ADOBE SYSTEMS INCORPORATED
EXHIBIT 10.32
SUBLEASE OF THE LAND AND LEASE OF THE IMPROVEMENTS BY AND
BETWEEN SUMITOMO BANK LEASING AND FINANCE INC. AND
ADOBE SYSTEMS INCORPORATED
126
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
127
TABLE OF CONTENTS
Page
ARTICLE I
BASIC LEASE PROVISIONS
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............................................... 2
1.7 Term................................................... 2
1.8 Interim Period......................................... 2
1.9 Rent Commencement Date................................. 2
1.10 Base Rent.............................................. 3
1.11 Ground Rent............................................ 3
1.12 Addresses for Notices.................................. 3
1.13 Wire Transfer Instructions............................. 3
ARTICLE 2
DEFINITIONS
2.1 Additional Rent........................................ 4
2.2 Advance................................................ 4
2.3 After Tax Basis........................................ 4
2.4 Base Rent.............................................. 5
2.5 Building............................................... 5
2.6 Calculation Period..................................... 5
2.7 Capitalized Amount..................................... 5
2.8 Capitalized Funding Costs.............................. 5
2.9 City................................................... 6
2.10 Collateral............................................. 6
2.11 Commitment Amount...................................... 6
2.12 Commitment Component................................... 6
2.13 Construction Management Agreement...................... 6
2.14 Contractor............................................. 6
2.15 Default Rate........................................... 6
2.16 Entity................................................. 6
2.17 Event of Default....................................... 7
2.18 Guaranteed Residual Value.............................. 7
2.19 Improvements........................................... 7
2.20 Improvements Commencement Date......................... 7
2.21 Initial Advance........................................ 7
2.22 Interim Period......................................... 7
2.23 Land................................................... 7
2.24 Landlord Affiliate..................................... 7
2.25 Lease Inception Date................................... 7
2.26 Lease Investment Balance............................... 7
2.27 Legal Requirements..................................... 8
2.28 LIBOR Rate............................................. 8
2.29 Notice................................................. 8
2.30 Official Records....................................... 9
2.31 Permitted Title Exceptions............................. 9
128
2.32 Pledge Agreement....................................... 9
2.33 Premises............................................... 9
2.34 Real Estate Taxes...................................... 9
2.35 Rent Commencement Date................................. 9
2.36 Rent Payment Date...................................... 9
2.37 Required Permits....................................... 9
2.38 SBLF Deed of Trust..................................... 9
2.39 SBNYTC................................................. 9
2.40 Taking................................................. 9
2.41 Term................................................... 10
2.42 Terminology............................................ 10
ARTICLE 3
DEMISE
3.1 Premises............................................... 10
ARTICLE 4
TERM
4.1 Term................................................... 10
4.2 Option to Extend....................................... 10
4.3 Holding Over........................................... 10
ARTICLE 5
CONSTRUCTION OF IMPROVEMENTS
5.1 Tenant's Rights to Construct Improvements.............. 11
5.2 Title to and Nature of Improvements.................... 11
ARTICLE 6
FUNDING
6.1 Request for Construction Funding:
Landlord's Obligation to Fund....................... 11
6.2 Exhibit Reflecting Rent Commencement Date.............. 11
ARTICLE 7
RENT
7.1 Base Rent.............................................. 11
7.2 Proration.............................................. 12
7.3 No Abatement of Rent................................... 12
7.4 Delinquent Rent........................................ 12
7.5 Additional Rent........................................ 12
ARTICLE 8
TAXES
8.1 Real Estate Taxes....................................... 12
8.2 Personal Property Taxes................................. 13
8.3 Right to Contest........................................ 13
8.4 Additional Charges...................................... 14
ARTICLE 9
INSURANCE
9.1 Liability Insurance..................................... 15
9.2 Builders' Risk Insurance................................ 15
9.3 All-Risk Insurance...................................... 15
9.4 General Requirements.................................... 16
129
9.5 Waiver of Subrogation.................................. 16
9.6 Indemnity.............................................. 17
ARTICLE 10
USE
10.1 Use.................................................... 17
10.2 Contest of Legal Requirements.......................... 19
ARTICLE 11
UTILITIES AND SERVICES
11.1 Services to the Premises............................... 19
ARTICLE 12
MAINTENANCE AND REPAIRS; SURRENDER OF THE PREMISES
12.1 Tenant Obligations..................................... 19
12.2 Surrender of the Premises.............................. 20
ARTICLE 13
LIENS
13.1 ....................................................... 20
ARTICLE 14
ASSIGNMENT BY LANDLORD
14.1 Further Mortgages or Encumbrances by Landlord.......... 20
14.2 Landlord's Right to Sell............................... 20
14.3 Transfer of Funds and Property......................... 21
ARTICLE 15
ASSIGNMENT AND SUBLEASING
15.1 Right to Assign........................................ 21
15.2 Right to Sublet........................................ 22
15.3 Mortgage by Tenant..................................... 22
ARTICLE 16
EMINENT DOMAIN
16.1 Total or Substantial Taking............................ 22
16.2 Partial Taking......................................... 22
16.3 Temporary Taking....................................... 23
16.4 Damages................................................ 23
16.5 Notice and Execution................................... 23
16.6 Terms of Ground Lease.................................. 23
ARTICLE 17
DAMAGE OR DESTRUCTION
17.1 Casualty............................................... 24
17.2 Termination of Lease................................... 24
17.3 Insurance Proceeds..................................... 24
17.4 Terms of Ground Lease.................................. 26
ARTICLE 18
DEFAULT
18.1 Default................................................ 26
18.2 Contest by Tenant...................................... 28
18.3 Remedies............................................... 28
130
18.4 No Waiver.............................................. 29
18.5 Effect of Assignment................................... 29
18.6 Landlord Cure Right.................................... 30
18.7 Landlord's Default..................................... 30
ARTICLE 19
QUIET ENJOYMENT
19.1 Quiet Enjoyment........................................ 31
ARTICLE 20
TENANT'S OPTION TO PURCHASE OR TERMINATE
20.1 Option To Purchase Premises............................ 31
20.2 Termination Option..................................... 33
ARTICLE 21
COVENANTS OF LANDLORD
21.1 Title.................................................. 34
21.2 Land Use............................................... 34
21.3 Transfer of Property Interests......................... 35
ARTICLE 22
MISCELLANEOUS
22.1 Relationship.......................................... 35
22.2 Form of Transaction: Certain Tax Matters.............. 35
22.3 Notices............................................... 36
22.4 Severability of Provisions............................ 36
22.5 Entire Agreement: Amendment........................... 36
22.6 Memorandum of Sublease of the Land and Lease of the
Improvements.......................................... 37
22.7 Successors and Assigns................................ 37
22.8 Commissions........................................... 37
22.9 Attorneys' Fees....................................... 37
22.10 Governing Law......................................... 37
22.11 Counterparts.......................................... 37
22.12 Time Is of the Essence................................ 38
22.13 No Third Party Beneficiaries.......................... 38
22.14 Limitations on Recourse............................... 38
22.15 Estoppel Certificates................................. 38
22.16 Collateral............................................ 38
22.17 As-Is Lease........................................... 38
22.18 Net Lease............................................. 38
22.19 Representations and Warranties........................ 39
22.20 Financial Reporting................................... 39
22.21 Nondiscrimination..................................... 39
ARTICLE 23
INDEMNIFICATION
23.1 Tax Indemnity......................................... 40
23.2 Environmental Indemnity............................... 41
23.3 Construction Indemnification.......................... 41
23.4 General Indemnity..................................... 42
131
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: October 12, 1994.
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
132
Commencement Date; and the Term of this Lease shall expire on October
15, 2001. 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." 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: Interim Period shall be the period commencing on the
Date of Lease and ending on the day before the
Improvements Commencement Date as defined in Section 2.20 below.
1.9 Rent Commencement Date:
The rent commencement date ("Rent Commencement Date") shall be 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 forty-fifth (45th) day following 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 notices of
completion have been recorded with respect thereto; and (iii) all
necessary governmental approvals (including 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:
133
TENANT:
Sumitomo Bank Leasing and Finance, Inc.
One World Trade Center, Suite 8545
New York, NY 10048
Attention: Chief Credit Officer
134
Adobe Systems Incorporated
1625 Charleston Road (zip 94043)
Post Office Box 7900
Mountain View, CA 94039-7900
Attention: Director of Real Estate
With a copy to: With a copy to:
Landels, Ripley & Diamond
Hills Plaza
350 Steuart Street
San Francisco, CA 94105-1250
Attention: Bruce W. Hyman, Esq.
135
Adobe Systems Incorporated
1625 Charleston Road (zip 94043)
Post Office Box 7900
Mountain View, CA 94039-7900
Attention: General Counsel
and
136
and
Sumitomo Bank of New York Trust
Company
One World Trade Center, Suite 8505
New York, NY 10048
Attention: Corporate Trust Department
137
Shartsis, Friese & Ginsburg
One Maritime Plaza, 18th Floor
San Francisco, CA 94111
Attention: David H. Kremer, Esq.
1.13 Wire Transfer Instructions:
Morgan Guaranty Trust Company of New York
ABA#021000238
For credit to The Sumitomo Bank, LimitedA/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, 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
to the Improvements; (ii) the items and/or amounts described in Exhibit B; (iii)
Real Estate
138
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), custodian fees related to the
Collateral 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
139
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 two (2) business days prior to the start of each
Calculation Period with respect to the 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 Collateral. "Collateral" shall have the meaning set forth in
Section 22.16.
2.11 Commitment Amount. "Commitment Amount" shall mean SIXTY SIX
MILLION and no/100 Dollars ($66,000,000.00).
2.12 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 Commitment 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.
2.13 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.
2.14 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.
2.15 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.
2.16 Entity. "Entity" shall mean any person, corporation, partnership
(general
140
or limited), joint venture, association, joint stock company, trust or other
business entity or organization.
2.17 Event of Default. "Event of Default" shall have the meaning set forth
in Section 18.1.
2.18 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 equals approximately 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.
2.19 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.
2.20 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.
2.21 Initial Advance. Initial Advance shall mean the amounts described in
Exhibit B pertaining to execution of the Ground Lease and this Lease.
2.22 Interim Period. "Interim Period" shall have the meaning set forth in
the Basic Lease Provisions.
2.23 Land. "Land" shall have the meaning set forth in the Basic Lease
Provisions.
2.24 Landlord Affiliate. "Landlord Affiliate" shall mean any Entity which
controls, is controlled by or is under the common control of Landlord.
2.25 Lease Inception Date. "Lease Inception Date" shall mean the Date of
Lease.
2.26 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 (including, without limitation, the Pledge Agreement) that
are not otherwise applied to reduce the Lease Investment Balance and which
constitute a repayment or reduction of the amounts placed at risk by the
Landlord (whether through realization upon the Collateral or otherwise)
141
(excluding for purposes of this clause amounts paid as rent, reimbursement for
expenses payable by Tenant, fees payable by Tenant and similar items).
2.27 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.
2.28 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 two (2) 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.
2.29 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.
2.30 Official Records. "Official Records" shall mean the official records
of Santa Clara County, California.
2.31 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
142
Land unless any of the foregoing arise as a result of Landlord's actions or with
Landlord's written consent (unless such actions taken or consent given by
Landlord are requested in writing by Tenant); and (6) this Lease.
2.32 Pledge Agreement. "Pledge Agreement" shall mean that certain Pledge
Agreement of even date herewith executed by and between Tenant and Landlord.
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 Taking. "Taking" shall have the meaning set forth in Section 16.1.
2.41 Term. "Term" shall have the meaning set forth in the Basic Lease
Provisions.
2.42 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 Basic Rent and
the determination of the LIBOR Rate) are generally closed for business and
weekends) unless otherwise expressly stated. Unless otherwise specified herein,
all accounting terms used
143
herein shall be interpreted, all accounting determinations hereunder 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
3.1 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.
ARTICLE T
144
FUNDING
6.1 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 1.14. 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.
145
7.5 Additional Rent. Tenant agrees to pay all Additional Rent when it
becomes due and payable under this Lease.
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) 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 this 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
146
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 imposed 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
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
147
(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
148
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 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 shall covenant 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 cancelled without thirty (30) days' prior written notice to Landlord.
Renewal certificates shall be furnished
149
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, and no less than A/III and 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 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"
150
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.
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
151
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 both: (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.
(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
152
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 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.
153
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) 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.
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 theretofore or thereafter arising under this Lease.
154
(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 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.
155
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 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
156
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 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
157
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 the 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 reconstruction 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.
17.4 Terms of Ground Lease. Notwithstanding any of the foregoing
158
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
8.02 of the Ground Lease, the terms of Section 8.02 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 8.02 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) Failure to Replenish Under Pledge Agreement. Tenant's failure to
replenish the collateral under the Pledge Agreement (as defined in Section 2.3
1) after the notice and cure periods provided in the Pledge Agreement.
159
(f) 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 of One Million Dollars
($1,000,000) or more.
(g) 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. The ratio will
be defined as net income plus interest, taxes, and rent expense divided by the
sum of taxes, interest, rent expense and CPLTD (current portion of long-term
debt).
3) Tenant's "Consolidated Tangible Net Worth" as defined herein
shall fall below Two Hundred Twenty Million Dollars ($220,000,000.00). 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.
(h) Construction Management Agreement. A material breach by Tenant of its
obligations under the Construction Management Agreement.
(i) Termination Option. If Tenant exercises the Termination Option
pursuant to Section 20.2 below, Tenant's failure to sell the Premises at the end
of the Term as provided in Section 20.2.
18.2 Contest 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 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)
160
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 and whether or not Landlord has also
exercised any right under Section 18.2. 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. For purposes of the preceding sentence, the amount realized
by Landlord upon a sale of the Premises shall be net of Landlord's sale expenses
and other expenses incurred by Landlord but required to be paid
by Tenant pursuant to Section 20.1(c)(iv). Landlord's obligation to pay such
excess to Tenant shall survive any termination of this Lease.
161
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 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
162
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 contrary, Landlord's liability under this Lease
shall in all events be limited as provided in Section 22.14 below.
ARTICLE s
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, plus 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.
(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
163
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).
(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. 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 the escrow fees; the recorder's
fee for recording the Deed; the premium for the title insurance policy; all
documentary transfer taxes; Tenant's attorneys' fees; Landlord's reasonable
attorneys' fees; all other costs and expenses incurred by Tenant in consummating
the transfer of the Premises; and all reasonable expenses (except as specified
in the next sentence) incurred by Landlord in consummating the transfer of the
Premises pursuant to this Section 20.1. Landlord shall pay the costs and
expenses of clearing title as required by Section 20. 1 (c)(i).
164
(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, no later than six (6) months prior to the expiration of the Term,
Tenant may 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 pursuant to Section 20.1 above. The six (6) 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 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.
Except as provided in Section 20.2(e), the proceeds (the "Proceeds") of any sale
of the Premises pursuant to the Termination Option shall be paid to Landlord
upon any such sale without
165
deductions, and not later than the expiration of the Lease Term.
(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 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 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 Proceeds
shall be applied first to the Lease Investment Balance, Tenant shall reimburse
Landlord for the difference between the Lease Investment Balance (calculated
immediately prior to receipt of the Proceeds) and the Proceeds, up to the amount
of the Guaranteed Residual Value, and Landlord shall have no claim whatsoever to
the Proceeds in excess of such amount upon receipt of such Proceeds.
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)
166
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).
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
167
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
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,
168
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. Landlord acknowledges that it is responsible for the payment of a
commission to Pacific Union Financial Services in connection with this Lease,
which amount shall not be reimbursable to Landlord by Tenant or otherwise added
to the Lease Investment Balance.
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.
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
169
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 Collateral. The parties acknowledge that Tenant has pledged certain
collateral ("Collateral") to Landlord to secure Tenant's obligations pursuant to
the Pledge Agreement. If Landlord applies any of the Collateral to satisfy an
obligation hereunder, such application shall be deemed to reduce the Lease
Investment Balance under this Lease on a dollar-for-dollar basis. Tenant shall
have no claims, rights or causes of action against Landlord arising from any
application of the Collateral to satisfy any obligation under the Lease.
22.17 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.
22.18 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
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.
22.19 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
170
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.
22.20 Financial Reporting. Tenant shall provide to Landlord: (1) annually,
within one hundred (100) days after the end of each of Tenant'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.
22.21 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:
(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));
171
(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 indemnify 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
172
or any other Entity) which Landlord may incur. Tenant's duty to indemnify
Landlord under this Section 23.2 shall 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.
IN WITNESS WHEREOF, the parties hereto have duly executed this Lease as of
the day and year first above written.
TENANT:
173
ADOBE SYSTEMS INCORPORATED,
a California Corporation
By
Name
Its
LANDLORD:
174
SUMITOMO BANK LEASING AND
FINANCE, INC., a Delaware corporation
By
Name
Its
By
Name
Its
175
Exhibit A
DESCRIPTION OF THE LAND
[To be completed]
176
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 (SBL&F)
177
$150,0002.Fees of Landels, Ripley & Diamond
178
$ 37,5003.Title Insurance premiums paid by Landlord
at the closing of this transaction
179
$ 18,8104.Cushman & Wakefield (appraisal)
180
$ 9,5005.Fee of SBNYTC (set up fee)
181
$ 2,500
182
Exhibit C
PERMITTED TITLE EXCEPTIONS
[To be attached]
183
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 _____________ _____, 1994. 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 the that Rent Commencement Date for the
Premises is ____________________, 199__.
3. The dollar value of the Guaranteed Residual Value (defined in Section
2.18 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:
184
ADOBE SYSTEMS INCORPORATED,
a California Corporation
By
Name
Its
LANDLORD:
185
SUMITOMO BANK LEASING AND
FINANCE, INC., a Delaware corporation
By
Name
Its
By
Name
Its
186
Exhibit E
(MEMORANDUM OF SUBLEASE
OF THE LAND AND LEASE OF THE IMPROVEMENTS)
RECORDING REQUESTED BY, AND WHEN RECORDED, RETURN TO:
_____________________________
_____________________________
_____________________________
Attention: __________________________________, 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 October 12,1994, 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 October 12, 1994, 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 I 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 October 15, 2001, subject to
Tenant's right to extend the Term for one additional five (5) year period
pursuant to the terms of this Lease.
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
187
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:
188
ADOBE SYSTEMS INCORPORATED,
a California Corporation
By
Name
Its
LANDLORD:
189
SUMITOMO BANK LEASING AND
FINANCE, INC., a Delaware corporation
By
Name
Its
By
Name
Its
190
Schedule 1 to Exhibit E
[To be inserted]
191
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____________ __, 1994
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.
Date:___________________________ ____________________________
192