===============================================================================
UNITED STATES
SECURITIES & EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
FORM 10-Q
(Mark One)
[X] Quarterly report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the quarterly period ended March 31, 1999
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the transition period from _____________
to _____________.
Commission file number 000-23795
------------------------------------
EXODUS COMMUNICATIONS, INC.
--------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 77-0403076
------------------------------- ------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2831 Mission College Blvd., Santa Clara, CA 95054
------------------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(408) 346-2200
------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
The number of shares outstanding of the issuer's common stock, par value $0.001,
as of May 10, 1999 was 41,160,218 shares. This number reflects the effect of
a two-for-one stock split effected April 12, 1999.
===============================================================================
<PAGE>
EXODUS COMMUNICATIONS, INC.
INDEX
-----
PART I. Financial Information
---------------------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - March 31, 1999 and
December 31, 1998
Condensed Consolidated Statements of Operations - Three
Month Periods Ended March 31, 1999 and 1998
Condensed Consolidated Statements of Cash Flows - Three
Month Periods Ended March 31, 1999 and 1998
Notes to Condensed Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market
Risk
PART II. Other Information
-----------------
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
<PAGE>
I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
EXODUS COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- -----------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents........................... $323,642 $150,891
Accounts receivable, net............................ 16,277 11,174
Prepaid expenses and other current assets........... 6,727 4,677
----------- -----------
Total current assets.............................. 346,646 166,742
Property and equipment, net........................... 101,793 68,306
Restricted cash equivalents and investments........... 36,292 45,614
Other assets.......................................... 41,561 12,624
----------- -----------
$526,292 $293,286
=========== ===========
Liabilities and Stockholders'(Deficit)Equity
Current liabilities:
Current portion of equipment loans and line of
credit facilities.................................. $6,804 $14,367
Current portion of capital lease obligations........ 5,950 5,140
Accounts payable.................................... 24,504 9,208
Accrued expenses.................................... 7,623 6,771
Accrued interest payable............................ 6,949 11,563
----------- -----------
Total current liabilities......................... 51,830 47,049
Equipment loans and line of credit facilities, less
current portion...................................... 12,864 15,695
Capital lease obligations, less current portion....... 12,111 11,401
Convertible Subordinated Notes........................ 250,000 --
Senior Notes.......................................... 200,000 200,000
----------- -----------
Total liabilities................................. 526,805 274,145
----------- -----------
Stockholders' (deficit) equity:
Common stock, $0.001 par value: 100,000,000
authorized; 40,776,326 and 40,134,704 shares
issued and outstanding as of March 31, 1999
and December 31, 1998, respectively................ 41 40
Additional paid-in capital.......................... 119,520 117,200
Deferred stock compensation......................... (891) (1,080)
Accumulated deficit................................. (119,183) (97,019)
----------- -----------
Total stockholders' (deficit) equity.............. (513) 19,141
----------- -----------
$526,292 $293,286
=========== ===========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
EXODUS COMMUNICATIONS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------
1999 1998
--------- ---------
<S> <C> <C>
Revenues......................... $30,087 $7,105
--------- ---------
Costs and expenses:
Cost of revenues............. 28,110 9,881
Marketing and sales.......... 10,264 6,417
General and administrative... 7,055 2,657
Product development.......... 1,285 645
--------- ---------
Total costs and expenses......... 46,714 19,600
--------- ---------
Operating loss................... (16,627) (12,495)
Net interest expense............. 5,537 826
--------- ---------
Net loss..................... (22,164) (13,321)
Cumulative dividends and
accretion on redeemable
convertible preferred stock.... -- (2,014)
--------- ---------
Net loss attributable to
common stockholders............ ($22,164) ($15,335)
========= =========
Basic and diluted net loss
per share....................... ($0.55) ($2.23)
========= =========
Shares used in computing basic
and diluted net loss per share.. 40,526 6,872
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
EXODUS COMMUNICATIONS, INC.
CONDENSED CONSOLIDATE STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------
1999 1998
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net loss............................................. ($22,164) ($13,321)
Adjustments to reconcile net loss to net cash used
for operating activities:
Depreciation and amortization...................... 5,533 1,975
Loss on disposal of property and equipment......... -- --
Noncash warrant expense............................ -- 525
Amortization of deferred stock compensation........ 189 378
Amortization of debt issuance costs................ 332 122
Interest accretion on restricted cash equivalents.. (1,088) --
Changes in operating assets and liabilities:
Accounts receivable............................ (4,120) (1,217)
Prepaid expenses and other assets.............. (5,190) (628)
Accounts payable............................... 14,867 2,671
Accrued expenses............................... 748 1,735
Accrued interest payable....................... (4,614) --
--------- ---------
Net cash used for operating activities..... (15,507) (7,760)
--------- ---------
Cash flows from investing activities:
Purchases of property and equipment.................. (34,850) (7,146)
Business acquired, net of cash received.............. (19,990) --
Release (increase) of restricted cash
equivalents and investments......................... 10,410 (185)
--------- ---------
Net cash used for investing activities...... (44,430) (7,331)
--------- ---------
Cash flows from financing activities:
Proceeds from issuance of redeemable
convertible preferred stock and warrants............ -- 2,176
Proceeds from issuance of common stock............... 2,321 70,302
Notes receivable from stockholders, net.............. -- 8
Repayment of bank borrowings......................... -- (3,000)
Proceeds from sale-leaseback transactions............ -- 1,922
Payment on capital lease obligations................. (1,332) (266)
Proceeds from debt................................... -- 8,823
Repayment of debt.................................... (10,551) (991)
Proceeds from 5% Convertible Subordinated
Notes, net.......................................... 242,250 --
--------- ---------
Net cash provided by financing activities.. 232,688 78,974
--------- ---------
Net increase in cash and cash equivalents.............. 172,751 63,883
Cash and cash equivalents at beginning of year......... 150,891 10,270
--------- ---------
Cash and cash equivalents at end of period............. $323,642 $74,153
========= =========
Supplemental disclosure of cash flow information:
Cash paid-interest................................... $13,405 $765
========= =========
Noncash investing and financing activities:
Assets recorded under capital lease................ $2,852 $1,089
========= =========
Cumulative dividends and accretion on
Series C and D redeemable convertible
preferred stock and warrants.................... $ -- $2,014
========= =========
Conversion of redeemable convertible
preferred stock to common stock................. $ -- $43,437
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
<PAGE>
EXODUS COMMUNICATIONS, INC.
---------------------------
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
----------------------------------------------------
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed financial statements have been
prepared in accordance with generally accepted accounting principles
for interim financial information, the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not contain all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of
management, the accompanying unaudited condensed financial statements
include all adjustments, consisting only of normal recurring
adjustments, necessary for the fair presentation of the Company's
financial position as of March 31, 1999 and the results of its
operations and cash flows for the three month periods ended March 31,
1999 and 1998. These financial statements should be read in
conjunction with the Company's audited financial statements as of
December 31, 1998 and 1997 and for each of the three years in the
period ended December 31, 1998, including notes thereto, included in
the Company's 1998 Annual Report on Form 10-K. Operating results for the
three month period ended March 31, 1999 are not necessarily indicative
of the results that may be expected for the year ending December 31,
1999.
NOTE 2 - NET LOSS PER SHARE
Basic and diluted net loss per share has been computed by dividing the
net loss attributable to common stockholders by the weighted average
number of shares of common stock outstanding. Diluted net loss per
share for the three month periods ended March 31, 1999 and 1998 does
not include the effect of (i) 10,268,000 and 6,384,000 shares issuable
under stock options outstanding as of March 31, 1999 and March 31,
1998, respectively, (ii) 133,000 and 808,000 shares issuable pursuant
to warrants to purchase common stock, as of March 31, 1999 and March
31, 1998, respectively, and (iii) no shares and 23,974,000 shares (up
to the date of the initial public offering) of redeemable convertible
preferred stock as of March 31, 1999 and 1998, respectively.
NOTE 3 - REVENUE RECOGNITION
Our revenues consist of (i) monthly fees from customer use of Internet
Data Center sites, network services and managed services, (ii) revenues
from sales of third-party equipment to customers and (iii) fees for
installation and certain professional services. Currently,
substantially all of our revenue is derived from services. Revenues
(other than installation fees, equipment sales to customers and certain
professional services) are generally billed and recognized ratably over
the term of the contract, which is generally one year. Installation
fees are typically recognized at the time the installation occurs, and
equipment revenues are typically recognized when the equipment is
delivered to the customer or placed into service at an Internet Data
Center. One-time professional service fees are typically recognized
when services are rendered. We sell third-party equipment to our
customers as an accommodation to facilitate their purchase of services.
NOTE 4 - PROPERTY AND EQUIPMENT
Property and equipment consisted of the following (in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- -----------
<S> <C> <C>
Data centers and related equipment....... $47,586 $43,959
Furniture, fixtures, computer equipment
and other.............................. 43,126 32,887
Construction in progress................. 33,655 8,497
----------- -----------
124,367 85,343
Less accumulated depreciation and
amortization........................... 22,574 17,037
----------- -----------
$101,793 $68,306
=========== ===========
</TABLE>
Computer equipment and certain data center equipment are recorded under
capital leases that aggregated $23,088,000 and $20,236,000 as of March
31, 1999 and December 31, 1998, respectively. Accumulated amortization
on the assets recorded under capital leases aggregated $5,827,000 and
$4,426,000 as of March 31, 1999 and December 31, 1998, respectively.
<PAGE>
NOTE 5 - ACQUISITIONS
On October 2, 1998, the Company purchased substantially all of the
assets, including customer agreements, and assumed certain liabilities
of, Arca, a wholly owned subsidiary of Cyberguard Corporation. Arca, which
has been in business for more than ten years, is a provider of advanced
network and system security consulting services and designs and
develops security technology solutions for complex and sensitive
information systems. Arca operates as a wholly owned subsidiary of the
Company. Total consideration paid, including direct acquisition costs,
aggregated approximately $5,800,000. The acquisition was accounted for
as a purchase with the results of Arca included from the acquisition
date. The excess of the purchase price over the fair value of tangible
net assets acquired amounted to approximately $5,000,000 and was
attributed primarily to workforce in place ($2,500,000) and goodwill
($2,400,000).
On February 1, 1999, the Company purchased all of the capital stock of
American Information Systems, Inc ("AIS"). AIS provides colocation
services as well as professional services. Total consideration paid,
including direct acquisition costs, aggregated approximately
$20,500,000. The acquisition was accounted for as a purchase with the
results of AIS included from the acquisition date. The excess of the
purchase price over the fair value of tangible net assets acquired
amounted to approximately $18,700,000 and was attributed primarily to
goodwill ($15,000,000), customer lists ($3,200,000) and assembled
workforce ($500,000).
The following summary, prepared on an unaudited pro forma basis,
combines the Company's consolidated results of operations with Arca's and AIS'
results of operations, as if Arca and AIS had been acquired on January 1, 1998
(in thousands, except per share data):
<TABLE>
<CAPTION>
Three Months Ended
March 31
------------------------
1999 1998
----------- -----------
<S> <C> <C>
Revenues $30,735 $9,589
Net loss attributable to common stockholders ($22,140) ($15,154)
Basic and diluted net loss per share ($0.55) ($2.21)
Shares used in pro forma per share computation 40,526 6,872
</TABLE>
The pro forma results are not necessarily indicative of what would have
occurred if the acquisition had been in effect for the periods
presented. In addition, they are not intended to be a projection of
future results and do not reflect any synergyies that might be achieved
from combined operations.
NOTE 6 - BANK BORROWINGS, EQUIPMENT LOANS AND LINE OF CREDIT FACILITIES
The Company has a $7,000,000 bank line of credit bearing interest at
the bank's prime rate. As of March 31, 1999, no amount was outstanding
under the line of credit. The line of credit expires in May 1999.
A summary of equipment loans and line of credit facilities follows (in
thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1999 1998
----------- -----------
<S> <C> <C>
$1,800,000 equipment line of credit facility;
effective interest rate of 16.4%; principal and
interest due April 2000 through September 2000;
collateralized by equipment........................... $789 $981
$3,000,000 equipment line of credit facility-April
1997; effective interest rate of 12.9%; principal
and interest due monthly through July 2001;
collateralized by equipment........................... 1,772 2,080
$6,500,000 equipment line of credit facility;
effective interest rate of 15.9%; principal and
interest due monthly through July 2001;
collateralized by equipment........................... 4,204 4,842
$3,000,000 equipment line of credit facility-August
1997; effective interest rate of 16.2%; principal
and interest due monthly through May 2001;
collateralized by equipment........................... 1,914 2,192
$5,000,000 equipment line of credit facility;
effective interest rate of 16.2%; principal and
interest due monthly through September 2001;
collateralized by equipment........................... 2,716 3,084
$10,000,000 equipment line of credit facility;
effective interest rate of 13.8%; principal and
interest due monthly through August 2002;
collateralized by equipment........................... 8,127 8,883
$8,000,000 line of credit facility; interest rate
of 12.8%; principal and interest due March 1999;
collateralized by all of the Company's assets......... -- 8,000
Other 146 --
----------- -----------
19,668 30,062
Less current portion................................... 6,804 14,367
----------- -----------
Equipment loans and line of credit facilities, less
current portion....................................... $12,864 $15,695
=========== ===========
</TABLE>
On March 3, 1999 the Company issued $250 million of 5% Convertible
Subordinated Notes due 2006 for aggregated net proceeds of
approximately $243 million. Interest on the Convertible Subordinated
Notes is payable on March 15 and September 15 of each year, commencing
on September 15, 1999.
On July 1, 1998, the Company issued $200,000,000 of 11-1/4% Senior
Notes due 2008 for aggregate net proceeds of approximately $193,400,000
(net of discounts to the initial purchasers and offering expenses).
Interest is payable semi-annually on January 1 and July 1 of each year
commencing January 1, 1999. As of March 31, 1999 restricted cash
equivalents and investments include approximately $32,800,000 deposited
with an escrow agent that will be used to pay the first four semiannual
interest payments when due. An interest payment of $11,250,000 was made
in January 1999. Subject to significant exceptions, the Senior Notes
Indenture restricts, among other things, the Company's ability to incur
additional indebtedness and the use of proceeds there from, pay
dividends, make certain other restricted payments, incur certain liens
to secure indebtedness or engage in merger transactions.
NOTE 7 - COMPREHENSIVE INCOME
There were no material differences between net loss and comprehensive
loss during the three months ended March 31, 1999 and 1998.
NOTE 8 - SEGMENT INFORMATION
The Company currently operates eight Internet Data Centers throughout
the United States. The Company establishes these Internet Data Centers
using a consistent investment and operating model. As a result, the
expected long term economic characteristics and financial performance
are relatively similar, depending on the size of each Internet Data
Center. In particular, each data center provides the same Internet
related services to a similar type of customer who may locate their
servers in multiple data centers. As a result, the Company believes
these data centers represent one reportable segment under the
aggregation criteria of Statement of Financial Accounting Standards
("SFAS") No. 131, Disclosures About Segments of an Enterprise and
Related Information.
<TABLE>
<CAPTION>
March 31
------------------------
1999 1998
----------- -----------
<S> <C> <C>
Revenues............................................ $30,087 $7,105
Operating profit (loss): Internet Data Centers...... 4,592 (1,402)
Operating loss: Corporate areas..................... (21,219) (11,093)
Total Operating loss................................ (16,627) (12,495)
Total Assets: Internet Data Centers................. 77,184 25,376
Total Assets: Corporate assets...................... 449,108 87,648
Total Assets........................................ 526,292 113,024
</TABLE>
Note 9 - SUBSEQUENT EVENT
On April 12, 1999 the Company completed a two-for-one stock split
accomplished in the form of a stock dividend. Share and per share
amounts reflect the two-for-one stock split retroactively.
On April 21, 1999, Exodus entered into a definitive agreement to
acquire Cohesive Technology Solutions, Inc. for approximately $100
million in cash and common stock of the Company and the assumption of
Cohesive options. Cohesive is a technology professional services
organization with expertise in networking, web applications and
technology solutions. The Company expects this transaction, which is
subject to regulatory review and approval, to close in the third
quarter of 1999.
The Company expects to account for the purchase of Cohesive Technology
Solutions, Inc under the purchase method of accounting and anticipates
a significant portion of the purchase price will be allocated to
goodwill.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
This Form 10-Q contains forward-looking statements within the meaning
of Section 21E of the Securities Exchange Act of 1934 and Section 27A
of the Securities Act of 1933. Forward-looking statements are
identified by words such as "believes," "anticipates," "expects,"
"intends," "will," "may" and other similar expressions. In addition,
any statements which refer to expectations, projections or other
characterizations of future events or circumstances are forward-looking
statements. In addition, the section labeled "Factors Affecting Future
Results" consists primarily of forward-looking statements. We undertake
no obligation to revise forward-looking statements. Readers are urged
to review and consider carefully the various disclosures made by us in
this report and in the our other reports filed with the Securities and
Exchange Commission, including our 1998 Annual Report on Form 10-K,
that advise interested parties of risks and uncertainties that may
affect our business. These risks and uncertainties include the risk
that completion of the acquisition of Cohesive Technology Solutions,
Inc. ("Cohesive") will not be completed in a timely manner,
difficulties in achieving timely expansion of our network and opening
of additional Internet Data Centers, difficulties in executing our
current business plan, retaining customers and attracting new
customers, and difficulties in developing and deploying new services.
Our actual results may differ materially from any forward-looking
statements due to such risks and uncertainties.
Overview
We are a leading provider of Internet system and network management
solutions for enterprises with mission-critical Internet operations.
Our solutions include Internet Data Centers, network services and
managed services, that together provide the high performance,
scalability and expertise that enterprises need to optimize Internet
operations. We deliver our services from our geographically
distributed, state-of-the-art Internet Data Centers that are connected
through a high-performance Internet backbone network.
We are the successor to a Maryland corporation that was formed in
August 1992 to provide computer-consulting services. We began offering
server hosting and Internet connectivity services in late 1995, opened
our first dedicated Internet Data Center in August 1996 and introduced
managed services in 1997 and professional services, a subcategory of
managed services, in 1998. We have derived most of our revenues from
customers for whom we provide these services. Each of our Internet
Data Center customers initially purchases a subset of our service
offerings to address specific departmental or enterprise Internet
computing needs, and some of these customers purchase additional
services as the scale and complexity of their Internet operations
increase. We sell our services under contracts that typically have
minimum terms of one year. Customers pay monthly fees for the services
utilized, as well as one-time fees for installation and for equipment
they purchase from us.
We opened our first Internet Data Center in the San Francisco
metropolitan area in August 1996. Since that time, we have opened seven
additional domestic Internet Data Centers in the metropolitan areas of
New York (March 1997), San Francisco (second site-August 1997; third
site-June 1998), Seattle (September 1997), Los Angeles (October 1997),
Washington, D.C. (December 1997) and Boston (July 1998), and we have a
server hosting facility in London. We plan to open additional data
centers during the second quarter of 1999 in the following metropolitan
areas: Chicago, Seattle, Washington, D.C. and London. The building of
Internet Data Centers has required us to obtain substantial equity and
debt financing. See "-Factors Affecting Future Results-Our Substantial
Leverage and Debt Service Obligations Adversely Affect Our Cash Flow"
and "-Liquidity and Capital Resources" below.
In October 1998, we purchased the assets of Arca Systems, Inc.
("Arca"), a provider of advanced network and system security consulting
services. In February 1999, we acquired American Information Systems,
Inc. ("AIS"), a regional provider of co-location, Web hosting and
professional services. In April 1999, we entered into a definitive
agreement to acquire Cohesive Technology Solutions, Inc. We expect to
complete the acquisition of Cohesive during the third quarter of 1999.
We intend to expand domestically and internationally. In addition to
the data centers described above, we expect to open additional Internet
Data Centers in the United States and server hosting facilities in
Europe and Japan in 1999. Prior to building an Internet Data Center in
a new geographic region, we employ various means to evaluate the market
opportunity in a given location, including market research on Internet
usage statistics, the pre-selling of services into the proposed market
and analysis of specific financial criteria. We typically require at
least six months to select the appropriate location for an Internet
Data Center, construct the necessary facilities, install equipment and
telecommunications infrastructure, and hire the operations and sales
personnel needed to conduct business at that site. Expenditures related
to an Internet Data Center commence well before the Internet Data
Center opens, and it takes an extended period to approach break-even
capacity utilization at each site. As a result, we expect that
individual Internet Data Centers will experience losses for an excess
of one year from the time they are opened. We experience further losses
from sales personnel hired to test market our services in markets where
there is no, and may never be an, Internet Data Center. As a result, we
expect to make investments in expanding our business rapidly into new
geographic regions which, while potentially increasing our revenues in
the long term, will lead to significant losses for the foreseeable
future. See "-Factors Affecting Future Results-Rapid Expansion Produces
a Significant Strain on Our Business" for risks related to the
foregoing forward-looking statements.
Since we began to offer server hosting and Internet connectivity
services in 1995, we have experienced operating losses and negative
cash flows from operations in each quarterly and annual period. As of
March 31, 1999, we had an accumulated deficit of approximately $119
million. The revenue and income potential of our business and market is
unproven, and our limited operating history makes an evaluation of our
prospects and us difficult. We intend to invest in new Internet Data
Centers and other sites, product development, sales and marketing
programs, and therefore we believe that we will continue to experience
net losses on a quarterly and annual basis for the foreseeable future.
Companies, such as Exodus, in the new and rapidly evolving market for
Internet system and network management solutions encounter risks,
expenses and difficulties that affect their business and prospects.
There can be no assurance that we will ever achieve profitability on a
quarterly or an annual basis or will sustain profitability if achieved.
See "-Factors Affecting Future Results-Our Short Operating History and
Heavy Losses Make Our Business Difficult to Evaluate" for risks related
to the foregoing forward-looking statements.
RESULTS OF OPERATIONS
The following table sets forth certain statement of operations data as
a percentage of total revenues for the three month periods ended
March 31, 1999 and 1998. This information has been derived
from our unaudited condensed consolidated financial statements which,
in management's opinion, have been prepared on substantially the same
basis as the audited financial statements and include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the financial information for the quarters presented.
This information should be read in conjunction with the Condensed
Consolidated Financial Statements and accompanying Notes included in
this form 10-Q. The operating results in any quarter are not
necessarily indicative of the results to be expected for any future
period.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------
1999 1998
--------- ---------
<S> <C> <C>
Revenues......................... 100.0% 100.0%
Costs and expenses:
Cost of revenues............. 93.4% 139.1%
Marketing and sales.......... 34.1% 90.3%
General and administrative... 23.4% 37.4%
Product development.......... 4.4% 9.1%
--------- ---------
Total costs and expenses......... 155.3% 275.9%
--------- ---------
Operating loss................... (55.3%) (175.9%)
Net interest expense............. (18.4%) (11.6%)
--------- ---------
Net loss..................... (73.7%) (187.5%)
========= =========
</TABLE>
Revenues
Our revenues consist of (i) monthly fees from customer use of Internet
Data Center sites, network services and managed services, (ii) revenues
from sales of third-party equipment to customers and (iii) fees for
installation and certain professional services. Currently,
substantially all of our revenue is derived from services. Revenues
(other than installation fees, equipment sales to customers and certain
professional services) are generally billed and recognized ratably over
the term of the contract, which is generally one year. Installation
fees are typically recognized at the time the installation occurs, and
equipment revenues are typically recognized when the equipment is
delivered to the customer or placed into service at an Internet Data
Center. One-time professional service fees are typically recognized
when services are rendered. We sell third-party equipment to our
customers as an accommodation to facilitate their purchase of services.
Our revenues increased 323% to $30.1 million in the quarter ended March
31, 1999 from $7.1 million in the three-month period March 31, 1998.
This growth in revenues was the result of increases in the number of
new customers, substantially all of which were Internet Data Center
customers, increases in revenues from existing customers and revenue
contributions from ARCA and AIS.
Cost of Revenues
Our cost of revenues is comprised of our costs for our
backbone network and local telecommunications loops, depreciation,
salaries and benefits for our customer service and operations personnel
(customer service personnel, network engineers and professional
services personnel), rent, repairs and utilities related to our
Internet Data Centers and other sites and costs of third party
equipment sold to customers.
Cost of revenues increased 187% to $28.1 million for the three month
period ended March 31, 1999 from $9.9 million in the same period of the
prior year. These increases in cost of revenues in absolute dollars
were primarily the result of costs associated with hiring additional
employees, network costs, rent, utilities and other costs related to
the opening and expanding of Internet Data Centers. Our cost of
revenues as a percentage of revenues decreased to 93% for the three
months ended March 31, 1999 from 139% for the same period of the prior
year. This decline was due to our increase in revenue between
comparison periods. We expect that cost of revenues will continue to
increase in absolute dollars but will continue to decline as a
percentage of total revenue as existing costs are spread over more
substantial operations.
Marketing and Sales
Our marketing and sales expenses are comprised of salaries,
commissions and benefits for our marketing and sales personnel,
printing and advertising costs, public relations costs, consultants'
fees and travel and entertainment expenses.
Our marketing and sales expenses increased 60% to $10.3 million for the
three month period ended March 31, 1999 from $6.4 million in the same
period of the prior year. The increase in absolute dollars was the
result of hiring additional marketing and sales personnel, and expanding
marketing programs in connection with our expansion of our operations,
including the number and scope of our Internet system and network
management solutions. Our marketing and sales expense as a percentage
of revenues decreased to 34% for the three months ended March 31, 1999
from 90% for the same period of the prior year. This decline was due
to our significant increase in revenue between comparison periods. We
expect that marketing and sales expense will continue to decrease as
a percentage of total revenue as existing costs are spread over more
substantial operations.
General and Administrative
Our general and administrative expenses are comprised of salaries and
benefits for our administrative and management information systems
personnel and fees paid for recruiting.
Our general and administrative expenses increased to $7.1 million for
the three-month period ended March 31, 1999 from $2.7 million in the
same period of the prior year. The increase in absolute dollars was the
result of increased hiring of general and administrative personnel and
fees paid for recruiting. Salaries and benefits for general and
administrative personnel increased by approximately $2.2 million for
the three month period ended March 31, 1999 compared to the same period
of the prior year. Goodwill amortization increased by $613,000 for the
three month period ended March 31, 1999 compared to the same period of
the prior year. Recruiting fees increased by approximately $280,000 for
the three-month period ended March 31, 1999 compared to the same period
for the prior year. Our general and administrative expense as a
percentage of revenues decreased to 23% for the three-month period
ended March 31, 1999 from 37% for the same period of the prior year.
This decline was due to our significant increase in revenue between
comparison periods. We expect that general and administrative expense
will continue to decrease as a percentage of total revenue as existing
costs are spread over more substantial operations.
Product Development
Our product development expenses are comprised of salaries and
benefits for our product development personnel and fees paid to
consultants.
Our product development expenses increased 99% to $1.3 million for the
three month period ended March 31, 1999 from $645,000 in the same
period of the prior year. Our product development expenses grew
primarily because of the addition of product development personnel to
support our expanded service offerings. Our product development expense
as a percentage of revenues decreased to 4% for the three months ended
March 31, 1999 from 9% for the same period of the prior year. This
decline was due to our significant increase in revenue between
comparison periods.
Net Interest Expense
Our net interest expense increased to $5.5 million from $826,000 for
the three months ended March 31, 1999 compared to the same period of
the prior year. The increase in net interest expense was primarily the
result of interest expense associated with our senior notes which were
issued July 1, 1998 and our 5% convertible subordinated notes which
were issued March 3, 1999.
We expect that net interest expense will continue to increase as we
enter into additional equipment leases and loans, obtain additional
borrowings and long term debt and as interest income is reduced as a
result of the decline in our cash reserves to fund working capital
and other uses.
Stock Compensation Expense
During 1997, we recorded deferred stock compensation of
approximately $3.5 million in connection with the grant of certain
stock options from March through December 1997. This amount is
generally amortized over the 50-month vesting period of such options.
Of this amount, approximately $188,000 was amortized for the three
months ended March 31, 1999 while $378,000 was amortized for the same
period of the prior year. This amortization is being recorded in a
manner consistent with FASB Interpretation No. 28.
EBITDA
Our loss before interest, taxes, depreciation, amortization and
other non-cash charges ("EBITDA") was $10.9 million for the three
month period ended March 31, 1999 and $9.6 million for the same period of the
prior year. The increase in the level of EBITDA losses between the
comparison periods was due to increased expenditures needed
to support our growth in operations, including salaries and benefits
for additional employees, network costs, rent, utilities and other
costs related to the increase in the number of our Internet Data
Center sites as well as increased marketing and sales expenses, consulting
fees and professional services. Although EBITDA should not be used as
an alternative to operating loss or net cash provided by (used for)
operating activities, investing activities or financing activities,
each as measured under generally accepted accounting principles, our
management believes that EBITDA is an additional meaningful measure of
performance and liquidity.
Liquidity and Capital Resources
From inception through March 31, 1999, we have financed our operations
primarily through private sales of preferred stock, our initial public
offering in March 1998, our senior notes offering in July 1998, our
convertible subordinated notes offering in March 1999 and through
various types of equipment loans and lease lines and working capital
lines of credit. At March 31, 1999, our principal sources of liquidity
were $323.6 million of cash and cash equivalents. As of that date, we
also had equipment loans and lease lines and working capital lines of
credit under which we could borrow up to an additional aggregate of
$4.6 million for purchases of equipment and for working capital. As of
March 31, 1999, our total bank borrowings, equipment loans and lines of
credit facilities, capital lease obligations and senior notes were
$487.7 million. See Note 6 of Notes to Condensed Consolidated
Financial Statements.
Since we began to offer server-hosting services in 1995, we have had
significant negative cash flows from operating activities. Net cash
used for operating activities for the three months ended March 31, 1999
was $16.4 million, primarily due to net losses, offset in part by
increases in accounts payable, depreciation and amortization and
accrued expenses. This compares to net cash used for operating
activities for the three months ended March 31, 1998 of $7.8 million,
primarily due to net losses, offset in part by increases in accounts
payable, depreciation and amortization and accrued expenses.
Net cash used for investing activities for the three months ended March
31, 1999 was $44.4 million compared to $7.3 million as compared to the
same period of the prior year. Net cash used for investing activities
was due to capital expenditures for the continued construction of
Internet Data Centers and in the quarter ended March 31, 1999, the
acquisition of American Information Systems, Inc. Net cash provided by
financing activities for the three month period ended March 31, 1999
was $233.6 million, primarily due to the proceeds from our issuance of
$250 million of convertible subordinated notes. This compares to net
cash provided by financing activities for the three months ended March
31, 1998 of $79 million primarily due to the initial public offering.
As of March 31, 1999, we had commitments under capital leases and under
noncancellable operating leases of $18.1 million and $121.7 million,
respectively, through 2010. We intend to make significant expenditures
during the next 12 months primarily for property and equipment, in
particular equipment needed for existing and future Internet Data
Centers, as well as office equipment, computers and telephones. We
expect to finance such capital expenditures primarily through existing
and future equipment loans and lease lines and net proceeds from the
senior notes and convertible subordinated notes. We believe our working
capital and capital expenditure requirements over the next 12 months can be
met with existing cash and cash equivalents and short-term investments,
cash from sales of services and proceeds from existing and future
working capital lines of credit. We may enter into additional equipment
loans and capital leases. We may also seek to raise additional funds
through public or private financing, strategic relationships or other
arrangements. There can be no assurance that we will be successful
generating sufficient cash flows from operations or raising capital in
sufficient amounts on terms acceptable to us. See "-Factors Affecting
Future Results-Rapid Expansion Produces a Significant Strain on Our
Business."
Factors Affecting Future Results
Our Short Operating History and Heavy Losses Make Our Business Difficult to
Evaluate
Our limited operating history makes evaluating our business
operations and our prospects difficult. We began offering server
hosting and Internet connectivity services in 1995 and opened our first
dedicated Internet Data Center in August 1996. With such a short
operating history, our business model is still in an emerging state. We
have incurred operating losses and negative cash flows each quarter and
year since 1995. Our accumulated deficit was approximately $119 million
at March 31, 1999. We anticipate making significant investments in new
Internet Data Centers and network infrastructure, product development,
sales and marketing programs and personnel. We believe that we will
continue to experience net losses on a quarterly and annual basis for
the foreseeable future. We may also use significant amounts of cash to
acquire complementary businesses, products, services or technologies.
Although we have experienced significant growth in revenues in recent
periods, we do not believe that this growth rate is necessarily
indicative of future operating results. It is possible that we may
never achieve profitability on a quarterly or an annual basis.
Our Operating Results Have Fluctuated Widely and We Expect This to Continue
We have experienced significant fluctuations in our results of
operations on a quarterly and an annual basis. We expect to continue to
experience significant fluctuations due to a variety of factors, many
of which are outside of our control, including:
o demand for and market acceptance of our services;
o reliable continuity of service and network availability;
o the ability to increase bandwidth as necessary, both on our
network and at our interconnection points with other networks;
o costs related to the acquisition of network capacity and
arrangements for interconnections with third-party networks;
o customer retention and satisfaction;
o capacity utilization of our Internet Data Centers;
o the timing, magnitude and integration of acquisitions of
complementary businesses and assets;
o the timing of customer installations;
o the provision of customer discounts and credits;
o the mix of services sold by us;
o the timing and success of marketing efforts and service
introductions by us and our competitors;
o the timing and magnitude of capital expenditures, including
construction costs relating to the expansion of operations;
o the timely expansion of existing Internet Data Centers and
completion of new Internet Data Centers;
o the introduction by third parties of new Internet and networking
technologies;
o changes in our pricing policies and those of our competitors; and
o fluctuations in bandwidth used by customers.
In addition, a relatively large portion of our expenses are fixed in
the short-term, particularly with respect to telecommunications,
depreciation, certain substantial interest expenses, real estate and
personnel. Therefore, our results of operations are particularly
sensitive to fluctuations in revenues. Furthermore, if we were to
become unable to continue leveraging third party products in our
services offerings, our product development costs could increase
significantly. Finally, many of our customers are in an emerging stage,
and there is the possibility that we will not be able to collect
receivables on a timely basis.
Rapid Expansion Produces a Significant Strain on Our Business
The expansion of our network through the opening of additional
Internet Data Centers in geographically diverse locations is one of our
key strategies. We currently have eight Internet Data Centers located
in six metropolitan areas: Boston, San Francisco, New York, Los
Angeles, Seattle and Washington, D.C., and we have a server hosting
facility in the London metropolitan area. We expect to open additional
Internet Data Centers in the Chicago, Seattle, Washington, D.C. and
London metropolitan areas in the second quarter of 1999. We also expect
to open other data centers in the United States and server hosting
facilities in Europe and Japan in 1999. To successfully expand, we must
be able to assess markets, locate and secure new Internet Data Center
sites, install facilities and establish additional peering
interconnections with Internet service providers in a timely manner and
at a reasonable cost. To manage this expansion effectively, we must
continue to improve our operational and financial systems and expand,
train and manage our employee base. Our inability to establish
additional Internet Data Centers or effectively manage our expansion
would have a material adverse effect upon our business.
We expect to expend substantial resources for leases of real estate,
significant improvements of facilities, purchase of complementary
businesses, assets and equipment, implementation of multiple
telecommunications connections and hiring of network, administrative,
customer support and sales and marketing personnel with the
establishment of each new Internet Data Center. Moreover, we expect to
make significant investments in sales and marketing and the development
of new services as part of our expansion strategy. The failure to
generate sufficient cash flows or to raise sufficient funds may require
us to delay or abandon some or all of our development and expansion
plans or otherwise forego market opportunities, making it difficult for
us to respond to competitive pressures.
It usually takes us at least six months to select the appropriate
location for a new Internet Data Center, construct the necessary
facilities, install equipment and telecommunications infrastructure,
and hire operations and sales personnel. Expenditures commence well
before the Internet Data Center opens, and it takes an extended period
for us to approach break-even capacity utilization. As a result, we
expect that individual Internet Data Centers will experience losses for
in excess of one year from the time they are opened. We experience
further losses from sales personnel hired to test market our services
in markets where there is no Internet Data Center. Growth in the number
of our Internet Data Centers is likely to increase the amount and
duration of losses. In addition, if we do not attract customers to new
Internet Data Centers in a timely manner, or at all, our business would
be materially adversely affected.
We Must Manage Growth Effectively
We are experiencing, and expect to continue experiencing, rapid
growth with respect to the building of our Internet Data Centers and
network infrastructure expansion of our customer base and increase in
the number of employees. This growth has placed, and if it continues,
will place, a significant strain on our financial, management,
operational and other resources, including our ability to ensure
customer satisfaction. This expansion also requires significant time
commitment from our senior management and places a significant strain
on their ability to manage the existing business. In addition, we may
be required to manage multiple relationships with a growing number of
third parties as we seek to complement our service offerings. Our
ability to manage our growth effectively will require us to continue to
expand operating and financial procedures and controls, to replace or
upgrade our operational, financial and management information systems
and to attract, train, motivate and retain key employees. We have
recently hired many key employees and officers, and as a result, our
entire management team has worked together for only a brief time. If
our executives are unable to manage growth effectively, our business
could be materially adversely affected.
Risks Associated with Acquisitions
In October 1998 we acquired the assets of Arca and in February 1999
we acquired American Information Systems, Inc. We continue to expend
resources integrating these new businesses and the personnel hired in
connection with such acquisitions. In April 1999 we announced that we
had entered into a definitive agreement to acquire Cohesive Technology
Solutions, Inc. We believe that our future growth depends, in part,
upon the acquisition of complementary businesses, products, services or
technologies. If we buy a company, we could have difficulty in
assimilating that company's technology, personnel and operations. In
addition, the key personnel of the acquired company may decide not to
work for us. These difficulties could disrupt our ongoing business,
distract our management and employees and increase our expenses. In
addition, future acquisitions by us may result in the incurrence of
additional debt, large one-time write-offs and the creation of goodwill
or other intangible assets that could result in amortization expenses.
Our Substantial Leverage and Debt Service Obligations Adversely
Affect Our Cash Flow
We have substantial amounts of outstanding indebtedness, primarily from
our senior notes and convertible notes. There is the possibility that
we may be unable to generate cash sufficient to pay the principal of,
interest on and other amounts due in respect of our indebtedness when
due. As of March 31, 1999, we had indebtedness of approximately $487.7
million and available borrowings of up to an additional $4.6 million.
We also expect to add additional equipment loans and lease lines to
finance capital expenditures for our Internet Data Centers and may
obtain additional long term debt, working capital lines of credit and
lease lines. There can be no assurance that any such financing
arrangements will be available.
Our substantial leverage could have significant negative
consequences, including:
o increasing our vulnerability to general adverse economic and
industry conditions;
o limiting our ability to obtain additional financing;
o requiring the dedication of a substantial portion of our expected
cash flow from operations to service our indebtedness, thereby
reducing the amount of our expected cash flow available for other
purposes, including capital expenditures;
o limiting our flexibility in planning for, or reacting to, changes
in our business and the industry in which we compete; and
o placing us at a possible competitive disadvantage vis-a-vis less
leveraged competitors and competitors that have better access to
capital resources.
We Are Subject to Restrictive Covenants That Limit Our Flexibility
Our senior notes and convertible notes contain various restrictions on
our ability to incur indebtedness, pay dividends or make other
restricted payments, sell assets, enter into affiliate transactions and
take other actions. Furthermore, certain of our existing financing
arrangements are, and future financing arrangements may be, secured by
substantially all of our assets. The existing financing arrangements
require, and future financing arrangements are likely to require, that
we maintain certain financial ratios and comply with covenants
restricting our ability to incur indebtedness, pay dividends or make
other restricted payments, sell assets, enter into affiliate
transactions or take other actions.
In addition, the convertible notes proceeds may be used only for
limited purposes. Proceeds in the amount of $48.5 million may be used
for general corporate purposes. The remaining $194.5 million may be
used only to finance the purchase of assets or other businesses to
be used in our business.
We Compete With Much Larger Companies and There Are Few Barriers to
Entry
Our market is intensely competitive. There are few substantial
barriers to entry, and we expect to face additional competition from
existing competitors and new market entrants in the future. The
principal competitive factors in this market include:
o Internet system engineering and other expertise;
o customer service;
o network capability, reliability, quality of service and
scalability;
o the variety of services offered;
o access to network resources, including circuits, equipment
and interconnection capacity to other networks;
o broad geographic presence;
o price;
o the ability to maintain and expand distribution channels;
o brand name;
o the timing of introductions of new services;
o network security; and
o financial resources.
There can be no assurance that we will have the resources or
expertise to compete successfully in the future. Our current and
potential competitors in the market include:
o providers of server hosting services;
o national and regional ISPs;
o global, regional and local telecommunications companies and
Regional Bell Operating Companies; and
o large IT outsourcing firms.
Many of our competitors have substantially greater resources, more
customers, longer operating histories, greater name recognition and
more established relationships in the industry. As a result, these
competitors may be able to develop and expand their network
infrastructures and service offerings more quickly, devote greater
resources to the marketing and sale of their products and adopt more
aggressive pricing policies. In addition, these competitors have
entered and will likely continue to enter into business relationships
to provide additional services competitive with those we provide.
Some of our competitors may be able to provide customers with
additional benefits in connection with their Internet system and
network management solutions, including reduced communications costs,
which could reduce the overall costs of their services relative to
ours. We may not be able to offset the effects of any such price
reductions. In addition, we believe our market is likely to encounter
consolidation in the near future, which could result in increased price
and other competition.
Our Market Is New and Our Services May Not Be Generally Accepted
The market for Internet system and network management solutions has
only recently begun to develop, is evolving rapidly and is
characterized by an increasing number of market entrants. This market
may not prove to be viable or, if it becomes viable, may not continue
to grow. Our future growth depends on the willingness of enterprises to
outsource the system and network management of their mission-critical
Internet operations and our ability to market our services in a cost-
effective manner to a sufficiently large number of customers. If this
market fails to develop, or develops more slowly than expected, or if
our services do not achieve market acceptance, our business would be
materially and adversely affected. In addition, in order to be
successful we must be able to differentiate ourselves from our
competition through our service offerings.
System Failures Could Lead to Significant Costs
We must protect our network infrastructure and customers' equipment
against damage from human error, physical or electronic security
breaches, power loss and other facility failures, fire, earthquake,
flood, telecommunications failure, sabotage, vandalism and similar
events. Despite precautions we have taken, a natural disaster or other
unanticipated problems at one or more of our Internet Data Centers
could result in interruptions in our services or significant damage to
customer equipment. In addition, failure of any of our
telecommunications providers, such as MCI WorldCom or Qwest
Communications Corporation, to provide consistent data communications
capacity could result in interruptions in our services. Any damage to
or failure of our systems or service providers could result in
reductions in, or terminations of, services supplied to our customers,
which could have a material adverse effect on our business. In the
past, we have experienced interruptions in specific circuits within our
network resulting from events outside our control, which led to short-
term degradation in the level of performance of our network.
Customer Satisfaction is Critical to Our Success
Our customers demand a very high level of service. Our customer
contracts generally provide a limited service level warranty related to
the continuous availability of service on a 24 hours per day, seven
days per week basis. This warranty is generally limited to a credit
consisting of free service for a short period of time for disruptions
in Internet transmission services. To date, only a limited number of
customers have been entitled to this warranty. If we incur significant
warranty obligations in connection with system downtime, our liability
insurance may not be adequate to cover such expenses. As customers
outsource more mission-critical operations to us, we may be subject to
increased liability claims and customer dissatisfaction should our
systems fail or our customers otherwise become unsatisfied.
Our Ability to Expand Our Network Is Unproven
To satisfy customer requirements, we must continue to expand and adapt
our network infrastructure. We are dependent on MCI WorldCom and Qwest
and certain other telecommunications providers for our backbone
capacity, including our dedicated clear channel network. The expansion
and adaptation of our telecommunications infrastructure will require
substantial financial, operational and management resources as we
negotiate telecommunications capacity with network infrastructure
suppliers. Due to the limited deployment of our services to date, our
ability to connect and manage a substantially larger number of
customers at high transmission speeds is unknown. We have yet to prove
our network's ability to be scaled up to higher customer levels while
maintaining superior performance. Furthermore, it may be difficult for
us to quickly increase our network capacity in light of current
necessary lead times within the industry to purchase circuits and other
critical items. If we fail to achieve or maintain high capacity data
transmission circuits, consumer demand could shrink because of possible
degradation of service. In addition, as we upgrade our
telecommunications infrastructure to increase bandwidth available to
our customers, we expect to encounter equipment or software
incompatibility which may cause delays in implementation.
We Depend on Certain Network Interconnections
We rely on a number of public and private network interconnections,
commonly referred to as peering relationships, to allow our customers
to connect to other networks. If our peering partners were to
discontinue their support for the peering relationships, our ability to
exchange traffic would be significantly constrained. Furthermore, our
business will be adversely affected if these peering partners do not
add more bandwidth to accommodate increased traffic. Many of the
companies with which we maintain private peering interconnections are
our competitors. There is nothing to prevent any peering partners, many
of which are significantly larger than us, from charging high usage
fees or denying access. In the future, private peering partners could
refuse to continue to interconnect directly with us, might impose
significant costs on us or limit our customers access to their
networks. If we were unable on a cost-effective basis to access
alternative networks to exchange our customers' traffic or if we were
unable to pass through to our customers any additional costs of
utilizing these networks, our business could be materially adversely
affected.
Risks Associated with International Operations
A component of our strategy is to expand into international markets,
including Europe and Japan, and we currently have a server hosting site
in the London metropolitan area. We expect to open an Internet Data
Center in the London metropolitan area by the end of the second quarter
of 1999 and server hosting facilities in Europe and Japan by the end of
1999. In order to expand international operations, we may enter into
joint ventures or outsourcing agreements with third parties, acquire
rights to high-bandwidth transmission capability, acquire complementary
businesses or operations, or establish and maintain new operations
outside of the United States. Thus, we will depend on third parties to
be successful in our international operations. In addition, the rate of
development and adoption of the Internet has been slower outside of the
United States, and the cost of bandwidth has been higher, which may
adversely affect our ability to expand operations and may increase our
cost of operations internationally. The risks inherent in conducting
business internationally include:
o unexpected changes in regulatory requirements, export
restrictions, tariffs and other trade barriers;
o challenges in staffing and managing foreign operations;
o differences in technology standards;
o employment laws and practices in foreign countries;
o longer payment cycles and problems in collecting accounts
receivable;
o political instability;
o fluctuations in currency exchange rates and imposition of
currency exchange controls; and
o potentially adverse tax consequences.
Rapid Technological Change and Evolving Industry Standards
Our future success will depend on our ability to offer services that
incorporate leading technology and address the increasingly
sophisticated and varied needs of our current and prospective
customers. Our market is characterized by rapidly changing and unproven
technology, evolving industry standards, changes in customer needs,
emerging competition and frequent new service introductions. Future
advances in technology may not be beneficial to, or compatible with,
our business, and we may not be able to incorporate advances on a cost-
effective and timely basis. Moreover, technological advances may have
the effect of encouraging certain of our current or future customers to
rely on in-house personnel and equipment to furnish the services we
currently provide. In addition, keeping pace with technological
advances may require substantial expenditures and lead time.
We believe that our ability to compete successfully is also
dependent upon the continued compatibility and interoperability of our
services with products, services and architectures offered by various
vendors. Although we work with various vendors in testing newly
developed products, these products may not be compatible with our
infrastructure or adequate to address changing customer needs. For
instance, existing networking hardware may not be immediately
compatible with leading edge telecommunications infrastructure services
and therefore may require us to make significant investments to achieve
compatibility. Although we intend to support emerging standards,
industry standards may not be established or we may not be able to
timely conform to new standards. Our failure to conform to a prevailing
standard, or the failure of a common standard to emerge, could have a
material adverse effect on our business.
System Security Risks Could Disrupt Our Services
The ability to provide secure transmissions of confidential
information over networks accessible to the public is a significant
barrier to electronic commerce and communications. Certain of our
services rely on encryption and authentication technology licensed from
third parties. Despite a variety of network security measures taken by
us, we cannot assure that unauthorized access, computer viruses,
accidental or intentional actions and other disruptions will not occur.
Our Internet Data Centers have experienced and may in the future
experience delays or interruptions in service as a result of the
accidental or intentional actions of Internet users, current and former
employees or others. Furthermore, such inappropriate use of the network
by third parties could also jeopardize the security of confidential
information, such as customer and Exodus passwords as well as credit
card and bank account numbers, stored in our computer systems or those
of our customers. This could result in liability to us and the loss of
existing customers or the deterrence of potential customers. The costs
required to eliminate computer viruses and alleviate other security
problems could be prohibitively expensive and the efforts to address
such problems could result in interruptions, delays or cessation of
service to our customers.
We Depend on Third-Party Equipment and Software Suppliers
We depend on vendors to supply certain key components of our
telecommunications infrastructure and system and network management
solutions. Some of the telecommunications services and networking
equipment is available only from sole or limited sources. For instance,
the routers, switches and modems we use are currently supplied
primarily by Cisco Systems, Inc. We typically purchase or lease all of
our components under purchase orders placed from time to time. We do
not carry significant inventories of components and have no guaranteed
supply arrangements with vendors. Our failure to obtain required
products or services on a timely basis and at an acceptable cost would
have a material adverse effect on our business. In addition, the
failure of our sole or limited source suppliers to provide products or
components that comply with evolving Internet and telecommunications
standards or that interoperate with other products or components we use
could have a material adverse effect on our business. For example, we
have experienced performance problems, including previous unknown
software and firmware bugs, with routers and switches that have caused
temporary disruptions in and impairment of network performance. In
addition, we expect to depend for a time on third parties to deliver
our services from and manage our international operations, including
our site in London.
Government Regulation and Legal Uncertainties May Adversely Affect
Our Business
Laws and regulations directly applicable to communications and
commerce over the Internet are becoming more prevalent. The United
States Congress has recently considered Internet laws regarding
children's privacy, copyrights, taxation and the transmission of
sexually explicit material. The European Union also recently enacted
its own privacy regulations. The law of the Internet, however, remains
largely unsettled, even in areas where there has been some legislative
action. It may take years to determine whether and how existing laws
such as those governing intellectual property, privacy, libel and
taxation apply to the Internet. In addition, the growth and development
of the market for online commerce may prompt calls for more stringent
consumer protection laws, both in the United States and abroad, that
may impose additional burdens on companies conducting business online.
The adoption or modification of laws or regulations relating to the
Internet could adversely affect our business. We provide services over
the Internet in all states in the United States and in many foreign
countries, and we facilitate the activities of our customers in these
jurisdictions. As a result we may be required to qualify to do
business, or be subject to taxation, or be subject to other laws and
regulations, in these jurisdictions even if we do not have a physical
presence or employees or property in these jurisdictions. The
application of these multiple sets of laws and regulations is
uncertain, but we could find that Exodus is subject to regulation,
taxation, enforcement or other liability in unexpected ways, which
could materially adversely affect our business.
There are Risks Involved with the Information Disseminated through
Our Network
The law relating to the liability of online services companies and
Internet access providers for information carried on or disseminated
through their networks is currently unsettled. The Child Online
Protection Act of 1998 imposes criminal penalties and civil liability
on anyone engaged in the business of selling or transferring material
that is harmful to minors, by means of the World Wide Web, without
restricting access to such material by underage persons. Numerous
states have adopted or are currently considering similar types of
legislation. The imposition upon us and other Internet network
providers of potential liability for information carried on or
disseminated through systems could require us to implement measures to
reduce exposure to liability, which may require the expenditure of
substantial resources, or to discontinue certain service or product
offerings. Further, the costs of defending against any such claims and
potential adverse outcomes of such claims could have a material adverse
effect on our business. While we carry professional liability
insurance, it may not be adequate to compensate or may not cover us in
the event we become liable for information carried on or disseminated
through our networks.
Certain businesses, organizations and individuals have in the past
sent unsolicited commercial e-mails advertising sites hosted at our
facilities to massive numbers of people. This practice, known as
"spamming," has led to some complaints against us. In addition, certain
ISPs and other online services companies could deny network access to
us if we allow undesired content or spamming to be transmitted through
our networks. Although we prohibit customers by contract from spamming,
there can be no assurance that customers will not engage in this
practice, which could have a material adverse effect on our business.
We Depend on Our Key Personnel
Our success depends in significant part upon the continued services
of our key technical, sales and senior management personnel. Although
certain of our executive officers participate in our executive
employment policy, none of our officers is a party to an employment
agreement. Any officer or employee can terminate his or her
relationship at any time. The loss of the services of one or more of
our key employees or our failure to attract additional qualified
personnel could have a material adverse effect on our business. We do
not carry key-person life insurance for any of our employees.
We Depend on the Internet and Internet Infrastructure Development
Our success will depend in large part on continued growth in the use
of the Internet. Critical issues concerning the commercial use of the
Internet, including security, reliability, cost, ease of access,
quality of service and necessary increases in bandwidth availability,
remain unresolved and are likely to affect the development of the
market for our services. In addition, the rate of development and
adoption of the Internet has been slower outside of the United States
and the cost of bandwidth has been higher. The recent growth in the use
of the Internet has caused frequent periods of performance degradation,
requiring the upgrade of routers and switches, telecommunications links
and other components forming the infrastructure of the Internet by ISPs
and other organizations with links to the Internet. Any perceived
degradation in the performance of the Internet as a whole could
undermine the benefits of our services. Consequently, the emergence and
growth of the market for our services is dependent on improvements
being made to the entire Internet infrastructure to alleviate
overloading and congestion.
Risks Associated with Protection and Enforcement of Intellectual
Property Rights
We rely on a combination of copyright, trademark, service mark and
trade secret laws and contractual restrictions to establish and protect
certain proprietary rights in our products and services. We have no
patented technology that would preclude or inhibit competitors from
entering our market. Although we have entered into confidentiality
agreements with our employees, contractors, suppliers, distributors and
appropriate customers to limit access to and disclosure of our
proprietary information, these may prove insufficient to prevent
misappropriation of our technology or to deter independent third-party
development of similar technologies. In addition, the laws of certain
foreign countries may not protect our products, services or
intellectual property rights to the same extent as do the laws of the
United States.
In addition to licensing technologies from third parties, we are
developing and acquiring additional proprietary intellectual property.
Third parties may try to claim that our products or services infringe
their intellectual property. We expect that participants in our markets
will be increasingly subject to infringement claims. Any such claim,
whether meritorious or not, could be time consuming, result in costly
litigation, cause product installation delays or require us to enter
into royalty or licensing agreements. Such royalty or licensing
agreements might not be available on terms acceptable to us or at all.
Volatility of Our Stock Price
The market price of our common stock has fluctuated in the past and
is likely to continue to fluctuate. In addition, the securities
markets, particularly with respect to Internet stocks, have experienced
significant price and volume fluctuations.
Risk Related to the Year 2000 Problem
YEAR 2000 RISKS. The Year 2000 problem stems from the use of a two
digit date to represent the year (e.g., 85 = 1985) in computer software
and firmware. As a result, many currently installed computer systems
are not capable of distinguishing dates beginning with the year 2000
from dates prior to the year 2000. As a result, computer systems or
applications used by many companies in a wide variety of industries may
experience operating difficulties unless the systems or applications
are modified to process adequately information related to the date
change. Significant uncertainty exists in the software and other
industries concerning the scope and magnitude of problems associated
with the century change. To the extent Year 2000 issues cause
significant delays in or cancellation of decisions to purchase products
or product support, due to the reallocation of resources to address
Year 2000 issues or otherwise, our business could be materially
adversely affected.
We recognize the need to ensure our operations will not be adversely
impacted by Year 2000 issues. We have put into place a comprehensive
Year 2000 Risk Management initiative that is adequately funded, staffed
and managed. This initiative's scope covers both our information
technology (IT) systems and non-IT systems and addresses all areas of
the Year 2000 issues as defined by the Information Technology
Association of America (ITAA). Our internal inventory audit was
completed in January 1999. We plan to have an independent review of our
Year 2000 assessment completed in the second quarter of 1999, with
final Year 2000 compliance expected in the third quarter of 1999.
We have determined that our Internet Data Center equipment is either
currently Year 2000 compliant or that a funded replacement/upgrade plan
is in place to resolve known issues. Likewise, based on the on-going
assessment relative to our current software service offerings, we
believe that the current versions of these products are either Year
2000 compliant or will not require substantial effort or cost to make
them Year 2000 compliant by the end of the third quarter of 1999. We
have reviewed, and continue to review, internal management information
and other systems in order to identify and modify those products,
services or systems that may not be Year 2000 compliant. Based on our
assessment to date, we believe that internal management information and
other systems are either Year 2000 compliant or will not require
substantial effort or cost to make them Year 2000 compliant. We do not
foresee any issues with internal IT and internal non-IT systems being
Year 2000 compliant by the end of the third quarter of 1999.
Our Year 2000 initiative also addresses vendor relationships (both IT
and non-IT) and their readiness/preparedness relating to Year 2000
issues. IT vendors include software providers, hardware providers,
service providers, off the shelf software publishers and IT
consultants. Non-IT providers include electric power suppliers,
vendors of uninterruptable power supplies and generators,
telecommunications service and equipment providers, business partners,
facilities maintainers and other non-IT service contractors. In the
event that third parties cannot provide us with products, services or
systems that are Year 2000 compliant on a timely basis, our business
could be materially adversely affected. To date, we have not
discovered nor do we anticipate any material Year 2000 issues with
vendors and service providers. Evaluation of vendor Year 2000
preparedness is an on-going process. As our Year 2000 evaluation does
not evaluate our vendors' vendors nor our vendors' customer base
viability issues, we will be developing contingency plans to address
specific vendor/service provider concerns. Our contingency plan shall
be completed by September 30, 1999.
Many of our customers maintain their Internet operations on servers,
which may be impacted by Year 2000 complications. The failure of our
customers to ensure that their servers are Year 2000 compliant could
have a material adverse effect on our customers, which in turn could
have a material adverse effect on our business, if our customers are
forced to cease or interrupt Internet operations or experience
malfunctions related to their equipment.
We have established procedures for evaluating and managing the risks
and costs associated with this problem. Funding and execution for this
initiative is within our existing business units and operating budgets
and is not viewed as material. Based on our current assessment, we
believe the costs, excluding employee personnel time and effort, to
resolve Year 2000 issues, other than unanticipated liabilities, should
not exceed $500,000. We further estimate that the time and effort
required of our personnel to resolve Year 2000 issues will not be
material.
While we believe our Year 2000 initiative to be prudent, properly
funded and staffed and well-managed, there can be no assurance that we
will identify and remedy all Year 2000 problems in a timely fashion,
that any remedial efforts in this regard will not involve significant
time and expense, or that such problems will not have a material
adverse effect on our business.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We have limited exposure to financial market risks, including changes
in interest rates. The fair value of our investment portfolio or
related income would not be significantly impacted by a 100 basis
100 basis point increase or decrease in interest rates due mainly to
the short-term nature of the major portion of our investment portfolio.
An increase or decrease in interest rates would not significantly
increase or decrease interest expense on debt obligations due to the
fixed nature of our debt obligations. We do not currently have any
significant foreign operations and thus are not currently materially
exposed to foreign currency fluctuations.
II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
We are not a party to any material legal proceedings.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Use of Our Initial Public Offering Proceeds
Our initial public offering of Common Stock was effected through
a Registration Statement on Form S-1 (File No. 333-44469) that was declared
effective by the SEC on March 18, 1998 and pursuant to which we sold an
aggregate of 10,250,000 shares of our common stock.
As of March 31, 1999, we had used the estimated aggregate net
proceeds of $69.8 million from our initial public offering as follows:
Construction of plant, building and facilities: $1.0 million
Purchase and installation of machinery and equipment: $1.7 million
Purchases of real estate: $ 0
Acquisition of other businesses: $ 0
Repayment of indebtedness: $11.5 million
Working capital: $51.1 million
Temporary investments (short term, interest bearing
treasury securities): $4.5 million
Other purposes: $ 0
These amounts represent our best estimate of our use of proceeds
for the period indicated. No such payments were made to our directors
or officers or their associates, holders of 10% or more of any class
of our equity securities or to our affiliates.
Sale of Unregistered Note Proceeds
On March 3, 1999, we sold $250,000,000 principal amount of our
convertible subordinated notes due March 15, 2006 for approximately
$243 million (after underwriting discount) through a private offering
within the United States to qualified institutional buyers. Goldman,
Sachs & Co., BancBoston Robertson Stephens, BT Alex. Brown Incorporated,
Donaldson Lufkin & Jenrette Securities Corporation, and Hambrecht
and Quist LLC were the initial purchasers of the notes. The sale and
issuance of the notes were deemed exempt from registration under
Section 4(2) of the Securities Act of 1933. The notes are convertible
into our common stock at any time at a conversion rate of 21.8926 shares
(taking into account the two-for-one stock split on April 12, 1999) per
$1,000 principal amount of notes.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On March 18, 1999 we held a special meeting of stockholders. The
stockholders approved an amendment to our certificate of incorporation
to increase the authorized number of our shares of common stock from
50,000,000 to 100,000,000 by the vote indicated:
Votes For Votes Against Votes Abstained Broker Non-Votes
----------- ------------- ----------------- -----------------
31,790,372 219,316 4,994 --
ITEM 5. OTHER INFORMATION
On April 12, 1999 we completed a two-for-one stock split
accomplished in the form of a stock dividend. Share and per share
amounts in this document reflect the two-for-one stock split.
On April 21, 1999, we entered into a definitive agreement to
acquire Cohesive Technology Solutions, Inc. for $100 million. Cohesive
is a technology professional services organization with expertise in
networking, web applications and technology solutions. We expect to
close this transaction, which is subject to regulatory review and
approval, in the third quarter of 1999.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
a. Exhibits
Exhibit
No. Description of Exhibit
- ------ --------------------------------------------------------------------
3.04 Amendment to Certificate of Incorporation
4.05 Form of Note for Registrant's 5% Convertible Subordinated Notes.
4.06 Indenture between Exodus Communications, Inc. as Issuer and Chase
Manhattan Bank and Trust Company, National Association, as Trustee
dated March 1, 1999.
10.48 * WorldCom Data Services Revenue Plan effective February 1, 1999 between
WorldCom, Inc. and Registrant.
10.49 Building Lease dated January 29, 1999 between G&I Walsh
and Registrant.
10.50 Building Lease dated January 29, 1999 between Talus Corporation
and Registrant.
10.51 * Capacity Sales Agreement dated February 17, 1999 between Registrant
and MFS Cableco (Bermuda) Limited.
10.52 Building Lease dated March 26, 1999 between Lincoln-RECP CM-ES OPCO, LLC
and Registrant.
10.53 First Amendment to Lease Agreement dated April 4, 1999 between
Amdahl Corporation and Exodus Communications, Inc.
10.54 Purchase Agreement dated February 25, 1999 among Registrant,
Goldman, Sachs & Co., BancBoston Robertson Stephens Inc., BT Alex Brown
Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation and
Hambrecht & Quist LLC.
10.55 Registration Rights Agreement dated March 1, 1999 among Registrant,
Goldman, Sachs & Co., BancBoston Robertson Stephens Inc., BT Alex Brown
Incorporated, Donaldson, Lufkin & Jenrette Securities Corporation and
Hambrecht & Quist LLC.
10.56 * WorldCom Capacity Access Service Agreement dated February 17, 1999
between Registrant and Worldcom Technologies, Inc.
27.1 Financial Data Schedule
* Confidential treatment has been requested for certain portions of
this document pursuant to an application for confidential treatment
sent to the Securities and Exchange Commission. Such portions have been
redacted and marked with a triple asterisk. The non-redacted version of
this document has been sent to the Securities and Exchange Commission.
b. Reports on Form 8-K
On January 29, 1999, we filed a Form 8-K to report the adoption of
our stockholder rights plan. On February 22, 1999, we filed a Form 8-K
to report our intent to sell our 5% convertible subordinated notes, and
on March 2, 1999 we filed a Form 8-K to report the sale of our 5%
convertible subordinated notes.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
EXODUS COMMUNICATIONS, INC.
May 14, 1999 /s/ Ellen M. Hancock
- ---------------------------- --------------------------------------
Date Ellen M. Hancock
President, Chief Executive Officer
and Director
May 14, 1999 /s/ Richard S. Stoltz
- ---------------------------- --------------------------------------
Date Richard S. Stoltz
Chief Financial Officer and
Chief Operating Officer
(Duly Authorized Officer and Chief
Accounting Officer)
<PAGE>
EXHIBIT 3.04
RESTATED CERTIFICATE OF INCORPORATION
OF
EXODUS COMMUNICATIONS, INC.
(Originally incorporated on January 6, 1998)
Exodus Communications, Inc., a Delaware corporation, hereby
certifies that the Restated Certificate of Incorporation of the
corporation attached hereto as Exhibit A, which is incorporated herein by
this reference, and which restates, integrates and further amends the
provisions of the Restated Certificate of Incorporation of this
corporation, has been duly adopted by the corporation's Board of
Directors and stockholders in accordance with Sections 228, 242 and 245
of the Delaware General Corporation Law.
IN WITNESS WHEREOF, said corporation has caused this Restated
Certificate of Incorporation to be signed by its duly authorized officers
this 18th day of March, 1999.
EXODUS COMMUNICATIONS, INC.
a Delaware corporation
By:
Ellen M. Hancock,
President and Chief Executive
Officer
ATTEST:
Adam W. Wegner, Secretary
EXHIBIT A
RESTATED CERTIFICATE OF INCORPORATION
OF
EXODUS COMMUNICATIONS, INC.
ARTICLE I
The name of the corporation is Exodus Communications, Inc.
ARTICLE II
The address of the registered office of the corporation in the State
of Delaware is 1013 Centre Road, City of Wilmington, 19805, County of New
Castle. The name of its registered agent at that address is Corporation
Service Company.
ARTICLE III
The purpose of the corporation is to engage in any lawful act or
activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
ARTICLE IV
The total number of shares of all classes of stock which the
corporation has authority to issue is one hundred five million
(105,000,000) shares, consisting of two classes: one hundred million
(100,000,000) shares of Common Stock, $0.001 par value per share, and
five million (5,000,000) shares of Preferred Stock, $0.001 par value per
share.
The Board of Directors is authorized, subject to any limitations
prescribed by the law of the State of Delaware, to provide for the
issuance of the shares of Preferred Stock in one or more series, and, by
filing a certificate of designation pursuant to the applicable law of the
State of Delaware, to establish from time to time the number of shares to
be included in each such series, to fix the designation, powers,
preferences and rights of the shares of each such series and any
qualifications, limitations or restrictions thereof and to increase or
decrease the number of shares of any such series (but not below the
number of shares of such series then outstanding).
The number of authorized shares of Common Stock or Preferred Stock
may be increased or decreased (but not below the number of shares thereof
then outstanding) by the affirmative vote of the holders of a majority of
the stock of the corporation entitled to vote, unless a vote of any other
holders is required pursuant to a certificate or certificates
establishing a series of Preferred Stock.
Except as expressly provided in any certificate of designation
designating any series of Preferred Stock pursuant to the foregoing
provisions of this Article IV, any new series of Preferred Stock may be
designated, fixed and determined as provided herein by the Board of
Directors without approval of the holders of Common Stock or the holders
of Preferred Stock, or any series thereof, and any such new series may
have powers, preferences and rights, including, without limitation,
voting rights, dividend rights, liquidation rights, redemption rights and
conversion rights senior to, junior to or pari passu with the rights of
the Common Stock, the Preferred Stock, or any future class or series of
Preferred Stock or Common Stock.
If the certificate of designation creating a series of Preferred
Stock so provides, any shares of a series of Preferred Stock that are
acquired by the corporation, whether by redemption, purchase, conversion
or otherwise, so that such shares are issued but not outstanding, may not
be reissued as shares of such series or as shares of the class of
Preferred Stock. Upon the retirement of any such shares and the filing
of a certificate of retirement pursuant to Sections 103 and 243 of the
Delaware General Corporation Law with respect thereto, the shares of such
series shall be eliminated and the number of shares of Preferred Stock
shall be reduced accordingly.
ARTICLE V
The business and affairs of the corporation shall be managed by or
under the direction of the Board of Directors. The number of directors
shall be fixed from time to time exclusively by a resolution of the
Board of Directors adopted by the affirmative vote of a majority of the
total number of directors that the corporation would have if there were
no vacancies.
Any vacancy on the Board of Directors, however resulting, and any
newly created directorships resulting from any increase in the
authorized number of directors shall be filled only by the affirmative
vote of a majority of the directors then in office, even if less than a
quorum, or by a sole remaining director, unless the Board of Directors
determines that any such vacancies or newly created directorships shall
be filled by the stockholders.
The Board of Directors of the corporation shall have the power to
adopt, amend or repeal Bylaws of the corporation.
ARTICLE VI
Any action required or permitted to be taken by the stockholders
of the corporation may be effected at a duly called annual or special
meeting of such holders and may not be effected by any consent in
writing by such holders. Subject to the rights of the holders of any
class or series of Preferred Stock, special meetings of stockholders of
the corporation shall be called only by the Board of Directors or upon
the request of the Chairman of the Board of Directors or the Chief
Executive Officer of the corporation. If a special meeting is requested
by the Chairman of the Board of Directors or the Chief Executive
Officer, the Board of Director shall determine the time and the place of
such meeting, which shall be called for no less than 35 days nor more
than 120 days after the receipt by the Secretary of the corporation of
the request for such meeting.
Election of directors need not be by written ballot unless the
Bylaws of the corporation shall so provide.
ARTICLE VII
To the fullest extent permitted by law, no director of the
corporation shall be personally liable for monetary damages for breach of
fiduciary duty as a director. Without limiting the effect of the
preceding sentence, if the Delaware General Corporation Law is hereafter
amended to authorize the further elimination or limitation of the
liability of a director, then the liability of a director of the
corporation shall be eliminated or limited to the fullest extent
permitted by the Delaware General Corporation Law, as so amended.
Neither any amendment nor repeal of this Article VII, nor the
adoption of any provision of this Certificate of Incorporation
inconsistent with this Article VII, shall eliminate, reduce or otherwise
adversely affect any limitation on the personal liability of a director
of the corporation existing at the time of such amendment, repeal or
adoption of such an inconsistent provision.
ARTICLE VIII
Actions shall be taken by the corporation's stockholders only at
annual or special meetings of stockholders, and the corporation's
stockholders may not act by written consent.
EXHIBIT 4.05
THIS SECURITY AND ANY COMMON STOCK ISSUABLE UPON THE CONVERSION OF THIS
SECURITY HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY THAT IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY
BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THIS SECURITY AND ANY SHARES OF COMMON STOCK ISSUABLE UPON ITS
CONVERSION MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT (I) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER ACQUIRING FOR ITS OWN ACCOUNT OR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS
OF RULE 144A, (II) TO AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR"
WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT IN A TRANSACTION EXEMPT FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT, (III) PURSUANT TO THE EXEMPTION
FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED BY RULE 144
THEREUNDER (IF AVAILABLE), OR (IV) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT, AND IN EACH OF CASES (I) THROUGH
(IV) IN ACCORDANCE WITH ALL APPLICABLE SECURITIES LAWS OF THE STATES AND
OTHER JURISDICTION OF THE UNITED STATES.
THIS SECURITY, ANY SHARES OF COMMON STOCK ISSUABLE UPON ITS CONVERSION
AND ANY RELATED DOCUMENTATION MAY BE AMENDED OR SUPPLEMENTED FROM TIME
TO TIME TO MODIFY THE RESTRICTIONS ON RESALES AND OTHER TRANSFERS OF
THIS SECURITY AND ANY SUCH SHARES TO REFLECT ANY CHANGE IN APPLICABLE
LAW OR REGULATION (OR THE INTERPRETATION THEREOF) OR IN PRACTICES
RELATING TO THE RESALE OR TRANSFER OF RESTRICTED SECURITIES GENERALLY.
THE HOLDER OF THIS SECURITY AND ANY SUCH SHARES SHALL BE DEEMED BY THE
ACCEPTANCE OF THIS SECURITY AND ANY SUCH SHARES TO HAVE AGREED TO ANY
SUCH AMENDMENT OR SUPPLEMENT.
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE INDENTURE
HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE DEPOSITARY
OR A NOMINEE OF THE DEPOSITARY, WHICH MAY BE TREATED BY THE COMPANY, THE
TRUSTEE AND ANY AGENT THEREOF AS OWNER AND HOLDER OF THIS SECURITY FOR
ALL PURPOSES.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH
AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE REGISTERED FORM IN THE LIMITED CIRCUMSTANCES REFERRED TO IN
THE INDENTURE, THIS GLOBAL SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE
OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY
OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A
NOMINEE OF SUCH SUCCESSOR DEPOSITARY.
EXODUS COMMUNICATIONS, INC.
5% CONVERTIBLE SUBORDINATED NOTE DUE MARCH 15, 2006
No. R-2 $50,000,000
CUSIP NO. 302088 AC 3
EXODUS COMMUNICATIONS, INC., a corporation duly organized and existing
under the laws of the State of Delaware (herein called the "Company",
which term includes any successor Person under the Indenture referred to
on the reverse hereof), for value received, hereby promises to pay to
Cede & Co., or registered assigns, the principal sum of Fifty Million
United States Dollars (U.S.$50,000,000) (which principal amount may from
time to time be increased or decreased to such other principal amounts
(which, taken together with the principal amounts of all other
Outstanding Securities, shall not exceed $250,000,000 in the aggregate
at any time) by adjustments made on the records of the Trustee
hereinafter referred to in accordance with the Indenture) on March 15,
2006 and to pay interest thereon, from March 3, 1999, or from the most
recent Interest Payment Date (as defined below) to which interest has
been paid or duly provided for, semi-annually in arrears on March 15 and
September 15 in each year (each, an "Interest Payment Date"),
commencing September 15, 1999, at the rate of 5% per annum, until the
principal hereof is due, and at the rate of 7% per annum on any overdue
principal and premium, if any, and, to the extent permitted by law, on
any overdue interest. The interest so payable, and punctually paid or
duly provided for, on any Interest Payment Date will, as provided in the
Indenture, be paid to the Person in whose name this Security (or one or
more Predecessor Securities) is registered at the close of business on
the Regular Record Date for such interest, which shall be the March 1 or
September 1 (whether or not a Business Day), as the case may be, next
preceding such Interest Payment Date. Except as otherwise provided in
the Indenture, any such interest not so punctually paid or duly provided
for will forthwith cease to be payable to the Holder on such Regular
Record Date and may either be paid to the Person in whose name this
Security (or one or more Predecessor Securities) is registered at the
close of business on a Special Record Date for the payment of such
Defaulted Interest to be fixed by the Company, notice whereof shall be
given to Holders of Securities not less than 10 days prior to the
Special Record Date, or be paid at any time in any other lawful manner
not inconsistent with the requirements of any automated quotation system
or securities exchange on which the Securities may be quoted or listed,
and upon such notice as may be required by such exchange, all as more
fully provided in the Indenture. Payments of principal shall be made
upon the surrender of this Security at the option of the Holder at the
Corporate Trust Office of the Trustee, or at such other office or
agency of the Company as may be designated by it for such purpose in the
Borough of Manhattan, The City of New York, in such coin or currency of
the United States of America as at the time of payment shall be legal
tender for the payment of public and private debts, or at such other
offices or agencies as the Company may designate, by United States
Dollar check drawn on, or transfer to, a United States Dollar account
(such a transfer to be made only to a Holder of an aggregate principal
amount of Securities in excess of U.S.$2,000,000, and only if such
Holder shall have furnished wire instructions in writing to the Trustee
no later than 15 days prior to the relevant payment date). Payment of
interest on this Security may be made by United States Dollar check
mailed to the address of the Person entitled thereto as such address
shall appear in the Security Register, or, upon written application by
the Holder to the Security Registrar setting forth wire instructions not
later than the relevant Record Date, by transfer to a United States
Dollar account (such a transfer to be made only to a Holder of an
aggregate principal amount of Securities in excess of U.S. $2,000,000
and only if such Holder shall have furnished wire instructions in
writing to the Trustee no later than 15 days prior to the relevant
payment date).
Except as specifically provided herein and in the Indenture, the Company
shall not be required to make any payment with respect to any tax,
assessment or other governmental charge imposed by any government or any
political subdivision or taxing authority thereof or therein.
Reference is hereby made to the further provisions of this Security set
forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed by the
Trustee referred to on the reverse hereof or an Authenticating Agent by
the manual signature of one of their respective authorized signatories,
this Security shall not be entitled to any benefit under the Indenture
or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this Security to be duly
executed.
EXODUS COMMUNICATIONS, INC.
By:
___________________________________
Name: Ellen M. Hancock
Title: Chief Executive Officer and
President
Attest:
By:
___________________________________
Name: Adam W. Wegner
Title: Secretary
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the within-mentioned
Indenture.
Dated: March 3, 1999
CHASE MANHATTAN BANK AND TRUST
COMPANY, NATIONAL ASSOCIATION,
as Trustee
By: _______________________________________
Authorized Signatory
[REVERSE SIDE OF SECURITY]
This Security is one of a duly authorized issue of securities of the
Company designated as its "5% Convertible Subordinated Notes due March
15, 2006" (herein called the "Securities"), limited in aggregate
principal amount to U.S. $250,000,000, issued and to be issued under an
Indenture, dated as of March 1, 1999 (herein called the "Indenture"),
between the Company and Chase Manhattan Bank and Trust Company, National
Association, as Trustee (herein called the "Trustee", which term
includes any successor trustee under the Indenture), to which Indenture
and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Company, the Trustee, the holders of Senior
Indebtedness and the Holders of the Securities and of the terms upon
which the Securities are, and are to be, authenticated and delivered.
As provided in the Indenture and subject to certain limitations therein
set forth, Securities are exchangeable for a like aggregate principal
amount of Securities of any authorized denominations as requested by the
Holder surrendering the same upon surrender of the Security or
Securities to be exchanged, at the Corporate Trust Office of the
Trustee. The Trustee upon such surrender by the Holder will issue the
new Securities in the requested denominations.
No sinking fund is provided for the Securities. The Securities will not
be subject to redemption prior to March 20, 2001 and will be redeemable
on and after that date at the option of the Company, in whole or in
part, upon not less than 30 nor more than 60 days notice to the Holders
prior to the Redemption Date at the Redemption Prices (expressed as
percentages of the principal amount) set forth below; provided, however,
that the Securities will not be redeemable at the option of the Company
on or after March 20, 2001 and before March 20, 2003 unless the last
reported bid price for the Common Stock equals or exceeds 140% of the
conversion price for at least 20 trading days within a period of 30
consecutive trading days ending within five trading days of the call for
redemption.
The following table sets forth the Redemption Prices (expressed as
percentages of the principal amount) if such Security is redeemed during
the 12-month periods beginning on March 20 of the years indicated below:
YEAR REDEMPTION PRICE
----- ----------------
2001 103.57%
2002 102.86
2003 102.14
2004 101.43
2005 100.71
and thereafter at a Redemption Price equal to 100% of the principal
amount, together, in each case, with accrued interest to the Redemption
Date; provided, however, that interest installments on Securities whose
Stated Maturity is on or prior to such Redemption Date will be payable
to the Holders of such Securities, or one or more Predecessor
Securities, of record at the close of business on the relevant Record
Dates referred to on the face hereof, all as provided in the Indenture.
In the event of a redemption of the Securities, the Company will not be
required (a) to register the transfer or exchange of Securities for a
period of 15 days immediately preceding the date notice is given
identifying the serial numbers of the Securities called for such
redemption or (b) to register the transfer or exchange of any Security,
or portion thereof, called for redemption.
In any case where the due date for the payment of the principal of,
premium, if any, interest, or Liquidated Damages on any Security or the
last day on which a Holder of a Security has a right to convert his
Security shall be, at any Place of Payment or Place of Conversion as the
case may be, a day on which banking institutions at such Place of
Payment or Place of Conversion are authorized or obligated by law or
executive order to close, then payment of principal, premium, if any,
interest, or Liquidated Damages, or delivery for conversion of such
Security need not be made on or by such date at such place but may be
made on or by the next succeeding day at such place which is not a day
on which banking institutions are authorized or obligated by law or
executive order to close, with the same force and effect as if made on
the date for such payment or the date fixed for redemption or
repurchase, or by such last day for conversion, and no interest shall
accrue on the amount so payable for the period after such date.
Subject to and upon compliance with the provisions of the Indenture, the
Holder of this Security is entitled, at his option, at any time
following the initial issuance date of the Securities and on or before
the close of business on the date of Maturity, or in case this Security
or a portion hereof is called for redemption or the Holder hereof has
exercised his right to require the Company to repurchase this Security
or such portion hereof, then in respect of this Security until and
including, but (unless the Company defaults in making the payment due
upon redemption or repurchase, as the case may be) not after, the close
of business on the Redemption Date or the Repurchase Date, as the case
may be, to convert this Security (or any portion of the principal amount
hereof that is an integral multiple of U.S.$1,000, provided that the
unconverted portion of such principal amount is U.S.$1,000 or any
integral multiple of U.S.$1,000 in excess thereof) into fully paid and
nonassessable shares of Common Stock of the Company at an initial
Conversion Rate of 10.9463 shares of Common Stock for each U.S.$1,000
principal amount of Securities (or at the current adjusted Conversion
Rate if an adjustment has been made as provided in the Indenture) by
surrender of this Security, duly endorsed or assigned to the Company or
in blank, with the conversion notice hereon duly executed and, in case
such surrender shall be made during the period from the close of
business on any Regular Record Date next preceding any Interest Payment
Date to the opening of business on such Interest Payment Date (except if
this Security or portion thereof has been called for redemption on a
Redemption Date during the period from such Regular Record Date through
the date that is three Business Days following such Interest Payment
Date), also accompanied by payment in New York Clearing House or other
funds acceptable to the Company of an amount equal to the interest
payable on such Interest Payment Date on the principal amount of this
Security then being converted, to the Company at the Corporate Trust
Office of the Trustee, or at such other office or agency of the Company,
subject to any laws or regulations applicable thereto and subject to the
right of the Company to terminate the appointment of any Conversion
Agent (as defined below) as may be designated by it for such purpose in
the Borough of Manhattan, The City of New York, or at such other
offices or agencies as the Company may designate (each a "Conversion
Agent"). Subject, in the case of a conversion after the close of
business on the Regular Record Date next preceding any Interest Payment
Date and on or before the close of business on such Interest Payment
Date, to the right of the Holder of this Security (or any Predecessor
Security of record as of such Regular Record Date) to receive the
related installment of interest to the extent and under the
circumstances provided in the Indenture, no cash payment or adjustment
is to be made on conversion for interest accrued hereon from the
Interest Payment Date next preceding the day of conversion, or for
dividends on the Common Stock issued on conversion hereof. The Company
shall thereafter deliver to the Holder the fixed number of shares of
Common Stock (together with any cash adjustment, as provided in the
Indenture) into which this Security is convertible and such delivery
will be deemed to satisfy the Company's obligation to pay the principal
amount of this Security. No fractions of shares or scrip representing
fractions of shares will be issued on conversion, but instead of any
fractional interest (calculated to the nearest 1/100th of a share) the
Company shall pay a cash adjustment as provided in the Indenture. The
Conversion Rate is subject to adjustment as provided in the Indenture.
In addition, the Indenture provides that in case of certain
consolidations or mergers to which the Company is a party (other than a
consolidation or merger that does not result in any reclassification,
conversion, exchange or cancellation of the Common Stock) or the
conveyance, transfer, sale or lease of all or substantially all of the
property and assets of the Company, the Indenture shall be amended,
without the consent of any Holders of Securities, so that this
Security, if then Outstanding, will be convertible thereafter, during
the period this Security shall be convertible as specified above, only
into the kind and amount of securities, cash and other property
receivable upon such consolidation, merger, conveyance, transfer, sale
or lease by a holder of the number of shares of Common Stock of the
Company into which this Security could have been converted immediately
prior to such consolidation, merger, conveyance, transfer, sale or
lease (assuming such holder of Common Stock is not a Constituent Person
or an Affiliate of a Constituent Person, failed to exercise any rights
of election and received per share the kind and amount received per
share by a plurality of Non-electing Shares). No adjustment in the
Conversion Rate will be made until such adjustment would require an
increase or decrease of at least one percent of such rate, provided
that any adjustment that would otherwise be made will be carried
forward and taken into account in the computation of any subsequent
adjustment.
If this Security is a Registrable Security (as defined in this
Indenture), then the Holder of this Security (including any Person that
has a beneficial interest in this Security) and the Common Stock of the
Company issuable upon conversion hereof is entitled to the benefits of
the Registration Rights Agreement, dated as of March 1, 1999 (the
"Registration Rights Agreement"), between the Company and the Initial
Purchasers, as such agreement may be amended from time to time.
Pursuant to the Registration Rights Agreement, the Company has agreed
for the benefit of the Holders from time to time of the Registrable
Securities that it will, at its expense, (a) within 90 days after the
Issue Date file a shelf registration statement (the "Shelf Registration
Statement") with the Commission with respect to resales of the
Registrable Securities, (b) use all reasonable efforts to cause such
Shelf Registration Statement to be declared effective by the Commission
within 180 days after the Issue Date of the Securities, provided,
however, that the Company may, upon written notice to all the Holders,
postpone having the Shelf Registration Statement declared effective for
a reasonable period not to exceed 90 days if the Company possesses
material non-public information, the disclosure of which would have a
material adverse effect on the Company and its subsidiaries taken as a
whole, and (c) use all reasonable efforts to maintain such Shelf
Registration Statement effective under the Securities Act of 1933, as
amended, until the second annual anniversary of the date it is declared
effective or such earlier date as is provided in the Registration Rights
Agreement (the "Effectiveness Period"). The Company will be permitted
to suspend the use of the prospectus which is part of the Shelf
Registration Statement during certain periods of time as provided in
the Registration Rights Agreement.
If (i) on or prior to 90 days following the Issue Date, a Shelf
Registration Statement has not been filed with the Commission, or (ii)
on or prior to the 180th day following the Issue Date, such Shelf
Registration Statement is not declared effective (each, a "Registration
Default"), additional interest ("Liquidated Damages") will accrue on
this Restricted Security from and including the day following such
Registration Default to but excluding the day on which such Registration
Default has been cured. Liquidated Damages will be paid semi-annually in
arrears, with the first semi-annual payment due on the first Interest
Payment Date, as applicable, in respect of the Restricted Securities
following the date on which such Liquidated Damages begin to accrue, and
will accrue at a rate per annum equal to an additional one-quarter of
one percent (0.25%) of the principal amount of the Restricted Securities
to and including the 90th day following such Registration Default and at
a rate per annum equal to one-half of one percent (0.50%) thereof from
and after the 91st day following such Registration Default. Pursuant to
the Registration Rights Agreement, in the event that the Shelf
Registration Statement ceases to be effective (or the Holders of
Registrable Securities are otherwise prevented or restricted by the
Company from effecting sales pursuant thereto) (an "Effective Failure")
during the Effectiveness Period for more than 45 days, whether or not
consecutive, during any 90 day period, or for more than 90 days, whether
or not consecutive, during any 12-month period, then the interest rate
borne by the Restricted Securities shall increase by an additional
one-half of one percent (0.50%) per annum from the 46th day of the
applicable 90 day period or the 91st day of the applicable 12-month
period, as the case may be, until such time as the Effective Failure is
cured.
Whenever in this Security there is a reference, in any context, to the
payment of the principal of, premium, if any, or interest on, or in
respect of, any Security, such mention shall be deemed to include
mention of the payment of Liquidated Damages payable as described in the
preceding paragraph to the extent that, in such context, Liquidated
Damages are, were or would be payable in respect of such Security and
express mention of the payment of Liquidated Damages (if applicable) in
any provisions of this Security shall not be construed as excluding
Liquidated Damages in those provisions of this Security where such
express mention is not made.
If this Security is a Registrable Security and the Holder of this
Security (including any Person that has a beneficial interest in this
Security) elects to sell this Security pursuant to the Shelf
Registration Statement then, by its acceptance hereof, such Holder of
this Security agrees to be bound by the terms of the Registration Rights
Agreement relating to the Registrable Securities which are the subject
of such election.
If a Change in Control occurs, the Holder of this Security, at the
Holder's option, shall have the right, in accordance with the provisions
of the Indenture, to require the Company to repurchase this Security (or
any portion of the principal amount hereof that is an integral multiple
of $1,000 for cash at a Repurchase Price equal to 100% of the principal
amount thereof plus interest accrued to the Repurchase Date. At the
option of the Company, the Repurchase Price may be paid in cash or,
subject to the conditions provided in the Indenture, by delivery of
shares of Common Stock having a fair market value equal to the
Repurchase Price. For purposes of this paragraph, the fair market value
of shares of Common Stock shall be determined by the Company and shall
be equal to 95% of the average of the Closing Prices Per Share for the
five consecutive Trading Days immediately preceding and including the
third Trading Day prior to the Repurchase Date. Whenever in this
Security there is a reference, in any context, to the principal of any
Security as of any time, such reference shall be deemed to include
reference to the Repurchase Price payable in respect of such Security to
the extent that such Repurchase Price is, was or would be so payable at
such time, and express mention of the Repurchase Price in any provision
of this Security shall not be construed as excluding the Repurchase
Price so payable in those provisions of this Security when such express
mention is not made; provided, however, that, for the purposes of the
second succeeding paragraph, such reference shall be deemed to include
reference to the Repurchase Price only to the extent the Repurchase
Price is payable in cash.
In the event of a deposit or withdrawal of an interest in this Security,
including an exchange, transfer, redemption, repurchase or conversion of
this Security in part only, the Trustee, as custodian of the Depositary,
shall make an adjustment on its records to reflect such deposit or
withdrawal in accordance with the Applicable Procedures.
The indebtedness evidenced by this Security is, to the extent and in the
manner provided in the Indenture, subordinate and subject in right of
payment to the prior payment in full of all Senior Indebtedness of the
Company, and this Security is issued subject to such provisions of the
Indenture with respect thereto. Each Holder of this Security, by
accepting the same, (a) agrees to and shall be bound by such provisions,
(b) authorizes and directs the Trustee on his behalf to take such action
as may be necessary or appropriate to effectuate the subordination so
provided and (c) appoints the Trustee his attorney-in-fact for any and
all such purposes.
If an Event of Default shall occur and be continuing, the principal of
all the Securities, together with accrued interest to the date of
declaration, may be declared due and payable in the manner and with the
effect provided in the Indenture. Upon payment (i) of the amount of
principal so declared due and payable, together with accrued interest to
the date of declaration, and (ii) of interest on any overdue principal
and, to the extent permitted by applicable law, overdue interest, all of
the Company's obligations in respect of the payment of the principal of
and interest on the Securities shall terminate.
The Indenture permits, with certain exceptions as therein provided, the
amendment thereof and the modification of the rights and obligations of
the Company and the rights of the Holders of the Securities under the
Indenture at any time by the Company and the Trustee with either (a) the
written consent of the Holders of not less than a majority in principal
amount of the Securities at the time Outstanding, or (b) by the adoption
of a resolution, at a meeting of Holders of the Outstanding Securities
at which a quorum is present, by the Holders of at least 66-2/3% in
aggregate principal amount of the Outstanding Securities represented and
entitled to vote at such meeting. The Indenture also contains
provisions permitting the Holders of specified percentages in principal
amount of the Securities at the time Outstanding, on behalf of the
Holders of all the Securities, to waive compliance by the Company with
certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the
Holder of this Security shall be conclusive and binding upon such
Holder and upon all future Holders of this Security and of any Security
issued in exchange therefore or in lieu hereof whether or not notation
of such consent or waiver is made upon this Security or such other Security.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any
proceeding with respect to the Indenture or for the appointment of a
receiver or trustee or for any other remedy thereunder, unless such
Holder shall have previously given the Trustee written notice of a
continuing Event of Default, the Holders of not less than 25% in
principal amount of the Outstanding Securities shall have made written
request to the Trustee to institute proceedings in respect of such Event
of Default as Trustee and offered the Trustee reasonable indemnity and
the Trustee shall not have received from the Holders of a majority in
principal amount of the Securities Outstanding a direction inconsistent
with such request, and shall have failed to institute any such
proceeding, for 60 days after receipt of such notice, request and offer
of indemnity. The foregoing shall not apply to any suit instituted by
the Holder of this Security for the enforcement of any payment of
principal hereof, premiums if any, or interest (including Liquidated
Damages) hereon on or after the respective due dates expressed herein or
for the enforcement of the right to convert this Security as provided in
the Indenture.
No reference herein to the Indenture and no provision of this Security
or of the Indenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of, premium,
if any, and interest (including Liquidated Damages) on this Security at
the times, places and rate, and in the coin or currency, herein
prescribed or to convert this Security as provided in the Indenture.
As provided in the Indenture and subject to certain limitations therein
set forth, the transfer of this Security is registrable on the Security
Register upon surrender of this Security for registration of transfer
at the Corporate Trust Office of the Trustee or at such other office or
agency of the Company as may be designated by it for such purpose in the
Borough of Manhattan, The City of New York (which shall initially be an
office or agency of the Trustee), or at such other offices or agencies
as the Company may designate, duly endorsed by, or accompanied by a
written instrument of transfer in form satisfactory to the Company and
the Security Registrar duly executed by, the Holder thereof or his
attorney duly authorized in writing, and thereupon one or more new
Securities, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or
transferees by the Registrar. No service charge shall be made for any
such registration of transfer or exchange, but the Company may require
payment of a sum sufficient to recover any tax or other governmental
charge payable in connection therewith.
Prior to due presentation of a this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the
Trustee may treat the Person in whose name such Security is
registered, as the owner thereof for all purposes, whether or not such
Security be overdue, and neither the Company, the Trustee nor any such
agent shall be affected by notice to the contrary.
No recourse for the payment of the principal (and premium, if any) or
interest on this Security and no recourse under or upon any obligation,
covenant or agreement of the Company in the Indenture or any indenture
supplemental thereto or in any Security, or because of the creation of
any indebtedness represented thereby, shall be had against any
incorporator, stockholder, employee, agent, officer or director or
subsidiary, as such, past, present or future, of the Company or of any
successor corporation, either directly or through the Company or any
successor corporation, whether by virtue of any constitution, statute or
rule of law or by the enforcement of any assessment or penalty or
otherwise, all such liability being, by the acceptance hereof and as
part of consideration for the issue hereof, expressly waived and
released.
THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF
AMERICA, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS.
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.
<PAGE>
ABBREVIATIONS
The following abbreviations, when used in the inscription of the face of
this Security, shall be construed as though they were written out in
full according to applicable laws or regulations:
TEN COM as tenant in common
TEN ENT as tenants by the entireties (Cust)
JT TEN as joint tenants with right
of survivorship and not as
tenants in common
UNIF GIFT MIN ACT ____ Custodian _____
(Cust) (Minor)
under Uniform
Gifts to Minors Act _____
(State)
Additional abbreviations may also be used though not in the above list.
<PAGE>
ELECTION OF HOLDER TO REQUIRE REPURCHASE
(1) Pursuant to Article 14.1 of the Indenture, the undersigned hereby
elects to have this Security repurchased by the Company.
(2) The undersigned hereby directs the Trustee or the Company to pay
it or ______________ an amount in cash or, at the Company's
election, Common Stock valued as set forth in the Indenture, equal
to 100% of the principal amount to be repurchased (as set forth
below), plus interest accrued to the Repurchase Date, as provided
in the Indenture.
Dated: ______________
______________________________________
Signature(s)
Signature(s) must be guaranteed by an Eligible
Guarantor Institution with membership in an
approved signature guarantee program pursuant
to Rule 17Ad-15 under the Securities Exchange
Act of 1934.
______________________________________
Signature Guarantee
Principal amount to be repurchased (at least
U.S. $5,000 or an integral multiple of $1,000
in excess thereof): ___________________
Remaining principal amount following such
repurchase (not less than U.S. $1,000):
______________
NOTICE: The signature to the foregoing Election must correspond to the
Name as written upon the face of this Security in every particular,
without alteration or any change whatsoever.
<PAGE>
CONVERSION NOTICE
To: Exodus Communications, Inc.
The undersigned Holder of this Security hereby irrevocably
exercises the option to convert this Security, or any portion of the
principal amount hereof (which is U.S.$1,000 or an integral multiple of
U.S.$1,000 in excess thereof, provided that the unconverted portion of
such principal amount is U.S. $1,000 or any integral multiple of U.S.
$1,000 in excess thereof) below designated, into shares of Common Stock
in accordance with the terms of the Indenture referred to in this
Security, and directs that such shares, together with a check in payment
for any fractional share and any Securities representing any unconverted
principal amount hereof, be delivered to and be registered in the name
of the undersigned unless a different name has been indicated below. If
shares of Common Stock or Securities are to be registered in the name of
a Person other than the undersigned, (a) the undersigned will pay all
transfer taxes payable with respect thereto and (b) signature(s) must be
guaranteed by an Eligible Guarantor Institution with membership in an
approved signature guarantee program pursuant to Rule 17Ad-15 under the
Securities Exchange Act of 1934. Any amount required to be paid by the
undersigned on account of interest accompanies this Security.
Dated:__________________ ___________________________________
Signature(s)
Signature(s) must be guaranteed by an Eligible
Guarantor Institution with membership in an
approved signature guarantee program pursuant
to Rule 17Ad-15 under the Securities Exchange
Act of 1934.
_____________________________________
Signature Guarantee
If shares or Securities are to be registered in the name of a Person
other than the Holder, please
print such Person's name and address:
______________________________________
(Name)
______________________________________
(Address)
______________________________________
Social Security or other Identification
Number, if any.
If only a portion of the Securities is to be converted, please indicate:
1. Principal amount to be converted: U.S. $ ___________
2. Principal amount and denomination of Securities
representing unconverted principal amount to be issued:
Amount: U.S. $___________ Denominations: U.S. $____________
(U.S.$1,000 or any integral multiple of U.S.$1,000 in excess thereof,
provided that the unconverted portion of such principal amount is U.S.
$1,000 or any integral multiple of U.S. $1,000 in excess thereof)
<PAGE>
ASSIGNMENT
For value received ________________ hereby sell(s), assign(s) and
transfer(s) unto ________________ (Please insert social security or
other identifying number of assignee) the within Security, and hereby
irrevocably constitutes and appoints ____________________as attorney to
transfer the said Security on the books of the Company, with full power
of substitution in the premises.
Dated:_________________
______________________________________
Signature(s)
Signature(s) must be guaranteed by an Eligible
Guarantor Institution with membership in an
approved signature guarantee program pursuant
to Rule 17Ad-15 under the Securities Exchange
Act of 1934.
______________________________________
Signature Guarantee
EXHIBIT 4.06
____________________________________
EXODUS COMMUNICATIONS, INC.
ISSUER
TO
CHASE MANHATTAN BANK AND TRUST COMPANY, NATIONAL ASSOCIATION,
TRUSTEE
__________________
INDENTURE
Dated as of March 1, 1999
__________________
5% CONVERTIBLE SUBORDINATED NOTES DUE MARCH 15, 2006
_______________________________________
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION 1
SECTION I.1 Definitions 1
SECTION I. 2 Compliance Certificates And Opinions 11
SECTION I. 3 Form of Documents Delivered to The Trustee 11
SECTION I. 4 Acts of Holders of Securities 12
SECTION I.5 Notices, Etc. to Trustee and Company 14
SECTION I. 6 Notice to Holders of Securities; Waiver 15
SECTION I. 7 Effect of Headings and Table of Contents 15
SECTION I. 8 Successors and Assigns 15
SECTION I. 9 Separability Clause 16
SECTION I. 10 Benefits of Indenture 16
SECTION I. 11 Governing Law 16
SECTION I. 12 Legal Holidays 16
SECTION I. 13 Conflict With Trust Indenture Act 16
ARTICLE II SECURITY FORMS 17
SECTION II. 1 Form Generally 17
SECTION II. 2 Form of Security 18
SECTION II. 3 Form of Certificate of Authentication 31
SECTION II. 4 Form of Conversion Notice 32
SECTION II. 5 Form of Assignment 34
ARTICLE III THE SECURITIES 35
SECTION III. 1 Title and Terms 35
SECTION III. 2 Denominations 36
SECTION III. 3 Execution, Authentication, Delivery and Dating 36
SECTION III. 4 Global Securities; Non-global Securities; Book-entry
Provisions 36
SECTION III. 5 Registration; Registration of Transfer and Exchange;
Restrictions on Transfer 38
SECTION III. 6 Mutilated, Destroyed, Lost or Stolen Securities 42
SECTION III. 7 Payment of Interest; Interest Rights Preserved 43
SECTION III. 8 Persons Deemed Owners 44
SECTION III. 9 Cancellation 44
SECTION III. 10 Computation of Interest 44
SECTION III. 11 Cusip Numbers 44
ARTICLE IV SATISFACTION AND DISCHARGE 45
SECTION IV. 1 Satisfaction And Discharge of Indenture 45
SECTION IV. 2 Application of Trust Money 46
ARTICLE V REMEDIES 47
SECTION V. 1 Events of Default 47
SECTION V. 2 Acceleration of Maturity; Rescission and Annulment 48
SECTION V. 3 Collection of Indebtedness and Suits for Enforcement by
Trustee 49
SECTION V. 4 Trustee May File Proofs of Claim 50
SECTION V. 5 Trustee May Enforce Claims Without Possession of
Securities 51
SECTION V. 6 Application of Money Collected 51
SECTION V. 7 Limitation on Suits 52
SECTION V. 8 Unconditional Right of Holders to Receive Principal,
Premium and Interest and to Convert 52
SECTION V. 9 Restoration of Rights and Remedies 53
SECTION V. 10 Rights and Remedies Cumulative 53
SECTION V. 11 Delay or Omission Not Waiver 53
SECTION V. 12 Control by Holders of Securities 53
SECTION V. 13 Waiver of Past Defaults 54
SECTION V. 14 Undertaking for Costs 54
SECTION V. 15 Waiver of Stay, Usury or Extension Laws 54
ARTICLE VI THE TRUSTEE 55
SECTION VI. 1 Certain Duties and Responsibilities 55
SECTION VI. 2 Notice of Defaults 56
SECTION VI. 3 Certain Rights of Trustee 56
SECTION VI. 4 Not Responsible for Recitals or Issuance of Securities 57
SECTION VI. 5 May Hold Securities, Act as Trustee under Other Indentures 58
SECTION VI. 6 Money Held in Trust 58
SECTION VI. 7 Compensation and Reimbursement 58
SECTION VI. 8 Corporate Trustee Required; Eligibility 59
SECTION VI. 9 Resignation and Removal; Appointment of Successor 59
SECTION VI. 10 Acceptance of Appointment by Successor 61
SECTION VI. 11 Merger, Conversion, Consolidation or Succession to
Business 61
SECTION VI. 12 Authenticating Agents 61
SECTION VI. 13 Disqualification; Conflicting Interests 64
SECTION VI. 14 Preferential Collection of Claims Against Company 64
ARTICLE VII CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE 64
SECTION VII.1 Company May Consolidate, Etc., Only on Certain Terms 64
SECTION VII. 2 Successor Substituted 65
ARTICLE VIII SUPPLEMENTAL INDENTURES 65
SECTION VIII. 1 Supplemental Indentures Without Consent of Holders of
Securities 65
SECTION VIII. 2 Supplemental Indentures with Consent of Holders of
Securities 66
SECTION VIII. 3 Execution of Supplemental Indentures 67
SECTION VIII. 4 Effect of Supplemental Indentures 67
SECTION VIII. 5 Reference in Securities to Supplemental Indentures 68
SECTION VIII. 6 Notice of Supplemental Indentures 68
ARTICLE IX MEETINGS OF HOLDERS OF SECURITIES 68
SECTION IX. 1 Purposes for Which Meetings May Be Called 68
SECTION IX. 2 Call, Notice and Place of Meetings 68
SECTION IX. 3 Persons Entitled to Vote at Meetings 69
SECTION IX. 4 Quorum; Action 69
SECTION IX. 5 Determination of Voting Rights; Conduct and Adjournment
of Meetings 70
SECTION IX. 6 Counting Votes and Recording Action of Meetings 71
ARTICLE X COVENANTS 71
SECTION X. 1 Payment of Principal, Premium and Interest 71
SECTION X. 2 Maintenance of Offices or Agencies 71
SECTION X. 3 Money for Security Payments to Be Held in Trust 72
SECTION X. 4 Existence 73
SECTION X. 5 Maintenance of Properties 73
SECTION X. 6 Payment of Taxes and Other Claims 74
SECTION X. 7 Registration and Listing 74
SECTION X. 8 Statement by Officers as to Default 74
SECTION X. 9 Delivery of Certain Information 75
SECTION X. 10 Resale of Certain Securities 75
SECTION X. 11 Registration Rights 76
SECTION X. 11 Registration Rights 77
SECTION X. 12 Waiver of Certain Covenants 78
ARTICLE XI REDEMPTION OF SECURITIES 78
SECTION XI. 1 Right of Redemption 78
SECTION XI. 2 Applicability of Article 78
SECTION XI. 3 Election to Redeem; Notice to Trustee 78
SECTION XI. 4 Selection by Trustee of Securities to Be Redeemed 79
SECTION XI. 5 Notice of Redemption 79
SECTION XI. 6 Deposit of Redemption Price 80
SECTION XI. 7 Securities Payable on Redemption Date 80
SECTION XI. 8 Conversion Arrangement on Call for Redemption 81
ARTICLE XII CONVERSION OF SECURITIES 82
SECTION XII. 1 Conversion Privilege and Conversion Rate 82
SECTION XII. 2 Exercise of Conversion Privilege 82
SECTION XII. 3 Fractions of Shares 84
SECTION XII. 4 Adjustment of Conversion Rate 84
SECTION XII. 5 Notice of Adjustments of Conversion Rate 89
SECTION XII. 6 Notice of Certain Corporate Action 90
SECTION XII. 7 Company to Reserve Common Stock 91
SECTION XII. 8 Taxes on Conversions 91
SECTION XII. 9 Covenant as to Common Stock 91
SECTION XII. 10 Cancellation of Converted Securities 91
SECTION XII. 11 Provision in Case of Consolidation, Merger or Sale
of Assets 91
SECTION XII. 12 Rights Issued in Respect of Common Stock 92
SECTION XII. 13 Responsibility of Trustee for Conversion Provisions 93
ARTICLE XIII SUBORDINATION OF SECURITIES 94
SECTION XIII. 1 Securities Subordinate to Senior Indebtedness 94
SECTION XIII. 2 No Payment in Certain Circumstances, Payment over of
Proceeds upon Dissolution, Etc 94
SECTION XIII. 3 Prior Payment to Senior Indebtedness upon Acceleration
of Securities 96
SECTION XIII. 4 Payment Permitted If No Default 97
SECTION XIII. 5 Subrogation to Rights of Holders of Senior Indebtedness 97
SECTION XIII. 6 Provisions Solely to Define Relative Rights 97
SECTION XIII. 7 Trustee to Effectuate Subordination 98
SECTION XIII. 8 No Waiver of Subordination Provisions 98
SECTION XIII. 9 Notice to Trustee 98
SECTION XIII. 10 Reliance on Judicial Order or Certificate of
Liquidating Agent 99
SECTION XIII. 11 Trustee Not Fiduciary for Holders of Senior
Indebtedness 99
SECTION XIII. 12 Reliance by Holders of Senior Indebtedness on
Subordination Provisions 100
SECTION XIII. 13 Rights of Trustee as Holder of Senior
Indebtedness; Preservation of Trustee's Rights 100
SECTION XIII. 14 Article Applicable to Paying Agents 100
SECTION XIII. 15 Certain Conversions and Repurchases Deemed Payment 100
ARTICLE XIV REPURCHASE OF SECURITIES AT THE OPTION OF THE HOLDER
UPON A CHANGE IN CONTROL 101
SECTION XIV. 1 Right to Require Repurchase 101
SECTION XIV. 2 Conditions to the Company's Election to Pay the Repurchase
Price in Common Stock 102
SECTION XIV. 3 Notices; Method of Exercising Repurchase Right, Etc 103
SECTION XIV. 4 Certain Definitions 106
SECTION XIV. 5 Consolidation, Merger, etc 107
ARTICLE XV HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY;
NON-RECOURSE 108
SECTION XV. 1 Company to Furnish Trustee Names and Addresses of Holders 108
SECTION XV. 2 Preservation of Information 108
SECTION XV. 3 Reserved 108
SECTION XV. 4 Reports by Trustee 108
SECTION XV. 5 Reports by Company 109
ARTICLE XVI IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND
DIRECTORS 109
SECTION XVI. 1 Indenture and Securities Solely Corporate Obligations 109
<PAGE>
INDENTURE, dated as of March 1, 1999, between EXODUS
COMMUNICATIONS, INC., a corporation duly organized and existing under the
laws of the State of Delaware, having its principal office at 2831
Mission College Boulevard, Santa Clara, California 95054 (herein called
the "Company"), and CHASE MANHATTAN BANK AND TRUST COMPANY, NATIONAL
ASSOCIATION, a national banking association, as Trustee hereunder (herein
called the "Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of
its 5% Convertible Subordinated Notes due March 15, 2006 (herein called
the "Securities") of substantially the tenor and amount hereinafter set
forth, and to provide therefor the Company has duly authorized the
execution and delivery of this Indenture.
All things necessary to make the Securities, when the
Securities are executed by the Company and authenticated and delivered
hereunder, the valid obligations of the Company, and to make this
Indenture a valid agreement of the Company, in accordance with their and
its terms, have been done. Further, all things necessary to duly
authorize the issuance of the Common Stock of the Company issuable upon
the conversion of the Securities, and to duly reserve for issuance the
number of shares of Common Stock issuable upon such conversion, have been
done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of
the Securities by the Holders thereof, it is mutually covenanted and
agreed, for the equal and proportionate benefit of all Holders of the
Securities, as follows:
ARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATIONARTICLE I
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
SECTION 1.1 Definitions . SECTION I.1 Definitions
For all purposes of this Indenture, except as otherwise
expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well as the
singular;
(2) all accounting terms not otherwise defined herein have
the meanings assigned to them in accordance with generally accepted
accounting principles in the United States, and, except as otherwise
herein expressly provided, the term "generally accepted accounting
principles" with respect to any computation required or permitted
hereunder shall mean such accounting principles as are generally accepted
at the date of such computation; and
(3) the words "herein", "hereof" and "hereunder" and
other words of similar import refer to this Indenture as a whole and not
to any particular Article, Section or other subdivision.
"Act", when used with respect to any Holder of a Security, has
the meaning specified in Section 1.4.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such specified Person. For the purposes of
this definition, "control", when used with respect to any specified
Person, means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Agent Member" means any member of, or participant in, the
Depositary.
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Global Security or beneficial interest therein,
the rules and procedures of The Depository Trust Company, in each case to
the extent applicable to such transaction and as in effect from time to
time.
"Authenticating Agent" means any Person authorized pursuant to
Section 6.12 to act on behalf of the Trustee to authenticate Securities.
"Board of Directors" means either the board of directors of the
Company or any duly authorized committee of that board.
"Board Resolution" means a resolution duly adopted by the Board
of Directors, a copy of which, certified by the Secretary or an Assistant
Secretary of the Company to have been duly adopted by the Board of
Directors and to be in full force and effect on the date of such
certification, shall have been delivered to the Trustee.
"Business Day", when used with respect to any Place of Payment,
Place of Conversion or any other place, as the case may be, means each
Monday, Tuesday, Wednesday, Thursday and Friday which is not a day on
which banking institutions in such Place of Payment, Place of Conversion
or other place, as the case may be, are authorized or obligated by law or
executive order to close; provided, however, that a day on which banking
institutions in New York, New York are authorized or obligated by law or
executive order to close shall not be a Business Day for purposes of
Section 13.9.
"Change in Control" has the meaning specified in Section 14.4(2).
"Closing Price Per Share" means, with respect to the Common
Stock, for any day, (i) the last reported bid price regular way on the
Nasdaq National Market or, (ii) if the Common Stock is not quoted on the
Nasdaq National Market, the last reported sale price regular way per
share or, in case no such reported sale takes place on such day, the
average of the reported closing bid and asked prices regular way, in
either case, on the principal national securities exchange on which the
Common Stock is listed or admitted to trading, or (iii) if the Common
Stock is not quoted on the Nasdaq National Market or listed or admitted
to trading on any national securities exchange, the average of the
closing bid prices in the over-the-counter market as furnished by any New
York Stock Exchange member firm selected from time to time by the Company
for that purpose.
"Code" has the meaning specified in Section 2.l.
"Commission" means the United States Securities and Exchange
Commission, as from time to time constituted, created under the Exchange
Act, or, if at any time after the execution of this instrument such
Commission is not existing and performing the duties now assigned to it
under the Trust Indenture Act, then the body performing such duties at
such time.
"Common Stock" means the Common Stock, par value $0.001 per
share, of the Company authorized at the date of this instrument as
originally executed. Subject to the provisions of Section 12.11, shares
issuable on conversion or repurchase of Securities shall include only
shares of Common Stock or shares of any class or classes of common stock
resulting from any reclassification or reclassifications thereof;
provided, however, that if at any time there shall be more than one such
resulting class, the shares so issuable on conversion of Securities shall
include shares of all such classes, and the shares of each such class
then so issuable shall be substantially in the proportion which the total
number of shares of such class resulting from all such reclassifications
bears to the total number of shares of all such classes resulting from
all such reclassifications.
"Common stock" includes any stock of any class of capital stock
which has no preference in respect of dividends or of amounts payable in
the event of any voluntary or involuntary liquidation, dissolution or
winding up of the issuer thereof and which is not subject to redemption
by the issuer thereof.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become
such pursuant to the applicable provisions of this Indenture, and
thereafter "Company" shall mean such successor Person.
"Company Request" or "Company Order" means a written request or
order signed in the name of the Company by its (i) Chairman of the Board,
its Vice Chairman of the Board, its Chief Executive Officer, its
President, an Executive Vice President or a Vice President, and by its
(ii) principal financial officer, Treasurer, an Assistant Treasurer, its
Secretary or an Assistant Secretary, and delivered to the Trustee.
"Constituent Person" has the meaning specified in Section 12.11.
"Conversion Agent" means any Person authorized by the Company to
convert Securities in accordance with Article XII. The Company has
initially appointed the Trustee as its Conversion Agent pursuant to
Section 10.2 hereof.
"Conversion Price" has the meaning specified in Section 14.4(3).
"Conversion Rate" has the meaning specified in Section 12.1.
"Corporate Trust Office" means the office of the Trustee at which
at any particular time the trust created by this Indenture shall be
principally administered (which at the date of this Indenture is located
at 101 California Street, Suite 2725, San Francisco, CA 94111, Attention:
Corporate Trust Administration (Exodus Communications, Inc., 5%
Convertible Subordinated Notes due March 15, 2006)).
"Corporation" means a corporation, company, association,
joint-stock company or business trust.
"Defaulted Interest" has the meaning specified in Section 3.7.
"Depositary" means, with respect to any Securities (including any
Global Securities), a clearing agency that is registered as such under
the Exchange Act and is designated by the Company to act as Depositary
for such Securities (or any successor securities clearing agency so
registered).
"Designated Senior Debt" means the Company's obligations in
respect of (x) the Company's 11 1/4% Senior Notes due 2008 and (y) any
particular Senior Indebtedness in which the instrument creating or
evidencing the same or the assumption or guarantee thereof (or related
agreements or documents to which the Company is a party) expressly
provides that such Senior Indebtedness shall be "Designated Senior
Debt" for purposes of this Indenture (provided that such instrument,
agreement or other document may place limitations and conditions on the
right of such Senior Indebtedness to exercise the rights of Designated
Senior Debt).
"Distribution Date" shall mean the "Distribution Date" as such
term is defined in the Rights Agreement.
"Dollar" or "U.S. $" means a dollar or other equivalent unit in
such coin or currency of the United States as at the time shall be legal
tender for the payment of public and private debts.
"DTC" means The Depository Trust Company, a New York corporation.
"Effective Failure" has the meaning specified in Section 10.11.
"Effectiveness Period" has the meaning specified in Section
10.11.
"Event of Default" has the meaning specified in Section 5.1.
"Exchange Act" means the United States Securities Exchange Act of
1934 (or any successor statute), as amended from time to time.
"Global Security" means a Security that is registered in the
Security Register in the name of a Depositary or a nominee thereof.
"Holder" means the Person in whose name the Security is
registered in the Security Register.
"Indenture" means this instrument as originally executed or as it
may from time to time be supplemented or amended by one or more
indentures supplemental hereto entered into pursuant to the applicable
provisions hereof, including, for all purposes of this instrument and any
such supplemental indenture, the provisions of the Trust Indenture Act
that are deemed to be a part of and govern this instrument and any such
supplemental indenture, respectively.
"Initial Purchasers" means Goldman, Sachs & Co., BancBoston
Robertson Stephens Inc., BT Alex. Brown Incorporated, Donaldson, Lufkin &
Jenrette Securities Corporation and Hambrecht & Quist LLC.
"Interest Payment Date" means the Stated Maturity of an
installment of interest on the Securities.
"Issue Date" means March 3, 1999.
"Liquidated Damages" has the meaning specified in Section 10.11.
"Maturity", when used with respect to any Security, means the
date on which the principal of such Security becomes due and payable as
therein or herein provided, whether at the Stated Maturity or by
declaration of acceleration, call for redemption, exercise of the
repurchase right set forth in Article XIV or otherwise.
"Non-electing Share" has the meaning specified in Section 12.11.
"Notice of Default" has the meaning specified in Section 5.1.
"Offer to Purchase" has the meaning specified in Section 14.3
"Officers' Certificate" means a certificate signed by (i) the
Chairman of the Board, a Vice Chairman of the Board, the Chief Executive
Officer, the President, an Executive Vice President or a Vice President
and by (ii) the principal financial officer, the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary of the Company, and
delivered to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may
be counsel for the Company and who shall be acceptable to the Trustee.
"Outstanding", when used with respect to Securities, means, as of
the date of determination, all Securities theretofore authenticated and
delivered under this Indenture, except:
(i) Securities theretofore canceled by the
Trustee or delivered to the Trustee for cancellation;
(ii) Securities for the payment or redemption of
which money in the necessary amount has been theretofore deposited with
the Trustee or any Paying Agent (other than the Company) in trust or set
aside and segregated in trust by the Company (if the Company shall act as
its own Paying Agent) for the Holders of such Securities, provided that
if such Securities are to be redeemed, notice of such redemption has been
duly given pursuant to this Indenture or provision therefor satisfactory
to the Trustee has been made;
(iii) Securities which have been paid pursuant to
Section 3.6 or in exchange for or in lieu of which other Securities have
been authenticated and delivered pursuant to this Indenture, other than
any such Securities in respect of which there shall have been presented
to the Trustee proof satisfactory to it that such Securities are held by
a bona fide purchaser in whose hands such Securities are valid
obligations of the Company; and
(iv) Securities converted into Common Stock pursuant to Article XII;
provided, however, that in determining whether the Holders of the
requisite principal amount of Outstanding Securities are present at a
meeting of Holders of Securities for quorum purposes or have given any
request, demand, authorization, direction, notice, consent or waiver
hereunder, Securities owned by the Company or any other obligor upon the
Securities or any Affiliate of the Company or such other obligor shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Trustee shall be protected in relying upon any such
determination as to the presence of a quorum or upon any such request,
demand, authorization, direction, notice, consent or waiver, only
Securities which a Responsible Officer of the Trustee has been notified
in writing to be so owned shall be so disregarded. Securities so owned
which have been pledged in good faith may be regarded as Outstanding if
the pledgee is not the Company or any other obligor upon the Securities
or any Affiliate of the Company or such other obligor, and the Trustee
shall be protected in relying upon an Officer's Certificate to such
effect.
"Paying Agent" means any Person authorized by the Company to pay
the principal of or interest on any Securities on behalf of the Company
and, except as otherwise specifically set forth herein, such term shall
include the Company if it shall act as its own Paying Agent. The Company
has initially appointed the Trustee as its Paying Agent pursuant to
Section 10.2 hereof.
"Payment Blockage Notice" has the meaning specified in Section
13.2.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, trust, estate, unincorporated
organization or government or any agency or political subdivision
thereof.
"Place of Conversion" has the meaning specified in Section 3.1.
"Place of Payment" has the meaning specified in Section 3.1.
"Predecessor Security" of any particular Security means every
previous Security evidencing all or a portion of the same debt as that
evidenced by such particular Security; and, for the purposes of this
definition, any Security authenticated and delivered under Section 3.6 in
exchange for or in lieu of a mutilated, destroyed, lost or stolen
Security shall be deemed to evidence the same debt as the mutilated,
destroyed, lost or stolen Security.
"Purchase Agreement" means the Purchase Agreement, dated as of
February 25, 1999, between the Company and the Initial Purchasers, as
such agreement may be amended from time to time.
"Qualified Institutional Buyer" shall mean a "qualified
institutional buyer" as defined in Rule 144A.
"Record Date" means any Regular Record Date or Special Record
Date.
"Record Date Period" means the period from the close of business
of any Regular Record Date next preceding any Interest Payment Date to
the opening of business on such Interest Payment Date.
"Redemption Date", when used with respect to any Security to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Security to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
"Registrable Securities" has the meaning specified in Section
10.11.
"Registration Default" has the meaning specified in Section
10.11.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of March 1, 1999, between the Company and the Initial
Purchasers, as such agreement may be amended from time to time.
"Regular Record Date" for interest payable in respect of any
Security on any Interest Payment Date means the March 1 or September 1
(whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date.
"Representative" means the (a) indenture trustee or other
trustee, agent or representative for any Senior Indebtedness or (b) with
respect to any Senior Indebtedness that does not have any such trustee,
agent or other representative, (i) in the case of such Senior
Indebtedness issued pursuant to an agreement providing for voting
arrangements as among the holders or owners of such Senior Indebtedness,
any holder or owner of such Senior Indebtedness acting with the consent
of the required persons necessary to bind such holders or owners of such
Senior Indebtedness and (ii) in the case of all other such Senior
Indebtedness, the holder or owner of such Senior Indebtedness.
"Repurchase Date" has the meaning specified in Section 14.1.
"Repurchase Price" has the meaning specified in Section 14.1.
"Responsible Officer", when used with respect to the Trustee,
means any officer within the Corporate Trust Office of the Trustee with
direct responsibility for the administration of this Indenture and also
means, with respect to a particular corporate trust matter, any other
officer to whom such matter is referred because of his knowledge and
familiarity with the particular subject.
"Restricted Global Security" has the meaning specified in Section
2.1.
"Restricted Securities" means all Securities required pursuant to
Section 3.5(3) to bear any Restricted Securities Legend. Such term
includes the Restricted Global Security.
"Restricted Securities Certificate" means a certificate
substantially in the form set forth in Annex A.
"Restricted Securities Legend" means, collectively, the legends
substantially in the forms of the legends required in the form of
Security set forth in Section 2.2 to be placed upon each Restricted
Security.
"Rule 144A" means Rule 144A under the Securities Act (or any
successor provision), as it may be amended from time to time.
"Rule 144A Information" has the meaning specified in Section
10.9.
"Securities" has the meaning ascribed to it in the first
paragraph under the caption "Recitals of the Company".
"Securities Act" means the United States Securities Act of 1933
(or any successor statute), as amended from time to time.
"Security Register" and "Security Registrar" have the respective
meanings specified in Section 3.5.
"Senior Indebtedness" means the principal of (and premium, if
any) and interest (including all interest accruing subsequent to the
commencement of any bankruptcy or similar proceeding, whether or not a
claim for post-petition interest is allowable as a claim in any such
proceeding) rent and end of term payments payable on, and, to the extent
not included in the foregoing, all amounts payable as fees, costs,
expenses, liquidated damages, indemnities, repurchase and other put
obligations and other amounts to the extent accrued or due, in connection
with the following, whether secured or unsecured, due or to become due,
outstanding on the date of this Indenture or thereafter created, incurred
or assumed: (a) indebtedness of the Company evidenced by a credit or
loan agreement, note, bond, debenture or other written obligation, (b)
all obligations of the Company for money borrowed, (c) all obligations of
the Company evidenced by a note or similar instrument given in connection
with the acquisition of any businesses, properties or assets of any kind,
(d) obligations of the Company (i) as lessee under leases required to be
capitalized on the balance sheet of the lessee under generally accepted
accounting principles and (ii) as lessee under other leases for
facilities, capital equipment or related assets, whether or not
capitalized, entered into or leased for financing purposes, (e) all
obligations of the Company under interest rate and currency swaps, caps,
floors, collars, hedge agreements, forward contracts or similar
agreements or arrangements, (f) all obligations of the Company with
respect to letters of credit, bankers' acceptances and similar facilities
(including reimbursement obligations with respect to the foregoing), (g)
all obligations of the Company issued or assumed as the deferred purchase
price of property or services (but excluding trade accounts payable and
accrued expenses arising in the ordinary course of business), (h) all
obligations of the type referred to in clauses (a) through (g) above of
another Person and all dividends of another Person, the payment of which,
in either case, the Company has assumed or guaranteed, or for which the
Company is responsible or liable, directly or indirectly, jointly or
severally, as obligor, guarantor or otherwise, or which is secured by a
lien on the property of the Company, and (i) renewals, extensions,
modifications, replacements, restatements and refundings of, or any
indebtedness or obligation issued in exchange for, any such indebtedness
or obligation described in clauses (a) through (h) of this paragraph;
provided, however, that Senior Indebtedness shall not include the
Securities or any such indebtedness or obligation if the terms of such
indebtedness or obligation (or the terms of the instrument under which,
or pursuant to which it is issued) expressly provide that such
indebtedness or obligation is not superior in right of payment to the
Securities.
"Shelf Registration Statement" has the meaning specified in
Section 10.11.
"Significant Subsidiary" means, with respect to any Person, a
Subsidiary of such Person that would constitute a "significant
subsidiary" as such term is defined under Rule 1-02 of Regulation S-X
under the Securities Act and the Exchange Act.
"Special Record Date" for the payment of any Defaulted Interest
means a date fixed by the Company pursuant to Section 3.7.
"Stated Maturity", when used with respect to any Security or any
installment of interest thereon, means the date specified in such
Security as the fixed date on which the principal of such Security or
such installment of interest is due and payable.
"Subsidiary" means a corporation more than 50% of the outstanding
voting stock of which is owned, directly or indirectly, by the Company or
by one or more other Subsidiaries, or by the Company and one or more
other Subsidiaries. For the purposes of this definition, "voting stock"
means stock or other similar interests in the corporation which
ordinarily has or have voting power for the election of directors, or
persons performing similar functions, whether at all times or only so
long as no senior class of stock or other interests has or have such
voting power by reason of any contingency.
"Successor Security" of any particular Security means every
Security issued after, and evidencing all or a portion of the same debt
as that evidenced by, such particular Security; and, for the purposes of
this definition, any Security authenticated and delivered under Section
3.6 in exchange for or in lieu of a mutilated, destroyed, lost or stolen
Security shall be deemed to evidence the same debt as the mutilated,
destroyed, lost or stolen Security.
"Surrender Certificate" means a certificate substantially in the
form set forth in Annex C.
"Trading Day" means (i) if the Common Stock is quoted on the
Nasdaq National Market or any other system of automated dissemination of
quotations of securities prices, days on which trades may be effected
through such system, (ii) if the Common Stock is listed or admitted for
trading on any national or regional securities exchange, days on which
such national or regional securities exchange is open for business, or
(iii) if the Common Stock is not listed on a national or regional
securities exchange or quoted on the Nasdaq National Market or any other
system of automated dissemination of quotation of securities prices, days
on which the Common Stock is traded regular way in the over-the-counter
market and for which a closing bid and a closing asked price for the
Common Stock are available.
"Trust Indenture Act" means the Trust Indenture Act of 1939, and
the rules and regulations thereunder, as in force at the date as of which
this instrument was executed, provided, however, that in the event the
Trust Indenture Act of 1939 is amended after such date, "Trust Indenture
Act" means, to the extent required by any such amendment, the Trust
Indenture Act of 1939, and the rules and regulations thereunder, as so
amended.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become
such pursuant to the applicable provisions of this Indenture, and
thereafter "Trustee" shall mean such successor Trustee.
"United States" means the United States of America (including the
States and the District of Columbia), its territories, its possessions
and other areas subject to its jurisdiction (its "possessions"
including Puerto Rico, the U.S. Virgin Islands, Guam, American Samoa,
Wake Island and the Northern Mariana Islands).
"Unrestricted Securities Certificate" means a certificate
substantially in the form set forth in Annex B.
"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number
or a word or words added before or after the title "vice president".
SECTION 1.2 Compliance Certificates And Opinions
Upon any application or request by the Company to the Trustee to
take any action under any provision of this Indenture, the Company shall
furnish to the Trustee an Officers' Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating to
the proposed action have been complied with and an Opinion of Counsel
stating that in the opinion of such counsel all such conditions
precedent, if any, have been complied with, except that in the case of
any such application or request as to which the furnishing of such
documents is specifically required by any provision of this Indenture
relating to such particular application or request, no additional
certificate or opinion need be furnished.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (including
certificates provided for in Section 10.8) shall include:
(1) a statement that each individual signing such
certificate or opinion has read such covenant or condition and the
definitions herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such individual, he
has made such examination or investigation as is necessary to enable him
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 1.3 Form of Documents Delivered to The Trustee
In any case where several matters are required to be certified by,
or covered by an opinion of, any specified Person, it is not necessary
that all such matters be certified by, or covered by the opinion of, only
one such Person, or that they be so certified or covered by only one
document, but one such Person may certify or give an opinion with respect
to some matters and one or more other such Persons as to other matters,
and any such Person may certify or give an opinion as to such matters in
one or several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or
opinion of, or representations by, counsel, unless such officer knows, or
in the exercise of reasonable care should know, that the certificate or
opinion or representations with respect to the matters upon which such
certificate or opinion is based are erroneous. Any such certificate or
opinion of counsel may be based, insofar as it relates to factual
matters, upon a certificate or opinion of, or representations by, an
officer or officers of the Company or any other Person stating that the
information with respect to such factual matters is in the possession of
the Company or such other Person, unless such counsel knows, or in the
exercise of reasonable care should know, that the certificate or opinion
or representations with respect to such matters are erroneous.
Where any Person is required to make, give or execute two or more
applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be
consolidated and form one instrument.
SECTION 1.4 Acts of Holders of Securities
(1) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided or permitted by this Indenture
to be given or taken by Holders of Securities may be embodied in and
evidenced by (A) one or more instruments of substantially similar tenor
signed by such Holders in person or by an agent or proxy duly appointed
in writing by such Holders or (B) the record of Holders of Securities
voting in favor thereof, either in person or by proxies duly appointed in
writing, at any meeting of Holders of Securities duly called and held in
accordance with the provisions of Article IX. Such action shall become
effective when such instrument or instruments or record is delivered to
the Trustee and, where it is hereby expressly required, to the Company.
The Trustee shall promptly deliver to the Company copies of all such
instruments and records delivered to the Trustee. Such instrument or
instruments and records (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders
of Securities signing such instrument or instruments and so voting at
such meeting. Proof of execution of any such instrument or of a writing
appointing any such agent or proxy, or of the holding by any Person of a
Security, shall be sufficient for any purpose of this Indenture and
(subject to Section 6.1) conclusive in favor of the Trustee and the
Company if made in the manner provided in this Section. The record of any
meeting of Holders of Securities shall be proved in the manner provided
in Section 9.6.
(2) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a witness of
such execution or by a certificate of a notary public or other officer
authorized by law to take acknowledgments of deeds, certifying that the
individual signing such instrument or writing acknowledged to him the
execution thereof. Where such execution is by a signer acting in a
capacity other than his individual capacity, such certificate or
affidavit shall also constitute sufficient proof of his authority.
(3) The principal amount and serial number of any Security
held by any Person, and the date of his holding the same, shall be proved
by the Security Register.
(4) The fact and date of execution of any such instrument
or writing and the authority of the Person executing the same may also be
proved in any other manner which the Trustee deems sufficient; and the
Trustee may in any instance require further proof with respect to any of
the matters referred to in this Section 1.4.
(5) The Company may, but shall not be obligated to, set any
day as the record date for the purpose of determining the Holders
entitled to give or take any request, demand, authorization, direction,
notice, consent, waiver or other action, or to vote on any action,
authorized or permitted by this Indenture to be given or taken by
Holders. Promptly and in any case not later than ten days after setting a
record date, the Company shall notify the Trustee and the Holders of such
record date. If not set by the Company prior to the first solicitation of
a Holder made by any Person in respect of any such action, or, in the
case of any such vote, prior to such vote, the record date for any such
action or vote shall be the 30th day (or, if later, the date of the most
recent list of Holders required to be provided pursuant to Section 15.1)
prior to such first solicitation or vote, as the case may be. With regard
to any record date, the Holders on such date (or their duly appointed
agents or proxies), and only such Persons, shall be entitled to give or
take, or vote on, the relevant action, whether or not such Holders remain
Holders after such record date. Notwithstanding the foregoing, the
Company shall not set a record date for, and the provisions of this
paragraph shall not apply with respect to, any notice, declaration or
direction referred to in the next paragraph. Nothing in this paragraph
shall prevent the Company from setting a new record date for any action
for which a record date has previously been set pursuant to this
paragraph (whereupon the record date previously set shall automatically
and with no action by any Person be canceled and of no effect), nor shall
anything in this paragraph be construed to render ineffective any action
taken by Holders of the requisite principal amount of Outstanding
Securities on the date such action is taken.
(6) Upon receipt by the Trustee from any Holder of (i) any
notice of default or breach referred to in Section 5.1(4), if such
default or breach has occurred and is continuing and the Trustee shall
not have given such a notice to the Company, (ii) any declaration of
acceleration referred to in Section 5.2, if an Event of Default has
occurred and is continuing and the Trustee shall not have given such a
declaration to the Company, or (iii) any direction referred to in Section
5.12, if the Trustee shall not have taken the action specified in such
direction, then, with respect to clauses (ii) and (iii), a record date
shall automatically and without any action by the Company or the Trustee
be set for determining the Holders entitled to join in such declaration
or direction, which record date shall be the close of business on the
tenth day (or, if such day is not a Business Day, the first Business Day
thereafter) following the day on which the Trustee receives such
declaration or direction, and, with respect to clause (i), the Trustee
may set any day as a record date for the purpose of determining the
Holders entitled to join in such notice of default. Promptly after such
receipt by the Trustee of any such declaration or direction referred to
in clause (ii) or (iii), and promptly after setting any record date with
respect to clause (i), and as soon as practicable thereafter, the
Trustee shall notify the Company and the Holders of any such record date
so fixed. The Holders on such record date (or their duly appointed agents
or proxies), and only such Persons, shall be entitled to join in such
notice, declaration or direction, whether or not such Holders remain
Holders after such record date; provided that, unless such notice,
declaration or direction shall have become effective by virtue of Holders
of the requisite principal amount of Securities on such record date (or
their duly appointed agents or proxies) having joined therein on or prior
to the 90th day after such record date, such notice, declaration or
direction shall automatically and without any action by any Person be
canceled and of no further effect. Nothing in this paragraph shall be
construed to prevent a Holder (or a duly appointed agent or proxy
thereof) from giving, before or after the expiration of such 90-day
period, a notice, declaration or direction contrary to or different from,
or, after the expiration of such period, identical to, the notice,
declaration or direction to which such record date relates, in which
event a new record date in respect thereof shall be set pursuant to this
paragraph. In addition, nothing in this paragraph shall be construed to
render ineffective any notice, declaration or direction of the type
referred to in this paragraph given at any time to the Trustee and the
Company by Holders (or their duly appointed agents or proxies) of the
requisite principal amount of Securities on the date such notice,
declaration or direction is so given.
(7) Except as provided in Sections 5.12 and 5.13, any
request, demand, authorization, direction, notice, consent, election,
waiver or other Act of the Holder of any Security shall bind every future
Holder of the same Security and the Holder of every Security issued upon
the registration of transfer thereof or in exchange therefor or in lieu
thereof in respect of anything done, omitted or suffered to be done by
the Trustee or the Company in reliance thereon, whether or not notation
of such action is made upon such Security.
(8) The provisions of this Section 1.4 are subject to the
provisions of Section 9.5.
SECTION 1.5 Notices, Etc. to Trustee and Company
Any request, demand, authorization, direction, notice, consent,
election, waiver or other Act of Holders of Securities or other document
provided or permitted by this Indenture to be made upon, given or
furnished to, or filed with,
(1) the Trustee by any Holder of Securities or by the
Company shall be sufficient for every purpose hereunder if made, given,
furnished or filed in writing to or with a Responsible Officer of the
Trustee and received at its Corporate Trust Office, Attention: Corporate
Trust Administration (Exodus Communications, Inc., 5% Convertible
Subordinated Notes due March 15, 2006).
(2) the Company by the Trustee or by any Holder of
Securities shall be sufficient for every purpose hereunder (unless
otherwise herein expressly provided) if in writing, mailed, first-class
postage prepaid, or telecopied and confirmed by mail, first-class postage
prepaid, or delivered by hand or overnight courier, addressed to the
Company at 2831 Mission College Boulevard, Santa Clara, California 95054,
Attention: General Counsel, or at any other address previously furnished
in writing to the Trustee by the Company.
SECTION 1.6 Notice to Holders of Securities;
Except as otherwise expressly provided herein, where this Indenture
provides for notice to Holders of Securities of any event, such notice
shall be sufficiently given to Holders if in writing and mailed,
first-class postage prepaid or delivered by an overnight delivery
service, to each Holder of a Security affected by such event, at the
address of such Holder as it appears in the Security Register, not
earlier than the earliest date and not later than the latest date
prescribed for the giving of such notice.
Neither the failure to mail such notice, nor any defect in any
notice so mailed, to any particular Holder of a Security shall affect the
sufficiency of such notice with respect to other Holders of Securities.
In case by reason of the suspension of regular mail service or by reason
of any other cause it shall be impracticable to give such notice by mail,
then such notification to Holders of Securities as shall be made with the
approval of the Trustee, which approval shall not be unreasonably
withheld, shall constitute a sufficient notification to such Holders for
every purpose hereunder.
Such notice shall be deemed to have been given when such notice is
mailed.
Where this Indenture provides for notice in any manner, such notice
may be waived in writing by the Person entitled to receive such notice,
either before or after the event, and such waiver shall be the equivalent
of such notice. Waivers of notice by Holders of Securities shall be filed
with the Trustee, but such filing shall not be a condition precedent to
the validity of any action taken in reliance upon such waiver.
SECTION 1.7 Effect of Headings and Table of Contents
The Article and Section headings herein and the Table of Contents
are for convenience only and shall not affect the construction hereof.
SECTION 1.8 Successors and Assigns
All covenants and agreements in this Indenture by the Company shall
bind its successors and assigns, whether so expressed or not.
SECTION 1.9 Separability Clause
In case any provision in this Indenture or the Securities shall be
invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be
affected or impaired thereby.
SECTION 1.10 Benefits of Indenture
Except as provided in the next sentence, nothing in this Indenture
or in the Securities, express or implied, shall give to any Person, other
than the parties hereto and their successors assigns hereunder and the
Holders of Securities, any benefit or legal or equitable right, remedy or
claim under this Indenture. The provisions of Article XIII are intended
to be for the benefit of, and shall be enforceable directly by, the
holders of Senior Indebtedness.
SECTION 1.11 Governing Law
THIS INDENTURE AND THE SECURITIES SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, THE
UNITED STATES OF AMERICA, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS
OF LAWS.
SECTION 1.12 Legal Holidays
In any case where any Interest Payment Date, Redemption Date,
Repurchase Date or Stated Maturity of any Security or the last day on
which a Holder of a Security has a right to convert his Security shall
not be a Business Day at a Place of Payment or Place of Conversion, as
the case may be, then (notwithstanding any other provision of this
Indenture or of the Securities) payment of principal of, premium, if any,
or interest on, or the payment of the Repurchase Price (whether the same
is payable in cash or in shares of Common Stock) with respect to, or
delivery for conversion of, such Security need not be made at such Place
of Payment or Place of Conversion, as the case may be, on or by such
day, but may be made on or by the next succeeding Business Day at such
Place of Payment or Place of Conversion, as the case may be, with the
same force and effect as if made on the Interest Payment Date,
Redemption Date or Repurchase Date, or at the Stated Maturity or by such
last day for conversion; provided, however, that in the case that payment
is made on such succeeding Business Day, no interest shall accrue on the
amount so payable for the period from and after such Interest Payment
Date, Redemption Date, Repurchase Date, Stated Maturity or last day for
conversion, as the case may be.
SECTION 1.13 Conflict With Trust Indenture Act
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act that is required under such Act to
be a part of and govern this Indenture, the latter provision shall
control. If any provision of this Indenture modifies or excludes any
provision of the Trust Indenture Act that may be so modified or excluded,
the latter provision shall be deemed to apply to this Indenture as so
modified or to be excluded, as the case may be. Until such time as this
Indenture shall be qualified under the Trust Indenture Act, this
Indenture, the Company and the Trustee shall be deemed for all purposes
hereof to be subject to and governed by the Trust Indenture Act to the
same extent as would be the case if this Indenture were so qualified on
the date hereof.
ARTICLE II
SECURITY FORMS
SECTION 2.1 Form Generally
The Securities shall be in substantially the form set forth in this
Article, with such appropriate insertions, omissions, substitutions and
other variations as are required or permitted by this Indenture, and may
have such letters, numbers or other marks of identification and such
legends or endorsements placed thereon as may be required to comply with
the rules of any securities exchange, the Internal Revenue Code of 1986,
as amended, and regulations thereunder (the "Code"), or as may,
consistent herewith, be determined by the officers executing such
Securities, as evidenced by their execution thereof. All Securities
shall be in fully registered form.
The Trustee's certificates of authentication shall be in
substantially the form set forth in Section 2.3.
Conversion notices shall be in substantially the form set forth in
Section 2.4.
Repurchase notices shall be substantially in the form set forth in
Section 2.2.
The Securities shall be printed, lithographed, typewritten or
engraved or produced by any combination of these methods or may be
produced in any other manner permitted by the rules of any automated
quotation system or securities exchange (including on steel engraved
borders if so required by any securities exchange upon which the
Securities may be listed) on which the Securities may be quoted or
listed, as the case may be, all as determined by the officers executing
such Securities, as evidenced by their execution thereof.
Upon their original issuance, Securities issued as contemplated by
the Purchase Agreement to Qualified Institutional Buyers in reliance on
Rule 144A shall be issued in the form of one or more Global Securities in
definitive, fully registered form without interest coupons and bearing
the Restricted Securities Legend. Such Global Security shall be
registered in the name of DTC, as Depositary, or its nominee and
deposited with the Trustee, as custodian for DTC, for credit by DTC to
the respective accounts of beneficial owners of the Securities
represented thereby (or such other accounts as they may direct). Such
Global Security, together with its Successor Securities which are Global
Securities, are collectively herein called the "Restricted Global
Security".
SECTION 2.2 Form of Security
[FORM OF FACE]
[THE FOLLOWING LEGEND SHALL APPEAR ON THE FACE OF EACH RESTRICTED
SECURITY:
THIS SECURITY AND ANY COMMON STOCK ISSUABLE UPON THE CONVERSION OF
THIS SECURITY HAVE NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THIS SECURITY THAT IS
A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IS HEREBY NOTIFIED THAT THE SELLER OF THIS SECURITY MAY
BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER.
THIS SECURITY AND ANY SHARES OF COMMON STOCK ISSUABLE UPON ITS
CONVERSION MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT (I) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER ACQUIRING FOR ITS OWN ACCOUNT OR THE ACCOUNT OF A
QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE REQUIREMENTS
OF RULE 144A, (II) TO AN INSTITUTION THAT IS AN "ACCREDITED INVESTOR"
WITHIN THE MEANING OF RULE 501(a)(1), (2), (3) OR (7) UNDER THE
SECURITIES ACT IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT, (III) PURSUANT TO THE EXEMPTION FROM REGISTRATION
UNDER THE SECURITIES ACT PROVIDED BY RULE 144 THEREUNDER (IF AVAILABLE),
OR (IV) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT, AND IN EACH OF CASES (I) THROUGH (IV) IN ACCORDANCE WITH
ALL APPLICABLE SECURITIES LAWS OF THE STATES AND OTHER JURISDICTION OF
THE UNITED STATES.
THIS SECURITY, ANY SHARES OF COMMON STOCK ISSUABLE UPON ITS
CONVERSION AND ANY RELATED DOCUMENTATION MAY BE AMENDED OR SUPPLEMENTED
FROM TIME TO TIME TO MODIFY THE RESTRICTIONS ON RESALES AND OTHER
TRANSFERS OF THIS SECURITY AND ANY SUCH SHARES TO REFLECT ANY CHANGE IN
APPLICABLE LAW OR REGULATION (OR THE INTERPRETATION THEREOF) OR IN
PRACTICES RELATING TO THE RESALE OR TRANSFER OF RESTRICTED SECURITIES
GENERALLY. THE HOLDER OF THIS SECURITY AND ANY SUCH SHARES SHALL BE
DEEMED BY THE ACCEPTANCE OF THIS SECURITY AND ANY SUCH SHARES TO HAVE
AGREED TO ANY SUCH AMENDMENT OR SUPPLEMENT.]
[THE FOLLOWING LEGEND SHALL APPEAR ON THE FACE OF EACH GLOBAL
SECURITY:
THIS SECURITY IS A GLOBAL SECURITY WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE
DEPOSITARY OR A NOMINEE OF THE DEPOSITARY, WHICH MAY BE TREATED BY THE
COMPANY, THE TRUSTEE AND ANY AGENT THEREOF AS OWNER AND HOLDER OF THIS
SECURITY FOR ALL PURPOSES.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), TO THE COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME
OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES
IN DEFINITIVE REGISTERED FORM IN THE LIMITED CIRCUMSTANCES REFERRED TO IN
THE INDENTURE, THIS GLOBAL SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF
THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR
BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A
NOMINEE OF SUCH SUCCESSOR DEPOSITARY.]
<PAGE>
EXODUS COMMUNICATIONS, INC.
5% CONVERTIBLE SUBORDINATED NOTE DUE MARCH 15, 2006
No._______________ $ ______________
CUSIP NO.______________
EXODUS COMMUNICATIONS, INC., a corporation duly organized and
existing under the laws of the State of Delaware (herein called the
"Company", which term includes any successor Person under the Indenture
referred to on the reverse hereof), for value received, hereby promises
to pay to _________________, or registered assigns, the principal sum of
________ United States Dollars (U.S.$______ ) [if this Security is a
Global Security, then insert -- (which principal amount may from time to
time be increased or decreased to such other principal amounts (which,
taken together with the principal amounts of all other Outstanding
Securities, shall not exceed $250,000,000 in the aggregate at any time)
by adjustments made on the records of the Trustee hereinafter referred to
in accordance with the Indenture)] on March 15, 2006 and to pay interest
thereon, from March 3, 1999, or from the most recent Interest Payment
Date (as defined below) to which interest has been paid or duly provided
for, semi-annually in arrears on March 15 and September 15 in each year
(each, an "Interest Payment Date"), commencing September 15, 1999, at
the rate of 5% per annum, until the principal hereof is due, and at the
rate of 7% per annum on any overdue principal and premium, if any, and,
to the extent permitted by law, on any overdue interest. The interest so
payable, and punctually paid or duly provided for, on any Interest
Payment Date will, as provided in the Indenture, be paid to the Person in
whose name this Security (or one or more Predecessor Securities) is
registered at the close of business on the Regular Record Date for such
interest, which shall be the March 1 or September 1 (whether or not a
Business Day), as the case may be, next preceding such Interest Payment
Date. Except as otherwise provided in the Indenture, any such interest
not so punctually paid or duly provided for will forthwith cease to be
payable to the Holder on such Regular Record Date and may either be paid
to the Person in whose name this Security (or one or more Predecessor
Securities) is registered at the close of business on a Special Record
Date for the payment of such Defaulted Interest to be fixed by the
Company, notice whereof shall be given to Holders of Securities not less
than 10 days prior to the Special Record Date, or be paid at any time in
any other lawful manner not inconsistent with the requirements of any
automated quotation system or securities exchange on which the Securities
may be quoted or listed, and upon such notice as may be required by such
exchange, all as more fully provided in the Indenture. Payments of
principal shall be made upon the surrender of this Security at the
option of the Holder at the Corporate Trust Office of the Trustee, or at
such other office or agency of the Company as may be designated by it for
such purpose in the Borough of Manhattan, The City of New York, in such
coin or currency of the United States of America as at the time of
payment shall be legal tender for the payment of public and private
debts, or at such other offices or agencies as the Company may designate,
by United States Dollar check drawn on, or transfer to, a United States
Dollar account (such a transfer to be made only to a Holder of an
aggregate principal amount of Securities in excess of U.S.$2,000,000, and
only if such Holder shall have furnished wire instructions in writing to
the Trustee no later than 15 days prior to the relevant payment date).
Payment of interest on this Security may be made by United States Dollar
check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register, or, upon written
application by the Holder to the Security Registrar setting forth wire
instructions not later than the relevant Record Date, by transfer to a
United States Dollar account (such a transfer to be made only to a Holder
of an aggregate principal amount of Securities in excess of U.S.
$2,000,000 and only if such Holder shall have furnished wire instructions
in writing to the Trustee no later than 15 days prior to the relevant
payment date).
Except as specifically provided herein and in the Indenture, the
Company shall not be required to make any payment with respect to any
tax, assessment or other governmental charge imposed by any government or
any political subdivision or taxing authority thereof or therein.
Reference is hereby made to the further provisions of this Security
set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
Unless the certificate of authentication hereon has been executed
by the Trustee referred to on the reverse hereof or an Authenticating
Agent by the manual signature of one of their respective authorized
signatories, this Security shall not be entitled to any benefit under the
Indenture or be valid or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this Security to be duly
executed.
EXODUS COMMUNICATIONS, INC.
By:__________________________________
Name:
Title:
Attest:
By:_______________________________
Name:
Title:
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities referred to in the within-mentioned Indenture.
Dated:
CHASE MANHATTAN BANK AND TRUST
COMPANY, NATIONAL ASSOCIATION,
as Trustee
By:__________________________________
Authorized Signatory
[FORM OF REVERSE]
This Security is one of a duly authorized issue of securities of
the Company designated as its "5% Convertible Subordinated Notes due
March 15, 2006" (herein called the "Securities"), limited in aggregate
principal amount to U.S. $250,000,000, issued and to be issued under an
Indenture, dated as of March 1, 1999 (herein called the "Indenture"),
between the Company and Chase Manhattan Bank and Trust Company, National
Association, as Trustee (herein called the "Trustee", which term
includes any successor trustee under the Indenture), to which Indenture
and all indentures supplemental thereto reference is hereby made for a
statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Company, the Trustee, the holders of Senior
Indebtedness and the Holders of the Securities and of the terms upon
which the Securities are, and are to be, authenticated and delivered. As
provided in the Indenture and subject to certain limitations therein set
forth, Securities are exchangeable for a like aggregate principal amount
of Securities of any authorized denominations as requested by the Holder
surrendering the same upon surrender of the Security or Securities to be
exchanged, at the Corporate Trust Office of the Trustee. The Trustee upon
such surrender by the Holder will issue the new Securities in the
requested denominations.
No sinking fund is provided for the Securities. The Securities
will not be subject to redemption prior to March 20, 2001 and will be
redeemable on and after that date at the option of the Company, in whole
or in part, upon not less than 30 nor more than 60 days notice to the
Holders prior to the Redemption Date at the Redemption Prices (expressed
as percentages of the principal amount) set forth below; provided,
however, that the Securities will not be redeemable at the option of the
Company on or after March 20, 2001 and before March 20, 2003 unless the
last reported bid price for the Common Stock equals or exceeds 140% of
the conversion price for at least 20 trading days within a period of 30
consecutive trading days ending within five trading days of the call for
redemption.
The following table sets forth the Redemption Prices (expressed as
percentages of the principal amount) if such Security is redeemed during
the 12-month periods beginning on March 20 of the years indicated below:
YEAR REDEMPTION PRICE
----- ----------------
2001 103.57%
2002 102.86
2003 102.14
2004 101.43
2005 100.71
and thereafter at a Redemption Price equal to 100% of the principal
amount, together, in each case, with accrued interest to the Redemption
Date; provided, however, that interest installments on Securities whose
Stated Maturity is on or prior to such Redemption Date will be payable to
the Holders of such Securities, or one or more Predecessor Securities, of
record at the close of business on the relevant Record Dates referred to
on the face hereof, all as provided in the Indenture.
In the event of a redemption of the Securities, the Company will
not be required (a) to register the transfer or exchange of Securities
for a period of 15 days immediately preceding the date notice is given
identifying the serial numbers of the Securities called for such
redemption or (b) to register the transfer or exchange of any Security,
or portion thereof, called for redemption.
In any case where the due date for the payment of the principal of,
premium, if any, interest, or Liquidated Damages on any Security or the
last day on which a Holder of a Security has a right to convert his
Security shall be, at any Place of Payment or Place of Conversion as the
case may be, a day on which banking institutions at such Place of Payment
or Place of Conversion are authorized or obligated by law or executive
order to close, then payment of principal, premium, if any, interest, or
Liquidated Damages, or delivery for conversion of such Security need not
be made on or by such date at such place but may be made on or by the
next succeeding day at such place which is not a day on which banking
institutions are authorized or obligated by law or executive order to
close, with the same force and effect as if made on the date for such
payment or the date fixed for redemption or repurchase, or by such last
day for conversion, and no interest shall accrue on the amount so payable
for the period after such date.
Subject to and upon compliance with the provisions of the
Indenture, the Holder of this Security is entitled, at his option, at any
time following the initial issuance date of the Securities and on or
before the close of business on the date of Maturity, or in case this
Security or a portion hereof is called for redemption or the Holder
hereof has exercised his right to require the Company to repurchase this
Security or such portion hereof, then in respect of this Security until
and including, but (unless the Company defaults in making the payment due
upon redemption or repurchase, as the case may be) not after, the close
of business on the Redemption Date or the Repurchase Date, as the case
may be, to convert this Security (or any portion of the principal amount
hereof that is an integral multiple of U.S.$1,000, provided that the
unconverted portion of such principal amount is U.S.$1,000 or any
integral multiple of U.S.$1,000 in excess thereof) into fully paid and
nonassessable shares of Common Stock of the Company at an initial
Conversion Rate of 10.9463 shares of Common Stock for each U.S.$1,000
principal amount of Securities (or at the current adjusted Conversion
Rate if an adjustment has been made as provided in the Indenture) by
surrender of this Security, duly endorsed or assigned to the Company or
in blank, with the conversion notice hereon duly executed and, in case
such surrender shall be made during the period from the close of business
on any Regular Record Date next preceding any Interest Payment Date to
the opening of business on such Interest Payment Date (except if this
Security or portion thereof has been called for redemption on a
Redemption Date during the period from such Regular Record Date through
the date that is three Business Days following such Interest Payment
Date), also accompanied by payment in New York Clearing House or other
funds acceptable to the Company of an amount equal to the interest
payable on such Interest Payment Date on the principal amount of this
Security then being converted, to the Company at the Corporate Trust
Office of the Trustee, or at such other office or agency of the Company,
subject to any laws or regulations applicable thereto and subject to the
right of the Company to terminate the appointment of any Conversion Agent
(as defined below) as may be designated by it for such purpose in the
Borough of Manhattan, The City of New York, or at such other offices or
agencies as the Company may designate (each a "Conversion Agent").
Subject, in the case of a conversion after the close of business on the
Regular Record Date next preceding any Interest Payment Date and on or
before the close of business on such Interest Payment Date, to the right
of the Holder of this Security (or any Predecessor Security of record as
of such Regular Record Date) to receive the related installment of
interest to the extent and under the circumstances provided in the
Indenture, no cash payment or adjustment is to be made on conversion for
interest accrued hereon from the Interest Payment Date next preceding the
day of conversion, or for dividends on the Common Stock issued on
conversion hereof. The Company shall thereafter deliver to the Holder
the fixed number of shares of Common Stock (together with any cash
adjustment, as provided in the Indenture) into which this Security is
convertible and such delivery will be deemed to satisfy the Company's
obligation to pay the principal amount of this Security. No fractions of
shares or scrip representing fractions of shares will be issued on
conversion, but instead of any fractional interest (calculated to the
nearest 1/100th of a share) the Company shall pay a cash adjustment as
provided in the Indenture. The Conversion Rate is subject to adjustment
as provided in the Indenture. In addition, the Indenture provides that in
case of certain consolidations or mergers to which the Company is a party
(other than a consolidation or merger that does not result in any
reclassification, conversion, exchange or cancellation of the Common
Stock) or the conveyance, transfer, sale or lease of all or substantially
all of the property and assets of the Company, the Indenture shall be
amended, without the consent of any Holders of Securities, so that this
Security, if then Outstanding, will be convertible thereafter, during the
period this Security shall be convertible as specified above, only into
the kind and amount of securities, cash and other property receivable
upon such consolidation, merger, conveyance, transfer, sale or lease by a
holder of the number of shares of Common Stock of the Company into which
this Security could have been converted immediately prior to such
consolidation, merger, conveyance, transfer, sale or lease (assuming such
holder of Common Stock is not a Constituent Person or an Affiliate of a
Constituent Person, failed to exercise any rights of election and
received per share the kind and amount received per share by a plurality
of Non-electing Shares). No adjustment in the Conversion Rate will be
made until such adjustment would require an increase or decrease of at
least one percent of such rate, provided that any adjustment that would
otherwise be made will be carried forward and taken into account in the
computation of any subsequent adjustment.
If this Security is a Registrable Security (as defined in this
Indenture), then the Holder of this Security [if this security is a
global security, then insert -- (including any Person that has a
beneficial interest in this Security)] and the Common Stock of the
Company issuable upon conversion hereof is entitled to the benefits of
the Registration Rights Agreement, dated as of March 1, 1999 (the
"Registration Rights Agreement"), between the Company and the Initial
Purchasers, as such agreement may be amended from time to time. Pursuant
to the Registration Rights Agreement, the Company has agreed for the
benefit of the Holders from time to time of the Registrable Securities
that it will, at its expense, (a) within 90 days after the Issue Date
file a shelf registration statement (the "Shelf Registration
Statement") with the Commission with respect to resales of the
Registrable Securities, (b) use all reasonable efforts to cause such
Shelf Registration Statement to be declared effective by the Commission
within 180 days after the Issue Date of the Securities, provided,
however, that the Company may, upon written notice to all the Holders,
postpone having the Shelf Registration Statement declared effective for a
reasonable period not to exceed 90 days if the Company possesses material
non-public information, the disclosure of which would have a material
adverse effect on the Company and its subsidiaries taken as a whole, and
(c) use all reasonable efforts to maintain such Shelf Registration
Statement effective under the Securities Act of 1933, as amended, until
the second annual anniversary of the date it is declared effective or
such earlier date as is provided in the Registration Rights Agreement
(the "Effectiveness Period"). The Company will be permitted to suspend
the use of the prospectus which is part of the Shelf Registration
Statement during certain periods of time as provided in the Registration
Rights Agreement.
If (i) on or prior to 90 days following the Issue Date, a Shelf
Registration Statement has not been filed with the Commission, or (ii) on
or prior to the 180th day following the Issue Date, such Shelf
Registration Statement is not declared effective (each, a "Registration
Default"), additional interest ("Liquidated Damages") will accrue on
this Restricted Security from and including the day following such
Registration Default to but excluding the day on which such Registration
Default has been cured. Liquidated Damages will be paid semi-annually in
arrears, with the first semi-annual payment due on the first Interest
Payment Date, as applicable, in respect of the Restricted Securities
following the date on which such Liquidated Damages begin to accrue, and
will accrue at a rate per annum equal to an additional one-quarter of one
percent (0.25%) of the principal amount of the Restricted Securities to
and including the 90th day following such Registration Default and at a
rate per annum equal to one-half of one percent (0.50%) thereof from and
after the 91st day following such Registration Default. Pursuant to the
Registration Rights Agreement, in the event that the Shelf Registration
Statement ceases to be effective (or the Holders of Registrable
Securities are otherwise prevented or restricted by the Company from
effecting sales pursuant thereto) (an "Effective Failure") during the
Effectiveness Period for more than 45 days, whether or not consecutive,
during any 90 day period, or for more than 90 days, whether or not
consecutive, during any 12-month period, then the interest rate borne by
the Restricted Securities shall increase by an additional one-half of one
percent (0.50%) per annum from the 46th day of the applicable 90 day
period or the 91st day of the applicable 12-month period, as the case may
be, until such time as the Effective Failure is cured.
Whenever in this Security there is a reference, in any context, to
the payment of the principal of, premium, if any, or interest on, or in
respect of, any Security, such mention shall be deemed to include mention
of the payment of Liquidated Damages payable as described in the
preceding paragraph to the extent that, in such context, Liquidated
Damages are, were or would be payable in respect of such Security and
express mention of the payment of Liquidated Damages (if applicable) in
any provisions of this Security shall not be construed as excluding
Liquidated Damages in those provisions of this Security where such
express mention is not made.
[If this Security is a Registrable Security and the Holder of this
Security [if this security is a global security, then insert --
(including any Person that has a beneficial interest in this Security)]
elects to sell this Security pursuant to the Shelf Registration Statement
then, by its acceptance hereof, such Holder of this Security agrees to be
bound by the terms of the Registration Rights Agreement relating to the
Registrable Securities which are the subject of such election.]
If a Change in Control occurs, the Holder of this Security, at the
Holder's option, shall have the right, in accordance with the provisions
of the Indenture, to require the Company to repurchase this Security (or
any portion of the principal amount hereof that is an integral multiple
of $1,000 for cash at a Repurchase Price equal to 100% of the principal
amount thereof plus interest accrued to the Repurchase Date. At the
option of the Company, the Repurchase Price may be paid in cash or,
subject to the conditions provided in the Indenture, by delivery of
shares of Common Stock having a fair market value equal to the Repurchase
Price. For purposes of this paragraph, the fair market value of shares of
Common Stock shall be determined by the Company and shall be equal to 95%
of the average of the Closing Prices Per Share for the five consecutive
Trading Days immediately preceding and including the third Trading Day
prior to the Repurchase Date. Whenever in this Security there is a
reference, in any context, to the principal of any Security as of any
time, such reference shall be deemed to include reference to the
Repurchase Price payable in respect of such Security to the extent that
such Repurchase Price is, was or would be so payable at such time, and
express mention of the Repurchase Price in any provision of this Security
shall not be construed as excluding the Repurchase Price so payable in
those provisions of this Security when such express mention is not made;
provided, however, that, for the purposes of the second succeeding
paragraph, such reference shall be deemed to include reference to the
Repurchase Price only to the extent the Repurchase Price is payable in
cash.
[The following paragraph shall appear in each Global Security:
In the event of a deposit or withdrawal of an interest in this
Security, including an exchange, transfer, redemption, repurchase or
conversion of this Security in part only, the Trustee, as custodian of
the Depositary, shall make an adjustment on its records to reflect such
deposit or withdrawal in accordance with the Applicable Procedures.]
[The following paragraph shall appear in each Security that is not
a Global Security:
In the event of redemption, repurchase or conversion of this
Security in part only, a new Security or Securities for the unredeemed,
unrepurchased or unconverted portion hereof will be issued in the name of
the Holder hereof.]
The indebtedness evidenced by this Security is, to the extent and
in the manner provided in the Indenture, subordinate and subject in right
of payment to the prior payment in full of all Senior Indebtedness of
the Company, and this Security is issued subject to such provisions of
the Indenture with respect thereto. Each Holder of this Security, by
accepting the same, (a) agrees to and shall be bound by such provisions,
(b) authorizes and directs the Trustee on his behalf to take such action
as may be necessary or appropriate to effectuate the subordination so
provided and (c) appoints the Trustee his attorney-in-fact for any and
all such purposes.
If an Event of Default shall occur and be continuing, the principal
of all the Securities, together with accrued interest to the date of
declaration, may be declared due and payable in the manner and with the
effect provided in the Indenture. Upon payment (i) of the amount of
principal so declared due and payable, together with accrued interest to
the date of declaration, and (ii) of interest on any overdue principal
and, to the extent permitted by applicable law, overdue interest, all of
the Company's obligations in respect of the payment of the principal of
and interest on the Securities shall terminate.
The Indenture permits, with certain exceptions as therein provided,
the amendment thereof and the modification of the rights and obligations
of the Company and the rights of the Holders of the Securities under the
Indenture at any time by the Company and the Trustee with either (a) the
written consent of the Holders of not less than a majority in principal
amount of the Securities at the time Outstanding, or (b) by the adoption
of a resolution, at a meeting of Holders of the Outstanding Securities at
which a quorum is present, by the Holders of at least 66-2/3% in
aggregate principal amount of the Outstanding Securities represented and
entitled to vote at such meeting. The Indenture also contains provisions
permitting the Holders of specified percentages in principal amount of
the Securities at the time Outstanding, on behalf of the Holders of all
the Securities, to waive compliance by the Company with certain
provisions of the Indenture and certain past defaults under the Indenture
and their consequences. Any such consent or waiver by the Holder of this
Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued in exchange
therefore or in lieu hereof whether or not notation of such consent or
waiver is made upon this Security or such other Security.
As provided in and subject to the provisions of the Indenture, the
Holder of this Security shall not have the right to institute any
proceeding with respect to the Indenture or for the appointment of a
receiver or trustee or for any other remedy thereunder, unless such
Holder shall have previously given the Trustee written notice of a
continuing Event of Default, the Holders of not less than 25% in
principal amount of the Outstanding Securities shall have made written
request to the Trustee to institute proceedings in respect of such Event
of Default as Trustee and offered the Trustee reasonable indemnity and
the Trustee shall not have received from the Holders of a majority in
principal amount of the Securities Outstanding a direction inconsistent
with such request, and shall have failed to institute any such
proceeding, for 60 days after receipt of such notice, request and offer
of indemnity. The foregoing shall not apply to any suit instituted by the
Holder of this Security for the enforcement of any payment of principal
hereof, premiums if any, or interest (including Liquidated Damages)
hereon on or after the respective due dates expressed herein or for the
enforcement of the right to convert this Security as provided in the
Indenture.
No reference herein to the Indenture and no provision of this
Security or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of,
premium, if any, and interest (including Liquidated Damages) on this
Security at the times, places and rate, and in the coin or currency,
herein prescribed or to convert this Security as provided in the
Indenture.
As provided in the Indenture and subject to certain limitations
therein set forth, the transfer of this Security is registrable on the
Security Register upon surrender of this Security for registration of
transfer at the Corporate Trust Office of the Trustee or at such other
office or agency of the Company as may be designated by it for such
purpose in the Borough of Manhattan, The City of New York (which shall
initially be an office or agency of the Trustee), or at such other
offices or agencies as the Company may designate, duly endorsed by, or
accompanied by a written instrument of transfer in form satisfactory to
the Company and the Security Registrar duly executed by, the Holder
thereof or his attorney duly authorized in writing, and thereupon one or
more new Securities, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee
or transferees by the Registrar. No service charge shall be made for any
such registration of transfer or exchange, but the Company may require
payment of a sum sufficient to recover any tax or other governmental
charge payable in connection therewith.
Prior to due presentation of a this Security for registration of
transfer, the Company, the Trustee and any agent of the Company or the
Trustee may treat the Person in whose name such Security is registered,
as the owner thereof for all purposes, whether or not such Security be
overdue, and neither the Company, the Trustee nor any such agent shall be
affected by notice to the contrary.
No recourse for the payment of the principal (and premium, if any)
or interest on this Security and no recourse under or upon any
obligation, covenant or agreement of the Company in the Indenture or any
indenture supplemental thereto or in any Security, or because of the
creation of any indebtedness represented thereby, shall be had against
any incorporator, stockholder, employee, agent, officer or director or
subsidiary, as such, past, present or future, of the Company or of any
successor corporation, either directly or through the Company or any
successor corporation, whether by virtue of any constitution, statute or
rule of law or by the enforcement of any assessment or penalty or
otherwise, all such liability being, by the acceptance hereof and as part
of consideration for the issue hereof, expressly waived and released.
THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, UNITED STATES OF
AMERICA, WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAWS.
All terms used in this Security which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
ABBREVIATIONS
The following abbreviations, when used in the inscription of the
face of this Security, shall be construed as though they were written out
in full according to applicable laws or regulations:
TEN COM as tenant in common
TEN ENT as tenants by the entireties (Cust)
JT TEN as joint tenants with right
of survivorship and not as
tenants in common
UNIF GIFT MIN ACT ____ Custodian _____
(Cust) (Minor)
under Uniform
Gifts to Minors Act _____
(State)
Additional abbreviations may also be used though not in the above
list.
ELECTION OF HOLDER TO REQUIRE REPURCHASE
(1) Pursuant to Article 14.1 of the Indenture, the undersigned
hereby elects to have this Security repurchased by the Company.
(2) The undersigned hereby directs the Trustee or the Company to
pay it or ______________ an amount in cash or, at the Company's election,
Common Stock valued as set forth in the Indenture, equal to 100% of the
principal amount to be repurchased (as set forth below), plus interest
accrued to the Repurchase Date, as provided in the Indenture.
Dated:
Signature(s)
Signature(s) must be guaranteed by an Eligible
Guarantor Institution with membership in an
approved signature guarantee program pursuant
to Rule 17Ad-15 under the Securities Exchange
Act of 1934.
Signature Guaranteed
Principal amount to be repurchased (at least
U.S. $5,000 or an integral multiple of $1,000
in excess thereof): ___________________
Remaining principal amount following such
repurchase (not less than U.S. $1,000):
______________
NOTICE: The signature to the foregoing Election must correspond to the
Name as written upon the face of this Security in every particular,
without alteration or any change whatsoever.
SECTION 2.3 Form of Certificate of Authentication
The Trustee's certificate of authentication shall be in
substantially the following form:
This is one of the Securities referred to in the within-mentioned
Indenture.
Dated:
CHASE MANHATTAN BANK AND TRUST COMPANY,
NATIONAL ASSOCIATION, as Trustee
By:___________________________________________
Authorized Signatory
SECTION 2.4 Form of Conversion Notice
CONVERSION NOTICE
The undersigned Holder of this Security hereby irrevocably
exercises the option to convert this Security, or any portion of the
principal amount hereof (which is U.S.$1,000 or an integral multiple of
U.S.$1,000 in excess thereof, provided that the unconverted portion of
such principal amount is U.S. $1,000 or any integral multiple of U.S.
$1,000 in excess thereof) below designated, into shares of Common Stock
in accordance with the terms of the Indenture referred to in this
Security, and directs that such shares, together with a check in payment
for any fractional share and any Securities representing any unconverted
principal amount hereof, be delivered to and be registered in the name of
the undersigned unless a different name has been indicated below. If
shares of Common Stock or Securities are to be registered in the name of
a Person other than the undersigned, (a) the undersigned will pay all
transfer taxes payable with respect thereto and (b) signature(s) must be
guaranteed by an Eligible Guarantor Institution with membership in an
approved signature guarantee program pursuant to Rule 17Ad-15 under the
Securities Exchange Act of 1934. Any amount required to be paid by the
undersigned on account of interest accompanies this Security.
Dated: ______________ Signature(s)________________________
If shares or Securities are to be registered in the
name of a Person other than the Holder, please
print such Person's name and address:
(Name)
(Address)
Social Security or other Identification
Number, if any
[Signature Guaranteed]
If only a portion of the Securities is to be converted, please indicate:
1. Principal amount to be converted: U.S. $ ___________
2. Principal amount and denomination of Securities
representing unconverted principal amount to be issued:
Amount: U.S. $___________ Denominations: U.S. $____________
(U.S.$1,000 or any integral multiple of U.S.$1,000 in excess thereof,
provided that the unconverted portion of such principal amount is U.S.
$1,000 or any integral multiple of U.S. $1,000 in excess thereof)
SECTION 2.5 Form of Assignment
For value received ________________ hereby sell(s), assign(s) and
transfer(s) unto ________________ (Please insert social security or other
identifying number of assignee) the within Security, and hereby
irrevocably constitutes and appoints ____________________as attorney to
transfer the said Security on the books of the Company, with full power
of substitution in the premises.
Dated:_____________________
Dated: ______________
______________________________________
Signature(s)
Signature(s) must be guaranteed by an Eligible
Guarantor Institution with membership in an
approved signature guarantee program pursuant
to Rule 17Ad-15 under the Securities Exchange
Act of 1934.
______________________________________
Signature Guarantee
ARTICLE III
THE SECURITIES
SECTION 3.1 Title and Terms
The aggregate principal amount of Securities which may be
authenticated and delivered under this Indenture is limited to U.S.
$250,000,000, except for Securities authenticated and delivered pursuant
to Section 3.4, 3.5, 3.6, 8.5, 11.7, 12.2 or 14.3(5) in exchange for, or
in lieu of, other Securities previously authenticated and delivered under
this Indenture.
The Securities shall be known and designated as the "5%
Convertible Subordinated Notes due March 15, 2006" of the Company.
Their Stated Maturity shall be March 15, 2006 and they shall bear
interest on their principal amount from March 3, 1999, payable
semi-annually in arrears on March 15 and September 15 in each year,
commencing September 15, 1999, at the rate of 5.0% per annum until the
principal thereof is due and at the rate of 7.0% per annum on any overdue
principal and, to the extent permitted by law, on any overdue interest;
provided, however, that payments shall only be made on a Business Day as
provided in Section 1.12.
The principal of, premium, if any, and interest on the Securities
shall be payable as provided in the form of Securities set forth in
Section 2.2, and the Repurchase Price, whether payable in cash or in
shares of Common Stock, shall be payable at such places as are identified
in the Offer to Purchase given pursuant to Section 14.3 (any city in
which any Paying Agent is located being herein called a "Place of
Payment").
The Registrable Securities are entitled to the benefits of a
Registration Rights Agreement as provided by Section 10.11 and in the
form of Security set forth in Section 2.2. The Securities are entitled to
the payment of Liquidated Damages as provided by Section 10.11.
The Securities shall be redeemable at the option of the Company at
any time on or after June 20, 2001, in whole or in part, subject to the
conditions and as otherwise provided in Article XI and in the form of
Security set forth in Section 2.2.
The Securities shall be convertible as provided in Article XII (any
city in which any Conversion Agent is located being herein called a
"Place of Conversion").
The Securities shall be subordinated in right of payment to Senior
Indebtedness of the Company as provided in Article XIII.
The Securities shall be subject to repurchase by the Company at the
option of the Holders as provided in Article XIV.
SECTION 3.2 Denominations
The Securities shall be issuable only in registered form, without
coupons, in denominations of U.S.$1,000 and integral multiples of
U.S.$1,000 in excess thereof.
SECTION 3.3 Execution, Authentication, Delivery and Dating
The Securities shall be executed on behalf of the Company by its
Chairman of the Board, its Vice Chairman of the Board, its Chief
Executive Officer, its President, one of its Executive Vice Presidents or
one of its Vice Presidents, and attested by its Chief Financial Officer,
Secretary or one of its Assistant Secretaries. Any such signature may be
manual or facsimile.
Securities bearing the manual or facsimile signature of individuals
who were at any time the proper officers of the Company shall bind the
Company, notwithstanding that such individuals or any of them have ceased
to hold such offices prior to the authentication and delivery of such
Securities or did not hold such offices at the date of such Securities.
At any time and from time to time after the execution and delivery
of this Indenture, the Company may deliver Securities executed by the
Company to the Trustee or to its order for authentication, together with
a Company Order for the authentication and delivery of such Securities,
and the Trustee in accordance with such Company Order shall authenticate
and make available for delivery such Securities as in this Indenture
provided.
Each Security shall be dated the date of its authentication.
No Security shall be entitled to any benefit under this Indenture
or be valid or obligatory for any purpose unless there appears on such
Security a certificate of authentication substantially in the form
provided for herein executed by the Trustee by manual signature of an
authorized signatory, and such certificate upon any Security shall be
conclusive evidence, and the only evidence, that such Security has been
duly authenticated and delivered hereunder.
SECTION 3.4 Global Securities; Non-global Securities; Book-entry
Provisions
(1) Global Securities
(i) Each Global Security authenticated under
this Indenture shall be registered in the name of the Depositary
designated by the Company for such Global Security or a nominee thereof
and delivered to such Depositary or a nominee thereof or custodian
therefor, and each such Global Security shall constitute a single
Security for all purposes of this Indenture.
(ii) Except for exchanges of Global Securities
for definitive, non-Global Securities at the sole discretion of the
Company, no Global Security may be exchanged in whole or in part for
Securities registered, and no transfer of a Global Security in whole or
in part may be registered, in the name of any Person other than the
Depositary for such Global Security or a nominee thereof unless (A) such
Depositary (i) has notified the Company that it is unwilling or unable to
continue as Depositary for such Global Security or (ii) has ceased to be
a clearing agency registered as such under the Exchange Act or announces
an intention permanently to cease business or does in fact do so, and a
successor Depositary is not appointed by the Company within 90 days after
it receives notice or becomes aware of such ineligibility, or (B) there
shall have occurred and be continuing an Event of Default with respect to
such Global Security. In such event, the Company will execute, and the
Trustee, upon receipt of an Officers' Certificate directing the
authentication and delivery of Securities, will authenticate and deliver,
Securities, in any authorized denominations in an aggregate principal
amount equal to the principal amount of such Global Security in exchange
for such Global Security.
(iii) If any Global Security is to be exchanged
for other Securities or canceled in whole, it shall be surrendered by or
on behalf of the Depositary or its nominee to the Trustee, as Security
Registrar, for exchange or cancellation, as provided in this Article III.
If any Global Security is to be exchanged for other Securities or
canceled in part, or if another Security is to be exchanged in whole or
in part for a beneficial interest in any Global Security, in each case,
as provided in Section 3.5, then either (A) such Global Security shall be
so surrendered for exchange or cancellation, as provided in this Article
III, or (B) the principal amount thereof shall be reduced or increased by
an amount equal to the portion thereof to be so exchanged or canceled, or
equal to the principal amount of such other Security to be so exchanged
for a beneficial interest therein, as the case may be, by means of an
appropriate adjustment made on the records of the Trustee, as Security
Registrar, whereupon the Trustee, in accordance with the Applicable
Procedures, shall instruct the Depositary or its authorized
representative to make a corresponding adjustment to its records. Upon
any such surrender or adjustment of a Global Security, the Trustee shall,
subject to Section 3.5(3) and as otherwise provided in this Article III,
authenticate and deliver any Securities issuable in exchange for such
Global Security (or any portion thereof) to or upon the order of, and
registered in such names as may be directed by, the Depositary or its
authorized representative. Upon the request of the Trustee in connection
with the occurrence of any of the events specified in the preceding
paragraph, the Company shall promptly make available to the Trustee a
reasonable supply of Securities that are not in the form of Global
Securities. The Trustee shall be entitled to rely upon any order,
direction or request of the Depositary or its authorized representative
which is given or made pursuant to this Article III if such order,
direction or request is given or made in accordance with the Applicable
Procedures.
(iv) Every Security authenticated and delivered
upon registration of transfer of, or in exchange for or in lieu of, a
Global Security or any portion thereof, whether pursuant to this Article
III or otherwise, shall be authenticated and delivered in the form of,
and shall be, a registered Global Security, unless such Security is
registered in the name of a Person other than the Depositary for such
Global Security or a nominee thereof, in which case such Security shall
be authenticated and delivered in definitive, fully registered form,
without interest coupons.
(v) The Depositary or its nominee, as
registered owner of a Global Security, shall be the Holder of such Global
Security for all purposes under the Indenture and the Securities, and
owners of beneficial interests in a Global Security shall hold such
interests pursuant to the Applicable Procedures. Accordingly, any such
owner's beneficial interest in a Global Security will be shown only on,
and the transfer of such interest shall be effected only through, records
maintained by the Depositary or its nominee or its Agent Members and such
owners of beneficial interests in a Global Security will not be
considered the owners or holders thereof.
(2) Non-Global Securities. Securities issued upon the
events described in Section 3.4(l)(ii) shall be in definitive, fully
registered form, without interest coupons, and shall bear the Restricted
Securities Legend if and as required by this Indenture.
SECTION 3.5 Registration; Registration of Transfer and Exchange;
Restrictions on Transfer
(1) The Company shall cause to be kept at the Corporate
Trust Office of the Trustee a register (the register maintained in such
office referred to as the "Security Register") in which, subject to
such reasonable regulations as it may prescribe, the Company shall
provide for the registration of Securities and of transfers of
Securities. The Trustee is hereby appointed "Security Registrar" for
the purpose of registering Securities and transfers and exchanges of
Securities as herein provided.
Upon surrender for registration of transfer of any Security at an
office or agency of the Company designated pursuant to Section 10.2 for
such purpose, the Company shall execute, and the Trustee shall
authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Securities of any authorized denominations
and of a like aggregate principal amount and bearing such restrictive
legends as may be required by this Indenture.
At the option of the Holder, and subject to the other provisions of
this Section 3.5, Securities may be exchanged for other Securities of any
authorized denomination and of a like aggregate principal amount, upon
surrender of the Securities to be exchanged at any such office or agency.
Whenever any Securities are so surrendered for exchange, and subject to
the other provisions of this Section 3.5, the Company shall execute, and
the Trustee shall authenticate and deliver, the Securities which the
Holder making the exchange is entitled to receive. Every Security
presented or surrendered for registration of transfer or for exchange
shall (if so required by the Company or the Security Registrar) be duly
endorsed, or be accompanied by a written instrument of transfer in form
satisfactory to the Company, the Trustee and the Security Registrar duly
executed, by the Holder thereof or his attorney duly authorized in
writing.
All Securities issued upon any registration of transfer or exchange
of Securities shall be the valid obligations of the Company, evidencing
the same debt and entitled to the same benefits under this Indenture as
the Securities surrendered upon such registration of transfer or
exchange.
No service charge shall be made to a Holder for any registration of
transfer or exchange of Securities except as provided in Section 3.6, but
the Company may require payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in connection with any
registration of transfer or exchange of Securities, other than exchanges
pursuant to Section 3.4, 8.5, 12.2 or 14.3 (other than where the shares
of Common Stock are to be issued or delivered in a name other than that
of the Holder of the Security) not involving any transfer and other than
any stamp and other duties, if any, which may be imposed in connection
with any such transfer or exchange by the United States or any political
subdivision thereof or therein, which shall be paid by the Company.
In the event of a redemption of the Securities, neither the Company
nor the Securities Registrar will be required (a) to register the
transfer of or exchange Securities for a period of 15 days immediately
preceding the date notice is given identifying the serial numbers of the
Securities called for such redemption or (b) to register the transfer of
or exchange any Security, or portion thereof, called for redemption.
(2) Certain Transfers and Exchanges. Notwithstanding any
other provision of this Indenture or the Securities, transfers and
exchanges of Securities and beneficial interests in a Global Security of
the kinds specified in this Section 3.5(2) shall be made only in
accordance with this Section 3.5(2).
(i) Restricted Global Security to Restricted
Non-global Security. In the event that non-Global Securities are to be
issued pursuant to Section 3.4(1)(ii) in connection with any transfer of
Securities, such transfer may be effected only in accordance with the
provisions of this Clause (2)(i) and subject to the Applicable
Procedures. Upon receipt by the Trustee, as Security Registrar, of (A) a
Company Order from the Company directing the Trustee, as Security
Registrar, to (x) authenticate and deliver one or more Securities of the
same aggregate principal amount as the beneficial interest in the
Restricted Global Security to be transferred, such instructions to
contain the name or names of the designated transferee or transferees,
the authorized denomination or denominations of the Securities to be so
issued and appropriate delivery instructions and (y) decrease the
beneficial interest of a specified Agent Member's account in a Restricted
Global Security by a specified principal amount not greater than the
principal amount of such Restricted Global Security, and (B) such other
certifications, legal opinions or other information as the Company or the
Trustee may reasonably require to confirm that such transfer is being
made pursuant to an exemption from, or in a transaction not subject to,
the registration requirements of the Securities Act, then the Trustee, as
Security Registrar, shall decrease the principal amount of the Restricted
Global Security by the specified amount and authenticate and deliver
Securities in accordance with such instructions from the Company as
provided in Section 3.4(1)(iii).
(ii) Restricted Non-global Security to
Restricted Global Security. If the Holder of a Restricted Security
(other than a Global Security) wishes at any time to transfer all or any
portion of such Restricted Security to a Person who wishes to take
delivery thereof in the form of a beneficial interest in the Restricted
Global Security, such transfer may be effected only in accordance with
the provisions of this Clause (2)(ii) and subject to the Applicable
Procedures. Upon receipt by the Trustee, as Security Registrar, of (A)
such Restricted Security as provided in Section 3.5(1) and instructions
from the Company directing that a beneficial interest in the Restricted
Global Security in a specified principal amount not greater than the
principal amount of such Security be credited to a specified Agent
Member's account and (B) a Restricted Securities Certificate,
satisfactory to the Trustee and duly executed by such Holder or his
attorney duly authorized in writing, then the Trustee, as Security
Registrar, shall cancel such Restricted Security (and issue a new
Restricted Security in respect of any untransferred portion thereof) as
provided in Section 3.5(1) and increase the principal amount of the
Restricted Global Security by the specified principal amount as provided
in Section 3.4(1)(iii).
(iii) Exchanges Between Global Security and
Non-global Security. A beneficial interest in a Global Security may be
exchanged for a Security that is not a Global Security only as provided
in Section 3.4 and only if such exchange occurs in connection with a
transfer effected in accordance with Clause 2(i) above, provided that, if
such interest is a beneficial interest in the Restricted Global Security,
then such interest shall be exchanged for a Restricted Security (subject
in each case to Section 3.5(3)). A Security that is not a Global Security
may be exchanged for a beneficial interest in a Global Security only if
such exchange occurs in connection with a transfer effected in accordance
with Clause (2)(ii) above.
(3) Securities Act Legends. All Securities issued pursuant
to this Indenture, and all Successor Securities, shall bear the
Restricted Securities Legend, subject to the following:
(i) subject to the following Clauses of this
Section 3.5(3), a Security or any portion thereof which is exchanged,
upon transfer or otherwise, for a Global Security or any portion thereof
shall bear the Restricted Securities Legend borne by such Global Security
for which the Security was exchanged;
(ii) subject to the following Clauses of this
Section 3.5(3), a new Security which is not a Global Security and is
issued in exchange for another Security (including a Global Security) or
any portion thereof, upon transfer or otherwise, shall bear the
Restricted Securities Legend borne by the Security for which the new
Security was exchanged;
(iii) any Securities which are sold or otherwise
disposed of pursuant to an effective registration statement under the
Securities Act (including the Shelf Registration Statement), together
with their Successor Securities shall not bear a Restricted Securities
Legend; the Company shall inform the Trustee in writing of the effective
date of any such registration statement registering the Securities under
the Securities Act and shall notify the Trustee at any time when
prospectuses must be delivered with respect to Securities to be sold
pursuant to such registration statement. The Trustee shall not be liable
for any action taken or omitted to be taken by it in good faith in
accordance with the aforementioned registration statement;
(iv) at any time after the Securities may be
freely transferred without registration under the Securities Act or
without being subject to transfer restrictions pursuant to the Securities
Act, a new Security which does not bear a Restricted Securities Legend
may be issued in exchange for or in lieu of a Security (other than a
Global Security) or any portion thereof which bears such a legend if the
Trustee has received an Unrestricted Securities Certificate, satisfactory
to the Trustee and duly executed by the Holder of such Security bearing a
Restricted Securities Legend or his attorney duly authorized in writing,
and after such date and receipt of such certificate, the Trustee shall
authenticate and deliver such new Security in exchange for or in lieu of
such other Security as provided in this Article III;
(v) a new Security which does not bear a
Restricted Securities Legend may be issued in exchange for or in lieu of
a Security (other than a Global Security) or any portion thereof which
bears such a legend if, in the Company's judgment, placing such a legend
upon such new Security is not necessary to ensure compliance with the
registration requirements of the Securities Act, and the Trustee, at the
direction of the Company, shall authenticate and deliver such a new
Security as provided in this Article III; and
(vi) notwithstanding the foregoing provisions of
this Section 3.5(3), a Successor Security of a Security that does not
bear a Restricted Securities Legend shall not bear such legend unless the
Company has reasonable cause to believe that such Successor Security is a
"restricted security" within the meaning of Rule 144, in which case the
Trustee, at the direction of the Company, shall authenticate and deliver
a new Security bearing a Restricted Securities Legend in exchange for
such Successor Security as provided in this Article III.
(4) Any stock certificate representing shares of Common
Stock issued upon conversion of the Securities shall bear the Restricted
Securities Legend borne by such Securities, to the extent required by
this Indenture, unless such shares of Common Stock have been sold
pursuant to a registration statement that has been declared effective
under the Securities Act (and which continues to be effective at the time
of such transfer) or sold pursuant to Rule 144 of the Securities Act, or
unless otherwise agreed by the Company in writing with written notice
thereof to the transfer agent for the Common Stock. With respect to the
transfer of shares of Common Stock issued upon conversion of the
Securities that are restricted hereunder, any deliveries of certificates,
legal opinions or other instruments that would be required to be made to
the Security Registrar in the case of a transfer of Securities, as
described above, shall instead be made to the transfer agent for the
Common Stock.
(5) Neither the Trustee, the Paying Agent nor any of their
agents shall (i) have any duty to monitor compliance with or with respect
to any federal or state or other securities or tax laws or (ii) have any
duty to obtain documentation on any transfers or exchanges other than as
specifically required hereunder.
SECTION 3.6 Mutilated, Destroyed, Lost or Stolen Securities
If any mutilated Security is surrendered to the Trustee, the
Company shall execute and the Trustee shall authenticate and deliver in
exchange therefor a new Security of like tenor and principal amount and
bearing a number not contemporaneously outstanding.
If there be delivered to the Company and to the Trustee:
(1) evidence to their satisfaction of the destruction, loss
or theft of any Security, and
(2) such security or indemnity as may be satisfactory to
the Company and the Trustee to save each of them and any agent of either
of them harmless, then, in the absence of actual notice to the Company or
the Trustee that such Security has been acquired by a bona fide
purchaser, the Company shall execute and the Trustee shall authenticate
and deliver, in lieu of any such destroyed, lost or stolen Security, a
new Security of like tenor and principal amount and bearing a number not
contemporaneously outstanding.
In case any such mutilated, destroyed, lost or stolen Security has
become or is about to become due and payable, the Company in its
discretion, but subject to any conversion rights, may, instead of issuing
a new Security, pay such Security, upon satisfaction of the conditions
set forth in the preceding paragraph.
Upon the issuance of any new Security under this Section 3.6, the
Company may require the payment of a sum sufficient to cover any tax or
other governmental charge that may be imposed in relation thereto (other
than any stamp and other duties, if any, which may be imposed in
connection therewith by the United States or any political subdivision
thereof or therein, which shall be paid by the Company) and any other
expenses (including the fees and expenses of the Trustee) connected
therewith.
Every new Security issued pursuant to this Section 3.6 in lieu of
any mutilated, destroyed, lost or stolen Security shall constitute an
original additional contractual obligation of the Company, whether or not
the mutilated, destroyed, lost or stolen Security shall be at any time
enforceable by anyone, and such new Security shall be entitled to all the
benefits of this Indenture equally and proportionately with any and all
other Securities duly issued hereunder.
The provisions of this Section 3.6 are exclusive and shall preclude
(to the extent lawful) all other rights and remedies of any Holder with
respect to the replacement or payment of mutilated, destroyed, lost or
stolen Securities.
SECTION 3.7 Payment of Interest; Interest Rights Preserved
Interest on any Security which is payable, and is punctually paid
or duly provided for, on any Interest Payment Date shall be paid to the
Person in whose name that Security (or one or more Predecessor
Securities) is registered at the close of business on the Regular Record
Date for such interest.
Any interest on any Security which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date
(herein called "Defaulted Interest") shall forthwith cease to be
payable to the Holder on the relevant Regular Record Date by virtue of
having been such Holder, and such Defaulted Interest may be paid by the
Company, at its election in each case, as provided in Clause (1) or (2)
below:
(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Securities (or their
respective Predecessor Securities) are registered at the close of
business on a Special Record Date for the payment of such Defaulted
Interest, which shall be fixed in the following manner. The Company
shall notify the Trustee in writing of the amount of Defaulted Interest
proposed to be paid on each Security, the date of the proposed payment
and the Special Record Date, and at the same time the Company shall
deposit with the Trustee an amount of money equal to the aggregate amount
proposed to be paid in respect of such Defaulted Interest or shall make
arrangements satisfactory to the Trustee for such deposit prior to the
date of the proposed payment, such money when deposited to be held in
trust for the benefit of the Persons entitled to such Defaulted Interest
as in this Clause provided. The Special Record Date for the payment of
such Defaulted Interest shall be not more than 15 days and not less than
10 days prior to the date of the proposed payment and not less than 10
days after the receipt by the Trustee of the notice of the proposed
payment. The Trustee, in the name and at the expense of the Company,
shall cause notice of the proposed payment of such Defaulted Interest and
the Special Record Date therefor to be mailed, first-class postage
prepaid, to each Holder at such Holder's address as it appears in the
Security Register, not less than 10 days prior to such Special Record
Date. Notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor having been so mailed, such Defaulted
Interest shall be paid to the Persons in whose names the Securities (or
their respective Predecessor Securities) are registered at the close of
business on such Special Record Date and shall no longer be payable
pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest
in any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Securities may be listed, and upon such
notice as may be required by such exchange, if, after notice given by the
Company to the Trustee of the proposed payment pursuant to this Clause,
such manner of payment shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section and Section
3.5, each Security delivered under this Indenture upon registration of
transfer of or in exchange for or in lieu of any other Security shall
carry the rights to interest accrued and unpaid, and to accrue, which
were carried by such other Security.
Interest on any Security which is converted in accordance with
Section 12.2 during a Record Date Period shall be payable in accordance
with the provisions of Section 12.2.
SECTION 3.8 Persons Deemed Owners
Prior to due presentment of a Security for registration of
transfer, the Company, the Trustee, any Paying Agent or the Security
Registrar, and any agent of the Company, the Trustee or any Paying Agent
or the Security Registrar, may treat the Person in whose name such
Security is registered as the owner of such Security for the purpose of
receiving payment of principal of, premium, if any, and (subject to
Section 3.7) interest on such Security and for all other purposes
whatsoever, whether or not such Security be overdue, and neither the
Company, the Trustee, any Paying Agent, the Security Registrar nor any
agent of the Company, the Trustee or any Paying Agent or the Security
Registrar shall be affected by notice to the contrary.
None of the Company, the Trustee, any Paying Agent or the Security
Registrar will have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of a Global Security or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interests,
and each shall be protected in acting on any such information provided by
the Depositary.
SECTION 3.9 Cancellation
All Securities surrendered for payment, redemption, repurchase,
registration of transfer or exchange or conversion shall, if surrendered
to any Person other than the Trustee, be delivered to the Trustee. All
Securities so delivered to the Trustee shall be canceled promptly by the
Trustee (or its agent). No Securities shall be authenticated in lieu of
or in exchange for any Securities canceled as provided in this Section
3.9. The Trustee shall dispose of all canceled Securities in accordance
with applicable law and its customary practices in effect from time to
time.
SECTION 3.10 Computation of Interest
Interest on the Securities (including any interest upon overdue
interest or Liquidated Damages) shall be computed on the basis of a
360-day year of twelve 30-day months.
SECTION 3.11 Cusip Numbers
The Company in issuing Securities may use "CUSIP" numbers (if
then generally in use) in addition to serial numbers; if so, the Trustee
shall use such CUSIP numbers in addition to serial numbers in notices of
redemption and repurchase as a convenience to Holders; provided that any
such notice may state that no representation is made as to the
correctness of such CUSIP numbers either as printed on the Securities or
as contained in any notice of a redemption or repurchase and that
reliance may be placed only on the serial or other identification numbers
printed on the Securities, and any such redemption or repurchase shall
not be affected by any defect in or omission of such CUSIP numbers.
ARTICLE IV
SATISFACTION AND DISCHARGE
SECTION 4.1 Satisfaction And Discharge of Indenture
This Indenture shall upon Company Request cease to be of further
effect (except as to any surviving rights of conversion, or registration
of transfer or exchange, or replacement of Securities herein expressly
provided for and any right to receive Liquidated Damages as provided in
Section 10.11 and in the form of Securities set forth in Section 2.2 and
the Company's obligations to the Trustee pursuant to Section 6.7), and
the Trustee, at the expense of the Company, shall execute proper
instruments in form and substance satisfactory to the Trustee
acknowledging satisfaction and discharge of this Indenture, when
(1) either
(i) all Securities theretofore authenticated
and delivered (other than (A) Securities which have been destroyed, lost
or stolen and which have been replaced or paid as provided in Section 3.6
and (B) Securities for whose payment money has theretofore been deposited
in trust or segregated and held in trust by the Company and thereafter
repaid to the Company or discharged from such trust, as provided in
Section 10.3) have been delivered to the Trustee for cancellation; or
(ii) all such Securities not theretofore
delivered to the Trustee or its agent for cancellation (other than
Securities referred to in clauses (A) and (B) of clause (1)(i) above)
(a) have become due and payable, or
(b) will have become due and payable at their
Stated Maturity within one year, or
(c) are to be called for redemption within one
year under arrangements satisfactory to the Trustee for the giving of
notice of redemption by the Trustee in the name, and at the expense, of
the Company, and the Company, in the case of clause (a), (b) or (c)
above, has deposited or caused to be deposited with the Trustee as trust
funds (immediately available to the Holders in the case of clause (a)) in
trust for the purpose an amount in cash sufficient to pay and discharge
the entire indebtedness on such Securities not theretofore delivered to
the Trustee for cancellation, for principal, premium, if any, and
interest (including any interest upon overdue interest and Liquidated
Damages) to the date of such deposit (in the case of Securities which
have become due and payable) or to the Stated Maturity or Redemption
Date, as the case may be, including without limitation the payment of all
fees and expenses of the Trustee, its agents and counsel;
(2) the Company has paid or caused to be paid all other
sums payable hereunder by the Company, including without limitation the
payment of all fees and expenses of the Trustee, its agents and counsel ;
and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and discharge
of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture,
the obligations of the Company to the Trustee under Section 6.7, the
obligations of the Company to any Authenticating Agent under Section
6.12, the obligation of the Company to pay Liquidated Damages, if money
shall have been deposited with the Trustee pursuant to clause (1)(ii) of
this Section 4.1, the obligations of the Trustee under Section 4.2 and
the last paragraph of Section 10.3 and the obligations of the Company and
the Trustee under Section 3.5 and Article XII shall survive.
SECTION 4.2 Application of Trust Money
Subject to the provisions of the last paragraph of Section 10.3,
all money deposited with the Trustee pursuant to Section 4.1 and in
accordance with the provisions of Article XIII shall be held in trust for
the sole benefit of the Holders and not be subject to the subordination
provisions of Article XIII, and such monies shall be applied by the
Trustee, in accordance with the provisions of the Securities and this
Indenture, to the payment, either directly or through any Paying Agent,
to the Persons entitled thereto, of the principal, premium, if any, and
interest for whose payment such money has been deposited with the
Trustee.
All moneys deposited with the Trustee pursuant to Section 4.1 (and
held by it or any Paying Agent) for the payment of Securities
subsequently converted shall be returned to the Company upon Company
Request.
The Company shall pay and indemnify the Trustee against any tax,
fee or other charge imposed or assessed against all money deposited with
the Trustee pursuant to Section 4.1 (other than income taxes and
franchise taxes incurred or payable by the Trustee and such other taxes,
fees or charges incurred or payable by the Trustee that are not directly
the result of the deposit of such money with the Trustee).
ARTICLE V
REMEDIES
SECTION 5.1 Events of Default
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and
whether it shall be occasioned by the provisions of Article XIII or be
voluntary or involuntary or be effected by operation of law or pursuant
to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):
(1) default in the payment of the principal of or premium,
if any, on any Security at its Maturity, whether or not such payment is
prohibited by the subordination provisions of the Securities or of this
Indenture; or
(2) default in the payment of any interest (including any
interest upon overdue interest or Liquidated Damages) upon any Security
when it becomes due and payable, and continuance of such default for a
period of 30 days, whether or not such payment is prohibited by the
subordination provisions of the Securities or of this Indenture; or
(3) failure by the Company to provide an Offer to Purchase
in accordance with Section 14.3 whether or not such Offer to Purchase is
prohibited by the subordination provisions of the Securities or the
Indenture; or
(4) default in the performance, or breach, of any covenant
or warranty of the Company in this Indenture (other than a covenant or
warranty a default in the performance or breach of which is specifically
dealt with elsewhere in this Section), and continuance of such default or
breach for a period of 60 days after there has been given, by registered
or certified mail, to the Company by the Trustee or to the Company and
the Trustee by the Holders of at least 25% in principal amount of the
Outstanding Securities a written notice (a "Notice of Default")
specifying such default or breach and requiring it to be remedied and
stating that such notice is a Notice of Default hereunder; or
(5) (i) any default by the Company or any Significant
Subsidiary in the payment of the principal, premium, if any, or interest
has occurred with respect to amounts in excess of $10.0 million under any
agreement, indenture or instrument evidencing Indebtedness when the same
shall become due and payable in full and such default shall have
continued after any applicable grace period and shall not have been cured
or waived and, if not already matured at its final maturity in accordance
with its terms, the holder such Indebtedness shall have the right to
accelerate such Indebtedness, or (ii) any event of default as defined in
any agreement, indenture or instrument of the Company or any Significant
Subsidiary evidencing Indebtedness in excess of $10.0 million shall have
occurred and the Indebtedness thereunder, if not already matured at its
final maturity in accordance with its terms, shall have been accelerated;
or
(6) the entry by a court having jurisdiction in the
premises of (A) a decree or order for relief in respect of the Company or
any Significant Subsidiary in an involuntary case or proceeding under any
applicable Federal or State bankruptcy, insolvency, reorganization or
other similar law or (B) a decree or order adjudging the Company or any
Significant Subsidiary a bankrupt or insolvent, or approving as properly
filed a petition seeking reorganization, arrangement, adjustment or
composition of or in respect of the Company or any Significant Subsidiary
under any applicable Federal or State law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator or other similar
official of the Company or any Significant Subsidiary or of any
substantial part of the property of either, or ordering the winding up or
liquidation of its affairs, and the continuance of any such decree or
order for relief or any such other decree or order unstayed and in effect
for a period of 60 consecutive days; or
(7) the commencement by the Company or any Significant
Subsidiary of a voluntary case or proceeding under any applicable Federal
or State bankruptcy, insolvency, reorganization or other similar law or
of any other case or proceeding to be adjudicated a bankrupt or
insolvent, or the consent by either to the entry of a decree or order for
relief in respect of the Company or any Significant Subsidiary in an
involuntary case or proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other similar law or to the
commencement of any bankruptcy or insolvency case or proceeding against
either, or the filing by either of a petition or answer or consent
seeking reorganization or similar relief under any applicable Federal or
State law, or the consent by either to the filing of such petition or to
the appointment of or taking possession by a custodian, receiver,
liquidator, assignee, trustee, sequestrator or other similar official of
the Company or any Significant Subsidiary or of any substantial part of
the property of either, or the making by either of an assignment for the
benefit of creditors, or the admission by either in writing of its
inability to pay its debts generally as they become due, or the taking of
corporate action by the Company or any Significant Subsidiary in
furtherance of any such action.
SECTION 5.2 Acceleration of Maturity; Rescission and Annulment
If an Event of Default (other than an Event of Default specified in
Section 5.1(6) or 5.1(7) with respect to the Company) occurs and is
continuing, then in every such case the Trustee or the Holders of not
less than 25% in principal amount of the Outstanding Securities may,
subject to the provisions of Article XIII, declare the principal of all
the Securities to be due and payable immediately, by a notice in writing
to the Company (and to the Trustee if given by the Holders), and upon any
such declaration such principal and all accrued interest thereon shall
become immediately due and payable. If an Event of Default specified in
Section 5.1(6) or 5.1(7) with respect to the Company occurs, the
principal of, and accrued interest on, all the Securities shall, subject
to the provisions of Article XIII, ipso facto become immediately due and
payable without any declaration or other Act of the Holders or any act on
the part of the Trustee.
At any time after such declaration of acceleration has been made
and before a judgment or decree for payment of the money due has been
obtained by the Trustee as hereinafter in this Article V provided, the
Holders of a majority in principal amount of the Outstanding Securities,
by written notice to the Company and the Trustee, may, on behalf of all
Holders, rescind and annul such declaration and its consequences if:
(1) the Company has paid or deposited with the Trustee a
sum sufficient to pay
(i) all overdue interest on all Securities,
(ii) the principal of and premium, if any, on
any Securities which have become due otherwise than by such declaration
of acceleration and any interest thereon at the rate borne by the
Securities,
(iii) to the extent permitted by applicable law,
interest upon overdue interest at a rate of 7.0% per annum, and
(iv) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel;
(2) all Events of Default, other than the nonpayment of the
principal of and any premium and interest on, Securities which have
become due solely by such declaration of acceleration, have been cured or
waived as provided in Section 5.13; and
(3) such rescission and annulment would not conflict with
any judgment or decree issued in appropriate judicial proceedings
regarding the payment by the Trustee to the Holders of the amounts
referred to in 5.2(1).
No rescission or annulment referred to above shall affect any
subsequent default or impair any right consequent thereon.
SECTION 5.3 Collection of Indebtedness and Suits for Enforcement by
Trustee
The Company covenants that if:
(1) default is made in the payment of any interest
(including any interest upon overdue interest or Liquidated Damages) on
any Security when it becomes due and payable and such default continues
for a period of 30 days, or
(2) default is made in the payment of the principal of or
premium, if any, on any Security at the Maturity thereof,
the Company will, upon demand of the Trustee but subject to the
provisions of Article XIII pay to it, for the benefit of the Holders of
such Securities the whole amount then due and payable on such Securities
for principal and interest (including any Liquidated Damages) and
interest on any overdue principal and premium, if any, and, to the extent
permitted by applicable law, any interest upon overdue interest
(including any Liquidated Damages), at a rate of 7.0% per annum, and in
addition thereto, such further amount as shall be sufficient to cover the
reasonable costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel.
If the Company fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name and as trustee of an express trust,
may institute a judicial proceeding for the collection of the sums so due
and unpaid, may prosecute such proceeding to judgment or final decree and
may enforce the same against the Company or any other obligor upon the
Securities and collect the moneys adjudged or decreed to be payable in
the manner provided by law out of the property of the Company or any
other obligor upon the Securities, wherever situated.
If an Event of Default occurs and is continuing, the Trustee may in
its discretion proceed to protect and enforce its rights and the rights
of the Holders of Securities by such appropriate judicial proceedings as
the Trustee shall deem most effectual to protect and enforce any such
rights, whether for the specific enforcement of any covenant or agreement
in this Indenture or in aid of the exercise of any power granted herein,
or to enforce any other proper remedy.
SECTION 5.4 Trustee May File Proofs of Claim
In case of the pendency of any receivership, insolvency,
liquidation, bankruptcy, reorganization, arrangement, adjustment,
composition or other judicial proceeding relative to the Company or any
other obligor upon the Securities or the property of the Company or of
such other obligor or the creditors of either, the Trustee (irrespective
of whether the principal of, and any interest on, the Securities shall
then be due and payable as therein expressed or by declaration or
otherwise and irrespective of whether the Trustee shall have made any
demand on the Company for the payment of overdue principal or interest)
shall be entitled and empowered, by intervention in such proceeding or
otherwise,
(1) to file and prove a claim for the whole amount of
principal, premium, if any, and interest owing and unpaid in respect of
the Securities and take such other actions, including participating as a
member, voting or otherwise, of any official committee of creditors
appointed in such matter, and to file such other papers or documents, in
each of the foregoing cases, as may be necessary or advisable in order to
have the claims of the Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Trustee, its
agents and counsel) and of the Holders of Securities allowed in such
judicial proceeding, and
(2) to collect and receive any moneys or other property
payable or deliverable on any such claim and to distribute the same; and
any custodian, receiver, assignee, trustee, liquidator, sequestrator or
other similar official in any such judicial proceeding is hereby
authorized by each Holder of Securities to make such payments to the
Trustee and, in the event that the Trustee shall consent to the making of
such payments directly to the Holders of Securities to pay to the Trustee
any amount due to it for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel and any
other amounts due the Trustee under Section 6.7.
Nothing herein contained shall be deemed to authorize the Trustee
to authorize or consent to or accept or adopt on behalf of any Holder of
a Security any plan of reorganization, arrangement, adjustment or
composition affecting the Securities or the rights of any Holder thereof
or to authorize the Trustee to vote in respect of the claim of any Holder
of a Security in any such proceeding; provided, however, that the Trustee
may, on behalf of such Holders, vote for the election of a trustee in
bankruptcy or similar official.
SECTION 5.5 Trustee May Enforce Claims Without Possession of Securities
All rights of action and claims under this Indenture or the
Securities may be prosecuted and enforced by the Trustee without the
possession of any of the Securities or the production thereof in any
proceeding relating thereto, and any such proceeding instituted by the
Trustee shall be brought in its own name as trustee of an express trust,
and any recovery of judgment shall, after provision for the payment of
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and counsel, be for the ratable benefit of the
Holders of the Securities in respect of which judgment has been
recovered.
SECTION 5.6 Application of Money Collected
Subject to Article XIII, any money collected by the Trustee
pursuant to this Article V shall be applied in the following order, at
the date or dates fixed by the Trustee and, in case of the distribution
of such money on account of principal, premium, if any, or interest, upon
presentation of the Securities and the notation thereon of the payment if
only partially paid and upon surrender thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee under Section
6.7;
SECOND: To the payment of the amounts then due and unpaid for
principal of, premium, if any, or interest (including Liquidated Damages,
if any) on, the Securities in respect of which or for the benefit of
which such money has been collected, ratably, without preference or
priority of any kind, according to the amounts due and payable on such
Securities for principal, premium, if any, and interest (including
Liquidated Damages, if any), respectively;
THIRD: To such other Person or Persons, if any, to the extent
entitled thereto; and
FOURTH: Any remaining amounts shall be repaid to the Company.
SECTION 5.7 Limitation on Suits
No Holder of any Security shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for
the appointment of a receiver or trustee, or for any other remedy
hereunder, unless:
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in principal amount of
the Outstanding Securities shall have made written request to the Trustee
to institute proceedings in respect of such Event of Default in its own
name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee, and
if requested, shall have provided, reasonable indemnity against the
costs, expenses and liabilities to be incurred in compliance with such
request;
(4) the Trustee for 60 days after its receipt of such
notice, request and offer of indemnity (or if requested, receipt of
indemnity) has failed to institute any such proceeding; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 60 day period by the Holders of a
majority in principal amount of the Outstanding Securities, it being
understood and intended that no one or more of such Holders shall have
any right in any manner whatever by virtue of, or by availing of, any
provision of this Indenture to affect, disturb or prejudice the rights of
any other of such Holders, or to obtain or seek to obtain priority or
preference over any other of such Holders or to enforce any right under
this Indenture, except in the manner herein provided and for the equal
and ratable benefit of all such Holders.
SECTION 5.8 Unconditional Right of Holders to Receive Principal,
Premium and Interest and to Convert
Notwithstanding any other provision in this Indenture, but subject
to the provisions of Article XIII, the Holder of any Security shall have
the right, which is absolute and unconditional, to receive payment of the
principal of, premium, if any, and (subject to Section 3.7) interest
(including Liquidated Damages, if any) on such Security on the respective
Stated Maturities expressed in such Security (or, in the case of
redemption or repurchase, on the Redemption Date or Repurchase Date, as
the case may be), and to convert such Security in accordance with Article
XII, and to institute suit for the enforcement of any such payment and
right to convert, and such rights shall not be impaired without the
consent of such Holder.
SECTION 5.9 Restoration of Rights and Remedies
If the Trustee or any Holder of a Security has instituted any
proceeding to enforce any right or remedy under this Indenture and such
proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Trustee or to such Holder, then and in every
such case, subject to any determination in such proceeding, the Company,
the Trustee and the Holders of Securities shall be restored severally and
respectively to their former positions hereunder and thereafter all
rights and remedies of the Trustee and such Holders shall continue as
though no such proceeding had been instituted.
SECTION 5.10 Rights and Remedies Cumulative
Except as otherwise provided with respect to the replacement or
payment of mutilated, destroyed, lost or stolen Securities in the last
paragraph of Section 3.6, no right or remedy herein conferred upon or
reserved to the Trustee or to the Holders of Securities is intended to be
exclusive of any other right or remedy, and every right and remedy shall,
to the extent permitted by law, be cumulative and in addition to every
other right and remedy given hereunder or now or hereafter existing at
law or in equity or otherwise. The assertion or employment of any right
or remedy hereunder, or otherwise, shall not prevent the concurrent
assertion or employment of any other appropriate right or remedy.
SECTION 5.11 Delay or Omission Not Waiver
No delay or omission of the Trustee or of any Holder of any
Security to exercise any right or remedy accruing upon any Event of
Default shall impair any such right or remedy or constitute a waiver of
any such Event of Default or any acquiescence therein. Every right and
remedy given by this Article V or by law to the Trustee or to the Holders
of Securities may be exercised from time to time, and as often as may be
deemed expedient, by the Trustee or (subject to the limitations contained
in this Indenture) by the Holders of Securities as the case may be.
SECTION 5.12 Control by Holders of Securities
Subject to Section 6.3, the Holders of a majority in principal
amount of the Outstanding Securities shall have the right to direct the
time, method and place of conducting any proceeding for any remedy
available to the Trustee or exercising any trust or power conferred on
the Trustee, provided that
(1) such direction shall not be in conflict with any rule
of law or with this Indenture, and
(2) the Trustee may take any other action deemed proper by
the Trustee which is not inconsistent with such direction, and
(3) the Trustee need not take any action which might
involve it in personal liability or be unjustly prejudicial to the
Holders of Securities not consenting.
SECTION 5.13 Waiver of Past Defaults
The Holders, either (i) through the written consent of not less
than a majority in principal amount of the Outstanding Securities or (ii)
by the adoption of a resolution, at a meeting of Holders of the
Outstanding Securities at which a quorum is present, by the Holders of at
least 66-2/3% in principal amount of the Outstanding Securities
represented at such meeting, may on behalf of the Holders of all the
Securities waive any past default hereunder and its consequences, except
a default (A) in the payment of the principal of, premium, if any, or
interest (including Liquidated Damages) on any Security, or (B) in
respect of a covenant or provision hereof which under Article VIII cannot
be modified or amended without the consent of the Holder of each
Outstanding Security affected.
Upon any such waiver, such default shall cease to exist, and any
Event of Default arising therefrom shall be deemed to have been cured,
for every purpose of this Indenture; but no such waiver shall extend to
any subsequent or other default or impair any right consequent thereon.
SECTION 5.14 Undertaking for Costs
All parties to this Indenture agree, and each Holder of any
Security by his acceptance thereof shall be deemed to have agreed, that
any court may in its discretion require, in any suit for the enforcement
of any right or remedy under this Indenture, or any suit against the
Trustee for any action taken, suffered or omitted by it as Trustee, the
filing by any party litigant in such suit of an undertaking to pay the
costs of such suit, and that such court may in its discretion assess
reasonable costs, including reasonable attorneys' fees, against any party
litigant in such suit, having due regard to the merits and good faith of
the claims or defenses made by such party litigant; but the provisions of
this Section 5.14 shall not apply to any suit instituted by the Company,
to any suit instituted by the Trustee, to any suit instituted by any
Holder, or group of Holders, holding in the aggregate more than 10% in
principal amount of the Outstanding Securities, or to any suit instituted
by any Holder of any Security for the enforcement of the payment of the
principal of, premium, if any, or interest on any Security on or after
the respective Stated Maturity or Maturities expressed in such Security
(or, in the case of redemption or repurchase, on or after the Redemption
Date or Repurchase Date, as the case may be) or for the enforcement of
the right to convert any Security in accordance with Article XII.
SECTION 5.15 Waiver of Stay, Usury or Extension Laws
The Company covenants (to the extent that it may lawfully do so)
that it will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay, usury or
extension law wherever enacted, now or at any time hereafter in force,
which may affect the covenants or the performance of this Indenture; and
the Company (to the extent that it may lawfully do so) hereby expressly
waives all benefit or advantage of any such law and covenants that it
will not hinder, delay or impede by reason of such law the execution of
any power herein granted to the Trustee, but will suffer and permit the
execution of every such power as though no such law had been enacted.
ARTICLE VI
THE TRUSTEE
SECTION 6.1 Certain Duties and Responsibilities
(1) Except during the continuance of an Event of Default,
(i) the Trustee undertakes to perform such
duties and only such duties as are specifically set forth in this
Indenture, and no implied covenants or obligations shall be read into
this Indenture against the Trustee; and
(ii) in the absence of bad faith on its part,
the Trustee may conclusively rely, as to the truth of the statements and
the correctness of the opinions expressed therein, upon certificates or
opinions furnished to the Trustee and conforming to the requirements of
this Indenture, but in the case of any such certificates or opinions
which by any provision hereof are specifically required to be furnished
to the Trustee, the Trustee shall be under a duty to examine the same to
determine whether or not they conform to the requirements of this
Indenture, but not to verify the contents thereof (or to confirm or
investigate the accuracy of mathematical calculations or other facts
stated therein).
(2) In case an Event of Default has occurred and is
continuing, the Trustee shall exercise such of the rights and powers
vested in it by this Indenture, and use the same degree of care and skill
in their exercise, as a prudent man would exercise or use under the
circumstances in the conduct of his own affairs.
(3) No provision of this Indenture shall be construed to
relieve the Trustee from liability for its own negligent action, its own
negligent failure to act, or its own willful misconduct, except that
(i) this paragraph (3) shall not be construed
to limit the effect of paragraph (1) of this Section;
(ii) the Trustee shall not be liable for any
error of judgment made in good faith by a Responsible Officer, unless it
shall be proved that the Trustee was negligent in ascertaining the
pertinent facts;
(iii) the Trustee shall not be liable with
respect to any action taken or omitted to be taken by it in good faith in
accordance with the direction of the Holders of a majority in principal
amount of the Outstanding Securities relating to the time, method and
place of conducting any proceeding for any remedy available to the
Trustee, or exercising any trust or power conferred upon the Trustee,
under this Indenture; and
(iv) no provision of this Indenture shall
require the Trustee to expend or risk its own funds or otherwise incur
any financial liability in the performance of any of its duties
hereunder, or in the exercise of any of its rights or powers, if it shall
have reasonable grounds for believing that repayment of such funds or
adequate indemnity against such risk or liability is not reasonably
assured to it.
(4) Whether or not therein expressly so provided, every
provision of this Indenture relating to the conduct or affecting the
liability of or affording protection to the Trustee shall be subject to
the provisions of this Section.
SECTION 6.2 Notice of Defaults
Within 90 days after the occurrence of any default hereunder as to
which the Trustee has received written notice, the Trustee shall give to
all Holders of Securities, in the manner provided in Section 1.6, notice
of such default, unless such default shall have been cured or waived;
provided, however, that, except in the case of a default in the payment
of the principal of, premium, if any, or interest on any Security the
Trustee shall be protected in withholding such notice if and so long as
the board of directors, the executive committee or a trust committee of
directors or Responsible Officers of the Trustee in good faith determines
that the withholding of such notice is in the interest of the Holders;
and provided, further, that in the case of any default of the character
specified in Section 5.1(4), no such notice to Holders of Securities
shall be given until at least 60 days after the occurrence thereof or, if
applicable, the cure period specified therein. For the purpose of this
Section, the term "default" means any event which is, or after notice
or lapse of time or both would become, an Event of Default.
SECTION 6.3 Certain Rights of Trustee
Subject to the provisions of Section 6.1:
(1) the Trustee may conclusively rely, and shall be
protected in acting or refraining from acting, upon any resolution,
Officers' Certificate, other certificate, statement, instrument, opinion,
report, notice, request, direction, consent, order, bond, debenture,
note, coupon, other evidence of indebtedness or other paper or document
(collectively, the "Documents") believed by it to be genuine and to
have been signed or presented by the proper party or parties, and the
Trustee need not investigate any fact or matter stated in such Documents;
(2) any request or direction of the Company mentioned
herein shall be sufficiently evidenced by a Company Request or Company
Order and any resolution of the Board of Directors shall be sufficiently
evidenced by a Board Resolution;
(3) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the Trustee
(unless other evidence be the one specifically prescribed) may, in the
absence of bad faith on its part, request and rely upon an Officers'
Certificate or Opinion of Counsel;
(4) the Trustee may consult with counsel of its selection
and the advice of such counsel or any Opinion of Counsel shall be full
and complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon;
(5) the Trustee shall be under no obligation to exercise
any of the rights or powers vested in it by this Indenture at the request
or direction of any of the Holders of Securities pursuant to this
Indenture, unless such Holders shall have offered, and, if requested by
the Trustee, delivered, to the Trustee reasonable security or indemnity
against the costs, expenses and liabilities which might be incurred by it
in compliance with such request or direction;
(6) the Trustee shall not be bound to make any
investigation into the facts or matters stated in any Document, but the
Trustee may make such further inquiry or investigation into such facts or
matters as it may see fit, and, if the Trustee shall determine to make
such further inquiry or investigation, it shall be entitled to examine
the books, records and premises of the Company, personally or by agent or
attorney;
(7) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible for
any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder;
(8) the Trustee shall not be liable for any action it
takes, suffers to be taken or omits in good faith; and
(9) the Trustee shall not be deemed to have notice of any
default or Event of Default unless a Responsible Officer of the Trustee
has actual knowledge thereof or unless written notice of any event which
is in fact such a default is received by the Trustee at the Corporate
Trust Office of the Trustee, and such notice references the Securities or
this Indenture.
SECTION 6.4 Not Responsible for Recitals or Issuance of Securities
The recitals contained herein and in the Securities (except the
Trustee's certificates of authentication) shall be taken as the
statements of the Company, and the Trustee assumes no responsibility for
their correctness. The Trustee makes no representations as to the
validity or sufficiency of this Indenture, of the Securities or of the
Common Stock issuable upon the conversion of the Securities. The Trustee
shall not be accountable for the use or application by the Company of
Securities or the proceeds thereof.
SECTION 6.5 May Hold Securities, Act as Trustee under Other Indentures
The Trustee, any Authenticating Agent, any Paying Agent, any
Conversion Agent or any other agent of the Company or the Trustee, in
its individual or any other capacity, may become the owner or pledgee of
Securities and may otherwise deal with the Company with the same rights
it would have if it were not Trustee, Authenticating Agent, Paying Agent,
Conversion Agent or such other agent.
The Trustee is hereby authorized to act as trustee under that
certain indenture between Exodus Communications, Inc. and the Trustee,
dated as of July 1, 1998 (the "1998 Indenture") notwithstanding any
provisions of this Indenture or the 1998 Indenture affecting the relative
rights of holders of securities issued under such indentures to payment
thereon and to security given to secure such payment. The Trustee may
become and act as trustee under other indentures under which other
securities, or certificates of interest or participation in other
securities, of the Company are outstanding in the same manner as if it
were not Trustee hereunder. The Trustee is authorized to resign from any
of its appointments as Trustee hereunder, as trustee under the 1998
Indenture, or as trustee under any other indenture in the event that the
Trustee determines in good faith that its performance hereunder or
thereunder subjects the Trustee to a conflict of interest.
SECTION 6.6 Money Held in Trust
Money held by the Trustee in trust hereunder need not be segregated
from other funds except to the extent required by law. The Trustee shall
be under no liability for interest on any money received by it hereunder
except as otherwise agreed in writing with the Company.
SECTION 6.7 Compensation and Reimbursement
The Company agrees:
(1) to pay to the Trustee from time to time such reasonable
compensation as the Company and the Trustee shall from time to time agree
in writing for its acceptance of this Indenture and for all services
rendered by it hereunder (which compensation shall not be limited by any
provision of law in regard to the compensation of a trustee of an express
trust);
(2) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee (including
costs and expenses of enforcing this Indenture and defending itself
against any claim (whether asserted by the Company, any Holder of
Securities or any other Person) or liability in connection with the
exercise of any of its powers or duties hereunder) in accordance with any
provision of this Indenture (including the reasonable compensation and
the expenses and disbursements of its agents and counsel), except any
such expense, disbursement or advance as may be attributable to its
negligence or bad faith; and
(3) to indemnify the Trustee (and its directors, officers,
employees and agents) for, and to hold it harmless against, any loss,
damage, claim, liability or expense incurred without negligence or bad
faith on its part, arising out of or in connection with the acceptance or
administration of this trust, including without limitation the reasonable
costs, expenses and reasonable attorneys' fees and expenses of defending
itself against any claim or liability in connection with the exercise or
performance of any of its powers or duties hereunder.
When the Trustee incurs expenses or renders services in connection
with an Event of Default specified in Section 5.1(6) or Section 5.1(7),
the expenses (including the reasonable fees and expenses of its agents
and counsel) and the compensation for the services are intended to
constitute expenses of the administration under any applicable Federal or
state bankruptcy, insolvency or other similar law.
If the Company shall default in the payment of any amount owing to
the Trustee pursuant to this Section 6.7, the Trustee shall benetitled to
payment of such amount out of all property and funds held by it hereunder
prior to payment to the Holders of any amount owing to them under the
Notes.
The provisions of this Section shall survive the termination of
this Indenture or the earlier resignation or removal of the Trustee.
SECTION 6.8 Corporate Trustee Required; Eligibility
There shall at all times be a Trustee hereunder which shall be a
Person that is eligible pursuant to the Trust Indenture Act to act as
such and has (or, in the case of a corporation included in a bank holding
company system, the related bank holding company has) a combined capital
and surplus of at least U.S. $50,000,000, subject to supervision or
examination by federal or state authority, and in good standing. The
Trustee or an Affiliate of the Trustee shall maintain an established
place of business in the Borough of Manhattan, The City of New York. If
such corporation publishes reports of condition at least annually,
pursuant to law or to the requirements of said supervising or examining
authority, then for the purposes of this Section, the combined capital
and surplus of such corporation shall be deemed to be its combined
capital and surplus as set forth in its most recent report of condition
so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall resign
immediately in the manner and with the effect hereinafter specified in
this Article and a successor shall be appointed pursuant to Section 6.9.
SECTION 6.9 Resignation and Removal; Appointment of Successor
(1) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee in
accordance with the applicable requirements of Section 6.10.
(2) The Trustee may resign at any time by giving written
notice thereof to the Company. If the instrument of acceptance by a
successor Trustee required by Section 6.10 shall not have been delivered
to the Trustee within 30 days after the giving of such notice of
resignation, the resigning Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(3) The Trustee may be removed at any time by an Act of the
Holders of a majority in principal amount of the Outstanding Securities,
delivered to the Trustee and the Company. If the instrument of acceptance
by a successor Trustee required by Section 6.10 shall not have been
delivered to the Trustee within 30 days after the giving of such notice
of removal, the removed Trustee may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
(4) If at any time:
(i) the Trustee shall cease to be eligible
under Section 6.8 and shall fail to resign after written request therefor
by the Company or by any Holder of a Security who has been a bona fide
Holder of a Security for at least six months, or
(ii) the Trustee shall become incapable of
acting or shall be adjudged a bankrupt or insolvent or a receiver of the
Trustee or of its property shall be appointed or any public officer shall
take charge or control of the Trustee or of its property or affairs for
the purpose of rehabilitation, conservation or liquidation,
then, in any such case (i) the Company by a Board Resolution may remove
the Trustee, or (ii) subject to Section 5.14, any Holder of a Security
who has been a bona fide Holder of a Security for at least six months
may, on behalf of himself and all others similarly situated, petition any
court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
(5) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Trustee
for any cause, the Company, by a Board Resolution, shall promptly appoint
a successor Trustee and shall comply with the applicable requirements of
this Section and Section 6.10. If, within one year after such
resignation, removal or incapability, or the occurrence of such vacancy,
a successor Trustee shall be appointed by Act of the Holders of a
majority in principal amount of the Outstanding Securities delivered to
the Company and the retiring Trustee, the successor Trustee so appointed
shall, forthwith upon its acceptance of such appointment in accordance
with the applicable requirements of Section 6.10, become the successor
Trustee and supersede the successor Trustee appointed by the Company. If
no successor Trustee shall have been so appointed by the Company or the
Holders of Securities and accepted appointment in the manner required by
this Section and Section 6.10, any Holder of a Security who has been a
bona fide Holder of a Security for at least six months may, on behalf of
himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(6) The Company shall give notice of each resignation and
each removal of the Trustee and each appointment of a successor Trustee
to all Holders of Securities in the manner provided in Section 1.6. Each
notice shall include the name of the successor Trustee and the address of
its Corporate Trust Office.
SECTION 6.10 Acceptance of Appointment by Successor
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an
instrument accepting such appointment, and thereupon the resignation or
removal of the retiring Trustee shall become effective and such successor
Trustee, without any further act, deed or conveyance, shall become vested
with all the rights, powers, trusts and duties of the retiring Trustee;
but, on the request of the Company or the successor Trustee, such
retiring Trustee shall, upon payment of its charges, execute and deliver
an instrument transferring to such successor Trustee all the rights,
powers and trusts of the retiring Trustee and shall duly assign, transfer
and deliver to such successor Trustee all property and money held by such
retiring Trustee hereunder. Upon request of any such successor Trustee,
the Company shall execute any and all instruments for more fully and
certainly vesting in and confirming to such successor Trustee all such
rights, powers and trusts. Notwithstanding the replacement of the
Trustee pursuant to this Section 6.10, the Company's obligations under
Section 6.7 hereof shall continue for the benefit of the retiring
Trustee.
No successor Trustee shall accept its appointment unless at the
time of such acceptance such successor Trustee shall be eligible under
this Article.
SECTION 6.11 Merger, Conversion, Consolidation or Succession to Business
Any corporation into which the Trustee may be merged or converted
or with which it may be consolidated, or any corporation resulting from
any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to all or substantially all of the
corporate trust business of the Trustee (including the trust created by
this Indenture), shall be the successor of the Trustee hereunder,
provided such corporation shall be otherwise eligible under this Article,
without the execution or filing of any paper or any further act on the
part of any of the parties hereto. In case any Securities shall have been
authenticated, but not delivered, by the Trustee then in office, any
successor by merger, conversion or consolidation to such authenticating
Trustee may adopt such authentication and deliver the Securities so
authenticated with the same effect as if such successor Trustee had
itself authenticated such Securities.
SECTION 6.12 Authenticating Agents
The Trustee may, with the consent of the Company, appoint an
Authenticating Agent or Agents acceptable to the Company with respect to
the Securities which shall be authorized to act on behalf of the Trustee
to authenticate Securities issued upon exchange or substitution pursuant
to this Indenture.
Securities authenticated by an Authenticating Agent shall be
entitled to the benefits of this Indenture and shall be valid and
obligatory for all purposes as if authenticated by the Trustee hereunder,
and every reference in this Indenture to the authentication and delivery
of Securities by the Trustee or the Trustee's certificate of
authentication shall be deemed to include authentication and delivery on
behalf of the Trustee by an Authenticating Agent and a certificate of
authentication executed on behalf of the Trustee by an Authenticating
Agent. Each Authenticating Agent shall be subject to acceptance by the
Company and shall at all times be a corporation organized and doing
business under the laws of the United States of America, any State
thereof or the District of Columbia, authorized under such laws to act as
Authenticating Agent and subject to supervision or examination by
government or other fiscal authority. If at any time an Authenticating
Agent shall cease to be eligible in accordance with the provisions of
this Section 6.12, such Authenticating Agent shall resign immediately in
the manner and with the effect specified in this Section 6.12.
Any corporation into which an Authenticating Agent may be merged or
converted or with which it may be consolidated, or any corporation
resulting from any merger, conversion or consolidation to which such
Authenticating Agent shall be a party, or any corporation succeeding to
the corporate agency or corporate trust business of an Authenticating
Agent, shall continue to be an Authenticating Agent, provided such
corporation shall be otherwise eligible under this Section 6.12, without
the execution or filing of any paper or any further act on the part of
the Trustee or the Authenticating Agent.
An Authenticating Agent may resign at any time by giving written
notice thereof to the Trustee and to the Company. The Trustee may at any
time terminate the agency of an Authenticating Agent by giving written
notice thereof to such Authenticating Agent and to the Company. Upon
receiving such a notice of resignation or upon such a termination, or in
case at any time such Authenticating Agent shall cease to be eligible in
accordance with the provisions of this Section 6.12, the Trustee may
appoint a successor Authenticating Agent which shall be subject to
acceptance by the Company. Any successor Authenticating Agent upon
acceptance of its appointment hereunder shall become vested with all the
rights, powers and duties of its predecessor hereunder, with like effect
as if originally named as an Authenticating Agent. No successor
Authenticating Agent shall be appointed unless eligible under the
provisions of this Section 6.12.
The Company agrees to pay to each Authenticating Agent from time to
time reasonable compensation for its services under this Section 6.12.
If an Authenticating Agent is appointed with respect to the
Securities pursuant to this Section 6.12, the Securities may have
endorsed thereon, in addition to or in lieu of the Trustee's
certification of authentication, an alternative certificate of
authentication in the following form:
This is one of the Securities referred to in the within-mentioned
Indenture.
CHASE MANHATTAN BANK AND TRUST
COMPANY, NATIONAL ASSOCIATION,
as Trustee
By:_______________________________________
As Authenticating Agent
By:_______________________________________
Authorized Signatory
SECTION 6.13 Disqualification; Conflicting Interests
If the Trustee has or shall acquire a conflicting interest within
the meaning of the Trust Indenture Act, the Trustee shall either
eliminate such interest or resign, to the extent and in the manner
provided by, and subject to the provisions of, the Trust Indenture Act
and this Indenture.
SECTION 6.14 Preferential Collection of Claims Against Company
If and when the Trustee shall be or become a creditor of the
Company (or any other obligor upon the Securities), the Trustee shall be
subject to the provisions of the Trust Indenture Act regarding the
collection of claims against the Company (or any such other obligor).
ARTICLE VII
CONSOLIDATION, MERGER, CONVEYANCE, TRANSFER OR LEASE
SECTION 7.1 Company May Consolidate, Etc., Only on Certain Terms
The Company shall not consolidate with or merge into any other
Person or convey, transfer or lease all its properties and assets
substantially as an entirety to any Person, and the Company shall not
permit any Person to consolidate with or merge into the Company or
convey, transfer, sell or lease such Person's properties and assets
substantially as an entirety to the Company unless:
(1) the Person formed by such consolidation or into or with
which the Company is merged or the Person to which the properties and
assets of the Company are so conveyed, transferred, sold or leased shall
be a corporation, limited liability company, partnership or trust
organized and validly existing under the laws of the United States of
America, any State thereof or the District of Columbia and, if other than
the Company, shall expressly assume, by an indenture supplemental hereto,
executed and delivered to the Trustee, in form satisfactory to the
Trustee, the due and punctual payment of the principal of, premium, if
any, and interest (including Liquidated Damages, if any) on all of the
Securities as applicable, and the performance or observance of every
covenant of this Indenture on the part of the Company to be performed or
observed and shall have provided for conversion rights in accordance with
Article XII;
(2) immediately after giving effect to such transaction, no
Event of Default, and no event that after notice or lapse of time or
both, would become an Event of Default, shall have occurred and be
continuing; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger, conveyance, transfer or lease and, if a
supplemental indenture is required in connection with such transaction,
such supplemental indenture comply with this Article and that all
conditions precedent herein provided for relating to such transaction
have been complied with, together with any documents required under
Section 8.3.
SECTION 7.2 Successor Substituted
Upon any consolidation of the Company with, or merger of the
Company into any other Person or any conveyance, transfer or lease of all
or substantially all the properties and assets of the Company in
accordance with Section 7.1, the successor Person formed by such
consolidation or into or with which the Company is merged or to which
such conveyance, transfer or lease is made shall succeed to, and be
substituted for, and may exercise every right and power of, the Company
under this Indenture with the same effect as if such successor Person had
been named as the Company herein, and thereafter, except in the case of a
lease, the predecessor Person shall be relieved of all obligations and
covenants under this Indenture and the Securities.
ARTICLE VIII
SUPPLEMENTAL INDENTURES
SECTION 8.1 Supplemental Indentures Without Consent of Holders of
Securities
Without the consent of any Holders of Securities the Company, when
authorized by a Board Resolution, and the Trustee, at any time and from
time to time, may enter into one or more indentures supplemental hereto
for any of the following purposes:
(1) to evidence the succession of another Person to the
Company and the assumption by any such successor of the covenants and
obligations of the Company herein and in the Securities as permitted by
Article VII of this Indenture; or
(2) to add to the covenants of the Company for the benefit
of the Holders of Securities or to surrender any right or power herein
conferred upon the Company; or
(3) to secure the Securities; or
(4) to make provision with respect to the conversion rights
of Holders of Securities pursuant to Section 12.11 or to make provision
with respect to the repurchase rights of Holders of Securities pursuant
to Section 14.5; or
(5) to make any changes or modifications to this Indenture
necessary in connection with the registration of any Registrable
Securities under the Securities Act as contemplated by Section 10.11,
provided such action pursuant to this clause (5) shall not adversely
affect the interests of the Holders of Securities; or
(6) to comply with the requirements of the Trust Indenture
Act or the rules and regulations of the Commission thereunder in order to
effect or maintain the qualification of this Indenture under the Trust
Indenture Act, as contemplated by this Indenture or otherwise; or
(7) to evidence and provide for the acceptance of
appointment hereunder by a successor Trustee; or
(8) subject to Section 13.12, to make any change in Article
XIII that would limit or terminate the benefits available to any holder
of Senior Indebtedness under such Article; or
(9) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision
herein or which is otherwise defective, or to make any other provisions
with respect to matters or questions arising under this Indenture as the
Company and the Trustee may deem necessary or desirable, provided such
action pursuant to this clause (9) shall not adversely affect the
interests of the Holders of Securities in any material respect.
Upon Company Request, accompanied by a Board Resolution authorizing
the execution of any such supplemental indenture, and subject to and upon
receipt by the Trustee of the documents described in Section 8.3 hereof,
the Trustee shall join with the Company in the execution of any
supplemental indenture authorized or permitted by the terms of this
Indenture and to make any further appropriate agreements and stipulations
which may be therein contained.
SECTION 8.2 Supplemental Indentures with Consent of Holders of
Securities
With either (i) the written consent of the Holders of not less than
a majority in principal amount of the Outstanding Securities, by the Act
of said Holders delivered to the Company and the Trustee, or (ii) by the
adoption of a resolution, at a meeting of Holders of the Outstanding
Securities at which a quorum is present, by the Holders of at least
66-2/3% in principal amount of the Outstanding Securities represented at
such meeting, the Company, when authorized by a Board Resolution, and the
Trustee may enter into an indenture or indentures supplemental hereto for
the purpose of adding any provisions to or changing in any manner or
eliminating any of the provisions of this Indenture or of modifying in
any manner the rights of the Holders of Securities under this Indenture;
provided, however, that no such supplemental indenture shall, without the
consent or affirmative vote of the Holder of each Outstanding Security
affected thereby,
(1) change the Stated Maturity of the principal of, or any
installment of interest on, any Security, or reduce the principal amount
of, or the premium, if any, or the rate of interest payable thereon, or
reduce the amount payable upon a redemption or mandatory repurchase, or
change the place or currency of payment of the principal of, premium, if
any, or interest on any Security (including any payment of Liquidated
Damages or Redemption Price or Repurchase Price in respect of such
Security) or impair the right to institute suit for the enforcement of
any payment in respect of any Security on or after the Stated Maturity
thereof (or, in the case of redemption or any repurchase, on or after the
Redemption Date or Repurchase Date, as the case may be) or, except as
permitted by Section 12.11, adversely affect the right of Holders to
convert any Security as provided in Article XII, or modify the provisions
of this Indenture with respect to the subordination of the Securities in
a manner adverse to the Holders; or
(2) reduce the requirements of Section 9.4 for quorum or
voting, or reduce the percentage in principal amount of the Outstanding
Securities the consent of whose Holders is required for any such
supplemental indenture or the consent of whose Holders is required for
any waiver (of compliance with certain provisions of this Indenture or
certain defaults hereunder and their consequences) provided for in this
Indenture; or
(3) modify the obligation of the Company to maintain an
office or agency in the Borough of Manhattan, The City of New York,
pursuant to Section 10.2; or
(4) modify any of the provisions of this Section or Section
5.13 or 10.13, except to increase any percentage contained herein or
therein or to provide that certain other provisions of this Indenture
cannot be modified or waived without the consent of the Holder of each
Outstanding Security affected thereby; or
(5) adversely affect the right of Holders to require the
Company to repurchase any Note other than as provided in Article XIV; or
(6) modify any of the provisions of Section 10.9.
It shall not be necessary for any Act of Holders of Securities
under this Section to approve the particular form of any proposed
supplemental indenture, but it shall be sufficient if such Act shall
approve the substance thereof.
SECTION 8.3 Execution of Supplemental Indentures
In executing, or accepting the additional trusts created by, any
supplemental indenture permitted by this Article or the modifications
thereby of the trusts created by this Indenture, the Trustee shall be
entitled to receive, and (subject to Sections 6.1 and 6.3) shall be fully
protected in relying upon, an Opinion of Counsel stating that the
execution of such supplemental indenture is authorized or permitted by
this Indenture, and that such supplemental indenture has been duly
authorized, executed and delivered by the Company and constitutes a valid
and legally binding obligation of the Company enforceable against the
Company in accordance with its terms. The Trustee may, but shall not be
obligated to, enter into any such supplemental indenture which affects
the Trustee's own rights, duties or immunities under this Indenture or
otherwise.
SECTION 8.4 Effect of Supplemental Indentures
Upon the execution of any supplemental indenture under this
Article, this Indenture shall be modified in accordance therewith, and
such supplemental indenture shall form a part of this Indenture for all
purposes; and every Holder of Securities theretofore or thereafter
authenticated and delivered hereunder appertaining thereto shall be bound
thereby.
SECTION 8.5 Reference in Securities to Supplemental Indentures
Securities authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if
required by the Trustee, bear a notation in form approved by the Trustee
as to any matter provided for in such supplemental indenture. If the
Company shall so determine, new Securities so modified as to conform, in
the opinion of the Company and the Trustee, to any such supplemental
indenture may be prepared and executed by the Company and authenticated
and delivered by the Trustee in exchange for Outstanding Securities.
SECTION 8.6 Notice of Supplemental Indentures
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of Section 8.1, the
Company shall give notice to all Holders of Securities of such fact,
setting forth in general terms the substance of such supplemental
indenture, in the manner provided in Section 1.6. Any failure of the
Company to give such notice, or any defect therein, shall not in any way
impair or affect the validity of any such supplemental indenture.
ARTICLE IX
MEETINGS OF HOLDERS OF SECURITIES
SECTION 9.1 Purposes for Which Meetings May Be Called
A meeting of Holders of Securities may be called at any time and
from time to time pursuant to this Article to make, give or take any
request, demand, authorization, direction, notice, consent, waiver or
other action provided by this Indenture to be made, given or taken by
Holders of Securities.
SECTION 9.2 Call, Notice and Place of Meetings
(1) The Trustee may at any time call a meeting of Holders
of Securities for any purpose specified in Section 9.1, to be held at
such time and at such place in the Borough of Manhattan, The City of New
York, as the Trustee shall determine. Notice of every meeting of Holders
of Securities, setting forth the time and the place of such meeting and
in general terms the action proposed to be taken at such meeting, shall
be given, in the manner provided in Section 1.6, not less than 21 nor
more than 180 days prior to the date fixed for the meeting.
(2) In case at any time the Company, pursuant to a Board
Resolution, or the Holders of at least 10% in principal amount of the
Outstanding Securities shall have requested the Trustee to call a meeting
of the Holders of Securities for any purpose specified in Section 9.1, by
written request setting forth in reasonable detail the action proposed to
be taken at the meeting, and the Trustee shall not have mailed the notice
of such meeting within 21 days after receipt of such request or shall not
thereafter proceed to cause the meeting to be held as provided herein,
then the Company or the Holders of Securities in the amount specified, as
the case may be, may determine the time and the place in the Borough of
Manhattan, The City of New York, for such meeting and may call such
meeting for such purposes by giving notice thereof as provided in
paragraph (1) of this Section.
SECTION 9.3 Persons Entitled to Vote at Meetings
To be entitled to vote at any meeting of Holders of Securities, a
Person shall be (i) a Holder of one or more Outstanding Securities on the
date of such meeting, or (ii) a Person appointed by an instrument in
writing as proxy for a Holder or Holders of one or more Outstanding
Securities by such Holder or Holders. The only Persons who shall be
entitled to be present or to speak at any meeting of Holders shall be the
Persons entitled to vote at such meeting and their counsel, any
representatives of the Trustee and its counsel and any representatives of
the Company and its counsel.
SECTION 9.4 Quorum; Action
The Persons entitled to vote a majority in principal amount of the
Outstanding Securities shall constitute a quorum. In the absence of a
quorum within 30 minutes of the time appointed for any such meeting, the
meeting shall, if convened at the request of Holders of Securities, be
dissolved. In any other case, the meeting may be adjourned for a period
of not less than 10 days as determined by the chairman of the meeting
prior to the adjournment of such meeting. In the absence of a quorum at
any such adjourned meeting, such adjourned meeting may be further
adjourned for a period not less than 10 days as determined by the
chairman of the meeting prior to the adjournment of such adjourned
meeting (subject to repeated applications of this sentence). Notice of
the reconvening of any adjourned meeting shall be given as provided in
Section 9.2(1), except that such notice need be given only once not less
than five days prior to the date on which the meeting is scheduled to be
reconvened. Notice of the reconvening of an adjourned meeting shall
state expressly the percentage of the principal amount of the Outstanding
Securities which shall constitute a quorum.
Subject to the foregoing, at the reconvening of any meeting
adjourned for a lack of a quorum, the Persons entitled to vote 25% in
principal amount of the Outstanding Securities at the time shall
constitute a quorum for the taking of any action set forth in the notice
of the original meeting.
At a meeting or an adjourned meeting duly reconvened and at which a
quorum is present as aforesaid, any resolution and all matters (except as
limited by the proviso to Section 8.2 and except to the extent Section
10.13 requires a different vote) shall be effectively passed and decided
if passed or decided by the lesser of (i) the Holders of not less than a
majority in principal amount of Outstanding Securities and (ii) the
Persons entitled to vote not less than 66-2/3% in principal amount of
Outstanding Securities represented and entitled to vote at such meeting.
Any resolution passed or decisions taken at any meeting of Holders
of Securities duly held in accordance with this Section shall be binding
on all the Holders of Securities whether or not present or represented at
the meeting. The Trustee shall, in the name and at the expense of the
Company, notify all the Holders of Securities of any such resolutions or
decisions pursuant to Section 1.6.
SECTION 9.5 Determination of Voting Rights; Conduct and Adjournment
of Meetings
(1) Notwithstanding any other provisions of this Indenture,
the Trustee may make such reasonable regulations as it may deem advisable
for any meeting of Holders of Securities in regard to proof of the
holding of Securities and of the appointment of proxies and in regard to
the appointment and duties of inspectors of votes, the submission and
examination of proxies, certificates and other evidence of the right to
vote, and such other matters concerning the conduct of the meeting as it
shall deem appropriate. Except as otherwise permitted or required by any
such regulations, the holding of Securities shall be proved in the manner
specified in Section 1.4 and the appointment of any proxy shall be proved
in the manner specified in Section 1.4 or by having the signature of the
Person executing the proxy guaranteed by any bank, broker or other
eligible institution participating in a recognized medallion signature
guarantee program.
(2) The Trustee shall, by an instrument in writing, appoint
a temporary chairman (which may be the Trustee) of the meeting, unless
the meeting shall have been called by the Company or by Holders of
Securities as provided in Section 9.2(1), in which case the Company or
the Holders of Securities calling the meeting, as the case may be, shall
in like manner appoint a temporary chairman. A permanent chairman and a
permanent secretary of the meeting shall be elected by vote of the
Persons entitled to vote a majority in principal amount of the
Outstanding Securities represented at the meeting.
(3) At any meeting, each Holder of a Security or proxy
shall be entitled to one vote for each U.S. $1,000 principal amount of
Securities held or represented by him; provided, however, that no vote
shall be cast or counted at any meeting in respect of any Security
challenged as not Outstanding and ruled by the chairman of the meeting to
be not Outstanding. The chairman of the meeting shall have no right to
vote, except as a Holder of a Security or proxy.
(4) Any meeting of Holders of Securities duly called
pursuant to Section 9.2 at which a quorum is present may be adjourned
from time to time by Persons entitled to vote a majority in principal
amount of the Outstanding Securities represented at the meeting, and the
meeting may be held as so adjourned without further notice.
SECTION 9.6 Counting Votes and Recording Action of Meetings
The vote upon any resolution submitted to any meeting of Holders of
Securities shall be by written ballots on which shall be subscribed the
signatures of the Holders of Securities or of their representatives by
proxy and the principal amounts at Stated Maturity and serial numbers of
the Outstanding Securities held or represented by them. The permanent
chairman of the meeting shall appoint two inspectors of votes who shall
count all votes cast at the meeting for or against any resolution and who
shall make and file with the secretary of the meeting their verified
written reports in duplicate of all votes cast at the meeting. A record,
at least in duplicate, of the proceedings of each meeting of Holders of
Securities shall be prepared by the secretary of the meeting and there
shall be attached to said record the original reports of the inspectors
of votes on any vote by ballot taken thereat and affidavits by one or
more Persons having knowledge of the facts setting forth a copy of the
notice of the meeting and showing that said notice was given as provided
in Section 9.2 and, if applicable, Section 9.4. Each copy shall be signed
and verified by the affidavits of the permanent chairman and secretary of
the meeting and one such copy shall be delivered to the Company and
another to the Trustee to be preserved by the Trustee, the latter to have
attached thereto the ballots voted at the meeting. Any record so signed
and verified shall be conclusive evidence of the matters therein stated.
ARTICLE X
COVENANTS
SECTION 10.1 Payment of Principal, Premium and Interest
The Company covenants and agrees that it will duly and punctually
pay the principal of and premium, if any, and interest (including
Liquidated Damages, if any) on the Securities in accordance with the
terms of the Securities and this Indenture. The Company will deposit or
cause to be deposited with the Trustee, no later than the opening of
business on the date of the Stated Maturity of any Security or no later
than the opening of business on the due date for any installment of
interest, all payments so due, which payments shall be in immediately
available funds on the date of such Stated Maturity or due date, as the
case may be.
SECTION 10.2 Maintenance of Offices or Agencies
The Company will maintain in the Borough of Manhattan, The City of
New York, an office or agency where the Securities may be surrendered for
registration of transfer or exchange or for presentation for payment or
for conversion, redemption or repurchase and where notices and demands to
or upon the Company in respect of the Securities and this Indenture may
be served. The Company will give prompt written notice to the Trustee of
the location, and any change in the location, of such office or agency
not designated or appointed by the Trustee. If at any time the Company
shall fail to maintain any such required office or agency or shall fail
to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate
Trust Office or the office or agency of the Trustee in the Borough of
Manhattan, The City of New York, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders,
notices and demands.
The Company may at any time and from time to time vary or terminate
the appointment of any such agent or appoint any additional agents for
any or all of such purposes; provided, however, that until all of the
Securities have been delivered to the Trustee for cancellation, or moneys
sufficient to pay the principal of, premium, if any, and interest on the
Securities have been made available for payment and either paid or
returned to the Company pursuant to the provisions of Section 10.3, the
Company will maintain in the Borough of Manhattan, The City of New York,
an office or agency where Securities may be presented or surrendered for
payment and conversion, which shall initially be the Trustee, where
Securities may be surrendered for registration of transfer or exchange
and where notices and demands to or upon the Company in respect of the
Securities and this Indenture may be served. The Company will give prompt
written notice to the Trustee, and notice to the Holders in accordance
with Section 1.6, of the appointment or termination of any such agents
and of the location and any change in the location of any such office or
agency.
The Company hereby initially designates the Trustee as Paying
Agent, Security Registrar and Conversion Agent, and each of the Corporate
Trust Office of the Trustee and the office or agency of the Trustee in
the Borough of Manhattan, The City of New York, located at 55 Water
Street, Room 234 North, Corporate Trust Securities Window, New York, New
York 10041, attention: Exodus Communications, Inc. 5% Convertible
Subordinated Notes due March 15, 2006 one such office or agency of the
Company for each of the aforesaid purposes.
SECTION 10.3 Money for Security Payments to Be Held in Trust
If the Company shall act as its own Paying Agent, it will, on or
before each due date of the principal of, premium, if any, or interest on
any of the Securities, segregate and hold in trust for the benefit of the
Persons entitled thereto a sum sufficient to pay the principal, premium,
if any, or interest so becoming due until such sums shall be paid to such
Persons or otherwise disposed of as herein provided and the Company will
promptly notify the Trustee of its action or failure so to act.
Whenever the Company shall have one or more Paying Agents, it will,
no later than the opening of business on each due date of the principal
of, premium, if any, or interest on any Securities, deposit with the
Trustee a sum in funds immediately payable on the payment date sufficient
to pay the principal, premium, if any, or interest so becoming due, such
sum to be held for the benefit of the Persons entitled to such principal,
premium, if any, or interest, and (unless such Paying Agent is the
Trustee) the Company will promptly notify the Trustee of any failure so
to act.
The Company will cause each Paying Agent other than the Trustee to
execute and deliver to the Trustee an instrument in which such Paying
Agent shall agree with the Trustee, subject to the provisions of this
Section, that such Paying Agent will:
(1) hold all sums held by it for the payment of the
principal of, premium, if any, or interest on Securities for the benefit
of the Persons entitled thereto until such sums shall be paid to such
Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company
(or any other obligor upon the Securities) in the making of any payment
of principal, premium, if any, or interest; and
(3) at any time during the continuance of any such default,
upon the written request of the Trustee, forthwith pay to the Trustee all
sums so held by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose,
pay, or by Company Order direct any Paying Agent to pay, to the Trustee
all sums held in trust by the Company or such Paying Agent, such sums to
be held by the Trustee upon the same trusts as those upon which such sums
were held by the Company or such Paying Agent; and, upon such payment by
any Paying Agent to the Trustee, such Paying Agent shall be released from
all further liability with respect to such money.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of,
premium, if any, or interest on any Security and remaining unclaimed for
two years after such principal, premium, if any, or interest has become
due and payable shall be paid to the Company on Company Request, or (if
then held by the Company) shall be discharged from such trust; and the
Holder of such Security shall thereafter, as an unsecured general
creditor, look only to the Company for payment thereof, and all liability
of the Trustee or such Paying Agent with respect to such trust money, and
all liability of the Company as trustee thereof, shall thereupon cease.
SECTION 10.4 Existence
Subject to Article VII, the Company will do or cause to be done all
things necessary to preserve and keep in full force and effect its
existence, rights (charter and statutory) and franchises; provided,
however, that the Company shall not be required to preserve any such
right or franchise if the Company shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the
Company and that the loss thereof is not disadvantageous in any material
respect to the Holders.
SECTION 10.5 Maintenance of Properties
The Company will cause all properties used or useful in the conduct
of its business or the business of any Significant Subsidiary to be
maintained and kept in good condition, repair and working order and
supplied with all necessary equipment and will cause to be made all
necessary repairs, renewals, replacements, betterments and improvements
thereof, all as in the judgment of the Company may be necessary so that
the business carried on in connection therewith may be properly and
advantageously conducted at all times; provided, however, that nothing in
this Section shall prevent the Company from discontinuing the operation
or maintenance of any of such properties if such discontinuance is, in
the judgment of the Company, desirable in the conduct of its business or
the business of any Significant Subsidiary and not disadvantageous in any
material respect to the Holders.
SECTION 10.6 Payment of Taxes and Other Claims
The Company will pay or discharge, or cause to be paid or
discharged, before the same may become delinquent, (i) all taxes,
assessments and governmental charges levied or imposed upon the Company
or any Significant Subsidiary or upon the income, profits or property of
the Company or any Significant Subsidiary, (ii) all claims for labor,
materials and supplies which, if unpaid, might by law become a lien or
charge upon the property of the Company or any Significant Subsidiary,
and (iii) all stamps and other duties, if any, which may be imposed by
the United States or any political subdivision thereof or therein in
connection with the issuance, transfer, exchange or conversion of any
Securities or with respect to this Indenture; provided, however, that, in
the case of clauses (i) and (ii), the Company shall not be required to
pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim (A) if the failure to do so will not, in the
aggregate, have a material adverse impact on the Company, or (B) if the
amount, applicability or validity is being contested in good faith by
appropriate proceedings.
SECTION 10.7 Registration and Listing
The Company (i) will effect all registrations with, and obtain all
approvals by, all governmental authorities that may be necessary under
any United States Federal or state law (including the Securities Act, the
Exchange Act and state securities and Blue Sky laws) before the shares of
Common Stock issuable upon conversion of Securities are issued and
delivered, and qualified or listed as contemplated by clause (ii) (it
being understood that the Company shall not be required to register the
Securities under the Securities Act, except pursuant to the Registration
Rights Agreement referred to in Section 10.11); and (ii) will qualify the
shares of Common Stock required to be issued and delivered upon
conversion of Securities, prior to such issuance or delivery, for
quotation on the Nasdaq National Market or, if the Common Stock is not
then quoted on the Nasdaq National Market, list the Common Stock on each
national securities exchange or quotation system on which outstanding
Common Stock is listed or quoted at the time of such delivery.
Nothing in this Section will limit the application of Section 10.11.
SECTION 10.8 Statement by Officers as to Default
The Company shall deliver to the Trustee, within 120 days after the
end of each fiscal year of the Company ending after the date hereof, an
Officers' Certificate, stating whether or not to the best knowledge of
the signers thereof the Company is in default in the performance and
observance of any of the terms, provisions and conditions of this
Indenture (without regard to any period of grace or requirement of notice
provided hereunder) and, if the Company shall be in default, specifying
all such defaults and the nature and status thereof of which they may
have knowledge.
The Company will deliver to the Trustee, forthwith upon becoming
aware of any default under this Indenture or any Event of Default, an
Officers' Certificate specifying with particularity such default or Event
of Default and further stating what action the Company has taken, is
taking or proposes to take with respect thereto. For the purpose of this
Section, the term "default" includes any event which is, or after
notice or lapse of time or both would become, an Event of Default.
Any notice required to be given under this Section 10.8 shall be
delivered to the Trustee at its Corporate Trust Office.
SECTION 10.9 Delivery of Certain Information
At any time when the Company is not subject to Section 13 or 15(d)
of the Exchange Act, upon the request of a Holder of a Restricted
Security or the holder of shares of Common Stock issued upon conversion
thereof, the Company will promptly furnish or cause to be furnished Rule
144A Information (as defined below) to such Holder of Restricted
Securities or such holder of shares of Common Stock issued upon
conversion of Restricted Securities, or to a prospective purchaser of any
such security designated by any such Holder or holder, as the case may
be, to the extent required to permit compliance by such Holder or holder
with Rule 144A under the Securities Act (or any successor provision
thereto) in connection with the resale of any such security; provided,
however, that the Company shall not be required to furnish such
information in connection with any request made on or after the date
which is two years from the later of (i) the date such a security (or any
such predecessor security) was last acquired from the Company or (ii) the
date such a security (or any such predecessor security) was last acquired
from an "affiliate" of the Company within the meaning of Rule 144 under
the Securities Act (or any successor provision thereto). "Rule 144A
Information" shall be such information as is specified pursuant to Rule
144A(d)(4) under the Securities Act (or any successor provision thereto).
SECTION 10.10 Resale of Certain Securities
During the period beginning on the last date of original issuance
of the Securities and ending on the date that is two years from such date
(or such shortened period under Rule 144(k) under the Securities Act or
any successor rule), the Company will not, and will use all reasonable
efforts to ensure that its "affiliates" (as defined under Rule 144
under the Securities Act or any successor provision thereto) do not,
resell (i) any Securities which constitute "restricted securities"
under Rule 144 or (ii) any securities into which the Securities have been
converted under this Indenture which constitute "restricted securities"
under Rule 144, that in either case have been reacquired by any of them.
The Trustee shall have no responsibility in respect of the Company's
performance of its agreement in the preceding sentence.
SECTION 10.11 Registration Rights
The Company agrees that the Holders from time to time of
Registrable Securities (as defined below) are entitled to the benefits of
a Registration Rights Agreement. Pursuant to the Registration Rights
Agreement, the Company has agreed for the benefit of the holders from
time to time of the Registrable Securities that it will, at its expense,
(i) within 90 days after the Issue Date (as defined below) of the
Securities, file a shelf registration statement (the "Shelf Registration
Statement") with the Commission with respect to resales of the
Registrable Securities, (ii) use all reasonable efforts to cause such
Shelf Registration Statement to be declared effective by the Commission
within 180 days after the Issue Date of the Securities, provided, however
that the Company may, upon written notice to all the Holders, postpone
having the Shelf Registration Statement declared effective if the Company
possesses material non-public information, the disclosure of which would
have a material adverse effect on the Company and its subsidiaries taken
as a whole and (iii) use all reasonable efforts to maintain such Shelf
Registration Statement effective under the Securities Act until the
second annual anniversary of the date it is declared effective or such
earlier date as is provided in the Registration Rights Agreement (the
"Effectiveness Period"). The Company will be permitted to suspend the
use of the prospectus which is a part of the Shelf Registration Statement
during certain periods of time as provided in the Registration Rights
Agreement.
If (i) on or prior to 90 days following the Issue Date of the
Securities, a Shelf Registration Statement has not been filed with the
Commission, or (ii) subject to the Company's right to postpone
effectiveness as set forth in the immediately preceding paragraph, on or
prior to the 180th day following the Issue Date of the Securities, such
Shelf Registration Statement is not declared effective (each, a
"Registration Default"), additional interest ("Liquidated Damages")
will accrue on the Restricted Securities from and including the day
following such Registration Default to but excluding the day on which
such Registration Default has been cured. Liquidated Damages will be paid
semi-annually in arrears, with the first semi-annual payment due on the
first Interest Payment Date, as applicable, in respect of the Restricted
Securities following the date on which such Liquidated Damages begin to
accrue, and will accrue at a rate per annum equal to an additional
one-quarter of one percent (0.25%) of the principal amount of the
Restricted Securities to and including the 90th day following such
Registration Default and at a rate per annum equal to one-half of one
percent (0.50%) thereof from and after the 91st day following such
Registration Default. Pursuant to the Registration Rights Agreement, in
the event that the Shelf Registration Statement ceases to be effective
(or the Holders of Registrable Securities are otherwise prevented or
restricted by the Company from effecting sales pursuant thereto) (an
"Effective Failure") during the Effectiveness Period for more than 45
days, whether or not consecutive, during any 90 day period, or for more
than 90 days, whether or not consecutive, during any 12-month period,
then the interest rate borne by the Restricted Securities shall increase
by an additional one-half of one percent (0.50%) per annum from the 46th
day of the applicable 90 day period or the 91st day of the applicable
12-month period, as the case may be, until such time as the Effective
Failure is cured.
Whenever in this Indenture there is mentioned, in any context, the
payment of the principal of, premium, if any, or interest on, or in
respect of, any Security, such mention shall be deemed to include mention
of the payment of Liquidated Damages provided for in this Section to the
extent that, in such context, Liquidated Damages are, were or would be
payable in respect thereof pursuant to the provisions of this Section and
express mention of the payment of Liquidated Damages (if applicable) in
any provisions hereof shall not be construed as excluding Liquidated
Damages in those provisions hereof where such express mention is not
made.
For the purposes of the Registration Rights Agreement,
"Registrable Securities" means all or any portion of the Restricted
Securities issued from time to time under this Indenture and the shares
of Common Stock issuable upon conversion or repurchase of such Restricted
Securities, except any such Restricted Security or share of Common Stock
issuable upon conversion or repurchase thereof which (i) has been
effectively registered under the Securities Act and sold in a manner
contemplated by the Shelf Registration Statement, (ii) has been
transferred in compliance with Rule 144 under the Securities Act (or any
successor provision thereto) or is transferable pursuant to paragraph (k)
of such Rule 144 (or any successor provision thereto) or (iii) otherwise
has been transferred and a new Security or share of Common Stock not
subject to transfer restrictions under the Securities Act has been
delivered by or on behalf of the Company in accordance with Section 3.5
of this Indenture.
If a Security, or the shares of Common Stock issuable upon
conversion of a Security, is a Registrable Security, and the Holder
thereof elects to sell such Registrable Security pursuant to the Shelf
Registration Statement then, by its acceptance thereof, the Holder of
such Registrable Security will have agreed to be bound by the terms of
the Registration Rights Agreement relating to the Registrable Securities
which are the subject of such election.
For the purposes of the Registration Rights Agreement, the term
"Holder" includes any Person that has a beneficial interest in any
Restricted Global Security or any beneficial interest in a global
security representing shares of Common Stock issuable upon conversion of
a Security.
SECTION 10.12 Use of Proceeds
The Company shall use the net proceeds of the sale of the
Securities (other than $48.475 million) to finance the purchase or other
acquisition of any property, inventory, asset or business directly or
indirectly, by the Company or any Restricted Subsidiary used in, or to be
used in, the System and Network Management Business, or for such other
purposes as may be permitted by the 1998 Indenture (as defined in Section
6.5 hereof). "Restricted Subsidiary" shall mean any subsidiary of the
Company that has not been designated an "Unrestricted Subsidiary"
pursuant to the 1998 Indenture. "System and Network Management
Business" means: (i) server and other hardware hosting; (ii)
connectivity, data networking, telecommunications or content for computer
or data networks or systems; (iii) management of computer or data
networks or systems; (iv) technology services, equipment sales or leasing
or software licensing for computer or data networks or systems (including
Internet Protocol and any successor protocol(s) based networks); and (v)
businesses reasonably related, complementary or incidental thereto.
SECTION 10.13 Waiver of Certain Covenants
The Company may omit in any particular instance to comply with any
covenant or condition set forth in Sections 10.4 (other than with respect
to the existence of the Company (subject to Article VII)), 10.5 and 10.
6, inclusive (other than a covenant or condition which under Article VIII
cannot be modified or amended without the consent of the Holder of each
Outstanding Security affected), if before the time for such compliance
the Holders shall, through the written consent of not less than a
majority in principal amount of the Outstanding Securities, or the
adoption of a resolution at a meeting of Holders of the Outstanding
Securities at which a quorum is present by 66-2/3 % in principal amount
of Outstanding Securities represented and entitled to vote at such
meeting, either waive such compliance in such instance or generally waive
compliance with such covenant or condition, but no such waiver shall
extend to or affect such covenant or condition except to the extent so
expressly waived, and, until such waiver shall become effective, the
obligations of the Company and the duties of the Trustee or any Paying or
Conversion Agent in respect of any such covenant or condition shall
remain in full force and effect.
ARTICLE XI
REDEMPTION OF SECURITIES
SECTION 11.1 Right of Redemption
The Securities may be redeemed in accordance with the provisions of
the form of Securities set forth in Section 2.2.
SECTION 11.2 Applicability of Article
Redemption of Securities at the election of the Company or
otherwise, as permitted or required by any provision of the Securities or
this Indenture, shall be made in accordance with such provision and this
Article XI.
SECTION 11.3 Election to Redeem; Notice to Trustee
The election of the Company to redeem any Securities shall be
evidenced by a Board Resolution. In case of any redemption at the
election of the Company of any of the Securities, the Company shall, at
least 30 days prior to the Redemption Date fixed by the Company (unless a
shorter notice shall be satisfactory to the Trustee), notify the Trustee
in writing of such Redemption Date.
SECTION 11.4 Selection by Trustee of Securities to Be Redeemed
If less than all the Securities are to be redeemed, the particular
Securities to be redeemed shall be selected by the Trustee within five
Business Days after it receives the notice described in 11.3, from the
Outstanding Securities not previously called for redemption, by lot or by
such other method as the Trustee may deem fair and appropriate.
If any Security selected for partial redemption is converted in
part before termination of the conversion right with respect to the
portion of the Security so selected, the converted portion of such
Security shall be deemed (so far as may be) to be the portion selected
for redemption. Securities which have been converted during a selection
of Securities to be redeemed may be treated by the Trustee as Outstanding
for the purpose of such selection. The Trustee shall promptly notify the
Company and each Security Registrar in writing of the securities selected
for redemption and, in the case of any Securities selected for partial
redemption, the principal amount thereof to be redeemed.
For all purposes of this Indenture, unless the context otherwise
requires, all provisions relating to the redemption of Securities shall
relate, in the case of any Securities redeemed or to be redeemed only in
part, to the portion of the principal amount of such Securities which has
been or is to be redeemed.
SECTION 11.5 Notice of Redemption
Notice of redemption shall be given in the manner provided in
Section 1.6 to the Holders of Securities to be redeemed not less than 30
nor more than 60 days prior to the Redemption Date, and such notice shall
be irrevocable.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price, and accrued interest (including
Liquidated Damages, if any), if any, to the Redemption Date,
(3) if less than all Outstanding Securities are to be
redeemed, the aggregate principal amount of Securities to be redeemed and
the aggregate principal amount of Securities which will be outstanding
after such partial redemption,
(4) that on the Redemption Date the Redemption Price, and
accrued interest (including Liquidated Damages, if any), if any, to the
Redemption Date, will become due and payable upon each such Security to
be redeemed, and that interest thereon shall cease to accrue on and after
said date,
(5) the Conversion Rate, the date on which the right to
convert the Securities to be redeemed will terminate and the places where
such Securities may be surrendered for conversion, and
(6) the place or places where such Securities are to be
surrendered for payment of the Redemption Price and accrued interest
(including Liquidated Damages, if any), if any, to the Redemption Date.
In case of a partial redemption, the notice shall specify the
serial and CUSIP numbers (if any) and the portions thereof called for
redemption and that transfers and exchanges may occur on or prior to the
Redemption Date.
Notice of redemption of Securities to be redeemed at the election
of the Company shall be given by the Company or, at the Company's written
request, by the Trustee in the name of and at the expense of the Company.
Notice of redemption of Securities to be redeemed at the election of the
Company received by the Trustee shall be given by the Trustee to each
Paying Agent in the name of and at the expense of the Company.
SECTION 11.6 Deposit of Redemption Price
On or prior to the Redemption Date, the Company shall deposit with
the Trustee (or, if the Company is acting as its own Paying Agent,
segregate and hold in trust as provided in Section 10.3) an amount of
money (which shall be in immediately available funds on such Redemption
Date) sufficient to pay the Redemption Price of, and (except if the
Redemption Date shall be an Interest Payment Date) accrued interest
(including Liquidated Damages, if any) to the Redemption Date on, all the
Securities which are to be redeemed on that date other than any
Securities called for redemption on that date which have been converted
prior to the date of such deposit.
If any Security called for redemption is converted, any money
deposited with the Trustee or so segregated and held in trust for the
redemption of such Security shall (subject to any right of the Holder of
such Security or any Predecessor Security to receive interest as provided
in the last paragraph of Section 3.7) be paid to the Company on Company
Request or, if then held by the Company, shall be discharged from such
trust.
SECTION 11.7 Securities Payable on Redemption Date
Notice of redemption having been given as aforesaid, the Securities
so to be redeemed shall, on the Redemption Date, become due and payable
at the Redemption Price therein specified and from and after such date
(unless the Company shall default in the payment of the Redemption Price,
including accrued interest) such Securities shall cease to bear interest.
Upon surrender of any Security for redemption in accordance with said
notice such Security shall be paid by the Company at the Redemption Price
together with accrued and unpaid interest (including Liquidated Damages,
if any) to the Redemption Date; provided, however, that installments of
interest on Securities whose Stated Maturity is on or prior to the
Redemption Date shall be payable to the Holders of such Securities, or
one or more Predecessor Securities, registered as such on the relevant
Record Date according to their terms and the provisions of Section 3.7.
If any Security called for redemption shall not be so paid upon
surrender thereof for redemption, the principal amount of, premium, if
any, and, to the extent permitted by applicable law, accrued interest on
such Security shall, until paid, bear interest from the Redemption Date
at a rate of 7.0% per annum and such Security shall remain convertible
until the Redemption Price of such Security (or portion thereof, as the
case may be) shall have been paid or duly provided for.
Any Security which is to be redeemed only in part shall be
surrendered at the Corporate Trust Office or an office or agency of the
Company designated for that purpose pursuant to Section 10.2 (with, if
the Company or the Trustee so requires, due endorsement by, or a written
instrument of transfer in form satisfactory to the Company and the
Trustee duly executed by, the Holder thereof or his attorney duly
authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and make available for delivery to the Holder of such
Security without service charge, a new Security or Securities, of any
authorized denomination as requested by such Holder, in aggregate
principal amount equal to and in exchange for the unredeemed portion of
the principal of the Security so surrendered.
SECTION 11.8 Conversion Arrangement on Call for Redemption
In connection with any redemption of Securities, the Company may
arrange for the purchase and conversion of any Securities by an agreement
with one or more investment bankers or other purchasers (the
"Purchasers") to purchase such securities by paying to the Trustee in
trust for the Holders, on or before the Redemption Date, an amount not
less than the applicable Redemption Price, together with interest accrued
to the Redemption Date, of such Securities. Notwithstanding anything to
the contrary contained in this Article XI, the obligation of the Company
to pay the Redemption Price, together with interest accrued to the
Redemption Date, shall be deemed to be satisfied and discharged to the
extent such amount is so paid by such Purchasers. If such an agreement is
entered into (a copy of which shall be filed with the Trustee prior to
the close of business on the Business Day immediately prior to the
Redemption Date), any Securities called for redemption that are not duly
surrendered for conversion by the Holders thereof may, at the option of
the Company, be deemed, to the fullest extent permitted by law, and
consistent with any agreement or agreements with such Purchasers, to be
acquired by such Purchasers from such Holders and (notwithstanding
anything to the contrary contained in Article XII) surrendered by such
Purchasers for conversion, all as of immediately prior to the close of
business on the Redemption Date (and the right to convert any such
Securities shall be extended through such time), subject to payment of
the above amount as aforesaid. At the direction of the Company, the
Trustee shall hold and dispose of any such amount paid to it by the
Purchasers to the Holders in the same manner as it would monies deposited
with it by the Company for the redemption of Securities. Without the
Trustee's prior written consent, no arrangement between the Company and
such Purchasers for the purchase and conversion of any Securities shall
increase or otherwise affect any of the powers, duties, responsibilities
or obligations of the Trustee as set forth in this Indenture, and the
Company agrees to indemnify the Trustee from, and hold it harmless
against, any loss, liability or expense arising out of or in connection
with any such arrangement for the purchase and conversion of any
Securities between the Company and such Purchasers, including the costs
and expenses, including reasonable legal fees, incurred by the Trustee in
the defense of any claim or liability arising out of or in connection
with the exercise or performance of any of its powers, duties,
responsibilities or obligations under this Indenture.
ARTICLE XII
CONVERSION OF SECURITIES
SECTION 12.1 Conversion Privilege and Conversion Rate
Subject to and upon compliance with the provisions of this Article,
at the option of the Holder thereof, any Security may be converted into
fully paid and nonassessable shares (calculated as to each conversion to
the nearest 1/100th of a share) of Common Stock of the Company at the
Conversion Rate, determined as hereinafter provided, in effect at the
time of conversion. Such conversion right shall commence on the date the
Securities are issued and expire at the close of business on the date of
Maturity, subject, in the case of conversion of any Global Security, to
any Applicable Procedures. In case a Security or portion thereof is
called for redemption at the election of the Company or the Holder
thereof exercises his right to require the Company to repurchase the
Security, such conversion right in respect of the Security, or portion
thereof so called, shall expire at the close of business on the Business
Day next preceding such Redemption Date or the Repurchase Date, as the
case may be, unless the Company defaults in making the payment due upon
redemption or repurchase, as the case may be (in each case subject as
aforesaid to any Applicable Procedures with respect to any Global
Security).
The rate at which shares of Common Stock shall be delivered upon
conversion (herein called the "Conversion Rate") shall be initially
10.9463 shares of Common Stock for each U.S.$1,000 principal amount of
Securities. The Conversion Rate shall be adjusted in certain instances as
provided in this Article XII.
SECTION 12.2 Exercise of Conversion Privilege
In order to exercise the conversion privilege, the Holder of any
Security to be converted shall surrender such Security, duly endorsed in
blank, at any office or agency of the Company maintained for that purpose
pursuant to Section 10.2, accompanied by a duly signed conversion notice
substantially in the form set forth in Section 2.4 stating that the
Holder elects to convert such Security or, if less than the entire
principal amount thereof is to be converted, the portion thereof to be
converted. Each Security surrendered for conversion (in whole or in part)
during the Record Date Period shall (except in the case of any Security
or portion thereof which has been called for redemption on a Redemption
Date occurring within the period beginning on such Regular Record Date
and ending on the date three Business Days after the next succeeding
Interest Payment Date) be accompanied by payment in New York Clearing
House funds or other funds acceptable to the Company of an amount equal
to the interest payable on such Interest Payment Date on the principal
amount of such Security (or part thereof, as the case may be) being
surrendered for conversion. The interest so payable on such Interest
Payment Date with respect to any Security (or portion thereof, if
applicable) which is surrendered for conversion during the Record Date
Period shall be paid to the Holder of such Security as of such Regular
Record Date in an amount equal to the interest that would have been
payable on such Security if such Security had been converted as of the
close of business on such Interest Payment Date. Interest payable in
respect of any Security surrendered for conversion on or after an
Interest Payment Date shall be paid to the Holder of such Security as of
the next preceding Regular Record Date, notwithstanding the exercise of
the right of conversion. Except as provided in this paragraph, no cash
payment or adjustment shall be made upon any conversion on account of any
interest accrued from the Interest Payment Date next preceding the
conversion date, in respect of any Security (or part thereof, as the case
may be) surrendered for conversion, or on account of any dividends on the
Common Stock issued upon conversion. The Company's delivery to the Holder
of the number of shares of Common Stock (and cash in lieu of fractions
thereof, as provided in this Indenture) into which a Security is
convertible will be deemed to satisfy the Company's obligation to pay the
principal amount of the Security.
Securities shall be deemed to have been converted immediately prior
to the close of business on the day of surrender of such Securities for
conversion in accordance with the foregoing provisions, and at such time
the rights of the Holders of such Securities as Holders shall cease, and
the Person or Persons entitled to receive the Common Stock issuable upon
conversion shall be treated for all purposes as the record holder or
holders of such Common Stock at such time. As promptly as practicable on
or after the conversion date, the Company shall issue and deliver to the
Trustee, for delivery to the Holder, a certificate or certificates for
the number of full shares of Common Stock issuable upon conversion,
together with payment in lieu of any fraction of a share, as provided in
Section 12.3.
All shares of Common Stock delivered upon such conversion of
Restricted Securities shall bear restrictive legends substantially in the
form of the legends required to be set forth on the Restricted Securities
pursuant to Section 3.5 and shall be subject to the restrictions on
transfer provided in such legends. Neither the Trustee nor any agent
maintained for the purpose of such conversion shall have any
responsibility for the inclusion or content of any such restrictive
legends on such Common Stock; provided, however, that the Trustee or any
agent maintained for the purpose of such conversion shall have provided,
to the Company or to the Company's transfer agent for such Common Stock,
prior to or concurrently with a request to the Company to deliver such
Common Stock, written notice that the Securities delivered for conversion
are Restricted Securities.
In the case of any Security which is converted in part only, upon
such conversion the Company shall execute and the Trustee shall
authenticate and deliver to the Holder thereof, at the expense of the
Company, a new Security or Securities of authorized denominations in an
aggregate principal amount equal to the unconverted portion of the
principal amount of such Security. A Security may be converted in part,
but only if the principal amount of such Security to be converted is any
integral multiple of U.S. $1,000 and the principal amount of such
security to remain Outstanding after such conversion is equal to U.S.
$1,000 or any integral multiple of $1,000 in excess thereof.
If shares of Common Stock to be issued upon conversion of a
Restricted Security, or Securities to be issued upon conversion of a
Restricted Security in part only, are to be registered in a name other
than that of the beneficial owner of such Restricted Security, then such
Holder must deliver to the Conversion Agent a Surrender Certificate,
dated the date of surrender of such Restricted Security and signed by
such beneficial owner, as to compliance with the restrictions on transfer
applicable to such Restricted Security. Neither the Trustee nor any
Conversion Agent, Registrar or Transfer Agent shall be required to
register in a name other than that of the beneficial owner, shares of
Common Stock or Securities issued upon conversion of any such Restricted
Security not so accompanied by a properly completed Surrender
Certificate.
SECTION 12.3 Fractions of Shares
No fractional shares of Common Stock shall be issued upon
conversion of any Security or Securities. If more than one Security shall
be surrendered for conversion at one time by the same Holder, the number
of full shares which shall be issuable upon conversion thereof shall be
computed on the basis of the aggregate principal amount of the Securities
(or specified portions thereof) so surrendered. Instead of any fractional
share of Common Stock which would otherwise be issuable upon conversion
of any Security or Securities (or specified portions thereof), the
Company shall calculate and pay a cash adjustment in respect of such
fraction (calculated to the nearest 1/100th of a share) in an amount
equal to the same fraction of the Closing Price Per Share at the close of
business on the day of conversion.
SECTION 12.4 Adjustment of Conversion Rate
The Conversion Rate shall be subject to adjustments from time to
time as follows:
(1) In case the Company shall pay or make a dividend or
other distribution on shares of any class of Common Stock payable in
shares of Common Stock, the Conversion Rate in effect at the opening of
business on the day following the date fixed for the determination of
shareholders entitled to receive such dividend or other distribution
shall be increased by dividing such Conversion Rate by a fraction of
which the numerator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for such
determination and the denominator shall be the sum of such number of
shares and the total number of shares constituting such dividend or other
distribution, such increase to become effective immediately after the
opening of business on the day following the date fixed for such
determination. If, after any such date fixed for determination, any
dividend or distribution is not in fact paid, the Conversion Rate shall
be immediately readjusted, effective as of the date the Board of
Directors determines not to pay such dividend or distribution, to the
Conversion Rate that would have been in effect if such determination date
had not been fixed. For the purposes of this paragraph (1), the number of
shares of Common Stock at any time outstanding shall not include shares
held in the treasury of the Company but shall include shares issuable in
respect of scrip certificates issued in lieu of fractions of shares of
Common Stock. The Company will not pay any dividend or make any
distribution on shares of Common Stock held in the treasury of the
Company.
(2) In case the Company shall issue rights, options or
warrants to all holders of its Common Stock entitling them to subscribe
for or purchase shares of Common Stock at a price per share less than the
current market price per share (determined as provided in paragraph (8)
of this Section 12.4) of the Common Stock on the date fixed for the
determination of stockholders entitled to receive such rights, options or
warrants (other than any rights, options or warrants that by their terms
will also be issued to any Holder upon conversion of a Security into
shares of Common Stock without any action required by the Company or any
other Person), the Conversion Rate in effect at the opening of business
on the day following the date fixed for such determination shall be
increased by dividing such Conversion Rate by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at
the close of business on the date fixed for such determination plus the
number of shares of Common Stock which the aggregate of the offering
price of the total number of shares of Common Stock so offered for
subscription or purchase would purchase at such current market price and
the denominator shall be the number of shares of Common Stock outstanding
at the close of business on the date fixed for such determination plus
the number of shares of Common Stock so offered for subscription or
purchase, such increase to become effective immediately after the opening
of business on the day following the date fixed for such determination.
If, after any such date fixed for determination, any such rights, options
or warrants are not in fact issued, or are not exercised prior to the
expiration thereof, the Conversion Rate shall be immediately readjusted,
effective as of the date such rights, options or warrants expire, or the
date the Board of Directors determines not to issue such rights, options
or warrants, to the Conversion Rate that would have been in effect if the
unexercised rights, options or warrants had never been granted or such
determination date had not been fixed, as the case may be. For the
purposes of this paragraph (2), the number of shares of Common Stock at
any time outstanding shall not include shares held in the treasury of the
Company but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of shares of Common Stock. The
Company will not issue any rights, options or warrants in respect of
shares of Common Stock held in the treasury of the Company.
(3) In case outstanding shares of Common Stock shall be
subdivided into a greater number of shares of Common Stock, the
Conversion Rate in effect at the opening of business on the day following
the day upon which such subdivision becomes effective shall be
proportionately increased, and, conversely, in case outstanding shares of
Common Stock shall be combined into a smaller number of shares of Common
Stock, the Conversion Rate in effect at the opening of business on the
day following the day upon which such subdivision or combination becomes
effective shall be proportionately reduced, such increase or reduction,
as the case may be, to become effective immediately after the opening of
business on the day following the day upon which such subdivision or
combination becomes effective.
(4) In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock evidences of its
indebtedness, shares of any class of capital stock or other assets
(including securities, but excluding (i) any rights, options or warrants
referred to in paragraph (2) of this Section, (ii) any dividend or
distribution paid exclusively in cash, (iii) any dividend or distribution
referred to in paragraph (1) of this Section and (iv) mergers or
consolidations to which Section 12.11 applies), the Conversion Rate shall
be adjusted so that the same shall equal the rate determined by dividing
the Conversion Rate in effect immediately prior to the close of business
on the date fixed for the determination of stockholders entitled to
receive such distribution by a fraction of which the numerator shall be
the current market price per share (determined as provided in paragraph
(8) of this Section 12.4) of the Common Stock on the date fixed for such
determination less the then fair market value (as determined by the Board
of directors, whose determination shall be conclusive and described in a
Board Resolution filed with the Trustee) of the portion of the assets,
shares or evidences of indebtedness so distributed applicable to one
share of Common Stock and the denominator shall be such current market
price per share of the Common Stock, such adjustment to become effective
immediately prior to the opening of business on the day following the
date fixed for the determination of stockholders entitled to receive such
distribution. If after any such date fixed for determination, any such
distribution is not in fact made, the Conversion Rate shall be
immediately readjusted, effective as of the date of the Board of
Directors determines not to make such distribution, to the Conversion
Rate that would have been in effect if such determination date had not
been fixed.
(5) In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock cash (excluding any cash
that is distributed as part of a distribution referred to in paragraph
(4) of this Section or cash distributed upon a merger or consolidation to
which Section 12.11 applies) in an aggregate amount that, combined
together with (I) the aggregate amount of any other all-cash
distributions to all holders of its Common Stock made exclusively in cash
within the 12 months preceding the date of payment of such distribution
and in respect of which no adjustment pursuant to this paragraph (5) has
been made and (II) the aggregate of any cash plus the fair market value
(as determined by the Board of Directors, whose determination shall be
conclusive and described in a Board Resolution) of other consideration
payable in respect of any tender offer by the Company or any of its
Subsidiaries for all or any portion of the Common Stock concluded within
the 12 months preceding the date of payment of such distribution and in
respect of which no adjustment pursuant to paragraph (6) of this Section
12.4 has been made (the "combined cash and tender amount") exceeds 10%
of the product of the current market price per share (determined as
provided in paragraph (8) of this Section 12.4) of the Common Stock on
the date for the determination of holders of shares of Common Stock
entitled to receive such distribution times the number of shares of
Common Stock outstanding on such date (the "aggregate current market
price"), then, and in each such case, immediately after the close of
business on such date for determination, the Conversion Rate shall be
adjusted so that the same shall equal the rate determined by dividing the
Conversion Rate in effect immediately prior to the close of business on
the date fixed for determination of the stockholders entitled to receive
such distribution by a fraction (i) the numerator of which shall be equal
to the current market price per share (determined as provided in
paragraph (8) of this Section) of the Common Stock on the date fixed for
such determination less an amount equal to the quotient of (x) the excess
of such combined cash and tender amount over such aggregate current
market price divided by (y) the number of shares of Common Stock
outstanding on such date for determination and (ii) the denominator of
which shall be equal to the current market price per share (determined as
provided in paragraph (8) of this Section 12.4) of the Common Stock on
such date fixed for determination.
(6) In case a tender offer made by the Company or any
Subsidiary for all or any portion of the Common Stock shall expire and
such tender offer (as amended upon the expiration thereof) shall require
the payment to stockholders (based on the acceptance (up to any maximum
specified in the terms of the tender offer) of Purchased Shares (as
defined below)) of an aggregate consideration having a fair market value
(as determined by the Board of Directors, whose determination shall be
conclusive and described in a Board Resolution) that combined together
with (I) the aggregate of the cash plus the fair market value (as
determined by the Board of Directors, whose determination shall be
conclusive and described in a Board Resolution), as of the expiration of
such tender offer, of consideration payable in respect of any other
tender offer by the Company or any Subsidiary for all or any portion of
the Common Stock expiring within the 12 months preceding the expiration
of such tender offer and in respect of which no adjustment pursuant to
this paragraph (6) has been made and (II) the aggregate amount of any
cash distributions to all holders of the Common Stock within 12 months
preceding the expiration of such tender offer and in respect of which no
adjustment pursuant to paragraph (5) of this Section has been made (the
"combined tender and cash amount") exceeds 10% of the product of the
current market price per share of the Common Stock (determined as
provided in paragraph (8) of this Section 12.4) as of the last time (the
"Expiration Time") tenders could have been made pursuant to such tender
offer (as it may be amended) times the number of shares of Common Stock
outstanding (including any tendered shares) as of the Expiration Time,
then, and in each such case immediately prior to the opening of business
on the day after the date of the Expiration Time, the Conversion Rate
shall be adjusted so that the same shall equal the rate determined by
dividing the Conversion Rate immediately prior to close of business on
the date of the Expiration Time by a fraction (i) the numerator of which
shall be equal to (A) the product of (I) the current market price per
share of the Common Stock (determined as provided in paragraph (8) of
this Section 12.4) on the date of the Expiration Time multiplied by (II)
the number of shares of Common Stock outstanding (including any tendered
shares) on the Expiration Time less (B) the combined tender and cash
amount, and (ii) the denominator of which shall be equal to the product
of (A) the current market price per share of the Common Stock (determined
as provided in paragraph (8) of this Section 12.4) as of the Expiration
Time multiplied by (B) the number of shares of Common Stock outstanding
(including any tendered shares) as of the Expiration Time less the number
of all shares validly tendered and not withdrawn as of the Expiration
Time (the shares deemed so accepted up to any such maximum, being
referred to as the "Purchased Shares").
(7) The reclassification of Common Stock into securities
other than Common Stock (other than any reclassification upon a
consolidation or merger to which Section 12.11 applies) shall be deemed
to involve (a) a distribution of such securities other than Common Stock
to all holders of Common Stock (and the effective date of such
reclassification shall be deemed to be "the date fixed for the
determination of stockholders entitled to receive such distribution" and
"the date fixed for such determination" within the meaning of paragraph
(4) of this Section), and (b) a subdivision or combination, as the case
may be, of the number of shares of Common Stock outstanding immediately
prior to such reclassification into the number of shares of Common Stock
outstanding immediately thereafter (and the effective date of such
reclassification shall be deemed to be "the day upon which such
subdivision becomes effective" or "the day upon which such combination
becomes effective", as the case may be, and "the day upon which such
subdivision or combination becomes effective" within the meaning of
paragraph (3) of this Section 12.4).
(8) For the purpose of any computation under paragraphs
(2), (4), (5) or (6) of this Section 12.4, the current market price per
share of Common Stock on any date shall be calculated by the Company and
be the average of the daily Closing Prices Per Share for the five
consecutive Trading Days selected by the Company commencing not more than
10 Trading Days before, and ending not later than the earlier of the day
in question and the day before the "ex" date with respect to the
issuance or distribution requiring such computation. For purposes of this
paragraph, the term "'ex' date", when used with respect to any issuance
or distribution, means the first date on which the Common Stock trades
regular way in the applicable securities market or on the applicable
securities exchange without the right to receive such issuance or
distribution.
(9) No adjustment in the Conversion Rate shall be required
unless such adjustment (plus any adjustments not previously made by
reason of this paragraph (9)) would require an increase or decrease of at
least one percent in such rate; provided, however, that any adjustments
which by reason of this paragraph (9) are not required to be made shall
be carried forward and taken into account in any subsequent adjustment.
All calculations under this Article shall be made to the nearest cent or
to the nearest one-hundredth of a share, as the case may be.
(10) The Company may make such increases in the Conversion
Rate, for the remaining term of the Securities or any shorter term, in
addition to those required by paragraphs (1), (2), (3), (4), (5) and (6)
of this Section 12.4, as it considers to be advisable in order to avoid
or diminish any income tax to any holders of shares of Common Stock
resulting from any dividend or distribution of stock or issuance of
rights or warrants to purchase or subscribe for stock or from any event
treated as such for income tax purposes. The Company shall have the power
to resolve any ambiguity or correct any error in this paragraph (10) and
its actions in so doing shall, absent manifest error, be final and
conclusive.
(11) Notwithstanding the foregoing provisions of this
Section, no adjustment of the Conversion Rate shall be required to be
made (a) upon the issuance of shares of Common Stock pursuant to any
present or future plan for the reinvestment of dividends or (b) because
of a tender or exchange offer of the character described in Rule
13e-4(h)(5) under the Exchange Act or any successor rule thereto.
(12) To the extent permitted by applicable law, the Company
from time to time may increase the Conversion Rate by any amount for any
period of time if the period is at least twenty (20) days, the increase
is irrevocable during such period, and the Board of Directors shall have
made a determination that such increase would be in the best interests of
the Company, which determination shall be conclusive; provided, however,
that no such increase shall be taken into account for purposes of
determining (i) whether the Closing Price Per Share of the Common Stock
equals or exceeds 105% of the Conversion Price in connection with an
event which would otherwise be a Change of Control pursuant to Section
14.4, or (ii) whether the Closing Price Per Share of the Common Stock
exceeds 140% of the Conversion Price in connection with redemption of the
Securities in accordance with the provisions of the form of Securities
set forth in Section 2.2 hereof. Whenever the Conversion Rate is
increased pursuant to the preceding sentence, the Company shall give
notice of the increase to the Holders in the manner provided in Section
1.6 at least fifteen (15) days prior to the date the increased Conversion
Rate takes effect, and such notice shall state the increased Conversion
Rate and the period during which it will be in effect.
SECTION 12.5 Notice of Adjustments of Conversion Rate
Whenever the Conversion Rate is adjusted as herein provided:
(1) the Company shall compute the adjusted Conversion Rate
in accordance with Section 12.4 and shall prepare a certificate signed by
the Chief Financial Officer of the Company setting forth the adjusted
Conversion Rate and showing in reasonable detail the facts upon which
such adjustment is based, and such certificate shall promptly be filed
with the Trustee and with each Conversion Agent; and
(2) upon each such adjustment, a notice stating that the
Conversion Rate has been adjusted and setting forth the adjusted
Conversion Rate shall be required, and as soon as practicable after it is
required, such notice shall be provided by the Company to all Holders in
accordance with Section 1.6.
Neither the Trustee nor any Conversion Agent shall be under any
duty or responsibility with respect to any such certificate or the
information and calculations contained therein, except to exhibit the
same to any Holder of Securities desiring inspection thereof at its
office during normal business hours, and shall not be deemed to have
knowledge of any adjustment in the Conversion Rate unless and until a
Responsible Officer of the Trustee shall have received such a
certificate. Until a Responsible Officer of the Trustee receives such a
certificate, the Trustee and each Conversion Agent may assume without
inquiry that the last Conversion Rate of which the Trustee has knowledge
of remains in effect.
SECTION 12.6 Notice of Certain Corporate Action
In case:
(1) the Company shall declare a dividend (or any other
distribution) on its Common Stock payable (i) otherwise than exclusively
in cash or (ii) exclusively in cash in an amount that would require any
adjustment pursuant to Section 12.4; or
(2) the Company shall authorize the granting to all or
substantially all of the holders of its Common Stock of rights, options
or warrants to subscribe for or purchase any shares of capital stock of
any class or of any other rights that would require any adjustment
pursuant to Section 12.4; or
(3) of any reclassification of the Common Stock, or of any
consolidation, merger or share exchange to which the Company is a party
and for which approval of any stockholders of the Company is required, or
of the conveyance, sale, transfer or lease of all or substantially all of
the assets of the Company; or
(4) of the voluntary or involuntary dissolution,
liquidation or winding up of the Company;
Then the Company shall cause to be filed at each office or agency
maintained for the purpose of conversion of Securities pursuant to
Section 10.2, and shall cause to be provided to all Holders in accordance
with Section 1.6, at least 20 days (or 10 days in any case specified in
clause (1) or (2) above) prior to the applicable record or effective date
hereinafter specified, a notice stating (x) the date on which a record is
to be taken for the purpose of such dividend, distribution, rights,
options or warrants, or, if a record is not to be taken, the date as of
which the holders of Common Stock of record to be entitled to such
dividend, distribution, rights, options or warrants are to be determined
or (y) the date on which such reclassification, consolidation, merger,
conveyance, transfer, sale, lease, dissolution, liquidation or winding up
is expected to become effective, and the date as of which it is expected
that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities, cash or other property
deliverable upon such reclassification, consolidation, merger,
conveyance, transfer, sale, lease, dissolution, liquidation or winding
up. Neither the failure to give such notice or the notice referred to in
the following paragraph nor any defect therein shall affect the legality
or validity of the proceedings described in clauses (1) through (4) of
this Section 12.6. If at the time the Trustee shall not be the conversion
agent, a copy of such notice shall also forthwith be filed by the Company
with the Trustee.
The Company shall cause to be filed at the Corporate Trust Office
and each office or agency maintained for the purpose of conversion of
Securities pursuant to Section 10.2, and shall cause to be provided to
all Holders in accordance with Section 1.6, notice of any tender offer by
the Company or any Subsidiary for all or any portion of the Common Stock
at or about the time that such notice of tender offer is provided to the
public generally.
SECTION 12.7 Company to Reserve Common Stock
The Company shall at all times reserve and keep available, free
from preemptive rights, out of its authorized but unissued Common Stock,
for the purpose of effecting the conversion of Securities, the full
number of shares of Common Stock then issuable upon the conversion of all
Outstanding Securities.
SECTION 12.8 Taxes on Conversions
Except as provided in the next sentence, the Company will pay any
and all taxes and duties that may be payable in respect of the issue or
delivery of shares of Common Stock on conversion of Securities pursuant
hereto. The Company shall not, however, be required to pay any tax or
duty which may be payable in respect of any transfer involved in the
issue and delivery of shares of Common Stock in a name other than that of
the Holder of the Security or Securities to be converted, and no such
issue or delivery shall be made unless and until the Person requesting
such issue has paid to the Company the amount of any such tax or duty, or
has established to the satisfaction of the Company that such tax or duty
has been paid.
SECTION 12.9 Covenant as to Common Stock
The Company agrees that all shares of Common Stock which may be
delivered upon conversion of Securities, upon such delivery, will have
been duly authorized and validly issued and will be fully paid and
nonassessable and, except as provided in Section 12.8, the Company will
pay all taxes, liens and charges with respect to the issue thereof.
SECTION 12.10 Cancellation of Converted Securities
All Securities delivered for conversion shall be delivered to the
Trustee or its agent to be canceled by or at the direction of the
Trustee, which shall dispose of the same as provided in Section 3.9.
SECTION 12.11 Provision in Case of Consolidation, Merger or Sale of Assets
In case of any consolidation or merger of the Company with or into
any other Person, any merger of another Person with or into the Company
(other than a merger which does not result in any reclassification,
conversion, exchange or cancellation of outstanding shares of Common
Stock of the Company) or any conveyance, sale, transfer or lease of all
or substantially all of the assets of the Company, the Person formed by
such consolidation or resulting from such merger or which acquires such
assets, as the case may be, shall execute and deliver to the Trustee a
supplemental indenture providing that the Holder of each Security then
Outstanding shall have the right thereafter, during the period such
Security shall be convertible as specified in Section 12.1, to convert
such Security only into the kind and amount of securities, cash and other
property receivable upon such consolidation, merger, conveyance, sale,
transfer or lease by a holder of the number of shares of Common Stock of
the Company into which such Security might have been converted
immediately prior to such consolidation, merger, conveyance, sale,
transfer or lease, assuming such holder of Common Stock of the Company
(i) is not (A) a Person with which the Company consolidated or merged
with or into or which merged into or with the Company or to which such
conveyance, sale, transfer or lease was made, as the case may be (a
"Constituent Person"), or (B) an Affiliate of a Constituent Person and
(ii) failed to exercise his rights of election, if any, as to the kind or
amount of securities, cash and other property receivable upon such
consolidation, merger, conveyance, sale, transfer or lease (provided that
if the kind or amount of securities, cash and other property receivable
upon such consolidation, merger, conveyance, sale, transfer, or lease is
not the same for each share of Common Stock of the Company held
immediately prior to such consolidation, merger, conveyance, sale,
transfer or lease by others than a Constituent Person or an Affiliate
thereof and in respect of which such rights of election shall not have
been exercised ("Non-electing Share"), then for the purpose of this
Section 12.11 the kind and amount of securities, cash and other property
receivable upon such consolidation, merger, conveyance, sale, transfer or
lease by the holders of each Non-electing Share shall be deemed to be the
kind and amount so receivable per share by a plurality of the
Non-electing Shares). Such supplemental indenture shall provide for
adjustments which, for events subsequent to the effective date of such
supplemental indenture, shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Article. The above
provisions of this Section 12.11 shall similarly apply to successive
consolidations, mergers, conveyances, sales, transfers or leases. Notice
of the execution of such a supplemental indenture shall be given by the
Company to the Holder of each Security as provided in Section 1.6
promptly upon such execution.
Neither the Trustee nor any Conversion Agent shall be under any
responsibility to determine the correctness of any provisions contained
in any such supplemental indenture relating either to the kind or amount
of shares of stock or other securities or property or cash receivable by
Holders of Securities upon the conversion of their Securities after any
such consolidation, merger, conveyance, transfer, sale or lease or to any
such adjustment, but may accept as conclusive evidence of the correctness
of any such provisions, and shall be protected in relying upon, an
Opinion of Counsel with respect thereto, which the Company shall cause to
be furnished to the Trustee upon request.
SECTION 12.12 Rights Issued in Respect of Common Stock
Rights or warrants distributed by the Company to all holders of
Common Stock entitling the holders thereof to subscribe for or purchase
shares of the Company's capital stock (either initially or under certain
circumstances), which rights or warrants, until the occurrence of a
specified event or events ("Trigger Event"):
(1) are deemed to be transferred with such shares of Common Stock,
(2) are not exercisable, and
(3) are also issued in respect of future issuances of Common Stock
shall not be deemed distributed for purposes of Section 12.4(2) until the
occurrence of the earliest Trigger Event, whereupon such rights and
warrants shall be deemed to have been distributed and an appropriate
adjustment (if any is required) to the Conversion Price shall be made
under this Section 12.4(4). If any such right or warrant, including any
such existing rights or warrants distributed prior to the date of this
Indenture, are subject to events, upon the occurrence of which such
rights or warrants become exercisable to purchase different securities,
evidences of indebtedness or other assets or different amounts of any of
the foregoing, or both, then the date of the occurrence of any such event
shall be deemed to be the date of distribution and record date with
respect to new rights or warrants with such rights (and a termination or
expiration of the existing rights or warrants without exercise by any of
the holders thereof). In addition, in the event of any distribution of
rights or warrants, or any Trigger Event with respect thereto, that shall
have resulted in an adjustment to the Conversion Rate under Section
12.4(2), (1) in the case of any such rights or warrants which shall all
have been redeemed or repurchased without exercise by any holders
thereof, the Conversion Rate shall be readjusted upon such final
redemption or repurchase to give effect to such distribution or Trigger
Event, as the case may be, as though it were a cash distribution, equal
to the per share redemption or repurchase price received by a holder of
Common Stock with respect to such rights or warrants (assuming such
holder had retained such rights or warrants), made to all holders of
Common Stock as of the date of such redemption or repurchase, and (2) in
the case of any such rights or warrants all of which shall have expired
without exercise by any holder thereof, the Conversion Price shall be
readjusted as if such issuance had not occurred.
SECTION 12.13 Responsibility of Trustee for Conversion Provisions
The Trustee, subject to the provisions of Section 6.1, and any
Conversion Agent shall not at any time be under any duty or
responsibility to any Holder of Securities to determine whether any facts
exist which may require any adjustment of the Conversion Rate, or with
respect to the nature or extent of any such adjustment when made, or with
respect to the method employed, herein or in any supplemental indenture
provided to be employed, in making the same, or whether a supplemental
indenture need be entered into. Neither the Trustee, subject to the
provisions of Section 6.1, nor any Conversion Agent shall be accountable
with respect to the validity or value (or the kind or amount) of any
Common Stock, or of any other securities or property or cash, which may
at any time be issued or delivered upon the conversion of any Security;
and it or they do not make any representation with respect thereto.
Neither the Trustee, subject to the provisions of Section 6.1, nor any
Conversion Agent shall be responsible for any failure of the Company to
make or calculate any cash payment or to issue, transfer or deliver any
shares of Common Stock or share certificates or other securities or
property or cash upon the surrender of any Security for the purpose of
conversion; and the Trustee, subject to the provisions of Section 6.1,
and any Conversion Agent shall not be responsible for any failure of the
Company to comply with any of the covenants of the Company contained in
this Article.
ARTICLE XIII
SUBORDINATION OF SECURITIES
SECTION 13.1 Securities Subordinate to Senior Indebtedness
The Company covenants and agrees, and each Holder of a Security, by
its acceptance thereof, likewise covenants and agrees, that, to the
extent and in the manner hereinafter set forth in this Article (subject
to the provisions of Article IV), the indebtedness represented by the
Securities and the payment of the principal of, or premium, if any, or
interest (including Liquidated Damages, if any) on, each and all of the
Securities (including, but not limited to, the Redemption Price with
respect to the Securities to be called for redemption in accordance with
Article XI or the Repurchase Price with respect to Securities submitted
for repurchase in accordance with Article XIV), are hereby expressly made
subordinate and subject in right of payment to the prior payment in full
of all Senior Indebtedness.
SECTION 13.2 No Payment in Certain Circumstances, Payment over of
Proceeds upon Dissolution, Etc
No payment shall be made with respect to the principal of, or
premium, if any, or interest (including Liquidated Damages, if any) on
the Securities (including, but not limited to, the Redemption Price with
respect to the Securities to be called for redemption in accordance with
Article XI or the Repurchase Price with respect to Securities submitted
for repurchase in accordance with Article XIV), except payments and
distributions made by the Trustee as permitted by Section 13.9, if:
(1) a default in the payment of principal, premium, if any,
or interest (including a default under any repurchase or redemption
obligation) or other amounts with respect to any Designated Senior Debt
occurs and is continuing (or, in the case of Designated Senior Debt for
which there is a period of grace, in the event of such a default that
continues beyond the period of grace, if any, specified in the instrument
or lease evidencing such Designated Senior Debt) unless and until such
default shall have been cured or waived or shall have ceased to exist; or
(2) any other event of default occurs and is continuing
with respect to Designated Senior Debt that then permits holders of such
Designated Senior Debt to accelerate its maturity and the Trustee
receives a notice of the default (a "Payment Blockage Notice") from a
Representative or holder of Designated Senior Debt or the Company.
If the Trustee receives any Payment Blockage Notice pursuant to
clause (ii) above, no subsequent Payment Blockage Notice shall be
effective for purposes of this Section unless and until (A) at least 365
days shall have elapsed since the initial effectiveness of the
immediately prior Payment Blockage Notice, and (B) all scheduled payments
of principal, premium, if any, and interest on the Securities that have
come due have been paid in full in cash. No nonpayment default that
existed or was continuing on the date of delivery of any Payment Blockage
Notice to the Trustee shall be, or be made, the basis for a subsequent
Payment Blockage Notice.
The Company may and shall resume payments on and distributions in
respect of the Securities upon the earlier of:
(3) in the case of a default referred to in clause (i)
above, the date upon which the default is cured or waived or ceases to
exist, or
(4) in the case of a default referred to in clause (ii)
above, the date upon which the default is cured or waived or ceases to
exist or 179 days pass after notice is received if the maturity of such
Designated Senior Debt has not been accelerated.
Unless this Article XIII otherwise prohibits the payment or
distribution at the time of such payment or distribution.
In the event of (a) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization or other
similar case or proceeding in connection therewith, relative to the
Company or to its creditors, as such, or to its assets, or (b) any
liquidation, dissolution or other winding up of the Company, whether
voluntary or involuntary and whether or not involving insolvency or
bankruptcy, or (c) any assignment for the benefit of creditors or any
other marshaling of assets and liabilities of the Company, then and in
any such event the holders of Senior Indebtedness shall be entitled to
receive payment in full of all amounts due or to become due on or in
respect of all Senior Indebtedness in cash before the Holders of the
Securities are entitled to receive any payment on account of principal of
(or premium, if any) or interest (including any Liquidated Damages) on
the Securities or on account of the purchase, redemption or other
acquisition of Securities, and to that end the holders of Senior
Indebtedness shall be entitled to receive, for application to the payment
thereof, any payment or distribution of any kind or character, whether in
cash, property or securities, which may be payable or deliverable in
respect of the Securities in any such case, proceeding, dissolution,
liquidation or other winding up or event.
In the event that, notwithstanding the foregoing provisions of this
Section, the Trustee or the Holder of any Security shall have received
any payment or distribution of assets of the Company of any kind or
character, whether in cash, securities or other property, before all
Senior Indebtedness is paid in full, and if such fact shall, at or prior
to the time of such payment or distribution, have been made known to the
Trustee or, as the case may be, such Holder, then and in such event such
payment or distribution shall be paid over or delivered forthwith to the
trustee in bankruptcy, receiver, liquidating trustee, custodian,
assignee, agent or other Person making payment or distribution of assets
of the Company for application to the payment of all Senior Indebtedness
remaining unpaid, to the extent necessary to pay all Senior Indebtedness
in full, after giving effect to any concurrent payment or distribution to
or for the holders of Senior Indebtedness.
For purposes of this Article only, the words "cash, property or
securities" shall not be deemed to include shares of capital stock of
the Company as reorganized or readjusted, or securities of the Company or
any other corporation provided for by a plan of reorganization or
readjustment, which shares of stock or securities are subordinated in
right of payment to all then outstanding Senior Indebtedness to
substantially the same extent as, or to a greater extent than, the
Securities are so subordinated as provided in this Article. The
consolidation of the Company with, or the merger of the Company into,
another Person or the liquidation or dissolution of the Company following
the conveyance or transfer of its properties and assets substantially as
an entirety to another Person upon the terms and conditions set forth in
Article VII shall not be deemed a dissolution, winding up, liquidation,
reorganization, assignment for the benefit of creditors or marshaling of
assets and liabilities of the Company for the purposes of this Section if
the Person formed by such consolidation or into which the Company is
merged or which acquires by conveyance or transfer such properties and
assets substantially as an entirety, as the case may be, shall, as a part
of such consolidation, merger, conveyance or transfer, comply with the
conditions set forth in Article VII.
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of any Security prohibited
by the foregoing provisions of this Section, and if such fact shall, at
or prior to the time of such payment, have been made known to the Trustee
or, as the case may be, such Holder, then and in such event such payment
shall be paid over and delivered forthwith to the Company, in the case of
the Trustee, or the Trustee, in the case of such Holder.
SECTION 13.3 Prior Payment to Senior Indebtedness upon Acceleration
of Securities
In the event of the acceleration of the Securities because of an
Event of Default, no payment or distribution shall be made to the Trustee
or any holder of Securities in respect of the principal of, premium, if
any, or interest (including Liquidated Damages, if any) on the Securities
(including, but not limited to, the Redemption Price with respect to the
Securities called for redemption in accordance with Article XI or the
Repurchase Price with respect to the Securities submitted for repurchase
in accordance with Article XIV), except payments and distributions made
by the Trustee as permitted by Section 13.9, until all Senior
Indebtedness has been paid in full in cash or other payment satisfactory
to the holders of Senior Indebtedness or such acceleration is rescinded
in accordance with the terms of this Indenture. If payment of the
Securities is accelerated because of an Event of Default, the Company
shall promptly notify holders of Senior Indebtedness of the acceleration.
In the event that, notwithstanding the foregoing, the Company shall
make any payment to the Trustee or the Holder of any Security prohibited
by the foregoing provisions of this Section, and if such fact shall, at
or prior to the time of such payment, have been made known to the Trustee
or, as the case may be, such Holder, then and in such event such payment
shall be paid over and delivered forthwith to the Company, in the case of
the Trustee, or the Trustee, in the case of such Holder.
SECTION 13.4 Payment Permitted If No Default
Nothing contained in this Article or elsewhere in this Indenture or
in any of the Securities shall prevent (a) the Company, at any time
except during the pendency of any case, proceeding, dissolution,
liquidation or other winding up, assignment for the benefit of creditors
or other marshaling of assets and liabilities of the Company referred to
in Section 13.2, or during the circumstances referred to in the first
paragraph of Section 13.2, or under the conditions described in Section
13.3, from making payments at any time of principal of (and premium, if
any) or interest on the Securities, or (b) the application by the Trustee
of any money deposited with it hereunder to the payment of or on account
of the principal of (and premium, if any) or interest on the Securities
or the retention of such payment by the Holders, if, at the time of such
application by the Trustee, it did not have knowledge that such payment
would have been prohibited by the provisions of this Article.
SECTION 13.5 Subrogation to Rights of Holders of Senior Indebtedness
Subject to the payment in full of all Senior Indebtedness, the
Holders of the Securities shall be subrogated to the extent of the
payments or distributions made to the holders of such Senior Indebtedness
pursuant to the provisions of this Article (equally and ratably with the
holders of all indebtedness of the Company which by its express terms is
subordinated to other indebtedness of the Company to substantially the
same extent as the Securities are subordinated and is entitled to like
rights of subrogation) to the rights of the holders of such Senior
Indebtedness to receive payments and distributions of cash, property and
securities applicable to the Senior Indebtedness until the principal of
(and premium, if any) and interest on the Securities shall be paid in
full. For purposes of such subrogation, no payments or distributions to
the holders of the Senior Indebtedness of any cash, property or
securities to which the Holders of the Securities or the Trustee would be
entitled except for the provisions of this Article, and no payments over
pursuant to the provisions of this Article to the holders of Senior
Indebtedness by Holders of the Securities or the Trustee, shall, as among
the Company, its creditors other than holders of Senior Indebtedness and
the Holders of the Securities, be deemed to be a payment or distribution
by the Company to or on account of the Senior Indebtedness.
SECTION 13.6 Provisions Solely to Define Relative Rights
The provisions of this Article are and are intended solely for the
purpose of defining the relative rights of the Holders of the Securities
on the one hand and the holders of Senior Indebtedness on the other hand.
Nothing contained in this Article or elsewhere in this Indenture or in
the Securities is intended to or shall (i) impair, as among the Company,
its creditors other than holders of Senior Indebtedness and the Holders
of the Securities, the obligation of the Company, which is absolute and
unconditional, to pay to the Holders of the Securities the principal of
(and premium, if any) and interest (including Liquidated Damages, if any)
on the Securities as and when the same shall become due and payable in
accordance with their terms; or (ii) affect the relative rights against
the Company of the Holders of the Securities and creditors of the Company
other than the holders of Senior Indebtedness; or (iii) prevent the
Trustee or the Holder of any Security from exercising all remedies
otherwise permitted by applicable law upon default under this Indenture,
subject to the rights, if any, under this Article of the holders of
Senior Indebtedness to receive cash, property and securities otherwise
payable or deliverable to the Trustee or such Holder.
SECTION 13.7 Trustee to Effectuate Subordination
Each Holder of a Security by its acceptance thereof authorizes and
directs the Trustee on its behalf to take such action as may be necessary
or appropriate to effectuate the subordination provided in this Article
and appoints the Trustee its attorney-in-fact for any and all such
purposes.
SECTION 13.8 No Waiver of Subordination Provisions
No right of any present or future holder of any Senior Indebtedness
to enforce subordination as herein provided shall at any time in any way
be prejudiced or impaired by any act or failure to act on the part of the
Company, or by any non-compliance by the Company with the terms,
provisions and covenants of this Indenture, regardless of any knowledge
thereof any such holder may have or be otherwise charged with.
Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Indebtedness may, at any time and from
time to time, without the consent of or notice to the Trustee or the
Holders of the Securities, without incurring responsibility to the
Holders of the Securities and without impairing or releasing the
subordination provided in this Article or the obligations hereunder of
the Holders of the Securities to the holders of Senior Indebtedness, do
any one or more of the following: (i) change the manner, place or terms
of payment or extend the time of payment of, or renew or alter, Senior
Indebtedness, or otherwise amend or supplement in any manner Senior
Indebtedness or any instrument evidencing the same or any agreement under
which Senior Indebtedness is outstanding; (ii) sell, exchange, release or
otherwise deal with any property pledged, mortgaged or otherwise securing
Senior Indebtedness; (iii) release any Person liable in any manner for
the collection of Senior Indebtedness; and (iv) exercise or refrain from
exercising any rights against the Company and any other Person.
SECTION 13.9 Notice to Trustee
The Company shall give prompt written notice to the Trustee of any
fact known to the Company which would prohibit the making of any payment
to or by the Trustee in respect of the Securities. Notwithstanding the
provisions of this Article or any other provision of this Indenture, the
Trustee shall not be charged with knowledge of the existence of any facts
which would prohibit the making of any payment to or by the Trustee in
respect of the Securities, unless and until a Responsible Officer of the
Trustee shall have received written notice thereof from the Company or a
Representative or a holder of Senior Indebtedness (including, without
limitation, a holder of Designated Senior Debt) and, prior to the receipt
of any such written notice, the Trustee, subject to the provisions of
Section 6.1, shall be entitled in all respects to assume that no such
facts exist; provided, however, that if the Trustee shall not have
received the notice provided for in this Section 13.9 at least two
Business Days prior to the date upon which by the terms hereof any money
may become payable for any purpose (including, without limitation, the
payment of the principal of (and premium, if any) or interest (including
Liquidated Damages, if any) on any Security), then, anything herein
contained to the contrary notwithstanding, the Trustee shall have full
power and authority to receive such money and to apply the same to the
purpose for which such money was received and shall not be affected by
any notice to the contrary which may be received by it within one
Business Day prior to such date.
Notwithstanding anything in this Article XIII to the contrary,
nothing shall prevent any payment by the Trustee to the Holders of monies
deposited with it pursuant to Section 4.1, and any such payment shall not
be subject to the provisions of Section 13.2 or 13.3.
Subject to the provisions of Section 6.1, the Trustee shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a Representative or a holder of Senior
Indebtedness (including, without limitation, a holder of Designated
Senior Debt) to establish that such notice has been given by a
Representative or a holder of Senior Indebtedness (including, without
limitation, a holder of Designated Senior Debt). In the event that the
Trustee determines in good faith that further evidence is required with
respect to the right of any Person as a holder of Senior Indebtedness to
participate in any payment or distribution pursuant to this Article, the
Trustee may request such Person to furnish evidence to the reasonable
satisfaction of the Trustee as to the amount of Senior Indebtedness held
by such Person, the extent to which such Person is entitled to
participate in such payment or distribution and any other facts pertinent
to the rights of such Person under this Article, and if such evidence is
not furnished, the Trustee may defer any payment to such Person pending
judicial determination as to the right of such Person to receive such
payment.
SECTION 13.10 Reliance on Judicial Order or Certificate of
Liquidating Agent
Upon any payment or distribution of assets of the Company referred
to in this Article, the Trustee, subject to the provisions of Section
6.1, and the Holders of the Securities shall be entitled to rely upon any
order or decree entered by any court of competent jurisdiction in which
such insolvency, bankruptcy, receivership, liquidation, reorganization,
dissolution, winding up or similar case or proceeding is pending, or a
certificate of the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee for the benefit of creditors, agent or other Person
making such payment or distribution, delivered to the Trustee or to the
Holders of Securities, for the purpose of ascertaining the Persons
entitled to participate in such payment or distribution, the holders of
the Senior Indebtedness and other indebtedness of the Company, the amount
thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article.
SECTION 13.11 Trustee Not Fiduciary for Holders of Senior Indebtedness
The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness and shall not be liable to any such
holders if it shall in good faith mistakenly pay over or distribute to
Holders of Securities or to the Company or to any other Person cash,
property or securities to which any holders of Senior Indebtedness shall
be entitled by virtue of this Article or otherwise.
SECTION 13.12 Reliance by Holders of Senior Indebtedness on
Subordination Provisions
Each Holder by accepting a Security acknowledges and agrees that
the foregoing subordination provisions are, and are intended to be, an
inducement and a consideration to each holder of any Senior Indebtedness,
whether such Senior Indebtedness was created or acquired before or after
the issuance of the Securities, to acquire and continue to hold, or to
continue to hold, such Senior Indebtedness and such holder of Senior
Indebtedness shall be deemed conclusively to have relied on such
subordination provisions in acquiring and continuing to hold, or in
continuing to hold, such Senior Indebtedness, and no amendment or
modification of the provisions contained herein shall diminish the rights
of such holders of Senior Indebtedness unless such holders shall have
agreed in writing thereto.
SECTION 13.13 Rights of Trustee as Holder of Senior Indebtedness;
Preservation of Trustee's Rights
The Trustee in its individual capacity shall be entitled to all the
rights set forth in this Article with respect to any Senior Indebtedness
which may at any time be held by it, to the same extent as any other
holder of Senior Indebtedness, and nothing in this Indenture shall
deprive the Trustee of any of its rights as such holder.
Nothing in this Article shall apply to claims of, or payments to,
the Trustee under or pursuant to Section 6.7.
SECTION 13.14 Article Applicable to Paying Agents
In case at any time any Paying Agent other than the Trustee shall
have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article shall in such case (unless the
context otherwise requires) be construed as extending to and including
such Paying Agent within its meaning as fully for all intents and
purposes as if such Paying Agent were named in this Article in addition
to or in place of the Trustee; provided, however, that Section 13.13
shall not apply to the Company or any Affiliate of the Company if it or
such Affiliate acts as Paying Agent.
SECTION 13.15 Certain Conversions and Repurchases Deemed Payment
For the purposes of this Article only, (i) the issuance and
delivery of junior securities upon conversion of Securities in accordance
with Article XII or upon the repurchase of Securities in accordance with
Article XIV shall not be deemed to constitute a payment or distribution
on account of the principal of or premium or interest (including
Liquidated Damages, if any) on Securities or on account of the purchase
or other acquisition of Securities, and (ii) the payment, issuance or
delivery of cash (except in satisfaction of fractional shares pursuant to
Section 12.3), property or securities (other than junior securities) upon
conversion of a Security shall be deemed to constitute payment on account
of the principal of such Security. For the purposes of this Section, the
term "junior securities" means (a) shares of any stock of any class of
the Company and securities into which the Securities are convertible
pursuant to Article XII and (b) securities of the Company which are
subordinated in right of payment to all Senior Indebtedness which may be
outstanding at the time of issuance or delivery of such securities to
substantially the same extent as, or to a greater extent than, the
Securities are so subordinated as provided in this Article. Nothing
contained in this Article or elsewhere in this Indenture or in the
Securities is intended to or shall impair, as among the Company, its
creditors other than holders of Senior Indebtedness and the Holders of
the Securities, the right, which is absolute and unconditional, of the
Holder of any Security to convert such Security in accordance with
Article XII or to exchange such Security for Common Stock in accordance
with Article XIV if the Company elects to satisfy the obligations under
Article XIV by the delivery of Common Stock.
ARTICLE XIV
REPURCHASE OF SECURITIES AT THE OPTION OF THE
HOLDER UPON A CHANGE IN CONTROL
SECTION 14.1 Right to Require Repurchase
In the event that a Change in Control (as hereinafter defined)
shall occur, then each Holder shall have the right, at the Holder's
option, but subject to the provisions of Section 14.2, to require the
Company to repurchase, and upon the exercise of such right the Company
shall repurchase, all of such Holder's Securities not theretofore called
for redemption, or any portion of the principal amount thereof that is
equal to any integral multiple of U.S. $1,000 (provided that no single
Security may be repurchased in part unless the portion of the principal
amount of such Security to be Outstanding after such repurchase is equal
to U.S. $1,000 or integral multiples of U.S. $1,000 in excess thereof),
on the date (the "Repurchase Date") specified by the Company that is
not less than 40 nor more than 60 days after the date of the Offer to
Purchase (as defined in Section 14.3) at a purchase price equal to 100%
of the principal amount of the Securities to be repurchased plus interest
accrued to the Repurchase Date (the "Repurchase Price"); provided,
however, that installments of interest on Securities whose Stated
Maturity is on or prior to the Repurchase Date shall be payable to the
Holders of such Securities, or one or more Predecessor Securities,
registered as such on the relevant Record Date according to their terms
and the provisions of Section 3.7. Such right to require the repurchase
of the Securities shall not continue after a discharge of the Company
from its obligations with respect to the Securities in accordance with
Article IV, unless a Change in Control shall have occurred prior to such
discharge. At the option of the Company, the Repurchase Price may be paid
in cash or, subject to the fulfillment by the Company of the conditions
set forth Section 14.2, by delivery of shares of Common Stock having a
fair market value equal to the Repurchase Price. Whenever in this
Indenture (including Sections 2.2, 3.1 , 5.1(1) and 5.8) there is a
reference, in any context, to the principal of any Security as of any
time, such reference shall be deemed to include reference to the
Repurchase Price payable in respect of such Security to the extent that
such Repurchase Price is, was or would be so payable at such time, and
express mention of the Repurchase Price in any provision of this
Indenture shall not be construed as excluding the Repurchase Price in
those provisions of this Indenture when such express mention is not made;
provided, however, that for the purposes of Article XIII such reference
shall be deemed to include reference to the Repurchase Price only to the
extent the Repurchase Price is payable in cash.
SECTION 14.2 Conditions to the Company's Election to Pay the
Repurchase Price in Common Stock
The Company may elect to pay the Repurchase Price by delivery of
shares of Common Stock pursuant to Section 14.1 if and only if the
following conditions shall have been satisfied:
(1) The shares of Common Stock deliverable in payment of
the Repurchase Price shall have a fair market value as of the Repurchase
Date of not less than the Repurchase Price. For purposes of Section 14.1
and this Section 14.2, the fair market value of shares of Common Stock
shall be determined by the Company and shall be equal to 95% of the
average of the Closing Prices Per Share of the Common Stock for the five
consecutive Trading Days immediately preceding and including the third
Trading Day prior to the Repurchase Date;
(2) The Repurchase Price shall be paid only in cash in the
event any shares of Common Stock to be issued upon repurchase of
Securities hereunder (i) require registration under any federal
securities law before such shares may be freely transferable without
being subject to any transfer restrictions under the Securities Act upon
repurchase and if such registration is not completed or does not become
effective prior to the Repurchase Date, and/or (ii) require registration
with or approval of any governmental authority under any state law or any
other federal law before such shares may be validly issued or delivered
upon repurchase and if such registration is not completed or does not
become effective or such approval is not obtained prior to the Repurchase
Date;
(3) Payment of the Repurchase Price may not be made in
Common Stock unless such stock is, or shall have been, approved for
quotation on the Nasdaq National Market or listed on a national
securities exchange, in either case, prior to the Repurchase Date; and
(4) All shares of Common Stock which may be issued upon
repurchase of Securities will be issued out of the Company's authorized
but unissued Common Stock and, will upon issue, be duly and validly
issued and fully paid and non-assessable and free of any preemptive or
similar rights.
If all of the conditions set forth in this Section 14.2 are not
satisfied in accordance with the terms thereof, the Repurchase Price
shall be paid by the Company only in cash.
SECTION 14.3 Notices; Method of Exercising Repurchase Right, Etc.
(1) Unless the Company shall have theretofore called for
redemption all of the Outstanding Securities, on or before the 30th day
after the occurrence of a Change in Control, the Company or, at the
request and expense of the Company on or before the 15th day after such
occurrence, the Trustee, shall give to all Holders of Securities, in the
manner provided in Section 1.6, notice (the "Offer to Purchase") of the
occurrence of the Change of Control and of the repurchase right set forth
herein arising as a result thereof. The Company shall also deliver a
copy of such Offer to Purchase to the Trustee.
Each notice of a repurchase right shall state:
(i) the Repurchase Date,
(ii) the date by which the repurchase right must
be exercised pursuant to Section 14.3(2),
(iii) the Repurchase Price, and whether the
Repurchase Price shall be paid by the Company in cash or by delivery of
shares of Common Stock,
(iv) a description of the procedure which a
Holder must follow to exercise a repurchase right, and the place or
places where such Securities are to be surrendered for payment of the
Repurchase Price and accrued interest (including Liquidated Damages, if
any), if any to the Repurchase Date,
(v) that on the Repurchase Date the Repurchase
Price, and accrued interest (including liquidated Damages, if any), if
any to the Repurchase Date, will become due and payable upon each such
Security designated by the Holder to be repurchased, and that interest
thereon shall cease to accrue on and after said date,
(vi) the Conversion Rate then in effect, the
date on which the right to convert the principal amount of the Securities
to be repurchased will terminate and the place or places where such
Securities may be surrendered for conversion, and
(vii) the place or places that the Security
certificate with the Election of Holder to Require Repurchase as
specified in Section 2.2 shall be delivered, and if the Security is a
Restricted Securities Certificate the place or places that the Surrender
Certificate required by Section 14.3(9) shall be delivered.
No failure of the Company to give the foregoing notices or defect
therein shall limit any Holder' s right to exercise a repurchase right or
affect the validity of the proceedings for the repurchase of Securities.
If any of the foregoing provisions or other provisions of this
Article XIV are inconsistent with applicable law, such law shall govern.
(2) To exercise a repurchase right, a Holder shall deliver
to the Trustee on or before the date that is five Business Days prior to
the Repurchase Date of the Offer to Purchase (i) written notice of the
Holder's exercise of such right, which notice shall set forth the name of
the Holder, the principal amount of the Securities to be repurchased
(and, if any Security is to repurchased in part, the serial number
thereof, the portion of the principal amount thereof to be repurchased
and the name of the Person in which the portion thereof to remain
Outstanding after such repurchase is to be registered) and a statement
that an election to exercise the repurchase right is being made thereby,
and, in the event that the Repurchase Price shall be paid in shares of
Common Stock, the name or names (with addresses) in which the certificate
or certificates for shares of Common Stock shall be issued, and (ii) the
Securities with respect to which the repurchase right is being exercised.
Such written notice shall be irrevocable, except that the right of the
Holder to convert the Securities with respect to which the repurchase
right is being exercised shall continue until the close of business on
the Repurchase Date.
(3) In the event a repurchase right shall be exercised in
accordance with the terms hereof, the Company shall pay or cause to be
paid to the Trustee the Repurchase Price in cash or shares of Common
Stock, as provided above, for payment to the Holder on the Repurchase
Date or, if shares of Common Stock are to be paid, as promptly after the
Repurchase Date as practicable, together with accrued and unpaid interest
to the Repurchase Date payable with respect to the Securities as to which
the repurchase right has been exercised; provided, however, that
installments of interest that mature on or prior to the Repurchase Date
shall be payable in cash to the Holders of such Securities, or one or
more Predecessor Securities, registered as such at the close of business
on the relevant Regular Record Date.
(4) If any Security (or portion thereof) surrendered for
repurchase shall not be so paid on the Repurchase Date, the principal
amount of such Security (or portion thereof, as the case may be) shall,
until paid, bear interest to the extent permitted by applicable law from
the Repurchase Date at the rate of 7.0% per annum, and each Security
shall remain convertible into Common Stock until the principal of such
Security (or portion thereof, as the case may be) shall have been paid or
duly provided for.
(5) Any Security which is to be repurchased only in part
shall be surrendered to the Trustee (with, if the Company or the Trustee
so requires, due endorsement by, or a written instrument of transfer in
form satisfactory to the Company and the Trustee duly executed by, the
Holder thereof or his attorney duly authorized in writing), and the
Company shall execute, and the Trustee shall authenticate and make
available for delivery to the Holder of such Security without service
charge, a new Security or Securities, containing identical terms and
conditions, each in an authorized denomination in aggregate principal
amount equal to and in exchange for the unrepurchased portion of the
principal of the Security so surrendered.
(6) Any issuance of shares of Common Stock in respect of
the Repurchase Price shall be deemed to have been effected immediately
prior to the close of business on the Repurchase Date and the Person or
Persons in whose name or names any certificate or certificates for shares
of Common Stock shall be issuable upon such repurchase shall be deemed to
have become on the Repurchase Date the holder or holders of record of the
shares represented thereby; provided, however, that any surrender for
repurchase on a date when the stock transfer books of the Company shall
be closed shall constitute the Person or Persons in whose name or names
the certificate or certificates for such shares are to be issued as the
record holder or holders thereof for all purposes at the opening of
business on the next succeeding day on which such stock transfer books
are open. No payment or adjustment shall be made for dividends or
distributions on any Common Stock issued upon repurchase of any Security
declared prior to the Repurchase Date.
(7) No fractions of shares shall be issued upon repurchase
of Securities. If more than one Security shall be repurchased from the
same Holder and the Repurchase Price shall be payable in shares of Common
Stock, the number of full shares which shall be issuable upon such
repurchase shall be computed on the basis of the aggregate principal
amount of the Securities so repurchased. Instead of any fractional share
of Common Stock which would otherwise be issuable on the repurchase of
any Security or Securities, the Company will deliver to the applicable
Holder its check for the current market value of such fractional share.
The current market value of a fraction of a share is determined by
multiplying the current market price of a full share by the fraction, and
rounding the result to the nearest cent. For purposes of this Section,
the current market price of a share of Common Stock is the Closing Price
Per Share of the Common Stock on the Trading Day immediately preceding
the Repurchase Date.
(8) Any issuance and delivery of certificates for shares of
Common Stock on repurchase of Securities shall be made without charge to
the Holder of Securities being repurchased for such certificates or for
any tax or duty in respect of the issuance or delivery of such
certificates or the securities represented thereby; provided, however,
that the Company shall not be required to pay any tax or duty which may
be payable in respect of (i) income of the Holder or (ii) any transfer
involved in the issuance or delivery of certificates for shares of Common
Stock in a name other than that of the Holder of the Securities being
repurchased, and no such issuance or delivery shall be made unless and
until the Person requesting such issuance or delivery has paid to the
Company the amount of any such tax or duty or has established, to the
satisfaction of the Company, that such tax or duty has been paid.
(9) If shares of Common Stock to be delivered upon
repurchase of a Security are to be registered in a name other than that
of the beneficial owner of such Security, then such Holder must deliver
to the Trustee a Surrender Certificate, dated the date of surrender of
such Restricted Security and signed by such beneficial owner, as to
compliance with the restrictions on transfer applicable to such
Restricted Security. Neither the Trustee nor any Registrar or Transfer
Agent or other agents shall be required to register in a name other than
that of the beneficial owner shares of Common Stock issued upon
repurchase of any such Restricted Security not so accompanied by a
properly completed Surrender Certificate.
(10) All Securities delivered for repurchase shall be
delivered to the Trustee to be canceled at the direction of the Trustee,
which shall dispose of the same as provided in Section 3.9.
SECTION 14.4 Certain Definitions
For purposes of this Article XIV,
(1) the term "beneficial owner" shall be determined in
accordance with Rule 13d-3, as in effect on the date of the original
execution of this Indenture, promulgated by the Commission pursuant to
the Exchange Act;
(2) a "Change in Control" shall be deemed to have
occurred at the time, after the original issuance of the Securities, of:
(i) the acquisition by any Person (including
any syndicate or group deemed to be a "person" under Section 13(d)(3)
of the Exchange Act) of beneficial ownership, directly or indirectly,
through a purchase, merger or other acquisition transaction or series of
transactions, of shares of capital stock of the Company entitling such
person to exercise 50% or more of the total voting power of all shares of
capital stock of the Company entitled to vote generally in the elections
of directors, other than any such acquisition by the Company, any
subsidiary of the Company or any employee benefit plan of the Company; or
(ii) any consolidation of the Company with, or
merger of the Company into, any other Person, any merger of another
Person into the Company, or any conveyance, sale, transfer or lease of
all or substantially all of the assets of the Company to another Person
(other than (a) any such transaction (x) which does not result in any
reclassification, conversion, exchange or cancellation of outstanding
shares of capital stock of the Company and (y) pursuant to which the
holders of the Common Stock immediately prior to such transaction have
the entitlement to exercise, directly or indirectly, 50% or more of the
total voting power of all shares of capital stock entitled to vote
generally in the election of directors of the continuing or surviving
corporation immediately after such transaction and (b) any merger which
is effected solely to change the jurisdiction of incorporation of the
Company and results in a reclassification, conversion or exchange of
outstanding shares of Common Stock into solely shares of common stock);
provided, however, that a Change in Control shall not be deemed to have
occurred if (I) the Closing Sales Price Per Share of the Common Stock for
any five Trading Days within the period of 10 consecutive Trading Days
ending immediately after the later of the Change in Control or the public
announcement of the Change in Control (in the case of a Change in Control
under clause (i) above) or the period of 10 consecutive Trading Days
ending immediately before the Change in Control (in the case of a Change
in Control under clause (ii) above) shall equal or exceed 105% of the
Conversion Price of the Securities in effect on each such Trading Day, or
(II) all of the consideration (excluding cash payments for fractional
shares and cash payments made pursuant to dissenters' appraisal rights)
in a merger or consolidation constituting a Change of Control consists of
shares of common stock traded on a national securities exchange or on the
Nasdaq National Market (or will be so traded or quoted immediately
following the Change of Control).
(3) the term "Conversion Price" shall equal U.S.$1,000
divided by the Conversion Rate (rounded to the nearest cent); and
(4) for purposes of Section 14.4(2)(i), the term "Person"
shall include any syndicate or group which would be deemed to be a
"person" under Section 13(d)(3) of the Exchange Act, as in effect on
the date of the original execution of this Indenture.
SECTION 14.5 Consolidation, Merger, etc.
In the case of any merger, consolidation, conveyance, sale,
transfer or lease of all or substantially all of the assets of the
Company to which Section 12.11 applies, in which the Common stock of the
Company is changed or exchanged as a result into the right to receive
shares of stock and other securities or property or assets (including
cash) which includes shares of Common Stock of the Company or common
stock of another Person that are, or upon issuance will be, traded on a
United States national securities exchange or approved for trading on an
established automated over-the-counter trading market in the United
States and such shares constitute at the time such change or exchange
becomes effective in excess of 50% of the aggregate fair market value of
such shares of stock and other securities, property and assets (including
cash) (as determined by the Company, which determination shall be
conclusive and binding), then the Person formed by such consolidation or
resulting from such merger or combination or which acquires the
properties or assets (including cash) of the Company, as the case may be,
shall execute and deliver to the Trustee a supplemental indenture (which
shall comply with the Trust Indenture Act as in force at the date of
execution of such supplemental indenture) modifying the provisions of
this Indenture relating to the right of Holders to cause the Company to
repurchase the Securities following a Change in Control, including
without limitation the applicable provisions of this Article XIV and the
definitions of the Common Stock and Change in Control, as appropriate,
and such other related definitions set forth herein as determined in good
faith by the Company (which determination shall be conclusive and
binding), to make such provisions apply in the event of a subsequent
Change in Control to the common stock and the issuer thereof if different
from the Company and Common Stock of the Company (in lieu of the Company
and the Common Stock of the Company).
ARTICLE XV
HOLDERS LISTS AND REPORTS BY TRUSTEE AND COMPANY; NON-RECOURSE
SECTION 15.1 Company to Furnish Trustee Names and Addresses of Holders
The Company will furnish or cause to be furnished to the Trustee:
(1) semi-annually, not more than 15 days after the Regular
Record Date, a list, in such form as the Trustee may reasonably require,
of the names and addresses of the Holders of Securities as of such
Regular Record Date, and
(2) at such other times as the Trustee may reasonably
request in writing, within 30 days after the receipt by the Company of
any such request, a list of similar form and content as of a date not
more than 15 days prior to the time such list is furnished;
provided, however, that no such list need be furnished so long as the
Trustee is acting as Security Registrar.
SECTION 15.2 Preservation of Information
(1) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders contained in
the most recent list furnished to the Trustee as provided in Section 15.1
and the names and addresses of Holders received by the Trustee in its
capacity as Security Registrar. The Trustee may destroy any list, if any,
furnished to it as provided in Section 15.1 upon receipt of a new list so
furnished.
(2) After this Indenture has been qualified under the Trust
Indenture Act, the rights of Holders to communicate with other Holders
with respect to their rights under this Indenture or under the
Securities, and the corresponding rights, and duties of the Trustee,
shall be as provided by the Trust Indenture Act.
(3) Every Holder of Securities, by receiving and holding
the same, agrees with the Company and the Trustee that neither the
Company nor the Trustee nor any agent of either of them shall be held
accountable by reason of any disclosure of information as to names and
addresses of Holders made pursuant to the Trust Indenture Act.
SECTION 15.3 Reserved
SECTION 15.4 Reports by Trustee
(1) After this Indenture has been qualified under the Trust
Indenture Act, the Trustee shall transmit to Holders such reports
concerning the Trustee and its actions under this Indenture as may be
required pursuant to the Trust Indenture Act at the times and in the
manner provided pursuant thereto.
(2) After this Indenture has been qualified under the Trust
Indenture Act, a copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange
upon which the Securities are listed, with the Commission and with the
Company. The Company will notify the Trustee when the Securities are
listed on any stock exchange or any delisiting thereof.
SECTION 15.5 Reports by Company
After this Indenture has been qualified under the Trust Indenture
Act, the Company shall file with the Trustee and the Commission, and
transmit to Holders, such information, documents and other reports, and
such summaries thereof, as may be required pursuant to the Trust
Indenture Act at the times and in the manner provided pursuant to such
Act; provided that any such information, documents or reports required to
be filed with the Commission pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934 shall be filed with the Trustee within 15
days after the same is so required to be filed with the Commission.
ARTICLE XVI
IMMUNITY OF INCORPORATORS, STOCKHOLDERS, OFFICERS AND DIRECTORS
SECTION 16.1 Indenture and Securities Solely Corporate Obligations
No recourse for the payment of the principal of or premium, if any,
or interest on any Security and no recourse under or upon any obligation,
covenant or agreement of the Company in this Indenture or in any
supplemental indenture or in any Security, or because of the creation of
any indebtedness represented thereby, shall be had against any
incorporator, stockholder, employee, agent, officer, or director or
subsidiary, as such, past, present or future, of the Company or of any
successor corporation, whether by virtue of any constitution, statute or
rule of law, or by the enforcement of any assessment or penalty or
otherwise; it being expressly understood that all such liability is
hereby waived and released as a condition of, and as a consideration for,
the execution of this Indenture and the issue of the Securities.
This instrument may be executed in any number of counterparts, each
of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Indenture
to be duly executed all as of the day and year first above written.
EXODUS COMMUNICATIONS, INC.
By:_________________________________
Name:
Title:
CHASE MANHATTAN BANK AND TRUST
COMPANY, NATIONAL ASSOCIATION,
as Trustee
By:_________________________________
Name:
Title:
[Signature Page to Indenture]
<PAGE>
ANNEX A -- Form of Restricted Securities Certificate
RESTRICTED SECURITIES CERTIFICATE (For transfers pursuant to
Section 3.5(2)(ii) and (iii) of the Indenture)
Chase Manhattan Bank and Trust Company, National Association
101 California Street, Suite 2725,
San Francisco CA 94111.
Re: 5% CONVERTIBLE SUBORDINATED NOTES DUE MARCH 15, 2006 OF
EXODUS COMMUNICATIONS, INC. (THE "SECURITIES")
Reference is made to the Indenture, dated as of March 1, 1999 (the
"Indenture"), from Exodus Communications, Inc. (the "Company") to
Chase Manhattan Bank and Trust Company, National Association, as Trustee.
Terms used herein and defined in the Indenture or Rule 144 under the U.S.
Securities Act of 1933 (the "Securities Act") are used herein as so
defined.
This certificate relates to U.S. $________ principal amount of
Securities, which are evidenced by the following certificate(s) (the
"Specified Securities"):
CUSIP No._______________
CERTIFICATE No(s).__________
The person in whose name this certificate is executed below (the
"Undersigned") hereby certifies that either (i) it is the sole
beneficial owner of the Specified Securities or (ii) it is acting on
behalf of all the beneficial owners of the Specified Securities and is
duly authorized by them to do so. Such beneficial owner or owners are
referred to herein collectively as the "Owner". If the Specified
Securities are represented by a Global Security, they are held through
the Depositary or an Agent Member in the name of the Undersigned, as or
on behalf of the Owner. If the Specified Securities are not represented
by a Global Security, they are registered in the name of the Undersigned,
as or on behalf of the Owner.
The Owner has requested that the Specified Securities be
transferred to a person (the "Transferee") who will take delivery in
the form of a Restricted Security. In connection with such transfer, the
Owner hereby certifies that, unless such transfer is being effected
pursuant to an effective registration statement under the Securities Act,
it is being effected in accordance with Rule 144A or Rule 144 under the
Securities Act and all applicable securities laws of the states of the
United States and other jurisdictions. Accordingly, the Owner hereby
further certifies as:
(1) RULE 144A TRANSFERS. If the transfer is being effected in
accordance with Rule 144A:
(A) the Specified Securities are being transferred to a
person that the Owner and any person acting on its behalf reasonably
believe is a "qualified institutional buyer" within the meaning of Rule
144A, acquiring for its own account or for the account of a qualified
institutional buyer; and
(B) the Owner and any person acting on its behalf have
taken reasonable steps to ensure that the Transferee is aware that the
Owner may be relying on Rule 144A in connection with the transfer; and
(2) RULE 144 TRANSFERS. If the transfer is being effected
pursuant to Rule 144:
(A) the transfer is occurring after a holding period of at
least one year (computed in accordance with paragraph (d) of Rule 144)
has elapsed since the date the Specified Securities were acquired from
the Company or from an affiliate (as such term is defined in Rule 144) of
the Company, whichever is later, and is being effected in accordance with
the applicable amount, manner of sale and notice requirements of
paragraphs (e), (f) and (h) of Rule 144; or
(B) the transfer is occurring after a period of at least
two years has elapsed since the date the Specified Securities were
acquired from the Company or from an affiliate (as such term is defined
in Rule 144) of the Company, whichever is later, and the Owner is not,
and during the preceding three months has not been, an affiliate of the
Company.
This certificate and the statements contained herein are made for
your benefit and the benefit of the Company and the Initial Purchasers.
Dated:
Print the name of the Undersigned, as such term is defined in the
second paragraph of this certificate.)
By:
Name:
Title:
(If the Undersigned is a corporation, partnership or fiduciary, the
title of the person signing on behalf of the Undersigned must be stated.)
<PAGE>
ANNEX B -- Form of Unrestricted Securities Certificate
UNRESTRICTED SECURITIES CERTIFICATE
(For removal of Restricted Securities Legend pursuant to Section 3.5(3))
Chase Manhattan Bank and Trust Company, National Association
101 California Street, Suite 2725,
San Francisco, CA 94111.
RE: 5% CONVERTIBLE SUBORDINATED NOTES DUE MARCH 15,
2006 OF EXODUS COMMUNICATIONS, INC. (THE
"SECURITIES")
Reference is made to the Indenture, dated as of March
1, 1999 (the "Indenture"), from Exodus Communications, Inc. (the
"Company") to Chase Manhattan Bank and Trust Company, National
Association, as Trustee. Terms used herein and defined in the Indenture
or in Rule 144 under the U.S. Securities Act of 1933 (the "Securities
Act") are used herein as so defined.
This certificate relates to U.S.$_______________
principal amount of Securities, which are evidenced by the following
certificate(s) (the "Specified Securities"):
CUSIP No._______________
CERTIFICATE No(s).__________
The person in whose name this certificate is executed
below (the "Undersigned") hereby certifies that either (i) it is the
sole beneficial owner of the Specified Securities or (ii) it is acting on
behalf of all the beneficial owners of the Specified Securities and is
duly authorized by them to do so. Such beneficial owner or owners are
referred to herein collectively as the "Owner". If the Specified
Securities are represented by a Global Security, they are held through
the Depositary or an Agent Member in the name of the Undersigned, as or
on behalf of the Owner. If the Specified Securities are not represented
by a Global Security, they are registered in the name of the Undersigned,
as or on behalf of the Owner.
The Owner has requested that the Specified Securities
be exchanged for Securities bearing no Restricted Securities Legend
pursuant to Section 3.5(3) of the Indenture. In connection with such
exchange, the Owner hereby certifies that the exchange is occurring after
a period of at least two years has elapsed since the date the Specified
Securities were acquired from the Company or from an "affiliate" (as
such term is defined in Rule 144) of the Company, whichever is later, and
the Owner is not, and during the preceding three months has not been, an
affiliate of the Company. The Owner also acknowledges that any future
transfers of the Specified Securities must comply with all applicable
securities laws of the states of the United States and other
jurisdictions.
This certificate and the statements contained herein
are made for your benefit and the benefit of the Company and the Initial
Purchasers.
Dated:
(Print the name of the Undersigned, as such term is defined in the
second paragraph of this certificate.)
By:
Name:
Title:
(If the Undersigned is a corporation, partnership or fiduciary, the
title of the person signing on behalf of the Undersigned must be stated.)
<PAGE>
ANNEX C -- Form of Surrender Certificate
In connection with the certification contemplated by
Section 12.2 or 14.3(9) relating to compliance with certain restrictions
relating to transfers of Restricted Securities, such certification shall
be provided substantially in the form of the following certificate, with
only such changes thereto as shall be approved by the Company and
Goldman, Sachs & Co.:
CERTIFICATE
EXODUS COMMUNICATIONS, INC.
5% CONVERTIBLE NOTES DUE MARCH 15, 2006
This is to certify that as of the date hereof with
respect to U.S. $______ principal amount of the above-captioned
securities surrendered on the date hereof (the "Surrendered
Securities") for registration of transfer, or for conversion or
repurchase where the securities issuable upon such conversion or
repurchase are to be registered in a name other than that of the
undersigned Holder (each such transaction being a "transfer"), the
undersigned Holder (as defined in the Indenture) certifies that the
transfer of Surrendered Securities associated with such transfer complies
with the restrictive legend set forth on the face of the Surrendered
Securities for the reason checked below:
The transfer of the Surrendered Securities complies
with Rule 144 under the United States Securities Act of 1933,
as amended (the "Securities Act"); or
The transfer of the Surrendered Securities complies
with Rule 144A under the Securities Act; or
The transfer of the Surrendered Securities has been
made to an institution that is an "accredited investor"
within the meaning of Rule 501(a)(1), (2), (3) or (7) under
the Securities Act in a transaction exempt from the
registration requirements of the Securities Act.
[Name of Holder]
Dated:
*To be dated the date of surrender
EXHIBIT 10.48
WORLDCOM DATA SERVICES
(REVENUE PLAN)
This Application for Data Services (the "Agreement") is made by EXODUS
COMMUNICATIONS, INC., a California corporation with its principal office
at 2650 San Tomas Expressway, Santa Clara, California 95051,
("Customer"), and WORLDCOM TECHNOLOGIES, INC., a Delaware corporation
("WorldCom"), for service described below.
1. SERVICES: Interexchange telecommunications service (the "Private
Line Service") and frame relay service (the "Frame Relay Service"),
ATM Service, as described below, (the "WorldCom ATM Service")
international frame relay service (the "International Frame Relay
Service") and international private line services (the "International
Private Line Service") shall be provided by WorldCom pursuant to the
applicable tariffs of WorldCom Network Services, Inc., a wholly owned
subsidiary of WorldCom, (the "Tariffs"). The Tariffs provide terms and
conditions of the Service which include, but are not limited to, taxes,
credit approval procedures, Customer credits, termination liability, and
limitations with respect to the assignment of the Service. The Tariffs
may be modified from time to time by WorldCom in accordance with law and
thereby affect the Service furnished to Customer For purposes of this
Agreement, Private Line Service, Frame Relay Service, ATM Service,
International Private Line and International Frame Relay shall be
collectively referred to as (the "Service"). The Private Line Service
shall also include OC-3c and OC-12c as described below:
OC-3c Service consists of a concatenated, non-switched, dedicated 155.52
Mbps circuit used to carry Customer's telecommunications traffic between
Local Access and Transport Areas (LATAs). OC-3c Service is consistent
with the Synchronous Optical Network (SONET) standard for optical
transport as defined by the Exchange Carriers Standards Association
(ECSA) for the American National Standards Institute (ANSI). OC-3c
Service consists of interexchange carrier (IXC) service, local access
service and operational and administrative services.
OC-12c Service consists of a concatenated, non-switched, dedicated 622
Mbps circuit used to carry Customer's telecommunications traffic between
Local Access and Transport Areas (LATAs). OC-12c Service is consistent
with the Synchronous Optical Network (SONET) standard for optical
transport as defined by the Exchange Carriers Standards Association
(ECSA) for the American National Standards Institute (ANSI). OC-3c/OC-12c
Service consists of interexchange carrier (IXC) service, local access
service and operational and administrative services.
ATM Service may include the following: (i) equipment necessary to
support the ATM Service including equipment located on Customer's
premises and equipment located on WorldCom's premises, (ii) local access
facilities, (iii) a Network Node (as described below) for each location
requiring connectivity to the WorldCom network, and (iv) maintenance of
the equipment and services provided by WorldCom. A "Network Node"
includes a port connection, i.e., access to the WorldCom network, and the
permanent virtual circuits assigned to said port.
2. TERMS AND CONDITIONS: The parties agree that the terms and
conditions of this Agreement shall supplement, or to the extent they are
inconsistent with the Tariffs, supersede the terms and conditions of the
Tariffs. For purposes of this Agreement, any references to "Service"
in the Tariffs shall also be deemed to refer to the applicable WorldCom
Service in the Tariffs. For the convenience of the parties, ATM Service
will be provided by WorldCom subject to the rules and regulations set
forth in the WorldCom Network Services, Inc., a wholly owned subsidiary
of WorldCom, Frame Relay tariff (the "Frame Relay Tariff"), in addition
to the terms and conditions set forth herein. The rules and regulations
of the Frame Relay Tariff provide terms and conditions which apply to ATM
Service, which include, but are not limited to, termination liability,
taxes, credit approval procedures, Customer credits, and limitations with
respect to the assignment of ATM Service. For purposes of this Agreement,
any references to Service in the Frame Relay Tariff shall be deemed to
refer to ATM Service. The Frame Relay Tariff may be modified from time
to time by WorldCom in accordance with law and thereby affect the ATM
Service furnished to Customer except that the terms and conditions
contained in this Agreement shall supplement, or to the extent
inconsistent, supersede the Frame Relay Tariff's rules and regulations
and shall remain in effect throughout the Service Commitment Period
selected by Customer.
3. MINIMUM MONTHLY COMMITMENT: Commencing as of the Commitment
Commencing Date set forth below and continuing through the Commitment
Ending Date below, Customer agrees to maintain each month:
(i) the aggregate base rate charges for OC-3c and OC-12c Services (after
the application of discounts); and/or
(ii) the aggregate base rate charges for Domestic Private Line Service,
excluding OC-3c and OC-12c Services (after the application of
discounts); and/or
(iii) the aggregate base rate charges for Domestic Frame Relay Services
(after the application of discounts); and/or
(iv) the aggregate base rate charges for International Frame Relay
Services (after the application of discounts); and/or
(v) the aggregate base rate charges for Domestic ATM Services (after the
application of discounts); and/or
(vi) the aggregate base rate charges for International Private Line
Service (after the application of discounts) (collectively, the
"Aggregate Base Rate Charges") as follows:
Minimum Monthly Commitment: $1,000,000.00
4. REVENUE PLAN SERVICE TERM/COMMENCEMENT /COMMITMENT:
Customer Commitment Period: Sixty (60) Months
Commencement Date: For the purposes of this Agreement, (the
"Agreement Commencement Date") will be the next billing cycle following
the date this Agreement has been fully executed by both parties and
Customer has received a satisfactory credit review and approval from
WorldCom's Credit Department, and all security documentation, if any,
required by WorldCom has been properly executed and delivered to WorldCom
(collectively, the "Credit Review").
Commitment Commencement Date: is the same as the Commencement Date above.
Commitment Ending Date: is sixty (60) months following the Commitment
Commencement Date above.
5. APPLICATION OF DISCOUNTS: Commencing as of the Commencement Date
set forth in Section 4 above and continuing through the Commitment Ending
Date, WorldCom agrees to aggregate:
(i) monthly recurring charges for Domestic Private Line Service (before
the application of discounts); and/or
(ii) monthly recurring Network Node charges for Domestic Frame Relay
Service (before the application of discounts); and/or
(iii) monthly recurring Network Node charges for International Frame
Relay Service (before the application of discounts) in determining
Customer's corresponding discount for Domestic Private Line, Domestic
Frame Relay, Domestic ATM Service, and International Frame Relay.
6. PROPRIETARY INFORMATION: (a) Confidential Information: The parties
understand and agree that the terms and conditions of this Agreement, all
documents referenced and invoices to Customer for Service provided
hereunder, communications between the parties regarding this Agreement
(including price quotes to Customer for any Service proposed to be
provided or actually provided hereunder), as well as such non-public
information relevant to any other agreement between the parties
(collectively, "Confidential Information"), are confidential as between
Customer and WorldCom.
(b) Limited Disclosure: A party shall not disclose Confidential
Information unless subject to discovery or disclosure pursuant to legal
process, or to any party other than the directors, officers, and
employees of a party or a party's agents including their respective
brokers, lenders, insurance carriers or bona fide prospective purchasers
who have specifically agreed in writing to nondisclosure of the terms and
conditions hereof. Any disclosure hereof required by legal process shall
only be made after providing the non-disclosing party with notice thereof
in order to permit the non-disclosing party to seek an appropriate
protective order or exemption. Violation by a party or its agents of the
foregoing provisions shall entitle the non-disclosing party, at its
option, to obtain injunctive relief without a showing of irreparable harm
or injury and without bond.
(c) Press Releases: The parties further agree that any press
release, advertisement or publication generated by a party regarding this
Agreement, will be submitted to the non-publishing party for its written
approval prior to publication.
(d) Survival of Confidentiality: The provisions of this Section 6
will be effective as of the date of this Agreement and remain in full
force and effect for a period which will be the longer of (i) one (1)
year following the date of this Agreement, or (ii) one (1) year from the
termination of all Service hereunder.
7. LETTER OF AGENCY ("LOA"): The Undersigned [duly authorized
representative of Customer] hereby authorizes WorldCom, if requested in
writing by Customer, to provision Customer's Local Access. This LOA
supersedes all previous LOAs and shall remain in effect until canceled by
Customer in writing.
8. PRICING: (a) Rates for Domestic Private Line Service, Domestic
Frame Relay Service, International Private Line and International Frame
Relay are as set forth in the applicable WorldCom tariffs.
(b) Rates for OC-3c and OC-12c Private Line Service are as
described below for the location and quantities as set forth in Sections
I. and J.
(c) Discounts for both Domestic Private Line, Domestic Frame Relay,
International Private Line and International Frame Relay Service are as
described below.
(d) Rates for ATM Service shall be as set forth in WorldCom's
Service Orders (the "Service Orders"). Discounts for domestic ATM
Service are as described below.
***
9. ***
10. ***
11. ***
12. REPLACEMENT SERVICE: In the event Customer's business requirements
change, requiring Customer to replace OC-3c/OC-12c Service provided
hereunder ("Original Service") with new technology (hereinafter
"Replacement Service"), Customer shall provide written notice of its
intent to replace Original Service with Replacement Service from
WorldCom. During the final six (6) months of the Customer Commitment
Period, WorldCom shall not accept Customer orders for Replacement
Service. Provided Customer is not in default of its obligations under
this Agreement, Customer may cancel and upgrade Original Service to
Replacement Service without being subject to any cancellation charge
relevant to the Original Service under the following conditions:
***Confidential treatment has been requested for certain portions of this
document. Such omitted portions have been filed separately with the
Securities and Exchange Commission.
A. Customer shall provide WorldCom with at least forty-five (45) days'
written notice prior to the effective date of cancellation of the
Original Service and concurrently therewith submits a Service Order
for Replacement Service having a Requested Service Date concurrent
with the effective date of such cancellation.
B. The Replacement Service is available and uncommitteed.
C. The cities served by the Original Service continue to be served by the
Replacement Service and when applicable, a reconfiguration of the
Original Service which is available, i.e., cities served prior to the
upgrade continue to be served by the Replacement Service following the
upgrade.
D. Customer will be liable for costs, if any, reasonably incurred by
WorldCom from third parties (e.g., Local Access providers or
interconnecting carriers) as a result of such cancellation, provided
WorldCom notifies Customer of such costs within a reasonable time
following receipt of Customer's Service Order to effect a cancellation
and obtain Replacement Service.
E. Replacement Service shall have a similar Minimum Monthly Commitment as
Original Service. The Customer Commitment Period for Replacement
Service shall be similar to the Original Service.
13. ADDITIONAL SERVICES: During the Service Commitment Period, WorldCom
commits to make available to Customer related services offered by
WorldCom wholly owned subsidiaries. The inclusion of these services will
be addressed through a future amendment to the Revenue Plan, at a time
when these services become available and Customer desires these services.
14. TERMINATION: Should Customer elect to terminate the Agreement for
convenience prior to the term, the following early termination charges
would apply:
A. If the termination becomes effective prior to completion of the
first year of the Commitment Period, then the charge shall be an amount
equal to the balance of the then-current Minimum Monthly Commitment times
the number of months (or pro rata portion thereof) remaining in the
Commitment Period through the expiration of the first year of the
Commitment Period plus fifty percent (50%) of the balance of such Minimum
Monthly Commitment times the remainder of the Commitment Period beyond
the first year.
B. If the termination becomes effective after the completion of the
first year of the Commitment Period, then the charge shall be an amount
equal to fifty percent (50%) of the balance of the then-current Minimum
Monthly Commitment times the number of months (or pro-rata portion
thereof) remaining in the Commitment period.
C. If any circuit under the Revenue Plan is either Restricted IXC or
subject to an ICB arrangement, then the charge will be an amount equal to
the total cancellation charges incurred by WorldCom, in addition to
termination charges set forth in "A" or "B" above.
D. Customer is also liable for any charges, expenses, fees or
penalties incurred by WorldCom or its affiliated companies due to
cancellation of Local Access plus any costs, expenses or additional
charges reasonably incurred by WorldCom on behalf of Customer as
Customer's agent.
15. ***
16. INDIVIDUAL CIRCUIT TERM: The Service Commitment Period for each
Circuit comprising Qualifying IXC Service of the Revenue Plan is twelve
(12) months, unless the aforementioned Circuit is upgraded to a Service
of equal or greater monthly recurring charge and such Circuit has been
installed for no less than a six (6) month period. The Customer is also
liable for any charges, expenses, fees, or penalties incurred by WorldCom
or its affiliated companies due to cancellation of Local Access plus any
costs, expenses, or additional charges reasonably incurred by WorldCom on
behalf of Customer as Customer's agent.
***Confidential treatment has been requested for certain portions of this
document. Such omitted portions have been filed separately with the
Securities and Exchange Commission.
ENTIRE AGREEMENT: This Agreement (including any documents incorporated
herein by reference) constitutes the entire understanding between the
parties and supersedes any prior agreements and proposals between the
parties, whether oral or written, for Service provided hereunder.
WORLDCOM TECHNOLOGIES, INC. EXODUS COMMUNICATIONS, INC.
/s/ Frank M. Grillo /s/ Richard S. Stoltz
____________________________ ________________________________
(Authorized Signature) (Authorized Signature)
FRANK M. GRILLO Richard S. Stoltz
____________________________ ________________________________
(Print Name) (Print Name)
1/11/1999
____________________________ ________________________________
(Date Received) (Date Signed)
Terms and conditions contained herein will be offered for fifteen (15)
days from January 7, 1999
Mail to: Sales Contract Admin., WorldCom, Inc., 500 Clinton Center Drive,
Bldg. 4, 4th Floor, Clinton, MS 39056
EXHIBIT 10.49
[LOGO] AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE - NET
(DO NOT USE THIS FORM FOR MULTI-TENANT BUILDINGS)
1. BASIC PROVISIONS ("BASIC PROVISIONS").
1.1 PARTIES: This Lease ("LEASE"), dated for reference purposes only,
January 29, 1999, is made by and between G&I WALSH LLC, a Delaware
limited liability company ("LESSOR") and EXODUS COMMUNICATIONS, INC., a
Delaware corporation ("LESSEE"), (collectively the "PARTIES," or
individually a "PARTY").
1.2 PREMISES: That certain real property, including all improvements
therein or to be provided by Lessor under the terms of this Lease,
commonly known as 2401 Walsh Avenue, Santa Clara, located in the County
of Santa Clara, State of California, and generally described as (describe
briefly the nature of the property and, if applicable, the "PROJECT," if
the property is located within a Project) an industrial/commercial
building (the "Building") with an agreed rentable area of 95,700 square
feet ("PREMISES"). (See also Paragraph 2)
1.3 TERM: Four (4) years and 8 months ("ORIGINAL TERM") commencing
June 1, 2004 ("COMMENCEMENT DATE") and ending January 31, 2009
("EXPIRATION DATE"). (See also Paragraph 3)
1.4 EARLY POSSESSION: [Not applicable] ("EARLY POSSESSION DATE").
(See also Paragraphs 3.2 and 3.3)
1.5 BASE RENT: $115,797.00 per month ("BASE RENT"), payable on the
first day of each month commencing June 1, 2004. (See also Paragraph 4)
[X] If this box is checked, there are provisions in this Lease for the
Base Rent to be adjusted. See Addendum 1.5
1.6 BASE RENT PAID UPON EXECUTION: $ None as Base Rent for the period
[Not applicable].
1.7 SECURITY DEPOSIT: $ See Addendum 1.7 ("SECURITY DEPOSIT"). (See
also Paragraph 5)
1.8 AGREED USE: Data Center processing and other lawful related uses.
(See also Paragraph 6)
1.9 INSURING PARTY. Lessor is the "INSURING PARTY" unless otherwise
stated herein. (See also Paragraph 8)
1.10 REAL ESTATE BROKERS. (See also Paragraph 15)
(a) REPRESENTATION: The following real estate brokers (collectively,
the "BROKERS") and brokerage relationships exist in this transaction
(check applicable boxes):
[x] Landmark Asset Management Group represents Lessor exclusively
("LESSOR'S BROKER");
[x] The Commercial Property Services Company represents Lessee
exclusively ("LESSEE'S BROKER"); or
[ ] ________________________________________ represents both Lessor and
Lessee ("DUAL AGENCY").
(b) PAYMENT TO BROKERS: Upon execution and delivery of this Lease by
both Parties, Lessor shall pay to the Broker the fee agreed to in their
separate written agreement.
1.11 GUARANTOR. The obligations of the Lessee under this Lease are to
be guaranteed by [Not applicable] ("GUARANTOR"). (See also Paragraph 37)
1.12 ADDENDA AND EXHIBITS. Attached hereto is an Addendum or Addenda
consisting of 20 pages and Exhibits A and B, all of which constitute a
part of this Lease.
2. PREMISES
2.1 LETTING. Lessor hereby leases to Lessee, and Lessee hereby leases
from Lessor, the Premises, for the term, at the rental, and upon all of
the terms, covenants and conditions set forth in this Lease. Unless
otherwise provided herein, any statement of size set forth in this Lease,
or that may have been used in calculating rental, is an approximation
which the Parties agree is reasonable and the rental based thereon is not
subject to revision whether or not the actual size is more or less.
2.2 See Addendum 2.2
2.3 COMPLIANCE. Lessor makes no representation or warranty as to
whether the improvements on the Premises comply with applicable laws,
covenants or restrictions of record, building codes, regulations and
ordinances ("APPLICABLE REQUIREMENTS"). NOTE: Lessee is responsible for
determining whether or not the zoning is appropriate for Lessee's
intended use, and acknowledges that past uses of the Premises may no
longer be allowed. If the Applicable Requirements are hereafter changed
(as opposed to being in existence at the commencement of the term of the
Prior Sublease (as defined in Addendum 2.2), which is addressed in
Paragraph 6.2(e) below) so as to require during the term of this Lease
the construction of an addition to or an alteration of the Building, the
remediation of any Hazardous Substance, or the reinforcement or other
physical modification of the Building ("CAPITAL EXPENDITURE"), Lessor and
Lessee shall allocate the cost of such work as follows:
(a) Subject to Paragraph 2.3(c) below, if such Capital Expenditures
are required as a result of the specific and unique use of the Premises
by Lessee as compared with uses by tenants in general, Lessee shall be
fully responsible for the cost thereof, provided, however that if such
Capital Expenditure is required during the last two (2) years of this
Lease and the cost thereof exceeds six (6) months' Base Rent, Lessee may
instead terminate this Lease unless Lessor notifies Lessee, in writing,
within ten (10) days after receipt of Lessee's termination notice that
Lessor has elected to pay the difference between the actual cost thereof
and the amount equal to six (6) months' Base Rent. If Lessee elects
termination, Lessee shall immediately cease the use of the Premises which
requires such Capital Expenditure and deliver to Lessor written notice
specifying a termination date at least ninety (90) days thereafter. Such
termination date shall, however, in no event be earlier than the last day
that Lessee could legally utilize the Premises without commencing such
Capital Expenditure.
(b) If such Capital Expenditure is not the result of the specific
and unique use of the Premises by Lessee (such as, governmentally
mandated seismic modifications), then Lessor and Lessee shall allocate
the obligation to pay for such costs pursuant to the provisions of
Paragraph 7.1(c); provided, however, that if such Capital Expenditure is
required during the last two years of this Lease and the cost thereof
exceeds six (6) months' Base Rent, Lessor shall have the option to
terminate this Lease upon ninety (90) days prior written notice to Lessee
unless Lessee notifies Lessor, in writing, within ten (10) days after
receipt of Lessor's termination notice that Lessee will pay the
difference between the actual cost of such Capital Expenditure and the
amount equal to six (6) months' Base Rent. If Lessor does not elect to
terminate, and fails to tender its share of any such Capital Expenditure,
Lessee may advance such funds and deduct same, with interest, from Rent
until Lessor's share of such costs have been fully paid. If Lessee is
unable to finance Lessor's share, or if the balance of the Rent due and
payable for the remainder of this Lease is not sufficient to fully
reimburse Lessee on an offset basis, Lessee shall have the right to
terminate this Lease upon thirty (30) days written notice to Lessor.
(c) Notwithstanding the above, the provisions concerning Capital
Expenditures are intended to apply only to non-voluntary, unexpected, and
new Applicable Requirements. If the Capital Expenditures are instead
triggered by Lessee as a result of an actual or proposed change in use,
change in intensity of use, or modification to the Premises then, and in
that event, Lessee shall be fully responsible for the cost thereof, and
Lessee shall not have any right to terminate this Lease.
2.4 ACKNOWLEDGEMENTS. Lessee acknowledges that: (a) it has been
advised by Lessor and/or Brokers to satisfy itself with respect to the
condition of the Premises (including but not limited to the electrical,
HVAC and fire sprinkler systems, security, environmental aspects, and
compliance with Applicable Requirements), and their suitability for
Lessee's intended use, (b) Lessee has made such investigation as it deems
necessary with reference to such matters and assumes all responsibility
therefor as the same relate to its occupancy of the Premises, and (c)
neither Lessor, Lessor's agents, nor any broker has made any oral or
written representations or warranties with respect to said matters other
than as set forth in this Lease. In addition, Lessor acknowledges that:
(a) Broker has made no representations, promises or warranties concerning
Lessee's ability to honor the Lease or suitability to occupy the
Premises, and (b) it is Lessor's sole responsibility to investigate the
financial capability and/or suitability of all proposed tenants.
2.5 LESSEE AS PRIOR OWNER/OCCUPANT. The warranties made by Lessor in
Paragraph 2 shall be of no force or effect if immediately prior to the
Start Date Lessee was the owner or occupant of the Premises. In such
event, Lessee shall be responsible for any necessary corrective work.
3. TERM. See Addendum 3.1
3.1 TERM. The Commencement Date, Expiration Date and Original Term of
this Lease are as specified in Paragraph 1.3.
3.3 DELAY IN POSSESSION. Lessor agrees to use its best commercially
reasonable efforts to deliver possession of the Premises to Lessee by the
Commencement Date. If, despite said efforts, Lessor is unable to deliver
possession as agreed, Lessor shall not be subject to any liability
therefor, nor shall such failure affect the validity of this Lease.
Lessee shall not, however, be obligated to pay Rent or perform its other
obligations until it receives possession of the Premises. If possession
is not delivered within sixty (60) days after the Commencement Date,
Lessee may, at its option, by notice in writing within ten (10) days
after the end of such sixty (60) day period, cancel this Lease, in which
event the Parties shall be discharged from all obligations hereunder. If
such written notice is not received by Lessor within said ten (10) day
period, Lessee's right to cancel shall terminate. Except as otherwise
provided, if possession is not tendered to Lessee by the Start Date and
Lessee does not terminate this Lease, as aforesaid, any period of rent
abatement that Lessee would otherwise have enjoyed shall run from the
date of delivery of possession and continue for a period equal to what
Lessee would otherwise have enjoyed under the terms hereof, but minus any
days of delay caused by the acts or omissions of Lessee. If possession of
the Premises is not delivered within four (4) months after the
Commencement Date, this Lease shall terminate unless other agreements are
reached between Lessor and Lessee, in writing.
3.4 LESSEE COMPLIANCE. Lessor shall not be required to tender
possession of the Premises to Lessee until Lessee complies with its
obligation to provide evidence of insurance (Paragraph 8.5). Pending
delivery of such evidence, Lessee shall be required to perform all of its
obligations under this Lease from and after the Start Date, including the
payment of Rent, notwithstanding Lessor's election to withhold possession
pending receipt of such evidence of insurance. Further, if Lessee is
required to perform any other conditions prior to or concurrent with the
Start Date, the Start Date shall occur but Lessor may elect to withhold
possession until such conditions are satisfied.
4. RENT.
4.1 RENT DEFINED. All monetary obligations of Lessee to Lessor under
the terms of this Lease (except for the Security Deposit) are deemed to
be rent ("RENT").
4.2 PAYMENT. Lessee shall cause payment of rent to be received by
Lessor in lawful money of the United States, without offset or deduction
(except as specifically permitted in this Lease), on or before the day on
which it is due. Rent for any period during the term hereof which is for
less than one (1) full calendar month shall be prorated based upon the
actual number of days of said month. Payment of Rent shall be made to
Lessor at its address stated herein or to such other persons or place as
Lessor may from time to time designate in writing. Acceptance of a
payment which is less than the amount then due shall not be a waiver of
Lessor's rights to the balance of such Rent, regardless of Lessor's
endorsement of any check so stating.
5. SECURITY DEPOSIT. See Addendum 1.7.
6. USE.
6.1 USE. Lessee shall use and occupy the Premises only for the
Agreed Use, or any other legal use which is reasonably comparable
thereto, and for no other purpose. Lessee shall not use or permit the use
of the Premises in a manner that is unlawful, creates damage, waste or a
nuisance, or that disturbs owners and/or occupants of, or causes damage
to neighboring properties. Lessor shall not unreasonably withhold or
delay its consent to any written request for a modification of the Agreed
Use, so long as the same will not impair the structural integrity of the
improvements on the Premises or the mechanical or electrical systems
therein, is not significantly more burdensome to the Premises. If Lessor
elects to withhold consent, Lessor shall within five (5) business days
after such request give written notification of same, which notice shall
include an explanation of Lessor's objections to the change in use.
6.2 HAZARDOUS SUBSTANCES.
(a) REPORTABLE USES REQUIRE CONSENT. The term "HAZARDOUS
SUBSTANCE" as used in this Lease shall mean any product, substance, or
waste whose presence, use, manufacture, disposal, transportation, or
release, either by itself or in combination with other materials expected
to be on the Premises, is either: (i) potentially injurious to the public
health, safety or welfare, the environment or the Premises; (ii)
regulated or monitored by any governmental authority. Hazardous
Substances shall include, but not be limited to, hydrocarbons, petroleum,
gasoline, diesel fuel and/or crude oil or any products, by-products or
fractions thereof. Lessee shall not engage in any activity in or on the
Premises which constitutes a Reportable Use of Hazardous Substances
without the express prior written consent of Lessor and timely compliance
(at Lessee's expense) with all Applicable Requirements. "REPORTABLE USE"
shall mean (i) the installation or use of any above or below ground
storage tank, (ii) the generation, possession, storage, use,
transportation, or disposal of a Hazardous Substance that requires a
permit from, or with respect to which a report, notice, registration or
business plan is required to be filed with, any governmental authority,
and/or (iii) the presence at the Premises of a Hazardous Substance with
respect to which any Applicable Requirements requires that a notice be
given to persons entering or occupying the Premises or neighboring
properties. Notwithstanding the foregoing, Lessee may use any ordinary
and customary materials reasonably required to be used in the normal
course of the Agreed Use, so long as such use is in compliance with all
Applicable Requirements, is not a Reportable Use, and does not expose the
Premises or neighboring property to any meaningful risk of contamination
or damage or expose Lessor to any liability therefor. In addition, Lessor
may condition its consent to any Reportable Use upon receiving such
additional assurances as Lessor reasonably deems necessary to protect
itself, the public, the Premises and/or the environment against damage,
contamination, injury and/or liability, including, but not limited to,
the installation (and removal on or before Lease expiration or
termination) of protective modifications (such as concrete encasements)
and/or increasing the Security Deposit. See Addendum 6.2(a).
(b) DUTY TO INFORM LESSOR. If Lessee knows, or has reasonable
cause to believe, that a Hazardous Substance has come to be located in,
on, under or about the Premises, other than as previously consented to by
Lessor, Lessee shall immediately give written notice of such fact to
Lessor, and provide Lessor with a copy of any report, notice, claim or
other documentation which it has concerning the presence of such
Hazardous Substance.
(c) LESSEE REMEDIATION. Lessee shall not cause or permit any
Hazardous Substance to be spilled or released in, on, under, or about the
Premises (including through the plumbing or sanitary sewer system) and
shall promptly, at Lessee's expense, take all investigatory and/or
remedial action reasonably recommended, whether or not formally ordered
or required, for the cleanup of any contamination of, and for the
maintenance, security and/or monitoring of the Premises or neighboring
properties, that was caused or materially contributed to by Lessee, or
pertaining to or involving any Hazardous Substance brought onto the
Premises during the term of this Lease, by or for Lessee, or any party
other than Lessor.
(d) LESSEE INDEMNIFICATION. Lessee shall indemnify, defend and
hold Lessor, its agents, employees, lenders and ground lessor, if any,
harmless from and against any and all loss of rents and/or damages,
liabilities, judgments, claims, expenses, penalties, and attorneys' and
consultants' fees arising out of or involving any Hazardous Substance
brought onto the Premises during the term of this Lease or the Prior
Sublease by or for Lessee, or any party other than Lessor (provided,
however, that Lessee shall have no liability under this Lease with
respect to underground migration of any Hazardous Substance under the
Premises from adjacent properties). Lessee's obligations shall include,
but not be limited to, the effects of any contamination or injury to
person, property or the environment created or suffered by Lessee, and
the cost of investigation, removal, remediation, restoration and/or
abatement, and shall survive the expiration or termination of this Lease.
NO TERMINATION, CANCELLATION OR RELEASE AGREEMENT ENTERED INTO BY LESSOR
AND LESSEE SHALL RELEASE LESSEE FROM ITS OBLIGATIONS UNDER THIS LEASE
WITH RESPECT TO HAZARDOUS SUBSTANCES, UNLESS SPECIFICALLY SO AGREED BY
LESSOR IN WRITING AT THE TIME OF SUCH AGREEMENT.
(e) LESSOR INDEMNIFICATION. Lessor and its successors and assigns
shall indemnify, defend, reimburse and hold Lessee, its employees and
lenders, harmless from and against any and all environmental damages,
including the cost of remediation, which existed as a result of Hazardous
Substances on the Premises prior to the date of commencement of the Prior
Sublease or which are caused by the gross negligence or willful
misconduct of Lessor, its agents or employees. Lessor's obligations, as
and when required by the Applicable Requirements, shall include, but not
be limited to, the cost of investigation, removal, remediation,
restoration and/or abatement, and shall survive the expiration or
termination of this Lease.
(f) INVESTIGATIONS AND REMEDIATIONS. Lessor shall retain the
responsibility and pay for any investigations or remediation measures
required by governmental entities having jurisdiction with respect to the
existence of Hazardous Substances on the Premises prior to the date of
commencement of the Prior Sublease unless such remediation measure is
required as a result of Lessee's use (including "Alterations", as defined
in paragraph 7.3(a) below) of the Premises, in which event Lessee shall
be responsible for such payment. Lessee shall cooperate fully in any such
activities at the request of Lessor, including allowing Lessor and
Lessor's agents to have reasonable access in accordance with Section 32
of the Addendum to the Premises at reasonable times in order to carry out
Lessor's investigative and remedial responsibilities.
(g) LESSOR TERMINATION OPTION. If a Hazardous Substance Condition
occurs during the term of this Lease, unless Lessee is legally
responsible therefor (in which case Lessee shall make the investigation
and remediation thereof required by the Applicable Requirements and this
Lease shall continue in full force and effect, but subject to Lessor's
rights under Paragraph 6.2(d) and Paragraph 13), Lessor may, at Lessor's
option, either (i) investigate and remediate such Hazardous Substance
Condition, if required, as soon as reasonably possible at Lessor's
expense, in which event this Lease shall continue in full force and
effect, or (ii) if the estimated cost to remediate such condition exceeds
twelve (12) times the then monthly Base Rent or $100,000, whichever is
greater, give written notice to Lessee, within thirty (30) days after
receipt by Lessor of knowledge of the occurrence of such Hazardous
Substance Condition, of Lessor's desire to terminate this Lease as of the
date sixty (60) days following the date of such notice. In the event
Lessor elects to give a termination notice, Lessee may, within ten (10)
days thereafter, give written notice to Lessor of Lessee's commitment to
pay the amount by which the cost of the remediation of such Hazardous
Substance Condition exceeds an amount equal to twelve (12) times the then
monthly Base Rent or $100,000, whichever is greater. Lessee shall provide
Lessor with said funds or satisfactory assurance thereof within thirty
(30) days following such commitment. In such event, this Lease shall
continue in full force and effect, and Lessor shall proceed to make such
remediation as soon as reasonably possible after the required funds are
available. If Lessee does not give such notice and provide the required
funds or assurance thereof within the time provided, this Lease shall
terminate as of the date specified in Lessor's notice of termination. See
Addendum 6.2(g).
6.3 LESSEE'S COMPLIANCE WITH APPLICABLE REQUIREMENTS. Except as
otherwise provided in this Lease, Lessee shall, at Lessee's sole expense,
fully, diligently and in a timely manner, materially comply with all
Applicable Requirements, the requirements of any applicable fire
insurance underwriter or rating bureau, and the recommendations of
Lessor's engineers and/or consultants which relate in any manner to the
Premises as the same pertain to interpretation of the Applicable
Requirements without regard to whether said requirements are now in
effect or become effective after the Start Date. Lessee shall, within ten
(10) days after receipt of Lessor's written request, provide Lessor with
copies of all permits and other documents, and other information
evidencing Lessee's compliance with any Applicable Requirements specified
by Lessor, and shall immediately upon receipt, notify Lessor in writing
(with copies of any documents involved) or any threatened or actual
claim, notice, citation, warning, complaint or report pertaining to or
involving the failure of Lessee or the Premises to comply with any
Applicable Requirements.
6.4 INSPECTION; COMPLIANCE. Lessor and Lessor's "Lender" (as defined
in Paragraph 30 below) and consultants shall have the right to enter into
Premises at any time, in the case of an emergency, and otherwise at
reasonable times in accordance with Section 32 of the Addendum for the
purpose of inspecting the condition of the Premises and for verifying
compliance by Lessee with this Lease. The cost of any such inspections
shall be paid by Lessor, unless a violation of Applicable Requirements,
or a contamination is found to exist, or the inspection is requested or
ordered by a governmental authority. In such case, Lessee shall upon
request reimburse Lessor for the reasonable cost of such inspections, so
long as such inspection is reasonably related to the violation or
contamination.
7. MAINTENANCE; REPAIRS, UTILITY INSTALLATIONS; TRADE FIXTURES AND
ALTERATIONS.
7.1 LESSEE'S OBLIGATIONS.
(a) IN GENERAL. Subject to the provisions of Addendum 2.2, 2.3
(Compliance), 6.3 (Lessee's Compliance with Applicable Requirements), 7.2
(Lessor's Obligations), 9 (Damage or Destruction), and 14 (Condemnation),
Lessee shall, at Lessee's sole expense, keep the Premises, Utility
Installations, and Alterations in good order, condition and repair
(whether or not the portion of the Premises requiring repairs, or the
means of repairing the same, are reasonably or readily accessible to
Lessee, and whether or not the need for such repairs occurs as a result
of Lessee's use, any prior use, the elements or the age of such portion
of the Premises), including, but not limited to, all equipment or
facilities, such as plumbing, heating, ventilating, air-conditioning,
electrical, lighting facilities, boilers, pressure vessels, fire
protection system, fixtures, walls (interior and exterior), foundations,
ceilings, roofs, floors, windows, doors, plate glass, skylights,
landscaping, driveways, parking lots, fences, retaining walls, signs,
sidewalks and parkways located in, on, or adjacent to the Premises.
Lessee, in keeping the Premises in good order, condition and repair,
shall exercise and perform good maintenance practices, specifically
including the procurement and maintenance of the service contracts
required by Paragraph 7.1(b) below. Lessee's obligations shall include
restorations, replacements or renewals when necessary to keep the
Premises and all improvements thereon or a part thereof in good order,
condition and state of repair. Lessee shall, during the term of this
Lease, keep the exterior appearance of the Building in a good and
tenantable condition consistent with the exterior appearance of other
similar facilities of comparable age and size in the vicinity, including,
when necessary, the exterior repairing of the Building.
(b) SERVICE CONTRACTS. Lessee shall, at Lessee's sole expense,
procure and maintain contracts, with copies to Lessor, in customary form
and substance for, and with contractors specializing and experienced in
the maintenance of the following equipment and improvements ("Basic
Elements"), if any, if and when installed on the Premises: (i) HVAC
equipment, (ii) boiler, and pressure vessels, (iii) fire extinguishing
systems, including fire alarm and/or smoke detection, (iv) landscaping
and irrigation systems, (v) roof covering and drains, (vi) driveways and
parking lots, (vii) clarifiers, (viii) basic utility feed to the
perimeter of the Building, and (ix) any other equipment, if reasonably
required by Lessor.
(c) REPLACEMENT. Subject to Lessee's indemnification of Lessor as
set forth in Paragraph 8.7 below, and without relieving Lessee of
liability resulting from Lessee's failure to exercise and perform good
maintenance practices, if the Basic Elements described in Paragraph
7.1(b) cannot be repaired other than at a cost which is in excess of 50%
of the cost of replacing such Basic Elements, then such Basic Elements
shall be replaced by Lessor, and the cost thereof shall be prorated
between the Parties and Lessee shall only be obligated to pay, each month
during the remainder of the term of this Lease, on the date on which Base
Rent is due, an amount equal to the product of multiplying the cost of
such replacement by a fraction, the numerator of which is one, and the
denominator of which is the number of months of the useful life of such
replacement as such useful life is specified pursuant to generally
accepted accounting principles for depreciation thereof (including
interest on the unamortized balance at the Prime Rate (as defined in
Addendum 7.1), with Lessee reserving the right to prepay its obligation
at any time. See Addendum 7.1.
7.2 LESSOR'S OBLIGATIONS. Subject to the provisions of Addendum 2.2,
and Paragraphs 2.3 (Compliance), 9 (Damage or Destruction) and 14
(Condemnation), it is intended by the Parties hereto that Lessor have no
obligation, in any manner whatsoever, to repair and maintain the
Premises, or the equipment therein, all of which obligations are intended
to be that of the Lessee. It is the intention of the Parties that the
terms of this Lease govern the respective obligations of the Parties as
to maintenance and repair of the Premises, and they expressly waive the
benefit of any statute now or hereafter in effect to the extent it is
inconsistent with the terms of this Lease.
7.3 UTILITY INSTALLATIONS; TRADE FIXTURES; ALTERATIONS. See Addendum 7.3.
(a) DEFINITIONS; CONSENT REQUIRED. The term "UTILITY INSTALLATIONS"
refers to all floor and window coverings, air lines, power panels,
electrical distribution, security and fire protection systems,
communication systems, lighting fixtures, HVAC equipment, plumbing, and
fencing in or on the Premises. The term "TRADE FIXTURES" shall mean
Lessee's machinery and equipment that can be removed without doing
material damage to the Premises. The term "ALTERATIONS" shall mean any
modification of the improvements, other than Utility Installations or
Trade Fixtures, whether by addition or deletion. "LESSEE OWNED
ALTERATIONS AND/OR UTILITY INSTALLATIONS" are defined as Alterations
and/or Utility Installations made by Lessee that are not yet owned by
Lessor pursuant to Paragraph 7.4(a) or that Lessee is permitted to
remove. Pursuant to Addendum 7.4, Lessee shall not make any Alterations
or Utility Installations to the Premises without Lessor's prior written
consent. Lessee may, however, make non-structural Utility Installations
to the interior of the Premises without such consent but upon notice to
Lessor, as long as they are not visible from the outside, do not involve
puncturing, relocating or removing existing walls, and the cumulative
cost thereof during this Lease as extended does not exceed $100,000 in
any one year.
(b) CONSENT. Any Alterations or Utility Installations that Lessee
shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with detailed plans. Consent shall be
deemed conditioned upon Lessee's: (i) acquiring all applicable
governmental permits, (ii) furnishing Lessor with copies of both the
permits and the plans and specifications prior to commencement of the
work, and (iii) compliance with all conditions of said permits and other
Applicable Requirements in a prompt and expeditious manner. Any
Alterations or Utility Installations shall be performed in a workmanlike
manner with good and sufficient materials. Lessee shall promptly upon
completion furnish Lessor with as-built plans and specifications whether
or not such Alterations or Utility Installations require Lessor's
consent. For work which costs more than $1,000,000 excluding the cost of
any Trade Fixtures, Lessor may condition its consent upon Lessee
providing a lien and completion bond in an amount equal to one and one-
half times the estimated costs of such Alteration or Utility Installation
and/or upon Lessee's posting an additional Security Deposit with Lessor.
(c) INDEMNIFICATION. Lessee shall pay, when due, all claims for
labor or materials furnished or alleged to have been furnished to or for
Lessee at or for use on the Premises, which claims are or may be secured
by any mechanic's or materialmen's lien against the Premises or any
interest therein. Lessee shall give lessor not less than ten (10) days'
notice prior to the commencement of any work in, on or about the
Premises, and Lessor shall have the right to post notices of non-
responsibility. If Lessee shall contest the validity of any such lien,
claim or demand, then Lessee shall, at its sole expense defend and
protect itself, Lessor and the Premises against the same and shall pay
and satisfy any such adverse judgment that may be rendered thereon before
the enforcement thereof. If Lessor shall require, Lessee shall furnish a
surety bond in an amount equal to one and one-half times the amount of
such contested lien, claim or demand, indemnifying Lessor against
liability for the same. If Lessor elects to participate in any such
action, Lessee shall pay Lessor's attorneys' fees and costs.
7.4 OWNERSHIP; REMOVAL; SURRENDER; AND RESTORATION. See Addendum 7.4.
(a) OWNERSHIP. Subject to Lessor's right to require removal or elect
ownership as hereinafter provided, all Alterations and Utility
Installations made by Lessee shall be the property of Lessee, but
considered a part of the Premises. Lessor may, at any time, elect in
writing to be the owner of all or any specified part of the Lessee Owned
Alterations and Utility Installations. Unless otherwise instructed per
Paragraph 7.4(b) hereof, all Lessee Owned Alterations and Utility
Installations shall, at the expiration or termination of this Lease,
become the property of Lessor and be surrendered by Lessee with the
Premises.
(b) REMOVAL. By delivery to Lessee of written notice from Lessor
not earlier than ninety (90) and not later than thirty (30) days prior to
the end of the term of this Lease, Lessor may require that any or all
Lessee Owned Alterations or Utility Installations be removed by the
expiration or termination of this Lease. Lessor may require the removal
at any time of all or any part of any Lessee Owned Alterations or Utility
Installations made without the required consent.
(c) SURRENDER/RESTORATION. Lessee shall surrender the Premises by
the Expiration Date or any earlier termination date, with all of the
improvements, parts and surfaces thereof (except for those which Lessee
is permitted to remove pursuant to Addendum paragraph 7.4 or required to
remove pursuant to subparagraph 7.4(b) above) broom clean and free of
debris, and in good operating order, condition and state of repair,
ordinary wear and tear excepted. "Ordinary wear and tear" shall not
include any damage or deterioration that would have been prevented by
good maintenance practice. Lessee shall repair any damage occasioned by
the installation, maintenance or removal of Trade Fixtures, Lessee Owned
Alterations and/or Utility Installations, furnishings, and equipment as
well as the removal of any storage tank installed by or for Lessee, and
the removal, replacement or remediation of any soil, material or
groundwater contaminated by Lessee. Trade Fixtures shall remain the
property of Lessee and shall be removed by Lessee. The failure by Lessee
to timely vacate the Premises pursuant to this Paragraph 7.4(c) without
the express written consent of Lessor shall constitute a holdover under
the provisions of Paragraph 26 below.
8. INSURANCE; INDEMNITY.
8.1 PAYMENT FOR INSURANCE. Lessee shall pay for all insurance
required under Paragraph 8 Except to the extent of the cost attributable
to liability insurance carried by Lessor under Paragraph 8.2(b) in excess
of $10,000,000 per occurrence. Premiums for policy periods commencing
prior to or extending beyond the Lease term shall be prorated to
correspond to the Lease term. Payment shall be made by Lessee to lessor
within ten (10) days following receipt of an invoice. See Addendum 8.1
8.2 LIABILITY INSURANCE.
(a) CARRIED BY LESSEE. Lessee shall obtain and keep in force a
Commercial General Liability Policy of Insurance protecting Lessee and
Lessor against claims for bodily injury, personal injury and property
damage based upon or arising out of the ownership, use, occupancy or
maintenance of the Premises and all areas appurtenant thereto. Such
insurance shall be on an occurrence basis providing single limit coverage
in an amount not less than $10,000,000 per occurrence with an "ADDITIONAL
INSURED-MANAGERS OR LESSORS OF PREMISES ENDORSEMENT" and contain the
"AMENDMENT OF THE POLLUTION EXCLUSION ENDORSEMENT" for damage caused by
heat, smoke or fumes from a hostile fire. The Policy shall not contain
any intra-insured exclusions as between insured persons or organizations,
but shall include coverage for liability assumed under this Lease as an
"insured contract" for the performance of Lessee's indemnity obligations
under this Lease. The limits of said insurance shall not, however, limit
the liability of Lessee nor relieve Lessee of any obligation hereunder.
All insurance carried by Lessee shall be primary to and not contributory
with any similar insurance carried by Lessor, whose insurance shall be
considered excess insurance only.
(b) CARRIED BY LESSOR. Lessor shall maintain liability insurance as
described in Paragraph 8.2(a), in addition to, and not in lieu of, the
insurance required to be maintained by Lessee. Lessee shall not be named
as an additional insured therein.
8.3 PROPERTY INSURANCE - BUILDING, IMPROVEMENTS AND RENTAL VALUE.
(a) BUILDING AND IMPROVEMENTS. The Insuring Party shall obtain and
keep in force a policy or policies in the name of Lessor, with loss
payable to Lessor, any groundlessor, and to any Lender(s) insuring loss
or damage to the Premises. The amount of such insurance shall be equal to
the full replacement cost of the Premises, as the same shall exist from
time to time, or the amount required by any Lenders, but in no event more
than the commercially reasonable and available insurable value thereof.
If Lessor is the Insuring Party, however, Lessee Owned Alterations and
Utility Installations, Trade Fixtures, and Lessee's personal property
shall be insured by Lessee under Paragraph 8.4 rather than by Lessor. If
the coverage is available and commercially appropriate, such policy or
policies shall insure against all risks of direct physical loss or damage
(including the perils of flood and/or earthquake), including coverage for
debris removal and the enforcement of any Applicable Requirements
requiring the upgrading, demolition, reconstruction or replacement of any
portion of the Premises as the result of a covered loss. Said policy or
policies shall also contain an agreed valuation provision in lieu of any
coinsurance clause, waiver of subrogation, and inflation guard protection
causing an increase in the annual property insurance coverage amount by a
factor of not less than the adjusted U.S. Department of Labor Consumer
Price Index for All Urban Consumers for the city nearest to where the
Premises are located. If such insurance coverage has a deductible clause,
the deductible amount shall not exceed $5,000 per occurrence, and Lessee
shall be liable for such deductible amount in the event of an insured
Loss. See Addendum 8.3
(b) RENTAL VALUE. The Insuring Party shall obtain and keep in force
a policy or policies in the name of Lessor with loss payable to Lessor
and any Lender, insuring the loss of the full Rent for one (1) year. Said
insurance shall provide that in the event the Lease is terminated by
reason of an insured loss, the period of indemnity for such coverage
shall be extended beyond the date of the completion of repairs or
replacement of the Premises, to provide for one full year's loss of Rent
from the date of any such loss. Said insurance shall contain an agreed
valuation provision in lieu of any coinsurance clause, and the amount of
coverage shall be adjusted annually to reflect the projected Rent
otherwise payable by Lessee, for the next twelve (12) month period.
Lessee shall be liable for any deductible amount in the event of such
loss.
(c) ADJACENT PREMISES. If the Premises are part of a larger
building, or of a group of buildings owned by Lessor which are adjacent
to the Premises, the Lessee shall pay for any increase in the premiums
for the property insurance of such building or buildings if said increase
is caused by Lessee's acts, omissions, use or occupancy of the Premises.
8.4 LESSEE'S PROPERTY/BUSINESS INTERRUPTION INSURANCE
(a) PROPERTY DAMAGE. Lessee shall obtain and maintain insurance
coverage on all or Lessee's personal property, Trade Fixtures, and Lessee
Owned Alterations and Utility Installations. Such insurance shall be full
replacement cost coverage with a deductible of not to exceed $5,000 per
occurrence. The proceeds from any such insurance shall be used by Lessee
for the replacement of personal property, Trade Fixtures and Lessee Owned
Alterations and Utility Installations, except in the case of a casualty
occurring during the final year of the term of this Lease. Lessee shall
provide Lessor with written evidence that such insurance is in force.
(b) NO REPRESENTATION OF ADEQUATE COVERAGE. Lessor makes no
representation that the limits or forms of coverage of insurance
specified herein are adequate to cover Lessee's property, business
operations or obligations under this Lease.
8.5 INSURANCE POLICIES. Insurance required herein shall be by
companies duly licensed or admitted to transact business in the state
where the Premises are located, and maintaining during the policy term a
"General Policyholders Rating" of at least B+ IX, as set forth in the
most current issue of "Best's Insurance Guide", or such other rating as
may be required by a Lender. Lessee shall not do or permit to be done
anything which invalidates the required insurance policies. Lessee shall,
prior to the Start Date, deliver to Lessor certified copies of policies
of such insurance or certificates evidencing the existence and amounts of
the required insurance. No such policy shall be cancelable or subject to
modification except after thirty (30) days prior written notice to
Lessor. Lessee shall, at least thirty (30) days prior to the expiration
of such policies, furnish Lessor with evidence of renewals or "insurance
binders" evidencing renewal thereof, or Lessor may order such insurance
and charge the cost thereof to Lessee, which amount shall be payable by
Lessee to Lessor upon demand. Such policies shall be for a term of at
least one year, or the length of the remaining term of this Lease,
whichever is less. If either Party shall fail to procure and maintain the
insurance required to be carried by it, the other Party may, but shall
not be required to, procure and maintain the same.
8.6 WAIVER OF SUBROGATION. Without affecting any other rights or
remedies, Lessee and Lessor each hereby release and relieve the other,
and waive their entire right to recover damages against the other, for
loss of or damage to its property arising out of or incident to the
perils required to be insured against herein. The effect of such releases
and waivers is not limited by the amount of insurance carried or
required, or by any deductibles applicable hereto. The Parties agree to
have their respective property damage insurance carriers waive any right
to subrogation that such companies may have against Lessor or Lessee, as
the case may be, so long as the insurance is not invalidated thereby.
8.7 INDEMNITY. Except for Lessor's gross negligence or willful
misconduct, Lessee shall indemnify, protect, defend and hold harmless the
Premises, Lessor and its agents, Lessor's master or ground lessor,
partners and Lenders, from and against any and all claims, loss of rents
and/or damages, liens, judgments, penalties, attorneys' and consultants'
fees, expenses and/or liabilities arising out of, involving, or in
connection with, the use and/or occupancy of the Premises by Lessee. If
any action or proceeding is brought against Lessor by reason of any of
the foregoing matters, Lessee shall upon notice defend the same at
Lessee's expense by counsel reasonably satisfactory to Lessor and Lessor
shall cooperate with Lessee in such defense. Lessor need not have first
paid any such claim in order to be defended or indemnified.
8.8 EXEMPTION OF LESSOR FROM LIABILITY. Lessor shall not be liable
for injury or damage to the person or goods, wares, merchandise or other
property of Lessee, Lessee's employees, contractors, invitees, customers,
or any other person in or about the Premises, whether such damage or
injury is caused by or results from fire, steam, electricity, gas, water
or rain, or from the breakage, leakage, obstruction or other defects of
pipes, fire sprinklers, wires, appliances, plumbing, HVAC or lighting
fixtures, or from any other cause, whether the said injury or damage
results from conditions arising upon the Premises or upon other portions
of the Building of which the Premises are a part, or from other sources
or places. Lessor shall not be liable for any damages arising from any
act or neglect of any other tenant or Lessor. Notwithstanding Lessor's
negligence or breach of this Lease, Lessor shall under no circumstances
be liable for injury to Lessee's business or for any loss of income or
profit therefrom.
9. DAMAGE OR DESTRUCTION. Nothing in this Paragraph 8.8 is intended to
relieve Lessor from its obligations, if any, under Paragraph 6.2 of this
Lease (including the Addendum).
9.1 DEFINITIONS.
(a) "PREMISES PARTIAL DAMAGE" shall mean damage or destruction to
the improvements on the Premises, other than Lessee Owned Alterations and
Utility Installations, which can reasonably be repaired in six (6) months
or less from the date of the damage or destruction.
Initials________ __________
Lessor shall notify Lessee in writing within thirty (30) days from the
date of the damage or destruction as to whether or not the damage is
Partial or Total.
(b) "PREMISES TOTAL DESTRUCTION" shall mean damage or destruction to
the Premises, other than Lessee Owned Alterations and Utility
Installations and Trade Fixtures, which cannot reasonably be repaired in
six (6) months or less from the date of the damage or destruction. Lessor
shall notify Lessee in writing within thirty (30) days from the date of
the damage or destruction as to whether or not the damage is Partial or
Total.
(c) "INSURED LOSS" shall mean damage or destruction to improvements
on the Premises, other than Lessee Owned Alterations and Utility
Installations and Trade Fixtures, which was caused by an event required
to be covered by the insurance described in Paragraph 8.3(a),
irrespective of any deductible amounts or coverage limits involved.
(d) "REPLACEMENT COST" shall mean the cost to repair or rebuild the
improvements owned by Lessor at the time of the occurrence to their
condition existing immediately prior thereto, including demolition,
debris removal and upgrading by the operation of Applicable Requirements,
and without deduction for depreciation.
(e) "HAZARDOUS SUBSTANCE CONDITION" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination
by, a Hazardous Substance as defined in Paragraph 6.2(a), in, on, or
under the Premises.
9.2 PARTIAL DAMAGE -- INSURED LOSS. If a Premises Partial Damage that
is an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair
such damage (but not Lessee's Trade Fixtures or Lessee Owned Alterations
and Utility Installations) as soon as reasonably possible and this Lease
shall continue in full force and effect; provided, however, that Lessee
shall, at Lessor's election, make the repair of any damage or destruction
the total cost to repair of which is $10,000 or less, and, in such event.
Lessor shall make any applicable insurance proceeds available to Lessee
on a reasonable basis for that purpose. Notwithstanding the foregoing, if
the required insurance was not in force or the insurance proceeds are not
sufficient to effect such repair, the Insuring Party shall promptly
contribute the shortage in proceeds (except as to the deductible which is
Lessee's responsibility) as and when required to complete said repairs.
In the event, however, such shortage was due to the fact that, by reason
of the unique nature of the improvements, full replacement cost insurance
coverage was not commercially reasonable and available, Lessor shall have
no obligation to pay for the shortage in insurance proceeds or to fully
restore the unique aspects of the Premises unless Lessee provides Lessor
with the funds to cover same, or adequate assurance thereof, within ten
(10) days following receipt of written notice of such shortage and
request therefor. If Lessor receives said funds or adequate assurance
thereof within said ten (10) day period, the party responsible for making
the repairs shall complete them as soon as reasonably possible and this
Lease shall remain in full force and effect. If such funds or assurance
are not received, Lessor may nevertheless elect by written notice to
Lessee within ten (10) days thereafter to: (i) make such restoration and
repair as is commercially reasonable with Lessor paying any shortage in
proceeds, in which case this Lease shall remain in full force and effect;
or (ii) have this Lease terminate thirty (30) days thereafter. Lessee
shall not be entitled to reimbursement of any funds contributed by Lessee
to repair any such damage or destruction. Premises Partial Damage due to
flood or earthquake shall be subject to Paragraph 9.3, notwithstanding
that there may be some insurance coverage, but the net proceeds of any
such insurance shall be made available for the repairs if made by either
Party; provided, however, that if Lessor actually receives proceeds
sufficient to cover the full amount of the loss, excluding any
deductible, this Paragraph 9.2 shall govern.
9.3 PARTIAL DAMAGE -- UNINSURED LOSS. If a Premises Partial Damage
that is not an Insured Loss occurs, unless caused by a negligent or
willful act of Lessee (in which event Lessee shall make the repairs at
Lessee's expense), Lessor may either: (i) repair such damage as soon as
reasonably possible at Lessor's expense, in which event this Lease shall
continue in full force and effect, or (ii) terminate this Lease by giving
written notice to Lessee within thirty (30) days after receipt by Lessor
of knowledge of the occurrence of such damage. Such termination shall be
effective sixty (60) days following the date of such notice. In the event
Lessor elects to terminate this Lease, Lessee shall have the right within
ten (10) days after receipt of the termination notice to give written
notice to Lessor of Lessee's commitment to pay for the repair of such
damage without reimbursement from Lessor. Lessee shall provide Lessor
with said funds or satisfactory assurance thereof within thirty (30) days
after making such commitment. In such event this Lease shall continue in
full force and effect, and Lessor shall proceed to make such repairs as
soon as reasonably possible after the required funds are available. If
Lessee does not make the required commitment, this Lease shall terminate
as of the date specified in the termination notice. See Addendum 9.3
9.4 TOTAL DESTRUCTION. Notwithstanding any other provision hereof, if
a Premises Total Destruction occurs, this Lease shall terminate sixty
(60) days following such Destruction. If the damage or destruction was
caused by the gross negligence or willful misconduct of Lessee, Lessor
shall have the right to recover Lessor's damages from Lessee, except as
provided in Paragraph 8.6.
9.5 DAMAGE NEAR END OF TERM. If at any time during the last six (6)
months of this Lease there is damage for which the cost to repair two (2)
month's Base Rent, whether or not an Insured Loss, Lessor may terminate
this Lease effective sixty (60) days following the date of occurrence of
such damage by giving a written termination notice to Lessee within
thirty (30) days after the date of occurrence of such damage.
Notwithstanding the foregoing, if Lessee at that time has an exercisable
option to extend this Lease or to purchase the Premises, then Lessee may
preserve this Lease by, (a) exercising such option and (b) providing
Lessor with any shortage in insurance proceeds (or adequate assurance
thereof) needed to make the repairs on or before the earlier of (i) the
date which is ten days after Lessee's receipt of Lessor's written notice
purporting to terminate this Lease, or (ii) the day prior to the date
upon which such option expires. If Lessee duly exercises such option
during such period and provides Lessor with funds (or adequate assurance
thereof) to cover any shortage in insurance proceeds, Lessor shall, at
Lessor's commercially reasonable expense, repair such damage as soon as
reasonably possible and this Lease shall continue in full force and
effect. If Lessee fails to exercise such option and provide such funds or
assurance during such period, then this Lease shall terminate on the date
specified in the termination notice and Lessee's option shall be
extinguished.
9.6 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) ABATEMENT. In the event of Premises Partial Damage or Premises
Total Destruction or a Hazardous Substance Condition for which Lessee is
not responsible under this Lease, the Rent payable by Lessee for the
period required for the repair, remediation or restoration of such damage
shall be abated in proportion to the degree to which Lessee's use of the
Premises is impaired, but not to exceed the proceeds received from the
Rental Value insurance. All other obligations of Lessee hereunder shall
be performed by Lessee, and Lessor shall have no liability for any such
damage, destruction, remediation, repair or restoration except as
provided herein.
(b) REMEDIES. If Lessor shall be obligated to repair or restore the
Premises and does not commence, in a substantial and meaningful way, such
repair or restoration within ninety (90) days after such obligation shall
accrue, Lessee may, at any time prior to the commencement of such repair
or restoration, give written notice to Lessor and to any Lenders of which
Lessee has actual notice, of Lessee's election to terminate this Lease on
a date not less than sixty (60) days following the giving of such notice.
If Lessee gives such notice and such repair or restoration is not
commenced within thirty (30) days thereafter, this Lease shall terminate
as of the date specified in said notice. If the repair or restoration is
commenced within said thirty (30) days, this Lease shall continue in full
force and effect. "COMMENCE" shall mean the beginning of the actual work
on the Premises. See Addendum 9.6
9.7 TERMINATION-ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to Paragraph 6.2(g) or Paragraph 9, an equitable adjustment
shall be made concerning advance Base Rent and any other advance payments
made by Lessee to Lessor. Lessor shall, in addition, return to Lessee so
much of Lessee's Security Deposit as has not been, or is not then
required to be, used by Lessor.
9.8 WAIVE STATUTES. Lessor and Lessee agree that the terms of this
Lease shall govern the effect of any damage to or destruction of the
Premises with respect to the termination of this Lease and hereby waive
the provisions of any present or future statute to the extent
inconsistent herewith.
10. REAL PROPERTY TAXES.
10.1 DEFINITION OF "REAL PROPERTY TAXES." As used herein, the term
"REAL PROPERTY TAXES" shall include any form of assessment; real estate,
general, special, ordinary or extraordinary, or rental levy or tax (other
than inheritance, personal income or estate taxes); improvement bond;
and/or license fee imposed upon or levied against any legal or equitable
interest of Lessor in the Premises, Lessor's right to gross revenues
therefrom (but not any tax on Lessor's net income from all sources),
and/or Lessor's business of leasing, by any authority having the direct
or indirect power to tax and where the funds are generated with reference
to the Building address and where the proceeds so generated are to be
applied by the city, county or other local taxing authority of a
jurisdiction within which the Premises are located. The term "REAL
PROPERTY TAXES" shall also include any tax, fee, levy, assessment or
charge, or any increase therein, imposed by reason of events occurring
during the term of this Lease, including but not limited to, a change in
the ownership of the Premises.
10.2 See Addendum 10.2.
(a) PAYMENT OF TAXES. Lessee shall pay the Real Property Taxes
applicable to the Premises during the term of this Lease. Subject to
Paragraph 10.2(b), all such payments shall be made at least ten (10) days
prior to any delinquency date. Lessee shall promptly furnish Lessor with
satisfactory evidence that such taxes have been paid. If any such taxes
shall cover any period of time prior to or after the expiration or
termination of this Lease, Lessee's share of such taxes shall be prorated
to cover only that portion of the tax bill applicable to the period that
this Lease is in effect, and Lessor shall reimburse Lessee for any
overpayment. If Lessee shall fail to pay any required Real Property
Taxes, Lessor shall have the right to pay the same, and Lessee shall
reimburse Lessor therefor upon demand.
(b) ADVANCE PAYMENT. In the event Lessee incurs a late charge on
any Rent payment two (2) times during any twelve (12) month period,
Lessor may, at Lessor's option, estimate the current Real Property Taxes,
and require that such taxes be paid in advance to Lessor by Lessee,
either: (i) in a lump sum amount equal to the installment due, at least
twenty (20) days prior to the applicable delinquency date, or (ii)
monthly in advance with the payment of the Base Rent. If Lessor elects to
require payment monthly in advance, the monthly payment shall be an
amount equal to the amount of the estimated installment of taxes divided
by the number of months remaining before the month in which said
installment becomes delinquent. When the actual amount of the applicable
tax bill is known, the amount of such equal monthly advance payments
shall be adjusted as required to provide the funds needed to pay the
applicable taxes. If the amount collected by Lessor is insufficient to
pay such Real Property Taxes when due, Lessee shall pay Lessor, upon
demand, such additional sums as are necessary to pay such obligations.
All moneys paid to Lessor under this Paragraph may be intermingled with
other moneys of Lessor and shall not bear interest. In the event of a
Breach by Lessee in the performance of its obligations under this Lease,
then any balance of funds paid to Lessor under the provisions of this
Paragraph may at the option of Lessor, be treated as an additional
Security Deposit.
10.3 JOINT ASSESSMENT. If the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the Real Property
Taxes for all of the land and improvements included within the tax parcel
assessed, such proportion to be reasonably determined by Lessor from the
respective valuations assigned in the assessor's work sheets or such
other information as may be reasonably available.
10.4 PERSONAL PROPERTY TAXES. Lessee shall pay, prior to delinquency,
all taxes assessed against and levied upon Lessee Owned Alterations,
Utility Installations, Trade Fixtures, furnishings, equipment and all
personal property of Lessee. When possible, Lessee shall cause such
property to be assessed and billed separately from the real property of
Lessor. If any of Lessee's said personal property shall be assessed with
Lessor's real property, Lessee shall pay Lessor the taxes attributable to
Lessee's property within ten (10) days after receipt of a written
statement.
11. UTILITIES. Lessee shall pay for all water, gas, heat, light, power,
telephone, trash disposal and other utilities and services supplied to
the Premises, together with any taxes thereon. If any such services are
not separately metered to Lessee, Lessee shall pay a reasonable
proportion, to be determined by Lessor, of all charges jointly metered.
12. ASSIGNMENT AND SUBLETTING. See Addendum 12.
12.1 LESSOR'S CONSENT REQUIRED.
(a) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or encumber (collectively, "ASSIGN OR ASSIGNMENT") or
sublet all or any part of Lessee's interest in this Lease or in the
Premises without Lessor's prior written consent, which consent shall not
be unreasonably withheld or delayed.
(b) A change in the control of Lessee shall constitute an
assignment requiring consent. The transfer, on a cumulative basis, of
twenty-five percent (25%) or more of the voting control of Lessee shall
constitute a change in control for this purpose.
(c) The involvement of Lessee or its assets in any transaction, or
series of transactions (by way of merger, sale, acquisition, financing,
transfer, leveraged buy-out or otherwise), whether or not a formal
assignment or hypothecation of this Lease or Lessee's assets occurs,
which results or will result in a reduction of the Net Worth of Lessee by
an amount greater than twenty-five percent (25%) of such Net Worth as it
was represented at the time of the execution of this Lease or at the time
of the most recent assignment to which Lessor has consented, or as it
exists immediately prior to said transaction constituting such reduction,
whichever was or is greater, shall be considered an assignment of this
Lease to which Lessor may withhold its consent. "NET WORTH OF LESSEE"
shall mean the net worth of Lessee (excluding any guarantors) established
under generally accepted accounting principles.
(d) An assignment or subletting without consent shall be a Default
curable after notice per Paragraph 13.1(c). If Lessee fails to cure such
Default within the applicable cure period, Lessor may either: (i)
terminate this Lease, or (ii) upon thirty (30) days written notice,
increase the monthly Base Rent to one hundred ten percent (110%) of the
Base Rent then in effect. Further, in the event of such Breach and rental
adjustment, (i) the purchase price of any option to purchase the Premises
held by Lessee shall be subject to similar adjustment to one hundred ten
percent (110%) of the price previously in effect, and (ii) all fixed and
non-fixed rental adjustments scheduled during the remainder of the Lease
term shall be increased to One Hundred Ten Percent (110%) of the
scheduled adjusted rent.
(e) Lessee's remedy for any breach of Paragraph 12.1 by Lessor
shall be limited to compensatory damages and/or injunctive relief.
12.2 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.
(a) Regardless of Lessor's consent, any assignment or subletting
shall not: (i) be effective without the express written assumption by
such assignee or sublessee of the obligations of Lessee under this Lease,
(ii) release Lessee of any obligations hereunder, or (iii) alter the
primary liability of Lessee for the payment of Rent or for the
performance of any other obligations to be performed by Lessee.
(b) Lessor may accept Rent or performance of Lessee's obligations
from any person other than Lessee pending approval or disapproval of an
assignment. Neither a delay in the approval or disapproval of such
assignment nor the acceptance of Rent or performance shall constitute a
waiver or estoppel of Lessor's right to exercise its remedies for
Lessee's Default or Breach.
(c) Lessor's consent to any assignment or subletting shall not
constitute a consent to any subsequent assignment or subletting.
(d) In the event of any Default or Breach by Lessee, Lessor may
proceed directly against Lessee, any Guarantors or anyone else
responsible for the performance of Lessee's obligations under this Lease,
including any assignee or sublessee, without first exhausting Lessor's
remedies against any other person or entity responsible therefore to
Lessor, or any security held by Lessor.
(e) Each request for consent to an assignment or subletting shall
be in writing, accompanied by information relevant to Lessor's
determination as to the financial and operational responsibility and
appropriateness of the proposed assignee or sublessee, including but not
limited to the intended use and/or required modification of the Premises,
if any, together with a fee of $1,000 or three percent (3%) of the
current monthly Base Rent applicable to the portion of the Premises which
is the subject of the proposed assignment or sublease, whichever is
greater, as consideration for Lessor's considering and processing said
request. Lessee agrees to provide Lessor with such other or additional
information and/or documentation as may be reasonably requested.
(f) Any assignee of, or sublessee under, this Lease shall, by
reason of accepting such assignment or entering into such sublease, be
deemed to have assumed and agreed to conform and comply with each and
every term, covenant, condition and obligation herein to be observed or
performed by Lessee during the term of said assignment or sublease, other
than such obligations as are contrary to or inconsistent with provisions
of an assignment or sublease to which Lessor has specifically consented
to in writing.
12.3 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. The
following terms and conditions shall apply to any subletting by Lessee of
all or any part of the Premises and shall be deemed included in all
subleases under this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all Rent payable on any sublease, and Lessor may collect such
Rent and apply same toward Lessee's obligations under this Lease;
provided, however, that until a Breach shall occur in the performance of
Lessee's obligations, Lessee may collect said Rent. Lessor shall not, by
reason of the foregoing or any assignment of such sublease, nor by reason
of the collection of Rent, be deemed liable to the sublessee for any
failure of Lessee to perform and comply with any of Lessee's obligations
to such sublessee. Lessee hereby irrevocably authorizes and directs any
such sublessee, upon receipt of a written notice from Lessor stating that
a Breach exists in the performance of Lessee's obligations under this
Lease, to pay to Lessor that portion of the Rent due and to become due
under the sublease demanded in such notice from Lessor, provided that the
amount demanded shall not exceed all amounts then due and payable by
Lessee hereunder, including any past due Rent, as well as current Rent.
Sublessee shall rely upon any such notice from Lessor and shall pay all
Rents demanded by to Lessor without any obligation or right to inquire as
to whether such Breach exists, notwithstanding any claim from Lessee to
the contrary.
(b) In the event of a Breach by Lessee, Lessor may, at its option,
require sublessee to attorn to Lessor, in which event Lessor shall
undertake the obligations of the sublessor under such sublease from the
time of the exercise of said option to the expiration of such sublease;
provided, however, Lessor shall not be liable for any prepaid rents or
security deposit paid by such sublessee to such sublessor or for any
prior Defaults or Breaches of such sublessor.
(c) Any matter requiring the consent of the sublessor under a
sublease shall also require the consent of Lessor.
(d) No sublessee shall further assign or sublet all or any part of
the Premises without Lessor's prior written consent.
(e) Lessor shall deliver a copy of any notice of Default or Breach
by Lessee to the sublessee, who shall have the right to cure the Default
of Lessee within the grace period, if any, specified in such notice. The
sublessee shall have a right of reimbursement and offset from and against
Lessee for any such Defaults cured by the sublessee.
13. DEFAULT; BREACH; REMEDIES. See Addendum 13.1
13.1 DEFAULT; BREACH. A "DEFAULT" is defined as a failure by the
Lessee to comply with or perform any of the terms, covenants, conditions
or rules under this Lease. A "BREACH" is defined as the occurrence of one
or more of the following Defaults, and the failure of Lessee to cure such
Default within any applicable grace period:
(a) The abandonment of the Premises; or the vacating of the Premises
without providing a commercially reasonable level of security, or where
the coverage of the property insurance described in Paragraph 8.3 is
jeopardized as a result thereof, or without providing reasonable
assurances to minimize potential vandalism.
(b) The failure of Lessee to make any payment of Rent or any
Security Deposit required to be made by Lessee hereunder, whether to
Lessor or to a third party, when due, to provide reasonable evidence of
insurance or surety bond, or to fulfill any obligation under this Lease
which endangers or threatens life or property, where such failure
continues for a period of three (3) business days following written
notice to Lessee.
(c) The failure by Lessee to provide (i) reasonable written evidence
of compliance with Applicable Requirements, (ii) the service contracts,
(iii) the rescission of an unauthorized assignment or subletting, (iv) a
Estoppel Certificate, (v) a requested Subordination, (vii) any document
requested under Paragraph 42 (easements), or (viii) any other
documentation or information which Lessor may reasonably require of
Lessee under the terms of this Lease, where any such failure continues
for a period of ten (10) days or, in the case of any of the items set
forth in clauses (i), (ii) or (viii), thirty (30) days following written
notice to Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 40
hereof, other than those described in subparagraphs 13.1(a), (b) or (c),
above, where such Default continues for a period of thirty (30) days
after written notice; provided, however, that if the nature of Lessee's
Default is such that more than thirty (30) days are reasonably required
for its cure, then it shall not be deemed to be a Breach if Lessee
commences such cure within said thirty (30) day period and thereafter
diligently prosecutes such cure to completion.
(e) The occurrence of any of the following events: (i) the making of
any general arrangement or assignment for the benefit of creditors; (ii)
becoming a "DEBTOR" as defined in 11 U.S.C. Section 101 or any successor
statute thereto (unless, in the case of a petition filed against Lessee,
the same is dismissed within sixty (60) days); (iii) the appointment of a
trustee or receiver to take possession of substantially all of Lessee's
assets located at the Premises or of Lessee's interest in this Lease,
where possession is not restored to Lessee within thirty (30) days; or
(iv) the attachment, execution or other judicial seizure of substantially
all of Lessee's assets located at the Premises or of Lessee's interest in
this Lease, where such seizure is not discharged within thirty (30) days;
provided, however, in the event that any provision of this subparagraph
(e) is contrary to any applicable law, such provision shall be of no
force or effect, and not affect the validity of the remaining provisions.
(f) The discovery that any financial statement of Lessee given to
Lessor was materially false.
13.2 REMEDIES. If Lessee fails to perform any of its affirmative
duties or obligations, within ten (10) days after written notice (or in
case of an emergency, without notice), Lessor may, at its option, perform
such duty or obligation on Lessee's behalf, including but not limited to
the obtaining of reasonably required bonds, insurance policies, or
governmental licenses, permits or approvals. The costs and expenses of
any such performance by Lessor shall be due and payable by Lessee upon
receipt of invoice therefor. If any check given to Lessor by Lessee shall
not be honored by the bank upon which it is drawn, Lessor, at its option,
may require all future payments to be made by Lessee to be by cashier's
check. In the event of a Breach, Lessor may, with or without further
notice or demand, and without limiting Lessor in the exercise of any
right or remedy which Lessor may have by reason of such Breach:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease shall terminate and Lessee shall
immediately surrender possession to Lessor. In such event Lessor shall be
entitled to recover from Lessee: (i) the unpaid Rent which had been
earned at the time of termination; (ii) the worth at the time of award of
the amount by which the unpaid rent which would have been earned after
termination until the time of award exceeds the amount of such rental
loss that the Lessee proves could have been reasonably avoided; (iii) the
worth at the time of award of the amount by which the unpaid rent for the
balance of the term after the time of award exceeds the amount of such
rental loss that the Lessee proves could be reasonably avoided; and (iv)
any other amount necessary to compensate Lessor for all the detriment
proximately caused by the Lessee's failure to perform its obligations
under this Lease or which in the ordinary course of things would be
likely to result therefrom, including but not limited to the cost of
recovering possession of the Premises, expenses of reletting, including
necessary renovation and alteration of the Premises, reasonable
attorneys' fees, and that portion of any leasing commission paid by
Lessor in connection with this Lease applicable to the unexpired term of
this Lease. The worth at the time of award of the amount referred to in
provision (iii) of the immediately preceding sentence shall be computed
by discounting such amount at the discount rate of the Federal Reserve
Bank of the District within which the Premises are located at the time of
award plus one percent (1%). Efforts by Lessor to mitigate damages caused
by Lessee's Breach of this Lease shall not waive Lessor's right to
recover damages under Paragraph 12. If termination of this Lease is
obtained through the provisional remedy of unlawful detainer, Lessor
shall have the right to recover in such proceeding any unpaid Rent and
damages as are recoverable therein, or Lessor may reserve the right to
recover all or any part thereof in a separate suit. If a notice and grace
period required under Paragraph 13.1 was not previously given, a notice
to pay rent or quit, or to perform or quit given to Lessee under the
unlawful detainer statute shall also constitute the notice required by
Paragraph 13.1. In such case, the applicable grace period required by
Paragraph 13.1 and the unlawful detainer statute shall run concurrently,
and the failure of Lessee to cure the Default within the greater of the
two such grace periods shall constitute both an unlawful detainer and a
Breach of this Lease entitling Lessor to the remedies provided for in
this Lease and/or by said statute.
(b) Continue the Lease and Lessee's right to possession and recover
the Rent as it becomes due, in which event Lessee may sublet or assign,
subject only to reasonable limitations. Acts of maintenance, efforts to
relet, and/or the appointment of a receiver to protect the Lessor's
interests, shall not constitute a termination of the Lessee's right to
possession.
(c) Pursue any other remedy now or hereafter available under the
laws or judicial decisions of the state wherein the Premises are located.
The expiration or termination of this Lease and/or the termination of
Lessee's right to possession shall not relieve Lessee from liability
under any indemnity provisions of this Lease as to matters occurring or
accruing during the term hereof or by reason of Lessee's occupancy of the
Premises.
13.3 INDUCEMENT RECAPTURE. Any agreement for free or abated rent or
other charges, or for the giving or paying by Lessor to or for Lessee of
any cash or other bonus, inducement or consideration for Lessee's
entering into this Lease, all of which concessions are hereinafter
referred to as "INDUCEMENT PROVISIONS," shall be deemed conditioned upon
Lessee's full and faithful performance of all of the terms, covenants and
conditions of this Lease. Upon Breach of this Lease by Lessee, any such
Inducement Provision shall automatically be deemed deleted from this
Lease and of no further force or effect, and any rent, other charge,
bonus, inducement or consideration theretofore abated, given or paid by
Lessor under such an Inducement Provision shall be immediately due and
payable by Lessee to Lessor, notwithstanding any subsequent cure of said
Breach by Lessee. The acceptance by Lessor of rent or the cure of the
Breach which initiated the operation of this paragraph shall not be
deemed a waiver by Lessor of the provisions of this paragraph unless
specifically so stated in writing by Lessor at the time of such
acceptance.
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by
Lessee of Rent will cause Lessor to incur costs not contemplated by this
Lease, the exact amount of which will be extremely difficult to
ascertain. Such costs include, but are not limited to, processing and
accounting charges, and late charges which may be imposed upon Lessor by
any Lender. Accordingly, if any Rent shall not be received by Lessor
within five (5) days after such amount shall be due, then, without any
requirement for notice to Lessee, Lessee shall pay to Lessor a one-time
late charge equal to six percent (6%) of each such overdue amount. The
parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor will incur by reason of such late
payment. Acceptance of such late charge by Lessor shall in no event
constitute a waiver of Lessee's Default or Breach with respect to such
overdue amount, nor prevent the exercise of any of the other rights and
remedies granted hereunder. In the event that a late charge is payable
hereunder, whether or not collected, for three (3) consecutive
installments of Base Rent, then notwithstanding any provision of this
Lease to the contrary, Base Rent shall, at Lessor's option, become due
and payable quarterly in advance.
13.5 INTEREST. Any monetary payment due Lessor hereunder, other than
late charges, not received by Lessor, when due as to scheduled payments
(such as Base Rent) or within thirty (30) days following the date on
which it was due for non-scheduled payment, shall bear interest from the
date when due, as to scheduled payments, or the thirty-first (31st) day
after it was due as to non-scheduled payments. The interest ("INTEREST")
charged shall be equal to the prime rate reported in the Wall Street
Journal as published closest prior to the date when due plus four percent
(4%), but shall not exceed the maximum rate allowed by law. Interest is
payable in addition to the potential late charge provided for in
Paragraph 13.4.
13.6 BREACH BY LESSOR.
(a) NOTICE OF BREACH. Lessor shall not be deemed in breach of this
Lease unless Lessor fails within a reasonable time to perform an
obligation required to be performed by Lessor. For purposes of this
Paragraph, a reasonable time shall in no event be more than thirty (30)
days after receipt by Lessor, and any Lender whose name and address shall
have been furnished Lessee in writing for such purpose, of written notice
specifying wherein such obligation of Lessor has not been performed,
provided, however, that if the nature of Lessor's obligation is such that
more than thirty (30) days are reasonably required for its performance,
then Lessor shall not be in breach if performance is commenced within
such thirty (30) day period and thereafter diligently pursued to
completion.
(b) PERFORMANCE BY LESSEE ON BEHALF OF LESSOR. In the event that
neither Lessor not Lender cures said breach within thirty (30) days after
receipt of said notice, or if having commenced said cure they do not
diligently pursue it to completion, or in the case of an emergency,
without waiting for the 30 day cure period to expire, then Lessee may
elect to cure said breach at Lessee's expense and offset from Rent an
amount equal to two (2) month's Base Rent and to pay an excess of such
expense under protest, reserving Lessee's right to reimbursement from
Lessor. Lessee shall document the cost of said cure and supply said
documentation to Lessor.
14. CONDEMNATION. If the Premises or any portion thereof are taken under
the power of eminent domain or sold under the threat of the exercise of
said power (collectively "CONDEMNATION"), this Lease shall terminate as
to the part taken as of the date the condemning authority takes title or
possession, whichever first occurs. If more than ten percent (10%) of any
building portion of the premises, or more than twenty-five percent (25%)
of the land area portion of the premises not occupied by any building, is
taken by Condemnation. Lessee may, at Lessee's option, to be exercised in
writing within ten (10) days after Lessor shall have given Lessee written
notice of such taking (or in the absence of option, to be exercised in
writing within ten (10) days after Lessor shall have given Lessee written
notice of such taking (or in the absence of such notice, within ten (10)
days after Lessee obtains knowledge that the condemning authority shall
have taken possession) terminate this Lease as of the date the condemning
authority takes such possession. If Lessee does not terminate this Lease
in accordance with the foregoing, this Lease shall remain in full force
and effect as to the portion of the Premises remaining, except that the
Base Rent shall be reduced in proportion to the reduction in utility of
the Premises caused by such Condemnation. Condemnation awards and/or
payments shall be the property of Lessor, whether such award shall be
made as compensation for diminution in value of the leasehold, the value
of the part taken, or for severance damages; provided, however, that
Lessee shall be entitled to any compensation for Lessee's relocation
expenses, loss of business goodwill and/or Trade Fixtures, without regard
to whether or not this Lease is terminated pursuant to the provisions of
this Paragraph. All Alterations and Utility Installations made to the
Premises by Lessee, for purposes of Condemnation only, shall be
considered the property of the Lessee and Lessee shall be entitled to any
and all compensation which is payable therefor. In the event that this
Lease is not terminated by reason of the Condemnation, Lessor shall
repair any damage to the Premises caused by such Condemnation.
15. BROKERS' FEE,
15.3 REPRESENTATIONS AND INDEMNITIES OF BROKER RELATIONSHIP. Lessee
and Lessor each represent and warrant to the other that it has had no
dealings with any person, firm, broker or finder (other than the Brokers,
if any) in connection with this Lease, and that no one other than said
named Brokers is entitled to any commission or finder's fee in connection
herewith. Lessee and Lessor do each hereby agree to indemnify, protect,
defend and hold the other harmless from and against liability for
compensation or charges which may be claimed by any such unnamed broker,
finder or other similar party by reason of any dealings or actions of the
indemnifying Party, including any costs, expenses, attorneys' fees
reasonably incurred with respect thereto.
16. ESTOPPEL CERTIFICATES. See Addendum 16
(a) Each Party (as "RESPONDING PARTY") shall within ten (10) days
after written notice from the other Party (the "REQUESTING PARTY")
execute, acknowledge and deliver to the Requesting Party a statement in
writing in form similar to the then most current "ESTOPPEL CERTIFICATE"
form published by the American Industrial Real Estate Association, plus
such additional information, confirmation and/or statements as may be
reasonably requested by the Requesting Party, or by any prospective
purchaser of the Premises, or by any existing or prospective lender to
Lessor.
(c) If Lessor desires to finance, refinance, or sell the Premises,
or any part thereof, Lessee shall deliver within five (5) business days
after written request by Lessor, to any potential lender or purchaser
designated by Lessor such financial statements as may be reasonably
required by such lender or purchaser, including but not limited to
Lessee's financial statements for the past three (3) years. All such
financial statements shall be received by Lessor and such lender or
purchaser in confidence and shall be used only for the purposes herein
set forth.
17. DEFINITION OF LESSOR. The term "LESSOR" as used herein shall mean
the owner or owners at the time in question of the fee title to the
Premises, or, if this is a sublease, of the Lessee's interest in the
prior lease. In the event of a transfer of Lessor's title or interest in
the Premises or this Lease, Lessor shall deliver to the transferee or
assignee (in cash or by credit) any unused Security Deposit held by
Lessor. Except as provided in Paragraph 15, upon such transfer or
assignment and delivery of the Security Deposit, as aforesaid, the prior
Lessor shall be relieved of all liability with respect to the obligations
and/or covenants under this Lease thereafter to be performed by the
Lessor, and the transferee or assignee shall be responsible for the
performance of the obligations and covenants under this Lease from which
the prior Lessor is relieved. Subject to the foregoing, the obligations
and/or covenants in this Lease to be performed by the Lessor shall be
binding only upon the Lessor as hereinabove defined. Notwithstanding the
above, and subject to the provisions of Paragraph 20 below, the original
Lessor under this Lease, and all subsequent holders of the Lessor's
interest in this Lease shall remain liable and responsible with regard to
the potential duties and liabilities of Lessor pertaining to Hazardous
Substances as outlined in Paragraph 6 above.
18. SEVERABILITY. The invalidity of any provision of this Lease, as
determined by a court of competent jurisdiction, shall in no way affect
the validity of any other provision hereof.
19. DAYS. Unless otherwise specifically indicated to the contrary, the
word "days" as used in this Lease shall mean and refer to calendar days.
20. LIMITATION ON LIABILITY. Subject to the provisions of Paragraph 17
above, the obligations of Lessor under this Lease shall not constitute
personal obligations of Lessor, the individual partners of Lessor or its
or their individual partners, directors, officers or shareholders, and
Lessee shall look to the Premises, and to no other assets of Lessor, for
the satisfaction of any liability of Lessor with respect to this Lease,
and shall not seek recourse against the individual partners of Lessor, or
its or their individual partners, directors, or officers or shareholders,
or any of their personal assets for such satisfaction.
21. TIME OF ESSENCE. Time is of the essence with respect to the
performance of all obligations to be performed or observed by the Parties
under this Lease.
22. NO PRIOR OR OTHER AGREEMENTS; BROKER DISCLAIMER. This Lease contains
all agreements between the Parties with respect to any matter mentioned
herein, and no other prior or contemporaneous agreement or understanding
shall be effective. Lessor and Lessee each represents and warrants to the
Brokers that it has made, and is relying solely upon, its own
investigation as to the nature, quality, character and financial
responsibility of the other Party to this Lease and as to the nature,
quality and character of the Premises. Brokers have no responsibility
with respect thereto or with respect to any default or breach hereof by
either Party. The liability (including court costs and Attorneys' fees),
of any Broker with respect to negotiation, execution, delivery or
performance by either Lessor or Lessee under this Lease or any amendment
or modification hereto shall be limited to an amount up to the fee
received by such Broker pursuant to this Lease; provided, however, that
the foregoing limitation on each Broker's liability shall not be
applicable to any gross negligence or willful misconduct of such Broker.
23. NOTICES.
23.1 NOTICE REQUIREMENTS. All notices required or permitted by this
Lease shall be in writing and may be delivered in person (by hand or by
courier) or may be sent by certified or registered mail or U.S. Postal
Service Express Mail, return receipt requested with postage prepaid, or
by facsimile transmission, and shall be deemed sufficiently given if
served in a manner specified in this Paragraph 23. The addresses noted
adjacent to a Party's signature on this Lease shall be that Party's
address for delivery or mailing of notices. Either Party may be written
notice to the other specify a different address for notice, except that
upon Lessee's taking possession of the Premises, the Premises shall
constitute Lessee's address for notice. A copy of all notices to Lessor
shall be concurrently transmitted to such party or parties at such
addresses as Lessor may from time to time hereafter designate in writing.
See Addendum 23.1
23.2 DATE OF NOTICE. Any notice sent by registered or certified mail,
return receipt requested, shall be deemed given on the date of delivery
shown on the receipt card, or if no delivery date is shown, the postmark
thereon. Notices delivered by United States Express Mail or overnight
courier that guarantee next day delivery shall be deemed given on the
next business day after delivery of the same to the Postal Service or
courier. Notices transmitted by facsimile or similar means shall be
deemed delivered upon completion of legible transmission provided a copy
is also delivered via delivery or mail. If notice is received on a
Saturday, Sunday or legal holiday, it shall be deemed received on the
next business day.
24. WAIVERS. No waiver by Lessor or the Default or Breach of any term,
covenant or condition hereof by Lessee, shall be deemed a waiver of any
other term, covenant or condition hereof, or of any subsequent Default or
Breach by Lessee of the same or of any other term, covenant or condition
hereof. Lessor's consent to, or approval of, any act shall not be deemed
to render unnecessary the obtaining of Lessor's consent to, or approval
of, any subsequent or similar act by Lessee, or be construed as the basis
of an estoppel to enforce the provision or provisions of this Lease
requiring such consent. The acceptance of Rent by Lessor shall not be a
waiver of any Default or Breach by Lessee. Any payment by Lessee may be
accepted by Lessor on account of moneys or damages due Lessor,
notwithstanding any qualifying statements or conditions made by Lessee in
connection therewith, which such statements and/or conditions shall be of
no force or effect whatsoever unless specifically agreed to in writing by
Lessor at or before the time of deposit of such payment.
25. RECORDING. Either Lessor or Lessee shall, upon request of the other,
execute, acknowledge and deliver to the other a short form memorandum of
this Lease for recording purposes. The Party requesting recordation shall
be responsible for payment of any fees applicable thereto.
26. NO RIGHT TO HOLDOVER. Lessee has no right to retain possession of
the Premises or any part thereof beyond the expiration or termination of
this Lease. In the event that Lessee holds over, then the Base Rent shall
be increased to an amount equal to two times the Base Rent applicable
during the month immediately preceding the expiration or termination.
Nothing contained herein shall be construed as consent by Lessor to any
holding over by Lessee.
27. CUMULATIVE REMEDIES. No remedy or election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other
remedies at law or in equity.
28. COVENANTS AND CONDITIONS; CONSTRUCTION OF AGREEMENT. All provisions
of this Lease to be observed or performed by Lessee are both covenants
and conditions. In construing this Lease, all headings and titles are for
the convenience of the parties only and shall not be considered a part of
this Lease. Whenever required by the context, the singular shall include
the plural and vice versa. This Lease shall not be construed as if
prepared by one of the parties, but rather according to its fair meaning
as a whole, as if both parties had prepared it.
29. BINDING EFFECT; CHOICE OF LAW. This Lease shall be binding upon the
parties, their personal representatives, successors and assigns and be
governed by the laws of the State in which the Premises are located. Any
litigation between the Parties hereto concerning this Lease shall be
initiated in the county in which the Premises are located.
30. SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.
30.1 SUBORDINATION. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or
other hypothecation or security device (collectively, "SECURITY DEVICE"),
now or hereafter placed upon the Premises, to any and all advances made
on the security thereof, and to all renewals, modifications, and
extensions thereof. Lessee agrees that the holders of any such Security
Devices (in this Lease together referred to as "Lender") shall have no
liability or obligation to perform any of the obligations of Lessor under
this Lease. Any Lender may elect to have this Lease and/or any Option
granted hereby superior to the lien of its Security Device by giving
written notice thereof to Lessee, whereupon this Lease and such Options
shall be deemed prior to such Security Device, notwithstanding the
relative dates of the documentation or recordation thereof.
30.2 ATTORNMENT. Subject to the non-disturbance provisions of
Paragraph 30.3, Lease agrees to attorn to a Lender or any other party who
acquires ownership of the Premises by reason of a foreclosure of a
Security Device, and that in the event of such foreclosure, such new
owner shall not: (i) be liable for any act or omission of any prior
lessor or with respect to events occurring prior to acquisition of
ownership; (ii) be subject to any offsets or defenses which Lessee might
have against any prior lessor, or (iii) be bound by prepayment of more
than one (1) month's rent.
30.3 NON-DISTURBANCE. With respect to Security Devices entered into by
Lessor after the execution of this Lease, Lessee's subordination of this
Lease shall be subject to receiving a commercially reasonable non-
disturbance agreement (a "NON-DISTURBANCE AGREEMENT") from the Lender
which Non-Disturbance Agreement provides that Lessee's possession of the
Premises, and this Lease, including any options to extend the term
hereof, will not be disturbed so long as Lessee is not in Breach hereof
and attorns to the record owner of the Premises. Further, within sixty
(60) days after the execution of this Lease, Lessor shall use its
commercially reasonable efforts to obtain a Non-Disturbance Agreement
from the holder of any pre-existing Security Device which is secured by
the Premies. In the event that Lessor is unable to provide the Non-
Disturbance Agreement within said sixty (60) days, then Lessee may, at
Lessee's option, directly contact Lessor's lender and attempt to
negotiate for the execution and delivery of a Non-Disturbance Agreement.
30.4 SELF-EXECUTING. The agreements contained in this Paragraph 30
shall be effective without the execution of any further documents;
provided, however, that, upon written request from Lessor or a Lender in
connection with a sale, financing or refinancing of the Premises, Lessee
and Lessor shall execute such further writings as may be reasonably
required to separately document any subordination, attornment and/or Non-
Disturbance Agreement provided for herein.
31. ATTORNEYS' FEES. If any Party or Broker brings an action or
proceeding involving the Premises to enforce the terms hereof or to
declare rights hereunder, the Prevailing Party (as hereafter defined) in
any such proceeding, action, or appeal thereon, shall be entitled to
reasonable attorneys' fees. Such fees may be awarded in the same suit or
recovered in a separate suit, whether or not such action or proceeding is
pursued to decision or judgment. The term, "PREVAILING PARTY" shall
include, without limitation, a Party who substantially obtains or defeats
the relief sought, as the case may be, whether by compromise, settlement,
judgment, or the abandonment by the other Party of its claim or defense.
The attorneys' fees award shall not be computed in accordance with any
court fee schedule, but shall be such as to fully reimburse all
attorneys' fees reasonably incurred. In addition, Lessor shall be
entitled to attorneys' fees, costs and expenses incurred in the
preparation and service of notices of Default and consultations in
connection therewith, whether or not a legal action is subsequently
commenced in connection with such Default or resulting Breach.
32. LESSOR'S ACCESS; SHOWING PREMISES; REPAIRS. Lessor and Lessor's
agents and any Lender and its agents shall have the right to enter the
Premises at any time, in the case of an emergency, and otherwise at
reasonable times for the purpose of showing the same to prospective
purchasers, lenders, or lessees inspecting the Premises, and making such
alterations, repairs, improvements or additions to the Premises as Lessor
may deem necessary. All such activities shall be without abatement of
rent or liability to Lessee. Lessor may at any time place on the Premises
any ordinary "FOR SALE" signs and Lessor may during the last six (6)
months of the term hereof place on the Premises any ordinary "FOR LEASE"
signs. Lessee may at any time place on or about the Premises any ordinary
"FOR SUBLEASE" sign. See Addendum 32.
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted, any
auction upon the Premises without Lessor's prior written consent. Lessor
shall not be obligated to exercise any standard of reasonableness in
determining whether to permit an auction.
34. SIGNS. Except for ordinary "For Sublease" signs, Lessee shall not
place any sign upon the Premises without Lessor's prior written consent,
which consent shall not be unreasonably withheld or delayed. All signs
must comply with all Applicable Requirements.
35. TERMINATION; MERGER. Unless specifically stated otherwise in writing
by Lessor, the voluntary or other surrender of this Lease by Lessee, the
mutual termination or cancellation hereof, or a termination hereof by
Lessor for Breach by Lessee, shall automatically terminate any sublease
or lesser estate in the Premises; provided, however, that Lessor may
elect to continue any one or all existing subtenancies. Lessor's failure
within ten (10) days following any such event to elect to the contrary by
written notice to the holder of any such lesser interest, shall
constitute Lessor's election to have such event constitute the
termination of such interest.
36. CONSENTS. Except as otherwise provided herein, wherever in this
Lease the consent of a Party is required to an act by or for the other
Party, such consent shall not be unreasonably withheld or delayed.
Lessor's actual reasonable costs and expenses (including but not limited
to architects', attorneys', engineers' and other consultants' fees)
incurred in the consideration of, or response to, a request by Lessee for
any Lessor consent, including but not limited to consents to an
assignment, a subletting or the presence or use of a Hazardous Substance,
shall be paid by Lessee upon receipt of an invoice and supporting
documentation therefor. Lessor's consent to any act, assignment or
subletting shall not constitute an acknowledgment that no Default or
Breach by Lessee of this Lease exists, nor shall such consent be deemed a
waiver of any then existing Default or Breach, except as may be otherwise
specifically stated in writing by Lessor at the time of such consent. The
failure to specify herein any particular condition to Lessor's consent
shall not preclude the imposition by Lessor at the time of consent of
such further or other conditions as are then reasonable with reference to
the particular matter for which consent is being given. In the event that
either Party disagrees with any determination made by the other hereunder
and reasonably requests the reasons for such determination, the
determining party shall furnish its reasons in writing and in reasonable
detail within ten (10) business days following such request.
38. QUIET POSSESSION. Subject to payment by Lessee of the Rent and
performance of all of the covenants, conditions and provisions on
Lessee's part to be observed and performed under this Lease, Lessee shall
have quiet possession and quiet enjoyment of the Premises during the term
hereof.
39. OPTIONS. See Addendum 39.
39.1 DEFINITION. "OPTION" shall mean: (a) the right to extend the term
of or renew this Lease or to extend or renew any lease that Lessee has on
other property of Lessor; (b) the right of first refusal or first offer
to lease either the Premises or other property of Lessor; (c) the right
to purchase or the right of first refusal to purchase the Premises or
other property of Lessor.
39.2 OPTIONS PERSONAL TO ORIGINAL LESSEE. Each Option granted to
Lessee in this Lease is personal to the original Lessee, and cannot be
assigned or exercised by anyone other than said original Lessee and only
while the original Lessee is in full possession of the Premises and, if
requested by Lessor, with Lessee certifying that Lessee has no intention
of thereafter assigning or subletting.
39.3 MULTIPLE OPTIONS. In the event that Lessee has any multiple
Options to extend or renew this Lease, a later Option cannot be exercised
unless the prior Options have been validly exercised.
39.4 EFFECT OF DEFAULT ON OPTIONS.
(a) Lessee shall have no right to exercise an Option: (i) during
the period commencing with the giving of any notice of Default and
continuing until said Default is cured, (ii) during the period of time
any Rent is unpaid (without regard to whether notice thereof is given
Lessee), (iii) during the time Lessee is in Breach of this Lease, or (iv)
in the event that Lessee has been given three (3) or more notices of
separate Default, whether or not the Defaults are cured, during the
twelve (12) month period immediately preceding the exercise of the
Option.
(b) The period of time within which an Option may be exercised
shall not be extended or enlarged by reason of Lessee's inability to
exercise an Option because of the provisions of Paragraph 39.4(a).
(c) An Option shall terminate and be of no further force or effect,
notwithstanding Lessee's due and timely exercise of the Option, if, after
such exercise and prior to the commencement of the extended term, (i)
Lessee fails to pay Rent for a period of thirty (30) days after such Rent
becomes due (without any necessity of Lessor to give notice thereof), or
(ii) Lessor gives to Lessee three (3) or more notices of separate Default
during any twelve (12) month period, whether or not the Defaults are
cured.
40. MULTIPLE BUILDINGS. If the Premises are a part of a group of
buildings controlled by Lessor, Lessee agrees that it will observe all
reasonable rules and regulations which Lessor may make from time to time
for the management, safety, and care of said properties, including the
care and cleanliness of the grounds and including the parking, loading
and unloading of vehicles, and that Lessee will pay its fair share of
common expenses incurred in connection therewith.
41. SECURITY MEASURES. Lessee hereby acknowledges that the rental
payable to Lessor hereunder does not include the cost of guard service or
other security measures, and that Lessor shall have no obligation
whatsoever to provide same. Lessee assumes all responsibility for the
protection of the Premises, Lessee, its agents and invitees and their
property from the acts of third parties, except those resulting from
Lessor's willful misconduct or gross negligence.
42. RESERVATIONS. Lessor reserves to itself the right, from time to
time, to grant, without the consent or joinder of Lessee, such easements,
rights and dedications that Lessor deems necessary, and to cause the
recordation of parcel maps and restrictions, so long as such easements,
rights, dedications, maps and restrictions do not unreasonably interfere
with the use of the Premises by Lessee. Lessee agrees to sign any
documents reasonably requested by Lessor to effectuate any such easement
rights, dedication, map or restrictions.
43. PERFORMANCE UNDER PROTEST. If any time a dispute shall arise as to
any amount or sum of money to be paid by one Party to the other under the
provisions hereof, the Party against whom the obligation to pay the money
is asserted shall have the right to make payment "under protest" and such
payment shall not be regarded as a voluntary payment and there shall
survive the right on the part of said Party to institute suit for
recovery of such sum. If it shall be adjudged that there was no legal
obligation on the part of said Party to pay such sum or any part thereof,
said Party shall be entitled to recover such sum or so much thereof as it
was not legally required to pay.
44. AUTHORITY. If either Party hereto is a corporation, trust, limited
liability company, partnership, or similar entity, each individual
executing this Lease on behalf of such entity represents and warrants
that he or she is duly authorized to execute and deliver this Lease on
its behalf. Each party shall, within thirty (30) days after request,
deliver to the other party satisfactory evidence of such authority.
45. CONFLICT. Any conflict between the printed provisions of this Lease
and the typewritten or handwritten provisions shall be controlled by the
typewritten or handwritten provisions.
46. OFFER. Preparation of this Lease by either Party or their agent and
submission of same to the other Party shall not be deemed an offer to
lease to the other Party. This Lease is not intended to be binding until
executed and delivered by all Parties hereto. See Addendum 46.
47. AMENDMENTS. This Lease may be modified only in writing, signed by
the Parties in interest at the time of the modification.
48. MULTIPLE PARTIES. If more than one person or entity is named herein
as either Lessor or Lessee, such multiple Parties shall have joint and
several responsibility to comply with the terms of this Lease.
49. MEDIATION AND ARBITRATION OF DISPUTES. An Addendum requiring the
Mediation and/or the Arbitration of all disputes between the Parties
and/or Brokers arising out of this Lease [ ] IS [x] IS NOT attached to
this Lease.
50. See Addendum 50.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH
TERM AND PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE
SHOW THEIR INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY
AGREE THAT, AT THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE
ARE COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF
LESSOR AND LESSEE WITH RESPECT TO THE PREMISES.
ATTENTION: NO REPRESENTATION OR RECOMMENDATION IS MADE BY THE AMERICAN
INDUSTRIAL REAL ESTATE ASSOCIATION OR BY ANY BROKER AS TO THE LEGAL
SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS LEASE OR THE
TRANSACTION TO WHICH IT RELATES. THE PARTIES ARE URGED TO:
1. SEEK ADVICE OF COUNSEL AS TO THE LEGAL AND TAX CONSEQUENCES OF THIS
LEASE. 2. RETAIN APPROPRIATE CONSULTANTS TO REVIEW AND INVESTIGATE THE
CONDITION OF THE PREMISES. SAID INVESTIGATION SHOULD INCLUDE BUT NOT BE
LIMITED TO: THE POSSIBLE PRESENCE OF HAZARDOUS SUBSTANCES, THE ZONING OF
THE PREMISES, THE STRUCTURAL INTEGRITY, THE CONDITION OF THE ROOF AND
OPERATING SYSTEMS, AND THE SUITABILITY OF THE PREMISES FOR LESSEE'S
INTENDED USE.
WARNING: IF THE PREMISES IS LOCATED IN A STATE OTHER THAN CALIFORNIA,
CERTAIN PROVISIONS OF THE LEASE MAY NEED TO BE REVISED TO COMPLY WITH THE
LAWS OF THE STATE IN WHICH THE PREMISES IS LOCATED.
The parties hereto have executed this Lease at the place and on the dates
specified above their respective signatures.
Executed at: Executed at:
on: on:
By LESSOR: G&I WALSH LLC, By LESSEE: EXODUS COMMUNICATIONS, INC.
a Delaware limited liability
company
By: C&I Investment Walsh LLC, a Delaware corporation
a Delaware limited By: /s/ Robert V. Sanford III
liability company, Name Printed: Robert V. Sanford III
its managing member Title: VP Operations
By: [SIGNATURE ILLEGIBLE] By: [SIGNATURE ILLEGIBLE]
Name: [ILLEGIBLE] Name Printed: [ILLEGIBLE]
Title: President Title: [ILLEGIBLE]
Address: c/o Landmark Asset Address: 2831 Mission College
Management Group, Boulevard, Santa Clara, CA
95051 23422 Mill Creek Drive,
Suite 125, Laguna Hills, CA 92653
Telephone: (949) 830-7616 Telephone: (408) 346-2220
Facsimile: (949) 472-9342 Facsimile: (408) 346-2206
Federal ID No. Federal ID No.
<PAGE>
ADDENDUM TO STANDARD
INDUSTRIAL/COMMERCIAL SINGLE-LESSEE LEASE - NET
THIS ADDENDUM (this "Addendum") is attached to and made a part
of that certain Standard Industrial/Commercial Single-Lessee
Lease - Net, dated January 29, 1999 (the "Lease"), by and between
G&I WALSH LLC, a Delaware limited liability company ("Lessor"), and
EXODUS COMMUNICATIONS, INC., a Delaware corporation ("Lessee"). To
the extent any provisions of this Addendum are inconsistent with
the provisions of the Lease, the terms of this Addendum shall
prevail.
1.5 Increases of Base Rent. Effective as of each February 1
during the Term, commencing with February 1, 2005, the monthly Base
Rent payable under the Lease shall be increased as follows:
Increase Date Monthly Base Rent
2/1/2005 $121,539.00
2/1/2006 $128,238.00
2/1/2007 $133,980.00
2/1/2008 $140,679.00
1.7 Letter of Credit for Security Deposit.
(a) Upon execution of this Lease, Lessee shall deliver to
Lessor the Letter of Credit described below as security for
Lessee's performance of all of Lessee's covenants and obligations
under this Lease; provided, however, that neither the Letter of
Credit nor any Letter of Credit Proceeds (as defined below) shall
be deemed an advance rent deposit or an advance payment of any
other kind, or a measure of Lessor's damages upon Lessee's default.
The Letter of Credit shall be maintained in effect from the date
hereof through the date which is one hundred twenty (120) days
after the Expiration Date, as the same may be extended in
accordance with the provisions of this Lease, provided that upon
Lessee's surrender of the Premises at the expiration of the Term,
Lessor and Lessee shall endeavor to determine as soon as
practicable any amounts owing by Lessee on account of its
obligation to restore the Premises, and within five (5) Business
Days after payment of such amount (and any other amounts owing to
Lessor) and Lessee's fulfillment of any other obligations to
Lessor, Lessor shall return to Lessee the Letter of Credit and any
Letter of Credit Proceeds then held by Lessor (other than those
held for application by Lessor as provided below). Lessor shall
not be required to segregate the Letter of Credit Proceeds from its
other funds, and in no event shall Letter of Credit Proceeds or any
portion thereof be deemed to be held in trust for Lessee. No
interest shall accrue or be payable to Lessee with respect Letter
of Credit Proceeds. Lessor may (but shall not be required to) draw
upon the Letter of Credit and use the proceeds therefrom (the
"Letter of Credit Proceeds") or any portion thereof to cure any
Breach under this Lease or to compensate Lessor for any damage
Lessor incurs as a result of Lessee's failure to perform any of its
obligations hereunder, it being understood that any use of the
Letter of Credit Proceeds shall not constitute a bar or defense to
any of Lessor's remedies set forth in Paragraph 13 below. In such
event and upon written notice from Lessor to Lessee specifying the
amount of the Letter of Credit Proceeds so utilized by Lessor and
the particular purpose for which such amount was applied, Lessee
shall immediately deliver to Lessor an amendment Letter of Credit
or a replacement Letter of Credit in an amount equal to one hundred
percent (100%) of the amount specified below. Lessee's failure to
deliver such replacement Letter of Credit to Lessor within five (5)
business days of Lessor's notice shall constitute a Breach
hereunder. If Lessee is not in default at the expiration or
termination of this Lease, within one hundred twenty (120) days
after such expiration or termination, or such earlier date as
provided above, Lessor shall return to Lessee the Letter of Credit
or the balance of the Letter of Credit Proceeds then held by
Lessor; provided, however, that in no event shall any such return
be construed as an admission by Lessor that Lessee has performed
all of its obligations hereunder. No Lender (as defined in
Paragraph 30.1), nor any purchaser at any judicial or private
foreclosure sale of the Premises or any portion thereof, shall be
responsible to Lessee for such Letter of Credit or any Letter of
Credit Proceeds unless such holder or purchaser shall have actually
received the same.
(b) As used herein, Letter of Credit shall mean an
unconditional, irrevocable letter of credit (hereinafter referred
to as the "Letter of Credit") issued by a major "money center"
bank satisfactory to Lessor in its sole and absolute discretion
(the "Bank"), drawings under which may be made at an office of the
Bank located in either New York, New York, or San Francisco,
California, or Los Angeles, California, naming Lessor as
beneficiary, in the amounts set forth below, and otherwise in form
and substance satisfactory to Lessor. The initial amount of the
Letter of Credit shall be Two Hundred Thousand Dollars
($200,000.00) during the period from the execution of this Lease
through May 31, 2003; not later than June 1, 2003, the amount of
the Letter of credit shall be increased to Three Hundred Thousand
Dollars ($300,000.00); and not later than June 1, 2004, the amount
of the Letter of Credit shall be increased to Six Hundred Thousand
Dollars ($600,000.00), and shall be maintained in said amount for
so long as the Letter of Credit is required to be maintained
pursuant to subparagraph (a), above. In addition, should the
Agreed Use be amended to accommodate a material change in the
business of Lessee or to accommodate a sublessee or assignee,
Lessee shall, upon thirty (30) days' written notice from Lessor,
cause the amount of the Letter of Credit to be increased to an
amount necessary, in Lessor's reasonable judgment, to account for
any increased wear and tear that the Premises may suffer as a
result thereof. Furthermore, if a change in control of Lessee
occurs during the term of this Lease or the Prior Sublease (as
defined in Section 2.2 of this Addendum), and following such change
in control, (1) Lessee is not a publicly traded company, and
(2) the financial condition of Lessee is, in Lessor's reasonable
judgment, significantly reduced, Lessee shall, upon thirty days'
written notice from Lessor, cause the amount of the Letter of
Credit to be increased, effective on the later to occur of the
expiration of thirty (30) days after Lessor gives such notice, or
the thirtieth (30th) day prior to the Commencement Date, to an
amount, which, in Lessor's reasonable judgment, is commercially
reasonable based on such change in financial condition. The Letter
of Credit shall be for an initial term of not less than one year
and shall provide: (i) that Lessor may make partial and multiple
draws thereunder, up to the face amount thereof, (ii) that Lessor
may draw upon the Letter of Credit up to the full amount thereof,
as determined by Lessor, and the Bank will pay to Lessor the amount
of such draw upon receipt by the Bank of a sight draft signed by
Lessor and accompanied by a written certification from Lessor to
the Bank stating either: (A) that a Breach has occurred and is
continuing under this Lease or (B) that Lessor has not received
notice from the Bank that the Letter of Credit will be renewed by
the Bank for at least one (1) year beyond the then applicable
expiration date and Lessee has not furnished Lessor with a
replacement Letter of Credit as hereinafter provided; and (iii)
that, in the event of Lessor's assignment or other transfer of its
interest in this Lease, the Letter of Credit shall be freely
transferable by Lessor, without charge and without recourse, to the
assignee or transferee of such interest and the Bank shall confirm
the same to Lessor and such assignee or transferee. The Letter of
Credit shall further provide that a draw thereon pursuant to clause
(ii)(B) above may only be made during the thirty (30) day period
preceding the then applicable expiration date of the Letter of
Credit. In the event that no later than thirty (30) days prior to
then applicable expiration date of the Letter of Credit, neither
(1) the Bank shall have notified Lessor that the Letter of Credit
will be renewed for at least one (1) year beyond the then
applicable expiration date, nor (2) Lessee shall have delivered to
Lessor a replacement Letter of Credit in the amount required
hereunder and otherwise meeting the requirements set forth above,
then Lessor shall be entitled to draw on the Letter of Credit as
provided above, and shall hold the proceeds of such draw as Letter
of Credit Proceeds pursuant to subparagraph (a) above and
Paragraph 5 of the Lease, provided that such drawing shall not
constitute a waiver of Lessor's right to declare a Breach of the
Lease pursuant to subparagraph 13.1(c) of this Addendum.
(c) At any time during the Term, Lessee may replace any
Letter of Credit provided hereunder with another Letter of Credit
meeting the requirements hereunder, and Lessor shall cooperate in
arranging a simultaneous exchange of such Letters of Credit.
2.2 Lessee in Possession Under Sublease; Premises Leased "As-
Is." The parties acknowledge that immediately prior to the
Commencement Date of the Term of this Lease (also referred to
sometimes in this Lease as the "Start Date"), Lessee shall have
been in possession of a portion of the Premises consisting of an
agreed rentable area of 85,200 square feet, since February 1, 1999,
pursuant to a sublease agreement between Talus Corporation, a
California corporation, formerly known as Scientific Custom Metal
Products International, Inc. ("Prior Lessee"), as sublessor, and
Lessee, as sublessee, made with the consent of Lessor (the "Prior
Sublease"). In addition, except in the event of Early Commencement
(as defined in Addendum Paragraph 3.1) of the Term which occurs
prior to the termination of the ACC Sublease (as defined in
Addendum Paragraph 3.1), Lessee shall also have been in possession
of the remaining portion of the Premises (consisting of the ACC
Space, as defined in Addendum Paragraph 3.1) immediately prior to
the Commencement Date, pursuant to the Prior Sublease. The lease
pursuant to which Prior Lessee currently leases the Premises from
Lessor, as the same may be amended from time to time, is referred
to herein as the "Prior Master Lease." Accordingly, the lease of
the Premises to Lessee pursuant to this Lease shall be on an "AS-
IS, WITH ALL FAULTS" basis. Lessor makes no representation or
warranty of any nature to Lessee with respect to the Premises or
any part, element or component thereof, including, but not limited
to, electrical, plumbing, fire sprinkler, life safety, lighting, or
heating ventilating and air conditioning ("HVAC") systems, loading
doors, roof, exterior walls, foundations or other structural
elements.
3.1 Condition to Commencement.
A. It shall be a condition to the commencement of the Term
of this Lease that Lessee shall not have defaulted under the Prior
Sublease beyond the expiration of any applicable cure period, and
that the Prior Sublease shall not have terminated for any reason
prior to the scheduled expiration date of May 31, 2004, except as
provided below in this Addendum Paragraph 3.1.
B. Notwithstanding the provisions of subparagraph A of this
Addendum Paragraph 3.1, in the event that the Prior Sublease is
terminated solely as a result of the termination of the Prior
Master Lease by Lessor due to a default of the Prior Lessee under
the Prior Master Lease, then so long as Lessee is not then in
default under the terms of the Prior Sublease, and no event shall
have occurred and be continuing which, under the terms of the Prior
Sublease would constitute a default of Lessee thereunder after the
giving of notice or passage of time, or both, then the Original
Term of this Lease shall commence immediately upon the termination
of the Prior Master Lease and Prior Sublease ("Early
Commencement"). In the event of Early Commencement, the
Commencement Date hereunder shall be adjusted accordingly, but the
Expiration Date shall not be changed, and the Monthly Base Rent for
any period of the Original Term occurring prior to the originally
scheduled Commencement Date (i.e., June 1, 2004) due to Early
Commencement shall be determined for the applicable period in
accordance with the following schedule, subject to subparagraph C
of this Addendum Paragraph 3.1:
Starting Date Ending Date Monthly Base Rent
2/1/1999 1/31/2000 $90,915.00
2/1/2000 1/31/2001 $95,700.00
2/1/2001 1/31/2002 $100,485.00
2/1/2002 1/31/2003 $105,270.00
2/1/2003 1/31/2004 $110,055.00
2/1/2004 5/31/2004 $115,797.00
C. The parties acknowledge that upon the commencement of
the Prior Sublease, and for a term continuing through April 30,
2002, a portion of the Premises consisting of an agreed rentable
area of 10,500 square feet (the "ACC Space") is being subleased by
Prior Lessee to ACC Microelectronics Corporation ("ACC"), pursuant
to a Standard Office Lease-Gross, between Prior Lessee and ACC,
dated April 25, 1997 (the "ACC Sublease"). If Early Commencement
of this Lease occurs prior to April 30, 2002, then unless Lessee
notifies Lessor within five (5) business days after Lessee's
receipt of notice of Early Commencement of this Lease from Lessor,
that Lessee desires to leave ACC in possession of the ACC Space,
(1) Lessor shall commence commercially reasonable efforts to evict
ACC from the ACC Space, at Lessor's sole cost and expense,
(2) Lessor shall be entitled to all rent or other compensation from
ACC with respect to ACC's occupancy from and after the Commencement
Date (as determined based on Early Commencement) until the date
Lessor delivers the ACC Space to Lessee, and (3) Lessee shall be
entitled to a credit against Monthly Base Rent payable under the
Lease for the period of time from and after the Commencement Date
(as determined based on Early Commencement) until the date Lessor
delivers the ACC Space to Lessee determined in accordance with the
following schedule (with the amounts shown below prorated for any
partial month):
[The remainder of this page is intentionally left blank]
Amount of
Monthly Credit
Against Monthly
Base Rent
Attributable to
Starting Date Ending Date ACC Space
2/1/1999 2/28/1999 $8,640.00
3/1/1999 2/29/2000 $9,072.00
3/1/2000 2/28/2001 $9,526.00
3/1/2001 2/28/2002 $10,002.00
3/1/2002 4/30/2002 $10,502.00
In the alternative, if Lessee notifies Lessor within five (5)
business days after Lessee's receipt of notice of Early
Commencement of this Lease from Lessor, that Lessee desires to
leave ACC in possession of the ACC Space, then (1) Lessee shall be
liable for the full amount of Monthly Base Rent determined pursuant
to subparagraph B of this Addendum Paragraph 3.1 from the
Commencement Date (as determined based on Early Commencement), and
(2) Lessee shall enter into a sublease with ACC for ACC to remain
in possession of the ACC Space, subject to Paragraph 12 of the
Lease provided, that Addendum Paragraph 12.C shall not be
applicable to any portion of the term of any sublease of the ACC
Space to ACC occurring prior to May 1, 2002, and provided, further,
that if requested to do so by Lessee, Lessor shall assign to
Lessee, without any representation or warranty of any nature, its
rights, if any, under the ACC Sublease.
D. In addition, in the event of Early Commencement,
notwithstanding the provisions of subparagraph 1.7(b) of this
Addendum, above, Lessee shall cause the amount of the Letter of
Credit to be increased to Six Hundred Thousand Dollars
($600,000.00), within thirty (30) days after the Commencement Date
(as determined pursuant to this Addendum Paragraph 3.1 based on
Early Commencement), and the Letter of Credit shall be maintained
in said amount for so long as the Letter of Credit is required to
be maintained pursuant to subparagraph 1.7(a) of this Addendum 1.7.
6.2(a) Consent to Diesel Fuel Tank(s). Lessor hereby consents
to the installation by Lessee of one or more above-ground diesel
fuel tanks at the Premises, provided that such installation shall
be in compliance with all Applicable Requirements, and Lessee shall
obtain Lessor's prior approval of the precise location thereof, and
of the protective enclosures or encasements thereof, which approval
shall not be unreasonably withheld or delayed.
6.2(g) Limitations on Lessor's Termination Option Under
Paragraph 6.2(g); Lessee's Termination Option. Notwithstanding any
provision of subparagraph 6.2(g), Lessor shall not be permitted to
exercise the termination option under clause (ii) of
subparagraph 6.2(g), (1) if Lessor is subject to an order of a
governmental agency with jurisdiction over the Hazardous Substance
Condition requiring Lessor to remediate the same, unless such
remediation cannot practicably be accomplished with Lessee
remaining in possession of the Premises, or (2) unless in Lessor's
reasonable judgment, continued occupancy of the Premises by Lessee
without remediation of the Hazardous Substance Condition poses a
risk of potential liability to Lessor. Furthermore, and
notwithstanding any provision of subparagraph 6.2(g), Lessor shall
be under no duty to remediate any Hazardous Substance Condition
except to the extent Lessor is subject to an order of a
governmental agency with jurisdiction over the Hazardous Substance
Condition requiring Lessor to remediate the same. To the extent
Lessor is subject to an order of a governmental agency with
jurisdiction over the Hazardous Substance Condition requiring
Lessor to remediate the same, Lessor shall diligently proceed with
such remediation, in accordance with any remedial action plan
approved by the appropriate governmental agency(ies). In the event
that in the opinion of the environmental consultant hired by Lessor
to oversee the remediation, the remediation cannot practicably be
completed without Lessee vacating the Premises for a period which
will exceed six (6) months, Lessee shall have the option to
terminate this Lease by giving notice to Lessor within thirty (30)
days after Lessee is notified by Lessor that the remediation cannot
practicably be completed without Lessee vacating the Premises for a
period which will exceed six (6) months (which notification shall
include notice of the date Lessor requires Lessee to vacate the
Premises for such remediation, which date shall not be earlier than
six(6) months after the date of such notification, except to the
extent it is reasonably necessary for Lessor to commence such
remediation on an earlier date in order to comply with any order of
a governmental agency requiring Lessor to remediate the same,
including any remedial action plan approved by the appropriate
governmental agency(ies)), such termination to be effective upon
the date set forth in Lessor's notice that Lessor requires Lessee
to vacate the Premises.
7.1 Additional Provisions Applicable to Paragraph 7.1. As used
in the Lease, the term "Prime Rate" means the prime rate of
interest published in the Wall Street Journal on the first day of
the month in which the applicable replacement Basic Element is
installed at the property (or the first day of such month on which
the Wall Street Journal is published), provided that if a range of
interest rates is published for the prime rate on such day, the
highest rate in such range shall be used. In the event that the
generally accepted accounting principles specifies a range of time
for the useful life of any Basic Element which is replaced, the
shortest time allowed under generally accepted accounting
principles shall be used for the amortization period under
Paragraph 7.1 of the Lease.
7.3 Additional Provisions Applicable to Paragraph 7.3(a). The
following sentences are added to the end of Paragraph 7.3(a) of the
Lease: "In addition, Lessee may install satellite dishes, not to
exceed two (2) feet in diameter, on the roof of the Building only,
without Lessor's consent, but upon notice to Lessor, provided that
such satellite dishes are installed behind a roof screen, are not
visible from the street, and are installed in compliance with
Applicable Law. If Lessee wishes to use other satellite dishes
and/or install satellite dishes in any other manner or location,
such installation shall be in compliance with Applicable Law, and
shall not be made without Lessor's prior written approval of such
installation, which approval shall not be unreasonably withheld or
delayed." Lessor hereby consents to Lessee making and/or
installing upon commencement of the term of the Prior Sublease, the
Alterations, Utility Installations and Trade Fixtures shown on the
plans and specifications set forth on Exhibit A to this Lease. In
addition, Lessor shall not unreasonably withhold or delay the
granting of its consent to future Alterations, Utility
Installations or Trade Fixtures which are consistent with the
Alterations, Utility Installations or Trade Fixtures shown on said
plans and specifications. Lessor shall not unreasonably withhold
or delay the granting of its consent to the installation by Lessee
of security fencing which will in part enclose the Building,
provided that such installation shall be in compliance with
Applicable Requirements, and Lessee shall obtain Lessor's prior
written approval of the precise location, height and type thereof.
Lessee agrees that reasonable considerations in determining such
approval shall include, but not be limited to, whether such
security fencing unreasonably interferes with the use or occupancy
(including parking, ingress and egress) of 2403 Walsh Avenue or its
marketability to prospective tenants or subtenants.
7.4 Additional Provisions Applicable to Paragraph 7.4. To the
extent any item installed at, or any alteration or modification
made to, the Premises by Lessee during the term of the Prior
Sublease would fall within the definitions of any of "Utility
Installations," Trade Fixtures," "Alterations" or "Lessee Owned
Alterations and/or Utility Installations" if the same were
installed or made during the term of this Lease, then for all
purposes of this Lease, including but not limited to,
Paragraph 7.4, the same shall be deemed to constitute "Utility
Installations," Trade Fixtures," "Alterations" or "Lessee Owned
Alterations and/or Utility Installations," as applicable, under
this Lease, except that if Lessor's consent to the same was either
obtained or not required under the terms of the Prior Sublease,
then no further consent to the same shall be required under
Paragraph 7.3 of this Lease. The following provisions are added at
the end of Paragraph 7.4(c): "Without limiting the generality of
the foregoing, prior to the last day of the Lease term or any
earlier termination date, and subsequent to the removal of all
satellite dishes and other equipment which Lessee is entitled or
required to remove from the roof upon the termination of this
Lease, Lessee shall replace the roof of the Premises, and the
replacement roof shall comply with the specifications set forth on
Exhibit B to this Lease." Notwithstanding any provisions of
subparagraph 7.4(a) to the contrary, but subject to the final
sentence of this Addendum Paragraph 7.4, Lessor acknowledges that
the following items installed at the Premises shall at all times
during the term of this Lease be and remain the Property of Lessee,
and Lessee shall have the right to remove the same upon the
expiration of the term of the Lease, subject to Lessee's
obligations under subparagraph 7.4(c):
(a) Permanent and temporary generator systems including
enclosures and fuel tanks with the associated
electronic and manual switch gear.
(b) Independent, stand-alone air-conditioning units,
provided that following the removal of such units
the Building has a fully functioning HVAC system
adequate in Lessor's sole judgment for general
office purposes.
(c) Raised Flooring, Racking, Cage materials, cabinets
and patch panels.
(d) UPS Battery Systems including electrical switch
gear.
(e) FM200 fire suppression canisters, piping and
nozzles.
(f) VESDA or smoke sensor stations in ceiling or floor
area.
(g) Inside or outside security cameras, access card
reader stations, VCR, multiplexer, monitors and
computers.
(h) Partition and conference room furniture systems and
freestanding, cabinets, storage units.
(i) Telephone and voice mail system with desk stations
and receptionist, computers, servers, printers,
phone sets.
(j) Fiber Muxes or other Telco equipment installed in
MPOE rooms.
(k) Emergency distribution board and telephone
backboard with connectors.
(l) Maintenance bypass electronic and manual switch
gear.
(m) Kitchen appliances like microwaves, refrigerators
and vending machines.
(n) Console monitors, screen projection and screens in
command center.
(o) Bulletproof/resistant glass, provided that removal
of the same shall be conditioned upon replacement
of the openings with other glazing suitable in
Lessor's reasonable judgment.
(p) Satellite dishes or other communications equipment.
(q) Electrical distribution equipment consisting of an
automatic transfer switch, parallel switch and
bypass unit, parallel UPS Units and several power
distribution units installed inside the Building by
Lessee, inward from the most inward point(s) of
connection to all transformers, switches, meters
and other electrical distribution equipment
installed by the public utility providing power to
the Building. The parties acknowledge that Lessee
intends to request that the City of Santa Clara
Power and Electric Company to add two new 3000 AMP
services to the Building, including two
transformers placed on the exterior of the Building
(one for each 3000 AMP service), and one or more
power switches and metering boxes inside the
Building, which are not part of the electrical
distribution equipment that Lessee is entitled to
remove pursuant to this Addendum Paragraph 7.4.
(r) Customer and vendor equipment and related materials
of the type listed above in this Addendum
Paragraph 7.4.
(s) Lessee, Lessee Customer and Lessee Vendor personal
property which is not attached to the Premises.
(t) Any Trade Fixtures similar or related to the
foregoing items that was installed by or for Lessee
pursuant to the terms of the Lease.
Notwithstanding the foregoing, if the Lease terminates
prior to the scheduled Expiration Date (as the same may be
extended in accordance with Addendum Paragraph 39) as a
result of a Breach by Lessee under the Lease, then Lessee
shall have no right to remove any of items listed in
subparagraphs (a), (b) or (q), above; provided that Lessor
may require Lessee to remove any of such items (or Lessor
may remove such items at Lessee's sole cost and expense),
and any such items which Lessor does not require Lessee to
remove shall become the sole property of Lessor upon
termination of the Lease.
8.1 Additional Provisions Applicable to Paragraph 8.1.
Notwithstanding the provisions of Paragraph 8.1, Lessor, and not
Lessee shall pay any increase in the premiums for the property
insurance covering the Premises carried by Lessor pursuant to
Paragraph 8.3 to the extent such increase results from any acts or
omissions occurring on, or the use or occupancy of, any building(s)
owned by Lessor which are adjacent to the Building, and which are
not occupied by Lessee, either as a direct tenant of Lessor, or as
a subtenant.
8.3 Additional Provisions Applicable to Paragraph 8.3.
Notwithstanding the provisions of subparagraph 8.3(a), the
deductible for earthquake insurance may exceed $5,000, but shall
not exceed the greater of $100,000 or 20% of the replacement cost
of the Building, as determined by the insurer issuing the
earthquake insurance policy.
9.3 Additional Provisions Applicable to Paragraph 9.3. In the
event Lessor elects to complete the repairs pursuant to clause (i)
of Paragraph 9.3, and fails to actually complete the same within
six (6) months after the date of damage or destruction, subject to
extension for Force Majeure (as defined below), Lessee shall have
the right at any time after the expiration of such six (6) month
period, as the same may be extended for Force Majeure, but prior to
Lessor actually completing such repairs, to terminate this Lease by
giving written notice to Lessor. As used in this Lease, "Force
Majeure" shall mean strikes, lockouts, labor disputes, shortages of
material or labor, fire, flood or other casualty, acts of God, any
delays caused by Lessee or any other cause beyond the control of
Lessor.
9.6 Additional Provisions Applicable to Paragraph 9.6. If
Lessor shall be obligated to repair or restore the Premises
pursuant to any provision of Article 9, and it is possible, at
additional cost, to commence such repair or restoration earlier
than ninety (90) days after such obligation shall accrue and/or to
accelerate the work so that the same shall be completed prior to
the deadline for Lessor to complete the same pursuant to the
applicable provision of Article 9, then upon Lessee's written
request, and subject to the conditions set forth below, Lessor
shall use its best efforts to commence such repair or restoration
as soon as is possible, subject to availability of labor and
materials; provided that (1) prior to incurring any additional
costs to commence such repair or restoration earlier than Lessor is
obligated to do so or to accelerate the work, Lessee shall have
agreed, in writing, to pay all such additional costs, and shall
have deposited with Lessor, funds equal to the amount reasonably
estimated by Lessor as the total amount of such additional costs to
be incurred (provided that the amount of such deposit shall not
limit Lessee's liability to pay such additional costs, and Lessor
shall refund to Lessee upon completion of the repair and
restoration, the amount of such deposit, if any, in excess of the
additional costs incurred); and (2) in no event will Lessor be
obligated to commence any repair or restoration prior to obtaining
all necessary governmental permits and approvals therefor.
10.2 Contest of Real Property Taxes. Lessee may contest the
amount of Real Property Taxes assessed against the Premises, at its
sole cost and expense, including, but not limited to, any penalties
or fees associated with an unsuccessful contest. In the event
Lessee elects to contest the amount of Real Property Taxes, Lessee
must pay the contested Real Property Taxes under protest, and apply
for a refund, or provide such security as Lessor may require to
prevent such taxes from becoming a delinquent lien upon the
Premises. Any refund of Real Property Taxes paid by Lessee with
respect to the term of this Lease shall belong to Lessee, whether
received as a result of a contest by Lessee or otherwise, and
regardless of when received. Lessee shall have no right to any
refund of Property Taxes applicable to any period of time other
than the term of this Lease, even if such refund is received during
the term of this Lease.
12. Additional Provisions Applicable to Assignment and
Subletting.
A. The provisions of Paragraph 12 shall be fully operative
immediately upon execution of this Lease, and shall apply to the
occurrence of any transaction or event occurring after the
execution of the Lease, but prior to the commencement of the Term
thereof, as well as any transaction or event occurring during the
Term thereof.
B. Notwithstanding any provision of Paragraph 12 of the
Lease or this Addendum, in the event of any change in the control
of Lessee, such change in control shall not constitute an
assignment of the Lease so long as Lessee is a publicly traded
company immediately following such change in control.
C. Notwithstanding any provision of Paragraph 12, Lessor,
as a condition to giving its consent to any assignment or
subletting, may require that Lessee pay to Lessor, as additional
Rent under the Lease,
(i) in the case of an assignment where the Lease is the
only asset assigned by Lessee to the assignee, promptly
after receipt by Lessee (or any affiliate thereof or other
person or entity designated by Lessee) seventy-five percent
(75%) of the amount, if any, by which (A) any consideration
(including, without limitation, payment for leasehold
improvements) paid by the assignee to Lessee or such
affiliate or other designated person or entity for the
assignment or otherwise attributable to the value of
Lessee's interest in the Lease exceeds (B) the Assignment or
Subletting Costs (as defined below);
(ii) in the case of an assignment where the Lease is
not the only asset assigned by Lessee to the assignee (e.g.,
an assignment in connection with a sale of Lessee's
operations at the Premises or an assignment resulting from a
change in control of Lessee where Lessee is not a publicly
traded company immediately following such change in
control), on a monthly basis, seventy-five percent (75%) of
the amount, if any, by which (A) the Prevailing Market Rent
(as defined below) for the Premises for each month of the
term of the Lease after the date of the assignment exceeds
(B) the total amount of Rent payable hereunder for each such
month; as used herein, the term "Prevailing Market Rent"
for the Premises shall mean the total monthly Rent that
Lessor could obtain for each month of term of the Lease
remaining after the date of the assignment from a third
party desiring to lease the Premises for the remaining term
of the Lease after the date of the assignment, taking into
account the age of the Building, the size of the Premises,
the quality of construction of the Building, the other terms
of this Lease, the rental and any other consideration then
being obtained for new leases of space comparable to the
Premises in the locality of the Building and all other
factors that would be relevant to a third party desiring to
lease the Premises for such term in determining the rental
such party would be willing to pay therefor, but excluding
any rental value attributable to any items Lessee is
permitted to remove from the Premises upon expiration of the
term of this Lease pursuant to Paragraph 7.4 of this
Addendum; provided that if Lessee and Lessor are unable to
agree upon the Prevailing Market Rent within thirty (30)
days after the date of the assignment, then the Prevailing
Market Rent for the remaining term of this Lease shall be
determined by appraisal following the same procedures as set
forth in Paragraph 39(c) of this Addendum for the
determination of "Fair Market Rent" for the first year of
a Renewal Option Term; and
(iii) in the case of a sublease, on a monthly basis,
seventy-five percent (75%) of the amount, if any, by which
(A) the rent paid to Lessee (or any affiliate thereof or
other person or entity designed by Lessee) for the sublet
space by the sublessee (such rent to include all
consideration paid for the sublet space) for each month
exceeds (B) the total amount of Rent payable under the Lease
attributable to the sublet space for such month; provided,
however, that in the case of a sublease, prior to paying any
amounts to Lessor pursuant to this Paragraph 12.C(iii),
Lessee may recover out of the rent or other consideration
payable by the sublessee to Lessee (or any affiliate thereof
or other person or entity designated by Lessee), and use
such recovery to reimburse itself for, a pro rata share of
the Assignment or Subletting Costs incurred in connection
with such sublease, such pro rata share to be determined by
allocating an equal portion of the total amount of
Assignment or Subletting Costs incurred in connection with
such sublease to each month of the term of such sublease; if
there is more than one sublease under this Lease, the
amounts (if any) to be paid by Lessee to Lessor pursuant to
this subparagraph (iii) shall be separately calculated for
each sublease and amounts due Lessor with regard to any one
sublease may not be offset against rental and other
consideration pertaining to or due under any other sublease.
As used herein, the term "Assignment or Subletting Costs" means
the total amount of any brokerage commissions paid by Lessee in
connection with a specific subletting or assignment (not to exceed
commissions typically paid in the market at the time of such
subletting or assignment), Lessee's reasonable costs of advertising
the space for sublease or assignment, Lessee's reasonable legal
fees and expenses in connection with such assignment or sublease,
and any improvement allowance or other inducement (such as moving
expenses and lease takeover obligations), paid by Lessee to the
sublessee or assignee; provided that, as a condition to Lessee
recovering Assignment or Subletting Costs pursuant to subparagraph
(i) or (iii) of this Paragraph 12.C, Lessee shall provide to
Lessor, within sixty (60) days of Lessor's execution of Lessor's
consent to the assignment or subletting, a detailed accounting of
the Assignment or Subletting Costs and supporting documents, such
as receipts and invoices, except that if any Assignment or
Subletting Costs are not determinable by such date, Lessee shall so
state in its accounting, identifying with reasonable specificity
the costs not determinable, and promptly after such costs are
determinable, but in no event later than thirty (30) days after
effective date of the assignment or ninety (90) days after the
commencement of the term of such sublease, as applicable, a
supplemental accounting shall be delivered to Lessor setting forth
all Assignment or Subletting Costs and supporting documents (if not
previously delivered).
D. Notwithstanding any provision of Paragraph 12, the
granting of a security interest in the Lease by Lessee in
connection with a senior secured credit facility provided by
Goldman, Sachs & Co. ("GS"), shall not constitute an assignment of
the Lease, and shall not require Lessor's consent under the Lease;
provided that GS shall not be entitled to foreclose such security
interest or otherwise take any possessory interest in the Premises
or any portion thereof, unless GS assumes all of Exodus'
obligations under the Lease and the Exodus Sublease (if the term
thereof shall not have expired), and cures all then uncured
defaults (if any) under the Lease and the Exodus Sublease (if the
term thereof shall not have expired).
13.1 Additional Breaches. In addition to the events set forth
in Paragraph 13.1, the occurrence of any of the following events
shall constitute a Breach under this Lease, and Lessor shall have
all rights and remedies available under the Lease in the event of a
Breach as result thereof:
(a) The termination of the Prior Sublease for any reason
prior to May 31, 2004, except under circumstances which, pursuant
to Paragraph 3.1 of this Addendum result in Early Commencement of
this Lease.
(b) The failure of Lessee to cause the amount of the Letter
of Credit to be increased as and when required in accordance with
the requirements of subparagraph 1.7(b) of this Addendum, or
Paragraph 3.1 of this Addendum, if applicable, where such failure
continues for a period of three (3) business days following written
notice to Lessee.
(c) Upon the election of Lessor, in the event that no later
than thirty (30) days prior to then applicable expiration date of
the Letter of Credit, neither (1) the Bank shall have notified
Lessor that the Letter of Credit will be renewed for at least one
(1) year beyond the then applicable expiration date, nor (2) Lessee
shall have delivered to Lessor a replacement Letter of Credit in
the amount required hereunder and otherwise meeting the
requirements set forth in Paragraph 1.7 of this Addendum.
16. Replacement of Paragraph 16(b). The following is
substituted for Paragraph 16(b): "(b) If the Responding Party
shall fail to execute or deliver a proposed Estoppel Certificate
which is submitted to the Responding Party by the Requesting Party
within the ten day period set forth in Paragraph 16(a) of the
Lease, then the Responding Party shall be deemed to have agreed
that all matters set forth in such proposed Estoppel Certificate
are true and correct and shall be estopped from denying the truth
of any of the matters set forth in said proposed Estoppel
Certificate."
23.1 Notices. Any notice given to Lessee at the address set
forth on the signature page of the Lease shall be marked
"Attention: Chief Financial Officer." A duplicate of any notice
given to Lessee under this Lease shall be sent, in the manner
required under Paragraph 23.1 of this Lease, to Exodus
Communications, Inc., Attention: Kyle Barriger, IDC Manager, 2401
Walsh Avenue, Santa Clara, CA 95054, Telephone: (408) 346-1507,
Facsimile: (408) 346-2420. A duplicate of any notice given to
Lessor under this Lease shall be sent, in the manner required under
Paragraph 23.1 of this Lease, to Lessor in care of DRA Advisors,
Inc., 1180 Avenue of the Americas, 18th Floor, New York, NY 10036,
Telephone: (212) 764-3210, Facsimile: (212) 764-3571.
32. Lessor's Access to the Premises. Lessor acknowledges that
Lessee intends to operate a secure internet data center facility at
the Premises. Accordingly, except in the case of an emergency,
Lessor, its agents, any Lender or its agents shall give Lessee
twenty-four (24) hours' advance notice prior to entering the
Premises, and Lessee shall have the right to require that a
representative of Lessee accompany any parties entering the
Premises. In the case of an emergency, Lessor or its agents shall
make such effort as is deemed appropriate by Lessor or its agents
under the circumstances to contact an on-site representative of
Lessee, if one is present at the Premises, prior to entering the
Premises; provided, however, that if an on-site representative
cannot be located after such effort is made, or if immediate entry
to the Premises without attempting to locate an on-site
representative of Lessee is deemed appropriate by Lessor or its
agents due to the nature of the emergency, Lessor or its agents may
enter the Premises unaccompanied by a representative of Lessee.
39. Option to Renew.
(a) Lessor hereby grants to Lessee two options (each, a
"Renewal Option") to renew the term of this Lease, each for an
additional term of five (5) years (each, a "Renewal Option Term"),
upon and subject to the terms and conditions set forth in this
Paragraph 39 of this Addendum and Paragraph 39 of the Lease. The
first Renewal Option Term will commence immediately following the
Expiration Date of the initial term of this Lease (the "Initial
Term") and will terminate on the fifth anniversary of the
Expiration Date of the Initial Term. The first Renewal Option
shall be exercised, if at all, by written notice to Lessor on or
before the date that is twelve (12) months prior to the Expiration
Date of the Initial Term. The second Renewal Option Term will
commence immediately following the expiration date of the first
Renewal Option Term and will terminate on the fifth anniversary of
the expiration date of the first Renewal Option Term. The second
Renewal Option shall be exercised, if at all, by written notice to
Lessor on or before the date that is twelve (12) months prior to
the expiration date of the first Renewal Option Term. If Lessee
exercises a Renewal Option, each of the terms, covenants and
conditions of this Lease shall apply during the applicable Renewal
Option Term as though the expiration date of the applicable Renewal
Option Term was the date originally set forth herein as the
Expiration Date of this Lease, provided that: (1) during the first
Renewal Option Term, there shall only be one more Renewal Option
under this Paragraph 39, and during the Second Renewal Option Term,
there shall be no further Renewal Options under this Lease, (2) the
monthly Base Rent to be paid during the first year of the Renewal
Option Term shall be the greater of (i) one hundred five percent
(105%) of the monthly Base Rent payable for the month immediately
prior to the commencement of the applicable Renewal Option Term, or
(ii) the Fair Market Rent, as hereinafter defined, for the Premises
for the Renewal Option Term, and (3) the monthly Base Rent to be
paid during each year after the first year of the Renewal Option
Term shall be equal to one hundred five percent (105%) of the
monthly Base Rent payable for the preceding year. As used herein,
the term "Fair Market Rent" for the Premises shall mean the
monthly Base Rent that Lessor could obtain for each month of the
first year of the applicable Renewal Option Term from a third party
desiring to lease the Premises for a five (5)-year term commencing
at the commencement of the applicable Renewal Option Term, taking
into account the increases in rent provided under clause (3),
above, the age of the Building, the size of the Premises, the
quality of construction of the Building, the other terms of this
Lease, the rental and any other consideration then being obtained
for new leases of space comparable to the Premises in the locality
of the Building and all other factors that would be relevant to a
third party desiring to lease the Premises for a five (5)-year term
commencing at the commencement of the applicable Renewal Option
Term in determining the rental such party would be willing to pay
therefor, but excluding any rental value attributable to any items
Lessee is permitted to remove from the Premises upon expiration of
the term of this Lease pursuant to Paragraph 7.4 of this Addendum.
(b) If Lessee exercises a Renewal Option, Lessor shall send
to Lessee, on or before the date that is one hundred twenty (120)
days prior to the Expiration Date of the Initial Term, in the case
of the first Renewal Option, or one hundred fifty (150) days prior
to the expiration date of the first Renewal Option Term, in the
case of the second Renewal Option, a notice setting forth the Fair
Market Rent for the Premises for the first year of the applicable
Renewal Option Term. If Lessee disputes Lessor's determination of
the Fair Market Rent for the first year of a Renewal Option Term,
Lessee shall, within thirty (30) days after the date of Lessor's
notice setting forth Lessor's determination thereof, send to Lessor
a notice stating that Lessee disagrees with Lessor's determination
of Fair Market Rent for the first year of the Renewal Option Term
and elects to resolve the disagreement as provided in
subparagraph 39(c) below. If Lessee does not send to Lessor a
notice as provided in the previous sentence, Lessor's determination
of the Fair Market Rent shall be the basis for determining the
monthly Base Rent to be paid by Lessee hereunder during the first
year of the applicable Renewal Option Term. If Lessee elects to
resolve the disagreement as provided in subparagraph 39(c) below
and such procedures shall not have been concluded prior to the
commencement of the applicable Renewal Option Term, Lessee shall
pay monthly Base Rent in an amount equal to the greater of (i) one
hundred five percent (105%) of the monthly Base Rent payable for
the month immediately prior to the commencement of the applicable
Renewal Option Term or (ii) the Fair Market Rent (on a monthly
basis) as determined by Lessor in the manner provided above. If
the amount of Fair Market Rent for the first year of the applicable
Renewal Option Term as finally determined pursuant to
subparagraph 39(c) is greater than Lessor's determination, Lessee
shall pay to Lessor the difference between the amount paid by
Lessee and the Fair Market Rent as so determined pursuant to
subparagraph 39(c) within thirty (30) days after the determination.
If the Fair Market Rent for the first year of the applicable
Renewal Option Term as finally determined pursuant to
subparagraph 39(c) is less than Lessor's determination, the
difference between the amount paid by Lessee and the Fair Market
Rent as so determined pursuant to subparagraph 39(c) shall be
credited against the next installment(s) of monthly Base Rent due
from Lessee to Lessor hereunder.
(c) Any disagreement regarding the Fair Market Rent for the
first year of the applicable Renewal Option Term shall be resolved
as follows:
(i) If, within thirty (30) days after Lessee's response
to Lessor's notice to Lessee of the Fair Market Rent, Lessor and
Lessee shall not have reached agreement as to the Fair Market Rent
for the first year of the applicable Renewal Option Term, they
shall each select one appraiser to determine the Fair Market Rent
for the first year of the applicable Renewal Option Term. Each
such appraiser shall arrive at a determination of the Fair Market
Rent for the first year of the applicable Renewal Option Term and
submit their conclusions to Lessor and Lessee within forty-five
(45) days after the expiration of the thirty (30) day period
described in this subparagraph (i).
(ii) If only one appraisal is submitted within the
requisite time period, it shall be deemed to be the Fair Market
Rent for the first year of the applicable Renewal Option Term. If
both appraisals are submitted within such time period, and if the
two appraisals so submitted differ by less than five percent (5%)
of the lower of the two, the average of the two shall be the Fair
Market Rent for the first year of the applicable Renewal Option
Term. If the two appraisals differ by more than five percent (5%)
of the lower of the two, then the two appraisers shall immediately
select a third appraiser who shall within thirty (30) days after
his or her selection make his or her own determination of the Fair
Market Rent for the first year of the applicable Renewal Option
Term and submit such determination to Lessor and Lessee
simultaneously. Neither Lessor nor Lessee shall advise the third
appraiser of the Fair Market Rent determinations delivered by the
first two appraisers, and Lessor and Lessee shall instruct the
first two appraisers not to advise the third appraiser of such
determinations. If the Fair Market Rent determined by the third
appraiser is the average of the determinations of the Fair Market
Rent determined by the first two appraisers, the third appraiser's
determination of Fair Market Rent shall be the Fair Market Rent.
If such is not the case, Fair Market Rent shall be the Fair Market
Rent as determined by Lessor's appraiser or Lessee's appraiser
which is closest to the determination of Fair Market Rent by the
third appraiser.
(iii) All appraisers appointed pursuant to this Lease
shall be members of the American Institute of Real Estate
Appraisers with not less than ten (10) years' experience appraising
commercial and industrial properties in Santa Clara county. Each
party shall pay the cost of the appraiser selected by such party
and one-half of the cost of the third appraiser, if necessary plus
one-half of any other costs incurred in resolving the disagreement
pursuant to this subparagraph 39(c).
46. Counterparts; Facsimile Signatures. The Lease and this
Addendum may be signed in counterparts, and delivered by facsimile,
and such facsimile counterparts shall be valid and binding on
Lessor and Lessee with the same effect as if original signatures
had been exchanged.
50. Parking. Subject to the rules and regulations promulgated
from time to time by Lessor, Lessee shall be entitled to use 50.3%
of the parking spaces for the 2401/2403 Walsh Avenue complex for
use by its agents, servants, employees and invitees (individually
and collectively referred to as "Lessee's Invitees") for parking
of passenger vehicles with a capacity of 8 persons or less only.
If Lessor in its sole discretion agrees in writing to permit Lessee
to use any parking spaces or areas which could be used for parking
spaces for any other purpose (e.g., temporary storage of materials,
satellite dish installation, etc.), Lessee's then current number of
parking spaces will automatically be reduced by the number of
spaces utilized for such purpose plus any spaces which cannot be
reasonably used for normal parking as a result thereof. Lessee
agrees that overnight parking is prohibited. Lessee also agrees
that under no circumstances shall Lessee's Invitees in any manner
interfere with occupancy and/or access to the property known as
2403 Walsh Avenue, including, without limitation, interference with
the ingress or egress to the building, parking lot or shipping and
receiving areas. If Lessee commits, permits or allows any of the
prohibited activities described herein or in the rules and
regulations then in effect, then Lessor shall have the right,
without notice, in addition to such other rights and remedies that
it may have, to remove or tow away the vehicle(s) involved and
charge the cost to Lessee, which cost shall be immediately payable
upon demand by Lessor. Lessee agrees that Lessor may re-stripe the
existing parking lots so as to reconfigure the same, so long as
such re-striping or reconfiguration does not reduce the number of
parking spaces that Lessee is otherwise entitled to use under the
Lease. Subject to the prior written approval of Lessor, which
approval shall not be unreasonably withheld or delayed, Lessee may
re-stripe the existing parking lots so as to reconfigure the same,
so long as such re-striping or reconfiguration does not reduce the
number of total parking spaces for the 2401/2403 Walsh Avenue
complex or unreasonably interfere with the use or occupancy of
2403 Walsh Avenue or its marketability to prospective tenants and
subtenants. Provided that Lessee shall have obtained Lessor's
approval of such restriping as required under this Paragraph 29,
then notwithstanding anything contained in the Lease, Lessee shall
not have any obligation to change the striping or configuration of
the parking lots back to the original configuration at the
termination of the Lease.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Addendum
as of the date of the Lease.
Lessee:
EXODUS COMMUNICATIONS, INC.,
a Delaware corporation,
By:
Print Name:
Title:
Lessor:
G&I WALSH LLC,
a Delaware limited liability company
By: G&I Investment Walsh LLC,
a Delaware limited liability
company,
its managing member
By: G&I Investment Walsh Corp.,
a Delaware corporation,
its managing member
By:
Name:
Title:
<PAGE>
EXHIBIT 10.50
EXODUS SUBLEASE
THIS EXODUS SUBLEASE ("Sublease"), is made and effective this 1st
day of February, 1999 (if and only if it is executed below where
indicated by Sublessor, Sublessee and Lessor), by and between TALUS
CORPORATION, a California corporation, c/o Electronic Manufacturing
Systems, Inc., 120 Ninth Avenue, Longmont, CO 80501 ("Sublessor"), and
EXODUS COMMUNICATIONS, INC., a Delaware corporation, 2831 Mission College
Blvd., Santa Clara, CA 95054 ("Sublessee"). Talus Corporation and Exodus
Communications, Inc. are referred to collectively as the "Parties" and
individually as a "Party").
RECITALS
A. Sublessor, formerly known as Scientific Custom Metal Products
International, Inc., as Lessee, entered into a Standard
Industrial/Commercial Single-Tenant Lease - Net including Exhibit
{A} with Mopar, LLC as lessor, dated as of March 1, 1996, as
amended by that certain Lease Amendment, identical counterparts of
which have been dated as of November 14, 1997, and November 20,
1997 (as so amended, the "Original Lease"), for the lease of a
portion of an industrial building of approximately 95,700 square
feet (the "Building") located at 2401 Walsh Avenue, Santa Clara,
California. G&I Walsh LLC, a Delaware limited liability company
("Lessor") has purchased the Building from Mopar, LLC, and is
the present Lessor under the Lease. Except as provided herein,
terms shall have the same meanings in this Sublease as in the
Lease (as that term is hereinafter defined).
A. The Original Lease has been or is about to be amended by a further
Lease Amendment dated as of January 29, 1999 (the "January Lease
Amendment").
A. The Original Lease as amended by the January Lease Amendment, all
of which are attached hereto, are hereinafter collectively
referred to as the "Lease." From the Commencement Date through
April 30, 2002, the premises leased to Sublessor under the Lease
(i.e. 2401 Walsh Avenue), less the premises leased to ACC (as
generally described below), is hereinafter referred to as the
"Premises." On and after May 1, 2002, and as to any references
which relate to this time period (when Sublessee also rents the
ACC Sublease Premises (as defined below), and as to any time when
Sublessee also rents the ACC Sublease Premises, the term
"Premises" herein shall refer to the entire "Premises" leased
to Sublessor under the Original Lease (regardless of whether the
ACC Sublease Premises is also expressly mentioned).
A. On April 25, 1997, Sublessor agreed to lease to ACC
Microelectronics Corporation, a California corporation, dba Auctor
Corporation ("ACC"), approximately 10,500 rentable feet in the
Building, more or less ("ACC Sublease Premises"), as well as
other terms and conditions pursuant to the Standard Office Lease -
Gross dated April 25, 1997, with attached First Addendum to Lease
Agreement and Rules and Regulations for Standard Office Lease
("Existing ACC Sublease"), also attached hereto.
A. Sublessee's signature below evidences its receipt and careful
review of the terms and conditions contained in all of the above-
mentioned documents.
A. Sublessor desires to sublease to Sublessee and Sublessee desires
to sublease from Sublessor the Premises on the terms and
conditions set forth in this Sublease.
For and in consideration of the foregoing recitals, the mutual
promises and covenants of the parties, and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, Sublessor and Sublessee hereby covenant and agree as
follows:
ARTICLE I
BASIC SUBLEASE PROVISIONS
1.1 Subleased Premises. Sublessor hereby subleases to Sublessee
and Sublessee hereby rents from Sublessor the Premises. On and after May 1,
2002 (or such earlier date as provided herein or otherwise agreed to in
writing by the Parties), Sublessee also rents from Sublessor the ACC
Sublease Premises which shall also be included in the Premises.
Sublessor shall not be responsible for any delays in delivering
possession of the ACC Sublease Premises to Sublessee so long as it uses
reasonable steps to deliver possession to Sublessee as soon as possible
after May 1, 2002. In the event that Sublessor is unable,
notwithstanding its reasonable steps, to deliver possession of the ACC
Sublease Premises to Sublessee on May 1, 2002, Sublessee's obligations to
pay Base Rent (as set forth below) and other Rent (as defined below)
which is attributable to the ACC Sublease Premises shall be suspended
until Sublessor is able to deliver possession of the ACC Sublease
Premises. In other words, until Sublessor is able to deliver possession
of the ACC Sublease Premises, Sublessee shall pay only Eighty-Nine and
03/100 percent (89.03%) of the Base Rent for the applicable period(s) set
forth below in section 2.1 plus those costs for Additional Rent set forth
in section 2.2 (in lieu of section 2.3) below, in addition to its other
obligations under the Sublease. None of the Existing ACC Sublease
provisions shall apply to this Sublease. Notwithstanding the provisions
of this section 1.1 above, in the event that the Existing ACC Sublease is
terminated prior to May 1, 2002, then so long as Sublessee is not then in
default under the terms of this Sublease, and no event shall have
occurred and be continuing which, under the terms of this Sublease would
constitute a default under the Sublease after the giving of notice or
passage of time, or both, Sublessee shall begin renting the ACC Sublease
Premises immediately following the termination of the Existing ACC
Sublease and the vacancy by ACC of the ACC Sublease Premises. In the
event of such early renting by Sublessee of the ACC Sublease Premises,
then from and after the date of such early renting, in addition to all of
Sublessee's obligations under the Sublease, the Additional Rent shall be
payable by Sublessee in accordance with section 2.3 below, and the
monthly Base Rent set forth in section 2.1 shall be modified in
accordance with the following schedule:
<TABLE>
<CAPTION>
Starting Ending Monthly
Date Date Base Rent
- ----------- ----------- ------------
<S> <C> <C>
02/01/99 01/31/2000 $90,915.00
02/01/2000 01/31/2001 $95,700.00
02/01/2001 01/31/2002 $100,485.00
02/01/2002 01/31/2003 $105,270.00
02/01/2003 01/31/2004 $110,055.00
02/01/2004 05/31/2004 $115,797.00
</TABLE>
1.2 Use. Sublessee shall use the Premises as data center processing
and other lawful related uses (restricted, however, for non-hazardous
purposes) only ("Agreed Use"). With respect to the foregoing
restrictions on the use of the Premises, Sublessee agrees to abide by
such restrictions unless Sublessor gives its advance written consent to
another use. Sublessee agrees to comply with all zoning and land use
laws and requirements imposed on the Premises.
1.3 Term. The Term of this Sublease shall commence on the first day
of February, 1999 (hereinafter called the "Commencement Date") and
shall end at twelve o'clock midnight on May 31, 2004 (hereinafter called
the "Expiration Date"), or shall end on such earlier date pursuant to any
of the terms and conditions of this Sublease (which in this and other
provisions herein includes, unless expressly indicated otherwise, the
incorporated Lease).
1.4 Condition of Subleased Premises. Sublessee represents that it
has inspected the Premises (including the ACC Sublease Premises) and is
familiar with the condition of every part thereof including, without
limitation, the occupancy and operation of ACC. Sublessee agrees that it
enters into this Sublease without any representations, promises,
agreements or warranties by Sublessor, its officers, employees, agents,
or representatives, as to the condition or fitness for a particular
purpose or use of the Premises (including the ACC Sublease Premises) or
any part, element or component thereof, including, but not limited to,
electrical, plumbing, fire sprinkler, life safety, lighting, or heating
ventilating and air conditioning ("HVAC") systems, loading doors, roof,
exterior walls, foundations or other structural elements, except as
provided in section 4.1(c) below. Sublessee agrees to accept the
Premises on an "AS-IS, WITH ALL FAULTS" basis, without requiring any
alteration, addition, installation, repair, decoration or other
improvement to be made by Sublessor or at Sublessor's expense.
1.5 Services. Without limiting the effect of the provisions of the
incorporated Lease relating thereto, Sublessor shall not be obligated to
provide any services to Sublessee. Sublessor makes no representations or
warranties as to the availability or adequacy of services.
1.6 Vehicle Parking. So long as Sublessee is not in default, and
subject to the rules and regulations promulgated from time to time by
Sublessor and/or Lessor, Sublessee shall be entitled to use 50.3 % of the
parking spaces for the 2401/2403 Walsh Avenue building project (less,
until Sublessee's rental of the ACC Lease Premises, 42 spaces), for use
by its agents', servants', employees' and invitees' (individually and
collectively referred to as "Sublessee's Agents") passenger vehicles
with 8 or less capacity only. If Sublessor in its sole discretion agrees
in writing to permit Sublessee to use any parking spaces for any other
purpose (e.g., temporary storage of materials, satellite dish
installation, etc.), Sublessee's then current number of parking spaces
will automatically be reduced by the number of spaces utilized for such
purpose plus any spaces which cannot be reasonably used for normal
parking as a result thereof. Sublessee agrees that overnight parking is
prohibited. Sublessee also agrees that under no circumstances shall
Sublessee's Agents in any manner interfere with occupancy and/or access
to the property known as 2403 Walsh Avenue, including, without
limitation, interference with the ingress or egress to the building,
parking lot or shipping and receiving areas. If Sublessee commits,
permits or allows any of the prohibited activities described in the
Sublease (including the incorporated Lease) or the rules and regulations
then in effect, then Sublessor shall have the right, without notice, in
addition to such other rights and remedies that it may have, to remove or
tow away the vehicle(s) involved and charge the cost to Sublessee, which
cost shall be immediately payable upon demand by Lessor. Sublessee
agrees that Sublessor may "re-stripe" so as to reconfigure the existing
parking lots, so long as such does not reduce the number of parking
spaces that Sublessee is otherwise entitled. Subject to the prior
written approval of Sublessor and Lessor which shall not be unreasonably
withheld or delayed, Sublessee may also "re-stripe" so as to
reconfigure the existing parking lots, so long as such does not reduce
the number of total parking spaces or unreasonably interfere with the use
or occupancy of 2403 Walsh Avenue or its marketability to prospective
subtenants.
1.7 Sublessee Compliance. Sublessor shall not be required to tender
possession of the Premises to Sublessee until Sublessee provides
satisfactory evidence of insurance pursuant to paragraph 8.5 of the
Lease, delivers the original Letter of Credit (hereinafter defined)
pursuant to section 2.5 below of this Sublease, and delivers the initial
monthly Base Rent payment in the amount of $11,076.00 and a payment of
$7,875.00 (which represents Lessor's fee it is requiring of Sublessor
pursuant to paragraph 12.2(e)). Pending delivery of such evidence of
insurance, Letter of Credit and initial Base Rent payment and paragraph
12.2(e) fee, Sublessee shall be required to perform all of its
obligations under the Sublease from and after the Commencement Date,
including the payment of Rent (as hereinafter defined), notwithstanding
Sublessor's election to withhold possession pending receipt of such
evidence of insurance and Letter of Credit.
ARTICLE II
RENT AND OTHER CHARGES
2.1 Base Rent. Notwithstanding anything contained in this Sublease
(including the incorporated Lease) and regardless of the Commencement
Date, Sublessee agrees to pay Sublessor Base Rent commencing on February
1, 1999, and on the first day of each month thereafter, in accordance
with the schedule set forth below:
<TABLE>
<CAPTION>
Starting Ending Monthly
Date Date Base Rent
- ----------- ----------- ------------
<S> <C> <C>
02/01/99 02/28/99 $11,076.00
03/01/99 03/31/99 $58,403.21
04/01/99 01/31/2000 $80,940.00
02/01/2000 01/31/2001 $85,200.00
02/01/2001 01/31/2002 $89,460.00
02/01/2002 04/30/2002 $93,720.00
05/01/2002 01/31/2003 $105,270.00
02/01/2003 01/31/2004 $110,055.00
02/01/2004 05/31/2004 $115,797.00
</TABLE>
2.2 Additional Rent. For the period from March 1, 1999 through
April 30, 2002, Sublessee shall also pay to Sublessor (or such other
party(s) as may be designated in writing by Sublessor) as and when due
under the Lease any and all additional rent and other charges which are
due and payable by Lessee under the Lease, without any deduction or
offset of any kind or nature, including, but not limited to, the costs
associated with:
(a) All maintenance and repair obligations of Lessee
which concern the Premises and/or are caused in
whole or in part, directly or indirectly, by
Sublessee's Agents, as generally set forth in
paragraph 7 of the Lease (without regard to
deduction or offset in this and the following
provisions of this section 2.2 for any payments
by ACC). With respect to other maintenance
and/or repairs which do not only concern the
Premises or are not caused in whole or in part,
directly or indirectly, by Sublessee's Agents,
Sublessee shall pay its pro rata share (as
hereinafter defined) of all such obligations,
(b) All non-Building exterior repairs of the office
building project (i.e., 2401 and 2403 Walsh
Avenue) including, without limitation, repairs
of the landscaping, walkways, lawns, parking
lots and exterior lighting (individually and
collectively referred to hereinafter as the
"Exterior Grounds") which are caused in whole
or in part, directly or indirectly, by
Sublessee's Agents, as generally set forth in
paragraph 7 of the Lease. With respect to other
Exterior Grounds repairs which are not caused in
whole or in part, directly or indirectly, by
Sublessee's Agents, as well as maintenance of
the Exterior Grounds, Sublessee shall pay Forty-
Four and 52/100 percent (44.52%) of all such
obligations,
(c) All insurance obligations of Lessee (for which
Sublessor shall pay to Sublessee for the period
March 1, 1999 through April 30, 2002, Ten and
97/100 percent (10.97%) of the reasonable cost
of such insurance directly attributable to the
Premises, except for the cost for insurance
which is attributable to earthquake and flood
coverage which shall be solely borne by
Sublessee, as set forth in section 5.1 below),
generally set forth in paragraph 8 of the Lease,
(d) Sublessee's pro rata share of all Real Property
Taxes obligations of Lessee, and 100% of
Personal Property Taxes obligations of Lessee
for property on the Premises (including any
exterior areas around the Building), generally
set forth in paragraph 10 of the Lease,
(e) All utility obligations of Lessee, generally set
forth in paragraph 11 of the Lease, less the
agreed upon sum of $1,180.00 per month, until
such time as Sublessor installs a meter or
meters to separately monitor the utility
obligations of Sublessee and/or ACC (which are
capable of monitoring) when Sublessee shall then
pay the amounts represented by such meter(s) in
addition to any other utility obligations which
are not capable of monitoring.
(f) All Alterations and improvements made to the
Premises by reason of the laws and requirements of
any public authorities and any application, permit,
inspection or license fees required in connection
therewith or for the operation, use or occupancy of
the Premises.
Sublessee's "pro rata share" shall refer to Eighty-Nine and 03/100
percent (89.03%) of the total costs of the subject item(s).
2.3 Additional Rent. For the period from May 1, 2002 (or such
earlier date as provided herein when Sublessee occupies the ACC Sublease
Premises or otherwise agreed to in writing by the Parties), through the
Expiration Date, Sublessee shall also pay to Sublessor (or such other
party(s) as may be designated in writing by Sublessor) as and when due
under the Lease any and all additional rent and other charges which are
due and payable by Lessee under the Lease, without any deduction or
offset of any kind or nature, including, but not limited to, the costs
associated with:
(a) All maintenance and repair obligations of Lessee
generally set forth in paragraph 7 of the Lease,
(b) All non-Building exterior repairs of the office
building project (i.e., 2401 and 2403 Walsh
Avenue) including, without limitation, repairs
of the landscaping, walkways, lawns, parking
lots and exterior lighting (individually and
collectively referred to as "Exterior
Grounds") which are caused in whole or in part,
directly or indirectly, by Sublessee's Agents,
as generally set forth in paragraph 7 of the
Lease. With respect to other Exterior Grounds
repairs which are not caused in whole or in
part, directly or indirectly, by Sublessee's
Agents, as well as maintenance of the Exterior
Grounds, Sublessee shall pay Fifty percent (50%)
of all such obligations,
(c) All insurance obligations of Lessee, generally
set forth in paragraph 8 of the Lease,
(d) All Real Property Taxes obligations of Lessee,
and all Personal Property Taxes obligations of
Lessee for property on the Premises (including
any exterior areas around the Building),
generally set forth in paragraph 10 of the
Lease,
(e) All utilities obligations of Lessee, generally
set forth in paragraph 11 of the Lease, and
(f) All Alterations and improvements made to the
Premises by reason of the laws and requirements of
any public authorities and any application, permit,
inspection or license fees required in connection
therewith or for the operation, use or occupancy of
the Premises.
Notwithstanding anything contained in the Lease, except as expressly
provided to the contrary in this Sublease (e.g., with respect to the ACC
Sublease Premises prior to rental by Sublessee), the Parties agree that
it is the intent of this Sublease that Sublessee perform and pay all
obligations of Lessee under the Lease.
2.4 Payment. The Base Rent, and any additional rent and the other
charges payable herein in the Sublease (and in the Lease incorporated
herein) reserved or payable, shall be paid to Sublessor at its address
first-above stated (directed to the attention of: Controller) or at such
other place as Sublessor may designate in writing, in lawful money of the
United States of America, as and when the same become due and payable,
without demand therefor and without any deduction, notice, offset,
counterclaim or abatement whatsoever, except as otherwise expressly
provided in this Sublease. All monetary obligations of Sublessee to
Sublessor under the terms of the Sublease (except for the Security
Deposit) are deemed to be rent ("Rent"). Rent for any period during
the Term hereof which is for less than one (1) full calendar month shall
be prorated based upon the actual number of days of said month.
Acceptance of a payment which is less than the amount then due shall not
be a waiver of Sublessor's rights to the balance of such Rent, regardless
of Sublessor's endorsement of any check so stating.
2.5 Security Deposit.
(a) Upon execution of this Sublease, Sublessee shall deliver to
Sublessor the Letter of Credit described below as security for
Sublessee's performance of all of Sublessee's covenants and obligations
under this Sublease; provided, however, that neither the Letter of Credit
nor any Letter of Credit Proceeds (as defined below) shall be deemed an
advance rent deposit or an advance payment of any other kind, or a
measure of Sublessor's damages upon Sublessee's Default or Breach. The
Letter of Credit shall be maintained in effect from the date hereof
through the date which is one hundred twenty (120) days after the
Expiration Date, provided that upon Sublessee's surrender of the Premises
at the expiration of the Term, Sublessor and Sublessee shall endeavor to
determine as soon as practicable any amounts owing by Sublessee, and
within five (5) Business Days after payment of such amount and
Sublessee's fulfillment of any other obligations to Sublessor, Sublessor
shall return to Sublessee the Letter of Credit and any Letter of Credit
Proceeds then held by Sublessor (other than those held for application by
Sublessor as provided below). Sublessor shall not be required to
segregate the Letter of Credit Proceeds from its other funds, and in no
event shall Letter of Credit Proceeds or any portion thereof be deemed to
be held in trust for Sublessee. No interest shall accrue or be payable
to Sublessee with respect to the Letter of Credit Proceeds. Sublessor
may (but shall not be required to) draw upon the Letter of Credit and use
the proceeds therefrom (the "Letter of Credit Proceeds") or any portion
thereof to cure any Default or Breach under this Sublease or to
compensate Sublessor for any damage Sublessor incurs as a result of
Sublessee's failure to perform any of its obligations hereunder, it being
understood that any use of the Letter of Credit Proceeds shall not
constitute a bar or defense to any of Sublessor's remedies set forth
herein. In such event and upon written notice from Sublessor to
Sublessee specifying the amount of the Letter of Credit Proceeds so
utilized by Sublessor and the particular purpose for which such amount
was applied, Sublessee shall immediately deliver to Sublessor an
amendment letter of Credit or a replacement Letter of Credit in an amount
equal to one hundred percent (100%) of the amount specified below.
Sublessee's failure to deliver such replacement Letter of Credit to
Sublessor within five (5) business days of Lessor's notice shall
constitute a Breach hereunder. If Sublessee is not in default at the
expiration or termination of this Sublease, within one hundred twenty
(120) days after such expiration or termination, or such earlier date as
provided above, Sublessor shall return to Sublessee the Letter of Credit
or the balance of the Letter of Credit Proceeds then held by Sublessor;
provided, however, that in no event shall any such return be construed as
an admission by Sublessor that Sublessee has performed all of its
obligations hereunder. Under no circumstances shall Sublessor be
required to return the Letter of Credit or Letter of Credit proceeds
before receiving written acknowledgment by Lessor that Sublessor has
fulfilled all of its Sublessor's obligations and is completely released
from liability under the Lease.
(b) As used herein, Letter of Credit shall mean an
unconditional, irrevocable letter of credit (hereinafter referred to as
the "Letter of Credit") issued by a major "money center" bank
satisfactory to Sublessor in its sole and absolute discretion (the
"Bank"), drawings under which may be made at an office of the Bank
located in Denver or Boulder, Colorado, naming Sublessor as beneficiary,
in the amounts set forth below, and otherwise in form and substance
satisfactory to Sublessor. The initial amount of the Letter of Credit
shall be Four Hundred Thousand Dollars ($400,000.00) during the period
from the execution of this Sublease through May 31, 2003, after which the
amount of the Letter of Credit shall be reduced to Three Hundred Thousand
Dollars ($300,000.00) for so long as the Letter of Credit is required to
be maintained pursuant to subsection (a) above. In addition, should the
Agreed Use be amended to accommodate a material change in the business of
Sublessee or to accommodate a sublessee or assignee of Sublessee,
Sublessee shall, upon thirty (30) days' written notice from Sublessor,
cause the amount of the Letter of Credit to be increased to an amount
necessary, in Sublessor's reasonable judgment, to account for any
increased wear and tear that the Premises may suffer as a result thereof.
Furthermore, if a change in control of Sublessee occurs during the term
of this Sublease, and following such change in control, (1) Sublessee is
not a publicly traded company, and (2) the financial condition of
Sublessee is, in Sublessor's reasonable judgment, significantly reduced,
Sublessee shall, upon thirty days' written notice from Sublessor, cause
the amount of the Letter of Credit to be increased, effective on the
later to occur of the expiration of thirty (30) days after Sublessor
gives such notice, or the thirtieth (30th) day prior to the Commencement
Date, to an amount, which, in Sublessor's reasonable judgment, is
commercially reasonable based on such change in financial condition. The
Letter of Credit shall be for an initial term of not less than one year
and shall provide: (i) that Sublessor may make partial and multiple draws
thereunder, up to the face amount thereof, (ii) that Sublessor may draw
upon the Letter of Credit up to the full amount thereof, as determined by
Sublessor, and the Bank will pay to Sublessor the amount of such draw
upon receipt by the Bank of a sight draft signed by Sublessor and
accompanied by a written certification from Sublessor to the Bank stating
either: (A) that a Breach has occurred and is continuing under this Lease
or (B) that Sublessor has not received notice from the Bank that the
Letter of Credit will be renewed by the Bank for at least one (1) year
beyond the then applicable expiration date and Sublessee has not
furnished Sublessor with a replacement Letter of Credit as hereinafter
provided; and (iii) that, in the event of Sublessor's assignment or other
transfer of its interest in this Sublease, the Letter of Credit shall be
freely transferable by Sublessor, without charge and without recourse, to
the assignee or transferee of such interest and the Bank shall confirm
the same to Sublessor and such assignee or transferee. The Letter of
Credit shall further provide that a draw thereon pursuant to clause
(ii)(B) above may only be made during the thirty (30) day period
preceding the then applicable expiration date of the Letter of Credit.
In the event that no later than thirty (30) days prior to the then
applicable expiration date of the Letter of Credit, neither (1) the Bank
shall have notified Sublessor that the Letter of Credit will be renewed
for at least one (1) year beyond the then applicable expiration date, nor
(2) Sublessee shall have delivered to Sublessor a replacement Letter of
Credit in the amount required hereunder and otherwise meeting the
requirements set forth above, then Sublessor shall be entitled to draw on
the Letter of Credit as provided above, and shall hold the proceeds of
such draw as Letter of Credit Proceeds pursuant to subsection (a) above
and Paragraph 5 of the Lease, provided that such drawing shall not
constitute a waiver of Sublessor's right to declare a Breach of the
Sublease pursuant to paragraph 13.1(c) of the Lease.
(c) At any time during the Term, Sublessee may replace any
Letter of Credit provided hereunder with another Letter of Credit meeting
the requirements hereunder, and Sublessor shall cooperate in arranging a
simultaneous exchange of such Letters of Credit.
ARTICLE III
SUBLESSEE'S AFFIRMATIVE OBLIGATIONS
Without limiting Sublessee's obligations pursuant to the Lease,
including those set forth in paragraph 7, Sublessee also agrees to the
following:
3.1 Alterations. Sublessee agrees that any Alteration, Utility
Installation, addition, improvement, installation of Trade Fixtures,
and/or other installation or decoration after the Commencement Date shall
be made only (a) with the prior written consent of Sublessor which shall
not be unreasonably withheld or delayed (and the Lessor, if required by
the terms of the Lease), (b) by workmen or contractors approved by
Sublessor which shall not be unreasonably withheld or delayed; (c) in
full compliance with all laws, ordinances and regulations of applicable
authorities (including any fire insurance rating organizations having
jurisdiction over the Premises); (d) in accordance with the provisions of
the Lease, and (e) after receipt by Sublessor of such insurance policies
as are reasonably required by Sublessor and Lessor. Notwithstanding
anything to the contrary and without limiting in any manner Sublessee's
obligations under this Sublease, Sublessee shall also be responsible for
all restoration obligations of Lessee under the Lease including, without
limitation, the restoration obligations relating to the items mentioned
in paragraph 10 of the January Lease Amendment.
3.2 Sublessor's Consent. Sublessor hereby consents to Sublessee
making and/or installing the Alterations, Utility Installations and Trade
Fixtures specifically shown and identified with specificity on the plans
and specifications described in Exhibit A attached hereto, which plans
and specifications and Exhibit A are incorporated herein by reference, so
long as prior to any construction whatsoever, Sublessee shall first
furnish to Sublessor a lien and completion bond satisfactory to Sublessor
in an amount equal to the estimated cost of such Alteration(s) or Utility
Installation(s). Notwithstanding anything contained in the Sublease,
Sublessor hereby affirmatively states that it does not approve of or
consent to any Alterations, Utility Installations or Trade Fixtures which
are mentioned or described in the plans and specifications but do not
include specifics as to their location, size, mechanical, architectural
or electrical detail or specifications. Without limiting the foregoing
or Sublessee's obligations under this Sublease, notwithstanding the
January Lease Amendment, Sublessee also agrees to the following
modifications to the January Lease Amendment:
(a) Sublessor hereby consents to the installation by Sublessee
of two (2) above-ground diesel fuel tanks and five (5)
diesel generators at the Premises, provided that such
installation shall be in compliance with all Applicable Law,
and Sublessee shall obtain Sublessor's prior written
approval of the precise location thereof, and of the
protective enclosures or encasements thereof, which approval
shall not be unreasonably withheld or delayed. Sublessee
agrees that reasonable considerations in determining such
approval shall include without limitation whether such
tanks, enclosures, encasements and/or generators
unreasonably interfere with the use or occupancy (including
parking, ingress and egress) of the ACC Space, or the use or
occupancy (including parking, ingress and egress) of 2403
Walsh Avenue or its marketability to prospective subtenants.
(b) Sublessor hereby consents to the installation by Sublessee
satellite dishes not to exceed two (2) feet in diameter, on
the roof of the Building only, so long as prior notice is
provided to Sublessor and Lessor and provided that they are
installed behind a roof screen, are not visible from the
street, and are installed in compliance with Applicable Law.
If Sublessee wishes to use other satellite dishes and/or
install satellite dishes in any other manner or location,
such installation shall be in compliance with all Applicable
Law, and shall not be made without Sublessor's and Lessor's
prior written approval of such installation, which approval
shall not be unreasonably withheld or delayed. Sublessee
agrees that reasonable considerations in determining such
approval shall include without limitation whether such
satellite dishes unreasonably interfere with the use or
occupancy (including parking, ingress and egress) of the ACC
Space, or the use or occupancy (including parking, ingress
and egress) of 2403 Walsh Avenue or its marketability to
prospective subtenants, or increase the restoration
obligations pursuant to paragraph 7.4 of the Lease without
the provision of additional security or payment to
Sublessor.
(c) Sublessor shall not unreasonably withhold or delay the
granting of its consent to Alterations, Utility
Installations or Trade Fixtures which are consistent with
the Alterations, Utility Installations or Trade Fixtures
shown on the plans and specifications (Exhibit A).
Sublessee agrees that reasonable considerations in
determining such approval shall include without limitation
whether such Alterations, Utility Installations and/or Trade
Fixtures unreasonably interfere with the use or occupancy
(including parking, ingress and egress) of the ACC Space, or
the use or occupancy (including parking, ingress and egress)
of 2403 Walsh Avenue or its marketability to prospective
subtenants, or increase the restoration obligations pursuant
to paragraph 7.4 of the Lease without the provision of
additional security or payment to Sublessor.
(d) Sublessor hereby agrees not to unreasonably withhold its
consent to the installation by Sublessee of security fencing
which will in part enclose the Building, provided that such
installation shall be in compliance with all Applicable Law,
and Sublessee shall obtain Sublessor's prior written
approval of the precise location, height and type thereof.
Sublessee agrees that reasonable considerations in
determining such approval shall include without limitation
whether such security fencing unreasonably interferes with
the use or occupancy (including parking, ingress and egress)
of the ACC Space, or the use or occupancy (including
parking, ingress and egress) of 2403 Walsh Avenue or its
marketability to prospective subtenants.
3.3 Maintenance and Repair. Sublessee shall take good care of,
repair and maintain the Premises and the fixtures, equipment and other
improvements and appurtenances therein. All damage or injury to the
Premises and to its fixtures, glass, appurtenances and equipment caused
by the moving of property by Sublessee's Agents in or out of the
Premises, or by the installation or removal by Sublessee's Agents of
furniture, fixtures or other property, or resulting from carelessness,
omission, neglect or improper conduct of Sublessee's Agents, shall be
repaired, restored or replaced promptly by Sublessee, at its sole cost
and expense, to the reasonable satisfaction of Sublessor and Lessor. All
of said repairs and replacements required to be made by Sublessee shall
be in quality and class equal to the original work or installation and
shall be done in a good and workmanlike manner.
3.4 Financial Information. On the first day of February of each
calendar year during the term of this Sublease, Sublessee shall provide
Sublessor, upon request, with copies of all of the most recent financial
statements of Sublessee, and all of its parent and/or subsidiary
company(s). Upon request, Sublessee also agrees to provide any
supplemental financial information as may be from time to time requested
by Sublessor.
3.5 Non-Interference. Sublessee agrees that it will in no manner
disrupt or otherwise interfere with ACC's tenancy and use of the Building
pursuant to the Existing ACC Sublease.
ARTICLE IV
SUBLESSOR'S COVENANTS AND REPRESENTATIONS
4.1 Covenants and Representations. Sublessor covenants and
represents to Sublessee as follows that:
(a) The Lease is in full force and effect, Sublessor has
received no notice of default and, to the best of
Sublessor's knowledge, no default exists thereunder;
(b) During the term of this Sublease, Sublessor will fully and
faithfully perform the terms and conditions of the Lease on
its part to be performed; and
(c) Sublessor has no knowledge or information that the Premises
contain Hazardous Substances.
4.2 Sublessor Indemnity. Notwithstanding any provisions to the
contrary, and in particular paragraph 6 of the Lease, Sublessor shall
defend, indemnify and hold Sublessee harmless from and against any and
all claims, response or remediation costs, losses, damages, penalties,
other costs, actions, judgments, expenses and other liability (including,
without limitation, attorney's fees and expenses of investigation,
remediation or defense) due to Hazardous Substances which were brought
onto the Premises by Sublessor after November 14, 1997 and before the
Commencement Date, and Hazardous Substances brought onto the Premises by
Sublessor during the Term of this Sublease.
ARTICLE V
INSURANCE
5.1 Insurance. Notwithstanding anything to the contrary except as
is expressly provided herein below in this section 5.1, Sublessee shall
procure and maintain at its own cost and expense, throughout the Term of
this Sublease, such policy or policies of insurance with respect to the
entire Premises as Sublessor is required (as Lessee) to maintain pursuant
to the Lease (i.e., including the ACC Sublease Premises) including, but
not limited to, the policies required pursuant to paragraph 8 of the
Lease. Sublessee shall also pay for any insurance policy(s) which Lessor
is required or otherwise permitted to maintain pursuant to the Lease.
All insurance policies must maintain during the policy term a "General
Policyholders Rating" of at least A, IX. Notwithstanding the preceding,
for the period February 1, 1999 through February 28, 1999, Sublessor
shall reimburse Sublessee for the reasonable cost of such insurance
directly attributable to the entire Premises within thirty (30) days of
receipt of invoice(s) and other documentation evidencing such cost
(except for the cost for insurance which is attributable to earthquake
and flood coverage which shall be solely borne by Sublessee).
Notwithstanding the preceding, for the period March 1, 1999 through April
30, 2002, Sublessor shall pay to Sublessee Ten and 97/100 percent
(10.97%) of the reasonable cost of such insurance directly attributable
to the Premises within thirty (30) days of receipt of invoice(s) and
other documentation evidencing such cost (except for the cost for
insurance which is attributable to earthquake and flood coverage which
shall be solely borne by Sublessee). The policies shall also name
Sublessor, Lessor and their respective officers, directors and employees,
as additional insureds, shall insure performance of the indemnities of
Sublessee contained in the Sublease and shall be primary coverage in the
instance of Sublessee's indemnities, so that any insurance coverage
obtained by Lessor or Sublessor shall be in excess thereto. All policies
required under the Sublease shall be endorsed to provide a waiver of
subrogation as to Sublessor and Lessor. Sublessee shall from time to
time upon written request promptly deliver to Sublessor evidence that all
premiums have been paid and all policies are in full force and effect,
all in such form as Sublessor may reasonably request. All policies
required under this Sublease shall include an unconditional agreement by
the insurer that the policy shall not be canceled, terminated, modified
or allowed to expire without 90 days' advance written notice to Sublessor
and Lessor. When Sublessee has any reason to believe that any insurance
policy required under the Lease may be cancelled, modified, expire or
terminate, Sublessee agrees to immediately provide written notice
detailing the same to Sublessor. All policy(s) required of Sublessee
pursuant to the Lease shall be tendered to Sublessee, upon renewal and
modification without request, and at any other time upon Sublessor's
request. Sublessor shall be under no obligation to maintain any
insurance, and if in its sole discretion it elects to do so, Sublessee
shall not be named as an additional insured therein.
ARTICLE VI
LOSS OF SUBLEASED PREMISES
6.1 Casualty. If the Subleased Premises shall be damaged by fire or
other casualty, or be condemned or taken in any manner for a public or
quasi-public use (and if this Sublease shall not have been terminated as
provided in the Lease), Sublessee agrees that Sublessor's obligation, if
any, to repair, restore or rebuild the Premises shall be determined in
accordance with the Lease. If the Premises or any part thereof shall be
damaged by fire or other casualty, Sublessee shall give prompt written
notice to Sublessor.
6.2 Condemnation. In the event of any condemnation or taking of the
Premises, or any portion thereof, Sublessee's rights are limited by the
Lease. Sublessee agrees that under no circumstances is Sublessor
responsible for any payment whatsoever to Sublessee arising from or in
any manner related to any condemnation involving the Premises. In the
event of a taking of all or a portion of the Premises, Sublessee shall
also not be entitled to receive any part of any award made in the
condemnation proceeding; provided, however, that nothing contained herein
shall be deemed to preclude Sublessee from intervening for Sublessee's
own interest in such proceedings to claim or receive from the condemning
authority any compensation to which Sublessee may otherwise be lawfully
entitled, and Sublessee shall be entitled to the benefit of any
diminution in rent granted to Sublessor under the Lease which is
applicable to the portion of the Premises so condemned or taken.
ARTICLE VII
DEFAULT AND BREACH
7.1 Sublessor's Remedies. In the event of any Default and/or Breach
on the part of Sublessee under any of the terms, provisions, covenants or
agreements of the Lease or of this Sublease, Sublessor shall have the
same rights and remedies against Sublessee under this Sublease as are
available to the Lessor against Lessee under the provisions of the Lease
including, but not limited to, those under paragraph 13 of the Lease.
Without limiting the foregoing, the occurrence of any of the following
events shall also constitute a Breach under this Sublease, and Sublessor
shall have all rights and remedies available under the Lease to Lessor in
the event of a Breach as a result of:
(a) The failure of Sublessee to cause the amount of the Letter
of Credit to be increased as and when required in accordance
with the requirements of section 2.5(b) above, where such
failure continues for a period of three (3) business days
following written notice to Sublessee, or
(b) Upon the election of Sublessor, in the event that no later
than thirty (30) days prior to the then applicable
expiration date of the Letter of Credit, neither (1) the
Bank shall have notified Sublessor that the Letter of Credit
will be renewed for at least one (1) year beyond the then
applicable expiration date, nor (2) Sublessee shall have
delivered to Sublessor a replacement Letter of Credit in the
amount required hereunder and otherwise meeting the
requirements set forth in section 2.5 above.
7.2 Sublessee's Remedies. In the event of any Default and/or Breach
on the part of Sublessor under any of the terms, provisions, covenants or
agreements of this Sublease, Sublessee shall have the right to seek
monetary damages or specific performance, but shall not have the right to
terminate this Sublease, except as otherwise expressly provided herein in
this Sublease. Notwithstanding anything contained in this Sublease,
Sublessor shall not be deemed in breach of any obligation under this
Sublease if it is reasonably unable to perform such obligation due to its
status as a Lessee (and not the Lessor) under the Lease. By way of
example but not limitation, if Lessor were required under the Lease to
make certain repairs but refused to do so, and Sublessor (as Lessee under
the Lease) was not permitted under the terms of the Lease to make such
repairs, Sublessor would be reasonably unable to perform such repairs and
therefore, not be deemed in Breach of the Sublease. As to obligations
under the Sublease that Sublessor is reasonably able to perform,
Sublessor shall not be deemed in breach of this Sublease unless Sublessor
fails within a reasonable time to perform an obligation required to be
performed by Sublessor. For purposes of the preceding sentence, a
reasonable time shall in no event be more than thirty (30) days after
receipt by Sublessor of written notice specifying wherein such obligation
of Sublessor has not been performed; provided, however, that if the
nature of Sublessor's obligation is such that more than thirty (30) days
are reasonably required for its performance, then Sublessor shall not be
in breach if performance is commenced within such thirty (30) day period
and thereafter diligently pursued to completion.
ARTICLE VIII
SUBLEASE
8.1 Incorporation of the Lease. Except as set forth herein in this
Sublease, the terms, covenants, conditions and agreements of the Lease,
are incorporated herein and made part of this Sublease as though fully
set forth herein (and references to the Sublease herein shall refer to
both this Sublease and the incorporated Lease regardless of whether the
Lease is expressly mentioned) and are applicable to this Sublease with
the same force and effect as though Sublessor was Lessor under the Lease,
Sublessee was Lessee under the Lease, and the Premises herein were the
Premises under the Lease. In the incorporation of such terms, covenants,
provisions, conditions and agreements, if there is a conflict between the
terms of the Lease and this Sublease, the terms of this Sublease shall
control. By way of example but not limitation, the terms "Breach" and
"Default" shall have the same meanings as those contained in the Lease
and entitle Sublessor to invoke against Sublessee those remedies enjoyed
by Lessor when Lessee causes a Breach and/or Default under the Lease;
however, Sublessee's obligations to pay Base Rent are based on the
amounts set forth in section 2.1 above and not those contained in the
Lease. Without limiting the generality of the foregoing, regardless of
whether certain provisions of the January Lease Amendment refer to
"Exodus" specifically or simply "Lessee," such provisions shall
nonetheless apply to Sublessee (except as set forth below in section
8.2). Sublessor and Sublessee acknowledge and agree that as between them
with respect to the interpretation of provisions of the January Lease
Amendment which is incorporated into this Sublease by reference, the sole
purpose of using the term "Exodus" instead of "Lessee" in the January
Lease Amendment is to clarify certain distinctions being made in the
January Lease Amendment. Additionally, by way of example but not
limitation, when a particular provision in the Lease requires Lessor's
consent, Lessor's approval, Lessor's judgment or comparable language,
such consent, approval, etc., will be required of both Talus
Corporation (which stands in the shoes of the Lessor in the Lease
pursuant to section 8.1 of the Sublease), and G&I Walsh LLC (which is the
actual Lessor under the Lease). This Sublease is subject and subordinate
to, and Sublessee accepts this Sublease subject and subordinate to, all
of the terms, covenants, provisions, conditions and agreements contained
in the Lease, Existing ACC Sublease and the matters to which the Lease is
subject and subordinate. This Sublease shall also be subject to any
amendments and supplements to the Lease hereafter made between Lessor and
Sublessor, provided that any such amendment or supplement to the Lease
will not prevent or adversely affect the use by Sublessee of the Premises
in accordance with the terms of this Sublease or additionally increase
the Base Rent, additional rent or other charges required to be paid by
Sublessee under the terms of this Sublease. Sublessee acknowledges and
agrees that it shall not be permitted to exercise any options granted to
Lessee under the Lease.
8.2 Exclusions. Notwithstanding anything contained in the Sublease,
the following provisions of the Lease are expressly excluded from
incorporation herein (as are any references to the following provisions
which are contained in a non-excluded provision): paragraphs 1.1 through
1.12; paragraphs 2.2, 2.3, 2.5, 3.1, 3.2, 4.1, 5, 8.2(b), 13.1(g), 15.1
through 15.6, 37.1, 37.2, 38, 39.1 through 39.4, 48, paragraphs 1, 3 and
4 (and the first sentence of paragraph 2) of Exhibit {A}, the Guaranties,
the Lease Amendment dated November 14, 1997 and November 20, 1997, and
paragraphs 2, 30, 31, 32 and 33 of the January Lease Amendment.
8.3 Sublessee's Additional Duties Regarding the Lease. Without
limiting Sublessee's obligations pursuant to the Sublease relating to the
below matters, Sublessee also covenants and agrees as follows:
(a) To perform and observe all of the terms, covenants,
conditions and agreements of the Lease to be performed on
the part of Sublessor with respect to the Premises to the
extent the same are not expressly modified or inconsistent
with the terms of this Sublease;
(b) That Sublessee will not do or cause to be done or suffer or
permit any act or thing to be done which would or might
cause any Default and/or Breach under this Sublease or the
Lease, or cause the rights of Sublessor as Lessee thereunder
to be canceled, terminated or forfeited, or which would make
Sublessor liable for any damages, claim or penalty;
(c) Except as provided in the Sublease with respect to diesel
fuel, Sublessee shall not cause or permit any Hazardous
Substances to be used, stored, generated or disposed of on
the Premises;
(d) Sublessor shall also have the right to enter the Premises at
any time, in the case of an emergency, and otherwise with 24
hours' advance notice for the purpose of inspecting the
Premises. Sublessor acknowledges that Sublessee intends to
operate a secure internet data center facility at the
Premises. Accordingly, except in the case of an emergency,
Sublessor or its agents shall give Sublessee 24 hours'
advance notice prior to entering the Premises, and Sublessee
shall have the right to require that a representative of
Sublessee accompany any parties entering the Premises. In
the case of an emergency, Sublessor or its agents shall make
such effort as is deemed appropriate by Sublessor or its
agents under the circumstances to contact an on-site
representative of Sublessee, if one is present at the
Premises, prior to entering the Premises; provided, however,
that if an on-site representative cannot be located after
such effort is made or if immediately entry to the Premises
without attempting to locate an on-site representative of
Sublessee is deemed appropriate by Sublessor or its agents
due to the nature of the emergency, Sublessor or its agents
may enter the Premises unaccompanied by a representative of
Sublessee; and
(e) Sublessee acknowledges and agrees that paragraph 40 of the
Lease is applicable to this Sublease since the Premises are
part of a group of buildings controlled by Lessor.
ARTICLE IX
NONDISTURBANCE
9.1 Quiet Possession. If, and so long as Sublessee pays the Base
Rent, additional rent and other charges due and payable described herein
and keeps, observes and performs all of the other covenants, agreements,
terms, provisions and conditions herein contained on the part of
Sublessee to be kept, observed and performed, Sublessee shall have quiet
possession of the Premises, subject, however, to the covenants,
agreements, terms, provisions and conditions of this Sublease, the Lease,
the Existing ACC Sublease, and to the matters to which the Lease is or
becomes subject and/or subordinate.
9.2 Notice of Default and Right to Cure. Sublessor shall provide
Sublessee with copies of any written notice to or from Lessor specifying
a Default by Sublessor under the terms of the Lease within seventy-two
(72) hours of Sublessor's receipt from or delivery of the notice to
Lessor. Upon demand from Sublessee and so long as Sublessee has not
defaulted under the terms of this Sublease, Sublessor shall take all
action reasonably necessary to avoid termination of the Lease or
disturbance of Sublessee's use and occupancy of the Premises as a result
of such Default. Sublessor shall keep Sublessee fully advised as to
Sublessor's efforts to cure or resolve any allegation of a Default and
shall provide Sublessee, at Sublessor's expense, with copies of all non-
privileged correspondence, and documentation, including but not limited
to, any pleadings filed by or on behalf of Sublessor or Lessor in the
course of any litigation which involves an alleged Default relating
thereto. If Sublessor fails to timely cure a Default or contests the
same by appropriate legal proceedings, and Lessor has threatened to
disturb Sublessee's use or occupancy of the Premises or any party
thereof, Sublessee shall have the right so long as it is not in default
under this Sublease, but not the duty, to take whatever action is
reasonably necessary to cure the Default. All reasonable and necessary
costs, expenses and fees (including reasonable attorneys' fees) incurred
by Sublessee in the course of curing a Default shall be fully recoverable
from all payments (including Base Rent and additional rent) that come due
to Sublessor under this Sublease.
ARTICLE X
NOTICE
10.1 Notice. Paragraph 23 of the Lease shall govern notices except
the designated addresses shall be those provided in the initial paragraph
of this Sublease. All notices to Sublessor shall be sent to Sublessor's
address, to the attention of the Controller. All notices to Sublessee
shall be sent to the attention of Richard Stoltz, CFO, COO.
10.2 Courtesy Copies. Whenever notice is delivered pursuant to this
Sublease, copies shall also be delivered to the following:
To Sublessor:
Robert M. Horowitz, Esq.
Pearson, Milligan & Horowitz, P.C.
1999 Broadway, Suite 2300
Denver, CO 80202
Fax: (303) 298-7010
To Sublessee:
Kyle Barriger, IDC Manager
Exodus Communications, Inc.
2401 Walsh Avenue
Santa Clara, CA 95054
Fax: (408) 346-2206
ARTICLE XI
SUBLEASING AND ASSIGNMENT BY SUBLESSEE
11.1 No Future Assignment or Sublease.
(a) Except as provided herein in this section 11.1, Sublessee
shall not assign or otherwise transfer, mortgage, pledge,
hypothecate or encumber this Sublease or the Premises, or
any interest therein, and shall not sublet (which term
herein shall also include "sub-subletting") the Premises or
any part thereof, or any right or privilege appurtenant
thereof, or permit any other party to occupy the Premises,
or any portion thereof, except in accordance with the
provisions of paragraph 12 of the Lease. The foregoing
shall also require the written consent of both Sublessor and
Lessor in accordance with the criteria set forth in
paragraph 12 of the Lease. Sublessor's consent to any
assignment, transfer or subletting by Sublessee shall not
relieve Sublessee from any of its obligations under this
Sublease. As a condition to providing such written consent,
Sublessor reserves the right to make such changes in the
Sublease as Sublessor and/or Lessor may require to be made
to the Lease pursuant to paragraph 12 thereof. If Sublessee
violates any of the terms contained in this section 11.1,
such shall constitute a Breach under the terms of this
Sublease.
(b) Notwithstanding anything to the contrary, Sublessee agrees
that Sublessor, as a condition to giving its consent to any
proposed sublease or assignment, in addition to any other
obligations of or amounts due from Sublessee pursuant to the
Lease, shall require that Sublessee pay to Sublessor, as
additional Rent under the Sublease, before execution of any
proposed assignment or sublease (i) any and all amounts
required by Lessor to be paid by Sublessor pursuant to
paragraph 12.2(e) of the Original Lease, (ii) any and all
other amounts which Lessor requires to be paid or delivered
by Sublessor in connection with or in any manner related to
the proposed assignment or sublease, and (iii) all other
reasonable out-of-pocket expenses incurred by Sublessor in
connection with the proposed assignment or sublease,
including, without limitation, attorneys' and consultants'
fees and expenses. The amounts described in subsection
(iii) above shall be referred to (if at all) in the January
Lease Amendment as the "Talus Amounts," and such amounts
shall be paid regardless of and in addition to any amounts
set forth in section 11.1(c) below. The Parties agree that
it is the express intent of this section 11.1(b) to make
Sublessor "whole" by not requiring Sublessor to incur any
expense whatsoever in connection or relating to Sublessee's
subletting(s) or assignment(s), proposed or otherwise, all
such expense to be immediately reimbursed by Sublessee to
Sublessor.
(c) Notwithstanding any provision of paragraph 12 of the Lease,
Sublessor, as a condition to giving its consent to any
proposed sublease or assignment, may also (i.e, in addition
to Sublessee's obligations under the Sublease including
without limitation those set forth in section 11.1(b) above)
require that Sublessee pay to Sublessor, as additional Rent
under the Sublease,
(i) In the case of an assignment where the Sublease is the
only asset assigned by Sublessee to the assignee,
promptly after receipt by Sublessee (or any affiliate
thereof or other person or entity designated by
Sublessee) seventy-five percent (75%) of the amount, if
any, by which (A) any consideration (including, without
limitation, payment for leasehold improvements) paid by
the assignee to Sublessee or such affiliate or other
designated person or entity for the assignment or
otherwise attributable to the value of Sublessee's
interest in the Sublease exceeds (B) the Assignment or
Subletting Costs (as defined below);
(ii) In the case of an assignment where the Sublease is not
the only asset assigned by Sublessee to the assignee
(e.g., an assignment in connection with a sale of
Sublessee's operations at the Premises or an assignment
resulting from a change in control of Sublessee where
Sublessee is not a publicly traded company immediately
following such change in control), on a monthly basis,
seventy-five percent (75%) of the amount, if any, by
which (A) the Prevailing Market Rent (as defined below)
for the Premises for each month of the term of the
Sublease after the date of the assignment exceeds (B)
the total amount of Rent payable hereunder for each such
month; as used herein, the term "Prevailing Market Rent"
for the Premises shall mean the total monthly Rent that
Sublessor could obtain for each month of term of the
Sublease remaining after the date of the assignment from
a third party desiring to lease the Premises for the
remaining term of the Sublease after the date of the
assignment, taking into account the age of the Building,
the size of the Premises, the quality of construction of
the Building, the other terms of this Sublease, the
rental and any other consideration then being obtained
for new leases of space comparable to the Premises in
the locality of the Building and all other factors that
would be relevant to a third party desiring to lease the
Premises for such term in determining the rental such
party would be willing to pay therefor, but excluding
any rental value attributable to any items Sublessee is
permitted to remove from the Premises upon expiration of
the term of this Sublease pursuant to paragraph 7.4 of
the Lease; provided that if Sublessee and Sublessor are
unable to agree upon the Prevailing Market Rent within
thirty (30) days after the date of the assignment, then
the Prevailing Market Rent for the remaining term of
this Sublease shall be determined by appraisal following
the same procedures as set forth in paragraph 39(c) of
the Addendum to the Direct Lease between Exodus
Communications, Inc. and G&I Walsh LLC dated January
_____, 1999 (which provision is incorporated herein by
reference solely for purposes of such appraisal
procedures), for the determination of "Fair Market Rent"
for the first year of a Renewal Option Term; and
(iii) in the case of a sublease, on a monthly basis,
seventy-five percent (75%) of the amount, if any, by
which (A) the rent paid to Sublessee (or any affiliate
thereof or other person or entity designated by
Sublessee) for the sublet space by the sublessee (such
rent to include all consideration paid for the sublet
space) for each month exceeds (B) the total amount of
Rent payable under the Sublease attributable to the
sublet space for such month; provided, however, that in
the case of a sublease, prior to paying any amounts to
Sublessor pursuant to this section 11.1(c)(iii),
Sublessee may recover out of the rent or other
consideration payable by the sublessee to Sublessee (or
any affiliate thereof or other person or entity
designated by Sublessee), and use such recovery to
reimburse itself for, a pro rata share of the Assignment
or Subletting Costs incurred in connection with such
sublease, such pro rata share to be determined by
allocating an equal portion of the total amount of
Assignment or Subletting Costs incurred in connection
with such sublease to each month of the term of such
sublease; if there is more than one sublease under this
Sublease, the amounts (if any) to be paid by Sublessee
to Sublessor pursuant to this section 11.1(c)(iii) shall
be separately calculated for each sublease and amounts
due Sublessor with regard to any one sublease may not be
offset against rental and other consideration pertaining
to or due under any other sublease.
As used herein, the term "Assignment or Subletting Costs" means the total
amount of any brokerage commissions paid by Sublessee in connection with
a specific subletting or assignment (not to exceed commissions typically
paid in the market at the time of such subletting or assignment),
Sublessee's reasonable costs of advertising the space for sublease or
assignment, Sublessee's reasonable legal fees and expenses in connection
with such assignment or sublease, and any improvement allowance or other
inducement (such as moving expenses and lease takeover obligations), paid
by Sublessee to the sublessee or assignee; provided that, as a condition
to Sublessee recovering Assignment or Subletting Costs pursuant to
section (i) or (iii) of this section 11.1(c), Sublessee shall provide to
Sublessor, within sixty (60) days of Sublessor's execution of Sublessor's
consent to the assignment or subletting, a detailed accounting of the
Assignment or Subletting Costs and supporting documents, such as receipts
and invoices, except that if any Assignment or Subletting Costs are not
determinable by such date, Sublessee shall so state in its accounting,
identifying with reasonable specificity the costs not determinable, and
promptly after such costs are determinable, but in no event later than
thirty (30) days after effective date of the assignment or ninety (90)
days after the commencement of the term of such sublease, as applicable,
a supplemental accounting shall be delivered to Sublessor setting forth
all Assignment or Subletting Costs and supporting documents (if not
previously delivered).
ARTICLE XII
MISCELLANEOUS
12.1 Binding Effect. The covenants, agreements, terms, provisions
and conditions of this Sublease shall bind and inure to the benefit of
the respective successors and assigns of the parties with the same effect
as if mentioned in each instance where a party is named or referred to,
except that no violation of the provisions of section 11.1 above shall
operate to vest any rights in any successor, assignee or legal
representative of Sublessee.
12.2 Broker. Sublessee warrants and represents that the only person,
firm, brokers or finders with whom it had any dealings in connection
with this transaction are CPS. Sublessee hereby agrees to indemnify,
protect, defend and hold harmless from and against liability for
compensation or charges which may be claimed by any unnamed broker,
finder or other similar party by reason of any dealings or actions of
Sublessee, including any costs, expenses, attorneys' fees reasonably
incurred with respect thereto.
12.3 Sole Agreement. This Sublease with attachments sets forth the
entire agreement between the parties. This Sublease supersedes all prior
negotiations and agreements between Sublessor and Sublessee with respect
to the subject matter of this Sublease. No modification or alteration of
this Sublease shall be effective unless reduced to writing and executed
by Sublessor or Sublessee, together with any necessary consent by Lessor.
12.4 Sublessor's Consent. Whenever the consent and/or approval of
Sublessor is required to be given under the provisions of this Sublease,
Sublessor shall be conclusively deemed not to have unreasonably withheld
its consent and/or approval if the Lessor has refused or withheld its
consent and/or approval thereto for any reason.
12.5 Severability. Should any of the provisions of the Sublease to
any extent be held to be invalid or unenforceable, the remainder of this
Sublease shall continue in full force and effect.
12.6 Headings. The subject headings used in this Sublease are
included for purposes of reference only, and shall not affect the
construction or interpretation of any of its provisions.
12.7 Construction. The Rule of Construction which provides that
ambiguities in a contract shall be construed against the drafter shall
not apply to this Sublease and the Parties waive any such claim or
defense to the terms of this Sublease.
12.8 Further Acts. Upon reasonable request by Sublessor from time to
time, Sublessee shall execute and deliver such additional documents and
instruments and take such other actions as may be reasonably necessary to
give effect to the intents and purposes of this Sublease.
12.9 Non-modification of obligations under the Lease. Nothing
hereinabove in this Sublease is intended to reduce or increase Talus
Corporation's obligations or reduce or increase G & I Walsh LLC's
obligations under the Lease.
12.10 Facsimile Signature. The parties hereto agree that a facsimile
signature may substitute for and have the same legal effect as the
original signature.
IN WITNESS WHEREOF, Sublessor and Sublessee have duly executed this
Sublease as of the day and year first above written.
SUBLESSOR:
TALUS CORPORATION
By: _______________________________________
Name: _____________________________________
Title: ___________________________________
SUBLESSEE:
EXODUS COMMUNICATIONS, INC.
By: _______________________________________
Name: _____________________________________
Title: ___________________________________
APPROVAL AND CONSENT OF LESSOR
Lessor's signature below evidences its approval of and consent to the
foregoing Sublease. Lessor's approval of and consent to the foregoing
Sublease does not constitute Lessor's approval of or consent to any
future or further assignment of or subletting under the Lease or the
foregoing Sublease, which shall require the future consent of the Lessor
subject to the conditions set forth in paragraph 12 of the Lease.
Lessor's approval of and consent to the foregoing Sublease shall not
constitute the waiver of any other terms or provisions of the Lease, and
Sublessor and Sublessee shall at all times comply with the terms and
provisions thereof.
LESSOR:
G&I WALSH LLC, a Delaware limited liability company
By: G&I Investment Walsh LLC, a Delaware
limited liability company, its managing member
By: G&I Investment Walsh Corp., a
Delaware corporation, its managing member
By: _______________________________________
Name: _____________________________________
Title: ___________________________________
<PAGE>
EXHIBIT A
Plans and Specifications for Exodus New Data Center-SC4, prepared by
Datasphere, Project No. 65098.00, Permit & Bid Set, dated 1/7/99,
consisting of the drawings listed below:
INDEX OF DRAWINGS
SHEET NO. SHEET TITLE
CS-1 COVERSHEET
CIVIL
C101 SITE PLAN - NEW WORK
ARCHITECTURAL
A001 GENERAL NOTES, LEGEND AND ABBREVIATIONS
AD101 DEMOLITION PLAN - FIRST FLOOR
AD102 DEMOLITION PLAN - SECOND FLOOR
AD103 REFLECTED CEILING PLAN - DEMOLITION FIRST FLOOR
AD104 REFLECTED CEILING PLAN - DEMOLITION SECOND FLOOR
A101 NEW WORK PLAN - FIRST FLOOR AND WALL SCHEDULE
A102 NEW WORK PLAN - SECOND FLOOR
A103 PARTIAL PLAN - NEW WORK FIRST FLOOR
A104 PARTIAL PLAN - NEW WORK FIRST FLOOR
A105 ROOF PLAN - NEW WORK
A201 BUILDING ELEVATIONS AND DETAILS
A401 DETAILS
A402 DETAILS
A403 DETAILS
A801 REFLECTED CEILING PLAN - NEW WORK FIRST FLOOR
A901 DOOR AND LOUVER SCHEDULE AND DETAILS
A902 WINDOW SCHEDULE
A903 FINISHES PLAN AND SCHEDULE
STRUCTURAL
S0.1 GENERAL NOTES AND TYPICAL DETAILS
S2.1 FOUNDATION PLAN
S2.2 INTERSTITIAL LEVEL FRAMING PLAN
S2.3 MEZZANINE FRAMING PLAN
S2.4 ROOF FRAMING PLAN
S6.1 CONCRETE AND MASONRY DETAILS
S7.1 STEEL DETAILS
S7.3 METAL STUD DETAILS
S8.1 WOOD DETAILS
MECHANICAL
M001 TITLE 24, NOTES AND LEGEND
M002 SPECIFICATIONS
M101 ROOF AND WAREHOUSE DEMOLITION PLAN
M102 PARTIAL PLAN - DEMOLITION FIRST FLOOR
M103 ROOF PLAN - NEW WORK
M104 PARTIAL PLAN - NEW WORK FIRST FLOOR
M105 PARTIAL COMPUTER ROOM PLAN - FIRST FLOOR
M106 SMOKE DAMPER AND PLENUM PLAN
M201 COMPUTER ROOM SECTION AND SCHEDULES
M301 DETAILS AND CONTROL WORK
ELECTRICAL
E101 SITE ELECTRICAL PLAN
E101 ELECTRICAL SYMBOLS AND NOTES
E201 SINGLE LINE DIAGRAM
E202 SINGLE LINE DIAGRAM
E203 SINGLE LINE DIAGRAM
E204 EPO AND SWITCHBOARD ELEVATIONS
E301 PANEL SCHEDULES
E302 PANEL SCHEDULES
E303 PANEL SCHEDULES
E400 TITLE 24 FORMS, LIGHTING FIXTURE SCHEDULE AND DETAILS
E401 PARTIAL FIRST FLOOR LIGHTING PLAN
E402 PARTIAL FIRST FLOOR LIGHTING PLAN
E501 PARTIAL FIRST FLOOR POWER PLAN
E502 PARTIAL FIRST FLOOR POWER PLAN
E503 ROOF ELECTRICAL PLAN
E601 FIRST FLOOR GOUNDING PLAN
E602 GROUNDING DETAILS AND NOTES
<PAGE>
SECOND AMENDMENT TO LEASE
THIS SECOND AMENDMENT TO LEASE (this "Amendment") is made as of
January 29, 1999, by and between G&I WALSH LLC, a Delaware limited
liability company ("Lessor"), and TALUS CORPORATION, a California
corporation, formerly known as Scientific Custom Metal Products
International, Inc. ("Lessee").
RECITALS
A. Mopar, LLC, Lessor's predecessor-in-interest, and Lessee
have previously entered into that certain Standard
Industrial/Commercial Single-Tenant Lease-Net, dated as of March 1,
1996, as amended by that certain Lease Amendment, identical
counterparts of which have been dated as of November 14, 1997, and
November 20, 1997 (as so amended, the "Original Lease"), covering
certain premises commonly known as 2401 Walsh Avenue, Santa Clara,
California (the "Premises"); and
B. Lessee has previously entered into a sublease with ACC
Microelectronics Corporation ("ACC"), dated April 25, 1997 (the
"Existing ACC Sublease"), pursuant to which ACC has subleased a
portion of the Premises consisting of an agreed area of 10,500
rentable square feet (the "ACC Sublease Premises").
C. Lessor and Lessee desire to amend the Original Lease in
connection with the proposed subletting by Lessee to Exodus
Communications, Inc., a Delaware corporation ("Exodus") of,
initially, that portion of the Premises other than the ACC Sublease
Premises, and, eventually, the entire Premises, pursuant to that
certain sublease entered into or to be entered into on or about the
date hereof, between Lessee, as sublessor, and Exodus, as sublessee
(the "Exodus Sublease"), upon and subject to the terms, covenants
and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the agreements of Lessor and
Lessee herein contained and other valuable consideration, the
receipt and adequacy of which are hereby acknowledged, Lessor and
Lessee hereby agree as follows:
1. Use of Terms. As used herein, terms shall have the same
meanings as in the Original Lease. The term "Lease" as used in
the Original Lease and in this Amendment shall mean the Original
Lease as modified by this Amendment. As used herein, the term
"Talus Corporation" shall mean Talus Corporation, a California
corporation, formerly known as Scientific Custom Metal Products
International, Inc., the present Lessee under the Lease, any
successor-in-interest thereto, or any assignee of its interest
under the Lease. As between Lessor and Talus Corporation, the
terms "Lessee" and "Talus Corporation" are interchangeable.
Lessee and Lessor acknowledge that the sole purpose of using the
term "Talus Corporation" herein instead of "Lessee" is to
facilitate certain distinctions being made in the Exodus Sublease
with respect to provisions of the Lease which are being
incorporated by reference in the Exodus Sublease.
2. Modification of Base Rent.
(a) Effective as of February 1, 1999, the Base Rent payable
under the Lease shall be adjusted as follows:
Starting Date Ending Date Monthly Base Rent
2/1/1999 2/28/1999 $89,580.00
3/1/1999 1/31/2000 $90,012.00
2/1/2000 2/29/2000 $94,272.00
3/1/2000 1/31/2001 $94,726.00
2/1/2001 2/28/2001 $98,986.00
3/1/2001 1/31/2002 $99,462.00
2/1/2002 2/28/2002 $103,722.00
3/1/2002 4/30/2002 $104,222.00
5/1/2002 1/31/2003 $105,270.00
2/1/2003 1/31/2004 $110,055.00
2/1/2004 5/31/2004 $115,797.00
Notwithstanding the foregoing, in the event that pursuant to the
terms of the Exodus Sublease, Exodus begins renting the ACC
Sublease Premises prior to May 1, 2002, then from and after the
date of such early renting, the rent schedule set forth above shall
be replaced with the following rent schedule:
Starting Date Ending Date Monthly Base Rent
2/1/1999 1/31/2000 $90,915.00
2/1/2000 1/31/2001 $95,700.00
2/1/2001 1/31/2002 $100,485.00
2/1/2002 1/31/2003 $105,270.00
2/1/2003 1/31/2004 $110,055.00
2/1/2004 5/31/2004 $115,797.00
(b) Notwithstanding the provisions of Paragraph 2(a), above,
if the Exodus Sublease is terminated as a result of Exodus'
default, then from and after the date of termination of the Exodus
Sublease (the "Exodus Termination Date"), the provisions of
Paragraph 2(a) shall be null and void, and Lessee shall thereafter
pay Base Rent in the amount set forth in the Original Lease without
regard to the adjustment of Base Rent pursuant to Paragraph 2(a) of
this Amendment, but subject to any future adjustment of Base Rent
applicable under the terms of the Lease (other than an adjustment
arising or relating to the subleasing of the Premises to Exodus).
After the Exodus Termination Date, if and when Lessee recovers any
amounts payable by Exodus under the Exodus Sublease from time to
time, including, but not limited to, any recovery from any letter
of credit or other security deposit held by Lessee (an "Exodus
Recovery"), such amounts shall be applied by Lessee in the
following order of priority:
(i) first, whether or not the Lease has terminated prior
to the date Lessee receives the Exodus Recovery, Lessee shall
retain an amount from the Exodus Recovery not to exceed the amount
of Lessee's reasonable attorneys' fees and costs incurred in
obtaining the Exodus Recovery;
(ii) second, whether or not the Lease has terminated
prior to the date Lessee receives the Exodus Recovery, Lessee shall
retain an amount from the Exodus Recovery not to exceed the amount
of any unpaid Base Rent and Additional Rent under the Exodus
Sublease through the Exodus Termination Date;
(iii) third, whether or not the Lease has terminated
prior to the date Lessee receives the Exodus Recovery, Lessee shall
retain from the Exodus Recovery an amount not to exceed the amount
of Allocated Rent (as defined below) payable by Lessee under the
Lease for any period of time from and after the Exodus Termination
Date through and including the earlier of the date Lessee receives
the Exodus Recovery or the date of termination of the Lease, for
which no sublessee (other than ACC under the Existing ACC Sublease,
if the Existing ACC Sublease is in effect) is paying sublease rent
to Lessee;
(iv) fourth, whether or not the Lease has terminated
prior to the date Lessee receives the Exodus Recovery, if Lessee
subsequently subleases the Premises or any portion thereof to one
or more sublessees (other than ACC under the Existing ACC
Sublease), then, only with respect to any period of time from and
after the Exodus Termination Date through and including the earlier
of the date Lessee receives the Exodus Recovery or the date of
termination of the Lease, during which period of time the total
sublease rent payable by the sublessee(s) (other than ACC under the
Existing ACC Sublease, if the Existing ACC Sublease is in effect)
to Lessee is less than the total amount of Allocated Rent payable
by Lessee under the Lease for the same period of time, Lessee shall
retain from the Exodus Recovery an amount not to exceed: (A) the
total amount of Allocated Rent payable by Lessee under the Lease
for the same period of time, minus (B) the total amount of sublease
rent received by Lessee from sublessee(s) (other than ACC under the
Existing ACC Sublease, if the Existing ACC Sublease is in effect)
for the same period of time; and
(v) fifth, whether or not the Lease has terminated prior
to the date Lessee receives the Exodus Recovery, Lessee shall
retain from the Exodus Recovery an amount not to exceed the total
amount of any non-contingent obligations owing from Exodus to
Lessee in connection with the Exodus Sublease as of the date Lessee
receives the Exodus Recovery, which obligations have not been
satisfied by the amounts retained by Lessee pursuant to clauses
(ii), (iii) and (iv), above,
(vi) sixth, provided that the Exodus Recovery has not
been exhausted by the operation of subparagraphs (i) through (v),
above,
(A) if the Lease has terminated prior to the date
Lessee receives the Exodus Recovery, and such termination occurred
prior to the scheduled Expiration Date (i.e., May 31, 2004) as a
result of Lessee's default under the Lease, then, if Lessee has
paid to Lessor any amounts owing to Lessor as a result of such
default, Lessee may retain from the Exodus Recovery an amount not
to exceed the total amount paid by Lessee to Lessor as a result of
such default, and Lessee shall pay the remainder of the Exodus
Recovery, if any, to Lessor within three (3) business days after
receipt thereof, as additional rent under this Lease, in addition
to Base Rent and Additional Rent previously received by Lessor;
provided that any amounts paid to Lessor pursuant to this clause
(A) shall first be credited against any amounts owing from Lessee
to Lessor, or
(B) if the Lease has terminated prior to the date
Lessee receives the Exodus Recovery under any circumstances other
than as describe in clause (A), above, Lessee shall pay the
remainder of the Exodus Recovery, if any, to Lessor within
three (3) business days after receipt thereof, as additional rent
under this Lease, in addition to Base Rent and Additional Rent
previously received by Lessor; provided that any amounts paid to
Lessor pursuant to this clause (B) shall first be credited against
any amounts owing from Lessee to Lessor, or
(C) if the Lease has not terminated prior to the
date Lessee receives the Exodus Recovery, Lessee shall deposit the
remainder of the Exodus Recovery, if any, within three (3) business
days after receipt thereof, into a deposit account opened jointly
in the name of Lessee and Lessor, at a bank located in California,
mutually agreeable to Lessee and Lessor (the "Exodus Recovery
Account"), for disbursement pursuant to Paragraph 2(c), below. All
interest earned on the funds deposited in the Exodus Recovery
Account shall belong to Lessee and shall be disbursed to Lessee as
and when paid by the depository.
As used in this Paragraph 2(b) and in Paragraph 2(c), below, the
term "Additional Rent" means all regular recurring monetary
obligations payable by Lessee under the Lease other than Base Rent,
for items such as Real Property Taxes, insurance, utilities and
other items paid by Lessee a part of the "triple net" arrangement
under the Lease; "Additional Rent" shall not, however, include
items such as obligations under indemnity provisions or other non-
recurring items. As used in this Paragraph 2(b) and in
Paragraph 2(c), below, the term "Allocated Rent" shall mean:
(1) for any period of time during which Lessee, itself, does not
occupy any portion of the Premises, and during which ACC occupies
the ACC Sublease Premises, an amount equal to eighty-nine percent
(89%) of the total amount of Base Rent and Additional Rent payable
by Lessee under the Lease for the relevant period of time, or
(2) for any period of time during which Lessee, itself, does not
occupy any portion of the Premises, and during which ACC does not
occupy the ACC Sublease Premises, an amount equal to the total
amount of Base Rent and Additional Rent payable by Lessee under the
Lease for the relevant period of time, or (3) for any period of
time during which Lessee, itself, occupies any portion of the
Premises, and during which ACC occupies the ACC Sublease Premises,
an amount equal to the total amount of Base Rent and Additional
Rent payable by Lessee under the Lease for the relevant period of
time which is applicable to that portion (only) of the Premises
which neither Lessee, itself, nor ACC occupies, determined by
apportioning the Base Rent and Additional Rent on an equal per-
square-foot basis over the Premises, or (4) for any period of time
during which Lessee, itself, occupies any portion of the Premises,
and during which ACC does not occupy the ACC Sublease Premises, an
amount equal to the total amount of Base Rent and Additional Rent
payable by Lessee under the Lease for the relevant period of time
which is applicable to that portion (only) of the Premises which
Lessee, itself, does not occupy, determined by apportioning the
Base Rent and Additional Rent on an equal per-square-foot basis
over the Premises.
(c) On the first day of each month, Lessee and Lessor shall
arrange for disbursement of funds from the Exodus Recovery Account
in an amount which will reimburse Lessee for the following amounts
actually paid by Lessee to Lessor with respect to the immediately
preceding month:
(i) for any portion of the immediately preceding month
for which no sublessee (other than ACC under the Existing ACC
Sublease, if the Existing ACC Sublease is in effect) is paying
sublease rent to Lessee, an amount not to exceed the amount of
Allocated Rent for such portion of the month payable by Lessee
under the Lease; and
(ii) if Lessee subsequently subleases the Premises or
any portion thereof to one or more sublessees (other than ACC under
the Existing ACC Sublease), then, only with respect to any portion
of the immediately preceding month during which the total sublease
rent payable by the sublessee(s) (other than ACC under the Existing
ACC Sublease, if the Existing ACC Sublease is in effect) to Lessee
is less than the total amount of Allocated Rent payable by Lessee
under the Lease for the same period of time, an amount not to
exceed: (A) the total amount of Allocated Rent payable by Lessee
under the Lease for said period of time, minus (B) the total amount
of sublease rent received by Lessee from sublessee(s) (other than
ACC under the Existing ACC Sublease, if the Existing ACC Sublease
is in effect) for the same period of time.
If, upon termination of the Lease, any funds remain on deposit in
the Exodus Recovery Account, after payment of all sums Lessee is
entitled to receive pursuant to Paragraph 2(b), above, and this
Paragraph 2(c) through the termination of the Lease, Lessee and
Lessor shall arrange for disbursement of all remaining funds on
deposit in the Exodus Recovery Account to Lessor, within three (3)
business days after termination of the Lease, as additional rent
under the Lease, in addition to Base Rent and Additional Rent
previously received by Lessor; provided that any amounts paid to
Lessor pursuant to this sentence shall first be credited against
any amounts owing from Lessee to Lessor.
(d) Notwithstanding the provisions of Paragraphs 2(b) and
2(c), above, if Lessee subsequently subleases the Premises or any
portion thereof to one or more sublessees, Lessor reserves the
right to adjust the Base Rent payable under the Lease in accordance
with the provisions of Paragraph 12.2(h) thereof.
3. Termination of Options to Extend. All options for Lessee to
extend the term of the Lease beyond May 31, 2004, are hereby
terminated, and shall be of no further force or effect.
4. Permitted Use. Paragraph 1.8 of the Original Lease is
modified to add data center processing and other lawful related
uses as additional permitted uses.
5. Modification of Paragraph 6.2; Consent to Diesel Fuel
Tank(s). In the fourth and fifth lines of Paragraph 6.2(a) the
words: ", or (iii) a basis for liability . common law theory" are
hereby deleted. Pursuant to Paragraph 6.2(a) of the Original
Lease, Lessor hereby consents to the installation by Exodus of one
or more above-ground diesel fuel tanks at the Premises, provided
that such installation shall be in compliance with all Applicable
Law, and Exodus shall obtain Lessor's prior approval of the precise
location thereof, and of the protective enclosures or encasements
thereof, which approval shall not be unreasonably withheld or
delayed.
6. Modification of Paragraph 6.3. In the fourth line of
Paragraph 6.3, following the word "consultants" and preceding the
comma which follows the word "consultants" the following shall be
added: "as the same pertain to interpretation of the foregoing".
7. Modification of Paragraph 6.4. In the second line of
Paragraph 6.4, following the word "times" and preceding the comma
which follows the word "times" the following shall be added: "in
accordance with Paragraph 26 of the Second Amendment to this
Lease". In the seventh line of Paragraph 6.4, the words "or be
imminent" (which follow the words "to exist") are deleted. In
the seventh and eighth lines of Paragraph 6.4, the words "as the
result of any such existing or imminent violation or contamination"
are deleted. In the eighth and ninth lines of Paragraph 6.4, the
words "or Lessor's Lender, as the case may be, for the costs and
expenses of such inspections." are deleted and replaced with the
following: "for the reasonable cost of such inspections, so long
as such inspection is reasonably related to the violation or
contamination."
8. Modification of Paragraph 7.1. The last sentence of
Paragraph 7.1 is hereby deleted and replaced with the following:
"Lessee shall, during the term of this Lease, keep the exterior
appearance of the Building in good and tenantable condition
consistent with the exterior appearance of other similar facilities
of comparable age and size in the vicinity, including, when
necessary, the exterior repainting of the Building."
9. Modification of Paragraph 7.3. In the first line of
Paragraph 7.3(a), the word "carpeting," is deleted and replaced
with "floor and". In the third line of Paragraph 7.3(a), the
words "in, on or about" are deleted and replaced with "in or
on". In the fourth and fifth lines of Paragraph 7.3(a), the words
"on the Premises from that which are provided by Lessor under the
terms of this Lease" are hereby deleted. In the sixth and seventh
lines of Paragraph 7.3(a), the words "as defined in
Paragraph 7.4(a)" are deleted and replaced with "pursuant to
Paragraph 7.4(a) or that Exodus is permitted to remove pursuant to
Paragraph 10 of the Second Amendment to this Lease". In the eighth
line of Paragraph 7.3(a), the words "(excluding the roof)" are
hereby deleted. In the ninth line of Paragraph 7.3(a), the words
"the roof or" are hereby deleted. In the tenth line of
Paragraph 7.3(a), the word "$25,000." is hereby deleted and
replaced with "$100,000 in any one year." The following sentences
are added to the end of Paragraph 7.3(a) of the Lease: "In
addition, Lessee may install satellite dishes, not to exceed two
(2) feet in diameter, on the roof of the Building only, without
Lessor's consent, but upon notice to Lessor, provided that such
satellite dishes are installed behind a roof screen, are not
visible from the street, and are installed in compliance with
Applicable Law. If Lessee wishes to use other satellite dishes
and/or install satellite dishes in any other manner or location,
such installation shall be in compliance with Applicable Law, and
shall not be made without Lessor's prior written approval of such
installation, which approval shall not be unreasonably withheld or
delayed." In the seventh line of Paragraph 7.3(b), following the
word "therefor" and preceding the period which follows the word
"therefor" the following shall be added: "whether or not such
Alterations or Utility Installations require Lessor's consent". In
the ninth line of Paragraph 7.3(b), the words "under Paragraph 36
hereof" are deleted. Lessor hereby consents to Exodus making
and/or installing upon commencement of the term of the Exodus
Sublease, the Alterations, Utility Installations and Trade Fixtures
shown on the plans and specifications set forth on Exhibit A to
this Amendment. In addition, Lessor shall not unreasonably
withhold or delay the granting of its consent to future
Alterations, Utility Installations or Trade Fixtures which are
consistent with the Alterations, Utility Installations or Trade
Fixtures shown on the plans and specifications set forth on
Exhibit A to this Amendment. Lessor hereby consents to the
installation of separate meters for monitoring utilities for the
ACC Sublease Premises and/or the portion of the Premises to be
subleased by Exodus. Lessor shall not unreasonably withhold or
delay the granting of its consent to the installation by Exodus of
security fencing which will in part enclose the Building, provided
that such installation shall be in compliance with Applicable Law,
and Lessee shall obtain Lessor's prior written approval of the
precise location, height and type thereof. Lessee agrees that
reasonable considerations in determining such approval shall
include, but not be limited to, whether such security fencing
unreasonably interferes with the use or occupancy (including
parking, ingress and egress) of 2403 Walsh Avenue or its
marketability to prospective tenants or subtenants.
10. Modification of Paragraph 7.4. In the second line of
Paragraph 7.4(c), following the word "thereof" and preceding the
word "clean" the following is added: "(except for those which
Lessee is permitted to remove pursuant to Paragraph 10 of the
Second Amendment to this Lease or required to remove pursuant to
subparagraph 7.4(b) above) broom". In the third through the fifth
lines of Paragraph 7.4(c) the words "or by Lessee performing .
include the Utility Installations." are deleted. In the sixth line
of Paragraph 7.4(c), following the word "and" and preceding the
word "Alterations" the following is added: "Lessee Owned".
Notwithstanding any provision of the Lease to the contrary, so long
as Exodus remains in possession of the Premises following the
termination of the Lease, pursuant to a direct lease between Lessor
and Exodus (the "Exodus Direct Lease"), Lessee shall have no
obligations to remove any Lessee Owned Alterations or Utility
Installations or to restore the Premises upon the termination of
the Lease, and thereafter Lessor shall look solely to Exodus with
respect to any damage caused to the Premises by Exodus, whether
during the term of the Exodus Sublease or during the term of the
Exodus Direct Lease. Notwithstanding any provisions of
Paragraph 7.4(a) to the contrary, Lessor acknowledges that the
following items installed at the Premises by Exodus shall at all
times during the term of this Lease be and remain the Property of
Exodus, and Exodus shall have the right to remove the same upon the
expiration of the term of the Lease, subject to Lessee's
obligations under Paragraph 7.4(c):
(a) Raised Flooring, Racking, Cage materials, cabinets
and patch panels.
(b) UPS Battery Systems including electrical switch
gear.
(c) FM200 fire suppression canisters, piping and
nozzles.
(d) VESDA or smoke sensor stations in ceiling or floor
area.
(e) Inside or outside security cameras, access card
reader stations, VCR, multiplexer, monitors and
computers.
(f) Partition and conference room furniture systems and
freestanding, cabinets, storage units.
(g) Telephone and voice mail system with desk stations
and receptionist, computers, servers, printers,
phone sets.
(h) Fiber Muxes or other Telco equipment installed in
MPOE rooms.
(i) Emergency distribution board and telephone
backboard with connectors.
(j) Maintenance bypass electronic and manual switch
gear.
(k) Kitchen appliances like microwaves, refrigerators
and vending machines.
(l) Console monitors, screen projection and screens in
command center.
(m) Bulletproof/resistant glass, provided that removal
of the same shall be conditioned upon replacement
of the openings with other glazing suitable in
Lessor's reasonable judgment.
(n) Satellite dishes or other communications equipment,
provided that removal of the same from the roof
shall be conditioned upon Lessee's or Exodus'
repair of all roof penetrations so that the
integrity of the roof is not compromised in any
manner, as determined by Lessor in its reasonable
judgment.
(o) Customer and vendor equipment and related materials
of the type listed above in this Paragraph 10.
(p) Exodus, Exodus Customer and Exodus Vendor personal
property which is not attached to the Premises.
(q) Any Trade Fixtures similar or related to the
foregoing items that were installed by or for
Exodus pursuant to the terms of the Lease.
Notwithstanding anything in the Lease to the contrary, under no
circumstances shall Talus Corporation be obligated to restore the
Premises with respect to, or to remove, any Alterations, Utility
Installations or other improvements to be installed by Exodus
pursuant to the plans and specifications described in Exhibit A
other than removal of the items listed in subparagraphs (a) through
(q) above (excluding any raised flooring), and any restoration
related to such removal. Without limiting the generality of the
foregoing, Talus Corporation shall have no obligation or right to
remove the following Alterations, Utility Installations or other
improvements to be installed by Exodus pursuant to the plans and
specifications described in Exhibit A:
(r) Permanent and temporary generator systems including
enclosures and fuel tanks with the associated
electronic and manual switch gear.
(s) Independent, stand-alone air-conditioning units or
any other components of the HVAC system at the
Premises.
(t) Electrical distribution equipment consisting of an
automatic transfer switch, parallel switch and
bypass unit, parallel UPS Units and several power
distribution units installed inside the Building by
Lessee, inward from the most inward point(s) of
connection to all transformers, switches, meters
and other electrical distribution equipment
installed by the public utility providing power to
the Building, or any electrical distribution
equipment installed by the City of Santa Clara
Power and Electric Company to add two new 3000 AMP
services to the Building, including two
transformers placed on the exterior of the Building
(one for each 3000 AMP service), and one or more
power switches and metering boxes inside the
Building.
(u) The mezzanine floor.
(v) Any raised flooring.
(w) Security fencing.
11. Modification of Paragraph 8.1. Notwithstanding the
provisions of Paragraph 8.1, Lessor, and not Lessee shall pay any
increase in the premiums for the property insurance covering the
Premises carried by Lessor pursuant to Paragraph 8.3 to the extent
such increase results from any acts or omissions occurring on, or
the use or occupancy of, any building(s) owned by Lessor which are
adjacent to the Building, and which are not occupied by Lessee,
either as a direct tenant of Lessor, or as a subtenant.
12. Insuring Party. The first sentence of Paragraph 2 of
Exhibit {A} of the Original Lease is hereby deleted. Lessor shall
be the "Insuring Party" under the Lease.
13. Deletion of Paragraph 8.2(b). Paragraph 8.2(b) of the Lease
is hereby deleted in its entirety.
14. Modification of Paragraph 8.3. Notwithstanding the
provisions of Paragraph 8.3(a), the deductible for earthquake
insurance (if applicable) may exceed $5,000, but shall not exceed
the greater of $100,000 or 20% of the replacement cost of the
building at the Premises, as determined by the insurer issuing the
earthquake insurance policy.
15. Modification of Paragraph 8.4. Paragraph 8.4 is hereby
deleted in its entirety and replaced with the following: "8.4
Lessee's Property Insurance. Lessee shall obtain and maintain
insurance coverage on all of Lessee's personal property, Trade
Fixtures, and Lessee Owned Alterations and Utility Installations.
Such insurance shall be full replacement cost coverage with a
deductible of not to exceed $5,000 per occurrence. The proceeds of
any such insurance shall be used by Lessee for the replacement of
personal property, Trade Fixtures and Lessee Owned Alterations and
Utility Installations, except in the case of a casualty occurring
during the final year of the term of this Lease. Lessee shall
provide Lessor with written evidence that such insurance is in
force. Lessor makes no representation that the limits or forms of
coverage of insurance specified herein are adequate to cover
Lessee's property, business operations or obligations under this
Lease."
16. Modification of Paragraph 8.5. In the fourth line of
Paragraph 8.5, the words "If Lessee is the Insuring Party," are
deleted. The following sentence is added to Paragraph 8.5,
immediately preceding the final sentence thereof: "Such policies
shall be for a term of at least one year, or the length of the
remaining term of this Lease, whichever is less." In the next to
the last line of Paragraph 8.5, the words "the Insuring Party" are
deleted both places where they appear, and in the first such place,
they are replaced with the words "either Party", and in the second
such place they are replaced with the words "it".
17. Additional Matter Pertaining to Insurance. During the term
of the Exodus Sublease, any insurance required to be provided by
Lessee under the terms of the Lease may be provided by either Talus
Corporation or Exodus, and Lessor shall not require Talus
Corporation and Exodus to carry duplicative insurance, provided
that all insurance required under the terms of the Lease shall be
maintained by one or the other of them in accordance with the
requirements of the Lease.
18. Modification of Paragraph 9.2. The following is added to
the end of the last sentence of Paragraph 9.2: "; provided,
however, that if Lessor actually receives proceeds sufficient to
cover the fully amount of the loss, excluding any deductible, this
Paragraph 9.2 shall govern."
19. Modification of Paragraph 9.5. Notwithstanding the
provisions of Paragraph 9.5, in the event Exodus confirms in
writing to Talus Corporation and Lessor within twenty (20) days
after the occurrence of any damage which would entitle Lessor to
terminate the Lease pursuant to Paragraph 9.5, that Exodus shall
not terminate either the Exodus Sublease or the direct lease
between Exodus and Lessor which commences immediately following the
termination of this Lease, on account of such damage, then Lessor
shall have no right to terminate the Lease pursuant to
Paragraph 9.5.
20. Modification of Paragraph 9.6. The last sentence of
Paragraph 9.6(b) is deleted and replaced with the following:
"`Commence' as used in this Paragraph shall mean the beginning of
actual work on the Premises." If Lessor shall be obligated to
repair or restore the Premises pursuant to any provision of
Article 9, and it is possible, at additional cost, to commence such
repair or restoration earlier than ninety (90) days after such
obligation shall accrue and/or to accelerate the work so that the
same shall be completed prior to the deadline for Lessor to
complete the same pursuant to the applicable provision of this
Article 9, then upon Lessee's written request, and subject to the
conditions set forth below, Lessor shall use its best efforts to
commence such repair or restoration as soon as is possible, subject
to availability of labor and materials; provided that (1) prior to
incurring any additional costs to commence such repair or
restoration earlier than Lessor is obligated to do so or to
accelerate the work, Lessee shall have agreed, in writing, to pay
all such additional costs, and shall have deposited with Lessor,
funds equal to the amount reasonably estimated by Lessor as the
total amount of such additional costs to be incurred (provided that
the amount of such deposit shall not limit Lessee's liability to
pay such additional costs, and Lessor shall refund to Lessee upon
completion of the repair and restoration, the amount of such
deposit, if any, in excess of the additional costs incurred); and
(2) in no event will Lessor be obligated to commence any repair or
restoration prior to obtaining all necessary governmental permits
and approvals therefor.
21. Modification of Paragraph 9.7. Notwithstanding any
provision of Paragraph 9.7, Lessor shall not be permitted to
exercise the termination option under clause (ii) of Paragraph 9.7,
(1) if Lessor is subject to an order of a governmental agency with
jurisdiction over the Hazardous Substance Condition requiring
Lessor to remediate the same, unless such remediation cannot
practicably be accomplished with Lessee remaining in possession of
the Premises, or (2) unless in Lessor's reasonable judgment,
continued occupancy of the Premises by Lessee without remediation
of the Hazardous Substance Condition poses a risk of potential
liability to Lessor. Furthermore, and notwithstanding any
provision of Paragraph 9.7, Lessor shall be under no duty to
remediate any Hazardous Substance Condition except to the extent
Lessor is subject to an order of a governmental agency with
jurisdiction over the Hazardous Substance Condition requiring
Lessor to remediate the same. To the extent Lessor is subject to
an order of a governmental agency with jurisdiction over the
Hazardous Substance Condition requiring Lessor to remediate the
same, Lessor shall diligently proceed with such remediation, in
accordance with any remedial action plan approved by the
appropriate governmental agency(ies). In the event that in the
opinion of the environmental consultant hired by Lessor to oversee
the remediation, the remediation cannot practicably be completed
without Lessee vacating the Premises for a period which will exceed
six (6) months, Lessee shall have the option to terminate this
Lease by giving notice to Lessor within thirty (30) days after
Lessee is notified by Lessor that the remediation cannot
practicably be completed without Lessee vacating the Premises for a
period which will exceed six (6) months (which notification shall
include notice of the date Lessor requires Lessee to vacate the
Premises for such remediation, which date shall not be earlier than
six(6) months after the date of such notification, except to the
extent it is reasonably necessary for Lessor to commence such
remediation on an earlier date in order to comply with any order of
a governmental agency requiring Lessor to remediate the same,
including any remedial action plan approved by the appropriate
governmental agency(ies)), such termination to be effective upon
the date set forth in Lessor's notice that Lessor requires Lessee
to vacate the Premises.
22. Modification of Paragraph 10.1. In the first line of
Paragraph 10.1(b), the words "In order to assure payment . Real
Property Taxes," are deleted and replaced with the following: "In
the event Lessee incurs a late charge on any Rent payment two (2)
times during any twelve (12) month period,". Lessee may contest
the amount of Real Property Taxes assessed against the Premises, at
its sole cost and expense, including, but not limited to, any
penalties or fees associated with an unsuccessful contest. In the
event Lessee elects to contest the amount of Real Property Taxes,
Lessee must pay the contested Real Property Taxes under protest,
and apply for a refund, or provide such security as Lessor may
require to prevent such taxes from becoming a delinquent lien upon
the Premises. Any refund of Real Property Taxes paid by Lessee
with respect to the term of this Lease shall belong to Lessee,
whether received as a result of a contest by Lessee or otherwise,
and regardless of when received. Lessee shall have no right to any
refund of Property Taxes applicable to any period of time other
than the term of this Lease, even if such refund is received during
the term of this Lease.
23. Modification of Paragraph 10.2. On the fifth line of
Paragraph 10.2, the words "other income therefrom" are deleted and
replaced with "gross revenues therefrom (but not any tax on
Lessor's net income from all sources)".
24. Modification of Paragraph 10.3. On the second line of
Paragraph 10.3, following the word "be", and prior to the word
"determined", the word "reasonably" shall be inserted.
25. Modification of Article 12 With Respect to Subletting or
Assignment by Exodus. Notwithstanding any provision of Article 12
of the Lease, (i) in the event of any change in the control of
Exodus, such change in control shall not constitute an assignment
of the Lease or the Exodus Sublease so long as Exodus is a publicly
traded company immediately following such change in control, and
(ii) the granting of a security interest in the Exodus Sublease by
Exodus in connection with a senior secured credit facility provided
by Goldman, Sachs & Co. ("GS"), shall not constitute an assignment
of the Lease or the Exodus Sublease, and shall not require Lessor's
consent under the Lease; provided that GS shall not be entitled to
foreclose such security interest or otherwise take any possessory
interest in the Premises or any portion thereof, unless GS assumes
all of Exodus' obligations under the Exodus Sublease and the Exodus
Direct Lease, and cures all then uncured defaults (if any) under
the Exodus Sublease and the Exodus Direct Lease. Any other
assignment of, or subletting under, the Exodus Sublease shall
require Lessor's prior written consent, in accordance with the
provisions of Article 12 of the Lease, provided that Lessor agrees
that it shall not unreasonably withhold or delay its consent to any
proposed assignment of the Exodus Sublease by Exodus or any
proposed subletting thereunder by Exodus. In the event Talus
Corporation receives any consideration from Exodus in connection
with any assignment of, or subletting under, the Exodus Sublease,
in excess of the rent and other consideration payable by Exodus to
Talus Corporation under the Exodus Sublease in the absence of such
assignment or subletting, Talus Corporation shall pay to Lessor,
the entire amount of such excess consideration, excluding the Talus
Amounts (as defined below) which shall be retained by Talus
Corporation, as additional rent under the Lease, as and when
received by Talus Corporation, in lieu of any adjustment of the
rent payable under the Lease pursuant to Paragraph 12.2(h) on
account of such assignment of, or subletting under, the Exodus
Sublease. As used in this Paragraph 25, the term "Talus Amounts"
shall mean any amounts which Talus Corporation collects from
Exodus, which amounts are expressly designated between Talus
Corporation and Exodus as reimbursement of reasonable out-of pocket
expenses incurred by Talus Corporation in connection with any
assignment or subletting (or proposed assignment or subletting) by
Exodus under the Exodus Sublease, including, but not limited to,
attorneys' and consultants' fees and expenses. Notwithstanding the
foregoing, in the event that the Exodus Sublease provides that any
amounts to be paid to Talus Corporation in connection with any
assignment or subletting by Exodus are to be determined based on
"market rent," "fair market rent," "prevailing market rent," or
other similar concept, (a) Talus Corporation shall not agree with
Exodus as to the determination of the same without obtaining
Lessor's prior written consent, which consent may be granted or
withheld in Lessor's sole and absolute discretion, (b) if an
appraisal procedure is used to determine "market rent," "fair
market rent," "prevailing market rent," or other similar concept,
Talus Corporation shall obtain Lessor's prior written approval of
any appraiser to be appointed by it, which approval may be withheld
or granted in Lessor's sole and absolute discretion, (c) Talus
Corporation agrees to notify Lessor of the initiation of any
appraisal procedure by Talus Corporation or Exodus within three (3)
business day after such initiation by Talus Corporation or after
Talus Corporation receives notice of such initiation by Exodus,
whichever is applicable, and (d) Lessor may, if it elects to do so,
participate in all negotiations and appraisal procedures between
Talus Corporation and Exodus with regard to the determination of
"market rent," "fair market rent," "prevailing market rent," or
other similar concept.
26. Modification of Paragraph 32. In the first line of
Paragraph 32, following the words "Lessor's agents" and preceding
the words "shall have the right", the words "and any Lender and
its agents" shall be inserted. In the second line of Paragraph 32,
following the words "or lessees," and preceding the words "and
making such", the words "inspecting the Premises," shall be
inserted. Lessor acknowledges that Exodus intends to operate a
secure internet data center facility at the Premises. Accordingly,
except in the case of an emergency, Lessor, its agents, any Lender
or its agents shall give Exodus twenty-four (24) hours' advance
notice prior to entering the Premises, and Exodus shall have the
right to require that a representative of Exodus accompany any
parties entering the Premises. In the case of an emergency, Lessor
or its agents shall make such effort as is deemed appropriate by
Lessor or its agents under the circumstances to contact an on-site
representative of Exodus, if one is present at the Premises, prior
to entering the Premises; provided, however, that if an on-site
representative cannot be located after such effort is made, or if
immediate entry to the Premises without attempting to locate an on-
site representative of Exodus is deemed appropriate by Lessor or
its agents due to the nature of the emergency, Lessor or its agents
may enter the Premises unaccompanied by a representative of Exodus.
27. Modification of Paragraph 34. Paragraph 34 is deleted in
its entirety and replaced with the following: "34. Signs. Except
for ordinary `For Sublease' signs, Lessee shall not place any sign
upon the Premises without Lessor's prior written consent, which
consent shall not be unreasonably withheld or delayed. All signs
must comply with all Applicable Law."
28. Modification of Paragraph 41. The following words are added
to the end of the last sentence of Paragraph 41: ", except those
resulting from Lessor's willful misconduct or gross negligence."
29. Parking.
(a) Subject to the rules and regulations promulgated from
time to time by Lessor, Lessee shall be entitled to use 50.3% of
the parking spaces for the 2401/2403 Walsh Avenue complex for use
by its agents, servants, employees and invitees (individually and
collectively referred to as "Lessee's Invitees"). If Lessor in
its sole discretion agrees in writing to permit Lessee to use any
parking spaces or areas which could be used for parking spaces for
any other purpose (e.g., temporary storage of materials, satellite
dish installation, etc.), Lessee's then current number of parking
spaces will automatically be reduced by the number of spaces
utilized for such purpose plus any spaces which cannot be
reasonably used for normal parking as a result thereof. Lessee
also agrees that under no circumstances shall Lessee's Invitees in
any manner interfere with occupancy and/or access to the property
known as 2403 Walsh Avenue, including, without limitation,
interference with the ingress or egress to the building, parking
lot or shipping and receiving areas. Lessee agrees that Lessor may
re-stripe the existing parking lots so as to reconfigure the same,
so long as such re-striping or reconfiguration does not reduce the
number of parking spaces that Lessee is otherwise entitled to use
under the Lease. Subject to the prior written approval of Lessor,
which approval shall not be unreasonably withheld or delayed,
Lessee may re-stripe the existing parking lots so as to reconfigure
the same, so long as such re-striping or reconfiguration does not
reduce the number of total parking spaces for the 2401/2403 Walsh
Avenue complex or unreasonably interfere with the use or occupancy
of 2403 Walsh Avenue or its marketability to prospective tenants
and subtenants.
(b) Provided that Lessee shall have obtained Lessor's
approval of such restriping as required under this Paragraph 29,
then notwithstanding anything contained in the Lease, Lessee shall
not have any obligation to change the striping or configuration of
the parking lots back to the original configuration at the
termination of the Lease.
30. Consent to Assignment and Subletting Required. Execution of
this Second Amendment does not constitute Lessor's consent to Talus
Corporation's subletting of the Premises to Exodus; such consent
shall be indicated only by Lessor's specific written consent on a
copy of the proposed Exodus Sublease which has been fully executed
by both Talus Corporation and Exodus. Except as provided in
Paragraph 25 hereof, nothing in this Second Amendment shall
constitute Lessor's consent to any future assignment or subletting
by Talus Corporation or Exodus, should it become a sublessee of the
Premises, which consent shall be granted only in accordance with
the provisions of Paragraph 12 of the Lease.
31. Reservation of Rights. By executing this Amendment, Lessor
is not waiving any rights with respect to any transaction (other
than the Exodus Sublease, upon execution of Lessor's consent
thereto) which occurred during the term of the Lease, and which
under terms of Paragraph 12 of the Lease constitutes an assignment
or subletting by Talus Corporation, or otherwise requires Lessor's
consent pursuant to Paragraph 11, including, but not limited to,
any change in control of Talus Corporation, and to which Lessor (or
its predecessor-in-interest) has not previously granted its
consent. By executing this Amendment, Talus Corporation is not
waiving any rights to contend that no transaction occurred during
the term of the Lease without Lessor's (or its predecessor-in-
interest's) consent pursuant to Paragraph 12 of the Lease, which
under terms of Paragraph 12 of the Lease constitutes an assignment
or subletting by Talus Corporation, or otherwise requires Lessor's
consent (or otherwise required Lessor's predecessor-in-interest's
consent) pursuant to Paragraph 12, including, but not limited to
any change in control of Talus Corporation. Talus Corporation also
reserves all of its rights under the Original Lease, including all
rights in connection with defending any such claim(s) or
contention(s) by Lessor. Notwithstanding anything contained in
this Amendment, Lessor agrees that it shall not seek to modify the
provisions of Paragraph 2(a) for any period of time prior to the
Exodus Termination Date; provided that the foregoing shall not
preclude Lessor from receiving any amounts Lessor is entitled to
receive pursuant to Paragraph 25 of this Amendment.
32. Return of Security Deposit. Provided that Exodus remains in
possession of the Premises following the termination of the Lease
pursuant to the Exodus Direct Lease, Lessor shall return the
Security Deposit, less any deductions Lessor is entitled to make
therefrom, to Lessee, within thirty (30) days after the termination
of the Lease.
33. Lessee's Right to Extend Term Under Limited Circumstances.
If the Exodus Sublease is terminated as a result of Exodus'
default, and the Exodus Termination Date occurs after April 1,
2004, and provided that the Lease has not otherwise terminated,
then Lessee shall have the right to extend the term of the Lease to
a date which is not later than sixty (60) days after the Exodus
Termination Date, by giving notice of such extension to Lessor
within five (5) business days after the Exodus Termination Date;
provided that the Monthly Base Rent payable during the term of such
extension shall be $115,797.00, prorated for any partial month.
34. Payment of Processing Fee. Within five (5) business days
after the execution by Lessor of this Amendment and of Lessor's
consent to the Exodus Sublease, Lessee shall pay to Lessor the sum
of Seven Thousand Eight Hundred Seventy-Five Dollars ($7,875.00),
as payment in full of all amounts owing by Lessee to Lessor under
Paragraph 12.2(e) of the Lease, as consideration for Lessor's
considering and processing of its consent to the Exodus Sublease.
35. Counterparts; Facsimile Signatures. This Amendment may be
signed in counterparts, and delivered by facsimile, and such
facsimile counterparts shall be valid and binding on Lessor and
Lessee (subject to Paragraph 38, below) with the same effect as if
original signatures had been exchanged.
36. Ratification. The Original Lease, as modified hereby, is
hereby ratified and confirmed in all respects.
37. Successors and Assigns. This Amendment shall bind and inure
to the benefit of Lessor and Lessee and their respective legal
representatives and successors and assigns.
38. Effectiveness of This Amendment. Notwithstanding any
provision of this Amendment to the contrary, (1) this Amendment
shall not be come effective unless and until Talus Corporation and
Exodus shall have both fully executed and delivered the Exodus
Sublease, and Lessor shall have given its specific written consent
thereto on a copy thereof; and (2) in the event that termination of
the Exodus Sublease does not occur concurrently with the
termination of the Lease, then from and after the date of
termination of the Exodus Sublease, Paragraphs 3 through 9,
inclusive, 11, 15 through 28, inclusive, and 29(a) of this
Amendment shall become null and void, but said provisions shall
continue to govern with respect to the period of time during which
the Exodus Sublease was in effect.
IN WITNESS WHEREOF, Lessor and Lessee have executed this Amendment
as of the date first above written.
Lessee:
TALUS CORPORATION,
a California corporation,
formerly known as Scientific Custom
Metal Products International, Inc.
By:
Print Name:
Title:
Lessor:
G&I WALSH LLC,
a Delaware limited liability company
By: G&I Investment Walsh LLC,
a Delaware limited liability
company,
its managing member
By: G&I Investment Walsh Corp.,
a Delaware corporation,
its managing member
By:
Name:
Title:
CONSENT OF GUARANTOR
WHEREAS, ELECTRONIC MANUFACTURING SYSTEMS, INC., a Delaware corporation
("EMS"), did execute that certain Lease Guaranty, dated as of
November 20, 1997 (the "Lease Guaranty") whereby EMS did guaranty
Lessee's obligations under the Original Lease (as defined in the
foregoing Second Amendment to Lease);
NOW, THEREFORE, EMS hereby consents to the terms and conditions of
the foregoing Second Amendment to Lease, and hereby ratifies and
confirms that the Lease Guaranty, remains in full force and effect
as a valid and binding obligation of EMS, with respect to Lessee's
obligations under the Original Lease as modified by the foregoing
Second Amendment to Lease (whether such obligations are stated as
being obligations of "Lessee" or obligations of "Talus
Corporation").
Dated: January 29, 1999
ELECTRONIC MANUFACTURING SYSTEMS, INC.,
a Delaware corporation
By:
Print Name:
Title:
<PAGE>
[LOGO] AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
STANDARD INDUSTRIAL/COMMERCIAL SINGLE-TENANT LEASE--NET
(Do not use this form for Multi-Tenant Property)
1. BASIC PROVISIONS ("BASIC PROVISIONS").
1.1 PARTIES: This Lease ("LEASE"), dated for reference purposes only,
March 1, 1996, is made by and between MOPAR, LLC ("LESSOR") and
Scientific Custom Metal Products International, Inc. ("LESSEE"),
(collectively the "PARTIES," or individually a "PARTY").
1.2 PREMISES: That certain real property, including all improvements
therein or to be provided by Lessor under the terms of this Lease,
commonly known by the street address of 2401 Walsh Avenue, Santa Clara,
located in the County of Santa Clara, State of California, and generally
described as (describe briefly the nature of the property) Industrial
Building, approximately 95,700 square feet; APN 216-28-037 (parcel #2)
("PREMISES"). (See Paragraph 2 for further provisions.)
1.3 TERM: 19 years and 0 months ("ORIGINAL TERM") commencing March 1,
1997 ("COMMENCEMENT DATE") and ending February 28, 2016 ("EXPIRATION
DATE"). (See Paragraph 3 for further provisions.)
1.4 EARLY POSSESSION: N/A ("EARLY POSSESSION DATE"). (See Paragraphs
3.2 and 3.3 for further provisions.)
1.5 BASE RENT: $40,000 per month ("BASE RENT"), payable on the 1st
day of each month commencing March 1, 1997, and thereafter according to
the rent schedule as set forth on Exhibit (A) to this agreement. See
Paragraph 4 for further provisions.)
[X] If this box is checked, there are provisions in this Lease for the
Base Rent to be adjusted.
1.6 BASE RENT PAID UPON EXECUTION: $40,000 as Base Rent for the
period March 1, 1997 through March 31, 1997, and thereafter as set forth
in Exhibit (A) to this agreement.
1.7 SECURITY DEPOSIT: $ 10,000 ("SECURITY DEPOSIT"). (See Paragraph 5
for further provisions.)
1.8 PERMITTED USE: Light manufacturing, Office, and R&D. (See
Paragraph 6 for further provisions.)
1.9 INSURING PARTY. Lessor is the "INSURING PARTY" unless otherwise
stated herein. (See Paragraph 8 for further provisions.)
1.10 REAL ESTATE BROKERS. The following real estate broker(s)
(collectively, the "BROKERS") and brokerage relationships exist in this
transaction and are consented to by the Parties (check applicable boxes):
None represents [ ] Lessor exclusively ("LESSOR'S BROKER"); [ ] both
Lessor and Lessee, and None represents [ ] Lessee exclusively ("LESSEE'S
BROKER"); [ ] both Lessee and Lessor. (See Paragraph 15 for further
provisions.)
1.11 GUARANTOR. The obligations of the Lessee under this Lease are to
be guaranteed by Scientific Custom Metal Products International, Inc.
("GUARANTOR"). (See Paragraph 37 for further provisions.)
1.12 ADDENDA. Attached hereto is an Addendum or Addenda consisting of
Paragraphs __ through __ and Exhibits A and the Guarantee Agreement all
of which constitute a part of this Lease.
2. PREMISES.
2.1 LETTING. Lessor hereby leases to Lessee, and Lessee hereby leases
from Lessor, the Premises, for the term, at the rental, and upon all of
the terms, covenants and conditions set forth in this Lease. Unless
otherwise provided herein, any statement of square footage set forth in
this Lease, or that may have been used in calculating rental, is an
approximation which Lessor and Lessee agree is reasonable and the rental
based thereon is not subject to revision whether or not the actual square
footage is more or less.
2.2 CONDITION. Lessor shall deliver the Premises to Lessee clean and
free of debris on the Commencement Date and warrants to Lessee that the
existing plumbing, fire sprinkler system, lighting, air conditioning
heating, and loading doors, if any, in the Premises, other than those
constructed by Lessee, shall be in good operating condition on the
Commencement Date. If a non-compliance with said warranty exists as of
the Commencement Date, Lessor shall, except as otherwise provided in this
Lease, promptly after receipt of written notice from Lessee setting forth
with specificity the nature and extent of such non-compliance, rectify
same at Lessor's expense. If Lessee does not give Lessor written notice
of a non-compliance with this warranty within thirty (30) days after the
Commencement Date, correction of that non-compliance shall be the
obligation of Lessee at Lessee's sole cost and expense.
2.3 COMPLIANCE WITH COVENANTS, RESTRICTIONS AND BUILDING CODE. Lessor
warrants to Lessee that the improvements on the Premises comply with all
applicable covenants or restrictions of record and applicable building
codes, regulations and ordinances in effect on the Commencement Date.
Said warranty does not apply to the use to which Lessee will put the
Premises or to any Alterations or Utility Installations (as defined in
Paragraph 7.3(a)) made or to be made by Lessee. If the Premises do not
comply with said warranty, Lessor shall, except as otherwise provided in
this Lease, promptly after receipt of written notice from Lessee setting
forth with specificity the nature and extent of such non-compliance,
rectify the same at Lessor's expense. If Lessee does not give Lessor
written notice of a non-compliance with this warranty within six (6)
months following the Commencement Date, correction of that non-compliance
shall be the obligation of Lessee at Lessee's sole cost and expense.
2.4 ACCEPTANCE OF PREMISES. Lessee hereby acknowledges: (a) that it
has been advised by the Brokers to satisfy itself with respect to the
condition of the Premises, (including but not limited to the electrical
and fire sprinkler systems, security, environmental aspects, compliance
with Applicable Law, as defined in Paragraph 6.3) and the present and
future suitability of the Premises for Lessee's intended use, (b) that
Lessee has made such investigation as it deems necessary with reference
to such matters and assumes all responsibility therefor as the same
relate to Lessee's occupancy of the Premises and/or the terms of this
Lease, and (c) that neither Lessor, nor any of Lessor's agents, has made
any oral or written representations or warranties with respect to the
said matters other than as set forth in this Lease.
2.5 LESSEE AS PRIOR OWNER/OCCUPANT. The warranties made by Lessor in
this Paragraph 2 shall be of no force or effect if immediately prior to
the date set forth in Paragraph 1.1 Lessee was the owner or occupant of
the Premises. In such event, Lessee shall, at Lessee's sole cost and
expense, correct any non-compliance of the Premises with said warranties.
3. TERM.
3.1 TERM. The Commencement Date, Expiration Date and Original Term of
this Lease are as specified in Paragraph 1.3.
3.2 EARLY POSSESSION. If Lessee totally or partially occupies the
Premises prior to the Commencement Date, the obligation to pay Base Rent
shall be abated for the period of such early possession. All other terms
of this Lease, however, (including but not limited to the obligations to
pay Real Property Taxes and insurance premiums and to maintain the
Premises) shall be in effect during such period. Any such early
possession shall not affect nor advance the Expiration Date of the
Original Term.
3.3 DELAY IN POSSESSION. If for any reason Lessor cannot deliver
possession of the Premises to Lessee as agreed herein by the Early
Possession Date, if one is specified in Paragraph 1,4, or, if no Early
Possession Date is specified, by the Commencement Date, Lessor shall not
be subject to any liability therefor, nor shall such failure affect the
validity of this Lease, or the obligations of Lessee hereunder, or extend
the term hereof, but in such case, Lessee shall not, except as otherwise
provided herein, be obligated to pay rent or perform any other obligation
of Lessee under the terms of this Lease until Lessee Date delivers
possession of the Premises to Lessee. If possession of the Premises is
not delivered to Lessee within sixty (60) days after the Commencement
Date, Lessee may, at its option, by notice in writing to Lessor within
ten (10) days thereafter, cancel this Lease, in which event the Parties
shall be discharged from all obligations hereunder; provided, however,
that if such written notice by Lessee is not received by Lessor within
said ten (10) day period, Lessee's right to cancel the Lease shall
terminate and be of no further force or effect. Except as may be
otherwise provided, and regardless of when the term actually commences,
if possession is not tendered to Lessee when required by this Lease and
Lessee does not terminate this Lease, as aforesaid, the period free of
obligation to pay Base Rent, if any, that Lessee would otherwise have
enjoyed shall run from the date of delivery of possession and continue
for a period equal to what Lessee would otherwise have enjoyed under the
terms hereof, but minus any days of delay caused by the acts, changes or
omissions of Lessee.
4. RENT.
4.1 BASE RENT. Lessee shall cause payment of Base Rent and other
rent or charges, as the same may be adjusted from time to time, to be
received by Lessor in lawful money of the United States, without offset
or deduction, on or before the day on which it is due under the terms of
this Lease. Base Rent and all other rent and charges for any period
during the term hereof which is for less than one (1) full calendar month
shall be prorated based upon the actual number of days of the calendar
month involved. Payment of Base Rent and other charges shall be made to
Lessor at its address stated herein or to such other persons or at such
other addresses as Lessor may from time to time designate in writing to
Lessee.
5. SECURITY DEPOSIT. Lessee shall deposit with Lessor upon execution
hereof the Security Deposit set forth in Paragraph 1.7 as security for
Lessee's faithful performance of Lessee's obligations under this Lease.
If Lessee fails to pay Base Rent or other rent or charges due hereunder,
or otherwise Defaults under this Lease (as defined in Paragraph 13.1),
Lessor may use, apply or retain all or any portion of said Security
Deposit for the payment of any amount due Lessor or to reimburse or
compensate Lessor for any liability, cost, expense, loss or damage
(including attorneys' fees) which Lessor may suffer or incur by reason
hereof. If Lessor uses or applies all or any portion of said Security
Deposit, Lessee shall within ten (10) days after written request therefor
deposit moneys with Lessor sufficient to restore said Security Deposit to
the full amount required by this Lease. Any time the Base Rent increases
during the term of this Lease, Lessee shall, upon written request from
Lessor, deposit additional moneys with Lessor sufficient to maintain the
same ratio between the Security Deposit and the Base Rent as those
amounts are specified in the Basic Provisions. Lessor shall not be
required to keep all or any part of the Security Deposit separate from
its general accounts. Lessor shall, at the expiration or earlier
termination of the term hereof and after Lessee has vacated the Premises,
return to Lessee (or, at Lessor's option, to the last assignee, if any,
of Lessee's interest herein), that portion of the Security Deposit not
used or applied by Lessor. Unless otherwise expressly agreed in writing
by Lessor, no part of the Security Deposit shall be considered to be held
in trust, to bear interest or other increment for its use, or to be
prepayment for any moneys to be paid by Lessee under this Lease.
6. USE.
6.1 USE. Lessee shall use and occupy the Premises only for the
purposes set forth in Paragraph 1.8, or any other use which is comparable
thereto, and for no other purpose. Lessee shall not use or permit the use
of the Premises in a manner that creates waste or a nuisance, or that
disturbs owners and/or occupants of, or causes damage to, neighboring
premises or properties. Lessor hereby agrees to not unreasonably withhold
or delay its consent to any written request by Lessee, Lessees assignees
or subtenants, and by prospective assignees and subtenants of the Lessee,
its assignees and subtenants, for a modification of said permitted
purpose for which the premises may be used or occupied, so long as the
same will not impair the structural integrity of the improvements on the
Premises, the mechanical or electrical systems therein, is not
significantly more burdensome to the Premises and the improvements
thereon, and is otherwise permissible pursuant to this Paragraph 6. If
Lessor elects to withhold such consent, Lessor shall within five (5)
business days give a written notification of same, which notice shall
include an explanation of Lessor's reasonable objections to the change in
use.
6.2 HAZARDOUS SUBSTANCES.
(a) REPORTABLE USES REQUIRE CONSENT. The term "Hazardous Substance"
as used in this Lease shall mean any product, substance, chemical,
material or waste whose presence, nature, quantity and/or intensity of
existence, use, manufacture, disposal, transportation, spill, release or
effect, either by itself or in combination with other materials expected
to be on the Premises, is either: (i) potentially injurious to the public
health, safety or welfare, the environment or the Premises, (ii)
regulated or monitored by any governmental authority, or (iii) a basis
for liability of Lessor to any governmental agency or third party under
any applicable statute or common law theory. Hazardous Substance shall
include, but not be limited to, hydrocarbons, petroleum, gasoline, crude
oil or any products, by-products or fractions thereof. Lessee shall not
engage in any activity in, on or about the Premises which constitutes a
Reportable Use (as hereinafter defined) of Hazardous Substances without
the express prior written consent of Lessor and compliance in a timely
manner (at Lessee's sole cost and expense) with all Applicable Law (as
defined in Paragraph 6.3). "Reportable Use" shall mean (i) the
installation or use of any above or below ground storage tank, (ii) the
generation, possession, storage, use, transportation, or disposal of a
Hazardous Substance that requires a permit from, or with respect to which
a report, notice, registration or business plan is required to be filed
with, any governmental authority. Reportable Use shall also include
Lessee's being responsible for the presence in, on or about the Premises
of a Hazardous Substance with respect to which any Applicable Law
requires that a notice be given to persons entering or occupying the
Premises or neighboring properties. Notwithstanding the foregoing, Lessee
may, without Lessor's prior consent, but in compliance with all
Applicable Law, use any ordinary and customary materials reasonably
required to be used by Lessee in the normal course of Lessee's business
permitted on the Premises, so long as such use is not a Reportable Use
and does not expose the Premises or neighboring properties to any
meaningful risk of contamination or damage or expose Lessor to any
liability therefor. In addition, Lessor may (but without any obligation
to do so) condition its consent to the use or presence of any Hazardous
Substance, activity or storage tank by Lessee upon Lessee's giving Lessor
such additional assurances as Lessor, in its reasonable discretion, deems
necessary to protect itself, the public, the Premises and the environment
against damage, contamination or injury and/or liability therefrom or
therefor, including, but not limited to, the installation (and removal on
or before Lease expiration or earlier termination) or reasonably
necessary protective modifications to the Premises (such as concrete
encasements) and/or the deposit of an additional Security Deposit under
Paragraph 6 hereof.
(b) DUTY TO INFORM LESSOR. If Lessee knows, or has reasonable
cause to believe, that a Hazardous Substance, or a condition involving or
resulting from same, has come to be located in, on, under or about the
Premises, other than as previously consented to by Lessor, Lessee shall
immediately give written notice of such fact to Lessor. Lessee shall also
immediately give Lessor a copy of any statement, report, notice,
registration, application, permit, business plan, license, claim, action
or proceeding given to, or received from, any governmental authority or
private party, or persons entering or occupying the Premises, concerning
the presence, spill, release, discharge of, or exposure to, any Hazardous
Substance or contamination in, on, or about the Premises, including but
not limited to all such documents as may be involving in any Reportable
Uses Involving the Premises.
(c) INDEMNIFICATION. Lessee shall indemnify, protect, defend and
hold Lessor, its agents, employees, lenders and ground lessor, if any,
and the Premises, harmless from and against any and all loss of rents
and/or damages, liabilities, judgments, costs, claims, liens, expenses,
penalties, permits and attorney's and consultant's fees arising out of or
involving any Hazardous Substance or storage tank brought onto the
Premises by or for Lessee or under Lessee's control, Lessee's obligations
under this Paragraph 6 shall include, but not be limited to, the effects
of any contamination or injury to person, property or the environment
created or suffered by Lessee, and the cost of investigation (including
consultant's and attorney's fees and testing), removal, remediation,
restoration and/or abatement thereof, or of any contamination therein
involved, and shall survive the expiration or earlier termination of this
Lease. No termination, cancellation or release agreement entered into by
Lessor and Lessee shall release Lessee from its obligations under this
Lease with respect to Hazardous Substances or storage tanks, unless
specifically so agreed by Lessor in writing at the time of such
agreement.
6.3 LESSEE'S COMPLIANCE WITH LAW. Except as otherwise provided in
this Lease, Lessee, shall, at Lessee's sole cost and expense, fully,
diligently and in a timely manner, comply with all "Applicable Law,"
which term is used in this Lease to include all laws, rules, regulations,
ordinances, directives, covenants, easements and restrictions of record,
permits, the requirements of any applicable fire insurance underwriter or
rating bureau, and the recommendations of Lessor's engineers and/or
consultants, relating in any manner to the Premises (including but not
limited to matters pertaining to (i) industrial hygiene, (ii)
environmental conditions on, in, under or about the Premises, including
soil and groundwater conditions, and (ii) the use, generation,
manufacture, production, installation, maintenance, removal,
transportation, storage, spill or release of any Hazardous Substance or
storage tank), now in effect or which may hereafter come into effect, and
whether or not reflecting a change in policy from any previously existing
policy. Lessee shall, within five (5) days after receipt of Lessor's
written request, provide Lessor with copies of all documents and
information, including, but not limited to, permits, registrations,
manifests, applications, reports and certificates, evidencing Lessee's
compliance with any Applicable Law specified by Lessor, and shall
immediately upon receipt, notify Lessor in writing (with copies of any
documents involved) of any threatened or actual claim, notice, citation,
warning, complaint or report pertaining to or involving failure by Lessee
or the Premises to comply with any Applicable Law.
6.4 INSPECTION; COMPLIANCE. Lessor and Lessor's Lender(s) (as
defined in Paragraph 8.3(a)) shall have the right to enter the Premises
at any time, in the case of an emergency, and otherwise at reasonable
times, for the purpose of inspecting the condition of the Premises and
for verifying compliance by Lessee with this Lease and all Applicable
Laws (as defined in Paragraph 6.3), and to employ experts and/or
consultants in connection therewith and/or to advise Lessor with respect
to Lessee's activities, including but not limited to the installation,
operation, use, monitoring, maintenance, or removal of any Hazardous
Substance or storage tank on or from the Premises. The costs and expenses
of any such inspections shall be paid by the party requesting same,
unless a Default or Breach of this Lease, violation of Applicable Law, or
a contamination, caused or materially contributed to by Lessee is found
to exist or be imminent, or unless the inspection is requested or ordered
by a governmental authority as the result of any such existing or
imminent violation or contamination, in any such case, Lessee shall upon
request reimburse Lessor or Lessor's Lender, as the case may be, for the
costs and expenses of such inspections.
7. MAINTENANCE; REPAIRS; UTILITY INSTALLATIONS; TRADE FIXTURES AND
ALTERATIONS.
7.1 LESSEE'S OBLIGATIONS.
(a) Subject to the provisions of Paragraph 2.2 (Lessor's warranty
as to condition), 2.3 (Lessor's warranty as to compliance with covenants,
etc), 7.2 (Lessor's obligations to repair), -- (damage and destruction),
and 14 (condemnation), Lessee shall, at Lessee's sole cost and expense
and at all times, keep the Premises and every part thereof in good order,
condition and repair, structural and non-structural (whether or not such
portion of the Premises requiring repairs, or the means of repairing the
same, are reasonably or readily accessible to Lessee, and whether or not
the need for such repairs occurs as a result of Lessee's use, any prior
use, the elements or the age of such portion of the Premises), including,
without limiting the generality of the foregoing, all equipment or
facilities serving the Premises, such as plumbing, heating, air
conditioning, ventilating, electrical, lighting facilities, boilers,
fired or unfired pressure vessels, fire sprinkler and/or standpipe and
hose or other automatic fire extinguishing system, including fire alarm
and/or smoke detection systems and equipment, fire hydrants, fixtures,
walls (interior and exterior), foundations, ceilings, roofs, floors,
windows, doors, plate glass, skylights landscaping, driveways, parking
lots, fences, retaining walls, signs, sidewalks and parkways located in,
on, about, or adjacent to the Premises. Lessee shall not cause or permit
any Hazardous Substance to be spilled or released in, on, under or about
the Premises (including through the plumbing or sanitary sewer system)
and shall promptly, at Lessee's expense, take all investigatory and/or
remedial action reasonably recommended, whether or not formally ordered
or required, for the cleanup of any contamination of, and for the
maintenance, security and/or monitoring of the Premises, the elements
surrounding same, or neighboring properties, that was caused or
materially contributed to by Lessee, or pertaining to or involving any
Hazardous Substance and/or storage tank brought onto the Premises by or
for Lessee or under its control, Lessee, in keeping the Premises in good
order, condition and repair, shall exercise and perform good maintenance
practices. Lessee's obligations shall include restorations, replacements
or renewals when necessary to keep the Premises and all improvements
thereon or a part thereof in good order, condition and state of repair.
If Lessee occupies the Premises for seven (7) years or more, Lessor may
require Lessee to repaint the exterior of the buildings on the Premises
as reasonably required, but not more frequently than once every seven (7)
years.
(b) Lessee shall, at Lessee's sole cost and expense, procure and
maintain contracts, with copies to Lessor, in customary form and
substance for, and with contractors specializing and experienced in, the
inspection, maintenance and service of the following equipment and
improvements, if any, located on the Premises: (i) heating, air
conditioning and ventilation equipment, (ii) boiler, fired or unfired
pressure vessels, (iii) fire sprinkler and/or standpipe and hose or other
automatic fire extinguishing systems, including fire alarm and/or smoke
detection, (iv) landscaping and irrigation systems, (v) roof covering and
drain maintenance and (vi) asphalt and parking lot maintenance.
7.2 LESSOR'S OBLIGATIONS. Except for the warranties and agreements of
Lessor contained in Paragraphs 2.2 (relating to condition of the
Premises), 2.3 (relating to compliance with covenants, restrictions and
building code), 9 (relating to destruction of the Premises) and 14
(relating to condemnation of the Premises), it is intended by the Parties
hereto that Lessor have no obligation, in any manner whatsoever, to
repair and maintain the Premises, the improvements located thereon, or
the equipment therein, whether structural or nonstructural, all of which
obligations are intended to be that of the Lessee under Paragraph 7.1
hereof. It is the intention of the Parties that the terms of this Lease
govern the respective obligations of the Parties as to maintenance and
repair of the Premises. Lessee and Lessor expressly waive the benefit of
any statute now or hereafter in effect to the extent it is inconsistent
with the terms of this Lease with respect to, or which affords Lessee the
right to make repairs at the expense of Lessor or to terminate this Lease
by reason of any needed repairs.
7.3 UTILITY INSTALLATIONS; TRADE FIXTURES; ALTERATIONS.
(a) DEFINITIONS; CONSENT REQUIRED. The term "Utility Installations"
is used in this Lease to refer to all carpeting, window coverings, air
lines, power panels, electrical distribution, security, fire protection
systems, communication systems, lighting fixtures, heating, ventilating,
and air conditioning equipment, plumbing, and fencing in, on or about the
Premises. The term "TRADE FIXTURES" shall mean Lessee's machinery and
equipment that can be removed without doing material damage to the
Premises. The term "ALTERATIONS" shall mean any modification of the
improvements on the Premises from that which are provided by Lessor under
the terms of this Lease, other than Utility Installations or Trade
Fixtures, whether by addition or deletion. "Lessee Owned Alterations
and/or Utility Installations" are defined as Alterations and/or Utility
Installations made by lessee that are not yet owned by Lessor as defined
in Paragraph 7.4(a). Lessee shall not make any Alterations or Utility
Installations in, on, under or about the Premises without Lessor's prior
written consent. Lessee may, however, make non-structural Utility
Installations to the interior of the Premises (excluding the roof), as
long as they are not visible from the outside, do not involve puncturing,
relocating or removing the roof or any existing walls, and the cumulative
cost thereof during the term of this Lease as extended does not exceed
$25.000.
(b) CONSENT. Any Alterations or Utility Installations that Lessee
shall desire to make and which require the consent of the Lessor shall be
presented to Lessor in written form with proposed detailed plans. All
consents given by Lessor, whether by virtue of Paragraph 7.3(a) or by
subsequent specific consent, shall be deemed conditioned upon; (i)
Lessee's acquiring all applicable permits required by governmental
authorities, (ii) the furnishing of copies of such permits together with
a copy of the plans and specifications for the Alteration or Utility
Installation to Lessor prior to commencement of the work thereon, and
(iii) the compliance by Lessee with all conditions of said permits in a
prompt and expeditious manner. Any Alterations or Utility Installations
by Lessee during the term of this Lease shall be done in a good and
workmanlike manner, with good and sufficient materials, and in compliance
with all Applicable Law. Lessee shall promptly upon completion thereof
furnish Lessor with as-built plans and specifications therefor. Lessor
may (but without obligation to do so) condition its consent to any
requested Alteration or Utility Installation that costs $10,000 or more
upon Lessee's providing Lessor with a lien and completion bond in an
amount equal to one and one-half times the estimated cost of such
Alteration or Utility Installation and/or upon Lessee's posting an
additional Security Deposit with Lessor under Paragraph 36 hereof.
(c) INDEMNIFICATION. Lessee shall pay, when due, all claims for
labor or materials furnished or alleged to have been furnished to or for
Lessee at or for use on the Premises, which claims are or may be secured
by any mechanics' or materialmen's lien against the Premises or any
interest therein. Lessee shall give Lessor not less than ten (10) days'
notice prior to the commencement of any work in, on or about the
Premises, and Lessor shall have the right to post notices of non-
responsibility in or on the Premises as provided by law. If Lessee shall,
in good faith, contest the validity of any such lien, claim or demand,
then Lessee shall, at its sole expense defend and protect itself, Lessor
and the Premises against the same and shall pay and satisfy any such
adverse judgment that may be rendered thereon before the enforcement
thereof against the Lessor or the Premises. If Lessor shall require,
Lessee shall furnish to Lessor a surety bond satisfactory to Lessor in an
amount equal to one and one-half times the amount of such contested lien
claim or demand, indemnifying Lessor against liability for the same, as
required by law for the holding of the Premises free from the effect of
such lien or claim. In addition, Lessor may require Lessee to pay
Lessor's attorney's fees and costs in participating in such action if
Lessor shall decide it is to its best interest to do so.
7.4 OWNERSHIP; REMOVAL; SURRENDER; AND RESTORATION.
(a) OWNERSHIP. Subject to Lessor's right to require their removal
or become the owner thereof as hereinafter provided in this Paragraph
7.4, all Alterations and Utility Additions made to the Premises by Lessee
shall be the property of and owned by Lessee, but considered a part of
the Premises. Lessor may, at any time and at its option, elect in writing
to Lessee to be the owner of all or any specified part of the Lessee
Owned Alterations and Utility Installations. Unless otherwise instructed
per subparagraph 7.4(b) hereof, all Lessee Owned Alterations and Utility
Installations shall, at the expiration or earlier termination of this
Lease, become the property of Lessor and remain upon and be surrendered
by Lessee with the Premises.
(b) REMOVAL. Unless otherwise agreed in writing, Lessor may require
that any or all Lessee Owned Alterations or Utility Installations be
removed by the expiration or earlier termination of this Lease,
notwithstanding their installation may have been consented to by Lessor.
Lessor may require the removal at any time of all or any part of any
Lessee Owned Alterations or Utility Installations made without the
required consent of Lessor.
(c) SURRENDER/RESTORATION. Lessee shall surrender the Premises by
the end of the last day of the Lease term or any earlier termination
date, with all of the improvements, parts and surfaces thereof clean and
free of debris and in good operating order, condition and state of
repair, ordinary wear and tear excepted. "Ordinary Wear and Tear" shall
not include any damage or deterioration that would have been prevented by
good maintenance practice or by Lessee performing all of its obligations
under this Lease. Except as otherwise agreed or specified in writing by
Lessor, the Premises, as surrendered, shall include the Utility
Installations. The obligation of Lessee shall include the repair of any
damage occasioned by the installation, maintenance or removal of Lessee's
Trade Fixtures, furnishings, equipment, and Alterations and/or Utility
Installations, as well as the removal of any storage tank installed by or
for Lessee, and the removal, replacement, or remediation of any soil,
material or ground water contaminated by Lessee, all as may then be
required by Applicable Law and/or good service practice. Lessee's Trade
Fixtures shall remain the property of Lessee and shall be removed by
Lessee subject to its obligation to repair and restore the Premises per
this Lease.
8. INSURANCE; INDEMNITY.
8.1 PAYMENT FOR INSURANCE. Regardless of whether the Lessor or Lessee
is the Insuring Party, Lessee shall pay for all insurance required under
this Paragraph 8 except to the extent of the cost attributable to
liability insurance carried by Lessor in excess of $1,000,000 per
occurrence. Premiums for policy periods commencing prior to or extending
beyond the Lease term shall be prorated to correspond to the Lease term.
Payment shall be made by Lessee to Lessor within ten (10) days following
receipt of an invoice for any amount due.
8.2 LIABILITY INSURANCE.
(a) CARRIED BY LESSEE. Lessee shall obtain and keep in force during
the term of this Lease a Commercial General Liability policy of insurance
protecting Lessee and Lessor (as an additional insured) against claims
for bodily injury, personal injury and property damage based upon,
involving or arising out of the ownership, use, occupancy or maintenance
of the Premises and all areas appurtenant thereto. Such insurance shall
be on an occurrence basis providing single limit coverage in an amount
not less than $1,000,000 per occurrence with an "Additional Insured-
Managers or Lessors of Premises" Endorsement and contain the "Amendment
of the Pollution Exclusion" for damage caused by heat, smoke or fumes
from a hostile fire. The policy shall not contain any intra-insured
exclusions as between insured persons or organizations, but shall include
coverage for liability assumed under this Lease as an "insured contract"
for the performance of Lessee's indemnity obligations under this Lease.
The limits of said insurance required by this Lease or as carried by
Lessee shall not, however, limit the liability of Lessee nor relieve
Lessee of any obligation hereunder. All insurance to be carried by Lessee
shall be primary to and not contributory with any similar insurance
carried by Lessor, whose insurance shall be considered excess insurance
only.
(b) CARRIED BY LESSOR. In the event Lessor is the Insuring Party,
Lessor shall also maintain liability insurance described in Paragraph
8.2(a), above, in addition to, and not in lieu of, the insurance required
to be maintained by Lessee. Lessee shall not be named as an additional
insured therein.
8.3 PROPERTY INSURANCE - BUILDING, IMPROVEMENTS AND RENTAL VALUE.
(a) BUILDING AND IMPROVEMENTS. The Insuring Party shall obtain and
keep in force during the term of this Lease a policy or policies in the
name of Lessor, with loss payable to Lessor and to the holders of any
mortgages, deeds of trust or ground leases on the Premises ("LENDER(S)"),
insuring loss of damage to the Premises. The amount of such insurance
shall be equal to the full replacement cost of the Premises, as the same
shall exist from time to time, or the amount required by Lenders, but in
no event more than the commercially reasonable and available insurable
value thereof if, by reason of the unique nature or age of the
improvements involved, such latter amount is less than full replacement
cost. If Lessor is the Insuring Party, however, Lessee Owned Alterations
and Utility Installations shall be insured by Lessee under Paragraph 8.4
rather than by Lessor. If the coverage is available and commercially
appropriate, such policy or policies shall insure against all risks of
direct physical loss or damage (except the perils of flood and/or
earthquake unless required by a Lender), including coverage for any
additional costs resulting from debris removal and reasonable amounts of
coverage for the enforcement of any ordinance or law regulating the
reconstruction or replacement of any undamaged sections of the Premises
required to be demolished or removed by reason of the enforcement of any
building, zoning, safety or land use laws as the result of a covered
cause of loss. Said policy or policies shall also contain an agreed
valuation provision in lieu of any coinsurance clause, waiver of
subrogation, and inflation guard protection causing an increase in the
annual property insurance coverage amount by a factor of not less than
the adjusted U.S. Department of Labor Consumer Price Index for All Urban
Consumers for the city nearest to where the Premises are located. If such
insurance coverage has a deductible clause, the deductible amount shall
not exceed $1,000 per occurrence, and Lessee shall be liable for such
deductible amount in the event of an Insured Loss, as defined in
Paragraph 9.1(c).
(b) RENTAL VALUE. The Insuring Party shall, in addition, obtain and
keep in force during the term of this Lease a policy or policies in the
name of Lessor, with loss payable to Lessor and Lender(s), insuring the
loss of the full rental and other charges payable by Lessee to Lessor
under this Lease for one (1) year (including all real estate taxes,
insurance costs, and any scheduled rental increases). Said insurance
shall provide that in the event the Lease is terminated by reason of an
insured loss, the period of indemnity for such coverage shall be extended
beyond the date of the completion of repairs or replacement of the
Premises, to provide for one full year's loss of rental revenues from the
date of any such loss. Said insurance shall contain an agreed valuation
provision in lieu of any coinsurance clause, and the amount of coverage
shall be adjusted annually to reflect the projected rental income,
property taxes, insurance premium costs and other expenses, if any,
otherwise payable by Lessee, for the next twelve (12) month period.
Lessee shall be liable for any deductible amount in the event of such
loss.
(c) ADJACENT PREMISES. If the Premises are part of a larger
building, or if the Premises are part of a group of buildings owned by
Lessor which are adjacent to the Premises, the Lessee shall pay for any
increase in the premiums for the property insurance of such building or
buildings if said increase is caused by Lessee's acts, omissions, use or
occupancy of the Premises.
(d) TENANT'S IMPROVEMENTS. If the Lessor is the Insuring Party, the
Lessor shall not be required to insure Lessee Owned Alterations and
Utility Installations unless the item in question has become the property
of Lessor under the terms of this Lease. If Lessee is the Insuring Party,
the policy carried by Lessee under this Paragraph 8.3 shall insure Lessee
Owned Alterations and Utility Installations.
8.4 LESSEE'S PROPERTY INSURANCE. Subject to the requirements of
Paragraph 8.5, Lessee at its cost shall either by separate policy or, at
Lessor's option, by endorsement to a policy already carried, maintain
insurance coverage on all of Lessee's personal property, Lessee Owned
Alterations and Utility Installations in, on, or about the Premises
similar in coverage to that carried by the Insuring Party under Paragraph
8.3. Such insurance shall be full replacement cost coverage with a
deductible of not to exceed $1,000 per occurrence. The proceeds from any
such insurance shall be used by Lessee for the replacement of personal
property or the restoration of Lessee Owned Alterations and Utility
Installations. Lessee shall be the Insuring Party with respect to the
insurance required by this Paragraph 8.4 and shall provide Lessor with
written evidence that such insurance is in force.
8.5 INSURANCE POLICIES. Insurance required hereunder shall be in
companies duly licensed to transact business in the state where the
Premises are located, and maintaining during the policy term a "General
Policyholders Rating" of at least B+, V, or such other rating as may be
required by a Lender having a lien on the Premises, as set forth in the
most current issue of "Best's Insurance Guide." Lessee shall not do or
permit to be done anything which shall invalidate the insurance policies
referred to in this Paragraph 8. If Lessee is the Insuring Party, Lessee
shall cause to be delivered to Lessor certified copies of policies of
such insurance or certificates evidencing the existence and amounts of
such insurance with the insureds and loss payable clauses as required by
this Lease. No such policy shall be cancellable or subject to
modification except after thirty (30) days prior written notice to
Lessor. Lessee shall at least thirty (30) days prior to the expiration of
such policies, furnish Lessor with evidence of renewals or "Insurance
binders" evidencing renewal thereof, or Lessor may order such insurance
and charge the cost thereof to Lessee, which amount shall be payable by
Lessee to Lessor upon demand. If the Insuring Party shall fail to procure
and maintain the insurance required to be carried by the Insuring Party
under this Paragraph 8, the other Party may, but shall not be required
to, procure and maintain the same, but at Lessee's expense.
8.6 WAIVER OF SUBROGRATION. Without affecting any other rights or
remedies, Lessee and Lessor ("WAIVING PARTY") each hereby release and
relieve the other, and waive their entire right to recover damages
(whether in contract or in tort) against the other, for loss of or damage
to the Waiving Party's property arising out of or incident to the perils
required to be insured against under Paragraph 8. The effect of such
releases and waivers of the right to recover damages shall not be limited
by the amount of insurance carried or required, or by any deductibles
applicable thereto.
8.7 INDEMNITY. Except for Lessor's negligence and/or breach of
express warranties, Lessee shall indemnify, protect, defend and hold
harmless the Premises, Lessor and its agents, Lessor's master or ground
lessor, partners and Lenders, from and against any and all claims, loss
of rents and/or damages, costs, liens, judgments, penalties, permits,
attorney's and consultant's fees, expenses and/or liabilities arising out
of, involving, or in dealing with, the occupancy of the Premises by
Lessee, the conduct of Lessee's business, any act, omission or neglect of
Lessee, its agents, contractors, employees or invitees, and out of any
Default or Breach by Lessee in the performance in a timely manner of any
obligation on Lessee's part to be performed under this Lease. The
foregoing shall include, but not be limited to, the defense or pursuit of
any claim or any action or proceeding involved therein, and whether or
not (in the case of claims made against Lessor) litigated and/or reduced
to judgment, and whether well founded or not. In case any action or
proceeding be brought against Lessor by reason of any of the foregoing
matters, Lessee upon notice from Lessor shall defend the same at Lessee's
expense by counsel reasonably satisfactory to Lessor and Lessor shall
cooperate with Lessee in such defense. Lessor need not have first paid
any such claim in order to be so indemnified.
8.8 EXEMPTION OF LESSOR FROM LIABILITY. Lessor shall not be liable
for injury or damage to the person or goods, wares, merchandise or other
property of Lessee, Lessee's employees, contractors, invitees, customers,
or any other person in or about the Premises, whether such damage or
injury is caused by or results from fire, steam, electricity, gas, water
or rain, or from the breakage, leakage, obstruction or other defects of
pipes, fire sprinklers, wires, appliances, plumbing, air conditioning or
lighting fixtures, or from any other cause, whether the said injury or
damage results from conditions arising upon the Premises or upon other
portions of the building of which the Premises are a part, or from other
sources or places, and regardless of whether the cause of such damage or
injury or the means of repairing the same is accessible or not. Lessor
shall not be liable for any damages arising from any act or neglect of
any other tenant of Lessor. Notwithstanding Lessor's negligence or breach
of this Lease, Lessor shall under no circumstances be liable for injury
to Lessee's business or for any loss of income or profit therefrom.
9. DAMAGE OR DESTRUCTION.
9.1 DEFINITIONS.
(a) "PREMISES PARTIAL DAMAGE" shall mean damage or destruction to
the improvements on the Premises, other than Lessee Owned Alterations and
Utility Installations, the repair cost of which damage or destruction is
less than 50% of the then Replacement Cost of the Premises immediately
prior to such damage or destruction, excluding from such calculation the
value of the land and Lessee Owned Alterations and Utility Installations.
(b) "PREMISES TOTAL DESTRUCTION" shall mean damage or destruction to
the Premises, other than Lessee Owned Alterations and Utility
Installations the repair cost of which damage or destruction is 50% or
more of the then Replacement Cost of the Premises immediately prior to
such damage or destruction, excluding from such calculation the value of
the land and Lessee Owned Alterations and Utility Installations.
(c) "INSURED LOSS" shall mean damage or destruction to improvements
on the Premises, other than Lessee Owned Alterations and Utility
Installations, which was caused by an event required to be covered by the
insurance described in Paragraph 8.3(a), irrespective of any deductible
amounts or coverage limits involved.
(d) "REPLACEMENT COST" shall mean the cost to repair or rebuild the
improvements owned by Lessor at the time of the occurrence to their
condition existing immediately prior thereto, including demolition,
debris removal and upgrading required by the operation of applicable
building codes, ordinances or laws, and without deduction for
depreciation.
(e) "HAZARDOUS SUBSTANCE CONDITION" shall mean the occurrence or
discovery of a condition involving the presence of, or a contamination
by, a Hazardous Substance as defined in Paragraph 8.2(a), in, on, or
under the Premises.
9.2 PARTIAL DAMAGE - INSURED LOSS. If a Premises Partial Damage that
is an Insured Loss occurs, then Lessor shall, at Lessor's expense, repair
such damage (but not Lessee's Trade Fixtures or Lessee Owned Alterations
and Utility Installations) as soon as reasonably possible and this Lease
shall continue in full force and effect; provided, however, that Lessee
shall, at Lessor's election, make the repair of any damage or destruction
the total cost to repair of which is $10,000 or less, and, in such event,
Lessor shall make the insurance proceeds available to Lessee on a
reasonable basis for that purpose. Notwithstanding the foregoing, if the
required insurance was not in force or the insurance proceeds are not
sufficient to effect such repair, the Insuring Party shall promptly
contribute the shortage in proceeds (except as to the deductible which is
Lessee's responsibility) as and when required to complete said repairs.
In the event, however, the shortage in proceeds was due to the fact that,
by reason of the unique nature of the improvements, full replacement cost
insurance coverage was not commercially reasonable and available, Lessor
shall have no obligation to pay for the shortage in insurance proceeds or
to fully restore the unique aspects of the Premises unless Lessee
provides Lessor with the funds to cover same, or adequate assurance
thereof, within ten (10) days following receipt of written notice of such
shortage and request therefor. If Lessor receives said funds or adequate
assurance thereof within said ten (10) day period, the party responsible
for making the repairs shall complete them as soon as reasonably possible
and this Lease shall remain in full force and effect. If Lessor does not
receive such funds or assurance within said period, Lessor may
nevertheless elect by written notice to Lessee within ten (10) days
thereafter to make such restoration and repair as is commercially
reasonable with Lessor paying any shortage in proceeds, in which case
this Lease shall remain in full force and effect. If in such case Lessor
does not so elect, then this Lease shall terminate sixty (60) days
following the occurrence of the damage or destruction. Unless otherwise
agreed, Lessee shall in no event have any right to reimbursement from
Lessor for [TEXT ILLEGIBLE] to repair any such damage or destruction.
Premises Partial Damage due to flood or earthquake shall be subject to
Paragraph 9.3 rather than Paragraph 9.2, notwithstanding that there may
be some insurance coverage, but the net proceeds of any such insurance
shall be made available for the repairs if made by either Party.
9.3 PARTIAL DAMAGE - UNINSURED LOSS. If a Premises Partial Damage
that is not an Insured Loss occurs, unless caused by a negligent or
willful act of Lessee (in which event Lessee shall make the repairs at
Lessee's expense and this Lease shall continue in full force and effect,
but subject to Lessor's rights under Paragraph 13), Lessor may at
Lessor's option, either: (i) repair such damage as soon as reasonably
possible at Lessor's expense, in which event this Lease shall continue in
full force and effect, or (ii) give written notice to Lessee within
thirty (30) days after receipt by Lessor of knowledge of the occurrence
of such damage of Lessor's desire to terminate this Lease as of the date
sixty (60) days following the giving of such notice. In the event Lessor
elects to give such notice of Lessor's intention to terminate this Lease,
Lessee shall have the right within ten (10) days after the receipt of
such notice to give written notice to Lessor of Lessee's commitment to
pay for the repair of such damage totally at Lessee's expense and without
reimbursement from Lessor. Lessee shall provide Lessor with the required
funds or satisfactory assurance thereof within thirty (30) days following
Lessee's said commitment. In such event this Lease shall continue in full
force and effect, and Lessor shall proceed to make such repairs as soon
as reasonably possible and the required funds are available. If Lessee
does not give such notice and provide the funds or assurance thereof
within the times specified above, this Lease shall terminate as of the
date specified in Lessor's notice of termination.
9.4 TOTAL DESTRUCTION. Notwithstanding any other provision hereof, if
a Premises Total Destruction occurs (including any destruction required
by any authorized public authority), this Lease shall terminate sixty
(60) days following the date of such Premises Total Destruction, whether
or not the damage or destruction is an Insured Loss or was caused by a
negligent or willful act of Lessee. In the event, however, that the
damage or destruction was caused by Lessee, Lessor shall have the right
to recover Lessor's damages from Lessee except as released and waived in
Paragraph 8.6.
9.5 DAMAGE NEAR END OF TERM. If at any time during the last six (6)
months of the term of this Lease there is damage for which the cost to
repair exceeds one (1) month's Base Rent, whether or not an Insured Loss,
Lessor may, at Lessor's option, terminate this Lease effective sixty (60)
days following the date of occurrence of such damage by giving written
notice to Lessee of Lessor's election to do so within thirty (30) days
after the date of occurrence of such damage. Provided, however, if Lessee
at that time has an exercisable option to extend this Lease or to
purchase the Premises, then Lessee may preserve this Lease by, within
twenty (20) days following the occurrence of the damage, or before the
expiration of the time provided in such option for its exercise,
whichever is earlier ("Exercise Period"), (i) exercising such option and
(ii) providing Lessor with any shortage in insurance proceeds (or
adequate assurance thereof) needed to make the repairs. If Lessee duly
exercises such option during said Exercise Period and provides Lessor
with funds (or adequate assurance thereof) to cover any shortage in
insurance proceeds, Lessor shall, at Lessor's expense repair such damage
as soon as reasonably possible and this Lease shall continue in full
force and effect. If Lessee fails to exercise such option and provide
such funds or assurance during said Exercise Period, then Lessor may at
Lessor's option terminate this Lease as of the expiration of said sixty
(60) day period following the occurrence of such damage by giving written
notice to Lessee of Lessor's election to do so within ten (10) days after
the expiration of the Exercise Period, notwithstanding any term or
provision in the grant of option to the contrary.
9.6 ABATEMENT OF RENT; LESSEE'S REMEDIES.
(a) In the event of damage described in Paragraph 9.2 (Partial
Damage - Insured), whether or not Lessor or Lessee repairs or restores
the Premises, the Base Rent, Real Property Taxes, insurance premiums, and
other charges, if any, payable by Lessee hereunder for the period during
which such damage, its repair or the restoration continues (not to exceed
the period for which rental value insurance is required under Paragraph
8.3(b)), shall be abated in proportion to the degree to which Lessee's
use of the Premises is impaired. Except for abatement of Base Rent, Real
Property Taxes, insurance premiums, and other charges, if any, as
aforesaid, all other obligations of Lessee hereunder shall be performed
by Lessee, and Lessee shall have no claim against Lessor for any damage
suffered by reason of any such repair or restoration.
(b) If Lessor shall be obligated to repair or restore the Premises
under the provisions of this Paragraph 9 and shall not commence, in a
substantial and meaningful way, the repair or restoration of the Premises
within ninety (90) days after such obligation shall accrue, Lessee may,
at any time prior to the commencement of such repair or restoration, give
written notice to Lessor and to any Lenders of which Lessee has actual
notice of Lessee's election to terminate this Lease on a date not less
than sixty (60) days following the giving of such notice. If Lessee gives
such notice to Lessor and such Lenders and such repair or restoration is
not commenced within thirty (30) days after receipt of such notice, this
Lease shall terminate as of the date specified in said notice. If Lessor
or a Lender commences the repair or restoration of the Premises within
thirty (30) days after receipt of such notice, this Lease shall continue
in full force and effect. "Commence" as used in this Paragraph shall mean
either the unconditional authorization of the preparation of the required
plans, or the beginning of the actual work on the Premises, whichever
first occurs.
9.7 HAZARDOUS SUBSTANCE CONDITIONS. If a Hazardous Substance
Condition occurs, unless Lessee is legally responsible therefor (in which
case Lessee shall make the investigation and remediation thereof required
by Applicable Law and this Lease shall continue in full force and effect,
but subject to Lessor's rights under Paragraph 13), Lessor may at
Lessor's option either (i) investigate and remediate such Hazardous
Substance Condition, if required, as soon as reasonably possible at
Lessor's expense, in which event this Lease shall continue in full force
and effect, or (ii) if the estimated cost to investigate and remediate
such condition exceeds twelve (12) times the then monthly Base Rent or
$100,000, whichever is greater, give written notice to Lessee within
thirty (30) days after receipt by Lessor of knowledge of the occurrence
of such Hazardous Substance Condition of Lessor's desire to terminate
this Lease as of the date sixty (60) days following the giving of such
notice. In the event Lessor elects to give such notice of Lessor's
intention to terminate this Lease, Lessee shall have the right within ten
(10) days after the receipt of such notice to give written notice to
Lessor of Lessee's commitment to pay for the investigation and
remediation of such Hazardous Substance Condition totally at Lessee's
expense and without reimbursement from Lessor except to the extent of an
amount equal to twelve (12) times the then monthly Base Rent or $100,000,
whichever is greater. Lessee shall provide Lessor with the funds required
of Lessee or satisfactory assurance thereof within thirty (30) days
following Lessee's said commitment. In such event this Lease shall
continue in full force and effect, and Lessor shall proceed to make such
investigation and remediation as soon as reasonably possible and the
required funds are available. If Lessee does not give such notice and
provide the required funds or assurance thereof within the times
specified above, this Lease shall terminate as of the date specified in
Lessor's notice of termination. If a Hazardous Substance Condition occurs
for which Lessee is not legally responsible, there shall be abatement of
Lessee's obligations under this Lease to the same extent as provided in
Paragraph 9.6(a) for a period of not to exceed twelve (12) months.
9.8 TERMINATION - ADVANCE PAYMENTS. Upon termination of this Lease
pursuant to this Paragraph 9, an equitable adjustment shall be made
concerning advance Base Rent and any other advance payments made by
Lessee to Lessor. Lessor shall, in addition, return to Lessee so much of
Lessee's Security Deposit as has not been, or is not then required to be,
used by Lessor under the terms of this Lease.
9.9 WAIVE STATUTES. Lessor and Lessee agree that the terms of this
Lease shall govern the effect of any damage to or destruction of the
Premises with respect to the termination of this Lease and hereby waive
the provisions of any present or future statute to the extent
inconsistent herewith.
10. REAL PROPERTY TAXES.
10.1 (a) PAYMENT OF TAXES. Lessee shall pay the Real Property Taxes,
as defined in Paragraph 10.2, applicable to the Premises during the term
of this Lease. Subject to Paragraph 10.1(b), all such payments shall be
made at least ten (10) days prior to the delinquency date of the
applicable installment. Lessee shall promptly furnish Lessor with
satisfactory evidence that such taxes have been paid. If any such taxes
to be paid by Lessee shall cover any period of time prior to or after the
expiration or earlier termination of the term hereof, Lessee's share of
such taxes shall be equitably prorated to cover only the period of time
within the tax fiscal year this Lease is in effect, and Lessor shall
reimburse Lessee for any overpayment after such proration. If Lessee
shall fail to pay any Real Property Taxes required by this Lease to be
paid by Lessee, Lessor shall have the right to pay the same, and Lessee
shall reimburse Lessor therefor upon demand.
(b) ADVANCE PAYMENT. In order to insure payment when due and before
delinquency of any or all Real Property Taxes, Lessor reserves the right,
at Lessor's option, to estimate the current Real Property Taxes
applicable to the Premises, and to require such current year's Real
Property Taxes to be paid in advance to Lessor by Lessee, either: (i) in
a lump sum amount equal to the installment due, at least twenty (20) days
prior to the applicable delinquency date, or (ii) monthly in advance with
the payment of the Base Rent. If Lessor elects to require payment monthly
in advance, the monthly payment shall be that equal monthly amount which,
over the number of months remaining before the month in which the
applicable tax installment would become delinquent (and without interest
thereon), would provide a fund large enough to fully discharge before
delinquency the estimated installment of taxes to be paid. When the
actual amount of the applicable tax bill is known, the amount of such
equal monthly advance payment shall be adjusted as required to provide
the fund needed to pay the applicable taxes before delinquency. If the
amounts paid to Lessor by Lessee under the provisions of this Paragraph
are insufficient to discharge the obligations of Lessee to pay such Real
Property Taxes as the same become due, Lessee shall pay to Lessor, upon
Lessor's demand, such additional sums as are necessary to pay such
obligations. All moneys paid to Lessor under this Paragraph may be
intermingled with other moneys of Lessor and shall not bear interest. In
the event of a Breach by Lessee in the performance of the obligations of
Lessee under this Lease, then any balance of funds paid to Lessor under
the provisions of this Paragraph may, subject to proration as provided in
Paragraph 10.1(a), at the option of Lessor, be treated as an additional
Security Deposit under Paragraph 5.
10.2 DEFINITION OF "REAL PROPERTY TAXES." As used herein, the term
"Real Property Taxes" shall include any form of real estate tax or
assessment, general, special, ordinary or extraordinary, and any license
fee, commercial rental tax, improvement bond or bonds, levy or tax (other
than inheritance, personal income or estate taxes) imposed upon the
Premises by any authority having the direct or indirect power to tax,
including any city, state or federal government, or any school,
agricultural, sanitary, fire, street, drainage or other improvement
district thereof, levied against any legal or equitable interest of
Lessor in the Premises or in the real property of which the Premises are
a part, Lessor's right to rent or other income therefrom, and/or Lessor's
business of leasing the Premises. The term "Real Property Taxes" shall
also include any tax, fee, levy, assessment or charge, or any increase
therein, imposed by reason of events occurring, or changes in applicable
law taking effect, during the term of this Lease, including but not
limited to a change in the ownership of the Premises or in the
improvements thereon, the execution of this Lease, or any modification,
amendment or transfer thereof, and whether or not contemplated by the
Parties.
10.3 JOINT ASSESSMENT. If the Premises are not separately assessed,
Lessee's liability shall be an equitable proportion of the Real Property
Taxes for all of the land and improvements included within the tax parcel
assessed, such proportion to be determined by Lessor from the respective
valuations assigned in the assessor's work sheets or such other
information as may be reasonably available. Lessor's reasonable
determination thereof, in good faith, shall be conclusive.
10.4 PERSONAL PROPERTY TAXES. Lessee shall pay prior to delinquency
all taxes assessed against and levied upon Lessee Owned Alterations,
Utility Installations, Trade Fixtures, furnishings, equipment and all
personal property of Lessee contained in the Premises or elsewhere. When
possible, Lessee shall cause its Trade Fixtures, furnishings, equipment
and all other personal property to be assessed and billed separately from
the real property of Lessor. If any of Lessee's said personal property
shall be assessed with Lessor's real property, Lessee shall pay Lessor
the taxes attributable to Lessee within ten (10) days after receipt of a
written statement setting forth the taxes applicable to Lessee's property
or, at Lessor's option, as provided in Paragraph 10.1(b).
11. UTILITIES. Lessee shall pay for all water, gas, heat, light, power,
telephone, trash disposal and other utilities and services supplied to
the Premises, together with any taxes thereon. If any such services are
not separately metered to Lessee, Lessee shall pay a reasonable
proportion, to be determined by Lessor, of all charges jointly metered
with other premises.
12. ASSIGNMENT AND SUBLETTING.
12.1 LESSOR'S CONSENT REQUIRED.
(a) Lessee shall not voluntarily or by operation of law assign,
transfer, mortgage or otherwise transfer or encumber (collectively,
"ASSIGNMENT") or sublet all or any part of Lessee's interest in this
Lease or in the Premises without Lessor's prior written consent given
under and subject to the terms of Paragraph 36.
(b) A change in the control of Lessee shall constitute an
assignment requiring Lessor's consent. The transfer, on a cumulative
basis, of twenty-five percent (25%) or more of the voting control of
Lessee shall constitute a change in control for this purpose.
(c) The involvement of Lessee or its assets in any transaction, or
series of transactions (by way of merger, sale, acquisition, financing,
refinancing, transfer, leveraged buy-out or otherwise), whether or not a
formal assignment or hypothecation of this Lease or Lessee's assets
occurs, which results or will result in a reduction of the Net Worth of
Lessee, as hereinafter defined, by an amount equal to or greater than
twenty-five percent (25%) of such Net Worth of Lessee as it was
represented to Lessor at the time of the execution by Lessor of this
Lease or at the time of the most recent assignment to which Lessor has
consented, or as it still exists immediately prior to said transaction or
transactions constituting such reduction, at whichever time said Net
Worth of Lessee was or is greater, shall be considered an assignment of
this Lease by Lessee to which Lessor may reasonably withhold its consent.
"NET WORTH OF LESSEE" for purposes of this Lease shall be the net worth
of Lessee (excluding any guarantors) established under generally accepted
accounting principles consistently applied.
(d) An assignment or subletting of Lessee's interest in this Lease
without Lessor's specific prior written consent shall, at Lessor's
option, be a Default curable after notice per Paragraph 13.1(c), or a
noncurable Breach without the necessity of any notice and grace period.
If Lessor elects to treat such unconsented to assignment or subletting as
a noncurable Breach, Lessor shall have the right to either: (i) terminate
this Lease, or (ii) upon thirty (30) days written notice ("LESSOR'S
NOTICE"), increase the monthly Base Rent to fair market rental value or
one hundred ten percent (110%) of the Base Rent then in effect, whichever
is greater. Pending determination of the new fair market rental value, if
disputed by Lessee, Lessee shall pay the amount set forth in Lessor's
Notice, with any overpayment credited against the next installment(s) of
Base Rent coming due, and any underpayment for the period retroactively
to the effective date of the adjustment being due and payable immediately
upon the determination thereof. Further, in the event of such Breach and
market value adjustment, (i) the purchase price of any option to purchase
the Premises held by Lessee shall be subject to similar adjustment to the
then fair market value (without the Lease being considered an encumbrance
or any deduction for depreciation or obsolescence, and considering the
Premises at its highest and best use and in good condition), or one
hundred ten percent (110%) of the price previously in effect, whichever
is greater, (ii) any index-oriented rental or price adjustment formulas
contained in this Lease shall be adjusted to require that the base index
be determined with reference to the index applicable to the time of such
adjustment, and (iii) any fixed rental adjustments scheduled during the
remainder of the Lease term shall be increased in the same ratio as the
new market rental bears to the Base Rent in effect immediately prior to
the market value adjustment.
(e) Lessee's remedy for any breach of this Paragraph 12.1 by
Lessor shall be limited to compensatory damages and injunctive relief.
12.2 TERMS AND CONDITIONS APPLICABLE TO ASSIGNMENT AND SUBLETTING.
(a) Regardless of Lessor's consent, any assignment or subletting
shall not: (i) be effective without the express written assumption by
such assignee or sublessee of the obligations of Lessee under this Lease,
(ii) release Lessee of any obligations hereunder, or (iii) alter the
primary liability of Lessee for the payment of Base Rent and other sums
due Lessor hereunder or for the performance of any other obligations to
be performed by Lessee under this Lease.
(b) Lessor may accept any rent or performance of Lessee's
obligations from any person other than Lessee pending approval or
disapproval of an assignment. Neither a delay in the approval or
disapproval of such assignment nor the acceptance of any rent or
performance shall constitute a waiver or estoppel of Lessor's right to
exercise its remedies for the Default or Breach by Lessee of any of the
terms, covenants or conditions of this Lease.
(c) The consent of Lessor to any assignment or subletting shall
not constitute a consent to any subsequent assignment or subletting by
Lessee or to any subsequent or successive assignment or subletting by the
sublessee. However, Lessor may consent to subsequent sublettings and
assignments of the sublease or any amendments or modifications thereto
without notifying Lessee or anyone else liable on the Lease or sublease
and without obtaining their consent, and such action shall not relieve
such persons from liability under this Lease or sublease.
(d) In the event of any Default or Breach of Lessee's obligations
under this Lease, Lessor may proceed directly against Lessee, any
Guarantors or any one else responsible for the performance of the
Lessee's obligations under this Lease, including the sublessee, without
first exhausting Lessor's remedies against any other person or entity
responsible therefor to Lessor, or any security held by Lessor or Lessee.
(e) Each request for consent to an assignment or subletting shall
be in writing, accompanied by information relevant to Lessor's
determination as to the financial and operational responsibility and
appropriateness of the proposed assignee or sublessee, including but not
limited to the intended use and/or required modification of the Premises,
if any, together with a non-refundable deposit of $1,000 or ten percent
(10%) of the current monthly Base Rent, whichever is greater, as
reasonable consideration for Lessor's considering and processing the
request for consent. Lessee agrees to provide Lessor with such other or
additional information and/or documentation as may be reasonably
requested by Lessor.
(f) Any assignee of, or sublessee under, this Lease shall, by
reason of accepting such assignment or entering into such sublease, be
deemed, for the benefit of Lessor, to have assumed and agreed to conform
and comply with each and every term, covenant, condition and obligation
herein to be observed or performed by Lessee during the term of said
assignment or sublease, other than such obligations as are contrary to or
inconsistent with provisions of an assignment or sublease to which Lessor
has specifically consented in writing.
(g) The occurrence of a transaction described in Paragraph 12.1(c)
shall give Lessor the right (but not the obligation) to require that the
Security Deposit be increased to an amount equal to six (6) times the
then monthly Base Rent, and Lessor may make the actual receipt by Lessor
of the amount required to establish such Security Deposit a condition to
Lessor's consent to such transaction.
(h) Lessor, as a condition to giving its consent to any assignment
or subletting, may require that the amount and adjustment structure of
the rent payable under this Lease be adjusted to what is then the market
value and/or adjustment structure for property similar to the Premises as
then constituted.
12.3 ADDITIONAL TERMS AND CONDITIONS APPLICABLE TO SUBLETTING. The
following terms and conditions shall apply to any subletting by Lessee of
all or any part of the Premises and shall be deemed included in all
subleases under this Lease whether or not expressly incorporated therein:
(a) Lessee hereby assigns and transfers to Lessor all of Lessee's
interest in all rentals and income arising from any sublease of all or a
portion of the Premises heretofore or hereafter made by Lessee, and
Lessor may collect such rent and income and apply same toward Lessee's
obligations under this Lease; provided, however, that until a Breach (as
defined in Paragraph 13.1) shall occur in the performance of Lessee's
obligations under this Lease, Lessee may, except as otherwise provided in
this Lease, receive, collect and enjoy the rents accruing under such
sublease. Lessor shall not, by reason of this or any other assignment of
such sublease to Lessor, nor by reason of the collection of the rents
from a sublessee, be deemed liable to the sublessee for any failure of
Lessee to perform and comply with any of Lessee's obligations to such
sublessee under such sublease. Lessee hereby irrevocably authorizes and
directs any such sublessee, upon receipt of a written notice from Lessor
stating that a Breach exists in the performance of Lessee's obligations
under this Lease, to pay to Lessor the rents and other charges due and to
become due under the sublease. Sublessee shall rely upon any such
statement and request from Lessor and shall pay such rents and other
charges to Lessor without any obligation or right to inquire as to
whether such Breach exists and notwithstanding any notice from or claim
from Lessee to the contrary. Lessee shall have no right or claim against
said sublessee, or, until the Breach has been cured, against Lessor, for
any such rents and other charges so paid by said sublessee to Lessor.
(b) In the event of a Breach by Lessee in the performance of its
obligations under this Lease, Lessor, at its option and without any
obligation to do so, may require any sublessee to attorn to Lessor, in
which event Lessor shall undertake the obligations of the sublessor under
such sublease from the time of the exercise of said option to the
expiration of such sublease; provided, however, Lessor shall not be
liable for any prepaid rents or security deposit paid by such sublessee
to such sublessor or for any other prior Defaults or Breaches of such
sublessor under such sublease.
(c) Any matter or thing requiring the consent of the sublessor
under a sublease shall also require the consent of Lessor herein.
(d) No sublessee shall further assign or sublet all or any part of
the Premises without Lessor's prior written consent.
(e) Lessor shall deliver a copy of any notice of Default or Breach
by Lessee to the sublessee, who shall have the right to cure the Default
of Lessee within the grace period, if any, specified in such notice. The
sublessee shall have a right of reimbursement and offset from and against
Lessee for any such Defaults cured by the sublessee.
13. DEFAULT; BREACH; REMEDIES.
13.1 DEFAULT; BREACH. Lessor and Lessee agree that if an attorney is
consulted by Lessor in connection with a Lessee Default or Breach (as
hereinafter defined), $350.00 is a reasonable minimum sum per such
occurrence for legal services and costs in the preparation and service of
a notice of Default, and that Lessor may include the cost of such
services and costs in said notice as rent due and payable to cure said
Default. A "Default" is defined as a failure by the Lessee to observe,
comply with or perform any of the terms, covenants, conditions or rules
applicable to Lessee under this Lease. A "Breach" is defined as the
occurrence of any one or more of the following Defaults, and, where a
grace period for cure after notice is specified herein, the failure by
Lessee to cure such Default prior to the expiration of the applicable
grace period, shall entitle Lessor to pursue the remedies set forth in
Paragraphs 13.2 and/or 13.3:
(a) The vacating of the Premises without the intention to reoccupy
same, or the abandonment of the Premises.
(b) Except as expressly otherwise provided in this Lease, the
failure by Lessee to make any payment of Base Rent or any other or
monetary payment required to be made by Lessee hereunder, whether to
Lessor or to a third party, as and when due, the failure by Lessee to
provide Lessor with reasonable evidence of insurance or surety bond
required under this Lease, or the failure of Lessee to fulfill any
obligation under this Lease which endangers or threatens life or
property, where such failure continues for a period of three (3) days
following written notice thereof by or on behalf of Lessor to Lessee.
(c) Except as expressly otherwise provided in this Lease, the
failure by Lessee to provide Lessor with reasonable written evidence (in
duly executed original form, if applicable) of (i) compliance with
Applicable Law per Paragraph 6.3, (ii) the inspection, maintenance and
service contracts required under Paragraph 7.1(b), (iii) the recission of
an unauthorized assignment or subletting per Paragraph 12.1(b), (iv) a
Tenancy Statement per Paragraphs 16 or 37, (v) the subordination or non-
subordination of this Lease per Paragraph 30, (vi) the guaranty of the
performance of Lessee's obligations under this Lease if required under
Paragraphs 1.11 and 37, (vii) the execution of any document requested
under Paragraph 42 (easements), or (viii) any other documentation or
information which Lessor may reasonably require of Lessee under the terms
of this Lease, where any such failure continues for a period of ten (10)
days following written notice by or on behalf of Lessor to Lessee.
(d) A Default by Lessee as to the terms, covenants, conditions or
provisions of this Lease, or of the rules adopted under Paragraph 40
hereof, that are to be observed, complied with or performed by Lessee,
other than those described in subparagraphs (a), (b) or (c), above, where
such Default continues for a period of thirty (30) days after written
notice thereof by or on behalf of Lessor to Lessee; provided, however,
that if the nature of Lessee's Default is such that more than thirty (30)
days are reasonably required for its cure, then it shall not be deemed to
be a Breach of this Lease by Lessee if Lessee commences such cure within
said thirty (30) day period and thereafter diligently prosecutes such
cure to completion.
(e) The occurrence of any of the following events: (i) The making by
lessee of any general arrangement or assignment for the benefit of
creditors; (ii) Lessee's becoming a "debtor" as defined in 11 U.S.C.
Section 101 or any successor statute thereto (unless, in the case of a
petition filed against Lessee, the same is dismissed with sixty (60)
days); (iii) the appointment of a trustee or receiver to take possession
of substantially all of Lessee's assets located at the Premises or of
Lessee's interest in this Lease, where possession is not restored to
Lessee within thirty (30) days; or (iv) the attachment, execution or
other judicial seizure of substantially all of Lessee's assets located at
the Premises or of Lessee's interest in this Lease, where such seizure is
not discharged within thirty (30) days; provided, however, in the event
that any provision of this subparagraph (e) is contrary to any applicable
law, such provision shall be of no force or effect, and not affect the
validity of the remaining provisions.
(f) The discovery by Lessor that any financial statement given to
Lessor by Lessee or any Guarantor of Lessee's obligations hereunder was
materially false.
(g) If the performance of Lessee's obligations under this Lease is
guaranteed: (i) the death of a guarantor, (ii) the termination of a
guarantor's liability with respect to this Lease other than in accordance
with the terms of such guaranty, (iii) a guarantor's becoming insolvent
or the subject of a bankruptcy filing, (iv) a guarantor's refusal to
honor the guaranty, or (v) a guarantor's breach of its guaranty
obligation on an anticipatory breach basis, and Lessee's failure, within
sixty (60) days following written notice by or on behalf of Lessor to
Lessee of any such event, to provide Lessor with written alternative
assurance or security, which, when coupled with the then existing
resources of Lessee, equals or exceeds the combined financial resources
of Lessee and the guarantors that existed at the time of execution of
this Lease.
13.2 REMEDIES. If Lessee fails to perform any affirmative duty or
obligation of Lessee under this Lease, within ten (10) days after written
notice to Lessee (or in case of an emergency, without notice), Lessor may
at its option (but without obligation to do so), perform such duty or
obligation on Lessee's behalf, including but not limited to the obtaining
of reasonably required bonds, insurance policies, or governmental
licenses, permits or approvals. The costs and expenses of any such
performance by Lessor shall be due and payable by Lessee to Lessor upon
invoice therefor. If any check given to Lessor by Lessee shall not be
honored by the bank upon which it is drawn, Lessor, at its option, may
require all future payments to be made under this Lease by Lessee to be
made only by cashier's check. In the event of a Breach of this Lease by
Lessee, as defined in Paragraph 13.1, with or without further notice or
demand, and without limiting Lessor in the exercise of any right or
remedy which Lessor may have by reason of such Breach, Lessor may:
(a) Terminate Lessee's right to possession of the Premises by any
lawful means, in which case this Lease and the term hereof shall
terminate and Lessee shall immediately surrender possession of the
Premises to Lessor. In such event Lessor shall be entitled to recover
from Lessee: (i) the worth at the time of the award of the unpaid rent
which had been earned at the time of termination; (ii) the worth at the
time of award of the amount by which the unpaid rent which would have
been earned after termination until the time of award exceeds the amount
of such rental loss that the Lessee proves could have been reasonably
avoided; (iii) the worth at the time of award of the amount by which the
unpaid rent for the balance of the term after the time of award exceeds
the amount of such rental loss that the Lessee proves could be reasonably
avoided; and (iv) any other amount necessary to compensate Lessor for all
the detriment proximately caused by the Lessee's failure to perform its
obligations under this Lease or which in the ordinary course of things
would be likely to result therefrom, including but not limited to the
cost of recovering possession of the Premises, expenses of reletting,
including necessary renovation and alteration of the Premises, reasonable
attorneys' fees, and that portion of the leasing commission paid by
Lessor applicable to the unexpired term of this Lease. The worth at the
time of award of the amount referred to in provision (iii) of the prior
sentence shall be computed by discounting such amount at the discount
rate of the Federal Reserve Bank of San Francisco at the time of award
plus one percent (1%). Efforts by Lessor to mitigate damages caused by
Lessee's Default or Breach of this Lease shall not waive Lessor's right
to recover damages under this Paragraph. If termination of this Lease is
obtained through the provisional remedy of unlawful detainer, Lessor
shall have the right to recover in such proceeding the unpaid rent and
damages as are recoverable therein, or Lessor may reserve therein the
right to recover all or any part thereof in a separate suit for such rent
and/or damages. If a notice and grace period required under subparagraphs
13.1(b), (c) or (d) was not previously given, a notice to pay rent or
quit, or to perform or quit, as the case may be, given to Lessee under
any statute authorizing the forfeiture of leases for unlawful detainer
shall also constitute the applicable notice for grace period purposes
required by subparagraphs 13.1(b), (c) or (d). In such case, the
applicable grace period under subparagraphs 13.1(b), (c) or (d) and under
the unlawful detainer statute shall run concurrently after the one such
statutory notice, and the failure of Lessee to cure the Default within
the greater of the two such grace periods shall constitute both an
unlawful detainer and a Breach of this Lease entitling Lessor to the
remedies provided for in this Lease and/or by said statute.
(b) Continue the Lease and Lessee's right to possession in effect
(in California under California Civil Code Section 1951.4) after Lessee's
Breach and abandonment and recover the rent as it becomes due, provided
Lessee has the right to sublet or assign, subject only to reasonable
limitations. See Paragraphs 12 and 36 for the limitations on assignment
and subletting which limitations Lessee and Lessor agree are reasonable.
Acts of maintenance or preservation, efforts to relet the Premises, or
the appointment of a receiver to protect the Lessor's interest under the
Lease, shall not constitute a termination of the Lessee's right to
possession.
(c) Pursue any other remedy now or hereafter available to Lessor
under the laws or judicial decisions of the state wherein the Premises
are located.
(d) The expiration or termination of this Lease and/or the
termination of Lessee's right to possession shall not relieve Lessee from
liability under any indemnity provisions of this Lease as to matters
occurring or accruing during the term hereof or by reason of Lessee's
occupancy of the Premises.
13.3 INDUCEMENT RECAPTURE IN EVENT OF BREACH. Any agreement by Lessor
for free or abated rent or other charges applicable to the Premises, or
for the giving or paying by Lessor to or for Lessee of any cash or other
bonus, inducement or consideration for Lessee's entering into this Lease,
all of which concessions are hereinafter referred to as "Inducement
Provisions," shall be deemed conditioned upon lessee's full and faithful
performance of all of the terms, covenants and conditions of this Lease
to be performed or observed by Lessee during the term hereof as the same
may be extended. Upon the occurrence of a Breach of this Lease by Lessee,
as defined in Paragraph 13.1, any such Inducement Provision shall
automatically be deemed deleted from this Lease and of no further force
or effect, and any rent, other charge, bonus, inducement or consideration
theretofore abated, given or paid by Lessor under such an Inducement
Provision shall be immediately due and payable by Lessee to Lessor, and
recoverable by Lessor as additional rent due under this Lease,
notwithstanding any subsequent cure of said Breach by Lessee. The
acceptance by Lessor of rent or the cure of the Breach which initiated
the operation of this Paragraph shall not be deemed a waiver by Lessor of
the provisions of this Paragraph unless specifically so stated in writing
by Lessor at the time of such acceptance.
13.4 LATE CHARGES. Lessee hereby acknowledges that late payment by
Lessee to Lessor of rent and other sums due hereunder will cause Lessor
to incur costs not contemplated by this Lease, the exact amount of which
will be extremely difficult to ascertain. Such costs include, but are not
limited to, processing and accounting charges, and late charges which may
be imposed upon Lessor by the terms of any ground lease, mortgage or
trust deed covering the Premises. Accordingly, if any installment of rent
or any other sum due from Lessee shall not be received by Lessor or
Lessor's designee within five (5) days after such amount shall be due,
then, without any requirement for notice to Lessee, Lessee shall pay to
Lessor a late charge equal to six percent (6%) of such overdue amount.
The parties hereby agree that such late charge represents a fair and
reasonable estimate of the costs Lessor will incur by reason of late
payment by Lessee. Acceptance of such late charge by Lessor shall in no
event constitute a waiver of Lessee's Default or Breach with respect to
such overdue amount, nor prevent Lessor from exercising any of the other
rights and remedies granted hereunder. In the event that a late charge is
payable hereunder, whether or not collected, for three (3) consecutive
installments of Base Rent, then notwithstanding Paragraph 4.1 or any
other provision of this Lease to the contrary. Base Rent shall, at
Lessor's option, become due and payable quarterly in advance.
13.5 BREACH BY LESSOR. Lessor shall not be deemed in breach of this
Lease unless Lessor fails within a reasonable time to perform an
obligation required to be performed by Lessor. For purposes of this
Paragraph 13.5, a reasonable time shall in no event be less than thirty
(30) days after receipt by Lessor, and by the holders of any ground
lease, mortgage or deed of trust covering the Premises whose name and
address shall have been furnished Lessee in writing for such purpose, of
written notice specifying wherein such obligation of Lessor has not been
performed; provided, however, that if the nature of Lessor's obligation
is such that more than thirty (30) days after such notice are reasonably
required for its performance, then Lessor shall not be in breach of this
Lease if performance is commenced within such thirty (30) day period and
thereafter diligently pursued to completion.
14. CONDEMNATION. If the Premises or any portion thereof are taken under
the power of eminent domain or sold under the threat of the exercise of
said power (all of which are herein called "condemnation"), this Lease
shall terminate as to the part so taken as of the date the condemning
authority takes title or possession, whichever first occurs. If more than
ten percent (10%) of the floor area of the Premises, or more than twenty-
five percent (25%) of the land area not occupied by any building, is
taken by condemnation, Lessee may, at Lessee's option, to be exercised in
writing within ten (10) days after Lessor shall have given Lessee written
notice of such taking (or in the absence of such notice, within ten (10)
days after the condemning authority shall have taken possession)
terminate this Lease as of the date the condemning authority takes such
possession. If Lessee does not terminate this Lease in accordance with
the foregoing, this Lease shall remain in full force and effect as to the
portion of the Premises remaining, except that the Base Rent shall be
reduced in the same proportion as the rentable floor area of the Premises
taken bears to the total rentable floor area of the building located on
the Premises. No reduction of Base Rent shall occur if the only portion
of the Premises taken is land on which the there is no building. Any
award for the taking of all or any part of the Premises under the power
of eminent domain or any payment made under threat of the exercise of
such power shall be the property of Lessor, whether such award shall be
made as compensation for diminution in value of the leasehold or for the
taking of the fee, or as severance damages; provided, however, that
Lessee shall be entitled to any compensation separately awarded to Lessee
for Lessee's relocation expenses and/or loss of Lessee's Trade Fixtures.
In the event that this Lease is not terminated by reason of such
condemnation, Lessor shall to the extent of its net severance damages
received, over and above the legal and other expenses incurred by Lessor
in the condemnation matter, repair any damage to the Premises caused by
such condemnation, except to the extent that Lessee has been reimbursed
therefor by the condemning authority. Lessee shall be responsible for the
payment of any amount in excess of such net severance damages required to
complete such repair.
15. BROKER'S FEES.
15.1 The Brokers named in Paragraph 1.10 are the procuring causes of
this Lease. 15.2 Upon execution of this Lease by both Parties, Lessor
shall pay to said Brokers jointly, or in such separate shares as they may
mutually designate in writing, a fee as set forth in a separate written
agreement between Lessor and said Brokers (or in the event there is no
separate written agreement between Lessor and said Brokers, the sum of $
None) for brokerage services rendered by said Brokers to Lessor in this
transaction. 15.3 Unless Lessor and Brokers have otherwise agreed in
writing, Lessor further agrees that: (a) if Lessee exercises any Option
(as defined in Paragraph 39.1) or any Option subsequently granted which
is substantially similar to an Option granted to Lessee in this Lease, or
(b) if Lessee acquires any rights to the Premises or other premises
described in this Lease which are substantially similar to what Lessee
would have acquired had an Option herein granted to Lessee been
exercised, or (c) if Lessee remains in possession of the Premises, with
the consent of Lessor, after the expiration of the term of this Lease
after having failed to exercise an Option, or (d) if said Brokers are the
procuring cause of any other lease or sale entered into between the
Parties pertaining to the Premises and/or any adjacent property in which
Lessor has an interest, or (e) if Base Rent is increased, whether by
agreement or operation of an escalation clause herein, then as to any of
said transactions, Lessor shall pay said Brokers a fee in accordance with
the schedule of said Brokers in effect at the time of the execution of
this Lease. 15.4 Any buyer of transferee of Lessor's interest in this
Lease, whether such transfer is by agreement or by operation of law,
shall be deemed to have assumed Lessor's obligation under this Paragraph
15. Each Broker shall be a third party beneficiary of the provisions of
this Paragraph 15 to the extent of its interest in any commission arising
from this Lease and may enforce that right directly against Lessor and
its successors. 15.5 Lessee and Lessor each represent and warrant to the
other that it has had no dealings with any person, firm, broker or finder
(other than the Brokers, if any named in Paragraph 1.10) in connection
with the negotiation of this Lease and/or the consummation of the
transaction contemplated hereby, and that no broker or other person, firm
or entity other than said named Brokers is entitled to any commission or
finder's fee in connection with said transaction,. Lessee and Lessor do
each hereby agree to indemnify, protect, defend and hold the other
harmless from and against liability for compensation or charges which may
be claimed by any such unnamed broker, finder or other similar party by
reason of any dealings or actions of the Indemnifying Party, including
any costs, expenses, attorney's fees reasonably incurred with respect
thereto. 15.6 Lessor and Lessee hereby consent to and approve all agency
relationships, including any dual agencies, indicated in Paragraph 1.10.
16. TENANCY STATEMENT. 16.1 Each Party (as "Responding Party") shall
within ten (10) days after written notice from the other Party (the
"Requesting Party") execute, acknowledge and deliver to the Requesting
Party a statement in writing in form similar to the then most current
"Tenancy Statement" form published by the American Industrial Real
Estate Association, plus such additional information, confirmation
and/or statements as may be reasonably requested by the Requesting
Party. 16.2 If Lessor desires to finance, refinance, or sell the
Premises, any part thereof, or the building of which the Premises are
a part, Lessee and all Guarantors of Lessee's performance hereunder
shall deliver to any potential lender or purchaser designated by
Lessor such financial statements of Lessee and such Guarantors as may
be reasonably required by such lender or purchaser, including but not
limited to Lessee's financial statements for the past three (3) years.
All such financial statements shall be received by Lessor and such
lender or purchaser in confidence and shall be used only for the
purposes herein set forth.
17. LESSOR'S LIABILITY. The term "Lessor" as used herein shall mean
the owner or owners at the time in question of the fee title to the
Premises, or, if this is a sublease, of the Lessee's interest in the
prior lease. In the event of a transfer of Lessor's title or interest in
the Premises or in this Lease, Lessor shall deliver to the transferee or
assignee (in cash or by credit) any unused Security Deposit held by
Lessor at the time of such transfer or assignment. Except as provided in
Paragraph 15, upon such transfer or assignment and delivery of the
Security Deposit, as aforesaid, the prior Lessor shall be relieved of all
liability with respect to the obligations and/or covenants under this
Lease thereafter to be performed by the Lessor. Subject to the foregoing,
the obligations and/or covenants in this Lease to be performed by the
Lessor shall be binding only upon the Lessor as hereinabove defined.
18. SEVERABILITY. The invalidity of any provision of this Lease, as
determined by a court of competent jurisdiction, shall in no way affect
the validity of any other provision hereof.
19. INTEREST ON PAST-DUE OBLIGATIONS. Any monetary payment due Lessor
hereunder, other than late charges, not received by Lessor within thirty
(30) days following the date on which it was due, shall bear interest
from the thirty-first (31st) day after it was due at the rate of 12% per
annum, but not exceeding the maximum rate allowed by law, in addition to
the late charge provided for in Paragraph 13.4.
20. TIME OF ESSENCE. Time is of the essence with respect to the
performance of all obligations to be performed or observed by the Parties
under this Lease.
21. RENT DEFINED. All monetary obligations of Lessee to Lessor under
the terms of this Lease are deemed to be rent.
22. NO PRIOR OR OTHER AGREEMENTS; BROKER DISCLAIMER. This Lease
contains all agreements between the Parties with respect to any matter
mentioned herein, and no other prior or contemporaneous agreement or
understanding shall be effective. Lessor and Lessee each represents and
warrants to the Brokers that it has made, and is relying solely upon, its
own investigation as to the nature, quality, character and financial
responsibility of the other Party to this Lease and as to the nature,
quality and character of the Premises. Brokers have no responsibility
with respect thereto or with respect to any default or breach hereof by
either Party.
23. NOTICES. 23.1 All notices required or permitted by this Lease shall
be writing and may be delivered in person (by hand or by messenger or
courier service) or may be sent by regular, certified or registered
mail or U.S. Postal Service Express Mail, with postage prepaid, or by
facsimile transmission, and shall be deemed sufficiently given if
served in a manner specified in this Paragraph 23. The addresses noted
adjacent to a Party's signature on this Lease shall be that Party's
address for delivery or mailing of notice purposes. Either Party may
by written notice to the other specify a different address for notice
purposes, except that upon Lessee's taking possession of the Premises,
the Premises shall constitute Lessee's address for the purpose of
mailing or delivering notices to Lessee. A copy of all notices
required or permitted to be given to Lessor hereunder shall be
concurrently transmitted to such party or parties at such addresses as
Lessor may from time to time hereafter designate by written notice to
Lessee. 23.2 Any notice sent by registered or certified mail, return
receipt requested, shall be deemed given on the date of delivery shown
on the receipt card, or if no delivery date is shown, the postmark
thereon. If sent by regular mail the notice shall be deemed given
forty-eight (48) hours after the same is addressed as required herein
and mailed with postage prepaid. Notices delivered by United States
Express Mail or overnight courier that guarantees next day delivery
shall be deemed given twenty-four (24) hours after delivery of the
same to the United States Postal Service or courier. If any notice is
transmitted by facsimile transmission or similar means, the same shall
be deemed served or delivered upon telephone confirmation of receipt
of the transmission thereof, provided a copy is also delivered via
delivery or mail. If notice is received on a Sunday or legal holiday,
it shall be deemed received on the next business day.
24. WAIVERS. No waiver by Lessor of the Default or Breach of any term,
covenant or condition hereof by Lessee, shall be deemed a waiver of any
other term, covenant or condition hereof, or of any subsequent Default or
Breach by Lessee of the same or of any other term, covenant or condition
hereof. Lessor's consent to, or approval of, any act shall not be deemed
to render unnecessary the obtaining of Lessor's consent to, or approval
of, any subsequent or similar act by Lessee, or to be construed as the
basis of an estoppel to enforce the provision or provisions of this Lease
requiring such consent. Regardless of Lessor's knowledge of a Default or
Breach at the time of accepting rent, the acceptance of rent by Lessor
shall not be a waiver of any preceding Default or Breach by Lessee of any
provision hereof, other than the failure of Lessee to pay the particular
rent so accepted. Any payment given Lessor by Lessee may be accepted by
Lessor on account of moneys or damages due Lessor, notwithstanding any
qualifying statements or conditions made by Lessee in connection
therewith, which such statements and/or conditions shall be of no force
or effect whatsoever unless specifically agreed to in writing by Lessor
at or before the time of deposit of such payment.
25. RECORDING. Either Lessor or Lessee shall, upon request of the
other, execute, acknowledge and deliver to the other a short form
memorandum of this Lease for recording purposes. The Party requesting
recordation shall be responsible for payment of any fees or taxes
applicable thereto.
26. NO RIGHT TO HOLDOVER. Lessee has no right to retain possession of
the Premises or any part thereof beyond the expiration or earlier
termination of this Lease.
27. CUMULATIVE ?? . No remedy of election hereunder shall be deemed
exclusive but shall, wherever possible, be cumulative with all other
remedies at law or in equity.
28. COVENANTS AND CONDITIONS. All provisions of this Lease to be observed
or performed by Lessee are both covenants and conditions.
29. BINDING EFFECT; CHOICE OF LAW. This Lease shall be binding upon the
parties, their personal representatives, successors and assigns and be
governed by the laws of the State in which the Premises are located. Any
litigation between the Parties hereto concerning this Lease shall be
initiated in the county in which the Premises are located.
30. SUBORDINATION; ATTORNMENT; NON-DISTURBANCE.
30.1. SUBORDINATION. This Lease and any Option granted hereby shall be
subject and subordinate to any ground lease, mortgage, deed of trust, or
other hypothecation or security device (collectively, "SECURITY DEVICE"),
now or hereafter placed by Lessor upon the real property of which the
Premises are a part, to any and all advances made on the security
thereof, and to all renewals, modifications, consolidations, replacements
and extensions thereof. Lessee agrees that the Lenders holding any such
Security Device shall have no duty, liability or obligation to perform
any of the obligations of Lessor under this Lease, but that in the event
of Lessor's default with respect to any such obligation, Lessee will give
any Lender whose name and address have been furnished Lessee in writing
for such purpose notice of Lessor's default and allow such Lender thirty
(30) days following receipt of such notice for the cure of said default
before invoking any remedies Lessee may have by reason thereof. If any
Lender shall elect to have this Lease and/or any Option granted hereby
superior to the lien of its Security Device and shall give written notice
thereof to Lessee, this Lease and such Options shall be deemed prior to
such Security Device, notwithstanding the relative dates of the
documentation or recordation thereof.
30.2 ATTORNMENT. Subject to the non-disturbance provisions of
Paragraph 30.3, Lessee agrees to attorn to a Lender or any other party
who acquires ownership of the Premises by reason of a foreclosure of a
Security Device, and that in the event of such foreclosure, such new
owner shall not: (i) be liable for any act or omission of any prior
lessor or with respect to events occurring prior to acquisition of
ownership, (ii) be subject to any offsets or defenses which Lessee might
have against any prior lessor, or (iii) be bound by prepayment of more
than one (1) month's rent.
30.3 NON-DISTURBANCE. With respect to Security Devices entered into by
Lessor after the execution of this Lease, Lessee's subordination of this
Lease shall be subject to receiving assurance (a "NON-DISTURBANCE
AGREEMENT") from the Lender that Lessee's possession and this Lease,
including any options to extend the term hereof, will not be disturbed so
long as Lessee is not in Breach hereof and attorns to the record owner of
the Premises.
30.4 SELF-EXECUTING. The agreements contained in this Paragraph 30
shall be effective without the execution of any further documents;
provided, however, that, upon written request from Lessor or a Lender in
connection with a sale, financing or refinancing of the Premises, Lessee
and Lessor shall execute such further writings as may be reasonably
required to separately document any such subordination or non-
subordination, attornment and/or non-disturbance agreement as is provided
for herein.
31. ATTORNEY'S FEES. If any Party or Broker brings an action or
proceeding to enforce the terms hereof or declare rights hereunder, the
Prevailing Party (as hereafter defined) or Broker in any such proceeding,
action, or appeal thereon, shall be entitled to reasonable attorney's
fees. Such fees may be awarded in the same suit or recovered in a
separate suit, whether or not such action or proceeding is pursued to
decision or judgment. The term, "PREVAILING PARTY" shall include, without
limitation, a Party or Broker who substantially obtains or defeats the
relief sought, as the case may be, whether by compromise, settlement,
judgment, or the abandonment by the other Party or Broker of its claim or
defenses. The attorney's fees award shall not be computed in accordance
with any court fee schedule, but shall be such as to fully reimburse all
attorney's fees reasonably incurred. Lessor shall be entitled to
attorney's fees, costs and expenses incurred in the preparation and
service of notices of Default and consultations in connection therewith,
whether or not a legal action is subsequently commenced in connection
with such Default or resulting Breach.
32. LESSOR'S ACCESS; SHOWING PREMISES; REPAIRS. Lessor and Lessor's
agents shall have the right to enter the Premises at any time, in the
case of an emergency, and otherwise at reasonable times for the purpose
of showing the same to prospective purchasers, lenders, or lessees, and
making such alterations, repairs, improvements or additions to the
Premises or to the building of which they are a part, as Lessor may
reasonably deem necessary. Lessor may at any time place on or about the
Premises or building any ordinary "For Sale" signs and Lessor may at any
time during the last one hundred twenty (120) days of the term hereof
place on or about the Premises any ordinary "For Lease" signs. All such
activities of Lessor shall be without abatement of rent or liability to
Lessee.
33. AUCTIONS. Lessee shall not conduct, nor permit to be conducted,
either voluntarily or involuntarily, any auction upon the Premises
without first having obtained Lessor's prior written consent.
Notwithstanding anything to the contrary in this Lease, Lessor shall not
be obligated to exercise any standard of reasonableness in determining
whether to grant such consent.
34. SIGNS. Lessee shall not place any sign upon the Premises, except that
Lessee may, with Lessor's prior written consent, install (but not on the
roof) such signs as are reasonably required to advertise Lessee's own
business. The installation of any sign on the Premises by or for Lessee
shall be subject to the provisions of Paragraph 7 (Maintenance, Repairs,
Utility Installations, Trade Fixtures and Alterations). Unless otherwise
expressly agreed herein, Lessor reserves all rights to the use of the
roof and the right to install, and all revenues from the installation of,
such advertising signs on the Premises, including the roof, as do not
unreasonably interfere with the conduct of Lessee's business.
35. TERMINATION; MERGER. Unless specifically stated otherwise in writing
by Lessor, the voluntary or other surrender of this Lease by Lessee, the
mutual termination or cancellation hereof, or a termination hereof by
Lessor for Breach by Lessee, shall automatically terminate any sublease
or lessor estate in the Premises; provided, however, Lessor shall, in the
event of any such surrender, termination or cancellation, have the option
to continue any one or all of any existing subtenancies. Lessor's failure
within ten (10) days following any such event to make a written election
to the contrary by written notice to the holder of any such lesser
interest, shall constitute Lessor's election to have such event
constitute the termination of such interest.
36. CONSENTS.
(a) Except for Paragraph 33 hereof (Auctions) or as otherwise provided
herein, wherever in this Lease the consent of a Party is required to an
act by or for the other Party, such consent shall not be unreasonably
withheld or delayed. Lessor's actual reasonable costs and expenses
(including but not limited to architects', attorneys', engineers' or
other consultants' fees) incurred in the consideration of, or response
to, a request by Lessee for any Lessor consent pertaining to this Lease
or the Premises, including but not limited to consents to an assignment,
a subletting or the presence or use of a Hazardous Substance, practice or
storage tank, shall be paid by Lessee to Lessor upon receipt of an
invoice and supporting documentation therefor. Subject to Paragraph
12.2(a) (applicable to assignment or subletting), Lessor may, as a
condition to considering any such request by Lessee, require that Lessee
deposit with Lessor an amount of money (in addition to the Security
Deposit held under Paragraph 5) reasonably calculated by Lessor to
represent the cost Lessor will incur in considering and responding to
Lessee's request. Except as otherwise provided, any unused portion of
said deposit shall be refunded to Lessee without interest. Lessor's
consent to any act, assignment of this Lease or subletting of the
Premises by Lessee shall not constitute an acknowledgement that no
Default or Breach by Lessee of this Lease exists, nor shall such consent
be deemed a waiver of any then existing Default or Breach, except as may
be otherwise specifically stated in writing by Lessor at the time of such
consent.
(b) All conditions to Lessor's consent authorized by this Lease are
acknowledged by Lessee as being reasonable. The failure to specify herein
any particular condition to Lessor's consent shall not preclude the
imposition by Lessor at the time of consent of such further or other
conditions as are then reasonable with reference to the particular matter
for which consent is being given.
37. GUARANTOR.
37.1 If there are to be any Guarantors of this Lease per Paragraph
1.11, the form of the guaranty to be executed by each such Guarantor
shall be in the form most recently published by the American Industrial
Real Estate Association, and each said Guarantor shall have the same
obligations as Lessee under this Lease, including but not limited to the
obligation to provide the Tenancy Statement and information called for by
Paragraph 18.
37.2 It shall constitute a Default of the Lessee under this Lease if
any such Guarantor fails or refuses, upon reasonable request by Lessor to
give: (a) evidence of the due execution of the guaranty called for by
this Lease, including the authority of the Guarantor (and of the party
signing on Guarantor's behalf) to obligate such Guarantor on said
guaranty, and including in the case of a corporate Guarantor, a certified
copy of a resolution of its board of directors authorizing the making of
such guaranty, together with a certificate of incumbency showing the
signature of the persons authorized to sign on its behalf, (b) current
financial statements of Guarantor as may from time to time be requested
by Lessor, (c) a Tenancy Statement, or (d) written confirmation that the
guaranty is still in effect.
38. QUIET POSSESSION. Upon payment by Lessee of the rent for the Premises
and the observance and performance of all of the covenants, conditions
and provisions of Lessee's part to be observed and performed under this
Lease, Lessee shall have quiet possession of the Premises for the entire
term hereof subject to all of the provisions of this Lease.
39. OPTIONS.
39.1 DEFINITION. As used in this Paragraph 39 the word "Option" has
the following meaning: (a) the right to extend the term of this Lease or
to renew this Lease or to extend or renew any lease that Lessee has on
other property of Lessor; (b) the right of first refusal to lease the
Premises or the right of first offer to lease the Premises or the right
of first refusal to lease other property of Lessor or the right of first
offer to lease other property of Lessor; (c) the right to purchase the
Premises, or the right of first refusal to purchase the Premises, or the
right of first offer to purchase the Premises, or the right to purchase
other property of Lessor, or the right of first refusal to purchase other
property of Lessor, or the right of first offer to purchase other
property of Lessor.
39.2 OPTIONS PERSONAL TO ORIGINAL LESSEE. Each Option granted to
Lessee in this Lease is personal to the original Lessee named in
Paragraph 1.1 hereof, and cannot be voluntarily or involuntarily assigned
or exercised by any person or entity other than said original Lessee
while the original Lessee is in full and actual possession of the
Premises and without the intention of thereafter assigning or subletting.
The Options, if any, herein granted to Lessee are not assignable, either
as a part of an assignment of this Lease or separately or apart
therefrom, and no Option may be separated from this Lease in any manner,
by reservation or otherwise.
39.3 MULTIPLE OPTIONS. In the event that Lessee has any Multiple
Options to extend or renew this Lease, a later Option cannot be exercised
unless the prior Options to extend or renew this Lease have been validly
exercised.
39.4 EFFECT OF DEFAULT ON OPTIONS.
(a) Lessee shall have no right to exercise an Option,
notwithstanding any provision in the grant of Option to the contrary; (i)
during the period commencing with the giving of any notice of Default
under Paragraph 13.1 and continuing until the noticed Default is cured,
or (ii) during the period of time any monetary obligation due Lessor from
Lessee is unpaid (without regard to whether notice thereof is given
Lessee), or (iii) during the time Lessee is in Breach of this Lease, or
(iv) in the event that Lessor has given to Lessee three (3) or more
notices of Default under Paragraph 13.1, whether or not the Defaults are
cured, during the twelve (12) month period immediately preceding the
exercise of the Option.
(b) The period of time within which an Option may be exercised
shall not be extended or enlarged by reason of Lessee's inability to
exercise an Option because of the provisions of Paragraph 39.4(a).
(c) All rights of Lessee under the provisions of an Option shall
terminate and be of no further force or effect, notwithstanding Lessee's
due and timely exercise of the Option, if, after such exercise and during
the term of this Lease, (i) Lessee fails to pay to Lessor a monetary
obligation of Lessee for a period of thirty (30) days after such
obligation becomes due (without any necessity of Lessor to give notice
thereof to Lessee), or (ii) Lessor gives to Lessee three (3) or more
notices of Default under Paragraph 13.1 during any twelve (12) month
period, whether or not the Defaults are cured, or (iii) if Lessee commits
a Breach of this Lease.
40. MULTIPLE BUILDINGS. If the Premises are part of a group of buildings
controlled by Lessor, Lessee agrees that it will abide by, keep and
observe all reasonable rules and regulations which Lessor may make from
time to time for the management, safety, care, and cleanliness of the
grounds, the parking and unloading of vehicles and the preservation of
good order, as well as for the convenience of other occupants or tenants
of such other buildings and their invitees, and that Lessee will pay its
fair share of common expenses incurred in connection therewith.
41. SECURITY MEASURES. Lessee hereby acknowledges that the rental
payable to Lessor hereunder does not include the cost of guard service or
other security measures, and that Lessor shall have no obligation
whatsoever to provide same. Lessee assumes all responsibility for the
protection of the Premises, Lessee, its agents and invitees and their
property from the acts of third parties.
42. RESERVATIONS. Lessor reserves to itself the right, from time to
time, to grant, without the consent or joinder of Lessee, such easements,
rights and dedications that Lessor deems necessary, and to cause the
recordation of parcel maps and restrictions, so long as such easements,
rights, dedications, maps and restrictions do not unreasonably interfere
with the use of the Premises by Lessee. Lessee agrees to sign any
documents reasonably requested by Lessor to effectuate any such easement
rights, dedication, map or restrictions.
43. PERFORMANCE UNDER PROTEST. If at any time a dispute shall arise as
to any amount or sum of money to be paid by one Party to the other under
the provisions hereof, the Party against whom the obligation to pay the
money is asserted shall have the right to make payment "under protest"
and such payment shall not be regarded as a voluntary payment and there
shall survive the right on the part of said Party to institute suit for
recovery of such sum. If it shall be adjudged that there was no legal
obligation on the part of said Party to pay such sum or any part thereof,
said Party shall be entitled to recover such sum or so much thereof as it
was not legally required to pay under the provisions of this Lease.
44. AUTHORITY. If either Party hereto is a corporation, trust, or
general or limited partnership, each individual executing this Lease on
behalf of such entity represents and warrants that he or she is duly
authorized to execute and deliver this Lease on its behalf. If Lessee is
a corporation, trust or partnership, Lessee shall, within thirty (30)
days after request by Lessor, deliver to Lessor evidence satisfactory to
Lessor of such authority.
45. CONFLICT. Any conflict between the printed provisions of this Lease
and the typewritten or handwritten provisions shall be controlled by the
typewritten or handwritten provisions.
46. OFFER. Preparation of this Lease by Lessor or Lessor's agent and
submission of same to Lessee shall not be deemed an offer to lease to
Lessee. This Lease is not intended to be binding until executed by all
Parties hereto.
47. AMENDMENTS. This Lease may be modified only in writing, signed by
the Parties in interest at the time of the modification. The parties
shall amend this Lease from time to time to reflect any adjustments that
are made to the Base Rent or other rent payable under this Lease. As long
as they do not materially change Lessee's obligations hereunder, Lessee
agrees to make such reasonable non-monetary modifications to this Lease
as may be reasonably required by an institutional, insurance company, or
pension plan Lender in connection with the obtaining of normal financing
or refinancing of the property of which the Premises are a part.
48. MULTIPLE PARTIES. Except as otherwise expressly provided herein, if
more than one person or entity is named herein as either Lessor or
Lessee, the obligations of such Multiple Parties shall be the joint and
several responsibility of all persons or entities named herein as such
Lessor or Lessee.
LESSOR AND LESSEE HAVE CAREFULLY READ AND REVIEWED THIS LEASE AND EACH
TERM AND PROVISION CONTAINED HEREIN, AND BY THE EXECUTION OF THIS LEASE
SHOW THEIR INFORMED AND VOLUNTARY CONSENT THERETO. THE PARTIES HEREBY
AGREE THAT, AT THE TIME THIS LEASE IS EXECUTED, THE TERMS OF THIS LEASE
ARE COMMERCIALLY REASONABLE AND EFFECTUATE THE INTENT AND PURPOSE OF
LESSOR AND LESSEE WITH RESPECT TO THE PREMISES.
IF THIS LEASE HAS BEEN FILLED IN, IT HAS BEEN PREPARED FOR SUBMISSION
TO YOUR ATTORNEY FOR HIS APPROVAL FURTHER, EXPERTS SHOULD BE CONSULTED
TO EVALUATE THE CONDITION OF THE PROPERTY AS TO THE POSSIBLE PRESENCE
OF ASBESTOS, STORAGE TANKS OR HAZARDOUS SUBSTANCES. NO REPRESENTATION
OR RECOMMENDATION IS MADE BY THE AMERICAN INDUSTRIAL REAL ESTATE
ASSOCIATION OR BY THE REAL ESTATE BROKER(S) OR THEIR AGENTS OR
EMPLOYEES AS TO THE LEGAL SUFFICIENCY, LEGAL EFFECT, OR TAX
CONSEQUENCES OF THIS LEASE OR THE TRANSACTION TO WHICH IT RELATES; THE
PARTIES SHALL RELY SOLELY UPON THE ADVICE OF THEIR OWN COUNSEL AS TO
THE LEGAL AND TAX CONSEQUENCES OF THIS LEASE. IF THE SUBJECT PROPERTY
IS LOCATED IN A STATE OTHER THAN CALIFORNIA, AN ATTORNEY FROM THE
STATE WHERE THE PROPERTY IS LOCATED SHOULD BE CONSULTED.
THE PARTIES HERETO HAVE EXECUTED THIS LEASE AT THE PLACE ON THE DATES
SPECIFIED ABOVE TO THEIR RESPECTIVE SIGNATURES.
EXECUTED AT Santa Clara, CA EXECUTED AT Santa Clara, CA
on March 1, 1996 on March 1, 1996
by LESSOR: by LESSEE:
MOPAR, LLC Scientific Custom Metal
Products International, Inc.
By /s/ MICHAEL W. MOSHIER By /s/ ANDREW T. MOSHIER
Name Printed: Michael W. Moshier Name Printed: Andrew T. Moshier
Title: CEO Title: President
By By
Name Printed: Name Printed:
Title: Title:
Address: Address:
Tel. No. ( ) Fax No.( ) Tel. No. ( ) Fax No.( )
EXHIBIT (A)
This Exhibit is part of that certain real property lease dated March
1, 1996, between MOPAR, LLC, Lessor, and Scientific Custom Metal Products
International Inc., Lessee. The following additional terms and conditions
are part of said lease, and are hereby incorporated therein, and made a
part thereof:
1. RENT INDEXING. The base rent as set forth in paragraph 1.5 of the
lease agreement, shall be adjusted annually at each anniversary by an
amount equal to the CPI as published in the Wall Street Journal, or the
Rent Schedule shown on page two of this Exhibit, whichever is greater.
2. INSURANCE. The 'Insuring Party' as set forth in paragraph 1.9 of
the lease agreement shall be changed from the Lessor, to the Lessee. The
amount of insurance coverage set forth in paragraphs 8.1 and 8.2 of the
lease agreement shall be changed from $1,000,000 to $10,000,000. The
insurance deductible amounts set forth in paragraphs 8.3 and 8.4 of the
lease agreement shall be changed from $1,000 to $5,000.
3. OPTION TO EXTEND. In the event that Lessee is not in default in
the performance of any term or condition of this lease, then upon the
expiration of the lease term as set forth in paragraph 1.3 of the
original lease agreement, Lessee shall have the option to renew the lease
for an additional term of 10 years. During such renewal period, all of
the terms and conditions of the lease shall remain in effect, except that
the new base rent shall be equal to the rent payable during the last year
of the original lease, or adjusted to the then current market rent
determined by appraisal, whichever is greater. Lessee shall provide
Lessor with not less than eighteen (18) months advance written notice of
its intention to exercise this option, or this option will become null
and void.
4. SUBLETTING. Notwithstanding the provisions of paragraphs 12.1,
12.2 and 12.3 of the lease agreement, and if Lessee is not in default of
any other terms or conditions of the lease agreement, then Lessee shall
have the right to sublet portions of the leased spaces to a sub-
tenant(s), however it shall be Lessee's responsibility to ensure that
such sub-tenancy complies with the spirit and intention of the lease
agreement between Lessor and Lessee. If in Lessor's sole discretion such
sub-tenancy does not comply, then paragraphs 12.1, 12.2 and 12.3 of the
lease agreement shall fully apply.
LESSEE LESSOR
/s/ Andrew T. Moshier /s/ Michael W. Moshier
________________________ _____________________________
By: Andrew T. Moshier By: Michael W. Moshier
President CEO
Scientific Custom Metal MOPAR, LLC
Products Int., Inc.
Date: 3/1/96 Date: 3/1/96
<PAGE>
RENT SCHEDULE-2401 LEASE
MOPAR, LLC - SCMPINTERNATIONAL LEASE
RENT SCHEDULE: BLDG. 2401
LEASE COMMENCEMENT DATE: MARCH 1, 1997
<TABLE>
<CAPTION>
YEAR
LEASE ENDING STARTING MONTHLY NUMBER OF
YEAR # (FEBRUARY) DATE RENTAL MONTHS
- ----------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C>
1 1998 01-Mar-97 $40,000 2
1998 01-May-97 $75,000 10
2 1999 01-Mar-98 $78,750 12
3 2000 01-Mar-99 $82,688 12
4 2001 01-Mar-00 $86,822 12
5 2002 01-Mar-01 $91,163 12
6 2003 01-Mar-02 $95,721 12
7 2004 01-Mar-03 $100,507 12
8 2005 01-Mar-04 $105,533 12
9 2006 01-Mar-05 $110,809 12
10 2007 01-Mar-06 $116,350 12
11 2008 01-Mar-07 $122,167 12
12 2009 01-Mar-08 $128,275 12
13 2010 01-Mar-09 $134,689 12
14 2011 01-Mar-10 $141,424 12
15 2012 01-Mar-11 $148,495 12
16 2013 01-Mar-12 $155,920 12
17 2014 01-Mar-13 $163,716 12
18 2015 01-Mar-14 $171,901 12
19 2016 01-Mar-15 $180,496 12
</TABLE>
[GUARANTY OF LEASE LOGO]
AMERICAN INDUSTRIAL REAL ESTATE ASSOCIATION
WHEREAS, MOPAR, LLC referred to as "Lessor", and Scientific Custom
Metal Products International, Inc. hereinafter referred to as "Lessee",
are about to execute a document entitled "Lease" dated March 1, 1996
concerning the premises commonly known as 2401 Walsh Avenue, Santa Clara,
CA wherein Lessor will lease the premises to Lessee and
WHEREAS, Scientific Custom Metal Products International, Inc.
hereinafter referred to as "Guarantors" have a financial interest in
Lessee and
WHEREAS, Lessor would not execute the Lease if Guarantor did not
execute and deliver to Lessor this Guarantee of Lease.
NOW THEREFORE, for and in consideration of the execution of the
foregoing Lease by Lessor and as a material inducement to Lessor to
execute said Lease, Guarantors hereby jointly, severally, unconditionally
and irrevocably guarantee the prompt payment by Lessee of all rentals and
all other sums payable by Lessee under said Lease and the faithful and
prompt performance by Lessee of each and every one of the terms,
conditions and covenants of said Lease to be kept and performed by
Lessee.
It is specifically agreed and understood that the terms of the
foregoing Lease may be altered, affected, modified or changed by
agreement between Lessor and Lessee, or by a course of conduct, and said
Lease may be assigned by Lessor or any assignee of Lessor without consent
or notice to Guarantors and that this Guaranty shall thereupon and
thereafter guarantee the performance of said Lease as so changed,
modified, altered or assigned.
This Guaranty shall not be released, modified or affected by failure
or delay on the part of Lessor to enforce any of the rights or remedies
of the Lessor under said Lease, whether pursuant to the terms thereof or
at law or in equity.
No notice of default need be given to Guarantors, it being
specifically agreed and understood that the guarantee of the undersigned
is a continuing guarantee under which Lessor may proceed forthwith and
immediately against Lessee or against Guarantors following any breach or
default by Lessee or for the enforcement of any rights which Lessor may
have as against Lessee pursuant to or under the terms of the within Lease
or at law or in equity.
Lessor shall have the right to proceed against Guarantors hereunder
following any breach or default by Lessee without first proceeding
against Lessee and without previous notice to or demand upon either
Lessee or Guarantors.
Guarantors hereby waive(s) notice of acceptance of this Guaranty. (b)
demand of payment, presentation and protest, (c) all right to assert or
plead any statute of limitations as to or relating to this Guaranty and
the Lease, (d) any right to require the Lessor to proceed against the
Lessee or any other Guarantor or any other person or entity liable to
Lessor. (e) any right to require Lessor to apply to any default any
security deposit or other security it may hold under the Lease. (f) any
right to require Lessor to proceed under any other remedy Lessor may have
before proceeding against Guarantors. (g) any right of subrogation.
Guarantors do hereby subrogate all existing or future indebtedness of
Lessee to Guarantors to the obligations owed to Lessor under the Lease
and this Guaranty.
Any married woman who signs this Guaranty expressly agrees that
recourse may be had against her separate property for all of her
obligations hereunder.
The obligations of Lessee under the Lease to execute and deliver
estoppel statements and financial statements, as therein provided, shall
be deemed to also require the Guarantors hereunder to do and provide the
same relative to Guarantors.
The term "Lessor" whenever hereinabove used refers to and means the
Lessor in the foregoing Lease specifically named and also any assignee of
said Lessor, whether by outright assignment or by assignment for
security, and also any successor to the interest of said Lessor or of any
assignee in such Lease or any part thereof, whether by assignment or
otherwise. So long as the Lessor's interest in or to the leased premises
or the rents, issues and profits therefrom, or in, to or under said
Lease, are subject to any mortgage or deed of trust or assignment for
security, no acquisition by Guarantors of the Lessor's interest in the
leased premises or under said Lease shall affect the continuing
obligation of Guarantors under this Guaranty which shall nevertheless
continue in full force and effect for the benefit of the mortgagee,
beneficiary, trustee or assignee under such mortgage, deed of trust or
assignment, of any purchase at sale by judicial foreclosure or under
private power of sale, and of the successors and assigns of any such
mortgagee, beneficiary, trustee, assignee or purchaser.
The term "Lessee" whenever hereinabove used refers to and means the
Lessee in the forgoing Lease specifically named and also any assignee or
sublessee of said Lease and also any successor to the interests of said
Lessee, assignee or sublessee of such Lease or any part thereof, whether
by assignment, sublease or otherwise.
In the event any action be brought by said Lessor against Guarantor
hereunder to enforce the obligation of Guarantors hereunder, the
unsuccessful party in such action shall pay to the prevailing party
therein a reasonable attorney's fee which shall be fixed by the court.
IF THIS FORM HAS BEEN FILLED IN IT HAS BEEN PREPARED FOR SUBMISSION TO
YOUR ATTORNEY FOR HIS APPROVAL. NO REPRESENTATION OR RECOMMENDATION IS
MADE BY THE REAL ESTATE BROKER OR ITS AGENTS OR EMPLOYEES AS TO THE LEGAL
SUFFICIENCY, LEGAL EFFECT, OR TAX CONSEQUENCES OF THIS FORM OR THE
TRANSACTION RELATING THERETO.
Executed at Santa Clara, CA /s/ ANDREW T. MOSHIER
on March 1, 1996 By: Andrew T. Moshier,
President
Address 2401 Walsh Avenue Scientific Custom Metal Products
International, Inc.
"GUARANTORS"
EXHIBIT 10.51
CAPACITY SALES AGREEMENT
This Agreement is made and entered into this 23rd day of February, 1999
between MFS CABLECO (BERMUDA) LIMITED, a Bermuda company and affiliate
of WorldCom Technologies, Inc., having its registered office at
Clarendon House, Church Street, Hamilton, HMCX 12, Bermuda
("Cableco"), and EXODUS COMMUNICATIONS, INC., a Delaware corporation
located at 2831 Mission College Boulevard, Santa Clara, California
95054 ("Customer").
R E C I T A L S:
A. Cableco has an ownership interest in capacity on the
transatlantic fiber optic submarine and terrestrial cable network owned
and operated by Gemini Submarine Cable System Limited ("Gemini") which
runs between London, England and New York, New York, and which consists
of the Backhaul and the Gemini System (as such terms are hereinafter
defined) (the "Gemini Network").
B. Customer desires to purchase from Cableco, and Cableco is willing
to grant to Customer, an indefeasible right of use ("IRU") in a unit
of capacity equal to STM-1 (the "Capacity") on all or a segment of the
Gemini Network for the System Lifetime (as hereafter defined).
C. Cableco and Customer (hereinafter referred to as the "Parties",
and each as a "Party") desire to enter into this Agreement to set
forth the terms and conditions under which the IRU in the Capacity will
be granted to Customer.
NOW, THEREFORE, in consideration of the mutual covenants expressed
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Parties covenant and
agree with each other as follows:
1. Definitions. Unless otherwise defined in this Agreement, the
following capitalized terms used in this Agreement shall have the
applicable meaning set forth below and in Schedule 1 attached hereto
and incorporated by reference herein. To the extent that any
definition set forth in this Agreement for any capitalized term is
different from the definition for such term set forth in the C&MA, the
definition set forth in this Agreement shall apply.
1.1 "Agreement" means this agreement together with the Schedule(s)
specifically referenced herein and attached hereto.
1.2 "Backhaul" means, the indefeasible right of use granted by a
Backhaul Provider to Gemini for capacity in all that plant and
equipment and all those facilities required to connect a US or UK
System Interface Point (excluding such System Interface Point) to its
respective Backhaul Interface Point (including such Backhaul Interface
Point). The US and UK Backhauls shall comprise the following:
1.2.1 US BACKHAUL
"US Backhaul" means the indefeasible right of use granted by the US
Backhaul Provider to Gemini for capacity in all that plant and
equipment and all those facilities necessary to provide redundant,
protected two-way digital communications between and from the US System
Interface Points (excluding such System Interface Points) to the US
Backhaul Interface Points (and shall include such US Backhaul Interface
Points).
1.2.2 UK BACKHAUL
"UK Backhaul" means the indefeasible right of use granted by the UK
Backhaul Provider to Gemini for capacity in all that plant and
equipment and all those facilities necessary to provide redundant,
protected two-way digital communications between and from the UK System
Interface Points (excluding such System Interface Points) to the UK
Backhaul Interface Points (including such Backhaul Interface Points).
1.3 BACKHAUL INTERFACE POINT
"Backhaul Interface Point" means a point at which a Carrier User
may interconnect with the Backhaul to access the Gemini Network.
1.4 BACKHAUL PROVIDER
"Backhaul Provider" means collectively, the US Backhaul Provider
and the UK Backhaul Provider.
1.5 "IC&MA" means the Construction, Operation and Maintenance
Agreement dated October 8, 1998, herewith and attached hereto as
Schedule 1, as may be amended from time to time in accordance with its
terms.
1.6 "FCC" means the United States Federal Communications Commission.
1.7 "Gemini System" means all plant and equipment between and
including the System Interface Points consisting of two transatlantic
fiber optic systems between the US and UK (each consisting of two
optical fiber pairs), interconnected at each end by an lntedink between
the Cable Station at such end, all of which will be operated in a
redundant loop configuration. Gemini System will constitute a part of
the Gemini Network (as defined on Schedule 1).
1.8 "Granting Date" means the date upon which Customer shall
have both
received notice from Cableco of Capacity availability in accordance
with Subsection 2.3; and (ii) paid Cableco the Granting Price (as
hereafter defined) in full.
1.9 "Hand-off Points" means the points between which the
Capacity shall be provided. More particularly these are the STM-1
electrical interfaces on the Gemini add drop mulitplexer forming part
of the Gemini digital distribution frame located at 60 Hudson Street,
New York City, NY, US and at Aylesbury Street, London, UK.
1.10 "IRU" means the "indefeasible right of use" of a unit of
capacity on the Gemini Network (or portion thereof for the System
lifetime.
1.11 "Network Ready for Customer Service Date" or "RFCS Date"
means the date on which the first portion of the Gemini Network (i.e.,
the southern submarine cable route linking Porthcurno, United Kingdom
to Manasquan, New Jersey, together with associated Backhaul system
linking Porthcurno and London in the UK and Manasquan, New Jersey and
New York, New York in the US) is ready for the provision of commercial
services from London, England to New York, New York, as certified by
Gemini, being 28 February 1998.
1.12 "Network Ready for Service Date" of "RFS Date" means the
date on which the complete Gemini Network (including all associated
Backhaul systems) is ready for the provision of commercial services
from London, England to New York, New York, as certified by Gemini.
1.13 "Restoration Charges" means the charges payable by
Customer to Cableco to restore the Capacity on another cable system.
1.14 "STM-1" means a l55.22OMbps/sec both way digital line
section passing between two System Interface Points, together with the
interconnection interfaces pertaining thereto, in accordance with ITU-
TS recommendations.
1.15 "System Interface Points" means a point at which the
Gemini System may be interconnected with the Backhaul or the networks
of a Carrier User or other backhaul provider and shall be located at
digital distribution frame, or equivalent equipment, associated with
the Gemini System at a Cable Station.
1.16 "System Lifetime" means the lifetime of the Gemini Network
from the RFCS Date until the Gemini Network is retired in accordance
with this C&MA.
2. Grant of IRU.
2.1 In consideration for the payment by Customer to Cableco of
the Granting Price and the O&M Costs, Cableco grants to Customer
effective as of the Granting Date an IRU in the Capacity, subject to
the terms and conditions set forth in this Agreement.
2.2 The Capacity shall be provided between the Hand-off Points,
and shall be presented to Customer via WorldCom leased access circuits
as set forth below. The provision of the aforementioned leased
circuits from the Hand-off Points to Customer's premises by Cableco
shall be subject to WorldCom Technologies, Inc.'s standard terms and
conditions as set forth in the WorldCom Capacity Access Service
Agreement, copy of which is attached hereto as Schedule 2.
2.3 Cableco shall use commercially reasonable efforts to make
the Capacity available to Customer by March 31, 1999 (the "Capacity
Request Date"). Cableco shall, upon its making the Capacity available
to Customer in accordance with this Subsection 2.3, demonstrate to the
reasonable satisfaction of Customer the performance of such Capacity
against testing criteria (to be determined in Cableco's sole
discretion) to be provided by Cableco. In the event Customer makes use
of the Capacity prior to the Capacity Request Date, it shall be deemed
to have acknowledged that availability of such Capacity and to have
delivered a notice to Cableco on such date.
2.4 Customer acknowledges that Gemini may from time to time
require use of the Capacity for the purpose of conducting tests,
adjustments and work and Customer shall make the Capacity available to
Gemini (or to its subsidiaries or agents) for such purpose, at such
times as may be necessary for such Capacity to be maintained in
efficient working order. In the event Gemini shall require access to
the Capacity as described in this Subsection 2.4, Cableco shall provide
written notice (the "Test Notice") to Customer as soon as commercially
reasonable, but in no event will the notice be less than 5 business
days. In the event that delivery of the Test Notice is not
commercially reasonable, Cableco shall contact Customer by telephone at
such location as Customer may from time to time notify Cableco in
writing immediately prior to the commencement of any such tests,
adjustments or work. All such tests, adjustments or work shall be
performed at such times and in such manner as shall minimize or prevent
any interruption in or interference with the Capacity.
2.5 The communications capability and efficiency of any
Capacity may be optimized by Customer by the use of equipment, provided
that the use and operation of such equipment by Customer or any person
or entity claiming through or under Customer shall not (i) cause any
interruption of, or interference to, the use of any other capacity on
the Gemini Network, (ii) prevent the use of similar equipment by other
owners or operators of the Gemini Network, (iii) impair privacy of any
communications over such facilities, (iv) cause damage to any plant or
equipment, or (v) create hazards to employees, affiliates or connecting
companies of Cableco, Customer, or any other user, owner or operator of
the Gemini Network or the public; and provided, further, that Customer
shall indemnify Cableco in connection with the use of any such
equipment by Customer or any person or entity claiming through or under
Customer in accordance with the provisions of Subsection 2.5. Such
equipment, if used, shall not constitute a part of the Gemini Network.
In addition, Customer shall bear the cost of any additional protective
apparatus reasonably required to be installed because of the use of
such facilities by Customer, any lessees of Customer, or any customer
or customers of Customer or of any such lessee. Customer shall, in any
agreements with third parties for the sale of any interests in the
Capacity, include in such agreements provisions substantially in the
form of those contained in this Subsection 2.5.
3. Payment for IRU.
3.1 In consideration for the grant to Customer of an IRU in the
Capacity,
Customer shall pay to Cableco *** (the "Granting Price"). The
Granting
Price shall be payable as follows:
(i) Fifty percent (50%) payable within thirty (30) days
following execution of this Agreement;
(ii) With the remaining fifty percent (50%) payable within
thirty (30) days following the date on which Cableco notifies Customer
that the Capacity is available to Customer.
3.2 In addition to the Granting Price described in Subsection
3.1 above, Customer shall be liable for those costs reasonably incurred
by or on behalf or Gemini in connection with the operation, maintenance
and repair of the Gemini Network as described in more detail in the
C&MA (the "O&M Costs"). The O&M costs consist of ***. The Annual
Charge shall be due on the Granting Date and the anniversary of each
date thereafter. The Restoration Charge shall be due within thirty
(30) days following receipt of a Cableco invoice for any restoration
incident.
3.3 All payments made by Customer under this Agreement shall be
made without any deduction or withholding for or on account of any tax,
duty or other charges of whatever nature imposed by any taxing or
governmental authority (collectively, "Taxes"). If Customer is
required by law to make any deduction or withholding from any payment
due hereunder to Cableco then, notwithstanding anything to the contrary
contained in this Agreement, the gross amount payable by Customer to
Cableco will be increased so that, after any such deduction or
withholding for Taxes, the net amount received by Cableco will not be
less than Cableco would have received had no such deduction or
withholding been required. Customer acknowledges and understands that
Cableco computes all charges herein exclusive of any applicable
foreign, VAT, federal, state or local use, excise, gross receipts,
sales and privilege taxes, duties, fees or similar liabilities (other
than general income or property taxes), whether charged to or against
Cableco or Customer because of the Service furnished to Customer
("Additional Charges"). Customer shall pay such Additional Charges in
addition to all other charges provided for herein.
3.4 If payment is not received by Cableco on or before the
applicable due date, Customer shall, on five (5) business days' notice
from Cableco, also pay a late fee in the amount of the lesser of one
and one-half percent (1 1/2%) of the unpaid balance of the applicable
charge, or, the maximum lawful rate under applicable state law.
3.5 Cableco shall render invoices under this Agreement in U.S.
dollars, and Customer shall pay the amounts due in U.S. dollars.
Customer shall make said payments to Cableco in immediately available
funds.
***Confidential treatment has been requested for certain portions of
this document. Such omitted portions have been filed separately with
the Securities and Exchange Commission.
3.6 Invoices shall be deemed to have been accepted by Customer if it
does not present a written objection to Cableco on or before the date
when payment is due. If such objection is made, Customer shall pay the
undisputed portion of such invoice and the Parties shall make all
reasonable efforts to resolve such dispute promptly.
4. Operation and Maintenance.
4.1 Cableco shall furnish the Capacity to Customer and maintain
the Capacity in accordance with the terms of the C&MA.
4.2 In the event that the Capacity and any in-system
restoration shall become unavailable during the System Lifetime and
restoration facilities are available to Gemini on another cable system,
Gemini shall arrange restoration of the Capacity and Customer shall pay
the Restoration Charges therefor. In the event Customer notifies
Cableco in writing that it shall not require restoration of the
Capacity, Cableco shall not be obliged to procure the restoration of
the Capacity and Customer shall not be liable for payment of the
Restoration Charges therefor.
5. Representations, Warranties and Covenants.
5.1 Customer hereby represents to, warrants and covenants with
Cableco as
follows:
(a) Customer is a Delaware corporation, duly organized
and validly existing under the laws of its state or jurisdiction of
organization and has the requisite authority to execute this Agreement
and to perform its obligations hereunder.
(b) This Agreement constitutes a valid and binding
obligation of Customer, enforceable against Customer in accordance with
its terms.
(c) There are not pending, or, to Customer's knowledge,
any threatened claims, actions, suits, audits, investigations or
proceedings by or against Customer which could have a material adverse
effect on Customer's ability to perform its obligations under this
Agreement.
(d) To the best of Customer's present knowledge, Customer
has obtained and shall maintain in good standing, all such consents,
approvals, licenses, permits and other approvals, both governmental and
private, as may be required, at the time of performance, to permit
Customer to perform its obligations under this Agreement and to acquire
and use the Capacity. In the event Customer learns of any such
consents, approvals, licenses, permits or other approvals, governmental
or private, as may be required, Customer shall obtain and thereafter
shall maintain in good standing, all such consents, approvals,
licenses, permits and other approvals, both governmental and private,
as may be required, at the time of performance, to permit Customer to
perform its obligations under this Agreement and to acquire and use the
Capacity.
(e) Customer is a "Carrier User" within the meaning of
that term as it is used in the C&MA.
(f) Customer shall perform its obligations under this
Agreement and use the Capacity in a manner consistent with applicable
law, and shall not use, or permit the Capacity to be used, for any
illegal purpose or in any other unlawful manner.
(g) Customer shall not create or permit to exist, any
liens, encumbrances or charges to be placed upon the Capacity or
Customer's rights under this Agreement other than liens, encumbrances
or charges of financial institutions or others against Customer's
assets generally in connection with financing arrangements by Customer.
(h) Customer shall use the Capacity and shall cause all
other persons using the Capacity to use the Capacity in such a manner
so as not to cause any interruption of, or interference to, the Gemini
Network, or the use of any other capacity on the Gemini Network.
5.2 Cableco hereby represents to, warrants and covenants with
Customer as
follows:
(a) Cableco is a Bermuda company, duly organized and
validly existing under the laws of Bermuda and has the requisite
authority to execute this Agreement and to perform its obligations
hereunder.
(b) This Agreement constitutes a valid and binding
obligation of Cableco, enforceable against Cableco in accordance with
its terms.
(c) There are no pending, or, to Cableco's knowledge,
threatened claims, actions, suits, audits, investigations or
proceedings by or against Cableco which could have a material adverse
affect on Cableco's ability to perform its obligations under this
Agreement.
(d) Cableco has obtained or shall obtain and shall
maintain in good standing, all necessary consents, approvals, licenses,
permits and other approvals, both governmental and private, as are
necessary to permit Cableco to perform its obligations under this
Agreement.
(e) Cableco shall not create or permit to exist, any
liens, encumbrances or charges to be placed upon the Capacity or
Cableco's rights under this Agreement other than liens, encumbrances or
charges of financial institutions or others against Cableco's assets
generally in connection with financing arrangements by Cableco.
(f) Cableco shall perform its obligations under this
Agreement in a manner consistent with applicable law.
6. Default.
6.1 In the event Customer (i) fails to make any payment under
this Agreement when due, (ii) fails to perform any of its material
obligations under this Agreement, or (iii) is otherwise in breach of
any material representation, warranty, covenant or other obligation
under this Agreement, which event remains uncured for a period of
thirty (30) days following receipt by Customer of written notice of any
such breach or failure, Cableco shall be entitled upon ten (10)
business days' written notice to Customer to terminate this Agreement
and to reclaim the IRU granted hereunder, and shall be relieved of any
liability to Customer due to such termination and reclamation.
6.2 In the event Cableco (i) fails to perform any of its
material obligations under this Agreement, or (ii) is otherwise in
breach of any material representation, warranty, covenant or other
obligation under this Agreement, which event remains uncured for a
period of thirty (30) days following receipt by Cableco or written
notice of any such breach or failure, Customer shall be entitled, upon
ten (10) business days' written notice to Cableco to terminate this
Agreement and shall be relieved of any liability to Cableco due to such
termination. In the event Customer terminates this Agreement in
accordance with this Subsection 6.2, Cableco shall be entitled to
reclaim the IRU granted hereunder and, if Cableco so reclaims the IRU
granted hereunder, Cableco shall make payment to Customer of a
proportion of the Granting Price appropriately pro rated according to
the following schedule:
Termination Date Portion of Granting Price to Be
Reimbursed
0-1 year after Granting Date ***
1-2 years after Granting Date ***
2-3 years after Granting Date ***
3-4 years after Granting Date ***
4-5 years after Granting Date ***
5+ years after Granting Date ***
In addition, in the event Cableco reclaims the IRU in accordance
with this Subsection 6.2, Cableco shall refund Customer an amount equal
to the product of the O&M Costs paid by Customer at the beginning of
the year of such termination, multiplied by the number of months
remaining in the contract year (measured from the anniversary of the
Granting Date), divided by twelve (12).
6.3 Either Party shall be entitled to terminate this Agreement
by written notice to the other Party in the event that the other Party
shall be dissolved or go into liquidation (other than for the purposes
of reconstruction or amalgamation), bankruptcy or insolvency, including
(i) the filing of a voluntary or involuntary petition seeking
liquidation, reorganization, arrangement or a readjustment in any form,
of its debts under any federal or state bankruptcy insolvency or
similar law with involuntary petitions not canceled or withdrawn with
forty-five (45) days' of filing thereof; of (ii) the making of any
assignment for the benefit of its creditors.
***Confidential treatment has been requested for certain portions of
this document. Such omitted portions have been filed separately with
the Securities and Exchange Commission.
6.4 This Agreement shall terminate in the event of: (i) any final
action by the FCC or other applicable regulatory or governmental
authority directing either Party or Gemini to terminate this Agreement
or declaring that this Agreement is in any way inconsistent with FCC
rules or other applicable laws, rules and regulations, or (ii) upon the
expiration or earlier revocation of any license granted to either Party
by a regulatory or governmental authority and required by such Party to
authorize its use of the Gemini Network in accordance with the terms of
this Agreement. ***
6.5 The exercise by either Party of its rights under this
Section 6 shall be without prejudice to any and all rights and legal
and equitable remedies which such Party may have under this Agreement
or otherwise (including its rights and remedies to enforce the other
Party's obligations under this Agreement).
7. Limited Liability; General Indemnity; Reimbursement.
7.1 IN NO EVENT SHALL EITHER PARTY HERETO OR ITS AFFILIATES BE
LIABLE TO THE OTHER PARTY (OR ANY PERSON OR ENTITY CLAIMING THROUGH OR
UNDER SUCH PARTY, DIRECTLY OR INDIRECTLY) FOR ANY INDIRECT, SPECIAL,
INCIDENTAL OR CONSEQUENTIAL LOSSES OR DAMAGES, INCLUDING WITHOUT
LIMITATION, LOSS OF REVENUE, LOSS OF CUSTOMERS OR CLIENTS, LOSS OF
GOODWILL OR LOSS OF PROFITS ARISING IN ANY MANNER FROM THIS AGREEMENT
AND THE PERFORMANCE OR NONPERFORMANCE OF OBLIGATIONS HEREUNDER,
INCLUDING WITHOUT LIMITATION, ANY DAMAGE SUSTAINED BY REASON OF ANY
DELAY IN COMMENCING, OR ANY FAILURE IN OR BREAKDOWN OF THE GEMINI
NETWORK OR ANY FACILITIES ASSOCIATED WITH THE GEMINI NETWORK, OR FOR
ANY INTERRUPTION OF SERVICE WHATSOEVER, EVEN IF SUCH PARTY OR ITS
AGENTS WERE AWARE OF THE POSSIBILITY OF SUCH LOSSES.
7.2 In the event parties other than Customer (e.g., Customer's
affiliates and/or Customer's end users) shall have use of the Service
through Customer, then Customer agrees to forever indemnify and hold
Cableco and its affiliated companies harmless from and against any and
all claims, demands, suits, actions, losses, damages, assessments or
payments which those parties may assert arising out of or relating to
any defect in the Service.
7.3 The Parties agree to reimburse the other Party for all
reasonable costs and expenses incurred by the other party due to such
Party's direct participation (either as a party or witness) in any
administrative, regulatory or criminal proceeding concerning the other
party if such Party's involvement in said proceeding is based solely on
any issue or provision of Services arising out of this Agreement.
***Confidential treatment has been requested for certain portions of
this document. Such omitted portions have been filed separately with
the Securities and Exchange Commission.
8. Force Majeure. Except as otherwise specifically provided for in
this Agreement, Cableco's performance shall be excused and it shall not
be liable to Customer or any other person, firm or entity for any
failure of performance hereunder if such failure is due to any cause or
causes beyond the reasonable control of Cableco. Such causes shall
include, without limitation, acts of God, fire, explosion, vandalism,
cable cut, storm or other similar occurrence, any law, order,
regulation, direction, action or request of the United States
government or of any other government or of any civil or military
authority, national emergencies, insurrections, dots, wars, strikes,
lockouts or work stoppages or other labor difficulties, supplier
failures, shortages, breaches or delays.
9. Relationship of Parties. The relationship of the Parties hereto
shall not be that of partners and shall be limited to the express
provisions of this Agreement. Nothing herein contained shall be deemed
to constitute a partnership between them or to merge their assets or
their fiscal or other liabilities or undertakings, nor shall it allow a
Party to act as an agent of the other party.
10. Severability. It any provision of this Agreement is found by an
appropriate judicial or regulatory authority to be void or
unenforceable, such provision shall be deemed to be deleted from this
Agreement and the remaining provisions shall continue in full force and
effect.
11. Headings; References. Headings are inserted for convenience only
and shall
not affect the interpretation of this Agreement. References to
Sections, Subsections and Schedules are to references to Sections,
Subsections and Schedules to this Agreement. Unless the context
otherwise requires, words importing the singular number shall include
the plural and vice versa. Unless the context otherwise requires,
references to a person include an individual, firm, body, corporation,
unincorporated association and government or governmental, semi-
governmental or local authority or agency.
12. Assignment. Customer shall not assign or transfer its rights or
obligations under this Agreement without the prior written consent of
Cableco. Any assignment or transfer without such consent shall be
void.
13. Increase or Decrease in Design Capacity.
13.1 Customer acknowledges that Gemini may increase, at its own
cost and expense, the initial design capacity of the Gemini Network.
13.2 Customer acknowledges that in the event the capacity that
the Gemini Network is capable of providing at the RFS Date is less than
the aggregate amount of capacity purchased by all purchasers of
capacity on the Gemini Network, or in the event the capacity that the
Gemini Network is capable of providing is reduced below the aggregate
level of capacity purchased by all carrier users at any time during the
System Lifetime for any cause outside Gemini's reasonable control, the
available capacity shall be assigned to all purchasers of capacity on
the Gemini Network in proportion to their respective shares of the
purchased capacity. In case of such capacity reduction the O&M Costs
payable by each Customer shall be recomputed. In such event, Customer
shall have the right to terminate this Agreement on not less than one
hundred eighty (180) days notice to Cableco, unless Cableco is able to
restore full Capacity to Customer within that one hundred eighty day
(180) period.
14. Continuation of Obligations.
14.1 Upon any termination of this Agreement in accordance with
Section 6, the rights and obligations of Customer in the IRU granted to
it hereunder shall terminate in accordance with the terms of this
Agreement.
14.2 Termination of this Agreement shall not operate as a waiver
by either Party of any breach of the provisions hereof and shall be
without prejudice to the rights or remedies of either Party which may
arise as a consequ6nce of such breach or which may have accrued
hereunder up to the date of such termination.
15. Governing Law and Arbitration. This Agreement shall be construed
under the laws of the State of New York without regard to choice of law
principles,
Any dispute relating to this Agreement or its subject matter -
including disputes as to validity, performance, breach, or termination
- -- which cannot be settled by negotiation, shall be submitted to
binding arbitration in accordance with the Arbitration Rules of the
United Nations Commission on International Trade Law ("UNCITRAL
Rules") as in force on the date of commencement of arbitration, and as
modified by this Arbitration Clause. Claims alleging violations of the
telecommunications laws of the United States of America, however, shall
be brought solely before the United States Federal Communications
Commission.
ADR Associates shall serve as both the appointing authority and
the administering body under the UNCITRAL Rules. ADR Associates shall
appoint a single arbitrator of a nationality other than the
nationalities of the parties. All arbitration proceedings shall be
conducted in English. The place of arbitration shall be Bermuda.
Neither the parties, nor the arbitrator, nor ADR Associates shall
disclose the existence, content, or results of any arbitration except
with the prior written consent of both parties. The law governing the
arbitration proceedings shall be the Bermuda International Conciliation
and Arbitration Act 1993.
The arbitrator shall abide by the rules of Ethics for
International Arbitrators established by the International Bar
Association. The arbitrators authority to grant relief is subject to
the terms of this Arbitration Clause, the terms of the Agreement, and
the law governing the Agreement. The arbitrator shall have no
authority to award exemplary, punitive, or treble damages.
Each party shall pay one half the costs of the arbitration (as
defined in Article 38, UNCITRAL Rules), except that each party shall
pay the expenses it incurs for its own legal representation and
assistance. Judgment on the award may be entered in any court of
competent jurisdiction. The post-award proceedings shall be governed
by the Convention on Recognition and Enforcement of Foreign Arbitral
Awards of 1958 (the "New York Convention"). The validity and
construction of this Arbitration Clause shall be governed by the law of
the State of New York, U.S.A., without regard to its conflict of laws
rules.
16. Successors and Assigns. This Agreement and all the provisions
hereof shall be binding upon and insure to the benefit of the Parties
hereto and their respective successors and permitted assigns.
17. Waiver. The waiver by any Party, in whole or in part, of a
breach of or a default under any of the provisions of the Agreement, or
the failure, in whole or in part, of any Party, upon one or more
occasions, to enforce any of the provisions of this Agreement or to
exercise any right or privilege hereunder shall not thereafter be
construed as a waiver of any subsequent breach or default of a similar
nature or as a waiver or any such provision, right or privilege
hereunder.
18. Counterparts. This Agreement may be executed in counterparts,
each of which when executed and delivered shall be deemed an original.
Such counterparts shall together (as well as separately) constitute one
and the same instrument.
19. Notices. Notices under this Agreement shall be in writing and
delivered to the person identified below at the offices of the parties
as they appear below or as otherwise provided for by proper notice
hereunder. Notices under this Agreement shall be transmitted via
facsimile, overnight courier, hand delivery or certified or registered
mail, postage prepaid and return receipt requested. Customer shall
notify Cableco in writing if Customers billing address is different
than the address shown below. The effective date for any notice under
this Agreement shall be the date of actual receipt of such notice by
the appropriate party, notwithstanding the date of mailing.
If to Cableco: MCI WorldCom
500 Clinton Center Drive
Building 4, 4th Floor
Clinton, MS 39056
Fax: 601-460-8442
Attn: Marketing, Contract Administration
If to Customer: Exodus Communications, Inc.
2831 Mission College Blvd.
Santa Clara, California 95054
Fax: 408-346-2420
Attn: VP Engineering
With Copy to: Exodus Communications, Inc.
2831 Mission College Blvd.
Santa Clara, California 95054
Attn: General Counsel
20. Partial Invalidity; Government Action.
20.1 If any part of any provision of this Agreement or any other
agreement, document or writing given pursuant to or in connection with
this Agreement shall be invalid or unenforceable under applicable law,
rule or regulation, that part shall be ineffective to the extent of
such invalidity only, without in any way affecting the remaining parts
of that provision or the remaining provisions of this Agreement. In
such event, Customer and Cableco will negotiate in good faith with
respect to any such invalid or unenforceable part to the extent
necessary to render such part valid, enforceable, and capable of
accomplishing the lawful objectives and intent of the parties.
20.2 Upon thirty (30) days prior notice, either party shall have
the right, without liability to the other, to cancel an affected
portion of the Service if any material rate or term contained herein
and relevant to the affected Service is substantially changed (to the
material detriment of the terminating party) or found to be unlawful or
the relationship between the parties hereunder is found to be unlawful
by order of the highest court of competent jurisdiction to which the
matter is appealed, the FCC, or other local, state or federal
government authority of competent jurisdiction.
21. Exclusive Remedies. Except as otherwise specifically provided
for herein, the remedies set forth in this Agreement comprise the
exclusive remedies available to either party at law or in equity.
22. Use of Service.
22.1 Under the terms and conditions of this Agreement, Cableco
will provide the Capacity specified therein to Customer upon condition
that the Capacity shall not be used for any unlawful purpose. The
provision of Capacity will not create a partnership or joint venture
between the parties or result in a joint communications service
offering to any third parties, and Cableco and Customer agree that this
Agreement, to the extent it is subject to FCC regulation, is an inter-
carrier agreement which is not subject to the filing requirements of
Section 21 1 (a) of the Communications Act of 1934 (47 U.S.C. 21 1
(a)) as implemented in 47 C.F.R. 43.51.
22.2 In consideration of the charges offered to Customer
hereunder, Customer agrees not to resell the Capacity provided
hereunder to any third party, and that any such resale shall be
considered a breach of this Agreement.
23. Rule of Construction. No rule of construction requiring
interpretation against the drafting party hereof shall apply in the
interpretation of this Agreement.
24. Confidential Information.
24.1 The Parties understand and agree that the terms and
conditions of this Agreement, all documents referenced herein
(including invoices to Customer for Service provided hereunder),
communications between the Parties regarding this Agreement or the
Service to be provided hereunder (including but not limited to price
quotes to Customer for any Service proposed to be provided or actually
provided hereunder, technical information, business or marketing plans,
and customer data), as well as such information relevant to any other
agreement between the Parties (collectively, "Confidential
Information"), are confidential as between Customer and Cableco.
However, this Agreement imposes no obligation upon the receiving party
with respect to information that (i) was in the receiving party's
possession before receipt for the disclosing party; (ii) is or becomes
a matter of public knowledge through no fault of the receiving party;
(iii) is rightfully received by the receiving party from a third party
without a duty of confidentiality; or (iv) is independently developed
by the receiving party.
24.2 A party shall not disclose Confidential Information unless
subject to discovery or disclosure pursuant to legal process, nor to
any other party other than the directors, officers, and employees of a
party or a party's agents including their respective brokers, lenders,
insurance carriers or bona fide prospective purchasers who have
specifically agreed in writing to nondisclosure of the terms and
conditions hereof. Any disclosure hereof required by legal process
shall only be made after providing the non-disclosing party with notice
thereof in advance so as to permit the non-disclosing party the
opportunity to seek an appropriate protective order or exemption.
Violation by a party or its agents of the foregoing provisions shall
entitle the non-disclosing party, at its option, to obtain immediate
injunctive relief without a showing of irreparable harm or injury and
without the necessity of bond.
24.3 The provisions of this Section 24 will be effective as of
the date of this Agreement and remain in full force and effect for a
period which will be the longer of (i) one (1) year following the date
of this Agreement, or (ii) one (1) year from the termination of all
Service hereunder.
25. Press Releases. The parties agree that any press release,
advertisement or publication generated by a Party regarding this
Agreement, the Service provided hereunder or in which a Party desires
to mention the name of the other Party or the other Party's parent or
affiliated company(ies), will be submitted to the non-publishing Party
for its written approval at least five (5) days prior to publication
unless a shorter period be mutually agreed and evidenced in writing.
No press release shall be issued regarding this Agreement without the
other party's written approval.
26. Entire Agreement. This Agreement constitutes the complete and
exclusive statement of the understandings between the parties and
supersedes all proposals and prior agreements (oral or written) between
the parties relating to the subject matter of this Agreement. No
subsequent agreement between the Parties concerning the Service shall
be effective or binding unless it is made in writing and subscribed to
by authorized representatives of Customer and Cableco.
IN WITNESS WHEREOF, the parties have executed this Capacity Sales
Agreement on the date written below.
MFS CABLECO (BERMUDA) LTD. EXODUS COMMUNICATIONS, INC,
By: /s/ Frank Grillo By: /s/ James J. McInerney
Print Name: Frank Grillo Print Name: James J. McInerney
Title: V.P. Marketing Title: EVP, Engineering
Date: Date: February 17, 1999
<PAGE>
Schedule I
GEMINI NETWORK
CONSTRUCTION, OPERATION AND MAINTENANCE ARRANGEMENT
(C&MA)
1. DEFINITIONS
Definitions shall be as set forth in the Capacity Sales Agreement with
the following additions:
1.1 BASIC SYSTEM MODULE
"Basic System Module" of the Gemini Network means an STM-1 digital
line section with interfaced provide in accordance with the appropriate
ITU-TS Recommendations.
1.2 CABLE STATION
"Cable Station" means a building which houses Gemini System terminal
equipment at a Gemini System landing point.
1.3 CARRIER USER
"Carrier User" means any entity that is authorized or permitted, under
the laws of its respective country, to acquire and use submarine cable
telecommunications serves between or via the US and the UK, and that
acquires capacity of the Gemini Network for the provision of
international telecommunication services.
1.4 COUNTRY
"Country" means a country territory or place, as appropriates.
1.5 CSA
"CSA" means in relation to any Carrier User, the capacity sales
agreement for the grant by Gemini to such Carrier User of capacity on
the Gemini Network executed between Gemini and such Carrier User.
1.6 FOUNDING PARTY
'"Founding Party" means a shareholder of Gemini.
1.7 GEMINI
"Gemini" means the joint venture formed by the Founding Parties to
build, own (or obtain indefeasible rights of us in), operate, and
maintain the Gemini Network.. Gemini has been formed to build, operate
and maintain the Gemini Network.
1.8 GEMINI NETWORK
"Gemini Network" means the fiber optic submarine and terrestrial cable
network capable of providing telecommunications services from London,
England to New York, New York, which network consists of the Backhaul
and the Gemini System. Gemini Network is intended to provide digital
transmission services using fiber optic cable between points in or
reached via the US and point in or reached via the UK; necessary
permits, wayleaves and other authorizations in accordance with English
law are available Cable & Wireless communications limited at UKL
affiliate of Cable & Wireless PLC (hereinafter the "UK Landing Party")
to enable the Gemini Network to be installed and operated in the UK,
and necessary rights of way and permits, licenses and other
authorizations in accordance with applicable United States federal and
state law are available to MFS Cable co. (US), Inc. A Delaware
corporation, which is an US affiliate of MFS Cable Co (Bermuda) Ltd.
(hereinafter, the "US Landing Party" to enable the Gemini Network to
be installed and operated in the US;
1.9 INTERLINK
"Interlink" means the fiber optic capacity connecting the Cable
Stations at the UIS and UK ends of the Gemini Network (i.e. subsegments
S3 and S4), respectively.
1.10 ITU-TS
"ITU-TS" means the international Telecommunications Union
Telecommunications Standardization Sector (Previously referred to as
CCITT).
1.11 LANDING PARTY
"Landing Party" means an entity that contracts with Gemini to provide
the use of the permits, wayleaves, right of way and authorizations
necessary to enable the Gemini System to be installed and operated in
the US or the UK.
1.12 LANDING STATION SYSTEM MULTIPLEX EEQUIPMENT
"Landing Station System Multiplex Equipment" means any and all
equipment necessary in each of the Cable Stations required to operate
and interface at the System digital input-output ports.
1.13 O&M COSTS
"O&M Costs" means those operation, maintenance and repair costs
associated with, of the Gemini Network as described in Clause 8 hereof
1.14 O&M CONTRACT
"O&M contract" means an agreement providing for the provision of
material services, or equipment pertaining to the operation,
maintenance, or report of the Gemini Network.
1.15 TRANSIT CIRCUIT
"transit Circuit" means a circuit conveyed on the Gemini Network but
which does not terminate in one or both of the UK or US.
1.16 UK BACKHAUL PROVIDER
"UK Backhaul Provider" means Cable and Wireless Communications
Limited, a company organized under the Laws of England and Wales; or
such other person as may provide UK Backhaul services to Gemini, from
time to time.
1.17 USABLE CAPACITY
The "Usable Capacity" of the Gemini Network means the fully restorable 128
Basic System Modules of capacity available for use when the complete
Gemini Network is available for service and operated as a fully
redundant, self-restoring 20 Gigabit system.
1.18 US BACKHAUL PROVIDER
"US Backhaul Provider" means MFS Cable Co (US), Inc., a Delaware
corporation or such other person as may provide US Backhaul services to
Gemini, from time to time.
2. GEMINI NETWORK SEGMENTS AND SUBSEGMENTS
The Gemini System, as shown in Diagram 2.2 hereto, shall be provided
constructed, maintained and operated among the Cable Station in
Manaquan, New Jersey, US; Porthcurno, UK; Charlestown, Rhode island,
US; and Oxwich Bay, UK. The Gemini System shall consist of two fiber
optic pairs configured to operate in a loop configuration that will
connect Charlestown and Manasquan in the US with Porthcurno and Oxwich
Bay in the UK.
2.1 SEGMENTS
Solely for the purposes of identifying capacity utilization, Segments
A, B, C, D shall each consist of an appropriate share of land and
building at the specified locations for the cable landing and for the
cable right-of-way and ducts between the Cable Station and its
respective landing point, and an appropriate share of common services
and equipment (other than services and equipment associated solely with
the Gemini System, and other than Landing Station System Multiplex
Equipment), or indefeasible rights of use therein, at each of the
locations.
2.1.1 Segment A
A Cable Station located in Charlestown, Rhode Island, US .
2.1.2 Segment B
A Cable Station located in Manasquan, New Jersey, US.
2.1.3 Segment C
A Cable Station locate din Oxwich Bay, UK
2.1.4 Segment D
A Cable Station located in Porthcurno, UK.
2.2 Segment S
Solely for purposes of identifying capacity utilization, Segment S
shall consist of the whole of the submarine cable and Interlinks, which
shall include all submersible cable, plant, equipment and facilities,
or indefeasible rights of use therein, between and including the System
Interface Points in the US and UK. It includes, but is not limited to,
all necessary submarine and terrestrial cable, cable joints and joint
housing, repeaters, transmission equipment, power feeding equipment
(and the associated sea earth cable and electrode system and/or the
land earth system, or an appropriate share thereof), and special test
equipment directly associated with the submersible plant, and
interconnection facilitates, provided, and Including the System
Interface Points at the Cable Station at Charlestown, Rhode Island, US;
Manasquan, New Jersey, US, Oxwich Bay; UK and Porthcurno,
2.2.1
Segment A
(Charlestown)
Segment S1
Segment C
(Oxwich Bay)
Segment
S3
Segment
S4
Segment B
(Manasquan)
Segment S2
Segment D
(Porthcurno)
3. OBLIGATIONS TO PROVIDE BACKHAUL AND INTERCONNECTION FACILITIES
Gemini shall use its commercially reasonable efforts to ensure for the
System Lifetime (a) the availability of such Backhaul facilities as may
be reasonably required to utilize efficiently the Gemini System and
with inland networks at the Backhaul Interface Points, including all
necessary facilities to connect the System Interface points and
Backhaul Interface Points; and (b) the availability of suitable
connection with the allocated capacity in the Gemini System to allow
interconnection to the Backhaul and other telecommunications networks
at the System Interface Points at the STM-1 level.
4. REDUCTION IN CAPACITY
In the event that the capacity that the Gemini Network is capable of
providing at the RFS Date is less than the capacity purchased by
Carrier Users, or in the event that the capacity the Gemini Network is
capable of providing is reduced below the level purchased by Carrier
Users at any time during the System Lifetime, due to physical
deterioration or for any other reason, the available capacity shall be
assigned to Carrier Users in proportion to their respective shares of
the purchased capacity in an equitable manner as determined by the
Management committee. In case of such capacity reduction, Gemini will
recompute the pro rate allocation of and make appropriate adjustments
to the O&M Costs and associated Fees payable by each Carrier User.
5. INTERCONNECTION
Carrier Users will be allowed to interconnect their networks with the
Gemini Network either
(i) at a Backhaul Interface Point at the STM-1 level; or
(ii) at a System Interface Point at the STM-1 level; or
(iii) Transit Circuit purposes only, at the Porthcurno, United Kingdom
System Interface Point, at the STM-1, DS-3 or E-1 levels.
The interface will be in accordance with the appropriate ITU-TS
recommendation
6. OPERATION AND MAINTENANCE - DUTIES AND RIGHTS
6-1 Subject to the regulatory compliance obligations of the Landing
parties, Gemini shall have responsibility to control, operate and
maintain the various Segments and Subsegments of the Gemini Network in
a manner consistent with applicable law and with international cable
operation and maintenance practices Gemini shall be the maintenance
authority for the Gemini Network and shall use a reasonable efforts to
maintain the Gemini System Network economically in efficient working
order and with the objective of achieving effective and timely repairs
when necessary.
6.2 Gemini shall have the right to deactivate on a temporary basis
all or any part of the Gemini network in order to perform the duties
imposed upon it in this Clause or at the instruction of a Landing Party
or Backhaul provider where specifically required for regulatory
compliance. Prior to such deactivation, reasonable notice shall be
given and coo-ordination shall be made with Carrier users.
6.3 Gemini shall advise Carrier Users in writing of the timing and
scope of significant planned maintenance operations, of significant
changes to existing operations and maintenance methods, and of
significant impact on the operation or maintenance of the Gemini
Network.
7. OPERATING AND MAINTENANCE COSTS
7.1 O&M Costs shall be defined as all costs reasonably incurred by
Gemini in operating, maintaining and repairing-mg the Gemini Network,
including, but not limited to, the costs of attendance at repair
operations, testing, adjustments, repairs, placement and additions,
storage of plant and equipment, vendor charges, Backhaul
Interface Point charges, other Backhaul charges, Landing Partty Cable
Station charges, electricity, personnel expenses, providing cable
ships, remotely controlled submersible vessels, cable depots or
any other necessary maintenance or repair devices and facilities which
are or may become available (including the standby costs of such
facilities), reburial and the replacement of plant, tools and
test equipment, terrestrial repairs, restoration, customs duties, taxes
(except income taxes imposed on the net income of Gemini),
insurance, rights of way, supervision and overheads.
7.2 Gemini may authorize the purchase and use of special tools and
test equipment which may reasonably be required for the maintenance or
repair of the Gemini Network. The related costs may include, but are
not limited to, the costs, or an appropriate share thereof, for the
purchase, storage, and maintenance of this equipment, which will be
included as part of the O&M costs.
8. OTHER RESPONSIBILITIES OF GEMINI
WorldCom warrants that in its agreement with Gemini that Gemini shall
take responsibility for ensuring that.
(i) The technical design for the Gemini Network is in accordance with
good engineering practice, appropriate recommended national and
international technical standards.
(ii) The Gemini Network is technically in compliance with ITU-TS
recommendations pertaining to system interfaces at the System Interface
Points;
(iii) All necessary permits, licenses, regulatory approvals and other
authorizations to enable the Gemini Network to be landed, installed,
operated, maintained and repaired in the UK and US are obtained, are in
accordance with the respective UK and US law, and continue in effect
during the term of this Agreement; and
(iv) Reasonable restoration arrangements are made available as
appropriate with other cable system.
9. RETIREMENT AND EXTENSION OF GEMINI NETWORK
WorldCom warrants that in its agreement with Gemini that :
9.1 Gemini intends to operate and maintain the Gemini network for the
expected System Lifetime of 25 years from the RFCS Date, unless the
System Lifetime is extended or reduced in accordance with the provision
of this Clause 9.
9.2 Gemini may retire the Gemini Network in the event of a
catastrophic failure of all or a portion of the Gemini Network whether
caused by natural hazard or major technical fault, which makes it
impossible to maintain the business efficacy of the Gemini Network, or
if any governmental, municipal, institutional, or commercial authority,
license, permission authorization, right, or concession necessary for
the business efficacy of the Gemini Network is subject to prohibitive
condition or is terminated with no reasonable prospect of retrieval
within a period of twelve months following the date of termination.
9.3 Upon the occurrence of any event falling within Clause 19.2, the
GUCC shall be entitled to require Gemini to confirm to the GUCC its
intentions in relation to either (a) the extension of the System
Lifetime of the Gemini Network beyond the expected System Lifetime of
twenty-five years or (b) the decommissioning of the Gemini Network
prior to the end of such expected System Lifetime and as the terms and
conditions upon which such extension or decommissioning would be
effected.
9.4 If, after receiving notification of the terms and conditions
governing extension, Carrier users holding a total of two-thirds of the
assigned capacity of the Gemini Network vote in favor of requesting
extension of the System Lifetime beyond twenty-five years, and Gemini
and the Founding Parties concur in this decision, Gemini shall extend
the System Lifetime for such additional terms as Gemini believe in its
sole discretion to be advisable.
9.5 If, after receiving notification for the terms and conditions
governing decommissioning, Carrier Users holding a total of to-thirds,
of the assigned capacity for the Gemini Network vote in favor of
requesting decommissioning, and the Gemini and the Founding Parties
concur in this decision, Gemini shall be responsible for the orderly
retirement of the Gemini Network and shall proceed to retire from
service the Gemini Network in accordance with appropriate national and
international regulations.
9.6 Upon retirement of the Gemini network, Gemini shall give to
Carrier users three (3) months' notice of any intended sale or removal
operations and make arrangement for minimizing the risks to other
seabed users of such an operation.
10. DURATION
The provisions of this C&MA shall continue in effect, as amended from
time to time by Gemini, for the system Lifetime, subject to the earlier
retirement of the Gemini Network in accordance with the terms of the
CSA and of this C&MA.
11. GOVERNMENTAL APPROVALS
This C&MA is subject to the obtaining and continuance of such
governmental approvals, consents, authorizations, licenses, and permits
as provided in this C&MA and in the CSA.
12. HEADINGS, REFERENCES
Headings are inserted for convenience only and shall not affect the
interpretation of this C&MA. References to recitals, clauses, and
attachments are to recitals and clauses of and attachments to this
C&MA. Unless the context otherwise requires, words importing the
singular number shall include the plural and vice versa, words
importing he masculine gender shall include the feminine and neuter
genders, and vice versa. Unless the context otherwise requires,
references to a person include an individual, firm, body, corporation,
unincorporated association, and government or governmental or local
authority or agency.
13. AMENDMENTS
This C&MA and any of its provision maybe amended or added to only in
writing signed by a duly authorized person on behalf of Gemini In the
event that Gemini shall propose material changes to the terms of this
C&MA, it shall notify GUCC and shall consult with the GUCC as to the
nature and terms of any proposed amendment. Notwithstanding the
foregoing, in no event shall such changes materially alter or diminish
Gemini's obligations under the CSA.
EXHIBIT 10.52
LEASE AGREEMENT
(NNN)
Basic Lease Information
Lease Date: March 26, 1999
Landlord: LINCOLN-RECP CM-ES OPCO, LLC, a Delaware limited
liability company
Landlord's Address: c/o Legacy Partners Commercial, Inc.
30 Executive Park, Suite 100
Irvine, California 92614
Tenant: Exodus Communications, Inc., a Delaware corporation
Tenant's Address: 2831 Mission College Boulevard, Santa Clara, CA
95054-1838
Attention: General Counsel
Building: A one-story concrete tilt-up structure consisting
of approximately 90,818 rentable square feet as
shown on Exhibit A-1
Premises: The Building together with vehicular parking
spaces, pedestrian walkways and landscaping within
the area outlined and depicted on Exhibit A-1
hereto.
Park: The Lot, the two buildings containing approximately 198,100
rentable square feet and a parking structure as
shown on Exhibit A
Premises Address: 198 North Nash Street, El Segundo, California
90245
Delivery Date: The date both parties execute and actually deliver
this Lease
Term: July 1, 1999 ("Commencement Date"), through June 30, 2009
("Expiration Date")
Base Rent (3): Sixty-one Thousand Seven Hundred Fifty-six and
24/100 Dollars ($61,756.24) per month
Adjustments to Base Rent: In accordance with the provisions of
Section 41 hereof.
Security Deposit (4): Seventy-one Thousand Six Hundred Fifty-five and
40/100 Dollars ($71,655.40)
*Tenant's Share of Operating Expenses (6.1): 45.8% of the Park and 100% of
the Premises
*Tenant's Share of Tax Expenses (6.2): 45.8% of the Park
*The amount of Tenant's Share of the expenses as referenced above shall
be subject to modification as set forth in this Lease.
Permitted Uses (9): Office and data center, general warehousing, light
industrial and other related uses, but only to the
extent permitted by the City of El Segundo and all
agencies and governmental authorities having
jurisdiction thereof
Unreserved
Parking Spaces: Two Hundred Thirty-five (235) exclusive spaces
within the Premises as depicted on Exhibit A-1
hereto.
Brokers (38): McKinney Travers for Tenant
Klabin Company for Landlord
Exhibits: Exhibit A - Lot and Park
Exhibit A-1 - Building, Premises and Parking
Exhibit B - Tenant Improvements
Exhibit C - Rules and Regulations
Exhibit D - Hazardous Materials Disclosure Certificate -
Example
Exhibit E - Tenant's Initial Hazardous Materials Disclosure
Certificate
Exhibit F - Memorandum of Lease and Option to Purchase
Exhibit G - Subordination, Non-Disturbance and Attornment
Agreement
Exhibit H - Tenant's Confidential Nondisclosure Agreement
Exhibit I- Tenant's Property
TABLE OF CONTENTS
SECTION PAGE
1. PREMISES 4
2. COMMENCEMENT DATE; CONDITION OF PREMISES 4
3. RENT 5
4. SECURITY DEPOSIT 5
5. TENANT IMPROVEMENTS 6
6. ADDITIONAL RENT 6
7. UTILITIES 9
8. LATE CHARGES 9
9. USE OF PREMISES 9
10. ALTERATIONS AND ADDITIONS; AND SURRENDER OF PREMISES 10
11. REPAIRS AND MAINTENANCE 11
12. INSURANCE 12
13. WAIVER OF SUBROGATION 14
14. LIMITATION OF LIABILITY AND INDEMNITY 14
15. ASSIGNMENT AND SUBLEASING 15
16. AD VALOREM TAXES 17
17. SUBORDINATION 17
18. RIGHT OF ENTRY 18
19. ESTOPPEL CERTIFICATE 19
20. TENANT'S DEFAULT 19
21. REMEDIES FOR TENANT'S DEFAULT 20
22. HOLDING OVER 21
23. LANDLORD'S DEFAULT 21
24. PARKING 22
25. SALE OF PREMISES 22
26. WAIVER 22
27. CASUALTY DAMAGE 22
28. CONDEMNATION 24
29. ENVIRONMENTAL MATTERS/HAZARDOUS MATERIALS 24
30. FINANCIAL STATEMENTS 27
31. GENERAL PROVISIONS 27
32. SIGNS 28
33. MORTGAGEE PROTECTION 29
34. QUITCLAIM 29
35. MODIFICATIONS FOR LENDER 29
36. WARRANTIES OF TENANT 29
37. COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT 30
38. BROKERAGE COMMISSION 30
39. QUIET ENJOYMENT 31
40. LANDLORD'S ABILITY TO PERFORM TENANT'S UNPERFORMED OBLIGATIONS 31
41. ADJUSTMENTS TO BASE RENT 31
42. OPTIONS TO EXTEND THE LEASE TERM 32
43. OPTION TO EXPAND 34
44. OPTION TO PURCHASE 36
45. LETTER OF CREDIT 38
46. TENANT'S ABILITY TO PERFORM LANDLORD'S UNPERFORMED OBLIGATIONS 39
47. SATELLITE DISH 40
LEASE AGREEMENT
DATE: This Lease is made and entered into as of the Lease Date set forth
on Page 1. The Basic Lease Information set forth on Page 1 and
this Lease are and shall be construed as a single instrument.
1. PREMISES
Landlord hereby leases the Premises to Tenant upon the terms and
conditions contained herein. The Premises consist of the entirety of the
Building together with vehicular parking spaces, pedestrian walkways and
landscaping within the area outlined and depicted on Exhibit A-1 hereto.
Tenant may not use any other portion of the Park other than the
Premises. The location, fencing and configuration of the area
surrounding the Building shall be subject to the approval of the
governmental agencies having jurisdiction thereof, and Tenant
acknowledges and agrees that the location and configuration of the area
surrounding the Building may be changed in accordance with the
governmental agencies' requirements. At Tenant's sole cost and expense,
Tenant hereby covenants to construct and install around the perimeter of
the area surrounding the Building a fence reasonably acceptable to
Landlord and all governmental entities having jurisdiction thereof.
Tenant's and Tenant's Representatives' (hereafter defined) use and
occupancy of the fenced area surrounding the Building shall be exclusive
only as to (i) the other tenants of the Park and (ii) the public in
general but not including Landlord and its authorized representatives,
employees, invitees, contractors and similarly affiliated parties for the
purposes of fulfilling Landlord's obligations hereunder as well as for
purposes of Landlord's exercise of its rights and remedies hereunder.
Tenant shall use, maintain and repair the fenced area surrounding the
Building subject to, and in accordance with, the terms and provisions of
this Lease, including but not limited to, the provisions of Section 11
hereinbelow. In addition to the foregoing, Tenant shall be solely
responsible and liable for any and all security measures related to the
fenced area surrounding the Building and the Premises and, subject to the
provisions of Section 14 hereof, Landlord shall not in any manner or
circumstance be liable nor responsible for any goods, personal property
or similar items stored, kept and/or situated in, on or about the
Premises at any time during the Term of this Lease. Nothing contained
herein shall limit, impair or otherwise diminish Landlord's and its
authorized representatives' rights and ability to enter the area
surrounding the Building for purposes of performing Landlord's
obligations under this Lease (if any) but such entry shall be subject to
the provisions of Section 18 hereinbelow. Landlord and its
representatives will use commercially reasonable efforts to minimize
interference with the conduct of Tenant's business in the Premises.
Landlord and Tenant hereby agree that for purposes of this Lease, as of
the Lease Date, the rentable square footage area of the Premises and the
Park shall be deemed to be the number of rentable square feet as set
forth in the Basic Lease Information. Tenant further agrees that the
number of rentable square feet of the Park may subsequently change after
the Lease Date commensurate with any modifications to any of the
foregoing by Landlord, and Tenant's Share shall accordingly change.
Tenant's Share shall not change by reason of the Tenant Improvements
performed by Tenant so long as there is no increase in the rentable
square footage of the perimeter of the Building; provided, for purposes
hereof, the addition by Tenant of any interior mezzanine area and outdoor
storage areas shall not be construed as an increase in the rentable
square footage of the Building.
2. COMMENCEMENT DATE; CONDITION OF PREMISES
2.1 The Term of this Lease shall commence on the Commencement
Date subject to extension due to Landlord Delays. For purposes hereof,
the term "Landlord Delays" shall mean and refer to unreasonable delays
solely on the part of Landlord in timely responding and giving its
approval or disapproval of any of the Construction Documents within the
time frames expressly set forth in Exhibit B hereto. Landlord shall
deliver the Premises to Tenant on the Delivery Date broom clean in its
presently existing condition (without any additional improvements made
thereto) in order for Tenant to begin construction of its Tenant
Improvements in accordance with the provisions of Exhibit B hereto.
Tenant's contractor shall have access to the Premises for the purpose of
constructing Tenant Improvements therein. From and after the Delivery
Date, Tenant shall perform all obligations of Tenant hereunder, other
than those requiring the payment of Rent. Tenant's obligation to pay
Rent shall commence on the Commencement Date regardless of whether or not
the Tenant Improvements are completed. Notwithstanding anything to the
contrary contained herein, it is the parties' intention that (i) the
Commencement Date of this Lease shall be the date specified in the Basic
Lease information, July 1, 1999, (ii) except to the extent attributable
solely to Landlord Delays, any delays in Tenant completing the Tenant
Improvements shall not affect or otherwise extend the Commencement Date
of July 1, 1999, and (iii) Tenant shall be wholly responsible for the
design, construction and substantial completion of the Tenant
Improvements. If there are any undisputed Landlord Delays, the
Commencement Date shall be adjusted commensurately on a daily basis for
each day of a Landlord Delay. The word "Term" whenever used herein
refers to the initial term of this Lease and any extension thereof.
2.2 Landlord shall permit Tenant to occupy the Premises on the
Delivery Date for the limited purpose described below. Such early
occupancy shall be at Tenant's sole risk and subject to all the
provisions of this Lease other than those requiring the payment of Rent,
including, but not limited to, paying the Security Deposit, obtaining the
insurance required pursuant to this Lease and delivering insurance
certificates as required herein. Such early occupancy (i) shall also be
subject to the provisions of Exhibit B, (ii) shall only be permitted to
the extent such occupancy is approved by the City of El Segundo, and
(iii) shall only be for the limited purpose of construction by Tenant of
the Tenant Improvements. In addition to the foregoing, Landlord shall
have the right, from time to time, to impose such additional conditions
on Tenant's early occupancy as shall be reasonably necessary or
appropriate for the protection of the rights of other tenants of the Park
to the quiet use and enjoyment of their premises. By taking possession
of the Premises, Tenant shall be deemed to have accepted the Premises in
good condition and state of repair. Tenant hereby acknowledges and
agrees that neither Landlord nor any of Landlord's agents or
representatives has made any representations or warranties as to the
suitability, safety or fitness of the Premises for the conduct of
Tenant's business, Tenant's intended use of the Premises or for any other
purpose.
3. RENT
On the date that Tenant executes this Lease, Tenant shall deliver to
Landlord the original executed Lease, the Base Rent payable for one (1)
calendar month (which shall be applied against the Rent payable for the
first month Tenant is required to pay Base Rent), the Security Deposit,
and all insurance certificates evidencing the insurance required to be
obtained by Tenant under Section 12 and Exhibit B of this Lease. Tenant
agrees to pay Landlord, without prior notice or demand, or abatement,
offset, deduction or claim, the Base Rent described in the Basic Lease
Information, payable in advance at Landlord's address specified in the
Basic Lease Information on the Commencement Date and thereafter on the
first (1st) day of each month throughout the balance of the Term of the
Lease. In addition to the Base Rent set forth in the Basic Lease
Information, Tenant shall pay Landlord in advance on the Commencement
Date and thereafter on the first (1st) day of each month throughout the
balance of the Term of this Lease, as Additional Rent, Tenant's Share of
Operating Expenses and Tax Expenses. The term "Rent" whenever used
herein refers to the aggregate of all these amounts. The Rent for any
fractional part of a calendar month at the commencement or termination of
the Lease term shall be a prorated amount of the Rent for a full calendar
month based upon a thirty (30) day month.
4. SECURITY DEPOSIT
Simultaneously with Tenant's execution of this Lease, Tenant shall
deliver to Landlord, as a Security Deposit for the performance by Tenant
of its obligations under this Lease, the amount specified in the Basic
Lease Information. If Tenant is in default, Landlord may, but without
obligation to do so, use the Security Deposit, or any portion thereof, to
cure the default or to compensate Landlord for all damages sustained by
Landlord resulting from Tenant's default. Tenant shall, immediately on
demand, pay to Landlord a sum equal to the portion of the Security
Deposit so applied or used so as to replenish the amount of the Security
Deposit held to increase such deposit to the amount initially deposited
with Landlord. At any time after Tenant has defaulted hereunder more
than three (3) times in any twelve (12) month period (a "Chronic
Default"), Landlord may require an increase in the amount of the
Security Deposit required hereunder, up to a maximum of two hundred
percent (200%) of the amount of the original Security Deposit, for the
then balance of the Lease Term and Tenant shall, immediately on demand,
pay to Landlord additional sums in the amount of such increase. Within
thirty (30) days after the termination of this Lease, Landlord shall
return the Security Deposit to Tenant, less such amounts as are
reasonably necessary, if any, to remedy Tenant's default(s) hereunder or
to otherwise restore the Premises to a clean and safe condition,
reasonable wear and tear excepted. If the cost to restore the Premises
exceeds the amount of the Security Deposit, Tenant shall promptly deliver
to Landlord any and all of such excess sums as reasonably determined by
Landlord. The foregoing treatment of the Security Deposit shall be in
the manner prescribed by the provisions of California Civil Code Section
1950.7 and any amendments, replacement or successor statutes thereof.
Landlord shall not be required to keep the Security Deposit separate from
other funds, and, unless otherwise required by law, Tenant shall not be
entitled to interest on the Security Deposit. In no event or
circumstance shall Tenant have the right to any use of the Security
Deposit and, specifically, Tenant may not use the Security Deposit as a
credit or to otherwise offset any payments required hereunder, including,
but not limited to, Rent or any portion thereof.
5. TENANT IMPROVEMENTS
Tenant hereby agrees to accept the Premises on the Delivery Date as
suitable for Tenant's intended use and as being in good operating order,
condition and repair, "AS IS", except as specified in Exhibit B attached
hereto. Tenant shall design, install and construct the Tenant
Improvements (as such term is defined in Exhibit B hereto) in accordance
with the terms, conditions, criteria and provisions set forth in Exhibit
B. Landlord and Tenant hereby agree to and shall be bound by the terms,
conditions and provisions of Exhibit B. Tenant acknowledges and agrees
that neither Landlord nor any of Landlord's agents, representatives or
employees has made any representations as to the suitability, fitness or
condition of the Premises for the conduct of Tenant's business or for any
other purpose, including without limitation, any storage incidental
thereto. Any exception to the foregoing provisions must be made by
express written agreement by both parties.
6. ADDITIONAL RENT
It is intended by Landlord and Tenant that this Lease be a "triple net
lease." The costs and expenses described in this Section 6 and all other
sums, charges, costs and expenses specified in this Lease other than Base
Rent are to be paid by Tenant to Landlord as additional rent
(collectively, "Additional Rent").
6.1 Operating Expenses: In addition to the Base Rent set forth
in Section 3, Tenant shall pay Tenant's Share, which is specified in the
Basic Lease Information, of all Operating Expenses as Additional Rent.
The term "Operating Expenses" as used herein shall mean the total amounts
paid or payable by Landlord in connection with the ownership,
maintenance, repair and operation of the Premises and the Lot. These
Operating Expenses may include, but are not limited to:
6.1.1 Landlord's annual cost of insurance insuring against
fire and extended coverage (including, if Landlord elects, "all
risk" or "special purpose" coverage) and all other insurance,
including, but not limited to, earthquake coverage for the Building,
the Lot and, to the extent applicable, the Park, rental value
insurance against loss of Rent in an amount equal to the amount of
Rent for a period of at least six (6) months commencing on the date
of loss, and any deductible, all of the foregoing in accordance with
the provisions of Section 12.5 below;
6.1.2 Landlord's cost of: (i) modifications and/or new
improvements to the Premises required by any rules, laws or
regulations effective subsequent to the Delivery Date; (ii)
reasonably necessary replacement improvements to the Premises after
the Delivery Date, other than and excluding the replacement of the
items set forth in Section 11.3 hereof that are the sole
responsibility of Landlord; and (iii) new improvements to the
Premises, that reduce operating costs or improve life/safety
conditions, all as reasonably determined by Landlord, in its sole
discretion; provided, however, if any of the foregoing are in the
nature of capital improvements, then the cost of such capital
improvements shall be amortized on a straight-line basis over a
reasonable period, which shall be the estimated useful life of such
modifications, new improvements or replacement improvements in
question (at an interest rate as reasonably determined by
Landlord), and Tenant shall pay Tenant's Share of the monthly
amortized portion of such costs (including interest charges) as
part of the Operating Expenses herein;
6.1.3 Landlord's cost for the repairs and maintenance items
set forth in Section 11.2 below; and
6.1.4 Landlord's cost for the management and administration
of the Premises, including without limitation, a property
management fee, accounting, auditing, billing, salaries for
clerical and supervisory employees (whether located within the Park
or off-site) and all fees, licenses and permits related to the
ownership, operation and management of any portion of the Park in
an amount not to exceed one and one-half percent ( 1/2%) of the Base
Rent.
Notwithstanding anything in this Section 6.1 to the contrary, the
term "Operating Expense" shall not include any of the following and none
of the following items shall be payable in whole or in part by or in any
way charged to Tenant:
(i) Interest or penalties resulting from late payment
of any Operating Expense by Landlord due to Landlord's
negligence or willful misconduct (unless Landlord in good
faith disputes a charge and subsequently loses or settles that
dispute); provided, that Tenant timely pays Tenant's Share of
Operating Expenses and Tax Expenses to Landlord when due as
set forth herein;
(ii) Costs, fees, and compensation paid to Landlord, or
to Landlord's subsidiaries or affiliates, for services in or
to the Building to the extent that they exceed the charges for
comparable services rendered by an unaffiliated third party of
comparable skill, competence, stature, and reputation;
(iii) Costs associated with the investigation and/or
remediation of Hazardous Materials (hereinafter defined)
present in, on or about the Premises or the Park, unless such
costs and expenses are the responsibility of Tenant as
provided in Section 29 of this Lease, in which event such
costs and expenses shall be paid solely by Tenant in
accordance with the provisions of Section 29 of this Lease;
(iv) Any cost or expense which is actually reimbursed
to Landlord through insurance or otherwise;
(v) Costs attributable to seeking and obtaining new
tenants in the Park as well as retaining existing tenants in
the Park (other than Tenant), such as advertising, brokerage
commissions, architectural, engineering and attorneys' fees
and costs for renovations and improvements to buildings in the
Park other than the Premises;
(vi) Any items for which Landlord is actually
reimbursed by any other tenant of the Park;
(vii) Real estate brokers' leasing commissions;
(viii) Other than any interest charges for capital
improvements referred to in Section 6.1.2 hereinabove, any
interest or payments on any financing for the Building or the
Park, and any bad debt loss, rent loss or reserves for same;
(ix) Any costs, fines or penalties incurred solely and
directly resulting from actual violations by Landlord of any
governmental rule or authority for which Landlord is
responsible hereunder;
(x) Costs associated with the operation of the
business of the entity which constitutes Landlord or
Landlord's property manager, as the same are distinguished
from the cost of operation of the Building or the Park,
including partnership or corporate accounting and legal
matters, costs of defending any lawsuits with any mortgagee or
lender, costs of selling, syndicating, financing, mortgaging
or hypothecating any of Landlord's interest in the Park or the
Building, disputes of Landlord with the property management
company managing the Park, to the extent any of the
aforementioned costs are not, in any way, attributable to the
use being made of the Premises by Tenant and Tenant's
Representatives or otherwise attributable to the acts or
omissions of Tenant and/or any of Tenant's Representatives;
(xi) Overhead and profit paid to subsidiaries or
affiliates of Landlord for management services to the extent
that the cost of those items would not have been paid had the
services been provided by unaffiliated parties on a
competitive basis; and
(xii) Except for costs paid or payable by Landlord
with respect to insurance and taxes (including without
limitation, Tax Expenses), any amount paid or payable by
Landlord in connection with the ownership, maintenance, repair
and operation of the building (presently occupied by Duty Free
Shoppers), parking areas parking structure, pedestrian
walkways, and landscaping wholly situated on the portion of
the Lot which is not included within the Premises.
6.2 Tax Expenses: In addition to the Base Rent set forth in
Section 3, Tenant shall pay Tenant's Share of all real property taxes
applicable to the land and improvements included within the Lot on which
the Premises are situated and one hundred percent (100%) of all personal
property taxes now or hereafter assessed or levied against the Premises
or Tenant's personal property. Tenant shall also pay one hundred percent
(100%) of any increase in real property taxes attributable to any and all
alterations, Tenant Improvements or other improvements of any kind,
whatsoever placed in, on or about the Premises for the benefit of, at the
request of, or by Tenant. The term "Tax Expenses" shall mean and
include, without limitation, any form of tax and assessment (general,
special, supplemental, ordinary or extraordinary), commercial rental tax,
payments under any improvement bond or bonds, license fees, license tax,
business license fee, rental tax, transaction tax, levy, or penalty
imposed by authority having the direct or indirect power of tax
(including any city, county, state or federal government, or any school,
agricultural, lighting, drainage or other improvement district thereof)
as against any legal or equitable interest of Landlord in the Premises,
the Lot or the Park, as against Landlord's right to rent or as against
Landlord's business of leasing the Premises or the occupancy of Tenant or
any other tax, fee, or excise, however described, including, but not
limited to, any value added tax, or any tax imposed in substitution
(partially or totally) of any tax previously included within the
definition of real property taxes, or any additional tax the nature of
which was previously included within the definition of real property
taxes. The term "Tax Expenses" shall not include any franchise, estate,
gift, inheritance, net income, capital stock, or excess profits tax
imposed upon Landlord or any other tax which is applied or measured by
Landlord's general or net income (as opposed to rents or income
attributable to operations at the Park). Tax Expenses shall not include
any interest or late payment expense or penalty resulting from Landlord's
failure to pay the Tax Expenses in a timely manner unless such failure is
the direct result of Tenant's failure to pay its proportionate share
thereof within the times prescribed by this Lease.
6.3 Payment of Expenses: Landlord shall estimate Tenant's Share
of the Operating Expenses and Tax Expenses for the calendar year in which
the Lease commences. Commencing on the Commencement Date, one-twelfth
(1/12th) of this estimated amount shall be paid by Tenant to Landlord, as
Additional Rent, and thereafter on the first (1st) day of each month
throughout the remaining months of such calendar year. Thereafter,
Landlord may estimate such expenses as of the beginning of each calendar
year during the Term of this Lease and Tenant shall pay one-twelfth
(1/12th) of such estimated amount as Additional Rent hereunder on the
first (1st) day of each month during such calendar year and for each
ensuing calendar year throughout the Term of this Lease. Operating
Expenses for partial calendar years occurring at the beginning and the
end of the Lease Term shall be prorated on the basis of the number of
months in such partial calendar year. Tenant's obligation to pay
Tenant's Share of Operating Expenses and Tax Expenses shall survive the
expiration or earlier termination of this Lease.
6.4 Annual Reconciliation: By June 30th of each calendar year
Landlord shall furnish Tenant with an accounting of actual Operating
Expenses and Tax Expenses. Within thirty (30) days of Landlord's
delivery of such accounting, Tenant shall pay to Landlord the amount of
any underpayment. Notwithstanding the foregoing, failure by Landlord to
give such accounting by such date shall not constitute a waiver by
Landlord of its right to collect any of Tenant's underpayment at any
time. Landlord shall credit the amount of any overpayment by Tenant
toward the next estimated monthly installment(s) falling due, or where
the Term of the Lease has expired, refund the amount of overpayment to
Tenant. If the Term of the Lease expires prior to the annual
reconciliation of expenses Landlord shall have the right to reasonably
estimate Tenant's Share of such expenses, and if Landlord determines that
an underpayment is due, Tenant hereby agrees that Landlord shall be
entitled to deduct such underpayment from Tenant's Security Deposit. If
Landlord reasonably determines that an overpayment has been made by
Tenant, Landlord shall refund said overpayment to Tenant as soon as
practicable thereafter. Notwithstanding the foregoing, failure of
Landlord to accurately estimate Tenant's Share of such expenses or to
otherwise perform such reconciliation of expenses, including without
limitation, Landlord's failure to deduct any portion of any underpayment
from Tenant's Security Deposit, shall not constitute a waiver of
Landlord's right to collect any of Tenant's underpayment at any time
during the Term of the Lease or at any time after the expiration or
earlier termination of this Lease.
6.5 Audit: After delivery to Landlord of at least thirty (30)
days prior written notice, Tenant, at its sole cost and expense through
any accountant designated by it, shall have the right to examine and/or
audit the books and records evidencing such costs and expenses for the
previous one (1) calendar year, during Landlord's reasonable business
hours but not more frequently than once during any calendar year. Any
such accounting firm designated by Tenant may not be compensated on a
contingency fee basis. The results of any such audit (and any
negotiations between the parties related thereto) shall be maintained
strictly confidential by Tenant and its accounting firm and shall not be
disclosed, published or otherwise disseminated to any other party other
than to Landlord and its authorized agents or as required by law or in
connection with any actual or contemplated legal proceeding regarding
Operating Expenses or Tax Expenses. If it is determined (by agreement of
the parties, by an arbitrator, or by a final adjudicated judgment) that
the Operating Expenses and/or Tax Expenses charged Tenant for any
calendar year exceeded the actual amount hereof by more than six percent
(6%) Landlord shall, in addition to the refund or credit to Tenant of
such excess, reimburse Tenant for all third-party verified accounting
costs (but no other fees or costs) reasonably incurred by Tenant in
connection with the audit and recovery of amounts overpaid. Landlord and
Tenant shall use their best efforts to cooperate in such negotiations and
to promptly resolve any discrepancies between Landlord and Tenant in the
accounting of such costs and expenses.
7. UTILITIES
Prior to the Delivery Date, Tenant shall cause all of the Utility
Expenses (hereinafter defined) to be placed in Tenant's name with the
invoices sent directly to Tenant at the Premises. Tenant shall pay
directly to the appropriate utility company or similar entity the cost of
all water, sewer use, sewer discharge fees and sewer connection fees,
gas, heat, electricity, refuse pickup, janitorial service, telephone,
telecommunications and other utilities (collectively, the "Utility
Expenses") billed or metered separately to the Premises and/or Tenant
during the Term of the Lease and during the period of Tenant's occupancy
of the Premises prior to the Commencement Date. Tenant shall also pay
any and all assessments or charges for utility or similar purposes
included within any tax bill for the Lot on which the Building is
situated, including without limitation, entitlement fees, allocation unit
fees and/or any similar fees or charges. Upon Landlord's request, Tenant
shall promptly deliver to Landlord written evidence of Tenant's payment
of the Utility Expenses. Tenant acknowledges that the Premises may
become subject to the rationing of water or restrictions on water use as
required by a public utility company, governmental agency or other
similar entity having jurisdiction thereof. Notwithstanding any such
rationing or restrictions on use of any such water, Tenant acknowledges
and agrees that its tenancy and occupancy hereunder shall be subject to
such rationing restrictions as may be imposed upon Landlord, Tenant, the
Premises or the Park, and Tenant shall in no event be excused or relieved
from any covenant or obligation to be kept or performed by Tenant by
reason of any such rationing or restrictions. Tenant further agrees to
timely and faithfully pay, prior to delinquency, any amount, tax, charge,
surcharge, assessment or imposition levied, assessed or imposed upon the
Premises, or Tenant's use and occupancy thereof by a public utility
company, governmental agency, taxing authority or similar entity having
jurisdiction thereof.
8. LATE CHARGES
Any and all sums or charges set forth in this Section 8 are considered
part of Additional Rent. Tenant acknowledges that late payment (the
fifth day of each month or any time thereafter) by Tenant to Landlord of
Base Rent, Tenant's Share of Operating Expenses, Tax Expenses, or other
sums due hereunder, will cause Landlord to incur costs not contemplated
by this Lease, the exact amount of such costs being extremely difficult
and impracticable to fix. Such costs include, without limitation,
processing and accounting charges, and late charges that may be imposed
on Landlord by the terms of any note secured by any encumbrance against
the Premises, and late charges and penalties due to the late payment of
real property taxes on the Premises. Therefore, if any installment of
Rent or any other sum due from Tenant is not received by Landlord when
due, Tenant shall promptly pay to Landlord an additional sum equal to
five percent (5%) of such delinquent amount. If Tenant delivers to
Landlord a check for which there are not sufficient funds, Landlord may,
at its sole option, require Tenant to replace such check with a cashier's
check for the amount of such check and all other charges payable
hereunder. The parties agree that this late charge and the other charges
referenced above represent a fair and reasonable estimate of the costs
that Landlord will incur by reason of late payment by Tenant. Acceptance
of any late charge or other charges shall not constitute a waiver by
Landlord of Tenant's default with respect to the delinquent amount, nor
prevent Landlord from exercising any of the other rights and remedies
available to Landlord for any other breach of Tenant under this Lease.
9. USE OF PREMISES
9.1 Compliance with Laws, Recorded Matters, and Rules and
Regulations: The Premises are to be used solely for the purposes and
uses specified in the Basic Lease Information and for no other uses or
purposes without Landlord's prior written consent, which consent shall
not be unreasonably withheld or delayed so long as the proposed use (i)
does not involve the use of Hazardous Materials other than as expressly
permitted under the provisions of Section 29 below, (ii) does not require
any additional parking in excess of the parking spaces already provided
to Tenant pursuant to the provisions of Section 24 of this Lease, and
(iii) is compatible and consistent with the other uses then being made in
the Park and in other similar types of buildings in the vicinity of the
Park, as reasonably determined by Landlord. The use of the Premises by
Tenant and its employees, representatives, agents, invitees, licensees,
subtenants, customers or contractors (collectively, "Tenant's
Representatives") shall be subject to, and at all times in compliance
with, (a) any and all applicable laws, ordinances, statutes, orders and
regulations as same exist from time to time (collectively, the "Laws"),
(b) any and all documents, matters or instruments, including without
limitation, any declarations of covenants, conditions and restrictions,
and any supplements thereto, each of which has been or hereafter is
recorded in any official or public records with respect to the Premises,
the Lot and/or the Park, or any portion thereof (collectively, the
"Recorded Matters"), and (c) any and all rules and regulations set forth
in Exhibit C, attached to and made a part of this Lease, and any other
reasonable rules and regulations promulgated by Landlord now or hereafter
enacted relating to parking and the operation of the Premises and the
Park (collectively, the "Rules and Regulations"). Tenant agrees to, and
does hereby, assume full and complete responsibility to ensure that the
Premises are adequate to fully meet the needs and requirements of
Tenant's intended operations of its business within the Premises, and
Tenant's use of the Premises and that same are in compliance with all
applicable Laws throughout the Term of this Lease. Additionally, Tenant
shall be solely responsible for the payment of all costs, fees and
expenses associated with any modifications, improvements or alterations
to the Premises, the Common Areas and/or the Park occasioned by the
enactment of, or changes to, any Laws arising from Tenant's particular
use of the Premises or alterations, improvements or additions made to the
Premises by or on behalf of Tenant regardless of when such Laws became
effective.
9.2 Prohibition on Use: Tenant shall not use the Premises or
permit anything to be done in or about the Premises nor keep or bring
anything therein which will in any way conflict with any of the
requirements of the Board of Fire Underwriters or similar body now or
hereafter constituted or in any way increase the existing rate of or
affect any policy of fire or other insurance upon the Building or any of
its contents, or cause a cancellation of any insurance policy. No
auctions may be held or otherwise conducted in, on or about the Premises,
the Lot or the Park without Landlord's written consent thereto, which
consent may be given or withheld in Landlord's sole discretion. Tenant
shall not do or permit anything to be done in or about the Premises which
will in any way obstruct or interfere with the rights of Landlord, other
tenants or occupants of other buildings in the Park, or other persons or
businesses in the area, or injure or annoy other tenants or use or allow
the Premises to be used for any unlawful or purpose, nor shall Tenant
cause, maintain or permit any private or public nuisance in, on or about
the Premises, Park and/or the Common Areas, including, but not limited
to, any offensive odors, noises, fumes or vibrations. Tenant shall not
damage or deface or otherwise commit or suffer to be committed any waste
in, upon or about the Premises. Tenant shall not place or store, nor
permit any other person or entity to place or store, any property,
equipment, materials, supplies, personal property or any other items or
goods outside of the Premises for any period of time. Tenant shall not
permit any animals, including, but not limited to, any household pets, to
be brought or kept in or about the Premises. Tenant shall place no loads
upon the floors, walls, or ceilings in excess of the maximum designed
load permitted by the applicable Uniform Building Code or which may
damage the Building or outside areas; nor place any harmful liquids in
the drainage systems; nor dump or store waste materials, refuse or other
such materials, or allow such to remain outside the Building area, except
for any non-hazardous or non-harmful materials which may be stored in
refuse dumpsters or in any enclosed trash areas provided
10. ALTERATIONS AND ADDITIONS; AND SURRENDER OF PREMISES
10.1 Alterations and Additions: Tenant shall be permitted to
install and construct in and about the Premises the Tenant Improvements
subject to, and in accordance with, the provisions of Exhibit B hereto.
Except for the Tenant Improvements as aforesaid, Tenant shall not install
any signs, fixtures, improvements, nor make or permit any other
alterations or additions to the Premises without the prior written
consent of Landlord which consent shall not be unreasonably withheld or
delayed; provided, however, in no event may Tenant expand the Premises or
make any penetrations to the roof which will affect the structural
integrity of the Building without first obtaining Landlord's prior
written consent, which consent may be given or withheld in Landlord's
sole discretion. Notwithstanding the foregoing, Tenant shall be
permitted to make, at its sole cost and expense, non-structural
alterations and additions to the Premises and roof penetrations which do
not affect the structural integrity of the Building without obtaining
Landlord's prior written consent, provided the cost of same does not
exceed $150,000 (exclusive of the cost of any equipment, personal
property or trade fixtures) in the aggregate during a calendar year (the
"Permitted Improvements"). Tenant, however, shall first notify Landlord
of such alterations or additions so that Landlord may post a Notice of
Non-Responsibility on the Premises. Within fifteen (15) business days of
Landlord's receipt of Tenant's written notice of any item comprising the
Permitted Improvements, Landlord shall notify Tenant, in writing, whether
or not Landlord will require Tenant to remove such item from the Premises
upon the expiration or earlier termination of this Lease. If any such
alteration or addition is expressly permitted by Landlord or otherwise
under the provisions of this Lease, Tenant shall deliver at least fifteen
(15) days prior notice to Landlord, from the date Tenant intends to
commence construction, sufficient to enable Landlord to post a Notice of
Non-Responsibility. At the time Landlord notifies Tenant of its approval
or disapproval of any such request, Landlord shall advise Tenant in
writing of those fixtures (other than trade fixtures and the Tenant's
Property which property shall be, and remain, owned by Tenant and which
Tenant will remove from the Premises), improvements, alterations and
additions which Landlord will require Tenant to remove (including without
limitation, any items comprising the Tenant Improvements) upon the
expiration or earlier termination of the Lease. In the event Landlord
does not advise Tenant whether or not such fixture, improvement,
alteration or addition should be removed, Tenant shall deem such silence
to mean that such fixture, improvement, alteration and addition will be
required to be removed at the expiration or earlier termination of this
Lease. In all events, Tenant shall obtain all permits or other
governmental approvals prior to commencing any of such work and deliver a
copy of same to Landlord. All alterations and additions shall be
installed by a licensed contractor reasonably approved by Landlord, at
Tenant's sole expense, in compliance with all applicable Laws (including,
but not limited to, the ADA as defined herein), Recorded Matters, and
Rules and Regulations. Tenant shall keep the Premises and the property
on which the Building is situated free from any liens arising out of any
work performed, materials furnished or obligations incurred by or on
behalf of Tenant. For purposes hereof, alterations shall include, but
not be limited to, electric lines, feeders, risers, wiring and cables.
10.2 Surrender of Premises: Upon the termination of this Lease,
whether by forfeiture, lapse of time or otherwise, or upon the
termination of Tenant's right to possession of the Premises, Tenant will
at once surrender and deliver up the Premises to Landlord, together with
any attached fixtures [other than the Tenant's Property (defined below),
trade fixtures, and any furniture bolted for earthquake purposes which
shall be deemed to be not attached to the Premises], additions and
improvements which Tenant is not to remove pursuant to the provisions of
Section 10.1 hereof, in good condition and repair (including, but not
limited to, replacing all light bulbs and ballasts not in good working
condition) and, notwithstanding anything to the contrary contained
herein, unless otherwise notified by Landlord in writing in accordance
with the provisions hereof, in the condition in which the Premises
existed as of the Lease Date, except for reasonable wear and tear.
Reasonable wear and tear shall not include any damage or deterioration to
the floors of the Premises arising from the use of forklifts in, on or
about the Premises (including, without limitation, any marks or stains of
any portion of the floors), and any damage or deterioration that would
have been prevented by proper maintenance by Tenant or Tenant otherwise
timely performing all of its obligations under this Lease. Upon such
termination of this Lease, Tenant shall remove the Permitted Improvements
(to the extent Landlord has notified Tenant in writing, at the time set
forth in Section 10.1, that it will require such removal, or it is deemed
to be required to be removed), the Tenant's Property, all tenant signage,
trade fixtures, non-attached fixtures, furniture, furnishings, personal
property and, if Landlord has notified Tenant, in writing, that it will
require such removal (or it is deemed to be required to be removed) such
attached fixtures (other than trade fixtures), additions or improvements
installed by, or on behalf of Tenant (including without limitation, any
items comprising the Tenant Improvements) or situated in or about the
Premises. Tenant shall repair any and all damage caused by the
installation or removal of such signs, trade fixtures, furniture,
furnishings, fixtures, additions and improvements which are to be removed
from the Premises by Tenant hereunder. In addition to the foregoing,
certain equipment of Tenant used in, on or about the Premises is listed
in Exhibit I, attached hereto and made a part hereof (collectively, the
"Tenant's Property"). Notwithstanding anything to the contrary contained
herein, at the expiration or earlier termination of this Lease Tenant
shall remove from the Premises the Tenant's Property. Tenant shall
ensure that the removal of such items and the repair and restoration of
the Premises will be completed prior to such expiration or earlier
termination of this Lease.
11. REPAIRS AND MAINTENANCE
11.1 Tenant's Repairs and Maintenance Obligations: Except for
those portions of the Building to be maintained by Landlord, as provided
in Sections 11.2 and 11.3 below, Tenant shall, at Tenant's sole cost and
expense, keep and maintain the entirety of the Premises in good, clean
and safe condition and repair to the reasonable satisfaction of Landlord
including, but not limited to, repairing any damage caused by Tenant or
any of Tenant's Representatives and replacing any property so damaged by
Tenant or any of Tenant's Representatives, sweeping and otherwise
maintaining the parking lot, and maintaining and replacing the
landscaping. Without limiting the generality of the foregoing, Tenant
shall be solely responsible for maintaining, repairing and replacing (a)
all mechanical systems, heating, ventilation and air conditioning systems
exclusively serving the Premises, including without limitation,
Landlord's existing HVAC unit, (b) all plumbing, electrical wiring and
equipment serving the Premises, (c) all interior lighting (including,
without limitation, light bulbs and/or ballasts) and exterior lighting
serving the Premises or adjacent to the Premises, (d) all glass, windows,
window frames, window casements, skylights, interior and exterior doors,
door frames and door closers, (e) all roll-up doors, ramps and dock
equipment, including without limitation, dock bumpers, dock plates, dock
seals, dock levelers and dock lights, (f) all tenant signage, (g) lifts
for disabled persons serving the Premises, (h) sprinkler systems, fire
protection systems and security systems, (i) all partitions, fixtures,
equipment, interior painting, and interior walls and floors of the
Premises and every part thereof (including, without limitation, any
demising walls contiguous to any portion of the Premises), (j) the roof
and the roof membrane, including without limitation, the structural
portions of the roof, (k) all fencing and gates for any fencing, (l) the
parking lot within the Premises, including without limitation, slurry
sealing and/or striping of said parking lot (but not more often than once
every five (5) years); and (m) the exterior walls of the Building.
Notwithstanding the foregoing, if Landlord's HVAC unit needs to be
replaced due to normal wear and tear during the Term, or if the roof
needs to be replaced during either of the Extended Terms due to normal
wear and tear (and such replacements are not in any manner required due
to Tenant's failure to properly use, repair and maintain said items or
damage to such items caused by Tenant or any of Tenant's
Representatives), then Landlord shall be responsible for making such
replacements. The replacement costs for such items shall be amortized at
the interest rate which is the lesser of twelve percent (12%) per annum
or the maximum rate of interest permitted by law. Such amortization
shall be based upon the useful life of such replacement items as
reasonably determined by Landlord. If any such replacements are made,
Tenant shall pay all such amortized amounts (including all interest
charges) to Landlord monthly, as Additional Rent for each month during
the balance of the applicable term of this Lease after such replacement
is made until the earlier of (A) the expiration or earlier termination of
the Lease, or (B) the end of the applicable amortization period.
11.2 Reimbursable Repairs and Maintenance Obligations: Subject to
the provisions of Sections 6 and 9 of this Lease and except for (i) the
obligations of Tenant set forth in Section 11.1 above, (ii) the
obligations of Landlord set forth in Section 11.3 below, and (iii) the
repairs rendered necessary by the intentional or negligent acts or
omissions of Tenant or any of Tenant's Representatives, Landlord agrees,
at Landlord's expense, subject to reimbursement pursuant to Section 6
above, to keep in good repair the plumbing and mechanical systems
exterior to the Building, signage (exclusive of tenant signage), and
exterior electrical wiring and equipment, exterior lighting, exterior
glass, exterior doors/entrances and door closers, exterior window
casements, exterior painting of the Building, and underground utility and
sewer pipes outside the exterior walls of the Building. Tenant shall
procure and maintain the heating, ventilation and air conditioning
systems preventative maintenance and repair contract(s); such contracts
as same are made with respect to Landlord's heating, ventilating and air
conditioning equipment shall be on a minimum of a quarterly basis and
shall name Landlord as a third-party beneficiary thereof. Tenant will
promptly deliver to Landlord a true and complete copy of each such
contract and any and all renewals or extensions thereof, and each service
report or other summary received by Tenant pursuant to or in connection
with such contract(s).
11.3 Landlord's Repairs and Maintenance Obligations: Except for
repairs rendered necessary by the intentional or negligent acts or
omissions of Tenant or any of Tenant's Representatives, Landlord agrees,
at Landlord's sole cost and expense, to keep in good repair the
structural portions of the floors (to the extent not altered by any
improvements made thereto by Tenant) and foundations.
11.4 Tenant's Failure to Perform Repairs and Maintenance
Obligations: Notwithstanding the foregoing, if Tenant refuses or
neglects to timely repair, maintain and replace the Premises as required
herein and to the reasonable satisfaction of Landlord, Landlord may, but
without obligation to do so, at any time make such repairs, maintenance
and replacements without (i) Landlord having any liability to Tenant for
any loss or damage that may accrue to Tenant's merchandise, fixtures or
other property, or to Tenant's business by reason thereof, except to the
extent any damage is caused by the willful misconduct or negligent acts
of Landlord or its authorized agents and representatives; and (ii) being
required to provide any additional cure period to Tenant except as
expressly set forth in Section 20.3 hereof. In the event Landlord makes
such repairs, maintenance and replacements, upon completion thereof
Tenant shall pay to Landlord, as additional rent, the Landlord's costs
for making such repairs, maintenance and replacements. The obligations
of Tenant hereunder shall survive the expiration of the Term of this
Lease or the earlier termination thereof. Tenant hereby waives any right
to repair at the expense of Landlord under any applicable Laws now or
hereafter in effect respecting the Premises.
12. INSURANCE
12.1 Types of Insurance: Tenant shall maintain in full force and
effect at all times during the Term of this Lease, at Tenant's sole cost
and expense, for the protection of Tenant and Landlord, as their
interests may appear, policies of insurance issued by a carrier or
carriers reasonably acceptable to Landlord and its lender(s) which afford
the following coverages: (i) worker's compensation: statutory limits;
(ii) employer's liability, as required by law, with a minimum limit of
$100,000 per employee and $500,000 per occurrence; (iii) commercial
general liability insurance (occurrence form) providing coverage against
any and all claims for bodily injury and property damage occurring in, on
or about the Premises arising out of Tenant's and Tenant's
Representatives' use and/or occupancy of the Premises. Such insurance
shall include coverage for blanket contractual liability, legal
liability, fire damage, premises, personal injury, completed operations,
products liability and personal and advertising. Such insurance shall
have a combined single limit of not less than One Million Dollars
($1,000,000) per occurrence with a Two Million Dollar ($2,000,000)
aggregate limit and excess/umbrella insurance in the amount of Two
Million Dollars ($2,000,000). If Tenant has other locations which it
owns or leases, the policy shall include an aggregate limit per location
endorsement. If necessary, as reasonably determined by Landlord, Tenant
shall provide for restoration of the aggregate limit; (iv) comprehensive
automobile liability insurance: a combined single limit of not less than
$2,000,000 per occurrence and insuring Tenant against liability for
claims arising out of the ownership, maintenance, or use of any owned,
hired or non-owned automobiles; (v) "all risk" or "special purpose"
property insurance, including without limitation, sprinkler leakage,
boiler and machinery comprehensive form, if applicable, covering damage
to or loss of any of Tenant's personal property, trade fixtures,
inventory, fixtures and equipment located in, on or about the Premises,
and in addition, coverage for business interruption of Tenant. Such "all
risk" or "special purpose" property insurance shall be written on a
replacement cost basis (without deduction for depreciation) in an amount
equal to at least one hundred percent (100%) of the full replacement
value of the items; and (vi) such other insurance or higher limits of
liability as is then customarily required to be carried for similar types
of buildings within the general vicinity of the Park or as may be
reasonably required by any of Landlord's lenders.
12.2 Insurance Policies: Insurance required to be maintained by
Tenant shall be written by companies (i) licensed to do business in the
State of California, (ii) domiciled in the United States of America, and
(iii) having a "General Policyholders Rating" of at least A:X (or such
higher rating as may be required by a lender having a lien on the
Premises) as set forth in the most current issue of "A.M. Best's Rating
Guides." Any deductible amounts under any of the insurance policies
required hereunder shall not exceed Ten Thousand Dollars ($10,000).
Tenant shall deliver to Landlord certificates of insurance and true and
complete copies of any and all endorsements required herein for all
insurance required to be maintained by Tenant hereunder at the time of
execution of this Lease by Tenant. Tenant shall, at least thirty (30)
days prior to expiration of each policy, furnish Landlord with
certificates of renewal or "binders" thereof. Each certificate shall
expressly provide that such policies shall not be cancelable or otherwise
subject to modification except after thirty (30) days prior written
notice to the parties named as additional insureds as required in this
Lease (except for cancellation for nonpayment of premium, in which event
cancellation shall not take effect until at least ten (10) days' notice
has been given to Landlord). Tenant shall have the right to provide
insurance coverage which it is obligated to carry pursuant to the terms
of this Lease under a blanket insurance policy, provided such blanket
policy expressly affords coverage for the Premises and for Landlord as
required by this Lease.
12.3 Additional Insureds and Coverage: Landlord, any property
management company and/or agent of Landlord for the Premises, the Lot or
the Park, and any lender(s) of Landlord having a lien against the
Premises, the Lot or the Park shall be named as additional insureds under
all of the policies required in Section 12.1(iii) above. Additionally,
such policies shall provide for severability of interest. All insurance
to be maintained by Tenant shall, except for workers' compensation and
employer's liability insurance, be primary, without right of contribution
from insurance maintained by Landlord. Any umbrella/excess liability
policy (which shall be in "following form") shall provide that if the
underlying aggregate is exhausted, the excess coverage will drop down as
primary insurance. The limits of insurance maintained by Tenant shall
not limit Tenant's liability under this Lease. It is the parties'
intention that the insurance to be procured and maintained by Tenant as
required herein shall provide coverage for any and all damage or injury
arising from or related to Tenant's operations of its business and/or
Tenant's or Tenant's Representatives' use of the Premises and/or any of
the areas within the Park, whether such events occur within the Premises
(as described in Exhibit A-1 hereto) or in any other areas of the Park.
It is not contemplated or anticipated by the parties that the
aforementioned risks of loss be borne by Landlord's insurance carriers,
rather it is contemplated and anticipated by Landlord and Tenant that
such risks of loss be borne by Tenant's insurance carriers pursuant to
the insurance policies procured and maintained by Tenant as required
herein.
12.4 Failure of Tenant to Purchase and Maintain Insurance: In the
event Tenant does not purchase the insurance required in this Lease or
keep the same in full force and effect throughout the Term of this Lease
(including any renewals or extensions), Landlord may, but without
obligation to do so, purchase the necessary insurance and pay the
premiums therefor. If Landlord so elects to purchase such insurance,
Tenant shall promptly pay to Landlord as Additional Rent, the amount so
paid by Landlord, upon Landlord's demand therefor. In addition, Landlord
may recover from Tenant and Tenant agrees to pay, as Additional Rent and
damages which Landlord may sustain by reason of Tenant's failure to
obtain and maintain such insurance. If Tenant fails to maintain any
insurance required in this Lease, Tenant shall be liable for all losses,
damages and costs resulting from such failure.
12.5 Landlord's Insurance: Landlord shall maintain in full force
and effect during the Term of this Lease, subject to reimbursement as
provided in Section 6, policies of insurance which afford such coverages
as are commercially reasonable and as is consistent with other properties
in Landlord's portfolio. Landlord shall also procure such additional
insurance coverage as Tenant shall reasonably request Landlord to obtain;
provided, however, notwithstanding anything to the contrary contained
herein, Tenant shall pay, and shall be solely responsible for, any and
all costs, premiums and expenses of any such additional insurance, as
Additional Rent, and Tenant shall pay same to Landlord within ten (10)
days of Landlord's demand therefor. Landlord shall obtain and keep in
force during the Term of this Lease, as an item of Operating Expenses, a
policy or policies in the name of Landlord, with loss payable to Landlord
and to the holders of any mortgages, deeds of trust or ground leases on
the Premises ("Lender(s)"), insuring loss or damage to the Building,
including all improvements, fixtures (other than trade fixtures) and
permanent additions. However, all alterations, additions and
improvements made to the Premises by Tenant (other than the Tenant
Improvements) shall be insured by Tenant rather than by Landlord. The
amount of such insurance procured by Landlord shall be equal to one
hundred percent (100%) of the full replacement cost of the Building
(excluding the cost of excavation and installation of footings),
including all improvements and permanent additions as the same shall
exist from time to time, or the amount required by Lenders. At
Landlord's option, such policy or policies shall insure against all risks
of direct physical loss or damage (including, without limitation, the
perils of earthquake), including coverage for any additional costs
resulting from debris removal and reasonable amounts of coverage for the
enforcement of any ordinance or law regulating the reconstruction or
replacement of any undamaged sections of the Building required to be
demolished or removed by reason of the enforcement of any building,
zoning, safety or land use laws as the result of a covered cause of loss.
If any such insurance coverage procured by Landlord has a deductible
clause, the deductible shall not exceed commercially reasonable amounts,
and in the event of any casualty, the amount of such deductible shall be
an item of Operating Expenses as so limited. Notwithstanding anything to
the contrary contained herein, to the extent the cost of maintaining
insurance with respect to the Building and/or any other buildings within
the Park is increased as a result of Tenant's acts, omissions,
alterations, improvements (including without limitation, the Tenant
Improvements), use or occupancy of the Premises, Tenant shall pay one
hundred percent (100%) of, and for, such increase(s) as Additional Rent.
13. WAIVER OF SUBROGATION
Landlord and Tenant hereby mutually waive their respective rights of
recovery against each other for any loss of, or damage to, either
parties' property to the extent that such loss or damage is insured by an
insurance policy required to be in effect at the time of such loss or
damage. Each party shall obtain any special endorsements, if required by
its insurer whereby the insurer waives its rights of subrogation against
the other party. This provision is intended to waive fully, and for the
benefit of the parties hereto, any rights and/or claims which might give
rise to a right of subrogation in favor of any insurance carrier. The
coverage obtained by Tenant pursuant to Section 12 of this Lease shall
include, without limitation, a waiver of subrogation endorsement attached
to the certificate of insurance. The provisions of this Section 13 shall
not apply in those instances in which such waiver of subrogation would
invalidate such insurance coverage or would cause either party's
insurance coverage to be voided or otherwise uncollectible.
14. LIMITATION OF LIABILITY AND INDEMNITY
Except to the extent of damage resulting from the active negligence or
willful misconduct of Landlord or its agents, employees, representatives
or contractors (collectively, the "Landlord's Representatives"), Tenant
agrees to protect, defend (with counsel reasonably acceptable to
Landlord) and hold Landlord and Landlord's lenders, partners, members,
property management company (if other than Landlord), agents, directors,
officers, employees, representatives, contractors, successors and assigns
(collectively, the "Indemnitees") harmless and indemnify the Indemnitees
from and against all liabilities, damages, claims, losses, judgments,
charges and expenses (including reasonable attorneys' fees, costs of
court and expenses necessary in the prosecution or defense of any
litigation including the enforcement of this provision) arising from or
in any way related to, directly or indirectly, (i) Tenant's or Tenant's
Representatives' use of the Premises and/or the Park, (ii) the conduct of
Tenant's business, (iii) from any activity, work or thing done, permitted
or suffered by Tenant in or about the Premises, (iv) any liability for
injury to person or property of Tenant, Tenant's Representatives, or
third party persons, and/or (v) Tenant's failure to perform any covenant
or obligation of Tenant under this Lease. Tenant agrees that the
obligations of Tenant herein shall survive the expiration or earlier
termination of this Lease.
Except to the extent of damage resulting from the active negligence
or willful misconduct of Landlord or Landlord's Representatives, to the
fullest extent permitted by law, Tenant agrees that neither Landlord nor
any of Landlord's lender(s), partners, members, or any of Landlord's
Representatives shall at any time or to any extent whatsoever be liable,
responsible or in any way accountable for any loss, liability, injury,
death or damage to persons or property which at any time may be suffered
or sustained by Tenant, including, but not limited to, any acts, errors or
omissions by or on behalf of any other tenants or occupants of the Park.
Tenant shall not, in any event or circumstance, be permitted to offset or
otherwise credit against any payments of Rent required herein for matters
for which Landlord may be liable hereunder. Landlord and its authorized
representatives shall not be liable for any interference with light or
air, or for any latent defect in the Premises.
15. ASSIGNMENT AND SUBLEASING
15.1 Prohibition: Tenant shall not assign, mortgage, hypothecate,
encumber, grant any license or concession, pledge or otherwise transfer
this Lease (collectively, "assignment"), in whole or in part, whether
voluntarily or involuntarily or by operation of law, nor sublet or permit
occupancy by any person other than Tenant of all or any portion of the
Premises without in each instance first obtaining the prior written
consent of Landlord, which consent shall not be unreasonably withheld or
delayed, but which shall be subject to the provisions of this Section 15.
Tenant hereby agrees that Landlord may withhold its consent to any
proposed sublease or assignment if at the time of Tenant's request for
Landlord's consent to any proposed assignee or subtenant (i) Tenant is in
default of its obligations under this Lease beyond applicable notice and
cure periods, or (ii) the use to be made of the Premises by the proposed
assignee or subtenant differs from the uses permitted under this Lease.
Tenant further agrees that Landlord may withhold its consent to any
proposed sublease or assignment if the proposed subtenant or assignee or
its business is subject to compliance with additional requirements of the
ADA (defined below) for which Landlord would be responsible hereunder
and/or Environmental Laws (defined below) beyond those requirements which
are applicable to Tenant, unless the proposed subtenant or assignee shall
(a) first deliver plans and specifications for complying with such
additional ADA requirements and/or Environmental Laws and obtain
Landlord's written consent thereto, and (b) comply with all Landlord's
reasonable conditions for or contained in such consent, including without
limitation, requirements for security to assure the lien-free completion
of such improvements. No consent to any assignment or sublease shall
constitute a waiver of the provisions of this Section 15, and all
subsequent assignments or subleases may be made only with the prior
written consent of Landlord, which consent shall not be unreasonably
withheld or delayed, but which shall be subject to the provisions of this
Section 15.
15.2 Request for Consent: Except as otherwise provided below and
in Section 15.6, if Tenant seeks to sublet or assign all or any portion
of the Premises, Tenant shall deliver to Landlord at least twenty (20)
days prior to the proposed commencement of the sublease or assignment
(the "Proposed Effective Date") the following information and documents
(the "Tenant's Notice"): (i) the name, address and nature of the business
of the proposed assignee or subtenant; (ii) such information as to such
assignee's or subtenant's financial responsibility and condition as
Landlord may reasonably require (including without limitation, audited
financial statements for no more than the three (3) most recent
consecutive fiscal years) to enable Landlord to determine its financial
condition; (iii) the aforementioned plans and specifications, if any;
(iv) the Proposed Effective Date of such proposed assignment or sublease;
and (v) the proposed form of sublease or assignment agreement (as
applicable), and such instrument shall include a provision whereby the
assignee or sublessee assumes all of Tenant's obligations hereunder and
agrees to be bound by the terms hereof. Tenant shall give Landlord the
Tenant's Notice by registered or certified mail addressed to Landlord at
Landlord's Address. Within ten (10) business days after Landlord's
receipt of the Tenant's Notice (the "Landlord Response Period") Landlord
shall notify Tenant, in writing, of its determination with respect to
such requested proposed assignment or sublease and the election to
recapture as set forth in Section 15.3 below. If Landlord does not elect
to recapture pursuant to the provisions of Section 15.3 hereof and
Landlord does consent to the requested proposed assignment or sublease,
Tenant may thereafter assign its interests in and to this Lease or
sublease all or a portion of the Premises to the same party and on the
same terms as set forth in the Tenant's Notice. Within said Landlord
Response Period, in addition to the other provisions hereof, Landlord
shall have the right to withhold consent to the proposed assignment or
sublease (a) if the proposed use is prohibited by the provisions of this
Lease, and in particular, the provisions of Section 9 hereof, (b) the
proposed assignee's financial condition, in the reasonable judgment of
Landlord, is not reasonably adequate and sufficient in relation to the
then remaining obligations of Tenant under this Lease, or (c) if Tenant
publicly offers or advertises to assign or sublet at a rate that is below
the then current market rate being charged for space of similar nature
and size by landlords of comparable buildings in the Los Angeles market.
Each permitted assignee or sublessee shall assume and be deemed to
assume this Lease and shall be and remain liable jointly and severally
with Tenant for payment of Rent and for the performance of, and
compliance with, all the terms, covenants, conditions and agreements
herein contained on Tenant's part to be performed or complied with, for
the Term of this Lease. No assignment or subletting shall affect the
continuing primary liability of Tenant (which, following assignment,
shall be joint and several with the assignee), and Tenant shall not be
released from performing any of the terms, covenants and conditions of
this Lease. An assignee of Tenant shall become directly liable to
Landlord for all obligations of Tenant hereunder, but no sublease or
assignment by Tenant shall relieve Tenant of any liability under this
Lease. Except as otherwise expressly set forth in Section 15.6 below,
for purposes hereof, in the event Tenant is a corporation, partnership,
joint venture, trust or other entity other than a natural person, any
change in the direct or indirect ownership of Tenant (other than pursuant
to one or more publicly traded transfers of common stock) which results
in a change of more than fifty percent (50%) in the direct or indirect
ownership of Tenant shall be deemed to be an assignment within the
meaning of this Section 15 and shall be subject to all the provisions
hereof. Any and all options, first rights of refusal, tenant improvement
allowances and other similar rights granted to Tenant in this Lease, if
any, shall not be assignable by Tenant (except for a permissible
assignment to a Related Entity) unless expressly authorized in writing by
Landlord. As Additional Rent hereunder, Tenant shall pay to Landlord,
within thirty (30) days of Landlord's written demand therefor, a fee in
the amount of five hundred dollars ($500) plus Tenant shall reimburse
Landlord for actual legal and other expenses incurred by Landlord in
connection with any actual or proposed assignment or subletting.
Notwithstanding anything to the contrary contained herein, if Tenant
properly exercises the Expansion Option and leases the Expansion
Premises, then during the first two (2) years of the initial term of the
Lease for said Expansion Premises (the "EP Tolling Period") if Tenant
permissibly subleases portions of the Expansion Premises (an "EP
Sublease"), (A) Tenant shall not be required to pay to Landlord any
portion of the Bonus Rent paid during the EP Tolling Period, and (B)
Landlord shall not have the right to recapture the space subject to the
EP Sublease during the EP Tolling Period.
15.3 Recapture: Except for an assignment to a Related Entity in
accordance with the provisions of Section 15.6 of this Lease and except
for an EP Sublease during the EP Tolling Period pursuant to the
provisions of Section 15.2 hereof, in the event the sublease or
assignment (i) by itself or taken together with prior sublease(s) or
partial assignment(s) covers or totals, as the case may be, more than
thirty-five percent (35%) of the rentable square feet of the Building or
(ii) is for a term which by itself or taken together with then existing
or pending subleases or partial assignments is greater than fifty percent
(50%) of the period remaining in the Term of this Lease as of the time of
the Proposed Effective Date, then Landlord shall have the right, to be
exercised by giving written notice to Tenant within Landlord's Response
Period, to recapture the space described in the sublease or assignment.
If such recapture notice is given, it shall serve to terminate this Lease
with respect to the proposed sublease or assignment space, or, if the
proposed sublease or assignment space covers all the Premises, it shall
serve to terminate the entire Term of this Lease in either case, as of
the Proposed Effective Date. However, no termination of this Lease with
respect to part or all of the Premises shall become effective without the
prior written consent, where necessary, of the holder of each deed of
trust encumbering the Premises or any part thereof. If this Lease is
terminated pursuant to the foregoing with respect to less than the entire
Premises, the Rent shall be adjusted on the basis of the proportion of
square feet retained by Tenant to the square feet originally demised and
this Lease as so amended shall continue thereafter in full force and
effect. Notwithstanding the foregoing or anything to the contrary
contained in Section 15.4 hereof, Landlord shall not have the right to
recapture the proposed sublease or assignment space if the proposed
sublease or assignment is to an entity or party not considered to be a
Related Entity under this Lease so long as Landlord is paid one hundred
percent (100%) of the Bonus Rent (hereinafter defined) by Tenant, as
Additional Rent, at the same time as the monthly installments of Rent are
payable hereunder.
15.4 Excess Sublease Rental or Assignment Consideration: Subject
to the provisions of Sections 15.2 and 15.3 hereof, in the event of any
sublease or assignment of more than thirty-five percent (35%) of the
Premises (in the aggregate) to an entity which is not a Related Entity
where the rent or other consideration provided for or with respect to the
sublease(s) or assignment(s) either initially or over the term of the
sublease(s) or assignment(s) exceeds the Rent or pro rata portion of the
Rent, as the case may be, for such space(s) reserved in the Lease, Tenant
shall pay the Landlord monthly, as Additional Rent, at the same time as
the monthly installments of Rent are payable hereunder, fifty percent
(50%) of the excess of each such payment of rent or other consideration
in excess of the Rent called for hereunder after deducting Tenant's
actual but reasonable costs of subletting, including, but not limited to,
advertising and then customary brokerage commissions and tenant
improvement costs incurred with respect to such sublease(s) or
assignment(s) (the "Bonus Rent").
15.5 Waiver: Notwithstanding any assignment or sublease, or any
indulgences, waivers or extensions of time granted by Landlord to any
assignee or sublessee, or failure by Landlord to take action against any
assignee or sublessee, Tenant agrees that Landlord may, at its option,
proceed against Tenant without having taken action against or joined such
assignee or sublessee, except that Tenant shall have the benefit of any
indulgences, waivers and extensions of time granted to any such assignee
or sublessee.
15.6 Related Entity Exception: Notwithstanding anything to the
contrary contained in this Section 15 and so long as Tenant (a) is not in
default of any of its obligations under this Lease beyond any applicable
notice and cure periods, and (b) complies with all of the requirements of
this Section 15.6, Tenant shall not be required to obtain Landlord's
prior written consent in any of the following instances:
(i) to any assignment or sublease to any franchisee, customer in
the ordinary course of business, joint venture partner or any entity
controlled or under common control with Tenant or to a parent or
wholly-owned subsidiary of Tenant (as such terms may be defined in
Rule 12b-2 of the Securities Exchange Act of 1934, as amended or
supplemented from time to time), and in the case of a sublease, each
subtenant's use of said subleased space conforms to the provisions
of this Lease, and in particular, Section 9 hereof; and
(ii) to any assignment to Tenant's successor in interest by
merger, consolidation, or acquisition of substantially all of
Tenant's assets.
Tenant shall deliver to Landlord a photocopy of the assignment or
sublease on or about the effective date thereof. The assignee or
subtenant shall use the Premises in accordance with the uses permitted
herein, and in particular, under Section 9 hereof, and shall be subject
to all other terms, covenants and provisions of this Lease. As a
condition precedent to any assignment or sublease made under this Section
15.6, Tenant shall give Landlord at least ten (10) business days' written
notice of its intention to assign this Lease or to sublet all or any
portion of the Premises, which notice shall include: (A) notice that
Tenant intends to assign or sublease under Section 15.6 of the Lease; (B)
the terms and conditions of the assignment or sublease, including without
limitation, the identity of said assignee or subtenant; and (C)
sufficient financial information to enable Landlord to determine whether
or not the assignee or Tenant's successor in interest has satisfied the
financial criterion set forth in subsection (ii) above. No assignment or
subletting under or pursuant to the provisions of this Section 15.6 shall
affect the continuing primary liability of Tenant (which, following
assignment, shall be joint and several with the assignee) throughout the
Term of this Lease, and Tenant shall not be released from performing any
of the terms, covenants and conditions of this Lease throughout the Term
of this Lease. An assignee of Tenant under or pursuant to the provisions
of this Section 15.6 shall become directly liable to Landlord for all
obligations of Tenant hereunder, but no sublease or assignment by Tenant
under or pursuant to the provisions of this Section 15.6 shall relieve
Tenant of any liability under this Lease. For purposes of this Lease the
term "Related Entity" shall mean and refer to an entity which conforms
with the requirements of this Section 15.6.
16. AD VALOREM TAXES
Prior to delinquency, Tenant shall pay all taxes and assessments levied
upon trade fixtures, alterations, additions, improvements, inventories
and personal property located and/or installed on or in the Premises by,
or on behalf of, Tenant; and if requested by Landlord, Tenant shall
promptly deliver to Landlord copies of receipts for payment of all such
taxes and assessments. To the extent any such taxes are not separately
assessed or billed to Tenant, Tenant shall pay the amount thereof as
invoiced by Landlord, subject to Tenant's ability to audit as provided in
Section 6.5 hereof.
17. SUBORDINATION
Subject to the provisions of this Section 17 with respect to obtaining a
reasonably acceptable subordination, non-disturbance and attornment
agreement, at the election of Landlord or any bona fide mortgagee or deed
of trust beneficiary with a lien on all or any portion of the Premises or
any ground lessor with respect to the land of which the Premises are a
part, the rights of Tenant under this Lease and this Lease shall be
subject and subordinate at all times to: (i) all ground leases or
underlying leases which may hereafter be executed affecting the Building
or the land upon which the Building is situated or both, and (ii) the
lien of any mortgage or deed of trust which may now exist or hereafter be
executed in any amount for which the Building, the Lot, ground leases or
underlying leases, or Landlord's interest or estate in any of said items
is specified as security. Notwithstanding the foregoing but subject to
the provisions of this Section 17, Landlord or any such ground lessor,
mortgagee, or any beneficiary shall have the right to subordinate or
cause to be subordinated any such ground leases or underlying leases or
any such liens to this Lease. If any ground lease or underlying lease
terminates for any reason or any mortgage or deed of trust is foreclosed
or a conveyance in lieu of foreclosure is made for any reason, Tenant
shall, notwithstanding any subordination, attorn to and become the Tenant
of the successor in interest to Landlord, and such successor in interest
will not disturb Tenant's use, occupancy or quiet enjoyment of the
Premises so long as Tenant is not in default (beyond applicable notice
and cure periods, if any) of the terms and provisions of this Lease. The
successor in interest to Landlord following foreclosure, sale or deed in
lieu thereof shall not be (a) liable for any act or omission of any prior
lessor or with respect to events occurring prior to acquisition of
ownership; (b) subject to any offsets or defenses which Tenant might have
against any prior lessor; or (c) bound by prepayment of more than one (1)
month's Rent; or (d) liable to Tenant for any Security Deposit not
actually received by such successor in interest to the extent any portion
or all of such Security Deposit has not already been forfeited by, or
refunded to, Tenant. Landlord shall be liable to Tenant for all or any
portion of the Security Deposit not forfeited by, or refunded to Tenant,
until and unless Landlord transfers such Security Deposit to the
successor in interest. Tenant covenants and agrees to execute (and
acknowledge if required by Landlord, any lender or ground lessor) and
deliver, within ten (10) days of a demand or request by Landlord and in a
commercially reasonable form requested by Landlord, ground lessor,
mortgagee or beneficiary (provided such document(s) does not materially
and adversely affect Tenant's rights hereunder), any additional documents
evidencing the priority or subordination of this Lease with respect to
any such ground leases or underlying leases or the lien of any such
mortgage or deed of trust. Tenant's failure to timely execute and
deliver such additional documents shall, at Landlord's option, constitute
a material default hereunder. It is further agreed that Tenant shall be
liable to Landlord, and shall indemnify Landlord from and against any
loss, cost, damage or expense, incidental, consequential, or otherwise,
arising or accruing directly or indirectly, from any wrongful failure of
Tenant to execute or deliver to Landlord any such additional documents.
Tenant hereby acknowledges that as of the date on which Landlord and
Tenant execute this Lease there is a deed of trust encumbering, and in
force against, the Premises and the Lot in favor of Credit Suisse First
Boston Mortgage Capital LLC (the "Current Lender"). Simultaneously with
Tenant's execution and delivery of this Lease, Tenant shall sign,
notarize and deliver a subordination, non-disturbance and attornment
agreement substantially in the form of Exhibit G attached hereto,
entitled "Subordination, Non-Disturbance and Attornment Agreement."
Within twenty (20) business days after both parties have executed this
Lease, Landlord shall deliver to Tenant a copy of the fully executed
Subordination, Non-Disturbance and Attornment Agreement, or if the
Current Lender records said agreement, an endorsed copy of said
agreement. If Landlord at any time during the Term of the Lease causes
the Premises and the Lot to be encumbered by a new deed of trust or
mortgage pursuant to which the beneficiary of such deed of trust or
mortgage is a party or entity other than the Current Lender, the parties
acknowledge and agree that the form of any non-disturbance and attornment
agreement that may be requested to be executed and delivered by Tenant in
connection therewith will not be the "Non-Disturbance and Attornment
Agreement" attached to the Lease as Exhibit G, but will be in
substantially the same form as Exhibit G hereto. If the foregoing occurs
and/or if any party which acquires, or otherwise succeeds to, Landlord's
interest in the Premises or the Lot (including without limitation, any
ground lessee) encumbers or places a lien against the Premises, the
Building or the Lot with a mortgage, deed of trust or similar security
instrument and the beneficiary thereof requires this Lease to be
subordinated to such encumbrance or lien, Landlord or the successor of
Landlord will use commercially reasonable efforts to provide to Tenant a
subordination, non-disturbance and attornment agreement in form
reasonably acceptable to Landlord or such successor of Landlord, the
subject beneficiary and Tenant and substantially the same as Exhibit G
hereto. If said subordination, non-disturbance and attornment agreement
is required and agreed upon by the aforesaid parties, Landlord or the
successor of Landlord, the subject beneficiary and Tenant shall cause any
such subordination, non-disturbance and attornment agreement to be
executed, acknowledged and recorded concurrently with, or as soon as
practicable after, the execution and recordation of any such lien, deed
of trust or mortgage. In addition to the foregoing, if Landlord enters
into a ground lease with regard to the Building and/or the Lot and such
ground lessee requires this Lease to be subordinated to such ground
lease, the ground lessee and ground lessor will use commercially
reasonable efforts to provide to Tenant a subordination, non-disturbance
and attornment agreement in form reasonably acceptable to such ground
lessee, ground lessor, any beneficiary of ground lessee, and to Tenant.
18. RIGHT OF ENTRY
Except in the event of an emergency which if not responded to immediately
poses an imminent risk of injury to persons or damage to property (in
which instances only prior notice shall not be required, however,
Landlord or its agents shall be accompanied by a representative of Tenant
if required herein) Landlord or its representatives, contractors, agents,
lenders, employees and prospective buyers (collectively, the "Landlord
Representatives") may enter the Premises upon twenty-four (24) hours
prior notice and, provided that the Premises are wholly fenced or gated
and there is a security guard on-site, accompanied by Tenant's personnel
or representative for purposes of inspection, exhibition, posting of
notices, repair or alteration, including without limitation, for purposes
of responding to any release or discharge of Hazardous Materials in, on
or about the Premises. Tenant covenants that a representative of Tenant
will be available to accompany Landlord and the Landlord Representatives
at all times. Additionally, Tenant covenants and agrees that it shall
hire and maintain a security guard and other security personnel seven (7)
days a week, 24 hours a day throughout the Lease Term so long as the
Premises are wholly fenced or there is a gate. During the last ten (10)
months of the Lease Term, Landlord shall have the right to place "for
rent" or "for lease" signs on the outside of the Building and in the
parking lot of the Premises. Landlord shall also have the right to place
"for sale" signs on the outside of the Building and in the parking lot of
the Premises. Except in the event of an emergency, Landlord and
Landlord's Representatives shall, as a condition of entry, execute
Tenant's standard confidentiality and non-disclosure agreement which
Tenant requires of all visitors to its Premises in the form of Exhibit H
attached hereto. Tenant shall deliver to Landlord and the Landlord
Representatives a full and complete copy of any security manuals with
respect to Tenant's operations in the Premises.
19. ESTOPPEL CERTIFICATE
Tenant shall execute (and acknowledge if required by any Lender or ground
lessor) and deliver to Landlord, within ten (10) days after Landlord
provides such to Tenant, a statement in writing certifying that this
Lease is unmodified and in full force and effect (or, if modified,
stating the nature of such modification), the date to which the Rent and
other charges are paid in advance, if any, acknowledging that there are
not, to Tenant's knowledge, any uncured defaults on the part of Landlord
hereunder or specifying such defaults as are claimed, and such other
matters as Landlord may reasonably require. Any such statement may be
conclusively relied upon by Landlord and any prospective purchaser or
encumbrancer of the Premises. Tenant's failure to deliver such statement
within such time shall be conclusive upon the Tenant that the information
contained in said estoppel certificate is true, correct and complete in
all respects, including without limitation, that (a) this Lease is in
full force and effect, without modification except as may be represented
by Landlord, (b) there are no uncured defaults in Landlord's performance,
and (c) not more than one month's Rent has been paid in advance. Failure
by Tenant to so deliver such certified estoppel certificate shall be a
material default of the provisions of this Lease. Tenant shall be liable
to Landlord, and shall indemnify Landlord from and against any loss,
cost, damage or expense, incidental, consequential, or otherwise, arising
or accruing directly or indirectly, from any failure of Tenant to execute
or deliver to Landlord any such certified estoppel certificate.
Landlord shall execute (and acknowledge if required by any lender)
and deliver to Tenant, within ten (10) business days after Tenant provides
such to Landlord, a statement in writing certifying that, to the best of
Landlord's actual knowledge) this Lease is unmodified and in full force
and effect (or, if modified, stating the nature of such modification), the
date to which the Base Rent and other charges are paid in advance, if any
and acknowledging that there are not, to Landlord's actual knowledge, any
uncured defaults on the part of Tenant hereunder or specifying such
defaults as are claimed. Any such statement may be conclusively relied
upon by Tenant and any prospective lender, joint venturer or purchaser of
Tenant. Landlord's failure to deliver such statement within such time
shall be conclusive upon the Landlord that (a) this Lease is in full force
and effect, without modification except as may be represented by Tenant;
(b) there are no uncured defaults in Tenant's performance; and (c) not
more than one month's Rent has been paid in advance.
20. TENANT'S DEFAULT
The occurrence of any one or more of the following events shall, at
Landlord's option, constitute a material default by Tenant of the
provisions of this Lease:
20.1 The abandonment of the Premises by Tenant or the vacation of
the Premises by Tenant which would cause any insurance policy to be
invalidated or otherwise lapse.
20.2 The failure by Tenant to make any payment of Rent, Additional
Rent or any other payment required hereunder on the date said payment is
due;
20.3 The failure by Tenant to observe, perform or comply with any
of the conditions, covenants or provisions of this Lease (except failure
to make any payment of Rent and/or Additional Rent) and such failure is
not cured within (i) thirty (30) days of the date on which Landlord
delivers written notice of such failure to Tenant for all failures other
than with respect to (a) Hazardous Materials (defined in Section 29
hereof), (b) Tenant making the repairs, maintenance and replacements
required under the provisions of Section 11.1 hereof, or (c) the timely
delivery by Tenant of a subordination, non-disturbance and attornment
agreement, an assignment or sublease agreement, an estoppel certificate
and insurance certificates, (ii) ten (10) business days of the date on
which Landlord delivers written notice of such failure to Tenant for all
failures in any way related to Hazardous Materials or Tenant failing to
timely make the repairs, maintenance or replacements required by Section
11.1, and (iii) the time period specified in the applicable sections of
this Lease with respect to subordination, assignment and sublease,
estoppel certificates and insurance. However, Tenant shall not be in
default of its obligations hereunder if such failure (other than any
failure of Tenant to timely and properly make the repairs, maintenance,
or replacements required by Section 11.1, or timely deliver a
subordination, non-disturbance and attornment agreement, an assignment or
sublease agreement, an estoppel certificate or insurance certificates,
for which no additional cure period shall be given to Tenant) cannot
reasonably be cured within such thirty (30) or ten (10) business day
period, as applicable, and Tenant promptly commences, and thereafter
diligently proceeds with same to completion, all actions necessary to
cure such failure as soon as is reasonably possible, but in no event
shall the completion of such cure be later than sixty (60) days after the
date on which Landlord delivers to Tenant written notice of such failure,
unless Landlord, acting reasonably and in good faith, otherwise expressly
agrees in writing to a longer period of time based upon the circumstances
relating to such failure as well as the nature of the failure and the
nature of the actions necessary to cure such failure;
20.4 The making of a general assignment by Tenant for the benefit
of creditors, the filing of a voluntary petition by Tenant or the filing
of an involuntary petition by any of Tenant's creditors seeking the
rehabilitation, liquidation, or reorganization of Tenant under any law
relating to bankruptcy, insolvency or other relief of debtors and, in the
case of an involuntary action, the failure to remove or discharge the
same within sixty (60) days of such filing, the appointment of a receiver
or other custodian to take possession of substantially all of Tenant's
assets or this leasehold, Tenant's insolvency or inability to pay
Tenant's debts or failure generally to pay Tenant's debts when due, any
court entering a decree or order directing the winding up or liquidation
of Tenant or of substantially all of Tenant's assets, Tenant taking any
action toward the dissolution or winding up of Tenant's affairs, the
cessation or suspension of Tenant's use of the Premises, or the
attachment, execution or other judicial seizure of substantially all of
Tenant's assets or this leasehold;
20.5 Tenant's use or storage of Hazardous Materials in, on or
about any portion of the Premises or the Park other than as expressly
permitted by the provisions of Section 29 below; or
20.6 The intentional making of any material misrepresentation or
omission by Tenant in any materials delivered by or on behalf of Tenant
to Landlord pursuant to this Lease.
21. REMEDIES FOR TENANT'S DEFAULT
21.1 Landlord's Rights: In the event of Tenant's material default
under this Lease, Landlord may terminate Tenant's right to possession of
the Premises by any lawful means in which case upon delivery of written
notice by Landlord this Lease shall terminate on the date specified by
Landlord in such notice and Tenant shall immediately surrender possession
of the Premises to Landlord. In addition, the Landlord shall have the
immediate right of re-entry whether or not this Lease is terminated, and
if this right of re-entry is exercised following abandonment of the
Premises by Tenant, Landlord may consider any personal property belonging
to Tenant and left on the Premises to also have been abandoned. No re-
entry or taking possession of the Premises by Landlord pursuant to this
Section 21 shall be construed as an election to terminate this Lease
unless a written notice of such intention is given to Tenant. If
Landlord relets the Premises or any portion thereof, (i) Tenant shall be
liable immediately to Landlord for all costs Landlord incurs in reletting
the Premises or any part thereof, including, without limitation, broker's
commissions, expenses of cleaning, redecorating, and further improving
the Premises and other similar costs (collectively, the "Reletting
Costs"), and (ii) the rent received by Landlord from such reletting shall
be applied to the payment of, first, any indebtedness from Tenant to
Landlord other than Base Rent, Operating Expenses, and Tax Expenses;
second, all costs including maintenance, incurred by Landlord in
reletting; and, third, Base Rent, Operating Expenses and Tax Expenses and
all other sums due under this Lease. Any and all of the Reletting Costs
shall be fully chargeable to Tenant and shall not be prorated or
otherwise amortized in relation to any new lease for the Premises or any
portion thereof. After deducting the payments referred to above, any sum
remaining from the rental Landlord receives from reletting shall be held
by Landlord and applied in payment of future Rent as Rent becomes due
under this Lease. In no event shall Tenant be entitled to any excess
rent received by Landlord. Reletting may be for a period shorter or
longer than the remaining term of this Lease. No act by Landlord other
than giving written notice to Tenant shall terminate this Lease. Acts of
maintenance, efforts to relet the Premises or the appointment of a
receiver on Landlord's initiative to protect Landlord's interest under
this Lease shall not constitute a termination of Tenant's right to
possession. So long as this Lease is not terminated, Landlord shall have
the right to remedy any default of Tenant, to maintain or improve the
Premises, to cause a receiver to be appointed to administer the Premises
and new or existing subleases and to add to the Rent payable hereunder
all of Landlord's reasonable costs in so doing, with interest at the
maximum rate permitted by law from the date of such expenditure.
21.2 Damages Recoverable: If Tenant breaches this Lease and
abandons the Premises before the end of the Term, or if Tenant's right to
possession is terminated by Landlord because of a breach or default under
this Lease, then in either such case, Landlord may recover from Tenant
all damages suffered by Landlord as a result of Tenant's failure to
perform its obligations hereunder, including, but not limited to, the
unamortized cost of any Tenant Improvements constructed by or on behalf
of Tenant pursuant to Exhibit B hereto, the unamortized portion of any
broker's or leasing agent's commission incurred with respect to the
leasing of the Premises to Tenant for the balance of the Term of the
Lease remaining after the date on which Tenant is in default of its
obligations hereunder, and all reasonable Reletting Costs, and the worth
at the time of the award (computed in accordance with paragraph (3) of
Subdivision (a) of Section 1951.2 of the California Civil Code) of the
amount by which the Rent then unpaid hereunder for the balance of the
Lease Term exceeds the amount of such loss of Rent for the same period
which Tenant proves could be reasonably avoided by Landlord and in such
case, Landlord prior to the award, may relet the Premises for the purpose
of mitigating damages suffered by Landlord because of Tenant's failure to
perform its obligations hereunder; provided, however, that even though
Tenant has abandoned the Premises following such breach, this Lease shall
nevertheless continue in full force and effect for as long as Landlord
does not terminate Tenant's right of possession, and until such
termination, Landlord shall have the remedy described in Section 1951.4
of the California Civil Code (Landlord may continue this Lease in effect
after Tenant's breach and abandonment and recover Rent as it becomes due,
if Tenant has the right to sublet or assign, subject only to reasonable
limitations) and may enforce all its rights and remedies under this
Lease, including the right to recover the Rent from Tenant as it becomes
due hereunder. The "worth at the time of the award" within the meaning
of Subparagraphs (a)(1) and (a)(2) of Section 1951.2 of the California
Civil Code shall be computed by allowing interest at the rate of ten
percent (10%) per annum. Tenant waives redemption or relief from
forfeiture under California Code of Civil Procedure Sections 1174 and
1179, or under any other present or future law, in the event Tenant is
evicted or Landlord takes possession of the Premises by reason of any
default of Tenant hereunder.
21.3 Rights and Remedies Cumulative: The foregoing rights and
remedies of Landlord are not exclusive; they are cumulative in addition
to any rights and remedies now or hereafter existing at law, in equity by
statute or otherwise, or to any equitable remedies Landlord may have, and
to any remedies Landlord may have under bankruptcy laws or laws affecting
creditor's rights generally. In addition to all remedies set forth
above, if Tenant has at any time been in Chronic Default of its
obligations hereunder during the Term of this Lease, all options granted
to Tenant hereunder shall automatically terminate, unless otherwise
expressly agreed to in writing by Landlord.
21.4 Waiver of a Default: The waiver by Landlord of any default
of any provision of this Lease shall not be deemed or construed a waiver
of any other default by Tenant hereunder or of any subsequent default of
this Lease, except for the default specified in the waiver.
22. HOLDING OVER
If Tenant holds possession of the Premises after the expiration of the
Term of this Lease with Landlord's consent, Tenant shall become a tenant
from month-to-month upon the terms and provisions of this Lease, provided
the monthly Base Rent during such hold over period shall be 125% of the
Base Rent due on the last month of the Lease Term, payable in advance on
or before the first day of each month. Acceptance by Landlord of the
monthly Base Rent without the additional twenty-five percent (25%)
increase of Base Rent shall not be deemed or construed as a waiver by
Landlord of any of its rights to collect the increased amount of the Base
Rent as provided herein at any time. Such month-to-month tenancy shall
not constitute a renewal or extension for any further term. All options,
if any, granted under the terms of this Lease shall be deemed
automatically terminated and be of no force or effect during said month-
to-month tenancy. Tenant shall continue in possession until such tenancy
shall be terminated by either Landlord or Tenant giving written notice of
termination to the other party at least thirty (30) days prior to the
effective date of termination. This paragraph shall not be construed as
Landlord's permission for Tenant to hold over. Acceptance of Base Rent
by Landlord following expiration or termination of this Lease shall not
constitute a renewal of this Lease.
23. LANDLORD'S DEFAULT
Landlord shall not be deemed in breach or default of this Lease unless
Landlord fails within a reasonable time to perform an obligation required
to be performed by Landlord hereunder. For purposes of this provision,
except for Emergency Repairs (defined below), a reasonable time shall not
be less than thirty (30) days after receipt by Landlord of written notice
specifying the nature of the obligation Landlord has not performed;
provided, however, that if the nature of Landlord's obligation is such
that more than thirty (30) days, after receipt of written notice, is
reasonably necessary for its performance, then Landlord shall not be in
breach or default of this Lease if performance of such obligation is
commenced within such thirty (30) day period and thereafter diligently
pursued to completion. For purposes of this provision, "Emergency
Repairs" shall mean those repairs which are the express obligation of
Landlord and which if not made immediately are very likely to pose a
material and imminent risk of injury to persons or substantial damage to
property. Emergency Repair shall be commenced by Landlord within two (2)
business days after notice and diligently pursued to completion; however,
Tenant shall promptly provide to Landlord follow-up written notice
thereof.
24. PARKING
Subject to reduction due to a casualty or condemnation, Tenant shall have
throughout the Term of this Lease, without a fee or charge, the number of
parking spaces specified in the Basic Lease Information. Such parking
shall be provided in the Premises and Landlord shall not grant other or
additional rights to use the parking areas within the Premises. Landlord
shall exercise reasonable efforts to insure that such spaces are
available to Tenant for its use, but Landlord shall not be required to
enforce Tenant's right to use the same.
25. SALE OF PREMISES
In the event of any sale of the Premises by Landlord or the cessation
otherwise of Landlord's interest therein, Landlord shall be entirely
released from any and all of its obligations to further perform under
this Lease and from all liability hereunder to the extent such
obligations or liability arises or accrues from or after the date of such
sale. Notwithstanding the foregoing, such successor in interest shall
assume, in writing, Landlord's obligations hereunder to the extent first
arising and accruing from and after the date of such transfer and
Landlord shall notify Tenant of such in writing on or after the date of
such conveyance. For purposes of this Section 25, the term "Landlord"
means only the owner and/or agent of the owner as such parties exist as
of the date on which Tenant executes this Lease. A ground lease or
similar long term lease by Landlord of the entire Building or the Park,
of which the Premises are a part, shall be deemed a sale within the
meaning of this Section 25. Tenant agrees to attorn to such new owner
provided such new owner does not disturb Tenant's use, occupancy or quiet
enjoyment of the Premises so long as Tenant is not in default of any of
the provisions of this Lease.
26. WAIVER
No delay or omission in the exercise of any right or remedy of Landlord
on any default by Tenant shall impair such a right or remedy or be
construed as a waiver. The subsequent acceptance of Rent by Landlord
after default by Tenant of any covenant or term of this Lease shall not
be deemed a waiver of such default, other than a waiver of timely payment
for the particular Rent payment involved, and shall not prevent Landlord
from maintaining an unlawful detainer or other action based on such
breach. No payment by Tenant or receipt by Landlord of a lesser amount
than the monthly Rent and other sums due hereunder shall be deemed to be
other than on account of the earliest Rent or other sums due, nor shall
any endorsement or statement on any check or accompanying any check or
payment be deemed an accord and satisfaction; and Landlord may accept
such check or payment without prejudice to Landlord's right to recover
the balance of such Rent or other sum or pursue any other remedy provided
in this Lease. No failure, partial exercise or delay on the part of the
Landlord in exercising any right, power or privilege hereunder shall
operate as a waiver thereof.
27. CASUALTY DAMAGE
27.1 Casualty. If the Premises or any part thereof (excluding the
Tenant Improvements and any other alterations, additions or improvements
installed by or for the benefit of Tenant) shall be damaged or destroyed
by fire or other casualty, Tenant shall give immediate written notice
thereof to Landlord. Within sixty (60) days after receipt by Landlord of
such notice, Landlord shall notify Tenant, in writing, whether the
necessary repairs can reasonably be made: (a) within one hundred twenty
(120) days; or (b) in more than one hundred twenty (120) days, from the
date of such notice.
27.1.1 Minor Insured Damage. If the Premises are damaged only
to such extent that repairs, rebuilding and/or restoration can be
reasonably completed within one hundred twenty (120) days, subject
to the provisions hereof, this Lease shall not terminate and,
provided that insurance proceeds are available to fully repair the
damage or, at Tenant's election to be made within ten (10) business
days of being notified of said shortfall, Tenant contributes any
shortfall in insurance proceeds, Landlord shall repair the Premises
to substantially the same condition that existed prior to the
occurrence of such casualty, except Landlord shall not be required
to rebuild, repair, or replace the Tenant Improvements or any
alterations, additions or improvements installed by or for the
benefit of Tenant or any part of Tenant's Property. The Rent
payable hereunder shall be abated proportionately from the date and
to the extent such damage or destruction materially interferes with
Tenant's use or occupancy of the Premises but only to the extent
rental loss insurance proceeds are received by Landlord.
Notwithstanding the foregoing, if insurance proceeds are not
available to fully repair the damage and Tenant elects not to
contribute said shortfall or fails to timely notify Landlord of
said election, then Landlord may terminate this Lease by delivering
written notice thereof to Tenant. If Landlord elects to terminate
this Lease, Rent shall be abated from the date Tenant actually
vacates the Premises.
27.1.2 Major Insured Damage. If the Premises are damaged to
such extent that repairs, rebuilding and/or restoration cannot be
reasonably completed within one hundred twenty (120) days, then
either Landlord or Tenant may terminate this Lease by giving
written notice within twenty (20) days after notice from Landlord
regarding the time period of repair. If either party notifies the
other of its intention to so terminate the Lease, then this Lease
shall terminate and the Rent shall be abated from the date Tenant
actually vacates the Premises; provided, however, if Landlord
elects to terminate this Lease due to a shortfall of insurance
proceeds to fully repair said damage, then within ten (10) days
after Landlord notifies Tenant of same, Tenant may elect to require
Landlord to rescind said termination if, and only if, Tenant
unconditionally and conclusively agrees to fully, promptly and
completely pay to Landlord the entirety of any actual shortfall of
insurance proceeds. If neither party elects to terminate this
Lease or if Tenant timely elects to so contribute any shortfall in
funds to allow Landlord to fully repair the damage and Landlord
rescinds its election to terminate this Lease, Landlord shall
promptly commence and diligently prosecute to completion the
repairs to the Premises, provided insurance proceeds are available
to fully repair the damage or Tenant contributes any shortfall in
insurance proceeds (except that Landlord shall not be required to
rebuild, repair, or replace The Tenant Improvements, or any
alterations, additions or improvements installed by or for the
benefit of Tenant or any part of Tenant's Property). During the
time when Landlord is prosecuting such repairs to completion, the
Rent payable hereunder shall be abated proportionately from the
date and to the extent such damage or destruction materially
interferes with Tenant's use or occupancy of the Premises or
portion thereof, as applicable, but only to the extent rental loss
insurance proceeds are received by Landlord.
27.1.3 Damage Near End of Term. Notwithstanding anything to
the contrary contained in this Lease except for the provisions of
Section 27.2 below, if the Premises are damaged or destroyed during
the last year of the then applicable term of this Lease, Landlord
may, at its option, cancel and terminate this Lease by giving
written notice to Tenant of its election to do so within sixty (60)
days after receipt by Landlord of notice from Tenant of the
occurrence of such casualty. If Landlord so elects to terminate
this Lease, all rights of Tenant hereunder shall cease and
terminate ten (10) business days after Tenant's receipt of such
notice.
27.2 Tenant's or Tenant's Representative's Fault. If any portion
of the Premises is damaged or destroyed due to the fault, negligence
(active or passive) or breach of this Lease by Tenant or any of Tenant's
Representatives, Rent shall not be diminished during the repair of such
damage and Tenant shall be liable to Landlord for the cost of the repair
caused thereby to the extent such cost is not covered by any insurance
proceeds. In addition, notwithstanding any to the contrary contained
herein, Tenant shall not have any rights to terminate this Lease pursuant
to the provisions of this Section 27.
27.3 Uninsured Casualty. Tenant shall be responsible for and
shall pay to Landlord, as Additional Rent, any deductible amounts under
the property insurance policies for the Premises and/or the Park. If any
portion of the Premises is damaged and is not fully covered by insurance
proceeds received by Landlord (and Tenant elects not to pay any such
difference) or if the holder of any indebtedness secured by the Premises
requires that the insurance proceeds be applied to such indebtedness,
then Landlord or Tenant shall also have the right to terminate this Lease
by delivering written notice of termination to the other party within
thirty (30) days after the date of Landlord's delivery of notice to
Tenant of any such event, whereupon all rights and obligations shall
cease and terminate hereunder, except for those obligations expressly
intended to survive any such termination of this Lease. If Tenant or
Landlord elects to terminate this Lease due to any such casualty or
damage to the Premises in accordance with the provisions of this Section
27, Tenant shall use all diligent efforts to vacate the Premises as
quickly as possible after the occurrence of such damage or casualty.
27.4 Tenant's Waiver. Landlord shall not be liable for any
inconvenience or annoyance to Tenant, injury to the business of Tenant,
loss of use of any part of the Premises by Tenant or loss of Tenant's
Property, resulting in any way from such damage, destruction or the
repair thereof, except that, Landlord shall allow Tenant a fair
diminution of Rent during the time and to the extent the Premises are
unfit for occupancy as specifically provided above in this Section 27.
With respect to any damage or destruction which Landlord is obligated to
repair or may elect to repair, Tenant hereby waives all rights to
terminate this Lease, except as otherwise expressly permitted hereunder,
or offset any amounts against Rent pursuant to rights accorded Tenant by
any Law currently existing or hereafter enacted, including but not
limited to, all rights pursuant to the provisions of Sections 1932(2.),
1933(4.), 1941 and 1942 of the California Civil Code, as the same may be
amended, substituted or supplemented from time to time.
28. CONDEMNATION
If twenty-five percent (25%) or more of the Premises is condemned by
eminent domain, inversely condemned or sold in lieu of condemnation for
any public or quasi-public use or purpose ("Condemned"), then Tenant or
Landlord may terminate this Lease as of the date when physical possession
of the Premises is taken and title vests in such condemning authority,
and Rent shall be adjusted to the date of termination. Tenant shall not
because of such condemnation assert any claim against Landlord or the
condemning authority for any compensation because of such condemnation,
and Landlord shall be entitled to receive the entire amount of any award
without deduction for any estate of interest or other interest of Tenant;
provided, however, the foregoing provisions shall not preclude Tenant, at
Tenant's sole cost and expense, from obtaining any separate award to
Tenant for loss of or damage to Tenant's trade fixtures and removable
personal property or for damages for cessation or interruption of
Tenant's business provided such award is separate from Landlord's award
and provided further such separate award does not diminish nor impair the
award otherwise payable to Landlord. In addition to the foregoing,
Tenant shall be entitled to seek compensation for the relocation costs
recoverable by Tenant pursuant to the provisions of California Government
Code Section 7262. If neither party elects to terminate this Lease,
Landlord shall, if necessary, promptly proceed to restore the Premises to
substantially its same condition prior to such partial condemnation,
allowing for the reasonable effects of such partial condemnation, and a
proportionate allowance shall be made to Tenant, on a square foot basis,
for the Rent corresponding to the time during which, and to the part of
the Premises of which, Tenant is deprived on account of such partial
condemnation and restoration. Landlord shall not be required to spend
funds for restoration in excess of the amount received by Landlord as
compensation awarded.
29. ENVIRONMENTAL MATTERS/HAZARDOUS MATERIALS
29.1 Hazardous Materials Disclosure Certificate: Prior to
executing this Lease, Tenant has completed, executed and delivered to
Landlord Tenant's initial Hazardous Materials Disclosure Certificate (the
"Initial HazMat Certificate"), a copy of which is attached hereto as
Exhibit E and incorporated herein by this reference. Tenant covenants,
represents and warrants to Landlord that the information on the Initial
HazMat Certificate is true and correct and accurately describes the use(s)
of Hazardous Materials which will be made and/or used on the Premises by
Tenant. Tenant shall commencing with the date which is one year from the
Commencement Date and continuing every year thereafter, complete, execute,
and deliver to Landlord, a Hazardous Materials Disclosure Certificate
("the "HazMat Certificate") describing Tenant's present use of Hazardous
Materials on the Premises, and any other reasonably necessary documents
related to such Hazardous Materials as requested by Landlord. The HazMat
Certificate required hereunder shall be in substantially the form as that
which is attached hereto as Exhibit D. Landlord has approved the Initial
HazMat Certificate; however, any such approval by Landlord shall not be
construed to relieve Tenant from its obligations and/or any liabilities
under this Section 29.
29.2 Definition of Hazardous Materials: As used in this Lease, the
term Hazardous Materials shall mean and include (a) any hazardous or toxic
wastes, materials or substances, and other pollutants or contaminants,
which are or become regulated by any Environmental Laws; (b) petroleum,
petroleum by products, gasoline, diesel fuel, crude oil or any fraction
thereof; (c) asbestos and asbestos containing material, in any form,
whether friable or non-friable; (d) polychlorinated biphenyls; (e)
radioactive materials; (f) lead and lead-containing materials, and
carcinogens; (g) any other material, waste or substance displaying toxic,
reactive, ignitable or corrosive characteristics, as all such terms are
used in their broadest sense, and are defined or become defined by any
Environmental Law (defined below); or (h) any materials which cause or
threatens to cause a nuisance upon or waste to any portion of the
Premises, the Lot, the Park or any surrounding property; or poses or
threatens to pose a hazard to the health and safety of persons on the
Premises or any surrounding property.
29.3 Prohibition; Environmental Laws: Except for those Hazardous
Materials of the type and in the quantities specified in the Initial
HazMat Certificate and in the HMMP (defined below), Tenant shall not be
entitled to use nor store any Hazardous Materials on, in, or about the
Premises, the Lot and the Park, or any portion of the foregoing, without,
in each instance, obtaining Landlord's prior written consent thereto. If
Landlord consents to any such usage or storage, then Tenant shall be
permitted to use and/or store only those Hazardous Materials that are
necessary for Tenant's business and to the extent disclosed in the Initial
HazMat Certificate and as expressly approved by Landlord in writing,
provided that such usage and storage is only to the extent of the
quantities of Hazardous Materials as specified in the then applicable
HazMat Certificate as expressly approved by Landlord and provided further
that such usage and storage is in full compliance with any and all local,
state and federal environmental, health and/or safety-related laws,
statutes, orders, standards, courts' decisions, ordinances, rules and
regulations (as interpreted by judicial and administrative decisions),
decrees, directives, guidelines, permits or permit conditions, currently
existing and as amended, enacted, issued or adopted in the future which
are or become applicable to Tenant or all or any portion of the Premises
(collectively, the "Environmental Laws"). Tenant agrees that any changes
to the type and/or quantities of Hazardous Materials specified in the most
recent HazMat Certificate may be implemented only with the prior written
consent of Landlord, which consent may be given or withheld in Landlord's
sole discretion. Except for the double contained, leakage monitored
above-ground tank specified in the HMMP (defined below), Tenant shall not
be entitled nor permitted to install any tanks under, on or about the
Premises for the storage of Hazardous Materials without the express
written consent of Landlord, which may be given or withheld in Landlord's
sole discretion. Such above-ground tank in which diesel fuel is stored,
used and/or distributed therefrom shall be sealed in a leak-proof, double-
contained tank using the best available technology at the time of
installation. Landlord shall have the right at all times during the Term
of this Lease (i) subject to the provisions of Section 18 hereof, to
inspect the Premises, (ii) to conduct tests and investigations to
determine whether Tenant is in compliance with the provisions of this
Section 29, and (iii) to request lists of all Hazardous Materials used,
stored or otherwise located on, under or about any portion of the
Premises. The cost of all such inspections, tests and investigations
shall be borne solely by Tenant, if Landlord reasonably determines that
Tenant or any of Tenant's Representatives are directly or indirectly
responsible in any manner for any contamination revealed by such
inspections, tests and investigations. The aforementioned rights granted
herein to Landlord and its representatives shall not create (a) a duty on
Landlord's part to inspect, test, investigate, monitor or otherwise
observe the Premises or the activities of Tenant and Tenant's
Representatives with respect to Hazardous Materials, including without
limitation, Tenant's operation, use and any remediation related thereto,
or (b) liability on the part of Landlord and its representatives for
Tenant's use, storage, disposal or remediation of Hazardous Materials, it
being understood that Tenant shall be solely responsible for all liability
in connection therewith. Notwithstanding anything to the contrary
contained herein, Tenant and Tenant's Representatives shall not conduct
any diesel or gas filling operations in, on, at or about the Premises it
being Tenant's intention to solely use said diesel for emergency generator
situations only. In addition to the foregoing, Tenant and Tenant's
Representatives shall limit the types and amounts of Hazardous Materials
to be stored at the Premises to the types and quantities specified in the
Initial HazMat Certificate attached hereto.
29.4 Tenant's Environmental Obligations: Tenant shall give to
Landlord immediate verbal and follow-up written notice of any spills,
releases, discharges, disposals, emissions, migrations, removals or
transportation of Hazardous Materials on, under or about any portion of
the Premises or in the Park. Tenant, at its sole cost and expense,
covenants and warrants to promptly investigate, clean up, remove, restore
and otherwise remediate (including, without limitation, preparation of any
feasibility studies or reports and the performance of any and all
closures) any spill, release, discharge, disposal, emission, migration or
transportation of Hazardous Materials arising from or related to the
intentional or negligent acts or omissions of Tenant or Tenant's
Representatives such that the affected portions of the Park and any
adjacent property are returned to the condition existing prior to the
appearance of such Hazardous Materials. Any such investigation, clean up,
removal, restoration and other remediation shall only be performed after
Tenant has obtained Landlord's prior written consent, which consent shall
not be unreasonably withheld so long as such actions would not potentially
have a material adverse long-term or short-term effect on any portion of
the Premises, the Lot or the Park. Notwithstanding the foregoing, Tenant
shall be entitled to respond immediately to an emergency without first
obtaining Landlord's prior written consent. Tenant, at its sole cost and
expense, shall conduct and perform, or cause to be conducted and
performed, all closures as required by any Environmental Laws or any
agencies or other governmental authorities having jurisdiction thereof.
If Tenant fails to so promptly investigate, clean up, remove, restore,
provide closure or otherwise so remediate, Landlord may, but without
obligation to do so, take any and all steps necessary to rectify the same
and Tenant shall promptly reimburse Landlord, upon demand, for all costs
and expenses to Landlord of performing investigation, clean up, removal,
restoration, closure and remediation work. All such work undertaken by
Tenant, as required herein, shall be performed in such a manner so as to
enable Landlord to make full economic use of the Premises, the Lot and the
Park after the satisfactory completion of such work. Notwithstanding
anything to the contrary contained herein and in addition to Tenant's
obligations under this Section 29.4 any Hazardous Materials to be stored
at the Premises by Tenant and/or Tenant's Representatives shall be stored
in the tank and concrete containment structure for the tank and the
generators, and handled in the manner specified in the draft Hazardous
Material Management Plan for Tenant's operation at the Building (the final
approved version thereof referred to as the "HMMP") and in strict
accordance with all Environmental Laws, including without limitation, the
regulations, standards and requirements of the National Fire Protection
Association and the applicable building and fire departments. In addition
to any other rights and remedies available to Landlord under the
provisions of this Lease, it will be a material default if Hazardous
Materials are stored and/or used in, on, at or about the Premises in
quantities, or are of a type, other than as specified in the Initial
HazMat Certificate hereto or any subsequent HazMat Certificate, or any
Hazardous Materials are handled in any manner which is different from
those procedures specified in the HMMP or as otherwise required by
Environmental Laws. In addition to any other requirements imposed upon
Tenant and Tenant's Representatives under this Section 29 or in any other
provision of this Lease Tenant shall give immediate written notice to
Landlord of: (a) any enforcement, remediation, or other regulatory action
or order, taken or threatened, by and agency regarding, or in connection
with, the presence, release or threat of release of any Hazardous
Materials in, on, under, about or from the Premises, or otherwise
resulting from Tenant's or Tenant's Representatives' use of the Premises;
(b) all demands or claims made or threatened by any third party against
Tenant or any of Tenant's Representatives and relating to liability, loss,
damage, or injury resulting from the presence, release or threat of
release of any Hazardous Materials in, on, under, about or from any
portion of the Premises, or otherwise arising, in any manner whatsoever,
from Tenant's or Tenant's Representatives' use of the Premises; (c) any
spill, release, or discharge of Hazardous Materials in, on, under, about
or from the Premises, including without limitation, any such spill,
release, or discharge required to be reported to any agency under any
Environmental Law; and (d) all incidents or matters where Tenant or any of
Tenant's Representatives is required to give notice to any agency pursuant
to any Environmental Laws. Tenant shall post and maintain such notices
in, at and about the Premises as required by any Environmental Laws,
including without limitation, any notices required under Proposition 65.
Tenant shall promptly provide to Landlord true and complete copies of all
materials, reports, technical data, notices, and correspondence relating
to the above incidents or any other matters subject to Landlord
notification or notification to other tenants in the Park or to the
general public. Tenant shall also obtain and promptly provide to Landlord
true and complete copies, revisions, and/or modifications of all building
permits, permits, fire permits, manufacturer specifications for the tank
and the generators, approvals, and registrations Tenant receives or
submits with respect to its operations on the Premises, including without
limitation, any revisions or modification to its HMMP, and, at a minimum
annually, inspection reports, leakage reports and test results for the
tank and generators. Tenant hereby covenants, represents and warrants
that it shall promptly and diligently prepare and deliver to Landlord a
final approved HMMP with respect to the Premises by no later than sixty
(60) days after the Lease Date. In addition to the foregoing, Tenant
shall (1) implement vapor control and spill prevention control measures
for the tank and the generators, (2) obtain inspection reports from the
applicable building and fire departments after the installation of the
tank and the generators, and (3) promptly deliver to Landlord evidence
thereof, including a true and complete copy of all such inspection
reports.
29.5 Environmental Indemnity: In addition to Tenant's obligations
as set forth hereinabove, Tenant agrees to, and shall, protect, indemnify,
defend (with counsel acceptable to Landlord) and hold Landlord and the
other Indemnitees harmless from and against any and all claims, judgments,
damages, penalties, fines, liabilities, losses (including, without
limitation, diminution in value of any portion of the Premises, the Lot or
the Park, damages for the loss of or restriction on the use of rentable or
usable space, and from any adverse impact of Landlord's marketing of any
space within the Park), suits, administrative proceedings and costs
(including, but not limited to, attorneys' and consultant fees and court
costs) arising at any time during or after the Term of this Lease in
connection with or related to, directly or indirectly, the use, presence,
transportation, storage, disposal, migration, removal, spill, release or
discharge of Hazardous Materials on, in or about any portion of the
Premises, the Lot or the Park as a result (directly or indirectly) of the
intentional or negligent acts or omissions of Tenant or any of Tenant's
Representatives. Neither the written consent of Landlord to the presence,
use or storage of Hazardous Materials in, on, under or about any portion
of the Premises, the Lot and/or the Park, nor the strict compliance by
Tenant with all Environmental Laws shall excuse Tenant from its
obligations of indemnification pursuant hereto. Tenant shall not be
relieved of its indemnification obligations under the provisions of this
Section 29.5 due to Landlord's status as either an "owner" or "operator"
under any Environmental Laws.
29.6 Survival: Tenant's obligations and liabilities pursuant to
the provisions of this Section 29 shall survive the expiration or earlier
termination of this Lease. If it is determined by Landlord that the
condition of all or any portion of the Premises, the Lot and/or the Park
is not as a result of the intentional or negligent acts or omissions of
Tenant or any of Tenant's Representatives in compliance with the
provisions of this Lease with respect to Hazardous Materials, including
without limitation, all Environmental Laws at the expiration or earlier
termination of this Lease, then in Landlord's sole discretion, Landlord
may require Tenant to hold over possession of the Premises until Tenant
can surrender the Premises to Landlord in the condition in which the
Premises existed as of the Commencement Date and prior to the appearance
of such Hazardous Materials except for reasonable wear and tear, including
without limitation, the conduct or performance of any closures as required
by any Environmental Laws. For purposes hereof, the term "reasonable wear
and tear" shall not include any deterioration in the condition or
diminution of the value of any portion of the Premises, the Lot and/or the
Park in any manner whatsoever related to directly, or indirectly,
Hazardous Materials. Any such holdover by Tenant will be with Landlord's
consent, will not be terminable by Tenant in any event or circumstance and
will otherwise be subject to the provisions of Section 22 of this Lease.
30. FINANCIAL STATEMENTS
The provisions of this Section 30 shall not apply to Tenant or any
Related Entity for so long as the Tenant or any Related Entity of Tenant
is a publicly traded company for which audited financial statements are
available to the public. Any assignee or subtenant of Tenant, and Tenant
and any Related Entity of Tenant that is not publicly traded will for the
reliance of Landlord, any lender holding or anticipated to acquire a lien
upon the Premises or the Park or any portion thereof, or any prospective
purchaser of the Building or the Park or any portion thereof, within ten
(10) business days after Landlord's request therefor, but not more often
than once annually so long as Tenant, the assignee, the subtenant or the
Related Entity (as the case may be) is not in default of this Lease,
deliver to Landlord the then current audited financial statements of said
assignee, subtenant, or non-publicly traded Tenant or Related Entity
which statements shall be prepared or compiled by a certified public
accountant and shall present fairly the financial condition of said
entity at such dates and the result of its operations and changes in its
financial positions for the periods ended on such dates. If an audited
financial statement has not been prepared, said entity shall provide
Landlord with an unaudited financial statement and/or such other
information, the type and form of which are acceptable to Landlord in
Landlord's reasonable discretion, which reflects the financial condition
of said entity.
31. GENERAL PROVISIONS
31.1 Time. Time is of the essence in this Lease and with respect
to each and all of its provisions in which performance is a factor.
31.2 Successors and Assigns. The covenants and conditions herein
contained, subject to the provisions as to assignment, apply to and bind
the heirs, successors, executors, administrators and assigns of the
parties hereto.
31.3 Recordation. Tenant shall not record this Lease. Landlord
and Tenant shall, contemporaneously with the execution and delivery of
this Lease, execute, deliver and record a Memorandum of Lease in
substantially the form of Exhibit F hereto.
31.4 Landlord's Personal Liability. The liability of Landlord
(which, for purposes of this Lease, shall include Landlord and the owner
of the Building if other than Landlord) to Tenant for any default by
Landlord under the terms of this Lease shall be limited to the actual
interest of Landlord and its present or future partners or members in the
Premises, and Tenant agrees to look solely to the Premises for
satisfaction of any liability and shall not look to other assets of
Landlord nor seek any recourse against the assets of the individual
partners, members, directors, officers, shareholders, agents or employees
of Landlord (including without limitation, any property management
company of Landlord); it being intended that Landlord and the individual
partners, members, directors, officers, shareholders, agents and
employees of Landlord (including without limitation, any property
management company of Landlord) shall not be personally liable in any
manner whatsoever for any judgment or deficiency. The liability of
Landlord under this Lease is limited to its actual period of ownership of
title to the Premises, and Landlord shall be automatically released from
further performance of any unaccrued obligations under this Lease upon
transfer of Landlord's interest in the Premises.
31.5 Separability. Any provisions of this Lease which shall prove
to be invalid, void or illegal shall in no way affect, impair or
invalidate any other provisions hereof and such other provision shall
remain in full force and effect.
31.6 Choice of Law. This Lease shall be governed by, and
construed in accordance with, the laws of the State of California.
31.7 Attorneys' Fees. In the event any dispute between the
parties results in litigation or other proceeding, the prevailing party
shall be reimbursed by the party not prevailing for all reasonable costs
and expenses, including, without limitation, reasonable attorneys' and
experts' fees and costs incurred by the prevailing party in connection
with such litigation or other proceeding, and any appeal thereof. Such
costs, expenses and fees shall be included in and made a part of the
judgment recovered by the prevailing party, if any.
31.8 Entire Agreement. This Lease supersedes any prior
agreements, representations, negotiations or correspondence between the
parties, and contains the entire agreement of the parties on matters
covered. No other agreement, statement or promise made by any party,
that is not in writing and signed by all parties to this Lease, shall be
binding.
31.9 Warranty of Authority. On the date that Tenant executes this
Lease, Tenant shall deliver to Landlord an original certificate of status
for Tenant issued by the California Secretary of State or statement of
partnership for Tenant recorded in the county in which the Premises are
located, as applicable, and such other documents as Landlord may
reasonably request with regard to the lawful existence of Tenant. Each
person executing this Lease on behalf of a party represents and warrants
that (1) such person is duly and validly authorized to do so on behalf of
the entity it purports to so bind, and (2) if such party is a
partnership, corporation or trustee, that such partnership, corporation
or trustee has full right and authority to enter into this Lease and
perform all of its obligations hereunder. Tenant hereby warrants that
this Lease is valid and binding upon Tenant and, subject to creditors'
rights generally, enforceable against Tenant in accordance with its
terms.
31.10 Notices. Any and all notices and demands required or
permitted to be given hereunder to Landlord shall be in writing and shall
be sent: (a) by United States mail, certified and postage prepaid; or (b)
by personal delivery to the Vice President of operations of Landlord's
property management company; or (c) by overnight courier, addressed to
Landlord, Attention: Vice President, Operations, 30 Executive Park, Suite
100, Irvine, California 92614. Any and all notices and demands required
or permitted to be given hereunder to Tenant shall be in writing and
shall be sent: (i) by United States mail, certified and postage prepaid;
or (ii) by personal delivery to the General Counsel of Tenant; or (iii)
by overnight courier, all of which shall be addressed to Tenant at
Tenant's Address as stated in the Basic Lease Information or at such
other address as Tenant may specify by notice given to Landlord pursuant
to this Section 31.10. Notice and/or demand shall be deemed given upon
the earlier of actual receipt or the third day following deposit in the
United States mail if notice is sent by mail, when personally delivered
if notice is given by personal delivery or when delivered if notice is
given by overnight courier.
31.11 Joint and Several. If Tenant consists of more than one
person or entity, the obligations of all such persons or entities shall
be joint and several.
31.12 Covenants and Conditions. Each provision to be performed by
Tenant hereunder shall be deemed to be both a covenant and a condition.
31.13 Waiver of Jury Trial. The parties hereto shall and they
hereby do waive trial by jury in any action, proceeding or counterclaim
brought by either of the parties hereto against the other on any matters
whatsoever arising out of or in any way related to this Lease, the
relationship of Landlord and Tenant, Tenant's use or occupancy of the
Premises or the Park, and/or any claim of injury, loss or damage.
31.14 Merger. The voluntary or other surrender of this Lease by
Tenant, the mutual termination or cancellation hereof by Landlord and
Tenant, or a termination of this Lease by Landlord for a material default
by Tenant hereunder, shall not work a merger, and, at the sole option of
Landlord, (i) shall terminate all or any existing subleases or
subtenancies, or (ii) may operate as an assignment to Landlord of any or
all of such subleases or subtenancies. Landlord's election of either or
both of the foregoing options shall be exercised by delivery by Landlord
of written notice thereof to Tenant and all known subtenants under any
sublease.
32. SIGNS
All signs and graphics of every kind located on the exterior of the
Building shall be subject to Landlord's prior written approval, which
approval will not be unreasonably withheld or delayed, and shall be
subject to any applicable governmental laws, ordinances, and regulations
and in compliance with Landlord's reasonable sign criteria as same may
exist from time to time. Tenant shall remove all such signs and graphics
prior to the termination of this Lease. Such installations and removals
shall be made in a manner as to avoid damage or defacement of the
Premises; and Tenant shall repair any damage or defacement, including
without limitation, discoloration caused by such installation or removal.
Landlord shall have the right, at its option, to deduct from the
Security Deposit such sums as are reasonably necessary to remove such
signs, including, but not limited to, the costs and expenses associated
with any repairs necessitated by such removal. Notwithstanding the
foregoing, in no event shall any: (a) neon, flashing or moving sign(s) or
(b) sign(s) which shall interfere with the visibility of any sign,
awning, canopy, advertising matter, or decoration of any kind of any
other business or occupant of the Park be permitted hereunder. Tenant
further agrees to maintain any such sign, awning, canopy, advertising
matter, lettering, decoration or other thing as may be approved in good
condition and repair at all times.
33. MORTGAGEE PROTECTION
Upon any default on the part of Landlord, Tenant will give written notice
by registered or certified mail to any beneficiary of a deed of trust or
mortgagee of a mortgage covering the Premises who has requested such
notice (however, upon executing a subordination agreement said mortgagee
or beneficiary shall be deemed to have requested a notice) and provided
Tenant with notice of their interest together with an address for
receiving notice, and shall offer such beneficiary or mortgagee a
reasonable opportunity to cure the default, including time to obtain
possession of the Premises by power of sale or a judicial foreclosure, if
such should prove necessary to effect a cure. If such default cannot be
cured within such time period, then such additional time as may be
necessary will be given to such beneficiary or mortgagee to effect such
cure so long as such beneficiary or mortgagee has commenced the cure
within the original time period and thereafter diligently pursues such
cure to completion, in which event this Lease shall not be terminated
while such cure is being diligently pursued. Tenant agrees that each
lender to whom this Lease has been assigned by Landlord is an express
third party beneficiary hereof. Tenant shall not make any prepayment of
Rent more than one (1) month in advance without the prior written consent
of each such lender, except if Tenant is required to make quarterly
payments of Rent in advance pursuant to the provisions of Section 8
above. Tenant waives the collection of any deposit from such lender(s)
or any purchaser at a foreclosure sale of such lender(s)' deed of trust
unless the lender(s) or such purchaser shall have actually received and
not refunded the deposit. Tenant agrees to make all payments under this
Lease to the lender with the most senior encumbrance upon receiving a
direction, in writing, to pay said amounts to such lender. Tenant shall
comply with such written direction to pay without determining whether an
event of default exists under such lender's loan to Landlord.
34. QUITCLAIM
Upon any termination of this Lease and/or the Purchase Option, Tenant
shall, at Landlord's request, execute, have acknowledged and deliver to
Landlord a quitclaim deed of Tenant's interest in and to the Premises and
the Purchase Option, as applicable. If Tenant wrongfully fails to timely
deliver to Landlord such a quitclaim deed, Tenant hereby agrees to
indemnify, defend and hold Landlord harmless from and against any and all
judgments, claims, losses, damages, actions, liabilities, costs and
expenses (including without limitation, attorneys' fees and costs)
relating to such failure.
35. MODIFICATIONS FOR LENDER
If, in connection with obtaining financing for the Premises or any
portion thereof, Landlord's lender shall request reasonable
modification(s) to this Lease as a condition to such financing, Tenant
shall not unreasonably withhold, delay or defer its consent thereto,
provided such modifications do not materially adversely affect Tenant's
rights hereunder or the use, occupancy or quiet enjoyment of Tenant
hereunder.
36. WARRANTIES OF TENANT
Tenant hereby warrants and represents to Landlord, for the express
benefit of Landlord, that Tenant has undertaken a complete and
independent evaluation of the risks inherent in the execution of this
Lease and the operation of the Premises for the use permitted hereby, and
that, based upon said independent evaluation, Tenant has elected to enter
into this Lease and hereby assumes all risks with respect thereto.
Tenant hereby further warrants and represents to Landlord, for the
express benefit of Landlord, that in entering into this Lease, Tenant has
not relied upon any statement, fact, promise or representation (whether
express or implied, written or oral) not specifically set forth herein in
writing and that any statement, fact, promise or representation (whether
express or implied, written or oral) made at any time to Tenant, which is
not expressly set forth in writing, is hereby waived by Tenant.
37. COMPLIANCE WITH AMERICANS WITH DISABILITIES ACT
Landlord and Tenant hereby agree and acknowledge that the Premises and/or
the Park may be subject to the requirements of the Americans with
Disabilities Act, a federal law codified at 42 U.S.C. 12101 et seq,
including, but not limited to Title III thereof, all regulations and
guidelines related thereto, together with any and all laws, rules,
regulations, ordinances, codes and statutes now or hereafter enacted by
local or state agencies having jurisdiction thereof, including all
requirements of Title 24 of the State of California, as the same may be in
effect on the date of this Lease and may be hereafter modified, amended or
supplemented (collectively, the "ADA"). Any Tenant Improvements to be
constructed hereunder shall be in compliance with the requirements of the
ADA, and all costs incurred for purposes of compliance therewith shall be
a part of and included in the costs of the Tenant Improvements. Tenant
shall be solely responsible for conducting its own independent
investigation of this matter and for ensuring that the design of all
Tenant Improvements strictly comply with all requirements of the ADA.
Subject to reimbursement pursuant to Section 6 of the Lease, if any
barrier removal work or other work is required to the Building, the
Premises or the Park under the ADA, then such work shall be the
responsibility of Landlord; provided, if such work is required under the
ADA as a result of Tenant's use of the Premises or any work or alteration
made to the Premises by or on behalf of Tenant, then such work shall be
performed by Landlord at the sole cost and expense of Tenant. Except as
otherwise expressly provided in this provision, Tenant shall be
responsible at its sole cost and expense for fully and faithfully
complying with all requirements of the ADA, including without limitation,
not discriminating against any disabled persons in the operation of
Tenant's business in or about the Premises, and offering or otherwise
providing auxiliary aids and services as, and when, required by the ADA.
Within ten (10) days after receipt, Landlord and Tenant shall advise the
other party in writing, and provide the other with copies of (as
applicable), any notices alleging violation of the ADA relating to any
portion of the Premises or the Building; any claims made or threatened in
writing regarding noncompliance with the ADA and relating to any portion
of the Premises or the Building; or any governmental or regulatory actions
or investigations instituted or threatened regarding noncompliance with
the ADA and relating to any portion of the Premises or the Building.
Tenant shall and hereby agrees to protect, defend (with counsel acceptable
to Landlord) and hold Landlord and the other Indemnitees harmless and
indemnify the Indemnitees from and against all liabilities, damages,
claims, losses, penalties, judgments, charges and expenses (including
reasonable attorneys' fees, costs of court and expenses necessary in the
prosecution or defense of any litigation including the enforcement of this
provision) arising from or in any way related to, directly or indirectly,
Tenant's or Tenant's Representatives' violation or alleged violation of
the ADA. Tenant agrees that the obligations of Tenant herein shall
survive the expiration or earlier termination of this Lease.
Notwithstanding anything to the contrary contained herein, if Tenant in
the conduct of its operations in the Premises (and not in making any
alterations or improvements in or about the Premises, including without
limitation, the Tenant Improvements) fails to comply with the ADA
requirements, Tenant shall not be considered to be in default of the
provisions of this Lease so long as Tenant indemnifies Landlord and the
other Indemnitees with respect to said violations, as such indemnity is
set forth herein.
38. BROKERAGE COMMISSION
Landlord and Tenant each represents and warrants for the benefit of the
other that it has had no dealings with any real estate broker, agent or
finder in connection with the Premises and/or the negotiation of this
Lease, except for the Broker(s) (as set forth on Page 1), and that it
knows of no other real estate broker, agent or finder who is or might be
entitled to a real estate brokerage commission or finder's fee in
connection with this Lease or otherwise based upon contacts between the
claimant and Tenant. Each party shall indemnify and hold harmless the
other from and against any and all liabilities or expenses arising out of
claims made for a fee or commission by any real estate broker, agent or
finder in connection with the Premises and this Lease other than
Broker(s), if any, resulting from the actions of the indemnifying party.
Any real estate brokerage commission or finder's fee payable to the
Broker(s) in connection with this Lease shall only be payable and
applicable to the extent of the initial Term of the Lease and to the
extent of the Premises as same exist as of the date on which Tenant
executes this Lease. Unless expressly agreed to in writing by Landlord
and Broker(s), no real estate brokerage commission or finder's fee shall
be owed to, or otherwise payable to, the Broker(s) for any renewals or
other extensions of the initial Term of this Lease or for any additional
space leased by Tenant other than the Premises as same exists as of the
date on which Tenant executes this Lease. Tenant further represents and
warrants to Landlord that Tenant will not receive (i) any portion of any
brokerage commission or finder's fee payable to the Broker(s) in
connection with this Lease or (ii) any other form of compensation or
incentive from the Broker(s) with respect to this Lease. Landlord shall
pay and indemnify and hold Tenant free and harmless from all fees and
commissions owed or hereafter owing to Brokers in connection with this
Lease (but not the Purchase Option for which no commission is due or
payable).
39. QUIET ENJOYMENT
Landlord covenants with Tenant, upon the paying of Rent and observing and
keeping the covenants, agreements and conditions of this Lease on its
part to be kept, and during the periods that Tenant is not otherwise in
default of any of the terms or provisions of this Lease beyond any
applicable cure periods , and subject to the rights of any of Landlord's
lenders, (i) that Tenant shall and may peaceably and quietly hold, occupy
and enjoy the Premises and the Common Areas during the Term of this
Lease, and (ii) neither Landlord, nor any successor or assign of
Landlord, nor any of Landlord's Representatives shall disturb Tenant's
occupancy or enjoyment of the Premises and the Common Areas.
40. LANDLORD'S ABILITY TO PERFORM TENANT'S UNPERFORMED OBLIGATIONS
Notwithstanding anything to the contrary contained in this Lease, if
Tenant shall fail to perform any of the terms, provisions, covenants or
conditions to be performed or complied with by Tenant pursuant to this
Lease, and if the failure of Tenant relates to a matter which in
Landlord's judgment reasonably exercised is of an emergency nature and
such failure shall remain uncured for a period of time commensurate with
such emergency, then Landlord may upon twenty-four hours prior written
notice to Tenant, at Landlord's option without any obligation to do so,
and in its sole discretion as to the necessity therefor, perform any such
term, provision, covenant, or condition, or make any such payment and
Landlord by reason of so doing shall not be liable or responsible for any
loss or damage thereby sustained by Tenant or anyone holding under or
through Tenant. If Landlord so performs any of Tenant's obligations
hereunder, the full amount of the cost and expense reasonably entailed or
the reasonable payment so made or the amount of the loss so sustained
shall immediately be owing by Tenant to Landlord, and Tenant shall
promptly pay to Landlord upon demand, as Additional Rent, the full amount
thereof with interest thereon from the date of payment at the greater of
(i) ten percent (10%) per annum, or (ii) the highest rate permitted by
applicable law.
41. ADJUSTMENTS TO BASE RENT
The monthly Base Rent payable by Tenant to Landlord, as set forth in this
Lease, shall be adjusted effective on the first (1st) day of each of the
thirty-first (31st), sixty-first (61st) and ninety-first (91st) month
anniversary dates of the Commencement Date of this Lease (each an
"Adjustment Date"), in accordance with the percentage increase, if any,
in the "Consumer Price Index for Urban Wage Earners and Clerical Workers
(CPI-W) for Los Angeles-Riverside-Orange County, California" (Base:
1982-1984=100), as published by the United States Department of Labor,
Bureau of Labor Statistics ("Index").
The monthly Base Rent payable on each Adjustment Date shall be the product
of the monthly Base Rent in effect on the last day preceding each
Adjustment Date and the fraction described below. The denominator of such
fraction shall be the Index in effect one (1) month prior to the
Commencement Date of the Lease or the last Adjustment Date, as the case
may be ("Base Index"). The numerator of such fraction shall be the Index
in effect one (1) month prior to the last day preceding each Adjustment
Date ("Adjustment Index"). The monthly Base Rent shall be increased and
paid thereafter in accordance with the percentage increase, if any,
between such Indices; provided, however, in no event shall such increase,
on an annual basis, be less than two percent (2%) or more than five
percent (5%).
Should said Bureau discontinue the publication of the above Index, or the
compilation of the Index be materially altered, or publish the same less
frequently, or vary the method of calculation of same, or alter the same
in some other manner, then Landlord shall adopt a substitute index which
is most nearly the same or substitute procedure which reasonably reflects
and monitors consumer prices, and shall be used to make such calculation.
If the Index is changed so that the base year differs from that in
effect when the term commences, the Index shall be converted in
accordance with the conversion factor published by the United States
Department of Labor, Bureau of Labor Statistics, or, if said bureau shall
not publish the same, then with the use of such conversion factor,
formula or table as may be published by Prentice Hall Inc. or by any
other nationally recognized publisher of similar statistical information.
In the event the compilation and/or publication of the Index shall be
discontinued or materially altered, then the index most nearly the same
as the Index shall be used to make such calculation. In the event
Landlord and Tenant cannot agree on such alternative Index, then the
matter shall be submitted to the American Arbitration Association in
accordance with the then rules of the said Association and a decision of
the arbitrators as to the applicable Index shall be binding upon the
parties. The cost of said arbitrator shall be paid equally by Landlord
and Tenant.
Example:
Hypothetical Facts:
Lease Commencement Date or
Last Adjustment Date: 9/1/92
Adjustment Date: 9/1/93
Monthly rent in effect: 8/31/93 $2,000.00
Base Index: July, 1992 - 410.0
Adjustment Index: July, 1993 - 430.0
Adjusted Rent Calculation:
Ratio of Indices: 430.0 = 1.0488 or 4.88%
410.0
Adjusted monthly rent: $2,000.00 x 4.88% = $2,097.60
42. OPTIONS TO EXTEND THE LEASE TERM
42.1 Grant of Extension Options. Subject to the provisions,
limitations and conditions set forth in Section 42.5 below, Tenant shall
have an option (individually, an "Option" and collectively, the
"Options") to extend the term of the Lease for two (2) successive five
(5) year periods (individually, the "First Extended Term" and the
"Second Extended Term", respectively, and collectively, the "Extended
Terms").
42.2 Tenant's Option Notice. Landlord must receive written notice
(an "Option Notice") from Tenant of Tenant's exercise of an Option on a
date which is not more than twelve (12) months nor less than ten (10)
months prior to the end of, with respect to the First Extended Term, the
initial term of the Lease or, with respect to the Second Extended Term,
the First Extended Term. In the event Tenant fails to timely and
properly exercise such Option for the (i) First Extended Term, all rights
to both Options shall automatically terminate and be of no further force
or effect, or (ii) Second Extended Term, all rights to the Option for the
Second Extended Term shall automatically terminate and be of no further
force or effect.
42.3 Establishing the Initial Monthly Base Rent for the Extended
Terms. The initial monthly Base Rent for each of the First Extended Term
and the Second Extended Term shall be ninety-five percent (95%) of the
then current market rent for the then current use of the Premises within
the competitive market area of the Premises (the "Fair Rental Value").
Notwithstanding the foregoing, "Fair Rental Value" of the Premises
means the current market rental value of the Premises as of the
commencement of the First Extended Term or the Second Extended Term, as
applicable, taking into consideration all relevant factors, including
length of term, the warehouse uses permitted under the Lease, the
quality, size, design and location of the Premises, including the
condition and value of existing tenant improvements (but only to the
extent the cost of which has been contributed to by Landlord), and the
monthly base rent paid by tenants for premises comparable to the
Premises, and located within the competitive market area of the Premises.
In no event shall the monthly Base Rent for any period of the First
Extended Term, as determined pursuant to this Section 42.3, be less than
the highest monthly Base Rent charged during the initial term of the
Lease. In no event shall the monthly Base Rent for any period during the
Second Extended Term, as determined pursuant to this Section 42.3, be
less than the highest monthly Base Rent charged during the initial term
or the First Extended Term.
(a) Determination of Base Rent for the First Extended Term. Base
Rent for the First Extended Term of this Lease, if applicable,
shall be a monthly sum, (which in no event shall be less than the
monthly sum payable during the last full calendar month of the
initial term), which shall be determined as follows:
(i) During the period commencing within the Option Notice
and ending nine and one-half (9 1/2) months prior to the
expiration of the initial term, Landlord and Tenant shall
meet at such times as they shall mutually agree and endeavor
in good faith to agree upon the Base Rent for the First
Extended Term.
(ii) If Landlord and Tenant are unable to agree, during the
period stated in subsection (a)(i), on the Base Rent for the
First Extended Term, such Base Rent shall be determined by
appraisal in the manner provided in subsection (c) below.
(b) Determination of Base Rent for the Second Extended Term.
Base Rent for the Second Extended Term of this Lease, if
applicable, shall be a monthly sum (which in no event shall be less
than the monthly sum payable during the last full calendar month of
the First Extended Term), which shall be determined as follows:
(i) During the period commencing with Tenant's delivery of
the Option Notice and ending nine and one-half (9 1/2) months
prior to the expiration of the First Extended Term, Landlord
and Tenant shall meet at such times as they shall mutually
agree and endeavor in good faith to agree upon the Base Rent
for the Second Extended Term.
(ii) If Landlord and Tenant are unable to agree, during the
period stated in subsection (b)(i), on the Base Rent for the
Second Extended Term, such Base Rent shall be determined by
appraisal in the manner provided in subsection (c) below.
(c) Appraisal Process. If Landlord and Tenant are unable to
agree upon the amount of Base Rent payable during either of the
Extended Terms, as provided above, they each shall, not later than
ten (10) days after the end of the period for attempting to agree
upon Base Rent, appoint an independent M.A.I. appraiser who shall
have at least ten (10) years' experience in the commercial real
estate market in which the Premises is located and shall be
familiar with the valuation of comparable property in such area and
otherwise qualified to act as an expert witness over objection to
give opinion testimony addressed to the issue in a court of
competent jurisdiction. Within said ten (10) day period, each
party shall notify the other party in writing of the name, address,
telephone number and qualifications of its appraiser so appointed.
If either party shall fail to notify the other party of its named
appraiser within said ten (10) day period, the determination of
Base Rent by the single appraiser appointed shall be conclusive and
binding upon both Landlord and Tenant.
(i) The appraisers appointed pursuant to this subsection
(c) shall determine the "Fair Rental Value" for the Premises
as of the date of calculation thereof.
(ii) The appraisers shall, not later than eight (8) months
prior to the expiration of the initial term, or the First
Extended Term, as the case may be, report in writing to the
party appointing him/her their opinion as to the Fair Rental
Value. Each party shall, promptly upon receipt of the
appraisal report from its appraiser, provide the other party
with a copy thereof. Not later than seven and one-half (7 1/2)
months prior to the expiration of the applicable Term,
Landlord and Tenant shall meet at such times as they shall
mutually agree and endeavor in good faith to agree upon the
Base Rent based upon the reports of the appraisers. If
Landlord and Tenant are unable to agree on the Base Rent
within the time specified above, the appraisers shall appoint
a third appraiser, qualified as aforesaid, who shall, not
later than six and one-half (6 1/2) months prior to the
expiration of the applicable Term, determine the Fair Rental
Value on the basis of the two appraisal reports previously
prepared and consultation with such appraisers and/or other
experts and competent authorities as such third appraiser
shall deem relevant or appropriate in his/her discretion. So
long as it is not inconsistent with any of the express
provisions of this Lease and is not arbitrary and capricious,
the written report and determination of Fair Rental Value by
the third appraiser shall be accepted by Landlord and Tenant
as the Base Rent, which determination shall be final and
binding and enforceable in a court of competent jurisdiction
with the same force and effect as if the same were a judgment
duly entered by such court. In the event that the two
originally appointed appraisers cannot for any reason agree
on a third M.A.I. appraiser, then either Landlord or Tenant,
on behalf on both, may request appointment of such third
M.A.I. appraiser by the then Chief Judge of the United States
District Court having jurisdiction over the Premises, and
neither party shall raise any question as to such Judge's
full power and jurisdiction to entertain the application for
and make such appointment hereunder.
(iii) In the use of appraisers hereunder, each party shall
pay the fees and expenses of its own appraiser and shall
share equally the fees and expenses of any third appraiser
appointed hereunder.
Upon determination of the initial monthly Base Rent for the First
Extended Term and the Second Extended Term, as applicable, pursuant to
the terms outlined above, Landlord and Tenant shall immediately execute
an amendment to the Lease. Such amendment shall set forth among other
things, the initial monthly Base Rent for the First Extended Term or the
Second Extended Term, as applicable, and the actual commencement date and
expiration date of the First Extended Term or the Second Extended Term,
as the case may be. Tenant shall have no other right to further extend
the term of the Lease under this Section 42 unless Landlord and Tenant
otherwise agree in writing.
42.4 Condition of Premises and Brokerage Commissions for the
Extended Terms. If Tenant timely and properly exercises either Option,
in strict accordance with the terms contained herein: (1) Tenant shall
accept the Premises in its then "AS-IS" condition and, accordingly,
Landlord shall not be required to perform any additional improvements to
the Premises; and (2) Tenant hereby agrees that it will solely be
responsible for any and all brokerage commissions and finder's fees
payable to any broker now or hereafter procured or hired by Tenant or who
otherwise claims a commission based on any act or statement of Tenant
("Tenant's Broker") in connection with the Options; and Tenant hereby
further agrees that Landlord shall in no event or circumstance be
responsible for the payment of any such commissions and fees to Tenant's
Broker.
42.5 Limitations On, and Conditions To, Extension Options. The
Options described in this Section 42 are personal to Tenant and may not
be assigned, voluntarily or involuntarily, separate from or as part of
the Lease except for an assignment to a Related Entity as part of the
assignment of the entirety of this Lease. At Landlord's option, all
rights of Tenant and any Related Entity in, to and under the Options
described in this Section 42 shall terminate and be of no force or effect
if any of the following individual events occur or any combination
thereof occur: (1) Tenant or the Related Entity, as the case may be, is
in default in the performance of any of its obligations under this Lease
beyond applicable notice and cure periods at the time of Tenant's or the
Related Entity's (as the case may be) exercise of the then applicable
Option to extend the then applicable term of this Lease; and/or (2)
Tenant or the Related Entity (as the case may be) has assigned all of its
rights and obligations under the Lease to any party other than a Related
Entity, or Tenant has subleased all of the Premises; and/or (3) Tenant
has failed to exercise properly the Options described in this Section 42
in a timely manner in strict accordance with the provisions of this
Section 42; and/or (4) Tenant or the Related Entity (as the case may be)
no longer has possession of all of the Premises under the Lease.
42.6 Time is of the Essence. Time is of the essence with respect
to each and every time period set forth in this Section 42.
43. OPTION TO EXPAND
43.1 Grant of Expansion Option. Subject to the provisions,
limitations and conditions set forth in this Section 43, Tenant shall
have a one-time option ("Expansion Option") to lease the adjacent
building situated within the Park consisting of approximately 107,182
rentable square feet ("Expansion Premises") on the terms and conditions
as set forth below. Notwithstanding anything to the contrary contained
herein, the Expansion Option shall not be effective until and unless the
subject Expansion Premises becomes available for lease by a third party,
subject and subordinate to the rights of the existing tenant, namely Duty
Free Shoppers (together with its successors and assigns, "DFS"),
presently occupying the Expansion Premises pursuant to the terms and
provisions of its lease, as such lease may be later modified or amended
but in no event extended. Notwithstanding anything to the contrary
contained herein, the Expansion Option shall not be available to Tenant
nor effective if the Expansion Premises are occupied through the
Expansion Option Date defined below.
43.2 Tenant's Election Notice to Lease Expansion Premises; and
Lease Term for Expansion Premises. In order to duly exercise the
Expansion Option hereunder Tenant must deliver to Landlord by no later
than October 1, 2000 ("Expansion Option Date") prior written notice of
its unconditional and unequivocal intention to exercise the Expansion
Option to lease the Expansion Premises (the "Expansion Option Notice")
commencing on the earlier to occur of (i) the date on which the Expansion
Premises becomes available, or (ii) August 1, 2001 if DFS timely vacates
the Expansion Premises and surrenders possession thereof to Landlord in
accordance with DFS' lease agreement (the "EP Commencement Date").
Tenant hereby acknowledges and agrees that Landlord needs and requires at
least nine (9) months' prior written notice of Tenant's election to
exercise the Expansion Option hereunder. If Tenant timely and duly
delivers to Landlord the Expansion Option Notice by the Expansion Option
Date and Tenant also complies with all of the terms and provisions of
this Section 43, the term for the Expansion Premises shall be coterminous
with the Term of this Lease and begin on the EP Commencement Date.
Tenant acknowledges and agrees that the actual commencement date of the
term for the Expansion Premises shall not be dependent upon completion of
any tenant improvement work therein; rather, the actual commencement date
shall be the EP Commencement Date dependent only upon the Expansion
Premises then being vacant and available for lease by Tenant.
43.3 Expansion Premises Base Rent, Security Deposit and Other
Terms. The Rent payable by Tenant for the Expansion Premises shall
initially be the same as is then in effect for the Premises as of the EP
Commencement Date and thereafter shall be subject to adjustments in
accordance with the provisions of Section 41 above. Tenant shall not be
required to pay Base Rent for the Expansion Premises during the first two
(2) calendar months of the Term therefor. If the Expansion Option is
duly exercised, from and after the EP Commencement Date, the term
"Premises" as used herein shall mean and refer to the aggregate of the
Premises, as described herein as of the Lease Date, and the Expansion
Premises. In addition to the increase in Rent, (i) the amount of the
Security Deposit shall be increased by the amount of the last months'
Base Rent payable for the Expansion Premises (as estimated by Landlord)
and Tenant shall pay same to Landlord within ten (10) business days of
delivery to Landlord of the Expansion Option Notice, (ii) the Tenant's
Share for all expenses shall increase to 100% of the Park, (iii) the
number of Tenant's parking spaces shall be increased commensurately, (iv)
Exhibit B shall be modified to provide that there shall be no Tenant
Improvement Allowance attributable or otherwise payable by Landlord with
respect to the Expansion Premises; it being the intention of the parties
that the Tenant pay for all of the costs and expenses associated with any
tenant improvements to be made to the Expansion Premises, (v) the
exclusions from the definition of Operating Expenses shall be modified as
appropriate, including but not limited to, deleting clauses (vi) and
(xii) therefrom, and (vi) the parties shall execute an amendment to this
Lease effectuating the foregoing within ten (10) business days of
delivery to Landlord of the Expansion Option Notice. All other terms and
conditions shall remain the same.
43.4 Brokerage Commission for the Expansion Premises. Tenant
hereby agrees that it will be solely responsible for any and all
brokerage commissions and finder's fees payable or allegedly payable to
any broker now or hereafter procured or otherwise hired by Tenant
("Tenant's Broker") in connection with Tenant's lease of the Expansion
Premises. Tenant hereby further agrees that Landlord shall in no event
or circumstance be responsible or otherwise liable for the payment of any
such brokerage commissions and/or finder's fees to Tenant's Broker and,
accordingly, Tenant shall indemnify, defend and hold Landlord and each of
its partners, members, officers, directors, shareholders, representatives
and agents harmless from and against any and all claims, damages,
judgments, liabilities, costs and expenses (including without limitation,
attorneys' and experts' fees and costs) related thereto.
43.5 Limitations on, and Conditions to, Expansion Option.
43.5.1 The Expansion Option granted to Tenant herein is
personal to Tenant and may not be assigned, voluntarily or
involuntarily, separate from or as a part of the Lease except for
an assignment to a Related Entity as part of the assignment of the
entirety of this Lease. At Landlord's sole option, all rights of
Tenant and any Related Entity in, to and under this Section 43
shall terminate and be of no force or effect if any of the
following individual events occur or any combination thereof occur
at any time during the Term of the Lease: (i) Tenant or the Related
Entity, as the case may be, is in default of any provision of the
Lease beyond applicable notice and cure periods at the time of
Tenant's or the Related Entity's (as the case may be) delivery to
Landlord of the Expansion Option Notice; and/or (ii) Tenant or the
Related Entity (as the case may be) has assigned all of its rights
and delegated its obligations under the Lease to a party other than
a Related Entity or Tenant has subleased all of the Premises;
and/or (iii) Tenant has failed to timely, properly and duly
exercise the Expansion Option in strict accordance with the
provisions of this Section 43; and/or (iv) Tenant or the Related
Entity (as the case may be) no longer has possession of all of the
Premises.
43.5.2 If any of the following described events occur the
Expansion Option shall automatically terminate with respect to the
Expansion Premises and thereafter be of no further force or effect:
(i) Tenant elects not to exercise the Expansion Option; or (ii)
Tenant fails to timely deliver the Expansion Option Notice to
Landlord prior to the Expansion Option Date. If any of the
foregoing events occur, Tenant shall have no further right to
exercise the Expansion Option thereafter. It is the express
intention of the parties hereto that the Expansion Option only be
available to be exercised, declined or deemed declined by Tenant
one time and the Expansion Option shall neither be construed nor
interpreted as being a continuing right of Tenant or of a
continuing nature.
43.6. Confidentiality Obligations. Tenant hereby covenants and
warrants to Landlord that Tenant shall (i) keep and maintain the terms
and provisions of this Section 43 and the terms of any offers,
acceptances and correspondence pursuant to this Section 43 strictly
confidential, and (ii) not disclose, disseminate or otherwise publish the
terms of this Section 43 or the terms of any offers, acceptances and
correspondence to any party other than to Tenant's respective advisors.
The foregoing covenant and warranty made by Tenant shall not apply in
those instances where such disclosure is required by law, a valid court
order, or in order to effectuate the provisions of this Section 43. If
any such disclosure is made, then Tenant shall ensure that each party to
whom such disclosure is made will enter into a similar covenant and
warranty to maintain such information in strict confidence for the
benefit of Landlord. If Tenant violates any of the provisions of this
Section 43.6, then Landlord may immediately terminate the Expansion
Option unless Tenant cures such violation within ten (10) days after
Landlord's delivery to Tenant of written notice thereof.
43.7 Time of the Essence. Time is of the essence in the
performance of the parties' respective obligations set forth in this
Section 43.
44. OPTION TO PURCHASE
44.1 Grant of Purchase Option: Landlord hereby grants to Tenant
the right and option (the "Purchase Option") to purchase the Park
(inclusive of the Buildings, the parking structure and the Lot) subject
to all of the terms, conditions and provisions contained in this Section
44. Notwithstanding anything to the contrary contained herein, if Tenant
is in Chronic Default at any time during the Term of this Lease, then the
Purchase Option granted herein shall immediately expire, lapse and
terminate for all purposes as of the date of the occurrence of the last
of such uncured default and thereafter shall be of no further force or
effect.
44.2 Term of Purchase Option: The term of the Purchase Option
(the "Purchase Option Term") shall be for a period of six (6) months,
commencing on July 1, 1999 and ending on December 31, 1999. Unless
timely and properly exercised as provided herein, the Purchase Option
shall expire, lapse and terminate for all purposes at the end of the
Purchase Option Term and thereafter shall be of no further force or
effect. In such event, within five (5) days thereafter, Tenant shall
execute, acknowledge and deliver to Landlord a quitclaim deed, in
recordable form and as is then acceptable to Landlord, terminating its
interest in, to and under the Purchase Option.
44.3 Exercise of Purchase Option and Execution of Sale Agreement:
Tenant shall exercise the Purchase Option, if at all, by delivering
written notice (the "Notice of Exercise") to Landlord within the Purchase
Option Term and prior to the expiration of the Purchase Option Term. The
Notice of Exercise shall set forth the fact that the Purchase Option is
being unconditionally and unequivocally exercised by Tenant with
absolutely no contingencies except for (i) the delivery by Landlord into
escrow of the Grant Deed and any other documents Landlord is required to
deliver to effectuate the closing contemplated herein, and (ii) a thirty
(30) day inspection period from the date on which the Notice of Exercise
is delivered during which Tenant may perform a "Phase 1" environmental
site assessment, review and approve any other leases, any contracts and
title matters and notify Landlord of its approval of the acquisition of
the Park (the "Inspection Period"). Within one (1) week after Tenant's
delivery to Landlord of the Notice of Exercise, Landlord and Tenant shall
execute and deliver a written sale agreement for the purchase of the
Park, in form acceptable to both Landlord and Tenant (the "Sale
Agreement"). Notwithstanding the foregoing nor anything to the contrary
contained herein, the Sale Agreement shall provide for and contain, inter
alia, the following provisions: (i) the provisions of this Section 44
pertaining the sale of the Park (including but not limited to, the amount
of the Purchase Price as specified herein, the method of payment of the
Purchase Price as specified herein, the identity of the "Escrow Holder"
or "Title Company" as specified herein, and the Closing Date as specified
herein); (ii) that Tenant shall purchase the Park strictly "AS IS",
"WHERE IS" and "WITH ALL FAULTS" and with absolutely no implied or
express representations or warranties from Landlord or any of its agents,
employees or representatives except as otherwise expressly set forth in
Section 44.3.1 below; and (iii) Tenant shall unconditionally and
unequivocally release Landlord and its members, agents, employees,
representatives, lenders, successors and assigns from any and all claims,
liabilities, demands, causes of action, matters, damages, judgments,
losses, expenses, whether foreseeable, unforeseeable, known or unknown,
in any manner relating to the Park, including without limitation, the
condition of the Park. Such release shall be in form acceptable to
Landlord in its sole and absolute discretion, and shall include a release
of claims as specified in California Civil Code Section 1542. If for any
reason whatsoever the Sale Agreement is not executed and delivered by
both Landlord and Tenant prior to the expiration of said one (1) week
period, then unless Landlord expressly extends such 1-week time period in
writing, the Purchase Option shall expire, lapse and terminate for all
purposes at the end of such one (1) week period and thereafter shall be
of no further force or effect.
44.3.1 Limited Representations of Landlord. Except as then
otherwise disclosed by Landlord to Tenant, Landlord shall make the
following representations in the Sale Agreement, to the actual
knowledge of Landlord:
(a) there is no litigation then pending or, to Landlord's
actual knowledge threatened, against Landlord or the Park or any basis
therefor that arises out of the ownership of the Park or that is likely to
materially and detrimentally affect the use or operation of the Park for
Tenant's intended purpose or materially and adversely affect the ability
of Landlord to perform its obligations under the Sale Agreement.
(b) to Landlord's actual knowledge, other than the occupants
of the Park, no other parties have the right of possession to any portion
of the Park.
(c) Landlord has not given any other party an option to
purchase the Park.
(d) to Landlord's actual knowledge, Landlord has not
received written notice of any material pending violations of Laws
excluding any matters or violations relating to Hazardous Materials or the
physical condition of the Park.
44.4 Effect of Exercise and Closing Date: In the event Tenant
exercises the Purchase Option as provided herein, then from the date of
delivery of the Notice of Exercise Tenant unequivocally and
unconditionally agrees to purchase the Park from Landlord and Landlord
agrees to sell the Park in accordance with the provisions contained in
this Section 44 and the Sale Agreement. So long as Tenant has timely and
properly exercised the Purchase Option and executed and delivered the Sale
Agreement in strict accordance with the provisions of this Section 44,
escrow shall close for the sale of the Park on the date which is sixty
(60) days after the date on which Tenant delivers to Landlord the Notice
of Exercise (the "Closing Date"). The Closing Date shall not be extended
to a later date unless Landlord expressly agrees otherwise in writing, in
Landlord's sole and absolute discretion.
44.5 Purchase Price: The purchase price (the "Purchase Price") of
the Park shall be the sum in the amount of Sixteen Million Two Hundred
Forty-Five Thousand Twenty Dollars ($16,245,020.00), subject to
prorations. Tenant shall pay the Purchase Price to Landlord at Close of
Escrow (defined below), in cash, in immediately available funds via wire
transfer or cashier's check drawn upon a California bank, at Close of
Escrow. Tenant shall deliver such funds into escrow by no later than one
(1) business day prior to the Closing Date or such earlier date as may be
required by the Escrow Holder.
44.6 Conveyance: Landlord shall by grant deed, in form reasonably
acceptable to Landlord (the "Grant Deed"), at Close of Escrow (defined
below) convey to Tenant fee title to the Park subject to all taxes and
assessments, matters of record, all encumbrances and liens (other than
any lien of a deed of trust or mortgage executed by Landlord in favor a
lender with respect to the Park or other monetary encumbrances created by
Landlord), applicable Laws, rules and regulations and the exceptions to
title as set forth in a preliminary title report (the "Title Report")
from Fidelity National Title Insurance Company ("Escrow Holder" or "Title
Company"), located at 50 California Street, Suite 2950, San Francisco,
California 94111 (Mr. Bill Waite). Evidence of title to the Park shall
be insured by use of the form of a California Land Title Association
policy of title insurance (the "CLTA Owner's Title Policy"), naming
Tenant as the insured, which insurance shall be in the amount of the
Purchase Price.
44.7 Escrow and Possession: Within two (2) business days after
the date on which Tenant delivers to Landlord the Notice of Exercise,
Tenant shall open escrow for this sale with the Title Company. All
escrow instructions shall be consistent with the terms and conditions of
this Section 44 and the Sale Agreement. Close of escrow ("Close of
Escrow") means the moment when the Grant Deed is recorded in the Official
Records of Los Angeles County, California. Title shall be conveyed and
possession given to Tenant at Close of Escrow, subject to this Lease if
Tenant so elects, in writing. Escrow shall close on the Closing Date.
Each party shall timely deposit such documents, monies and written escrow
instructions with the Escrow Holder as may be necessary for the
conveyance of the Park in accordance with the terms of this Section 44
and the Sale Agreement.
44.8 Condition of Park: Tenant acknowledges that prior to Close
of Escrow it or its agents will have occupied the Premises, inspected the
Park and observed the physical characteristics and condition of the Park.
Tenant hereby waives any and all deficiencies and defects in the
physical characteristics and condition of the Park which would be
disclosed by such inspection. Tenant further acknowledges that except
for the limited representations set forth in Section 44.3.1 hereof
neither Landlord or any of Landlord's employees, agents or
representatives have made or will make any representations, warranties or
agreements by or on behalf of Landlord as to any matters concerning the
Park, the present use thereof or the suitability of Tenant's intended use
of the Park, including without limitation, the suitability of the
topography; the availability of water rights or utilities; the present
and future zoning, subdivision and any and all other land use matters;
the condition of the soil, subsoil or groundwater of the Park and any and
all other environmental matters; the purposes(s) to which the Park is
suited; drainage; flooding; access to public roads; or proposed routes of
roads or extensions thereof.
44.9 Closing Costs and Prorations: All costs associated with the
transfer of title to the Park and the associated escrow shall be in
accordance with the customary practices in Los Angeles County except as
otherwise expressly set forth herein. Landlord shall pay the applicable
city transfer taxes (if any), the documentary county transfer taxes, one-
half of the escrow fees, and the recording costs with respect to the
Grant Deed and to remove monetary liens attributable to financing
obtained by Landlord with respect to the Park. Tenant shall pay one-half
of the escrow fees, and the recording costs for any instruments it
desires to be recorded. Tenant may elect to cause the Title Company to
issue an ALTA Owner's Policy of Title Insurance (extended coverage) and
if Tenant so elects, Tenant shall timely provide the Title Company with
an ALTA Survey of the Park, at its sole cost and expense (the "ALTA
Policy"). Landlord shall pay the premium charged for the CLTA Owner's
Title Policy (excluding endorsements) and Tenant shall pay for any
incremental premiums or other charges related to the ALTA Policy
(including endorsements). Real property taxes and assessments, except
for those paid by Tenant under the Lease, shall be prorated as of Close
of Escrow. Rent and other operating expenses for the Lease shall also be
prorated as of Close of Escrow. Each party shall pay the legal fees
incurred for its own legal counsel.
44.10 Broker's Commission: No brokerage commission or fee shall be
due or payable to any party in connection with the transfer of the Park
as contemplated in this Section 44 and in the Sale Agreement. Landlord
and Tenant each covenant to the other that they have not entered into any
agreement or incurred any obligation which may result in the obligation
of the other party to pay a sales or brokerage commission or finder's fee
on this transaction to any party or company.
44.11 Assignment: The terms and provisions of this Section 44
shall be binding upon and inure to the benefit of the parties'
successors. Except for an assignment to a Related Entity as part of this
Lease, the Purchase Option is personal to Tenant and may not be assigned,
voluntarily or involuntarily, to any party or entity, separate from or as
part of the Lease. Any such attempted assignment in violation of the
foregoing shall be null and void.
45. LETTER OF CREDIT
Simultaneously with Tenant's delivery to Landlord of this Lease, the
first month's Base Rent and Security Deposit in accordance with the
provisions of Section 3 above, Tenant shall deliver to Landlord, as
collateral for the full and faithful performance by Tenant of all of its
obligations under this Lease and for all losses and damages Landlord may
suffer as a result of any default by Tenant under this Lease, an
irrevocable and unconditional negotiable letter of credit, in the form
and containing the terms required herein, payable in the City of Irvine,
California running in favor of Landlord issued by a solvent bank under
the supervision of the Superintendent of Banks of the State of
California, or a National Banking Association (the "Issuer"), in the
amount of Five Hundred Thousand Dollars ($500,000.00), (the "Letter of
Credit"). The Letter of Credit shall be (a) at sight, irrevocable and
unconditional, (b) maintained in effect, whether through replacement,
renewal or extension, until one (1) month after the entire Lease Term or
until such time as Tenant achieves three (3) successive quarters of
positive earnings before interest, taxes, depreciation and amortization
as reported in Tenant's audited 10Q (the "Letter of Credit Expiration
Date") and Tenant shall deliver a new Letter of Credit or certificate of
renewal or extension to Landlord at least thirty (30) days prior to the
expiration of the Letter of Credit, without any action whatsoever on the
part of Landlord, (c) subject to the Uniform Customs and Practices for
Documentary Credits (1993-Rev) International Chamber of Commerce
Publication #500, (d) acceptable to Landlord in its reasonable
discretion, and (e) fully assignable by Landlord by amendment thereto in
accordance with customary letter of credit practice and shall permit
partial draws. In addition to the foregoing, the form and terms of the
Letter of Credit (and the bank issuing the same) shall be acceptable to
Landlord, in Landlord's reasonable discretion, and shall provide, among
other things, in effect that: (1) Landlord, or its then managing agent,
shall have the right to draw down an amount up to the face amount of the
Letter of Credit upon the presentation to the issuing bank of Landlord's
(or Landlord's then managing agent's) statement that such (A) amount is
due to Landlord under the terms and conditions of this Lease, it being
understood that if Landlord or its managing agent be a limited liability
company, corporation, partnership or other entity, then such statement
shall be signed by a managing member (if a limited liability company), an
officer (if a corporation), a general partner (if a partnership), or any
authorized party (if another entity), and (B) an event of default has
occurred under this Lease and, all applicable notice and cure periods
have elapsed; (2) the Letter of Credit will be honored by the issuing
bank without inquiry as to the accuracy thereof and regardless of whether
the Tenant disputes the content of such statement; and (3) in the event
of a transfer of Landlord's interest in the Premises, Landlord shall
transfer the Letter of Credit, in whole or in part (or cause at Tenant's
expense a substitute letter of credit to be delivered, as applicable), to
the transferee and thereupon the Landlord shall, without any further
agreement between the parties, be released by Tenant from all liability
therefor, and it is agreed that the provisions hereof shall apply to
every transfer or assignment of the whole or any portion of said Letter
of Credit to a new Landlord. Tenant hereby acknowledges and agrees that
Landlord is entering into this Lease in material reliance upon the
ability of Landlord to draw upon the Letter of Credit upon the occurrence
of any default on the part of Tenant hereunder which continues beyond any
applicable notice and cure periods. Tenant further acknowledges and
agrees that if Landlord cannot draw upon the Letter of Credit within the
times and in the manner as anticipated by Landlord herein, Landlord shall
suffer irreparable damage, harm and injury. From time to time during the
Term of this Lease, including, but not limited to, the event whereby
Tenant meets certain financial condition criterion as set forth in this
Section 45, it is anticipated by the parties that the Letter of Credit
will need to be amended, modified and, possibly reissued. Landlord and
Tenant hereby covenant and agree to cooperate with one another to
promptly effectuate any such amendments, modifications and new issuances,
including without limitation, executing and submitting to the Issuer any
and all documents or instruments as may be reasonably required to
effectuate same. Each and every time during the Term of this Lease there
is a change in the identity or address of the parties, including without
limitation, any change in the identity of Landlord due to the sale,
transfer or other conveyance by Landlord of its rights and interests in,
to and under this Lease to any other party, person or entity, the Letter
of Credit shall immediately be amended or reissued to reflect such
changes and the parties hereby agree to execute and submit to the Issuer
such further applications, documents and instruments as may be necessary
to effectuate same. It is the intention of the parties that each and
every successor and assign of both Landlord and Tenant be bound by and
subject to the terms and provisions of this Section 45. Landlord may, at
any time and without notice to Tenant and without first obtaining
Tenant's consent thereto, assign all or any portion of its interest in
and to the Letter of Credit to another party, person or entity,
regardless of whether or not such assignment is separate from or as a
part of the assignment by Landlord of its rights and interests in and to
this Lease. If, as a result of any such application of all or any part
of the Letter of Credit, the amount of the Letter of Credit shall be less
than Five Hundred Thousand Dollars ($500,000.00), Tenant shall within
five (5) business days thereafter provide Landlord with additional
letter(s) of credit in an amount equal to the deficiency (or a
replacement letter of credit in the total amount of Five Hundred Thousand
Dollars ($500,000.00) and each such additional (or replacement) letter of
credit shall comply with all of the provisions of this Section 45, and if
Tenant fails to do so, notwithstanding anything to the contrary contained
in Section 20 hereof, the same shall constitute an incurable default by
Tenant. Tenant further covenants and warrants that it will neither
assign nor encumber the Letter of Credit or any part thereof and that
neither Landlord nor its successors or assigns will be bound by any such
assignment, encumbrance, attempted assignment or attempted encumbrance.
Without limiting the generality of the foregoing, if the Letter of Credit
expires earlier than the Letter of Credit Expiration Date, Landlord will
accept a renewal thereof or substitute letter of credit (such renewal or
substitute letter of credit to be in effect not later than thirty (30)
days prior to the expiration thereof), which shall be irrevocable and
automatically renewable as above provided through the Letter of Credit
Expiration Date upon the same terms as the expiring letter of credit or
such other terms as may be acceptable to Landlord in its reasonable
discretion. However, if the Letter of Credit is not timely renewed or a
substitute letter of credit is not timely received, or if Tenant fails to
maintain the Letter of Credit in the amount and terms set forth in this
Section 45, Landlord shall have the right to present such Letter of
Credit to the bank in accordance with the terms of this Section 45, and
the entire sum evidenced thereby shall be paid to and held by Landlord as
collateral for performance of all of Tenant's obligations under this
Lease and for all losses and damages Landlord may suffer as a result of
any default by Tenant under this Lease. If there shall occur a default
under this Lease as set forth in Section 20 of this Lease, Landlord may,
but without obligation to do so, draw upon the Letter of Credit, in part
or in whole, to cure any default of Tenant and/or to compensate Landlord
for any and all damages of any kind or nature sustained or which may be
sustained by Landlord resulting from Tenant's default. Tenant agrees not
to interfere in any way with payment to Landlord of the proceeds of the
Letter of Credit, either prior to or following a "draw" by Landlord of
any portion of the Letter of Credit, regardless of whether any dispute
exists between Tenant and Landlord as to Landlord's right to draw from
the Letter of Credit. No condition or term of this Lease shall be deemed
to render the Letter of Credit conditional to justify the issuer of the
Letter of Credit in failing to honor a drawing upon such Letter of Credit
in a timely manner. Landlord and Tenant acknowledge and agree that in no
event or circumstance shall the Letter of Credit or any renewal thereof
or substitute therefor be (i) deemed to be or treated as a "security
deposit" within the meaning of California Civil Code Section 1950.7 (as
supplemented, amended, replaced and substituted from time to time), (ii)
subject to the terms of such Section 1950.7 (as supplemented, amended,
replaced and substituted from time to time), or (iii) intended to serve
as a "security deposit" within the meaning of such Section 1950.7 (as
supplemented, amended, replaced and substituted from time to time). The
parties hereto recite that, with respect to the Letter of Credit, (x) the
Letter of Credit is not intended to serve as a security deposit and such
Section 1950.7 (as supplemented, amended, replaced and substituted from
time to time) and any and all other laws, rules and regulations
applicable to security deposits in the commercial context ("Security
Deposit Laws") shall have no applicability or relevancy to the Letter of
Credit and (y) Tenant waives any and all rights, duties and obligations
either party may now or, in the future, will have relating to or arising
from the Security Deposit Laws.
46. TENANT'S ABILITY TO PERFORM LANDLORD'S UNPERFORMED OBLIGATIONS
Notwithstanding anything to the contrary contained in this Lease, if
Landlord shall fail to perform any of the terms, provisions, covenants or
conditions to be performed or complied with by Landlord under Section
11.2 of this Lease with respect only to the Premises (such terms,
provisions, covenants or conditions are referred to herein, collectively
as "Landlord Repair Obligations") after expiration of all applicable
notice and cure periods for Landlord's and any mortgagee's benefit as set
forth in Sections 23 and 33, respectively, then Tenant may, at Tenant's
option and risk, but without any obligation to do so, after delivery of
an additional twenty (20) day prior written notice to Landlord, perform
such Landlord Repair Obligations on Landlord's behalf. If Tenant so
performs any of such Landlord Repair Obligations hereunder, then Tenant
will perform such Landlord Repair Obligations (1) in compliance with all
applicable Laws, regulations and requirements to which Landlord would be
subject under this Lease (if Landlord were performing such Landlord
Repair Obligations), (2) in a good workmanlike manner using materials of
a quality and grade at least equal to that in place as of the date of
delivery of the Premises to Tenant, if applicable, (3) without
interfering with the rights of other tenants of the Park, and (4) in
compliance with the terms and provisions of Section 10.1 hereof, as
applicable. Tenant will promptly assign to Landlord any warranties or
guaranties in respect of any Landlord Repair Obligations. If Tenant so
performs any of such Landlord Repair Obligations hereunder, the full
amount of the fair and reasonable costs and expenses incurred by Tenant
shall be owing by Landlord to Tenant, and Landlord shall pay to Tenant
the full undisputed amount thereof within sixty (60) days of Landlord's
receipt of Tenant's written demand therefor together with reasonable
evidence verifying the amount of such costs and expenses.
47. SATELLITE DISH
Tenant shall have the right (but only to the extent permitted by the City
of El Segundo and all agencies and governmental authorities having
jurisdiction thereof), at Tenant's sole cost and expense, to install and
operate a satellite or microwave dish or dishes ("Satellite Dishes")
along with any necessary cables ("Cables") on a portion of the roof of
the Building to be designated by Landlord ("Roof Space") for the Term of
the Lease (the Satellite Dishes and Cables are hereinafter collectively
referred to as the "Equipment"). The location and size of the Equipment
shall be subject to Landlord's approval, not to unreasonably withheld and
which best promotes the safety, aesthetics and efficiency of the
Equipment; provided, all of the Equipment and any modifications thereto
or placement thereof shall be (i) at Tenant's sole cost and expense, (ii)
contained visually within the roof screen, (iii) installed and operated
to Landlord's reasonable specifications, and (iv) installed, maintained,
operated and removed in accordance with all Recorded Matters, applicable
Laws, and the provisions of Section 10 of this Lease. For purposes
hereof, the Equipment shall be construed as part of the Tenant's Property
and shall be removed by Tenant at the expiration or earlier termination
of this Lease. Landlord shall cooperate reasonably with Tenant to modify
the roof screen placement (subject to all applicable Laws and Recorded
Matters) if required for signal quality, reconfiguration due to the
installation of any HVAC systems and other reasonable considerations;
provided, the cost of all such modifications shall be solely the
responsibility of Tenant. All modifications to the Building, including
the Roof Space, if any, shall be reasonably approved by Landlord prior to
commencement of any work with respect to the Equipment. No additional
rent shall be paid by Tenant for use of the Roof Space and operation of
the Equipment. The Equipment shall remain the property of Tenant and
Tenant shall remove the Equipment upon the expiration or earlier
termination of the Lease in accordance with the provisions of Section 10
of this Lease. Tenant shall restore the Roof Space and any other portion
of the Building affected by the Equipment to its original condition,
excepting ordinary wear and tear and/or damage or destruction due to fire
or other casualty not caused directly or indirectly by Tenant, its
agents, employees, contractors or the Equipment or any part thereof.
Notwithstanding anything to the contrary contained herein, Tenant may not
assign, lease, rent, sublet or otherwise transfer any of its interest in
the Roof Space or the Equipment except together with the remainder of all
of the Premises as more particularly set forth in Section 15. Each of
the other provisions of this Lease shall be applicable to the Equipment
and the use of the Roof Space by Tenant, including without limitation,
Sections 12 and 14 of this Lease. The Equipment shall comply with all
rules and regulations of the Federal Communications Commission and all
other agencies having jurisdiction thereof. If applicable, Tenant shall
provide to Landlord a copy of (i) the Federal Communications Commission
(or other agency) grant which has awarded frequencies to Tenant and (ii)
a list of Tenant's frequencies. Anything to the contrary contained
herein notwithstanding, if, during the Lease Term, as such Term may be
extended, Landlord, in its reasonable judgment, believes that the
Equipment poses a threat to human health or otherwise may be an
environmental hazard that cannot be remediated or has not been remediated
within ten (10) days after Tenant has been notified thereof, then Tenant
shall immediately cease all operations of the Equipment and Tenant shall
remove all of the Equipment within thirty (30) days thereafter. To the
best of Tenant's knowledge, Tenant represents to Landlord that the
Equipment shall not emit or project any electro-magnetic fields which
pose a threat to human health or otherwise may be an environmental
hazard. In addition, Tenant shall be solely responsible for insuring the
Equipment and Landlord shall have no responsibility therefor. Tenant
shall indemnify, defend (by counsel reasonably acceptable to Landlord)
and hold harmless Landlord and the other Indemnitees from and against any
and all claims, demands, liabilities, damages, judgments, losses,
penalties, costs and expenses (including reasonable attorneys' fees)
Landlord may suffer or incur arising out of or related to the
installation, use, operation, maintenance, replacement and/or removal of
the Equipment or any portion thereof, including without limitation. the
cost of repairs and replacements to the roof of the Building occasioned
by the installation, maintenance, repairs and removal of the Equipment.
IN WITNESS WHEREOF, this Lease is executed by the parties as of the
Lease Date referenced in the Basic Lease Information.
LANDLORD:
LINCOLN-RECP CM-ES OPCO, LLC,
a Delaware limited liability company
By: Legacy Partners Commercial, Inc.,
as agent for LINCOLN-RECP CM-ES OPCO, LLC
By: ___________________________
, Vice President
Date: ________________________, 1999
TENANT:
Exodus Communications, Inc.,
a Delaware corporation
By: ____________________________
Name: ____________________________
Title: ____________________________
By: ____________________________
Name: ____________________________
Title: ____________________________
Date: ________________________, 1999
EXHIBIT A
PREMISES
This exhibit, entitled "Premises", is and shall constitute EXHIBIT A to
that certain Lease Agreement, dated for reference purposes as of March
26, 1999 (the "Lease"), by and between LINCOLN-RECP CM-ES OPCO, LLC, a
Delaware limited liability company ("Landlord"), and Exodus
Communications, Inc., a Delaware corporation ("Tenant"), for the
leasing of certain premises located at 198 North Nash Street, El Segundo,
California (the "Premises").
The Premises consist of the rentable square footage of space specified in
the Basic Lease Information and has the address specified in the Basic
Lease Information. The Premises consist of the entirety of the Building
specified in the Basic Lease Information.
EXHIBIT B
TENANT IMPROVEMENTS
This exhibit, entitled "Tenant Improvements", is and shall constitute
EXHIBIT B to that certain Lease Agreement, dated for reference purposes
as of March 26, 1999 (the "Lease"), by and between LINCOLN-RECP CM-ES
OPCO LLC, a Delaware limited liability company ("Landlord"), and Exodus
Communications, Inc., a Delaware corporation ("Tenant"), for the leasing
of certain premises located at 198 North Nash Street, El Segundo,
California. The terms, conditions and provisions of this EXHIBIT B are
hereby incorporated into and are made a part of the Lease. Any
capitalized terms used herein and not otherwise defined herein shall have
the meaning ascribed to such terms as set forth in the Lease.
1. Tenant to Construct Tenant Improvements. Subject to the conditions
set forth below, Tenant shall be solely responsible for the planning,
design, construction and completion of the interior tenant improvements
("Tenant Improvements") to the Premises in accordance with the terms and
conditions of this EXHIBIT B. "Tenant Improvements" shall specifically
not include any of Tenant's trade fixtures, equipment, furniture,
furnishings, telephone equipment or other personal property
(collectively, "Personal Property"). The Tenant Improvements shall
include any and all interior improvements to be made to the Premises as
specified in the Final Drawings (defined below), as agreed to by Tenant
and Landlord.
2. Tenant Improvement Plans.
A. Preliminary Plans and Specifications. Tenant and/or Tenant's
Representatives shall furnish to Landlord preliminary working
architectural and engineering plans and specifications ("Preliminary
Plans and Specifications") for the Tenant Improvements. The Preliminary
Plans and Specifications shall be in sufficient detail to show power and
plumbing requirements, regular and special HVAC needs, telephone and
electrical outlets, lighting, lighting fixtures and related power, and
all other building improvements. All plans, drawings, specifications and
other details describing the Work which have been, or are hereafter,
furnished by or on behalf of Tenant shall be subject to Landlord's
reasonable approval or disapproval, which shall be provided within five
(5) business days after Landlord receives the Preliminary Plans and
Specifications and, if disapproved, Landlord shall return the Preliminary
Plans and Specifications to Tenant, who shall make all necessary
revisions within ten (10) days after Tenant's receipt thereof. This
procedure shall be repeated until Landlord approves the Preliminary Plans
and Specifications. The approved Preliminary Plans and Specifications,
as modified, shall be deemed the "Final Preliminary Plans and
Specifications". Notwithstanding the foregoing, Landlord hereby
consents to the following minimum items comprising the scope of work, the
specifics of which will be included in the Preliminary Plans and
Specifications and subject to Landlord's reasonable approval, as set
forth herein, provided that in giving such approval Landlord shall not
require any material deviation in the following described scope of work:
Demolition Minimum demolition is required. The 1st floor
Electrical Room, freight elevator and stairwell will be
removed. New stairwell will be added in the northwest
corner of the building.
Site Work In order to accommodate new mechanical and electrical
equipment, the following site work will be required.
o Pour concrete pad and install fencing for new air-
cooled condensing units.
o Excavate an area of approximately 60' x 100' in the
rear of the building in order to accommodate a
new block wall and concrete pad.
o Construct block wall approximately 14' high for new
diesel engine generators, switchgear and SCE
electrical equipment.
o Construct block wall building with roof for new UPS,
switchgear and batteries. This room will also be
climate controlled for optimum life.
Structural To accommodate new mechanical fan coil unit, it will be
necessary to construct two equipment platforms inside
of the building at approximately 16' high. Equipment
platform will be 40' wide by approximately 220' long
and be installed running parallel to the north side of
the building and parallel to the south side of the
building. Each equipment platform will accommodate
approximately 5 or 6 mechanical fan coil units.
Interior Construction In the northwest corner of the building Tenant
will construct interior offices and the Network
Operations Center (NOC), NODE (Fiber Room), MIS Room
and Conference Rooms. Level 5 Bullet Resistant walls,
doors and windows will protect the Customer Lobby.
Interior construction to total approximately 10,000 to
12,000 square feet.
Raised Access Floor Approximately 60,000 square feet of the 1st floor
will be covered by a raised access floor system
installed 12" above slab. This accommodates underfloor
power cabling, network cabling and fiber.
Mechanical To properly cool the Internet Data Center area, Air
cooled mechanical systems will be installed
distributing air through overhead ductwork throughout
the building. Fan coil units will be located on
equipment platforms above the T-bar ceiling and below
the roof and will be connected to air cooled condensers
outside of the building installed on concrete equipment
pads.
Electrical Existing main services to the building will be upgraded
to accommodate tenant requirements. SCE has agreed to
bring an upgraded feeder, as well as, a second feeder
to the property. For backup power, five (5) 1250KW
diesel engine generators will be installed with fuel
storage providing a minimum of two (2) days of
operation in the event of power outage. Tenant will
install metering switchgear, transformers and
substations to accommodate installation of
sophisticated electrical equipment consisting of
switchgear, uninterruptible power supply systems and
batteries. Power will be distributed throughout the
Internet Data Center via portable power distribution
units located within the Internet Data Center on the
access floor. Underfloor power cables will be used to
distribute power to each customer co-location space.
Fire Protection Tenant will install a fire alarm and detection
system providing early warning of smoke or fire. Fire
alarms systems will be integrated into a dry type pre-
action sprinkler system providing discharge only in the
event of a fire.
Security and Sophisticated security and monitoring systems
will be installed to monitor and
Monitoring control operation and access of the Internet Data
Center.
Elevator To accommodate the 2nd Floor office space, Tenant will
install a people rated elevator providing access from
the existing Lobby in the southwest corner of the
building to the second floor.
Shipping/
Receiving Dock To remain as is.
Parking Approximately 30 to 40 parking spaces will be eliminated on
the East End of the building to accommodate
installation of diesel engine generators, switchgear
and UPS systems.
Notwithstanding the foregoing or anything to the contrary contained in
this Exhibit B or in the Lease, the aforesaid scope of work shall in all
events and circumstances be in compliance with all applicable Laws,
including without limitation, all applicable requirements of the City of
El Segundo, the Uniform Building Code and local ordinances. Without
limiting the generality of the foregoing, Tenant hereby acknowledges and
agrees that as of the Delivery Date, there will be two hundred thirty-
five (235) exclusive parking spaces striped for Tenant's use within the
Premises. The parties hereby further acknowledge and agree that any
elimination by Tenant of any parking spaces must be in accordance with
the requirements of all applicable Laws, including without limitation,
the requirements of the City of El Segundo with respect thereto. Prior
to Tenant applying for or attempting to obtain any variance, conditional
use permit or other land use approval pursuant to which the zoning and
land use requirements applicable to the Premises will be affected
thereby, Tenant shall first obtain Landlord's prior written consent
thereto, which consent shall not be unreasonably withheld or delayed.
However, Tenant hereby assumes any and all risk that the governmental and
regulatory agencies will not permit parking spaces within the Premises to
be eliminated. Upon Landlord's request to be delivered to Tenant at
least sixty (60) days prior to the expiration or earlier termination of
this Lease, Tenant shall cause any such variance, conditional use permit
or other land use approval obtained by Tenant with respect to the
premises to be removed or discontinued as of the termination of the
Lease.
B. Final Plans and Specifications. After the Final Preliminary
Plans and Specifications are approved by Landlord and are deemed to be
the Final Preliminary Plans and Specifications, Tenant shall cause to be
prepared the final working architectural and engineering plans,
specifications and drawings, ("Final Plans and Specifications") for the
Tenant Improvements. Tenant shall then deliver the Final Plans and
Specifications to Landlord. Landlord shall reasonably approve or
disapprove the Final Plans and Specifications within five (5) business
days after Landlord receives the Final Plans and Specifications and, if
disapproved, Landlord shall return the Final Plans and Specifications to
Tenant, who shall make all necessary revisions within ten (10) days after
Tenant's receipt thereof. This procedure shall be repeated until
Landlord approves the Final Plans and Specifications. The approved Final
Plans and Specifications, as modified, shall be deemed the "Construction
Documents".
C. Miscellaneous. All deliveries of the Preliminary Plans and
Specifications, the Final Preliminary Plans and Specifications, the Final
Plans and Specifications, and the Construction Documents between the
parties shall be via messenger service, personal hand delivery or
overnight parcel service. While Landlord has the right to approve the
Preliminary Plans and Specifications, the Final Preliminary Plans and
Specifications, the Final Plans and Specifications, and the Construction
Documents, Landlord's interest in doing so is to protect the Premises,
the Building and Landlord's interest therein. Accordingly, Tenant shall
not rely upon Landlord's approvals and Landlord shall not be the
guarantor of, nor responsible for, the adequacy and correctness or
accuracy of the Preliminary Plans and Specifications, the Final
Preliminary Plans and Specifications, the Final Plans and Specifications,
and the Construction Documents, or the compliance thereof with applicable
Laws, and Landlord shall incur no liability of any kind by reason of
granting such approvals. Tenant agrees to, and does hereby, assume full,
sole and complete responsibility to ensure that the Final Preliminary
Plans and Specifications, the Final Plans and Specifications, and the
Construction Documents are adequate to fully meet the needs and
requirements of Tenant's intended operations of its business within the
Premises and Tenant's use of the Premises.
D. Building Standard Work. The Construction Documents shall
provide that the Tenant Improvements to be constructed in accordance
therewith must be at least equal, in quality, to Landlord's building
standard materials, quantities and procedures then in use by Landlord
("Building Standards") attached hereto as Exhibit B-2, and shall
consist of improvements which are generic in nature.
E. Construction Agreements. Tenant hereby covenants and agrees
that it will use commercially reasonable efforts to include in each and
every agreement made with the Architect and the Contractor with respect
to the Tenant Improvements, a provision specifying that the Landlord
shall be a third party beneficiary thereof, including without limitation,
a third party beneficiary of all covenants, representations, indemnities
and warranties made by the Architect and/or Contractor.
F. Change Orders. Tenant shall obtain Landlord's prior written
approval of any and all proposed change orders which either affect the
structural integrity of the Building or are otherwise reasonably
considered to be a material change to any of the Construction Documents.
G. Confidentiality. Landlord acknowledges that Tenant has
advised Landlord that (i) Tenant is in the "Managed Internet Services"
business, (ii) the manner in which the Tenant Improvements are designed,
engineered, and constructed is unique, and an integral part of Tenant's
business and, as such, is confidential information and (iii) Tenant's
Property and the manner in which it is integrated and installed is
proprietary and confidential. Landlord agrees to use diligent efforts to
hold and maintain all such confidential information in strict confidence,
not to disclose such information to third parties and not to use any such
information for any purpose except that Landlord may (1) disclose such
information to its employees, members, contractors, agents, consultants,
representatives, lenders and legal representatives who need to know such
information, (2) disclose and/or use such information in order to perform
its obligations under this Lease or in the event of an emergency
involving the Premises, (3) disclose such information to the extent
required in order to sell or otherwise convey the Lot, the Building or
the Park to a purchaser, and (4) disclose such information as may be
required by court order, any Law, subpoena, or otherwise to prosecute or
defend itself with respect to the Lease or any matters relating thereto.
Landlord's breach of this covenant shall be a material breach of this
Lease and Tenant may initiate a legal proceeding to enjoin any such
breach. For purposes hereof, any and all of such information which is in
the public records or otherwise in the public domain shall not be
considered part of the "confidential information" referred to herein.
3. Permits. Tenant, at its sole cost and expense (subject to the
provisions of Paragraph 5 below) shall obtain all governmental approvals
of the Construction Documents to the full extent necessary for the
issuance of a building permit for the Tenant Improvements based upon such
Construction Documents. Tenant, at its sole cost and expense, shall also
cause to be obtained all other necessary approvals and permits from all
governmental agencies having jurisdiction or authority for the
construction and installation of the Tenant Improvements in accordance
with the approved Construction Documents. Tenant, at its sole cost and
expense (subject to the provisions of Paragraph 5 below) shall undertake
all steps necessary to ensure that the construction of the Tenant
Improvements is accomplished in strict compliance with all statutes,
laws, ordinances, codes, rules and regulations applicable to the
construction of the Tenant Improvements and the requirements and
standards of any insurance underwriting board, inspection bureau or
insurance carrier insuring the Premises.
4. Construction.
A. Tenant shall be solely responsible for the construction,
installation and completion of the Tenant Improvements in accordance with
the Construction Documents approved by Landlord and is solely responsible
for the payment of all amounts when payable in connection therewith
without any cost or expense to Landlord, except for Landlord's obligation
to contribute the Tenant Improvement Allowance in accordance with
Paragraph 5 below. Tenant shall diligently proceed with the construction,
installation and completion of the Tenant Improvements in accordance with
the Construction Documents and the completion schedule reasonably approved
by Landlord. No material changes shall be made to the Construction
Documents and the completion schedule approved by Landlord without
Landlord's prior written consent, which consent shall not be unreasonably
withheld.
B. Landlord shall reasonably approve Tenant's selection of the
licensed, insured and bonded general contractor (the "Contractor"), and
after selection of the Contractor, Tenant shall employ the Contractor to
construct the Tenant Improvements in accordance with the Construction
Documents. The construction contracts between Tenant and the Contractor
and between the Contractor and subcontractors shall be subject to
Landlord's prior written approval, which approval shall not be
unreasonably withheld or conditioned. Proof that the Contractor is
licensed in California, is bonded as required under California law, and
has the insurance specified in Exhibit B-1, attached hereto and
incorporated herein by this reference, shall be provided to Landlord at
the time the Tenant requests approval of the Contractor from Landlord.
Tenant shall comply with or cause the Contractor to comply with all other
terms and provisions of Exhibit B-1.
C. Prior to the commencement of the construction and
installation of the Tenant Improvements, Tenant shall provide the
following to Landlord, all of which shall be to Landlord's reasonable
satisfaction and approval:
(i) An estimated budget and cost breakdown for the Tenant
Improvements.
(ii) Estimated completion schedule for the Tenant
Improvements.
(iii) Copies of all required approvals and permits from
governmental agencies having jurisdiction or authority for the
construction and installation of the Tenant Improvements.
(iv) Evidence of Tenant's procurement of insurance required
to be obtained pursuant to the provisions of Paragraphs 4.B and 4.G.
D. Landlord shall, at all reasonable times, have a right to
inspect the Tenant Improvements and Tenant shall immediately cease work
upon written notice from Landlord if the Tenant Improvements are not in
compliance with the Construction Documents approved by Landlord. If
Landlord shall give notice of faulty construction or any other deviation
from the Construction Documents, Tenant shall cause Contractor to make
corrections promptly. However, neither the privilege herein granted to
Landlord to make such inspections, nor the making of such inspections by
Landlord shall operate as a waiver of any rights of Landlord to require
good and workmanlike construction and improvements constructed in
accordance with the Construction Documents.
E. Subject to Landlord complying with its obligations in
Paragraph 5 below, Tenant shall pay and discharge promptly and fully all
claims for labor done and materials and services furnished in connection
with the Tenant Improvements. The Tenant Improvements shall not be
commenced until five (5) business days after Landlord has received notice
from Tenant stating the date the construction of the Tenant Improvements
is to commence so that Landlord can post and record any appropriate
Notice of Non-Responsibility.
F. Tenant shall maintain or cause to be maintained, during the
construction of the Tenant Improvements, at its sole cost and expense,
insurance of the types and in the amounts specified in Exhibit B-1 and in
the applicable provisions of the Lease, together with builders' risk
insurance for the amount of the completed value of the Tenant
Improvements on an all-risk non-reporting form covering all improvements
under construction, including building materials.
G. Except for equipment of Tenant's customers, no materials,
equipment or fixtures shall be delivered to or installed upon the
Premises pursuant to any agreement by which another party has a security
interest or rights to remove or repossess such items, without the prior
written consent of Landlord, which consent shall not be unreasonably
withheld or conditioned.
H. Landlord reserves the right to establish reasonable rules and
regulations for the use of the Building during the course of construction
of the Tenant Improvements, including, but not limited to, construction
parking, storage of materials, hours of work and clean-up of construction
related debris.
I. Upon completion of the Tenant Improvements, Tenant shall
deliver to Landlord the following, all of which shall be to Landlord's
reasonable satisfaction:
(i) Any certificates required for occupancy, including a
permanent and complete Certificate of Occupancy issued by the City of El
Segundo.
(ii) A Certificate of Completion signed by the Architect who
prepared the Construction Documents, reasonably approved by Landlord.
(iii) A cost breakdown itemizing all expenses for the Tenant
Improvements, together with invoices and receipts for the same or other
evidence of payment.
(iv) Final and unconditional mechanic's lien waivers for all
the Tenant Improvements.
(v) A Notice of Completion for execution by Landlord, which
certificate once executed by Landlord shall be recorded by Tenant in the
official record of the County of Los Angeles, and Tenant shall then
deliver the Landlord a true and correct copy of the recorded Notice of
Completion.
(vi) A true and complete copy of all as-built plans and
drawings for the Tenant Improvements.
5. Tenant Improvement Allowance; Tenant Improvement Costs.
A. Subject to Tenant's compliance with the provisions of this
Exhibit B, Landlord shall provide to Tenant an allowance for the
planning, design and construction of the Tenant Improvements in the
Premises, as described in the Construction Documents, in the amount of
approximately One Hundred Eighty-One Thousand Six Hundred Thirty-Six
Dollars ($181,636.00) (the "Tenant Improvement Allowance") based upon
an allowance of Two Dollars ($2.00) per rentable square foot for 90,818
rentable square feet of the Premises which is to be improved, as
described in the Construction Documents. Tenant shall not be entitled to
any credit, abatement or payment from Landlord in the event that the
amount of the Tenant Improvement Allowance specified above exceeds the
actual Tenant Improvement Costs. The Tenant Improvement Allowance shall
be the maximum contribution by Landlord for the Tenant Improvement Costs.
The Tenant Improvement Allowance shall be used to design, prepare, plan,
obtain the approval of, construct and install the Tenant Improvements and
for no other purpose. Except as otherwise expressly provided herein,
Landlord shall have no obligation to contribute the Tenant Improvement
Allowance unless and until the Construction Documents have been approved
by Landlord and Tenant has complied with all requirements set forth in
Paragraph 4.C. of this Exhibit B. The costs to be paid out of the Tenant
Improvement Allowance shall include all reasonable costs and expenses
associated with the design, preparation, approval, planning, construction
and installation of the Tenant Improvements (collectively, the "Tenant
Improvement Costs"), including all of the following:
(i) All costs of the Preliminary Plans and Specifications,
the Final Plans and Specifications, and the Construction Documents, and
engineering costs associated with completion of the State of California
energy utilization calculations under Title 24 legislation;
(ii) All costs of obtaining building permits and other
necessary authorizations and approvals from the City of El Segundo and
other applicable jurisdictions;
(iii) All costs of interior design and finish schedule plans
and specifications including as-built drawings;
(iv) All direct and indirect costs of procuring,
constructing and installing the Tenant Improvements in the Premises,
including, but not limited to, the construction fee for overhead and
profit, the cost of all on-site supervisory and administrative staff,
office, equipment and temporary services rendered by the Contractor in
connection with construction of the Tenant Improvements, and all labor
(including overtime) and materials constituting the Tenant Improvements;
(v) All fees payable to the Architect and any engineer if
they are required to redesign any portion of the Tenant Improvements
following Tenant's and Landlord's approval of the Construction Documents;
(vi) Utility connection fees;
(vii) Inspection fees and filing fees payable to local
governmental authorities, if any; and
(viii) All costs of permanently affixed equipment and non-trade
fixtures provided for in the Construction Documents, including the cost of
installation.
The Tenant Improvement Allowance shall be the sole and maximum
contribution by Landlord for the Tenant Improvement Costs, and the
disbursement of the Tenant Improvement Allowance shall be in the manner
specified herein and shall be subject to the terms and provisions
contained hereinbelow. There shall be no fee payable to, and imposed by
Landlord for any oversight, plan review, or other work or services
provided by or on behalf of Landlord or its representatives.
Landlord will make payments to Tenant from the Tenant Improvement
Allowance to reimburse Tenant for the Tenant Improvement Costs paid or
incurred by Tenant (as invoiced by third parties). All payments of the
Tenant Improvement Allowance shall be by progress payments not more
frequently than once per month and only after satisfaction of the
following conditions precedent: (a) receipt by Landlord of conditional
mechanics' lien releases for the work completed and to be paid by said
progress payment, conditioned only on the payment of the sums set forth
in the mechanics' lien release, executed by the Contractor and all
subcontractors, labor suppliers and materialmen; (b) receipt by Landlord
of unconditional mechanics' lien releases from the Contractor and all
subcontractors, labor suppliers and materialmen for all work other than
that being paid by the current progress payment previously completed by
the Contractor, subcontractors, labor suppliers and materialmen and for
which Tenant has received funds from the Tenant Improvement Allowance to
pay for such work; (c) receipt by Landlord of any documentation
reasonably required by Landlord detailing the work that has been
completed and the materials and supplies used as of the date of Tenant's
request for the progress payment, including, without limitation,
invoices, bills, or statements for the work completed and the materials
and supplies used; and (d) completion by Landlord or Landlord's agents of
any inspections of the work completed and materials and supplies used as
deemed reasonably necessary by Landlord (Landlord hereby agrees to cause
such inspections to be done, if at all, within five (5) business days
after Landlord's receipt of a request from Tenant for the then applicable
progress payment). Tenant Improvement Allowance progress payments shall
be paid to Tenant within fourteen (14) days from the satisfaction of the
conditions set forth in the immediately preceding sentence.
Notwithstanding the foregoing to the contrary, Landlord shall be entitled
to withhold and retain five percent (5%) of the Tenant Improvement
Allowance or of any Tenant Improvement Allowance progress payment until
the earlier to occur of Landlord's receipt of all unconditional and final
lien waivers and releases (with no notation therein of sums being
disputed) or the lien-free expiration of the time for filing of any
mechanics' liens claimed or which might be filed on account of any work
ordered by Tenant or the Contractor or any subcontractor in connection
with the construction and installation of the Tenant Improvements.
B. Landlord shall not be obligated to pay any Tenant Improvement
Allowance progress payment or the Tenant Improvement Allowance retention
if on the date Tenant is entitled to receive the Tenant Improvement
Allowance progress payment or the Tenant Improvement Allowance retention,
Tenant is in default of any of the provisions of the Lease beyond any
applicable cure period. Such payments shall resume upon Tenant
completely, timely and satisfactorily curing any such default within the
time periods which may be provided for in the Lease.
C. If the total and actual cost of designing, planning,
constructing and installing the Tenant Improvements is less than the
Tenant Improvement Allowance, the Tenant Improvement Allowance shall be
automatically reduced to the amount which is equal to said actual Tenant
Improvement Costs.
6. Termination. If the Lease is terminated prior to the Completion
Date, for any reason due to the default of Tenant hereunder, in addition
to any other remedies available to Landlord under the Lease, Landlord
shall have the right to pursue any and all remedies available at law or
in equity, including any and all costs incurred by Landlord and not
reimbursed or otherwise paid by Tenant through the date of termination in
connection with the Tenant Improvements to the extent planned, installed
and/or constructed as of such date of termination, including, but not
limited to, any costs related to the removal of all or any portion of the
Tenant Improvements and restoration costs related thereto. Subject to
the provisions of the Lease regarding surrender of the Premises, upon the
expiration or earlier termination of the Lease, Tenant shall be required
to remove the items comprising the Tenant Improvements in accordance with
the provisions of Section 10 of the Lease.
7. Lease Provisions; Conflict. The terms and provisions of the
Lease, insofar as they are applicable, in whole or in part, to this
EXHIBIT B, are hereby incorporated herein by reference, and specifically
including all of the provisions of Section 31 of the Lease. In the event
of any conflict between the terms of the Lease and this EXHIBIT B, the
terms of this EXHIBIT B shall prevail. Any amounts payable by Tenant to
Landlord hereunder shall be deemed to be Additional Rent under the Lease
and, upon any default in the payment of same, Landlord shall have all
rights and remedies available to it as provided for in the Lease.
EXHIBIT C
RULES AND REGULATIONS
This exhibit, entitled "Rules & Regulations", is and shall constitute
EXHIBIT C to that certain Lease Agreement dated for reference purposes as
of March 26, 1999 (the "Lease"), by and between LINCOLN-RECP CM-ES
OPCO, LLC, a Delaware limited liability company ("Landlord"), and
Exodus Communications, Inc., a Delaware corporation ("Tenant"), for the
leasing of certain premises located at 198 North Nash Street, El Segundo,
California (the "Premises"). The terms, conditions and provisions of
this EXHIBIT C are hereby incorporated into and are made a part of the
Lease. Any capitalized terms used herein and not otherwise defined
herein shall have the meaning ascribed to such terms as set forth in the
Lease.
1. Tenant shall not suffer or permit the obstruction of any Common
Areas, including driveways, walkways and stairways.
2. Landlord reserves the right to refuse access to any persons
Landlord in good faith judges to be a threat to the safety,
reputation, or property of the Park and its occupants.
3. Tenant shall not make or permit any noise or odors that annoy or
interfere with other Tenants or persons having business within the
Park.
4. Tenant shall not keep animals or birds within the Park, and shall
not bring bicycles, motorcycles or other vehicles into areas not
designated as authorized for the same.
5. Tenant shall not make, suffer or permit litter except in
appropriate receptacles for that purpose.
6. Tenant shall be responsible for the inappropriate use of any toilet
rooms, plumbing or other utilities. No foreign substances of any
kind are to be inserted therein.
7. Tenant shall not deface the walls, partitions or other surfaces of
the premises of the Park.
8. Tenant shall return all keys at the termination of its tenancy and
shall be responsible for the cost of replacing any keys that are
lost.
9. No window coverings, shades or awnings shall be installed or used
by Tenant, without Landlord's written prior consent.
10. Tenant shall not suffer or permit smoking or carrying of lighted
cigars or cigarettes in areas reasonably designated by Landlord or
by applicable governmental agencies as non-smoking areas.
11. The Premises shall not be used for lodging.
12. Tenant shall comply with all safety, fire protection and evacuation
regulations established by any applicable governmental agency.
13. Landlord reserves the right to waive any one of these rules or
regulations and/or as to any particular Tenant, and any such waiver
shall not constitute a waiver of any other rule or regulation or
any subsequent application thereof to such Tenant.
14. Tenant assumes all risks from theft or vandalism and agrees to keep
its Premises locked as may be required.
15. Landlord reserves the right to make such other reasonable rules and
regulations not inconsistent with the terms of this Lease as it may
from time to time deem necessary for the appropriate operation and
safety of the Park and its occupants. Tenant agrees to abide by
these and such rules and regulations.
16. The maintenance, washing, waxing or cleaning of any vehicles in or
about the Premises is prohibited.
17. There shall not be any outside storage of any equipment, property,
furnishings, inventory or other goods in the areas surrounding the
Building but within the Premises, except as expressly contemplated
in Tenant's HMMP.
EXHIBIT D
HAZARDOUS MATERIALS DISCLOSURE CERTIFICATE - SAMPLE
Your cooperation in this matter is appreciated. Initially, the
information provided by you in this Hazardous Materials Disclosure
Certificate is necessary for the Landlord (identified below) to evaluate
and finalize a lease agreement with you as tenant. After a lease
agreement is signed by you and the Landlord (the "Lease Agreement"), on an
annual basis in accordance with the provisions of Section 29 of the signed
Lease Agreement, you are to provide an update to the information initially
provided by you in this certificate. The information contained in the
initial Hazardous Materials Disclosure Certificate and each annual
certificate provided by you thereafter will be maintained in
confidentiality by Landlord subject to release and disclosure as required
by (i) any lenders and owners and their respective environmental
consultants, (ii) any prospective purchaser(s) of all or any portion of
the property on which the Premises are located, (iii) Landlord to defend
itself or its lenders, partners or representatives against any claim or
demand, and (iv) any laws, rules, regulations, orders, decrees, or
ordinances, including, without limitation, court orders or subpoenas. Any
and all capitalized terms used herein, which are not otherwise defined
herein, shall have the same meaning ascribed to such term in the signed
Lease Agreement. Any questions regarding this certificate should be
directed to, and when completed, the certificate should be delivered to:
Landlord: LINCOLN-RECP CM-ES OPCO, LLC
c/o Legacy Partners Commercial, Inc.
30 Executive Park, Suite 100
Irvine, California 92614
Attn: Property Manager
Phone: (949) 261-2100
Name of Tenant: Exodus Communications, Inc., a Delaware corporation
Mailing Address: 2831 Mission College Boulevard, Santa Clara, California
95054-1838
Contact Person, Title and Telephone Number(s):
___________________________________________
Contact Person for Hazardous Waste Materials Management and Manifests and
Telephone Number(s):
______________________________________________________________
Address of Premises: 198 North Nash Street, El Segundo, California
90245
Length of Initial Term: One Hundred Twenty (120) months
1. GENERAL INFORMATION:
Describe the initial proposed operations to take place in, on, or
about the Premises, including, without limitation, principal
products processed, manufactured or assembled services and
activities to be provided or otherwise conducted. Existing tenants
should describe any proposed changes to on-going operations.
2. USE, STORAGE AND DISPOSAL OF HAZARDOUS MATERIALS
2.1 Will any Hazardous Materials be used, generated, stored or
disposed of in, on or about the Premises? Existing tenants
should describe any Hazardous Materials which continue to be
used, generated, stored or disposed of in, on or about the
Premises.
Wastes Yes 0 No 0
Chemical Products Yes 0 No 0
Other Yes 0 No 0
If Yes is marked attach all MSDS's and please explain: (MSDS's
Attached ")
___________________________________________________________________
2.2 If Yes is marked in Section 2.1, attach a list of any
Hazardous Materials to be used, generated, stored or disposed
of in, on or about the Premises, including the applicable
hazard class and an estimate of the quantities of such
Hazardous Materials at any given time; estimated annual
throughput; the proposed location(s) and method of storage
(excluding nominal amounts of ordinary household cleaners and
janitorial supplies which are not regulated by any
Environmental Laws); and the proposed location(s) and method
of disposal for each Hazardous Material, including, the
estimated frequency, and the proposed contractors or
subcontractors. Existing tenants should attach a list
setting forth the information requested above and such list
should include actual data from on-going operations and the
identification of any variations in such information from the
prior year's certificate.
Attach a Site Plan indicating all storage areas - (Attached
")
3. STORAGE TANKS AND SUMPS
3.1 Is any above or below ground storage of gasoline, diesel,
petroleum, or other Hazardous Materials in tanks or sumps
proposed in, on or about the Premises? Existing tenants
should describe any such actual or proposed activities,
including any required SPCC Plan.
Yes 0 No 0
If yes, please explain:
_____________________________________________________________
4. WASTE MANAGEMENT
4.1 Has your company been issued an EPA Hazardous Waste Generator
I.D. Number? Existing tenants should describe any additional
identification numbers issued since the previous certificate.
Yes 0 No 0
Describe RCRA status:
______________________________________________
4.2 Has your company filed a biennial or quarterly reports as a
hazardous waste generator? Existing tenants should describe
any new reports filed.
Yes 0 No 0
If yes, attach a copy of the most recent report filed. (")
5. WASTEWATER TREATMENT AND DISCHARGE
5.1 Will your company discharge wastewater or other wastes to:
storm drain? sewer?
surface water? no wastewater or other wastes
discharged.
______ grounds? _______ facility treatment plant?
(i.e., compressor blow-down)
Existing tenants should indicate any actual discharges. If so,
describe the nature of any proposed or actual discharge(s).
(Note: Generally, discharges to storm drains will be
prohibited without prior review and approval from Landlord)
5.2 Will any such wastewater or waste be treated before
discharge?
Yes 0 No 0
If yes, describe the type of treatment proposed to be
conducted. Existing tenants should describe the actual
treatment conducted.
6. AIR DISCHARGES
6.1 Do you plan for any air filtration systems or stacks to be
used in your company's operations in, on or about the
Premises that will discharge into the air; and will such air
emissions be monitored? Existing tenants should indicate
whether or not there are any such air filtration systems or
stacks in use in, on or about the Premises which discharge
into the air and whether such air emissions are being
monitored.
Yes 0 No 0
If yes, please describe:
_______________________________________________
6.2 Do you propose to operate any of the following types of
equipment, or any other equipment requiring an air emissions
permit? Existing tenants should specify any such equipment
being operated in, on or about the Premises.
Spray booth(s) Incinerator(s)
Dip tank(s) Other (Please describe)
Drying oven(s) No Equipment Requiring Air Permits
______ Dry-cleaning
If yes, please describe:
7. HAZARDOUS MATERIALS DISCLOSURES
7.1 Has your company prepared or will it be required to prepare a
Hazardous Materials management plan ("HMMP") pursuant to Fire
Department or other governmental or regulatory agencies'
requirements? Existing tenants should indicate whether or
not an HMMP is required and has been prepared.
Yes 0 No 0
If yes, attach a copy of the HMMP. Existing tenants should attach a copy
of any required updates to the HMMP.
7.2 (CA Only) Are any of the Hazardous Materials, and in
particular chemicals, proposed to be used in your operations
in, on or about the Premises regulated under Proposition 65?
Existing tenants should indicate whether or not there are
any new Hazardous Materials being so used which are regulated
under Proposition 65.
Yes 0 No 0
If yes, please explain:
8. ENFORCEMENT ACTIONS AND COMPLAINTS
8.1 With respect to Hazardous Materials or Environmental Laws,
has your company ever been subject to any agency enforcement
actions, administrative orders, or consent decrees or has
your company received requests for information, notice or
demand letters, or any other inquiries regarding its
operations? Existing tenants should indicate whether or not
any such actions, orders or decrees have been, or are in the
process of being, undertaken or if any such requests have
been received.
Yes 0 No 0
If yes, describe the actions, orders or decrees and any
continuing compliance obligations imposed as a result of
these actions, orders or decrees and also describe any
requests, notices or demands, and attach a copy of all such
documents. Existing tenants should describe and attach a
copy of any new actions, orders, decrees, requests, notices
or demands not already delivered to Landlord pursuant to the
provisions of Section 29 of the signed Lease Agreement.
8.2 Have there ever been, or are there now pending, any lawsuits
against your company regarding any environmental or health
and safety concerns?
Yes 0 No 0
If yes, describe any such lawsuits and attach copies of the
complaint(s), cross-complaint(s), pleadings and all other
documents related thereto as requested by Landlord. Existing
tenants should describe and attach a copy of any new
complaint(s), cross-complaint(s), pleadings and other related
documents not already delivered to Landlord pursuant to the
provisions of Section 29 of the signed Lease Agreement.
8.3 Have there been any problems or complaints from adjacent
tenants, owners or other neighbors at your company's current
facility with regard to environmental or health and safety
concerns? Existing tenants should indicate whether or not
there have been any such problems or complaints from adjacent
tenants, owners or other neighbors at, about or near the
Premises.
Yes 0 No 0
If yes, please describe. Existing tenants should describe any
such problems or complaints not already disclosed to Landlord
under the provisions of the signed Lease Agreement.
8.4 Please provide the addresses for each space leased by your
Company within the State of California in the past ten years
the name and phone number of each Landlord.
9. PERMITS AND LICENSES
9.1 Attach copies of all Hazardous Materials permits and licenses
including a Transporter Permit number issued to your company
with respect to its proposed operations in, on or about the
Premises, including, without limitation, any wastewater
discharge permits, air emissions permits, and use permits or
approvals. Existing tenants should attach copies of any new
permits and licenses as well as any renewals of permits or
licenses previously issued.
The undersigned hereby acknowledges and agrees that (A) this Hazardous
Materials Disclosure Certificate is being delivered in connection with,
and as required by, Landlord in connection with the evaluation and
finalization of a Lease Agreement and will be attached thereto as an
exhibit; (B) that this Hazardous Materials Disclosure Certificate is
being delivered in accordance with, and as required by, the provisions of
Section 29 of the Lease Agreement; and (C) that Tenant shall have and
retain full and complete responsibility and liability with respect to any
of the Hazardous Materials disclosed in the HazMat Certificate
notwithstanding Landlord's/Tenant's receipt and/or approval of such
certificate. Tenant further agrees that none of the following described
acts or events shall be construed or otherwise interpreted as either (a)
excusing, diminishing or otherwise limiting Tenant from the requirement
to fully and faithfully perform its obligations under the Lease with
respect to Hazardous Materials, including, without limitation, Tenant's
indemnification of the Indemnitees and compliance with all Environmental
Laws, or (b) imposing upon Landlord, directly or indirectly, any duty or
liability with respect to any such Hazardous Materials, including,
without limitation, any duty on Landlord to investigate or otherwise
verify the accuracy of the representations and statements made therein or
to ensure that Tenant is in compliance with all Environmental Laws; (i)
the delivery of such certificate to Landlord and/or Landlord's acceptance
of such certificate, (ii) Landlord's review and approval of such
certificate, (iii) Landlord's failure to obtain such certificate from
Tenant at any time, or (iv) Landlord's actual or constructive knowledge
of the types and quantities of Hazardous Materials being used, stored,
generated, disposed of or transported on or about the Premises by Tenant
or Tenant's Representatives. Notwithstanding the foregoing or anything
to the contrary contained herein, the undersigned acknowledges and agrees
that Landlord and its partners, lenders and representatives may, and
will, rely upon the statements, representations, warranties, and
certifications made herein and the truthfulness thereof in entering into
the Lease Agreement and the continuance thereof throughout the term, and
any renewals thereof, of the Lease Agreement.
I ___________________________ and _________________________, acting with
full authority to bind the (proposed) Tenant and on behalf of the
(proposed) Tenant, certify, represent and warrant that the information
contained in this certificate is true and correct.
TENANT:
Exodus Communications, Inc., a Delaware corporation
BY:
NAME:
TITLE:
BY:
NAME:
TITLE:
DATE:
EXHIBIT E
TENANT'S INITIAL HAZARDOUS MATERIALS DISCLOSURE CERTIFICATE
SEE ATTACHED
EXHIBIT F
MEMORANDUM OF LEASE
AND
OPTION TO PURCHASE
RECORDING REQUESTED BY
AND WHEN RECORDED, RETURN TO:
Legacy Partners Commercial, Inc.
30 Executive Park, Suite 100
Irvine, California 92614
Attention: Portfolio Manager
MEMORANDUM OF LEASE
AND
OPTION TO PURCHASE
This Memorandum of Lease and Option to Purchase (the
"Memorandum") is made this ___________ day of March , 1999 between
LINCOLN-RECP CM-ES OPCO, LLC, a Delaware limited liability company
("Landlord"), and EXODUS COMMUNICATIONS, INC., a Delaware corporation
("Tenant"), who agree as follows:
I. TERM AND PREMISES
By Lease Agreement, dated for reference purposes as of March 26,
1999 (the "Lease"), Landlord leases to Tenant and Tenant leases from
Landlord those certain premises located at 198 North Nash Street, El
Segundo, California (the "Leased Premises"), being a portion of the land
which is more particularly described on Exhibit "1" attached hereto and
made a part hereof (the "Park"). The Leased Premises consists of a
single building (the "Building") containing approximately 90,818 rentable
square feet together with vehicular parking spaces, pedestrian walkways
and landscaping as specifically granted to Tenant in the Lease and as
more particularly described in the Lease. Tenant shall lease the Leased
Premises from Landlord for an initial term of ten (10) years from and
after the Commencement Date, as more particularly set forth in Section 2
of the Lease. The Lease grants to Tenant two (2) successive options to
extend the initial term of the Lease, each of such extension terms being
for a period of five (5) years, each from the date on which the Lease
would otherwise expire. Each and all of the provisions of said Lease, as
the same may be amended from time to time, are incorporated into this
Memorandum by this reference. Any capitalized terms used herein but not
otherwise defined herein shall have the meaning ascribed to such terms in
the Lease.
II. OPTION TO PURCHASE
Tenant has a Purchase Option to acquire the Park subject to all
of the terms, conditions and provisions contained in the Lease, and in
particular, Section 45 of the Lease. The Purchase Option Term is for a
period of six (6) months commencing July 1, 1999 and ending on December
31, 1999. If Tenant does not properly exercise the Purchase Option
within said Purchase Option Term, Tenant shall have no further right or
option to purchase the Park and the Purchase Option shall be of no force
or effect.
III. PURPOSE OF MEMORANDUM
The purpose of this Memorandum is for recordation and the notice
thereby imparted. This Memorandum does not and shall not, in any way,
modify the provisions of the Lease or the Purchase Option referred to
above.
IV. COUNTERPARTS
This Memorandum may be executed in one or more counterparts, each
of which shall be deemed an original, and all of which shall, taken
together, be deemed one instrument.
LANDLORD:
LINCOLN-RECP CM-ES OPCO, LLC,
a Delaware limited liability company
By: Legacy Partners Commercial, Inc.,
as agent for LINCOLN-RECP CM-ES OPCO, LLC
By: ___________________________
, Vice President
TENANT:
Exodus Communications, Inc.,
a Delaware corporation
By: __________________________________
Its: __________________________________
By: __________________________________
Its: __________________________________
EXHIBIT G
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
This Subordination, Non-Disturbance and Attornment Agreement (this
"Agreement") is made as of the ____ day of _____________, 1999, between
Credit Suisse First Boston Mortgage Capital LLC ("Lender") and EXODUS
COMMUNICATIONS, INC., a Delaware corporation ("Tenant").
RECITALS
A. The undersigned is the tenant ("Tenant") under the
"Lease." For purposes hereof the "Lease" shall mean and refer to that
certain Lease Agreement, dated for reference purposes as of March 26,
1999, for those certain premises (the "Premises") situated at 198 North
Nash Street, El Segundo, California (the "Building"). All capitalized
terms not otherwise defined herein shall have the meanings set forth in
the Lease.
Tenant is the tenant under a certain lease (the "Lease"), dated
as of March 26, 1999, with LINCOLN-RECP CM-ES OPCO, LLC, a Delaware
limited liability company ("Landlord"), of the Premises as more
particularly described in Exhibit A hereto.
B. This Agreement is being entered into in connection with a
certain loan (the "Loan") which Lender has made to Landlord, and
secured in part by a Deed of Trust, Assignment of Leases and Rents and
Security Agreement on the Premises (the "Deed of Trust ") dated as of
________________________, 199_ and an assignment of leases and rents
dated as of ________________________, 199_ (the "Assignment"; the Deed
of Trust, the Assignment and the other documents executed and delivered
in connection with the Loan are hereinafter collectively referred to as
the "Loan Documents").
AGREEMENT
For mutual consideration, including the mutual covenants and
agreements set forth below, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Tenant agrees that the Lease and all terms and conditions
contained therein and all rights, options, liens and charges created
thereby, including without limitation, the Purchase Option, is and shall
be subject and subordinate in all respects to the Loan Documents and to
all present or future advances under the obligations secured thereby and
all renewals, amendments, modifications, consolidations, replacements and
extensions of secured obligations and the Loan Documents, to the full
extent of all amounts secured by the Loan Documents from time to time.
2. Lender agrees that, if Lender exercises any of its rights
under the Loan Documents such that it becomes the owner of the Premises,
including but not limited to an entry by Lender pursuant to the Deed of
Trust, a foreclosure of the Deed of Trust, a power of sale under the Deed
of Trust or otherwise: (a) the Lease (including without limitation, the
Purchase Option if said option has not been earlier terminated or, by its
terms, expired) shall continue in full force and effect as a direct lease
between Lender and Tenant, and subject to all the terms, covenants and
conditions of the Lease, and (b) Lender shall not disturb Tenant's right
of quiet possession of the Premises under the terms of the Lease so long
as Tenant is not in default beyond any applicable grace period of any
term, covenant or condition of the Lease.
3. Tenant agrees that, in the event of a exercise of the power
of sale or foreclosure of the Deed of Trust by Lender or the acceptance
of a deed in lieu of foreclosure by Lender or any other succession of
Lender to ownership of the Premises, Tenant will attorn to and recognize
Lender as its landlord under the Lease for the remainder of the term of
the Lease (including all extension periods which have been or are
hereafter exercised) upon the same terms and conditions as are set forth
in the Lease, and Tenant hereby agrees to pay and perform all of the
obligations of Tenant pursuant to the Lease.
4. Tenant agrees that, in the event Lender succeeds to the
interest of Landlord under the Lease, Lender shall not be:
(a) liable in any way for any act, omission, neglect or default of
any prior Landlord (including, without limitation, the then defaulting
Landlord), or
(b) subject to any claim, defense, counterclaim or offsets
which Tenant may have against any prior Landlord (including, without
limitation, the then defaulting Landlord), or
(c) bound by any payment of rent or additional rent which
Tenant might have paid for more than one month in advance of the due date
under the Lease to any prior Landlord (including, without limitation, the
then defaulting Landlord), or
(d) bound by any obligation to make any payment to Tenant
which was required to be made prior to the time Lender succeeded to any
prior Landlord's interest, or
(e) accountable for any monies deposited with any prior
Landlord (including security deposits), except to the extent such monies
are actually received by Lender, or
(f) bound by any amendment or modification of the Lease
made without the written consent of Lender.
Nothing contained herein shall prevent Lender from naming Tenant in
any foreclosure or other action or proceeding initiated in order for
Lender to avail itself of and complete any such foreclosure or other
remedy.
5. Tenant hereby agrees to give to Lender copies of all notices
of Landlord default(s) under the Lease in the same manner as, and
whenever, Tenant shall give any such notice of default to Landlord and no
such notice of default shall be deemed given to Landlord unless and until
a copy of such notice shall have been so delivered to Lender. Lender
shall have the right but no obligation to remedy any landlord default
under the Lease, or to cause any default of Landlord under the Lease to
be remedied, and for such purpose Tenant hereby grants Lender, in
addition the period given to Landlord for remedying defaults, an
additional 30 days to remedy, or cause to be remedied, any such default.
Tenant shall accept performance by Lender of any term, covenant,
condition or agreement to be performed by Landlord under the Lease with
the same force and effect as though performed by Landlord. No Landlord
default under the Lease shall exist or shall be deemed to exist (i) as
long as Lender, in good faith, shall have commenced to cure such default
within the above reference time period and shall be prosecuting the same
to completion with reasonable diligence, subject to force majeure, or
(ii) if possession of the Premises is required in order to cure such
default, or if such default is not susceptible of being cured by Lender,
as long as Lender, in good faith, shall have notified Tenant that Lender
intends to institute proceedings under the Loan Documents, and,
thereafter, as long as such proceedings shall have been instituted and
shall be prosecuted with reasonable diligence. In the event of the
termination of the Lease by reason of any default thereunder by Landlord,
upon Lender's written request, given within thirty (30) days after any
such termination, Tenant, within fifteen (15) days after receipt of such
request, shall execute and deliver to Lender or its designee or nominee a
new lease of the Premises for the remainder of the term of the Lease upon
all of the terms, covenants and conditions of the Lease. Neither Lender
nor its designee or nominee shall become liable under the Lease unless
and until Lender or its designee or nominee becomes, and then only with
respect to periods in which Lender or its designee or nominee remains,
the owner of the Premises. In no event shall Lender have any personal
liability as successor to Landlord and Tenant shall look only to the
estate and property of Lender in the Premises for the satisfaction of
Tenant's remedies for the collection of a judgment (or other judicial
process) requiring the payment of money in the event of any default by
Lender as Landlord under the Lease, and no other property or assets of
Lender shall be subject to levy, execution or other enforcement procedure
for the satisfaction of Tenant's remedies under or with respect to the
Lease. Lender shall have the right, without Tenant's consent, to
foreclose the Deed of Trust or to accept a deed in lieu of foreclosure of
the Deed of Trust or to exercise any other remedies under the Loan
Documents.
6. Tenant has no knowledge of any prior assignment or pledge of
the rents accruing under the Lease by Landlord. Tenant hereby
acknowledges the making of the Assignment from Landlord to Lender in
connection with the Loan. Tenant acknowledges that the interest of the
Landlord under the Lease is to be assigned to Lender solely as security
for the purposes specified in said assignments, and Lender shall have no
duty, liability or obligation whatsoever under the Lease or any extension
or renewal thereof, either by virtue of said assignments or by any
subsequent receipt or collection of rents thereunder, unless Lender shall
specifically undertake such liability in writing.
7. If Tenant is a corporation, each individual executing this
Agreement on behalf of said corporation represents and warrants that s/he
is duly authorized to execute and deliver this Agreement on behalf of
said corporation, in accordance with a duly adopted resolution of the
Board of Directors of said corporation or in accordance with the by-laws
of said corporation, and that this Agreement is binding upon said
corporation in accordance with its terms. If Landlord is a partnership,
each individual executing this Agreement on behalf of said partnership
represents and warrants that s/he is duly authorized to execute and
deliver this Agreement on behalf of said partnership in accordance with
the partnership agreement for said partnership.
8. Any notice, election, communication, request or other
document or demand required or permitted under this Agreement shall be in
writing and shall be deemed delivered on the earlier to occur of (a)
receipt or (b) the date of delivery, refusal or nondelivery indicated on
the return receipt, if deposited in a United States Postal Service
Depository, postage prepaid, sent certified or registered mail, return
receipt requested, or if sent via recognized commercial courier service
providing for a receipt, addressed to Tenant or Lender, as the case may
be at the following addresses:
If to Tenant: Exodus Communications, Inc.
2831 Mission College Boulevard
Santa Clara, California 95054-1838
Attention: General Counsel
If to Lender: Credit Suisse First Boston Mortgage Capital
LLC
11 Madison Avenue
New York, New York 10010
Attention:
with a copy to: Cadwalader, Wickersham & Taft
100 Maiden Lane
New York, New York 10038
Attention: William P. McInerney, Esq.
9. The term "Lender" as used herein includes any successor or
assign of the named Lender herein, including without limitation, any co-
lender at the time of making the Loan, any purchaser at a foreclosure sale
and any transferee pursuant to a deed in lieu of foreclosure, and their
successors and assigns, and the term "Tenant" as used herein includes any
successor and assign of the named Tenant herein.
10. If any provision of this Agreement is held to be invalid or
unenforceable by a court of competent jurisdiction, such provision shall
be deemed modified to the extent necessary to be enforceable, or if such
modification is not practicable such provision shall be deemed deleted
from this Agreement, and the other provisions of this Agreement shall
remain in full force and effect.
11. Neither this Agreement nor any of the terms hereof may be
terminated, amended, supplemented, waived or modified orally, but only by
an instrument in writing executed by the party against which enforcement
of the termination, amendment, supplement, waiver or modification is
sought.
\\\\\ continued on next page
12. This Agreement shall be construed in accordance with the laws
of the State of California.
13. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original, and all of which shall, taken
together, be deemed one agreement.
Witness the execution hereof as of the date first above written.
LENDER:
Credit Suisse First Boston Mortgage Capital LLC
By:
Name:
Title:
TENANT:
Exodus Communications, Inc.,
a Delaware corporation
By: __________________________________
Its: __________________________________
By: __________________________________
Its: __________________________________
The undersigned Landlord hereby consents to the foregoing Agreement
and confirms the facts stated in the foregoing Agreement.
LANDLORD:
LINCOLN-RECP CM-ES OPCO, LLC,
a Delaware limited liability company
By: Legacy Partners Commercial, Inc.,
as agent for LINCOLN-RECP CM-ES OPCO, LLC
By: ___________________________
, Vice President
EXHIBIT H
TENANT'S CONFIDENTIALITY AGREEMENT
CONFIDENTIAL NONDISCLOSURE AGREEMENT
1. Proprietary Information is technical or business information
describing or related to the activities of Exodus Communications, Inc.
(Exodus) which: (1) Exodus has generated at private expense and holds
in confidence, or (2) Exodus has received from third parties under an
obligation to maintain as confidential.
2. Visitor agrees not to disclose the Proprietary Information to any
third party. Visitor agrees to use the Proprietary Information only
for purposes expressly authorized in writing by Exodus and not to use
it for Visitor's own use.
3. The Visitor agrees that disclosure of Proprietary Information received
from Exodus shall be limited only to those of Visitor's (or Visitor's
employers) employees with a strict need to know for purposes expressly
authorized in writing by Exodus.
4. The obligations and duties set forth hereunder shall continue for a
period of three (3) years from receipt by Visitor.
5. Visitor shall not expose Exodus to any of Visitor's proprietary or
confidential information, or to the confidential or proprietary
information of any third party.
6. The terms of a confidential nondisclosure agreement previously
executed by Exodus and Visitor (or Visitor's employer), if any, will
supersede the terms of this agreement.
Your signature on this line indicates that you have read the above
confidential nondisclosure agreement and have agreed to abide by its
contents.
Signature_____________________________________________________________
_______
EXHIBIT I
TENANT'S PROPERTY
1. Permanent and temporary generator systems including enclosures and
fuel tanks with the associated electronic and manual switch gear.
2. Mechanical Systems i.e., Air Conditioning, and condenser systems,
air handlers and electrical dampers.
3. Raised flooring, racking, cage materials, cabinets and patch
panels.
4. UPS Battery Systems including electrical switch gear.
5. Any customer satellite dishes installed on roof or parking lot
areas.
6. FM200 fire suppression canisters, piping and nozzles.
7. VESDA or smoke sensor stations in ceiling or floor area.
8. Inside or outside security cameras, access card reader stations,
VCR, multiplexer, monitors, and computers.
9. Partition and conference room furniture systems and freestanding,
cabinets, storage units.
10. Telephone and voice mail system with desk stations and
receptionist, computers, servers, printers, phone sets.
11. Fiber Muxes or other Telco equipment installed in MPOE rooms.
12. Emergency distribution board and telephone backboard with
connectors.
13. Maintenance bypass electronic and manual switch gear.
14. Transformers and Power Distributions Units installed on premises.
15. Kitchen appliances like microwaves, refrigerators and vending
machines.
16. Console monitors, screen projection and screens in command center.
17. Bulletproof/resistant glass.
18. Satellite dishes or other communications equipment installed on
roof.
19. Customer and vendor equipment and related materials.
20. Tenant, tenant customer and tenant vendor personal property.
EXHIBIT 10.53
AMENDMENT NO. 3 TO SUBLEASE
THIS AMENDMENT NO. 3 TO SUBLEASE ("Amendment") is made as of April 8,
1999 between AMDAHL CORPORATION, a Delaware corporation ("Sublessor"),
and EXODUS COMMUNICATIONS, INC., a California corporation ("Sublessee").
THE PARTIES ENTER INTO THIS AMENDMENT based upon the following facts,
understandings and intentions:
A. John A. Sobrato and Susan R. Sobrato, a married couple, Carl E.
Berg and Mary Ann Berg, a married couple, Clyde J. Berg and Nancy Berg, a
married couple, and Robert M. Granum, II and Kay Granum (collectively,
the "Landlord"), as landlord, and Sublessor, as tenant, are now parties
to that certain lease agreement dated April 3, 1979, as amended by an
Addendum No. 1 to Lease dated June 7, 1979, Addendum No. 2 to Lease dated
October 19, 1979 and Addendum No. 3 to Lease dated December 17, 1979
("Master Lease") with respect to certain premises (the "Building")
located at 2251 Lawson Lane in Santa Clara, California.
B. Sublessor and Sublessee are now parties to a Sublease Agreement
effective January __, 1998 and amended on February 13, 1998 by Amendment
No. 1 to Sublease and on December 23, 1998 by Amendment No. 2 to Sublease
(as amended, the "Sublease") whereby Sublessee currently subleases a
portion of the Building (the "Existing Sublet Space") consisting of
approximately 55,000 rentable square feet and more particularly described
in the Sublease.
C. The parties hereto now wish to amend the Sublease to expand the
space subleased by Sublessor to Sublessee.
D. Capitalized terms used herein shall have the meanings given them
in the Sublease, unless otherwise defined herein.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants and promises
of the parties, the parties hereto agree as follows:
1. Expansion of Sublet Space. The Existing Sublet Space shall be
expanded to include additional space consisting of approximately 33,490
square feet located on the second floor of the Building and shown on
Exhibit A, attached hereto and incorporated herein by this reference (the
"Expanded Sublet Space"). As of the execution of this Amendment,
Sublessee acknowledges that Sublessee shall have conducted Sublessee's
own investigation of the Expanded Sublet Space and the physical condition
thereof, including accessibility and location of utilities, improvements,
existence of hazardous materials, including but not limited to asbestos,
asbestos containing materials, polychlorinated biphenyls (PCBs) and
earthquake preparedness, which in Sublessee's judgment affect or
influence Sublessee's use of the Expanded Sublet Space and Sublessee's
willingness to enter into this Amendment. Sublessee recognizes the
Sublessor would not sublease the Expanded Sublet Space except on an "as
is" basis and acknowledges that Sublessor has made no representations of
any kind in connection with improvements or physical conditions on, or
bearing on, the use of the Expanded Sublet Space. Sublessee shall rely
solely on Sublessee's own inspection and examination of such items and
not on any representations of Sublessor, express or implied. Sublessee
further recognizes and agrees that neither Sublessor nor Landlord shall
be required to perform any work of construction, alteration or
maintenance of or to the Expanded Sublet Space. Notwithstanding anything
to the contrary contained herein, Sublessee shall be solely responsible
for ensuring that the Entire Sublet Space complies with all code
requirements and other governmental regulations including, but not
limited to, fire code requirements for existing Area B as such Area is
currently configured and depicted on Exhibit A.
2. Term. The Term of the Sublease with respect to the Expanded
Sublet Space shall be for nine (9) years and eight (8) months, commencing
on April 1, 1999 ("Expansion Commencement Date") and expiring on November
30, 2008 (the "Expansion Expiration Date"), or any earlier date on which
the Sublease is terminated pursuant to its terms. Sublessee shall have no
right whatsoever to extend the Term of the Sublease.
3. Early Occupancy. Provided that Sublessor and Master Landlord have
already approved any plans of Sublessee for any demolition and/or tenant
improvement work to be performed by Sublessee in the Expanded Sublet
Space, Sublessee may, at Sublessee's sole risk, enter the Expanded Sublet
Space prior to the Expansion Commencement Date solely to install trade
fixtures and equipment; provided, however, that (a) Sublessee's early
entry shall not interfere with Sublessor's activities in the Expanded
Sublet Space or cause labor difficulties; (b) Sublessee shall provide
Sublessor with satisfactory evidence that Sublessee has obtained the
insurance required of Sublessee under the Sublease; (c) such early
occupancy shall be on all of the terms and conditions of the Sublease
(except for Sublessee's obligations to pay Base Rent and Additional
Rent), and (d) Sublessee shall pay Sublessor the utility charges related
to such early occupancy by Sublessee.
4. Base Rent. The monthly rent due for the Expanded Sublet Space
shall be $45,211.50 ($1.35 per rentable square foot) from the Expansion
Commencement Date through January 30, 2000. This amount shall be in
addition to all sums due under the Sublease. Beginning on February 1,
2000 (month 25 under the Sublease), Base Rent shall increase annually by
$0.5 per rentable square foot as per the Sublease for the Existing Sublet
Space and the Expanded Sublet Space (collectively, the "Entire Sublet
Space").
Upon the execution of this Amendment, Sublessee shall deliver to
Sublessor the Base Rent for the first month of the term of the Sublease
applicable to the Expanded Sublet Space.
5. Letter of Credit
a. No later than the close of business on April 2, 1999, Sublessee
shall deposit with Sublessor an unconditional irrevocable letter of
credit in the amount of Two Hundred Sixty-Five Thousand and No/100
Dollars ($265,000.00) (the "Letter of Credit"). The financial institution
issuing the Letter of Credit shall be reasonably acceptable to Sublessor.
Such financial institution shall be a part of the federal banking system
and shall have at least one branch within fifty (50) miles of the
Building.
b. The Letter of Credit shall provide for its payment to Sublessor
upon its presentation of a statement from Sublessor that an event of
default by Sublessee exists hereunder. Upon the failure of Sublessee to
deliver a replacement letter of credit (or any extension of the existing
Letter of Credit) on or before thirty (30) days prior to any maturity
date of any such Letter of Credit, Sublessor may draw upon the same and
thereafter treat such cash as a portion of the Security Deposit. If an
event of default by Sublessee under the Sublease does not then exist, (i)
on the first day of the thirty-seventh (37th) month of the term
applicable to the Expanded Sublet Space, the amount of the Letter of
Credit required of Sublessee hereunder shall be reduced to Two Hundred
Thirty-Five Thousand and No/100 Dollars ($235,000.00), and (ii) on the
first day of the forty-ninth (49th) month of the term applicable to the
Expanded Sublet Space, the amount of the Letter of Credit required of
Sublessee hereunder shall be reduced to Two Hundred Five Thousand and
No/100 Dollars ($205,000.00).
6. Operating Expenses. Sublessor and Sublessee agree that the second
floor of the Building is comprised of 63,900 square feet. For the time
period commencing with the Expansion Commencement Date and ending on the
Expansion Expiration Date, or any earlier date on which the Sublease is
terminated pursuant to its terms, Sublessee's Share shall be sixty-five
and thirty-five one hundredths percent (65.35%) (88,490 square feet of
135,400 Building square feet). Notwithstanding the foregoing, Sublessee
shall bear sole responsibility for the payment of all utilities serving
the Entire Sublet Space. The Entire Sublet Space shall be separately
metered at Sublessee's expense.
7. Sublessee Improvements.
a. Sublessor will pay an amount equal to $50,235.00 ($1.50 per
rentable square foot of the Expanded Sublet Space) ("Construction
Allowance") toward Sublessee's costs of construction to demise and
improve the Entire Sublet Space. Sublessor shall reimburse Sublessee for
the costs of construction within forty-five (45) days of receipt from
Sublessee of receipts for the work associated with such improvements and
unconditional mechanical and materialmen lien releases. Sublessee shall
bear sole responsibility for any and all costs of construction in excess
of the Construction Allowance. Sublessee shall timely pay all such excess
amounts and shall keep the Building and the Entire Sublet Space free and
clear of all liens and encumbrances. Sublessee shall be solely
responsible for obtaining all required governmental approvals, including
but not limited to building permits, for all improvements.
b. Sublessee shall employ a contractor or contractors of
Sublessee's choice and reasonably acceptable to Sublessor to construct
the improvements in substantial conformance with plans and specifications
approved by Sublessor, which approval shall not be unreasonably withheld.
The improvements shall be constructed in a good, workmanlike manner and
shall be at least equal in quality to the building standard work.
c. The term "costs of construction" as used herein shall mean all
costs incurred in the design and construction of the Sublessee
improvements, including the following: (i) labor and construction costs;
(ii) cost of materials; and (iii) architectural and design fees.
d. Notwithstanding anything to the contrary herein, within thirty
(30) days of the Expansion Commencement Date, Sublessee, at Sublessee's
sole expense, (i) shall construct a corridor between the Expanded Sublet
Space and the area identified as "Space B" on Exhibit A attached hereto.
In connection therewith, the Sublessee shall construct large double door
access to Space B from such corridor, (ii) shall construct a conference
room in such "Space B" area which is reasonably equivalent to the
existing configuration of Room 2464 shown on Exhibit A, (iii) shall
remove the west door in hallway 2800 and the north wall in room 308, and
shall relocate the existing fire hose, all as shown on the attached
Exhibit A and (iv) shall construct an alarmed emergency exit from the
corridor in the Expanded Sublet Space as shown on attached Exhibit A.
Further, if required by fire code, Sublessee, at Sublessee's sole
expense, shall construct an alarmed emergency exit from the Expanded
Sublet Space adjacent to room 2912 and adjacent to room 2928 on the
attached Exhibit A. Such work shall be performed in a good and
workmanlike manner pursuant to plans and specifications therefore that
have been approved in advance by Sublessor and Master Lessor.
e. Sublessor shall install a card key access on the east door in
hallway 2800 as shown on the attached Exhibit A.
f. Sublessor shall use commercially reasonable efforts to allow
Sublessee to begin to: (i) construct and relocate the caged area in room
2880C on the attached Exhibit A by 6pm on April 1, 1999, and (ii) allow
Sublessee to begin to construct the demising wall for the corridor as
shown on the attached Exhibit A by 6 PM on April 1, 1999, provided that
nothing herein shall be deemed to require Sublessee to incur any expense
or liability in connection therewith.
8. Access. Sublessee shall have non-exclusive use of the freight
elevator in the Expanded Sublet Space throughout the Term of the Sublease
until the Expiration Expansion Date. In addition, Sublessee shall provide
Sublessor throughout the Term of this Sublease until the Expiration
Expansion Date with reasonable access to the restrooms on the second
floor of the Building, along with access to the area marked as "Space B"
on Exhibit A from the Building lobby.
9. No Brokers. Sublessee warrants for the benefit of Sublessor that
its sole contact with Sublessor or the Expanded Sublet Space in
connection with this transaction has been directly with Sublessor.
Sublessee further warrants for the benefit of Sublessor that no broker or
finder can properly claim a right to a commission or a finder's fee based
upon contacts between the claimant and Sublessee with respect to the
other party or the Expanded Sublet Space. Sublessee shall indemnify,
defend by counsel acceptable to Sublessor and hold Sublessor harmless
from and against any loss, cost or expense, including, but not limited
to, attorneys' fees and court costs, resulting from any claim for a fee
or commission by any broker or finder in connection with the Expanded
Sublet Space and this Sublease. In no event shall Sublessor be liable for
any commissions or finder's fees related to the Expanded Sublet Space or
this Sublease.
10. Full Force and Effect. Except as herein amended and supplemented,
the Sublease shall continue in full force and effect as written.
IN WITNESS WHEREOF, the parties hereto have executed this Amendment
with duplicate counterparts as of the day and year first above written.
"Sublessor"
AMDAHL CORPORATION,
a Delaware corporation,
By: /s/ EDWARD S. HARTFORD
Name: Edward S. Hartford
Title: Vice President, Corporate Facilities
"Sublessee"
EXODUS COMMUNICATIONS, INC.,
a California corporation
By: /s/ RICHARD STOLTZ
Name: Richard Stoltz
Title: Chief Operating Officer and Chief
Economic Officer
By:
Name: Robert Sanford
Title: Vice President, Operations
<PAGE>
EXHIBIT A
EXPANDED SUBLET SPACE
EXHIBIT A
[BUILDING 7 (SECOND FLOOR) FLOOR PLAN]
<PAGE>
EXHIBIT 10.54
Exodus Communications, Inc.
5% Convertible Subordinated Notes due March 15, 2006
Purchase Agreement
February 25, 1999
Goldman, Sachs & Co.,
BancBoston Robertson Stephens Inc.
BT Alex. Brown Incorporated
Donaldson, Lufkin & Jenrette
Securities Corporation
Hambrecht & Quist LLC
As representatives of the several Purchasers
named in Schedule I hereto,
c/o Goldman, Sachs & Co.
85 Broad Street,
New York, New York 10004.
Ladies and Gentlemen:
Exodus Communications, Inc., a Delaware corporation (the
"Company"), proposes, subject to the terms and conditions stated
herein, to issue and sell to the Purchasers named in Schedule I hereto
(the "Purchasers") an aggregate of $200,000,000 principal amount of the
5% Convertible Subordinated Notes due March 15, 2006, convertible into
Common Stock, $0.001 par value per share ("Stock") of the Company,
specified above (the "Firm Securities") and, at the election of the
Underwriters, up to an aggregate of $50,000,000 additional aggregate
principal amount (the "Optional Securities") (the Firm Securities and the
Optional Securities which the Underwriters elect to purchase pursuant to
Section 2 hereof are herein collectively called the "Securities").
1. The Company represents and warrants to, and agrees with, each
of the Purchasers that:
(a) A preliminary offering circular, dated February 22, 1999
(the "Preliminary Offering Circular") and an offering circular,
dated February 25, 1999 (the "Offering Circular"), have been
prepared in connection with the offering of the Securities and
shares of the Stock issuable upon conversion thereof.
Additionally, the Company has previously prepared the following
documents: the Company's Special Preliminary Proxy Statement filed
pursuant to Section 14(a) of the United States Securities Exchange
Act of 1934, as amended (the "Exchange Act"), dated January 29,
1999, the Company's Special Definitive Proxy Statement filed
pursuant to Section 14(a) of the Exchange Act, dated February 9,
1999, the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1998 and the Company's Current Reports on Form
8-K, dated January 29, 1999 and February 22, 1999 (together the
"Exchange Act Reports"). Any reference (other than in Sections
7(a) and 7(b) hereof) to the Preliminary Offering Circular or the
Offering Circular shall be deemed to refer to and include the
Exchange Act Reports, and any reference (other than in Sections
7(a) and 7(b) hereof) to the Preliminary Offering Circular or the
Offering Circular as amended or supplemented as of any specified
date after the date hereof shall be deemed to include (i) the
Exchange Act Reports and all subsequent documents filed with the
United States Securities and Exchange Commission (the
"Commission") pursuant to Section 13(a), 13(c) or 15(d) of the
Exchange Act, after the date of the Offering Circular and prior to
such specified date and (ii) any Additional Issuer Information (as
defined in Section 5(f)) furnished by the Company, prior to the
completion of the distribution of the Securities. The Exchange Act
Reports, when they were filed with the Commission, conformed in all
material respects to the applicable requirements of the Exchange
Act and the applicable rules and regulations of the Commission
thereunder. The Preliminary Offering Circular, the Offering
Circular and the Exchange Act Reports did not, as of their
respective dates, contain an untrue statement of a material fact or
omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which
they were made, not misleading; provided, however, that this
representation and warranty shall not apply to any statements or
omissions made in reliance upon and in conformity with information
furnished in writing to the Company by a Purchaser through Goldman,
Sachs & Co. expressly for use therein. Since December 31, 1998,
the Company has not filed any documents with the Commission
pursuant to Section 13(a), 13(c) or 15(d) of the Exchange Act other
than the Exchange Act Reports;
(b) Neither the Company nor any of its subsidiaries has
sustained since the date of the latest audited financial statements
included in the Offering Circular any material loss or interference
with its business from fire, explosion, flood or other calamity,
whether or not covered by insurance, or from any labor dispute or
court or governmental action, order or decree, otherwise than as
set forth or contemplated in the Offering Circular; and, since the
respective dates as of which information is given in the Offering
Circular, there has not been any change in the capital stock or
long-term debt of the Company or any of its subsidiaries or any
material adverse change, or any development that is reasonably
likely to result in a material adverse change, in or affecting the
general affairs, management, financial position, stockholders'
equity or results of operations of the Company and its
subsidiaries, otherwise than as set forth or contemplated in the
Offering Circular;
(c) The Company has no subsidiary that is a "Significant
Subsidiary" of the Company within the meaning of Regulation S-X
under the Securities Act of 1933, as amended (the "Securities
Act");
(d) The Company and its subsidiaries own no real property.
The Company and its subsidiaries have good and marketable title to
all personal property owned by them, in each case free and clear of
all liens, encumbrances and defects except such as are described in
the Offering Circular or such as do not materially affect the value
of such property and do not interfere with the use made and
proposed to be made of such property by the Company and its
subsidiaries; and any real property and buildings held under lease
by the Company and its subsidiaries are held by them under valid,
subsisting and enforceable leases with such exceptions as are not
material and do not interfere with the use made and proposed to be
made of such property and buildings by the Company and its
subsidiaries;
(e) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of
Delaware, with power and authority (corporate and other) to own its
properties and conduct its business as described in the Offering
Circular, and has been duly qualified as a foreign corporation for
the transaction of business and is in good standing under the laws
of each other jurisdiction in which it owns or leases properties or
conducts any business so as to require such qualification, or is
subject to no material liability or disability by reason of the
failure to be so qualified in any such jurisdiction; and each
subsidiary of the Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of its
jurisdiction of incorporation;
(f) The Company has an authorized capitalization as set forth
in the Offering Circular, and all of the issued shares of capital
stock of the Company have been duly and validly authorized and
issued and are fully paid and non-assessable; the shares of Stock
initially issuable upon conversion of the Securities have been duly
and validly authorized and reserved for issuance and, when issued
and delivered in accordance with the provisions of the Securities
and the Indenture referred to below, will be duly and validly
issued, fully paid and non-assessable and will conform to the
description of the Stock contained in the Offering Circular; and
all of the issued and outstanding shares of capital stock of each
subsidiary of the Company have been duly and validly authorized and
issued, are fully paid and non-assessable and (except for
directors' qualifying shares and except as otherwise set forth in
the Offering Circular) are owned directly or indirectly by the
Company, free and clear of all liens, encumbrances, equities or
claims;
(g) The Securities have been duly authorized and, when issued
and delivered pursuant to this Agreement, will have been duly
executed, authenticated, issued and delivered and will constitute
valid and legally binding obligations of the Company entitled to
the benefits provided by the indenture to be dated as of March 1,
1999 (the "Indenture") between the Company and Chase Manhattan
Bank and Trust Company, National Association, as Trustee (the
"Trustee"), under which they are to be issued, which will be
substantially in the form previously delivered to you; the
Indenture has been duly authorized and, when executed and delivered
by the Company and the Trustee, the Indenture will constitute a
valid and legally binding instrument, enforceable in accordance
with its terms, subject, as to enforcement, to bankruptcy,
insolvency, reorganization and other laws of general applicability
relating to or affecting creditors' rights and to general equity
principles; and the Securities and the Indenture conform to the
descriptions thereof in the Offering Circular and are in
substantially the form previously delivered to you;
(h) That certain Registration Rights Agreement among the
Company and the Purchasers to be dated as of March 1, 1999 (the
"Registration Rights Agreement") has been duly authorized and,
when executed and delivered by the Company, the Registration Rights
Agreement will constitute a valid and legally binding instrument,
enforceable in accordance with its terms;
(i) None of the transactions contemplated by this Agreement
(including, without limitation, the use of the proceeds from the
sale of the Securities) will violate or result in a violation of
Section 7 of the Exchange Act, or any regulation promulgated
thereunder, including, without limitation, Regulations T, U, and X
of the Board of Governors of the Federal Reserve System;
(j) Prior to the date hereof, neither the Company nor any of
its affiliates (as such term is defined in Rule 144 promulgated
under the Securities Act) has taken any action which is designed to
or which has constituted or which might have reasonably been
expected to cause or result in stabilization or manipulation of the
price of any security of the Company in connection with the
offering of the Securities;
(k) The issue and sale of the Securities and the compliance by
the Company with all of the provisions of the Securities, the
Indenture, the Registration Rights Agreement and this Agreement and
the consummation of the transactions herein and therein
contemplated will not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a
default under, any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company or
any of its subsidiaries is a party or by which the Company or any
of its subsidiaries is bound or to which any of the property or
assets of the Company or any of its subsidiaries is subject, nor
will such action result in any violation of the provisions of the
Certificate of Incorporation or By-laws of the Company or any
statute or any order, rule or regulation of any court or
governmental agency or body having jurisdiction over the Company or
any of its subsidiaries or any of their properties; and no consent,
approval, authorization, order, registration or qualification of or
with any such court or governmental agency or body is required for
the issue and sale of the Securities or the consummation by the
Company of the transactions contemplated by this Agreement, the
Indenture or the Registration Rights Agreement except such
consents, approvals, authorizations, registrations or
qualifications as may be required under state securities or Blue
Sky laws in connection with the purchase and distribution of the
Securities by the Purchasers;
(l) Neither the Company nor any of its subsidiaries is in
violation of its Certificate of Incorporation or By-laws or in
default in the performance or observance of any material
obligation, covenant or condition contained in any indenture,
mortgage, deed of trust, loan agreement, lease or other agreement
or instrument to which it is a party or by which it or any of its
properties may be bound;
(m) The statements set forth in the Offering Circular under
the caption "Description
of Notes" and "Description of Common Stock", insofar as they
purport to constitute a summary of the terms of the Securities, the
Indenture, the Registration Rights Agreement and the Stock, under
the caption "Certain United States Federal Income Tax
Considerations", and under the caption "Underwriting", insofar
as they purport to describe the provisions of the laws and
documents referred to therein, are accurate, complete and fair;
(n) Other than as set forth in the Offering Circular, there
are no legal or governmental proceedings pending to which the
Company or any of its subsidiaries is a party or of which any
property of the Company or any of its subsidiaries is the subject
which, if determined adversely to the Company or any of its
subsidiaries, would individually or in the aggregate have a
material adverse effect on the current or future financial
position, stockholders' equity or results of operations of the
Company and its subsidiaries; and, to the best of the Company's
knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others;
(o) When the Securities are issued and delivered pursuant to
this Agreement, the Securities will not be of the same class
(within the meaning of Rule 144A under the Securities Act as
securities which are listed on a national securities exchange
registered under Section 6 of the Exchange Act or quoted in a U.S.
automated inter-dealer quotation system;
(p) The Company is subject to Section 13 or 15(d) of the
Exchange Act;
(q) The Company is not, and after giving effect to the
offering and sale of the Securities, will not be an "investment
company", as such term is defined in the United States Investment
Company Act of 1940, as amended (the "Investment Company Act");
(r) Neither the Company nor any of its subsidiaries, nor any
person acting on its or their behalf has offered or sold the
Securities by means of any general solicitation or general
advertising within the meaning of Rule 502(c) under the Securities
Act;
(s) Within the preceding six months, neither the Company nor
any other person acting on behalf of the Company has offered or
sold to any person any Securities, or any securities of the same or
a similar class as the Securities, other than Securities offered or
sold to the Purchasers hereunder. The Company will take reasonable
precautions designed to insure that any offer or sale, direct or
indirect, in the United States or to any U.S. person (as defined in
Rule 902 under the Securities Act) of any Securities or any
substantially similar security issued by the Company, within six
months subsequent to the date on which the distribution of the
Securities has been completed (as notified to the Company by
Goldman, Sachs & Co.), is made under restrictions and other
circumstances reasonably designed not to affect the status of the
offer and sale of the Securities in the United States and to U.S.
persons contemplated by this Agreement as transactions exempt from
the registration provisions of the Securities Act;
(t) Neither the Company nor any of its affiliates does
business with the government of Cuba or with any person or
affiliate located in Cuba within the meaning of Section 517.075,
Florida Statutes; and
(u) KPMG Peat Marwick LLP, who have certified certain
financial statements of the Company and its subsidiaries, are
independent public accountants as required by the Securities Act
and the rules and regulations of the Commission thereunder;
(v) The Company owns or possesses, or can acquire on
reasonable terms, adequate patents, patent rights, licenses,
inventions, copyrights, know-how (including trade secrets and other
unpatented and/or unpatentable proprietary or confidential
information, systems or procedures), trademarks, service marks,
trade names or other intellectual property (collectively,
"Intellectual Property") necessary to carry on the business now
operated by it, and the Company has not received any notice of, and
is not otherwise aware of, any infringement of or conflict with
asserted rights of others with respect to any Intellectual Property
or of any facts or circumstances which would render invalid, or
otherwise prevent or materially inhibit the Company from utilizing,
any Intellectual Property necessary to carry on the business now
conducted by the Company, and which infringement or conflict (if
the subject of any unfavorable decision, ruling or finding),
invalidity, prevention or inhibition, singly or in the aggregate,
is reasonably likely to result in a material adverse change in the
general affairs, management, financial position, stockholders'
equity or results of operations of the Company;
(w) Except as described in the Offering Circular and except as
would not, singly or in the aggregate, result in a material adverse
change in or affecting the general affairs, management, financial
position, stockholders' equity or results of operations of the
Company, (A) the Company is not in violation of any federal, state,
local or foreign statute, law, rule, regulation, ordinance, code,
policy or rule of common law or any judicial or administrative
interpretation thereof, including any judicial or administrative
order, consent, decree or judgment, relating to pollution or
protection of human health, the environment (including, without
limitation, ambient air, surface water, groundwater, land surface
or subsurface strata) or wildlife, including, without limitation,
laws and regulations relating to the release or threatened release
of chemicals, pollutants, contaminants, wastes, toxic substances,
hazardous substances, petroleum or petroleum products (collectively
"Hazardous Materials") or to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or
handling of Hazardous Materials (collectively, "Environmental
Laws"), (B) the Company has all permits, authorizations and
approvals required under any applicable Environmental Laws and is
in compliance with their requirements, (C) there are no pending or,
to the best of the Company's knowledge, threatened administrative,
regulatory or judicial action, suits, demands, demand letters,
claims, liens, notices of noncompliance or violation, investigation
or proceedings relating to any Environmental Law against the
Company and (D) to the best of the Company's knowledge, there are
no events or circumstances that might reasonably be expected to
form the basis of an order for clean-up or remediation, or an
action, suit or proceeding by any private party or government body
or agency, against or affecting the Company relating to Hazardous
Materials or any Environmental Laws;
(x) The Company has reviewed its operations and that of its
subsidiaries and any third parties with which the Company or any of
its subsidiaries has a material relationship to evaluate the extent
to which the business or operations of the Company or any of its
subsidiaries will be affected by the Year 2000 Problem. Based on
such review, the Company has no reason to believe, and does not
believe, that the Year 2000 Problem will have a material adverse
effect on the general affairs, management, the current or future
consolidated financial position, stockholders' equity or results of
operations of the Company and its subsidiaries or result in any
material loss or interference with the Company's business or
operations. The "Year 2000 Problem" as used herein means any
significant risk that computer hardware or software used in the
receipt, transmission, processing, manipulation, storage,
retrieval, retransmission or other utilization of data or in the
operation of mechanical or electrical systems of any kind will not,
in the case of dates or time periods occurring after December 31,
1999, function at least as effectively as in the case of dates or
time periods occurring prior to January 1, 2000.
2. Subject to the terms and conditions herein set forth, (a) the
Company agrees to issue and sell to each of the Purchasers, and each of
the Purchasers agrees, severally and not jointly, to purchase from the
Company, at a purchase price of 97.25% of the principal amount thereof,
plus accrued interest, if any, from March 3, 1999 to the Time of Delivery
hereunder, the principal amount of Firm Securities set forth opposite the
name of such Purchaser in Schedule I hereto, and (b) in the event and to
the extent that the Underwriters shall exercise the election to purchase
Optional Securities as provided below, the Company agrees to issue and
sell to each of the Purchasers, and each of the Purchasers agrees,
severally and not jointly, to purchase from the Company, at the same
purchase price set forth in clause (a) of this Section 2, that portion of
the aggregate principal amount of the Optional Securities as to which
such election shall have been exercised (to be adjusted by you so as to
eliminate fractions) determined by multiplying such aggregate principal
amount of Optional Securities by a fraction, the numerator of which is
the maximum aggregate principal amount of Optional Securities which such
Purchaser is entitled to purchase as set forth opposite the name of such
Purchaser in Schedule I hereto and the denominator of which is the
maximum aggregate principal amount of Optional Securities which all of
the Purchasers are entitled to purchase hereunder.
The Company hereby grants to the Purchasers the right to purchase
at their election up to $50,000,000 aggregate principal amount of
Optional Securities, at the same purchase price set forth in clause (a)
of the first paragraph of this Section 2, for the sole purpose of
covering overallotments in the sale of Firm Securities. Any such election
to purchase Optional Securities may be exercised by written notice from
Goldman, Sachs & Co. to the Company, given within a period of 30 calendar
days after the date of this Agreement, setting forth the aggregate
principal amount of Optional Securities to be purchased and the date on
which such Optional Securities are to be delivered, as determined by you
but in no event earlier than the First Time of Delivery (as defined in
Section (4) hereof) or, unless you and the Company otherwise agree in
writing, earlier than two or later than ten business days after the date
of such notice.
3. Upon the authorization by Goldman, Sachs & Co. of the release
of the Firm Securities, the several Purchasers propose to offer the Firm
Securities for sale upon the terms and conditions set forth in this
Agreement and the Offering Circular and each Purchaser hereby represents
and warrants to, and agrees with the Company that:
(a) It will offer and sell the Securities only to persons who it
reasonably believes are "qualified institutional buyers" ("QIBs")
within the meaning of Rule 144A under the Securities Act in transactions
meeting the requirements of Rule 144A;
(b) It is an Institutional Accredited Investor;
(c) Upon request of the Company, it will notify the Company upon
completion of the distribution of the Securities; and
(d) It has not offered and will not offer or sell the Securities
by any form of general solicitation or general advertising, including but
not limited to the methods described in Rule 502(c) under the Securities
Act.
4. (a) The Securities to be purchased by each Purchaser hereunder
will be represented by one or more definitive global Securities in book
entry form which will be deposited by or on behalf of the Company with
The Depository Trust Company ("DTC") or its designated custodian. The
Company will deliver the Securities to Goldman, Sachs & Co. for the
account of each Purchaser, against payment by or on behalf of such
Purchaser of the purchase price therefor by wire transfer, payable to the
order of the Company in Federal (same day) funds, by causing DTC to
credit the Securities to the account of Goldman, Sachs & Co. at DTC. The
Company will cause the certificates representing the Securities to be
made available to Goldman, Sachs & Co. for checking at least twenty-four
hours prior to the Time of Delivery (as defined below) at the office of
DTC or its designated custodian (the "Designated Office"). The time and
date of such delivery and payment shall be, with respect to the Firm
Securities, 9:30 a.m., New York City time, on March 3, 1999 or at such
other time and date as you and the Company may agree upon in writing,
and, with respect to the Optional Securities, 9:30 a.m., New York City
time, on the date specified by you in the written notice given by you of
the Purchasers' election to purchase the Optional Securities, or at such
other time and date as you and the Company may agree upon in writing.
Such time and date for delivery of the Firm Securities is herein called
the "First Time of Delivery", such time and date for delivery of the
Optional Securities, if not the First Time of Delivery, is herein called
the "Second Time of Delivery", and each such time and date for delivery
is herein called a "Time of Delivery".
(b) The documents to be delivered at each Time of Delivery by or
on behalf of the parties hereto pursuant to Section 7 hereof, including
the cross-receipt for the Securities and any additional documents
requested by the Purchasers pursuant to Section 7(i) hereof, will be
delivered at such time and date at the offices of Fenwick & West LLP, Two
Palo Alto Square, Palo Alto, California 94034 (the "Closing Location"),
and the Securities will be delivered at the Designated Office, all at
such Time of Delivery. A meeting will be held at the Closing Location at
6:00 p.m., New York City time, on the New York Business Day next
preceding such Time of Delivery, at which meeting the final drafts of the
documents to be delivered pursuant to the preceding sentence will be
available for review by the parties hereto. For the purposes of this
Section 4, "New York Business Day" shall mean each Monday, Tuesday,
Wednesday, Thursday and Friday which is not a day on which banking
institutions in New York are generally authorized or obligated by law or
executive order to close.
5. The Company agrees with each of the Purchasers:
(a) To prepare the Offering Circular in a form approved by you; to
make no amendment or any supplement to the Offering Circular which shall
be disapproved by you promptly after reasonable notice thereof; and to
furnish you with copies thereof;
(b) Promptly from time to time to take such action as you may
reasonably request to qualify the Securities and the shares of Stock
issuable upon conversion of the Securities for offering and sale under
the securities laws of such jurisdictions as you may request and to
comply with such laws so as to permit the continuance of sales and
dealings therein in such jurisdictions for as long as may be necessary to
complete the distribution of the Securities, provided that in connection
therewith the Company shall not be required to qualify as a foreign
corporation or to file a general consent to service of process in any
jurisdiction;
(c) To furnish the Purchasers with five copies of the Offering
Circular and each amendment or supplement thereto signed by an authorized
officer of the Company with the independent accountants' report(s) in the
Offering Circular, and any amendment or supplement containing amendments
to the financial statements covered by such report(s), signed by the
accountants, and additional copies thereof in such quantities as you may
from time to time reasonably request, and if, at any time prior to the
expiration of nine months after the date of the Offering Circular, any
event shall have occurred as a result of which the Offering Circular as
then amended or supplemented would include an untrue statement of a
material fact or omit to state any material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made when such Offering Circular is delivered, not
misleading, or, if for any other reason it shall be necessary or
desirable during such same period to amend or supplement the Offering
Circular, to notify you and upon your request to prepare and furnish
without charge to each Purchaser and to any dealer in securities as many
copies as you may from time to time reasonably request of an amended
Offering Circular or a supplement to the Offering Circular which will
correct such statement or omission or effect such compliance;
(d) During the period beginning from the date hereof and
continuing until the date ninety days after the date of the Offering
Circular, not to offer, sell contract to sell or otherwise dispose of,
except as provided hereunder any securities of the Company that are
substantially similar to the Securities or the Stock, including but not
limited to any securities that are convertible into or exchangeable for,
or that represent the right to receive, Stock or any such substantially
similar securities (other than (i) pursuant to employee stock and option
plans and agreements existing on, or upon the conversion or exchange of
convertible or exchangeable securities outstanding as of, the date of
this Agreement, or (ii) pursuant to stock option agreements entered into
after the date of this Agreement, provided that no shares shall vest
under such new stock option agreements until after the date ninety days
after the date of the Offering Circular), without your prior written
consent; provided, however, that the Company may issue shares of Stock as
consideration for acquisitions of businesses occurring after the date of
the Offering Circular, provided that each recipient of any such shares
agrees in writing for the benefit of the Purchasers that all such shares
shall remain subject to restrictions identical to those contained in this
paragraph.
(e) Not to be or become, at any time prior to the expiration of
three years after the date of the latest Time of Delivery, an open-end
investment company, unit investment trust, closed-end investment company
or face-amount certificate company that is or is required to be
registered under Section 8 of the Investment Company Act;
(f) At any time when the Company is not subject to Section 13 or
15(d) of the Exchange Act, for the benefit of holders from time to time
of Securities, to furnish at its expense, upon request, to holders of
Securities and prospective purchasers of securities information (the
"Additional Issuer Information") satisfying the requirements of
subsection (d)(4)(i) of Rule 144A under the Securities Act;
(g) If requested by you, to use its best efforts to cause
Securities to be eligible for the PORTAL trading system of the National
Association of Securities Dealers, Inc.;
(h) To furnish to the holders of the Securities as soon as
practicable after the end of each fiscal year an annual report (including
a balance sheet and statements of income, stockholders' equity and cash
flows of the Company and its consolidated subsidiaries certified by
independent public accountants) and, as soon as practicable after the end
of each of the first three quarters of each fiscal year (beginning with
the fiscal quarter ending after the date of the Offering Circular), to
make available to its stockholders consolidated summary financial
information of the Company and its subsidiaries for such quarter in
reasonable detail;
(i) During a period of five years from the date of the Offering
Circular, to furnish to you copies of all reports or other communications
(financial or other) furnished to stockholders of the Company, and to
deliver to you (i) as soon as they are available, copies of any reports
and financial statements furnished to or filed with the Commission or any
securities exchange on which the Securities or any class of securities of
the Company is listed; and (ii) such additional information concerning
the business and financial condition of the Company as you may from time
to time reasonably request (such financial statements to be on a
consolidated basis to the extent the accounts of the Company and its
subsidiaries are consolidated in reports furnished to its stockholders
generally or to the Commission) provided that you agree to hold in
confidence any confidential or nonpublic information so provided;
(j) During the period of two years after the date of the Offering
Circular, the Company will not, and will use all reasonable efforts to
ensure that its "affiliates" (as defined in Rule 144 under the
Securities Act) do not, resell any of the Securities which constitute
"restricted securities" under Rule 144 that have been reacquired by any
of them;
(k) The Company agrees that it will use the net proceeds of the
sale of the Securities (other than $48.475 million) to finance the
purchase or other acquisition of any property, inventory, asset or
business directly or indirectly, by the Company or any Restricted
Subsidiary used in, or to be used in, the System and Network Management
Business or for such other purposes permitted by the Senior Note
Indenture (as defined below). Neither the Company nor any of its
Restricted Subsidiaries has, as of the date hereof, incurred any Debt
under Section 1008(11) of the Senior Notes Indenture. "Debt" has the
meaning given thereto in the Senior Notes Indenture. "Restricted
Subsidiary" shall mean any subsidiary of the Company that has not been
designated an "Unrestricted Subsidiary" pursuant to the Indenture dated
as of July 1, 1998 between the Company and the Chase Manhattan Bank and
Trust Company, National Association, as trustee governing the Company's
11 1/4% Senior Notes due 2008 (as amended or supplemented from time to time,
the "Senior Notes Indenture"). "System and Network Management Business"
means: (i) server and other hardware hosting; (ii) connectivity, data
networking, telecommunications or content for computer or data networks
or systems; (iii) management of computer or data networks or systems;
(iv) technology services, equipment sales or leasing or software
licensing for computer or data networks or systems (including Internet
Protocol and any successor protocol(s) based networks); and (v)
businesses reasonably related, complementary or incidental thereto.;
(l) To reserve and keep available at all times, free of preemptive
rights, shares of Stock for the purpose of enabling the Company to
satisfy any obligations to issue shares of its Stock upon conversion of
the Securities; and
(m) To use its best efforts to list, subject to notice of
issuance, the shares of Stock issuable upon conversion of the Securities
on the Nasdaq National Market.
6. The Company covenants and agrees with the several Purchasers
that the Company will pay or cause to be paid the following: (i) the
fees, disbursements and expenses of the Company's counsel and accountants
in connection with the issue of the Securities and the shares of Stock
issuable upon conversion of the Securities and all other expenses in
connection with the preparation, printing and filing of the Preliminary
Offering Circular and the Offering Circular and any amendments and
supplements thereto and the mailing and delivering of copies thereof to
the Purchasers and dealers; (ii) the cost of printing or producing any
Agreement among Purchasers, this Agreement, the Indenture, the Blue Sky
and Legal Investment Memoranda, closing documents (including any
compilations thereof) and any other documents in connection with the
offering, purchase, sale and delivery of the Securities; (iii) all
expenses in connection with the qualification of the Securities and the
shares of Stock issuable upon conversion of the Securities for offering
and sale under state securities laws as provided in Section 5(b) hereof,
including the fees and disbursements of counsel for the Purchasers in
connection with such qualification and in connection with the Blue Sky
and legal investment surveys; (iv) any fees charged by securities rating
services for rating the Securities; (v) the cost of preparing the
Securities; (vi) the fees and expenses of the Trustee and any agent of
the Trustee and the fees and disbursements of counsel for the Trustee in
connection with the Indenture and the Securities; (vii) any cost incurred
in connection with the designation of the Securities for trading in
PORTAL and the listing on the Nasdaq National Market of the shares of
Stock issuable upon conversion of the Securities; and all other costs and
expenses incident to the performance of its obligations hereunder which
are not otherwise specifically provided for in this Section. It is
understood, however, that, except as provided in this Section, and
Sections 8 and 11 hereof, the Purchasers will pay all of their own costs
and expenses, including the fees of their counsel, transfer taxes on
resale of any of the Securities by them, and any advertising expenses
connected with any offers they may make.
7. The obligations of the Purchasers hereunder shall be subject,
in their discretion, to the condition that all representations and
warranties and other statements of the Company herein are, at and as of
each Time of Delivery, true and correct, the condition that the Company
shall have performed all of its obligations hereunder theretofore to be
performed, and the following additional conditions:
(a) Wilson Sonsini Goodrich & Rosati, Professional Corporation,
counsel for the Purchasers, shall have furnished to you such opinion or
opinions, dated such Time of Delivery, with respect to the matters
covered in paragraphs (i), (ii), (v), (vi), (vii), (xi), (xii), (xiii)
and (xiv) of subsection (b) below as well as such other related matters
as you may reasonably request, and such counsel shall have received such
papers and information as they may reasonably request to enable them to
pass upon such matters;
(b) Fenwick & West LLP, counsel for the Company (or such other
counsel as the Company shall deem appropriate) shall have furnished to
you their written opinion, dated such Time of Delivery, in form and
substance satisfactory to you, to the effect that:
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the
state of Delaware, with corporate power and corporate authority to
own its properties and conduct its business as described in the
Offering Circular;
(ii) The Company had, as of the dates specified in the Offering
Circular, duly authorized capital stock as set forth under the
caption "Capitalization" in the Offering Circular, and all of the
issued and outstanding shares of capital stock of the Company
described therein have been duly and validly authorized and issued,
are non-assessable and to such counsel's knowledge, are fully paid,
and the shares of Stock initially issuable upon conversion of the
Securities have been duly and validly authorized and reserved for
issuance and, when issued and delivered in accordance with the
provisions of the Securities and the Indenture, will be duly and
validly issued and fully paid and non-assessable, and will conform
to the description of the Stock contained in the Offering Circular;
(iii) The Company has been duly qualified as a foreign
corporation for the transaction of business and is in good standing
under the laws of each jurisdiction within the United States in
which it owns or leases properties or employs personnel, or where
the failure to be so qualified would have a material adverse effect
of the business, financial condition or results of operations of
the Company;
(iv) To such counsel's knowledge and other than as set forth in
the Offering Circular, there are no legal or governmental
proceedings pending to which the Company is a party or of which any
property of the Company is the subject which, if determined
adversely to the Company, would individually or in the aggregate
have a material adverse effect on the current or future
consolidated financial position, stockholders' equity or results of
operations of the Company; and, to such counsel's knowledge, no
such proceedings are threatened by governmental authorities or
threatened by others;
(v) This Agreement has been duly authorized and duly executed
and delivered by the Company to you;
(vi) The Securities have been duly authorized, executed,
authenticated, issued and delivered and constitute valid and
legally binding obligations of the Company;
(vii) The Indenture and the Registration Rights Agreement have
been duly authorized, executed and delivered by the Company and
each constitutes a valid and legally binding instrument,
enforceable in accordance with its terms, subject, as to
enforcement, to bankruptcy, insolvency, reorganization and other
laws of general applicability relating to or affecting creditors'
rights and to general equity principles;
(viii) The issue and sale of the Securities being delivered at
such Time of Delivery and the compliance by the Company with all of
the provisions of the Securities, the Indenture, the Registration
Rights Agreement and this Agreement and the consummation of the
transactions herein and therein contemplated were they to be
completed on or prior to the date of such opinion and assuming the
absence of any applicable cure period, waiting period or other
similar provision, do not conflict with or result in a breach or
violation of any of the terms or provisions of, or constitute a
default under, any of the agreements listed as exhibits to the
Company's Annual Report on Form 10-K for the year ended December
31, 1998 or any agreements entered into by the Company after
December 31, 1998 that would be required to be filed as a material
agreement exhibit on Form 10-Q or any other Exchange Act Report
(collectively, the "Material Agreements") (provided that in
determining which documents would be required to be so filed, such
counsel may rely on an officer's certificate that specifies
agreements that the Company has entered into since December 31,
1998) nor does such action result in any violation of the
provisions of the Certificate of Incorporation or Bylaws of the
Company or any statute or any order, rule or regulation known to
such counsel of any court or governmental agency or body having
jurisdiction over the Company or any of its properties;
(ix) No consent, approval, authorization, order, registration
or qualification of or with any such court or governmental agency
or body is required for the issue and sale of the Securities or the
consummation by the Company of the transactions contemplated by
this Agreement, the Indenture or the Registration Rights Agreement,
except (A) such as may be required under the Securities Act in
connection with the shares of Stock issuable upon conversion of the
Securities and such consents, approvals, authorizations,
registrations or qualifications as may be required under state
securities or Blue Sky laws in connection with the purchase and
distribution of the Securities by the Purchasers (as to which such
counsel renders no opinion) or (B) such consents, approvals,
authorizations, orders, registrations or qualifications as are
referenced in the Offering Circular;
(x) The Company is not in violation of its Certificate of
Incorporation or By-laws or, to such counsel's knowledge, in
default in the performance or observance of any material
obligation, agreement, covenant or condition contained in any of
the Material Agreements;
(xi) The statements set forth in the Offering Circular under the
the caption "Description of Notes", and "Description of Capital
Stock", insofar as they purport to constitute a summary of the
terms of the Securities, the Indenture, the Registration Rights
Agreement and the Stock, under the caption "Certain United States
Federal Income Tax Considerations", and under the caption
"Underwriting", insofar as they purport to describe the
provisions of the laws and documents referred to therein, are
accurate and complete in all material respects;
(xii) The Exchange Act Reports (other than the financial
statements and related notes and schedules (and financial data)
therein, as to which such counsel need express no opinion), when
they were filed with the Commission, complied as to form in all
material respects with the requirements of the Exchange Act, and
the rules and regulations of the Commission promulgated thereunder;
(xiii) No registration of the Securities under the Securities
Act, and no qualification of an indenture under the United States
Trust Indenture Act of 1939 with respect thereto, is required for
the offer and, sale to, and initial resale of the Securities by,
the Purchasers in the manner contemplated by this Agreement; and
(xiv) The Company is not an "investment company", as such
term is defined in the Investment Company Act.
In addition, such counsel shall state that, although they
are not passing upon and do not assume any responsibility for, nor
have they independently verified, the accuracy, completeness or
fairness of the statements contained in the Preliminary Offering
Circular and the Offering Circular, except for and to the extent of
those referred to in the opinion in subsection (xi) of this
Section 7(b), they have participated in certain conferences with
officers and other employees of the Company, representatives of the
Company's independent certified public accountants and
representatives of the Purchasers with respect to the preparation
of the Preliminary Offering Circular and the Offering Circular, and
no facts have come to the attention of attorneys devoting attention
to the representation of the Company in its preparation of the
Preliminary Offering Circular and the Offering Circular that have
caused them to believe that, as of their respective dates and as of
the Time of Delivery, the Preliminary Offering Circular and the
Offering Circular or any further amendments thereto made by the
Company prior to such Time of Delivery (other than the financial
statements and related notes, related schedules and financial data
included therein, as to which such counsel need express no opinion)
contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under
which they were made, not misleading. Further, such counsel shall
state that, although they are not passing upon and do not assume
any responsibility for, nor have they independently verified, the
accuracy, completeness or fairness of the statements contained in
the Exchange Act Reports, they have participated in certain
conferences with officers and other employees of the Company, and
representatives of the Company's independent certified public
accountants with respect to the preparation of the respective
Exchange Act Reports, and no facts have come to the attention of
attorneys devoting attention to the representation of the Company
in its preparation of the respective Exchange Act Reports that have
caused them to believe that as of the dates on which the respective
Exchange Act Reports were filed with the Commission, the Exchange
Act Reports (other than the financial statements and related notes,
related schedules and financial data included therein, as to which
such counsel need express no opinion) contained an untrue statement
of material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances under which they were made when such
documents were so filed, not misleading.
(c) On the date of the Offering Circular prior to the execution of
this Agreement and also at such Time of Delivery, KPMG Peat Marwick LLP
shall have furnished to you a letter or letters, dated the respective
dates of delivery thereof, in form and substance satisfactory to you, to
the effect set forth in Annex II hereto;
(d) (i) Neither the Company nor any of its subsidiaries shall have
sustained since the date of the latest audited financial statements
included in the Offering Circular any loss or interference with its
business from fire, explosion, flood or other calamity, whether or not
covered by insurance, or from any labor dispute or court or governmental
action, order or decree, otherwise than as set forth or contemplated in
the Offering Circular, and (ii) since the respective dates as of which
information is given in the Offering Circular there shall not have been
any change in the capital stock or long-term debt of the Company or any
of its subsidiaries or any change, or any development involving a
prospective change, in or affecting the general affairs, management,
financial position, stockholders' equity or results of operations of the
Company and its subsidiaries, otherwise than as set forth or contemplated
in the Offering Circular, the effect of which, in any such case described
in Clause (i) or (ii), is in the judgment of the Purchasers so material
and adverse as to make it impracticable or inadvisable to proceed with
the public offering or the delivery of the Securities being delivered at
such Time of Delivery on the terms and in the manner contemplated in this
Agreement and in the Offering Circular;
(e) On or after the date hereof (i) no downgrading shall have
occurred in the rating accorded the Company's debt securities by any
"nationally recognized statistical rating organization", as that term
is defined by the Commission for purposes of Rule 436(g)(2) under the
Securities Act, and (ii) no such organization shall have publicly
announced that it has under surveillance or review, with possible
negative implications, its rating of any of the Company's debt
securities;
(f) On or after the date hereof there shall not have occurred any
of the following: (i) a suspension or material limitation in trading in
securities generally on the New York Stock Exchange or the Nasdaq
National Market; (ii) a suspension or material limitation in trading in
the Company's securities on the Nasdaq National Market; (iii) a general
moratorium on commercial banking activities declared by either Federal or
New York State authorities; (iv) the outbreak or escalation of
hostilities involving the United States or the declaration by the United
States of a national emergency or war, if the effect of any such event
specified in this Clause (iv) in the judgment of the Purchasers makes it
impracticable or inadvisable to proceed with the public offering or the
delivery of the Securities being delivered at such Time of Delivery on
the terms and in the manner contemplated in the Offering Circular; or (v)
the occurrence of any material adverse change in the existing financial,
political or economic conditions in the United States or elsewhere which,
in the judgment of the Purchasers, would materially and adversely affect
the financial markets or markets for the Securities or other debt
securities;
(g) The Securities have been designated for trading on PORTAL;
(h) At such Time of Delivery, a Listing of Additional Shares
Application shall have been previously received by the Nasdaq National
Market for the purpose of duly listing the shares of Stock issuable upon
conversion of the Securities being delivered at such Time of Delivery;
(i) The Company shall have furnished to you executed copies of the
Indenture and the Registration Rights Agreement; and
(j) The Company shall have furnished or caused to be furnished to
you at such Time of Delivery certificates of officers of the Company
satisfactory to you as to the accuracy of the representations and
warranties of the Company herein at and as of such Time of Delivery, as
to the performance by the Company of all of its obligations hereunder to
be performed at or prior to such Time of Delivery, as to the matters set
forth in subsection (d) of this Section and as to such other matters as
you may reasonably request.
8. (a) The Company will indemnify and hold harmless each
Purchaser against any losses, claims, damages or liabilities, joint or
several, to which such Purchaser may become subject, under the Securities
Act or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereof) arise out of or are based upon an untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Offering Circular or the Offering Circular, or any amendment
or supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact necessary to make the
statements therein not misleading, and will reimburse each Purchaser for
any legal or other expenses reasonably incurred by such Purchaser in
connection with investigating or defending any such action or claim as
such expenses are incurred; provided, however, that the Company shall not
be liable in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any
Preliminary Offering Circular or the Offering Circular or any such
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by any Purchaser through Goldman,
Sachs & Co. expressly for use therein.
(b) Each Purchaser will indemnify and hold harmless the Company
against any losses, claims, damages or liabilities to which the Company
may become subject, under the Securities Act or otherwise, insofar as
such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged
untrue statement of a material fact contained in any Preliminary Offering
Circular or the Offering Circular, or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact or necessary to make the
statements therein not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in any Preliminary Offering
Circular or the Offering Circular or any such amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by such Purchaser through Goldman, Sachs & Co. expressly for use
therein; and will reimburse the Company for any legal or other expenses
reasonably incurred by the Company in connection with investigating or
defending any such action or claim as such expenses are incurred.
(c) Promptly after receipt by an indemnified party under
subsection (a) or (b) above of notice of the commencement of any action,
such indemnified party shall, if a claim in respect thereof is to be made
against the indemnifying party under such subsection, notify the
indemnifying party in writing of the commencement thereof; but the
omission so to notify the indemnifying party shall not relieve it from
any liability which it may have to any indemnified party otherwise than
under such subsection. In case any such action shall be brought against
any indemnified party and it shall notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to
participate therein and, to the extent that it shall wish, jointly with
any other indemnifying party similarly notified, to assume the defense
thereof, with counsel satisfactory to such indemnified party (who shall
not, except with the consent of the indemnified party, be counsel to the
indemnifying party), and, after notice from the indemnifying party to
such indemnified party of its election so to assume the defense thereof,
the indemnifying party shall not be liable to such indemnified party
under such subsection for any legal expenses of other counsel or any
other expenses, in each case subsequently incurred by such indemnified
party, in connection with the defense thereof other than reasonable costs
of investigation. No indemnifying party shall, without the written
consent of the indemnified party, effect the settlement or compromise of,
or consent to the entry of any judgment with respect to, any pending or
threatened action or claim in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified
party is an actual or potential party to such action or claim) unless
such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability arising out of such
action or claim and (ii) does not include a statement as to, or an
admission of, fault, culpability or a failure to act, by or on behalf of
any indemnified party.
(d) If the indemnification provided for in this Section 8 is
unavailable to or insufficient to hold harmless an indemnified party
under subsection (a) or (b) above in respect of any losses, claims,
damages or liabilities (or actions in respect thereof) referred to
therein, then each indemnifying party shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages or liabilities (or actions in respect thereof) in such proportion
as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Purchasers on the other from the offering
of the Securities. If, however, the allocation provided by the
immediately preceding sentence is not permitted by applicable law or if
the indemnified party failed to give the notice required under subsection
(c) above, then each indemnifying party shall contribute to such amount
paid or payable by such indemnified party in such proportion as is
appropriate to reflect not only such relative benefits but also the
relative fault of the Company on the one hand and the Purchasers on the
other in connection with the statements or omissions which resulted in
such losses, claims, damages or liabilities (or actions in respect
thereof), as well as any other relevant equitable considerations. The
relative benefits received by the Company on the one hand and the
Purchasers on the other shall be deemed to be in the same proportion as
the total net proceeds from the offering (before deducting expenses)
received by the Company bear to the total underwriting discounts and
commissions received by the Purchasers, in each case as set forth in the
Offering Circular. The relative fault shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of
a material fact or the omission or alleged omission to state a material
fact relates to information supplied by the Company on the one hand or
the Purchasers on the other and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
statement or omission. The Company and the Purchasers agree that it
would not be just and equitable if contribution pursuant to this
subsection (d) were determined by pro rata allocation (even if the
Purchasers were treated as one entity for such purpose) or by any other
method of allocation which does not take account of the equitable
considerations referred to above in this subsection (d). The amount paid
or payable by an indemnified party as a result of the losses, claims,
damages or liabilities (or actions in respect thereof) referred to above
in this subsection (d) shall be deemed to include any legal or other
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this subsection (d), no Purchaser shall be required to
contribute any amount in excess of the amount by which the total price at
which the Securities underwritten by it and distributed to investors were
offered to investors exceeds the amount of any damages which such
Purchaser has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. The Purchasers'
obligations in this subsection (d) to contribute are several in
proportion to their respective underwriting obligations and not joint.
(e) The obligations of the Company under this Section 8 shall be
in addition to any liability which the Company may otherwise have and
shall extend, upon the same terms and conditions, to each person, if any,
who controls any Purchaser within the meaning of the Securities Act; and
the obligations of the Purchasers under this Section 8 shall be in
addition to any liability which the respective Purchasers may otherwise
have and shall extend, upon the same terms and conditions, to each
officer and director of the Company and to each person, if any, who
controls the Company within the meaning of the Securities Act.
9. (a) If any Purchaser shall default in its obligation to
purchase the Securities which it has agreed to purchase hereunder at a
Time of Delivery, you may in your discretion arrange for you or another
party or other parties to purchase such Securities on the terms contained
herein. If within thirty-six hours after such default by any Purchaser
you do not arrange for the purchase of such Securities, then the Company
shall be entitled to a further period of thirty-six hours within which to
procure another party or other parties satisfactory to you to purchase
such Securities on such terms. In the event that, within the respective
prescribed periods, you notify the Company that you have so arranged for
the purchase of such Securities, or the Company notifies you that it has
so arranged for the purchase of such Securities, you or the Company shall
have the right to postpone such Time of Delivery for a period of not more
than seven days, in order to effect whatever changes may thereby be made
necessary in the Offering Circular, or in any other documents or
arrangements, and the Company agrees to prepare promptly any amendments
to the Offering Circular which in your opinion may thereby be made
necessary. The term "Purchaser" as used in this Agreement shall
include any person substituted under this Section with like effect as if
such person had originally been a party to this Agreement with respect to
such Securities.
(b) If, after giving effect to any arrangements for the purchase
of the Securities of a defaulting Purchaser or Purchasers by you and the
Company as provided in subsection (a) above, the aggregate principal
amount of such Securities which remains unpurchased does not exceed
one-eleventh of the aggregate principal amount of all the Securities to
be purchased at such Time of Delivery, then the Company shall have the
right to require each non-defaulting Purchaser to purchase the principal
amount of Securities which such Purchaser agreed to purchase hereunder at
such Time of Delivery and, in addition, to require each non-defaulting
Purchaser to purchase its pro rata share (based on the principal amount
of Securities which such Purchaser agreed to purchase hereunder) of the
Securities of such defaulting Purchaser or Purchasers for which such
arrangements have not been made; but nothing herein shall relieve a
defaulting Purchaser from liability for its default.
(c) If, after giving effect to any arrangements for the purchase
of the Securities of a defaulting Purchaser or Purchasers by you and the
Company as provided in subsection (a) above, the aggregate principal
amount of Securities which remains unpurchased exceeds one-eleventh of
the aggregate principal amount of all the Securities to be purchased at
such Time of Delivery, or if the Company shall not exercise the right
described in subsection (b) above to require non-defaulting Purchasers to
purchase Securities of a defaulting Purchaser or Purchasers, then this
Agreement (or, with respect to the Second Time of Delivery, the
obligation of the Purchasers to purchase and of the Company to sell the
Optional Securities) shall thereupon terminate, without liability on the
part of any non-defaulting Purchaser or the Company, except for the
expenses to be borne by the Company and the Purchasers as provided in
Section 6 hereof and the indemnity and contribution agreements in Section
8 hereof; but nothing herein shall relieve a defaulting Purchaser from
liability for its default.
10. The respective indemnities, agreements, representations,
warranties and other statements of the Company and the several
Purchasers, as set forth in this Agreement or made by or on behalf of
them, respectively, pursuant to this Agreement, shall remain in full
force and effect, regardless of any investigation (or any statement as to
the results thereof) made by or on behalf of any Purchaser or any
controlling person of any Purchaser, or the Company, or any officer or
director or controlling person of the Company, and shall survive delivery
of and payment for the Securities.
11. If this Agreement shall be terminated pursuant to Section 9
hereof, the Company shall not then be under any liability to any
Purchaser except as provided in Sections 6 and 8 hereof; but, if for any
other reason, any Securities are not delivered by or on behalf of the
Company as provided herein, the Company will reimburse the Purchasers
through you for all out-of-pocket expenses approved in writing by you,
including fees and disbursements of counsel, reasonably incurred by the
Purchasers in making preparations for the purchase, sale and delivery of
the Securities, but the Company shall then be under no further liability
to any Purchaser except as provided in Sections 6 and 8 hereof.
12. In all dealings hereunder, you shall act on behalf of each of
the Purchasers, and the parties hereto shall be entitled to act and rely
upon any statement, request, notice or agreement on behalf of any
Purchaser made or given by you jointly or by Goldman, Sachs & Co. on
behalf of you as the representatives.
All statements, requests, notices and agreements hereunder shall be
in writing, and if to the Purchasers shall be delivered or sent by mail,
telex or facsimile transmission to you as the representatives in care of
Goldman, Sachs & Co., 32 Old Slip, 9th Floor, New York, New York 10005,
Attention: Registration Department; and if to the Company shall be
delivered or sent by mail, telex or facsimile transmission to the address
of the Company set forth in the Offering Circular, Attention: Secretary;
provided, however, that any notice to a Purchaser pursuant to Section
8(c) hereof shall be delivered or sent by mail, telex or facsimile
transmission to such Purchaser at its address set forth in its
Purchasers' Questionnaire, or telex constituting such Questionnaire,
which address will be supplied to the Company by you upon request. Any
such statements, requests, notices or agreements shall take effect upon
receipt thereof.
13. This Agreement shall be binding upon, and inure solely to the
benefit of, the Purchasers, the Company and, to the extent provided in
Sections 8 and 10 hereof, the officers and directors of the Company and
each person who controls the Company or any Purchaser, and their
respective heirs, executors, administrators, successors and assigns, and
no other person shall acquire or have any right under or by virtue of
this Agreement. No purchaser of any of the Securities from any Purchaser
shall be deemed a successor or assign by reason merely of such purchase.
14. Time shall be of the essence of this Agreement.
15. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York.
16. This Agreement may be executed by any one or more of the
parties hereto in any number of counterparts, each of which shall be
deemed to be an original, but all such respective counterparts shall
together constitute one and the same instrument.
<PAGE>
If the foregoing is in accordance with your understanding, please
sign and return to us counterparts hereof, and upon the acceptance hereof
by you, on behalf of each of the Purchasers, this letter and such
acceptance hereof shall constitute a binding agreement between each of
the Purchasers and the Company. It is understood that your acceptance of
this letter on behalf of each of the Purchasers is pursuant to the
authority set forth in a form of Agreement among Purchasers, the form of
which shall be submitted to the Company for examination upon request, but
without warranty on your part as to the authority of the signers thereof.
Very truly yours,
EXODUS COMMUNICATIONS, INC.
By:
__________________________
Name:
Title:
Accepted as of the date hereof:
Goldman, Sachs & Co.
BancBoston Robertson Stephens Inc.
BT Alex. Brown Incorporated
Donaldson, Lufkin & Jenrette
Securities Corporation
Hambrecht & Quist LLC
By: _____________________________________
(Goldman, Sachs & Co.)
On behalf of each of the Purchasers
[Signature Page to Purchase Agreement]
<PAGE>
SCHEDULE I
Principal
Amount of
Optional
Securities to
Principal be Purchased
Amount of Firm if Maximum
Securities to Option
Purchaser be Purchased Exercised
- ----------------------------------- --------------- ---------------
Goldman, Sachs & Co............. $120,000,000 $30,000,000
BancAmerica Robertson Stephens.. 20,000,000 5,000,000
BT Alex. Brown Incorporated..... 20,000,000 5,000,000
Donaldson Lufkin & Jenrette
Securities Corporation........ 20,000,000 5,000,000
Hambrecht & Quist LLC........... 20,000,000 5,000,000
--------------- ---------------
Total $200,000,000 $50,000,000
=============== ===============
<PAGE>
ANNEX I
Pursuant to Section 7(d) of the Purchase Agreement, the accountants
shall furnish letters to the Purchasers to the effect that:
(i) They are independent certified public accountants with
respect to the Company and its subsidiaries within the meaning of
the Securities Exchange Act of 1934 (the "Exchange Act") and the
applicable published rules and regulations thereunder;
(ii) In our opinion, the consolidated financial statements and
financial statement schedules audited by us and included in the
Offering Circular comply as to form in all material respects with
the applicable requirements of the Exchange Act and the related
published rules and regulations;
(iii) The unaudited selected financial information with
respect to the consolidated results of operations and financial
position of the Company for the five most recent fiscal years
included in the Offering Circular agrees with the corresponding
amounts (after restatements where applicable) in the audited
consolidated financial statements for such five fiscal years;
(iv) On the basis of limited procedures not constituting an
audit in accordance with generally accepted auditing standards,
consisting of a reading of the unaudited financial statements and
other information referred to below, a reading of the latest
available interim financial statements of the Company and its
subsidiaries, inspection of the minute books of the Company and its
subsidiaries since the date of the latest audited financial
statements included in the Offering Circular, inquiries of
officials of the Company and its subsidiaries responsible for
financial and accounting matters and such other inquiries and
procedures as may be specified in such letter, nothing came to
their attention that caused them to believe that:
(A) the unaudited consolidated statements of income,
consolidated balance sheets and consolidated statements of
cash flows included in the Offering Circular are not in
conformity with generally accepted accounting principles
applied on the basis substantially consistent with the basis
for the unaudited condensed consolidated statements of
income, consolidated balance sheets and consolidated
statements of cash flows included in the Offering Circular;
(B) any other unaudited income statement data and balance
sheet items included in the Offering Circular do not agree
with the corresponding items in the unaudited consolidated
financial statements from which such data and items were
derived, and any such unaudited data and items were not
determined on a basis substantially consistent with the basis
for the corresponding amounts in the audited consolidated
financial statements included in the Offering Circular;
(C) the unaudited financial statements which were not
included in the Offering Circular but from which were derived
any unaudited condensed financial statements referred to in
Clause (A) and any unaudited income statement data and
balance sheet items included in the Offering Circular and
referred to in Clause (B) were not determined on a basis
substantially consistent with the basis for the audited
consolidated financial statements included in the Offering
Circular;
(D) any unaudited pro forma consolidated condensed
financial statements included in the Offering Circular do not
comply as to form in all material respects with the
applicable accounting requirements or the pro forma
adjustments have not been properly applied to the historical
amounts in the compilation of those statements;
(E) as of a specified date not more than five days prior
to the date of such letter, there have been any changes in
the consolidated capital stock (other than issuances of
capital stock upon exercise of options and stock appreciation
rights, upon earn-outs of performance shares and upon
conversions of convertible securities, in each case which
were outstanding on the date of the latest financial
statements included in the Offering Circular or any increase
in the consolidated long-term debt of the Company and its
subsidiaries, or any decreases in consolidated net current
assets or stockholders' equity or other items specified by
the Purchasers, or any increases in any items specified by
the Purchasers, in each case as compared with amounts shown
in the latest balance sheet included in the Offering Circular
except in each case for changes, increases or decreases which
the Offering Circular discloses have occurred or may occur or
which are described in such letter; and
(F) for the period from the date of the latest financial
statements included in the Offering Circular to the specified
date referred to in Clause (E) there were any decreases in
consolidated net revenues or operating profit or the total or
per share amounts of consolidated net income or other items
specified by the Purchasers, or any increases in any items
specified by the Purchasers, in each case as compared with
the comparable period of the preceding year and with any
other period of corresponding length specified by the
Purchasers, except in each case for decreases or increases
which the Offering Circular discloses have occurred or may
occur or which are described in such letter; and
(v) In addition to the examination referred to in their
report(s) included in the Offering Circular and the limited
procedures, inspection of minute books, inquiries and other
procedures referred to in paragraphs (iii) and (iv) above, they
have carried out certain specified procedures, not constituting an
audit in accordance with generally accepted auditing standards,
with respect to certain amounts, percentages and financial
information specified by the Purchasers, which are derived from the
general accounting records of the Company and its subsidiaries,
which appear in the Offering Circular, and have compared certain of
such amounts, percentages and financial information with the
accounting records of the Company and its subsidiaries and have
found them to be in agreement.
___________, 1999
Dear KPMG Peat Marwick:
Goldman, Sachs & Co., as representatives of the Purchasers of __%
Convertible Subordinated Notes due 2006 to be issued by Exodus
Communications, Inc. (the "Company"), will be reviewing certain
information relating to the Company that will be included (incorporated
by reference) in the Offering Circular. This review process, applied to
the information relation to the issue, is (will be) substantially
consistent with the due diligence review process that we would perform if
this placement of securities were being registered pursuant to the
Securities Act of 1933 (the Act). It is recognized however that what is
"substantially consistent" may vary from situation to situation and may
not be the same as that done in a registered offering of the same
securities for the same issuer and whether the procedures being, or to
be, followed will be "substantially consistent" will be determined by
us on a case-by-case basis. We are knowledgeable with respect to the due
diligence review process that would be performed if this placement of
securities were being registered pursuant to the Act. We hereby request
that you deliver to us a "comfort" letter concerning the financial
statements of the issuer and certain statistical and other data included
in the offering document. We will contact you to identify the procedures
we wish you to follow and the form we wish the comfort letter to take.
Very truly yours,
________________________________________
(Goldman, Sachs & Co.)
EXHIBIT 10.55
EXODUS COMMUNICATIONS, INC.
5% CONVERTIBLE SUBORDINATED NOTES
DUE MARCH 15, 2006
REGISTRATION RIGHTS AGREEMENT
Dated as of March 1, 1999
Goldman, Sachs & Co.
BancBoston Robertson Stephens Inc.
BT Alex. Brown Incorporated
Donaldson, Lufkin & Jenrette
Securities Corporation
Hambrecht & Quist LLC
As representatives of the several Purchasers
Named in Schedule I hereto
c/o Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
Ladies and Gentlemen:
Exodus Communications, Inc., a Delaware corporation (the
"Company"), proposes to issue and sell to the Purchasers (as defined
herein) upon the terms set forth in a Purchase Agreement (as defined
herein) its 5% Convertible Subordinated Notes due March 15, 2006 (the
"Securities"). As an inducement to the Purchasers to enter into the
Purchase Agreement and in satisfaction of a condition to the obligations
of the Purchasers thereunder, the Company agrees with the Purchasers, for
the benefit of the Holders (as defined herein) from time to time of the
Registrable Securities (as defined herein), as follows:
1. Definitions. Capitalized terms used herein without definition
shall have their respective meanings set forth in or pursuant to the
Purchase Agreement. As used in this Agreement, the following capitalized
defined terms shall have the following meanings:
"Act" or "Securities Act" means the United States Securities Act of
1933, as amended.
"Affiliate" of any specified person means any other person which,
directly or indirectly, is in control of, is controlled by, or is under
common control with such specified person. For purposes of this
definition, control of a person means the power, direct or indirect, to
direct or cause the direction of the management and policies of such
person whether by contract or otherwise; and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Common Stock" means the Company's Common Stock, par value $0.001
per share.
"Commission" means the United States Securities and Exchange
Commission.
"DTC" means The Depository Trust Company.
"Effective Failure" has the meaning assigned thereto in Section 7
hereof.
"Effective Time" means the date on which the Commission declares
the Shelf Registration Statement effective or on which the Shelf
Registration Statement otherwise becomes effective.
"Effectiveness Period" has the meaning set forth in Section 2(b)(i)
hereof.
"Electing Holder" has the meaning assigned thereto in
Section 3(a)(3) hereof.
"Exchange Act" means the United States Securities Exchange Act of
1934, as amended.
"Expedited Filing" has the meaning assigned thereto in
Section 3(a)(1) hereof.
"Expedited Filing Questionnaire Deadline" has the meaning assigned
thereto in Section 3(a)(1) hereof.
"Holder" means any Person that has a beneficial interest in any
Restricted Global Security or any beneficial interest in a global
security representing shares of Common Stock issuable upon conversion of
a Security.
"Indenture" means the Indenture dated as of March 1, 1999 between
the Company and Chase Manhattan Bank and Trust Company, National
Association, as Trustee, as amended and supplemented from time to time.
"Liquidated Damages" has the meaning assigned thereto in Section 7
hereof.
"Managing Underwriters" means the investment banker or investment
bankers and manager or managers that shall administer an underwritten
offering, if any, as set forth in Section 6 hereof.
"NASD Rules" means the Rules of the National Association of
Securities Dealers, Inc., as amended from time to time.
"Notice and Questionnaire" means a Notice of Registration Statement
and Selling Securityholder Questionnaire substantially in the form of
Exhibit A hereto.
"Person" shall mean an individual, partnership, corporation, trust
or unincorporated organization, or a government or agency or political
subdivision thereof.
"Prospectus" means the prospectus included in any Shelf
Registration Statement (including, without limitation, any preliminary
prospectus, any final prospectus and any prospectus that discloses
information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A under the
Act), included in the Shelf Registration Statement, as amended or
supplemented by any prospectus supplement, with respect to the terms of
the offering of any portion of the Registrable Securities covered by the
Shelf Registration Statement and by all other amendments and supplements
to such prospectus, including all material incorporated by reference in
such prospectus and all documents filed after the date of such prospectus
by the Company under the Exchange Act and incorporated by reference
therein.
"Purchase Agreement" means the purchase agreement dated February
25, 1999 between the Company and the Purchasers.
"Purchasers" means you, as the Purchasers named in Schedule I to
the Purchase Agreement.
"Registrable Securities" means all or any portion of the Securities
issued from time to time under the Indenture in registered form and the
Common Stock issuable upon conversion or repurchase of such Securities;
provided, however, that a security ceases to be a Registrable Security
when it is no longer a Restricted Security.
"Registration Default" has the meaning assigned thereto in
Section 7 hereof.
"Restricted Security" means any Security or share of Common Stock
issuable upon conversion or repurchase thereof except any such Security
or such share of Common Stock which (i) has been effectively registered
under the Securities Act and sold in a manner contemplated by the Shelf
Registration Statement, (ii) has been transferred in compliance with Rule
144 under the Securities Act (or any successor provision thereto) or is
transferable pursuant to paragraph (k) of such Rule 144 (or any successor
provision thereto), or (iii) has otherwise been transferred and a new
Security or share of Common Stock not subject to transfer restrictions
under the Securities Act has been delivered by or on behalf of the
Company in accordance with Section 3.5 of the Indenture.
"Shelf Registration" means a registration effected pursuant to
Section 2 hereof.
"Shelf Registration Statement" means a shelf registration statement
of the Company pursuant to the provisions of Section 2 hereof filed with
the Commission which covers some or all of the Registrable Securities, as
applicable, on an appropriate form under Rule 415 under the Act, or any
similar rule that may be adopted by the Commission, amendments and
supplements to such registration statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"Underwriter" means any underwriter of Registrable Securities in
connection with an offering thereof under a Shelf Registration Statement.
2. Shelf Registration.
(a) The Company shall, within 90 calendar days following the
First Time of Delivery (as defined in the Purchase Agreement), file with
the Commission a Shelf Registration Statement relating to the offer and
sale of the Registrable Securities by the Holders and, thereafter, shall
use all reasonable efforts to cause such Shelf Registration Statement to
be declared effective under the Securities Act within 180 calendar days
after the First Time of Delivery (as defined in the Purchase Agreement);
provided, however, that the Company may, upon written notice to all the
Holders, postpone having the Shelf Registration Statement declared
effective for a reasonable period not to exceed 90 days if the Company
possesses material non-public information, the disclosure of which would
have a material adverse effect on the Company and its subsidiaries taken
as a whole; provided, further, however, that no Holder shall be entitled
to have the Registrable Securities held by it covered by such Shelf
Registration unless such Holder is an Electing Holder.
(b) The Company shall use all reasonable efforts:
(i) To keep the Shelf Registration Statement
continuously effective in order to permit the Prospectus forming part
thereof to be usable by Electing Holders for a period of two years from
the date it is declared effective, or such shorter period that will
terminate when there are no Registrable Securities outstanding (in either
case, such period being referred to herein as the "Effectiveness
Period");
(ii) After the Effective Time of the Shelf
Registration Statement, promptly upon the request of any Holder of
Registrable Securities that is not then an Electing Holder, to take any
action reasonably necessary to enable such Holder to use the Prospectus
forming a part thereof for offers and resales of Registrable Securities,
including, without limitation, any action reasonably necessary to
identify such Holder as a selling securityholder in the Shelf
Registration Statement; provided, however, that nothing in this
subparagraph shall relieve such Holder of the obligation to return a
completed and signed Notice and Questionnaire to the Company in
accordance with Sections 3(a)(1) or 3(a)(2) hereof; and
(iii) If at any time, the Securities, pursuant to
Article XII of the Indenture, are convertible into securities other than
shares of Common Stock, the Company shall, or shall cause any successor
under the Indenture to, cause such securities to be included in the Shelf
Registration Statement no later than the date on which the Securities may
then be convertible into such securities.
The Company shall be deemed not to have used all reasonable efforts
to keep the Shelf Registration Statement effective during the
Effectiveness Period if the Company voluntarily takes any action that
would result in Electing Holders not being able to offer and sell any of
their Registrable Securities during such period, unless (i) such action
is required by applicable law or regulation, (ii) the Company determines
based on the advice of counsel that it is advisable to disclose in the
Shelf Registration Statement a financing, acquisition or other corporate
transaction or other material event or circumstance affecting the Company
or its securities, and the Board of Directors of the Company (or an
executive officer of the Company duly authorized for such purpose) shall
have determined in good faith that such disclosure at such time is not in
the best interests of the Company and its stockholders, and, in the case
of clause (i) above, the Company thereafter promptly complies with the
requirements of paragraph 3(h) below.
3. Registration Procedures. In connection with any Shelf
Registration Statement, the following provisions shall apply:
(a) (1) If the Company expects to file and obtain the
effectiveness of a Shelf Registration Statement within 30 days of the
date hereof (an "Expedited Filing"), it shall (x) mail, as promptly as
reasonably practicable after the date hereof to the Holders of
Registrable Securities, a Notice and Questionnaire with a response
deadline of 30 days from the date of such Notice (the "Expedited Filing
Questionnaire Deadline"), and (y) as promptly as reasonably practicable
after the response deadline but in any event no later than 10 days
thereafter, prepare a Prospectus supplement (and if required file an
amendment or a supplement to the Shelf Registration Statement) or take
such other measures, if any, as are necessary to include in the Shelf
Registration Statement the Registrable Securities of Electing Holders.
If the Company does not intend to make an Expedited Filing, it shall mail
the Notice and Questionnaire to the Holders of Registrable Securities not
less than 30 calendar days prior to the time the Company intends in good
faith to have the Shelf Registration Statement declared effective.
Subject to Section 3(a)(2) hereof, no Holder of Registrable Securities
shall be entitled to be named as a selling securityholder in the Shelf
Registration Statement as of the Effective Time (or in the first
Prospectus supplement filed thereafter in the case of an Expedited
Filing), and no Holder of Registrable Securities shall be entitled to use
the Prospectus forming a part thereof for offers and resales of
Registrable Securities at any time, unless such Holder has returned a
completed and signed Notice and Questionnaire to the Company by the
deadline for response set forth therein; provided, however, that Holders
of Registrable Securities shall have at least 28 calendar days from the
date on which the Notice and Questionnaire is first mailed to such
Holders to return a completed and signed Notice and Questionnaire to the
Company.
(2) After the Effective Time of the Shelf
Registration Statement (or the Expedited Filing Questionnaire Deadline in
the case of an Expedited Filing), the Company shall, upon the request of
any Holder of Registrable Securities that is not then an Electing Holder,
as promptly as reasonably practicable, send a Notice and Questionnaire to
such Holder. The Company shall not be required to take any action to
name such Holder as a selling securityholder in the Shelf Registration
Statement until such Holder has returned a completed and signed Notice
and Questionnaire to the Company. Following its receipt of such Notice
and Questionnaire, the Company will reasonably promptly include the
Registrable Securities covered thereby in the Shelf Registration
Statement (if not previously included).
(3) The term "Electing Holder" shall mean any Holder
of Registrable Securities that has returned a completed and signed Notice
and Questionnaire to the Company in accordance with Section 3(a)(1) or
3(a)(2) hereof.
(b) The Company shall, as promptly as reasonably practicable,
take such action as may be necessary so that (i) each of the Shelf
Registration Statement and any amendment thereto and any Prospectus
forming part thereof and any amendment or supplement thereto (and each
report or other document incorporated therein by reference in each case)
complies in all material respects with the Securities Act and the
Exchange Act and the respective rules and regulations thereunder, (ii)
each of the Shelf Registration Statement and any amendment thereto does
not, when it becomes effective, contain an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and (iii) each
of the Prospectus forming part of the Shelf Registration Statement, and
any amendment or supplement to such Prospectus, does not include an
untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
(c) (i) The Company shall, as promptly as reasonably
practicable, advise each Electing Holder and shall confirm such advice in
writing if so requested by any such Electing Holder:
(1) when a Shelf Registration Statement and any
amendment thereto has been filed with the Commission and when the Shelf
Registration Statement or any post-effective amendment thereto has become
effective;
(2) of any request by the Commission for
amendments or supplements to the Shelf Registration Statement or the
Prospectus included therein or for additional information;
(3) of the issuance by the Commission of any stop
order suspending effectiveness of the Shelf Registration Statement or the
initiation of any proceedings for that purpose; and
(4) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
securities included in the Shelf Registration Statement for sale in any
jurisdiction or the initiation of any proceeding for such purpose.
(ii) The Company shall, as promptly as reasonably
practicable, advise DTC and the trustee under the Indenture of the
happening of any event or the existence of any state of facts that
requires the making of any changes in the Shelf Registration Statement or
the Prospectus included therein so that, as of such date, the Shelf
Registration Statement and the Prospectus do not contain an untrue
statement of a material fact and do not omit to state a material fact
required to be stated therein or necessary to make the statements therein
(in the case of the Prospectus, in light of the circumstances under which
they were made) not misleading (which advice shall be accompanied by an
instruction to suspend the use of the Prospectus until the requisite
changes have been made).
(d) The Company shall use all reasonable efforts to prevent
the issuance, and if issued to obtain the withdrawal, of any order
suspending the effectiveness of any Shelf Registration Statement at the
earliest possible time.
(e) The Company shall furnish to each Electing Holder, without
charge, at least one copy of such Shelf Registration Statement and any
post-effective amendment thereto, including financial statements and
schedules, and, if the Electing Holder so requests in writing, all
reports, other documents and exhibits that are filed with or incorporated
by reference in the Shelf Registration Statement. The Company shall use
all reasonable efforts to take into account and, if appropriate, reflect
in an amendment to the Shelf Registration Statement such comments on the
Shelf Registration Statement as initially filed as the Electing Holders
and their counsel may reasonably propose.
(f) The Company shall, during the Effectiveness Period,
deliver to each Electing Holder, without charge, as many copies of the
Prospectus (including each preliminary Prospectus) included in the Shelf
Registration Statement and any amendment or supplement thereto as such
Electing Holder may reasonably request; and the Company consents (except
during the continuance of any event described in Section 3(c)(ii)) to the
use of the Prospectus or any amendment or supplement thereto by each of
the Electing Holders in connection with the offering and sale of the
Registrable Securities covered by the Prospectus or any amendment or
supplement thereto during the Effectiveness Period. The Company shall
use all reasonable efforts to take into account and, if appropriate,
reflect in a Prospectus supplement or amendment such comments as the
Electing Holders and their counsel may reasonably propose.
(g) Prior to any offering of Registrable Securities pursuant
to the Shelf Registration Statement, the Company shall (i) register or
qualify or cooperate with the Electing Holders and their respective
counsel in connection with the registration or qualification of such
Registrable Securities for offer and sale under the securities or blue
sky laws of such jurisdictions as any such Electing Holders reasonably
request, (ii) keep such registrations or qualifications in effect and
comply with such laws so as to permit the continuance of offers and sales
in such jurisdictions for so long as may be necessary to enable any
Electing Holder or underwriter, if any, to complete its distribution of
Registrable Securities pursuant to the Shelf Registration Statement and
(iii) take any and all other actions necessary or advisable to enable the
disposition in such jurisdictions of such Registrable Securities;
provided, however, that in no event shall the Company be obligated to (a)
qualify as a foreign corporation or as a dealer in securities in any
jurisdiction where it would not otherwise be required to so qualify but
for this Section 3(g), or (b) file any general consent to service of
process in any jurisdiction where it is not as of the date hereof then so
subject.
(h) Upon the occurrence of any event contemplated by paragraph
3(c)(ii) above, the Company shall as promptly as reasonably practicable
prepare a post-effective amendment or supplement to the Shelf
Registration Statement or the Prospectus, or any document incorporated
therein be reference, or file any other required document so that, as
thereafter delivered to purchasers of the Registrable Securities included
therein, the Prospectus will not include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances under which they
were made, not misleading; provided, however, if the Company determines
based upon the advice of counsel that it is advisable to disclose in the
Shelf Registration Statement a financing, acquisition or other corporate
transaction or other material event affecting the Company or its
securities, and the Board of Directors of the Company (or an executive
officer of the Company duly authorized for such purpose) shall have
determined in good faith that such disclosure would not be in the best
interests of the Company and its stockholders, the Company shall not be
required to prepare and file such amendment, supplement or document for
such period as the Board of Directors of the Company shall have
determined in good faith is in the best interests of the Company and its
stockholders. If the Electing Holders are notified of the occurrence of
any event contemplated by paragraph 3(c)(ii) above, the Electing Holders
shall suspend the use of the Prospectus until the requisite changes to
the Prospectus have been made.
(i) Not later than the Effective Time of the Shelf
Registration Statement, the Company shall provide a CUSIP number for the
Registrable Securities that are debt securities.
(j) The Company shall use its best efforts to comply with all
applicable rules and regulations of the Commission and shall make
generally available to its security holders as soon as practicable, but
in any event not later than eighteen months after (i) the effective date
(as defined in Rule 158(c) under the Securities Act) of the Shelf
Registration Statement and (ii) the effective date of each post-effective
amendment to the Shelf Registration Statement and (iii) the date of each
filing by the Company with the Commission of an Annual Report on Form 10-
K or 10-KSB that is incorporated by reference in the Shelf Registration
Statement, an earnings statement of the Company and its subsidiaries
satisfying the provisions of Section 11(a) of the Securities Act.
(k) The Company shall cause the Indenture and the Securities
to be qualified under the Trust Indenture Act in a timely manner; and in
connection with such qualification, the Company shall cooperate with the
Trustee under the Indenture and the Holders (as defined in the Indenture)
to effect such changes to the Indenture as may be required for such
Indenture to be so qualified in accordance with the terms of the Trust
Indenture Act; and the Company shall execute and use all reasonable
efforts to cause the Trustee to execute, all documents that may be
required to effect such changes and all other forms and documents
required to be filed with the Commission to enable such Indenture to be
so qualified in a timely manner.
(l) In the event of an underwritten offering conducted
pursuant to Section 6 hereof, the Company shall, if requested, promptly
include or incorporate in a Prospectus supplement or post-effective
amendment to the Shelf Registration Statement such information as the
Managing Underwriters reasonably agree should be included therein and to
which the Company does not reasonably object and shall make all required
filings of such Prospectus supplement or post-effective amendment as soon
as reasonably practicable after it is notified of the matters to be
included or incorporated in such Prospectus supplement or post-effective
amendment.
(m) Upon request, the Company shall enter into such customary
agreements (including underwriting agreements in customary form) and take
all other appropriate actions in order to expedite or facilitate the
registration and disposition of the Registrable Securities, and in
connection therewith, if an underwriting agreement is entered into, cause
the same to contain indemnification and contribution provisions and
procedures substantially identical to those set forth in Section 5 (or
such other provisions and procedures acceptable to the Managing
Underwriters, if any) with respect to all parties to be indemnified
pursuant to Section 5 hereof.
(n) The Company shall, upon request:
(i) make reasonably available for inspection by one
representative of the Electing Holders designated in writing by the
Holders of a majority of the Registrable Securities to be registered
thereunder, any underwriter participating in any underwritten offering
pursuant to Section 6 hereof, and any attorney, accountant or other agent
retained by such representative or any such underwriter all relevant
financial and other records, pertinent corporate documents and properties
of the Company and its subsidiaries, as is customary for similar due
diligence examinations;
(ii) cause the Company's officers, directors and
employees to make reasonably available for inspection all relevant
information reasonably requested by such representative or any such
underwriter, attorney, accountant or agent in connection with any such
Shelf Registration Statement, in each case, as is customary for similar
due diligence examinations; provided, however, that any information that
is designated in writing by the Company, in good faith, as confidential
at the time of delivery of such information shall be kept confidential by
such representative, any Holders or any such underwriter, attorney,
accountant or agent, unless (x) such disclosure is made in connection
with a court proceeding or required by law, or (y) such information
becomes available to the public generally or through a third party
without an accompanying obligation of confidentiality; and provided,
further, that as promptly as reasonably practicable before disclosure is
made pursuant to clause (x) above, the Company is given prior written
notice.
(iii) in connection with any underwritten offering
conducted pursuant to Section 6 hereof, make such representations and
warranties to the Electing Holders and the underwriters, if any, in form,
substance and scope as are customarily made by the Company to
underwriters in primary underwritten offerings and covering matters
including, but not limited to, those set forth in the Purchase Agreement;
(iv) in connection with any underwritten offering
conducted pursuant to Section 6 hereof, obtain opinions of counsel to the
Company and updates thereof (which counsel and opinions (in form, scope
and substance) shall be reasonably satisfactory to the Managing
Underwriters, if any) addressed to each Electing Holder and the
underwriters, if any, covering such matters as are customarily covered in
opinions requested in underwritten offerings and such other matters as
may be reasonably requested by such Electing Holders and underwriters (it
being agreed that the matters to be covered by such opinion or written
statement by such counsel delivered in connection with such opinions
shall include in customary form, without limitation, as of the date of
the opinion and as of the effective date of the Shelf Registration
Statement or most recent post-effective amendment thereto, as the case
may be, the absence from such Shelf Registration Statement and the
Prospectus included therein, as then amended or supplemented, including
the documents incorporated by reference therein, of an untrue statement
of a material fact or the omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading);
(v) in connection with any underwritten offering
conducted pursuant to Section 6 hereof, obtain "cold comfort" letters and
updates thereof from the independent public accountants of the Company
(and, if necessary, any other independent public accountants of any
subsidiary of the Company or of any business acquired by the Company for
which financial statements and financial data are, or are required to be,
included in the Shelf Registration Statement), addressed to each Electing
Holder and the underwriters, if any, in customary form and covering
matters of the type customarily covered in "cold comfort" letters in
connection with primary underwritten offerings;
(vi) in connection with any underwritten offering
conducted pursuant to Section 6 hereof, deliver such documents and
certificates as may be reasonably requested by any such Electing Holders
and the Managing Underwriters, if any, including those to evidence
compliance with Section 3(h) hereof and with any customary conditions
contained in the underwriting agreement or other agreement entered into
by the Company.
(o) The Company will use all reasonable efforts to cause the
shares of Common Stock issuable upon conversion of the Securities to be
quoted on the Nasdaq National Market or other trading system or stock
exchange on which the Common Stock primarily trades on or prior to the
Effective Time of any Shelf Registration Statement hereunder.
(p) In the event that any broker-dealer registered under the
Exchange Act shall be an "affiliate" (as defined in Rule 2720(b)(1) of
the NASD Rules (or any successor provision thereto)) of the Company or
has a "conflict of interest" (as defined in Rule 2720(b)(7) of the NASD
Rules (or any successor provision thereto)) and such broker-dealer shall
underwrite, participate as a member of an underwriting syndicate or
selling group or assist in the distribution of any Registrable Securities
covered by the Shelf Registration Statement, whether as a Holder of such
Registrable Securities or as an underwriter, a placement or sales agent
or a broker or dealer in respect thereof, or otherwise, assist such
broker or dealer in respect thereof, or otherwise, the Company shall
assist such broker-dealer in complying with the requirements of the NASD
Rules, including, without limitation, by (A) engaging a "qualified
independent underwriter" (as defined in Rule 2720(b)(15) of the NASD
Rules (or any successor provision thereto)) to participate in the
preparation of the Shelf Registration Statement relating to such
Registrable Securities, to exercise usual standards of due diligence in
respect thereto and to recommend the public offering price of such
Registrable Securities, (B) indemnifying any such qualified independent
underwriter to the extent of the indemnification of underwriters provided
in Section 5 hereof, and (C) providing such information to such broker-
dealer as may be required in order for such broker-dealer to comply with
the requirements of the NASD Rules.
(q) The Company shall use all reasonable efforts to take all
other steps necessary to effect the registration, offering and sale of
the Registrable Securities covered by the Shelf Registration Statement
contemplated hereby.
4. Registration Expenses. The Company shall bear all fees and
expenses incurred in connection with the performance of its obligations
under Sections 2, 3 and 6 hereof and shall bear or reimburse the Electing
Holders for the reasonable fees and disbursements of one firm of counsel
designated by the Company and reasonably acceptable to the Holders of a
majority of the Registrable Securities covered by the Shelf Registration
Statement to act as counsel therefor in connection therewith, subject to
the provisions of Section 6 with respect to the payment of fees and
expenses in connection with an underwritten offering.
5. Indemnification and Contribution.
(a) Indemnification by the Company. In connection with any
Shelf Registration Statement, the Company shall indemnify and hold
harmless each Electing Holder and each underwriter, selling agent or
other securities professional, if any, who facilitates the disposition of
Registrable Securities, and each of their respective officers and
directors and each person, if any, who controls such Electing Holder,
underwriter, selling agent or other securities professional within the
meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act (each such person being sometimes referred to herein as an
"Indemnified Person") against any losses, claims, damages or liabilities,
joint or several, to which such Indemnified Person may become subject
under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or
are based on any untrue statement or alleged untrue statement of a
material fact contained in any Shelf Registration Statement (or any
amendment thereto) under which such Registrable Securities are registered
under the Securities Act, or any Prospectus contained therein or
furnished by the Company to any Indemnified Person, or any amendment or
supplement thereto, or arise out of or are based upon the omission or
alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading (in
the case of the Prospectus, in light of the circumstances under which
they were made), and the Company hereby agrees to reimburse such
Indemnified Person for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such action or
claim as such expenses are incurred; provided, however, that the Company
shall not be liable to any such Indemnified Person in any such case to
the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such Shelf Registration Statement or
Prospectus, or any amendment or supplement thereto, in reliance upon and
in conformity with written information furnished to the Company by such
Indemnified Person expressly for use therein.
(b) Indemnification by the Holders and Any Agents and
Underwriters. Each Electing Holder agrees, as a consequence of the
inclusion of any such holder's Registrable Securities in such Shelf
Registration Statement, and each underwriter, selling agent or other
securities professional, if any, who facilitates the disposition of
Registrable Securities shall agree, as a consequence of facilitating such
disposition of Registrable Securities, severally and not jointly, to (i)
indemnify and hold harmless the Company, its directors, officers who sign
any Shelf Registration Statement and each person, if any, who controls
the Company within the meaning of Section 15 of the Securities Act or
Section 20 of the Exchange Act, against any losses, claims, damages or
liabilities to which the Company or such other persons may become
subject, under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in such Shelf Registration Statement or
Prospectus, or any amendment or supplement thereto, or arise out of or
are based upon an omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading (in the case of the Prospectus, in
light of the circumstances under which they were made), in each case to
the extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was made in reliance
upon and in conformity with written information furnished to the Company
by such Electing Holder, underwriter, selling agent or other securities
professional expressly for use therein and (ii) reimburse the Company for
any legal or other expenses reasonably incurred by the Company in
connection with investigating or defending any such action or claim as
such expenses are incurred.
(c) Notices and Claims. Promptly after receipt by an
indemnified party under subsection (a) or (b) above of notice of the
commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against an indemnifying party under this
Section 5, notify such indemnifying party in writing of the commencement
thereof; but the omission to so notify the indemnifying party shall not
relieve it from any liability which it may have to the indemnified party
otherwise than under this Section 5. In case any such action shall be
brought against any indemnified party and it shall notify an indemnifying
party of the commencement thereof, such indemnifying party shall be
entitled to participate therein and, to the extent that it shall wish,
jointly with any other indemnifying party similarly notified, to assume
the defense thereof, with counsel reasonably satisfactory to such
indemnified party (who shall not, except with the consent of the
indemnified party, be counsel to the indemnifying party) and, after
notice from the indemnifying party of its election so to assume the
defense thereof, such indemnifying party shall not be liable to such
indemnified party under this Section 5 for any legal expenses of other
counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without
the written consent of the indemnified party, effect the settlement or
compromise of, or consent to the entry of any judgment with respect to,
any pending or threatened action or claim in respect of which
indemnification or contribution may be sought hereunder (whether or not
the indemnified party is an actual party to such action or claim) unless
such settlement, compromise or judgment (i) includes an unconditional
release of the indemnified party from all liability arising out of such
action or claim and (ii) does not include a statement as to, or an
admission of, fault, culpability or a failure to act, by or on behalf of
any indemnified party.
(d) Contribution. If the indemnification provided for in this
Section 5 is unavailable to or insufficient to hold harmless an
indemnified party under subsection (a) or (b) of this Section 5 in
respect of any losses, claims, damages or liabilities (or actions in
respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a
result of such losses, claims, damages or liabilities (or actions in
respect thereof) in such proportion as is appropriate to reflect the
relative fault of the indemnifying party and the indemnified party in
connection with the statements or omissions which resulted in such
losses, claims, damages and liabilities (or actions in respect thereof),
as well as any other relevant equitable considerations. The relative
fault of such indemnifying party and indemnified party shall be
determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by such
indemnifying party or by such indemnified party, and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The parties hereto agree
that it would not be just and equitable if contribution pursuant to this
Section 5(d) were determined by pro rata allocation (even if the Electing
Holders or any underwriters, selling agents or other securities
professionals or all of them were treated as one entity for such purpose)
or by any other method of allocation that does not take into account the
equitable considerations referred to in this Section 5(d). The amount
paid or payable by an indemnified party as a result of the losses,
claims, damages or liabilities (or actions in respect thereof) referred
to above shall be deemed to include any legal or other fees or expenses
reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was
not guilty of such fraudulent misrepresentation. The obligations of the
Electing Holders and any underwriters, selling agents or other securities
professionals in this Section 5(d) to contribute shall be several in
proportion to the percentage of principal amount of Registrable
Securities registered or underwritten, as the case may be, by them and
not joint.
(e) Notwithstanding any other provision of this Section 5, in
no event shall any Electing Holder be required to undertake liability to
any person under this Section 5 for any amounts in excess of the dollar
amount of the proceeds received by such Electing Holder from the sale of
such Electing Holder's Registrable Securities (after deducting any fees,
discounts and commissions applicable thereto) pursuant to any Shelf
Registration Statement under which such Registrable Securities are
registered under the Securities Act.
(f) The obligations of the Company under this Section 5 shall
be in addition to any liability which the Company may otherwise have to
any Indemnified Person and the obligations of any Electing Holder,
underwriter, selling agent or other securities professional under this
Section 5 shall be in addition to any liability which any such Electing
Holder, underwriter, selling agent or other securities professional shall
otherwise have to the Company. The remedies provided in this Section 5
are not exclusive and shall not limit any rights or remedies which may
otherwise be available to an indemnified party at law or in equity.
6. Underwritten Offering. Any Electing Holder who desires to do so
may sell Registrable Securities (in whole or in part) in an underwritten
offering, provided that (i) the Electing Holders of at least 25% in
aggregate principal amount of the Registrable Securities then covered by
the Shelf Registration Statement shall request such an offering and (ii)
at least such aggregate principal amount of such Registrable Securities
shall be included in such offering, and provided, further, that the
Company shall not be obligated to cooperate with more than one
underwritten offering. Upon receipt of such a request, the Company shall
provide all Holders of Registrable Securities written notice of the
request, which notice shall inform such Holders that they have the
opportunity to participate in the offering. In any such underwritten
offering, the investment banker or bankers and manager or managers that
will administer the offering will be selected by, and the underwriting
arrangements with respect thereto will be approved by the Holders of a
majority of the Registrable Securities to be included in such offering;
provided, however, that such investment bankers and managers and
underwriting arrangements must be reasonably satisfactory to the Company.
No Holder may participate in any underwritten offering contemplated
hereby unless (a) such Holder agrees to sell such Holder's Registrable
Securities to be included in the underwritten offering in accordance with
any approved underwriting arrangements, (b) such Holder completes and
executes all reasonable questionnaires, powers of attorney, indemnities,
underwriting agreements, lock-up letters and other documents required
under the terms of such approved underwriting arrangements, and (c) if
such Holder is not then an Electing Holder, such Holder returns a
completed and signed Notice and Questionnaire to the Company in
accordance with Section 3(a)(2) hereof within a reasonable amount of time
before such underwritten offering. The Holders participating in any
underwritten offering shall be responsible for any underwriting discounts
and commissions and fees and expenses of their own counsel. The Company
shall pay all expenses customarily borne by issuers in an underwritten
offering, including but not limited to filing fees, the fees and
disbursements of its counsel and accountants and any printing expenses
incurred in connection with such underwritten offering. Notwithstanding
the foregoing or the provisions of Sections 3(l) and 3(m) hereof, upon
receipt of a request from the Managing Underwriter or a representative of
Holders of a majority of the Registrable Securities to be included in an
underwritten offering to prepare and file an amendment or supplement to
the Shelf Registration Statement and Prospectus in connection with an
underwritten offering, the Company may delay the filing of any such
amendment or supplement for up to 60 days if the Board of Directors of
the Company (or an executive officer of the Company duly authorized for
such purpose) shall have determined in good faith that the Company has a
valid business reason for such delay.
7. Liquidated Damages. Pursuant to Section 2(a) hereof, the
Company may, upon written notice to all the Holders, postpone having the
Shelf Registration Statement declared effective for a reasonable period
not to exceed 90 days if the Company possesses material non-public
information, the disclosure of which would have a material adverse effect
on the Company and its subsidiaries taken as a whole. Notwithstanding
any such postponement, if (i) on or prior to the 90th day following the
date of the First Time of Delivery (as defined in the Purchase
Agreement), a Shelf Registration Statement has not been filed with the
Commission or (ii) on or prior to the 180th day following the date of the
First Time of Delivery (as defined in the Purchase Agreement), such Shelf
Registration Statement is not declared effective by the Commission (each,
a "Registration Default"), the Company shall be required to pay
liquidated damages ("Liquidated Damages"), from and including the day
following such Registration Default until such Shelf Registration
Statement is either so filed or so filed and subsequently declared
effective, as applicable. Such Liquidated Damages shall be paid semi-
annually in arrears, with the first semi-annual payment due on the first
Interest Payment Date (as defined in the Indenture), as applicable,
following the date of such Registration Default, and will accrue at a
rate per annum equal to an additional one-quarter of one percent (0.25%)
of the principal amount of Restricted Securities, to and including the
90th day following such Registration Default and one-half of one percent
(0.5%) thereof from and after the 91st day following such Registration
Default. In the event that the Shelf Registration Statement ceases to be
effective (or the Holders of Registrable Securities are otherwise
prevented or restricted by the Company from effecting sales pursuant
thereto) (an "Effective Failure") for more than 45 days, whether or not
consecutive, in any 90 day period, and 90 days, whether or not
consecutive, during any twelve-month period, then the Company shall pay
Liquidated Damages in the amount of one-half of one percent (0.5%) per
annum from the 46th day of the applicable 90 day period or the 90th day
of the applicable twelve-month period, as the case may be, that such
Shelf Registration Statement ceases to be effective (or the Holders of
Registrable Securities are otherwise prevented or restricted by the
Company from effecting sales pursuant thereto) until such time as the
Effective Failure is cured. For the purpose of determining an Effective
Failure, days on which the Company has been obligated to pay Liquidated
Damages in accordance with the foregoing in respect of a prior Effective
Failure within the applicable 90 day or twelve-month period, as the case
may be, shall not be included. The Liquidated Damages as set forth in
this Section 7 shall be the exclusive monetary remedy available to the
Holders of Registrable Securities for such Registration Default or
Effective Failure. In no event shall the Company be required to pay
Liquidated Damages in excess of the applicable maximumamount of one-half
of one percent (0.5%) set forth above, regardless of whether one or
multiple Registration Defaults exist.
8. Miscellaneous.
(a) Other Registration Rights. The Company may grant
registration rights that would permit any Person that is a third party
the right to piggy-back on any Shelf Registration Statement, provided
that if the Managing Underwriter, if any, of any underwritten offering
conducted pursuant to Section 6 hereof notifies the Company and the
Electing Holders that the total amount of securities which the Electing
Holders and the holders of such piggy-back rights intend to include in
any Shelf Registration Statement is so large as to materially threaten
the success of such offering (including the price at which such
securities can be sold), then the amount, number or kind of securities to
be offered for the account of holders of such piggy-back rights will be
reduced to the extent necessary to reduce the total amount of securities
to be included in such offering to the amount, number or kind recommended
by the Managing Underwriter prior to any reduction in the amount of
Registrable Securities to be included in such Shelf Registration
Statement.
(b) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this Section 8(b), may be amended, and
waivers or consents to departures from the provisions hereof may be
given, only by a written instrument duly executed by the Company and the
Holders of a majority in aggregate principal amount of Registrable
Securities then outstanding. Each Holder of Registrable Securities
outstanding at the time of any such amendment, waiver or consent or
thereafter shall be bound by any amendment, waiver or consent effected
pursuant to this Section 8(b), whether or not any notice, writing or
marking indicating such amendment, waiver or consent appears on the
Registrable Securities or is delivered to such Holder.
(c) Notices. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand-delivery, first-
class mail, telex, telecopier, or air courier guaranteeing overnight
delivery:
(1) if to a Holder, at the most current address
given by such Holder to the Company in accordance with the provisions of
this Section 8(c);
(2) if to the Purchasers, initially at the address
set forth in the Purchase Agreement; and
(3) if to the Company, initially at its address
set forth in the Purchase Agreement.
All such notices and communications shall be deemed to have been
duly given when received.
The Purchasers or the Company by notice to the other may designate
additional or different addresses for subsequent notices or
communications.
(d) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and assigns of each of the
parties and the Holders, including, without the need for an express
assignment or any consent by the Company thereto, subsequent Holders of
Registrable Securities. The Company hereby agrees to extend the benefits
of this Agreement to any Holder of Registrable Securities and any such
Holder may specifically enforce the provisions of this Agreement as if an
original party hereto.
(e) Counterparts. This agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of
which taken together shall constitute one and the same agreement.
(f) Headings. The headings in this agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(g) Governing Law. This agreement shall be governed by and
construed in accordance with the laws of the State of New York, without
giving effect to any provisions relating to conflicts of laws.
(h) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any
circumstances, is held invalid, illegal or unenforceable in any respect
for any reason, the validity, legality and enforceability of any such
provision in every other respect and of the remaining provisions hereof
shall not be in any way impaired or affected thereby, it being intended
that all of the rights and privileges of the parties shall be enforceable
to the fullest extent permitted by law.
(i) Survival. The respective indemnities, agreements,
representations, warranties and other provisions set forth in this
Agreement or made pursuant hereto shall remain in full force and effect,
regardless of any investigation (or any statement as to the results
thereof) made by or on behalf of any Electing Holder, any director,
officer or partner of such Electing Holder, any agent or underwriter, any
director, officer or partner of such agent or underwriter, or any
controlling person of any of the foregoing, and shall survive the
transfer and registration of the Registrable Securities of such Holder.
Please confirm that the foregoing correctly sets forth the
agreement between the Company and you.
Very truly yours,
Exodus Communications, Inc.
By:____________________________
Name:
Title:
The foregoing Registration Rights Agreement is hereby confirmed and
accepted as of the date first above written.
Goldman, Sachs & Co.
BancBoston Robertson Stephens Inc.
BT Alex. Brown Incorporated
Donaldson, Lufkin & Jenrette
Securities Corporation
Hambrecht & Quist LLC
By:____________________________
(Goldman, Sachs & Co.)
On behalf of each of the Purchasers
[Signature Page to Registration Rights Agreement]
<PAGE>
Exhibit A
EXODUS COMMUNICATIONS, INC.
INSTRUCTION TO DTC PARTICIPANTS
(DATE OF MAILING)
URGENT -- IMMEDIATE ATTENTION REQUESTED
DEADLINE FOR RESPONSE: (DATE)
The Depository Trust Company ("DTC") has identified you as a DTC
Participant through which beneficial interests in Exodus Communications,
Inc. (the "Company") 5% Convertible Subordinated Notes due March 15, 2006
(the "Securities") are held.
The Company is in the process of registering the Securities under
the Securities Act of 1933, as amended, for resale by the beneficial
owners thereof. In order to have their Securities included in the
registration statement, beneficial owners, INCLUDING BENEFICIAL OWNERS
RESIDENT OUTSIDE THE UNITED STATES, must complete and return the enclosed
Notice of Registration Statement and Selling Securityholder
Questionnaire.
IT IS IMPORTANT THE BENEFICIAL OWNERS OF THE SECURITIES RECEIVE A
COPY OF THE ENCLOSED MATERIALS AS SOON AS POSSIBLE as their rights to
have the Securities included in the registration statement depend upon
their returning the Notice and Questionnaire [DEADLINE FOR RESPONSE].
Please forward a copy of the enclosed materials to each beneficial owner
that holds interests in the Securities through you. If you require more
copies of the enclosed materials or have any questions regarding this
matter, please contact [Name, address and telephone number of contact at
the Company].
<PAGE>
EXODUS COMMUNICATIONS, INC.
NOTICE OF REGISTRATION STATEMENT AND SELLING SECURITY HOLDER
QUESTIONNAIRE
(DATE)
Exodus Communications, Inc. (the "Company") has filed or intends
shortly to file with the United States Securities and Exchange Commission
(the "Commission") a registration statement on form S-3 (the "Shelf
Registration Statement") for the registration and resale under the United
States Securities Act of 1933, as amended (the "Securities Act"), of the
Company's 5% Convertible Subordinated Notes due March 15, 2006 (CUSIP No.
0________) (the "Notes"), and Common Stock, par value $0.001 per share,
of the Company issuable upon conversion or repurchase thereof, in
accordance with the terms of the Registration Rights Agreement dated as
of March 1, 1999 (the "Registration Rights Agreement") between the
Company and the purchasers named therein (the "Purchasers"). A copy of
the Registration Rights Agreement is attached hereto. All capitalized
terms not otherwise defined herein shall have the meanings ascribed
thereto in the Registration Rights Agreement.
In order to have Registrable Securities included in the Shelf
Registration Statement (or a supplement or amendment thereto), this
Notice of Registration Statement and Selling Securityholder Questionnaire
("Notice and Questionnaire") must be completed, executed and delivered to
the Company at the address set forth herein for receipt ON OR BEFORE
[insert date that is 30 days from the Notice Date] (the "Questionnaire
Deadline"). Unless the Company otherwise consents, beneficial owners of
Registrable Securities who do not complete, execute and return this
Notice and Questionnaire by such date (i) will not be named as selling
securityholders in the Shelf Registration Statement (or a supplement or
amendment thereto) and related Prospectus and (ii) may not sell their
Registrable Securities pursuant thereto. Beneficial owners of
Registrable Securities not having returned a Notice and Questionnaire by
the Questionnaire Deadline may, however, receive another Notice and
Questionnaire from the Company upon request. Following its receipt of a
completed Notice and Questionnaire in return, the Company will reasonably
promptly include the Registrable Securities covered thereby in the Shelf
Registration Statement.
Certain legal consequences arise from being named as a selling
securityholder in the Shelf Registration Statement and related
Prospectus. Accordingly, Holders and beneficial owners of Registrable
Securities are advised to consult their own securities law counsel
regarding the consequences of being named or not being named as a selling
securityholder in the Shelf Registration Statement and related
Prospectus.
The term "Registrable Securities" is defined in the Registration
Rights Agreement to mean all or any portion of the Notes issued under the
Indenture and the Common Stock issuable upon conversion or repurchase
thereof; provided, however, that a security ceases to be a Registrable
Security when it is no longer a Restricted Security.
The term "Restricted Security" is defined in the Registration
Rights Agreement to mean any Note or share of Common Stock issuable upon
conversion or repurchase thereof except any such Note or share of Common
Stock which (i) has been effectively registered under the Securities Act
and sold in a manner contemplated by the Shelf Registration Statement,
(ii) has been transferred in compliance with Rule 144 under the
Securities Act (or any successor provision thereto) or is transferable
pursuant to paragraph (k) of such Rule 144 (or any successor provision
thereto), or (iii) has otherwise been transferred and a new Security or
share of Common Stock not subject to transfer restrictions under the
Securities Act has been delivered by or on behalf of the Company in
accordance with Section 3.5 of the Indenture.
<PAGE>
ELECTION
The undersigned holder (the "Selling Securityholder") of
Registrable Securities hereby elects to include in the Shelf Registration
Statement the Registrable Securities beneficially owned by it and listed
below in Item (3) (unless otherwise specified under Item (3). The
undersigned, by signing and returning this Notice and Questionnaire,
agrees to be bound with respect to such Registrable Securities by the
terms and conditions of this Notice and Questionnaire and the
Registration Rights Agreement, including, without limitation, Section 5
of the Registration Rights Agreement, as if the undersigned Selling
Securityholder were an original party thereto.
Upon any sale of Registrable Securities pursuant to the Shelf
Registration Statement, the undersigned Selling Securityholder will be
required to deliver to the Company and the Trustee under the Indenture
the Notice of Transfer completed and signed set forth in Appendix I to
the Notice and Questionnaire and hereby undertakes to do so.
The undersigned Selling Securityholder hereby provides the
following information to the Company and represents and warrants that
such information is accurate and complete:
<PAGE>
QUESTIONNAIRE
(1) (a) Full Legal Name of Selling Securityholder:
(b) Full Legal Name of Registered Holder (if not the same as in
(a) above) of Registrable Securities Listed in (3) Below:
(c) Full Legal Name of DTC Participant (if applicable and if not
the same as (b) above) Through Which Registrable Securities
Listed in (3) Below are Held:
(2) Address for Notices to Selling Securityholder:
Telephone:
Fax:
Contact:
(3) Beneficial Ownership of Registrable Securities:
Except as set forth below, the undersigned Selling Securityholder
does not beneficially own any Notes or Common Stock previously
issued upon conversion or repurchase of any Note.
Principal amount of Notes beneficially owned:
Number of shares of Common Stock beneficially owned and issued to
date upon conversion or repurchase of Notes (if any):
Principal amount of Notes which the undersigned wishes to be
included in the Shelf Registration Statement:
Number of shares of Common Stock (if any) issued upon conversion or
repurchase of Registrable Securities which are to be included in
the Shelf Registration Statement:
(4) Other shares of Common Stock or other Notes of the Company Owned by
the Selling Securityholder:
Except as set forth below, and under Item (3) above, the
undersigned Selling Securityholder is not the beneficial or
registered owner of any shares of Common Stock or any other
securities of the Company.
State any exceptions here:
(5) Relationships with the Company:
Except as set forth below, neither the Selling Securityholder nor
any of its affiliates, officers, directors or principal equity
holders (5% or more) has held any position or office or has had any
other material relationship with the Company (or its predecessors
or affiliates) during the past three years.
State any exceptions here:
(6) Plan of Distribution:
Except as set forth below, the undersigned Selling Securityholder
intends to distribute the Registrable Securities listed above in
Item (3) only as follows (if at all): Such Registrable Securities
may be sold from time to time directly by the undersigned Selling
Securityholder or, alternatively, through underwriters, broker-
dealer or agents. Such Registrable Securities may be sold in one
or more transactions at fixed prices, at prevailing market prices
at the time of sale, at varying prices determined at the time of
sale, or at negotiated prices. Such sales may be effected in
transactions (which may involve crosses or block transactions) (i)
on any national securities exchanges or U.S. inter-dealer quotation
system of a registered national securities association on which the
Registrable Securities may be listed or quoted at the time of sale,
(ii) in the over-the-counter market, (iii) in transactions
otherwise than on such exchanges or services or in the over-the-
counter market, or (iv) through the writing of options. In
connection with sales of the Registrable Securities or otherwise,
the Selling Securityholder may enter into hedging transactions with
broker-dealers, which may in turn engage in short sales of the
Registrable Securities in the course of hedging the positions they
assume. The Selling Securityholder may also sell Registrable
Securities short and deliver Registrable Securities to close out
such short position, or loan or pledge Registrable Securities to
broker-dealers that in turn may sell such securities.
State any exceptions here:
Note: In no event may such method(s) of distribution take the form
of an underwritten offering of the Registrable Securities without
the prior agreement of the Company.
By signing below, the Selling Securityholder acknowledges that it
understands its obligation to comply, and agrees that it will
comply, with the prospectus delivery and other provisions of the
Securities Act and Exchange Act and the respective rules
thereunder, particularly Regulation M.
In the event that the Selling Securityholder transfers all or any
portion of the Registrable Securities listed in Item (3) above
after the date on which such information is provided to the
Company, the Selling Securityholder agrees to notify the
transferee(s) at the time of the transfer of its rights and
obligations under this Notice and Questionnaire and the
Registration Rights Agreement.
By signing below, the Selling Securityholder consents to the
disclosure of the information contained herein in its answers to
Items (1) through (6) above and the inclusion of such information
in the Shelf Registration Statement and related Prospectus. The
Selling Securityholder understands that such information will be
relied upon by the Company in connection with the preparation of
the Shelf Registration Statement and related Prospectus.
In accordance with the Selling Securityholder's obligation under
the Registration Rights Agreement to provide such information as
may be required by law for inclusion in the Self Registration
Statement, the Selling Securityholder agrees to promptly notify the
Company of any inaccuracies or changes in the information provided
herein which may occur subsequent to the date hereof at any time
while the Self Registration Statement remains in effect. All
notices hereunder and pursuant to the Registration Rights Agreement
shall be made in writing by hand delivery, first-class mail, or air
courier guaranteeing overnight delivery as follows:
To the Company:
Exodus Communications, Inc.
2831 Mission College Blvd.
Santa Clara, CA 95054
Attention: General Counsel and Secretary
Once this Notice and Questionnaire is executed by the Selling
Securityholder and received by the Company, the terms of this
Notice and Questionnaire, and the representations and warranties
contained herein, shall be binding on, shall inure to the benefit
of and shall be enforceable by the respective successors, heirs,
personal representatives and assigns of the Company and the Selling
Securityholder with respect to the Registrable Securities
beneficially owned by such Selling Securityholder and listed in
Item (3) above. This Agreement shall be governed in all respects
by the laws of the State of New York.
IN WITNESS WHEREOF, the undersigned, by authority duly given, has
caused this Notice and Questionnaire to be executed and delivered either
in person or by its duly authorized agent.
Dated:
Selling Securityholder
(Print/type full legal name of beneficial owner of Registrable
Securities)
By:
Name:
Title:
PLEASE RETURN THE COMPLETED AND EXECUTED NOTICE AND QUESTIONNAIRE
FOR RECEIPT ON OR BEFORE (DEADLINE FOR RESPONSE) TO THE COMPANY AT:
Exodus Communications, Inc.
2831 Mission College Blvd.
Santa Clara, CA 95054
Attention: General Counsel and Secretar
<PAGE>
APPENDIX I
NOTICE TO TRANSFER PURSUANT TO REGISTRATION STATEMENT
Chase Manhattan Bank and Trust Company,
National Association
101 California Street, Suite 2725
San Francisco, CA 94111
Exodus Communications, Inc.
2831 Mission College Blvd.
Santa Clara, CA 95054
Attention: General Counsel and Secretary
Re Exodus Communications, Inc. 5% Convertible Subordinated Notes
due March 15, 2006 (the "Notes")
Dear Sirs:
Please be advised that _________________________________ has
transferred $_____ aggregate principal amount of the above-referenced
notes or ______ shares of the Company's Common Stock, issued on
conversion, repurchase or redemption of Notes, pursuant to the
Registration Statement Form S-3 (File No. 333-_________) filed by the
Company.
We hereby certify that the prospectus delivery requirements, if
any, of the Securities Act of 1933, as amended, have been satisfied with
respect to the transfer described above and that the above-named
beneficial owner of the Notes of Common Stock is named as a selling
security holder in the Prospectus dated ____________ or in amendments or
supplements thereto, and that the aggregate principal amount of the Notes
of number of Common Stock transferred are [a portion of] the Notes or
Common Stock listed in such Prospectus as amended or supplemented
opposite such owner's name.
Dated:
Very truly yours,
(Name)
By:
(Authorized Signature)
EXHIBIT 10.56
Capacity Sales Agreement Schedule 2
WORLDCOM CAPACITY ACCESS SERVICE AGREEMENT
This WorldCom Capacity Access Service Agreement (the "Agreement") is
made by Exodus Communications Inc., a California corporation located at
2831 Mission College Boulevard, Santa Clara, California 95054
("Customer"), and WORLDCOM TECHNOLOGIES, INC. ("WorldCom"), a Delaware
corporation, for service described below.
1. SERVICES: Interexchange telecommunications service (the "Private
Line Service") and STM-1 Service shall be provided by WorldCom subject
to the rules and regulations governing the Service in the applicable
tariffs of WorldCom and one or more of the tariffs of WorldCom affiliates
(e.g., WorldCom Network Services, Inc. and Brooks Fiber Properties, Inc.)
for the applicable jurisdictions and/or state(s) (collectively, the
"Tarift"). The Tariffs provide terms and conditions of the Service
which include, but are not limited to, taxes, credit approval procedures,
Customer credits, termination liability, and limitations with respect to
the assignment of the Service. The Tariffs may be modified from time to
time by WorldCom in accordance with law and thereby affect the Service
furnished to Customer. For purposes of this Agreement, Private Line
Service and STM-1 Service shall be referred to as (the "Service").
WorldCom STM-1 service is interexchange high capacity private line
interexchange point-to-point service conforming the SDH standard for
transmission of simultaneous full-duplex digital signals at 155.52 Mbps
("STM-1 Service").
2. TERMS AND CONDITIONS: The parties agree that the terms and
conditions of this Agreement shall supplement, or to the extent they are
inconsistent with the Tariffs, supersede the terms and conditions of the
Tariffs.
3. TERM/COMMENCEMENT /COMMITMENT:
Customer Commitment Period: ***
Minimum Monthly Commitment: ***
Commencement Date: For the purposes of this Agreement, (the
"Commencement Date") will be the next billing cycle following the date
this Agreement has been fully executed by both parties and Customer has
received a satisfactory credit review and approval from WorldCom's Credit
Department, and all security documentation, if any, required by WorldCom
has been properly executed and delivered to WorldCom (collectively, the
"Credit Review").
Commitment Commencement Date: is 3 months following the
Commencement Date above.
***Confidential treatment has been requested for certain portions of this
document. Such omitted portions have been filed separately with the
Securities and Exchange Commission.
Commitment Ending Date: is *** months following the Commitment
Commencement Date above; thereafter, Commitment shall be month-to-month
until either Party gives thirty (30) days' written notice to the other
Party.
4. LETTER OF AGENCY ("LOA"): The undersigned [duly authorized
representative of Customer] hereby authorizes WorldCom, if requested by
Customer, to provision Customers Local Access. This LOA supersedes all
previous LOAs and shall remain in effect until canceled by Customer in
writing.
5. PRICING: Rates and discounts for Interstate Domestic Private Line
Service during the Customer Commitment Period shall be as set forth in
the applicable Tariffs. Rates for STM-1 Service are as set forth below:
A. WORLDCOM LOCAL ACCESS PRICING
(based on one hundred and twenty (120) months)
SERVICE TYPE PRICING*
STM-1 Type I Per city pair, as set forth below
Type 1 sites consist of sites which are provisioned entirely on
WorldCom's local network ("Type I Sites").
***
***Confidential treatment has been requested for certain portions of this
document. Such omitted portions have been filed separately with the
Securities and Exchange Commission.
ENTIRE AGREEMENT: This Agreement (including any documents incorporated
herein by reference) constitutes the entire understanding between the
parties and supersedes any prior agreements and proposals between the
whether oral or written, for Capacity Access Service provided hereunder.
WORLDCOM TECHNOLOGIES, INC. Exodus Communications Inc.
/s/ Frank M. Grillo /s/ James J. McInerney
(Authorized Signature) (Authorized Signature)
FRANK M. GRILLO, V.P. OF MARKETING James J. McInerney, EVP, Engineering
(Print Name - Title) (Print Name - Title)
February 17, 1999
(Date Received) (Date Received)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE BALANCE SHEET, STATEMENT OF OPERATIONS AND STATEMENT
OF CASH FLOWS INCLUDED IN THE COMPANY'S FORM 10-Q FOR THE THREE
MONTH PERIOD ENDED MARCH 31, 1999, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 323,642
<SECURITIES> 0
<RECEIVABLES> 16,277
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 346,646
<PP&E> 101,793
<DEPRECIATION> 22,574
<TOTAL-ASSETS> 526,292
<CURRENT-LIABILITIES> 51,830
<BONDS> 450,000
0
0
<COMMON> 41
<OTHER-SE> (554)
<TOTAL-LIABILITY-AND-EQUITY> 526,292
<SALES> 30,087
<TOTAL-REVENUES> 30,087
<CGS> 28,110
<TOTAL-COSTS> 28,110
<OTHER-EXPENSES> 18,604
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,537
<INCOME-PRETAX> (22,164)
<INCOME-TAX> 0
<INCOME-CONTINUING> (22,164)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (22,164)
<EPS-PRIMARY> (0.55)
<EPS-DILUTED> (0.55)
</TABLE>
