California-San Jose Sublease of the Land and Lease of the Improvements - Sumitomo Bank Leasing and Finance Inc. and Adobe Systems Inc.
SUBLEASE OF THE LAND
AND LEASE OF THE IMPROVEMENTS
By and Between
SUMITOMO BANK LEASING AND FINANCE, INC.,
a Delaware corporation
as Landlord
and
ADOBE SYSTEMS INCORPORATED,
a California corporation
as Tenant
for
Premises located in
San Jose, California
THIS LEASE IS NOT INTENDED TO CONSTITUTE A TRUE LEASE
FOR INCOME TAX PURPOSES. SEE SECTION 22.2
<PAGE>
TABLE OF CONTENTS
PAGE
----
ARTICLE 1
BASIC LEASE PROVISIONS . . . . . . . . . . 1
1.1 Date of Lease . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Landlord. . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.3 Tenant. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.4 Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.5 Ground Lessor . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.6 Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.7 Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.8 Interim Period. . . . . . . . . . . . . . . . . . . . . . . . . 2
1.9 Rent Commencement Date. . . . . . . . . . . . . . . . . . . . . 2
1.10 Base Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.11 Ground Rent . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.12 Addresses for Notices . . . . . . . . . . . . . . . . . . . . . 2
1.13 Wire Transfer Instructions. . . . . . . . . . . . . . . . . . . 3
ARTICLE 2
DEFINITIONS . . . . . . . . . . . . . 3
2.1 Additional Rent . . . . . . . . . . . . . . . . . . . . . . . . 3
2.2 Advance . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.3 After Tax Basis . . . . . . . . . . . . . . . . . . . . . . . . 4
2.4 Base Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.5 Building. . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.6 Calculation Period. . . . . . . . . . . . . . . . . . . . . . . 4
2.7 Capitalized Amount. . . . . . . . . . . . . . . . . . . . . . . 4
2.8 Capitalized Funding Costs . . . . . . . . . . . . . . . . . . . 4
2.9 City. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.10 Commitment Amount . . . . . . . . . . . . . . . . . . . . . . . 5
2.11 Commitment Component. . . . . . . . . . . . . . . . . . . . . . 5
2.12 Construction Management Agreement . . . . . . . . . . . . . . . 5
2.13 Contractor. . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.14 Default Rate. . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.15 Entity . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
2.16 Equity Commitment Amount. . . . . . . . . . . . . . . . . . . . 5
2.17 Event of Default. . . . . . . . . . . . . . . . . . . . . . . . 5
2.18 Guaranteed Residual Value . . . . . . . . . . . . . . . . . . . 5
2.19 Improvements. . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.20 Improvements Commencement Date. . . . . . . . . . . . . . . . . 6
2.21 Initial Advance . . . . . . . . . . . . . . . . . . . . . . . . 6
2.22 Interim Period. . . . . . . . . . . . . . . . . . . . . . . . . 6
2.23 Land. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.24 Landlord Affiliate. . . . . . . . . . . . . . . . . . . . . . . 6
2.25 Lease Inception Date. . . . . . . . . . . . . . . . . . . . . . 6
2.26 Lease Investment Balance. . . . . . . . . . . . . . . . . . . . 6
i
<PAGE>
PAGE
----
2.27 Legal Requirements. . . . . . . . . . . . . . . . . . . . . . . 6
2.28 LIBOR Rate. . . . . . . . . . . . . . . . . . . . . . . . . . . 6
2.29 Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.30 Official Records. . . . . . . . . . . . . . . . . . . . . . . . 7
2.31 Permitted Title Exceptions. . . . . . . . . . . . . . . . . . . 7
2.32 Premises . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.33 Real Estate Taxes . . . . . . . . . . . . . . . . . . . . . . . 7
2.34 Rent Commencement Date. . . . . . . . . . . . . . . . . . . . . 7
2.35 Rent Payment Date . . . . . . . . . . . . . . . . . . . . . . . 7
2.36 Required Permits. . . . . . . . . . . . . . . . . . . . . . . . 8
2.37 SBLF Deed of Trust. . . . . . . . . . . . . . . . . . . . . . . 8
2.38 SBNYTC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.39 Second Deed of Trust. . . . . . . . . . . . . . . . . . . . . . 8
2.40 Security Deposit. . . . . . . . . . . . . . . . . . . . . . . . 8
2.41 Taking. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.42 Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
2.43 Terminology . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 3
DEMISE. . . . . . . . . . . . . . . 8
3.1 Premises. . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
ARTICLE 4
TERM . . . . . . . . . . . . . . . 9
4.1 Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
4.2 Option to Extend. . . . . . . . . . . . . . . . . . . . . . . . 9
4.3 Holding Over. . . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE 5
CONSTRUCTION OF IMPROVEMENTS . . . . . . . . . 9
5.1 Tenant's Rights to Construct Improvements . . . . . . . . . . . 9
5.2 Title to and Nature of Improvements . . . . . . . . . . . . . . 9
ARTICLE 6
FUNDING
6.1 Request for Construction Funding: Landlord's Obligation to
Fund. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
6.2 Exhibit Reflecting Rent Commencement Date . . . . . . . . . . . 9
ARTICLE 7
RENT . . . . . . . . . . . . . . . 10
7.1 Base Rent . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.2 Proration . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
7.3 No Abatement of Rent. . . . . . . . . . . . . . . . . . . . . . 10
7.4 Delinquent Rent . . . . . . . . . . . . . . . . . . . . . . . . 10
7.5 Additional Rent . . . . . . . . . . . . . . . . . . . . . . . . 10
7.6 Fixed Rate Option . . . . . . . . . . . . . . . . . . . . . . . 10
7.7 Security Deposit. . . . . . . . . . . . . . . . . . . . . . . . 10
ii
<PAGE>
PAGE
----
8.1 Real Estate Taxes . . . . . . . . . . . . . . . . . . . . . . . 11
8.2 Personal Property Taxes . . . . . . . . . . . . . . . . . . . . 12
8.3 Right to Contest. . . . . . . . . . . . . . . . . . . . . . . . 12
8.4 Additional Charges. . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE 9
INSURANCE. . . . . . . . . . . . . . 13
9.1 Liability Insurance . . . . . . . . . . . . . . . . . . . . . . 13
9.2 Builders' Risk Insurance. . . . . . . . . . . . . . . . . . . . 14
9.3 All-Risk Insurance. . . . . . . . . . . . . . . . . . . . . . . 14
9.4 General Requirements. . . . . . . . . . . . . . . . . . . . . . 14
9.5 Waiver of Subrogation . . . . . . . . . . . . . . . . . . . . . 14
9.6 Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
ARTICLE 10
USE . . . . . . . . . . . . . . . 15
10.1 Use . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
10.2 Contest of Legal Requirements . . . . . . . . . . . . . . . . . 17
ARTICLE 11
UTILITIES AND SERVICES . . . . . . . . . . 17
11.1 Services to the Premises. . . . . . . . . . . . . . . . . . . . 17
ARTICLE 12
MAINTENANCE AND REPAIRS; SURRENDER OF THE PREMISES . . . 17
12.1 Tenant Obligations. . . . . . . . . . . . . . . . . . . . . . . 17
12.2 Surrender of the Premises . . . . . . . . . . . . . . . . . . . 17
ARTICLE 13
LIENS. . . . . . . . . . . . . . . 18
13.1 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
ARTICLE 14
ASSIGNMENT BY LANDLORD . . . . . . . . . . 18
14.1 Further Mortgages or Encumbrances by Landlord . . . . . . . . . 18
14.2 Landlord's Right to Sell. . . . . . . . . . . . . . . . . . . . 18
14.3 Transfer of Funds and Property. . . . . . . . . . . . . . . . . 18
ARTICLE 15
ASSIGNMENT AND SUBLEASING . . . . . . . . . 19
15.1 Right to Assign . . . . . . . . . . . . . . . . . . . . . . . . 19
15.2 Right to Sublet . . . . . . . . . . . . . . . . . . . . . . . . 19
15.3 Mortgage by Tenant. . . . . . . . . . . . . . . . . . . . . . . 19
ARTICLE 16
EMINENT DOMAIN. . . . . . . . . . . . 19
16.1 Total or Substantial Taking . . . . . . . . . . . . . . . . . . 19
16.2 Partial Taking. . . . . . . . . . . . . . . . . . . . . . . . . 20
16.3 Temporary Taking. . . . . . . . . . . . . . . . . . . . . . . . 20
iii
<PAGE>
PAGE
----
16.4 Damages . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
16.5 Notice and Execution. . . . . . . . . . . . . . . . . . . . . . 20
16.6 Terms of Ground Lease . . . . . . . . . . . . . . . . . . . . . 20
ARTICLE 17
DAMAGE OR DESTRUCTION. . . . . . . . . . . 21
17.1 Casualty. . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
17.2 Termination of Lease. . . . . . . . . . . . . . . . . . . . . . 21
17.3 Insurance Proceeds. . . . . . . . . . . . . . . . . . . . . . . 21
17.4 Terms of Ground Lease . . . . . . . . . . . . . . . . . . . . . 23
ARTICLE 18
DEFAULT . . . . . . . . . . . . . . 23
18.1 Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
18.2 Contest by Tenant . . . . . . . . . . . . . . . . . . . . . . . 24
18.3 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
18.4 No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
18.5 Effect of Assignment. . . . . . . . . . . . . . . . . . . . . . 26
18.6 Landlord Cure Right . . . . . . . . . . . . . . . . . . . . . . 26
18.7 Landlord's Default. . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE 19
QUIET ENJOYMENT . . . . . . . . . . . . 27
19.1 Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . . . . . 27
ARTICLE 20
TENANT'S OPTION TO PURCHASE OR TERMINATE. . . . . . 27
20.1 Option To Purchase Premises . . . . . . . . . . . . . . . . . . 27
20.2 Termination Option. . . . . . . . . . . . . . . . . . . . . . . 28
ARTICLE 21
COVENANTS OF LANDLORD . . . . . . . . . . 30
21.1 Title . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
21.2 Land Use. . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
21.3 Transfer of Property Interests. . . . . . . . . . . . . . . . . 30
ARTICLE 22
MISCELLANEOUS . . . . . . . . . . . . 30
22.1 Relationship. . . . . . . . . . . . . . . . . . . . . . . . . . 30
22.2 Form of Transaction: Certain Tax Matters. . . . . . . . . . . . 31
22.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
22.4 Severability of Provisions . . . . . . . . . . . . . . . . . . 32
22.5 Entire Agreement: Amendment . . . . . . . . . . . . . . . . . . 32
22.6 Memorandum of Sublease of the Land and Lease of the
Improvements. . . . . . . . . . . . . . . . . . . . . . . . . . 32
22.7 Successors and Assigns. . . . . . . . . . . . . . . . . . . . . 32
22.8 Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . 32
22.9 Attorneys' Fees . . . . . . . . . . . . . . . . . . . . . . . . 32
22.10 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . 32
iv
<PAGE>
PAGE
----
22.11 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . 32
22.12 Time Is of the Essence. . . . . . . . . . . . . . . . . . . . . 33
22.13 No Third Party Beneficiaries. . . . . . . . . . . . . . . . . . 33
22.14 Limitations on Recourse . . . . . . . . . . . . . . . . . . . . 33
22.15 Estoppel Certificates . . . . . . . . . . . . . . . . . . . . . 33
22.16 As-Is Lease . . . . . . . . . . . . . . . . . . . . . . . . . . 33
22.17 Net Lease . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
22.18 Representations and Warranties. . . . . . . . . . . . . . . . . 34
22.19 Financial Reporting . . . . . . . . . . . . . . . . . . . . . . 34
22.20 Nondiscrimination . . . . . . . . . . . . . . . . . . . . . . . 34
ARTICLE 23
INDEMNIFICATION . . . . . . . . . . . . 34
23.1 Tax Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . 34
23.2 Environmental Indemnity . . . . . . . . . . . . . . . . . . . . 35
23.3 Construction Indemnification. . . . . . . . . . . . . . . . . . 36
23.4 General Indemnity . . . . . . . . . . . . . . . . . . . . . . . 36
v
<PAGE>
SUBLEASE OF THE LAND AND LEASE OF THE IMPROVEMENTS
THIS SUBLEASE OF THE LAND AND LEASE OF THE IMPROVEMENTS ("Lease") by and
between SUMITOMO BANK LEASING AND FINANCE, INC., a Delaware corporation
("Landlord"), and ADOBE SYSTEMS INCORPORATED, a California corporation
("Tenant"), is entered into as of the date set forth in ARTICLE 1 and shall be
effective and binding upon the parties hereto as of such date. Capitalized terms
used in this Lease shall have the definitions set forth in ARTICLE 2 or in the
text of this Lease.
In consideration of the Base Rent reserved herein, and the terms, covenants
and conditions set forth below, Landlord and Tenant hereby agree as follows:
ARTICLE 1
BASIC LEASE PROVISIONS
1.1 DATE OF LEASE: August 15, 1996.
1.2 LANDLORD: Sumitomo Bank Leasing and Finance, Inc., a
Delaware corporation.
1.3 TENANT: Adobe Systems Incorporated, a California
corporation.
1.4 LAND: A leasehold interest in that certain tract of
land located in the City of San Jose, Santa
Clara County, California, as more
particularly described on EXHIBIT A attached
hereto, arising under that certain Ground
Lease of even date herewith between the
Redevelopment Agency of the City of San Jose,
as Ground Lessor, and Landlord, as Ground
Lessee (the "Ground Lease"),together with all
easements, rights of way, appurtenances and
other rights and benefits belonging or
pertaining to such land. Landlord makes no
representations as to the accuracy of the
description of the Land or the leasehold
interest.
1.5 GROUND LESSOR: Redevelopment Agency of the City of San Jose,
50 West San Fernando Street, San Jose,
California 95113.
1.6 PREMISES: The Land and the Improvements which Tenant
may construct, as agent for Landlord, on the
Land pursuant to the terms of that certain
Construction Management Agreement of even
date herewith between Landlord and Tenant.
1.7 TERM: The initial term of this Lease ("Initial
Term") shall commence (i) with respect to the
Land on the Date of Lease set forth in
SECTION 1.1 above, and (ii) with respect to
the Improvements, on the Improvements
Commencement Date; and the Term of this Lease
shall expire on August 14, 2003. The Term of
this Lease may be extended for one additional
five (5) year period (the "Extension Term")
in accordance with the terms of SECTION 4.2
below. The Initial Term and (if so extended)
the Extension Term shall be referred to
herein as the "Term."
1
<PAGE>
The Term shall cease upon, and shall not
refer to any period of time after,
termination of this Lease (whether pursuant
to the terms of the Lease, by operation of
law, or otherwise).
1.8 INTERIM PERIOD: The period commencing on the Date of Lease
and ending on the day before the Improvements
Commencement Date as defined in SECTION 2.21
below.
1.9 RENT COMMENCEMENT DATE: The fifteenth (15th) day of the second full
calendar month which commences immediately
following the earlier to occur of the
following:
(1) Thirty (30) months following the Date of
Lease; or
(2) The date upon which all of the following
have occurred: (i) the Building and all other
Improvements that Tenant intends to cause to
be constructed with Advances made by Landlord
pursuant to the Construction Management
Agreement have been substantially completed;
(ii) valid final notices of completion have
been recorded with respect thereto; and (iii)
all necessary governmental approvals
(including final permanent certificates of
occupancy) have been issued as may be
necessary to occupy all portions of the
Building for the conduct of Tenant's business
therein.
1.10 BASE RENT: As described in SECTION 2.4.
1.11 GROUND RENT: Any payment made to Ground Lessor under the
Ground Lease.
1.12 ADDRESSES FOR NOTICES:
LANDLORD: TENANT:
Sumitomo Bank Leasing and Finance, Inc. Adobe Systems Incorporated
277 Park Avenue 345 Park Avenue
New York, NY 10172 San Jose, CA 95110
Attention: Chief Credit Officer Attention: Director of Real Estate
With a copy to: With a copy to:
Graham & James LLP Adobe Systems Incorporated
One Maritime Plaza, Suite 300 345 Park Avenue
San Francisco, CA 94111 San Jose, CA 95110
Attention: Bruce W. Hyman, Esq. Attention: General Counsel
and and
2
<PAGE>
Sumitomo Bank of New York Trust Shartsis, Friese & Ginsburg
Company One Maritime Plaza, 18th Floor
Two World Financial Center San Francisco, CA 94111
Tower B Attention: David H. Kremer, Esq.
225 Liberty Street, 35th Floor
New York, NY 10281
Attention: Corporate Trust Department
1.13 WIRE TRANSFER INSTRUCTIONS:
Morgan Guaranty Trust Company of New York
ABA#021000238
For credit to The Sumitomo Bank, Limited
A/C #631-28-256
Further credit to Sumitomo Bank Leasing and Finance, Inc.
A/C No. 283572
This ARTICLE 1 is intended to supplement and/or summarize the provisions
set forth in the balance of this Lease. If there is any conflict between any
provisions contained in this ARTICLE 1 and the balance of this Lease, the
balance of this Lease shall control.
ARTICLE 2
DEFINITIONS
For purposes of this Lease, the following defined terms shall have the
meanings set forth in this ARTICLE 2.
2.1 ADDITIONAL RENT. "Additional Rent" shall mean any amounts other
than Base Rent payable by Tenant to Landlord or to other Entities on Landlord's
behalf as required under this Lease, including, without limitation, interest
accrued on past due Base Rent and on other past due Additional Rent amounts
owing to Landlord hereunder at the Default Rate (to be compounded annually),
costs and expenses to be paid or reimbursed by Tenant hereunder (including any
amounts which Tenant owes to Landlord pursuant to the terms of SECTION 18.6),
break-funding costs of Landlord related to the Lease Investment Balance (as
defined below) arising out of unscheduled payments or exercise of the Purchase
Option pursuant to SECTION 20.1 below other than on Rent Payment Days (or if
Tenant has elected a fixed rate pursuant to SECTION 7.6 below, exercise of the
Purchase Option other than on the maturity date of the appropriate fixed rate
contract), amounts due pursuant to Tenant's indemnity obligations hereunder,
Real Estate Taxes, Tenant's obligation to pay condemnation proceeds to Landlord
pursuant to SECTION 16.4, Tenant's obligation to pay insurance proceeds to
Landlord pursuant to SECTION 17.3, and failure of Tenant to pay to Landlord the
Lease Investment Balance at the end of the Term or upon an Event of Default,
unless Tenant has elected its option to purchase or terminate under ARTICLE 20
below and is not in default in its obligations thereunder.
2.2 ADVANCE. "Advance" shall mean any payment by Landlord for (i) any
costs relating to construction of the Improvements, whether funded under the
Construction Management Agreement or paid directly by Landlord, including,
without limitation, transaction costs (including title charges and professional
fees and expenses), construction costs, architectural, engineering and other
professional fees, arrangement fees, appraisal fees, inspection, testing and
permitting fees, fees and costs for review of plans and any changes thereto,
travel expense for inspections, insurance and any other soft costs relating
3
<PAGE>
to the Improvements; (ii) the items and/or amounts described in EXHIBIT B; (iii)
Real Estate Taxes and any other amounts, if any, that are paid by Landlord as
lessee under the Ground Lease during the Interim Period; and (iv) all reasonable
and customary fees of Landlord during the Interim Period relating to the
construction of the Improvements and the processing of Draw Requests (including
an annual servicing fee of $2000 to SBNYTC), and any other payment described
herein or in the Construction Management Agreement as an Advance.
2.3 AFTER TAX BASIS. "After Tax Basis" means, with respect to any
payment to be received, the amount of such payment increased so that, after
deduction of the amount of all taxes required to be paid by the recipient (less
any tax savings realized and the present value of any tax savings projected to
be realized by the recipient as a result of the payment of the indemnified
amount) with respect to the receipt by the recipient of such amounts, such
increased payment (as so reduced) is equal to the payment otherwise required to
be made.
2.4 BASE RENT. "Base Rent" shall mean, as of a Rent Payment Date, that
annual amount equal to the product obtained by multiplying the Lease Investment
Balance (at the time of the relevant calculation) by the sum of the LIBOR Rate
plus 25 basis points, which annual amount is then prorated for the monthly
rental period in question on the basis of a 360 day year and the actual number
of days elapsed.
2.5 BUILDING. "Building" shall mean the building and related
improvements to be constructed on the Land that shall become part of the
Improvements, which shall be an office complex.
2.6 CALCULATION PERIOD. "Calculation Period" shall mean the period from
and including the 15th day of each month during the Interim Period through the
14th day of the following month; provided that the first Calculation Period
shall be the period from the Date of Lease through the 14th day of the following
month and the last Calculation Period shall be the period from and including the
15th day of the month prior to the month in which the Improvements Commencement
Date occurs through the day immediately preceding the Improvements Commencement
Date.
2.7 CAPITALIZED AMOUNT. "Capitalized Amount" shall mean that amount,
determined as of the close of each Calculation Period during the Interim Period
and added to the Lease Investment Balance as of such date, equal to the sum of
the Capitalized Funding Costs plus the Commitment Component accrued for the
Calculation Period in question. Landlord shall notify Tenant of the Capitalized
Amount for each Calculation Period and the basis for the determination thereof;
and if Tenant fails to object to such determination within five (5) Business
Days of Landlord's notice thereof, Tenant shall be deemed to have approved such
determination.
2.8 CAPITALIZED FUNDING COSTS. "Capitalized Funding Costs" shall mean,
for each Calculation Period during the Interim Period, that annual amount equal
to the product obtained by multiplying the Lease Investment Balance outstanding
from time to time during the Calculation Period in question by the sum of the
LIBOR Rate plus 25 basis points, which annual amount is then prorated for the
Calculation Period in question on the basis of a 360 day year and the actual
number of days in such Calculation Period. The LIBOR Rate to be used with
respect to the determination of Capitalized Funding Costs shall be the 1, 2, 3,
6, 9 or 12 month LIBOR Rate, as specified by Tenant at least three (3) Business
Days prior to the start of each Calculation Period with respect to the
4
<PAGE>
Lease Investment Balance outstanding as of such Calculation Period; provided
that, if Tenant fails to so specify a LIBOR Rate prior to the start of a
Calculation Period, the one (1) month LIBOR Rate shall be deemed to have been
designated by Tenant.
2.9 CITY. "City" shall mean the City of San Jose, California.
2.10 COMMITMENT AMOUNT. "Commitment Amount" shall mean SEVENTY- FIVE
MILLION and No/100 Dollars ($75,000,000.00) and shall include the Equity
Commitment Amount.
2.11 COMMITMENT COMPONENT. "Commitment Component" shall mean, for each
Calculation Period during the Interim Period, that annual amount equal to the
product obtained by multiplying the unused Equity Commitment Maximum Amount
outstanding from time to time during the Calculation Period in question by .25%,
which annual amount is then prorated for the Calculation Period in question on
the basis of a 360 day year and the actual number of days in such Calculation
Period. Portions of the Commitment Amount shall be deemed to be used (i) as of
the date of each Advance by Landlord during the Interim Period, on which date
each such Advance shall be added to and become part of the Lease Investment
Balance, and (ii) as of the date at the close of each Calculation Period on
which the Capitalized Amount for such Calculation Period is added to and becomes
part of the Lease Investment Balance.
For purposes of calculating the Lease Investment Balance and any
other obligations under this Lease, the Commitment Component shall only accrue
during the Interim Period and shall cease to accrue following the Improvements
Commencement Date.
2.12 CONSTRUCTION MANAGEMENT AGREEMENT. "Construction Management
Agreement" shall mean that certain Construction Management Agreement of even
date herewith between Landlord and Tenant regarding the construction of the
Improvements.
2.13 CONTRACTOR. "Contractor" shall mean any general contractor hired to
construct any portion of the Improvements, which contractor shall be selected by
Tenant in Tenant's capacity as agent for Landlord under the Construction
Management Agreement, and shall be subject to Landlord's approval, which shall
not be unreasonably withheld or delayed.
2.14 DEFAULT RATE. "Default Rate" means with respect to the Lease
Investment Balance, the one (1) month LIBOR Rate plus 225 basis points.
Notwithstanding the foregoing, in the event that the foregoing Default Rate
shall be in violation of any usury or similar law, then the Default Rate shall
be reduced to the extent necessary to cause the Default Rate to comply with any
usury or similar law.
2.15 ENTITY. "Entity" shall mean any person, corporation, partnership
(general or limited), joint venture, association, joint stock company, trust or
other business entity or organization.
2.16 EQUITY COMMITMENT AMOUNT. "Equity Commitment Amount" shall mean the
Lease Investment Balance as of the Improvements Commencement Date minus the
Guaranteed Residual Value as specified in the Rent Commencement Date Memorandum
executed by the parties as provided in SECTION 6.2 below; provided, however,
that in no
5
<PAGE>
event shall the Equity Commitment Amount exceed the Equity Commitment Maximum
Amount.
2.17 EQUITY COMMITMENT MAXIMUM AMOUNT. "Equity Commitment Maximum Amount"
shall mean Eleven Million Two Hundred Fifty Thousand Dollars ($11,250,000).
2.18 EVENT OF DEFAULT. "Event of Default" shall have the meaning set
forth in SECTION 18.1.
2.19 GUARANTEED RESIDUAL VALUE. "Guaranteed Residual Value" shall mean
the maximum amount, the present value of which, when added to the present value
of the Tenant's other minimum lease payments under this Lease, both discounted
to the Improvements Commencement Date using the appropriate discount rate,
creates a sum which approximately equals but does not exceed eighty-nine and
nine/tenths percent (89.9%) of the Lease Investment Balance at such date. These
calculations will be performed in accordance with the provisions of Statement of
Financial Accounting Standards Number 13.
2.20 IMPROVEMENTS. "Improvements" shall mean any and all improvements
which Tenant shall, as construction agent for Landlord, erect, construct or
situate upon the Land or any part thereof during the Term under and pursuant to
the terms of, and using funding provided by or through Landlord pursuant to the
Construction Management Agreement.
2.21 IMPROVEMENTS COMMENCEMENT DATE. "Improvements Commencement Date"
shall mean the fifteenth (15th) day of the month immediately preceding the month
in which the Rent Commencement Date occurs.
2.22 INITIAL ADVANCE. Initial Advance shall mean the amounts described
in EXHIBIT B pertaining to execution of the Ground Lease and this Lease.
2.23 INTERIM PERIOD. "Interim Period" shall have the meaning set forth
in the Basic Lease Provisions.
2.24 LAND. "Land" shall have the meaning set forth in the Basic Lease
Provisions.
2.25 LANDLORD AFFILIATE. "Landlord Affiliate" shall mean any Entity which
controls, is controlled by or is under the common control of Landlord.
2.26 LEASE INCEPTION DATE. "Lease Inception Date" shall mean the Date of
Lease.
2.27 LEASE INVESTMENT BALANCE. "Lease Investment Balance" shall mean, at
the time in question, the aggregate amount of all Advances made by Landlord plus
any outstanding Capitalized Amount not yet added to the Lease Investment Balance
(as described in SECTION 2.7 above), REDUCED BY THE FOLLOWING: (1) the aggregate
of all amounts received by Landlord pursuant to the provisions of ARTICLE 16
(Eminent Domain), ARTICLE 17 (Damage or Destruction), SECTION 18.3(b) and
18.3(c), and/or ARTICLE 20 (Tenant's Option to Purchase or Terminate); and (2)
the aggregate of all amounts received by Landlord in respect of this Lease or
any related agreement that are not otherwise
6
<PAGE>
applied to reduce the Lease Investment Balance and which constitute a repayment
or reduction of the amounts placed at risk by the Landlord (excluding for
purposes of this clause amounts paid as rent, reimbursement for expenses payable
by Tenant, fees payable by Tenant and similar items).
2.28 LEGAL REQUIREMENTS "Legal Requirements" shall mean all statutes,
codes, laws, acts, ordinances, orders, judgments, decrees, injunctions, rules,
regulations, permits, licenses, authorizations, directions and requirements of
all federal, state, county, municipal and other governments, departments,
commissions, boards, courts, authorities, officials and officers, which now or
at any time hereafter are applicable to this Lease or applicable to and
enforceable against the Premises, the Improvements or any part thereof, as
applicable.
2.29 LIBOR RATE. "LIBOR Rate" shall mean, for each Borrowing Period as
defined below, the annualized rate determined by The Sumitomo Bank, Limited as
the rate that would be offered to The Sumitomo Bank, Limited's San Francisco or
New York office for U.S. dollar deposits in the London Interbank Market as
quoted for the mid-morning average LIBOR Rate published by Reuters Monitoring
Systems for the particular Borrowing Period (rounded upwards, if necessary, to
the next higher 1/16th of 1%) for deposits by The Sumitomo Bank, Limited of
immediately available dollars in the London Interbank Market on the day two (2)
Business Days preceding the first day of the term of that Borrowing Period. In
the event the Reuters quote is not available, the British Banker's Association's
Interest Settlement Rate should be used. "Borrowing Period" shall mean 1, 2, 3,
6, 9, or 12 months (i) as selected by Tenant during the Interim Period as
provided in SECTION 2.8 above, and (ii) as selected by Tenant from time to time
during the balance of the Term at least three (3) Business Days prior to the end
of the then current Borrowing Period (provided that, if Tenant fails to so
select a Borrowing Period prior to the end of the then current Borrowing Period,
a Borrowing Period of one (1) month shall be deemed to have been selected by
Tenant); provided, however, that (X) during the Interim Period there shall not
be more than three (3) LIBOR Rates in effect at any time, and (Y) from and after
the Improvements Commencement Date, there shall not be more than five (5) LIBOR
Rates in effect at any time. Landlord and Tenant acknowledge that more than one
LIBOR Rate may be in effect at any time during the Term with respect to portions
of the outstanding Lease Investment Balance as designated by Tenant at the time
that a particular Borrowing Period is designated, and the calculation of monthly
Capitalized Funding Costs or Base Rent, as the case may be, shall be based upon
the LIBOR Rates applicable to the portions of the Lease Investment Balance so
designated.
2.30 NOTICE. "Notice" shall mean a written advice, request, demand or
notification required or permitted by this Lease, as more particularly provided
in SECTION 22.3.
2.31 OFFICIAL RECORDS. "Official Records" shall mean the official
records of Santa Clara County, California.
2.32 PERMITTED TITLE EXCEPTIONS. "Permitted Title Exceptions" shall mean
the following: (1) the exceptions set forth in EXHIBIT C; (2) any exceptions
created or caused
by Tenant or to which Tenant consents in writing; (3) taxes and assessments not
yet due and payable; (4) the SBLF Deed of Trust; (5) all title defects, liens,
encumbrances, deeds of trust, mortgages, rights-of-way, and restrictive
covenants and conditions affecting the Land unless any of the foregoing arise as
a result of Landlord's actions or with
7
<PAGE>
Landlord's written consent (unless such actions taken or consent given by
Landlord are requested in writing by Tenant); and (6) this Lease.
2.33 PREMISES. "Premises" shall have the meaning set forth in the Basic
Lease Provisions.
2.34 REAL ESTATE TAXES. "Real Estate Taxes" shall have the meaning set
forth in SECTION 8.1(b).
2.35 RENT COMMENCEMENT DATE. "Rent Commencement Date" shall have the
meaning set forth in the Basic Lease Provisions.
2.36 RENT PAYMENT DATE. "Rent Payment Date" shall have the meaning set
forth in SECTION 7.1.
2.37 REQUIRED PERMITS. "Required Permits" shall mean each and every
building and development permit including, without limitation, demolition
permits, site permits and addenda thereto (including, without limitation,
foundation permits and structural permits), temporary and final occupancy
permits and any other governmental or quasi-governmental approvals which must be
issued by any governmental authority, department, commission, board, official or
officer as a condition precedent to construction and occupancy of any
Improvements.
2.38 SBLF DEED OF TRUST. "SBLF Deed of Trust" shall mean that certain
deed of trust of even date herewith in favor of Landlord which is executed by
Tenant.
2.39 SBNYTC. "SBNYTC" shall mean Sumitomo Bank of New York Trust
Company.
2.40 SECOND DEED OF TRUST. "Second Deed of Trust" shall mean that certain
deed of trust of even date herewith in favor of Tenant which is executed by
Landlord.
2.41 SECURITY DEPOSIT. "Security Deposit" shall have the meaning set
forth in SECTION 7.7.
2.42 TAKING. "Taking" shall have the meaning set forth in SECTION 16.1.
2.43 TERM. "Term" shall have the meaning set forth in the Basic Lease
Provisions.
2.44 TERMINOLOGY. All personal pronouns used in this Lease shall include
all other genders. The singular shall include the plural and the plural shall
include the singular. Titles of Articles, Sections and Subsections in this
Lease are for convenience only and neither limit nor amplify the provisions of
this Lease, and all references in this Lease to Articles, Sections or
Subsections shall refer to the corresponding Article, Section or Subsection of
this Lease unless specific reference is made to the articles, sections or other
subdivisions of another document or instrument. The word "days" as used herein
shall mean Business Days (i.e., excluding holidays when banks in California, New
York and London (with respect to payment of Advances, payment of Base Rent and
the determination of the LIBOR Rate) are generally closed for business and
weekends) unless otherwise expressly stated ("Business Days"). Unless otherwise
specified herein, all accounting terms used herein shall be interpreted, all
accounting determinations hereunder
8
<PAGE>
shall be made, and all financial statements required to be delivered hereunder
shall be prepared in accordance with generally accepted accounting principles as
in effect from time to time, applied on a basis consistent with the most recent
audited consolidated financial statements of the Tenant and its consolidated
subsidiaries delivered to Landlord.
ARTICLE 3
DEMISE
3.l PREMISES. Subject to the terms, covenants and conditions contained
herein, Landlord hereby subleases the Land and leases the Improvements to
Tenant, and Tenant hereby leases from Landlord, the Land and Improvements,
together with all rights, privileges, easements and appurtenances relating to
the Land and Improvements. Tenant agrees that it shall use the Premises in
accordance with all of the terms and conditions of the Ground Lease and shall
comply with all terms and conditions of the Ground Lease applicable to Tenant.
ARTICLE 4
TERM
4.1 TERM. The Term of this Lease is specified in ARTICLE 1.
4.2 OPTION TO EXTEND. If no Event of Default exists hereunder or would
exist except for the passage of time or giving of notice, Landlord hereby grants
to Tenant at the end of the Initial Term upon not less than six (6) months prior
written notice the option to extend the Term for one (1) five (5) year period.
The Base Rent and Additional Rent shall be calculated during the Extension Term
in the same manner as in the Initial Term.
4.3 HOLDING OVER. If Tenant remains in possession of the Premises after
the expiration of the Term without executing a new lease, such holding over
shall be construed as a tenancy from month-to-month, subject to all terms,
covenants and conditions herein contained, and the Base Rent shall be calculated
based upon the Default Rate and shall be required to be paid by Tenant during
such holding over in the same manner as during the Term.
ARTICLE 5
CONSTRUCTION OF IMPROVEMENTS
5.1 TENANT'S RIGHTS TO CONSTRUCT IMPROVEMENTS. As of the Date of Lease,
no improvements exist on the Land. Tenant shall have the right, in accordance
with the terms of the Construction Management Agreement, to require Landlord to
pay for the construction of the Improvements.
5.2 TITLE TO AND NATURE OF IMPROVEMENTS. Subject to the provisions of
SECTIONS 12.2 and 22.2, Tenant agrees that any and all Improvements of whatever
nature at any time constructed, placed or maintained upon any part of the Land
shall be and remain the property of Landlord, subject to Tenant's rights under
ARTICLE 16, ARTICLE 17 and ARTICLE 20 and elsewhere in this Lease.
9
<PAGE>
ARTICLE 6
FUNDING
6.l REQUEST FOR CONSTRUCTION FUNDING: LANDLORD'S OBLIGATION TO FUND.
During the Interim Period, Tenant shall request Landlord to provide Advances for
the construction of Improvements in accordance with the Construction Management
Agreement. Each such request shall be in writing and shall generally describe
the nature of the Advance. Landlord shall fund Advances requested by Tenant in
accordance with the terms of the Construction Management Agreement. Landlord
shall have no obligation to make any further Advances following the Improvements
Commencement Date.
6.2 EXHIBIT REFLECTING RENT COMMENCEMENT DATE. Within thirty (30) days
after the Rent Commencement Date, Landlord and Tenant shall execute the "Rent
Commencement Date Memorandum" in the form attached hereto as EXHIBIT D.
ARTICLE 7
RENT
7.1 BASE RENT. Commencing upon the Rent Commencement Date and continuing
thereafter throughout the Term, Tenant shall pay Base Rent to Landlord, or at
such other place as Landlord may from time to time instruct. Tenant shall pay
Base Rent by wire transfer. Landlord shall supply Tenant with such bank account
information as Tenant shall require to enable payment by wire transfer of
Federal funds to the account described in SECTION 1.13. Rental payments shall be
payable monthly in arrears on the fifteenth (15th) day of each successive month,
except that the last installment of Base Rent shall be payable on the last day
of the Term (each such date shall be a "Rent Payment Date"). No sooner than
thirty (30) days or later than ten (10) days prior to the due date for any
installment of Base Rent hereunder, Landlord shall deliver to Tenant a Notice
indicating the exact dollar amount of the Base Rent that is due on such due date
("Invoice'). If Landlord fails to send the Invoice, Tenant shall pay the amount
shown on the previous month's Invoice.
7.2 PRORATION. If the Term expires or is otherwise terminated on other
than the fifteen (15th) day of a calendar month, then Base Rent shall be
prorated for the period from the immediately preceding Rent Payment Date until
the termination date on the basis of actual days elapsed on the basis of a three
hundred sixty (360) day year.
7.3 NO ABATEMENT OF RENT. Except as a consequence of a reduction in the
Lease Investment Balance or the terms of SECTIONS 16.1 AND 16.2 (Taking) Tenant
shall not be entitled to any abatement, diminution, reduction, setoff or
postponement of Base Rent as a consequence of any inconvenience to, interruption
of, cessation of or loss of Tenant's use or enjoyment of the Premises or as a
result of any reason whatsoever.
7.4 DELINQUENT RENT. Any Base Rent not paid on the due date shall
accrue interest at the Default Rate from the date such Base Rent was originally
due until the date such Base Rent is paid. All interest accrued on past due
Base Rent shall be due and payable to Landlord at the time the Base Rent is
paid, or upon demand by Landlord, if earlier.
7.5 ADDITIONAL RENT. Tenant agrees to pay all Additional Rent when it
becomes due and payable under this Lease.
10
<PAGE>
7.6 FIXED RATE OPTION. If no Event of Default exists hereunder or would
exist except for the passage of time or giving of notice, Tenant shall have the
right upon five (5) days prior written notice to Landlord to request that
Landlord convert the method for calculating Base Rent from that based on the
LIBOR Rate to that calculated on a fixed rate of interest based on the then
market conditions ("Fixed Rate Base Rent"). In the event Tenant properly
exercises its option under this SECTION 7.6, Landlord and Tenant shall cooperate
in good faith to enter into an amendment to this Lease in the form attached
hereto as EXHIBIT D-1 setting forth the terms of the Fixed Rate Base Rent,
including, without limitation, the timing and method of the payment of Base
Rent, the new Default Rate, the term of the fixed rate contract and any other
terms and conditions of the Lease which must be amended as a result of the
conversion from the LIBOR Rate to a fixed interest rate. Upon the expiration of
the fixed rate contract, Base Rent shall be calculated using the LIBOR Rate plus
25 basis points.
7.7 SECURITY DEPOSIT.
(a) On or before 12:00 p.m. New York time on the date of each
Advance to be made by Landlord pursuant to the Construction Management
Agreement, Tenant shall deliver to Landlord a security deposit payment
(individually and collectively, the "Security Deposit") in an amount equal to
eighty five and sixty eight one hundredths percent (85.68%) of the amount of
such Advance. Landlord shall give Tenant three (3) Business Days' prior written
notice of (i) the date of any Advance to be made by Landlord and the amount of
such Advance, (ii) the amount of the Security Deposit payment due from Tenant,
and (iii) the then-current balance of the Security Deposit. Tenant hereby
grants to Landlord a security interest in the Security Deposit and Landlord may
use and commingle the Security Deposit with other funds of Landlord.
(b) From and after the date of the first payment of the Security
Deposit by Tenant, the Security Deposit shall earn interest at the LIBOR Rate
plus eighteen (18) bask points determined on the basis of a 360-day year and the
actual number of days elapsed. Landlord shall pay such interest to Tenant on
the date of each Advance during the Interim Period and on each Rent Payment Date
thereafter by wire transfer to such account as Tenant shall specify from time to
time by written notice to Landlord; provided, however, that (i) Landlord shall
not be required to pay such interest amount so long as any Base Rent is due but
unpaid, and (ii) if the Base Rent due on any Rent Payment Date is not received
by 12:00 p.m. New York time, any such interest payment on the Security Deposit
shall not be due from Landlord to Tenant until the next Business Day. Any such
interest payment that is not paid by Landlord when due shall bear interest at
the federal funds rate for the first three (3) days of delinquency and
thereafter at the Default Rate.
(c) As of the Improvements Commencement Date, the amount of the
Security Deposit shall be increased or decreased to an amount equal to the
Guaranteed Residual Value; and Landlord shall refund to Tenant or Tenant shall
pay to Landlord, as the case may be, the amount required to make such adjustment
to the amount of the Security Deposit within two (2) Business Days of the
determination of such adjustment.
(d) If at any time during the Term the Lease Investment Balance
is reduced (whether pursuant to ARTICLE 16, ARTICLE 17 or otherwise), the
Security Deposit shall be reduced in the same proportion as the reduction in the
Lease Investment Balance, and Landlord shall promptly pay to Tenant the excess
amount of the Security Deposit.
11
<PAGE>
(e) The Security Deposit shall be held by Landlord as security
for the payment of Base Rent and Additional Rent by Tenant pursuant to this
Lease. If at any time during the Term any Base Rent or Additional Rent shall be
overdue, then Landlord may at its election (but shall be not be required to)
appropriate and apply any portion of the Security Deposit to the payment of any
such overdue Base Rent or Additional Rent. Should the entire Security Deposit,
or any portion thereof, be appropriated and applied by Landlord as provided
herein, then Tenant shall immediately, after receipt of written demand by
Landlord, pay to Landlord a sufficient sum in cash to restore the Security
Deposit to the amount required hereunder.
(f) In addition, the Security Deposit shall also be held by
Landlord as security for the payment of any amount due Landlord under SECTION
18.3(b) or SECTION 20.2(d) or for the payment of the Purchase Price in the event
Tenant exercises the Purchase Option pursuant to SECTION 20. 1. At the end of
the Term, any portion of the Security Deposit then held by Landlord and not
applied as provided in clause (e) above or in the preceding sentence shall be
returned to Tenant; provided, however, that Landlord and Tenant shall apply and
set off the Security Deposit or any portion thereof against any amounts owed by
Tenant to Landlord at the end of the Term (whether pursuant to SECTION 20.1,
SECTION 20.2 or otherwise).
ARTICLE 8
TAXES
8.1 REAL ESTATE TAXES.
(a) From and after the Improvements Commencement Date, Tenant
shall pay directly to the appropriate taxing authority all Real Estate Taxes.
If the Improvements Commencement Date occurs or the Term expires or otherwise
terminates at any time other than the beginning or end of a taxable year,
Tenant's obligation to pay Real Estate Taxes shall be prorated on the basis of a
365-day year, so as to include only that portion of the taxable year which is a
part of the Term. Unless a termination of the Lease results from the purchase
of the Premises pursuant to ARTICLE 20 below, any Real Estate Taxes levied
against the Premises which accrue during the Term of this Lease but which would
not be due and payable to the appropriate taxing authority until after the
expiration of the Term of this Lease (as the same may be extended) shall be
paid, by Tenant to Landlord upon such termination. Landlord shall pay such
amounts to the appropriate taxing authority on a timely basis. Landlord shall
pay any Real Estate Taxes accruing during the Interim Period to the extent such
Real Estate Taxes are payable by the ground lessee under the terms of the Ground
Lease during such period.
(b) Except to the extent that Real Estate Tax bills and
statements are sent directly to Tenant by the taxing authority, upon receipt by
Landlord of the tax bills or statements, Landlord will use reasonable efforts to
promptly advise Tenant in writing of all Real Estate Taxes and shall deliver
copies of all applicable tax bills or statements to Tenant. Tenant shall pay
directly to the taxing authority all Real Estate Taxes prior to the later of (i)
thirty (30) days after receipt by Tenant from Landlord of a copy of such bills
and statements referred to above, or (ii) five (5) days prior to delinquency.
As used herein, the term "Real Estate Taxes" shall mean any and all taxes,
governmental fees and similar charges or assessments levied or assessed against
the Improvements and/or the Land including, without limitation, ad valorem taxes
and special assessments applicable to real property, as well as any taxes (as
defined in Section 402.1 of the Ground Lease)
12
<PAGE>
and other amounts payable under Section 402 of the Ground Lease; provided,
however, that Real Estate Taxes shall not include any Landlord Income Taxes.
Real Estate Taxes shall also include any and all documentary, transfer, sales,
mortgage, recording or similar taxes imposed on Landlord or Tenant in connection
with (i) the original acquisition of the Premises by Landlord, (ii) any transfer
of the Premises to Tenant pursuant to the terms of As Lease, or (iii) any sale
of the Premises to a third party pursuant to the terms of this Lease. As used
herein, the term "Landlord Income Taxes" shall mean any and all income,
franchise, gains, gift, succession, excess profits, gross receipts, revenue,
estate, rental, or similar taxes or taxes in lieu thereof imposed upon Landlord
or any party other than Tenant (or an affiliate thereof) and any withholding tax
imposed as a collection device for, in lieu of, or otherwise related to any of
the foregoing without regard to whether such tax is required to be collected by
Tenant and without regard to whether Tenant would be liable for such withholding
tax in the event it failed to so withhold. For purposes of the foregoing, an
income tax shall include, without limitation, any tax unposed under the United
States Internal Revenue Code or the California Bank and Corporation Tax Law as
well as any tax which could qualify as an "income tax" under United States
Treasury Regulation Section 1.901-2 (except to the extent any such statute or
regulation is subsequently modified to include a tax or other governmental
charge of a materially different type and nature from the taxes currently
described therein) and any income tax which may be payable under the laws of any
jurisdiction either now or in the future. Real Estate Taxes for any given tax
year shall exclude assessment installments that are not due and payable during
such tax year.
8.2 PERSONAL PROPERTY TAXES. Tenant shall pay directly to the appropriate
taxing authorities prior to delinquency any and all taxes and assessments levied
or assessed during the Term upon or against Tenant's furniture, equipment, trade
fixtures and any other personal property in the Premises.
8.3 RIGHT TO CONTEST. Tenant shall not be required to pay any Real
Estate Taxes or any other taxes for which Tenant is liable hereunder (including,
without limitation, any taxes for which Tenant is required to indemnify Landlord
under SECTION 23.1)(including penalties and interest), so long as (i) Tenant
shall contest the same or the validity thereof by appropriate legal proceedings
in such a manner to prevent the tax sale of any portion of the Premises and (ii)
the position to be taken by Tenant pursuant to such contest would have a
realistic possibility of success if litigated. For purposes of this Lease,
Tenant may conclusively establish that a position to be taken in a contest would
have a realistic possibility of success if litigated by providing to Landlord a
letter from counsel stating an opinion to such effect. In the event of any such
contest, Tenant shall, within thirty (30) days after the final determination
thereof, pay and discharge the amounts determined to be due in accordance
therewith and with the provisions of this Lease, together with any penalties,
fines, interest, costs and expenses that may have accrued thereon or that may
have resulted from Tenant's contest. Tenant also shall have a right to contest
any taxes for which it is liable hereunder, but with regard to which the
position to be taken pursuant to such contest would not have a realistic
possibility of success if litigated, provided that Tenant pays such taxes on or
prior to the date upon which such taxes are asserted to be due by the relevant
governmental authority. Notwithstanding the foregoing provisions of this
SECTION 8.3, Tenant shall have an unconditional right to contest (without prior
payment) any taxes imposed by law upon Tenant rather than upon Landlord.
Tenant's decision to pay any taxes prior to contesting its or another party's
underlying liability therefore shall not be deemed to imply or suggest that the
position to be taken in such contest would not have a realistic possibility of
success if litigated. Landlord shall cooperate fully with Tenant
13
<PAGE>
in connection with the exercise of Tenant's right of contest contained herein,
and in the event that applicable law shall require that Landlord, rather than
Tenant, pursue legal proceedings for such contest, Landlord will initiate and
pursue such contest upon Tenant's request and in accordance with Tenant's
instructions (including, without limitation, Tenant's instructions as to the
selection of legal counsel and matters of strategy or settlement); PROVIDED,
HOWEVER, that Landlord shall not be subject to any liability for the payment of
any costs or expenses in connection with any such contest or proceedings, and
Tenant will indemnify and save harmless Landlord from any such costs and
expenses (including, without limitation, reasonable attorneys' fees, costs of
court and appraisal costs), reimbursing Landlord therefor upon demand (or paying
such costs and expenses directly when due, all as directed by Landlord). Tenant
shall be entitled to any refund of any taxes and penalties or interest from any
governmental authority to the extent the refund represents monies paid to the
governmental authority by Tenant or paid by Landlord and reimbursed by Tenant.
8.4 ADDITIONAL CHARGES. All payments made by Tenant under this Lease
shall be made free and clear of, and without reduction or withholding for or on
account of, any present or future taxes, levies, imposts, duties, charges, fees,
deductions or withholdings, now or hereafter imposed, levied, collected,
withheld or assessed pursuant to any Legal Requirement, excluding, however, any
Landlord Income Taxes (all such nonexcluded taxes, levies, imposts, deductions,
charges or withholdings being hereinafter called "Additional Charges"). Tenant
shall be responsible for the payment of any such Additional Charges and if any
such Additional Charges are required to be withheld from any amounts payable to
Landlord hereunder, then the amounts so payable to Landlord shall be increased
by an amount ("Additional Amount") necessary to yield to Landlord (after payment
of all Additional Charges) the Base Rent and other amounts payable hereunder at
the rates or in the amounts specified in this Lease. Whenever any Additional
Charges are required to be withheld by Tenant, such Additional Charges shall be
deducted or withheld by Tenant, and shall be paid by Tenant to the appropriate
governmental authority in accordance with applicable Legal Requirements. As
promptly as possible thereafter, Tenant shall send to Landlord for its own
account a copy of an Original official receipt (or other evidence of payment)
received by Tenant showing payment thereof. If Tenant is required to pay
Landlord any Additional Amount, Landlord shall use its best efforts (consistent
with its internal policy and legal and regulatory restrictions) to change its
jurisdiction if the making of such a change would avoid the need for, or reduce
to the greatest extent possible the amount of, any such Additional Amount which
may thereafter accrue and would not, in the reasonable judgment of Landlord be
otherwise disadvantageous to Landlord. If Landlord subsequently receives a
refund of any Additional Amounts, or if such Additional Amounts result in a net
benefit to Landlord, the amount of such refund or net benefit shall be paid to
Tenant within 30 days of the receipt of such refund or net benefit; provided,
however, that the payment to Tenant shall not exceed the Additional Amount to
which the refund or net benefit relates. The agreements in this Section 8.4
shall survive the termination of this Lease with respect to any Additional
Charges that become due during the Term.
ARTICLE 9
INSURANCE
9.1 LIABILITY INSURANCE. At all times during the Term, Tenant shall
obtain at Tenant's sole cost and expense a policy or policies of comprehensive
general liability insurance on an "occurrence" basis against claims for
"personal injury" liability, including bodily injury, death or property damage
liability. The liability insurance policy shall
14
<PAGE>
contain coverage limits no less than the following: (1) Three Million Dollars
($3,000,000) per person; (2) Five Million Dollars ($5,000,000) per incident; and
(3) One Million Dollars ($1,000,000) for property damage.
9.2 BUILDERS' RISK INSURANCE. With respect to any Improvements which
may be under construction and not yet covered by insurance under the terms of
SECTION 9.3, Tenant shall maintain or cause to be maintained a policy or
policies of builders' risk insurance in an amount equal to the value upon
completion of the work (exclusive of land, foundation, excavation, grading,
landscaping, architectural and development fees and other items customarily
excluded from such coverage), insuring against the risks customarily insured
against under such insurance, including fire, vandalism, malicious mischief,
sprinkler leakage, lightning, and windstorm.
9.3 ALL-RISK INSURANCE. With respect to any completed Improvements,
prior to the termination of the builders' risk insurance required by SECTION
9.2, and at all times thereafter, Tenant shall, at Tenant's sole cost and
expense, obtain and maintain, or cause to be obtained and maintained, (a) a
policy or policies of all-risk insurance covering the Improvements, providing
coverage against loss or damage by fire, vandalism, malicious mischief,
sprinkler leakage, lightning, windstorm, and other insurable perils, as, under
good insurance practice, from time to time are insured against under all-risk
coverage for properties of similar character, age and location in an amount or
amounts not less than one hundred percent (100%) of the then actual replacement
cost (exclusive of land, foundation, excavations, grading, landscaping,
architectural and development fees and other items customarily excluded from
such coverage and without any deduction for depreciation); (b) standard
earthquake coverage, with a deductible not to exceed ten percent (10%) of the
insured amount; and (c) standard flood coverage. Provided, however Tenant may
elect not to obtain earthquake insurance, in which case Tenant hereby covenants
to pay the cost of repairing damage to the Improvements caused by an earthquake.
9.4 GENERAL REQUIREMENTS. The insurance required under this ARTICLE 9
may be furnished under a "primary" policy and an "umbrella" policy or policies.
Landlord shall be named as an additional insured under Tenant's policy of
insurance required under SECTION 9.1; and such policies shall contain an
endorsement for cross-liability coverage. Tenant shall furnish Landlord with
certificates from Tenant's insurers with respect to the insurance required to be
carried hereunder on or before the date such insurance is required to be
carried. The certificates shall state that such insurance is in full force and
effect and that coverage will not be reduced in any amount or otherwise limited
or canceled without thirty (30) days' prior written notice to Landlord. Renewal
certificates shall be furnished to Landlord not less than thirty (30) days prior
to the expiration of each such policy. Any blanket insurance policy or policies
that insure Tenant against the risks and for the amounts herein specified shall
be deemed to satisfy the obligation of Tenant hereunder, provided that any such
policy of blanket insurance shall specify the amount of the total insurance
allocated to the risks required to be insured hereunder and such allocated
amount meets the requirements of this ARTICLE 9. All insurance required by this
ARTICLE 9 shall be with an insurance company licensed to do business in the
State of California with a general policyholder's rating, as rated by the most
current available "Bests" Insurance Reports, of no less than A/VII and shall be
non-contributing.
9.5 WAIVER OF SUBROGATION. Notwithstanding anything to the contrary
contained herein, to the extent permitted by law and so long as any insurance
coverage maintained by Tenant is not diminished by reason thereof, Tenant hereby
(a) releases and waives any
15
<PAGE>
rights it may have against Landlord and its officers, agents and employees on
account of any loss or damages occasioned to Tenant, its property or the
Premises, and arising from any risk covered by any fire and extended coverage
insurance maintained by Tenant, whether or not due to the negligence of
Landlord, its agents, employees, contractors, licensees, invitees or other
persons, and (b) waives on behalf of any insurer providing such insurance to
Tenant any right of subrogation that any such insurer may have or acquire
against Landlord or such persons by virtue of payment of any loss under such
insurance. Tenant shall use its commercially reasonable efforts to cause its
insurance policies to contain a waiver of subrogation clauses in accordance with
the foregoing.
9.6 INDEMNITY. Tenant shall protect, defend, indemnify, hold and save
Landlord harmless from and against any and all losses, costs, liabilities or
damages (including reasonable attorneys' fees and disbursements and court costs)
arising by reason of: (i) any and all injury or death of persons or damage to
property against which Tenant is obligated to maintain insurance for the benefit
of Landlord pursuant to this ARTICLE 9; (ii) the failure to obtain the waiver of
subrogation clause required by SECTION 9.5 hereof where such clause could have
been obtained through the exercise of Tenant's commercially reasonable efforts;
or (iii) the invalidation of such insurance policy required to be obtained by
Tenant hereunder by Tenant's insurer. Tenant's duty to indemnify Landlord under
this SECTION 9.6 shall survive the expiration or earlier termination of this
Lease with respect to events occurring during the Term.
ARTICLE 10
USE
10.1 USE.
(a) PERMITTED. Tenant may use the Premises for any purpose
permitted under the Ground Lease.
(b) ENVIRONMENTAL COMPLIANCE.
1) DEFINED TERMS. The term "Applicable Environmental Laws"
shall mean any applicable laws, regulations or ordinances pertaining to health
or the environment, including, without limitation, the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended by
the Superfund Amendments and Reauthorization Act of 1986 or otherwise (as
amended, hereinafter called "CERCLA"), the Resource Conservation and Recovery
Act of 1976, as amended by the Used Oil Recycling Act of 1980, the Solid Waste
Disposal Act Amendments of 1980, the Hazardous and Solid Waste Amendments of
1984 or otherwise (as amended, hereinafter called "RCRA"), and California Health
& Safety Code Section 25501(j). The terms "hazardous substance" and "release"
as used in this Lease shall have the meanings specified in CERCLA, and the terms
"solid waste" and "disposal" (or "disposed") shall have the meanings specified
in RCRA; provided, in the event either CERCLA or RCRA is amended or superseded
by other laws so as to broaden the meaning of any term defined thereby, such
broader meaning shall apply subsequent to the effective date of such amendment
or other laws: and, provided further, to the extent that the laws of the State
of California establish a meaning for "hazardous substance", "release", "solid
waste", or "disposal" which is broader than that specified in either CERCLA or
RCRA, such broader meaning shall apply.
16
<PAGE>
2) TENANT'S COVENANTS. Tenant will not cause or permit the
Premises to be in violation of, or do anything or permit anything to be done
which subjects Landlord, Tenant or the Premises to any remedial obligations
under or which creates a claim or cause of action under, any Applicable
Environmental Laws, including, without limitation, CERCLA, RCRA, and the
California Health and Safety Code 25501(j), assuming disclosure to the
applicable governmental authorities of all relevant facts, conditions and
circumstances, if any, pertaining to the Premises and Tenant will promptly
notify Landlord in writing of any existing, pending or threatened investigation,
claim or inquiry of which Tenant has knowledge by any governmental authority in
connection with any Applicable Environmental Laws. Tenant shall obtain any
permits, licenses or similar authorizations to construct, occupy, operate or use
any Improvements, fixtures and equipment at any time located on the Premises by
reason of any Applicable Environmental Laws. Tenant will not use the Premises
in a manner which will result in the unlawful disposal or other unlawful release
of any hazardous substance or solid waste on or to the Premises and covenants
and agrees to keep or cause the Premises to be kept free of any unlawful
hazardous substance, unlawful solid waste or unlawful environmental contaminants
(including, without limitation, friable asbestos and any substance containing
asbestos deemed hazardous and unlawful by any Applicable Environmental Law) and
to remove the unlawful amounts of the same (or if removal is prohibited by law,
to take whatever action is required by law) promptly upon discovery at Tenant's
sole expense. Tenant shall promptly notify Landlord in writing of any unlawful
disposal or other unlawful release of any hazardous substance, environmental
contaminants or solid wastes on or to the Premises or the Improvements. In the
event Tenant fails to comply with or perform any of the foregoing covenants and
obligations, after thirty (30) days' prior written Notice to Tenant, Landlord
may, but shall be under no obligation to, cause the Premises to be freed from
the unlawful hazardous substance, unlawful solid waste or unlawful environmental
contaminants (or if removal is prohibited by law, to take whatever action is
required by law) and the reasonable cost of the removal or such other action
shall be a demand obligation owing by Tenant to Landlord pursuant to this Lease.
Notwithstanding the foregoing, Landlord shall have no right to cause the removal
of such materials so long as Tenant body (1) is diligently and in good faith
proceeding to comply with Tenant's obligation to remove the unlawful amounts of
such materials; and (2) has the financial ability to so comply. Subject to the
foregoing, Tenant grants to Landlord and Landlord's agents and employees access
to the Premises, and the license to remove the unlawful hazardous substance,
unlawful solid waste or unlawful environmental contaminants (or if removal is
prohibited by law, to take whatever action is required by law) and agrees to
indemnify and save Landlord harmless from all reasonable costs and expenses
involved and from all claims (including consequential damages) asserted or
proven against Landlord by any party in connection therewith. Upon Landlord's
reasonable request for "good cause" (defined below), at any time and from time
to time during the Term, Tenant will provide at Tenant's sole expense an
inspection or audit of the Premises from an engineering or consulting firm
approved by Landlord, indicating the presence or absence of any hazardous
substance, solid waste or environmental contaminants located on the Premises.
If Tenant fails to provide same after sixty (60) days' notice, Landlord may
order same, and Tenant grants to Landlord and Landlord's employees and agents
access to the Premises and a license to undertake any testing reasonably
required to obtain such inspection or audit. The reasonable cost of obtaining
such inspection or audit and any expenses incurred by Landlord in connection
therewith, shall be a demand obligation owing by Tenant to Landlord pursuant to
this Lease. For purposes of this SECTION 10.1(b)(2), "good cause" shall mean
that Landlord shall have reasonable grounds to believe that an unlawful release
or unlawful disposal of hazardous substances or solid wastes has occurred on the
Premises.
17
<PAGE>
(c) COMPLIANCE WITH LEGAL REQUIREMENTS. Tenant shall at
all-times comply with all material Legal Requirements applicable to the Land or
the Improvements and/or the use thereof.
10.2 CONTEST OF LEGAL REQUIREMENTS. Tenant shall have the right at its
sole cost and expense to contest the validity of any Legal Requirements
applicable to the Premises by appropriate proceedings diligently conducted in
good faith; and upon the request of Tenant and at Tenant's sole cost and
expense, Landlord will join and cooperate with Tenant in such proceedings.
Subject to SECTION 8.3, any other provision of this Lease to the contrary
notwithstanding, Tenant's right to contest Legal Requirements must be exercised
in such a manner as to avoid any exposure of the Premises or any part thereof to
foreclosure or execution sale or exposure of Landlord to civil or criminal
penalties arising from Tenant's non-compliance with such Legal Requirements.
Tenant shall defend and indemnify Landlord against, and hold Landlord harmless
from, any and all liability, loss, cost, damage, injury or expense (including,
without limitation, attorneys' fees and costs) which Landlord may sustain or
suffer by reason of Tenant's failure or delay in complying with, or Tenant's
contest of, any such Legal Requirements (or Landlord's contest, if requested in
writing by Tenant), and Tenant's duty to indemnify Landlord under this SECTION
10.2 shall survive the expiration or earlier termination of this Lease.
ARTICLE 11
UTILITIES AND SERVICES
11.1 SERVICES TO THE PREMISES. At Tenant's sole cost and expense, Tenant
shall make its own arrangements for the provision of all utilities and services
to be provided to or consumed on the Premises, including, without limitation,
air conditioning, ventilation, heating, electric power, telephone, water (both
domestic and fire protection), sanitary sewer, storm drain, natural gas and
janitorial services, including for the installation, maintenance and repair of
service lines and meters to measure Tenant's consumption of such utilities.
ARTICLE 12
MAINTENANCE AND REPAIRS; SURRENDER OF THE PREMISES
12.1 TENANT OBLIGATIONS. Except as otherwise provided in this Lease,
Tenant shall maintain the Premises and the Improvements in good repair, normal
wear and tear and casualty excepted. All maintenance that Tenant is obligated
to perform under this SECTION 12.1 shall be at the sole expense of Tenant.
12.2 SURRENDER OF THE PREMISES. Except as provided in ARTICLE 20, upon
the expiration or earlier termination of the Term, Tenant shall surrender the
Premises to Landlord in its then "AS-IS" condition, including, without
limitation, any condition resulting from: (i) wear and tear; (ii) obsolescence
and damage by fire or other casualty, act of God or the elements (subject to the
terms of ARTICLE 17); (iii) damage that is caused by Landlord, its agents,
employees or contractors; and (iv) any improvements, alterations, additions,
repairs, replacements, or decorations in, to or of the Premises or on the Land
which are not Improvements but which Tenant may elect to remain on the Land or
the Premises. Title to all improvements, furniture, furnishings, fixtures,
trade fixtures and personal property of Tenant which have not been funded by
Landlord pursuant to the terms of ARTICLE 6 and located in or upon the Premises
or the Land, whether or not
18
<PAGE>
affixed to the realty, shall be and remain in Tenant throughout the Term, and at
any time during the Term of this Lease, the same may be removed by Tenant or, at
Tenant's election, surrendered with the Premises, in which event title to such
surrendered property shall, if Landlord so elects in Landlord's sole discretion,
be deemed transferred to Landlord. Any of such property that is not removed
from the Premises or the Improvements on or prior to the expiration or earlier
termination of this Lease shall be considered abandoned and Landlord may deal
with it as Landlord elects.
ARTICLE 13
LIENS
13.1 Except for claims that Tenant or Devcon, with Tenant's approval, is
contesting in good faith in such manner as to avoid any exposure of the Premises
or any part thereof to foreclosure or execution sale, Tenant shall promptly pay
and discharge all claims for work or labor done, supplies furnished or services
rendered to the Premises, and shall keep the Premises free and clear of all
mechanics' and materialmen's liens in connection therewith.
ARTICLE 14
ASSIGNMENT BY LANDLORD
14.1 FURTHER MORTGAGES OR ENCUMBRANCES BY LANDLORD. Except for the SBLF
Deed of Trust (which is hereby approved by Tenant), the Second Deed of Trust,
and as specifically permitted in ARTICLE 21 and in the Construction Management
Agreement, Landlord shall not cause or create any mortgages, deeds of trust, or
encumbrances to exist with respect to the Premises at any time. Landlord agrees
that it will not materially modify the SBLF Deed of Trust nor will it cause any
new bonds or assessments to encumber the Premises without Tenant's approval
which may be withheld in Tenant's sole discretion.
14.2 LANDLORD'S RIGHT TO SELL. Subject to Tenant's Purchase Option,
Landlord may not transfer all or any portion of its right, title and interest in
the Premises; provided, however that nothing contained in this Lease shall be
deemed in any way to limit, restrict or otherwise affect the right of Landlord
at any time and from time to time to sell or transfer all or any portion of its
right, title and estate in the Premises to: (1) a Landlord Affiliate; (2)
another financial institution or trust established by such an institution; or
(3) if an Event of Default has occurred and is continuing at the time of such
sale or transfer, to any Entity. Any sale or transfer by Landlord whatsoever
shall by its express terms recognize and confirm the right of possession of
Tenant to the Premises and Tenant's other rights arising out of this Lease shall
not be affected or disturbed in any way by any such sale, transfer, assignment
or conveyance (except for any disturbance resulting from a foreclosure sale
conducted pursuant to the laws of the State of California at which independent
third party bids were permitted, pursuant to the SBLF Deed of Trust, all subject
to the terms of SECTION 21.3)
14.3 TRANSFER OF FUNDS AND PROPERTY. At each time Landlord sells,
assigns, transfers or conveys the entire right, title and estate of Landlord in
the Premises and in this Lease, Landlord shall turn over to the transferee any
funds or other property then held by Landlord under this Lease and thereupon all
the liabilities and obligations on the part of the Landlord under this Lease
arising after the effective date of such sale, assignment, transfer or
conveyance shall terminate as to the transferor and be binding upon the
transferee.
19
<PAGE>
ARTICLE 15
ASSIGNMENT AND SUBLEASING
15.1 RIGHT TO ASSIGN.
(a) TENANT'S RIGHT. Tenant shall have the right, at any time
and from time to time during the Term, to assign all or any portion of its
right, title and estate in the Premises and in this Lease without approval by
Landlord. Any such assignee, immediate or remote, shall have the same right of
assignment. Any such assignment shall be evidenced by a written instrument,
properly executed and acknowledged by all parties thereto and, at Tenant's
election, duly recorded in the Official Records, wherein and whereby the
assignee assumes all of the obligations of Tenant under this Lease.
Notwithstanding any such assignment and assumption or any sublease permitted
under SECTION 15.2 hereof, Tenant shall remain primarily liable for all
obligations and liabilities on the part of Tenant thereafter or thereafter
arising under this Lease.
(b) NOTICE. Tenant shall, promptly after execution of each
assignment, notify Landlord of the name and mailing address of the assignee and
shall, on demand, permit Landlord to examine and copy the assignment agreement.
15.2 RIGHT TO SUBLET.
(a) TENANT'S RIGHT. Tenant shall have the right, at any time
and from time to time during the Term, to sublet all or any portion of the
Premises and to extend, modify or renew any sublease without the approval of
Landlord.
(b) NOTICE. Tenant shall, promptly after execution of each
sublease, notify Landlord of the name and mailing address of the subtenant and
shall, on demand, permit Landlord to examine and copy the sublease.
(c) NON-DISTURBANCE AGREEMENT. Upon Tenant's request, Landlord
shall enter into a "landlord agreement" with any subtenant of Tenant. Such
agreement shall provide that Landlord shall recognize the sublease and not
disturb the subtenant's possession thereunder so long as such subtenant shall
not be in default under its sublease, and an Event of Default is not then in
existence and continuing under this Lease. Tenant shall immediately reimburse
Landlord on demand for all reasonable out-of-pocket costs and expenses incurred
by Landlord in complying with Landlord's obligations under this
SECTION 15.2(c).
15.3 MORTGAGE BY TENANT. Tenant shall not have the right to mortgage,
pledge or otherwise encumber all or any portion of the right, title and estate
of Tenant in the Premises or in this Lease, without the consent of Landlord.
ARTICLE 16
EMINENT DOMAIN
16.1 TOTAL OR SUBSTANTIAL TAKING. If title or access is taken for any
public or quasi-public use, or under any statute or by right of condemnation or
eminent domain, or by sale in lieu thereof (a "Taking") with respect to all of
the Premises, or if title to so much of the Premises or access thereto is Taken,
or if the Premises or access thereto is damaged, blocked or impaired by the
Taking, so that, in Tenant's sole discretion, the
20
<PAGE>
Premises or access thereto, even after a reasonable amount of reconstruction
thereof, will no longer be suitable for Tenant's (and/or Tenant's subtenants')
continued occupancy for the conduct of Tenant's (and/or Tenant's subtenants')
business in a manner consistent with the conduct of such business prior to such
Taking, then in any such event, this Lease shall terminate on the date of such
Taking.
16.2 PARTIAL TAKING. If any part of the Premises, or access thereto,
shall be Taken, and the Premises or the remaining part thereof and access
thereto will be, in Tenant's sole discretion, suitable for Tenant's (and/or
Tenant's subtenants') continued occupancy for the conduct of Tenant's (and/or
Tenant's subtenants') business in a manner consistent with the conduct of such
business prior to such Taking, all of the terms, covenants and conditions of
this Lease shall continue, except that Base Rent shall be adjusted to reflect
the decreased Lease Investment Balance remaining after application thereto of
the award made to Landlord for such Taking.
16.3 TEMPORARY TAKING. If the whole or any part of the Premises is Taken
for temporary use or occupancy, this Lease shall not terminate by reason thereof
and Tenant shall continue to pay, in the manner and at the times herein
specified, the full amount of the Base Rent payable by Tenant hereunder, and,
except only to the extent that Tenant may be prevented from so doing by reason
of such Taking, Tenant shall continue to perform and observe all of the other
terms, covenants and conditions hereof on the part of Tenant to be performed and
observed, as though the Taking had not occurred. In the event of any such
temporary Taking, Tenant shall be entitled to receive the entire amount of the
award made for the Taking, whether paid by way of damages, rent or otherwise.
If the temporary Taking is for a term in excess of thirty (30) days, then the
Taking shall be treated as a permanent Taking and be governed by SECTIONS 16.1
OR 16.2, as applicable.
16.4 DAMAGES. The compensation attributable to the Premises (in each
case the compensation or value shall be determined as of the date of the Taking)
awarded or paid upon any Taking (other than a temporary Taking, which shall be
governed by SECTION 16.3), whether awarded to Landlord, Tenant, or both of them,
shall be held by the Escrow Agent described in SECTION 17.3(b), and distributed
in the same manner as insurance proceeds pursuant to SECTION 17.3. For purposes
of this SECTION 16.4, references to the term "casualty" or similar terms in
SECTION 17.3 shall be deemed to refer to "Taking."
16.5 NOTICE AND EXECUTION. Immediately upon service of process upon
Landlord or Tenant in connection with any Taking relating to the Premises or any
portion thereof or access thereto, each party shall give the other Notice
thereof. Each party agrees to execute and deliver to the other all instruments
that may be required to effectuate the provisions of this ARTICLE 16. Tenant
reserves the right to appear in and to contest any proceedings in connection
with any such Taking. Tenant shall immediately reimburse Landlord on demand for
all reasonable out-of-pocket costs and expenses incurred by Landlord in
complying with Landlord's obligations under this SECTION 16.5.
16.6 TERMS OF GROUND LEASE. Notwithstanding any of the foregoing
provisions of this Article 16, Landlord and Tenant acknowledge that in the event
of any inconsistency between the foregoing terms of this Article 16 and Article
XI of the Ground Lease, the terms of Article XI of the Ground Lease shall
control; and Tenant shall have no right to terminate this Lease as a consequence
of a Taking unless Landlord shall also have the right to terminate the Ground
Lease as a consequence thereof (provided that
21
<PAGE>
Tenant may exercise the Purchase Option under SECTION 20.1 at any time);
Landlord shall not exercise any right to terminate the Ground Lease without
Tenant's prior approval, in Tenant's sole discretion; Tenant shall restore the
Premises to the extent provided in the Ground Lease in the event this Lease and
the Ground Lease are not terminated; and the provisions of SECTION 16.4 above
shall be applicable only to the compensation allocated to the ground lessee
under the terms of the Ground Lease in the event of a Taking.
ARTICLE 17
DAMAGE OR DESTRUCTION
17.1 CASUALTY. If the Improvements are damaged or destroyed by fire or
other casualty, except as provided to the contrary in SECTION 17.2, this Lease
shall continue in full force and effect without any abatement or reduction in
Base Rent, and Tenant, at Tenant's election, shall either (a) restore the
Improvements substantially to their condition prior to the damage or
destruction, or such other condition as Tenant shall elect, subject to
Landlord's approval in accordance with the terms of SECTION 12 of the
Construction Management Agreement, which shall not be unreasonably withheld,, or
(b) not restore the Improvements, but perform, or cause to be performed, at
Tenant's sole cost and expense, any work or service required by any Legal
Requirement for the protection of persons or property from any risk, or for the
abatement of any nuisance, created by or arising from the casualty or the damage
or destruction caused thereby.
17.2 TERMINATION OF LEASE. In the case of: (a) any damage or casualty of
the Building, which in the good faith judgment of Tenant's Board of Directors
would render the Building either unsuitable or uneconomic for restoration or
continued use by Tenant; (b) the damage or destruction of all or substantially
all (as determined in good faith by Tenant's Board of Directors) of the
Building; or (c) the damage or destruction of the Building where restoration
cannot (as determined in good faith by Tenant's Board of Directors) reasonably
be completed either within 365 days or prior to the expiration of the Term, then
Tenant may elect to terminate this Lease. In the event Tenant terminates the
Lease pursuant to the preceding sentence, Tenant shall purchase Landlord's
interest in the Premises for a purchase price equal to the Purchase Price for
the Premises as such Purchase Price is defined in SECTION 20.1. The purchase of
Landlord's interest in the Premises shall be pursuant to the terms of SECTION
20.1, as applicable to the Premises. Upon the completion of such purchase, this
Lease and all obligations hereunder in respect of the Premises shall terminate.
17.3 INSURANCE PROCEEDS. In the event of any fire or other casualty, the
proceeds of any insurance policies maintained by Tenant pursuant to SECTION 9.2
OR 9.3 shall be held, applied and dealt with as follows:
(a) Any proceeds (per occurrence) of such policies attributable
to the Improvements below the amount of Two Hundred Fifty Thousand Dollars
($250,000) or any proceeds directly attributable to improvements constructed on
the property by Tenant solely with its own funds shall be paid directly to
Tenant and applied and used as Tenant may direct in its sole discretion for any
construction, restoration or reconstruction purposes in connection with any
improvements located on the Land which were destroyed, damaged or affected by
such casualty. Any portion of such proceeds which Tenant does not want to use
(subject to the terms of SECTION 17.3(c)) for any construction, restoration or
reconstruction shall be paid as follows (the order of payment as set forth below
shall be the "Distribution Formula"): (1) to Landlord (but only to the extent of
the
22
<PAGE>
then-existing Lease Investment Balance); and (2) with any remaining
excess to be paid to Tenant.
(b) Any proceeds (per occurrence) of such policies attributable
to the Improvements greater than Two Hundred Fifty Thousand Dollars ($250,000)
shall be paid to an escrow agent ("Escrow Agent") mutually agreeable to the
parties (but such escrow agent shall not be a party which is related to or
affiliated with either of the parties to this Lease, but shall be bound by the
terms of this ARTICLE 17). Such proceeds shall be invested by the Escrow Agent
as Tenant may direct (provided, however, that such proceeds may not be invested
in any securities or any debt obligations issued by Tenant). Such proceeds
shall be paid by the Escrow Agent to Tenant (or to third parties as Tenant may
direct), as Tenant may direct from time to time as restoration, construction or
rebuilding progresses to pay the cost of any restoration, construction or
rebuilding which Tenant elects to take place on the Land or any Improvements
located upon the Land, so long as Landlord reasonably determines that the
following conditions are satisfied at the time of such request for payment by
Tenant: (i) the sum requested has been paid or is then due and payable or will
become due and payable within thirty (30) days; (ii) Tenant has the financial
ability (taking into account the insurance proceeds held by the Escrow Agent) to
complete the restoration, construction or rebuilding which Tenant has elected to
perform; (iii) Landlord has approved do plans, if any, relating to the
restoration of Improvements; and (iv) in Landlord's reasonable judgment, such
restoration work which Tenant desires to perform in connection with the
Improvements can be completed prior to the expiration of the Term. Landlord
shall promptly upon request instruct the Escrow Agent to make the payments
requested by Tenant unless one of the four (4) conditions described above is not
satisfied at the time of such request. Any excess insurance proceeds existing
after either Tenant's completion of the restoration, construction or rebuilding
which Tenant elects to perform or Tenant's failure to comply with the funding
condition described in subitems (ii), (iii) and (iv) immediately above in this
SECTION 17.3(b), shall be paid pursuant to the Distribution Formula. If Tenant
elects to terminate this Lease, Tenant may use any insurance proceeds to pay the
Purchase Price described in SECTION 17.2, and all rights of Landlord in
insurance proceeds not used to pay the Purchase Price shall be assigned to
Tenant by Landlord at the time Tenant purchases Landlord's interest in the
Premises.
(c) If either: (1) Tenant has not delivered written notice to
Landlord within ninety (90) days after reaching final written settlement with
all insurance companies regarding the amount of proceeds to be paid for the
casualty in question, pursuant to which notice Tenant elects to either exercise
some or all of its termination rights under SECTION 17.2 and/or to fully or
partially repair or restore pursuant to SECTION 17.1; or (2) Landlord
reasonably believes that Tenant has abandoned restruction or restoration work
which Tenant may have elected to perform (and Tenant shall have failed to
diligently recommence reconstruction or restoration work which Tenant is then
able to perform within thirty (30) days after Tenant's receipt from Landlord of
a Notice of Landlord's belief of Tenant's abandonment of the reconstruction or
restoration work); then, in either case, the proceeds attributable to the
Improvements shall be paid pursuant to the Distribution Formula.
(d) Any insurance proceeds paid to Landlord under this ARTICLE
17 shall reduce the Lease Investment Balance by a like amount.
23
<PAGE>
17.4 TERMS OF GROUND LEASE. Notwithstanding any of the foregoing
provisions of this Article 17, Landlord and Tenant acknowledge that in the event
of any inconsistency between the foregoing terms of this Article 17 and Section
802 of the Ground Lease, the terms of Section 802 of the Ground Lease shall
control; and Tenant shall have no right to terminate this Lease as a consequence
of any damage or destruction unless Landlord shall also have the right to
terminate the Ground Lease as a consequence thereof (provided that Tenant may
exercise the Purchase Option under SECTION 20.1 at any time); Landlord shall not
exercise any right to terminate the Ground Lease without Tenant's prior
approval, in Tenant's sole discretion; Tenant shall restore or rebuild the
Premises in the manner and subject to the terms of the Ground Lease in the event
this Lease and the Ground Lease are not terminated; and the provisions regarding
the application of insurance proceeds provided for in SECTION 17.3 above shall
be subject to the terms of Section 802 of the Ground Lease and the allocation
of insurance proceeds between the ground lessor and ground lessee provided for
therein.
ARTICLE 18
DEFAULT
18.1 DEFAULT. Each of the following events shall constitute an event of
default ("Event of Default") by Tenant:
(a) FAILURE TO PAY BASE RENT. Tenant's failure to pay any Base
Rent within ten (10) days after the due date.
(b) FAILURE TO PAY ADDITIONAL RENT. Tenant's failure to pay any
Additional Rent which is due to Landlord within ten (10) days after the due date
under this Lease (which due date shall be the date of Tenant's receipt of Notice
from Landlord that such Additional Rent is due).
(c) FAILURE TO CARRY INSURANCE. Tenant's failure to carry any
policy of insurance required by ARTICLE 9.
(d) INSOLVENCY. Subject to SECTION 18.2, the occurrence of: (i)
an assignment by Tenant for the benefit of creditors generally; or (ii) the
filing of a voluntary or involuntary petition by or against Tenant under any
present or future applicable federal, state or other statute or law having for
its purpose the adjudication of Tenant as a bankrupt; (iii) the appointment of a
receiver, liquidator or trustee for all or a substantial portion of the Premises
by reason of the insolvency or alleged insolvency of Tenant; or (iv) the taking
of possession by any department of city, county, state or federal government, or
any officer thereof duly authorized, of all or a substantial portion of the
Premises by reason of the insolvency or alleged insolvency of Tenant; and
Tenant's failure to timely give any Notice it is permitted to give pursuant to
SECTION 18.2 (or, in the event Tenant gives timely Notice and pursues a contest
under SECTION 18.2, Tenant's failure to finally prevail in the contest).
(e) DEFAULT UNDER A CREDIT FACILITY. A payment default, which
has not been waived and is continuing (after expiration of applicable notice and
cure periods) under any credit facility of Tenant (excluding any leases other
than this Lease) of One Million Dollars ($1,000,000) or more.
24
<PAGE>
(f) FINANCIAL COVENANTS. The occurrence of any of the
following:
1) Tenant's "Total Debt" (as defined herein) divided by
Consolidated Tangible Net Worth (as defined below) (with both determined in
accordance with generally accepted accounting principles consistently applied)
exceeds 2:1. As used herein the term "Total Debt" shall mean, the total of all
items of indebtedness, obligation or liability as shown on Tenant's consolidated
financial statements.
2) Tenant fails to maintain a debt service coverage ratio of at
least 1:1 times for each fiscal quarter on an annualized basis (calculated by
using such fiscal quarter and the previous three fiscal quarters). The ratio
will be defined as net income plus interest, taxes, and rent expense as set
forth in the most recent year end financial statements of Tenant divided by the
sum of taxes, interest, rent expense as set forth in the most recent year end
financial statements of Tenant and CPLTD (current portion of long-term debt).
3) Tenant's "Consolidated Tangible Net Worth" as defined herein
shall fall below the greater of: (i) Five Hundred Million Dollars
($500,000,000.00) less stock repurchases occurring after December 1, 1995, or
(ii) Three Hundred Million Dollars ($300,000,000.00). As used herein, the term
"Consolidated Tangible Net Worth" means the excess of total assets over total
liabilities of Tenant and its Subsidiaries determined in accordance with
generally accepted accounting principles on a consolidated basis excluding,
however, from the determination of total assets (i) all assets which would be
classified as intangible assets under generally accepted accounting principles,
including, without limitation, goodwill (whether representing the excess cost
over book value of assets acquired or otherwise), patents, trademarks, trade
names, copyrights, franchises and deferred charges (including, without
limitation, unamortized debt discount and expense, organization costs and
research and product development costs), and (ii) to the extent not already
deducted from total assets, reserves for depreciation, depletion, obsolescence
and/or amortization of properties and all other reserves or appropriation of
retained earnings which, in accordance with generally accepted accounting
principles, should be established in connection with the business conducted.
(g) CONSTRUCTION MANAGEMENT AGREEMENT. A material breach by
Tenant of its obligations under the Construction Management Agreement.
(h) TERMINATION OPTION. If Tenant exercises the Termination
Option pursuant to SECTION 20.2 below, Tenant's failure to pay Landlord the
Guaranteed Residual Value at the end of the Term as provided in SECTION 20.2, or
if Tenant exercises the Purchase Option pursuant to SECTION 20.1 below, Tenant's
failure to complete the Purchase Option in accordance with SECTION 20.1.
(i) EVENT OF DEFAULT UNDER PHASE I DEED OF TRUST. The
occurrence of an "Event of Default" under and as defined in that certain
Sublease of the Land and Lease of the Improvements executed by and between
Landlord and Tenant dated as of October 12, 1994, unless such default is
expressly waived in writing by Landlord.
18.2 CONTENST BY TENANT. If upon the filing of any involuntary petition
of the type described in SECTION 18.1(d) or upon the appointment of a
receiver, other than a receiver appointed in any voluntary proceeding referred
to in SECTION 18.1(d), or the taking of possession of all or a substantial
portion of the Premises by any department of the city, county, state or federal
government, or any officer thereof duly authorized, by
25
<PAGE>
reason of the alleged insolvency of Tenant without the consent or over the
objection of Tenant, should Tenant desire to contest the same in good faith,
Tenant shall, within ninety (90) days after the filing of the petition or after
the appointment or taking of possession, give Notice to Landlord that Tenant
proposes to make the contest, and the same shall not constitute an Event of
Default so long as Tenant shall prosecute the proceedings with due diligence and
no part of the Premises shall be exposed to sale by reason of the continuance of
the contest.
18.3 REMEDIES. Landlord shall have the remedies specified below:
(a) CONTINUE LEASE. In connection with an Event of Default,
Landlord shall have the right to enforce, by suit or otherwise, all other
covenants and conditions hereof to be performed or complied with by Tenant and
to exercise all other remedies permitted by Section 1951.4 of the California
Civil Code, or any amendments thereof. Landlord has the remedy described in
California Civil Code Section 1951.4 (Landlord may continue the Lease in effect
after Tenant's breach and abandonment and recover Base Rent as it becomes due,
if Tenant has right to sublet or assign, subject only to reasonable limitation).
Upon application by Landlord, a receiver may be appointed to take possession of
the Premises and exercise all rights granted to Landlord as set forth in this
SECTION 18.3.
(b) TERMINATE LEASE. In connection with an Event of Default,
Landlord may terminate this Lease, by giving Tenant Notice thereof, at any time
after the occurrence of such Event of Default. In such event Tenant shall be
obligated to purchase the Premises for an amount equal to the Purchase Price
described in the Purchase Option contained in SECTION 20.1 below (that is, all
accrued Base Rent, Additional Rent and the Lease Investment Balance). Landlord
shall also have its other remedies at law (including its rights under the SBLF
Deed of Trust), provided, however, that Tenant's right to purchase the Premises
pursuant to SECTION 20.1 shall survive any termination of this Lease up
through the date of foreclosure sale under the SBLF Deed of Trust.
(c) LANDLORD'S CONTINUING OBLIGATION TO SELL. Except in the
case of a foreclosure under the SBLF Deed of Trust, in the event Landlord
obtains possession of the Premises pursuant to the terms of this Lease (because
of Tenant's default, lease expiration, or otherwise), Landlord shall be under a
continuing obligation to use its commercially reasonable efforts to sell the
Premises to one or more unrelated third parties, PROVIDED, HOWEVER, that
Landlord shall not be required to sell or attempt to sell any portion of the
Premises (i) in a manner, or under circumstances, that could materially impair
Landlord's ability to enforce any of its rights or remedies under this Lease (as
determined in Landlord's sole discretion) or (ii) at a time when market
conditions render it inadvisable to sell or attempt to sell the Premises (as
determined in Landlord's sole discretion). Upon the occurrence of any such sale
Landlord shall be obligated to pay to Tenant any excess of the amount realized
by Landlord in connection with such sale over the Purchase Price as defined in
SECTION 20.1 below. Landlord's obligation to pay such excess to Tenant shall
survive any termination of this Lease.
18.4 NO WAIVER. No failure by Landlord or Tenant to insist upon the
strict performance of any term, covenant or condition of this Lease or to
exercise any right or remedy consequent upon a breach thereof and no acceptance
of full or partial Rent during the continuance of any breach shall constitute a
waiver of any such breach or of the term, covenant, or condition. No term,
covenant or condition of this Lease to be performed or complied with by Tenant
or Landlord, and no breach thereof, shall be
26
<PAGE>
waived, terminated, altered or modified except by a written instrument executed
by Landlord and Tenant No waiver of any breach shall affect or alter this Lease,
but each and every term, covenant, and condition of this Lease shall continue in
full force and effect with respect to any other then existing subsequent breach
thereof.
18.5 EFFECT OF ASSIGNMENT. Notwithstanding an Entity's prior assignment
or transfer of its interest as Tenant under this Lease, so long as Landlord has
been given Notice of such assignment pursuant to SECTIONS 15.1 and 22.3,
Landlord shall give such Entity copies of all Notices required by this ARTICLE
18 in connection with any Event of Default, and such Entity shall have the
period granted hereunder to Tenant to cure such Event of Default, unless such
Entity shall have been released from all obligations arising under this Lease.
Landlord may not assert any rights against such Entity in the absence of such
Notice and opportunity to cure, so long as Landlord has been given Notice of
such assignment pursuant to SECTIONS 15.1 AND 22.3.
18.6 LANDLORD CURE RIGHT. If Tenant fails to perform any covenant or
agreement to be performed by Tenant under this Lease, and if the failure or
default continues for thirty (30) days after Notice to Tenant (except for
emergencies and except for payment of any lien or encumbrance threatening the
imminent sale of the Premises or any portion thereof, in which case payment or
cure may be made as soon as necessary to minimize the damage to person or
property caused by such emergency or to prevent any such sale), Landlord may,
but shall have no obligation to, pay the same and cure such default on behalf of
and at the expense of Tenant and do all reasonably necessary work and make all
reasonably necessary payments in connection therewith including, but not limited
to, the payment of reasonable attorneys' fees and disbursements incurred by
Landlord. Notwithstanding the foregoing, Landlord shall have no right to cure
any such failure to perform by Tenant so long as Tenant: (1) is diligently and
in good faith attempting to cure such matter and prosecuting such cure to
completion; (2) has the financial ability to so comply; and (3) commenced cure
of such matter within thirty (30) days after Tenant's receipt of Notice thereof
from Landlord. Failure by Tenant to comply with the above shall allow Landlord
to commence in a reasonable and customary manner and in good faith to attempt to
cure such matter. Upon demand, Tenant shall reimburse Landlord for the
reasonable amount so paid, together with interest at the Default Rate from the
date incurred until the date repaid.
18.7 LANDLORD'S DEFAULT. If Landlord fails to perform any covenant or
agreement to be performed by Landlord under ARTICLE 6, SECTION 14.1, SECTION
16.4, ARTICLE 20, ARTICLE 21, or SECTION 22.8 of this Lease (including, but not
limited to, Landlord's failure to keep the Premises free of any and all liens
created by or through Landlord except as approved by Tenant in writing), and if
the failure or default continues for thirty (30) days after Notice to Landlord
(except for emergencies and except for payment of any lien or encumbrance
threatening the imminent sale of the Premises or any portion thereof, in which
case payment or cure may be made as soon as necessary to minimize the damage to
person or property caused by such emergency or to prevent any such sale), Tenant
may, but shall have no obligation to, pay the same and cure such default on
behalf of and, so long as such failure to perform arises due to Landlord's gross
negligence, willful misconduct, or willful breach of this Lease, at the expense
of Landlord and do all reasonably necessary work and make all reasonably
necessary payments in connection therewith including, but not limited to, the
payment of reasonable attorneys' fees and disbursements incurred by Tenant.
Notwithstanding the foregoing, Tenant shall have no right to cure any such
failure to perform by Landlord so long as Landlord is diligently and in good
faith attempting to cure such matter. Notwithstanding anything to the
27
<PAGE>
contrary, Landlord's liability under this Lease shall in all events be limited
as provided in SECTION 22.14 below.
ARTICLE 19
QUIET ENJOYMENT
19.1 QUIET ENJOYMENT. Landlord covenants to secure to Tenant the quiet
possession of the Premises for the full Term against all persons claiming the
same, by, through or in the right of Landlord, subject to Landlord's rights and
remedies under SECTION 18 upon an Event of Default by Tenant. The existence of
any Permitted Title Exceptions shall not be deemed to constitute a breach of
Landlord's obligations hereunder. Tenant shall, immediately upon demand,
reimburse Landlord for all reasonable costs, expenses and damages incurred or
paid by Landlord in the performance of Landlord's obligations under this ARTICLE
19 (except for any costs, expenses or damages arising from Landlord's willful
breach of this Lease). Landlord agrees that, so long as no Event of Default has
occurred and is continuing, Landlord shall not exercise the right to terminate
the Ground Lease specified in Section 1204 of the Ground Lease.
ARTICLE 20
TENANT'S OPTION TO PURCHASE OR TERMINATE
20.1 OPTION TO PURCHASE PREMISES.
(a) PURCHASE OPTION. At any time during the Term, Tenant shall
have the option ("Purchase Option") to purchase all of the then-existing
Premises. The purchase price ("Purchase Price") for the Premises shall be the
sum of accrued and unpaid Base Rent; any accrued and unpaid Additional Rent;
escrow fees; recorder's fee for recording the Deed; the premium for the title
insurance policy; all documentary transfer taxes; Landlord's reasonable
attorneys' fees; all reasonable expenses (except as specified in SECTION
20.1(c)(iv)) incurred by Landlord in consummating the transfer of the Premises
pursuant to this SECTION 20.1; and the Lease Investment Balance.
(b) PURCHASE OPTION EXERCISE NOTICE. If Tenant desires to
exercise the Purchase Option, Tenant shall deliver to Landlord thirty (30) days
prior written notice ("Purchase Option Exercise Notice") of Tenant's election.
If Tenant does not exercise the Termination Option as provided in SECTION 20.2
below it shall be deemed to have exercised the Purchase Option.
(c) TRANSFER. If Tenant exercises the Purchase Option, the
purchase and sale of the Premises shall be consummated as follows:
(i) Landlord shall grant and convey the Premises to Tenant, its
authorized agent or assignee, pursuant to a duly executed and acknowledged
assignment and assumption of leasehold interest (as to the Land) and a grant
deed as to the Improvements (collectively herein the "Deed"), free and clear of
all title defects, liens, encumbrances, deeds of trust, mortgages, rights-of-way
and restrictive covenants or conditions, of record, placed against the Premises
by Landlord except for the Permitted Title Exceptions (excluding the SBLF Deed
of Trust), and any UCC-1 filed or recorded which evidence security interests
encumbering the Premises or any part thereof in favor of SBLF, which security
interests SBLF shall cause to be released so that they no longer affect the
Premises).
28
<PAGE>
(ii) The Purchase Price shall be paid upon delivery of the Deed
and any other documents reasonably requested by Tenant to evidence the transfer
of the Premises subject to the Permitted Title Exceptions (excluding the SBLF
Deed of Trust, and any UCC-1 filed or recorded which evidence security interests
encumbering the Premises or any part thereof in favor of SBLF, which security
interests SBLF shall cause to be released so that they no longer affect the
Premises) ("Additional Documents"). In the event that Tenant elects to assign
the Purchase Option pursuant to SECTION 20.1(d) below, and Tenant's
assignee pays an amount less than the Purchase Price for the Premises, Tenant
shall pay to Landlord any excess of the Purchase Price over the amount paid by
such assignee. Landlord shall deliver the Deed and the Additional Documents to
Tenant on the date for closing specified by Tenant in the Purchase Option
Exercise Notice; provided that the date for closing shall occur no later than
the last day of the Term of this Lease. The closing shall take place at the
location and in the manner reasonably set forth by Tenant in the Purchase Option
Exercise Notice. Landlord and Tenant agree to cooperate to establish a
concurrent closing and release of the security interests so that the Collateral
may be used to pay the Purchase Price, if required.
(iii) If Landlord shall fail to cause title to be in the
condition required in SECTION 20.1(c)(i) above within the time herein prescribed
for the delivery of the Deed, then Tenant shall have the right (in addition to
all other rights provided by law) by a written notice to Landlord: (1) to extend
the time in which Landlord shall clear title and deliver the Deed and Additional
Documents, during which extension this Lease shall remain in full force and
effect, except Tenant shall be released from its obligation to pay Base Rent
during the extension; (2) to accept delivery of the Deed and Additional
Documents subject to such title defects, liens, encumbrances, deeds of trust,
mortgages, rights-of-way and restrictive covenants or conditions specified and
set forth in the Deed and not cleared by Landlord; (3) to rescind, by notice to
Landlord and without any penalty or liability therefor, any and all obligations
Tenant may have under and by virtue of the Purchase Option or the exercise
thereof, whereupon this Lease shall remain in full force and effect; (4) if the
title exception is curable by the payment of money. Tenant may make such payment
and such payment shall be a credit against the Purchase Price in favor of
Tenant.
(iv) Base Rent shall be prorated and paid and all Additional Rent
which is then due and payable shall be paid as of the date title to the Premises
is vested of record in Tenant. Tenant shall pay all Tenant's attorneys fees and
costs and all other costs and expenses incurred by Tenant in consummating the
transfer of the Premises. Landlord shall pay the costs and expenses of clearing
title as required by SECTION 20.1(c)(i).
(d) ASSIGNMENT. Tenant shall have the right, without Landlord's
consent, to assign this purchase option, in whole, to any Entity at any time,
whether or not Tenant also assigns its interest in the Lease.
20.2 TERMINATION OPTION.
(a) NOTICE. Provided that no Event of Default has occurred and is
continuing, unless Tenant has notified Landlord prior to such date that it
elects the Purchase Option, Tenant may, on the date which is not later than nine
(9) months prior to the expiration of the Term, notify Landlord in writing of
its election to exercise an option ("Termination Option") to sell the Premises;
provided, however that at any time Tenant can rescind its election to exercise
its Termination Option if it then exercises its Purchase Option
29
<PAGE>
pursuant to SECTION 20.1 above. The nine (9) month period is referred to herein
as the "Sales Period".
(b) TERMINATION OPTION. After giving the notice set forth in section
(a) above Tenant shall then use its best efforts to sell the Premises for cash
to a third party purchaser (who is not an affiliate of Tenant within the meaning
of Rule 405 under the Securities Act of 1933) and, if the Premises are not
conveyed to such purchaser prior to the expiration of the Term, Tenant shall
have no further right to sell the Premises, the Lease shall terminate, Tenant
shall immediately vacate the Premises, and quitclaim all interest of Tenant, if
any, therein to Landlord.
(c) TERMINATION OPTION PROCEDURES. In the event that Tenant elects the
Termination Option, Tenant shall use its best efforts throughout the Sales
Period to obtain a purchaser (who is not an affiliate of Tenant as described
above) for the Premises. Tenant shall have the exclusive right to market the
Premises during the first four (4) months of the Sales Period (the "Exclusive
Period"). Landlord may direct Tenant to hire and pay for no more than one (1)
commission sales agent after the expiration of the Exclusive Period. Except as
otherwise provided below, any sale by Tenant shall be for the highest cash bid
submitted to Tenant, including any cash bid submitted by Landlord. The
determination of the highest bid shall be made by Landlord prior to the end of
the Sales Period. After the end of the Exclusive Period, Landlord may accept
any commercially reasonable bid solicited by Landlord, Tenant or its agent, in
which case Tenant's sales effort may be suspended until the earlier of the
closing of such sale on the last day of the Term or revocation or rejection of
such cash bid. Notwithstanding the above provisions, Tenant may (i) accept
during the Exclusive Period any cash bid (net of expenses of sale) which exceeds
the Lease Investment Balance, and (ii) rescind the Termination Option at any
time so long as it is exercising its Purchase Option, which shall be prior and
superior to an accepted offer from a third party. If Landlord undertakes any
sales efforts, Tenant shall promptly reimburse Landlord for any reasonable
charges, costs and expenses incurred in such effort, including any commissions,
allocated time charges, costs and expenses of internal counsel, external counsel
or other attorneys' fees.
(d) PAYMENTS UNDER TERMINATION OPTION. If Tenant elects the Termination
Option, Tenant shall pay to Landlord on the last day of the Term in immediately
available funds any Base Rent or Additional Rent due and owing under the Lease.
The gross proceeds (the "Gross Proceeds") of any sale of the Premises pursuant
to the Termination Option shall be paid to Landlord upon any such sale without
deductions, and not later than the expiration of the Lease Term. Landlord shall
remit to Tenant from the Gross Proceeds the documented expenses incurred by
Tenant in connection with the sale of the Premises, including, without
limitation, the cost of all title insurance, surveys, environmental reports,
appraisals, transfer taxes, commissions, escrow fees, recording fees and taxes
and any costs reimbursed by Tenant to Landlord pursuant to paragraph (c) above.
The remaining Gross Proceeds of sale (the "Net Proceeds") shall be applied as
provided in paragraph (e) below.
(e) PROCEDURES UPON SALE UNDER THE TERMINATION OPTION. Any sale pursuant
to the Termination Option shall be consummated on the last day of the Term. To
the extent the Net Proceeds exceed the Lease Investment Balance, such excess
shall be paid out of escrow to Tenant. Upon payment to Landlord of all amounts
due it under this Lease, Landlord shall execute and deliver to the purchaser of
the Premises a grant deed in the same manner and subject to the same conditions
and obligations as are set forth in
30
<PAGE>
SECTION 20.1(c) above and have the same obligation to deliver title and remove
exceptions as set forth in said Section. Except as provided in the second
sentence of this subparagraph, the Net Proceeds shall be applied first to the
Lease Investment Balance and Tenant shall reimburse Landlord for the difference
between the Lease Investment Balance (calculated immediately prior to receipt of
the Net Proceeds) and the Net Proceeds, up to the amount of the Guaranteed
Residual Value.
ARTICLE 21
COVENANTS OF LANDLORD
21.1 TITLE. In the event Tenant so requests in writing (and so long as
either Tenant agrees to indemnify Landlord from any liabilities or obligations
in connection therewith, or Landlord does not incur any liabilities or
obligations in connection therewith), Landlord shall execute all documents,
instruments and agreements reasonably requested by Tenant in order to accomplish
any of the following in the manner reasonably requested by Tenant and within the
time parameters reasonably requested by Tenant: (1) remove exceptions to title
to or affecting the Premises; (2) create exceptions to title (including, without
limitation, easements and rights of way) to or affecting the Premises; or (3)
modify any then-existing exception to title. Tenant shall promptly reimburse
Landlord for, or at Landlord's request, pay directly in advance, all reasonable
costs, expenses and other amounts incurred or required to be expended by
Landlord in order to comply with Tenant's requests made in accordance with the
preceding sentence, and the failure of Tenant to reimburse or pay any such
amounts shall result in the suspension of Landlord's obligations under such
sentence with respect to that particular request until the amounts required to
be paid by Tenant under this sentence have been paid.
21.2 LAND USE. Except where requested by Tenant pursuant to this SECTION
21.2, Landlord shall not cause or give its written consent to any land use or
zoning change affecting the Premises or any changes of street grade. In the
event Tenant so requests in writing (and so long as either Tenant agrees to
indemnify Landlord from any liabilities or obligations in connection therewith,
or Landlord does not incur any liabilities or obligations in connection
therewith), Landlord shall execute all documents, instruments and agreements
reasonably requested by Tenant in order to accomplish any of the following in
the manner reasonably requested by Tenant and within the time parameters
reasonably requested by Tenant: (1) cause a change in any land use restriction
or law affecting the Premises; (2) cause a change in the zoning affecting the
Premises; or (3) cause a change in the street grade with respect to any street
in the vicinity of the Premises. Tenant shall promptly reimburse Landlord for,
or at Landlord's request, pay directly in advance, all reasonable costs,
expenses and other amounts incurred or required to be expended by Landlord in
order to comply with Tenant's requests made in accordance with the preceding
sentence, and the failure of Tenant to reimburse or pay any such amounts shall
result in the suspension of Landlord's obligations under such sentence with
respect to that particular request until the amounts required to be paid by
Tenant under this sentence have been paid.
21.3 TRANSFER OF PROPERTY INTERESTS. Except as requested by Tenant
pursuant to this Lease, Landlord shall not transfer to any third party any
rights inuring to or benefits associated with the Premises (including, without
limitation, zoning rights, development rights, air space rights, mineral, oil,
gas or water rights). Nothing in this Section shall limit Landlord's rights
pursuant to SECTION 14.2; provided that any purchaser of Landlord's interest in
the Premises shall be bound by the terms of this Lease, including without
limitation the terms of this SECTION 21.3).
31
<PAGE>
ARTICLE 22
MISCELLANEOUS
22.1 RELATIONSHIP. Neither this Lease nor any agreements or transactions
contemplated hereby shall in any respect be interpreted, deemed or construed as
constituting Landlord and Tenant as partners or joint venturers, one with the
other, or as creating any partnership, joint venture, association or, except as
set forth in SECTION 22.2 below, any other relationship other than that of
landlord and tenant; and, except as set forth in SECTION 22.2 below, both
Landlord and Tenant agree not to make any contrary assertion, contention, claim
or counterclaim in any action, suit or other legal proceeding involving either
Landlord or Tenant or the subject matter of this Lease.
22.2 FORM OF TRANSACTION; CERTAIN TAX MATTERS.
(a) Landlord and Tenant hereby agree and declare that the
transactions contemplated by this Lease are intended to constitute, both as to
matters of form and substance:
(i) an operating lease for financial accounting purposes,
and
(ii) a financing arrangement (and not a "true lease") for
purposes of Federal, state and local income, property or other forms of tax.
Accordingly, and notwithstanding any other provision of this Lease to the
contrary, Landlord and Tenant agree and declare that (A) the transactions
contemplated hereby are intended to have a dual, rather than single, form and
(B) all references in this Lease to the "Lease" of the Premises which fail to
reference such dual form do so as a matter of convenience only and do not
reflect the intent of Landlord and Tenant as to the true form of such
arrangements.
(b) Landlord and Tenant agree that, in accordance with their
intentions and the substance of the transactions contemplated hereby, Tenant
(and not Landlord) shall be treated as the owner of the Premises for Federal,
state, local income and property tax purposes and this Lease shall be treated as
a financing arrangement. Tenant shall be entitled to take any deduction, credit
allowance or other reporting, filing or other tax position consistent with such
characterizations. Landlord shall not file any Federal, state or local income
tax returns, reports or other statements in a manner which is inconsistent with
the foregoing provisions of this SECTION 22.2.
(c) Tenant acknowledges that it has retained accounting, tax and
legal advisors to assist it in structuring this Lease and Tenant is not relying
on any representations of Landlord regarding the proper treatment of this
transaction for accounting, income tax or any other Purpose.
22.3 NOTICES. Each Notice shall be in writing and shall be sent by
personal delivery, overnight courier (charges prepaid or billed to the sender)
or by the deposit of such with the United States Postal Service, or any official
successor thereto, designated as registered or certified mail, return receipt
requested, bearing adequate postage and in each case addressed as provided in
the Basic Lease Provisions. Each Notice shall be effective upon being
personally delivered or actually received. The time period in which a response
to any such Notice must be given or any action taken with respect thereto shall
32
<PAGE>
commence to run from the date of personal delivery or receipt of the Notice by
the addressee thereof, as reflected on the return receipt of the Notice.
Rejection or other refusal to accept shall be deemed to be receipt of the Notice
sent. By giving to the other party at least thirty (30) days' prior Notice
thereof, either party to this Lease shall have the right from time to time
during the Term of this Lease to change the address(es) thereof and to specify
as the address(es) thereof any other address(es) within the continental United
States of America.
22.4 SEVERABILITY OF PROVISIONS. If any term, covenant or condition of
this Lease, or the application thereof to any Entity or circumstance, shall be
invalid or unenforceable, the remainder of this Lease, or the application of
such term, covenant or condition to Entities or circumstances other than those
as to which it is invalid or unenforceable, shall not be affected thereby.
22.5 ENTIRE AGREEMENT; AMENDMENT. This Lease constitutes the entire
agreement of Landlord and Tenant with respect to the subject matter hereof.
Neither this Lease nor any provision hereof may be changed, waived, discharged
or terminated orally, but only by an instrument in writing signed by the party
against whom enforcement of the change, waiver, discharge or termination is
sought.
22.6 MEMORANDUM OF SUBLEASE OF THE LAND AND LEASE OF THE IMPROVEMENTS.
Neither party shall record this Lease. However, concurrently with the execution
of this Lease, Landlord and Tenant have executed a Memorandum of Sublease of the
Land and Lease of the Improvements ("Memorandum of Lease") in the form attached
hereto as EXHIBIT E and by this reference made a part hereof, which Memorandum
of Lease shall be promptly recorded in the Official Records.
22.7 SUCCESSORS AND ASSIGNS. Subject to ARTICLES 14 AND 15, this Lease
shall inure to the benefit of and be binding upon Landlord and Tenant and their
respective heirs, executors, legal representatives, successors and assigns.
Whenever in this Lease a reference to any Entity is made, such reference shall
be deemed to include a reference to the heirs, executors, legal representatives,
successors and assigns of such Entity.
22.8 COMMISSIONS. Landlord and Tenant each represent and warrant that
except as provided below, neither has dealt with any broker in connection with
this transaction and that no real estate broker, salesperson or finder has the
right to claim a real estate brokerage, salesperson's commission or finder's fee
by reason of contact between the parties brought about by such broker,
salesperson or finder. Each party shall hold and save the other harmless of and
from any and all loss, cost, damage, injury or expense arising out of or in any
way related to claims for real estate broker's or salesperson's commissions or
fees based upon allegations made by the claimant that it is entitled to such a
fee from the indemnified party arising out of contact with the indemnifying
party or alleged introductions of the indemnifying party to the indemnified
party.
22.9 ATTORNEYS' FEES. In the event any action is brought by Landlord or
Tenant against the other to enforce or for the breach of any of the terms,
covenants or conditions contained in this Lease, the prevailing party shall be
entitled to recover reasonable attorneys' fees to be fixed by the court,
together with costs of suit therein incurred. Tenant shall pay the reasonable
attorneys' fees incurred by Landlord for the review and negotiation of this
Lease.
33
<PAGE>
22.10 GOVERNING LAW. This Lease and the obligations of the parties
hereunder shall be governed by and interpreted, construed and enforced in
accordance with the laws of the State of California.
22.11 COUNTERPARTS. This Lease may be executed in any number of
counterparts, each of which shall be deemed to be an original and all of which
together shall comprise but a single instrument.
22.12 TIME IS OF THE ESSENCE. Time is of the essence of this Lease, and
of each provision hereof.
22.13 NO THIRD PARTY BENEFICIARIES. This Lease is entered into by
Landlord and Tenant for the sole benefit of Landlord and Tenant. There are no
third party beneficiaries to this Lease.
22.14 LIMITATIONS ON RECOURSE. The obligations of Tenant and Landlord
under this Lease shall be without recourse to any partner, officer, trustee,
beneficiary, shareholder, director or employee of Tenant or Landlord. Except
for the gross negligence or willful misconduct of Landlord, or for breach of
Landlord's obligation to fund pursuant to ARTICLE 6 above, Landlord's liability
to Tenant for any default by Landlord under this Lease: (1) shall be limited to
Landlord's equity in the Premises; and (2) shall extend to any actual damages of
Tenant, but shall not extend to any foreseeable and unforeseeable
consequential damages.
22.15 ESTOPPEL CERTIFICATES. Within thirty (30) days after request
therefor by either party, the non-requesting party shall deliver, in recordable
form, a certificate to any proposed mortgagee, purchaser, sublessee or assignee
and to the requesting party, certifying (if such be the case) that this Lease is
in full force and effect, the date of Tenant's most recent payment of Rent,
that, to the best of its knowledge, the non-requesting party has no defenses or
offsets outstanding, or stating those claimed, and any other information
reasonably requested. Failure to deliver said statement in time shall be
conclusive upon the non-requesting party that: (a) this Lease is in full force
and effect, without modification except as may be represented by the requesting
party; (b) there are no uncured defaults in the requesting party's performance
and the non-requesting party has no right of offset, counterclaim or deduction
against the non-requesting party's obligations hereunder; (c) no more than one
month's Base Rent has been paid in advance; and (d) any other matters reasonably
requested in such certificate.
22.16 AS-IS LEASE. Landlord makes no representations or warranties
concerning the condition, suitability or any other matters relating to the
Premises, and Tenant hereby acknowledges that Tenant leases the Premises from
Landlord on an "as is" basis.
22.17 NET LEASE. Except as otherwise provided in this Lease, Tenant
agrees that this Lease is an absolute net Lease, and the Base Rent called for
hereunder shall be paid as required net of all expenses associated with the
Premises, including without limitation, Real Estate Taxes and insurance premiums
for the insurance required to be carried hereunder, and all other reasonable and
customary costs and expenses incurred by Landlord in connection with the
Premises or this Lease, all of which shall be paid or reimbursed by Tenant
unless otherwise specifically provided herein. Tenant agrees to reimburse
Landlord, within five (5) Business Days following receipt of any written demand
therefor, for all reasonable and customary fees (including fees to SBNYTC), late
34
<PAGE>
charges, title endorsement, custodian fees related to the Collateral and other
costs and expenses charged to Landlord which accrue during any period unless
such expenses are capitalized and added to the Lease Investment Balance.
22.18 REPRESENTATIONS AND WARRANTIES. Tenant and Landlord each hereby
represents and warrants to the other that: (i) such party is duly organized and
existing under the laws of the jurisdiction in which it is formed, and is
qualified to do business in the State of California; (ii) such party has the
full right and authority to enter into this Lease, consummate the sale,
transfers and assignments contemplated herein and otherwise perform its
obligations under this Lease; (iii) the person or persons signatory to this
Lease and any document executed pursuant hereto on behalf of such party have
full power and authority to bind such party; and (iv) the execution and delivery
of this Lease and the performance of such party's obligations hereunder do not
and shall not result in the violation of its organizational documents or any
material contract or agreement to which such party may be a party.
22.19 FINANCIAL REPORTING. Tenant shall provide to Landlord: (1)
annually, within one hundred (100) days after the end of each of Tenants's
fiscal years during the Term, an annual report on Form 10-K for such fiscal
years as filed with the Securities and Exchange Commission; (2) quarterly,
within sixty (60) days after the end of each of Tenant's fiscal quarters during
the Term, quarterly reports on Form 10-Q as filed with the Securities and
Exchange Commission; (3) within thirty (30) days after filing with the
Securities and Exchange Commission, any other nonconfidential reports, final
proxy statements or registration statements on form S-3 or S-4 (after being
declared effective) filed during the Term with the Securities and Exchange
Commission; and (4) an officer's certificate stating that no Event of Default
has occurred under the Lease in the form attached as EXHIBIT F, with the
delivery of the Form 10(k) provided for in clause (1) above.
22.20 NONDISCRIMINATION. Tenant herein covenants by and for itself, its
heirs, executors, administrators and assigns, and all persons claiming under or
through it, and this Lease is made and accepted upon and subject to the
following conditions:
That there shall be no discrimination against or segregation of any
person or group of persons on account of race, color, creed, religion, sex, age,
handicap, marital status, ancestry or national origin in the leasing,
subleasing, transferring, use, occupancy, tenure or enjoyment of the premises
herein leased, nor shall Tenant itself, or any person claiming under or through
it, establish or permit any such practice or practices of discrimination or
segregation with reference to the selection, location, number, use or occupancy
of tenants, lessees, subtenants, sublessees or vendees in the premises herein
leased.
ARTICLE 23
INDEMNIFICATION
23.1 TAX INDEMNITY. Notwithstanding anything in ARTICLE 8 to the
contrary, Tenant shall protect and defend Landlord from and against all criminal
prosecution regarding and shall indemnify and hold Landlord harmless from and
against any and all loses, costs, liabilities or damages (including reasonable
attorneys' fees and disbursements and court costs) arising by reason of:
35
<PAGE>
(a) Any and all U.S. Federal, state or local income taxes
imposed upon Landlord in consequence of Landlord being treated as the owner or
lessor of the Premises (or any part thereof) for such tax purposes (provided
that Landlord has fully complied with its obligations under SECTION 22.2(b));
(b) Any and all taxes imposed upon Tenant (except to the extent
that such taxes are imposed upon Tenant as a result of Landlord's failure to
comply with its obligations under this Lease);
(c) Any and all taxes required to be withheld from payments made
by Tenant to a third party not related to or affiliated with Landlord;
(d) Any and all Real Estate Taxes;
(e) Any and all taxes owed by Landlord as a result of payment
made by Tenant to Landlord pursuant to Tenant's indemnity obligations under this
SECTION 23.1 and
(f) Any and all costs, liabilities or damages (including
reasonable attorneys' fees) incurred by Landlord in obtaining indemnification
payments from Tenant under the provisions of this SECTION 23. 1.
Tenant's obligation to reimburse or indemnify Landlord for any taxes,
governmental fees, penalties, interest or other supplemental tax charges under
this Lease shall be reduced by the value of any related or offsetting tax
benefits derived or realized by Landlord. Tenant's duty to indemnify Landlord
under this SECTION 23.1 shall apply only to taxes arising during the Term
(whether or not due and payable at the conclusion of the Term), but shall
otherwise survive the expiration or earlier termination of this Lease.
23.2 ENVIRONMENTAL INDEMNITY. Tenant agrees to indemnity and hold
Landlord harmless from and against, and to reimburse Landlord with respect to,
any and all claims, demands, causes of action, losses, damages, liabilities,
costs and expenses (including attorneys' fees and court costs), fines and/or
penalties of any and every kind or character, known or unknown, fixed or
contingent, asserted or potentially asserted against or incurred by Landlord at
any time and from time to time by reason of, in connection with or arising out
of (A) the failure of Tenant to perform any obligation herein required to be
performed by Tenant regarding Applicable Environmental Laws, (B) any violation
of any Applicable Environmental Law by Tenant or with respect to the Premises or
any disposal or other release by Tenant or with respect to the Premises of any
hazardous substance, environmental contaminants or solid waste on or to the
Premises, whether or not resulting in a violation of any Applicable
Environmental Law, (C) any act, omission, event or circumstance by Tenant or
with respect to the Premises which constitutes or has constituted violation of
any Applicable Environmental Law with respect to the Premises, regardless of
whether the act, omission, event or circumstance constituted a violation of any
Applicable Environmental Law at the time of its existence or occurrence, and (D)
any and all claims or proceedings (whether brought by private party or
governmental agencies) for bodily injury, property damage, abatement or
remediation, environmental damage or impairment or any other injury or damage
resulting from or relating to any hazardous or toxic substance or contaminated
material located upon or migrating into, from or through the Premises or the
Improvements (whether or not the release of such materials was caused by Tenant,
a subtenant, a prior owner of the Premises or any other Entity) which Landlord
may incur. Tenant's duty to indemnify Landlord under this SECTION 23.2 shall
36
<PAGE>
survive the expiration or earlier termination of the Lease with respect to
events occurring during or prior to the Term or after the Term while Landlord
has record title to and Tenant is occupying the Premises.
23.3 CONSTRUCTION INDEMNIFICATION. Tenant will defend, protect,
indemnify and save harmless Landlord from and against all liabilities,
obligations, claims, damages, causes of action, costs and expenses, imposed upon
or incurred by Landlord by reason of the occurrence or existence of any of the
following during the Term, except to the extent caused by the willful
misconduct, gross negligence, or willful breach of contract of Landlord or its
agents: (1) any accident, injury to or death of persons or loss of or damage to
property occurring on or about the Premises or Improvements; (2) performance of
any labor or services or the furnishing of any materials or other property in
respect of the Premises or the Improvements; (3) the negligence or willful
misconduct on the part of Tenant or any of its agents, invitees, employees or
contractors or any other persons entering onto the Premises or the Improvements
at the request, behest or with the permission of Tenant; (4) the use or
occupancy of the Improvements; (5) the use of the Land; or (6) any breach by the
"Owner" under the contracts entered into by Tenant as Landlord's agent pursuant
to the terms of the Construction Management Agreement if such breach is caused
by Tenant's actions or omissions or because of Tenant's failure to discharge its
duties under the Construction Management Agreement. Tenant's duty to indemnify
Landlord under this SECTION 23.3 shall survive the expiration or earlier
termination of this Lease with respect to events occurring during the Term or
after the Term while Landlord has record title to and Tenant is occupying the
Premises.
23.4 GENERAL INDEMNITY. Tenant shall defend, indemnify, and hold
Landlord harmless from and against any and all losses, costs, expenses,
liabilities, claims, causes of action and damages of all kinds that may result
to Landlord, including reasonable attorneys' fees and disbursements incurred by
Landlord, arising because of any failure by Tenant to perform any of its
obligations under this Lease. Tenant's duty to indemnify Landlord under this
Lease shall survive the expiration or earlier termination of this Lease.
[Signatures begin on next page.]
37
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Lease as of
the day and year first above written.
TENANT: ADOBE SYSTEMS INCORPORATED,
a California Corporation
By /s/ Charles M. Geschke
---------------------------
Name Charles M. Geschke
-------------------------
Its President
--------------------------
(Signatures continued on next page.]
38
<PAGE>
LANDLORD: SUMITOMO BANK LEASING AND
FINANCE, INC., a Delaware corporation
By /s/ William M. Ging
--------------------------------
Name William M. Ging
-----------------------------
Its President
-----------------------------
39
<PAGE>
EXHIBIT A
Real Property in the San Jose, County of Santa Clara, State of California,
described as follows:
PARCEL ONE:
Commencing at the Intersection of the centerline of Locust Street (now vacated)
with the centerline of Park Avenue as said centerlines are shown on the Record
of Survey recorded In Book 214 of Maps, at page 54, Santa Clara County Records;
thence North 29 DEG. 50 MINUTES 44 SECONDS West 79.00 feet along said
centerline of Locust Street to the True Point of Beginning of this description;
thence from said True Point of Beginning North 29 DEG. 50 MINUTES 44 SECONDS
West 501.75 feet along said centerline of Locust Street to a point thereon
which bears South 29 DEG. 50 MINUTES 44 SECONDS East 58.18 feet from the
intersection of said Locust Street centerline with the centerline of San
Fernando Street, as said centerlines are shown an said Record of Survey;
thence leaving said Locust Street centerline North 60 DEG. 57 MINUTES 13
SECONDS East 25.58 feet; thence South 29 DEG. 50 MINUTES 44 SECONDS East
138.20 feet; thence at right angles North 60 DEG. 09 MINUTES 16 SECONDS East
244.61 feet; thence South 29 DEG. 53 MINUTES 36 SECONDS East 32.91 feet;
thence South 30 DEG. 40 MINUTES 51 SECONDS East 272.06 feet; thence along a
tangent curve to the right having a radius of 50.00 feet through a central
angle of 88 DEG. 55 MINUTES 20 SECONDS an arc distance of 77.60 feet, thence
South 58 DEG. 14 MINUTES 29 SECONDS West 225.99 feet to the True Point
of Beginning.
PARCEL TWO:
A non-exclusive easement for pedestrian and vehicular ingress and egress,
utilities and construction, maintenance and use of a Loading ramp as more
particularly described in an Instrument recorded August ___, 1996 as Instrument
No. ______ , Official Records.
APN: 259-44-069, 079
ARB: 259-44-025, 25.1
<PAGE>
EXHIBIT B
CLOSING COSTS AND FEES TO BE INCLUDED IN INITIAL ADVANCE
The following items shall be included in the definition of the Initial
Advance under SECTION 2.21 of the Lease:
1. Arrangement fee (SBLF) $150,000
2. Fees and Costs of Graham & James LLP $ 25,000
3. Cushman & Wakefield (appraisal) $ 11,500
4. Fee of SBNYTC (set up fee) $ 2,500
TOTAL: $189,000
41
<PAGE>
EXHIBIT C
PERMITTED TITLE EXCEPTIONS
[TO BE ATTACHED]
42
<PAGE>
EXHIBIT C
1. PROPERTY TAXES, including any assessments collected with taxes, for the
fiscal year 1996-1997, a lien not yet due or payable.
2. THE LIEN of supplemental taxes, if any, assessed as a result of transfer of
interest and/or new construction, said supplemented taxes being assessed
pursuant to Chapter 3.5 commencing with Section 75 of the California
Revenue and Taxation Code, for which no Notice of Assessment has been
issued, as of the date herein.
3. The fact that said land is included within a project area of the
Redevelopment Agency shown below, and that the proceedings for the
redevelopment of said project have been instituted under the Redevelopment
Law (such redevelopment to proceed only after the adoption of the
redevelopment plan) as disclosed by a document.
Redevelopment Agency: REDEVELOPMENT AGENCY OF THE CITY OF SAN JOSE
Recorded : SEPTEMBER 21, 1960 IN BOOK 4923, PAGE 536, Official
Records
Amended Redevelopment Plan, Park Center Project Redevelopment Agency of the
City of San Jose, recorded September 24, 1965 in Book 7117 of Official
Records, page 8.
Amended Plan recorded March 9, 1967 in Book 7660 of Official Records, page
623.
Third Amended Plan recorded January 12, 1968 in Book 7993 of Official
Records, page 65.
Fourth Amended Plan recorded September 14, 1973 in Book 0563 of Official
Records, page 502.
Fifth Amended Plan recorded July 11, 1974 in Book 0986 of Official Records,
page 130.
4. Terms and conditions of that certain unrecorded Disposition and Development
Agreement dated September 22, 1994.
Disclosed by : Memorandum of DDA
Between : Redevelopment Agency of the City of San Jose
And : Adobe Systems Incorporated
Recorded : October 12, 1994 in Book N630, page 0765, Official
Records.
First Amendment to Acquisition, Disposition and Development Agreement
executed by the Redevelopment Agency of the City of San Jose and Adobe
Systems Incorporated dated June 6, 1996.
Reference is hereby made to the record for further particulars.
5. The fact, as disclosed by that certain ACQUISITION, DISPOSITION AND
DEVELOPMENT AGREEMENT, as disclosed by that certain MEMORANDUM OF DDA
recorded OCTOBER 12, 1994, AS INSTRUMENT N0. 12684584, Official Records,
that some violation of the Environmental Protection Laws may have occurred,
which may affect the land.
6. ANY RIGHTS, interests, or claims adverse to those of the vestee herein
which may exist or arise by reason of the following facts shown on a survey
plat entitled "ALTA/ACSM LAND TITLE SURVEY", dated December 11, 1996,
prepared by Kier & Wright Civil Engineers and Surveyors, Job No. 94106-10.
A) The fact that a sign located at the Southwesterly corner of said land
encroaches into Park Avenue.
<PAGE>
B) The fact that there are area lights and electroliers at various points
of said land.
7. The fact that said land is included within a project area of the
Redevelopment Agency shown below, and that the proceedings for the
redevelopment of said project have been instituted under the Redevelopment
Law (such redevelopment to proceed only after the adoption of the
redevelopment plan) as disclosed by a document.
Redevelopment Agency : REDEVELOPMENT AGENCY OF THE CITY OF SAN JOSE
Recorded : JULY 12, 1996 IN BOOK P414, PAGE 1529, Official
Records
8. Option to purchase in favor of SUMITOMO BANK LEASING AND FINANCE, INC., A
DELAWARE CORPORATION as contained in the lease referred to in the
Memorandum of Lease recorded August ____, 1996 as Instrument No. ______,
Official Records.
9. Any claim or asserted claim that the transaction purporting to vest the
leasehold estate created by that certain lease referred to above in Adobe
Systems, Inc. and the estates or interests covered by this policy in the
insured are an equitable mortgage.
10. AGREEMENT on the terms and conditions contained therein.
For : PEDESTRIAN AND VEHICULAR INGRESS AND EGRESS, UTILITIES AND
CONSTRUCTION, MAINTENANCE AND USE OF A LOADING RAMP.
Between : THE REDEVELOPMENT AGENCY OF THE CITY OF SAN JOSE, A MUNICIPAL
CORPORATION, ADOBE SYSTEMS INCORPORATED, A CALIFORNIA
CORPORATION AND SUMITOMO BANK LEASING AND FINANCE, INC., A
DELAWARE CORPORATION.
Recorded : AUGUST ___, 1996, AS INSTRUMENT NO. ______, Official
Records.
11. MATTERS contained in the document entitled "BUILDING SETBACK RESTRICTION"
Dated :
Executed by : THE REDEVELOPMENT AGENCY OF THE CITY OF SAN JOSE, A
MUNICIPAL CORPORATION, ADOBE SYSTEMS INCORPORATED, A
CALIFORNIA CORPORATION AND SUMITOMO BANK LEASING AND
FINANCE, INC., A DELAWARE CORPORATION
Recorded : AUGUST ___, 1996, AS INSTRUMENT NO ______, Official Records.
12. AGREEMENT on the terms and conditions contained therein.
For : PARKING
Between : THE REDEVELOPMENT AGENCY OF THE CITY OF SAN JOSE, A
MUNICIPAL CORPORATION, ADOBE SYSTEMS INCORPORATED, A
CALIFORNIA CORPORATION AND SUMITOMO BANK LEASING AND
FINANCE, INC., A DELAWARE CORPORATION
Recorded : AUGUST ___, 1996, AS INSTRUMENT NO. ______, Official
Records.
13. MATTERS contained in the document entitled "DECLARATION OF ACCESS RIGHTS"
Dated : AUGUST ,1996
Executed by : ADOBE SYSTEMS INCORPORATED, A CALIFORNIA CORPORATION AND
SUMITOMO BANK LEASING AND FINANCE, INC., A DELAWARE
CORPORATION
Recorded : AUGUST ___, 1996 AS INSTRUMENT NO. ______, Official
Records.
14. TERMS AND CONDITIONS contained in that certain Avigation Easement/Air Space
Easement. Said Easement shall run with the land and is binding upon the
heirs, administrators, executors, successors and assigns of the Grantor.
For the purpose of this document, the real property is the servient
tenement and SAN JOSE INTERNATIONAL AIRPORT is the dominant tenement.
Grantor : THE REDEVELOPMENT AGENCY OF THE CITY OF SAN JOSE
Grantee : CITY OF SAN JOSE, A MUNICIPAL CORPORATION
Recorded : AUGUST ___, 1996 AS INSTRUMENT NO. ______, Official
Records.
<PAGE>
15. TERMS AND CONDITIONS of that certain SITE DEVELOPMENT PERMIT
File No. :
Disclosed By : NOTICE OF GRANTING OF SITE DEVELOPMENT PERMIT
Recorded : AUGUST ___, 1996 AS INSTRUMENT NO. ______, Official Records
Reference is hereby made to the record for particulars.
16. A DEED OF TRUST to secure an indebtedness in the original principal sum
shown below and any other amounts and/or obligations secured thereby
Amount : $75,000,000.00
Dated :
Trustor : ADOBE SYSTEMS INCORPORATED, A CALIFORNIA CORPORATION
Trustee : FIRST AMERICAN TITLE INSURANCE COMPANY
Beneficiary : SUMITOMO BANK LEASING AND FINANCE, INC., A DELAWARE
CORPORATION
Recorded : AUGUST ___, 1996 AS INSTRUMENT NO. ______ , Official
Records.
17. UNRECORDED LEASE for the term and upon the terms and conditions contained
therein
Dated :
Lessor : SUMITOMO BANK LEASING AND FINANCE, INC., A DELAWARE
CORPORATION
Lessee : ADOBE SYSTEMS INCORPORATED, A CALIFORNIA CORPORATION
Disclosed by : MEMORANDUM OF LEASE, recorded AUGUST ___, 1996 AS INSTRUMENT
NO. ______, Official Records.
Said Lease contains an Option to purchase said land.
<PAGE>
Exhibit D
RENT COMMENCEMENT DATE MEMORANDUM
THIS RENT COMMENCEMENT DATE MEMORANDUM ("Memorandum") is entered into this
___ day of ______ , 199__, by and between SUMITOMO BANK LEASING AND FINANCE,
INC., a Delaware corporation ("Landlord"), and ADOBE SYSTEMS INCORPORATED, a
California corporation ("Tenant") concerning that certain Lease ("Lease")
between Landlord and Tenant dated August ___, 1996. Any capitalized terms not
defined in this Memorandum shall have their meaning as defined in the Lease.
1. Pursuant to SECTION 6.2 of the Lease, Landlord and Tenant are
required to enter into this Memorandum within thirty (30) days after the Rent
Commencement Date for the Premises.
2. Landlord and Tenant agree that the Rent Commencement Date for the
Premises is _________________, 199___
3. The dollar value of the Guaranteed Residual Value (defined in SECTION 2.19
of the Lease) for the Premises is $______.
IN WITNESS WHEREOF, the parties have executed this Memorandum as of the
date and year first above written.
TENANT: ADOBE SYSTEMS INCORPORATED,
a California Corporation
By
-----------------------------------
Name
-----------------------------------
Its
-----------------------------------
LANDLORD: SUMITOMO BANK LEASING AND
FINANCE, INC., a Delaware Corporation
By
-----------------------------------
Name
-----------------------------------
Its
-----------------------------------
1
<PAGE>
EXHIBIT D-1
FIRST AMENDMENT TO SUB LEASE OF THE LAND
AND LEASE OF THE IMPROVEMENTS
THIS FIRST AMENDMENT TO SUBLEASE OF THE LAND AND LEASE OF THE IMPROVEMENTS
("First Amendment") is made and entered into as of August ___, 1996, by and
between SUMITOMO BANK LEASING AND FINANCE, INC., a Delaware corporation
("Landlord"), and ADOBE SYSTEMS INCORPORATED, a California corporation
("Tenant").
THIS FIRST AMENDMENT IS ENTERED INTO upon the basis of the following facts,
understandings and intentions:
A. Landlord and Tenant entered into that certain Sublease of the Land
and Lease of the Improvements dated as of August ___, 1996 ("Lease"), pursuant
to which Landlord subleased to Tenant certain Land located in San Jose,
California, as shown on EXHIBIT A attached hereto and incorporated herein by
this reference, and leased certain Improvements to be constructed thereon
("Premises"). Any capitalized terms used but not defined in this First
Amendment which are defined in the Lease shall have the meaning ascribed in the
Lease.
B. Pursuant to the terms of SECTION 7.6 of the Lease, Tenant is
exercising its fixed rate option and Landlord and Tenant are entering into this
First Amendment to set forth the terms and conditions of the conversion from the
LIBOR Rate to a fixed rate of interest.
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereby agree as follows:
1. Commencing on August 17, 1998, Capitalized Funding Costs and, if
applicable, Base Rent under the Lease shall be calculated pursuant to SECTIONS
2.4 AND 2.8 of the Lease using the fixed rate of seven percent (7%) ("Fixed
Rate") rather than the LIBOR Rate plus 25 basis points, and shall be prorated
for the monthly rental period or Calculation Period in question on the basis of
a 30 day month and a 360 day year. If the Rent Commencement Date occurs later
than August 17, 1998, then commencing on the Rent Commencement Date, Base Rent
shall be calculated using the Fixed Rate. Unless Tenant has renewed its fixed
rate option as set forth below in PARAGRAPH 3, commencing on the day
immediately following the Contract Termination Date, Base Rent shall be
determined using the LIBOR Rate plus 25 basis points as set forth in SECTION 2.4
of the Lease rather than the Fixed Rate, and shall be prorated for the monthly
rental period in question on the basis of a 360 day year and actual number of
days elapsed.
2. The term of the Fixed Rate contract shall commence on August 17,
1998 and expire on August 15, 2003 ("Contract Termination Date").
3. Provided that (i) Tenant has exercised the option to extend the Term of
the Lease pursuant to SECTION 1.7 of the Lease and (ii) no Event of Default
exists under the
2
<PAGE>
Lease or would exist but for the passage of time or giving of Notice, Tenant
shall have the option, upon written notice received by Landlord no later than
five (5) days prior to any Contract Termination Date, to extend the Fixed Rate
for another Fixed Rate contract term selected by Tenant. The new Fixed Rate
shall be calculated based on market conditions as of the time Tenant exercises
such renewal option and shall otherwise be governed by all of the terms and
conditions of the Lease and this First Amendment. [With respect to any such
additional Fixed Rate election, Landlord and Tenant shall enter into a further
amendment to the Lease in form similar to this First Amendment, with such
additional provisions (such as a recalculation of the Guaranteed Residual Value)
as Landlord and Tenant deem necessary.]
4. Commencing on August 17, 1998, the Default Rate set forth in SECTION
2.14 of the Lease shall be the Fixed Rate plus 200 basis points. Unless Tenant
has exercised its renewal option set forth in PARAGRAPH 3 above, commencing on
the day immediately following the Contract Termination Date, the Default Rate
shall be one (1) month LIBOR Rate plus 225 basis points as set forth in SECTION
2.14 of the Lease.
5. From and after August 17, 1998, the Security Deposit of Tenant
described in SECTION 7.7 of the Lease shall earn interest at 6.881% per annum;
provided, however, that if the return on the Equity Commitment Amount portion
must be modified at the end of the Interim Period due to a swap adjustment
arising from a change in either the start date of the swap or notional amount of
the swap, the interest rate paid to Tenant on the Security Deposit shall be
adjusted accordingly to maintain the overall lease rate at the agreed upon Fixed
Rate. Unless Tenant has exercised its renewal option set forth in PARAGRAPH 3
above, commencing on the day immediately following the Contract Termination
Date, the interest rate paid to Tenant on the Security Deposit shall be
calculated using the LIBOR Rate plus 18 basis points as set forth in SECTION
7.7(b) of the Lease.
6. This First Amendment may be executed in any number of counterparts,
each of which shall be deemed to be an original and all of which together shall
comprise but a single instrument.
7. Tenant represents and warrants (1) that no Event of Default exists
under the Lease as of the date hereof; and (2) Tenant has the full right and
authority to enter into this First Amendment and the persons signing this First
Amendment have full power and authority to bind Tenant.
8. Except to the extent specifically amended hereby, all terms and
conditions of the Lease remain in full force and effect.
IN WITNESS WHEREOF, Landlord and Tenant have executed this First Amendment
as of the date and year first written above.
"TENANT"
ADOBE SYSTEMS INCORPORATED, a
California Corporation
By:
-------------------------------
Name:
------------------------
Its:
------------------------
(Signatures continue on next page)
3
<PAGE>
"LANDLORD"
SUMITOMO BANK LEASING AND
FINANCE, INC., a Delaware Corporation
By:
-------------------------------
Name:
------------------------
Its:
------------------------
4
<PAGE>
EXHIBIT A
Real Property in the San Jose, County of Santa Clara, State of California,
described as follows:
PARCEL ONE:
Commencing at the intersection of the centerline of Locust Street (now vacated)
with the centerline of Park Avenue as said centerlines are shown on the Record
of Survey recorded in Book 214 of Maps, at Page 54, Santa Clara County Records;
thence North 29DEG. 50'44" West 79.00 feet along said centerline of Locust
Street to the True Point of Beginning of this description; thence from said True
Point of Beginning North 29DEG. 50'44" West 501.75 feet along said centerline of
Locust Street to a point thereon which bears South 29DEG. 50'44" East 58.18 feet
from the Intersection of said Locust Street centerline with the centerline of
San Fernando Street, as said centerlines are shown on said Record of Survey;
thence leaving said Locust Street centerline North 60DEG. 57'13" East 25.58
feet; thence South 29DEG. 50'44" East 138.20 feet; thence at right angles North
60DEG. 09'16" East 244.61 feet; thence South 29DEG. 53'36" East 32.91 feet;
thence South 30DEG. 40'51" East 272.06 feet; thence along a tangent curve to
the right
having a radius of 50.00 feet through a central angle of 88DEG. 55'20" an arc
distance of 77.60 feet; thence South 58DEG. 14'29" West 225.99 feet to the True
Point of Beginning.
PARCEL TWO:
A non-exclusive easement for pedestrian and vehicular ingress and egress,
utilities and construction, maintenance and use of a loading ramp as more
particularly described in an Instrument recorded August ___,1996 as Instrument
No. ______ , Official Records.
APN: 259-44-069, 079
ARB: 259-44-025, 25.1
<PAGE>
EXHIBIT E
(MEMORANDUM OF SUBLEASE
OF THE LAND AND LEASE OF THE IMPROVEMENTS)
RECORDING REQUESTED BY, AND
WHEN RECORDED, RETURN TO:
Graham & James LLP
One Maritime Plaza, Suite 300
San Francisco, CA 94111
Attention: Bruce W. Hyman, Esq.
MEMORANDUM OF SUBLEASE
OF THE LAND AND LEASE OF THE IMPROVEMENTS
THIS MEMORANDUM OF SUBLEASE OF THE LAND AND LEASE OF THE IMPROVEMENTS
("Memorandum of Lease") is executed as of August ___, 1996, by and between
SUMITOMO BANK LEASING AND FINANCE, INC., a Delaware corporation ("Landlord"),
and ADOBE SYSTEMS INCORPORATED, a California corporation ("Tenant").
RECITALS
WHEREAS, Landlord and Tenant have executed that certain lease ("Lease")
dated as of August ___, 1996, covering a leasehold interest in certain land
located on the real property located in the City of San Jose, Santa Clara
County, California as more particularly described in SCHEDULE 1 attached hereto
and incorporated herein by this reference ("Land") and the Improvements which
may come to be located on said Land (the Land and Improvements are referred to
herein as the "Premises"); and
WHEREAS, Landlord and Tenant desire to record notice of the Lease in the
real estate records of Santa Clara County, California:
NOW, THEREFORE, in consideration of the foregoing, Landlord and Tenant
hereby declare as follows:
1. DEMISE. Landlord hereby leases the Premises to Tenant and Tenant
hereby leases the Premises from Landlord, subject to the terms, covenants and
conditions contained in the Lease.
2. EXPIRATION DATE. The term of the Lease ("Term") shall commence with
respect to the Land on the date hereof and with respect to the Improvements as
provided for in the Lease, and shall expire on August ___, 2003, subject to
Tenant's right to extend the Term for one additional five (5) year period
pursuant to the terms of the Lease.
1
<PAGE>
3. OPTION TO PURCHASE. Tenant has an option to purchase the Premises,
as more particularly described in the Lease, at any time during the Term
(including any extension thereof).
4. RESTRICTIONS ON ENCUMBRANCES. Landlord is prohibited from recording
against the Premises liens (including, without limitation, deeds of trust),
encumbrances, and other matters that would constitute exceptions to title, and
from amending or modifying any of the foregoing that may exist now or during the
Term, as more particularly described in the Lease.
5. RESTRICTIONS ON TRANSFERS BY LANDLORD. Subject to certain
exceptions, Landlord may transfer its interest in the Premises to a third party
subject to the restrictions which are set forth with more particularity in the
Lease.
6. COUNTERPARTS. This Memorandum of Lease may be executed in any
number of counterparts, each of which shall be deemed to be an original and all
of which together shall comprise but a single instrument.
IN WITNESS WHEREOF, Landlord and Tenant have executed this Memorandum of
Lease as of the date and year first written above.
TENANT: ADOBE SYSTEMS INCORPORATED.
a California Corporation
By
------------------------------
Name
------------------------------
Its
------------------------------
[Signatures continued on next page.]
[All Signatures must be acknowledged.]
2
<PAGE>
LANDLORD: SUMITOMO BANK LEASING AND
FINANCE, INC., a Delaware
Corporation
By
------------------------------
Name
------------------------------
Its
------------------------------
(all signatures must be acknowledged)
3
<PAGE>
EXHIBIT F
FORM OF OFFICER'S CERTIFICATE
The undersigned, ________________ of Adobe Systems Incorporated, a
California corporation hereby certifies that, as to the best of his/her
knowledge, as of the date hereof the lease dated August ___, 1996 by and between
Sumitomo Bank Leasing and Finance, Inc., as Landlord and Adobe Systems
Incorporated as Tenant is in full force and effect, and Tenant is not in default
thereunder.
Dated:
---------------------- --------------------
5