the fullest extent permitted by law, any objection a party may have to the laying of venue for any such suit, action or proceeding brought in such court. THE PARTIES ALSO EXPRESSLY WAIVE ANY RIGHT THEY HAVE OR MAY HAVE TO A JURY TRIAL OF ANY SUCH SUIT, ACTION OR PROCEEDING. If any one or more provisions of this Agreement shall for any reason be held invalid or unenforceable, it is the specific intent of the parties that such provisions shall be modified to the minimum

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extent necessary to make it or its application valid and enforceable. Notwithstanding anything to the contrary contained in the Participant’s Employee Inventions & Secrecy Agreement (the “ Inventions & Secrecy Agreement ”), Section 16 of such agreement is hereby amended to be consistent with this Section 3.5 and this constitutes an amendment of such Inventions & Secrecy Agreement to change the governing law of such agreement to be consistent with this Section 3.5 (with references therein to the “Agreement” to continue to be deemed references to the Inventions & Secrecy Agreement).

3.6 Conformity to Securities Laws . Participant acknowledges that the Plan, the Grant Notice and this Agreement are intended to conform to the extent necessary with all provisions of the Securities Act and the Exchange Act and any and all regulations and rules promulgated thereunder by the United States Securities and Exchange Commission, including, without limitation, Rule 16b-3 under the Exchange Act. Notwithstanding anything herein to the contrary, the Plan shall be administered, and the Awards are granted, only in such a manner as to conform to such laws, rules and regulations. To the extent permitted by applicable law, the Plan, the Grant Notice and this Agreement shall be deemed amended to the extent necessary to conform to such laws, rules and regulations.

3.7 Tax Representations . Participant has reviewed with Participant’s own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by the Grant Notice and this Agreement. Participant is relying solely on such advisors and not on any statements or representations of the Company or any of its agents. Participant understands that Participant (and not the Company) shall be responsible for Participant’s own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement.

3.8 Successors and Assigns . The Company may assign any of its rights under this Agreement to single or multiple assignees, and this Agreement shall inure to the benefit of the successors and assigns of the Company. Subject to the restrictions on transfer set forth herein, this Agreement shall be binding upon Participant and his or her heirs, executors, administrators, successors and assigns.

3.9 Limitations Applicable to Section 16 Persons . Notwithstanding any other provision of the Plan or this Agreement, if Participant is subject to Section 16 of the Exchange Act, the Shares, the Plan and this Agreement shall be subject to any additional limitations set forth in any applicable exemptive rule under Section 16 of the Exchange Act (including any amendment to Rule 16b-3 of the Exchange Act) that are requirements for the application of such exemptive rule. To the extent permitted by applicable law, this Agreement shall be deemed amended to the extent necessary to conform to such applicable exemptive rule.

3.10 Amendment, Suspension and Termination . To the extent permitted by the Plan, this Agreement may be wholly or partially amended or otherwise modified, suspended or terminated at any time or from time to time by the Board (or any Committee to which administration of the Plan has been delegated by the Board); provided that, except as may otherwise be provided by the Plan, no amendment, modification, suspension or termination of this Agreement shall impair any rights or obligations under this Agreement in any material way without the prior written consent of Participant.

3.11 Paperless Administration . By accepting this Award, Participant hereby agrees to receive documentation related to the Award by electronic delivery, such as a system using an internet website or interactive voice response, maintained by the Company or a third party designated by the Company.

3.12 Entire Agreement . The Plan, the Grant Notice, this Agreement and the Inventions & Secrecy Agreement constitute the entire agreement of the parties and supersede in their entirety all oral, implied or written promises, statements, understandings, undertakings and agreements between the Company and Participant with respect to the subject matter hereof, including without limitation, the

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provisions of any employment agreement or offer letter regarding equity awards to be awarded to Participant by the Company, or any other oral, implied or written promises, statements, understandings, undertakings or agreements by the Company or any of its representatives regarding equity awards to be awarded to Participant by the Company. Notwithstanding the foregoing, Section 2.5 of this Agreement is in addition to and does not limit the effect of other agreements or understandings between Participant and the Company or any Affiliate with respect to matters addressed therein, including the Inventions & Secrecy Agreement or any other agreement with respect to prohibitions against solicitation and the protection of the Company’s trade secrets and confidential information and noncompetition and nonsolicitation covenants of Participant; provided, however, that to the extent the provisions of Section 2.5 of this Agreement are more restrictive that any such agreements, including the Inventions & Secrecy Agreement, Participant and the Company agree that the provisions of Section 2.5 of this Agreement shall govern.

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Exhibit 10.3

CONSTRUCTION AND DEVELOPMENT AGREEMENT

DATED AS OF FEBRUARY 5, 2019

BETWEEN

BANKERS COMMERCIAL CORPORATION,

AS OWNER

AND

CUBIC CORPORATION,

AS CONSTRUCTION AGENT

TABLE OF CONTENTS


ARTICLE I DEFINITIONS		1
SECTION 1.1.	Defined Terms.	1
ARTICLE II APPOINTMENT OF CONSTRUCTION AGENT		2
SECTION 2.1.	Appointment.	2
SECTION 2.2.	Acceptance.	2
SECTION 2.3.	Term.	2
SECTION 2.4.	Construction Documents.	2
SECTION 2.5.	Scope of Authority.	4
SECTION 2.6.	Construction Budget.	5
SECTION 2.7.	Covenants of Construction Agent.	6
SECTION 2.8.	Governmental Approvals.	10
ARTICLE III FACILITY		10
SECTION 3.1.	Construction.	10
SECTION 3.2.	Amendments; Modifications; Supplements.	10
SECTION 3.3.	Casualty, Condemnation and Force Majeure.	11
SECTION 3.4.	Environmental Matters.	14
ARTICLE IV PAYMENT OF FUNDS		15
SECTION 4.1.	Funding of Construction Costs.	15
ARTICLE V CONSTRUCTION EVENTS OF DEFAULT		15
SECTION 5.1.	Construction Events of Default.	15
SECTION 5.2.	Survival.	17
SECTION 5.3.	Remedies; Remedies Cumulative.	17
SECTION 5.4.	Surrender and Return.	19
ARTICLE VI CONSTRUCTION FEE		20
ARTICLE VII OWNER’S RIGHTS		20
SECTION 7.1.	Owner’s Right to Cure Construction Agent’s Defaults.	20
ARTICLE VIII MISCELLANEOUS		20
SECTION 8.1.	Notices.	20
SECTION 8.2.	Successors and Assigns.	20


SECTION 8.3.	Governing Law.	21
SECTION 8.4.	Amendments and Waivers.	21
SECTION 8.5.	Counterparts.	21
SECTION 8.6.	Severability.	21
SECTION 8.7.	Headings and Table of Contents.	21
SECTION 8.8.	Submission to Jurisdiction.	21
SECTION 8.9.	Jury Trial.	22
SECTION 8.10.	Payments.	22
SECTION 8.11.	Binding Effect.	23
SECTION 8.12.	Nature of Transaction.	23

SCHEDULES

Schedule 1	List of Government Actions
Schedule 2.7(d)	Construction Period Insurance Requirements

CONSTRUCTION AND DEVELOPMENT AGREEMENT

CONSTRUCTION AND DEVELOPMENT AGREEMENT dated as of February 5, 2019 (this “ Agreement ”), is entered into between BANKERS COMMERCIAL CORPORATION, a California corporation (“ Owner ”), and CUBIC CORPORATION, a Delaware corporation (“ Construction Agent ”).

PRELIMINARY STATEMENT

A. Cubic Corporation, as lessee (“ Lessee ”), and Owner, as lessor, are parties to that certain Lease Agreement, dated of even date herewith (as amended, supplemented or otherwise modified from time to time pursuant thereto, the “ Lease ”), pursuant to which Lessee has agreed to lease from Owner, and Owner has agreed to lease to Lessee, the Leased Property.

B. Owner and Lessee are also parties to that certain Participation Agreement, dated of even date herewith (as amended, supplemented or otherwise modified from time to time pursuant thereto, the “ Participation Agreement ”), among Owner, Lessee, MUFG Bank, Ltd., as Administrative Agent, MUFG Union Bank, N.A. as Collateral Agent and the Rent Assignees.

C. Subject to the terms and conditions hereof, (i) Owner desires to appoint Construction Agent as its sole and exclusive agent and constructor for the demolition of Building 1 and construction of the Facility on the Site in accordance with the Construction Budget and the Plans and Specifications (in each case, as supplemented or amended pursuant to Section 3.2) and pursuant to the terms of the Lease and the other Operative Documents, and (ii) Construction Agent desires, on behalf of Owner, to cause Building 1 to be demolished and the Facility to be constructed in accordance with the Construction Budget and the Plans and Specifications (in each case, as supplemented or amended pursuant to Section 3.2) and pursuant to the terms of this Agreement and the other Operative Documents.

NOW, THEREFORE, in consideration of the foregoing, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto covenant and agree as follows:

ARTICLE I

DEFINITIONS

SECTION 1.1. Defined Terms.

The capitalized terms used herein and not otherwise defined shall have the meanings ascribed thereto in Appendix I to the Participation Agreement, and the rules of interpretation set forth in Appendix I to the Participation Agreement shall apply to this Agreement.

ARTICLE II

APPOINTMENT OF CONSTRUCTION AGENT

SECTION 2.1. Appointment.

Pursuant to and subject to the terms and conditions set forth herein, in the Participation Agreement and the other Operative Documents, Owner hereby irrevocably (during the term of this Agreement) appoints Construction Agent to act in accordance with the Construction Budget and the Plans and Specifications and the requirements set forth in this Agreement as exclusive agent and constructor for the demolition of Building 1 and the construction and installation of the Facility on the Site, provided, however, no construction shall commence prior to the leasing of the Site to the Owner pursuant to the Ground Lease and no demolition of Building 1 shall occur prior to the transfer of title to Building 1 pursuant to the Deed.

SECTION 2.2. Acceptance.

Construction Agent hereby unconditionally and irrevocably (during the term of this Agreement) accepts the appointment as Construction Agent and agrees to perform its duties and obligations, as set forth in this Agreement.

SECTION 2.3. Term.

This Agreement shall commence on the date hereof and shall terminate upon the first to occur of:

(a) payment by Lessee of the Lease Balance and all other amounts owing under the Operative Documents, and termination of the Commitments in accordance herewith, the Lease and the Participation Agreement;

(b) the Construction Period Termination Date;

(d) the Completion Date.

SECTION 2.4. Construction Documents.

(a) Subject to each of the terms and conditions in this Agreement, Construction Agent may execute any of its duties under this Agreement by or through agents, contractors, employees or attorneys-in-fact. Construction Agent shall enter into such agreements in its capacity as agent for Owner (such agreements, together with subcontracts, contracts, purchase orders and other agreements entered into or accepted by the Developer or the General Contractor pursuant to the Development Agreement and the General Construction Agreement, respectively, may be referred to herein as the “ Construction Documents ”) with architects, developers, designers, contractors, manufacturers and other persons who may supply materials, labor, equipment and/or services as

Construction Agent deems necessary or desirable for the Construction including, without limitation, the Development Agreement and the General Construction Agreement provided, however, that no such delegation shall limit or reduce in any way Construction Agent’s duties and obligations under this Agreement. Contemporaneously herewith, Construction Agent, Developer and Owner, as applicable, have executed and delivered assignments of contracts (collectively, the “ Assignment of Contracts ”) regarding all of the Major Construction Documents now or hereafter in effect related to Construction and Construction Agent shall have obtained from the Developer, the General Contractor and each other relevant contracting party under each of the other Major Construction Documents then in effect a Consent and Acknowledgment with respect thereto. Construction Agent shall cause each relevant contracting party under each Major Construction Document that becomes effective after the Closing Date to execute and deliver a Consent and Acknowledgment concurrent with the effectiveness of such Major Construction Document. For purposes hereof, the term “ Major Construction Document ” shall mean the Development Agreement, the General Construction Agreement and any Construction Document calling for payments of $1,900,000 or more during the Construction Period. Each of the Development Agreement and the General Construction Agreement shall be a guaranteed maximum or fixed price contract in form and substance reasonably satisfactory to the Administrative Agent. Costs payable under the Development Agreement and the General Construction Agreement necessary to achieve Substantial Completion and to complete the Final Completion Work, together with the costs payable under all other Construction Documents and all Construction Costs necessary to achieve Substantial Completion and to complete the Final Completion Work shall not exceed either (x) the aggregate amount permitted for all such items in the Construction Budget or (y) the Available Commitment.

(b) Each Construction Document, including each Major Construction Document shall provide (it being understood that, this Section 2.4(b) may be satisfied, regarding each Major Construction Document, if the following covenants and agreements are contained in a Consent and Acknowledgment any such Person is required to deliver to Owner) that: (i) none of the Agents or any Participant is liable for any claims or obligations incurred under any Construction Document it being understood and agreed that the contractor thereunder agrees to look solely to the proceeds of amounts advanced pursuant to the Participation Agreement for payments of amounts due under such contracts, (ii) the contractor under such Construction Document shall provide written notice to Owner and the Administrative Agent of any material breach under such contract and Owner and the Administrative Agent shall have an additional cure period for Owner and the Administrative Agent of sixty (60) days beyond the period allowed for Construction Agent to cure any such material breach, which cure period shall be reflected in such Construction Document or a Consent and Acknowledgement executed by such contractor, and (iii) upon the written request of Owner or the Administrative Agent, such contractor shall provide to Owner or the Administrative Agent an estoppel certificate in respect of such contract in a form reasonably requested by Owner or the Administrative Agent.

SECTION 2.5. Scope of Authority.

(a) Subject to the terms, conditions, restrictions and limitations set forth in the Operative Documents, Construction Agent unconditionally agrees to take all action necessary or desirable for the performance and satisfaction of all of Construction Agent’s obligations hereunder, including, without limitation:

(i) all actions relating to and necessary for the ground lease of the Site by Owner on or after the Closing Date;

(ii) all design and supervisory functions relating to and necessary for the construction of the Facility on the Site;

(iii) negotiating and entering into all contracts or arrangements to procure the labor, materials, equipment and supplies necessary to demolish Building 1 and to construct the Facility on such terms and conditions as are customary and reasonable in light of local standards and practices;

(iv) obtaining all necessary permits, licenses, consents, approvals and other authorizations, including those required under Applicable Laws and Regulations (including Environmental Laws), from all Authorities in connection with the demolition of Building 1 and the development and construction of the Facility in accordance with the Plans and Specifications;

(v) maintaining all books and records with respect to the construction and management of the Site and the Facility;

(vi) performing any other acts necessary in connection with the demolition of Building 1 and the construction and development of the Facility in accordance with the Plans and Specifications, Construction Budget, Applicable Laws and Regulations and all Construction Period Insurance Requirements;

(vii) paying (subject to receipt of Advances under the Participation Agreement) all Construction Costs to be paid during the Construction Period;

(viii) enforcing performance by each party to each Construction Document of its respective obligations, warranties and other design, construction and other obligations with respect to the demolition of Building 1 and the design, engineering, construction and completion of the Facility and pursuing remedies with respect to the breach of those obligations; and

(ix) to the extent permitted under the Operative Documents, using the proceeds of any insurance maintained in accordance with Section 2.7(d) hereof with respect to the Facility to complete construction of or rebuild any portion of the Facility with respect to

an Event of Loss, a Casualty or Condemnation occurring with respect to that portion of the Facility and in accordance with Section 3.3 hereof.

If a Construction Event of Default has occurred and is continuing, neither Construction Agent nor any agent or contractor of Construction Agent shall have the authority to take any of the above-described actions without the prior written consent of the Administrative Agent acting at the direction of the Required Participants.

(b) Subject to the terms and conditions of this Agreement and the other Operative Documents, Construction Agent, in its capacity as agent for Owner, shall have sole management, control and responsibility over and the duty to cause, the Construction, construction means, methods (including testing of the Facility or any part thereof), sequences and procedures, the use of Hazardous Materials and the hiring, termination and contracting for and supervision of and payment for labor, personnel and services with respect to the construction of the Facility. Construction Agent acknowledges and agrees that, until such time as Owner or its designee has taken possession of the Facility through the exercise of remedies under the Operative Documents or pursuant to a return of the Facility to Owner or its designee permitted under the Operative Documents, as between Owner and Construction Agent, Construction Agent will have at all times sole dominion over and control of the Facility and the Site and that Construction Agent will bear or cause General Contractor to bear all responsibility for injuries and mishaps to third parties and their property on the Site.

(c) All fees and expenses of Lessee under any Operative Document which are of the type included in the Construction Budget shall be paid or reimbursed through Advances as provided in the Participation Agreement.

SECTION 2.6. Construction Budget.

At least ten (10) days prior to the Closing Date, Construction Agent shall prepare and deliver, or cause to be prepared and delivered, to the Agents, the Participants and the Construction Consultant, the Construction Budget for the Facility, setting forth in reasonable detail the budget for the Construction of the proposed Facility on the Site in accordance with the preliminary Plans and Specifications and all related costs including, without limitation, the Carrying Costs and Transaction Costs expected to accrue during the Construction Period and other Construction Costs. Such Construction Budget shall include a line item for the amount of any insurance deductible applicable to the insurance required by the Construction Period Insurance Requirements. Construction Agent shall cause the Construction Budget to be updated as necessary to reflect any changes in any updated or otherwise modified Plans and Specifications delivered in accordance with Section 2.7(o), and shall deliver such updated Construction Budget promptly to the Administrative Agent and the Construction Consultant. The Construction Budget, together with the previously incurred capitalized costs, shall not exceed the Commitment Amount. The Construction Budget shall be approved by Owner, such approval not to be unreasonably withheld, on or prior to the first Advance Date. The funding of the Advance by Owner as of the Closing Date shall be evidence of Owner’s approval of the Construction Budget.

SECTION 2.7. Covenants of Construction Agent.

Construction Agent hereby covenants and agrees that with respect to the Leased Property and the Site it will:

(a) promptly notify the Administrative Agent and the Construction Consultant of (i) any defaults, failures to perform or termination notices under any Major Construction Document to which Construction Agent is a party, (ii) any defaults, failures to perform or termination notices under any Major Construction Document to which Construction Agent is not a party and of which Construction Agent has knowledge, (iii) any material defaults or material failures to perform under any other Construction Document to which Construction Agent is a party and, for such Construction Documents to which Construction Agent is not a party, of any such defaults and failures of which Construction Agent has knowledge, (iv) any Force Majeure Event and (v) Completion;

(b) provide (i) the Agents, the Participants and the Construction Consultant reasonable access to the Facility, the Site and to all construction records necessary to confirm compliance with this Agreement and the other Operative Documents during normal business hours, at reasonable intervals and with reasonable prior notice to Construction Agent, subject to reasonable safety and confidentiality requirements of Construction Agent and (ii) the Construction Consultant with access to scheduled meetings of the Construction Agent with the Developer, the General Contractor, and/or any subcontractors;

(c) cause all Liens (including, without limitation, Liens or claims for materials supplied or labor or services performed in connection with the construction of the Facility), other than Permitted Liens, to be discharged (or if contested in accordance with Section 9.5 of the Lease to be bonded) with proceeds of Advances;

(d) comply with, or cause General Contractor or the Developer to comply with, the insurance requirements set forth in Schedule 2.7(d) hereto. The costs of all such insurance coverage shall be provided for as a separate category of Construction Costs in the Construction Budget and paid for with Advances. In addition, Construction Agent will cause General Contractor or the Developer, as applicable, to monitor the compliance of each subcontractor with the insurance required pursuant to their applicable subcontracts;

(e) cause Construction of the Facility to be prosecuted diligently and without undue and unscheduled interruption (except to the extent due to a Force Majeure Event) substantially in accordance with the Plans and Specifications and within the Construction Budget (in each case, as supplemented or amended pursuant to Section 3.2) and cause the Completion Date to occur on or before the Construction Period Termination Date;

(f) at least three (3) Business Days prior to the Demolition Date, deliver a notice of the Demolition Date to the Administrative Agent and, thereafter on or one (1) Business Day prior to the Demolition Date, cause Building 1 to be deeded to Owner and to be razed and cause (notwithstanding any Alterations or other additions to or changes to the Facility at any time, as

more fully described in the Plans and Specification) the Facility to be constructed on the Site as two three-story office buildings, each consisting of approximately 125,000 square feet of Class A office space, and approximately 1,016 surface parking stalls including all buildings, structures, fixtures, Equipment, personal property, roadways and other improvements of every kind constructed and purchased at any time and from time to time on or under the Site pursuant to the Construction and Development Agreement with amounts advanced by Owner pursuant to the Participation Agreement;

(g) at all times maintain the Facility under construction in such a way that (i) the Facility under construction meets the standards required to be met under Applicable Laws and Regulations and under the insurance policies required under the Construction Period Insurance Requirements, (ii) when Complete, the Facility and the Site comply with all local ordinances, rules and regulations including applicable zoning regulations, and (iii) it does not constitute an unreasonable danger to persons or things;

(h) ensure that each Major Construction Document will be entered into by Construction Agent and/or the Developer, consistent with the Plans and Specifications, and also ensure that such Major Construction Documents contain warranties substantially in accordance with customary industry practice;

(i) ensure that each Major Construction Document or the Consent and Acknowledgment with respect to the applicable Major Construction Document will explicitly provide that the rights of Construction Agent regarding such Major Construction Document can be assigned and pledged without consent of the counterparty thereto;

(j) deliver to the Administrative Agent and the Construction Consultant a copy of each Major Construction Document promptly upon the execution of such Major Construction Document by all parties thereto;

(k) (i) provide the Participants and the Construction Consultant with advance notice, together with a copy, of any proposed Change Order under any Construction Document that would increase the total amount payable under such Construction Document by more than the higher of $200,000 and ten percent (10%) of the original total amount payable under such Construction Document (in the aggregate with all prior and concurrent Change Orders with respect to such Construction Document) or which otherwise requires Owner’s consent pursuant to Section 3.2 hereof, and (ii) prior to agreeing to any such Change Order referenced in the foregoing subsection (i), Construction Agent will certify to the Participants and the Construction Consultant to the matters referenced in Section 3.1(e) of the Participation Agreement;

(l) cause to be promptly and duly taken, executed, acknowledged and delivered all such further acts, documents and assurances as any Participant reasonably may request from time to time in order to carry out more effectively the intent and purposes of this Agreement and the other Operative Documents and the Overall Transaction. Owner, Lessee and Construction Agent, the cost of which shall be paid as a Transaction Cost or a Construction Cost, as applicable, will cause all financing statements (including precautionary financing statements), fixture filings,

mortgages and other documents to be recorded or filed at such places and time in such manner as may be required by Applicable Laws and Regulations, and will take all such other actions or cause such actions to be taken, as may be necessary or as may be reasonably requested by the Administrative Agent or the Participants in order to establish, preserve, protect and (if applicable under Applicable Laws and Regulations) perfect the interests of Owner in the Construction Documents, the Lien of Owner in the Lessee Collateral and any Participant’s rights under this Agreement and the other Operative Documents;

(m) to ensure its compliance with Section 2.7(g) hereof, observe and comply with a heightened standard of care if a change in Applicable Laws and Regulations after the Closing Date would require a heightened standard of care in order to comply with such covenant at all times, including the execution of amendments of such covenant from time to time upon the reasonable request of Owner in order to more fully give effect to the foregoing agreement;

(n) ensure that the construction, maintenance and operation of the structures constituting part of the Leased Property at any time will be done in such a manner that such structures will meet the standards which, in the given circumstances, they may be expected to meet so as not to constitute an unreasonable danger to persons or things;

(o) promptly after becoming available from Construction Agent’s vendors or preparation by Construction Agent, deliver copies of the Plans and Specifications for the Facility and the Offsite Plans and Specifications to the Administrative Agent and the Construction Consultant. Within thirty (30) days after the end of each calendar quarter following such delivery, Construction Agent will update the copy of the Plans and Specifications and Offsite Plans and Specifications to reflect any modifications made thereto during such calendar quarter and will deliver such update to the Construction Consultant. Within ten (10) days of receipt thereof, the Construction Consultant shall certify to the Administrative Agent and Participants that, based on such update, (x) the aggregate Commitments of the Rent Assignees and the Owner are sufficient to Complete the Facility and to pay all Construction Costs, in each case on or before the Construction Period Termination Date; and (y) Completion of the Facility can be achieved before the Construction Period Termination Date. Promptly after becoming available from the City of San Diego (and in any event prior to commencing construction of any Facility improvements), Construction Agent shall deliver copies of a zoning letter from the City of San Diego with respect to the Site, specifying the zoning designations applicable thereto. Notwithstanding the foregoing, (i) Construction Agent will cause all Plans and Specifications for the Facility to be delivered to the Administrative Agent and the Construction Consultant by the completion of the engineering phase of the planning for Construction and (ii) at least five (5) Business Days prior to the commencement of Construction of any portion of the Facility, Construction Agent will cause all Plans and Specifications for such portion of the Facility to be delivered to the Administrative Agent and the Construction Consultant;

(p) not agree to any Material Modification of any Major Construction Document (or any series of changes which, taken in the aggregate, amounts to a Material Modification) or

termination of any Major Construction Document, in each case without the consent of the Administrative Agent acting upon the direction of the Required Participants;

(q) provide to the Administrative Agent and Construction Consultant promptly upon receipt thereof, copies of all notices and other correspondence received by Construction Agent from any Authority and any relating to the remediation of any Environmental Violations related to the Site or the Facility;

(r) take all necessary actions required to remediate any soil contamination related to the Site or the Facility to the extent required by Applicable Laws and Regulations on or before the Completion Date; provided, that in no event shall the failure of Construction Agent to satisfy the terms of this Section 2.7(r) be deemed to prevent the Completion Date from having occurred;

(s) If at any time prior to the Completion Date an Environmental Violation shall occur that is not contemplated to be remediated pursuant to the Remediation Plan, Construction Agent shall give Administrative Agent and Construction Consultant prompt written notice of such occurrence and the date thereof. Following the occurrence of such Environmental Violation, Construction Agent shall apply all funds received by Construction Agent from any Authority, insurer or other third-party which are given with the intent that they be applied to remediate any Environmental Violation in or around the Site or relating to the Facility for such intended purposes. Further, Construction Agent shall not apply any such funds in a manner which unduly discriminates against the Site in favor of any other parcels which may be owned by Construction Agent or any of its Affiliates; and

(t) comply with or cause to be complied with each of the following provisions of the Lease at all times prior to the Base Term Commencement Date notwithstanding the fact that any of the following provisions in the Lease and Memorandum of Lease may indicate that such provisions are only applicable during the Lease Term (excluding the Construction Period) (and Construction Agent hereby acknowledges and agrees that all such provisions shall be operative as to it to the same extent as Lessee and its records and shall be effective from and after the date hereof whether or not the Base Term Commencement Date shall have occurred): Sections 2.1, 3.1, 4.2, 4.3, 4.4, 7.1, 8.1, 8.2, 9.1, 10.2, 13.4, 13.9, 18.4 and Articles VI, XII, XV, XVI and XXIII of the Lease and Sections 6, 7, 13 and 29 of the Memorandum of Lease; provided, however, that, notwithstanding anything to the contrary set forth in this Agreement or in any of the Operative Documents, prior to the Base Term Commencement Date, the costs and expenses of complying with the foregoing obligations and under Section 2.7 shall be solely funded with Advances and insurance proceeds, as applicable, pursuant and subject to the terms and conditions of Article III of the Participation Agreement and Construction Agent’s obligation to pay for such amounts is limited to the extent Advances and insurance proceeds, as applicable, are available. Prior to the Base Term Commencement Date, Construction Agent may exercise the rights set forth in Sections 3.2 and 9.5 of the Lease subject to the terms and conditions set forth in such section provided, that, no such contest, challenge, appeal, proceeding, waiver, extension, forbearance or noncompliance shall result in a delay in the Completion Date beyond the Construction Period Termination Date. As a condition to any such contest, challenge, appeal, proceeding, waiver, extension, forbearance

or noncompliance, Construction Agent shall demonstrate that there are sufficient contingency reserves in the Construction Budget set aside for such purposes.

SECTION 2.8. Governmental Approvals.

As of the date of the Closing Date and each Advance Date, Construction Agent hereby represents and warrants that, other than with respect to environmental matters, the representations of which are treated exclusively in Section 4.1(e) of the Participation Agreement, the list of Governmental Actions set forth as Schedule 1 hereto, as it may be amended from time to time, lists all material Governmental Actions necessary in connection with the construction of the Facility. Notwithstanding the foregoing, as of the date of the Closing Date and each Advance Date, Construction Agent hereby further represents and warrants that (a) the application and submission for approval of any and all Governmental Actions of all types necessary from time to time in order to Complete the Facility is in the exclusive control of Construction Agent or a Cubic Person; (b) Construction Agent has undertaken and completed sufficient diligence with respect to the Facility to have ascertained all Governmental Actions necessary from time to time to Complete the Facility; and (c) Construction Agent has no Actual Knowledge of any impairment in its ability to obtain all necessary Governmental Actions from time to time necessary to Complete the Facility on or prior to the Construction Period Termination Date within the remaining Available Commitment of the Participants.

ARTICLE III

FACILITY

SECTION 3.1. Construction.

Construction Agent shall, in compliance with this Agreement, within the Construction Budget and in all material respects in compliance with the Plans and Specifications (in each case as supplemented or amended pursuant to Section 3.2 below), cause the Facility to be constructed, equipped, maintained and used on the Site, in accordance with the Construction Documents, all Applicable Laws and Regulations and all Construction Period Insurance Requirements.

SECTION 3.2. Amendments; Modifications; Supplements.

Construction Agent may, subject to the conditions, restrictions and limitations set forth herein and in the other Operative Documents, at any time during the Construction Period amend or modify (it being understood that any Change Order will be an amendment subject to this Section 3.2 and such Change Orders may be referred to hereinafter in this Section 3.2 as the applicable Change Orders) the Construction Documents, the Plans and Specifications and individual line items in the Construction Budget without the consent of Administrative Agent, acting upon the direction of the Required Participants, provided, however, that (a) the Current Change Orders, individually and in the aggregate, after giving effect thereto, will not (i) materially diminish: (A) the utility, useful life or functional capability of the Facility as two Class A office buildings when Completion has been effected; (B) the expected Fair Market Value of the Facility

as of the Construction Period Termination Date; or (C) the expected Fair Market Value of the Facility as of the Maturity Date; (ii) cause the remaining Available Commitment of the Participants to be insufficient to Complete the Facility; or (iii) delay Completion beyond the Construction Period Termination Date; (b) funds for the Current Change Orders are available from the unused Aggregate Contingency Amount (subject to the requirement for Administrative Agent’s consent, if applicable, as referenced in subsection (d) below); (c) in the aggregate respecting any particular Major Construction Document, the cost of all Current Change Orders under such Major Construction Document, when aggregated with the cost of all prior Change Orders under such Major Construction Document, does not exceed the higher of $200,000 and ten percent (10%) of the original total amount payable under such Major Construction Document (in the aggregate with all prior and concurrent Change Orders with respect to such Construction Document) ; and (d) in the aggregate respecting all Construction Documents, the Construction Budget and the Plans and Specifications, the cost of all Current Change Orders, when aggregated with the cost of all prior Change Orders, does not exceed an amount equal to the Permitted Excess Amount unless the Administrative Agent, acting upon the direction of the Required Participants, has provided its prior written consent to each such additional Current Change Order causing such amount to exceed the Permitted Excess Amount, (as the applicable Change Orders shall be attached to the Advance Certificates delivered from time to time and the foregoing matters regarding the applicable Change Orders shall be certified by Construction Agent in such Advance Certificates, all pursuant to Section 3.1(e) of the Participation Agreement). Regardless of whether the consent of Administrative Agent is required, Construction Agent shall provide to the Administrative Agent and the Construction Consultant a reconciliation of the Construction Budget and such additional details or documentation as any such Person may reasonably request.

SECTION 3.3. Casualty, Condemnation and Force Majeure.

(a) If at any time prior to the Completion Date a Casualty, Condemnation, Force Majeure Event, Event of Loss or Event of Taking shall occur, Construction Agent shall give Administrative Agent and Construction Consultant prompt written notice of such occurrence and the date thereof.

(i) If such a Casualty, Condemnation or Force Majeure Event shall occur then, except to the extent such Force Majeure Event constitutes an Event of Loss or Event of Taking and then as otherwise provided in Section 3.3(a)(ii) below, in each case Construction Agent shall (x) as soon as practicable after such Casualty, Condemnation or Force Majeure Event, subject to receipt of Advances hereunder and the awards or proceeds relating to such Condemnation or Casualty, as applicable, from Administrative Agent, repair and rebuild the affected portions of the Leased Property suffering such Casualty, Condemnation or Force Majeure Event (or cause such affected portions to be repaired and rebuilt) to the condition it was immediately prior to the occurrence of such Casualty, Condemnation or Force Majeure Event, and (y) promptly and diligently Complete the Facility in accordance with the terms hereof, and cause the Completion Date to occur on or prior to the Construction Period Termination Date; provided, that the Administrative Agent shall be entitled to receive all awards, property and builder’s risk insurance proceeds

and other proceeds with respect to such Casualty, Condemnation or Force Majeure Event and, to the extent Construction Agent receives any such amounts, Construction Agent shall promptly remit the same to the Administrative Agent; provided further, that the cost of any such repair or rebuilding shall be financed with the proceeds of any insurance and condemnation awards received by the Administrative Agent with respect to such Casualty, Condemnation or Force Majeure Event, as applicable, and Advances from Owner.

(ii) If an Event of Taking shall occur, this Agreement and the Lease shall terminate, subject to Participants’ rights under the Operative Documents with respect to any existing Construction Event of Default. Upon such occurrence of an Event of Taking, the Administrative Agent shall be entitled to receive all condemnation awards, property and builder’s risk insurance proceeds and other awards and proceeds with respect to such Event of Taking and to the extent Construction Agent receives any such amounts, Construction Agent shall promptly remit the same to the Administrative Agent. Upon such termination of this Agreement and the Lease, the Administrative Agent shall be entitled to retain any and all such awards and proceeds, up to but not exceeding the Purchase Amount, with any excess of such awards or proceeds being paid to Construction Agent and any deficiency being paid by Construction Agent to Administrative Agent up to the Construction Recourse Amount unless such Event of Taking is due solely to a Force Majeure Event in which case Owner shall have no further recourse to Construction Agent; provided , that this limitation shall not affect Lessee’s indemnification liability under Sections 7.1(f)(i)(B)(1) and (2) of the Participation Agreement or other liabilities hereunder or under the other Operative Documents during the continuance of an Event of Default; provided, further, that this limitation shall not affect the Participants’ rights with regard to the Leased Property.

If an Event of Loss shall occur, Owner may elect to terminate this Agreement and the Lease, subject to clause (iv) below and Owner’s rights under the Operative Documents with respect to any existing Construction Event of Default. Upon such occurrence of an Event of Loss, Owner shall be entitled to receive all awards, property and builder’s risk insurance proceeds and other awards and proceeds with respect to such Event of Loss and to the extent Construction Agent receives any such amounts, Construction Agent shall promptly remit the same to Owner. Owner may retain all such amounts, up to but not exceeding the Purchase Amount, with any excess of such proceeds being paid to Construction Agent and any deficiency being paid by Construction Agent to Owner up to the Construction Recourse Amount unless such Event of Loss is due solely to a Force Majeure Event in which case Owner shall have no further recourse to Construction Agent; provided , that this limitation shall not affect Lessee’s indemnification liability under Sections 7.1(f)(i)(B)(1) and (2) of the Participation Agreement or other liabilities hereunder or under the other Operative Documents during the continuance of a Construction Event of Default; provided, further, that this limitation shall not affect Participants’ rights with regard to the Leased Property.

(iii) Upon receipt by the Administrative Agent of such condemnation or other awards of proceeds and other sums payable under Section 3.3(a)(ii) hereof, this Agreement and the Lease shall terminate, subject to the Participants’ rights under the Operative Documents with respect to any existing Construction Event of Default; provided , that this limitation shall not affect Lessee’s indemnification liability under Sections 7.1(f)(i)(B)(1) and (2) of the Participation Agreement; provided, further, that this limitation shall not affect the Participants’ rights with regard to the Leased Property. Upon the Administrative Agent’s receipt of such awards, proceeds and/or sums equal to the Purchase Amount and application thereof under Article X of the Participation Agreement, Owner will transfer the Leased Property (including all rights under the Ground Lease) and all rights to any remaining proceeds and awards to Lessee or its designee in accordance with Section 23.11 of the Lease.

(iv) Notwithstanding Owner’s election to terminate this Agreement and the Lease with respect to an Event of Loss, so long as no Construction Default, Construction Event of Default or Event of Taking shall have occurred, Construction Agent may elect to Complete the Facility and continue this Agreement and the Lease by written notice thereof to Owner within thirty (30) days of such Event of Loss provided (A) Construction Agent delivers a certificate from a Responsible Officer of Construction Agent certifying that the remaining Available Commitment of the Participants (taking into account any approved requests under Section 2.2(c) of the Participation Agreement), together with the proceeds of any property and builder’s risk insurance received by the Administrative Agent or payable as a result of such Event of Loss, is sufficient to effect repair and restoration of the Leased Property as a result thereof and Complete the Facility and that Completion will occur in accordance with the Construction Budget on or prior to the Construction Period Termination Date (as it may be modified pursuant to Section 2.3(d) of the Participation Agreement), (B) the Construction Consultant certifies in writing to the Participants that the representation set forth in (A) above is true and correct and (C) in the case of any Force Majeure Event, the consent of the Administrative Agent is obtained. In such case, Construction Agent shall continue to cause the Facility to be constructed in accordance with this Agreement and other Operative Documents.

(b) Following an Event of Loss (so long as Owner does not elect to terminate this Agreement and the Lease as a result thereof), Casualty, Condemnation or Force Majeure Event, and provided that no Construction Default, Construction Event of Default or Event of Taking shall have occurred and be continuing, (i) this Agreement and the Lease shall continue, (ii) Construction Agent shall (x) as soon as practicable after such Event of Loss, Casualty, Condemnation or Force Majeure Event, repair and rebuild the affected portions of the Leased Property suffering such Event of Loss, Casualty, Condemnation or Force Majeure Event (or cause such affected portions to be repaired and rebuilt) to the condition it was immediately prior to the occurrence of such Event of Loss, Casualty, Condemnation or Force Majeure Event, and (y) promptly and diligently Complete the Facility, and cause the Completion Date to occur on or prior to the Construction Period Termination Date in accordance with the Construction Budget; provided, that the cost of any such repair or rebuilding shall be financed with the proceeds of any insurance received by the

Administrative Agent with respect to such Event of Loss, Casualty, Condemnation or Force Majeure Event and Advances from the Participants (subject to satisfaction of the conditions, restrictions and limitations contained in this Agreement and the other Operative Documents with respect to the funding of Advances), and (iii) all such condemnation awards and insurance proceeds shall be used or made available to Construction Agent to be used (together with the remaining undisbursed portion of the Commitment Amount) to pay costs actually incurred by Construction Agent to restore the Leased Property to the condition it was immediately prior to the occurrence of such Event of Loss, Casualty, Condemnation or Force Majeure Event.

(c) In the event any part of the Leased Property becomes subject to condemnation or requisition proceedings during the Construction Period, to the extent permitted by any Applicable Laws and Regulations, Owner shall be entitled to control such negotiations in consultation with Construction Agent, at Construction Agent’s expense; provided, that no settlement will be made without Construction Agent’s prior written consent, not to be unreasonably withheld. Construction Agent shall give to Owner such information, and copies of such documents, which relate to such proceedings, or which relate to the settlement of amounts due under insurance policies required by Section 2.7(d), and are in the possession of Construction Agent, as are reasonably requested by Owner. If the proceedings relate to an Event of Taking, Construction Agent shall act diligently in connection therewith. Nothing contained in this Section 3.3(c) shall diminish Owner’s rights with respect to condemnation awards or proceeds and property insurance proceeds under Section 3.3(a).

(d) Liquidated damages which are payable pursuant to any terms of a Major Construction Document shall be paid to the Administrative Agent and applied, provided no Construction Default or Construction Event of Default shall have occurred and be continuing, first to pay any increased Construction Costs arising as a direct or indirect result of any Force Majeure Event, then to pay any other Construction Costs arising as a result of the terms of such Major Construction Document including any increased Carrying Costs and then in accordance with Section 10.2(b) of the Participation Agreement.

SECTION 3.4. Environmental Matters.

Construction Agent shall promptly and diligently and in material accordance with Applicable Laws and Regulations commence and complete any response, clean up, remedial or other action necessary to remove, clean up or remediate any Environmental Violation with respect to the Leased Property or the Site to the extent required of Construction Agent or any Participant in order to comply with Applicable Laws and Regulations. Construction Agent shall, upon completion of remedial action by Construction Agent (i) with respect to any Material Environmental Violation described in clause (ii) of the definition thereof, cause to be prepared by a Responsible Officer of Construction Agent a certificate describing in sufficient detail such Environmental Violation and the actions taken by Construction Agent (or its agents) in response to such Environmental Violation and a statement of such Responsible Officer of Construction Agent that such Environmental Violation has been remedied in compliance in all material respects with Applicable Laws and Regulations and (ii) with respect to any other Material Environmental Violation, cause to be prepared by the Environmental Expert a report describing in sufficient detail

such Environmental Violation and the actions taken by Construction Agent (or its agents) in response to such Environmental Violation, and a statement by the Environmental Expert that the Environmental Violation has been remedied in compliance in all material respects with Applicable Laws and Regulations. Except to the extent remediation thereof is included in the Construction Budget, each Environmental Violation shall be remedied at Construction Agent’s sole cost and expense prior to the Completion Date; provided, that if remedying such Environmental Violation requires continued operation of a remediation system or monitoring of testing wells or similar ongoing testing, Construction Agent shall have access at reasonable times and shall remain obligated to perform such actions, unless Owner, in its sole and absolute discretion, notifies Construction Agent to terminate such actions. Nothing in this Section 3.4 shall reduce or limit Construction Agent’s obligations under Article VII of the Participation Agreement (which obligations shall include any Claims arising from such actions).

ARTICLE IV

PAYMENT OF FUNDS

SECTION 4.1. Funding of Construction Costs.

(a) During the Construction Period, Construction Agent shall request that Owner advance funds for the payment of Construction Costs and Owner will comply with such request, in each case, to the extent provided for under, and subject to the conditions, restrictions and limitations contained in, this Agreement and the Participation Agreement with respect to the funding of Advances. Construction Agent and Owner acknowledge and agree that Construction Agent’s right to request funds and Owner’s obligation to advance funds for the payment of the Construction Costs are subject in all respects to the terms and the conditions hereof and of the Participation Agreement and the other Operative Documents.

(b) The proceeds of any funds made available to Owner or Administrative Agent for Construction Costs shall be made available to Construction Agent in accordance with the Advance Request relating thereto and subject to the terms and conditions hereof and of the Participation Agreement. Construction Agent will use such proceeds only to reimburse itself or pay for the Construction Costs set forth in the Advance Request relating to such funds. Specifically, but without limitation, no Advances shall be used for general corporate purposes of Construction Agent or any Affiliate thereof.

ARTICLE V

CONSTRUCTION EVENTS OF DEFAULT

SECTION 5.1. Construction Events of Default.

If any one or more of the following events (each a “ Construction Event of Default ”) shall occur:

(a) the Completion Date shall fail to occur, for any reason, on or prior to the Construction Period Termination Date or Construction Agent suspends its Construction of the Facility for a period of thirty (30) days or longer;

(b) subject to Construction Agent’s right to request an extension of the Completion Date or increase of the amount of Available Commitment under the Participation Agreement, at any time, (i) the remaining Available Commitment of the Participants is not sufficient to (A) Complete the Facility on or before the Construction Period Termination Date or (B) pay all Construction Costs or (ii) Construction of the Facility in accordance with this Agreement and the other Operative Documents cannot be completed for any reason on or prior to the Construction Period Termination Date;

(d) any Cubic Person commits any fraud, misapplication of funds, illegal acts or willful misconduct in any way relating to the Leased Property, the Overall Transaction or that results in a Material Adverse Effect;

(e) Construction Agent shall fail, or fail to cause General Contractor and/or Developer, as applicable, to maintain insurance as required by Section 2.7(d) hereof;

(f) Construction Agent shall fail in any respect to observe or perform any other term, covenant or condition of this Agreement (except those specified in clauses (a) through (e) above), and such failure shall remain uncured for a period of thirty (30) days after the earlier of the date Construction Agent has actual knowledge thereof or receipt of written notice thereof by Construction Agent; or

(g) any Event of Default shall have occurred and be continuing;

then, in any such event, the Administrative Agent acting upon the direction of the Required Participants may, in addition to the other rights and remedies provided for in this Article V and under the Lease, immediately terminate this Agreement by giving Construction Agent written notice of such termination, and upon the giving of such notice, this Agreement shall terminate provided, however , that this Agreement shall terminate immediately without notice and the aggregate outstanding Lease Balance, any Break Amount and all other amounts payable by Construction Agent hereunder, shall become immediately due and payable without demand therefor, upon the occurrence of an Event of Default described in paragraphs (h) or (i) of Article XVII of the Lease . Upon termination of this Agreement, all rights of Construction Agent and all obligations of Owner under this Agreement shall cease. Subject to Section 5.3(c) hereof, Owner may demand that the aggregate outstanding Lease Balance, any Break Amount and all other amounts payable by Construction Agent hereunder to be immediately due and payable and Owner shall be entitled to recover from Construction Agent, and Construction Agent shall pay upon such demand, all costs, expenses, losses, expenditures and damages (including, without limitation, attorneys’ fees and expenses) incurred by or on behalf of Owner in connection with any

Construction Event of Default and such obligations shall survive any termination of this Agreement.

SECTION 5.2. Survival.

The termination of this Agreement pursuant to Sections 5.1 or 5.3 shall in no event relieve Construction Agent of its liability and obligations hereunder or under any other Operative Document which accrued prior to such termination, all of which shall survive any such termination.

SECTION 5.3. Remedies; Remedies Cumulative.

(a) Upon the occurrence of a Construction Event of Default, at Owner’s option and without limiting Owner in the exercise of any other right or remedy Owner may have on account of such default (including, without limitation, any rights or remedies under the Lease and the other Operative Documents all of which are hereby incorporated by reference) and without any further demand or notice, the Administrative Agent acting upon the direction of the Required Participants may take any of the following actions to the fullest extent permitted by Applicable Law and Regulations, either individually or in combination with any other such remedy:

(i) exercise any and all rights and may pursue any and all remedies provided to it in the Lease, the terms and provisions of which are incorporated herein by this reference;

(ii) replace Construction Agent and cause construction of the Facility to be completed and require Construction Agent to pay to Owner any damages as a result thereof;

(iii) require Construction Agent to complete construction of all or part of the Facility (as determined by the Required Participants) with Advances and require Construction Agent to pay to the Participants any damages as a result thereof;

(iv) terminate this Agreement and/or the Lease and/or terminate the Commitments for the Construction of the Facility;

(v) exercise any and all of its rights under the Construction Documents including foreclosure on such Construction Documents pursuant to the Assignment of Contracts or otherwise and/or continue to make any or all payments thereunder (including on an accelerated basis), in each case, as determined by the Required Participants;

(vi) exercise any other right or remedy that may be available to it under Applicable Laws and Regulations or in equity, or proceed by appropriate court action (legal or equitable) to enforce the terms or to recover damages for the breach hereof; and

(vii) exercise any and all of its rights under the Operative Documents (including the right to accelerate the Lease Balance and all other amounts due and payable under the Operative Documents) in accordance with the terms thereof.

(b) To the extent permitted by, and subject to the mandatory requirements of, Applicable Laws and Regulations, each and every right, power and remedy herein specifically given to Owner or otherwise in this Agreement or in any other Operative Document shall be cumulative and shall be in addition to every other right, power and remedy herein specifically given or now or hereafter existing at law, in equity or by statute, and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by Owner, and the exercise or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the same time or thereafter any other right, power or remedy. No delay or omission by Owner in the exercise of any right, power or remedy or in the pursuit of any remedy shall impair any such right, power or remedy or be construed to be a waiver of any default on the part of Construction Agent or be an acquiescence therein. Owner’s consent to any request made by Construction Agent shall not be deemed to constitute or preclude the necessity for obtaining Owner’s consent, in the future, to all similar requests. No express or implied waiver by Owner of any Construction Event of Default shall in any way be, or be construed to be, a waiver of any future or subsequent Construction Event of Default. To the extent permitted by Applicable Laws and Regulations, Construction Agent hereby waives any rights now or hereafter conferred by statute or otherwise that may require Owner to sell, lease or otherwise use the Leased Property or any part thereof in mitigation of Owner’s damages upon the occurrence of a Construction Event of Default or that may otherwise limit or modify any of Owner’s rights or remedies under this Article V.

(c) Notwithstanding anything set forth herein or in the other Operative Documents to the contrary, during the Construction Period, the aggregate amount payable by Construction Agent on a recourse basis under this Article V shall be subject to the limitations on recourse liability set forth in Section 18.5 of the Lease subject to the rights and remedies of Owner and the Indemnitees set forth therein.

(d) So long as Owner has not exercised any other remedy inconsistent therewith, Construction Agent shall be obligated to purchase the Leased Property for the Purchase Amount automatically and without notice or demand therefor upon the occurrence of any Event of Default described in clauses (h) or (i) of Article XVII of the Lease. Upon receipt of the Purchase Amount, the Leased Property together with all of Owner’s rights to all insurance proceeds (other than any liability insurance proceeds) and condemnation awards shall be transferred to Construction Agent (or its designee) pursuant to Section 23.11 of the Lease.

(e) All payments received and amounts held or realized by Owner at any time when a Construction Event of Default shall be continuing and after the Lease Balance shall have been accelerated pursuant to this Section 5.3 as well as all payments or amounts then held or thereafter received by Owner (except for rents received by Owner from subletting pursuant to Section 18.1(a)(vii) of the Lease, which shall be distributed as set forth therein) and the proceeds of sale pursuant to Section 18.1(a)(iii)(B)(2) of the Lease shall be distributed forthwith upon receipt by Owner in accordance with Article X of the Participation Agreement.

(f) Construction Agent acknowledges that Owner has, as security for its obligations under the Rent Assignment Agreements and the other Operative Documents, among other grants, collaterally assigned its rights hereunder to the Collateral Agent and Administrative Agent and Construction Agent agrees that certain rights and remedies set forth herein are exercisable by the Administrative Agent as applicable.

SECTION 5.4. Surrender and Return .

(a) Upon the early termination of this Agreement, Construction Agent shall peaceably leave and surrender and return the Leased Property to Owner and Construction Agent shall remove from the Leased Property on or prior to such expiration or earlier termination all property situated thereon which is not the property of Owner and Construction Agent shall repair any damage caused by such removal. Property not so removed shall become the property of Owner and Owner may cause such property to be removed from the Leased Property and disposed of, and Construction Agent shall pay (without right of reimbursement out of gross sale proceeds) the reasonable cost of any such removal and disposition and of repairing any damage caused by such removal.

(b) Except for surrender upon the earlier termination hereof, no surrender to Owner of the Lease or of the Leased Property shall be valid or effective unless agreed to and accepted in writing by Owner.

(c) Without limiting the generality of the foregoing, upon the surrender and return of the Leased Property to Owner pursuant to this Section 5.4, the Leased Property shall be (x) capable of being immediately utilized by a third-party purchaser or third-party lessee without further inspection, alterations, licenses, permits, or approvals, except for any of the foregoing required solely by virtue of the change in ownership (other than to Owner), use or occupancy of the Leased Property, (y) in accordance and compliance with all Applicable Laws and Regulations including, without limitation, any of the foregoing required by virtue of a change in ownership, use or occupancy of the Leased Property other than to Construction Agent, and (z) legally subdivided and free and clear of any Lien other than Permitted Liens. Until the Leased Property has been surrendered and returned to Owner in accordance with the provisions of this Section 5.4 and subject to the other provisions of Article V hereof, Construction Agent shall continue to be responsible for all Carrying Costs, Transaction Costs and Supplemental Rent due hereunder.

(d) Construction Agent acknowledges and agrees that a breach of any of the provisions of this Section 5.4 may result in damages to Owner that are difficult or impossible to ascertain and that may not be compensable at law. Accordingly, upon application to any court of equity having jurisdiction over the Leased Property or Construction Agent, Owner shall be entitled to a decree against Construction Agent requiring specific performance of the covenants of Construction Agent set forth in this Section 5.4.

ARTICLE VI

CONSTRUCTION FEE

As consideration for and as an inducement to Construction Agent entering into this Agreement, so long as no Default or Construction Event of Default shall have occurred and be continuing, Construction Agent will be entitled to, and Owner shall pay to Construction Agent on each Advance Date (to and including the Completion Date), a construction supervisory fee (the “ Construction Fee ”) in an amount equal to $250 per Advance funded in connection with the Advance funded on such Advance Date.

ARTICLE VII

OWNER’S RIGHTS

SECTION 7.1. Owner’s Right to Cure Construction Agent’s Defaults.

Owner, without waiving or releasing any obligation or Construction Event of Default, may (but shall be under no obligation to) remedy any Construction Event of Default for the account of and at the sole cost and expense of Construction Agent and in furtherance of such right, Owner may make Advance Requests and otherwise exercise all rights and perform all duties of Construction Agent and Lessee hereunder and under the Participation Agreement with respect to the construction of the Facility. All out of pocket costs and expenses so incurred (including fees and expenses of counsel), together with interest thereon at the Overdue Rate from the date on which such sums or expenses are paid by Owner shall be paid by Construction Agent to Owner on demand, provided that any such expenses shall be subject to the limitations on recourse liability set forth in Section 5.3 hereof and, if applicable, in Section 3.3 hereof.

ARTICLE VIII

MISCELLANEOUS

SECTION 8.1. Notices.

All notices, consents, directions, approvals, instructions, requests, demands and other communications required or permitted by the terms hereof to be given to any Person shall be given in writing in the manner provided in, shall be sent to the respective addresses set forth in, and the effectiveness thereof shall be governed by the provisions of, Section 9.3 of the Participation Agreement.

SECTION 8.2. Successors and Assigns.

This Agreement shall be binding upon and inure to the benefit of Owner, Construction Agent and their respective successors and assigns provided, however, that Construction Agent shall not assign any of its rights (except pursuant to Article XII of the Lease) or, except as permitted by Sections 2.4, 2.6 and 2.7 hereof, delegate any of its duties or obligations under this Agreement without the prior written consent of Owner, which consent may be granted or withheld in Owner’s sole and absolute discretion.

SECTION 8.3. Governing Law.

THIS AGREEMENT HAS BEEN DELIVERED IN, AND SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF, THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES (EXCEPT SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW), INCLUDING ANY MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, EXCEPT TO THE EXTENT THAT THE LAWS OF THE STATE WHERE THE SITE IS LOCATED ARE REQUIRED TO APPLY.

SECTION 8.4. Amendments and Waivers.

Owner and Construction Agent may from time to time, enter into written amendments, supplements or modifications hereto.

SECTION 8.5. Counterparts.

This Agreement may be executed on any number of separate counterparts and all of said counterparts taken together shall be deemed to constitute one and the same instrument.

SECTION 8.6. Severability.

Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

SECTION 8.7. Headings and Table of Contents.

The headings and table of contents contained in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

SECTION 8.8. Submission to Jurisdiction.

EACH OF CONSTRUCTION AGENT AND OWNER IRREVOCABLY AND UNCONDITIONALLY:

(a) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS CONSTRUCTION AND DEVELOPMENT AGREEMENT, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE SOLE, EXCLUSIVE GENERAL JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN, AND APPELLATE COURTS FROM ANY THEREOF;

(b) CONSENTS THAT ANY SUCH ACTION OR PROCEEDING MAY BE BROUGHT TO SUCH COURTS, AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT FORUM AND AGREES NOT TO PLEAD OR CLAIM THE SAME;

(c) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MALL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS SET FORTH ON SCHEDULE II TO THE PARTICIPATION AGREEMENT OR AT SUCH OTHER ADDRESS OF WHICH THE OTHER PARTIES HERETO SHALL HAVE BEEN NOTIFIED PURSUANT TO SECTION 8.3 OF THE PARTICIPATION AGREEMENT; AND

(d) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

SECTION 8.9. Jury Trial.

EACH OF CONSTRUCTION AGENT AND OWNER IRREVOCABLY WAIVES ANY AND ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS AGREEMENT OR ANY OTHER OPERATIVE DOCUMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER OPERATIVE DOCUMENT AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

SECTION 8.10. Payments.

All payments to be made by Construction Agent hereunder shall be made to Owner in Dollars in immediately available and freely transferable funds at the place of payment, all such payments to be paid without setoff, counterclaim or reduction and without deduction for, and free from, any and all present or future taxes, levies, imposts, duties, fees, charges, deductions, withholding or liabilities with respect thereto or any restrictions or conditions of any nature. If Construction Agent is required by law to make any deduction or withholding on account of any tax or other withholding or deduction from any sum payable by Construction Agent hereunder, Construction Agent shall pay any such tax or other withholding or deduction and shall make such payment on a Grossed-Up Basis, subject to the restrictions on recourse liability set forth in Section 5.3(c) hereof, the limitations set forth in Sections 7.2(a)(iii) and 7.6 of the Participation Agreement, reimbursement obligations of Indemnitees set forth in Sections 7.2(a)(iii), 7.2(e) and 7.2(f) of the Participation Agreement and other rights of Lessee set forth in Sections 7.2(b), 7.2(e), 7.2(f) and 7.6 of the Participation Agreement.

SECTION 8.11. Binding Effect.

Notwithstanding any other provision of this Agreement, it is intended that Supplemental Rent, the Lease Balance and all other amounts due and payable hereunder shall be paid without counterclaim, setoff, deduction or defense of any kind and without abatement, suspension, deferment, diminution or reduction of any kind, and Construction Agent’s obligation to pay all such amounts throughout the Construction Period is absolute and unconditional. The obligations and liabilities of Construction Agent hereunder shall, to the fullest extent permitted by Applicable Laws and Regulations, in no way be released, discharged or otherwise affected for any reason (other than the indefeasible payment or performance in full of such liability or obligation), whether or not Construction Agent shall have notice or knowledge of any of the foregoing. This Agreement shall be noncancellable by Construction Agent for any reason whatsoever and Construction Agent, to the fullest extent permitted by Applicable Laws and Regulations, waives all rights now or hereafter conferred by statute or otherwise to quit, terminate or surrender this Agreement or to any diminution, abatement or reduction of such amounts payable by Construction Agent hereunder. If for any reason whatsoever this Agreement shall be terminated or amended in whole or in part by operation of law or otherwise, except as expressly provided in Section 3.3(a) hereof, Construction Agent shall, unless prohibited by Applicable Laws and Regulations, pay to Owner or to whomever shall be entitled thereto a compensation in an amount equal to such amounts at the time and in the manner that such amounts would have become due and payable under the terms of this Agreement if it had not been terminated or amended in whole or in part. Each such payment made by Construction Agent hereunder shall be final and, absent error in the computation of the amount thereof, Construction Agent shall not seek or have any right to recover all or any part of such payment from any Participant or any party to any agreements related thereto for any reason whatsoever. Without affecting Construction Agent’s obligation to pay such amounts due and payable hereunder or to perform its obligations hereunder, Construction Agent may, notwithstanding any other provision hereof (but subject to Section 9.11 of the Participation Agreement), seek damages of any kind or any other remedy at law or equity against Owner for any willful misconduct or gross negligence or negligence in the handling of funds or for a breach by Owner of its obligations hereunder.

SECTION 8.12. Nature of Transaction.

It is the intention of the parties that the Overall Transaction constitutes an operating lease for purposes of the Lessee’s financial reporting under GAAP provisions relating to leases and variable interest entities including without limitation the Accounting Standards Codification (“ASC”) 810-10-55, and ASC 840 (including ASC 840-10, ASC 840-20 and 840-40) and ASC 842 (including 842-10 and 842-40-55).

* * *

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized representatives as of the day and year first above written.

	CUBIC CORPORATION ,
	AS CONSTRUCTION AGENT


	By:
		Name:
		Title:

	BANKERS COMMERCIAL CORPORATION,
	AS OWNER


	By:
		Name:
		Title:

SCHEDULE 1

To Construction and Development Agreement

List of Government Actions

SCHEDULE 2.7(d)

To Construction and Development Agreement

Construction Period Insurance Requirements

Required Coverages .

During the Construction Period, Construction Agent will provide or cause to be provided insurance with respect to the Leased Property and the Site of a character usually obtained by Construction Agent and its Affiliates against loss or damage of the kinds and in the amounts customarily insured against by Construction Agent and its Affiliates with respect to similar properties, and carry such other insurance as is usually carried by Construction Agent and its Affiliates with respect to similar properties; provided , that in any event Construction Agent will maintain or cause to be maintained, as applicable:

Comprehensive General Liability Insurance . Construction Agent will maintain or will cause each of the Developer and the General Contractor to maintain, comprehensive general liability insurance, including coverages for contractual liability, against third-party bodily injury, including death, and third-party property damage, written on an occurrence basis against claims, including against Construction Agent, Lessor, Developer and any Contractor, in an amount at least equal to $30,000,000 per occurrence and $30,000,000 in the aggregate (which coverage may be met in combination with Primary Commercial General Liability coverage and Umbrella Liability excess coverages); provided that no such coverage shall be under a blanket policy. Such coverage shall (x) not be subject to any self-insurance and shall be subject to a deductible of no more than $50,000 per occurrence, (y) be in such form and amounts and covering such risks as were approved by Owner on the Closing Date, and (z) name each of Owner, each Rent Assignee, the Agents as an additional insured (collectively, the “ Additional Insureds ”) and, with respect to the liability insurance maintained by the Developer, name Construction Agent as co-Named Insured. Construction Agent, Developer and General Contractor each may, at its option, purchase additional primary liability insurance to meet the combined liability insurance requirements.

Without limiting the foregoing, Construction Agent will maintain a pollution legal liability policy covering itself. Such coverage shall be written on a claims made basis and shall apply to sudden and non-sudden pollution conditions. Such policy shall have limits not less than $15,000,000 per occurrence and $15,000,000 in the aggregate claims for bodily injury, property damage and cleanup costs, shall be renewed for a period of three years following the Base Term Commencement Date and shall name Lessor as an additional insured with respect to such policy.

Automobile Liability Insurance: Automobile liability insurance for the Construction Agent’s liability arising out of claims for bodily injury and property damage covering all owned (if any), leased (if any), non-owned and hired vehicles used in the performance of the Construction Agent’s obligations under the Construction and Development Agreement with a $2,000,000 minimum limit per accident for combined bodily injury and property damage and containing

appropriate no-fault insurance provisions wherever applicable. The automobile liability insurance shall have no self-insurance amounts and shall have deductibles not in excess of $50,000.

Worker’s Compensation and Employer’s Liability Insurance : Worker’s Compensation and Employer’s Liability Insurance, with respect to the General Contractor and the Developer, including occupational illness or disease coverage, or other similar social insurance in accordance with the laws of the nation, state, territory or province exercising jurisdiction over the Leased Property. Employer’s Liability coverage shall have a limit of $1,000,000 per accident, per employee for disease and in the aggregate for disease.

Builders’ Risk Insurance . Construction Agent will maintain or cause the General Contractor and the Developer to maintain a special form builders’ risk insurance policy on terms and conditions acceptable to the Participants and in an amount not less than 100% of insurable replacement cost value, but if aggregate Advances are in excess of 100% of the insurable replacement cost value (such replacement cost value as determined at the time of claim under such policy) then in an amount not less than such Advances (the “ Minimum Coverage ”), subject to a deductible not in excess of $50,000 per occurrence but, in the case of flood, $50,000 per occurrence and in the case of named storms, $25,000 per occurrence and, in the case of earth movement, not in excess of $100,000 per occurrence (and not in the form of self-insurance) and shall have no other self-insurance with respect thereto. Such builders’ risk insurance policy shall provide for property damage on an “all risk” basis in form and substance reasonably satisfactory to Administrative Agent, subject to limits, perils, exclusions and deductibles insuring Construction Agent, the Participants, the Developer, any contractor and subcontractors at any tier, as their interests may appear, including coverage for the perils of earth movement (including but not limited to earthquake, landslide and subsidence), damage from collapse, coverage for fire, hurricanes and flood (if the property is located in a high-risk flood zone), strike, riot, vandalism, sabotage and damage or loss caused by machinery accidents and operational and performance testing and start-up. Construction Agent shall require and shall ensure that such policy at all times during the Construction Period name the Additional Insureds as additional insureds and the Administrative Agent as loss payee, as its interests may appear. To the extent Construction Agent contracts directly with any contractor with respect to the Construction other than the General Contractor or the Developer and other than with respect to contracts for acquisition, delivery and/or installation of personal property, Construction Agent shall maintain or cause to be maintained a special form builders’ risk insurance in conformity with the above with respect to the work and materials to be performed under such direct contract.

Property Covered: The builder’s risk policy shall provide coverage for (a) the Facility, including buildings, all preliminary work, temporary works, non-temporary structures, machinery, equipment, facilities, fixtures, supplies and other property constituting part of the leased property including but not limited to boiler and machinery insurance covering pressure vessels, air tanks, boilers, machinery, pressure piping, heating, ventilation and air conditioning equipment, and elevator and escalator equipment and other properties constituting the Facility, (b) coverage for foundations, including underground water and sewer mains, pilings and other

property below the surface of the ground, (c) electronic equipment and (d) property of others in the care, custody or control of the Construction Agent, a Lessee Person or Lessor.

Additional Coverages: The builder’s risk policy shall insure (a) off-site coverage with sub-limits sufficient to insure the full replacement value of any equipment, supplies and materials not stored on the Site, (b) the removal of debris with a sublimit of not less than the lesser of twenty-five percent of the Minimum Coverage and $15,000,000 per occurrence, (c) inland transit coverage with sublimits to insure the largest single shipment to or from the Site from designated storage facilities, (d) project management costs including architects’ fees, engineering costs, permit application fees, and other necessary fees or costs directly incurred in order to replace damage to insured property and (e) pollution cleanup and removal with a sublimit not less than $1,500,000 per occurrence.

Special Clauses: The builder’s risk policy shall include (a) earthquake coverage in an amount not less than the Minimum Coverage with a deductible not to exceed $50,000 per occurrence, (b) a requirement that the insurer pay losses within a reasonable period of time after receipt of an acceptable proof or partial proof of loss, (c) a clause making this insurance primary over any other insurance and (d) an unintentional errors and omissions clause.

Prohibited Exclusions: The builder’s risk policy shall not contain any (a) coinsurance provisions, (b) exclusion for loss or damage covered under any guarantee or warranty arising out of an insured peril, (c) exclusion for resultant damage caused by faulty workmanship, designs, specifications or materials or (d) exclusion for resultant damage to insured property from a peril not otherwise excluded caused by ordinary wear and tear, gradual deterioration, normal subsidence, settling, cracking, expansion or contraction, and faulty workmanship, design or materials.

Sum Insured: The builder’s risk policy shall (a) be on a completed value form, with no periodic reporting requirements, (b) insure the Facility for 100% of its insurable replacement cost value, but in no case less than the aggregate amount of all Advances outstanding at any time, (c) value losses at replacement cost, without deduction for physical depreciation or obsolescence including customs duties, taxes and fees (if rebuilt or repaired), and (d) insure earth movement and named-wind coverage at the greater of (i) 100% of the Facility’s replacement cost and (ii) outstanding Advances.

Delay In Startup Insurance : Construction Agent shall maintain delay in startup insurance for the benefit of the Lessor and Construction Agent, as their interests may appear. Coverage shall include loss of rental income, in any, accrued and Capitalized Yield, any other capitalized fees or expenses and other fixed and continuing expenses for an eighteen (18) month period of indemnity

provided such delay in startup directly results from physical loss or damage insured under the coverage required above under the heading Builders’ Risk Insurance on this Schedule 2.7(d).

Subject to policy terms and conditions, such delay in startup insurance shall (a) have no self-insurance amounts and shall have deductibles not in excess of fifteen (15) days, (b) include an interim payment (or partial payment) clause allowing for the monthly payment of a claim following an acceptable proof of loss or partial proof of loss, (c) cover loss sustained when ingress or egress to the Site is prevented due to an insured peril at premises in the vicinity of the Site, (d) insure loss caused by damage to (i) finished or unfinished equipment or machinery intended for the Site while located at a supplier’s or vendor’s premises or another location designated by agreement for such purpose, and (ii) any property, materials, machinery or equipment at a supplier’s or vendor’s premises, which prevent such supplier(s) or vendor(s) from the satisfactory performance of their supply obligation, provided always that such loss or damage is to property of a type not otherwise excluded in the builder’s risk policy from named perils not otherwise excluded in the builder’s risk policy, (e) insure loss caused by damage or mechanical breakdown to construction plant or equipment at the Site, (f) not contain any form of a coinsurance provision or include a waiver of such provision, (g) cover loss sustained due to the accidental interruption or failure of supplies of electricity, gas, sewer, water or telecommunication up to the terminal point of the utility supplier with the Site and (h) cover expenditures necessarily incurred for the purpose of reducing the period of time that start-up of the Project is actually delayed, but only to the extent that the delay loss otherwise payable from the insurer is thereby reduced.

Other Insurance . Insurance shall not cover any terrorism or war risks unless Construction Agent carries insurance for such risks generally on similar property it owns or leases. To the extent any portion of the Facility is located in an area identified as a special flood hazard area by the Federal Emergency Management Agency or other applicable Authority, Construction Agent shall (i) obtain flood insurance for the Facility in an amount not less than the greater of (1) 100% of the replacement cost of the Facility, including any costs that may be required to cause the Facility to be reconstructed to comply with then current Applicable Laws and Regulations or (2) the aggregate amount of all Advances outstanding at any time, and (ii) require and shall ensure that such flood insurance at all times during the Construction Period name the Additional Insureds as an additional insured and Administrative Agent as loss payee, as its interests may appear.

Insurance provided pursuant to this Schedule (other than permitted self-insurance) shall be written by reputable insurance companies that are financially sound and solvent with a rating of at least “A-:IX” by A.M. Best’s or a claims paying rating of “A-” by S&P or by other insurers approved in writing by the Participants and shall be with such insurance companies as were approved by the Participants on the Closing Date. Each policy referred to in this Schedule shall provide that: (i) it will not be canceled, materially modified or its limits reduced, or allowed to lapse without renewal, except after not less than thirty (30) days’ prior written notice to each of the Additional Insureds and Construction Agent provided, however, that with respect to the builders’ risk insurance policy to be maintained by the General Contractor, not less than ten (10) days’ prior written notice to each of the Administrative Agent and Construction Agent shall be

required for cancellation due to non-payment of premiums therefor; (ii) the interests of the Additional Insureds shall not be invalidated by any act or negligence of or breach of warranty or representation by Construction Agent or any Person having an interest in the Leased Property or the Site; (iii) such insurance is primary and non-contributory with respect to any other insurance carried by or available to any Additional Insured; (iv) the insurer shall waive customary rights of subrogation, setoff, counterclaim, or other deduction, whether by attachment or otherwise, against any additional insured or loss payee; (v) such policy shall contain a severability clause providing for coverage of each Additional Insured as if a separate policy had been issued to it; (vi) Construction Agent will notify each Additional Insured promptly of any policy cancellation, reduction in policy limits, lapse, modification or amendment; and (vii) the insurer shall waive all claims for premiums against the Additional Insureds.

Delivery of Insurance Certificates .

Pursuant to Section 2.1(c) of the Participation Agreement, Construction Agent shall deliver to each Additional Insured certificates of insurance satisfactory to it evidencing the existence of all insurance required to be maintained hereunder and setting forth the respective coverages, limits of liability, carrier, policy number and period of coverage. Thereafter, throughout the Construction Period, at the time each of Construction Agent’s insurance policies is renewed (but in no event less frequently than once every twelve (12) months) or upon written request by the Administrative Agent during the continuance of a Construction Event of Default, Construction Agent shall deliver to each Additional Insured certificates of insurance evidencing that all insurance required by this Schedule to be maintained by Construction Agent with respect to the Leased Property is in effect. Concurrent with the delivery of certificates required above, Construction Agent shall furnish each Additional Insured with a letter from an independent broker or the insurer(s) signed by an officer of the broker or insurer(s), stating that in the opinion of such broker or insurer(s) the insurance so carried is in compliance with this Schedule. Upon written request by the Administrative Agent, the Construction Agent will promptly furnish to the Administrative Agent copies of all insurance policies, applications, binders and cover notes or other evidence of insurance required to be maintained hereunder.

Construction Agent agrees that nothing in this Agreement shall prohibit any Additional Insured from maintaining its own insurance coverage, at the expense of such Person, which coverage shall not reduce the obligations of Construction Agent under this Schedule; provided, however, that no such insurance shall be maintained if its maintenance would prevent Construction Agent from maintaining insurance as to the Leased Property and the Site with insurers when required to do so herein.

No provision of this Schedule or any other Operative Document shall impose on any Additional Insured any obligation to verify the existence or adequacy of the insurance coverage to be maintained pursuant to this Schedule, nor shall any Additional Insured be responsible for any representations or warranties made by or on behalf of Construction Agent or any Cubic Person to any insurance company or underwriter. Any failure on the part of any Additional Insured to obtain the evidence of insurance required by this Schedule from Construction Agent and/or failure of any

such Person to point out any noncompliance of such evidence of insurance shall not constitute a waiver of any of the insurance requirements in this Schedule.

Exhibit 10.4

GROUND LEASE

THIS GROUND LEASE (as may be amended, modified and/or supplemented, this “ Lease ”) is made and entered into as of this 5th day of February, 2019, by and between Cubic Corporation, a Delaware corporation (together with its successors and assigns, “ Lessor ”) and Bankers Commercial Corporation, a California corporation (together with its successors and assigns, “ Lessee ”).

ARTICLE I

Definitions

In addition to terms defined elsewhere in this Lease, the terms defined in this Article I shall, for all purposes of this Lease and all agreements supplemental hereto, have the meanings herein specified, unless provided otherwise:

“ Authority ” shall mean the government of the United States, any other nation, or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

“ Building 1 ” shall mean the building commonly known as 9223 Balboa Avenue, which is approximately 132,172 square feet and located on approximately 13.879 acres in San Diego, California.

“ Business Day ” shall mean any day other than a Saturday, Sunday or other day on which commercial banks in New York, New York and San Diego, California are authorized or required by law to close.

“ DEH ” shall mean the Department of Environmental Health of the City of San Diego, California.

“ Environmental Laws ” shall mean all laws, statutes, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Authority, relating in any way to the environment, preservation or reclamation of natural resources, the presence, management, release or threatened release of or exposure to any Hazardous Material or to health and safety matters.

“ Facility Lease ” shall mean the Lease Agreement, dated as of February 5, 2019, by and between Bankers Commercial Corporation, as lessor (in such capacity, the “ Facility Lessor ”), and Cubic Corporation, as the lessee (in such capacity, the “ Facility Lessee ”), as may be amended from time to time.

“ Facility Lease Expiration Date ” shall mean the last day of the term of the Facility Lease, subject to any Extended Remarketing Period (as defined in the Facility Lease) or any other date on which the Facility Lease is terminated, including pursuant to Article XIII, XVIII, XX, XXI or XXII of the Facility Lease.

“ Facility Lease Term Commencement Date ” shall mean the date of commencement of the Lease Term as defined in the Facility Lease.

“ Governmental Regulations ” shall mean all federal, state, county and city laws, ordinances, rules and regulations governing Lessee’s construction of the Improvements or use of the Leased Property.

“ Hazardous Materials ” shall mean all explosive or radioactive substances or wastes and all hazardous or toxic materials, substances, wastes or other pollutants or contaminants, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances, materials or wastes of any nature regulated or defined pursuant to any Environmental Law.

“ Improvements ” shall mean the improvements, machinery, equipment, fixtures, facilities, structures and personal property of every kind and description which may be erected on the Land during the Term of this Lease by or on behalf of Lessee, including, but not limited to, any office buildings and amenities; provided, however, that Building 1 shall not be included in the Improvements until delivery of the Deed on the Demolition Date.

“ Land ” shall mean an approximately 13.1acre portion located on the northwest corner of the land located on Balboa Avenue between Ponderosa Avenues and Ruffin Road in San Diego, California, together with all rights, privileges, easements and appurtenances thereto, as more particularly described in Exhibit A hereto, subject only to the matters set forth in Exhibit B attached hereto and made a part hereof for all purposes (collectively, the “ Permitted Liens ”).

“ Lease Year ” shall mean each twelve (12) month period throughout the Term commencing on the first day of the first full month following the Commencement Date (as defined herein) and expiring on the last day of the twelfth full calendar month following such date, except that the first Lease Year also includes the partial month in which the Commencement Date occurs and the last Lease Year shall expire at midnight on the Expiration Date (as defined herein) or earlier termination of this Lease, as the case may be.

“ Leased Property ” shall mean the Land and the Improvements.

“ Monthly Date ” shall mean the twenty-fifth (25 th ) calendar day of each month (or the next succeeding Business Day if such day is not a Business Day unless such next succeeding Business Day falls in the next calendar month in which case Monthly Date shall mean the prior Business Day if such day is not a Business Day).

“ Payment Date ” shall mean (i) for any Payment Period commencing and ending prior to the Facility Lease Term Commencement Date: the Monthly Date, (ii) for the Payment Period commencing prior to the Facility Lease Term Commencement Date and ending on, but excluding, the Facility Lease Term Commencement Date: the Facility Lease Term Commencement Date, and (iii) for any Payment Period commencing on or after the Facility Lease Term Commencement Date: the same date of the month as the Facility Lease Term Commencement Date occurring every third month after the commencement of each such respective Payment Period; provided, that in each case regarding the foregoing subsection (i) –

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(iii), any Payment Date that would otherwise extend beyond the Term shall end on the last Business Day of the Term.

“ Payment Period ” shall mean (i) prior to the Facility Lease Term Commencement Date, a period of one (1) month ending on a Monthly Date, except for (x) the first Payment Period during the Construction Period which may be for a period other than one (1) month and which shall commence on the Closing Date and shall end on, but exclude, the Monthly Date occurring in February of 2019, and (y) the final Payment Period prior to the Facility Lease Term Commencement Date which may be for a period of less than one (1) month and shall end on, but exclude, the Facility Lease Term Commencement Date, and (ii) during the term of the Facility Lease, a period of three (3) months; provided, that, in each case, each Payment Period in which a Payment Date occurs shall end on such Payment Date; provided, that regarding each of the foregoing subsections (i) and (ii), any Payment Period that would otherwise extend beyond the Term shall end on the last day of the Term.

“ Person ” shall mean any individual, partnership, firm, corporation, association, joint venture, trust, or other entity, or any governmental body.

“ Release ” shall mean the release, deposit, disposal or leak of any Hazardous Material into or upon or under any land or water or air, or otherwise into the environment, including, without limitation, by means of burial, disposal, discharge, emission, injection, spillage, leakage, seepage, leaching, dumping, pumping, pouring, escaping, emptying, placement and the like.

“ Term ” shall mean the Initial Term (as defined herein) and the Renewal Term (as defined herein).

ARTICLE II

Grant, Easements and Services of Lessor

2.1 Grant . In consideration of the Rent (as defined herein) agreed to be paid and the mutual covenants and agreements herein made by the parties hereto, Lessor hereby demises and leases to Lessee and Lessee hereby leases from Lessor, the Land for the Term, upon the terms and conditions herein provided; provided, however, that Building 1 located on the Land shall not be subject to such demise and lease.

2.2 Easements . Lessor hereby further grants to Lessee rights-of-way, easements and the adequate and continuous right of access over and to any property of Lessor adjacent to or abutting the Land as may be necessary to construct, maintain, operate or gain access to the Improvements. Lessor hereby retains a right-of-way, easement and an adequate and continuous right of access over and to the property of Lessor as may be necessary to maintain, alter, repair, use, operate or gain access to Building 1. For the avoidance of doubt, the parties agree that Lessor retains all of its right, title and interest in and to Building 1, and Lessee bears no responsibility and incurs no liability with respect to Building 1.

2.3 Easement Agreements . Lessee shall have the right to enter into agreements with utility companies or governmental entities creating easements in favor of such companies or governmental entities as are required in order to permit Lessor, as construction agent for Lessee,

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to develop and construct all or any portion of the Leased Property and service any Improvements. Lessor agrees to join in the grant of any such utility easements and to execute any and all documents, agreements and instruments in order to effectuate the same, all at Lessee’s cost and expense except, prior to the Facility Lease Term Commencement Date, as part of the construction budget prepared by or for Lessor, as construction agent for Lessee.

ARTICLE III

Term, Rent, Termination and Sale

3.1 Term . Subject to the terms, covenants and agreements contained herein, the term of this Lease (the “ Initial Term ”) is for a period commencing on the date of this Lease as set forth above (the “ Commencement Date ”) and expiring on the Lease Expiration Date, as defined in the Facility Lease (as may be extended pursuant to Section 3.2, the “ Expiration Date ”), unless the Term is renewed or terminated in accordance with the terms hereof.

3.2 Renewal Term .

(a) In the event the Leased Property (as defined in the Facility Lease) is not purchased on or before the Expiration Date by (i) Lessor or its designee in accordance with the terms of the Facility Lease, or (ii) by a third party pursuant to (x) Article XXII of the Facility Lease following an election by Lessor of a Return Option, as defined in the Facility Lease, or (y) the exercise of rights and remedies under the Facility Lease documents following an Event of Default under the Facility Lease or Construction Development Agreement, as defined in the Facility Lease (such event, a “ Failure to Sell ”), the Term of this Lease shall automatically renew without any further action by Lessee or Lessor, subject to all the provisions of this Lease, including provisions for adjustments to the Rent, for a Renewal Term (as defined below) of fifty (50) years.

(b) The additional fifty (50) year period in effect hereunder shall be referred to as the “ Renewal Term .” Subject to Section 3.2(a), the Renewal Term shall commence on the Expiration Date. The “ Expiration Date ,” as used herein, shall be deemed extended, to the extent the Renewal Term has been validly elected, to the last date of the Renewal Term of this Lease.

3.3 Rent .

(a) The rental hereunder (“ Rent ”) for the Initial Term shall be Seven Hundred Fifty Thousand Dollars ($750,000) per year. Effective on the commencement date of the Renewal Term, the Rent shall be determined on the basis of fair market rental value (as determined in good faith by the parties hereto and, in the event the parties are unable to so agree, as determined by a qualified commercial real estate appraiser as mutually selected by the parties) and, on each successive five (5) year anniversary of the Renewal Term thereafter, such Rent will increase by two percent (2%) from the Rent in effect for the preceding five (5) years. Lessee shall pay the Rent to Lessor in lawful money of the United States of America and Rent shall be due and payable in equal (i) annual installments on each of the Closing Date and the first anniversary thereof, the second installment of which is payable within thirty (30) days of the due date, (ii) quarterly installments on each Payment Date on and after the Facility Lease Term

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Commencement Date and ending on the Expiration Date of the Initial Term, and (iii) thereafter, to the extent the Renewal Term has been validly commenced, quarterly installments on each Payment Date or such other dates as may be mutually agreed to by Lessor and Lessee, except that all payments due hereunder for any fractional month at the end of this Lease shall be prorated based upon the number of days in such fractional month during the Term, at the address of Lessor set forth in Article XIV herein. Notwithstanding the foregoing, Lessee shall be deemed to have complied with its obligations under this Section for the period described in clause (ii) so long as the Facility Lease shall not have been terminated.

(b) If Lessee fails to pay an installment of Rent due under the terms hereof by the twentieth (20th) day after Lessor has delivered written notice to Lessee that such installment is due, any such amount which continues to be past due after such twenty (20) day period shall bear interest at the rate of five percent (5%) per annum from the date such installment was originally due until the date it is paid. With regard to payments of rent due under clause (ii) above, the parties agree that, to the extent Lessor owes periodic rent installments to Lessee under the Facility Lease, Lessee shall be entitled to a credit hereunder for the rent payable by Lessor thereunder, it being the intention and agreement of the parties that such credit will fully offset Lessee’s payment obligations under such clause (ii). The Rent provided for in this Article III shall constitute the total monetary obligation due to Lessor under this Lease.

3.4 Termination . Notwithstanding any language to the contrary contained in this Lease, this Lease shall automatically terminate upon the purchase of the Leased Property by (i) Lessor or its designee in accordance with the terms of the Facility Lease, or (ii) by a third party pursuant to Article XXII of the Facility Lease following an election by Lessor of its Return Option (such date of purchase herein called the “ Termination Date ”). On the Termination Date, this Lease shall automatically terminate, all of the terms, covenants and conditions of this Lease thereafter shall be null and void and of no further force and effect, and neither party shall have any further obligation or liability to the other hereunder, except to the extent any such obligation or liability expressly survive such termination as provided hereunder.

3.5 Failure to Sell . In the event that a Failure to Sell shall occur, in addition to Lessee’s right to elect the Renewal Term and retain, use, lease or otherwise dispose of the Leased Property, Lessee shall have the option to arrange a sale of the Improvements and an assignment of its interests in the Land and other Leased Property to a third party as determined by Lessee in its sole discretion.

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ARTICLE IV

Use, Regulations, Liens and Alterations

4.1 Use of Land . Lessee may use, occupy and operate the Land for any and all lawful uses or purposes, which use, occupancy and operation rights have been demised to Lessor pursuant to the Facility Lease during the Initial Term and shall include, without limitation, the development, construction, operation and maintenance of two to-be-constructed class-A commercial office buildings thereon.

4.2 Governmental Regulations .

(a) Throughout the Term, Lessee shall comply or cause compliance in all material respects with all Governmental Regulations.

(b) Upon prior written notice to Lessor, Lessee shall have the right to contest the validity or application of any Governmental Regulations, by appropriate legal proceedings diligently conducted in good faith, in the name of Lessee or Lessor or both, subject to the following:

(i) If by the terms of any Governmental Regulations, compliance legally may be delayed without the incurrence of any lien, charge or liability of any kind against the Land, or any part thereof, Lessee may delay compliance until the final determination of such proceeding; or

(ii) If any lien, charge or civil liability could be incurred by Lessor by reason of any such contest, Lessee nevertheless may contest the Governmental Regulations, provided that the same does not subject Lessor to criminal liability or fine, and Lessee prosecutes the contest with due diligence.

4.3 Liens Arising Through Lessee . In the event any lien shall be filed against the Land based upon any action or inaction of Lessee, Lessee shall promptly take such action by bonding, deposit or payment as will remove or satisfy the lien; provided , however , that Lessee may, contest the validity or amount of any such lien, and, pending the determination of such contest, postpone the removal or satisfaction thereof, except that Lessee shall not postpone such removal or satisfaction so long as to permit or cause any loss of title to all or any part of the Land. In the event that any lien shall be filed against the Land based upon any action or inaction of Lessee, Lessee shall pay the reasonable costs of Lessor, if any, incurred by Lessor due to such lien.

4.4 Liens Arising Through Lessor . In the event any lien shall be filed against the Leased Property based upon any action or inaction of Lessor, Lessor shall promptly take such action by bonding, deposit or payment as will remove or satisfy the lien; provided , however , that with respect to a lien affecting the Land, Lessor may contest the validity or amount of any such lien, and, pending the determination of such contest, postpone the removal or satisfaction thereof, except that Lessor shall not postpone such removal or satisfaction so long as to permit or cause any loss of title to all or any part of the Leased Property. In the event that any lien shall be

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filed against the Land based upon any action or inaction of Lessor, Lessor shall pay the reasonable costs of Lessee, if any, incurred by Lessee due to such lien.

4.5 Alterations . Lessee, in its sole discretion, shall have the right from time to time to make, or cause to be made, at its sole cost and expense, improvements, additions, alterations and changes in or to the Land and Improvements as it deems necessary or desirable to carry on any activity or use permitted by Section 4.1, including, without any compensation to Lessor, any alteration, demolition or removal of existing buildings or items of personal property on the Land.

4.6 Materials of Environmental Concern . Except for matters subject to the Remediation Plan, in the event that during the Term, Lessee or any other Person shall uncover or discover the presence of any Hazardous Materials on, in or under the Land that were Released (i) during or prior to the Initial Term, Lessor, in its capacity as Lessee under the Facility Lease, shall take all actions required under the Facility Lease and the other Operative Documents and will assume all liability therefor as set forth thereunder, and (ii) thereafter, Lessor and Lessee shall take such actions as mutually agreed in connection with the commencement of the Renewal Term. Except for matters subject to the Remediation Plan, Lessor shall immediately, at its sole cost, liability and expense, take all actions required by Environmental Laws, in coordination with Lessee, including, but not limited to, (i) to remove or treat such Hazardous Materials and any soil or water contaminated by such materials, (ii) replace, as necessary, such soil or water with uncontaminated soil or water, (iii) to prevent further or renewed Releases or spread of Hazardous Materials, and (iv) completing such remediation as is necessary to receive a “no further remediation” letter from the DEH and otherwise in accordance with the applicable Governmental Regulations. Pursuant to the Construction and Development Agreement, the matters subject to the Remediation Plan will be remediated such that the DEH will issue a “no further remediation” letter. Lessor’s obligations pursuant to this Section 4.6 shall be performed with the least disruption to the construction of the Improvements or operations on the Leased Property possible under the circumstances and otherwise in accordance with the Facility Lease during the Initial Term. Pursuant to the terms of the Facility Lease and related documents, Lessor shall be liable to Lessee for any additional costs incurred by Lessee in the construction of the Improvements or operations on the Leased Property as a result of the discovery of such Hazardous Materials, including, but not limited to costs, fees or monies required to be paid by Lessee under any third party contracts or agreements and anticipated or actual lost profits.

ARTICLE V

Improvements

5.1 Improvements . Lessee, in its sole discretion, shall have the right, subject to the Facility Lease during the Initial Term, to construct, alter or demolish, or cause the construction, alteration or demolition of, any Improvements on the Land.

5.2 Ownership of Improvements .

(a) All Improvements shall be owned by Lessee, subject to the terms and conditions of this Lease and the Facility Lease including the intentions of the parties thereto.

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(b) Notwithstanding any other provision herein but subject to the Facility Lease, Lessor and Lessee agree that the Improvements shall be considered the property of Lessee and, even if physically attached or affixed to or incorporated in or made part of the Land, shall not be or become fixtures or otherwise part of the real estate constituting the Land and shall not be or become subject to any lien of any mortgage, security agreement, deed of trust or other agreement, document or instrument placed on the Land, or relating thereto, by Lessor.

5.3 Removal of Improvements . At the expiration or earlier termination of this Lease, Lessor shall have the right to require that all Improvements and all utility installations (such as HVAC, plumbing, electrical and mechanical equipment and fixtures) and other improvements affixed to the buildings constructed on the Land (whether such improvements are real or personal property) shall be surrendered to Lessor with the Land. If Lessor elects not to require the surrender of all such Improvements at the expiration or earlier termination of the Sublease, Lessee shall have the right to remove any or all of the Improvements or any part thereof or shall have the right to leave the Improvements on the Land. Lessor shall have the right to remove, sell or destroy any Improvements which Lessee elects not to remove upon prior written notice to Lessee. In any event, however, Lessee shall have the right to retain any furniture or equipment or any personal property not affixed to the Improvement and not necessary in connection with the operation of the Improvement, all of which property (whether classified as real or personal property) shall be the property of Lessee. Lessee’s interest in all Improvements remaining on the Land on the date which is three (3) months after the Expiration Date or earlier termination of the Term (the “ Transfer Date ”) shall be vacated and surrendered by Lessee to Lessor. Any Improvements left on the Land after the Transfer Date will become the property of Lessor without further action and shall be considered conveyed to and accepted by Lessor “AS-IS, WHERE AS, AND WITH ALL FAULTS” with no cost to Lessee and with no warranties of any kind whatsoever.

ARTICLE VI

Assessments; Utilities

6.1 Payment of Assessments .

(a) Throughout the Term, Lessee shall pay, or cause to be paid, as and when the same become due, all taxes of any description, assessments, special assessments, excises, levies, water and sewer charges, charges for public utilities and other charges and governmental impositions (“ Assessments ”) levied, assessed, charged or imposed upon the Leased Property, of any kind and nature, whether such Assessments are general or special, ordinary or extraordinary, or foreseen or unforeseen. Lessor shall promptly provide to Lessee all invoices for Assessments received by it. Notwithstanding the foregoing, Lessee’s obligations under this clause (a) shall be deemed satisfied during the Initial Term as a result of its entering into of the Facility Lease, but only for such portion of the Initial Term occurring after Completion of Construction under the Construction and Development Agreement.

(b) Nothing contained in this Lease shall require Lessee to pay any franchise, margin, estate, inheritance, succession, capital levy, stamp levy, stamp tax, or transfer tax of Lessor or any income, excess profits, or revenue tax, or any other tax, assessment, charge, or

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levy based on or measured by the gross income or capital stock of Lessor or upon any rental payable by Lessee under this Lease.

6.2 Contests . Lessee shall have the right to contest or review by legal proceedings, as permitted under Governmental Regulations, any Assessments provided Lessee may contest the validity or amount of any such tax, assessment or imposition, provided: (a) Lessee notifies Lessor of such contest; (b) Lessee protects the Leased Property and Lessor from any lien as a result of such contest by an adequate surety bond or other appropriate security, if required by Lessor; (c) Lessee pays all costs and expenses of such contest; and (d) Lessee pays all amounts, including interest and penalties, ultimately determined to be due. Lessor shall be required only to join in any proceeding or contest in which the applicable laws or regulations require joinder of Lessor. In such event, Lessor, at the request of Lessee, will cooperate with Lessee, but without expense to Lessor, in effecting such a reduction. Any tax refund resulting from such proceeding shall be the property of Lessee.

6.3 Utilities . From and after the Commencement Date, Lessee shall pay or cause to be paid all charges for water, heat, gas, electricity, cable, trash disposal, sewers and any and all other utilities used upon the Land throughout the remaining Term, including, without limitation, any connection and servicing fees, permit fees, inspection fees, and fees to reserve utilities capacity. Notwithstanding the foregoing, Lessee’s obligations under this Section 6.3 shall be deemed satisfied during the Initial Term as a result of its entering into of the Facility Lease, but only for such portion of the Initial Term occurring after Completion of Construction under the Construction and Development Agreement.

ARTICLE VII

Insurance

7.1 Liability Insurance . Lessee, at Lessee’s sole cost and expense, shall obtain and maintain or cause to be obtained and maintained in effect a comprehensive general liability insurance policy issued by a company or companies to be chosen by Lessee in Lessee’s sole discretion and reasonably satisfactory to any Leasehold Mortgagee (as defined herein) with limits of not less than $1,000,000.00 with respect to bodily injury or death to any number of persons in any one accident or occurrence, and not less than $1,000,000.00 with respect to property damage in any one accident or occurrence.

The foregoing policy of liability insurance shall name Lessee as insured and shall insure Lessor and each Leasehold Mortgagee, if any, as additional insureds. Lessee agrees to furnish and thereafter maintain with Lessor and each Leasehold Mortgagee certificates of insurance stating that the foregoing policy of liability insurance is in full force and effect and will not be canceled without ten (10) days prior written notice to each of such parties.

7.2 Waiver of Subrogation . Whenever any loss, cost, damage or expense resulting from fire, explosion or any other casualty or occurrence is incurred by either Lessor or Lessee, or anyone claiming by, through, or under Lessor or Lessee in connection with the Leased Property; and such party is then covered, in whole or in part, by insurance with respect to such loss, cost, damage or expense, then the party so insured hereby releases the other party from any liability

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the other party may have on account of such loss, cost, damage or expense, to the extent of any amount recovered by reason of such insurance, and waives any right of subrogation which otherwise might exist in or accrue to such party on account thereof; provided that such release of liability and waiver of the right of subrogation shall not be operative in any case where the effect thereof is to invalidate such insurance coverage or increase the cost thereof.

7.3 Blanket Policies . Lessee may obtain the insurance policy required under Section 7.1 under a blanket insurance policy or policies covering other properties as well as the Land; provided, however, that any such policy or policies of blanket insurance shall specify therein (or Lessee shall furnish Lessor with a written statement from the insurers under such policy or policies specifying) the amount of the total insurance allocated to the Land, which amounts shall not be less than the amounts required by Section 7.1 above.

7.4 Payment and Performance by Sublessees . Notwithstanding the foregoing, Lessee’s obligations under this Article shall be deemed satisfied during the Initial Term as a result of its entering into of the Facility Lease, but only for such portion of the Initial Term occurring after Completion of Construction under the Construction and Development Agreement.

ARTICLE VIII

Representations

8.1 Lessor represents and warrants that, as of the Commencement Date:

(a) Lessor is an Delaware corporation, duly organized, validly existing and in good standing under the laws of the State of Delaware and has full power and lawful authority to enter into this Lease;

(b) Lessor has good, marketable and indefeasible title to the Land free and clear of all occupancies, tenancies, mortgages, liens and encumbrances, except for the Permitted Liens;

(c) the execution, delivery and performance by Lessor of this Lease has been duly authorized by all necessary action on the part of Lessor;

(d) this Lease has been duly executed and delivered by Lessor and constitutes the valid and legally binding obligation of Lessor;

(e) no consent, approval or authorization of, or declaration or filing with any other Person is required as a condition to the valid execution, delivery or performance of this Lease that has not already been obtained; and

(f) each of the representations and warranties of Lessor set forth in the Participation Agreement, as defined in the Facility Lease are true and correct and are hereby remade and incorporated by reference herein.

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8.2 Lessee represents and warrants that:

(a) Lessee is an California corporation, duly organized, validly existing and in good standing under the laws of the State of California and has full power and lawful authority to enter into this Lease;

(b) the execution, delivery and performance by Lessee of this Lease has been duly authorized by all necessary action on the part of Lessee;

(c) this Lease has been duly executed and delivered by Lessee and constitutes the valid and legally binding obligation of Lessee; and

(d) no consent, approval or authorization of, or declaration or filing with any other Person is required as a condition to the valid execution, delivery or performance of this Lease that has not already been obtained.

ARTICLE IX

Condemnation

9.1 Termination . If, at any time during the Term, title to all or any part of the Leased Property shall be taken in condemnation, requisition, confiscation, seizure proceedings, by any right of eminent domain or by any conveyance in lieu of or in settlement of a condemnation or eminent domain proceeding by the Government of the United States, the State of California, the County of San Diego, or any other governmental authority with such jurisdiction and power over the Leased Property (“ Condemnation ”), Lessee shall have the right to terminate this Lease upon providing Lessor with notice of such intent to terminate within thirty (30) days of receipt of notice of Condemnation. In the event that Lessee elects to terminate this Lease as provided for herein, this Lease shall terminate as of the earlier of (i) the date of taking possession by the condemning authorities or (ii) the date on which Lessor and Lessee receive their respective portions of any Condemnation award as set forth below after which neither party shall have any further liability or obligation to the other hereunder.

9.2 Proceeds . Except as provided in Section 9.4 below, the proceeds of any Condemnation or exercise of a right of eminent domain shall be distributed in the following order of priority:

(a) all expenses, including reasonable attorneys’ fees, incurred by Lessor and Lessee with respect to said condemnation proceedings shall be reimbursed to Lessor and Lessee, respectively;

(b) in the event of a condemnation of less than all of the Leased Property (“ Partial Condemnation ”) to which Lessee has not exercised the right to terminate this Lease as provided for in Section 9.1 above, Lessee shall receive such portion of the condemnation proceeds and damage award for restoration costs as may be actually and reasonably incurred on account of such Partial Condemnation shall be used to repair, restore, replace or rebuild the

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Leased Property as nearly as possible to its value, condition and character immediately prior to such Partial condemnation;

(c) to any Leasehold Mortgagee in the amount required to pay and discharge its Leasehold Mortgage; provided , however , that if more than one Leasehold Mortgage exists, payment shall be made to each Leasehold Mortgagee in the order of its lien priority;

(d) (i) Lessee shall be entitled to receive and retain such portion of the proceeds and damage award as shall represent the unamortized value of Lessee’s fee interest in the Improvements, its leasehold interest in the Land, and its interest as Lessee under this Lease and (ii) Lessor shall be entitled to receive and retain such portion of the proceeds and damage award as shall represent compensation for the value of Lessor’s reversionary fee interest in the Land and its interest as Lessor under this Lease; and then

(e) any excess condemnation proceeds shall be split by Lessee and Lessor based on the ratio the amount in clause (d)(i) above bears to the amount in clause (d)(ii) above.

9.3 Partial Condemnation . In the event of a Partial Condemnation to which Lessee has not exercised the right to terminate this Lease as provided for in Section 9.1 above the following shall apply:

(a) this Lease shall continue in effect as to the remainder of the Land for the balance of the Term, provided that the Rent accruing after delivery of possession to the condemning authority shall be equitably reduced by the greater of an amount which bears the same proportion to the Rent immediately prior to the Partial Condemnation as (i) the square footage of the part of the Land so taken bears to the square footage of the Land prior to such Partial Condemnation, or (ii) the relative value of the part of the Land so taken bears to the value of the Land prior to such Partial Condemnation; and

(b) such proceeds to repair, restore, replace or rebuild the Improvements as provided for in Section 9.2(b) shall be deposited with (i) each Leasehold Mortgagee in order of priority, or (ii) if no Leasehold Mortgagee exists, Lessee.

9.4 Temporary Condemnation; Initial Term . Notwithstanding the other provisions of this Article IX, if the whole or any part of the Leased Property shall be subject to Condemnation (a) for a temporary use or occupancy (“ Temporary Condemnation ”) Lessee shall be entitled to receive the entire amount of any condemnation award made for such Temporary Condemnation whether such award is paid by way of damages, rent or otherwise, unless such Temporary Condemnation shall extend beyond the expiration of the Term, in which case such award shall be apportioned by Lessor and Lessee in the ratio that the part of the entire period for which such compensation is made falls before the date of expiration bears to that part falling after such date of expiration, and (b) during the Initial Term, the provisions set forth in the Facility Lease shall govern the sharing of awards and disposition of the Leased Property.

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ARTICLE X

Assignment and Mortgages

10.1 Assignment and Transfer .

(a) Lessee may sell, assign, mortgage, pledge, encumber or in any manner transfer the Improvements, Lessee’s interest in the Land and this Lease, and Lessee’s personal property, fixtures, equipment and furnishings used in connection with the foregoing (collectively, “ Lessee’s Property ”) or any part thereof, without the consent of Lessor.

(b) Each and every assignee of Lessee’s Property, whether as assignee or as successor in interest of any assignee of Lessee, including any purchaser of this Lease under the foreclosure of or exercise of other remedies under any Leasehold Mortgage or other lien on this Lease, shall be entitled to all of the rights of Lessee hereunder. In the event such assignee or purchaser delivers to Lessor a recordable instrument which contains a covenant of assumption by said assignee or purchaser, the assignor of Lessee’s interest, whether it be Lessee or a successor in interest to Lessee, shall be automatically released and relieved of its obligations and liabilities under this Lease from and after the date of such assignment.

10.2 Leasehold Mortgages . Lessee, and every successor and assign of Lessee, is hereby given the right, without Lessor’s consent, to mortgage its interest in this Lease or assign this Lease as security, under one or more leasehold mortgages or deeds of trust (each a “ Leasehold Mortgage ”). If Lessee and/or any successor or assign shall mortgage this Lease, and if the holder at the time in question of any Leasehold Mortgage (the “ Leasehold Mortgagee ”) shall send to Lessor written notice thereof, specifying Leasehold Mortgagee’s name and address, Lessor agrees that the following provisions shall apply to such Leasehold Mortgage and to any successive holders thereof, and shall supersede any inconsistent provisions contained in any other section of this Lease, as long as the Leasehold Mortgage shall remain unsatisfied of record or until written notice of satisfaction is given by such Leasehold Mortgagee to Lessor. Lessor hereby acknowledges notice of the Leasehold Mortgages created pursuant to the Memorandum of Lease, as defined in the Facility Lease.

(a) Lessor shall, upon providing Lessee with notice of default or notice of termination or other notice provided for in this Lease, simultaneously provide a copy of such notice to each Leasehold Mortgagee. No notice to Lessee under this Lease shall be deemed to have been duly given unless and until a copy thereof has been so served upon each Leasehold Mortgagee. Each Leasehold Mortgagee shall thereupon have the same right as Lessee, but not the obligation, to remedy or to cause to be remedied or to commence to remedy the defaults which are the subject matter of such notice, in addition to the other rights granted to Leasehold Mortgagee in this Section 10.2. Lessor shall accept such performance by or on behalf of Leasehold Mortgagee as if the performance had been done by Lessee.

(b) If any Lessee Event of Default (as defined herein) shall occur, Lessor shall have no right to terminate this Lease or exercise any remedies under this Lease, including but not limited to, any rights to reenter, repossess or relet the Land, unless Lessor shall first give to each Leasehold Mortgagee a notice of default (the “ Leasehold Mortgagee Notice of Default ”), which

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shall contain a statement of all existing events of default under the Lease. If within thirty (30) days after receipt of such Leasehold Mortgagee Notice of Default, Leasehold Mortgagee shall have cured any stated monetary Lessee Event of Default and/or if within ninety (90) days after receipt of such Leasehold Mortgagee Notice of Default, Leasehold Mortgagee shall have cured or commenced the curing of any stated nonmonetary Lessee Event of Default and shall thereafter prosecute the same to completion with all reasonable diligence, then in such event, but subject to the provisions of Section 10.2(c) below, Lessor shall not be entitled to terminate this Lease or exercise any such remedy and both the notice of default given to Lessee and the Leasehold Mortgagee Notice of Default given to Leasehold Mortgagee shall be null and void.

(c) In the event, however, that if in order to cure such Lessee Event of Default possession of, or title to, the leasehold estate would be required, or if the Lessee Event of Default is of such a nature that it is not reasonably susceptible of cure by a Leasehold Mortgagee, Lessor shall not be entitled to terminate this Lease or exercise any such remedy, provided that (i) Leasehold Mortgagee shall notify Lessor within such ninety (90) day period that it has elected to proceed under this Section 10.2(c); and (ii) Leasehold Mortgagee shall (a) cure or cause to be cured any stated monetary Lessee Event of Default as provided in Section 10.2(b) above; and (b) perform or cause to be performed all of Lessee’s other nonmonetary obligations under this Lease which are reasonably susceptible of being performed by Leasehold Mortgagee without having gained possession of the Land and title to the leasehold; and (c) take steps to acquire or sell Lessee’s interest in this Lease by judicial or nonjudicial foreclosure or similar enforcement proceeding of the Leasehold Mortgage, or acceptance of a deed in lieu of foreclosure (“ Foreclosure ”) or otherwise and prosecute the same to completion with reasonable diligence. If Leasehold Mortgagee is complying with the provisions of this Section 10.2(c), then upon Leasehold Mortgagee’s having caused this Lease to be transferred by Foreclosure or otherwise, this Lease shall continue in full force and effect as a lease between Lessor and Leasehold Mortgagee, its designee, the purchaser of the leasehold estate in any Foreclosure proceedings, or the assignee or transferee of the leasehold estate under any assignment or transfer, and Leasehold Mortgagee, its designee or such purchaser, shall with due diligence cure any Lessee Event of Default.

(d) Nothing in this Section 10.2, however, shall be construed to require a Leasehold Mortgagee to continue such Foreclosure or other steps after the stated Lessee Event of Default has been cured. If the stated Lessee Event of Default shall be cured and Leasehold Mortgagee shall discontinue such Foreclosure or other steps, this Lease shall continue in full force and effect as if Lessee had not defaulted under this Lease.

(e) In the event of the termination of this Lease prior to the expiration of the Term due to a Lessee Event of Default, whether due to a bankruptcy event, insolvency, liquidation, reorganization or winding-up or otherwise, whether by summary proceedings to dispossess, by service of notice to terminate, or otherwise, Lessor shall serve upon each Leasehold Mortgagee written notice that the Lease has been terminated, together with a statement of any and all sums which would at that time be due under this Lease but for such termination, and of all other Lessee Events of Default, if any, then known to Lessor. Any Leasehold Mortgagee thereupon shall have the option to obtain a new lease in accordance with and upon the following terms and conditions (it being understood and agreed that if more than

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one (1) Leasehold Mortgagee requests a new lease, the Leasehold Mortgagee with the lien of highest priority shall be entitled to such new lease):

(i) any Leasehold Mortgagee must deliver to Lessor its request for a new lease within sixty (60) days after its receipt of notice that the Lease has been terminated;

(ii) the new lease shall be entered into at the reasonable cost of the Lessee thereunder, shall be effective as at the date of termination of this Lease, and shall be for the remainder of the Term of this Lease and at the Rent and upon all the agreements, terms, covenants and conditions hereof, including any applicable rights of renewal, rights of first refusal and options to purchase; and

(iii) the new lease shall require the Lessee to perform any unfilled obligation of Lessee under this Lease which is reasonably susceptible of being performed by such Lessee; and upon the execution of such new lease, Lessor shall allow to the Lessee named therein, and such Lessee shall be entitled to, an adjustment in an amount equal to the net income derived by Lessor from the premises during the period from the date of termination of this Lease to the date of execution of such new lease.

(f) Leasehold Mortgagee shall not be deemed to be an assignee or transferee of this Lease or of the leasehold estate by virtue of being the mortgagee under the Leasehold Mortgage so as to require Leasehold Mortgagee to assume the performance of any of the terms, covenants and conditions on the part of Lessee to be performed hereunder. The liability of Leasehold Mortgagee, its successors and assigns, shall be limited in all respects to its interest in this Lease and the leasehold estate created hereby.

(g) Any notice or other communication which Lessor shall desire or is required to give to or serve upon Leasehold Mortgagee shall be in writing and addressed to each Leasehold Mortgagee at the address set forth in the notice provision of the applicable Leasehold Mortgage, as modified by the most recent written notice delivered to Lessor from such Leasehold Mortgagee identifying such Leasehold Mortgagee’s interest in the leasehold and this Lease, or at such other address as shall be designated by each Leasehold Mortgage by notice in writing given to Lessor. Any notice or other communication which the Leasehold Mortgagee shall desire or is required to give to or serve upon Lessor shall be in writing and addressed at the address for Lessor set forth in this Lease. Each such notice and communication provided for under this section otherwise shall comply with the requirements of notice as provided for in Article XIV.

(h) In the event any Leasehold Mortgagee shall request reasonable modifications to this Lease, Lessor agrees that it shall not unreasonably withhold, delay or condition its consent thereto, provided that such modifications do not change the amount, manner or time of payment of any of the Rent due from Lessee to Lessor under this Lease.

10.3 Subordination of Fee . Lessor covenants and agrees, whenever and as often as Lessee may request Lessor, to mortgage and to subordinate Lessor’s fee simple title to the Leased Property, or any portions thereof that may be designated by Lessee, together with all rents and other benefits due to Lessor under this Lease, to the lien of such leasehold mortgage or

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mortgages as Lessee may obtain. Lessor will join in the execution of mortgages and such related instruments as may be required to impose valid mortgage liens on fee simple estate to the Leased Property and will execute all documents reasonably required by the leasehold mortgagee or by the leasehold mortgagee’s attorneys or by the title company insuring the mortgage or by any combination of the foregoing.

10.4 Estoppel Certificates . At any time during the Term, but in no event more than two (2) times in any Lease Year, and upon request, Lessor and Lessee shall execute and deliver to each other, or to any person whom the requesting party may designate, an estoppel certificate within fifteen (15) days of request therefor consisting of the following certifications (or, if untrue, an explanation for the same):

(a) this Lease is in full force and effect, with Rent current through the date of the certificate and that no Rent has been paid in advance;

(b) identifying this Lease and all waivers, amendments and supplements hereto and certifying that the same have not been modified or amended (or attaching all waivers, amendments and supplements);

(c) to such party’s actual knowledge and belief, the other party is not then in default, and Lessee and Lessor have fully performed all of their respective obligations, hereunder; and

(d) such further statements, agreements or consents as may be reasonably requested by Lessor, Lessee, any Leasehold Mortgagee, or assignee or transferee of the interest of same, as applicable, representing that no defaults (or events which, but for the passage of time, if not cured, would constitute defaults) under this Lease exist or, if any such defaults (or the existence of such events) are claimed, specifying in detail the nature of such alleged defaults (or events which would give rise to a default). Any such statement may be conclusively relied upon by any prospective assignee or leasehold mortgagee. Such certificate shall be prepared by the party requesting the certificate, at such party’s expense, but in a form reasonably acceptable to both parties.

ARTICLE XI

Default

11.1 Lessee Event of Default . Each of the following shall be deemed a “ Lessee Event of Default ” under this Lease:

(a) Lessee’s failure to make any payment of Rent pursuant to Section 3.3(a) hereof which has not been cured within ten (10) Business Days following notice from Lessor;

(b) Lessee’s failure to observe or perform any material provisions of this Lease for sixty (60) days after receipt of written notice specifying such failure, provided, however that if Lessee has commenced to cure the same within such sixty (60) day period and thereafter shall prosecute the curing of same with reasonable diligence, then the time within

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which such failure may be cured shall be extended for such period as may be reasonably necessary to complete the same with reasonable diligence;

(d) the making by Lessee of any general assignment for the benefit of creditors or the filing by or against Lessee a petition to have Lessee adjudged a bankrupt or a petition for reorganization or arrangement under any law relating to bankruptcy, unless such events are revoked or dismissed within sixty (60) days or the leasehold mortgagee commences foreclosure proceedings on its leasehold mortgage within said sixty (60) days and diligently prosecutes said foreclosure to completion, or unless Lessor is afforded adequate assurances pursuant to Section 365(b)(3) of the Bankruptcy Code;

11.2 Lessor’s Remedies for Lessee’s Default . If a Lessee Event of Default shall have occurred and all cure periods shall have expired, Lessor shall have the right at its election, then or at any time thereafter, and subject to the rights of any Leasehold Mortgagee hereunder and subject to applicable law, to:

(a) Lessor may continue this Lease in full force and effect, without terminating Lessee’s right of possession, and collect rent and other monetary charges when due. Lessor shall have the right to take the following actions which shall not constitute a termination of Lessee’s right to possession; or

(b) give written notice to Lessee of its election to terminate this Lease on a date specified in such notice, which date shall not be less than sixty (60) days after the giving of such notice. Thereafter, the Lease shall terminate and the parties shall have no further rights, liabilities or obligations hereunder except as otherwise expressly provided for herein, including, but not limited to, Section 5.3. In the event that Lessor shall exercise its right to terminate this Lease, Lessor and its agents and representatives, shall have the right to reenter and take possession of the Land.

11.3 Lessor’s Event of Default . Each of the following shall be deemed a “ Lessor Event of Default ” under this Lease:

(a) Lessor shall default in any of its covenants, obligations or liabilities hereunder for sixty (60) days after receipt of written notice specifying such failure, provided, however that if Lessor has commenced to cure the same within such sixty (60) day period and thereafter shall prosecute the curing of same with reasonable diligence, then the time within which such failure may be cured shall be extended for such period as may be reasonably necessary to complete the same with reasonable diligence; or

(b) any of Lessor’s representations and warranties herein are untrue, incomplete or incorrect in any respect; or

(c) the making of Lessor of any general assignment for the benefit of creditors or the filing by or against Lessor of a petition to have Lessee adjudged a bankrupt or a petition for reorganization or arrangement under any law relating to bankruptcy, unless such events are

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revoked or dismissed within sixty (60) days or the leasehold mortgagee commences foreclosure proceedings on its leasehold mortgage within said sixty (60) days and diligently prosecutes said foreclosure to completion, or unless Lessee is afforded adequate assurances pursuant to Section 365(b)(3) of the Bankruptcy Code.

11.4 Lessee’s Remedies for Lessor Default . So long as a Lessor Event of Default is continuing hereunder, Lessee may exercise one or more of the following remedies for such Lessor Event of Default in addition to all the other rights and remedies provided at law or in equity:

(a) terminate this Lease, in which event Lessee shall surrender possession and vacate the Land and deliver possession thereof to Lessor, after which Lessee shall have no further liability or obligation to Lessor hereunder and Lessor immediately shall reimburse Lessee for any costs incurred by Lessor as a result of such termination, including, but not limited to, anticipated lost profits; or

(b) cure any Lessor Event of Default on Lessor’s behalf, in which event Lessor immediately shall reimburse Lessee for the costs of such cure, together with interest at the rate of five percent (5%) per annum. In the event Lessor fails to so reimburse Lessee within ten (10) days following Lessee’s request therefor, Lessee may offset any costs incurred by Lessee as a result of such cure, together with interest thereon as provided above, against the amount of Rent then or thereafter due and owing Lessor under the terms of this Lease.

11.5 No Waiver of Default . No waiver of any breach of any covenant or provision of this Lease shall be construed to be a waiver of any other covenant or provision.

11.6 Attorneys’ Fees . In the event either Lessor or Lessee defaults in the performance of any of the terms, covenants, conditions, agreements or provisions contained in this Lease and the other party employs attorneys and/or brings suit in connection with the enforcement of this Lease, or any provision hereof, or the exercise of any of its remedies hereunder, then the prevailing party shall be promptly reimbursed by the other party for all reasonable attorneys’ fees and court costs so incurred.

ARTICLE XII

Limitation of Liability and Indemnity

12.1 Lessor’s Exculpation . Lessor’s maximum exposure and liability with respect to any claims of Lessee as a result of any default or breach of any of the terms, covenants, agreements, provisions, conditions and limitations of this Lease on Lessee’s part to be kept, observed or performed, is limited to the interest and/or title of Lessor in this Lease, and no other assets of Lessor shall be subject to any judgment, decree, execution, attachment, sequestration or other legal remedy.

12.2 Indemnification .

LESSOR AGREES TO INDEMNIFY, DEFEND, SAVE, PROTECT AND HOLD HARMLESS LESSEE FROM AND AGAINST ALL THIRD PARTY CLAIMS,

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INCLUDING ANY ACTION OR PROCEEDING BROUGHT THEREON, AND ALL COSTS, LOSSES, EXPENSES AND LIABILITY (INCLUDING REASONABLE ATTORNEY’S FEES AND COST OF SUIT) ARISING FROM OR AS A RESULT OF ANY PERSONAL INJURY OR DEATH TO LESSOR, LESSOR’S AGENTS, EMPLOYEES, OFFICERS, DIRECTORS, REPRESENTATIVES OR ANY THIRD PARTY WHOSE CLAIM ARISES UNDER OR THROUGH ITS OWNERSHIP OF BUILDING 1 AND USE THEREOF ON THE LAND OR ANY DAMAGE OR LOSS TO BUILDING 1 OR WITH RESPECT TO ANY MAINTENANCE, ALTERATION, REPAIR, USE, OPERATION OR ACCESS THEREOF, EXCEPT TO THE EXTENT CONTRIBUTED TO OR CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF LESSEE.

FURTHER, DURING THE RENEWAL TERM, LESSEE AGREES TO INDEMNIFY, DEFEND, SAVE, PROTECT AND HOLD HARMLESS LESSOR FROM AND AGAINST ALL THIRD PARTY CLAIMS, INCLUDING ANY ACTION OR PROCEEDING BROUGHT THEREON, AND ALL COSTS, LOSSES, EXPENSES AND LIABILITY (INCLUDING REASONABLE ATTORNEY’S FEES AND COST OF SUIT) ARISING FROM OR AS A RESULT OF ANY PERSONAL INJURY OR DEATH TO LESSOR, LESSOR’S AGENTS, EMPLOYEES, OFFICERS, DIRECTORS, REPRESENTATIVES OR ANY THIRD PARTY WHOSE CLAIM ARISES UNDER OR THROUGH THE LAND, OR ANY DAMAGE OR LOSS TO THE LEASED PROPERTY OR IN THE OPERATIONS THEREON, EXCEPT TO THE EXTENT CONTRIBUTED TO OR CAUSED BY THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF LESSOR.

THE PROVISIONS OF THIS SECTION 12.2 SHALL SURVIVE, AND SHALL CONTINUE IN FULL FORCE AND EFFECT FOLLOWING THE EXPIRATION OR EARLIER TERMINATION OF THIS LEASE.

ARTICLE XIII

Quiet Enjoyment

Lessor covenants that Lessee shall quietly enjoy the Leased Property without hindrance or molestation by Lessor or anyone claiming by, through or under Lessor, subject to the terms, provisions and conditions of this Lease, Leasehold Mortgages and related instruments and the Permitted Liens.

ARTICLE XIV

Notices

Any notice required or permitted to be given hereunder shall be in writing and shall be (i) personally delivered, (ii) deposited in the United States mail, prepaid and registered addressed to the parties to be notified with return receipt requested (airmail if international), (iii) transmitted by internationally‑recognized overnight courier service, or (iv) transmitted by email

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with delivery thereunder pursuant to (i), (ii) or (iii) above by another method. For purposes of notice, the addresses of the parties shall be as follows:

(a) In the case of Lessor:

Cubic Corporation

9333 Balboa Avenue

San Diego, California 92123

Attn: Legal Department

With a copy to:

Cubic Corporation

9333 Balboa Avenue

San Diego, California 92123

Attn: Treasury Department

Email: Rhys.Williams@cubic.com

(b) In the case of Lessee:

Bankers Commercial Corporation
445 South Figueroa, 14th Floor
Los Angeles, California 90071
Attention: Portfolio Servicing
Email: CMalekyan@us.mufg.jp

All notices and other communications shall be deemed to have been duly given on (i) the date of receipt if delivered personally, (ii) 2 days after the date of posting if transmitted by mail, (iii) the day after delivery to the courier if transmitted by courier, or (iv) the date of transmission with confirmation if transmitted by email, whichever shall first occur, except that in all cases notice given to any Leasehold Mortgagee must be received by such Leasehold Mortgagee to be effective. Notice in any other manner shall be effective only if and when received by the party to be notified. Any party may change its address for purposes hereof by notice to the other party.

ARTICLE XV

End of Term

Upon the date of expiration of the Term of this Lease or upon the date of earlier termination thereof by either party hereto and subject to Lessee’s rights to remove the Improvements pursuant to Section 5.3 hereof, (a) Lessee shall peaceably and quietly leave, surrender and yield up unto Lessor all and singular the Land in the condition in which it then exists, with no duty to repair or replace, and (b) upon written request of Lessor, Lessee shall execute and deliver to Lessor a quitclaim deed in reasonable form conveying all of Lessee’s right, title and interest in and to the Leased Property. The provisions of this Article XV shall survive the expiration or termination of this Lease.

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ARTICLE XVI

Covenants Binding

The terms, covenants, agreements, provisions and conditions of this Lease shall be binding upon and inure to the benefit of the successors and assigns of Lessor and the successors and assigns of Lessee and shall be construed as covenants running with the land.

ARTICLE XVII

Memorandum of Lease

Either party may prepare a Memorandum of Lease in recordable form which shall be signed by Lessor and Lessee simultaneously (or at any time during the Term hereof) with the execution hereof, to be recorded pursuant to the provisions of law, which Memorandum shall set forth the lease provisions, or the substance thereof, as the parties shall mutually agree.

ARTICLE XVIII

Miscellaneous

18.1 No Partnerships or Joint Ventures . Nothing herein contained shall be construed to make the parties partners or joint venturers or to make Lessor liable for any obligations incurred by Lessee in the conduct of its business and no party dealing with Lessee shall be entitled to look to Lessor or to Lessor’s interest in the Land for the recovery of any sum owed by Lessee or any damages for which Lessee may be liable.

18.2 Additional Documents . Each party agrees that at any time and from time to time upon the written request of the other party, it will execute, acknowledge and deliver to the other party not later than ten (10) days after said written request such certificates or other documents as the requesting party may reasonably request in connection with this Lease.

18.3 Severability . If any term or provision of this Lease shall, to any extent, be illegal, invalid or unenforceable, the remainder of this Lease shall not be affected thereby, and each term and provision of this Lease shall be valid and be enforced to the fullest extent permitted by law. Furthermore, in lieu of such illegal, invalid or unenforceable provision, there shall be automatically as a part of this Lease, a provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and be legal, valid and enforceable.

18.4 Force Majeure . If any work or act required to be performed by Lessee under this lease shall be delayed by reason of delays due to strikes, lockouts, acts of God, fire or other casualty, the breach or default of Lessor in the performance of its obligations under this Lease, or other similar cause beyond the reasonable control of Lessee, not including Lessee’s insolvency or financial condition, the time within which Lessee is to perform such work or act shall be extended for the period of time Lessee is so delayed.

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18.5 Counterparts . This Lease may be executed in multiple counterparts, each of which shall be deemed to be an original, but all of which, taken together, shall constitute one and the same agreement.

18.6 Entire Agreement . It is expressly understood and agreed by and between the parties hereto that this Lease and the documents referred to herein set forth all of the promises, agreements, conditions and understandings between Lessor and Lessee relative to the Land and that there are no promises, agreements, conditions or understandings, either oral or written, between them other than as herein set forth.

18.7 No Merger of Estates . The leasehold estate shall not merge with the fee estate in the event that the same person or entity acquires, owns or holds, directly or indirectly, the fee estate and the leasehold estate in the Land.

18.8 Choice of Law; Venue . This Lease shall be governed by and construed in accordance with the laws of the State of California, without giving effect to any choice of law rules thereof which may direct the application of the laws of another jurisdiction. Any claim arising directly or indirectly from or relating to this Lease shall be filed and maintained in a court of competent jurisdiction in the state or federal courts located in San Diego County, California, and the parties submit to that jurisdiction and venue for all purposes.

18.9 Table of Contents and Captions . The table of contents and the captions under the Article numbers of this Lease are for convenience and reference only and in no way define, limit or describe the scope or intent of this Lease nor in any way affect this Lease.

18.10 Modifications . Each and every modification and amendment of this Lease shall be in writing and signed by Lessor and Lessee, and each and every waiver of, or consent to, or departure from any representation, warranty, covenant, or other term of this Lease shall be in writing and signed by the affected party thereto.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

- 22 -

IN WITNESS WHEREOF , this Lease has been executed as of the date first written above.

	LESSOR: CUBIC CORPORATION


	By:
	Name:
	Title:


	LESSEE: BANKERS COMMERCIAL
	CORPORATION


	By:
	Name:
	Title:

EXHIBIT A

DESCRIPTION OF LAND

THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF SAN DIEGO, IN THE COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, AND IS DESCRIBED AS FOLLOWS:

PARCEL 2 OF PARCEL MAP NO. 21650, IN THE CITY OF SAN DIEGO, COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, ACCORDING TO MAP THEREOF FILED IN THE OFFICE OF THE COUNTY RECORDER OF SAN DIEGO COUNTY, DECEMBER 21, 2018 AS DOCUMENT NO. 2018-7000508 OF OFFICIAL RECORDS.

EXCEPTING THEREFROM ALL BUILDING IMPROVEMENTS LOCATED ON SAID LAND.

APN: PORTIONS 369-163-05-00 AND 369-170-18-00

EXHIBIT B

PERMITTED LIENS

Defined terms used on this Exhibit B and not otherwise defined in this Lease shall have the meanings set forth in the Facility Lease.

(a) The respective rights and interests of the Facility Lessee, the Participants, the Agents, as provided in the Operative Documents, (b) Lessor Liens, (c) Liens for Taxes either not yet delinquent or being contested in good faith and by appropriate proceedings diligently conducted and in any event constituting a Permitted Contest, (d) materialmen’s, mechanics’, workers, repairmen’s, employees’ or other like Liens arising in the ordinary course of business for amounts either not yet due or being contested in good faith and by appropriate proceedings constituting a Permitted Contest and to the extent any reserve or other appropriate provision required by GAAP shall have been made in respect of the Lien, (e) Liens arising after the Closing Date out of judgments or awards not otherwise constituting an Event of Default under clause (j) of Article XVII of the Facility Lease and with respect to which at the time an appeal or proceeding for review is being prosecuted in good faith and either (x) (A) with respect to such Liens arising on or prior to the Completion Date, have been bonded to the reasonable satisfaction of the Facility Lessor or (B) with respect to such Liens arising after the Completion Date, for which reserves have been made to the extent required by GAAP, or (y) the enforcement of such Lien has been stayed pending such appeal or review, and (f) Liens set forth on Schedule III to the Participation Agreement.

Exhibit 10.5

LEASE AGREEMENT

DATED AS OF FEBRUARY 5, 2019

BETWEEN

BANKERS COMMERCIAL CORPORATION,

AS THE LESSOR,

AND

CUBIC CORPORATION,

AS THE LESSEE

THIS LEASE AGREEMENT HAS BEEN EXECUTED IN MULTIPLE COUNTERPARTS. TO THE EXTENT, IF ANY, THAT THIS LEASE AGREEMENT CONSTITUTES CHATTEL PAPER (AS SUCH TERM IS DEFINED IN THE UNIFORM COMMERCIAL CODE AS IN EFFECT IN ANY APPLICABLE JURISDICTION), NO SECURITY INTEREST IN THIS LEASE AGREEMENT MAY BE CREATED THROUGH THE TRANSFER OR POSSESSION OF ANY COUNTERPART HEREOF OTHER THAN COUNTERPART NO. 1, WHICH SHALL BE IDENTIFIED AS THE COUNTERPART CONTAINING THE RECEIPT THEREFOR EXECUTED BY THE COLLATERAL AGENT ON OR FOLLOWING THE SIGNATURE PAGES THEREOF.

TABLE OF CONTENTS


		Page
ARTICLE I DEFINITIONS		1
SECTION 1.1.	Definitions .	1
ARTICLE II LEASE OF LEASED PROPERTY; LEASE TERM		2
SECTION 2.1.	Acceptance and Lease .	2
SECTION 2.2.	Lease Term .	2
ARTICLE III TAXES		2
SECTION 3.1.	Impositions .	2
SECTION 3.2.	Contests .	3
ARTICLE IV RENT		3
SECTION 4.1.	Basic Rent .	3
SECTION 4.2.	Supplemental Rent .	3
SECTION 4.3.	Method and Amount of Payment .	3
SECTION 4.4.	Late Payment .	4
ARTICLE V NET LEASE		4
ARTICLE VI UTILITY CHARGES		5
ARTICLE VII CONDITION AND USE OF LEASED PROPERTY		6
SECTION 7.1.	Waivers .	6
ARTICLE VIII LIENS; EASEMENTS		7
SECTION 8.1.	Liens.	7
SECTION 8.2.	Easements.	7
ARTICLE IX MAINTENANCE AND REPAIR; ALTERATIONS AND ADDITIONS		8
SECTION 9.1.	Maintenance and Repair; Compliance With Law .	8
SECTION 9.2.	Facility and Alterations .	9
SECTION 9.3.	Alterations Subject to Lease .	10
SECTION 9.4.	Maintenance and Repair Reports .	11
SECTION 9.5.	Permitted Contests .	11
ARTICLE X USE		11
SECTION 10.1.	Use.	11
SECTION 10.2.	Trade Compliance.	12
ARTICLE XI INSURANCE		12
SECTION 11.1.	Required Coverages .	12


SECTION 11.2.	Delivery of Insurance Certificates .	15
SECTION 11.3.	Other Insurance .	16
ARTICLE XII ASSIGNMENT AND SUBLEASING		16
ARTICLE XIII LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE; ENVIRONMENTAL		18
SECTION 13.1.	Event of Taking, Event of Loss.	18
SECTION 13.2.	Application of Payments Relating to an Event of Taking or an Event of Loss .	18
SECTION 13.3.	Application of Certain Payments Relating to a Condemnation .	19
SECTION 13.4.	Application of Certain Payments Relating to a Casualty .	19
SECTION 13.5.	Proceeds .	20
SECTION 13.6.	Negotiations .	20
SECTION 13.7.	No Rent Abatement .	21
SECTION 13.8.	Environmental Matters .	21
SECTION 13.9.	Notice of Environmental Matters .	22
ARTICLE XIV CERTAIN DUTIES AND RESPONSIBILITIES		22
ARTICLE XV INSPECTION		22
ARTICLE XVI THE GROUND LEASE		23
ARTICLE XVII EVENTS OF DEFAULT		23
ARTICLE XVIII ENFORCEMENT		25
SECTION 18.1.	Remedies .	25
SECTION 18.2.	Proceeds of Sale; Deficiency.	30
SECTION 18.3.	Waiver of Certain Rights .	30
SECTION 18.4.	Remedies Cumulative; No Waiver; Consents .	30
SECTION 18.5.	Limitation of Recourse Liability .	31
SECTION 18.6.	Phase I Environmental Report .	31
ARTICLE XIX RIGHT TO CURE		32
ARTICLE XX EARLY TERMINATION OPTION AND OBLIGATION TO PURCHASE		32
SECTION 20.1.	Early Termination Option .	32
SECTION 20.2.	Required Purchase .	32
ARTICLE XXI END OF TERM OPTIONS		33
SECTION 21.1.	End of Term Options	33
SECTION 21.2.	Election of Options .	33
ARTICLE XXII RETURN OPTION		33


SECTION 22.1.	Return Option Procedures .	33
SECTION 22.2.	Sale .	36
SECTION 22.3.	Application of Sale Proceeds and Recourse Payments .	37
SECTION 22.4.	Failure to Sell Leased Property .	38
SECTION 22.5.	Surrender and Return.	40
ARTICLE XXIII MISCELLANEOUS		41
SECTION 23.1.	Binding Effect; Successors and Assigns; Survival .	41
SECTION 23.2.	Severability .	41
SECTION 23.3.	Notices .	41
SECTION 23.4.	Amendment; Complete Agreements .	41
SECTION 23.5.	Headings .	42
SECTION 23.6.	Original Executed Counterpart .	42
SECTION 23.7.	Governing Law .	42
SECTION 23.8.	No Joint Venture .	42
SECTION 23.9.	No Accord and Satisfaction .	42
SECTION 23.10.	Survival .	42
SECTION 23.11.	Transfer of Leased Property .	43
SECTION 23.12.	Enforcement of Certain Warranties .	43
SECTION 23.13.	Security Interest in Funds .	44
SECTION 23.14.	Quiet Enjoyment .	44
SECTION 23.15.	Submission to Jurisdiction .	44
SECTION 23.16.	Jury Trial .	45
SECTION 23.17.	Payments .	45
SECTION 23.18.	Nature of Transaction .	46

EXHIBITS

EXHIBIT A

FORM OF LEASE SUPPLEMENT

iii

LEASE AGREEMENT

THIS LEASE AGREEMENT, dated as of February 5, 2019 (as amended, supplemented, or otherwise modified from time to time, this “ Lease ”), is between BANKERS COMMERCIAL CORPORATION, a California corporation, as the Lessor (the “ Lessor ”), and whose principal offices are located at 445 S. Figueroa Street, 14 th Floor, Los Angeles, California 90071, and CUBIC CORPORATION, a Delaware corporation, as the Lessee (the “ Lessee ”), and whose principal offices are located at 9333 Balboa Avenue, San Diego, California 92123-1589.

WITNESSETH:

The parties hereto desire to enter into the Overall Transaction for the purpose of financing the construction of the Facility on the Site.

A. Subject to the terms and conditions set forth in the Operative Documents, on the Closing Date, pursuant to the Ground Lease, the Lessor, as ground lessee, will lease the Site from the Lessee, as ground lessor.

B. Pursuant to the Construction and Development Agreement, the Construction Agent, using Advances funded by the Participants, subject to and in accordance with the terms of the Operative Documents, will construct the Facility on behalf of the Lessor.

C. Pursuant to this Lease, the Lessor will lease the Leased Property to the Lessee, and the Lessee will lease the Leased Property from the Lessor.

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

ARTICLE I

DEFINITIONS

SECTION 1.1. Definitions .

For all purposes hereof, the capitalized terms used herein and not otherwise defined and interpretation thereof shall have the meanings assigned thereto in Appendix I to that certain Participation Agreement dated as of even date herewith, among the Lessee, the Construction Agent, the Lessor, MUFG Bank, Ltd., as the Administrative Agent, MUFG Union Bank, N.A. as the Collateral Agent, and the Rent Assignee(s) named on Schedule I-A thereto from time to time (as the same may be amended, modified, restated or supplemented from time to time, the “ Participation Agreement ”), and the rules of interpretation set forth in Appendix I to the Participation Agreement shall apply to this Lease.

ARTICLE II

LEASE OF LEASED PROPERTY; LEASE TERM

SECTION 2.1. Acceptance and Lease .

The Lessor, subject to the satisfaction or waiver of the conditions set forth in Section 2.1 of the Participation Agreement, hereby agrees to lease all of the Leased Property to the Lessee hereunder, and the Lessee hereby agrees, expressly for the direct benefit of the Lessor, to lease from the Lessor for the Lease Term, all of the Leased Property. Without limiting the generality of the foregoing, the Lessee acknowledges that the leasehold interest conveyed by this Lease and the Lessee’s rights hereunder are expressly made subject to the terms and conditions of the matters listed in Schedule B to the Title Policy, the Ground Lease, all other Permitted Liens and any other Liens not constituting Lessor Liens. The Lessee hereby agrees that delivery of possession of the subleasehold interest in the Site under the Ground Lease or payment from Advances for any portion of the Facility shall, without further act, constitute the irrevocable acceptance by the Lessee of the Site and such portion of the Facility for all purposes of this Lease and shall constitute the Lessee’s agreement to lease the Leased Property pursuant to the terms hereof during the Lease Term.

Subject to Articles XII and XVIII hereof, the Lessor will not lease nor otherwise make the Leased Property, in whole or in part, available to any Person other than the Lessee and its permitted successors, assigns and sublessees during the Lease Term, and (without derogating in any way from the Lessor’s rights under Article XV hereof) during the Lease Term the Lessee shall have unimpeded physical control of the Leased Property notwithstanding the Lessor’s rights to inspect the Leased Property in accordance with Article XV.

SECTION 2.2. Lease Term .

Unless earlier terminated, the term of this Lease shall consist of (a) a base term (the “ Base Term ”) commencing immediately upon, and without further act of the parties hereto, the Completion Date (such date, the “ Base Term Commencement Date ”) and ending on the fifth anniversary of the Base Term Commencement Date, and (b) any Extended Remarketing Period described in Section 22.4 (the Base Term and any such Extended Remarketing Period are hereinafter collectively referred to as the “ Lease Term ”).

ARTICLE III

TAXES

SECTION 3.1. Impositions .

During the Lease Term, the Lessee agrees to pay when due without penalty or interest all Taxes imposed upon or levied against the Leased Property or any part thereof or interest therein consistent with Section 7.2 of the Participation Agreement. The Site is a separate tax lot for real property tax assessment purposes. Any Tax relating to a fiscal period of any taxing Authority falling partially within and partially outside the Lease Term shall be apportioned and adjusted between the Lessor and the Lessee. The Lessee covenants to furnish the Lessor, upon its request, within forty-five (45) days after the last date when any Tax must be paid by the Lessee, official

receipts of the appropriate taxing Authority or other proof satisfactory to the Lessor evidencing the payment thereof.

SECTION 3.2. Contests .

The Lessee shall have the right to contest any Tax in accordance with Section 7.2(b) of the Participation Agreement.

ARTICLE IV

RENT

SECTION 4.1. Basic Rent .

During the Lease Term, the Lessee shall pay Basic Rent in arrears to the Lessor (i) on each Payment Date; provided , however , that prior to the Base Term Commencement Date, Basic Rent shall be payable solely from Advances, (ii) on the date required under Section 22.3 in connection with the Lessee’s exercise of the Return Option, if exercised, and (iii) on any date on which this Lease terminates, whether on a Lease Expiration Date or upon the Maturity Date or upon demand following an Event of Default pursuant to Article XVII.

SECTION 4.2. Supplemental Rent .

The Lessee shall pay to the Lessor, or to whomever shall be entitled thereto as expressly provided herein or in any other Operative Document (and the Lessor hereby directs the Lessee, on behalf of the Lessor, to so pay any such other Person), any and all Supplemental Rent promptly as the same shall become due and payable and, in the event of any failure on the part of the Lessee to pay any Supplemental Rent, the Lessor shall have all rights, powers and remedies provided for herein or by law or in equity or otherwise in the case of nonpayment of Basic Rent subject to any applicable notice and grace period; provided, however, that prior to the Base Term Commencement Date, any Supplemental Rent payable through Advances pursuant to the Participation Agreement shall be payable by the Lessee only through Advances and shall be payable on Advance Dates. The Lessee hereby reaffirms that its obligation to pay Supplemental Rent shall include the payment of any and all Additional Costs. The expiration or other termination of the Lessee’s obligations to pay Basic Rent hereunder shall not limit or modify the obligations of the Lessee with respect to Supplemental Rent.

SECTION 4.3. Method and Amount of Payment .

Basic Rent and Supplemental Rent shall be paid by wire transfer by the Lessee to the Lessor (or, in the case of Supplemental Rent, to such Person as may be entitled thereto) at such place as the Lessor (or such other Person) shall specify in writing to the Lessee pursuant to Schedule II to the Participation Agreement; provided, however, that, so long as any Rent Assignee retains a Rent Assignment Interest, the Lessor directs the Lessee to pay Basic Rent to the Administrative Agent for the benefit of the Participants in accordance with Section 2.7 of the Participation Agreement. Each payment of Rent shall be made by the Lessee prior to 2:00 P.M. New York time (and payments made after such time shall be deemed to have been made on the next day) at the place of payment in funds consisting of Dollars which (in the case of any amount payable to any

Participant or any other Indemnitee) shall be immediately available on the scheduled date when such payment shall be due unless, with respect to Supplemental Rent, the scheduled date shall not be a Business Day, in which case such payment shall be due and made on the next succeeding Business Day. The provisions of the foregoing sentence of this Section 4.3 shall be applicable only to Basic Rent and to Supplemental Rent payable to, or on behalf of or for the account of the Lessor and any other Indemnitee.

SECTION 4.4. Late Payment .

If any Basic Rent shall not be paid when due, the Lessee shall pay to the Lessor, or if any Supplemental Rent payable to or on behalf or for the account of the Lessor, any Participant or other Indemnitee is not paid when due, the Lessee shall pay to whomever shall be entitled thereto, in each case as Supplemental Rent, interest at the Overdue Rate (to the maximum extent permitted by law) on such overdue amount from and including the due date thereof (without regard to any applicable grace period) to but excluding the Business Day of payment thereof.

ARTICLE V

NET LEASE

This Lease shall constitute a net lease and, notwithstanding any other provision of this Lease, except as specifically set forth in Article XIII and Section 20.1 below, it is intended that Basic Rent, Supplemental Rent, the Lease Balance and all other amounts due and payable under the Operative Documents shall be paid without counterclaim, setoff, deduction or defense of any kind and without abatement, suspension, deferment, diminution or reduction of any kind, and the Lessee’s obligation to pay all such amounts throughout the Lease Term is absolute and unconditional. The obligations and liabilities of the Lessee hereunder shall, to the fullest extent permitted by Applicable Laws and Regulations, in no way be released, discharged or otherwise affected for any reason (other than the indefeasible payment or performance in full of such liability or obligation) including: (a) any defect in the condition, merchantability, design, construction, quality or fitness for use of any portion of any Leased Property or the Site, or any failure of any Leased Property or the Site to comply with all Applicable Laws and Regulations, including any inability to occupy or use any Leased Property or the Site by reason of such non-compliance; (b) any damage to, abandonment, loss, contamination of or Release from or destruction of or any requisition or taking of any Leased Property or the Site or any part thereof; (c) any restriction, prevention or curtailment of or interference with any use of any Leased Property or the Site or any part thereof, including eviction; (d) any defect in title to or rights to any Leased Property or the Site or any Lien on such title or rights or on any Leased Property or the Site; (e) any change, waiver, extension, indulgence or other action or omission or breach in respect of any obligation or liability of or by any Participant; (f) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceedings relating to the Lessee, any Participant or any other Person, or any action taken with respect to this Lease by any trustee or receiver of the Lessee, any Participant or any other Person, or by any court, in any such proceeding; (g) any claim that the Lessee has or might have against any Person including, without limitation, any Participant, arising from any of the circumstances set forth in this sentence (but will not constitute a waiver of such claim); (h) any action, omission or breach on the part of the Ground Lessor or Ground Lessee under the Ground Lease or any failure on the part of the Lessor to perform or comply with any of the terms of this Lease, any other Operative Document or of any other agreement whether or not

related to the Overall Transaction; (i) any invalidity or unenforceability or disaffirmance against or by the Lessee of this Lease or any provision hereof or any of the other Operative Documents or any provision of any thereof; (j) the impossibility of performance by the Lessee, the Lessor or both; (k) any action by any court, administrative agency or other Authority; (l) any restriction, prevention or curtailment of or any use of any Leased Property or any part thereof or the construction of any Alterations; (m) the failure of the Lessee to achieve any accounting or tax benefits or the characterization of the transaction intended by Section 2.14 of the Participation Agreement; (n) the inability or failure of Ground Lessee to take leasehold title to the Site under the Ground Lease; or (o) any other occurrence whatsoever, whether similar or dissimilar to the foregoing, whether or not the Lessee shall have notice or knowledge of any of the foregoing. Except as specifically set forth in Article XIII or Section 20.1 of this Lease, this Lease shall be noncancellable by the Lessee for any reason whatsoever, and the Lessee, to the fullest extent permitted by Applicable Laws and Regulations, 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 by the Lessee hereunder. If for any reason whatsoever this Lease shall be terminated or amended in whole or in part by operation of law or otherwise, except as expressly provided in Article XIII or Sections 20.1 or 23.4 of this Lease, the Lessee shall, unless prohibited by Applicable Laws and Regulations, pay to the Lessor (or, in the case of Supplemental Rent, to whomever shall be entitled thereto) a compensation in an amount equal to each Rent payment (including the Lease Balance and any other amount due and payable under any Operative Documents) at the time and in the manner that such payment would have become due and payable under the terms of this Lease if it had not been terminated or amended in whole or in part. Each payment of Rent (including any payment of the Lease Balance and Purchase Amount) made by the Lessee hereunder shall be final and, absent error in the computation of the amount thereof, the Lessee shall not seek or have any right to recover all or any part of such payment from any Participant or any party to any agreements related thereto for any reason whatsoever. Lessee assumes the sole responsibility for the condition, use, operation, maintenance, and management of the Leased Property and the Site and the Lessor shall have no responsibility in respect thereof and shall have no liability for damage to the Leased Property, the Site or the property relating thereto of the Lessee or any subtenant of the Lessee on any account or for any reason whatsoever. Without affecting the Lessee’s obligation to pay Basic Rent, Supplemental Rent, the Lease Balance and all other amounts due and payable under the Operative Documents or to perform its obligations under the Operative Documents, the Lessee may, notwithstanding any other provision of the Operative Documents (but subject to Section 9.11 of the Participation Agreement), seek damages of any kind or any other remedy at law or equity against the Lessor for such willful misconduct or gross negligence or negligence in the handling of funds or for a breach by the Lessor of its obligations under this Lease or the other Operative Documents.

ARTICLE VI

UTILITY CHARGES

During the Lease Term the Lessee shall pay or cause to be paid all development and improvement charges and all charges for electricity, power, gas, oil, water, telephone, sanitary sewer service and all other rents, utilities or public dues used in or on the Leased Property or the Site during the Lease Term. The Lessee shall be entitled to receive any credit or refund with respect to any utility charge or public dues paid by the Lessee and the amount of any credit or refund

received by the Lessor on account of any utility charges paid by the Lessee, net of the costs and expenses reasonably incurred by the Lessor in obtaining such credit or refund, which amount shall be promptly paid over to the Lessee. All charges for utilities imposed, rents or public dues with respect to the Leased Property and the Site (a) incurred prior to the Base Term Commencement Date shall be paid solely through the proceeds of Advances pursuant to the Construction and Development Agreement and the Participation Agreement, and (b) for a billing period during which this Lease expires or terminates (except pursuant to Article XX or Section 21.1(a), in which case the Lessee shall be solely responsible for all such charges) shall be adjusted and prorated on a daily basis between the Lessee and any purchaser of the Leased Property, and each party shall pay or reimburse the other for each party’s pro rata share thereof; provided , that in no event shall the Lessor have any liability therefor. Unless requested by the Lessee, the Lessor agrees not to take any action to incur any additional utility charges during the Lease Term.

ARTICLE VII

CONDITION AND USE OF LEASED PROPERTY

SECTION 7.1. Waivers .

THE LESSEE ACKNOWLEDGES AND AGREES THAT THE LESSEE, ACTING AS THE CONSTRUCTION AGENT AND AGENT FOR LESSOR, IS RESPONSIBLE UNDER THE TERMS OF THE CONSTRUCTION AND DEVELOPMENT AGREEMENT FOR THE DESIGN, DEVELOPMENT, BUDGETING AND SUPERVISION OF CONSTRUCTION OF THE FACILITY AND ANY ALTERATIONS OR MODIFICATIONS. THE LESSEE FURTHER ACKNOWLEDGES AND AGREES THAT IT IS LEASING THE LEASED PROPERTY FROM THE LESSOR “AS IS” IN ITS PRESENT CONDITION, SUBJECT TO (A) ANY RIGHTS OF ANY PARTIES IN POSSESSION THEREOF OR OF THE SITE, (B) THE STATE OF THE TITLE THERETO OR TO THE SITE EXISTING AT THE TIME THE LESSOR ACQUIRED ITS INTEREST IN THE LEASED PROPERTY, (C) ANY STATE OF FACTS WHICH AN ACCURATE SURVEY OR PHYSICAL INSPECTION MIGHT SHOW (INCLUDING ANY SURVEY DELIVERED ON OR PRIOR TO THE CLOSING DATE, ANY ADVANCE DATE OR THE COMPLETION DATE), (D) ALL APPLICABLE LAWS AND REGULATIONS, AND (E) ANY VIOLATIONS OF APPLICABLE LAWS AND REGULATIONS WHICH MAY EXIST AT THE COMMENCEMENT OF THE LEASE TERM. THE LESSEE HAS EXAMINED THE LEASED PROPERTY AND THE SITE AND (INSOFAR AS THE LESSOR IS CONCERNED) HAS FOUND THE SAME TO BE SATISFACTORY. WITHOUT LIMITING THE SPECIFIC REPRESENTATIONS AND WARRANTIES IN ARTICLE IV OF THE PARTICIPATION AGREEMENT, NONE OF THE LESSOR, THE COLLATERAL AGENT, THE ADMINISTRATIVE AGENT NOR ANY OTHER PARTICIPANT HAS MADE OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, NOR SHALL BE DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE TITLE TO THE LEASED PROPERTY OR THE SITE OR TO THE VALUE, MERCHANTABILITY, HABITABILITY, CONDITION, OR FITNESS FOR USE OF THE LEASED PROPERTY OR THE SITE, OR ANY PART THEREOF, OR ANY OTHER REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO THE LEASED PROPERTY OR THE SITE, OR ANY PART THEREOF, AND NONE OF THE LESSOR, THE COLLATERAL AGENT, THE ADMINISTRATIVE

AGENT NOR ANY OTHER PARTICIPANT SHALL BE LIABLE FOR ANY LATENT, HIDDEN, OR PATENT DEFECT THEREIN OR THE FAILURE OF THE LEASED PROPERTY OR THE SITE, OR ANY PART THEREOF, TO COMPLY WITH ANY APPLICABLE LAWS AND REGULATIONS, except that the Lessor hereby represents and warrants that as of the date of this Lease, the Leased Property is free of Lessor Liens. The Lessee, having been afforded full opportunity to inspect the Leased Property and the Site, is satisfied with the results of its inspections 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, as between the Collateral Agent, the Administrative Agent and the Participants, on the one hand, and the Lessee, on the other, are to be borne by the Lessee. The provisions of this Article VII have been negotiated, and, except to the extent otherwise expressly stated, the foregoing provisions are intended to be a complete exclusion and negation of any representations or warranties by any of the Collateral Agent, the Administrative Agent or the Participant, express or implied, with respect to the Leased Property (or any interest therein) and the Site, that may arise pursuant to any law now or hereafter in effect or otherwise.

ARTICLE VIII

LIENS; EASEMENTS

SECTION 8.1. Liens.

During the Lease Term, the Lessee will not directly or indirectly create, incur, assume or suffer to exist any Lien (other than Permitted Liens) on or with respect to any portion of the Leased Property, the Site or the Lessor’s interest therein. The Lessee, at its own expense, will promptly pay, satisfy and otherwise take such actions as may be necessary to keep the Leased Property and the Site free and clear of, and duly to discharge, eliminate or bond in a manner reasonably satisfactory to the Required Participants, any such Lien (other than Permitted Liens) if the same shall arise at any time provided that any such payments required prior to the Base Term Commencement Date shall be paid solely through the proceeds of Advances pursuant to the Construction and Development Agreement and the Participation Agreement.

SECTION 8.2. Easements.

Notwithstanding Section 8.1, at the request of the Lessee, the Lessor shall, from time to time during the Lease Term and upon reasonable advance written notice from the Lessee and receipt of the materials specified below, consent to and join in any (i) grant of easements, licenses, rights of way and other rights in the nature of easements including, without limitation, utility easements which in each case facilitate the Lessee’s use, development and operation of the Leased Property, (ii) release or termination of easements, licenses, rights of way or other rights in the nature of easements which releases and terminations are for the benefit of the Site or the Facility or any portion thereof, (iii) execution of agreements for ingress and egress and amendments to any covenants and restrictions affecting the Site or the Facility or any portion thereof, and (iv) request to any Authority for platting or subdivision or replatting or resubdivision approval with respect to the Site or any portion thereof or any parcel of land of which the Site or any portion thereof forms a part or a request for any variance from zoning or other governmental requirements, provided that :

(a) any such action shall be at the sole cost and expense of the Lessee and the Lessee shall pay all out-of-pocket costs of Lessor and the other Participants in connection therewith (including, without limitation, the reasonable fees of attorneys, architects, engineers, planners, appraisers and other professionals retained by Lessor or the other Participants in connection with any such action);

(b) the Lessee shall have delivered to the Lessor a certificate of a Responsible Officer of the Lessee stating that:

(i) such action will not cause the Leased Property, the Site or the Facility, or any portion thereof, to fail to comply in any respect with the provisions of the Lease or any other Operative Documents, or in any respect with Applicable Laws and Regulations; and

(ii) such action will not materially reduce the Fair Market Value, utility or useful life of the Leased Property, the Site or the Facility or the Lessor’s interest therein;

(c) in the case of any release or conveyance, if Lessor or the Required Participants so reasonably request, Lessee will cause to be issued and delivered to Lessor by the Title Insurance Company endorsements to the Title Policies (to the extent available) pursuant to which the Title Insurance Company agrees that its liability for the payment of any loss or damage under the terms and provisions of the Title Policies, as to the remaining portion of the Leased Property that was not released or conveyed, will not be affected by reason of the fact that a portion of the real property referred to in Schedule A of the Title Policies has been released or conveyed by the Lessor; and

(d) there shall be no abatement of Rent as a result thereof.

ARTICLE IX

MAINTENANCE AND REPAIR; ALTERATIONS AND ADDITIONS

SECTION 9.1. Maintenance and Repair; Compliance With Law .

At all times during the Lease Term, the Lessee shall (a) maintain the Leased Property and the Site in good operating condition and repair, subject to ordinary wear and tear, and in any event in a manner consistent with exercising reasonable care and prudence and with other similar facilities or buildings owned or leased by the Lessee and its Affiliates and similar to other facilities of like kind, quality and use; (b) subject to Section 9.5, maintain the Leased Property and the Site in accordance with all Applicable Laws and Regulations (including all Environmental Laws) in all material respects, whether or not such maintenance requires structural modifications; (c) maintain the Facility (whether under construction or completed) and the Site in such a way that the Facility and the Site shall not constitute a danger to persons or things; (d) comply in all material respects with the Insurance Requirements which are in effect at any time with respect to the Leased Property or any part thereof; (e) use the Leased Property and the Site only in accordance with Article X; (f) make all necessary or appropriate repairs, replacements and renewals of the Leased Property and the Site or any part thereof which may be required to keep the Leased Property and the Site in the condition required by this Section 9.1, whether interior or exterior, structural or nonstructural, ordinary or extraordinary, and including, without limitation, repairs, replacements and renewals that would constitute capital expenditures under GAAP if incurred by an owner of property; and

(g) procure, maintain and comply in all material respects with all licenses, permits, orders, approvals, consents and other authorizations required for the construction, use, maintenance and operation of the Leased Property. The Lessee waives any right that it may now have or hereafter acquire to (x) require the Lessor to maintain, repair, replace, alter, remove or rebuild all or any part of the Leased Property or (y) make repairs at the expense of the Lessor pursuant to any Applicable Laws and Regulations or other agreements.

SECTION 9.2. Facility and Alterations .

(a) In addition to the Lessee’s obligations in its capacity as the Construction Agent to build the Facility under the Construction and Development Agreement, on and after the Base Term Commencement Date (i) the Lessee, at the Lessee’s own cost and expense, shall make alterations, renovations, repairs, improvements and additions to the Leased Property or any part thereof and substitutions and replacements therefor (collectively, “ Alterations ”) which are (A) necessary or advisable to repair or maintain the Leased Property or the Site in the condition required by Section 9.1 or (B) necessary or advisable to restore the Leased Property and the Site to its condition existing prior to a Casualty or Condemnation to the extent required pursuant to Article XIII and (ii) so long as no Material Default or Event of Default is continuing, the Lessee, at the Lessee’s own cost and expense, may undertake Alterations to the Leased Property so long as, in each case, such Alterations comply in all material respects with Applicable Laws and Regulations and are consistent and comply with Section 9.1 and subsection (b) of this Section 9.2.

(b) The making of any Alterations must be in compliance with the following requirements:

(i) The Lessee shall not make any Alterations in violation of the terms of any restriction, easement, condition, covenant or other similar matter affecting title to or binding on the Leased Property or the Site.

(ii) No Alterations shall be undertaken until the Lessee shall have procured and paid for, so far as the same may be required from time to time, all permits and authorizations relating to such Alterations of all municipal and other Authorities having jurisdiction over the Leased Property or the Site. The Lessor, at the Lessee’s expense, shall join in the application for any such permit or authorization and execute and deliver any document in connection therewith, whenever such joinder is necessary or advisable; provided, however, such joinder shall not constitute or be deemed to constitute, any assumption or responsibility or liability whatsoever.

(iii) The Alterations shall be completed in a good and workmanlike manner and in compliance in all material respects with all Applicable Laws and Regulations then in effect and with the standards imposed by any insurance policies required to be maintained hereunder.

(iv) All Alterations shall, when completed, be of such a character as to not materially diminish (A) the utility, useful life or functional capability of the Facility as Class A office buildings, (B) the then current Fair Market Value, or (C) the Fair Market

Value as of the Maturity Date, and provided that the Facility at all times shall remain Class A office buildings.

(v) The Lessee shall have made adequate arrangements for payment of the cost of all Alterations when due so that the Leased Property and the Site shall at all times be free of Liens for labor and materials supplied or claimed to have been supplied to the Leased Property or the Site, other than Permitted Liens; provided , that the Lessee shall have the right to engage in Permitted Contests in accordance with Section 9.5 or otherwise bond over any Liens for labor or materials.

(vi) The Alterations must be located solely on the Site.

SECTION 9.3. Alterations Subject to Lease .

The following Alterations without further act shall be deemed to constitute a part of the Leased Property and be subject to this Lease:

(a) Alterations that are in replacement of or in substitution for a portion of the Facility:

(b) Alterations that are required to be made pursuant to the terms of Section 9.1 or 9.2(a)(i) hereof; or

To the extent any Alterations are deemed to constitute part of the Leased Property pursuant to the preceding sentence, the Lessee hereby acknowledges and agrees that such will become upon installation property of the Lessor. The Lessee will, at the Lessor’s request, execute and deliver any documents reasonably necessary to evidence or cause the vesting of such interests in and to such Alterations to the Lessor.

If such Alterations are not within any of the categories set forth in clauses (a) through (c) of this Section 9.3 and have not become property of the Lessor in accordance therewith, then such Alterations shall remain the sole property of the Lessee and such Alterations shall not be deemed to be Alterations which are part of the Leased Property. All such Alterations not constituting part of the Leased Property may, so long as no Material Default or Event of Default is continuing, be removed at any time by the Lessee other than Alterations the removal of which would result in a violation of Applicable Laws and Regulations. The Lessee shall at its expense prior to the Lease Expiration Date repair any damage to the Leased Property or the Site caused by the removal of such Alterations. The Lessor (or the purchaser of the Leased Property if the Lessee elects the Return Option or in connection with a sale pursuant to Section 18.1) may purchase from the Lessee any such Alterations (if not already owned by the Lessor) that the Lessee intends to remove from the Leased Property or the Site prior to the Lease Expiration Date, which purchase shall be at the Fair Market Value of such Alterations as determined by the Appraiser or an appraiser reasonably selected by the Lessor at the time of such purchase.

SECTION 9.4. Maintenance and Repair Reports .

During the Lease Term, the Lessee shall keep maintenance and repair reports regarding the Facility in sufficient detail, on the same basis as records are kept for similar properties owned or leased by the Lessee or its Affiliates and as otherwise would be kept by the lessees of other similar Class A office buildings of comparable age and size, to indicate the nature and date of major work done. Such reports shall be kept on file by the Lessee at its offices during the Lease Term, and shall be made available at the Lessee’s office to the Lessor upon reasonable request.

SECTION 9.5. Permitted Contests .

If, to the extent and for so long as (a) a contest of the legality, validity or applicability to the Leased Property or the Site or any interest therein of, or the operation, use or maintenance thereof by the Lessee of (i) any Applicable Laws and Regulations, (ii) any term or condition of, or any revocation or amendment of, or other proceeding relating to, any Governmental Action, or (iii) any Lien or Tax shall be made in good faith, by appropriate proceedings initiated timely and diligently prosecuted, by the Lessee or (b) compliance with such Applicable Laws and Regulations, Governmental Action, Lien or Tax shall have been excused or exempted by a valid nonconforming use permit, waiver, extension or forbearance, the Lessee shall not be required to comply with such Applicable Laws and Regulations, Governmental Action, Lien or Tax but only if and so long as any such contest shall constitute a Permitted Contest and shall be conducted in accordance with Section 7.1(c) or Section 7.2(b), as applicable, of the Participation Agreement.

The Lessor will not be required to join in any Permitted Contest unless a provision of any Applicable Laws and Regulations requires, or, in the good faith opinion of the Lessee, it is materially helpful to the Lessee that such proceedings be brought by or in the name of the Lessor; and in that event, the Lessor will join in the proceedings or permit them or any part thereof to be brought in its name only if and so long as (i) no Material Default or Event of Default is continuing, (ii) the Lessee has not elected the Return Option, and (iii) the Lessee pays all related out-of-pocket expenses, and the Lessee shall be deemed to have acknowledged and agreed that the Lessor is indemnified therefor pursuant to Section 7.1 or Section 7.2 of the Participation Agreement.

ARTICLE X

USE

SECTION 10.1. Use.

The Site on which the Facility is located shall be used solely for the purposes of constructing and operating two Class A office buildings. The Lessee shall not use the Leased Property or the Site or any part thereof for any purpose or in any manner that would not keep the Facility in a first-class condition consistent with other similar Class A office buildings of comparable age and size or that would diminish (A) the utility, useful life or functional capability of the Facility as Class A office buildings, (B) the then current Fair Market Value, or (C) the Fair Market Value as of the Maturity Date. The Lessee shall use the Leased Property and the Site in compliance in all material respects with (a) any Applicable Laws and Regulations (including Environmental Laws), except to the extent permitted by Section 9.5, (b) the Insurance Requirements, and (c) all of the Operative Documents. The Lessee shall pay, or cause to be paid,

all charges and costs required in connection with the use of the Leased Property and the Site in accordance with this Lease and the Participation Agreement. The Lessee shall not commit or permit any waste of the Leased Property or any part thereof or the Site.

SECTION 10.2. Trade Compliance.

The Lessee shall comply with the Trading with the Enemy Act, as amended, and all of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended), federal sanctions and embargo laws and regulations, and the USA PATRIOT Act in the conduct of all of its activities, including the following: (i) the use, assignment, or sublease of Site or the Facility by Prohibited Persons; and (ii) the export of any products manufactured at the Facility to any destination or Prohibited Person.

ARTICLE XI

INSURANCE

SECTION 11.1. Required Coverages .

The Lessee will provide or cause to be provided insurance with respect to the Leased Property and the Site of a character usually obtained by the Lessee and its Affiliates against loss or damage of the kinds and in the amounts customarily insured against by the Lessee and its Affiliates with respect to similar properties, and carry such other insurance as is usually carried by the Lessee and its Affiliates with respect to similar properties; provided , that in any event the Lessee will maintain insurance during the Lease Term, as follows:

(a) Comprehensive General Liability Insurance . The Lessee will maintain comprehensive general liability insurance, including coverages for contractual liability, against third-party bodily injury, including death, and third-party property damage, written on a claims-made basis, including against Lessor, in an amount at least equal to $30,000,000 per occurrence and $30,000,000 in the aggregate during the Lease Term (which coverage may be met in combination with Primary Commercial General Liability coverage and Umbrella Liability excess coverage). Such coverage may be subject to deductibles or self-insurance of no more than such amount that is customarily carried by the Lessee with respect to similar properties, whichever is lower. Such liability insurance shall name the Administrative Agent, the Collateral Agent, Lessor and each of the other Participants as additional insureds and such parties shall continue to be named as additional insureds, and such policy shall remain in effect, until at least the third (3 rd ) anniversary of the Maturity Date.

Without limiting the foregoing, Lessee will maintain a pollution legal liability policy covering itself. Such coverage shall be written on a claims made basis and shall apply to sudden and non-sudden pollution conditions. Such policy shall have limits not less than $15,000,000 per occurrence and $15,000,000 in the aggregate claims for bodily injury, property damage and cleanup costs, shall be in effect for a period of three years from and after the Completion Date and shall name Lessor as an additional insured with respect to such policy.

(b) Property Insurance . From and after the Completion Date, the Lessee will maintain insurance against loss or damage covering the Leased Property, the Site and any portion thereof

against such risks customarily maintained by the Lessee with respect to similar properties, including coverage for the perils of earth movement (including but not limited to earthquake and landslide) and fire, hurricanes and flood (if the property is located in a high-risk flood zone), in an amount not less than the Lease Balance or the replacement cost of the Facility (including any costs that may be required to cause the Facility to be reconstructed to comply with then current Applicable Laws and Regulations), whichever is greater. Such property insurance coverage may be subject to deductibles or self-insurance in amounts to be approved by Lessor. Such property insurance shall name the Administrative Agent, the Collateral Agent, Lessor and each of the other Participants as additional insureds and Administrative Agent as loss payee as their interests may appear.

(c) Automobile Liability Insurance: Automobile liability insurance for the Lessee’s liability arising out of claims for bodily injury and property damage covering all owned (if any), leased (if any), non-owned and hired vehicles used in the performance of the Lessee’s obligations under the Lease with a $2,000,000 minimum limit per accident for combined bodily injury and property damage and containing appropriate no-fault insurance provisions wherever applicable. The automobile liability insurance shall have no self-insurance amounts and shall have deductibles not in excess of $50,000.

(d) Worker’s Compensation and Employer’s Liability Insurance : Worker’s Compensation and Employer’s Liability Insurance, with respect to any Contractor or the Developer, if applicable, including occupational illness or disease coverage, or other similar social insurance in accordance with the laws of the nation, state, territory or province exercising jurisdiction over the Leased Property. Employer’s Liability coverage shall have a limit of $1,000,000 per accident, per employee for disease and in the aggregate for disease.

(e) Builders’ Risk Insurance . From and after the Completion Date with respect to any rebuilding of the Leased Property under Section 13.4 hereof, the Lessee will maintain a builders’ all-risk insurance policy on terms and conditions acceptable to the Required Participants and in an amount not less than the higher of replacement cost of the Facility and the aggregate amount of the outstanding Lease Balance at any time, subject to a deductible not in excess of $50,000 per occurrence but, in the case of flood, $25,000 per occurrence and in the case of named storms, $25,000 per occurrence and, in the case of earth movement, not in excess of $50,000 per occurrence (and not in the form of self-insurance) and shall have no other self-insurance with respect thereto. Such builders’ risk insurance policy shall provide for property damage on an “all risk” basis in form and substance reasonably acceptable to Administrative Agent, subject to limits, perils, exclusions and deductibles listed on the policies and its forms, insuring Lessee, each Participant, the Developer, any contractor and subcontractors at any tier, as their interests may appear, including coverage for the perils of earth movement (including but not limited to earthquake, landslide and subsidence), damage from collapse, coverage for fire, hurricanes and flood (if the property is located in a high-risk flood zone), strike, riot, vandalism, sabotage and damage or loss caused by machinery accidents and operational and performance testing and start-up. Such builders’ all-risk insurance shall name the Administrative Agent, the Collateral Agent, Lessor and each of the other Participants as additional insureds and Administrative Agent as loss payee as their interests may appear. The builder’s risk policy shall provide coverage for (a) the Facility, including buildings, non-temporary structures, machinery, equipment, facilities, fixtures, supplies and other property constituting part of the leased property including but not limited to

boiler and machinery insurance covering pressure vessels, air tanks, boilers, machinery, pressure piping, heating, ventilation and air conditioning equipment, and elevator and escalator equipment and other properties constituting the Facility, (b) coverage for foundations, including underground water and sewer mains, pilings and other property below the surface of the ground, and (c) electronic equipment. In addition,

(i) Property Covered: The builder’s risk policy shall provide coverage for (a) the Facility, including buildings, all preliminary work, temporary works, non-temporary structures, machinery, equipment, facilities, fixtures, supplies and other property constituting part of the leased property including but not limited to boiler and machinery insurance covering pressure vessels, air tanks, boilers, machinery, pressure piping, heating, ventilation and air conditioning equipment, and elevator and escalator equipment and other properties constituting the Facility, (b) coverage for foundations, including underground water and sewer mains, pilings and other property below the surface of the ground, (c) electronic equipment and (d) property of others in the care, custody or control of the Lessee, a Lessee Person or Lessor.

(ii) Special Clauses: The builder’s risk policy shall include (a) earthquake coverage in an amount not less than the higher of replacement cost of the Facility and the aggregate amount of all Advances outstanding at any time with a deductible not to exceed $100,000 per occurrence, (b) a requirement that the insurer pay losses within a reasonable period of time after receipt of an acceptable proof or partial proof of loss, (c) a clause making this insurance primary over any other insurance and (d) an unintentional errors and omissions clause.

(iii) Additional Coverages: The builder’s risk policy shall insure (a) off-site coverage with sub-limits sufficient to insure the full replacement value of any equipment, supplies and materials not stored on the Site, (b) the removal of debris with a sublimit of not less than the lesser of twenty-five percent of the minimum builder’s risk coverage required hereunder and $15,000,000 per occurrence, (c) inland transit coverage with sublimits to insure the largest single shipment to or from the Site from designated storage facilities, (d) project management costs including architects’ fees, engineering costs, permit application fees, and other necessary fees or costs directly incurred in order to replace damage to insured property and (e) pollution cleanup and removal with a sublimit not less than $1,500,000 per occurrence.

(iv) Prohibited Exclusions: The builder’s risk policy shall not contain any (a) coinsurance provisions, (b) exclusion for loss or damage covered under any guarantee or warranty arising out of an insured peril, (c) exclusion for resultant damage caused by faulty workmanship, designs, specifications or materials or (d) exclusion for resultant damage to insured property from a peril not otherwise excluded caused by ordinary wear and tear, gradual deterioration, normal subsidence, settling, cracking, expansion or contraction, and faulty workmanship, design or materials.

(v) Sum Insured: The builder’s risk policy shall (a) be on a completed value form, with no periodic reporting requirements, (b) insure the Facility for 100% of its insurable replacement cost value, but in no case less than the aggregate amount of all

Advances outstanding at any time, (c) value losses at replacement cost, without deduction for physical depreciation or obsolescence including customs duties, taxes and fees (if rebuilt or repaired), and (d) insure earth movement and named-wind coverage at the greater of (i) 100% of the Facility’s replacement cost and (ii) outstanding Advances.

(f) Other Insurance . Insurance shall not cover any terrorism or war risks unless the Lessee carries insurance for such risks generally on similar property it owns or leases. To the extent any portion of the Facility is located in an area identified as a special flood hazard area by the Federal Emergency Management Agency or other applicable Authority, the Lessee shall (i) obtain flood insurance for the Facility in an amount not less than the greater of (1) 100% of the replacement cost of the Facility, including any costs that may be required to cause the Facility to be reconstructed to comply with then current Applicable Laws and Regulations, and (2) the aggregate amount of all Advances outstanding at any time, and (ii) require and shall ensure that such flood insurance at all times names Lessor as an additional insured and as loss payee, as its interests may appear.

(g) Insurance Requirements. Insurance provided pursuant to this Section 11.1 (other than permitted self-insurance) shall be written by reputable insurance companies that are financially sound and solvent with a rating of at least “A-/VIII” by A.M. Best’s or a claims paying rating of “A-” by S&P or by other insurers approved in writing by the Lessor and shall be with such insurance companies as were approved by the Lessor on the Closing Date. Each policy referred to in this Section 11.1 shall provide that: (i) it will not be canceled, materially modified or its limits reduced, or allowed to lapse without renewal, except after not less than thirty (30) days’ prior written notice to the Administrative Agent and Lessor and not less than ten (10) days’ prior written notice to the Administrative Agent and Lessor for the non-payment of premium; (ii) the interests of the Administrative Agent, the Collateral Agent, Lessor and any other Participant shall not be invalidated by any act or negligence of or breach of warranty or representation by the Lessee or any Person having an interest in the Leased Property or the Site; (iii) such insurance is primary and non-contributory with respect to any other insurance carried by or available to the Administrative Agent, the Collateral Agent, the Lessor or any other Participant; (iv) the insurer shall waive customary rights of subrogation, setoff, counterclaim, or other deduction, whether by attachment or otherwise, against any additional insured or loss payee; (v) such policy shall contain a severability clause providing for coverage of the Administrative Agent, the Collateral Agent, the Lessor and each other Participant as if separate policies had been issued to each of them; (vi) the Lessee will notify the Administrative Agent and the Lessor promptly of any policy cancellation, reduction in policy limits, lapse, modification or amendment; and (vii) the insurer shall waive all claims for premiums against the Administrative Agent, the Collateral Agent, the Lessor and any other Participant.

SECTION 11.2. Delivery of Insurance Certificates .

Throughout the Lease Term, at the time each of the Lessee’s insurance policies is renewed (but in no event less frequently than once every twelve (12) months) or upon written request by the Lessor during the continuance of an Event of Default, the Lessee shall deliver to the Administrative Agent, the Collateral Agent, the Lessor and each other Participant certificates of insurance evidencing that all insurance required by Section 11.1 to be maintained by the Lessee with respect to the Leased Property is in effect. Concurrent with the delivery of certificates required

above, the Lessee shall furnish the Administrative Agent, the Collateral Agent, the Lessor and each other Participant with a letter from an independent broker or the insurer(s) signed by an officer of the broker or insurer(s), stating that in the opinion of such broker or insurer(s) the insurance so carried is in compliance with Section 11.1. Upon written request by the Administrative Agent, the Lessee will promptly furnish to the Administrative Agent copies of all insurance policies, applications, binders and cover notes or other evidence of insurance required to be maintained hereunder.

No provision of Article XI or any other Operative Document shall impose on the Administrative Agent, the Collateral Agent, the Lessor or any other Participant any obligation to verify the existence or adequacy of the insurance coverage to be maintained pursuant to Article XI, nor shall any such Person be responsible for any representations or warranties made by or on behalf of the Lessee or any Cubic Person to any insurance company or underwriter. Any failure on the part of Lessor to obtain the evidence of insurance required by Article XI from the Lessee and/or failure of such to identify any noncompliance of such evidence of insurance shall not constitute a waiver of any of the insurance requirements in Article XI.

SECTION 11.3. Other Insurance .

Lessee agrees that nothing in this Article XI shall prohibit the Lessor or any other Participant from maintaining its own insurance coverage, at the expense of such Person, which coverage shall not reduce the obligations of the Lessee under this Article XI; provided, however, that no such insurance shall be maintained if its maintenance would prevent the Lessee from maintaining insurance as to the Leased Property and the Site with insurers when required to do so herein.

ARTICLE XII

ASSIGNMENT AND SUBLEASING

During the Lease Term, the Lessee may not assign, mortgage, transfer or pledge to any Person (including any Affiliate), at any time, in whole or in part, its right, title or interest in, to or under this Lease or any portion of the Leased Property or the Site without the prior written consent of the Lessor, which may be granted or withheld in its sole and absolute discretion provided, however, that Lessee may sublease its rights in connection with this Lease or the Leased Property to any Person with the prior consent of the Participants, not to be unreasonably withheld or delayed at any time, it being agreed that it would be reasonable to withhold such consent if, among other things, (x) any such sublease would subject any of the Participants to a violation of laws or regulations then applicable to any of the Participants, including, without limitation, those promulgated by OFAC, (y) an Event of Default shall be continuing or, after giving effect to such sublease, would exist, or (z) any such sublease extends beyond the Base Term expiration date, is not expressly subject and subordinate to the Lease or Lessee does not remain primarily liable for all obligations under the Lease.

Notwithstanding the foregoing, the Lessee will have the right at any time during the Lease Term, without the written consent of Lessor so long as no Material Default or Event of Default shall be continuing, to sublease all of the Leased Property to any Affiliate, provided that (i) no sublease may be made to any Person which would subject a Participant to a violation of Applicable

Laws and Regulations applicable to such Participant including, without limitation, those promulgated by OFAC, and (ii) such sublease is expressly subject and subordinate to the Lease and the Lessee remains primarily liable for all obligations hereunder. Lessee shall give Lessor and Administrative Agent prompt written notice of any such sublease which notice shall include copies of each such sublease. Lessee hereby agrees that no sublease hereunder will violate the terms of the Ground Lease.

No sublease hereunder will discharge or diminish any of the Lessee’s obligations hereunder or any of the Lessee’s obligations hereunder or under the other Operative Documents and the Lessee shall remain directly and primarily liable under the Lease with respect to the Leased Property and the Operative Documents to which it is a party. Each sublease permitted hereby shall be made and shall expressly provide in writing that it is subject and subordinate to this Lease and the rights of the Lessor hereunder, shall expressly provide for the surrender of the Leased Property by the sublessee at the election of the Lessor after an Event of Default, shall provide that such provisions may be directly enforced by the Lessor, and shall provide that such sublessee expressly agrees to comply with the use restrictions set forth in Article X hereof. All such subleases under this Article XII shall expressly provide in writing for termination on or prior to the Lease Expiration Date unless the Lessee shall purchase all of the Leased Property pursuant to Section 21.1(a) and Article XX of this Lease.

Notwithstanding the foregoing, (a) the Lessee will have the right at any time during the Lease Term, without the prior written consent of the Lessor, to purchase the Leased Property pursuant to Section 20.1 hereof, (b) the Lessee may assign, at any time during the Lease Term, in whole but not in part, its right, title and interest in, to and under this Lease as a result of any transaction permitted under Section 5.3 of the Participation Agreement, and (c) the Lessee may otherwise assign, in whole but not in part, its right, title and interest in, to and under this Lease to any Affiliate of the Lessee without the prior written consent of the Lessor and Administrative Agent at the direction of Required Participants provided that (i) the parties enter into an assignment agreement as to all of Lessee’s obligations under the Operative Documents and related amendments thereto, each in form and substance reasonably satisfactory to the Lessor, (ii) after such assignment, the Lessee shall remain fully liable under the Operative Documents or shall issue an irrevocable and unconditional guaranty of the obligations of such assignee thereunder in form and substance reasonably satisfactory to the Lessor, (iii) prior to such assignment and immediately after giving effect thereto, no Default or Event of Default shall be continuing, (iv) all filings of or in respect of any such assignment necessary to protect the rights of the Lessor in the Leased Property, the Site and the other Operative Documents are made in a timely fashion, (v) without limiting any provisions of this Article XII, any such assignment shall include an appropriate provision for the operation, maintenance and insurance of the Leased Property and the Site in accordance with the terms hereof, (vi) the Lessor shall have received certificates and opinions of counsel with respect to the foregoing and such other matters as the Lessor may reasonably request, (vii) such assignment will not result in the imposition of any unindemnified Taxes, (viii) the Lessor shall receive such other documents and instruments and the Lessee shall take such further acts as the Lessor may reasonably request, (ix) such assignment will not, with respect to any Participant, violate the use restrictions set forth in Article X hereof or Applicable Laws and Regulations including, without limitation, those promulgated by OFAC, and (x) the Lessee shall provide to the Lessor not less than thirty (30) days’ prior written notice of such assignment, such notice to identify the assignee.

ARTICLE XIII

LOSS, DESTRUCTION, CONDEMNATION OR DAMAGE; ENVIRONMENTAL

SECTION 13.1. Event of Taking, Event of Loss.

(a) If an Event of Taking shall occur during the Lease Term, the Lessee shall give the Lessor prompt written notice of such occurrence and the date thereof and on the next succeeding Payment Date (the “ Next Date ”) after such Event of Taking shall have occurred or, if such Event of Taking shall have occurred within five (5) Business Days preceding a Payment Date, then on the next succeeding Payment Date after such Next Date shall have occurred, this Lease shall terminate and, as compensation for such Event of Taking, the Lessee shall pay to the Lessor on such Payment Date the Purchase Amount.

(b) If an Event of Loss shall occur during the Lease Term, the Lessee shall give the Lessor prompt written notice of such occurrence and the date thereof which notice shall contain an election by the Lessee to either (i) purchase the Leased Property from the Lessor on the second Next Date after the date such Event of Loss shall have occurred, but in no event sooner than sixty (60) days after the date of such Event of Loss, at a purchase price equal to the Purchase Amount (and if the Lessee makes such election the Purchase Amount shall become due and payable and the Lessee shall purchase the Leased Property on such Payment Date) or (ii) provided no Material Default or Event of Default is continuing and rebuilding of the Facility is capable of being completed prior to the end of the Lease Term (as certified in writing by the Construction Consultant), rebuild the Facility and continue the Lease (it being understood that insurance proceeds shall be paid over by the Administrative Agent to the Lessee against costs actually incurred by the Lessee and the Lessee shall be entitled to any excess insurance proceeds), subject further to the obligations of the Lessee under the Operative Documents. If the Lessee elects to rebuild the Facility, the Lessee shall rebuild the Facility to the condition required to be maintained pursuant to Section 9.1.

(c) Upon receipt in full by the Administrative Agent, as assignee of Lessor, of the Purchase Amount pursuant to this Section 13.1, the Lease shall terminate and the obligations of the Lessee hereunder and under the other Operative Documents (in each case, other than any obligations expressed herein or in any other Operative Document as surviving termination of this Lease or such other Operative Document) shall terminate as of the date of such receipt. Upon such receipt in full of the Purchase Amount, the Leased Property (including all rights under the Ground Lease) and all rights to any remaining awards or proceeds shall be transferred to the Lessee or its designee in accordance with Section 23.11 hereof.

SECTION 13.2. Application of Payments Relating to an Event of Taking or an Event of Loss .

Regarding any Event of Taking, all condemnation awards and proceeds and property insurance proceeds received at any time by the Lessee during the Lease Term from any Authority or other Person with respect to any Event of Taking shall be promptly remitted to the Administrative Agent, as assignee of Lessor (up to, but not exceeding, the Purchase Amount), and, unless an Event of Default as described in clauses (h) or (i) of Article XVII hereof is continuing, upon the indefeasible payment in full of the Purchase Amount in accordance with Section 13.1(a),

the Administrative Agent and Lessor shall assign to the Lessee all rights to any condemnation awards and proceeds and property insurance proceeds and any such condemnation awards and proceeds and property insurance proceeds remaining thereafter or thereafter received shall be paid by the Administrative Agent over to the Lessee, or as the Lessee may direct, and any receipt of such proceeds shall satisfy the Lessee’s obligations under Section 13.1(a).

Regarding any Event of Loss, all awards and proceeds and property insurance proceeds received at any time by the Lessee during the Lease Term from any Person with respect to any Event of Loss shall be promptly remitted to the Administrative Agent (up to, but not exceeding, the Purchase Amount) and, unless an Event of Default as described in clauses (h) or (i) of Article XVII hereof is continuing, upon the indefeasible payment in full of the Purchase Amount in accordance with Section 13.1(b)(i), the Administrative Agent and Lessor shall assign to the Lessee all rights to any awards and proceeds and property insurance proceeds and any such awards and proceeds and property insurance proceeds remaining thereafter or thereafter received shall be paid by the Administrative Agent over to the Lessee, or as the Lessee may direct, and any receipt of such proceeds shall satisfy the Lessee’s obligations under Section 13.1(b); provided, if the Lessee elects to rebuild the Facility in accordance with Section 13.1(b)(ii), then any awards and proceeds and property insurance proceeds shall be applied as described in Section 13.1(b)(ii).

SECTION 13.3. Application of Certain Payments Relating to a Condemnation .

In case of a Condemnation of the Leased Property or a portion thereof (which, for clarification, is not an Event of Taking), this Lease shall remain in full force and effect, without any abatement or reduction of Rent, and the awards and proceeds received from any Authority relating to such Condemnation for the affected portion of the Leased Property shall, so long as no Material Default or Event of Default shall be continuing, be paid by the Administrative Agent to the Lessee and shall be used by the Lessee to repair and restore the affected Leased Property to the condition required by Section 9.1. Notwithstanding anything herein to the contrary, any portion of such awards and proceeds that is awarded with respect to the time period after the expiration or termination of the Lease Term (unless the Lessee shall have exercised an option to purchase the Leased Property and consummated such purchase) shall be paid to the Administrative Agent; provided , that if the Lessee has paid the Purchase Amount to the Administrative Agent such proceeds (or the portion of such proceeds in excess of portion thereof applied to the Purchase Amount) shall be paid by the Administrative Agent over to the Lessee. Regarding any Condemnation occurring during the Lease Term, the Lessee shall give the Administrative Agent and Lessor written notice of such Condemnation.

SECTION 13.4. Application of Certain Payments Relating to a Casualty .

Upon any Casualty during the Lease Term with respect to the Leased Property (which, for clarification, is not an Event of Loss), this Lease shall remain in full force and effect, without any abatement or reduction of Rent and, regarding any Casualty, if the cost of repair would exceed One Million Dollars ($1,000,000), the Lessee shall give to the Administrative Agent and Lessor written notice of such Casualty. As soon as practicable after such Casualty (which, for clarification, is not an Event of Loss) with respect to the Leased Property has occurred, subject to receipt of insurance proceeds if held by Administrative Agent in accordance with Section 13.1(b)(ii), the Lessee shall repair and rebuild the affected portions of the Leased Property suffering such Casualty

(or cause such affected portions to be repaired and rebuilt) to the condition required to be maintained by Section 9.1 and so that the value, utility, useful life and functional capability of such item as restored is at least equivalent to the value, utility, useful life and functional capability of such item as in effect immediately prior to the occurrence of such Casualty (assuming the Facility was being maintained in accordance with Section 9.1); provided , that at all times during such repair or rebuilding the Lessee shall maintain the Facility in accordance with Section 9.1.

SECTION 13.5. Proceeds .

Upon the occurrence of any Event of Taking, if a Material Default or Event of Default is continuing at such time, any awards or proceeds received from any Authority or any other Person or any property insurance proceeds, in either case, with respect to any Event of Taking (a) shall be paid to and held by the Administrative Agent and (b) if an Event of Default is continuing, then in the Administrative Agent’s sole and absolute discretion, such amounts may be applied to the amounts then due and owing or accrued by the Lessee pursuant to the Operative Documents or as Lessee may direct so long as no Material Default or Event of Default is continuing.

Upon the occurrence of any Event of Loss, Casualty or Condemnation, if an Event of Default or Default is continuing at such time or if the Lessee has elected either to rebuild the Facility or to purchase the Facility pursuant to Section 13.1 hereof, any awards or proceeds received from any Authority or any other Person or any property insurance proceeds, in either case, with respect to such Event of Loss, Casualty or Condemnation, shall be held by the Administrative Agent. If an Event of Default is then continuing, then in the Administrative Agent’s sole and absolute discretion, such amounts may be applied to the amounts then due and owing or accrued by the Lessee pursuant to the Operative Documents. If no Material Default or Event of Default is then continuing, any such awards or proceeds received from any Authority or any insurance proceeds with respect to any Event of Loss, Casualty or Condemnation, in each case, shall be held by the Administrative Agent and made available to the Lessee to the extent the Lessee rebuilds the Facility pursuant to Section 13.1, to pay costs actually incurred by the Lessee to restore the Leased Property as required herein in accordance with Section 13.1 and any awards or proceeds received from any Authority or any insurance proceeds remaining after such restoration shall be paid by the Administrative Agent over to the Lessee. To the extent the Lessee purchases the Facility pursuant to Section 13.1, after the Lessee has satisfied all payment obligations pursuant to Section 13.1 regarding such purchase, so long as no Event of Default as described in clauses (h) or (i) of Article XVII hereof is continuing (as evidenced by an order of a court), any awards or proceeds received from any Authority or any insurance proceeds shall be paid by Administrative Agent over to Lessee.

SECTION 13.6. Negotiations .

In the event any part of the Leased Property becomes subject to condemnation or requisition proceedings during the Lease Term, the Lessee shall give notice thereof to the Administrative Agent and Lessor promptly after the Lessee has knowledge thereof and, to the extent permitted by any Applicable Laws and Regulations, the Lessee shall control the negotiations with the relevant Authority unless a Material Default or Event of Default exists or such condemnation or requisition occurs during the Construction Period, in which case the Lessor shall be entitled to control such negotiations in consultation with the Lessee; provided , that in any event

the Lessor may participate at the Lessor’s expense (or if a Material Default or Event of Default exists or such negotiations occur during the Construction Period, at the Construction Agent’s expense) in such negotiations. The Lessee shall give to the Lessor such information, and copies of such documents, which relate to such proceedings, or which relate to the settlement of amounts due under insurance policies required by Section 11.1, and are in the possession of the Lessee, as are reasonably requested by the Lessor. If the proceedings relate to an Event of Taking, the Lessee shall act diligently in connection therewith. Nothing contained in this Section 13.6 shall diminish the Lessor’s rights with respect to condemnation awards or proceeds and property insurance proceeds under Section 13.1.

SECTION 13.7. No Rent Abatement .

Rent shall not abate hereunder by reason of any Casualty, any Event of Loss, any Event of Taking or any Condemnation of any portion of the Leased Property, and the Lessee shall continue to perform and fulfill all of the Lessee’s obligations, covenants and agreements hereunder notwithstanding such Casualty, Event of Loss, Event of Taking or Condemnation until the Lease Expiration Date or the purchase of the Leased Property by the Lessee in accordance with Section 13.1 hereof.

SECTION 13.8. Environmental Matters .

At the Lessee’s sole cost and expense, the Lessee shall promptly and diligently and in material accordance with Applicable Laws and Regulations commence and complete any response, clean up, remedial or other action necessary to remove, clean up or remediate any Environmental Violation with respect to the Leased Property or the Site to the extent required of the Lessee, any Participant, the Collateral Agent or the Administrative Agent, as required by the DEH and otherwise in order to comply with Applicable Laws and Regulations. Lessee shall, upon completion of remedial action by the Lessee (i) with respect to any Material Environmental Violation described in clause (ii) of the definition thereof, cause to be prepared by a Responsible Officer of the Lessee a certificate describing in sufficient detail such Environmental Violation and the actions taken by the Lessee (or its agents) in response to such Environmental Violation and a statement of such Responsible Officer of the Lessee that such Environmental Violation has been remedied in compliance in all material respects with Applicable Laws and Regulations and (ii) with respect to any other Material Environmental Violation, cause to be prepared by the Environmental Expert a report describing in sufficient detail such Environmental Violation and the actions taken by the Lessee (or its agents) in response to such Environmental Violation, and a statement by the Environmental Expert that the Environmental Violation has been remedied in compliance in all material respects with Applicable Laws and Regulations, and a letter or other document issued by the DEH or other appropriate Authority having jurisdiction with respect to the Leased Property or the Site, as applicable, that would allow continued use of the Leased Property and the Site for their uses as of the date hereof, and confirming that no further action is required with respect to the investigation, cleanup, remediation or monitoring of the Leased Property or the Site with respect to such Environmental Violation. Each Environmental Violation shall be remedied in full prior to the Maturity Date unless the Leased Property has been purchased by the Lessee in accordance with Section 20.1, 20.2 or 21.1(a). Nothing in this Article XIII shall reduce or limit the Lessee’s obligations under Article VII of the Participation Agreement (which obligations shall include any Claims arising from such actions). On each anniversary of the Closing

Date, the Lessee shall deliver to the Lessor (i) copies of any work plans, reports and other documents submitted to DEH, (ii) copies of all correspondence with or from DEH, and (iii) a copy of any supplement or modification to the regulatory concurrence letter from DEH.

SECTION 13.9. Notice of Environmental Matters .

Promptly upon the Lessee’s obtaining knowledge of the existence of any Material Environmental Violation with respect to the Leased Property or the Site, the Lessee shall notify the Lessor in writing of such Material Environmental Violation. Promptly, but in any event within thirty (30) days from the date a Responsible Officer of the Lessee has actual knowledge thereof, the Lessee shall provide to the Lessor written notice of any pending or, to the Lessee’s knowledge, threatened claim, action or proceeding involving any Material Environmental Violation with respect to the Leased Property or the Site. All such notices shall describe in reasonable detail the nature of the claim, action or proceeding and the Lessee’s proposed response thereto. In addition, the Lessee shall provide to the Lessor, within thirty (30) days of receipt, copies of all material written communications with any Authority relating to any such Material Environmental Violation for which notice was provided. The Lessee shall also promptly provide such detailed reports of any Material Environmental Violation for which notice was provided as may reasonably be requested by the Administrative Agent or any Participant. For purposes hereof, “ Material Environmental Violation ” shall mean any Environmental Violation (i) which imposes or, in the good faith judgment of the Lessee, the Administrative Agent, the Collateral Agent, or any Participant, could reasonably be expected to impose criminal liability on the Administrative Agent, the Collateral Agent, or any Participant or (ii) the cost of which to remediate is in excess of Five Hundred Thousand Dollars ($500,000).

ARTICLE XIV

CERTAIN DUTIES AND RESPONSIBILITIES

The Lessor undertakes to perform such duties and only such duties as are specifically set forth herein and in the other Operative Documents, and no implied covenants or obligations shall be read into this Lease against the Lessor, and the Lessor agrees that it shall not, nor shall it have a duty to, manage, control, use, sell, maintain, insure, register, lease, operate, modify, dispose of or otherwise deal with the Leased Property or the Site in any manner whatsoever, except as required by the terms of the Operative Documents and as otherwise provided herein.

ARTICLE XV

INSPECTION

Upon five (5) Business Days prior notice to the Lessee, the Lessor and the Rent Assignees or their respective authorized representatives (the “ Inspecting Parties ”) at any time during the Lease Term (provided that, except during the continuance of an Event of Default, the Lessor and the Rent Assignees shall limit their inspections to no more than one time in any calendar year and the Lessor shall coordinate such inspections as set forth below) may inspect (a) the Leased Property and the Site and (b) the books and records of the Lessee and its Affiliates relating to the Leased Property and the Site and make copies and abstracts therefrom. All such inspections shall be (i) during the Lessee’s normal business hours, (ii) subject to the Lessee’s reasonable safety and

confidentiality requirements, (iii) accompanied by a representative of Lessee, and (iv) at the expense and risk of the Inspecting Parties, except that if an Event of Default is continuing, the Lessee shall reimburse the Inspecting Parties for the costs and reasonable out-of-pocket expenses of such inspections and, except for the Inspecting Party’s gross negligence or willful misconduct, such inspection shall be at the Lessee’s risk. In addition, Inspecting Parties shall use commercially reasonable efforts to coordinate their visits together and inspect the Leased Property and the Site in groups to the extent reasonably practicable. No inspection shall unreasonably interfere with the Lessee’s operations. None of the Inspecting Parties shall have any duty to make any such inspection or inquiry. None of the Inspecting Parties shall incur any liability or obligation by reason of making any such inspection or inquiry unless and to the extent such Inspecting Party causes damage to the Leased Property or the Site or any property of the Lessee or any other Person during the course of such inspection. The Inspecting Parties shall be third party beneficiaries of this Lease with respect to the rights set forth in this Article XV applicable to such Persons.

ARTICLE XVI

THE GROUND LEASE

Lessee acknowledges receipt of the Ground Lease and is familiar with the respective terms thereof. Lessee will, for the benefit of Lessor, perform all obligations, covenants and agreements to be performed by the lessee under the Ground Lease including without limitation the payment of all rent and other amounts due under such agreements during the term hereof and, as between Lessor and Lessee, Lessor shall have no responsibility for compliance with such obligations, covenants and agreements accruing during the term hereof. Lessee will at all times during the term hereof do all things necessary to perform all Ground Lessor’s obligations, covenants and agreements under the Ground Lease and will give Lessor notice of all defaults under the Ground Lease promptly after obtaining Actual Knowledge thereof. In addition to, and not in limitation of, Lessee’s obligations set forth elsewhere in this Lease during the term hereof, Lessee shall punctually pay and perform for the benefit of Lessor all of the obligations and liabilities whatsoever of Lessee or Lessor under any instrument that is a Permitted Lien including, without limitation, payment of indemnification of Lessor from and against all claims for which Lessor is liable thereunder during the term hereof. Lessee represents as of the date hereof that the Ground Lease is in full force and effect.

ARTICLE XVII

EVENTS OF DEFAULT

The occurrence of any one or more of the following events, whether any such event shall be voluntary or involuntary or come about or be effected by operation of law or pursuant to or in compliance with any judgment, decree or order of any court or any order, rule or regulation of any administrative or governmental body, shall constitute an “ Event of Default ”:

(a) (i) the Lessee shall fail to make any payment of Basic Rent when due and such failure shall continue for a period of two (2) Business Days after the same became due, (ii) the Lessee shall fail to make any payment of the Purchase Amount, Lease Balance or other amounts due and payable under Article XIII, Article XVIII, Article XX, Article XXI or Article XXII, or

(iii) the Lessee shall fail to make any payment of any amount due and payable on the Maturity Date or the Lease Expiration Date;

(b) the Lessee shall fail to make payment of any Supplemental Rent (other than any Supplemental Rent described in clause (a) above) when due and such failure shall continue for a period of five (5) days after written notice thereof has been given to the Lessee;

(c) the Lessee shall fail to (i) comply with Sections 5.2(d), 5.3, 5.6 or 6.5 of the Participation Agreement, (ii) perform or comply with Article XII hereof, or (iii) maintain insurance as required by Article XI hereof;

(d) the Lessee shall fail to perform or observe any of the terms, covenants, conditions and agreements set forth in Articles XXI and XXII hereof other than the failure to give notice of an end of term option pursuant to Section 21.1 hereof;

(e) any representation, warranty, certification or statement made or deemed to be made by the Lessee under this Lease, any other Operative Document or in any report, certificate, financial statement or other document delivered pursuant hereto or thereto, shall at any time prove to have been incorrect in any material respect as of the date when made or deemed made;

(f) the Lessee shall default in the performance or observance of any term, covenant, condition or agreement contained in this Lease or any other Operative Document (in each case, other than as specifically provided for otherwise in this Article XVII) and such default shall continue for a period of fifteen (15) days after written notice thereof has been given to the Lessee or the Construction Agent;

(g) the Lessee or any Restricted Subsidiary or Guarantor (i) fails to make any payment when due (whether by scheduled maturity, required prepayment, acceleration, demand, or otherwise) in respect of any Material Indebtedness (other than payment obligations hereunder), or (ii) fails to observe or perform any other agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event occurs, the effect of which default or other event is to cause, or to permit the holder or holders or the beneficiary or beneficiaries of such Indebtedness (or a trustee or agent on behalf of such holder or holders or beneficiary or beneficiaries) to cause, with the giving of notice if required, such Indebtedness to be demanded or to become due or to be repurchased, prepaid, defeased or redeemed (automatically or otherwise), or an offer to repurchase, prepay, defease or redeem such Indebtedness to be made, prior to its stated maturity, or cash collateral in respect thereof to be demanded;

(h) an involuntary proceeding shall be commenced or an involuntary petition shall be filed seeking (i) liquidation, reorganization or other relief in respect of the Lessee or any Restricted Subsidiary or Guarantor or its debts, or of a substantial part of its assets, under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect or (ii) the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Lessee or any Restricted Subsidiary or Guarantor or for a substantial part of its assets, and, in any such case, such proceeding or petition shall continue undismissed for 60 days or an order or decree approving or ordering any of the foregoing shall be entered;

(i) the Lessee or any Restricted Subsidiary or Guarantor shall (i) voluntarily commence any proceeding or file any petition seeking liquidation, reorganization or other relief under any Federal, state or foreign bankruptcy, insolvency, receivership or similar law now or hereafter in effect, (ii) consent to the institution of, or fail to contest in a timely and appropriate manner, any proceeding or petition described in clause (h) of this Article, (iii) apply for or consent to the appointment of a receiver, trustee, custodian, sequestrator, conservator or similar official for the Lessee or any Restricted Subsidiary or Guarantor or for a substantial part of its assets, (iv) file an answer admitting the material allegations of a petition filed against it in any such proceeding, (v) make a general assignment for the benefit of creditors or (vi) take any action for the purpose of effecting any of the foregoing;

(j) the Lessee or any Restricted Subsidiary or Guarantor shall become unable, admit in writing its inability or fail generally to pay its debts as they become due;

(k) one or more judgments or orders for the payment of money in aggregate amount in excess of US$20,000,000 (not covered by insurance where the carrier has accepted responsibility in writing) shall be rendered against the Lessee, any Restricted Subsidiary or Guarantor or any combination thereof and the same shall remain undischarged for a period of sixty (60) consecutive days during which execution shall not be effectively stayed, or any action shall be legally taken by a judgment creditor to attach or levy upon any material assets of the Lessee or any Subsidiary to enforce any such judgment;

(l) an ERISA Event shall have occurred that, in the opinion of the Required Participants, when taken together with all other ERISA Events that have occurred, could reasonably be expected to result in a Material Adverse Effect ;

(m) any Operative Document (except in accordance with its terms), in whole or in part, terminates, ceases to be effective or ceases to be the legal, valid and binding enforceable obligation of the Lessee or its Affiliates or the Lessee or any of its Affiliates directly or indirectly, contests in any manner in any court the effectiveness, validity, binding nature or enforceability thereof; or any assignment, security interest or Lien securing the Lessee’s obligations under the Operative Documents, in whole or in part, ceases to be perfected with the same priority as was in effect on the Closing Date or the Lessee shall disaffirm or deny any of its obligations under any Operative Document;

(n) a Construction Event of Default shall be continuing; or

(o) a Lessee Change of Control shall occur.

ARTICLE XVIII

ENFORCEMENT

SECTION 18.1. Remedies .

(a) Subject to the limitation set forth in Section 18.5 hereof, during the existence of an Event of Default and notwithstanding any Event of Loss, Event of Taking, termination of this Lease pursuant to Article XIII or any other matter or occurrence, at the Lessor’s option and without

limiting the Lessor in the exercise of any other right or remedy the Lessor may have on account of such Event of Default, and without any further demand or notice, the Lessor may to the fullest extent permitted under Applicable Laws and Regulations cause the following to occur:

(i) By notice to the Lessee, the Lessor may terminate the Lessee’s right to possession of the Leased Property provided, however , that this Lease shall terminate immediately without notice upon the occurrence of an Event of Default described in paragraphs (h) or (i) of Article XVII hereof.

(ii) Upon termination of the Lessee’s right to possession and without further demand or notice, the Lessee shall surrender possession and vacate the Leased Property and deliver possession of the Leased Property in accordance with Section 22.5 of this Lease, and the Lessor may re-enter the Leased Property and remove any Persons in possession thereof and re-lease the Leased Property to any third party.

(iii) The Lessor may terminate this Lease with respect to all or any part of the Leased Property and/or declare the aggregate outstanding Lease Balance and all other amounts payable by the Lessee hereunder or under any other Operative Document to be immediately due and payable (provided, however , that this Lease shall terminate immediately without notice, and the aggregate outstanding Lease Balance and Break Amounts, if any, and such other amounts payable by the Lessee shall become immediately due and payable without demand therefor, upon the occurrence of an Event of Default described in paragraphs (h) or (i) of Article XVII hereof and, subject to the conditions therein, the Leased Property shall be transferred in accordance with Section 20.2 hereof), and the Lessor shall be entitled to (x) recover from the Lessee the following amounts without duplication of amounts owed and (y) take the following actions:

(A) the Lessee shall pay all accrued and unpaid Rent hereunder (including, without limitation, Basic Rent and Supplemental Rent) for the period commencing on the Closing Date through the Final Rent Payment Date with respect to the Leased Property;

(B) the Lessor may elect either of the following with respect to any or all of the Leased Property:

(1) the Lessor may demand, by written notice to the Lessee specifying a payment date (the “ Final Rent Payment Date ”) on a date no earlier than thirty (30) days after the date of such notice, that the Lessee shall pay to the Lessor, on the Final Rent Payment Date (in lieu of Basic Rent due after the Final Rent Payment Date), an amount equal to the sum of (A) the Lease Balance, plus (B) Break Amounts, if any, and (C) all accrued and unpaid Rent due and unpaid for the period commencing on the Closing Date to and including the Final Rent Payment Date (less any amounts paid by the Lessee under clause (A) above), and upon payment of such amount, and the amount of all other sums due and payable by the Lessee under this Lease and the other Operative Documents (and interest at the Overdue Rate on the amounts payable under this clause (B)(1) from the

Final Rent Payment Date to the date of actual payment), the Leased Property shall be transferred to the Lessee or its designee pursuant to Section 23.11; provided, however, (x) that at any time prior to the Base Term Commencement Date, if the Lessee pays the amounts set forth above with respect to an Event of Default other than as described in paragraphs (n) or (o) of Article XVII where such Event of Default arises solely as a result of a Force Majeure Event, in the case of clause (m), and an unsolicited Change of Control to which neither the board of directors nor the shareholders of the Lessee approve, consent or acquiesce, in the case of clause (n), or (y) if the limitations set forth in Section 18.5 hereof shall be in effect and, in lieu of paying the amounts set forth above in full, the Lessee pays to the Lessor the Construction Recourse Amount, then, in each such case, the Leased Property shall not be transferred to the Lessee (or any designee thereof) and the Lessor shall have all of its rights and remedies with respect to the Leased Property and the Site contained in this Article XVIII (including, but not limited to, Section 18.5); or

(2) the Lessor may sell its interest in the Leased Property and/or pursue any and all remedies under the Security Documents, and, in any event, the Lessee shall pay to the Lessor an amount equal to the excess, if any, of (x) all amounts described in clause (B)(1) above due the Lessor over (y) the net Sale Proceeds received by the Lessor from the foregoing sale ( provided , that in calculating such net Sale Proceeds, all expenses and Taxes to the extent not indemnified and not paid by the Lessee pursuant to Section 7.2 of the Participation Agreement incurred by any of the Participants in connection with such sale including, without limitation, legal fees and expenses, shall be deducted from such Sale Proceeds);

(C) Any other amount necessary to compensate the Lessor for all the damages caused by or resulting from the Lessee’s failure to perform the Lessee’s obligation under this Lease, including, but not limited to, the costs and expenses (including without limitation, attorneys’ fees and expenses, advertising costs and brokers’ commissions) of recovering possession of the Facility, removing Persons or property from the Facility, placing the Facility in good order, condition, and repair, preparing and altering the Facility for reletting, and all other costs and expenses of reletting; and

(D) Such other amounts in addition to or in lieu of the foregoing as may be permitted from time to time by Applicable Laws and Regulations.

(iv) The Lessor may exercise any and all rights and remedies under the Security Documents.

(v) If the Event of Default occurs prior to the Base Term Commencement Date, the Lessor may exercise any and all rights and remedies under the Construction and Development Agreement.

(vi) If the Lessee has breached this Lease, this Lease shall continue in effect for so long as the Lessor does not terminate this Lease, and the Lessor may enforce all of the Lessor’s rights and remedies under this Lease, including the right to recover the Rent hereunder (including, without limitation, Basic Rent (when applicable) and Supplemental Rent) as it becomes due under this Lease. The Lessee’s right to possession shall not be deemed to have been terminated by the Lessor except pursuant to clause (i) above. The following do not constitute a termination of this Lease:

(A) Acts of maintenance or preservation or efforts to relet the Leased Property; and

(B) Withholding of consent to assignment or subletting, or terminating a subletting or assignment by the Lessee.

(vii) In the event that the Lessor elects to continue this Lease in full force and effect following the termination of the Lessee’s right of possession of the Facility, the Lessor, to the maximum extent permitted by Applicable Laws and Regulations, may enforce all its rights and remedies under this Lease, including, but not limited to, the right to recover Rent hereunder as it becomes due. During the continuance of an Event of Default or following the termination of the Lessee’s right to possession of the Facility, the Lessor may enter the Facility and the Site in accordance with Applicable Laws and Regulations without terminating this Lease and, pursuant to Article VII hereof, sublet all or any part of the Leased Property for the Lessee’s account to any Person, for such term (which may be a period beyond the remaining Lease Term), at such rents and on such other terms and conditions as are commercially reasonable. In the event of any such subletting, rents received by the Lessor from such subletting shall be applied (a) first, to the payment of the costs incurred by the Lessor in maintaining, preserving, altering and preparing the Leased Property for subletting and other costs of subletting, including, but not limited to, brokers’ commissions and attorneys’ fees and expenses; (b) second, to the payment of Rent hereunder then due and payable; (c) third, to the payment of future Rent hereunder as the same may become due and payable hereunder; (d) fourth, to the payment of all other obligations of the Lessee hereunder and under the other Operative Documents (including, without limitation, the Lease Balance), and (e) fifth, the balance, if any, shall be paid to the Lessee upon (but not before) expiration of the Lease Term. If the rents received by the Lessor from such subletting, after application as provided above, are insufficient in any period to pay the Rent due and payable hereunder for such period, the Lessee shall pay such deficiency to the Lessor upon demand. Notwithstanding any such subletting for the Lessee’s account without termination, the Lessor may at any time thereafter, by written notice to the Lessee, elect to terminate this Lease.

(viii) The Lessor may exercise any other right or remedy that may be available to it under Applicable Laws and Regulations or in equity, or proceed by appropriate court action (legal or equitable) to enforce the terms or to recover damages for the breach hereof, including those arising from a breach by the Lessee of its obligations under Section 20.2 hereof. Separate suits may be brought to collect any such damages for any Rent installment period(s), and such suits shall not in any manner prejudice the Lessor’s right to collect any

such damages for any subsequent Rent installment period(s), or the Lessor may defer any such suit until the Lessor determines to bring such suit.

(ix) The Lessor may retain and apply against the Lessor’s damages all sums which the Lessor would, absent such Event of Default, be required to pay to, or turn over to, the Lessee pursuant to the terms of this Lease.

The Lessee acknowledges and agrees that upon the declaration of an Event of Default the amount due and owing by the Lessee to the Lessor hereunder shall be the Lease Balance and that to the maximum extent permitted by Applicable Laws and Regulations, the Lessee waives any right to contest the Lease Balance as the liquidated sum or agreed upon sum due and owing.

(b) In the event that an Event of Default is declared (or deemed declared) solely and exclusively on the basis of the occurrence of one or more Limiting Events on or before September 30, 2019:

(i) a claim or demand by the Lessor for payment by the Lessee of or in respect of the Lease Balance under Section 18.1(a) hereof shall be limited as follows:

(A) any obligation of the Lessee to pay the Lease Balance and amounts due under clauses (C) and (D) of Section 18.1(a)(iii) shall be reduced to be an obligation to pay an amount equal to the Recourse Deficiency Amount; provided, however, that if the Lessee shall not pay the full Lease Balance and such other amounts, the Lessor shall not have any obligation to transfer the Leased Property to the Lessee or its designee including, without limitation, as provided in clause (B)(1) of Section 18.1(a)(iii); and

(B) any obligation of the Lessee to pay any shortfall determined by reference to the Lease Balance as provided in clause (B)(2) of Section 18.1(a)(iii), and amounts due under clauses (C) and (D) of Section 18.1(a)(iii) shall be revised to be an obligation to pay the lesser of (i) such shortfall plus such other amounts and (ii) the Recourse Deficiency Amount; and

the references to “Lease Balance” in the last paragraph of Section 18.1(a) and in Section 18.2 shall be deemed references to the amount described in clause (A) or clause (B) above, as applicable, provided, however, that the foregoing limitation shall not limit or affect any other rights of the Lessor as the Lessor shall have all rights and remedies available under the Operative Documents or available at law, equity or otherwise including, without limitation, the right to demand the payment of Supplemental Rent (other than the Lease Balance) and the right to require surrender and return or sale to a third party of the Leased Property all as set forth herein; and

(ii) if Section 18.1(a)(vii) is applicable, the reference to Lease Balance in clause (d) thereof shall be a reference to the Recourse Deficiency Amount so long as the Lease has not been terminated.

SECTION 18.2. Proceeds of Sale; Deficiency.

All payments received and amounts held or realized by the Lessor at any time when an Event of Default shall be continuing and after the Lease Balance shall have been accelerated pursuant to this Article XVIII as well as all payments or amounts then held or thereafter received by the Lessor (except for rents received by the Lessor from subletting pursuant to Section 18.1(a)(vii), which shall be distributed as set forth therein) and the proceeds of sale pursuant to Section 18.1(a)(iii)(B)(2) shall be distributed forthwith upon receipt by the Lessor in accordance with Article III of the Loan Agreement.

SECTION 18.3. Waiver of Certain Rights .

To the maximum extent permitted by Applicable Laws and Regulations, (a) the Lessee hereby waives the benefit of any appraisement, valuation, stay, extension, reinstatement and redemption laws now or hereafter in force and all rights of marshalling in the event of any sale of the Leased Property or any interest therein and (b) if this Lease shall be terminated pursuant to this Article XVIII, the Lessee waives, to the fullest extent permitted by Applicable Laws and Regulations, (i) any notice of re-entry or the institution of legal proceedings to obtain re-entry or possession; (ii) any right of redemption, re-entry or repossession; (iii) the benefit of any laws now or hereafter in force exempting property from liability for rent or for debt or limiting the Lessor with respect to the election of remedies; (iv) any other rights which might otherwise limit or modify any of the Lessor’s rights or remedies under this Article XVIII; and (v) any rights now or hereafter conferred under California Applicable Laws and Regulations that may require the Lessor to sell, lease or otherwise use the Leased Property, or any part thereof in mitigation of the Lessor’s damages upon the occurrence of an Event of Default or that may otherwise limit or modify any of the Lessor’s rights or remedies under this Article XVIII.

SECTION 18.4. Remedies Cumulative; No Waiver; Consents .

To the extent permitted by, and subject to the mandatory requirements of, Applicable Laws and Regulations, each and every right, power and remedy herein specifically given to the Lessor or otherwise in this Lease shall be cumulative and shall be in addition to every other right, power and remedy herein specifically given or now or hereafter existing at law, in equity or by statute, and each and every right, power and remedy whether specifically herein given or otherwise existing may be exercised from time to time and as often and in such order as may be deemed expedient by the Lessor, and the exercise or the beginning of the exercise of any power or remedy shall not be construed to be a waiver of the right to exercise at the same time or thereafter any other right, power or remedy. No delay or omission by the Lessor in the exercise of any right, power or remedy or in the pursuit of any remedy shall impair any such right, power or remedy or be construed to be a waiver of any default on the part of the Lessee or be an acquiescence therein. The Lessor’s consent to any request made by the Lessee shall not be deemed to constitute or preclude the necessity for obtaining the Lessor’s consent, in the future, to all similar requests. No express or implied waiver by the Lessor of any Default or Event of Default shall in any way be, or be construed to be, a waiver of any future or subsequent Default or Event of Default.

SECTION 18.5. Limitation of Recourse Liability .

(a) Notwithstanding anything set forth herein or in the other Operative Documents to the contrary with respect to the Lessee’s obligations to pay the Lease Balance under this Article XVIII, the Lessor shall have full recourse to the Leased Property, the other Lessee Collateral and the proceeds thereof and to any non-Cubic Person. However, recourse to the Lessee for such payment obligation prior to the Base Term Commencement Date shall be limited as follows:

(i) upon a termination of this Lease caused by or arising out of an Event of Loss or an Event of Taking if caused by a Force Majeure Event during the Construction Period, the Lessee’s indemnification liability under Section 7.1(f)(i)(B)(1) of the Participation Agreement shall remain in effect, but so long as no Specified Event has occurred there shall be no other recourse to the Lessee;

(ii) upon the occurrence and during the continuation of an Event of Default caused by or arising out of a Specified Event, or upon a termination of this Lease caused by or arising out of any Specified Event, the Lessee shall be obligated to the full extent of its payment obligations under the Operative Documents; and

(iii) in any other case, the Lessee’s payment obligation shall be limited to an amount not to exceed the Construction Recourse Amount, provided, that this limitation shall not affect the Lessee’s indemnification liability under Section 7.1(f)(i)(B)(1) of the Participation Agreement.

(b) Concurrently with the payment of any amounts set forth in Section 18.5(a) above and other amounts then owing, the Lessee shall, if requested by the Lessor, relinquish possession of the Leased Property, in the condition required by this Lease, subject only to Permitted Liens described in clauses (a) (but excluding any such rights and interests of the Lessee referenced therein) and (b) of the definition thereof, if the Lessor requests, convey by deed all of the Lessee’s right, title and interest, if any, in and to the Leased Property or any part thereof to the Lessor or a party designated by the Lessor, subject only to Permitted Liens described in clauses (a) (but excluding any such rights and interests of the Lessee referenced therein) and (b) of the definition thereof. The foregoing limitation on recourse to the Lessee will not apply on or after the Base Term Commencement Date. Notwithstanding the foregoing limitation on recourse to other assets of the Lessee, (1) the Lessor shall have the right to proceed against the Leased Property and to exercise any and all rights and remedies under the Security Documents and to sell or lease the Leased Property (or any parts thereof) and to recover the remaining outstanding Lease Balance and all other amounts due and owing hereunder from the proceeds of any sale, lease or other disposition thereof, and (2) subject to Section 7.1(f) of the Participation Agreement, each Indemnitee shall have the right to seek indemnification from the Lessee for any Claim and regarding Taxes pursuant to the indemnity sections of the Participation Agreement.

SECTION 18.6. Phase I Environmental Report .

Upon the occurrence of an Event of Default, the Lessee at Lessor’s request shall furnish to the Lessor a current Phase I environmental assessment report for the Leased Property (and such other reports that may be reasonably required or recommended under such report) dated,

commenced and completed no earlier than forty-five (45) days from and after the date of occurrence of the Event of Default and in form and substance reasonably satisfactory to the Lessor, from an environmental consultant selected by the Lessee and approved by the Lessor as to the environmental conditions with respect to the Leased Property. The obligations of the Lessee under this Section 18.6 shall survive the termination of this Lease.

ARTICLE XIX

RIGHT TO CURE

If any Event of Default shall be continuing and in the Lessor’s reasonable judgment the Lessee is not acting diligently and appropriately to cure such Event of Default, the Lessor may, but shall not be obligated to, on five (5) Business Days’ prior notice to the Lessee (except in the event of an emergency, in which case only one (1) Business Day’s prior notice shall be required), cure such Event of Default and the Lessor shall not thereby be deemed to have waived any default caused by such failure to cure, and the amount of any such payment and the amount of any expenses of the Lessor (including attorneys’ fees and expenses) incurred in connection with such cure, together with interest thereon at the Overdue Rate, shall be deemed Supplemental Rent, payable by the Lessee to the Lessor upon demand.

ARTICLE XX

EARLY TERMINATION OPTION AND OBLIGATION TO PURCHASE

SECTION 20.1. Early Termination Option .

Without limitation of the Lessee’s purchase obligation pursuant to Section 20.2, the Lessee may, at its option, on any Payment Date following the second anniversary of the Base Term Commencement Date but at least one hundred eighty (180) days prior to the Return Date, purchase all, but not less than all, of the Leased Property (the “ Early Termination Option ”) at a price equal to the Purchase Amount. In order to exercise its option to purchase the Leased Property pursuant to this Section 20.1, the Lessee shall give the Lessor not less than thirty (30) days’ prior written notice of such election which election shall be irrevocable when made. Upon receipt of the Purchase Amount, the Leased Property shall be transferred to the Lessee (or its designee) pursuant to Section 23.11 whereupon this Lease shall terminate except for such provisions which expressly survive such a termination.

SECTION 20.2. Required Purchase .

On or after the Base Term Commencement Date and so long as the Lessor has not exercised any other remedy inconsistent therewith, the Lessee shall be obligated to purchase the Leased Property for the Purchase Amount automatically and without notice upon the occurrence of any Event of Default described in clauses (h) or (i) of Article XVII and upon receipt of the Purchase Amount the Leased Property shall be transferred to the Lessee (or its designee) pursuant to Section 23.11 whereupon this Lease shall terminate except for such provisions which expressly survive such a termination.

ARTICLE XXI

END OF TERM OPTIONS

SECTION 21.1. End of Term Options

At least one hundred and eighty (180) days prior to the Return Date, the Lessee shall, by delivery of an irrevocable written notice to the Administrative Agent, exercise one of the following options:

(a) Purchase for cash for the Purchase Amount all, but not less than all, of the Leased Property then subject to this Lease on the last day of the Lease Term (the “ Purchase Option ”); and if the Lessee shall have elected the Purchase Option, upon the payment to the Lessor of the Purchase Amount, the Leased Property shall be transferred to the Lessee (or its designee or assignee provided that the Lessee shall remain primarily liable for all payments due in respect of the Purchase Option election) pursuant to Section 23.11 whereupon this Lease shall terminate except for such provisions which expressly survive such a termination; or

(b) Provided no Default or Event of Default shall be continuing, return the Leased Property to the Lessor at the end of the scheduled expiration date of the Lease Term (the “ Return Option ”). The Return Option shall be conditioned upon and subject to the fulfillment by the Lessee of each of the terms and conditions set forth in Article XXII and, thereafter, the Lessee shall have no further obligations to pay Basic Rent or the remaining Lease Balance. The Lessee shall not enter into any additional subleases or renew any subleases with respect to the Leased Property following the Lessee’s election of the Return Option. Following the Lessee’s election of the Return Option, the Lessee shall not remove any Alterations.

SECTION 21.2. Election of Options .

In the event the Lessee fails to make a timely election under Section 21.1 hereof, the Lessee shall be deemed to have elected the Purchase Option. The Lessee may not elect the Return Option if there exists on the date the election is made or prior to the Lease Expiration Date a Default, an Event of Default, an Event of Loss, an Event of Taking, a Casualty or a Condemnation.

ARTICLE XXII

RETURN OPTION

SECTION 22.1. Return Option Procedures .

(a) If the Lessee elects the Return Option, and the Lessor elects to require the Lessee to offer to assign Lessor’s Ground Lease interests and to sell the Facility, at the option of the Lessor, (x) the purchaser shall be reasonably entitled (whether on or before the Return Date or thereafter) to (i) (A) be granted a ground lease in lieu of the Ground Lease, from the Lessee, as ground lessor, substantially in the form of such Ground Lease, as modified by the Estoppel Certificate (the “ Third Party Ground Lease ”), free and clear of any Lien other than the Liens created pursuant to the Additional Easement, Lessor Liens, the Liens set forth on Schedule III to the Participation Agreement and any Liens arising after the Closing Date which have been expressly approved by the Participants in accordance with the Operative Documents (the “ Return

Option Liens ”), which leasehold estate shall be evidenced of record by a memorandum of the Third Party Ground Lease in form and substance reasonably acceptable to Lessee as ground lessor and such purchaser, and the Ground Lessor acknowledge that the Facility and other improvements on the Site shall not revert to the Ground Lessor until the expiration or termination of the Third Party Ground Lease, and (B) if not otherwise provided in the Third Party Ground Lease, be granted easements on portions of the Overall Parcel (the “ Additional Easement ”) to (i) enable the purchaser to reasonably operate and have access over and use of paths, lots (including parking lots) and private ways necessary to ensure the continued operation of the Facility, or (ii) remain in compliance with Applicable Laws and Regulations including, without limitation, zoning ordinances and the California Subdivision Map Act, as applicable, which easement shall not be a “blanket easement” and is in all other respects reasonably acceptable to Lessor and Ground Lessor (which obligation of the Lessee to grant or cause to be granted such Third Party Ground Lease and Additional Easement hereunder shall survive the termination of this Lease) provided, however, to the extent necessary to enable Ground Lessor to reasonably operate improvements located on the Overall Parcel other than the Site, Lessor or such purchaser shall grant an easement over the Site in favor of the Ground Lessor, which easement shall not be a “blanket easement” and shall be in all other respects reasonably acceptable to Lessor and Ground Lessor (which obligation of Lessor or such purchaser to grant or cause to be granted such Third Party Ground Lease and Additional Easement hereunder shall survive the termination of this Lease), or (ii) be assigned the rights of the Lessor, as lessee under the Ground Lease, for the remaining term thereof, free and clear of any Lien other than the Return Option Liens and be granted the Additional Easement (which obligation of the Lessee to grant the Additional Easement hereunder shall survive the termination of this Lease), and (y) the Lessee shall use commercially reasonable efforts as non-exclusive agent for the Lessor to remarket the Leased Property and obtain the highest all cash purchase price for the sale of the Facility and the leasehold interests in the Site from the date of such request to the Return Date, subject to any extension thereof pursuant to Section 22.4(b). In the event the Lessee receives any bid, the Lessee shall within five (5) Business Days after receipt thereof and, at least twenty (20) Business Days prior to the Return Date, certify to the Lessor in writing the amount and terms of such bid and the name and address of the party (provided, such party shall not be (x) the Lessee or any Affiliate of the Lessee, or (y) any Person with whom the Lessee has an understanding or arrangement regarding their future use, possession or ownership of the Leased Property or the Lessor’s other rights, title and interest in and to the Leased Property, unless, in the case of the foregoing subsections (x) or (y) the sum of (i) the Sale Proceeds pursuant to a proposed bid which the Lessee desires to accept plus (ii) the Return Price Recourse Deficiency Amount (as set forth in the Lease Supplement hereto) plus (iii) any amount payable pursuant to Section 7.7 of the Participation Agreement is equal to or greater than the Lease Balance; provided further, such party may be the Lessor, any Affiliate thereof, or any other Person contacted by the Lessor (other than as referenced in the foregoing subsections (x) or (y))) submitting such bid, and the Lessee and any ground Lessee or sublessee shall confirm in writing both to the Lessor and to the bidder that it will surrender and vacate the Facility and take such reasonable steps as may be required to grant to the bidder the Third Party Ground Lease on or before the Return Date.

If the sum of (i) the Sale Proceeds pursuant to a proposed bid which the Lessee desires to accept plus (ii) the Return Price Recourse Deficiency Amount plus (iii) any amount payable pursuant to Section 7.7 of the Participation Agreement is equal to or greater than the Lease Balance, then the Lessee shall determine and accept the winning bid; otherwise, the Lessor shall have the right, in its sole and absolute discretion, to consent to such sale and the Lessor shall have

the right, in its sole and absolute discretion to accept or reject any bid so presented by the Lessee to the extent any portion of its Lessor Investment would remain unpaid. Unless pursuant to the terms of the bid submitted, the Sale Proceeds shall exceed the aggregate outstanding Lease Balance as of the Return Date, any Participant may submit a bid to the Lessee not later than five (5) Business Days prior to the Return Date. As non-exclusive selling agent, Lessee’s expenses and the out-of-pocket expenses incurred by the Lessor and each other Participant in connection with any such bidding and sale process pursuant to this Section 22.1 as well as all costs and expenses incurred by any party (including a buyer or potential buyer) to the extent the Lessor and the Lessee have agreed to such payment to place the Leased Property and the Site in the condition required by Section 9.1, shall be deducted from the Sale Proceeds.

(b) On or before the Return Date, (i) the Lessee shall (a) prepare, in form and substance reasonably satisfactory to the lessee under the Ground Lease or Third Party Ground Lease an acknowledgement that the Facility and other improvements on the Site shall not revert to the Ground Lessor until the expiration or termination of the Third Party Ground Lease or the Ground Lease, (b) transfer all of the Lessee’s right, title and interest in and to the Leased Property hereunder, to the extent required by the bidder, if any, which shall have submitted the bid (if any) accepted pursuant to Section 22.1(a), in the same manner and in the same condition and otherwise in accordance with all of the terms of this Lease; and (c) if applicable, prepare, in form and substance reasonably satisfactory to the purchaser of the Facility under Section 22.1(a), a Third Party Ground Lease and the Additional Easement; (ii) subject to the prior or current payment by the Lessee of all amounts due under clause (iii) of this sentence, the Lessor shall comply with any conditions to transfer set forth in Section 22.2 and the transfer provisions of Section 23.11 in order to transfer its interests in the Leased Property for cash to such bidder; (iii) the Lessee, as non-exclusive selling agent, shall simultaneously pay to the Lessor all of the amounts required pursuant to Section 22.3; (iv) after payment in full of all amounts owing to the Lessor hereunder and under the terms of the bid, this Lease shall terminate; and (v) subject to the conditions set forth in subsection (d) below, at least thirty (30) days prior to the Return Date, Lessor and Lessee shall enter into the Additional Easement; provided, however, that any return of the Leased Property under a Return Option shall be conditioned upon the absence of any Default or Event of Default on the Return Date (in which case, this subsection will not apply and the Lessee shall be responsible for the Lease Balance (and, in the case where the Lease Balance is paid, the Lessor shall convey to the Lessee or its designee the Leased Property in accordance with Section 23.11)). Neither the Administrative Agent nor any Participant shall have any responsibility for procuring any purchaser; provided, however, that the Lessor and its designees may, at the direction of the Required Participants, engage in activities to market and sell the Leased Property so long as such activities do not conflict with Lessee’s remarketing activities. Any such activities undertaken by the Lessor pursuant to this Section 22.1 shall be at the Lessee’s sole cost and expense (which shall be deducted from the Sale Proceeds in accordance with the foregoing) and shall not change the Lessee’s obligations, as non-exclusive selling agent, under this Section 22.1 or during the Extended Remarketing Period (as defined in Section 22.4) to use commercially reasonable efforts, as non-exclusive selling agent, to sell the Leased Property in accordance with the requirements of this Article XXII.

(c) On the Return Date, the Lessor or any purchaser of the Leased Property, if sold, shall pay to the Lessee the Fair Market Rental Value of the Site subject to the Ground Lease or Third Party Ground Lease for the remainder of the term of the Ground Lease or the term of the

Third Party Ground Lease, commencing on the Lease Expiration Date. Such amount shall not affect the calculation of any other amount owed by any party to the Operative Documents and shall be paid by wire transfer to the Lessee at such place as the Lessee shall specify in writing to the Lessor pursuant to Schedule 11 to the Participation Agreement. The term “Fair Market Rental Value of the Site” means the value for the Site that would be obtained in an arm’s-length transaction for the leasing of such portion of the Site for the remainder of the term of the Ground Lease or the term of the Third Party Ground Lease, between an informed and willing lessee-user (other than a lessee currently in possession) under no compulsion to lease and an informed and willing lessor under no compulsion to lease, as the same shall be specified by agreement between the Lessor and the Lessee or, if not agreed to by Lessor and the Lessee, upon the election of the Return Option, within a period of fifteen (15) days after either party requests the determination, then as specified in an appraisal mutually agreed to by two real estate appraisers, one of which shall be appointed by the Lessor and the other of which shall be appointed by Lessee, or, if such appraisers cannot agree on such appraisal, an appraisal arrived at by a third independent real estate appraiser chosen by the mutual consent of the two appraisers, or if they do not agree, appointed by the American Arbitration Association. If either party should fail to appoint an appraiser within fifteen (15) days of receiving notice of the appointment of an appraiser by the other party, then such appraisal shall be made by the appraiser appointed by the first party. If the two appraisers cannot agree on such appraisal and fail to appoint a third appraiser within fifteen (15) days after the appointment of the second appraiser, then either party may apply to the American Arbitration Association to make such appointment. The appraisal shall be completed within thirty (30) days of the appointment of the last appraiser appointed and before the consummation of the Return Option.

SECTION 22.2. Sale .

The Lessee, as non-exclusive selling agent for Lessor, shall, on the Return Date, at the Lessee’s own expense (without right of reimbursement therefor out of gross sale proceeds), ensure that the Leased Property as so transferred is (i) free and clear of all Liens, other than Permitted Liens described in clauses (a) (but excluding any such rights and interests of the Lessee referenced therein) or (b) of the definition thereof and (ii) (A) in the condition required by the terms of this Lease, (B) without any parties in possession claiming relief or exemption from judicial execution, and (C) in compliance with all Applicable Laws and Regulations. The Lessee, as non-exclusive selling agent, shall obtain all necessary Governmental Actions and make all governmental filings required by the Lessee or the Lessor in connection with any sale and grant of rights. The Lessee, as non-exclusive selling agent, shall cooperate with the purchaser of the Leased Property in order to facilitate the transfers of the ownership and operation of the Leased Property by such purchaser after the date of the sale or transfer, including providing all books, reports and records regarding the maintenance, repair and ownership of the Leased Property, permitting inspection of the Leased Property by the Lessor, the Administrative Agent and any potential purchasers, granting or assigning all licenses that are assignable and necessary for the operation of the Leased Property and cooperating in seeking and obtaining all necessary Governmental Actions, and otherwise doing all things reasonably necessary to sell and deliver possession of the Leased Property to any purchaser. The Lessee shall also, on the Return Date, vacate and cause any sublessee to vacate the Leased Property in accordance with Section 22.5. As a further condition to the Lessee’s rights hereunder, the Lessee shall pay the total cost for the completion of all Alterations commenced after the Base Term Commencement Date and prior to the Return Date and, subject to the Lessee’s right

to use applicable insurance proceeds as set forth in Article XIII hereof, for the repair and rebuilding of the affected portions of the Leased Property suffering a Casualty or a Condemnation after the Base Term Commencement Date. Such Alterations and all such repairs and rebuilding shall be completed prior to the Return Date. Prior to the Return Date, the Lessee (or the independent purchaser) shall furnish to the Administrative Agent, the Collateral Agent, the Participants and the independent purchaser hereunder a reasonably current Phase II environmental assessment report for the Leased Property (and such other reports that may be required or recommended under such report) dated, commenced and completed no earlier than forty-five (45) days prior to the Return Date and in form and substance satisfactory to the Lessor in its reasonable discretion, from an environmental consultant reasonably selected by the Lessee and approved by the Lessor, certifying that (x) there exists no contamination with respect to the Leased Property that would adversely affect the fair market value, marketability, utility, useful life or functional capability of the Leased Property or have any adverse effect on the Lessor and (y) there are no environmental remediation requirements with respect to the Leased Property, which certificate shall be addressed to each such party in form and substance satisfactory in the reasonable discretion of such purchaser, the Administrative Agent and the Participants. The obligations of the Lessee under this Section 22.2 shall survive the Maturity Date or the expiration or termination of this Lease.

Unless the Lessee shall have exercised or been deemed to have exercised its Purchase Option, the Lessor shall be entitled to perform such investigation, including obtaining reports of engineers and other experts as to the condition and state of repair and maintenance of the Leased Property and the Site required by this Section 22.2 and as to the compliance of the Leased Property, such land and the Site with Applicable Laws and Regulations including Environmental Laws, as it deems appropriate. The Lessee, at its sole cost and expense (without right of reimbursement therefor out of gross sale proceeds but, subject to the Lessee’s right to use applicable insurance and condemnation proceeds as set forth in Article XIII hereof), shall cause the repair or other remediation of any discrepancies between the actual condition of the Leased Property and the Site and the condition required under this Lease, such repair or remediation to be completed not later than the Return Date.

SECTION 22.3. Application of Sale Proceeds and Recourse Payments .

(a) On the Return Date, in connection with the Lessee’s exercise of the Return Option, the Lessee shall pay to the Lessor all Rent then due together with all other amounts due and payable by the Lessee to any Indemnitee. The Lessee also shall cause to be paid to the Lessor, from the aggregate Sale Proceeds (after application of gross sale proceeds to payment of any deed or transfer tax thereon to the extent not paid by the purchaser thereof and payment or reimbursement to the Lessee, the Lessor and any other party (including a buyer or potential buyer) to the extent the Lessor and the Lessee have agreed to such payment for any costs or expenses incurred by the Lessee, the Lessor or such other party in connection with the actions required under this Article XXII, excluding any provision of Article XXII which expressly specifies that the Lessee’s costs shall not be reimbursable out of gross sale proceeds), the aggregate outstanding Lease Balance as of the Return Date (as determined after the payment of all Rent due on such date). If the Sale Proceeds exceed the Lease Balance as of the Return Date, the Lessee shall retain or be entitled to receive the portion of the Sale Proceeds in excess thereof. If the Sale Proceeds are less than the aggregate outstanding Lease Balance, the Lessee shall pay or shall cause to be paid to the Lessor, as Supplemental Rent, on the Return Date, in addition to the Sale Proceeds, an additional amount

(the “ Deficiency ”) equal to the lesser of (x) the amount that the Lease Balance exceeds the Sale Proceeds or, (y) provided no Default or Event of Default is continuing (in which case, this clause (y) will not apply and the Lessee shall be responsible for the Lease Balance (and, in the case where the Lease Balance is paid, the Lessor shall convey to the Lessee or its designee the Leased Property in accordance with Section 23.11)), the Return Price Recourse Deficiency Amount.

(b) The obligation of the Lessee to pay the amounts determined pursuant to Sections 22.3(a) and 22.4 shall be recourse obligations of the Lessee, and such payments by the Lessee shall not limit any other obligation of the Lessee under the Operative Documents, including pursuant to Article VII of the Participation Agreement.

SECTION 22.4. Failure to Sell Leased Property .

If the Leased Property shall not have been sold on or prior to the Return Date, in accordance with and subject to the provisions of this Article XXII, then the Lessee and the Lessor hereby agree as follows:

(a) The Lessee shall pay to the Lessor on the Return Date an amount equal to the Return Price Recourse Deficiency Amount plus all other Rent then due under this Lease and the other Operative Documents or, in the event a Default or Event of Default shall be continuing on such date, the Lease Balance and, in the case where the Lease Balance is paid, the Lessor shall convey to the Lessee or its designee the Leased Property in accordance with Section 23.11 whereupon this Lease shall terminate except for such provisions which expressly survive such a termination.

(b) To the extent that the Lessor has required the Lessee to remarket the Leased Property, at the option of the Lessor, the Lessee shall be required to continue using commercially reasonable efforts as non-exclusive agent for the Lessor to sell the Leased Property in accordance with this Article XXII for the period (the “ Extended Remarketing Period ”) commencing on the Return Date and ending on the earliest of (i) the sale of the Leased Property in accordance with the provisions of this Article XXII or such earlier date as the Lessor has received payment in full of the Lease Balance and all accrued and unpaid Rent, (ii) the delivery of a written notice from the Lessor to the Lessee at any time terminating this Lease, which notice shall indicate that such termination is being made pursuant to this Section 22.4(b)(ii) and the date such termination shall be effective, (iii) the delivery of a written notice from the Lessee to the Lessor pursuant to which the Lessee notifies the Lessor of its election to terminate the Extended Remarketing Period; and (iv) the end of the twelfth month following the Return Date. The notice given by the Lessee pursuant to this Section 22.4(b)(iii) shall indicate that it is being made pursuant to this Section 22.4(b)(iii) and shall set forth the date of termination of the Extended Remarketing Period; provided, however, in no event shall such termination date occur prior to the ninth (9 th ) month following the Return Date. On the last day of the Extended Remarketing Period, if the Leased Property has not been sold during the Extended Remarketing Period in accordance with this Article XXII, the Lessee shall also make the payments required under Section 22.4(a), to the extent not already paid under such Section. Nothing in this Section 22.4 shall adversely affect any other rights the Lessor may have to terminate this Lease pursuant to any other Section of this Lease or the Lessor’s right to pursue any remedy hereunder as a result of an Event of Default arising as a result of the Lessee’s failure to comply with the requirements set forth herein including, without

limitation, pursuant to Article XVII or the Lessee’s obligation to pay amounts arising under Article VII of the Participation Agreement.

(c) Following the expiration of the Extended Remarketing Period (or, if not so elected by the Lessor, following the Return Date) and the absence of any sale of the Leased Property, the Lessor may sell the Leased Property and require that the Lessee (pursuant to documents reasonably acceptable to the Lessee and the purchaser of the Leased Property) (1) (x) grant a Third Party Ground Lease and grant the Additional Easement, (y) consent to Lessor’s assignment of the rights of the Lessor, as lessee under the Ground Lease, or (z) consent to Lessor’s lease of the Leased Property and the Lessor’s other interest in and to the Leased Property to any third party at such reasonable times and for such amounts as the Lessor deems commercially reasonable and appropriate, and (2) facilitate the transfers of the ownership, leasing and operation of the Leased Property to Lessor or any third party designated by the Lessor including providing all books, reports and records regarding the maintenance, repair and ownership of the Leased Property, granting or assigning all licenses necessary for the operation of the Leased Property and cooperating in seeking and obtaining all necessary Governmental Actions and otherwise doing all things reasonably necessary to convey and deliver possession of the Leased Property to any such Person in order to maximize the Lessor’s opportunity to recover the Lease Balance and the Lessor shall not have any obligation to account to the Lessee for, and the Lessor shall be entitled to retain, any Sale Proceeds or other amounts recovered from the sale or other disposition or lease of the Leased Property following such termination (whether or not in the excess of the Lease Balance). The Lessor’s appointment of the Lessee as the Lessor’s non-exclusive agent to use commercially reasonable efforts to obtain the highest all-cash price for the purchase of the Leased Property and the Lessor’s interest therein shall not restrict the Lessor’s right to market or lease the Leased Property and the Lessor’s interest in the Leased Property, to retain one or more sales agents or brokers (with the costs and expenses thereof being paid out of the Sale Proceeds, as provided in Sections 22.1(a) and 22.3(a) hereof), or the right of any Participant to submit or cause to be submitted bids for the Leased Property and the Lessor’s other interest in and to the Leased Property in the manner contemplated by Section 22.1. Upon such sale, assignment and transfer of the Leased Property, the Lessee’s possession under this Lease shall terminate; provided that any provisions hereof that expressly survive the expiration or other termination of this Lease shall survive such termination.

(d) The Lessor reserves all rights under this Lease and the other Operative Documents arising out of the Lessee’s breach of any provisions of this Lease (including this Article XXII), whether occurring prior to, on or after the Return Date, including the Lessee’s breach of any of its obligations under this Article XXII, including the right to sue the Lessee for damages.

(e) To the greatest extent permitted by law, the Lessee hereby unconditionally and irrevocably waives any right, and releases the Lessor from any related obligation, to require the Lessor at any time prior to the Return Date or the last day of the Extended Remarketing Period, as applicable, to market the Leased Property and the Lessor’s other interest in and to the Leased Property at all or for any minimum purchase price or on any particular terms and conditions. The Lessee hereby agrees that if the Lessee shall elect the Return Option, its ability to sell the Leased Property and the Lessor’s other interest in and to the Leased Property on or prior to the Return Date, and to cause any Person to submit a bid to the Lessor pursuant to Section 22.1 shall constitute full and complete protection of the Lessee’s interest hereunder.

SECTION 22.5. Surrender and Return.

(a) Upon the expiration or earlier termination of the Lease Term, and provided that the Lessee, if so entitled, has not exercised its option to purchase the Leased Property or to renew this Lease, the Lessee shall peaceably leave and surrender and return the Leased Property to the Lessor in the same condition in which the Leased Property existed on the Closing Date and such subsequent date on which the Facility thereon (including any Alterations that constitute part of the Facility) was constructed pursuant to the Construction and Development Agreement, except as completed, repaired, rebuilt, restored, altered or added to as required by or permitted by any provision of this Lease (ordinary wear and tear excepted). The Lessee shall remove from the Leased Property on or prior to such expiration or earlier termination all property situated thereon which is not the property of the Lessor and the Leased Property shall be clean and the Lessee shall repair any damage caused by such removal. Leased Property not so removed shall become the property of the Lessor and the Lessor may cause such property to be removed from the Leased Property and disposed of, and the Lessee shall pay (without right of reimbursement out of gross sale proceeds) the reasonable cost of any such removal and disposition and of repairing any damage caused by such removal. Notwithstanding the foregoing, if the Lease is terminated early due to an Event of Default, then Lessee shall have a period of thirty (30) days to remove any property that is not part of the Leased Property other than such property the removal of which would result in a violation of Applicable Laws and Regulations. The Lessee shall at its expense repair any damage to the Leased Property caused by the removal of such property.

(b) Except for surrender upon the expiration or earlier termination of the Lease Term hereof, no surrender to the Lessor of this Lease or of the Leased Property shall be valid or effective unless agreed to and accepted in writing by the Lessor.

(c) Without limiting the generality of the foregoing, upon the surrender and return of the Leased Property to the Lessor pursuant to this Section 22.5, (i) the Leased Property shall be (x) capable of being immediately utilized by a third-party purchaser or third-party lessee without further inspection, repair, replacement, alterations or improvements, licenses, permits, or approvals, except for any of the foregoing required solely by virtue of the change in ownership (other than to the Lessor), use or occupancy of the Leased Property, (y) in accordance and compliance with all Applicable Laws and Regulations including, without limitation, any of the foregoing required by virtue of a change in ownership, use or occupancy of the Leased Property other than to the Lessee, and (z) free and clear of any Lien and (ii) the Facility shall have been Completed. Until the Leased Property has been surrendered and returned to the Lessor in accordance with the provisions of this Section 22.5 and subject to Article XVIII hereof, the Lessee shall continue to pay the Lessor all Basic Rent and Supplemental Rent due hereunder.

(d) The Lessee acknowledges and agrees that a breach of any of the provisions of this Section 22.5 may result in damages to the Lessor that are difficult or impossible to ascertain and that may not be compensable at law. Accordingly, upon application to any court of equity having jurisdiction over the Leased Property or the Lessee, the Lessor shall be entitled to a decree against the Lessee requiring specific performance of the covenants of the Lessee set forth in this Section 22.5.

(e) Upon the request of the Lessor, the Lessee shall continue to maintain its insurance policies for the Leased Property, to the extent permitted by such policies, provided that the Lessor pays or reimburses the Lessee for the pro rata cost thereof.

ARTICLE XXIII

MISCELLANEOUS

SECTION 23.1. Binding Effect; Successors and Assigns; Survival .

The terms and provisions of this Lease, and the respective rights and obligations hereunder of the Lessor and the Lessee shall be binding upon them and their respective successors, legal representatives and assigns (including, in the case of the Lessor, any Person to whom the Lessor may transfer the Leased Property or any interest therein in accordance with the provisions of the Operative Documents), and inure to their benefit and the benefit of their respective permitted successors, legal representatives and assigns (including, in the case of the Lessor, any Person to whom the Lessor may transfer the Leased Property or any interest therein in accordance with the provisions of the Operative Documents).

SECTION 23.2. Severability .

Any provision of this Lease that shall be prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction, and the Lessee shall remain liable to perform its obligations hereunder except to the extent of such unenforceability. To the extent permitted by Applicable Laws and Regulations, the Lessee hereby waives any provision of law that renders any provision hereof prohibited or unenforceable in any respect.

SECTION 23.3. Notices .

Unless otherwise specified herein, all notices, requests, demands or other communications to or upon the respective parties hereto shall be in writing and shall be delivered and shall be deemed to have been given in accordance with Section 9.3 of the Participation Agreement. The parties shall copy the Administrative Agent, the Collateral Agent and the Rent Assignees on all notices, requests, demands or other written communications made hereunder.

SECTION 23.4. Amendment; Complete Agreements .

Neither this Lease or any other Operative Document nor any terms hereof or thereof may be amended, supplemented or modified except in accordance with the provisions of the Participation Agreement. This Lease, together with the other Operative Documents, is intended by the parties as a final expression of their agreement and as a complete and exclusive statement of the terms thereof, all negotiations, considerations and representations between the parties having been incorporated herein and therein. No course of prior dealings between the parties or their officers, employees, agents or Affiliates shall be relevant or admissible to supplement, explain, or vary any of the terms of this Lease or any other Operative Document. Acceptance of, or

acquiescence in, a course of performance rendered under this or any prior agreement between the parties or their Affiliates shall not be relevant or admissible to determine the meaning of any of the terms of this Lease or any other Operative Document. No representations, undertakings, or agreements have been made or relied upon in the making of this Lease other than those specifically set forth in the Operative Documents.

SECTION 23.5. Headings .

The Table of Contents and headings of the various Articles and Sections of this Lease are for convenience of reference only and shall not modify, define or limit any of the terms or provisions hereof.

SECTION 23.6. Original Executed Counterpart .

The single executed original of this Lease containing the receipt of the Lessor therefor on or following the signature pages thereof shall be the “original executed counterpart” of this Lease. To the extent that this Lease constitutes chattel paper, as such term is defined in the Uniform Commercial Code as in effect in any applicable jurisdiction, no security interest in this Lease may be created through the transfer or possession of any counterpart other than the “original executed counterpart.”

SECTION 23.7. Governing Law .

THIS LEASE HAS BEEN DELIVERED IN, AND SHALL IN ALL RESPECTS BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF, THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES (EXCEPT SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW), INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, EXCEPT TO THE EXTENT THAT THE LAWS OF THE STATE WHERE THE SITE IS LOCATED ARE REQUIRED TO APPLY.

SECTION 23.8. No Joint Venture .

Any intention to create a joint venture or partnership relation hereunder or pursuant to any other Operative Document between the Lessor and the Lessee is hereby expressly disclaimed.

SECTION 23.9. No Accord and Satisfaction .

The acceptance by the Lessor of any sums from the Lessee (whether as Basic Rent or otherwise) in amounts which are less than the amounts due and payable by the Lessee hereunder is not intended, nor shall be construed, to constitute an accord and satisfaction of any dispute between the Lessor and the Lessee regarding sums due and payable by the Lessee hereunder, unless the Required Participants specifically deem it as such in writing.

SECTION 23.10. Survival .

The termination of this Lease pursuant to Section 18.1 shall in no event relieve the Lessee of its liabilities and obligations hereunder or under any other Operative Document which accrued

prior to such termination, all of which shall survive any such termination. The extension of any applicable statute of limitations by the Lessee, any Participant or any other Indemnitee shall not affect such survival.

SECTION 23.11. Transfer of Leased Property .

Except as provided in Article XXII, any sale or transfer of the Leased Property pursuant to this Lease (excluding for this purpose any transfer pursuant to Section 6.3(b) of the Participation Agreement, unless such transfer is made after the occurrence and during the continuance of any Default or Event of Default) shall be at the Lessee’s expense. Upon receipt by the Lessor of payment in full of the Purchase Amount pursuant to the applicable provision of this Lease (but subject to the proviso in Section 18.1(a)(iii)(B)(1) hereof) (i) the Leased Property shall be transferred to the Lessee or any designee it may identify, and (ii) upon request of Lessee, the interest in the Site granted by the Ground Lease shall be terminated by the filing of the Ground Lease Release.

Any transfer of the Lessor’s interest in and to the Leased Property pursuant to this Lease shall be transferred on an “as is, where is, with all faults” basis, without covenants or warranties of title and without recourse, representation or warranty of any kind, other than with respect to the Lessor, the absence of Lessor Liens, and together with the due assumption by the Lessee (or its designee), of, and due release of the Lessor from, all obligations relating to the Leased Property. In connection with any transfer to an independent third party, the Lessee shall, or shall ensure that its designee shall, execute and deliver such documents, certificates and estoppels as may be required to facilitate the transfer of the Leased Property. Any provision in this Lease or other Operative Document to the contrary notwithstanding, no transfer of the Leased Property to the Lessee or to a third party buyer pursuant to the Purchase Option, the Return Option or otherwise shall be made until the Participants have received all Rent and other amounts then due and owing by the Lessee hereunder and under the other Operative Documents and no designation by the Lessee of a third party buyer shall relieve it of any its obligations hereunder or under the other Operative Documents. At or subsequent to the transfer or return of all or any of the Leased Property to a third party buyer pursuant to the Return Option, the Lessee will provide the Lessor with such lien and title searches as the Lessor may reasonably request to demonstrate to the Lessor’s satisfaction that the Leased Property is subject to no Liens other than Permitted Liens as described in clauses (a) (but excluding any such rights and interests of the Lessee referenced therein) or (b) of the definition thereof. Notwithstanding anything contained herein or in the other Operative Documents to the contrary, any obligation of the Lessor to transfer any assets to the Lessee shall be satisfied by a transfer of such assets to any designee selected by it.

SECTION 23.12. Enforcement of Certain Warranties .

Lessor hereby assigns, without recourse or warranty whatsoever, to Lessee, all warranties related to the construction of the Facility. Such assignment shall remain in effect until the expiration or termination of this Lease. Lessor shall also retain the right to enforce any warranties assigned in the name of Lessee upon the occurrence of an Event of Default. Lessor hereby agrees to execute and deliver at Lessee’s expense such further documents, including powers of attorney, as Lessee may reasonably request in order that Lessee may have the full benefit of the assignment effected or intended to be effected by this Section 23.12. Upon the termination of this Lease, the

warranties hereby assigned shall automatically revert to Lessor or be transferred to Lessee or its designee in accordance with Section 23.11. The foregoing provision of reversion shall be self‑operative and no further instrument of reassignment shall be required. In confirmation of such reassignment to Lessor or assignment to Lessee in connection with a transfer under Section 23.11, Lessee or Lessor, as applicable, shall execute and deliver promptly any certificate or other instrument which other may reasonably request. Any monies collected by Lessee under any of the warranties after the occurrence of and during the continuation of an Event of Default shall be held in trust by Lessee and promptly paid over to Lessor to be held in trust in accordance with Section 23.13.

SECTION 23.13. Security Interest in Funds .

As long as a Material Default or Event of Default shall be continuing, any amount that would otherwise be payable to the Lessee under the Operative Documents shall be paid to or retained by the Lessor (including amounts to be paid to the Lessee pursuant to Article XIII or Section 23.12) as security for the performance by the Lessee in full of its obligations under this Lease and the other Operative Documents, and it may be applied to the obligations of the Lessee hereunder and under the other Operative Documents and distributed pursuant to Section 18.2. At such time as no Material Default or Event of Default shall be continuing, such amounts, net of any amounts previously applied to the Lessee’s obligations hereunder or under any other Operative Documents, shall be paid to the Lessee. Any such amounts which are held pending payment to the Lessee or application hereunder shall be invested by the Lessor as directed from time to time in writing by the Lessee, and at the expense and risk of the Lessee, in Permitted Investments. Any gain (including interest received) realized as the result of any such investment (net of any fees, commissions and other expenses, if any, incurred in connection with such investment) shall be applied from time to time in the same manner as the principal invested. The Lessor shall not be liable for any losses on such investments or for any failure to make any investment.

SECTION 23.14. Quiet Enjoyment .

Lessor covenants that it will not interfere in Lessee’s quiet enjoyment of the Leased Property in accordance with this Lease during the Base Term so long as no Event of Default is continuing. Such right of quiet enjoyment is independent of, and shall not affect, Lessor’s rights otherwise to initiate legal action to enforce the obligations of Lessee under this Lease during the continuance of an Event of Default.

SECTION 23.15. Submission to Jurisdiction .

EACH OF THE LESSOR AND THE LESSEE IRREVOCABLY AND UNCONDITIONALLY:

(a) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS LEASE, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE SOLE, EXCLUSIVE GENERAL JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR OF ANY NEW YORK STATE COURT

SITTING IN THE BOROUGH OF MANHATTAN, AND APPELLATE COURTS FROM ANY THEREOF;

(b) CONSENTS THAT ANY SUCH ACTION OR PROCEEDINGS MAY BE BROUGHT TO SUCH COURTS, AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT FORUM AND AGREES NOT TO PLEAD OR CLAIM THE SAME;

(c) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS SET FORTH ON SCHEDULE II TO THE PARTICIPATION AGREEMENT OR AT SUCH OTHER ADDRESS OF WHICH THE OTHER PARTIES HERETO SHALL HAVE BEEN NOTIFIED PURSUANT TO SECTION 9.3 OF THE PARTICIPATION AGREEMENT; AND

(d) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

SECTION 23.16. Jury Trial .

EACH OF THE LESSOR AND THE LESSEE HEREBY IRREVOCABLY WAIVES ANY AND ALL RIGHT TO A TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND ANY RIGHTS UNDER THIS LEASE OR ANY OTHER OPERATIVE DOCUMENT OR UNDER ANY AMENDMENT, INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE FUTURE BE DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR ARISING FROM ANY RELATIONSHIP EXISTING IN CONNECTION WITH THIS LEASE OR ANY OTHER OPERATIVE DOCUMENT AND AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A COURT AND NOT BEFORE A JURY.

SECTION 23.17. Payments .

All payments to be made by the Lessee hereunder shall be made to the Lessor or the Administrative Agent, as the case may be, in Dollars in immediately available and freely transferable funds at the place of payment, all such payments to be paid without setoff, counterclaim or reduction and without deduction for, and free from, any and all present or future taxes, levies, imposts, duties, fees, charges, deductions, withholding or liabilities with respect thereto or any restrictions or conditions of any nature. If the Lessee is required by law to make any deduction or withholding on account of any tax or other withholding or deduction from any sum payable by the undersigned hereunder, the Lessee shall pay any such tax or other withholding or deduction and shall pay such additional amount necessary to ensure that, after making any payment, deduction or withholding, the recipient thereof shall receive and retain (free of any liability in respect of any payment, deduction or withholding) a net sum equal to what it would have received and so retained hereunder had no such deduction, withholding or payment been required to have been made, which payment or withholding is made subject to the limitations set

forth in Sections 7.2(a)(iii) and 7.6 of the Participation Agreement, reimbursement obligations of Indemnitees set forth in Sections 7.2(a)(iii), 7.2(e) and 7.2(f) of the Participation Agreement and other rights of the Lessee set forth in Sections 7.2(e), 7.2(f) and 7.6 of the Participation Agreement.

SECTION 23.18. Nature of Transaction .

It is the intention of the parties that the Overall Transaction constitutes an operating lease for purposes of the Lessee’s financial reporting under GAAP provisions relating to leases and variable interest entities including without limitation the Accounting Standards Codification (“ASC”) 810-10-55, ASC 840 (including ASC 840-10, ASC 840-20 and 840-40) and, once applicable, ASC 842 (including 842-10 and 842-40-55).

[Signature Pages Follow]

IN WITNESS WHEREOF, the undersigned have each caused this Lease to be duly executed and delivered by their respective representatives thereunto duly authorized as of the day and year first above written.

	BANKERS COMMERCIAL CORPORATION,
	AS THE LESSOR


	By:
		Name:
		Title:

[THIS IS COUNTERPART NO.__ OF __ ORIGINALLY EXECUTED COUNTERPARTS.]


	CUBIC CORPORATION ,
	AS THE LESSEE


	By:
		Name:
		Title:

[THIS IS COUNTERPART NO.__ OF __ ORIGINALLY EXECUTED COUNTERPARTS.]

Receipt of this original counterpart of the foregoing Lease Agreement dated February __, 2019, is hereby acknowledged on this ____ day of February, 2019.


	MUFG UNION BANK, N.A.,
	AS COLLATERAL AGENT


	By:
		Name:
		Title:


		Lease Agreement

	A-1

Exhibit A
to Lease

LEASE SUPPLEMENT

This Lease Supplement is executed pursuant to, and incorporates by reference all of the terms, conditions and provisions of, the Lease Agreement, dated as of February 5, 2019 (as amended, amended and restated, supplemented or otherwise modified from time to time, the “ Lease ”), between Bankers Commercial Corporation (“ Lessor ”) and Cubic Corporation (“ Lessee ”). All capitalized terms used herein which are not defined herein shall have the meaning given to such terms in the Lease. Lessor and Lessee hereby agree that:

1. Basic Term Commencement Date : [  ], [2021]

2. Return Price Recourse Deficiency Amount : the Return Price Recourse Deficiency Amount, calculated as of the Base Term Commencement Date, is the amount equal to __% times the Lease Balance.

3. Basic Term : Expires on [__], [2026].

4. Miscellaneous : This Lease Supplement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. To the extent that this Lease Supplement constitutes chattel paper, within the meaning of any applicable Uniform Commercial Code provision, no security interest in this Lease Supplement may be created through the transfer or possession of any counterpart other than the original executed counterpart, which shall be identified for such purposes as the counterpart No. 1, containing the receipt therefor executed by Lessor on the signature page thereof.

5. Governing Law : This Lease Supplement shall be construed in accordance with and governed by the laws of the State of New York without giving effect to the conflicts of laws principles thereof (except for Section 5-1401 of the New York General Obligations Law).


		Lease Agreement

	A-2


Dated: , [2021].

	BANKERS COMMERCIAL CORPORATION
	(Lessor)


	By:
	Name:
	Title:


	CUBIC CORPORATION
	(Lessee)


	By:
	Name:
	Title:

COUNTERPART NO. OF SERIALLY NUMBERED MANUALLY EXECUTED COUNTERPARTS. TO THE EXTENT, IF ANY, THAT THIS DOCUMENT CONSTITUTES CHATTEL PAPER UNDER THE UNIFORM COMMERCIAL CODE, NO SECURITY INTEREST IN THIS DOCUMENT MAY BE CREATED THROUGH THE TRANSFER AND POSSESSION OF ANY COUNTERPART OTHER THAN COUNTERPART NO. 1.


		Lease Agreement

	A-3

Exhibit 10.6

CERTAIN INFORMATION (INDICATED BY ASTERISKS) HAS BEEN OMITTED FROM THIS DOCUMENT BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED

PARTICIPATION AGREEMENT

DATED AS OF FEBRUARY 5, 2019

AMONG

CUBIC CORPORATION,

AS THE LESSEE AND THE CONSTRUCTION AGENT,

BANKERS COMMERCIAL CORPORATION,

AS THE LESSOR,

MUFG UNION BANK, N.A.,

AS COLLATERAL AGENT,

MUFG BANK, LTD.

AS ADMINISTRATIVE AGENT,

AND

THE RENT ASSIGNEES SET FORTH ON

SCHEDULE I-A FROM TIME TO TIME

AS RENT ASSIGNEES

TABLE OF CONTENTS


		Page
ARTICLE I DEFINITIONS		2
ARTICLE II EFFECTIVENESS; GENERAL PROVISION		2
SECTION 2.1.	Effectiveness of Agreement.	2
SECTION 2.2.	Commitments.	7
SECTION 2.3.	Fundings.	10
SECTION 2.4.	Obligations Several.	11
SECTION 2.5.	Advance Requests.	12
SECTION 2.6.	Funding Notations.	13
SECTION 2.7.	Payments to Participants.	13
SECTION 2.8.	Computations.	13
SECTION 2.9.	Determination of Yield Rate and Payment Periods.	13
SECTION 2.10.	Capitalized Yield.	16
SECTION 2.11.	Lessor Investment.	16
SECTION 2.12.	Rent Assignment Interests.	18
SECTION 2.13.	Fees and Other Transaction Costs.	19
SECTION 2.14.	Nature of Transaction.	20
SECTION 2.15.	Amounts Due.	21
ARTICLE III CONDITIONS TO ADVANCES; DELIVERIES UPON COMPLETION		22
SECTION 3.1.	Conditions to Each Advance.	22
SECTION 3.2.	Conditions to Initial Advance.	25
SECTION 3.3.	Deliveries Upon Completion.	25
SECTION 3.4.	Final Funding Date Conditions.	27
ARTICLE IV REPRESENTATIONS AND WARRANTIES		28
SECTION 4.1.	Representations and Warranties of the Lessee.	28
SECTION 4.2.	Representations and Warranties of the Lessor.	34
SECTION 4.3.	Representations and Warranties of Rent Assignees.	35
SECTION 4.4.	Representations and Warranties of Administrative Agent and Collateral Agent.	36
ARTICLE V COVENANTS OF THE LESSEE		37
SECTION 5.1.	Financial Reporting.	37

TABLE OF CONTENTS

(continued)


		Page
SECTION 5.2.	Affirmative Covenants of the Lessee.	40
SECTION 5.3.	Consolidations, Mergers, Sales of Assets.	42
SECTION 5.4.	Compliance with Laws and Approvals.	43
SECTION 5.5.	Change of Control.	43
SECTION 5.6.	Financial Covenants of the Lessee.	43
ARTICLE VI OTHER COVENANTS AND AGREEMENTS		50
SECTION 6.1.	Cooperation with the Lessee.	50
SECTION 6.2.	Covenants of the Agents and the Participants.	50
SECTION 6.3.	Assignments.	53
SECTION 6.4.	Participations.	56
SECTION 6.5.	Ground Lease.	57
SECTION 6.6.	Amendments Related to Credit Facilities.	57
ARTICLE VII INDEMNIFICATION AND ADDITIONAL PAYMENTS		58
SECTION 7.1.	General Indemnification.	58
SECTION 7.2.	General Tax Indemnity.	63
SECTION 7.3.	Withholding Tax Documentation.	70
SECTION 7.4.	Increased Costs.	72
SECTION 7.5.	Funding Losses.	74
SECTION 7.6.	Gross Up.	74
SECTION 7.7.	Leased Property Indemnity.	75
ARTICLE VIII AGENCY		75
SECTION 8.1.	Appointment of Administrative Agent and Collateral Agent; Powers and Authorization to Take Certain Actions.	75
SECTION 8.2.	Reliance.	77
SECTION 8.3.	Action Upon Instructions Generally.	77
SECTION 8.4.	Indemnification.	78
SECTION 8.5.	Independent Credit Investigation.	78
SECTION 8.6.	Refusal to Act.	79
SECTION 8.7.	Resignation or Removal of Administrative Agent, Collateral Agent; Appointment of Successor.	79
SECTION 8.8.	Separate Agent.	80

TABLE OF CONTENTS

(continued)


		Page
SECTION 8.9.	Termination of Agency.	81
SECTION 8.10.	Compensation of Administrative Agent and Collateral Agent.	81
SECTION 8.11.	Limitations.	81
ARTICLE IX MISCELLANEOUS		82
SECTION 9.1.	Survival of Indemnities.	82
SECTION 9.2.	No Broker, etc.	82
SECTION 9.3.	Notices.	82
SECTION 9.4.	Counterparts.	82
SECTION 9.5.	Amendments.	83
SECTION 9.6.	Headings, etc.	84
SECTION 9.7.	Parties in Interest.	84
SECTION 9.8.	Governing Law.	84
SECTION 9.9.	Payment of Transaction Costs and Other Costs.	84
SECTION 9.10.	Severability.	85
SECTION 9.11.	Limited Liability of the Lessor.	85
SECTION 9.12.	Liabilities of the Participants.	86
SECTION 9.13.	Submission to Jurisdiction; Waivers.	86
SECTION 9.14.	Reproduction of Documents.	87
SECTION 9.15.	Role of Arranger.	87
SECTION 9.16.	Rights Under Rent Assignment Agreements.	87
SECTION 9.17.	Limitation on Recourse Liability During Construction Period.	87
SECTION 9.18.	Payments in Dollars.	88
SECTION 9.19.	Confidentiality.	88
SECTION 9.20.	Entire Agreement.	89
SECTION 9.21.	UCC Filings and Other Matters.	90
SECTION 9.22.	Existence and Continuation of an Event of Default.	90
SECTION 9.23.	USA PATRIOT Act.	90
SECTION 9.24.	Certifications from the Construction Consultant.	90
SECTION 9.25.	Substitution of a Participant; Change in Lending Office.	90

iii

TABLE OF CONTENTS

(continued)


		Page
ARTICLE X RECEIPT, DISTRIBUTION AND APPLICATION OF RECEIPTS		92
SECTION 10.1.	Receipt, Distribution and Application of Receipts	92
SECTION 10.2.	Distribution of Certain Other Payments	92
SECTION 10.3.	Distribution of Payments After Event of Default	94
SECTION 10.4.	Other Payments	94
SECTION 10.5.	Distribution of Excluded Amounts	95


Appendix I	Definitions
Schedule I-A	Rent Assignee Commitments
Schedule I-B	Lessor Investment
Schedule II	Addresses For Notice; Wire Instructions
Schedule III	Liens
Schedule IV	Description of Site Owned by the Lessor
Schedule 2.9(f)
Exhibit A	Form of Advance Request
Exhibit B	Form of Assignment Agreement

PARTICIPATION AGREEMENT

THIS PARTICIPATION AGREEMENT, dated as of February 5, 2019 (this “Agreement” ), is made among CUBIC CORPORATION, a Delaware corporation, as Lessee (the “Lessee” ) and as the Construction Agent (the “Construction Agent” ), BANKERS COMMERCIAL CORPORATION, a California corporation, as the Lessor (in such capacity, the “Lessor” ), MUFG UNION BANK, N.A., as Collateral Agent for the Rent Assignees (the “ Collateral Agent ”), MUFG BANK, LTD., as Administrative Agent for the Participants (in such capacity, the “Administrative Agent” ) and the Rent Assignee(s) named on Schedule I-A hereto from time to time (the “Rent Assignees ” ).

PRELIMINARY STATEMENT

A. Subject to the terms and conditions of this Agreement and the other Operative Documents:

(i) as of the Closing Date, among other things:

(a) the Lessor will lease the Site pursuant to the Ground Lease;

(b) the Lessor and the Lessee will enter into the Lease pursuant to which the Lessor will sublease its interest in the Site and lease its interest in the Facility to the Lessee;

(c) the Lessor and the Construction Agent will enter into (1) the Construction and Development Agreement pursuant to which the Construction Agent will construct the Facility on the Site, and (2) the applicable Assignment of Contracts;

(d) the Lessee and the Lessor will enter into the Memorandum of Lease pursuant to which (i) the Lessee will grant the Lessor a Lien on and a security interest in the interests of the Lessee in the Site and Facility, in all rights and interests of the Lessee under and in the Construction Documents and in the other Lessee Collateral, in each case, in order to secure the obligations of the Lessee to the Lessor under the Lease and of the Lessee and the Construction Agent under the other Operative Documents, (ii) notice of the leasing of the Site and Facility will be publicized, and (iii) the Lessor will grant the Lessee a Lien on and security interest in the interests of the Lessor in the Site and Facility to secure its obligations in the event a Purchase Option has been validly exercised by the Lessee; and

(e) the Lessor and each Rent Assignee will enter into a Rent Assignment Agreement pursuant to which, inter alia , each Rent Assignee shall, subject to the terms and conditions hereof and thereof, undertake to acquire the Rent Assignment Interests from the Lessor to enable the Lessor to make Advances to the Construction Agent on the Advance Date specified in any Advance Request; and

(ii) during the Construction Period:

(a) on or one (1) Business Day prior to the Demolition Date, the Lessor will acquire Building 1 pursuant to the Deed and, pursuant to the Construction and Development Agreement, the Construction Agent shall demolish Building 1;

(b) the Lessor will, pursuant to the terms of this Agreement and the Construction and Development Agreement, undertake to provide fundings to make Advances to the Construction Agent;

(c) the Construction Agent, using Advances funded by the Lessor in part from the acquisition of the Rent Assignment Interests by the Rent Assignees pursuant to the Rent Assignment Interests and in part from the Lessor Investment, will demolish Building 1 and construct the Facility on the Site pursuant to the Construction and Development Agreement; and

(d) notwithstanding the effectiveness of certain covenants and terms of the Lease during such period, the Lessee will not be required to begin to make scheduled payments of Basic Rent under the Lease until the Base Term Commencement Date.

NOW, THEREFORE, in consideration of the mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto hereby agree as follows:

ARTICLE I

DEFINITIONS

Unless the context shall otherwise require, capitalized terms used and not defined herein shall have the meanings assigned thereto in Appendix I hereto for all purposes hereof and the rules of interpretation set forth in Appendix I hereto shall apply to this Agreement.

ARTICLE II

EFFECTIVENESS; GENERAL PROVISION

SECTION 2.1. Effectiveness of Agreement.

The obligations of the Lessor to acquire Building 1 pursuant to the Deed and lease the Site pursuant to the Ground Lease and lease the Leased Property and of the Participants to finance the demolition of Building 1 and construction of the Facility and issue their respective Commitments and the effectiveness of this Agreement (the “ Closing ”) shall occur upon the satisfaction of each of the following conditions and of the conditions set forth in Section 3.1 hereof (all such conditions to be satisfied to the satisfaction of the Lessor in its reasonable discretion):

(a) Authorization, Execution and Delivery of Documents; No Default . The Operative Documents shall have been duly authorized, executed and delivered by each of the parties thereto, shall be in form and substance reasonably satisfactory to the Lessee, each Participant, and the Agents and an executed counterpart of each thereof shall have been received by such parties. Each of the documents referred to above shall be in full force and effect as to all

parties and no event which would constitute a Default or Event of Default under the Lease or a default under any other Operative Document shall be continuing.

(b) Legal Opinions . The Agents and each of the Participants shall have received favorable opinions of James R. Edwards, Senior Vice President, General Counsel and Secretary of the Lessee, and of Jones Day, special counsel to the Lessee and as California local counsel. Each of the foregoing opinions shall be dated the Closing Date and in form and substance reasonably satisfactory to the recipients thereof.

(c) Insurance . The Agents and each Participant shall have received the insurance certificates required by Section 2.7(d) of the Construction and Development Agreement.

(d) Governmental and Third Party Approvals . All necessary or advisable Governmental Actions and all consents, approvals and authorizations of Persons, required in connection with the Overall Transaction, shall have been obtained or made and be in full force and effect and not be subject to any pending procedures or appeals, whether administrative, judicial or otherwise, except for (i) any Governmental Actions that are not required with respect to the then current status of the construction of the Facility; and (ii) any other Governmental Action, consent, approval or authorization the failure to obtain which, or the appeal of or further procedures with respect to which, would not reasonably be expected to have a Material Adverse Effect.

(e) Corporate Status and Proceedings . The Agents and each of the Participants shall have received:

(i) certificates of good standing with respect to the Lessee from the State of Delaware and the State of California, each dated no earlier than the thirtieth (30 th ) day prior to the Closing Date; and

(ii) a certificate of the Secretary or Assistant Secretary (or other Responsible Officer) of the Lessee, in form and substance reasonably satisfactory to the Agents and each of the Participants and attaching and certifying as to (A) the board of directors’ resolutions in respect of the execution, delivery and performance by the Lessee of each Operative Document to which it is or will be a party, (B) its certificate of incorporation and bylaws, and (C) the incumbency and signatures of persons authorized to execute and deliver the Operative Documents on behalf of the Lessee.

(f) The Lessor Documents . Each of the Rent Assignees, the Agents and the Lessee shall have received:

(i) a certificate of good standing with respect to the Lessor from the State of California, dated no earlier than the thirtieth (30 th ) day prior to the Closing Date; and

(ii) a certificate of the Secretary or Assistant Secretary (or other Responsible Officer) of the Lessor, in form and substance reasonably satisfactory to the Lessee and attaching and certifying as to (A) the directors’ resolutions in respect of the execution, delivery and performance by the Lessor of each Operative Document to which

it is or will be a party, (B) its certificate of incorporation and by-laws and (C) the incumbency and signatures of persons authorized to execute and deliver the Operative Documents on behalf of the Lessor.

(g) Representations and Warranties; Absence of Defaults; Etc . Each representation and warranty of the Lessee and the Participants contained herein or in any other Operative Document shall be true and correct in all material respects.

(h) Appraisal; Survey . The Agents and each of the Participants shall have received an (the “Appraisal” ) from the Appraiser which shall establish (by the use of appraisal methods reasonably satisfactory to the Participants) values and other information as required by the Participants, including without limitation, as to the economic useful life of the Leased Property (assuming Completion of the Facility on the Site substantially in accordance with Applicable Laws and Regulations, and assuming that the Facility has been constructed) as of the Construction Period Termination Date and as of the Maturity Date. The Appraisal shall comply with all of the provisions of the Financial Institutions Reform, Recovery and Enforcement Act of 1989, as amended, the rules and regulations adopted pursuant thereto, and all other Applicable Laws and Regulations. The Lessee shall have delivered, or shall have caused to be delivered, to the Participants, at the Lessee’s expense, sufficient copies of an accurate “Boundary” survey (the “ Survey ”) prepared in accordance with the 2016 Minimum Standard Detail Requirements for ALTA/NSPS Land Title Surveys certified to the Agents and each of the Participants and showing no state of facts reasonably unsatisfactory to each of the Participants and prepared within thirty (30) days of the Closing Date by a Person reasonably satisfactory to each of the Participants. Such survey shall (1) be acceptable to the Title Insurance Company, (2) show no encroachments on the Site by structures owned by others, and no encroachments from any part of the Leased Property onto any land owned by others, and (3) disclose no state of facts reasonably objectionable to any of the Participants or the Title Insurance Company, and be reasonably acceptable to each such Participant.

(i) Environmental Report and Related Reliance Letter. The Agents and each of the Participants shall have received a copy of the “Phase I” environmental assessment report (or its equivalent) of the Site in form and substance satisfactory to each of the Participants by the Environmental Expert, and, if such assessment indicates any exceptions reasonably requiring remedy or further investigation, a further environmental assessment of the Site by such environmental engineer satisfactory to each of the Participants; and the Environmental Expert shall have delivered to each of the Participants a letter in form and substance satisfactory to each of the Participants stating that each such Person may rely upon the Environmental Expert’s assessment of the Site. In addition, the Lessee shall deliver to the Administrative Agent a written approval from the DEH of (i) the Remediation Plan in connection with certain remediation actions to be undertaken as part of the Construction, and such approval shall be satisfactory in form and substance to the Participants, and (ii) the project-specific community health and safety plan related to the Construction.

(j) Construction Matters . The Agents and each of the Participants shall have received:

(i) a certificate from the Construction Consultant and the Construction Agent (provided, the Construction Consultant shall provide such certifications only with respect to the matters described in subsections (A) and (B) of this Section 2.1(j)(i) and only if the Agents or any of the Participants, prior to the Closing, expressly requests the Construction Consultant to provide such certifications but the Construction Agent shall provide certifications with respect to the matters described in all subsections of this Section 2.1(j)(i)), dated the Closing Date, certifying to the effect that: (A) the aggregate Commitments of the Rent Assignees and the Lessor are sufficient to Complete the Facility and to pay all Construction Costs, in each case on or before the Construction Period Termination Date; (B) Completion of the Facility can be achieved before the Construction Period Termination Date; (C) the Facility will be constructed on the Site substantially in accordance with the Plans and Specifications and in accordance with the Construction Budget; (D) all representations and warranties of the Lessee and the Construction Agent contained in the Operative Documents are true and correct in all material respects; (E) no Construction Default, Construction Event of Default or Force Majeure Event is continuing; (F) the matters set forth in clause (d) of this Section 2.1 are true and correct; and (G) attached thereto are true, correct and complete copies of the Construction Budget (which includes appropriate contingency reserves as set forth therein), the construction schedule, a site-map of the Site and the Major Construction Documents entered into as of the Closing Date, and that the same have not been amended or otherwise modified, revoked or rescinded and, in the case of such Major Construction Documents, are in full force and effect;

(ii) at least ten (10) days prior to the Closing Date, a copy of the Construction Budget prepared in accordance with Section 2.6 of the Construction and Development Agreement and a copy of the General Construction Agreement, the Development Agreement; and

(iii) an Assignment of Contracts and a Consent and Acknowledgment with respect to each Major Construction Document then in existence.

(k) No Material Adverse Effect . Since September 30, 2018, there has been no Material Adverse Effect with respect to the Site or the Lessee.

(l) Fees and Transaction Costs . (i) The Agents, the Arranger and each of the Participants shall have received payment of all Fees agreed to by the Lessee in writing and due and payable to them on the Closing Date and (ii) the Lessee shall have paid all other Transaction Costs due and payable on or prior to the Closing Date that have been set forth in detailed invoices delivered to the Lessee at least five (5) Business Days prior to the Closing Date. Provisions for the payment of all Taxes and filing fees and other charges in connection with the execution, delivery, recording, filing and registration of the Operative Documents and the Overall Transaction shall have been made by the Lessee to the reasonable satisfaction of the Administrative Agent and each of the Participants.

(m) Title and Title Insurance. On the Closing Date, the Site will be ground leased to the Lessor pursuant to the Ground Lease. The Title Insurance Company shall deliver to

Lessor, a Leasehold Policy of Title Insurance and an alternative Mortgagee Policy of Title Insurance (insuring the lien of the mortgage contained in the Memorandum of Lease) issued to the Lessor and its successors and assigns including Administrative Agent, in each case, reasonably acceptable in form and substance to the Administrative Agent and each of the Participants (collectively, the “ Title Policy ”). The Title Policy shall be dated as of the Closing Date, shall include coverage over the general exceptions to such policy and shall contain such affirmative endorsements as to mechanic’s liens, easements and rights-of-way, encroachments, the non-violation of covenants and restrictions, zoning, survey matters, an alternative policy endorsement and other matters as the Lessor or Lessee shall reasonably request, in each case to the extent customarily available in California, as applicable.

(n) Lien Searches, Financing Statements. Uniform Commercial Code lien searches shall have been performed and sufficient copies thereof delivered to the Lessor and Administrative Agent, which shall indicate to each such party’s reasonable satisfaction that there are no Liens other than Liens released concurrently with the effectiveness of this Agreement on the Closing Date (regardless of whether senior, pari passu or junior) in effect with respect to any Lessee Collateral and UCC-1 financing statements covering such collateral shall have been prepared by the parties thereto and copies thereof delivered to the Lessor and the Administrative Agent, all of which shall be in form and substance reasonably acceptable to the Lessor and the Administrative Agent.

(o) Filings, Recordings and Other Actions . The Lessee shall have caused the Ground Lease to be executed and delivered in favor of the Lessor. The Lessee and the Lessor shall have executed and delivered all instruments and documents necessary for (i) the Lessor to obtain a Lien on the Lessee Collateral and (ii) any of the Operative Documents to become effective or enforceable, in each case in accordance with Applicable Laws and Regulations and to the extent reasonably required in connection with the then current status of the construction and planning of the Facility. The Lessee and the Lessor shall cause all such instruments and documents to be filed and recorded in the Recorder’s Office or such governmental offices as is necessary to perfect or publish notice of such Liens in favor of the Lessor. The Lessor and the Administrative Agent shall have received satisfactory evidence of the payment of all recording and filing fees and taxes with respect to any recordings or filings made of the Memorandum of Lease, the Memorandum of Ground Lease and any UCC financing statements to be filed with the Secretary of State of the State of Delaware and the Recorder’s Office (or other appropriate filing office).

(p) Flood Hazard Certification . The Administrative Agent and the Lessor shall have obtained the necessary documents regarding flood hazard certification, which shall be prepared at Lessee’s expense.

(q) Assignments and Liens . The Lessor shall have a security interest in the interests of the Lessee in the Lessee Collateral.

(r) No Event of Loss, Taking, Force Majeure Event . No Event of Loss, Event of Taking, Force Majeure Event shall have occurred with respect to the Leased Property.

(s) Rent Assignment Interests and Lessor Investment Permitted by Applicable Law, etc. The acquisition of the Rent Assignment Interests by the Rent Assignees and the making of the Lessor Investment by the Lessor shall be permitted by Applicable Laws and Regulations (including, without limitation, Regulations T, U and X of the F.R.S. Board) and shall not subject any Participant to any Tax, penalty, liability or other onerous condition under or pursuant to any Applicable Laws and Regulations. If requested any Participant, such Participant shall have received an Officer’s Certificate from a Responsible Officer by the Lessee certifying as to such matters of fact as it may reasonably specify to enable it to determine whether such acquisition of the Rent Assignment Interests or the making of the Lessor Investment, as applicable, is so permitted.

(t) The Lessor Confirmation Letter . The Lessee shall have received a lessor confirmation letter from the Lessor providing information related to ASC 810.

(u) KYC, FIN Cen Information . Upon the reasonable request of the Lessor made at least ten (10) days prior to the initial Advance Date, Lessee shall have provided to the Lessor the documentation and other information so requested in connection with applicable “know your customer” and anti-money-laundering rules and regulations, including the USA PATRIOT Act, as defined below, in each case at least five (5) days prior to the initial Advance Date.

All documents and instruments required to be delivered on the Closing Date pursuant to the Operative Documents shall be delivered at the offices of Dechert LLP, or at such other location as the Lessor, the Agents and the Lessee may agree. The release by any party of its counterpart to this Agreement shall constitute conclusive evidence of its satisfaction with the form and substance of each of the items so delivered under this Section 2.1, subject to the right of the Lessor to require a side letter for satisfaction of certain items under this Section 2.1 after the Closing Date.

SECTION 2.2. Commitments.

(a) Rent Assignment Commitments.

(i) Subject to the terms and conditions hereof and of the Rent Assignment Agreement and after receipt of each Advance Request in accordance with Section 2.5 hereof, each Rent Assignee severally agrees to acquire the Rent Assignment Interests from the Lessor for the purpose of enabling the Lessor to make the Advance to Lessee on the Closing Date and on each other Advance Date, in the amounts required under Section 2.12(a) hereof and Section 1.02(b) of the respective Rent Assignment Agreement.

(ii) Each Rent Assignee’s Commitment and Commitment Percentage are as specified on Schedule I-A (in the case of the initial Rent Assignees) or as specified in the applicable Assignment Agreement pursuant to which such Rent Assignee became a party to the Rent Assignment Agreement. In no event shall any Rent Assignee be obligated to acquire any Rent Assignment Interest to fund an Advance on any Advance Date if, after giving effect to such Advance, (1) the aggregate outstanding amount of the Rent Assignment Advances funded and Lessor Investment made to fund Advances would

exceed the Commitment Amount or (2) the aggregate amount of funds so provided by such Rent Assignee would exceed the amount of its Commitment.

(b) Lessor Commitment.

(i) Subject to the terms and conditions hereof and after receipt of each Advance Request in accordance with Section 2.5 hereof, the Lessor agrees to make an investment on the Closing Date and each other Advance Date to the Administrative Agent in accordance with Section 2.3 in an amount equal to its Commitment Percentage times the Commitment Amount (such contributions collectively called the “ Lessor Investment ”).

(ii) The Lessor’s Commitment and Commitment Percentage are as specified on Schedule I-B or as specified in the applicable Assignment Agreement pursuant to which the Lessor became a party hereto. In no event shall the Lessor be obligated to make a Lessor Investment on any Advance Date if, after giving effect to such Advance, (1) the aggregate outstanding amount of the Rent Assignment Advances funded and Lessor Investment made to fund Advances would exceed the Commitment Amount or (2) the aggregate amount of funds so provided by the Lessor would exceed the amount of its Commitment. Nothing in this Section 2.2(b) shall operate to relieve the Rent Assignees or the Lessee from their respective obligations under the Operative Documents or to waive any of the Lessor’s rights against the Rent Assignees or Lessee.

(i) Notwithstanding anything in this Agreement to the contrary, the Commitments shall terminate and the Lessor shall not be obligated to make any Advance, and no Rent Assignee shall be obligated to make any Rent Assignment Advances in respect of any Advance and no Advance Date may thereafter occur at 11:00 a.m. New York time on the last day of the Commitment Period.

(ii) During the continuation of an Event of Default, whether automatically or with the consent, or at the request, of the Required Participants, upon written notice to the Lessee (except in the case of an Event of Default described in paragraphs (h) or (i) of Article XVII of the Lease), the Commitments of the Participants shall be terminated, the Lease Balance outstanding with accrued Yield thereon and all other amounts owing hereunder and shall immediately become due and payable and the application of proceeds therefrom shall be subject to Article X hereof.

(iii) The Lessee shall have the right, upon not less than ten (10) days prior written notice to the Administrative Agent, to voluntarily reduce the Commitments on a Payment Date, subject to the satisfaction of the following conditions:

(A) the Construction Consultant and the Construction Agent shall certify (provided the Construction Consultant shall provide the certifications specified in subsections (i) and (ii) below but not subsection (iii) below) to each Participant that, following such reduction of the Commitment, (i) the remaining Available Commitments of the Lessor and Rent Assignees are

sufficient to Complete the Facility and to pay all Construction Costs, (ii) the Facility can be Completed before the Construction Period Termination Date, and (iii) no Construction Event of Default is continuing;

(B) all Transaction Costs and other amounts accrued with respect to the portion of the Commitments so reduced through the effective date of such reduction shall be paid in accordance with Section 2.13;

(C) such reduction shall be in a minimum amount of $1,000,000 in the aggregate or, if less, the aggregate remaining unfunded Available Commitments of the Lessor and Rent Assignees; and

(D) such reduction shall reduce (1) each Rent Assignee’s Commitment pro rata based on the percentage of the aggregate Commitments of the Rent Assignees then in effect represented by such Rent Assignee’s Commitment, and (2) the Lessor’s Commitment pro rata based on the percentage of the aggregate Commitments of all of the Participants then in effect represented by the Lessor’s Commitments.

(d) Increase in Commitments . If the Construction Agent determines that the Commitments are not sufficient to Complete the Facility on or prior to the Construction Period Termination Date inclusive of all Carrying Costs, then the Participants and the Construction Agent shall, at the written request of the Construction Agent accompanied by the certificate hereinafter described, in good faith, but for a period not in excess of twenty (20) days (provided that such period shall not extend beyond the Construction Period Termination Date), discuss the terms and conditions applicable to an increase in the Commitments to enable the Construction Agent to Complete the Facility on or prior to the Construction Period Termination Date. Notwithstanding any provision of any Operative Document to the contrary, during such twenty (20) (or shorter) day period, no Advance shall be made but none of the Participants may exercise any remedy under any Operative Document solely as a result of the remaining Available Commitments of the Lessor and the Rent Assignees being insufficient to Complete the Facility and to pay all Construction Costs. It is understood and agreed that (x) the Participants are not obligated to increase the Commitments by reason of their entering into such good faith discussions and may decline to increase their respective Commitment for any reason in their sole and absolute discretion and (y) no Participant may cause another Participant’s Commitment to be increased without such Participant’s prior consent which may be withheld in its sole and absolute discretion. In connection with any such request, the Construction Agent shall deliver to the Participants (i) a written explanation detailing the reasons why the Commitment was not sufficient to finance Completion, (ii) a certification from the Construction Consultant and the Construction Agent to the effect that the increased Commitment will allow Completion to occur on or before the Construction Period Termination Date substantially in accordance with the Plans and Specifications and in accordance with the Construction Budget, and (iii) any other evidence or information reasonably requested by the Participants in connection therewith. If less than all of the Participants agree to increase their respective Commitments, the remaining Participants have the option to increase their Commitments further, on a pro rata basis with other Participants also electing to further increase their Commitments (and, in such event, the parties hereto agree that the amounts and percentages set forth opposite each Participant’s names on Schedule I-A and Schedule I-B shall be modified

accordingly) provided, however, if after such twenty (20) day (or shorter) period, the Construction Agent is unable to obtain the Commitments necessary to Complete the Facility, then a Construction Event of Default shall have occurred.

SECTION 2.3. Fundings.

(a) Closing Date . The initial Advance Date shall be the Closing Date. Prior to the initial Advance Date, subject to the terms and conditions set forth in this Agreement and the Rent Assignment Agreement, the Participants, in accordance with their respective Commitment Percentages, shall provide immediately available funds to the Administrative Agent, and on the initial Advance Date, subject to the terms and conditions set forth in this Agreement and the Rent Assignment Agreement, the parties shall instruct the Administrative Agent to provide immediately available funds to the Lessee in an amount necessary to enable (i) the Lessee to pay for the Transaction Costs and Fees referred to in Section 2.1(l), and (ii) the Construction Agent to be reimbursed for, or to be able to make funds available to pay third parties for, any Construction Costs incurred as of or prior to the Closing Date. Such amounts transferred or applied by the Administrative Agent shall constitute an Advance.

(b) Fundings Generally . Subject to the terms and conditions of this Agreement and the Rent Assignment Agreement, and in reliance on the representations and warranties of each of the parties hereto contained herein or made pursuant hereto, upon receipt of an Advance Request in accordance with Section 2.5, regarding each Advance Date, each Participant shall provide immediately available funds to the Administrative Agent, and on each Advance Date, subject to the terms and conditions set forth in this Agreement, the parties intend that the Administrative Agent shall provide immediately available funds to Construction Agent, which shall be used by the Construction Agent for the payment of Construction Costs, including Carrying Costs invoiced at least five (5) Business Days prior to the relevant Advance Date. Such amounts transferred or applied by the Administrative Agent shall constitute an Advance. Transfers of such funds by the Participants shall be made in immediately available funds by wire transfers to the Administrative Agent in accordance with the instructions set forth in Schedule II for deposit not later than 11:00 a.m., New York time, on each Advance Date, except that such funds shall be made available not later than 3:00 p.m., New York time, on the initial Advance Date. The parties intend that funds from the Participants shall be transferred by the Administrative Agent to such account as the Lessee or the Construction Agent, as applicable, shall have indicated in the Advance Request and for same day value provided, that, if the terms and conditions for the Funding set forth herein have not been satisfied by 5:00 p.m. New York time on two (2) Business Days prior to such date, the Participants shall not be obligated to maintain the availability of their funds for such Funding unless the Lessee elects to deliver a satisfactory indemnity for the overnight investment of such funds.

(c) No Reborrowing . No amounts paid or prepaid with respect to any Advance, Lessor Investment or Rent Assignment Interest may be readvanced.

(d) Limitations on Advances . There shall be no more than one Advance made during any calendar month (except as may be the case with the final Advance), which shall be made on the Monthly Date occurring in each month. Each Advance made after the first two

Advance Dates (excluding any Advance made solely to fund Carrying Costs and excluding the final Advance) shall be in a minimum amount of $500,000 or such other amount as the Lessee and the Lessor shall agree. The Advance made on the final Advance Date shall include funds for any anticipated Construction Costs not yet incurred by the Construction Agent, any Construction Costs being contested by the Construction Agent or for any reimbursement which is in process, provided, that, such final Advance shall be made to the Escrow Agent to be held and disbursed pursuant to the Escrow Agreement and provided, further, that if the amount of such funds advanced and remaining unapplied to such Construction Costs on the next Payment Date following the Construction Period Termination Date exceed $150,000 (to the extent not related to the Holdback Amount (as defined in the Development Agreement)), the Construction Agent will return to the Administrative Agent on behalf of the Participants any such funds on the next Payment Date following the Construction Period Termination Date and any such returned funds shall be credited against and reduce the outstanding Lease Balance. With respect to the Holdback Amount, the Construction Agent will return to the Administrative Agent on behalf of the Participants any such funds remaining unapplied in excess of $150,000 on the first Payment Date following the Post GMP Warranty Period (as defined in the Development Agreement).

(e) Extension of Construction Period . If the Construction Agent reasonably determines in good faith that it will be unable to Complete the Facility on or prior to the Construction Period Termination Date, then the Participants and the Construction Agent shall, at the written request of the Construction Agent accompanied by the certificate hereinafter described, in good faith, but for a period not in excess of thirty (30) days (provided that such period shall not extend beyond the Construction Period Termination Date), discuss the terms and conditions applicable to a postponement of the Construction Period Termination Date to enable the Construction Agent to Complete the Facility on or prior to such extended Construction Period Termination Date. Notwithstanding any provision of any Operative Document to the contrary, during such thirty (30) (or shorter) day period, no Participant may exercise any remedy under any Operative Document solely as a result of the Construction Agent being unable to Complete the Facility by the Construction Period Termination Date. It is understood and agreed that the Participants are not obligated to extend the Construction Period for any reason. The request for such postponement shall be subject to the prior approval of the Required Participants which may be granted or withheld in the Required Participants’ sole and absolute discretion. In connection with any such request, the Construction Agent shall deliver to the Participants (i) a written explanation detailing the reasons why Completion will be unable to occur prior to the Construction Period Termination Date and how such delays will be rectified, and (ii) a certification from the Construction Consultant and the Construction Agent to the effect that the extension of the Construction Period will allow Completion to occur on or before the extended Construction Period Termination Date and within the remaining Available Commitments. If after such thirty (30) day (or shorter) period, the Construction Agent is unable to obtain approval for such postponement, then a Construction Event of Default shall have occurred.

SECTION 2.4. Obligations Several.

The obligations of the Participants hereunder or elsewhere in the Operative Documents shall be several and not joint and the Participants shall not be liable or responsible for the acts or defaults of any other Participant hereunder or under any other Operative Document, nor shall the

failure of any Participant to perform its obligations in and of itself relieve any other Participant from its obligations hereunder.

SECTION 2.5. Advance Requests.

At or before 11:00 a.m. New York time on the fifth (5 th ) Business Day prior to a proposed Advance Date, which proposed Advance Date must be a Monthly Date, the Construction Agent shall deliver to the Construction Consultant and the Administrative Agent an irrevocable written notice substantially in the form of Exhibit A (an “ Advance Request ”), together with the certificate required under Section 3.1(e), setting forth:

(i) the proposed Advance Date;

(ii) a statement of the amount of the requested Advance in Dollars (including a separate statement of the amount thereof, if any, that constitutes Carrying Costs, Upfront Fees, Non-Use Fees, Transaction Costs, other Fees and other Construction Costs);

(iii) the initial Payment Period applicable thereto; and

(iv) wire transfer instructions for the disbursement of the appropriate amount of funds to the Lessee or the Construction Agent, as applicable.

Notwithstanding the foregoing, with respect to the initial Advance Date only, the Construction Agent may request that the Advance be made on any Business Day agreed to between the Construction Agent and the Participants. Promptly upon receipt, the Administrative Agent shall confirm the Capitalized Yield and Non-Use Fees set forth in the Advance Request and the Administrative Agent shall forward the Advance Request to each Participant with instructions to each recipient as to the amount of Capitalized Yield and Non-Use Fees which have accrued with respect to its Rent Assignment Interests or Lessor Investment, as applicable, and to retain such amounts from their respective Advances. In the event the Construction Agent shall not deliver an Advance Request at or before 11:00 a.m. New York time on the fifth (5 th ) Business Day prior to a Payment Date during the Construction Period, the Construction Agent shall be deemed to have made an Advance Request in accordance with Sections 2.10 (Capitalized Yield) and 2.13 (Fees and Other Transaction Costs) and the other relevant terms of this Agreement.

All documents and instruments required to be delivered on any Advance Date pursuant to the Operative Documents other than the Advance Request shall be delivered to the Administrative Agent, or at such other location as the Administrative Agent and the Construction Agent may agree. On the scheduled Advance Date, and subject to the satisfaction of the conditions set forth in this Section 2.5 and in Section 3.1, the Participants shall fund their respective portion of the Advance in Dollars by wire transfer to the Administrative Agent for payment to the Construction Agent in the manner described in Section 2.3(b). Notwithstanding the foregoing, in the event that the Lessor elects to cause the Completion of the Facility pursuant to Section 5.3(a)(iii) of the Construction and Development Agreement, then the Lessor may submit Advance Requests, the aggregate amount available to be funded by the Participants shall equal the aggregate amount of

the Available Commitments and such amounts shall be disbursed directly to the Lessor for the payment of Construction Costs.

SECTION 2.6. Funding Notations.

Each Participant is hereby authorized to record the date and amount of each funding made in respect of an Advance, the amount of all Capitalized Yield, each payment or repayment of principal with respect to its Rent Assignment Interests or Lessor Investment, as applicable, and the length of each Payment Period with respect thereto in any manner consistent with its ordinary business practices, and any such recordation shall constitute prima facie evidence of the accuracy of the information so recorded; provided, that the failure to make any such recordation or any errors in such recordation shall not affect the obligation of the Lessor under such instrument or the corresponding obligation of the Lessee to pay Rent (including any Lease Balance).

SECTION 2.7. Payments to Participants. The parties to this Agreement hereby agree that any payment required to be made to (a) the Lessor or (b) the Rent Assignees by the Lessor pursuant to the Rent Assignment Agreements from payments to be made by the Lessee shall be made to the Administrative Agent. Such payment by the Lessee to the Administrative Agent for the benefit of the Participants, shall be deemed to constitute (i) the required payment from the Lessee to the Lessor and (ii) the corresponding payment by the Lessor to the Rent Assignees.

SECTION 2.8. Computations.

For all purposes under the Operative Documents, all computations of Yield and other accrued amounts (including, without limitation, the Overdue Rate) shall be made on the basis of a 360-day year and the actual days elapsed (including the first day but excluding the last day).

SECTION 2.9. Determination of Yield Rate and Payment Periods.

(a) Determination of Yield Rate . The Lease Balance outstanding from time to time shall accrue Yield at the rate per annum equal to the Yield Rate. The Administrative Agent shall as soon as practicable after receipt of the related Advance Request, but in no event later than 11:00 a.m., New York time, two (2) Business Days prior to the effectiveness of each LIBOR Rate, notify the Lessee, the Lessor and each other Participant of such LIBOR Rate and the corresponding Yield Rate but failure to so notify shall not affect the obligations of the parties hereunder or under the other Operative Documents, provided, however, that such notice may be delivered no later than 11:00 a.m., New York time, one (1) Business Day prior to the effectiveness of such LIBOR Rate with respect to the initial Advance Request. Prior to the Completion Date, Yield attributable to amounts advanced by the Lessor and the Rent Assignees will be (i) retained by the Participants and added to the Lessor Investment or Rent Assignment Interests, as applicable, pursuant to Section 2.10 and (ii) capitalized monthly in arrears. From and after the Base Term Commencement Date, accrued Yield shall be due and payable on each applicable Payment Date and on the Maturity Date and, for purposes of calculating the amount of Yield due and payable on any such date, Yield accruing on the last day of any Payment Period that is not a Payment Date shall be capitalized and added to the outstanding amount of Rent Assignment Advances or Lessor Investment, as

applicable, and such capitalized amount shall earn Yield until the next to occur of a Payment Date or the Maturity Date. If all or any portion of the principal of the Lease Balance, any accrued Yield payable thereon or any other amount payable hereunder shall not be paid when due (whether at stated maturity, acceleration or otherwise), such overdue amount shall bear interest at a rate per annum which is equal to the Overdue Rate and shall be payable from time to time on demand as Supplemental Rent.

(b) Change in Law, Circumstances . If:

(A) the Administrative Agent or any Participant shall determine (which determination shall be conclusive and binding on the Lessee absent manifest error) that

(i) a Change in Law after the date hereof makes it unlawful, or the applicable central bank or other applicable Authority asserts that it is unlawful, for such Participant or its principal bank Affiliate to make, continue or maintain any amount of such Participant’s Lessor Investment or Rent Assignment Advances, as applicable, on a LIBOR Rate basis, or

(ii) deposits in Dollars (in the applicable amounts) are not being offered to such Participant or its principal bank Affiliate in the relevant market for the applicable Payment Period, or that, adequate and reasonable means do not exist for ascertaining the LIBOR Rate (including, without limitation, because the LIBOR Screen Rate is not available or published on a current basis) and such circumstances are unlikely to be temporary, or

(B) the Administrative Agent or any Participant determines (which determination shall be conclusive and binding upon the Lessee absent manifest error) that (i) the LIBOR Rate, as determined by the Administrative Agent, will not adequately and fairly reflect the cost to such Participant or its principal bank Affiliates of maintaining or funding its investments for the applicable Payment Period, or (ii) the making or funding of such Participant’s investment hereunder on a LIBOR Rate basis has become impracticable as a result of an event occurring after the date hereof which in the opinion of such Participant materially changes such investment, or

(D) (i) the supervisor for the administrator of the LIBOR Rate or an Authority having jurisdiction over the Administrative Agent or any Participant has made a public statement identifying a specific date after which the LIBOR Rate shall no longer be used for determining interest rates for loans, or (ii) LIBOR Rate is no longer a widely recognized benchmark rate for newly originated loans in the United States syndicated loan market in the applicable currency,

then the obligations of such Participant to make, continue or maintain any such investment on a LIBOR Rate basis shall, upon such determination, forthwith be suspended until such Participant shall notify the Lessee that such circumstances no longer exist, and (i) in the case of clauses (B)(ii) and (D) above, the Administrative Agent and the Lessee shall endeavor to establish an alternate rate of interest (the “ Replacement Rate ”) to the LIBOR Rate that gives due consideration to the then prevailing market convention for determining a rate of interest for syndicated loans in the United States at such time, and shall enter into an amendment to this Agreement to reflect such alternate rate of interest and such other related changes to this Agreement as may be applicable. Notwithstanding anything to the contrary in Section 9.5, such amendment shall become effective without any further action or consent of any other party to this Agreement so long as the Administrative Agent shall not have received, within five (5) Business Days of the date notice of the Replacement Rate is provided to the Participants, a written notice from the Required Participants stating that such Required Participants object to such amendment. Until the Replacement Rate is determined (but, in the case of the circumstances described in clause (D)(ii) above only to the extent the LIBOR Rate for such Payment Period is not available or published at such time on a current basis), Yield on the Lease Balance shall be determined on the basis of the Alternate Base Rate. Notwithstanding anything else herein, in no event shall such Replacement Rate be less than zero for the purposes hereof or of any other Operative Document. To the extent the Replacement Rate is approved by the Administrative Agent in connection with this clause, the Replacement Rate shall be applied in a manner consistent with market practice; provided, that, in each case, to the extent such market practice is not administratively feasible for the Administrative Agent, the Replacement Rate shall be applied as otherwise reasonably determined by the Administrative Agent (it being understood that any such modification by the Administrative Agent shall not require the consent of, or consultation with, any of the Participants), and (ii) in all other cases, all Yield allocable to the fundings made or to be made by the Participants shall automatically be determined on an Alternate Base Rate basis beginning on the Advance Date or the next immediately succeeding Payment Date with respect thereto or sooner, if required by such law, assertion or determination. Subject to the rights of the Participants following an Event of Default and except as set forth in clause (i) hereof, the provisions of this clause (b) shall not limit the right of the Lessee to receive Advances funded by the Participants that accrue yield at the Alternate Base Rate.

(c) Rate Determinations. Each determination of a Yield Rate pursuant to any provision of this Agreement or any other Operative Document shall be conclusive and binding on the Lessee and the Participants in the absence of manifest error.

(d) LIBOR Payment Periods. Each Payment Period applicable to Fundings bearing yield at a rate determined with respect to the LIBOR Rate shall end on a Payment Date and shall be a period of one month, if such Payment Period commences during the Construction Period, in each case, after the end of the preceding Payment Period or the Advance Date applicable to such Funding, as the case may be, except (i) the first Payment Period shall commence on the Closing Date and last until the first Payment Date, (ii) for the Payment Period applicable to any such Funding outstanding on the Base Term Commencement Date, which Payment Period shall end on, but exclude, the Base Term Commencement Date even if such Payment Period is less than one month, and (ii) as otherwise agreed to by the Participants, but in any event ending not later than the date such Funding shall be due and payable.

(e) Alternate Base Rate Payment Periods. Each Payment Period applicable to Fundings bearing yield at the Alternate Base Rate shall end on a Payment Date and shall be a period of one month, if such Payment Period commences during the Construction Period, in each case, after the end of the preceding Payment Period or regarding the initial Advance Date, one month after the initial Advance Date, except (i) for the Payment Period applicable to any such Funding outstanding on the Base Term Commencement Date, which Payment Period shall end on, but exclude, the Base Term Commencement Date even if such Payment Period is less than one month, and (ii) as otherwise agreed to by the Participants. So long as none of the circumstances described in clauses (A), (B) or (C) of Section 2.09(b) shall exist, the Lessee may elect during the Construction Period to convert any Funding bearing yield at the Alternate Base Rate into a Funding bearing yield at a rate determined with respect to the LIBOR Rate on three (3) Business Days’ irrevocable notice to the Administrative Agent and each of the Participants prior to a Monthly Date and, subject to clause (b) above, such conversion shall be effective on such Monthly Date and such date shall be the last day of the Payment Period that was applicable to such Funding prior to such conversion.

(f) LIBOR Calculation During the Construction Period . For purposes of calculating the LIBOR Rate during the Construction Period, the Construction Agent currently intends to request Advances in accordance with Schedule 2.9(f) hereto. The parties agree that the Construction Agent is not required to request Advances in accordance with such Schedule, and actual Advances shall be made pursuant to Advance Requests properly submitted in accordance with Section 2.5 hereof.

SECTION 2.10. Capitalized Yield.

During the Construction Period, in the event the Construction Agent shall not deliver an Advance Request at or before 11:00 a.m. New York time on the fifth (5 th ) Business Day prior to a Payment Date, the Construction Agent shall be deemed to have requested an Advance in Dollars in an amount equal to Capitalized Yield accrued on the Lease Balance for the Payment Period ending on such Payment Date. The Advance Date with respect to each such Advance for such accrued Capitalized Yield shall be the relevant Payment Date. The Payment Period with respect to any such Advance shall be the same as the Payment Period with respect to an Advance of the same type that is made on the same Advance Date. If no Advance Request is timely delivered by the Construction Agent, the Administrative Agent shall calculate such Capitalized Yield accrued on the Lease Balance in accordance with the following sentence and notify the Participants and Construction Agent thereof in writing setting forth the calculation. On each such Advance Date, the Lessor Investment shall be increased by an amount equal to Lessor’s Commitment Percentage of such deemed Advance and the outstanding principal of each Rent Assignee’s Rent Assignment Advances shall be increased by an amount equal to such Rent Assignee’s respective Commitment Percentage of such deemed Advance.

SECTION 2.11. Lessor Investment.

(a) Procedure for Investment . Upon receipt of an Advance Request, and subject to the terms and conditions of this Agreement, the Lessor agrees that it shall wire transfer its portion of the requested Advance equal to the lesser of (i) its Commitment Percentage multiplied

by the amount requested for such Advance, and (ii) its Available Commitment, in immediately available funds to the Administrative Agent for further funding to Lessee or the Construction Agent, as applicable, as set forth in Section 2.3.

(b) Return of Investment . The Lessor shall be entitled to a return of its Lessor Investment outstanding, in full, together with (i) Yield accrued thereon to the date of return and (ii) all other amounts then due and payable by the Lessee hereunder or under the other Operative Documents to the Lessor, upon the first to occur of:

(i) the purchase by the Lessee during the Base Term of all of the Leased Property pursuant to Article XIII, Article XX or Article XXI of the Lease, such return to be due on the date specified in such provisions for payment with respect to such purchase;

(ii) a termination of the Lease during the Construction Period pursuant to Section 3.3(a) of the Construction and Development Agreement, such return to be due on the date of such termination;

(iii) the Return Date; and

(iv) following an Event of Default and the exercise of remedies under the Lease.

(c) Scheduled Return of Lessor Investment . Except in the case of a required return described in Section 2.11(b) above and any payment of Lease Balance pursuant to Section 2.3(d) (which will be applied pro rata among the outstanding Advances), no return in respect of the Lessor Investment shall be due prior to the Maturity Date. On the Maturity Date and subject to the rights of the Rent Assignees under Article X hereof and the Rent Assignment Agreements, the Lessor shall be entitled to the aggregate unpaid Lessor Investment as of such date.

(d) Yield .

(i) The Lessor Investment outstanding shall earn a Yield on the unpaid amount thereof at a rate per annum equal to the Yield Rate.

(ii) If all or a portion of the Lessor Investment or Yield is not paid when due (whether at the stated maturity, by acceleration or otherwise), such overdue amount shall, without limiting the rights of the Lessor under any Operative Document, bear interest at the Overdue Rate, in each case from the date of nonpayment until paid (after as well as before judgment).

(iii) Yield shall be payable in arrears on each Payment Date.

(e) Computation of Yield . Yield in respect of the Lessor Investment shall be calculated as provided in Section 2.8.

SECTION 2.12. Rent Assignment Interests.

(a) Procedure for Acquiring Rent Assignment Interests. Upon receipt of the Advance Request and subject to the terms and conditions of this Agreement, (i) each Rent Assignee agrees that it shall wire transfer funds equal to the lesser of (x) its Commitment Percentage multiplied by such Advance, and (ii) its Available Commitment, in immediately available funds to the Administrative Agent for further funding to Lessee or the Construction Agent, as applicable, as set forth in Section 2.3.

(b) Payments with respect to Rent Assignment Interests . Payments with respect to the Rent Assignment Interests shall be made to the Rent Assignees together with all accrued and unpaid Yield thereon, at the times and in the manner set forth in the Rent Assignment Agreements and this Agreement. Each Rent Assignee shall be entitled to payments with respect to its outstanding Rent Assignment Advances, in full, together with (i) Yield accrued thereon to the date of repayment and (ii) all other amounts then due and payable by the Lessor under the related Rent Assignment Agreement to such Rent Assignee, upon the first to occur of:

(i) the purchase by the Lessee during the Base Term of all of the Leased Property pursuant to Article XIII, Article XX or Article XXI of the Lease, such payment to be made on the date specified in such provisions for payment with respect to such purchase;

(ii) a termination of the Lease during the Construction Period pursuant to Sections 3.3(a) of the Construction and Development Agreement, such payment to be made on the date of such termination;

(iii) the Return Date; and

(iv) following an Event of Default.

(c) Scheduled Return of Rent Assignment Advances. Except in the case of a required repayment described in Section 2.12(b) above and any payment of Lease Balance pursuant to Section 2.3(d) (which will be applied pro rata among the outstanding Advances), there shall be no payments with respect to Rent Assignment Advances prior to the Maturity Date. On the Maturity Date, the Rent Assignees shall be entitled to payments to be applied to the aggregate unpaid principal amount of the Rent Assignment Advances as of such date.

(d) Yield .

(i) Pursuant to Section 2.01 of each Rent Assignment Agreement, Yield shall be payable with respect to the outstanding Rent Assignment Advances at an effective rate per annum thereon equal to the Yield Rate.

(ii) If all or a portion of the Rent Assignment Advances or Yield is not paid when due under the Rent Assignment Agreements or under Article X hereof, such overdue amount shall, without limiting the rights of the Rent Assignees under any

Operative Document, bear interest at the Overdue Rate, in each case from the date of nonpayment until paid (after as well as before judgment).

(iii) Payments of Yield with respect to Rent Assignment Advances shall be payable in arrears on each Payment Date.

(e) Computation of Yield . Yield in respect of the Rent Assignment Interests shall be calculated as provided in Section 2.8.

SECTION 2.13. Fees and Other Transaction Costs.

The Construction Agent shall authorize and request Advances to fund during the Construction Period any and all Transaction Costs with respect to which invoices have been received at least five (5) Business Days prior to an Advance Date and shall pay any and all fees described in the succeeding provisions of this Section 2.13 (collectively, “Fees” ):

(a) Arrangement Fee . The Construction Agent shall pay to the Arranger on the initial Advance Date, an arrangement and structuring fee as previously agreed to in writing between Lessee and Arranger. (the “ Arrangement Fee ”);

(b) Upfront Fee. The Construction Agent shall pay to each Rent Assignee on the Closing Date, a commitment fee (the “Upfront Fee” ) as previously agreed to in writing between Construction Agent and such Rent Assignee;

(c) Non-Use Fee. The Construction Agent shall pay to the Participants on each Advance Date occurring during the Commitment Period and on the last day of the Commitment Period, an unused commitment fee (the “Non-Use Fee” ) at a rate per annum equal to the product of the Non-Use Fee Rate times the average amount of the Available Commitment of each such Participant during the preceding Payment Period (or other period commencing on the Closing Date or ending on the last day of the Commitment Period, as applicable). Such fee shall commence to accrue on the Closing Date and shall cease to accrue on the day prior to the last day of the Commitment Period. During the Construction Period, (A) pursuant to Section 2.10 hereof, the Construction Agent shall be deemed to have requested an Advance in an amount equal to Non-Use Fees accrued with respect to the Rent Assignment Advances and Lessor Investment with a Payment Period ending on such Payment Date, (B) each Participant shall retain the Non-Use Fees applicable to its Rent Assignment Advances and Lessor Investment in accordance with the Construction Agent’s instructions pursuant to Section 2.5, (C) if no Advance Request is timely delivered by the Construction Agent, the Participants shall calculate such Non-Use Fees in accordance with the prior sentence and notify the Construction Agent thereof, and (D) on each such Advance Date, the Lessor Investment shall be increased by an amount equal to such Advance;

(d) Non-Use Fee Statements. The Administrative Agent shall provide to the Construction Agent from time to time not less than ten (10) Business Days prior to the due date(s) for the Non-Use Fee a written statement of the amount of such Fees then due, the due date therefor and the calculation thereof provided, that, failure to give such notice shall not relieve the Construction Agent of its obligation to authorize Advances in respect of such Fees;

(e) Agent Fees . The Construction Agent and Lessee, respectively, shall pay to the Administrative Agent (for the benefit of the Agents) in advance (i) on the initial Advance Date, an initial agency fee and (ii) on each anniversary of the initial Advance Date (excluding the Maturity Date), an annual agency fee, each in the amounts set forth in a separate writing between the Agents and Cubic; and

(f) Cap Fees . The Construction Agent shall pay to the Participants on the Closing Date an interest rate cap fee in the amount set forth in separate writings between the Participants and the Lessee.

(g) Post Construction Period. Notwithstanding any term to the contrary in this Section 2.13, after the Construction Period, the Lessee shall promptly pay all Transaction Costs after receiving invoices therefor and shall pay all Fees when due and payable.

SECTION 2.14. Nature of Transaction.

It is the intention of the parties that:

(a) the Overall Transaction constitutes an operating lease for purposes of the Lessee’s financial reporting under GAAP provisions relating to leases including without limitation the Accounting Standards Codification (“ ASC ”) 840 (including ASC 840-20 and 840-40) and, upon applicability, ASC 842; and

(b) for United States federal, state and local income tax, property tax, transfer tax, sales tax, franchise tax, general corporation tax and other similar taxes that may be imposed upon net or gross income, bankruptcy (including the substantive law upon which bankruptcy proceedings are based) and real estate and commercial law purposes:

(i) the Overall Transaction constitutes (x) a financing by the Lessor to the Lessee, the obligations of the Lessee to pay Basic Rent shall be treated as payments of interest to the Lessor and the payment by the Lessee of any amounts in respect of the Lease Balance shall be treated as payments of principal to the Lessor, and (y) a sale of receivables and other rights under the Operative Documents as set forth in the Rent Assignment Agreements from the Lessor to the Rent Assignees;

(ii) The Lessee will not be entitled to, and shall not avail itself of, any of the rights or benefits accorded to a lessee under Applicable Laws and Regulations except as expressly permitted under the Lease and the Lessor will be deemed and will have the rights of a lender making secured loans to the Lessee secured by, among other things the Lessee Collateral, a portion of which rights will be deemed sold by the Lessor to the Rent Assignees upon payment for their respective Rent Assigned Interests; and

(iii) The Lessee is and will be the owner of the Site and the Facility and lessor of the Site under the Ground Lease.

The Lessee acknowledges and agrees that none of the Agents, the Arranger or any of the Participants has made, in any capacity, any representations or warranties concerning the tax,

accounting or legal consequences or characteristics of the Operative Documents or any aspect of the Overall Transaction and that the Lessee has obtained and relied upon such tax, accounting and legal advice concerning the Operative Documents and the Overall Transaction as it deems appropriate, provided, that the Lessee may rely on the representations and warranties contained in the Operative Documents and the legal opinions issued to it in connection therewith and to which it is an addressee. Each Participant acknowledges and agrees that the Lessee has not made any representations or warranties concerning the tax, accounting or legal consequences or characteristics of the Operative Documents or any aspect of the Overall Transaction and that such Person has obtained and relied upon such tax, accounting and legal advice concerning the Operative Documents and the Overall Transaction as it deems appropriate, provided, that each Participant may rely on the representations and warranties contained in the Operative Documents and the legal opinions issued in connection therewith.

SECTION 2.15. Amounts Due.

(a) It is the intention of the Lessee and the Participants that (i) from and after the Completion Date, the amount and timing of installments of Basic Rent due and payable from time to time from the Lessee under the Lease shall be equal to the aggregate payments due and payable in respect of Yield accrued on the Lessor Investment and payable with respect to the Rent Assignee Advances under each Rent Assignment Agreement due on each Payment Date; (ii) if the Lessee elects the Early Termination Option or the Purchase Option, the outstanding principal of the Rent Assignment Advances and the Lessor Investment, all Yield thereon, all Fees and Transaction Costs and all other obligations of the Lessee owing to the Agents and the Participants shall be paid in full by the Lessee in accordance with Article XX or Article XXI of the Lease, as applicable; (iii) if the Lessee properly elects the Return Option and remarkets the Leased Property in accordance with Article XXII of the Lease, in the absence of a Default or Event of Default or a default under the Lease, the Lessee shall be required to pay the Sale Proceeds of the sale of the Leased Property (in an amount not to exceed the Lease Balance, any excess being payable to the Lessee, except in the case of application of Section 22.4 of the Lease), and if the Sale Proceeds are less than the Lease Balance, the lesser of (x) the amount of such difference and (y) the Return Price Recourse Deficiency Amount, all in accordance with Article XXII of the Lease, and any amounts due pursuant to Article VII hereof and Section 22.3(a) of the Lease (which aggregate amounts may be less than the Lease Balance); and (iv) upon an Event of Default or a default under the Lease that is not solely a Limiting Event pursuant to Section 18.1(b) of the Lease or that is not subject to the limitations of Section 18.5 of the Lease, the amounts then due and payable by the Lessee under the Lease and the Construction Agent under the Construction and Development Agreement shall include all amounts necessary to pay in full the outstanding principal with respect to the Rent Assignment Advances and the Lessor Investment and all accrued Yield on the Lease Balance, plus all other amounts then payable by the Lessee to the Agents and the Participants under the Operative Documents.

(b) The Lessee and the Construction Agent, as applicable, shall pay or repay the Advances at such times and in such amounts as the Lease Balance becomes due and payable, which payment obligations shall be satisfied by and to the extent of any payment made by or on behalf of the Lessee or the Construction Agent, as applicable, pursuant to the Operative Documents of Rent, the Lease Balance, the Purchase Amount, the Sale Proceeds, the Construction Recourse

Amount, Deficiency payments, the Return Price Recourse Deficiency Amount or the Recourse Deficiency Amount, as the case may be.

ARTICLE III

CONDITIONS TO ADVANCES; DELIVERIES UPON COMPLETION

SECTION 3.1. Conditions to Each Advance.

The obligation of each Participant to perform its obligations on any Advance Date shall be subject to Section 2.2 and to the satisfaction of, or the waiver in writing by such Participant of, the conditions precedent set forth in this Section 3.1 on or prior to such Advance Date (all such conditions precedent to be satisfied to the satisfaction of such Participant in its reasonable discretion, except that the obligation of any party hereto shall not be subject to such party’s own performance or compliance):

(a) Advance Request . The Construction Agent shall have delivered an Advance Request conforming to the requirements of Section 2.5 in respect of the proposed Advance Date.

(b) Performance . The Lessee and the Construction Agent shall have performed and complied in all material respects with all agreements and conditions contained herein and in any other Operative Document to which such Person is a party that are required to be performed or complied with by such party on or prior to the proposed Advance Date.

(c) Consents and Approvals . All necessary or advisable Governmental Actions, and all consents, approvals and authorizations of Persons, required in connection with the Overall Transaction, shall have been obtained or made and be in full force and effect and not be subject to any pending procedures or appeals, whether administrative, judicial or otherwise, except for (i) any Governmental Actions that are not required with respect to the then current status of the construction of the Facility; and (ii) any other Governmental Action, consent, approval or authorization the failure to obtain which, or the appeal of or further procedures with respect to which, would not reasonably be expected to have a Material Adverse Effect.

(d) Representations and Warranties True; Absence of Defaults . Each representation and warranty of the Lessee and the Construction Agent contained herein or in any other Operative Document or in any certificate delivered in connection therewith shall be true and correct in all material respects as though made on and as of the related Advance Date, except that any such representation or warranty which is expressly made only as of an earlier date need be true only as of such date. No Default for which the cure period, if any, has commenced, Default for which there is no notice and cure period, or Event of Default shall be continuing.

(e) Certificates . The Agents, the Participants and the Construction Consultant shall have received a certificate (an “ Advance Certificate ”) from a Responsible Officer of the Construction Agent certifying to the effect that (i) the remaining Available Commitment of the Rent Assignees and Lessor is sufficient to Complete the Facility and to pay all Construction Costs, (ii) Completion can be achieved before the Construction Period Termination Date, (iii) the Facility

is being constructed on the Site substantially in accordance with the Plans and Specifications and in accordance with the Construction Budget (in each case, as supplemented or amended pursuant to Section 3.2 of the Construction and Development Agreement), (iv) all Change Orders which have not previously been certified in a prior Advance Certificate are attached as an exhibit to the applicable Advance Certificate, together with reasonably sufficient detail thereof, including the change and cost of the change for all such Change Orders, (v) the Change Orders required to be attached as an exhibit to the applicable Advance Certificate pursuant to the foregoing subsection (iv) (the “Current Change Orders” ), individually and in the aggregate, after giving effect thereto, will not (A) materially diminish: (1) the utility, useful life or functional capability of the Facility as two (2) Class A office buildings when Completion has been effected; (2) the expected Fair Market Value of the Facility as of the Construction Period Termination Date; or (3) the Fair Market Value as of the Maturity Date; (B) cause the remaining Available Commitments of Lessor and the Rent Assignees to be insufficient to Complete the Facility; or (C) delay Completion beyond the Construction Period Termination Date (unless extended in accordance with the terms hereof), (vi) funds for the Current Change Orders are available from the unused Aggregate Contingency Amount (subject to the requirement for Lessor’s consent, if applicable, as referenced in subsection (viii) below), (vii) in the aggregate respecting any particular Major Construction Document, the cost of all Current Change Orders under such Major Construction Document, when aggregated with the cost of all prior Change Orders under such Major Construction Document, does not exceed the higher of $200,000 and ten percent (10%) of the original total amount payable under such Major Construction Document (in the aggregate with all prior and concurrent Change Orders with respect to such Construction Document) unless the Administrative Agent, acting upon the direction of the Required Participants, has provided its prior written consent to each such additional Current Change Order under such Major Construction Document; provided, that the prior written consent of Administrative Agent, acting upon the direction of the Required Participants, shall also be required for any Change Order that is for an amount in excess of $250,000 , (viii) in the aggregate respecting all Construction Documents, the Construction Budget and the Plans and Specifications, the cost of all Current Change Orders, when aggregated with the cost of all prior Change Orders, does not exceed an amount equal to the Permitted Excess Amount, unless the Administrative Agent, acting upon the direction of the Required Participants, has provided its prior written consent to each such additional Current Change Order causing such amount to exceed the Permitted Excess Amount, (ix) attached thereto is a reconciliation of the Construction Budget which shall be attached as an exhibit thereto, (x) all representations and warranties of the Lessee and the Construction Agent contained in the Operative Documents are true and correct in all material respects except for those representations and warranties that were made as of a specific date, which shall be true and correct as of such specific date, (xi) no Construction Event of Default or Construction Default is continuing, (xii) all necessary or advisable Governmental Actions, and all consents, approvals and authorizations of Persons, required in connection with the Overall Transaction, shall have been obtained or made and be in full force and effect and not be subject to any pending procedures or appeals, whether administrative, judicial or otherwise, except for (A) any Governmental Actions that are not required with respect to the then current status of the construction of the Facility; (B) any other Governmental Action, consent, approval or authorization the failure to obtain which, or the appeal of or further procedures with respect to which, would not reasonably be expected to have a Material Adverse Effect; and (C) the execution of those Construction Documents not required with respect to the then current status of the

construction of the Facility, (xiii) all Major Construction Documents which have been entered into by the Construction Agent prior to such Advance Date have been assigned to the Lessor pursuant to an Assignment of Contracts or joinder thereto and any applicable Consent and Acknowledgments have been delivered to the Lessor, (xiv) the proceeds of the Advance will be used solely to pay for accrued and unpaid Construction Costs previously performed or contracted for and then due or payable, or that have been invoiced (or in the case of costs incurred by the Construction Agent using its own resources, that have been described in writing to the Lessor in reasonable detail) and will become due and payable in the month immediately following such Advance Date, or materials previously purchased or contracted for, together with all Carrying Costs and that all invoices for the foregoing costs have been (or will be with the proceeds of such Advance) paid in full, (xv) none of such costs specified in clause (xiv) have been reimbursed or paid pursuant to a previous Advance, (xvi) the costs being funded with the Advance are as set forth in a schedule attached to such certificate, (xvii) no Major Construction Documents have been entered into since the Closing Date or the most recent prior Advance Date, as applicable, except as for those attached to the Advance Request and which have been approved by the Administrative Agent, and (xviii) all conditions precedent to the Advance have been satisfied. The foregoing certifications may be included in the applicable Advance Request.

(f) Collateral Assignments and Liens . The Lessor shall have a security interest in all Lessee Collateral, including collateral assignments of the Lessee’s rights under all Major Construction Documents pursuant to the Assignments of Contract then in existence or hereafter arising and Consent and Acknowledgments with respect to each Major Construction Document then in existence or hereafter arising and the Lessee shall have, subject to the prior security interest therein in favor of the Lessor, a security interest in the Lessor’s rights and interests as set forth in the Memorandum of Lease.

(g) No Event of Loss, Event of Taking, Force Majeure Event . No Event of Loss, Event of Taking, Force Majeure Event shall have occurred and be continuing, unless the Lessor shall have elected to continue the Lease and Complete the Facility in accordance with Section 3.3(b) of the Construction and Development Agreement.

(h) Mechanics Liens, Etc . No mechanic’s (unless bonded over) or other liens exist and one or more waivers, as needed, as evidence of the same are delivered in form and substance satisfactory to the Title Insurance Company in order for it to issue date-down endorsement(s), if available, to the Title Policies insuring the continuing first priority of the interests described therein, as applicable, and increasing the insured amount thereunder to reflect the Advance made on such date, and such endorsements have been issued.

(i) Transaction Costs . After the initial Advance, all Transaction Costs invoiced at least five (5) Business Days prior to such Advance Date shall have been paid, or will be paid with the proceeds of the Advance to be made on such Advance Date, to the parties to whom such Transaction Costs were owed.

(j) Construction Report . The Lessee has delivered or cause to be delivered to the Administrative Agent and each of the Participants the most recently due update of any report provided pursuant to Section 2.7(o) of the Construction and Development Agreement.

(k) Available Commitment . No Advance hereunder would exceed the aggregate Available Commitments of the Participants and, in such circumstance, no Participant shall have any obligation to make any such funding and any Participant shall have the right to declare a default under the Construction and Development Agreement.

(l) Demolition Date Conditions . On or one (1) Business Day prior to the Demolition Date, Lessee shall execute and deliver the Deed to the Lessor and, thereafter, commence demolition of Building 1 pursuant to the Construction and Development Agreement. On or prior to the Demolition Date, Lessee shall deliver to Administrative Agent a copy of the Twentieth Amendment to Declaration of Restrictions of San Diego Industrial Park (the “ Twentieth CCR Amendment ”), which shall be executed by a sufficient number of Property Owners (as defined therein) to make such document effective and which shall be promptly recorded in the Recorder’s Office.

For the avoidance of doubt, no Participant shall have any obligation to make any Advance if any Construction Event of Default or Construction Default shall be continuing, except to the extent that such Advance is requested with respect to any Construction Costs which have previously been paid by the Construction Agent but not previously reimbursed with proceeds from any Advance prior to the occurrence of such Construction Event of Default or Construction Default.

SECTION 3.2. Conditions to Initial Advance.

The obligation of each Participant to perform its obligations on the initial Advance Date shall be subject to the satisfaction of, or the waiver in writing by, such Participant of the conditions precedent set forth in Section 2.1 and, to the extent not inconsistent therewith, Section 3.1.

SECTION 3.3. Deliveries Upon Completion.

(a) Promptly (but not to exceed twenty (20) Business Days following the Completion Date), the Lessee shall furnish to the Agents and each Participant a certification of a Responsible Officer of the Lessee as follows (such certification and such certified items referenced therein or attached thereto to be satisfactory to the Lessor in its reasonable discretion):

(i) the Facility has been Completed;

(ii) the Facility complies in all material respects with all Applicable Laws and Regulations;

(iii) the representations and warranties of the Lessee with respect to the Leased Property and the Site set forth in Section 4.1(j) are true and correct in all material respects as of the Completion Date as if made on and as of each such date (except to the extent any such representation or warranty specifically relates to an earlier date in which case such representations and warranties shall have been true and correct as of such earlier date). All amounts owing to third parties for the construction of the Facility with respect to which invoices have been received by the Lessee on or before the day which is forty-five (45) days prior to such date have been paid in full (other than any subject to a Permitted

Contest and other than contingent obligations for which adequate reserves have been created to the extent required by GAAP);

(iv) no changes or modifications were made to the Plans and Specifications except in accordance with Section 3.2 of the Construction and Development Agreement or as approved by Lessor;

(v) there are no defects to the Facility which individually or in the aggregate have caused or reasonably could cause a Material Adverse Effect;

(vi) setting forth the aggregate final amount of the (x) Lessor Investment, (y) Rent Assignment Advances and (z) Lease Balance, each with itemized documentation detailing such amount, as of the Base Term Commencement Date;

(vii) attaching insurance certificates respecting the Facility as required under the Operative Documents; and

(viii) attaching a true and correct copy of the temporary certificate of occupancy (or final certificate of occupancy, if available);

provided, however, that if the items described in clauses (vii) and (viii) are not available at the time of delivery such certification, the Lessee shall have up to twenty (20) Business Days following the Completion Date to deliver such items to each Agent and the Participants.

The Administrative Agent and each Participant shall have the right to contest the information contained in such certification.

(b) Subject to the Lessee’s right to contest same under Section 9.5 of the Lease, as soon as practicable (but not to exceed ninety (90) days following the Completion Date), the Lessee shall deliver unconditional lien waivers by the applicable contractors, subcontractors and suppliers with respect to the Facility.

(c) As soon as practicable (but not to exceed ninety (90) days) following the Completion Date, the Lessee shall furnish to the Agents and each Participant a certification of a Responsible Officer of the Lessee as follows (such certification and such certified items referenced therein or attached thereto to be satisfactory to the Lessor in its reasonable discretion):

(i) attaching a true and correct copy of the final certificate of occupancy for the Facility;

(ii) no holdback amounts or contingency allocations under the Budget, the Development Agreement or any Construction Document was left unpaid to the Developer, General Contractor or other party thereto except for such sums which have been paid over by the Lessee to the Administrative Agent pursuant to Section 3.3(g) below; and

(iii) attaching evidence that all utilities required to adequately service the Facility for its intended use are available except to the extent the unavailability of which

individually or in the aggregate would not be reasonably expected to have a Material Adverse Effect.

The Administrative Agent and each Participant shall have the right to contest the information contained in such certification.

(d) As soon as practicable (but not to exceed one hundred twenty (120) days) following the Completion Date, the Lessee shall deliver or cause to be delivered to the Lessor (unless previously delivered to the Lessor) originals of the following relating to the Facility, each of which shall be in form and substance acceptable to the Lessor, in its sole and reasonable discretion, and paid for with the Advances by the Lessee: (x) a title insurance endorsement regarding the title insurance policies in connection with the requirements of Section 2.1(m) provide for insurance in an amount at least equal to the maximum total Lease Balance and, if endorsed, the endorsement shall not include any title change or exception except to the extent that such is acceptable to the Lessor, in its reasonable discretion; (y) a certification of a Responsible Officer of the Lessee, with a true and complete copy of an “as-built” or “record” survey of the Facility and a site map of the Site reflecting the actual location of the Facility attached thereto and (z) a recorded copy of the Twentieth CCR Amendment.

(e) Lessee shall deliver or cause to be delivered to the Agents and each Participant a supplement to the environmental report delivered pursuant to Section 2.1(i) hereof, dated within ninety (90) days of the Completion Date, showing that the environmental assessment of the Site has not deteriorated in any material respect since the date of the original environmental report.

(f) As soon as practicable (but not to exceed ninety (90) days) following the Completion Date, the Lessee shall furnish to the Agents and each Participant written evidence of approval by the DEH of performance to completion of the Remediation Plan and concurrence from DEH that all remediation and mitigation activities set forth in the Remediation Plan have been completed and that no further action is necessary.

(g) As soon as practicable (but not to exceed five (5) Business Days) following the final completion of work under the Development Agreement or any Construction Document but, in any event, not to exceed ninety (90) days following the Completion Date, the Lessee shall pay over to the Administrative Agent any holdback amounts or contingency allocations under the Development Agreement or such Construction Document to which it is entitled and retained or received thereunder (which amounts are not to be applied toward any replacement contract for any such Construction Document) and any such funds shall be credited against and reduce the outstanding Lease Balance in accordance with Section 10.2.

SECTION 3.4. Final Funding Date Conditions.

At least five (5) Business Days prior to the designated Base Term Commencement Date, the Lessee shall have delivered to the Lessor a Base Term Commencement Date Notice. On or before the Base Term Commencement Date, (i) the Lessee shall have delivered a bring down certificate as to its incumbency certificate and as to the representations and warranties set forth

herein, (ii) a Lease Supplement shall have been entered into to reflect the Return Price Recourse Deficiency Amount, calculated as of the Base Term Commencement Date, (iii) all Transaction Costs shall have been paid, and (iv) an Escrow Agreement shall be entered into, the purpose of which will be to hold any Advances made for Construction Costs that are to be paid following the Completion Date including the Holdback Amount, all other holdbacks and all contingency amounts outstanding and to be applied under the respective Construction Documents.

ARTICLE IV

REPRESENTATIONS AND WARRANTIES

SECTION 4.1. Representations and Warranties of the Lessee.

As of the Closing Date and each Advance Date, the Lessee makes the representations and warranties set forth in this Section 4.1 to each of the other parties hereto:

(a) Organization; Power; Qualification . The Lessee is duly incorporated and is validly existing and in good standing under the laws of the State of Delaware, has the power and authority to own its properties and to carry on its business as now being and hereafter proposed to be conducted and is duly qualified and authorized to do business in the State of California and each other jurisdiction in which the character of its properties or the nature of its business requires such qualification and authorization, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect.

(b) Authorization of Operative Documents . The Lessee has the right, power and authority and has taken all necessary corporate and other action to authorize the execution, delivery and performance of each of the Operative Documents to which it is a party in accordance with its respective terms. Each of the Operative Documents to which the Lessee is a party has been duly executed and delivered by a Responsible Officer of the Lessee, and each such document constitutes the legal, valid and binding obligation of the Lessee, enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or similar debtor relief laws from time to time in effect which affect the enforcement of creditors’ rights in general and the availability of equitable remedies.

(c) No Conflicts, etc . The execution, delivery and performance by the Lessee of the Operative Documents to which it is a party and the transactions contemplated thereby do not and will not, by the passage of time, the giving of notice or otherwise, (i) violate any Applicable Laws and Regulations relating to the Lessee, (ii) conflict with, result in a breach of or constitute a default under the charter or bylaws of the Lessee, or any material agreement, judgment, injunction, order, decree or other material instrument binding upon the Lessee, or any Governmental Action relating to the Lessee, except, in any case, as could not reasonably be expected to have a Material Adverse Effect, or (iii) result in or require the creation or imposition of any Lien upon or with respect to the Leased Property or the Site (except as contemplated by the Operative Documents) or any material Lien upon or with respect to any other property now owned or hereafter acquired by the Lessee.

(d) Compliance with Law; Governmental Approvals . Other than with respect to environmental matters, which are treated exclusively in Section 4.1(e) hereof, (i) the Lessee has obtained or received all Governmental Action required by any Applicable Laws and Regulations with respect to the then current status of the construction of the Facility on the Site, each of which is in full force and effect and not subject to any pending proceedings or appeals (administrative, judicial or otherwise), except for any other Governmental Action the failure to obtain which, or the appeal of or further procedures with respect to which, would not reasonably be expected to have a Material Adverse Effect, (ii) the information provided by the Lessee to the Agents, the Participants and the Construction Consultant regarding the Governmental Actions that are necessary to Complete the Facility was true and complete in all material respects, and (iii) the Lessee and the Leased Property are in compliance with each Governmental Action applicable to it and in compliance with all other Applicable Laws and Regulations relating to it in each case, except where the failure to do so could not reasonably be expected to have a Material Adverse Effect.

(e) Environmental Matters . Except as could not reasonably be expected to have a Material Adverse Effect:

(i) the Site (including soils, surface waters and ground waters on, at or under the Site or such structures) does not contain and is not otherwise adversely affected by, and to the Lessee’s knowledge has not previously contained or been adversely affected by, any Hazardous Materials in amounts or concentrations which (A) constitute or constituted a violation of applicable Environmental Laws or (B) could give rise to any liability or obligation under applicable Environmental Laws;

(ii) the Site and all operations conducted in connection therewith are in compliance, and during Lessee’s operation of the Site have been in compliance, with all applicable Environmental Laws, and there are no Hazardous Materials at, under or about the Site and there was and is no Release of Hazardous Materials from, to, at, under or about the Site or from such operations;

(iii) the Lessee has obtained, is in compliance with, and has made all appropriate filings for issuance or renewal of, all Environmental Permits required for the then current status of the Site and the construction of the Facility, and all such Environmental Permits are in full force and effect;

(iv) the Lessee has not received any written notice of violation, alleged violation, noncompliance, liability or potential liability regarding environmental matters or compliance with Environmental Laws with respect to the Site that has not been fully remediated, nor does the Lessee have knowledge that any such notice will be received or is being threatened; and

(v) no judicial proceeding or governmental or administrative action is pending, or, to the knowledge of the Lessee threatened, under any Environmental Law to which the Lessee has been or will be named as a party, nor are there any consent decrees or other decrees, consent orders, administrative orders or other orders, or other

administrative or judicial requirements outstanding under any Environmental Law with respect to the Site or operations of the Lessee with respect thereto, other than the Voluntary Assistance Program Case No. DEH2018˗LSAM˗000521.

(f) Absence of Defaults, Loss, etc . No Default for which the cure period, if any, has commenced, Default for which there is no notice and cure period, Event of Default, Event of Loss (unless the Lessor shall have elected to continue the Lease and Complete the Facility in accordance with Section 3.3(b) of the Construction and Development Agreement), Event of Taking, or Condemnation or Casualty has occurred and is continuing; there is no action pending or, to the best of its knowledge, threatened by an Authority to initiate a Condemnation or an Event of Taking.

(g) Accuracy and Completeness of Information . The information, taken as a whole and in light of the circumstances under which such information is furnished, furnished by or on behalf of the Lessee to the Agents and any Participant in connection with the negotiation of this Agreement and the other Operative Documents or delivered hereunder (as modified or supplemented by other information so furnished) is true and accurate in all material respects on the date as of which such information is furnished, and true and accurate in all material respects on the date as of which such information is stated or certified ; provided that, with respect to the Construction Budget and any other projected financial information, the Lessee represents only that such information was prepared in good faith based upon assumptions believed to be reasonable at the time. It is understood that the foregoing is limited to the extent that (i) projections have been made in good faith by the management of the Lessee and in the view of the Lessee’s management are reasonable in light of all information known to management as of the date such representations and warranties are made, and (ii) no representation or warranty is made as to whether the projected results will be realized.

(h) Subjection to Government Regulation . To the Lessee’s Actual Knowledge, none of the Lessor, the Agents or any Participant shall be required to, solely by reason of entering into the Operative Documents or consummating any of the transactions contemplated thereby (other than upon the exercise by such Person of remedies under the Operative Documents), perform in its own capacity or on behalf of any other Person any obligations, instructions or other duties imposed by an Authority (except with respect to bank regulations or, if such Person shall have assumed operational control of the Leased Property, operating permit requirements for the Leased Property) as long as the Lessee is not in breach of any of the Operative Documents.

(i) Private Offering . Excluding the effect of any violation by the Participants of Section 5 of the Securities Act or any state or foreign securities laws, and assuming that the representations and warranties contained in Sections 4.2 and 4.3 are correct, the issuance and delivery of the interests in the Operative Documents under the circumstances contemplated hereby do not require the registration or qualification of such interests under the Securities Act, any state securities laws or the Trust Indenture Act of 1939.

(j) The Leased Property and the Site .

(i) As of the Closing, the Lessee is the sole owner of and holds legal title to the Site (as is described on Schedule IV hereto), free and clear of all Liens other than Permitted Liens; the Site is subject to a valid leasehold interest in favor of the Lessor pursuant to the Ground Lease; after giving effect to the transactions to be consummated on the Closing Date, no default or event of default has or will occur under the Ground Lease; and the Lessee is not a party to any other contract or agreement to sell, transfer or encumber any interest in the Leased Property or the Site in which it has an interest or any part thereof other than pursuant to the Operative Documents and no party is in default under the Lease;

(ii) the Site is located on the parcel of land described on Schedule IV to this Agreement and such parcel constitutes all of the land subject to the Lease, the surveys of the Site furnished pursuant to Section 2.1(h) are complete and true and correct in all material respects and contain a flood hazard certification, no portion of the Site is located in an area identified as a special flood hazard area by the Federal Emergency Management Agency or other applicable Authority and the Facility is being constructed entirely on the Site. The Leased Property and any present use or construction and presently anticipated future use or construction thereof by the Lessee and its agents, assignees, employees, invitees, lessees, licensees and tenants comply with all Applicable Laws and Regulations (including planning, zoning and land use laws and Environmental Laws) and Insurance Requirements, except for such instances of non-compliance that would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect or that are inconsequential for the then current status of the construction of the Facility. No notices, complaints or orders of violation or non-compliance or liability have been issued or, to the best of its knowledge, threatened by any Authority with respect to the Leased Property or the Site or the present or intended future use of the Leased Property or the Site except for such violations and instances of non-compliance as would not reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect, and the Lessee is not aware of any circumstances which could give rise to the issuance of any such notices, complaints or orders;

(iii) Upon Completion, the Facility will be serviced by all utilities necessary for the use and operation of the Facility and transmission pipes and other connections into the Facility and out of the Facility necessary for the contemplated use and operation thereof, all of which are located on the Site and access to the Facility or any part thereof from the public road is or will be provided by the Operative Documents;

(iv) The Lessor has, in accordance with the Operative Documents, or will have, upon execution of the Memorandum of Lease and the filing of any documents required in respect thereof, a valid Lien on the Lessee Collateral, and such Lien has or will have, upon proper filing of any documents required in connection with such agreements, priority over any other Lien on the Lessee Collateral, except for Permitted Liens, and provided that any Lien in favor of the Lessee pursuant to the Memorandum of Lease shall be subordinate to the Liens in favor of the Lessor pursuant to the Security Documents;

(v) all Major Construction Documents that have been entered into explicitly allow for and will allow for the assignment or pledge of the rights of the

Construction Agent thereunder, except for any such provision as has been waived by the appropriate Persons in accordance with the terms of such document, or the Lessee has caused the counterparty thereto to enter into a consent to assignment with the Lessor, and no default is continuing under any Major Construction Contract;

(vi) to the Actual Knowledge of the Lessee, there is no action being taken by any Person with respect to any actual or pending Condemnation or Event of Taking, except as is being contested by the Lessee in accordance with Section 13.6 of the Lease;

(vii) the structures constructed as part of the Leased Property are in such condition that such structures at all times meet the standards which, in the given circumstances, each of them may be expected to meet so as not to constitute a danger for persons or things;

(viii) the rights granted or made available to the Lessor pursuant to the Operative Documents, assuming due performance by the parties thereto, are sufficient in all material respects to enable the Lessor or its assigns or any designee thereof to maintain, use and operate the Facility from and after the date of possession of the Leased Property by the Lessor; and

(ix) the description of the Lessee Collateral sufficiently identifies such property to the extent required by Applicable Laws and Regulations in order to obtain a valid security interest therein.

(k) Facility Ownership in the Lessor . Subject to Permitted Liens and the Lease, the Lessor will be the sole owner of and holds legal title to the Facility.

(l) Financial Information . The Lessee has heretofore furnished to the Administrative Agent financial statements of the Lessee (i) for the fiscal year ended September 30, 2017 audited by Ernst & Young LLP, independent public accountants and (ii) for the fiscal quarters ended March 31, 2018 and June 30, 2018, which quarterly financial statements were unaudited. Such financial statements present fairly in all material respects the financial condition and results of operations of the Lessee and its Subsidiaries as of the dates and for the periods indicated, and such financial statements disclose in accordance with GAAP all material liabilities, direct or contingent, of the Lessee as of the dates thereof.

Since September 30, 2017, there has been no material adverse change in the business, assets, operations or financial condition of the Lessee and its Restricted Subsidiaries, considered as a whole.

(m) Taxes .

(i) The Lessee has filed or caused to be filed all United States Federal income Tax returns and all other material Tax returns which are required to be filed by it and has paid or caused to be paid all Taxes due pursuant to such returns or pursuant to any assessment received by it except where the amount, applicability or validity of such Taxes

are being contested in good faith by proper legal proceedings. The charges, accruals and reserves on the books of the Lessee in respect of Taxes or other governmental charges, additions to taxes and any penalties and interest thereon are, in the opinion of the Lessee, adequate; and

(ii) On the Closing Date, to the Actual Knowledge of the Lessee, no Participant is subject to any Taxes with respect to which the Lessee is obligated to indemnify such Participant pursuant to Section 7.2(a)(ii) and no Indemnitee is subject to Withholding Taxes with respect to which the Lessee is obligated to indemnify such Indemnitee pursuant to Section 7.2(a)(iii), assuming that each Indemnitee complies with its obligations pursuant to Section 7.3.

(n) Compliance with ERISA . Except to the extent it would not result in any material liability, each of the Lessee and its Restricted Subsidiaries and each ERISA Affiliate (i) has fulfilled its obligations under the minimum funding standards of ERISA and the Code with respect to each Plan, (ii) is in compliance in all material respects with the presently applicable provisions of ERISA and the Code with respect to each Plan, and (iii) has not incurred any liability under Title IV of ERISA (A) to the PBGC other than a liability to the PBGC for premiums under Section 4007 of ERISA or (B) in respect of a Multiemployer Plan which has not been discharged in full when due.

(o) No Actions. There is no action, suit or proceeding against, or to the knowledge of the Lessee threatened against or affecting, the Lessee or any of its Restricted Subsidiaries before any Authority or arbitrator that (1) could be expected, individually or in the aggregate, to have a Material Adverse Effect or (2) purports to affect or draws into question the legality, validity or enforceability of this Agreement or any Operative Document or the consummation of the transactions contemplated hereby or thereby in any material respect.

(p) Dissolution or Winding Up . The Lessee has not taken any action nor have any steps been taken or legal proceedings commenced or, to the Actual Knowledge of the Lessee, threatened, against the Lessee for its dissolution, winding-up, examination, administration, court protection or reorganization or for the appointment of a receiver, administrator, administrative receiver, examiner, trustee or similar official with respect to the Lessee or any substantial part of its assets or revenues. Prior to and after giving effect to the overall transaction, the Lessee will be Solvent.

(q) Foreign Assets Control Regulations, etc . The use of the proceeds of the Lessor Investment and the Rent Assignment Advances will not violate the Trading with the Enemy Act, as amended, or any of the foreign assets control regulations of the United States Treasury Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive order relating thereto. None of the Lessee, nor any investor in the Lessee, is (i) on the SDNL, or (ii) in violation of any money laundering law, regulation or order including the Beneficial Ownership Regulations and Executive Order No. 13244 on Terrorist Financing, effective September 24, 2001 and relating to Blocking Property and Prohibiting Transactions With Persons Who Commit, Threaten to Commit, or Support Terrorism and the Uniting and Strengthening

America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (Public Law 107-56) (the “ USA PATRIOT Act ”).

(r) Location of the Lessee . The location of the Lessee, as defined by the Uniform Commercial Code, is the State of Delaware and the Lessee’s address for purposes of preparing any UCC financing statement is at the following address:

Cubic Corporation
9333 Balboa Avenue
San Diego, California 92123

The Lessee keeps or will keep its company records concerning the Facility, the Site and the Operative Documents to which it is or will be a party at such address or at such other address of which the Lessee will provide the Lessor notice within forty-five (45) days after its company records have been relocated.

(s) Subject to Government Regulation . The Lessee is not an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940. The Lessee is not a “covered fund” under Section 619 of the Dodd-Frank Wall Street Reform and Consumer Protection Act (12 U.S.C. § 1851).

(t) Not a Foreign Person . The Lessee is not a “foreign person” within the meaning of Sections 1445 and 7701 of the Code (i.e., the Lessee is not a non-resident alien, foreign corporation, foreign partnership, foreign trust or foreign estate as those terms are defined in the Code and regulations promulgated thereunder).

(u) No Approvals, etc . The execution and delivery by the Lessee of any of the Operative Documents to which it is a party does not require the consent or approval of, or the giving of notice to or registration with, or the taking of any other action in respect of, any Authority.

SECTION 4.2. Representations and Warranties of the Lessor.

As of the Closing Date, the Lessor represents and warrants to each of the other parties hereto as follows:

(a) Due Organization, etc . The Lessor is duly incorporated and validly existing under the laws of the jurisdiction of its incorporation and has full power and authority to own its properties, to enter into and perform its obligations as the Lessor under each Operative Document to which it is or will be a party and each other agreement, instrument and document to be executed and delivered by it on or before the Closing Date in connection with or as contemplated by each such Operative Document to which it is or is to be a party, and to carry on its business as now being and hereafter proposed to be conducted.

(b) ERISA . It is making its Lessor Investment with assets that are not “plan assets” within the meaning of 29 C.F.R. Section 2510.3-101, as modified by Section 3(42) of ERISA, of any Employee Benefit Plan.

(c) Due Authorization; Enforceability, etc . This Agreement and each other Operative Document to which the Lessor is or will be a party have been or will be (to the extent it is to be a party thereto in its individual capacity) duly authorized, executed and delivered by or on behalf of the Lessor (in its individual capacity) and are, or upon execution and delivery will be, legal, valid and binding obligations of the Lessor, enforceable against it in accordance with their respective terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, or similar laws affecting creditors’ rights generally and by general equitable principles.

(d) No Conflict . The execution and delivery by the Lessor of each Operative Document to which the Lessor is or will be a party, are not and will not be, and the performance by the Lessor of its obligations under each Operative Document (i) are not and will not be, inconsistent with the organizational documents of the Lessor; (ii) do not and will not contravene any Applicable Laws and Regulations applicable to the Lessor and (iii) do not and will not conflict with result in a breach of, or a default under, the charter documents or resolutions of the Lessor or any indenture or other material agreement or instrument to which the Lessor is party, or any Governmental Action relating to the Lessor, except in any case, as could not reasonably be expected to have a material adverse effect on the ability of the Lessor to perform its obligations pursuant to the Operative Documents.

(e) Lessor Liens . The Leased Property is free and clear of all Lessor Liens attributable to the Lessor and no act or omission by it has occurred which would cause a Lessor Lien attributable to it.

(f) Location of the Lessor . The location of the Lessor, as defined by the Uniform Commercial Code, is the State of California and the Lessor’s address for purposes of preparing any UCC financing statement is at the following address:

Bankers Commercial Corporation
445 South Figueroa, 14th Floor
Los Angeles, California 90017

The Lessor keeps or will keep its company records concerning the Facility, the Site and the Operative Documents to which it is or will be a party at such address or at such other address of which the Lessor will provide the Collateral Agent notice within forty-five (45) days after its company records have been relocated.

(g) Not a Foreign Person . The Lessor is not a “foreign person” within the meaning of Sections 1445 and 7701 of the Code (i.e., the Lessor is not a non-resident alien, foreign corporation, foreign partnership, foreign trust or foreign estate as those terms are defined in the Code and regulations promulgated thereunder).

SECTION 4.3. Representations and Warranties of Rent Assignees.

As of the Closing Date, each Rent Assignee represents and warrants severally and only as to itself to each of the other parties hereto as follows:

(a) Due Organization, etc . It is duly organized and validly existing under the laws of the jurisdiction of its formation and has full power and authority to enter into and perform its obligations as a Rent Assignee under each Operative Document to which it is or is to be a party and each other agreement, instrument and document to be executed and delivered by it on or before the Closing Date in connection with or as contemplated by each such Operative Document to which it is or is to be a party.

(b) ERISA . It is acquiring the Rent Assignment Interests with assets that are not “plan assets”, within the meaning of 29 C.F.R. Section 2510.3-101, as modified by Section 3(42) of ERISA, of any Employee Benefit Plan.

(c) Investment in Rent Assignment Interests . It is acquiring the Rent Assignment Interests for its own account for investment and not with a view to any distribution (as such term is used in Section 2(11) of the Securities Act) thereof other than in accordance with the Operative Documents and, if in the future it should decide to dispose of its interest in such Rent Assignment Interest, it understands that it may do so only in compliance with the Securities Act and the rules and regulations of the United States Securities and Exchange Commission thereunder, any applicable state securities laws and the applicable securities laws of any other jurisdiction. It is an Eligible Assignee and is aware that the Rent Assignment Interests have not been registered under the Securities Act or qualified or registered under any state or other jurisdiction’s securities laws. Neither it nor anyone authorized to act on its behalf has taken or will take any action which would subject the issuance or sale of any Rent Assignment Interest to the registration requirements of Section 5 of the Securities Act. No representation or warranty contained in this Section 4.3(c) shall include or cover any action or inaction of any Cubic Person whether or not purportedly on behalf of the Agents, any Participant or any of their Affiliates. Notwithstanding the foregoing, but subject to the provisions of Article VI hereof, it is understood among the parties that the disposition of its property shall be at all times within its control. It and its respective agents and representatives have such knowledge and experience in financial and business matters as to enable them to utilize the information made available to them in connection with the transactions contemplated hereby, to evaluate the merits and risk of an investment in the Rent Assignment Interests and to make an informed decision with respect thereto and such an evaluation and informed decision have been made.

(d) Lessor Liens . The Leased Property is free and clear of all Lessor Liens attributable to it and no act or omission by it has occurred which would cause a Lessor Lien attributable to it.

SECTION 4.4. Representations and Warranties of Administrative Agent and Collateral Agent.

As of the Closing Date, each Agent hereby represents and warrants to each of the other parties hereto as follows:

(a) Organization and Authority . It is duly organized, validly existing and in good standing under the laws of the jurisdiction of its formation and has the power and authority to enter into and perform its obligations under the Operative Documents.

(b) Authorization; Binding Effect . The Operative Documents to which it is or will be a party have been or will be, on the date required to be delivered hereby, duly authorized, executed and delivered by it and this Agreement is, and such other Operative Documents are, or, when so executed and delivered by it will be, valid, legal and binding agreements of such Agent, enforceable against it in accordance with their respective terms, except as enforcement may be limited by bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting the enforcement of creditors’ rights generally and by general principles of equity.

(c) Non-Contravention . Neither the execution and delivery by it of the Operative Documents to which it is or will be a party, either in its individual capacity, as Agent or both, nor compliance with the terms and provisions thereof, conflicts with, results in a breach of, constitutes a default under (with or without the giving of notice or lapse of time or both), or violates any of the terms, conditions or provisions of: (i) its organizational documents; (ii) any bond, debenture, note, mortgage, indenture, agreement, lease or other instrument to which it, either in its individual capacity, as Agent, or both, is now a party or by which it or its property, either in its individual capacity, as Agent or both, is bound or affected, where such conflict, breach, default or violation would be reasonably likely to materially and adversely affect its ability, either in its individual capacity, as Agent or both, to perform its obligations under any Operative Document to which it is or will be a party, either in its individual capacity, as Agent or both; or (iii) any of the terms, conditions or provisions of any Applicable Laws and Regulations governing its banking or trust powers, or any order, injunction or decree of any Authority applicable to it in its individual capacity, as Agent or both, where such conflict, breach, default or violation would be reasonably likely to materially and adversely affect its ability, either in its individual capacity, as the Agent or both, to perform its obligations under any Operative Document to which it is or will be a party.

(d) Absence of Litigation, etc . There is no litigation (including, without limitation, derivative actions), arbitration or governmental proceedings served and pending or, to the best knowledge of such Agent, threatened against it which would be reasonably likely to adversely affect its ability to perform its obligations under the Operative Documents to which it is party.

(e) Consents, etc . No authorization, consent, approval, license or formal exemption from, nor any filing, declaration or registration with, any Authority governing its banking or trust powers, is or will be required in connection with its execution and delivery of the Operative Documents to which it is party or its performance by of its obligations under such Operative Documents.

(f) Lessor Liens . The Leased Property is free and clear of all Lessor Liens attributable to it.

ARTICLE V

COVENANTS OF THE LESSEE

SECTION 5.1. Financial Reporting.

The Lessee agrees to furnish or cause to be furnished each of the following to the Administrative Agent:

(a) Annual Reports . Within one hundred twenty (120) days after the end of each fiscal year of the Lessee (or such earlier date on which the Lessee is required to file a Form 10-K under the Securities Exchange Act of 1934), the consolidated balance sheet of the Lessee as of the end of such fiscal year; and related consolidated statements of income, cash flows and stockholders’ equity for such fiscal year, in comparative form with such financial statements as of the end of, and for, the preceding fiscal year, accompanied by an unqualified opinion thereon of independent public accountants of recognized national standing, stating that such financial statements present fairly, in all material respects, the consolidated financial condition, results of operations and cash flows of the Lessee as of the dates and for the periods specified in accordance with GAAP consistently applied (it being understood that the information required may be furnished in the form of a Form 10-K (together with the Lessee’s annual report to shareholders, if any, prepared pursuant to Rule 14a-3 under the Exchange Act) prepared in accordance with the requirements therefor and filed with the SEC ).

(b) Quarterly Reports . Within sixty (60) days (or such earlier date on which the Lessee is required to file a Form 10-Q under the Securities Exchange Act of 1934) after the end of each of the first three (3) fiscal quarters of each fiscal year, the consolidated balance sheet of the Lessee as of the end of such fiscal quarter and related consolidated statements of income and cash flows for such fiscal quarter and for the then elapsed portion of the fiscal year, in comparative form with the consolidated statements of income and cash flows for the comparable periods in the previous fiscal year, and accompanied by a certificate of the chief financial officer, principal accounting officer or treasurer of the Lessee stating that such financial statements fairly present, in all material respects, the consolidated financial condition, results of operations and cash flows of the Lessee as of the date and for the periods specified therein in accordance with GAAP consistently applied, and on a basis consistent with audited financial statements referred to in clause (a) of this Section, subject to normal year-end audit adjustments and the absence of footnote disclosures (it being understood that the information required may be furnished in the form of a Form 10-Q).

(c) Public Reports . Promptly after the same become publicly available, copies of all periodic and other financial statement, proxy statements, notices and reports which the Lessee sends to its public stockholders and other materials filed by the Lessee with the SEC, or any Authority succeeding to any or all of the functions of the SEC, or with any national securities exchange.

(d) Notice Regarding Default or Event of Default . Within ten (10) Business Days after the Lessee obtains Actual Knowledge of any Default or Event of Default, if such Default or Event of Default is then continuing, a written notice setting forth the details thereof and the action that the Lessee is taking or proposes to take with respect thereto.

(e) ERISA Matters . Promptly, and in any event within thirty (30) days after the Lessee becomes aware of any of the following with respect to the Lessee or any ERISA Affiliate, a written notice setting forth the nature thereof and the actions, if any that the Lessee or any ERISA

Affiliate proposes to take (i) with respect to any Plan, any reportable event, as defined in Section 4043(b) of ERISA and the regulations thereunder, for which notice thereof has not been waived pursuant to such regulations as in effect on the date hereof ; (ii) the taking by the PBGC of steps to institute, or the threatening by the PBGC of the institution of, proceedings under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by the Lessee or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by the PBGC with respect to such Multiemployer Plan ; or (iii) any ERISA Event or any event, transaction or condition that reasonably could be expected to result in the incurrence of any liability by the Lessee or any ERISA Affiliate pursuant to Title I or IV of ERISA or the penalty or excise tax provisions of the Code relating to employee benefit plans, or in the imposition of any Lien on any of the rights, properties or assets of the Lessee or any ERISA Affiliate pursuant to Title I or IV of ERISA or such penalty or excise tax provisions, if such liability or Lien, taken together with any other such liabilities or Liens then existing, could reasonably be expected to have a Material Adverse Effect .

(f) Authority Matters . Promptly, and in any event within thirty (30) days of receipt thereof, copies of any notice to the Lessee or any Subsidiary from any Authority relating to any order, ruling, statute or other law or regulation that could reasonably be expected to have a Material Adverse Effect .

(g) USA PATRIOT Act and Other Regulations . Any information the Agents or any of the Participants is required to obtain from the Lessee to comply with the requirements of the USA PATRIOT Act, the Beneficial Ownership Regulation or other applicable anti-money-laundering laws.

(h) Other Information . Promptly, from time to time, such other data and information regarding the operations, business affairs and financial condition of the Lessee, the condition, use and operation of the Facility, or compliance with the terms of any Operative Document, as the Administrative Agent or any of the Participants may reasonably request; provided, however, that such Person will not be allowed to receive information the provision or disclosure of which is prohibited pursuant to Applicable Laws and Regulations or contractual obligations or that is protected by attorney-client privilege.

(i) Financial Covenants . Contemporaneously with the delivery of reports pursuant to Section 5.1(a) and (b), an Officer’s Certificate stating that, as of the last day of the preceding quarter, and to the best of his or her knowledge, at all times during the preceding quarter, the Lessee was in compliance with the covenants referred to in Section 5.6 and providing reasonable details of the calculations evidencing the Lessee’s compliance with such covenants.

(j) Reporting Treatment of Unrestricted Subsidiaries . Notwithstanding anything to the contrary contained in this Agreement, so long as the Unrestricted Subsidiaries continue to constitute, in the aggregate, less than seven percent (7%) of Consolidated Total Capitalization in any fiscal period, the Lessee shall be permitted to include, for purposes of the financial reporting requirements contained in Sections 5.1(a) and (b), and only for purposes of such Sections (and in no event for purposes of determining compliance with any of the covenants contained in this Article V hereof), the financial information of such entities on a

consolidated basis. If at any time the Unrestricted Subsidiaries shall constitute, in the aggregate, seven percent (7%) or more of Consolidated Total Capitalization in any fiscal period, the Lessee shall, notwithstanding that Section 5.1(a) and (b) permit the Lessee to comply therewith by delivery of its Quarterly Reports on SEC Form 10-Q and Annual Reports on SEC Form 10-K, provide consolidating financial statements setting forth separately the financial information for the Unrestricted Subsidiaries for such period, together with the financial information of such entities on a consolidated basis for purposes of the financial reporting requirements contained in Sections 5.1(a) and (b) and only for purposes of such Sections (and in no event for purposes of determining compliance with any of the covenants contained in this Article V hereof). In no event shall the Lessee include financial information of the Unrestricted Subsidiaries for purposes of any determination of compliance with any of the covenants contained in this Article V hereof.

Any documents required to be delivered pursuant to clauses (a), (b), (c) or (e) above may be delivered electronically (including by having been publicly filed with the SEC) and if so delivered, shall be deemed to have been delivered to the Administrative Agent and each of the Participants on the date (i) on which the Lessee posts such documents or provides a link thereto on the Lessee’s website on the Internet at www.cubic.com (or such other website address provided to the Administrative Agent and each of the Participants in writing from time to time); (ii) on which such documents are posted on the Lessee’s behalf on an Internet or intranet website, if any, to which the Administrative Agent and each of the Participants has access (whether a commercial, third-party website or whether sponsored by the Administrative Agent or any of the Participants); or (iii) if publicly filed with the SEC, as of the date of such filing. Neither the Administrative Agent nor any Participant shall have any obligation to request the delivery or to maintain copies of the documents referred to above, and in any event shall have no responsibility to monitor compliance by the Lessee with any such request for delivery, and each of the Administrative Agent and each Participant shall be solely responsible for requesting delivery to it or maintaining its copies of such documents.

SECTION 5.2. Affirmative Covenants of the Lessee.

The Lessee covenants and agrees with the Lessor that the Agents and each of the Participants shall comply with the following provisions of this Section 5.2 and the covenants set forth in Sections 5.3 and 5.4.

(a) Investigation and Litigation . The Lessee shall deliver a written notice to the Administrative Agent promptly upon the Lessee’s receiving notice, or upon the Lessee’s obtaining Actual Knowledge, of the intent by an Authority to (i) take an action which would constitute a Condemnation or Event of Taking, (ii) investigate the Leased Property or the Site or other land on which any portion of the Leased Property has been or is being constructed for a material violation of any Applicable Laws and Regulations (including any Environmental Law) on or in respect of the Facility or any portion thereof, or (iii) investigate the Leased Property or the Site or other land on which any portion of the Leased Property has been or is being constructed (other than routine fire, occupational health and safety and similar inspections) for any violation of Applicable Laws and Regulations under which civil liability in excess of $500,000 or any criminal liability may be incurred or imposed upon the Agents, the Participants or the Lessee.

(b) Notices . The Lessee shall provide prompt (but, other than as noted clause (iii) below, in no event later than five (5) Business Days after the Lessee obtains Actual Knowledge thereof) telephonic (confirmed in writing) or written notice to the Administrative Agent of:

(i) the commencement of all proceedings and investigations by or before any Authority and all actions and proceedings in any court or before any arbitrator against or involving the Lessee or any of the Leased Property or the Site or other land on which any portion of the Leased Property has been or is being constructed (A) which in the reasonable judgment of the Lessee could reasonably be expected to have a Material Adverse Effect or (B) with respect to any Operative Document;

(ii) the occurrence and continuation of any event which constitutes, or which could reasonably be expected to result in, a Default, Event of Default, Event of Loss, Event of Taking, Casualty (as required by Section 3.3 of the Construction and Development Agreement or Section 13.4 of the Lease) or Condemnation (as required by Section 3.3 of the Construction and Development Agreement or Section 13.3 of the Lease); and

(iii) any change or proposed change in Applicable Laws and Regulations which would, if adopted, require that the Agents or any of the Participants pay any amount in Taxes sufficient to cause the remaining Available Commitments of the Lessor and Rent Assignees to be insufficient to Complete the Facility on or before the Construction Period Termination Date. Notice of any such change or proposed change in Applicable Laws and Regulations shall be delivered within thirty (30) days of the earliest date a Responsible Officer of the Lessee obtains Actual Knowledge thereof.

(c) Securities . The Lessee shall not, nor shall it permit anyone (other than the Arranger and the Participants) authorized to act on its behalf to, take any action which would subject the issuance or sale of the Rent Assignment Interests, the Leased Property or the Operative Documents, or any security or lease the offering of which, for purposes of the Securities Act or any state securities laws would be deemed to be part of the same offering as the offering of the aforementioned items, to the registration requirements of Section 5 of the Securities Act or any state securities laws.

(d) Conduct of Business and Maintenance of Existence . The Lessee will (i) continue to engage in business of the same general type as now conducted by the Lessee, (ii) preserve, renew and keep in full force and effect its existence and (iii) preserve, renew and keep in full force and effect its rights, privileges and franchises necessary or desirable (as determined in good faith by the Lessee) in the normal conduct of business except (i) for any such rights, privileges and franchises the failure of which to preserve, renew or keep in full force and effect would not, individually or in the aggregate, have a Material Adverse Effect, taken as a whole, and (ii) as permitted under Section 5.3 below.

(e) Compliance with Laws . The Lessee will comply with all applicable laws and regulations (including ERISA and Environmental Laws), ordinances, rules, regulations, and requirements of Authorities applicable to the Lessee except where (a) the necessity of compliance therewith is contested by a Permitted Contest in good faith by appropriate proceedings diligently

prosecuted so long as such proceedings shall not involve any meaningful danger of the sale, forfeiture, loss or diminution in value of, and shall not interfere with the use, operation or disposition of, any part of the Leased Property or the Site, the Lease or title thereto or any interest therein or the payment of Rent or (b) noncompliance therewith would not, individually or in the aggregate, reasonably be expected to have a Material Adverse Effect.

(f) Obligations to Rank Pari Passu . The obligations of the Lessee under the Lease and other Operative Documents are and shall at all times rank at least pari passu as against the assets of the Lessee with all other present and future unsecured Indebtedness (actual or contingent) of the Lessee which is not expressed to be subordinate or junior in rank to any other unsecured Indebtedness of the Lessee.

(g) Rates . With respect to each determination of Yield pursuant to this Agreement, the Rent Assignment Agreement and of Basic Rent under the Lease, the Lessee agrees to be bound by Sections 2.8, 2.9(d), 2.9(e), 2.11(d) and 2.12(d) hereof and the applicable definitions in Appendix I with respect to such determinations.

SECTION 5.3. Consolidations, Mergers, Sales of Assets.

(a) Except for a Permitted Acquisition, the Lessee shall not , and will not permit any Restricted Subsidiary to, (i) merge or consolidate with or into any other Person (other than a Subsidiary) or (ii) convey, transfer, lease or otherwise dispose of, or permit a Subsidiary to convey, transfer, lease, or otherwise dispose of (whether in one transaction or in a series of related transactions), all or substantially all of the assets, all or a substantial part of, a business, division, brand or product line, or all or substantially all of the stock of the Lessee and its Subsidiaries taken as a whole (whether now owned or hereafter acquired), directly or indirectly, to any Person, including through a merger or consolidation of a Subsidiary with an unaffiliated party, unless (A) in each case of (i) or (ii), after giving effect to such proposed transaction, no Default or Event of Default would exist and (B) in the case of clause (i), the surviving corporation is the Lessee, provided the Lessee may engage in the transactions contemplated by Section 5.3(b).

(b) The Lessee will not, and will not permit any Restricted Subsidiary to, sell, lease, transfer, abandon or otherwise dispose of assets (except as provided in this Section 5.3); provided that the foregoing restrictions do not apply to:

(i) the sale, lease, transfer or other disposition of assets (x) of the Lessee to a Restricted Subsidiary or (y) of a Restricted Subsidiary to the Lessee or a Wholly-owned Restricted Subsidiary;

(ii) the sale of inventory in the ordinary course of business and sales of accounts receivable pursuant to the terms of a Permitted Factoring Program ; or

(iii) the sale of assets for cash or other property to a Person or Persons other than an Affiliate if all of the following conditions are met:

(1) such assets (valued at net book value) do not, together with all other assets (valued at book value) of the Lessee and its Restricted Subsidiaries previously

disposed of pursuant to this clause (b)(iii) during the immediately preceding twelve calendar month period, exceed ten percent (10%) of Consolidated Total Assets (determined by reference to Consolidated Total Assets as of the last day of the most recently ended fiscal quarter of the Lessee for which financial statements have been delivered (or, if prior to the date of the delivery of the first financial statements to be delivered pursuant to Section 5.1(a) or (b), the most recent financial statements referred to in Section 4.1(l)));

(2) in the opinion of the Lessee’s Board of Directors, the sale is for fair value and is in the best interests of the Lessee;

(3) immediately after the consummation of the transaction and after giving effect thereto, no Default would exist; and

(4) in the case of any such sale of assets having a net book value in excess of 1% of Consolidated Total Assets (determined by reference to Consolidated Total Assets as of the last day of the most recently ended fiscal quarter of the Lessee for which financial statements have been delivered (or, if prior to the date of the delivery of the first financial statements to be delivered pursuant to Section 5.1(a) or (b), the most recent financial statements referred to in Section 4.1(l))), the Lessee prior to the consummation of such sale, shall have delivered a certificate to the Administrative Agent to the effect that the foregoing conditions of this clause (b)(iii) shall have been met, including calculations evidencing compliance with clause (a) above.

SECTION 5.4. Compliance with Laws and Approvals.

The Lessee shall observe and remain in compliance with all Applicable Laws and Regulations and maintain in full force and effect all Governmental Actions, in each case applicable to the conduct of its business except (x) where the failure to observe or comply could not reasonably be expected to have a Material Adverse Effect; or (y) where such obligations are being contested by the Lessee in good faith in accordance with Section 9.5 of the Lease. The Lessee shall promptly notify the Agents and each of the Participants should it or its parent companies be named on the SDNL and shall promptly cause such entity to be removed from such list.

SECTION 5.5. [Intentionally Omitted.]

SECTION 5.6. Financial Covenants of the Lessee.

(a) Financial Ratios. The Lessee shall not permit:

(i) the ratio determined at the end of each fiscal quarter on a rolling four quarter basis of (x) Consolidated EBITDA to (y) Consolidated Cash Interest Expense to be less than 3.00 to 1.00; or

(ii) the Leverage Ratio at the end of any fiscal quarter ending on or after December 31, 2017 to be greater than 3.50 to 1.00.

Notwithstanding the foregoing, the Lessee shall be permitted at any time, but in no event on more than two (2) occasions during the term of the Credit Agreement, as in effect on the date hereof, to allow the Leverage Ratio permitted under Section 5.6(a)(ii) to be increased to 4.00 to 1.00 for a period of four consecutive fiscal quarters (such period, an “ Adjusted Covenant Period ”) in connection with a Permitted Acquisition if the aggregate consideration paid or to be paid in respect of such Permitted Acquisition exceeds $50,000,000 (and in respect of which the Lessee shall provide notice in writing to the Administrative Agent (for distribution to the Participants) of such increase and a transaction description of such Permitted Acquisition (regarding the name of the Person or summary description of the assets being acquired and the approximate purchase price)), so long as the Lessee is in compliance on a pro forma basis with the Leverage Ratio of 4.00 to 1.00 on the closing date of such Permitted Acquisition immediately after giving effect (including pro forma effect) to such Permitted Acquisition; provided that it is understood and agreed that (x) the Lessee may not elect a new Adjusted Covenant Period for at least two (2) fiscal quarters following the end of an Adjusted Covenant Period and (y) with respect to the first fiscal quarter end following an Adjusted Covenant Period, the Leverage Ratio permitted under Section 5.6(a)(ii) shall revert to 3.50 to 1.00 and thereafter until another Adjusted Covenant Period (if any) is elected pursuant to the terms and conditions described above. Agents and the Participants acknowledge that Lessee is in an Adjusted Covenant Period as of the date hereof, having made a Permitted Acquisition in October 2018, and as a result thereof, the Adjusted Covenant Ratio is effective as of the date hereof through September 30, 2019.

(b) Designation of Subsidiaries . The Lessee may designate or redesignate any Unrestricted Subsidiary as a Restricted Subsidiary and may designate or redesignate any Restricted Subsidiary as an Unrestricted Subsidiary; provided, that (a) any such designation of a Restricted Subsidiary (other than a Restricted Subsidiary that is an SPE) as an Unrestricted Subsidiary shall be subject to the prior written approval of the Required Participants when a Default is continuing (or would arise immediately after giving effect on a pro forma basis to such designation), any such Subsidiary designated as an Unrestricted Subsidiary shall not, directly or indirectly, own any Indebtedness or capital stock (or similar equity interests) of the Lessee or any Restricted Subsidiary, the designation of such Restricted Subsidiary (other than a Restricted Subsidiary that is an SPE) as an Unrestricted Subsidiary shall be deemed to be a sale or other disposition of assets to be consummated within the limitations of Section 5.3(b)(iii) and, immediately after giving effect to such deemed sale or other disposition, the company would be in pro-forma compliance with such Section, (b) immediately after giving effect to such designation as an Unrestricted Subsidiary, the company would be in pro-forma compliance with Section 6.11 of the Credit Agreement, as in effect on the date hereof, and (c) no such designation or redesignation shall be effective unless the Lessee has delivered to the Administrative Agent written notice thereof together with a certification by a Responsible Officer of the Lessee that the requirements set forth in this Section 5.6 have been satisfied. For the avoidance of doubt, upon and following the designation of an Unrestricted Subsidiary as a Restricted Subsidiary and after giving effect thereto, each Restricted Subsidiary so designated shall be subject to the provisions of this Agreement which apply to Restricted Subsidiaries.

(c) Restricted Payments . The Lessee will not, and will not permit any of its Restricted Subsidiaries to, declare or make, or agree to pay or make, directly or indirectly (including, without limitation, on a synthetic basis through Swap Agreements), any Restricted

Payment, except (a) the Lessee may declare and pay dividends with respect to its Equity Interests payable solely in additional Equity Interests, (b) Subsidiaries may declare and pay dividends and other Restricted Payments ratably with respect to their Equity Interests, (c) the Lessee may make Restricted Payments pursuant to and in accordance with option plans or other benefit plans for management or employees of the Lessee and its Subsidiaries, and (d) the Lessee may declare and pay cash dividends on its Equity Interests, or make any payment on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such Equity Interests or any option, warrant or other right to acquire any such Equity Interests (i) in an unlimited amount so long as the Leverage Ratio as of the last day of the most recently ended fiscal quarter of the Lessee for which financial statements have been delivered (and giving pro forma effect to any such Restricted Payment) is less than or equal to 2.50 to 1.00, (ii) if the Leverage Ratio as of the last day of the most recently ended fiscal quarter of the Lessee for which financial statements have been delivered (and giving pro forma effect to any such Restricted Payment) is greater than 2.50 to 1.00 but less than or equal to 3.00 to 1.00, in an amount not to exceed, together with all such Restricted Payments made during the current fiscal quarter and the period of three consecutive complete fiscal quarters immediately preceding such current fiscal quarter, ten percent (10%) of Consolidated Tangible Assets (determined by reference to Consolidated Tangible Assets as of the last day of the most recently ended fiscal quarter of the Lessee for which financial statements have been delivered (or, if prior to the date of the delivery of the first financial statements to be delivered pursuant to Section 5.1(a) or (b), the most recent financial statements referred to in Section 4.1(l))) and (iii) if the Leverage Ratio as of the last day of the most recently ended fiscal quarter of the Lessee for which financial statements have been delivered (and giving pro forma effect to any such Restricted Payment) is greater than 3.00 to 1.00, in an amount not to exceed, together with all such Restricted Payments made during the current fiscal quarter and the period of three consecutive complete fiscal quarters immediately preceding such current fiscal quarter, five percent (5%) of Consolidated Tangible Assets (determined by reference to Consolidated Tangible Assets as of the last day of the most recently ended fiscal quarter of the Lessee for which financial statements have been delivered (or, if prior to the date of the delivery of the first financial statements to be delivered pursuant to Section 5.1(a) or (b), the most recent financial statements referred to in Section 4.1(l))), in each case if, at the time thereof and immediately after giving effect thereto, no Default shall be continuing.

(d) Investments, Loans, Advances, and Guarantees . The Lessee will not, and will not permit any of its Restricted Subsidiaries to, purchase, hold or acquire any capital stock, evidences of indebtedness or other securities (including any option, warrant or other right to acquire any of the foregoing) of, make or permit to exist any loans or advances to, Guarantee any obligations of, or make or permit to exist any investment or any other interest in, any Unrestricted Subsidiary, except that the Lessee or any of its Restricted Subsidiaries may (a) hold any such security, loan, Guarantee, investment or other interest in an Unrestricted Subsidiary that exists on the date of this Agreement, or (b) make or acquire any such security, loan, Guarantee, investment or other interest in an Unrestricted Subsidiary (based on the amount of cash or the fair market value of property originally transferred as consideration for such investments less the amount of cash or the fair market value of property received as a return on or repayment of such investments) (i) in an unlimited amount so long as the Leverage Ratio as of the last day of the most recently ended fiscal quarter of the Lessee for which financial statements have been delivered (and giving pro forma effect to any such security, loan, Guarantee, investment or interest (or, if made or

acquired while such Unrestricted Subsidiary was designated a Restricted Subsidiary, then at the time of designation as an Unrestricted Subsidiary and immediately after giving effect thereto)) is less than 2.50 to 1.00, (ii) if the Leverage Ratio as of the last day of the most recently ended fiscal quarter of the Lessee for which financial statements have been delivered (and giving pro forma effect to any such security, loan, Guarantee, investment or interest (or, if made or acquired while such Unrestricted Subsidiary was designated a Restricted Subsidiary, then at the time of designation as an Unrestricted Subsidiary and immediately after giving effect thereto)) is greater than or equal to 2.50 to 1.00 but less than 3.00 to 1.00, in an amount not to exceed ten percent (10%) of Consolidated Tangible Assets (determined by reference to Consolidated Tangible Assets as of the last day of the most recently ended fiscal quarter of the Lessee for which financial statements have been delivered (or, if prior to the date of the delivery of the first financial statements to be delivered pursuant to Section 5.1(a) or (b), the most recent financial statements referred to in Section 4.1(l))) and (iii) if the Leverage Ratio as of the last day of the most recently ended fiscal quarter of the Lessee for which financial statements have been delivered (and giving pro forma effect to any such security, loan, Guarantee, investment or interest (or, if made or acquired while such Unrestricted Subsidiary was designated a Restricted Subsidiary, then at the time of designation as an Unrestricted Subsidiary and immediately after giving effect thereto)) is greater than or equal to 3.00 to 1.00, in an amount not to exceed five percent (5%) of Consolidated Tangible Assets (determined by reference to Consolidated Tangible Assets as of the last day of the most recently ended fiscal quarter of the Lessee for which financial statements have been delivered (or, if prior to the date of the delivery of the first financial statements to be delivered pursuant to Section 5.1(a) or (b), the most recent financial statements referred to in Section 4.1(l))), in each case if, at the time thereof and immediately after giving effect thereto, no Default shall be continuing.

(e) Limitations on Indebtedness .

(i) The Lessee will not, and will not permit any Restricted Subsidiary to, create, incur, assume or permit to exist any Indebtedness, unless if both immediately before and immediately after giving effect to any such creation, incurrence or assumption the Lessee is in compliance on a pro forma basis with Section 5.6(a) hereof.

(ii) The Lessee will not permit any Restricted Subsidiary to create, incur, assume or permit to exist any Indebtedness, except:

(1) Guarantees by any Restricted Subsidiary of Indebtedness of the Lessee or any other Restricted Subsidiary otherwise permitted hereunder; and

(2) other Indebtedness if, immediately after giving effect to any such creation, incurrence or assumption, the aggregate amount of all such Indebtedness then outstanding shall not exceed ten percent (10%) of Consolidated Total Assets (determined by reference to Consolidated Total Assets as of the last day of the most recently ended fiscal quarter of the Lessee for which financial statements have been delivered (or, if prior to the date of the delivery of the first financial statements to be delivered pursuant to Section 5.1(a) or (b), the most recent financial statements referred to in Section 4.1(l))) . In the event of the acquisition or designation of any Restricted Subsidiary, the pro forma Indebtedness of such Restricted Subsidiary

outstanding after giving effect to such acquisition or designation shall be deemed to have been incurred by it at the time of such acquisition or designation.

(f) Limitation on Liens . The Lessee will not, and will not permit any Restricted Subsidiary to, create or incur, or suffer to be incurred or to exist, any Lien on its or their property or assets, whether now owned or hereafter acquired, or upon any income or profits therefrom, or transfer any property for the purpose of subjecting the same to the payment of obligations in priority to the payment of its or their general creditors, or acquire or agree to acquire, or permit any Restricted Subsidiary to acquire, any property or assets upon conditional sales agreements or other title retention devices, except:

(i) Liens for property taxes and assessments or governmental charges or levies and Liens securing claims or demands of mechanics and materialmen; provided that payment thereof is not at the time required by Section 7.2(i);

(ii) Liens of or resulting from any judgment or award, the time for the appeal or petition for rehearing of which shall not have expired, or in respect of which the Lessee or a Restricted Subsidiary shall at any time in good faith be prosecuting an appeal or proceeding for a review and in respect of which a stay of execution pending such appeal or proceeding for review shall have been secured;

(iii) Liens incidental to the conduct of business or the ownership of properties and assets (including Liens in connection with worker’s compensation, unemployment insurance and other like laws, warehousemen’s and attorneys’ liens and statutory landlords’ liens) and Liens to secure the performance of bids, tenders or trade contracts, or to secure statutory obligations, surety or appeal bonds or other Liens of like general nature, in any such case incurred in the ordinary course of business and not in connection with the borrowing of money; provided in each case, the obligation secured is not overdue or, if overdue, is being contested in good faith by appropriate actions or proceedings;

(iv) minor survey exceptions or minor encumbrances, easements or reservations, or rights of others for rights-of-way, utilities and other similar purposes, or zoning or other restrictions as to the use of real properties, which are necessary for the conduct of the activities of the Lessee and its Restricted Subsidiaries or which customarily exist on properties of corporations engaged in similar activities and similarly situated and which do not in any event materially impair their use in the operation of the business of the Lessee and its Restricted Subsidiaries;

(v) Liens securing Indebtedness of a Restricted Subsidiary to the Lessee or to another Wholly-owned Restricted Subsidiary;

(vi) Permitted Liens;

(vii) Liens on fixed or capital assets acquired, constructed or improved by the Lessee or any Restricted Subsidiary; provided that (i) such security interests secure

Indebtedness permitted by Section 5.6(e), (ii) such Liens and the Indebtedness secured thereby are incurred prior to or within 90 days after such acquisition or the completion of such construction or improvement, (iii) the Indebtedness secured thereby does not exceed 100% of the cost of acquiring, constructing or improving such fixed or capital assets and (iv) such security interests shall not apply to any other property or assets of the Lessee or any Subsidiary, other than proceeds of such fixed or capital assets acquired, constructed or improved by the Lessee or any Restricted Subsidiary;

(viii) other Liens securing obligations of the Lessee and its Restricted Subsidiaries other than as described in the foregoing clauses (i) through (vii) above, provided that the obligations secured by all such other Liens do not exceed at any time fifteen percent (15%) of Consolidated Total Assets (determined by reference to Consolidated Total Assets as of the last day of the most recently ended fiscal quarter of the Lessee for which financial statements have been delivered (or, if prior to the date of the delivery of the first financial statements to be delivered pursuant to Section 5.1(a) or (b), the most recent financial statements referred to in Section 4.1(l))) ; and

(ix) Liens on accounts receivable subject to a Permitted Factoring Program, as well as supporting obligations and proceeds in respect thereof, and other ancillary property and rights related to such accounts receivable.

(g) Limitation on Sale and Leasebacks . The Lessee will not, and will not permit any Restricted Subsidiary to, enter into any arrangement, directly or indirectly, whereby the Lessee or such Restricted Subsidiary shall in one or more related transactions sell, transfer or otherwise dispose of any property owned by the Lessee or such Restricted Subsidiary more than 180 days after the later of the date of initial acquisition of such property or completion or occupancy thereof, as the case may be, by the Lessee or such Restricted Subsidiary, and then rent or lease, as lessee, such property or any part thereof (a “ Sale and Leaseback Transaction ”); provided that the foregoing restriction shall not apply to any Sale and Leaseback Transaction if immediately after the consummation of such Sale and Leaseback Transaction and after giving effect thereto and the application of the proceeds therefrom, no Default would exist and either:

(i) the sale of property relating to such Sale and Leaseback Transaction constitutes a sale of such property by a Restricted Subsidiary to the Lessee or to a Wholly-owned Restricted Subsidiary or by the Lessee to a Wholly-owned Restricted Subsidiary; or

(ii) the aggregate fair market value (as determined in good faith by the Lessee) of all property of the Lessee and its Restricted Subsidiaries disposed of in all such Sale and Leaseback Transactions consummated and permitted by this clause (b) does not exceed $50,000,000 in the aggregate during the term of the Credit Agreement, as in effect on the date hereof; provided that, if after giving effect (including giving effect on a pro forma basis) to any such Sale and Leaseback Transaction the Leverage Ratio would be greater than 3.00 to 1.00, the sale of such property is for cash consideration which (after deduction of any expenses incurred by the Lessee or any Restricted Subsidiary in connection with such Sale and Leaseback Transaction) equals or exceeds the fair market value of the property so sold (as determined in good faith by the board of directors of the Lessee) and the net proceeds from such sale are applied to either (x) the purchase or acquisition (and, in the case of real property, the construction) of

fixed assets useful and intended to be used by the Lessee or a Restricted Subsidiary in the operation of the business of the Lessee and its Restricted Subsidiaries of the same general nature of the business engaged in by the Lessee and its Restricted Subsidiaries on the date of this Agreement ( provided ; that in any such event the Lessee and its Restricted Subsidiaries shall not then or thereafter cause or permit or agree or consent to cause or permit such tangible assets to be subject to any Lien) or (y) the prepayment with the applicable prepayment premium, if any, on a pro rata basis, of Senior Funded Debt of the Lessee; provided that if any such Senior Funded Debt so prepaid constitutes Indebtedness outstanding under any revolving credit or similar credit facility, such prepayment shall result in a permanent reduction of the Indebtedness which the Lessee and its Restricted Subsidiaries may incur thereunder by an amount at least equal to the amount of the prepayment of such Senior Funded Debt.

(h) Restrictive Agreements . The Lessee will not, and will not permit any of its Restricted Subsidiaries to, directly or indirectly, enter into, incur or permit to exist any agreement or other arrangement that prohibits, restricts or imposes any condition upon (a) the ability of the Lessee or any Restricted Subsidiary to create, incur or permit to exist any Lien upon any of its property or assets, or (b) the ability of any Subsidiary (other than an Unrestricted Subsidiary that is an SPE) to pay dividends or other distributions with respect to any shares of its capital stock (or similar equity interests) or to make or repay loans or advances to the Lessee or any other Restricted Subsidiary or to Guarantee Indebtedness of the Lessee or any other Subsidiary; provided ; that (i) the foregoing shall not apply to restrictions and conditions imposed by law or by this Agreement, (ii) the foregoing shall not apply to such restrictions and conditions contained in documents evidencing unsecured Indebtedness of the Lessee so long as (x) such Indebtedness has a final maturity date after the date that is 181 days after the Maturity Date, (y) any such Indebtedness that requires scheduled amortization or other scheduled payments of principal shall have a weighted average life to maturity after the date that is two years after the Maturity Date (provided ; that such Indebtedness in a principal amount not to exceed $100,000,000 at any time outstanding may have a weighted average life to maturity prior to the date that is two years after the Maturity Date but after the date that is 181 days after the Maturity Date) and (z) the covenants contained in such documents are not more onerous or more restrictive (taken as a whole) than the applicable covenants under this Agreement, (iii) the foregoing shall not apply to customary restrictions and conditions contained in agreements relating to the sale of a Restricted Subsidiary or any asset pending such sale, provided such restrictions and conditions apply only to the Restricted Subsidiary or asset that is to be sold and such sale is permitted hereunder, (iv) clause (a) of the foregoing shall not apply to restrictions or conditions imposed by any agreement relating to Liens permitted by this Agreement if such restrictions or conditions apply only to the property or assets subject to such permitted Lien and (v) clause (a) of the foregoing shall not apply to customary provisions in leases, licenses and other contracts restricting the assignment thereof.

ARTICLE VI

OTHER COVENANTS AND AGREEMENTS

SECTION 6.1. Cooperation with the Lessee.

The Agents and each of the Participants shall, to the extent reasonably requested by the Lessee (but without assuming additional liability on account thereof), as a Transaction Cost (or as a Construction Cost before the Completion Date) and at the Lessee’s expense thereafter, cooperate to allow the Lessee to (a) perform its covenants contained in the Construction and Development Agreement including, without limitation, at any time and from time to time, upon the reasonable request of the Lessee, to promptly and duly execute and deliver any and all such further instruments, documents and financing statements (and continuation statements related thereto) as the Lessee may reasonably request in order to perform such covenants and (b) further the Lessee’s requirements as lessee of the Leased Property, including, without limitation, to file any statement with respect to any tax abatements or other requirements; provided, none of the foregoing expose the Administrative Agent or any Participant to increased liability beyond that contemplated by the Operative Documents.

SECTION 6.2. Covenants of the Agents and the Participants.

(a) Discharge of Liens . Each of the Rent Assignees covenants as to itself, and not jointly with any other Rent Assignee, that it will not create or permit to exist at any time, any Lessor Lien attributable to it and will, at its own cost and expense, promptly take such action as may be necessary duly to discharge, or to cause to be discharged, all Lessor Liens attributable to it and will cause restitution to be made to the Lessor for the benefit of the Lessee and the other Participants (as their interests may appear) in the amount of any diminution of the value of the Leased Property or the Site as a result of its failure to discharge or cause to be discharged all Lessor Liens attributable to it pursuant to this Section 6.2(a). The Lessor will not create or permit to exist at any time any Lessor Lien attributable to it, and will promptly take such action as may be necessary duly to discharge, or to cause to be discharged, all Lessor Liens attributable to it and will cause restitution to be made to the Lessee and the Rent Assignees (as their interests may appear) in the amount of any diminution of the value of the Leased Property or the Site as a result of its failure to comply with its obligations under this Section 6.2(a). Each Agent, in both its individual capacity and in its capacity as Agent, will not create or permit to exist at any time any Lessor Lien attributable to it, and will promptly take such action as may be necessary duly to discharge, or to cause to be discharged, all Lessor Liens attributable to it and will cause restitution to be made to the Lessor for the benefit of the Lessee and the Participants (as their interests may appear) in the amount of any diminution of the value of the Leased Property or the Site as a result of its failure to comply with its obligations under this Section 6.2(a). Notwithstanding the foregoing, none of the Participants and/or the Agents, as the case may be, shall be required to so discharge any such Lessor Lien while the same is being contested by a Permitted Contest in good faith by appropriate proceedings diligently prosecuted so long as such proceedings shall not involve any meaningful danger of the sale, forfeiture, loss or diminution in value of, and shall not interfere with the use, operation or disposition of, any part of the Leased Property or the Site, the Lease or title thereto or any interest therein or the payment of Rent; provided, however, that each

Participant and each Agent shall discharge any such Lessor Lien attributable to it, whether or not subject to contest as provided above, upon the purchase of the Leased Property by the Lessee pursuant to the Lease or a sale of the Leased Property pursuant to the Return Option.

(b) Other Lessor Covenants . The Lessor shall not subject any of the Leased Property or the Site to any mortgage, lien, security interest or other claim or encumbrance, other than in favor of the Collateral Agent, the Lessee and the Participants or transfer any interest in the Leased Property in each case other than as contemplated by, arising from or related to the Operative Documents.

(c) Change of Information . The Lessor shall give prompt notice to the other Participants and the Lessee if any facts regarding it shall change where such change might reasonably affect its interests in the Leased Property.

(d) Depreciation . Prior to the termination of the Lease and the transfer of the Leased Property to any Person other than the Lessee or its Affiliate or its designee, none of the Participants shall claim any United States federal, state, or local tax attributes or benefits (including depreciation) relating to the Leased Property unless required to do so by an appropriate taxing Authority or after a clearly applicable change in Applicable Laws and Regulations or as a protective response to a proposed adjustment by an Authority; provided, however, that if an appropriate taxing Authority shall require such Participant to claim any such United States federal, state, or local tax attributes or benefits, such Participant shall promptly notify the Lessee thereof and shall permit the Lessee to contest such requirement in a manner similar to the contest rights provided in, and subject to any applicable limitation to a contest contained in, Section 7.2(b) hereof.

(e) Quiet Possession . If and so long as no Event of Default shall be continuing, the Agents and each Participant, individually, and not severally, agrees that it shall not interfere with the Lessee’s right to the use, possession and quiet enjoyment of the Leased Property and the Site according to the terms hereof and of the other Operative Documents.

(f) Assignment of Warranties and Other Rights and Appointment of the Lessee as Agent .

(i) The Lessor hereby assigns to the Construction Agent, as its construction agent, all of its rights, if any (including indemnification rights and rights to receive payments), under any and all warranties of, and other claims against, dealers, manufacturers, vendors, suppliers, installers, contractors or subcontractors relating to the Leased Property. If the Lessor is contractually or legally prohibited from so assigning any such warranty, indemnity or claim, the Lessor hereby assigns to the Construction Agent, to the extent permitted by Applicable Laws and Regulations, its beneficial interest in such warranty, indemnity or claim. Except as set forth below, the Lessor hereby irrevocably appoints the Construction Agent as its attorney-in-fact and agent with full authority in its place and stead and in the Lessor or otherwise from time to time to assert and enforce (including compromise, waiver or settlement thereof) whatever claims and rights the Lessor may have against suppliers, dealers, manufacturers, vendors, contractors and

subcontractors relating to the Leased Property or any component thereof, whether under warranty, product liability claim or otherwise.

(ii) Upon the occurrence of (A) and during the continuation of an Event of Default and (B) either (1) the Lessor’s election to take possession of the Facility or (2) its express termination of the agency relationship between itself and the Construction Agent, the power of attorney granted pursuant to Section 6.2(f)(i) shall terminate and the Construction Agent shall, without further act on its part, be deemed to have reassigned to the Lessor (A) all of the rights and claims held by the Construction Agent under this subsection relating to the Facility that arise after such taking of possession or termination of the agency relationship and (B) a share of such rights and claims held by the Construction Agent under this subsection relating to the Facility that arise before such taking of possession or termination of the agency relationship to the extent that the claims relate to effects that continue after such taking of possession, apportioned by the parties on a reasonable basis between the Construction Agent and the Lessor, taking all relevant factors into account.

(iii) Except during the continuance of an Event of Default, the Lessor agrees to remit to the Lessee any rebates, refunds or like payments received from dealers, manufacturers, vendors or suppliers of the Leased Property as and when received from such Persons. Any such rebates, refunds or like payments shall not affect in any manner the amounts owing or the payments to be made by the Lessee hereunder.

(g) Insurance Covenants . The Agents and the Participants herewith accept all covenants between the Lessee and each insurer made in accordance with the terms of the Operative Documents for their respective benefit, including but not limited to the naming of the Agents and the Participants as additional insureds or as loss payees, as the case may be.

(h) ERISA . No amount shall be funded or held by the Lessor or any Participant with “plan assets,” as defined by 29 C.F.R. Section 2510.3-101, as modified by Section 3(42) of ERISA, of any Employee Benefit Plan.

(i) Further Assurances . Upon the written request of the Lessee delivered at least thirty (30) days prior to the date specified in such request for a restructuring of the Overall Transaction, as a result of a change or proposed change in the applicable accounting rules, the Participants agree to cooperate with the reasonable requests of the Lessee promptly and in good faith to negotiate with a view toward causing a restructuring of the obligations represented by the Lease and the other Operative Documents, provided the Lessee shall reimburse the Participants for their respective expenses incurred in connection with any such written request or restructuring including the reasonable and properly documented fees and expenses of its legal counsel. In the event any such restructuring involves a change in the nature and scope of the Lessor’s obligations under the Operative Documents and does not involve a transfer by the Lessor of its interest in the Facility and the Site, the Lessee and the Lessor shall agree upon a reasonable and appropriate amount to be paid to the Lessor as reimbursement for personnel expenses incurred by the Lessor in such restructuring. Notwithstanding any of the foregoing negotiations, the Lessor shall not be obligated to restructure the transaction.

(j) Notice of Change; Lessor Confirmation Letter . The Lessor shall, upon the request of the Lessee and, in any event, not more than on an annual basis, provide to the Lessee a letter of the same tenor as the Lessor Confirmation Letter. In the event the Lessor is not able to provide the Lessor Confirmation Letter, then at the Lessee’s option, the Lessor shall, at the Lessee’s expense, assign its interest in this Agreement, the other Operative Documents and the Leased Property to a successor lessor designated by the Lessee in accordance with Section 6.3(a).

(k) Compliance with Operative Documents . The Participants agree to comply with their obligations under the Operative Documents

SECTION 6.3. Assignments.

(a) Rent Assignee Assignments . Any Rent Assignee may, with the prior written consent of the Lessee, which consent shall not be unreasonably withheld or delayed at any time (it being agreed that it would be reasonable for the Lessee to withhold such consent if, among other things, payments to any such transferee would be subject to United States federal or state Withholding Tax, or would be subject to an indemnity obligation under Section 7.2(a)(ii) or related gross-up obligations which would not apply to the transferor), assign and delegate all or a portion of its Rent Assignment Interest, Commitment and its rights, obligations and interest in, to or under this Agreement, the Operative Documents and the Leased Property to one or more Eligible Assignees, subject to the following conditions:

(i) if the assignment occurs prior to the end of the Commitment Period, the assignor shall concurrently assign to the assignee that percentage of its Commitment set forth in Schedule I-A hereto equal to the percentage of its Rent Assignment Interest being assigned;

(ii) each such assignment shall be of a constant, and not a varying, percentage of the assigning Rent Assignee’s rights and obligations being assigned;

(iii) the aggregate principal amount of the Rent Assignment Advances and Commitment assigned by any Rent Assignee shall be in a minimum amount equal to the least of (A) $25,000,000 and integral multiples of $5,000,000 in excess thereof, (B) any lower amount approved by the Lessee in its sole discretion, and (C) the aggregate principal amount of all of such Rent Assignee’s Rent Assignment Advances and Commitment; and

(iv) after giving effect to any such assignment by a Rent Assignee, such Rent Assignee holds an aggregate outstanding principal amount of Rent Assignment Advances and Commitment equal to either zero or at least $25,000,000 or any lower amount approved by the Lessee in its sole discretion.

(b) Lessor Assignments . Subject to Section 6.3(d), the Lessor shall not directly or indirectly assign, convey or otherwise transfer in whole or in part any of its right, title or interest in this Agreement, the Leased Property, the Lease or any other Operative Document to any Person except upon compliance with the conditions set forth in this Section 6.3(b); provided that without regard to any of the restrictions contained in this Section 6.3(b) the Lessor may, prior to the end

of the Lease Term, agree to sell or otherwise dispose of its beneficial interest in the Leased Property effective at or after the end of the Lease Term. The Lessor shall not, without the prior written consent of the Lessee, transfer its interests in the Facility and the Operative Documents to any entity that would (i) be subject to United States federal or state Withholding Tax, if any (except to the extent that the transferor at the time of such transfer is subject to United States federal or state Withholding Tax subject to indemnification by the Lessee pursuant to Section 7.2(a)(iii)), or (ii) as reasonably determined by the Lessee and communicated in writing to the Lessor, result in consolidation of the transferee to the balance sheet of the Lessee pursuant to ASC 810, as defined by the Financial Accounting Standards Board. The Lessor shall have the right at any time without the consent of the Lessee but with prior notice to the Lessee, at the Lessor’s sole expense, to sell, assign or transfer in whole or in part such right, title and interest to a transferee satisfying the conditions set forth below (a “ Permitted Transferee ”) and, provided, further, that it shall also be a condition to any such sale, assignment or transfer that:

(i) such sale, assignment or transfer will not be in violation of the registration requirements of the Securities Act of 1933, as amended or violate the Patriot Act or otherwise cause Lessee to violate Section 4.1(g);

(ii) the Permitted Transferee shall have the requisite power and authority to enter into and carry out the transactions of the Lessor contemplated hereby and by the Operative Documents to which the Lessor is then a party;

(iii) the Permitted Transferee shall execute an instrument, in form and substance reasonably satisfactory to the Lessee, the Agents, the Lessor and the other Participants, whereby such Permitted Transferee confirms for the benefit of the Lessee, the Agents, the Lessor and the other Participants, that it has the requisite power and authority to enter into and to carry out the provisions of this Agreement and the Operative Documents to which the Lessor is then a party and agrees to be bound by all the terms of, and assumes all of the liabilities and obligations of the Lessor contained in, this Agreement and each of such Operative Documents;

(iv) the Permitted Transferee shall be either (A) an Eligible Assignee, (B) a subsidiary of any Person described in clause (A) above, or (C) a corporation which is a member of the same consolidated group for Federal income tax purposes as the Lessor, or another corporation owned and controlled by, or under common control with, the Lessor, provided, that if the Permitted Transferee is (x) a Person described in clause (B) above and not described in clause (A) above, a Person described in clause (A) shall have executed and delivered a guaranty in form and substance reasonably satisfactory to the Lessee, the Agents and the other Participants, or (y) a Person described in clause (C) above and not described in clause (A) above, the Lessor shall continue to be liable with respect to the obligations of the Permitted Transferee and shall confirm such fact in writing to the Lessee, the Agents and the other Participants; and

(v) if the Lessor proposes to transfer its interest hereunder at any time pursuant to this Section 6.3(b), the Lessor shall give not less than ten (10) days’ (or in the case of a transfer to a Person described in clause (B) or (C) of clause (iv) above, five (5)

days’) notice to the Lessee, the Agents and the other Participants specifying the name and address of the proposed Permitted Transferee and specifying the facts necessary to determine compliance with this Section 6.3.

From and after any transfer effected in accordance with this Section 6.3(b), the Permitted Transferee shall be deemed the “Lessor” for all purposes of the Operative Documents and shall be deemed to have made the Lessor Investment in the Leased Property previously made by the Lessor; and each reference contained in the Operative Documents to the Lessor shall thereafter be deemed a reference to the Permitted Transferee, as the Lessor shall have no further liability hereunder or thereunder except (i) to the extent of claims relating to or arising out of the period prior to such transfer or (ii) as otherwise provided in this Section 6.3(b).

(c) Required Deliveries . The Lessee, the Agents and the other Participants may continue to deal solely and directly with the assignor Lessor in connection with any interest so assigned until (A) notice of such assignment shall have been given to the Lessee, the Agents and the other Participants by such Lessor or its assignee; and (B) the assignor and assignee shall have executed and delivered to the Lessee, the Administrative Agent and the other Participants an instrument of assignment in the form attached hereto as Exhibit B . When the relevant Persons have received the items listed in clauses (A) and (B) of the preceding sentence, subject to subsection (a) or (b) above, as applicable, the assignee shall be a party hereto and the other Operative Documents to which the assignor was (or, in the case of a partial assignment, is) a party and, to the extent of the rights and obligations so assigned to it, shall have the rights and obligations of the Lessor hereunder and under such other Operative Documents, and the assignor shall, to the extent that rights and obligations hereunder and under such other Operative Documents have been assigned by it, relinquish its rights and be released from its obligations hereunder and under such other Operative Documents. The Commitment allocated to an assignee shall reduce the Commitment of the assignor pro tanto .

(d) Exceptions to Restrictions . Notwithstanding anything to the contrary contained in this Section 6.3, (i) when an Event of Default is continuing, no consent of the Lessee shall be required in respect of an assignment by any Participant to any third party (whether or not an Eligible Assignee or a Permitted Transferee) of all or any part of its rights and obligations under or with respect to this Agreement and the other Operative Documents, (ii) without the consent of the Lessee, any Participant may assign and pledge all or any portion of its Commitment, Rent Assignment Advance or Lessor Investment, as applicable, owing to it to any Federal Reserve Bank, the European Central Bank and the central bank of any country which is a member of the Organization for Economic Cooperation and Development as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal Reserve Bank or regulations of the European Central Bank or other central bank of any country which is a member of the Organization for Economic Cooperation and Development, as applicable, provided that no such assignment shall release the assigning Participant from its obligations under the Operative Documents, (iii) without the consent of the Lessee, any Participant may assign all or any portion of its Commitment, Rent Assignment Advance or Lessor Investment, as applicable, owing to it (including retention of the unfunded portion of its Commitment and assignment of the funded portion of its Commitment and assignment of a portion of its Commitment or Rent Assignment Advance for capital requirement

purposes due to residual risk with respect thereto or otherwise) to any affiliate or subsidiary of such Participant, another Participant or any affiliate or subsidiary of such other Participant, provided that no such assignment shall cause payments to such transferee to be subject to United States federal or state Withholding Tax (except to the extent that the transferor at the time of such transfer is subject to United States federal or state Withholding Tax subject to indemnification by the Lessee pursuant to Section 7.2(a)(iii)) and, provided further that, for the avoidance of doubt, no change in the law, rules or regulations applicable to any Participant due solely to any such assignment shall be deemed a “Change in Law” or a change in any “regulatory requirement” as such terms are defined in Section 7.4 hereof, and (iv) no consent of the Lessee shall be required in respect to an assignment by any Participant to any third party (whether or not an Eligible Assignee or a Permitted Transferee) of all or any part of the rights and obligations under or with respect to this Agreement and the other Operative Documents, if such assignment is required by Applicable Laws and Regulations or constitutes a Permitted Lien.

(e) Register. The Administrative Agent shall maintain a book-entry register for the recordation of the names and addresses of the Participants that own Rent Assignment Interests, and the Commitments of, and Advances and any other amounts treated as principal or interest for United States Federal income tax purposes owing to, each Participant pursuant to the terms hereof from time to time (the “ Register ”). The entries in the Register shall be conclusive absent manifest error, and the Lessee, the Agents and the Participants shall treat each Person whose name is recorded in the Register pursuant to the terms hereof as a Participant hereunder for all purposes of this Agreement. The Register shall be available for inspection by the Lessee and any Participant, at any reasonable time and from time to time upon reasonable prior notice. The Administrative Agent shall make payments only to persons named on the Register, and a Participant may only transfer its right to receive payments in respect of its Rent Assignment Interests by having the transfer recorded on the Register.

SECTION 6.4. Participations.

Each of the Participants may sell, transfer or assign a participation in all or a portion of the interests represented by its Rent Assignment Interests or the interests represented by its Lessor Investment, as applicable, or any right to payment thereunder (each such sale, transfer or assignment of a participation in such interests or rights, a “ Participation ”), to any Person (such Person, a “ Participation Holder ”) upon prior notice to the Lessee. In the event of any such sale, transfer or assignment by a Rent Assignee or the Lessor of a Participation to a Participation Holder, the rights and obligations of such Participant under this Agreement and under the other Operative Documents shall remain unchanged, such Participant shall remain solely responsible for the performance thereof, such Participant shall remain the holder of its Rent Assignment Interests or the Lessor Investment, as applicable, for all purposes under this Agreement and under the other Operative Documents, and the Agents, the Lessee and the other Participants shall continue to deal solely and directly with such Participant in connection with such Participation Holder’s rights and obligations under this Agreement and the other Operative Documents. Any agreement pursuant to which any Rent Assignee or the Lessor may grant such a Participation shall provide that such Participant shall retain the sole right and responsibility to enforce the obligations of the Lessee under the Operative Documents including, without limitation, the right to approve any amendment, modification or waiver of any provision of the Operative Documents; provided, that such

agreement may require such Participant to obtain the consent of the Participation Holder party thereto before such Participant enters into or approves any amendment, modification or waiver of any provision of any Operative Document that (i) extends any date upon which any payment of money is due to the Participants, (ii) reduces the Yield on the Lease Balance, any fee or any other payment obligation under the Operative Documents, (iii) releases any party from any payment obligations, or (iv) releases any interest of Participants in the Leased Property (except as otherwise expressly provided for in any Operative Document). Any Participant that sells, transfers or assigns a Participation pursuant hereto hereby agrees to indemnify, protect, defend and hold harmless the Lessee, on a Grossed-Up Basis, against any United States federal or state Withholding Tax which may arise solely from its Participation, except to the extent (x) the Lessee is responsible for such Withholding Tax pursuant to Section 7.2(a)(iii) or (y) such Withholding Tax is imposed on the Lessee as a result of the fraud, gross negligence or willful misconduct of the Lessee. Each Participant that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Lessee, maintain a register on which it enters the name and address of each Participation Holder and information relating to the Rent Assignment Interests of each Participation Holder (including information relating to any amounts treated as principal or interest for United States Federal income tax purposes) (the “ Participant Register ”); provided that no Participant shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participation Holder or any information relating to a Participation Holder’s Rent Assignment Interests) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Participant shall treat each Person whose name is recorded in the Participant Register as the owner of such Participation for all purposes of this Agreement notwithstanding any notice to the contrary. Each Participant subject to this Section 6.4 shall make payments only to persons named on the Participant Register, and any owner of a participation may only transfer its right to receive payments in respect of its participation in Rent Assignment Interests by having the transfer recorded on the Participant Register.

SECTION 6.5. Ground Lease.

The Lessor will, for the benefit of the Collateral Agent on behalf of the Rent Assignees, pay and perform, or cause to be paid and performed, all obligations, covenants and agreements to be performed by it as the lessee under the Ground Lease including, without limitation, the payment of all rent and other amounts due thereunder. The Lessor will notify, or will cause to be notified, the Collateral Agent of all defaults (or alleged defaults) by any party under the Ground Lease, or any claim, action or proceeding made by or involving any party to the Ground Lease, in each case promptly after obtaining Actual Knowledge thereof. The Lessor will not amend, modify, terminate or waive any of the provisions of the Ground Lease without the prior written consent of the Collateral Agent, and any attempt to so amend, modify, terminate or waive, or approve or consent, shall be void. The Lessor will not surrender the leasehold interest in the Ground Lease.

SECTION 6.6. Amendments Related to Credit Facilities.

Following the Lessee’s written request, the Agents and the Participants each agree to promptly evaluate in good faith and in its sole discretion any request made by the Lessee to amend

this Agreement (and the other Operative Documents) from time to time as may be desirable in order to conform the operating covenants and negative covenants regarding the business operations of Lessee to any new credit or other similar facility to which the Lessee shall be subject from time to time.

ARTICLE VII

INDEMNIFICATION AND ADDITIONAL PAYMENTS

SECTION 7.1. General Indemnification.

(a) Subject to clauses (b) and (f) below, the Lessee will indemnify, defend and hold each Indemnitee harmless, on a Grossed-Up Basis, from and against any and all Claims (which may include the outstanding Lease Balance or any portion thereof subject to any limitations set forth in the Operative Documents, including, without limitation, payments limited to the Return Price Recourse Deficiency Amount, the Recourse Deficiency Amount or Construction Recourse Amount, as applicable) that directly or indirectly relate to, result from or arise out of or are alleged by Persons other than any Indemnitee to relate to, result from or arise out of any of the following (whether or not any such Indemnitee is indemnified as to such matter by any other Person and whether or not such Claim arises or accrues prior to the Closing Date, the Completion Date or after the Maturity Date or the Lease Expiration Date):

(i) the Leased Property, the Site, the Lessee Collateral or, in each case, any part thereof;

(ii) any of the Operative Documents or any of the transactions contemplated thereby, or any investigation, litigation, enforcement or proceeding in connection therewith, and any amendment, modification or waiver in respect thereof;

(iii) the regulation of the ownership, construction, installation, leasing, use or operation of the Leased Property, the Site or any part thereof, but only to the extent that the Indemnitee is subjected to such regulation as a result of its being a party to or beneficiary of the Operative Documents or its involvement in the transactions contemplated in the Operative Documents;

(iv) the offer, financing, refinancing, inspection, mortgaging, pledging, granting, of a security interest in, the design, manufacture, construction, purchase, ownership, acquisition, acceptance, rejection, delivery, nondelivery, redelivery, possession, transportation, lease, sublease, installation, condition, transfer of title or other ownership interest, rental, use, operation, storage, maintenance, modification, alteration, repair, assembly, sale, return, abandonment or other application or disposition of all or any part of the Leased Property or any product produced therewith, the Site or any interest therein or improvements thereto or the imposition of any Lien thereon, or the failure to perform or accomplish any of the foregoing in accordance with the requirements of the Operative Documents, other agreements governing such matters or Applicable Laws and Regulations including, without limitation: Claims or penalties arising from any violation

of law or in tort (strict liability or otherwise), latent or other defects, whether or not discoverable, any Claim based upon a violation or alleged violation of the terms of any restriction, easement, condition or covenant or other matter affecting title to the Leased Property or the Site, the making of any Alterations in violation of any standards imposed by any insurance policies required to be maintained by the Lessee pursuant to the Lease which policies are in effect at any time with respect to the Leased Property or any part thereof, any Claim for patent, trademark or copyright infringement, and Claims arising from any public improvements with respect to the Leased Property and the Site resulting in any change or special assessments being levied against the Leased Property or the Site or any plans to modify, widen or realign any street or highway adjacent to the Leased Property or any Claim for utility “tap-in” fees;

(v) a breach by the Lessee of any of its covenants under any Operative Document, or a misrepresentation by the Lessee (including any omission that makes any representation made by such party materially misleading) in any Operative Document or in any certificate or other document delivered by such party to the Agents or any Participant pursuant to any Operative Document, or during the continuance of any Default or Event of Default, or the material inaccuracy of any information provided by any such party to any third party in connection with the preparation by such third party of a report or other document required to be delivered pursuant to any Operative Document;

(vi) other than the Lessor’s Liens, the existence of any Lien on or with respect to the Leased Property, the Site, title thereto, any interest therein or any Basic Rent or Supplemental Rent, including any Liens which arise out of the possession, use, occupancy, construction, repair or rebuilding of the Leased Property or the Site or by reason of labor or materials furnished or claimed to have been furnished to the Lessee, or any of its contractors or agents or by reason of the financing of any personality or equipment purchased or leased by the Lessee or Alterations constructed by the Lessee, except Liens in favor of the Lessee, the Collateral Agent or the Lessor;

(vii) any Environmental Claim, including, without limitation, those indemnified under Section 13.8 of the Lease and Section 3.4 of the Construction and Development Agreement; and

(viii) the offer, issuance, sale, transfer or delivery of the Lessor Investments and the Rent Assignment Interests.

The Lessee shall be entitled to credit against any payments due to an Indemnitee under this Section 7.1 both (x) any insurance recoveries received by such Indemnitee in respect of the matters described herein under or from insurance paid for by any Person other than the Indemnitee or an Affiliate thereof or assigned to the Lessor by the Lessee and (y) any other indemnity amount received by such Indemnitee in respect of such matters from a Person (other than the Lessor) unrelated to such Indemnitee; provided, to the extent any such insurance amounts or indemnity amounts referenced in the foregoing subsections (x) or (y) are utilized for one purpose (for example, such as addressing a remediation expense in the context of an Event of Loss), then such

insurance amount or indemnity amount shall not be available, or deemed available, for any other purpose (for example, such as rebuilding the Leased Property in the context of an Event of Loss).

(b) Exclusions . The provisions of Section 7.1(a) shall not apply to any Claim:

(i) with respect to any Indemnitee, to the extent attributable to the willful misconduct or gross negligence of, or negligence in the handling of funds by, such Indemnitee, its officers, agents, employees and Affiliates or the breach in any material respect of any representation or warranty made by such Indemnitee under the Operative Documents;

(ii) to the extent attributable to acts or events that occur after the commencement of day to day operation of the Facility by the Lessor or any Person designated by the Lessor following an Event of Default or the return of the Leased Property pursuant to the Return Option (except (A) to the extent fairly attributable to circumstances existing or acts, events, liabilities or damages occurring or accruing prior to such day to day operation, or (B) to the extent relating to the acts or omissions of the Lessee or any other Cubic Person in relation to, or liabilities arising out of, the location, structure, installation, putting into service, operation, repair, servicing, maintenance, replacement or dismantling of the Facility or remaining on or the entering onto the Site or the Facility by any such Person); or

(iii) in respect of Taxes, which are governed by Section 7.2, other than a payment necessary to make payments under this Section 7.1 on a Grossed-Up Basis.

(c) Contests . In respect of the indemnification provided under Section 7.1(a), promptly after receipt by an Indemnitee of notice of any pending or threatened Claim, such Indemnitee shall, if a claim for indemnification in respect thereof is to be made against the Lessee, give notice thereof to the Lessee. So long as no Event of Default is continuing, the Lessee, at its own expense, may elect to assume the defense of any such Claim through its own counsel, which shall be subject to the reasonable approval of the Indemnitee, on behalf of the Indemnitee (with full right of subrogation to the Indemnitee’s rights and defenses). The Lessee must indicate its election to assume such defense by written notice to the Indemnitee within forty-five (45) days following receipt of Indemnitee’s notice of the Claim, or in the case of a third-party claim which requires a shorter time for response then within such shorter period as specified in the Indemnitee’s notice of Claim; provided that such Indemnitee has given the Lessee notice thereof. If the Lessee denies liability or fails to respond to the notice within the time period set forth above, the Indemnitee may defend or compromise the Claim as it deems appropriate without prejudice to any of Indemnitee’s rights hereunder. If the Lessee shall have elected to assume the defense of any such Claim, then upon the request of the Lessee, the Indemnitee requesting payment of indemnity under Section 7.1(a) shall promptly furnish the Lessee with copies of any records or documents pertaining to the matter to be indemnified and, to the extent known by such Indemnitee, a reasonably detailed explanation of the circumstances giving rise to the claim of indemnification and the determination of the amount of the requested indemnity payment. Upon payment in full to Indemnitee of any indemnity pursuant to Section 7.1(a), the Lessee shall be subrogated to any right of Indemnitee in respect of the matter against which such indemnity has been paid. If the Lessee

shall have elected to assume the defense of any such Claim, upon the written request at any time and from time to time of the Lessee, Indemnitee shall, at the expense of the Lessee, take such reasonable actions and execute such documents as are necessary or reasonably appropriate to assist the Lessee in the preservation and enforcement against third parties of the Lessee’s right of subrogation hereunder. The Indemnitee may employ separate counsel in any such Claim and participate in the defense thereof, but the fees and expenses of such counsel shall be at the expense of the Indemnitee unless the Indemnitee and the Lessee shall have been advised by counsel that there exists a conflict of interest in such counsel’s representation of the Indemnitee and the Lessee in which case the fees and expenses of such separate counsel shall be for the account of the Lessee. All fees and expenses shall be paid periodically as incurred. So long as no Default or Event of Default shall be continuing, the Lessee shall not be liable for any settlement of any such Claim effected without its consent unless the Lessee shall fail to, or elect in writing not to, assume the defense thereof in which case the Indemnitee, without waiving any rights to indemnification hereunder, may defend such Claim and enter into any good faith settlement thereof without the prior written consent of the Lessee. The Lessee shall not, without the prior written consent (not to be unreasonably withheld) of the Indemnitee, effect any settlement of any such Claim unless such settlement includes an unconditional release of the Indemnitee from all liabilities that are the subject of such Claim. The parties agree to cooperate in any defense or settlement of any such Claim and to give each other reasonable access to all information relevant thereto subject to appropriate confidentiality agreements. The parties will similarly cooperate in the prosecution of any claim or lawsuit against any third party.

(d) Subrogation . Upon the indefeasible payment in full of any Claim pursuant to this Section 7.1, the Lessee, without any further action, shall be subrogated to any claims the Indemnitee may have relating thereto. The Indemnitee agrees, at the Lessee’s expense, to give such further assurances or agreements and to cooperate with the Lessee to permit the Lessee to pursue such claims, if any, to the extent reasonably requested by the Lessee. If the Lessee shall have paid an amount to or for an Indemnitee pursuant to this Section 7.1, and such Indemnitee subsequently shall be reimbursed in respect of such indemnified amount from any other Person, such Indemnitee shall promptly pay the Lessee, but not before the Lessee shall have made all payments then due to such Indemnitee pursuant to this Section 7.1 and any other payments then due hereunder and under any other Operative Document, the amount of such reimbursement, including interest actually received attributable thereto, net of Taxes required to be paid by such Indemnitee as a result of any refund received, after giving effect to such payment to the Lessee.

(e) Not Residual Guaranty . Nothing in this Section 7.1 shall be construed as a guaranty of residual value of the Leased Property.

(f) Limitation .

(i) Prior to the Completion Date, the provisions of Sections 7.1, 7.2, 7.4, 7.5 and 7.6 shall be subject to the following provisions:

(A) The term “ Indemnitee ” shall mean the Lessor and its successors and/or assigns, and no other Person is entitled to the benefits of Section 7.1 from the Lessee, provided, that this provision shall not limit the rights of Administrative

Agent, the Collateral Agent, the Rent Assignees and other Persons against the Lessor under clause (C) of this Section 7.1(f)(i).

(B) The Lessee shall only be required to indemnify the Indemnitee for the following, without duplication:

1. Claims (including Rent Assignees’ Claims) caused by or resulting from a Specified Event;

2. Claims caused by or resulting from (a) the failure to Complete the Facility when required or from the failure to otherwise pay or perform its other obligations prior to the Construction Period Termination Date (other than caused by or resulting from a Specified Event) or (b) actions or failures to act of any Cubic Person; provided, however, that recourse to the assets of the Lessee for any such Claims shall be limited to the extent recourse against assets of the Lessee is limited by Section 18.5 of the Lease; and

3. Claims (including Taxes and Rent Assignees’ Claims) under Sections 7.2, 7.4, 7.5 and 7.6; provided, however, that such Claims under this clause (3) will only be funded out of proceeds of Advances.

(C) Subject to Section 9.11, the Lessor will, with respect to Claims of a type described in clauses (B)(1) through (B)(3) above, indemnify all Persons who would have otherwise been indemnified by the Lessee, to the extent such Persons would have been so indemnified, but for the foregoing provisions of Section 7.1(f)(i)(A); provided, however, that any obligation of the Lessor pursuant to this subsection shall be discharged solely and exclusively from amounts received by the Lessor pursuant to this subsection or, in the case of clause (B)(3) above, the proceeds of the applicable Advances.

(D) The Lessee agrees that any claim for indemnification by any Person against the Lessor pursuant to and permitted by clause (C) of this Section 7.1(f)(i) shall constitute a Claim entitling the Lessor to be indemnified by the Lessee pursuant to Section 7.1 of this Agreement.

(ii) The limitations set forth in Section 7.1(f)(i) shall continue to apply on and after the Completion Date with respect to Claims accruing prior to such Completion Date.

(iii) Any Claims that are incurred by any Indemnitee (as such term is defined during the Base Term, solely for the purposes of this clause (iii)) for which the Lessee is not obligated to indemnify either the Lessor or such Indemnitee pursuant to this Section by virtue of the provisions of Section 7.1(f)(i) (it being the understanding of the parties that if the Lessee is obligated to indemnify the Lessor for any Claim incurred or

arising during the Construction Period, with any other Indemnitee being indemnified by the Lessor under clause (i)(C) above for the same Claim, the applicable Claim will not be a Claim which is subject to this clause (iii)) shall, if requested in writing by the Required Participants to the Administrative Agent in their sole and absolute discretion, be capitalized and result in an increase to the Construction Costs (such claims herein called “ Funded Claims ”). In the event Funded Claims are advanced by the Lessor or Rent Assignees hereunder, any increase in Lessor Investment resulting therefrom shall not be included for purpose of (but for no other purpose) (x) calculating Eligible Construction Costs solely for purposes of calculating the Construction Recourse Amount, (y) calculating Eligible Construction Costs solely for purposes of calculating the Return Price Recourse Deficiency Amount payable by the Lessee following an election to return the Leased Property at the end of the applicable Lease Term and (z) calculating any Basic Rent that is to accrue thereon during the Lease Term. The foregoing indemnities are in addition to, and not in limitation of, the indemnities with respect to Sections 7.1 and 7.2 this Agreement.

SECTION 7.2. General Tax Indemnity.

(a) (i) Tax Indemnity . The Lessee shall pay on a Grossed-up Basis, and on written demand shall indemnify and hold each Indemnitee at all times harmless from and against, any and all Taxes, howsoever imposed, on or with respect to any Indemnitee, the Leased Property or the Lessee or any sublessee or user of the Leased Property by any taxing Authority, in connection with or in any way relating to: (A) the acquisition, mortgaging, design, construction, preparation, installation, inspection, delivery, non-delivery, acceptance, rejection, purchase, ownership, possession, rental, lease, sublease, repossession, maintenance, repair, alteration, modification, addition, substitution, storage, transfer of title, redelivery, use, financing, refinancing, operation, condition, purchase, repurchase, sale, return or other application or disposition of all or any part of the Leased Property or the imposition of any Lien (or incurrence of any liability to refund or pay over any amount as a result of any Lien) thereon; (B) the payment of Basic Rent or Supplemental Rent or the receipts arising from or received with respect to the Leased Property or any part thereof, or any interest therein; (C) the payment of any other amount pursuant to the Rent Assignment Agreements or any other Operative Documents, or the property or the income or other proceeds with respect to the Facility; (D) the Leased Property or any part thereof or any interest therein; (E) the execution, delivery, filing, registration or recording of any of the Operative Documents and any amendments and supplements thereto; and (F) otherwise with respect to or in connection with the transactions contemplated by the Operative Documents or the enforcement thereof; provided, however, that the indemnification obligation of this Section 7.2(a)(i) shall not apply to:

(1) Taxes (other than Taxes that are sales, use, rental, value added, real estate transfer or similar Taxes that are not substitutes for income taxes) based upon or measured by the Indemnitee’s gross or net income, gross or net receipts or that are in the nature of, or are imposed with respect to, capital, net worth, excess profits, accumulated earnings capital gains, franchise or conduct of business of such Indemnitee except in the case of gross or net income Taxes, to the extent necessary so that payments under this Section 7.2 are made to an Indemnitee on a Grossed-Up Basis within the meaning of Section 7.6;

(2) Taxes that result from a transfer or other disposition by the Indemnitee or any of its Affiliates of all or any portion of its interest in the Leased Property, the Rent Assignment Agreements or the Operative Documents (other than a transfer or disposition that occurs while an Event of Default is continuing and is related to such Event of Default or that results from (a) the Lessee’s exercise of the Return Option, the Early Termination Option or Purchase Option under the Lease, (b) any other transfer to the Lessee under the Operative Documents or which is contemplated by the Operative Documents or (c) any other transfer made at the request of the Lessee in an effort to maintain or enhance the accounting treatment of the Lessee with regard to the Overall Transaction);

(3) Taxes imposed with respect to any period or portion thereof after the expiration or earlier termination of the Lease (but not to the extent attributable to events occurring on or prior to such date) (other than any Tax that is attributable to (a) any Indemnitee exercising its remedies upon an Event of Default, (b) any payment to, by or on behalf of the Lessee after such termination, or (c) any party’s compliance with any obligation under the Operative Documents that survives the termination of the Lease, except, in each case, to the extent such Tax would otherwise be an excludable tax but for this parenthetical);

(4) Taxes resulting from (a) the gross negligence, willful misconduct or fraud of the Indemnitee or any of its Affiliates, (b) any representation, warranty, certification or statement of the Indemnitee under the Operative Documents proving to have been incorrect in any material respect when made or deemed to have been made, or (c) the breach of any covenant of the Indemnitee under the Operative Documents;

(5) Taxes imposed on the Agents, the Lessee or the Lessor, in each case in their respective individual capacity, with respect to any fees received by it for services rendered;

(6) Withholding Taxes, indemnification for which shall be solely as provided in Section 7.2(a)(iii) hereof;

(7) Taxes while they are being contested in accordance with Section 7.2(b);

(8) Taxes imposed on, or, in the case of value added taxes, not refunded to, an Indemnitee that results from its failure to file tax returns properly or timely, to claim a deduction or credit to which it is entitled, or to comply with certification, reporting, or similar requirements of the jurisdiction imposing the Tax, except to the extent caused by a failure of the Lessee to comply with Section 7.2(d), provided that the foregoing exclusion shall apply only if such Indemnitee is eligible to comply with such requirement and either (A) such Indemnitee shall have been given timely written notice by the Lessee of such requirement or (B) such Indemnitee’s officers or other employees having primary responsibility for

ensuring compliance with such requirement have actual and timely knowledge (without any obligation of due inquiry and without any imputation of such knowledge) of such requirement;

(9) Taxes imposed on a transferee of any Participant’s interest hereunder (other than a transferee who acquired such interest as a result of any transfer or assignment in connection with the occurrence of an Event of Default) to the extent of the excess of such Taxes over the total amount of the Taxes of the same or similar nature that would have been imposed had there not been a transfer by the initial Indemnitee of its interest after the Closing Date;

(10) Taxes in the nature of intangible taxes or similar taxes upon or with respect to the value of the interest of a Rent Assignee or the Lessor in any of the Rent Assignment Interests or the Lessor Investment, as applicable;

(11) Taxes included in the cost of the Facility and funded by Advances; and

(12) Taxes imposed by a taxing Authority that is not the United States or any taxing Authority within the United States, except to the extent caused by the Lessee making a payment from such jurisdiction.

(ii) Additional Tax Indemnity . Notwithstanding any contrary provision in Section 7.2(a)(i), the Lessee shall indemnify and hold harmless each Participant Party for any Taxes that are described in Section 7.2(a)(i) without regard to exclusions and that are imposed upon any Participant Party by the United States or by any taxing Authority within the United States, but only to the extent that such Taxes would not have been imposed on such Participant Party if, for purposes of such Taxes, the Advance made on each Advance Date by a Participant Party had been in the form of a secured loan made directly to the Lessee, the obligation to pay a proportionate part of Basic Rent were the obligation to pay interest to such Participant Party, and the proportionate amount of the Lease Balance were the principal amount owed to such Participant Party; provided, however, that the indemnification obligation of this Section 7.2(a)(ii) shall not apply to: (1) Taxes resulting from (a) the gross negligence, willful misconduct, or fraud of the Lessor, such Participant Party (if different) or any of their respective Affiliates, (b) any representation, warranty, certification or statement of the Lessor or such Participant Party (if different) under the Operative Documents proving to have been incorrect in any material respect when made or deemed to have been made, or (c) the breach of any covenant of the Lessor or such Participant Party (if different) under the Operative Documents; (2) Withholding Taxes, indemnification for which shall be solely provided in Section 7.2(a)(iii); (3) Taxes while they are being contested in accordance with Section 7.2(b); (4) Taxes imposed on such Participant Party that result from its failure to file tax returns properly or timely, to claim a deduction or credit to which it is entitled, or to comply with certification, reporting or similar requirements of the jurisdiction imposing the Tax, in each case, in accordance with the intent specified in Section 2.7 or as otherwise required by Applicable Laws and Regulations with respect to such Participant Party, except to the

extent such failure by such Participant Party is caused by a failure of the Lessee to comply with Section 7.2(d), provided that the foregoing exclusion shall apply only if such Participant Party is eligible to comply with such requirement and either (A) such Participant Party shall have been given timely written notice by the Lessee of such requirement or (B) such Participant Party’s officer or other employees having primary responsibility for ensuring compliance with such requirement have actual and timely knowledge (without any obligation of due inquiry and without any imputation of such knowledge) of such requirement; (5) Taxes imposed on a transferee of any Participant’s interest hereunder (other than a transferee who acquired such interest as a result of any transfer or assignment in connection with the occurrence of an Event of Default) to the extent of the excess of such Taxes over the total amount of the Taxes of the same or similar nature that would have been imposed had there not been a transfer by the initial Participant of its interest after the Closing Date; (6) Taxes included in the cost of the Facility and funded by Advances; (7) Taxes imposed upon the Leased Property and indemnifiable pursuant to Section 7.2(a)(i); and (8) Delaware income, franchise, corporate or other similar taxes imposed on an Indemnitee.

(iii) Withholding Tax Indemnity . The Lessee shall not be required to make any additional payment to or on behalf of an Indemnitee with respect to any Withholding Tax, except that the Lessee agrees to indemnify, protect, defend and hold harmless the Indemnitees, on a Grossed-Up Basis, against Withholding Taxes described in paragraphs (A) and (B) of this Section 7.2(a)(iii). If any such withholding is so required, the Lessee shall make the withholding and pay the amount withheld to the appropriate taxing Authority before penalties attach thereto or interest accrues thereon. The Lessee shall forthwith pay the relevant Indemnitee an amount that, after making all required deductions (including deductions applicable to additional sums payable under this Section), equals the amount that would have been paid if such withholding had not been required. Withholding Taxes referred to in the first sentence of this Section 7.2(a)(iii) as indemnifiable are:

(A) Withholding Taxes imposed under the laws of any jurisdiction other than the United States and any taxing jurisdictions therein, if such Tax is imposed solely as a result of the Lessee making the payment from such jurisdiction;

(B) Withholding Taxes imposed under the laws of the United States, or any taxing jurisdiction therein, imposed solely as the result of a change in Tax laws, regulations, rulings, interpretations or treaties after the Closing Date (and, in the case of a Rent Assignee, after the date of the assignment pursuant to which such Rent Assignee acquired an interest hereunder) other than a Withholding Tax that results from a change in Tax law which is excluded from the definition of Change in Law pursuant to Section 7.4(a)(i)(F).

Notwithstanding the foregoing, the Lessee shall not be required to make any additional payment to or on behalf of an Indemnitee with respect to any Withholding Tax to the extent result from the failure of such Indemnitee to comply with Section 7.3(c). If the Lessee pays any amount to an Indemnitee with respect to Withholding Taxes required to be withheld

by law but not subject to indemnity pursuant to this Section 7.2, such Indemnitee shall reimburse the Lessee within fifteen (15) days of written demand therefor for the amount so paid by the Lessee provided that if such Indemnitee fails to reimburse the Lessee within such fifteen (15) days, such Indemnitee shall thereafter be obligated to reimburse the Lessee for such amount together with interest on such amount at the Overdue Rate from the date such reimbursement was due until the date it is paid.

(iv) Nothing contained in Section 7.2(a) shall entitle an Indemnitee to indemnification of a Tax under more than one subsection of Section 7.2(a).

(b) Contests . If any claim or claims is or are made against any Indemnitee for any Tax which is subject to indemnification as provided in Section 7.2(a), such Indemnitee shall as soon as practicable, but in no event more than thirty (30) days after receipt of formal written notice of the Tax or proposed Tax, notify the Lessee and if, in the reasonable opinion of the Lessee there exists a reasonable basis to contest such Tax which satisfies the requirements of ABA Formal Opinion 85-352 (and if the provisos of the definition of “ Permitted Contest ” continue to be satisfied), the Lessee at its expense may, to the extent permitted by Applicable Laws and Regulations and provided that it has acknowledged in writing its liability for the Tax at issue if the contest is not successful, contest such Tax, and subsequently may appeal any adverse determination (other than to the United States Supreme Court), in the appropriate administrative and legal forums; provided, that in all other circumstances, upon notice from the Lessee to such Indemnitee that there exists a reasonable basis to contest any such Tax which satisfies the requirements of ABA Formal Opinion 85-352 (as supported by an opinion of tax counsel to the Lessee reasonably acceptable to the Indemnitee), the Indemnitee, at the Lessee’s expense, shall contest any such Tax (so long as the provisos of the definition of “ Permitted Contest ” continue to be satisfied and, in the case of a Tax on gross or net income, the aggregate amount of the Tax exceeds $100,000); provided, further, that no contest by the Indemnitee shall be required, and no contest by the Lessee shall be permitted, so long as an Event of Default shall be continuing, unless the Lessee shall have posted a bond or other security that is reasonably satisfactory to the Participants in respect of (A) Taxes reasonably expected to arise in connection with such contest that are indemnifiable pursuant to Section 7.2(a)(i) (including any amount necessary to make payment of such Taxes on a Grossed-up Basis) and (B) the Lessee’s obligations pursuant to this Section 7.2(b) in connection with such contest. The Lessee shall pay all expenses incurred by the Indemnitee in contesting any such Tax (including, without limitation, all reasonable attorney’s and accountants’ fees and expenses), upon demand by the Indemnitee. The Lessee shall have the right to participate in the conduct of any proceedings controlled by the Indemnitee to the extent that such participation by the Lessee does not interfere with the Indemnitee’s control of such contest and the Lessee shall in all events be kept informed, to the extent practicable, of material developments relative to such proceedings. The Indemnitee shall have the right to participate in the conduct of any proceedings controlled by the Lessee to the extent that such participation by the Indemnitee does not interfere with the Lessee’s control of such contest, and the Indemnitee shall in all events be kept informed, to the extent practicable, of material developments relative to such proceedings. The Indemnitees agree that a contested claim for which the Lessee would be required to make a reimbursement payment hereunder will not be settled or compromised without the Lessee’s prior written consent or the Indemnitee waives its right to indemnification hereunder and repays the Taxes advanced by the Lessee as a non-interest bearing loan by the Lessee to such

Indemnitee without interest. Indemnitee shall endeavor to settle or compromise any such contested claim in accordance with written instructions received from the Lessee; provided, that (i) the Lessee on or before the date the Indemnitee executes a settlement or compromise pays the contested Tax to the extent agreed upon or makes an indemnification payment to the Indemnitee in an amount acceptable to the Indemnitee; and (ii) the settlement or compromise does not, in the reasonable opinion of the Indemnitee materially adversely affect the right of the Lessor or such Indemnitee to receive Rent or the Lease Balance or any other payment pursuant to the Operative Documents, or involve a material risk of sale, forfeiture or loss of the Leased Property or any interest therein or any matter described in the provisos to the definition of “ Permitted Contest .” The failure of an Indemnitee to (x) notify the Lessee of the existence of any claim against such Indemnitee of any Tax as required by the first sentence of this Section 7.2(b) or (y) contest timely a claim against it for any Tax which is subject to indemnification under Section 7.2(a) and for which it has an obligation to the Lessee to contest under this Section 7.2(b) in the manner required by Applicable Laws and Regulations where the Lessee has timely requested (with regard to the time of the initial notification by Indemnitee) that such Indemnitee contest such claim, in each case shall relieve the Lessee of its obligations to such Indemnitee under Section 7.2(a) with respect to such claim only to the extent such failure results in the loss of an effective contest. If Applicable Laws and Regulations require the payment of a contested Tax as a condition to, or regardless of, its being contested, and the Lessee chooses to contest such Tax or to direct the Indemnitee to contest such Tax in accordance with this Section, then the Lessee shall provide the Indemnitee with the funds to pay such Tax, such provision of funds to be deemed a non-interest bearing loan by the Lessee to the Indemnitee to be repaid by any recovery of such Tax (including the amount of any interest received by reason of payment or deposit of the Tax claimed with funds advanced by the Lessee to the Indemnitee with respect to such recovered Tax, payable on a net after-tax basis to the Indemnitee) from such contest and any remaining unpaid amount not recovered to offset the Lessee’s obligation to indemnify the Indemnitee for such Tax. The Lessee shall indemnify the Indemnitee on a Grossed-Up Basis in accordance with Section 7.6 for and against any adverse consequences of any such interest-free loan.

(c) Payments . Any Tax indemnifiable under Section 7.2(a) shall be paid by the Lessee directly when due to the applicable taxing Authority if direct payment is practicable and permitted. If direct payment to the applicable taxing Authority is not permitted or is otherwise not made, any amount payable to an Indemnitee pursuant to Section 7.2(a) shall be paid within thirty (30) days after receipt of a written demand therefor from such Indemnitee accompanied by a written statement describing in reasonable detail the amount so payable, but not before the date that the relevant Taxes are due or, in the case of taxes that are contested under Section 7.2(b), the contest is finally resolved. Any payments made pursuant to Section 7.2(a) directly to the Indemnitee entitled thereto or the Lessee, as the case may be, shall be made in immediately available funds at such bank or to such account as specified by the payee in written directions to the payor, or, if no such direction shall have been given, by check of the payor payable to the order of the payee by certified mail, postage prepaid at its address as set forth in this Agreement. Upon the request of any Indemnitee with respect to a Tax that the Lessee is required to pay, the Lessee shall furnish to such Indemnitee the original or a certified copy of a receipt for the Lessee’s payment of such Tax or such other evidence of payment as is reasonably acceptable to such Indemnitee.

(d) Ownership . The Lessee represents that it is wholly owned by shareholders of its publicly traded stock and covenants that it shall remain (i) organized under the laws of the United States or any state thereof, and (ii) wholly owned by shareholders of its publicly traded stock; it being understood that the sole remedy of an Indemnitee for a breach by the Lessee of the foregoing representation and covenant shall be the right of such Indemnitee to indemnification by the Lessee on an after-tax basis for any incremental tax liability of such Indemnitee that would not have been imposed but for such breach.

(e) Calculation of Payments . Any payment that the Lessee shall be required to make to or for the account of any Indemnitee with respect to any Tax that is subject to indemnification under this Section 7.2 shall be paid on a Grossed-Up Basis under Section 7.6 of this Agreement. If an Indemnitee or any Affiliate of such Indemnitee who files any tax return on a combined, consolidated, unitary or similar basis with such Indemnitee shall actually realize any saving of any Tax not indemnifiable by the Lessee pursuant to the Operative Documents (by way of credit (including any foreign tax credit), deduction, exclusion from income or otherwise) by reason of any amount with respect to which the Lessee has indemnified such Indemnitee pursuant to this Section 7.2, and such tax saving was not taken into account in determining the amount payable by the Lessee on account of such indemnification, such Indemnitee shall promptly pay to the Lessee the amount of such saving together with the amount of any tax saving resulting from any payment pursuant to this sentence (provided that such payments by such Indemnitee shall not exceed the amount of the payments made by the Lessee to or for such Indemnitee which gave rise to such savings and payment by such Indemnitee). Each Indemnitee agrees to make, at the Lessee’s expense, good-faith efforts to claim any such tax saving that may reasonably be available and to provide promptly thereafter to the Lessee written notification of any action, proceeding or decision with respect to such claim.

(f) Refund . If an Indemnitee shall receive a refund of (or receive a credit against or any other current reduction in, any Tax not indemnified by the Lessee under this Section 7.2, in respect of) all or part of any Taxes which the Lessee shall have paid on behalf of such Indemnitee or for which the Lessee shall have reimbursed, advanced funds to or indemnified such Indemnitee, such Indemnitee shall promptly pay or repay to the Lessee an amount equal to the amount of such refund, plus any net tax benefit (taking into account any Taxes incurred by such Indemnitee by reason of the receipt of such refund, credit or reduction) realized by such Indemnitee as a result of any payment by such Indemnitee made pursuant to this sentence (provided that such payments by such Indemnitee shall not exceed the amount of the payments made by the Lessee to or for such Indemnitee which gave rise to such refund and payment by such Indemnitee). If, in addition to such refund, credit or reduction, as the case may be, such Indemnitee shall receive an amount representing interest on the amount of such refund, credit or reduction, as the case may be, such Indemnitee shall promptly pay to the Lessee that proportion of such interest that shall be fairly attributable to Taxes paid, reimbursed or advanced by the Lessee prior to the receipt of such refund. If an Indemnitee loses the benefit of any refund for which it has made a payment pursuant to this Section 7.2(f), such loss shall be treated as a Tax indemnifiable hereunder without regard to exclusions. Each Indemnitee agrees to make, at the Lessee’s expense, good-faith efforts to claim any such refund, credit or reduction that may reasonably be available and to provide promptly thereafter to the Lessee written notification of any action, proceeding or decision with respect to such claim.

(g) Restructuring for Withholding Taxes . Each party covered by this Section 7.2 agrees to use reasonable efforts to investigate alternatives for reducing any Withholding Taxes that are indemnified against hereunder or imposed on Rent, or Yield on the Lease Balance (whether or not indemnifiable hereunder) and to use reasonable efforts to reduce any Withholding Taxes that are indemnified against hereunder, including, without limitation, negotiating in good faith to restructure the Advance (which restructuring shall be at the Lessee’s expense in the case of indemnifiable Withholding Taxes), but no party shall be obligated to take any such action as such party determines will be adverse to its business or financial or commercial interests.

(h) Tax Ownership . Each Indemnitee represents and warrants that it will not, prior to the termination of the Lease and the transfer of the Leased Property to any Person other than the Lessee or its Affiliates, claim ownership of (or any tax benefits, including depreciation, with respect to) the Leased Property for any income tax purposes (unless required to do so by a taxing Authority) with respect to the period prior to the termination of the Lease, it being understood that it is the intention of all parties to this transaction that the Lessee is and will remain the owner of the Leased Property for such income tax purposes until the termination of the Lease and such transfer.

(i) Preparation and Filing of Tax Returns . The Lessee shall be responsible for preparing and filing on its behalf (i) any real and personal property or ad valorem Tax returns in respect of the Leased Property and (ii) any other Tax returns required of any Participant Party respecting the transactions described in the Operative Documents applicable to the Lessee (but in the case of Tax returns described in clause (ii), other than returns with respect to Taxes excluded from indemnification pursuant to Section 7.2(a)(i)). In case any report or Tax return shall be required to be made with respect to any Tax indemnified by the Lessee under Section 7.2(a)(i), the Lessee, at its sole cost and expense, shall notify the relevant Participant Party of such requirement and reasonably cooperate with such Participant Party in the filing of such return.

SECTION 7.3. Withholding Tax Documentation.

(a) Reserved.

(b) At least five (5) Business Days prior to the first payment date with respect to a payment under the Operative Documents that is subject to a Withholding Tax on interest or yield that is indemnifiable under Section 7.2(a)(iii) and that is imposed by a jurisdiction outside the United States, the Indemnitee shall have complied with certification, information, documentation, reporting, filing, or other similar requirements concerning the nationality, residence, identity, or connection with the jurisdiction imposing such Withholding Taxes or any other similar matters that are required by law as a condition to total exemption or total relief from such Withholding Taxes to the extent it is legally entitled to do so and shall have notified the Lessee in writing of such compliance. The Indemnitee shall further timely comply with all requirements for keeping any such exemption in full force and effect, unless a change in treaty, law, or regulation has occurred that would prevent the Indemnitee from complying and the Indemnitee promptly advises the Lessee in writing that it is not capable of receiving payments without withholding. Each of the Participants that is not a U.S. Person represents and warrants that

it qualifies for portfolio interest exemption contained in Section 871(h) or Section 881(c) of the Code. Each of the parties hereto agrees that on the Closing Date, no certification, documentation, reporting or similar confirmation is required of an Indemnitee to establish total exemption from Withholding Taxes on interest, yield or any other amounts relevant to this transaction in any applicable jurisdiction other than Internal Revenue Service Forms W-8BEN, W-8BEN-E, W-8ECI or W-8IMY and any required attachments (in the case of an Indemnitee that is not a U.S. Person) or Internal Revenue Service Form W-9 (in the case of an Indemnitee that is a U.S. Person), in each case as required by Section 7.3(c).

(c) At least five (5) Business Days prior to the first date on which any payment is due with respect to the Rent Assignment Agreement or Lessor Investment for the account of any Participant, such Participant shall have delivered to each of the Lessee, Lessor and Administrative Agent, (i) in the case of a Participant that is a U.S. Person, two duly completed copies of United States Internal Revenue Service form W-9, certifying that such Participant is exempt from United States backup withholding tax, and (ii) in the case of a Participant that is not a U.S. Person, two duly completed copies of United States Internal Revenue Service Form W-8BEN, W-8BEN-E, W-8ECI or W-8IMY and any required attachments, in any case with taxpayer identifying numbers, certifying that such Participant is entitled to receive payments of Yield and a return of principal of its Lease Balance, as applicable, including Capitalized Yield, under the Operative Documents without deduction or withholding of any United States Federal income taxes. In delivering any such form or any successor or replacement form, a Participant shall be entitled to assume that the payor of such Yield or return of principal is organized under the laws of the United States or any state thereof. Each Participant which so delivers Internal Revenue Service Form W-9 or Internal Revenue Service Form W-8BEN, W-8BEN-E, W-8ECI or W-8IMY and any required attachments shall further deliver to each of the Lessee, Lessor and Administrative Agent, two additional copies of such form (or a successor form) on or before the date that such form expires or becomes obsolete or within thirty (30) days after the occurrence of any event requiring a change in the most recent forms so delivered by it, and, as may be reasonably requested by the Lessee, the Lessor or the Administrative Agent such amendments thereto or extensions or renewals thereof, in each case certifying that such Participant is entitled to receive payments under the Operative Documents without deduction or withholding of any United States Federal income taxes, unless a change in treaty, law or regulation has occurred prior to the date on which any such delivery would otherwise be required which renders all such forms inapplicable or which would prevent such Participant from duly completing and delivering any such form with respect to it and such Participant promptly advises the Lessee, Lessor and Administrative Agent in writing that it is not capable of receiving payments without any withholding of United States Federal income tax.

(d) If any payment made to an Indemnitee hereunder would be subject to U.S. federal withholding Tax imposed by FATCA if such Indemnitee were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Indemnitee shall deliver to the Lessee, Lessor and Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Lessee or the other Participants such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) as may be necessary for the Lessee, Lessor and Administrative Agent to comply with their respective obligations, if any, under

FATCA and to determine that such Indemnitee has complied with such Indemnitee’s obligations under FATCA or to determine the amount to deduct and withhold from such payment.

SECTION 7.4. Increased Costs.

(a) If on or after the date hereof, the adoption of any applicable law, rule or regulation, or any change in any applicable law, rule or regulation, or any change in the interpretation or administration thereof (each such event being a “ Change in Law ”) by any Authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Participant (or its applicable lending office) with any request or directive (whether or not having the force of law) of any such Authority, central bank or comparable agency:

(i) shall subject any Participant (or its applicable lending office) to any Tax with respect to its Rent Assignment Advance or Lessor Investment or its obligation to make an additional Advance, or shall change the basis of taxation of payments to any Participant (or its applicable lending office) of the principal of or yield on its obligations hereunder or any other amounts due under the Operative Documents in respect of its obligations hereunder or thereunder (except for (A) franchise taxes or Taxes related to the general authority of such Participant (or its applicable lending office) to do business, (B) Taxes imposed other than by way of withholding from payments under this Agreement on the gross income of such Participant (or its applicable lending office), (C) Taxes imposed by the jurisdiction where such Participant is incorporated (or any political subdivision thereof) or where it is managed or controlled or where its applicable lending office is located, (D) Taxes that would not have been imposed but for the failure to provide an Internal Revenue Service Form W-9 or applicable Internal Revenue Service Form W-8 or such other certification that may reasonably be requested in order to avoid, eliminate or reduce any Taxes (or the withholding thereof) to the extent such Participant is legally entitled to provide such certification, (E) withholding taxes imposed under the laws of any jurisdiction other than the United States or any State thereof, unless imposed solely as a result of the Lessee making a payment from such jurisdiction, or (F) U.S. withholding Taxes imposed pursuant to FATCA); or

(ii) shall impose, modify or deem applicable any reserve (including, without limitation, any such requirement imposed by the Board of Governors of the Federal Reserve System, but excluding, with respect to any Rent Assignment Advance or Lessor Investment, the Yield on which is determined on a LIBOR Rate basis, any such requirement with respect to which such Participant is entitled to compensation pursuant to clause (d) below), special deposit, insurance assessment or similar requirement against assets of, deposits with or for the account of, or credit extended by, any Participant (or its applicable lending office) or shall impose on any Participant (or its applicable lending office) or on the London interbank market any other condition affecting its Rent Assignment Advance or Lessor Investment or its obligation to make an additional Advance;

and the result of any of the foregoing is to increase the cost to such Participant (or its applicable lending office) of making, acquiring or maintaining any Rent Assignment Advance or Lessor Investment or to reduce the amount of any sum received or receivable by such Participant (or its applicable lending office) under this Agreement or the Rent Assignment Agreements by an amount deemed by such Participant to be material, then, within fifteen (15) days after demand by such Participant (with a copy to the Administrative Agent), the Lessee shall pay to such Participant such additional amount or amounts as will compensate such Participant for such increased cost or reduction; provided that no such amount shall be payable with respect to any such increased costs or reductions incurred more than one hundred eighty (180) days before the date such Participant first notifies the Lessee of its intention to demand compensation under this Section 7.4(a); provided further that if the Change in Law that gives rise to such increased cost or reduction is retroactive, then the 180-day period referred to above shall be extended to include the period of retroactive effect thereof.

(b) If any Participant shall have determined that any applicable law, rule, guideline or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any Authority, central bank or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such Authority, central bank or comparable agency (a “ regulatory requirement ”), has or would have the effect of reducing the rate of return on capital of such Participant (or its parent) as a consequence of such Participant’s obligations under the Operative Documents to a level below that which such Participant (or its parent) could have achieved but for such regulatory requirement (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Participant to be material, then from time to time, within fifteen (15) days after demand by such Participant (with a copy to the Administrative Agent), the Lessee shall pay to such Participant such additional amount or amounts as will compensate such Participant (or its parent) for the portion of any such reduction which is reasonably allocable to the Operative Documents.

(c) Each Participant will promptly notify the Lessee and the Administrative Agent of any event of which it has knowledge, occurring after the date hereof, which will entitle such Participant to compensation pursuant to this Section and will designate a different applicable lending office if such designation will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Participant, result in any economic or regulatory or other disadvantage to such Participant. A certificate of any Participant claiming compensation under this Section and setting forth the additional amount or amounts to be paid to it hereunder, accompanied by a computation in reasonable detail of such amount or amounts, shall be conclusive if prepared in good faith and on a reasonable basis. In determining such amount, such Participant may use any reasonable averaging and attribution methods; provided that such methods shall not be inconsistent with the methods used by such Participant in calculating the reduction in return allocable to other similar investments or commitments to other companies.

(d) For so long as a Participant shall be required pursuant to the requirements of the Board of Governors of the Federal Reserve System to maintain reserves with respect to liabilities or assets consisting of or including “Eurocurrency liabilities” (or any other category of liabilities which includes deposits by reference to which the rate on the Rent Assignment Advances

or Lessor Investment, the Yield on which is determined on a LIBOR Rate basis, is determined or any category of extensions of credit or other assets which includes loans by a non-United States office of any Participant to United States residents), then such Participant may require the Lessee to pay, contemporaneously with each payment of Yield on such Rent Assignment Advances or Lessor Investment, additional yield on the related Rent Assignment Advances or Lessor Investment of such Participant at a rate per annum determined by such Participant up to but not exceeding the excess of (a) (i) the applicable LIBOR Rate divided by (ii) one minus the LIBOR Reserve Percentage over (b) the applicable LIBOR Rate. Any Participant wishing to require payment of such additional yield (x) shall so notify the Lessee and the Administrative Agent, in which case such additional yield on the Rent Assignment Advances or Lessor Investment of such Participant shall be payable to such Participant at the place indicated in such notice with respect to each Payment Period commencing at least four (4) Business Days after the giving of such notice and (y) to the extent possible, shall notify the Lessee at least four (4) Business Days prior to each date on which yield is payable on the Rent Assignment Advances or Lessor Investment of such Participant of the amount then due it under this clause.

SECTION 7.5. Funding Losses.

The Lessee shall pay to the Lessor, as Supplemental Rent, such amounts as may be necessary to reimburse any Participant for any loss or expense incurred (including any loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by such Participant to make, continue or maintain any portion of its Rent Assignment Advance or Lessor Investment on a LIBOR Rate basis but excluding any loss of margin included therein) as a result of (i) any payment of all or any portion of the Lease Balance for any reason on a date other than a Payment Date, including, without limitation, by reason of acceleration, or (ii) any Funding or Advance not being made due to the Construction Agent canceling a request previously made by it for, or not satisfying the conditions precedent to, such Funding or Advance, including with respect to the actions or inactions of the Administrative Agent (the amount of such loss or expense, the “ Break Amount ”). Any Participant shall promptly notify the Lessee, the Lessor and the Administrative Agent in writing of the amount of any claim under this Section 7.5, the reason or reasons therefor and the additional amount required fully to compensate such Participant for such loss or expense. Such written notice (which shall include calculations in reasonable detail) shall, in the absence of manifest error, be conclusive and binding on the Lessee.

SECTION 7.6. Gross Up.

If an Indemnitee shall not be entitled to a corresponding and equal deduction with respect to any payment or Tax which the Lessee is required to pay or reimburse under any other provision of this Article VII (each such payment or reimbursement under this Article VII, an “original payment”) and which original payment constitutes income to such Indemnitee when accrued or received, then the Lessee shall pay to such Indemnitee on demand the amount of such original payment on a grossed-up basis such that, after subtracting all Taxes imposed on such Indemnitee with respect to such grossed-up payment by the Lessee (including any Taxes otherwise excluded by Section 7.2(a)(i) and assuming for this purpose that such Indemnitee was subject to taxation at the highest United States Federal, state and local marginal rates applicable to corporations and, in the case of Withholding Taxes subject to indemnification pursuant to Section 7.2(a)(iii), the

marginal rates actually applicable to the Indemnitee for the year in which such income is taxable), such amount (i.e., the grossed-up payment minus the taxes thereon) shall be equal to the original payment to be received or reimbursed (net of any credits, deductions or other tax benefits then actually recognized that arise from the payment by such Indemnitee of any amount, including taxes, for which the payment to be received is made) (“ Grossed-Up Basis ”).

SECTION 7.7. Leased Property Indemnity.

Notwithstanding any provision to the contrary in this Article VII, in the event that (a) the Lessee elects the Return Option and (b) after paying to the Lessor, for the benefit of the Participants, any amounts due under Article XXII of the Lease, the Lease Balance shall not have been reduced to zero, then, except to the extent such amounts represent amounts due in respect of a Default or Event of Default, the Lessee shall promptly pay over to the Lessor on the Return Date, the shortfall between the Fair Market Value of the Leased Property as of the Return Date, and an amount up to but not to exceed the outstanding Lease Balance, unless an appraisal establishing the Fair Market Value of the Leased Property confirms that the reason such Fair Market Value is less than the outstanding Lease Balance is not due to any of the following events, circumstances or conditions, whether or not permitted under the Lease: (i) the failure to maintain the Leased Property as required by the Lease and the other Operative Documents, and in at least as good a condition as it was in on the Completion Date, ordinary wear and tear excepted; (ii) the carrying out of or the failure to complete any modifications, improvements or Alterations; (iii) any change or modification to the Plans and Specifications in violation of Section 3.2 of the Construction and Development Agreement; (iv) the existence of any environmental condition at or affecting the Leased Property that did not exist on the Closing Date (subject, in the case of any environmental condition arising prior to the Base Term Commencement Date, to the limitations set forth in Section 7.1(f) hereof); (v) any defect, exception, easement, restriction or other encumbrance on or title to the Leased Property not existing on the Closing Date and not consented to by the Lessor; or (vi) any other cause or condition within the power of the Lessee to control or affect (other than ordinary wear and tear) that did not exist on the Closing Date (subject, in the case of any cause or condition arising prior to the Base Term Commencement Date, to the limitations set forth in Section 7.1(f) hereof).

ARTICLE VIII

AGENCY

SECTION 8.1. Appointment of Administrative Agent and Collateral Agent; Powers and Authorization to Take Certain Actions.

(a) Each of the Participants irrevocably appoints and authorizes MUFG Bank, Ltd. to act as its Administrative Agent (and MUFG Bank, Ltd. hereby consents to such appointment and authorization) and the Lessor irrevocably appoints and authorizes MUFG Union Bank, N.A. to act as its Collateral Agent (and MUFG Union Bank, N.A. hereby consents to such appointment and authorization), in each case hereunder and under the other Operative Documents, with such powers as are specifically delegated to the Administrative Agent or the Collateral Agent by the terms hereof and thereof, together with such other powers as are reasonably incidental

thereto. Each Participant and the Lessor authorizes and directs the Administrative Agent or the Collateral Agent, as the case may be, to, and each of the Agents agrees for the benefit of the Participants and the Lessor and, as the case may be, that, on the Closing Date it will accept the documents described or referred to in Article III of this Agreement. Each of the Agents accepts the agency hereby created applicable to it and agrees to receive all applicable payments and proceeds pursuant to the Operative Documents and disburse such payments or proceeds in accordance with the Operative Documents to which it is a party.

(b) Neither the Administrative Agent nor the Collateral Agent shall have any duties or responsibilities except those expressly set forth in the Operative Documents. Neither the Administrative Agent nor the Collateral Agent shall be responsible to any Participant (or to any other Person): (i) for any recitals, statements, representations or warranties of any party contained in any Operative Document or in any certificate or other document referred to or provided for in, or received by it under, the Operative Documents, other than the representations and warranties made by each of the Agents in Section 4.4, (ii) for the value, validity, effectiveness, genuineness, enforceability or sufficiency of the Leased Property, the Site or the title thereto or (iii) for any failure by the Lessee, the Lessor, or any other Person (other than each of the Agents, as applicable) to perform any of its obligations under any Operative Document. Each of the Agents may, in fulfilling its obligations, employ agents, trustees or attorneys-in-fact, may vest any of them with any property, title, right or power deemed necessary for the purposes of such appointment and shall not be responsible for the negligence or misconduct of any of them selected by it with reasonable care.

(c) Neither the Administrative Agent nor the Collateral Agent shall have any duty or obligation to manage, control, use, operate, store, lease, sell, dispose of or otherwise deal with the Lease and, with respect to the Collateral Agent, any other easement granted to it pursuant to the Operative Documents, the Leased Property or the Site, or to otherwise take or refrain from taking any action with respect thereto, except as expressly provided by the terms of the Operative Documents, and no implied duties of any kind shall be read into any Operative Document against each of the Agents. The permissive right of each of the Agents to take actions enumerated in this Agreement or any other Operative Document shall never be construed as a duty, unless it is instructed or directed to exercise, perform or enforce one or more rights by the Required Participants (provided that each of the Agents has received indemnification reasonably satisfactory to it). Subject to Section 8.1(d) below, no provision of the Operative Documents shall require the Administrative Agent or the Collateral Agent to expend or risk its own funds or otherwise incur any financial liability in the performance of any of its obligations under the Operative Documents, or in the exercise of any of its rights or powers thereunder. It is understood and agreed that the duties of each of the Agents are ministerial in nature.

(d) Except as specifically provided herein, each of the Agents is acting hereunder solely as agent and, except as specifically provided herein, is not responsible to any party hereto in its individual capacity, except with respect to any claim arising from its own gross negligence or willful misconduct, or its negligence in the handling of funds or any breach of a representation or covenant made in its individual capacity.

(e) Each of the Agents may accept deposits from, lend money to and otherwise deal with the Lessee or any of its Affiliates with the same rights as it would have if it were not the named the Administrative Agent or the Collateral Agent hereunder.

SECTION 8.2. Reliance.

Each of the Agents may rely upon, and shall not be bound or obligated to make any investigation into the facts or matters stated in, any certificate, notice or other communication (including any communication by telephone, telecopy, telex, telegram or cable) reasonably believed by it to be genuine and correct and to have been made, signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by each of the Agents with due care (including any expert selected by each of the Agents to aid it in any calculations, if any, required in connection with its duties under the Operative Documents).

SECTION 8.3. Action Upon Instructions Generally.

(a) Subject to Sections 8.4 and 8.6, upon written instructions of the Required Participants if so required hereunder or pursuant to any other Operative Document, each of the Agents shall, solely in the furtherance of its duties as Administrative Agent or the Collateral Agent, as applicable, on behalf of the Participants or the Lessor, as the case may be, give such notice, consent, approval or direction, exercise such right, remedy or power hereunder or under the other Operative Documents or in respect of the Leased Property or the Site, and enter into such amendment to any document to which it is a party as the Administrative Agent or the Collateral Agent, as applicable, as may be specified in such instructions. The Administrative Agent shall deliver to each Participant a copy of each notice, demand, report and certificate received by it pursuant to the Operative Documents, and the Collateral Agent shall deliver to the Lessor a copy of each notice, demand, report and certificate received by it pursuant to the Operative Documents. Neither the Administrative Agent nor the Collateral Agent shall have any obligation to investigate or determine whether there has been an Event of Default or Default. Neither the Administrative Agent nor the Collateral Agent shall be deemed to have any notice or knowledge of an Event of Default or Default unless a Responsible Officer of it is notified in writing of such Event of Default or Default; provided that the Administrative Agent shall be deemed to have been notified in writing of any failure of the Lessee to pay Rent in the amounts and at the times set forth in Article IV of the Lease. If either the Administrative Agent or the Collateral Agent receives notice of an Event of Default, it shall give prompt notice thereof, at the Lessee’s expense, to each Participant, and if either the Administrative Agent or the Collateral Agent receives notice of an Event of Default, it shall give prompt notice thereof, at the Lessor’s expense, to each Rent Assignee.

(b) Subject to Sections 8.4 and 8.6, each of the Agents shall take action or refrain from taking action with respect to an Event of Default as directed by the Required Participants; provided that, unless and until it receives such directions, each of the Agents may refrain from taking any action with respect to such Event of Default; provided, further, that the Agents, in their individual capacity or any other capacity, covenants for the benefit of the Lessor and the Rent Assignees only, that it shall not exercise, or attempt to exercise, any right of setoff, banker’s lien or the like against any deposit account or property of the Lessee or any of its Affiliates

held or maintained by any Agent without the prior written consent of the Participants. Prior to the date the Lease Balance shall have become due and payable by acceleration pursuant to Section 18.1 of the Lease, the Required Participants may deliver written instructions to the Agents to waive, and each of the Agents, respectively, shall waive pursuant thereto, any Event of Default and its consequences; provided that in the absence of written instructions from all of the Participants, neither the Administrative Agent nor the Collateral Agent shall waive any payment default. As to any matters not expressly provided for by this Agreement, each of the Agents shall in all cases be fully protected in acting, or in refraining from acting, hereunder in accordance with instructions signed by the Required Participants and such instructions of the Required Participants and any action taken, and any action taken or failure to act pursuant thereto shall be binding on all Participants.

SECTION 8.4. Indemnification.

Each Rent Assignee and the Lessor shall reimburse and hold each of the Agents harmless, ratably in accordance with its Commitment at the time the indemnification is required to be given (but only to the extent that any such indemnified amounts have not in fact been paid to each of the Agents by, or on behalf of, the Lessee in accordance with Section 7.1), from any and all claims, losses, damages, obligations, penalties, liabilities, demands, suits, judgments, or causes of action, and all legal proceedings, and any reasonable costs or expenses in connection therewith, including allocated charges, costs and expenses of internal counsel of each of the Agents and all other reasonable attorneys’ fees and expenses incurred by each of the Agents, in any way relating to or arising in any manner out of (i) any Operative Document, the enforcement thereof or the consummation of the transactions contemplated thereby, (ii) instructions from the Required Participants (in the case of the Administrative Agent) or the Lessor (in the case of the Collateral Agent) or all Participants or the Lessor, as the case may be, if so required hereunder or pursuant to any other Operative Document (including, without limitation, the costs and expenses that the Lessee is obligated to and does not pay hereunder, but excluding normal administrative costs and expenses incident to the performance by each of the Agents of its agency duties hereunder other than materially increased administrative costs and expenses incurred as a result of an Event of Default); provided that no Rent Assignee shall be liable for any of the foregoing to the extent they arise from (a) the gross negligence or willful misconduct of either of the Administrative Agent or the Collateral Agent, (b) the inaccuracy of any representation or warranty or breach of any covenant given by the Administrative Agent or the Collateral Agent in Section 4.4 or in the Rent Assignment Agreement, (c) in the case of the Administrative Agent’s handling of funds, the failure to act with the same care as the Administrative Agent uses in handling its own funds, or (d) any taxes, fees or other charges payable by each of the Agents based on or measured by any fees, commissions or compensation received by it for acting as Administrative Agent or the Collateral Agent, as applicable, in connection with the Overall Transaction.

SECTION 8.5. Independent Credit Investigation.

Each Participant, by entering into this Agreement agrees that it has, independently and without reliance on each of the Agents, the Arranger or any other Participant and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Lessee and its own decision to enter into this Agreement and each of the other Operative

Documents to which it is a party and that it will, independently and without reliance upon the Administrative Agent or the Collateral Agent, the Arranger or any other Participant and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking action under this Agreement and any related documents to which it is a party. Neither the Administrative Agent nor the Collateral Agent shall be required to keep itself informed as to the performance or observance by the Lessee of any other document referred to (directly or indirectly) or provided for herein or to inspect the properties or books of the Lessee. Except for notices or statements which the Administrative Agent or the Collateral Agent is expressly required to give under this Agreement and for notices, reports and other documents and information expressly required to be furnished to the Administrative Agent or the Collateral Agent alone (and not also to each Participant, it being understood that each of the Agents shall forward copies of same to each of the other Participants or the Rent Assignees, as the case may be) hereunder or under any other Operative Document, neither the Administrative Agent nor the Collateral Agent shall have any duty or responsibility to provide any Participant with copies of notices or with any credit or other information concerning the affairs, financial condition or business of the Lessee (or any of its Affiliates) that may come into the possession of the Administrative Agent or the Collateral Agent or any of their respective Affiliates. Notices, reports and other documents and information expressly required to be furnished to the Collateral Agent are being provided to the Collateral Agent for file-keeping purposes only and unless otherwise expressly provided herein, the Collateral Agent shall have no obligation to review or be familiar with the contents thereof or provide copies to any other person.

SECTION 8.6. Refusal to Act.

Except for notices and actions expressly required of each of the Agents hereunder and except for the performance of expressed obligations under the Operative Documents as the Administrative Agent or the Collateral Agent, each of the Agents shall in all cases be fully justified in failing or refusing to act unless (a) it is indemnified to its reasonable satisfaction by the Participants or the Lessor, as applicable, against any and all liability and reasonable expense which may be incurred by it by reason of taking or continuing to take any such action (provided that such indemnity shall be subject to each of the limitations set forth in Section 8.4, including clauses (a) through (d) of Section 8.4, it being understood that no action taken by the Administrative Agent or the Collateral Agent in accordance with the instructions of the Required Participants (in the case of the Administrative Agent) or of the Lessor (in the case of the Collateral Agent) shall be deemed to constitute any such matter) and (b) it is reasonably satisfied that such action is not contrary to any Operative Document or to any Applicable Laws and Regulations.

SECTION 8.7. Resignation or Removal of Administrative Agent, Collateral Agent; Appointment of Successor.

Subject to the appointment and acceptance of a successor Administrative Agent or Collateral Agent as provided below, each of the Administrative Agent and Collateral Agent may resign at any time by giving notice thereof to the other and to each Participant and the Lessee, and may be removed from such position at any time by written notice from the Required Participants or the Lessor, as applicable. Upon any such resignation or removal of the Administrative Agent or Collateral Agent, the Required Participants or the Lessor, as applicable, at the time of the

resignation or removal shall have the right to appoint a successor Administrative Agent or Collateral Agent, as applicable, which shall be a financial institution having (i) a long-term credit rating no lower than investment grade as rated by Moody’s and S&P and (ii) a combined capital and surplus of not less than $100,000,000. If, within thirty (30) days after the retiring Administrative Agent’s or Collateral Agent’s giving of notice of resignation or receipt of a written notice of removal, a successor Administrative Agent or Collateral Agent is not so appointed and does not accept such appointment, then the retiring or removed Administrative Agent or Collateral Agent may appoint a successor to itself meeting the requirements in the prior sentence and transfer to such successor all of its rights and obligations. Upon the acceptance of any appointment as the Administrative Agent or Collateral Agent hereunder, such successor Administrative Agent or Collateral Agent, as applicable, shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring or removed Administrative Agent and Collateral Agent, respectively, and the retiring or removed Administrative Agent or Collateral Agent, as applicable, shall be discharged from duties and obligations as Administrative Agent and Collateral Agent, respectively, thereafter arising hereunder and under any related document. If the retiring Administrative Agent or Collateral Agent does not appoint a successor, any Participant or the Lessor, as applicable, shall be entitled to apply to a court of competent jurisdiction for such appointment, and such court may thereupon appoint a successor to act until such time, if any, as a successor shall have been appointed as above provided.

SECTION 8.8. Separate Agent.

Subject to any Applicable Laws and Regulations, the Required Participants or the Lessor, as applicable, may, and if they fail to do so at any time when they are so required, each of the Agents may, for the purpose of meeting any legal requirements of any jurisdiction in which the Leased Property may be located, appoint one or more Persons either to act as co-agent jointly with the Administrative Agent or the Collateral Agent, as applicable, or to act as separate agent of all or any part of the Leased Property or the Site, and vest in such individuals or corporations, in such capacity, such rights to such Leased Property or the Site or any part thereof, and such other rights or duties as each of the Agents may consider necessary or desirable. Each of the Agents shall execute, acknowledge and deliver all such instruments as may be required by any such co-agent or separate agent more fully confirming such title, rights or duties to such co-agent or separate agent. Upon the acceptance in writing of such appointment by any such co-agent or separate agent, it shall be vested with such interest in the Leased Property or any part thereof, and with such rights and duties, not inconsistent with the provisions of the Operative Documents, as shall be specified in the instrument of appointment, jointly with each of the Agents (except insofar as local law makes it necessary for any such co-agent or separate agent to act alone), subject to all terms of the Operative Documents. Any co-agent or separate agent, to the fullest extent permitted by legal requirements of the relevant jurisdiction, at any time, by an instrument in writing, shall constitute the Administrative Agent or the Collateral Agent, as applicable, pursuant to its appointment, its attorney-in-fact and agent, with full power and authority to do all acts and things and to exercise all discretion on its behalf and in its name. If any co-agent or separate agent shall become incapable of acting, resign or be removed, the interest in the Leased Property and all rights and duties of such co-agent or separate agent shall, so far as permitted by law, vest in and be exercised by the Administrative Agent or the Collateral Agent, respectively, without the appointment of a successor to such co-agent or separate agent.

SECTION 8.9. Termination of Agency.

The agency created hereby shall terminate upon the final disposition by each of the Agents of all Leased Property and each of the Administrative Agent’s and the Collateral Agent’s interest in the Site and the final distribution by each of the Agents of all monies or other property or proceeds received pursuant to the Operative Documents in accordance with their terms; provided, that at such time the Lessee shall have complied fully with all the terms hereof.

SECTION 8.10. Compensation of Administrative Agent and Collateral Agent.

The Lessee shall pay each of the Agents the annual fee as set forth in Section 2.13(e) hereof and including after an Event of Default, any other fees, costs and expenses for the performance by each of the Administrative Agent and Collateral Agent of its respective obligations hereunder (including the reasonable fees and expenses of its counsel) (collectively, “ Agency Fees ”).

SECTION 8.11. Limitations.

It is expressly understood and agreed by and among the parties hereto that, except as otherwise provided herein or in the other Operative Documents: (a) to the extent each of the Agents is entering into such documents and agreements as the Administrative Agent or the Collateral Agent, this Agreement and the other Operative Documents to which each of the Agents is a party are executed by each of the Administrative Agent or the Collateral Agent in its capacity as Administrative Agent or Collateral Agent, as applicable, under the Operative Documents in the exercise of the power and authority conferred and vested in it as such Administrative Agent or Collateral Agent; (b) each of the undertakings and agreements herein made on the part of each of the Agents are each and every one of them made and intended not as personal undertakings and agreements by each of the Agents, or for the purpose or with the intention of binding each of the Agents personally, but are made and intended for the purpose of binding only the Leased Property unless expressly provided otherwise; (c) actions to be taken by each of the Agents pursuant to its obligations under the Operative Documents may, in certain circumstances, be taken by each of the Agents only upon specific authority of the Participants or the Rent Assignees, as further set forth herein an in the other Operative Documents; (d) nothing contained in the Operative Documents shall be construed as creating any liability on either of and the Agents, individually or personally, or any incorporator or any past, present or future subscriber to the capital stock of, or stockholder, officer or director, employee or agent of, each of the Agents to perform any covenants either express or implied contained herein, all such liability, if any, being expressly waived by the other parties hereto and by any Person claiming by, through or under them; and (e) so far as each of the Agents, individually or personally, is concerned, the other parties hereto and any Person claiming by, through or under them shall look solely to the Leased Property and the Lessee for the performance of any obligation under any of the instruments referred to herein, provided, however, that nothing in this Section 8.11 shall be construed to limit in scope or substance the general corporate liability of each of the Agents in respect of its gross negligence or willful misconduct, negligence in the handling of funds or for those representations, warranties and covenants of each of the Agents, as applicable, in its individual capacity set forth herein, in the other Operative Documents or in any of the other agreements contemplated hereby or thereby.

ARTICLE IX

MISCELLANEOUS

SECTION 9.1. Survival of Indemnities.

The indemnities of the parties provided for in the Operative Documents shall survive the execution and delivery and the termination or expiration of this Agreement and any of the Operative Documents, the transfer of the interest in the Leased Property as provided herein or in any other Operative Documents, any disposition of any interest of the Lessor or the Collateral Agent in the Leased Property, the purchase and sale of the Rent Assignment Interests, payment therefor and any disposition thereof and shall continue in effect notwithstanding that any party hereto may waive compliance with any of the other terms, provisions or conditions of any of the Operative Documents.

SECTION 9.2. No Broker, etc.

Except for the Lessee’s dealings with the Arranger (for which the Lessee shall be responsible) each of the parties hereto represents to the others that it has not retained or employed any arranger, broker, finder or financial advisor to act on its behalf in connection with this Agreement, nor has it authorized any arranger, broker, finder or financial adviser retained or employed by any other Person so to act, nor has it incurred any fees or commissions to which the Agents or any Participant might be subjected by virtue of its entering into the transactions contemplated by this Agreement. Any party who is in breach of this representation shall indemnify and hold the other parties harmless from and against any liability arising out of such breach of this representation.

SECTION 9.3. Notices.

Unless otherwise specified herein, all notices, requests, demands or other communications to or upon the respective parties hereto in connection with the Operative Documents shall be in writing (including bank wire, transmission, electronic mail or similar writing) and shall be effective given to such party: (i) if given by electronic mail transmission, when transmitted to the e-mail address specified on Schedule II during the recipient’s normal business hours and confirmation of receipt is received or (ii) if given by any other means, when delivered during the recipient’s normal business hours at the address specified on Schedule II ; provided that notices under Article II or Sections 7.4, 7.5 or 7.6 hereof shall not be effective until received.

SECTION 9.4. Counterparts.

This Agreement and each of the other Operative Documents may be executed by the parties hereto and thereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same agreement.

SECTION 9.5. Amendments.

No Operative Document nor any of the terms thereof may be terminated, amended, supplemented, waived or modified without the written agreement or consent of the Lessor, the Administrative Agent (as directed by the Required Participants), the Lessee, the Collateral Agent (as directed by the Lessor), the Required Participants and the Lessor; provided, however, that Section 9.15 hereof and the other Sections referenced therein may not be terminated, amended, supplemented, waived or modified without the written consent of the Arranger; provided, further, that such termination, amendment, supplement, waiver or modification of any Operative Document shall require the written agreement or consent of each Participant if such termination, amendment, supplement, waiver or modification would:

(a) modify any of the provisions of this Section 9.5, change the definition of “Required Participants”, or modify or waive any provision of any Operative Document requiring action by the Required Participants or all of the Participants such that such provision no longer requires such action, or release any collateral (except in connection with a transaction permitted by the Operative Documents);

(b) reduce the amount or change the time of payment of any amount of principal owing or payable with respect to any Rent Assignment Advances, Lessor Investment, or Yield owing or payable with respect thereto or Fees, or modify any of the provisions of Article X or Sections 2.11 or 2.12 hereof, or modify the definition of “Yield Rate” or the other defined terms contained in such definitions;

(d) reduce the amount or change the time of payment of any Rent, the Lease Balance, Purchase Amount, Sale Proceeds, Deficiency payments, Construction Recourse Deficiency Amount, the Recourse Deficiency Amount or the Return Option Construction Recourse Amount;

(e) modify any provision of any Operative Document that expressly requires the unanimous consent of the Participants;

(f) consent to releasing the Lessee from its obligations to pay any Rent, the Lease Balance, Purchase Amount, Sale Proceeds, Deficiency payments, the Construction Recourse Amount, the Recourse Deficiency Amount or the Return Price Recourse Deficiency Amount or changing the absolute and unconditional character of such obligations;

(g) permit the creation of any Lien on the Leased Property, the Site, the Lessee Collateral or any part thereof, except as permitted by the Operative Documents;

(h) modify the definition of “Maturity Date” or “Lease Expiration Date” or otherwise extend either such date other than as permitted by Section 2.17 provided, however, for purposes of clarity, that any extension of either such date permitted under Section 2.17 shall

require the unanimous vote of each Participant (including any Replacement Participant which replace the non-consenting Participants in accordance with the terms thereof); and

(i) waive, amend or otherwise modify any of the provisions contained in Section 2.2(d).

SECTION 9.6. Headings, etc.

The Table of Contents and headings of the various Articles and Sections of this Agreement are for convenience of reference only and shall not modify, define, expand or limit any of the terms or provisions hereof.

SECTION 9.7. Parties in Interest.

Except as expressly provided herein, none of the provisions of this Agreement is intended for the benefit of any Person except the parties hereto and their respective successors and permitted assigns.

SECTION 9.8. Governing Law.

THIS AGREEMENT HAS BEEN DELIVERED IN, AND SHALL IN ALL RESPECTS BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF, THE STATE OF NEW YORK, WITHOUT REGARD TO THE CONFLICTS OF LAWS PRINCIPLES OF SUCH STATE (EXCEPT SECTION 5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW) EXCEPT TO THE EXTENT THAT THE LAWS OF THE STATE WHERE THE SITE IS LOCATED ARE REQUIRED TO APPLY.

SECTION 9.9. Payment of Transaction Costs and Other Costs.

(a) Transaction Costs and Fees . As and when any portion of Transaction Costs, including, without limitation, any Fees becomes due and payable, such Transaction Costs, including, without limitation, any Fees shall be paid by the Lessee as Supplemental Rent; provided, that with respect to Transaction Costs, including, without limitation, any Fees which are due and payable before the Completion Date, the Lessee’s obligation to pay such Transaction Costs including, without limitation, any Fees is subject to the provisions of Section 2.13.

(b) Continuing Expenses . The continuing fees, expenses and disbursements (including reasonable counsel fees) of (i) the Lessor set forth by the Lessor and agreed in writing by the Lessee, (ii) the Administrative Agent and Collateral Agent, as set forth in Section 2.13, and (iii) the Participants, in each case as set forth in Section 2.13, shall be included in Advance Requests and paid for out of Advances before the Completion Date and, following the Completion Date, paid directly by the Lessee as Supplemental Rent.

(c) Amendments, Supplements, etc . Without limitation of the foregoing, the Lessee agrees to pay to the Agents and the Participants (i) all costs and expenses (including reasonable and properly documented legal fees and expenses of counsel to the Agents and the Participants) incurred by any of them in connection with: (A) the considering, evaluating,

investigating, negotiating and entering into or giving or withholding of any amendments or supplements or waivers or consents with respect to any Operative Document requested by the Lessee; or (B) the negotiation and documentation of any restructuring or “workout,” whether or not consummated, of any Operative Document; and (ii) all costs and expenses (including properly documented legal fees and expenses of counsel to the Agents and the Participants) incurred by any of them in connection with: (A) the enforcement of the rights or remedies under the Operative Documents; or (B) any sale, assignment or transfer by a Participant of any interest in the Operative Documents during the continuance of an Event of Default.

SECTION 9.10. Severability.

Any provision of this Agreement that is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction.

SECTION 9.11. Limited Liability of the Lessor.

The parties hereto agree that except as specifically set forth herein or in any Operative Document, no Representatives (other than Affiliates of the Lessor to the extent that funds are received by the Lessor and not applied in accordance with the terms of the Operating Documents) of the Lessor shall have personal liability whatsoever to the Lessee or its successors and assigns for any claim or obligation based on or in respect of this Agreement or any of the other Operative Documents (including the construction of the Facility or for the accuracy, sufficiency or adequacy of any of the information or documents submitted in connection with each Advance or upon Completion of the Facility) or arising in any way from the transactions contemplated hereby or thereby, except to the extent attributable to the willful misconduct or gross negligence of, or negligence in the handling of funds by, Lessor, its officers, agents, employees and Affiliates or the breach in any material respect of any representation or warranty made by the Lessor under the Operative Documents or a breach or violation of the terms and conditions of this Agreement or any Operative Document. Anything in this Agreement or the other Operative Documents to the contrary notwithstanding, none of the Lessee, any Agent, any Rent Assignee and any other holder of Rent Assignment Interests (and the successors or assigns of any of said Persons) shall have any claim, remedy or right to proceed against the Lessor or any past, present or future stockholder, subscriber of capital stock, officer, director, incorporator or partner of the Lessor, whether by virtue of any statute or rule of law or by enforcement of any penalty or assessment or otherwise, for the payment of any amount owing under this Agreement or any other Operative Documents or any deficiency or any other sum owing on account of the indebtedness evidenced by the Rent Assignment Interests or for the payment of any other unpaid Obligations or any liability resulting from the breach of any representation, agreement or warranty of any nature whatsoever in this Agreement or any other Operative Document; and the parties hereto, by their execution and delivery of this Agreement, waive and release any liability of the Lessor or any past, present or future stockholder, subscriber of capital stock, officer, director, incorporator or partner of the Lessor for and on account of such amounts, deficiencies, sums, payments or such liability; provided , however , that nothing herein contained shall limit, restrict or impair the rights of a party

hereto to bring suit and obtain a judgment against the Lessor under this Agreement or any other Operative Documents or to exercise all rights and remedies provided under the Lease.

SECTION 9.12. Liabilities of the Participants.

No Participant shall have any obligation to the Agents or any other Participant or to the Lessee with respect to the Overall Transaction except those obligations of such Participant expressly set forth in the Operative Documents or except as set forth in the instruments delivered in connection therewith, and no Participant shall be liable for performance by any other party hereto of such other party’s obligations under the Operative Documents except as otherwise so set forth.

SECTION 9.13. Submission to Jurisdiction; Waivers.

(a) EACH PARTY HERETO IRREVOCABLY AND UNCONDITIONALLY:

(i) SUBMITS FOR ITSELF AND ITS PROPERTY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT OR ANY OTHER OPERATIVE DOCUMENT, OR FOR RECOGNITION AND ENFORCEMENT OF ANY JUDGMENT IN RESPECT THEREOF, TO THE SOLE, EXCLUSIVE GENERAL JURISDICTION OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK OR OF ANY NEW YORK STATE COURT SITTING IN THE BOROUGH OF MANHATTAN, AND APPELLATE COURTS FROM ANY THEREOF;

(ii) CONSENTS THAT ANY SUCH ACTION OR PROCEEDINGS MAY BE BROUGHT TO SUCH COURTS, AND WAIVES ANY OBJECTION THAT IT MAY NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING IN ANY SUCH COURT OR THAT SUCH ACTION OR PROCEEDING WAS BROUGHT IN AN INCONVENIENT COURT AND AGREES NOT TO PLEAD OR CLAIM THE SAME;

(iii) AGREES THAT SERVICE OF PROCESS IN ANY SUCH ACTION OR PROCEEDING MAY BE EFFECTED BY MAILING A COPY THEREOF BY REGISTERED OR CERTIFIED MAIL (OR ANY SUBSTANTIALLY SIMILAR FORM OF MAIL), POSTAGE PREPAID, TO SUCH PARTY AT ITS ADDRESS SET FORTH ON SCHEDULE II OR AT SUCH OTHER ADDRESS OF WHICH THE OTHER PARTIES HERETO SHALL HAVE BEEN NOTIFIED PURSUANT TO SECTION 9.3; AND

(iv) AGREES THAT NOTHING HEREIN SHALL AFFECT THE RIGHT TO EFFECT SERVICE OF PROCESS IN ANY OTHER MANNER PERMITTED BY LAW.

(b) EACH PARTY HERETO HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TRIAL BY JURY IN ANY LEGAL ACTION OR

PROCEEDING RELATING TO THE OPERATIVE DOCUMENTS AND FOR ANY COUNTERCLAIM THEREIN.

SECTION 9.14. Reproduction of Documents.

Subject to Section 9.19, this Agreement, all documents constituting an Appendix, Schedule or Exhibit hereto, and all documents relating hereto received by a party hereto, including, without limitation: (a) consents, waivers and modifications that may hereafter be executed; (b) documents received by the Agents or any Participant in connection with the receipt and/or acquisition of the Leased Property; and (c) financial statements, certificates and other information previously or hereafter furnished to the Agents or any Participant may be reproduced by the party receiving the same by any photographic, photostatic, microfilm, micro-card, miniature photographic or other similar process. Each of the parties hereto agrees and stipulates that, to the extent permitted by law, any such reproduction shall be admissible in evidence as the original itself in any judicial or administrative proceeding (whether or not the original is in existence and whether or not such reproduction was made by such party in the regular course of business) and that, to the extent permitted by law, any enlargement, electronic copy, or further reproduction of such reproduction shall likewise be admissible in evidence.

SECTION 9.15. Role of Arranger .

Each party hereto acknowledges hereby that it is aware of the fact that the Arranger has acted as an “arranger” with respect to the transactions contemplated by the Operative Documents. The parties hereto acknowledge and agree that the Arranger and its Affiliates have not made any representations or warranties concerning, and that they have not relied upon the Arranger as to, the tax, accounting or legal characterization or validity of (i) the Operative Documents or (ii) any aspect of the Overall Transaction. The parties hereto acknowledge and agree that the Arranger has no duties, express or implied, under the Operative Documents in its capacity as the Arranger. The parties hereto further agree that Section 2.1(l), Section 2.8, Section 2.13(a), Section 8.5, Section 9.2, Section 9.5, Section 9.9(a) and this Section 9.15 are for the express benefit of the Arranger, in such capacity, and the Arranger shall be entitled to rely thereon as if it were a party hereto.

SECTION 9.16. Rights Under Rent Assignment Agreements.

The Lessee acknowledges the sales and assignments by the Lessor under the Rent Assignment Agreements, expressly consents to the sales and assignments thereof regarding the Lessee and agrees to pay and deliver to the Rent Assignees the sums and materials set forth therein as they relate to the Lessee.

SECTION 9.17. Limitation on Recourse Liability During Construction Period.

Nothing herein contained shall affect the applicability of the provisions of Section 18.5 of the Lease.

SECTION 9.18. Payments in Dollars.

All payments to be made by the Lessee hereunder shall be made in Dollars in immediately available and freely transferable funds at the place of payment, all such payments to be paid without setoff, counterclaim or reduction.

SECTION 9.19. Confidentiality.

In connection with the Overall Transaction and the Lessee’s compliance with the Operative Documents, the Agents and the Participants may be receiving certain information (whether in written or electronic form, or if oral, confirmed in writing as confidential information) which is non-public, confidential or proprietary in nature. Such information and any other non-public, confidential or proprietary information concerning the Plans and Specifications, the Facility, the Lessee and/or its Subsidiaries (the Lessee and/or its Subsidiaries being collectively referred to as the “ Cubic Companies ”) furnished by or on behalf of the Cubic Companies to the Agents or the Participants in connection with the Overall Transaction (at any time on, before or after the date hereof), together with any other documents prepared by the Cubic Companies or by any of their respective agents, Affiliates, representatives (including attorneys, accountants and financial advisors) or employees which contain or otherwise reflect such information is hereinafter referred to as the “ Information ”.

The Agents and each of the Participants hereby severally agrees, as to itself only, subject to the exclusions set forth elsewhere in this Section 9.19, that the Information shall be kept confidential and shall not, without the prior written consent of relevant Cubic Company, be disclosed by such Person or by any of its Affiliates, directors, officers, employees, attorneys and agents (“ Representatives ”) in any manner whatsoever, in whole or in part, and shall not be used by such Person or its Representatives other than in connection with monitoring the progress of the construction of the Facility and the compliance by the Cubic Companies with the terms of the Operative Documents, provided, however, that such Person may reveal the Information (i) to its Representatives solely for the purpose of evaluating or managing such Person’s investment in the Overall Transaction if the recipients of the Information are informed by such Person of the confidentiality obligations with respect to the Information and such recipients agree to be bound by the terms and conditions of this Section or are otherwise bound by an obligation of confidentiality with respect thereto or (ii) to applicable regulatory Authorities having jurisdiction.

The provisions of this Section shall be inoperative as to such portions of the Information that (i) are or become generally available to the public on a non-confidential basis through no fault of or action by the Agents or the Participants or by any of their respective Representatives, (ii) become available to the Agents or any of the Participants on a non-confidential basis from a source other than the Cubic Companies or their representatives or agents, so long as the Person to whom such portions of Information have been made available has no knowledge that the source of such Information is prohibited from disclosing such portions by a contractual, legal or fiduciary obligation to the Cubic Companies, (iii) was heretofore independently developed or compiled by the Agents, or any of the Participants or their respective Representatives, as evidenced by records of such Person, without the use of the Information, or (iv) are provided to any court or tribunal in connection with the exercise or enforcement of any rights under this Agreement or other Operative

Document. In addition, the Agents and the Participants may disclose such Information to potential transferees of its interest, provided such potential transferee has entered into a confidentiality agreement containing provisions substantially similar to the provisions of this Section.

In the event that the Agents or any of the Participants or anyone to whom any such Person transmits the Information pursuant to this Section 9.19, becomes required by Applicable Laws and Regulations or Governmental Action to disclose any of the Information, the Person so required (if a party to this Agreement) or the Person that transmitted the Information to the Person so required (if the Person so required is not a party to this Agreement) if legally permitted shall provide the Lessee with notice of such event promptly upon obtaining knowledge thereof so that the Lessee or the applicable Cubic Company may seek a protective order or other appropriate remedy against such disclosure. In the event that no protective order or other remedy is obtained, the Person so required to disclose such Information (if a party to this Agreement) or the Person that transmitted the Information to the Person so required to disclose such Information (if the Person so required is not a party to this Agreement) shall have the right to disclose such information to the appropriate Authority. Notwithstanding such right, such Person shall, at the Lessee’s expense, cooperate to the extent reasonable with the Lessee’s or such Cubic Company’s instructions to disclose, only that portion of the Information that is required to be disclosed in accordance with Applicable Laws and Regulations and shall do so in a manner reasonably designed to preserve the Information’s confidential nature. Notwithstanding anything to the contrary in this Section 9.19, the Agents and each of the Participants may disclose the Information as requested by any Authority to whose jurisdiction such Person is subject or in connection with an examination of such Person by regulatory examiners or independent auditors. In addition, to the extent not contrary to the foregoing, the Lessor shall use reasonable efforts to comply with written instruction from the Lessee to such Person or, at the Lessee’s expense, return confidential information to the Lessee; provided, however, that the Lessor may retain one (1) file copy of such Information, documents, memoranda, notes and other writings for regulatory and audit purposes and for the purposes of defending or maintaining any proceedings relating to this Agreement, and any such materials so retained shall remain subject to the provisions of this Section 9.19.

The agreements of the Agents and each of the Participants in this Section shall survive the termination of any of the Operative Documents to which any such Person is a party and the payment of all or any part of the Lease Balance or the Purchase Amount and the repayment of all or any part of the Advances or Fundings made by the Agents or any of the Participants in respect thereof.

SECTION 9.20. Entire Agreement.

This Agreement (together with the other Operative Documents) constitutes the entire agreement between the parties hereto with respect to the matters covered hereby and supersedes all prior agreements and understandings, written or oral, with respect to such matters between the parties. The parties hereto shall not have any duties or obligations, except those expressly set forth herein, and no implied duties or obligations shall be read into this Agreement.

SECTION 9.21. UCC Filings and Other Matters.

The Lessee hereby grants to the Collateral Agent (or Lessor or its counsel on its behalf) the permission and right to file, without the signature of the Lessee, any financing statements, amendment statements and continuation statements under the Uniform Commercial Code necessary to perfect the Collateral Agent’s security interest in the Lessee Collateral under the Memorandum and Security Documents. The Lessee shall attend to the filing of any necessary UCC amendment statements and continuation statements in order to maintain the perfection of its security interest as set forth in the Memorandum of Lease perfected by the UCC Financing Statements filed on or about the Closing Date and referencing the Lessee as the secured party.

SECTION 9.22. Existence and Continuation of an Event of Default.

Notwithstanding any other provision of any Operative Document to the contrary, if an Event of Default shall have occurred then following the giving of any required notice and the expiration of any applicable cure period, such Event of Default shall continue in existence unless and until such time that such Event of Default is expressly and specifically waived in writing by the Administrative Agent or the Participants, as applicable, in accordance with the requirements of the Operative Documents.

SECTION 9.23. USA PATRIOT Act.

The Lessee acknowledges that the Administrative Agent and the Participants may be required, pursuant to the USA PATRIOT Act, to obtain, verify, record and disclose to law enforcement authorities information that identifies the Lessee, including the name and address of the Lessee. Consistent with Section 5.1(g) hereof, the Lessee will provide to the Administrative Agent and the Participants any such information they may request pursuant to the USA PATRIOT Act, and the Lessee agrees that the Administrative Agent and the Participants may disclose such information to law enforcement authorities if the authorities make a request or demand for disclosure pursuant to the USA PATRIOT Act. The Lessee also acknowledges that, in such event the Administrative Agent and the Participants may not be required or even permitted by the USA PATRIOT Act to notify the Lessee of the request or demand for disclosure.

SECTION 9.24. Certifications from the Construction Consultant.

Notwithstanding any other provision of any Operative Document to the contrary, any certification or other reporting required to be made by the Construction Consultant pursuant to any Operative Document shall be required only to the extent the Administrative Agent and the Participants determines such certification or reporting to be necessary or appropriate at the applicable time, such determination to be made by the Administrative Agent and the Participants in its sole and absolute discretion.

SECTION 9.25. Substitution of a Participant; Change in Lending Office.

(a) If any Indemnitee has demanded indemnification under Sections 2.9(b), 7.2(a)(ii), 7.2(a)(iii) or 7.4 hereof and such demand for indemnification or compensation by Indemnitee has been made to other similarly situated companies with LIBOR based pricing and

similar terms, then, if no Default or Event of Default is continuing, the Lessee shall have the right, with or without the assistance of the Administrative Agent, but subject to Section 6.3 hereof and the provisos below, to seek a substitute financial institution or institutions to purchase the Rent Assignment Advances or Lessor Investment, as applicable, from such Indemnitee making such demand and to instruct such Indemnitee to, and such Indemnitee shall, promptly upon the identification by the Lessee of such substitute financial institution or financial institutions, assign its Rent Assignment Interests or Lessor Investment, as applicable, and all of its rights and obligations under the Operative Documents to such substitute financial institution or financial institutions, subject to Section 6.3 hereof, provided, that such Indemnitee shall have been paid in full in immediately available funds for all amounts due hereunder or under any other Operative Document. The Lessee shall exercise its rights under this Section 9.25 if at all, within ten (10) days of receipt of any claim by an Indemnitee under Sections 2.9(b), 7.2(a)(ii), 7.2(a)(iii) or 7.4 hereof, as applicable, and, provided further that such substitute institution or institutions will not make any similar demand.

(b) If any Indemnitee requests compensation under Section 2.9(b), then such Indemnitee shall use reasonable efforts to designate a different lending office for funding or booking its Rent Assignment Interests or Lessor Investment hereunder or to assign its rights and obligations hereunder to another of its offices, branches or Affiliates, if, in the judgment of such Indemnitee, such designation or assignment (i) would eliminate or reduce amounts payable pursuant to Section 2.9(b) in the future and (ii) would not subject such Indemnitee to any unreimbursed cost or expense and would not otherwise be disadvantageous to such Indemnitee. The Lessee hereby agrees to pay all reasonable costs and expenses incurred by any Indemnitee in connection with any such designation or assignment.

SECTION 9.26. Collateral Agent Statements

To the extent amounts are held and/or invested by the Collateral Agent under the Operative Documents including, without limitation, under Section 23.13 of the Lease, the Collateral Agent shall furnish the Lessee periodic cash transaction statements which shall include detail for all investment transactions effected by the Collateral Agent. Upon the Lessee’s election, such statements will be delivered via the Collateral Agent providing the Lessee with online access to the Collateral Agent’s system with respect to this Participation Agreement and upon electing such service, paper statements will be provided only upon request. The Lessee waives the right to receive brokerage confirmations of security transactions effected by the Collateral Agent as they occur, to the extent permitted by law. The Lessee further understands that trade confirmations for securities transactions effected by the Collateral Agent will be available upon request and at no additional cost and other trade confirmations may be obtained from the applicable broker.

ARTICLE X

RECEIPT, DISTRIBUTION AND APPLICATION OF RECEIPTS

SECTION 10.1. Receipt, Distribution and Application of Receipts ; Rent Distribution.

The parties hereto agree that the payments specified in this Section 10 will be distributed pursuant to the applicable subsections of this Section 10 and, with respect to payments required in this Section 10 below to be made to the Rent Assignees, in accordance with the Rent Assignment Agreement.

(a) Except as otherwise provided in Section 10.1(b) and Section 10.3, each payment of Basic Rent under the Lease as well as any payment of interest on overdue installments of Basic Rent under the Lease, and any other monies paid over by the Lessee to Administrative Agent which shall be remitted to Administrative Agent on behalf of the Lessor, shall be distributed by Administrative Agent as promptly as possible (it being understood that any payments of Basic Rent received by Administrative Agent under the Lease on a timely basis and in accordance with the provisions of the Lease shall be distributed by Administrative Agent on the date received in the funds so received) to the Rent Assignees and the Lessor, pro rata , without priority of one such Person over the other, with the Rent Assignees to be paid in accordance with such Rent Assignee’s Commitment Percentage and the remainder to be paid to the Lessor; provided , however , that such payment of interest on overdue installments of Basic Rent shall be paid to the Rent Assignees and the Lessor, without priority of one such Person over the other, in accordance with the ratio of the portion of such installment due to such Person over the total amount of such installment.

(b) Except as otherwise provided in Section 10.3, if any payment of Basic Rent shall be insufficient to pay in full the amounts set forth in Section 10.1(a), then such payment of Basic Rent as well as any payment in respect of interest on such payment of Basic Rent and any other monies paid over by the Lessee to the Lessor or any party hereto in respect thereof, shall be remitted to Administrative Agent and distributed as promptly as possible (it being understood that any payments of Basic Rent received by Administrative Agent under the Lease on a timely basis and in accordance with the provisions of the Lease shall be distributed by the Administrative Agent on the date received in the funds so received) to the Rent Assignees and the Lessor, pro rata , without priority of one such Person over the other, with the Rent Assignees to be paid in accordance with such Rent Assignee’s Commitment Percentage and the remainder to be paid to the Lessor. Any payment of interest at the Overdue Rate shall be paid to the Participants still due their full payment of Yield, without priority of one such Person over the other, in such proportions as such amount due and unpaid to such Participant bears to the total amount of Basic Rent remaining unpaid.

SECTION 10.2. Distribution of Certain Other Payments . (a) Except as otherwise provided in Sections 10.3 and 10.5, the amount of any payment of Purchase Amount, Lease Balance, Deficiency, Recourse Deficiency Amount, Sale Proceeds and any other amounts received

as a result of the termination of the Lease due to a purchase of the Leased Property by the Lessee, an election to return the Leased Property pursuant to Section 21.1(b) of the Lease, an Event of Loss or an Event of Taking (including, without limitation, any insurance proceeds, condemnation awards or payments by any Authority) under the Lease, in each case, with respect to which the Lessor, Agents or Rent Assignee shall have the right to receive and apply such amounts, shall, in each case be distributed and/or paid by Administrative Agent, in the following order of priority:

(i) first , so much of such payments, proceeds and/or amounts as shall be required to reimburse the Agents for services in their capacities as such as provided in the Operative Documents for any Tax or other Claim incurred by such Persons (to the extent not previously reimbursed and to the extent incurred in connection with their administrative duties under the Operative Documents duties as Agents) and any such unpaid ongoing administrative fees owing to such Persons shall be retained by the Person due such amounts;

(ii) second , the balance of such payments, proceeds and/or amounts shall be distributed to the Rent Assignees and Lessor, pro rata , without priority of one such Person over the other, with the Rent Assignees to be paid in accordance with such Rent Assignee’s Commitment Percentage and the remainder to be paid to the Lessor until payment in full of the outstanding Lease Balance with respect to the Rent Assignee Advances and the Lessor Investment together with all accrued and unpaid Yield thereon and all other amounts payable to the Rent Assignees and the Lessor under the Operative Documents;

(iii) third , the balance thereof shall be distributed to the Rent Assignees and Lessor, pro rata , without priority of one such Person over the other, with respect to all other amounts payable to the Rent Assignees and the Lessor under the Operative Documents; and

(iv) fourth , the balance, if any, shall be paid to the Lessee or such other Person as the Lessee may designate in writing.

(b) Any payment received as a result of a Casualty or Condemnation that does not result in the termination of the Lease and/or the Construction and Development Agreement (including, without limitation, any insurance proceeds, condemnation awards or payments by any Authority), shall be paid to the Lessee in accordance with the Lease or the Construction and Development Agreement, as applicable, if the Lessee or the Construction Agent, as applicable, is entitled thereto pursuant to the terms of the Operative Documents and, if the Lessee or the Construction Agent, as applicable, is not entitled thereto, such payment shall be remitted to Administrative Agent and distributed and paid in accordance with Section 10.3.

(c) Any payment received as a result of a payment of holdback amounts or unused contingency amounts pursuant to Section 3.3(g) hereof shall be applied in accordance with Section 10.2(a) hereof.

SECTION 10.3. Distribution of Payments After Event of Default . Except as otherwise provided in Section 10.5:

(a) All payments received and amounts realized by the Lessor and the Agents after the Lease shall have been declared in default in accordance with Article XVII of the Lease following an Event of Default shall be continuing, as well as all payments or amounts then held or thereafter received (other than Excluded Amounts) by the Lessor and the Agents while such Event of Default shall be continuing, shall be remitted to Administrative Agent, and forthwith distributed, in each case, with respect to which the Lessor, the Agents or the Rent Assignees shall have the right to receive and apply such amounts, in the following order of priority:

(i) first , so much of such payments or amounts as shall be required to reimburse the Agents for services in their capacities as such as provided in the Operative Documents for any Tax or other Claim incurred by such Persons (to the extent not previously reimbursed and to the extent incurred in connection with their administrative duties under the Operative Documents duties as Agents) and any such unpaid ongoing administrative fees owing to such Persons shall be retained by the Person due such amounts;

(ii) second , so much of such payments or amounts as shall be required to reimburse the then existing or prior Rent Assignees or Lessor for payments made by them pursuant to this Agreement or other Operative Documents in connection with such Event of Default (to the extent not previously reimbursed), excluding payments in respect of Yield, Rent Assignee Advance or Lessor Investment and any such unpaid payments or amounts owing to such Rent Assignees or Lessor shall be distributed to each such Rent Assignee or Lessor, pro rata , without priority of one over the other, in proportion to the amount of such payment or payments payable to each such Rent Assignee and Lessor;

(iii) third , the balance of such payments and amounts shall be distributed to the Rent Assignees and the Lessor, pro rata , without priority of one such Person over the other, with the Rent Assignees to be paid in accordance with such Rent Assignee’s Commitment Percentage and the remainder to be paid to the Lessor until payment in full of the outstanding principal amount with respect to the Rent Assignee Advances and the Lessor Investment together with all accrued and unpaid Yield thereon and all other amounts payable to the Rent Assignees and the Lessor under the Operative Documents;

(iv) fourth , so much of the remainder thereof provision for the application of which is contained in the Lease or any of the Operative Documents shall be applied and distributed in accordance with the terms of the Lease or such Operative Document; and

(v) fifth , the balance, if any, shall be paid to the Lessee or such other Person as the Lessee may designate in writing.

SECTION 10.4. Other Payments . (a) Except as otherwise provided in Sections 10.1, 10.2, 10.3 and 10.5 and paragraph (b) below:

(i) any payments received by the Lessor (or Administrative Agent or Collateral Agent) no provision for the application of which is made in the Operative Documents or elsewhere in this Section 10, and

(ii) all payments received and amounts realized by the Lessor (or Administrative Agent or Collateral Agent) under the Lease or otherwise with respect to the Leased Property to the extent received or realized at any time after payment in full of the outstanding Lease Balance with respect to the Rent Assignee Advances and the Lessor Investment together with all accrued and unpaid Yield thereon and all other amounts payable to the Rent Assignees and the Lessor under the Operative Documents, shall be remitted to the Administrative Agent and distributed forthwith in the order of priority set forth in Section 10.2, if the Lease shall not have been declared in default in accordance with Article XVII of the Lease during the continuance of an Event of Default, and Section 10.3(a), if the Lease shall have been declared in default in accordance with Article XVII of the Lease during the continuance of an Event of Default.

(b) Any payment received by the Lessor (or the Administrative Agent or the Collateral Agent) provision for the application of which is made in an Operative Document but not elsewhere in this Section 10 shall be remitted to the Administrative Agent and distributed forthwith to the Person for the purpose for which such payment was made in accordance with the terms of such Operative Document.

SECTION 10.5. Distribution of Excluded Amounts and Supplemental Rent . All amounts constituting Excluded Amounts or Supplemental Rent received by the Lessor (or Administrative Agent) shall be remitted to Administrative Agent and paid to or upon the order of the Person entitled thereto pursuant to the Operative Documents.

[Signature Pages Follow]

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.


	CUBIC CORPORATION,
	AS THE LESSEE AND THE CONSTRUCTION AGENT


	By:
		Name:
		Title:

[Participation Agreement]


	BANKERS COMMERCIAL CORPORATION,
	AS THE LESSOR


	By:
		Name:
		Title:

[Participation Agreement]


	MUFG UNION BANK, N.A.,
	AS COLLATERAL AGENT


	By:
		Name:
		Title:

[Participation Agreement]


	MUFG BANK, LTD.,
	AS THE ADMINISTRATIVE AGENT


	By:
		Name:
		Title:

[Participation Agreement]


	BA LEASING BSC, LLC
	AS A RENT ASSIGNEE


	By:
		Name:
		Title:

[Participation Agreement]

Schedule I-A

Rent Assignee Commitments

Institution	Commitment Amount		Commitment Percentage

BA Leasing BSC, LLC	$	52,400,000	50	%

Aggregate Rent Assignee Commitments:	$	52,400,000	50	%

Schedule I-B

Lessor Commitment

Schedule III

Liens

None

Schedule IV

Description of Site Owned by Lessor

THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF SAN DIEGO, IN THE COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, AND IS DESCRIBED AS FOLLOWS:

EXCEPTING THEREFROM ALL BUILDING IMPROVEMENTS LOCATED ON SAID LAND.

APN: PORTIONS 369-163-05-00 AND 369-170-18-00

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Schedule 2.9(f)

Draw Date	Cumulative Advance
2/5/19	$ 0
2/25/19	$ 7,969,283
3/25/19	$ 8,574,833
4/25/19	$ 11,822,855
5/28/19	$ 14,314,140
6/25/19	$ 16,963,615
7/25/19	$ 19,585,891
8/26/19	$ 23,318,875
9/25/19	$ 25,967,102
10/25/19	$ 29,863,643
11/25/19	$ 34,397,595
12/26/19	$ 38,878,560
1/27/20	$ 44,422,822
2/25/20	$ 49,164,724
3/25/20	$ 54,915,988
4/27/20	$ 60,910,737
5/26/20	$ 67,754,792
6/25/20	$ 75,451,966
7/27/20	$ 83,125,570
8/25/20	$ 90,830,508
9/25/20	$ 97,788,179
10/26/20	$ 103,781,989
11/25/20	$ 104,800,000
12/28/20	$ 104,800,000
1/25/21	$ 104,800,000

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EXHIBIT A
TO PARTICIPATION AGREEMENT

Form of Advance Request

________________, 20__

To:

Bankers Commercial Corporation, in its capacity as the Lessor (the “ Lessor ”)

MUFG Bank, Ltd., in its capacity as Administrative Agent (the “ Administrative Agent ”)

CBRE Global Investors, LLC, in its capacity as Construction Consultant

From:

Cubic Corporation, as Construction Agent

Re:

Advance for $ [_________________] pursuant to the Participation Agreement dated as of February 5, 2019 (as may be amended, the “ Participation Agreement ”), among Cubic Corporation, as the Lessee (the “ Lessee ”) and the Construction Agent, MUFG Union Bank, N.A., as Collateral Agent (the “ Collateral Agent ”), the Administrative Agent, the Rent Assignee(s) named on Schedule I-A thereto from time to time, and the Lessor.

1. All capitalized terms used but not defined herein shall have the meanings as set forth in Annex I of the [__, 2019, draft of the] 1 Participation Agreement.

2. The proposed Advance Date is __________ __, 20__ (the “ Advance Date ”), provided that the Lessor is hereby directed and authorized by the Construction Agent to wire the Advance directly to the Administrative Agent on the proposed Advance Date 2 .

3. The Lessee hereby requests that the Advance be made in an aggregate amount of $[_________________].

4. $[_________________] of the Advance is to fund Construction Costs other than Carrying Costs.

5. $[_________________] of the Advance is to fund Carrying Costs other than Capitalized Yield and Transaction Costs.

6. $[_________________] of the Advance is to fund Capitalized Yield.

7. $[_________________] of the Advance is to fund Upfront Fees. 3

1 Use for initial Advance only.

2 The Monthly Date which will be the same date each month.

3 Initial Advance Request only.

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8. $[_________________] of the Advance is to fund Non-Use Fees.

9. $[_________________] of the Advance is to fund Transaction Costs other than Upfront Fees and Non-Use Fees.

10. The initial Payment Period for the Advance commences on the Advance Date and shall end on [ the next Monthly Date/the Base Term Commencement Date] .

11. [The Lessee agrees that it shall pay to the Lessor and Rent Assignees such amounts as may be necessary to reimburse the Lessor and Rent Assignees for any loss or expense incurred (including any loss or expense incurred by reason of the liquidation or reemployment of deposits or other funds acquired by the Lessor or Rent Assignees to make, continue or maintain any portion of its investment in any Rent Assignment Interests or Lessor Investment, as applicable, on a LIBOR Rate basis) as a result of the Advance not being made on the Advance Date due to the Lessee cancelling or rescinding this Advance Request, or not satisfying the conditions precedent to, the Advance on the Advance Date or otherwise with respect to the actions or inactions of the Administrative Agent such that the Lessor or Rent Assignees are not able, in light of internal funding procedures or otherwise, to deliver or release its portion of the Advance on the Advance Date. The Lessor and Rent Assignees shall promptly notify the Lessee in writing of the amount of any claim under this paragraph, the reason or reasons therefore and the additional amount required fully to compensate the Lessor and Rent Assignees for such loss or expense. Such written notice (which shall include calculations in reasonable detail) shall, in the absence of manifest error, be conclusive and binding upon the Lessee. The indemnity set forth herein shall survive the Advance Date and the execution and delivery hereof.] 4

12. The undersigned requests that disbursements be sent by wire transfer in accordance with the wire instructions of the Lessee set forth in Schedule II to the Participation Agreement.

13. [The notice provisions set forth in Section 9.3 of the Participation Agreement are hereby incorporated by reference as if fully set forth herein. Any notices delivered hereunder in accordance with such Section shall be deemed validly given to such other Person.] 5

14. [In addition, the provisions set forth in Sections 9.8, 9.10, 9.13, and 9.17 of the [__], 2019 draft of Participation Agreement shall be incorporated herein by reference.] 6

4 Only to be made in connection with initial Advance Request.

5 Only to be made in connection with initial Advance Request.

6 Only to be made in connection with initial Advance Request.

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15. Each addressee hereof shall be entitled to rely on this Advance Request and the undersigned agree that such addressees shall have third-party beneficiary rights, all as if such addressees were signatories hereto.

16. Pursuant to Section 3.1(e) of the Participation Agreement, the undersigned hereby certifies that:

(i) the remaining Available Commitments of the Lessor and the Rent Assignees are sufficient to Complete the Facility and to pay all Construction Costs;

(ii) Completion can be achieved before the Construction Period Termination Date;

(iii) the Facility is being constructed on the Site substantially in accordance with the Plans and Specifications and in accordance with the Construction Budget (in each case, as supplemented or amended pursuant to Section 3.2 of the Construction and Development Agreement);

(iv) all Change Orders which have not previously been certified in a prior Advance Certificate are attached hereto as Exhibit A (the “ Current Change Orders ”), together with reasonably sufficient detail thereof, including of the change and cost of the change for all such Change Orders;

(v) the Current Change Orders, individually and in the aggregate, after giving effect thereto, will not (A) materially diminish: (1) the utility, useful life or functional capability of the Facility as Class A office buildings when Completion has been effected; (2) the expected Fair Market Value of the Facility as of the Construction Period Termination Date; or (3) the Fair Market Value as of the Maturity Date; (B) cause the remaining Available Commitments of the Lessor and the Rent Assignees to be insufficient to Complete the Facility; or (C) delay Completion beyond the Construction Period Termination Date;

(vi) funds for the Current Change Orders are available from the unused Aggregate Contingency Amount (subject to the requirement for Lessor’s and Rent Assignees’ consent, if applicable, as referenced in subsection (viii) below);

(vii) in the aggregate respecting any particular Major Construction Document, the cost of all Current Change Orders under such Major Construction Document, when aggregated with the cost of all prior Change Orders under such Major Construction Document, does not exceed the higher of $200,000 and ten percent (10%) of the original total amount payable under such Major Construction Document (in the aggregate with all prior and concurrent Change Orders with respect to such Construction Document) ;

(viii) in the aggregate respecting all Construction Documents, the Construction Budget and the Plans and Specifications, the cost of all Current Change Orders, when aggregated with the cost of all prior Change Orders, does not exceed an amount equal to the Permitted Excess Amount, unless the Lessor and Rent

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Assignees have provided their prior written consent to each such additional Current Change Order causing such amount to exceed the Permitted Excess Amount;

(ix) a true, correct and complete reconciliation of the Construction Budget is attached hereto as Exhibit B-1 and, to the extent completed since the prior Advance, a true, correct and complete copy of the Plans and Specifications are attached hereto as Exhibit B-2 and the Offsite Plans and Specifications are attached hereto as Exhibit B-3 ;

(x) all representations and warranties of the Lessee and the Construction Agent contained in the Operative Documents are true and correct in all material respects;

(xi) no Construction Event of Default or Construction Default is continuing;

(xii) all necessary or advisable Governmental Actions, and all consents, approvals and authorizations of Persons, required in connection with the Overall Transaction, have been obtained or made and are in full force and effect and are not subject to any pending procedures or appeals, whether administrative, judicial or otherwise, except for (A) any Governmental Actions that are not required with respect to the current status of the construction of the Facility; (B) any other Governmental Action, consent, approval or authorization the failure to obtain which, or the appeal of or further procedures with respect to which, would not reasonably be expected to have a Material Adverse Effect; and (C) the execution of those Construction Documents not required with respect to the current status of the construction of the Facility;

(xiii) all Major Construction Documents which have been entered into by the Construction Agent prior to the Advance Date have been assigned to the Lessor pursuant to an Assignment of Contracts and the applicable Consent and Acknowledgments have been delivered to Lessor, the Rent Assignees and the Administrative Agent;

(xiv) the proceeds of the Advance will be used solely to pay for accrued and unpaid Construction Costs previously performed or contracted for and then due or payable, or that have been invoiced (or in the case of costs incurred by the Construction Agent using its own resources, that have been described in writing to the Lessor in reasonable detail) and will be come due and payable in the month immediately following the Advance Date, or materials previously purchased or contracted for, together with all Carrying Costs and that all invoices for the foregoing costs have been (or will be with the proceeds of such Advance) paid in full;

(xv) none of such costs specified in clause (xiv) have been reimbursed or paid pursuant to a previous Advance;

(xvi) the costs being funded with the Advance are as set forth in Schedule 1 attached hereto;

(xvii) all conditions precedent to the Advance have been satisfied, and

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(xviii) no Major Construction Documents have been entered into since the Closing Date or the most recent prior Advance Date, as applicable[, except for those attached hereto as Exhibit C ].

17. $250 of the Advance is to fund the Construction Fee.

[Signature page follows]

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IN WITNESS WHEREOF, the undersigned has caused this Advance Request to be duly executed and delivered by its proper and duly authorized officers as of the day and year first above written.


	CUBIC CORPORATION


	By:
		Name:
		Title:

EXHIBIT B

TO PARTICIPATION AGREEMENT

FORM OF ASSIGNMENT AGREEMENT

This Assignment Agreement (this “ Assignment Agreement ”) is made and entered into as of ____________, _______, by and between [NAME OF ASSIGNOR] (the “ Assignor ”) and [NAME OF ASSIGNEE] (the “ Assignee ”).

RECITALS

A. Reference is made to the Participation Agreement, dated as of February 5, 2019, by and among Cubic Corporation, a Delaware corporation, as the Lessee and the Construction Agent, Bankers Commercial Corporation, as the Lessor, MUFG Union Bank, N.A., as the Collateral Agent, MUFG Bank, Ltd. as the Administrative Agent and the Rent Assignee(s) named on Schedule I-A thereto from time to time (as the same may be amended, supplemented or otherwise modified from time to time, the “ Participation Agreement ”). Capitalized terms used herein that are defined in the Participation Agreement shall have the meanings therein defined.

B. Pursuant to the Participation Agreement and the other Operative Documents and subject to the limitations set forth therein, (i) the Rent Assignees agreed to acquire the Rent Assignment Interests from the Lessor which are to be sold by Lessor under each Rent Assignment Agreement and (ii) the Lessor agreed to make the Lessor Investment.

C. The Assignor’s Commitment (without giving effect to the assignment effected hereby or to other assignments thereof which have not yet become effective) in respect of Rent Assignment Interests and Lessor Investment is specified in Item 1 of Schedule I hereto. The outstanding principal amount of the Rent Assignment Interests corresponding to Assignor’s Rent Assignment Interests and/or the outstanding principal amount of the Lessor Investment of the Assignor (without, in both cases, giving effect to the assignment effected hereby or to other assignments thereof which have not yet become effective) are specified in Item 2 of Schedule 1 hereto.

D. The Assignor wishes to sell and assign to the Assignee, and the Assignee wishes to purchase and assume from the Assignor, (i) the portion of the Assignor’s rights and obligations under the Operative Documents, including its Commitment specified in Item 3 of Schedule 1 hereto (collectively, the “ Assigned Commitment ”) and (ii) the portion of the Assignor’s Rent Assignment Interests, and/or outstanding Lessor Investment specified in Item 4 of Schedule 1 hereto (the “ Assigned Property ”).

NOW, THEREFORE, in consideration of the foregoing and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

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1. Assignment

Subject to the terms and conditions set forth herein and in the Participation Agreement, the Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, without recourse, on the date first set forth above (the “ Assignment Date ”), (i) all right, title and interest of the Assignor to the Assigned Property and (ii) all obligations of the Assignor under the Operative Documents with respect to the Assigned Commitment. The Assignor shall at the cost and expense of the Assignee take such steps as may be necessary to fully effect legally or commercially such sale. As full consideration for the sale of the Assigned Property and the Assigned Commitment, the Assignee shall pay to the Assignor on the Assignment Date the purchase price agreed to between such parties (the “ Purchase Price ”).

2. Representations, Warranties [and Comments]

(a) Each of the Assignor and the Assignee represents and warrants to the other that (i) it has full power and legal right to execute and deliver this Assignment Agreement and to perform the provisions of this Assignment Agreement; (ii) the execution, delivery and performance of this Assignment Agreement have been authorized by all necessary action, corporate or otherwise, and do not violate any provisions of its organizational documents or any contractual obligations or requirement of law binding on it; and (iii) this Assignment Agreement constitutes its legal, valid and binding obligation, enforceable against it in accordance with its terms. The Assignor further represents to the Assignee that it is the legal and beneficial owner of the interest being assigned by it hereunder and that such interest is free and clear of any adverse claim created by the Assignor.

(b) The Assignee represents and warrants to the Assignor, the Lessee, the Administrative Agent and the Lessor that it is an Eligible Assignee or, in the case of an assignment made by the Lessor pursuant to Section 6.3(b) of the Participation Agreement, that it is a Permitted Transferee and that the conditions of assignment set forth in Section 6.3 of the Participation Agreement have been satisfied.

(c) The Assignee represents and warrants to the Lessee, upon consummation of the assignment and assumption contemplated hereby, that it will not be subject to United States federal or state Withholding Tax on payments of yield under the Operative Documents.

(d) [The Assignee agrees to deliver a lessor confirmation letter to the Lessee]. 1

3. Conditions Precedent

The obligations of the Assignor and the Assignee hereunder shall be subject to the fulfillment of the conditions that the Assignor shall have (i) received payment in full of the Purchase Price, and (ii) complied with the other applicable provisions of Section 6.3 of the Participation Agreement.

1 Applicable only to Lessor.

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4. Notice of Assignment

The Assignor agrees to give notice of the assignment and assumption of the Assigned Property and the Assigned Commitment in accordance with Section 6.3(c)(A) of the Participation Agreement and hereby instructs the Administrative Agent, the Lessee and the Lessor to make all payments with respect to the Assigned Property and the Assigned Commitment directly to the Assignee at the applicable offices specified on Schedule 2 hereto; provided, however, that the Administrative Agent, the Lessee and the Lessor shall be entitled to continue to deal solely and directly with the Assignor in connection with the interests so assigned until (i) the Agents, the other Participants and the Lessee shall have received notice of the assignment and (ii) the Lessee shall have consented in writing thereto to the extent required by Section 6.3 of the Participation Agreement. From and after the date (the “ Assignment Effective Date ”) on which the Administrative Agent shall notify the Lessee and the Assignor that the requirements set forth in the foregoing sentence shall have occurred and all consents (if any) required shall have been given, (x) the Assignee shall be deemed to be a party to the Operative Documents and, to the extent that rights and obligations thereunder shall have been assigned to Assignee as provided in such notice of assignment to the Administrative Agent, shall have the rights and obligations of a Rent Assignee and/or the Lessor, as applicable, under the Operative Documents, and (y) the Assignee shall be deemed to have appointed and the Agents to take such action as agent on its behalf and to exercise such powers under the Operative Documents as are delegated to the Administrative Agent or the Collateral Agent, as applicable, by the terms thereof, together with such powers as are reasonably incidental thereto. After the Assignment Effective Date, the Administrative Agent and the Lessee shall make all payments in respect of the interest assigned hereby (including payments of principal on the Rent Assignment Interests, Lessor Investment, Yield, Fees and other amounts) to the Assignee. The Assignor and the Assignee shall make all appropriate adjustment in payments under the Assigned Property and the Assigned Commitment for periods prior to the Assignment Effective Date hereof directly between themselves. If the Assignee is not a United States Person as defined in Section 7701(a)(30) of the Code, the Assignee (if legally entitled to do so) shall deliver to the Administrative Agent and the Lessor and the Lessee herewith the forms required by Section 7.3 of the Participation Agreement to evidence the Assignee’s complete exemption from United States withholding taxes with respect to payments under the Operative Documents. If the Assignee is a United States Person, the Assignee (if legally entitled to do so) shall deliver to the Administrative Agent and the Lessor and the Lessee herewith an Internal Revenue Service Form W-9 evidencing the Assignee’s exemption from United States backup withholding taxes and any other forms required by Section 7.3 of the Participation Agreement.

5. Independent Investigation

The Assignee acknowledges that it is purchasing the Assigned Property and the Assigned Commitment from the Assignor totally without recourse and, except as provided in Section 2 hereof, without representation or warranty. The Assignee further acknowledges that it has made its own independent investigation and credit evaluation of the Lessee in connection with its purchase of the Assigned Property and the Assigned Commitment. Except for the representations or warranties set forth in Section 2, the Assignee acknowledges that it is not relying on any representation or warranty of the Assignor, expressed or implied, including without limitation, any representation or warranty relating to the legality, validity, genuineness,

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enforceability, collectibility, yield rate, repayment schedule or accrual status of the Assigned Property or the Assigned Commitment, the legality, validity, genuineness or enforceability of the Operative Documents, or the financial condition or creditworthiness of the Lessee or any other Person. The Assignor has not and will not be acting as the representative, agent or trustee of the Assignee with respect to matters arising out of or relating to the Operative Documents or this Assignment Agreement. From and after the Assignment Effective Date, except as set forth in Section 4 above, the Assignor shall have no rights or obligations with respect to the Assigned Property or the Assigned Commitment.

6. Consents

Pursuant to the provisions of Section 6.3 of the Participation Agreement and to the extent required thereby, the Lessee, by signing below, consents to this Assignment Agreement and to the assignment contemplated herein.

7. Method of Payment

All payments to be made by either party hereunder shall be in funds available at the place of payment on the same day and shall be made by wire transfer to the account designated by the party to receive payment.

8. Integration

This Assignment Agreement shall supersede any prior agreement or understanding between the parties (other than the Participation Agreement and the other Operative Documents) as to the subject matter hereof.

9. Counterparts

This Assignment Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and shall be binding upon all parties, their successors and assigns.

10. Headings

Section headings have been inserted herein for convenience only and shall not be construed to be a part hereof.

11. Amendments; Waivers

This Assignment Agreement may not be amended, changed, waived or modified except by a writing executed by the parties hereto, and may not be amended, changed, waived or modified in any manner inconsistent with Section 6.3 of the Participation Agreement without the prior written consent of the Administrative Agent and the Lessee.

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12. Governing Law

This Assignment Agreement shall be governed by, and construed and interpreted in accordance with, the internal laws of the State of New York, without regard to principles of conflict of laws (except Section 5-1401 of the New York General Obligations Law).

13. Beneficiaries

To the extent not a party hereto, the Agents, the Lessor and the Lessee shall be third party beneficiaries of this Assignment Agreement with respect to the representations and warranties applicable to such parties as set forth in Sections 2(b), (c) and/or (d) hereof.

* *

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IN WITNESS WHEREOF, the parties hereto have caused this Assignment Agreement to be duly executed and delivered by their proper and duly authorized officers as of the day and year first above written.


		[NAME OF ASSIGNOR], as Assignor


		By:
			Name:
			Title:


		[NAME OF ASSIGNEE], as Assignee


		By:
			Name:
			Title:


Consented to by 2 :

Cubic Corporation, as Lessee


By:
	Name:
	Title:

2 To the extent required under Section 6(a) hereof.

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SCHEDULE 1

ASSIGNMENT AGREEMENT,

dated as of _________, 20___,

between [Name of Assignor], as Assignor and

[Name of Assignee], as Assignee


Item 1 Assignor’s Commitment:

	Rent Assignment Interests	$____________
	Lessor Investment	$____________

Item 2 Outstanding principal amount of:

	Rent Assignment Interests	$____________
	Lessor Investment	$____________

Item 3 Assigned Commitment:		$____________

Item 4 Outstanding amount of Assigned Property:

	Rent Assignment Interests	$____________
	Lessor Investment	$____________

SCHEDULE 2

ASSIGNMENT AGREEMENT

dated as of _________ ___, 20___,

between [Name of Assignor], as Assignor and

[Name of Assignee], as Assignee

DOMESTIC LENDING OFFICE		LIBOR LENDING OFFICE



Attention:		Attention:
Telephone: (___) ____-_________		Telephone: (___) ____-_________
Telecopy: (___) ____-_________		Telecopy: (___) ____-_________

ADDRESS FOR NOTICES



Attention:
Telephone: (___) ____-__________
Telecopy: (___) ____-_________

WIRING INSTRUCTIONS FOR ASSIGNEE :


Bank:
Account Number:
ABA Number:
Attention:
Ref:

APPENDIX I

PARTICIPATION AGREEMENT

In the Participation Agreement and each other Operative Document, unless the context otherwise requires:

(b) any term defined below by reference to another instrument or document shall continue to have the meaning ascribed thereto whether or not such other instrument or document remains in effect;

(d) words importing a gender include any gender;

(e) a reference to a part, clause, section, article, exhibit or schedule is a reference to a part, clause, section and article of, and exhibit and schedule to, such Operative Document;

(f) a reference to any statute, regulation, proclamation, ordinance or law includes all statutes, regulations, proclamations, ordinances or laws amending, supplementing, supplanting, varying, consolidating or replacing them, and a reference to a statute includes all regulations, proclamations and ordinances issued or otherwise applicable under that statute;

(g) a reference to a document includes any amendment, modification or supplement to, or replacement, restatement or novation of, that document;

(h) a reference to a party to a document includes that party’s successors and assigns;

(i) all accounting terms not specifically defined herein shall be construed in accordance with GAAP; and

(j) references to “including” shall mean including without limiting the generality of any description preceding such term and for purposes hereof the rule of ejusdem generis shall not be applicable to limit a general statement followed by or referable to an enumeration of specific matters to matters similar to those specifically mentioned.

Further, each of the parties to the Operative Documents and their counsel have reviewed and revised the Operative Documents, or requested revisions thereto, and the usual rule of construction that any ambiguities are to be resolved against the drafting party shall be inapplicable in construing and interpreting the Operative Documents.

“ Acquisition ” shall mean any acquisition by the Lessee or any of its Subsidiaries of all or substantially all of the capital stock of, or all or a substantial part of the assets of, or of a business unit or division of, any Person.

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“Actual Knowledge” shall mean, as to any matter with respect to any Person, the actual knowledge of such matter by a Responsible Officer of such Person.

“Additional Costs” shall mean the amounts payable by the Lessee pursuant to Sections 7.2(a)(iii), 7.4, 7.5 and 7.7 of the Participation Agreement.

“Administrative Agent” shall mean MUFG Bank, Ltd. in its capacity as Administrative Agent under the Operative Documents.

“Adjusted Covenant Period ” shall have the meaning set forth in Section 5.6 of the Participation Agreement.

“Advance” shall mean an advance of funds by the Lessor pursuant to Article II of the Participation Agreement comprised of Rent Assignment Advances made by the Rent Assignees and an advance of a portion of the Lessor Investment made by the Lessor.

“Advance Certificate ” shall have the meaning set forth in Section 3.1(e) of the Participation Agreement.

“Advance Date” shall mean the actual date on which an Advance occurs in accordance with the terms of Section 2.5 of the Participation Agreement.

“Advance Request” shall have the meaning provided in Section 2.5 of the Participation Agreement.

“Affiliate” shall mean, with respect to any Person, any other Person which directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, such first Person or any of its subsidiaries. The term “control” shall mean the possession, directly or indirectly, of any power to direct or cause the direction of the management and policies of a Person, whether through ownership of voting securities, by contract or otherwise.

“Agency Fees” shall have the meaning provided in Section 8.10 of the Participation Agreement.

“Agents” shall mean the Administrative Agent and the Collateral Agent.

“Aggregate Contingency Amount” shall mean an amount equal to $10,000,000.

“Alterations” shall have the meaning provided in Section 9.2(a) of the Lease.

“Alternate Base Rate” shall mean for any day, a rate per annum equal to the higher of (a) the MUFG Base Rate for such day, (b) the sum of 0.50% per annum plus the Federal Funds Rate for such day, and (c) the LIBOR Rate on such day plus 1.00%. Any change in the Alternate Base Rate due to a change in the MUFG Base Rate, the Federal Funds Rate or the LIBOR Rate shall be effective as of the opening of business on the day of such change in the MUFG Base Rate, the Federal Funds Rate or the LIBOR Rate, respectively.

“A.M. Best’s” shall mean A.M. Best Company or any successor thereto.

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“Applicable Laws and Regulations” shall mean as of any date all applicable laws, rules, regulations (including Environmental Laws), statutes, treaties, codes, ordinances, permits, certificates, orders and licenses of and interpretations by, any Authority, and applicable judgments, decrees, injunctions, writs, orders or like action of any court, arbitrator or other administrative, judicial or quasi-judicial tribunal or agency of competent jurisdiction (including those pertaining to health, safety or the environment and those pertaining to the construction, use, occupancy or subdivision of the Leased Property and the Site) and any restrictive covenant or deed restriction or easement of record affecting the Leased Property or the Site (including the Appurtenant Service Rights).

“Applicable Margin” shall mean [***] basis points.

“Appraisal” shall have the meaning provided in Section 2.1(h) of the Participation Agreement.

“Appraiser” shall mean CBRE Group, Inc., or such other appraiser or appraisal firm that is reasonably satisfactory to the Lessor.

“Appurtenant Service Rights” shall mean all rights and easements appurtenant to the Site which are necessary to provide the Facility with all utility services necessary for construction and use of the Facility (including without limitation, electric, gas, telephone, water and sewer service) to be transmitted into the Facility and out of the Facility which the Ground Lessor, as fee owner, has the right to grant and connect.

“Arrangement Fee” shall have the meaning provided in Section 2.13(a) of the Participation Agreement.

“Arranger” shall mean Bankers Commercial Corporation.

“ASC” shall have the meaning provided in Section 2.14(a) of the Participation Agreement.

“Assignment Agreement” shall mean an Assignment Agreement substantially in the form of Exhibit B to the Participation Agreement.

“Assignment of Contracts” shall have the meaning provided in Section 2.4(a) of the Construction and Development Agreement, which shall include, without limitation, the following, each of which is dated as of the Closing Date: (1) Developer Consent Agreement, by and among the Construction Agent and the Developer for the benefit of the Lessor, (2) General Contractor Assignment and Consent Agreement, by and among the Construction Agent and the Developer for the benefit of the Lessor, and acknowledged and consented to by the General Contractor, (3) General Contractor Consent Agreement, by and between the Construction Agent and the Lessor, and (4) Subcontractor Assignment and Consent Agreement, by and among the Construction Agent, the Developer and the General Contractor for the benefit of Lessor, and acknowledged and consented to by the subcontractor and suppliers listed on Exhibit A thereto from time to time.

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“Authority” shall mean the government of the United States, any other nation, or any political subdivision thereof, whether state or local, and any agency, authority, instrumentality, regulatory body, court, central bank or other entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government.

“Available Commitment” shall mean, as to any Participant, an amount equal to the difference, if any, of (a) the aggregate Commitment of such Participant minus (b) the aggregate outstanding amount of such Participant’s Rent Assignment Advances (in the case of the Rent Assignees) or Lessor Investment (in the case of the Lessor).

“Bankruptcy Code” shall mean the United States Bankruptcy Code as set forth in Title 11 of the United States Code, as amended from time to time and any successor provision.

“Base Term” shall have the meaning provided in Section 2.2 of the Lease.

“Base Term Commencement Date” shall have the meaning provided in Section 2.2 of the Lease.

“ Base Term Commencement Date Notice ” shall mean an Officer’s Certificate of the Lessee that shall set forth: (a) the aggregate principal amount of the Rent Assignment Advances made by the Rent Assignees, (b) the aggregate Lessor Investment made by the Lessor, and (c) the date of the Base Term Commencement Date.

“Basic Rent” shall mean the sum of the Basic Rent (Facility) and the Basic Rent (Land).

“Basic Rent (Facility) ” shall mean for any period of determination, an amount equal to the aggregate amount of Yield payable on the last day of such period on the Lease Balance.

“Basic Rent (Land) ” shall mean for any period of determination, an amount equal to $750,000, per annum, payable in advance on the Closing Date and on the first Advance Date after the one year anniversary of the Closing Date.

“Beneficial Ownership Regulation ” shall mean 31 C.F.R. § 1010.230

“Bill of Sale” shall mean any Bill of Sale, dated on or after the Closing Date, from a vendor, as grantor, to the Lessor, as grantee, with respect to any Equipment.

“Board of Directors” shall mean, with respect to any Person, (a) in the case of any corporation, the board of directors of such Person, (b) in the case of any limited liability company, the board of managers of such Person, (c) in the case of any partnership, the Board of Directors of the general partner of such Person and (d) in any other case, the functional equivalent of the foregoing.

“Break Amount” shall have the meaning provided in Section 7.5 of the Participation Agreement.

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“Building 1 ” shall have the meaning provided in the definition of Existing Buildings.

“Business Day” shall mean any day other than a Saturday, Sunday or other day on which commercial banks in New York, New York and San Diego, California (and, solely with respect to definition of LIBOR Rate and the payment of any Yield calculated on the basis of the LIBOR Rate, London, England) are authorized or required by law to close.

“Capital Lease Obligations” of any Person shall mean all obligations of such Person to pay rent or other amounts under any lease of (or other arrangement conveying the right to use) real or personal property, or a combination thereof, which obligations are required to be classified and accounted for as capital leases on a balance sheet of such Person under GAAP, and the amount of such obligations shall be the capitalized amount thereof determined in accordance with GAAP.

“Capital Lease ” shall mean all leases that have been or should be, in accordance with GAAP, recorded as capital leases.

“ Capitalized Rentals ” shall mean, with respect to any Person and as of the date of any determination thereof, the amount at which the aggregate Rentals due and to become due under all Capital Leases under which such Person is a lessee would be reflected as a liability on a consolidated balance sheet of such Person.

“Capitalized Yield” shall mean, with respect to the Lessor Investment and Rent Assignment Advances, the aggregate amount of all Yield accruing thereon attributable to Advances made during and for any Payment Period ending on or before the Base Term Commencement Date. Yield accruing during such Payment Periods on the Advances shall be treated as Capitalized Yield pursuant to Section 2.10 of the Participation Agreement, except to the extent that such amount is not to be capitalized because such amount exceeds the Available Commitment for the Lessor or Rent Assignee, as applicable.

“Carrying Costs” shall mean, carrying and closing costs incurred in connection the Overall Transaction including Transaction Costs (except any amounts constituting indemnification that are payable by the Lessee directly prior to the Construction Period Termination Date and not through Advances) and Capitalized Yield on prior unpaid Advances, Taxes, insurance premiums and other similar budget items.

“Casualty” shall mean an event of damage or casualty relating to any portion or all of the Leased Property which does not constitute an Event of Loss.

“Change in Law” shall have the meaning provided in Section 7.4(a) of the Participation Agreement.

“Change Order” shall mean any amendment, modification, supplement, replacement, restatement or novation regarding any Construction Document, the Construction Budget and/or the Plans and Specifications, including any component part or line item of any Construction Document, the Construction Budget and/or the Plans and Specifications.

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“Claims” shall mean liabilities, obligations, damages, losses, demands, penalties, fines, claims, actions, suits, judgments, settlements, charges, costs, fees, expenses and disbursements (including, without limitation, out-of-pocket legal fees and expenses and costs of investigation which, in the case of counsel or investigators retained by an Indemnitee, shall be reasonable) of any kind and nature whatsoever including (except where specifically noted otherwise) but not limited to the outstanding Lease Balance or any part thereof.

“Closing” shall have the meaning provided in Section 2.1 of the Participation Agreement.

“Closing Date” shall mean February 5, 2019.

“Code” shall mean the Internal Revenue Code of 1986 and the rules and regulations thereunder, each as amended, supplemented or otherwise modified from time to time.

“Collateral Agent” shall mean MUFG Union Bank, N.A., in its capacity as Collateral Agent under the Operative Documents.

“Commitment” shall mean (i) as to any Rent Assignee, its obligation to acquire Rent Assignment Interests from the Lessor which are to be sold by the Lessor under each Rent Assignment Agreement and to make Rent Assignment Advances available to the Escrow Agent (for the account of Lessor) in an aggregate amount not to exceed at any one time outstanding the amount set forth opposite such Rent Assignee’s name on Schedule I-A to the Participation Agreement, and (ii) as to the Lessor, its obligation to fund Advances from proceeds of its Lessor Investment in an aggregate amount not to exceed at any one time outstanding the amount set forth on Schedule I-B to the Participation Agreement, in each case as such schedule may be amended pursuant to Section 2.2(d) or Section 9.5 of the Participation Agreement .

“Commitment Amount” shall mean $104,800,000.

“Commitment Percentage” shall mean as to any Participant, the percentage set forth opposite such Person’s name under the heading “Commitment Percentage” on Schedule I-A to the Participation Agreement with respect to the Rent Assignees or on Schedule I-B to the Participation Agreement with respect to the Lessor or the percentage obtained by dividing (x) the amount of the Commitment assumed by such Participant pursuant to the Participation Agreement or the Assignment Agreement by (y) the aggregate amount of the Commitments of the Participants.

“Commitment Period” shall mean the period of time beginning on the Closing Date and ending on the earlier of (i) the Construction Period Termination Date and (ii) the date upon which the Commitments are otherwise terminated pursuant to the terms of the Operative Documents.

“Commodity Hedging Agreement” shall mean any agreement (including any master agreement or master netting agreement) that evidences or provides for a swap, cap, collar, floor, put, call, option, future, other derivative, spot purchase or sale, forward purchase or sale, supply or off-take, transportation agreement, storage agreement or other commercial or trading agreement in or involving crude oil, natural gas, any feedstock, blendstock, intermediate product, finished product, refined product or other hydrocarbons product, carbon credit, pollution credits

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and/or any other “cap and trade” assets or any other energy, weather or emissions related commodity (including any crack spread), or any prices or price indices relating to any of the foregoing commodities, or any economic index or measure of economic risk or value, or other benchmark against which payments or deliveries are to be made (including any combination of such transactions).

“Complete” shall mean to cause Completion to occur.

“Completion” shall mean Substantial Completion of the Facility substantially in accordance with the Plans and Specifications and in accordance with the Construction Budget (in each case, as supplemented or amended pursuant to Section 3.2 of the Construction and Development Agreement, but without regard to whether the Facility has been subjected to any post-construction testing requirements called for under any Construction Document).

“Completion Date” shall mean the date on which Completion has occurred.

“Condemnation” shall mean any condemnation, requisition, confiscation, seizure or other taking or sale of the use, occupancy or title to the Leased Property or the Site or any part thereof in, by or on account of any eminent domain proceeding or other action by any Authority or other Person under the power of eminent domain or otherwise or any transfer in lieu of or in anticipation thereof, which in any case (a) does not constitute an Event of Taking and (b) in any event, unlike an Event of Taking, does not result in the loss of use or possession of substantially all or a material portion of the Leased Property or the Site as reasonably determined in good faith by the Board of Directors of the Lessee, with any such determination of an Event of Taking to be made promptly after the occurrence of such event and to be evidenced by an Officer’s Certificate of the Lessee delivered promptly after the occurrence of such event to the Administrative Agent and each of the Participants. A Condemnation shall be deemed to have “occurred” on the earliest of the dates that use, occupancy or title is taken. For clarification, a Condemnation shall not constitute an Event of Taking.

“ Consent and Acknowledgment ” shall mean each Joinder to Subcontractor Assignment and Consent Agreement, in form and substance reasonably acceptable to Lessor, to be entered into by a subcontractor or a supplier, pursuant to which such subcontractor or supplier will consent to, among other things, the Assignment of Contracts to the Lessor related to the Major Construction Document applicable to such subcontractor or supplier.

“ Consolidated Cash Interest Expense ” shall mean, with respect to the Lessee and its Restricted Subsidiaries for any period, the cash interest expense of the Lessee and its Restricted Subsidiaries during such period determined on a consolidated basis in accordance with GAAP.

“ Consolidated EBITDA ” shall mean, with respect to the Lessee and its Restricted Subsidiaries for any period (a) the sum of (i) Consolidated Net Income for such period, (ii) Consolidated Interest Expense (to the extent deducted in determining Consolidated Net Income), (iii) income tax expense (to the extent deducted in determining Consolidated Net Income), (iv) depreciation and amortization expense (to the extent deducted in determining Consolidated Net Income) and (v) non-cash stock compensation and other non-cash expense items (to the extent deducted in determining Consolidated Net Income), calculated on a consolidated basis in

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accordance with GAAP, (b) plus, (i) enterprise resource planning expense not to exceed (A) $12,500,000 with respect to the four consecutive fiscal quarter measurement period ending on December 31, 2018, (B) $7,500,000 with respect to the four consecutive fiscal quarter measurement period ending on March 31, 2019 or (C) $2,500,000 with respect to the four consecutive fiscal quarter measurement period ending on June 30, 2019 and (ii) the following one-time non-recurring expense items in connection with any acquisition or disposition, including, without limitation, the GATR Acquisition and the acquisition of TeraLogics: (A) options expense, (B) deal bonuses, (C) earn outs and purchase price allocations relating to options, (D) expense in respect of inventory in finished goods, (E) retention expense, (F) legal, accounting, tax and other consulting expense, (G) integration expense, (H) director & officer and representation & warranty insurance expense, (I) fees and expenses in respect of the financing of any acquisition and (J) solely in connection with any disposition: (1) severance and relocation costs and expenses, and (2) legal and investment banking fees and expenses and restructuring costs, charges, or expenses, minus (c) non-cash items of gain or revenue (to the extent added in determining Consolidated Net Income), calculated on a consolidated basis in accordance with GAAP .

“ Consolidated Indebtedness ” shall mean, as the context requires, (a) all Indebtedness of the Lessee and its Restricted Subsidiaries or (b) all Indebtedness of the Lessee and its Subsidiaries, in either case determined on a consolidated basis eliminating intercompany loans; provided that, notwithstanding anything to the contrary in the definition of the term “Indebtedness”, for purposes of this definition, “Indebtedness” shall include all non-contingent liabilities in respect of letters of credit or instruments serving a similar function, in each case which have been drawn upon by the beneficiary thereof and which were issued or accepted for the account of the Lessee or any Restricted Subsidiary (in the case of clause (a)) or the Lessee or any Subsidiary (in the case of clause (b)), as applicable, by banks or other financial institutions, whether or not representing obligations for borrowed money.

“ Consolidated Interest Expense ” shall mean, with respect to the Lessee and its Restricted Subsidiaries for any period, the interest expense of the Lessee and its Restricted Subsidiaries during such period determined on a consolidated basis in accordance with GAAP, and shall in any event include, without limitation, (i) the amortization of debt discounts, (ii) the amortization of all fees payable in connection with the incurrence of Indebtedness to the extent included in interest expense and (iii) the portion of any Capital Lease allocable to interest expense .

“ Consolidated Net Income ” shall mean, for any period, consolidated net income or net earnings (or any comparable line item) of the Lessee and its Restricted Subsidiaries for such period, determined on a consolidated basis in accordance with GAAP, but excluding extraordinary items and gains or losses resulting from changes in accounting principles .

“ Consolidated Tangible Assets ” shall mean, as of any date of determination thereof, Consolidated Total Assets minus the Intangible Assets of the Lessee and its Restricted Subsidiaries on such date.

“ Consolidated Total Assets ” shall mean, as of the date of any determination thereof, total assets of the Lessee and its Restricted Subsidiaries calculated in accordance with GAAP on a consolidated basis as of such date.

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“Construction” shall mean the razing of Building 1, preparation of the Site, remediation of the Site pursuant to the Remediation Plan and design and construction of the entire Facility on the Site, including engineering (including front-end loading and detailed engineering), mechanical construction and procurement procedures.

“Construction Agent” shall mean Cubic in its capacity as the “Construction Agent” under the Operative Documents.

“Construction and Development Agreement” shall mean the Construction and Development Agreement dated as of the Closing Date, between the Owner and the Construction Agent.

“Construction Budget” shall mean the construction budget delivered pursuant to Section 2.1(j)(ii) of the Participation Agreement, which Construction Budget shall (i) specify the Construction Costs allocable to Completion of the Facility and (ii) set forth as separate line items the portion of the Contingency Reserve allocated by the Construction Agent and which, as modified, shall be subject to the reasonable satisfaction of the Participants and the Construction Consultant.

“Construction Consultant” shall mean CBRE Global Investors, LLC, or such other construction consultant services firm reasonably satisfactory to the Participants.

“Construction Costs” shall mean the amounts (including Carrying Costs during the Construction Period) required to (i) construct the Facility (including Soft Costs) substantially in accordance with the Plans and Specifications (as supplemented or amended pursuant to Section 2.7(o) or 3.2 of the Construction and Development Agreement) and the Operative Documents, (ii) pay Transaction Costs, (iii) pay Fees, (iv) pay utility charges pursuant to Article VI of the Lease, (v) pay property taxes relating to the Site, (vi) pay any tax indemnity claims required by Section 7.2 of the Participation Agreement, (vii) pay any funded insurance premium, deductible or other costs, all of which shall be funded through the Commitments, (viii) rent the Site under the Ground Lease and acquire and demolish Building 1, and (ix) pay any other expenses for Construction of the Facility or other items as set forth in the Construction Budget.

“Construction Default” shall mean any event, condition or failure which, with notice or lapse of time or both, would become a Construction Event of Default.

“Construction Documents” shall have the meaning provided in Section 2.4(a) of the Construction and Development Agreement.

“Construction Documents Collateral” shall have the meaning provided in Section 1 of the Memorandum of Lease.

“Construction Event of Default” shall have the meaning provided in Section 5.1 of the Construction and Development Agreement.

“Construction Fee” shall have the meaning provided in Article VI of the Construction and Development Agreement.

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“Construction Period” shall mean a period commencing on and including the Closing Date and ending on the Completion Date.

“Construction Period Insurance Requirements” shall mean the terms of the insurance required to be maintained in accordance with Section 2.7(d) of the Construction and Development Agreement.

“Construction Period Termination Date” shall mean February 5, 2021, as the same may be extended by the Lessee up to (3) three months during the occurrence of any Force Majeure Event or restoration of the Facility following an Event of Loss, Condemnation or Casualty, or as may be extended by the Lessor in its sole and absolute discretion at the request of the Construction Agent; provided, that such date shall not be extended beyond May 5, 2021.

“Construction Recourse Amount” shall mean, as of any date of determination calculated as required by ASC 840-40-55-10 through 55-13, the sum of (i) the accreted value of Basic Rent and any other payments that are required to be included in the computation of the maximum guarantee test as prescribed in ASC 840-40-55-11(a) previously paid prior to Completion and (ii) an amount, the present value of which, discounted to the date on which any claim or demand is paid in the case of a Construction Event of Default (such date, the “ Calculation Date ”), when added to the present value (discounted to the Calculation Date) of (x) Fees described in Section 2.13(a) and (b) of the Participation Agreement, and (y) any other Supplemental Rent (other than the Construction Recourse Amount itself) which is required by ASC 840-40-55-11(b), in each case to be paid by the Lessee (including the estimated reasonable costs relating to the realization by the Lessor of the Construction Recourse Amount which will be borne by the Lessee) will not exceed 89.9% of the Eligible Construction Costs. The rate used to accrete or discount values will be the incremental borrowing rate of the Lessee.

“Contingency Reserve” shall mean an aggregate reserve, as such shall adjust from time to time, to be funded by Advances in excess of all budgeted Construction Costs and Transaction Costs (without duplication), as listed in the Construction Budget.

“Contingent Obligation” shall mean, as to any Person, any obligation, agreement, understanding or arrangement of such Person guaranteeing or intended to guarantee any Indebtedness (“ primary obligations ”) of any other Person (the “ primary obligor ”) in any manner, whether directly or indirectly, including any obligation of such Person, whether or not contingent, (a) to purchase any such primary obligation or any property constituting direct or indirect security therefor; (b) to advance or supply funds (i) for the purchase or payment of any such primary obligation or (ii) to maintain working capital or equity capital of the primary obligor or otherwise to maintain the net worth or solvency of the primary obligor; (c) to purchase property, securities or services primarily for the purpose of assuring the owner of any such primary obligation of the ability of the primary obligor to make payment of such primary obligation; (d) with respect to bankers’ acceptances, letters of credit and similar credit arrangements, until a reimbursement obligation arises; or (e) otherwise to assure or hold harmless the holder of such primary obligation against loss in respect thereof; provided, however, that the term “Contingent Obligation” shall not include endorsements of instruments for deposit or collection in the ordinary course of business or any product warranties and other customary contractual indemnities. The amount of any Contingent Obligation shall be deemed to be an amount equal to the stated or determinable amount

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of the primary obligation in respect of which such Contingent Obligation is made (or, if less, the maximum amount of such primary obligation for which such person may be liable, whether singly or jointly, pursuant to the terms of the instrument evidencing such Contingent Obligation) or, if not stated or determinable, the maximum reasonably anticipated liability in respect thereof (assuming such person is required to perform thereunder) as determined by such person in good faith.

“Contractual Obligation” shall mean, as to any Person, any provision of any security issued by such Person or of any agreement, instrument or other undertaking to which such Person is a party or by which it or any of its property is bound.

“Credit Agreement” shall mean that certain Third Amended and Restated Credit Agreement, dated as of August 11, 2016 by and among Cubic Corporation, the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, MUFG Union Bank, N.A., as syndication agent, and Bank of the West, U.S. Bank National Association and Wells Fargo Bank, National Association, as co-documentation agents, as amended by the First Amendment to Third Amended and Restated Credit Agreement dated May 4, 2017, and as further amended by the Consent and Second Amendment to Third Amended and Restated Credit Agreement dated December 11, 2017, as the same may be further amended, restated, supplemented or otherwise modified.

“Cubic” shall mean Cubic Corporation, a Delaware corporation.

“Cubic Companies” shall have the meaning provided in Section 9.19 of the Participation Agreement.

“Cubic Person” shall mean (i) the Lessee or the Construction Agent, (ii) any contractor, subcontractor, architect, engineer or Person performing services or providing materials under a Major Construction Document with respect to the Construction of the Facility pursuant to the Construction and Development Agreement and the other applicable Operative Documents, (iii) any other third party for which any Person identified in clauses (i) through (ii) above has control or supervisory authority (by contract or otherwise), and (iv) their respective affiliates, employees, officers or agents.

“Current Change Orders” shall have the meaning provided in Section 3.1(e) of the Participation Agreement.

“Deed” shall mean the Quitclaim Deed dated on or one (1) Business Day prior to the Demolition Date from Lessee, as grantor, to Lessor, as grantee, pursuant to which Lessor acquires title to Building 1.

“Default” shall mean any event, condition or failure which, with notice or lapse of time or both, would become an Event of Default.

“ Deficiency ” shall have the meaning set forth in Section 22.3(a) of the Lease.

“DEH” shall mean the Department of Environmental Health of the City of San Diego, California.

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“Demolition Date” shall mean the date demolition of Building 1 commences pursuant to the Construction and Development Agreement.

“ Developer ” shall mean Cisterra Partners, LLC, a California limited liability company.

“Development Agreement” shall mean that certain Development Management Agreement dated as of the Closing Date between Developer and Construction Agent.

“Dollars” or “$” shall mean, unless otherwise qualified, dollars in lawful currency of the United States.

“Early Termination Option” shall have the meaning provided in Section 20.1 of the Lease.

“Eligible Assignee” shall mean (A) an entity that is either (i) a commercial bank organized under the laws of the United States, or any State thereof or the District of Columbia, and having a capital and surplus in excess of $100,000,000; (ii) a commercial bank organized under the laws of any other country which is a member of the Organization for Economic Cooperation and Development or has concluded special lending arrangements with the International Monetary Fund associated with its General Arrangements to Borrow, or a political subdivision of any such country, and having a tangible net worth in excess of $100,000,000, (iii) the central bank of any country which is a member of the Organization for Economic Cooperation and Development; or (iv) a finance company, insurance company or other financial institution (whether a corporation, partnership or other entity, but excluding any savings and loan association) which is engaged in making, purchasing or otherwise investing in commercial loans in the ordinary course of its business, and having a tangible net worth in excess of $100,000,000, (B) each of the Participants on the Closing Date, and (C) each other Person reasonably approved by the Lessee as an Eligible Assignee; provided that in no instance may an Eligible Assignee be a Prohibited Person.

“Eligible Construction Costs” shall mean the aggregate amount of all Construction Costs incurred as of the date of any demand for the Lessee to pay the Lease Balance, Construction Recourse Amount or Recourse Deficiency Amount, as applicable (including any amounts paid by the Lessor to complete construction of the Facility pursuant to Section 5.3(a)(ii), (iii) or (v) of the Construction and Development Agreement (including any payments made under any Construction Document)), and any damages relating to the breach or termination of any Construction Document following a Construction Event of Default, but excluding (i) all Capitalized Yield, (ii) all Fees paid to the Lessor or any of its Affiliates (in any capacity) and (iii) all payments which may not be capitalized in accordance with GAAP, and subject to the provisions of Section 7.1(f)(iii) of the Participation Agreement.

“Employee Benefit Plan” shall mean any employee benefit plan within the meaning of Section 3(3) of ERISA which is subject to Title I of ERISA or a “plan” within the meaning of Section 4975(e)(I) of the Code.

“Environmental Claim” shall mean any accusation, allegation, notice of violation, claim, demand, abatement order or other order or direction (conditional or otherwise), or other mandatory communication by any Authority or any Person for any damage, including personal

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injury (including sickness, disease or death), tangible or intangible property damage, contribution, indemnity, indirect or consequential damage, damage to the environment, violation of pollution standards, nuisance, pollution, contamination or other adverse effects on the environment, or for fines, penalties or restrictions, in each case resulting from or based upon (A) the existence of a Release (whether sudden or non-sudden or accidental or non-accidental), or exposure to, any Hazardous Material in, into or onto the environment at, in, by, from or related to the Leased Property or any part thereof and relating to, arising from or as a result of the Lessee’s or any of its Affiliate’s or any other sublessee’s or sub-sublessee’s use or operation thereof, or any architect, engineer or any tier of the Lessee’s or the Construction Agent’s subcontractors in the construction of the Facility on the Lessor’s behalf while any such entity is in possession or control of the Leased Property (each such Person, a “Covered Contractor” ) use or operation thereof, (B) the use, handling, transportation, storage, treatment or disposal of any such Hazardous Material in connection with the operation of the Leased Property or any part thereof and relating to, arising from or as a result of the Lessee’s or any of its Affiliate’s or any other sublessee’s or sub-sublessee’s or Covered Contractor’s use or operation thereof, or (C) the violation, or alleged violation of any Environmental Laws or any Environmental Permits or other Governmental Action in connection with the Leased Property or any part thereof or any contiguous, proximate or neighboring property irrespective of whether or not such property is owned or leased by the Lessee or the Lessor, and arising from, relating to or as a result of the Lessee’s or any of their respective Affiliate’s or any other sublessee’s or sub-sublessee’s or Covered Contractor’s use or operation thereof.

“Environmental Expert” shall mean EFI Global, Inc., or such other environmental services firm reasonably satisfactory to the Participants.

“Environmental Laws” shall mean all laws, statutes, rules, regulations, codes, ordinances, orders, decrees, judgments, injunctions, notices or binding agreements issued, promulgated or entered into by any Authority, relating in any way to the environment, preservation or reclamation of natural resources, the presence, management, release or threatened release of or exposure to any Hazardous Material or to health and safety matters.

“Environmental Permits” shall mean all permits, licenses, authorizations, registrations, certificates and approvals of Authorities required by Environmental Laws relating to the Leased Property or the Overall Transaction.

“Environmental Violation” shall mean an activity, occurrence or condition that violates or results in non-compliance with or liability under or arising as a result of Environmental Laws or Environmental Permits.

“Equipment” shall mean personal property of every kind and nature whatsoever purchased or otherwise paid for with Advances or otherwise acquired by or on behalf of the Lessor and necessary for the legal use and operation of the Facility or the Site including but without limiting the generality of the foregoing, all electrical and mechanical equipment, plumbing, ventilation, furnaces, air conditioning and air-cooling apparatus, escalators, generators, communications systems (including satellite dishes and antennae), sprinkler systems and other fire prevention and extinguishing apparatus and materials, security systems, motors, engines, machinery, pipes, pumps, tanks, conduits, fittings and fixtures of every kind and description, and

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any substitutions or replacements thereof, except that, unless acquired using the Advances, lab equipment, machinery, tools and testing equipment are the sole property of the Lessee and shall not be part of the Equipment.

“Equity Interests” shall mean, shares of capital stock, partnership interests, membership interests in a limited liability company, beneficial interests in a trust or other equity ownership interests in a Person, and any warrants, options or other rights entitling the holder thereof to purchase or acquire any such equity interest .

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, and the rules and regulations thereunder, each as amended, supplemented or otherwise modified from time to time.

“ERISA Affiliate” shall mean any trade or business (whether or not incorporated) that, together with the Lessee, is treated as a single employer under Section 414(b) or (c) of the Code or, solely for purposes of Section 302 of ERISA and Section 412 of the Code, is treated as a single employer under Section 414 of the Code .

“ ERISA Event ” shall mean (a) any “reportable event”, as defined in Section 4043 of ERISA or the regulations issued thereunder with respect to a Plan (other than an event for which the 30-day notice period is waived); (b) with respect to a Plan, the failure to satisfy the “minimum funding standard” (as defined in Section 412 of the Code or Section 302 of ERISA), whether or not waived; (c) the filing pursuant to Section 412(c) of the Code or Section 302(c) of ERISA of an application for a waiver of the minimum funding standard with respect to any Plan; (d) the incurrence by the Lessee or any of its ERISA Affiliates of any material liability under Title IV of ERISA with respect to the termination of any Plan; (e) the receipt by the Lessee or any ERISA Affiliate from the PBGC or a plan administrator of any notice stating its intention to terminate any Plan in a distress termination or notice from PBGC of its intent to appoint a trustee to administer any Plan; (f) with respect to a Multiemployer Plan, the incurrence by the Lessee or any of its ERISA Affiliates any Withdrawal Liability with respect to the total withdrawal or partial withdrawal (within the meaning of Sections 4203 and 4205 of ERISA) of the Lessee or any of its ERISA Affiliates; or (g) the receipt by the Lessee or any ERISA Affiliate of any notice from any Multiemployer Plan regarding its intent to impose upon the Lessee or any of its ERISA Affiliates of Withdrawal Liability or that a determination was made that a Multiemployer Plan is, or is expected to be, insolvent or in reorganization, within the meaning of Title IV of ERISA .

“Escrow Agent” shall mean the Title Insurance Company agent.

“Escrow Agreement” shall mean that certain Escrow Agreement dated as of the Base Term Commencement Date among Escrow Agent, the Administrative Agent and the Lessee.

“Event of Default” shall have the meaning provided in Article XVII of the Lease.

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damage to the Facility which results in an insurance settlement on the basis of a total loss or constructive total loss (including title insurance proceeds) in respect of a total loss of the Facility or (y) an Environmental Violation with respect to which the Lessee, the Agents or any Participant could reasonably be expected to incur liability in excess of $1,000,000; provided, however, any activity, occurrence or condition subject to the Remediation Plan shall not constitute an Event of Loss. For clarification, no Casualty, Condemnation or Event of Taking shall constitute an Event of Loss.

“Event of Taking” shall mean: any Condemnation, requisition, confiscation, seizure or other taking or sale of the use, occupancy or title to the Leased Property or the Site or any part thereof in, by or on account of any eminent domain proceeding or other action by any Authority or other Person under the power of eminent domain or otherwise or any transfer in lieu thereof (other than a requisition of temporary use) or requisition of use for a period scheduled to last beyond the Maturity Date or which in fact is continuing on the Maturity Date (even if not scheduled to last beyond the Maturity Date), in any case, resulting in the loss of use or possession of substantially all or a material portion of the Leased Property or the Site as reasonably determined in good faith by the Board of Directors of the Lessee, such determination to be made promptly after the occurrence of such event and to be evidenced by an Officer’s Certificate of the Lessee delivered promptly after the occurrence of such event to the Administrative Agent. For clarification, no Casualty, Condemnation or Event of Loss shall constitute an Event of Taking.

“Excluded Amounts” shall mean:

(k) indemnity payments, tax or general, and expenses to which the Agents or any Participant (or any of their respective Affiliates, successors, assigns, agents, officers, directors or employees) is entitled pursuant to the Operative Documents;

(l) any amounts payable under any Operative Documents to reimburse the Agents or any Participant (including the reasonable expenses incurred in connection with any such payment) for performing or complying with any of the obligations of the Lessee under and as permitted by any Operative Document;

(m) any insurance proceeds (or payments with respect to risks self-insured or policy deductibles) under liability policies payable to the Agents or any Participant (or any of their respective successors, assigns, agents, officers, directors or employees);

(n) any insurance proceeds under policies maintained by the Agents or any Participant and not required to be maintained by the Lessee under the Lease;

(o) any amount payable to the Agents or the Participants pursuant to Section 2.1(l) of the Participation Agreement;

(p) any payments of interest or yield on payments referred to in clauses (a) through (e) above; and

(q) all rights to receive and enforce payment of the foregoing.

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“Existing Buildings” shall mean, collectively, the four (4) buildings (referred to individually as “ Building 1 ” (9223 Balboa Avenue; 132,172 square feet on 13.879 acres), “ Building 2 ” (4285 Ponderosa Avenue; 65,146 square feet on 3.86 acres), “ Building 8 ” (9323 Balboa Ave; 101,325 square feet on 4.05 acres) and “ Building 10 ” (9333 Balboa Ave; 98,730 square feet on 4.05 acres)).

“Extended Remarketing Period” shall have the meaning provided in Section 22.4(b) of the Lease.

“Facility” shall mean the two three-story office buildings, each consisting of approximately 125,000 square feet of Class A office space, and approximately 1,016 surface parking stalls to be constructed on the Site in accordance with the terms of the Construction and Development Agreement including all buildings, structures, fixtures, Equipment, Personal Property and other improvements of every kind constructed and purchased at any time and from time to time on or under the Site (pursuant to the Construction and Development Agreement with amounts advanced by the Lessor pursuant to the Participation Agreement), together with all Alterations (except any Alteration which remains the property of the Lessee in accordance with the Operative Documents).

“Fair Market Value” shall with respect to the Leased Property or any portion thereof, as of the date of determination, the fair market value (which in any event shall not be less than zero), as mutually agreed to by the Lessor and the Lessee, and in the absence of such agreement, as determined by an independent appraiser chosen by the Lessor and reasonably acceptable to the Lessee, that would be obtained in an arm’s-length transaction settled in cash or comparable financial instruments between an informed and willing buyer (other than a buyer currently in possession) and an informed and willing seller, under no compulsion to buy or sell, and neither of which is related to the Lessor, the Agents or the Lessee or any of their respective Affiliates, for the purchase of the Leased Property or any portion thereof, as applicable. Such fair market value shall be determined assuming a reasonable amount of time is allowed for exposure in the open market, and the price shall represent the normal consideration for the property unaffected by any financing or sales concessions granted by anyone associated with the sale. Such fair market value shall be calculated as the value for the use of the Leased Property or any such portion, assuming, in the determination of such fair market value, that the Leased Property or any such portion is in the condition and repair required to be maintained by the terms of the Lease (unless such fair market value is being determined for purposes of the Appraisal to be delivered on or prior to the Closing Date or for evaluating the items described in Section 7.7 of the Participation Agreement, in which case this assumption shall not be made).

“ FATCA ” shall mean Sections 1471 through 1474 of the Code, any current or future regulations promulgated thereunder or official interpretations thereof, any applicable agreements entered into pursuant to Section 1471(b)(1) of the Code, and any applicable intergovernmental agreements and local implementing laws, regulations and official guidance with respect to the foregoing.

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Federal funds brokers on such day, as published by the Federal Reserve Bank of New York on the Business Day next succeeding such day; provided that (a) if such day is not a Business Day, the Federal Funds Rate for such day shall be such rate on such transactions on the next preceding Business Day as so published on the next succeeding Business Day, and (b) if no such rate is so published on such next succeeding Business Day, the Federal Funds Rate for such day shall be the average rate quoted to the Administrative Agent, on such day on such transactions as determined by the Administrative Agent.

“ Fees ” shall have the meaning provided in Section 2.13 of the Participation Agreement.

“ Final Completion Work ” shall mean any work (other than performance relating to warranty obligations) required under the Construction Documents subsequent to Substantial Completion in order to fully perform such contract including the completion of all punch list items and all payments required thereunder.

“Final Rent Payment Date” shall have the meaning provided in Section 18.1(a)(iii)(B)(1) of the Lease.

“Force Majeure Event” shall mean any act of God, unusually severe weather conditions (such as catastrophic storms or floods, tornadoes, hurricanes and cyclones), civil or enemy action, or any Governmental Action or inability to obtain or delay in obtaining labor or materials not arising from an act or omission of any Cubic Person; provided, that any Specified Event and any other event, cause or condition that is within the control of any Cubic Person shall not be a Force Majeure Event.

“F.R.S. Board” shall mean the Board of Governors of the Federal Reserve System or any successor thereto.

“Fund,” “Funded” or “Funding” shall mean each funding of any Advance as described in Article II of the Participation Agreement.

“Funded Claim” shall have the meaning provided in Section 7.1(f)(iii) of the Participation Agreement.

“ Funded Debt ” shall mean, with respect to any Person, (a) all Indebtedness of such Person for borrowed money or which has been incurred in connection with the acquisition of assets in each case having a final maturity of one or more than one year from the date of origin thereof (or which is renewable or extendible at the option of the obligor for a period or periods more than one year from the date of origin), including all payments in respect thereof that are required to be made within one year from the date of any determination of Funded Debt, whether or not the obligation to make such payments shall constitute a current liability of the obligor under GAAP, (b) all Capitalized Rentals of such Person, and (c) all Guaranties by such Person of Funded Debt of others.

“GAAP” shall mean generally accepted accounting principles in the United States as in effect from time to time, consistently applied and maintained on a consistent basis for the Lessee throughout the period indicated.

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“GATR Acquisition” shall mean the acquisition by the Lessee of all the capital stock of GATR Technologies, Inc., an Alabama corporation ( “ GATR ” ), pursuant to the Stock Purchase Agreement dated as of December 18, 2015, among GATR, the shareholders of GATR, the representative of such shareholders and the Lessee as such agreement may be amended, supplemented or otherwise modified, in each case in any material respect which is not adverse to the Agents or the Lessor (it being understood and agreed that changes to the purchase price in excess of 10% thereof of the definition of “ Material Adverse Effect ” appearing therein shall be deemed to be a material amendment or modification which is adverse to the Agents and the Lessor) from time to time.

“ General Construction Agreement ” shall mean that certain Cubic Corporation Headquarters/CTS Building General Contractor Agreement (Cost of the Work with a Fee and Guaranteed Maximum Price), dated as of February 5, 2019, by and among General Contractor, Developer and Construction Agent, as agent for the Lessor, together with all addendums appended thereto , and assigned to the Lessor pursuant to the Assignment of Contracts, as it may be amended, supplemented or modified from time to time in accordance with the terms thereof and of the Construction and Development Agreement.

“ General Contractor ” shall mean The Whiting-Turner Contracting Company, a Maryland corporation.

“Governmental Action” shall mean all applicable permits, authorizations, registrations, consents, approvals, waivers, exceptions, variances, orders, judgments, decrees, licenses, exemptions, publications, filings, notices to and declarations of or with, or required by, any Authority, or required by any Applicable Laws and Regulations, and shall include, without limitation, all citings, Environmental Permits, construction permits and operating permits and licenses that are required for the use, occupancy, zoning, construction and operation of the Leased Property.

“Grossed-Up Basis” shall have the meaning provided in Section 7.6 of the Participation Agreement.

“Ground Lease ” shall mean the Ground Lease Agreement, dated as of the Closing Date, between Lessee, as ground lessor, and Lessor, as ground lessee.

“Ground Lease Release ” shall mean the Discharge and Release of Ground Lease, dated on or after the Return Date by Ground Lessee.

“Ground Lessee ” shall mean the Lessor in its capacity as ground lessee under the Ground Lease.

“Ground Lessor ” shall mean the Lessee in its capacity as ground lessor under the Ground Lease.

“Guarantee ” shall mean with respect to any Person, any obligation (except the endorsement in the ordinary course of business of negotiable instruments for deposit or collection) of such Person guaranteeing or in effect guaranteeing any Indebtedness, dividend or other

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obligation of any other Person in any manner, whether directly or indirectly, including (without limitation) obligations incurred through an agreement, contingent or otherwise, by such Person:

(a) to purchase such Indebtedness or obligation or any property constituting security therefor;

(b) to advance or supply funds (i) for the purchase or payment of such Indebtedness or obligation, or (ii) to maintain any working capital or other balance sheet condition or any income statement condition of any other Person or otherwise to advance or make available funds for the purchase or payment of such Indebtedness or obligation;

(c) to lease properties or to purchase properties or services primarily for the purpose of assuring the owner of such Indebtedness or obligation of the ability of any other Person to make payment of the Indebtedness or obligation; or

(d) otherwise to assure the owner of such Indebtedness or obligation against loss in respect thereof.

Without limiting the foregoing, in any computation of the Indebtedness or other liabilities of the obligor under any Guarantee, the Indebtedness or other obligations that are the subject of such Guarantee shall be assumed to be direct obligations of such obligor.

“ Guarantor ” shall mean each domestic Restricted Subsidiary now existing or hereafter created that is a party to the Subsidiary Guarantee; provided that in no event shall any SPE be required to be a Guarantor.

“Hazardous Material” shall mean all explosive or radioactive substances or wastes and all hazardous or toxic materials, substances, wastes or other pollutants or contaminants, including petroleum or petroleum distillates, asbestos or asbestos-containing materials, polychlorinated biphenyls, radon gas, infectious or medical wastes and all other substances, materials or wastes of any nature regulated or defined pursuant to any Environmental Law.

“Indebtedness” of any Person shall mean, at any time, without duplication:

(a) its liabilities for borrowed money, including, without limitation, deferred payments, and its redemption obligations in respect of mandatorily redeemable Preferred Stock;

(b) its liabilities for the deferred purchase price of property acquired by such Person (excluding accounts payable arising in the ordinary course of business but including all liabilities created or arising under any conditional sale or other title retention agreement with respect to any such property);

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(d) all liabilities for borrowed money secured by any Lien with respect to any property owned by such Person (whether or not it has assumed or otherwise become liable for such liabilities);

(e) all its liabilities in respect of letters of credit or instruments serving a similar function issued or accepted for its account by banks and other financial institutions, whether or not representing obligations for borrowed money, but excluding any commercial letter of credit entered into in the ordinary course of business by any such bank or other financial institution relating to the export or import of properties or any letter of credit entered into in the ordinary course of business by any such bank or other financial institution relating to the performance by such Person of its obligations under any contract or agreement (other than any note, credit, loan or other financial instrument or like agreement);

(f) Swaps of such Person; and

(g) any Guarantee of such Person with respect to liabilities of a type described in any of clauses (a) through (f) hereof.

“Indemnitee” shall mean the Lessor, the Rent Assignees, the Agents, any co-agent appointed in accordance with the terms of the Participation Agreement and their respective Affiliates, successors, permitted assigns, permitted transferees, contractors, servants, employees, officers, directors, shareholders, partners, participants, representatives, trustees and agents; provided, however, that in no event shall the Lessee or any its Affiliates be an indemnitee.

“Information” shall have the meaning provided in Section 9.19 of the Participation Agreement.

“Inspecting Parties” shall have the meaning provided in Article XV of the Lease.

“Insurance Requirements” shall mean the terms of the insurance required to be maintained in accordance with the Lease.

“Intangible Assets ” shall mean the aggregate amount, for the Lessee and its Restricted Subsidiaries on a consolidated basis, of all assets classified as intangible assets under GAAP, including, without limitation, in each case solely to the extent classified as intangible assets under GAAP, customer lists, acquired technology, goodwill, computer software, trademarks, patents, copyrights, organization expenses, franchises, licenses, trade names, brand names, mailing lists, catalogs, unamortized debt discount and capitalized research and development costs.

“Invested Amounts” shall mean the amounts invested by investors that are not Affiliates of the Lessee in connection with a receivables securitization program and paid to the Lessee or any of its Subsidiaries, as reduced by the aggregate amounts received by such investors from the payment of receivables and applied to reduce such invested amounts.

“Land ” shall mean approximately 26-acres of property located on Balboa Avenue between Ponderosa Avenues and Ruffin Road in San Diego, California, together with all rights,

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privileges, easements and appurtenances thereto, as more particularly described in Exhibit A attached to the Development Agreement.

“Lease” shall mean that certain Lease Agreement dated as of the Closing Date between the Lessor and the Lessee.

“Lease Balance” shall mean, as of any date of determination, an amount equal to the aggregate sum of the outstanding principal amount of the Rent Assignment Advances of all of the Rent Assignees and of the Lessor Investment of the Lessor which may include, without limitation, any Advance amounts by the Participants during the Construction Period in excess of the aggregate Commitments of the Lessor and the Rent Assignees, any Capitalized Yield and any Transaction Costs which are capitalized. Except as otherwise expressly required pursuant to Section 18.5 of the Lease, any reference to the Lease Balance shall be to the Lease Balance taken as a whole.

“Lease Expiration Date” shall mean the last day of the Lease Term, subject to any Extended Remarketing Period or any other date on which the Lease is terminated, including pursuant to Article XIII, XVIII, XX, XXI or XXII of the Lease.

“Lease Supplement ” shall mean the supplement to the Lease delivered prior to the Base Term Commencement Date pursuant to Section 3.4 of the Participation Agreement.

“Lease Term” shall have the meaning provided in Section 2.2 of the Lease.

“Leased Property” shall mean the Facility (excluding Personal Property other than Personal Property which is Equipment or which has been funded by an Advance) and the leasehold interest of the Lessor in the Site granted to it pursuant to the Ground Lease.

“Lessee” shall mean Cubic Corporation, a Delaware corporation.

“Lessee Change of Control” shall mean (a) the acquisition by any party, or two or more parties acting in concert, of beneficial ownership (within the meaning of Rule 13d-3 of the SEC under the Securities Exchange Act of 1934) of 50% or more of the outstanding shares of voting stock of the Lessee, or (b) during any period of twelve (12) consecutive months, a majority of the members of the board of directors or other equivalent governing body of the Lessee cease to be composed of individuals (i) who were members of that board or equivalent governing body as of the first day of such period, (ii) whose election or nomination to that board or equivalent governing body was approved by individuals referred to in clause (i) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body, or (iii) whose election or nomination to that board or other equivalent governing body was approved by individuals referred to in clauses (i) and (ii) above constituting at the time of such election or nomination at least a majority of that board or equivalent governing body; provided, however, that neither the ownership nor acquisitions of shares of the capital stock of the Lessee by, nor the transfers of shares of the capital stock of the Lessee between, Members of the Zable Family shall constitute a Lessee Change in Control .

“Lessee Collateral” shall mean the property of the Lessee with respect to which a lien is purported to be granted pursuant to the Lease and the Memorandum of Lease.

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“Lessor” shall mean Bankers Commercial Corporation, a California corporation.

“ Lessor Confirmation Letter ” shall mean that certain letter, dated February 5, 2019, from the Lessor to the Lessee with respect to ASC 810.

“Lessor Investment” shall mean, as of any date of determination, the aggregate amount advanced by the Lessor pursuant to Article II of the Participation Agreement, net of any distributions (other than distributions of Yield or Break Amount) with respect thereto. Except as otherwise expressly required pursuant to Section 18.5 of the Lease, any reference to the Lessor Investment shall be to the Lessor Investment taken as a whole.

“Lessor Liens” shall mean Liens on or against the Leased Property, the Site, the Lease or any payment of Rent (a) which result from any act of, or any Claim against, either of the Agents and any Participant, in any case, unrelated to the transactions contemplated by the Operative Documents, (b) which result from any Tax owed by the Lessor (in its individual capacity), the Agents or any Participant, except any Tax for which such Person is entitled to indemnification by Lessee under the Operative Documents, or (c) which result from any act or omission of the Lessor that is in breach of such Person’s covenants or agreements under the Operative Documents.

“Leverage Ratio ” shall mean, as of the last day of any fiscal quarter of the Lessee and its Restricted Subsidiaries on a consolidated basis, the ratio on a rolling four fiscal quarter basis of (i) (x) Consolidated Indebtedness minus (y) to the extent included in Consolidated Indebtedness, all Indebtedness attributable to undrawn letters of credit (including, without duplication, Indebtedness in the form of Guarantees with respect to letters of credit) to (ii) Consolidated Adjusted EBITDA

“LIBOR Office” shall mean initially, the funding office of each Participant designated as such in Schedule II to the Participation Agreement and, thereafter, such other office of such Participant, if any, which shall be making or maintaining the Rent Assignment Advances or the Lessor Investment, as applicable.

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including the Payment Period starting on January 25, 2021, at a rate of 3.00% per annum for Advances on a cumulative basis at or below the levels set forth on Schedule 2.9(f) of the Participation Agreement, or (ii) in the event the rates referenced in the preceding clause (i) are not available, (x) the rate per annum (rounded to the nearest 1/100 of 1%) equal to the quotation rate offered to first class banks in the London interbank market as determined by the Administrative Agent for deposits (for delivery on the first day of the relevant period) in Dollars of amounts in same day funds comparable to the principal amount of the Lease Balance, for which LIBOR is then being determined with maturities comparable to such period as of approximately 11:00 a.m., (London time) time on such determination date or (y) to the extent an alternative rate under clause (x) is not ascertainable, a comparable or successor rate, which rate is approved by the Administrative Agent provided, that if the LIBOR as otherwise determined above would be less than zero percent (0.00%), then the LIBOR for the purposes hereof shall be deemed to be zero percent (0.00%). If the F.R.S. Board imposes a LIBOR Reserve Percentage with respect to LIBOR deposits and the applicable rate is determined by reference to the foregoing clause (i), then LIBOR shall be (x) the foregoing rate, divided by (y) the sum of 1 minus the LIBOR Reserve Percentage. To the extent a comparable or successor rate is approved by the Administrative Agent in connection herewith, the approved rate shall be applied in a manner consistent with market practice; provided, further that to the extent such market practice is not administratively feasible for the Administrative Agent, such approved rate shall be applied in a manner as otherwise reasonably determined by the Administrative Agent.

“LIBOR Reserve Percentage” shall mean, relative to any Payment Period, the reserve percentage (expressed as a decimal) equal to the maximum aggregate reserve requirements (including all basic, emergency, supplemental, marginal and other reserves and taking into account any transitional adjustments or other scheduled changes in reserve requirements) specified under regulations issued from time to time by the F.R.S. Board and then applicable to assets or liabilities consisting of and including “Eurocurrency Liabilities”, as currently defined in Regulation D of the F.R.S. Board, having a term approximately equal or comparable to such Payment Period.

“Lien” shall mean any interest in property securing an obligation owed to, or a claim by, a Person other than the owner of the property, whether such interest is based on the common law, statute or contract, and including but not limited to the security interest lien arising from a mortgage, encumbrance, pledge, conditional sale or trust receipt or a lease, consignment or bailment for security purposes. The term “ Lien ” shall include reservations, exceptions, encroachments, easements, rights-of-way, covenants, conditions, restrictions, leases and other title exceptions and encumbrances (including, with respect to stock, stockholder agreements, voting trust agreements, buy-back agreements and all similar arrangements) affecting property. For the purposes of this Agreement, the Lessee or a Subsidiary shall be deemed to be the owner of any property which it has acquired or holds subject to a conditional sale agreement, Capital Lease or other arrangement pursuant to which title to the property has been retained by or vested in some other Person for security purposes and such retention or vesting shall constitute a Lien.

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covenant, representation or warranty was based on the following: a subjective interpretation of the term “adequate,” “diligently,” “material,” “materially,” “Material Adverse Effect,” “materially adversely affect,” “material adverse change,” “materially and adversely affects,” “material adverse effect,” or any other term that is not objectively determinable, or results from a condition that is not solely related to the Lessee or the Lessee’s operations or the Lessee’s use of the Leased Property; provided, however, if the Event of Default, covenant, representation or warranty relates to the Lessee’s use of the Leased Property, then such Event of Default, covenant, representation or warranty will not be deemed a Limiting Event.

“Major Construction Document” shall have the meaning provided in Section 2.4(a) of the Construction and Development Agreement.

“ Margin Stock ” shall have the meaning given such term under Regulation U issued by the Board of Governors of the Federal Reserve System.

“Material Adverse Effect” shall mean a material adverse effect on (a) the business, assets, operations or financial condition of the Lessee and its Restricted Subsidiaries taken as a whole, (b) the ability of the Lessee to perform any of its obligations under this Agreement and the other Operative Documents, taken as a whole, (c) the validity or enforceability of any of the Operative Documents, or (d) the rights of or benefits available to the Participants or the Administrative Agent under this Agreement and the other Operative Documents, taken as a whole.

“Material Default ” shall mean any event, condition or failure which, with notice or lapse of time or both, would become an Event of Default of the type described in clause (a), (b), (c), (g), (h) or (i) of Article XVII of the Lease.

“Material Environmental Violation” shall have the meaning provided in Section 13.9 of the Lease.

“ Material Indebtedness ” shall mean (i) Indebtedness or obligations in respect of one or more Swaps, of any one or more of the Lessee or any Restricted Subsidiary in an aggregate principal amount exceeding $5,000,000 and (ii) the Indebtedness under the Credit Agreement. For purposes of determining Material Indebtedness, the “principal amount” of the obligations of the Lessee or any Subsidiary in respect of any Swap Agreement at any time shall be the maximum aggregate amount (giving effect to any netting agreements) that the Lessee or such Subsidiary would be required to pay if such Swap Agreement were terminated at such time.

“Material Modification” shall mean, with respect to any Major Construction Document, any amendment, waiver, termination, release or other alteration which would diminish in any material respect, with regard to the Facility, when Completion has been effected, as an office building, the value, utility, useful life or functional capability of the Facility.

“Maturity Date” shall mean the date which is the earlier of the day that is the seventh anniversary of the Closing Date (subject to any extension due to a Force Majeure Event not to exceed three months) or the fifth anniversary of the Base Term Commencement Date.

“ Member of the Zable Family ” shall mean Walter J. Zable, his spouse, his children, his grandchildren and any trust of which Walter J. Zable is the settlor.

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“Memorandum of Ground Lease” shall mean that certain Memorandum of Ground Lease, dated as of the Closing Date by and between the Ground Lessor and the Ground Lessee.

“Memorandum of Lease” shall mean that certain Memorandum of Lease, Fee and Leasehold Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing dated as of the Closing Date by and between the Lessee and the Lessor.

“Monthly Date” shall mean (i) the twenty-fifth (25 th ) calendar day of each month (or the next succeeding Business Day if such day is not a Business Day unless such next succeeding Business Day falls in the next calendar month in which case Monthly Date shall mean the prior Business Day if such day is not a Business Day) and (ii) for the final Advance only, the Base Term Commencement Date.

“Moody’s” shall mean Moody’s Investor Service, Inc., or any successor thereto.

“MUFG” shall mean MUFG Bank, Ltd.

“MUFG Base Rate” shall mean the rate of interest publicly announced by MUFG Union Bank, N.A., from time to time as its base rate.

“ Multiemployer Plan ” shall mean a multiemployer plan as defined in Section 4001(a)(3) of ERISA which is subject to Title IV of ERISA to which Lessee or any ERISA Affiliate is then, or at any time during the preceding five (5) calendar years was, making or obligated to make contributions or with respect to which Lessee or any ERISA Affiliate has any liability .

“Next Date” shall have the meaning provided in Section 13.1(a) of the Lease.

“ Non-Severable ” shall mean regarding fixtures, Alterations, additions and improvements and substitutions and replacements thereof relating to the Facility and Personal Property, those which (i) cannot be readily removed from the Facility without causing damage to the Facility or the Site which cannot be readily repaired, or (ii) are required for the Leased Property to comply with Applicable Laws and Regulations and Insurance Requirements; for the avoidance of doubt, the foregoing shall not include any items of personalty (or their replacement) which were not paid for as part of Construction Costs during the period prior to the Completion Date.

“Non-Use Fee” shall have the meaning provided in Section 2.13(c) of the Participation Agreement.

“Non-Use Fee Rate” shall mean [***] basis points.

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Documents from time to time, including, without limitation, following an Event of Default including any rejection by Cubic of the Construction and Development Agreement, the Lease or any other Operative Document in any bankruptcy, insolvency or similar proceeding, (v) Cubic’s obligation to pay the Basic Rent (including yield accruing after the filing of any bankruptcy, insolvency or similar petition), (vi) Cubic’s obligation to pay any and all other amounts of Rent, and (vii) Cubic’s obligation to pay or perform, as applicable, all other fees, expenses and commissions (including attorney’s fees and expenses), charges, costs, indebtedness, loans, liabilities, financial accommodations, obligations, covenants and duties owing by the Lessee to the Agents, any Participant or any other Person, of every kind, nature and description, direct or indirect, absolute or contingent, due or to become due, contractual or tortuous, liquidated or unliquidated, and whether or not evidenced by any note, instrument, agreement or any other document, in each case under or in respect of the Operative Documents.

“OFAC” shall mean the Office of the Foreign Assets Control of the U.S. Treasury Department.

“Officer’s Certificate” of a Person shall mean a certificate signed by the Chairman of the Board of Directors and/or the President and/or any Executive Vice President and/or any Senior Vice President and/or any other Vice President, Managing Director, Principal and/or other authorized officer(s) of such Person, provided, that with respect to the Lessee, whomever signs the certificate is authorized to represent such Person.

“Offsite Plans and Specifications” shall mean the plans and specifications necessary to construct the improvements as described in, and pursuant to, the Development Agreement and delivered to the Lessor pursuant to Section 3.3(a) of the Participation Agreement and updated and supplemented pursuant to Section 2.7(o) of the Construction and Development Agreement including working drawings and other drawings and specifications of every kind and description required to construct such improvements.

“Operative Documents” shall mean, as the context requires:

(1) the Participation Agreement;

(2) the Lease;

(3) the Memorandum of Lease;

(4) the Construction and Development Agreement;

(5) each Rent Assignment Agreement;

(6) the Ground Lease;

(7) the Memorandum of Ground Lease;

(8) the Deed;

(9) each Assignment of Contracts;

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(10) each Consent and Acknowledgment;

(11) each Bill of Sale; and

(12) the Escrow Agreement.

“Overall Parcel” shall mean the Site and the land adjacent thereto commonly referred to as Lots 18 and 22 as depicted on the Survey.

“Overall Transaction” shall mean all the transactions and activities referred to in or contemplated by the Operative Documents.

“Overdue Rate” shall mean the lesser of (a) the highest interest rate permitted by Applicable Laws and Regulations and (b) an interest rate per annum equal to the Yield Rate (without regard to the proviso in clause (i) of the definition of “LIBOR Rate”, to the extent applicable) plus 2% per annum.

“ Owner ” shall mean Bankers Commercial Corporation, in its capacity as owner of the Facility and Building 1, and as lessee under the Ground Lease.

“Participant Party ” shall mean the Participants and their respective Affiliates, successors, permitted assigns and permitted transferees.

“Participants” shall mean the Lessor and the Rent Assignees, collectively.

“Participation” shall have the meaning provided in Section 6.4 of the Participation Agreement.

“Participation Agreement” shall mean the Participation Agreement dated as of the Closing Date among the Lessee, the Lessor, the Rent Assignees and the Agents.

“Participation Holder” shall have the meaning provided in Section 6.4 of the Participation Agreement.

“Payment Date” shall mean (i) for any Payment Period commencing and ending prior to the Base Term Commencement Date: the Monthly Date, (ii) for the Payment Period commencing prior to the Base Term Commencement Date and ending on, but excluding, the Base Term Commencement Date: the Base Term Commencement Date, and (iii) for any Payment Period commencing on or after the Base Term Commencement Date: the Monthly Date occurring after the third month of a respective Payment Period; provided, that, with reference to Yield defined by reference to the Alternate Base Rate, the Monthly Date immediately following the prior Payment Period, provided further, that in each case regarding the foregoing subsection (i) – (iii), any Payment Date that would otherwise extend beyond the Maturity Date shall end on the Maturity Date.

“Payment Event of Default” shall mean an Event of Default arising under paragraph 17(a)(i) or 17(a)(iii) of Article XVII of the Lease.

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“Payment Period” shall mean (i) during the Construction Period, a period of one (1) month ending on a Monthly Date, except for (x) the first Payment Period during the Construction Period which shall be for a period less than one (1) month and which shall commence on the Closing Date and shall end on the next Monthly Date, and (y) the final Payment Period during the Construction Period which may be for a period of less than one (1) month and shall end on, but exclude, the Base Term Commencement Date, and (ii) during the Base Term, a period of three (3) months; provided, that, in each case, each Payment Period in which a Payment Date occurs shall end on such Payment Date, provided that, with respect to Yield defined by reference to the Alternate Base Rate, the Monthly Date immediately following the prior Payment Period, provided, further, that regarding each of the foregoing subsections (i) and (ii), any Payment Period that would otherwise extend beyond the Maturity Date shall end on the Maturity Date.

“PBGC” shall mean the Pension Benefit Guaranty Corporation referred to and defined in ERISA or any successor agency.

“Permitted Acquisition ” shall mean the acquisition of all or substantially all of the assets, all or a substantial part of, a business, division, brand or product line, or all or substantially all of the stock of any Person (such Person being the “ Target ”) that is engaged in a line of business which is substantially related to that of the Lessee and with respect to which:

(a) such acquisition was approved by each Person’s (including the Target’s) Board of Directors (or other similar governing body);

(b) at the time of such proposed acquisition and immediately after giving effect thereto, no Default would exist;

(c) at the time of such proposed acquisition and immediately after giving effect thereto, the Lessee is in compliance, on a pro forma basis, with the maximum Leverage Ratio permitted under Section 5.6(a)(ii) of the Participation Agreement at such time (including, if applicable, giving effect to the impact of any Adjusted Covenant Period to the extent elected by the Lessee in accordance with Section 5.6(a)(ii) of the Participation Agreement) recomputed as of the last day of the most recently ended fiscal quarter of the Lessee for which financial statements have been delivered (such compliance to be confirmed by an officer’s certificate in a form satisfactory to the Administrative Agent); and

(d) the Lessee shall have given the Administrative Agent prior written notice, together with, if the total consideration being paid in connection with such acquisition (including, without limitation, assumed Indebtedness or Preferred Stock) exceeds $50,000,000, such documents and information as the Administrative Agent may reasonably request and which are reasonably available to the Lessee at such time.

“Permitted Contest” shall mean actions taken by a Person to contest in good faith, by appropriate proceedings initiated timely and diligently prosecuted, the legality, validity or applicability to the Leased Property, the Site or any interest in the Leased Property, the Site or to the operation, use or maintenance of the Leased Property and the Site or the Overall Transaction by, any Person of: (a) any Applicable Laws and Regulations; (b) any term or condition of, or any revocation or amendment of, or other proceeding relating to, any Governmental Action; or (c) any Lien or Tax; provided that the initiation and prosecution of such contest would not: (i) in the

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reasonable opinion of an Indemnitee to which such proceeding relates, result in, or increase the risk of, the imposition of any criminal liability or penalty or material civil liability on any Indemnitee; (ii) be reasonably likely to adversely affect the validity, perfection or priority of the lien and security interests created by the Operative Documents or the right, title or interest of the Lessor in or to the Leased Property, the Site, or the right of any Participant to receive payment of the Lease Balance or Yield or any interest therein; (iii) be reasonably likely to adversely affect the fair market value, utility or remaining useful life of the Leased Property, the Site or any interest in the Leased Property or the Site or the continued economic operation of the Leased Property and the Site; and provided further that in any event reserves to the extent required by GAAP are maintained against any adverse determination of such contest; or (iv) involve any Claim not fully indemnified by the Lessee which the Lessee and the Indemnitee to which such Claim relates have been unable to sever from the indemnified Claims, unless the Lessee shall have posted a bond or other security that is reasonably satisfactory to such Indemnitee to defend, protect, save and keep harmless such Indemnitee on a Grossed Up Basis with respect to costs, expenses, fees and charges arising from such otherwise not fully indemnified Claim; and provided further that in any event reserves to the extent required by GAAP are maintained against any adverse determination of such contest.

“Permitted Excess Amount” shall mean an amount equal to fifty percent (50%) of the Aggregate Contingency Amount.

“ Permitted Factoring Program ” shall mean the sale by the Lessee or its Subsidiaries of accounts receivable originated by the Lessee or such Subsidiaries, in an aggregate amount not to exceed $30,000,000 during any fiscal year of the Lessee, to a third-party factor in the ordinary course of business and on a basis that is non-recourse to the Lessee or its Subsidiaries other than limited recourse customary for factoring transactions of a similar kind.

“Permitted Investments” shall mean (i) full faith and credit obligations of the United States of America, or fully guaranteed as to interest and principal by the full faith and credit of the United States of America, of deposit having a final maturity of not more than one (1) year after the date of issuance maturing in not more than one (1) year from the date such investment is made, (ii) certificates of any Participant or of any other commercial bank incorporated under the laws of the United States of America or any state thereof or the District of Columbia, which bank is a member of the Federal Reserve System and has a combined capital and surplus of not less than $500,000,000 and with a senior unsecured debt credit rating of at least “A” by Moody’s and “A” by S&P, (iii) commercial paper of the Participants having a remaining term until maturity of not more than 180 days from the date such investment is made rated at least A-1 by S&P and P-1 by Moody’s, (iv) commercial paper of companies, banks, trust companies or national banking associations (in each case excluding the Lessee and its Affiliates) incorporated or doing business under the laws of the United States or one of the States thereof, in each case having a remaining term until maturity of not more than 180 days from the date such investment is made and rated at least “P-1” by Moody’s or at least “A-F” by S&P, and (v) repurchase agreements maturing within one (1) year with any financial institution having combined capital and surplus of not less than $500,000,000 with any of the obligations described in clauses (i) through (iv) as collateral so long as title to the underlying obligations pass to the Collateral Agent and such underlying securities shall be segregated in a custodial or trust account for the benefit of the Collateral Agent.

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“Permitted Liens” shall mean (a) the respective rights and interests of the Lessee, the Participants, the Agents, as provided in the Operative Documents, (b) Lessor Liens, (c) Liens for Taxes either not yet delinquent or being contested in good faith and by appropriate proceedings diligently conducted and in any event constituting a Permitted Contest, (d) materialmen’s, mechanics’, workers, repairmen’s, employees’ or other like Liens arising in the ordinary course of business for amounts either not yet due or being contested in good faith and by appropriate proceedings constituting a Permitted Contest and to the extent any reserve or other appropriate provision required by GAAP shall have been made in respect of the Lien, (e) Liens arising after the Closing Date out of judgments or awards not otherwise constituting an Event of Default under clause (j) of Article XVII of the Lease and with respect to which at the time an appeal or proceeding for review is being prosecuted in good faith and either (x) (A) with respect to such Liens arising on or prior to the Completion Date, have been bonded to the reasonable satisfaction of the Lessor or (B) with respect to such Liens arising after the Completion Date, have been reserved for to the extent required by GAAP, or (y) the enforcement of such Lien has been stayed pending such appeal or review, and (f) Liens set forth on Schedule III to the Participation Agreement.

“Permitted Transferee” shall have the meaning provided in Section 6.3(b) of the Participation Agreement.

“Person” shall mean any individual, partnership, corporation, limited liability company, trust, association, joint venture, joint stock company, un-incorporated organization, Authority or any other entity.

“ Personal Property ” means all of the Leased Property that does not constitute real property and in which a security interest may be created under the UCC including the Equipment.

“Plan” shall mean any employee pension benefit plan (other than a Multiemployer Plan) subject to the provisions of Title IV of ERISA or Section 412 of the Code or Section 302 of ERISA, and in respect of which the Lessee or any ERISA Affiliate is (or, if such plan were terminated, would under Section 4069 of ERISA be deemed to be) an “employer” as defined in Section 3(5) of ERISA .

“Plans and Specifications” shall mean the plans and specifications necessary to demolish Building 1 and to construct the Facility to operate in accordance with its intended purposes as Class A office buildings and delivered to the Appraiser and the Lessor pursuant to Section 2.7(o) of the Construction and Development Agreement and updated and supplemented pursuant to Section 2.7(o) of the Construction and Development Agreement including working drawings and other drawings and specifications of every kind and description required to assemble and construct the Facility.

“ Preferred Stock ” shall mean any class of capital stock (or other equity interests) of a Person that is preferred over any other class of capital stock (or other equity interests) of such Person as to the payment of dividends or other distributions or the payment of any amount upon liquidation or dissolution of such Person.

“ Prohibited Person ” shall mean a Person that is (i) on the SDNL or (ii) in violation of any money laundering law, regulation or order, including the USA PATRIOT Act.

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“ Public Utility Holding Company Act ” shall mean the Public Utility Holding Company Act of 2005.

“Purchase Amount” shall mean, as of any date of determination, the sum of (a) the aggregate sum of the outstanding principal amount of the outstanding Rent Assignment Advances of all the Rent Assignees and the Lessor Investment of the Lessor (including amounts with respect to Funded Claims), plus (b) all accrued but unpaid Yield, plus (c) Break Amounts, if any, plus (d) without duplication, all unpaid Rent and all other sums then due and payable pursuant to the terms of the Operative Documents by the Lessee or the Lessor including, without limitation, all Supplemental Rent.

“Purchase Option” shall have the meaning provided in Section 21.1(a) of the Lease.

“Recorder’s Office” shall mean the County Clerk’s Office for San Diego County, California.

“Recourse Deficiency Amount” shall mean, as of the date on which any claim or demand is made (the “ Calculation Date ”) due to the occurrence of a Limiting Event (in the case of application of Section 18.1(b) of the Lease), the sum of (i) the accreted value of Basic Rent and any other payments that are required to be included in the computation of the maximum guarantee test as prescribed in ASC 840-10-25-14 and ASC 840-10-25-1(d) or ASC 842-10-25-2 and ASC 842-10-55-2, as applicable to Lessee, previously paid prior to the Calculation Date and (ii) an amount, the present value of which, discounted to the Calculation Date, when added to the present value (discounted to the Calculation Date) of (x) Fees described in Section 2.13(a) and (b) of the Participation Agreement and (y) any other Supplemental Rent (other than the Recourse Deficiency Amount itself) which is required to be included in the 90% test pursuant to ASC 840-10-25-14 and ASC 840-10-25-1(d) or ASC 842-10-25-2 and ASC 842-10-55-2, as applicable to Lessee, in each case to be paid by the Lessee (plus the estimated reasonable costs relating to such Limiting Event which will be borne by the Lessee) from and after the Completion Date to and including the Calculation Date will be equal to 89.95% of Eligible Construction Costs. The rate used to accrete or discount values will be (x) the incremental borrowing rate of Lessee prior to the Construction Period Termination Date, and (y) the implicit rate of the Lease used for determination of classification of the Lease on the Closing Date for a term equal to such date of claim or demand under ASC 840-10-25-1(d) or ASC 842-20-30-3, respectively. The calculation further assumes that such payments are made quarterly in arrears throughout the period at the rates established hereunder, calculated using an actual day convention on the Lease Balance outstanding on such date of claim or demand. To the extent the Calculation Date shall occur on or before September 30, 2019, the foregoing calculations shall be made with reference to ASC 840, and thereafter, with reference to ASC 842.

“Regulations” shall mean the income tax regulations promulgated from time to time under and pursuant to the Code.

“Release” shall mean the release, deposit, disposal or leak of any Hazardous Material into or upon or under any land or water or air, or otherwise into the environment, including, without limitation, by means of burial, disposal, discharge, emission, injection, spillage,

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leakage, seepage, leaching, dumping, pumping, pouring, escaping, emptying, placement and the like.

“Remediation Plan” shall mean the Soil Management Plan dated December 17, 2018 by SCS Engineers related to DEH Voluntary Assistance Program Case # DEH2018-LSAM-000521.

“Rent” shall mean Basic Rent and Supplemental Rent, collectively.

“Rent Assignee” or “Rent Assignees” shall mean any Person which enters into a Rent Assignment Agreement with Lessor and joins the Participation Agreement and other Operative Documents as a Rent Assignee.

“ Rent Assignee Release ” shall mean the release and discharge executed by the Collateral Agent which will cause the Recorder’s Office to release, discharge and cancel the Security Documents from its registry when it is submitted.

“Rent Assignment Advance” shall mean the aggregate amount advanced by the Rent Assignees pursuant to Article II of the Participation Agreement and Section 2.1 of each Rent Assignment Agreement.

“Rent Assignment Agreements” shall mean each Rent Assignment Agreement dated as of the Closing Date between the Lessor and a Rent Assignee and any Rent Assignment Agreement agreed to from time to time pursuant to a permitted assignment by a Rent Assignee.

“Rent Assignment Documents” shall mean the Rent Assignment Agreements, the Security Documents and all documents and instruments executed and delivered in connection with each of the foregoing.

“ Rent Assignment Interests ” shall have the meaning set forth in Section 2.01 of each Rent Assignment Agreement.

“ Rentals ” shall mean as of the date of any determination thereof all fixed payments (including as such all payments which the lessee is obligated to make to the lessor on termination of the lease or surrender of the property) payable by the Lessee or a Restricted Subsidiary, as lessee or sublessee under a lease of real or personal property, but shall be exclusive of any amounts required to be paid by the Lessee or a Restricted Subsidiary (whether or not designated as rents or additional rents) on account of maintenance, repairs, insurance, taxes and similar charges.

“Replacement Rate” shall have the meaning provided in Section 2.9(b) of the Participation Agreement.

“Representatives” shall have the meaning provided in Section 9.19 of the Participation Agreement.

“Required Rent Assignees” shall mean, as of the date of the determination, the Rent Assignee(s) holding outstanding Rent Assignment Advances (directly or indirectly through

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acquisitions of Rent Assignment Advances) representing at least 50.1% of the unpaid principal amount of all Rent Assignment Advances.

“Required Participants” shall mean, as of the date of determination, Participants with outstanding Rent Assignment Advances and Lessor Investment (directly or indirectly through acquisitions of Rent Assignment Advances or Lessor Investment) representing at least 50.1% of the aggregate unpaid balance of the Rent Assignment Advances and Lessor Investments; provided, however, that with respect to (i) any termination, amendment, supplement, waiver or modification of, or request, direction or action under, Article IX, XI, XII, XIII, XXI, XXII, XXIII of the Lease or under Sections 2.6, 2.7 or 3.3 of the Construction Development Agreement, or (ii) any termination, amendment, supplement, waiver or modification of Section 2.10 of the Participation Agreement or the Rent Assignment Agreement, “Required Participants” shall mean, as of any date of determination, subject to the terms of the Rent Assignment Agreement, the Required Rent Assignees and the Lessor, voting as separate classes.

“Responsible Officer” of (i) Lessor shall mean the President or any Vice President, Assistant Vice President, Secretary, Assistant Secretary, Treasurer or Assistant Treasurer, or (ii) Lessee shall mean any Senior Financial Officer or any other officer of Lessee with responsibility for the administration of the relevant portion of any Operative Document.

“Restricted Payment ” shall mean any dividend or other distribution (whether in cash, securities or other property) with respect to any Equity Interests in the Lessee or any Subsidiary, or any payment (whether in cash, securities or other property), including any sinking fund or similar deposit, on account of the purchase, redemption, retirement, acquisition, cancellation or termination of any such Equity Interests or any option, warrant or other right to acquire any such Equity Interests.

“Restricted Subsidiary ” shall mean any Subsidiary (a) of which more than 80% (by number of votes) of the Equity Interests with voting power is beneficially owned, directly or indirectly, by the Lessee and (b) if applicable, as so designated within the limitations of Section 5.6 of the Participation Agreement. An SPE may be either a Restricted Subsidiary or an Unrestricted Subsidiary.

“Return Date” shall mean the earlier to occur of the Lease Expiration Date or the Maturity Date.

“Return Option” shall have the meaning provided in Section 21.1(b) of the Lease.

“Return Option Liens” shall have the meaning provided in Section 22.1(a) of the Lease.

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842-10-25-2 and ASC 842-10-55-2 previously paid prior to Completion together with the Basic Rent to be paid during the Base Term, (y) Fees described in Section 2.13(a) and (b) of the Participation Agreement and (z) any other Supplemental Rent (other than the Return Price Recourse Deficiency Amount itself) which is included under ASC 842-10-25 and ASC 842-10-55-2, in each case to be paid by the Lessee during the Lease Term to and including the Calculation Date will be equal to 89.95% of Eligible Construction Costs. The rate used to accrete or discount values will be the implicit rate of the Lease used for determination of classification of the Lease on the Calculation Date for a term equal to the Base Term as prescribed in ASC 842-20-30-3. The calculation further assumes that such payments are made quarterly in arrears throughout the period at the rates established hereunder, calculated using an actual day convention on the Lease Balance outstanding on the Base Term Commencement Date.

“Sale Proceeds” shall mean the gross sale proceeds from the sale of the Leased Property pursuant to Articles XVIII or XXII of the Lease minus any transfer or deed tax thereon (to the extent not paid by the assignee or transferee thereof) and minus the aggregate amount of any costs or expenses incurred by the Lessee (under Article XXII but not under Article XVIII of the Lease), the Lessor and, if so referenced under Article XXII of the Lease as entitled to reimbursement from sale proceeds, any other Person (including a buyer or potential buyer) to the extent Lessor and Lessee have agreed to such payment of such other Person’s costs or expenses, in each case, in connection with the actions required under Article XXII of the Lease, excluding, in the case of the Lessee, any provision of Article XXII which expressly specifies that the Lessee’s costs shall not be reimbursable out of gross sale proceeds.

“SDNL” shall mean the list of Specially Designated Nationals and Blocked Persons issued by OFAC.

“Securities Act” shall mean the Securities Act of 1933, as amended.

“Security Documents” shall mean, collectively, the Assignments of Contracts.

“Senior Funded Debt ” shall mean all Funded Debt of the Lessee which is not expressed to be subordinate or junior in rank to any other Funded Debt of the Lessee.

“Significant Subsidiary ” shall mean a subsidiary that is a “significant subsidiary” as defined in Article 1, Rule 1-02 of Regulation S-X.

“Site” shall mean an approximately 13.879-acre portion located on the northwest corner of the Land on which the Facility is to be located, as described in Schedule IV to the Participation Agreement.

“Soft Costs” shall mean Construction Costs incurred for the production of the Plans and Specifications, architectural and engineering fees, legal and accounting fees, permit and license fees and other such similar costs.

“ Solvent ” shall mean, with respect to any Person, that as of the date of determination both (i) the then fair saleable value of the assets of such Person is (y) greater than the total amount of liabilities of such Person and (z) not less than the amount that will be required to pay the probable liabilities on such Person’s then existing debts as they become absolute and

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matured considering all financing alternatives and potential asset sales reasonably available to such Person; and (ii) such Person is “solvent” within the meaning given that term and similar terms under applicable laws relating to fraudulent transfers and conveyances.

“SPE ” shall mean any direct or indirect Subsidiary of Cubic Corporation that constitutes a special purpose entity.

“Specified Event” shall mean (i) any Event of Default described in clause (h) or (i) of Article XVII of the Lease, (ii) fraud, misapplication of funds, illegal acts or willful misconduct on the part of Lessee, (iii) with respect to Claims pursuant to Section 7.1(a)(vii) of the Participation Agreement, any acts, events, conditions or circumstances existing or occurring with respect to the Site on or prior to the Closing Date, or (iv) any act or failure to act (including any misrepresentation or the failure to comply with the Operative Documents including, without limitation, the failure to maintain insurance required by the Lease or the Construction and Development Agreement) by any Cubic Person (other than the failure to complete construction of the Facility or to cause Completion by the Construction Period Termination Date). For the avoidance of doubt, it shall deemed to be the Lessee’s failure to act where any exclusion arises from insurance coverages required to be maintained by the Lessee under the Lease or the Construction and Development Agreement.

“S&P” shall mean Standard & Poor’s Rating Services, a division of the McGraw-Hill Companies, Inc. or any successor thereto.

“Subsidiary” shall mean, as to any Person, any corporation, association or other business entity in which such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries owns sufficient equity or voting interests to enable it or them (as a group) ordinarily, in the absence of contingencies, to elect a majority of the directors (or Persons performing similar functions) of such entity, and any partnership or joint venture if more than a 50% interest in the profits or capital thereof is owned by such Person or one or more of its Subsidiaries or such Person and one or more of its Subsidiaries (unless such partnership can and does ordinarily take major business actions without the prior approval of such Person or one or more of its Subsidiaries). Unless the context otherwise clearly requires, any reference to a “Subsidiary” is a reference to a Subsidiary of the Lessee .

“ Subsidiary Guarantee ” shall mean that certain Third Amended and Restated Guarantee dated as of August 11, 2016 (including any and all supplements thereto) and executed (or joined) by each Guarantor, as amended, restated, supplemented or otherwise modified from time to time.

“Substantial Completion” shall mean substantial completion of the Construction subject to punch list items, final work and final payments, in accordance with the approved Plans and Specifications and pursuant to the General Construction Agreement which substantial completion may be evidenced by a certificate of occupancy (including a temporary certificate of occupancy) or its equivalent as available.

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Amount, Break Amounts, Additional Costs, Sale Proceeds, the Construction Recourse Amount, payments of Deficiency, the Recourse Deficiency Amount or the Return Price Recourse Deficiency Amount, the amounts payable pursuant to Section 7.7 of the Participation Agreement and indemnities and damages for breach of any covenants, representations, warranties or agreements by Lessee contained in the Operative Documents.

“ Survey ” shall have the meaning provided in Section 2.1(h) of the Participation Agreement.

“Swap Agreement ” shall mean any agreement with respect to any swap, forward, future or derivative transaction or option or similar agreement involving, or settled by reference to, one or more rates, currencies, commodities, equity or debt instruments or securities, or economic, financial or pricing indices or measures of economic, financial or pricing risk or value or any similar transaction or any combination of these transactions; provided that no phantom stock or similar plan providing for payments only on account of services provided by current or former directors, officers, employees or consultants of the Lessee or the Subsidiaries shall be a Swap Agreement.

“Swaps ” shall mean, with respect to any Person, payment obligations with respect to interest rate swaps, currency swaps and similar obligations obligating such Person to make payments, whether periodically or upon the happening of a contingency; provided that Swaps entered into by such Person in the ordinary course of business for the sole purpose of managing or hedging risk shall not be deemed or construed to constitute Indebtedness within the terms of this Agreement. Without limiting the foregoing, the amount of the obligation under any Swap shall be the amount determined in respect thereof as of the end of the then most recently ended fiscal quarter of such Person, based on the assumption that such Swap had terminated at the end of such fiscal quarter, and in making such determination, if any agreement relating to such Swap provides for the netting of amounts payable by and to such Person thereunder or if any such agreement provides for the simultaneous payment of amounts by and to such Person, then in each such case, the amount of such obligation shall be the net amount so determined.

“Tax” and “Taxes” shall mean any and all fees (including, without limitation, documentation, recording, license and registration fees and public dues), taxes (including, without limitation, income (whether net, gross or adjusted gross), gross receipts, sales, rental, use, value added, net asset, property, real estate transfer, transfer, excise and stamp taxes), levies, imposts, duties, charges, assessments or withholdings of any nature whatsoever imposed by an Authority, together with any penalties, fines or interest thereon or additions thereto.

“ TeraLogics ” shall mean TeraLogics, LLC, a Maryland limited liability company.

“ Title Insurance Company ” shall mean the title insurance company that has or will issue the title policies with respect to the Leased Property, which company shall be reasonably acceptable to the Lessor.

“ Title Policy ” shall have the meaning provided in Section 2.1(m) of the Participation Agreement.

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“Transaction Costs” shall mean reasonable and properly documented costs, expenses and fees incurred by the Lessee, the Agents and the Participants in connection with the consummation of the transactions contemplated by the Operative Documents, and the preparation, negotiation, syndication, execution and delivery of the Operative Documents, including, without duplication, (1) the fees and expenses of Jones Day, special counsel to the Lessee and special California counsel to the Lessee; (2) the fees and expenses of Dechert LLP, special counsel to the Lessor and Rent Assignees; (3) all premiums and other fees and expenses of the Title Insurance Company with respect to its issuance of the Title Policies; (4) all fees and expenses of the Environmental Expert with respect to the Phase I environmental report and any additional work as referenced in Section 2.1(i) of the Participation Agreement, payable in accordance with the fee agreement between the Environmental Expert and the Lessor; (5) the initial and ongoing reasonable fees and expenses of the Agents and their respective counsel; (6) all fees and expenses of the Appraiser with respect to the Appraisal payable in accordance with the fee agreement between the Appraiser and the Lessor; (7) all taxes and search fees, recording fees and filing fees incurred in connection with lien searches and the recording, registering or filing any Operative Document, any deed, declaration, mortgage, security agreement, notice, release, discharge, termination or financing statement with any public office, registry or governmental agency; (8) all reasonable costs, expenses and fees of the surveyor engaged to survey the Site, including any flood zone determination costs, expenses and fees; (9) all fees and expenses of the Construction Consultant with respect to the initial preparation and subsequent updating of the construction report (as referenced in Section 3.1(j) of the Participation Agreement) payable in accordance with the fee agreement between the Construction Consultant and the Lessor; (10) all costs and expenses of one company engaged to advise the Participants on insurance issues arising in connection with the negotiation of the Operative Documents; (11) all insurance premiums, including premiums related to residual value insurance procured by Lessor for its accounting purposes; (12) the out-of-pocket fees and expenses of the Participants; and (13) all other Fees.

“ Uniform Commercial Code ” and “ UCC ” shall mean the Uniform Commercial Code as in effect from time to time in any applicable jurisdiction.

“Unrestricted Subsidiary ” shall mean any Subsidiary which is not a Restricted Subsidiary and, if applicable, as has been designated as such within the limitations of Section 5.6 of the Participation Agreement. An SPE may be either a Restricted Subsidiary or an Unrestricted Subsidiary.

“Upfront Fee” shall have the meaning provided in Section 2.13(b) of the Participation Agreement.

“U.S. Person ” shall mean any Person that is a “United States Person” as defined in Section 7701(a)(30) of the Code.

“USA PATRIOT Act” shall have the meaning provided in Section 4.1(q) of the Participation Agreement.

“ Wholly-owned Restricted Subsidiary ” shall mean, at any time, any Restricted Subsidiary one hundred percent (100%) of all of the Equity Interests (except directors’ qualifying shares) and voting interests of which are owned by any one or more of the Lessee and the Lessee’s other Wholly-owned Restricted Subsidiaries at such time.

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“ Wholly-owned Subsidiary ” shall mean, at any time, any Subsidiary one hundred percent (100%) of all of the Equity Interests (except directors’ qualifying shares) and voting interests of which are owned by any one or more of the Lessee and the Lessee’s other Wholly-owned Subsidiaries at such time.

“Withdrawal Liability ” shall mean liability to a Multiemployer Plan as a result of a complete or partial withdrawal from such Multiemployer Plan, as such terms are defined in Part I of Subtitle E of Title IV of ERISA.

“Withholding Taxes” shall mean Taxes arising under the laws of any national, municipal or local government, political subdivision or taxing Authority of the United States or any other jurisdiction imposed or collected by way of withholding (regardless of whether such taxes may also be imposed upon or collected from the recipient of a payment), and fines, interest, penalties or other additions thereto, thereon, in lieu thereof or for noncollection or in respect thereof.

“Yield” shall mean with respect to each Payment Period (a) the Yield Rate for such Payment Period multiplied by (b) the aggregate Lease Balance outstanding.

“Yield Rate” shall mean, for any Payment Period, (a) the sum of the LIBOR Rate for such Payment Period plus the Applicable Margin or (b) at any time that the provisions of Section 2.9(b) of the Participation Agreement shall apply to the Lease Balance, the Replacement Rate or the Alternate Base Rate, as applicable, plus the Applicable Margin; and (ii) during the Base Term, (a) the sum of the LIBOR Rate for such Payment Period plus the Applicable Margin.

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Exhibit 10.7

A.CERTAIN INFORMATION (INDICATED BY ASTERISKS) HAS BEEN OMITTED FROM THIS DOCUMENT BECAUSE IT IS NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED

RECORDING REQUESTED BY

WHEN RECORDED MAIL TO:

Bruce D. Hickey, Esq.
Dechert LLP
One International Place, 40 th Floor
100 Oliver Street
Boston, MA 02110

ORDER NO. 00101039

SPACE ABOVE THIS LINE FOR RECORDER'S USE

THE UNDERSIGNED GRANTOR(s) DECLARE(s)

DOCUMENTARY TRANSFER TAX is $0.00

CITY TAX $0.00

No transfer tax is due because the Lease term is less than 35 years.

MEMORANDUM OF LEASE, FEE AND LEASEHOLD DEED OF TRUST, ASSIGNMENT OF LEASES AND RENTS, SECURITY AGREEMENT AND FIXTURE FILING

Dated as of February 5, 2019

by and between

CUBIC CORPORATION

and

BANKERS COMMERCIAL CORPORATION

and

CHICAGO TITLE COMPANY, as Deed of Trust Trustee

for the benefit of

BANKERS COMMERCIAL CORPORATION, as Lessor

TABLE OF CONTENTS

		Page
SECTION 1.	DEFINITIONS AND INTERPRETATION.	2
SECTION 2.	ACCEPTANCE AND APPROVAL.	6
SECTION 3.	LEASE OF LEASED PROPERTY; PAYMENT AND PERFORMANCE OF OBLIGATIONS.	6
SECTION 4.	LEASE TERM.	6
SECTION 5.	NOTICE OF PURCHASE OPTIONS.	7
SECTION 6.	LESSEE GRANT OF LIEN AND SECURITY INTEREST.	7
SECTION 7.	REMEDIES.	7
SECTION 8.	REMEDIES NOT EXCLUSIVE.	12
SECTION 9.	OTHER COVENANTS.	13
SECTION 10.	DUTY OF LESSOR.	13
SECTION 11.	POWERS COUPLED WITH AN INTEREST.	13
SECTION 12.	AUTHORIZATION OF FINANCING STATEMENTS.	14
SECTION 13.	SECURITY AGREEMENT UNDER UCC.	14
SECTION 14.	LESSOR’S MORTGAGE IN FAVOR OF LESSEE’S DEED OF TRUST TRUSTEE.	15
SECTION 15.	INCORPORATION INTO LEASE.	16
SECTION 16.	NOTICE TO POTENTIAL CLAIMANT.	16
SECTION 17.	RATIFICATION.	16
SECTION 18.	ASSIGNMENT OF LEASE, THE CONSTRUCTION AND DEVELOPMENT AGREEMENT AND LIENS.	17
SECTION 19.	NOTICES.	17
SECTION 20.	SEVERABILITY.	17
SECTION 21.	AMENDMENTS IN WRITING; CUMULATIVE REMEDIES.	17
SECTION 22.	SECTION HEADINGS.	17
SECTION 23.	SUCCESSORS AND ASSIGNS.	17
SECTION 24.	PARTIAL RELEASE; FULL RELEASE.	18
SECTION 25.	FUTURE ADVANCES; CONSTRUCTION RELATED PROVISIONS.	18
SECTION 26.	CERTAIN POWERS OF DEED OF TRUST TRUSTEE: SUBSTITUTION OF DEED OF TRUST TRUSTEE.	18

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SECTION 27.	SUCCESSOR COLLATERAL AGENT.	19
SECTION 28.	CERTAIN ACKNOWLEDGMENTS AND AGREEMENTS OF LESSEE.	19
SECTION 29.	COUNTERPART EXECUTION.	21
SECTION 30.	WAIVER OF CERTAIN RIGHTS.	21
SECTION 31.	REFERENCES.	21
SECTION 32.	CALIFORNIA PROVISIONS. TO THE EXTENT PERMITTED BY, AND SUBJECT TO, APPLICABLE LAWS AND REGULATIONS:	22
SECTION 33.	GOVERNING LAW.	24
SECTION 34.	DEED OF TRUST TRUSTEE PROVISIONS.	24


EXHIBIT A	Legal Description of Site

Appendix I	Definitions

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MEMORANDUM OF LEASE, FEE AND LEASEHOLD DEED OF TRUST,

ASSIGNMENT OF LEASES AND RENTS,

SECURITY AGREEMENT AND FIXTURE FILING

This Memorandum of Lease, Fee and Leasehold Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing is made as of February 5, 2019 (this “ Memorandum of Lease ”), by and between CUBIC CORPORATION, a Delaware corporation, as Lessee and trustor (together with its successors and assigns, “ Lessee ” or “ Cubic ”), and BANKERS COMMERCIAL CORPORATION, a California corporation, as Lessor (together with its successors and assigns, “ Lessor ”), and with respect to the grant set forth in Section 6 below, from Lessee to Chicago Title Company, as Deed of Trust Trustee (“ Deed of Trust Trustee ”) for the benefit of the Lessor, having an address at 445 South Figueroa, 14 th Floor, Los Angeles, California 90017.

RECITALS

A. Lessee and Lessor have entered into that certain Lease Agreement dated as of the date hereof (as amended, restated, or supplemented from time to time, the “ Lease ”).

B. Pursuant to that certain Participation Agreement (as amended, restated, or supplemented from time to time, the “ Participation Agreement ”), dated as of the date hereof, by and among Lessee, as lessee, Lessor, as lessor, the Rent Assignees that are a party thereto from time to time, as rent assignees (the “ Rent Assignees ” and together with the Lessor, collectively, the “ Participants ”), MUFG Bank, Ltd., as Administrative Agent for the Participants (in such capacity, “ Administrative Agent ”) and MUFG Union Bank, N.A., as Collateral Agent for the Rent Assignees (“ Collateral Agent ”), Lessee, as Construction Agent, and Lessor, as Owner, shall enter into a Construction and Development Agreement (the “ Construction and Development Agreement ”), dated as of the date hereof, pursuant to which Lessee, as Construction Agent, shall enter in the Construction Documents and cause the Facility to be constructed on the Site.

C. Pursuant to each Rent Assignment Agreement (as amended, restated, supplemented, or otherwise modified from time to time, the “ Rent Assignment Agreement ”) dated as of the date hereof, each by and between Lessor, as rent assignor, and a Rent Assignee, as rent assignee, and the Participation Agreement, the Rent Assignee has agreed to acquire Rent Assignment Interests from Lessor in the aggregate amount of $52,400,000 upon the terms and subject to the conditions set out in the Rent Assignment Agreement and the Participation Agreement.

D. Pursuant to the Participation Agreement, Lessor will use the proceeds of a Lessor Investment advanced by Lessor in an aggregate amount not to exceed $52,400,000 together with the Rent Assignment Advances to finance (i) its leasing of the Site from Lessee under a Ground Lease, (ii) its acquisition of Building 1 pursuant to the Deed, (iii) the demolition of Building 1 and the construction of the Facility by Construction Agent, and (iv) the payment of related Transaction Costs.

E. Lessor will record its leasehold interests in the Site and its record title to the Facility and other Mortgaged Property, subject to the rights of Lessee under the Lease, the Construction and Development Agreement and the other Operative Documents.

F. The Participation Agreement and the Lease provide for the execution and delivery of this Memorandum of Lease with respect to the Site and Facility, all for the purpose of confirming (i) Lessee’s acceptance of the lease of the Site and the Facility in accordance with the terms and conditions of the Lease, (ii) Construction Agent’s construction of the Facility in accordance with the Construction and Development Agreement, (iii) Lessor’s lease of its interest in the Site and Facility to Lessee pursuant to the terms of the Lease, (iv) Lessee’s grant of a lien and security interest in its interest in the Site and Facility in order to secure Lessee’s and Construction Agent’s payment and performance obligations under the Operative Documents, and (v) Lessor’s grant of a lien and security interest in its interest in the Site and Facility in order to secure its obligation to convey title therein to Lessee under certain circumstances.

NOW, THEREFORE, in consideration of the premises and other good and sufficient consideration, Lessor and Lessee hereby agree as follows:

Section 1. Definitions and Interpretation .

For purposes of this Memorandum of Lease, each capitalized term or phrase used and not defined in this Memorandum of Lease shall have the meaning set forth in Appendix I attached hereto and the rules of interpretation set out in such Appendix I shall also apply to this Memorandum of Lease. This Memorandum of Lease evidences of record the Lease, and all references in this Memorandum of Lease or in the other Operative Documents to the Lease shall be deemed to include this Memorandum of Lease. As used in this Memorandum of Lease:

“ Base Term Commencement Date ” means the date on which Substantial Completion of the Facility has occurred.

“ Construction Documents Collateral ” means all of Construction Agent’s right, title and interest in (i) the Construction Documents, (ii) contracts and warranties relating to the construction of the Facility, (iii) the Plans and Specifications and all other plans and specifications relating to the Facility, including without limitation all blueprints and other construction, architectural, design and engineering drawings and specifications or other similar documents relating to the Facility, (iv) any liquidated damage payments payable under any Construction Document together with all rebates, offsets or other warranty payments thereunder, (v) any assignments under purchase orders, invoices or purchase agreements with any manufacturer of or contractor for any portion of the Facility including the General Contractor under the General Construction Agreement and any other contractor under any other Construction Documents, (vi) all insurance policies required to be maintained pursuant to the Construction and Development Agreement and/or the Construction Documents, and (vii) all products, excess successions, subleases, rents, issues, profits, products, returns, income and proceeds of and from any or all of the foregoing (including proceeds from any of the foregoing), and to the extent not otherwise included, all payments under insurance (whether or not Lessee or Construction Agent is the loss payee thereof) or any indemnity, warranty or guarantee payable by reason of loss or damage to or otherwise with respect to any of the foregoing.

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“ Excluded Property ” means fixtures, Equipment and other personalty not funded with Advances (which may include, without limitation (except to the extent acquired using the Advances), lab equipment, machinery, tools and testing equipment, and which does not constitute property of the Lessor pursuant to the Lease).

“ Event of Default ” means an Event of Default, as set forth in the Lease.

“ Force Majeure Event ” shall mean any act of God, unusually severe weather conditions (such as catastrophic storms or floods, tornadoes, hurricanes and cyclones), civil or enemy action, or any Governmental Action or inability to obtain or delay in obtaining labor or materials not arising from an act or omission of any Cubic Person; provided, that any Specified Event and any other event, cause or condition that is within the control of any Cubic Person shall not be a Force Majeure Event.

“ Mortgaged Property ” means all of Lessee’s interest and title in and to all of the following property, wherever located whether such interest and title is held or owned now or in the future, as such interest may appear, be determined or be re-characterized:

(a) the Site described on Exhibit A attached hereto, along with all buildings, structures and other improvements which are now or in the future located or to be constructed on the Site from time to time, and whether or not such buildings, structures, or other improvements have become subject to the Lease (the “ Facility ”), and all other Leased Property which is now or in the future located or to be constructed or installed on or off the Site from time to time with proceeds from the Advances made pursuant to the Participation Agreement and Construction Development Agreement but excluding any Excluded Property (the interest in Facility and in the Site, together with Appurtenant Rights and Fixtures (as such terms are defined below) relating thereto being collectively referred to as the “ Leased Property ”);

(b) the Lease, including without limitation, the deed of trust liens and security interests granted by Lessee to Lessor hereunder and under the Lease, and all Rent and all other rents, payments, purchase prices, receipts, revenues, issues and profits payable under the Lease or pursuant to any other lease with respect to the Leased Property;

(d) all the estate, right, title, claim or demand, in possession or expectancy, in and to the Leased Property or any part thereof;

(e) all of the fixtures of every kind and nature whatsoever, and all appurtenances and additions thereto and substitutions or replacements thereof (together with, in each case, attachments, components, parts and accessories) now or subsequently attached to the Leased Property which are Non-Severable or which are acquired with proceeds from the Advances made pursuant to the Participation Agreement and Construction Development Agreement but excluding any Excluded Property (all of the foregoing in this paragraph (c) being referred to as the “ Fixtures ”);

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(f) all substitutes and replacements of, and all additions and improvements to, the Leased Property and the Fixtures, subsequently acquired, constructed, assembled or placed on the Site, immediately upon such acquisition, construction, assembling or placement, including any and all building materials whether stored at the Leased Property or offsite, and, in each such case, without any further conveyance, mortgage, assignment or other act by any Person but excluding the Excluded Property;

(g) to the extent assignable, all Construction Documents and all other contracts and warranties necessary to purchase, construct, remodel, repair, operate and maintain the Leased Property (including without limitation all contracts and subcontracts for the performance of work or the supply of materials required for the purchase, construction, remodeling, repair, operation or maintenance of the Leased Property, and all architectural, engineering and other design contracts related to the Leased Property);

(h) (i) to the extent assignable, all Governmental Actions relating to construction, completion, occupancy, use or operation of the Leased Property or any part thereof and (ii) all Plans and Specifications relating to the Leased Property;

(i) all right, title and interest of Lessee in proceeds payable under all property insurance policies required to be maintained by Lessee or obtained on behalf of Lessee pursuant to Article XI of the Lease and by or on behalf of Construction Agent pursuant to Section 2.7(d) of the Construction and Development Agreement (to the extent relating to the Leased Property and/or Fixtures), including subject to the rights of Lessee under Article XIII of the Lease and of Construction Agent under Section 3.3 of the Construction and Development Agreement, respectively, the right to collect and receive such proceeds; and, subject to such rights of Lessee and Construction Agent, all awards and other compensation, including the interest payable thereon and the right to collect and receive the same, made to the present or any subsequent owner of the Leased Property for the taking by eminent domain, condemnation or otherwise, of all or any part of the Leased Property or any easement or other right therein running for the benefit of the Leased Property;

(j) (i) all accounts, general intangibles, tangible chattel paper, deposit accounts, money, investment property, instruments and documents relating to or otherwise arising in connection with or derived from the Leased Property, (ii) all refunds, rebates, reserves, deferred payments, deposits, cost savings, and payments of any kind due from or payable by (A) any Authority, or (B) any insurance or utility company, relating in either case to any or all of the Leased Property, (iii) all refunds, rebates and payments of any kind due from or payable by any Authority for any taxes, assessments, or governmental or quasi governmental charges or levies imposed with respect to or upon any or all of the Leased Property, and (iv) any cash collateral account maintained pursuant to any of the or Operative Documents;

(k) all tenements, hereditaments, appurtenances and privileges in and to all or any part of the Leased Property or any interest therein (and any greater estate in the Leased Property now owned or hereafter acquired pursuant thereto), and all other rights and interests now or in the future benefiting or otherwise relating to the Leased Property,

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including easements, rights of way, sidewalks, alleys and strips and gores of land adjacent to or used in connection with the Leased Property, development rights, mineral rights, water rights and water stock (collectively, “ Appurtenant Rights ”);

(l) all the estate, right, title, claim or demand, in possession or expectancy, in and to the Construction Documents Collateral or any part thereof with respect to the construction of or on any portion of the Leased Property;

(m) all rights to liquidated damages, rebates, offset or other warranty payments, or assignment under a purchase order, invoice or purchase agreement with any manufacturer of or contractor with respect to the Construction Documents;

(n) all security deposits, rents, issues, profits, returns, income and proceeds of and from any or all of the foregoing (including proceeds from any of the foregoing), and to the extent not otherwise included, all payments under insurance (whether or not Lessee is the loss payee thereof) or any indemnity, warranty or guarantee payable by reason of loss or damage to or otherwise with respect to any of the foregoing but excluding all products; and

(o) all cash and non-cash proceeds of the foregoing.

“ Non-Severable ” means those fixtures, Alterations, additions and improvements and substitutions and replacements thereof relating to the Facility which (i) cannot be readily removed from the Facility without causing damage to the Facility or the Site unless promptly repaired by Lessee, or (ii) is required for the Leased Property to comply with Applicable Laws and Regulations and Insurance Requirements.

“ Obligations ” shall mean, in each case, whether now in existence or hereafter arising: all payment and performance obligations of Cubic under the Operative Documents including, without limitation, (i) Cubic’s obligation to pay the Construction Recourse Amount, (ii) Cubic’s obligation to pay the Recourse Deficiency Amount or the Return Price Recourse Deficiency Amount, as applicable, and Deficiency payments, (iii) Cubic’s obligation to pay the Purchase Amount as the purchase price for the Leased Property, (iv) Cubic’s obligation to pay any damages incurred by the Administrative Agent or any Participant or other amounts due under the Operative Documents from time to time, including, without limitation, following an Event of Default including any rejection by Cubic of the Construction and Development Agreement, the Lease or any other Operative Document in any bankruptcy, insolvency or similar proceeding, (v) Cubic’s obligation to pay the Basic Rent (including yield accruing after the filing of any bankruptcy, insolvency or similar petition), (vi) Cubic’s obligation to pay any and all other amounts of Rent, and (vii) Cubic’s obligation to pay or perform, as applicable, all other fees, expenses and commissions (including attorney’s fees and expenses), charges, costs, indebtedness, loans, liabilities, financial accommodations, obligations, covenants and duties owing by the Lessee to the Agents, any Participant or any other Person, of every kind, nature and description, direct or indirect, absolute or contingent, due or to become due, contractual or tortuous, liquidated or unliquidated, and whether or not evidenced by any note, instrument, agreement or any other document, in each case under or in respect of the Operative Documents.

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“ Personal Property ” means all of the Mortgaged Property that does not constitute real property and in which a security interest may be created under the UCC.

“ Substantial Completion ” means substantial completion of the Construction subject to punch list items, final work and final payments, in accordance with the approved Plans and Specifications and pursuant to the General Construction Agreement which substantial completion may be evidenced by a certificate of occupancy (including a temporary certificate of occupancy) or its equivalent as available.

“ Uniform Commercial Code ” and “UCC” means the Uniform Commercial Code as in effect from time to time in the State of New York except to the extent the Uniform Commercial Code of the State in which the Site is located is applicable pursuant to Section 33 hereof.

Section 2. Acceptance and Approval .

Lessee hereby acknowledges and confirms that Lessee’s execution of this Memorandum of Lease, without further act, constitutes the irrevocable acceptance by Lessee of Lessor’s interest in the Site described on Exhibit A attached hereto and incorporated herein by reference and in the Facility on the Site for all purposes of the Lease and the other Operative Documents.

Section 3. Lease of Leased Property; Payment and Performance of Obligations .

(a) Effective upon the execution and delivery of this Memorandum by Lessor and Lessee, Lessor’s rights in and to the Leased Property for all purposes hereof and of the Lease shall be subject to the terms and provisions of the Lease. Commencing on the Base Term Commencement Date as defined in the Lease, Lessor hereby delivers, demises and leases the Leased Property to Lessee and Lessee hereby accepts, hires and leases the Leased Property from Lessor for the term of the Lease, as described in Section 2.2 of the Lease.

(b) Cubic in its capacities as Lessee and Construction Agent shall pay and perform the Obligations in accordance with the terms of the Lease, the Construction and Development Agreement, the Participation Agreement and the other Operative Documents.

Section 4. Lease Term .

Unless earlier terminated, the term of the Lease shall commence on and include the Base Term Commencement Date, which shall occur on or prior to two (2) years from the date hereof, or to the extent of an occurrence of a Force Majeure Event, in which case the Base Term Commencement Date shall occur no later than May 5, 2021, and end on:

(a) the fifth year anniversary of the Base Term Commencement Date; or, if applicable,

(b) the end of any Extended Remarketing Period described in Section 22.4 of the Lease (which shall not exceed twelve (12) months).

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Section 5. Notice of Purchase Options .

Notice is hereby made of purchase options that have been granted under the Lease in favor of Lessee which purchase options may, subject to the terms and conditions set forth therein, be exercised on any Business Day two years following the Base Term Commencement Date but at least one hundred eighty (180) days prior to the Return Date, upon not less than thirty (30) days’ prior written notice which election shall be irrevocable when made.

Section 6. Lessee Grant of Lien and Security Interest .

(a) To secure the full and timely payment of, and the complete and timely performance and discharge of, the Obligations by Lessee, Lessee has GRANTED, BARGAINED, SOLD, ASSIGNED, and CONVEYED, and does hereby GRANT, BARGAIN, SELL, ASSIGN and CONVEY unto the Deed of Trust Trustee, in trust with a power of sale and for the benefit of Lessor, all of the Mortgaged Property (other than the Personal Property), subject to the Permitted Liens, TO HAVE AND TO HOLD the Mortgaged Property and the rights and privileges hereby granted unto Deed of Trust Trustee and its successors and assigns, until all the Obligations are paid, performed and satisfied in full.

(b) To secure the full and timely payment of, and the complete and timely performance and discharge of, the Obligations by Lessee, Lessee further grants to the Lessor, pursuant to the UCC, a security interest in all of Lessee’s present and future right, title, and interest in and to the Personal Property.

Section 7. Remedies .

(a) Without limiting any other remedies set forth in the Lease or the Construction and Development Agreement, while an Event of Default or a Construction Event of Default exists, Lessor may, at its option, declare all Obligations to be immediately due and payable without any presentment, demand, protest or notice of any kind (except as may otherwise be provided in the Operative Documents), and if the Obligations have been accelerated then, so long as Lessee has not already purchased the Leased Property in accordance with Section 20.1 of the Lease, subject to and in accordance with applicable law:

(i) the Deed of Trust Trustee and the Collateral Agent, as assignee of Lessor’s interests, in addition to all other remedies available at law or in equity, shall have the right forthwith, with or without bringing any action or proceeding, with or without a receiver appointed by a court, and without regard to the adequacy of its security, (A) to enter upon and take possession of the Mortgaged Property, or any part thereof, in its own name or in the name of Lessee, to make repairs and do any acts which it deems necessary or desirable to preserve the value, marketability or rentability of the Mortgaged Property, or any part thereof or interest therein, increase the income therefrom or protect the security hereof, (B) to let the Mortgaged Property, and (C) with or without taking possession of the Mortgaged Property, to sue for or otherwise collect and receive the rents, issues and profits

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thereof and to apply said rentals and profits, after payment of all necessary or proper charges and expenses, including reasonable attorneys’ fees, on account of the amounts hereby secured (subject to the Excluded Amounts). The collection of such rentals and profits and the application thereof as aforesaid, shall not cure or waive any Event of Default or notice of an Event of Default hereunder or invalidate any act done in response to such Event of Default or pursuant to such notice of and Event of Default and, notwithstanding the continuance in possession of all or any portion of the Mortgaged Property or the collection, receipt and application of rentals and profits, Collateral Agent shall be entitled to exercise every right provided for in any of the Operative Documents or by law upon occurrence of any Event of Default, including the right to exercise the power of sale herein contained. Failure or discontinuance of Collateral Agent at any time, or from time to time, to collect rentals and profits shall not in any manner affect the subsequent enforcement of Collateral Agent of the right to collect the same. Lessee grants to Lessor the right but not the obligation to enter upon and take possession of the Mortgaged Property for the purpose of collecting any such rents and to otherwise exercise in Lessor’s discretion any and all rights and remedies afforded Lessor under Section 2938 of the California Civil Code.

(ii) Collateral Agent shall, as a matter of right, without notice to Lessee or anyone claiming under Lessee, and without regard to the then value of the Mortgaged Property, or the interest of Lessee therein, at the option of Collateral Agent, be entitled to the appointment of a receiver for the Mortgaged Property, and Lessee hereby consents to such appointment and waives notice of any application therefor and waives any requirement that the receiver post or deliver a bond. Any such receiver or receivers shall have all the usual powers and duties of receivers in like or similar cases and all the powers and duties of Collateral Agent and Deed of Trust Trustee in case of entry as provided in this Memorandum of Lease and shall continue as such and exercise all such powers until the later of (A) the date of confirmation of sale of the Mortgaged Property; (B) the disbursement of all proceeds of the Mortgaged Property collected by such receiver and the payment of all expenses incurred in connection therewith; or (C) the termination of such receivership with the consent of Collateral Agent or pursuant to an order by a court of competent jurisdiction.

(iii) Lessee and Lessor agree that, in any assignments, deeds, bills of sale, notices of sale, or postings, given by Deed of Trust Trustee or Lessor, any and all statements of fact or other recitals therein made as to the identity of Lessor, or as to the existence of any Event of Default, or as to the acceleration of the maturity of the Obligations, or as to the request to sell, posting of notice of sale, notice of sale, time, place, terms and manner of sale and receipt, distribution and application of the money realized therefrom, or as to the due and proper appointment of a substitute trustee and without being limited by the foregoing, as to any other act or thing having been duly done by Lessor or by Deed of Trust Trustee, shall be construed by all courts of law and equity as prima facie evidence that the said statements or recitals state facts and are without further question to be so accepted,

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and Lessee does hereby ratify and confirm any and all acts that Deed of Trust Trustee may lawfully do in the Mortgaged Property by virtue hereof.

(iv) Collateral Agent, as assignee of Lessor’s interests, may, or Deed of Trust Trustee may upon written request of Collateral Agent, proceed by suit or suits, at law or in equity, to enforce the payment and performance of the Obligations in accordance with the terms hereof or of the other Operative Documents, to foreclose or otherwise enforce the assignments, liens, and security interests created or evidenced by the other Operative Documents, or this Memorandum of Lease as against all, or any part of, the Mortgaged Property, and to have all or any part of the Mortgaged Property sold under the judgment or decree of a court of competent jurisdiction.

(v) To the extent permitted by law, Lessor or Collateral Agent may enter upon the Site, take possession of the Mortgaged Property and remove the Leased Property or any part thereof, with or without judicial process, and, in connection therewith, without any responsibility or liability on the part of Lessor or Collateral Agent, take possession of any property located on or in the Site and the improvements situated on the Site which is not a part of the Mortgaged Property and hold or store such property at Lessee’s expense.

(vi) Lessor or Collateral Agent may assume and/or purchase the Mortgaged Property, or any part thereof, at any public sale (if permitted by applicable law) or any judicial sale.

(vii) Notwithstanding anything contained herein to the contrary, pursuant to Section 9-604(a) of the UCC, as amended, Collateral Agent may proceed under Chapter 9 of the UCC as to all Personal Property covered hereby or, at Collateral Agent’s election, Collateral Agent may proceed as to both the real and personal property covered hereby in accordance with Collateral Agent’s rights and remedies in respect of real property, in which case the provisions of Chapter 9 of the UCC shall not apply.

(viii) If Lessor or Collateral Agent is the purchaser of the Mortgaged Property, or any part thereof, at any sale thereof or upon any other foreclosure (conducted in accordance with the terms of applicable California law) or enforcement of the assignments, liens, and security interests hereof, or otherwise, Lessor or Collateral Agent, as applicable, shall, upon any such purchase, acquire good title to the Mortgaged Property so purchased, free of the assignments, liens, and security interests of these presents.

(ix) Lessee covenants to promptly reimburse and pay to Lessor until the Obligations are indefeasibly paid and performed in full, the amount of all reasonable expenses (including the cost of any insurance, taxes, or other charges) incurred by Lessor and Collateral Agent in connection with its custody, preservation, use or operation of the Mortgaged Property, together with interest thereon from the date incurred by such party at the Overdue Rate (so long as such

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interest is not deemed a penalty under applicable California law) and all such expenses, cost, taxes, interest, and other charges shall be a part of the Obligations.

(x) If the assignments, liens, or security interests hereof shall be foreclosed or otherwise enforced by a Deed of Trust Trustee’s sale, or by any other judicial or (to the extent permitted by applicable law) non-judicial action, then the purchaser at any such sale shall receive, as an incident to his ownership, immediate possession of that portion of the Mortgaged Property purchased, and if Lessee or Lessee’s successors shall hold possession of any of said portion of the Mortgaged Property subsequent to such foreclosure, Lessee and Lessee’s successors shall be considered as tenants at sufferance of the purchaser at such foreclosure sale, and any one occupying the Mortgaged Property (or any part thereof) after demand made for possession thereof shall be guilty of forcible detainer and shall be subject to eviction and removal, in accordance with applicable California law, and all damages by reason thereof are hereby expressly waived.

(xi) Deed of Trust Trustee, Lessor, Collateral Agent and Administrative Agent may exercise all other rights and remedies provided herein, in any of the Operative Documents or other document or agreement now or hereafter securing all or any portion of the Obligations secured hereby, by law or equity or by virtue of any of the Operative Documents, or under the UCC or otherwise.

(xii) During the continuance of an Event of Default hereunder, Collateral Agent may proceed or cause Deed of Trust Trustee, in any sequence: (A) to exercise its rights hereunder with respect to all or any portion of the Mortgaged Property and all or any portion of the Personal Property; and (B) to exercise its rights under Section 13 hereof with respect to all or any portion of the Personal Property in accordance with the provisions of the UCC, in each case subject to Lessee’s rights under the Lease (including Lessee’s right to purchase the Leased Property under Section 20.1 of the Lease).

(xiii) Subject to the rights, if any, of Lessee under the Lease (including Lessee’s right to purchase the Leased Property under Section 20.1 of the Lease) and of Construction Agent under the Construction and Development Agreement and the other Operative Documents to which it is a party, to the extent not prohibited by applicable California law, Lessor or Collateral Agent as its assignee may proceed to exercise all rights, privileges and remedies of Lessor under the Lease and under the Construction and Development Agreement.

(b) Foreclosure By Power of Sale Pursuant to California Civil Code Sections 2924-2924l. Subject to, and in accordance with, Applicable Laws and Regulations:

(i) Should Lessor elect to foreclose by exercise of the power of sale herein contained, Lessor shall notify Deed of Trust Trustee and shall deposit with Deed of Trust Trustee this Memorandum of Lease and such receipts and evidence of expenditures made and secured hereby as Deed of Trust Trustee may require.

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(ii) Upon receipt of such notice from Lessor, Deed of Trust Trustee shall cause to be recorded, published and delivered to Lessee such notice of default and election to sell as is then required by law and by this Memorandum of Lease. Deed of Trust Trustee shall, without demand on Lessee, after lapse of such time as may then be required by law and after recordation of such notice of default and after notice of sale having been given as required by law, sell the Mortgaged Property at the time and place of sale fixed by Deed of Trust Trustee in said notice of sale, either as a whole, or in separate lots or parcels or items, and in such order as Lessor may direct Deed of Trust Trustee so to do, at public auction to the highest bidder for cash in lawful money of the United States payable at the time of sale. Deed of Trust Trustee shall deliver to such purchaser or purchasers thereof its good and sufficient deed or deeds conveying the property so sold, but without any covenant or warranty, express or implied. The recitals in such deed of any matter or fact shall be conclusive proof of the truthfulness thereof. Any person including, without limitation, Lessee, Deed of Trust Trustee or Lessor may purchase at such sale, and Lessee hereby covenants to warrant and defend the title of such purchaser or purchasers.

(iii) Upon non-judicial foreclosure of this Memorandum of Lease, Lessor shall be entitled to credit bid up to and including the entire amount of the obligations and indebtedness secured hereby. If Lessor makes a combined credit and cash bid and is the successful bidder, Deed of Trust Trustee shall apply the cash bid first to pay the holders of liens subordinate hereto and encumbering the Mortgaged Property, in their respective order of priority; then to pay delinquent taxes, if any; and shall pay any remaining balance to Lessee; or, if such order of payment shall be prohibited by law, then in such other order or priority as is required by law. If a third party is the successful bidder at such public auction, upon receipt of cash from such bidder: Deed of Trust Trustee shall apply the cash bid received from the third party, after deducting all costs, fees and expenses of Lessor and of the Deed of Trust Trustee, including costs of evidence of title in connection with the sale, (i) first to pay all sums due and owing by Lessee, with accrued interest at the Overdue Rate, under this Memorandum of Lease and the other Operative Documents (except as to any other Operative Document) and to the satisfaction of all of Lessee’s other obligations under this Memorandum of Lease and such other Operative Documents, and (ii) the remainder, if any, to the Lessee or any other person or persons legally entitled thereto.

(iv) Subject to California Civil Code Section 2924g, Deed of Trust Trustee may postpone sale of all or any portion of the Mortgaged Property by public announcement at such time and place of sale, and from time to time thereafter may postpone such sale by public announcement or subsequently noticed sale, and without further notice make such sale at the time fixed by the last postponement, or may, in its discretion, give a new notice of sale.

(v) A sale of less than the whole of the Mortgaged Property or any defective or irregular sale made hereunder shall not exhaust the power of sale provided for herein; and subsequent sales may be made hereunder until all

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obligations secured hereby have been satisfied, or the entire Mortgaged Property sold, without defect or irregularity.

(c) If an Event of Default or a Construction Event of Default, as applicable, exists and the Obligations have been accelerated, subject to the then existing rights, if any, of Lessee under the Lease (including Lessee’s right to purchase the Leased Property under Section 20.1 of the Lease) and of Construction Agent under the Construction and Development Agreement, and the other Operative Documents to which it is a party, Lessor or Collateral Agent as its assignee may, subject to Applicable Laws and Regulations, proceed by an action at law, suit in equity or other appropriate proceeding, to protect and enforce its rights, including for the foreclosure of the lien of this Memorandum of Lease. Lessee acknowledges and agrees that any defense or contest by Lessee of Lessor’s exercise of its rights hereunder or under the Lease during the continuance of an Event of Default is within the control of Lessee.

Section 8. Remedies Not Exclusive .

Subject to, and in accordance with Applicable Laws and Regulations, each of Lessor and Collateral Agent shall be entitled to enforce payment of the indebtedness and performance of the Obligations and to exercise or cause Deed of Trust Trustee to exercise all rights and powers under this Memorandum of Lease or under any of the other Operative Documents or other agreement or any Applicable Laws and Regulations now or hereafter in force, notwithstanding that some or all of the Obligations may now or hereafter be otherwise secured, whether by deed of trust, mortgage, security agreement, pledge, lien, assignment or otherwise. Neither the acceptance of this Memorandum of Lease nor its enforcement shall prejudice or in any manner affect Lessor’s, Collateral Agent’s or Deed of Trust Trustee’s right to realize upon or enforce any other security now or hereafter held by Lessor, Collateral Agent or Deed of Trust Trustee, it being agreed that such parties shall be entitled to enforce or cause Deed of Trust Trustee to enforce this Memorandum of Lease and any other security now or hereafter held by Lessor, Collateral Agent or Deed of Trust Trustee in such order and manner as such party may determine in its absolute discretion, subject to, and in accordance with, Applicable Laws and Regulations. To the extent permitted by Applicable Laws and Regulations, no remedy herein conferred upon or reserved to Lessor or Collateral Agent as its assignee or Deed of Trust Trustee is intended to be exclusive of any other remedy herein or by law provided or permitted, but each shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute. To the extent permitted by Applicable Laws and Regulations, every power or remedy given by any of the Operative Documents to Lessor, Collateral Agent or Deed of Trust Trustee or to which they may otherwise be entitled, may be exercised, concurrently or independently, from time to time and as often as may be deemed expedient by such party. In no event shall any such party, in the exercise of the remedies provided in this Memorandum of Lease (including in connection with the appointment of a receiver and the entry of such receiver on to all or any part of the Mortgaged Property or the Leased Property), be deemed a “mortgagee in possession” unless and until such party takes possession of the Mortgaged Property or the Leased Property and no such party shall in any way be made liable for any act, either of commission or omission, in connection with the exercise of such remedies.

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Section 9. Other Covenants .

(a) At any time and from time to time, upon the written request of Lessor or Collateral Agent, and at the sole expense of Lessee, Lessee will promptly and duly execute and deliver such further instruments and documents and take such further actions as such party reasonably may request for the purposes of obtaining or preserving the full benefits of this Memorandum of Lease and of the rights and powers granted by this Memorandum of Lease. Lessee hereby irrevocably constitutes and appoints each of Lessor and Collateral Agent as Lessee’s true and lawful attorney-in fact (which power is coupled with an interest) to execute and deliver such further instruments, and take such further actions for the purposes of obtaining or preserving the full benefits of this Memorandum of Lease and of the rights and powers granted by this Memorandum of Lease.

(b) Provided no Event of Default exists, Lessee shall be suffered and permitted to remain in full possession, enjoyment and control of Lessee’s interest in the Mortgaged Property subject always to the observance and performance by Lessee of the terms of this Memorandum of Lease and of the Participation Agreement and the other Operative Documents.

(c) All monies constituting a part of the Mortgaged Property shall be paid and distributed in accordance with the terms and provisions of Article III of the Rent Assignment Agreement.

Any monies received by Lessee as payment for any loss under any policy of title insurance or as an award or compensation for any condemnation shall become part of the Mortgaged Property and shall be paid and applied in the same manner as net proceeds of a Casualty or Condemnation as provided in the Participation Agreement.

Section 10. Duty of Lessor .

Lessor’s sole duty with respect to the custody, safekeeping and physical preservation of any Mortgaged Property in its possession, under the UCC or otherwise, shall be to deal with it in the same manner as Lessor deals with similar property for its own account. None of Lessor, Collateral Agent, Deed of Trust Trustee, the Rent Assignees and their respective directors, officers, employees or agents shall be liable for failure to demand, collect or realize upon any of the Mortgaged Property, or for any delay in doing so or shall be under any obligation to sell or otherwise dispose of any Mortgaged Property, upon the request of Lessee or any other Person or to take any other action whatsoever with regard to the Mortgaged Property, or any part thereof.

Section 11. Powers Coupled with an Interest .

All powers, authorizations and agencies contained in this Memorandum of Lease are coupled with an interest and are irrevocable until this Memorandum of Lease is terminated and the lien created hereby is released.

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Section 12. Authorization of Financing Statements .

Lessee authorizes the financing statements to be filed with respect to the Mortgaged Property without the signature of such party in such form and in such filing offices as Lessor or Collateral Agent reasonably determines appropriate to perfect the security interests of Lessor and Collateral Agent under this Memorandum of Lease. A carbon, photographic or other reproduction of this Memorandum of Lease shall be sufficient as a financing statement for filing in any jurisdiction.

Section 13. Security Agreement under UCC .

(a) It is the intention of the parties hereto that this Memorandum of Lease shall constitute with respect to the Personal Property a “security agreement” within the meaning of the UCC. If an Event of Default shall be continuing, and subject to Lessee’s rights under the Lease (including Lessee’s right to purchase the Leased Property under Section 20.1 of the Lease), then in addition to having any other right or remedy available at law or in equity, Collateral Agent as assignee of Lessor’s interests thereunder shall have the option (subject to and in accordance with applicable law) of either (i) proceeding under the UCC and exercising such rights and remedies as may be provided to a secured party by the UCC with respect to all or any portion of the Mortgaged Property or Lessee’s Collateral which is personal property (including taking possession of and selling such property) or (ii) treating such property as real property and proceeding with respect to both the real and personal property constituting the Mortgaged Property or Lessee’s Collateral in accordance with Deed of Trust Trustee’s rights, powers and remedies with respect to the real property (in which event the default provisions of the UCC shall not apply). If Collateral Agent shall elect to proceed under the UCC, then ten (10) days’ notice of sale of the personal property shall be deemed reasonable notice and the expenses of retaking, holding, preparing for sale, selling and the like incurred by Collateral Agent shall include, but not be limited to, attorneys’ fees and legal expenses (including allocated costs of internal counsel) of Collateral Agent. At Collateral Agent’s request, Lessee shall assemble its Personal Property subject to the lien hereof and make it available to Collateral Agent at a place designated by Collateral Agent which is reasonably convenient to both parties.

(b) Lessee and Lessor agree, to the extent permitted by law, that this Memorandum of Lease, upon recording or registration in the real estate records of the proper office, shall constitute a financing statement filed as a “fixture filing” within the meaning of the UCC, with Lessee as debtor and Lessor as secured party. The Lessee’s organization number in the State of Delaware is 2050509.

(c) Lessee hereby acknowledges that (i) this Memorandum of Lease covers goods which are or are to become fixtures on the Leased Property, (ii) this Memorandum of Lease is to be recorded in the real estate records, and (iii) products of collateral are also covered.

(d) With respect to “fixtures” within the meaning of the California Uniform Commercial Code (the “ California UCC ”), to the extent permitted by applicable law, Lessor or Deed of Trust Trustee may elect to treat same as either real property or personal

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property and proceed to exercise such rights and remedies applicable to the categorization so chosen. Lessor may proceed against the items of real property and any items of Mortgaged Property separately or together in any order whatsoever, without in any way affecting or waiving Lessor’s rights and remedies under the California UCC, this Memorandum of Lease or the other Operative Documents. Lessee acknowledges and agrees that Lessor’s rights and remedies under this Memorandum of Lease and the other Operative Documents shall be cumulative and shall be in addition to every other right and remedy now or hereafter existing at law, in equity, by statute or by agreement of parties.

Section 14. Lessor’s Mortgage in favor of Lessee’s Deed of Trust Trustee .

(a) In the event a Purchase Option is validly exercised and Lessee has fully performed its obligations under the Lease with respect to the conveyance of Lessor’s right, title and interest in and to the Leased Property to Lessee or its designee including, without limitation, the payment to Lessor (or deposit into mutually agreeable escrow of such payment) of the Purchase Amount and all other amounts due and payable under the Lease, Lessor is obligated to convey such right, title and interest to Lessee in accordance with the Lease (the “ Lessor’s Secured Obligation ”). In order to secure the full and timely performance and discharge of Lessor’s Secured Obligation, Lessor has GRANTED, BARGAINED, SOLD, ASSIGNED, CONVEYED, MORTGAGED and WARRANTED, and does hereby GRANT, BARGAIN, SELL, ASSIGN, CONVEY, MORTGAGE and WARRANT unto the Deed of Trust Trustee for the benefit of Lessee solely with regard to the Lessor’s Secured Obligations, all of Lessor’s present and future right, title and interest in and to the Leased Property, subject to the Permitted Liens, TO HAVE AND TO HOLD the Leased Property unto Lessee, its successors and assigns, until (i) all Lessor’s Secured Obligations are performed and satisfied in full, (ii) an Event of Default shall be continuing and either a foreclosure of the liens created pursuant to Section 6 hereof shall have been consummated which results in a transfer of title to any Mortgaged Property or Lessee shall have delivered an assignment of lease in lieu of foreclosure, or (iii) Lessee shall have elected and consummated the Return Option. Lessee may enforce such mortgage after any breach by Lessor of Lessor’s Secured Obligation, but not otherwise. Upon the occurrence of any circumstance described in clauses (i), (ii) or (iii) above, such mortgage shall be discharged, released and of no further force and effect without any further act or deed by Lessor or Lessee provided, however, if requested by Lessor, Lessee shall execute written releases of such mortgage in recordable form reasonably acceptable to Lessor. Notwithstanding anything contained to the contrary herein or in any other Operative Document, the grant of the Lien by Lessor in this Section 14(a) shall be second and subject and subordinate to the grant of the Lien by Lessee set forth in Sections 6 and 13 above.

(b) To secure the full and timely payment of, and the complete and timely performance and discharge of, Lessor’s Secured Obligations, Lessor further grants to Lessee, pursuant to the UCC, a security interest in all of Lessor’s present and future right, title, and interest in and to the Personal Property. Lessee may enforce such security interest after any breach by Lessor of Lessor’s Secured Obligations, but not otherwise. Upon the occurrence of any circumstance described in clauses (i), (ii) or (iii) in clause (a) above, such security interest shall be discharged, released and of no further force and effect without any further act or deed by Lessor or Lessee; provided, however, if requested by

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Lessor, Lessee shall execute written releases of, or provide applicable termination statements with respect to, such security interest, in each case in form reasonably acceptable to Lessor. Notwithstanding anything contained to the contrary herein or in any other Operative Document, the grant of the Lien by Lessor in this Section 14(b) shall be second and subject and subordinate to the grant of the Lien by Lessee.

(c) Lessee and Lessor agree, to the extent permitted by law, that this Memorandum of Lease, upon recording or registration in the local real estate records, shall constitute a financing statement filed as a “fixture filing” within the meaning of the UCC, with Lessor as debtor and Lessee as secured party. Lessor’s organization number in the State of California is C0577846 7 . Lessee is the record title holder of the Site and Lessor is the record title holder of the leasehold interest in the Site.

(d) Lessee and Lessor hereby acknowledge that (i) this Memorandum of Lease covers goods which are or are to become fixtures on the Leased Property, and (ii) this Memorandum of Lease is to be recorded in the real estate records.

Section 15. Incorporation into Lease .

This Memorandum of Lease shall be construed in connection with and as part of the Lease, and all terms, conditions and covenants contained in the Lease, as supplemented by this Memorandum of Lease, shall be and remain in full force and effect and shall govern the Leased Property, as located on the Site described in Exhibit A attached hereto and incorporated herein by reference.

Section 16. Notice to Potential Claimant .

Nothing contained in this Memorandum of Lease or the Lease shall be construed as constituting the consent or request of Lessor, expressed or implied, to or for the performance by any contractor, mechanic, laborer, materialman, supplier 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 Facility or any part thereof. NOTICE IS HEREBY GIVEN THAT NEITHER LESSOR NOR COLLATERAL AGENT IS OR SHALL BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO LESSEE, OR TO ANYONE HOLDING THE FACILITY OR ANY PART OR PORTION THEREOF THROUGH OR UNDER LESSEE, AND THAT NO MECHANIC’S OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF LESSOR OR COLLATERAL AGENT IN AND TO ALL OR ANY PORTION OF THE FACILITY.

Section 17. Ratification .

Except as expressly supplemented hereby, the terms and provisions of the Lease are hereby ratified and confirmed and remain in full force and effect. In the event of any conflict between the terms of the Lease and the terms of this Memorandum of Lease, the terms of the Lease shall control.

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Section 18. Assignment of Memorandum of Lease .

Notwithstanding the intention of the parties, in the event a court of competent jurisdiction determines that the transactions contemplated by the Rent Assignment Agreement are found to be a financing and not a true sale, Lessor hereby assigns the mortgage granted by Lessee to Lessor in Section 6(a) hereof to Collateral Agent for the benefit of Lessor and the Rent Assignees as security for the payment and performance obligations of Lessor under the Rent Assignment Agreement. Notwithstanding the foregoing, pursuant to the Construction and Development Agreement, so long as no Construction Event of Default shall be continuing, the Lessee may exercise all rights under or with respect to the Construction Documents.

Section 19. Notices .

All notices, requests and demands to or upon Collateral Agent, Lessor or Lessee shall be given in accordance with Section 9.3 of the Participation Agreement. Notices to the Deed of Trust Trustee shall be addressed as provided on page 1 hereof, or such other address as such party may designate by written notice.

Section 20. Severability .

To the extent permitted by applicable law, any provision of this Memorandum of Lease which is prohibited or unenforceable shall be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof.

Section 21. Amendments in Writing; Cumulative Remedies .

(a) None of the terms or provisions of this Memorandum of Lease may be waived, amended, supplemented or otherwise modified except by a written instrument executed by Lessee and Lessor in accordance with the terms of Section 9.5 of the Participation Agreement.

(b) The rights and remedies herein provided are cumulative, may be exercised singly or concurrently and are not exclusive of any other rights or remedies provided by Applicable Laws and Regulations.

Section 22. Section Headings .

The section headings used in this Memorandum of Lease are for convenience of reference only and are not to affect the construction hereof or be taken into consideration in the interpretation hereof.

Section 23. Successors and Assigns .

This Memorandum of Lease shall run with the land and be binding upon the successors and assigns of Lessor and Lessee and shall inure to the benefit of Lessor, Administrative Agent, Rent Assignees, Deed of Trust Trustee and their respective successors and assigns.

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Section 24. Partial Release; Full Release .

Subject to Section 9.5 of the Participation Agreement and Article VII of the Lease, at any time, or from time to time without liability therefor and without notice, upon written request of Administrative Agent and presentation of this Memorandum of Lease and the Operative Documents for endorsement, and without affecting the personal liability of any Person for payment of the indebtedness secured hereby or the effect of this Memorandum of Lease upon the remainder of the Mortgaged Property, Lessor may (a) release any part of said Mortgaged Property, (b) consent in writing to the making of any map or plat thereof, (c) join in granting any easement thereon, or (d) join in any extension agreement or any agreement subordinating the lien or charge hereof.

Section 25. Future Advances; Construction Related Provisions .

In addition to any other sum secured hereby, this Memorandum of Lease shall also secure the unpaid principal balance of, plus accrued interest on, any amount of money loaned, advanced or paid by Lessor or Administrative Agent to or for the account and benefit of Lessee after this Memorandum of Lease is delivered to and filed in the Office of the Clerk of San Diego County, California, for recording, in order to pay (i) any real estate taxes and assessments, and insurance premiums; and (ii) all other costs and expenses incurred in connection with the operation of the Mortgaged Property and the protection or preservation of the Mortgaged Property or the security of this Memorandum of Lease, including to cure any of Lessee’s defaults by making any payments which Lessee should have made as provided in this Memorandum of Lease.

Section 26. Certain Powers of Deed of Trust Trustee: Substitution of Deed of Trust Trustee .

(a) Deed of Trust Trustee may act in the execution of this trust, and Deed of Trust Trustee is hereby authorized to act by agent or attorney in the execution of this trust. It shall not be necessary for Deed of Trust Trustee to be present in person at any foreclosure sale hereunder.

(b) It is hereby expressly covenanted and agreed by all parties hereto that Lessor may, at any time and from time to time hereafter, with notice to Lessee by registered or certified mail (or otherwise in compliance with applicable law), appoint and substitute another Deed of Trust Trustee in place of Deed of Trust Trustee herein named to execute the trust herein created. Upon such appointment, either with or without conveyance to said substituted Deed of Trust Trustee by the Deed of Trust Trustee herein named, or by any substituted Deed of Trust Trustee in case the said right of appointment is exercised more than once, the new and substituted Deed of Trust Trustee in each instance shall be vested with all rights, titles, interests, powers, duties and trusts in the premises which are vested in and conferred upon the Deed of Trust Trustee herein named; and such new and substituted Deed of Trust Trustee shall be considered the successor and assign of Deed of Trust Trustee who is named herein within the meaning of this Memorandum of Lease, and substituted in its place and stead. Each such appointment and substitution shall be evidenced by an instrument in writing which shall recite the parties to, and the book and page of record of, this Memorandum of Lease and the description of the real property herein described, which instrument, executed and acknowledged by Lessor or Collateral Agent

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and recorded in the appropriate office of the county wherein the Mortgaged Property is situated, shall be conclusive proof of the proper substitution and appointment of such successor Deed of Trust Trustee, and notice of such proper substitution and appointment to all parties in interest.

Section 27. Successor Collateral Agent .

Collateral Agent acting alone may from time to time, by written instrument executed and acknowledged by Collateral Agent, mailed to Lessee and Lessor and recorded in the Office of the Clerk of San Diego County, California, and by otherwise complying with the provisions of Applicable Laws and Regulations, substitute a successor or successors to Collateral Agent named herein or acting hereunder for the benefit of Lessor and the Rent Assignees.

Section 28. Certain Acknowledgments and Agreements of Lessee .

Lessee hereby acknowledges and agrees that:

(a) The Rent Assignment Advances and the Lessor Investment are being made for Lessee’s direct benefit and will be used to ground lease the Mortgaged Property and fund the demolition of Building 1 and the construction of the Facility on the Site, and it is the intention of the parties hereto that Lessee be the beneficial owner of the Mortgaged Property for tax and bankruptcy law purposes, but that Lessor be the owner for Lessee’s financial reporting purposes.

(b) Lessee, on behalf of itself and all persons now or hereafter interested in the Mortgaged Property, or any part thereof, to the fullest extent permitted by Applicable Laws and Regulations, hereby waives all rights under all appraisement, homestead, moratorium, valuation, exemption, stay, extension, and redemption statutes, laws or equities now or hereafter existing, and hereby further waives the pleading of any statute of limitations as a defense to any and all indebtedness and payments thereon secured by this Memorandum of Lease, and Lessee agrees that no defense, claim or right based on any thereof will be asserted, or may be enforced, in any action enforcing or relating to this Memorandum of Lease or any of this Mortgaged Property. Without limiting the generality of the preceding sentence, Lessee, on its own behalf and on behalf of each and every person acquiring any interest in or title to the Mortgaged Property, or any part thereof, subsequent to the date of this Memorandum of Lease, hereby irrevocably waives any and all rights of redemption from sale under any order or decree of foreclosure of this Memorandum of Lease or under any power contained herein or under any sale pursuant to any statute, order, decree or judgment of any court. Lessee, for itself and for all persons hereafter claiming through or under it, hereby expressly waives and releases all rights to direct the order in which any of the Mortgaged Property shall be sold in the event of any sale or sales pursuant hereto and to have any of the Mortgaged Property and/or any other property now or hereafter constituting security for any of the indebtedness secured hereby marshaled upon any foreclosure of this Memorandum of Lease. Collateral Agent shall have the right to determine the order in which any or all of the Mortgaged Property shall be subjected to the remedies provided herein. Collateral Agent shall have the right to determine the order in which any or all portions of the Obligations are satisfied from the proceeds realized upon

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the exercise of the remedies provided herein. Nothing contained herein shall be deemed to be a waiver of Lessee’s right to purchase the Leased Property in accordance with the provisions of the Lease.

(c) Lessee further waives: (i) diligence and demand of payment except as otherwise required hereunder, the Lease and the Participation Agreement or any other Operative Document; (ii) the right to receive any notices sent to the other or to any other person, including notices of the creation, renewal, extension, modification, or accrual, of any obligations contained in the Operative Documents or notice of any other matters relating thereto not expressly required under the other Operative Documents; (iii) all demands whatsoever not otherwise required to be delivered under the Operative Documents; (iv) any duty on the part of Collateral Agent or Deed of Trust Trustee to disclose to Lessee any facts that either may now or hereafter know about the other, regardless of whether Collateral Agent or Deed of Trust Trustee has reason to believe that any such facts materially increase the risk beyond that which Lessee intends to assume or has reason to believe that such facts are unknown to Lessee, it being understood and agreed that Lessee is fully responsible for being and keeping informed of the financial condition of the other and of all circumstances bearing on the risk of nonpayment of any amount hereby secured; (v) any circumstances which would constitute a legal or equitable discharge of Lessee hereunder; (vi) any right Lessee may have to require Collateral Agent or Deed of Trust Trustee to proceed against Lessor or against any other party to foreclose any lien on any real or personal property, to exercise any right or remedy under the Operative Documents, or to pursue any other remedy, or to enforce any other right; and (vii) any rights, legal or equitable, to require marshaling of assets or to require upon foreclosure sales in a particular order.

(d) No failure to exercise, nor any delay in exercising, on the part of Collateral Agent, Deed of Trust Trustee, Lessor or Rent Assignees, any right, power or privilege hereunder shall operate as a waiver thereof. No single or partial exercise of any right, power or privilege hereunder shall preclude any other or further exercise thereof or the exercise of any other right, power or privilege. A waiver by Lessor, Collateral Agent, Deed of Trust Trustee or Rent Assignees of any right or remedy hereunder on any one occasion shall not be construed as a bar to any right or remedy that Lessor, Collateral Agent, Deed of Trust Trustee or Rent Assignees would otherwise have on any future occasion.

(e) The rights of Lessor, Collateral Agent, Deed of Trust Trustee and Rent Assignees in relation to the Mortgaged Property or in relation to Lessee under any Operative Document shall in no way be affected or impaired by reason of the occurrence from time to time of any of the following events, even if such event takes place without notice to or the further consent of Lessee: (i) the waiver by Lessor, Rent Assignees, Collateral Agent, Deed of Trust Trustee of the performance or observance by Lessee or any other party of any of the agreements, covenants, terms or conditions contained in any of the Operative Documents; (ii) the doing or the omission of any of the acts referred to in the Participation Agreement, the Rent Assignment Agreement or any other Operative Document; (iii) any failure, omission or delay on the part of Lessor, Collateral Agent, Deed of Trust Trustee or Rent Assignees to enforce, assert or exercise any right, power or remedy conferred on or available to Lessor, Collateral Agent, Deed of Trust Trustee, Rent

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Assignees, or any of them in or by any of the Operative Documents; (iv) the voluntary or involuntary liquidation, dissolution, sale of all or substantially all of the assets, marshaling of assets and liabilities, receivership, conservatorship, custodianship, insolvency, bankruptcy, assignment for the benefit of creditors, reorganization, arrangement, composition or readjustment of, or other similar proceeding affecting Lessee or any of its assets; (v) the inability of Lessor, Collateral Agent, Deed of Trust Trustee or Rent Assignees, respectively, to enforce any provision of the Operative Documents; (vi) any change in the relationship between Lessor and Lessee or any termination of such relationship; (vii) the inability of Lessee to perform, or the release of Lessee from the performance of, any obligation, agreement, covenant, term or condition of Lessee under any of the Operative Documents, including this Memorandum of Lease, by reason of any law, regulation or decree, now or hereafter in effect; or (viii) any action or inaction by Collateral Agent, Deed of Trust Trustee, Rent Assignees or Lessor that results in any impairment or destruction of any rights of Lessee to proceed against the other or any person for reimbursement.

Notwithstanding anything stated to the contrary herein, nothing contained herein shall limit or impair the right of Lessee to purchase the Leased Property pursuant to Section 20.1 of the Lease or any other rights (including the right to receive notices) Lessee may have under any of the other Operative Documents.

Section 29. Counterpart Execution .

This Memorandum of Lease may be executed in any number of counterparts and by each of the parties hereto in separate counterparts, all such counterparts together constituting but one and the same instrument.

Section 30. Waiver of Certain Rights .

If the Lease shall be terminated pursuant to Article XVIII thereof or a foreclosure hereunder, Lessee waives, to the fullest extent permitted by law, (a) any notice of legal proceedings to obtain possession; (b) any right of redemption or repossession; and (c) the benefit of any laws now or hereafter in force exempting property from liability for rent or for debt or limiting Lessor with respect to the election of remedies.

Section 31. References .

Any and all notices, requests, certificates and other instruments executed and delivered concurrently with or after the execution and delivery of this Memorandum of Lease may refer to the “Memorandum of Lease, dated as of February 5, 2019,” or may identify this Memorandum of Lease in any other respect without making specific reference to this Memorandum of Lease, but nevertheless all such references shall be deemed to include this Memorandum of Lease, unless the context shall otherwise require.

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Section 32. California Provisions . To the extent permitted by, and subject to, Applicable Laws and Regulations:

(a) In the case of a power of sale foreclosure under this Memorandum of Lease, the fair market value of the real property collateral shall be conclusively deemed to be the amount of the successful bid at the foreclosure sale. Lessee waives any rights or benefits it may now or hereafter have to a fair value hearing under Section 580a of the California Code of Civil Procedure. Lessor shall have absolutely no obligation to make a bid at any foreclosure sale, but rather may make no bid or bid any amount which Lessor, in its sole discretion, deems appropriate.

(b) Lessee warrants and represents to Lessor that (i) it now has or will continue to have full and complete access to any and all information concerning the transactions contemplated by the Operative Documents and (ii) Lessee has reviewed and approved copies of the Operative Documents and is fully informed of the remedies Lessor may pursue, with or without notice to Lessee, in the event of default under the Operative Documents.

(c) Lessee agrees that Lessor may exercise any right or remedy hereunder or under any of the Operative Documents without the necessity of resorting to or exhausting any security or collateral conveyed or assigned by Lessee. Lessee, to the extent permitted by law, hereby waives any right it may now or hereafter have to require Lessor to foreclose any lien on any real or personal property collateral conveyed or assigned to Lessor by Lessee, to exercise any right or remedy under the Operative Documents, to draw upon any letter of credit issued in connection with any of the Obligations, or to pursue any other remedy or to enforce any other right under the Operative Documents.

(d) Lessee has read and hereby approves this Memorandum of Lease, the other Operative Documents and all other agreements and documents relating thereto. Lessee acknowledges that it has been represented by counsel of its choice to review this Memorandum of Lease, the other Operative Documents and all other documents relating thereto and said counsel has explained and Lessee understands the provisions thereof, or that Lessee has voluntarily declined to retain such counsel.

(e) Lessee hereby authorizes and empowers Lessor in its sole discretion, without any notice or demand and without affecting the lien and charge of this Memorandum of Lease, to exercise any right or remedy which Lessor may have available to it, including, but not limited to, judicial foreclosure, exercise of rights of power of sale without judicial action as to any collateral security for the Obligations, whether real, personal or intangible property. Without limiting the foregoing, Lessee specifically agrees that any action maintained by Lessor for the appointment of any receiver, trustee or custodian to collect rents, issues or profits or to obtain possession of the Mortgaged Property shall not constitute an “action” within the meaning of §726 of the California Code of Civil Procedure.

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(f) The power of sale conferred by this Memorandum of Lease and by the California Deeds of Trust Act is not an exclusive remedy, and when not exercised, Lessor may judicially foreclose this Memorandum of Lease as a mortgage.

(g) In case of a non-judicial sale under this Memorandum of Lease, the Mortgaged Property and any property therein contained, real, personal and mixed, may be sold in one parcel or in separate parcels and in such order as Deed of Trust Trustee shall determine.

(h) In the event that this Memorandum of Lease is foreclosed as a mortgage and the Mortgaged Property or any part thereof sold at a foreclosure sale, the purchaser may, during any redemption period allowed, make such repairs or alteration on any such property as may be reasonably necessary for the proper operation, care, preservation, protection and insuring thereof. To the extent permitted by law, any sums so paid together with interest thereon from the time of such expenditure at the Overdue Rate shall be added to, and become a part of, the amount required to be paid for redemption from such sale.

(i) Lessee agrees that, to the extent permitted by law, if an Event of Default occurs and reinstatement is claimed by Lessee under the provisions of any law permitting reinstatement upon payment of all sums then due, Lessor shall designate an attorney or other professional help for the assistance of the Deed of Trust Trustee and the cost and fees of any such attorney or professional help together with all other expenses incurred as a result of the Event of Default and foreclosure proceedings, shall be deemed Deed of Trust Trustee’s costs and shall be paid by Lessee directly to Lessor as a condition precedent to the reinstatement.

(j) In the event of any non-judicial Memorandum of Lease foreclosure by Deed of Trust Trustee hereunder, Lessee requests that a copy of any notice of default executed by Deed of Trust Trustee hereunder be mailed to Lessee at its address hereinbefore set forth.

(k) Lessor may at any time and from time to time, by an instrument in writing served upon the Deed of Trust Trustee, substitute a successor or successors to any deed of trust trustee named herein or acting hereunder, which instrument, executed and acknowledged by Lessor and recorded in the office of the recorder of the recording district where the Site is situated, shall be conclusive proof of proper substitution of such successor trustee or trustees, who shall, without conveyance from the predecessor trustee, succeed to all its title, estate, rights, powers and duties. Said instrument shall contain the names of Lessee, the original deed of trust trustee and Lessor, the book and page where this Memorandum of Lease is recorded, and the name and address of the new deed of trust trustee.

(l) Without limiting the generality of the foregoing, to the fullest extent now or hereafter permitted by applicable law, Lessee agrees that if an Event of Default is continuing (i) Lessor is not subject to any “one action” or “election of remedies” law or rule, and (ii) all liens and other rights, remedies or privileges provided to Lessor shall remain in full force and effect until Lessor has exhausted all of its remedies against the

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Mortgaged Property and/or the Leased Property and the liens created pursuant to Section 6 hereof have been foreclosed, sold and/or otherwise realized upon in satisfaction of the Obligations or the Obligations have been satisfied in full.

Section 33. Governing Law .

THIS MEMORANDUM OF LEASE SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES (OTHER THAN TITLE 14 OF ARTICLE 5 OF THE NEW YORK GENERAL OBLIGATIONS LAW), EXCEPT AS TO MATTERS RELATING TO THE CREATION OF THE GRANT OF A DEED OF TRUST LIEN AND SECURITY INTEREST HEREUNDER AND THE EXERCISE OF RIGHTS AND REMEDIES WITH RESPECT THERETO, WHICH SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE OF CALIFORNIA. WITHOUT LIMITING THE FOREGOING, IN THE EVENT THAT THE LEASE IS DEEMED TO CONSTITUTE A FINANCING, WHICH IS THE INTENTION OF THE PARTIES FOR THIS PURPOSE, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES (OTHER THAN TITLE 14 OF ARTICLE 5 OF THE NEW YORK GENERAL OBLIGATIONS LAW), SHALL GOVERN THE CREATION, TERMS AND PROVISIONS OF THE INDEBTEDNESS EVIDENCED HEREBY AND THE CREATING OF THE LIEN GRANTED HEREUNDER, BUT PERFECTION AND ENFORCEMENT OF SAID LIEN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATE IN WHICH THE SITE IS LOCATED.

Section 34. Deed of Trust Trustee Provisions .

(a) Deed of Trust Trustee shall be under no duty to take any action hereunder except as expressly required hereunder or by law, or to perform any act which would involve Deed of Trust Trustee in any expense or liability or to institute or defend any suit in respect hereof, unless properly indemnified to Deed of Trust Trustee’s reasonable satisfaction. Deed of Trust Trustee, by acceptance of this Memorandum of Lease (which acceptance shall be indicated in writing or by Deed of Trust Trustee knowingly exercising powers or performing duties hereunder), covenants to perform and fulfill the trusts herein created, being liable, however, only for gross negligence or willful misconduct, and hereby waives any statutory fee and agrees to accept reasonable compensation, in lieu thereof, for any services rendered by Deed of Trust Trustee in accordance with the terms hereof. Deed of Trust Trustee may resign at any time upon giving thirty (30) days’ notice to Lessor and to Lessee or as otherwise permitted by Applicable Laws and Regulations. Lessor may remove Deed of Trust Trustee at any time or from time to time and select a successor trustee. In the event of the death, removal, resignation, refusal to act, or inability to act of Deed of Trust Trustee, or in its sole discretion for any reason whatsoever Lessor may, without notice and without specifying any reason therefor and without applying to any court, select and appoint a successor trustee, by an instrument recorded wherever this Memorandum of Lease is recorded and all powers, rights, duties and authority of Deed of Trust Trustee, as aforesaid, shall thereupon become vested in such successor. Such substitute trustee shall not be required to give bond for the faithful performance of the duties of Deed of Trust Trustee hereunder unless required by Lessor. The procedure provided for in this Section 34(a) for substitution of Deed of Trust

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Trustee shall be in addition to and not in exclusion of any other provisions for substitution, by law or otherwise.

(b) Lessee shall pay all costs, fees and expenses incurred by Deed of Trust Trustee and Deed of Trust Trustee’s agents and counsel in connection with the performance by Deed of Trust Trustee of Deed of Trust Trustee’s duties hereunder and all such costs, fees and expenses shall be secured by this Memorandum of Lease.

(c) With the approval of Lessor, Deed of Trust Trustee shall have the right to take any and all of the following actions: (i) to select, employ, and advise with counsel (who may be, but need not be, counsel for Lessor) upon any matters arising hereunder, including the interpretation of this Memorandum of Lease or the other Operative Documents, and shall be fully protected in relying as to legal matters on the advice of counsel, (ii) to execute any of the trusts and powers hereof and to perform any duty hereunder either directly or through his/her agents or attorneys, (iii) to select and employ, in and about the execution of his/her duties hereunder, suitable accountants, engineers and other experts, agents and attorneys-in-fact, either corporate or individual, not regularly in the employ of Deed of Trust Trustee, and Deed of Trust Trustee shall not be answerable for any act, default, negligence, or misconduct of any such accountant, engineer or other expert, agent or attorney-in-fact, if selected with reasonable care, or for any error of judgment or act done by Deed of Trust Trustee in good faith, or be otherwise responsible or accountable under any circumstances whatsoever, except for Deed of Trust Trustee’s gross negligence or willful misconduct, and (iv) any and all other lawful action as Lessor may instruct Deed of Trust Trustee to take to protect or enforce Lessor’s rights hereunder. Deed of Trust Trustee shall not be personally liable in case of entry by Deed of Trust Trustee, or anyone entering by virtue of the powers herein granted to Deed of Trust Trustee, upon the Mortgaged Property for debts contracted for or liability or damages incurred in the management or operation of the Mortgaged Property. Deed of Trust Trustee shall have the right to rely on any instrument, document, or signature authorizing or supporting an action taken or proposed to be taken by Deed of Trust Trustee hereunder, believed by Deed of Trust Trustee in good faith to be genuine. Deed of Trust Trustee shall be entitled to reimbursement for actual expenses incurred by Deed of Trust Trustee in the performance of Deed of Trust Trustee’s duties hereunder and to reasonable compensation for such of Deed of Trust Trustee’s services hereunder as shall be rendered.

(d) All moneys received by Deed of Trust Trustee shall, until used or applied as herein provided, be held in trust for the purposes for which they were received, but need not be segregated in any manner from any other moneys (except to the extent required by Applicable Laws and Regulations) and Deed of Trust Trustee shall be under no liability for interest on any moneys received by the Deed of Trust Trustee hereunder.

(e) Should any deed, conveyance, or instrument of any nature be required from Lessee by any Deed of Trust Trustee or substitute trustee to more fully and certainly vest in and confirm to the Deed of Trust Trustee or substitute trustee such estates, rights, powers, and duties, then, upon request by the Deed of Trust Trustee or substitute trustee, any and all such deeds, conveyances and instruments shall be made, executed, acknowledged, and delivered and shall be caused to be recorded and/or filed by Lessee.

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(f) Any substitute trustee appointed pursuant to any of the provisions hereof shall, without any further act, deed, or conveyance, become vested with all the estates, properties, rights, powers, and trusts of its or his/her predecessor in the rights hereunder with like effect as if originally named as Deed of Trust Trustee herein; but nevertheless, upon the written request of Lessor or of the substitute trustee, the Deed of Trust Trustee ceasing to act shall execute and deliver any instrument transferring to such substitute trustee, upon the trusts herein expressed, all the estates, properties, rights, powers, and trusts of the Deed of Trust Trustee so ceasing to act, and shall duly assign, transfer and deliver any of the property and moneys held by such Deed of Trust Trustee to the substitute trustee so appointed in the Deed of Trust Trustee’s place.

[Signatures Begin on Following Page]

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In Witness Whereof, the parties hereto have caused this Memorandum of Lease, Deed of Trust, Assignment of Leases and Rents, Security Agreement and Fixture Filing to be executed by the parties on the date set out in their respective acknowledgments below, but it is to be effective on the day and year first above written.


	Lessee :

	CUBIC CORPORATION, a Delaware corporation

	By:
		Name:
		Title:


	Address: 9333 Balboa Avenue
	San Diego, California 92123-1589


	Lessor :

	BANKERS COMMERCIAL CORPORATION, a
	California corporation

	By:
		Name:
		Title:


	Address: 445 South Figueroa Street
	12 th Floor
	Los Angeles, California 90071

	Collateral Agent :

	MUFG UNION BANK, N.A.,
	a national association

	By:
		Name:
		Title:


	Address: 350 California Street
	17 th Floor
	San Francisco, CA 94104
	Attention: Corporate Trust

A notary public or other officer completing this certificate verifies only the identity of the individual who signed the document to which this certificate is attached, and not the truthfulness, accuracy, or validity of that document.

ACKNOWLEDGMENT

State of California )

County of ______________________ )

On , before me, , Notary Public, personally appeared , who proved to me on the basis of satisfactory evidence to be the person(s) whose name(s) is/are subscribed to the within instrument and acknowledged to me that he/she/they executed the same in his/her/their authorized capacity(ies), and that by his/her/their signature(s) on the instrument the person(s), or the entity upon behalf of which the person(s) acted, executed the instrument.

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Signature _______________________________

(Seal)

ACKNOWLEDGMENT

State of California )

County of ______________________ )

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Signature _______________________________

(Seal)

ACKNOWLEDGMENT

State of California )

County of ______________________ )

I certify under PENALTY OF PERJURY under the laws of the State of California that the foregoing paragraph is true and correct.

WITNESS my hand and official seal.

Signature _______________________________

(Seal)

Exhibit A

THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE CITY OF SAN DIEGO, IN THE COUNTY OF SAN DIEGO, STATE OF CALIFORNIA, AND IS DESCRIBED AS FOLLOWS:

EXCEPTING THEREFROM ALL BUILDING IMPROVEMENTS LOCATED ON SAID LAND.

APN: PORTIONS 369-163-05-00 AND 369-170-18-00

Appendix I

APPENDIX I

PARTICIPATION AGREEMENT

In this Memorandum of Lease, unless the context otherwise requires:

any term defined below by reference to another instrument or document shall continue to have the meaning ascribed thereto whether or not such other instrument or document remains in effect;

words importing the singular include the plural and vice versa;

words importing a gender include any gender;

a reference to a part, clause, section, article, exhibit or schedule is a reference to a part, clause, section and article of, and exhibit and schedule to, such Operative Document;

a reference to any statute, regulation, proclamation, ordinance or law includes all statutes, regulations, proclamations, ordinances or laws amending, supplementing, supplanting, varying, consolidating or replacing them, and a reference to a statute includes all regulations, proclamations and ordinances issued or otherwise applicable under that statute;

a reference to a document includes any amendment, modification or supplement to, or replacement, restatement or novation of, that document;

a reference to a party to a document includes that party’s successors and assigns;

all accounting terms not specifically defined herein shall be construed in accordance with GAAP; and

references to “including” shall mean including without limiting the generality of any description preceding such term and for purposes hereof the rule of ejusdem generis shall not be applicable to limit a general statement followed by or referable to an enumeration of specific matters to matters similar to those specifically mentioned.

Further, each of the parties hereto and their counsel have reviewed and revised this Memorandum of Lease, or requested revisions thereto, and the usual rule of construction that any ambiguities are to be resolved against the drafting party shall be inapplicable in construing and interpreting this Memorandum of Lease.